ww5.cityofpasadena.net · 2017-05-11 · PASADENA FIRE & POLICE PASADENA FIRE & POLICE RETIREMENT...

PASADENA

FIRE & POLICE

PASADENA FIRE & POLICE RETIREMENT SYSTEM

RETIREMENT BOARD - REGULAR MEETING

Wednesday, May 17, 2017 RETIREMENT SYSTEM City Council Chambers, 100 N. Garfield Ave., #S249

10:15 a.m.

AGENDA

1 . Call to Order 2. Public Comment 3. Minutes: April19, 2017 (Regular Meeting)

CONSENT CALENDAR 4. Approve the monthly retirement allowance roll of $1,072,755.90 for April2017. 5. Approve additions/removals of the following members/beneficiaries to/from the

hi II II mont 1y a owance ro : Effective Add/ Pension Pension

Name Date Remove Continuance Amount a. M. Miller 04/02/17 remove No $2,753.57

b. H. Quinan 04/16/17 remove No $702.40 St 6. Rece1ve and f1le the 1 Quarter 2017 Asset Manager Performance Reports from

the following asset managers: a. Atlanta Capital Investment Managers b. Capital Group, American Funds EuroPacific Growth Fund c. lnvesco Core Real Estate, USA- LP d. PIMCO All Asset Fund e. TCW MetWest Fixed Income Review f. Voya Senior Loan Trust Fund Review

CaiPERS HEARING 7. CaiPERS scheduled hearing on the Service Pending Industrial Disability

Retirement application for Anthony Godinez, Firefighter.

ACTION ITEMS - The Board may discuss and take action on the following items: 8. Review and take action on the engagement letter for preparation of the June 30,

2017 financial audit with System Auditor Macias Gini & O'Connell. 9. Review and take action on the recommendation from System Actuary, Bartel

Associates, regarding the June 30, 2016 Valuation Assumptions.

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10. Review, discuss and possibly take action on the FY 2018 Recommended Budget.

11. Review and take action on the revised Board policies for Disability Hearing Procedures and Document Procedures.

12. Schedule the hearing on the CaiPERS Industrial Disability Retirement application for Shannon Reece, Police Officer, for an upcoming regular meeting of the FPRS Board.

13. Discuss and possibly ·take action on the following investment reports submitted by Verus Investments: a. Receive and file, 1st Quarter 2017 Investment Performance Review b. Receive and file, April2017 Performance Update c. Receive and file, Transaction Summary {Asset Allocation Rebalance, and

Quarterly Withdrawal for Benefits) d. Review and approve, lnvesco Core Real Estate Redemption {anticipated

for July 1, 2017) e. Receive and file, Active Management Environment Summary

INFORMATION ITEMS 14. Staff Report 15. Counsel Report 16. Articles/Newsletters/Conferences

COMMENTS FROM BOARD MEMBERS

ADJOURN

POSTING STATEMENT: I HEREBY CERTIFY that this Agenda was posted in its entirety at the City Kiosk and on the City Council Chamber bulletin board, Room S249, on May 11, 2017 at 5:00 p.m., and a copy was sent to the Central Library for posting.

-1R~~~ Jill Fosselman Administrator/Secretary to the Board

0

In compliance with the Americans with Disabilities Act of 1990, listening assistive devices are available from the City Clerk's Office with a 24-hour advance notice. Please call (626) 7 44-4320 to request use of a listening device.

Any documents distributed to a majority of the Pasadena Fire & Police Retirement Board regarding any item on this agenda will be made available at the office of the Fire & Police Retirement System, located at 100 N. Garfield Avenue, #N204, Pasadena, CA 91101. To make arrangements to view Items, during normal business hours, please contact the Retirement office at (626)744-4320.

DISTRIBUTION Board Members Bartel Associates A Taylor, Verus I. Safie, City Atty

Police Dept (Admin Srv) Fire Chief Director of Finance City Treasurer

P. Fuleihan S. Lebovitz A. Snitzer

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T. Phillips, CPA D. Barba, AdminSure D. Sullivan, AdminSure R Lennon, AdminSure

W. Boyer, PIO Library, NIS City Controller

PASADENA FIRE & POLICE RETIREMENT SYSTEM RETIREMENT BOARD - REGULAR MEETING

Wednesday, April 19, 2017 City Council Chambers S249

Pasadena City Hall, 100 N. Garfield Avenue 10:15 a.m.

MINUTES

1. Call to Order

The regular meeting of the Pasadena Fire & Police Retirement Board was called to order by the Chair, Mr. Keith Jones, on Wednesday, April19, 2017 at 10:19 a.m. in the City Council Chambers at City Hall.

Members - Present K. Jones, Chair J. Brinsley J. Milligan T. Tornek

Staff- Present J. Fosselman, Administrator/Secretary E. Wong, Tech. Assistant I. Safie, City Attorney Representative

Others Present A. Taylor, M. Batterson, P. Fuleihan, S. Lebovitz

2. Public Comment

None noted.

Not Present P. Boyle, Vice Chair

Not Present

3. Minutes: Approve the minutes for the regular meeting of March 15, 2017

MOTION by Mr. Milligan, seconded by Mr. Brinsley, to approve the Minutes for the regular meeting of March 15, 2017. (Motion unanimously carried, 4-0)

CONSENT CALENDAR

4. Approve the monthly retirement allowance roll of $1,086,444.43 for March 2017. 5. Approve additions/removals of the following members/beneficiaries to/from the

man thl II II IY a owance ro : Effective Add/ Pension Pension

Name Date Remove Continuance Amount a. R. Picard 03/28/17 remove No $1,316.96

Page 1 of6

6. Schedule the hearing on the CaiPERS Service Pending Industrial Disability Retirement application for Anthony Godinez, Firefighter, for the May 17, 2017 regular meeting of the FPRS Board.

MOTION by Mr. Brinsley, seconded by Mr. Milligan, to approve items 4-6 on the Consent Calendar. (Motion unanimously carried, 4-0)

CaiPERS HEARINGS

8. CaiPERS scheduled hearing on the Service Pending Industrial Disability Retirement application for Michael Batterson, Fire Engineer.

The hearing was opened on the CaiPERS Service Pending Industrial Disability Retirement application filed by Michael Batterson, Fire Engineer. The Board received the Disability Hearing Option form signed by the applicant requesting the Retirement Board close the hearing to the general public, including the discussion of the medical reports submitted in consideration of the Retirement Board's determination. Therefore, the hearing was closed to the public.

The following were present at the hearing: Patrick Fuleihan and Sam Lebovitz (City and counsel), and Michael Batterson (Applicant). The Applicant was administered the oath of witness.

By order of the Chair, the following exhibits were marked and entered into record: a. CaiPERS Service Pending Industrial Disability Retirement application, filed by

Michael Batterson, Fire Engineer, dated December 1, 2016. b. Verification of employment with the City of Pasadena. c. Certification Forms signed by the City and Applicant. d. Information report and recommendation from the Human Resources Department

dated Apri110, 2017, and the accompanying medical file, including: 1) Essential Functions Job Analysis- Fire Engineer; 2) Dr. Andrew Roth, M.D., AME orthopedic evaluation (dated 4-9-12); 3) Dr. Saadia Chaudhary, M.D., MRI report- right hip (dated 5-19-15); 4) Dr. Gregory Adamson, M.D., initial orthopedic evaluation (dated 4-27-15); 5) Dr. Gregory Adamson, M.D., PTP progress report (dated 6-1-15); 6) Dr. Todd Dietrick, M.D., initial orthopedic consultation report- right hip and

knee (dated 9-9-15); 7) Dr. Todd Dietrick, M.D., orthopedic consultation report- right knee (dated 1-

18-16); 8) Dr. Todd Dietrick, M.D., surgical report (dated 1-28-16); 9) Dr. Todd Dietrick, M.D., orthopedic progress report (dated 2-12-16); 10)Dr. Todd Dietrick, M.D., orthopedic progress report (dated 3-9-16); 11)Dr. Todd Dietrick, M.D., PTP progress report (dated 4-20-16); 12)Dr. Todd Dietrick, M.D., PTP permanent and stationary report for the right

knee (dated 1-18-17); 13)Application for Adjudication of Claim ADJ3196270 (dated 3-22-13); 14)Application for Adjudication of Claim ADJ7888690 (dated 7-14-11); 15)Application for Adjudication of Claim ADJ10005609 (dated 6-9-15); and 16)Dr. Andrew Roth, M.D., AME reevaluation report (dated 2-28-17).

Page 2 of 6

Mr. Lebovitz highlighted the medical evidence relevant to a finding of substantial incapacity, which qualifies the applicant for an industrial disability retirement.

There being no testimony or discussion, a MOTION to close the hearing was made by Mr. Milligan, seconded by Mr. Brinsley. (Motion unanimously carried, 4-0)

MOTION by Mr. Milligan, seconded by Mr. Brinsley, to approve the CaiPERS Service Pending Industrial Disability Retirement Application, filed by Michael Batterson, Fire Engineer, with an effective date of January 27, 2017, and instruct the System's Attorney and the Secretary to prepare the necessary documentation of this Board's determination and forward same to the California Public Employees' Retirement System. (Motion unanimously carried, 4-0)

On the behalf of the City and City Council, Member Tornek offered thanks and appreciation for Mr. Batterson's years of service, and expressed gratitude for his good work. Chair Jones echoed Mr. Tornek's comments, and thanked Mr. Batterson on the behalf of the Board.

ACTION ITEMS - The Board may discuss and take action on the following items:

8. Receive and take action on the nomination of Fire Trustee, FPRS Board.

MOTION by Mr. Brinsley, seconded by Mr. Tornek, to certify William Joseph "Joe" Milligan as the certified nominee for the position of Fire Trustee and declare him elected for the July 1, 2017- June 30, 2021 term. (Motion unanimously carried, 4-0)

Following this item, Chair Jones moved to Item 11 on the agenda.

11. Discuss and possibly take action on the following investment reports submitted by Verus Investments:

a. Receive and file, Transaction Summary (Asset Allocation Rebalance)

Annie Taylor reviewed the transaction summary noting the Phase 1 purchases of Senior Bank Loans and Short Term Fixed Income to remain in compliance with the Board's Investment Policy Statement ("IPS"). On March 27, a total of $9,665,000 was withdrawn from MetWest. Following, $8,850,000 was invested with Short Term Fixed Income asset manager Vanguard, and $815,000 was invested with Senior Bank Loans asset manager Voya. Ms. Taylor noted the second phase of the rebalance to the newly revised target asset allocations would be accomplished in April along with the withdrawal for quarterly benefits.

MOTION by Mr. Brinsley, seconded by Mr. Milligan, to receive and file the Transaction Summary. (Motion unanimously carried, 4-0)

Page 3 of 6

---~~--------------------- --· --

b. Review and approve, Revised Investment Policy Statement

Ms. Taylor reviewed the changes in the IPS to reflect the Board's decision in March to approve the move to Mix 3 in the asset allocation. Specifically, she noted the reduction in the target allocation to Core Fixed Income, as well as the corresponding change in the allocation range. She next noted the addition of the new asset class for Short Term Fixed Income, including its target allocation, allocation range, and benchmark. Further, she noted the revised target allocation for Senior Bank Loans, including the revised allocation range. Lastly, she noted the name change for the benchmarks for Core Fixed Income and TIPS.

MOTION by Mr. Tornek, seconded by Mr. Brinsley, to approve the revised Investment Policy Statement, as recommended by Verus Investments. (Motion unanimously carried, 4-0)

c. Receive and file, March 2017 Performance Update

The update was reviewed reflecting performance without pooled cash. The total fund returned 1.1% net of fees (v. the policy index of 0.6%) for March, bringing the fiscal year-to-date return to 7.9% net of fees (vs. the policy index of 6.1 %). Ms. Taylor noted the earnings in Domestic Equity (6.1% for the quarter, and 18.6% FYTD) and International Equity (9.4% for the quarter, and 18.8% FYTD) continue as earnings drivers in the portfolio. On a fiscal year-to-date basis, the value exposure in both asset classes outperformed growth exposure. Total market value for the end of March was $125.7 million, including pooled cash with the City.

MOTION by Mr. Milligan, seconded by Mr. Brinsley, to receive and file the March 2017 Performance Update, as recommended by Verus Investments. (Motion unanimously carried, 4-0)

d. Review and approve, Asset Allocation Rebalance and 2nd Quarter 2017 Withdrawal (version 1 and version 2)

Ms. Taylor noted the presentation of two versions of the quarterly rebalance and withdrawal to illustrate mid-month recording differences by the custodian when settling future purchases of Mortgage-Backed Securities contracts by active manager MetWest. Ms. Taylor clarified that U.S. Bank will modify their daily reporting procedures to capture cash commitments for future securities contracts.

Ms. Taylor reported that Phase 2 of the asset rebalance to purchase Short Term Fixed Income and increase the allocation to Senior Bank Loans would be accomplished at month's end. Approximately $6.7 million would be liquidated from MetWest and invested with the Vanguard and Voya asset managers. Following, cash for the $3.3 million quarterly withdrawal for pension benefits and administration will be taken primarily from International and Domestic Equities, as well as a likely small amount from Liquid Alternatives.

Page 4 of6

MOTION by Mr. Milligan, seconded by Mr. Brinsley, to approve the preliminary rebalance and withdrawal of $3,300,000, as recommended by Verus Investments. (Motion unanimously carried, 4-0)

Following this item, Chair Jones moved to Item 9 on the agenda.

9. Review and take action on the policy renewal for Fiduciary Liability Insurance and the purchase of Cyber Liability Insurance, effective July 2, 2017.

Jill Fosselman reviewed the report, highlighting the premiums and coverage afforded in the proposals for fiduciary liability and cyber liability. Although increased coverage was explored and quoted, she explained that the work of the Board likely has adequate coverage under the current limits. In particular, since no claim had ever been filed against the System, and given the comparatively high cost for increased coverage, Ms. Fosselman noted the City's Risk Manager and her shared the belief that the current level of liability coverage was adequate. Further, given the minimal premium discount offered in exchange for a retainer (i.e., deductible), she recommended continuing the policy with no retainer. Ms. Fosselman also reviewed coverage under the proposed new policy for cyber liability, and the Board discussed the merits of purchasing its own policy since the Board could not be added as additional insured under the City's cyber liability policy. System counsel, Isabel Safie, noted her concurrence with the recommendation to maintain the Board's current coverage under the fiduciary liability policy and to purchase a new cyber liability policy.

MOTION by Mr. Tornek, seconded by Mr. Brinsley, to: 1. Approve the policy renewal for fiduciary liability insurance with Markel America

Insurance Company, through Ullico Casualty Group, Inc., in the amount of $18,358 effective July 2, 2017, subject to Counsel review, and

2. Approve the purchase of cyber liability insurance with BCS Insurance Company in the amount of $4,191 effective July 2, 2017, subject to Counsel review. (Motion unanimously carried, 4-0)

Following the action, Chair Jones called for a recess of the meeting at 11:13 a.m.

The Chair reconvened the meeting at 11:25 a.m. and moved to Item 10.

10. Review, discuss and possibly take action on the Administrative Review and Long-term System Forecast. (Continued from March 15, 2017)

Briefly, the Board acknowledged that there were no significant pressing challenges to warrant further exploration into annuitizing the System. The Board next discussed possible changes that could be made in the near term to reduce administrative expenses, including modifying the work of the Board. Discussion ensued as to the work-load and responsibilities of each staff position, including the likely impact on service and/or work of the Board from making changes to the current staffing level. Board members discussed reducing meeting dates by 50% (generally meeting bimonthly), and there was general consensus that they were open to non-personnel reductions. The Board asked staff to include such reductions, including a

Page 5 of 6

recommendation on reducing the number of meeting dates of the Board, as part of the Fiscal Year 2018 Recommended Budget.

MOTION by Mr. Tornek, seconded by Mr. Brinsley, to receive and file the report. (Motion unanimously carried, 4-0}

INFORMATION ITEMS

12. Staff Report- Ms. Fosselman provided a brief update on upcoming disability hearings, trustee training opportunities, and the May/June Board calendar. a. March 2017 Budget Report- noted.

13. Counsel Report - Ms. Safie updated the Board on expected revisions to the Board's disability hearing procedures and the resolution template based on new CaiPERS rulings.

14. Articles/Newsletters/Conferences- none noted.

COMMENTS FROM BOARD MEMBERS

None noted.

ADJOURNMENT

MOTION by Mr. Brinsley, seconded by Mr. Milligan, to adjourn the meeting at 12:03 p.m. (Motion unanimously carried}

Respectfully submitted,

J:d:~~· Keith Jones Secretary to the Board/Administrator Chair, Retirement Board

Details of this meeting are contained on a DVD recording of the meeting and will be kept in the archives for two years, per Board policy.

DISTRIBUTION: Board Members City Attorney Director of Finance

Fire & Police Retirees Assn. Police Chief Fire Chief

P. Fuleihan S. Lebovitz

Page 6 of 6

A. Snitzer D. Barba

PASADENA FIRE AND POLICE RETIREMENT SYSTEM

MONTHLY ALLOWANCE ROLL- TOTALS

MONTH 2014-2015 2015-2016 2016-2017 Notes

JULY 1 '156,360.39 1 '133,056.86 1 '113,678.65 a., b. AUGUST 1,139,148.67 1,132,739.08 1,114,712.51 b., c. SEPTEMBER 1,140,585.54 1 '127, 165.89 1,110,857.14 d. OCTOBER 1,141,527.41 1,122,125.71 1,110,857.14 NOVEMBER 1 '139,378.41 1,121,651 .68 1,110,857.14 DECEMBER 1 '137,229.40 1 '120,576.82 1,105,747.36 e. , f. JANUARY 1,137,229.40 1 '120,576.82 1 ,089,152.42 f., Q. , h., i. , i., k., I. FEBRUARY 1,137,229.40 1,120,576.82 1 ,076,066.67 m., n. , o MARCH 1 '130,773.44 1 '111 ,905.50 1 ,086,444.43 ·. , k., m. , n., o., p. APRIL 1,131,857.62 1 '115,262.14 1 ,072, 755.90 1., p., q., r. MAY 1,126,038.77 1,111 ,905.50 0.00 q ., r. JUNE 1,122,917.19 1,110,123.41 0.00 FY TOTALS 13,640,275.64 13,447,666.23 10,991 '129.36

COL BENEFITS INCLUDED ABOVE 7,177,264.72 7,086,401 .87 5,819,906.81

COL - %Of Total 53% 53% 53%

a. 1% COLA applied to all members and beneficiaries. b. R. Lighter passed away 7/15/16. $4,393.85/month with no continuance. Estate was paid final payment of $2,126.06

on August 31 , 2016 pension payroll (paper check). c . L. Quinn passed away 8/19/16. $2,821.51/month with no continuance. Estate was paid final payment of $1 ,729.31

on August 31 , 2016 pension payroll (paper check). d. N. Roberts passed away 9/15/16. $5,329.71 with 100% continuance to spouse. e. L. Bergeson passed away 12/3/16. $4,696.01 with 100% continuance to spouse. f. J. Ki tabjian passed away 12/13/16. $5,109.78 with NO continuance. Estate was paid final payment of $2,142.81 on

January 31,2017 pension payroll (electronic deposit). g. J. Mackessy passed away 1/2/2017. $7,804.85 with 60% continuance to spouse. Estate was paid final payment of

$503.54 on January 31 , 2017 pension payroll (electronic deposit). h. A. McCracken passed away 1/12/2017. $4,461 .92 with no continuance. Final payment paid 2/28/17. i. B. Williams passed away 1/14/2017. B. Williams has ORO with M. Williams. Her benefit terminated upon his death.

BOTH final payments were paid on the February 28, 2017 pension payroll. B. Williams: $2,869.82. M. Williams: $1 ,385.55. No continuances for either.

j . D. Fraser passed away 1/18/2017. D. Fraser has ORO with the MaryEllen Fraser Revocable Trust. Both final payments were paid on March 31 , 2017. Both payments terminate upon his death. Both payments were each $2,246.00 with No continuance.

k. J. Ireland's ORO payment of $2,607.94 was suspended January and February until paperwork was completed. Accrued January and Feburary and current March payments were paid in March.

I. H. Gouin passed away 1/28/2017. $2,587.29 with NO continuance. Final payment paid April 30, 2017. m. J. Bohn passed 2/4/2017. $3,774.65 with NO continuance. Final payment paid March 31 , 2017.(Paper chk) n. J. Peron passed 2/4/2017. $4,688.72 with NO continuance. Final payment paid March 31 , 2017. o. J . Fields passed 2/20/2017. $3,339.83 with NO continuance. Final payment paid March 31 , 2017. p. R. Picard passed 3/28/17. $1 ,316.96 with NO continuance. Overpaid in Mar, received Refund chk 4/18/17. q. M. Miller passed 4/2/2017. $2,753.57 with NO continuance. Overpaid in April. r. H. Quinan passed 4/16/2017. $702.40 with NO continuance. Final payment was suspended.

R:\Office Docs\Office Management\Retiree Payroii\Payroii\[Total Payroll FY 2017.xlsx]FY 2016 Allow 5/9/2017

ITEM #: 4DATE: 5/17/17

Your Atlanta Capital Team

Michael Jaje, CFA Investment Specialist & Principal (404) 682-2498 [email protected]

Cheryl lnnerarity Portfolio Administrator (404) 682-2552 cheryl. [email protected]

ATLANTA CAPITAL INVESTMENT MANAGERS

1075 Peachtree Street NE I Suite 2100 I Atlanta I GA I 30309

Atlanta Capital Management Co., LLC As of March 31, 2017

• Founded in 1969 in Atlanta, Georgia

• Singular focus on High Quality stocks and bonds

• Owned by employees & Eaton Vance Corporation

• Employ 41 professionals (19 are equity partners)

Investment Franchises ($18.1 Billion)

Core Equity Management ($13.5 Billion)

Fixed Income 10%

Core Equity

Growth Equity -

Assets under management I inception date of strategy.

Small Cap $2.0 bn I 1992

Select Equity $718 mm I 2006

SMID Cap $10.8 bn I 2004

ATLANTA CAPITAL INVESTME~T MANAGE~$

Seasoned & Stable Investment Team

A focused team that combines the benefit of conducting independent fundamental research with the ability to make timely investment decisions.

Portfolio Managers

Investment Specialist

• Portfolio managers are generalists and serve as both research analyst and portfolio manager • Our team does not rely on a research staff to generate ideas or perform fundamental research • Each portfolio manager conducts his own research while decisions are made on a consensus basis

Years indusby experience as of 3131/17 I year joined Atlanta Capital.

ATLANTA CAPITAL INVE5TM ENT MAN.ACiE R.S

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Consistent Growth & Stability in Earnings Key Tenet of Our Investment Philosophy

12%

9%

6%

3%

• •

Five-Year Rolling CAGR of As Reported Earnings Russell2000® Index by Earnings Stability

I I I I I I I I I -- -~-- -~---~-- -~-- -~-- -~-- -~-- -~- --------

1 I I 1 I I - - -~- - -,- - - - - - - - -

I I

87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

Earnings Stability Above-Average Below-Average

Avg. 5-Year CAGR 6.9% 3.8%

Earnings Variability 1.7% 3.6%

# Positive Periods 120 or 100% 101 or 84%

# Negative Periods OorO%

19 or 16%

*Time period: January 1, 1987 - December 31, 2016. The Above-Average Earnings Stability and Below-Average Earnings Stability portfolios are provided to compare the aggregate of all companies in the index with High Quality S&P Rankings (B+ or Better) to those with Low Quality S&P Ran kings (B or Below). The Earnings Stability portfolios are model portfolios fonmed and rebalanced monthly by Atlanta Capital. The universe includes all Russell 2000® Index constituents with S&P Quality Rankings and prices greater than $1. Five-year historical earnings growth rates are calculated using a market capitalization-weighted methodology. The Russell 2000® Index is a widely-accepted measure of the U.S. small cap stock market. Indexes are unmanaged and it is not possible to directly invest in an index. The Above-Average Earnings Stability and Below-Average Earnings Stability portfolios were derived in part from the Russell Index Data and Frank Russell Company remains the source and owner of the Russell Index Data contained or reflected and all trademarks and copyrights. Sources: Russell, Standard & Poor's, Wilshire Atlas, Atlanta Capital. The material is based upon infonmation that Russell, S&P, Wilshire and Atlanta Capital considers to be reliable, but neither Russell, S&P, Wilshire nor Atlanta Capital warrants its completeness, accuracy or adequacy and it should not be relied upon as such. This infonmation is provided for illustrative purposes only and does not reflect historical results for any particular Atlanta Capital investment strategy. Individual client results may vary. The material should not be considered investment advice or a recommendation to invest in a particular strategy. Past perfonmance does not predict future results. Reproduction or redistribution of this page in any form without express penmission from Atlanta Capital is prohibited.


3

Investment Objective April 1, 1992- March 31, 2017

40%

30%

20%

10%

0%

We seek to outperform over the long term by participating in rising markets and protecting capital during declining markets ...

RISING MARKETS DECLINING MARKETS SINCE INCEPTION* (100 Total Quarters) (67 Positive Quarters) (33 Negative Quarters)

Upside Reward + Downside Protection = Long-Term Results

0%

-10%

-20%

-30%

-40%

Beta • HQ Small I R2000® •

0.72 11.00

13%

11%

9%

7%

5%

Standard Deviation • HQ Small I R2000® •

15.2% 119.6%

... without the volatility typically associated with small cap investing. ·t~ceptio~ data of the High O•ality Small capitalization Composije is April1, 1992. For ill•strative p.rposas only. The charta above illustrate the average (annualized) retum of the High Quality Small capitalization Composita during both rising and declining markets and since inception. Rising markets are defined as quarters where the return of the Russell 2000® index was positive. Declining markets are defined as quarters where the return of the Russell 2000" index was negative. These positiva and negativa quartar11 are saparatad out from the intervening quarters, cumulatod across the pe~od. and annualizad. Composite performance is shown in US dollars and reflects reinvestment of all income and capital gains. Composita performance is shown gross of investment advisory and custody faas; upside reward, downside protection and long-term results will be reducad by teas and other client expenses. Composita performance on a nat-of-management teas basis was 11 .9% for the period (after a maximum annual fee of 0.80% accrued monthly). Performance du~ng certain pe~ods reflects strong stock market performance that Is not typical and may not be repeated. Individual client returns will vary due to fees, client-imposad invastment constraints and client inception date. Bate measures the historical sansitivity of portfolio excaas returns to movements in the excess return of the markat index. Standard Deviation is a measure of absolute volatility of returns. The Russell 2000® index is unmanaged and does not incur management teas or other expenses associetad with managad accounts. R is not possible to directly invest in an index. This material is supplemental to the GIPS8 presentation included at the and of this presentation. Please sea the GIPS® composite prasantation for important additional information and disclosura. Past performance does not predict or guarantee futura rasuRa. Source: eVfS~ment and Atlanta ~pita!.

ATLANTA ~APITAL I"''VESTME"''T MANAGEA.5

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Disciplined Investment Process High Quality Small Cap Equity

Step 1. Create a 'Focus List' of High Quality Companies

Exclude companies with:

• Volatile earnings streams

• Short operating histories

• High levels of debt

• Weak cash flow generation

• Low returns on capital

Step 2. Conduct Proprietary 'Onsite' Fundamental Research

Step 3. Construct a Focused Yet Well-Diversified Portfolio

• 3-year average basad on a single representative client portfolio for the strategy and subject to change. Actual results may vary for each client.

5

Step 4. Monitor Holdings & Review Focus List


Summary of Guidelines City of Pasadena Fire & Police Retirement System

Objective • Over rolling three-year periods, the account will be expected to achieve the following:

Outperform the return of the Russell 2000® Index.

Provide a rate of return which ranks in the top half of the Mercer US Small Mid Cap Core Equity Universe.

Generate a standard deviation of quarterly returns which does not exceed that of the Russell 2000® Index by more than 50% without a proportionate percentage increase in return achieved.

Guidelines • No more than 7% of the portfolio's total market value shall be invested in cash.

• The market cap of securities held will generally be within the range of stocks comprising the Russell 2000® Index. Atlanta Capital defines a small cap company as one with a market capitalization greater than the market capitalization of the smallest company in the Russell 2000® Index and less than three times the weighted average market capitalization of companies in that Index. The portfolio management team will generally not initiate a position in a company unless it has a market capitalization between $200 million and $3.0 billion.

• The account's exposure to the securities of any one issuer is limited to the greater of 7.5% of the total account at market value or the benchmark weight of the security plus 2%.

• Portfolio sector allocations is limited to a maximum of 200% of the weight of the sector in the benchmark index or 30%, whichever is greater, with the exception of sectors whose benchmark allocation is less than 5%, where the maximum allocation shall be 15%.

• The account may hold non-U.S. companies up to a maximum of 10% of the total account at market value. All issues must be denominated in US dollars.

Trading • Investment Managers shall effect all purchases and sales of securities for the account in a manner consistent with the

principals of best execution, taking into account net price (including commissions), execution capability and other services which the broker or dealer may provide.


6

Summary of Guidelines City of Pasadena Fire & Police Retirement System

Proxy Voting • All proxies shall be voted at the Investment Managers' discretion in the best interests of the participants of the system's

constituent base.

Investment Policy Date: July 2011. Amended February 2015


7

Annualized Performance As of March 31, 2017

City of Pasadena Fire and Police Retirement System

QTD (%)

YTD (%)

1 Yr (%)

3Yrs* (%)

5Yrs* (%)

7Yrs* (%)

10 Yrs* (%)

Since Inception*

(%)

High Quality Small Cap 1.77 1.77 16.37 11.48 14.55 15.39 - 17.83

Russell 2500 - 2000 (03/01/15) Periods < 03/01/15 represent SMID

2.47 2.47 26.22 7.97

Account Summary

Performance Inception Date:

Net Investment Contributions:

Investment Dollars Earned:

Market Value (03/31/17):

"Time periods greater than one year are annualized. Performance reflects reinvestment of all income and capital gains (realized and unrealized). Results are based on the accrual method of accounting as well as trade dale valuation. Returns are gross of fees unless otherwise noted.

12.95

June 30, 2009

($4,975,964)

$9,905,393

$4,929,429

Gross of fee returns do not reflect the deduction of management and custodial fees. Net of fee returns reflect the deduction of the management fee accrued on a monthly basis. Returns are based on the total assets of the client's account, calculated on a daily basis, and geometrically linked to calculate returns for longer periods of time. The unmanaged indexes shown for comparative purposes do not reflect the subtraction of any fees or transaction costs. II is not possible to directly invest in an index. Past performance does not guarantee or predict future results.

8

12.97 16.36


Performance Drivers & Detractors As of March 31, 2017 City of Pasadena Fire and Police Retirement System

Total Portfolio

vs. Russell 2000® Index

Sector Allocation

Stock Selection

Excess Return

Last3-Mos. Attribution

(%)

-0.3

-0.4

-0.7

+ Positive stock selection in Industrials and Consumer Staples

+ Underweight Energy, Real Estate

+ Underweight Financials

- Negative stock selection in Technology, Health Care, and Financials

- Underweight Health Care (specifically Biotech)

Sector Allocation

Stock Selection

Excess Return

Last 12-Mos. Attribution

(%)

-9.2

-9.7

-0.5

+ Positive stock selection in Health Care

+ Underweight Real Estate and Health Care

+ Lack of exposure to Utilities

- Negative stock selection in Technology, Financials, Materials, and Industrials

- Overweight Consumer Discretionary

- Overweight Consumer Staples

Stock Selection + Sector Allocation = Excess Return Source: Factset


9

Portfolio Transactions Last 3-Months Ending March 31, 2017 City of Pasadena Fire and Police Retirement System High Quality Small Cap

Purchases none this quarter


10

Portfolio Transactions Last 3-Months Ending March 31, 2017 City of Pasadena Fire and Police Retirement System High Quality Small Cap

Sales Consumer Discretionary

CLARCOR Manufactures specialized filters used in industrial end markets. CLARCOR receiwd offer to be acquired by Parker Hannafin in the fourth quarter. The transaction closed during the first quarter.


11

Portfolio Characteristics As of March 31, 2017 City of Pasadena Fire and Police Retirement System

Top Ten Holdings o/o Portfolio Metrics

Manhattan Associates 3.9 Corelogic 3.1 Metrics AptarGroup 2.9

#of Holdings Black baud 2.8 Casey's General Stores 2.7 Wtd. A\9. Mkt. Cap (billions)

Exponent 2.5 Historical Earnings Growth

Morningstar 2.5 Forecasted Earnings Growth Choice Hotels lnt'l 2.5 Return on Equity Fair Isaac Corp. 2.5 Price/Earnings (NTM) Columbia Sportswear 2.5 Dividend Yield

Sector Exposure

Russe II 2000® Total Index Portfolio

1,946 57 $2.2 $3.2 9% 7% 13% 10% 7% 17%

18.5x 22.6x 1.4% 0.9%

40

35

30

25

20

15

10

• Total Portfolio • Russell 2000® Index

5

0

23A

Industrials Information Consumer Financial& Health Care Consumer Materials Technology Discretionary Staples

Source: FactSet. Sector weight percentages shown are percentages of total equities.

12

0.0 0.7

Energy Real Estate Telecomm Services

3.7 5.0

0.0

Utilities Cash


Current Portfolio Holdings As of March 31, 2017

City of Pasadena Fire and Police Retirement System High Quality Small Cap

Ending

Sector Weight

Consumer Discretionary 15.5% vs. 12.2% State Bank Financial (SlBZ)

Bright Horizons (BFAM) 1.3% Urrpqua Holdings Corp. (UWQ)

Choice Hotels lnt'l (CHH) 2.5% Westarrerica Bancorp. (WABC)

Colurrbia Sportswear (COLM) 2.5% Health Care

DorrTBn R"oducts (DORM) 2.4% Bio-Rad Labs (BIO)

Hibbett Sports (HIBB) 0.7% Bio-Techne (TECH)

11/bnro 11/Uffler Brake (11/NRO) 1.3% OJ Medical (K;U~

R>ol Corp. (POOL) 1.9% Integra LifeSciences (LI\Rl)

Sally Beauty Hldgs. (SBH) 2.0% VC'A (INOOF)

Wolverine World Wide (1/W\/N) 0.8% Industrials

Consumer Staples 7.6% vs. 2.9% AAON(AAON)

casey's General Stores (C'ASY) 2.7% Advisory Board Co. (ABCO)

Inter Parfums (IPAR) 1.9% Beacon Roofing Supply (BECN)

J&J Snack Foods Corp. (JJSF) 1.8% Exponent (EXPO)

Lancaster Colony Corp. (LANC) 1.1% Forward Air (FWRD)

Energy 1.1% vs. 3.4% Graco (GGG)

Drii-Quip (DRQ) 1.1% HEro Corp. A (H8.A)

Financials 14.8% vs. 19.4% Huron Consulting Group (HURN)

Artisan Partners (APAM) 1.0% Kirby Corp. (KEX)

IBERLI\BANK Corp. (IBKC) 1.4% Knight Transportation (KNX.)

11/brningstar (t.IORN) 2.5% Landstar System (LSTR)

Navigators Group (NA VG) 1.5% 11/bog (MOG.A)

Pinnacle Fin'l Partners (PNFF? 1.4% Raven Industries (RA VN)

R"osperity Bancshares (PB) 1.6% UniFirst Corp. (UNF)

RLI Corp. (RL~ 1.2% US Ecology (ECOL)

Source: FactSet.

13

• Total Portfolio

• Russell 2000® Index

1.6% Information Technology 18.9% vs. 17.5%

1.2% Blackbaud (BLKB) 2.8%

1.4% cass nforrTBtion Sys (C'ASS) 1.0%

8.1% vs. 13.0% CoreLogic (CLGX) 3.1%

2.3% Fair Isaac Corp. (FK::O) 2.5%

2.0% l\llanhattan Associates (IVIANH) 3.9%

1.1% Nationallnstrurrents (NA Tl) 1.3%

1.5% R>wer Integrations (PO~ 0.9%

1.2% ScanSource (SCSC) 0.9%

23.4% vs. 14.3% wcx. (W'CX.) 2.5%

1.0% Materials 4.7% vs. 5.2%

1.1% AptarGroup (A TR) 2.9%

1.4% Balchem Corp. (BCPC) 1.0%

2.5% Stepan Co. (SCL) 0.8%

1.6% Real EState 1.0% vs. 7.8% 2.0% Universal Health Realty (UHl) 1.0%

2.0% Telecommunication Services 0.0% vs. 0.7%

1.0%

2.1% Utilities 0.0% vs. 3.7% 1.8%

1.8% Cash 5.0% vs. 0.0%

1.8%

1.0%

1.6%

0.7%


Investment Outlook & Strategy As of March 31, 2017

High Quality Small Cap

Outlook

• The Russell 20QQ® small cap index hit an all-time high in March and posted a total gain of+ 2.5% for the quarter.

• The fourth quarter "Trump Trade" favoring Financials, Energy, and Industrials largely reversed in the first quarter. All three sectors underperformed for the period.

• With US unemployment at a relatively low 4.7% and global economic growth accelerating, inflation pressures are emerging. Headline inflation in the US has recently surged to 2.7% from near zero two years ago. Higher inflation could cause the Federal Reserve to raise interest rates more aggressively and upend our richly priced stock market.

Portfolio Positioning

• During the first quarter, CLARCOR was acquired by Parker Hannifin for a premium. There were no new purchases.

• At quarter end, the portfolio contained 57 positions representing nine of the eleven economic sectors in the Russell 2000®.

• Relative to the benchmark, the portfolio was overweight Industrials, Consumer Staples, Consumer Discretionary, and Technology.

• The portfolio was underweight Real Estate, Health Care, Financials, Energy, and Materials. There are no positions in Utilities or Telecom Services.


14

GIPS® Performance Information and Disclosure High Quality Small Capitalization Composite (E7)

January 1, 2007 through March 31, 2017

Period Composite Composite Russell 2000® Composite Russell 2000®

Gross Return(%) Nat Return (%) Return(%) 3-yr Std. Dav. (%) 3-yr Std. Dav. (%)

2017(1) 1.72 1.52 2.47 12.37 15.46

2016 19.00 18.07 21.31 12.69 15.76

2015 5.12 4.29 -4.41 12.68 13.96

2014 3.60 2.78 4.89 10.52 13.12

2013 42.34 41.24 38.82 12.80 16.45

2012 12.24 11.36 16.35 16.63 20.20

2011 10.31 9.44 -4.18 21.88 24.99

2010 25.98 24.99 26.86 24.41 27.69

2009 27.17 26.18 27.17 21.69 24.83

2008 -19.41 -20.06 -33.79 16.62 19.85

2007 6.77 5.92 -1.57 10.66 13.17

(1) Period- 01/01/2017through 03/31/2017. Past performance does not predict or guarantee future results.

Number of Internal Composite Firm Portfolios Dispersion (%) Assets ($mil) Assets ($mil)

52 0.08 1,499 18,104

53 0.19 1,544 17,646

54 0.16 1,259 16,054

56 0.24 1,235 16,707

57 0.51 1,294 18,082

60 0.22 996 14,235

60 0.25 1,023 11,964

49 0.19 737 9,845

36 0.34 639 7,748

38 0.34 494 6,199

37 0.25 551 8,828

Atlanta Capital Management Company, LLC claims compliance with the Global Investment Performance Standards (GIPS") and has prepared and presented this report in compliance with the GIPS Standards. Atlanta Capital Management has bean independently verified for the periods January 1, 1999 through June 30, 2016.

Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm's policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. The High Quality Small Capitalization Composite has bean examined for the periods January 1,1999 through June 30, 2016. The verification and performance examination reports are available upon request.

Composite Description: The investment objective of this style is to seek long-tsrm capital growth. Accounts in this composite invest in common stocks of companies having market capitalizations within the range of companies comprising the Russell 2000®. Management seeks to invest in quality companies in strong financial condition whose equities are priced below their estimate of fair value. Characteristics of high quality companies include a history of sustained growth in earnings and operating cash flow, high returns on capital, attractive profit margins and leading industry positions. Investments are determined based primarily on fundamental analysis of a company's financial trends, products and services, and other factors. Financial quality ran kings provided by nationally-recognized rating services may be utilized as part of the investment analysis but are not solely relied upon. The portfolios are broadly diversified. All fully discretionary accounts that are managed in this style and do not pay a bundled or SMA wrap fee are eligible for inclusion in the composite. Benchmark: The benchmark for this composite is the Russell2000® Index. The Index includes the smallest 2000 companies in the Russell 3000® and is a widely accepted measure of the small-<:ap segment of the U.S. equ~y universe. The index is unmanaged and does not incur management fees, transaction cosls or other expanses associated with managed accounts. II is not possible to directly invest in an index. Prior to July 1, 2005, the composite utilized two indexes as benchmarks, the Russell 2000® and the Russell 2000® Value Index, the rationale baing that the portfolio construction process produced both cora and value characteristics. Our high quality investment philosophy tends to be defensive in natura and does consider valuation matrics, but it is mora consistent with the philosophy and process of a cora manager than a value manager. In order to clarify our philosophy and process for potential clients, we determined that it is most appropriate to benchmark our performance results against the Russell 2000® Index only. This change to the composite presentation was made as of July 1, 2005 and did not change the portfolio construction process. Gross and Net Returns: Performance reflects reinvestment of all income and capital gains. Composite returns and market values are reported in U.S. dollars. Gross-of-fees performance returns are presented before management and custodial fees but after all trading expenses. Returns are presented net of withholding taxes. Net-of-fees performance returns are calculated by deducting the highest management fee of 0.80% from the monthly gross-of-fees returns. Other expenses will reduce a client's returns. The annual fee schedule for this composite is as follows: 0.80% on the first $50 million in assets; 0. 70% on the next $50 million in assets; 0.60% on the next $150 million. Actual management fees incurred by clients may vary. Dispersion: The annual internal composite dispersion is calculated using the asset-weighted standard deviation of annual gross returns of those portfolios that ware included in the composite for the entire year. The three-year annualized standard deviation measures the variability of the composite and the benchmark returns over the preceding 36-month period. Notes: The creation date of this composite is July 1992. Effective July 1, 2010, the composite was redefined to include both taxable and tax-exempt institutional accounts. The composite up to that time included only tax-exempt institutional accounts. The change provides increased transparency to prospective clients by reducing the number of separate composites maintained for this strategy. There has been no change in investment objective or management style. Clients or prospective clients should not assume that they will have an investment experience similar to that indicated by past performance results, as shown on the Schedule. Returns may vary based upon differences in account size, timing of transactions and market conditions at the time of investment. Performance during certain time periods reflects the strong stock market performance and/or the strong performance of stocks held during those periods. This performance is not typical and may not be repeated. Firm Definition: Atlanta Capital Management Company, LLC (Atlanta Capital or the Firm) is an SEC-registered investment adviser located in Atlanta, Georgia. The Firm became a majority-owned subsidiary of Eaton Vance Corp. in 2001. Atlanta Capital operates as an independent subsidiary of Eaton Vance and provides professional investment advisory services to a broad range of institutional and individual clients, and sub-advisory investment management to mutual funds and separately managed sub-advisory account programs. Atlanta Capital includes all discretionary accounts under management in its composites; firm assets include nondiscretionary accounts as well. The Firm's list of composite descriptions and policies for valuing portfolios, calculating performance and preparing compliant presentations are available upon request. To request any additional information, please contact the Atlanta Capital Management Performance Department at404-876-9411 or write to Atlanta Capital Management Company, LLC, 1075 Peachtree Street NE, Suite 2100, Atlanta, Georgia 30309, Attention Performance Department.

Atlanta Capital High Quality Small Capitalization Composite

Composite Gross of Fees

Composite Nat of Fees

Russell 2000® Index

Inception date 1s Apri/1, 1992. 04.10.17

1 Year

16.34

15.43

26.22

Annualiud Returns (%) for Periods Ending 03131/2017

3Years 5Years 7Years

10.03 14.14 15.42

9.16 13.24 14.52

7.22 12.35 12.27

15

Cumulative (%)

10 Years Since Inception• Since Inception•

12.10 12.83 1942.39

11.22 11.93 1573.60

7.12 9.48 861.65



16

CITY OF PASADENA FIRE AND POLICE RETIREMENT SYSTEM

EQUITIES

CONSUMER DISCRETIONARY CONSUMER STAPLES ENERGY FINANCIALS HEALTH CARE INDUSTRIALS INFORMATION TECHNOLOGY MATERIALS REAL ESTATE

SUBTOTAL EQUITIES

INVESTABLE CASH

EQUITY CASH

TOTAL

ACCRUED DIVIDENDS

TOTAL PORTFOLIO

INVESTMENT SUMMARY

TOTAL COST

($)

658,862 289,910

66,743 589,172 292,747 954,946 647,425 137,036 38,763

3,675,604

247,837

3,923,441

TOTAL MARKET

($)

762,284 374,922

52,368 731,096 398,908

1,151,575 929,730 229,994 48,246

4,679,122

247,837

4,926,959

2,469

4,929,429

17

PORT WGHT

(%)

15.5 7.6 1.1

14.8 8.1

23.4 18.9 4.7 1.0

95.0

5.0

100.0

ANNUAL INCOME

($)

5,466 4,982

0 15,738

1,221 7,323 3,588 2,984 1,960

43,262

25

43,287

03/31/17

CURRENT YIELD

(%)

0.7 1.3 0.0 2.2 0.3 0.6 0.4 1.3 4.1

0.9

0.0

0.9

CITY OF PASADENA FIRE AND POLICE 03/31/17 RETIREMENT SYSTEM

ASSET STATEMENT

SECURITY COST I MARKET I TOTAL TOTAL PORT ANNUAL CURRENT DESCRIPTION SHARE SHARE COST MARKET WHTG INCOME YIELD

SHARES ($) ($) ($) ($) (%) ($) (%)

EQUITIES

CONSUMER DISCRETIONARY

BRIGHT HORIZONS FAMILY SOL 859 64.94 72.49 55,784 62,269 1.3 0 0.0 CHOICE HOTELS INT'L INC 1,967 59.90 62.60 117,818 123,134 2.5 1,692 1.4 COLUMBIA SPORTSWEAR CO 2,140 38.87 58.75 83,171 125,725 2.6 1,541 1.2 DORMAN PRODUCTS INC 1,412 46.51 82.13 65,668 115,968 2.4 0 0.0 HIBBETT SPORTS INC 1,122 48.96 29.50 54,932 33,099 0.7 0 0.0 MONRO MUFFLER BRAKE INC 1,250 63.19 52.10 78,992 65,125 1.3 850 1.3 POOL CORP 797 69.18 119.33 55,138 95,106 1.9 988 1.0 SALLY BEAUTY HOLDINGS INC 4,927 19.92 20.44 98,129 100,708 2.0 0 0.0 WOLVERINE WORLD WIDE INC 1,648 29.87 24.97 49,228 41,151 0.8 396 1.0

658,862 762,284 15.5 5,466 0.7

CONSUMER STAPLES

CASEY'S GEN'L STORES INC 1,193 91.46 112.25 109,114 133,914 2.7 1,145 0.9 INTER PARFUMS INC 2,611 28.35 36.55 74,026 95,432 1.9 1,775 1.9 J&J SNACK FOODS CORP 669 101.45 135.56 67,868 90,690 1.8 1,124 1.2 LANCASTER COLONY CORP 426 91.32 128.84 38,902 54,886 1.1 937 1.7

289,910 374,922 7.6 4,982 1.3

ENERGY

DRIL-QUIP INC 960 69.52 54.55 66,743 52,368 1.1 0 0.0

FINANCIALS

ARTISAN PARTNERS ASSET MGMT INC 1,724 49.74 27.60 85,760 47,582 1.0 4,138 8.7 IBERIABANK CORP 878 61.96 79.10 54,401 69,450 1.4 1,264 1.8 MORNINGSTAR INC 1,593 50.67 78.60 80,716 125,210 2.5 1,466 1.2 NAVIGATORS GROUP INC 1,372 43.67 54.30 59,916 74,500 1.5 247 0.3 PINNACLE FINANCIAL PARTNERS 1,056 40.87 66.45 43,154 70,171 1.4 591 0.8

18


ASSET STATEMENT


SHARES ($) ($) ($) ($) (%) ($) (%)

EQUITIES -cont.

FINANCIALS -cont.

PROSPERITY BANCSHARES INC 1,124 52.09 69.71 58,544 78,354 1.6 1,529 2.0 RLI CORP 1,003 49.72 60.02 49,866 60,200 1.2 802 1.3 STATE BANK FINANCIAL CORP 3,047 20.08 26.12 61,175 79,588 1.6 1,706 2.1 UMPQUA HOLDINGS CORP 3,278 13.00 17.74 42,618 58,152 1.2 2,098 3.6 WESTAMERICA BANCORPORATION 1,216 43.60 55.83 53,023 67,889 1.4 1,897 2.8

589,172 731,096 14.8 15,738 2.2

HEALTH CARE

BIO-RAD LABORATORIES INC CL A 572 82.81 199.34 47,369 114,022 2.3 0 0.0 BIO-TECHNE CORP 954 97.73 101.65 93,233 96,974 2.0 1,221 1.3 ICU MEDICAL INC 356 126.11 152.70 44,894 54,361 1.1 0 0.0 INTEGRA LIFESCIENCES HOLDINGS 1,717 42.38 42.13 72,774 72,337 1.5 0 0.0 VCAINC 669 51.53 91.50 34,476 61,214 1.2 0 0.0

292,747 398,908 8.1 1,221 0.3

INDUSTRIALS

MONINC 1,405 23.90 35.35 33,580 49,667 1.0 365 0.7 ADVISORY BOARD CO 1,104 52.42 46.80 57,867 51,667 1.0 0 0.0 BEACON ROOFING SUPPLY INC 1,372 28.98 49.16 39,759 67,448 1.4 0 0.0 EXPONENT INC 2,028 43.75 59.55 88,724 120,767 2.5 1,704 1.4 FORWARD AIR CORP 1,705 52.98 47.57 90,339 81,107 1.6 1,023 1.3 GRACO INC 1,035 42.02 94.14 43,490 97,435 2.0 1,490 1.5 HE ICO CORP CL A 1,325 42.95 75.00 56,906 99,375 2.0 239 0.2 HURON CONSULTING GROUP INC 1,219 64.72 42.10 78,889 51,320 1.0 0 0.0 KIRBY CORPORATION 1,472 53.06 70.55 78,107 103,850 2.1 0 0.0 KNIGHT TRANSPORTATION INC 2,883 31.78 31.35 91,622 90,382 1.8 692 0.8 LANDSTAR SYSTEM INC 1,037 57.62 85.65 59,754 88,819 1.8 373 0.4 MOOG INCCLA 1,340 76.00 67.35 101,840 90,249 1.8 0 0.0 RAVEN INDUSTRIES INC 1,620 20.35 29.05 32,962 47,061 1.0 842 1.8

19


ASSET STATEMENT


SHARES ($) ($) ($) ($) (%) ($) (%)

EQUITIES -cont.

INDUSTRIALS -cont.

UNIFIRST CORP 560 122.04 141.45 68,343 79,212 1.6 84 0.1 US ECOLOGY INC 709 46.21 46.85 32,764 33,217 0.7 510 1.5

954,946 1,151,575 23.4 7,323 0.6

INFORMATION TECHNOLOGY

BLACKBAUD INC 1,807 23.40 76.67 42,286 138,543 2.8 867 0.6 CASS INFORMATION SYSTEMS INC 721 50.81 66.10 36,632 47,658 1.0 663 1.4 CORELOGIC INC 3,713 36.00 40.72 133,684 151,193 3.1 0 0.0 FAIR ISAAC CORP 970 15.59 128.95 15,123 125,082 2.5 78 0.1 MANHATTAN ASSOCIATES INC 3,702 48.72 52.05 180,366 192,689 3.9 0 0.0 NATIONAL INSTRUMENTS CORP 1,907 30.72 32.56 58,586 62,092 1.3 1,602 2.6 POWER INTEGRATIONS INC 675 56.74 65.75 38,298 44,381 0.9 378 0.9 SCANSOURCE INC 1 '171 37.27 39.25 43,640 45,962 0.9 0 0.0 WEXINC 1,180 83.74 103.50 98,811 122,130 2.5 0 0.0

647,425 929,730 18.9 3,588 0.4

MATERIALS

APTARGROUP INC 1,841 44.40 76.99 81,738 141,739 2.9 2,356 1.7 BALCHEM CORP 608 58.49 82.42 35,564 50,111 1.0 231 0.5 STEPAN CO 484 40.77 78.81 19,735 38,144 0.8 397 1.0

137,036 229,994 4.7 2,984 1.3

REAL ESTATE

20


ASSET STATEMENT


SHARES ($) ($) ($) ($) (%) ($) (%)

EQUITIES -cont. UNIVERSAL HEALTH RL TY INCOME TR 748 51.82 64.50 38,763 48,246 1.0 1,960 4.1

3,675,604 4,679,122 95.0 43,262 0.9

INVESTABLE CASH

EQUITY CASH 248 0.00 1000.00 247,837 247,837 5.0 25 0.0

TOTAL 3,923,441 4,926,959 100.0 43,287 0.9

ACCRUED DIVIDENDS 2,469

TOTAL PORTFOLIO 4,929,429

21


SECURITY

EQUITIES

APTARGROUP INC BIO-TECHNE CORP COLUMBIA SPORTSWEAR CO DORMAN PRODUCTS INC ICU MEDICAL INC INTER PARFUMS INC KIRBY CORPORATION UNIFIRST CORP WEXINC BIO-TECHNE CORP BIO-TECHNE CORP BIO-TECHNE CORP BIO-TECHNE CORP BIO-TECHNE CORP BIO-TECHNE CORP BIO-TECHNE CORP BIO-TECHNE CORP BIO-TECHNE CORP BIO-TECHNE CORP BIO-TECHNE CORP BIO-TECHNE CORP BIO-TECHNE CORP APTARGROUP INC BIO-TECHNE CORP UNIFIRST CORP APTARGROUP INC BIO-TECHNE CORP APTARGROUP INC BIO-TECHNE CORP APTARGROUP INC BIO-TECHNE CORP APTARGROUP INC BIO-TECHNE CORP

PARI SHARES

166 76

169 83 36

220 71 78

168 1 1 4 4 5 3 3 8 5 5 2 2 2 1 2 2 3 2 3 2 2 1 3 5

TRANSACTION SCHEDULE - PURCHASES

FROM: 01/01/17

TRADE DATE

01/25/17 01/25/17 01/25/17 01/25/17 01/25/17 01/25/17 01/25/17 01/25/17 01/25/17 02/09/17 02/09/17 02/10/17 02/13/17 02/14/17 02/15/17 02/16/17 02/17/17 02/21/17 02/22/17 02/23/17 02/24/17 02/27/17 02/28/17 02/28/17 02/28/17 03/01/17 03/01/17 03/02/17 03/02/17 03/03/17 03/03/17 03/06/17 03/06/17

TO: 03/31/17

COST/ SHARE

($)

-73.47 -99.18 -56.71 -68.93

-136.24 -32.61 -66.04

-130.34 -116.81 -102.51 -102.66 -102.83 -104.02 -104.42 -104.52 -104.64 -105.04 -105.29 -105.81 -106.05 -106.08 -106.81

-74.47 -106.70 -132.83

-75.96 -107.96

-75.87 -106.98

-75.99 -107.D1

-75.82 -107.14

22

TOTAL COST

($)

-12,195.51 -7,537.30 -9,584.47 -5,721.60 -4,904.46 -7,174.71 -4,688.49

-10,166.13 -19,624.32

-102.51 -102.66 -411.31 -416.08 -522.10 -313.57 -313.93 -840.28 -526.45 -529.05 -212.10 -212.15 -213.62

-74.47 -213.40 -265.66 -227.87 -215.91 -227.61 -213.96 -151.97 -107.01 -227.45 -535.69


SECURITY

EQUITIES -cont.

APTARGROUP INC BIO-TECHNE CORP APTARGROUP INC BIO-TECHNE CORP BIO-TECHNE CORP APTARGROUP INC BIO-TECHNE CORP BIO-TECHNE CORP BIO-TECHNE CORP BIO-TECHNE CORP CORELOGIC INC GRACO INC INTEGRA LIFESCIENCES HOLDINGS INTEGRA LIFESCIENCES HOLDINGS NAVIGATORS GROUP INC NAVIGATORS GROUP INC WEXINC CORELOGIC INC CORELOGIC INC CORELOGIC INC CORELOGIC INC

PARI SHARES

4 3 5 1 2 1 1 3 3

26 66 72 65

164 50 92

141 170 118 107 128

TRANSACTION SCHEDULE - PURCHASES

FROM: 01/01/17

TRADE DATE

03/07/17 03/07/17 03/08/17 03/08/17 03/08/17 03/09/17 03/09/17 03/09/17 03/10/17 03/15/17 03/24/17 03/24/17 03/24/17 03/24/17 03/24/17 03/24/17 03/24/17 03/27/17 03/28/17 03/30/17 03/30/17

TO: 03/31/17

COST/ SHARE

($)

-75.40 -106.81

-75.92 -106.88 -106.89

-76.32 -107.13 -107.12 -107.81 -106.85

-39.19 -94.39 -42.54 -42.92 -53.80 -53.83

-102.08 -38.85 -39.89 -40.50 -40.58

23

TOTAL COST

($)

-301.61 -320.42 -379.59 -106.88 -213.77

-76.32 -107.13 -321.36 -323.44

-2,778.12 -2,586.75 -6,796.14 -2,765.34 -7,038.32 -2,689.76 -4,952.77

-14,392.62 -6,603.79 -4,706.44 -4,333.47 -5,193.83

-155,761.67


EQUITIES

AAON INC BLACKBAUD INC

SECURITY DESCRIPTION

CASS INFORMATION SYSTEMS INC CHOICE HOTELS INTL INC CLARCORINC DRIL-QUIP INC FAIR ISAAC CORP FORWARD AIR CORP GRACO INC IBERIABANK CORP MANHATTAN ASSOCIATES INC MOOG INCCLA MORNINGSTAR INC NATIONAL INSTRUMENTS CORP PINNACLE FINANCIAL PARTNERS POOL CORP POWER INTEGRATIONS INC PROSPERITY BANCSHARES INC RLI CORP UMPQUA HOLDINGS CORP US ECOLOGY INC VCAINC CLARCORINC CLARCORINC CLARCORINC CLARCORINC CLARCORINC CLARCORINC CLARCORINC CLARCORINC CLARCORINC CLARCORINC CLARCORINC

PARI SHARES

162 143 102 349 350 206

66 231

84 106 152 109 329 265

73 65

105 147 195 429 102 416

10 3 5

10 7

18 7

16 3 6 8

TRANSACTION SCHEDULE -SALES

FROM: 01/01/17

TRADE DATE

01/25/17 01/25/17 01/25/17 01/25/17 01/25/17 01/25/17 01/25/17 01/25/17 01/25/17 01/25/17 01/25/17 01/25/17 01/25/17 01/25/17 01/25/17 01/25/17 01/25/17 01/25/17 01/25/17 01/25/17 01/25/17 01/25/17 02/09/17 02/10/17 02/10/17 02/13/17 02/14/17 02/15/17 02/16/17 02/17/17 02/21/17 02/21/17 02/22/17

TO: 03/31/17

COST/ SHARE

($)

23.90 23.40 50.81 59.90 47.07 69.52 15.59 52.98 38.10 61.96 48.72 76.00 50.67 30.72 40.87 69.18 56.74 52.09 49.72 13.00 46.21 51.53 47.07 47.07 47.07 47.07 47.07 47.07 47.07 47.07 47.07 47.07 47.07

24

TOTAL COST

($)

3,871.90 3,346.35 5,182.27

20,904.23 16,475.98 14,321.95

1,028.96 12,239.49 3,200.75 6,567.79 7,405.62 8,284.02

16,670.10 8,141.23 2,983.18 4,496.86 5,957.52 7,656.58 9,694.85 5,577.47 4,713.61

21,438.26 470.74 141.22 235.37 470.74 329.52 847.34 329.52 753.19 141.22 282.45 376.59

PRICE/ SHARE

($)

34.50 67.22 67.36 55.61 82.96 63.16

124.99 49.75 88.15 82.90 52.39 63.37 75.97 31.80 68.91

106.44 71.96 75.49 60.30 18.47 51.31 90.70 82.88 82.86 82.86 82.88 82.88 82.91 82.91 82.91 82.92 82.95 82.95

TOTAL PROCEEDS

($)

5,588.21 9,612.25 6,870.74

19,406.76 29,037.60 13,011.70 8,249.16

11,491.52 7,404.85 8,787.73 7,963.34 6,907.71

24,993.28 8,425.98 5,030.68 6,918.76 7,556.15

11,097.57 11,759.21 7,925.59 5,233.91

37,732.45 828.80 248.59 414.30 828.80 580.17

1,492.41 580.34

1,326.56 248.77 497.68 663.59

GAIN LOSS

($)

1,716.31 6,265.90 1,688.47

-1,497.47 12,561.62 -1,310.25 7,220.20 -747.97

4,204.10 2,219.94

557.72 -1,376.31 8,323.18

284.75 2,047.50 2,421.90 1,598.63 3,440.99 2,064.36 2,348.12

520.30 16,294.19

358.06 107.37 178.93 358.06 250.65 645.07 250.82 573.37 107.55 215.23 287.00


EQUITIES

CLARCORINC CLARCORINC CLARCORINC CLARCORINC HEICO CORP CL A

SECURITY DESCRIPTION

-cont.

PARI SHARES

5 13 30

1,029 39

TRANSACTION SCHEDULE -SALES

FROM: 01/01/17

TRADE DATE

02/23/17 02/24/17 02/24/17 02/28/17 03/24/17

TO: 03/31/17

COST/ SHARE

($)

47.07 47.07 47.07 47.07 42.95

25

TOTAL COST

($)

235.37 611.97

1,412.23 48,439.39

1,674.96

246,910.79

246,910.79

PRICE/ SHARE

($)

82.94 82.94 82.95 83.00 73.11

TOTAL PROCEEDS

($)

414.72 1,078.25 2,488.50

85,407.00 2,851.40

360,955.03

360,955.03

GAIN LOSS

($)

179.35 466.28

1,076.27 36,967.61

1,176.44

114,044.24

114,044.24

Proxy Report


26

City of Pasadena Fire and Police Retirement System Reporting Period: 01/01/2017 to 03/31/2017

UniFirst Corporation Meeting Date: 01/10/2017 Record Date: 11/17/2016

ProPOSal Number Issue

1.1 Elect Director Ronald D. Croatti

1.2 Elect Director Thomas S. Postek

1.3 Elect Director Raymond C. Zemlin

2 Ratify Ernst & Young LLP as Auditors

Sally Beauty Holdings, Inc. Meeting Date: 01/26/2017 Record Date: 12/01/2016


1.1 Elect Director Katherine Button Bell

1.2 Elect Director Christian A. Brickman

1.3 Elect Director Erin Nealy Cox

1.4 Elect Director Marshall E. Eisenberg

1.5 Elect Director David W. Gibbs

1.6 Elect Director Robert R. McMaster

1.7 Elect Director John A. Miller

1.8 Elect Director Susan R. Mulder

1.9 Elect Director Edward W. Rabin

Shares Voted: 480

Withhold

Withhold

For

For

Shares Voted: 4,927

For

For

For

For

For

For

For

For

For

2 Advisory Vote to Ratify Named Executive Officers' For Compensation

3 Advisory Vote on Say on Pay Frequency

4 Ratify KPMG LLP as Auditors

Beacon Roofing Supply, Inc. Meeting Date: 02/10/2017

ProPOSal Number

1.1

1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

Record Date: 12/16/2016

Elect Director Robert R. Buck

Elect Director Paul M. Isabella

Elect Director carl T. Berquist

Elect Director Richard W. Frost

Elect Director Alan Gershenhorn

Elect Director Philip W. Knisely

Elect Director Robert M. Mclaughlin

Elect Director Neil S. Novich

Elect Director Stuart A. Randle

One Year

For

Shares Voted: 1,372

For

For

For

For

For

For

For

For

For

27

1.10 Elect Director Douglas L. Young For

2 Ratify Ernst & Young LLP as Auditors For

3 Advisory Vote to Ratify Named Executive Officers' For Compensation

4 Advisory Vote on Say on Pay Frequency One Year

5 Approve Executive Incentive Bonus Plan For

Fair Isaac Corporation Meeting Date: 02/15/2017

Proposal Number

1a

1b

1c

1d

1e

1f

1g

1h

1i

2

3

4

5

Record Date: 12/19/2016 Shares Voted: 1,036

Elect Director Braden R. Kelly

Elect Director A. George Battle

Elect Director Mark W. Begor

Elect Director Greg R. Gianforte

Elect Director James D. Kirsner

Elect Director William J. Lansing

Elect Director Marc F. McMorris

Elect Director Joanna Rees

Elect Director David A. Rey

Amend Omnibus Stock Plan

Advisory Vote to Ratify Named Executive Officers' Compensation

Advisory Vote on Say on Pay Frequency

Ratify Deloitte & Touche LLP as Auditors

For

For

For

For

For

For

For

For

For

For

For

One Year

For

J &. J SNACK FOODS CORP. Meeting Date: 02/15/2017

Proposal Number

2

3

Moog Inc. Meeting Date: 02/15/2017

Proposal Number

2

Record Date: 12/19/2016 Shares Voted: 669

Elect Director Dennis G. Moore

Advisory Vote to Ratify Named Executive Officers' Compensation


For

For

One Year

Record Date: 12/20/2016 Shares Voted: 1,449

Elect Director Kraig H. Kayser For

Approve Qualified Employee Stock Purchase Plan For

Moog Inc.

3 Ratify Ernst & Young LLP as Auditors

CLARCOR Inc. Meeting Date: 02/23/2017 Record Date: 01/19/2017


2

3

Approve Merger Agreement

Advisory Vote on Golden Parachutes

Adjourn Meeting

HEICO Corporation Meeting Date: 03/17/2017 Record Date: 01/13/2017


1.1 Elect Director Thomas M. Culligan

1.2 Elect Director Adolfo Henriques

1.3 Elect Director Mark H. Hildebrandt

1.4 Elect Director Wolfgang Mayrhuber

1.5 Elect Director Eric A. Mendelson

1.6 Elect Director Laurans A. Mendelson

1.7 Elect Director Victor H. Mendelson

1.8 Elect Director Julie Neitzel

1.9 Elect Director Alan Schriesheim

1.10 Elect Director Frank J. Schwitter

For

Shares Voted: 1,520

For

For

For

Shares Voted: 1,364

For

For

For

For

For

For

For

For

For

For

2 Advisory Vote to Ratify Named Executive Officers' Compensation

For

3

4

VCA Inc.


Ratify Deloitte & Touche LLP as Auditors

Meeting Date: 03/28/2017 Record Date: 02/10/2017


2

3

Approve Merger Agreement

Advisory Vote on Golden Parachutes

Adjourn Meeting

One Year

For

Shares Voted: 669

For

For

For

28

April 10, 2017

Bill Hackney, CFA(404) 876-9411

www.atlcap.com

OPINION AND ANALYSIS OF KEY ECONOMIC AND INVESTMENT ISSUES Page One

How do you reconcile the chaos and dysfuncti on in Washington with the so-called Trump Rally in the stock market?

How do you square President Trump’s record low approval rati ng and civil unrest over his policies with recent surveys showing a surge in opti mism among American consumers and business?

Is the country headed in the right or wrong directi on? A recent Rasmussen poll shows only 38% of Americans say we are on the right track. But that’s actually a big improvement from 30% of those surveyed just prior to the electi on and 24% at this ti me last year.

I have pondered these questi ons ad nauseam, trying to divine their relevance to the outlook for stock and bonds.

A psychologist might conclude that our “body politi c” is suff ering from both schizophrenia and multi ple personality disorder. As most people know, schizophrenia is an affl icti on that causes people to lose touch with reality, become unreasonably suspicious of others, feel persecuted, and become fearful and someti mes violent. MPD is characterized by a person having two or more disti nct identi ti es and personaliti es. It is oft en caused by extreme stress and childhood trauma. (Quick! Hide the kids from Rush Limbaugh, Rachel Maddow and C-SPAN.)

� e “Circus Maximus” of American politics

The conclusion that much of the country is going crazy may be a useful, if not enti rely accurate, way of explaining some of the contradicti ons that confront investors. My view is that the US media—broadly defi ned as print, radio, TV and parti cularly social media—has helped fuel our collecti ve psychosis. The media is too focused on the noisy and vitriolic “Circus Maximus” of American politi cs. Too litt le att enti on is paid to events outside Washington and inside the private sector. Amplifi ed by a 24 hour news cycle, the media’s devoti on to politi cs creates the false impression that government is the primary determinant of our economic well-being. In a nutshell, the media makes it hard for investors to separate the signal from the noise.

Since the November electi on, the US stock market gained 11% as of March 31st. This so-called Trump Rally was initi ally led by market sectors deemed to benefi t most from the new administrati on’s policies: namely, Energy, Materials, Industrials and Financials. What’s more, US stocks with low foreign exposure outperformed those with high foreign exposure throughout 2016.

The outperformance of the Trump benefi ciaries began to falter in the waning days of 2016 and new leadership emerged in the fi rst quarter. The Informati on Technology, Health Care and Consumer Discreti onary sectors led the market during the fi rst three months of 2017. Stocks with high foreign exposure outperformed more

“Fake News”

“Tax Reform”

“GDP”The Signal and the Noise

~ New York TimesApril 9, 2017

Economics has a foundation in hard numbers–employment, infl ation, spending–that has

largely allowed it to sidestep the competing partisan narratives

that have affl icted American politics and culture. But not anymore. Since Donald J. Trump’s victory consumer sentiment has diverged in

an unprecedented way, the Republicans convinced that a

boom is at hand, and Democrats foreseeing an imminent

recession.

OPINION AND ANALYSIS OF KEY ECONOMIC AND INVESTMENT ISSUES Page Two

domesti c-oriented names. And it’s worth noti ng that the best performing stocks within the Consumer Discreti onary sector were internet retailing and media stocks. Like technology and health care, internet retailing and media are US industries which are globally competi ti ve in their own right and not generally viewed as Trump benefi ciaries or in need of government help.

Synchronized global economic expansion

So what’s going on with the Trump Rally? It appears there’s more to it than just Donald Trump and his policies. Indeed there is. What’s going on is a synchronized global economic expansion the likes of which we haven’t seen in almost a decade.

In 2008-09 the US and Europe were mired in recession while China and many emerging market economies enjoyed modest growth. Just as a tepid recovery got underway in the West, a sovereign debt crisis hit Europe and the Eurozone “double-dipped” into a second recession in 2012. As Europe regained its footi ng in 2013-14, China experienced a fi nancial crisis in its real estate markets. This together with a plunge in commodity prices in late-2014 caused many emerging market economies to weaken or enter recession (think Brazil and Russia).

The disjointed, out-of-sync nature of the global economy in 2008-2015 gave rise to a defl ati onary environment which undermined credit markets and caused many central banks to pursue zero interest rate policies. Finally in 2016, commodity prices began to fi rm and China and other emerging market economies began to exhibit improved performance. As a result, all major areas of the world economy are now growing in unison—even the lethargic Eurozone. Unemployment there recently hit an eight-year low and the region’s closely watched PMI index signaled robust fi rst quarter 2017 economic acti vity. So, in the Eurozone and around the world, infl ati on is back. And interest rates are beginning to rise.

With almost 30% of our GDP dependent on internati onal trade and almost 40% of S&P 500 revenues derived from foreign sources, the synchronized global expansion is having a positi ve impact on the US equity market. Earnings are beginning to grow

Gloomy projections for Europe refl ect a classic

forecasting mistake, which is to extrapolate from recent

trends and miss the big shifts. Predictions of an impending

takeover by destabilizing populists overstate their

momentum.

~The Economic Winds are at Europe’s Back, Ruchir Sharma

Wall Street JournalMarch 31, 2017

Indicator Commentary Current Reading

❶ Short-term vs. long-term interest rates

When short-term interest rates rise to meet or exceed long-term rates, monetary policy is usually tight enough to eventually cause a recession. Fed funds rate is

far below 10-year T note.

❷ High-quality vs. low-quality bond yields

A widening gap between junk bond yields and Treasuries indicates deteriorating credit market conditions. Credit Spreads are still

narrow

❸ Wage inflation When wages rise at a 4% annual rate, it is difficult for the Fed to keep core inflation near its 2% goal. So the Fed usually tightens policy aggressively. Wage growth is 3% and

beginning to accelerate

❹ S&P 500 P/E ratio Price earnings ratios over 20 times makes stocks vulnerable to rising interest rates and inflation.

P/E is 20.1 times

❺ The leading economic indicators

The Conference Board’s LEI has peaked and turned down in advance of each recession since 1960.

Strong uptrend

Exhibit 1: Five Key Warning Signs that the End is Near. Four of fi ve indicators are sti ll positi ve.

The fi nal Markit Eurozone Manufacturing PMI rose

to 56.2 in March 2017 . . . It was the highest reading since April 2011, as output and new

orders expanded the most in nearly six years, amid

stronger infl ows of new work from domestic and export clients. On the price front,

manufacturers’ purchasing costs rose at a rate close to February’s 69 month high.

~Trading EconomicsApril 6, 2017

OPINION AND ANALYSIS OF KEY ECONOMIC AND INVESTMENT ISSUES Page Three

again. From 2014 to 2016, S&P 500 earnings per share fl atlined around $117 as global growth slowed and commodity prices remained under pressure. In the fourth quarter of last year, however, US corporate earnings growth began to accelerate with the pick-up in global economic acti vity. Esti mates for S&P 500 earnings in 2017 are in the range of $125 to $130, a gain of 7-10% over the prior year.

In my view, the emergence of a synchronized global expansion is a more signifi cant signal for investors than any that may be gleaned from examining the entrails of our politi cal process. Now what? Despite strong gains in stock prices over the past nine years, I believe the US market can sti ll trend higher over the balance of 2017.

Exhibit 1 shows fi ve indicators that I’ve found useful in providing an early warning signal that the end of a bull market is near. These indicators are not useful in signaling a correcti on in stock prices—the 5% to 15% dips in the market averages which have pockmarked bull markets throughout history. As a rule of thumb, I would turn more negati ve on the market when three of the fi ve indicators turn negati ve.

Currently only one indicator is negati ve: the S&P 500 index closed the fi rst quarter at 2393 putti ng its price/earnings rati o slightly over 20 ti mes trailing four quarter earnings. The market’s P/E rati o (or most any other valuati on metric) is generally a poor indicator of future market trends. P/E rati os can stay high or low for extended periods. In fact, economic environments with low interest rates and infl ati on, like the current one, are conducive to sustaining higher than average P/E rati os.

Over the long-term, P/E rati os for the market have generally fl uctuated between about 10 and 20 ti mes, with 15 being the long-term average. The reason we include P/E among our fi ve indicators is that “expensive” markets can fall a lot once the other indicators turn negati ve. For example, in the year 2000, the S&P 500 index traded at a record 30 ti mes earnings. Between the March 2000 high and the October 2002 low the market plunged almost 50% despite only a brief, mild recession in 2001. Rich valuati ons limit the upside potenti al for the stock market and can create the potenti al for big declines if the economy turns sour.

~ Wall Street JournalMarch 28, 2017

In 2015, two Princeton University economists published a landmark paper showing that mortality was rising for white middle-aged Americans after decades of decline, a startling

development for an economically advanced nation. Now a new

analysis . . . paints an even bleaker picture of the nation’s largest population group . . .

Driving the uptick are increases in “deaths of despair” –from drugs, alcohol-related liver

disease and suicide.

0%

5%

10%

15%

20%

25%

0%

5%

10%

15%

20%

25%

1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

90-Day Treasury Bill Yield 10-Yr Treasury Note Yield High Yield (Junk) Bond Yield

Recessions

Rising credit spreads. Junk bond yields rise relative to Treasury yields. Inverted yield curve. Short-term Interest rates rise above long-term rates.

Today, credit spreads are falling and the yield curve is steep.

Sources: Bloomberg, Bank of America Merrill Lynch, Atlanta Capital as of 3/31/17

Exhibit 2: Mind the Gap! The gap between short-term/long-term interest rates and high-quality /low-quality bond yields are important signals for equity investors.

OPINION AND ANALYSIS OF KEY ECONOMIC AND INVESTMENT ISSUES Page Four

Atlanta Capital Management Co., LLC1075 Peachtree Street NESuite 2100Atlanta, GA 30309

This material is presented for informati onal and illustrati ve purposes only and should not be construed as investment advice, a recommendati on to purchase or sell specifi c securiti es, or to adopt any parti cular investment strategy. The opinions expressed herein are those of the author and do not necessarily refl ect the views of other employees at Atlanta Capital Management. Any current investment views and opinions/analyses expressed consti tute judgments as of the date of this material and are subject to change at any ti me without noti ce. Index and commodity changes are based on price-only percentage change. This material has been prepared on the basis of publicly available informati on, internally developed data, and other third party sources believed to be reliable. However, no assurances are provided regarding the reliability of such informati on and Atlanta Capital has not sought to independently verify informati on taken from public and third party sources. This material may contain statements that are not historical facts, referred to as forward-looking statements. Future results may diff er signifi cantly from those stated in forward-looking statements, depending on factors such as changes in securiti es or fi nancial markets or general economic conditi ons. Investi ng entails risks and there can be no assurance that any forecasts or opinions expressed in this material will be realized. It is not possible to directly invest in an index. Past performance does not predict future results.

~Vice President Spiro Agnew referring to the media in a speech

September 11, 1970

In the United States today, we have more than our share

of the nattering nabobs of negativism. They have

formed their own 4-H Club–the hopeless, hysterical

hypochondriacs of history.

I don’t see much potenti al for the US economy to turn down in 2017. US leading economic indicators remain in a strong uptrend and an LEI downturn typically leads a recession by about three quarters. Wage infl ati on is not yet strong enough to cause the Federal Reserve to hit the panic butt on, i.e., jack up interest rates aggressively to rein in infl ati on pressures.

