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HomeMy WebLinkAbout04. PFM review of the GASB 45 Trust and OPEB Trust Investments 4. Central San December 27, 2016 TO: FINANCE COMMITTEE VIA: ROGER S. BAILEY, GENERAL MANAGER Ob�/ ANN SASAKI, DEPUTY GENERAL MANAGER W' PHIL LEIBER, DIRECTOR OF FINANCE AND ADMINISTRATION FROM: THEA VASSALLO, FINANCE MANAGER SUBJECT: GASB 45 OPEB INDEPENDENT TRUST REVIEW This is a follow up item from the Finance Committee parking lot to have the GASB 45 Other Post-Employment Benefits (OPEB) Trust independently reviewed. PFM Asset Management LLC (PFM) was hired to review the following: • Investment Policy (including Investment Guideline Document (IGD)) • Asset Allocation • Plan Performance • Performance Monitoring & Reporting • Investment Managers • Fees The primary focus at the Committee meeting will be the Executive Summary (Pages 1 — 8 of the attached report). Lauren Brant, Managing Director of PFM will attend the meeting to review PFM's findings and answer questions. TV:slc Attached Supporting Document: 1. Evaluation of Other Post-Employment Benefits ("OPEB') Trust Report C:\Users\CGranzella\AppData\Local\Microsoft\Windows\Temporary Internet Files\Content.0utlook\IFG8EC11\GASB 45 Trust Review Cover Memo 12-20-16 Finance(002).docx �l ,soft_ ' f C Central Centra Costa �= Sanitary District Protecting Public "a Evaluation of Other Post-Employment Benefits ("OPEB"") Trust December 27, 2016 ® P i,NI -- PFM Asset Management LLC 50 California Street, Suite 2300 San Francisco, CA 94111 415.982.5544 • 415.982.4513 fax • www.pfr-n.com Table of Contents Page Executive Summary 1 II Investment Policy 9 Asset Allocation 14 IV. Plan Performance 22 V Performance Monitoring & Reporting 26 VI. Investment Managers 33 VII. Fees 38 VIII.Appendix 41 ©2016 PFM Asset Management LLC Executive Summary 0"� ©2016 PFM Asset Management LLC Introduction PFM Asset Management ("PFM") is pleased to present our analysis of the Central Contra Costa Sanitary District OPEB Trust. The following documents were reviewed as part of the study: Fee Schedule for PARS and HighMark Capital Management (U.S. Bank) Actuarial Valuation as of July 1 , 2014 Investment Policy Statement, last amended October 2013 Actuarial Valuation for DB Pension, as of January 1 , 2015 Quarterly Performance Report, as of June 30, 2016 Quarterly Performance for Total Plan through June 30, 2016 ©2016 PFM Asset Management LLC 1 InvestmentPOUCY (pp. 9 - 13) OBSERVATIONS RECOMMENDATIONS Investment Policy Statement (IPS) Review IPS annually to comply with policy last updated October 2013 and guidelines and best practice. Suggest creating an contains some frequently appendix or separate document that is easily changing information i.e. asset revised to reflect information (i.e. asset values and values cash flows) that is likely to change frequently Policy states asset allocation Add overall portfolio benchmark representing ranges and targets for broad target portfolio 40% Russell 3000, 10% MSCI asset classes but no overall ACWI ex US, 45% Bloomberg Barclays US portfolio benchmark Aggregate and 5% 90-Day T-Bill Security guidelines and total Consider broadening ranges to +/- 20% to allow portfolio blended benchmark are for tactical shifts and separating U.S. Equity and very specific and quite restrictive, Non-U.S. Equity into two distinct asset classes but weights don't correspond to and adopting broad portfolio benchmark described overall target allocation for the above portfolio ©2016 PFM Asset Management LLC 2 Asset Allocation (pp. 14 - 21) OBSERVATIONS RECOMMENDATIONS Current allocation is likely to achieve Review and adjust asset allocation actuarial return assumption of 6.25% Increase allocation to international over the long-term Diversify fixed income PFMAM expects portfolio to Reduce cash allocation underperform actuarial return assumption of 6.25% in intermediate- term ©2016 PFM Asset Management LLC 3 Plan Performance ( pp. 22 - 2s) OBSERVATIONS RECOMMENDATIONS Plan underperforms total portfolio PFMAM recommends benchmarks be blended benchmark for all trailing reviewed to ensure they remain compatible periods ending June 30, 2016 with the specific goals of the plan. Advisor should focus on achieving target returns over When calendar year performance full market cycles — not just beating blended lags the total portfolio blended benchmarks benchmark, it is by a significant margin-2%+ Consider adjustment to underlying manager structure. Recent performance has lagged Plan goes up 5% more than total benchmark and peer group comparison. portfolio blended benchmark in a Portfolio performs poorly in down markets. rising market Seven year annual performance is competitive Plan goes down 24% more in a down market than the total portfolio blended Plan should focus on reducing downside risk benchmark while trying to capture more upside return ©2016 PFM Asset Management LLC 4 Performance Monitoring & Reporting ( pp. 26 - 32) OBSERVATIONS RECOMMENDATIONS Current performance reporting Board should require the investment provided by PARS and HighMark advisor to provide quarterly reports with lack quantitative and qualitative greater consistency of information and analytics accepted as industry best more detail regarding the areas currently practices' missing from some or all of the reports to ensure the Board is fulfilling its fiduciary Reporting comes from different duty in overseeing the investment advisor sources and is not consolidated for the Plan. Report should include: into a comprehensive report Information on economy, capital markets Reports do not show manager Financial reconciliation of portfolio performance vs. peer group value Allocation to managers and asset classes Portfolio characteristics Performance attribution Manager and portfolio performance vs relevant benchmarks and peer groups (if available) Donald Stone,AIFO. `Investment Selection and Monitoring:A Practical Approach to Best Practices," 401khelpcenter.com/4Olk/Stone—investment—se/ection.htm/ ©2016 PFM Asset Management LLC 5 Investment Managers ( pp. 33 - 37) OBSERVATIONS RECOMMENDATIONS Portfolio has 18 managers, 16 active Reducing the number of funds used would managers simplify monitoring and will probably reduce U.S. Equity - eight funds, investment management expense including two passive ETFs International - four actively CCCSD should consider using passive managed funds investment strategies for "efficient" asset REIT — one active fund classes like U.S. equity, developed international equities. Wide analyst coverage Fixed income — five actively of stocks ("near perfect information") in these managed funds asset classes reduces opportunities for active managers to beat the market. Passive Managers generally have competitive strategies reduce underperformance risk performance over the long-term (5 while lowering all-in fees years) Majority of managers are lagging Continue to monitor manager performance benchmarks/peer group for trailing 1 year ©2016 PFM Asset Management LLC 6 Fees (pp. 38 - 40) OBSERVATIONS RECOMMENDATIONS Administrator and Investment Advisor fees are competitive Overall portfolio's investment PFMAM recommends incorporating management fee of 0.58% is passively-managed index funds for efficient relatively high for a plan of this asset classes, i.e. U.S. equity, developed size with no alternative international equity to reduce investment investments manager fees from 0.58% to 0.28% resulting in annual estimated savings of $123,155 (pp. 49) ©2016 