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Home My WebLink About04.a. Review and provide input on Highmark Capital Management Government Accounting Standards Board (GASB 45), Other Post-Employment BenefitsPage 1 of 24 Item 4.a. Central Contra Costa Sanitary District November 21, 2017 TO: FINANCE COMMITTEE FROM: THEAVASSALLO, FINANCE MANAGER REVIEWED BY: PHIL LEIBER, DIRECTOR OF FINANCE AND ADMINISTRATION ROGER S. BAILEY, GENERAL MANAGER SUBJECT: REVIEW AND PROVIDE INPUT ON HIGHMARK CAPITAL MANAGEMENT GOVERNMENT ACCOUNTING STANDARDS BOARD (GASB 45), OTHER POST -EMPLOYMENT BENEFITS (OPEB), AND PENSION SUB -TRUST QUARTERLY REPORT (THI RD QUARTER 2017) - INVITED GUESTS: ANDREW BROWN, DIRECTOR, AND RANDY YURCHAK, HIGHMARK CAPITAL MANAGEMENT Attached for review is the most recent Highmark overview, and GASB 45 OPEB and Pension Sub -trust Report. Strategic Plan Tie -In GOAL THREE: Be a Fiscally Sound and Effective Water Sector Utility Strategy 1 - Conduct Long -Range Financial Planning ATTACHMENTS: 1. Highmark Overview of 3rd Quarter 2017 GASB 45 OPEB and Pension Sub -Trust Report 2. PARS: Highmark 3rd Quarter 2017 GASB 45 OPEB and Pension Sub -Trust Report November 21, 2017 Regular FINANCE Committee Meeting Agenda Packet - Page 165 of 219 Page 2 of 24 JHIGHMARK@ CAPITAL MANAGEMENT November 7, 2017 Thea Vassallo Finance Manager Central Contra Costa Sanitary District 5019 Imhoff Place Martinez, CA 94553-4392 RE: 3rd quarter 2017 OPEB/Pension Report Dear Thea, Storms, both natural and manmade, were not enough to slow down global equity markets during the third quarter. Solid corporate earnings results and encouraging economic data helped investors shrug off worries about the impact of major hurricane damage and escalating tensions between the U.S. and North Korea. Continued strength in a now globally synchronized growth cycle has reinforced equity markets' resilience to adverse events that did not pose an imminent threat to the seemingly solid global economic momentum. The domestic economy, though not growing as fast as during prior cycles, also shows little sign of slowing down. Accommodative financial conditions continue to perpetuate steady economic growth amidst a backdrop of low inflation and unemployment, creating an environment supportive of equity -risk taking. A lack of competitive returns offered by bonds and cash further fueled a `buy the dip' mentality that persisted in the stock market despite some absolute valuation measures indicating richness. Equity markets in the third quarter responded to this background environment by turning in solid gains. The S&P500 returned (+4.48%), the Russell Mid Cap Index gained (+3.47%), and small caps posted a +(5.67%) return, as measured by the Russell 2000 Index. Global equity markets posted equally strong returns in the third quarter with the MSCI- EAFE Index (+5.4%) and MSCI Emerging Market Index (+7.89%) representing areas of strength. Throughout 2017, global growth combined with the U.S. dollar weakness, has added to foreign investment gains. Emerging market have shown resilience in the face of political tensions rising from North Korea. The bond market has struggled to find such a definitive direction this year. Long-term bond yields fell for most of the quarter until an abrupt pivot in early September when investors were surprised by a healthier than expected headline inflation print. The Federal Reserve's (Fed) decision to officially implement its well -telegraphed plan to shrink its balance sheet, along with some hawkish comments from Chairwoman Yellen, have also added upward pressure to rates late in the quarter. As of the end of the quarter, the yield -to -maturity on the 10 -year U.S. Treasury Note (2.33%) settled just 11 basis points lower than where it started the year, but up 30 basis points from levels traded in early September. On the shorter end of the yield curve, interest rates found more upward directionality with the yield on the 2 -year Treasury Note (1.47%) breaking out to new cycle highs at the close of the quarter. Under this backdrop, fixed income as represented by the Bloomberg Barclays Aggregate Bond Index returned a modest (+0.85%) in the quarter. November 21, 2017 Regular FINANCE Committee Meeting Agenda Packet - Page 166 of 219 Page 3 of 24 By most measures, the global economy stands as strong as it has been since the beginning of the financial crisis. In concert with low real and nominal interest rates orchestrated by central banks, such economic tranquility is music to investor's ears and reflected by healthy asset price appreciation over the past 12 to 18 months. However, an environment