Agenda

Investment Advisory Council (IAC)

Tuesday, June 30, 2020 1:00 P.M.*

Hermitage Centre Hermitage Conference Room, First Floor 1801 Hermitage Blvd., Tallahassee, FL 32308

1:00 – 1:05 P.M. 1. Welcome/Call to Order/Approval of Minutes Vinny Olmstead, Chair

(Action Required)

1:05 – 1:15 P.M. 2. Opening Remarks/Reports Ash Williams, Executive Director & CIO

1:15 – 2:00 P.M. 3. Florida PRIME Review

A. Florida PRIME Legal Compliance Review – Chapter 218, Pt. IV, Florida Statutes Glenn Thomas, Lewis, Longman and Walker, P.A.

B. Florida PRIME Best Practices Review Kristen Doyle, Aon Katie Comstock, Aon

C. Florida PRIME Portfolio Review Amy Michaliszyn, Federated Investors Paige Wilhelm, Federated Investors

D. Review of Florida PRIME Investment Policy Statement Ash Williams, Executive Director & CIO

(Action Required)

IAC Meeting – Agenda June 30, 2020 Page 2

2:00 – 2:45 P.M. 4. Private Equity Asset Class Review John Bradley, SIO, Private Equity Wes Bradle, Senior Portfolio Manager Sheila Ryan, Cambridge Associates

2:45 – 3:30 P.M. 5. Defined Contribution Program Review Daniel Beard, Chief – Defined Contribution Programs Mini Watson, Director of Administration Walter Kelleher, Director of Educational Services Kristen Doyle, Aon Katie Comstock, Aon

3:30 – 4:20 P.M. 6. SIO Asset Class Updates Tim Taylor, SIO, Global Equity Katy Wojciechowski, SIO, Fixed Income Steve Spook, SIO, Real Estate Trent Webster, SIO, Strategic Investments

4:20 – 4:35 P.M. 7. Review Changes to Florida Retirement System Pension Plan Investment Policy Statement Ash Williams, Executive Director & CIO

(Action Required)

4:35 – 4:45 P.M. 8. Major Mandate Review Kristen Doyle, Aon Katie Comstock, Aon

4:45 – 5:00 P.M. 9. Audience Comments/2020 Scheduled Meetings/ Closing Remarks/Adjourn Vinny Olmstead, Chair

*All agenda item times are subject to change.

Investment Advisory Council Meeting Investment Advisory Council Meeting March 31, 2020 March 31, 2020

Page 2 · · · · · · · · · · ·APPEARANCES · · · ·(Participants appearing telephonically)

IAC MEMBERS:

BOBBY JONES CHUCK COBB · · · ·STATE BOARD OF ADMINISTRATION OF FLORIDA GARY WENDT JOHN GOETZ PETER COLLINS PETER JONES SEAN McGOULD · · · · ·INVESTMENT ADVISORY COUNCIL MEETING TERE CANIDA VINNY OLMSTEAD

SBA EMPLOYEES:

ASH WILLIAMS, EXECUTIVE DIRECTOR AND CIO JOHN BENTON STEVE SPOOK · · · · · · · ·TUESDAY, MARCH 31, 2020 LYNNE GRAY · · · · · · · · 1:05 P.M. - 4:30 P.M. MICHAEL FOGLIANO MICHAEL McCAULEY TIM TAYLOR ALISON ROMANO · · · · · · · ·1801 HERMITAGE BOULEVARD JOHN BRADLEY · · · · · · ·HERMITAGE ROOM, FIRST FLOOR TRENT WEBSTER · · · · · · · · ·TALLAHASSEE, FLORIDA DANIEL BEARD CONSULTANTS:

KRISTEN DOYLE - (Aon Hewitt) KATIE COMSTOCK - (Aon Hewitt) AARON CHASTAIN - (Aon Hewitt) NAYEF PERRY - (Hamilton Lane) KATIE MOORE- (Hamilton Lane) ANKUR DADHANIA - (Hamilton Lane) ROBERT COUSIN - (J.P. Morgan) TYLER JAYROE - (J.P. Morgan) · · · · · · Stenographically Reported By: PATRICK MILLER - (J.P. Morgan) RICHARD BROWN - (Townsend Group) · · · · · · · · · ·JO LANGSTON, RPR SETH MARCUS - (Townsend Group)