What’s more, our two credit market indicators are signaling that monetary policy is sti ll relati vely easy and there’s suffi cient credit availability to fi nance economic growth. Exhibit 2 depicts the two indicators over the past 20 years. We compare short-term interest rates to long-term interest rates (Indicator 1) by showing the trends in yields for the 90-day Treasury bill and the 10-year Treasury note. As you can see, the gap between short and long rates is sti ll relati vely wide. Thus the yield curve is positi vely sloped—an indicator of healthy credit markets. Note the red circles around years 2000 and 2006-2007. These were periods right before recessions when the yield curve was fl at or inverted, i.e., short-term rates equaled or exceeded long rates. This is an abnormal conditi on and signals trouble ahead.

To determine Indicator 2, I compare yields for high yield (junk) bonds to those of 10-year Treasuries. A widening spread signals that lenders are becoming more quality conscious and credit conditi ons are ti ghtening. Conversely, when spreads are narrow, like now, credit conditi ons are healthy and accommodati ve to borrowers.

Tax reform and stock prices

A few days ago I att ended a tax seminar at the University of North Carolina at Chapel Hill. Aft er hearing from a number of tax experts in government, industry and academia, I left the seminar with the conclusion that there is litt le hope for signifi cant tax reform this year. It’s just too diffi cult an undertaking in today’s fracti ous politi cal environment.

More than a few market pundits opine that corporate tax reform is an important preconditi on for higher US stock prices given the loft y valuati ons of our market. I don’t agree. This nati on has long endured with a globally uncompeti ti ve corporate tax code and an expensive and dysfuncti onal health care delivery system. While both need reform, the fortunes of investors over the next 12 months are more likely to be infl uenced by trends in global economic data than the vagaries of US politi cs. So put down your Washington Post, turn off Fox News and pick up a copy of The Economist. It’s the London-based weekly that does a credible job of putti ng us Yanks into a proper global perspecti ve and helping us separate the signal from the noise.

~Mitch Ratcliffe Journalist and digital media executive

A computer lets you make more mistakes faster than any other invention with the possible exceptions of handguns and Tequila.

EuroPacific Growth Fund®

As of March 31, 2017

Appropriate for a Core International allocation and has the flexibility to invest in emerging markets.

Quarterly review

Brief market overview

Implementation guidance:

• Non-U.S. companies advanced strongly through the quarter, with currency appreciationversus the U.S. dollar further lifting returns for many markets.

• Companies domiciled in the euro zone rallied strongly as signs of improving economicgrowth outweighed rising political risk. The Eurozone Composite Purchasing ManagersIndex rose to its highest level in almost six years, while consumer price inflation touched2.0% in February before falling to 1.5% in March. The European Central Bank left bothinterest rates and its asset-purchase program unchanged, but ECB President MarioDraghi noted that the risk of deflation in the euro zone had passed, meaning the centralbank no longer had "a sense of urgency" for further expansionary measures.

• U.K.-listed companies rose, but lagged those in continental Europe, affected byindications that higher inflation was starting to affect consumer spending. The U.K.government fended off calls for a second referendum on Scottish independence and, onMarch 29, triggered Article 50, the start of the two-year process for leaving the EuropeanUnion.

• Japanese companies lagged those in other regions, posting flat returns in local currencyterms, though the firmer yen boosted results for U.S. investors. While the economyexpanded at an upwardly revised annualized rate of 1.2% in the fourth quarter, thestronger yen is now a headwind for Japanese exporters.

• Companies based in the Pacific ex Japan delivered double-digit returns. After lagging in2016, Hong Kong- and China-listed companies rebounded, driven by encouragingeconomic data from China. Australian companies also rallied strongly, with financialscompanies leading the advance.

The fund's investment objective is to provide long-term growth of capital.

• The fund aims to provide long-term growth of capital by investing in the equity of non-U.S. issuers based chiefly in Europe and the Pacific Basin.

• The portfolio managers have the flexibility to invest outside the United States, offeringthe broadest potential to access the most attractive investments.

• They leverage Capital Group's global research capability to gain a deep knowledge ofcompanies worldwide.

• Companies domiciled in developing economies were among those with the strongestreturns through the quarter, boosted by signs of improving economic growth, risingcommodity prices and a weaker U.S. dollar. Indian companies were notably strong. Thecountry's ruling Bharatiya Janata Party's decisive victory in India's most populous stateboosted hopes that Prime Minister Modi would be able to implement reforms.However, Russian companies retreated, undermined by weak oil prices.

Long-term perspective

Brief market overview

Objective:

Invests in companies in Europe and the Pacific Basin, ranging from small firms to large corporations.Distinguishing characteristics:

Page 1 of 10Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.



Figures shown are past results for Class F-1, F-2 and R-6 shares and are not predictive of results in future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. Investing for short periods makes losses more likely. For current information and month-end results, visit americanfunds.com or americanfundsretirement.com.

Returns Total returns Average annual total returns Expense

For periods ended March 31, 2017 (%) 3 mo YTD 1 year 3 years 5 years 10 years Lifetime ratio

EuroPacific Growth Fund F-1 9.29 9.29 12.69 1.80 6.25 3.22 10.63 0.86

EuroPacific Growth Fund F-2 9.34 9.34 12.99 2.07 6.54 3.49 10.90 0.60

EuroPacific Growth Fund R-6 9.37 9.37 13.10 2.17 6.64 3.58 11.01 0.50

Historical Benchmarks Index* 7.86 7.86 13.13 0.56 4.36 1.35 8.33 ---MSCI All Country World ex USA Index** 7.86 7.86 13.13 0.56 4.36 1.35 --- ---Lipper International Funds Average 7.99 7.99 10.50 0.39 5.11 1.15 8.53 ---

Fund inception: April 16, 1984

*Returns reflect results of the fund's current and former benchmark indexes: MSCI All Country World ex USA Index, April 2007-present; MSCI EAFE Index, fund inception-March 2007.Results reflect net dividends.**Results reflect gross dividends through December 31, 2000 and net dividends thereafter.Market indexes are unmanaged and, therefore, have no expenses. Investors cannot invest directly in an index. Lipper averages reflect the current composition of all eligible mutual funds (all share classes) within a given category. There have been periods when the fund has lagged the indexes.

We offer a range of share classes designed to meet the needs of retirement plan sponsors and participants. The different share classes incorporate varying levels of advisor compensation and service provider payments. Because Class R-6 shares do not include any recordkeeping payments, expenses are lower and results are higher. Other share classes that include recordkeeping costs have higher expenses and lower results than Class R-6.

Investment results assume all distributions are reinvested and reflect applicable fees and expenses. When applicable, investment results reflect fee waivers and/or expense reimbursements, without which results would have been lower. Please see americanfunds.com for more information. Class F-1 shares were first offered on March 15, 2001, Class F-2 shares on August 1, 2008, and Class R-6 shares on May 1, 2009. Class F-1 share results prior to the date of first sale are hypothetical based on Class A share results without a sales charge, adjusted for estimated additional annual expenses. Class F-2 and R-6 share results prior to the date of first sale are hypothetical based on Class A share results without a sales charge, adjusted for typical estimated expenses. Please see americanfunds.com for more information on specific expense adjustments and the actual dates of first sale. Expense ratios are as of the fund's prospectus available at the time of publication.

Page 2 of 10



1Q Quarterly analysis

Portfolio* 5.9 6.7 9.2 12.6 8.4 7.2 16.9 16.2 4.2 3.0 1.7 7.9

Index* 6.9 8.2 11.7 11.3 9.7 8.0 23.5 9.6 4.6 3.1 3.3 ---- *Average weights for time period. Figures may not reconcile due to rounding.

Sector weights Sector attribution

Commentary

Sector 9 2 -3 -1 1 -1 3 41 1 ---- 2 -58

Security 12 21 12 61 -8 -7 54 7 ---- 7 10 ----

Active weights versus MSCI ACWI ex USA Index Portfolio

ENG MAT IND CD CS HC FIN IT TEL UTL RE CA

• Almost all the sectors in which the fund was invested made a positive contribution torelative results, with consumer staples and health care the only detractors on a relativebasis.

• Investment selection among consumer discretionary companies was additive to returns.

• Strong returns from India's HDFC Bank and Kotak Mahindra Bank boosted resultsamong financials companies.

• A higher-than-index position in information technology companies lifted results sincethey were among those with the strongest returns through the quarter. China's Alibabawas among the top contributors.

• Select investments in consumer staples companies were a drag on returns, with U.K.-domiciled Associated British Foods and South Korea-listed AmorePacific among thelargest detractors.

Sector selection Security selection

ENG MAT IND CD CS HC FIN IT TEL UTL RE CA

Page 3 of 10

Important note: All of the American Funds are managed using The Capital System. Each individual portfolio manager manages their portfolio independently through a bottom-up, research-driven process.

SM

ENG=ENERGY, MAT=MATERIALS, IND=INDUSTRIALS, CD=CONSUMER DISCRETIONARY, CS=CONSUMER STAPLES, HC=HEALTH CARE, FIN=FINANCIALS, IT=INFORMATION TECHNOLOGY,TEL=TELECOM SERVICES, UTL=UTILITIES, RE=REAL ESTATE, CA=CASH




*Average weights for time period. Figures may not reconcile due to rounding.

Regional weights Regional attribution

Commentary

Active weights versus MSCI ACWI ex USA Index

Canada Eurozone Japan EmergingMarkets

OtherEurope

Pacificex Japan

UK USA

Portfolio* 3.9 20.0 14.3 26.8 7.1 6.8 12.3 1.0

Index* 7.0 21.5 16.8 23.3 10.2 8.7 12.6 ----


OtherEurope

Pacificex Japan

UK USA

Region 17 -6 10 13 ---- -27 2 -2

Security -17 45 44 126 -29 27 23 -2

• Holdings of companies domiciled in developing economies helped lift returns, withIndia-listed HDFC Bank, Reliance Industries and Kotak Mahindra Bank among the topcontributors. China's Alibaba further boosted results.

• Both a lower holding and stock selection boosted returns among Japanese companies.

• Investment selection among euro-zone-domiciled companies was additive to results.

• Strong returns from British American Tobacco bolstered returns among U.K.-listedcompanies.

• Denmark's Novo Nordisk weighed on results among companies domiciled in non-euro-zone countries in Europe.

Portfolio Region selection Security selection

Page 4 of 10


SM



Company Portfolio* % Index* %Relative

contribution

ISR: HDFC Bank Limited 2.20 0.00 0.33

Alibaba Group Holding Ltd. Sponsored ADR 2.10 0.63 0.20

Reliance Industries Limited 1.20 0.12 0.19

British American Tobacco p.l.c. 2.43 0.63 0.17

Kotak Mahindra Bank Limited 0.91 0.00 0.15


contribution

Associated British Foods plc 1.13 0.06 -0.15

Novo Nordisk A/S Class B 1.02 0.37 -0.11

Toshiba Corporation 0.49 0.05 -0.10

ISR: Amorepacific Corp. 0.71 0.05 -0.09

Schlumberger NV 0.57 0.00 -0.08


* Average position for quarter; portfolio holdings change. * Average position for quarter; portfolio holdings change.

Commentary Commentary

HDFC Bank

HDFC Bank is an Indian banking and financial services company headquartered inMumbai. It has a rapidly growing customer base aided by several key tailwinds: Indiaincreasingly participates in international trade, ever more consumers have a need forbanking solutions and transaction volumes are increasing dramatically as India continuesto enjoy transformational growth. Shares surged after the company beat third-quarterfiscal 2017 earnings forecasts, helped by strong growth in deposits. The company'sprofitability reflects its size, breadth of offerings, expertise and geographic presence.

Alibaba

Alibaba is one of the world's largest e-commerce companies. The company providesshareholders with exposure to transformational growth in China. Shares rallied on raisedrevenue guidance for 2017 as third-quarter fiscal 2017 sales and earnings beat forecasts,backed by a strong contribution from Alibaba's digital media and entertainment unit.Marketplace fundamentals continue to bolster Alibaba's business model as disposableincome in China rises, the economy becomes more consumer-centric, and both buyersand sellers seek a trusted intermediary in a dynamic fulfilment market.

Top five security contributors versus MSCI ACWI ex USA Index Bottom five security contributors versus MSCI ACWI ex USA Index

Associated British Foods

Associated British Foods is a U.K.-based conglomerate involved in commodityagriprocessing, branded food products and ingredients, as well as discount clothing retailunder the Primark brand. Shares fell after the company warned that U.S. dollar strengthwould erode operating margins in 2017, and that rapid expansion in selling space hadheld back same-store sales in Germany and the Netherlands.

Novo Nordisk

Novo Nordisk is a Denmark-based global biopharmaceutical firm that has been aninnovator in the treatment and management of diabetes. Shares eased after the companywarned that revenue and operating profit could fall in 2017 amid downward pressure oninsulin prices.

The mnemonic 'ISR:' indicates that two or more issues of the same issuer have been rolled up and thus what is presented in the report is the Issuer Level data.

Page 5 of 10


SM


As of December 31, 2016

YTD Year-to-date analysis

Portfolio* 4.6 5.2 9.1 13.6 8.1 11.2 17.4 15.1 3.8 2.9 0.7 8.4

Index* 6.6 7.2 11.5 11.7 11.0 8.9 24.5 8.9 5.1 3.5 1.1 ---- *Average weights for time period. Figures may not reconcile due to rounding.

Sector weights Sector attribution

Commentary

Sector -57 -50 -4 -12 15 -38 2 36 10 1 11 -92

Security -6 71 -111 38 -51 -139 -134 108 21 15 -5 ----

Active weights versus MSCI ACWI ex USA Index Portfolio

• Holdings of health care companies were a drag on returns, with Denmark's NovoNordisk and Belgium's UCB among the largest detractors.

• Investment selection among financials companies hindered portfolio results, with U.K.-listed Barclays among the most notable detractors.

• Spain-listed International Consolidated Airlines Group, owner of British Airways, Iberia,Aer Lingus and Vueling, weighed on returns among industrials companies.

• A lower-than-index weighting to energy companies dampened returns since they wereamong those with the strongest returns through the year.

• U.K.-listed Associated British Foods held back returns among consumer staplescompanies.

• Investments in information technology companies boosted returns, with Japan'sNintendo, Taiwan Semiconductor Manufacturing and U.K.-listed ARM Holdings amongthe top contributors to results.

• Investment selection among telecommunication services companies was additive toresults.

• Materials companies rallied strongly through the year. While the fund's lower-than-index position hindered returns, this was more than offset by stock selection, withnotable strong returns from U.K.-listed Glencore and Australia's Fortescue Metals.

Sector selection Security selection

ENG MAT IND CD CS HC FIN IT TEL UTL RE CA ENG MAT IND CD CS HC FIN IT TEL UTL RE CA

Page 6 of 10


SM

ENG=ENERGY, MAT=MATERIALS, IND=INDUSTRIALS, CD=CONSUMER DISCRETIONARY, CS=CONSUMER STAPLES, HC=HEALTH CARE, FIN=FINANCIALS, IT=INFORMATION TECHNOLOGY,TEL=TELECOM SERVICES, UTL=UTILITIES, RE=REAL ESTATE, CA=CASH




*Average weights for time period. Figures may not reconcile due to rounding.

Regional weights Regional attribution

Commentary

Active weights versus MSCI ACWI ex USA Index


Other Europe Pacificex Japan

UK USA

Portfolio* 3.3 19.0 14.3 24.0 11.0 6.8 12.2 1.0

Index* 6.7 21.5 16.8 22.2 10.8 8.5 13.6 ----


Other Europe Pacificex Japan

UK USA

Region -66 6 20 -25 -3 -3 17 -9

Security 6 3 53 -37 -176 -13 -51 1

• Almost all the regions in which the fund was invested had a negative impact on relativereturns, with Japan and the euro zone the only contributors on a relative basis.

• Holdings of companies domiciled in non-euro-zone countries in Europe were theprimary driver of the fund's relative results, with Denmark's Novo Nordisk among thelargest detractors.

• Investment selection among companies domiciled in developing economiesdampened results, primarily due to a higher-than-index holding in India and a lower-than-index position in Russia.

• Canadian companies were among those with the strongest returns, driven by rallies inenergy and materials companies. The fund's lower-than-index weighting was a drag onreturns.

• Investment selection among Japanese companies boosted results, with Nintendoamong the top contributors to returns.

Region selection Security selectionPortfolio

Page 7 of 10


SM




contribution

Nintendo Co., Ltd. 1.78 0.12 0.63

Glencore plc 0.68 0.17 0.40

Fortescue Metals Group Ltd 0.31 0.03 0.30

ARM Holdings plc 0.38 0.09 0.24

ISR: Taiwan Semiconductor Manufacturing Co., Ltd. 1.78 0.76 0.23


contribution

Novo Nordisk A/S Class B 3.95 0.56 -1.59

Associated British Foods plc 1.50 0.09 -0.56

ISR: International Consolidated Airlines Group SA 0.90 0.03 -0.49

Barclays PLC 1.43 0.24 -0.31

UCB S.A. 0.85 0.06 -0.31


* Average position for time period; portfolio holdings change. * Average position for time period; portfolio holdings change.

Commentary Commentary

Nintendo

Nintendo is a global company that develops, manufactures and sells home-use videogame hardware and software. Shares surged on the company's push into mobile gaming,backed by the runaway success of the newly launched Pokemon Go smartphone game, aswell as on news that Apple was to adopt Nintendo's Super Mario Run game for its iPhone.

Taiwan Semiconductor Manufacturing

Taiwan Semiconductor Manufacturing is one of the world's largest semiconductormanufacturers with a market share of about 55% and facilities in Taiwan, Singapore,United States and China. Shares advanced more than 30% in 2016 due to better-than-projected quarterly earnings results throughout the year and continued earningsguidance increases. Management provided a five-year outlook that will generateconsistent free cash flow growth, enabling the company to pay and expand its dividends.Investors gained comfort as the company reduced its technology gap against keycompetitor Intel, and mentioned that the computing segment will provide a new growthlever and spur potential positive surprises.

Top five security contributors versus MSCI ACWI ex USA Index Bottom five security contributors versus MSCI ACWI ex USA Index

Novo Nordisk

Novo Nordisk is a Denmark-based global biopharmaceutical firm engaged in thediscovery, development, manufacture and marketing of pharmaceutical products. Sharesslid after new trial data revealed its diabetes drug Victoza was not as effective as rival EliLilly's product at reducing the risk of death from heart attacks and strokes. Shares also fellon concerns over the 2017 outlook amid intense pricing pressure from U.S. payers.

Associated British Foods

Associated British Foods is a U.K.-based conglomerate involved in commodityagriprocessing, branded food products, ingredients and discount clothing retail under thePrimark brand. Shares eased on concerns over flagging sales at Primark and concerns thatsterling weakness could hurt the clothing chain's profit margins in fiscal 2017.

The mnemonic 'ISR:' indicates that two or more issues of the same issuer have been rolled up and thus what is presented in the report is the Issuer Level data.

Page 8 of 10


SM



Portfolio manager viewpoint Portfolio manager years of experience

Carl M. Kawaja

Portfolio managers Years with Capital Group Years in profession

Mark E. Denning 35 35

Nicholas J. Grace 23 27

Carl M. Kawaja 26 30

Jonathan Knowles 25 25

Lawrence Kymisis 14 22

Sung Lee 23 23

Jesper Lyckeus 21 22

Andrew B. Suzman 24 24

Christopher Thomsen 20 20

Statements attributed to an individual represent the opinions of that individual as of the date published and donot necessarily reflect the opinions of Capital Group or its affiliates. This information is intended to highlightissues and not be comprehensive or to provide advice.

The global economic outlook remains mixed. The relative performance ofthe U.S. economy makes it likely that the Federal Reserve will continue toraise short-term interest rates as 2017 progresses. However, uncertaintylingers around the U.K.'s exit from the European Union while Japancontinues to struggle. Commodity prices continue to support modestimprovement in most emerging markets, but growth concerns havehampered some economic activity.

The portfolio remains focused on attractively valued, well-run companiesthat are positioned to benefit from areas of economic growth globallyand increasing consumer demand in emerging markets. We alsocontinue to identify promising investment opportunities in businessesthat may be able to profit from technological innovations. Following theU.S. election, our interest in cyclical sectors such as energy, materials andfinancials remains heightened.

— Carl M. Kawaja (March 2017)

Page 9 of 10

Although the American Funds are compared to their benchmarks, portfolio managers manage the funds consistent with each fund’s investment objectives.



Attribution methodology disclosureEquity attribution data was produced using FactSet, a third-party software system, basedon daily portfolios. Securities in their initial period of acquisition may not be included inthis analysis. The analysis includes equity investments only and excludes forward contractsand fixed-income investments, if applicable. It does not account for buy and selltransactions that might have occurred intraday. As a result, average portfolio weightpercentages are approximate and the actual average portfolio weight percentages mightbe higher or lower. Data elements such as pricing, income, market cap, etc., wereprovided by FactSet. The index provided for attribution is based on FactSet’smethodology. The index is a broad-based market benchmark and may not be used byCapital Group as the sole comparative index for this fund. Capital believes the softwareand information from FactSet to be reliable. However, Capital cannot be responsible forinaccuracies, incomplete information or updating of information by FactSet. Past resultsare not predictive of results in future periods.

Index definitions

EuroPacific Growth Fund Historical Benchmarks Index returns reflect the results of theMSCI EAFE® Index through 3/31/2007 and the MSCI All Country World ex USA Index, thefund’s current primary benchmark, thereafter. MSCI EAFE® (Europe, Australasia, Far East)Index is a free float-adjusted market capitalization weighted index that is designed tomeasure developed equity market results, excluding the United States and Canada. MSCIAll Country World ex USA Index is a free float-adjusted market capitalization weightedindex that is designed to measure equity market results in the global developed andemerging markets, excluding the United States. The index consists of more than 40developed and emerging market country indexes. Results reflect dividends net ofwithholding taxes. These indexes are unmanaged and, therefore, have no expenses, andtheir results include reinvested dividends and/or distributions.

MSCI All Country World ex USA Index is a free float-adjusted market capitalizationweighted index that is designed to measure equity market results in the globaldeveloped and emerging markets, excluding the United States. The index consists ofmore than 40 developed and emerging market country indexes. Results reflect dividendsgross of withholding taxes through December 31, 2000, and dividends net ofwithholding taxes thereafter. This index is unmanaged, and its results include reinvesteddividends and/or distributions but do not reflect the effect of sales charges, commissions,account fees, expenses or taxes. This index was not in existence as of the date the fundbegan investment operations; therefore, lifetime results are not available.

Lipper International Funds Average is composed of funds that invest assets in securitieswith primary trading markets outside the United States. The results of the underlyingfunds in the average include the reinvestment of dividends and capital gain distributions,as well as brokerage commissions paid by the funds for portfolio transactions and otherfund expenses, but do not reflect the effect of sales charges, account fees or taxes.

MSCI has not approved, reviewed or produced this report, makes no express or impliedwarranties or representations and is not liable whatsoever for any data in the report. Youmay not redistribute the MSCI data or use it as a basis for other indices or investmentproducts.

Source: Thomson Reuters Lipper

Page 10 of 10

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectus and summary prospectus, which can be obtained from a financial professional and should be read carefully before investing. Investing outside the United States involves risks such as currency fluctuations, periods of illiquidity and price volatility, as more fully described in the prospectus. These risks may be heightened in connection with investments in developing countries.

Lit No. ITGEQSX-016-0417O CGD/10219-S54592 © 2017 American Funds Distributors, Inc

Invesco Core Real Estate - U.S.A., L.P.

Pasadena Fire & Police Retirement System

Statement of Net Asset Value

Rollforward of quarterly investment activity:

FQE 03/31/17 FQE 06/30/16FQE 09/30/16FQE 12/31/16

Beginning Net Asset Value 15,354,456 15,068,069 17,843,493 17,265,929 $ $ $ $

Contributions/(Redemptions) - - (3,000,000) -

Dividend Reinvestments 99,370 97,997 84,149 84,178

Net Income/(Loss) 143,754 141,558 140,189 172,787

Realized Gain/(Loss) on Investments (3,934) 6,640 (230,249)(73)

Unrealized Gain/(Loss) on Investments 256,460 121,153 134,511 679,361

Unrealized Gain/(Loss) on Debt (8,140) 70,212 (30,202) 6,454

Dividend Payable (126,751) (125,932) (148,786)(128,813)

Ending Net Asset Value 15,701,822 15,354,456 15,068,069 17,843,493 $ $ $ $

Ending Number of Units 91.77 91.27 90.77 108.38

Ownership Percentage 0.19% 0.19% 0.19% 0.22%

Management Fees Due 43,534.25 42,573.32 41,783.50 49,415.73 $ $ $ $

Net Asset Value per Unit 171,095.06 168,227.23 166,011.45 164,632.01 $ $ $ $

Total Fund Units Outstanding 48,806.52 48,290.05 48,246.02 49,158.76

Notes*:

Units outstanding at beginning of quarter 91.27 90.77 108.38 107.77

Change in units due to contributions/(redemptions) - - (18.22) -

Change in units due to dividend reinvestments 0.50 0.51 0.60 0.61

Units outstanding at end of quarter 91.77 91.27 90.77 108.38

Dividend paid from previous quarter 126,751.03 $ $ $ $ 125,932.16 148,786.16 145,701.20

Payment of management fees due from previous quarter (42,573.32) (41,783.50) (49,415.73) (47,703.98)

84,177.71 99,370.43 97,997.22 84,148.66 $ $ $ $Dividend reinvestments in current quarter

*Due to the calculations/rounding of the disclosure information above, amounts may/may not total to the exact unit.

Invesco Core Real Estate - U.S.A., L.P.

Looking Forward ICRE remains well positioned to generate long-term outperformance as a result of its superior asset and location quality and the

durability and growth profile of the existing income stream. In addition, the Fund will generate significant additional NOI in thenear- and medium-term from both the assets in the Core Portfolio and assets reaching fruition in the Manage-to-Core Portfolio.

ICRE also continues to maintain a strong, flexible balance sheet with long duration, primarily fixed rate debt that will providefinancial flexibility to take advantage of opportunities across cycles.

The Manage-to-Core percentage as presented in the Key Statistics above continues to be calculated on a “fully-funded” basis(current cost, plus remaining cost, plus appreciation to date), which we believe is the most transparent way to reflect theweighting within the portfolio.

Fund Highlights For the first quarter 2017, the Fund generated a total gross return of 2.54%, comprised of 0.93% income and 1.61% appreciation. The current quarter and one year total gross returns were impacted by a negative 5 bps and a positive 26 bps, respectively, as a

result of debt mark-to-market adjustments. ICRE’s emphasis on long duration, fixed rate debt (weighted average remaining termof 8.2 years) makes it relatively more sensitive to changes in interest rates.

The Fund produced gross unlevered appreciation of 126 bps on the total portfolio for the quarter. Appreciation in the CorePortfolio was broad based across all sectors, while the Manage-to-Core Portfolio generated approximately $21 million ofappreciation for the Fund. We expect continued, meaningful, value creation from these Manage-to-Core assets as they matureover the near- and medium-term.

Overall portfolio fundamentals remain strong with the Fund ending the quarter at 93.2% leased, an increase of 10 bps over theprior quarter and 40 bps over the prior year. The Core Portfolio percentage leased decreased 40 bps from the prior quarter and20 bps from the prior year to 94.7%.

The Fund declared a dividend of $69.0 million; a 15% increase over the trailing eight quarters.Investment Activity During the quarter, the Fund closed on the acquisition of Pacific Commons, an 111 acre land parcel for a future 1.7 million square

foot multi-building industrial development in Fremont, CA (SF Bay Area).

Investor Activity The Fund called $168.8 million of capital from two new and seven existing investors and redemptions of $48.0 million were paid. Subsequent to quarter end, $89.8 million of capital was called resulting in no remaining signed queue and approximately $100-

$200 million of potential commitments in various stages of negotiation and documentation. In addition, outstanding redemptionswere paid for a total of $130.8 million.

Quarterly

Top Ten MSAs ($ in billions) based on Proforma

1 Proforma property type and MSA weightings include the Manage-to-Core Portfolio on a fully funded basis.2 Represents San Francisco, SF East Bay and San Jose. 3 Represents Los Angeles and the Inland Empire Region.

Quarterly Flash Report

Invesco Core Real Estate–U.S.A.

First Quarter 2017

Key Statistics 1 Investment Performance Gross Income

GrossAppreciation

Total Gross

Gross Asset Value $11.64B Number of Investors 4 117 Current Quarter 0.93% 1.61% 2.54%

Net Asset Value $8.41B Contributions for the Quarter 5 $201.5M One Year Rolling 3.85% 6.35% 10.38%

Number of Investments 92 Withdrawals for the Quarter $48.0M Three Year Rolling 4.15% 7.98% 12.38%

Debt to Total Assets 2 25.8% Trailing 4 Qtr Gross Distribution Yield 3.4% Five Year Rolling 4.44% 7.30% 11.98%

Manage-to-Core Portfolio 3 12.1% Cash as % of NAV 1.7% Seven Year Rolling 4.77% 8.52% 13.58%

Total Portfolio Leased 93.2% Ten Year Rolling 4.92% 0.67% 5.63%

Core Portfolio Leased 94.7% Annualized Since Inception (4Q04-1Q17) 5.29% 2.94% 8.35%1

See Notes to Performance; 2

Short-term line of credit balance was zero.3

Represents the Manage-to-Core Portfolio on a fully funded basis plus appreciation to date;4

Invested as of 03/31/17; 5

Includes reinvested dividends.

Diversification Property Type (%) based on Proforma1

1

407 1st Avenue New York, NY

0.0

0.5

1.0

1.5

2.0

2.5

SF B

ay A

rea

Los

Ang

eles

Are

a

New

Yor

k

Was

hing

ton

DC

Den

ver

Dal

las

Hou

ston

Bos

ton

Ora

nge

Coun

ty

Chi

cago

( in

bill

ions

)

Apartment Industrial Office Retail

17%

14%

10%9%

8%

1

7%7% 6%

4%3%

0%

10%

20%

30%

40%

50%

Industrial Apartment Retail Office Other

Strategic Range Invesco Core Real Estate-U.S.A Current Target ODCE-Equal Weightedas of 12/31/16

12%

35%

22%

31%

0%

Notes to Performance

Invesco Core Real Estate – U.S.A.First Quarter 2017

1. The Invesco Core Real Estate U.S.A., L.P. is a core style, open-end real estate fund with a September 30, 2004inception date. The Fund can also invest up to 15% of gross assets in value added strategies.

2. Information is presented on a preliminary basis and is subject to change.

3. Performance is calculated in US dollars. Performance returns are leveraged and calculated on an investment levelfollowing the Modified Dietz methodology.

4. Returns include Fund Level operating expenses. The impact of cash balances and any interest earnings are alsoreflected in the Fund’s returns.

5. Returns are shown gross of fees. An investor’s return would be reduced by the amount of the fees which could differbased on the size of their investment. The highest fee would be 1.1% of NAV assuming a minimum investment of $10million.

6. Operating results of the Fund are presented on a fair value basis of accounting in conformity with U.S. GAAP and areaudited annually.

7. Real estate investments and debt obligations are valued on a quarterly basis by independent third party valuers.

8. In an effort to most accurately reflect the Fund’s geographic and property type exposure and provide information onleverage and other investment parameters, all Joint Venture investments are reported at the Fund’s ownershippercentage.

9. Investors in the Fund have the option of reinvesting all or a portion of the quarterly cash distributions made by theFund.

10. UBIT/Transactions: To date, no investments have been made outside of ICRE REIT Holdings. If ICRE REIT Holdings isdetermined to be a "pension-held REIT", the Manager does not anticipate that tax-exempt Members will be subject tounrelated business income tax except to the extent they own more than 10% of the Fund's Units or they have borrowedto make their investment in the Fund. As of the date of this report ICRE REIT Holdings is not a “pension-held REIT”.

11. As with all investments there are associated inherent risks. Please obtain and review all financial materials carefullybefore investing.

12. Certain information contained in this report constitutes forward-looking statements, which can be identified by the useof forward-looking terminology such as “may,” “seek,” “should,” “expect,” “anticipate,” “project,” “estimate,” “intend,”“continue,” or “believe” or the negatives thereof or other variations thereon or comparable terminology. While webelieve that such statements and information are based upon reasonable estimates and assumptions, due to variousrisks and uncertainties, actual events or results or the actual performance may differ materially from those reflected orcontemplated in such forward-looking statements.

All material presented is compiled from sources believed to be reliable and current but accuracy cannot be guaranteed. This is not to beconstrued as an offer to buy or sell any financial instrument. It is not our intention to state, indicate or imply in any manner that current orpast results are indicative of future profitability or expectations. As with all investments there are associated inherent risks. Please obtainand review all financial material carefully before investing. This report may contain confidential and proprietary information for the Fund andInvesco Ltd. Circulation, disclosure or dissemination of all or any part of this material to any unauthorized persons is prohibited. This reportis intended for Fund investors only.

2

Legacy West Plano, TX

Investment Policy & Performance

Investor Relations

William C. Grubbs Jr.Managing DirectorLead Portfolio ManagerInvesco Real Estate101 California Street, Suite 1800San Francisco, CA [email protected]

Michelle FossSenior DirectorPortfolio ManagerInvesco Real Estate101 California Street, Suite 1800San Francisco, CA [email protected]

Beth WorthyDirector of Fund OperationsInvesco Real Estate2001 Ross Avenue, Suite 3400Dallas, TX [email protected]

Chad ProvostAssociate Portfolio ManagerInvesco Real Estate101 California Street; Suite 1800San Francisco, CA [email protected]

Thomas ThreadgillFund Operations AnalystInvesco Real Estate2001 Ross Avenue,Suite 3400Dallas, TX [email protected]

Melissa NeckarProduct SpecialistInvesco Real Estate2001 Ross Avenue, Suite 3400Dallas, TX [email protected]

PIMC 0

Quarterly Investment Report II Q 17

PIM CO All Asset Fund

A company of Alllanz @

1

Performance periods ended 31 Mar '17 3 mos. 6 mos. 1 yr. 3 yrs. 5 yrs. 10 yrs. SI

Fund after fees 5.08 4.75 13.21 2.32 3.72 5.06 7.09

Benchmark* 1.05 -0.44 1.45 1.46 0.62 3.59 4.21

Secondary Benchmark** 1.60 3.58 7.38 6.09 6.27 6.73 7.09

As of 31 March 2017

Performance quoted represents past performance. Past performance is not a guarantee or a reliable indicator of future results. Investment

return and the principal value of an investment will fluctuate. Shares may be worth more or less than original cost when redeemed. Current

performance may be lower or higher than performance shown. For performance current to the most recent month end, visit pimco.com or

call 888.87.PIMCO.

*Bloomberg Barclays U.S. TIPS: 1-10 Year Index; **Consumer Price Index + 500 Basis Points

Class:

Inception date:

Fund assets (in millions):

Annual operating expense:

Net operating expense: 0.915%

INST

31 Jul '02

$18,871.94

1.075%

Asset allocation

72.5%

18.4%

5.5%

20.9%

15.4%

0.0%

3.8%

8.4%

16.1%

5.8%

7.7%

2.6%

11.4%

0.3%

11.2%

Market value

Emerging Markets Equities

Third Pillar

Commodities and REITs

Emerging Markets Bond

Credit

Global Bonds

Inflation-Linked Bonds

Alternative Strategies

Developed ex-U.S. Equities

First Pillar

Second Pillar

U.S. Core Bonds

U.S. Long Maturity Bonds

Short-Term Bonds

U.S. Equities

Portfolio performance

DETRACTORS CONTRIBUTORS

The All Asset Fund is designed to serve as a “Third Pillar” strategy, aiming to provide a diversified return stream versus traditional stock/bond-centric approaches. In seeking a long-term real return consistent with its secondary benchmark of CPI + 5%, the Fund also seeks to provide a measure of inflation protection that may not be provided by traditional stocks and bonds.

Portfolio strategy

• Exposure to commodities • Positions in emerging markets equities and bonds

• Exposure to developed markets ex-US equities

• Allocations to credit strategies

• Exposure to US core and long maturity bonds

• The All Asset strategy is positioned to benefit from a continuation of the trends of rising inflation expectations, EM stabilization, and value outperforming momentum.

• Emphasize “Third Pillar” asset classes that diversify fully-valued U.S. stocks and bonds, provide responsiveness to changes in inflation levels, and offer compelling risk and return potential relative to 60/40 balanced portfolios.

2

Strong Q1 2017 performance in third pillar assets, continuing 2016 rebound

As of 31 March 2017

SOURCE: Barclays, BofA, JPMorgan, Bloomberg U.S. equities represented by S&P 500 Total Return Index; Small cap equities represented by Russell 2000 index; Developed ex. U.S. equities represented by

MSCI Daily TR Gross EAFE USD Index; U.S. core fixed income represented by Bloomberg Barclays U.S. Aggregate Total Return Index; Long U.S. Treasuries represented by Bloomberg Barclays U.S. Aggregate

Long Treasury Index; U.S. investment grade credit represented by Bloomberg Barclays U.S. Aggregate Credit Total Return Index; U.S. high yield represented by Bloomberg Barclays U.S. Corporate High

Yield Index; Long U.S. TIPS represented by Bloomberg Barclays U.S. Treasury Inflation Notes: 10+ Year Index; EM local bonds represented by JPMorgan Government Bond Index- Emerging Markets Global

Diversified Index (Unhedged); EM equities represented by MSCI EM Index; REITS represented by Dow Jones Select U.S. REITs Index.; Diversified commodities represented by DJ-UBS Commodity TR Index.

6.1%

2.5%

7.2%

0.8%1.4% 1.3%

2.3%

6.5%

11.4%

2.1%

-0.3%

-2.3%

12.0%

21.3%

1.0%

2.6%1.3%

5.6%

14.7%

9.9%11.2%

7.3%6.7%

11.8%

-5%

0%

5%

10%

15%

20%

25%

U.S.

equities

Small cap

equities

Developed

ex. U.S.

equities

U.S. core

fixed

income

Long U.S.

Treasuries

U.S.

investment

grade credit

U.S. high

yield

EM local

bonds

EM

equities

Long U.S.

TIPS

REITs Diversified

commodities

Asset class returns 1Q '17 2016

First Pillar Second Pillar Third Pillar

3

All Asset posted strong performance in Q1 2017 continuing the 2016 rebound Strong performance in 2016-2017 was fueled by a reversal of three factors which represented headwinds from 2013-2015: First, rising inflation expectations amid a

recovery in oil prices and reduced fears of a China slowdown. Second, EM stabilization given attractive valuations and strengthening EM currencies. Third, value

outperforming momentum as fundamentals improved.

As of 31 March 2017

215

-8

136

430 8 14 11 13 1 1

73

369

106153

228

1

73102

11

-1

1 7

84

-200

-100

0

100

200

300

400

Emerging

Markets

Equities

Commodities

and REITs

Emerging

Markets Bonds

Credit Global Bonds Inflation-Linked

Bonds

Alternative

Strategies

US Core Bonds US Long

Maturity Bonds

Short-Term

Bonds

US Equities Developed ex-

US Equities

All Asset Attribution Q1 2017 YTD 2016

Equities

EM stocks posted their strongest quarter in five years as fundamentals remained healthy. European stocks also gained as sentiment rose to a nearly six year high despite political uncertainties. U.S. equities notched record highs as robust risk sentiment buoyed by generally strong economic data drove returns.

Emerging markets bonds and currencies

EM debt returns were positive as index spreads narrowed and local index yields were generally lower. EM currencies broadly strengthened against the U.S. dollar as a pickup in global trade underpinned stronger exports from EM. Despite a rate hike by the U.S. Federal Reserve, EM assets performed well as fundamentals, growth and flows into the asset class continued to improve.

Commodities

Broad commodity indices were negative, led down by energy. Natural gas was the notable underperformer due to the incredibly warm US winter weather. Oil prices dipped lower on record-high US inventory prints and doubts about OPEC’s commitment to production cuts. In contrast, precious metals led with gains as gold benefited from lower real yields.

Performance quoted represents past performance. Past performance is not a guarantee or a reliable indicator of future results. Investment return and the principal value of an investment will fluctuate.

Shares may be worth more or less than original cost when redeemed. Current performance may be lower or higher than performance shown. For performance current to the most recent month-end, visit

www.pimco.com or call (888) 87-PIMCO.

4 As of 31 March 2017

Change relative to

2016 data

PIMCO forecast ranges as of March 2017.

Real GDP and inflation projections reflect the midpoints of PIMCO’s forecast ranges for 2017.

U.S.

GDP: 2.25%

CPI: 2.25%

MEXICO

GDP: 1.50%

CPI: 5.25%

U.K.

GDP: 2.00%

CPI: 2.75%

RUSSIA

GDP: 1.25%

CPI: 4.50%

JAPAN

GDP: 1.00%

CPI: 0.50%

BRAZIL

GDP: 1.00%

CPI: 4.50%

EUROZONE

GDP: 1.75%

HICP: 1.50%

INDIA

GDP: 7.50%

CPI: 4.50%

CHINA

GDP: 6.25%

CPI: 2.50%

% of world GDP

Forecasts GDP Inflation

2016 2017 2016 2017

Developed Markets 1.60 2.00 0.80 2.00

Emerging Markets 4.80 5.25 3.50 3.25

World 2.60 3.00 1.70 2.50

5

Strategic Positioning The Fund is emphasizing Third Pillar asset classes that diversify fully-valued U.S. stocks and bonds, provide responsiveness to changes in inflation levels, and offer

compelling risk and return potential relative to traditional 60/40 balanced portfolios.

As of 31 March 2017

0.2%

10.8%

18.8%

0.3%

11.2%

18.4%

0%5%

10%15%20%25%

U.S. Equities Developed ex-U.S. Equities EM Equities

(%)

Net

ass

ets

4Q16 1Q17

19.9% 18.8%20.9% 18.4%

0%

10%

20%

30%

EM Bonds EM Equities

(%)

Net

ass

ets

4Q16 1Q17

4.7% 5.3%5.8%7.7%

0%

5%

10%

15%

20%

Inflation-Linked Bonds Commodities and REITs

(%)

Net

ass

ets

4Q16 1Q17

9.0% 8.4%

0%

5%

10%

15%

Alternative Strategies(%

) N

et

ass

ets

4Q16 1Q17

Key strategies Position

Equities

Our U.S. equity allocation remains low as a mature U.S. bull market has led to rich valuations and reduced return expectations. Instead we are focusing on EM and developed ex-US equities given higher dividend yields and more attractive valuations.

Emerging markets

EM assets (stocks and local debt) are attractive given depressed prices, elevated yields and stealth inflation hedging properties. We have exposure to EM currencies due their potential for exchange rate appreciation and their higher expected returns from attractive real yields.

U.S. core and long maturity bonds

Increased long maturity bond exposure in Q1 following the post-election rise in yields, and given risk diversification potential of long duration assets.

Alternative strategies

Rotated out of alternative strategies as a market neutral “dry powder” and into Developed Ex-U.S. equities and U.S. bonds.

6

1 2 0 0

4

116

11 11

5

5 3

5

4

56

3

4 2

5 8

6

1317

98

5

1

84

4

4

1

1

0 0

33 28

15

17 15

16 20 21

20 21

12 86

5 6

912

1419 18

0

10

20

30

40

50

60

70

80

90

100

Dec '11 Dec '13 Dec '15 Dec '16 Mar '17

Perc

en

t o

f n

et

ass

ets

(%

)Current allocation mix

Emerging markets equities

Commodities and REITs

Inflation-linked bonds

Emerging markets bonds

Global bonds

Credit


U.S. Long maturity bonds

U.S. Core bonds

Short-term bonds

Developed ex-U.S. equities

U.S. equities

As of 31 March 2017

7 As of 31 March 2017

PIMCO All Asset Fund (net of fees performance)

Performance periods ended: 31 Mar '17

Annual

operating

expense

Net expense

ratio

NAV

currency

Class

Inception

date 3 mos. 6 mos. 1 yr. 3 yrs. 5 yrs. 10 yrs. SI

Class A (at NAV) 1.525 1.365 USD 30 Apr '03 4.98 4.59 12.67 1.81 3.22 4.50 6.49

Class A (at MOP) 1.525 1.365 USD 30 Apr '03 1.04 0.67 8.45 0.52 2.43 4.10 6.21

Class ADMIN 1.325 1.165 USD 31 Dec '02 5.02 4.69 13.00 2.06 3.48 4.81 6.83

Class C (at NAV) 2.275 2.115 USD 30 Apr '03 4.76 4.12 11.82 1.03 2.43 3.72 5.69

Class C (at MOP) 2.275 2.115 USD 30 Apr '03 3.76 3.12 10.82 1.03 2.43 3.72 5.69

Class D 1.475 1.315 USD 30 Apr '03 5.00 4.63 12.77 1.91 3.32 4.62 6.57

Class INST 1.075 0.915 USD 31 Jul '02 5.08 4.75 13.21 2.32 3.72 5.06 7.09

Class P 1.175 1.015 USD 30 Apr '08 5.05 4.78 13.18 2.21 3.63 4.97 6.99

Class R 1.775 1.615 USD 31 Jan '06 4.87 4.40 12.39 1.55 2.95 4.22 6.20

Bloomberg Barclays U.S. TIPS: 1-10 Year Index 1.05 -0.44 1.45 1.46 0.62 3.59 4.21

Consumer Price Index + 500 Basis Points 1.60 3.58 7.38 6.09 6.27 6.73 7.09

-- -- -- -- -- -- --

-- -- -- -- -- -- --

-- -- -- -- -- -- --

-- -- -- -- -- -- --

-- -- -- -- -- -- --

-- -- -- -- -- -- --

-- -- -- -- -- -- --

-- -- -- -- -- -- --

-- -- -- -- -- -- --

Certain classes may have an inception date which is different than the inception date of the fund. For the periods prior to the inception date of the oldest class shares, performance

information is based on the performance of the oldest class shares, adjusted to reflect the actual distribution and/or service (12b-1) fees and other expenses paid by the other class

shares. The net expense ratio reflects a contractual expense reduction agreement through 31 July 2017.

Performance quoted represents past performance. Past performance is not a guarantee or a reliable indicator of future results. Investment return and the principal value of an

investment will fluctuate. Shares may be worth more or less than original cost when redeemed. Current performance may be lower or higher than performance shown. For

performance current to the most recent month end, visit pimco.com or call 888.87.PIMCO. The maximum offering price (MOP) returns take into account the Class A maximum initial

sales charge of 3.75%. The maximum offering price (MOP) returns take into account the contingent deferred sales charge (CDSC) for Class C shares, which for this fund is 1.00%.

8

This material is authorized for use only when preceded or accompanied by the current PIMCO funds prospectus or summary prospectus, if available.

Past performance is not a guarantee or a reliable indicator of future results. The performance figures presented reflect the total return performance, after fees, and reflect changes in share price and

reinvestment of dividend and capital gain distributions. All periods longer than one year are annualized. The minimum initial investment for institutional, administrative, and P class shares is $1 million;

however, it may be modified for certain financial intermediaries who submit trades on behalf of eligible investors.

No assurance is being made that any fund that may have experienced high or unusual performance for one or more periods will continue to experience such performance. High performance is

defined as an unusual growth in alpha between reporting periods or total return when measured to historical returns. Unusual performance is defined as an unusual change in performance

(+/-) between reporting periods and the portfolio experienced unusual performance for one or more periods.

Investments made by a Fund and the results achieved by a Fund are not expected to be the same as those made by any other PIMCO-advised Fund, including those with a similar name, investment

objective or policies. A new or smaller Fund’s performance may not represent how the Fund is expected to or may perform in the long-term. New Funds have limited operating histories for investors to

evaluate and new and smaller Funds may not attract sufficient assets to achieve investment and trading efficiencies. A Fund may be forced to sell a comparatively large portion of its portfolio to meet

significant shareholder redemptions for cash, or hold a comparatively large portion of its portfolio in cash due to significant share purchases for cash, in each case when the Fund otherwise would not

seek to do so, which may adversely affect performance.

Differences in the Fund’s performance versus the index and related attribution information with respect to particular categories of securities or individual positions may be attributable, in part, to

differences in the pricing methodologies used by the Fund and the index.

A word about risk: A word about risk: The fund invests in other PIMCO funds and performance is subject to underlying investment weightings which will vary. Investing in the bond market is subject to

risks, including market, interest rate, issuer, credit, inflation risk, and liquidity risk. The value of most bonds and bond strategies are impacted by changes in interest rates. Bonds and bond strategies with

longer durations tend to be more sensitive and volatile than those with shorter durations; bond prices generally fall as interest rates rise, and the current low interest rate environment increases this risk.

Current reductions in bond counterparty capacity may contribute to decreased market liquidity and increased price volatility. Bond investments may be worth more or less than the original cost when

redeemed. Investing in foreign denominated and/or domiciled securities may involve heightened risk due to currency fluctuations, and economic and political risks, which may be enhanced in

emerging markets. Commodities contain heightened risk including market, political, regulatory, and natural conditions, and may not be suitable for all investors. Mortgage and asset-backed securities

may be sensitive to changes in interest rates, subject to early repayment risk, and their value may fluctuate in response to the market’s perception of issuer creditworthiness; while generally supported by

some form of government or private guarantee there is no assurance that private guarantors will meet their obligations. High-yield, lower-rated, securities involve greater risk than higher-rated securities;

portfolios that invest in them may be subject to greater levels of credit and liquidity risk than portfolios that do not. Investing in securities of smaller companies tends to be more volatile and less liquid

than securities of larger companies. Inflation-linked bonds (ILBs) issued by a government are fixed-income securities whose principal value is periodically adjusted according to the rate of inflation; ILBs

decline in value when real interest rates rise. Equities may decline in value due to both real and perceived general market, economic, and industry conditions. Derivatives and commodity-linked

derivatives may involve certain costs and risks such as liquidity, interest rate, market, credit, management and the risk that a position could not be closed when most advantageous. Commodity-linked

derivative instruments may involve additional costs and risks such as changes in commodity index volatility or factors affecting a particular industry or commodity, such as drought, floods, weather,

livestock disease, embargoes, tariffs and international economic, political and regulatory developments. Investing in derivatives could lose more than the amount invested. The cost of investing in the

Fund will generally be higher than the cost of investing in a fund that invests directly in individual stocks and bonds. Diversification does not ensure against loss.

Bloomberg Barclays U.S. TIPS: 1-10 Year Index is an unmanaged market index comprised of U.S. Treasury Inflation-Protected Securities having a maturity of at least 1 year and less than 10 years.

Portfolio allocations and other information in the charts in this Quarterly Investment Report are based on the fund's net assets. These percentages may differ from those used for the fund's compliance

calculations, including the fund's prospectus, regulatory, and other investment limitations and policies, which may be based on total assets of the fund or other measurements, may include or exclude

various categories of investments from those covered in the portfolio allocation categories shown in this report, and may be based on different classifications and measurements of the fund's investments

and other criteria. All funds are separately monitored for compliance with prospectus and regulatory requirements.

As of 31 March 2017

9

The following defined terms are used throughout the report. Emerging market short duration instruments includes an emerging market security or other instrument economically tied to an emerging

market country by country of risk with an effective duration less than one year and rated investment grade or higher or if unrated, determined to be similar quality by PIMCO. Net other short duration

instruments includes securities and other instruments (except instruments tied to emerging markets by country of risk) with an effective duration less than one year and rated investment grade or higher

or, if unrated, determined by PIMCO to be of comparable quality, commingled liquidity funds, uninvested cash, interest receivables, net unsettled trades, broker money and derivatives offset. With respect

to certain categories of short duration securities, the Adviser reserves the discretion to require a minimum credit rating higher than investment grade for inclusion in this category. Short duration

derivatives and derivatives offsets include: 1) derivatives with an effective duration less than one year and where the country of risk is not an emerging market country (for example, Eurodollar futures) and

2) offsets associated with investments in futures, swaps and other derivatives. Such offsets may be taken at the notional value of the derivative position which in certain instances may exceed the actual

amount owed on such positions. Municipals/Other may include convertibles, preferred and yankee bonds.

The SEC yield is an annualized yield based on the most recent 30 day period. The average distribution yield is the average of the last four quarterly distribution yields. The quarterly distribution yield is

calculated by annualizing the quarter's distribution and dividing by the NAV on the last business day of the period. It does not include long- or short-term capital gains distributions. Average coupon is

the average of the coupon payments of the underlying bonds within the portfolio. Average effective maturity is a weighted average of all the maturities of the bonds in a portfolio, computed by

weighting each bond’s effective maturity by the market value of the security. Duration is the measure of a bond's price sensitivity to interest rates and is expressed in years. Effective duration is the

duration for a bond with an embedded option when the value is calculated to include the expected change in cash flow caused by the option as interest rates change. Information ratio is a ratio of

portfolio returns above the returns of a benchmark to the volatility of those returns. Tracking error measures the dispersion or volatility of excess returns relative to a benchmark. Tracking error measures

the dispersion or volatility of excess returns relative to a benchmark.

Statements concerning financial market trends or portfolio strategies are based on current market conditions, which will fluctuate. There is no guarantee that these investment strategies will work under

all market conditions or are suitable for all investors and each investor should evaluate their ability to invest for the long term, especially during periods of downturn in the market. Outlook and strategies

are subject to change without notice.

The performance figures presented reflect the performance for the institutional class unless otherwise noted.

A note about Sector exposure: Other indicates swaps and securities issued in euros.

A note about Emerging markets exposure by country of risk: country of risk reflects the country of incorporation of the ultimate parent company.

PIMCO uses an internal model for calculating effective duration, which may result in a different value for the duration of an index compared to the duration calculated by the index provider or another

third party.

This material contains the current opinions of the manager and such opinions are subject to change without notice. This material has been distributed for informational purposes only and should not be

considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but

not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. PIMCO is a trademark of Allianz Asset Management of

America L.P. in the United States and throughout the world. PIMCO Investments LLC, distributor, 1633 Broadway, New York, NY, 10019 is a company of PIMCO ©2017 PIMCO.

As of 31 March 2017

736_QIR-1Q17

Fixed Income ReviewTCW Core and Core Plus Fixed Income StrategiesFIRST QUARTER 2017

FOR INVESTMENT PROFESSIONAL USE ONLY


DFIqr878CCP 4/18/17

Table of Contents

Organization Update . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (pp 1-2)

1Q 2017 Bloomberg Barclays Index Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (p 3)

1Q 2017 Core and Core Plus Fixed Income Performance Attribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (p 4)

1Q 2017 Market Fading the Trump Trade? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (p 5)

1Q 2017 The Fed Continues to Tighten Amid Lackluster Economic Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (p 6)

1Q 2017 Credit Review and Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (p 7)

1Q 2017 Securitized Products Review and Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (p 8)

1Q 2017 Global Review and Outlook. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (p 9)

1Q 2017 Core and Core Plus Fixed Income Positioning Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (p 10)

1Q 2017 Sector Highlight: Non-Agency CMBS Retail Exposure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (p 11)

DFIqr878CCP 4/18/17 1


Core/Core Plus Fixed Income* ($120.0)

SecuritizedProducts ($19.2)

Long Duration ($7.5)

Strategic/Unconstrained/Absolute ($7.0)

Low Duration** ($4.7)High Yield/Bank Loans ($2.3)

Investment Grade Credit ($1.4)Other Fixed Income*** ($0.8)

Emerging Markets Fixed Income ($9.7)

TCW Assets Under ManagementAS OF MARCH 31, 2017

FIRM AUM: $194.3 BILLION

U.S. FixedIncome

U.S. Equities

International& Global

AlternativeInvestments

$11.3$6.4

$14.2

$162.5

TOTAL FIXED INCOME ASSETS: $172.6 BILLIONBY STRATEGY

Source: TCWNote: Totals may not reconcile due to rounding.Comprises the assets under management, or committed to management, of The TCW Group, Inc. and its subsidiaries.* Includes Core, Core Plus, Intermediate, and Opportunistic Core Plus Fixed Income.** Includes Low Duration and Ultra Short/Cash Management.*** Includes U.S. Government, Government/Credit, Global, and Other Fixed Income.

DFIqr878CCP 4/18/17 2


Fixed Income ExpertiseAS OF MARCH 2017

Portfolio Investment Team

Bret BarkerLawrence Rhee

Brian Smith

Analysts/TradersJeannie Fong

Michael Pak, CFANishi PanchalTim TorlineTyler Tucci

Katherine Wu

Marcos GutierrezChait Errande

Ricardo Horowicz, PhDMhair Orchanian, PhD

Anish Patel, FRMMelicia Shen

Mateo Martinez

Patrick MooreDavid Vick, CFAGino Nucci, CFA

Jeffrey KatzTimothy BitsbergerMark McNeill, CFA

Jamie FrancoJulie StevensonVictoria VogelTracy GibsonIrene Mapua

Government/RatesSecuritized Products CreditInvestment

Risk Management Product Management

Credit TradingJerry Cudzil

Mike Carrion, CFATammy Karp Simon Park

Drew SweeneyBrian Gelfand

Credit ResearchJamie FarnhamPatrick Barrett

Alex Bibi Marie Choi

Nikhil ChopraAnthony Garcia

Griffi th LeeChet Malhotra

Melinda NewmanRonnie Ng

Nick Nilarp, CFASteven Purdy

Joel ShpallKenneth Toshima

GENERALIST PORTFOLIO MANAGERS

Tad Rivelle, CIO-Fixed Income Laird Landmann Stephen Kane, CFA Bryan Whalen, CFA

Analysts

Ruben Hovhannisyan, CFAConnor Tuttle, CFA

Portfolio Investment TeamPenny Foley

David Robbins

Portfolio SpecialistAnisha Goodly

Sovereign ResearchBlaise Antin

David LoevingerMarcela Meirelles, PhD, CFA

Brett RowleySpencer Rodriguez

Corporate Credit ResearchJavier Segovia, CFAStephen Keck, CFAJeffrey Nuruki, CFA

Shant Thomasian, CFA

Strategy/TradingCurrency - Jae H. Lee

Corporate - Chris Hays

TradingAlex StanojevicJason ShamalyJustin Becker

Emerging Markets Debt

AgencyMitch Flack

Eric Arentsen Pat Ahn

Nanlan Ye Tim Brown

Melissa Conn, CFAStephen Leech

CreditScott Austin, CFA

Harrison Choi

ABS/CMBSPhilip Choi

Elizabeth CrawfordDavid Doan

Tony Lee, CFASagar Parikh, CFA Palak Pathak, CFA

Kyle Phillips Zhao Zhao

Non-Agency RMBSPhillip Dominguez, CFA

Michael Hsu Brian Choi

Brian Rosenlund, CFAJonathan Marcus

DFIqr878CCP 4/18/17 3


1Q 2017 Index Returns

1Q 2017 1Q 2017 12 Month 12 MonthFixed Income Total Return Excess Return* Total Return Excess Return* Yield-to-Maturity OAS (bps)

Treasury 0.7% 0.0% -1.4% 0.0% 1.9% 0

3 mo T-Bills 0.1% 0.0% 0.4% 0.0% 0.8% 7

1-3 Year 0.3% 0.0% 0.2% 0.0% 1.3% 0

TIPS 1.3% 0.0% 1.5% 0.0% 2.3% -

Corporate 1.2% 0.4% 3.3% 5.0% 3.3% 118

AA-Rated 0.9% 0.2% 0.9% 2.4% 2.7% 71

BBB-Rated 1.5% 0.6% 5.3% 7.0% 3.7% 147

High Yield 2.7% 2.1% 16.4% 17.0% 6.2% 383

Agency MBS 0.5% -0.2% 0.2% 0.1% 2.9% 27

Commercial MBS 0.9% 0.1% 0.6% 1.8% 2.8% 77

Asset Backed 0.5% 0.2% 1.2% 1.0% 1.9% 54

Non U.S. Sovereign 2.7% 1.8% -4.0% -1.8% 0.7% 25

Emerging Markets 3.8% 3.0% 7.9% 10.0% 5.1% 284

Source: Bloomberg Barclays *Excess returns are calculated by Bloomberg Barclays and represent the return of a sector excluding the impact of interest rate changes.

1Q 2017 12 Month Equity Total Return Total Return Yield-to-Maturity OAS (bps)

S&P 500 Index 6.07% 17.16% - -

DJIA Index 5.19% 19.91% - -

NASDAQ Index 10.13% 22.95% - -

Source: Bloomberg For period ending 3/31/17

Standard & Poor’s 500® is a trademark of The McGraw-Hill Companies.

DFIqr878CCP 4/18/17 4


1Q 2017 Core and Core Plus Fixed Income Performance Attribution

• Financials outpaced industrials and utilities, buoyed by brokers, finance companies, and REITs

• Emerging market debt posted strong returns and commodity-related sectors tightened, despite some price volatility during the quarter

• Non-agency MBS sector continued to benefit from solid investor demand given attractive loss-adjusted yields and a profile characterized by low volatility, short duration, and improving fundamentals

• Government sponsored student loan ABS outpaced Treasuries as rating agencies neared the end of their review

• Yield benefits declined but were still attractive for the quarter

• Among corporates, favor financials with an emphasis on large U.S. banks, insurance, and REITs

• Avoid issues with non-U.S. risks and exposure to the volatile energy and metals sectors

• Maintain position in current pay, senior, non-agency MBS backed by subprime and alt-A loans

• Emphasis on non-traditional ABS sectors such as student loans, with a modest position in other high quality ABS

• Continued to hold 3-month JGB T-bills, where allowed, hedging Yen exposure with a dollar-yen cross-currency swap, but reduced the position as demand for dollar assets eased

Issue Selection

Positive

• Non-government sectors outperformed in the quarter, with the overall Aggregate Index ahead of Treasuries by 11 bps

• Investment grade credit outpaced Treasuries by nearly 50 bps, led by non-U.S. sovereign credit, while high yield corporates posted nearly 215 bps of excess return versus Treasuries

• Structured products generally trailed credit sectors, but out-paced Treasuries on a duration adjusted basis. Agency MBS was the only sector to lag, trailing Treasuries by 17 bps

• Underweight governments

• Underweight exposure to investment grade credit, with a small allocation to high yield where allowed

• Overweight structured products, with the exception of agency residential MBS

Sector Small Negative

While long Treasury rates moved slightly lower, front-end yields were 20 to 30 bps higher, resulting in 26 bps of flattening between 1-Year and 30-Year yields

Underweight the long end with a slight preference for 5-Year maturities

Yield Curve

Neutral

Both 10-Year and 30-Year Treasury yields fell by approximately 6 bps, ending the quarter at 2.39% and 3.01%, respectively

Duration moved from 0.3 years shorter than the Index to approximately 0.4 years short as intermediate and long Treasury yields declinedDuration Neutral

Market ActionPositioning Result

Portfolio characteristics and holdings are subject to change at any time. Past performance is no guarantee of future results.

DFIqr878CCP 4/18/17 5


1Q 2017 Market Fading the Trump Trade?

Our View: At almost eight years, the current credit cycle is already longer than all but two post-war recoveries, extended by massive amounts of Fed liquidity. Until the end of the first quarter, markets traded on the hope that fiscal policy could step in to provide a catalyst for economic growth through fiscal spending and tax reform. However, Washington is not likely to deliver on the paradigm shift that many were expecting. As a result, we remain cautious and defensively positioned, looking to provide downside protection while we wait for better valuations that will result from market volatility.

• The first quarter of 2017 was again characterized by the typical indicators of a late cycle, such as increasingly rich valuations in both the credit and equity markets and record high leverage. Additionally, surveys showed a continued tightening of lending standards, particularly for consumers. While data on jobless claims and overall confidence has been strong this quarter, softness in consumer spending and business investment call into question whether economic growth is actually accelerating.

• The latest market reversal suggests there is doubt regarding whether the new administration will be able to seamlessly implement their policy agenda and provide the needed boost to growth to meaningfully change the dynamics of the credit cycle, particularly if the policies are more modest in order to get political support. This cycle has gone on as long as it has largely due to the backdrop of low inflation, low rates, and an accommodative Fed that has stepped in to provide a backstop to markets. Meanwhile, if fiscal stimulus were passed and provided a temporary boost to growth, this could portend a more aggressive Fed than the market currently anticipates, ultimately tightening financial conditions and potentially precipitating a broader market deleveraging.

• Post-election, markets pinned their hopes on the new administration’s ability to deliver a package of fiscal stimulus, tax reform, and other business friendly efforts to de-regulate. Besides economic growth, investors were also predicting higher inflation and, until recently, largely pricing in an unreasonably optimistic scenario. The failure of the House GOP to pass health care reform at the end of the quarter suggests that there will be limits to what is achievable on a legislative agenda going forward. As a result, markets have reversed some of the post-election gains. The dollar retraced most of the strength achieved since November, as did bank stocks, while the 10-Year Treasury has fallen back from a post-election high of 2.6% to 2.4%.

• Policy uncertainty has subsequently weighed on markets and investors forecasts have been further complicated by the fact that the new administration’s proposals do not all affect the economy in the same way. For instance, tax reform and infrastructure spending are often growth-enhancing while policies that increase barriers to trade and limit immigration can have negative growth effects. Meanwhile, headwinds in the form of cycle-high debt levels (both corporate and government), higher rates, a stronger dollar, and a possible pickup in inflation may also limit the ability of fiscal policy to meaningfully increase growth.

11/8/16 12/1/16 12/26/16 1/18/17 2/10/17 3/7/17 3/30/1797.5

98.5

99.5

100.5

101.5

102.5

103.5

97.5

98.5

99.5

100.5

101.5

102.5

103.5

3/31/17

Source: Bloomberg

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

-30

-10

10

30

50

70

90

-30

-10

10

30

50

70

90C&I

CRE

Card

Auto

Source: Morgan Stanley Research, Federal Reserve, Haver

U.S. DOLLAR POST-ELECTION RALLY LOSES STEAM

LENDING STANDARDS ARE STARTING TO TIGHTEN

DFIqr878CCP 4/18/17 6


1Q 2017 The Fed Continues to Tighten Amid Lackluster Economic Growth

Our View: While market sentiment has improved dramatically over the past few months, we continue to believe we are in the late stages of the credit cycle. We expect the Fed to continue its gradual approach to rate hikes, with a plan to begin shrinking of the balance sheet announced later this year. As policy is normalized to bring about rate levels more consistent with 2% growth, tighter financial conditions or volatility surrounding the reduction of asset purchases could provide the spark that ignites a broader market correction.

• With the consensus forecast for lackluster growth of around 2% largely intact for this year, it is important to put this hiking cycle into context. When viewed against the past two hiking cycles (1994, 2004) the Fed is hiking much later in the cycle, when growth is relatively weak and leverage is much higher. Given that leverage has been sustained largely due to low rates and central bank accommodation, the Fed may have much less latitude to continue raising rates without precipitating a deleveraging in the credit markets or cutting off economic growth.

• The Fed’s progress towards normalizing rates has made the topic of their balance sheet more relevant. Since the crisis, the Fed’s balance sheet has grown to roughly $4 trillion, five times its pre-crisis size and including both Treasuries and Agency MBS. Despite Fed statements that they do not plan to start normalizing the balance sheet until rate increases are “sufficiently underway,” Chairwoman Yellen may want to begin the process of shrinking the balance sheet before she leaves office early next year. Operationally, many expect the Fed to cease reinvestments and gradually let securities mature instead of outright selling MBS and Treasury holdings, though details will be critical given the significant impact the Fed could have on markets.

• At the March meeting, the Fed raised the target range for the federal funds rate 25 basis points to 0.75-1.0%, the second increase in three months. While markets anticipated the hike, the fact that the Fed left their economic and rate projections materially unchanged and did not discuss plans to reduce their balance sheet was largely viewed as dovish. For the moment, a gradual approach to normalizing rates appears to be the Fed’s preferred course of action until the actual content of fiscal policy is agreed to and implemented.

• Despite the hike, 2017 U.S. growth is still trending below average. One likely factor influencing the Fed’s more optimistic assessment of the economy is that “soft data”, which is sentiment or survey-based, recorded strong gains over the past several months. However, the “hard data” or more activity-based data has not shown a similar improvement. The hard data, such as employment, consumer spending, and GDP data, available to the Fed before their March 2016 meeting and this past March meeting shows that the economy has not materially improved.

Source: Morgan Stanley, Bloomberg

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

-2.5

-1.5

-0.5

0.5

1.5

2.5

-2.5

-1.5

-0.5

0.5

1.5

2.5

Surveys & Business Cycle Indicators Average of Non-Survey Components

WIDENING GAP BETWEEN “HARD” AND “SOFT” U.S. DATA Rate Hike Cycle

Metric 1994 2004 Current

First Hike Feb-94 Jun-04 Dec-15Second Hike Mar-94 Aug-04 Dec-16Third Hike Apr-94 Sep-04 Mar-17Starting Rate 3.00% 1.00% 0.25%Rate After 2nd Hike 3.50% 1.50% 0.75%Rate After 3rd Hike 3.75% 1.75% 1.00%Years Since Last Recession 3.1 2.8 7.7Avg GDP Growth (Past 4 Quarters) 4.3% 3.5% 1.9%LTM S&P 500 EPS Growth 25.37% 21.48% 4.47%IG Leverage (Net) 1.71x 1.99x 2.33x

Source: Morgan Stanley Research, Bloomberg, St. Louis Fed, Thompson

DFIqr878CCP 4/18/17 7


1Q 2017 Credit Review and Outlook

Our View: High leverage and weak underwriting are significant concerns and are unlikely to unwind gradually or smoothly, but rather in a more dramatic and painful fashion. While the timing is difficult to predict, markets appear increasingly fragile with the potential for the credit correction to happen at any point. There are many potential catalysts that could end the credit cycle: higher rates/tighter monetary conditions, policy error by the fiscal or monetary authorities, slower global growth, decline in global trade, currency volatility, increasing corporate defaults, or commodity price volatility. As such, we hold higher quality and more defensive securities which we believe are robust enough to weather the expected volatility, while building ample liquidity to take advantage of opportunities that inevitably arise in such environments.

• With the Fed’s March rate hike largely priced into the market and hope lingering that fiscal policy will deliver some economic growth, the appetite for risk bolstered U.S. credit markets in the first quarter. High yield corporates gained nearly 2.7% and outpaced Treasuries by 214 bps on a duration-adjusted basis, while investment grade credit gained 1.3%, led by financial and industrial sectors, which outpaced Treasuries by 55 and 34 bps, respectively, on a duration adjusted basis.

• Corporate leverage metrics remain considerably above any prior non-recessionary period (with HY and IG gross leverage at an all-time high – 4.7X and 2.8X, respectively) and record investment grade supply nearly 30% over the post-crisis average. Meanwhile, interest coverage has declined for the fifth consecutive quarter across the market, largely due to the rapid pace of debt growth which, despite declining coupons, has meant interest expenses are set to rise. While interest coverage is certainly not as low as it has been in other cycles, it is harder to make the case that increasing leverage is sustainable, particularly if higher rates materialize as forecast and growth remains subdued.

2007 2008 2009 2010 2011 2012 2013 2014 2015 20164.0

6.0

8.0

10.0

12.0

14.0

2.0

3.0

4.0

5.0

6.0

IG Interest Coverage

HY Interest Coverage

CORPORATE INTEREST COVERAGE HAS DECLINED

Source: Morgan Stanley Research, Bloomberg Finance LP, Citigroup Index LLC

• Given the backdrop of rising rates in Q4, investors have continued to shift into floating rate products, contributing to positive flows into loan funds for 1Q17 at the same time high yield funds experienced outflows. The robust demand for floating rate instruments stimulated repricing activity in the bank loan market to record high levels of $229 billion year-to-date, with this trend likely to continue as 66% of the leveraged loan market was trading above par as of the end of March.

• After a steady increase in the corporate high yield 12-month trailing default rate over the course of 2016 due to weakness in the Energy and Metals & Mining sectors, the first quarter of 2017 saw a reversal of this trend as the impact of commodity price declines has been mostly worked through. While there have been improvements in the commodity and energy sectors, the balance of risks is still skewed towards more downgrades than upgrades as high debt levels, rising rates, and slow growth pressure credit fundamentals. Of note, retail is the one sector at significant risk for downgrades given the secular headwinds faced by the traditional brick-and-mortar retailer, while the defensively oriented healthcare sector also has some idiosyncratic downside risks as well.

Savings & LoansInvestment Companies

Chemicals Packaging & Containers

Telecommunications Pipelines

Oil & GasRetail

Healthcare Products 22.715.2

12.411.1

3.22.52.5

0.30.3

Source: Goldman Sachs

Issuer Par % ofBBB & BBB- Sectors Face Amount on Downgrade Watch ($bn) Count Sector

1 40%1 36%2 9%2 6%1 8%1 31%2 3%1 5%1 33%

POTENTIAL DOWNGRADES SPREAD ACROSS SECTORS

DFIqr878CCP 4/18/17 8


1Q 2017 Securitized Products Review and Outlook

Our View: Structured products offer good risk-adjusted yields and protection from excesses in the credit markets. Non-agency MBS continues to deliver good returns and there remain opportunities to invest despite a shrinking market. CMBS and ABS holdings continue to focus on the senior-most parts of the capital structure and high quality collateral that often has government guarantees. Finally, though agency MBS offers a high quality, higher yielding, and fairly liquid alternative to Treasuries, yield compensation is still relatively small given the policy uncertainty hanging over the market.

• With significant policy uncertainty relating to the Fed’s balance sheet weighing on the market, Agency MBS lagged Treasuries by nearly 20 basis points over the quarter, despite declining prepayments and largely stable Treasury rates. Investors have begun positioning for the eventual removal of Fed reinvestment, pushing spreads on short duration and extension-protected securities to very tight levels, though the broader market saw spreads widen marginally. Looking at the historical relationship between agency MBS spreads and government ownership levels (both Fed and GSE), it is possible that a tapering of Fed reinvestments could contribute to a widening of the current coupon spread by over 60 basis points over time.

• The CMBS market continues to display late cycle dynamics with retailers in particular facing challenges. Since 2010, CMBS mall-backed loan liquidations totaled $3.89 billion at a loss of $2.88 billion (74% loss severity) to the securitization trusts. In addition to the liquidations, another $3.81 billion, or 7.8% of all mall-backed loans, is currently in special servicing (implying a high likelihood of default for modifications). Of the roughly $500 billion CMBS market, retail represents around 30% of the underlying mortgaged properties, and regional malls which are seeing the greatest stress accounts for around 10% of the total CMBS market. Rising rates will put further pressure on this part of the market unless they are accompanied by strong growth, which is not currently in the forecast.

• In the ABS market, FFELP student loans outperformed other sectors of the ABS market as well as the broader credit market on a total return basis as the uncertainty surrounding rating downgrades has dissipated. Moody’s concluded the review of currently rated FFELP transactions under its updated methodology late last year. Meanwhile, Fitch has taken action on roughly 87% of the FFELP ABS it placed on ratings watch and expects to conclude its review by April 2017. The resultant downgrades have been far less extensive than anticipated, driving positive excess returns to nearly +165 basis points for the quarter and approximately +680 basis points on a rolling 12-month basis.

-20

0

20

40

60

80

100

120

140

160

-20

0

20

40

60

80

100

120

140

160

15% 20% 25% 30% 35% 40%

Bloo

mbe

rg B

arcl

ays

MBS

Fix

ed In

dex

OAS

(bp

s)

Fed/GSE Combined Ownership Share

Current

y = - 463.67x + 188.87

?

STUDENT LOANS RECOVERED FROM DOWNGRADE REVIEWFED TAPERING COULD WIDEN MBS SPREADS

Source: Barclays, Bank of America/Merrill Lynch

Source: FTN Financial, Bloomberg Barclays, TCWNote: 2009 - Present (QE Period)

1/30/15 4/30/15 7/31/15 10/30/15 1/29/16 4/29/16 7/29/16 10/31/16 1/31/17

60

80

100

120

140

160

180

200

-300

-100

100

300

500

700

bps bps

3/31/17

FFELP Spreads

Excess Return - 12 mo (rhs)

DFIqr878CCP 4/18/17 9


1Q 2017 Global Review and Outlook

Our View: Emerging markets remain vulnerable to credit markets in the U.S., and while growth prospects may start to improve, actions from abroad will challenge fundamentals - whether they are related to the impact of higher U.S. rates, a stronger dollar, or instability in China. In our opinion, emerging markets, like high yield credit, are susceptible to waning global liquidity and an end to the credit cycle, with the potential for underperformance even if long-term characteristics are favorable.

• This time last year worries about China’s economic growth and rapid currency depreciation shook global markets. For now, it seems China’s economy has appeared to stabilize, with reported growth of 6.7% last year within the government’s target range of 6.5-7%. While both services and manufacturing PMIs have started to improve, much of the stabilization in their economy has been supported by a rapid expansion in credit. Total debt has risen to over 280% of gross domestic product from 160% in 2005, with corporate debt jumping to 125% of GDP from 105%. Additionally, recent home price appreciation has fueled renewed worries of a bubble and prompted some to question the authorities’ ability to keep a lid on prices without harming the broader economy.

• Stabilization in China, abating deflationary fears globally, and a gradual U.S. hiking cycle has historically been good news for emerging markets. Emerging Market returns were 4.0% for the quarter, outpacing the developed market. The question is whether macroeconomic fundamentals support continued improvement in the outlook for emerging markets. While manufacturing PMI readings this quarter indicate that EM manufacturers are beginning to recover, this has not provided a significant boost to growth as of yet. Vulnerabilities still abound for emerging markets, notably a strong dollar, the potential for tighter monetary policy globally, and the prospect of protectionist trade policies from the U.S.

• Recovery in Europe appears to be gaining some momentum as business sentiment, growth, and unemployment metrics have all improved since the beginning of the year. Economic growth for the Euro Area last year reached 1.7%, prompting many market participants to expect additional tapering of the ECB’s QE program, though this may be a bit premature given low inflation numbers. While headline inflation has improved mainly due to temporary factors such as rising energy prices, core inflation has remained persistently below 1% for the past year and does not show signs of accelerating. Additionally, credit growth appears to be faltering, with consumer loan growth down from 4.6% to 4.3% in February.

• There are several risks that could undermine the economic outlook in Europe. The upcoming election cycle is fraught with political risk as rising Euro-skepticism has driven support for populist/nationalist candidates that could alter the status-quo if elected. More immediately, deep concerns remain about the Italian banking system as gross-non performing loans at €365 billion total nearly 20% of outstanding loans, three times the average amount in most European economies. In addition to the well-publicized challenges facing Unicredit and Banca Monte dei Paschi di Siena, two additional mid-tier Italian banks requested state aid this quarter just to remain open.