of low interest rates, narrow credit spreads and elevated equity market valuations lowers future upside return potential from stocks. Past historical returns for major asset classes are unlikely to be matched or exceeded going forward, unless we see strong growth from corporate earnings. Because of this dynamic, corporate tax reform could be a supporting catalyst for the equity markets. By lowering the corporate tax rate, a significant boost to corporate earnings could be witnessed. With major central banks seeking to pull back monetary policy accommodation as the global economy firms up, investors must not become complacent. Although recent market behavior has heavily discounted the likelihood of such an outcome, hitting an air pocket in the economy is never out of the question when indications of a slowdown eventually emerge, seemingly insatiable appetites for equity market risk may change at a moment's notice. Therefore, it is especially important that we remind ourselves during periods of general calm that staying focused on long term goals and strategic asset allocation policy is the key to riding out any storm that could eventually rattle markets. It is this backdrop that has driven our hesitancy to overweight equities in 2017, and instead implementing a neutral asset allocation target of 50% to stocks for the OPEB Plan. Our fixed income target remains at 46.5% for OPEB, and cash is currently positioned at 3.5% of Plan assets. The Central Contra Costa Sanitary District OPEB Plan returned 2.70% for the quarter, gross of investment fees. The fixed income investments in the quarter posted a 0.88% return, which matched the Bloomberg Barclays Aggregate return of 0.85%. The U.S. Treasury curve flattened in the quarter with short and intermediate-term yields rising faster than longer dated maturities. The Aggregate Index sold off in September (-.48% September) after hawkish comments from Fed Chairwoman Yellen. Corporate spreads moved lower for both investment grade and non -investment grade issues. Manager performance was led by strong contributions from the Pimco Total Return Bond Fund (+1.5%,4 1h percentile in the Morningstar US Fund Intermediate Term Bond Universe) and the Prudential Total Return Bond Fund (+1.39%, 5t" percentile in the Morningstar US Fund Intermediate Term Bond Universe). The Plan's equities drove investment returns posting a 4.49%return. The overweight to international equities aided returns with the segment returning 6.52%, ahead of the MSCI-EAFE Index return of 5.40%. Small cap equity returns lagged the benchmark, returning +4.67. Small cap stocks should be aided by any significant corporate tax cut, which would benefit many smaller sized organizations. Mid cap and large cap equity returns returned (+2.74%) and (+3.90%) respectively. Enclosed in our report are the results for the Pension Plan. We received the first contribution on August 31s'. Our goal was to average into the market the initial contribution over a 2-3 month period of time. For the Pension Plan, we are currently targeting an asset allocation mix of 30% equities, 67% bonds, and 3% cash/money market. At the end of the 3rd quarter, we were invested 18% equities, 61% bonds, and 21 % cash. Andrew Brown November 21, 2017 Regular FINANCE Committee Meeting Agenda Packet - Page 167 of 219 PARS: Central Contra Costa Sanitary District OPEB and Pension Plan Third Quarter 2017 Presented by Andrew Brown, CFA JHIGHMARKO CAPITAL MANAGEMENT CCCSD — OPEB Asset Allocation Total Assets: $54,200,813 Period Ending 9-30-2017 3Q17 Return: 2.70% 1 Year Return: 9.71 % Inception -to -Date Return: 9.92% Inception Date: 4-1-2009 Fixed Income $ 24,804,768 45.76% Beginning Value Contributions Withdrawals Gain (Loss) Interest and Dividends Net Accrued Income Ending Market Value Cash 1 dA1 F9 $ 566,683.26 99,709,666.30 -63,548,899.10 8,099,476.59 9,373,908.54 83,198.87 ;) 54"et$4,uJ4.40 - Equity $ 27,904,423 51.48% * Ending Market Value differs from total market value on page 3 due to differences in reporting methodology. The above ending market value includes accruals. JHIGHMARK 0 PARS: Central Contra Costa Sanitary District 2 CAPITAL MANAGEMENT ASSET ALLOCATION — Central Contra Costa Sanitary District OPEB As of Third Quarter 2017 Current Asset Allocation Investment Vehicle Equity 51.48% Range: 40%-60% 27, 904, 423 Large Cap Core 11.08% IVV iShares S&P 500 Index Fund 6,004,305 Short -Term 4.00% VGIAX Vanguard Growth & Income Adm 2,170,412 Large Cap Value 6.08% IVE iShares S&P 500 Value Fund 3,297,406 Large Cap Growth 4.24% IVW iShares S&P 500 Growth Fund 2,296,298 Mid Cap Core 3.77% IWR iShares Russell MidCap