PASADENA PASADENA FIRE POLICE RETIREMENT SYSTEM FIRE ... · 3/15/2017 · Ms. Annie Taylor of...

PASADENA

FIRE & POLICE

RETIREMENT SYSTEM

1. Call to Order 2. Public Comment

PASADENA FIRE & POLICE RETIREMENT SYSTEM

RETIREMENT BOARD - REGULAR MEETING

Wednesday, March 15, 2017

City Council Chambers, 100 N. Garfield Ave., #S249

10:15 a.m.

AGENDA

3. Minutes: February 15, 2017 (Regular Meeting)

CONSENT CALENDAR 4. Approve the monthly retirement allowance roll of $1,076,066.67 for February

2017. 5. Approve additions/removals of the following members/beneficiaries to/from the

monthly allowance roll: Effective Add/ Pension Pension

Name Date Remove Continuance Amount a. J.Bohn 02/04/17 remove No $3,774.65

b. J. Peron 02/04/17 remove No $4,688.72

c. J. Fields 02/20/17 remove No $3,339.83

6. Receive and file the 4th Quarter 2016 Asset Manager Performance Reports from the following asset manager: a. Vanguard Growth Index Fund, 4th Quarter Investment Commentary b. Vanguard TIPS Fund, 4th Quarter Investment Commentary

ACTION ITEMS - The Board may discuss and take action on the following items: 7. Receive, discuss, and possibly take action on the presentation by liquid

alternatives asset manager PIMCO. 8. Discuss and possibly take action on the following investment reports submitted

by Verus Investments: a. Receive and file, February 2017 Performance Update b. Review, discuss and possibly take action on the System's 10-Year Asset

Allocation Review and Return Forecast c. Review, discuss and possibly take action on the effective duration limits

for the Fund's fixed income asset manager 9. Review, discuss and possibly take action on the Fiscal Year 2017 Midyear

Budget Review and Long-term System Forecast.

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INFORMATION ITEMS 10. Staff Report

a. February 2017 Budget Report 11. Counsel Report 12. Articles/Newsletters/Conferences

COMMENTS FROM BOARD MEMBERS

ADJOURN

POSTING STATEMENT: I HEREBY CERTIFY that this Agenda was posted in its entirety at the City Kiosk and on the City Council Chamber bulletin board, Room S249, on March 9, 2017 at 5:00 p.m., and a copy was sent to the Central Library for posting.

J1L+;UJL. Jill Fosselman

Administrator/Secretary to the Board

In compliance with the Americans with Disabilities Act of 1990, listening assistive devices are available from the City Clerk's Office with a 24-hour advance notice. Please call (626) 744-4320 to request use of a listening device.

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

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

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

P. Fuleihan S. Lebovitz A. Snitzer

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

W. Boyer, PIO Library, NIS City Controller

PASADENA FIRE & POLICE RETIREMENT SYSTEM RETIREMENT BOARD - REGULAR MEETING

Wednesday, February 15, 2017 City Council Chambers S249

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

MINUTES

1. Call to Order

The regular meeting of the Pasadena Fire & Police Retirement Board was called to order by the Chair, Mr. Keith Jones, on Wednesday, February 15, 2017 at 10: 18 a.m. in the City Council Chambers at City Hall. ·

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

Not Present P. Boyle, Vice Chair

Staff - Present Not Present J. Fosselman, Administrator/Secretary E. Wong, Tech. Assistant I. Safie, City Attorney Representative (arrived at 10:28 a.m.)

Others Present A. Taylor (Verus Investments, via teleconference at 10:35 a.m.), D. Qualls, P. Fuleihan, S. Lebovitz

2. Public Comment

None noted.

3. Minutes: Approve the minutes for the regular meeting of January 18, 2017

MOTION by Mr. Milligan, seconded by Mr. Brinsley, to approve the Minutes for the regular meeting of January 18, 2017. (Motion unanimously carried, 4-0)

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CONSENT CALENDAR

4. Approve the monthly retirement allowance roll of $1,089, 152.42 for January 2017. 5. Approve additions/removals of the following members/beneficiaries to/from the

mon thl II II 1y a owance ro : Effective Add/ Pension Pension

Name Date Remove Continuance Amount a. A. McCracken 01/12/17 remove No $4,461.92

b. B. Williams 01/14/17 remove No $2,869.82

c. M. Williams (ORO) 01/14/17 remove No $1,385.55

d. D. Fraser 01/18/17 remove No $2,246.00

e. Estate of M. Fraser 01/18/17 remove No $2,246.00 (ORO)

f. H. Gouin 01/28/17 remove No $2,587.29

6. Receive and file the 4th Quarter 2016 Asset Manager Performance Reports from the following asset managers: a. Atlanta Capital Investment Managers, including Proxy Voting Summary b. Capital Group, American Funds EuroPacific Growth Fund c. Dodge & Cox Investment Managers, International Stock Fund d. Dodge & Cox Investment Managers, Stock Fund e. Invesco Core Real Estate, USA- LP, 2015 Q4 Flash Report f. PIMCO All Asset Fund g. TCW MetWest Fixed Income Review h. Voya Senior Loan Collective Trust Funds

7. Schedule the hearing on the CalPERS Service Pending Industrial Disability Retirement application for Michael Batterson, Fire Engineer Paramedic, for the April 19, 2017 regular meeting of the FPRS Board.

MOTION by Mr. Milligan, seconded by Mr. Brinsley, to approve items 4-7 on the Consent Calendar. (Motion unanimously carried, 4-0)

CalPERS HEARINGS

8. CalPERS scheduled hearing on the Service Pending Industrial Disability Retirement application for Darryl Qualls, Deputy Chief (Police).

The hearing was opened on the CalPERS Service Pending Industrial Disability Retirement application filed by Darryl Qualls, Deputy Chief (Police). The Board received the Disability Hearing Option form signed by the Applicant requesting the Retirement Board close the hearing to the general public. However, the Applicant verbally expressed his desire for an open hearing. Upon confirming this preference, the Chair did not close the hearing to the public.

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

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

Darryl Qualls, Deputy Chief (Police), dated December 21, 2016. b. Verification of employment with the City of Pasadena. c. Certification Forms signed by the City and Applicant. d. Information report and recommendation from the Human Resources Department

dated February 6, 2017, and the accompanying medical file, including: 1) Dr. Glen Apramian, M.D., doctor's report of occupational injury for right shoulder

(dated 4-21-15); 2) Dr. Vahe Panossian, M.D., PTP orthopedic evaluation (dated 5-12-15); 3) Dr. Vahe Panossian, M.D., PTP progress report (dated 6-16-15); 4) Dr. Vahe Panossian, M.D., PTP surgical operative report (dated 7-13-15); 5) Dr. Vahe Panossian, M.D., PTP progress report (dated 7-24-15); 6) Dr. Vahe Panossian, M.D., PTP progress report (dated 8-25-15); 7) Dr. Vahe Panossian, M.D., PTP progress report (dated 10-7-15); 8) Dr. Vahe Panossian, M.D., PTP periodic report (dated 10-7-15); 9) Dr. Vahe Panossian, M.D., PTP progress report (dated 11-18-15); 10)Dr. Vahe Panossian, M.D., PTP progress report (dated 12-18-15); 11)Dr. Vahe Panossian, M.D., PTP surgical operative report (dated 2-19-16); 12)(a)Dr. Vahe Panossian, M.D., PTP permanent and stationary report for the right

shoulder (dated 8-23-16); 12)(b)Dr. Vahe Panossian, M.D., PTP permanent and stationary report for the left

shoulder (dated 8-23-16); 13) Rehab West utilization review (dated 5-28-15); 14)Rehab West utilization review (dated 1-6-16); 15)Dr. William Wortman, M.D., magnetic resonance imaging report of the left

shoulder (dated 11-24-15); 16) Huntington Orthopedic Physical Therapy evaluation (dated 12-22-15); 17)Dr. Hmayk Manasyan, M.D., PTP progress report (dated 2-4-16); 18) Dr. Hmayk Manasyan, M.D., surgical clearance (dated 2-11-16); and 19) Essential Functions Job Analysis - Deputy Police Chief.

Mr. Lebovitz highlighted that the medical reports indicate 20 pound restrictions on both upper extremities due to injuries sustained as a Police Officer. Thus, the requirement for substantial incapacity is satisfied and further qualifies Deputy Chief Qualls for an industrial disability retirement.

There being no testimony or discussion, a MOTION to close the hearing was made by Mr. Brinsley, seconded by Mr. Milligan.

MOTION by Mr. Tomek, seconded by Mr. Brinsley, to approve the CalPERS Service Pending Industrial Disability Retirement Application, filed by Darryl Qualls, Deputy Chief (Police), with an effective date of February 20, 2017, and instruct the System's Attorney and the Secretary to prepare the necessary documentation of this Board's determination and forward same to the California Public Employees' Retirement System. (Motion unanimously carried, 4-0)

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Following the action, Chair Jones noted Deputy Chief Qualls' distinguished 33 Y2 years of service as a police officer; and when taking into account his service as an Explorer and Cadet with the Pasadena Police Department, it was really 40 years of service. He noted the quiet heroism of DC Qualls, and particularly thanked him for his work on a DEA taskforce in the 1980's that saved many Pasadena lives. On the behalf of the Pasadena community, he offered appreciation for the many sacrifices and incredible service he gave to the City and community. Member Tomek further echoed the Chair's comments, and offered gratitude to DC Qualls on the behaif of the City Council and City of Pasadena.

DC Qualls noted that he started with the Pasadena PD as a 15 year old Explorer, and then was accepted as a Cadet at 18. His service in the Police Department allowed him tremendous experiences and opportunities, including: international travel and training on dealing with terrorism, and working the 1984 Summer Olympics, 1994 World Cup and two Super Bowl games. He noted that the PPD has many great programs to engage and protect Pasadena youth, especially, the Pasadena/Altadena Integration Council and Day One (drug and alcohol prevention for youth) programs. DC Qualls noted that he believes the best future for the City will be to encourage more local youth to go into law enforcement, and he plans to continue fostering and promoting this goal through continued volunteerism in these programs.

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

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

a. Receive and file, 4th Quarter 2016 Quarterly Investment Report

Ms. Annie Taylor of Verus Investments reviewed the research report. For the quarter, net cash flow was -$3.5 million, and the net investment change was $370,000, bringing the value of the portfolio to $123 million on December 31, 2016 (not including pooled cash with the City). Overall, the Fund returned 0.3% net of fees for the quarter (v. the policy index of -0.1 %), bringing the fiscal yearto-date earnings to 3.9% (v. the policy index of 2.9%). Earnings in Domestic Equity (5.5%) and Real Estate (1.9%) helped lessen negative earnings in the other asset classes for the quarter. All holdings are within the range mandated in the Investment Performance Statement, and all except Real Estate (which has been maintained as a strategic overweight) are at their target allocations. Fees for the Fund average around 51 basis points, which is very good for a fund of this size. The Fund's cumulative performance for the quarter ranked in the 75th percentile relative to its peer universe (lnvestorForce Public DB $50mm-$250mm Gross), which was largely attributed to the Fund's asset allocation and holdings in Domestic Equity and US Fixed income relative to its peers.

MOTION by Mr. Milligan, seconded by Mr. Brinsley, to receive and file the 4th Quarter 2016 Investment Performance Review, as recommended by Verus Investments. (Motion unanimously carried, 4-0)

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b. Receive and file, January 2017 Performance Update

The update was reviewed reflecting performance without pooled cash. The total fund returned 1.5% net of fees (v. the policy index of 1.1 %) for January, bringing the fiscal year-to-date return to 5.4% net of fees (vs. the policy index of 4.0%). Ms. Taylor noted the earnings for the month in International Equity (4.4% for January and 13.4% FYTD) and Domestic Equity (2.2% for January and 14.2% FYTD) are the FYTD earnings drivers in the portfolio. Total market value for the end of January was $125 million, including pooled cash with the City.

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

c. Receive and file, Transaction Summary (1st Quarter 2017 Withdrawal)

Ms. Taylor briefly reviewed the final rebalance for January's withdrawal for quarterly pension benefits and administration of $3,450,000. The majority of the withdrawal was taken from fixed income, followed next by domestic equities and international equities.

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

10. Adopt Resolution No. 324 setting the cost of living adjustment at an increase of 2% for all eligible retires and beneficiaries per Charter Section 1509.8 to become effective July 1, 2017, as determined by Bartel Associates, FPRS actuary.

Jill Fosselman noted the report was provided by System Actuary, Bartel Associates, indicated that a 2% cost of living adjustment effective July 1, 2017 is the recommended adjustment per Charter Section 1509.8.

MOTION by Mr. Brinsley, seconded by Mr. Tomek, to adopt Resolution No. 324 setting the cost of living adjustment at an increase of 2% for all eligible retires and beneficiaries per Charter Section 1509.8 to become effective July 1, 2017. (Motion unanimously carried, 4-0)

11. Approve the letter of agreement with System Actuary Bartel Associates for preparation of the June 30, 2017-2019 actuarial valuation and actuarial services.

Ms. Fosselman briefly reviewed the report. She also noted that System counsel had reviewed the document, including the insurance certificate for compliance with the coverage requested in the RFP.

MOTION by Mr. Milligan, seconded by Mr. Brinsley, to approve the letter of agreement with System Actuary Bartel Associates for the preparation of the June 30, 2017-2019 actuarial valuation and actuarial services. (Motion unanimously carried, 4-0)

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INFORMATION ITEMS

12. Staff Report - Ms. Fosselman provided a brief update on the new payroll process, upcoming Board training opportunities, and the Spring Board calendar. a. FY 2017 Projected Expenses to Budget Report

13. Counsel Report - none noted. 14. Articles/Newsletters/Conferences - none noted.

COMMENTS FROM BOARD MEMBERS

None noted.

ADJOURNMENT

MOTION by Mr. Brinsley, seconded by Mr. Milligan, to adjourn the meeting at 11: 10 a.m. (Motion unanimously carried, 4-0)

Respectfully submitted,

~~· Jill Fossei: Keith Jones Secretary to the Board/Administrator Chair, Retirement Board

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

DISTRIBUTION: Board Members City Attorney Director of Finance

Fire & Police Retirees Assn. Police Chief Fire Chief

P. Fuleihan S. Lebovitz

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A. Snitzer D. Barba

PASADENA FIRE AND POLICE RETIREMENT SYSTEM

MONTHLY ALLOWANCE ROLL - TOTALS

MONTH 2014-2015 2015-2016 2016-2017

JULY 1, 156,360.39 1, 133,056.86 1, 113,678.65 AUGUST 1, 139, 148.67 1, 132, 739.08 1,114,712.51 SEPTEMBER 1, 140,585.54 1,127,165.89 1,110,857.14 OCTOBER 1,141,527.41 1,122,125.71 1,110,857.14 NOVEMBER 1, 139,378.41 1, 121,651.68 1,110,857.14 DECEMBER 1, 137,229.40 1, 120,576.82 1, 105,747.36 JANUARY 1, 137,229.40 1, 120,576.82 1,089, 152.42 FEBRUARY 1, 137,229.40 1, 120,576.82 1,076,066.67 MARCH 1, 130, 773.44 1, 111,905.50 0.00 APRIL 1, 131,857.62 1, 115,262.14 0.00 MAY 1, 126,038. 77 1, 111,905.50 0.00 JUNE 1,122,917.19 1,110,123.41 0.00 FY TOTALS 13,640,275.64 13,447,666.23 8,831,929.03

COL BENEFITS INCLUDED ABOVE 7,177,264.72 7,086,401.87 4,685,736.57

COL - % Of Total 53% 53% 53%

a. 1 % COLA applied to all members and beneficiaries.