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Page 3 Page 4 ·1· · · ·INVESTMENT ADVISORY COUNCIL MEETING ·1· · · · MS. CANIDA:· I'm here, Ash. ·2· · · · · · · · · · · * * * ·2· · · · MR. WILLIAMS:· Thank you.· And Mr. Vinny ·3· · · · MR. WILLIAMS:· Welcome all.· So let's do a ·3· ·Olmstead? ·4· ·quick roll call, if we could.· I heard Bobby ·4· · · · MR. OLMSTEAD:· I'm here. ·5· ·Jones.· Which other IAC members do we have?· I'm ·5· · · · MR. WILLIAMS:· Great.· So by way of ·6· ·going to call roll here and see if that will ·6· ·housekeeping rules, I think it will be helpful if ·7· ·help.· Ambassador Cobb, are you on the phone? ·7· ·folks will mute their phones when not using them, ·8· ·Gary Wendt? ·8· ·which of course means -- and we all have this ·9· · · · UNIDENTIFIED SPEAKER:· He will be ·9· ·problem.· When you want to say something, you 10· ·momentarily. 10· ·have to remember to unmute it.· Otherwise, you'll 11· · · · MR. WILLIAMS:· Okay, great.· Thank you. 11· ·say something brilliant, and then when no one 12· ·Gary Wendt? 12· ·responds and you're feeling disappointed and 13· · · · MR. WENDT:· Yes. 13· ·lonely, you'll realize nobody heard it. 14· · · · MR. WILLIAMS:· Excellent.· Thank you.· John 14· · · · So with that, Mr. Chairman, do you want to 15· ·Goetz? 15· ·open the meeting? 16· · · · MR. GOETZ:· Yes. 16· · · · MR. NEAL:· Ash, this is Pat Neal.· I just 17· · · · MR. WILLIAMS:· Thank you.· Peter Collins? 17· ·should tell you I'm here and I'll be silent, but 18· ·Peter Collins?· Not sure on that one.· Peter 18· ·I'm here listening. 19· ·Jones? 19· · · · MR. WILLIAMS:· Excellent.· Welcome, Senator. 20· · · · MR. PETER JONES:· I'm here, Ash. 20· ·Good to have you with us. 21· · · · MR. WILLIAMS:· Thank you, Mr. Jones.· Sean 21· · · · MR. CHRIS WILLIAMS:· And, Ash, this is Chris 22· ·McGould? 22· ·Williams also. 23· · · · MR. McGOULD:· Sean is here, Ash. 23· · · · MR. WILLIAMS:· Terrific.· Thank you so much 24· · · · MR. WILLIAMS:· Great.· Thank you, Sean. 24· ·for being with us.· And do we have any others on 25· ·Tere Canida? 25· ·the line who would like to be recognized?