PFM Asset Management LLC 7 Recommendations (Top 4 Action List) 1 ) Update Investment Policy Statement, review annually 2) Refine asset allocation to maximize value-added from portfolio structure and diversification 3) Consider using fewer funds and low-cost passive management for efficient asset classes, i.e. U.S. equity, developed market equity, to reduce investment fees 4) Seek more comprehensive reporting to support CCCSD fiduciary duty to monitor portfolio and facilitate decision-making ©2016 PFM Asset Management LLC 8 Investment Policy ©2016 PFM Asset Management LLC Key Components of a Sound Investment Policy Purpose: Discusses the origination of the Plan and identifies the fiduciaries. Outlines the general purpose of the Investment Policy. Investment Authority: Documents significant parties involved and their respective roles (Committee, Investment Advisor, Custodian, etc.), as well as fiduciary requirements of all parties. Statement of Objectives: Documents the Plan's objectives, performance expectations, cash flows, risk tolerance and liquidity expectations. Investment Guidelines: Establishes the investment time horizon, diversification parameters, asset allocation targets and ranges, rebalancing philosophy, risk tolerances, and performance expectations. Selection of Investment Managers: Documents criteria for selecting investment managers. Guidelines for Portfolio Holdings: Establishes the criteria for portfolio holdings in equities, fixed income, cash, and other asset classes. It also discusses prohibited investments. Safekeeping of Assets: Documents the manner in which assets are held in custody. Control Procedures: Documents the procedure for reviewing investment objectives, investment performance, the voting of proxies, and the execution of security trades. ©2016 PFM Asset Management LLC 9 Investment Policy Statement Investment policy was last updated in October 2013 — Policy states that Investment Manager should assist the Committee with maintenance of policy guidelines on an annual basis — PFMAM recommends references to specific information that changes frequently (i.e. asset value, monthly cash flow needs) to be in appendix or other document that is easily updated — Roles and responsibilities are defined well, but policy should clearly state that all parties have a fiduciary duty to the Plan and its beneficiaries Investment Objectives & Constraints — Guidelines for Equities and Fixed Income provide good description, but does not define target allocations — Consider separating Equity into two distinct asset classes (US and Non-US) and broadening ranges to +/- 20% of target to allow for greater tactical changes — Non-US Equity guidelines should contain some language regarding concentration within emerging markets — PFMAM recommends adopting guidelines for overall fixed income allocation that include a minimum average credit quality and range of duration relative to a broad benchmark, e.g Bloomberg Barclays U.S. Aggregate ©2016 PFM Asset Management LLC 10 Investment Policy Statement Investment Objectives & Constraints (Cont.) — Total Portfolio Blended Benchmark includes indices for each asset class represented by funds held — The weights of each index should correspond to the target allocations for the portfolio. Target allocations are not specifically referenced in the policy — PFMAM recommends using a total portfolio blended benchmark with allocations to Russell 3000 (US Equity), MSCI ACWI ex US (Non-US Equity), Barclays Aggregate (Fixed Income) and 90-Day T-Bill (Cash) — International Equity should be benchmarked against MSCI ACWI ex US, which includes emerging markets — High Yield benchmark is not consistent with the one used in the total portfolio benchmark — Policy does not contain any language allowing alternative investments such as real estate (other than REITs), commodities, private equity or hedge funds — Some alternatives may add value during certain market environments and should at least be considered as part of the entire investment universe ©2016 PFM Asset Management LLC 1 Investment Policy Statement Duties and Responsibilities — Responsibilities of Plan Sponsor, Trustee and Investment Manager are clearly outlined Detailed responsibilities do a good job of defining the role of each party, but the policy should also clearly state that all parties have a fiduciary duty to the Plan and its beneficiaries 02016 PFM Asset Management LLC 12 Policy Compliance As of 6/30/2016, the portfolio was in compliance with the investment policy guidelines Asset Class Subgroup - . Total Equities 49.43% 50% 40% - 60% Yes Domestic Large Cap Equity 23.82% 15% - 45% Yes Domestic Mid Cap Equity 3.63% 0% - 10% Yes Domestic Small Cap Equity 9.15% 0% - 15% Yes International Equity (incl Emerging Markets) 11.33% 0% - 15% Yes REIT 1.50% 0% - 15% Yes Total Fixed Income 46.98% 45% 40% - 60% Yes Long-Term Bonds 0.00% 0% - 25% Yes Intermediate-Term Bonds 39.39% 25% - 60% Yes Short-Term Bonds 7.59% 0% - 25% Yes High Yield Bonds 0.00% 0% - 10% Yes Convertible Bonds 0.00% 0% - 10% Yes Cash 3.59% 5% 0% - 20% Yes Source: Central Contra Costa Sanitary District Performance Report as of 6/30/2016 Central Contra Costa Sanitary District Investment Guidelines Document as of October 2013 ©2016 PFM Asset Management LLC 13 Asset Allocation ©2016 PFM Asset Management LLC Asset Allocation Summary Relative to its peers (Public Plans < $100m in assets), the Plan's current allocation is more conservative — Allocation to US equity falls in the bottom quartile of peers, while fixed income and cash fall in the top decile — Actuarial return assumption of 6.25% is also lower than most peers and may justify the more conservative portfolio Long-term expected return for target asset allocation of 7.00% (reflected in table on page 16) exceeds actuarial return assumption of 6.25% — Further diversification within fixed income and a slightly higher allocation to international equity may improve risk/return of the portfolio and increase the probability of achieving the target return — Target cash allocation of 5% seems excessive for an OPEB plan that is less than 40% funded and should be experiencing net positive cash flows each year, but a further analysis of cash flows should be done to confirm appropriate allocation — If ARC is fully funded and portfolio achieves a roughly 7% return, the Plan should be fully funded in 20-25 years ©2016 PFM Asset Management LLC 14 Asset Allocation — Peer Group Comparison Asset allocatlon.Anahsis All Pub11c Plans<$100 million As ol'Juue3O,2016 80.0 ._.._._.__._........._..__... _ _. 700 60.0 30.0 $ 30.0 20.0 10.9 00 -10.0 -20.0 DS Equity inti.Equity US Fixed Income ]ad Fixed Income ;ltemacM Iny. Real Estate Cash ■CCCSD OPEB Town 36.60(86) 11.33(39) 3698(9) 0.00 0.00 130(100) 3.:9(9) \.¢dian 43 97 12.19 34.91 4.7+_ 4.11 6.39 1.29 Poptua0on 3I 321 440 124 73 324 307 Numbers in parentheses represent CCCSD's percentile rank in the universe of all Public Plans<$100 million. ©2016 PFM Asset Management LLC 15 Asset Allocation Comparison CCCSD Alternative 50/50Portfolio Equity 48.3% 50.0% Domestic Equity 39.0% 33.0% International Developed Equity 6.0% 12.0% Emerging Markets Equity 3.3% 5.0% Fixed Income 50.0% 50.0% Core Fixed Income 43.5% 32.0% Investment Grade Corporate 0.0% 3.3% Emerging Markets Debt 0.0% 3.3% High Yield 1 .5% 3.3% Bank Loans 0.0% 3.3% Cash 5.0% 5.0% Alternatives 1 .8% 0.0% Real Estate Investment Trusts 1 .8% 0.0% Intermediate Assump. (5 Years) Expected Return 4.8% 5.2% Standard Deviation 9.0% 9.4% Probability of 6.25% Return 36.4% 40.2% Long-Term Assump. 