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New Jersey State Investment Council

Agenda

Date: Thursday, October 13, 2011

Location: N.J. State Museum Auditorium 205 West State Street, Trenton, NJ 08608

10:00 AM: Regular Meeting, Open to Public

AGENDA FOR REGULAR MEETING

Roll Call and Notice of Meeting

1. Approval of Minutes for Regular Meeting held July 21, 2011

2. Election of Chair and Vice Chair

3. Appointment of members to Executive Committee, Audit Committee and IPC Committee

4. Directors Report/Update

5. Private Equity/Bank Loan Fund Investments

a. Sterling Capital Partners

b. AnaCap

c. TPG

d. Tenaya VI

6. Real Estate Investments

a. Wheelock

7. Hedge Fund Investments

a. Value Act Capital Partners II

b. Brevan Howard Master Fund

c. Elliott Associates

d. Winton Futures Fund (add-on)

e. Centerbridge (add-on)

f. Asian Century Quest Fund (add-on)

8. Fiscal 2011 Proxy Voting Summary

9. Report from Audit Committee on fiscal 2011 audit

10. Report from the State Treasurer

11. Opportunity for Public Comment

ADJOURNMENT

New Jersey State Investment Council

July 21, 2011 Regular Meeting Minutes

Minutes of the Regular Meeting Held July 21, 2011 at 2:00 PM at 50 West State Street, 1 st floor conference room.

Council Members in Attendance:

Robert Grady, Chair (Telephonic) Marty Barrett Brendan T. Byrne, Jr. James Hanson, II (Telephonic) Guy Haselmann (Telephonic) James Joyner James Kellogg (Joined telephonically at 2:15 during discussion of the minutes) James Marketti Peter Maurer Timothy McGuckin Jeffrey Oram (Telephonic)

The Regular Meeting was called to order by Chair Grady at 2:02 PM.

Roll Call and Meeting Notice Ms. Christine Eckel performed roll call and reported that notice of the Regular Meeting scheduled for July 21, 2011 was posted on the Division’s website and faxed to the Times of Trenton, the Star-Ledger, the Bergen Record, the Courier Post and the Secretary of State on July 13, 2011. A copy of the notice was posted at the Division and is on file.

Chair Grady motioned to appoint Ms. Eckel as Council Secretary. Council Member Barrett seconded the motion and all were in favor. Chair Grady also welcomed new Council Members, Mr. James Joyner ( representing TPAF) and Mr. Peter Maurer(representing PERS), as well as returning Council Member Marty Barrett (representing PFRS).

Chair Grady also announced the upcoming resignation of Council Member Kellogg, effective July 31, 2011. He thanked Mr. Kellogg for his extraordinary service to the Council, with his many contributions, insight and wisdom.

Approval of Minutes for Special Meeting held June 30, 2011

Chair Grady and Council Members Kellogg and Byrne noted some changes to the Minutes for the special meeting held on June 30, 2011. A motion was made by Chair Grady to approve the minutes as amended and Council Member Bryne

seconded the motion.

present at the meeting. All Council Members voted in favor.

Council Members Barrett, Joyner and Maurer abstained from the vote since they were not

Directors Report for June 2011 The Director’s report for June 2011 was not available due to the additional time required to affect the fiscal year end accounting close.

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New Jersey State Investment Council

July 21, 2011 Regular Meeting Minutes

Approval of amendments to the State Investment Council By-Laws Chair Grady noted that the proposed amendments to the State Investment Council By-Laws reflected the changes to the Council membership based upon a statute enacted at the end of June. Council Member Marketti pointed out an incorrect cross-reference between sections in the document. Chair Grady motioned to approve the By-Laws as amended by Council Member Marketti. The motion was seconded by Council Member Oram. All Council Members voted in favor of the motion.

Approval of adopted amendments to N.J.A.C. 17:16-22 and 45 Director Walsh stated that the Division had not received any comments on the proposed amendments to N.J.A.C. 17:16- 22 and 45 and the Council Members were presented with the notices of adoption and a resolution for approval. Council Member Haselmann motioned to approve the resolution adopting amendments to N.J.A.C. 17:16-22 and 45. The motion was seconded by Council Member Byrne. All Council members voted in favor of the motion. [See attached resolution]

High Yield allocation

Director Walsh gave a brief overview of the high yield fixed income asset class. In 2008, the Division recommended to the Council that $2 billion be allocated to this class, and the Division engaged several external investment advisors to

provide non-discretionary investment advice.

to the portfolio advised by Logan Circle, one of the external advisors, was limited to $100 million based upon the firm’s

assets under management.

At the time the initial portfolios were established, the amount allocated

Director Walsh informed the Council Members that the portfolio account for which Logan

Circle will be providing investment advice may be increased up to $300 million due to the growth of their assets under

management and performance to date.

Commission Soft Dollar Expenditures Director Walsh gave a brief overview on the Division’s Commission Soft Dollar expenditures. Director Walsh stated that this is money that is used to fund mainly Information research and brokerage services. As part of its effort to reduce overall expenditures, the Division anticipates that it will reduce the value of services paid through soft dollars by approximately 10% for fiscal year 2012.

Real Asset Investment Blackstone Resources Select John Nicolini of SIS, the Division’s consultant, presented the proposed $250 million investment in Blackstone Resources Select Fund (“BRSF”) to the Council. He advised the Council that this fund is a means to increase commodities exposure through a customized, long-biased portfolio which trades across energy,

metals and agriculture.

2.39% for the BXCI, -2.33% for the GSCI and 0.19% for the DJ-UBS. Chairman Grady commented that the 0.80% management fee with no carry was better than market for fund of fund products, and is a reasonable fee structure.

In

response to Chair Grady’s question, Director Walsh stated that the Division’s target allocation for real assets is 4% or $1.5 billion for fiscal year 2012. Chair Grady noted that BSRF would be investing in Astenbeck Commodities Fund, and the Pension Fund was investing in that fund directly as well. Mr. Nicolini responded that 22% of BRSF will be invested in Astenbeck active management portfolio custom strategy, which is different from the stand alone investment in

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BRSF has an annualized return since inception of May 2007 through May 2011 of 10.65% net vs.

New Jersey State Investment Council

July 21, 2011 Regular Meeting Minutes

Astenbeck Commodities Fund, which is a Hedge Fund. Chair Grady informed the Council that the Investment Policy committee had discussed this investment and found the Division’s due diligence to be adequate and appropriate. Council Member Marketti went on record as opposing the Investment and made a motion to reject the investment. Council Member Maurer seconded the motion. The motion was rejected by a vote of 2-9, with Council Members Marketti and Maurer voting in favor of the motion.

Real Estate Investment Blackstone Real Estate Partners VII Kevin Lynch of The Townsend Group presented the proposed $300 million investment in Blackstone Real Estate Partners

VII (“BREP VII”). BREP VII will seek to invest in distressed portfolios or assets where either the capital structure is

broken, the real estate is undermanaged or the current owner is a motivated seller. BREP VII is a follow on to Funds V

and VI which are both in the top quartile of fund performance. Participants in the first closing will receive a management fee reduction of 25 basis points to 1.25%, in addition to a management fee waiver for 4 months which equates to a savings of about $1.25 million. Chair Grady informed the Council that the Investment Policy committee had discussed this investment and found the Division’s due diligence to be adequate and appropriate. Council Member Marketti went on record as opposed to the Investment and made a motion to reject the investment. Council Member Maurer seconded the motion. The motion was rejected by a vote of 2-9, with Council Members Marketti and Maurer voting in favor of the motion.