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Page 5 Page 6 ·1· · · · MR. BALLARD:· Ash, if we're checking in, ·1· · · · Normally, we would be looking at audited ·2· ·this is David Ballard and Tommy Gregory are here. ·2· ·historic financial information, which is not ·3· · · · MR. WILLIAMS:· Okay, tremendous.· Thank you. ·3· ·relevant to today's unprecedented situation. ·4· ·Go ahead. ·4· ·Before approval of the minutes and election of ·5· · · · JIM MOORE:· This is technical.· If you are ·5· ·officers, I do want to say thank you to all of ·6· ·watching the slides on the computer, we ask that ·6· ·those essential government workers, teachers, ·7· ·you please mute your speakers because there will ·7· ·transportation, first responders and so many, ·8· ·be a delay.· If you're watching the slides on the ·8· ·many others now called essential that so many of ·9· ·computer, please turn your speakers off because ·9· ·us will never take for granted, and I also want 10· ·it will cause a delay in the phone.· Thank you. 10· ·to thank our SBA staff. 11· · · · MR. BOBBY JONES:· Ash, this is Bobby Jones. 11· · · · I want to cite the transparency of the State 12· · · · MR. WILLIAMS:· Yes, sir. 12· ·Board of Administration, including our website. 13· · · · MR. BOBBY JONES:· My name is Bobby Jones, 13· ·Again, the State of Florida Retirement System or 14· ·and I serve as chair of the Investment Advisory 14· ·Florida State Board of Administration, all the 15· ·Council for the State Board of Administration. I 15· ·minutes, transcripts, roles, including that of 16· ·want to thank all of you in attendance.· And 16· ·the Investment Advisory Council, are clearly on 17· ·obviously this has been an unprecedented time. 17· ·our website. 18· ·Usually we are all together in the Hermitage Room 18· · · · I would also want to comment that in 19· ·in Tallahassee, but this is different, obviously, 19· ·February of 2020, the SBA posted a look-back at 20· ·for the safety of our staff and attendees. 20· ·the 2007 and 2008 financial crisis.· Not that 21· · · · I have asked the executive director to lead 21· ·anything is the same, but sometimes history can 22· ·the call as much as possible.· I've asked the 22· ·help give perspective. 23· ·executive director to address the current 23· · · · I want everyone to stay safe.· Now what I 24· ·environment as much as possible versus the 24· ·would like to do is request the approval of the 25· ·original agenda. 25· ·minutes of our December 17, 2019 meeting.

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Page 7 Page 8 ·1· · · · MS. CANIDA:· This is Tere Canida.· I make a ·1· ·director and again thank everyone. ·2· ·motion. ·2· · · · MR. WILLIAMS:· Thank you, Mr. Chairman and ·3· · · · MR. BOBBY JONES:· Do I have a second? ·3· ·members of the Investment Advisory Council, for ·4· · · · MR. WENDT:· Second from Wendt. ·4· ·joining us in this virtual meeting today.· As the ·5· · · · MR. BOBBY JONES:· All in favor? ·5· ·chairman just pointed out, we're all trying to be ·6· · · · (Ayes) ·6· ·responsible.· We're honoring social isolation but ·7· · · · MR. BOBBY JONES:· I would also like to ·7· ·at the same time getting the job done that we ·8· ·request that we defer the election of officers ·8· ·have to do to serve our many beneficiaries who ·9· ·until the end of the meeting, if there is no ·9· ·have given their lives to public service. 10· ·objection.· My goal is mostly to assure 10· · · · The SBA has adopted numerous safety 11· ·continuity.· And also turn the meeting over to 11· ·provisions, most of them adopted very early in 12· ·our executive director and staff.· Is there any 12· ·the onset of the COVID-19 pandemic, and we are 13· ·objection? 13· ·now operating remotely.· We suspended travel on a 14· · · · MR. COLLINS:· No objection. 14· ·self-imposed basis several weeks ago.· We 15· · · · MR. BOBBY JONES:· Without objection -- I'm 15· ·likewise advised all of our investment partners 16· ·sorry? 16· ·who commonly visit the building from their 17· · · · MR. COLLINS:· Hey, Peter Jones.· It's Peter 17· ·headquarters all over the world that that would 18· ·Collins. 18· ·no longer be appropriate and suggested that, 19· · · · MR. BOBBY JONES:· Is there any objection to 19· ·absent some very, very extraordinary and 20· ·deferring the election of officers to the end of 20· ·compelling circumstances, that we conduct those 21· ·the meeting so we can move to the executive 21· ·meetings by teleconference, and we've been 22· ·director report next? 22· ·following that. 23· · · · MR. COLLINS:· No objection. 23· · · · Likewise, over the past probably five-plus 24· · · · MR. BOBBY JONES:· Without hearing objection, 24· ·years, we've put a lot of time and effort into 25· ·I would now like to turn it over to the executive 25· ·building the technical infrastructure to securely

