i. performance and asset allocation - tmrs 8 q4 2016 staff report... · 2 i. performance and asset...

2

I. Performance and Asset Allocation

• Asset Allocation: Current and Target Allocations (page 4)

• Performance by Asset Class (page 5)

II. Public Equities • Asset Class Overview (page 7) • Portfolio Management Structure (page 8) • Allocation (page 9-10) • Managers’ Proxy Votes (11) • Performance (page 12-13)

III. Fixed Income

• Core Fixed Income • Asset Class Overview (page 15) • Portfolio Management Structure (page 16) • Allocation (page 17) • Performance (page 18)

• Non-Core Fixed Income • Asset Class Overview (page 19) • Portfolio Management Structure (page 20) • Allocation (page 21) • Performance (page 22)

IV. Real Estate

• Asset Class Overview (page 24) • Portfolio Management Structure (page 25) • Allocation (page 26) • Performance (page 27-29)

V. Real Return • Asset Class Overview (page 31) • Portfolio Management Structure (page 32-33) • Allocation (page 34) • Managers’ Proxy Votes (page 35) • Performance (page 36)

VI. Absolute Return

• Asset Class Overview (page 38) • Portfolio Management Structure (page 39) • Allocation (page 40) • Performance (page 41)

VII. Private Equity

• Asset Class Overview (pages 43) • Portfolio Management Structure (page 44) • Allocation (page 45-46) • Performance (page 47)

VIII. Compliance • Compliance Overview (page 49) • Investment Guideline Compliance (page 50) • Pacing Plan Update (page 51)

IX. Risk Management

• Overview (page 53) • Updates (page 54)

3

I. Performance and Asset Allocation

4

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

Core FixedIncome

US Equities Non-USEquities

Real Return Real Estate PrivateEquity

AbsoluteReturn

Non-CoreFixed Income

CashEquivalents

Perc

ent A

lloca

ted

TMRS Investment Portfolio Asset Allocation as of 12/31/2016

Current Allocation

Allocation RecognizingUnfunded Commitments

Target Allocation

5

1 Year Performance 5 Year Performance

*Real Estate return as of prior quarter end (real estate returns are available on a quarterly basis only) ^Performance is the annualized return since inception, since performance history is less than 5 years Source: State Street Investment Services

7.0%

2.9%

7.6%

13.2%

3.5%

6.9%

12.3%

2.3%

6.8%

2.7%

13.6% 12.7%

4.4% 4.0%

10.0%

0.3% 0.0%

5.0%

10.0%

15.0%

20.0%TMRSBenchmark

6.5%

2.4% 3.8%

14.5%

5.7%

2.2%

11.7%

2.5%

6.2%

2.2% 2.2%

14.7%

5.4%

1.0%

12.4%

0.9%

0.0%

5.0%

10.0%

15.0%

20.0%TMRSBenchmark

7

US Equity

Objective Intended to provide capital appreciation and is structured using a Core-Satellite Approach with

the overall objective of exceeding its benchmark performance net of fees over rolling five year periods.

Satellite strategies (Active and Rules-Based strategies with an active component) are expected to add excess return within established tracking error limits and will meet quality, diversification, and liquidity guidelines as specified in the Managers’ contracts.

International Equity

Objective Intended to provide capital appreciation and diversification, and is structured using a Core-

Satellite Approach with the overall objective of exceeding its benchmark performance net of fees over rolling five year periods.

Satellite strategies (Active and Rules-Based strategies with an active component) are expected to add excess return within established tracking error limits and will meet quality, diversification, and liquidity guidelines as specified in the Managers’ contracts or otherwise agreed to in writing between TMRS and the Investment Manager.

8

Asset Class Manager Strategy Portfolio Benchmark

Domestic Equities US Core/Passive

Northern Trust Asset Management Passive Broad Market Index Russell 3000 Index

US Rules-Based State Street Global Advisors Passive Fundamental Index Russell US Fundamental Index

US Rules-Based UBS Global Asset Management Passive Minimum Volatility MSCI US Min Vol Index

US Satellite/Active Epoch Investment Partners, Inc. US Traditional All Cap Russell 3000 Index

US Satellite/Active Sasco Capital, Inc. US Opportunistic All Cap Russell Mid Cap Value Index

US Satellite/Active The Boston Company US Mid Cap Opportunistic Russell Mid Cap Index

US Satellite/Active Champlain Investment Partners US Mid Cap Core Russell Mid Cap Index

US Satellite/Active The Boston Company US Small Cap Opportunistic Russell 2000 Index

US Satellite/Active Wellington Management US Small Cap Opportunities Russell 2000 Index

International Equities Non-US Core/Passive

Northern Trust Asset Management Passive Broad Market Index All Country World (ACW) ex US Investable Market Index (IMI)

Non-US Rules-Based State Street Global Advisors Passive Fundamental Index Russell Fundamental Global ex US

Non-US Rules-Based UBS Global Asset Management Passive Minimum Volatility MSCI World ex US Min Vol Index

Non-US Satellite/Active Wellington Management Non-US Opportunistic Relative Value

MSCI ACWI ex US Index

Non-US Satellite/Active Lazard Asset Management Non-US Opportunistic Core MSCI ACWI ex US Index

Non-US Satellite/Active Acadian Asset Management Non-US Emerging Markets MSCI Emerging Markets (EM) Index

Non-US Satellite/Active William Blair & Company Non-US Emerging Markets MSCI Emerging Markets (EM) Index

Non-US Satellite/Active Wellington Management Non-US Small Cap Opportunities MSCI EAFE Small Cap Index

Non-US Satellite/Active Wasatch Advisors Non-US Small Cap Growth MSCI AC World ex. US Small Cap Index

9

% of Total Fund as of 12/31/2016*

PASSIVE Portfolio Managers

Market Value % of Total Portfolio

US CORE EQUITY: NTGI Russell 3000 4,605,230,623 18.4%

NON-US CORE EQUITY: NTGI ACW ex. US IMI

2,434,845,867 9.7%

TOTAL: 7,040,076,490 28.1%

ACTIVE Portfolio Managers

Market Value % of Total Portfolio

US RULES-BASED EQUITY:

671,057,521 2.7%

US ACTIVE EQUITY: 1,468,436,594 5.9%

NON-US RULES-BASED EQUITY:

490,959,812 1.9%

NON-US ACTIVE EQUITY:

1,201,322,629 4.8%

TOTAL: 3,831,776,555 15.3%

NOTE: Percentages may not be exact due to rounding *Prelim market values per State Street Analytics