CHINESE DEBT LEVELS HAVE RISEN SUBSTANTIALLY

Numbers may not sum due to rounding.Source: MGI Country Debt database; McKinsey

2000 2007 2Q14

2.1

237

83

8121

42

24

72

20158

55

65

125

38

282

44

56

105

81

286

31

61

69

113

274

89

36

67

77

269

80

70

54

54

258

70

25

60

92

247

Total Debt($ Trillion)

China(%)

By Country, 2Q14

7.4 28.2

SouthKorea

Australia UnitedStates

Germany Canada

Government Financial InstitutionsNon-Financial CorporateHouseholds

NON-PERFORMING LOANS ELEVATED IN PERIPHERAL EUROPE

Source: Bloomberg, Eurostat, National Central Banks, JFSA, EBA, J.P. Morgan (as of end 2015)

Total Gross Other Total Gross Gross NPE Non-Performing Non-Performing NPE as % as of % Loans Exposure or Europe of GDP

Italy 198 160 37% 22%

Spain 131 81 22% 19%

Portugal 32 14 5% 26%

Ireland 25 9 4% 13%

Sub-total 285 264 68% 20%

France 76 0 8% 4%

Europe 694 264 100% 7%

DFIqr878CCP 4/18/17 10


1Q 2017 Core and Core Plus Fixed Income Positioning Summary

Portfolio characteristics and holdings are subject to change at any time. The views and forecasts expressed in this quarterly review are as of April 2017, are subject to change without notice and may not come to pass. TCW reserves the right to change its investment perspective and outlook without notice as market conditions dictate. Source: Bloomberg, TCW

Approximately 0.4 years shorter than the Index, with potential to extend or shorten modestly as Treasury rates fluctuate

Duration• Remain short duration as long as rates remain below long-term fair value• Look to extend duration as rates rise, with a preference for adding in the 5-year

part of the curve

Slightly favor 5-year maturitiesCurve All parts of the curve bear some risk of rising rates, though 10 and 30-year maturities are more vulnerable given the current flatness of the yield curve

Underweight with an emphasis on on-the-run securitiesGovernments• On-the-run securities provide greater liquidity for a small give up in yield• May look to Treasury futures market to further enhance liquidity

• Agency MBS – slight underweight, bias to add

• Non-Agency MBS – maintain allocationMBS

• Tactically utilize specified pools and TBAs contingent on the pay-up requirements and carry advantage available

• Maintain emphasis on higher quality, shorter duration, currently amortizing bonds

• Continue to optimize relative value within the sector as additional loan data becomes available

OverweightABS

• Emphasis on government guaranteed student loans with a bias to sell if spreads continue to tighten

• Hold short duration, high quality credit card and auto issues to boost liquidity, and top of the capital structure (AAA- rated) CLOs

Overweight, preference for agency CMBSCMBS

• Maintain allocation to agency CMBS which offers high quality cash flows and a yield advantage to Treasuries

• Favor seasoned non-agency issues and select more recent vintages given better structures and collateral, with a preference for single asset single borrower deals

Underweight, bias to add on weaknessCredit

• Emphasize financials with a preference for large U.S. banks, particularly shorter maturity issues that offer a yield advantage versus Treasuries

• Underweight industrials with emphasis on defensive sectors like pharmaceuticals, food & beverage, and communications, as well as airline EETCs which benefit from solid asset coverage

• Underweight high beta credit sectors and non-corporate credit, particularly non-U.S. issues

Small allocation High Yield Prefer defensive, relatively high quality credits away from volatile sectors like

energy, metals, and transportation

Minimal allocationEmerging Markets Weak growth in the developed markets, currency volatility, and susceptibility to

changing liquidity conditions suggest caution is warranted

PositioningCharacteristic Comments

An aging credit cycle and insufficient compensation for the risks underwritten informs a cautious approach to positioning. Defensiveness is expressed with an underweight to higher beta sectors and a focus on better quality, more senior areas of the market, while liquidity is maintained so that “dry powder” is available when opportunities arise.

DFIqr878CCP 4/18/17 11


1Q 2017 Sector Highlight: Non-Agency CMBS Retail ExposureWith the rise of eCommerce, traditional brick-and-mortar retailers continue to face headwinds and have been forced to right-size their footprints by closing unprofitable stores. This is especially evident in regional malls where anchor tenants like Sears and Macy’s recently announced significant store closures resulting in decreased mall valuations. Losses on regional malls in CMBS conduit deals present risks today and potential opportunities down the road.

Our View: The CMBS market is in the late stages of the credit cycle with commercial real estate valuations and conduit CMBS leverage above pre-crisis peaks. As a result, we have reduced exposure to non-agency CMBS, focused our exposure at the top of the capital structure, and added exposure to Single Asset Single Borrower (SASB) bonds that have more moderate trust leverage. Given the late cycle nature, we have focused our exposure in properties that better maintain their income and value throughout the cycle. This high quality emphasis provides protection from stresses, whether from retail or other factors. In weaker deals, if losses to junior tranches do materialize, the entire capital structure is likely to re-price lower, and we may be presented with the opportunity to buy fundamentally sound bonds at attractive levels.

Typical CMBS Structure

BCredit Enhancement: 4%

Spread: ~1,200+ bps

Super Senior: AAACredit Enhancement: 30%

Spread: ~60 bps

Mezzanine: AAACredit Enhancement: 22%

Spread: ~115 bps

AACredit Enhancement: 16%

Spread: ~130 bps

ACredit Enhancement: 12%

Spread: ~190 bps

BBBCredit Enhancement: 8%

Spread: ~400bps

BBCredit Enhancement: 5%

Spread: ~750+ bps

UnratedCredit Enhancement: 0%

Typical CMBS Loan Mix

High Concentration: 20%

AverageExposure: 10%

CHALLENGES FACING REGIONAL MALLS

• Rise of eCommerce– Currently captures 15-20% of industry sales– Expected to garner 35-40% of sales within next 5-10 years

• Regional Mall Supply Overhang– Suburban expansion and American consumerism has

led to 1,100 malls in the U.S.– Dedicated retail space per U.S. citizen at approximately

24 square feet exceeds closest market by 1.4x

• Low Productivity Malls are Closing– Sales per square foot (PSF) is one metric to gauge mall

sustainability– Sales greater than $500 PSF typically indicate a mall

is well positioned in its market place– Only 300 of the 1,100 malls in the U.S. generate sales

of approximately $500 PSF or more

Regional Mall Exposure

Retail 32%

Office34%

Multifamily11%

Lodging 9%

Industrial 6%

Mixed Use 3%

Other 5%

Regional Mall

DISTRESSED CASE

Regional Mall Exposure: 20%Default Assumption: 75%Severity: 90%Potential Losses: ~14%

BASE CASE

Regional Mall Exposure: 10%Default Assumption: 50%Severity: 74%Potential Losses: ~4%

DFIqr878CCP 4/18/17 12


This material is for general information purposes only and does not constitute an offer to sell, or a solicitation of an offer to buy, any security. Any issuers or securities noted in this document are provided as illustrations or examples only, for the limited purpose of analyzing general market or economic conditions and may not form the basis for an investment decision, nor are they intended to serve as investment advice. Any such issuers or securities are under periodic review by the portfolio management group and are subject to change without notice. TCW makes no representation as to whether any security or issuer mentioned in this document is now in any TCW portfolio. TCW, its officers, directors, employees or clients may have positions in securities or investments mentioned in this publication, which are subject to change without notice. Any information and statistical data contained herein derived from third party sources are believed to be reliable, but TCW does not represent that they are accurate, and they should not be relied on as such or be the basis for an investment decision.

An investment in the strategy described herein has risks, including the risk of losing some or all of the invested capital. An investor should carefully consider the risks and suitability of an investment strategy based on their own investment objectives and financial position. There is no assurance that the investment objectives and/or trends will come to pass or be maintained. The information contained herein may include preliminary information and/or “forward-looking statements.” Due to numerous factors, actual events may differ substantially from those presented herein. TCW assumes no duty to update any forward-looking statements or opinions in this document. This material comprises the assets under management of The TCW Group, Inc. and its subsidiaries, including TCW Investment Management Company LLC, TCW Asset Management Company LLC, and Metropolitan West Asset Management, LLC. Any opinions expressed herein are current only as of the time made and are subject to change without notice. The investment processes described herein are illustrative only and are subject to change. Past performance is no guarantee of future results. © 2017 TCW

Client Statement

865 S. Figueroa Street

Los Angeles CA 90017

TCW provides investment advisory services through the following investment advisors: Trust Company of the West, TCW Asset Management Company, TCW InvestmentManagement Company, and Metropolitan West Asset Management LLC. Your specific investment advisor(s) will depend on the investment(s) in which you participate.

You should compare this statement with any statements that you receive from the custodians for your investments.

Pasadena Fire and Police Retirement System (SMS650)

Client Services (FI) Central Delivery

Executive SummaryBase Currency: US Dollar

Portfolio Characteristics

Total Rate of Return (%)

Sector Allocation Highlights

-0.0

9

0.8

3

1.3

0

2.9

1

3.3

2

6.3

7

6.2

0

-0.1

2

0.7

5

0.9

9

2.5

9

3.0

0

6.0

4

5.8

7

-0.0

5

0.8

2

0.4

4

2.6

8

2.3

4

4.2

8 5.1

1

March Latest 3-Months 1 Year 3 Years 5 Years 10 Years Annualized S.I.

TCW (Gross) TCW (Net) Bloomberg Barclays Aggregate

IndexPortfolio

Yield To Worst 3.46% 2.61%

Duration 5.62 yrs 6.00 yrs

Spread Duration 4.39 yrs 3.86 yrs

Quality AA AA+

Portfolio Index

Mortgage Backed 40.94% 30.26%

Agency MBS 27.11% 28.49%

Non-Agency MBS 8.10% 0.00%

CMBS 5.73% 1.76%

Credit 28.06% 30.60%

26.30% 24.78%Corporate Credit

Investment Grade 26.30% 24.78%

High Yield 0.00% 0.00%

Non Corp Credit 1.76% 3.82%

Non USD Developed 0.00% 0.00%

Emerging Markets 0.00% 2.00%

Other 0.00% 0.00%

30,403,253.19

Ending Market Value

29.81%U.S. Government 38.67%

28.06%Credit 30.60%

40.94%Mortgage Backed 30.26%

8.22%Asset Backed 0.47%

(7.02)%Cash and Equivalents 0.00%

0.00%Other 0.00%

Pasadena Fire and Police Retirement System

As of 03/31/2017

Core Fixed Income (Account #: SMS650)Benchmark: Bloomberg Barclays Aggregate

Inception Date: 07/24/2000- Trade date basis- Returns are annualized for periods greater than one year.

1

Duration BreakdownQuality Breakdown

Maturity BreakdownBase Currency: US Dollar

Characteristics Summary

Index

Market Value %

PortfolioMarket Value Portfolio Index

Duration %

-624,8260 - 1 Yrs -2.06% 0.06% 0.40% 0.01%

5,431,5871 - 3 Yrs 17.87% 20.90% 4.57% 6.79%

7,112,4133 - 5 Yrs 23.39% 20.04% 16.57% 12.74%

12,993,4695 - 10 Yrs 42.74% 41.95% 36.94% 40.28%

2,494,81310 - 20 Yrs 8.21% 5.54% 10.63% 8.46%

2,995,79920+ Yrs 9.85% 11.50% 30.89% 31.71%

TOTAL 30,403,253 100%100% 100% 100%

IndexPortfolio

Yield to Worst 3.46% 2.61%

Spread Duration 4.39 yrs 3.86 yrs

Effective Duration 5.62 yrs 6.00 yrs

Duration Difference -0.38 yrs

Average Maturity 8.50 yrs 8.17 yrs

Average Credit Quality AA AA+

Average Coupon 3.44% 3.07%

Current Yield 3.40% 2.98%

Average Convexity 0.10 yrs 0.19 yrs

Index

Market Value %


Duration %

19,225,013AAA 63.23% 71.67% 68.62% 65.97%

1,660,935AA 5.46% 4.59% 6.11% 4.62%

5,158,642A 16.97% 10.22% 10.98% 12.69%

3,478,853BBB 11.44% 13.52% 13.75% 16.71%

48,550BB 0.16% 0.00% 0.01% 0.00%

547,831B 1.80% 0.00% 0.50% 0.00%

283,430CCC & Below 0.93% 0.00% 0.03% 0.00%

0Not Rated 0.00% 0.00% 0.00% 0.00%

TOTAL 30,403,253 100%100% 100% 100%

Index

Market Value %


Duration %

19,169< 0 Yrs 0.06% 0.00% 0.00% 0.00%

4,156,7850 - 1 Yrs 13.67% 0.22% 1.01% 0.03%

3,208,6351 - 2 Yrs 10.55% 11.18% 3.07% 2.83%

1,173,8792 - 3 Yrs 3.86% 10.69% 1.77% 4.48%

10,213,6003 - 5 Yrs 33.59% 31.62% 26.83% 21.60%

5,119,9015 - 7 Yrs 16.84% 24.00% 17.77% 23.61%

2,412,9217 - 9 Yrs 7.94% 8.12% 11.69% 10.68%

4,098,3639+ Yrs 13.48% 14.18% 37.87% 36.78%

TOTAL 30,403,253 100%100% 100% 100%


Core Fixed Income (Account #: SMS650)

As of 03/31/2017

Benchmark: Bloomberg Barclays Aggregate

All market values include accrued interestAll securities unrated by NRSROs will defer to the manager determined rating where applicable and permitted 2

Base Currency: US Dollar

Sector Allocations

Market Value Portfolio Index

% Market Value

Portfolio Index Portfolio Index

Duration % Duration

Mortgage Backed 40.94%12,445,978 30.51% 25.16%30.26% 4.19 4.99

Agency MBS 8,240,849 27.11% 28.49% 4.94 23.54%4.95 23.84%

2.05ARM 0.05% 0.01%15,978 0.05%0.15% 0.90

4.97Pass Through 25.64% 22.99%7,796,040 23.49%28.34% 5.04

0.00CMO 1.41% 0.84%428,831 0.00%0.00% 3.35

0.00Other 0.00% 0.00%0 0.00%0.00% 0.00

Non Agency MBS 2,461,726 8.10% 0.00% 0.71 0.00%0.00 1.02%

0.00Prime 1.22% 0.04%369,920 0.00%0.00% 0.21

0.00Alt-A 1.22% 0.51%369,517 0.00%0.00% 2.36

0.00Subprime 2.96% 0.11%898,775 0.00%0.00% 0.20

0.00Option ARM 2.28% 0.08%692,256 0.00%0.00% 0.20

0.00Other 0.43% 0.28%131,258 0.00%0.00% 3.68

CMBS 1,743,403 5.73% 1.76% 5.53 1.62%5.50 5.65%

5.06Agency CMBS 3.54% 4.35%1,076,808 0.59%0.70% 6.91

5.79Non Agency CMBS 2.19% 1.29%666,594 1.03%1.06% 3.32

Other 0 0.00% 0.00% 0.00 0.00%0.00 0.00%

Asset Backed 8.22%2,499,002 0.84% 0.18%0.47% 0.57 2.25

0.00Student Loan 6.13% 0.11%1,862,700 0.00%0.00% 0.11

0.00CLO 0.73% 0.02%221,275 0.00%0.00% 0.15

1.78Automobile 0.36% 0.01%110,655 0.07%0.22% 0.22

2.64Credit Card 0.36% 0.00%110,014 0.10%0.23% 0.05

3.09Other 0.64% 0.69%194,358 0.01%0.02% 6.03

Other 0.00%0 0.00% 0.00%0.00% 0.00 0.00

0.00Futures 0.00% 0.00%0 0.00%0.00% 0.00

0.00Swaps and Options 0.00% 0.00%0 0.00%0.00% 0.00

0.00Other 0.00% 0.00%0 0.00%0.00% 0.00

TOTAL ACCOUNT 5.6230,403,253 6.00100% 100% 100% 100%

Market Value Portfolio Index

% Market Value

Portfolio Index Portfolio Index

Duration % Duration

Cash and Equivalents (7.02)%(2,135,418) (0.01)% 0.00%0.00% 0.00 0.00

0.00Cash (7.02)% (0.01)%(2,135,418) 0.00%0.00% 0.00

0.00T-Bill 0.00% 0.00%0 0.00%0.00% 0.00

0.00Agency Discount Note 0.00% 0.00%0 0.00%0.00% 0.00

0.00UST Cash Equivalent 0.00% 0.00%0 0.00%0.00% 0.00

0.00TIPS Cash Equivalent 0.00% 0.00%0 0.00%0.00% 0.00

0.00Agency Cash Equiv 0.00% 0.00%0 0.00%0.00% 0.00

0.00Other Cash Equiv 0.00% 0.00%0 0.00%0.00% 0.00

U.S. Government 29.81%9,064,060 37.38% 38.66%38.67% 7.04 5.99

6.11US Treasury 27.46% 32.05%8,348,065 37.33%36.64% 6.56

0.00TIPs 2.36% 5.33%715,996 0.00%0.00% 12.72

3.93Agency 0.00% 0.00%0 1.33%2.03% 0.00

Credit 28.06%8,529,631 31.28% 36.01%30.60% 6.26 7.06

26.30% 24.78%7,995,355Corporate Credit 30.24%28.35%6.06 7.32

7.85Industrial 10.61% 17.90%3,226,980 19.76%15.09% 9.47

9.46Utility 2.98% 4.03%905,498 2.72%1.72% 7.60

5.84Financial 12.71% 6.42%3,862,877 7.77%7.97% 2.84

1.76% 3.82%534,277Non Corporate Credit 3.16%2.93%9.37 4.96

5.68Sovereign 0.00% 0.00%0 0.05%0.05% 0.00

3.71Foreign Agency 0.00% 0.00%0 0.67%1.08% 0.00

3.47Supranational 0.00% 0.00%0 1.00%1.74% 0.00

9.06Municipal 1.76% 2.93%534,277 1.44%0.95% 9.37

0.00% 0.00%0Bank Loan 0.00%0.00%0.00 0.00

0.00% 2.00%0Emerging Markets 2.60%0.00%0.00 7.81

0.00% 0.00%0Developed Markets 0.00%0.00%0.00 0.00

0.00% 0.00%0Other 0.00%0.00%0.00 0.00



As of 03/31/2017


All market values include accrued interest3

Cusip Security Name Coupon Maturity PriceParOriginal

CostCostPrice Principal Accrued

% ofPortfolio Dur S&PMoodys Fitch

CreditQuality

CASH AND EQUIVALENTS

CASH

USD US DOLLAR (2,135,418.44)1.000 (2,135,418.44) 0.00 (7.02)% 0.01 AAA

TOTAL CASH (2,135,418.44) (2,135,418.44) 0.00 (7.02)% 0.00

(2,135,418.44) (2,135,418.44) 0.00 (7.02)%TOTAL CASH AND EQUIVALENTS 0.00

U.S. GOVERNMENT

US TREASURY

912810RV2 US TREASURY N/B 3.000 02/15/47 99.6621,030,000.00 1,017,297.4798.767 1,026,519.63 3,848.62 3.39% 20.18 AAA Aaa AA+ AAA

912828V72 US TREASURY N/B 1.875 01/31/22 99.793355,000.00 352,545.5199.309 354,264.14 1,103.25 1.17% 4.63 AAA Aaa AA+ AAA

912828V98 US TREASURY N/B 2.250 02/15/27 98.736905,000.00 884,054.7197.686 893,563.52 2,535.60 2.95% 8.90 AAA Aaa AA+ AAA

912828W30 US TREASURY N/B 1.125 02/28/19 99.7851,550,000.00 1,545,711.7299.723 1,546,670.60 1,516.30 5.09% 1.89 AAA Aaa AA+ AAA

912828W89 US TREASURY N/B 1.875 03/31/22 99.752700,000.00 697,795.1999.685 698,264.00 35.86 2.30% 4.79 AAA AA+ AAA

912828XD7 US TREASURY NOTE 1.875 05/31/22 99.543415,000.00 414,367.7799.848 413,103.45 2,608.00 1.37% 4.91 AAA Aaa AA+ AAA

912828W55 US TREASURY NOTE 1.875 02/28/22 99.8093,405,000.00 3,398,685.5499.815 3,398,480.11 5,551.63 11.20% 4.70 AAA Aaa AA+ AAA

TOTAL US TREASURY 8,310,457.91 8,330,865.44 17,199.26 27.46% 6.56

TIPS

912810RW0 TSY INFL IX N/B 0.875 02/15/47 98.58858,336.40 57,120.8298.063 57,512.75 63.45 0.19% 20.18 AAA Aaa AA+

912810RL4 TSY INFL IX N/B 0.750 02/15/45 95.280242,296.75 245,551.46102.235 230,859.80 225.90 0.76% 20.08 AAA Aaa AA+ AAA

912828XL9 TSY INFL IX N/B 0.375 07/15/25 100.255425,913.28 435,468.04103.160 426,998.53 335.32 1.41% 7.74 AAA Aaa AA+ AAA

TOTAL TIPS 738,140.32 715,371.08 624.67 2.36% 12.72

9,048,598.23 9,046,236.52 17,823.93 29.81%TOTAL U.S. GOVERNMENT 7.04

CREDIT

CORPORATE CREDIT

INDUSTRIAL



As of 03/31/2017


Account Holdings Detail


4



As of 03/31/2017


Account Holdings Detail (continued)





CreditQuality

CORPORATE CREDIT

INDUSTRIAL

002824BF6 ABBOTT LABORATORIES 3.750 11/30/26 100.160105,000.00 104,218.8099.256 105,168.21 1,410.94 0.35% 8.03 BBB Baa3 BBB BBB

00287YAS8 ABBVIE INC 4.700 05/14/45 100.08770,000.00 67,619.3096.599 70,060.70 1,252.03 0.23% 15.62 A- Baa2 A-

00507UAS0 ACTAVIS FUNDING SCS 3.800 03/15/25 101.08050,000.00 50,883.00101.766 50,539.80 84.44 0.17% 6.86 BBB- Baa3 BBB BBB-

02209SAD5 ALTRIA GROUP INC 9.700 11/10/18 112.23495,000.00 106,677.40112.292 106,622.16 3,609.21 0.36% 1.49 A- A3 A- BBB+

031162BZ2 AMGEN INC 4.400 05/01/45 97.45050,000.00 47,469.0094.938 48,724.75 916.67 0.16% 15.96 BBB+ Baa1 A BBB

032511BK2 ANADARKO PETROLEUMCORP

4.500 07/15/44 94.69030,000.00 28,279.5094.265 28,407.03 285.00 0.09% 15.52 BBB Ba1 BBB BBB

035242AN6 ANHEUSER-BUSCH INBEVFIN

4.900 02/01/46 108.44872,000.00 71,830.8099.765 78,082.78 588.00 0.26% 16.16 A- A3 A- BBB

037833BX7 APPLE INC 4.650 02/23/46 107.38425,000.00 24,855.7599.423 26,845.93 122.71 0.09% 16.61 AA+ Aa1 AA+

00206RCQ3 AT&T INC 4.750 05/15/46 93.66490,000.00 89,679.6099.644 84,297.87 1,615.00 0.28% 15.31 BBB+ Baa1 BBB+ A-

00206RCT7 AT&T INC 4.125 02/17/26 101.59370,000.00 69,953.8099.934 71,114.96 352.92 0.24% 7.42 BBB+ Baa1 BBB+ A-

00206RDR0 AT&T INC 5.250 03/01/37 102.08280,000.00 79,623.2099.529 81,665.33 606.67 0.27% 12.55 BBB+ Baa1 BBB+ A-

09062XAD5 BIOGEN INC 5.200 09/15/45 108.61468,000.00 69,028.16101.512 73,857.38 157.16 0.24% 15.65 A- Baa1 A-

151020AU8 CELGENE CORP 5.000 08/15/45 104.81875,000.00 74,948.2599.931 78,613.16 479.17 0.26% 15.66 BBB+ Baa2 BBB+

161175AY0 CHARTER COMM OPTLLC/CAP

4.908 07/23/25 105.666115,000.00 115,000.00100.000 121,515.82 1,066.13 0.40% 6.82 BBB- Ba1 BBB- BBB-

210805CQ8 CONTINENTAL AIRLINES99-1 A

6.545 02/02/19 106.37582,052.24 89,642.07109.250 87,283.07 880.14 0.29% 1.30 A- Baa2 A-

210805BU0 CONTL AIRLINES 1997-4 6.900 01/02/18 103.4386,674.91 4,892.1373.291 6,904.36 113.86 0.02% 0.74 A+ A3 A+

210805CT2 CONTL AIRLINES 1999-2 7.256 03/15/20 105.310104,415.66 112,283.54107.535 109,960.13 336.73 0.36% 1.62 A Baa1 A

210805CY1 CONTL AIRLINES 2000-1 8.048 11/01/20 109.00028,344.23 31,036.93109.500 30,895.21 950.48 0.10% 1.70 A- Baa1 A-

126650CN8 CVS HEALTH CORP 5.125 07/20/45 110.61170,000.00 74,962.30107.089 77,427.39 707.53 0.26% 15.75 BBB+ Baa1 BBB+

29273RBF5 ENERGY TRANSFERPARTNERS

5.150 03/15/45 94.772125,000.00 124,715.0099.772 118,465.25 286.11 0.39% 14.68 BBB- Baa3 BBB- BBB-

36962G3U6 GENERAL ELEC CAP CORP 5.625 05/01/18 104.57570,000.00 53,582.9076.547 73,202.71 1,640.63 0.25% 1.04 AA- A1 AA- AA-

36962G6F6 GENERAL ELEC CAP CORP 3.150 09/07/22 103.034225,000.00 224,673.7599.855 231,826.76 472.50 0.76% 5.03 AA- A1 AA- AA-

375558BA0 GILEAD SCIENCES INC 4.500 02/01/45 98.88750,000.00 50,226.00100.452 49,443.58 375.00 0.16% 15.98 A A3 A

50077LAB2 KRAFT HEINZ FOODS CO 4.375 06/01/46 94.24840,000.00 39,873.6099.684 37,699.30 583.33 0.13% 16.13 BBB- Baa3 BBB- BBB-

5



As of 03/31/2017


Account Holdings Detail (continued)(continued)





CreditQuality

CORPORATE CREDIT

INDUSTRIAL

50077LAF3 KRAFT HEINZ FOODS CO 1.600 06/30/17 100.03668,000.00 67,957.1699.937 68,024.48 275.02 0.22% 0.24 BBB- Baa3 BBB- BBB-

594918BD5 MICROSOFT CORP 3.750 02/12/45 95.10465,000.00 64,272.0098.880 61,817.67 331.77 0.20% 17.25 AAA Aaa AAA AA+

655044AH8 NOBLE ENERGY INC 3.900 11/15/24 101.71634,000.00 33,896.3099.695 34,583.54 500.93 0.12% 6.50 BBB- Baa3 BBB BBB-

662352AA1 NORTHWELLHEALTHCARE INC

4.800 11/01/42 102.440150,000.00 149,061.0099.374 153,660.56 3,000.00 0.52% 14.94 A- A3 A- A

743756AB4 PROV ST JOSEPH HLTHOBL

2.746 10/01/26 95.39785,000.00 85,000.00100.000 81,087.28 1,186.50 0.27% 8.41 AA- Aa3 AA- AA-

78349AAB9 RWJ BARNABAS HEALTH 3.949 07/01/46 94.81265,000.00 65,000.00100.000 61,627.54 641.71 0.20% 17.08 A+ A1 A+

822582BF8 SHELL INTERNATIONALFIN

4.375 05/11/45 101.58970,000.00 69,512.8099.304 71,112.30 1,190.97 0.24% 16.39 AA- Aa2 A AA-

82481LAA7 SHIRE ACQ INV IRELANDDA

1.900 09/23/19 99.339100,000.00 98,759.0098.759 99,338.80 42.22 0.33% 2.42 BBB- Baa3 BBB-

880451AW9 TENNESSEE GAS PIPELINE(EL PASO)

8.375 06/15/32 127.69765,000.00 85,920.25132.185 83,002.82 1,602.88 0.28% 9.43 BBB- Baa3 BBB- BBB-

90345WAA2 US AIRWAYS 2012-1A PTT 5.900 10/01/24 111.750154,756.42 153,114.1398.939 172,940.30 4,565.31 0.58% 4.47 A A3 A A

92343VBR4 VERIZONCOMMUNICATIONS

5.150 09/15/23 109.96890,000.00 103,514.40115.016 98,971.16 206.00 0.33% 5.61 BBB+ Baa1 BBB+ A-

92343VCV4 VERIZONCOMMUNICATIONS

4.272 01/15/36 92.511100,000.00 92,184.0092.184 92,510.66 901.87 0.31% 12.81 BBB+ Baa1 BBB+ A-

92343VDU5 VERIZONCOMMUNICATIONS

5.250 03/16/37 103.63460,000.00 59,538.0099.230 62,180.46 131.25 0.21% 12.78 BBB+ Baa1 BBB+ A-

931142DK6 WAL-MART STORES INC 4.750 10/02/43 111.38240,000.00 43,533.20108.833 44,552.88 944.72 0.15% 15.67 AA Aa2 AA AA

931427AC2 WALGREENS BOOTSALLIANCE

4.800 11/18/44 101.83335,000.00 30,906.7588.305 35,641.67 620.67 0.12% 15.43 BBB Baa2 BBB BBB

931427AQ1 WALGREENS BOOTSALLIANCE

3.450 06/01/26 97.96670,000.00 69,823.6099.748 68,576.20 805.00 0.23% 7.78 BBB Baa2 BBB BBB

96949LAA3 WILLIAMS PARTNERS LP 3.600 03/15/22 101.54952,000.00 48,522.7693.313 52,805.27 83.20 0.17% 4.52 BBB- Baa3 BBB BBB-

TOTAL INDUSTRIAL 3,126,470.13 3,191,057.19 35,922.37 10.61% 9.47

UTILITY

030288AB0 AMERICANTRANSMISSION SY

5.000 09/01/44 108.75475,000.00 74,255.2599.007 81,565.31 312.50 0.27% 15.68 BBB Baa2 BBB- BBB+

26442CAM6 DUKE ENERGY CAROLINAS 4.250 12/15/41 103.755100,000.00 99,873.0099.873 103,755.10 1,251.39 0.35% 15.60 AA- Aa2 A AA-

6



As of 03/31/2017


Account Holdings Detail (continued)(continued) (continued)





CreditQuality

CORPORATE CREDIT

UTILITY

68233JAH7 ONCOR ELECTRICDELIVERY

5.250 09/30/40 117.774100,000.00 100,927.00100.927 117,773.79 14.58 0.39% 14.67 A- A3 A BBB+

744499AP9 PUBLIC SVC NEW MEXICO 7.950 05/15/18 106.890226,000.00 273,742.50121.125 241,572.30 6,787.53 0.82% 1.06 BBB+ Baa2 BBB+

8426EPAA6 SOUTHERN CO GASCAPITAL

2.450 10/01/23 96.076130,000.00 129,898.6099.922 124,898.74 1,751.75 0.42% 6.00 BBB+ Baa1 A- BBB+

898813AL4 TUCSON ELECTRIC POWERCO

3.850 03/15/23 100.191225,000.00 224,268.7599.675 225,430.20 385.00 0.74% 5.37 A- A3 BBB+

TOTAL UTILITY 902,965.10 894,995.43 10,502.76 2.98% 7.60

FINANCIAL

015271AF6 ALEXANDRIA REAL ESTATEE

2.750 01/15/20 100.37460,000.00 60,196.20100.327 60,224.58 348.33 0.20% 2.66 BBB Baa2 BBB

06051GDZ9 BANK OF AMERICA CORP 7.625 06/01/19 111.690100,000.00 112,114.00112.114 111,690.15 2,541.67 0.38% 2.00 BBB+ Baa1 BBB+ A

06051GFF1 BANK OF AMERICA CORP 4.000 04/01/24 103.838100,000.00 101,362.00101.362 103,837.60 2,000.00 0.35% 6.20 BBB+ Baa1 BBB+ A

59018YC66 BANK OF AMERICA CORP 0.000 05/02/17 95.630150,000.00 150,000.00100.000 143,445.00 0.00 0.47% 0.08 A Baa1 A

59018YD65 BANK OF AMERICA CORP 0.000 05/18/17 95.250150,000.00 150,000.00100.000 142,875.00 0.00 0.47% 0.13 A Baa1 A

06051GDX4 BANK OF AMERICA NA 5.650 05/01/18 104.118215,000.00 224,416.25104.380 223,853.69 5,061.46 0.75% 1.04 BBB+ Baa1 BBB+ A

073902RU4 BEAR STEARNS CO INC 7.250 02/01/18 104.525135,000.00 128,305.6095.041 141,108.75 1,631.25 0.47% 0.82 A- A3 A- A+

10112RAY0 BOSTON PROPERTIES LP 2.750 10/01/26 92.232100,000.00 91,666.0091.666 92,232.10 1,711.11 0.31% 8.32 BBB+ Baa2 A- BBB+

30958PAA1 FARMERS EXCHANGE CAPII

6.151 11/01/53 108.143140,000.00 140,000.00100.000 151,399.99 3,588.08 0.51% 10.67 A- Baa2 A-

38141EA25 GOLDMAN SACHS GROUPINC

7.500 02/15/19 109.794217,000.00 225,185.26103.772 238,253.41 2,079.58 0.79% 1.77 A- A3 BBB+ A

38141GFM1 GOLDMAN SACHS GROUPINC

6.150 04/01/18 104.203335,000.00 350,476.95104.620 349,080.72 10,301.25 1.18% 0.98 A- A3 BBB+ A

4041A2AH7 HBOS PLC 6.750 05/21/18 104.816125,000.00 107,746.2586.197 131,019.81 3,046.88 0.44% 1.08 BBB Baa2 BBB- A-

40414LAK5 HCP INC 4.200 03/01/24 103.10465,000.00 67,671.50104.110 67,017.48 227.50 0.22% 5.97 BBB Baa2 BBB BBB

42217KBF2 HEALTH CARE REIT INC 4.000 06/01/25 101.53050,000.00 52,652.50105.305 50,765.15 666.67 0.17% 6.89 BBB+ Baa1 BBB+ BBB+

48121CYK6 JP MORGAN CHASE BANKNA

6.000 10/01/17 102.10375,000.00 84,375.75112.501 76,576.88 2,250.00 0.26% 0.50 A A1 A- A

46623EKD0 JPMORGAN CHASE & CO 1.700 03/01/18 100.071100,000.00 100,160.00100.160 100,071.31 141.67 0.33% 0.88 A- A3 A- A+

7



As of 03/31/2017


Account Holdings Detail (continued)(continued) (continued) (continued)





CreditQuality

CORPORATE CREDIT

FINANCIAL

55608PAL8 MACQUARIE BANK LTD 1.662 10/27/17 100.30580,000.00 80,000.00100.000 80,244.08 236.34 0.26% 0.05 A A2 A A

592173AE8 METROPOLITAN LIFEINSURANCE COMPANY

7.800 11/01/25 128.045250,000.00 268,352.50107.341 320,113.25 8,125.00 1.08% 6.54 A A2 A A

6174467P8 MORGAN STANLEY 5.500 07/24/20 109.25450,000.00 49,506.0099.012 54,627.00 511.81 0.18% 3.05 A- A3 BBB+ A

61746BEH5 MORGAN STANLEY 1.842 02/14/20 100.245125,000.00 125,000.00100.000 125,306.25 274.99 0.41% 0.05 A- A3 BBB+ A

61747YCG8 MORGAN STANLEY 7.300 05/13/19 110.596100,000.00 114,780.00114.780 110,596.20 2,798.33 0.37% 1.95 A- A3 BBB+ A

638671AJ6 NATIONWIDE MUTUALINSURA

3.421 12/15/24 98.750105,000.00 105,000.00100.000 103,687.50 169.64 0.34% 0.20 A- A-

69353REJ3 PNC BANK NA 1.500 02/23/18 99.981250,000.00 249,972.5099.989 249,952.25 395.83 0.82% 0.88 A A2 A A+

92276MBB0 VENTAS REALTY LP/CAPCRP

2.700 04/01/20 100.899125,000.00 124,598.7599.679 126,123.75 1,687.50 0.42% 2.80 BBB+ Baa1 BBB+ BBB+

94973VBK2 WELLPOINT INC 4.650 08/15/44 102.64960,000.00 60,312.00100.520 61,589.46 356.50 0.20% 15.85 BBB Baa2 A BBB

949746RS2 WELLS FARGO &COMPANY

2.500 03/04/21 99.84585,000.00 84,980.4599.977 84,868.30 159.38 0.28% 3.74 A A2 A AA-

94988J5G8 WELLS FARGO BANK NA 2.150 12/06/19 100.274250,000.00 249,655.0099.862 250,686.11 1,687.15 0.83% 2.59 AA Aa2 AA- AA

42217KAU0 WELLTOWER INC 4.950 01/15/21 107.38055,000.00 56,233.30102.242 59,058.81 574.75 0.20% 3.31 BBB+ Baa1 BBB+ BBB+

TOTAL FINANCIAL 3,714,718.76 3,810,304.57 52,572.66 12.71% 2.84

TOTAL CORPORATE CREDIT 7,744,153.99 7,896,357.19 98,997.78 26.30% 6.06

NON CORPORATE CREDIT

MUNICIPAL

01026CAC5 ALABAMA ECONSETTLEME

3.163 09/15/25 100.678105,000.00 105,000.00100.000 105,711.90 147.61 0.35% 4.71 A A2 A-

13063BFS6 CA ST-TXBL 6.650 03/01/22 118.20950,000.00 63,108.00126.216 59,104.50 277.08 0.20% 3.92 AA- Aa3 AA- AA-

544525NZ7 LA DWP 6.008 07/01/39 123.459100,000.00 124,307.00124.307 123,459.00 1,502.00 0.41% 10.69 AA Aa2 AA+ AA

64971M4P4 NYC FIN AUTH 5.508 08/01/37 121.33550,000.00 63,200.50126.401 60,667.50 459.00 0.20% 12.00 AAA Aa1 AAA AAA

64972GMU5 NYC MUNI WTR FIN-AA 3.000 06/15/46 86.130110,000.00 89,389.3081.263 94,743.00 971.67 0.31% 14.88 AA+ Aa1 AA+ AA+

93974CRD4 WASHINGTON ST-F-BABS 5.040 08/01/31 115.47175,000.00 86,037.00114.716 86,603.25 630.00 0.29% 8.97 AA+ Aa1 AA+ AA+

TOTAL MUNICIPAL 531,041.80 530,289.15 3,987.36 1.76% 9.37

8



As of 03/31/2017







CreditQuality

TOTAL NON CORPORATE CREDIT 531,041.80 530,289.15 3,987.36 1.76% 9.37

8,275,195.79 8,426,646.34 102,985.14 28.06%TOTAL CREDIT 6.26

MORTGAGE BACKED

AGENCY MBS

ARM

31407ULL9 FN 841031 3.335 11/01/35 104.912851.15 851.94100.093 892.96 2.37 0.00% 0.62 AAA Aaa AAA AAA

31411YL27 FN 918445 5.508 05/01/37 103.72314,477.43 14,567.35100.621 15,016.39 66.45 0.05% 0.92 AAA Aaa AAA AAA

TOTAL ARM 15,419.29 15,909.35 68.82 0.05% 0.90

PASS THROUGH

3128KRVU5 FG A61527 5.000 07/01/36 110.72848,383.95 49,412.11102.125 53,574.56 201.60 0.18% 4.23 AAA Aaa AAA AAA

31294KL94 FG E01252 6.000 11/01/17 100.654575.69 601.32104.452 579.45 2.88 0.00% 0.23 AAA Aaa AAA AAA

3128M8MJ0 FG G06361 4.000 03/01/41 106.383100,349.78 98,766.1498.422 106,755.17 334.50 0.35% 5.30 AAA Aaa AAA AAA

3128MJXF2 FG G08677 4.000 11/01/45 104.913161,636.29 170,898.80105.731 169,577.46 538.79 0.56% 4.59 AAA Aaa AAA AAA

3128MJXK1 FG G08681 3.500 12/01/45 102.374186,171.99 191,698.97102.969 190,591.66 543.00 0.63% 5.29 AAA Aaa AAA AAA

3128MJX47 FG G08698 3.500 03/01/46 102.340166,995.09 175,005.64104.797 170,902.76 487.07 0.56% 5.36 AAA Aaa AAA AAA

3128MJX54 FG G08699 4.000 03/01/46 104.977129,155.29 137,767.32106.668 135,582.78 430.52 0.45% 4.59 AAA Aaa AAA AAA

3128MJX88 FG G08702 3.500 04/01/46 102.340363,771.09 381,494.88104.872 372,283.29 1,061.00 1.23% 5.51 AAA Aaa AAA AAA

3128MJYH7 FG G08711 3.500 06/01/46 102.369190,168.79 199,966.94105.152 194,673.84 554.66 0.64% 5.57 AAA Aaa AAA AAA

3128MJYM6 FG G08715 3.000 08/01/46 99.150351,397.36 365,398.63103.985 348,411.93 878.49 1.15% 6.52 AAA Aaa AAA AAA

3128MJYT1 FG G08721 3.000 09/01/46 99.150155,225.55 161,010.12103.727 153,906.77 388.06 0.51% 6.56 AAA Aaa AAA AAA

3128MJYU8 FG G08722 3.500 09/01/46 102.369167,788.17 177,261.08105.646 171,763.02 489.38 0.57% 5.60 AAA Aaa AAA AAA

3128MJYY0 FG G08726 3.000 10/01/46 99.150195,595.66 202,869.38103.719 193,933.91 488.99 0.64% 6.68 AAA Aaa AAA AAA

3128MJY61 FG G08732 3.000 11/01/46 99.150240,880.84 249,142.30103.430 238,834.35 602.20 0.79% 6.76 AAA Aaa AAA AAA

3128M1RU5 FG G12399 6.000 09/01/21 106.23022,766.15 23,420.68102.875 24,184.37 113.83 0.08% 1.52 AAA Aaa AAA AAA

3128MMVQ3 FG G18622 2.500 12/01/31 100.160199,685.38 199,693.18100.004 200,005.19 416.01 0.66% 4.83 AAA Aaa AAA AAA

9



As of 03/31/2017







CreditQuality

AGENCY MBS

PASS THROUGH

31335AJX7 FG G60278 4.000 10/01/45 106.07194,321.62 101,425.21107.531 100,047.95 314.41 0.33% 5.47 AAA Aaa AAA AAA

3132GLQN7 FG Q05261 3.500 12/01/41 103.27097,972.51 100,628.48102.711 101,175.75 285.75 0.33% 5.54 AAA Aaa AAA AAA

3132JMFT1 FG Q20178 3.500 07/01/43 103.232160,913.97 161,492.25100.359 166,115.08 469.33 0.55% 6.04 AAA Aaa AAA AAA

31390TVV8 FN 655928 7.000 08/01/32 118.39536,930.56 39,377.21106.625 43,724.00 215.43 0.14% 3.59 AAA Aaa AAA AAA

31402RHX0 FN 735646 4.500 07/01/20 102.96523,229.51 23,109.7499.484 23,918.25 87.11 0.08% 1.03 AAA Aaa AAA AAA

31416WYK2 FN AB1613 4.000 10/01/40 106.352125,725.34 128,082.69101.875 133,710.86 419.08 0.44% 5.04 AAA Aaa AAA AAA

31418RHG9 FN AD3830 4.500 04/01/25 106.46682,520.69 85,924.67104.125 87,856.30 309.45 0.29% 2.36 AAA Aaa AAA AAA

3138ERA59 FN AL9027 4.000 09/01/46 104.950107,727.22 113,563.84105.418 113,060.15 359.09 0.37% 4.54 AAA Aaa AAA AAA

3138ERTF7 FN AL9549 4.000 09/01/46 104.953213,212.05 224,439.00105.266 223,771.93 710.71 0.74% 4.58 AAA Aaa AAA AAA

31418AXN3 FN MA1584 3.500 09/01/33 103.79657,191.59 59,139.68103.406 59,362.45 166.81 0.20% 4.15 AAA Aaa AAA AAA

31418CCN2 FN MA2776 2.500 10/01/26 101.481195,777.76 202,002.88103.180 198,676.19 407.87 0.65% 3.42 AAA Aaa AAA AAA

D300417FB FNCI 15 YR 3.0 TBA APR 17 3.000 11/25/30 102.541300,000.00 305,156.25101.719 307,621.69 0.00 1.01% 3.94 AAA Aaa AAA AAA

F300417FB FNCL 30 YR 3.0 TBA APR 17 3.000 10/25/46 99.13340,000.00 39,362.5098.406 39,653.13 0.00 0.13% 6.89 AAA Aaa AAA AAA

F300417GS FNCL 30 YR 3.0 TBA APR 17 3.000 10/25/46 99.13385,000.00 83,618.7598.375 84,262.89 0.00 0.28% 6.89 AAA Aaa AAA AAA

F350417GS FNCL 30 YR 3.5 TBA APR 17 3.500 05/25/46 102.29765,000.00 66,056.25101.625 66,492.97 0.00 0.22% 5.46 AAA Aaa AAA AAA

F400417BP FNCL 30 YR 4.0 TBA APR 17 4.000 11/25/45 104.883145,000.00 151,253.13104.313 152,080.08 0.00 0.50% 4.71 AAA Aaa AAA AAA

F400417FB FNCL 30 YR 4.0 TBA APR 17 4.000 11/25/45 104.883210,000.00 219,056.25104.313 220,253.91 0.00 0.72% 4.71 AAA Aaa AAA AAA

F450417FB FNCL 30 YR 4.5 TBA APR 17 4.500 07/25/44 107.2661,270,000.00 1,356,915.63106.844 1,362,273.44 0.00 4.48% 4.21 AAA Aaa AAA AAA

36179R4E6 G2 MA3521 3.500 03/20/46 103.793144,723.99 153,316.98105.938 150,213.33 422.11 0.50% 4.77 AAA Aaa AAA AAA

36179SB89 G2 MA3663 3.500 05/20/46 103.79357,325.39 60,811.93106.082 59,499.72 167.20 0.20% 4.80 AAA Aaa AAA AAA

36179SLS4 G2 MA3937 3.500 09/20/46 103.792147,843.80 157,118.69106.273 153,449.46 431.21 0.51% 4.82 AAA Aaa AAA AAA

36179SQW0 G2 MA4069 3.500 11/20/46 103.792240,519.14 250,064.75103.969 249,638.68 701.51 0.82% 4.88 AAA Aaa AAA AAA

36179SUU9 G2 MA4195 3.000 01/20/47 101.003293,633.13 296,899.48101.112 296,577.36 734.08 0.98% 6.20 AAA Aaa AAA AAA

T300417FB G2SF 30 YR 3.0 TBA APR 17 3.000 11/20/46 100.88310,000.00 9,918.7599.188 10,088.28 0.00 0.03% 6.12 AAA Aaa AAA AAA

T300417GS G2SF 30 YR 3.0 TBA APR 17 3.000 11/20/46 100.883200,000.00 198,429.6999.215 201,765.63 0.00 0.66% 6.12 AAA Aaa AAA AAA

T350417FB G2SF 30 YR 3.5 TBA APR 17 3.500 01/20/46 103.688175,000.00 178,773.44102.156 181,453.13 0.00 0.60% 4.81 AAA Aaa AAA AAA

T400417CG G2SF 30 YR 4.0 TBA APR 17 4.000 12/20/45 105.62570,000.00 73,808.98105.441 73,937.50 0.00 0.24% 3.68 AAA Aaa AAA AAA

10



As of 03/31/2017







CreditQuality

AGENCY MBS

PASS THROUGH

36204QFC9 GN 376463 6.500 04/15/24 113.4731,860.25 1,776.5495.500 2,110.87 10.08 0.01% 2.32 AAA Aaa AAA AAA

36225ABC3 GN 780035 6.500 07/15/24 113.4881,664.26 1,589.3895.501 1,888.73 9.01 0.01% 2.09 AAA Aaa AAA AAA

36241LDX1 GN 782818 4.500 11/15/39 108.929175,702.12 180,108.40102.508 191,389.65 658.88 0.63% 5.08 AAA Aaa AAA AAA

TOTAL PASS THROUGH 7,807,628.91 7,781,629.85 14,410.12 25.64% 5.04

CMO

31339GNQ0 FHR 2368 AS 18.558 10/15/31 146.06913,767.66 12,029.4987.375 20,110.23 113.56 0.07% 8.84 AAA Aaa AAA AAA

3133TVPR1 FHR 2433 SA 18.558 02/15/32 126.82423,164.72 24,420.68105.422 29,378.37 191.06 0.10% 9.07 AAA Aaa AAA AAA

31393VW64 FHR 2642 BW 5.000 06/15/23 5.2589,094.30 1,659.7118.250 478.18 37.89 0.00% (2.38) AAA Aaa AAA AAA

31394L5S7 FHR 2684 ZN 4.000 10/15/33 104.93966,042.72 45,280.5468.563 69,304.78 220.14 0.23% 4.00 AAA Aaa AAA AAA

313921MN5 FNR 2001-52 YZ 6.500 10/25/31 114.47260,553.32 62,294.23102.875 69,316.80 328.00 0.23% 3.57 AAA Aaa AAA AAA

38373RBR9 GNR 2001-22 SO 17.929 05/20/31 131.56517,563.13 18,380.91104.656 23,106.92 96.22 0.08% 8.23 AAA Aaa AAA AAA

38376FLM2 GNR 2009-66 XS 5.872 07/16/39 14.504126,468.53 16,934.9313.391 18,343.48 309.41 0.06% (0.38) AAA Aaa AAA AAA

38374TDP6 GNR 2009-8 PS 5.372 08/16/38 12.211152,002.13 17,432.7411.469 18,560.83 340.21 0.06% 12.79 AAA Aaa AAA AAA

62888VAA6 NGN 2010-R1 1A 1.432 10/07/20 100.132104,552.45 104,552.45100.000 104,689.89 95.63 0.34% 0.20 AAA Aaa AA+ AAA

62888UAA8 NGN 2010-R2 1A 1.148 11/06/17 100.07873,697.44 73,697.44100.000 73,755.02 54.07 0.24% 0.22 AAA Aaa AA+

TOTAL CMO 376,683.12 427,044.49 1,786.19 1.41% 3.35

TOTAL AGENCY MBS 8,199,731.32 8,224,583.69 16,265.13 27.11% 4.94

NON AGENCY MBS

PRIME

06051GAX7 BAFC 2004-A 1A3 3.039 09/20/34 99.30920,990.11 20,898.2899.563 20,845.06 53.16 0.07% 0.20 AA+ AA+ AA

07384M4F6 BSARM 2004-10 14A1 3.460 01/25/35 97.937140,184.64 132,559.2494.561 137,293.07 404.22 0.45% 0.20 BBB B2 BBB

576433WL6 MARM 2004-13 3A7A 3.050 11/21/34 102.871191,027.75 187,207.2098.000 196,511.97 485.58 0.65% 0.20 AA+ Baa1 AA+

76110G6D8 RALI 2003-QS3 A4 5.500 02/25/18 100.77614,152.67 14,157.09100.031 14,262.47 64.87 0.05% 0.34 BB+ B1 BB+ A

TOTAL PRIME 354,821.81 368,912.56 1,007.83 1.22% 0.21

11



As of 03/31/2017







CreditQuality

ALT-A

173109AE9 CRMSI 2007-1 A5 5.664 03/25/37 103.000300,000.00 204,750.0068.250 308,999.64 1,415.86 1.02% 2.62 B Ba3 B- B

576433MW3 MARM 2004-5 3A1 1.625 06/25/34 80.9221,756.16 1,777.84101.234 1,421.13 2.38 0.00% 0.20 AA+ Ba1 AA+

55265WBD4 MSSTR 2004-1 4A1 3.134 10/25/32 100.68211,969.94 12,205.59101.969 12,051.57 31.26 0.04% 0.20 AA AA

760985W98 RAMP 2004-SL1 A8 6.500 11/25/31 101.60917,300.76 17,919.80103.578 17,579.11 93.71 0.06% 2.94 A BBB- A

45660LAP4 RAST 2004-IP2 2A1 3.210 12/25/34 99.86527,885.31 28,267.00101.369 27,847.65 74.59 0.09% 0.20 A+ Baa1 A+

TOTAL ALT-A 264,920.23 367,899.09 1,617.80 1.22% 2.36

SUBPRIME

17311CAU5 CMLTI 2007-WFH1 A4 1.182 01/25/37 100.27572,759.70 39,290.2454.000 72,959.46 11.94 0.24% 0.20 AAA Aaa BB-

126698AC3 CWL 2007-13 2A1 1.882 10/25/47 92.176149,655.65 102,139.9868.250 137,946.70 39.11 0.45% 0.20 AA A2 AA

64352VLK5 NCHET 2005-3 M2 1.472 07/25/35 98.976208,805.19 200,779.2496.156 206,667.73 42.68 0.68% 0.20 A Baa3 AA+ A

68389FJH8 OOMLT 2005-4 M1 1.422 11/25/35 98.547280,000.00 274,750.0098.125 275,931.26 55.29 0.91% 0.20 A Ba2 A+ A

73316MAD9 POPLR 2006-C A4 1.232 07/25/36 97.597210,134.14 106,117.7450.500 205,084.83 35.95 0.67% 0.20 A+ A1 A

TOTAL SUBPRIME 723,077.20 898,589.98 184.97 2.96% 0.20

OPTION ARM

12669GYY1 CWHL 2005-9 1A1 1.582 05/25/35 84.648104,541.64 74,649.2771.406 88,492.52 22.97 0.29% 0.20 CCC+ Caa1 CCC

45660LWD7 INDX 2005-AR18 2A1A 1.292 10/25/36 70.515276,345.66 131,955.0547.750 194,864.48 49.58 0.64% 0.20 CCC+ Caa1 CCC

45668RAC2 INDX 2007-FLX2 A1C 1.172 04/25/37 73.743321,880.76 148,467.5146.125 237,362.95 52.38 0.78% 0.20 B- B3 CCC

92922FR75 WAMU 2005-AR8 2A1A 1.272 07/25/45 96.441177,690.53 162,142.6191.250 171,366.78 43.94 0.56% 0.20 A A3 A

TOTAL OPTION ARM 517,214.44 692,086.74 168.86 2.28% 0.20

OTHER

59560UAD3 MDST 2004-1 B 8.900 08/15/37 114.193114,202.90 121,358.42106.266 130,411.43 847.00 0.43% 3.68 BBB Baa3 BBB

TOTAL OTHER 121,358.42 130,411.43 847.00 0.43% 3.68

TOTAL NON AGENCY MBS 1,981,392.10 2,457,899.80 3,826.46 8.10% 0.71

12



As of 03/31/2017







CreditQuality

CMBS

AGENCY CMBS

31419AEG8 FN AE0134 4.399 02/01/20 105.926121,000.00 130,245.16107.641 128,169.86 458.35 0.42% 2.27 AAA Aaa AAA AAA

3138EHAF9 FN AL0905 3.881 09/01/21 105.654190,616.53 206,848.72108.516 201,394.63 637.04 0.66% 3.34 AAA Aaa AAA AAA

3138L7JC1 FN AM6558 3.700 09/01/34 103.000100,859.73 112,466.48111.508 103,885.54 321.35 0.34% 10.39 AAA Aaa AAA AAA

3138L7QP4 FN AM6761 3.570 10/01/29 103.93276,898.20 82,184.94106.875 79,921.88 236.40 0.26% 8.61 AAA Aaa AAA AAA

3138L73Z7 FN AM7115 3.400 11/01/26 103.37077,247.78 83,632.79108.266 79,850.99 226.16 0.26% 7.18 AAA Aaa AAA AAA

3138L9C26 FN AM8188 2.640 03/01/27 98.07477,059.24 77,408.41100.453 75,574.92 175.18 0.25% 7.43 AAA Aaa AAA AAA

3138LAFP9 FN AM9173 3.110 06/01/27 101.17577,800.10 80,571.73103.563 78,714.08 208.35 0.26% 7.57 AAA Aaa AAA AAA

3138LAS26 FN AM9536 3.340 08/01/30 102.16778,064.73 81,565.44104.484 79,756.61 224.52 0.26% 9.16 AAA Aaa AAA AAA

3138LCLR4 FN AN0335 3.390 01/01/31 101.30780,000.00 86,675.00108.344 81,045.84 233.53 0.27% 9.54 AAA Aaa AAA AAA

3138LDJF1 FN AN1161 3.050 04/01/28 99.81385,000.00 86,072.46101.262 84,841.41 223.24 0.28% 8.53 AAA Aaa AAA AAA

3138LEBD2 FN AN1835 2.535 07/01/28 94.73385,000.00 85,318.75100.375 80,522.88 185.55 0.27% 9.05 AAA Aaa AAA AAA

TOTAL AGENCY CMBS 1,112,989.88 1,073,678.64 3,129.68 3.54% 6.91

NON AGENCY CMBS

05524UAA7 BAMLL 2012-PARK A 2.959 12/10/30 100.98240,000.00 41,925.00104.813 40,392.80 98.63 0.13% 4.97 AAA AAA

05529SAC3 BBCMS 2013-TYSN A2 3.756 09/05/32 104.79640,000.00 42,137.50105.344 41,918.19 125.21 0.14% 2.97 AAA Aaa

12625XAA5 COMM 2013-300P A1 4.353 08/10/30 108.59240,000.00 43,253.13108.133 43,436.60 145.10 0.14% 5.15 AAA AAA

12592FAA3 COMM 2014-277P A 3.611 08/10/49 103.84540,000.00 41,657.81104.145 41,537.80 120.38 0.14% 6.14 AAA AAA

23305UAA5 DBRR 2011-LC2 A4A 4.537 07/12/44 108.22555,000.00 57,526.56104.594 59,523.48 207.95 0.20% 3.36 AAA Aaa

46635TAK8 JPMCC 2011-C3 A3 4.388 02/15/46 102.153182,364.27 199,831.35109.578 186,291.38 666.80 0.61% 0.73 AAA AAA AAA

67087MAA4 OBP 2010-OBP A 4.646 07/15/45 106.60340,000.00 43,912.50109.781 42,641.01 154.87 0.14% 2.60 AAA AAA AAA

74932QAA8 RBSCF 2013-GSP A 3.834 01/13/32 105.52745,000.00 47,696.48105.992 47,487.13 143.76 0.16% 5.53 AAA AAA AAA

78413MAA6 SFAVE 2015-5AVE A1 3.872 01/05/43 97.98945,000.00 43,468.9596.598 44,094.99 145.20 0.15% 12.31 AAA AAA

92936CAE9 WFRBS 2011-C4 A3 4.394 06/15/44 103.277113,334.59 124,349.30109.719 117,048.21 414.99 0.39% 1.25 AAA Aaa AAA

TOTAL NON AGENCY CMBS 685,758.58 664,371.57 2,222.89 2.19% 3.32

TOTAL CMBS 1,798,748.46 1,738,050.21 5,352.57 5.73% 5.53

13



As of 03/31/2017







CreditQuality

11,979,871.88 12,420,533.70 25,444.16 40.94%TOTAL MORTGAGE BACKED 4.19

ASSET BACKED

STUDENT LOAN

10620NCE6 BRHEA 2010-1 A2 2.252 02/25/35 101.107100,000.00 95,585.9495.586 101,106.54 206.46 0.33% 0.15 AAA AA+ AAA

10620NCL0 BRHEA 2011-2 A3 2.038 10/27/36 100.27680,000.00 77,884.3897.356 80,220.97 298.89 0.26% 0.15 AAA AA+ AAA

17284LAA2 CITEL 2007-1 A 1.243 03/25/42 93.36358,204.43 52,820.5390.750 54,341.41 10.05 0.18% 0.15 AAA Aaa AA+

36156YAW1 GCOE 2006-2AR A1RN 1.632 08/27/46 90.090100,439.48 94,915.3194.500 90,486.10 22.76 0.30% 0.05 AAA Aaa AAA AAA

63938GAA7 NAVSL 2014-2 A 1.622 03/25/83 98.681178,231.69 178,231.69100.000 175,881.12 40.14 0.58% 0.05 AAA Aaa AAA

63938QAA5 NAVSL 2014-4 A 1.602 03/25/83 98.726140,919.93 140,919.93100.000 139,124.15 31.35 0.46% 0.05 AAA Aaa AAA

66704JBT4 NEF 2007-1 A1 1.139 04/28/30 98.32290,000.00 82,687.5091.875 88,489.31 173.70 0.29% 0.15 AAA Aaa AAA AAA

64033BAA0 NSLT 2012-5A A 1.582 10/27/36 99.526146,991.78 147,543.00100.375 146,294.76 32.29 0.48% 0.05 AAA Aaa AAA

64033MAB4 NSLT 2014-4A A2 1.932 11/25/48 98.029115,000.00 115,000.00100.000 112,733.17 30.85 0.37% 0.05 AAA Aa1 AAA

64033QAB5 NSLT 2015-2A A2 1.582 09/25/47 99.273168,728.95 168,728.95100.000 167,501.39 37.07 0.55% 0.05 AAA Aaa AAA

78442GJS6 SLMA 2003-11 A6 (RRN) 1.881 12/15/25 100.126110,000.00 107,473.4497.703 110,138.27 97.72 0.36% 0.15 AAA A1 AAA AAA

78442GMR4 SLMA 2004-8 B 1.498 01/25/40 90.76027,006.41 23,968.1988.750 24,510.94 74.16 0.08% 0.15 A A2 AA BBB

78442GPG5 SLMA 2005-4 A3 1.158 01/25/27 99.138155,992.17 153,676.6698.516 154,647.40 331.14 0.51% 0.15 AAA Aaa AAA AAA

78443HAF0 SLMA 2006-8 A6 1.198 01/25/41 92.933125,000.00 109,687.5087.750 116,166.23 274.52 0.38% 0.15 AAA Aaa AA+ AAA

78444CAF0 SLMA 2007-6 B 1.888 04/27/43 91.68326,428.36 22,721.1685.973 24,230.37 91.47 0.08% 0.15 A Baa3 AA A

784442AD7 SLMA 2008-2 B 2.238 01/25/83 94.47535,000.00 30,311.9186.606 33,066.14 143.60 0.11% 0.15 A+ A1 AA B

78444GAD6 SLMA 2008-3 B 2.238 04/26/83 92.99235,000.00 30,995.5188.559 32,547.17 143.60 0.11% 0.15 AA Aaa AA B

78445AAE6 SLMA 2008-4 B 2.888 04/25/29 97.25035,000.00 31,603.9190.297 34,037.44 185.31 0.11% 0.15 BB Ba2 AA B

78444YAE5 SLMA 2008-5 B 2.888 07/25/73 98.73035,000.00 33,941.8096.977 34,555.54 185.31 0.11% 0.15 A+ A1 AA B

78445CAE2 SLMA 2008-6 B 2.888 07/26/83 98.15035,000.00 33,433.2095.523 34,352.45 185.31 0.11% 0.15 BBB- Baa3 AA B

78445FAE5 SLMA 2008-7 B 2.888 07/26/83 98.15035,000.00 33,612.3096.035 34,352.41 185.31 0.11% 0.15 A A2 AA B

78445GAE3 SLMA 2008-8 B 3.288 10/25/75 100.45435,000.00 35,064.26100.184 35,158.91 210.97 0.12% 0.15 A+ A1 AA B

78445JAB3 SLMA 2008-9 B 3.288 10/25/83 101.58635,000.00 35,064.26100.184 35,555.01 210.97 0.12% 0.15 A+ A1 AA B

TOTAL STUDENT LOAN 1,835,871.33 1,859,497.20 3,202.94 6.13% 0.11

14



As of 03/31/2017







CreditQuality

CLO

532621AN9 LROCK 2014-2A AR 2.310 04/18/26 100.027100,000.00 100,000.00100.000 100,027.10 468.44 0.33% 0.15 AAA Aaa AAA

55953HAJ2 MAGNE 2015-12A AR 2.353 04/15/27 100.166120,000.00 120,000.00100.000 120,198.96 580.45 0.40% 0.15 AAA Aaa AAA

TOTAL CLO 220,000.00 220,226.06 1,048.89 0.73% 0.15

AUTOMOBILE

43814HAC2 HAROT 2014-3 A3 0.880 06/15/18 99.92126,842.10 26,823.2399.930 26,820.98 10.50 0.09% 0.19 AAA AAA AAA

43814LAB5 HAROT 2015-4 A2 0.820 07/23/18 99.91240,036.20 40,035.4799.998 40,001.03 9.12 0.13% 0.22 AAA Aaa AAA

65478AAB9 NAROT 2015-C A2A 0.870 11/15/18 99.92243,830.69 43,827.3499.992 43,796.29 16.95 0.14% 0.24 AAA Aaa AAA

TOTAL AUTOMOBILE 110,686.04 110,618.29 36.57 0.36% 0.22

CREDIT CARD

05522RBG2 BACCT 2007-A11 A11 0.982 12/15/19 99.967110,000.00 109,402.7399.457 109,963.12 51.02 0.36% 0.05 AAA Aaa AAA AAA

TOTAL CREDIT CARD 109,402.73 109,963.12 51.02 0.36% 0.05

OTHER

46617LAA9 HENDR 2013-3A A 4.080 01/17/73 100.22460,680.61 60,631.5099.919 60,816.77 110.03 0.20% 7.11 AAA Aaa

46618AAA2 HENDR 2014-2A A 3.610 01/17/73 94.69278,314.55 78,263.8099.935 74,157.70 125.65 0.24% 7.33 AAA Aaa

37952UAE3 SEACO 2014-1A A2 3.090 07/17/29 94.76962,333.33 62,316.5999.973 59,072.68 74.90 0.19% 3.29 A A

TOTAL OTHER 201,211.89 194,047.16 310.59 0.64% 6.03

2,477,171.99 2,494,351.84 4,650.00 8.22%TOTAL ASSET BACKED 0.57

15



As of 03/31/2017







CreditQuality

30,252,349.96

150,903.23

30,403,253.19

Principal Market Value

Accrued Income

Total Portfolio Market Value

Account Holdings Summary MarketValue

16

DescriptionTrade DateCurrent

FaceRealized

Gains/LossesCUSIP/SEDOL

NetAmount

OriginalFacePrice

Currency: US Dollar

Settle DateMaturity

Date

PURCHASES

03/01/2017 US TREASURY NOTE 99.438912828W55 -193,903.13195,000.00 0.0003/02/2017 02/28/2022 195,000.00


03/06/2017 FNCL 30 YR 3.0 TBA APR 17 98.406F300417FB -39,362.5040,000.00 0.0004/12/2017 10/25/2046 40,000.00

03/06/2017 FNCL 30 YR 3.0 TBA APR 17 98.375F300417GS -83,618.7585,000.00 0.0004/12/2017 10/25/2046 85,000.00


03/07/2017 BANK OF AMERICA NA 104.27506051GDX4 -119,916.25115,000.00 0.0003/10/2017 05/01/2018 115,000.00

03/07/2017 FNCL 30 YR 4.0 TBA APR 17 104.313F400417BP -151,253.13145,000.00 0.0004/12/2017 11/25/2045 145,000.00

03/07/2017 FNCL 30 YR 4.0 TBA APR 17 104.313F400417FB -219,056.25210,000.00 0.0004/12/2017 11/25/2045 210,000.00

03/07/2017 FNCL 30 YR 4.5 TBA APR 17 106.844F450417FB -1,356,915.631,270,000.00 0.0004/12/2017 07/25/2044 1,270,000.00

03/09/2017 US TREASURY BOND 94.016912810RU4 -42,307.0345,000.00 0.0003/10/2017 11/15/2046 45,000.00


03/10/2017 FNCI 15 YR 3.0 TBA APR 17 101.719D300417FB -305,156.25300,000.00 0.0004/19/2017 11/25/2030 300,000.00


03/13/2017 VERIZON COMMUNICATIONS 99.23092343VDU5 -59,538.0060,000.00 0.0003/16/2017 03/16/2037 60,000.00

03/14/2017 G2SF 30 YR 3.0 TBA APR 17 99.215T300417GS -223,233.40225,000.00 0.0004/20/2017 11/20/2046 225,000.00

03/14/2017 G2SF 30 YR 3.0 TBA APR 17 99.188T300417FB -9,918.7510,000.00 0.0004/20/2017 11/20/2046 10,000.00

03/14/2017 US TREASURY N/B 96.500912810RV2 -376,350.00390,000.00 0.0003/15/2017 02/15/2047 390,000.00

03/14/2017 US TREASURY N/B 96.984912828V98 -557,660.16575,000.00 0.0003/15/2017 02/15/2027 575,000.00

03/14/2017 US TREASURY N/B 99.523912828W30 -373,212.89375,000.00 0.0003/15/2017 02/28/2019 375,000.00

03/15/2017 G2SF 30 YR 3.5 TBA APR 17 102.156T350417FB -178,773.44175,000.00 0.0004/20/2017 01/20/2046 175,000.00

03/15/2017 G2SF 30 YR 3.5 TBA APR 17 102.168T350417GS -86,842.7785,000.00 0.0004/20/2017 01/20/2046 85,000.00

03/15/2017 US TREASURY N/B 97.102912828V98 -1,194,355.461,230,000.00 0.0003/16/2017 02/15/2027 1,230,000.00

03/15/2017 US TREASURY N/B 97.879912810RV2 -34,257.6235,000.00 0.0003/20/2017 02/15/2047 35,000.00

03/15/2017 US TREASURY N/B 97.012912810RV2 -43,655.2745,000.00 0.0003/20/2017 02/15/2047 45,000.00


03/17/2017 US TREASURY N/B 97.828912828V98 -567,403.13580,000.00 0.0003/21/2017 02/15/2027 580,000.00

03/17/2017 US TREASURY N/B 99.309912828V72 -1,449,905.471,460,000.00 0.0003/22/2017 01/31/2022 1,460,000.00



Account Transaction Activity

As of 03/31/2017


17



Account Transaction Activity (continued)

As of 03/31/2017



FaceRealized


NetAmount

OriginalFacePrice

Currency: US Dollar

Settle DateMaturity

Date

PURCHASES

03/20/2017 US TREASURY N/B 98.078912828V98 -53,942.9755,000.00 0.0003/23/2017 02/15/2027 55,000.00

03/20/2017 US TREASURY N/B 98.188912810RV2 -274,925.00280,000.00 0.0003/21/2017 02/15/2047 280,000.00

03/20/2017 US TREASURY N/B 98.203912810RV2 -319,160.16325,000.00 0.0003/21/2017 02/15/2047 325,000.00


03/21/2017 US TREASURY N/B 97.957912810RV2 -68,569.9270,000.00 0.0003/24/2017 02/15/2047 70,000.00

03/22/2017 GOLDMAN SACHS GROUP INC 104.21738141GFM1 -88,584.4585,000.00 0.0003/27/2017 04/01/2018 85,000.00

03/22/2017 TSY INFL IX N/B 98.063912810RW0 -57,120.8258,000.00 0.0003/23/2017 02/15/2047 58,000.00

03/23/2017 US TREASURY N/B 99.844912810RV2 -314,507.81315,000.00 0.0003/24/2017 02/15/2047 315,000.00

03/23/2017 WASHINGTON ST-F-BABS 114.71693974CRD4 -86,037.0075,000.00 0.0003/28/2017 08/01/2031 75,000.00

03/27/2017 ALTRIA GROUP INC 112.29202209SAD5 -106,677.4095,000.00 0.0003/30/2017 11/10/2018 95,000.00

03/27/2017 LA DWP 124.307544525NZ7 -124,307.00100,000.00 0.0003/30/2017 07/01/2039 100,000.00

03/27/2017 US TREASURY N/B 99.762912828W30 -478,856.25480,000.00 0.0003/28/2017 02/28/2019 480,000.00


03/29/2017 G2SF 30 YR 4.0 TBA APR 17 105.441T400417CG -73,808.9870,000.00 0.0004/20/2017 12/20/2045 70,000.00

03/29/2017 US TREASURY N/B 99.727912828W89 -433,810.55435,000.00 0.0003/31/2017 03/31/2022 435,000.00

03/29/2017 US TREASURY N/B 100.098912810RV2 -45,043.9545,000.00 0.0004/03/2017 02/15/2047 45,000.00

03/30/2017 US TREASURY N/B 99.617912828W89 -263,984.64265,000.00 0.0003/31/2017 03/31/2022 265,000.00

03/31/2017 US TREASURY N/B 98.625912828V98 -34,518.7535,000.00 0.0004/03/2017 02/15/2027 35,000.00

0.00-11,538,962.45TOTAL PURCHASES

SALES

03/03/2017 US TREASURY NOTE 102.332912828HR4 102,332.03100,000.00 -11,360.0003/03/2017 02/15/2018 100,000.00

03/06/2017 FNCL 30 YR 3.0 TBA MAR 17 98.557F300317GS 83,773.1485,000.00 -748.7403/13/2017 10/25/2046 85,000.00

03/06/2017 FNCL 30 YR 3.0 TBA MAR 17 98.588F300317FB 39,435.1640,000.00 -289.8403/13/2017 10/25/2046 40,000.00

03/06/2017 FNCL 30 YR 3.5 TBA MAR 17 101.818F350317GS 117,091.11115,000.00 -626.6603/13/2017 02/25/2046 115,000.00

03/07/2017 FNCL 30 YR 4.0 TBA MAR 17 104.504F400317FB 219,458.20210,000.00 -910.5503/13/2017 11/25/2045 210,000.00

03/07/2017 FNCL 30 YR 4.0 TBA MAR 17 104.504F400317BP 151,530.66145,000.00 -628.7203/13/2017 11/25/2045 145,000.00

03/07/2017 FNCL 30 YR 4.5 TBA MAR 17 107.000F450317FB 1,358,900.001,270,000.00 -6,945.3103/13/2017 07/25/2044 1,270,000.00

18



Account Transaction Activity (continued)(continued)

As of 03/31/2017



FaceRealized


NetAmount

OriginalFacePrice

Currency: US Dollar

Settle DateMaturity

Date

SALES

03/07/2017 US TREASURY N/B 99.633912828V56 114,577.73115,000.00 -312.9903/08/2017 01/31/2019 115,000.00

03/10/2017 FNCI 15 YR 3.0 TBA MAR 17 101.906D300317JP 305,718.75300,000.00 -2,531.2503/16/2017 08/25/2030 300,000.00


03/13/2017 US TREASURY BOND 93.453912810RU4 37,381.2540,000.00 -1,115.6203/14/2017 11/15/2046 40,000.00

03/14/2017 G2SF 30 YR 3.0 TBA MAR 17 99.387T300317GS 223,620.12225,000.00 -2,566.4003/21/2017 10/20/2046 225,000.00

03/14/2017 G2SF 30 YR 3.0 TBA MAR 17 99.359T300317FB 9,935.9410,000.00 -129.6903/21/2017 10/20/2046 10,000.00


03/14/2017 US TREASURY NOTE 94.875912828U24 564,504.38595,000.00 -9,670.6203/15/2017 11/15/2026 595,000.00

03/14/2017 US TREASURY NOTE 100.287912828A75 376,077.17375,000.00 -3,088.0603/15/2017 12/31/2018 375,000.00

03/15/2017 AMERICAN TRANSMISSION SY 106.461030288AB0 53,230.5050,000.00 3,727.0003/20/2017 09/01/2044 50,000.00

03/15/2017 APPLE INC 100.935037833BH2 45,420.7545,000.00 931.0503/20/2017 05/13/2045 45,000.00

03/15/2017 G2SF 30 YR 3.5 TBA MAR 17 102.363T350317GS 87,008.7985,000.00 -1,035.9403/21/2017 01/20/2046 85,000.00

03/15/2017 G2SF 30 YR 3.5 TBA MAR 17 102.352T350317FB 179,115.23175,000.00 -2,228.5203/21/2017 01/20/2046 175,000.00

03/15/2017 US TREASURY NOTE 94.984912828U24 1,211,050.781,275,000.00 -7,784.5403/16/2017 11/15/2026 1,275,000.00

03/16/2017 DRSLF 2015-37A A 100.05026249MAA5 120,060.00120,000.00 60.0003/21/2017 04/15/2027 120,000.00

03/16/2017 FG G18622 99.5353128MMVQ3 184,213.95185,074.25 -867.5304/19/2017 12/01/2031 190,000.00

03/16/2017 HEF 2014-1 A 99.719429827AY4 104,255.15104,549.20 -294.0403/21/2017 05/25/2034 115,000.00

03/16/2017 NAVSL 2014-3 A 97.65663938JAA1 176,389.82180,623.17 -4,233.3503/21/2017 03/25/2083 230,000.00

03/16/2017 SLMA 2004-8A A5 100.28178442GMS2 104,516.93104,223.80 -227.9903/21/2017 04/25/2024 260,000.00

03/16/2017 SLMA 2006-2 A6 94.81378442GRX6 118,515.63125,000.00 6,640.6303/21/2017 01/25/2041 125,000.00

03/17/2017 AMSI 2005-R5 M2 99.75003072SE35 228,130.20228,701.96 1,143.5103/22/2017 07/25/2035 230,000.00

03/17/2017 CWL 2007-13 2A2 93.000126698AD1 165,516.40177,974.63 15,572.7803/22/2017 10/25/2047 470,000.00

03/17/2017 FG G07924 102.2193128MAD55 254,350.40248,829.50 -7,348.2503/22/2017 01/01/2045 320,000.00

03/17/2017 FG G08706 101.8093128MJYC8 32,377.3331,802.16 -956.5503/22/2017 05/01/2046 35,000.00

03/17/2017 FG G08716 101.8013128MJYN4 226,294.14222,291.17 -8,583.3903/22/2017 08/01/2046 235,000.00

03/17/2017 FG G08747 98.5083128MJZM5 318,370.40323,193.04 -1,085.7203/22/2017 02/01/2047 325,000.00

03/17/2017 FG G18592 102.3053128MMUS0 86,819.5184,863.66 -2,002.2503/22/2017 03/01/2031 100,000.00

19



Account Transaction Activity (continued)(continued) (continued)