Election of Nominating Committee Members

Chair Grady nominated Council Members Oram, Haselmann and McGuckin as members of the nominating committee.

All Council Members voted in favor of the nominated slate. Chair Grady requested that the committee present its

nominations for Chair and Vice Chair at the September 2011 meeting.

Treasurer’s Report Steve Harris stated that there was no report from the Treasurer.

Opportunity for Public Comment Mr. Miskowski made a comment that he would like to discuss the issue of International FX Rates and Custodial Banks at the September Council meeting.

Chair Grady motioned to adjourn the meeting, with Council Member Oram seconding the motion. All voted in favor. The meeting was adjourned at 3:50 pm.

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DIVISION OF INVESTMENT

DIVISION OF INVESTMENT Market Update/Diversification Benefits Tim Walsh, Director New Jersey Division of Investment

Market Update/Diversification Benefits

Tim Walsh, Director New Jersey Division of Investment

October 13, 2011

June 30, 2011 & FYTD Performance Pension Fund Performance (1) Versus Benchmark 1 month QTD
June 30, 2011 & FYTD Performance
Pension Fund Performance (1) Versus Benchmark
1 month
QTD
CYTD
FYTD
Common Fund A (Domestic Equity) with Cash, Hedges, Miscellaneous
-1.96
-0.19
6.20
32.47
vs. S&P 1500 Composite
-1.70
0.02
6.30
31.65
Equity Only (Ex Cash)
-1.93
-0.06
6.61
33.40
Equity Only-Diversified Fund
-1.95
0.04
6.51
32.47
Equity Only-Concentrated Fund
-1.93
-0.26
6.93
35.68
Common Fund B (Domestic Fixed Income) with Cash, Hedges, Miscellaneous
-0.73
3.29
4.34
5.98
vs. Barclays Long Gov/Credit
-1.86
3.30
3.28
3.20
vs. Common B Custom Benchmark (2)
-1.42
3.38
3.71
3.98
Corporates, Treasuries, Agencies
-1.23
3.42
3.91
4.68
TIPS
1.14
5.12
6.63
8.35
Barclays US Infl-Linked Bond Index
0.83
3.71
5.84
7.78
High Yield
0.89
2.40
10.19
21.27
Barclays High Yield Index
-0.97
1.05
4.97
15.63
Common Fund D (International Equity) with Cash, Hedges, Miscellaneous
-1.50
0.22
2.38
25.58
vs. Custom International Equity Markets Index
-1.50
-4.11
vs. MSCI All World Country Index (ex US)
-1.45
0.38
3.80
29.73
Developed Markets Equity
-1.24
0.64
4.34
27.04
Custom International Equity Developed Markets Index (ex Canada)
-1.45
-4.20
MSCI EAFE
-1.25
1.56
4.98
30.36
Emerging Markets Equity
-1.37
-0.55
-0.07
27.99
Custom International Equity Emerging Markets Index
-1.68
-3.84
MSCI Emerging Markets
-1.54
-1.15
0.88
27.80
Common Fund E (Alternative Investments) with Cash, Hedges, Miscellaneous
4.34
4.79
10.25
17.69
Hedge Funds (May & June)
-0.65
-0.65
3.54
10.69
HFRI Fund of Funds Composite (May & June)
-1.08
0.03
3.24
7.13
Private Equity
7.45
10.67
16.61
21.68
Cambridge Associates (Data only available quarterly) (4)
5.39
5.39
13.43
21.33
Real Estate
11.33
7.89
12.42
17.55
NCREIF(NPI) (Data only available quarterly) (4)
3.94
3.94
7.43
16.73
Real Assets/Commodities
-5.36
-5.41
4.79
28.25
DJUBS TR Index
-5.04
-6.73
-2.58
25.91
Mortgage-Backed Securities
0.28
1.37
2.13
4.23
vs. Barclays MBS
0.09
2.28
2.87
3.77
Police & Fire Mortgage Program
0.96
1.81
3.84
5.90
Cash Mgt. Fund (3)
0.02
0.06
0.14
0.33
vs. US Treasury Bills (3 month)
0.01
0.02
0.06
0.14
Total Pension Fund
-0.31
1.86
5.31
17.79
Total Pension Fund ex Police and Fire Mortgages
-0.33
1.86
5.34
18.03
Total Fund Benchmark (4)
-1.00
1.58
4.619
17.03
(1) Figures are unaudited and are subject to change
(2) 83.5% BC Gov/Credit Long and 16.5% BC US Inflation Link Bond Index (TIPS)
(3) The cash aggregate comprises the seven plan cash accounts

Fiscal Year 2011 Summary

Total Fund ex Police and Fire Mortgages returned 18.03%, outperforming benchmark by 100 bps.

Total assets at the end of the Fiscal Year were $73.7 billion, up $6.9 billion from the start of the fiscal year net of pension payments. Domestic Equity, Fixed Income, Commodity, Private Equity, Real Estate and Hedge Fund portfolios all outperformed benchmarks, while International Equity underperformed. An overweight to Domestic Equity and an underweight to fixed income benefited performance for the fiscal year

New Jersey Division of Investment Risk vs. Total Returns of Master Trusts - Public Plans > $10 Billion 5 Years Ending June 30, 2011

Public Plans > $10 Billion 5 Years Ending June 30, 2011 Risk Value Risk Rank Return

Risk Value

Risk Rank

Return Value

Return Rank

Total Pension Fund ex Police

11.15

80*

5.23

37*

Median

12.93

4.89

*100 th Risk Rank is best, 1 st Risk Rank is worst; 1 st return rank is best, 100 th return rank is worst.

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Portfolio update 9/30/11

** SEPTEMBER AND FISCAL YEAR TO DATE PERFORMANCE AND ASSET VALUE DATA IN

THIS UPDATE IS ESTIMATED AND SUBJEC T TO CHANGE.

Key Portfolio Developments

Environment has been challenging for all internally managed portfolios

Added approximately $750 million of equity exposure through ETFs during September as part of rebalancing ($425

million of Developed Markets non -US, $200 million of Emerging Markets, and $125 of Domestic equity exposure.)

As part of the International Equity Portfolio rebalance, we initiated a number of option trades that have worked in

our favor. We have collected approximately $10 million on these trades and would collect approximately $ 6 million

more if we closed out the remaining positions.

Added $182 million of commodity exposure through ETFs.

Hedged a majority of $100 million of gold exposure at opportune levels.

Transitioned $500 million from actively managed international equity to passive ly managed international equity

Realized $21 million in profits on futures positions in fixed income portfolio

Redeemed a total of $50 million from two core real estate portfolios

a total of $50 million from two core real estate portfolios Total Pension Fund   July

Total Pension Fund

 

July

Aug

Sept Est

FYTD Est

Total Fund ex P&F Mortgage Benchmark

0.17%

-2.88%

-4.24%

-6.89%

0.30%

-4.66%

-6.40%

-10.49%

The Total Pension Fund performance does not reflect full FYTD returns for segments of the portfolio that are

reported on a lag (hedge funds, private equity, real estate, some components of real assets/commodities). Once

these returns are incorporated, we would expect Total Fund performance to decline and the alpha over the

benchmark to decrease.

The Fund has benefited FYTD from a number of asset allocation decisions, including sizable overweights to

Treasuries, Cash, and Investment Grade Fixed Income. Within the equity portfolio overweighting US vs. Non -US has

also been beneficial.