28.1%

15.3% 17.5% 17.5%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

PASSIVE Portfolio ACTIVE Portfolio

Current Allocation Target Allocation

5.9% 4.8%

2.7%

1.9%

8.75% 8.75%

0%1%2%3%4%5%6%7%8%9%

10%

US ACTIVEPortfolio

NON-USACTIVEPortfolio

Current Active Current RB Target Allocation

10 As of 12/31/2016

US Passive 18.4% Non-US Passive

9.7%

Non-US RB Active 1.9%

Non-US Active 4.8% US Active 5.9%

US RB Active 2.7%

Current Allocation By Asset Category vs. Total Portfolio

Russell 3000 US Passive

42.4%

ACW ex. US IMI non-US Passive

22.4%

2.1%

2.4%

1.9%

1.7%

1.7% 1.6%

2.0% 2.1% 2.3% 2.1%

2.0% 2.2%

2.5% 2.5%

3.1%

3.1%

Current Allocation by Manager vs. Total Equity Portfolio

Russell 3000

ACWI ex. US IMI

SSgA Global ex. US

UBS World ex. US MV

Wellington Intl Horizons

Lazard Intl Equity Plus

Acadian EM

William Blair EM

Wasatch Intl SC

Wellington Intl SC

Epoch

Sasco

The Boston Co. MC

Champlain

The Boston Co. SC

Wellington US SC

SSgA US Fund

UBS US MV

11

Manager Strategy Number of ballots cast

Number of issues voted

% of issues voted with management

% of issues voted against

management

Number of votes

abstaining Acadian Asset Management Emerging Markets

382 3138 89% 11% 0

The Boston Company

US Mid Cap Opportunistic Value Equity 56 565 93% 7%

0

The Boston Company US Small Cap Opportunistic Value Equity

76 673 88% 12% 0

Champlain Mid Cap Core 67 676 98% 2% 0

Epoch Investment Partners U.S. Choice

31 452 90% 10% 0

Lazard Asset Management International Equity Plus

64 952 94% 2% 0

Northern Trust NT Russell 3000 Index Fund 3944 33761 97% 3% 330

Northern Trust NT All Country World Index ex-US IMI Fund 7847 77353 90% 10% 268

Sasco Capital Mid-Cap Value 34 215 99% 1% 0

State Street Global Advisors

Russell Fundamental Global Ex-U.S. Index NL Fund

1109 16057 92% 8% 20

State Street Global Advisors Russell Fundamental U.S. Index NL Fund

1534 15707 92% 8% 45

UBS Asset Management

UBS U.S. Equity Minimum Volatility Index Collective Fund

173 2407 96% 4% 1

UBS Asset Management

UBS World (ex-US) Minimum Volatility Index Collective Fund

255 3521 92% 8% 5

Wasatch Advisors International Growth 84 917 97% 3% 21

Wellington Management Small Caps Opps 109 893 97% 1% 0 Wellington

Management International Small Cap Opps 133 1519 82% 4% 3 Wellington

Management International Horizons 50 688 79% 2% 1

William Blair Emerging Markets Leaders 74 600 87% 13% 0

12

Source: State Street Investment Analytics - Final

MKT VAL % of plan 1 Month 3 Months YTD 1 Yr. 3 Yrs. 5 Yrs. 7 Yrs. 10 Yrs. ITD Incept Date

NGR0A06 - TMRS - TOTAL DOMESTIC EQUITY 6,744,316,200.37 26.87 1.96 4.28 13.17 13.17 8.25 14.46 12.77 7.68 01-01-08 TMRS - RUSSELL 3000 DAILY 1.95 4.21 12.74 12.74 8.43 14.67 12.92 7.79 01-01-08

Excess 0.01 0.07 0.44 0.44 -0.19 -0.21 -0.16 -0.11 NGR6 - TMRS - RUSSELL 3000 INDEX FUND (NL) 4,605,575,976.04 18.35 1.96 4.23 12.74 12.74 8.42 14.64 12.90 14.83 12-01-08

RUSSELL 3000 (DAILY) 1.95 4.21 12.74 12.74 8.43 14.67 12.92 14.85 12-01-08 Excess 0.00 0.02 0.01 0.01 -0.01 -0.02 -0.03 -0.02 NGTM - SSGA RUSSELL RAFI US 332,070,579.93 1.32 2.04 6.15 16.93 16.93 8.42 13.11 02-01-13

Russell RAFI U.S. Index 2.08 6.27 17.26 17.26 8.59 13.30 02-01-13 Excess -0.04 -0.13 -0.32 -0.32 -0.17 -0.20 NGTN - UBS US EQUITY MIN VOL FUND NL 338,958,902.33 1.35 2.38 0.17 10.54 10.54 10.72 14.17 01-01-13

MSCI USA Minimum Volatility Index-Net 2.32 -0.04 9.84 9.84 10.08 13.49 01-01-13 Excess 0.06 0.20 0.70 0.70 0.63 0.68 NGTY - EPOCH U.S. CHOICE 247,386,770.52 0.99 1.91 4.12 5.08 5.08 6.32 6.32 01-01-14

RUSSELL 3000 (DAILY) 1.95 4.21 12.74 12.74 8.43 8.43 01-01-14 Excess -0.04 -0.09 -7.65 -7.65 -2.11 -2.11 NGTZ - SASCO U.S. CONTRARIAN VALUE 225,014,581.56 0.90 -0.44 2.10 18.02 18.02 2.91 2.91 01-01-14

Russell Midcap Value Total Return Index 1.78 5.52 20.00 20.00 9.45 9.45 01-01-14 Excess -2.22 -3.43 -1.98 -1.98 -6.54 -6.54 NGUG - THE BOSTON COMPANY OPP VALUE 217,205,395.66 0.87 1.81 8.07 16.46 16.46 3.25 12-01-14

RUSSELL MIDCAP (DAILY) 1.14 3.21 13.80 13.80 5.25 12-01-14 Excess 0.67 4.87 2.66 2.66 -2.00 NGUF - CHAMPLAIN MID-CAP CORE 243,210,737.96 0.97 1.85 4.12 19.25 19.25 9.22 12-01-14

RUSSELL MIDCAP (DAILY) 1.14 3.21 13.80 13.80 5.25 12-01-14 Excess 0.72 0.91 5.46 5.46 3.97 NGUR - BOSTON CO US SM CAP OPPORTUNISTIC VALUE 267,529,337.52 1.07 3.30 8.59 16.11 16.11 10.17 09-01-15

RUSSELL 2000 (DAILY) 2.80 8.83 21.31 21.31 14.30 09-01-15 Excess 0.49 -0.25 -5.20 -5.20 -4.13 NGUN - WELLINGTON US SMALL CAP OPP 267,355,063.77 1.07 2.47 7.98 18.32 18.32 12.00 12-01-15

RUSSELL 2000 (DAILY) 2.80 8.83 21.31 21.31 13.95 12-01-15 Excess -0.33 -0.85 -2.98 -2.98 -1.95

13

Source: State Street Investment Analytics - Final


NGR0A07 - TMRS - TOTAL INTERNATIONAL EQUITY 4,127,271,568.49 16.44 2.10 -2.97 3.50 3.50 -1.08 5.69 3.09 -0.60 01-01-08 INTL EQ ACTIVE WEIGHTED INDEX(DAILY) 2.50 -1.57 4.41 4.41 -1.44 5.35 2.81 -0.87 01-01-08