DATE 3/1§ /f 1 ITEM# 4

Notes

a., b. b., c. d.

e., f. f., a., h., i., i., k., I. m., n., o

b. R. Lighter passed away 7/15/16. $4,393.85/month with no continuance. Estate was paid final payment of $2, 126.06 on August 31, 2016 pension payroll (paper check).

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

d. N. Roberts passed away 9/15/16. $5,329. 71 with 100% continuance to spouse. e. L. Bergeson passed away 12/3/16. $4,696.01 with 100% continuance to spouse. f. J. Kitabjian passed away 12/13/16. $5,109.78 with NO continuance. Estate was paid final payment of

$2, 142.81 on January 31, 2017 pension payroll (electronic deposit). g. J. Mackessy passed away 1/2/2017. $7,804.85 with 60% continuance to spouse. Estate was paid

final payment of $503.54 on January 31, 2017 pension payroll (electronic deposit). h. A. McCracken passed away 1/12/2017. $4,461.92 with no continuance. Final payment paid 2/28/17. i. B. Williams passed away 1/14/2017. B. Williams has ORO with M. Williams. Her benefit terminated

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

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

k. J. Ireland's DRO payment of $2,607.94 is suspended until paperwork is completed. To be accrued. I. H. Gouin passed away 1/28/2017. $2,587.29 with NO continuance. Final payment was suspended

until receipt of paperwork. m. J. Bohn passed 2/4/2017. $3, 77 4.65 with NO continuance. Final payment was suspended n. J. Peron passed 2/4/2017. $4,688.72 with NO continuance. Final payment will be paid with the March 31,

2017 pension payroll. o. J. Fields passed 2/20/2017. $3,339.83 with NO continuance. Final payment will be paid with the March

31, 2017 pension payroll. Y:\Office Docs\US Bank Payroll Jan 2017-current\2017 Processing\[2017 USB Statement Reconcil 3/7/2017

Vanguard® Growth Index Fund

As of December 31, 2016

Product Summary

Seeks to track the performance of the CRSP US Large Cap Growth Index.Large-cap growth equity.Passively managed, full-replication approach.Fund remains fully invested.Low expenses minimize net tracking error.

Vanguard Style View: Large Growth

Index portfolio of large-capitalization growth stocks.

Value

Mid

Large

Small

BlendInvestment style

Mar

ket c

apit

aliz

atio

n

Growth

Central tendencyExpected range of fund holdings

For institutional use only. Not for distribution to retail investors.

Quarterly Commentary

U.S. stocks surged during the fourth quarter of 2016; demand for fixed income fell. Economic growth, stronger corporate earnings, and recovering oil prices all contributed to the enthusiasm for stocks, while a stronger economy and higher interest rates helped lower prices for U.S. government bonds. The yield on the benchmark 10-year Treasury note rose sharply by year’s end (price and yield move in opposite directions). International stocks, especially those in emerging markets, mostly underperformed their U.S. counterparts.

The CRSP US Large Cap Growth Index returned -0.42% for the three-month period ended December 31, trailing its value counterpart, the CRSP US Large Cap Value Index (+7.53%).

Health care (-6.6%), consumer goods (-3.0%), financials (-2.2%), and basic materials (-5.9%) detracted the most. Together, they pruned -1.7% from the index; health care alone subtracted -1.0%.

Consumer services (+3.2%), industrials (+3.8%), telecommunications (+11.8%), and oil & gas (+1.4%) were the top contributors. Together, they added 1.3% to the index; consumer services alone contributed 0.7%.

For the 12 months ended December 31, 2016, the CRSP US Large Cap Growth Index returned 6.16%. The largest contributors were technology (+12.2%), industrials (+16.9%), and consumer services (+7.2%). The only detractor was health care (-12.2%).

People and Process

Vanguard Growth Index Fund seeks to track the investment performance of the CRSP US Large Cap Growth Index, an unmanaged benchmark representing growth stocks of large U.S. firms. The fund attempts to replicate the target index by investing all, or substantially all, of its assets in the stocks that make up the index, holding each stock in approximately the same proportion as its weighting in the index. The experience and stability of Vanguard’s Equity Index Group have permitted continuous refinement of techniques for reducing tracking error. The group uses proprietary software to implement trading decisions that accommodate cash flow and maintain close correlation with index characteristics. Vanguard’s refined indexing process, combined with low management fees and efficient trading, has provided tight tracking net of expenses.

Vanguard Equity Index Group

Launched in 1975, The Vanguard Group, Malvern, Pennsylvania, is among the world’s largest equity and fixed income managers. As chief investment officer and managing director, Mortimer J. Buckley oversees Vanguard’s Equity Index, Quantitative Equity, and Fixed Income Groups. Joseph Brennan, CFA, Principal and global head of Vanguard's Equity Index Group, is responsible for all equity index funds. The Equity Index Group manages indexed equity portfolios covering U.S. and international markets. It has developed sophisticated portfolio construction methodologies and efficient trading strategies that seek to deliver returns that are highly correlated with target portfolio benchmarks. The group has advised Vanguard Growth Index Fund since 1992.

Investment Manager Biographies

Gerard C. O'Reilly, Principal. Portfolio manager. Advised the fund since 1994. Worked in investment management since 1992. B.S., Villanova University.

Walter Nejman. Portfolio manager. Advised the fund since 2016. Worked in investment management since 2008. B.A., Arcadia University. M.B.A., Villanova University.


Vanguard Growth Index Fund

Total Returns

QuarterYear

to Date 1 Year 3 Years 5 Years 10 Years

Growth Index Fund

Investor Shares (11/2/1992) -0.45% 5.99% 5.99% 7.46% 13.90% 7.99%

Admiral Shares (11/13/2000) -0.42 6.12 6.12 7.60 14.05 8.14

Institutional Shares (5/14/1998) -0.42 6.13 6.13 7.61 14.06 8.17

Spliced Growth Index -0.42 6.16 6.16 7.66 14.13 8.20

The performance data shown represent past performance, which is not a guarantee of future results. Investment returns and principal value willfluctuate, so investors’ shares, when sold, may be worth more or less than their original cost. Current performance may be lower or higher than theperformance data cited. For performance data current to the most recent month end, visit our website at vanguard.com/performance.Figures for periods of less than one year are cumulative returns. All other figures represent average annual returns. Performance figures include thereinvestment of all dividends and any capital gains distributions. All returns are net of expenses.

Note: Spliced Growth Index: S&P 500 Growth Index (formerly known as the S&P 500/Barra Growth Index) through May 16, 2003; MSCI US Prime MarketGrowth Index through April 16, 2013; CRSP US Large Cap Growth Index thereafter. Admiral class shareholders are required to maintain specific minimumbalances and meet other special criteria. Institutional class shareholders are required to maintain a minimum balance of $5 million.



Quarterly Returns: Investor Shares

Year-End

Year 1st Quarter 2nd Quarter 3rd Quarter 4th QuarterGrowth

IndexSpliced

Growth IndexAssets

(Millions)

2016 0.31% 0.98% 5.11% -0.45% 5.99% 6.16% $2,938

2015 3.40 -0.25 -6.05 6.47 3.17 3.38 3,038

2014 0.76 6.12 1.01 5.05 13.47 13.69 3,270

2013 9.24 1.17 8.43 10.29 32.16 32.47 3,630

2012 15.22 -3.92 6.78 -1.11 16.89 17.14 3,105

2011 4.95 0.91 -13.40 10.90 1.71 1.96 2,897

2010 4.85 -12.16 13.37 12.02 16.96 17.23 3,843

2009 -4.24 15.59 14.13 7.88 36.29 36.50 5,770

2008 -9.99 2.34 -12.04 -23.88 -38.32 -38.22 4,279

2007 1.21 6.65 4.35 -0.06 12.56 12.73 6,992

2006 3.30 -3.94 3.79 5.85 9.01 9.20 6,707

Quarterly Returns: Admiral Shares

Year-End


IndexSpliced

Growth IndexAssets

(Millions)

2016 0.34% 1.02% 5.14% -0.42% 6.12% 6.16% $18,617

2015 3.44 -0.24 -6.02 6.51 3.30 3.38 16,777

2014 0.78 6.16 1.05 5.10 13.63 13.69 14,907

2013 9.30 1.21 8.44 10.36 32.40 32.47 7,903

2012 15.26 -3.89 6.81 -1.11 17.01 17.14 5,774

2011 5.00 0.92 -13.34 10.94 1.87 1.96 4,819

2010 4.89 -12.13 13.40 12.06 17.12 17.23 4,712

2009 -4.21 15.57 14.18 7.92 36.42 36.50 1,641

2008 -9.97 2.37 -12.01 -23.82 -38.22 -38.22 1,296

2007 1.23 6.68 4.38 -0.03 12.70 12.73 2,203

2006 3.36 -3.94 3.85 5.84 9.13 9.20 2,505



Quarterly Returns: Institutional Shares

Year-End


IndexSpliced

Growth IndexAssets

(Millions)

2016 0.35% 1.02% 5.14% -0.42% 6.13% 6.16% $9,733

2015 3.44 -0.22 -6.02 6.51 3.33 3.38 9,380

2014 0.78 6.16 1.06 5.08 13.62 13.69 9,545

2013 9.31 1.19 8.47 10.36 32.41 32.47 8,015

2012 15.23 -3.85 6.79 -1.08 17.04 17.14 6,189

2011 5.01 0.92 -13.34 10.95 1.89 1.96 4,726

2010 4.90 -12.12 13.41 12.08 17.17 17.23 3,934

2009 -4.19 15.59 14.19 7.94 36.50 36.50 2,913

2008 -9.96 2.38 -12.00 -23.81 -38.19 -38.22 2,016

2007 1.24 6.69 4.38 -0.02 12.73 12.73 3,210

2006 3.37 -3.94 3.86 5.85 9.16 9.20 2,132

Fund FactsInvestorShares

AdmiralShares

InstitutionalShares ETF

Fund Number 0009 0509 0868 0967

Ticker VIGRX VIGAX VIGIX VUG

Newspaper Listing Growth GrwthAdml GrwthInst VangdGrowth

CUSIP Number 922908504 922908660 922908868 922908736

Assets (millions)(Total $54,328)

$2,938 $18,617 $9,733 $23,040

Inception 11/2/1992 11/13/2000 5/14/1998 1/26/2004

Expense Ratio(as of 4/2016) 0.22% 0.08% 0.07% 0.08%

Volatility MeasuresR-Squared Beta

Spliced Growth Index 1.00 1.00

DJ US Total Stock Mkt Float Adj Idx 0.93 1.03

R-squared and beta are calculated from trailing 36-month fund returnsrelative to the associated benchmark.



Top 10 Largest Holdings

% ofTotal Net Assets

Apple Inc. 6.4%

Alphabet Inc. 5.0

Amazon.com Inc. 3.3

Facebook Inc. 2.9

Comcast Corp. 1.8

Home Depot Inc. 1.8

Coca-Cola Co. 1.8

Walt Disney Co. 1.6

Visa Inc. 1.6

Philip Morris International Inc. 1.5

Total 27.7%

The holdings listed exclude any temporary cash investments and equityindex products.

Equity Characteristics

GrowthIndex

CRSP USLarge Cap

GrowthIndex

Number of stocks 323 317

Median market cap $70.3 Billion $70.3 Billion

Price/earnings ratio 27.1x 27.1x

Price/book ratio 4.7x 4.7x

Return on equity 20.8% 20.3%

Earnings growth rate 15.2% 15.9%

Equity yield (dividend) 1.5% 1.5%

Foreign holdings 0.2% 0.0%

Short-term reserves 0.0% —

Turnover rate (fiscal year end) 9.2% —

Sector Diversification (% of Stocks)

GrowthIndex

CRSP USLarge Cap

Growth IndexOverweight/Underweight

Basic Materials 1.0% 1.0% 0.0

Consumer Goods 11.1 11.1 0.0

Consumer Services 21.4 21.4 0.0

Financials 12.3 12.3 0.0

Health Care 13.8 13.8 0.0

Industrials 11.8 11.8 0.0

Oil & Gas 3.9 3.9 0.0

Other 0.0 0.0 0.0

Technology 24.1 24.2 -0.1

Telecommunications 0.6 0.5 0.1

Utilities 0.0 0.0 0.0

Total 100.0% 100.0%

Sector categories are based on the Industry Classification Benchmarksystem.

Important information

Visit our website, call 866-499-8473, or contact your broker to obtain a product description and prospectus or ifavailable, a summary prospectus for Vanguard ETF™ Shares. Investment objectives, risks, charges, expenses, andother important information are contained in these documents; read and consider them carefully before investing. Formore information about Vanguard funds, visit www.vanguard.com, or call 800-523-1036, to obtain a prospectus, or ifavailable, a summary prospectus.

Vanguard ETF Shares are not redeemable with the issuing Fund other than in very large aggregations worth millionsof dollars. Instead, investors must buy or sell Vanguard ETF Shares in the secondary market and hold those shares in abrokerage account. In doing so, the investor may incur brokerage commissions and may pay more than net asset valuewhen buying and receive less than net asset value when selling. Investments in bond funds and ETFs are subject to interest rate, credit, and inflation risk. The Fund is subject to interest rate risk,which is the chance that bond prices overall will decline because of rising interest rates. Interest rate risk is expected to beextremely high for the Fund because it invests mainly in zero coupon long-term bonds, which have prices that are very sensitiveto interest rate changes. Because the Fund invests mainly in Treasury strips with maturities ranging from 20 to 30 years, risinginterest rates may cause the value of the Fund's investments to decline significantly.

All investing is subject to risk, including the possible loss of the money you invest.

London Stock Exchange Group companies includes FTSE International Limited (“FTSE”), Frank Russell Company (“Russell”),MTS Next Limited (“MTS”), and FTSE TMX Global Debt Capital Markets Inc (“FTSE TMX”). All rights reserved. “FTSE®”,“Russell®”, “MTS®”, “FTSE TMX®” and “FTSE Russell” and other service marks and trademarks related to the FTSE or Russellindexes are trade marks of the London Stock Exchange Group companies and are used by FTSE, MTS, FTSE TMX and Russellunder licence. All information is provided for information purposes only. No responsibility or liability can be accepted by theLondon Stock Exchange Group companies nor its licensors for any errors or for any loss from use of this publication. Neither theLondon Stock Exchange Group companies nor any of their licensors make any claim, prediction, warranty or representationwhatsoever, expressly or impliedly, either as to the results to be obtained from the use of the index or the fitness or suitability ofthe index for any particular purpose to which it might be put.

The funds or securities referred to herein are not sponsored, endorsed, or promoted by MSCI, and MSCI bears no liability withrespect to any such funds or securities. For any such funds or securities, the prospectus or the Statement of AdditionalInformation contains a more detailed description of the limited relationship MSCI has with The Vanguard Group and any relatedfunds.

The index is a product of S&P Dow Jones Indices LLC (“SPDJI”), and has been licensed for use by Vanguard. Standard & Poor’s®and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones® is a registered trademarkof Dow Jones Trademark Holdings LLC (“Dow Jones”); S&P® and S&P 500® are trademarks of S&P; and these trademarks havebeen licensed for use by SPDJI and sublicensed for certain purposes by Vanguard. Vanguard product(s) are not sponsored,endorsed, sold or promoted by SPDJI, Dow Jones, S&P, or their respective affiliates and none of such parties make anyrepresentation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions,or interruptions of the index.