30 Years) Expected Return 7.0% 7.1 % Standard Deviation 8.7% 9.0% Probability of 6.25% Return 65.7% 69.0% Source: CCCSD allocations are based on the blended benchmark in the Investment Guidelines Document as of October 2013 ©2016 PFM Asset Management LLC 16 Efficient Frontier Based on Intermediate-Term Capita! Market Assumptions (CMA) 10 Emerging Markets Equity International Developed 9 Equity Domestic Equity 8 7 Real Estate Investment 2 6 High Yield ® Trusts v "",Alternative 50/50 Portfolio 5 CCOCSD a Bank Loans Emerging Markets Debt i 4 3 Investment Grade Corporate 2 Core Fixed Income 1 2 7 12 17 22 27 Risk: Standard Deviation 02016 PFM Asset Management LLC 17 Expected Returns — Intermediate-Term CMAs 25 1 Year 5 Year 10 Year 21.70 20.84 20 15 11.66 12.28 ® ' 10.15 0 10 9.51 c � 4.1 L • is cc I • : • ami 5 : N .7 i : i • -5 Target return may be achieved by the following: Higher than expected market returns Higher equity asset allocation -10 • Adding value through tactical allocation changes • Adding value through strong manager performance -15 CCCSD Alternative 50/50 CCCSD Alternative 50/50 CCCSD Alternative 50/50 Portfolio Portfolio Portfolio Bar charts represent the 95th,751h, 501h,25th, and 51h percentile expected returns.Actuarial return assumption of 6.25%is represented by the red line. ©2016 PFM Asset Management LLC 18 Efficient Frontier Based on Long-Term Capital Market Assumptions 11 Emerging Markets Equity 10 International Developed 9 p Equity Domestic Equity R a) as 8 E Emerging Markets Debt s a CCC Iternative 50/50 Portfolio 7 High Yield *Real Estate Investment Trusts ® Investment Grade Corporate 6 Core Fixed Income Bank Loans 5 4 6 8 10 12 14 16 18 20 22 Risk: Standard Deviation ©2016 PFM Asset Management LLC 19 Expected Returns — Long-Term CMAs 14 10 Year 20 Year 30 Year 12 11.73 11.40 10.00 10.31 10 9.49 9.72 L 8 N • �� 6 7 C C Q 4 - 2 0 CCCSD Alternative 50/50 CCCSD Alternative 50/50 CCCSD Alternative 50/50 Portfolio Portfolio Portfolio Bar charts represent the 95th 75'h 501h,25th, and 511 percentile expected returns.Actuarial return assumption of 6.25%is represented by the red line. ©2016 PFM Asset Management LLC 20 Asset/Liability Modeling Projections 6600,000,000 95th Percentile Scenario $500,000,000 ---- — --- --------- -- ' $400,000,000 / I .40 / 75th Percentile / Scenario $300,000,000 / .•, dop ♦ ' 50th Percentile .00 ♦ Scenario $200,000,000 ♦ ♦ 25th Percentile ♦ Scenario S100,000,000 5th Percentile Scenario $- '��` Nq0"P, 'IP, tiry y0 ti� rLb, rL<3 `LSO rL1 rye ti� "�O "�� "��' "�"�'O �O nN ^�h "�� "�1 �O '01 �O 'O , CCCSD-95th Percentile ...... CCCSD-75th Percentile —CCCSD-50th Percentile •CCCSD-25th Percentile —— CCCSD-5th Percentile Alternative 50/50 Portfolio-95th Percentile Alternative 50/50 Portfolio-75th Percentile Alternative 50/50 Portfolio-50th Percentile Alternative 50/50 Portfolio-25th Percentile Alternative 50/50 Portfolio-5th Percentile Based on data from 2014 actuarial valuation& PFMAM projections. ©2016 PFM Asset Management LLC 21 Plan Performance ®2016 PFM Asset Management LLC Performance & Risk Summary Over the time period analyzed, the Plan has exhibited underperformance relative to both its blended benchmark and peer universe Trailing Performance (page 23): — Plan has lagged its blended benchmark for all trailing periods shown — Plan performance falls in the bottom quartile for trailing 3, 5 and 7 year periods Calendar Year Performance (page 24): — Plan has lagged the blended benchmark for only 2 of the 6 calendar years shown, but each has been significant (2% or more) — Plan performance falls in the bottom half of peers in 3 of the 6 calendar years shown, but 2 of them were in the bottom decile Risk Statistics (page 25): — Plan has captured 105% of up-market performance vs. its blended benchmark, but has also captured 124% of down-market performance — Plan has experienced a lower standard deviation relative to its peers, but its up-market capture ratio falls in the bottom decile during the past 7 years ©2016 PFM Asset Management LLC 22 Peer Comparison — Trailing Performance Plan Sponsor Peer Group Anal sn All PublicPlans<5100 million .ss 0fJune 30,2016 14.0 12.0 10.0 0 30 � I: 6 4.0 06 .n -4.0 1 7M 1 3 5 i Qaatter Date Sev Sears Yeah Sears ■CCCSD OPE13 Saust 195(43) 24'_(63) 0 5(5715.42(92) F.80(86) 8.56(89) •CCCSD Blended Hmchmark IN(38) 3.81(19) 235(14) 619(79) 6._'5(72) 8.74(84) Aledian 1.87 2.9; 095 6.89 6.67 9.52 PopWation 332 331 326 311 296 27-- Numbers 79Numbers in parentheses represent CCCSD's percentile rank in the universe of all Public Plans< $100 million. ©2016 PFM Asset Management LLC 23 Peer Comparison — Calendar Performance Plan Sponsor Peer Group Analcsls All Public Plans<SI00 million As of Jane 30,?016 28.0 24.0 20-0 16.0 • 12.0 C 8.0 4.0 � 0.0 -4.0 -8 0 1015 2014 2013 2012 2011 2010 IIICCCSD OPEB T— 0.30(42) 4 70(92) 13.74(90) 1256(43) 0.13(49) 12.27(63) i CMD Blended Benchmark -o 12(64) 6.93(54) 13.06(92) 10.13(90) 2.12(11) 11,97(68) Median 0.01 7.04 17.42 1'_.32 0.07 12.62 Popuianon 323 312 319 327 328 - PaenAyecxarmpxcmnkrmkmas. Reounsxe exp-ssedsspmnngs. e Ca)aihnw basedvu gmneir'peiodian,'. � _ Numbers in parentheses represent CCCSD's percentile rank in the universe of all Public Plans< $100 million. ©2016 PFM Asset Management LLC 24 Peer Comparison - Risk Statistics Plae Sponsor Peer Groop.analysis-]lupi Statistics All Public Plans<S100 million vs.CCCSD Blended Benchmark 3s olJune 30,2016 Standard Sharpe rp.11arkes Dorm]lmkd Li 0 Dmulioo Alpha 1.6 Berg R14Sn ano Capture 120.0 Capture .---- _ 11.3 I.i 1.5 1 3 130.0 2000 10.6 li, O.S 1.4 1320 1800 1.2 9.9 0.1 11 i 114.0 160.0 I 1.2 Ll t ■ 116.0140.0 8-? 1.3 ■ 1.1 1 0 ■ I ■ I ]Gs n 12eG 7.8 -20 1.0 ■. 0.9 1000 I -- 7.1 2.7 0.9 i i 6.4 -34 0.8 C.8 92.0 80,0 5.7 -t 1 0.7 C.7 840 60.0 Peas Yeats Fears Peen Yeas Yeats ■CCCSDOPEBT- 832(801 -190(361 1.14(78) 103 G6) 10470(91) 17356 ('._) Median 9.08 -113 1.23 L04 11618 13723 Popula. 279 179 279 279 279 2;9 am&sn�vm Pncmale ral s. c>Iwaa� Numbers in parentheses represent CCCSD's percentile rank in the universe of all Public Plans<$100 million. 0 2016 PFM Asset Management LLC 25 Per ormance Monitoring & Reortin9 ©2016 PFM Asset Management LLC Monitoring & Reporting — Recommendations A best practices approach to monitoring and reporting provides plan fiduciaries with the knowledge they need to make informed decisions.' PFMAM suggests that at a minimum, CCCSD should receive a comprehensive report on a quarterly basis that includes the following information: — Review of the economy and financial markets, as well as a future outlook — Financial reconciliation that includes beginning and ending market values, cash flows and return on investment for various trailing periods (QTR, YTD, 1 Year, etc.) — Current allocation to each manager and asset class, as well as a comparison against investment policy targets and allowable ranges to ensure the portfolio is being managed in compliance with the investment policy — Trailing and calendar/fiscal year performance for the total portfolio and each underlying investment/manager compared to applicable benchmarks — Comparison of total portfolio performance to a plan sponsor universe of similar funds — Performance attribution at the portfolio level that clearly illustrates the sources of value added, such as asset allocation changes or manager selection — Portfolio characteristics, sector/industry allocation, capitalization