Total estimated assets as of September 30, 2011 were $ 66.4 billion, down $ 7.3 billion since June 30 th . Since July 1,

net withdraws from the Fund for benefit payments were approximately $1.8 billion.

Domestic Equity   July Aug Sept Est FYTD Est Domestic Equity -2.00% -6.46% -8.24% -15.88%
Domestic Equity   July Aug Sept Est FYTD Est Domestic Equity -2.00% -6.46% -8.24% -15.88%

Domestic Equity

 

July

Aug

Sept Est

FYTD Est

Domestic Equity

-2.00%

-6.46%

-8.24%

-15.88%

S&P 1500

-2.21%

-5.66%

-7.45%

-14.61%

The Do m e stic equity portfolio has under performed the benchmark by 1 27 bps FYTD as both the c oncentrated

portfolio (approx. $ 5.2 billion) and the index like portfolio ($10.9 billion) lost more than the benchmark .

The underperformance has been driven by small overwei ghts and poor stock selection in industrials and materials.

Stock selection in Consumer Discretionary and Telecom has also detracted from performance. Stock selection in IT

has partially offset the areas of underperformance.

The domestic equity allocation began the year as a 2% overweight. The overweight was reduced in August and stood

at 66 bps at the end of September .

in August and stood at 66 bps at the end of September . International Equity  

International Equity

 

July

Aug

Sept Est

FYTD Est

International Equity

-1.68%

-9.73%

-12.97%

-22.76%

ACWI ex US ex Prohibited

-1.22%

-8.60%

-10.95%

-19.60%

`

The developed markets portfolio has underperformed the benchmarks by 394 bps FYTD. The Emerging Markets

portfolio has underperformed by 89 bps FYTD.

Within the developed markets portfolio, the actively managed portfolio was the primary source of the

underperformance.

Within the emerging markets portfolio, three of the four advisors have outperformed the bench mark FYTD .

We have taken several actions in response to the under relative performance of the active developed markets

portfolio:

o

We have increased the passive exposure within the developed markets portfolio to 21 %. The allocation to

 

passive strategies will continue to increase in the coming months.

 

o

We have reduced a portfolio’s over and under weights relative the benchmark by both geography and sector

 

in an effort to reduce tracking error .

The Fund was underweight Non -US Equity by approximately 135 bps at the end of September. The portfolio had a

small overweight to Emerging Markets vs. Developed Markets at quarter end.

Fixed Income   July Aug Sept Est FYTD Est Fixed Income 3.39% 2.56% 2.75% 8.95%

Fixed Income

 

July

Aug

Sept Est

FYTD Est

Fixed Income

3.39%

2.56%

2.75%

8.95%

Benchmark*

3.18%

3.07%

3.53%

10.10%

* 50/50 blend of BC Gov/Credit Long and the BC Gov/Credit

Fixed Income has been the best performing segment of the portfolio on an absolute basis FYTD, producing positive

returns in each month.

Investment Grade Credit, Treasuries, and TIPS have all produced strong performance FYTD while high yield sold off

in August and September.

The Fund’s ove rweight to Treasuries and Investment Grade Credit has benefited the overall Pension Fund

performance for the Fiscal Year.

As of October 3 rd , duration was 10.13 , compared to 10.1 7 for the benchmark.

TIPS are substantially underweight (over $1.0 billion) due to valuations. The underweight has been beneficial as

they have underperformed Treasuries and Investment Grade Credit.

have underperformed Treasuries and Investment Grade Credit. Hedge Fund   July Aug Sept Est FYTD Est

Hedge Fund

 

July

Aug

Sept Est

FYTD Est

Hedge Funds*

0.00%

0.76%

-3.76%

-3.01%

HFRI Fund of Funds*

-1.29%

0.41%

-2.62%

-3.52%

* Monthly returns are on a one month lag with July portfolio performance reported 0%

 

Hedge Funds performed well relatively, declining significantly less than the S&P 500

As would be expected in a v olatile, down trending market, short biased and Macro managers produced the best

returns in the first three months of the fiscal year. Our two systematic macro (CTA) investments, Lynx and Winton

were up 11.7% and 6.3%, respectively, based on estimated per formance through September 30. Long -biased

long/short equity managers have generally produced the worst performance fiscal year to date.

Commodities   July Aug Sept Est FYTD Est Commodities/RA 1.16% 0.25% -6.30% -4.99% DJ-UBS

Commodities

 

July

Aug

Sept Est

FYTD Est

Commodities/RA

1.16%

0.25%

-6.30%

-4.99%

DJ-UBS Commodity Index

2.96%

1.00%

-14.75%

-11.33%

The performance of the Commodity/RA portfolio for September does not include the impact of investments that are not

priced daily.

We have added to commodity exposure through internal management via ETFs. We have approximately $ 100

million of exposure to G old and Gold Miners and added to broad commodity and agriculture ETFs. We are tactically

hedging the positions. The portfolio has outperformed the DJ-UBS Commodity Index for the fiscal year by over 500

bps.

First Fiscal Quarter Review:

WHAT’S GOING ON IN THE WORLD
WHAT’S GOING ON IN THE WORLD

Global markets were severely challenged from July 1 through June 30 . Continued political and de bt problems in Europe,

particularly Greece, together with Standard & Poor’s downgrade of US Treasury debt from AAA, led to declines worldwide in

equities.

The Dow Jones had its worst quarter since the first quarter of 2009

Of Dow 30 stocks, the best performer was McDonald’s, up 4.15%. Worst performer was Bank of America , down 44.16%

The S&P 1500 was down 14%

The EAFE (the international benchmark) was down 18.95%

Germany down 30.9%, UK down 16.7%, Italy down 31.2%

The MSCI Emerging Market Fund (benchmark for emerging markets) was down 22.49%

Brazil down 27.2% , Russia down 28.5%, India down 19.6%, China 26.1%, (BRIC’s)

The DJ UBS Commodity Index was down 13.62%

The S&P Financial index was down 25.16%

The yield on the 10 and 30 year treasury dropped 120 and 150 bps respectively

US Treasuries had their best quarter returns since first quarter of 2008

30 Year Freddie Mac Mortgage rate 4.01%

Shades of hope?

There seems to be progress in the Euro Markets, which pe rformed well with the possible resolution of the Greek Debt

Crisis.

FDIC announc es closure of two satellite offices in CA and IL, Worst of banking crisis over?