The Russell Indexes and Russell® are registered trademarks of Russell Investments and have been licensed for use by TheVanguard Group. The products are not sponsored, endorsed, sold or promoted by Russell Investments and Russell Investmentsmakes no representation regarding the advisability of investing in the products.

CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.

“Dividend Achievers”is a trademark of The NASDAQ OMX Group, Inc. (collectively, with its affiliates, “NASDAQ OMX”) and hasbeen licensed for use by The Vanguard Group, Inc. Vanguard mutual funds are not sponsored, endorsed, sold, or promoted byNASDAQ OMX and NASDAQ OMX makes no representation regarding the advisability of investing in the funds. NASDAQ OMXMAKES NO WARRANTIES AND BEARS NO LIABILITY WITH RESPECT TO THE VANGUARD MUTUAL FUNDS.

Vanguard ETFs are not sponsored, endorsed, sold, or promoted by Barclays. Barclays makes no representation or warranty,express or implied, to the owners of Vanguard ETFs or any member of the public regarding the advisability of investing insecurities generally or in Vanguard ETFs particularly or the ability of the Barclays Index to track general bond marketperformance. Barclays hereby expressly disclaims all warranties of merchantability and fitness for a particular purpose withrespect to the Barclays Index and any data included therein. Barclays’s only relationship to Vanguard and Vanguard ETFs is thelicensing of the Barclays Index which is determined, composed, and calculated by Barclays without regard to Vanguard or theVanguard ETFs. Barclays is not responsible for, and has not participated in, the determination of the timing of, prices of, orquantities of Vanguard ETFs to be issued.

Investments in Target Retirement Funds are subject to the risks of their underlying funds. The year in the Fund name refers to theapproximate year (the target date) when an investor in the Fund would retire and leave the work force. The Fund will graduallyshift its emphasis from more aggressive investments to more conservative ones based on its target date. An investment in theTarget Retirement Fund is not guaranteed at any time, including on or after the target date.

© 2017 The Vanguard Group, Inc. All rights reserved.U.S. Pat. No. 8,180,695; 8,185,464; 6,879,964 B2; 7,337,138; 7,720,749; 7,925,573; 8,090,646 and 8,417,623.Vanguard Marketing Corporation, Distributor.

Investment commentary

Connect with Vanguard® > vanguard.com For institutional use only. Not for distribution to retail investors.

Investor Shares Fourth Quarter 2016

Inception date November 2, 1992

Fund number 0009

Fund profile December 31, 2016

CUSIP number 922908504

Ticker symbol VIGRX

Newspaper listing Growth

Stock characteristicsGrowth Index FundNumber of stocks 323Median market cap $70.3BPrice/earnings ratio 27.1xPrice/book ratio 4.7xReturn on equity 20.8%Earnings growth rate 15.2%Equity yield (dividend) 1.5%Foreign holdings 0.2%Turnover rate (fiscal year end) 9.2%

• U.S. stocks surged during the fourth quarter of 2016; demand for fixed income fell.Economic growth, stronger corporate earnings, and recovering oil prices all contributed tothe enthusiasm for stocks, while a stronger economy and higher interest rates helpedlower prices for U.S. government bonds. The yield on the benchmark 10-year Treasury noterose sharply by year’s end (price and yield move in opposite directions). Internationalstocks, especially those in emerging markets, mostly underperformed their U.S.counterparts.

• The CRSP US Large Cap Growth Index returned –0.42% for the three-month period endedDecember 31, trailing its value counterpart, the CRSP US Large Cap Value Index (+7.53%).

• Health care (–6.6%), consumer goods (–3.0%), financials (–2.2%), and basic materials(–5.9%) detracted the most. Together, they pruned –1.7% from the index; health care alonesubtracted –1.0%.

• Consumer services (+3.2%), industrials (+3.8%), telecommunications (+11.8%), and oil &gas (+1.4%) were the top contributors. Together, they added 1.3% to the index; consumerservices alone contributed 0.7%.

• For the 12 months ended December 31, 2016, the CRSP US Large Cap Growth Indexreturned 6.16%. The largest contributors were technology (+12.2%), industrials (+16.9%),and consumer services (+7.2%). The only detractor was health care (–12.2%).

Benchmark characteristicsCRSP US Large Cap Growth IndexNumber of stocks 317Median market cap $70.3BPrice/earnings ratio 27.1xPrice/book ratio 4.7xReturn on equity 20.3%Earnings growth rate 15.9%Equity yield (dividend) 1.5%Foreign holdings 0.0%


Expense ratio(as of April 27, 2016) 0.22%

Short-Term Reserves 0.0%

Connect with Vanguard® > vanguard.com

© 2017 The Vanguard Group, Inc.All rights reserved.Vanguard Marketing Corporation, Distributor.

FC0009 122016

All funds are subject to market risk, including the possible loss of principal.For more information about Vanguard funds or to obtain a prospectus, see below for which situation is right for you.If you receive your retirement plan statement from Vanguard or log on to Vanguard’s website to view your plan, visit vanguard.com or call 800-523-1188.If you receive your retirement plan statement from a service provider other than Vanguard or log on to a record keeper’s website that is not Vanguard to view your plan, pleasecall 855-402-2646. Visit vanguard.com to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other importantinformation about a fund are contained in the prospectus; read and consider it carefully before investing.

Advisors: For more information about Vanguard funds, visit advisors.vanguard.com, or call 800-997-2798, to obtain a prospectus.

Total returns

Periods ended December 31, 2016

QuarterYear to

dateOneyear

Threeyears

Fiveyears

Tenyears

Growth Index FundInvestor Shares (November 2, 1992) -0.45% 5.99% 5.99% 7.46% 13.90% 7.99%

Spliced Growth Index -0.42% 6.16% 6.16% 7.66% 14.13% 8.20%

The performance data shown represent past performance, which is not a guarantee of future results. Investment returns and principal value will fluctuate, soinvestors’ shares, when sold, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data cited. Forperformance data current to the most recent month-end, visit our website at vanguard.com/performance. Figures for periods of less than one year are cumulative returns. All other figures represent average annual returns. Performance figures include the reinvestment of alldividends and any capital gains distributions. All returns are net of expenses. The performance of an index is not an exact representation of any particular investment, as youcannot invest directly in an index.Spliced Growth Index: S&P 500 Growth Index (formerly known as the S&P 500/Barra Growth Index) through May 16, 2003; MSCI US Prime Market Growth Index through April16, 2013; CRSP US Large Cap Growth Index thereafter.


Total fund volatility measures

SplicedGrowth Index

DJU.S. Total

MarketFA Index

Fund r-squared 1.00 0.93

Fund beta 1.00 1.03

R-squared and beta are calculated from trailing 36-month fund returns relative tothe associated benchmark.

Investor Shares

Sector diversification as % of common stock

GrowthIndex

CRSP USLarge Cap

Growth Index

Basic Materials 1.0% 1.0%

Consumer Goods 11.1 11.1

Consumer Services 21.4 21.4

Financials 12.3 12.3

Health Care 13.8 13.8

Industrials 11.8 11.8

Oil & Gas 3.9 3.9

Technology 24.1 24.2

Telecommunications 0.6 0.5

Utilities 0.0 0.0

Sector categories are based on the Industry Classification Benchmark system.

Ten largest stocks as % of total net assets

Apple Inc.

Alphabet Inc.

Amazon.com Inc.

Facebook Inc.

Comcast Corp.

Home Depot Inc.

Coca-Cola Co.

Walt Disney Co.

Visa Inc.

Philip Morris International Inc.

Top ten as % of total net assets 27.7%

The holdings listed exclude any temporary cash investments and equity indexproducts.

Vanguard® Inflation-Protected Securities Fund


Product Summary

Invests primarily in Treasury inflation-protected securities.Seeks inflation protection and income consistent with Treasury inflation-protected securities.Principal and interest adjusted for inflation.Provides unique diversification benefits.

Vanguard Style View: Inflation-Protected Bond

Portfolio of inflation-indexed securities.

ShortDuration

Qu

alit

y

LongMedium

Trsy/Agcy

Inv Grd

Corp

BelowInv

Grd

Central tendencyExpected range of fund holdings

For institutional use only. Not for distribution to retail investors.

Quarterly Commentary

The broad domestic taxable bond market modestly declined over the fourth quarter of 2016 as yields increased sharply, especially among government securities and across longer-dated maturities. Corporate bonds outperformed government bonds as credit spreads compressed. In bond markets abroad, yields also moved higher, and inflation expectations were buoyed by a rally in oil prices following OPEC’s agreement to curb production. The U.S. Federal Reserve increased interest rates in December, while the European Central Bank announced an extension of its asset purchase program through 2017. In this environment, the Bloomberg Barclays U.S. Treasury Index returned –3.84% as the 10-year Treasury yield increased sharply, from 1.59% to 2.44%. The Barclays U.S. Treasury Inflation Protected Securities Index, the fund’s benchmark, returned –2.41%.

Treasury Inflation-Protected Securities (TIPS) outperformed nominal Treasury securities as TIPS prices began to reflect stronger economic sentiment and higher inflation expectations following the U.S. election result. The 10-year break-even inflation rate increased over the quarter, from 1.61% to 1.97%. The 10-year TIPS real yield real rose 50 basis points, and the 5-year TIPS real yield increased 33 basis points.

Vanguard Inflation-Protected Securities Fund underperformed its benchmark and the average return of its peers (–1.63%). The fund invests almost exclusively in TIPS, and its performance can vary from those of competing funds, which may hold other types of securities of varying durations, including short-term TIPS and other real-return assets. At quarter-end, the fund’s duration was 7.5 years, modestly higher than the benchmark’s, which detracted from performance.

For the 12 months ended December 31, the Bloomberg Barclays U.S. Treasury Inflation Protected Securities Index returned 4.68%. That index outperformed both the Bloomberg Barclays U.S. Aggregate Bond Index (+2.65%) and the Bloomberg Barclays U.S. Treasury Index (+1.04%) as the 10-year break-even inflation rate rose from 1.58% to 1.97%.

The fund’s return, after expenses, for the 12 months was slightly below that of its benchmark and the average return of its peers (+4.70%). Although the fund benefited from its duration positioning, its modest expense ratio offset that benefit relative to the benchmark.

People and Process

Vanguard Inflation-Protected Securities Fund seeks to provide inflation protection and income consistent with investments in Treasury inflation-protected securities. The fund is actively managed using a style-pure, risk-controlled approach that seeks high predictability of returns relative to the benchmark. At least 80% of assets are invested in inflation-indexed bonds issued by the U.S. government, government agencies, and corporations. The fund may invest up to 20% of assets in nominal Treasury and corporate bonds, although this option is generally not used. The managers seek to position portfolio holdings along the Treasury inflation-protected securities yield curve, exploiting bond pricing inefficiencies and changes in inflation. The fund provides unique portfolio diversification benefits due to its low correlations with nominal Treasury bonds and stocks.

Vanguard Fixed Income Group

Launched in 1975, The Vanguard Group, Malvern, Pennsylvania, is among the world's largest equity and fixed income managers. As chief investment officer and managing director, Mortimer J. Buckley oversees Vanguard's Equity Index, Quantitative Equity, and Fixed Income Groups. Gregory Davis, CFA, principal and global head of Fixed Income Group, has direct oversight responsibility for all money market, bond, and stable value portfolios managed by the Fixed Income Group. The Fixed Income Group offers actively managed investments in U.S. Treasury, corporate, and tax-exempt securities, as well as passively managed index portfolios. Since 1981, it has refined techniques in total-return management, credit research, and index sampling to seek to deliver consistent performance with transparency and risk control. The group has advised Vanguard Inflation-Protected Securities Fund since 2000.

Investment Manager Biographies

Gemma Wright-Casparius, Principal. Portfolio manager. Advised the fund since 2011. Worked in investment management since 2005. B.B.A., Bernard M. Baruch College of The City University of New York. M.B.A., Bernard M. Baruch College of The City University of New York.


Vanguard Inflation-Protected Securities Fund

Total Returns

QuarterYear

to Date 1 Year 3 Years 5 Years 10 Years

Inflation-Protected Securities Fund

Investor Shares (6/29/2000) -2.69% 4.52% 4.52% 2.13% 0.71% 4.11%

Admiral Shares (6/10/2005) -2.66 4.62 4.62 2.26 0.82 4.22

Institutional Shares (12/12/2003) -2.68 4.63 4.63 2.30 0.85 4.26

Bloomberg Barclays U.S. TreasuryInflation Protected Securities Index -2.41 4.68 4.68 2.26 0.89 4.36

Inflation-Protected Bond Funds Average -1.63 4.70 4.70 1.28 0.41 3.39

The performance data shown represent past performance, which is not a guarantee of future results. Investment returns and principal value willfluctuate, so investors’ shares, when sold, may be worth more or less than their original cost. Current performance may be lower or higher than theperformance data cited. For performance data current to the most recent month end, visit our website at vanguard.com/performance.Figures for periods of less than one year are cumulative returns. All other figures represent average annual returns. Performance figures include thereinvestment of all dividends and any capital gains distributions. All returns are net of expenses.

Note: Average fund returns are derived from data provided by Lipper, a Thomson Reuters Company. Admiral class shareholders are required to maintainspecific minimum balances and meet other special criteria. Institutional class shareholders are required to maintain a minimum balance of $5 million.



Quarterly Returns: Investor Shares

Year-End

Year 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

Inflation-ProtectedSecurities

Fund

BloombergBarclaysInflation

ProtectedSecurities

IndexAssets

(Millions)

2016 4.60% 1.73% 0.95% -2.69% 4.52% 4.68% $4,496

2015 1.24 -1.27 -0.91 -0.87 -1.83 -1.44 4,746

2014 1.99 3.72 -1.98 0.13 3.83 3.64 5,604

2013 -0.34 -7.34 0.84 -2.19 -8.92 -8.61 6,577

2012 0.75 3.17 2.14 0.57 6.78 6.98 16,075

2011 1.85 3.40 4.84 2.56 13.24 13.56 15,220

2010 0.36 3.90 2.57 -0.74 6.17 6.31 12,979

2009 5.25 0.25 3.05 1.91 10.80 11.41 12,946

2008 5.31 -0.14 -3.88 -3.89 -2.85 -2.35 8,593

2007 2.39 -0.70 4.50 5.03 11.59 11.63 6,662

2006 -2.14 0.48 3.52 -1.34 0.43 0.41 5,440

Quarterly Returns: Admiral Shares

Year-End



Fund


ProtectedSecurities

IndexAssets

(Millions)

2016 4.56% 1.76% 1.01% -2.66% 4.62% 4.68% $12,205

2015 1.27 -1.26 -0.89 -0.80 -1.69 -1.44 10,533

2014 2.07 3.75 -1.98 0.17 3.97 3.64 10,778

2013 -0.30 -7.35 0.91 -2.22 -8.86 -8.61 11,005

2012 0.75 3.25 2.13 0.62 6.90 6.98 16,011

2011 1.82 3.43 4.86 2.59 13.29 13.56 13,533

2010 0.43 3.92 2.59 -0.71 6.31 6.31 11,440

2009 5.27 0.34 3.06 1.94 10.96 11.41 8,723

2008 5.33 -0.16 -3.79 -3.90 -2.78 -2.35 4,726

2007 2.43 -0.69 4.54 5.04 11.69 11.63 3,487

2006 -2.07 0.43 3.58 -1.32 0.52 0.41 2,566



Quarterly Returns: Institutional Shares

Year-End



Fund


ProtectedSecurities

IndexAssets

(Millions)

2016 4.58% 1.79% 1.01% -2.68% 4.63% 4.68% $8,637

2015 1.26 -1.31 -0.85 -0.76 -1.67 -1.44 7,471

2014 2.08 3.75 -1.93 0.20 4.07 3.64 8,449

2013 -0.25 -7.35 0.91 -2.24 -8.83 -8.61 8,919

2012 0.73 3.24 2.17 0.57 6.87 6.98 12,491

2011 1.90 3.37 4.88 2.63 13.39 13.56 10,367

2010 0.47 3.92 2.60 -0.74 6.33 6.31 7,720

2009 5.37 0.31 3.08 1.90 11.03 11.41 5,931

2008 5.34 -0.14 -3.82 -3.93 -2.81 -2.35 3,250

2007 2.55 -0.75 4.60 5.04 11.82 11.63 2,248

2006 -2.14 0.53 3.53 -1.36 0.46 0.41 1,587

Fund Facts

InvestorShares

AdmiralShares

InstitutionalShares

Fund Number 0119 5119 1190

Ticker VIPSX VAIPX VIPIX

NewspaperListing

InflaPro InfProAd InPrSeIn

CUSIP Number 922031869 922031737 922031745

Assets (millions)(Total $25,338)

$4,496 $12,205 $8,637

Inception 6/29/2000 6/10/2005 12/12/2003

Expense Ratio(as of 4/2016) 0.20% 0.10% 0.07%

0 In real terms, not adjusted for projected inflation. The principalamounts�and thus the interest payments�of these securities areadjusted over time to reflect inflation.