weights, credit allocations and other holdings-based statistics for each of the underlying managers Donald Stone,AIF®. `Investment Selection and Monitoring:A Practical Approach to Best Practices," 401khelpcenter.com/401k/stone investment_selection.html 2016 PFM Asset Management LLC 26 Monitoring & Reporting — Current HighMark Quarterly - . • Review of economy, financial markets and investment strategy/outlook No Financial reconciliation showing beginning and ending market values, Yes' cash flows and investment earnings for trailing periods Documentation of compliance with investment policy guidelines No Current allocation ($ & %) to each asset class and underlying manager Yes Trailing and calendar year performance for total portfolio and Yes2 underlying managers vs. applicable benchmarks Comparison of total portfolio performance to peer universe of similar No funds Performance attribution for total portfolio that shows value added from No asset allocation and investment manager decisions Portfolio characteristics, sector/industry allocation, capitalization weights, credit allocation and other holdings-based statistics for each No underlying manager 'Shown for entire since inception period only '-Trailing performance is provided but not calendar year; No benchmark is provided for total portfolio ©2016 PFM Asset Management LLC 27 Sample Reporting — Financial Reconciliation Account Reconciliation Sample C lienC-Muld-asset Class-Management As of June 30, 20115 QTR AlarketValue Market V nine Return On I Investment 0613012016 TOpf -. L-ND 6.050.836 - 1.194915 63.445.754 YTD Market Value Return 1 . Market Value As of Net Flows I 1 I Investment 0613012016 TOT.1 L-�•,,D 61.171:991 - 2;273.765 63.445.754 1lear Market Value Return On r*f2rket Value As of Net Flows 07/01/2015 Investment 06130r.016 TOTAL R ND 62,164.453 5.057 1-276.244 63.415.754 0 2016 PFM Asset Management LLC 28 Sample Reporting - Allocation & Performance Asset:kilocation & Performance Sample Client- -lfttlti-asset Class Management As of June 30, 2016 % Quarter Year Years Years Years Inception Date � ' ate TOTAL ND 100.00 _2.13 3.61 1.9? 6. F[ 6.5; 9.5-3 6.36 4710L`2006 Polic v Inde 1--5 1.14 1.50 6-21 6.14 9.0' 5.35 0,7V112006 Domestic EgWt� Manager A 419.32 41.69 3-65 2.14 11.07 11.59 15.00 12.31 OYOL2012 RtuseU 30001n*x '.61 1.6' 2.14 11.11 11.60 14.95 1136 051+11,'201' Manager 11.36 2.66 5.60 9.13 11.43 141?2 14.48 13.38 OV0112012 .S&P 500 2.46 3.34 3.99 11.66 I?.10 14.92 14.48 01.'01,,201 Iuternatioual Equics Manager C 1.96 -0.30 -2.31 -8.55 2.74 2.05 6.28 1.1-0 06='01x'2013 .VSC7 E,fFE r rtev -1.46 4.42 -10.16 '.06 I.68 5.9' O.S? Otu'`011?01 s Manager 3.70 2-77 4.45 ;.50 8.57 6.90 NIA 4.45 0101(2016 JUSCIAC World or VU Nip -0.64 -1.0_? -10.24 1.16 0.10 3.3.5 -1.0-7 OLV1 '016 Manager E 3.06 0.13 -0.34 -11.62 1.32 1.213 5.33 -2.33 05`01.2016 ,USCIAC lVotid or USA#Ne#) -0.64 -1.02 -10.:4 1.16 0.10 5.35 -3.19 OPOL2016 Manager F 1.79 0.44 -1.92 0.65 13.09 11.37 16?2 4.79 04/0V201-1 1 iSUAC World t r USA Snarl Ccp Index(Ver+ -1.32 -0.11 -6.13 4.01 1.76 7.S4 -3.01 04,171..2015 Other Growth D4anager G 6-71 6.80 13.550 23.93 13.41 12.44 2 0.74, 6.80 041'01.12016 ,Ii.SC'I US REIFInder 6.51 13.56 34.10 13.51 1.4.53 20.31 6S1 O4'�►1:?016 ©2016 PFM Asset Management LLC 29 Sample Reporting - Peer Group Comparison Plan.Sponsor Peer Group Analysis dill Public Plans-Total Fund Sample Client-1lulti-asset Class'Management As of June 30..-1016 14.0 11.0 8.0 5.0 E 4-0 1 year 1 ; 7 Jul-2006 Quarter To oFear Tears Tears Yews TO Date Jnn?[116 ■Sample Client-Multi Asset Class Management '.15 i?5) 3.61 (24) 1.92 (18) 6.77 (438) 6.55 (54) 9.58 (50) 6.36 (19) Policy-Index 1.7-5 (56) 3.34 (33) 1.50 (30) 621 (73) 6.14 (72) 9.07 (71) 5.35 (79) 5th Percentile 2.96 4.91 2:83 8.19 8.12 10.36 6.78 1st( uaitile 2.18 3.52 1.63 739 7.3 10.47 6.22 ltiiedian 1.83 2.82 0.61 6.74 6.645 9-57 5.84 3rd Otiaitile 1.52 2.15 -0.61 6.08 6.01 8.96 5.47 95th Percentile 0.99 1.14 -1.88 4.91 5.07 7.87 4.65 Popidation 404 443 394 381 362 344 242 ©2016 PFM Asset Management LLC 30 Sample Reporting — Performance Attribution Total Fund Atneibution Sample Client-'Multi-Asset ClassAlanagement 1 Year EndinoJune 30,.,2016 Total Fund Performance Total Value Added:0.134n Torld Value Naiad ALocaton Toral Ftmd lk---hiruk 'clanger value Ad&.,i Total Fend L92% Other O.OD% 0.79% 2.371'9 3.16% -O.K% 0.001 Total Asset Allocation:-0.46 4 Total Niamager Value Added:1.07% Dome=c Ecum� 0.59% Imematonal Eqtuty -0-29% -0.11% 0.93k. Real 1:—tate 1.03% 0.002, k1lawnHedge -0.04% O.Ovi Fmed Icon-& -5-25% CanhEqmvalent O.O(N. -10.00% -5.000. O.W/v 5-00% 10.00:-10 -1.00% -0.50% 0.00% Uo% 1O.30% 0.00% O.Scll> '.6c,: AwgeAct,,-e Weik Nf.Ma--U Value A4i� 2016 PFM Asset Management LLC 31 Sample Reporting - IPS Compliance Asset Allocation Summary Sample Client-Multi-Asset Class'Management As of June 30, 2016 Asset Target Minimum 'U'llimum Differences Allocation Allocation Allocation Allocation (0/0) TOTAL FUND 100.0 100.0 N;A NIA, 0.0 Domestic EqLuty 40.7 39.0 19.0 59.0 1.7 International EqLuty 10.5 21.0 1.0 41.0 -10.5 Other Grm-th 6.7 0.0 0.0 20.0 6.7 Fued Income 40.0 39.0 18.0 58.0 2.0 Other Income 0.0 0.0 0.0 20.0 0.0 Real Return 0.0 0.0 0.0 20.0 0.0 Cash Equivalent 2.1 2.0 0.0 20.0 0.1 Dome=Eqwy hremanonal Bclt=, Other Gmn-th Fled income 0dM Income Real Feet= gg C3shEqua-valent -30.0 a4 -15.010 15V4 30.01,1-i 45.0% 60.0% Tmeet.AHOcaton Actual ABDcaton UlocationDtffenmca- 0 2016 PFM Asset management LLC 32 Investment Managers ©2016 PFM Asset Management LLC Investment Manager Summary US equity allocation consists of 8 investment managers, including 2 passive ETFs 5 of the 8 managers lagged their benchmark for the trailing 1 , 3 and 5 year periods 7 of the 8 managers lagged their benchmark for the trailing 1 year period 8 managers, including 5 large cap, may be more than necessary and could result in overlap of securities and an index-like allocation holding nearly the entire market US equity is a fairly efficient asset class where it is difficult for active managers to outperform, making low-cost passive funds an attractive option International equity allocation includes 4 actively managed funds, including 1 emerging markets manager All 4 managers have outperformed their benchmark for the trailing 5 year period, but only one has outperformed more recently on a year-to-date basis Developed international equity is also fairly efficient and a good candidate for passive management, while emerging markets provide an opportunity for active management ©2016 PFM Asset Management LLC 33 Investment Manager Summary US REIT allocation includes a single actively managed fund REIT manager has generally tracked its benchmark for most trailing periods US REIT market is highly efficient due to a relative small universe of securities, making low-cost passive funds a good option to save on fees and achieve the market return Fixed income allocation includes 5 actively managed funds, including a dedicated high yield manager (which appears to just be residuals from recent liquidation) 3 of the 5 managers have exceeded their benchmarks for the trailing 5 years Prudential Total Return has had strong long-term performance but was only added to the portfolio in 2016 HighMark Bond Fund is the largest allocation and is affiliated with the Plan's investment advisor Active management makes sense within fixed income currently as they are better able to navigate low interest rate environment ©2016 PFM Asset Management LLC 34 Investment Manager