Index Fund 2,042,868 Small Cap Value 3.84% UBVLX Undiscovered Mgrs Behavioral Value Inst 2,082,718 Small Cap Growth 3.84% PRJIX T. Rowe Price New Horizons Fund I 2,082,890 International Core 4.27% NWHMX Nationwide Bailard Intl Equities 1 2,313,168 International Value 2.70% DODFX Dodge & Cox International Stock Fund 1,462,744 International Growth 2.79% MGRDX MFS® International Growth Fund Class R6 1,513,160 Emerging Markets 3.50% HHHYX Hartford Schroders Emerging Mkts Eq Y 1,895,380 Real Estate 1.37% VNQ Vanguard REIT ETF 743,074 Fixed Income 45.76% Range: 40%-60% 24,804,768 16.65% Core Fixed Income Portfolio 9,023,022 Short -Term 6.48% VFSUX Vanguard Short -Term Corp Adm Fund 3,510,987 Intermediate -Term 10.80% PTTRX PIMCO Total Return Instl Fund 5,852,653 11.84% PTRQX Prudential Total Return Bond Q 6,415,244 Floating Rate Notes 0.01% EIFHX Eaton Vance Floating -Rate and Hi Inc 1 2,862 Cash 2.75% Range: 0%-20% 1,491,623 2.75% FGZXX First American Government Oblig Z 1,491,623 TOTAL 100.00% $54,200,813 JHIGHMARK@ PARS: Central Contra Costa Sanitary District 3 CAPITAL MANAGEMENT Selected Period Performance CCCSD -OPEB Period Ending: 09/30/2017 Account Inception: 4/2009 CCCSD OPEB Benchmark consists of: 26.5% of S&P 500, 5% Russell Midcap, 7.5% Russell 2000, 1.75% Wilshire REIT, 3.25% MSCI EM Free, 6% MSCI EAFE, 33.5% BC Aggregate, 10% ML 1-3 Yr US Corp/Govt, 1.5% ML US High Yield Mstr II, and 5% Citigroup 1 Month T -Bill Indexes., Returns are gross -of -fees unless otherwise noted. Returns for periods over one year are annualized. The information presented has been obtained from sources believed to be accurate and reliable. Past performance is not indicative of future returns. Securities are not FDIC insured, have no bank guarantee, and may lose value. JHIGHMARK® PARS: Central Contra Costa Sanitary District CAPITAL MANAGEMENT 4 Year Inception to Date to Date Sector 3 Months (9 Months) 1 Year 3 Years 5 Years (102 Months) Cash Equivalents .22 .50 .57 .27 .17 .17 Lipper Money Market Funds Index .20 .44 .51 .19 .12 .08 Fixed Income ex Funds Total Fixed Income .88 3.78 1.20 2.69 2.27 4.79 BC US Aggregate Bd Index .85 3.14 .07 2.71 2.06 4.04 Total Equities 4.49 16.00 19.02 8.96 12.27 15.17 Large Cap Funds 3.90 14.06 19.04 10.10 13.96 15.78 S&P 500 Composite Index 4.48 14.24 18.61 14.22 16.94 Mid Cap Funds 2.74 10.43 14.67 8.19 11.41 Russell Midcap Index 3.47 11.74 15.32 9.54 14.26 18.50 Small Cap Funds 4.67 14.72 20.21 12.47 15.57 19.48 Russell 2000 Index 5.67 10.94 20.74 12.18 13.79 17.58 International Equities 6.52 24.29 20.93 5.48 6.47 10.59 MSCI EAFE Index 5.40 19.96 19.10 5.04 8.38 10.77 MSCI EM Free Index 7.89 27.78 22.46 4.90 3.99 10.49 Total Managed Portfolio 2.70 9.60 9.71 5.85 7.10 9.92 CCCSD OPEB 2.74 8.46 9.16 6.16 7.27 9.51 Account Inception: 4/2009 CCCSD OPEB Benchmark consists of: 26.5% of S&P 500, 5% Russell Midcap, 7.5% Russell 2000, 1.75% Wilshire REIT, 3.25% MSCI EM Free, 6% MSCI EAFE, 33.5% BC Aggregate, 10% ML 1-3 Yr US Corp/Govt, 1.5% ML US High Yield Mstr II, and 5% Citigroup 1 Month T -Bill Indexes., Returns are gross -of -fees unless otherwise noted. Returns for periods over one year are annualized. The information presented has been obtained from sources believed to be accurate and reliable. Past performance is not indicative of future returns. Securities are not FDIC insured, have no bank guarantee, and may lose value. JHIGHMARK® PARS: Central Contra Costa Sanitary District CAPITAL MANAGEMENT 4 FIXED INCOME PORTFOLIO: Statistics As of Third Quarter 2017 JHIGHMARK@ CAPITAL MANAGEMENT nie ,engbeF 21, 2017 CCCSD BC Aggregate Bond OPEB Index Weighted Average Maturity 1 6.53 years 7.73 years Effective Duration 1 5.23 years 5.82 years Average Coupon 1 2.74% 3.06% Yield to Maturity 1 2.38% 2.49% Average Quality I Aa2 Aa2 PARS: Central Contra Costa Sanitary District 5 FIXED INCOME PORTFOLIO: Sectors As of Third Quarter 2017 40.0% 30.0% 20.0% 10.0% 0.0% ■ CCCSD OPEB ■ Barclays U.S. Aggregate Bond Index JHIGHMARK@ CAPITAL MANAGEMENT Cash Treasury 0.0% 41.9% 0.0% 37.8% Agency Corp Non -Corp MBS CMO ABS 0.0% 33.6% 0.0% 20.8% 0.0% 3.7% 1.8% 26.0% 5.1% 26.8% 0.0% 0.6% PARS: Central Contra Costa Sanitary District 0 CMBS 0.0% 1.9% [.9 FIXED INCOME PORTFOLIO: Effective Duration As of Third Quarter 2017 40% 35% 30% 25% 20% 15% 10% 5% 0% • CCCSD OPEB • BC Aggregate Bond Index JHIGHMARK@ CAPITAL MANAGEMENT e ,ergbeF22 , 2017 0-1 Yrs. 1-3 Yrs. 3-5 Yrs. 5-7 Yrs. 7-10 Yrs. 10+ Yrs. 2.77% 22.97% 35.62% 20.80% 7.67% 10.17% 0.32% 23.10% 36.98% 16.74% 8.23% 14.64% PARS: Central Contra Costa Sanitary District 7 Holdings - Reporting as of Trade Date Account: 6746055900- PARS/CCCSD 