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Page 9 Page 10 ·1· ·operate remotely in the event our headquarters ·1· ·between Saudi Arabia and Russia. ·2· ·building in Tallahassee is unavailable as a ·2· · · · We also have focused presentations today on ·3· ·consequence of any kind of natural disaster or ·3· ·the Florida Growth Fund and the real estate asset ·4· ·other event.· That has served us well in recent ·4· ·class.· We'll certainly get both of those worked ·5· ·hurricane seasons, and it's serving us really ·5· ·in, and we'll hear from the asset class senior ·6· ·well now, as all we had to do was scale up ·6· ·investment officers and other SBA staff as needed ·7· ·practices we already had in place to operate ·7· ·to go through that discussion. ·8· ·remotely. ·8· · · · Given the role that the IAC and the SBA ·9· · · · So we've added a number of licenses for the ·9· ·staff play and the trustees' fulfillment of their 10· ·secure remote access we use, and the SBA is 10· ·fiduciary duty, I believe it's also important 11· ·operating, I'm going to say, well over 90 percent 11· ·today for us to hear from our consultants so that 12· ·remotely at this time.· And that does not mean we 12· ·we have the benefit not only of our own 13· ·have in any way had diminution of service levels. 13· ·commentary but the important perspective they 14· ·We're maintaining full operations, daily 14· ·bring on what the SBA is doing relative to their 15· ·liquidity, transactional capability and 15· ·broad knowledge of other institutional clients 16· ·transparency, with Florida PRIME as an example, 16· ·and also relative to best practice. 17· ·and it's working well. 17· · · · If anyone has questions or comments about 18· · · · As the chairman said, events have absolutely 18· ·fourth quarter reports or investment performance, 19· ·eclipsed the normal approach we would take to an 19· ·we'll be happy to address them.· And if that 20· ·IAC meeting.· So I thought what the group's 20· ·approach is acceptable to the chair and the IAC 21· ·preference would be, as Chairman Jones suggested, 21· ·membership, I'm happy to go ahead and frame up on 22· ·would be to go directly into the changes wrought 22· ·a total portfolio level where we are 23· ·by the pandemic and, in some sectors, changes 23· ·environmentally and give you the outline that I 24· ·that have been exacerbated by the collapse in 24· ·think you would all agree is the logical way for 25· ·energy prices, courtesy of the competition 25· ·us to go through this at the total fund level

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Page 11 Page 12 ·1· ·first and then drill down into the individual ·1· ·portfolio and governance are largely designed to ·2· ·asset classes.· Does that sound appropriate and ·2· ·cope with dislocations in a prudent and rational ·3· ·acceptable to you? ·3· ·manner.· If you think about it, we have a number ·4· · · · MR. BOBBY JONES:· This is Bobby Jones. I ·4· ·of things going for us that equip us perfectly to ·5· ·certainly would think that would be the most ·5· ·deal with this sort of situation. ·6· ·appropriate, efficient way to go forward. ·6· · · · Much as the military trains very thoroughly ·7· · · · MR. COLLINS:· And, Ash, I agree.· Ash, Peter ·7· ·for operations in different sorts of theaters and ·8· ·Collins.· I missed the roll call, but I'm here. ·8· ·masters the muscle memory and the intellectual ·9· · · · MR. WILLIAMS:· Okay.· We've got you checked ·9· ·discipline of how to cope with different sorts of 10· ·off.· I heard you a minute ago. 10· ·challenges, how to deal with changes, how to 11· · · · MR. WENDT:· This is Gary Wendt.· The pages 11· ·adapt and how to keep progressing as the 12· ·you are going to speak to are in the book? 12· ·battlefield evolves, we have detailed, thoroughly 13· · · · MR. WILLIAMS:· Got it.· All right. 13· ·documented investment policy that outlines all 14· · · · MR. WENDT:· Are the pages you're going to 14· ·the key elements to provide us advantage in 15· ·speak to in the book? 15· ·adverse market conditions. 16· · · · MR. WILLIAMS:· Not at the outset.· We will 16· · · · What does that mean?· Well, several things 17· ·identify pages when we come to pages. 17· ·that I'm sure those of you who have been on the 18· · · · MR. WENDT:· Is there anything that we will 18· ·IAC for a while are very familiar with.· Number 19· ·have visually to what you're talking about? 19· ·one, we're long-term oriented and we're 20· · · · MR. WILLIAMS:· Not at the outset, no, I 20· ·diversified across and within asset classes. 21· ·don't believe so.· I think this is primarily 21· ·Normally, correlations across those asset classes 22· ·going to be discussion. 22· ·and within the diversification intraclass serves 23· · · · MR. WENDT:· Thank you. 23· ·us well.· In times of extreme duress in global 24· · · · MR. WILLIAMS:· Yes.· Thank you.· So first of 24· ·markets, correlations tend to go toward one on a 25· ·all, by way of background, I think SBA's 25· ·temporary basis, but that usually unwinds.