Volatility MeasuresR-Squared Beta

BloomBarc US Trsy Inflat Prtcd Idx 0.99 1.02

BloomBarc US Aggregate Bond Index 0.72 1.19

R-squared and beta are calculated from trailing 36-month fund returnsrelative to the associated benchmark.

Distribution by Credit Quality

% of Portfolio

U.S. Government 99.6%

Aaa 0.4

Aa 0.0

A 0.0

Baa 0.0

Less Than Baa 0.0

Total 100.0%

Credit-quality ratings are measured on a scale that generally ranges fromAAA (highest) to D (lowest). ""NR"" is used to classify securities for which arating is not available. NR securities may include a fund's investment inVanguard Market Liquidity Fund or Vanguard Municipal Cash ManagementFund, each of which invests in high-quality money market instruments andmay serve as a cash management vehicle for the Vanguard funds, trusts,and accounts. U.S. Treasury, U.S. Agency, and U.S. Agencymortgage-backed securities appear under ""U.S. Government.""Credit-quality ratings for each issue are obtained from Barclays using ratingsderived from Moody's Investors Service (Moody's), Fitch Ratings (Fitch),and Standard & Poor's (S&P). When ratings from all three agencies areavailable, the median rating is used. When ratings are available from two ofthe agencies, the lower rating is used. When one rating is available, thatrating is used.



Distribution by Effective Maturity

% ofPortfolio

Under 1 Year 0.4%

1 to 3 Years 13.4%

3 to 5 Years 20.4%

5 to 10 Years 43.3%

10 to 20 Years 11.9%

20 to 30 Years 10.6%

Over 30 Years 0.0%

Total 100.0%

Fixed Income Characteristics


Fund


ProtectedSecurities

Index

Number of bonds 42 37

Average effective maturity 8.5 years 8.3 years

Average duration 7.9 years 7.8 years

Short-term reserves 0.5% �

The duration listed above estimates the percentage change in the price ofthe fund for a given change in nominal interest rates on conventionalTreasury securities. Actual inflation-protected securities (TIPS) pricemovements could be significantly different than implied by this estimate.The relationship of TIPS and conventional bonds varies and is difficult topredict with accuracy.

Distribution by Issuer

% of Portfolio

Asset-Backed 0.0%

Commercial Mortgage-Backed 0.0

Finance 0.0

Foreign 0.0

Government Mortgage-Backed 0.0

Industrial 0.0

Treasury/Agency 99.6

Utilities 0.0

Other 0.4

Total 100.0%

Important information

Visit our website, call 866-499-8473, or contact your broker to obtain a product description and prospectus or ifavailable, a summary prospectus for Vanguard ETF™ Shares. Investment objectives, risks, charges, expenses, andother important information are contained in these documents; read and consider them carefully before investing. Formore information about Vanguard funds, visit www.vanguard.com, or call 800-523-1036, to obtain a prospectus, or ifavailable, a summary prospectus.

Vanguard ETF Shares are not redeemable with the issuing Fund other than in very large aggregations worth millionsof dollars. Instead, investors must buy or sell Vanguard ETF Shares in the secondary market and hold those shares in abrokerage account. In doing so, the investor may incur brokerage commissions and may pay more than net asset valuewhen buying and receive less than net asset value when selling. Investments in bond funds and ETFs are subject to interest rate, credit, and inflation risk. The Fund is subject to interest rate risk,which is the chance that bond prices overall will decline because of rising interest rates. Interest rate risk is expected to beextremely high for the Fund because it invests mainly in zero coupon long-term bonds, which have prices that are very sensitiveto interest rate changes. Because the Fund invests mainly in Treasury strips with maturities ranging from 20 to 30 years, risinginterest rates may cause the value of the Fund's investments to decline significantly.

All investing is subject to risk, including the possible loss of the money you invest.

London Stock Exchange Group companies includes FTSE International Limited (“FTSE”), Frank Russell Company (“Russell”),MTS Next Limited (“MTS”), and FTSE TMX Global Debt Capital Markets Inc (“FTSE TMX”). All rights reserved. “FTSE®”,“Russell®”, “MTS®”, “FTSE TMX®” and “FTSE Russell” and other service marks and trademarks related to the FTSE or Russellindexes are trade marks of the London Stock Exchange Group companies and are used by FTSE, MTS, FTSE TMX and Russellunder licence. All information is provided for information purposes only. No responsibility or liability can be accepted by theLondon Stock Exchange Group companies nor its licensors for any errors or for any loss from use of this publication. Neither theLondon Stock Exchange Group companies nor any of their licensors make any claim, prediction, warranty or representationwhatsoever, expressly or impliedly, either as to the results to be obtained from the use of the index or the fitness or suitability ofthe index for any particular purpose to which it might be put.

The funds or securities referred to herein are not sponsored, endorsed, or promoted by MSCI, and MSCI bears no liability withrespect to any such funds or securities. For any such funds or securities, the prospectus or the Statement of AdditionalInformation contains a more detailed description of the limited relationship MSCI has with The Vanguard Group and any relatedfunds.

The index is a product of S&P Dow Jones Indices LLC (“SPDJI”), and has been licensed for use by Vanguard. Standard & Poor’s®and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones® is a registered trademarkof Dow Jones Trademark Holdings LLC (“Dow Jones”); S&P® and S&P 500® are trademarks of S&P; and these trademarks havebeen licensed for use by SPDJI and sublicensed for certain purposes by Vanguard. Vanguard product(s) are not sponsored,endorsed, sold or promoted by SPDJI, Dow Jones, S&P, or their respective affiliates and none of such parties make anyrepresentation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions,or interruptions of the index.

The Russell Indexes and Russell® are registered trademarks of Russell Investments and have been licensed for use by TheVanguard Group. The products are not sponsored, endorsed, sold or promoted by Russell Investments and Russell Investmentsmakes no representation regarding the advisability of investing in the products.

CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.

“Dividend Achievers”is a trademark of The NASDAQ OMX Group, Inc. (collectively, with its affiliates, “NASDAQ OMX”) and hasbeen licensed for use by The Vanguard Group, Inc. Vanguard mutual funds are not sponsored, endorsed, sold, or promoted byNASDAQ OMX and NASDAQ OMX makes no representation regarding the advisability of investing in the funds. NASDAQ OMXMAKES NO WARRANTIES AND BEARS NO LIABILITY WITH RESPECT TO THE VANGUARD MUTUAL FUNDS.

Vanguard ETFs are not sponsored, endorsed, sold, or promoted by Barclays. Barclays makes no representation or warranty,express or implied, to the owners of Vanguard ETFs or any member of the public regarding the advisability of investing insecurities generally or in Vanguard ETFs particularly or the ability of the Barclays Index to track general bond marketperformance. Barclays hereby expressly disclaims all warranties of merchantability and fitness for a particular purpose withrespect to the Barclays Index and any data included therein. Barclays’s only relationship to Vanguard and Vanguard ETFs is thelicensing of the Barclays Index which is determined, composed, and calculated by Barclays without regard to Vanguard or theVanguard ETFs. Barclays is not responsible for, and has not participated in, the determination of the timing of, prices of, orquantities of Vanguard ETFs to be issued.

Investments in Target Retirement Funds are subject to the risks of their underlying funds. The year in the Fund name refers to theapproximate year (the target date) when an investor in the Fund would retire and leave the work force. The Fund will graduallyshift its emphasis from more aggressive investments to more conservative ones based on its target date. An investment in theTarget Retirement Fund is not guaranteed at any time, including on or after the target date.

© 2017 The Vanguard Group, Inc. All rights reserved.U.S. Pat. No. 8,180,695; 8,185,464; 6,879,964 B2; 7,337,138; 7,720,749; 7,925,573; 8,090,646 and 8,417,623.Vanguard Marketing Corporation, Distributor.

Investment commentary

Connect with Vanguard® > vanguard.com For institutional use only. Not for distribution to retail investors.

Investor Shares Fourth Quarter 2016

Inception date June 29, 2000

Fund number 0119

Fund profile December 31, 2016

CUSIP number 922031869

Ticker symbol VIPSX

Newspaper listing InflaPro

• The broad domestic taxable bond market modestly declined over the fourth quarter of 2016as yields increased sharply, especially among government securities and acrosslonger-dated maturities. Corporate bonds outperformed government bonds as creditspreads compressed. In bond markets abroad, yields also moved higher, and inflationexpectations were buoyed by a rally in oil prices following OPEC’s agreement to curbproduction. The U.S. Federal Reserve increased interest rates in December, while theEuropean Central Bank announced an extension of its asset purchase program through2017. In this environment, the Bloomberg Barclays U.S. Treasury Index returned –3.84% asthe 10-year Treasury yield increased sharply, from 1.59% to 2.44%. The Barclays U.S.Treasury Inflation Protected Securities Index, the fund’s benchmark, returned –2.41%.

• Treasury Inflation-Protected Securities (TIPS) outperformed nominal Treasury securities asTIPS prices began to reflect stronger economic sentiment and higher inflation expectationsfollowing the U.S. election result. The 10-year break-even inflation rate increased over thequarter, from 1.61% to 1.97%. The 10-year TIPS real yield real rose 50 basis points, andthe 5-year TIPS real yield increased 33 basis points.

• Vanguard Inflation-Protected Securities Fund underperformed its benchmark and theaverage return of its peers (–1.63%). The fund invests almost exclusively in TIPS, and itsperformance can vary from those of competing funds, which may hold other types ofsecurities of varying durations, including short-term TIPS and other real-return assets. Atquarter-end, the fund’s duration was 7.5 years, modestly higher than the benchmark’s,which detracted from performance.

• For the 12 months ended December 31, the Bloomberg Barclays U.S. Treasury InflationProtected Securities Index returned 4.68%. That index outperformed both the BloombergBarclays U.S. Aggregate Bond Index (+2.65%) and the Bloomberg Barclays U.S. TreasuryIndex (+1.04%) as the 10-year break-even inflation rate rose from 1.58% to 1.97%.

• The fund’s return, after expenses, for the 12 months was slightly below that of itsbenchmark and the average return of its peers (+4.70%). Although the fund benefited fromits duration positioning, its modest expense ratio offset that benefit relative to thebenchmark.

Bond characteristicsInflation-Protected Securities FundNumber of bonds 42Average duration 7.9 yearsAverage effective maturity 8.5 yearsThe duration estimates the fund'spercentage change in price for a givenchange in the real interest rates in the TIPSmarket. Historically, the real interest rateson TIPS have been somewhat less volatilethan the nominal yields of conventional USTreasury bonds. However, the relationshipvaries over time and is difficult to predict.There may be periods when TIPS realyields and prices are more volatile thanconventional Treasury bonds.

Benchmark characteristicsBloomberg Barclays U.S. Treasury InflationProtected Securities IndexNumber of bonds 37Average duration 7.8 yearsAverage effective maturity 8.3 years


Expense ratio(as of April 26, 2016) 0.20%

Short-Term Reserves 0.5%

Connect with Vanguard® > vanguard.com

© 2017 The Vanguard Group, Inc.All rights reserved.Vanguard Marketing Corporation, Distributor.

FC0119 122016

All funds are subject to market risk, including the possible loss of principal. Bond funds are subject to the risk that an issuer will fail to make payments on time, and that bond prices will decline because of risinginterest rates or negative perceptions of an issuer’s ability to make payments. While U.S. Treasury or government agency securities provide substantial protection against credit risk, they do not protect investorsagainst price changes due to changing interest rates. Unlike stocks and bonds, U.S. Treasury bills are guaranteed as to the timely payment of principal and interest.For more information about Vanguard funds or to obtain a prospectus, see below for which situation is right for you.If you receive your retirement plan statement from Vanguard or log on to Vanguard’s website to view your plan, visit vanguard.com or call 800-523-1188.If you receive your retirement plan statement from a service provider other than Vanguard or log on to a record keeper’s website that is not Vanguard to view your plan, pleasecall 855-402-2646. Visit vanguard.com to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other importantinformation about a fund are contained in the prospectus; read and consider it carefully before investing.

Advisors: For more information about Vanguard funds, visit advisors.vanguard.com, or call 800-997-2798, to obtain a prospectus.

Total returns

Periods ended December 31, 2016

QuarterYear to

dateOneyear

Threeyears

Fiveyears

Tenyears

Inflation-Protected Securities FundInvestor Shares (June 29, 2000) -2.69% 4.52% 4.52% 2.13% 0.71% 4.11%

BloomBarc US Trsy Inflat Prtcd Idx -2.41% 4.68% 4.68% 2.26% 0.89% 4.36%

Inflation Protected Bond Funds Avg -1.63% 4.70% 4.70% 1.28% 0.41% 3.39%

The performance data shown represent past performance, which is not a guarantee of future results. Investment returns and principal value will fluctuate, soinvestors’ shares, when sold, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data cited. Forperformance data current to the most recent month-end, visit our website at vanguard.com/performance. Figures for periods of less than one year are cumulative returns. All other figures represent average annual returns. Performance figures include the reinvestment of alldividends and any capital gains distributions. All returns are net of expenses. The performance of an index is not an exact representation of any particular investment, as youcannot invest directly in an index.BloomBarc US Trsy Inflat Prtcd Idx: Includes the inflation-indexed securities within the Bloomberg Barclays U.S. Treasury Bond Index, which represents U.S. Treasuryobligations with maturities of more than 1 year. Inflation Protected Bond Funds Avg: Derived from data provided by Lipper, a Thomson Reuters Company.


Total fund volatility measures


ProtectedSecurities

Index

BloombergBarclays US

Aggregate BondIndex

Fund r-squared 0.99 0.72

Fund beta 1.02 1.19

R-squared and beta are calculated from trailing 36-month fund returns relative tothe associated benchmark.