Performance As of June 30,2016 QTR YTD 1 Year 3 Years 5 Years USEquity Columbia Contrarian Core 1.65 2.28 2.29 11.95 12.45 Russell 1000 Index 2.54 3.74 2.93 11.48 11.88 -0.88 -1.46 -0.64 0.47 0.57 Dodge & Cox Stock 1.70 0.70 -5.09 8.28 10.44 Russell 1000 Value Index 4.58 6.30 2.86 9.87 11.35 -2.88 -5.60 -7.95 -1.59 -0.91 Loomis Sayles Value 3.17 1.46 -3.45 7.95 9.92 Russell 1000 Value Index 4.58 6.30 2.86 9.87 11.35 -1.41 -4.84 -6.31 -1.92 -1.43 T. Rowe Price Growth Stock -0.69 -6.02 -2.74 12.40 12.04 Russell 1000 Growth Index 0.61 1.36 3.02 13.07 12.35 -1.30 -738 -5.77 -0.67 -0.30 iShares Russell Mid-Cap 3.12 5.40 0.39 10.61 10.73 Russell Midcap Index 3.18 5.50 0.56 10.80 10.90 -0.06 -0.10 -0.16 -0.19 -0.17 iShares Russell Mid-Cap Value 4.68 8.73 3.03 10.75 11.47 Russell Midcap Value Index 4.77 8.87 3.25 11.00 11.70 -0.09 -0.15 -0.22 -0.25 -0.24 Columbia Small Cap Value 2.12 2.79 -4.27 7.72 8.75 Russell 2000 Value Index 4.31 6.08 -2.58 6.36 8.15 -2.19 -3.29 -1.69 1.36 0.60 T. Rowe Price New Horizons 5.16 0.85 -2.21 11.59 13.03 Russell 2000 Growth Index 3.24 -1.59 -10.75 7.74 8.51 1.92 2.44 8.54 3.85 4.51 ©2016 PFM Asset Management LLC 35 Investment Manager Performance As of June 30,2016 OTR YTD 1 Year 3 Years 5 Years International Equity Nationwide Bailard International Equity -2.13 -4.05 -8.88 4.35 2.46 MSCI AC World ex USA(Net) -0.64 -1.02 -10.24 1.16 0.10 -1.49 -3.03 1.37 3.19 2.35 Dodge & Cox International Stock -1.20 -4.91 -18.86 0.37 1.02 MSCI AC World ex USA(Net) -0.64 -1.02 -10.24 1.16 0.10 -0.55 -3.89 -8.62 -0.80 0.92 MFS International Growth 0.55 2.10 -3.01 3.21 2.47 MSCI AC World ex USA Growth (Net) 0.46 0.13 -6.20 3.11 1.52 0.09 1.97 3.18 0.10 0.95 Schroder Emerging Markets Equity 2.32 5.42 -10.58 -1.38 -3.12 MSCI EM(net) 0.66 6.41 -12.05 -1.56 -3.78 1.66 -1.00 1.47 0.18 0.66 Real Estate Nuveen Real Estate Securities 6.49 11.56 23.03 13.48 12.18 Wilshire US REIT Index 5.60 11.09 22.82 13.63 12.48 0.90 0.47 0.21 -0.15 -0.30 ©2016 PFM Asset Management LLC 36 Investment Manager Performance As of June 30,2016 OTR YTD 1 Year 3 Years 5 Years Fixed Income Vanguard Short Term Corp Bond 1.30 3.09 3.26 2.55 2.42 Blmbg. Barc. U.S. Aggregate 1-3 Yrs 0.68 1.66 1.60 1.26 1.14 0.63 1.43 1.66 1.30 128 Nationwide HighMark Bond Fund 2.54 5.93 5.54 3.90 3.94 Blmbg. Barc. U.S.Aggregate 2.21 5.31 6.00 4.06 3.76 0.33 0.62 -0.46 -0.16 0.18 PIMCO Total Return 2.07 3.93 4.31 3.49 3.71 Blmbg. Barc. U.S.Aggregate 2.21 5.31 6.00 4.06 3.76 -0.14 -1.39 -1.69 -0.58 -0.05 Prudential Total Return 3.25 6.57 6.56 5.28 5.21 Blmbg. Barc. U.S.Aggregate 2.21 5.31 6.00 4.06 3.76 1.04 1.26 0.56 1.22 1.45 PIMCO High Yield 3.32 6.17 1.92 4.19 5.39 BofA Merrill Lynch US High Yield, BB-B Rated 4.60 7.90 2.06 4.59 5.87 -1.29 -1.72 -0.14 -0.40 -0.48 ©2016 PFM Asset Management LLC 37 Fees ©2016 PFM Asset Management LLC Administrator & Advisor Fees PARS Trust Administrator & Consultant Provides recordkeeping, administration and legal/compliance services HighMark Capital Management Investment Advisor Serves as sub-advisor to U.S. Bank (Trustee/Custodian) PARS HighMark Total First $5 Million 0.225% 0.315% 0.540% Next $5 Million 0.225% 0.225% 0.450% Next $5 Million 0.180% 0.180% 0.360% Next $35 Million 0.135% 0.135% 0.270% Thereafter 0.090% 0.090% 0.180% Weighted Average 42.6M 0.161% 0.172% 0.333% Estimated Annual Fees $68,833 $73,333 $142,166 Source: Fee Schedule as of July 2013 ©2016 PFM Asset Management LLC 38 Money Manager Fees The investment manager fees are in line with the median fees of similar funds The overall portfolio's investment management fee 0.58% is relatively high for a plan of this size with no alternative investments 93% of the portfolio is invested in active investment managers Including an allocation to passively-managed index funds in certain asset classes can further reduce fees and offset higher cost investments Money Manager Asset Class Allocation% Allocation($) Expense Ratio Fees(S) Morningstar Fee Group Morningstar Fee Group- Median Fee olumbia Contrarian Core Z Domestic Equity 5.60% 2,390,543 0.84% 20,081 Large Cap Institutional 0.79% Dodge&Cox Stock omestic Equity 5.76% 2,455,751 0.52% 12,770 Large Cap No Load 0.90% oomis Sayles Value Y Domestic Equity 5.73% 2,442,478 0.70% 17,097 Large Cap Institutional 0.79% arbor Capital Appreciation Instl Domestic Equity 3.36% 1,434,590 0.65% 9,325 Large Cap Institutional 0.79% F.Rowe Price Growth Stock I Domestic Equity 3.37% 1,435,897 0.52% 7,467 Large Cap Institutional 0.79% Shares Russell Mid-Cap Domestic Equity 2.62% 1,118,698 0.20% 2,237 Mid Cap Institutional 0.93% Shares Russell Mid-Cap Value Domestic Equity 1.01% 430,065 0.25% 1,075 Mid Cap Institutional 0.93% olumbia Small Cap Value Fund II Z Domestic Equity 5.65% 2,410,312 1.02% 24,585 Small Cap Institutional 1.00°% r.Rowe Price New Horizons I Domestic Equity 3.50% 1,493,276 0.67% 10,005 Small Cap Institutional 1.00% ationwide Bailard Intl E s Instl ntemational Developed Equity 4.08% 1,741,877 0.87% 15,154 Foreign Lange Cap Institutional 0.93% Dodge&Cox International Stock ntemational Developed Equity 2.27% 967,607 0.64% 6,193 Foreign Large Cap No Load 1.04°% FS International Growth I ntemational Developed Equity 2.27% 967,409 0.97% 9,384 Foreign Large Cap Institutional 0.93% artford Schroders Emerging Mkts Eq I merging Markets Equity 2.71% 1.156,753 1.21% 13,997 Emerging Markets Stock No Load 1.39°% uveen Real Estate Securities I eal Estate 1.50% 638,836 1.05% 6,708 Specialty Institutional 1.02% an uard Short-Term Investment-Grade Adm fixed Income 7.59% 3,237,287 0.10% 3,237 Short-Term Bond No Load 0.60% ationwide Hi hMark Bond Instl fixed Income 19.68% 8,394,946 0.50°% 41,975 Intermediate-Term Bond Institutional 0.50% IMCO Total Return Instl Fixed Income 9.86% 4.203.603 0.46% 19,337 Intermediate-Term Bond Institutional 0.50% rudential Total Return Bond Q ixed Income 9.85% 4 202,600 0.43% 18,071 Intermediate-Term Bond Institutional 0.50°% IMCO High Yield Instl ixed Income 0.00°-6 1,376 0.559.0 8 High-Yield Bond Institutional 0.75% Total Money Manager Fees Source: Central Contra Costa Sanitary District Performance Report as of 6/30/2016 Morningstar Direct ©2016 PFM Asset Management LLC 39 Money Manager Fees The following is an example of the potential cost savings by incorporating passively-managed index funds in some of the more efficient asset classes like domestic and international equity. Manager fees were reduced from 0.58% to 0.28%, resulting in annual estimated savings of $123,155. Money Manager Asset Class Allocation% Allocation($) Expense Ratio Fees Morningstar Fee Group Morningstar Fee Group- Median Fee Vanguard Total Stock Index Domestic Equity 36.60% 15,611,610 0.05% 7,806 Large Cap No Load 0.90% Vanguard Total Int'I Stock Index International Developed Equity 8.62% 3,676,893 0.12% 4,412 Foreign Large Cap No Load 1.04% artford Schroders Emerging Mkts Eg I merqinq Markets Equity 2.71% 1,156.753 1.21% 13,997 Emerging Markets Stock No Load 1.39% uveen Real Estate Securities I Real Estate 1.50% 638,836 1.05% 6,708 Specialty Institutional 1.02% Vanguard Short-Term Investment-Grade Adm fixed Income 7.59% 3,237,287 0.10% 3,237 Short-Term Bond No Load 0.60% ationwide Hi hMark Bond Instl fixed Income 19.68% 8,394 946 0.50% 41,975 Intermediate-Term Bond Institutional 0.50% IMCO Total Return Instl ixed Income 9.86% 4,203,603 0.46% 19,337 Intermediate-Term Bond Institutional 0.50% rudential Total Return Bond O fixed Income 9.85% 4,202,600 0.43% 18,071 Intermediate-Term Bond Institutional 0.50% IMCO Hi h Yield Instl ixed Income 0.00% 1,376 0.55% 8 High-Yield Bond Institutional 0.75% Source: Central Contra Costa Sanitary District Performance Report as of 6/30/2016 Morningstar Direct ©2016 PFM Asset Management LLC 40 Appendix ©2016 PFM Asset Management LLC Columbia Contrarian Core POrlfo Colunlbia:Cnli0tr Co-z A5 Af Jane 30.2 016 Go 520 I 17.6 36.0 e6 2SA _ a,p t 20:0 • C a 00 8 124 -0.0 9.0 � -8.0 10 i2 D .12.0 1 'Ta 1 3 s -,Ds Q.