115P - OPEB As of: 30 -Sep -2017 Asset Type Asset Short Name Ticker Shares/Units Price Market Value Cash & Cash Equivalents CASH (37,926.1400) $1.0000 ($37,926.14) Cash & Cash Equivalents FIRSTAMERN GOVT OBLIG FD CLZ#3676 FGZXX 1,529,548.9200 $1.0000 $1,529,548.92 Corporate Obligations AMERICAN INTLGROUP 2.300% 7/16/19 AIG2319 60,000.0000 100.498% $60,298.80 Corporate Obligations AMEX CREDIT BD 2.250% 8/15/19 AEC2219 80,000.0000 100.831% $80,664.80 Corporate Obligations ANHEUSER-BUSCH INBEV 3.650% 2/01/26 A133626 100,000.0000 103.451% $103,451.00 Corporate Obligations AT&T INC NTS 4.125% 2/17/26 AIN4126 80,000.0000 102.609% $82,087.20 Corporate Obligations AT&T INC SR GLBL NT 4.450% 4/01/24 AIS4424 40,000.0000 106.104% $42,441.60 Corporate Obligations AVALONBAY CMNTYS INC 3.450% 6/01/25 ACI3425 80,000.0000 102.319% $81,855.20 Corporate Obligations BB&T CORP BDS 2.450% 1/15/20 BCB2420 80,000.0000 101.062% $80,849.60 Corporate Obligations BECTON DICKINSON BDS 2.133% 6/06/19 BDB2119 80,000.0000 100.275% $80,220.00 Corporate Obligations BK OF AMERICA CORP 4.000% 4/01/24 BOA4024 120,000.0000 105.645% $126,774.00 Corporate Obligations BK OF NOVA SCOTIA 2.700% 3/07/22 BON2722 80,000.0000 100.996% $80,796.80 Corporate Obligations BK OF NY MELLON MTN 2.050% 5/03/21 BON2021 80,000.0000 99.550% $79,640.00 Corporate Obligations BOSTON PPTIES LP NTS 4.125% 5/15/21 BPL4121 80,000.0000 105.742% $84,593.60 Corporate Obligations CAPITAL ONE BK USA 3.375% 2/15/23 COB3323 120,000.0000 101.483% $121,779.60 Corporate Obligations CC CCIT 2014-A1 2.880% 1/23/23 CC22823A 125,000.0000 102.759% $128,448.75 Corporate Obligations CDN IMPERIAL BK 2.550% 6/16/22 CIB2522 80,000.0000 100.138% $80,110.40 Corporate Obligations CITIGROUP INC 3.200% 10/21/26 CI33226 120,000.0000 98.421% $118,105.20 Corporate Obligations CVS CAREMARK CORP NT 2.750% 12/01/22 CCC2722 80,000.0000 100.230% $80,184.00 Corporate Obligations DOW CHEM CO NTS 4.375% 11/15/42 DCC4342 80,000.0000 101.697% $81,357.60 Corporate Obligations ECO LAB INC SR NT 2.375% 8/10/22 EIS2322 80,000.0000 99.890% $79,912.00 Corporate Obligations EL PASO ENERGY CORP 7.800% 8/01/31 EP31 80,000.0000 126.818% $101,454.40 Corporate Obligations ENBRIDGE INC 2.900% 7/15/22 E122922 80,000.0000 100.585% $80,468.00 Corporate Obligations FORD MTR CO NTS 7.450% 7/16/31 F31 80,000.0000 129.510% $103,608.00 Corporate Obligations FORDO 2015-C A3 1.410% 2/15/20 F2A142013 85,287.8100 99.959% $85,252.84 Corporate Obligations GENERAL MTRS CO NT 3.500%10/02/18 GM18 80,000.0000 101.624% $81,299.20 JHIGHMARK@ PARS: Central Contra Costa Sanitary District s CAPITAL MANAGEMENT Holdings - Reporting as of Trade Date Account: 6746055900- PARS/CCCSD 115P - OPEB As of: 30 -Sep -2017 Asset Type Asset Short Name Ticker Shares/Units Price Market Value Corporate Obligations HEWLETT PACKARD CO NT4.375% 9/15/21 HPC4321 80,000.0000 106.220% $84,976.00 Corporate Obligations JOHNSON &JOHNSON 3.625% 3/03/37 80,000.0000 103.915% $83,132.00 Corporate Obligations JPMORGAN CHASE NTS 3.200% 1/25/23 JCN3223 120,000.0000 102.558% $123,069.60 Corporate Obligations MACY'S RETAIL HLDGS 4.375% 9/01/23 MRH4323 80,000.0000 100.447% $80,357.60 Corporate Obligations PETRO -CDA NT 6.800% 5/15/38 SU/38 50,000.0000 133.878% $66,939.00 Corporate Obligations QUEST DIAGNOSTICS BD 3.500% 3/30/25 QDB3525 80,000.0000 101.935% $81,548.00 Corporate Obligations ROYAL BK SCOTLAND GR 3.875% 9/12/23 RBS23B 80,000.0000 102.328% $81,862.40 Corporate Obligations SHIRE ACQINV IRELAND2.875% 9/23/23 SA12823 80,000.0000 99.378% $79,502.40 Corporate Obligations TAOT 2016-D A3 1.230% 10/15/20 T2A1220A 125,000.0000 99.420% $124,275.00 Corporate Obligations TIME WRNR ENTMT DEB 8.375% 3/15/23 TWE8323 80,000.0000 124.260% $99,408.00 Corporate Obligations TRANSCONTINENTAL NT 6.050% 6/15/18 WMB/18 80,000.0000 102.723% $82,178.40 Corporate Obligations VERIZON COMM SR NT 4.125% 3/16/27 VC44127 60,000.0000 104.341% $62,604.60 Corporate Obligations VERIZON COMMUNICATIO 5.250% 3/16/37 60,000.0000 109.664% $65,798.40 Corporate Obligations WELLS FARGO & CO NEW 3.000% 10/23/26 WFC3026A 120,000.0000 97.785% $117,342.00 Funds DODGE & COX INTLSTOCK FD(CLSD)#1048 DODFX 31,348.9860 $46.6600 $1,462,743.69 Funds EATON VANCE FLTG RT& HI INCM 1 #904 EIFHX 322.6550 $8.8700 $2,861.95 Funds HARTFORDSCHRODR MKTS EQCIL Y#1842 HHHYX 120,647.9740 $15.7100 $1,895,379.67 Funds ISHARES RUSSELL MIDCAP ETF IWR 10,362.0000 $197.1500 $2,042,868.30 Funds ISHARES S&P 500 GROWTH ETF IVW 16,011.0000 $143.4200 $2,296,297.62 Funds ISHARES S&P 500 VALUE ETF IVE 30,557.0000 $107.9100 $3,297,405.87 Funds ISHARES TR CORE S&P500 ETF IVV 23,739.0000 $252.9300 $6,004,305.27 