As of 03/31/2017



FaceRealized


NetAmount

OriginalFacePrice

Currency: US Dollar

Settle DateMaturity

Date

SALES

03/17/2017 FN AL0149 105.2663138EGEX8 140,634.06133,599.23 6,345.9603/22/2017 02/01/2041 290,000.00

03/17/2017 FN AX2572 104.5313138Y32E0 246,391.23235,710.59 -441.9603/22/2017 11/01/2044 375,000.00

03/17/2017 FN MA1404 101.81331418AR26 186,591.34183,269.58 -6,600.5703/22/2017 04/01/2043 245,000.00

03/17/2017 FN MA1490 101.43831418AUQ9 270,828.29266,990.31 3,253.9403/22/2017 07/01/2033 405,000.00

03/17/2017 FN MA1608 103.67231418AYE2 262,911.61253,599.75 1,030.2503/22/2017 10/01/2033 430,000.00

03/17/2017 G2 MA3597 103.14836179R7J2 174,841.34169,504.59 -4,846.7703/21/2017 04/20/2046 200,000.00

03/20/2017 FNCL 30 YR 4.5 TBA APR 17 106.984F450417GS 208,619.53195,000.00 365.6204/12/2017 07/25/2044 195,000.00

03/20/2017 G2SF 30 YR 3.0 TBA APR 17 100.270T300417GS 25,067.3825,000.00 263.6704/20/2017 11/20/2046 25,000.00

03/20/2017 G2SF 30 YR 3.5 TBA APR 17 103.090T350417GS 87,626.3785,000.00 783.6004/20/2017 01/20/2046 85,000.00

03/20/2017 ORACLE CORP 96.53168389XBL8 82,051.3585,000.00 -2,934.2003/23/2017 09/15/2023 85,000.00



03/21/2017 ANHEUSER-BUSCH INBEV FIN 100.183035242AP1 40,073.2040,000.00 -2,125.7403/24/2017 02/01/2026 40,000.00

03/21/2017 BANK OF AMERICA CORP 98.32506051GFX2 58,995.0060,000.00 -904.8003/24/2017 04/19/2026 60,000.00

03/21/2017 BERKSHIRE HATHAWAY FIN 103.859084664BU4 103,859.00100,000.00 1,898.0003/24/2017 05/15/2042 100,000.00

03/21/2017 CAPITAL ONE NA 100.51414042E5V8 70,359.8070,000.00 57.4003/24/2017 08/17/2018 70,000.00

03/21/2017 CITIGROUP INC 81.250172967DS7 48,750.0060,000.00 20,100.0003/24/2017 08/25/2036 60,000.00

03/21/2017 COMMONWEALTH EDISON CO 92.839202795JJ0 60,345.3565,000.00 -4,232.8003/24/2017 06/15/2046 65,000.00

03/21/2017 FHMS K151 A3 102.6993137BKGK0 97,564.2695,000.00 673.9503/24/2017 04/25/2030 95,000.00

03/21/2017 FN 467173 108.10931381P6J2 204,747.26189,388.99 -9,084.7503/24/2017 01/01/2021 205,000.00

03/21/2017 FNA 2014-M12 FA 100.0313136ALHU8 63,077.0863,057.38 38.7403/24/2017 10/25/2021 245,000.00

03/21/2017 GSMS 2012-ALOH A 104.82436192HAA2 41,929.6940,000.00 -1,071.8703/24/2017 04/10/2034 40,000.00

03/21/2017 HCP INC 100.21740414LAL3 50,108.5050,000.00 -190.0003/24/2017 08/15/2024 50,000.00

03/21/2017 JP MORGAN CHASE BANK NA 101.27148121CVZ6 131,652.30130,000.00 -6,436.3003/24/2017 07/05/2017 130,000.00

03/21/2017 MORGAN STANLEY 100.28161746BEH5 50,140.6050,000.00 140.6003/24/2017 02/14/2020 50,000.00

03/21/2017 NEXTERA ENERGY CAPITAL 99.70965339KAJ9 151,557.68152,000.00 -822.3203/24/2017 09/01/2018 152,000.00

03/21/2017 WELLS FARGO & COMPANY 95.357949746RW3 133,499.80140,000.00 -5,387.2003/24/2017 04/22/2026 140,000.00

20



Account Transaction Activity (continued)(continued) (continued) (continued)

As of 03/31/2017



FaceRealized


NetAmount

OriginalFacePrice

Currency: US Dollar

Settle DateMaturity

Date

SALES

03/21/2017 WFRBS 2012-C6 A4 104.09092936QAG3 213,384.18205,000.00 3,947.8503/24/2017 04/15/2045 205,000.00

03/22/2017 TSY INFL IX N/B 109.878912810RF7 62,863.0155,000.00 -1,352.3903/23/2017 02/15/2044 55,000.00

03/22/2017 US TREASURY N/B 99.758912828W30 89,782.0390,000.00 -42.1903/24/2017 02/28/2019 90,000.00

03/23/2017 US TREASURY BOND 97.263912810RU4 311,243.06320,000.00 2,311.6103/24/2017 11/15/2046 320,000.00

03/23/2017 US TREASURY N/B 98.512912828V98 83,734.9685,000.00 1,298.2403/27/2017 02/15/2027 85,000.00

03/24/2017 US TREASURY BOND 97.043912810RU4 368,763.28380,000.00 3,614.8303/27/2017 11/15/2046 380,000.00

03/24/2017 US TREASURY N/B 98.574912828V98 1,463,827.151,485,000.00 22,438.1103/27/2017 02/15/2027 1,485,000.00

03/24/2017 US TREASURY N/B 97.926912828H86 920,502.34940,000.00 -8,813.6103/27/2017 01/31/2022 940,000.00

03/24/2017 US TREASURY N/B 99.609912810RV2 408,398.44410,000.00 12,646.1003/27/2017 02/15/2047 410,000.00

03/24/2017 US TREASURY N/B 99.777912828V56 553,764.26555,000.00 -708.3303/27/2017 01/31/2019 555,000.00

03/24/2017 US TREASURY N/B 100.453912828B33 1,104,984.381,100,000.00 -3,473.4303/27/2017 01/31/2019 1,100,000.00

03/24/2017 US TREASURY N/B 99.648912828V72 2,929,664.062,940,000.00 -6,045.3303/27/2017 01/31/2022 2,940,000.00


03/27/2017 US TREASURY N/B 100.352912810RV2 65,228.5265,000.00 1,808.6003/29/2017 02/15/2047 65,000.00

03/28/2017 AETNA INC 99.47800817YAV0 99,478.00100,000.00 -376.0003/31/2017 06/15/2023 100,000.00

03/29/2017 FARMERS EXCHANGE CAP II 108.11830958PAA1 86,494.4080,000.00 6,494.4004/03/2017 11/01/2053 80,000.00

03/29/2017 FNCL 30 YR 3.5 TBA APR 17 102.195F350417GS 51,097.6650,000.00 285.1604/12/2017 05/25/2046 50,000.00

03/29/2017 US TREASURY N/B 99.771912828V72 434,001.89435,000.00 2,009.5103/30/2017 01/31/2022 435,000.00

03/30/2017 US TREASURY N/B 99.664912828V72 264,109.77265,000.00 942.0003/31/2017 01/31/2022 265,000.00

-66,241.1421,148,533.74TOTAL SALES

PAYDOWNS

02/06/2017 NGN 2010-R2 1A62888UAA8 2,105.53-2,105.53 0.0002/06/2017 11/06/2017 350,000.00

02/06/2017 NGN 2010-R2 1A62888UAA8 -2,104.102,104.10 0.0002/06/2017 11/06/2017 350,000.00

03/09/2017 NGN 2010-R1 1A62888VAA6 2,124.97-2,124.97 0.0003/09/2017 10/07/2020 360,000.00

03/09/2017 NGN 2010-R2 1A62888UAA8 1,722.99-1,722.99 0.0003/09/2017 11/06/2017 350,000.00

03/15/2017 CONTL AIRLINES 1999-2210805CT2 39,581.56-39,581.56 -2,982.5303/15/2017 03/15/2020 512,000.00

03/15/2017 FG A615273128KRVU5 158.57-158.57 -3.3703/15/2017 07/01/2036 520,000.00

21




As of 03/31/2017



FaceRealized


NetAmount

OriginalFacePrice

Currency: US Dollar

Settle DateMaturity

Date

PAYDOWNS

03/15/2017 FG E0125231294KL94 114.34-114.34 -5.0903/15/2017 11/01/2017 400,000.00

03/15/2017 FG G063613128M8MJ0 1,163.62-1,163.62 18.3603/15/2017 03/01/2041 210,000.00

03/15/2017 FG G079243128MAD55 2,524.65-2,524.65 -130.5703/15/2017 01/01/2045 320,000.00

03/15/2017 FG G086773128MJXF2 2,060.49-2,060.49 -118.0803/15/2017 11/01/2045 210,000.00

03/15/2017 FG G086813128MJXK1 1,443.76-1,443.76 -42.8603/15/2017 12/01/2045 225,000.00

03/15/2017 FG G086983128MJX47 1,160.58-1,160.58 -55.6703/15/2017 03/01/2046 195,000.00

03/15/2017 FG G086993128MJX54 1,371.36-1,371.36 -91.4403/15/2017 03/01/2046 155,000.00

03/15/2017 FG G087023128MJX88 2,329.71-2,329.71 -113.5103/15/2017 04/01/2046 410,000.00

03/15/2017 FG G087063128MJYC8 193.51-193.51 -9.3203/15/2017 05/01/2046 35,000.00

03/15/2017 FG G087113128MJYH7 1,142.06-1,142.06 -58.8403/15/2017 06/01/2046 205,000.00

03/15/2017 FG G087153128MJYM6 1,528.45-1,528.45 -60.9003/15/2017 08/01/2046 365,000.00

03/15/2017 FG G087163128MJYN4 1,331.71-1,331.71 -75.4003/15/2017 08/01/2046 235,000.00

03/15/2017 FG G087213128MJYT1 647.37-647.37 -24.1203/15/2017 09/01/2046 160,000.00

03/15/2017 FG G087223128MJYU8 1,095.81-1,095.81 -61.8703/15/2017 09/01/2046 175,000.00

03/15/2017 FG G087263128MJYY0 793.21-793.21 -29.5003/15/2017 10/01/2046 200,000.00

03/15/2017 FG G087323128MJY61 918.17-918.17 -31.4903/15/2017 11/01/2046 245,000.00

03/15/2017 FG G087473128MJZM5 1,041.76-1,041.76 12.0503/15/2017 02/01/2047 325,000.00

03/15/2017 FG G123993128M1RU5 655.37-655.37 -18.8403/15/2017 09/01/2021 795,000.00

03/15/2017 FG G185923128MMUS0 863.51-863.51 -40.2703/15/2017 03/01/2031 100,000.00

03/15/2017 FG G186223128MMVQ3 2,691.24-2,691.24 -0.1103/15/2017 12/01/2031 395,000.00

03/15/2017 FG G6027831335AJX7 856.30-856.30 -64.4903/15/2017 10/01/2045 110,000.00

03/15/2017 FG Q052613132GLQN7 706.95-706.95 -19.1703/15/2017 12/01/2041 165,000.00

03/15/2017 FG Q201783132JMFT1 681.60-681.60 -2.4503/15/2017 07/01/2043 220,000.00

03/15/2017 FHR 2368 AS31339GNQ0 61.65-61.65 7.7803/15/2017 10/15/2031 500,000.00

03/15/2017 FHR 2433 SA3133TVPR1 198.75-198.75 -10.7803/15/2017 02/15/2032 275,000.00

03/15/2017 FHR 2684 ZN31394L5S7 1,623.02-1,623.02 510.2403/15/2017 10/15/2033 190,000.00

03/15/2017 GN 37646336204QFC9 279.36-279.36 12.5703/15/2017 04/15/2024 341,247.00

22




As of 03/31/2017



FaceRealized


NetAmount

OriginalFacePrice

Currency: US Dollar

Settle DateMaturity

Date

PAYDOWNS

03/15/2017 GN 78003536225ABC3 33.03-33.03 1.4903/15/2017 07/15/2024 199,051.00

03/15/2017 GN 78281836241LDX1 1,201.15-1,201.15 -30.1203/15/2017 11/15/2039 430,000.00

03/15/2017 HAROT 2014-3 A343814HAC2 5,599.89-5,599.89 3.9403/15/2017 06/15/2018 115,000.00

03/15/2017 HENDR 2013-3A A46617LAA9 511.02-511.02 0.4103/15/2017 01/17/2073 75,000.00

03/15/2017 HENDR 2014-2A A46618AAA2 475.02-475.02 0.3103/15/2017 01/17/2073 90,000.00

03/15/2017 JPMCC 2011-C3 A346635TAK8 1,278.06-1,278.06 -122.4103/15/2017 02/15/2046 210,000.00

03/15/2017 MDST 2004-1 B59560UAD3 1,564.50-1,564.50 -98.0303/15/2017 08/15/2037 400,000.00

03/15/2017 NAROT 2015-C A2A65478AAB9 6,620.21-6,620.21 0.5103/15/2017 11/15/2018 115,000.00

03/15/2017 WFRBS 2011-C4 A392936CAE9 2,037.40-2,037.40 -198.0103/15/2017 06/15/2044 165,000.00

03/17/2017 SEACO 2014-1A A237952UAE3 708.33-708.33 0.1903/17/2017 07/17/2029 85,000.00

03/20/2017 BAFC 2004-A 1A306051GAX7 79.65-79.65 0.3503/20/2017 09/20/2034 660,000.00

03/20/2017 G2 MA352136179R4E6 1,721.70-1,721.70 -102.2303/20/2017 03/20/2046 180,000.00

03/20/2017 G2 MA359736179R7J2 1,935.69-1,935.69 -116.2903/20/2017 04/20/2046 200,000.00

03/20/2017 G2 MA366336179SB89 618.84-618.84 -37.6403/20/2017 05/20/2046 65,000.00

03/20/2017 G2 MA393736179SLS4 1,146.42-1,146.42 -71.9203/20/2017 09/20/2046 155,000.00

03/20/2017 G2 MA406936179SQW0 1,416.88-1,416.88 -56.2303/20/2017 11/20/2046 245,000.00

03/20/2017 G2 MA419536179SUU9 734.45-734.45 -8.1703/20/2017 01/20/2047 295,000.00

03/20/2017 GNR 2001-22 SO38373RBR9 273.54-273.54 -12.7403/20/2017 05/20/2031 1,707,394.00

03/21/2017 HAROT 2015-4 A243814LAB5 7,313.60-7,313.60 0.1303/21/2017 07/23/2018 115,000.00

03/21/2017 MARM 2004-13 3A7A576433WL6 2,315.66-2,315.66 46.3103/21/2017 11/21/2034 555,000.00

03/25/2017 BSARM 2004-10 14A107384M4F6 416.28-416.28 22.6403/27/2017 01/25/2035 1,530,000.00

03/25/2017 FN 46717331381P6J2 338.82-338.82 -43.7303/27/2017 01/01/2021 205,000.00

03/25/2017 FN 65592831390TVV8 729.63-729.63 -48.3403/27/2017 08/01/2032 765,000.00

03/25/2017 FN 73564631402RHX0 1,182.03-1,182.03 6.1003/27/2017 07/01/2020 900,000.00

03/25/2017 FN 84103131407ULL9 2.62-2.62 0.0003/27/2017 11/01/2035 380,000.00

03/25/2017 FN 91844531411YL27 3.16-3.16 -0.0203/27/2017 05/01/2037 705,000.00

03/25/2017 FN AB161331416WYK2 756.88-756.88 -14.1903/27/2017 10/01/2040 305,000.00

23




As of 03/31/2017



FaceRealized


NetAmount

OriginalFacePrice

Currency: US Dollar

Settle DateMaturity

Date

PAYDOWNS

03/25/2017 FN AD383031418RHG9 1,947.35-1,947.35 -80.3303/27/2017 04/01/2025 390,000.00

03/25/2017 FN AL01493138EGEX8 1,693.94-1,693.94 -8.7303/27/2017 02/01/2041 290,000.00

03/25/2017 FN AL09053138EHAF9 409.57-409.57 -34.8803/27/2017 09/01/2021 210,000.00

03/25/2017 FN AL90273138ERA59 1,572.33-1,572.33 -85.1903/27/2017 09/01/2046 130,000.00

03/25/2017 FN AL95493138ERTF7 2,671.62-2,671.62 -140.6803/27/2017 09/01/2046 225,000.00

03/25/2017 FN AM65583138L7JC1 176.79-176.79 -20.3403/27/2017 09/01/2034 105,000.00

03/25/2017 FN AM67613138L7QP4 135.85-135.85 -9.3403/27/2017 10/01/2029 80,000.00

03/25/2017 FN AM71153138L73Z7 129.23-129.23 -10.6803/27/2017 11/01/2026 80,000.00

03/25/2017 FN AM81883138L9C26 146.34-146.34 -0.6603/27/2017 03/01/2027 80,000.00

03/25/2017 FN AM91733138LAFP9 132.45-132.45 -4.7203/27/2017 06/01/2027 80,000.00

03/25/2017 FN AM95363138LAS26 129.83-129.83 -5.8203/27/2017 08/01/2030 80,000.00

03/25/2017 FN AX25723138Y32E0 6,542.46-6,542.46 -308.7203/27/2017 11/01/2044 375,000.00

03/25/2017 FN MA140431418AR26 2,124.25-2,124.25 -115.0103/27/2017 04/01/2043 245,000.00

03/25/2017 FN MA149031418AUQ9 2,607.13-2,607.13 -5.7003/27/2017 07/01/2033 405,000.00

03/25/2017 FN MA158431418AXN3 831.17-831.17 -28.3103/27/2017 09/01/2033 100,000.00

03/25/2017 FN MA160831418AYE2 3,522.62-3,522.62 -115.0403/27/2017 10/01/2033 430,000.00

03/25/2017 FN MA277631418CCN2 2,784.44-2,784.44 -88.5403/27/2017 10/01/2026 210,000.00

03/25/2017 FNA 2014-M12 FA3136ALHU8 118.94-118.94 0.0403/27/2017 10/25/2021 245,000.00

03/25/2017 FNR 2001-52 YZ313921MN5 394.97-394.97 -11.3603/27/2017 10/25/2031 575,000.00

03/25/2017 MARM 2004-5 3A1576433MW3 2.82-2.82 -0.0303/27/2017 06/25/2034 505,000.00

03/25/2017 MSSTR 2004-1 4A155265WBD4 53.43-53.43 -1.0503/27/2017 10/25/2032 550,000.00

03/25/2017 RALI 2003-QS3 A476110G6D8 2,118.69-2,118.69 -0.6603/27/2017 02/25/2018 1,100,000.00

03/25/2017 RAST 2004-IP2 2A145660LAP4 641.41-641.41 -8.7803/27/2017 12/25/2034 535,000.00

03/25/2017 WAMU 2005-AR8 2A1A92922FR75 2,271.33-2,271.33 198.7403/27/2017 07/25/2045 2,000,000.00

03/27/2017 CITEL 2007-1 A17284LAA2 1,851.71-1,851.71 171.2803/27/2017 03/25/2042 150,000.00

03/27/2017 CMLTI 2007-WFH1 A417311CAU5 3,317.98-3,317.98 1,526.2703/27/2017 01/25/2037 100,000.00

03/27/2017 CWHL 2005-9 1A112669GYY1 1,135.81-1,135.81 324.7703/27/2017 05/25/2035 1,000,000.00

24




As of 03/31/2017



FaceRealized


NetAmount

OriginalFacePrice

Currency: US Dollar

Settle DateMaturity

Date

PAYDOWNS

03/27/2017 CWL 2007-13 2A1126698AC3 1,812.12-1,812.12 575.3503/27/2017 10/25/2047 400,000.00

03/27/2017 INDX 2005-AR18 2A1A45660LWD7 1,761.44-1,761.44 920.3503/27/2017 10/25/2036 1,300,000.00

03/27/2017 NAVSL 2014-2 A63938GAA7 1,045.66-1,045.66 0.0003/27/2017 03/25/2083 230,000.00

03/27/2017 NAVSL 2014-4 A63938QAA5 919.78-919.78 0.0003/27/2017 03/25/2083 185,000.00

03/27/2017 NCHET 2005-3 M264352VLK5 9,223.59-9,223.59 354.5303/27/2017 07/25/2035 250,000.00

03/27/2017 NSLT 2012-5A A64033BAA0 1,653.75-1,653.75 -6.2003/27/2017 10/27/2036 270,000.00

03/27/2017 NSLT 2015-2A A264033QAB5 3,280.48-3,280.48 0.0003/27/2017 09/25/2047 200,000.00

03/27/2017 POPLR 2006-C A473316MAD9 4,449.58-4,449.58 2,202.5403/27/2017 07/25/2036 243,000.00

815.74177,693.15TOTAL PAYDOWNS

IO FACTOR ADJUSTMENT

03/15/2017 FHR 2642 BW31393VW64 0.009,094.30 -37.5303/15/2017 06/15/2023 520,000.00

03/16/2017 GNR 2009-66 XS38376FLM2 0.00126,468.53 -377.5303/16/2017 07/16/2039 1,350,000.00

03/16/2017 GNR 2009-8 PS38374TDP6 0.00152,002.13 -338.5703/16/2017 08/16/2038 995,000.00

-753.630.00TOTAL IO FACTOR ADJUSTMENT

INTEREST - BUY & SELL

03/01/2017 US TREASURY NOTE912828W55 -19.870.00 0.0003/02/2017 02/28/2022 195,000.00


03/03/2017 US TREASURY NOTE912828HR4 154.700.00 0.0003/03/2017 02/15/2018 100,000.00

03/07/2017 BANK OF AMERICA NA06051GDX4 -2,328.270.00 0.0003/10/2017 05/01/2018 115,000.00

03/07/2017 US TREASURY N/B912828V56 128.660.00 0.0003/08/2017 01/31/2019 115,000.00

03/09/2017 US TREASURY BOND912810RU4 -411.000.00 0.0003/10/2017 11/15/2046 45,000.00




03/13/2017 US TREASURY BOND912810RU4 378.040.00 0.0003/14/2017 11/15/2046 40,000.00

03/14/2017 US TREASURY BOND912810RU4 3,812.150.00 0.0003/15/2017 11/15/2046 400,000.00

03/14/2017 US TREASURY N/B912828V98 -1,000.690.00 0.0003/15/2017 02/15/2027 575,000.00

25




As of 03/31/2017



FaceRealized


NetAmount

OriginalFacePrice

Currency: US Dollar

Settle DateMaturity

Date


03/14/2017 US TREASURY N/B912810RV2 -904.970.00 0.0003/15/2017 02/15/2047 390,000.00

03/14/2017 US TREASURY N/B912828W30 -171.960.00 0.0003/15/2017 02/28/2019 375,000.00

03/14/2017 US TREASURY NOTE912828U24 3,944.750.00 0.0003/15/2017 11/15/2026 595,000.00

03/14/2017 US TREASURY NOTE912828A75 1,149.860.00 0.0003/15/2017 12/31/2018 375,000.00

03/15/2017 AMERICAN TRANSMISSION SY030288AB0 131.940.00 0.0003/20/2017 09/01/2044 50,000.00

03/15/2017 APPLE INC037833BH2 694.530.00 0.0003/20/2017 05/13/2045 45,000.00

03/15/2017 US TREASURY N/B912828V98 -2,217.060.00 0.0003/16/2017 02/15/2027 1,230,000.00

03/15/2017 US TREASURY N/B912810RV2 -123.070.00 0.0003/20/2017 02/15/2047 45,000.00

03/15/2017 US TREASURY N/B912810RV2 -95.720.00 0.0003/20/2017 02/15/2047 35,000.00

03/15/2017 US TREASURY NOTE912828U24 8,523.480.00 0.0003/16/2017 11/15/2026 1,275,000.00

03/16/2017 DRSLF 2015-37A A26249MAA5 529.870.00 0.0003/21/2017 04/15/2027 120,000.00

03/16/2017 FG G186223128MMVQ3 231.340.00 0.0004/19/2017 12/01/2031 190,000.00

03/16/2017 HEF 2014-1 A429827AY4 134.320.00 0.0003/21/2017 05/25/2034 115,000.00

03/16/2017 NAVSL 2014-3 A63938JAA1 154.350.00 0.0003/21/2017 03/25/2083 230,000.00

03/16/2017 SLMA 2004-8A A578442GMS2 244.880.00 0.0003/21/2017 04/25/2024 260,000.00

03/16/2017 SLMA 2006-2 A678442GRX6 230.670.00 0.0003/21/2017 01/25/2041 125,000.00

03/17/2017 AMSI 2005-R5 M203072SE35 180.940.00 0.0003/22/2017 07/25/2035 230,000.00

03/17/2017 CWL 2007-13 2A2126698AD1 179.470.00 0.0003/22/2017 10/25/2047 470,000.00

03/17/2017 FG G079243128MAD55 508.030.00 0.0003/22/2017 01/01/2045 320,000.00

03/17/2017 FG G087063128MJYC8 64.930.00 0.0003/22/2017 05/01/2046 35,000.00

03/17/2017 FG G087163128MJYN4 453.840.00 0.0003/22/2017 08/01/2046 235,000.00

03/17/2017 FG G087473128MJZM5 565.590.00 0.0003/22/2017 02/01/2047 325,000.00

03/17/2017 FG G185923128MMUS0 148.510.00 0.0003/22/2017 03/01/2031 100,000.00

03/17/2017 FN AL01493138EGEX8 311.730.00 0.0003/22/2017 02/01/2041 290,000.00

03/17/2017 FN AX25723138Y32E0 549.990.00 0.0003/22/2017 11/01/2044 375,000.00

03/17/2017 FN MA140431418AR26 374.180.00 0.0003/22/2017 04/01/2043 245,000.00

03/17/2017 FN MA149031418AUQ9 467.230.00 0.0003/22/2017 07/01/2033 405,000.00

26




As of 03/31/2017



FaceRealized


NetAmount

OriginalFacePrice

Currency: US Dollar

Settle DateMaturity

Date


03/17/2017 FN MA160831418AYE2 517.770.00 0.0003/22/2017 10/01/2033 430,000.00

03/17/2017 G2 MA359736179R7J2 329.590.00 0.0003/21/2017 04/20/2046 200,000.00

03/17/2017 US TREASURY N/B912828V72 -3,781.080.00 0.0003/22/2017 01/31/2022 1,460,000.00

03/17/2017 US TREASURY N/B912828V98 -1,225.690.00 0.0003/21/2017 02/15/2027 580,000.00

03/20/2017 ORACLE CORP68389XBL8 45.330.00 0.0003/23/2017 09/15/2023 85,000.00



03/20/2017 US TREASURY N/B912810RV2 -788.950.00 0.0003/21/2017 02/15/2047 280,000.00

03/20/2017 US TREASURY N/B912828V98 -123.070.00 0.0003/23/2017 02/15/2027 55,000.00

03/20/2017 US TREASURY N/B912810RV2 -915.750.00 0.0003/21/2017 02/15/2047 325,000.00


03/21/2017 ANHEUSER-BUSCH INBEV FIN035242AP1 214.940.00 0.0003/24/2017 02/01/2026 40,000.00

03/21/2017 BANK OF AMERICA CORP06051GFX2 904.170.00 0.0003/24/2017 04/19/2026 60,000.00

03/21/2017 BERKSHIRE HATHAWAY FIN084664BU4 1,576.670.00 0.0003/24/2017 05/15/2042 100,000.00

03/21/2017 CAPITAL ONE NA14042E5V8 169.070.00 0.0003/24/2017 08/17/2018 70,000.00

03/21/2017 CITIGROUP INC172967DS7 66.760.00 0.0003/24/2017 08/25/2036 60,000.00

03/21/2017 COMMONWEALTH EDISON CO202795JJ0 652.440.00 0.0003/24/2017 06/15/2046 65,000.00

03/21/2017 FHMS K151 A33137BKGK0 213.100.00 0.0003/24/2017 04/25/2030 95,000.00

03/21/2017 FN 46717331381P6J2 561.430.00 0.0003/24/2017 01/01/2021 205,000.00

03/21/2017 FNA 2014-M12 FA3136ALHU8 40.210.00 0.0003/24/2017 10/25/2021 245,000.00

03/21/2017 GSMS 2012-ALOH A36192HAA2 90.750.00 0.0003/24/2017 04/10/2034 40,000.00

03/21/2017 HCP INC40414LAL3 209.900.00 0.0003/24/2017 08/15/2024 50,000.00

03/21/2017 JP MORGAN CHASE BANK NA48121CVZ6 1,711.670.00 0.0003/24/2017 07/05/2017 130,000.00

03/21/2017 MORGAN STANLEY61746BEH5 89.530.00 0.0003/24/2017 02/14/2020 50,000.00

03/21/2017 NEXTERA ENERGY CAPITAL65339KAJ9 160.140.00 0.0003/24/2017 09/01/2018 152,000.00

03/21/2017 US TREASURY N/B912810RV2 -214.640.00 0.0003/24/2017 02/15/2047 70,000.00

03/21/2017 WELLS FARGO & COMPANY949746RW3 1,773.330.00 0.0003/24/2017 04/22/2026 140,000.00

27




As of 03/31/2017



FaceRealized


NetAmount

OriginalFacePrice

Currency: US Dollar

Settle DateMaturity

Date


03/21/2017 WFRBS 2012-C6 A492936QAG3 450.540.00 0.0003/24/2017 04/15/2045 205,000.00

03/22/2017 GOLDMAN SACHS GROUP INC38141GFM1 -2,555.670.00 0.0003/27/2017 04/01/2018 85,000.00

03/22/2017 TSY INFL IX N/B912810RF7 78.230.00 0.0003/23/2017 02/15/2044 55,000.00

03/22/2017 TSY INFL IX N/B912810RW0 -50.690.00 0.0003/23/2017 02/15/2047 58,000.00

03/22/2017 US TREASURY N/B912828W30 66.030.00 0.0003/24/2017 02/28/2019 90,000.00


03/23/2017 US TREASURY N/B912828V98 211.330.00 0.0003/27/2017 02/15/2027 85,000.00

03/23/2017 US TREASURY N/B912810RV2 -965.880.00 0.0003/24/2017 02/15/2047 315,000.00

03/23/2017 WASHINGTON ST-F-BABS93974CRD4 -598.500.00 0.0003/28/2017 08/01/2031 75,000.00


03/24/2017 US TREASURY N/B912828B33 2,506.910.00 0.0003/27/2017 01/31/2019 1,100,000.00

03/24/2017 US TREASURY N/B912828V72 8,375.350.00 0.0003/27/2017 01/31/2022 2,940,000.00

03/24/2017 US TREASURY N/B912828V98 3,691.990.00 0.0003/27/2017 02/15/2027 1,485,000.00

03/24/2017 US TREASURY N/B912828V56 948.640.00 0.0003/27/2017 01/31/2019 555,000.00

03/24/2017 US TREASURY N/B912828H86 2,142.270.00 0.0003/27/2017 01/31/2022 940,000.00

03/24/2017 US TREASURY N/B912810RV2 1,359.120.00 0.0003/27/2017 02/15/2047 410,000.00


03/27/2017 ALTRIA GROUP INC02209SAD5 -3,583.610.00 0.0003/30/2017 11/10/2018 95,000.00

03/27/2017 LA DWP544525NZ7 -1,485.310.00 0.0003/30/2017 07/01/2039 100,000.00

03/27/2017 US TREASURY N/B912810RV2 226.240.00 0.0003/29/2017 02/15/2047 65,000.00

03/27/2017 US TREASURY N/B912828W30 -410.870.00 0.0003/28/2017 02/28/2019 480,000.00

03/28/2017 AETNA INC00817YAV0 824.440.00 0.0003/31/2017 06/15/2023 100,000.00


03/29/2017 FARMERS EXCHANGE CAP II30958PAA1 2,077.670.00 0.0004/03/2017 11/01/2053 80,000.00

03/29/2017 US TREASURY N/B912810RV2 -175.280.00 0.0004/03/2017 02/15/2047 45,000.00

03/29/2017 US TREASURY N/B912828V72 1,306.800.00 0.0003/30/2017 01/31/2022 435,000.00

03/30/2017 US TREASURY N/B912828V72 809.820.00 0.0003/31/2017 01/31/2022 265,000.00

28




As of 03/31/2017



FaceRealized


NetAmount

OriginalFacePrice

Currency: US Dollar

Settle DateMaturity

Date


03/31/2017 US TREASURY N/B912828V98 -102.240.00 0.0004/03/2017 02/15/2027 35,000.00

0.0047,609.35TOTAL INTEREST - BUY & SELL

INTEREST - MORTGAGE COUPON

03/05/2017 BBCMS 2013-TYSN A205529SAC3 125.2140,000.00 0.0003/06/2017 09/05/2032 40,000.00

03/05/2017 SFAVE 2015-5AVE A178413MAA6 145.2045,000.00 0.0003/06/2017 01/05/2043 45,000.00

03/09/2017 NGN 2010-R1 1A62888VAA6 112.68106,677.42 0.0003/09/2017 10/07/2020 360,000.00

03/09/2017 NGN 2010-R2 1A62888UAA8 74.4775,420.43 0.0003/09/2017 11/06/2017 350,000.00

03/10/2017 BAMLL 2012-PARK A05524UAA7 98.6340,000.00 0.0003/10/2017 12/10/2030 40,000.00

03/10/2017 COMM 2013-300P A112625XAA5 145.1040,000.00 0.0003/10/2017 08/10/2030 40,000.00

03/10/2017 COMM 2014-277P A12592FAA3 120.3840,000.00 0.0003/10/2017 08/10/2049 40,000.00

03/10/2017 GSMS 2012-ALOH A36192HAA2 118.3740,000.00 0.0003/10/2017 04/10/2034 40,000.00

03/12/2017 DBRR 2011-LC2 A4A23305UAA5 207.9555,000.00 0.0003/13/2017 07/12/2044 55,000.00

03/13/2017 RBSCF 2013-GSP A74932QAA8 143.7645,000.00 0.0003/13/2017 01/13/2032 45,000.00

03/15/2017 BACCT 2007-A11 A1105522RBG2 71.87110,000.00 0.0003/15/2017 12/15/2019 110,000.00

03/15/2017 FG A615273128KRVU5 202.2648,542.52 0.0003/15/2017 07/01/2036 520,000.00

03/15/2017 FG E0125231294KL94 3.45690.02 0.0003/15/2017 11/01/2017 400,000.00

03/15/2017 FG G063613128M8MJ0 338.38101,513.41 0.0003/15/2017 03/01/2041 210,000.00

03/15/2017 FG G079243128MAD55 733.12251,354.15 0.0003/15/2017 01/01/2045 320,000.00

03/15/2017 FG G086773128MJXF2 545.66163,696.77 0.0003/15/2017 11/01/2045 210,000.00

03/15/2017 FG G086813128MJXK1 547.21187,615.74 0.0003/15/2017 12/01/2045 225,000.00

03/15/2017 FG G086983128MJX47 490.45168,155.67 0.0003/15/2017 03/01/2046 195,000.00

03/15/2017 FG G086993128MJX54 435.09130,526.65 0.0003/15/2017 03/01/2046 155,000.00

03/15/2017 FG G087023128MJX88 1,067.80366,100.80 0.0003/15/2017 04/01/2046 410,000.00

03/15/2017 FG G087063128MJYC8 93.3231,995.66 0.0003/15/2017 05/01/2046 35,000.00

03/15/2017 FG G087113128MJYH7 557.99191,310.85 0.0003/15/2017 06/01/2046 205,000.00

03/15/2017 FG G087153128MJYM6 882.31352,925.81 0.0003/15/2017 08/01/2046 365,000.00

03/15/2017 FG G087163128MJYN4 652.23223,622.87 0.0003/15/2017 08/01/2046 235,000.00

29




As of 03/31/2017



FaceRealized


NetAmount

OriginalFacePrice

Currency: US Dollar

Settle DateMaturity

Date


03/15/2017 FG G087213128MJYT1 389.68155,872.92 0.0003/15/2017 09/01/2046 160,000.00

03/15/2017 FG G087223128MJYU8 492.58168,883.97 0.0003/15/2017 09/01/2046 175,000.00

03/15/2017 FG G087263128MJYY0 490.97196,388.88 0.0003/15/2017 10/01/2046 200,000.00

03/15/2017 FG G087323128MJY61 604.50241,799.01 0.0003/15/2017 11/01/2046 245,000.00

03/15/2017 FG G087473128MJZM5 810.59324,234.80 0.0003/15/2017 02/01/2047 325,000.00

03/15/2017 FG G123993128M1RU5 117.1123,421.53 0.0003/15/2017 09/01/2021 795,000.00

03/15/2017 FG G185923128MMUS0 214.3285,727.17 0.0003/15/2017 03/01/2031 100,000.00

03/15/2017 FG G186223128MMVQ3 807.19387,450.87 0.0003/15/2017 12/01/2031 395,000.00

03/15/2017 FG G6027831335AJX7 317.2695,177.92 0.0003/15/2017 10/01/2045 110,000.00

03/15/2017 FG Q052613132GLQN7 287.8298,679.46 0.0003/15/2017 12/01/2041 165,000.00

03/15/2017 FG Q201783132JMFT1 471.32161,595.57 0.0003/15/2017 07/01/2043 220,000.00

03/15/2017 FHR 2368 AS31339GNQ0 218.1313,829.31 0.0003/15/2017 10/15/2031 500,000.00

03/15/2017 FHR 2433 SA3133TVPR1 368.5223,363.46 0.0003/15/2017 02/15/2032 275,000.00

03/15/2017 FHR 2642 BW31393VW64 38.759,299.93 0.0003/15/2017 06/15/2023 520,000.00

03/15/2017 FHR 2684 ZN31394L5S7 225.5567,665.75 0.0003/15/2017 10/15/2033 190,000.00

03/15/2017 GN 37646336204QFC9 11.592,139.61 0.0003/15/2017 04/15/2024 341,247.00

03/15/2017 GN 78003536225ABC3 9.191,697.30 0.0003/15/2017 07/15/2024 199,051.00

03/15/2017 GN 78281836241LDX1 663.39176,903.27 0.0003/15/2017 11/15/2039 430,000.00

03/15/2017 HAROT 2014-3 A343814HAC2 23.7932,442.00 0.0003/15/2017 06/15/2018 115,000.00

03/15/2017 HENDR 2013-3A A46617LAA9 208.0561,191.64 0.0003/15/2017 01/17/2073 75,000.00

03/15/2017 HENDR 2014-2A A46618AAA2 237.0378,789.58 0.0003/15/2017 01/17/2073 90,000.00

03/15/2017 JPMCC 2011-C3 A346635TAK8 671.47183,642.33 0.0003/15/2017 02/15/2046 210,000.00

03/15/2017 MDST 2004-1 B59560UAD3 858.61115,767.39 0.0003/15/2017 08/15/2037 400,000.00

03/15/2017 NAROT 2015-C A2A65478AAB9 36.5850,450.90 0.0003/15/2017 11/15/2018 115,000.00

03/15/2017 OBP 2010-OBP A67087MAA4 154.8740,000.00 0.0003/15/2017 07/15/2045 40,000.00

03/15/2017 SLMA 2003-11 A6 (RRN)78442GJS6 471.20110,000.00 0.0003/15/2017 12/15/2025 110,000.00

03/15/2017 WFRBS 2011-C4 A392936CAE9 422.45115,371.99 0.0003/15/2017 06/15/2044 165,000.00

30




As of 03/31/2017



FaceRealized


NetAmount

OriginalFacePrice

Currency: US Dollar

Settle DateMaturity

Date


03/15/2017 WFRBS 2012-C6 A492936QAG3 587.67205,000.00 0.0003/15/2017 04/15/2045 205,000.00

03/16/2017 GNR 2009-66 XS38376FLM2 649.67129,287.87 0.0003/16/2017 07/16/2039 1,350,000.00

03/16/2017 GNR 2009-8 PS38374TDP6 714.08154,954.20 0.0003/16/2017 08/16/2038 995,000.00

03/17/2017 SEACO 2014-1A A237952UAE3 162.3363,041.67 0.0003/17/2017 07/17/2029 85,000.00

03/20/2017 BAFC 2004-A 1A306051GAX7 53.3621,069.76 0.0003/20/2017 09/20/2034 660,000.00

03/20/2017 G2 MA352136179R4E6 427.13146,445.69 0.0003/20/2017 03/20/2046 180,000.00

03/20/2017 G2 MA359736179R7J2 500.03171,440.28 0.0003/20/2017 04/20/2046 200,000.00

03/20/2017 G2 MA366336179SB89 169.0057,944.23 0.0003/20/2017 05/20/2046 65,000.00

03/20/2017 G2 MA393736179SLS4 434.55148,990.22 0.0003/20/2017 09/20/2046 155,000.00

03/20/2017 G2 MA406936179SQW0 705.65241,936.02 0.0003/20/2017 11/20/2046 245,000.00

03/20/2017 G2 MA419536179SUU9 735.92294,367.58 0.0003/20/2017 01/20/2047 295,000.00

03/20/2017 GNR 2001-22 SO38373RBR9 273.8517,836.67 0.0003/20/2017 05/20/2031 1,707,394.00

03/21/2017 HAROT 2015-4 A243814LAB5 32.3647,349.80 0.0003/21/2017 07/23/2018 115,000.00

03/21/2017 MARM 2004-13 3A7A576433WL6 491.47193,343.41 0.0003/21/2017 11/21/2034 555,000.00

03/25/2017 BSARM 2004-10 14A107384M4F6 405.42140,600.92 0.0003/27/2017 01/25/2035 1,530,000.00

03/25/2017 CRMSI 2007-1 A5173109AE9 1,415.86300,000.00 0.0003/27/2017 03/25/2037 300,000.00

03/25/2017 FHMS K151 A33137BKGK0 277.9595,000.00 0.0003/27/2017 04/25/2030 95,000.00

03/25/2017 FN 46717331381P6J2 684.71189,727.81 0.0003/27/2017 01/01/2021 205,000.00

03/25/2017 FN 65592831390TVV8 219.6837,660.19 0.0003/27/2017 08/01/2032 765,000.00

03/25/2017 FN 73564631402RHX0 91.5424,411.55 0.0003/27/2017 07/01/2020 900,000.00

03/25/2017 FN 84103131407ULL9 2.37853.77 0.0003/27/2017 11/01/2035 380,000.00

03/25/2017 FN 91844531411YL27 66.4714,480.59 0.0003/27/2017 05/01/2037 705,000.00

03/25/2017 FN AB161331416WYK2 421.61126,482.23 0.0003/27/2017 10/01/2040 305,000.00

03/25/2017 FN AD383031418RHG9 316.7684,468.04 0.0003/27/2017 04/01/2025 390,000.00

03/25/2017 FN AE013431419AEG8 413.99121,000.00 0.0003/27/2017 02/01/2020 121,000.00

03/25/2017 FN AL01493138EGEX8 450.98135,293.17 0.0003/27/2017 02/01/2041 290,000.00

03/25/2017 FN AL09053138EHAF9 576.62191,026.10 0.0003/27/2017 09/01/2021 210,000.00

31




As of 03/31/2017



FaceRealized


NetAmount

OriginalFacePrice

Currency: US Dollar

Settle DateMaturity

Date


03/25/2017 FN AL90273138ERA59 364.33109,299.55 0.0003/27/2017 09/01/2046 130,000.00

03/25/2017 FN AL95493138ERTF7 719.61215,883.67 0.0003/27/2017 09/01/2046 225,000.00

03/25/2017 FN AM65583138L7JC1 290.76101,036.52 0.0003/27/2017 09/01/2034 105,000.00

03/25/2017 FN AM67613138L7QP4 213.9077,034.05 0.0003/27/2017 10/01/2029 80,000.00

03/25/2017 FN AM71153138L73Z7 204.6277,377.00 0.0003/27/2017 11/01/2026 80,000.00

03/25/2017 FN AM81883138L9C26 158.5377,205.58 0.0003/27/2017 03/01/2027 80,000.00

03/25/2017 FN AM91733138LAFP9 188.5177,932.56 0.0003/27/2017 06/01/2027 80,000.00

03/25/2017 FN AM95363138LAS26 203.1378,194.57 0.0003/27/2017 08/01/2030 80,000.00

03/25/2017 FN AN03353138LCLR4 210.9380,000.00 0.0003/27/2017 01/01/2031 80,000.00

03/25/2017 FN AN11613138LDJF1 201.6485,000.00 0.0003/27/2017 04/01/2028 85,000.00

03/25/2017 FN AN18353138LEBD2 167.5985,000.00 0.0003/27/2017 07/01/2028 85,000.00

03/25/2017 FN AX25723138Y32E0 807.51242,253.05 0.0003/27/2017 11/01/2044 375,000.00

03/25/2017 FN MA140431418AR26 540.73185,393.83 0.0003/27/2017 04/01/2043 245,000.00

03/25/2017 FN MA149031418AUQ9 673.99269,597.44 0.0003/27/2017 07/01/2033 405,000.00

03/25/2017 FN MA158431418AXN3 169.2358,022.76 0.0003/27/2017 09/01/2033 100,000.00

03/25/2017 FN MA160831418AYE2 749.94257,122.36 0.0003/27/2017 10/01/2033 430,000.00

03/25/2017 FN MA277631418CCN2 413.67198,562.20 0.0003/27/2017 10/01/2026 210,000.00

03/25/2017 FNA 2014-M12 FA3136ALHU8 52.5563,057.37 0.0003/27/2017 10/25/2021 245,000.00

03/25/2017 FNR 2001-52 YZ313921MN5 330.1460,948.30 0.0003/27/2017 10/25/2031 575,000.00

03/25/2017 MARM 2004-5 3A1576433MW3 2.381,758.98 0.0003/27/2017 06/25/2034 505,000.00

03/25/2017 MSSTR 2004-1 4A155265WBD4 31.4012,023.36 0.0003/27/2017 10/25/2032 550,000.00

03/25/2017 RALI 2003-QS3 A476110G6D8 74.5816,271.36 0.0003/27/2017 02/25/2018 1,100,000.00

03/25/2017 RAMP 2004-SL1 A8760985W98 93.7117,300.76 0.0003/27/2017 11/25/2031 675,000.00

03/25/2017 RAST 2004-IP2 2A145660LAP4 76.3128,526.72 0.0003/27/2017 12/25/2034 535,000.00

03/25/2017 WAMU 2005-AR8 2A1A92922FR75 149.53179,961.86 0.0003/27/2017 07/25/2045 2,000,000.00

03/27/2017 CITEL 2007-1 A17284LAA2 163.2160,056.14 0.0003/27/2017 03/25/2042 150,000.00

03/27/2017 CMLTI 2007-WFH1 A417311CAU5 57.8976,077.69 0.0003/27/2017 01/25/2037 100,000.00

32




As of 03/31/2017



FaceRealized


NetAmount

OriginalFacePrice

Currency: US Dollar

Settle DateMaturity

Date


03/27/2017 CWHL 2005-9 1A112669GYY1 113.29105,677.45 0.0003/27/2017 05/25/2035 1,000,000.00

03/27/2017 CWL 2007-13 2A1126698AC3 197.72151,467.77 0.0003/27/2017 10/25/2047 400,000.00

03/27/2017 GCOE 2006-2AR A1RN36156YAW1 111.58100,439.48 0.0003/27/2017 08/27/2046 130,000.00

03/27/2017 INDX 2005-AR18 2A1A45660LWD7 235.41278,107.11 0.0003/27/2017 10/25/2036 1,300,000.00

03/27/2017 INDX 2007-FLX2 A1C45668RAC2 242.42321,880.76 0.0003/27/2017 04/25/2037 320,000.00

03/27/2017 NAVSL 2014-2 A63938GAA7 197.77179,277.35 0.0003/27/2017 03/25/2083 230,000.00

03/27/2017 NAVSL 2014-4 A63938QAA5 154.26141,839.71 0.0003/27/2017 03/25/2083 185,000.00

03/27/2017 NCHET 2005-3 M264352VLK5 215.08218,028.78 0.0003/27/2017 07/25/2035 250,000.00

03/27/2017 NSLT 2012-5A A64033BAA0 159.35148,645.53 0.0003/27/2017 10/27/2036 270,000.00

03/27/2017 NSLT 2014-4A A264033MAB4 154.59115,000.00 0.0003/27/2017 11/25/2048 115,000.00

03/27/2017 NSLT 2015-2A A264033QAB5 184.40172,009.43 0.0003/27/2017 09/25/2047 200,000.00

03/27/2017 OOMLT 2005-4 M168389FJH8 265.33280,000.00 0.0003/27/2017 11/25/2035 280,000.00

03/27/2017 POPLR 2006-C A473316MAD9 171.63214,583.72 0.0003/27/2017 07/25/2036 243,000.00

0.0038,529.58TOTAL INTEREST - MORTGAGE COUPON

INTEREST - NON MORTGAGE COUPON

03/01/2017 AMERICAN TRANSMISSION SY030288AB0 3,125.00125,000.00 0.0003/01/2017 09/01/2044 125,000.00

03/01/2017 CA ST-TXBL13063BFS6 1,662.5050,000.00 0.0003/01/2017 03/01/2022 50,000.00

03/01/2017 HCP INC40414LAK5 1,365.0065,000.00 0.0003/01/2017 03/01/2024 65,000.00

03/01/2017 JPMORGAN CHASE & CO46623EKD0 850.00100,000.00 0.0003/01/2017 03/01/2018 100,000.00

03/01/2017 NEXTERA ENERGY CAPITAL65339KAJ9 1,253.24152,000.00 0.0003/01/2017 09/01/2018 152,000.00

03/04/2017 WELLS FARGO & COMPANY949746RS2 1,062.5085,000.00 0.0003/06/2017 03/04/2021 85,000.00

03/07/2017 GENERAL ELEC CAP CORP36962G6F6 3,543.75225,000.00 0.0003/07/2017 09/07/2022 225,000.00

03/15/2017 ACTAVIS FUNDING SCS00507UAS0 950.0050,000.00 0.0003/15/2017 03/15/2025 50,000.00

03/15/2017 ALABAMA ECON SETTLEME01026CAC5 830.29105,000.00 0.0003/15/2017 09/15/2025 105,000.00

03/15/2017 BIOGEN INC09062XAD5 1,768.0068,000.00 0.0003/15/2017 09/15/2045 68,000.00

03/15/2017 CONTL AIRLINES 1999-2210805CT2 5,224.22143,997.22 0.0003/15/2017 03/15/2020 512,000.00

03/15/2017 ENERGY TRANSFER PARTNERS29273RBF5 3,218.75125,000.00 0.0003/15/2017 03/15/2045 125,000.00

33




As of 03/31/2017



FaceRealized


NetAmount

OriginalFacePrice

Currency: US Dollar

Settle DateMaturity

Date

INTEREST - NON MORTGAGE COUPON

03/15/2017 NATIONWIDE MUTUAL INSURA638671AJ6 854.03105,000.00 0.0003/15/2017 12/15/2024 105,000.00

03/15/2017 ORACLE CORP68389XBL8 1,405.3385,000.00 0.0003/15/2017 09/15/2023 85,000.00

03/15/2017 TUCSON ELECTRIC POWER CO898813AL4 4,331.25225,000.00 0.0003/15/2017 03/15/2023 225,000.00

03/15/2017 VERIZON COMMUNICATIONS92343VBR4 2,317.5090,000.00 0.0003/15/2017 09/15/2023 90,000.00

03/15/2017 WILLIAMS PARTNERS LP96949LAA3 936.0052,000.00 0.0003/15/2017 03/15/2022 52,000.00

03/23/2017 SHIRE ACQ INV IRELAND DA82481LAA7 950.00100,000.00 0.0003/23/2017 09/23/2019 100,000.00

03/30/2017 ONCOR ELECTRIC DELIVERY68233JAH7 2,625.00100,000.00 0.0003/30/2017 09/30/2040 100,000.00

0.0038,272.36TOTAL INTEREST - NON MORTGAGE COUPON

INTEREST - STIF

03/01/2017 STIF INTERESTSTIF99999 322.270.00 0.0003/01/2017 12/31/2030 0.00

0.00322.27TOTAL INTEREST - STIF

CONTRIBUTIONS/WITHDRAWALS - CASH

03/27/2017 WITHDRAWALN/A -9,665,000.000.00 0.0003/27/2017 0.00

0.00-9,665,000.00TOTAL CONTRIBUTIONS/WITHDRAWALS - CASH

MISCELLANEOUS

03/06/2017 NGN 2010-R2 1A62888UAA8 30.160.00 0.0003/06/2017 11/06/2017 0.00

0.0030.16TOTAL MISCELLANEOUS

-66,179.03TOTALS 247,028.16

34

Metropolitan West Asset Management, LLC, TCW Asset Management Company LLC, and TCW Investment Management Company LLC are wholly owned subsidiaries of TheTCW Group Inc. (“TCW”).

This statement was prepared as a private communication to clients regarding an account with TCW, and is not intended for public circulation. Clients may authorize TCW inwriting to distribute this statement to their consultants or other agents. TCW manages a number of separate strategies, and the holdings in each separate strategy may differdepending on the portfolio manager’s views or analysis with respect to a particular company, security or the economy.

As part of the respective investment process, some TCW equity strategies have a defined range or maximum number of securities for the portfolio. The number of securitiesreflected in this statement may be over or under the range or maximum number due to open orders.

Nothing in this statement constitutes investment, legal, accounting, or tax advice, or a representation that any investment strategy is suitable or appropriate to therecipient’s individual circumstances. This statement is not to be relied upon for investment decisions by the client, or as a substitute for the exercise of independentjudgment by its recipient.

This statement is provided to its recipient as an indication of the holdings of the client’s account as of the date the statement was generated. This statement should not berelied upon to make investment decisions with respect to holdings of the portfolio. TCW may in fact be currently recommending the purchase of a security or the sale of asecurity regardless of any statement made in this document about that security and whether it is held in the client portfolio.

Important Information Regarding Risk FactorsInvestment strategies may not achieve the desired results due to implementation lag, other timing factors, portfolio management decision-making, economic or marketconditions or other unanticipated factors. The price and value of any of the securities or financial instruments mentioned in this statement are subject to variability and canfall as well as rise. Past performance is no guarantee of future results.

Important Information Regarding Client ResponsibilitiesClients are requested to carefully review all portfolio holdings and strategies and to promptly inform TCW of any potential or perceived policy or guideline inconsistencies. Inparticular, TCW understands that guideline enabling language is subject to a measure of interpretation and TCW strongly encourages clients to express any contrastinginterpretation as soon as practical. Due to changing industry standards and the wide variety of interpretations to which a client guideline may be subjected, there can be noassurance that TCW’s interpretation will conform to that of clients or their consultants. TCW Client Services can be reached by calling (213) 244-0810, or [email protected].

Clients are also requested to notify TCW of any updates to Client’s organization, such as (but not limited to) adding affiliates (including broker dealer affiliates), issuingadditional securities, name changes, mergers or other alterations to Client’s legal structure.

Important Information Regarding This Report




As of 03/31/2017

© 2016 The TCW Group Inc. 35

Portfolio ReviewQuarter ending March 31, 2017

Prepared for Pasadena Fire and Police Ret. System

For financial professional use only. Not for inspection by, distribution or quotation to, the general public.

2Pasadena Fire and Police Ret. System Senior LoanFor financial professional or qualified institutional investor use only. Not for inspection by, distribution or quotation to, the general public.

Table of Contents1. Market Review

2. Investment Policy

3. Portfolio Review

4. Business Highlights

5. Appendix

Voya Team

Dan Norman, Group HeadSenior Loan Group

Sandy Sinor, Senior Vice PresidentInstitutional Client Advisor

Rosa V. Martone, Senior Client Service Manager & Business SupportInstitutional Client ServicePhone: (860) 275-4607Fax: (860) 907-8513E-mail: [email protected]

Web Access: https://www.investments.voya.com/ClientAccess


Market Review — First Quarter 2017The “reflation” trade which has led risk assets to gains year-to-date, at least domestically, has taken mild respite. Our investment themes still hold a positive bias toward equities but we have begun rotating away from our long-held U.S. equity position toward the emerging markets and Europe. Our central view is that the United States is in a renewed leg of an expansion, but growth is now more synchronized across the world. We think this may herald a significant period where the rest of the world plays catch-up to the strong returns the U.S. has delivered over the past five years.

On monetary policy, the Federal Reserve raised interest rates by 25 basis points at the March meeting and we expect two more interest hikes this year. Regarding fiscal policy, the recent failure of the Trump administration’s healthcare bill is a double edged-sword. On the negative side, the abrupt pulling of the bill may tarnish Trump’s reputation as a dealmaker and put into question his ability to pass other legislation, but the positive is the administration appears to be moving on to tax reform and infrastructure spending. It’s not surprising to see the stock market give up some of the almost 10% post-election gains on this stumble.

Politics will remain front and center for the financial markets. The Dutch general election in March served the first defeat to the populist movement in Europe, with Mark Rutte’s Party for Freedom and Democracy edging out Geert Wilders far-right Freedom Party. In France, the independent candidate Emmanuel Macron is currently favored over far right candidate Marine Le Pen to win in the second runoff ballot. Prime Minister Theresa May finally invoked Article 50 of the Lisbon treaty and officially began the negotiation period that will result in the U.K. leaving the European Union. However the negotiations proceed, the final judge is likely to be the currency markets. The pound bears close watching for signs of stress.

Fixed income investments surprised on the upside, with most major market sectors recording positive returns for the quarter. Investors anticipated the move up in interest rates and although the Fed hiked short term rates; global growth concerns, aging demographics and continued central bank accommodation have kept long rates in check. High yield bonds continued their run, up 2.7%; but the Barclays Global Aggregate Bond Index was up almost 2% in the first quarter, demonstrating the strength of global economies and balance sheets.

Ten-year U.S. Treasury yields have traded in a narrow range of 2.3–2.6% since December, retreating most recently to approximately 2.4%. The Treasury yield curve has flattened year-to-date yet remains considerably steeper than a year ago. High yield spreads have widened 45 basis points since briefly touching cyclical lows at the beginning of March. We see this as possibly an entry opportunity rather than a cautionary sign, as defaults still remain low and corporate health should improve as profits continue to grow.


Investment Policy

Mandate Senior Loan

Benchmark S&P/LSTA Leveraged Loan Index

Inception The investment management agreement between Voya Investment Management and Pasadena Fire and Police Ret. System was effective June 27, 2014.

Strategy Summary Actively managed, ultra-short duration floating-rate income strategy that invests primarily in privately syndicated, below IG senior secured corporate loans.

Process Our investment process focuses on fundamental credit analysis, relative value assessment and high levels of diversification. We invest primarily in non-investment grade senior loans because they generally offer attractive yields, are typically secured by borrower assets, and are not subject to traditional interest rate risk. We target non-investment grade senior loans with the objective of achieving superior long-term risk adjusted returns, rather than investing for the absolute highest returns at the expense of significantly increased credit risk. Our investment process utilizes top-down analysis to target industries with strong operating momentum or improving credit conditions, while avoiding those sectors prone to the clustering of defaults. The other major component of our process, specific borrower selection, is based on fundamental bottom-up credit analysis that includes independent credit research, in depth collateral review and relative value analysis.


Performance Analysis — First Quarter 2017

Key Takeaways

For the quarter, the Trust underperformed its benchmark, the S&P/LSTA Leveraged Loan Index, due largely to sector positioning.

Strong investor demand versus lagging loan supply continued to drive repricings in the market.

Riskier ratings cohorts outperformed the Index for the period.

Portfolio Review

Consistent with other risk markets, loan prices generally moderated over the course of the quarter. The S&P/LSTA Leveraged Loan Index (“Index”) generated a 1.15% total return, due solely to interest carry as the market price return declined 0.02% over the period. Single B and BB loans returned 1.14% and 0.66%, respectively, while CCC and defaulted loans returned 5.02% and 3.06%, respectively, with most of those outsized gains coming in the earlier part of the quarter.

The quarter saw a record level of activity in the loan market, with $169 billion in institutional issuance overtaking the previous record of $149 billion in the first quarter of 2013. Of this quarter’s issuance figure, $54 billion was a result of opportunistic refinancing activity by issuers who were able to take advantage of the market’s strong demand bias to reprice their debt lower and, in some cases, extend near-term maturities. Another $170 billion of straight repricings done via amendment brought the total repricing volume to a heady $225 billion in the quarter. Given the size of these figures, it’s important to note that the pace of this activity was most pronounced early in the quarter, with some slowing in March as market risk tolerance retreated a bit.

Digging beneath the surface of these rather large figures, we see that leveraged buyout (LBO) and merger and acquisition (M&A) related activity actually increased, both for the quarter and on a year-over-year basis. In fact, the $81 billion in total LBO and M&A volume was the most in nearly two years and, at an institutional issuance level, acquisition-related deals were at a nearly 10-year high. These are important markers of the health of loan market supply.

Continued on next page


Performance Analysis — First Quarter 2017

Despite a slow start to the year, as managers gingerly treaded into the waters of the new risk retention regime, collateralized loan obligations (CLOs) issued $17.4 billion of new vehicles. Additionally, Lipper’s calculation of weekly reporters showed $11.4 billion of inflows into loan funds and exchange traded funds, besting the fourth quarter’s $9.6 billion.

The Trust in the first quarter returned 0.85% on a gross basis, 30 basis points behind the Index.

Underperformance was primarily due to the Trust’s overweight and selection in the retail sector and an underweight to oil & gas. Retail issuers have continued to face headwinds, particularly for mall-related and “fast fashion” types of business models. While we do expect restructuring activity to increase across this sector over time, at this juncture we do not envision additional material deterioration in market values for the majority of the Trust’s retail exposure. Nonetheless, upside catalysts remain a bit elusive at this stage and, consequently, overall investor sentiment as it pertains to retail risk is likely to remain somewhat bearish for the foreseeable future. Oil & gas, conversely, was a strong contributor to the Index during the quarter, although we will note that reversed in March when broad investor comfort with prospects within this general sector shifted on both the give-back in crude and natural gas prices and developing uncertainty around the Trump Administration’s agenda. The portfolio’s selection in the business equipment & service and telecommunications sectors contributed to returns.

There were no defaults in the Trust during the quarter, as compared to three defaults for the Index. The default rate by principal amount for the Index increased to 1.49% as of March 31. Over the period of September 2008 through March 2017, the Trust has avoided approximately 92% of the defaults within the Index.

Current Strategy and Outlook

Looking forward, we believe that market value returns will continue to be flat to slightly down in the near term, as refinancing activity continues to be a noticeable – albeit slowing – catalyst for spread compression and adjusted pricing. With investor demand not expected to retreat in the new rising rate environment—and with no material new issuance ramp up in the forecast—we believe the asset class as a whole should continue to provide positive, if not dramatically so, total returns. More importantly, we think that gross yields should hold relatively steady until the next Federal Reserve rate hike, which could come as soon as May.


*Inception Date is June 27, 2014. The ending balance shown above may differ from the total market value on the Portfolio Holdings Report due to cash flow posted at close of business on the last day of the quarter.

Portfolio AccountingQuarter Ending March 31, 2017

First Quarter 2017 Since Inception*

Beginning Balance $7,971,156.71 $0.00

Net Contributions 806,163.88 8,032,842.05

Investment Return 67,647.15 812,125.69

Ending Balance $8,844,967.74 $8,844,967.74


Performance SummaryQuarter Ending March 31, 2017

*Inception date of the account: June 27, 2014. Performance measurement inception date: July 1, 2014. Past Performance is no guarantee of future results.See Explanatory Notes Section for footnotes and disclosures.

Quarter 1 Year Since Inception*

Quarter 1 Year Since InceptionPortfolio Gross (%) 0.85 7.75 3.97 Portfolio Net (%) 0.73 7.23 3.47 Benchmark (%) 1.15 9.72 3.38 Relative to Gross (%) (0.30) (1.97) 0.59

0.85

7.75

3.97

1.15

9.72

3.38

0

2

4

6

8

10

12

Rate

s of

Ret

urn

(%)

Portfolio Gross S&P/LSTA Leveraged Loan

Annualized

Annualized

Calendar Year Returns 2016 2015Portfolio Gross (%) 8.52 1.39Portfolio Net (%) 7.98 0.88Benchmark(%) 10.16 (0.69)


Quarter Ending March 31, 2017

Portfolio Characteristics

See Explanatory Notes Section for footnotes and disclosures.

6.1

10.5

21.8

32.9

20.7

3.7 3.9

0.3

9.5

13.0

20.6 19.6

27.9

5.1 4.1

0.30

5

10

15

20

25

30

35

Ba1 or

Above

Ba2 Ba3 B1 B2 B3 Caa1 or

Below

Not

Rated

Ratings Distribution (Senior Secured Ratings)

Moody's

S&P

0.6 2.9

20.6

48.9

18.1

8.7

0.20

10

20

30

40

50

60

L+0 -

L+200

L+201 -

L+249

L+250 -

L+299

L+300 -

L+399

L+400 -

L+499

L+500 or

More

Prime

Spread

Spread Distribution (LIBOR + bps)

Portfolio CharacteristicsNumber of Industries 36Average per Industry $42,897,515Average per Industry as a % of AUM 2.78%Number of Issuers 330Average per Issuer $4,679,728Average per Issuer as a % of AUM 0.30%Weighted Average Spread 3.56%Weighted Average Maturity (years) 5.31Weighted Average Market Price 99.43%Leverage for Investment Purposes (%) 0.00%


Quarter Ending March 31, 2017

Asset Allocation

See Explanatory Notes Section for footnotes and disclosures.

Top Issuers ($ millions) Market Value % of AUMUnivision Communications, Inc. $19.4 1.26%Asurion, LLC $18.9 1.22%Dell International LLC $14.6 0.95%SFR Group SA (Numericable) $14.4 0.93%Avolon Holdings Limited $13.6 0.88%Advantage Sales & Marketing, Inc. $13.1 0.85%Albertsons LLC $12.5 0.81%First Data Corporation $11.8 0.77%Communications Sales & Leasing, Inc. $11.4 0.74%American Axle & Manufacturing, Inc. $11.1 0.72%

Sector Breakdown ($ millions) Market Value % of AUMElectronics/Electrical $202.0 13.08%Health Care $200.7 13.00%Telecommunications $97.8 6.33%Business Equipment & Services $94.5 6.12%Automotive $80.1 5.19%Cable & Satellite Television $77.9 5.05%Diversified Insurance $77.7 5.03%Retailers (Except Food & Drug) $77.5 5.02%Chemicals & Plastics $59.5 3.85%Lodging & Casinos $57.7 3.74%

13%

13%

6%

6%5% 5%

5%

5%

4%

4%

3%

3%

3%3%

3%

19%

Electronics/Electrical, 13%Health Care, 13%Telecommunications, 6%Business Equipment & Services, 6%Automotive, 5%Cable & Satellite Television, 5%Diversified Insurance, 5%Retailers (Except Food & Drug), 5%Chemicals & Plastics, 4%Lodging & Casinos, 4%Utili ties, 3%Radio & Television, 3%Containers & Glass Products, 3%Food Products, 3%Leisure Goods/Activities/Movies, 3%Other, 19%


1Q17 Business HighlightsVoya Personnel Update

Thought Leadership

Charlie Shaffer Joins Voya Investment Management as Head of Institutional Distribution

NEW YORK, March 27, 2017 /PRNewswire/ -- Voya Investment Management, the asset management business of Voya Financial, Inc. (NYSE: VOYA), announced today that Charlie Shaffer has joined the firm as a managing director and head of Institutional Distribution. Based in New York, Shaffer oversees all aspects of Voya Investment Management's institutional business including setting the strategic direction across U.S. and international sales, consultant relations, request for proposals, client service and relationship management. Shaffer reports to Shaun Mathews, senior managing director, head of the Client Group and is a part of the Management Committee of Voya Investment Management (IM).