Asset Allocation September 30, 2011 Estimated
Asset Allocation September 30, 2011
Estimated

As of September 30, 2011

Asset Class

Sub-Category

Current

Lower

FY 2012

Long Term

Upper

Allocation

Limit

Target

Target

Limit

Over/Under

Weight

Limit Target Target Limit Over/Under Weight CAP PRES 0.6% 0.0% 2.0% 3.5% 4.5% -1.39% Absolute
Limit Target Target Limit Over/Under Weight CAP PRES 0.6% 0.0% 2.0% 3.5% 4.5% -1.39% Absolute
Limit Target Target Limit Over/Under Weight CAP PRES 0.6% 0.0% 2.0% 3.5% 4.5% -1.39% Absolute
Limit Target Target Limit Over/Under Weight CAP PRES 0.6% 0.0% 2.0% 3.5% 4.5% -1.39% Absolute
Limit Target Target Limit Over/Under Weight CAP PRES 0.6% 0.0% 2.0% 3.5% 4.5% -1.39% Absolute
Limit Target Target Limit Over/Under Weight CAP PRES 0.6% 0.0% 2.0% 3.5% 4.5% -1.39% Absolute
CAP PRES 0.6% 0.0% 2.0% 3.5% 4.5% -1.39% Absolute Return HFs 2.0% 3.5% 0.6% -1.39%
CAP PRES
0.6%
0.0%
2.0%
3.5%
4.5%
-1.39%
Absolute Return HFs
2.0%
3.5%
0.6%
-1.39%
LIQUIDITY
5.7%
1.0%
4.5%
3.7%
9.5%
1.20%
Cash Equivalents
2.0%
2.0%
1.6%
-0.40%
US Treasuries
2.5%
1.7%
4.1%
1.60%
INCOME
31.9%
22.0%
27.0%
28.0%
32.0%
4.92%
Investment Grade Credit
20.0%
20.5%
25.4%
5.37%
High Yield Fixed Income
2.5%
2.5%
3.0%
0.51%
Credit-Oriented HFs
3.0%
3.5%
2.2%
-0.80%
Debt-Related PE
1.5%
1.6%
1.3%
-0.16%
REAL RETURN
8.8%
7.5%
12.5%
14.1%
17.5%
-3.70%
Commodities/RA
4.0%
4.2%
2.6%
-1.43%
TIPS
3.5%
2.8%
1.9%
-1.59%
Real Estate
5.0%
7.1%
4.3%
-0.69%
GLOBAL GROWTH
53.0%
49.0%
54.0%
50.6%
59.0%
-1.03%
US Equity
23.5%
18.3%
24.2%
0.66%
Non-US Dev Market Eq
15.0%
14.2%
14.1%
-0.88%
Emerging Market Eq
5.0%
4.8%
4.5%
-0.47%
Equity-Oriented HFs
5.0%
7.0%
3.2%
-1.82%
Buyouts/Venture Cap
5.5%
6.3%
7.0%
1.48%

Current Assets

FY 2012

Over/Under Weight

Target $

$

400,619,022 1,304,383,183 (903,764,161) 1,304,383,183 (903,764,161) 400,619,022 3,717,183,515 2,934,210,028
400,619,022
1,304,383,183
(903,764,161)
1,304,383,183
(903,764,161)
400,619,022
3,717,183,515
2,934,210,028
782,973,487
1,303,731,049
(261,731,049)
1,042,000,000
1,630,478,979
1,044,704,536
2,675,183,515
20,816,082,757
17,609,172,973
3,206,909,784
13,043,831,832
3,500,649,405
16,544,481,237
1,630,478,979
332,673,604
1,963,152,583
1,956,574,775
(520,622,886)
1,435,951,889
978,287,387
(105,790,339)
872,497,048
5,736,061,762
8,152,394,895
(2,416,333,133)
2,608,766,366
(933,630,545)
1,675,135,821
2,282,670,571
(1,035,474,021)
1,247,196,550
3,260,957,958
(447,228,567)
2,813,729,391
34,549,212,103
35,218,345,946
(669,133,843)
15,326,502,402
428,938,104
15,755,440,506
9,782,873,874
(572,627,177)
9,210,246,697
3,260,957,958
(307,261,447)
2,953,696,511
3,260,957,958
(1,184,951,060)
2,076,006,898
3,587,053,754
966,767,737
4,553,821,491
(307,261,447) 2,953,696,511 3,260,957,958 (1,184,951,060) 2,076,006,898 3,587,053,754 966,767,737 4,553,821,491
(307,261,447) 2,953,696,511 3,260,957,958 (1,184,951,060) 2,076,006,898 3,587,053,754 966,767,737 4,553,821,491
(307,261,447) 2,953,696,511 3,260,957,958 (1,184,951,060) 2,076,006,898 3,587,053,754 966,767,737 4,553,821,491
(307,261,447) 2,953,696,511 3,260,957,958 (1,184,951,060) 2,076,006,898 3,587,053,754 966,767,737 4,553,821,491

Total

P+F

Total Inc P&F

65,219,159,159

1,140,509,154

66,359,668,313

Fixed Income 9-30 Update
Fixed Income 9-30 Update
 

Est. Market Value

Avg Yield To

Income

 

Description

(09/30 EOD)

Maturity

Avg Mty

Generated

IG Corp YTM of

2.5%

or

less

765,179,786.35

2.084

5.1 yrs

15,946,602.26

IG Corp YTM of

2.5%

to

4%

4,193,849,101.92

3.259

10.4 yrs

136,689,300.63

IG Corp YTM 4% and over

6,298,910,775.08

4.743

20.9 yrs

298,772,951.50

Municipals (Taxable, BABs)

1,503,072,512.95

5.228

27.7 yrs

78,575,142.40

Sov & Agcy

2,545,142,603.89

3.696

9.9 yrs

94,070,194.21

Other IG Credit (MBS, etc.)

1,246,110,945.92

4.025

5.75 yrs

50,155,965.57

HY Corporates

761,438,345.88

9.630

7 yrs

72,259,954.36

HY Loans/ Alternative Inv.

 

1,193,929,748.00

11.000

4 yrs

131,332,272.28

Total without UST

 

18,507,633,820.00

877,802,383.21

US Treas YTM of 2.5% or less

1,397,624,142.00

2.345

13.6 yrs

32,777,361.22

US Treas YTM of 2.5% to 4%

2,513,050,191.63

3.286

13.9 yrs

82,580,257.52

Total including UST

 

22,418,308,153.63

993,160,001.94

MSCI ALL COUNTRY ASIA INDEX (1990-

2011)

Cumulative Return: -20.2%

Annualized Volatility: 21.2% 200 150 100 50 0 Jan-90 Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02
Annualized Volatility: 21.2%
200
150
100
50
0
Jan-90
Jan-92
Jan-94
Jan-96
Jan-98
Jan-00
Jan-02
Jan-04
Jan-06
Jan-08
Jan-10

Source: ACQ

Source: MSCI AC Asia Index (MXAS), Morgan Stanley and ACQ. 1/1/1990 through 8/31/2011.

11

New Jersey Division of Investment

11

Malaysia

Mexico

Italy

Germany

Turkey

Hungary

UK

India

Australia

Indonesia

South Africa

Greece

Ireland

Hong Kong

US

Japan

Israel

Korea

China

Russia

France

Singapore

Poland

Thailand

Spain

Taiwan

Brazil

Portugal

Philippines

Belgium

Malaysia

Mexico

Italy

Hungary

Germany

Turkey

UK

India

Australia

Indonesia

South Africa

Greece

Ireland

Kong

US

Japan

Israel

Korea

China

Russia

Singapore

France

Poland

Thailand

Spain

Taiwan

Brazil

Portugal

Philippines

Belgium

Hong

Ticking Time Bomb?

600%

500%

400%

300%

200%

100%

0%

Leverage In The Real Economy:

Total Debt as Percent of GDP

(Year End 2010)

Sovereign Health: Government Debt as Percent of GDP

(Year End 2010)

250%

200%

150%

100%

In Asia, only Japan, and modestly India, have sovereign health ratios

above the global average.