Excess -0.40 -1.39 -0.91 -0.91 0.37 0.35 0.28 0.28 NGTA - NTGI ACWI ex. US IMI (NL) 2,434,957,289.28 9.70 2.52 -1.56 4.64 4.64 -1.24 5.57 4.67 09-01-10

TMRS MSCI ACWI ex-US IMI NET (DAILY) 2.50 -1.57 4.41 4.41 -1.44 5.35 4.47 09-01-10 Excess 0.02 0.02 0.23 0.23 0.20 0.23 0.20 NGTP - SSGA RUSSELL RAFI GLOBAL EX-US 231,074,836.56 0.92 3.32 2.12 11.60 11.60 -0.57 3.35 02-01-13

Russell RAFI Global ex-U.S. Index NET 3.49 2.42 12.28 12.28 -0.30 3.52 02-01-13 Excess -0.18 -0.30 -0.69 -0.69 -0.27 -0.18 NGTQ - UBS WORLD EX US MIN VOL FD NL 259,858,788.51 1.04 1.86 -5.70 1.60 1.60 3.91 6.65 01-01-13

MSCI world ex USA Minimum Volatility-Net 1.81 -5.77 1.33 1.33 3.81 6.59 01-01-13 Excess 0.04 0.07 0.26 0.26 0.10 0.06 NGT9 - LAZARD INT'L EQUITY PLUS 189,322,937.36 0.75 2.56 -3.55 0.85 0.85 -3.07 09-01-14

MSCI AC WORLD ex US (NET) 2.56 -1.25 4.50 4.50 -4.33 09-01-14 Excess 0.00 -2.30 -3.64 -3.64 1.27 NGT8 - WELLINGTON INT'L HORIZONS 201,368,877.57 0.80 3.08 -3.67 -1.98 -1.98 -0.46 09-01-14

MSCI AC WORLD ex US (NET) 2.56 -1.25 4.50 4.50 -4.33 09-01-14 Excess 0.52 -2.41 -6.47 -6.47 3.87 NGUP - WILLIAM BLAIR EMERGING MARKETS 175,465,958.97 0.70 -1.04 -7.91 3.65 3.65 3.40 09-01-15

MSCI EMERGING MARKETS 0.22 -4.16 11.19 11.19 6.35 09-01-15 Excess -1.26 -3.75 -7.53 -7.53 -2.95 NGUQ - ACADIAN EMERGING MARKETS 185,006,966.65 0.74 0.38 -3.90 13.56 13.56 7.06 09-01-15

MSCI EMERGING MARKETS IMI INDEX (NET) 0.17 -4.45 9.90 9.90 6.05 09-01-15 Excess 0.21 0.55 3.66 3.66 1.01 NGUX - WASATCH INT'L SMALL CAP GROWTH 220,619,890.06 0.88 -1.08 -10.97 -6.75 -6.75 -6.75 01-01-16

MSCI ACWI Ex US Small Cap (DAILY) 2.12 -3.52 3.91 3.91 3.91 01-01-16 Excess -3.20 -7.45 -10.66 -10.66 -10.66 NGUY - WELLINGTON INT'L SMALL CAP OPP 229,596,023.53 0.91 2.46 -5.09 -2.59 -2.59 -2.59 01-01-16

MSCI EAFE SMALL CAP NET 2.87 -2.86 2.18 2.18 2.18 01-01-16 Excess -0.40 -2.23 -4.77 -4.77 -4.77

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III. Fixed Income

15

US Core Fixed Income Objective

Purpose is to diversify the risk of the overall investment portfolio with a secondary goal of capital preservation.

Performance objective is to exceed the Barclay’s US Aggregate Bond Index net of fees over rolling five-year periods and within tracking errors as specified in the Manager contracts, determined according to the specific strategies employed.

Investment Philosophy- BlackRock Top down determination of investment themes are based on bottom-up inputs. Investment

themes establish parameters for sector, sub-sector and security selection. Macro overlays for duration and volatility are viewed as a separate sector and used opportunistically.

Investment Philosophy- PIMCO PIMCO’s investment philosophy is driven by diversifying strategies and focuses on longer

term secular (3-5 year) trends. Seek to add value through top down strategies including interest rate exposures, duration,

volatility, yield curve positioning and sector rotation. Employ “bottom-up” strategies through in depth credit analysis and specific security

selection.

16

Manager Strategy Portfolio Benchmark

BlackRock US Core (enhanced index) Barclays US Aggregate Bond Index

PIMCO Active Core Plus Barclays US Aggregate Bond Index

17

As of December 31, 2016

NOTE: Percentages may not be exact due to rounding

Core Weighting vs. Target

19.2%

10.0%

9.2%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Actual Target Difference

Mandate Market Value % of Total Fund

CORE FIXED INCOME

BlackRock $3,088,424,493 12.30%

PIMCO $1,721,297,039 6.86%

TOTAL $4,809,721,532 19.16%

18 Source: State Street Investment Analytics


NGR0A03 - TMRS - TOTAL CORE FIXED INCOME 4,809,721,532.25 19.16 0.17 -2.86 2.89 2.89 3.08 2.40 3.74 4.23 7.82 01-01-89

TMRS - Total Fixed Income Index (Daily) 0.14 -2.98 2.65 2.65 3.03 2.23 3.63 4.05 7.27 01-01-89

Excess 0.03 0.11 0.25 0.25 0.05 0.16 0.12 0.18 0.55

NGR4 - TMRS - BLACKROCK CORE FIXED INCOME 3,088,424,493.18 12.30 0.21 -2.79 2.94 2.94 3.19 2.43 3.74 3.64 10-01-09

TMRS-Custom Core Fixed Income Index (Daily) 0.14 -2.98 2.65 2.65 3.03 2.23 3.63 3.53 10-01-09

Excess 0.06 0.18 0.29 0.29 0.16 0.19 0.12 0.11

NGR9 - TMRS PIMCO CORE PLUS FIXED INC 1,721,297,039.05 6.86 0.11 -2.98 2.83 2.83 2.75 2.37 3.65 02-01-10

BBG BARC Agg (Dly) 0.14 -2.98 2.65 2.65 3.03 2.23 3.44 02-01-10

Excess -0.03 -0.01 0.19 0.19 -0.28 0.14 0.21

19

Objective The purpose is to enhance total return through income and capital appreciation and provide

diversification to the total investment portfolio. This allocation may be managed actively and/or passively through multiple managers in consideration of manager concentration risk.

The Performance Objectives is to exceed the returns of a blended benchmark comprised of the Barclays US Corporate High Yield Index 50%, the JPM GBI-EM Global Diversified Index (USD Unhedged) 25%, and JPM CEMBI Broad Diversified Index 25%, net of fees over rolling five-year periods and within tracking errors as specified in the manager contracts or otherwise agreed to in writing, determined according to the specific strategies employed.