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Page 13 Page 14 ·1· ·Structurally, we think it's the right way to be ·1· · · · Likewise, to the extent there are ·2· ·positioned. ·2· ·extraordinary transient opportunities that come ·3· · · · Secondly, we're liquid.· We're very, very ·3· ·out of the forced selling and other duresses ·4· ·attentive to maintaining our liquidity, which ·4· ·associated with a major dislocation, we want to ·5· ·preserves our ability to meet our liabilities. ·5· ·be able to take advantage of them.· Collectively, ·6· ·So, for example, our benefit payments for March ·6· ·maintaining one's discipline on liquidity and ·7· ·were already reserved for in cash.· We've ·7· ·ensuring that you have liquidity when others ·8· ·likewise reserved in advance for other known ·8· ·don't is the difference between being prey and ·9· ·disbursements, such as the Lawton Chiles ·9· ·being a predator in a tough environment. 10· ·Endowment payout that will come in June. 10· · · · Thirdly, we're not levered.· We don't rely 11· · · · We maintain enough liquidity so that we are 11· ·on fund level leverage, total fund level 12· ·confident that we can not only meet liabilities 12· ·leverage.· As a consequence, we don't have any 13· ·but also undertake rebalancings when they're 13· ·pressures because of underlying loan providers or 14· ·indicated.· That's both a source of risk control 14· ·collateral requirements or covenants in debt. 15· ·and a source of return enhancement.· We want to 15· · · · And if you look at where some of the most 16· ·be able to meet capital calls as they come in 16· ·violent challenges have occurred in private 17· ·because, by definition, when events have caused 17· ·investment funds in the past couple of weeks, 18· ·asset prices to hit levels or relative values to 18· ·probably the number one area has been REITs that 19· ·hit levels or relative risks to hit levels that 19· ·run levered portfolios of real estate related 20· ·it creates an opportunity window for various 20· ·credit.· And today's news had reference to some 21· ·committed capital structure partners, they're 21· ·serious issues that have come out of there, where 22· ·going to call capital.· And that's exactly the 22· ·some providers are running into walls where they 23· ·time you do not want to be unable to fund a 23· ·can't meet margin calls. 24· ·capital call.· So we're very careful about 24· · · · I would also say, fourthly, we've got a 25· ·protecting that liquidity. 25· ·very, very experienced team here.· The senior

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Page 15 Page 16 ·1· ·team at the State Board and many of our mid and ·1· ·in one other thing.· If you contrast where this ·2· ·even some of the junior level people on our team ·2· ·organization is today versus where it was in, ·3· ·went through the global financial crisis, the ·3· ·say, the fall of 2008, first of all, we're fully ·4· ·dot-com collapse, 9/11, the Asian contagion, and ·4· ·staffed and stable.· We have a great team, as all ·5· ·there are a few of us around that even remember ·5· ·of y'all know.· That was not the case in early ·6· ·1987 and went through that in a fiduciary ·6· ·'08.· There were significant gaps in the staffing ·7· ·capacity.· So I think that experience is useful ·7· ·of the organization. ·8· ·because I think once people have seen that kind ·8· · · · Secondly, I think -- and I will knock wood ·9· ·of action once in their lives, they're less ·9· ·when saying this.· I think we have earned a high 10· ·likely to freeze up when they see it a second 10· ·degree of credibility in the industry with the 11· ·time. 11· ·investment-related media, with the various 12· · · · Lastly, I would say the relationships we 12· ·constituencies we have here in Florida, including 13· ·maintain with SBA's trustees and with all of you 13· ·first and foremost our trustees, secondly the 14· ·on the Investment Advisory Council and the 14· ·legislature, thirdly our beneficiaries, and 15· ·constant communication we have among ourselves is 15· ·fourthly the business community. 16· ·very, very useful.· And as an extension of that 16· · · · And if you think about one of the other 17· ·concept, we are fortunate, because of our size 17· ·things that was a major headwind for us coming 18· ·and the nature of our partnerships in the private 18· ·into the worst of the great financial -- the 19· ·sector, that we have close relationships with the 19· ·global financial crisis, it was issues that had 20· ·most senior levels of not only the largest but I 20· ·been encountered in Florida PRIME back in the 21· ·would argue the smartest and best resourced 21· ·fourth quarter of '07. 22· ·financial institutions in the world, and we have 22· · · · And to show you what a strong contrast there 23· ·the benefit of their insights in very nearly 23· ·is today versus that period, week before last, I 24· ·realtime. 24· ·believe it was, we did a call for Florida PRIME 25· · · · So with that background -- and let me throw 25· ·participants.· Florida PRIME has close to