Global average 68%
Global average 68%
Global average 68%
Global average 68%
Global average 68%
Global average 68%
Global average 68%
Global average 68%

Global average 208%

Global average 208%
Global average 208%
the global average. Global average 68% Global average 208% 50% 0% Source: ACQ 12 Source: UBS
the global average. Global average 68% Global average 208% 50% 0% Source: ACQ 12 Source: UBS
the global average. Global average 68% Global average 208% 50% 0% Source: ACQ 12 Source: UBS
the global average. Global average 68% Global average 208% 50% 0% Source: ACQ 12 Source: UBS
the global average. Global average 68% Global average 208% 50% 0% Source: ACQ 12 Source: UBS
the global average. Global average 68% Global average 208% 50% 0% Source: ACQ 12 Source: UBS
the global average. Global average 68% Global average 208% 50% 0% Source: ACQ 12 Source: UBS
50% 0%
50% 0%
50% 0%
50% 0%
50% 0%
50% 0%

50%

0%

Source: ACQ

12

Source: UBS Investment Bank

New Jersey Division of Investment

12

Tremendous Expected Long Term Growth in Asia

Global Market Capitalization Composition in 2030 (Projected 1 )

MSCI AC World Composition

2010-2030

Other EM 100% 9% Other EM Asia Europe Asia = 45% 27% 5% 14% 80%
Other EM
100%
9%
Other EM Asia
Europe
Asia = 45%
27%
5%
14%
80%
43%
DM Asia
48%
6%
Russia
22%
60%
India
4%
11%
5%
6%
Brazil
4%
13%
2%
40%
3%
44%
42%
20%
38%
China
N. America
0%
28%
26%
2010
2020
2030
US
China
BRICs
Rest of World

Source: ACQ

Source: IMF, World Federation of Exchanges, MSCI, Goldman Sachs Global ECS Research estimates.

13

New Jersey Division of Investment

13

History of Why do we invest in Alternatives?

History of Why do we invest in Alternatives? New Jersey Treasurer John McCormac, a McGreevey appointee,
New Jersey Treasurer John McCormac, a McGreevey appointee, said the council has been unresponsive to
New Jersey Treasurer John McCormac, a
McGreevey appointee, said the council
has been unresponsive to calls to re-
evaluate its strategy even as the pension
funds and other investments lost $26
billion over the last 24 months.
-excerpt from Bloomberg article from
September 2002
Why do we invest in Alternatives? 1. Diversification, Diversification, Diversification 2. Many investment opportunities

Why do we invest in Alternatives?

Why do we invest in Alternatives? 1. Diversification, Diversification, Diversification 2. Many investment opportunities

1. Diversification, Diversification, Diversification

2. Many investment opportunities can only be accessed through alternative investments. Examples include venture capital, buyouts, bankruptcy

3. Often the best investment talent work at

alternative investment firms(incentives work)

Types of Alternative Investments

We invest in the following types of alternative

investments:

Private Equity

Buyouts, Venture Capital, Private Debt

Hedge Funds

Long Short Equity, Global Macro, Event Driven, Credit

Real Estate

Core, Value-Add, Opportunistic

Commodities

Precious Metals (Gold), Agriculture, Energy, Industrial Metals

Alternative Performance FY To Date Through 6/30/11   June 30, 2010 June 30, 2011  

Alternative Performance FY To Date Through 6/30/11

Alternative Performance FY To Date Through 6/30/11   June 30, 2010 June 30, 2011   Allocation
 

June 30, 2010

June 30, 2011

 

Allocation $

Allocation %

Allocation $

Allocation %

Hedge Funds

$3,377

5.05%

$3,911

5.30%

Private Equity

4,219

6.31

5,384

7.30

Real Estate

1,876

2.81

2,732

3.71

Commodities & Other Real Assets

997

1.49

1,192

1.62

Total

$10,469

15.67%

$13,219

17.93%

Total Contribution

Total Distribution

Net Contribution

$2,882,418,837

$2,518,836,169

$363,582,668

Alternatives Portfolio has appreciated by approximately $2.4 billion in 12 months

S&P 500 vs. Hedge Funds
S&P 500 vs. Hedge Funds
Year S&P 500 HFRI Fund Weighted Composite Index 1 2000 -9.03 4.98 2001 -11.85 4.62
Year
S&P 500
HFRI Fund Weighted
Composite Index 1
2000
-9.03
4.98
2001
-11.85
4.62
2002
-21.97
-1.45
2003
28.36
19.55
2004
10.74
9.03
2005
4.83
9.30
2006
15.61
12.89
2007
5.48
9.96
2008
-36.55
-19.03
2009
25.93
19.98
2010
14.82
10.25
Total Return
4.61
105.05
Annualized Return
0.41
6.74
Yields Across US Treasuries as of September 30, 2011
Yields Across US Treasuries
as of September 30, 2011

12%

10%

8%

6%

4%

2%

0%

12% 10% 8% 6% 4% 2% 0% 2.90% 1.80% 0.90% 0.01% 0.24% 0.08% Target Rate 8.25%

2.90%

1.80%

12% 10% 8% 6% 4% 2% 0% 2.90% 1.80% 0.90% 0.01% 0.24% 0.08% Target Rate 8.25%

0.90%

0.90% 0.01% 0.24% 0.08%
0.90% 0.01% 0.24% 0.08%

0.01%

0.24%

0.08%

0.90% 0.01% 0.24% 0.08%
0.90% 0.01% 0.24% 0.08%
0.90% 0.01% 0.24% 0.08%
0.90% 0.01% 0.24% 0.08%
0.90% 0.01% 0.24% 0.08%
0.90% 0.01% 0.24% 0.08%
0.90% 0.01% 0.24% 0.08%

Target

Rate

Target Rate 8.25%

8.25%

12% 10% 8% 6% 4% 2% 0% 2.90% 1.80% 0.90% 0.01% 0.24% 0.08% Target Rate 8.25%
12% 10% 8% 6% 4% 2% 0% 2.90% 1.80% 0.90% 0.01% 0.24% 0.08% Target Rate 8.25%
0.90% 0.01% 0.24% 0.08% Target Rate 8.25% 14% NJ Pension Actuarial Yield 3 -Month 2 -

14%

NJ Pension

Actuarial

Yield

3 -Month

2 - Yr

5 - Yr

1 0 - Yr

1 0 - Yr

3 0 - Yr

Treas Bills

Notes

Notes

Notes

TIPS*

Notes

TIPS does not include inflation rate

Yield is approximate for informational purposes

Yields Across Various Equities/Asset Classes as of September 30, 2011 NJ Pension Target 12% 10%

Yields Across Various Equities/Asset Classes as of September 30, 2011

Various Equities/Asset Classes as of September 30, 2011 NJ Pension Target 12% 10% 8% 6% 4%
NJ Pension Target 12% 10% 8% 6% 4% 2% 0% -2% Actuarial Rate 8.25% Yield

NJ Pension

Target

12%

10%

8%

6%

4%

2%

0%

-2%

10% 8% 6% 4% 2% 0% -2%
10% 8% 6% 4% 2% 0% -2%
10% 8% 6% 4% 2% 0% -2%
10% 8% 6% 4% 2% 0% -2%

Actuarial

Rate

8.25% Yield

8.25%

8.25% Yield

Yield

NJ Pension Target 12% 10% 8% 6% 4% 2% 0% -2% Actuarial Rate 8.25% Yield
NJ Pension Target 12% 10% 8% 6% 4% 2% 0% -2% Actuarial Rate 8.25% Yield