Investor Shares

Distribution by issuer as % of bonds

Treasury/Agency 99.6%

Other 0.4

Total 100.0%

Distribution by effective maturity as % of bonds

Under 1 Year 0.4%

1 - 3 Years 13.4

3 - 5 Years 20.4

5 - 10 Years 43.3

10 - 20 Years 11.9

20 - 30 Years 10.6

Over 30 Years 0.0

Total 100.0%

Distribution by credit quality as % of bonds

U.S. Government 99.6%

Aaa 0.4

Total 100.0%

Credit-quality ratings are measured on a scale that generally ranges from AAA(highest) to D (lowest). ”NR” is used to classify securities for which a rating is notavailable. NR securities may include a fund’s investment in Vanguard MarketLiquidity Fund or Vanguard Municipal Cash Management Fund, each of whichinvests in high-quality money market instruments and may serve as a cashmanagement vehicle for the Vanguard funds, trusts, and accounts. U.S. Treasury,U.S. Agency, and U.S. Agency mortgage-backed securities appear under ”U.S.Government.” Credit-quality ratings for each issue are obtained from Barclaysusing ratings derived from Moody’s Investors Service (Moody’s), Fitch Ratings(Fitch), and Standard & Poor’s (S&P). When ratings from all three agencies areavailable, the median rating is used. When ratings are available from two of theagencies, the lower rating is used. When one rating is available, that rating isused.

Market Value % ofPortfolio 1 Mo YTD Fiscal

YTD 1 Yr_

Total Fund 122,954,060 100.0 1.2 2.8 6.7 12.7Policy Index 1.3 2.4 5.4 11.0Total Domestic Equity 24,633,118 20.0 3.4 5.6 18.1 29.2

S&P 500 4.0 5.9 14.2 25.0Vanguard Growth Index Ins 9,912,002 8.1 4.4 8.2 13.3 22.6

Spliced Vanguard Large Cap Growth Index 4.4 8.2 13.3 22.6MSCI US Prime Market Growth 4.2 8.1 13.8 22.5

Dodge & Cox Stock 9,808,820 8.0 3.0 5.3 26.9 38.1Russell 1000 Value 3.6 4.3 15.2 29.1

Atlanta Capital Management Company 4,912,296 4.0 2.1 1.3 10.7 23.8Russell 2000 1.9 2.3 21.4 36.1Russell 2500 2.4 3.8 17.4 31.7

Total International Equity 24,099,887 19.6 1.2 5.6 14.7 23.2MSCI EAFE 1.4 4.4 10.3 15.8MSCI ACWI ex USA 1.6 5.2 11.1 19.3Dodge & Cox Intl Stock 12,276,201 10.0 1.2 5.6 20.2 29.9

MSCI ACWI ex USA 1.6 5.2 11.1 19.3American Funds Europacific Growth R6 11,823,685 9.6 1.2 5.7 9.6 17.0

MSCI ACWI ex USA 1.6 5.2 11.1 19.3Total Domestic Fixed 52,664,800 42.8 0.6 0.9 0.0 3.0

BBgBarc US Aggregate TR 0.7 0.9 -1.7 1.4Metropolitan West Core Plus Fixed Income 40,105,677 32.6 0.6 0.9 -0.9 1.9

BBgBarc US Aggregate TR 0.7 0.9 -1.7 1.4Voya Senior Loan Fund 8,023,928 6.5 0.4 0.7 5.1 9.6

S&P/LSTA Leveraged Loan Index 0.5 1.1 6.5 12.7Vanguard Inflation-Protected Securities Adm 4,535,195 3.7 0.4 1.4 -0.3 3.4

BBgBarc US TIPS TR 0.5 1.3 -0.2 3.4

Policy Index as of 3/1/2016: 8% Russell 1000 Value, 8% Spliced Vanguard Large Growth, 4% Russell 2000, 20% MSCI EAFE, 35% BBgBarc US Aggregate, 5% BBgBarc US TIPS, 5% S&P/LSTA Leveraged Loan, 10% NCREIF-ODCE, 5% CPI + 5%. Pooled Cash not included in Total Fund calculation. CPI LOCAL (LA) includes Los Angeles-Riverside-Orange County. FY: 6/30. All manager returns shown net of fees. Effective 3/1/2015 Atlanta SMID Cap strategy changed to Atlanta Small Cap Core strategy. First American Treasury Obligation underwent share class change on 2/18/2016. Vanguard Inflation-Protected Securities underwent share class change on 4/27/2016. Invesco Core Real Estate market value as of 12/31/2016. All data is preliminary.

Pasadena Fire & Police Retirement SystemExecutive Summary - Preliminary (Net of Fees) Period Ending: February 28, 2017

Current % Policy %_

Domestic Equity LargeCap Growth $9,912,002 8.1% $9,836,325 8.0%

Domestic Equity LargeCap Value $9,808,820 8.0% $9,836,325 8.0%

Domestic Equity SmallCap Core $4,912,296 4.0% $4,918,162 4.0%

International Equity $24,099,887 19.6% $24,590,812 20.0%Domestic FixedIncome Core $40,105,677 32.6% $43,033,921 35.0%

Domestic FixedIncome Bank Loans $8,023,928 6.5% $6,147,703 5.0%

Domestic FixedIncome Real Return $4,535,195 3.7% $6,147,703 5.0%

Real Estate $15,481,207 12.6% $12,295,406 10.0%Alternative Investment $6,052,625 4.9% $6,147,703 5.0%Cash and Equivalents $22,423 0.0% $0 0.0%Total $122,954,060 100.0% $122,954,060 100.0%

Pasadena Fire & Police Retirement System 1

Policy Index as of 3/1/2016: 8% Russell 1000 Value, 8% Spliced Vanguard Large Growth, 4% Russell 2000, 20% MSCI EAFE, 35% BBgBarc US Aggregate, 5% BBgBarc US TIPS, 5% S&P/LSTA Leveraged Loan, 10% NCREIF-ODCE, 5% CPI + 5%. Pooled Cash not included in Total Fund calculation. CPI LOCAL (LA) includes Los Angeles-Riverside-Orange County. FY: 6/30. All manager returns shown net of fees. Effective 3/1/2015 Atlanta SMID Cap strategy changed to Atlanta Small Cap Core strategy. First American Treasury Obligation underwent share class change on 2/18/2016. Vanguard Inflation-Protected Securities underwent share class change on 4/27/2016. Invesco Core Real Estate market value as of 12/31/2016. All data is preliminary.

Pasadena Fire & Police Retirement SystemExecutive Summary - Preliminary (Net of Fees) Period Ending: February 28, 2017


Market Value % ofPortfolio 1 Mo YTD Fiscal

YTD 1 Yr_

Total Real Estate 15,481,207 12.6 N/A N/A N/A 8.0NCREIF-ODCE N/A N/A N/A 8.8NCREIF Property Index N/A N/A N/A 8.0Invesco Core Real Estate 15,481,207 12.6 N/A N/A N/A 8.0

NCREIF-ODCE N/A N/A N/A 8.8Total Alternatives 6,052,625 4.9 1.8 4.1 7.8 19.8

CPI + 5% N/A N/A N/A 7.1CPI (UNADJUSTED) N/A N/A N/A 2.4CPI LOCAL (LA) N/A N/A N/A 2.2PIMCO All Asset Ins 6,052,625 4.9 1.8 4.1 7.8 19.8

CPI + 5% N/A N/A N/A 7.1HFRI Fund of Funds Composite Index N/A N/A N/A 5.6

Cash 22,423 0.0 0.0 0.0 0.2 0.2Citi 3mth Treasury Bill 0.0 0.1 0.2 0.3First American Treasury Obligation Z 22,423 0.0 0.0 0.0 0.2 0.2

Citi 3mth Treasury Bill 0.0 0.1 0.2 0.3XXXXX

Pasadena Fire & Police Retirement SystemExecutive Summary with Pooled Cash - Preliminary Period Ending: February 28, 2017

Total MarketValue

% ofPortfolio

DomesticEquity LargeCap Growth

DomesticEquity Large

Cap Value

DomesticEquity Small

Cap Core

InternationalEquity

DomesticFixed Income

Core


Bank Loans


Real ReturnReal Estate Alternative

InvestmentCash and

Equivalents_

Total Fund Total Domestic Equity

Vanguard Growth Index Ins $9,912,002 7.9% $9,912,002Dodge & Cox Stock $9,808,820 7.8% $9,808,820Atlanta Capital Management Company $4,912,296 3.9% $4,912,296

Total International Equity Dodge & Cox Intl Stock $12,276,201 9.8% $12,276,201American Funds Europacific Growth R6 $11,823,685 9.4% $11,823,685

Total Domestic Fixed Metropolitan West Core Plus Fixed Income $40,105,677 32.0% $40,105,677Voya Senior Loan Fund $8,023,928 6.4% $8,023,928Vanguard Inflation-Protected Securities Adm $4,535,195 3.6% $4,535,195

Total Real Estate Invesco Core Real Estate $15,481,207 12.3% $15,481,207

Total Alternatives PIMCO All Asset Ins $6,052,625 4.8% $6,052,625

Cash First American Treasury Obligation Z $22,423 0.0% $22,423

Pooled Cash $2,470,000 2.0% $2,470,000Total $125,424,060 100.0% $9,912,002 $9,808,820 $4,912,296 $24,099,887 $40,105,677 $8,023,928 $4,535,195 $15,481,207 $6,052,625 $2,492,423

XXXXX


MARCH 15, 2017

Asset Allocation Review Presentation to

Pasadena Fire & Police Retirement System

10 year return & risk assumptions

March 15, 2017

Investors wishing to produce expected geometric return forecasts for their portfolios should use the arithmetic return forecasts provided here as inputs into that calculation, rather than the single‐asset‐class geometric return forecasts. This is the industry standard approach, but requires a complex explanation only a heavy quant could love, so we have chosen not to provide further details in this document – we will happily provide those details to any readers of this who are interested.

*Historical volatility of inflation. This is not a forecast.

Asset Class Index ProxyTen Year Return Forecast Standard Deviation

ForecastSharpe Ratio (g)

ForecastSharpe Ratio (a)

ForecastTen Year Historical Sharpe Ratio (g)

Ten Year Historical Sharpe Ratio (a)Geometric Arithmetic

EquitiesUS Large S&P 500 4.7% 5.9% 15.8% 0.16 0.24 0.39 0.45US Small Russell 2000 4.8% 7.0% 21.8% 0.12 0.22 0.30 0.39International Developed MSCI EAFE 9.7% 11.3% 18.9% 0.40 0.48 ‐0.02 0.07International Small MSCI EAFE Small Cap 8.1% 10.5% 23.3% 0.26 0.36 0.09 0.19Emerging Markets MSCI EM 8.6% 11.8% 27.2% 0.24 0.35 0.04 0.16Global Equity MSCI ACWI 7.0% 8.4% 17.9% 0.27 0.35 0.15 0.23Private Equity Cambridge Private Equity 7.8% 10.8% 26.2% 0.22 0.33 0.88 0.89Fixed IncomeCash 30 Day T‐Bills 2.2% 2.2% 1.2% ‐ ‐ ‐ ‐US TIPS Barclays US TIPS 5 ‐ 10 2.6% 2.7% 5.7% 0.08 0.10 0.57 0.59US Treasury Barclays Treasury 7 ‐ 10 year 2.4% 2.7% 6.9% 0.04 0.08 0.70 0.72Global Sovereign ex US Barclays Global Treasury ex US 2.8% 3.3% 10.0% 0.07 0.12 0.23 0.27Core Fixed Income Barclays US Aggregate Bond 3.3% 3.5% 6.5% 0.17 0.20 1.07 1.06Core Plus Fixed Income Barclays US Corporate IG 3.9% 4.2% 8.5% 0.20 0.24 0.75 0.76Short‐Term Gov’t/Credit Barclays US Gov’t/Credit 1 ‐ 3 year 2.6% 2.7% 3.7% 0.13 0.14 1.45 1.44Short‐Term Credit Barclays Credit 1 ‐ 3 year 2.8% 2.9% 3.5% 0.17 0.20 1.08 1.07Long‐Term Credit Barclays Long US Corporate 3.7% 4.2% 9.6% 0.17 0.21 0.56 0.59High Yield Corp. Credit Barclays High Yield 4.5% 5.2% 11.8% 0.20 0.26 0.60 0.63Bank Loans S&P/LSTA 4.5% 5.1% 10.8% 0.22 0.27 0.45 0.48Global Credit Barclays Global Credit 2.0% 2.3% 7.8% ‐0.03 0.01 0.50 0.53Emerging Markets Debt (Hard) JPM EMBI Global Diversified 5.8% 6.6% 13.0% 0.28 0.34 0.66 0.69Emerging Markets Debt (Local) JPM GBI EM Global Diversified 6.5% 7.2% 13.4% 0.35 0.41 0.22 0.28Private Credit High Yield + 200 bps 6.5% 7.2% 11.8% 0.37 0.43 ‐ ‐OtherCommodities Bloomberg Commodity 4.3% 5.5% 16.1% 0.13 0.21 ‐0.37 ‐0.35Hedge Funds HFRI Fund of Funds 6.0% 6.8% 13.2% 0.29 0.35 0.08 0.10Hedge Funds (Fund of Funds) HFRI Fund of Funds 5.0% 5.8% 13.2% 0.22 0.28 ‐ ‐Core Real Estate NCREIF Property 4.6% 5.1% 9.9% 0.25 0.29 1.03 1.03Value‐Add Real Estate NCREIF Property + 200bps 6.6% 8.1% 17.9% 0.25 0.33 ‐ ‐Opportunistic Real Estate NCREIF Property + 400bps 8.6% 11.5% 26.0% 0.25 0.46 ‐ ‐REITs Wilshire REIT 4.6% 6.4% 19.7% 0.1 0.21 0.15 0.28Risk Parity 7.2% 7.7% 10.0% 0.50 0.55 ‐ ‐Inflation 2.1% ‐ 1.4%* ‐ ‐ ‐ ‐

2PFPRS

2017 vs. 2016 return forecast

‐1.2%

‐0.3%

0.5%

‐0.5%

‐2.6%

‐0.3%

0.1%

‐0.1%

0.2%0.3%

0.1%

‐2.6%

0.4%

‐0.5%‐0.6%

‐0.3%

0.3%

0.0%

‐0.1% ‐0.1%

0.1%

‐3.0%

‐2.5%

‐2.0%

‐1.5%

‐1.0%

‐0.5%

0.0%

0.5%

1.0%

Change in Expected Re

turn

March 15, 2017

2017 VS. 2016 RETURN FORECAST

Higher valuations and lower real earnings growth led to a 2.5% drop in the return forecast for EM equity

A significant tightening in spreads was responsible for a 2.7% decrease in the high yield forecast

Higher valuations resulted in a 0.75% decrease in the U.S. large cap equity forecast

3PFPRS

Range of likely 10 year outcomes

March 15, 2017

10 YEAR RETURN 90% CONFIDENCE INTERVAL

‐10%

‐5%

0%

5%

10%

15%

20%

25%

30%

Return

5th to 25th 25th to 50th 50th to 75th 75th to 95th 10 Year Forecast (Geometric)High Volatility Low Volatility

4PFPRS

Correlation assumptions

March 15, 2017

Note: Correlation assumptions are based on the last ten years. Private Equity and Real Estate correlations are especially difficult to model – we have therefore used BarraOne correlation data to strengthen these correlation estimates.