- Dm 1s V- T- 2015 7014 2013 10L. 2011 •Coh".Caa Cme,2(59iGLY] 1.65(60) 7.3d f:') 2'9(33j 11.95(B) '-=1%;5? •CalimbiaCeataey SGDC) 3.A`(L'? 12.T_(16) 35.3(17 Is (i0) -0.s'a(56) w Rwrd11CwJ dex 3.51(_'9) 3':(K) 293('_B) 11.-08(I:) 13.E f19) s.Rva�dl IC 'finder 492(33J 33.29(21) 33.11(31) 1692 I31) I.A)(393 IO>3 41dm -0S' 11.36 3195 1341 4Ai MiflEiRMI R- SurLrd Sharpe 'via 1U. Trefaar Artirr Talon W d- Rte°.red Dreladaa Raba Ratio Rema Error Retia Coh-WC-C-2(&SGLYI 1195 1136 125 043 LOD O.L' 015 1.96 0_'3 09' R-110 01.d. 11.49 111' 1.03 0.00 1.00 0.110.00 0.00 NA 1.00 90 Dy U.S.T--Bio 0.0? 0 4.0 .05 -A 0.0' 0.00 0 -111'. 11.IS -1.03 00 I,)1i Numbers in parentheses represent Columbia Contrarian Core's percentile rank in the universe of U.S. Large Cap Core Equity Mutual Funds. ©2016 PFM Asset Management LLC 41 Dodge & Cox Stock Portfolio Dodge a Cox Stock(DODGX) Ad of j=t,30,2016 t cD u0 �' • 36.0 R.0 28.0 1.0 • L 20.0 0.0 120 6 a 4.0 40 4.0 ate -120 1 Te 1 3 5 MO Qaaels 1hU 1'� Teas Sean 20La _'Old 413 '_Ol, 2011 •Dod,,ICoa Stack(DOOGID 1.'0(70) 0.:0(?,.) -5.0(811 "(43) 10.63(261 •Dod.,&Coa S.&W. DGX) 4.49(63) 10A0(661 4055(3) 2:01(1) -.01(691 aRwse0lrfo Viloelndn J�(LO) 6.30(14) 286(16) 9.9"(14) 11.33(9) R-e 10M TabeLNev i.81 431 13.:5(9) 12-1501 1731 11) O.i9(� Mld- 2E 203 -1.51 8.0) 943 M.S. 10.89 3211 13.4E -2.39 Suadasd Shar0e T.y- A 9- T"d q Itt---tion De!*.6.. Ratio Mph' Bem Rada Rrmm Ermr Rad. RSq..d Dodge&Cos Stock(DODOX) 8.25 1264 069 -205 LOS 0.08 -1.9 393 -033 091 k-01000 VA.Wm 9.8' HIS O.39 0.00 100 0.10 0 00 0.01 V.A I00 90 Day D.S.T.-Bio 0 0- 0.05 N 0.07 0.00 0.00 -10.00 t 1.1R -0.89 0.00 1 U Numbers in parentheses represent Dodge&Cox Stock's percentile rank in the universe of U.S. Large Cap Value Equity Mutual Funds. ©2016 PFM Asset Management LLC 42 Loomis Sayles Value P-doll. Sa ixIs:LSValae;Y As fJune 30,2016 6 o s2.9 :6 d8.0 369 90 28.0 8.0 z AD 12.0 .8.0 dA - .8.0 a0 L'0 1 81. I ] 9 -2D.0 Qou1s D. Yav 1'xn Yan !019 2018 -^017 2012 _•011 •1---LSN,&I YILSGM _(JA 186(66) -IA5(69) '.95(5J 9.92(40) 0 No6,hlSV"Y UGR -8.19 159) 10'6(_,. 35.51(20+ :9.11(•1 .2.81(56} s Rva1e81ae Ydmhwd 8.58(10) 600(Ie) 296(16) 981(18) 1135(8) a Rm1d)1000 V.I.%du 383(53) M43(8) (H" :'.51(r) 039('t) . 26: 29) .L51 8.W 9A3 Aidim O.A. lC� 31_51 :SL =.39 6-d.rd Sh.rye 1rq..r -i ft. T-W g InOorma don R- Der.tlan Ratio a19h. Rrh R.H. P. Error Rad. "..d NT-LS Y.1-Y(LSGItI -95 1219 064 -:.01 10" O.OS -1.66 :1< -06- 096 R-I 1000 Mahe 8A5 9.3' 11.18 0.99 0.00 100 0.10 0.00 C:(.1 \..5 1.00 90 My U S.lrtaaaY RSB Oa7 0.05 N A 0.07 0.00 000 -10_00 11 18 -019 000 Numbers in parentheses represent Loomis Sayles Value's percentile rank in the universe of U.S. Large Cap Value Equity Mutual Funds. ©2016 PFM Asset Management LLC 43 I Rowe Price Growth Stock Pm-ttolio T Royce Price Gro SIk(PRGF"XI _�s of Jane 30,2016 P-Group Anal 91J� 5'.0 ±6.0 � 41ri L'.0 SO �� 22,0 - 4.0 R ?O.0 s i - 40 ao 40 IS.o Q.IIif lT. S: Y- Ywn 3WS 2014 M13 SOLS .011 •TRm.'eP-C StIcfPAGFS) -0.® -64'i89; -0'+i(63) I2.W(30} 12.J:(l') •TRaxe PeeeC 5@(t'RGF IO.i(-) 993 Q3) ii.20(/I) 19.92 fld) A9'ra) m Ruaw0:000 Cnv-�thleds 0.61(y7 136(9) 3.02(0) bIr(ST 1:35(Ib •Rmx➢70.WC ihlvda 5.6'(3qj 13.05(11) i3.d0(55) L'.26{' _bi (11) \IM® 031 -'.10 -IK 11x6 1036 551 1051 3:95 .1A) .-. R- Sm."M Sharpe Bem TM-. acme Tndit 6ferma i RSq-d Ileeladen R.n. Pm R.K. Rem.. E- Bade T Roue Price Om SIk(PRGF`.() 12M093 JS 093 .1.61 1.10 0.11 -0 36 1.55 -0.09 ).W R-aloaDc-u I.6 130" 1156 1.L' 0.00 1:00 0.13 000 0.00 \;A 1.00 901F.y U.S.T-BM 0.07 0.05 A 007 0.00 0.00 -13.91 119 -132 001 i'R\I Numbers in parentheses represent T. Rowe Price Growth Stock's percentile rank in the universe of U.S. Large Cap Growth Equity Mutual Funds. ©2016 PFM Asset Management LLC 44 iShares Russell Mid-Cap Porifulio iShares:Rass 311G-Cap(IRR) As of June 30,2016 10.0 - 51.0 ---- 15"0 41.0 10.0 e 5.0 18.0 00 20.0 -5.0 1?.0 aG -10.0 I 10� !2.0 .0.0 1 iso l 1G0 Qaa Dan SB 7'esn Tnn "IS 2014 7015 2012 7011 0I8h-p-154d.Cap(MTC 3.L`(10? 5.0(111 O-V(.5) 1061(1' 10-3 l9, •i8huesRmc hTdCVGRR) -2-r(3a) 13.03 11)) 3-'-%is 1-12(35) ea 1fid113134,t a Rmr �p 6dec 3.18(i6> 5.79 CS) Q_%(.'-',i 16iC,80110) IO. 17 1RmfA hLdvp7adta -a1(ii) 132E 1131 34.;6„ cl; 1,2S(3,4' .155(1'I \,Hue 2W 3.P -3.1V ST S.48 Mul- -3.S 9JI 44.7 16.01 .3.13 Snedard sh.Re 7rn•aer .icdre T-ki g Ldornadm Reaun D.-iad- Rade xp6a Bea Redo Return Er Redo R-Sgw d iShcru:Russ]fid-Cap(M4q IObI 11.'0 09: 0.16 I.00 0.11 -0.1' 00` -.S7 I.C) Rtuse3 Nh&ap]edn 1080 11.= 093 0.00 7.00 0.11 0.00 000 \A 1.CO 90 Day O.S.T.=16-0 0.0? 0.05 �A P.0' 0.00 0.00 -10.91 11. 093 0 CO' Cl•111 Numbers in parentheses represent iShares Russell Mid-Cap's percentile rank in the universe of U.S. Mid-Cap Core Equity Mutual Funds. ©2016 PFM Asset Management LLC 45 iShares Russell Mid-Cap Value Falll01i0 ish--Russ?1C F-a1 As.(J..,30,2016 U.S.Peer Group Analysis-MI I uo w.0 : a i aa.o • c -�_ � -: 3a.o i I 20.0 L- ' c " 10.0 fio 400 a0.0 .ISO 0.0 t.A.O 1 To 1 3 5 -39.0 Quota Dae Ys l'wn Ywn 2013 2017 2013 201-' 2011 •Shaw P.-MC Yd WS) 4.®p) 5.-1(I I? 3.Oi r+ 10.'3(14) 11.4'(9) •i_.R.,MCt'd(SRS` A93(46) 14.49(i3; 33::1(� 1"(3.1) -1.54 U') 4.P.uta0 Slid�Yth�e ludw 4.T(d) 8.8:(10) �=(117 tem lL) 71-'0 0 4,Ruurh t.L± 6otueatw 1'8(74) lin(i2i :3.46(6E) 18.A(37) -1.38 f'S=) .....m -.. 5.I 2.23 8.'1 6.18 Moi. -5.5 10.58 3380 Id L^- .4.19 P.- Snatiatd Sh q. Rew Tm uw U6. Troch., Iu(otnatioe R red lle,Ww. Ratio Rad* Retain Error Ratio Sou i9lues:AwsalC Yal(IFF3) 10.;3 11-49 0.94 -011 1.00 0.11 -023 0,07 -6.1. l.m AusxO tideap Paha]rhs 1100 1130 096 000 100 0.11 000 ON) \A 1.00 90 Dav Q.S.T.-R01 007 0.03 \'A 0.06 000 0.00 -I1 0- 11!0 -0.96 001 3 Numbers in parentheses represent iShares Russell Mid-Cap Value's percentile rank in the universe of U.S. Mid-Cap Value Equity Mutual Funds. ©2016 PFM Asset Management LLC 46 Columbia Small Cap Value Portfolio Columbia:SmCp Cal II;Z As of Juue 30,2016 Peer Croup Anah sis-IM U.S.Small Cap Value Equity(.%M ,cc GO.G —._......___....____.... 50.0 #O.0 =A I - 30.0 E G.G _ - MC - 9 �e cc 12D .C.O . -16.0 :0.0 1 Y- I 3 S -30.0 4H,� 1'= :916 m14 :ou :9u au •Cob®b.aS l'Y➢:Z(ESY.��O :.L`{551 -'�(76) -4.'-%(#6) -'-'1121 I..5(19) •CdN bizS.Cp VA IIS(\St:y� -..90(B] #.61(30) %"R3) 14.5 C -- (39) •P.w�e920^04'ahrLuka 431(Il) 6.06(27) -2.59(salt 636(29) 5.15(32) ♦Rwrd120tt%'>i.I dea 747(49) #n(33) 3152(54) 15.05(33) .3-"(63) 1'edn9 231 4.23 .4.5S ..a. '31 M dim .'.R 3..1 35.d L5.® -0A Ra«ro SuadardSharpe Tn2-aor .t d- irac W—doa Ikrlufoo Rada �Pha Hen Rada R—. E—r Rano R' and C9has.h.;SmCpt'al1I:Z(NSV&II0 13.:6 0.61 L70 0.93 007 I s =.9- 140 0.96 Rane➢'_000%Slue Id. 636 14--1 0.50 0 QO 190 00- 0 M 0.00 N A 1%10 901 vQ5.T.