20

Manager Strategy Allocated/Committed Portfolio Benchmark

Highland Capital Bank Loan/CLO Debt $ 375,000,000 Credit Suisse Leveraged Loan Index

Guggenheim Bank Loan/CLO Debt $ 375,000,000 Credit Suisse Leveraged Loan Index

Voya RMBS/CMBS $ 375,000,000 33% Barclays US Agg Corp Index and 67% Barclays US Corp High Yield Index

Ellington RMBS/CMBS $ 375,000,000 33% Barclays US Agg Corp Index and 67% Barclays US Corp High Yield Index

Alliance Bernstein** EMD $ 240,000,000 20% JP Morgan EMBI, 40% JP Morgan CEMBI and 40% JP Morgan GBI

Bluebay** EMD $ 240,000,000 20% JP Morgan EMBI, 40% JP Morgan CEMBI and 40% JP Morgan GBI

Golub* Direct Lending $ 300,000,000

H.I.G. Whitehorse* Direct Lending $ 150,000,000

TCW* Direct Lending $ 300,000,000

White Oak* Direct Lending $ 200,000,000

Marathon SPS* Opportunistic Credit $ 150,000,000

Marathon ECO* Opportunistic Credit $ 100,000,000

Marathon CLO* Opportunistic Credit

$ 50,000,000

PIMCO COF II* Opportunistic Credit $ 200,000,000

Beach Point Opportunistic Credit $ 200,000,000

Columbia** High Yield $ 300,000,000 BofA Merrill Lynch US High Yield Constrained Index

Neuberger Berman** High Yield $ 300,000,000 BofA Merrill Lynch US High Yield Constrained Index

Adams Street** Direct Lending $ 200,000,000

Bain** Opportunistic Credit $ 100,000,000

GoldenTree** Opportunistic Credit $ 200,000,000

Waterfall** Opportunistic Credit $ 200,000,000

Note: * Partially funded ** Approved. Funding pending.

21

As of December 31, 2016

Non-Core Weighting vs. Target

NOTE: Percentages may not be exact due to rounding * Partially funded ** Approved. Funding pending + On a committed basis

Mandate Market Value % of Total Fund

NON-CORE FIXED INCOME Guggenheim $407,591,449 1.62% Highland $407,970,649 1.63% Voya $401,097,579 1.60% Ellington $399,825,599 1.59% Alliance Bernstein** $240,000,000 0.96% Bluebay** $240,000,000 0.96% Golub* $300,000,000 1.20% H.I.G. Whitehorse* $150,000,000 0.60% TCW* $300,000,000 1.20% White Oak* $200,000,000 0.80% Adams Street** $200,000,000 0.80% Marathon SPS* $150,000,000 0.60% Marathon ECO* $100,000,000 0.40% Marathon CLO* $50,000,000 0.20% PIMCO COF II* $200,000,000 0.80% Beach Point $206,091,200 0.82% Columbia** $300,000,000 1.20% Neuberger Berman** $300,000,000 1.20% Bain** $100,000,000 0.40% GoldenTree** $200,000,000 0.80% Waterfall** $200,000,000 0.80% TOTAL $5,052,576,476 20.13%

20.1% 20.0%

0.1%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Actual+ Target Difference


Non-Core Fixed Income Performance

Period Ending December 31, 2016 (Net All)


NGR0A11 - TOTAL NON-CORE FIXED INCOME 2,092,565,799.99 8.34 1.09 2.19 7.62 7.62 3.81 10-01-14 TOT NON-CORE FIXED INCOME INDEX 1.59 -0.99 13.56 13.56 2.18 10-01-14

Excess -0.49 3.18 -5.94 -5.94 1.64 NGT6 - BANDERA II - GUGGENHEIM 407,591,448.77 1.62 0.85 1.76 8.33 8.33 4.25 10-01-14 CS Leveraged Loan Index 1.15 2.25 9.88 9.88 3.92 10-01-14

Excess -0.29 -0.49 -1.55 -1.55 0.32 NGT5 - BANDERA I - HIGHLAND 407,970,649.26 1.63 1.98 3.73 12.57 12.57 4.52 10-01-14 CS Leveraged Loan Index 1.15 2.25 9.88 9.88 3.92 10-01-14

Excess 0.83 1.48 2.69 2.69 0.59 NGUB - VOYA NON CORE FIXED INCOME 401,097,579.03 1.60 0.51 1.65 4.75 4.75 3.61 01-01-15 Non Agency RMBS/CMBS Strategy Index 1.46 0.23 13.41 13.41 4.78 01-01-15

Excess -0.95 1.43 -8.66 -8.66 -1.18 NGUD - ELLINGTON NON CORE FIXED INC 399,825,599.06 1.59 0.58 1.54 5.42 5.42 3.47 01-01-15 Non Agency RMBS/CMBS Strategy Index 1.46 0.23 13.41 13.41 4.78 01-01-15

Excess -0.88 1.31 -7.99 -7.99 -1.32 NGRV - GOLUB CAPITAL PEARLS DLP LP 51,765,132.73 0.21 0.28 1.91 4.53 07-01-16 NGXA - MARATHON SPS FUND, L.P. 66,851,822.25 0.27 -0.25 3.06 4.01 08-01-16 MARATHON SPS FUND Index -0.25 3.06 4.01 08-01-16 Excess 0.00 0.00 0.00 NGXB - PIMCO CORP OP FD II ONSHORE LP 25,657,149.72 0.10 6.90 4.31 4.31 10-01-16 TOT NON-CORE FIXED INCOME INDEX 1.59 -0.99 -0.99 10-01-16 Excess 5.32 5.30 5.30 NGXD - BEACH POINT TOTAL RET FD II LP 206,091,200.00 0.82 1.70 2.56 2.56 10-01-16 TOT NON-CORE FIXED INCOME INDEX 1.59 -0.99 -0.99 10-01-16 Excess 0.11 3.54 3.54 NGRU - WHITE OAK SUMMIT FUND, L.P 90,210,750.57 0.36 1.81 1.88 3.54 05-01-16 NGSV - MARATHON CLO EQUITY FD, L.P. 4,621,579.21 0.02 0.00 -0.02 11-01-16 TOT NON-CORE FIXED INCOME INDEX 1.59 -0.97 11-01-16 Excess -1.59 0.94 NGXE - TCW ASSET MANAGEMENT LLC 9,900,000.01 0.04 12-01-16 CS Leveraged Loan Index 1.15 12-01-16 Excess NGXF - H.I.G. WHITEHORSE CAPITAL, LLC 9,912,500.01 0.04 0.00 0.00 12-01-16 CS Leveraged Loan Index 1.15 1.15 12-01-16 Excess -1.15 -1.15 NGSW - MARATHON ECO FUND III, LP 11,070,389.37 0.04 -0.27 -0.24 -0.24 10-01-16 TOT NON-CORE FIXED INCOME INDEX 1.59 -0.99 -0.99 10-01-16 Excess -1.86 0.75 0.75

23

IV. Real Estate

24

Objective To enhance total return and provide diversification to the overall investment portfolio. Due to the illiquid and cyclical nature of the real estate asset class, Staff and the Real Estate

Investment Consultant recommend that the target allocation be invested over a multi-year period in order to avoid considerable vintage year risks.