Funds MFS INTERNATIONAL GROWTH R6#4805 MGRDX 46,217.4640 $32.7400 $1,513,159.77 Funds NATIONWIDE BAILARD INTL EQ 1 #6071 NWHMX 264,362.0890 $8.7500 $2,313,168.28 Funds PI MCO TOTAL RETURN INSTL #35 PTTRX 567,117.5690 $10.3200 $5,852,653.31 Funds PRUDENTIAL TOTAL RTRN BD CL Q PTRQX 440,910.2380 $14.5500 $6,415,243.96 Funds T ROWE PRICE NEW HORIZONS FD #532 PRJIX 38,190.1390 $54.5400 $2,082,890.18 Funds UNDISCOVERED MGRS BEHAVRLVAL 11368 UBVLX 30,018.9990 $69.3800 $2,082,718.15 JHIGHMARK@ PARS: Central Contra Costa Sanitary District 9 CAPITAL MANAGEMENT Asset Type Funds Funds Funds Government Obligations Government Obligations Government Obligations Government Obligations Government Obligations Government Obligations Government Obligations Government Obligations Government Obligations Government Obligations Government Obligations Government Obligations Government Obligations Government Obligations Government Obligations Subtotals Cash & Cash Equivalents Funds Government Obligations Corporate Obligations Total Holdings - Reporting as of Trade Date Account: 6746055900- PARS/CCCSD 115P - OPEB As of: 30 -Sep -2017 Asset Short Name Ticker Shares/Units Price Market Value VANGUARD GRO & INC ADMIRAL SHRS #593 VGIAX 28,584.3800 $75.9300 $2,170,411.97 VNGRD INDEX TR REIT VIPER SHS VNQ 8,943.0000 $83.0900 $743,073.87 VNGRDSTTERMINVMTGRADE ADM #539 VFSUX 328,436.5780 $10.6900 $3,510,987.02 FGLMC#E03097 2.500% 3/01/27 E03097F 255,404.2600 101.454% $259,117.84 FGLMC #G60453 3.000% 1/01/46 G60453F 246,816.8900 100.845% $248,901.51 FGLMC#130401 3.000% 1/01/30 J30401F 242,197.4500 103.033% $249,543.30 FHLMC G15252 3.0000% 12/1/2029 G15252F 193,487.0200 103.035% $199,359.35 FN MA AL9376 3.0000% 8/1/2031 AL9376A 194,561.8900 102.920% $200,243.10 FN MA AS7729 3.0000% 8/1/2046 AS7729A 271,908.3900 100.560% $273,431.08 F N MA BC1486 3.0000% 8/1/2046 BC1486A 242,836.5500 100.560% $244,196.43 FNMA MA2779 2.0000% 10/1/2026 MA2779A 201,597.1300 100.647% $202,901.46 US TREAS BDS 3.625% 8/15/43 UTB3643 540,000.0000 114.758% $619,693.20 US TREAS NTS 1.250% 12/15/18 UTN 1218C 1,000,000.0000 99.824% $998,240.00 US TREAS NTS 1.500% 11/30/19 UTN 1519E 650,000.0000 99.984% $649,896.00 US TREAS NTS 1.625% 4/30/23 UTN1623 395,000.0000 97.930% $386,823.50 US TREAS NTS 1.875% 1/31/22 UTN0022B 275,000.0000 100.051% $275,140.25 US TREAS NTS 2.000% 2/15/25 UTN 2025 150,000.0000 98.633% $147,949.50 US TREAS NTS 2.125% 8/15/21 UTN2521 700,000.0000 101.277% $708,939.00 $1,491,622.78 $43,686,168.88 $5,664,375.52 $3,358,645.99 $54,200,813.17 JHIGHMARK@ PARS: Central Contra Costa Sanitary District 10 CAPITAL MANAGEMENT CCCSD — Pension Asset Allocation Total Assets: $3,355,888 Period Ending 9-30-2017 1 Month Return: 0.21% Inception -to -Date Return: Inception Date: 9-1-2017 0.21% Cash $ 697,79 20.79% Beginning Value Contributions Withdrawals Gain (Loss) Interest and Dividends Net Accrued Income Ending Market Value Equity $ 606,086 1s 06% $ 2,052,003 61.15% $ 0.00 3,359,000.00 -207.25 3,566.63 -6,471.21 10,032.29 $ 3,365,920.46* * Ending Market Value differs from total market value on page 12 due to differences in reporting methodology. The above ending market value includes cruals. a HIGHMARK® PARS: Central Contra Costa Sanitary District CAPITAL MANAGEMENT 11 ASSET ALLOCATION — Central Contra Costa Sanitary District Pension As of Third Quarter 2017 Current Asset Allocation Investment Vehicle Equity 18.06% Range: 20%-40% 606,086 Large Cap Core 2.02% IVV iShares Core S&P 500 67,785 1.03% VGIAX Vanguard Growth & Income Adm 34,428 Large Cap Value 2.52% IVE iShares S&P 500 Value 84,494 Large Cap Growth 1.41% IVW iShares S&P 500 Growth 47,472 Mid Cap Core 1.51% IWR iShares Russell MidCap Index Fund 50,668 Small Cap Value 1.52% UBVLX Undiscovered Mgrs Behavioral Value Inst 51,055 Small Cap Growth 1.53% PRJIX T. Rowe Price New Horizons Fund I 51,246 International Core 2.03% NWHMX Nationwide Bailard Intl Equities I 68,128 International Value 1.76% DODFX Dodge & Cox International Stock Fund 59,115 International Growth 0.51% MGRDX MFS® International Growth Fund Class R6 17,099 Emerging Markets 1.41% HHHYX Hartford Schroders Emerging Mkts Eq Y 47,426 Real Estate 0.81% VNQ Vanguard REIT ETF 27,170 Fixed Income 61.15% Range: 50%-80% 2,052,003 45.69% Core Fixed Income Portfolio 1,533,145 Short -Term 2.50% VFSUX Vanguard Short -Term Corp Adm Fund 84,034 Intermediate -Term 8.97% AGG iShares Barclays Aggregate Bond Fund 300,934 2.00% PTTRX PIMCO Total Return Instl Fund 66,985 1.99% PTRQX Prudential Total Return Bond Q 66,904 Cash 20.79% Range: 0%-20% 697,799 20.79% FGZXX First American Government Oblig Z 697,799 TOTAL 100.00% $3,355,888 