Cash US Large US Small

Developed Large

Developed Small EM Global

Equity PE US TIPS US Treasury

Global Sovereign ex US

US Core

US Core Plus

Short –Term

Govt/Credit

Short‐Term Credit

Long‐Term Credit

US HY Bank Loans

Global Credit

EMD USD

EMD Local

Commodities

Hedge Funds

Real Estate REITs Risk

Parity Inflation

Cash 1.0

US Large ‐0.2 1.0

US Small ‐0.2 0.9 1.0Developed

Large ‐0.1 0.9 0.8 1.0Developed

Small ‐0.2 0.8 0.8 1.0 1.0

EM ‐0.1 0.8 0.7 0.9 0.9 1.0

Global Equity ‐0.1 1.0 0.9 1.0 0.9 0.9 1.0

PE ‐0.2 0.7 0.7 0.6 0.5 0.5 0.7 1.0

US TIPS 0.1 0.2 0.1 0.3 0.3 0.4 0.3 0.0 1.0

US Treasury 0.1 ‐0.3 ‐0.3 ‐0.2 ‐0.2 ‐0.2 ‐0.3 ‐0.2 0.6 1.0Global

Sovereign ex US

0.1 0.2 0.1 0.4 0.4 0.4 0.3 ‐0.1 0.6 0.5 1.0

US Core 0.1 0.0 ‐0.1 0.1 0.1 0.2 0.1 ‐0.1 0.8 0.9 0.6 1.0

US Core Plus ‐0.1 0.3 0.3 0.5 0.5 0.5 0.5 0.0 0.7 0.5 0.5 0.8 1.0Short –Term Govt/Credit 0.4 ‐0.1 ‐0.1 0.1 0.1 0.1 0.0 ‐0.2 0.6 0.6 0.6 0.7 0.5 1.0Short‐Term

Credit 0.1 0.3 0.2 0.5 0.5 0.5 0.4 ‐0.2 0.5 0.2 0.5 0.5 0.8 0.6 1.0Long‐Term Credit ‐0.1 0.3 0.2 0.4 0.4 0.4 0.4 ‐0.1 0.6 0.5 0.5 0.8 1.0 0.4 0.6 1.0

US HY ‐0.2 0.7 0.7 0.8 0.8 0.8 0.8 0.4 0.4 ‐0.2 0.3 0.2 0.6 0.1 0.6 0.5 1.0

Bank Loans ‐0.2 0.6 0.6 0.6 0.6 0.6 0.6 0.2 0.2 ‐0.4 0.0 0.0 0.4 ‐0.2 0.5 0.3 0.8 1.0

Global Credit ‐0.1 0.6 0.5 0.8 0.8 0.8 0.7 0.2 0.6 0.2 0.7 0.6 0.8 0.5 0.7 0.8 0.8 0.5 1.0

EMD USD ‐0.1 0.6 0.5 0.7 0.7 0.7 0.7 0.3 0.7 0.3 0.5 0.6 0.8 0.4 0.6 0.7 0.8 0.5 0.9 1.0

EMD Local 0.1 0.6 0.6 0.8 0.7 0.8 0.7 0.3 0.5 0.1 0.7 0.4 0.6 0.4 0.5 0.5 0.7 0.4 0.8 0.8 1.0

Commodities 0.0 0.5 0.4 0.6 0.6 0.7 0.6 0.2 0.3 ‐0.2 0.4 0.1 0.3 0.2 0.4 0.2 0.5 0.4 0.6 0.5 0.6 1.0

Hedge Funds ‐0.1 0.7 0.6 0.8 0.8 0.8 0.8 0.6 0.2 ‐0.3 0.1 0.0 0.4 0.0 0.4 0.3 0.7 0.6 0.6 0.5 0.5 0.6 1.0

Real Estate ‐0.1 0.3 0.3 0.3 0.3 0.3 0.3 0.2 0.1 0.0 0.1 0.0 0.1 0.0 0.0 0.1 0.2 0.0 0.2 0.2 0.2 0.0 0.2 1.0

REITs ‐0.1 0.7 0.8 0.7 0.6 0.6 0.7 0.5 0.3 0.0 0.3 0.3 0.5 0.1 0.3 0.4 0.7 0.5 0.6 0.6 0.6 0.3 0.4 0.4 1.0

Risk Parity 0.1 0.5 0.4 0.6 0.6 0.6 0.6 0.0 0.7 0.4 0.6 0.6 0.7 0.5 0.6 0.6 0.5 0.3 0.8 0.7 0.7 0.6 0.5 ‐0.1 0.4 1.0

Inflation 0.1 0.1 0.1 0.1 0.1 0.1 0.2 0.2 0.2 ‐0.2 0.0 ‐0.1 ‐0.1 0.0 ‐0.1 ‐0.2 0.2 0.3 0.1 0.1 0.1 0.3 0.3 0.1 0.1 0.0 1.0

5PFPRS

Asset Allocation

Current Allocation as of March 3, 2017Mix 2: 10% Private Mortgage allocation modeled as Core Fixed Income

March 15, 20176PFPRS

ReturnStandard Deviation

US Large 15.9 16 16 16 16 4.7 15.8

US Small 3.9 4 4 4 4 4.8 21.8

Total Domestic Equity 19.8 20 20 20 20

International Developed 14.4 20 20 20 20 9.7 18.9

Emerging Markets 4.9 0 0 0 0 8.6 27.2

Total Int'l Equity 19.3 20 20 20 20

Total Equity 39.1 40 40 40 40

Core Fixed Income 0 35 30 25 20 3.3 6.5

Core Plus Fixed Income 33.8 0 0 0 0 3.9 8.5

Short‐Term Gov't/Credit 0 0 5 10 10 2.6 3.7

Bank Loans 6.4 5 5 5 10 4.5 10.8

US TIPS 3.6 5 5 5 5 2.6 5.7

Total Fixed Income 43.8 45 45 45 45

Core Real Estate 12.3 10 10 10 10 4.6 9.9

Total Real Assets 12.3 10 10 10 10

Hedge Fund (Fund of Funds) 4.8 5 5 5 5 5.0 13.2

Total Non‐Public Investments 4.8 5 5 5 5

Cash 0 0 0 0 0 2.2 1.2

Total Allocation 100 100 100 100 100

CMA's (10 Yr)

Current Allocation Current Policy Mix 1 Mix 2 Mix 3

Scenario Analysis

Note: It is difficult to fully incorporate macro factors for opaque illiquid investments such as private equity and hedge funds

The forecasted 10 year return for the Current Policy in 2016 was 5.6%.



Forecast 10 Year Return 5.7 5.6 5.5 5.5 5.5

Standard Deviation 9.6 8.4 8.4 8.3 8.5

Return/Std. Deviation 0.60 0.66 0.66 0.66 0.65

1st percentile ret. 1 year ‐14.80 ‐13.41 ‐13.43 ‐13.29 ‐13.28

Sharpe Ratio 0.42 0.44 0.44 0.44 0.44

10 Year Return Forecast

Stagflation 5.7 5.5 5.5 5.5 5.4

Weak 2.9 2.6 2.6 2.5 2.5

Base CMA 5.8 5.6 5.6 5.6 5.6

Strong 9.2 9.1 9.0 9.0 9.1

Range of Scenario Forecast 6.4 6.5 6.5 6.5 6.6

Shock (1 year) ‐16.2 ‐15.2 ‐15.2 ‐15.2 ‐15.2

Stagflation ‐0.4 ‐0.6 ‐0.6 ‐0.6 ‐0.7

Weak 1.8 1.5 1.5 1.4 1.4

Base CMA 3.7 3.5 3.5 3.5 3.5

Strong 6.6 6.5 6.4 6.4 6.5

Range of Scenario Forecast 7.1 7.1 7.0 7.0 7.2

10 Year Real Return Forecast

Mean Variance Analysis

Verus Scenario Analysis

Risk Decomposition


5% 5% 5% 4% 4%

76% 78% 79% 80% 81%

9% 7% 7% 7% 7%9% 9% 9% 9% 8%

‐2%

‐1%

0%

1%

2%

3%

4%

5%

6%

7%

‐20%

0%

20%

40%

60%

80%

100%

120%


Rates Credit Equity Inflation Currency Other Total Risk

Tail Risk Scenario Analysis


‐30% ‐25% ‐20% ‐15% ‐10% ‐5% 0% 5% 10% 15% 20% 25%

1972 ‐ 1974 Oil Crisis (Dec. to Sep.)

1987 Market Crash (Oct. 14 to Oct. 19)

1989 ‐ 1990 Nikkei Stock Price Correction

1992 ‐ 1993 European Currency Crisis

1994 US Rate Hike

1997 ‐ 1999 Oil Price Decline

2007 ‐ 2008 Oil Price Rise

2001 Dot‐com Slowdown

2007‐2009 Subprime Mortgage Meltdown(Oct. toFeb.)

2009 July ‐ January

Current Allocation Current Policy Mix 1 Mix 2 Mix 3‐10% ‐5% 0% 5% 10% 15% 20%

1997 ‐ 1999 Oil Price Decline

Global Eq 20%

1989 ‐ 1990 Nikkei Stock Price Correction

Global Eq 20%

Global Credit Spreads ‐100bps

Notices & disclosuresPast performance is no guarantee of future results. This report or presentation is provided for informational purposes only and is directed to institutional clients and eligible institutional counterparties only and should not be relied upon by retail investors. Nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security or pursue a particular investment vehicle or any trading strategy. The opinions and information expressed are current as of the date provided or cited only and are subject to change without notice. This information is obtained from sources deemed reliable, but there is no representation or warranty as to its accuracy, completeness or reliability. This report or presentation cannot be used by the recipient for advertising or sales promotion purposes.

The material may include estimates, outlooks, projections and other “forward‐looking statements.” Such statements can be identified by the use of terminology such as “believes,” “expects,” “may,” “will,” “should,” “anticipates,” or the negative of any of the foregoing or comparable terminology, or by discussion of strategy, or assumptions such as economic conditions underlying other statements. No assurance can be given that future results described or implied by any forward looking information will be achieved. Actual events may differ significantly from those presented. Investing entails risks, including possible loss of principal. Risk controls and models do not promise any level of performance or guarantee against loss of principal.

“VERUS ADVISORY™ and VERUS INVESTORS™ and any associated designs are the respective trademarks of Verus Advisory, Inc. and Verus Investors, LLC. Additional information is available upon request.


Fixed income portfolio summaryStrategy Vehicle Type Benchmark Expense

RatioSecurities Duration2 Constraints

MetWest Core Plus Fixed Income(35% allocation target)

Separate Account (active)

BBgBarc US Aggregate Index

— 0.31%1 — US government obligations

— US and non‐US corporate debt

— MBS and ABS — US local, city and state

obligations— International agencies

(denominated in US dollars or non‐US currencies)

— Repurchase agreements

— Derivative instruments which are liquid

— Cash

— 5.6 years — Average duration +/‐ 20% of the benchmark

— Average quality should be A or higher

— Maximum 20% in bonds rated B or BB

— Maximum 5% allocation to any one corporate issuer

— Maximum 10% cash allocation

Voya Senior Loan (5% allocation target)

Commingled Fund (active)

S&P/LSTA Leveraged Loan Index

— 0.45% — Corporate debt (senior secured, floating rate)

— Cash

— 0.13 years — Non‐investment grade quality

— Maximum 5% allocation to any one industry

Vanguard Inflation Protected Securities(5% allocation target)

Mutual Fund (passive) BBbBarc US TIPS Index

— 0.10% — US government obligations

— Corporate debt— Cash

— 7.9 years — 80% of assets invested in inflation‐indexed bonds issued by US government

— 100% investment grade quality

March 15, 2017PFPRS

1 Fee schedule: 0.35% on first $25mm, 0.25% on next $75mm, 0.20% on remainder2 As of 1/31/2017, BBgBarc US Aggregate Index duration 6.0 years

1

Short-term fixed income previewStrategy Vehicle Type Benchmark Expense

RatioSecurities Duration Constraints

Vanguard Short‐TermInvestment‐Grade Bond (Admiral Share Class)

Mutual Fund (passive)

BBgBarc US 1‐5 Year Credit Index

— 0.10% — US government obligations

— US and non‐US corporate debt

— MBS and ABS — Cash

— 2.6 years — 80% allocation to short‐term and/or intermediate‐termduration

— 95% investment grade quality

— Average maturity between 1 to 4 years

March 15, 2017PFPRS 2

50%

21%

11%

10%8%

Vanguard Short‐Term Investment‐Grade BondSector Allocations

Corporate Government ABS MBS Other

20%

43%

23%

9%5%

Vanguard Short‐Term Investment‐Grade Bond Duration Allocations

< 1 Year 1 ‐ 3 Years 3 ‐ 5 Years 5 ‐ 7 Years 7 ‐ 10 Years

Pasadena Fire &:: Police Retirement System

AGENDA REPORT

TO: Chair Jones and Board Members of the Fire & Polic

FROM: Jill Fosselman, Secretary to the Board

DATE: March 15, 2017

ITEM: Fiscal Year 2017 Midyear Budget Review and Long-term System Forecast

RECOMMENDATION

The Board may direct staff to:

1. Receive and file the report, or 2. Other direction provided by the Board.

BACKGROUND

During this past year's budget discussion, the Board requested that staff prepare a long-term forecast of administrative expenditures to inform the Board prior to consideration of the Fiscal Year 2018 Recommended Budget. At that time, many of the largest expected expenses over the next three-five years were unknown due to either contracts expiring, anticipated but unknown price increases for personnel and services, and potential changes in retiree payroll. Since May 2016, many of these estimated expenses have been determined so that staff was able to develop a realistic long-term forecast of administrative expenditures.

Over the first half of the year staff worked to solidify issues that were yet-to-be resolved at the time of the budget discussion, including retiree payroll provision, new pricing for investment advisory services, and the new contract and pricing for actuarial services. Staff continues to work on securing pricing for the remaining unknown cost for expanded fiduciary liability coverage and cyber liability coverage, and is hopeful quotes will be available to present to the Board for consideration in April. Upon the Board's determination of insurance coverage, the forecast will be updated and presented in conjunction with the FY 2018 Recommended Budget.

MIDYEAR BUDGET REVIEW

Overall, System expenses for administration and retiree payroll are tracking modestly under budget. Based on actual expenditures for the first seven months of the year, it's anticipated that expenditures will be $13,579,534 for the fiscal year, which is $87,083 under the FY 2017 Adopted Budget. The majority of the anticipated savings is expected in retiree payroll, which is estimated to be approximately

March 15, 2017 Page 1of6

FY 2017 Midyear Review and System Forecast

DATE 3/15/2017ITEM #9

$68,000 under budget (based on mortality experience through February). Administration is expected to be at least $18,400 under the adopted budget and is largely due to expected unspent budgets for outside legal ($10,000), conferences and meetings ($3,500), custodial services ($1,575) and internal service changes ($1,286).

The rough budget for retiree payroll is developed on an annual basis by the actuary, and is based on actuarially-expected deaths that will occur over the fiscal year. Administration further refines this estimate based on the System's actual mortality experience over the year. The year-end estimate above is based on experience through February with no further mortality between March and June. Net deaths experienced this fiscal year-to-date is ten (compared to three net deaths last year at this time), thus reducing the total number of participants from 233 on July 1, 2016 to 223 on February 28, 2017. However, it is likely that there will be experience during the last four months of the fiscal year; thus, it's likely the projected savings in retiree payroll will increase. (See Attachment 1 for the detail of the midyear comparison of projected expenses to budget.)