Performance Objective Long term performance objective is a real rate of return (adjusted for inflation) of five percent

(5%) net of investment management fees. The real estate portfolio is expected to generate returns net of all fees and expenses, in excess

of their respective indices, over rolling five year investment time horizons.

25

Manager Strategy Allocated/Committed Portfolio Benchmark Abacus Core Income Fund I Core $ 75,000,000

NCREIF-ODCE

Harrison Street Core Property Fund Core $ 150,000,000 Invesco US Core Income Fund Core $ 150,000,000 Smart Markets Fund Core $ 200,000,000 Walton Street Debt Fund Core Debt $ 100,000,000 Tristan EPISO 4 Opportunistic $ 31,602,000 Abacus Multi-Family Fund II Value Add $ 50,000,000 Abacus Multi-Family Fund III Value Add $ 75,000,000 Greenfield Acquisition Partners VI Value Add $ 75,000,000 Greenfield Acquisition Partners VII Value Add $ 100,000,000 Miller Global Value Add $ 75,000,000 Rubenstein Properties II Value Add $ 75,000,000 Rubenstein Properties III Value Add $ 75,000,000 Stockbridge Value Fund I Value Add $ 75,000,000 Stockbridge Value Fund II Value Add $ 75,000,000 Lubert-Adler Fund VII Opportunistic $ 100,000,000 Moorfield Real Estate Fund III Opportunistic $ 61,755,000 H/2 CP Core $ 125,000,000 H/2 Core RE Debt Core $ 75,000,000 Walton Street Opportunistic $ 75,000,000 Alcion Value Add $ 50,000,000 Torchlight Debt Fund V Value Add $ 75,000,000 TPG Real Estate Partners II Opportunistic $ 100,000,000 USAA Eagle Fund Core $ 250,000,000 DivcoWest V Value Add $ 75,000,000 Blackstone Property Partners Core $ 300,000,000 Kildare EP II Opportunistic $ 100,000,000

TOTAL $ 2,306,000,000

Source: TMRS Accounting

26 Source: Courtland Q3 2016 Report

Property Type Diversification Based on Market Value Geographic Diversification Based on Market Value

Sector Diversification Based on Market Value

27 Source: State Street Investment Analytics, December 31, 2016 Report


NGR0A09 - TMRS - TOTAL REAL ESTATE 2,133,170,547.95 8.50 2.49 2.60 12.33 12.33 14.52 11.72 11.32 11-01-11

TOTAL REAL ESTATE INDEX 2.07 2.07 9.98 9.98 12.44 12.39 12.72 11-01-11

Excess 0.42 0.53 2.36 2.36 2.09 -0.67 -1.39

NGR0A10 - PRIVATE REAL ESTATE EX LIQUID FUNDS 1,995,566,047.94 7.95 2.60 2.60 12.40 12.40 14.80 12.32 11.90 11-01-11

NCREIF ODCE 1 QTR LAG 2.07 2.07 10.08 10.08 12.45 12.40 12.73 11-01-11

Excess 0.54 0.54 2.32 2.32 2.35 -0.08 -0.83

NGTD - SMART MARKETS FUND LP 305,051,465.01 1.22 2.75 2.75 10.00 10.00 11.60 11.11 11.11 01-01-12


Excess 0.69 0.69 -0.08 -0.08 -0.85 -1.28 -1.28

NGTE - HARRISON ST REAL ESTATE - CORE OPEN END 222,839,009.66 0.89 1.40 1.40 9.02 9.02 9.94 9.28 9.28 01-01-12


Excess -0.67 -0.67 -1.06 -1.06 -2.51 -3.12 -3.12

NGTF - GREENFIELD ACQUISITION PTRS VI 36,722,163.11 0.15 0.72 0.72 0.77 0.77 11.17 11.43 07-01-12

NCREIF ODCE 1 QTR LAG 2.07 2.07 10.08 10.08 12.45 12.42 07-01-12

Excess -1.34 -1.34 -9.31 -9.31 -1.28 -0.99

NGTG - STOCKBRIDGE VALUE FUND 27,227,628.72 0.11 3.31 3.31 17.17 17.17 22.41 22.53 10-01-12


Excess 1.24 1.24 7.09 7.09 9.96 10.00

NGTH - WALTON ST REAL ESTATE FUND VII 57,622,888.05 0.23 2.96 2.96 11.36 11.36 19.56 17.71 07-01-13


Excess 0.90 0.90 1.28 1.28 7.11 4.81

NGTI - ABACUS MULTI-FAMILY PTRS II 5,295,925.66 0.02 2.91 2.91 37.04 37.04 35.21 26.39 08-01-12


Excess 0.84 0.84 26.96 26.96 22.76 13.72

NGTJ - RUBENSTEIN PROPERTIES FUND II 45,481,902.92 0.18 0.88 0.88 0.25 0.25 19.09 14.05 04-01-13


Excess -1.19 -1.19 -9.83 -9.83 6.64 1.27



NGTL - MILLER GLOBAL FUND VII 28,643,926.76 0.11 4.63 4.63 13.16 13.16 24.21 13.71 10-01-12


Excess 2.56 2.56 3.08 3.08 11.76 1.18

NGTV - LUBERT-ADLER FUND VII 85,228,761.87 0.34 0.13 0.13 6.90 6.90 1.98 1.98 01-01-14


Excess -1.94 -1.94 -3.18 -3.18 -10.47 -10.47

NGTX - ABACUS CORE INCOME FUND I LP 68,833,491.08 0.27 2.10 2.10 15.70 15.70 8.73 8.73 01-01-14


Excess 0.04 0.04 5.62 5.62 -3.72 -3.72

NGTW - INVESCO ADVISERS, INC. 185,476,634.75 0.74 3.02 3.02 12.72 12.72 11.57 11.57 01-01-14


Excess 0.96 0.96 2.64 2.64 -0.88 -0.88

NGT3 - GREENFIELD ACQ PART VII LP 87,839,406.83 0.35 0.57 0.57 13.80 13.80 13.22 01-01-15

NCREIF ODCE 1 QTR LAG 2.07 2.07 10.08 10.08 12.48 01-01-15

Excess -1.49 -1.49 3.72 3.72 0.74

NGT4 - STOCKBRIDGE VALUE FD II LP 60,075,976.36 0.24 4.21 4.21 15.00 15.00 12.11 02-01-15


Excess 2.14 2.14 4.92 4.92 -0.97

NGUJ - ABACUS MULTI-FAMILY III 42,794,885.21 0.17 6.08 6.08 32.85 32.85 7.27 02-01-15


Excess 4.01 4.01 22.77 22.77 -5.82

NGUL - MOORFIELD REAL ESTATE III 27,185,522.39 0.11 -8.09 -8.09 19.89 19.89 10.82 02-01-15


Excess -10.16 -10.16 9.81 9.81 -2.27

NGUH - WALTON STREET REAL ESTATE DEBT FUND 38,683,807.04 0.15 1.85 1.85 5.07 5.07 4.67 12-01-15


Excess -0.22 -0.22 -5.01 -5.01 -8.30



NGAS - TORCHLIGHT DEBT OPP FUND V,LP 19,507,481.25 0.08 9.83 9.83 11.66 11.66 10.70 12-01-15 NCREIF ODCE 1 QTR LAG 2.07 2.07 10.08 10.08 12.96 12-01-15