JHIGHMARK@ PARS: Central Contra Costa Sanitary District 12 CAPITAL MANAGEMENT Selected Period Performance PARS/CCCSD 115P - PENSION Account 6746055901 Period Ending: 09/30/2017 Performance Inception: 09/2017 CCCSD Pension Benchmark consists of: 15.5% of S&P 500, 3% Russell Midcap, 4.5% Russell 2000, 1% Wilshire REIT, 2% MSCI EM Free, 4% MSCI EAFE, 49.25% BC Aggregate, 14% ML 1-3 Yr US Corp/Govt, 1.75% ML US High Yield Mstr II, and 5% Citigroup 1 Month T -Bill Indexes. Returns are gross -of -fees unless otherwise noted. Returns for periods over one year are annualized. The information presented has been obtained from sources believed to be accurate and reliable. Past performance is not indicative of future returns. Securities are not FDIC insured, have no bank guarantee, and may lose value. JHIGHMARK 0 PARS: Central Contra Costa Sanitary District CAPITAL MANAGEMENT NevengbeF 21, 2017 RegHlaF FINANGE GenqFnittee Meeting Agenda Peeket Page 189 of 219 13 Since Inception Sector (1 Month) Cash Equivalents .07 Lipper Money Market Funds Index .07 Fixed Income ex Funds -.29 Total Fixed Income -.40 BC US Aggregate Bd Index -.48 Total Equities 2.10 Large Cap Funds 1.83 S&P 500 Composite Index 2.06 Mid Cap Funds 2.11 Russell Midcap Index 2.77 Small Cap Funds 4.41 Russell 2000 Index 6.24 International Equities 1.66 MSCI EAFE Index 2.49 MSCI EM Free Index -.40 Real Estate - ETFs / Sctr Fds -.62 Wilshire REIT Index -.08 Total Managed Portfolio .21 CCCSD Pension .54 Performance Inception: 09/2017 CCCSD Pension Benchmark consists of: 15.5% of S&P 500, 3% Russell Midcap, 4.5% Russell 2000, 1% Wilshire REIT, 2% MSCI EM Free, 4% MSCI EAFE, 49.25% BC Aggregate, 14% ML 1-3 Yr US Corp/Govt, 1.75% ML US High Yield Mstr II, and 5% Citigroup 1 Month T -Bill Indexes. Returns are gross -of -fees unless otherwise noted. Returns for periods over one year are annualized. The information presented has been obtained from sources believed to be accurate and reliable. Past performance is not indicative of future returns. Securities are not FDIC insured, have no bank guarantee, and may lose value. JHIGHMARK 0 PARS: Central Contra Costa Sanitary District CAPITAL MANAGEMENT NevengbeF 21, 2017 RegHlaF FINANGE GenqFnittee Meeting Agenda Peeket Page 189 of 219 13 FIXED INCOME PORTFOLIO: Statistics As of Third Quarter 2017 JHIGHMARK@ CAPITAL MANAGEMENT nie ,engbeF 21, 2017 CCCSD BC Aggregate Bond Pension Index Weighted Average Maturity 1 6.59 years 7.73 years Effective Duration 1 5.21 years 5.82 years Average Coupon 1 2.97% 3.06% Yield to Maturity 1 2.52% 2.49% Average Quality I Aa3 Aa2 PARS: Central Contra Costa Sanitary District 14 FIXED INCOME PORTFOLIO: Sectors As of Third Quarter 2017 40.0% 30.0% 20.0% 10.0% 0.0% ■ CCCSD Pension ■ Barclays U.S. Aggregate Bond Index JHIGHMARK@ CAPITAL MANAGEMENT No m Cash Treasury Agency 0.0% 27.7% 0.0% 0.0% 37.8% 1.8% 11 111 1. 0 Corp Non -Corp MBS CMO ABS CMBS 44.8% 0.0% 23.0% 0.0% 4.5% 0.0% 26.0% 5.1% 26.8% 0.0% 0.6% 1.9% PARS: Central Contra Costa Sanitary District 15 FIXED INCOME PORTFOLIO: Effective Duration As of Third Quarter 2017 40% 35% 30% 25% 20% 15% 10% 5% 0% • CCCSD Pension • BC Aggregate Bond Index JHIGHMARK@ CAPITAL MANAGEMENT e ,engbeF 21, 2017 0-1 Yrs. 1-3 Yrs. 3-5 Yrs. 5-7 Yrs. 7-10 Yrs. 10+ Yrs. 3.90% 25.41% 31.31% 19.85% 9.28% 10.26% 0.32% 23.10% 36.98% 16.74% 8.23% 14.64% PARS: Central Contra Costa Sanitary District 16 Holdings - Reporting as of Trade Date Account: 6746055901- PARS/CCCSD 115P - PENSION As of: 30 -Sep -2017 Asset Type Asset Short Name Ticker Shares/Units Price Market Value Cash &Cash Equivalents FIRST AMERN GOVT OBLIG FD CIL Z#3676 FGZXX 697,799.0500 $1.0000 $697,799.05 Corporate Obligations AMERICAN INTL GROUP 2.300% 7/16/19 AIG2319 15,000.0000 100.498% $15,074.70 Corporate Obligations AMEX CREDIT BD 2.250% 8/15/19 AEC2219 15,000.0000 100.831% $15,124.65 Corporate Obligations ANHEUSER-BUSCH INBEV 3.650% 2/01/26 A133626 15,000.0000 103.451% $15,517.65 Corporate Obligations AT&T INC NTS 4.125% 2/17/26 AIN4126 15,000.0000 102.609% $15,391.35 Corporate Obligations AT&T INC SR GLBL NT 4.450% 4/01/24 AIS4424 10,000.0000 106.104% $10,610.40 Corporate Obligations AVALONBAYCMNTYS INC3.450% 6/01/25 AC13425 15,000.0000 102.319% $15,347.85 Corporate Obligations BB&T CORP BIDS 2.450% 1/15/20 BCB2420 15,000.0000 101.062% $15,159.30 Corporate Obligations BECTON DICKINSON BDS 2.133% 6/06/19 BDB2119 20,000.0000 100.275% $20,055.00 Corporate Obligations BK OF AMERICA CORP 4.000% 4/01/24 BOA4024 20,000.0000 105.645% $21,129.00 Corporate Obligations BK OF NOVA SCOTIA 2.700% 3/07/22 BON2722 20,000.0000 100.996% $20,199.20 Corporate Obligations BK OF NY