* Apple’s Stock Dividend is 0%

** Mezzanines’ range is between 9.50% and 14.00%

Yield is approximate for informational purposes

What is the Difference?
What is the Difference?
Portfolio A Industry Portfolio B American Tire Distributors Automobiles & Components Goodyear Tire & Rubber
Portfolio A
Industry
Portfolio B
American Tire Distributors
Automobiles & Components
Goodyear Tire & Rubber Co.
Armstrong World Industries, Inc.
Capital Goods
Texas Industries, Inc.
Bausch & Lomb Incorporated
Health Care Equipment & Services
Boston Scientific Corp.
Biomet, Inc.
Health Care Equipment & Services
Medtronic Inc.
David's Bridal, Inc.
Retailing
Destination Maternity Corp.
Dave and Buster's, Inc.
Consumer Services
Darden Restaurants Inc.
Duane Reade, Inc.
Food & Staples Retailing
Walgreen Company
EverBank Financial Corp.
Banks
U.S. Bancorp
Lear Corporation
Automobiles & Components
TRW Automotive Holdings Corp.
Petco Animal Supplies, Inc.
Retailing
PetSmart Inc.
The Lion Brewery, Inc.
Food, Beverage, and Tobacco
Boston Beer Co.
The Neiman Marcus Group, Inc.
Retailing
Saks Inc.
The Weather Channel
Media
Westwood One Inc.
Univision Communications Inc.
Media
Time Warner
Portfolio A contains private companies we own through Private Equity Funds; Portfolio B is public
Portfolio A contains private companies we own
through Private Equity Funds; Portfolio B is public
companies
Private Equity Industry Public Equity American Tire Distributors Automobiles & Components Goodyear Tire &
Private Equity
Industry
Public Equity
American Tire Distributors
Automobiles & Components
Goodyear Tire & Rubber Co.
Armstrong World Industries, Inc.
Capital Goods
Texas Industries, Inc.
Bausch & Lomb Incorporated
Health Care Equipment & Services
Boston Scientific Corp.
Biomet, Inc.
Health Care Equipment & Services
Medtronic Inc.
David's Bridal, Inc.
Retailing
Destination Maternity Corp.
Dave and Buster's, Inc.
Consumer Services
Darden Restaurants Inc.
Duane Reade, Inc.
Food & Staples Retailing
Walgreen Company
EverBank Financial Corp.
Banks
U.S. Bancorp
Lear Corporation
Automobiles & Components
TRW Automotive Holdings Corp.
Petco Animal Supplies, Inc.
Retailing
PetSmart Inc.
The Lion Brewery, Inc.
Food, Beverage, and Tobacco
Boston Beer Co.
The Neiman Marcus Group, Inc.
Retailing
Saks Inc.
The Weather Channel
Media
Westwood One Inc.
Univision Communications Inc.
Media
Time Warner
What is the difference?
What is the difference?
What is the difference? 521 5 t h Avenue 666 5 t h Avenue 23

521 5 th Avenue

What is the difference? 521 5 t h Avenue 666 5 t h Avenue 23

666 5 th Avenue

521 5 t h Avenue is owned by SL Green, a publically traded REIT. SL

521 5 th Avenue is owned by SL Green, a publically traded REIT. SL Green has

declined by 51% since the start of 2007.

REIT. SL Green has declined by 51% since the start of 2007. 666 5 t h

666 5 th Avenue is owned by Carlyle Realty V, a real estate partnership we are

invested in which has returned 1.6% since

2007.

REITs rated on their executive compensation

Green Street Advisors has ranked most REIT executive compensation and corporate governance practices favorably, however:

June 23, 2011

The Wall Street Journal cites a recent review by Green Street Advisors, which gave the nation’s real estate investment trusts (REITs) generally high marks for their executive compensation and corporate governance practices. Some, though, were

taken to task. For instance, Green Street wrote that SL Green Realty’s top executives have

been paid more than $100 million over the last three years an amount that is “inexplicably high amidst lagging total returns *vs. office peers+ over that same three-year period.” In addition, researchers faulted Westfield Group’s executive team for being in the “$100 million-over-three-years club.” The retail property giant defended itself by noting

that it lacks comparable firms for performance benchmarks. An SL Green spokesman,

meanwhile, noted that total return to shareholders has been strong over the last decade, adding: “SL Green’s executive compensation program is deeply rooted in a long-term pay- for-performance philosophy.”

BDC Investments

Business development companies (BDCs) raise capital

from investors to loan to small and medium sized private

comp.

They can be either publicly traded or private investment

vehicles.

After evaluating both publically traded and private BDCs, NJDOI chose to invest in a private BDC in May 2011.

The private BDC has a 0.75% management fee and 15%

performance fee compared to a 2% management fee and 20% performance fee for the average public BDC.

Since NJDOI made its investment, most of the public BDCs are down 10-15%.

Skype Owner Silver Lake Made $5 Billion In Microsoft Deal, Sources Say

By Megan Davies

As of 7/6/11, NJDOI owned $380 million of Microsoft stock

NEW YORK (Reuters) - Skype's owners, led by private equity firm Silver Lake, will make more than three times their investment - a total capital gain of more than $5 billion - on sale of the company to Microsoft Corp, a source

familiar with the deal said on Tuesday.

Private equity firms can make spectacular returns on investments if timed and executed right.….

New Jersey is an investor in Silver Lake, a Private Equity Fund

Silver Lake led an investor group in 2009 to buy Skype from eBay.

Skype was acquired for $3.1 billion in November 2009 and sold to Microsoft for $8.5 billion in May 2011. Silver Lake earned 3x its invested capital and produced $2.9 billion in proceeds. The Skype equity gain of over $5 billion is one of the largest in private equity history.

Buffett Said to Join Bid for Citigroup’s Consumer Lending

Unit

From: Bloomberg

By Donal Griffin - Jul 6, 2011

Billionaire Warren Buffett has joined a group seeking to buy Citigroup Inc. (C)’s consumer-lending unit, said two people with knowledge of

the talks.

Buffett’s Berkshire Hathaway Inc. (BRK/A) has teamed with Centerbridge Partners LLC* and Leucadia National Corp. (LUK) to bid for the business formerly known as CitiFinancial, said the people, who spoke on condition of anonymity because the talks with New York- based Citigroup are private. Buffett has said he’s looking for acquisitions and has $41.2 billion in cash to back his offer….

* We are currently invested in three funds with Centerbridge Partners LLC

D I V I S I O N

O F

I N V E S T M E N T

I N V E S T M E N T R E P O RT I N G PA C K A G E

A U G U S T

2 0 1 1

Actual Allocation vs FY 2012 Investment Plan Target (1)

8/31/2011

Actual Allocation % Absolute Return Hedge Funds (3) & Hedges 0.6% Total Capital Preservation 0.6%
Actual Allocation % Absolute Return Hedge Funds (3) & Hedges 0.6% Total Capital Preservation 0.6%

Actual

Allocation %

Actual Allocation % Absolute Return Hedge Funds (3) & Hedges 0.6% Total Capital Preservation 0.6%

Absolute Return Hedge Funds (3) & Hedges

0.6%

Total Capital Preservation

0.6%

Cash Equivalents (4)

3.1%

US Treasuries

4.5%

Total Liquidity

7.6%

Investment Grade Credit

22.6%

High Yield Fixed Income

2.6%

Credit Orient Hedge Funds (3)

2.1%

Debt Related Private Equity (2)

1.2%

Total Income

28.5%

Commodities and Other Real Assets (2)

2.2%

TIPS

2.2%

Real Estate

4.0%

Total Real Return

8.4%

US Equity

24.5%

Non-US Developed Markets Equity

14.6%

Emerging Markets Equity

4.7%

Equity Oriented Hedge Funds (3)

3.1%

Buyouts/Venture Capital (2)