Excess 7.76 7.76 1.58 1.58 -2.26 NGAR - TPG REAL ESTATE PART II, LP 38,468,195.54 0.15 28.70 28.70 79.45 79.45 71.44 12-01-15

NCREIF ODCE 1 QTR LAG 2.07 2.07 10.08 10.08 12.96 12-01-15 Excess 26.64 26.64 69.37 69.37 58.47 NGAP - ALCION RE PART FD III-B,LP 10,322,737.98 0.04 -5.24 -5.24 -4.63 -4.63 -3.98 11-01-15

NCREIF ODCE 1 QTR LAG 2.07 2.07 10.08 10.08 12.00 11-01-15 Excess -7.30 -7.30 -14.71 -14.71 -15.98 NGAM - EUROPEAN PROPERTY INV SPECIAL 4,954,330.21 0.02 5.76 5.76 2.23 2.23 2.06 12-01-15

NCREIF ODCE 1 QTR LAG 2.07 2.07 10.08 10.08 12.96 12-01-15 Excess 3.69 3.69 -7.85 -7.85 -10.91 NGAQ - USAA EAGLE REAL ESTATE FD 202,303,888.28 0.81 3.19 3.19 9.94 9.94 9.13 12-01-15

NCREIF ODCE 1 QTR LAG 2.07 2.07 10.08 10.08 12.96 12-01-15 Excess 1.12 1.12 -0.14 -0.14 -3.83 NGAV - H/2 CP CORE RE DEBT FUND,LP 76,496,700.00 0.30 2.75 2.75 4.86 04-01-16

NCREIF ODCE 1 QTR LAG 2.07 2.07 6.52 04-01-16 Excess 0.68 0.68 -1.66 NGRY - DIVCOWEST FUND V 3,542,819.26 0.01 12-01-16 NCREIF ODCE 1 QTR LAG 2.07 12-01-16 Excess NGRZ - BLACKSTONE PROPERTY PARTNERS 299,999,983.71 1.20 0.00 0.00 12-01-16 NCREIF ODCE 1 QTR LAG 2.07 2.07 12-01-16 Excess -2.07 -2.07 NGAN - RUBENSTEIN PROP FD III LP 14,966,516.25 0.06 -3.92 -3.92 -3.92 10-01-16 NCREIF ODCE 1 QTR LAG 2.07 2.07 2.07 10-01-16 Excess -5.98 -5.98 -5.98 NGR0A017 - REAL ESTATE LIQUID FUNDS 137,604,500.00 0.55 0.89 2.53 11.79 11.79 8.58 11-01-15 NGAU - H/2 CP, LP 137,604,500.00 0.55 0.89 2.53 11.79 11.79 8.58 11-01-15

NCREIF OPEN FUND INDEX (DAILY) 2.11 2.11 8.77 8.77 10.55 11-01-15 Excess -1.23 0.41 3.02 3.02 -1.96

30

V. Real Return

31

Objective Purpose is to enhance total return and provide diversification and hedge against inflation risks

to the overall investment portfolio. Due to the varied nature of the Real Return space the portfolio will include strategies across a

variety of real asset types as well as a number of investment vehicle types in order to maintain a diversified approach.

Performance Objective Long term performance objective over a period 5 years or a full market cycle is a real rate of

return (adjusted for inflation) of CPI + 400 basis points. On a short term basis the real return portfolio is expected to generate returns net of all fees

and expenses, in excess of their respective indices individually and in excess of the Barclay’s World Government Inflation Linked Bond Index for the portfolio as a whole.

32

Manager Strategy Portfolio Benchmark

Colchester Active Global Linkers Barclays World Govt Infl-Linked Bond Index

Nuveen

Real Asset Income – Public Securities

28% S&P Global Infrastructure Index, 21% FTSE EPRA/NAREIT Developed Index, 18% Wells Fargo Hybrid and Preferred Securities REIT Index, 15% Barclays Global Capital Securities Index, 18% Barclays U.S. Corporate High Yield Index

Cohen & Steers Real Asset Multi-Strategy 27.5% Bloomberg Commodity Index, 27.5% FTSE NAREIT Developed Real Estate Index (Net), 15% Dow Jones Brookfield Global Infrastructure Index, 15% S&P Global Natural Resources Index—Net), 10% BAML US Corporate Index, 1–3 Years and 5% Gold Index

33

Manager Strategy Allocated/Committed Portfolio Benchmark

Magnetar Energy Finance $100,000,000

Barclays World Govt Infl-

Linked Bond Index

Orion Mining Finance

$100,000,000

Amerra Agriculture Finance $100,000,000

Brookfield Infrastructure $150,000,000

Source: TMRS Accounting

34

*Source: Colchester 1. Barclays World Government Inflation-Linked Bond Index USD Unhedged 2. TMRS inception date Feb. 1, 2011 3. Annualized returns since inception