Voya IM launches new blog that provides regular access to our most compelling insights across investment platforms. Subscribe to learn more:https://investments.voya.com/Institutional/Research-Insights/Blog

Recent white papers and market insight articles on a variety of investment topics and market events include: https://investments.voya.com/Institutional/Research-Insights

► A Holistic Approach to Target Date Design

► 2017 Capital Market Assumptions

► 2017 Senior Bank Loan Outlook

► Fixed Income Perspectives - The Ides of Accommodative Policy? Not so Fast

► Volatility Controlled Alpha: 2016 Performance Highlights

If you would like to receive any of our thought leadership, please contact your client service representative or visit our website: www.voyainvestments.com

Upcoming Events May 11 – 12 : Institutional Investor Conference

► Topic: Redefining Fixed Income

► Panelist: Ralph Divino – Client Portfolio Manager

May 29: P&I Smart Beta Webinar

► Panelist: Vincent Costa, CFA – Head of Global Equities

Departures

Lloyd Flood VP, Senior Portfolio Manager, Insurance

Steven Rayner SVP, Research Analyst, Equity

Christopher Whitworth Portfolio Manager, Real Estate

Additions

David Huey Assistant Portfolio Manager, Real Estate

Gregory Wachsman VP, Research Analyst, Equity


Appendix1. Holdings

2. Explanatory Notes


Borrower LoanX ID Tranche Market Value % Portfolio Maturity Spread (%)

S&P Rating

Price

Aerospace & Defense

AVOLON HOLDINGS LIMITED LX158981 TL B-2 $13,562,257.04 0.87 % 01/20/2022 2.75 BBB- 101.51

GEO LX160943 TERM LOAN B $1,988,662.50 0.13 % 03/21/2024 2.25 BB+ 100.44

TRANSDIGM, INC. LX153128 NEW TERM LOAN F $2,980,317.93 0.19 % 06/09/2023 3 B 99.66

DIGITALGLOBE INC. LX157687 TERM LOAN B $7,485,474.42 0.48 % 01/15/2024 2.75 BB+ 100.46

$26,016,711.89 1.67 %

Automotive

AMERICAN AXLE & MANUFACTURING, INC. LX161296 TERM LOAN B $7,020,419.00 0.45 % 03/08/2024 2.25 BB 100.29

AMERICAN AXLE & MANUFACTURING, INC. LX161296 TERM LOAN B $4,086,886.78 0.26 % 03/08/2024 2.25 BB 100.29

AVIS BUDGET CAR RENTAL, LLC LX161045 TERM LOAN B $3,477,578.02 0.22 % 03/15/2022 2 BBB- 100.33

BBB INDUSTRIES US HOLDINGS, INC. LX141345 FIRST LIEN TERM LOAN $1,981,555.13 0.13 % 11/03/2021 5 B 100.84

CHRYSLER GROUP LLC LX135335 NEW TERM LOAN $5,021,470.00 0.32 % 12/31/2018 2.5 BBB- 100.43

DEALER TIRE, LLC LX155862 TERM LOAN B $1,979,208.01 0.13 % 12/22/2021 3.75 B 101.23

DYNACAST INTERNATIONAL LLC LX144577 UPSIZED FIRST LIEN TERM LOAN $4,232,756.59 0.27 % 01/28/2022 3.5 B 99.37

DYNACAST INTERNATIONAL LLC LX161902 2017 FIRST LIEN TERM LOAN $1,683,375.00 0.11 % 01/28/2022 3.25 B 100.50

FEDERAL-MOGUL CORPORATION LX136189 TERM LOAN C $7,204,609.68 0.46 % 04/15/2021 3.75 B- 99.81

GATES GLOBAL LLC LX137851 FIRST LIEN SECURED TERM LOAN $9,418,667.68 0.60 % 07/05/2021 3.25 B+ 100.31

HERTZ CORPORATION (THE) LX153003 TERM LOAN B $5,995,531.79 0.38 % 06/30/2023 2.75 BB 100.30

KAR AUCTION SERVICES, INC. LX151490 TERM LOAN B-3 $4,980,744.47 0.32 % 03/09/2023 3.5 BB- 101.33

KEY SAFETY SYSTEMS, INC. LX138594 UPSIZED FIRST LIEN TERM LOAN $4,279,705.11 0.27 % 08/29/2021 4.5 B+ 101.25

LUMILEDS LX161397 TERM LOAN B $3,037,500.00 0.19 % 04/15/2024 4.5 B+ 101.25

METALDYNE PERFORMANCE GROUP LX144529 TERM LOAN B $3,486,637.63 0.22 % 10/20/2021 2.75 BB+ 100.31

NN, INC. LX155280 UPSIZED TERM LOAN B $2,349,094.82 0.15 % 10/19/2022 4.25 B+ 100.17

SERVICE KING LX148738 2017 TERM LOAN B $4,032,611.24 0.26 % 08/18/2021 2.75 B 100.56

Holdings ReportPeriod Ending March 31, 2017



S&P Rating

Price

TI GROUP AUTOMOTIVE SYSTEMS, L.L.C. LX145315 UPSIZED USD TERM LOAN B $4,864,665.97 0.31 % 06/30/2022 2.75 BB- 100.69

CALIBER COLLISION LX159381 DELAYED DRAW TL $85,726.07 0.01 % 01/31/2024 3 B+ 100.85

CALIBER COLLISION LX159380 FIRST LIEN TERM LOAN $857,260.70 0.05 % 01/31/2024 3 B+ 100.85

$80,076,003.66 5.13 %

Beverage & Tobacco

JACOBS DOUWE EGBERTS LX138201 TL B USD $4,463,469.26 0.29 % 07/02/2022 2.5 BB 100.71

$4,463,469.26 0.29 %

Building & Development

AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC. LX155174 TERM LOAN B $2,816,485.02 0.18 % 10/31/2023 2.75 BB+ 100.56

DOOSAN INFRACORE BOBCAT HOLDINGS CO., LTD. LX137126 TERM LOAN B $5,553,212.44 0.36 % 05/28/2021 3.5 BB- 101.25

FORTERRA FINANCE, LLC LX155682 FIRST LIEN TERM LOAN $8,549,374.63 0.55 % 10/31/2023 3.5 B+ 100.94

HENRY COMPANY LLC LX154802 TERM LOAN B $1,922,494.22 0.12 % 10/05/2023 4.5 B 101.44

PLY GEM INDUSTRIES, INC. LX135000 TERM LOAN $1,980,782.94 0.13 % 02/01/2021 3 BB 100.61

QUIKRETE HOLDINGS LX155959 UPSIZED TERM LOAN B $6,675,446.76 0.43 % 11/15/2023 3.25 BB- 101.17

VENTIA SERVICE (FKA LEIGHTON) LX154539 UPSIZED TERM LOAN B $1,173,150.22 0.08 % 05/21/2022 4 BB+ 100.75

WILSONART LLC LX157636 TERM LOAN B $3,947,612.75 0.25 % 12/19/2023 3.5 B+ 100.83

ZEKELMAN INDUSTRIES, INC. (FKA JMC STEEL) LX152890 TERM LOAN B $2,216,280.41 0.14 % 06/14/2021 3.75 BB- 101.50

$34,834,839.39 2.23 %

Business Equipment & Services

NIELSEN COMPANY LX155255 TLB-3 USD $2,590,189.34 0.17 % 10/04/2023 2.5 BBB- 100.86

ACOSTA, INC. LX144231 NEW TERM LOAN B $4,774,030.64 0.31 % 09/26/2021 3.25 B 94.05

ADVANTAGE SALES & MARKETING, INC. LX138508 UPSIZED FIRST LIEN TERM LOAN $8,503,843.53 0.55 % 07/23/2021 3.25 B 99.11

ADVANTAGE SALES & MARKETING, INC. LX138509 SECOND LIEN TERM LOAN $4,631,250.00 0.30 % 07/25/2022 6.5 CCC+ 97.50

ALIXPARTNERS, LLP LX155476 TERM LOAN B $10,342,801.12 0.66 % 07/28/2022 3 B+ 100.79

CLARIVATE (F/K/A THOMSON REUTERS INTELLECTUAL PROPERTY & SCIENCE)

LX155002 1ST LIEN TERM LOAN $999,477.50 0.06 % 10/03/2023 3.75 BB- 100.45




S&P Rating

Price

CYXTERA TECHNOLOGIES, INC. LX161399 FIRST LIEN TERM LOAN $1,662,779.25 0.11 % 05/15/2024 3 B+ 100.77

DOCUMENT TECHNOLOGIES, INC. LX154767 TERM LOAN B $1,967,568.75 0.13 % 10/01/2023 5.25 B 98.63

EVO PAYMENTS LX156806 1L $3,642,188.40 0.23 % 12/22/2023 5 B 101.17

FIRST DATA CORPORATION LX155529 TERM LOAN 2021 USD $6,820,859.82 0.44 % 03/24/2021 3 BB 100.88

FIRST DATA CORPORATION LX158853 TERM LOAN A $5,022,729.30 0.32 % 06/02/2020 2 BB 100.46

IQOR LX135318 1ST LIEN TERM LOAN $2,428,432.77 0.16 % 04/01/2021 5 B 97.42

IQOR LX135320 2ND LIEN TERM LOAN $502,843.53 0.03 % 04/01/2022 8.75 CCC+ 89.00

LEGAL SHIELD LX129960 1L ADDITIONAL ADD ON $2,779,042.35 0.18 % 07/01/2019 5.25 BB- 101.04

LEGAL SHIELD LX129961 SECOND LIEN TERM LOAN $1,007,500.00 0.06 % 07/01/2020 9 B- 100.75

NEUSTAR, INC. LX160398 TERM LOAN B-2 $2,738,812.50 0.18 % 04/01/2024 3.75 BB 101.44

NEUSTAR, INC. LX160399 2ND LIEN TERM LOAN $834,796.88 0.05 % 04/01/2025 8 B- 101.19

ONSITE RENTAL GROUP OPERATIONS PTY LTD. LX139431 SENIOR SECURED TERM LOAN $1,791,562.50 0.11 % 07/30/2021 4.5 B- 73.50

SOLERA MANAGEMENT LX151194 USD INCREMENTAL B TERM LOAN $3,018,750.00 0.19 % 03/03/2023 3.25 B 100.63

SOLERA MANAGEMENT LX151194 USD INCREMENTAL B TERM LOAN $697,331.25 0.04 % 03/03/2023 3.25 B 100.63

SOURCEHOV LX141601 1ST LIEN TERM LOAN $4,461,538.97 0.29 % 10/31/2019 6.75 CCC+ 97.58

SOURCEHOV LX141603 2ND LIEN TERM LOAN $2,213,750.00 0.14 % 04/30/2020 10.5 CCC- 96.25

SURVEYMONKEY.COM, LLC LX128325 TERM LOAN B $2,692,465.67 0.17 % 02/07/2019 5 B- 100.06

VISTRA GROUP LTD LX146617 USD FIRST LIEN $632,246.88 0.04 % 10/26/2022 3.75 B 98.75

WEST CORP LX157879 TERM LOAN B-12 $1,417,068.98 0.09 % 06/17/2023 2.5 BB 100.36

COINMACH SERVICE CORP. LX129663 MAR 2015 UPSIZED TERM LOAN $6,220,911.75 0.40 % 11/14/2019 3.25 B 100.17

KINDERCARE EDUCATION, LLC (FKA KNOWLEDGE UNIVERSE EDUCATION, LLC)

LX155578 UPSIZED FIRST LIEN TERM LOAN $7,033,074.38 0.45 % 08/13/2022 4.25 B 100.85

LEARNING CARE GROUP LX136648 TERM LOAN $2,187,954.49 0.14 % 05/05/2021 4 B+ 101.63

WASH MULTI-FAMILY SERVICES LX144232 USD FIRST LIEN TERM LOAN $775,823.06 0.05 % 05/26/2022 3.25 B 100.06

WASH MULTI-FAMILY SERVICES LX144736 CAD FIRST LIEN TERM LOAN $135,869.56 0.01 % 05/26/2022 3.25 B 100.06

$94,527,493.15 6.06 %




S&P Rating

Price

Cable & Satellite Television

CHARTER COMMUNICATIONS OPERATING, LLC LX158178 TLI $4,181,204.06 0.27 % 01/15/2024 2.25 BBB- 100.62

NEW WAVE COMMUNICATIONS LX129106 TLB WITH ADD ON $2,875,758.84 0.18 % 04/30/2020 3.75 B+ 100.75

RCN GRANDE CABLE LX157714 TLB $3,612,757.01 0.23 % 12/16/2023 3 B 100.63

SUDDENLINK COMMUNICATIONS (AKA CEQUEL COMMUNICATIONS, LLC)

LX161576 NEW TERM LOAN B $750,468.75 0.05 % 01/25/2025 2.25 BB- 100.06

SUDDENLINK COMMUNICATIONS (AKA CEQUEL COMMUNICATIONS, LLC)

LX155841 NEW TERM LOAN B $7,008,684.38 0.45 % 01/15/2025 3 BB- 100.38

WAVEDIVISION HOLDINGS LLC LX125117 TLB 2/17 $1,677,568.45 0.11 % 10/15/2019 2.75 BB- 100.60

WIDEOPENWEST FINANCE, LLC LX154320 2016 TLB $10,047,342.51 0.64 % 08/18/2023 3.5 B 100.70

SFR GROUP SA (NUMERICABLE) LX162009 USD TL B11 $8,381,100.00 0.54 % 07/30/2025 2.75 B+ 99.78

SFR GROUP SA (NUMERICABLE) LX155719 TERM LOAN B10 USD $259,998.38 0.02 % 01/14/2025 3.25 B+ 100.25

SFR GROUP SA (NUMERICABLE) LX152260 TERM LOAN B7 USD $5,743,256.33 0.37 % 01/15/2024 4.25 B+ 100.64

TELENET GROUP HOLDING NV LX156208 TL AF $7,041,013.00 0.45 % 01/31/2025 3 BB- 100.59

TELESAT CANADA LX159275 TERM LOAN B $2,109,363.50 0.14 % 11/17/2023 3 BB- 100.95

UPC FINANCING PARTNERSHIP LX159894 TERM LOAN AP $5,724,937.50 0.37 % 05/30/2025 2.75 BB 100.44

VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED LX157822 TL I $10,075,503.22 0.65 % 01/31/2025 2.75 BB- 100.38

ZIGGO N.V. LX159375 USD TLE $8,439,028.53 0.54 % 04/15/2025 2.5 BB- 100.11

$77,927,984.45 5.00 %

Chemicals & Plastics

ALLNEX S.A.R.L. (MONARCH) LX152923 TERM B-3 NEW $1,197,510.69 0.08 % 09/13/2023 3.25 B 100.69

ALLNEX S.A.R.L. (MONARCH) LX152754 TERM B-2 NEW $1,585,968.97 0.10 % 09/13/2023 3.25 B 100.69

ATOTECH LX159041 TL B-1 USD $983,106.25 0.06 % 01/31/2024 3 B+ 100.63

AVANTOR PERFORMANCE MATERIALS LX161475 DELAYED DRAW 2L TL $24,331.58 0.00 % 03/11/2025 8.25 CCC+ 100.50

AVANTOR PERFORMANCE MATERIALS LX161475 DELAYED DRAW 2L TL $24,331.58 0.00 % 03/11/2025 8.25 CCC+ 100.50

AVANTOR PERFORMANCE MATERIALS LX161214 FIRST LIEN TERM LOAN $7,741,544.25 0.50 % 03/10/2024 4 B 100.84

AVANTOR PERFORMANCE MATERIALS LX161474 DELAYED DRAW 1L TL $325,959.74 0.02 % 03/11/2024 4 B 100.84




S&P Rating

Price

AVANTOR PERFORMANCE MATERIALS LX161216 SECOND LIEN TERM LOAN $553,543.42 0.04 % 03/10/2025 8.25 CCC+ 100.50

AXALTA COATING SYSTEMS (FKA DUPONT PERFORMANCE COATINGS)

LX134951 TL B USD $1,488,521.47 0.10 % 02/01/2023 2.5 BBB- 100.99

EMERALD PERFORMANCE MATERIALS LLC LX139054 SECOND LIEN TERM LOAN $751,250.25 0.05 % 08/01/2022 7.75 B- 100.17

EMERALD PERFORMANCE MATERIALS LLC LX139053 FIRST LIEN TERM LOAN $5,746,188.17 0.37 % 08/01/2021 3.5 B 100.80

FLINT GROUP HOLDINGS S.A.R.L. LX137287 USD TL B2 $3,107,347.43 0.20 % 09/07/2021 3 B 100.38

FLINT GROUP HOLDINGS S.A.R.L. LX137183 USD TL C $513,680.72 0.03 % 09/07/2021 3.5 B 100.38

FLINT GROUP HOLDINGS S.A.R.L. LX137290 2ND LIEN USD $581,773.82 0.04 % 09/05/2022 7.25 CCC+ 98.75

HUNTSMAN INTERNATIONAL LLC LX156697 2016 TERM LOAN B $2,360,088.38 0.15 % 04/01/2023 3 BB 101.13

INEOS US FINANCE LLC LX160308 TLB USD '22 $8,911,680.34 0.57 % 03/31/2022 2.75 BB 100.61

KRATON POLYMERS LLC LX157928 TERM LOAN FACILITY $4,906,936.99 0.31 % 01/06/2022 4 B+ 101.11

MACDERMID, INC. (A.K.A PLATFORM SPECIALTY PRODUCTS CORP)

LX155517 USD TL B4 $1,411,108.18 0.09 % 06/07/2023 4 BB- 100.97

ORION ENGINEERED CARBONS LX139696 TERM LOAN B (USD) $1,068,094.72 0.07 % 07/25/2021 3 BB- 100.98

ROYAL ADHESIVES & SEALANTS LX160238 FIRST LIEN TERM LOAN $4,504,335.94 0.29 % 06/19/2022 3.25 B- 100.94

ROYAL ADHESIVES & SEALANTS LX144984 SECOND LIEN TERM LOAN $179,982.76 0.01 % 06/19/2023 7.5 CCC 100.38

SOLENIS INTERNATIONAL, L.P. LX138119 USD FIRST LIEN TERM LOAN $5,130,767.49 0.33 % 07/31/2021 3.25 B 100.46

STYROLUTION GROUP GMBH LX155053 NEW USD FACILITY $2,886,963.71 0.19 % 09/30/2021 3.75 BB 100.67

UNIVAR INC. LX158999 DOLLAR TERM B2 LOAN $1,488,684.16 0.10 % 07/01/2022 2.75 BB- 100.25

ZEP INC LX156472 TERM LOAN $2,004,361.16 0.13 % 06/27/2022 4 B+ 101.50

$59,478,062.18 3.81 %

Clothing/Textiles

VARSITY BRANDS (FKA HERFF JONES, INC.) LX142296 OCT 2016 ADD ON $4,258,163.63 0.27 % 12/10/2021 4 B 101.53

VINCE, LLC LX133419 TERM LOAN $463,079.40 0.03 % 11/27/2019 5 CCC+ 95.00

$4,721,243.02 0.30 %

Conglomerates

JASON INCORPORATED LX137123 SECOND LIEN TERM LOAN $289,000.00 0.02 % 06/30/2022 8 CCC+ 68.00




S&P Rating

Price

SPECTRUM BRANDS, INC. LX155322 USD TERM LOAN $1,999,027.85 0.13 % 06/23/2022 2.5 BB+ 100.84

WATERPIK LX130643 1ST LIEN $1,138,986.78 0.07 % 07/08/2020 4.75 B 100.56

SERVICEMASTER COMPANY LX156211 TERM LOAN B $3,260,138.06 0.21 % 11/08/2023 2.5 BB+ 100.72

$6,687,152.70 0.43 %

Containers & Glass Products

BERLIN PACKAGING, LLC LX141075 SECOND LIEN TERM FACILITY $2,022,500.00 0.13 % 09/30/2022 6.75 CCC+ 101.13

BERLIN PACKAGING, LLC LX141073 UPSIZED 1L TL $4,907,780.18 0.31 % 10/01/2021 3.5 B 100.70

BERRY PLASTICS CORPORATION LX158899 TERM I LOAN $3,640,984.17 0.23 % 10/01/2022 2.5 BB 100.88

HUSKY INJECTION MOLDING SYSTEMS, LTD LX120047 FIRST LIEN TERM B LOAN $2,526,582.35 0.16 % 06/30/2021 3.25 B 100.68

MILACRON LLC LX159514 TERM LOAN $4,767,738.28 0.31 % 09/28/2023 3 B 100.63

NOVOLEX (AKA FLEX ACQUISITION COMPANY, INC) LX157924 FIRST LIEN TERM LOAN $5,286,232.00 0.34 % 12/29/2023 3.25 B 100.84

PROAMPAC PG BORROWER LLC LX156414 FIRST LIEN TERM LOAN $2,627,300.00 0.17 % 11/18/2023 4 B 101.05

PROAMPAC PG BORROWER LLC LX156416 SECOND LIEN TERM LOAN $552,493.75 0.04 % 11/18/2024 8.5 CCC+ 101.38

REYNOLDS GROUP HOLDINGS INC LX159202 USD TERM LOAN $8,042,339.07 0.52 % 02/04/2023 3 B+ 100.53

SIG COMBIBLOC GROUP AG LX143112 NEW USD TL $6,191,146.12 0.40 % 03/10/2022 3 B+ 100.69

TEKNI-PLEX, INC. LX143906 UPSIZED FIRST LIEN TERM LOAN $3,500,434.05 0.22 % 06/01/2022 3.5 B 100.20

TRICORBRAUN LX156672 FIRST LIEN TERM LOAN $2,481,669.72 0.16 % 11/30/2023 3.75 B 101.25

TRICORBRAUN LX156675 DELAYED DRAW TERM LOAN $248,166.97 0.02 % 11/30/2023 3.75 B 101.25

$46,795,366.66 3.00 %

Cosmetics/Toiletries

GALLERIA CO. (COTY INC.) LX148185 TL B GALLERIA $5,040,625.00 0.32 % 09/29/2023 3 BBB- 100.81

REVLON CONSUMER PRODUCTS CORPORATION LX153860 TLB 2016 $7,163,354.31 0.46 % 09/07/2023 3.5 B+ 100.21

$12,203,979.31 0.78 %

Diversified Insurance

ACRISURE, LLC LX156199 TERM LOAN $8,264,657.19 0.53 % 11/15/2023 4.75 B 101.66




S&P Rating

Price

ALLIANT HOLDINGS, I, LLC LX146742 TERM LOAN B $8,957,925.83 0.57 % 08/12/2022 3.25 B 100.82

AMWINS GROUP, INC. LX159018 1ST LIEN TERM LOAN $6,771,090.60 0.43 % 01/25/2024 2.75 B+ 100.39

APPLIED SYSTEMS INC. LX134867 2ND LIEN TERM LOAN $2,946,658.23 0.19 % 01/24/2022 6.5 CCC+ 100.83

APPLIED SYSTEMS INC. LX134866 1ST LIEN TERM LOAN ADD-ON $7,010,633.17 0.45 % 01/25/2021 3.25 B+ 100.60

ASSUREDPARTNERS, INC. LX156542 1ST LIEN TERM LOAN $5,719,986.62 0.37 % 10/21/2022 4.25 B+ 100.92

HUB INTERNATIONAL LIMITED LX132571 INCREMENTAL TERM LOAN B $9,998,813.23 0.64 % 10/02/2020 3.25 B+ 100.54

NATIONAL FINANCIAL PARTNERS CORP. LX157681 TERM LOAN $5,599,098.42 0.36 % 01/08/2024 3.5 B+ 101.14

SEDGWICK HOLDINGS, INC. LX135270 2ND LIEN TERM LOAN $2,713,500.00 0.17 % 02/28/2022 5.75 CCC+ 100.50

SEDGWICK HOLDINGS, INC. LX141423 INCREMENTAL 2ND LIEN TERM LOAN $501,666.50 0.03 % 02/28/2022 5.75 CCC+ 100.33

SEDGWICK HOLDINGS, INC. LX135266 1ST LIEN TERM LOAN $4,698,774.43 0.30 % 03/01/2021 2.75 B+ 100.40

USI, INC. LX134269 INCREMENTAL TERM LOAN (AUGUST 2015)

$9,245,832.69 0.59 % 12/27/2019 3.25 B 100.27

VERTAFORE, INC. LX158069 TERM LOAN B $5,293,029.47 0.34 % 06/30/2023 3.25 B 100.68

$77,721,666.38 4.98 %

Drugs

PRESTIGE BRANDS LX159002 B-4 $6,134,263.31 0.39 % 01/26/2024 2.75 BB- 101.02

HORIZON PHARMA, INC. LX162121 TERM B $1,148,550.00 0.07 % 03/23/2024 3.75 BB- 100.75

$7,282,813.31 0.47 %

Ecological Services & Equipment

ADVANCED DISPOSAL SERVICES, INC. (FKA ADS WASTE HOLDINGS, INC.)

LX155961 TERM LOAN B $8,415,536.40 0.54 % 11/10/2023 2.75 BB 100.85

WASTE INDUSTRIES USA, INC. LX153856 TERM LOAN B $2,242,351.37 0.14 % 02/27/2020 2.75 BB- 100.59

$10,657,887.77 0.68 %

Electronics/Electrical

ECI LX136848 TERM LOAN B $2,784,557.37 0.18 % 05/28/2021 4.75 B 100.81

NAVICO INC. LX161442 FIRST LIEN TERM LOAN $1,891,312.50 0.12 % 03/15/2023 5.75 B 98.25

APTEAN HOLDINGS, INC. LX157723 1ST LIEN TERM LOAN $1,621,500.80 0.10 % 12/20/2022 5 B 101.34




S&P Rating

Price

BMC SOFTWARE, INC. LX130254 U.S. TERM LOAN $10,441,466.55 0.67 % 09/10/2020 4 B+ 100.23

CAVIUM, INC. LX161603 TERM LOAN B $1,322,624.00 0.08 % 08/16/2022 2.25 BB 100.81

DELL INTERNATIONAL LLC LX159759 TERM LOAN B $14,602,549.60 0.94 % 09/07/2023 2.5 BBB- 100.60

EPICOR SOFTWARE CORPORATION LX144606 TERM LOAN B $3,507,850.55 0.22 % 06/01/2022 3.75 B- 100.36

EZE CASTLE SOFTWARE, INC. LX160375 1ST LIEN TERM LOAN $3,113,447.02 0.20 % 04/04/2020 3 B 100.38

EZE CASTLE SOFTWARE, INC. LX136217 2ND LIEN TERM LOAN $445,500.00 0.03 % 04/05/2021 6.5 CCC+ 99.00

GO DADDY OPERATING COMPANY, LLC LX159774 TERM LOAN $3,227,967.34 0.21 % 02/15/2024 2.5 BB- 100.23

GO DADDY OPERATING COMPANY, LLC LX160274 DELAYED DRAW TERM LOAN $4,288,907.66 0.27 % 02/15/2024 2.5 BB- 100.23

GREENEDEN U.S. HOLDINGS II, L.L.C. LX159076 USD TERM LOAN $5,242,250.00 0.34 % 12/01/2023 4 B- 100.81

HYLAND SOFTWARE, INC. LX159763 1ST LIEN TERM LOAN $6,983,409.56 0.45 % 07/01/2022 3.25 B 101.03

INFOR (US), INC. LX159959 USD TERM LOAN B $3,820,017.15 0.24 % 02/01/2022 2.75 B 100.08

JDA SOFTWARE (F.K.A REDPRAIRIE CORPORATION) LX155106 TERM LOAN B $6,067,827.41 0.39 % 10/12/2023 3.5 B 100.71

KRONOS INCORPORATED LX155548 FIRST LIEN TERM LOAN $9,531,355.64 0.61 % 11/01/2023 4 B 100.69

LINXENS LX160243 TL B-3 USD $2,113,620.47 0.14 % 10/14/2022 3.5 B 100.47

M/A-COM TECHNOLOGY SOLUTIONS HOLDINGS, INC. LX136922 TERM LOAN B $3,435,960.96 0.22 % 05/08/2021 3 B+ 101.69

MICROSEMI CORPORATION LX148757 TERM LOAN B $1,713,971.50 0.11 % 01/15/2023 2.25 BB 100.65

OBERTHUR TECHNOLOGIES LX157595 TL B1 USD $1,291,139.47 0.08 % 12/14/2023 3.75 B- 100.38

OBERTHUR TECHNOLOGIES LX157595 TL B1 USD $796,660.53 0.05 % 12/14/2023 3.75 B- 100.38

ON SEMICONDUCTOR CORPORATION LX155254 TERM LOAN B $8,740,620.23 0.56 % 03/31/2023 3.25 BB 100.66

RACKSPACE HOSTING LX155291 TERM LOAN B $6,692,106.90 0.43 % 11/03/2023 3.5 BB+ 100.89

SKILLSOFT CORP. LX136501 FIRST LIEN TERM LOAN $2,751,514.67 0.18 % 04/28/2021 4.75 B- 92.19

TESSERA TECHNOLOGIES (D/B/A XPERI) LX155535 TERM LOAN B $2,499,159.14 0.16 % 12/01/2023 3.25 BB- 101.23

TTM TECHNOLOGIES LX144287 TERM LOAN B $6,300,783.54 0.40 % 05/31/2021 4.25 BB- 101.75

WESTERN DIGITAL LX161280 USD TERM LOAN B-2 $10,807,900.18 0.69 % 04/29/2023 2.75 BBB- 100.83

ZEBRA TECHNOLOGIES LX152897 TERM LOAN B $6,808,220.83 0.44 % 10/27/2021 2.5 BB+ 100.97

COMPUWARE CORPORATION LX159760 TERM LOAN B-3 $9,112,358.53 0.58 % 12/15/2021 4.25 B 100.33




S&P Rating

Price

DELL SOFTWARE GROUP LX155015 TERM LOAN B $4,746,173.50 0.30 % 10/31/2022 6 B 101.53

INFORMATICA CORPORATION LX144702 TERM LOAN B $8,152,632.36 0.52 % 08/05/2022 3.5 B 99.64

OPTIV SECURITY, INC. (F.K.A. ACCUVANT INC.) LX158909 2ND LIEN TERM LOAN $1,518,750.00 0.10 % 02/01/2025 7.25 CCC+ 101.25

OPTIV SECURITY, INC. (F.K.A. ACCUVANT INC.) LX158907 1ST LIEN TERM LOAN $5,253,099.51 0.34 % 01/13/2024 3.25 B 100.67

RIVERBED TECHNOLOGY, INC. LX152765 1ST LIEN TERM LOAN $7,974,648.58 0.51 % 04/24/2022 3.25 B+ 100.06

ROVI SOLUTIONS CORPORATION LX137932 TERM LOAN B $2,983,695.33 0.19 % 07/02/2021 2.5 BB+ 100.48

SABRE INC. LX160335 TERM B FACILITY $2,579,085.66 0.17 % 02/16/2024 2.75 BB- 100.84

SOLARWINDS HOLDINGS, INC. LX159694 TERM LOAN $8,662,329.73 0.56 % 02/05/2023 3.5 B+ 100.23

SYNCHRONOSS TECHNOLOGIES, INC. LX158771 1ST LIEN TERM LOAN $3,957,222.72 0.25 % 01/23/2024 2.75 BB- 99.83

VERITAS TECHNOLOGIES CORPORATION LX151040 USD TERM LOAN B-1 $7,278,887.39 0.47 % 01/27/2023 5.62 B+ 99.55

AVAST SOFTWARE B.V. LX153911 TERM LOAN USD $6,980,554.24 0.45 % 09/30/2022 4 BB- 100.84

$202,043,639.13 12.95 %

Equipment Leasing

RENT-A-CENTER, INC. LX135487 TERM LOAN B $352,900.74 0.02 % 03/19/2021 3 B 98.44

$352,900.74 0.02 %

Equity REITs and REOCs

ESH HOSPITALITY, INC. LX159960 TLB $2,812,444.20 0.18 % 08/30/2023 2.5 BB+ 100.59

$2,812,444.20 0.18 %

Financial Intermediaries

DUFF & PHELPS LX128689 UPSIZED INCREMENTAL TLB 8/2015 $3,065,531.71 0.20 % 04/23/2020 3.75 B 100.81

FIRST EAGLE INVESTMENT MANAGEMENT, INC. LX148659 TERM LOAN ADD-ON $7,319,163.38 0.47 % 12/01/2022 4 BB+ 100.66

LPL HOLDINGS, INC. LX161254 TERM LOAN B $7,142,898.20 0.46 % 03/15/2024 2.75 BB- 100.60

TAXACT / HD VEST LX149416 TERM LOAN B $1,244,125.00 0.08 % 12/23/2022 6 BB- 100.88

TRANS UNION LLC LX144775 TERM B2 $1,995,870.05 0.13 % 04/09/2023 2.5 BB 100.90

$20,767,588.35 1.33 %




S&P Rating

Price

Food Products

ADVANCE PIERRE FOODS LX152943 1L TERM LOAN $5,363,399.87 0.34 % 06/02/2023 3 B+ 101.26

CSM BAKERY SUPPLIES LX129905 FIRST LIEN TL $5,045,190.18 0.32 % 07/03/2020 4 CCC+ 94.44

DEL MONTE FOODS CONSUMER PRODUCTS, INC. LX133785 1ST LIEN $2,178,135.87 0.14 % 02/18/2021 3.25 CCC+ 83.17

DEL MONTE FOODS CONSUMER PRODUCTS, INC. LX133786 2ND LIEN $1,308,937.50 0.08 % 08/18/2021 7.25 CCC- 67.13

DOLE FOOD COMPANY, INC. LX161900 TERM LOAN B $2,095,600.00 0.13 % 04/04/2024 3 B- 100.75

HOSTESS LX156717 TERM LOAN $4,767,891.05 0.31 % 08/03/2022 3 BB- 101.11

JBS USA, INC. (FKA SWIFT) LX159478 TERM LOAN B $7,326,615.80 0.47 % 10/30/2022 2.5 BBB- 100.36

ATRIUM INNOVATIONS, INC. LX135021 NEW USD 1ST LIEN TL $3,632,344.87 0.23 % 02/15/2021 3.5 B 100.72

ATRIUM INNOVATIONS, INC. LX135021 NEW USD 1ST LIEN TL $5,503,017.30 0.35 % 02/15/2021 3.5 B 100.72

ATKINS NUTRITIONALS HOLDINGS II, INC. LX128754 1ST LIEN TERM LOAN $1,368,684.64 0.09 % 01/02/2019 5 B+ 100.63

NPC INTERNATIONAL LX134282 TERM LOAN $4,948,577.49 0.32 % 12/28/2018 3.75 B 100.81

$43,538,394.58 2.79 %

Food Service

US FOODS, INC. LX153134 TERM LOAN B $6,035,231.02 0.39 % 06/27/2023 2.75 BB 101.01

MANITOWOC FOODSERVICE, INC. LX150914 TERM LOAN B $2,139,182.69 0.14 % 03/03/2023 3 B+ 101.13

CEC ENTERTAINMENT, INC., LX135145 FIRST LIEN TL $4,145,282.84 0.27 % 02/14/2021 3 B 99.50

LANDRY'S RESTAURANTS LX155084 TERM LOAN $2,325,941.56 0.15 % 10/04/2023 3.25 B+ 100.99

P.F. CHANG'S CHINA BISTRO, INC. LX124451 TERM LOAN $3,780,623.18 0.24 % 06/30/2019 3.25 B 98.75

WEIGHT WATCHERS INTERNATIONAL, INC. LX128907 TERM LOAN B-2 $1,967,688.33 0.13 % 04/02/2020 3.25 B- 93.63

$20,393,949.63 1.31 %

Food/Drug Retailers

PORTILLO RESTAURANT GROUP (THE) LX139631 UPSIZED 1ST LIEN TERM LOAN $1,965,843.75 0.13 % 08/04/2021 4.5 B- 100.81

NBTY, INC. LX160239 USD TERM LOAN B $3,674,134.22 0.24 % 05/05/2023 3.5 B+ 100.59

ALBERTSONS LLC LX157642 TL-B4 $9,005,999.64 0.58 % 08/15/2021 3 BB 100.60




S&P Rating

Price

ALBERTSONS LLC LX157644 TL-B6 $3,540,265.82 0.23 % 06/22/2023 3.25 BB 100.72

SAVE-A-LOT LX157028 TL-B $3,747,071.25 0.24 % 12/05/2023 6 B 99.92

SMART & FINAL STORES LX126664 EXTENDED TL-B $1,113,534.83 0.07 % 11/15/2022 3.5 B+ 98.78

SUPERVALU LX129627 TERM LOAN $4,605,507.17 0.30 % 03/21/2019 4.5 BB- 100.92

$27,652,356.69 1.77 %

Forest Products

BLOUNT INTERNATIONAL, INC. LX149926 TERM LOAN B USD $3,979,652.50 0.26 % 04/12/2023 6.25 B+ 101.00

$3,979,652.50 0.26 %

Health Care

ACADIA LX150425 TLB-2 $2,581,390.45 0.17 % 02/16/2023 3 BB- 100.93

AEGIS SCIENCES LX135369 1ST LIEN TERM LOAN $1,982,094.42 0.13 % 02/24/2021 4.5 B 99.17

AIR MEDICAL GROUP HOLDINGS, INC. LX143912 TERM LOAN B $7,820,132.42 0.50 % 04/28/2022 3.25 B 100.08

ALERE US HOLDINGS, LLC LX144969 NEW TERM LOAN B $5,744,597.94 0.37 % 06/15/2022 3.25 BB- 100.22

ASPEN DENTAL MANAGEMENT, INC. LX144074 INCREMENTAL TERM LOAN B $2,291,736.65 0.15 % 04/30/2022 3.75 B 101.25

ATI PHYSICAL THERAPY LX152458 FIRST LIEN TERM LOAN $3,207,726.48 0.21 % 05/10/2023 3.5 B 101.21

BIOCLINICA LX155335 1ST LIEN TERM LOAN $4,136,012.50 0.27 % 10/20/2023 4.25 B 101.13

CARECORE NATIONAL, LLC LX135345 UPSIZED TERM LOAN B $2,228,449.93 0.14 % 03/05/2021 4.5 B 100.50

CHANGE HEALTHCARE, INC. LX159695 TERM B $10,029,170.00 0.64 % 02/28/2024 2.75 B+ 100.29

CHG MEDICAL STAFFING, INC. LX152762 UPSIZED TERM LOAN B $4,710,153.45 0.30 % 06/07/2023 3.75 B 101.11

CHS/COMMUNITY HEALTH SYSTEMS, INC. LX134903 TERM A $2,850,577.79 0.18 % 01/27/2019 2.5 BB- 100.02

CHS/COMMUNITY HEALTH SYSTEMS, INC. LX144540 TERM LOAN H $7,599,051.43 0.49 % 01/27/2021 3 BB- 98.70

CONCENTRA INC LX144279 UPSIZED TERM LOAN B $1,649,365.62 0.11 % 06/01/2022 3 B+ 100.69

COTIVITI (F/K/A CONNOLLY / IHEALTH TECHNOLOGIES) LX155103 NEW 1ST LIEN TLB $4,504,918.84 0.29 % 09/28/2023 2.75 BB 100.63

DJO FINANCE LLC LX144227 FIRST LIEN TERM LOAN $7,816,905.63 0.50 % 06/08/2020 3.25 B+ 97.15

ENVISION HEALTHCARE CORPORATION LX156475 TRANCHE C $8,588,035.88 0.55 % 12/01/2023 3 BB- 101.13




S&P Rating

Price

EXAMWORKS GROUP, INC. LX159615 TERM B $4,527,453.13 0.29 % 07/27/2023 3.25 B 100.75

GREENWAY HEALTH LLC LX159734 TERM B $1,789,740.23 0.11 % 02/17/2024 4.75 B- 100.81

GRIFOLS S.A LX158207 TL B $10,312,637.33 0.66 % 01/31/2025 2.25 BB 100.37

HEALOGICS, INC. LX137952 SECOND LIEN TERM LOAN $1,047,499.50 0.07 % 07/01/2022 8 CCC+ 69.83

HEALOGICS, INC. LX137951 UPSIZED FIRST LIEN TERM LOAN $3,171,772.17 0.20 % 07/01/2021 4.25 B 93.48

IASIS HEALTHCARE LLC LX128470 TERM B-2 $9,697,631.06 0.62 % 05/03/2018 3.25 B 100.01

INVENTIV HEALTH INC. LX154353 TERM LOAN B $2,826,764.40 0.18 % 11/09/2023 3.75 B 100.49

KINETIC CONCEPTS, INC. LX159619 USD TERM B $8,664,511.86 0.56 % 02/03/2024 3.25 B 100.05

MULTIPLAN, INC LX152711 FIRST LIEN TERM LOAN $5,660,466.87 0.36 % 06/07/2023 4 B+ 101.39

NAPA LX152070 UPSIZED FIRST LIEN TERM LOAN $1,152,766.00 0.07 % 04/19/2023 5 B 100.67

NTHRIVE, INC LX161854 FIRST LIEN TERM LOAN $2,682,129.73 0.17 % 10/20/2022 4.5 B 100.88

NVA HOLDINGS, INC. LX160854 TLB-2 $5,416,855.71 0.35 % 08/14/2021 3.5 B 101.08

PATTERSON MEDICAL HOLDINGS, INC. LX147127 UPSIZED 1ST LIEN TERM LOAN $4,030,000.00 0.26 % 08/28/2022 4.75 B 100.75

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. LX146947 UPSIZED TERM LOAN $7,751,022.53 0.50 % 08/18/2022 3.25 B 100.45

PRESS GANEY LX155185 FIRST LIEN TERM LOAN $1,362,111.87 0.09 % 10/01/2023 3.25 B 100.41

PROSPECT MEDICAL HOLDINGS, INC. LX152960 TERM LOAN B $3,784,886.72 0.24 % 06/30/2022 6 B 101.44

QUORUM HEALTH LX152098 TERM B $3,012,503.93 0.19 % 04/29/2022 5.75 B- 98.04

SCHUMACHER GROUP LX147695 UPSIZED 1L TERM LOAN $3,298,622.26 0.21 % 07/31/2022 4 B 100.58

SELECT MEDICAL CORPORATION LX159955 TERM B $4,345,687.50 0.28 % 03/06/2024 3.5 BB- 101.06

STERIGENICS INTERNATIONAL LLC LX144331 TERM LOAN B $5,887,696.12 0.38 % 05/15/2022 3.25 B 100.38

SURGERY CENTER HOLDINGS, INC. LX138964 1ST LIEN TERM LOAN $7,798,086.03 0.50 % 11/03/2020 3.75 B 101.03

TEAM HEALTH, INC. LX156377 TERM B $8,901,571.88 0.57 % 01/25/2024 2.75 B 99.74

U.S. RENAL CARE, INC. LX148925 FIRST LIEN TERM LOAN $7,437,655.59 0.48 % 12/30/2022 4.25 B 94.00

VALEANT PHARMACEUTICALS INTERNATIONAL, INC. LX143679 F1 TERM LOAN $4,263,810.10 0.27 % 04/01/2022 4.75 BB- 100.51

VIZIENT, INC. LX155398 TERM B-2 $4,144,549.67 0.27 % 02/13/2023 4 B+ 101.08

$200,708,751.62 12.87 %




S&P Rating

Price

Home Furnishings

HUNTER FAN COMPANY LX127497 FIRST LIEN TERM LOAN $209,984.54 0.01 % 12/20/2017 5.25 BB- 99.50

SERTA SIMMONS BEDDING, LLC LX155523 FIRST LIEN TERM LOAN $8,047,144.00 0.52 % 11/08/2023 3.5 B 100.59

HILLMAN GROUP (THE), INC. LX137733 TERM LOAN B $4,875,435.47 0.31 % 06/30/2021 3.5 B+ 100.90

ADT FKA PROTECTION ONE, INC. LX157682 UPSIZED TERM LOAN B $5,683,182.35 0.36 % 05/02/2022 3.25 BB- 101.04

$18,815,746.36 1.21 %

Industrial Equipment

ACCUDYNE INDUSTRIES LLC LX128299 TERM LOAN $923,916.80 0.06 % 12/13/2019 3 B 94.55

APEX TOOL GROUP LX127865 TERM LOAN B $2,228,889.78 0.14 % 01/31/2020 3.25 B 99.38

GARDNER DENVER, INC. LX128915 TERM LOAN B USD $2,865,408.49 0.18 % 07/30/2020 3.25 B 99.92

MKS INSTRUMENTS LX157635 TERM LOAN B $970,819.57 0.06 % 05/01/2023 2.75 BB+ 101.30

REXNORD CORPORATION / RBS GLOBAL, INC. LX157834 FIRST LIEN TERM LOAN $4,663,432.04 0.30 % 08/21/2023 2.75 BB- 100.49

VERTIV GROUP CORPORATION LX161714 TERM LOAN B $5,142,811.16 0.33 % 11/30/2023 4 B+ 101.00

CERAMTEC GMBH LX132449 DOLLAR TERM B-2 LOAN $111,788.24 0.01 % 08/30/2020 3.25 B 101.29



COLUMBUS MCKINNON CORPORATION LX158071 1ST LIEN TERM LOAN $3,239,376.40 0.21 % 01/31/2024 3 B+ 101.00

GLOBAL BRASS AND COPPER, INC. LX153274 TERM LOAN B $1,413,024.38 0.09 % 07/18/2023 4.25 BB- 101.44

TEREX CORPORATION LX159620 TERM LOAN $864,478.88 0.06 % 01/31/2024 2.5 BBB- 100.52

KENAN ADVANTAGE GROUP, INC. LX146807 UPSIZED USD TERM LOAN B $2,756,550.86 0.18 % 07/31/2022 3 B+ 100.18

KENAN ADVANTAGE GROUP, INC. LX146975 TERM LOAN CANADA BORROWER $838,119.20 0.05 % 07/31/2022 3 B+ 100.18

$27,261,290.20 1.75 %

Leisure Goods/Activities/Movies

SRAM, LLC LX161278 FIRST LIEN TERM LOAN $1,356,750.00 0.09 % 03/13/2024 3.5 B 100.50

DELTA2 SARL LUXEMBOURG (FORMULA ONE WORLD CHAMPIONSHIP)

LX139585 SECOND LIEN FACILITY $1,202,061.35 0.08 % 08/08/2022 6.75 CCC+ 100.51




S&P Rating

Price

DELTA2 SARL LUXEMBOURG (FORMULA ONE WORLD CHAMPIONSHIP)

LX139582 NEW TL B3 $5,147,431.62 0.33 % 02/01/2024 3.25 B 100.08

NEP/NCP HOLDCO, INC LX127897 2ND LIEN WITH ADD ON $1,607,918.52 0.10 % 07/22/2020 8.75 B- 101.58

NEP/NCP HOLDCO, INC LX135200 TLB WITH ADD ON $4,628,609.65 0.30 % 01/22/2020 3.25 B+ 100.46

24 HOUR FITNESS WORLDWIDE, INC LX137112 TERM LOAN B $6,815,242.71 0.44 % 05/28/2021 3.75 B+ 100.06

EQUINOX HOLDINGS, INC. LX160948 SECOND LIEN TL-B $579,856.44 0.04 % 09/06/2024 7 CCC+ 101.73

FITNESS INTERNATIONAL, LLC. LX138000 UPSIZED TERM LOAN B $7,921,719.68 0.51 % 07/01/2020 5 BB- 100.94

LIFE TIME FITNESS LX159083 UPSIZED TERM LOAN B $4,965,561.05 0.32 % 06/10/2022 3 BB- 100.46

PLANET FITNESS HOLDINGS, LLC LX156908 TERM LOAN B $2,007,456.14 0.13 % 03/31/2021 3.5 BB- 100.63

WINNEBAGO LX155534 TERM LOAN B $3,014,550.00 0.19 % 11/08/2023 4.5 BB- 101.50

$39,247,157.16 2.52 %

Lodging & Casinos

AMAYA GAMING GROUP INC. LX160896 USD TERM LOAN $9,437,995.66 0.61 % 08/01/2021 3.5 BB- 100.36

AMERICAN CASINO AND ENTERTAINMENT PROPERTIES LLC

LX155958 TERM LOAN $2,113,237.37 0.14 % 07/07/2022 3.25 BB 100.69

ARISTOCRAT LEISURE LIMITED LX160898 TERM LOAN B $3,767,916.93 0.24 % 10/20/2021 2.25 BB 100.74

CITYCENTER HOLDINGS, LLC LX133060 TLB $4,068,648.66 0.26 % 10/16/2020 2.75 BB 101.28

ELDORADO RESORTS, INC. LX146684 TERM LOAN B $863,210.91 0.06 % 07/23/2022 3.25 BB 100.16

GLOBAL CASH ACCESS, INC. LX141038 TERM LOAN B $3,915,356.20 0.25 % 12/18/2020 5.25 B+ 100.94

GOLDEN NUGGET, INC. LX133417 DELAYED DRAW TERM LOAN $1,914,782.76 0.12 % 11/21/2019 3.5 BB- 101.56

GOLDEN NUGGET, INC. LX133415 TERM LOAN $4,467,826.45 0.29 % 11/21/2019 3.5 BB- 101.56

HORSESHOE BALTIMORE LX129329 FUNDED TERM LOAN B $1,313,344.14 0.08 % 07/02/2020 7 B- 100.38

LA QUINTA LX135546 FIRST LIEN TERM LOAN $8,077,805.25 0.52 % 04/14/2021 2.75 BB 100.78

SCIENTIFIC GAMES INTERNATIONAL, INC. LX159994 TERM LOAN B-3 $7,117,862.11 0.46 % 10/01/2021 4 B+ 101.36

STATION CASINOS LLC LX152816 TERM LOAN $7,651,679.11 0.49 % 06/08/2023 2.5 BB 100.49

TWIN RIVER MANAGEMENT GROUP, INC. LX136336 TERM LOAN B $2,972,211.60 0.19 % 07/10/2020 3.5 BB 101.25

$57,681,877.15 3.70 %




S&P Rating

Price

Nonferrous Metals/Minerals

FAIRMOUNT SANTROL INC (F.K.A FAIRMOUNT MINERALS LTD)

LX136121 TRANCHE B-2 TERM LOANS $6,366,426.65 0.41 % 09/05/2019 3.5 B- 98.29

$6,366,426.65 0.41 %

Oil & Gas

ENERGY TRANSFER EQUITY, L.P. LX159614 NEW TERM LOAN $3,466,283.63 0.22 % 02/02/2024 2.75 BB 99.89

FTS INTERNATIONAL, INC. (FKA FRACTECH) LX136541 TERM LOAN $5,203,308.93 0.33 % 04/16/2021 4.75 CCC 87.69

HARVEY GULF INTERNATIONAL MARINE, LLC LX130741 UPSIZED TERM LOAN A $2,800,132.35 0.18 % 06/18/2018 4.25 CCC+ 87.50

HARVEY GULF INTERNATIONAL MARINE, LLC LX130275 UPSIZED TERM LOAN B $2,373,740.49 0.15 % 06/18/2020 4.5 CCC+ 71.75

LIMETREE BAY TERMINALS LX159842 TERM LOAN $2,436,000.00 0.16 % 01/30/2024 5 BB- 101.50

MEG ENERGY CORP. LX159204 TERM LOAN $5,845,935.28 0.37 % 12/31/2023 3.5 BB+ 100.19

SEVENTY SEVEN ENERGY INC. LX137857 TERM LOAN $3,947,225.44 0.25 % 06/25/2020 3 B 99.56

SOUTHCROSS ENERGY PARTNERS, L.P. LX139218 TERM LOAN $2,522,775.53 0.16 % 08/04/2021 4.25 CCC+ 88.92

SOUTHCROSS HOLDINGS L.P. LX152427 EXIT TERM LOAN $496,690.46 0.03 % 04/13/2023 0 CCC+ 90.00

SUMMIT MIDSTREAM PARTNERS LX161196 TERM LOAN $953,700.00 0.06 % 05/15/2022 6 B- 102.00

CRESTWOOD HOLDINGS LLC LX129978 TERM LOAN $3,067,490.60 0.20 % 06/19/2019 8 B- 99.94

$33,113,282.71 2.12 %

Property & Casualty Insurance

BROADSTREET PARTNERS, INC. LX156103 TERM LOAN B $4,127,691.08 0.26 % 11/08/2023 4.25 B+ 101.55

$4,127,691.08 0.26 %

Publishing

CENGAGE LEARNING ACQUISITION, INC. LX152766 TL-B $3,706,935.99 0.24 % 06/07/2023 4.25 B+ 95.77

MCGRAW HILL GLOBAL EDUCATION LX152400 TERM LOAN B $6,393,459.70 0.41 % 05/04/2022 4 B+ 99.10

MERRILL COMMUNICATIONS, LLC LX144578 NEW FIRST LIEN TERM LOAN $3,428,889.98 0.22 % 06/01/2022 5.25 BB- 100.25

TRIBUNE COMPANY LX145376 TERM LOAN B $161,826.84 0.01 % 12/27/2020 3 BB+ 101.06




S&P Rating

Price

TRIBUNE COMPANY LX159214 TERM LOAN C $2,019,510.16 0.13 % 01/27/2024 3 BB+ 100.94

$15,710,622.67 1.01 %

Radio & Television

CBS RADIO, INC. LX155383 TERM LOAN B $2,746,188.68 0.18 % 10/17/2023 3.5 BB- 101.08

CUMULUS MEDIA HOLDINGS INC. LX134252 TERM LOAN $5,251,750.00 0.34 % 12/23/2020 3.25 CCC 75.03

LEARFIELD COMMUNICATIONS, INC LX156663 FIRST LIEN TL $2,397,195.12 0.15 % 12/01/2023 3.25 B+ 101.19

LIONS GATE ENTERTAINMENT CORP LX153562 NEW TERM LOAN B $7,566,695.42 0.49 % 12/08/2023 3 BB- 100.67

NEXSTAR BROADCASTING, INC. LX155368 NEW TERM LOAN B - MISSION $645,438.28 0.04 % 01/17/2024 3 BB+ 100.67

NEXSTAR BROADCASTING, INC. LX155123 NEW TERM LOAN B - NEXSTAR $6,657,473.23 0.43 % 01/17/2024 3 BB+ 100.67

SALEM COMMUNICATIONS CORPORATION LX128722 TERM LOAN B $2,983,828.87 0.19 % 03/13/2020 3.5 B- 98.38

UNIVISION COMMUNICATIONS, INC. LX134926 TL-C4 $3,161,812.50 0.20 % 03/01/2020 3 BB- 100.38

UNIVISION COMMUNICATIONS, INC. LX161197 TL-C5 $16,228,177.85 1.04 % 03/15/2024 2.75 BB- 99.42

$47,638,559.94 3.05 %

Retailers (Except Food & Drug)

ABERCROMBIE & FITCH MANAGEMENT CO. LX139440 TERM LOAN B $1,226,403.76 0.08 % 08/09/2021 3.75 BB 96.50

ASCENA RETAIL GROUP, INC. LX146680 TLB $5,790,430.76 0.37 % 08/21/2022 4.5 BB 90.63

BASS PRO GROUP, LLC LX156197 ASSET SALE FACILITY $1,746,525.00 0.11 % 06/08/2018 4.75 B+ 100.38

BELK LX148858 1ST LIEN TERM LOAN $3,802,529.61 0.24 % 12/12/2022 4.75 B 85.35

BJS WHOLESALE CLUB LX159354 1L TL-B $6,370,000.00 0.41 % 01/31/2024 3.75 B- 98.00

BJS WHOLESALE CLUB LX159355 2L TL-B $1,492,593.75 0.10 % 01/31/2025 7.5 CCC 97.88

FULLBEAUTY BRANDS (F.K.A. ONESTOPPLUS) LX148068 1ST LIEN TL $1,264,577.72 0.08 % 10/14/2022 4.75 B- 84.47

GENERAL NUTRITION CENTERS, INC. LX126268 TERM LOAN B $4,257,997.68 0.27 % 03/04/2019 2.5 BB 85.38

HARBOR FREIGHT TOOLS USA, INC. LX154324 TL-B $7,722,912.10 0.50 % 08/15/2023 3 BB- 100.08

HUDSON'S BAY COMPANY LX147151 TL-B $1,440,000.00 0.09 % 09/30/2022 3.25 BB 96.00




S&P Rating

Price

JO-ANN STORES, INC. LX155217 TL-B $5,585,336.89 0.36 % 10/15/2023 5 B+ 98.67

LANDS' END, INC. LX135757 TLB $789,368.61 0.05 % 04/04/2021 3.25 B- 81.00

LESLIES POOLMART, INC. LX154098 TL-B $3,301,286.72 0.21 % 08/16/2023 4.25 B 100.54

MEN'S WEARHOUSE LX136368 TERM LOAN $4,899,135.30 0.31 % 06/18/2021 3.5 B+ 96.08

NATIONAL VISION, INC. LX135786 UPSIZED FIRST LIEN TERM LOAN $1,531,127.10 0.10 % 03/13/2021 3 B 100.10

NEIMAN MARCUS GROUP, INC LX135908 TERM LOAN $1,393,772.00 0.09 % 10/25/2020 3.25 CCC+ 80.72

PARTY CITY HOLDINGS INC LX155718 TL-B $4,844,470.65 0.31 % 08/19/2022 3 B+ 99.90

PETCO ANIMAL SUPPLIES, INC. LX158994 TLB-1 $5,570,204.06 0.36 % 01/26/2023 3.25 B 94.56

PETSMART, INC. LX155570 TL-B $10,023,303.71 0.64 % 03/11/2022 3 BB- 95.90

RUE21 INC. LX131817 TERM LOAN B $609,502.28 0.04 % 10/09/2020 4.62 CCC- 20.67

SAVERS LX126298 TLB $3,829,768.84 0.25 % 07/09/2019 3.75 CCC+ 88.92

$77,491,246.55 4.97 %

Surface Transport

GOODPACK LTD. LX139619 SECOND LIEN TERM LOAN $1,421,250.00 0.09 % 09/09/2022 7 CCC+ 94.75

NAVISTAR INC. LX160018 TERM LOAN B $6,254,762.48 0.40 % 08/07/2020 4 B+ 101.29

OSG BULK SHIPS, INC. LX136855 FIRST LIEN TERM LOAN $6,385,282.31 0.41 % 08/05/2019 4.25 BB- 98.92

QUALITY DISTRIBUTION LX145100 FIRST LIEN TERM LOAN $979,644.89 0.06 % 08/18/2022 4.75 B- 97.00

V.GROUP LX159618 TL B $901,969.20 0.06 % 01/27/2024 3 B 100.22

XPO LOGISTICS LX161342 TERM LOAN B $4,546,808.15 0.29 % 10/31/2021 2.25 BB 100.45

$20,489,717.02 1.31 %

Telecommunications

ENCOMPASS DIGITAL MEDIA, INC. LX137376 FIRST LIEN $1,878,469.62 0.12 % 06/05/2021 4.5 B 96.38

ENCOMPASS DIGITAL MEDIA, INC. LX137379 SECOND LIEN $485,625.00 0.03 % 06/05/2022 7.75 CCC+ 92.50

ALTICE INTERNATIONAL S.A. LX162006 USD TLB $4,497,187.50 0.29 % 07/30/2025 2.75 BB- 99.94

ARICENT GROUP LX136313 AUG 2015 UPSIZED FIRST LIEN TERM LOAN

$5,296,699.91 0.34 % 04/14/2021 4.5 B- 100.33




S&P Rating

Price

ASURION, LLC LX135662 UPSIZED SECOND LIEN TERM LOAN $2,985,031.25 0.19 % 03/03/2021 7.5 B- 101.19

ASURION, LLC LX157686 REPLACEMENT B-2 TERM LOAN $4,936,321.48 0.32 % 07/08/2020 3.25 BB- 100.84

ASURION, LLC LX159075 REPLACEMENT B-4 TERM LOAN $4,888,174.87 0.31 % 08/04/2022 3.25 BB- 100.68

ASURION, LLC LX156134 INCREMENTAL TRANCHE B-5 TERM LOAN

$6,089,609.85 0.39 % 11/01/2023 3.75 BB- 101.00

AVAYA INC. LX159374 DIP TERM LOAN $5,160,940.00 0.33 % 01/23/2018 7.5 NR 103.22

COMMUNICATIONS SALES & LEASING, INC. LX159837 TERM LOAN B $11,413,146.10 0.73 % 10/24/2022 3 BB- 99.94

CONSOLIDATED COMMUNICATIONS, INC. LX154992 TERM LOAN B $5,953,149.68 0.38 % 10/05/2023 3 BB- 100.73

CONSOLIDATED COMMUNICATIONS, INC. LX157986 INCREMENTAL TERM LOAN $2,417,400.00 0.15 % 10/05/2023 3 BB- 100.73

GLOBAL TEL*LINK CORPORATION LX129696 SECOND LIEN TERM LOAN $848,937.50 0.05 % 11/23/2020 7.75 CCC+ 99.88

HAWAIIAN TELCOM COMMUNICATIONS, INC. LX123128 TERM LOAN B $3,185,226.25 0.20 % 06/06/2019 4.25 B 100.36

LEVEL 3 FINANCING, INC LX160334 TERM LOAN B $6,013,500.00 0.39 % 02/17/2024 2.25 BBB- 100.23

LIGHTOWER FIBER NETWORKS LX128970 2016 UPSIZED 1ST LIEN TERM LOAN $8,397,453.69 0.54 % 04/13/2020 3.25 B 100.87

SPRINT COMMUNICATIONS LX159257 TERM LOAN B $6,284,148.95 0.40 % 01/31/2024 2.5 BB- 100.15

SYNIVERSE HOLDINGS, INC. LX123795 INITIAL TERM LOAN $2,957,214.19 0.19 % 04/23/2019 3 B 92.50

U.S. TELEPACIFIC CORP LX139773 TERM LOAN B $4,831,794.05 0.31 % 11/25/2020 5 B 100.83

WINDSTREAM CORPORATION LX155086 UPSIZED TERM LOAN B-6 $7,180,595.04 0.46 % 03/29/2021 4 BB 101.10

ZAYO GROUP, LLC LX158900 TERM LOAN B-2 $2,074,162.50 0.13 % 01/19/2024 2.5 BB 100.69

$97,774,787.42 6.27 %

Utilities

CALPINE CORP LX149099 TERM LOAN B-6 $6,322,180.11 0.41 % 01/15/2023 2.75 BB 100.58

CALPINE CORP LX144710 TERM LOAN B-5 $2,693,779.38 0.17 % 01/15/2024 2.75 BB 100.55

LONGVIEW POWER, LLC LX143826 TERM LOAN $1,992,510.00 0.13 % 04/13/2021 6 B- 84.50

MRP GENERATION HOLDINGS, LLC (FKA TPF GENERATION HOLDINGS, LLC)

LX154155 TERM LOAN $2,808,835.25 0.18 % 09/30/2022 7 BB- 101.00

RISEC LX149086 TERM LOAN $1,741,162.50 0.11 % 12/19/2022 4.75 B+ 100.50

VISTRA OPERATIONS COMPANY LLC (FKA TCEH) LX155779 TERM LOAN B $4,542,914.25 0.29 % 08/04/2023 2.75 BB+ 99.88




S&P Rating

Price

VISTRA OPERATIONS COMPANY LLC (FKA TCEH) LX155780 TERM LOAN C $1,038,700.00 0.07 % 08/04/2023 2.75 BB+ 99.88

VISTRA OPERATIONS COMPANY LLC (FKA TCEH) LX157720 TERM LOAN B-2 $792,716.02 0.05 % 12/15/2023 3.25 BB+ 100.34

ACLARA TECHNOLOGIES LLC LX154197 TERM LOAN $2,374,866.00 0.15 % 08/15/2023 5.75 B 102.00

DAYTON POWER AND LIGHT COMPANY LX154380 TERM LOAN $1,124,871.81 0.07 % 08/30/2022 3.25 BBB- 100.69

DYNEGY INC. LX159020 TERM LOAN C $8,041,504.00 0.52 % 06/30/2023 3.25 BB 100.52

EASTERN GENERATION LLC (FKA TPF II POWER) LX140953 TERM LOAN $3,703,020.97 0.24 % 10/02/2023 4 BB- 100.86

HELIX GEN LLC LX160979 TERM LOAN $3,045,939.00 0.20 % 03/01/2024 3.75 BB 101.53

LINDEN POWER COMPLEX LX153086 TERM LOAN $4,384,868.54 0.28 % 06/28/2023 3.5 BB 101.05

SOUTHEAST POWERGEN, LLC LX141908 TERM LOAN B $3,966,703.42 0.25 % 12/02/2021 3.5 B+ 99.29

$48,574,571.24 3.11 %

Total Loans $1,559,937,326.71 100.00 %

Cash & Cash Equivalents ($18,103,638.97)

Total Market Value $1,541,833,687.74

We are providing this information in response to your request. Upon request, and where consistent with fiduciary obligations, we generally provide investors in the fund and/or their representatives with information relating to direct and indirect holdings. This information is confidential in nature and should not be shared or disclosed to any other parties.



The information contained in this document has been prepared solely for informational purposes and is not an offer or invitation to buy or sell any security or to participate in any trading activity. This document is intended only for professional investors and describes a strategy only. Some material shown is compiled from third party sources thought to be reliable, but accuracy and completeness cannot be guaranteed. Any opinions expressed herein reflect our judgment at this date and are subject to change without notice. Neither Voya Investment Management nor any other company or unit belonging to Voya Financial, nor any of its officers, directors, or employees accept any liability or responsibility in respect to the information or any recommendations expressed herein. No liability is accepted for any losses sustained by readers as a result of using this publication or basing decisions on it. The value of your investments may rise or fall. Past performance is not indicative of future results. Investments involve risk. The primary risks of investing in market based securities include, but are not limited to, credit risk (the risk that a borrower may default in the payment of interest and/or principal on its loans), interest rate risk (the risk that the yield on an investment will rise and fall in response to changes in market rates of interest), and market risk (the risk that the value of an investment will rise or fall in response to general economic conditions and events).

The account information presented in this report is based on the records and information provided by Voya Investment Management. The results may be preliminary and unreconciled and are subject to change. Voya Investment Management does not guarantee the accuracy of the information contained in this portfolio accounting report. The report is for informational purposes only and should not be relied upon or construed to be final. Clients are advised to refer to their custodial statements and confirmations for trade and holdings information.

FootnotesPortfolio Characteristics

The portfolio specific characteristics (such as Average Duration, Average Yield, etc.) are based on the total portfolio market value including cash and derivatives, as provided by our valuation provider (BNY Mellon) and security characteristics provided by BlackRock Solutions which utilizes a different pricing hierarchy (Barclays). BNY Mellon prices combined with Barclays analytics will result in different portfolio averages than are reported. Portfolio and Benchmark averages (Duration, Yield to Maturity, Convexity and Average Life) are reported directly from BlackRock Solutions using Blackrock models and assumptions. As such, the Benchmark Analytics provided above may be different from Barclays. Top ten credit exposures include cash.

Ratings

The portfolio’s average quality rating is calculated as a market value-weighted average of the rating assigned to all positions, including derivative securities, but excluding non-rated securities held within the portfolio measured and reported as of the date of this report. The "Effective Rating" is determined as follows: Voya IM seeks individual security ratings from three credit rating agencies that are registered with the SEC as nationally recognized statistical rating organizations -- typically Moody's, S&P and Fitch. If ratings are available from all three agencies, the security will be assigned the median rating. If ratings are available from only two of the agencies, the lower of the ratings will be used. If a rating is available from only one agency, then that rating will be used. If ratings are not available from any of the three agencies, then we may either assign the security an internal rating or mark it as "N/R" (not rated). AAA is the highest (best) Effective Rating, and D is the lowest (worst) Effective Rating. When an Effective Rating is reported for a group of securities (such as for an asset class or the overall portfolio), it is calculated as a market value-weighted average of the Effective Rating assigned to each component security (excluding securities without an Effective Rating). Please note that Voya does not endorse or affirm the Effective Ratings or any agency ratings.

Explanatory Notes


Furthermore, credit rating agencies disclaim all warranties and liability for their ratings, which (a) should be viewed as their opinions and not as statements of fact or recommendations as to suitability or to purchase, hold, or sell a security and (b) are not guaranteed as being accurate, timely or available. For derivative securities, swap contracts are rated on the basis of the underlying security, however, futures contracts are treated as a combination of Treasury securities and cash positions, they have no net impact to the average quality rating in the portfolio. Measures pertaining to average credit quality may change over time and illustrations presented in the client report are for informational purposes only. Individual client investment guidelines may have different rules and the foregoing presentation is not meant to represent a compliance certification of the portfolio’s overall credit quality.

This report may contain information obtained from third parties, including ratings from credit ratings agencies. Reproduction and distribution of third party content in any form is prohibited except with the prior written permission of the related third party. Third party content providers do not guarantee the accuracy, completeness, timeliness or availability of any information, including ratings, and are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, or for the result obtained from the use of such content. THIRD PARTY CONTENT PROVIDERS GIVE NO EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. THIRD PARTY CONTENT PROVIDERS SHALL NOT BE LIABLE FOR ANY DIRECT, INDIRECT, INCIDENTAL, EXEMPLARY, COMPENSATORY, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES, COSTS, EXPENSES, LEGAL FREES, OR LOSSES (INCLUDING LOST INCOME OR PROFITS AND OPPORTUNITY COSTS OR LOSSES CAUSED BY NEGLIGENCE) IN CONNECTION WITH ANY USE OF THEIR CONTENT, INCLUDING RATINGS. Credit agency ratings are statement of opinions and are not statements of fact or recommendations to purchase, hold or sell securities. They do not address the suitability of securities or the suitability of securities for investment purposes, and should not be relied on as investment advice.

Bond Sector Comparisons

Sector weights are based on total portfolio market value, which includes security market values (including accrued income), plus cash, cash equivalents and derivatives (variation margin for Futures, and Market Value of Swaps).

With the exception of the Treasury, ABS, and CMBS Sectors, the following sector groupings apply: ■ Treasury and Cash includes Cash/Cash equivalents which includes trade receivables/payables (which may be net positive or negative), TBA liabilities,

accrued income on securities that have been sold pending settlement (accrued income is otherwise reflected in the other sectors), and in Sector Weights, also includes variation margin for futures (which may be positive or negative).

■ Government Related sector is comprised of Agency, Local Government, Sovereign and Supranational securities. ■ Corporate sector is comprised of Financial Institutions, Industrial and Utility securities. ■ Agency Mortgages sector contains Fannie Mae (FNMA), Freddie Mac (FHLMC), and Government National Mortgage Association (GNMA). ■ Securitized sector is comprised of ABS, CMBS, and Agency and Non-Agency Mortgage Backed Securities. ■ Other sector is comprised of Convertibles, Common and Preferred Stocks and Municipal Bonds.■ "Derivatives“ (if applicable) includes forwards, options and swaps (see Appendix – Portfolio Holdings Derivatives for details) and futures.

Explanatory Notes (continued)


Performance Disclosures

Performance is calculated on a time-weighted total return basis. Performance quoted is past performance, is no guarantee of future results and assumes that dividends and distributions are reinvested. Current performance may be lower or higher. Investment value will fluctuate, and shares, when redeemed, may be worth more or less than original cost.

Net returns are reflective of trading costs, management fees, and other administrative fees. Gross returns are net of trading costs, but do not reflect the deduction of management, operating and admin fees. The returns for the Barclays Indexes are time-weighted total return performance results as reported by Barclays.

Attribution results for sub-portfolio components, as provided by Blackrock Solutions Systems, are calculated on a daily basis. These daily results are then geometrically compounded using a smoothing algorithm (Frongello Linking Algorithm) to produce results for “Month to Date” , “Quarter To Date” and “Year To Date” time periods. However, the use of this smoothing process, as well as rounding effects, may create immaterial differences to total portfolio returns reported to the client for “Month To Date” , “Quarter To Date” and “Year To Date” time periods. Additional details of these calculations are available upon request.

Holdings

Cash and Cash Equivalents include trade receivables/payables (which may be net positive or negative), accrued income, cash collateral, variation margin (which may be positive or negative), and TBA liabilities.

All derivative holdings (including notional amounts) are listed, as applicable. The market value of all derivatives other than futures (and only the variation margin for futures) is (a) included in the net cash/cash equivalent line at the end of the Portfolio Holdings Report and (b) reflected in the “other” sector in the Bond Sector Comparisons page.

The individual holdings and their respective valuations, (pricing and accruals) illustrated in this report are provided by IM’s operations servicer, Bank of New York Mellon. Individual Security and Portfolio Level attributes illustrations are provided by BlackRock Solutions which utilizes a different pricing hierarchy (Barclays) in the deriving of analytics such as; Duration, Yield to Maturity, Convexity, and Average Life. Please refer to the Explanatory Notes Section of your quarterly performance report for the valuation hierarchy as provided by Bank of New York Mellon, as well as other important disclosures.

Notes

A To-Be-Announced (“TBA”) security represents a “forward purchase” of a potential mortgage pool of similar characteristics such as coupon, yield and par value to be announced by a broker bundling “like” mortgages. The cash segregated as collateral for these forward purchases, in an amount equal to the purchase price to be paid, may be invested in “liquid assets, such as cash, U.S. Government securities or other appropriate high grade debt obligations” in a “segregated account” as described in Release 10666 of the SEC. Voya reports these within “Portfolio Holdings”. The valuation of this collateral is independent of the valuation of the TBA liability and may rise or fall, based on interest rates and market conditions.



FAS 157 Tier levels

FASB 157 establishes a framework for measuring fair value in Generally Accepted Accounting Principles. Under FAS, “fair value” is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. FASB 157 identifies a fair value hierarchy to rank the reliability of inputs used in a valuation approach. The first – and highest – level (Level 1) refers to quoted prices for identical assets or liabilities in an active market. When those prices are not available, the second – or middle – level (Level 2) will base fair value estimates on observable inputs that a market participant would use. If observable inputs are not available, the third – and lowest – level (Level 3) will require the use of unobservable inputs. Source: Valuation Research Corporation

Voya Investment Management employs the following criteria for the tier selection under the FAS 157 Rule:

Level 2 is identified as any security for which we have received a price through one of our pricing vendors (currently IDC, Pricing Direct, and Markit Partners). We identify as Level 3 any security (including mortgage-related securities) for which only a broker quote is available for valuation, as opposed to prices sourced from pricing vendors. Under our current policy, Level 1 is reserved for U.S. Treasury securities.

Effective January 1, 2013 , all Subprime assets that are priced by an external vendors are now classified as Tier 2. Prior to this time, Voya Investment Managementwas categorizing subprime external vendor priced securities as Tier 3 since December 2008.



AGENDA REPORT

TO:

FROM: Jill Fosselman, Secretary to the Board

DATE: May 17, 2017

ITEM: Engagement letter with System Auditor Macias Gini & O'Connell llP for the June 30, 2017 financial audit

RECOMMENDATION

Upon review of the report and presentation, the Board may:

1. Approve the engagement letter with Macias Gini & O'ConnellllP for the June 30, 2017 financial services audit, or

2. Other direction provided by the Board.

BACKGROUND

At the March 16, 2016 Board meeting, a two-year extension to the contract with Macias Gini & O'Connell llP ("MGO") for auditing financial services and the June 30, 2016-2017 financial audits was approved by the Board.

The objective of the audit is the expression of an opinion as to whether the financial statements are fairly presented, in all material respects, in conformity with U.S. Generally Accepted Accounting Principles. Further, the objective includes reporting on the fairness of the supplementary information when considered in relation to the financial statements as a whole. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; therefore, the audit will involve judgment about the number of transactions to be examined and the areas to be tested. The audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. An audit is not designed to detect immaterial misstatements or violations of laws or governmental regulations that do not have a direct and material effect on the financial statements. However, MGO will inform management of any material errors, any fraudulent financial reporting, or misappropriation of assets that comes to their attention. In addition, MGO will also inform management of any violations of laws or governmental regulations that come to their attention during the audit.

Audit work on the June 30, 2017 financial audit will consist of the following: • MGO will plan and perform the audit to obtain reasonable rather than absolute assurance

regarding whether the financial statements are free of material misstatement, whether from

May 17, 2017 Page 1 of 2

Financial Auditing Services Engagement Letter, June 30, 2017

ITEM #: 8DATE: 5/17/17

(1) errors, (2) fraudulent financial reporting, (3) misappropriation of assets, or (4) violations of laws or governmental regulations that are attributable to the System or to acts by management or employees acting on behalf of the System.

• MGO will perform certain agreed-upon procedures regarding the records and internal control procedures related to the administration of the System.

• MGO will perform required reporting for GASB statements, with related notes.

The audit will be conducted in accordance with auditing standards generally accepted in the United States of America and the standards for financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, and will include tests of the accounting records of the System and other procedures the auditors consider necessary to enable MGO to express such opinions. Upon completion of the audit, results will be presented in a written report to the Board in October containing the System's financial statements, findings, and recommendations for improvements in System operations, internal controls, and accounting procedures.

The engagement letter has been reviewed by the System's counsel Best, Best & Krieger.

FISCAL IMPACT

The total maximum contract amount for the June 30, 2017 financial audit is $49,500 (as approved by the Board on March 16, 2016) and is included in the FY 2018 Recommended Budget.

ATTACHMENT

1. Engagement letter for the June 30, 2017 financial audit with Macias Gini & O'Connell, LLP

May 17,2017 Page 2 of2

Financial Auditing Services Engagement Letter, June 30, 2017

April27, 2017

To the Retirement Board Pasadena Fire & Police Retirement System

We are pleased to confirm our understanding of the services we are to provide Pasadena Fire & Police Retirement System (System) for the year ended June 30, 2017.

We will audit the financial statements of the System as of and for the year ended June 30,2017. Accounting standards generally accepted in the United States of America provide for certain required supplementary information (RSI), such as management's discussion and analysis (MD&A), to supplement the System's basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. As part of our engagement, we will apply certain limited procedures to the System's RSI in accordance with auditing standards generally accepted in the United States of America. These limited procedures will consist of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We will not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. The following RSI is required by generally accepted accounting principles and will be subjected to certain limited procedures, but will not be audited:

l) Management's Discussion and Analysis 2) Schedules of Changes in Net Pension Liability and Related Ratios 3) Schedules of Employer Contribution 4) Schedule of Investment Returns 5) Notes to Required Supplementary Information

We have also been engaged to report on supplementary information other than RSI that accompanies the System's financial statements. We will subject the following supplementary information to the auditing procedures applied in our audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America, and we will provide an opinion on it in relation to the financial statements as a whole, in a report combined with our auditor's report on the financial statements.

1) Additions by Source and Deductions by Type.

The following other information accompanying the financial statements will not be subjected to the auditing procedures applied in our audit of the financial statements, and out auditor's report will not provide an opinion or any assurance on that other information:

1) Comparative Information from Prior Fiscal Years: Interest Rate Risk

Audit Objectives The objective of our audit is the expression of an opinion as to whether the System's financial statements are fairly presented, in all material respects, in conformity with U.S. generally accepted accounting principles and to report on the fairness of the supplementary information referred to in the second paragraph when considered in relation to the financial statements as a whole.

Our audit will be conducted in accordance with auditing standards generally accepted in the United States of America and the standards for financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, and will include tests of accounting records of the System and other procedures we consider necessary to enable us to express such opinions. We will issue a written report upon completion of our audit of the System's financial statements. Our report will be addressed to the Board of Retirement of the System. We cannot provide assurance that an unmodified opinion will be expressed. Circumstances may arise in which it is necessary for us to modify our opinion or add emphasis-of-matter or other-matter paragraphs. If our opinion are other than unmodified, we will discuss the reasons with you in advance. If, for any reason, we are unable to complete the audit or unable to form or have not formed an opinion, we may decline to express an opinion or issue reports, or may withdraw from this engagement.

We will also provide a report (that does not include an opinion) on internal control related to the financial statements and compliance with the provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a material effect on the financial statements as required by Government Auditing Standards. The report on internal control and on compliance and other matters will include a paragraph that states (1) that the purpose of the report is solely to describe the scope of testing of internal control and compliance, and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control on compliance, and (2) that the report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. The paragraph will also state that the report is not suitable for any other purpose. If during our audit we become aware that the System is subject to an audit requirement that is not encompassed in the terms of this engagement, we will communicate to management and those charged with governance that an audit in accordance with U.S. generally accepted auditing standards and the standards for financial audits contained in Government Auditing Standards may not satisfy the relevant legal, regulatory, or contractual requirements.

Audit Procedures-General

An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the fmancial statements; therefore, our audit will involve judgment about the number of transactions to be examined and the areas to be tested. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We will plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether from (1) errors, (2) fraudulent financial reporting, (3) misappropriation of assets, or (4) violations of laws or governmental regulations that are attributable to the government or to acts by management or employees acting on behalf of the government. Because the determination of abuse is subjective, Government Auditing Standards do not expect auditors to provide reasonable assurance of detecting abuse.

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Because of the inherent limitations of an audit, combined with the inherent limitations of internal control, and because we will not perform a detailed examination of all transactions, there is a risk that material misstatements or noncompliance may exist and not be detected by us, even though the audit is properly planned and performed in accordance with U.S. generally accepted auditing standards and Government Auditing Standards. In addition, an audit is not designed to detect immaterial misstatements or violations of laws or governmental regulations that do not have a direct and material effect on the financial statements or major programs. However, we will inform the appropriate level of management of any material errors, any fraudulent financial reporting, or misappropriation of assets that come to our attention. We will also inform the appropriate level of management of any violations of laws or governmental regulations that come to our attention, unless clearly inconsequential, and of any material abuse that comes to our attention. . Our responsibility as auditors is limited to the period covered by our audit and does not extend to any later periods for which we are not engaged as auditors.

Our procedures will include tests of documentary evidence supporting the transactions recorded in the accounts, and may include tests of the physical existence of inventories, and direct confirmation of receivables and certain other assets and liabilities by correspondence with selected individuals, funding sources, creditors, and financial institutions. We will request written representations from your attorneys as part of the engagement, and they may bill you for responding to this inquiry. At the conclusion of our audit, we will require certain written representations from you about your responsibilities for the financial statements; and other responsibilities required by generally accepted auditing standards.

Audit Procedures-Internal Control

Our audit will include obtaining an understanding of the government and its environment, including internal control, sufficient to assess the risks of material misstatement of the financial statements and to design the nature, timing, and extent of further audit procedures. Tests of controls may be performed to test the effectiveness of certain controls that we consider relevant to preventing and detecting errors and fraud that are material to the financial statements and to preventing and detecting misstatements resulting from illegal acts and other noncompliance matters that have a direct and material effect on the financial statements. Our tests, if performed, will be less in scope than would be necessary to render an opinion on internal control and, accordingly, no opinion will be expressed in our report on internal control issued pursuant to Government Auditing Standards.

An audit is not designed to provide assurance on internal control or to identify significant deficiencies or material weaknesses. However, during the audit, we will communicate to management and those charged with governance internal control related matters that are required to be communicated under AICPA professional standards and Government Auditing Standards.

Audit Procedures-Compliance

As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we will perform tests of the System's compliance with provisions of applicable laws, regulations, contracts, and agreements, including grant agreements. However, the objective of those procedures will not be to provide an opinion on overall compliance and we will not express such an opinion. in our report on compliance issued pursuant to Government Auditing Standards.

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Management Responsibilities

Management is responsible for establishing and maintaining effective internal controls, including evaluation and monitoring ongoing activities; to help ensure that appropriate goals and objectives are met; following laws and regulations; and ensuring that management and financial information is reliable and properly reported. Management is also responsible for implementing systems designed to achieve compliance with applicable laws, regulations, contracts, and grant agreements. You are also responsible for the selection and application of accounting principles; for the preparation and fair presentation of the financial statements and all accompanying information in conformity with U.S. generally accepted accounting principles; and for compliance with applicable laws and regulations and the provisions of contracts and grant agreements.

Management is also responsible for making all financial records and related information available to us and for the accuracy and completeness of that information. You are also responsible for providing us with ( 1) access to all information of which you are aware that is relevant to the preparation and fair presentation of the fmancial statements, (2) access to personnel, accounts, books, records, supporting documentation, and other information as needed to perform an audit, (3) additional information that we may request for the purpose of the audit, and (4) unrestricted access to persons within the government from whom we determine it necessary to obtain audit evidence.

Management's responsibilities include adjusting the financial statements to correct material misstatements and confirming to us in the management representation letter that the effects of any uncorrected misstatements aggregated by us during the current engagement and pertaining to the latest period presented are immaterial, both individually and in the aggregate, to the financial statements as a whole.

Management is responsible for the design and implementation of programs and controls to prevent and detect fraud, and for informing us about all known or suspected fraud affecting the government involving (I) management, (2) employees who have significant roles in internal control, and (3) others where the fraud could have a material effect on the financial statements. Management's responsibilities include informing us of your knowledge of any allegations of fraud or suspected fraud affecting the government received in communications from employees, former employees, grantors, regulators, or others. In addition, management is responsible for identifYing and ensuring that the government complies with applicable laws, regulations, contracts, agreements, and grants. Management is also responsible for taking timely and appropriate steps to remedy fraud and noncompliance with provisions of laws, regulations, contracts, and grant agreements, or abuse that we report.

Management is also responsible for the preparation of the other supplementary information, which we have been engaged to report on, in conformity with U.S. generally accepted accounting principles. Management agrees to include our report on the supplementary information in any document that contains, and indicates that we have reported on, the supplementary information. Management also agrees to include the audited financial statements with any presentation of the supplementary information that includes our report thereon. Management's responsibilities include acknowledging to us in the written representation letter that (1) management is responsible for presentation of the supplementary information in accordance with GAAP; (2) management believes the supplementary information, including its form and content, is fairly presented in accordance with GAAP; (3) the methods of measurement or presentation have not changed from those used in the prior period (or, if they have changed, the reasons for such changes); and ( 4) management has disclosed to us any significant assumptions or interpretations underlying the measurement or presentation of the supplementary information.

Management is responsible for establishing and maintaining a process for tracking the status of audit findings and recommendations. Management is also responsible for identifYing and providing report copies

4

of previous financial audits, attestation engagements, performance audits, or other studies related to the objectives discussed in the Audit Objectives section of this letter. This responsibility includes relaying to us corrective actions taken to address significant findings and recommendations resulting from those audits, attestation engagements, performance audits, or studies. Management is also responsible for providing management's views on our current findings, conclusions, and recommendations, as well as your planned corrective actions, for the report, and for the timing and format for providing that information.

Engagement Administration, Fees, and Other

Third-partv Service Providers We may from time to time, and depending on the circumstances, use an independent actuary in serving the System. We may share confidential information about the System with the independent actuary, but remain committed to maintaining the confidentiality and security of your information. Accordingly, we maintain internal policies, procedures, and safeguards to protect the confidentiality of the System's personal information. In addition, we will secure confidentiality agreements with the independent actuary to maintain the confidentiality of the System's information and we will take reasonable precautions to determine that they have appropriate procedures in place to prevent the unauthorized release of the System's confidential information to others. In the event that we are unable to secure an appropriate confidentiality agreement, the System will be asked to provide consent prior to the sharing of the System's confidential information with the independent actuary. Furthermore, we will remain responsible for the work provided by any such independent actuary.

Assistance from the System We understand that the System's employees will prepare all cash, accounts receivable, or other confirmations we request and will locate any documents selected by us for testing.

Report Copies We will provide copies of our reports to the System; however, management is responsible for distribution of the reports and the financial statements. Unless restricted by law or regulation, or containing privileged and confidential information, copies of our reports are to be made available for public inspection.

Audit Documentation The audit documentation for this engagement is the property ofMacias Gini & O'Connell LLP (MOO) and constitutes confidential information. However, subject to applicable laws and regulations, audit documentation and appropriate individuals will be made available upon request and in a timely manner to the System's cognizant agency or its designee, a federal agency providing direct or indirect funding, or the U.S. Government Accountability Office for purposes of a quality review of the audit, to resolve audit findings, or to carry out oversight responsibilities. We will notify management of any such request. If requested, access to such audit documentation will be provided under the supervision of MOO personnel. Furthermore, upon request, we may provide copies of selected audit documentation to the aforementioned parties. These parties may intend, or decide, to distribute the copies or information contained therein to others, including other governmental agencies.

The audit documentation for this engagement will be retained for a minimum of seven years after the report release date or for any additional period requested by the cognizant agency. If we are aware that a federal awarding agency, pass-through entity, or auditee is contesting an audit finding, we will contact the party(ies) contesting the audit finding for guidance prior to destroying the audit documentation.

Upon expiration ofthe seven-year period, MOO will be free to destroy our records related to this engagement. However, MOO does not keep any original client records, so we will return those to management at the completion of the services rendered under this engagement. When records are returned

5

to management, it is management's responsibility to retain and protect the records for possible future use, including potential examination by any government or regulatory agencies.

Engagement Partner

James V. Godsey is the engagement partner and is responsible for supervising the engagement and signing the reports or authorizing another individual to sign them.

Fees Our fee for these services will be at our standard hourly rates and will not exceed $49,500. Our standard hourly rates vary according to the degree of responsibility involved and the experience level of the personnel assigned to your audit. Our invoices for these fees will be rendered each month as work progresses. Each invoice is due and payable upon presentation and becomes past due after 30 days.