MELLON MTN 2.050% 5/03/21 BON2021 20,000.0000 99.550% $19,910.00 Corporate Obligations BOSTON PPTIES LP NTS 4.125% 5/15/21 BPL4121 20,000.0000 105.742% $21,148.40 Corporate Obligations CAPITAL ONE BK USA 3.375% 2/15/23 COB3323 25,000.0000 101.483% $25,370.75 Corporate Obligations CCCCIT2014-A1 2.880% 1/23/23 CC22823A 25,000.0000 102.759% $25,689.75 Corporate Obligations CDN IMPERIAL BK 2.550% 6/16/22 CIB2522 20,000.0000 100.138% $20,027.60 Corporate Obligations CITIGROUP INC 3.200% 10/21/26 C133226 25,000.0000 98.421% $24,605.25 Corporate Obligations CVS CAREMARK CORP NT 2.750% 12/01/22 CCC2722 20,000.0000 100.230% $20,046.00 Corporate Obligations DOW CHEM CO NTS 4.375%11/15/42 DCC4342 20,000.0000 101.697% $20,339.40 Corporate Obligations ECOLAB INC SR NT 2.375% 8/10/22 EIS2322 20,000.0000 99.890% $19,978.00 Corporate Obligations EL PASO ENERGY CORP 7.800% 8/01/31 EP31 20,000.0000 126.818% $25,363.60 Corporate Obligations ENBRIDGE INC 2.900% 7/15/22 E122922 20,000.0000 100.585% $20,117.00 Corporate Obligations FORD MTR CO NTS 7.450% 7/16/31 F31 20,000.0000 129.510% $25,902.00 Corporate Obligations FORDO 2015-C A3 1.410% 2/15/20 F2A1420B 18,540.8300 99.959% $18,533.23 Corporate Obligations GENERAL MTRS CO NT 3.500%10/02/18 GM18 20,000.0000 101.624% $20,324.80 Corporate Obligations HEWLETT PACKARD CO NT4.375% 9/15/21 HPC4321 20,000.0000 106.220% $21,244.00 JHIGHMARK@ PARS: Central Contra Costa Sanitary District 17 CAPITAL MANAGEMENT Holdings - Reporting as of Trade Date Account: 6746055901- PARS/CCCSD 115P - PENSION As of: 30 -Sep -2017 Asset Type Asset Short Name Ticker Shares/Units Price Market Value Corporate Obligations JOHNSON &JOHNSON 3.625% 3/03/37 20,000.0000 103.915% $20,783.00 Corporate Obligations JPMORGAN CHASE NTS 3.200% 1/25/23 JCN3223 25,000.0000 102.558% $25,639.50 Corporate Obligations MACY'S RETAIL HLDGS 4.375% 9/01/23 MRH4323 20,000.0000 100.447% $20,089.40 Corporate Obligations PETRO -CDA NT 6.800% 5/15/38 SU/38 10,000.0000 133.878% $13,387.80 Corporate Obligations QUEST DIAGNOSTICS BD 3.500% 3/30/25 QDB3525 20,000.0000 101.935% $20,387.00 Corporate Obligations ROYAL BK SCOTLAND GR 3.875% 9/12/23 RBS23B 20,000.0000 102.328% $20,465.60 Corporate Obligations SHIREACQINV IRELAND2.875% 9/23/23 SA12823 20,000.0000 99.378% $19,875.60 Corporate Obligations TAOT2016-DA3 1.230% 10/15/20 T2A1220A 25,000.0000 99.420% $24,855.00 Corporate Obligations TIME WRNR ENTMT DEB 8.375% 3/15/23 TWE8323 20,000.0000 124.260% $24,852.00 Corporate Obligations TRANSCONTINENTAL NIT 6.050% 6/15/18 WMB/18 20,000.0000 102.723% $20,544.60 Corporate Obligations VERIZON COMM SR NT 4.125% 3/16/27 VC44127 10,000.0000 104.341% $10,434.10 Corporate Obligations VERIZON COMMUNICATIO 5.250% 3/16/37 15,000.0000 109.664% $16,449.60 Corporate Obligations WELLS FARGO & CO NEW 3.000% 10/23/26 WFC3026A 25,000.0000 97.785% $24,446.25 Funds DODGE & COX INTI -STOCK FD(CLSD)#1048 DODFX 1,266.9320 $46.6600 $59,115.05 Funds HARTFORD SCHRODR MKTS EQ CL Y #1842 HHHYX 3,018.8700 $15.7100 $47,426.45 Funds ISHARES CORE US AGGREGATE BD ETF AGG 2,746.0000 $109.5900 $300,934.14 Funds ISHARES RUSSELL MIDCAP ETF IWR 257.0000 $197.1500 $50,667.55 Funds ISHARES S&P 500 GROWTH ETF IVW 331.0000 $143.4200 $47,472.02 Funds ISHARES S&P 500 VALUE ETF IVE 783.0000 $107.9100 $84,493.53 Funds ISHARES TR CORE S&P500 ETF IVV 268.0000 $252.9300 $67,785.24 Funds MFS INTERNATIONAL GROWTH R6#4805 MGRDX 522.2570 $32.7400 $17,098.69 Funds NATIONWIDE BAILARD INTL EQ 1 #6071 NWHMX 7,786.0390 $8.7500 $68,127.84 Funds PI MCO TOTAL RETURN INSTL #35 PTTRX 6,490.8200 $10.3200 $66,985.26 Funds PRUDENTIAL TOTAL RTRN BD CL Q PTRQX 4,598.2200 $14.5500 $66,904.10 Funds T ROWE PRICE NEW HORIZONS FD #532 PRJIX 939.6090 $54.5400 $51,246.27 Funds UNDISCOVERED MGRS BEHAVRLVAL 11368 UBVLX 735.8760 $69.3800 $51,055.08 Funds VANGUARD GRO & INC ADMIRAL SHRS #593 VGIAX 453.4220 $75.9300 $34,428.33 JHIGHMARK@ PARS: Central Contra Costa Sanitary District 18 CAPITAL MANAGEMENT Asset Type Funds Funds Government Obligations Government Obligations Government Obligations Government Obligations Government Obligations Government Obligations Government Obligations Government Obligations Government Obligations Government Obligations Government Obligations Government Obligations Government Obligations Subtotals Cash & Cash Equivalents Funds Government Obligations Corporate Obligations Total Holdings - Reporting as of Trade Date Account: 6746055901- PARS/CCCSD 115P - PENSION As of: 30 -Sep -2017 Asset Short Name Ticker Shares/Units Price Market Value VNGRD INDEX TR REITVIPER SHS VNQ 327.0000 $83.0900 $27,170.43 VNGRDSTTERM INVMTGRADE ADM #539 VFSUX 7,860.9780 $10.6900 $84,033.85 FGLMC#E03097 2.500% 3/01/27 E03097F 42,567.3800 101.454% $43,186.31 FGLMC #G60453 3.000% 1/01/46 G60453F 42,554.6400 100.845% $42,914.06 FGLMC #130401 3.000% 1/01/30 J30401F 38,059.6000 103.033% $39,213.95 FHLMC G15252 3.0000% 12/1/2029 G15252F 44,128.6200 103.035% $45,467.92 FN MA A L9376 3.0000% 8/1/2031 A L9376A 44, 218.6100 102.920% $45,509.79 FNMA AS7729 3.0000% 8/1/2046 AS7729A 46,880.7600 100.560% $47,143.29 F N MA BC1486 3.0000% 8/1/2046 BC1486A 46,699.3400 100.560% $46,960.86 FNMA MA2779 2.0000% 10/1/2026 MA2779A 42,893.0100 100.647% $43,170.53 US TREAS BDS 3.625% 8/15/43 UTB3643 75,000.0000 114.758% $86,068.50 US TREAS NTS 1.250% 12/15/18 UTN1218C 130,000.0000 99.824% $129,771.20 US TREAS NTS 1.500% 11/30/19 UTN1519E 170,000.0000 99.984% $169,972.80 USTREAS NITS 1.625% 4/30/23 UTN1623 15,000.0000 97.930% $14,689.50 US TREAS NTS 2.000% 2/15/25 UTN2025 25,000.0000 98.633% $24,658.25 $697,799.05 $1,124,943.83 $778,726.96 $754,418.33 $3,355,888.17 JHIGHMARK@ PARS: Central Contra Costa Sanitary District 19 CAPITAL MANAGEMENT CENTRAL CONTRA COSTA SANITARY DISTRICT For Period Ending September 30, 2017 Data Source: Morningstar, SEI Investments Returns less than one year are not annualized. Past performance is not indicative of future returns. The information presented has been obtained from sources believed accurate and reliable. Securities are not FDIC insured, have no bank guarantee and may lose value. JHIGHMARK@ CAPITAL MANAGEMENT nie ,engberz`1, 2017 PARS: Central Contra Costa Sanitary District 20 3 -Month YTD 1 -Year 3 -Ye a r 5 -Year Fund Name Inception Return Rank Return Rank Return Rank Return Rank Return Rank iShares Core S&P 500 (4/17) 4.47 38 14.21 27 18.57 36 10.76 14 14.17 19 iShares S&P 500 Value ETF (4/17) 3.45 66 8.39 66 16.28 52 8.78 33 13.02 33 Vanguard Growth & Income Adm (12/16) 4.89 20 13.21 55 17.81 56 10.74 15 14.40 12 iShares S&P 500 Growth ETF (4/17) 5.24 52 19.16 54 19.69 51 12.05 28 14.79 28 Idx: S&P 500 4.48 -- 14.24 -- 18.61 -- 10.81 -- 14.22 -- MID CAP EQUITY FUNDS iShares Russell Mid -Cap (3/16) 3.44 52 11.60 31 15.14 63 9.36 40 14.07 31 Idx: Russell Mid Cap 3.47 -- 11.74 -- 15.32 -- 9.54 -- 14.26 -- SMALL CAP EQUITY Undiscovered Managers Behavioral Val L (9/16) 4.54 57 7.47 16 16.28 69 11.89 19 15.70 2 Idx: Russell 2000 Value 5.11 -- 5.68 -- 20.55 -- 12.12 -- 13.27 T. Rowe Price New Horizons Fund 1 6.71 26 25.81 6 24.88 19 14.95 11 17.38 4 Idx: Russell 2000 Growth 6.22 -- 16.81 -- 20.98 -- 12.17 -- 14.28 INTERNATIONAL-- • Dodge & Cox International Stock 6.94 10 22.47 23 26.58 2 3.87 79 10.13 8 Nationwide Bailard Intl Equities 1 5.79 37 20.15 60 16.71 70 5.50 39 8.81 22 MFS® International Growth Fund Class R6 4.87 76 25.20 46 18.25 46 8.13 22 8.13 65 Idx: MSCI EAFE 5.40 -- 19.96 -- 19.10 -- 5.04 -- 8.38 -- Hartford Schroders Emerging Mkts Eq Y 9.32 22 31.91 19 25.41 16 6.71 14 4.91 32 Idx: MSCI Emerging Markets 7.89 -- 27.78 -- 22.46 -- 4.90 -- 3.99 Data Source: Morningstar, SEI Investments Returns less than one year are not annualized. Past performance is not indicative of future returns. The information presented has been obtained from sources believed accurate and reliable. Securities are not FDIC insured, have no bank guarantee and may lose value. JHIGHMARK@ CAPITAL MANAGEMENT nie ,engberz`1, 2017 PARS: Central Contra Costa Sanitary District 20 CENTRAL CONTRA COSTA SANITARY DISTRICT For Period Ending September 30, 2017 JHIGHMARK@ CAPITAL MANAGEMENT nie ,engbeF 21, 2017 PARS: Central Contra Costa Sanitary District 21 3 -Month YTD 1 -Year 3 -Ye a r 5 -Year Fund Name Inception Return Rank Return Rank Return Rank Return Rank Return Rank Vanguard REIT ETF (4/17) 0.90 39 3.51 47 0.43 43 9.54 27 9.48 21 Idx: Wilshire REIT Index 0.61 -- 2.44 -- 0.10 -- 9.65 -- 9.51 BOND FUNDS d� Pimco Total Return Inst'I 1.50 4 5.01 6 2.43 10 3.22 15 2.43 33 Prudential Total Return Bond Q (5/16) 1.38 5 5.53 3 2.35 11 4.11 3 3.64 3 Vanguard Short -Term Investment -Grade Adm 0.60 26 2.18 20 1.34 38 2.12 15 1.93 11 iShares Core US Aggregate Bond ETF (9/17) 0.84 52 3.16 58 0.06 72 2.68 42 2.02 56 Idx: BarCap US Aggregate Bond 0.85 -- 3.14 -- 0.07 -- 2.71 -- 2.06 -- Eaton Vance Floating -Rate & Hi Inc Inst (12/16) 0.93 49 3.66 5 6.23 8 4.29 5 4.26 14 Data Source: Morningstar, SEI Investments Returns less than one year are not annualized. Past performance is not indicative of future returns. The information presented has been obtained from sources believed accurate and reliable. Securities are not FDIC insured, have no bank guarantee and may lose value. JHIGHMARK@ CAPITAL MANAGEMENT nie ,engbeF 21, 2017 PARS: Central Contra Costa Sanitary District 21