35

Quarter Ending Manager Strategy Number of ballots cast

Number of issues voted

% of issues voted with

management

% of issues voted against management

Number of votes

abstaining

3/31/2016 Nuveen Asset Management Real Asset Income 0 0 NA NA NA

6/30/2016 Nuveen Asset Management Real Asset Income 68 611 87.69% 12.31% 2



3/31/2016 Cohen & Steers Real Assets Multi-

Strat 9 92 98.90% 1.09% 0

Since inception through 9/30/16 Cohen & Steers

Real Assets Multi-Strat 11 114 94.70% 5.30% 0

12/31/2016 Cohen & Steers Real Assets Multi-

Strat 78 127 88.98% 9.45% 0



NGR0A08 - TMRS - TOTAL REAL RETURN 2,301,882,917.93 9.17 1.07 -3.13 6.90 6.90 1.68 2.18 3.00 02-01-11

BBG BARC Wld Inf-Lk Bd TR 0.82 -5.31 4.02 4.02 1.05 0.98 2.47 02-01-11

Excess 0.25 2.18 2.87 2.87 0.63 1.20 0.53

NGR0A020 - REAL RETURN PUBLIC MARKETS 2,148,334,900.10 8.56 1.37 -3.12 6.06 6.06 1.41 2.02 2.86 02-01-11


Excess 0.55 2.18 2.04 2.04 0.36 1.04 0.40

NGTB - COLCHEST GLBL INFLTN-LINK BNDS 644,009,010.53 2.57 0.08 -5.38 1.98 1.98 0.09 1.22 2.18 02-01-11


Excess -0.74 -0.07 -2.05 -2.05 -0.96 0.24 -0.28

NGRQ - NUVEEN REAL ASSET INCOME 738,657,442.96 2.94 2.01 -3.15 5.08 04-01-16

Nuveen Custom Benchmark 2.26 -3.12 3.86 04-01-16

Excess -0.25 -0.03 1.22

NGRS - COHEN & STEERS REAL ASSET 765,668,446.60 3.05 1.87 0.81 5.24 06-01-16

Cohen & Steers Custom Benchmark 2.02 -1.29 2.95 06-01-16

Excess -0.15 2.10 2.29

NGR0A019 - REAL RETURN PRIVATE MARKETS 153,548,017.83 0.61 -3.01 -3.10 10.09 02-01-16

Real Return Private Market Index -3.01 -3.10 10.09 02-01-16

Excess 0.00 0.00 0.00

NGRP - MTP ENERGY OPPORTUNITIES FD II 30,223,673.96 0.12 1.55 1.60 8.64 02-01-16

MTP ENERGY OPPORTUNITIES FD II Index 1.55 1.60 8.64 02-01-16

Excess 0.00 0.00 0.00

NGSH - ORION MINE FINANCE FD II 37,857,814.42 0.15 10.45 10.54 14.62 06-01-16

ORION MINE FINANCE FD II Index 10.45 10.54 14.62 06-01-16

Excess 0.00 0.00 0.00

NGSR - BROOKFIELD INFRA PRTNR FD III 26,284,862.15 0.10 11.87 11.87 11.87 08-01-16

NGRW - AMERRA AGRI FUND III 59,181,667.29 0.24 -0.95 -1.26 -1.26 08-01-16

Amerra Agri Fund III Index -0.95 -1.26 -1.26 08-01-16

Excess 0.00 0.00 0.00

37

VI. Absolute Return

38

Objective Purpose is to diversify equity and credit market risk by targeting hedge fund return streams

that are independent of the directionality of the broad stock and bond markets. The ARS portfolio will be invested in a wide variety of hedge fund strategies, with specific constraints on overall portfolio risk and individual manager exposure.

Performance objective is to exceed the benchmark, defined as the HFRI Fund of Funds Diversified Index, net of fees, and to earn in excess of the appropriate long-term benchmark (3-month LIBOR + 500 basis points) on an ongoing rolling 5-year period.

Investment Philosophy Predicated on manager skill in:

Rotating (long/short trading) market factors based on valuation Navigating less liquid, non public and opaque markets Navigating special situations Predicting and capturing market trends

Accordingly, ARS is not an “asset class” (or market sector)

39

Manager Strategy Committed Capital Portfolio Benchmark

Blackstone Customized Fund of One $1,050,000,000

HFRI Fund of Funds Diversified Index

Alyeska Fund Direct Manager $75,000,000

Graticule Asia Macro Fund Direct Manager $125,000,000

Varde Investment Partners Direct Manager $115,000,000

Myriad Opportunities Fund Direct Manager $100,000,000

Roystone Capital Fund Direct Manager $60,000,000

Southpoint Fund Direct Manager $60,000,000

Man AHL Hydrogen LLC Direct Manager $90,000,000

PDT Mosaic Fund Direct Manager $90,000,000

DSAM Long/Short Equity Fund Direct Manager $75,000,000

East Lodge Capital Credit Opportunities Fund

Direct Manager $120,000,000

River Birch Partners Direct Manager 75,000,000

Field Street Partners Direct Manager $60,000,000

Pharo Gaia Fund Direct Manager $100,000,000

D.E. Shaw Valence Fund, L.L.C. Direct Manager $73,000,000

Redmile Capital Fund, LP Direct Manager $60,000,000

40 Source: BAAM; State Street

Equity, 16%

Credit, 27%

Relative Value, 18%Event Driven,

4%

Multi-Strat, 8%

Macro/CTA, 26%

Direct Portfolio Aggregated Manager Exposures

Equity, 15%

Credit, 31%

Relative Value, 21%

Event Driven, 10%

Multi-Strat, 7%

Macro/CTA, 16%

BAAM Aggregated Manager Exposures



TMRS - TOTAL ABSOLUTE RETURN 2,749,266,326.12 10.95 1.22 1.80 2.25 2.25 2.48 08-01-14

HFRI FOF DIVERSIFIED INDEX 1.18 1.19 0.26 0.26 0.88 08-01-14

Excess 0.04 0.61 1.99 1.99 1.60

TMRS - BLACKSTONE 1,512,462,736.07 6.02 1.30 2.35 2.70 2.70 2.67 08-01-14


Excess 0.12 1.17 2.44 2.44 1.78

TMRS - ABSOLUTE RETURN DIRECT 1,236,803,590.05 4.93 1.12 0.98 1.27 1.27 1.27 01-01-16


Excess -0.06 -0.20 1.00 1.00 1.00

42

VII. Private Equity

43

Objective The primary objective is to enhance the total return of the overall investment portfolio,

and secondarily to provide diversification. Private Equity investments are commingled funds structured as limited partnerships with capital commitments that are drawn down over time based on manager discretion. Potential distributions are made as a fund matures and investments are typically realized over an 8-12 year horizon.

The long term policy objective is to meet or exceed the Russell 3000 + 3.00% over periods of five years or greater.

Investment Philosophy Manager selection is critical, and managers add value through:

Reducing agency conflicts and aligning equity holder/executive incentives Investment structuring and balance sheet management Deep sector experience and creating operating efficiencies Navigating non-public information and capturing illiquidity premia

Note: Due to the illiquid nature of the Private Equity asset class, the target allocation will be invested over a multi-year period in order to avoid considerable vintage year risks.

44

Manager Strategy Commitment Portfolio Benchmark

Tritium Buy-out $50,000,000

Russell 3000 + 3%

Harvest Buy-out $20,000,000

Searchlight Buy-out $47,000,000

Kainos Buy-out $35,000,000

Incline Buy-out $40,000,000

H.I.G. Bayside Special Situations $60,000,000

Carlyle Special Situations $65,000,000

TPG Special Situations $75,000,000

GSO Special Situations $75,000,000

GSO Co-Investment Fund Special Situations $18,750,000

Providence Strategic Growth Growth $60,000,000

Updata Growth $50,000,000

Mercato Growth $40,000,000

FTV Growth $46,000,000

Foundry Venture-Growth $30,000,000

45

Policy Strategy Range Control/Buy-out 40.0% to 75.0% Venture/Growth/Minority 5.0% to 25.0% Special Situations/Opportunistic 10.0% to 35.0%

NOTE: Percentages may not be exact due to rounding

28.7%

32.1%

39.1%

Figure 1 : Private Equity Strategy Diversification by Commitment

Buy-out (40.0% to75.0%)Growth (5.0% to25.0%)Special Situations(10.0% to 35.0%)

16.1%

18.1%

22.0%

43.8%

Figure 2 : Private Equity Target Diversification

Buy-out (40.0% to75.0%)Growth (5.0% to25.0%)Special Situations(10.0% to 35.0%)Un-allocated