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Page 17 Page 18 ·1· ·$17 billion in assets currently and over 900 ·1· ·little perspective on what we're seeing, then ·2· ·accounts spread across, I want to say, about 170 ·2· ·talk about any unusual challenges either in ·3· ·governmental entities across Florida. ·3· ·market function or valuations of subcomponents of ·4· · · · So we did a call with that group to outline ·4· ·the various asset classes, then morph that into ·5· ·what we're doing in terms of the portfolio, a ·5· ·opportunities and how you see things unfolding as ·6· ·high degree of transparency, full disclosure of ·6· ·we go forward through this crisis. ·7· ·all positions.· And we basically had no issues ·7· · · · So first of all, at the total portfolio ·8· ·whatsoever or any compromises in our liquidity or ·8· ·level -- well, let me stop there.· Does that ·9· ·service provided. ·9· ·approach sound okay as a general outline to the 10· · · · So when we did a call, we had 110 different 10· ·IAC? 11· ·governmental entities on the call representing I 11· · · · MR. WENDT:· Outline good.· Gary Wendt would 12· ·don't know how many accounts.· And when we walked 12· ·like to know are there any pages you're referring 13· ·them through everything and had Federated, who is 13· ·to in the book. 14· ·a third-party contract asset manager for Florida 14· · · · MR. WILLIAMS:· Not at this point, no. 15· ·PRIME, they had the senior PM who manages PRIME's 15· · · · MR. WENDT:· Thank you. 16· ·portfolio on the call.· She did her walk-through, 16· · · · MR. WILLIAMS:· Yes, sir.· So at a total fund 17· ·and then we opened it up to questions.· We didn't 17· ·level, through the close yesterday, March 30, 18· ·have a single question from the participants. 18· ·fiscal year to date, the total fund is down 19· ·And money flows have been very orderly.· There's 19· ·5.83 percent.· That's 202 basis points ahead of 20· ·not been any sort of panic activity on the part 20· ·benchmark.· And in fairness, I have to note, 21· ·of any of our local government clients.· So we're 21· ·there's a tailwind in that relative performance 22· ·very happy with that. 22· ·in the form of delayed reporting of private 23· · · · So here's the outline I would suggest we 23· ·market asset classes. 24· ·follow as we go around the asset classes.· Let's 24· · · · So things like real estate and some of the 25· ·first talk about where we are now and get a 25· ·private equity assets and certain of the other