—Hil 0.C7 095 \:A 0.0' 0.00 000 --_13 t#:3 ASO 0-00 i Numbers in parentheses represent Columbia Small Cap Value's percentile rank in the universe of U.S. Small Cap Value Equity Mutual Funds. ©2016 PFM Asset Management LLC 47 T. Rowe Price New Horizons Portfolio T Rome Price Nese Rzas(PR-NWX) As of Jane 30,2016 _0a 1- 1a9 65o s.b 0 0 4.0 E � 90 i .10.0 c ® • •16.0 :00 -210 1.0 t tp ] 3 E 10.0 Dau T- 1'an V— 203: SDli 2 013 ?OL S011 •TR—P�\e.Rm11PP-MM, 5.16 G6) 0.85(35) -231(10) 11.59(1) 13A6(I) •TP—Pm,NmHm3(PRW3 D 5.50(8) 610 y) 4911(191 161(10) 6.a(1) ♦R—A2MG—h':ndx i_L(SS) -lam(56) -10.73(39) "4(35) SSI(3'_) a R."20000."Wa -1.38(41) 5.60(13) 4330(4'1 I'SC1, '.91(35) M.dw 3.30 -1322 -1105 6.65' '.1 M.6m 3f 1 M 32.91 11+A 1 S R— S..dvd S", AI>u Hm TreSw Mlle Tneldq Uf—d9e R- ed r Dniame Ram P Ram eeean E— Ram a TReax Prce`Ieu ams(PRVH.M 1159 1332 0.83 4.61 985 0.13 426 0.-6 99.1 R—R2000Goa5h Tndx ".i3 162, C.54 0.00 1.00 0.09 0.00 OW VA 1W 90 Dae U.S.T—BiO 00' 005 NSA 00' 000 0.00 .8-4 16' -04 0.01 1 Numbers in parentheses represent T. Rowe Price New Horizons' percentile rank in the universe of U.S. Small Cap Growth Equity Mutual Funds. ©2016 PFM Asset Management LLC 48 Nationwide Bailard Intl Equities Portfolio Nalio-ide:13ail Ill E;]1(W HL\) As of June 30.2016 16.0 ' s0.o S.e ,(3 e 6c I cc 1 _10.0 A I =l loc .10.0 ao= -35.0 - 1 Te 1 S s .400 Quite hate 7'er S'ata Yeua -015 '_1114 SdU 2012, 2011 •Nmonw BadldE\1(I117D.\: +.0 X91 .a.05('3j 5.14(4;) 4;(16) =-''6 20 •\mana'id.9 7;d E.`.i C�l{AL.\7 0.9;Vit-190 CAt_'1&1(30) It T(.q 5.39(5s) 1:SCIACUti dd.U&k(\e -0.6:(59? -l.03(51) -10.34(541 1.36(SS) 0.10(62) ♦\1SCI.4CA'oddex E'SA(\d) -3.C6{61?-3.87 143) 13.5(56) 46.63(68)-13.'1(A) .....m ou .00 -9ffi 163 0'S Mel- �S 14$ 1'31 is& '491 It- S..dard Slu Fa Bed Trey- Ardre Trac 1.-d.. R red Dea'ia15.n Ra� F Rad. P- Error Rada �6a tian.va(dcHaO In E]1(,min ) 335 1'.14 O41 530 0.57 OW 3.99 4.6'. 0.64 0.97. b15C1 A[l4.dde DSA N.) 1.16 13.0' 0.15 000 1.00 003 0.00 0.00 N'.4 1.00 90 Dy D.S.T--y Bill 0.07 0.05 N A 00-1 aDo 0 00 -1.94 1306 -0A, 0.00 Numbers in parentheses represent Nationwide Bailard Int'I Equities percentile rank in the universe of International Equity Mutual Funds. ©2016 PFM Asset Management LLC 49 Dodge & Cox International Stock Portfolio Dodge&-Co,Intl Stock(DODF1,Q As of June 30,2016 Peer Group Amh*sis-INFInternational Large Cap Core Ecluil�! _, 3E.0 O.G 280 � _2 O 0C 12G z E 4C 10.0 -1 G .13 0 _120 -2G.G � 250 L5t ] J E .28.0 Q..rtr Data 5'r 5'e.n Fenn 2015 1014 2013 2012 1011 •Dedge3Co.luE Stork(DODFX) 170(55) <31 Cl) 18.8E(1001 0.?.(60) 1.0:(33) •Dod¢eSCnx i.d Sark DODFI) -I!.i314_`1 0.08(dJ :6.31(5) 2!.@tl!) -1/.9'(8S s T1SCACWioddmVSA(N,O -061(-2; -1.0`(19} -107,1(3Ej t.16(39) 0.10(61) •SISCIAC WoddeaUSA(Net -1.C6(S'} ;.S(1;3 ism($) 18.83(6i) .li.'.1(EJ !3ednn -0.98 i.tl -11.M O-W 0d; 31eim :76 -6.4 1" 11.05 -13.09 IU- Standard Sh.rpe h. Ra Ieq- Acdve Sneking 1.1-doa k Deci.don R.do Bad. P.- Eexar F, lqna rl Dodge&Ca Ind Stock(DODF7q 0.37 1538 010 -0'4 I.I4 0.01 -0.46 430 -OAL 0.94 MSCI AC Woold e.MA(.Net) 1.16 130' 0.13 0.00 100 002 U. 0-00 VA 100 90 Day U.S.T-F101 0.0' 001 xA O.D. 0.90 0.00 -1.94 1306 4.15 0-W rr6L Numbers in parentheses represent Dodge& Cox International Stock's percentile rank in the universe of International Large Cap Core Equity Mutual Funds. ©2016 PFM Asset Management LLC 50 MFS International Growth Portfolio NIFS Intl Growthj(]1QGDD As ofdnne 30,2016 360 l 29.0 So 20.o • 1?.0 J.G s C SA t2 c i .12.0 I i .219 ']6 1 Te 5 .360 Qaarea Den is Yeah Paan :016 :01! 201] 22L. :011 •AffSlvb Gcomhlt,3QG1 0'5(16'. 7.10(61 3.01(14)321 pb)2T ) •\ff8lad Grm+lki(MQGN 0_'L(3<`. :iLv; -3.83(91) 39.'I(:n .10.@(231 a.MSCIAC WmkmUSA&-htNd) 0.. 120) OU Wi -.37(18)3.11(38) Cr12257 •\1SC1ACWdd.USAC-.,&(\e0 -1Z(66; -:.65(300 15Af80) 1".6'(65) -1421 r6p+ -I(s' 319 -10-0 2.53 1.99 11dw 0S 4.3 15.63 19.39 -13.5S Suadard Sharpe 7- Actin T.07 Ie-d- Iiemra Deriadoa Roti. Alpha Hen Rid. R.- Einar Rada .d . 11141 d Grm.&;1(11QGIh3 ;11 1199 032 0.24 095 003 0.07 2.83 0.03 095 MSCI AC k'mld Z USA Ocaach Cal 3.l] 1221 031 0.00 I.W 0.03 000 080 VSA 1.00 90 Dac US.Tre_Hill 0.W 0.05 3I.'A 0.0' 000 000 -3.'.3 12_21 -031 0.00 PFA7 Numbers in parentheses represent MFS International Growth's percentile rank in the universe of International Large Cap Growth Equity Mutual Funds. ©2016 PFM Asset Management LLC 51 Schroder Emerging Markets Equity Portfolio 5ithrode,:E.\lkt Egjnn .11 of dune 30,2016 iao ;Gc 80 .9G 0 P 19G E � x .J ]cc -16 0 .0.9 220 -39.9 -'_1.0 1 To 1 3 49.9 Date 1-^� '73 Tom^ SInB 501! 5017 5015 2011 •Sdvode E,EOd Eq;l.e(SEMN.1 i!(yt) 5+2(gE -]0.58(s11 -138(5 3.L`tas+ •Sd.adn3..wEgjwjSavll l 12A(37) 4AI(`3) -''2(56) !!.'i(:9) -I6.V(14) +S;SCIa.1(ae0 166(83) 641(.f 5) -L'OS(69, -156 15x) 3."8(16) ♦\iSCi DR.ed :111(56) -2-1(13) -_'01M le.'S(31 -:811361 Olyd- :2' 59) -10.31 .1.42 311 ;fedia -)L^0 -2515 -IT 18.80 .(9.5d 9-d-d SAeryeTmvor .4� Tnddy lvf-dm Dee"d.v Redo 'VpM Ile. Rad. Relay. Error Ratio RSq-d Sdvad-T-�t Eq 1-(SENM -1.38 15.06 -0.0! A.0! 0 91 0.00 000 3 35 0.00 096 SSSCI EU(ver) I]56 16:8 .002 0.00 1.00 0.00 0.4) 000 Y A 1.00 90 Day D.S.7 asvy lti0 0.0' 0.07 VA 00' 0.00 0.00 13316_6 0.02 0.10 Numbers in parentheses represent Schroder Emerging Markets Equity's percentile rank in the universe of Emerging Markets Equity Mutual Funds. ©2016 PFM Asset Management LLC 52 Nuveen Real Estate Securities Portfolio :�m eeu Real Estj As of June 30,2016 Peer Group Analysis-5 ! I 29.0. 36:0 .40 --._. 32.D 29.G 26D e j e - a 14.0 e0 j i 9.0 2.0 -d.0 ED 1 Ta Qaemr D. S4r Yem 1'un .015 2014 203 2012 .011 •.':m rmRerlEaJ(FARGCI 3.A GC; II%[301 2303(il) AAS(^) 12.7 t]') •X-Rn6&910'AACK 348(36) 31.7(16) 1.33(56) 1934. t24) a NISCIUSRMIT1ado4 b.61(12) 1356(4) 31.10(9) 1351(_01 1253 IS) a 119C1VSREI'uda 111(S) 3038(30) 24'(26) IA(29) 8.9(38) `.61 106' 11.09 12.9 IIAO N116. 2.66 29-i IC: 16.85 789 Rewrn Sleadard SI-P. Al ha Ben Im-mr Andre Inst I f.-.dm &�oared D.,Udea Rd. 9 Reda Rewe Ener Rada ' 2lurem AealEn;](FARC:� 1336 1471 0.93 031 097 0.14 -OnS 106 -0D' 10D USCI US REIT inch 1331 15.10 091 0.00 1.00 014 0.00 0.00 1A 1.00 90 Da US Ty-Ba 0.0' 0.05 \A 0 Dd 0 00 0.00 -13 80 1508 -0.91 0.07 Q- Numbers in parentheses represent Nuveen Real Estate Securities'percentile rank in the universe of Real Estate Sector Mutual Funds. 0 2016 PFM Asset Management LLC 53 Vanguard Short Term Corp Bond PO.f.. \-anguard Sh-7'm lnc;Adm as OL/une 30,2016 • 6.0 • 29 4.0 E ! _ • b s 2.0 • •'� Qf -06 1j 1 T. 1 3 5 -d.0 Il.artm D„e T- Y..r. Y- 2015 :017 2013 20ts :611 •4'msuud StrTm lne..gemll'FSlll 1.30(10) 3.•(3) 3255(I) 2.55(i) T(51 •l`mt SF.-T bw4dm(11SC.) 1.13(c) IN(31 1IS(-, 463(21) 2d'[I8) a H�bF HiC.G.S.Agarum±iYv O.f6(ST,: 1.66(iS;. 1.60 C-6? 1,f 13ff1 1.13158) aBimLe.Bac.C.3.Aeeegse l-3 Yv 0.66 f3_+)O.1!(36) 0.63(f0: 1.33(S� 1. (2$) 109 1.61 1.36 51� 02 0.(6 Cr 314 1.11 S-d.cd Sharpe T - &. Tr..klq Wormatloe D,".d.. Ratio `U� )km Redo Realm Error Redo R�ar.d "angucrd Sh-1'mIo.-;Adm(YFSIPO Nj 122 207 0.55 1-58 0.02 1.;5 0.6- 1 0.81 Bk.bg Basc.U S.Agp pt.1-3 Tv 1_26 0."0 1.-5 0.00 1.00 401 a 00 o A \A 100 90 Day US.T-BID 00' 00` NA 0.07 OAC OM -1.13 0.68 i.-7 0.13 Numbers in parentheses represent Vanguard Short Term Corporate Bond's percentile rank in the universe of U.S. Short Term Investment Grade Mutual Funds. ©2016 PFM Asset Management LLC 54 Nationwide HighMark Bond Fund Portfolio Nmi...,,idcHX1 Bond;Is(]11'JJX) A,ofJune 30,2016 P—G-upA-1,0, T%I U.S.11—d M-ko C.r.Fixed Income(AIF) 10 iok 3.0 6.0 • os .0.1 70 D- Y- Y— V— 2039 -014 4*13 2012 2011 • JB.d� TS �28,. 593�-) 5.54(�,� 3 JO(3S) 3-. 2—US, I -aL 05) LW C:) -IM 6.99 t3l) 6.61(53, %—WeMd 11�MX k'A',B_ 16�40,' 0 2) 421(7V, 7.34(11) S Agyq. 31 34) 00 04) 4.06(23) , .B�b�B—U S Agg— �!j(no iffl,(26) —Im(5 3.14 5 OB 3-7V 3.62 111�E— 0 W 5� .1W " 6S 111:4;6MMM� R.