46 NOTE: Percentages may not be exact due to rounding

Policy Guidelines No more than 35% with any one investment manager No more than 25% in any one investment vehicle

10.7%

10.7%

9.2%

8.5%

8.5% 7.1%

7.1%

6.7%

5.0%

7.1%

6.5%

5.7% 4.3% 2.8%

Figure 3: Private Equity Manager Diversification by Commitment

TPGGSOCarlyleH.I.G.ProvidenceTritiumUpdataSearchlightKainosInclineFTVMercatoFoundryHarvest

6.0% 6.0%

5.2%

4.8%

4.8%

4.0%

4.0% 3.8%

2.8% 4.0%

3.7% 3.2% 2.4%

1.6%

43.8%

Figure 4: Private Equity Target Manager Diversification

TPGGSOCarlyleH.I.G.ProvidenceTritiumUpdataSearchlightKainosInclineFTVMercatoFoundryHarvestUn-allocated


MKT VAL % of plan 1 Month 3 Months YTD 1 Yr. 3 Yrs. 5 Yrs. 7 Yrs. 10 Yrs. ITD

Incept Date

TMRS TOTAL PRIVATE EQUITY 114,184,632.91 0.45 7.20 7.20 1.68 1.68 1.55 12-01-15

BUY-OUT TOTAL 35,699,350.12 0.14 9.19 9.19 23.91 23.91 21.85 12-01-15

SEARCHLIGHT CAPITAL II 16,532,795.87 0.07 17.25 17.25 43.54 02-01-16

HARVEST PARTNERS VII 59,231.10 0.00 -14.19 -14.19 -14.19 10-01-16

KAINOS CAPITAL PARTNERS II LP 272,182.00 0.00 12-01-16

TRITIUM I, L.P. 18,835,141.14 0.08 0.51 0.51 8.87 8.87 8.15 12-01-15

VENTURE-GROWTH TOTAL 35,722,665.24 0.14 26.90 26.91 -14.77 07-01-16

FOUNDRY GROUP NEXT FUND LP 6,662,949.38 0.03 -3.64 -3.62 -3.62 08-01-16

MERCATO PARTNERS GROWTH III LP 6,106,947.60 0.02 2.14 2.14 -27.35 07-01-16

UPDATE PARTNERS V LP 15,515,671.50 0.06 2.31 2.31 -5.32 07-01-16

PROVIDENCE STRATEGIC GROWTH II LP 7,437,096.76 0.03 12-01-16

FTV V

SPECIAL SITUATIONS SUB TOTAL 42,762,617.54 0.17 5.46 5.46 -0.13 03-01-16

H.I.G. BAYSIDE FUND IV 9,627,887.47 0.04 12.57 12.57 -3.19 03-01-16

CARLYLE ENERGY MEZZANINE FUND II 5,100,540.35 0.02 -3.02 -3.02 -13.59 03-01-16

TSSP ADJACENT OPPORTUNITIES FUND III 24,495,121.54 0.10 3.30 3.30 4.53 03-01-16

GSO Capital Opportunities Fund III LP 3,539,068.19 0.01 -1.37 -1.36 -1.36 10-01-16

48

VIII. Compliance

49

• IPS Objectives • The primary objective of Compliance is to implement a detailed compliance program which

uses a combination of daily, weekly and monthly testing of all testable parameters of the Investment Policy Statement and all Manager guidelines at the Manager, asset class and total fund level, as appropriate.

• Testing may be completed either through systematic resources (automated custodial compliance) or manually if necessary.

• Compliance personnel shall create and present a quarterly report to the Board with the results of the testing performed during each period.

50

Policy Guidelines

Core Fixed Income

Non-Core Fixed Income

Real Return (Colchester)

Domestic Equities

Global Equities

Credit Quality

Liquidity/Cash Management

Permissible/Prohibited Investments

Concentration Risk

Country/Region & Currency

Issue/Issuer

Sector & Asset Type

Interest Rate Risk N/A N/A

Spread Risk N/A N/A

383 separate compliance tests were run on TMRS portfolios as of December 31, 2016. There were no active violations of TMRS guidelines.

51

Topic Update Automate Tests TMRS continues to be the primary source for testing guideline compliance

using internally designed automation processes. Upon successful completion of the TMRS legal contract process, EAOS (State Street’s more comprehensive services; approved by the Board in December) will significantly improve the level of service and diligence we receive from State Street’s compliance staff, allowing TMRS compliance resources to be more efficiently utilized.

Policies & Procedures

PolicyHub has been fully implemented and is now being used within the Investment department to manage the IPS & internal procedures, providing a time-stamped history & well documented audit trail of procedures created, reviewed, & updated, as well as distribution to staff and staff acknowledgment of receipt and understanding.

Annual Guideline Compliance Review

The internal portion of the review is complete. However, the custodian portion is on hold until the EAOS (State Street) contract is completed.

52

IX. Risk Management

53

● Risk Report:

● Risk Report For December 2016 was unavailable at the time of this reports submission

● Final year end total fund holdings for running Risk Report became available February 9th

● Risk Report Takes 10 Business days from receipt of data

● Risk Management Objective ● Management of the risk of not achieving TMRS investment objectives.

● Risk Management Responsibilities: ● Defining investment risk management policy and strategy ● Building a risk aware culture ● Analytical tools for investment risk management ● Reporting on investment risk to the Board

54

1. Private market asset classes, like Real Estate, are priced quarterly with a quarter lag due to use of appraised value pricing in the absence of market prices. For some asset class funds in less liquid public markets this is also true, although to a lesser extent and the lag is only one month

Topic Update Board and Internal

Risk Reporting Providing quarterly Board Risk Reports for the total fund and internal asset class reports analyzing risk taken by our managers.

Specialized Risk Analysis

Applying and further developing specialized risk analysis solutions for Alternative Asset Class investments

Performance Attribution

Performance Attribution allows us to better distinguish manager skill from luck by breaking down (attributing) returns to specific manager decisions.

Data Management Solution to support

analysis and reporting

A Data Warehouse was developed to satisfy portfolio data needs of the Performance Attribution System. Have hired a new Investment Data Analyst to continue work on the Data Warehouse including; covering all account related data needs and converting to a more powerful IT platform.

Performance Reporting

Expanding and refining Performance Reporting procedures and methodology to incorporate new asset types, new investment vehicles, and increased transparency. Responsibility for performance reporting will be assumed by the proposed Investment Operations team.

Quantitative Portfolio Analysis

Monitoring advances in quantitative portfolio analysis to ensure that risk and performance analysis remain current at TMRS

DISCLOSURES

TMRS periodically discloses public information that is not excepted from disclosure under Section 552.0225(b) of the Texas Public Information Act. Information provided

by a manager, a general partner or other data provider to TMRS or a TMRS service provider, and contained in these materials, may have been independently produced or

modified by TMRS or the TMRS service provider.

55

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