6.4%

Total Global Growth

53.2%

Police and Fire Mortgage Program (2, 5)

1.6%

Other Cash and Receivables

0.1%

Total Pension Fund

100.0%

Target %

Difference%

Allocation$

2.0%

-1.4%

438.05

2.0%

-1.4%

438.05

2.0%

1.1%

2,181.43

2.5%

2.0%

3,154.00

4.5%

3.1%

5,335.43

20.0%

2.6%

15,925.03

2.5%

0.1%

1,867.51

3.0%

-0.9%

1,447.92

1.5%

-0.3%

874.20

27.0%

1.5%

20,114.66

4.0%

-1.8%

1,537.11

3.5%

-1.3%

1,577.55

5.0%

-1.0%

2,819.66

12.5%

-4.1%

5,934.32

23.5%

1.0%

17,287.30

15.0%

-0.4%

10,319.24

5.0%

-0.3%

3,302.22

5.0%

-1.9%

2,155.40

5.5%

0.9%

4,486.13

54.0%

-0.8%

37,550.29

0.0%

1.6%

1,135.64

0.0%

0.1%

85.24

100.0%

0.0%

70,593.63

54.0% -0.8% 37,550.29 0.0% 1.6% 1,135.64 0.0% 0.1% 85.24 100.0% 0.0% 70,593.63
54.0% -0.8% 37,550.29 0.0% 1.6% 1,135.64 0.0% 0.1% 85.24 100.0% 0.0% 70,593.63
54.0% -0.8% 37,550.29 0.0% 1.6% 1,135.64 0.0% 0.1% 85.24 100.0% 0.0% 70,593.63
54.0% -0.8% 37,550.29 0.0% 1.6% 1,135.64 0.0% 0.1% 85.24 100.0% 0.0% 70,593.63
54.0% -0.8% 37,550.29 0.0% 1.6% 1,135.64 0.0% 0.1% 85.24 100.0% 0.0% 70,593.63
54.0% -0.8% 37,550.29 0.0% 1.6% 1,135.64 0.0% 0.1% 85.24 100.0% 0.0% 70,593.63
54.0% -0.8% 37,550.29 0.0% 1.6% 1,135.64 0.0% 0.1% 85.24 100.0% 0.0% 70,593.63

(1) Figures are unaudited and are subject to change

(2) Reflects the most recent market values available

(3) Values of July 31

(4) The cash aggregate comprises the four common fund cash accounts, in addition to the seven plan cash accounts

(5) Police & Fire Mortgage Program is not included in target asset allocation, assets are private mortgages that cannot be sold

Totals may not add equal sum of components due to rounding

assets are private mortgages that cannot be sold Totals may not add equal sum of components

Page 1

State of New Jersey Division of Investment August 31, 2011

August 2011 Perfomance

10.00 7.00 3.443 4.00 2.69 1.565 1.767 0.269 0.359 0.527 1.00 -2.00 -1.549 -5.00 -6.658
10.00
7.00
3.443
4.00
2.69
1.565
1.767
0.269
0.359
0.527
1.00
-2.00
-1.549
-5.00
-6.658
-8.00
-7.526
-11.00
Cap Pres*
Liquidity
Income
Global
Real
Growth
Return
Return
Benchmark
August Excess Returns
3
2.421
2.5
2.076
1.878
2
1.408
1.5
0.868
1
0.5
0
Cap Pres*
Liquidity
Income
Global
Real Return

Growth

12.00

8.00

4.00

0.00

-4.00

-8.00

Total Fund as of August 31, 2011

10.81 7.56 6.56 5.22 3.53 4.11 4.26 3.47 2.42 0.04 -2.77 -2.93 -4.37 -4.66 One
10.81
7.56
6.56
5.22
3.53
4.11
4.26
3.47
2.42
0.04
-2.77
-2.93
-4.37
-4.66
One
CYTD
FYTD
1 Year
3 Year
5 Year
10 Year
Month
Total Fund ex P&F Mtg
Benchmark

4.00

3.00

2.00

1.00

0.00

-1.00

-2.00

Total Fund Excess Returns as of 8/31/11

3.25 2.38 1.73 1.60 0.06 -0.16 -1.34 One CYTD FYTD 1 Year 3 Year 5
3.25
2.38
1.73
1.60
0.06
-0.16
-1.34
One
CYTD
FYTD
1 Year
3 Year
5 Year
10 Year

Month

* Capital Preservation performance includes Absolute Return Hedge Funds. The impact of portoflio hedges is reflected in Fund Performance. Page 2

Pension Fund Performance (1) Versus Benchmark August 31, 2011

 

1 month

FYTD

CYTD

1 Year

3 Years

5 Years

10 Year

Common Fund A (Domestic Equity) with Cash, Hedges, Miscellaneous

-6.46

-8.32

-2.64

19.04

2.00

2.67

3.67

vs. S&P 1500 Composite

-5.66

-7.74

-1.93

19.09

0.87

1.16

3.22

Equity Only (Ex Cash) Equity Only-Diversified Fund Equity Only-Concentrated Fund

-6.47

-8.37

-2.31

19.75

2.22

2.81

3.72

-6.37

-8.32

-2.35

18.74

     

-6.66

-8.34

-1.99

22.41

Common Fund B (Domestic Fixed Income) with Cash, Hedges, Miscellaneous (6)

2.56

6.04

10.63

6.36

11.47

9.29

7.28

vs. Common B Blended Benchmark (2)

3.07

6.35

9.83

2.94

10.07

7.94

7.30

Investment Grade

3.07

6.93

11.56

6.29

11.04

9.04

7.15

vs. Barclays Long Gov/Credit

4.46

9.06

12.63

5.57

11.00

8.48

7.57

High Yield

-1.79

-1.37

8.68

15.57

17.65

   

Barclays High Yield Index

-4.00

-2.89

1.94

8.39

11.95

Common Fund D (International Equity) with Cash, Hedges, Miscellaneous

-9.73

-11.24

-9.13

6.56

-1.89

0.13

5.17

vs. Custom International Equity Markets Index

-8.60

-9.72

         

vs. MSCI All World Country Index (ex US)

-8.57

-9.82

-6.39

10.34

-0.97

0.79

6.89

Developed Markets Equity

-10.37

-11.93

-8.05

7.69

     

Custom International Equity Developed Markets Index (ex Canada)

-8.53

-9.88

         

MSCI EAFE

-9.03

-10.48

-6.02

10.01

     

Emerging Markets Equity

-8.19

-8.61

-8.67

8.74

Custom International Equity Emerging Markets Index MSCI Emerging Markets

-8.80

-9.21

         

-8.94

-9.34

-8.55

9.07

Common Fund E (Alternative Investments) with Cash, Hedges, Miscellaneous

0.12

0.20

10.47

17.38

-0.80

2.08

 

Hedge Funds (July) (5) (6)

0.78

0.78

4.35

10.45

0.29

1.97

 

HFRI Fund of Funds Composite (July)

0.40

-0.92

2.29

6.28

-0.80

1.67

Private Equity

0.01

-0.03

16.58

21.67

4.00

5.48

Cambridge Associates (Data only available quarterly) (4)

0.00

0.00

13.43

21.33

4.29

10.40

 

Real Estate

-0.78

-0.82

11.51

17.03

-12.29

-4.30

 

NCREIF(NPI) (Data only available quarterly) (4)

0.00

0.00

7.43

16.73

-2.57

3.44

7.64

Real Assets/Commodities

0.25

1.40

6.26

25.63

-5.71

   