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Page 19 Page 20 ·1· ·assets held in strategic investments are not ·1· ·magnitude of this downturn, calls it an 11 ·2· ·shown on current marks.· That problem is going to ·2· ·standard deviation move in terms of market ·3· ·be there whether markets are rising or falling, ·3· ·factors, 11 standard deviations.· I've never ·4· ·and we treat it the same both ways, so we're not ·4· ·heard of anything with a probability that obscure ·5· ·changing it up for our own benefit. ·5· ·being modelable. ·6· · · · The fund, including distributions, is down ·6· · · · And when you look at the actual math on ·7· ·$13.8 billion from the beginning of the fiscal ·7· ·this, the number of zeros in front of the ·8· ·year.· So that is the combined impact of ·8· ·one-five percent at the end of it is so many that ·9· ·distributions, which average around 600 million a ·9· ·you're going to need a nap before you can count 10· ·month, and the investment market performance. 10· ·them all.· It's effectively a zero probability 11· · · · Let's put that in perspective for just a 11· ·event because it's never happened. 12· ·minute in terms of what we're seeing.· So SBA 12· · · · And what you really have is a simultaneous 13· ·uses a total fund risk model provided by 13· ·demand shock, where a forced shutdown of 14· ·BlackRock.· It's a model called Aladdin, and it's 14· ·economies all over the world simultaneously or 15· ·one in use by many of the leading investment 15· ·near simultaneously combined with a supply shock 16· ·institutions around the world. 16· ·that results from interruption in supply chains, 17· · · · John Benton, who you all know, has worked 17· ·supply shock from the other direction, surplus of 18· ·with the Aladdin model to develop perspective on 18· ·petroleum and energy products, has really sent a 19· ·just how extreme the changes are that we have 19· ·whale of a curve to the financial markets around 20· ·seen, the actual experience that we have had so 20· ·the world. 21· ·far through the financial upheaval that we've 21· · · · The other thing is, the speed with which 22· ·seen as a consequence of the pandemic. 22· ·this has occurred is a new record.· The MSCI All 23· · · · And this is in the category of fairly 23· ·Country World Index declined 33.9 percent between 24· ·amazing detail.· In looking at the model, the 24· ·the 23rd of February and the 23rd of March. A 25· ·Aladdin model, given the speed, volatility and 25· ·decline of that magnitude in that period of time

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Page 21 Page 22 ·1· ·is pretty much unprecedented.· And it just tells ·1· ·get fear of missing out when an asset is ·2· ·you how extreme this situation has been. ·2· ·appreciating and they rush toward it at an ·3· · · · And if you look at other declines that are ·3· ·already elevated price.· And then when they ·4· ·in that magnitude, which is north of 30 percent, ·4· ·encounter a shock and a decline in asset value, ·5· ·there are really only a few in the past several ·5· ·they get fearful, they feel guilty, and they tend ·6· ·decades.· You'd see, for example, 9/11 was a ·6· ·to sell at the wrong time. ·7· ·41.6 percent event.· The March, October ·7· · · · The very nature of policy-driven ·8· ·'02 collapse was 31, and the '07, '08, which is ·8· ·institutional investment is to have written ·9· ·of course the great financial crisis, 52.3.· So ·9· ·investment policy that compels you, compels you 10· ·the scale of this thing has been huge, and it has 10· ·to do the right thing at the right times.· So our 11· ·reached just about everywhere in the world. 11· ·standard policy is, if we get 300 basis points, 12· · · · Let me stop there and see if there are any 12· ·or 3 percent, below our target allocation for an 13· ·questions or other areas you'd like me to touch 13· ·asset class, we will rebalance into that 14· ·on.· All right.· Well -- did someone say 14· ·underweight asset class by selling off assets in 15· ·something? 15· ·whatever asset classes become overweight as a 16· · · · MR. BOBBY JONES:· Ash, this is Bobby. I 16· ·response to market conditions. 17· ·think you're going exactly on the information 17· · · · We first started brushing rebalancing levels 18· ·that is right to start to convey.· Thank you. 18· ·in declines in global equities, I'm going to say, 19· · · · MR. WILLIAMS:· All right.· So then why don't 19· ·week before last.· John, is that right? 20· ·we now -- let me just add one more background 20· · · · MR. BENTON:· Correct. 21· ·piece.· One of the key things that one addresses 21· · · · MR. WILLIAMS:· Mr. Benton is nodding yes. 22· ·in these environments is rebalancing.· And we all 22· ·And we took the decision, given the speed with 23· ·know that human beings are wired to respond to 23· ·which the markets were collapsing, not to do an 24· ·fear and greed, and they tend to respond to fear 24· ·immediate rebalance but to widen that guardrail, 25· ·and greed counter to their own interests.· They 25· ·as we call it, to 5 percent below policy target,