Although overall expenses are expected to stay under budget this fiscal year, personnel costs to the System will increase and likely exceed the adopted budget. There are two reasons for this increase in Personnel:

1. New annual unbudgeted expenses for Worker's Compensation ($1,000) and General Liability ($500). As noted to the Board at an earlier meeting, staff was informed of these expenses after the FY 2017 City budget was adopted.

2. New unbudgeted increase of approximately $2,400 associated with the Administrator's 2.25% COLA increase that was applied in August 2016 based on the Council-approved MOU for the position's bargaining unit. The MOU was approved after the Board adopted the FY 2017 Budget. COLA increases impact employee salary, as well as the costs for CalPERS, Medicare, and nonregular pay benefits (rates of each are applied to gross salary).

LONGTERM ADMINSTRATIVE FORECAST: FY 2018-2027

Two projections are presented for the Board's review: expense projections (all expenses against Fund 667 that are budgeted on an annual basis and tracked on a monthly basis), and an asset reconciliation forecast (the expenses and revenues that are tied to the financial statements and are reflected in the actuarial valuations). Together, these projections present a comprehensive picture of the projected experience of the Fund.

Summary Highlights: FPRS 5-Year and 10-Year Expense Projections

The Expense Projection seeks to identify trends and upcoming challenges from known and estimated expenses of the fund over time. All of the expenses run through the System's pooled cash fund with the City, Fund 667. Largely due to expected mortality among System retirees and beneficiaries, total overall expenses are expected to decline over the 10-year timeframe, although costs for Administration are expected to increase during this period.

Total expenses are anticipated to decline by 4% from $13.58 million in FY 2017 to $13.02 million in FY 2022, and to decline by 12% or $12 million by FY 2027. Conversely, the costs for Administration are expected to rise over the next five and ten-year periods largely due to rising costs in Personnel. Thus,

March 15, 2017 Page 2 of 6


expenses for Administration are anticipated to increase by 16% from $448,000 in FY 2017 to $520,000 in FY 2022, and to further increase by 30% over the FY 2017 level in FY 2027 to $583,000.

Projected Change in Expenses: FY 2017 - FY 2027

Projections Projections

FY 2017Est.

Actual FY 2027

Administration

Total Administration 447,505 520,187 16%

72,682

583,281

Benefits

Retiree Payroll

Change in Admin Expenses FY 2017-2022: $ Change in Admin Expenses FY 2017-2027:

_1_3.._, 1_32....:..,0_2_9 __ 1_,2,'"""50_0_,_,o_oo ____ -5_% 11,400,000

%ChgFrom

FY 17

30%

$ 135,777

-13%

_T_OT_A_L_Ex~p_e_ns_e_s _______ l3-'-,_57_9,~5_34_ 13,020,187 -4% _11~,9_8~3,_28_1 ____ -1_2%_ TOTAL Change in Expenses FY 2017-2022: $ (559,347}

TOTAL Change in Expenses FY 2017-2027: $ (1,596,252}

Notes:

See Attachment 2for the full detail of this chart.

The following assumptions were used to develop the FY 2018-2027 projections (see Attachment 2 for the detail of the annual expense projections per expense category):

1) Personnel assumes an average annual increase of 4% beginning in FY 2018 to project increasing CalPERS medical and retirement costs, COLAs, and other payroll increases. This rate of 4% was provided by City Treasury and is used by the City for General Fund projections. The FY 2018 projection for Personnel is based on the revised budget estimate of $201,000 (increased from $197,800) for FY 2017 to reflect expected increases from worker's compensation, general liability, and the costs associated with the Administrator's 2.25% COLA increase.

2) Misc - Admin in all years includes $6,000 budgeted for staff and trustee training and $10,000 for fiduciary counsel.

3) Misc - Fiduciary Insurance is increased to $20,000 for $10 million in fiduciary liability coverage, plus $2,500 for $1 million in cyber liability coverage beginning in 2018 and held constant until 2022. From FY 2023-2027 the cost of the combined coverage is increased by $2,500 and held flat until 2027.

4) Misc - PAYROLL PensionGold/USB reflects fill expected expenses for payroll beginning in FY 2018 (payroll through U.S. Bank began January 2017). Future costs are calculated based on the number of net payees decreasing by five each year, which reduce the total estimated costs expected each year.

5) Actuary is projected for FY 2018-2020 based on the new Letter of Agreement with Bartel Associates, held flat for an additional two years, then increased by an additional $1,000 and held flat from FY 2023-2027 to accommodate additional GASB reporting requirements. Any additional costs associated with a stochastic analysis to examine valuation assumptions have not been included at this time.

6) Auditor is increased to $49,500 for FY 2018 based on the current contract with Macias Gini & O'Connell, and then is projected to increase by $1,500 annually for each of the following years.



7) Custodian cost estimates reflect a steady decreasing trend due to the decreasing assets held in custody by U.S. Bank. The fee structure is based on a flat rate applied against the value of the assets held in custody.

8) Investment Advisor is fixed per the recently signed advisory agreement for FY 2018-2020, then increased by $5,000 for FY 2021-2023, and finally increased by $5,000 and held constant from FY 2024-2027. These periodic increases seek to mimic the level and style of increase as recently seen in the FY 2018-2020 advisory agreement.

9) Internal Service Charges assume an annual increase of 1% beginning in FY 2018. This rate of 1% was provided by City Treasury and is used by the City for General Fund projections.

10) Retiree Payroll for FY 2018 is estimated based on actual mortality experience in FY 2017 and the 2% COLA increase that will be effective on July 1. The annual payroll costs projected for FY 2019-2027 are from the 6-30-16 actuarial valuation.

Only three cost assumptions are projected to decrease, which include U.S. Bank payroll services, custodial services with U.S. Bank, and retiree benefit payments. Personnel, the largest expense category as a percentage of total administrative expenditures, makes up between 44-51% of the total projected costs for Administration. Based on the assumptions of the projection, the cost for Personnel will surpass all other expenses for Administration beginning in FY 2026.

R R R R R R ~ ~ ~ ~ ~ ~

2016 2017 2018 2019 2020 20212022 2023 2024 2025 2026 2027 Act. Est.

Act.

Summary Highlights: Asset Reconciliation Forecast

-Personnel

-All Other Admin

The asset reconciliation examines trends in the System's Fund (total assets held in trust for pension benefits) through mimicking the annual reconciliation in the valuation and in the financial statements. In addition to projected expenses, projected earnings and City contributions are included (as projected in the June 30, 2016 actuarial valuation report).

The first forecast applies the 5.6% 10-year rate of return as estimated by Verus Investments based on the System's current asset allocation, and the second forecast demonstrates the impact from a 3.0% 10-year rate of return. What becomes immediately evident is that although benefits are decreasing and Administration costs are increasing, in context, the greatest change in the portfolio will come from:

1. Actual earnings/returns on the portfolio, and

March 15, 2017 Page 4 of 6 FY 2017 Midyear Review and System Forecast

2. Actuarially-determined City contribution amounts (the difference between the funded level and target levels per the contribution agreements).

The actual amounts for the City contributions and any variations to the estimated future contributions are more heavily impacted by the degree of fluctuating earnings than from expenses. The following assumptions were used to develop the FY 2017-2027 Asset Reconciliation Forecast (see Attachment 3 for the detail of the two earnings forecasts):

1) Projected City (ER) Contributions for 2017-2027 are taken from the 6-30-16 actuarial valuation report. On an annual basis, the amount of each subsequent year's contribution will change based on each year's AVA Funded Percentage as calculated in the valuation. It is important to note that the AVA Funded Percentage was not recalculated as part of this forecast.

2) Investment Earnings are estimated by subtracting 1/2 of the year's expenses from the beginning market value, then multiplying the net (midyear) figure by the earnings rate.

3). Benefit Payment amounts for FY 2017 and FY 2018 are based on actual mortality experience and the 7-1-17 COLA. The estimates for FY 2019-2027 are taken from the 6-30-16 actuarial valuation report.

4) Investment Expenses are the same as reported on the financial statements and actuarial valuation and consist of expenses for custody, investment advisory, and asset management.

5) Admin Expenses are the same as reported on the financial statements and in the actuarial valuation.

6) The expenses in the Asset Reconciliation Forecast for benefit payments, administration, and investment are tied to the 10-year Expense Projection.

POTENTIAL CHANGES AND ISSUES TO CONSIDER

In addition to the forecast of expenditures, staff is evaluating professional services agreements, staffing positions and levels, administrative workload and appropriateness of certain administrative components, and potential methods to update and streamline current administrative processes.

)o> Options for long-term reduction/elimination of Administrative expenses: • Remove the City's automatic charge on regular pay for 805000 Benefits and direct

charge Fund 667 (actual annual charge is $17,000-20,000),

Only with City Finance Director approval

• Reduce or remove the annual budget of $10,000 for fiduciary counsel, • Maintain current liability coverage limits, and do not add cyber liability coverage (keeps

cost for insurance to approximately $18,500 per year), • Reduce the annual budget for training and education (currently $6,000), and • Rebid the contract for auditing services following the completion of the June 30, 2017

financial audit to seek to lower the cost.

)o> Options to explore the staffing levels for the System based on its long-term needs:

To maintain effective control over administrative needs and practices (including budgeting, accounts payable, preparation and execution of retiree payroll, and general administrative services to retirees), staff believes two staff members are necessary. However, given that the cost for Personnel is the largest expense, it warrants further review.



Salary

Benefits

Subtotal

FY 2017 Revised Budget

Personnel

TOTAL

118,679

65,304

183,983

805000 Benefits (15% on Sala!}'.) 17,802

TOTAL 201,785

%ofTotal

59%

32%

91%

9%

100%

• Total costs are split approximately 60/40 split between the Administrator/MA (60%) and the Sr. Office Assistant (40%). To realize meaningful savings, changes should include the Administrator.

• The savings from possible modifications to the current staffing levels are illustrated below:

Cost Savings Notes

2017 Revised $ 201,785 Current Staffing is (0.75) MA and (0.75) SOA

Options For Future Possible Changes:

(2) 0.5 FTE $ 129,200 $ 72,585 5 hours/day, full benefits (possible future issue)

(1) l.Ofte MA $ 164,973 $ 36,812 control challenges

0. 75 MA 0.5 SOA $ 182,316 $ 19,469 same can be gained by removing 80500 charge

• Any changes in staffing must take into account methods and procedures to ensure internal control.

» Options to explore regarding the future workload for the Board (impacts staffing needs): • Consider changing to bi-monthly or quarterly meetings? • Consider changing the policy of the Board to limit disability hearings to no more than one

per Board meeting?

FISCAL IMPACT

There is no fiscal impact from this report since it is presented for information only.

ATTACHMENTS

1. FY 2017 Midyear Comparison of Projected Expenses to Budget 2. FPRS 5 and 10-Vear Expense Projections 3. Asset Reconciliation Forecast (earnings at 5.6% and 3.0%)



Attachment 1 Fire and Police Retirement Board

FY 2017 MIDYEAR Comparison of Projected Expenses to Budget

(Based on Expenses July 1 throui;ih January 31, 2017)

A B c D E F G H I J

Actual Budget Variance FY 2017

FY 2017 Est. Est. Actual

Acct# Descriptions Year To Year To Year To Est. Actual

Adopted Variance as% of Bgt

Notes Date Date Date Budget

1 Contributions to System: 2 751000 Concord Asset Income 3 668900 Miscellaneous Cash/Income 8,611 class action distributions through March 2017 4 703200 Citv Cash Contributions 0 0 0 - - -5 Total Contributions to System 8,611 0 8,611 - - -6 7 Expenses: 8 800500/5800 Personnel Costs 108,989 115,383 6,394 198,989 197,800 (1, 189 100.6% 9 802200 Retiree Payroll 7,755,862 7,700,000 (55,862) 13, 132,029 13,200,000 67,971 99.5% Expected payroll based on no further mortality (Feb-June)

10 Subtotal Pers./Retiree Payroll 7,864,851 7,815,383 (49,468) 13,331,018 13,397,800 66,782 99.5% 11 12 Services & Supplies: 13 810100 Materials and Supplies 768 846 78 1, 118 1,450 332 77.1% 14 810900 Small Equipment Purchases - - - - - - 0.0% 15 811000 Outside Printing & Duplication 561 567 6 1,448 1,700 252 85.2% 16 811300 Equipment Maintenance 951 1,050 99 1,521 2,100 579 72.4% 17 810800 Computer Related Supplies - Software - - - - - - 0.0%

18 813500 Reference Materials - Subscriptions - - - - - - 0.0% 19 813900 Water 214 175 (39) 340 350 10 97.1% 20 812400 Dues and Memberships 750 250 (500) 750 750 - 100.0% 21 812700/2900 Conferences/Meetings - Board/Staff - 3,000 3,000 2,500 6,000 3,500 41.7% Estimated savings includes funds set aside for anticipated

I training (Elaine & Jill, $300), and 2 to attend the CALAPRS Conference ($2,200)

22 815600 Insurance 18,441 18,441 - 18,441 18,441 - 100.0% 23 811400 Contract Service& 24 811400 Misc Services 4,495 5,000 505 4,495 5,000 505 0.0% 25 811400 Actuarial Services 15,800 19,000 3,200 17,500 19,000 1,500 92.1% Est. expenses include $2,000 towards work on the 6-30-17

valuation in the current fiscal year 26 811400 Asset Managers - - - - - - 0.0%1 27 811400 Auditing Services 42,998 48,000 5,003 47,998 48,000 3 100.0% Est. expenses include $5,000 towards work on the 6-30-17

audit in the current fiscal year 28 811400 PensionGold Svs 705 - (705) 7,060 7,830 770 90.2% 29 811400 Custodial Bank Svs - - - - - - 0.0%

revision date: 3/8/2017

Attachment 1 Fire and Police Retirement Board

FY 2017 MIDYEAR Comparison of Projected Expenses to Budget

(Based on Expenses July 1 throu Jh January 31, 2017)

A B c D E F G H I J

Actual Budget Variance FY 2017

FY 2017 Est. Est. Actual

Acct# Descriptions Year To Year To Year To Est. Actual

Adopted Variance as% ofBgt

Notes Date Date Date Budget

30 811400 Investment Consultant Svs - - - - - - 0.0% 31 811400 Outside Legal Counsel - 5,833 5,833 - 10,000 10,000 0.0% 32 860700 Berwyn Group 300 300 - 300 300 - 100.0% 33 Subtotal Contract Services 64,298 78, 133 13,836 77,353 90, 130 12,777 85.8% 34 814800 Investment Expenses 35 814800 Custodial Bank Svs 13,075 14,000 925 22,425 24,000 1,575 0.0% 37 814800 Investment Consultant Svs 64,167 64,167 (0) 111,250 111,250 (0) 0.0% 38 814800 Subtotal Investment Expenses 77,242 78, 167 925 133,675 135,250 1,575 0.0% 39 Subtotal Services & Supplies 163,224 180,629 17,404 237,145 256,171 19,026 92.6% 40 41 Internal Service Charges: 42 860700 Printing - 67 67 - 100 100 0.0% 43 814400 Postage 1,164 1,429 265 1,814 2,450 636 74.1% 44 862600 Mail Services - 58 58 - 100 100 0.0% 45 861100 IS-Applic. Devel. & Support - 117 117 - 200 200 0.0% 46 861200 IS-PC Network Support - 146 146· - 250 250 0.0% 47 Subtotal Int. Service Charges 1,164 1,817 652 1,814 3,100 1,286 58.5% 48 49 Equipment: 50 850400 EgL1iQ~~nt/Fu_r11i!!!!_~------- __ . ____ - - - - - - 0.0%