— S.."M shn. MpM R— Tee— T.,kbg W—fi— D�1-9-- Rd. R— E— Rab. sq--d Vadomcide:HMBoek18 (-,;WIN. 390 165 44 ODS 1� D -0 15 0% n15 L. - Rl.bg R—U.S AW�P` 4.06 .52 0.00 00 0.04 i!00 0 N A I 90 NY U&T—:2 0 0-1 DR3 N1 A 005 0,00 0.00 -3:96 2.61 Numbers in parentheses represent Nationwide HighMark Bond Fund's percentile rank in the universe of U.S. Broad Market Core Fixed Income Mutual Funds. 2016 PFM Asset Management LLC 55 PI MCO Total Return Portfolio PENICO:Tot Rtn:Inst As of June 30,2016 53 3.0 4! 16 17 10 0.9 JC T. D— S'ar Tan Tan 2 1 2013 20L, 2011 -C a PXCO,-T.RMJ=(PTM`t,) 2.C--'(78) .93(93) 437(-9) ib(63) 1.71(4.1) 0 PL%1CO.T.%2.,n(PTnM 0.!54 13, 4 (-8) �12, - ,(4-,) lem(1) 416 H1.b,0-US.A!-T- .1,21(64) 1-31(33) E.0)(I4? 41% (40) a Bbbcfi—U S A".S— 0.55(15) 5.9'C6) (5-1) t.11 C,9) 7,94(11) hied— 2y 3.14 30 407 554 .1.99 596 6.69 R— Saodard Sb q. Mph. Tr-y— Tr.", Inf—d- RAq—d Rd. 13- Rd. Fu— eror lbd. 1`12,1M.T.,RM (MM 349 �N 1.03 0.03 -0.54 162 -9.34 013 tum R_ S Aggmp� 4.06 52 XA 1.00 U 05 NA to 90 My U.S.T.—Y EM 001 0� 00 DD -3.96 2.61 0.07 Numbers in parentheses represent PIMCO Total Return's percentile rank in the universe of U.S. Broad Market Core Fixed Income Mutual Funds. 2016 PFM Asset Management LLC 56 Prudential Total Return Portfolio Pru Tot Rtn Bond;Q As of June 90,?016 Peer Group.A—IN SiS-UNI 12-S.BroadMarket Core FLied Income(NI) F 8.0 IJ G 7.1 61 � s.G C 4 08 10 Al 1 Q_ Daa V_ Yt.n Yaa lets 2014 101J - :Olt •Pm T.tRm BmA;Q(PIP.QX) 325 l7) 6.5'(2) 636(4) 5�(1) 5.:1(1) •Ptu T-F.m Be.3Q(PTRQX) am(q6J 735(4) .091 (13) 936(3) 7.95(s) +H1mbe.Bar.U S.ALn. '_'_7 160 537 (34) 6-CO(14) i°6(:i) 3.76(JO) •Bhobe.H—U.S.Agpig2 O.A(19) !g(].01 =.Q`(5:J ._'1 C9) 1.s(117) 11N.m .3J J.ls 5.08 3.A 3S �iedim -0A: 53t -IV 595 6W Sondard Sher TrAreTrau rma W. dm Helen De I.d.. Hatlue A sh. sea Ha)y Areae T.,=, ]U_ En.r Hae. A rm Pru rut Fun B..d;Q(PTRQS() 5_'8 3.22 157 0.601.15 0.04 1 19 7 37 0.98 0.87 Blebg.Barr.U S.AWesate 4.06 2.62 1 2 000 1.00 0 W 090 0 00 \A 1.00 90 D.r US T--y Bill 0.0- 0.05 \A 0.05 0.00 007 -396 2.61 0.07 Aeff— =01-)I Numbers in parentheses represent Prudential Total Return's percentile rank in the universe of U.S. Broad Market Core Fixed Income Mutual Funds. ©2016 PFM Asset Management LLC 57 PIMCO High Yield Portfolio PL\ICO:HSgh Yield;lnst As of June 30,2016 1430 -- -- 75.0 11.0 84 . 110 s 5 � s 50 00 ' -IA 30 -SPA 170 ! 3 55.0 Q' hale 1'a 1'rn Y'nn 5015 5014 :013 5015 :011 •PiGICOfliS}1Md'3vrtlPHl1:� 32(16, 6.:'(62) L (161 8.19(1') 5.&(73 •PNCO:H*Yrcld]esl(P1HI:O -1-59(`1) 33)(1.'3 5 "f'01 1]^(511400(: ♦Ho9blemB LSvrhUS Hish Tidd BB-B Rmed 1.9(32) 10(19)205(14! 1.59(51 5.8'(11 tMAM-MMI-K Hig4'i dd.BB BRmd ..96(33) 3.4X(10; 6]1(56) 14.''-131)5.430 Nei® 4.11 6 A 0.S 3.14 4.9 9tedlm 9! Lr, 662 ,..- i it Hence Sundard SWR•eeBen Tae- Aethke Taadiry letoerades R aced Dndon Rano `tea Rada Renta E-, Rada � PRICO:Righlield:3m(PHIII) 4.19 S.11 0.02 -0.0'. 093 004 -0.40 1033 A39 096 R.f.A .AILI-h i5SHifind&BB-B Rued 459 141 0.95 0.00 1.00 0.05 0.00 0.00 NIA 1.00 90 Dap USTnaam'Bin 0.0' OAS NA 006 0.00 0.00 -453 5.40 -0.85 00_ Pt�l Numbers in parentheses represent PIMCO High Yield's percentile rank in the universe of U.S. High Yield Bond Mutual Funds. ©2016 PFM Asset Management LLC 58 overview of Actuarial Data Actuarial Value of Assets: $33.7 million Actuarial Accrued Liability: $103.9 million Funded Ratio: 32% Normal Cost: $2.3 million Amortized Unfunded Liability: $5.5 million Annual Required Contribution: $7.9 million Benefit Payments: $4.9 million Discount Rate: 6.25% Medical Trend: 8.9% grading down to 5.0% in 2022+ Plan Participants: 259 active; 249 retirees Additional Information: Medical and dental benefits are lower for employees hired after 6/30/09. Source: Central Contra Costa Sanitary District Actuarial Valuation as of July 1, 2014 ©2016 PFM Asset Management LLC 59 CMAs Are Basis of Our Investment Strategy 2016 Intermediate (5-Year) and Long Term (30-Year) Capital Market Assumptions 40 (CMAs) , 6 30 a a� 20 c L Q� 103.3• / ® ■ I 0 - y 0 ■ Q -10 CL X W -20 . %.A Cl a`Ol J�a� Q��+c1 Garr a Qi Intermediate-Term Capital Market Assumptions(5-Year) Long-Term Capital Market Assumptions(30-Year) Ranges represent+/- 1 standard deviation from the expected return ©2016 PFM Asset Management LLC 60 2016 Capital Market Assumptions Intermediate: Long Term Projections Expected Return Expected Risk Expected Return Expected Risk US Equity 7.1% 17% 7.7% 16% International 7.3% 18% 7.7% 17% Developed Equity Emerging Markets 6.5% 24% 8.1% 20% Equity Core Bonds 1.5% 4% 5.5% 5% Intermediate 2.6% 6% 6.3% 7% Investment Grade Emerging Markets 4.4% 10% 7.3/° 10% Debt High Yield 5.7% 10% 6.8% 10% Bank Loans 4.5% 6% 5.2% 6% REITs 5.5% 12% 6.4% 12% Private Equity Real 6.8% 15% 7.7% 15% Estate Commodities 3.0% 16% 5.3% 16% Hedge Funds 6.5% 15% 7.4% 15% Private Equity 9.5% 25% 9.8% 25% Cash 1.0% 1% 3.3% 1% For the intermediate term (up to 5 years), our capital market assumptions derive from our assessment of current economic conditions, including corporate profits, balance sheets,etc, and current valuations for various asset classes.Our long-term assumptions are derived using an economic building block approach that projects economic and corporate profit growth taking into consideration the fundamental factors driving long-term real economic growth, expectations for inflation, productivity and labor force growth. 0 2016 PFM Asset Management LLC 61 2016 Capital Market Assumptions, Cont. Emergingons International Emerging Private us Developed Markets Core Investment Markets High Bank REITs EquityReal Commodities Hedge Private Cash Equity Bonds - . Loans Funds Equity Equity Equity ..- . . -. Estate US Equity 1 International Developed 0.8 1 Equity Emerging Markets 0.7 0.7 1 Equity Core Bonds 0.3 0.2 0.2 1 Intermediate Investment 0.3 0.2 0.2 0.9 1 Grade Corp Emerging Markets Debt 0.5 0.5 0.5 0.4 0.4 1 High Yield 0.7 0.5 0.5 0.4 0.4 0.4 1 Bank Loans 0.4 0.3 0.3 0.3 0.3 0.7 0.7 1 REITs 0.5 0.4 0.4 0.3 0.3 0.3 0.4 0.4 1 Private Equity Real 0.4 0.3 0.3 0.3 0.3 0.2 0.4 0.2 0.8 1 Estate Commodities 0.1 0.1 0.2 0.2 0.2 0.3 0.2 0.2 0.1 0.1 1 Hedge Funds 0.6 0.5 0.5 0.4 0.4 0.3 0.4 0.4 0.4 0.3 0.2 1 Private Equity 0.7 0.6 0.6 0.3 0.3 0.3 0.5 0.2 0.4 0.4 0.1 0.5 1 Cash 0.1 0.1 0.1 0.2 0.2 0.1 0.1 0.2 0.1 0.1 0.1 0.1 0.1 1 ©2016 PFM Asset Management LLC 62 Disclaimers • Any investment advice in this document is provided solely by PFM Asset Management LLC. PFM Asset Management LLC ("PFMAM") is an investment advisor registered under the Investment Advisers Act of 1940. PFM Advisors is a division of PFM Asset Management LLC. Public Financial Management Inc. is not providing and is not responsible for any investment advice herein. • This material is based on information obtained from sources generally believed to be reliable and available to the public, however PFM Asset Management LLC cannot guarantee its accuracy, completeness or suitability. This material is for general information purposes only and is not intended to provide specific advice or a specific recommendation. All statements as to what will or may happen under certain circumstances are based on assumptions, some but not all of which are noted in the presentation. Assumptions may or may not be proven correct as actual events occur, and results may depend on events outside of your or our control. Changes in assumptions may have a material effect on results. Past performance does not necessarily reflect and is not a guaranty of future results. The information contained in this presentation is not an offer to purchase or sell any securities. ©2016 PFM Asset Management LLC