If we elect to terminate our services for nonpayment, our engagement will be deemed to have been completed upon written notification of termination, even if we have not completed our report(s). You will be obligated to compensate us for all time expended and to reimburse us for all out-of-pocket costs through the date of termination. The above fee is based on anticipated cooperation from your personnel and the assumption that unexpected circumstances will not be encountered during the audit. If significant additional time is necessary, we will discuss it with you and arrive at a new fee estimate before we incur the additional costs.

Subpoena and Other Release of Documents As a result of our services to you, we may be required or requested to provide information or documents to you or a third-party pursuant to a subpoena, court order or other administrative or legal process in connection with governmental regulations or activities, or a legal, arbitration or administrative proceeding, in which we are not a party. You agree that our efforts in complying with such requests or demands will be deemed a part of this engagement and MOO shall be entitled to additional compensation for our time, which is based on the hourly rates as specified in the original cost proposal, and reimbursement for our out-of-pocket expenditures (including legal fees) in complying with such requests or demands.

Use of Electronic Communication and Cloud-based Computing In connection with this engagement, we may communicate with management or others via e-mail transmission. As e-mail can be intercepted and read, disclosed, or otherwise used or communicated by an unintended third party, or may not be delivered to each of the parties to whom they are directed and only to such parties, we cannot guarantee or warrant that e-mail from us will be properly delivered and read only by the addressee. Therefore, we specifically disclaim and waive any liability or responsibility whatsoever for interception or unintentional disclosure or communication of e-mail transmissions, or for the unauthorized use or failed delivery of e-mail transmitted by us in connection with the performance of this engagement, except liability that results from gross negligence, willful misconduct, or fraud on the part of MGO and/or any of its employees, representatives, and/or agents. In that regard, management agrees that we shall have no liability for any loss of damage to any person or entity resulting from the use of e-mail transmissions, including any consequential, incidental, direct, indirect, or special damages, such as loss of revenues or anticipated profits, or disclosure or communication of confidential or proprietary information, except liability that results from gross negligence, willful misconduct, or fraud on the part ofMGO and/or any of its employees, representatives, and/or agents.

With regards to the electronic dissemination of audited financial statements, including financial statements published electronically on the System's website, management understands that electronic sites are a means to distribute information and, therefore, we are not required to read the information contained in these sites or to consider the consistency of other information in the electronic site with the original audited financial statement.

6

MGO uses cloud-based computing services, including the storage of data and files, at third party, offsite, secure facilities. In that regard, you agree that we shall have no liability for any loss or damage to any person or entity resulting from the use of email transmissions and cloud-based computing, including any direct or indirect damages that may result from any inadvertent or unanticipated disclosure of confidential or proprietary information, or disclosure through third party criminal conduct (e.g., hackers or hacking activities), except liability that results from gross negligence, willful misconduct, or fraud on the part of MGO and/or any of its employees, representatives and/or agents.

Additional Limitations on Liabilitv We rely in good faith on all information, assumptions, procedures and decisions communicated to us by you, your employees or your representatives, and we will not be responsible for any loss or other obligation arising from our reliance. Furthermore, the procedures we will perform in our engagement will be heavily influenced by, and dependent upon the written and oral representations and information that we receive from you. You agree that you are responsible for the accuracy and completeness of the representations and information provided to us by your employees, representatives and management, and you acknowledge that we may rely on the System to ensure the accuracy and completeness of the representations and information we receive from its employees, representatives and management.

Independence Professional and certain regulatory standards require us to be independent, in both fact and appearance, with respect to the System in the performance of our services. Any discussions that the System representatives have with professional personnel of MGO regarding employment could pose a threat to our independence. Therefore, you agree to inform us prior to any such discussions so that we can implement appropriate safeguards to maintain our independence.

Government Auditing Standards require that we provide the System with a copy of our most recent external peer review report and any letter of comment, and any subsequent peer review reports and letters of comment received during the period of the contract. Our 2015 peer review report accompanies this letter.

We appreciate the opportunity to be of service to the System and believe this letter accurately summarizes the significant terms of our engagement. If you have any questions, please let us know. If you agree with the terms of our engagement as described in this letter, please sign the enclosed copy and return it to us.

A facsimile or electronic signature shall be treated as an original signature, provided that the party providing the facsimile or electronic signature shall be responsible for obtaining an ink signature that will be provided to the other party(ies) immediately upon request.

Very truly yours,

James V. Godsey Partner Macias Gini & O'Connell LLP

7

RESPONSES: This letter correctly sets forth the understanding of the engagement. I have read this agreement, including the attached Terms and Conditions, and understand its terms. I am authorized to sign this agreement on behalf of the System.

By:

Title:

Date:

8


AGENDA REPORT

TO: etirement System


DATE: May 17,2017

ITEM: Actuarial Assumptions for Use in Preparing the June 30, 2017 Actuarial Valuation

RECOMMENDATION

Upon review of the report, the Board may:

1. Approve the assumptions for use in preparing the June 30, 2017 actuarial valuation, as recommended by System Actuary, Bartel Associates:

a. Discount Rate 6.0% b. Inflation 3.0% c. Base Mortality CaiPERS 1997-2011 Experience Study d. Mortality Improvement Scale MP-2014 modified to converge to ultimate mortality

improvement rates in 2022 2. Or, other direction provided by the Board.

BACKGROUND

System Actuary Joe D'Onofrio of Bartel Associates ("Bartel") has recommended that the discount rate, inflation rate, and mortality assumptions for the June 30, 2017 valuation be the same as those adopted for the June 30, 2016 actuarial valuation. It should also be noted that, although studied and reviewed by the Board annually, the discount and inflation rates have not changed since the June 30, 2012 actuarial valuation.

FISCAL IMPACT

Adequate funding is budgeted in Account 811400 for the recommended assumptions letter. The budget for the preparation of the June 30, 2017 actuarial valuation of $16,000 (as approved by the Board on February 15, 2017) is included in the FY 2018 Recommended Budget.

ATTACHMENT

1. June 30, 2017 Actuarial Valuation Assumptions, Bartel Associates (dated Apri/26, 2017)

May 17, 2017 Page 1 of 1 Actuarial Assumptions, June 30, 2017 Valuation

ITEM #: 9DATE: 5/17/17

B;1 R]~E L !lS~(lCIATES. LLC

April 26, 2017

Pasadena Fire and Police Retirement Board Pasadena Fire and Police Retirement System 100 North Garfield Ave, Room N204 Pasadena, CA 911 0 1-1726

Re: Pasadena Fire and Police Retirement System- June 30, 2017 Valuation Assumptions

Dear Sirs:

We recommend that the discount rate, inflation, and mortality assumptions for the June 30, 2017 actuarial valuation be the same as those used for the June 30, 2016 actuarial valuation.

Actuarial 6/30/16 Valuation Assumptions Assumptions

• Discount Rate • 6.0% annually

• Inflation • 3.0% annually

• Mortality • CalPERS 1997-2011 Experience Study

• Mortality Improvement Scale MP-20 14 modified to converge to ultimate mortality improvement rates in 2022

Please let us know if you have any questions.

Thank you.

Sincerely,

rJ~); !)~~ Joseph R. D'Onofrio, FSA Assistant Vice President

c: Matt Childs, Bartel Associates, LLC

0:\Ciients\PasadenaFPRS\Projects\Pension\2017\Assumptions\BA FPRS 17-04-26 pension 17-06-30 valuation assumptions.docx

6/30/17 Valuation Assumptions

• 6.0% annually

• 3.0% annually

• CalPERS 1997-2011 Experience Study

• Mortality Improvement Scale MP-20 14 modified to converge to ultimate mortality improvement rates in 2022

411 Borel Avenue, Suite 101 • San Mateo, California 94402 main: 650/377-1600 • fax: 650/345-8057 • web: www.bartel-associates.com


AGENDA REPORT

TO:


DATE: May 17,2017

ITEM: Fiscal Year 2018 Recommended Budget

RECOMMENDATION

Upon review of the report and presentation, the Board may direct staff to:

1. Adopt the Fiscal Year 2018 Recommended Budget, and/or 2. Other direction provided by the Board.

FISCAL YEAR 2017 IN REVIEW

The Pasadena Fire & Police Retirement System ("System") is a closed defined-benefit pension fund that disburses approximately $13.6 million annually in benefits payments to retirees and beneficiaries. As of the April 30, 2017 payroll, the System included 163 Retirees, 58 beneficiaries, and 24 Domestic Relations Orders for a total of 245 payees (compared to 258 at this time last year).

Accomplishments and major work efforts for the System over the past year include:

• System Administration o Worked collaboratively with the System's auditor to prepare the June 30, 2016 audited

financial statements (receiving a clean audit), and with the System's actuary to prepare the June 30, 2016 actuarial valuation.

o Conducted an RFP for actuarial valuation services to prepare the June 30, 2017-2019 actuarial valuations that resulted in lowering the annual expense. The Board awarded the contract to Bartel Associates for $16,000 for 2017, $16,500 for 2018, and $17,000 for 2019.

o Terminated the software agreement with PensionGold and transitioned retiree payroll services to custodian US Bank, effective January 1, 2017. Converted and reconciled all active payee data. Developed payroll policies, procedures and processes to implement monthly payroll, including wire transfers, bank statement reconciliation, recording in the City's General Ledger, and tracking and recording of retiree medical premiums (both employee and employer portions).

o Developed a database for ongoing administrative use with downloaded information from PensionGold for active payees.

o Developed a historical database for all non-active payees from PensionGold, which includes all data previously held in PensionGold (1995-2016).

May 17, 2017 FY 2017 Estimated Actual Expenditures and FY 2018 Recommended Budget Page 1 of 7

ITEM # 10DATE: 5/17/17

o As of May 17, 2017, will have completed five CaiPERS disability hearing retirements (compared to nine over the same time period in the previous year), and initiated/continued efforts on four additional disability hearings that are currently working their way through the disability hearing process.

o Initiated efforts to revise the Board's policies for disability hearing procedures and document procedures, including required certifications from the City and modifications to the resolution of determination template.

o Prepared the first annual five-year and ten-year expense forecast and asset reconciliation analysis, Including a work assessment. The analysis will be updated and evaluated on an annual basis to provide the Board with information to assist with long-term planning.

o Continued transitioning the System's Accounts Payable processes with the City's new budget and accounting system.

o Reached agreement with the System's investment advisor, Verus & Associates, to fix advisory fees at a flat annual amount of $115,000 from April1, 2017- March 31, 2020.

• Investments o Following the annual asset allocation review and 10-year expected return analysis, the

Board approved the inclusion of a new asset class for Short Term Fixed Income and modifications to the target allocations for Core Fixed Income and Bank Loans to continue to de-risk the portfolio and prepare for expected inflation. Based on the revised policy, the expected 10-year return forecast is 5.5%.

o The Investment Policy Statement was revised to reflect the following changes: • The target allocation to Domestic Core Fixed Income was decreased by 15%, from 35%

to 20%. • Through this action, 5% was moved to Bank Loans (increasing the target allocation from

5% to 10%). • The remaining 10% was allocated to a new asset class for Short Term Fixed Income, and

the Board hired Vanguard as the asset manager for this new asset class.

• System/City Collaborative Efforts o Continued efforts to recover approximately $5,682,105 in ground lease rent and interest on

the past-due ground lease rent from the Concord (as of 7-31-16), as well as net sale proceeds, through the upcoming sale of the property.

FISCAL YEAR 2017 SYSTEM ASSETS AND REVENUES

For the period ending April 30, 2017 System assets totaled approximately $125.9 million, including pooled cash with the City. According to Amended and Restated Contribution Agreement No. 20,823, a contribution from the City would not be required in FY 2017 if the minimum funding percentage of 78.0% was deemed met by the June 30, 2016 actuarial analysis. The June 30, 2016 Actuarial Value of Assets funded percentage was 80.5%, thus no supplemental payment was required of the City during Fiscal Year 2017.

The System's beneficial ownership in the Concord property has historically been carried at a zero value due to the HUD restrictions on the use of the property, as well as the perception that the property was unable to generate sufficient residual receipt income to cover the annual ground lease payment. Review of the July 31, 2016 financial audits of the property revealed the total booked liability owed to the City has increased by $344,270 over the past year. The operator booked a liability/payable to the City for $2,683,336 for the land lease and $2,998,769 for interest on the past-due liability for the land

May 17,2017 FY 2017 Estimated Actual Expenditures and FY 2018 Recommended Budget Page 2 of 6

lease for a total liability of $5,682,105. Although residual receipts were identified in the amount of $14,215 for the past fiscal year, the operator of the Concord elected not make a payment of rent to the City for the current amount due of $130,000. Rather, residual receipts were transferred to the HUDcontrolled Reserve for Replacements, which will be pledged towards project refinancing and/or improvements on the property. The balance in this restricted account continued to rise over the past year by $335,450, to a total reserve amount of $1,701,634 as of July 31, 2016. Withdrawals from Reserve for Replacements require prior written HUD approval, and may only be used for project maintenance and repair. Staff estimates that residual receipts are generally available on an annual basis between $30,000 and $180,000. Based on the original agreement with the City, the System is entitled to all cash flow from the property through 2031, and 93% of the net proceeds if the property is sold.

Estimated actual expenses, as well as the recommended budget, reflect all costs to the System for benefits and administration that are paid through the System's pooled cash account with the City. Please see Attachment 1, Fiscal Year 2017 Estimated/Actual Expenditures and Fiscal Year 2018 Recommended Budget, for the line item detail of expenditures and budgets in each category.

FISCAL YEAR 2017 ESTIMATED ACTUAL EXPENSES

Category FY 2017 Est. Actual Difference Percentage

Budget Expenses Retiree Payroll 13,200,000 13,136,641 -63,359 -0.5%

Admin Personnel 197,800 197,081 -719 -0.4% Ser'.Aces & Supplies 256,171 231,104 -25,067 -9.8%

Internal Ser'.Ace Charges 12,646 11,007 -1,639 -13.0%

Equipment 0 65 65 0.0% Subtotal Admin 466,617 439,257 -27,360 -5.9%

TOTAL FPRS 13,666,617 13,575,898 -90,719 -0.7%

Total expenses for retiree payroll for the year are estimated to be $13,136,641, which is $63,359 or 0.5% less than the Fiscal Year 2017 ("FY 2017") Adopted Budget of $13,200,000. Total estimated actual expenditures for the year in Administration are $439,257, which is $27,360 or 5.9% less than the FY 2017 Adopted Budget. Overall, year-end estimated actual expenditures are anticipated to be $13,575,898, which is $90,719 or 0.7% less than the FY 2017 Adopted Budget. The calculation of estimated actual expenses is generally based on actual expenses incurred through April, in addition to planned/expected expenses for May and June.

Admin Personnel Administration staffing is provided by two 0.75 positions: one 30-hour Management Analyst IV and one 30-hour Senior Office Assistant, and both receive City benefits. In the current fiscal year, year-end estimated expenditures for Admin Personnel are $197,081, which is $719 less than the FY 2017 Adopted Budget. This figure is based on actual posted personnel expenses in the City's financial system through March 31, 2017. Since the two positions are officially City positions, salary and benefits are guided by each position's respective MOU.

Services & Supplies Estimated expenses for Services & Supplies are $231,104, which 9.8% or $25,067 lower than the FY 2017 Adopted Budget. The majority of the savings realized in this category were in Outside Legal Counsel


($10,000), Conferences/Meetings ($5,700), Pension Gold/US Bank Payroll ($3,617) and Actuarial Services ($2,500). The Board approved one-time funds in the amount of $5,000 for new office furniture and to move the copier into the office- a total of $4,773 was expended for this project (including labor and the equipment purchased below) over the fiscal year.

Internal Service Charges & Equipment Estimated expenses for Internal Service Charges are $11,007, which is $1,639 less than the FY 2017 Adopted Budget. The majority of the expenses in this category are fixed (representing overhead) and determined by either square footage, or the number of telephones and computer connections. Other expenses are based on the System's use of City services (such as postage, printing, and telephone use). A total of $65 was spent to purchase wireless keyboards and mice as part of the furniture upgrade.

FISCAL YEAR 2018 RECOMMENDED BUDGET

FY 2017 FY 2018

Category Budget

Rec'd Difference Percentage Budget

Retiree Payroll 13,200,000 13,200,000 0 0.0%

Admin Personnel 197,800 212,000 14,200 7.2% Ser\ices & Supplies 256,171 240,019 -16,152 -6.3% Internal Ser\ice Charges 12,646 11,047 -1,599 -12.6% Equipment 0 0 0 0.0%

Subtotal Admin 466,617 463,066 -3,551 -0.8%

TOTAL FPRS 13,666,617 13,663,066 -3,551 0.0%

The total Fiscal Year 2018 ("FY 2018") Recommended Budget is $13,663,066 which is $3,551 less than the FY 2017 Adopted Budget. Estimated pension payroll for FY 2018 is $13,200,000. This figure is based on realized deaths in the past fiscal year, and includes the 2% COLA increase (effective 7 /1/17). The estimated amount for annual benefits payments is the same as the FY 2017 Adopted Budget, and is consistent with the long-term actuarial evaluation. The FY 2018 Recommended Budget for Administration is $463,066, which is $3,551 or 0.8% less than the FY 2017 Adopted Budget. Changes per budget category are detailed in the following sections. (See Attachment 1, for the line item detail of the Fiscal Year 2018 Recommended Budget.)

Admin Personnel The FY 2018 Recommended Budget for Admin Personnel is $212,000, which is 7.2% greater or $14,200 more than the FY 2017 Adopted Budget. This figure represents the estimated total expenses that will be charged to the System's fund for personnel, including abated costs for worker's compensation and general liability insurance. The net increase over the prior year's budget is attributed to rising CaiPERS pension costs, COLA salary increases, and corresponding increases in benefit costs due to higher salaries.

The budget also includes the citywide abatement on regular-pay to the Benefits Services Fund to pay for accrued non-regular payroll expenses (i.e., sick, vacation, and holiday time, etc.). Although the actual abatement is 21.86% of regular pay, staff budgets 15% based on generally expected leave. At 15%, the budget for this abatement is $18,460, which is included in the recommended budget for Admin Personnel.


Services & Supplies The FY 2018 Recommended Budget for Services & Supplies is $240,019, which is $16,152 or 6.3% less than the FY 2017 Adopted Budget. In addition to minor account reallocations (to reflect actual spending), the net decrease in this budget category is primarily due to the following adjustments:

• Removal of $10,000 for outside legal counsel in Account 811400, • Removal of $5,000 from Contract Services for FY 2017 one-time funds for the office

remodel/furniture purchase, • Reduction of $4,000 in conferences and meetings in Account 812700/812900 to more closely

align with actual spending, • Reduction of $3,000 for actuarial services in Account 811400 to reflect the new contract with

Bartel Associates (approved by the Board on February 15, 2017), • Reduction of $2,880 for custodial services in 814800 due to the decreasing value of assets in

custody, • Increase of $4,308 for fiduciary and cyber liability insurance premiums in Account 815600 based

on the policies approved by the Board on April19, 2017, • Increase of $3,750 for investment advisory services in Account 814800 based on the contract

pricing schedule (total contract amount for the fiscal year is $115,000), and • Increase of $1,500 for auditing services in Account 811400 based on the contract with Macias

Gini & O'Connell (approved by the Board on March 16, 2016, total not-to-exceed contract amount for the fiscal year is $49,500).

Internal Service Charges The FY 2018 Recommended Budget for Internal Service Charges is $11,047 which is $1,599 or 12.6% less than the FY 2017 Adopted Budget. The net decrease in this category is due to the reduction of the postage budget given the January 2017 move to U.S. Bank for retiree payroll processing and the use of pre-paid envelops for other mailing needs.

FISCAL YEAR 2018 SYSTEM REVENUES AND ASSETS

For the period ending April 30, 2017, the System's assets total approximately $125.9 million including pooled cash with the City (compared to $127.6 million last year at this time). According to Amended and Restated Contribution Agreement No. 20,823, a contribution from the City is not anticipated in the FY 2018 Recommended Budget as estimated by the June 30, 2016 Actuarial Valuation. For the fiscal year ending June 30, 2017, the minimum funding percentage for the year's valuation that is used to calculate the City's supplemental payment for FY 2018 is 78.5%. If the minimum funding percentage of 78.5% is deemed met by upcoming June 30, 2017 actuarial analysis, the City will not be required to provide a supplemental payment to the System by January 1, 2018.

The System's beneficial ownership in the Concord property has been carried at a zero value due to the HUD restrictions on use of the property, as well as the perception that the property was unable to generate sufficient rent to cover the annual ground lease. Over the year, staff will work with the City towards obtaining the $5.7 million in rent liability owed to the City on the property, as well as 93% of the net proceeds if the property is sold.

May 17,2017 FY 2017 Estimated Actual Expenditures and FY 2018 Recommended Budget Page 5 of 6

MAJOR PROJECTS/ISSUES FOR FISCAL YEAR 2017

Over the next fiscal year, staff anticipates working collaboratively with the City and the System's professional consultants to complete a number of projects, including:

• Preparation and issuance of an RFP for auditing financial services (current contract with Macias Gini & O'Connell LLC expires upon completion of the June 30, 2017 financial audit),

• Continued implementation of the Records Retention/Destruction Policy, including destruction of all non-permanent files upon creation of electronic copies,

• Initiate storage and cataloguing of permanent files and records in the City's digital record storage system, including subsequent destruction of the paper files, and

• Pursuit of efforts to obtain annual ground lease rent payment from the Concord as well as recovery of the past-due rent and interest liability, and potential net proceeds from the prospective sale of the property.

POLICY CHANGES FOR CONSIDERATION FOR FISCAL YEAR 2018

In addition to the preceding proposed budget reductions, staff recommends that the Board consider taking action on the following two policy changes:

• Reduce the number of Board meeting dates and consolidate work of the Board: o Quarterly (January, April, July, October), plus two (June and November) - this move

results in reducing Board meetings by four per year. (See Attachment 2, Proposed Board Meeting Schedule, for the modified work distribution.)

o Modify the standing rules for disability hearings to accommodate up to two unchallenged hearings or one challenged hearing per meeting. This adjustment will help maintain balance between the work of the Board and work performed on the behalf of the City.

• Formal request of the City's Finance Director or his designee to work with staff to evaluate transitioning Admin Personnel to direct-charge against the System's fund for ill! personnel expenses (and eliminate the abatement to the City's Benefit Services Fund). If successful, annual savings would be approximately $18,000 in FY 2018.

FISCAL IMPACT

The FY 2018 Recommended Budget for benefits and administration is $13,663,066, which is $3,5511ess than the FY 2017 Adopted Budget.

ATIACHMENTS

1. Fiscal Year 2017 Estimated/Actual Expenditures and Fiscal Year 2018 Recommended Budget 2. Proposed Board Meeting Schedule


Attachment 1 I I I I

Fire &: Police Retirement System Fiscal Year 2017 Estimated/ Actual Expenditures and Fiscal Year 2018 Recommended Budget

Fiscal Year 2017 Fiscal Year 2018

Acct# Descriptions ADOPTED Est. Actual Est-Act/ Rec'd FY 2017/

Diff % Budget Expenses Bgt Diff Budget FY 2018 Diff

NON-BUDGETED Pooled Cash Revenues 692600 Investment Income - - - - -668900 Miscellaneous Cash/Income - 26,966 (26,966) - -751000 Concord Asset Income - - - - -703200 City Cash Contributions/Revenues - - - - -

TOTAL Pooled Cash Revenue - 26 ,966 (26,966) - -

802200 Retiree Payroll 13,200,000 13,1 36,641 63,359 13,200,000 - 0.0%

802200 Retiree COLA 1% 2%

Personnel Number of Employees for Year 1.50 1.50 - 1.50 -

800500/5800 Personnel Costs 197,800 197,081 719 212,000 14,200 7.2% Total Personnel 197,800 197,081 719 212,000 14,200 7.2%

Services & Supplies 810100 Materials and Supplies 1,450 1,124 326 750 (700) 81 0900 Small Equipment Purchases - - - - -81 1000 Outside Printing & Duplication 1,700 1,437 263 1,100 (600) 811300 Equipment Lease Payments 2,100 1,516 584 2,1 00 -810800 Computer Related Supplies - Software - - - - -813500 Reference Materials - Subscriptions - - - - -813900 Water 350 376 (26) 350 -812400 Dues and Memberships 750 750 - 750 -

812700/2900 Conferences/Meetings - Board/Staff 6,000 300 5,700 2,000 (4,000) 815600 Insurance 18,441 18,441 - 22,749 4,308 811400 Contract Services -811400 Mise Services 5,000 4,495 505 - (5,000) 811400 Actuarial Services 19,000 16,500 2,500 16,000 (3,000) 811400 Asset Managers - - - - -811400 Auditing Services 48 ,000 47,998 3 49 ,500 1,500 811400 PensionGold/US Bank Payroll 7,830 4 ,213 3,617 8,300 470 811400 Outside Legal Counsel 10,000 - 10,000 - (10,000) 811400 Berwyn Group 300 300 - 300 -811400 Subtotal Contract Services 90,130 73, 506 16,624 74, 100 (16,030) -17. 8%

Page 1 of2 revision date: 5/3/2017

Fire &:. Police Retirement System Fiscal Year 2017 Estimated/ Actual Expenditures and Fiscal Year 2018 Recommended Budget

Fiscal Year 2017 Fiscal Year 2018

Acct# Descriptions ADOPTED Est. Actual Est-Act/ Rec'd FY 2017/

Diff% Budget Expenses Bgt Diff Budget FY 2018 Diff

814800 Investment Expenses 814800 Other Investment Exps (Voya) - - - - -814800 Custodial Bank Services 24,000 22,404 1,596 21,120 (2,880) 814800 Investment Consultant Services 111,250 111,250 (0) 115,000 3,750 814800 Subtotal Investment Expenses 135,250 133,654 1,596 136,120 870 0.6%

Total Services & Supplies 256,171 231,104 25,067 240,019 (16,152) -6.3%

Internal Service Charges -860700 Printing 100 - 100 100 -862600 Mail Services 100 - 100 100 -814400 Postage 2,450 1,523 927 850 (1 ,600) 862200 Telephones 150 88 62 150 -861100 IS-Applic. Devel. & Support 200 - 200 200 -861200 IS-PC Network Support 250 - 250 250 -863600 IS-DolT Desktop Replacement 284 284 - 285 1

860100/2000/3400 Struct MainVPrev MainVSec 5,269 5,269 - 5,269 -860400 Utilities/Insurance 2,160 2,160 - 2,160 -860500 Housekeeping 1,683 1,683 - 1,683 -

Subtotal City-Assessed /SCs 9,396 8,760 636 9,397 1 Total Internal Service Charges 12,646 11,007 1,639 11,047 (1,599) -12.6%

Equipment 850400 EquipmenVFurniture Per Month - - - - -850600 Computer Equipment Per Month - 65 (65) - -

Total Equipment - 65 (65) - - 0.0%

TOTAL FPRS ADMINISTRATION EXPENSES 466,617 439,257 27,360 463,066 (3,551) -0.8%

TOTAL FPRS OPERATIONAL EXPENSES 13,666,617 13,575,898 90,719 13,663,066 (3,551) 0.0%

Notes on ESTIMATED ACTUAL Expenses: Estimated Actual Expenses for FY 2017 based on actual expenses through April, unless noted below. 668900/Misc Cash/Income: $26 ,996 from net class action distributions from NT though 4-30 (SprinVNextel, Fannie Mae, Pfizer, Wells Fargo MBS, American Intel.). 811400 Auditing Services: Includes expected billings of $5,000 for pre-work on the 6-30-17 financial audit. I

I I I I

Page2 of2 revision date: 513/2017

Asset

MEET Qtly Rebal Allocation

January X X February

March

April X X X May

June X July X X August DARK

September

October X X November X December DARK

Attachment 2

Proposed Board Meeting Schedule

(January, April, June, July,October, November}

Engagement Val

IPS Revisions letter Audit Asmptns Valuation

X X

X X

X X X

IDR Trustee Board Contract

Budget Hearings Election Reorg Renewals

X X

X X

X X X X

X

R:\Office Docs\Board\FPRS Board Agenda Forecast, Rev Mtg Sched

Pasadena Fire ~ Police Retirement System

AGENDA REPORT

TO: Chair Jones and Board Members of the Fire & Police Retirement System

FROM: Jill Fosselman, Secretary to the Boar

DATE: May 17, 2017

ITEM: Revised Board Policies for Hearing Procedures and Document Procedures for CaiPERS

Safety Members Disability Hearings, as prepared by System Counsel Best Best & Krieger

RECOMMENDATION

Following discussion, the Board may:

1. Approve the revised policies for Disability Retirement Hearing Procedures and Disability Retirement Document Procedures, or

2. Other direction provided by the Board.

BACKGROUND

The Board's disability hearing policy documents, "Hearing Procedures" and "Document Procedures" were last updated in 2016 to adopt procedures for hearing appeals. At the last Board meeting, System Counsel Best Best & Krieger ("BBK") notified the Board that changes in CaiPERS' procedures would require certain certifications be made by the City to the Board, and certified in the resolution of determination by the Board. The attached revised policies have been prepared by BBK.

Modifications to Hearing Procedures include the following (see Attachment 1):

• Section II, to initiate the application, the applicant must submit to the City a completed Employer Information for Disability Retirement form;

• Section III.C., further required specificity in the medical reports submitted to substantiate physical or mental incapacity to perform the Applicant's job duties;

• Section III.F., under certain specific circumstances before a hearing is scheduled, the City must demonstrate to the Board that the City has obtained CaiPERS' determination that the applicant is eligible to apply for a disability retirement;

• Section IV.A.14., specific certifications that must be included in the Board's resolution of determination; and

• Throughout the document, various administrative clean-ups and clarifications.

Although a section on post hearing jurisdiction was originally added (Section XIL it was removed following additional legal research that confirmed that the responsibility for re-evaluation is the City's. Section 21173 permits a contracting agency's governing body to delegate any authority or duty with respect to local safety disability determinations under "this Article/' meaning Article 6 of Chapter 12 of

May 17, 2017 Page 1 of 2

Disability Hearing and Document Procedures

ITEM #: 11DATE: 5/17/17

PERL. Section 21192, which grants authority to require a disability retiree under the voluntary retirement age to undergo a medical examination to re-determine disability, is under Article 7, regarding reinstatement from retirement. Therefore, the statutory responsibility to re-evaluate is not a duty or authority that the City can delegate to the FPRS Board and is properly a City responsibility. Based on the preceding, the policies were revised to remove the sections discussing re-evaluations.

Modifications to Document Procedures include the following (see Attachment 2):

• Section III.A. and Section IV.B.l.e., requirement to complete and submit the CaiPERS Employer Information for Disability Retirement Form;

• Section IV.B., further clarification of the information required in the medical reports regarding the applicant's incapacity to perform the duties of the position; and

• Throughout the document, various administrative clean-ups and clarifications.

FISCAL IMPACT

There is no direct fiscal impact anticipated from this action.

ATIACHMENTS

1. Policy on Hearing Procedures for CaiPERS Safety Members Disability Retirement Hearings (redline copy)

2. Policy on Document Procedure for CaiPERS Safety Members Disability Retirement Hearings (redline copy)

May 17,2017 Page 2 of 2

Disability Hearing and Document Procedures

PASADENA FIRE & POLICE RETIREMENTSYSTEM

HEARING PROCEDURES

FOR CALPERS SAFETY MEMBERSDISABILITY HEARINGS

Approved by the Board: __________, 20162017

24924.00002\24425727.5

Attachment 2

GUIDELINES FOR PROCESSINGDISABILITY RETIREMENT APPLICATIONS

INITIAL APPLICATIONS

GENERALI.

The Retirement Board is responsible for hearing and determining all facts pertaining todisability retirement applications for local safety members of the California PublicEmployees’ Retirement System (PERS) (Government Code § 21156(b)(1)). Suchapplications are decided consistent with applicable provisions of the rules containedherein and the California Government Code. Unless otherwise stated, all citations toCode provisions refer to the California Government Code.

INITIATING THE APPLICATIONII.

PERS ApplicantsA.

The applicant, or any person acting on his or her behalf, may file an applicationdirectly with the PERS Board of Administration, which then forwards theapplication to the Retirement Board, with instructions to complete itsdetermination within six (6) months of receipt of the application, unlessotherwise waived by applicant. (Government Code §§ 21152, 21154, and21157). The applicant must provide the completed Employer Information forDisability Retirement form to the City.

Action of Office or Department HeadB.

The head of the office or department in which the applicant was last employedmay also initiate the application for disability retirement. (Government Code §21152(a)). In that case, the office or department head shall file directly with thePERS Board of Administration.

Action of CityC.

The City Council or an official designated by the City may also initiate theapplication for disability retirement. (Government Code § 21152(c)). In thatcase, the City Council or designated official shall file directly with the PERSBoard of Administration.

SCHEDULING OF HEARINGIII.

The Secretary of the Retirement Board (the “Secretary”) shall submit theA.application, filed in accordance with Section II .A. or B. above, to theRetirement Board at a subsequent regular scheduled meeting for the setting of ahearing date.

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If the Secretary is advised by the applicant or his/her attorney in writing at leastD.tenfourteen (1014) days in advance of the hearing that the scheduled date ortime is inconvenient,1 the matter may be calendared for the next succeedingregular meeting, or for a date mutually agreeable to the parties, at the discretionof the Retirement Board.

The Retirement Board shall make its best faith effort to schedule the hearing andE.make a determination within six months of the date after receipt of theapplication, unless the applicant waives the above requirement. (GovernmentCode § 21157).

The City must obtain PERS’ determination that the applicant is eligible to applyF.for disability retirement before the Retirement Board may schedule a hearing inany of the following circumstances:

The disciplinary process was underway prior to the applicant’s separation1.from City employment.

The applicant was terminated from the City for cause.2.

The applicant resigned in lieu of termination from the City.3.

Once a hearing date has been set by the Retirement Board, the Secretary shallB.notify the applicant and City of the hearing date within 10 days. They shall alsobe provided with a copy of the Hearing Procedures and the DocumentProcedures.

Medical reports are required and must be received by the Secretary at leastC.tennine (109) days prior the date of the hearing. The Secretary requires thesubmission of eightone (81) copiesoriginal paper copy, four (4) paper copies andone (1) electronic copy (in non-editable form) of medical or other relevantreports from the City’s designated representative, and from the applicant orhis/her attorney. Medical reports must demonstrate physical or mentalincapacity to perform applicant’s job duties from one year before his or her lastday of physical work to the present, and must not show gaps in treatment ofmore than six months during this period. After receipt of the reports, theSecretary distributes copies to members of the Retirement Board. The partysubmitting reports shall assume service of same upon the opposing party. Inextraordinary circumstances, where non-compliance was not within the controlof the applicant or the City, the Retirement Board at its discretion, may continuethe matter for failure to submit adequate medical reports or legal briefs on timeor may waive the time limit requirements.

1 A date may be inconvenient, for example, due to the illness of a party, court-calendarconflict of participating counsel, or insufficient time to investigate or prepare the case.

The applicant signed an agreement to waive his or her reinstatement right4.as part of a legal settlement with the City.

The applicant has been convicted of or is being investigated for a work-5.related felony.

HEARING PROCEDURESIV.

The Retirement Board shall follow the procedures outlined below in conductingA.hearings on disability applications:

The title of the matter shall be announced by the Chair of the Retirement1.Board (the “Chair”).

If an applicant is not present in the meeting room, the Retirement Board2.shall make inquiries outside of the meeting room to ascertain whether ornot the applicant is present for the hearing.

Applicants shall be sworn prior to giving any testimony. Applicants shall3.have the right to testify in person, and shall be subject to cross-examination only by members of the Retirement Board. All otherpersonal testimony is subject to the following: In the event theRetirement Board determines, in its sole discretion, that it needs furtherinformation concerning the matter and that such information may beprovided by the personal testimony of other persons, the RetirementBoard may allow or require the personal testimony of any other person,including, but not limited to medical experts. The Retirement Board shallso announce, and the hearing shall be deferred for a reasonable time toallow the parties to arrange for personal testimony of such witnesses.

The applicant may request a closing of the hearing to protect privacy of4.health or other private information. The request must be made prior tocommencement of testimony.

The Chair shall call for the moving party, generally the applicant, or5.his/her attorney to present his/her arguments, facts or documentaryevidence. Since the members of the Retirement Board have received andreviewed the file and documentary evidence in advance, the moving partyshall limit his or her remarks to the extent possible, and in no event shalla presentation last more than fifteen (15) minutes without RetirementBoard approval.

The Chair shall call for the opposing or responding party to present6.his/her argument, facts or documentary evidence. Since the members ofthe Retirement Board have received and reviewed the file anddocumentary evidence in advance, the movingopposing or respondingparty shall limit his or her remarks to the extent possible, and in no event

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shall a presentation last more than fifteen (15) minutes withoutRetirement Board approval.

The Chair may call for statements under oath from other persons with7.relevant information regarding the application.

The Chair shall call for questions or comments from the Retirement8.Board directed either to the applicant or the City’s designatedrepresentative.

The moving party shall be given an opportunity for rebuttal at the9.conclusion of the questions or statements. Since the members of theRetirement Board have received and reviewed the file and documentaryevidence in advance, the moving party shall limit his or her remarks tothe extent possible, and in no event shall a presentation last more thanfifteen (15) minutes without Retirement Board approval.

The Chair shall declare the evidentiary portion of the hearing closed and10.provide an opportunity for discussion in which members of theRetirement Board state their opinions of the facts and evidence beforethem.

By motion, the Retirement Board shall take action on the application.11.

The Chair shall announce the decision of the Retirement Board, briefly12.summarizing the reasons for that decision on the public record (e.g.,medical reports establish that the applicant’s job related disability ispermanent and stationary, and the City does not oppose this application).

The Chair shall instruct the Fire & Police Retirement System’s Counsel13.to prepare a Resolution documenting the Retirement Board’s decision.

Said Resolution shall be submitted to the members of the Retirement14.Board for approval and execution.

The Resolution shall address whether the applicant is substantiallya.incapacitated from performing the usual duties of his or herposition, whether the incapacity will exist for a permanent orextended and uncertainis expected to be permanent, extend for aduration of sixtwelve consecutive months or longer, or result indeath, and whether the disability is considered “industrial.”

The Resolution shall address the last day of compensation.b.

The Resolution shall address the primary disabling condition (e.g.c.orthopedic, cardiac, psychological, etc.).

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The Resolution shall address the effective date of retirement.d.

The Resolution shall address whether there is a third partye.liability related to the injury that caused the disability.

The Resolution shall address whether advanced disability pensionf.payments will be paid, specifying the monthly amount, if any.

The Resolution shall address whether or not the applicant hadg.filed a Workers’ Compensation claim(s) for his or her disablingcondition, and if so, whether the claim(s) was accepted.

The Resolution shall include a statement certifying under penaltyh.of perjury that the determination was made based on competentmedical opinion.

The Resolution shall include a statement certifying under penaltyi.of perjury that the determination was not used as a substitute forthe disciplinary process. If any of the circumstances in SectionIII.F is met, the Resolution shall include a statement that confirmsthat all relevant personnel documents were forwarded to PERSand that PERS’ determined that the applicant is eligible to applyfor disability retirement prior to starting the hearing process.

Thereafter, fully executed copies shall be transmitted by the Secretary15.within a reasonable amount of time to PERS, the applicant or his/herattorney, the City Attorney, and the City’s Workers’ CompensationSection, and the original shall be placed on file in the office of theSecretary.

If the Retirement Board denied the applicant’s disability retirement16.application, the Chair shall direct the Fire & Police Retirement System’sCounsel to prepare a denial notice to the application informing theapplicant of the decision and his or her right to appeal the decision to theRetirement Board within 30 days of receipt of the notice by filing awritten request in accordance with XIII Section XII.A below.

BURDEN OF PROOFV.

The burden of proof for disability cases under Government Code § 21156 is as follows:

The available information must show to the satisfaction of the Retirement BoardA.that the applicant is substantially incapacitated physically or mentally from theperformance of his or her usual job duties and that such incapacitation isexpected to be permanent, extend for a duration of twelve consecutive monthsor longer, or result in death, such that the memberapplicant is eligible fordisability retirement.

Page 5 of 131424924.00002\24425727.224425727.5

If the applicant is asserting an industrial disability, the available information mustB.show to the satisfaction of the Retirement Board that the applicant’s disability isa result of injury or disease arising out of and in the course of his or heremployment, such that the memberapplicant is eligible to retire for industrialdisability.

MEDICAL REPORTS AS EVIDENCEVI.

The Retirement Board prefers that medical opinions be provided in the form ofA.written reports. These reports shall include:

The date of examination;1.

History of the injury or illness;2.

Applicant’s present complaint;3.

Source of all facts set forth in the history and complaints;4.

Findings on examination;5.

Opinion as to the extent of disability and work limitations, if any;6.

Cause of disability;7.

Medical treatment indicated;8.

Opinion as to whether or not permanent disability has resulted from the9.injury or illness, or whether disability is of an extended and indefiniteduration (if disability is stationary, a description of the disability with acomplete evaluation);

Whether retirement is advised;10.

The reason for the opinion; and11.

A summary of the qualifications of the medical expert, including the12.expert’s familiarity with matters relating to police and fire safety officers.

CONTINUING DUTY TO FILE MEDICAL REPORTSVII.

If an applicant or his or her attorney, or the City’s designated representative, acquiresadditional medical reports after the initial submission of such reports, the applicant orhis or her attorney, or the City’s designated representative shall forward the additionalcopies of reports to the Secretary. The Secretary will then distribute the copies to theRetirement Board. However, the Retirement Board reserves the right to refuse toconsider materials determined not to be timely.

Page 6 of 131424924.00002\24425727.224425727.5

NON-MEDICAL EVIDENCEVIII.

Where non-medical written evidence is filed by either party in lieu of oral evidence,copies thereof shall be prepared by the party and delivered to the Secretary at least ten(10) business days before the hearing, unless a satisfactory showing is made that suchreports and records were not available for service within said time.

RECORD OF PROCEEDINGSIX.

The Secretary shall have an audio recording made of the hearing. At the discretion ofthe Secretary, the services of a court reporter may be procured to record theproceeding. The Secretary shall also be responsible for receiving and distributingdocuments from the applicant or his or her attorney, or the City’s designatedrepresentative, to the Retirement Board; giving notice required under these guidelines;identifying and maintaining documentary evidence offered at the hearing, and retainingthe records after the Retirement Board makes its determination.

CLOSING OF THE HEARINGX.

Upon the closing of the hearing, the matter will stand submitted by all parties.Accordingly, any arguments or points not made at the hearing shall be deemed waived,and any evidence not presented at the hearing shall not be admissible at a later date.The Retirement Board may, at its discretion, adjourn to deliberate in private beforeannouncing its decision.

XI. POST HEARING JURISDICTION

A. The Retirement Board may require one who has received a disability retirement andwho is under the age of voluntary retirement to undergo a medical examinationto determine whether the applicant is no longer incapacitated for service in theposition held by him/her when retired for disability (Government Code §§21172, 21175).

B. If the applicant refuses to submit to a medical examination, the applicant’s pensionmay be discontinued forthwith until his or her withdrawal of such refusal, and ifthe applicant continues such refusal for one (1) year, his or her disabilityretirement allowance may be canceled.

REQUESTS FOR RECONSIDERATION/APPEALS

XII. GENERALXI.

The Retirement Board has the authority to reconsider decisions regarding PERSapplicants who are local safety members. Appeals from such determinations must befiled with the Retirement Board and may not be filed with or considered by PERS.Appeals shall be conducted in accordance with the Administrative Procedures Act,codified at Government Code § 11500 et. seq. (Government Code § 21156(b)(2)).

Page 7 of 131424924.00002\24425727.224425727.5

XIII. INITIATING THE APPEALXII.

Upon receipt of a denial notice described in IV.A.16 above, applicant mayA.initiate an appeal by filing a written statement of issues with the Secretarysetting forth the legal and factual basis for appealing the Retirement Board’sdecision. The applicant must file said statement of issues within 30 days ofreceipt of the denial notice.

If the applicant’s statement of issues is insufficient, the Retirement Board mayB.request additional information from the applicant, to be provided by theapplicant within 10 days of the Retirement Board’s request.

At any time before the appeal is set for hearing, the Retirement Board mayC.permit the applicant to file an amended or supplemental statement of issues.

XIV. PRESIDING AUTHORITYXIII.

The Retirement Board may either request an Administrative Law Judge to hearA.the case alone, or hear the case itself with the assistance of an AdministrativeLaw Judge. (Government Code §11512(a)).

If the Retirement Board hears the case itself, the Administrative Law JudgeB.shall, upon request, advise the Retirement Board on matters of law. TheRetirement Board shall exercise all other powers relating to the conduct of thehearing but may delegate any or all of them to the Administrative Law Judge.

When an Administrative Law Judge alone hears a case, he or she shall exerciseC.all powers relating to the conduct of the hearing.

XV. SCHEDULING THE HEARINGXIV.

As soon as administratively feasible after receipt of the applicant’s request forA.appeal and statement of issues, the Retirement Board, Secretary, or legal counselshall contact the Office of Administrative Law Judges to request a hearing.

The Retirement Board shall deliver or mail a notice of hearing to all parties atB.least 10 days prior to the hearing that shall be substantially in the form describedin Government Code §11509.

The time and place of the hearing shall be subject to the availability of anC.Administrative Law Judge.

The hearing shall be held at a hearing facility maintained by the Office ofD.Administrative Law Judges closest to the City, a place selected by theRetirement Board that is closer to the City, or a place selected by agreement ofthe parties. The applicant may file a motion for a change in the place of hearing

Page 8 of 131424924.00002\24425727.224425727.5

with the Administrative Law Judge within 10 days after service of a notice ofhearing.

XVI. PLEADINGS AND FILINGSXV.

Pleadings, motions, and any other filings made in the course of the hearing mustA.include the names of the parties. Otherwise, such documents are not required tobe in any particular form.

Filings must be served on all parties and the presiding authority by mail or inB.person.

The Retirement Board shall file a response to the applicant’s statement of issuesC.along with the notice of hearing described in Section XIV.B above.

At any time before the appeal is set for hearing, the Retirement Board mayD.permit the applicant to file an amended or supplemental statement of issues.

The parties may file the following motions with the presiding authority duringE.the course of the appeal:

Motion to compel discovery made within the time limits of Government1.Code §11507.7.

Motion for a change in the place of hearing made within the time limits2.of Government Code § 11508(c).

Motion to hold a prehearing conference.3.

Motion for separate hearing of any issue for convenience or to avoid4.prejudice.

Motion for intervention.5.

Motion to correct clerical error in decision.6.

Motion for reconsideration of all or part of the case made within the7.time limits of Government Code §11521.

Motion to vacate decision made within the time limits of Government8.Code §11520(c).

Any other motions permitted by a presiding Administrative Law Judge.9.

XVII. ORDERS BY ADMINISTRATIVE LAW JUDGEXVI.

The Administrative Law Judge may order a prehearing conference and/or aA.settlement conference, and may issue such other orders as needed.

Page 9 of 131424924.00002\24425727.224425727.5

XVIII. CONDUCT OF HEARINGXVII.

If the Retirement Board is the presiding authority, the hearing shall beA.conducted using procedures similar to those outlined in Section IV above. TheRetirement Board may request assistance from the Administrative Law Judgewhile conducting the hearing.

If an Administrative Law Judge is the presiding authority, he or she shallB.exercise all powers relating to the conduct of the hearing.

XIX. CONTINUANCESXVIII.

The Administrative Law Judge that has been assigned to the hearing may grantA.continuances for good cause shown in accordance with Government Code§11524.

XX. EVIDENCEXIX.

GenerallyA.

The hearing need not be conducted according to technical rules relating toevidence and witnesses, except as provided in this Section XVIII XIX . Anyrelevant evidence shall be admitted if it is the sort of evidence on whichresponsible persons are accustomed to rely in the conduct of serious affairs,regardless of the existence of any common law or statutory rule which mightmake improper the admission of the evidence over objection in civil actions.

Hearsay evidence may be used for the purpose of supplementing or1.explaining other evidence but over timely objection shall not be sufficientin itself to support a finding unless it would be admissible over objectionin civil actions. An objection is timely if made before submission of thecase or on reconsideration.

The rules of privilege shall be effective to the extent that they are2.otherwise required by statute to be recognized at the hearing.

The presiding authority has discretion to exclude evidence if its probative3.value is substantially outweighed by the probability that its admission willnecessitate undue consumption of time.

Official notice may be requested for any fact which may be judicially4.noticed by the courts of California.

Discovery RequestsB.

Prior to the hearing and within 30 days after service of the initial1.statement of issues, or within 15 days after service of any additional

Page 10 of 131424924.00002\24425727.224425727.5

pleading, either party is entitled, upon written request to the other party,to:

Obtain the names and addresses of witnesses to the extent knowna.to the other party, including, but not limited to, those intended tobe called to testify at the hearing; and

Inspect and make a copy of any of the following in possession orb.custody or under the control of the other party (except for thoseprivileged from disclosure by law or protected as attorney workproduct):

A statement pertaining to the subject matter of the(i)proceeding made by any party to another party or person;

Statements of witnesses then proposed to be called by the(ii)party and of other persons having personal knowledge ofthe acts, omissions or events which are the basis for theproceeding, not included in (i) above;

All writings, including, but not limited to, reports of(iii)mental, physical and blood examinations and things whichthe party then proposes to offer in evidence;

Any other writing or thing which is relevant and which(iv)would be admissible in evidence;

Investigative reports made by or on behalf of the(v)Retirement Board or other party pertaining to the subjectmatter of the proceeding, to the extent that these reports(1) contain the names and addresses of witnesses or ofpersons having personal knowledge of the acts, omissionsor events which are the basis for the proceeding, or (2)reflect matters perceived by the investigator in the courseof his or her investigation, or (3) contain or include byattachment any statement or writing described in (a) to(e), inclusive, or summary thereof.

Oral EvidenceC.

Oral evidence shall be taken only on oath or affirmation.1.

Each party shall have the following rights:2.

to call and examine witnesses;a.

to introduce exhibits;b.

Page 11 of 131424924.00002\24425727.224425727.5

to cross-examine opposing witnesses on any matter relevant toc.the issues even though that matter was not covered in the directexamination;

to impeach any witness regardless of which party first called himd.or her to testify; and

to rebut the evidence against him or her.e.

If the applicant does not testify on his or her own behalf he or she may3.be called and examined as if under cross-examination.

AffidavitsD.

At any time 10 or more days prior to a hearing or a continued hearing,1.any party may mail or deliver to the opposing party a copy of anyaffidavit which it proposes to introduce in evidence, together with thenotice required by Government Code §11514(b).

Unless the opposing party, within seven days after such mailing or2.delivery, mails or delivers to the proponent a request to cross-examine anaffiant, the right to cross-examine such affiant is waived and the affidavit,if introduced in evidence, shall be given the same effect as if the affianthad testified orally. If an opportunity to cross-examine an affiant is notafforded after request therefor is made as herein provided, the affidavitmay be introduced in evidence, but shall be given only the same effect asother hearsay evidence.

A ruling of the Administrative Law Judge admitting or excluding evidence isE.subject to review in the same manner and to the same extent as theAdministrative Law Judge’s proposed decision in the proceeding, as set forth inXXII Section XXI below.

XXI. RECORD OF PROCEEDINGSXX.

The hearing shall be recorded by a stenographic reporter or, upon the consent ofA.all parties, electronically.

The complete record includes the pleadings, all notices and orders issued by theB.agency, any proposed decision by an Administrative Law Judge, the finaldecision, a transcript of all proceedings, the exhibits admitted or rejected, thewritten evidence, and any other papers in the case.

XXII. DECISIONXXI.

If the Retirement Board is the presiding authority:A.

Page 12 of 131424924.00002\24425727.224425727.5

No member of the Retirement Board who did not hear the evidence shall1.vote on the decision.

The Retirement Board shall issue its decision within 100 days of the2.hearing.

If an Administrative Law Judge is the presiding authority:B.

Within 30 days after the hearing, the Administrative Law Judge shall1.prepare a proposed decision in a form that may be adopted by theRetirement Board as the final decision in the case. Thirty days after thereceipt by the Retirement Board of the proposed decision, a copy of theproposed decision shall be filed by the Retirement Board as a publicrecord and a copy shall be served by the Retirement Board on each partyand his or her attorney. Such filing does not mean the Retirement Boardadopts the proposed decision.

Within 100 days of receipt of the Administrative Law Judge’s proposed2.decision, the Retirement Board may take one of the following actions. Ifit fails to act within 100 days of receipt of the proposed decision, theproposed decision shall be deemed adopted.

Adopt the proposed decision in its entirety.a.

Make technical or other minor changes in the proposed decisionb.and adopt it as the decision. Such action is limited to a clarifyingchange or a change of a similar nature that does not affect thefactual or legal basis of the proposed decision.

Reject the proposed decision and refer the case to the samec.Administrative Law Judge if reasonably available, or otherwise toanother Administrative Law Judge, to take additional evidence.The Administrative Law Judge shall prepare a revised proposeddecision based upon the additional evidence and the transcript andother papers that are part of the record of the prior hearing. Acopy of the revised proposed decision shall be furnished to eachparty and his or her attorney.

Reject the proposed decision, and decide the case upon thed.record, including the transcript, or upon an agreed statement ofthe parties, with or without taking additional evidence. Bystipulation of the parties, the Retirement Board may decide thecase upon the record without including the transcript. If theRetirement Board takes this action, all of the following provisionsapply:

Page 13 of 131424924.00002\24425727.224425727.5

A copy of the record shall be made available to the(i)parties. The Retirement Board may require payment offees covering direct costs of making the copy.

The Retirement Board shall not decide any case provided(ii)for in this subdivision without affording the parties theopportunity to present either oral or written argumentbefore the Retirement Board. If additional oral evidence isintroduced before the Retirement Board, no member mayvote unless the member heard the additional oral evidence.

The authority of the Retirement Board to decide the case(iii)includes authority to decide some but not all issues in thecase.

The Retirement Board shall issue its final decision not(iv)later than 100 days after rejection of the proposeddecision. If the Retirement Board has ordered a transcriptof the proceedings, the Retirement Board shall issue itsfinal decision not later than 100 days after receipt of thetranscript. If the Retirement Board finds that a furtherdelay is required by special circumstance, it shall issue anorder delaying the decision for no more than 30 days andspecifying the reasons therefor. The order shall be subjectto judicial review pursuant to Government Code § 11523.

Copies of the decision shall be delivered to the parties personally or sent toC.them by registered mail.

The decision shall become effective 30 days after it is delivered or mailed to theD.applicant unless a reconsideration is ordered within that time, the RetirementBoard orders that the decision shall become effective sooner, or a stay ofexecution is granted.

XXIII. JUDICIAL REVIEWXXII.

Either party may seek judicial review of the presiding authority’s decision inA.accordance with the guidelines set forth in Government Code §11523.

Revision adopted by the Fire & Police Retirement Board: _______________, 20162017

Page 14 of 131424924.00002\24425727.224425727.5

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PASADENA FIRE & POLICE RETIREMENTSYSTEM

DOCUMENT PROCEDURES

FOR CALPERS SAFETY MEMBERSDISABILITY HEARINGS

Approved by the Board: ________, 20162017

24924.00002\24425772.224425772.6

Attachment 1

PROCEDURES FOR PRESENTINGDOCUMENTS IN CONNECTION WITH

DISABILITY RETIREMENT APPLICATIONSGENERALI.

The Retirement Board is responsible for hearing and determining all factsA.pertaining to disability retirement applications for local safety members of theCalifornia Public Employees’ Retirement System (PERS) (Government Code §21156(b)(1)). To assist the Retirement Board in its consideration of applicationsfor retirement, and to increase efficiency in processing applications, the followingprocedures for presenting documents (“Document Procedures”) which are setforth herein shall apply.

The Document Procedures are in addition to the Retirement Board’s HearingB.Procedures set forth in a separate document, and are intended to provideguidance in connection with the submission of documents. In the event of anyinconsistency between the Document Procedures and the Hearing Procedures,the Hearing Procedures shall applycontrol.

EARLY FILING OF THE APPLICATIONII.

Applicants are strongly encouraged to file their application for retirement at leastA.one hundred twenty days prior to the desired hearing date.

An application may be withdrawn by the applicant or by the filing party (if anB.application was filed on the behalf of the applicant by the Office or DepartmentHead), at any time prior to the hearing date without penalty.

UNOPPOSED APPLICATIONSIII.

In unopposed matters, representatives of the City and of the applicant shallA.jointly present to the Retirement Board for its consideration the followingdocuments:

A written statement that the matter is unopposed.1.

All Permanent and Stationary reports.2.

The report of the Agreed Medical Examiner.3.

4. Completed Employer Information for Disability Retirement form.

Representatives of the City and the applicant shall eliminate duplication ofB.reports and other materials submitted to the Retirement Board to the greatestextent possible.

124924.00002\24425772.224425772.6

OPPOSED CASESAPPLICATIONSIV.

COORDINATION WITH WORKERS COMPENSATION CASEA.

Any Workers Compensation case in which an Answer (as defined by1.Government Code § 21166) has been filed by the City shall be deemedan Opposed Case, subject to these Document Procedures.

In the event the City withdraws its opposition in the Workers2.Compensation case, or that matter is settled, the City shall so notify theapplicant and the Retirement Board. The matter will then proceed as anunopposed case.

DOCUMENTS TO BE SUPPLIED BY THE PARTIES:B.

The applicant shall supply the Retirement Board with each of the1.following documents:

A brief statement of any known factual issues, and a citation toa.the report and page on which the facts relied upon by theapplicant appear.

Treating Physician Report (if applicable). demonstrating physicalb.or mental incapacity to perform the duties of his or her job fromone year before his or her last day of physical work to thepresent. Medical records must not show gaps in treatment ofmore than six months during this period.

Applicant’s Qualified Medical Examiner Report (if applicable).c.demonstrating physical or mental incapacity to perform the dutiesof his or her job from one year before his or her last day ofphysical work to the present. Medical records must not showgaps in treatment of more than six months during this period.

FPRS Disability Hearing Summary Form, with all “Applicant”d.sections completed.

Completed Employer Information for Disability Retirement form.e.

The City shall supply the Retirement Board with each of the following2.documents:

224924.00002\24425772.224425772.6

A brief statement of any known factual issues, and a citation toa.the report and page on which the facts relied upon by the Cityappear.

Treating Physician Report (if applicable).b.

City’s Qualified Medical Examiner Report (if applicable).c.

Agreed Medical Examiner Report.d.

FPRS Disability Hearing Summary Form, with all “City” sectionse.completed.

324924.00002\24425772.224425772.6

NUMBER OF COPIES AND RESPONSIBILITIES:C.

Each party shall supply the Retirement Board with eightone (81)1.copiesoriginal paper document, four (4) paper copies, and one (1)electronic copy (in non-editable form) of their documents. The copiesshall be supplied to the Retirement Board not later than tennine (109)days prior to the scheduled hearing date.

The parties shall coordinate prior to submission of their documents to2.eliminate duplication of copies of documents to the greatest extentconsistent with clear presentation of their respective positions.

FAILURE TO COMPLY WITH TIME LIMITS.D.

In the event the Retirement Board does not receive documents in accordancewith the Document Procedures, the Retirement Board, in its discretion mayeither:

Reschedule the hearing; or1.

Proceed with the hearing as an unopposed case.2.

REQUESTS FOR RECONSIDERATION/APPEALSV.

DOCUMENTS TO BE SUPPLIED BY THE PARTIES:A.

The applicant shall supply the Retirement Board with each of the1.following documents:

Written request for appeal including a statement of issues settinga.forth the legal and factual basis for appealing the RetirementBoard’s decision.

All other documents shall be submitted as exhibits to pleadings, petitions,2.motions, etc. in the course of the appeals hearing, in accordance with theHearing Procedures.

Revision adopted by the Fire & Police Retirement Board: _____________, 20162017.

424924.00002\24425772.224425772.6

Summary report:Litéra® Change-Pro 7.5.0.135 Document comparison done on 5/9/2017

6:58:41 PMStyle name: Default StyleIntelligent Table Comparison: ActiveOriginal DMS: iw://iManage/iManage/24425772/2Modified DMS: iw://iManage/iManage/24425772/6Changes:Add 19Delete 17Move From 0Move To 0Table Insert 0Table Delete 0Table moves to 0Table moves from 0Embedded Graphics (Visio, ChemDraw, Images etc.) 0Embedded Excel 0Format changes 0Total Changes: 36

AcaJPERS

April11, .2017

Shannon Reece 16392 Calle Castor Cir Huntington Beach, CA 92649-5219

Dear Ms. Reece,

Date: 411212017 4:01:05 PM IV~~~V~VVVVt~~V #VtVtVVtV~~

P.O. Box 2796 Sacramento, CA 95812·2796 888 CaiPERS (or 888·225-7377} rrY: (S77) 249-7442 I ~ax: {9lS} 79$.1280 www.calpers.ca.gov

Callfomla Public Employees" RctlrementSy~ttem

CaiPERS ID: 1454394906

We received your application for disability retirement. We requested your· employer provide a determination of your disability. Your employer is required to make a determination within six months of this notice unless you waive the requirements of this provision (Government Code section 21157).

lf your employer finds you substantially incapacitated from the performance of your usual duties, your application will be approved and cannot be canceled, If you are eligible and wish to change to a service retirement instead of disability retirement, you must submit your written request prior to the effective date of your disability retirement or within 30 days after notification of approval {Government Code section 21156) .

. If you are on service retirement and also receive Advance Disability Pension Payments (ADPP) from your employer, it is your responsibility to inforfl'! your employer to stop the Advance Disability Pension Payments and reimburse your employer all the ADPP paid to you while you receive service retirement benefit from CaiPERS. ·

If e person {other than your employer) caused an injury that results in certain CaiPERS benefits being paid, then we have the right to recover from the responsible person up to one-half of the total retirement benefit costs peyable due to this injury (Government Code sections 20250·20255).

If you pursue a claim against any person for the same injuries that also entitle you to disability retirement from CaiPERS (other than a workers' compensation claim or an uninsured motorist claim), you must inform us of the existence ofthis claim. This is true even if th~ claim has not yet resulted in a court action. CaiPERS has the right to participate in any such claim either through filing its own action against the responsible party, lntervenlnet: in your claim, or filing a lien against any judgment whieh you may recover. lf.you settle such a claim without notifying us, we may be entitled to file a lawsuit against you for recovery of subrogation rights.

Page 1 of 2

Item #: 12Date: 5/17/17

Date: 4/12/2017 4:01:05 PM IVIVIV~VVVVIVVV ,VIVIVVIV~~

If at any time prior to the mailing of your first warrant you wish to receive a refund of your accumulated contributions in a lump sum instead of a retirement allowance, you may do so by sending us a written request. Once the refund is mailed, your membership and eligibility for health Insurance with CaiPERS terminates, unless you return to CaiPERS covered employment (Government Code section 20340).

We are here to assist you. If you have any questions, please visit our website at www.calpers.ca.gov, or you may call us toll free at 888 CalPERS (888~225-7377).

Sincerely,

Stacey Olsen Retirement Program Specialist Disability Retirement Section

Enclosures: LS" 1st Letter to Employer Authorization to Disclose Protected Health Information

cc: City of Pasadena

Page 2 of2

PERIOD ENDING: MARCH 31, 2017

Investment Performance Review for


VERUSINVESTMENTS.COM

SEATTLE 206‐622‐3700LOS ANGELES 310‐297‐1777

SAN FRANCISCO 415‐362‐3484

Table of Contents

Investment Landscape TAB I

Investment Performance Review

TAB I I

2ND QUARTER 2017Investment Landscape




Table of contents

Economic environment 5

Fixed income rates & credit 20

Equity 26

Other assets 36

Appendix 39

2

1st quarter summary

THE ECONOMIC CLIMATE

—Developed economies continued to experience steady, moderate expansion with fourth quarter real GDP growth in the U.S., the Eurozone, and Japan all between 1.5‐2.0%. The base effect of lower oil prices led to higher year‐over‐year headline inflation in many countries. p. 16

—During the first quarter, the global economy exhibited a coordinated pick up in economic activity. Data generally exceeded expectations, especially in the U.S. and the Eurozone. p. 18

MARKET PORTFOLIO IMPACTS

—The U.S. Treasury curve flattened in the first quarter. Short‐term rates were driven higher by the Fed, while the long end of the curve remained unchanged. Even with Fed tightening, the U.S. may not be in a typical rising rate environment. p. 22

—A better outlook for commodity performance, as well as a flattening of the futures curve in some markets increases the attractiveness of commodities as an inflation hedge. p. 38

2nd Quarter 2017Investment Landscape

THE INVESTMENT CLIMATE

—While central banks are still accommodative outside of the U.S., most appear to be in later stages of the easing cycle. Developed central banks appear to be broadly entering a period of policy normalization. p. 22

—The market is expecting better earnings growth in U.S. equities. According to FactSet, the estimated Q1 earnings growth for the S&P 500 is 9.2% from the previous year. Higher earnings growth may help justify above average valuations. p. 29

ASSET ALLOCATION ISSUES

—Stabilizing currencies and commodity prices, as well as higher growth outlooks, may benefit emerging market equities. p. 33

—With U.S. Treasury yields still at historic lows and the expectation of additional tightening from the Fed, investors may not be adequately compensated for taking duration risk in the current environment. p.23

We continue to be neutral towards risk

3

What drove the market in Q1?

2nd Quarter 2017Investment Landscape 4

Source: Bloomberg, as of 4/12/17 – German 10yr yield minus French 10yr yield

Source: Bloomberg, 4/13/17

Source: Bloomberg, as of 3/31/17

GERMAN‐FRENCH 10‐YR YIELD SPREAD

U.S. TREASURY CURVE

CITI GLOBAL ECONOMIC SURPRISE INDEX

“The Market Conundrum of (Low) Volatility and Uncertainty”

CBOE VIX (10‐YEAR AVERAGE, 20.7)

Oct 31st Nov 30th Dec 31st Jan 31st Feb 28th Mar 31st

17.1 13.3 14.0 12.0 12.9 12.4

“French Political Turmoil Hits Bond Spreads”

GERMAN‐FRENCH 10‐YR YIELD SPREAD


0.30% 0.48% 0.48% 0.60% 0.68% 0.64%

“The Global Economy Enjoys a Synchronized Upswing”

CITI GLOBAL ECONOMIC SURPRISE INDEX


3.1 17.1 27.0 37.0 43.8 38.8

“Rates Rise, But Yield Curve Keeps Flattening”

U.S. TREASURY 10‐YR MINUS 2‐YEAR YIELD SPREAD


0.98% 1.26% 1.25% 1.26% 1.14% 1.13%

Source: The Economist, March 16th 2017

Source: Barron's, March 28th 2017

Source: Financial Times, February 6th 2017

Source: Bloomberg, January 30th 2017

0%

1%

2%

3%

4%Mar‐17 Dec‐16

‐40

‐20

0

20

40

60

Apr‐14 Aug‐15 Dec‐16

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

Apr‐16 Sep‐16 Feb‐17

Economic environment


U.S. economics summary—U.S. real GDP grew 2.0% YoY in

Q4, up from 1.7% in Q3. Moderate increases in consumer spending continued to be the main driver of the economy.

— Inflation moved higher as headline CPI increased 2.8% YoY in February. Core inflation, however, increased only modestly to 2.2%. Most of the rise was caused by the low base effect from falling oil prices last year.

—The Fed continued tighter monetary policy by raising the target federal funds rate 25 bps to 0.75‐1.00% at its March meeting. The FOMC dot plot indicates two more rate hikes in 2017, while the market has only priced in one more increase.

—The March Fed meeting minutes revealed that the central bank

may begin shrinking its balance sheet as early as December, representing a form of monetary tightening. It remains unclear whether the Fed will stop rolling over maturing securities or actively sell in the open market.

—On average, 178,000 jobs were added each month during Q1, and unemployment fell 0.2% to 4.5%. Data continued to indicate a tighter labor market, though wage growth is lackluster. Real hourly earnings fell 0.1% in February from the prior year.

—Soft data (consumer & business sentiment) improved markedly following the U.S. presidential election. We are continuing to monitor the degree to which soft data flows through to actual spending and investment patterns. At this point evidencestill is lacking.


Most Recent 12 Months Prior

GDP (annual YoY) 2.0%12/31/16

1.9%12/31/15

Inflation (CPI YoY, Headline)

2.8%2/28/17

1.0%2/29/16

Expected Inflation (5yr‐5yr forward)

2.2%3/31/17

1.8%3/31/16

Fed Funds Rate 0.75%3/31/17

0.25%3/31/16

10 Year Rate 2.4%3/31/17

1.8%3/31/16

U‐3 Unemployment 4.5%3/31/17

5.0%3/31/16

U‐6 Unemployment 8.9%3/31/17

9.8%3/31/16

‐6%

‐3%

0%

3%

6%

9%

12%

15%

Mar‐55 Jan‐62 Nov‐68 Oct‐75 Aug‐82 Jun‐89 Apr‐96 Feb‐03 Dec‐09 Oct‐16

Real GDP % Change YoY

U.S. REAL GDP GROWTH U.S. GDP COMPONENTS

U.S. economics – GDP growthReal GDP grew 2.0% YoY in Q4 (2.1% quarterly annualized rate) as slow but positive economic growth continued.

Personal consumption contributed 2.4% to quarterly GDP growth, and was once again the main driver of improvement in the economy. Rising post‐election consumer confidence did not immediately flow through to the real economy, but may support increased spending in coming quarters.

Private domestic investment also contributed to growth. A widening trade deficit from both an increase in imports and a decrease in exports was the largest detractor from GDP growth.

The Atlanta Fed GDP Now forecast for Q1 was 0.5% as of April 14th. The forecast was revised downward throughout the quarter mainly due to softer personal spending data. Part of this weakness can be attributed to a temporary decline in utilities spending from milder winter weather.


The U.S. economy continued to grow at a moderate pace

7

Source: FRED, as of 12/31/16 Source: BEA, annualized quarterly rate, as of 12/31/16

0

2

4

Mar‐15 Aug‐16

2.1% 2.6%2.0%

0.9%0.8%

1.4%

3.5%

2.1%

‐2%

0%

2%

4%

6%

Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16

Consumption Investment Government Exports Imports Inventories

‐4%

‐2%

0%

2%

4%

6%

Mar‐07 Mar‐10 Mar‐13 Mar‐16

Real Average Hourly Earnings YoY % Change

Moderate additions to payrolls and higher employment indicate a tighter labor market. Job gains averaged 178,000 per month in the first quarter, slightly below the expansion average of 199,000. The headline unemployment rate fell to a nearly decade low of 4.5%. The broader U‐6 unemployment rate, which includes discouraged workers who want a job but have given up looking, and part‐time workers who would like to be full‐time, fell to a cyclical low of 8.9%. The participation rate rose to 63.0%, an increase of 0.3%.

The number of job openings in the economy is relatively high, likely due to a lack of supply. Companies are having a difficult time finding qualified workers to fill open positions. While most employment data suggests a tight labor market, wage growth has been unusually muted throughout this cycle. As the U.S. economic expansion ages, we would expect companies to raise wages in order to attract and retain workers. However, real average hourly earnings fell 0.1% in February YoY.

U.S. UNEMPLOYMENT JOB OPENINGS REAL AVERAGE HOURLY EARNINGS

U.S. economics – Labor market


Source: FRED, as of 2/28/17 Source: FRED, as of 2/28/17 Source: FRED, as of 2/28/17

8

0%

4%

8%

12%

16%

20%

Jun‐05 Sep‐07 Nov‐09 Jan‐12 Apr‐14 Jun‐16

U3 U6

0%

2%

Jan‐16 Nov‐16

0

1

2

3

4

5

6

7

Dec‐00 Sep‐04 Jun‐08 Mar‐12 Dec‐15

Millions

U.S. LABOR FORCE PARTICIPATION CORE AGE GROUP (25‐54) PARTICIPATION

A closer look at participationThe labor force participation rate has fallen significantly following the financial crisis. While most of the drop can be attributed to an aging population, one‐third is a result of structural issues, and possibly some remaining cyclical factors. Stripping out the aging effect by looking at the core working age group shows a drop of 1.9% in participation over the past 10 years.

Unlike cyclical factors that move with the economic cycle, structural issues in the labor market may be more or less permanent. This is important because fewer workers participating in the economy will result in slower growth,

all else equal. Workers reentering the economy, however, could provide some protection against rapid wage price inflation, and therefore mitigate the risk that rapid wage inflation disrupts economic growth.

Structural issues that may explain lower participation include an increased number of unqualified workers due to a lack of requisite skills and education and those with criminal felony convictions. There may also be fewer incentives for people outside of the workforce to return because of slow wage growth and a greater reliance on permanent federal disability.


Source: BLS, Verus, as of 1/31/17 Source: BLS, as of 1/31/17

62%

63%

64%

65%

66%

67%

Jan‐07 Jan‐09 Jan‐11 Jan‐13 Jan‐15 Jan‐17

Cyclical/Structural

Aging

80%

81%

82%

83%

84%


Higher interest rates are expected to be a headwind for U.S. consumers, but other fundamentals reflect a positive overall environment. Much of the economic growth in the current cycle has been attributed to moderate, steady increases in consumer spending. In February, consumer spending grew 1.7% from the previous year. While positive spending growth has been consistent, there has yet to be a material flow through effect from the jump in confidence following the U.S. election in November.

An increase in financial assets during the current recovery has led to large gains in household net worth. The wealth effect, in which consumers increase spending habits based on a higher level of perceived wealth could have a positive impact on economic growth.

Although the consumer has led the economic expansion, credit has not been used as much as in previous cycles. Consumer credit growth has been moderate and household balance sheets remain relatively healthy.

CONSUMER SPENDING HOUSEHOLD NET WORTH CONSUMER CREDIT GROWTH

U.S. economics – The consumer


Source: Bloomberg, as of 2/28/17 Source: FRED, as of 1/31/17 Source: FRED, as of 1/31/17

10

0%

2%

4%

6%

8%

10%

Jun‐70 Dec‐85 Jun‐01 Nov‐16

Consumer Spending YoY Change$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

Jan‐90 Jul‐98 Jan‐07 Jul‐15

Thou

sand

s

‐10%

‐5%

0%

5%

10%

15%

20%

25%

Jan‐80 May‐88 Sep‐96 Jan‐05 May‐13

1

2

Jan‐16 Nov‐16

Steady increases in consumer spending has driven recent growth

Overall, consumers remain optimistic about the economy

CONSUMER COMFORT INDEX CONSUMER SENTIMENT U.S. ECONOMIC SURPRISE

U.S. economics – SentimentConsumer sentiment fell slightly over the quarter, but the overall level remains high. The University of Michigan Consumer Sentiment Index was 96.9 at the end of March, compared to the long‐term average of 85.6. Consumers cited three key components for the greater optimism: higher incomes, favorable job prospects, and low inflation expectations. Consumer sentiment and hard data do not always align as sentiment builds and falls more slowly through time.

The University of Michigan survey also identified a disconnect in consumer sentiment across political party

affiliations. Democrats expect an immediate recession, while Republicans expect robust economic growth. The index of consumer expectations was 50.5 points higher for Republicans than Democrats. Continued political uncertainty could weigh on sentiment in the coming months.

U.S. economic data has exceeded expectations ‐ a trend that started prior to the election. The Citi Economic Surprise Index was 48 at quarter‐end, its highest level in more than three years. However, much of the uptick in this indicator has been driven by “soft” data that has yet to flow through to the real economy.


Source: Bloomberg, as of 3/19/17 (see Appendix) Source: University of Michigan, as of 3/31/17 (see Appendix) Source: Bloomberg, as of 3/31/17 (see Appendix)

11

80 85 90 95100

Jun‐15 Feb‐16 Oct‐16

‐130

‐100

‐70

‐40

‐10

20

50

80

110

140

Jan‐03 May‐06 Sep‐09 Jan‐13 May‐16Citigroup Economic Surprise

40

60

80

100

120

140

Jun‐85 Oct‐95 Feb‐06 Jun‐16U of Michigan Consumer Sentiment Survey

20

30

40

50

60

70

Jul‐87 Feb‐97 Sep‐06 Apr‐16Bloomberg US Weekly Consumer Comfort Index

80

100

Jan‐16 Nov‐16‐50‐1030

Dec‐15 Oct‐16

CASE‐SHILLER HOME PRICE INDEX MONTHLY SUPPLY OF HOMES HOUSING STARTS AND PERMITS

U.S. economics – Housing Despite higher mortgage rates since November, home prices in the U.S. have moved upward. Over the 12 months ending in January, the Case‐Shiller National Home Price Index rose 5.8%. This price gauge has rallied 37.7% since bottoming in January of 2012 and is now slightly higher than the previous peak.

While increases in interest rates may act as a headwind, the housing market is supported by strong demand for single‐family homes and historically low supply,

in addition to an overall financially healthy consumer base. At the current rate of sales it would take only 5.4 months to completely sell the entire supply of homes.

Housing starts and building permits have been steadily trending upwards with homebuilders ramping up construction to meet outsized market demand. New homes coming on line may put downward pressure on prices.


Source: FRED, as of 1/31/17 Source: FRED, as of 2/28/17 Source: FRED, as of 2/28/17

12

0

2

4

6

8

10

12

14

Jan‐00 Jan‐05 Jan‐10 Jan‐15

0

500

1000

1500

2000

2500

Jan‐00 Jan‐05 Jan‐10 Jan‐15

Housing Starts Housing Permits0

40

80

120

160

200

Jan‐75 May‐83 Sep‐91 Jan‐00 May‐08 Sep‐16

U.S. CPI (YOY) U.S. TIPS BREAKEVEN RATES INFLATION EXPECTATIONS

U.S. economics – InflationHeadline CPI rose 2.8% in February from the previous year, its highest rate in five years. Much of this jump in inflation can be attributed to the base effect of low oil prices one year ago. The energy component of the CPI basket increased 15.6%. Core inflation remained unchanged at 2.2%.

After rising considerably following the presidential election, market inflation expectations were mostly unchanged during the first quarter. The 10‐year TIPS

breakeven inflation rate finished the period at 2.0%. The market continues to discount low levels of future inflation relative to history. In comparison, consumers are expecting 2.5% annualized inflation over the next 5‐10 years, according to the University of Michigan survey.

Our view remains that the market may be underpricing expected inflation at a time when inflation risks are skewed to the upside.