---- --------- ----- ----- ----- -·· - --------- ·---- - ---------------- - -- --------- ------- ------- --- ------- -- ------- ----- - ----- --···- ------ ------- ·- --------- --------- -··------------ --------- -----------------···-

51 850600 Computer Equipment 65 - (65) 65 - (65) 0.0% 52 Subtotal Equipment 65 - (65) 65 - (65) 0.0% 53 54 City Service Charges: 55 860100/2000/3400 Structural Maintenance 3,074 3,074 (0) 5,269 5,269 - 100.0% 56 860400 Utilities/Insurance 1,260 1,260 - 2,160 2,160 - 100.0% 57 860500 Housekeeping 983 982 (1) 1,683 1,683 - 100.0% 58 862200 Telephones 45 88 43 95 150 55 63.1% 57 864300 FY13 Cost Allocation Plan - - - - - - 0.0% FPRS not charged this fee 60 Subtotal City Serv Charges 5,526 5,569 41 9,491 9,546 55 99.4% 61 62 Subtotal FPRS Admin Expenses $ 278,968 $ 303,397 $ 24,429 $ 447,505 $ 466,617 $ 19, 112 95.9% 63 64 Total FPRS Operating Expenses $8,034,831 $8,003,397 $ (31,434) $ 13,579,534 $ 13,666,617 $ 87,083 99.4%

revision date: 3/8/2017

Attachment 2

FPRS 5-Year and 10-Year Expense Projections

Proposed FY 2018 Budget and Projections Projections

FY 2016 FY 2017 Est. %Chgfrom %Chgfrom FY 2018 FY 2019 FY2020 FY 2021 FY 2022 FY 2023 FY 2024 FY2025 FY 2026 FY2027

Actual Actual FY2017 FY 2017 Administration

Personnel 187,613 198,989 209,040 217,402 226,098 235,142 244,547 23% 254,329 264,502 275,082 286,086 297,529 50% Misc-Admin 5,857 12,537 22,150 22,150 22,150 22,150 22,150 77% 22,150 22,150 22,150 22,150 22,150 77% Misc - Fiduciary Ins. 18,462 18,441 22,500 22,500 22,500 22,500 22,500 22% 25,500 25,500 25,500 25,500 25,500 38% Misc -PAYROLL PensionGold/USB 7,829 7,060 8,500 8,361 8,196 8,031 7,866 11% 7,701 7,536 7,371 7,206 7,041 0% Actuary 17,240 17,500 16,000 16,500 17,000 17,000 17,000 -3% 18,000 18,000 18,000 18,000 18,000 3% Auditor 53,655 47,998 49,500 51,000 52,500 54,000 55,500 16% 57,000 58,500 60,000 61,500 63,000 31% Custodian 25,813 22,425 21,120 20,387 19,845 19,121 18,297 -18% 17,265 16,032 14,749 13,454 12,105 -46%

Investment A_dvisor 111,250 111,250 115,000 115,000 115,000 120,000 120,000 8% 120,000 125,000 125,000 125,000 125,000 12% Internal Srv Chgs 11,053 11,305 11,846 11,964 12,084 12,205 12,327 9% 12,450 12,575 12,701 12,828 12,956 15% Subtotal Administration 438,771 447,505 475,656 485,264 495,373 510,149 520,187 16% 534,395 549,795 560,553 571,723 583,281 30% Personnel as% of Administration 43% 44% 44% 45% 46% 46% 47% 48% 48% 49% 50% 51%

Change in Admin Expenses FY 2017-2022: 72,682 Change in Admin Expenses FY 2017-2027: 135,777 Benefits

Retiree Payroll 13,447,666 13,132,029 13,200,000 13,000,000 12,800,000 12,700,000 12,500,000 -5% 12,300,000 12,100,000 11,900,000 11,600,000 11,400,000 -13%

TOTAL Expenses 13,886,437 13,579,534 13,675,656 13,485,264 13,295,373 13,210,149 13,020,187 -4% 12,834,395 12,649,795 12,460,553 12,171,723 11,983,281 -12%

TOTAL Change in Expenses FY 2017-2022: {559,347) TOTAL Change in Expenses FY 2017-2027: {1,596,252)

Notes and Projection Assumptions:

1. Admin Personnel assumes an average annual increase of 4% (consistent with City projections) beginning in FY 2018 to project increasing Cal PERS medical and retirement costs, COLAs, and other payroll increases. 2. Misc - Admin in FY 2017 includes one-time $5k for office furniture. In all years $6k budgeted for training, and $10,000 for fiduciary counsel. 3. Misc - Fiduciary Ins is increased to $20,000 for FL coverage at $10m level, plus $2500 for Cyber at $1m level - held flat 2018-2022, increased generally by $3k 2023-2027. 4. Misc - Pension Gold annual contract expired 3-31-2016; USB Payroll began 1/1/17, future costs estimated based on number of payees decreasing by 5 per year. 5. Actuary is projected FY 18-20 based on new LOA, held flat until FY 2022, then increased by $1k/year and held flat for possible additional GASB reporting requirements/COLA. 6. Auditor is increased to $49,500 for FY 2018 based on the current contract, and estimated to increase by $1.5k/year for each year following. 7. Custodian estimates reflects an annual decrease due to decreasing assets (monthly cost based on value of assets). Custodian Rates= 0.0002 for first lOOm, 0.0001 next over lOOm. 8. Investment Advisor is fixed per the advisory agreement FY 2018-20, then increased by $5k FY 2021-23, then increased by $5k and held constant FY 2024-27 due to asset allocation/funding size. 9. Internal Srv Chgs assumes an annual increase of 1%. 10. Retiree Payroll for FY 2018 is estimated based on actual mortality and 2% COLA; FY 2019-2027 projections come from the 6-30-16 actuarial valuation.

R:\Office Docs\Board\Projections\Admin Projections revision date: 3/8/2017

Attachment 3

Asset Reconciliation Forecast (earnings at 5.6%)


FY 2017 Est

Actuals FY2018 FY2019 FY2020 FY 2021 FY 2022 FY2023 FY2024 FY2025 FY2026 FY2027

MV Beginning of Year 126,268 118,986 111,198 103,870 99,226 95,610 91,487 86,324 80,161 73,747 67,272

ER Contribution 700 3,600 4,800 4,300 3,300 2,400 2,300 2,300 2,200

Investment Earnings 6,680 6,270 5,839 5,434 5,176 4,979 4,753 4,469 4,129 3,778 3,421 Benefit Payments (13,132) (13,200) (13,000) (12,800) (12,700) (12,500) (12,300) (12,100) (11,900) (11,600) (11,400)

Investment Expenses (516) (518) (517) (517) (521) (520) (519) (523) (522) (520) (519)

Admin Expenses (314) (340) {350) (361) (371) (382) (397) (409) (421) (433) (446) MV End of Year 118,986 111,198 103,870 99,226 95,610 91,487 86,324 80,161 73,747 67,272 60,528

Actuarial Admin as % of Ending ASSETS:

0.26% 0.31% 0.34% 0.36% 0.39% 0.42% 0.46% 0.51% 0.57% 0.64% 0.74%

FY 2017-2027 AVERAGE Actuarial Admin as% of Ending Assets: 0.45%

Asset Reconciliation Forecast (earnings at 3.0%)


FY 2017 Est FY2018

Actuals FY2019 FY2020 FY 2021 FY 2022 FY 2023 FY2024 FY2025 FY 2026 FY2027

MV Beginning of Year 126,268 115,885 105,093 94,871 87,434 81,061 74,190 66,301 57,463 48,451 39,463 ER Contribution 700 3,600 4,800 4,300 3,300 2,400 2,300 2,300 2,200

Investment Earnings 3,579 3,266 2,945 2,641 2,419 2,231 2,027 1,794 1,531 1,265 998 Benefit Payments (13,132) (13,200) (13,000) (12,800) (12,700) (12,500) (12,300) (12,100) (11,900) (11,600) (11,400)

Investment Expenses (516) (518) (517) {517) (521) (520) (519) (523) (522) (520) (519)

Admin Expenses (314) (340) (350) (361) (371) (382) (397) (409) (421) (433) (446)

MV End of Year 115,885 105,093 94,871 87,434 81,061 74,190 66,301 57,463 48,451 39,463 30,296

Actuarial Admin as % of Ending ASSETS:

0.27% 0.32% 0.37% 0.41% 0.46% 0.51% 0.60% 0.71% 0.87% 1.10% 1.47%

FY 2017-2027 AVERAGE Actuarial Admin as % of Ending Assets: 0.65%

Notes:

1. Projected City (ER) Contributions for 2017-2027 are taken from the 6-30-16 valuation. This will change based on each year's AVA Funded Percentage as calculated in the valuation.

2. Investment Earnings estimated by subtracting 1/2 of the year's expenses from the beginning market value, then multiplying the net (midyear) figure by the earnings rate.

3. Benfit Payment amounts for FY 2017-2018 are estimated based on actual mortality experience and the 7-1-17 COLA, FY 2019-2027 are taken from the 6-30-16 valuation.

4. Investment Expenses are the same as reported on financial statements and actuarial valuation (custody, investment advisory, asset management).

5. Admin Expenses are the same as reported on the financial statements and in the actuarial valuation.

6. Expenses for benefit payments, administration, and investment are tied to the 10-year expense projection for the same time period.

R:\Office Docs\Board\Projections\Admin Projections revision date: 3/8/2017

Fire and Police Retirement Board Administration and Operating Expenses

FY 2017 Comparison of Actual to Budget

For the Month and Year Ended Februarv 28, 2017

A B c D E Actual Budget Variance

For For For Acct# Descriptions Month Month Month

1 System Revenue:

2 751000 Concord Asset Income 0 0 0 3 668900 Miscellaneous Cash/Income 0 0 0 4 703200 Citv Cash Contributions 0 0 0 5 Total System Revenues 0 0 0 6 7 Expenses: 8 800500/5800 Personnel Costs 15,500 16,483 983 9 802200 Retiree Pavroll 1076067 1 100,000 23,933 10 Subtotal Pers./Retiree Payroll 1,091,567 1,116,483 24,917 11 12 Services & Supplies: 13 810100 Materials and Suoolies 0 121 121 14 810900 Small Eauioment Purchases 0 0 0 15 811000 Outside Printinq & Duplication 0 567 567 16 811300 EauiP. Lease Pavments 107 175 68 17 810800 Computer Related Supplies - Software 0 0 0 18 813500 Reference Materials - Subscriotions 0 0 0 19 813900 Water 15 29 14 20 812400 Dues and Membershios 0 0 0 21 812700/2900 Conferences/Meetinqs - Board/Staff 0 500 500 22 815600 Insurance 0 0 0 23 811400 Contract Services 0 0 0 24 811400 Misc Services 0 0 0 25 811400 Actuarial Services 200 0 72001 26 811400 Asset Manaaers 0 0 0 27 811400 Auditing Services 0 0 0 28 811400 PensionGold Svs 711 7,830 7,119 29 811400 Custodial Bank Svs 0 0 0 30 811400 Investment Consultant Svs 0 0 0 31 811400 Outside Leaal Counsel 0 833 833 32 860700 Berwvn Group 0 0 0 33 Subtotal Contract Services 911 8,663 7,752 34 814800 Investment Expenses 35 814800 Misc/Other Fees 0 0 0 36 814800 Custodial Bank Svs 1,870 2,000 130 37 814800 Investment Consultant Svs 9,167 9,167 (0)

38 814800 Subtotal Investment Exoenses 11 037 11 167 130 39 Subtotal Services & Supplies 12,070 21,222 9,152

40 41 Internal Service Charges: 42 860700 Printina 0 0 0 43 814400 Postage 100 204 104 44 862600 Mail Services 0 8 8

45 861100 IS-Applic. Devel. & Suooort 0 17 17

46 861200 IS-PC Network Suooort 0 21 21 47 Subtotal Int. Service Charges 100 250 150

48 49 Equipment: 50 850400 EquipmenUFurniture 0 0 0

51 850600 Computer Eauipment 0 0 0

52 Subtotal Equipment 0 0 0

53

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DATE 3//5/W 1-:::r 1-rr=i n .u. I f"i -

"- IV1

F G H Actual Variance

Year To Budget Year To Date Year To Date Date

0 0 0

8,400 0 8,400 0 0 0

8,400 0 8,400

124,489 131,867 7,378 8,831,929 8 800 000 131,929) 8,956,418 8,931,867 (24,551)

768 967 199 0 0 0

561 1,133 572 1,058 1,400 342

0 0 0 0 0 0

229 233 5 750 750 0

0 4,000 4,000 18,441 18,441 0

0 0 0 4,495 5,000 505

16,000 19,000 3,000 0 0 0

42,998 48,000 5,003 2,133 7,830 5,697

0 0 0 0 0 0 0 6,667 6,667

300 300 0 65,926 86,797 20,871

0 0 0 14,945 16,000 1,055 73,333 73,333 (0) 88 278 89,333 1,055

176,011 203,054 27,044

0 67 67 1,264 1,633 369

0 67 67 0 133 133 0 167 167

1,264 2,067 802

0 0 0 65 0 (65) 65 0 (65)

3/8/2017 8:51 AM FPRS Adopted Budget FY 2017 linked

February

A

Acct# 54 55 860100/2000/3400 56 860400 57 860500 58 862200 59 863600 60 864300 61 62

63 64

65

66

67 68

Fire and Police Retirement Board Administration and Ooerating Expenses

FY 2017 Comparison of Actual to Budget

For the Month and Year Ended Februarv 28, 2017

B c D E F G H Actual Budget Variance Actual Variance

For For For Year To Budget Year To Descriptions Month Month Month Date Year To Date Date

City Service Charges: Struct MainUPrev MainUSec 439 439 0 3,513 3,513 (0) Utilities and Insurance 180 180 0 1,440 1,440 0 Housekeepinq 140 140 0 1,123 1,122 (1) Telephones 10 13 3 55 100 45 DolT Desktop Replacement Proq 24 24 (Q 188 189 1 FY 2014 Cost Allocation Proa 0 0 0 0 0 0 Subtotal City Serv Charges 793 796 2 6,319 6,364 45

Subtotal FPRS Admin Expenses 28,463 38,751 10,288 308,148 343,352 35,204

Total FPRS Operating Expenses 1,104,529 1,138,751 34,221 9,140,077 9,143,352 3,275

City Legal Expenses (I. Safie) 0 14,296

Balance of FPRS Funds Actual for Actual for

US Bank - Beg. Of Month 121,310,746 Investment Expenses Month YTD

Receiots 0 Atlanta Cao Qtlv <USB) 0 20,187

Investment Income 0 MetWest Qtlv <USB) 0 65,985

Disbursements 0 Invesco <USB\ 0 91, 199

Fees & Exoenses 0 Vova <USB) 3,050 23,538

Net Chq in Unrealized Gain/Loss 0 Class Action Fees (USB) 0 303

Realized Gain/Loss 0 Misc/Other 0 0

US Bank - End Of Month* 122,954,000 US Bank 1,870 14,945

Equity in Pooled Cash (100100) 2,465,348 Verus Investments 9 167 73 333

Concord Investment 0 Total Investment Exp 14,087 289,491

Total FPRS Funds on Deposit 125,419,348

*Total is from Verus' Februarv 28 2017 Performacne Uodate IUS Bank statements not available at time of Board oacket oreoaration\.

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3/8/2017 8:51 AM FPRS Adopted Budget FY 2017 linked

February

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