DJUBS TR Index

1.00

3.99

1.31

25.83

-4.50

0.84

6.90

Mortgage-Backed Securities

0.79

1.27

3.43

5.18

7.29

6.99

5.81

vs. Barclays MBS

1.25

2.19

5.12

4.98

7.23

6.80

5.75

Police & Fire Mortgage Program (5)

0.38

0.38

4.24

5.86

     

Cash Mgt. Fund (3)

0.01

0.03

0.17

0.30

0.66

2.05

2.18

vs. US Treasury Bills (3 month)

0.01

0.01

0.07

 

0.25

1.70

1.95

Total Pension Fund

-2.88

-2.72

2.45

10.72

     

Total Pension Fund ex Police and Fire Mortgages

-2.93

-2.77

2.42

10.81

3.53

4.11

5.22

Total Fund Benchmark

-4.66

-4.37

0.04

7.56

3.50

4.26

6.56

(1) Figures are unaudited and are subject to change (2) Common Fund B Blended Benchmark from 7/1/11 forward is a 50/50 blend of BC Gov/Credit Long and the BC Gov/Credit. Prior to 7/1/11 it was 100% BC Gov/Credit Long. (3) The cash aggregate comprises the seven plan cash accounts (4) Cambridge Associates & NCREIF (NPI) Benchmarks are only reported on a quarterly basis, non quarter-end months are reported as 0% (5) Hedge funds and the Police and Fire Mortgage Program are recorded on one month lag; July performance will be reflected in August (6) Common Fund B and Hedge Fund performance include the effect of transferring a number of bank loan funds from Common Fund E to Common Fund B in Fiscal Year 2009. Trailing Hedge Fund Performance including bank loans funds as of June 30, 2011 as calculated by Hedge Fund Consultant Cliffwater is: 1 Year: 12.88%, 3 Year: 4.27%; 5 Year 5.14%.

Page 3

Common Fund A (Domestic Equity)

8/31/2011

Top Holdings

 

% of

Company

Portfolio

APPLE INC EXXON MOBIL CORP MICROSOFT CORP JPMORGAN CHASE & CO GENERAL ELECTRIC CO MERCK & CO. INC. PFIZER INC USINESS MACHINES CORP PROCTOR & GAMBLE CONOCOPHILLIPS

4.29

2.73

2.01

1.79

1.61

1.45

1.42

1.24

1.22

1.21

Portfolio Sector Weightings

20.00 18.00 16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 A Fund S&P 1500
20.00
18.00
16.00
14.00
12.00
10.00
8.00
6.00
4.00
2.00
0.00
A Fund
S&P 1500

Page 4

Investment Grade Portfolio (Common Fund B)

8/31/2011

 

Portfolio

Benchmark

Difference

   

Issuer Name

Market Value [%]

Total Return

6.18

8.49

-2.31

US/T

US TREASURY N/B STRIPS FEDERAL HOME LN MTG CORP GOV'T OF ISRAEL VERIZON COMMUNICATIONS INC HYDRO QUEBEC

13.09

Quality Rating

AA-3

AA-2

N/A

US/S

3.47

Coupon

5.28

5.94

-0.66

FHLMC

2.83

Yield

4.39

4.97

-0.58

AID

1.69

Duration

9.74

13.35

-3.61

VZ

1.42

OAS

130.31

125.76

4.55

QHEL

1.37

Convexity

0.67

1.20

-0.53

T

AT&T INC

1.35

Maturity

14.71

23.47

-8.76

ONT

ONTARIO (PROVINCE OF)

1.29

 

RFC

RFCSP STRIP PRINCIPAL

1.20

Maturities

Portfolio

Benchmark

 

JNJ

JOHNSON & JOHNSON

1.16

0-5yr

8.23

1.23

 

5-10yr

34.03

0.87

10-15yr

18.23

11.96

 

Sectors By %

ASSET BACKED, 0.5 AGENCY, 4.0 CMO, 0.7 YANKEE, 10.0 CORPORATE, 54.4
ASSET
BACKED, 0.5
AGENCY, 4.0
CMO, 0.7
YANKEE, 10.0
CORPORATE, 54.4

15-20yr

12.66

16.31

20-25yr

9.47

13.99

25-30yr

15.39

54.08

>30yr

0.99

1.56

Unclassified

1.00

0.00

 

US TREASURY, 23.0

Ratings

Portfolio

Benchmark

 

Total AAA AA+ to AA AA- to A A- to BBB BBB- to BB Less than BB Unclassified

100.00

100.00

 

PRIVATE

32.03

8.92

23.23

28.70

48.25

5.34

14.12

25.63

PLACEMENT,

0.2

PLACEMENT, 0.2 MORTGAGE PASS- THROUGH, 2.5 MUNICIPAL, 4.7

MORTGAGE PASS-

THROUGH, 2.5

MUNICIPAL, 4.7

3.42

6.20

   

1.06

0.47

2.56

0.00

Benchmark: Barclays US Long Gov/Credit

Page 5

Common Fund D (International Equity)

8/31/2011

Top Holdings

 

% of

Company

Portfolio

ISHARES MSCI EAFE INDEX FUND VANGUARD EMERGING MARKETS ET ISHARES MSCE EMERGING MARKETS HSBC HOLDINGS PLC BHP BILLITON PLC RIO TINTO PLC ROCHE HOLDING AG GENUSSCHEIN GIVAUDAN AG XSTRATA PLC JAPAN TOBACCO INC

6.57

5.36

4.57

2.09

1.60

1.39

1.20

1.07

0.99

0.95

Portfolio Sector Weightings

30 25 20 15 10 5 0 D Fund Benchmark
30
25
20
15
10
5
0
D Fund
Benchmark

Page 6

Common Fund D (International Equity)

08/31/2011

Exposure By Country

 

Custom

Net Foreign

Custom

Net Foreign

International

Currency

International

Currency

 

Equity

% Equity

Index

Hedge

Exposure

Equity

% Equity

Index

Hedge

Exposure

Developed Markets:

Emerging Markets:

Australia

554.0

4.1%

6.7%

554.0

EM - Global EM - Europe/Middle East/Africa Czech Republic Egypt Guernsey Hungary Jersey Lebanon Luxembourg Maruitius Morocco Poland Russia South Africa Turkey Ukraine EM - Latam Argentina Brazil Chile Colombia Mexico Peru EM - Asia ex Japan China India Indonesia Kazakhstan Korea Malaysia Pakistan Philippines

0.8

0.0%

0.8

Austria

153.2

1.1%

0.2%

153.2

 

0.0

Belgium

92.5

0.7%

0.7%

92.5

25.0

0.2%

0.1%

25.0

Canada

1225.0

9.1%

9.3%

1225.0

29.1

0.2%

0.1%

29.1

Denmark

130.9

1.0%

0.7%

130.9

0.5

0.0%

0.5

Finland

199.2

1.5%

0.5%

199.2

18.2

0.1%

0.1%

18.2

France

954.9

7.1%

5.7%

954.9

0.8

0.0%

0.8

Germany

481.4

3.6%

5.3%

481.4

1.3

0.0%

1.3

Greece

21.6

0.2%

0.1%

21.6

2.4

0.0%

2.4

Hong Kong

388.1

2.9%

2.1%

388.1

0.1

0.0%

0.1

Ireland

6.2

0.0%

0.2%

6.2

0.2

0.0%

0.0%

0.2

Israel

26.3

0.2%