Source: FRED, as of 2/28/17 Source: FRED, as of 3/31/17 Source: Bloomberg, as of 3/31/17

13

0%

1%

2%

3%

Nov‐09 Dec‐11 Jan‐14 Jan‐16

US Breakeven 2 Year US Breakeven 10 YearUS Breakeven 5 Year US Breakeven 30 Year

‐4%

0%

4%

8%

12%

16%

Jun‐68 Apr‐84 Mar‐00 Jan‐16

US CPI Ex Food & Energy US CPI

0%

1%

2%

3%

4%

5%

6%

Apr‐01 Apr‐04 Mar‐07 Mar‐10 Feb‐13 Jan‐16

US Breakeven 10 Year UMich Expected Change in Price

0

3

Mar‐15 Feb‐17

85

90

95

100

105

110

115

120

Oct‐16 Nov‐16 Dec‐16 Jan‐17 Feb‐17 Mar‐17 Apr‐17

Inde

xed to 100

Russell 1000 Russell 2000 Russell 1000 Financial Services Bloomberg Dollar Spot Gold Copper Bloomberg Barclays US Treasury

Post-election price movements

+13.8%

+12.9%

+9.8%

+7.3%

+4.8%

‐1.6%

‐1.3%

Source: Bloomberg, 10/3/16‐4/10/17


U.S. presidential election

An update on political policies


POLICY AREA

Taxes

― Much of the optimism surrounding Trump’s victory in November was based on his promise to cut taxes for individuals and businesses.

― President Trump has stated that he wants to find a solution to repealing and replacing the Affordable Healthcare Act (ACA) prior to working on tax reforms. No further details have been released.

― The tentative deadline for the tax plan was originally set for August by Treasury Secretary Mnuchin, but it appears this may be pushed back further, and the actual timing remains unknown.

Trade

― In one of his first acts as president, Donald Trump delivered on a campaign promise and removed the U.S. from the Trans Pacific Partnership (TPP) in an effort to move away from multilateral trade agreements.

― After making many other “America first” trade policy promises, including withdrawing from NAFTA and implementing a border adjustment tax (BAT), the new administration appears to have softened its stance.

― Rather than a complete overhaul of U.S. trade policy, it may be more likely that President Trump makes smaller tweaks, such as renegotiating and stepping up enforcement of existing trade deals.

Deregulation

― President Trump signed an executive order to reduce the regulatory burden on businesses by requiring federal regulators to kill two existing regulations for every new rule introduced.

― In perhaps the biggest blow to the administration thus far, House Republican leaders pulled legislation to repeal parts of the ACA before a single vote was cast, exposing a divided Republican Congress.

― House Republicans announced a plan to introduce legislation that would overhaul Dodd Frank, although opposition from Senate Democrats is expected to be strong.

Infrastructure

― Infrastructure is another area in which President Trump has not provided much in terms of additional details after promising a $1 trillion dollar spending initiative through private tax breaks during his campaign.

― With the current focus on healthcare, and the lack of progress on tax reform, it is possible that the new administration may push back the timeline for introducing its infrastructure plan.

International economics summary


—Developed countries once again experienced moderate positive growth in the fourth quarter, in line with the trend of recent years. Real GDP in the U.S., Europe, and Japan grew between 1.5‐2.0%.

— The low base effect of the drop in energy prices that occurred in Q1 2016 helped boost inflation across the globe. With energy prices stabilizing over recent months, it is possible the jump in inflation is only transitory.

—Developed world unemployment rates declined over the quarter. In the Euro Area, the unemployment rate fell to a nearly eight year low of 9.5%, although this is still well above its pre‐crisis level of 7.3%.

— The economic recovery in Europe has also picked up in terms of higher growth and inflation. Much of this recovery can be attributed to the core countries, rather than

the periphery. However, significant tail risks remain including the French election, ECB tapering, and Brexit negotiations.

—On March 29th, the British Prime Minister, Theresa May, filed the official papers to withdraw the U.K. from the European Union. Article 50 of the Treaty of Lisbon outlines a two year timeframe for negotiations to take place.

— As many expected, Emmanuel Macron and Marine Le Pen were the top two vote getters in the first round of the French election. Macron and Le Pen will have a runoff vote on May 7th, where Macron is heavily favored, according to the most recent polls. Equity markets reacted positively to the results and the euro strengthened.

16

AreaGDP

(Real, YoY)Inflation (CPI, YoY) Unemployment

United States 2.0%12/31/16

2.7%2/28/17

4.5%3/31/17

Western Europe

1.8%12/31/16

1.5%3/31/17

8.6%12/31/16

Japan 1.6%12/31/16

0.3%2/28/17

2.8%2/28/17

BRIC Nations 5.2%12/31/16

3.1%12/31/16

5.5%12/31/16

Brazil (2.5%)12/31/16

4.6%3/31/17

12.9%3/31/17

Russia 0.3%12/31/16

4.3%3/31/17

5.4%12/31/16

India 7.0%12/31/16

3.7%2/28/17

7.1%12/31/15

China 6.8%12/31/16

0.8%2/28/17

4.0%12/30/16

INTERNATIONAL INFLATION REAL GDP GROWTH GLOBAL UNEMPLOYMENT

International economics


Source: Bloomberg, as of 2/28/17 Source: Bloomberg, as of 12/31/16 Source: Bloomberg, as of 2/28/17 or most recent release

17

‐4%

0%

4%

8%

12%

Jun‐00 Sep‐05 Nov‐10 Feb‐16USA CPI Japan CPI China CPIUK CPI Eurozone CPI

‐12%

‐9%

‐6%

‐3%

0%

3%

6%

9%

12%

Mar‐95 Jun‐00 Aug‐05 Oct‐10 Jan‐16US GDP (YoY%) Japan GDP (YoY%)Euro GDP (YoY%) BRICS GDP (YoY%)

0%

2%

4%

6%

8%

10%

12%

14%

Dec‐03 Feb‐08 Mar‐12 Apr‐16US Unemployment Europe UnemploymentJapan Unemployment BRICS Unemployment

‐1

1

3

Nov‐15 Jan‐17

0

3

6

Dec‐15 Dec‐16

A coordinated uptick in global economic sentiment occurred in recent quarters, and data continued to exceed expectations in Q1. Outside of the U.S., central banks remain relatively accommodative, and developed economies have experienced moderate growth and higher inflation. Real year‐over‐year GDP growth in the Euro Area and Japan came in at 1.8% and 1.6%, respectively.

In the Eurozone, headline CPI in February reached 2.0% YoY for the first time in the recovery. However, core

inflation, which excludes food and energy prices, only rose 0.7%, well below the ECB’s target of 2.0%. A weaker British pound helped boost U.K. headline inflation to 2.3% in February, the highest rate in more than three years.

Real GDP growth in the BRICS countries, the five major emerging economies, was 5.2% in the fourth quarter. Once again, India and China were the main drivers of growth. Russia experienced positive growth for the first time in seven quarters, while Brazil remained in a recession.

PURCHASING MANAGERS’ INDEXES CITI ECONOMIC SURPRISE INDEXES

Global economic pickupThere has been a general pick up in global economic conditions over the past six months, a trend that started prior to the U.S. presidential election. Purchasing managers’ indexes (PMI), which are derived from monthly surveys of private companies, have increased across nearly all major economies. The global composite PMI increased from 51.7 in September to 53.8 in March. Readings above 50 indicate economic expansion and have historically held some explanatory power of future economic growth.

Global economic data has also been coming in above expectations, as indicated by the Citi Economic Surprise Index (CESI). The Global CESI increased to 38.8 in March from ‐2.6 six months earlier. However, much of this move has been driven by “soft” data, such as sentiment and confidence indicators, which have not always flowed through to the real economy. If higher sentiment and confidence does lead to increased spending and production, it will be a boost to economic growth.


Source: Bloomberg, as of 3/31/17 Source: Bloomberg, as of 3/31/17

‐20

0

20

40

60

80

100

Global U.S. Eurozone U.K. Japan China

6 Months Ago March

‐6

‐4

‐2

0

2

4

6

8

Global U.S. Eurozone U.K. Japan China Brazil

6 Months Ago March

Expansion

Contraction

The European election cascadeFollowing the U.K.’s decision last June to leave the European Union, the rise in populism in Europe and corresponding political risks to the currency bloc have been heavily scrutinized. While the upcoming French presidential election has dominated the headlines, several other important elections coming up will help shape the future of Europe.

The presidential election in France may pose the largest political risk to the region. Far‐right, euroskepticcandidate, Marine Le Pen, has gained popularity running on the platform to remove France from the European Union and the use of the euro. Le Pen and centrist

candidate, Emmanuel Macron, were the top two vote getters in the first round of the election and will go head to head on May 7th. Macron is favored in the polls and market fears of a Frexit have subsided.

However, the threat of populism in Europe remains. Other elections, such as the German federal election in September and the Italian general election in early 2018 at the latest, will also be important as populist parties have gained popularity in countries across Europe. Additional risks loom in periphery countries like the Czech Republic, as debates heat up regarding EU membership referendums.


May 17

French presidential election; U.K. local elections

Scheduled Brexit date

Mar 19Sep 17

German federal election

May 18

Italian general election (early election possible)

Oct 17

Czech legislativeelection

French legislative elections; U.K. snap elections

Jun 17 Jan 18

Czech presidentialelection

Sep 18

Austrian legislative elections

Oct 18

Irish presidential election

2017 20192018

Fixed incomerates & credit


Interest rate environment



— U.S. Treasuries have an attractive yield relative to other developed sovereign bonds, but remain historically expensive.

— Despite broad agreement that the U.S. has entered an environment of rising interest rates, the broad yield curve rose very little over the past year. However, the short end of the curve has increased in line with Federal Reserve rate rises. Inflation has historically had a significant impact on the yield curve, which indicates investors should keep an eye on inflation trends.

— In March, the Federal Reserve announced a change to the federal funds target rate from 0.50‐0.75% to 0.75‐1.00%. The move resulted in the U.S. Treasury curve flattening

moderately as short‐term interest rates increased and long‐term rates remained materially unchanged. The Fed has indicated two additional rate hikes are expected to occur this year.

— Developed sovereign yields are expected to rise only modestly over the next year, with very little movement expected in longer dated bonds. Central banks of most developed economies are nearing the end of the monetary easing cycle or have begun to pull back, as in the case of the U.S. Federal Reserve.

— Many emerging market governments continue with monetary easing, suggesting these economies may be in an earlier stage of the economic cycle.

21

Area Short Term (3M) 10 Year

United States 0.75% 2.39%

Germany (0.92%) 0.33%

France (0.57%) 0.97%

Spain (0.39%) 1.65%

Italy (0.34%) 2.31%

Greece 2.39% 6.90%

U.K. 0.13% 1.14%

Japan (0.20%) 0.07%

Australia 1.59% 2.70%

China 2.93% 3.28%

Brazil 10.91% 10.06%

Russia 9.50% 7.87%

Monetary tightening— The Federal Reserve hiked interest rates for the second

time in March, raising the federal funds target to 0.75‐1.00%. Given the increased pace of tightening and more hawkish tone from the Fed, there has been much discussion regarding the effects of a rising rate environment in the U.S.

— While the Fed expects short‐term rates to normalize to 3% by 2019, the market is pricing in movement to only 1.8%. The market also does not expect much change in the long‐end of the curve with the 10‐year Treasury yield priced to rise only 26 bps over the next year. We believe that the market view of the path of interest rates is reasonable, and that there is a greater likelihood of surprisingly slow, rather than surprisingly fast, rate rises.

— Another unknown aspect of monetary policy relates to the Fed’s $4.5 trillion balance sheet. In the most recent meeting minutes it was noted that an unwinding of the balance sheet may begin at the end of the year. It remains unclear whether the Fed will simply stop reinvesting securities or actively sell in the market. A sale would be the more aggressive option, but either action would equate to monetary tightening, which may slow the expected pace of federal fund rate hikes.


Source: Bloomberg, FRED, as of 3/31/17

22

1%

2%

3%

4%

2017 2018 2019

Fed Projections (End of Year) Market Projections (End of Year)

FED FUNDS PROJECTED RATE

0%

1%

2%

3%

4%

1 Mo 3 Mo 2 Yr 5 Yr 7 Yr 10 Yr 15 Yr 20 Yr 30 YrSpot 6 Mo (Forward) 12 Mo (Forward)

U.S. TREASURY FORWARD YIELD CURVE

$0

$1

$2

$3

$4

$5

Mar‐07 Mar‐10 Mar‐13 Mar‐16

Trillions

FEDERAL RESERVE BALANCE SHEET

Long run Fed target

MBS

Treasuries

Other

Yield environment



Global investors continue to prefer U.S. Treasuries due to higher relative yields

23

YIELD CURVE CHANGES OVER LAST FIVE YEARS IMPLIED CHANGES OVER NEXT YEAR

GLOBAL GOVERNMENT YIELD CURVESU.S. YIELD CURVE

‐0.2

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1M 3M 6M 1Y 2Y 3Y 4Y 5Y 7Y 9Y 10Y 12Y 15Y 20Y 30Y

Yield Ch

ange (%

)

US Treasury UK Treasury Japan Treasury Germany Treasury

Canada Treasury Australia Treasury Italy Treasury

‐1%

0%

1%

2%

3%

4%

5%

1M3M6M 1Y 2Y 3Y 4Y 5Y 7Y 9Y 10Y 12Y 15Y 20Y 30YUS Treasury Curve 3/31/17 Japan Curve 3/31/17Canada Curve 3/31/17 Germany Curve 3/31/17United Kingdom Curve 3/31/17 France Curve 3/31/17Italy Curve 3/31/17 China Curve 3/31/17

‐4%

‐3%

‐2%

‐1%

0%

1%

2%

1M3M6M 1Y 2Y 3Y 4Y 5Y 7Y 9Y 10Y 12Y 15Y 20Y 30Y

US Japan CanadaGermany United Kingdom FranceItaly China

‐1

0

1

2

3

4

5

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

US Treasury Curve 3/31/17 US Treasury Curve 12/31/16US Treasury Curve 12/31/15 US Treasury Curve 12/31/14US Treasury Curve 12/31/10 US Treasury Curve 12/31/05

U.S. high yield option‐adjusted spreads compressed slightly during the first quarter to 3.9% and the asset class generated a 2.7% return (BBgBarc U.S. Corp. High Yield Index). High yield spreads are now tighter than those of bank loans on a duration neutral basis, despite being of generally lower credit quality and higher in the capital structure. Bank loans may provide a better risk‐return tradeoff in the current environment.

Upbeat consumer sentiment, stronger labor markets, and a generally brighter picture for the U.S. economy all bode well for credit markets. Although spreads have tightened

to levels consistent with a mid‐to‐later stage economic cycle, no overheating or obvious threats to the credit markets seem apparent.

The Federal Reserve voted to increase interest rates by 0.25% in March. The speed of rate rises has underwhelmed the market for some time, and the market is expecting this slow pace to continue. Investors may be well served by limiting duration risk, though the probability of a sharp bond selloff (quickly rising rates) seems low.

CREDIT SPREADS HIGH YIELD SECTOR SPREADS SPREADS

Credit environment


Source: Barclays Capital Indices, Bloomberg, as of 3/31/17 Source: Bloomberg, as of 3/31/17 Source: Barclays, Credit Suisse, Bloomberg, as of 3/31/17

24

MarketCredit Spread (3/31/17)

Credit Spread (1 Year Ago)

Long US Corporate 1.5% 2.1%

US Aggregate 0.9% 1.1%

US High Yield 4.1% 7.0%

US High YieldEnergy 4.5% 11.9%

US Bank Loans 3.8% 3.9%

0%

5%

10%

15%

20%

Dec‐98 Dec‐02 Dec‐06 Dec‐10 Dec‐14Barclays Long US Corp. Barclays US Agg.Barclays US HY Bloomberg US HY EnergyIG Energy

100

400

700

1000

1300

1600

Apr‐12 Aug‐13 Dec‐14 May‐16

Bloomberg US HY Energy USD HY ConsDisc. OASUSD HY Financials Snr OAS USD HY Comm. OASUSD HY Comm. OAS USD HY Materials OASUSD HY Technology OAS USD HY Industrial OAS

HY DEFAULT TRENDS (ROLLING 1 YEAR) ENERGY DEFAULT TRENDS GLOBAL ISSUANCE

Issuance and defaultBoth U.S. senior loan and high yield markets continue to stabilize with the majority of par defaults last year coming from energy and metals/mining sectors. Rolling default rates should fall as commodity prices continue to recover and commodity price‐induced credit problems have less impact on the credit universe. Active management may offer value to investors in the high yield space.

Global high yield and bank loan issuance has continued at a similar pace to what was seen last year. Lower spread levels lessen the borrowing costs for these issuers. The direction of interest rates will likely impact issuance trends in the near future.


Source: BofA Merrill Lynch, as of 3/31/17 Source: BofA Merrill Lynch, as of 3/31/17 Source: Bloomberg, BofA Merrill Lynch, as of 3/31/17

The effect of commodity related defaults should subside

25

0

5

10

15

20

Jan‐98 Jan‐01 Jan‐04 Jan‐07 Jan‐10 Jan‐13 Jan‐16

Default (%)

Developed Market High Yield US High YieldUS HY ex‐Commodities

0

50

100

150

200

250

300

350

400

450

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

$ Billion

Global Bank Loan Issuance Global HY Issuance

0

5

10

15

20

25

30

Jan‐98 Jan‐01 Jan‐04 Jan‐07 Jan‐10 Jan‐13 Jan‐16

Default (%)

US High Yield High Yield Energy

Equity


Equity environment


Source: Russell Investments, MSCI, STOXX, FTSE, Nikkei, as of 3/31/17

—The U.S. economic environment has shifted in a materially more positive direction, post‐election. This move was reflected in an upward adjustment to equity prices. We are relatively bullish on U.S. earnings growth in the near term, but remain concerned that investors are paying for this excess growth upfront through higher valuations. We maintain a neutral weight to U.S. equities.

—According to FactSet, the estimated Q1 2017 earnings growth rate of the S&P 500 was 9.2% YoY. The estimate was revised downward from 12.5% on December 31st due to negative EPS guidance in the Materials and Consumer Discretionary sectors.

—Growth equities outperformed value equities in Q1. The Russell

1000 Growth Index and Russell 1000 Value Index returned 8.9% and 3.3%, respectively.

— The U.S. dollar fell 3.6% in Q1 on a trade‐weighted basis, which has affected the returns of portfolios with unhedged currency exposure.

—As discussed recently in our Sound Thinking research piece, investors should be mindful of their biases in portfolio construction. One particularly prevalent bias is the tendency for investors to hold greater exposure to the markets where they reside (home country bias). As with any portfolio tilt, investors should understand why they hold it, have a solid basis for the exposure, and understand the tracking error the position introduces to the portfolio.

27

QTD TOTAL RETURN YTD TOTAL RETURN1 YEAR TOTAL

RETURN

(unhedged) (hedged) (unhedged) (hedged) (unhedged) (hedged)

US Large Cap (Russell 1000)

6.0% 6.0% 17.4%

US Small Cap (Russell 2000)

2.5% 2.5% 26.2%

US Large Value(Russell 1000

Value)3.3% 3.3% 19.2%

US Large Growth(Russell 1000 Growth)

8.9% 8.9% 15.8%

International Large

(MSCI EAFE)7.2% 5.0% 7.2% 5.0% 11.7% 18.9%

Eurozone (Euro Stoxx 50)

8.3% 7.2% 8.3% 7.2% 12.9% 21.7%

U.K. (FTSE 100)

4.9% 3.8% 4.9% 3.8% 7.3% 23.3%

Japan (NIKKEI 225)

4.3% 0.1% 4.3% 0.1% 15.8% 14.7%

Emerging Markets

(MSCI Emerging Markets)

11.4% 7.3% 11.4% 7.3% 17.2% 12.5%

The U.S. economic environment has shifted in a materially more positive direction, post‐election, as reflected by rising in equity prices. We are relatively bullish on U.S. earnings growth in the near term but remain concerned that investors are paying for this excess growth upfront through higher valuations. We maintain a neutral weight to U.S. equities.

Higher equity prices and earnings expectations have been influenced by corporate tax cuts and deregulation

proposed by the new administration. There have been no further details released on timing of tax cuts, and lofty expectations may leave room for disappointment.

According to FactSet, Q1 2017 S&P 500 earnings are expected to grow 9.2% YoY. The estimate was revised downward from 12.5% on December 31st due to negative EPS guidance in the Materials and Consumer Discretionary sectors.

U.S. EQUITIES S&P 500 EPS GROWTH Q1 FORECAST EPS GROWTH

Domestic equity


Source: Russell Investments, as of 4/3/17 Source: Bloomberg, as of 12/31/16 Source: FactSet, as of 4/14/17

Investors may be paying for higher earnings growth through elevated valuations

28

3000

4000

5000

6000

7000

Jul‐12 Jul‐13 Jul‐14 Jul‐15 Jul‐16

Russell 3000

+16.5%

+2.8%

‐10%

0%

10%

20%

Jan‐12 Sep‐13 May‐15

‐7%‐4%

‐2%1%2%2%

7%9%

13%13%

16%

‐10% ‐5% 0% 5% 10% 15% 20%

IndustrialsTelecom

CDHealthcare

CSUtilities

Real EstateS&P 500

ITMaterialsFinancials

40

60

80

100

120

140

160

‐18 ‐16 ‐14 ‐12 ‐10 ‐8 ‐6 ‐4 ‐2 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30

Inde

xed to 100

Months Relative to Beginning of Market Drawdown

Aug‐56 Aug‐59 Jan‐62 Feb‐66 Dec‐68 Jan‐73 Dec‐80Jul‐83 Aug‐87 Jun‐90 Jul‐98 Sep‐00 Nov‐07

Equity market correctionsWith above average U.S. equity valuations and a bull market that has lasted nearly nine years, there has been speculation that a market correction is approaching. While we remain concerned about valuations we do not believe that equities are necessarily in the final stages of the cycle, nor that market corrections are predictable. It is important to remember that equity drawdowns are normal, and should be viewed in the proper context.

The chart below shows the cumulative price movement of the S&P 500 during equity market corrections of at least 10%, starting from 18 months prior to the drawdown. In many instances, late cycle equity gains were enough to offset the entire drawdown, outside of major financial collapses. Market timing can be especially dangerous in these instances if an investor gets out of the market too early.


Source: Bloomberg

Equity market corrections are normal and should be viewed in the proper context

29

Buy‐and‐hold = price gain

Buy‐and‐hold = price loss

Beginning of market drawdown

SMALL CAP VS LARGE CAP (YOY) VALUE VS GROWTH (YOY)U.S. LARGE VS. SMALL RELATIVE PERFORMANCE

Domestic equity size and styleGrowth equities outperformed value equities during the quarter. The Russell 1000 Growth Index and Russell 1000 Value Index returned 8.9% and 3.3%, respectively. Financial sector performance had a significant effect on the value premium, affected by uncertainty around the direction of interest rates and deregulation proposals.

U.S. large cap equities outperformed small cap during the quarter, though small caps have delivered strong

year‐over‐year outperformance. Small cap equity valuations remain considerably elevated relative to large cap equities which will likely act as a headwind to future performance. However, if President Trump’s deregulation proposals are seen through, this should benefit smaller American companies. Further U.S. dollar appreciation would also benefit smaller companies on a relative basis due to less international currency exposure.


Source: Russell Investments, as of 3/31/17 Source: Russell Investments, as of 3/31/17 Source: Morningstar, as of 3/31/17

30

‐40

‐30

‐20

‐10

0

10

20

30

40

Jan‐80 Oct‐88 Jul‐97 Apr‐06 Jan‐15

Return Differen

ce (%

)

Russell 2000 minus Russell 1000

‐40

‐30

‐20

‐10

0

10

20

30

40

50

Jan‐80 Oct‐88 Jul‐97 Apr‐06 Jan‐15

Return Differen

ce (%

)

R3000 Value minus R3000 Growth

‐4% ‐4%

9%

‐3%

‐1% 0%

1%

‐6%

‐3%

0%

3%

6%

9%

12%

QTD YTD 1 Yr 3 Yrs 5 Yrs 10 Yrs 20 Yrs

Small Outperformance

Large Outperformance

GLOBAL EQUITY PERFORMANCE VALUATIONS EFFECT OF CURRENCY (1 YEAR ROLLING)

International equityInternational equity markets outperformed domestic equities over the quarter. The MSCI ACWI ex U.S. returned 7.9% on an unhedged basis while the S&P 500 returned 6.1%.

International and emerging markets continue to trade at lower valuation levels than domestic markets, based on a variety of metrics. Despite our positive outlook for earnings growth in the U.S., the upside for domestic equities appears limited due to the optimism already baked into the price. International markets likely possess greater upside potential through either valuation

expansion or earnings growth surprise, simply due to current valuation levels. However, tail risks are also apparent in these markets. We believe a neutral weight is appropriate.

The U.S. dollar fell 3.6% in Q1 on a trade‐weighted basis, and continued to contribute volatility to portfolios with unhedged currency exposure. Emerging market currencies exhibited further recovery during the quarter (MSCI EM 11.4% unhedged return vs. 7.3% hedged return) while the yen appreciated (4.3% NIKKEI 225 unhedged return vs. 0.1% hedged).


Source: Bloomberg, as of 3/31/17 Source: Bloomberg, MSCI, as of 3/31/17 ‐ 3 month average Source: MSCI, as of 3/31/17

31

‐20%

‐10%

0%

10%

20%

30%

Jan‐09 Dec‐10 Nov‐12 Oct‐14 Sep‐16MSCI EAFE MSCI ACWI ex USA MSCI EM

‐10

‐5

0

5

10

15

20

25

Mar‐16 Jun‐16 Sep‐16 Dec‐16 Mar‐17

Cumulative Re

turn (%

)

MSCI EAFE IndexMSCI Emerging Markets IndexMSCI EAFE Small Cap Index

1.7

21.2

11.5

3.14.7

3.1

22.0 21.2

2.0

4.5

1.6

15.513.4

2.5

6.4

0

5

10

15

20

25

P/BV P/E Price/FCF DividendYield (%)

EarningsYield (%)

EAFE

United States

Emerging Markets

‐30%

‐20%

‐10%

0%

10%

20%

30%


MSCI EM Hedged MSCI EM

5

10

15

20

25

Nov‐05 May‐08 Nov‐10 Apr‐13 Oct‐15

MSCI EAFE Emerging Markets MSCI EAFE Small

‐20%

‐10%

0%

10%

20%

30%

40%

50%

Dec‐03 Dec‐06 Dec‐09 Dec‐12 Dec‐15

3‐yr Rolling Pe

rformance

MSCI EM Bloomberg Commodity Spot

12‐MONTH ROLLING PERFORMANCE FORWARD P/E RATIOSCOMMODITY PRICES & EM PERFORMANCE

Emerging market equityEmerging market equities extended their positive run in the first quarter, as the unhedged MSCI Emerging Markets index returned 11.4% (7.3% hedged). Performance was bolstered by strong global growth and stable commodity prices which have correlated highly with emerging market equities in the past. Steady demand from developed markets encouraged manufacturing in emerging economies as seen by increases in aggregate purchasing managers’ indices (PMI).

Valuations increased moderately over the past three years but remain at attractive levels relative to EAFE and U.S equities. Earnings growth estimates were highest in the Technology and Financial sectors, concentrated mainly in Korea and China.

Positive long‐term growth expectations are not without potential disruptions. We remain particularly watchful of U.S. trade policies and upcoming elections in France, Germany, and Turkey.


Source: MPI, as of 3/31/17 Source: Bloomberg, as of 3/31/17 Source: Bloomberg as of 3/31/17

Fundamentals are improving in emerging economies

32

5

10

15

20

25

Nov‐05 Aug‐08 May‐11 Jan‐14 Oct‐16

MSCI EAFE Emerging Markets MSCI EAFE Small

8

12

16

20

24

28

Jan‐95 Jan‐00 Jan‐05 Jan‐10 Jan‐15

MSCI VALUATION METRICS (3 MONTH AVERAGE) S&P 500 FORWARD P/E INTERNATIONAL FORWARD P/E RATIOS

Equity valuationsThe outlook for corporate earnings growth improved in Q1 which contributed to mildly lower forward P/E multiples. Overall, valuations remain elevated, consistent with mid‐to‐later stages of the economic cycle and an environment of low interest rates and moderate inflation. As the global economy transitions towards higher rates and inflation, valuations may shift to a lower, more normal level.

The S&P 500 sits at a forward P/E of 18.3, above the 20‐

year average of 16.9, but within a single standard deviation of the average. The valuation of domestic equities is richer than international equities and emerging markets, as measured by trailing P/E and price‐to‐free cash flow ratios.

Further positive earnings and earnings expectations surprises would of course bode well for valuation levels as investors are properly compensated for above‐average equity prices.


Source: Bloomberg, as of 3/31/17 Source: Bloomberg, as of 3/31/17 Source: Bloomberg, as of 3/31/17

33

+1 Standard deviation

‐1 Standard deviation

Average (Since 1995)

1.7

21.2

11.5

3.14.7

3.1

22.0 21.2

2.0

4.5

1.6

15.513.4

2.5

6.4

0

5

10

15

20

25

P/BV P/E Price/FCF DividendYield (%)

EarningsYield (%)

EAFE

United States

Emerging Markets

0

5

10

15

20

Dec‐04 Mar‐07 May‐09 Jul‐11 Oct‐13 Dec‐15

MSCI Emerging Markets MSCI EAFE MSCI ACWI exUS

Valuations are above average, but not unusual

0

10

20

30

40

50

60

70

Jun‐90 Aug‐94 Sep‐98 Oct‐02 Nov‐06 Jan‐11 Feb‐15

VIX

U.S. IMPLIED VOLATILITY U.S. VOLATILITY SKEW INTERNATIONAL EQUITY VOLATILITY

Equity volatilityEquity volatility was considerably low in the first quarter. Realized volatility of the S&P 500 was 6.7%, the lowest mark since the beginning of this business cycle. Implied volatility, as indicated by the VIX, is also below average, despite greater political uncertainty. However, it is important to remember that volatility can return quickly. Other measures of equity risk, such as option skews, show that investors are paying a premium for large downside risk protection. Traditional measures of

volatility may be understating equity market risk.

International and emerging equities followed in a similar trend with below average realized volatility. Currency continued to play an important role in unhedged international equity exposure. Over the last ten years, unhedged currency exposure increased the annualized standard deviation of the MSCI EAFE and EM indices by 4% and 6%, respectively.


Source: CBOE, as of 3/31/17 Source: CBOE, as of 3/31/17 Source: MSCI, as of 3/31/17

34

0

10

20

30

40

50

60

70

Mar‐05 Mar‐08 Mar‐11 Mar‐14MSCI EAFE ‐ 3 month Rolling Risk

MSCI EM ‐ 3 month Rolling Risk

100

110

120

130

140

150

Jan‐96 Oct‐99 Jul‐03 Apr‐07 Jan‐11 Oct‐14CBOE SKEW INDEX Average

Equity volatility is low, but can return quickly

Long-term equity performance


Source: MPI, as of 3/31/17

35

500

1000

2000

4000

8000

Dec‐00 Sep‐04 Jun‐08 Mar‐12 Dec‐15

Growth of $

1,000 (Log

Scale)

S&P 500 Russell 2000 MSCI EAFE MSCI EAFE Small Cap MSCI EM MSCI ACWI

Other assets


‐16

‐12

‐8

‐4

0

4

Nov‐06 Nov‐09 Nov‐12 Nov‐15

3 mon

th ro

ll yield annu

alize

d (%)

S&P GSCI Roll Return

ROLL RETURN CURVE SHAPE

CommoditiesCommodity performance has been lackluster over the past decade, delivering negative returns through the global financial crisis and the recent oil crisis. Much of this performance has been caused not by price movement, but by the shape of commodity futures curves. An upward sloping curve creates a drag for investors as a higher price is paid to enter each futures contract, and a downward sloping curve creates positive carry for investors as prices paid for futures contracts are lower. This premium/discount is a major determinant of commodity performance, and is known as “roll yield”. Roll yield can be negatively affected by

commodity crises as current contract prices drop further than distant prices and the curve becomes steeper.

As commodity prices moderate, futures curves have flattened and negative roll yield has begun to dissipate. Oil in particular significantly impacts overall roll yield due to its larger weight in commodities indices. Oil has exhibited a flatter curve shape recently. We are continuing to monitor these effects since a neutral or positive roll return would help to materially improve commodity returns.

40

45

50

55

60

65

70

Oil (W

TI) Forward Cu

rve

4/10/2015 4/12/2016 10/12/2016 4/12/2017

Curve flattening implies less roll yield drag


The drag from negative roll yield is abating, improving the outlook for commodities performance

37

Source: Standard & Poor’s, Goldman Sachs, as of 3/31/17 Source: Bloomberg, as of 4/12/17

EFFECT OF CURRENCY (1YR ROLLING) LONG‐TERM TRADE WEIGHTED DOLLAR JPM EM CURRENCY INDEX

CurrencyIn the first quarter, the U.S. dollar reversed part of its gains following the presidential election in November. On a trade weighted basis, the dollar was down 3.6% against a basket of major currencies. Currency movement has been an important influence in unhedged foreign asset exposure. Over the past year, U.S. dollar strength has eroded positive equity returns in developed markets, while dollar weakness against emerging markets has added to returns.

Emerging market currencies rallied in the first quarter following a sharp decline to end last year. The JPM Emerging Market Currency Index was up 2.5%.

While long‐term movements in the U.S. are often driven by broad mean reversion to fair value based on purchasing power parity, shorter term moves are still likely to be heavily influenced by developments in foreign trade policy, where much uncertainty remains.


Source: MPI, as of 3/31/17 Source: FRED, as of 4/7/17 Source: Bloomberg, as of 3/31/17

38

60

70

80

90

100

110

Jul‐10 Sep‐12 Nov‐14 Jan‐17

60

70

Oct‐16 Jan‐17

‐20%

‐10%

0%

10%

20%

30%

Jan‐09 Apr‐11 Jun‐13 Aug‐15

MSCI EAFE MSCI ACWI ex USA MSCI EM

80

90

100

110

120

130

140

Jan‐95 Jan‐00 Jan‐05 Jan‐10 Jan‐15

116

124

132

Jan‐16 Jan‐17

Appendix


Periodic table of returns – March 2017

40

Source Data: Morningstar, Inc., Hedge Fund Research, Inc. (HFR), National Council of Real Estate Investment Fiduciaries (NCREIF). Indices used: Russell 1000, Russell 1000 Value, Russell 1000 Growth, Russell 2000, Russell 2000 Value, Russell 2000 Growth, MSCI EAFE, MSCI EM, BBgBarc US Aggregate, T‐Bill 90 Day, Bloomberg Commodity, NCREIF Property, HFRI FOF, MSCI ACWI, BBgBarc Global Bond. NCREIF Property performance data as of 3/31/17.


BEST

WORS

T Large Cap Equity Small Cap Growth Commodities

Large Cap Value International Equity Real Estate

Large Cap Growth Emerging Markets Equity Hedge Funds of Funds

Small Cap Equity US Bonds 60% MSCI ACWI/40% BC Global Bond

Small Cap Value Cash

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD 5‐Year 10‐Year

Emerging Markets Equity 16.6 38.4 23.2 35.2 38.7 66.4 31.8 14.0 25.9 56.3 26.0 34.5 32.6 39.8 5.2 79.0 29.1 14.3 18.6 43.3 13.5 13.3 31.7 11.4 13.3 9.1

Large Cap Growth 8.1 37.8 23.1 32.9 27.0 43.1 22.8 8.4 10.3 48.5 22.2 21.4 26.9 16.2 1.4 37.2 26.9 7.8 18.1 38.8 13.2 5.7 21.3 8.9 13.3 8.1

International Equity 6.4 37.2 22.4 31.8 20.3 33.2 12.2 7.3 6.7 47.3 20.7 20.1 23.5 15.8 ‐6.5 34.5 24.5 2.6 17.9 34.5 13.0 0.9 17.3 7.2 13.1 7.6

Large Cap Equity 4.4 31.0 21.6 30.5 19.3 27.3 11.6 3.3 1.6 46.0 18.3 14.0 22.2 11.8 ‐21.4 32.5 19.2 1.5 17.5 33.5 11.8 0.6 12.1 6.0 12.5 7.1

Small Cap Growth 3.2 28.5 21.4 22.4 16.2 26.5 7.0 2.8 1.0 39.2 16.5 7.5 18.4 11.6 ‐25.9 28.4 16.8 0.4 16.4 33.1 6.0 0.0 11.8 5.3 12.4 6.7

60/40 Global Portfolio 2.6 25.7 16.5 16.2 15.6 24.3 6.0 2.5 ‐5.9 30.0 14.5 7.1 16.6 10.9 ‐28.9 27.2 16.7 0.1 16.3 32.5 5.6 ‐0.4 11.3 4.8 12.1 6.1

Large Cap Value 0.4 19.6 14.4 13.9 8.7 21.3 4.1 ‐2.4 ‐6.0 29.9 14.3 6.3 15.5 10.3 ‐33.8 23.3 16.1 ‐2.1 15.3 23.3 4.9 ‐0.8 11.2 3.3 10.7 5.9

Small Cap Equity ‐1.5 18.5 11.3 12.9 4.9 20.9 ‐3.0 ‐5.6 ‐11.4 29.7 12.9 5.3 15.1 7.0 ‐35.6 20.6 15.5 ‐2.9 14.6 12.1 4.2 ‐1.4 8.0 2.5 5.8 4.3

Hedge Funds of Funds ‐1.8 15.2 10.3 10.6 1.2 13.2 ‐7.3 ‐9.1 ‐15.5 25.2 11.4 4.7 13.3 7.0 ‐36.8 19.7 13.1 ‐4.2 11.5 11.0 3.4 ‐2.5 7.1 2.0 5.2 4.0

Real Estate ‐2.0 11.6 9.9 9.7 ‐2.5 11.4 ‐7.8 ‐9.2 ‐15.7 23.9 9.1 4.6 10.4 5.8 ‐37.6 18.9 10.2 ‐5.5 10.5 9.0 2.8 ‐3.8 5.7 1.6 3.1 2.7

US Bonds ‐2.4 11.1 6.4 5.2 ‐5.1 7.3 ‐14.0 ‐12.4 ‐20.5 11.6 6.9 4.6 9.1 4.4 ‐38.4 11.5 8.2 ‐5.7 4.8 0.1 0.0 ‐4.4 2.6 0.8 2.3 1.2

Cash ‐2.9 7.5 6.0 2.1 ‐6.5 4.8 ‐22.4 ‐19.5 ‐21.7 9.0 6.3 4.2 4.8 ‐0.2 ‐38.5 5.9 6.5 ‐11.7 4.2 ‐2.0 ‐1.8 ‐7.5 1.0 0.1 0.8 1.1

Small Cap Value ‐3.5 5.7 5.1 ‐3.4 ‐25.3 ‐0.8 ‐22.4 ‐20.4 ‐27.9 4.1 4.3 3.2 4.3 ‐1.6 ‐43.1 0.2 5.7 ‐13.3 0.1 ‐2.3 ‐4.5 ‐14.9 0.5 ‐0.1 0.1 0.5

Commodities ‐7.3 ‐5.2 3.6 ‐11.6 ‐27.0 ‐1.5 ‐30.6 ‐21.2 ‐30.3 1.0 1.4 2.4 2.1 ‐9.8 ‐53.2 ‐16.9 0.1 ‐18.2 ‐1.1 ‐9.5 ‐17.0 ‐24.7 0.3 ‐2.3 ‐9.5 ‐6.2

Major asset class returns


Source: Morningstar, as of 3/31/17 Source: Morningstar, as of 3/31/17

41

ONE YEAR ENDING MARCH TEN YEARS ENDING MARCH

‐1.4%

0.1%

0.4%

2.0%

3.0%

8.7%

11.7%

15.8%

16.4%

17.2%

17.2%

19.2%

23.0%

26.2%

29.4%

‐10% 0% 10% 20% 30% 40% 50%

BBgBarc US Treasury

BBgBarc US Agency Interm

BBgBarc US Agg Bond

Wilshire US REIT

BBgBarc US Credit

Bloomberg Commodity

MSCI EAFE

Russell 1000 Growth

BBgBarc US Corp. High Yield

S&P 500

MSCI EM

Russell 1000 Value

Russell 2000 Growth

Russell 2000

Russell 2000 Value

‐6.2%

1.1%

2.7%

3.1%

3.9%

4.3%

4.4%

5.3%

5.9%

6.1%

7.1%

7.5%

7.5%

8.1%

9.1%

‐10% ‐5% 0% 5% 10% 15%

Bloomberg Commodity

MSCI EAFE

MSCI EM

BBgBarc US Agency Interm

BBgBarc US Treasury

BBgBarc US Agg Bond

Wilshire US REIT

BBgBarc US Credit

Russell 1000 Value

Russell 2000 Value

Russell 2000

BBgBarc US Corp. High Yield

S&P 500

Russell 2000 Growth

Russell 1000 Growth

S&P 500 and S&P 500 sector returns


Source: Morningstar, as of 3/31/17 Source: Morningstar, as of 3/31/17

42

1ST QUARTER ONE YEAR ENDING MARCH

‐6.7%

‐4.0%

2.5%

3.5%

4.6%

5.9%

6.1%

6.4%

6.4%

8.4%

8.4%

12.6%

‐15% ‐10% ‐5% 0% 5% 10% 15% 20%

Energy

Telecom

Financials

Real Estate

Industrials

Materials

S&P 500

Consumer Staples

Utilities

Health Care

Consumer Discretionary

Information Technology

1.7%

2.5%

6.2%

7.1%

11.6%

13.2%

14.3%

17.2%

18.4%

19.2%

24.9%

32.6%

‐10% 0% 10% 20% 30% 40%

Telecom

Real Estate

Consumer Staples

Utilities

Health Care

Consumer Discretionary

Energy

S&P 500

Industrials

Materials

Information Technology

Financials

Detailed index returns

43

Source: Morningstar, as of 3/31/17


DOMESTIC EQUITY FIXED INCOMEMonth QTD YTD 1 Year 3 Year 5 Year 10 Year Month QTD YTD 1 Year 3 Year 5 Year 10 Year

Core Index Broad Index

S&P 500 0.1 6.1 6.1 17.2 10.4 13.3 7.5 BBgBarc US Treasury US TIPS (0.1) 1.3 1.3 1.5 2.0 1.0 4.2

S&P 500 Equal Weighted 0.0 5.4 5.4 17.4 9.6 14.0 8.7 BBgBarc US Treasury Bills 0.0 0.1 0.1 0.4 0.2 0.2 0.8

DJ Industrial Average (0.6) 5.2 5.2 19.9 10.6 12.2 8.1 BBgBarc US Agg Bond (0.1) 0.8 0.8 0.4 2.7 2.3 4.3

Russell Top 200 0.2 6.4 6.4 17.6 10.6 13.3 7.5 Duration

Russell 1000 0.1 6.0 6.0 17.4 10.0 13.3 7.6 BBgBarc US Treasury 1‐3 Yr 0.0 0.3 0.3 0.2 0.7 0.6 2.0

Russell 2000 0.1 2.5 2.5 26.2 7.2 12.4 7.1 BBgBarc US Treasury Long (0.6) 1.4 1.4 (5.0) 5.8 4.0 6.7

Russell 3000 0.1 5.7 5.7 18.1 9.8 13.2 7.5 BBgBarc US Treasury (0.0) 0.7 0.7 (1.4) 2.1 1.6 3.9

Russell Mid Cap (0.2) 5.1 5.1 17.0 8.5 13.1 7.9 Issuer

Style Index BBgBarc US MBS 0.0 0.5 0.5 0.2 2.7 2.0 4.2

Russell 1000 Growth 1.2 8.9 8.9 15.8 11.3 13.3 9.1 BBgBarc US Corp. High Yield (0.2) 2.7 2.7 16.4 4.6 6.8 7.5

Russell 1000 Value (1.0) 3.3 3.3 19.2 8.7 13.1 5.9 BBgBarc US Agency Interm 0.0 0.5 0.5 0.1 1.4 1.2 3.1

Russell 2000 Growth 1.2 5.3 5.3 23.0 6.7 12.1 8.1 BBgBarc US Credit (0.2) 1.3 1.3 3.0 3.5 3.7 5.3

Russell 2000 Value (0.8) (0.1) (0.1) 29.4 7.6 12.5 6.1

INTERNATIONAL EQUITY OTHER

Broad Index Index

MSCI ACWI 1.2 6.9 6.9 15.0 5.1 8.4 4.0 Bloomberg Commodity (2.7) (2.3) (2.3) 8.7 (13.9) (9.5) (6.2)

MSCI ACWI ex US 2.5 7.9 7.9 13.1 0.6 4.4 1.4 Wilshire US REIT (2.7) 0.0 0.0 2.0 10.2 9.8 4.4

MSCI EAFE 2.8 7.2 7.2 11.7 0.5 5.8 1.1 CS Leveraged Loans 0.1 1.2 1.2 9.7 3.7 4.9 4.2

MSCI EM 2.5 11.4 11.4 17.2 1.2 0.8 2.7 Regional Index

MSCI EAFE Small Cap 2.0 8.0 8.0 11.0 3.6 9.2 3.0 JPM EMBI Global Div 0.4 3.9 3.9 8.9 6.2 5.8 7.0

Style Index JPM GBI‐EM Global Div 2.3 6.5 6.5 5.5 (2.7) (1.6) 4.1

MSCI EAFE Growth 2.7 8.5 8.5 7.4 1.5 6.0 2.0 Hedge Funds

MSCI EAFE Value 2.8 6.0 6.0 16.0 (0.6) 5.6 0.0 HFRI Composite 0.2 2.3 2.3 8.6 2.8 4.0 3.3

Regional Index HFRI FOF Composite 0.1 2.0 2.0 5.9 1.7 3.1 1.2

MSCI UK 1.7 5.0 5.0 7.4 (2.6) 3.5 0.5 Currency (Spot)

MSCI Japan (0.4) 4.5 4.5 14.4 6.0 6.8 0.6 Euro 0.7 1.4 1.4 (6.1) (8.1) (4.3) (2.2)

MSCI Euro 6.2 8.5 8.5 12.8 (1.3) 6.4 (0.2) Pound 0.5 1.2 1.2 (13.0) (9.1) (4.8) (4.4)

MSCI EM Asia 3.3 13.4 13.4 18.0 4.5 4.4 4.7 Yen 0.4 4.7 4.7 0.9 (2.6) (5.9) 0.6

MSCI EM Latin American 0.6 12.1 12.1 23.3 (4.0) (6.1) 0.8

DefinitionsBloomberg US Weekly Consumer Comfort Index ‐ tracks the public’s economic attitudes each week, providing a high‐frequency read on consumer sentiment. The index, based on cell and landline telephone interviews with a random, representative national sample of U.S. adults, tracks Americans' ratings of the national economy, their personal finances and the buying climate on a weekly basis, with views of the economy’s direction measured separately each month. (www.langerresearch.com)

University of Michigan Consumer Sentiment Index ‐ A survey of consumer attitudes concerning both the present situation as well as expectations regarding economic conditions conducted by the University of Michigan. For the preliminary release approximately three hundred consumers are surveyed while five hundred are interviewed for the final figure. The level of consumer sentiment is related to the strength of consumer spending. (www.Bloomberg.com)

Citi Economic Surprise Index ‐ objective and quantitative measures of economic news. Defined as weighted historical standard deviations of data surprises (actual releases vs Bloomberg survey median). A positive reading of the Economic Surprise Index suggests that economic releases have on balance been beating consensus. The indices are calculated daily in a rolling three‐month window. The weights of economic indicators are derived from relative high‐frequency spot FX impacts of 1 standard deviation data surprises. The indices also employ a time decay function to replicate the limited memory of markets. (www.Bloomberg.com)

Merrill Lynch Option Volatility Estimate (MOVE) Index – a yield curve weighted index comprised of a weighted set of 1‐month Treasury options, including 2.5.10 and 30 year tenor contracts. This index is an indicator of the expected (implied) future volatility in the rate markets. (www.Bloomberg.com)

OECD Consumer Confidence Index ‐ based on households' plans for major purchases and their economic situation, both currently and their expectations for the immediate future. Opinions compared to a “normal” state are collected and the difference between positive and negative answers provides a qualitative index on economic conditions. (https://data.oecd.org/)

OECD Business Confidence Index ‐ based on enterprises' assessment of production, orders and stocks, as well as its current position and expectations for the immediate future. Opinions compared to a “normal” state are collected and the difference between positive and negative answers provides a qualitative index on economic conditions. (https://data.oecd.org/)

NFIB Small Business Outlook ‐ Small Business Economic Trends (SBET) is a monthly assessment of the U.S. small‐business economy and its near‐term prospects. Its data are collected through mail surveys to random samples of the National Federal of Independent Business (NFIB) membership. The survey contains three broad question types: recent performance, near‐term forecasts, and demographics. The topics addressed include: outlook, sales, earnings, employment, employee compensation, investment, inventories, credit conditions, and single most important problem. (http://www.nfib‐sbet.org/about/)


Notices & disclosuresPast performance is no guarantee of future results. This report or presentation is provided for informational purposes only and is directed to institutional clients and eligible institutional counterparties only and should not be relied upon by retail investors. Nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security or pursue a particular investment vehicle or any trading strategy. The opinions and information expressed are current as of the date provided or cited only and are subject to change without notice. This information is obtained from sources deemed reliable, but there is no representation or warranty as to its accuracy, completeness or reliability. Verus Advisory Inc. and Verus Investors, LLC expressly disclaim any and all implied warranties or originality, accuracy, completeness, non‐infringement, merchantability and fitness for a particular purpose. This report or presentation cannot be used by the recipient for advertising or sales promotion purposes.

The material may include estimates, outlooks, projections and other “forward‐looking statements.” Such statements can be identified by the use of terminology such as “believes,” “expects,” “may,” “will,” “should,” “anticipates,” or the negative of any of the foregoing or comparable terminology, or by discussion of strategy, or assumptions such as economic conditions underlying other statements. No assurance can be given that future results described or implied by any forward looking information will be achieved. Actual events may differ significantly from those presented. Investing entails risks, including possible loss of principal. Risk controls and models do not promise any level of performance or guarantee against loss of principal.

“VERUS ADVISORY™ and VERUS INVESTORS™ and any associated designs are the respective trademarks of Verus Advisory, Inc. and Verus Investors, LLC. Additional information is available upon request.

Investment Performance ReviewPeriod Ending: March 31, 2017


Portfolio Reconciliation

Last ThreeMonths Fiscal Year-To-Date

_

Beginning Market Value $123,073,594 $125,223,935

Contributions $13,117,185 $20,044,096

Withdrawals -$16,618,377 -$30,549,374

Net Cash Flow -$3,501,193 -$10,505,278

Net Investment Change $4,742,970 $9,596,715

Ending Market Value $124,315,371 $124,315,371

Net Change $1,241,777 -$908,563_

Total FundPortfolio Reconciliation Period Ending: March 31, 2017

Contributions and withdrawals may include intra-account transfers between managers/funds. Portfolio Reconciliation does not include Pooled Cash.

Pasadena Fire & Police Retirement System 1

Does not include Pooled Cash. Invesco Core Real Estate ending market value includes dividend payable. First American Treasury funded 12/1/2015. Vanguard Short-Term Investment Grade funded 3/27/2017.

BeginningMarket Value Contributions Withdrawals Net Investment

ChangeEnding

Market Value_

Vanguard Growth Index Ins $9,162,207 $0 $0 $880,735 $10,042,942Dodge & Cox Stock $10,088,162 $0 -$800,000 $485,489 $9,773,650Atlanta Capital Management Company $5,028,106 $0 -$185,056 $86,513 $4,929,562Dodge & Cox Intl Stock $11,723,945 $0 -$100,000 $1,088,730 $12,712,675American Funds Europacific Growth R6 $11,190,140 $0 $0 $1,048,455 $12,238,595Metropolitan West Core Plus Fixed Income $42,121,430 $275 -$12,072,576 $373,780 $30,422,910Voya Senior Loan Fund $7,971,157 $815,000 -$8,836 $67,647 $8,844,968Vanguard Short-Term Investment Grade Adm -- $8,850,000 -$1,909 $4,176 $8,852,266Vanguard Inflation-Protected Securities Adm $4,472,012 $0 $0 $62,670 $4,534,682Invesco Core Real Estate $15,481,207 $0 $0 $349,428 $15,830,635PIMCO All Asset Ins $5,812,814 $0 $0 $295,333 $6,108,147First American Treasury Obligation Z $22,415 $3,451,909 -$3,450,000 $15 $24,340Total $123,073,594 $13,117,185 -$16,618,377 $4,742,970 $124,315,371

XXXXX

Total FundCash Flow by Manager Period Ending: March 31, 2017


CurrentBalance

CurrentAllocation Policy Difference Policy Range Within IPS

Range?_

Domestic Equity Large CapGrowth $10,042,942 8.1% 8.0% $97,712 3.0% - 20.0% Yes

Domestic Equity Large CapValue $9,773,650 7.9% 8.0% -$171,579 3.0% - 20.0% Yes

Domestic Equity Small CapCore $4,929,562 4.0% 4.0% -$43,053 0.0% - 10.0% Yes

International Equity $24,951,270 20.1% 20.0% $88,196 10.0% - 25.0% YesDomestic Fixed Income Core $30,422,910 24.5% 20.0% $5,559,835 10.0% - 35.0% YesDomestic Fixed Income BankLoans $8,844,968 7.1% 10.0% -$3,586,569 0.0% - 15.0% Yes

Domestic Fixed Income ShortTerm $8,852,266 7.1% 10.0% -$3,579,271 0.0% - 15.0% Yes

Domestic Fixed Income RealReturn $4,534,682 3.6% 5.0% -$1,681,087 0.0% - 10.0% Yes

Real Estate $15,830,635 12.7% 10.0% $3,399,098 0.0% - 15.0% YesAlternative Investment $6,108,147 4.9% 5.0% -$107,621 0.0% - 10.0% YesCash and Equivalents $24,340 0.0% 0.0% $24,340 0.0% - 10.0% YesTotal $124,315,371 100.0% 100.0%

XXXXX


Total FundAsset Allocation vs. Policy Period Ending: March 31, 2017

Market Value % ofPortfolio 3 Mo Fiscal

YTD YTD 1 Yr 3 Yrs 5 Yrs Fiscal2016

Fiscal2015

Fiscal2014

Fiscal2013

Fiscal2012

_

Total Fund 124,315,371 100.0 3.9 7.9 3.9 9.9 5.1 7.5 0.4 3.7 15.4 12.5 2.6Policy Index 3.3 6.3 3.3 8.0 4.9 7.1 1.8 3.0 14.8 11.3 3.3

Total Domestic Equity 24,746,154 19.9 6.1 18.6 6.1 21.1 10.3 14.2 -0.4 8.3 26.4 24.2 3.1S&P 500 6.1 14.4 6.1 17.2 10.4 13.3 4.0 7.4 24.6 20.6 5.4

Total International Equity 24,951,270 20.1 9.4 18.8 9.4 17.9 1.5 7.1 -14.2 -1.3 25.8 19.6 -14.4MSCI EAFE 7.2 13.3 7.2 11.7 0.5 5.8 -10.2 -4.2 23.6 18.6 -13.8MSCI ACWI ex USA 7.9 13.9 7.9 13.1 0.6 4.4 -10.2 -5.3 21.8 13.6 -14.6

Total Domestic Fixed 52,654,825 42.4 0.9 0.0 0.9 2.0 2.7 2.9 4.4 1.8 4.7 1.5 8.6BBgBarc US Aggregate TR 0.8 -1.7 0.8 0.4 2.7 2.3 6.0 1.9 4.4 -0.7 7.5

Total Real Estate 15,830,635 12.7 2.3 5.6 2.3 9.2 11.2 10.7 9.8 15.2 9.6 9.3 11.5NCREIF-ODCE 1.8 6.1 1.8 8.3 11.8 12.0 11.8 14.4 12.7 12.2 12.4NCREIF Property Index 1.6 5.1 1.6 7.3 10.6 10.7 10.6 13.0 11.2 10.7 12.0

Total Alternatives 6,108,147 4.9 5.1 8.8 5.1 13.2 2.3 -- 0.1 -5.8 11.5 -- --CPI + 5% 2.2 4.9 2.2 7.5 6.1 -- 6.0 5.1 7.2 -- --CPI (UNADJUSTED) 1.0 1.2 1.0 2.4 1.1 -- 1.0 0.1 2.1 -- --CPI LOCAL (LA) 1.7 1.9 1.7 2.7 1.6 -- 1.8 0.8 1.8 -- --

XXXXX

Total FundExecutive Summary (Net of Fees) Period Ending: March 31, 2017

Policy Index as of 3/31/2017: 8% Russell 1000 Value, 8% Spliced Vanguard Large Growth, 4% Russell 2000, 20% MSCI EAFE, 20% BBgBarc US Aggregate, 5% BBgBarc US TIPS, 10% S&P/LSTA Leveraged Loan, 10% BBgBarc US Credit 1-5 Year, 10% NCREIF-ODCE, 5% CPI+5%. CPI LOCAL (LA) includes Los Angeles-Riverside-Orange County. FY: 6/30


Invesco Core Real Estate market value includes dividend payable. Total Fund does not include Pooled Cash.

TotalMarketValue

% ofPortfolio

DomesticEquity

Large CapGrowth

DomesticEquity

Large CapValue

DomesticEquity

Small CapCore

International Equity

DomesticFixed

IncomeCore

DomesticFixed

IncomeBank Loans

DomesticFixed

IncomeShort Term

DomesticFixed

IncomeReal Return

Real Estate AlternativeInvestment

Cash andEquivalents

_

Total Domestic Equity Vanguard Growth Index Ins $10,042,942 8.1% $10,042,942Dodge & Cox Stock $9,773,650 7.9% $9,773,650Atlanta Capital Management Company $4,929,562 4.0% $4,929,562

Total International Equity Dodge & Cox Intl Stock $12,712,675 10.2% $12,712,675American Funds Europacific Growth R6 $12,238,595 9.8% $12,238,595

Total Domestic Fixed Metropolitan West Core Plus Fixed Income $30,422,910 24.5% $30,422,910Voya Senior Loan Fund $8,844,968 7.1% $8,844,968Vanguard Short-Term Investment Grade Adm $8,852,266 7.1% $8,852,266Vanguard Inflation-Protected Securities Adm $4,534,682 3.6% $4,534,682

Total Real Estate Invesco Core Real Estate $15,830,635 12.7% $15,830,635

Total Alternatives PIMCO All Asset Ins $6,108,147 4.9% $6,108,147

Cash First American Treasury Obligation Z $24,340 0.0% $24,340

Total $124,315,371 100.0% $10,042,942 $9,773,650 $4,929,562 $24,951,270 $30,422,910 $8,844,968 $8,852,266 $4,534,682 $15,830,635 $6,108,147 $24,340XXXXX

Total FundAsset Allocation by Account Period Ending: March 31, 2017


Total MarketValue

% ofPortfolio

DomesticEquity LargeCap Growth

DomesticEquity Large

Cap Value

DomesticEquity Small

Cap Core

InternationalEquity

DomesticFixed

Income Core

DomesticFixed

Income BankLoans

DomesticFixed

IncomeShort Term

DomesticFixed

Income RealReturn


Cash andEquivalents

_

Total Fund Total Domestic Equity

Vanguard Growth Index Ins $10,042,942 8.0% $10,042,942Dodge & Cox Stock $9,773,650 7.8% $9,773,650Atlanta Capital Management Company $4,929,562 3.9% $4,929,562






Pooled Cash $1,350,000 1.1% $1,350,000Total $125,665,371 100.0% $10,042,942 $9,773,650 $4,929,562 $24,951,270 $30,422,910 $8,844,968 $8,852,266 $4,534,682 $15,830,635 $6,108,147 $1,374,340

XXXXX

Invesco Core Real Estate market value includes dividend payable. Pooled Cash balance is an estimate.

Total Fund with Pooled CashAsset Allocation by Account with Pooled Cash Period Ending: March 31, 2017


Performance AttributionQuarter YTD

Wtd. Actual Return 3.87% 3.87%Wtd. Index Return * 3.29% 3.29%Excess Return 0.58% 0.58%Selection Effect 0.68% 0.68%Allocation Effect -0.08% -0.08%Interaction Effect -0.02% -0.02%

*Calculated from benchmark returns and weightings of each component.

Attribution SummaryLast Three Months

Wtd. ActualReturn

Wtd. IndexReturn

ExcessReturn

SelectionEffect

AllocationEffect

InteractionEffects

TotalEffects

Total Domestic Equity 6.1% 5.6% 0.5% 0.1% 0.0% 0.0% 0.1%Total International Equity 9.4% 7.2% 2.1% 0.4% -0.1% 0.0% 0.3%Total Domestic Fixed 0.9% 0.9% -0.1% 0.0% 0.0% 0.0% 0.0%Total Real Estate 2.3% 1.8% 0.5% 0.0% 0.0% 0.0% 0.0%Total Alternatives 5.1% 2.2% 2.9% 0.1% 0.0% 0.0% 0.1%Total 3.9% 3.3% 0.6% 0.7% -0.1% 0.0% 0.6%

Total FundAttribution Analysis - Asset Class Level (Net of Fees) Period Ending: March 31, 2017


Weighted returns shown in attribution analysis may differ from actual returns.

Anlzd StandardDeviation Anlzd Alpha Beta R-Squared Up Mkt

Capture RatioDown Mkt

Capture RatioInformation

Ratio Tracking Error Sharpe Ratio_

Total Fund 4.18% 0.58% 1.03 0.95 108.43% 85.14% 0.74 0.98% 1.30

Total Domestic Equity 7.86% -0.13% 1.04 0.90 107.59% 120.60% 0.13 2.52% 1.34

Total International Equity 12.14% 1.52% 1.08 0.93 110.68% 92.73% 0.46 3.36% 0.16

Total Domestic Fixed 2.67% 1.06% 0.75 0.94 92.79% 62.71% 0.35 1.09% 1.09

Total Real Estate 2.05% 1.14% 0.94 0.44 104.65% -- 0.32 1.53% 5.91

Total FundRisk Analysis - 3 Years (Gross of Fees) Period Ending: March 31, 2017


Total FundRolling Risk Statistics (Net of Fees) Period Ending: March 31, 2017


Total FundRolling Performance Relative to Policy (Net of Fees) Period Ending: March 31, 2017


Anlzd StandardDeviation Anlzd Alpha Beta R-Squared Up Mkt

Capture RatioDown Mkt

Capture RatioInformation

Ratio Tracking Error Sharpe Ratio_

Vanguard Growth Index Ins 9.21% -0.06% 1.00 1.00 99.58% 100.32% -2.30 0.03% 1.39

Dodge & Cox Stock 10.59% 1.02% 1.08 0.82 122.47% 114.44% 0.46 4.54% 1.43

Atlanta Capital Management Company 9.97% 4.67% 0.73 0.79 86.27% 48.48% 0.23 5.68% 1.36

Dodge & Cox Intl Stock 13.47% 2.46% 1.12 0.88 127.53% 93.59% 0.62 4.77% 0.54

American Funds Europacific Growth R6 10.96% 2.60% 0.93 0.92 112.60% 86.90% 0.70 3.25% 0.60

Metropolitan West Core Plus Fixed Income 2.96% 0.90% 0.89 0.91 105.95% 74.19% 0.67 0.96% 0.97

Vanguard Short-Term Investment Grade Adm 1.43% 0.12% 0.92 0.99 95.27% 88.00% -0.29 0.21% 1.41

Vanguard Inflation-Protected Securities Adm 5.33% -0.04% 1.03 1.00 102.70% 103.02% -0.02 0.34% 0.16

PIMCO All Asset Ins 7.38% -10.37% 2.24 0.22 65.98% 2,129.79% -0.38 6.80% 0.49XXXXX

Total FundRisk Analysis by Manager - 5 Years (Net of Fees) Period Ending: March 31, 2017

Page Excludes managers with less than 5 years of history.




Fiscal2015

Fiscal2014

Fiscal2013

Fiscal2012 Return Since

_

Total Domestic EquityVanguard Growth Index Ins 10,042,942 40.6 9.6 14.8 9.6 16.0 10.7 13.0 1.6 9.7 28.2 16.9 6.6 15.9 Jun-09

Spliced Vanguard Large Cap Growth Index 9.6 14.8 9.6 16.0 10.7 13.0 1.5 9.7 28.2 16.9 6.6 15.9 Jun-09Dodge & Cox Stock 9,773,650 39.5 5.1 26.9 5.1 29.2 10.0 15.8 -4.6 5.1 28.6 31.3 -0.4 9.5 Aug-00

Russell 1000 Value 3.3 14.0 3.3 19.2 8.7 13.1 2.9 4.1 23.8 25.3 3.0 6.8 Aug-00Atlanta Capital Management Company 4,929,562 19.9 1.8 11.7 1.8 16.4 11.5 14.6 5.2 14.4 20.7 26.4 3.6 17.8 Jun-09

Russell 2000 2.5 21.6 2.5 26.2 7.2 12.4 -6.7 6.5 23.6 24.2 -2.1 15.4 Jun-09Russell 2500 3.8 17.3 3.8 21.5 7.4 12.6 -3.7 5.9 25.6 25.6 -2.3

XXXXX

Total Domestic EquityPerformance Summary (Gross of Fees) Period Ending: March 31, 2017

Dodge & Cox Stock Inception: 8/31/2000. Vanguard Growth Index Ins and Atlanta Capital Management Company Inception: 6/30/2009. Dodge & Cox separate account performance shown prior to 6/19/2009. Effective 3/1/2015 Atlanta SMID Cap strategy changed to Atlanta Small Cap Core strategy.




Fiscal2015

Fiscal2014

Fiscal2013


_

Total Domestic EquityVanguard Growth Index Ins 10,042,942 40.6 9.6 14.8 9.6 15.9 10.7 12.9 1.5 9.6 28.1 16.8 6.5 15.8 Jun-09

Spliced Vanguard Large Cap Growth Index 9.6 14.8 9.6 16.0 10.7 13.0 1.5 9.7 28.2 16.9 6.6 15.9 Jun-09Dodge & Cox Stock 9,773,650 39.5 5.0 26.4 5.0 28.6 9.4 15.2 -5.1 4.5 28.0 30.6 -0.9 9.0 Aug-00

Russell 1000 Value 3.3 14.0 3.3 19.2 8.7 13.1 2.9 4.1 23.8 25.3 3.0 6.8 Aug-00Atlanta Capital Management Company 4,929,562 19.9 1.6 11.0 1.6 15.5 10.6 13.7 4.4 13.5 19.7 25.4 2.8 16.9 Jun-09

Russell 2000 2.5 21.6 2.5 26.2 7.2 12.4 -6.7 6.5 23.6 24.2 -2.1 15.4 Jun-09Russell 2500 3.8 17.3 3.8 21.5 7.4 12.6 -3.7 5.9 25.6 25.6 -2.3

XXXXX

Total Domestic EquityPerformance Summary (Net of Fees) Period Ending: March 31, 2017

Dodge & Cox Stock Inception: 8/31/2000. Vanguard Growth Index Ins and Atlanta Capital Management Company Inception: 6/30/2009. Dodge & Cox separate account performance shown prior to 6/19/2009. Effective 3/1/2015 Atlanta SMID Cap strategy changed to Atlanta Small Cap Core strategy.


Total International EquityPerformance Summary (Net of Fees) Period Ending: March 31, 2017

Dodge & Cox Intl Stock Inception: 9/30/2004. American Funds Europacific Growth R6 Inception: 2/24/2012. Dodge & Cox separate account performance shown prior to 6/19/2009.



Fiscal2015

Fiscal2014

Fiscal2013


_

Total International Equity Dodge & Cox Intl Stock 12,712,675 51.0 9.3 24.5 9.3 23.0 0.7 7.3 -18.9 -3.6 29.3 23.5 -15.7 7.0 Sep-04

MSCI ACWI ex USA 7.9 13.9 7.9 13.1 0.6 4.4 -10.2 -5.3 21.8 13.6 -14.6 5.8 Sep-04American Funds Europacific Growth R6 12,238,595 49.0 9.4 13.5 9.4 13.1 2.2 6.6 -9.6 1.0 22.4 15.9 -12.6 6.4 Feb-12

MSCI ACWI ex USA 7.9 13.9 7.9 13.1 0.6 4.4 -10.2 -5.3 21.8 13.6 -14.6 4.2 Feb-12XXXXX




Fiscal2015

Fiscal2014

Fiscal2013


_

Total Domestic FixedMetropolitan West Core Plus Fixed Income 30,422,910 57.8 0.9 -0.7 0.9 1.3 2.9 3.3 5.1 2.3 5.3 2.5 8.5 6.2 Jul-00

BBgBarc US Aggregate TR 0.8 -1.7 0.8 0.4 2.7 2.3 6.0 1.9 4.4 -0.7 7.5 5.1 Jul-00Voya Senior Loan Fund 8,844,968 16.8 0.8 5.6 0.8 7.7 -- -- 2.0 3.3 -- -- -- 3.9 Jun-14

S&P/LSTA Leveraged Loan Index 1.1 6.6 1.1 9.7 -- -- 0.9 1.8 -- -- -- 3.4 Jun-14Vanguard Short-Term Investment Grade Adm 8,852,266 16.8 0.9 0.6 0.9 2.0 2.0 2.2 3.4 1.2 3.4 1.9 2.8 0.0 Mar-17

BBgBarc US Credit 1-5 Yr TR 0.9 0.4 0.9 1.7 1.9 2.2 3.1 1.3 3.4 2.1 3.3 0.0 Mar-17Vanguard Inflation-Protected Securities Adm 4,534,682 8.6 1.4 -0.2 1.4 1.6 2.1 1.1 4.8 -1.8 4.6 -5.0 12.0 2.4 Jun-11

BBgBarc US TIPS TR 1.3 -0.2 1.3 1.5 2.0 1.0 4.4 -1.7 4.4 -4.8 11.7 2.2 Jun-11XXXXX


Total Domestic FixedPerformance Summary (Gross of Fees) Period Ending: March 31, 2017

Metropolitan West Core Plus Fixed Income Inception: 7/31/2000. Vanguard Inflation-Protected Securities Ins Inception: 6/30/2011. Voya Senior Loan Fund Inception: 6/27/2014. Vanguard Inflation-Protected Securities underwent share class change on 4/27/2016. Vanguard Short-Term Investment Grade funded 3/27/2017.



Fiscal2015

Fiscal2014

Fiscal2013


_

Total Domestic FixedMetropolitan West Core Plus Fixed Income 30,422,910 57.8 0.8 -1.0 0.8 1.0 2.6 3.0 4.8 1.9 5.0 2.2 8.1 5.9 Jul-00

BBgBarc US Aggregate TR 0.8 -1.7 0.8 0.4 2.7 2.3 6.0 1.9 4.4 -0.7 7.5 5.1 Jul-00Voya Senior Loan Fund 8,844,968 16.8 0.7 5.2 0.7 7.2 -- -- 1.5 2.9 -- -- -- 3.5 Jun-14

S&P/LSTA Leveraged Loan Index 1.1 6.6 1.1 9.7 -- -- 0.9 1.8 -- -- -- 3.4 Jun-14Vanguard Short-Term Investment Grade Adm 8,852,266 16.8 0.8 0.6 0.8 1.9 1.9 2.1 3.3 1.1 3.3 1.8 2.7 0.0 Mar-17

BBgBarc US Credit 1-5 Yr TR 0.9 0.4 0.9 1.7 1.9 2.2 3.1 1.3 3.4 2.1 3.3 0.0 Mar-17Vanguard Inflation-Protected Securities Adm 4,534,682 8.6 1.4 -0.3 1.4 1.5 2.1 1.0 4.8 -1.9 4.5 -5.1 11.9 2.3 Jun-11

BBgBarc US TIPS TR 1.3 -0.2 1.3 1.5 2.0 1.0 4.4 -1.7 4.4 -4.8 11.7 2.2 Jun-11XXXXX


Total Domestic FixedPerformance Summary (Net of Fees) Period Ending: March 31, 2017

Metropolitan West Core Plus Fixed Income Inception: 7/31/2000. Vanguard Inflation-Protected Securities Ins Inception: 6/30/2011. Voya Senior Loan Fund Inception: 6/27/2014. Vanguard Inflation-Protected Securities underwent share class change on 4/27/2016. Vanguard Short-Term Investment Grade funded 3/27/2017.



Fiscal2015

Fiscal2014

Fiscal2013


_

Total Real Estate Invesco Core Real Estate 15,830,635 100.0 2.3 5.6 2.3 9.2 11.1 -- 9.8 15.2 10.0 -- -- 11.2 Oct-12

NCREIF-ODCE 1.8 6.1 1.8 8.3 11.8 -- 11.8 14.4 12.7 -- -- 12.1 Oct-12XXXXX

Invesco Core Real Estate Inception: 10/1/2012. Invesco Core Real Estate market value includes dividend payable.


Total Real EstatePerformance Summary (Net of Fees) Period Ending: March 31, 2017



Fiscal2015

Fiscal2014

Fiscal2013


_

Total AlternativesPIMCO All Asset Ins 6,108,147 100.0 5.1 8.8 5.1 13.2 2.3 3.7 0.1 -5.8 11.4 5.8 3.0 2.1 May-13

CPI + 5% 2.2 4.9 2.2 7.5 6.1 6.3 6.0 5.1 7.2 6.8 6.7 6.2 May-13HFRI Fund of Funds Composite Index 2.4 5.6 2.4 6.2 1.8 3.2 -5.4 4.0 7.6 7.3 -4.5

XXXXX

Total AlternativesPerformance Summary (Net of Fees) Period Ending: March 31, 2017

PIMCO All Asset Ins Inception: 5/28/2013.


Name Asset Class Identifier Fee Schedule Market Value Estimated FeeValue Estimated Fee

Vanguard Growth Index Ins Domestic Equity VIGIX 0.07% of Assets $10,042,942 $7,030 0.07%Dodge & Cox Stock Domestic Equity DODGX 0.52% of Assets $9,773,650 $50,823 0.52%

Atlanta Capital Management Company Domestic Equity0.80% of First $50.0 Mil,0.70% of Next $105.0 Mil,0.60% of Next $255.0 Mil

$4,929,562 $39,436 0.80%

Dodge & Cox Intl Stock International Equity DODFX 0.64% of Assets $12,712,675 $81,361 0.64%American Funds Europacific Growth R6 International Equity RERGX 0.50% of Assets $12,238,595 $61,193 0.50%

Metropolitan West Core Plus Fixed Income Domestic Fixed Income0.35% of First $25.0 Mil,0.25% of Next $75.0 Mil,0.20% of Next $100.0 Mil

$30,422,910 $101,057 0.33%

Voya Senior Loan Fund Domestic Fixed Income 0.45% of Assets $8,844,968 $39,802 0.45%Vanguard Short-Term Investment Grade Adm Domestic Fixed Income VFSUX 0.10% of Assets $8,852,266 $8,852 0.10%Vanguard Inflation-Protected Securities Adm Domestic Fixed Income VAIPX 0.10% of Assets $4,534,682 $4,535 0.10%Invesco Core Real Estate Real Estate 1.10% of Assets $15,830,635 $174,137 1.10%PIMCO All Asset Ins Alternatives PAAIX 0.88% of Assets $6,108,147 $53,752 0.88%First American Treasury Obligation Z Cash and Equivalents FUZXX 0.20% of Assets $24,340 $49 0.20%Total $124,315,371 $622,028 0.50%

XXXXX

Total FundInvestment Fund Fee Analysis Period Ending: March 31, 2017

Does not include Pooled Cash. Invesco Core Real Estate market value includes dividend payable. First American Treasury Obligation expense ratio is discounted to fund's actual yield when below 20 bps. Mutual fund fees shown are sourced from Morningstar and are as of the most current prospectus.


Total FundAsset Allocation History Period Ending: March 31, 2017



Total FundPeer Universe Comparison: Cumulative Performance (Gross of Fees) Period Ending: March 31, 2017

Effective 1/01/2017, only traditional asset class (public equity, public fixed income, REITs) investment management fees will be included in the gross of fee return calculation.

Total FundPeer Universe Comparison: Consecutive Periods (Gross of Fees) Period Ending: March 31, 2017


Effective 1/01/2017, only traditional asset class (public equity, public fixed income, REITs) investment management fees will be included in the gross of fee return calculation.


Total FundPeer Universe Comparison: Asset Allocation Period Ending: March 31, 2017


Data Sources & Methodology Period Ending: March 31, 2017

PI MC 0

1Q17

All Asset Ft1nd PlMCO All Asset Fund utilizes an active asset aUocation approach to invest in a portfolio of mutual funds managed by PlMCO. The chart here shows portfolio manager Robert Arnott's quarterly sector strategy allocations since 2003. The fund aUocations are shown on the reverse.

SYMBOlS A Shares-PASAX C Shares-PASCX D shares-PASDX P shares-PALPX

A company of Amanz@)

R shares-PATRX lnst shares-PAAIX Admin. shares-PAALX

YN1 2003 : 2004 : : : · · · • • YTO

2007 : 2001 : 2009 : 2010 : 201 1 ~ 2012 ~ 20131 : 2014 ~ 2015 ; 2016 ; 2017 2005 : 2006

• EM ""*" 5lraiPjes • Global bond stmogios • U.S.Ioog maturity bond stratogios

• (OI'!Viodities alii RffT SIJatlgie5 • lnAatlon~olated bond straiPgies • llrort-torm bond SU'alogii!S

• EM bond strat2gios • Altemaliw stratogios • u.s. oqurty stratogil!s

• Cll!d~ suat1'gies • U.S. mr• bond stratogies • OMiopod ...U.S.oquity stratogios

f'erf(Xffi;I7Ce qvoiNI represents past perfami¥1Ce. Past perfarn~Ke is na a gvatartee a a relialie tndcator of future resuh lrwesrnll!nt retum and the (JftqJalvaht!of an iJveslment will Ouctuall!. Shares may bt! l'>fJfthfTI{)(P a kss flw origifl31 cost when redeemed. Current petixmafKI! maybt! lower or lighet tim petformi¥1Ce shown. For perfonnanuuurrent 10 the most TM!nt mort/rend, visit pmauomorcai888.87.PIMCQ l'eli!fm;ncedoes not ta~ iJtOiJC(/)IJ(Jl the miJJdfTJJm nidal sales ch!Kge and v.oukf bt! lmver I it did The fund~ totii illnuii opetadng expense, net expense. and n« ex.fnll!reSt expensnadosare 1.5Z59f., 1.3659f., and J.:JlS%, respecti!R/y.1

There is no assu-ance that al'f fund, illdudlng any fund that has experienced high or unusual performance for one or more periods, wrl expenence similar levels of llEffurmance in the future. HIQh performance is defined as a sq~ificant IOCiease In ehhet 1) a fund's (total) return in excess of that of the fund's bendimark between repon1119 periOds or 2) a fund's total return as compared to as hiSIOIIcal reuns between reponing periods. Unusual performance is defined as a Sl!JldiCaOI change 1n a fund's performance as compared 10 one or more premus reporting periods. ' The negative allocation to short-t«m suategtes IS due to unsettle<! trades. ' The net expense rauo reneas a conuxrual upense re<luctlon agreement ltlrough 31 Jury 2017. u-llllerest expenses reftect the accounting treatment of certain Investments (e.g., revetse rfjlU!dlase agreements) bot do not reflect actual expenses pa1d to PIMCO.

PI MC 0 PIMCOALLASSET FUND I INDIVIDUAL FUND ALLOCATIONS- % (I JAN ' tO- 31 MAR '17)

1010 2011 2011 2013 2014 l01S 2016 Mat '11

Thm:tPila'-01Yef'51fif!rs 8&.83% 8&.11% 8U3Ho 82.0!.. 14.11'J. 81.91'1. 74.2~ n.AB%

EM equities

RAE hlndamental &nfsglng Martec:s Fmd RAE kandan-..ental PWS Q IG RAE leN l'da18I:J PIUS EMG

5.81% 8.91% 9.71'l. 11.63% 0.01'1o

4.11% 7.7f1'4

4.63% 3.39!1> 10.74"

..................................... E!P..~~~~~.~.".!:"................ . ......... 0}?!!. 0.11'1o 0.11'1o 0.01'1o Commodties Car.mxllllesRUsrw StraV!Qt' 3.0S.'fo 4.49% ....... fi6''i ...... I79ii: ...... }~i· ....... CGSi ...... ~i'.i7~ ... . & REITs Ccmmodltf.le!Renm Strntegtt 4.24% 4.47'.b 0.089; l.lS'Jio 1.97% 1.61'% 0.53%

..................................... ~.~~~ .. ~.~.~ ..................... J:.~.~~ ..... J ... ?~.... . ........ }·~.~~ ....... ~.~~ ....... ~.?~ ....... !:.~~ ... . EM boods Err.erglng local Bond 1.53% SJS% 7.4S'Jio 1.13'1 9.1G% 8.48% 6.98%

En:«g!ngMall:&Cc:raxy 1.97% 7.1!% 6.96... 7.44'l. 9.0S% 11.!M% ll99'A. Err.erglng MarbnBoof 0.57% 2.68% 3.37'1: l75'Jio OA7% 0.31% Err.«91ngMarb!tsCo:poote8ond 0.7815 1.40'1. 0.21).% 0.~

HI!#!: YleH HI!Jl 'r'lekl SpKtrunt

1"""'' 01\E!IS!fled lr:eOOle low Ouranon Income' SeniOr ftlatlng Ra!e

................. 3:88% ....... 6.:Sl% ...... G'.'i4'i ........ i76i' ...... I64% ....... Eli ....... f3S% .. .. O.SI'fo 1.62% 3.02" 4.31" 2.90'¥. 3.8d% 4.6&% 8.94% 359% 6.13'1o

9.1)9% AJ7~

7.45% 0.112%

10.31" IG.66% 6.11% 6.34~ 7.~ A.28'1 lS9'l. O.IC'ro 0.24% 0.49% 6.56'1. 1.9911 O.O&'Io 0.2910> 2.64% 1.19'1o 1.07% 2.3.!%

................................... S.~!!~.~ . ................................................ }:!.~~ ...... }·~~ ...... ~:.?~.~ ... . G'lobal bonds ForelgnSood(Unhed;ej) 0.79% I.SI% 1.69'l. 0.05" 0.36% 0.29% ..................................... ~zt:·~~~.~~ ............................ t~·~~ ....... 6·:i~ ..... t6~~ ...... ~:i{~· ....... ~~·~~ ....... ~~·~ ...... 3.:19%"'' lnflatiOIHinked bonds RealitEl'..snAsset 8.13% 5.33% O.OO'l. 0.349; 1.17% 6.~ O.Sd14

..................................... ~~~.~.!~.~.~~.~.~~... 0.09'l. 0.08~ O.OS.% 0.10% O.IR


Un:omtr.l!re:f Bond Cred:I.Absolute AetiDI Mortgag,e OpporndleS MHOS l.l_.aoaged Ftru."Zo Strategy EqSl~ RAE -llelcrqlhon PIUS RAE Fttndamenta! Adv¥ttage PlUS RAE WOOittY~ fll':d:.menta!Arlv PlUS

1UWfo

15.711%

2.59% Olt'l.-

3.60\Co

J.i>llO> 3.8411 1.79% 2.08% 0.53% 1.04% 0.76% 0.1l%

0.3S%

4.149i. 0.81%

O.S5'l. M1% 0.74%

o ..... Q19'llo 0.16% OA!l'llo 3.08% ol84% d..SI%

7.96% 2.62% 116%

0.0011. 0.14.% 0.30%

s.m. 1.~ 1.1S4Jb

u.S.coceboDds TotaUiewm 0.17% 0.03% 1.4.6% 0,53,; 1.15% 1.6S% 1.91% ..................................... 1~1.~~.~~~~.~.~ ................. ?J.~ ....... ~:~!~ ...... l:.~.~.~ ....... ~·~.~~ ...... ..?J.~~ ....... ~9J'& ...... J:.~~ ... .

U.S. long maturity bonds

Short·term boods

U.S. eql.ities

-~"""" loog.-term US Ga~elllo1&'tt 0.07% 0.05% U14'l. 0.05'l. 3.91% ton~ Term Credit 4.101'o 3.034J,. 3.68" 3.81" 1.93% longf>nti:rl To1al RetL'tn 0.03% 0.13% 1.791:4 0.14'1. 1.86"-

0.00% 0.88% 1.421<i

I.S1% 2.4\% 0.17~ 1.20%

lo.¥ ou!Otlon ............................. 0:6.7% ....... ii.Ol% ...... <i:CKi" ...... o.s·siia· ....... o:·s·l% ....... fs:i'i ...... 2':ii·~ ... . LowOurauonkOJ.efiP 0.12% 0.19% Stn1 lEJm Gcr-iemment Mcney ll.;;rle[ Mor.eyMarl:af..r:d Net Shcrt O:lla:uc:n kmrumelli:S

RAE ~ndatrentaf PlUS RAE leN Vdailly PIUS RAE htnda~tal PlUS Small StotbA.US* Small

Q~l'lo O.<)l;'lo O.OO'Io O.OO'Io QOO'Io O.Sf1'4 2.26'l0.

3.1310. ~.ol'!l 0.08'!1 .().01% .().04'1o .().01'1o

OAS% O.t9%o O.G7'A:

0.62% 0.6llll> 0.06% 0.14% 0.14" O.O!l'llo 0.01% 0.01% 0.01'1o

0.10'11 &.02'1o Q82% 0.11'1o

0.01'1o

QS~%

2.7i1'4 1.21% 0.2S% 0.74% 0.3R Q02'1o O.OO'Io O.Of1'4

Sr.ocksi\US*Absoluteiletl.<:n ........................ 9J.~~ 0.31% 0.11% 0.11" O.Ol'f. .... ~;~·;;;;;;d················RAE'.FUiiiia·ireiitaiP'WS.iiiii'.. ·······o·:~ ·······s·::ro·~ ....... &.9'ii ....... iil'i% ....... rs·ii ...... I:s·i% .. .. ex· U.S. equities RAE loNVcidryPWS lttl 0.02" l.79'f. 4.24.~ 5.31%

ScoctsA.US*Ir.ti(USO-Hed}ed) 0.18% 0.45% OJ7'A: 0.11" 0.01% O.OS~ 2.93~ SIDdol'lUS"Irti(Ur>edged) 017% O.S7% 0.57% 0.64% Q01'1o 0.1611. EqSGbba!O,o1dend 0.11% 0.10" 0.1 1~ 0.01% EqSPathflrd!r 1J2'fo 1.30% 1.11'-' 3.48" 1.16JY.

'Ptlof to 27 Jaoodry 2017,1he Low DllrdtJOO Income fund v~ nam«< ~floating lncome Fund. 10n Of dbout 8 May 2017, the LO\\' OUratloo Actrve ElF d change ndme to the fiiJ'ldnced laH OUrdtiOO Active m.

PERFORMANCE

Retums as of 31 Mar '17 (afterf .. s)

OossA a1 NAV

OossA a1 MOP

OossP

Bloombe<g B<lldaY' U.S. TIPS: 1-10 Ye" lridex

CPI+ 5%

Upper Al1ema11Vl> Glob<ll Macro fllllls AYe!¥

1-yr. 3-yr.

12.67% 1.81%

8.45% 0.52%

13.18% 2.21%

13.21% 2.3l'JI.

1.45% 1.46%

7.38% 6.09%

6.4\% 0.73%

Sharn 5-yr. 10-yr. Inception inception date

3.2l'JI. 4.50% 6.49% 0413012003

2.43% 4.10% 6.21% 04/30/2003

3.63% 4.97% 6.99% 0413012008

3.72% 5.60% 0713112002

0.62% 3.59% 4.21%

6.27% 6.73%

2.36% 3.21% 5.95%

If this material is u~d after 30 Jun • 17, it must bQ accompanHMt by the most re<ent performance supple«Mnt. ~rformance quo red rppresMts past performam. Past p9!iofrrldnCP is no gr.Mrantee of fururP resultt. lnvestmMt return and tlle prindpd! vatu~ of an inVPstmMt will flucruate. St;ar~ may be wotth morP or ~ss than original cost whM redrxJmed. Cunenr perforrrtdf~C@ may be fowe,r or hightN than {J«fonnaoce shown. R~wms shown a1e annualiz~. For performanc@ currMt to the most tPCent monrh·end. visit pfmco.com. The maximum offefing pn·c~ (MOP} fPtums rate into eaount t~ 5.50-% maximum initial sa!~s charge. The /und'sA P and Institutional cldss toraf annual operating ex{JMsosare 1.515%, 1. 175% and 1.075% and net operating exptl(lsos ate 1.365%, 1.015% and 0.915%, resp«riVPiy. DlffefMC61n roo fund's perfoonanc~ wrs~.& the n:lex aoo reldted anrtbunoo lnforrndilon wsth respea to parUrular G1t~ o1 seru111es or 1ndMdual posntlnS may be •unblltlble, ., pan. 10 differences ., 1he f1!1dng methodologies used by the lllld •nd ~Index. I"'"""'""' m<>:fe b)' a lund "'d 1he ll'SUhs •d1evod by a Uid .,. no1 expeaed 10 be 1he some .slhose made by •ny o\het PlMCO..adviSl2d ftmd. lrdidlng those With a Similar Mlle, lm'{!strrun obJE!ClM! or poiiOeS.. A new or sma!le~ fund's performanc~ may 1101 refi'OSOfl1 how 1he IIDliS expecled 10 01 may perfoon rt 1he lonl}lefm. New funds"""' llmU!d ope101111g hls10<1es lor tlvestcrs to evalua~ dnd new <Yid smc.ler funds may not attract suf1klent assets to a~ tvleSUI'Iefll dOO trading ebnaes. A lund m>{ be lo!ced 10 ,.u • com,.,.uvely l<lrge f)OI11on ol I1S po111ol10 10 """'1511Jnrl1c<im !h>leholder ,.,..,nons lor 0111;. or hold a COOif>'ll>11\'e~ l.,ge portiOn ol ns porUclk> In c.1sh due 10 S1gnrl!c.1m !h>le p11dlases lor 0111;.10 each""" when the lund otheri\!Se\\OOid no1S .. K1odo so. v.flldl may a<lverse~ alfect pertormance. Ask your investme-nt professional for more information about this fund. You can also visit pimco.com. Investors should corrSider th@ fnVPstment obj~s. risks. charges and @xp9ns~s of the funds carefully beforp inVPsting. This end other information is containf!d in eoch fund's prospKtUs and summary prospecws. if avai!db/9. which may bP obt4ined by conrecting your investment prorPssione!. by visiting pfmco.com or by caNing 888.87.PIMCO. Pfedse rped them c-alefut!j ~for~ you invest or sMd money. A word about risk: IIMStlng In the bond martet IS su~t 10 certain nsts. RJLdl~ llldltet,lnterest ste,.ISSUEf. credit ancl 1nllanon nst: bood "'""' gener>lly 1.>1 as "''"''1 roles nse. Tho lllld '""""., 01her P!MCO lund~ and porto""'""' ~subject to underlyn,j rt•teStmen1 .,..,lghnng~ wh1dt ~•II v...,. 1r. co~ ol1ni'I!S1111g 111 • lund 1ha1 "'""' In o1her funds '"' gener•Uy be higher than the oost of lmoest~ng 1n a iJrld that klvests dlmdly 1n tldlvldual stodcs dnd bonds. Oerivatiws may lll'IOI'R <l!l:takl costs <rnd rilles sodi •s !rqiJdlly, 1meres1 ""~ rnari<P\ aed!\ man>gement>nd 1he nsl: 1ha1• poSI1lon coold rot bedOS<'d\llien most dd\tantageOUS.Inwsttng tl dem'atM!Soould lose mor~ th~ the ;woont lrwested.

llloornbe<9 B>~daY' U.S. liPS: 1-10 Ye:~lndex IS •• unrn<~nagodlridex COIOfl'1sed ol U.S. lre•suy lnflanon.f'r010<1ed Soollnes having • ma1ur11)'ol•11 .. st 1 yo>r .00 less 1han 10 years. 1r. Cl't + 5% beo<tvn.rl< 1Sae•1ed l7f ad<!ng 5% 10 1he •"'"~ per"""'!J' crunge ., the Coo""""' Pr1ce Index {CI't).lr. Coosumer PriCe ncex IS anunm•""!led 1ndex~ng 1he ra1e of 1nllanoo ollhe U.S. coost1111"' f'1CeS., d01erm1ned l7f 1he U5. Oepanmen1 oll>bor S~anS11cs. l11s n01 posst11e10 1nves1 rlrectly 111 •n 1nde< 1r. Al1emat1\• Globol M>ao FundsA"""ge IS •1o1>l <e111rn perf"""""' ""'OJ• ollunds uad1ed l7f twer. lnc.lh<l1 em~owocruniSllc trading strafergjes byfll\'eSllng In lnsuumoots based on lnflettkln polniS m maaoecooomlc trends <Kross vaoous tlnandallns.truments and asset das.ses. The mmum rutldllnmtment iof Institutional ;w:t P ddss shares 1s S1 mtllloo; however. n may be modified for CNUin flnanaal rnenned!arles who submit trades on behalf a elglble: IJ'JWStors. Pm'oondflce reft«ts ch~ges In share ~CP. reii'M!stmE!IU of dMdends dnd cap~tal ga1ns distributions. /IJ periods longer than oo~ )@at df~ anMI!Zro. No part of this m.atenal may be reprodUced In drfY form. or refroed 1or1 dflyother pOOIIauon, 'Mthou'l ~ess wrttten ,...,.,.,.,_ P!MCO IS • n•dem•rt oiAil>nlAss<!l M>n>gernerrt ol Amenc.1 l.P.rn 1he United S<>tes <onc! 1hf009hoot 11il>world. PIMCO lnvestmen1S LLC. <lsU1bu1C¥. 1633 Broodw>j.IIMYort, NY 10019,1S ac~!Y)' ol PIMCO. @2017, PIMCO

PI'C~18_51067·1Q17 pimco.com

Allocation Effect: An attribution effect that describes the amount attributable to the managers' asset allocation decisions, relative to the benchmark.

Alpha: The excess return of a portfolio after adjusting for market risk. This excess return is attributable to the selection skill of the portfolio manager. Alpha is calculated as: Portfolio Return - [Risk-free Rate +

Portfolio Beta x (Market Return - Risk-free Rate)].

Benchmark R-squared: Measures how well the Benchmark return series fits the manager's return series. The higher the Benchmark R-squared, the more appropriate the benchmark is for the manager.

Beta: A measure of systematic, or market risk; the part of risk in a portfolio or security that is attributable to general market movements. Beta is calculated by dividing the covariance of a security by the

variance of the market.

Book-to-Market: The ratio of book value per share to market price per share. Growth managers typically have low book-to-market ratios while value managers typically have high book-to-market ratios.

Capture Ratio: A statistical measure of an investment manager's overall performance in up or down markets. The capture ratio is used to evaluate how well an investment manager performed relative to an

index during periods when that index has risen (up market) or fallen (down market). The capture ratio is calculated by dividing the manager's returns by the returns of the index during the up/down market,

and multiplying that factor by 100.

Correlation: A measure of the relative movement of returns of one security or asset class relative to another over time. A correlation of 1 means the returns of two securities move in lock step, a correlation of

-1 means the returns of two securities move in the exact opposite direction over time. Correlation is used as a measure to help maximize the benefits of diversification when constructing an investment

portfolio.

Excess Return: A measure of the difference in appreciation or depreciation in the price of an investment compared to its benchmark, over a given time period. This is usually expressed as a percentage and

may be annualized over a number of years or represent a single period.

Information Ratio: A measure of a manager's ability to earn excess return without incurring additional risk. Information ratio is calculated as: excess return divided by tracking error.

Interaction Effect: An attribution effect that describes the portion of active management that is contributable to the cross interaction between the allocation and selection effect. This can also be explained as

an effect that cannot be easily traced to a source.

Portfolio Turnover: The percentage of a portfolio that is sold and replaced (turned over) during a given time period. Low portfolio turnover is indicative of a buy and hold strategy while high portfolio turnover

implies a more active form of management.

Price-to-Earnings Ratio (P/E): Also called the earnings multiplier, it is calculated by dividing the price of a company's stock into earnings per share. Growth managers typically hold stocks with high

price-to-earnings ratios whereas value managers hold stocks with low price-to-earnings ratios.

R-Squared: Also called the coefficient of determination, it measures the amount of variation in one variable explained by variations in another, i.e., the goodness of fit to a benchmark. In the case of

investments, the term is used to explain the amount of variation in a security or portfolio explained by movements in the market or the portfolio's benchmark.

Selection Effect: An attribution effect that describes the amount attributable to the managers' stock selection decisions, relative to the benchmark.

Sharpe Ratio: A measure of portfolio efficiency. The Sharpe Ratio indicates excess portfolio return for each unit of risk associated with achieving the excess return. The higher the Sharpe Ratio, the more

efficient the portfolio. Sharpe ratio is calculated as: Portfolio Excess Return / Portfolio Standard Deviation.

Sortino Ratio: Measures the risk-adjusted return of an investment, portfolio, or strategy. It is a modification of the Sharpe Ratio, but penalizes only those returns falling below a specified benchmark. The

Sortino Ratio uses downside deviation in the denominator rather than standard deviation, like the Sharpe Ratio.

Standard Deviation: A measure of volatility, or risk, inherent in a security or portfolio. The standard deviation of a series is a measure of the extent to which observations in the series differ from the arithmetic

mean of the series. For example, if a security has an average annual rate of return of 10% and a standard deviation of 5%, then two-thirds of the time, one would expect to receive an annual rate of return

between 5% and 15%.

Style Analysis: A return based analysis designed to identify combinations of passive investments to closely replicate the performance of funds

Style Map: A specialized form or scatter plot chart typically used to show where a Manager lies in relation to a set of style indices on a two-dimensional plane. This is simply a way of viewing the asset loadings

in a different context. The coordinates are calculated by rescaling the asset loadings to range from -1 to 1 on each axis and are dependent on the Style Indices comprising the Map.

Glossary

This report contains confidential and proprietary information and is subject to the terms and conditions of the Consulting Agreement. It is being provided for use solely by the customer. The reportmay not be sold or otherwise provided, in whole or in part, to any other person or entity without written permission from Verus Advisory, Inc., (hereinafter Verus) or as required by law or any

regulatory authority. The information presented does not constitute a recommendation by Verus and cannot be used for advertising or sales promotion purposes. This does not constitute an offer

or a solicitation of an offer to buy or sell securities, commodities or any other financial instruments or products.

The information presented has been prepared using data from third party sources that Verus believes to be reliable. While Verus exercised reasonable professional care in preparing the report, itcannot guarantee the accuracy of the information provided by third party sources. Therefore, Verus makes no representations or warranties as to the accuracy of the information presented. Verus

takes no responsibility or liability (including damages) for any error, omission, or inaccuracy in the data supplied by any third party. Nothing contained herein is, or should be relied on as a promise,

representation, or guarantee as to future performance or a particular outcome. Even with portfolio diversification, asset allocation, and a long-term approach, investing involves risk of loss that the

investor should be prepared to bear.

The information presented may be deemed to contain forward-looking information. Examples of forward looking information include, but are not limited to, (a) projections of or statementsregarding return on investment, future earnings, interest income, other income, growth prospects, capital structure and other financial terms, (b) statements of plans or objectives of management,

(c) statements of future economic performance, and (d) statements of assumptions, such as economic conditions underlying other statements. Such forward-looking information can be identified

by the use of forward looking terminology such as believes, expects, may, will, should, anticipates, or the negative of any of the foregoing or other variations thereon comparable terminology, or by

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Verus will make every reasonable effort to obtain and include accurate market values. However, if managers or custodians are unable to provide the reporting period's market values prior to thereport issuance, Verus may use the last reported market value or make estimates based on the manager's stated or estimated returns and other information available at the time. These estimates

may differ materially from the actual value. Hedge fund market values presented in this report are provided by the fund manager or custodian. Market values presented for private equity

investments reflect the last reported NAV by the custodian or manager net of capital calls and distributions as of the end of the reporting period. These values are estimates and may differ

materially from the investments actual value. Private equity managers report performance using an internal rate of return (IRR), which differs from the time-weighted rate of return (TWRR)

calculation done by Verus. It is inappropriate to compare IRR and TWRR to each other. IRR figures reported in the illiquid alternative pages are provided by the respective managers, and Verus has

not made any attempts to verify these returns. Until a partnership is liquidated (typically over 10-12 years), the IRR is only an interim estimated return. The actual IRR performance of any LP is not

known until the final liquidation.

Verus receives universe data from InvestorForce, eVestment Alliance, and Morningstar. We believe this data to be robust and appropriate for peer comparison. Nevertheless, these universes maynot be comprehensive of all peer investors/managers but rather of the investors/managers that comprise that database. The resulting universe composition is not static and will change over time.

Returns are annualized when they cover more than one year. Investment managers may revise their data after report distribution. Verus will make the appropriate correction to the client account

but may or may not disclose the change to the client based on the materiality of the change.

Disclaimer

Market Value % ofPortfolio 1 Mo YTD Fiscal

YTD 1 Yr_

Total Fund 122,353,871 100.0 1.1 5.0 9.1 10.0Policy Index 1.0 4.3 7.3 8.0Total Domestic Equity 23,869,523 19.5 1.3 7.5 20.2 21.7

S&P 500 1.0 7.2 15.5 17.9Vanguard Growth Index Ins 9,520,713 7.8 2.3 12.1 17.4 19.5

Spliced Vanguard Large Cap Growth Index 2.3 12.2 17.4 19.5MSCI US Prime Market Growth 2.2 11.4 17.4 18.8

Dodge & Cox Stock 9,489,151 7.8 0.4 5.4 26.9 26.4Russell 1000 Value -0.2 3.1 13.8 16.6

Atlanta Capital Management Company 4,859,658 4.0 1.3 2.9 12.4 16.2Russell 2000 1.1 3.6 22.9 25.6Russell 2500 0.8 4.6 18.2 20.7

Total International Equity 24,287,814 19.9 0.9 10.4 19.9 16.2MSCI EAFE 2.5 10.0 16.2 11.3MSCI ACWI ex USA 2.1 10.2 16.3 12.6Dodge & Cox Intl Stock 12,210,667 10.0 2.5 12.1 27.6 21.7

MSCI ACWI ex USA 2.1 10.2 16.3 12.6American Funds Europacific Growth R6 12,077,148 9.9 3.2 12.8 17.0 15.1

MSCI ACWI ex USA 2.1 10.2 16.3 12.6Total Domestic Fixed 52,558,742 43.0 0.6 1.5 0.6 2.1

BBgBarc US Aggregate TR 0.8 1.6 -1.0 0.8Metropolitan West Core Plus Fixed Income 23,924,121 19.6 0.8 1.6 -0.2 1.4

BBgBarc US Aggregate TR 0.8 1.6 -1.0 0.8Voya Senior Loan Fund 12,043,321 9.8 0.3 1.0 5.5 6.1

S&P/LSTA Leveraged Loan Index 0.4 1.6 7.1 8.1Vanguard Short-Term Investment Grade Adm 12,037,291 9.8 0.4 1.2 1.0 1.8

BBgBarc US Credit 1-5 Yr TR 0.5 1.4 0.9 1.8Vanguard Inflation-Protected Securities Adm 4,554,008 3.7 0.4 1.8 0.1 1.7

BBgBarc US TIPS TR 0.6 1.9 0.4 1.7

Policy Index as of 3/31/2017: 8% Russell 1000 Value, 8% Spliced Vanguard Large Growth, 4% Russell 2000, 20% MSCI EAFE, 20% BBgBarc US Aggregate, 5% BBgBarc US TIPS, 10% BBgBarc US 1-5 Yr Credit, 10% S&P/LSTA Leveraged Loan, 10% NCREIF-ODCE, 5% CPI + 5%. Pooled Cash not included in Total Fund calculation. CPI LOCAL (LA) includes Los Angeles-Riverside-Orange County. FY: 6/30. All manager returns shown net of fees. Effective 3/1/2015 Atlanta SMID Cap strategy changed to Atlanta Small Cap Core strategy. First American Treasury Obligation underwent share class change on 2/18/2016. Vanguard Inflation-Protected Securities underwent share class change on 4/27/2016. Vanguard Short-Term Investment Grade funded 3/27/2017. All data is preliminary.

Pasadena Fire & Police Retirement SystemExecutive Summary - Preliminary (Net of Fees) Period Ending: April 30, 2017

Current % Policy %_

Domestic Equity LargeCap Growth $9,520,713 7.8% $9,788,310 8.0%

Domestic Equity LargeCap Value $9,489,151 7.8% $9,788,310 8.0%

Domestic Equity SmallCap Core $4,859,658 4.0% $4,894,155 4.0%

International Equity $24,287,814 19.9% $24,470,774 20.0%Domestic FixedIncome Core $23,924,121 19.6% $24,470,774 20.0%

Domestic FixedIncome Bank Loans $12,043,321 9.8% $12,235,387 10.0%

Domestic FixedIncome Short Term $12,037,291 9.8% $12,235,387 10.0%

Domestic FixedIncome Real Return $4,554,008 3.7% $6,117,694 5.0%

Real Estate $15,830,635 12.9% $12,235,387 10.0%Alternative Investment $5,784,571 4.7% $6,117,694 5.0%Cash and Equivalents $22,586 0.0% $0 0.0%Total $122,353,871 100.0% $122,353,871 100.0%

XXXXX


Pasadena Fire & Police Retirement SystemExecutive Summary - Preliminary (Net of Fees) Period Ending: April 30, 2017


Policy Index as of 3/31/2017: 8% Russell 1000 Value, 8% Spliced Vanguard Large Growth, 4% Russell 2000, 20% MSCI EAFE, 20% BBgBarc US Aggregate, 5% BBgBarc US TIPS, 10% BBgBarc US 1-5 Yr Credit, 10% S&P/LSTA Leveraged Loan, 10% NCREIF-ODCE, 5% CPI + 5%. Pooled Cash not included in Total Fund calculation. CPI LOCAL (LA) includes Los Angeles-Riverside-Orange County. FY: 6/30. All manager returns shown net of fees. Effective 3/1/2015 Atlanta SMID Cap strategy changed to Atlanta Small Cap Core strategy. First American Treasury Obligation underwent share class change on 2/18/2016. Vanguard Inflation-Protected Securities underwent share class change on 4/27/2016. Vanguard Short-Term Investment Grade funded 3/27/2017. All data is preliminary.

Market Value % ofPortfolio 1 Mo YTD Fiscal

YTD 1 Yr_

Total Real Estate 15,830,635 12.9 N/A N/A N/A 9.2NCREIF-ODCE N/A N/A N/A 8.3NCREIF Property Index N/A N/A N/A 7.3Invesco Core Real Estate 15,830,635 12.9 N/A N/A N/A 9.2

NCREIF-ODCE N/A N/A N/A 8.3Total Alternatives 5,784,571 4.7 0.4 5.5 9.3 10.4

CPI + 5% N/A N/A N/A 6.6CPI (UNADJUSTED) N/A N/A N/A 1.9CPI LOCAL (LA) N/A N/A N/A 2.5PIMCO All Asset Ins 5,784,571 4.7 0.4 5.5 9.3 10.4

CPI + 5% N/A N/A N/A 6.6HFRI Fund of Funds Composite Index 0.6 3.0 6.2 6.3

Cash 22,586 0.0 0.1 0.1 0.3 0.3Citi 3mth Treasury Bill 0.1 0.2 0.3 0.4First American Treasury Obligation Z 22,586 0.0 0.1 0.1 0.3 0.3

Citi 3mth Treasury Bill 0.1 0.2 0.3 0.4XXXXX

Total MarketValue

% ofPortfolio

DomesticEquity LargeCap Growth

DomesticEquity Large

Cap Value

DomesticEquity Small

Cap Core

InternationalEquity

DomesticFixed

Income Core

DomesticFixed

Income BankLoans

DomesticFixed

IncomeShort Term

DomesticFixed

Income RealReturn


Cash andEquivalents

_

Total Fund Total Domestic Equity

Vanguard Growth Index Ins $9,520,713 7.6% $9,520,713Dodge & Cox Stock $9,489,151 7.5% $9,489,151Atlanta Capital Management Company $4,859,658 3.9% $4,859,658






Pooled Cash $3,540,000 2.8% $3,540,000Total $125,893,871 100.0% $9,520,713 $9,489,151 $4,859,658 $24,287,814 $23,924,121 $12,043,321 $12,037,291 $4,554,008 $15,830,635 $5,784,571 $3,562,586

XXXXX

Pasadena Fire & Police Retirement SystemExecutive Summary with Pooled Cash - Preliminary Period Ending: April 30, 2017


Transaction summary

May 17, 2017PFPRS 1

Date Transaction Type Fund(s) Sold Fund(s) Purchased Amount ($)

April 28, 2017Pooled cash funding

1. MetWest Core Plus Fixed Income strategy$375,000

2. Dodge & Cox Stock fund$325,000

3. Vanguard Large Cap Growth Index fund$750,000

4. Atlanta Small Cap Core strategy$125,000

5. Dodge & Cox International Stock fund$825,000

6. American Funds EuroPacific Growth fund$550,000

5. PIMCO All Asset fund$350,000

Pooled Cash 3,300,000$

May 1, 2017Mix 3

implementation: phase 2

MetWest Core Plus Fixed Income strategy

1. Vanguard Short‐Term Investment‐Grade Bond fund

$3,150,0002. Voya Senior Loan fund

$3,175,000

6,325,000$

Invesco Core Real Estate – U.S.A., L.P. Redemption Form

May 11, 2017

Mr. William C. Grubbs, Jr.

Portfolio Manager

Invesco Real Estate

101 California Street, Suite 1800

San Francisco, CA 94111

RE: ICRE Redemption Request

Dear Mr. Grubbs,

Please consider this letter to be a preliminary notification of our request to redeem

funds from Invesco Core Real Estate - U.S.A., L.P.

Client Name: Pasadena Fire & Police Retirement System

Date of Requested

Redemption:

(must be first business day of quarter following required 45-Day Notice Period)

July 1, 2017

Amount of Requested

Redemption:

$2,500,000

Wiring Instructions: U.S. Bank N.A. Minnesota

ABA 091 000 022

Credit to account number: 104790895775

Account Name; U.S. Bank IT&C California

FFC: PAS FIRE AND POLICE RET SYSTEM

Acct #: 001050992750

Authorized Signer:

Investor Name:

Keith Jones, Chairman

This request is subject to confirmation. If you have any questions please contact

Melissa Neckar at 972.715.7414 or [email protected].

Please send original to:

Melissa Neckar

Invesco Real Estate

2001 Ross Avenue

Suite 3400

Dallas, Texas 75201

mailto:[email protected]

Asset Class Manager Name Ticker Symbol CUSIP Actual $ Actual % Targets %Above / Under

Target % Target $Re‐Balance Estimate

Re‐Balance Actual New $ New %

Variance to Targets (%)

Domestic EquityLarge Cap Value Dodge & Cox Stock DODGX 256219106 9,551,839$ 7.8% 8.0% ‐0.2% 9,620,949$ 69,110$ 9,551,839$ 7.9% ‐0.1%Large Cap Growth Vanguard Growth Index VIGIX 922908868 9,627,721$ 7.8% 8.0% ‐0.2% 9,620,949$ (6,772)$ 9,627,721$ 8.0% 0.0%Small Cap Core Atlanta Capital Management n/a n/a 4,877,694$ 4.0% 4.0% 0.0% 4,810,474$ (67,220)$ 4,877,694$ 4.1% 0.1%Total Domestic 24,057,254$ 19.6% 20.0% ‐0.4% 24,052,372$ (4,882)$ 0 24,057,254$ 20.0% 0.0%

International EquityInternational Value Dodge & Cox Int'l Stock DODFX 256206103 12,448,017$ 10.1% 10.0% 0.1% 12,026,186$ (421,831)$ 12,448,017$ 10.4% 0.4%International Growth American Funds EuroPacific Growth RERGX 298706821 12,336,181$ 10.0% 10.0% 0.0% 12,026,186$ (309,995)$ 12,336,181$ 10.3% 0.3%Total International 24,784,198$ 20.2% 20.0% 0.2% 24,052,372$ (731,827)$ 0 24,784,198$ 20.6% 0.6%

Total Equity 48,841,452$ 39.8% 40.0% ‐0.2% 48,104,743$ (736,709) 0 48,841,452$ 40.6% 0.6%

Fixed Income

Core Fixed MetWest Core Plus 1 n/a n/a 23,711,639$ 19.3% 20.0% ‐0.7% 24,052,372$ 340,733$ 23,711,639$ 19.7% ‐0.3%Short‐Term Fixed Vanguard Short‐Term Investment‐Grade VFSUX 922031836 12,014,750$ 9.8% 10.0% ‐0.2% 12,026,186$ 11,436$ 12,014,750$ 10.0% 0.0%Senior Bank Loans Voya Senior Bank Loan CIT n/a n/a 12,054,704$ 9.8% 10.0% ‐0.2% 12,026,186$ (28,518)$ 12,054,704$ 10.0% 0.0%Real Return Vanguard Inflation‐Protected Securities VIPIX 922031745 4,501,300$ 3.7% 5.0% ‐1.3% 6,013,093$ 1,511,793$ 4,501,300$ 3.7% ‐1.3%Total Fixed 52,282,392$ 42.6% 45.0% ‐2.4% 54,117,836$ 1,835,445$ 0 52,282,392$ 43.5% ‐1.5%

Real Estate

Real Estate Invesco Core Real Estate 2 n/a n/a 15,830,635$ 12.9% 10.0% 2.9% 12,026,186$ (3,804,449)$ (2,500,000) 13,330,635$ 11.1% 1.1%Total Real Estate 15,830,635$ 12.9% 10.0% 2.9% 12,026,186$ (3,804,449)$ (2,500,000) 13,330,635$ 11.1% 1.1%

Liquid AlternativesLiquid Alternatives PIMCO All Asset PAAIX 722005626 5,784,571$ 4.7% 5.0% ‐0.3% 6,013,093$ 228,522$ 5,784,571$ 4.8% ‐0.2%

Total Alternatives 5,784,571$ 4.7% 5.0% ‐0.3% 6,013,093$ 228,522$ 0 5,784,571$ 4.8% ‐0.2%

Cash First American Treasury Obligations FUZXX 195998BA6 22,809$ 0.0% 0.0% 0.0% ‐$ (22,809)$ 22,809$ 0.0% 0.0%

Total Assets 122,761,858$ 100% 100% 0% 120,261,858$ (2,500,000)$ (2,500,000)$ 120,261,858$ 100% 0%

Total assets including Pooled Cash ($3,540,000) 126,301,858$ 1 Including negative cash from mortgage TBD forward contracts2 As of 3/31/2017, market value includes dividend payable

Pasadena Fire and Police Retirement PlanMay 11, 2017

Active management environment summaryAsset class Exposure Environment summary ActionEquities –U.S. large cap

― Passive/Active ― The evidence suggests that U.S. large cap equity has been a fairly efficient asset class over the trailing 3‐, 5‐, 7‐ and 10‐year time periods.

― Some products have been able to produce better returns even at this lower level of volatility, but most active products have simply increased volatility exposure.

― There seems to be a weak relationship between additional volatility and achieving additional return.

― None

Equities –U.S. small cap

― Active ― Over the long term it seems clear that there is little relationship between the amount of risk that U.S. small cap products take relative to the benchmark and their ability to outperform that benchmark.

― At the same time there appears to be some evidence that products have been able to produce excess return over most time periods, and to be able to do so more effectively than in the large cap U.S. space.

― None

Equities –International developed

― Active ― In the most recent 3 years, active management was as likely to outperform the benchmark as to underperform, and volatility was less than in longer periods.

― However, international active products struggled to add value in an absolute sense, with a significant portion of the universedelivering negative returns.

― None

May 17, 2017PFPRS

Equity asset classes

1

Active management environment summaryAsset class Exposure Environment summary ActionFixed Income –U.S. TIPS

― Passive ― Over each time period examined the TIPS asset class has been highly efficient, with active products producing minimal added value relative to the benchmark, and with a tight distribution of outcomes relative to the benchmark.

― While active management in TIPS has provided little excess return relative to the benchmark, TIPS exposure may still provide somediversification and risk management benefits.

― None

Fixed Income –U.S. core plus

― Active ― Over the long‐term, the core plus fixed income product universe demonstrated higher dispersion than the core bond universe.

― Over the long‐term, there seems to be a positive trade‐off between risk and return within the space.

― The role of active management in the core plus fixed income space, while generally limited, is predicated on the belief that products can add value through security selection and sector rotation while minimizing volatility.

― None

May 17, 2017PFPRS

Fixed income asset classes

2

JANUARY 2017Active Management Environment




Table of contents

Introduction 3

Asset class environments 6

Product persistency & universe shape stability

22

Product persistency charts 28

Appendix 1: Supplementary universe charts

41

Appendix 2: The new approach

57

Appendix 3: Supporting documents

68

2

The active management environmentOur work on active management addresses some shortfalls of the traditional analysis, which uses the median product to describe the active management universe as a whole. For the 2017 release of this document we have worked to expand our analysis and have dug deeper to test qualities such as product persistency and universe stability through time.

These improvements and insights have allowed us to better understand product behavior and may allow for more informed selection in the future. For first time readers, extensive supporting material has been included in Appendix 2. For those familiar with the new approach, please read on.

— Even without skilled selection there are many cases where active management can help investors achieve better portfolio outcomes in risk and return terms.

— Those better portfolio outcomes may come from additional return or lower risk. Not all investors have the same definition of better outcomes, and the trade‐offs facing them vary by universe.

— Adding skilled selection to the process can add additional value in portfolio construction.

— Fees remain an important part of the active management conversation. Fees and survivorship bias should be taken into account when analyzing active universes.

Using median product (median manager) performance to decide whether active management is appropriate can be misleading. This new tool can help investors make more informed decisions.

January 2017Active Management Environment 3

The true investment opportunity setInvestors often think of the investment opportunity set as a risk‐return chart, in the form of single‐point (dot) benchmark risk and return, and possibly single‐point median product to represent active management. However, active management universes in each asset class are extensive and this sort of analysis misses the true universe characteristics. Much of the risk‐return surface between 1% and 9% return and between 2% and 28% volatility is covered by various asset class options, and many parts of this space are covered by multiple active management universes.

This represents 10‐year product performance data and 75% contour areasSource: eVestment, as of 9/30/16. Universe returns have been adjusted for fees and survivorship bias

RISK‐RETURN REGIONS ACROSS ASSET CLASSES: 10 YEAR RESULTS


How to read a universe chart

The number of products included in the analysis provides insight into the robustness of the analysis.

The position of the benchmark relative to the universe may also change through time, representing dynamic structure changes.

The movement of the universe, the change in shape and of size all provide information about product behavior.

Throughout this report each asset class universe chart is placed at the same position on the page, at the same size and with the scales of the axes identical. This allows for easy comparison between universes.

Ring contains 75% of products


Dot represents benchmark

New 2017 addition


Asset class environments

Note: Universes are defined at the broadest level. Products vary in terms of style and/or treatment of currency exposure. Equity universe include both value and growth styles. International universes may include both products that hedge currency exposure and products that do not hedge currency exposure.


U.S. LARGE CAP ACTIVE PRODUCT PERFORMANCE YTD U.S. LARGE

Equities – U.S. large cap— The evidence suggests that U.S. large cap equity has been a fairly efficient asset class over the trailing 3‐, 5‐, 7‐ and 10‐year time periods. The

benchmark tends to exhibit less volatility than the universe. Some products have been able to produce better returns even at this lower level of volatility, but most active products have simply increased volatility exposure. There seems to be a weak relationship between additional volatility and achieving additional return.

— In a positive absolute year for large cap U.S. equity markets (through September 30th), regardless of style, the median large cap product failed to generate a positive excess return. In addition, whether in core, growth or value, nearly three‐quarters of active large cap products failed to surpass their respective benchmark year‐to‐date.

— Similar to the small cap space, the median large cap value product generated the least favorable excess return year‐to‐date (a reversal from last year).

Source: eVestment, as of 9/30/16, gross of fees Source: eVestment. Universe returns have been adjusted for fees and survivorship bias. Benchmark displayed is S&P 500

‐1.4‐1.9 ‐2.0

28 23 28

0

25

50

75

100

‐2.0

‐1.5

‐1.0

‐0.5

0.0

Core Growth Value % Produ

cts Be

ating Be

nchm

ark

Med

ian Prod

uct E

xcess R

eturn

Median Product Excess Return % Products Beating Benchmark


U.S. SMALL

Equities – U.S. small cap— Over the long term it seems clear that there is little relationship between the amount of risk that U.S. small cap products take relative to

the benchmark and their ability to outperform that benchmark. This can be seen in particular over the 10‐year period, where the distribution of product outcomes is essentially flat, similar to that seen in the large cap U.S. equity space.

— Over longer term time periods fewer products than in the large cap U.S. space choose to take on greater risk relative to the benchmark. At the same time there appears to be some evidence that products have been able to produce excess return over most time periods, and to be able to do so more effectively than in the large cap U.S. space.

— Similar to the large cap space, the median small cap value product generated the least favorable excess return year‐to‐date (a reversal from last year).

U.S. SMALL CAP ACTIVE PRODUCT PERFORMANCE YTD

Source: eVestment, as of 9/30/16, gross of fees Source: eVestment. Universe returns have been adjusted for fees and survivorship bias.Benchmark displayed is Russell 2000

‐1.5

0.1

‐2.834

51

22

0

25

50

75

100

‐3.0‐2.5‐2.0‐1.5‐1.0‐0.50.00.5

Core Growth Value

% Produ

cts B

eatin

g Be

nchm

ark

Med

ian Prod

uct E

xcess R

eturn

Median Product Excess Return % Products Beating Benchmark


INTERNATIONAL DEVELOPED – VALUE VS. GROWTH INTERNATIONAL LARGE

Equities – International developed

Source: MSCI, as of 11/30/16 Source: eVestment. Universe returns have been adjusted for fees and survivorship bias.Benchmark displayed is MSCI EAFE

— In the most recent 3 years, active management was as likely to outperform the benchmark as to underperform, and volatility was less than in longer periods. However, international active products struggled to add value in an absolute sense, with a significant portion of the universe delivering negative returns. Also, the most recent 3 years displayed less volatility dispersion than observed over 5‐, 7‐ and 10‐year periods. We see a much broader range of volatility during these periods, the longest of which includes the global financial crisis.

— The value style has been out of favor relative to growth for long periods. More recently, the gap between value and growth has narrowed as value has shown a more recent resurgence in the latest year.

‐15‐10‐505

1015202530

Dec‐05

Jun‐06

Dec‐06

Jun‐07

Dec‐07

Jun‐08

Dec‐08

Jun‐09

Dec‐09

Jun‐10

Dec‐10

Jun‐11

Dec‐11

Jun‐12

Dec‐12

Jun‐13

Dec‐13

Jun‐14

Dec‐14

Jun‐15

Dec‐15

Jun‐16

Annu

alize

d Re

turn (%

)

MSCI EAFE Value MSCI EAFE Growth


INTERNATIONAL SMALL CAP – EAFE & ACWI EX‐US INTERNATIONAL SMALL

Equities – International developed small cap

Source: MSCI, as of 11/30/16 Source: eVestment. Universe returns have been adjusted for fees and survivorship bias. Benchmark displayed is MSCI EAFE Small

— During most periods, active management in international small cap was as likely to add value over the benchmark as to underperform. As would be expected, during the shortest period the range of performance was wider than in longer periods. During both short and long periods, there appears to be a negligible relationship between return and the level of excess risk taken.

— International Small Cap remains an inefficient space and continues to attract new entrants. The size of the universe of actively managed products has increased considerably over time, although successful products often close, which limits availability for new clients.

— Many active international small cap products allocate a portion of the portfolio to emerging markets, which historically has influenced return. In the recent period, the MSCI EAFE Small Cap index has outperformed MSCI EAFE. However, the MSCI ACWI ex US Small Cap indexunderperformed both EAFE and EAFE Small Cap during the most recent 5‐year period.

‐10‐505

101520253035

Dec‐05

Jun‐06

Dec‐06

Jun‐07

Dec‐07

Jun‐08

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Jun‐09

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Jun‐10

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Jun‐11

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Annu

alize

d Re

turn (%

)

MSCI EAFE MSCI EAFE Small Cap MSCI ACWI Ex USA


TRACKING ERROR & EXCESS RETURN EMERGING MARKETS

Equities – Emerging markets

Source: eVestment, Verus Source: eVestment. Universe returns have been adjusted for fees and survivorship bias.Benchmark displayed is MSCI EM

— A major portion of emerging market equity products underperformed the index over the most recent 3‐, 5‐, 7‐ and 10‐year periods. During the latest 3 years in particular, a large portion of active products exhibited both negative absolute and relative performance. In the 3‐, 5‐ and 7‐year periods, products taking less risk than the benchmark were more likely to have outperformed.

— Performance of active products with significant country bets was influenced by the degree of under‐ or overweighting of countries exposed to the commodities complex. Latin American and emerging European companies tend to have a greater portion of commodity producers, while Asian markets have a greater portion of commodity consumers. The swings of commodity prices in the recent period had a significant impact on returns. In addition, countries with large current account deficits were more vulnerable to U.S. monetary policy and potential increases in interest rates.

— During the latest ten years, performance of actively managed emerging markets products appears to show a weak but positive relationship between tracking error and excess return. During this period, this relationship has held whether the product has a value or a growth orientation, though growth displayed more outliers. We note that there are fewer value products exhibiting an extremely high level of tracking error that also have a 10‐year track record.

‐8

‐6

‐4

‐2

0

2

4

6

8

0 5 10 15 20 25

Excess Ann

ualized

Return

(10yrs)

Tracking Error (10yrs)

ValueGrowth


10 YR U.S. TIPS BREAKEVEN U.S. TIPS

Fixed income – U.S. TIPS— Over each time period examined the TIPS asset class has been highly efficient, with active products producing minimal added value relative to

the benchmark, and with a tight distribution of outcomes relative to the benchmark. In most time periods there appears to be a modest upward tilt to the universe, suggesting some small amount of compensation for products that take extra risk relative to the benchmark. This relationship appears to have reversed over the most recent three years, however.

— U.S. TIPS 10‐year inflation breakeven spreads, while still below their long‐term average, have recently increased based on the expectation of higher future inflation.

— The expectation of rising inflation has contributed to increased investor demand for TIPS and other inflation sensitive assets.

— While active management in TIPS has provided little excess return relative to the benchmark, TIPS exposure may still provide some diversification and risk management benefits.

Source: Federal Reserve Bank of St Louis, as of 11/30/16 Source: eVestment. Universe returns have been adjusted for fees and survivorship bias.Benchmark displayed is Barclays US TIPS 5‐10

0.00

0.50

1.00

1.50

2.00

2.50

3.00

Percen

t (%)


— While the active management universe for U.S. Treasury securities has shown a higher degree of dispersion relative to TIPS, the risk‐reward tradeoff remains mostly consistent across time periods examined. Active product returns are highly correlated to volatility. Active products typically produce lower returns than the benchmark but with less volatility, and there appears to be a positive relationship between volatility and return.

— The Federal Reserve increased interest rates by 25 basis points in December and guided for additional rate increases in 2017; however, long‐term rates remain well below their historical average. Concerns over future economic growth and the potential for increasing inflation will continue to influence the path of rates.

— Products with biases towards remaining underweight duration in anticipation of higher interest rates have recently been rewarded as both rates and volatility have increased.

— Active management in this space is directly related to the risk environment. The very clear relationship between risk and return over multiple time periods, unlike most other asset classes, leaves the investor with a relatively clear risk management payoff decision to make.

U.S. TREASURY YIELDS & VOLATILITY U.S. TREASURY

Fixed income – U.S. treasury

Source: Federal Reserve Bank of St Louis, as of 11/30/16 Source: eVestment. Universe returns have been adjusted for fees and survivorship bias.Benchmark displayed is Barclays Treasury 7‐10 year

0246810121416

0

1

2

3

4

5

6

U.S. Treasury Vo

latility

(%)

U.S. Treasury Yield (%

)

U.S. Treasury 10‐Year (LHS) U.S. Treasury 10‐Year Volatility (RHS)


GLOBAL BOND PRODUCT COUNTRY EXPOSURES GLOBAL SOVEREIGN

Fixed income – Global sovereign— Evidence suggests that dispersion of global sovereign active product returns has recently increased due to rising idiosyncratic risks, divergent global

central bank policies and increased currency volatility. Over longer time periods active products have produced returns similar to the benchmark but with less volatility, and there has been little or no relationship between the level of risk taken and the level of return achieved. Over more recent periods these products have produced excess returns while taking more risk than the benchmark.

— Global bonds have historically provided interest rate diversification benefits within diversified fixed income portfolios. Developed market yields (ex: Europe & Japan) have remained low due to continued bond purchases by the ECB and Bank of Japan. U.S. interest rates have begun to rise on higher expected GDP growth and accelerating inflation.

— Many products use off‐benchmark securities, such as credit and currency, in an attempt to add value relative to a sovereign‐only benchmark. It remains unclear whether the results of these exposures should truly be attributed to benchmark‐relative performance, or should be thought of differently.

Source: sample products Source: eVestment. Universe returns have been adjusted for fees and survivorship bias.Benchmark displayed is Barclays Global Treasury ex US

0%

20%

40%

60%

80%

100%

Product 1 Product 2 Product 3 Product 4 Product 5 CitigroupWGBI

UnhedgedN. America UK Europe JapanAsia ex‐Japan Emerging markets Other developing


CORE BOND PRODUCT SECTOR EXPOSURES U.S. CORE

Fixed income – U.S. core— Over all time periods examined the core fixed income asset class appears to be highly efficient and shows little dispersion between active

products and the benchmark.

— Core bond portfolios are designed to provide income and return while delivering low correlation to equities. While interest rate volatility has increased recently, products continue to maintain exposures to off‐benchmark sectors (ex: high yield, municipal bonds, ABS, and private placement bonds) with the goal of increasing returns. Products have generally taken on these exposures with the intent to achieve excess returns relative to the benchmark.

— Despite active management, return dispersion remains tight suggesting there seems to be little differentiation in outcomes within the universe.

Source: eVestment sample products as of 9/30/16 Source: eVestment. Universe returns have been adjusted for fees and survivorship bias.Benchmark displayed is Barclays US Aggregate Bond

‐100

102030405060708090100

Product 1 Product 2 Product 3 Product 4 Index

Expo

sures (%)

Gov't Agency Corp IGCorp HY Non‐Agency ABS Non‐Agency MBSMunis Mortgages Other


U.S. CORE PLUS

Fixed income – U.S. core plus— Over the long‐term, the core plus fixed income product universe demonstrated higher dispersion than the core bond universe. More recently, as

developed market interest rates have declined, dispersion has decreased. Products are increasingly underweight to U.S. Treasury and Gov't bonds relative to the benchmark and have increased exposures to both IG credit and off‐benchmark allocations to lower quality and non‐U.S. dollar denominated bonds.

— Over the long‐term, there seems to be a positive trade‐off between risk and return within the space.

— More recently, as market volatility has increased, products with exposures to higher beta assets have reallocated to higher quality securities in order to minimize potential drawdowns.

— The role of active management in the core plus fixed income space, while generally limited, is predicated on the belief that products can add value through security selection and sector rotation while minimizing volatility.

CORE PLUS PRODUCT ASSET ALLOCATION SHIFTS

Source: eVestment, sample products Source: eVestment. Universe returns have been adjusted for fees and survivorship bias.Benchmark displayed is Barclays US Corporate IG

‐20%

0%

20%

40%

60%

80%

100%

Product 1 Product 2 Product 3 Product 4 Product 5 CitigroupWGBI

UnhedgedGovt Agency Corporate IGCorporate HY Non‐Agency ABS Non‐Agency MBSBank Loans Municipals Covertibles


U.S. HIGH YIELD HIGH YIELD

Fixed income – High yield— Over most periods examined active products in the high yield space have demonstrated greater dispersion around the benchmark compared to

Core and Core Plus products. Over longer periods greater volatility appears to be associated with slightly higher return, though more recently this seems to have reversed. However, it should be noted that over longer time periods little of the universe remains above the benchmark return level and the amount of compensation for risk taken is fairly small.

— More recently, high yield bond spreads have narrowed as commodity prices have stabilized and investors’ appetites for yield have remained strong. U.S. corporate balance sheets remain generally healthy and there is increasing optimism over the potential for increasing U.S. GDP and higher interest rates which signal improving business conditions.

— High yield bond market volatility is highly correlated to the economic business cycle. Avoiding idiosyncratic risks resulting from ratings downgrades or defaults is an important consideration for active management.

Source: Federal Reserve Bank, Bank of Merrill Lynch, as of 11/30/16 Source: eVestment. Universe returns have been adjusted for fees and survivorship bias.Benchmark displayed is Barclays High Yield

0

5

10

15

20

25

Dec‐06

May‐07

Oct‐07

Mar‐08

Aug‐08

Jan‐09

Jun‐09

Nov

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Feb‐11

Jul‐1

1De

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May‐12

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Jan‐14

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Apr‐15

Sep‐15

Feb‐16

Jul‐1

6

Percen

t (%)

Spreads Yield


GLOBAL CREDIT VOLATILITY GLOBAL CREDIT

Fixed income – Global credit— Over all time periods examined the global credit active product universe has demonstrated a high degree of dispersion relative to the benchmark.

Over longer periods few products have provided excess returns with lower volatility than the benchmark. More recently, as volatility has increased, there has been a negative correlation between additional risk taken and excess returns generated. Over longer time periods there appears to be little to no relationship between risk and return.

— Interest rates in developed markets remain below their long‐term historical average due primarily to continued global central bank monetary policy. In an effort to provide excess returns, active products continue to take off‐benchmark exposures.

— During periods of heightened market volatility, products with flexible investment mandates often take on exposure to lower quality bonds providing liquidity to the market with the goal of benefiting as markets and spreads normalize.

Source: Bloomberg, as of 11/30/16 Source: eVestment. Universe returns have been adjusted for fees and survivorship bias.Benchmark displayed is Barclays Global Credit

0

0.5

1

1.5

2

2.5

3

3.5

Dec‐10 Dec‐11 Dec‐12 Dec‐13 Dec‐14 Dec‐15

Trailing 1m

o Standard

Deviation of Inde

x Price

Global High Yield Global IG Credit


EMERGING MARKET DEBT CDS SPREADS EMERGING MARKET DEBT (HARD)

Fixed income – Emerging market debt (hard)— Products in the emerging market debt (EMD) hard currency universe have struggled to produce excess returns relative to the

benchmark. While over short time periods there has been a slightly positive relationship between risk and return, over longer periods this relationship has flattened out, with little apparent relationship between the returns generated and the risk taken.

— Products in the universe have historically included off‐benchmark exposures to quasi‐sovereign and hard currency corporate credits in an effort to increase returns.

— EMD hard currency spread volatility has in most cases stabilized as commodity prices have rebounded from their lows and concerns about future global economic growth is mitigated. While concerns over geopolitical and idiosyncratic risks remain, the primary driver of EM debt volatility remains the Federal Reserve and continued U.S. dollar strength.

Source: Bloomberg as of 11/30/16 Source: eVestment. Universe returns have been adjusted for fees and survivorship bias.Benchmark displayed is JP Morgan EMBI Global Diversified

0

200

400

600

800

Nov‐06 May‐08 Nov‐09 May‐11 Nov‐12 May‐14 Nov‐15

Spread

(%)

China Mexico Russia S. Africa Turkey Ukraine


EMERGING MARKET DEBT COUNTRY RETURNS YTD EMERGING MARKET DEBT (LOCAL)

Fixed income – Emerging market debt (local)— Over longer time periods there has been a slightly positive relationship between risk and return in the emerging market debt (EMD) local

universe. However, over recent periods dispersion between products appears to have increased and the risk‐reward proposition has turned negative.

— There remain concerns in this marketplace over rising default risk, the recent appreciation of the U.S. dollar, and timing of future Federal Reserve rate hikes.

— Recent performance of the sector has been negatively impacted by the relative weakness in emerging market currencies as a result of U.S. dollar strength. Stable commodity prices and the expectation of accelerating U.S. GDP growth and inflation should provide a tailwind for the space.

— Products in the space that have in the past benefited from taking large exposures to off‐benchmark allocations have been negatively impacted as EMD spreads widen.

Source: JPMorgan, GBI‐EM Global Diversified Index, as of 11/30/16 Source: eVestment. Universe returns have been adjusted for fees and survivorship bias.Benchmark displayed is JP Morgan GBI EM Global Diversified

‐20‐100

102030405060

Hedged Unhedged


2011 2012 2013 2014 2015 2016 YTDSelf Storage

35%Industrial

31%Hotel27%

Apartment15%

Self Storage35%

Industrial25%

Regional Mall22%

Regional Mall28%

Self Storage9%

Health Care14%

Apartment15%

Hotel14%

Apartment15%

Shopping Center25%

Industrial7%

Regional Mall22%

Shopping Center‐1%

Office9%

Health Care14%

Health Care20%

Office6%

Hotel‐14%

Regional Mall22%

Diversified4%

Diversified3%

Self Storage20%

Shopping Center5%

Self Storage35%

Industrial‐5%

Shopping Center2%


Office14%

Diversified4%


Office‐1%

Health Care2%

Office‐1%

Hotel13%

Regional Mall‐1%

Diversified3%

Diversified3%

Apartment‐4%

Industrial‐5%

Diversified12%

Apartment‐6%

Office‐1%

Health Care14%

Regional Mall‐5%

Hotel‐14%

Apartment7%

Health Care‐7%

Industrial‐5%

Hotel‐14%

Self Storage‐15%

‐14% to 35% 7% to 31% ‐7% to 27% 21% to 40% ‐24% to 41% ‐15% to 24%

SHARE PRICE PREMIUM TO NAV

U.S. REITS

U.S. REITs— Active products have been able to add value over the long term, primarily through the reduction of volatility. There is little evidence that

increased risk has generated excess return. In some cases (over the longest time periods) the relationship is in fact inverted. Over shorter time periods however, active management appears to have primarily reduced volatility.

— Sector dispersion within REIT sub sectors has been very high in recent years. Macro forces have been a major driver of performance while fundamentals remain generally positive. Uncertainty surrounding the potential of rising U.S. interest rates has fueled volatility. Over long periods of time it appears products have been able to take advantage of high volatility in REIT valuations, which tend to fluctuate rapidly. Differentiating factors among REIT sectors include lease durations, economic drivers and construction cycles.

— REITs became a standalone sector within the GICS classification standard, when they were carved out from Financials in September 2016. In the months leading up the change, more and more generalist investors, who as a whole have historically underweighted REITs, wereincreasing attention to the sector, which should be a marginal positive.

Source: eVestment. Universe returns have been adjusted for fees and survivorship bias.Source: Cohen & Steers, Morningstar, NAREIT, as of 11/20/16 Benchmark displayed is Wilshire REIT


Product persistency & universe shape stability


Product persistency & universe shape stabilityIn the 2017 active management environment we expanded our analysis to work towards a deeper understanding of universe characteristics, and of the active products within those universes. To further adopt this research into our views on active management, we seek answers to the following questions related to product persistency and universe shape stability:

— Do active products show persistency in terms of return relative to the benchmark?

— Do active products show persistency in terms of risk relative to the benchmark?

— Do active products show persistency in terms of risk‐adjusted performance relative to the benchmark?

— Once we know the shape of an active universe, can we make any assumptions as to whether this shape will continue into the future?

These questions may have important implications for how we select active products, risk/return tradeoffs of broad universes, the ideal degree of diversification across products within individual universes, and perhaps the overall attractiveness of active management within each asset class.


Active products may exhibit persistency in terms of return, risk, or risk‐adjusted performance. Persistency in any of these characteristics could be valuable for product selection.

Below are a few possible outcomes:

Active products display persistency in returns

— This is of course useful information, but literature tells us it is not the case.

Active products display persistency in volatility

— This is also useful information. If volatility is persistent then active management might add value by reducing volatility without sacrificing return in some universes.

Active products display persistency in risk‐adjusted performance

— This is useful information, and might allow investors to improve the risk‐adjusted performance of their portfolio.

Certain parts of the universe display persistency.

— Also useful information. Investors may stack the odds in their favor if better able to narrow down the active product opportunity set.

Product persistency

Outperforming products tend to outperform

Underperforming products tend to outperform

Lower volatility products tend to remain lower volatility

Higher volatility products tend to remain higher volatility

Different portions of the universe display unique persistence characteristics


Product persistency – FindingsOur initial findings are summarized below. Over the coming quarters our team will continue to examine the persistency characteristics of product universes. This research is expected to further shape our understanding of active management.

— Returns: In aggregate, active products do not appear to exhibit persistent returns. This suggests that investors should not select active products based on past returns because returns do not persist, in general.

— Volatility: In aggregate, active products exhibit persistence in volatility. Investors might reasonably expect lower volatility active products to deliver lower future volatility, and might expect higher volatility products to deliver higher future volatility.

— Risk‐adjusted performance: In aggregate, there is little evidence of persistence in risk‐adjusted performance.


Universe behavior relative to the benchmark during a given period helps us to understand our likelihood of success during that period, even if products in this universe displayed purely random relative performance.

If the shape of this active universe is somewhat consistent through time, knowing the shape of the universe can be valuable in product selection, even if individual product performance exhibits randomness in this universe.

Below are a few possible outcomes:

Universe tends to be sloping up to the right, or up to the left

— This is useful information, and potentially suggests value can be created by taking on more risk relative to the benchmark, or value can be created by lowering risk relative to the benchmark

Universe tends to outperform or underperform relative to the benchmark

— This is useful information, and implies active management is more or less attractive in the universe, independent of the investor’s selection skill

Universe appears to be random in nature

— May still be useful information. Suggests active management in the universe should not be expected to deliver value without selection skill.

Universe shape stability

?


Universe shape stability – Findings— Interpreting the stability of universe shape through time is a difficult exercise, partly due to lack of data. While investors

have access to sometimes thousands of active product track records within each universe, only one track record is available for each universe as a whole.

— Universe shape has been volatile through time across most universes and it is difficult to draw initial conclusions. Verus will be taking a closer look at broad universe characteristics in coming quarters and will provide a summary of findings in the next active management environment research document.


Product persistency charts

Note: Some universes are excluded due to too few active product track records.Universes are defined at the broadest level. Products vary in terms of style and/or treatment of currency exposure. Equity universe include both value and growth styles. International universes include both products that hedge currency exposure and products that do not hedge currency exposure.


How to read product persistency chartsActive products within each universe were tested for persistency in three ways: persistency of volatility (left chart), persistency of return (middle chart), and persistency of risk‐adjusted return (right chart). Dots are colored based on their exhibited persistence.

Source: eVestment, Verus, as of 9/30/16

Axis represents the level of product volatility in the following 5 years

Axis represents the level of product volatility in the first 5 years

Axis represents the level of product return in the first 5 years

Axis represents the level of product risk‐adjusted

performance in the first 5 years

Axis represents the level of product return in the following 5 years

Axis represents the level of product risk‐adjusted performance in the

following 5 years

High persistence

Low persistence

Product’s volatility relative to all other products (percentile rank)

Product’s return relative to all other products (percentile rank)

Product’s return divided by product’s risk relative to all other products (percentile rank)

Universe benchmark shown for each time period tested (circle)


How to read product persistency charts

Source: eVestment, Verus, as of 9/30/16

A round shape implies very little or no persistency

A perfect diagonal line of purple dots, with no scatter of products, would mean perfect (100%) persistence. Low or high volatility products would continue to exhibit the exact same low or high relative volatility in the following periods. Low orhigh returning products would continue to exhibit the same level of relative returns, etc.

More products clumped into top right or bottom left implies either persistency of high performers or persistency of low performers

High persistence

Low persistence


Equities – U.S. large cap

Source: eVestment, Verus, as of 9/30/16Benchmark displayed is S&P 500

Appears to be high persistency of volatility


High persistence

Low persistence

Equities – U.S. small cap

Source: eVestment, Verus, as of 9/30/16Benchmark displayed is Russell 2000



High persistence

Low persistence


Source: eVestment, Verus, as of 9/30/16Benchmark displayed is MSCI EAFE



High persistence

Low persistence


Source: eVestment, Verus, as of 9/30/16Benchmark displayed is MSCI EM

Appears to be persistency of volatility


High persistence

Low persistence

Fixed income – Global sovereign

Source: eVestment, Verus, as of 9/30/16Benchmark displayed is Barclays Global Treasury ex US

Appears to be high persistency of volatility, though data is limited


High persistence

Low persistence

Fixed income – U.S. core

Source: eVestment, Verus, as of 9/30/16Benchmark displayed is Barclays US Aggregate Bond

Appears to be some persistency of volatility


High persistence

Low persistence

Fixed income – U.S. core plus

Source: eVestment, Verus, as of 9/30/16Benchmark displayed is Barclays US Corporate IG

Appears to be high persistency of volatility, though data is limited


High persistence

Low persistence

Fixed income – High yield

Source: eVestment, Verus, as of 9/30/16Benchmark displayed is Barclays High Yield



High persistence

Low persistence

Fixed income – Emerging market debt (hard)

Source: eVestment, Verus, as of 9/30/16Benchmark displayed is JP Morgan EMBI Global Diversified

Persistency is less apparent


High persistence

Low persistence

U.S. REITs

Source: eVestment, Verus, as of 9/30/16Benchmark displayed is Wilshire REIT

Persistency is less apparent, though data is limited


High persistence

Low persistence

Appendix 1:Supplementary universe charts


Equities – U.S. large cap

Source: eVestment, Verus, as of 9/30/16, center circle indicates median manager


Equities – U.S. small cap



Equities – International developed small



Fixed income – U.S. TIPS



Fixed income – U.S. treasury



Fixed income – Global sovereign



Fixed income – U.S. core



Fixed income – U.S. core plus



Fixed income – High yield



Fixed income – Global credit



Fixed income – Emerging market debt (hard)



Fixed income – Emerging market debt (local)



U.S. REITs



Appendix 2:The new approach


The active/passive question The decision of active or passive management is faced by every investor. This problem is characterized by:

— A desire to boil the question down to a simple yes/no decision

— A desire to quantify where possible

— Lots of data to analyze and limited computing power to use

— Difficulties in determining whether manager outperformance was skill or luck

— Identifying the “best” manager is easy, when looking back through time


Traditional approach to managersThe traditional approach to analyzing active management often involves the following:

— Rank the managers on a single metric (return, for example)

— Pick the manager in the middle of the rank (the median manager)

— Use the properties of that manager to describe the universe


Traditional approach to managersMedian manager excess return minus expected fees is an oversimplified approach to analyzing managers.

Source: eVestment, 10 years ending 9/30/16

Asset ClassCommingled Fund

FeeMutual Fund

FeeMedian Manager Excess Return

Median Excess Returns NET of Commingled Fund Fees

Median Excess Returns NET of Mutual Fund Fees

US Large 0.61 0.81 0.37 (0.24) (0.44)

US Small 0.86 1.03 1.29 0.43 0.26

International Developed 0.73 0.93 1.26 0.53 0.33

International Developed Small 0.94 1.03 1.03 0.08 0.00

Emerging Markets 0.91 1.11 1.28 0.37 0.17

Cash 0.14 0.23 0.39 0.25 0.15

TIPS 0.23 0.48 0.10 (0.13) (0.39)

US Treasury 0.31 0.50 (1.58) (1.89) (2.08)

Global Sovereign 0.54 0.59 0.72 0.18 0.13

Core Fixed Income 0.31 0.50 0.53 0.21 0.03

IG Corp Credit 0.26 0.59 0.73 0.47 0.14

High Yield 0.62 0.71 (0.13) (0.75) (0.84)

Global Credit 0.48 0.59 0.31 (0.17) (0.28)

EM Debt Hard 0.64 0.73 0.47 (0.17) (0.26)

EM Debt Local 0.73 0.81 0.08 (0.65) (0.73)

US REIT 0.67 0.91 1.27 0.60 0.36


‐100

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Managers In Return Rank Order

Universe A

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Universe B

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Universe C

UNIVERSE B UNIVERSE C

The problem with mediansUsing the median manager to describe the universe can be very misleading. To show why we can create three imaginary universes.

— Each universe has 100 managers

— Each universe has an average excess return of 50 basis points

— Each universe has a median excess return of 25 basis points

Simply using the median manager as a description of the universes would be highly misleading – the median manager in each case would be the same even though the behavior within each of these universes is very different.

Representative Data Only

UNIVERSE A


Also, investors have different needs

The standard approach effectively assumes all investors behave in the same way towards risk and return. This assumption is flawed.

In reality, investors have different…

— Levels of funding

— Propensity of sponsor to add funds where needed

— Areas of legal authority

— Investment histories

— Board member experience

— Theoretical and practical opinions about investment management

These wide range of differences will by definition mean that investors should approach active management analysis in different ways.


Alternative approach to managers

The alternative approach to thinking about managers:

— Use the risk and return characteristics of all of the managers in the universe to calculate properties of the universe as a whole

— Plot the output of this analysis to demonstrate the behavior of the universe over time visually

Our goal is, where possible, to move away from using the median manager to describe active management behavior.


The active management environmentOur work on the active management environment addresses some of the shortfalls of traditional active management analysis. These new insights allow for us to better understand the range of impacts that active management can have on portfolio outcomes.

— Even without skilled manager selection there are many cases where active management can help investors achieve better portfolio outcomes in risk and return terms.

— Those better portfolio outcomes may come from additional return or lower risk. Not all investors have the same definition of better outcomes, and the trade‐offs facing them vary by universe.

— Adding skilled manager selection to the process can add additional value in portfolio construction.

— Fees remain an important part of the active management conversation. Fees and survivor bias should be taken into account when analyzing active management universes.

Using the median manager to decide whether active management is appropriate can be misleading. This new tool can help investors make more informed decisions.


How to read a universe chartThe line represents the area where we would expect to find 75% of all of the managers in the universe for the time period covered.

All universe data has been adjusted downwards to reflect the effect of fees and of survivorship bias.

The dot represents the behavior of the benchmark over the period concerned.

The relative positioning of the benchmark compared to the universe area tells us about the

possible benefits of active management.

The shape of the probability density function will not be oval in most cases. The size and shape of the area calculated contains important information about the behavior of active managers and the outcomes achieved.


Some possible scenariosActive managers were able to add volatility, but rarely were able to generate compensation for that volatility.

Active managers who reduced volatility had to give up significant return to do so.

Active managers were rarely able to produce much more return than the benchmark in absolute terms.

Active managers had opportunities to add return, both at similar levels of volatility to the benchmark and incrementally at higher volatility levels.

Active managers had significant ability to add return relative to the benchmark at similar and lower levels of volatility.

Volatility reduction by active managers resulted in little or no return reduction.

Few managers took advantage of the opportunities available to reduce volatility

relative to the benchmark.

Most of the active manager universe chose to reduce volatility relative to the benchmark.


Tracking universes through timeTracking the behavior of a single universe through time can provide insight into the way that active management has changed in that space over those time periods.

The number of products included in the analysis provides insight into the robustness of the analysis.

The relative position of the benchmark relative to the universe may also change through time, representing dynamic structure changes through time.

The movement of the universe, the change in shape and of size all provide information about product behavior.

Throughout this report each asset class universe chart is placed at the same position on the page, at the same size and with the scales of the axes identical. This allows for easy comparison between universes.



Dot represents benchmark


Appendix 3:Supporting documents


Possible investor behaviorsInvestors with high risk tolerance and a need for high return might consider significant volatility increase.

Other investors would be more likely to be best served by passive approaches.

Investors prepared to run some downside risk might consider active products offering modest risk reduction although passive management a good alternative.

Investors with high risk tolerance might consider active products with markedly higher risk investment styles.

Investors with at or above market levels of risk tolerance might select active products with those strategies in the expectation of higher return.

Other investors might well choose passive approaches to this universe.

Investors who would normally invest passively might think about active products with volatility

levels similar to the benchmark.

Other investors might hire active lower volatility products. Passive management is unlikely to be

appropriate.


Methodological note

As a means of describing the distribution of products in risk‐return space, we estimate joint probability distribution functions (PDF) using product reported performance. The joint PDF is a mathematical description of the probability of observing a given outcome within some region of risk‐return space, such that the integral of the function over all possible outcomes is one.

To estimate the PDF, we assume the reported product performance numbers represent an independent, random sampling of outcomes from the opportunity set within the asset class considered. While this is not perfectly true, as commonalities in strategy and imitation will lead to clustering, it is a reasonable approximation. We apply multivariate kernel density estimation, which effectively smooths the point‐wise sampling of outcomes. We choose the Gaussian kernel density estimator implemented in Python within the SciPy library1, where the bandwidth (a parameter governing the smoothing) is estimated by Scott’s Rule2. This approach is non‐parametric and makes no specific assumption about the underlying probability distribution (as opposed to fitting e.g. a multivariate normal distribution).

Probability contours are defined as curves enclosing the designated percentage of most likely outcomes (e.g. the 75% probability contour encloses the outcomes most likely to be observed 75% of the time). We determine these using Monte Carlo integration by resampling the kernel density estimate and iteratively converging the result using the Newton‐Rhapson method.

1) http://www.scipy.org/

2) D.W. Scott, “Multivariate Density Estimation: Theory, Practice, and Visualization”, John Wiley & Sons, New York, Chicester, 1992.


Product behavior as sampling

THE TRADITIONAL APPROACH

The concentration on the median product behavior has historically forced us to throw useful information about universes away. More than that, it has forced us to focus too hard on the specific results that specific products achieved over the particular time period we are measuring.

Doing this forces us to discard almost all the information about all of the products other than those at the median and quartile breaks, and to concentrate in detail on the characteristics of those specific products which happen to fall on those break lines. Those products, however, may provide little useful insight for us to help guide the decision process about use of active management.

This combination of too little information being used about most products in a universe and too much being used about a very small number of products selected simply because of their rank order in the universe is likely to lead to misunderstandings about the nature of active management.

THE UNIVERSE AS A WHOLE

The alternative approach that we propose in this document, and which will be covered more fully in an upcoming paper, takes a different approach, and uses a tool which is broadly used in the scientific community – the joint probability density function. Details of the calculation methodology used can be found on page 31 of this document.

What we are trying to do is to produce a description of the universe as a whole: we regard individual products as having no particular value on their own, but simply as random samples from the true universe. No particular portfolio is important in itself, but each portfolio adds a small amount of information about the likely true characteristics of the universe that they represent. Each portfolio is simply a random draw from an infinite universe of active products in that asset class.

A GRAPHICAL ANALYSIS

We use this information to plot an area representing the characteristics of the universe on a standard risk‐return chart. This area represents the true characteristics of the active management universe – not simply the behavior of one product in that universe. It uses information about all of the products in the universe and avoids concentrating on any single portfolio. It allows us for the first time to describe product universes in their own terms, clearly, visually and in a robust fashion.

Maybe the most important characteristic of these ranges is that it provides us with a much clearer view of the investment opportunity set available to investors as a whole. That opportunity set is not a single point on the chart, as represented by a benchmark or a median: it is in fact an area, and for many universes quite an extensive one.


Notices & disclosuresPast performance is no guarantee of future results. This report or presentation is provided for informational purposes only and is directed to institutional clients and eligible institutional counterparties only and should not be relied upon by retail investors. Nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security or pursue a particular investment vehicle or any trading strategy. The opinions and information expressed are current as of the date provided or cited only and are subject to change without notice. This information is obtained from sources deemed reliable, but there is no representation or warranty as to its accuracy, completeness or reliability. Verus Advisory Inc. and Verus Investors, LLC expressly disclaim any and all implied warranties or originality, accuracy, completeness, non‐infringement, merchantability and fitness for a particular purpose. This report or presentation cannot be used by the recipient for advertising or sales promotion purposes.

The material may include estimates, outlooks, projections and other “forward‐looking statements.” Such statements can be identified by the use of terminology such as “believes,” “expects,” “may,” “will,” “should,” “anticipates,” or the negative of any of the foregoing or comparable terminology, or by discussion of strategy, or assumptions such as economic conditions underlying other statements. No assurance can be given that future results described or implied by any forward looking information will be achieved. Actual events may differ significantly from those presented. Investing entails risks, including possible loss of principal. Risk controls and models do not promise any level of performance or guarantee against loss of principal.

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