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Page 23 Page 24 ·1· ·with the view that if we rebalanced immediately ·1· · · · And so we wanted to be able, in our ·2· ·and the markets continued down, we would just be ·2· ·rebalancing, to differentiate among industries, ·3· ·incinerating capital because we rebalanced too ·3· ·among countries, among individual companies, so ·4· ·fast. ·4· ·that we might have a more intelligent allocation ·5· · · · So we took a little bit of a pause, and sure ·5· ·of our capital into places where it's going to ·6· ·enough, the following week was particularly bad, ·6· ·be, one, safer, two, more likely to grow. ·7· ·and we made the decision to go ahead and ·7· · · · So with that, John Benton, unless you think ·8· ·rebalance back when we got toward the end of that ·8· ·there's something else we ought to touch on at a ·9· ·week.· And this would have been week before last. ·9· ·total fund level, I'm inclined to start moving to 10· ·We made the decision to go ahead and do a 10· ·the asset classes, maybe start out with global 11· ·rebalance back to about a 4 percent sub-target 11· ·equity, as the largest class, and go around.· And 12· ·level, which in terms of money, that's about a 12· ·global equity is where the rebalancing took 13· ·$670 million level. 13· ·place.· So Tim Taylor can give us more color and 14· · · · And, further, we took the decision to do a 14· ·specificity on that. 15· ·good part of that rebalancing into active 15· · · · And then once we get through the lap around 16· ·managers.· So when you've got ex-U.S. or U.S. 16· ·the asset classes, maybe we save real estate for 17· ·small cap, for example, we did a lot of work 17· ·last because that's a focus area and then maybe 18· ·through active managers, with a view that there 18· ·get a little on-high word from Aon in terms of 19· ·are some industries that are inherently facing 19· ·what they're seeing and then go ahead and do the 20· ·challenges going forward.· There are others for 20· ·Florida Growth Fund review so that that's covered 21· ·whom, in its own perverse way, the changes in 21· ·as well.· Does that sound acceptable? 22· ·lifestyle wrought by the pandemic have been 22· · · · MR. BOBBY JONES:· Ash, this is -- Executive 23· ·somewhat tailwinds.· I'm hesitant to use that 23· ·Director, this is Bobby Jones, and I think that 24· ·phrase in these bad circumstances.· But there's 24· ·is a great course to go forward. 25· ·been an element of that in some business models. 25· · · · MR. WILLIAMS:· All right.· Very good.· Well,

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Page 25 Page 26 ·1· ·with that, Tim Taylor, if you're on, why don't ·1· ·of crisis, like the TMT bubble.· I joined the SBA ·2· ·you tell us about global equities. ·2· ·in March of 1999.· That was one of my first ·3· · · · MR. TAYLOR:· Yes, sir.· I am on and good ·3· ·experiences.· The global financial crisis and ·4· ·afternoon to everyone.· I hope everyone is ·4· ·perhaps even now. ·5· ·staying safe.· Coming into 2020, we all know the ·5· · · · In general, global equity normally has a ·6· ·equity markets were exceptionally strong for an ·6· ·bias towards higher quality stocks, as defined by ·7· ·extended period of time.· Global equity's ·7· ·consistent and relatively predictable ·8· ·benchmark from inception in 2010 had returned ·8· ·profitability, combined with profiles that are ·9· ·almost 10.5 percent on an annualized basis for a ·9· ·not as negatively impacted by challenging 10· ·decade. 10· ·economic environments. 11· · · · 2019 was essentially an exclamation point on 11· · · · We normally are biased against companies 12· ·the entire decade.· Markets last year surged 26 12· ·with higher levels of leverage, and we carry an 13· ·percent, and every sector was up 20 percent or 13· ·underweight to financials and to the cyclically 14· ·more, except energy, and energy was up 14· ·dependent energy sector.· So we're pretty 15· ·12 percent.· So far in 2020, equity returns are 15· ·well-positioned at all times, I think, 16· ·down a notable 22 percent.· Volatility has 16· ·particularly when events such as this occur. 17· ·significantly increased -- we expected it would 17· · · · We are currently -- global equity as an 18· ·at some point, right -- with daily market swings 18· ·asset class is currently ahead of its benchmark 19· ·of 5 to 10 percent either way becoming more 19· ·year to date -- and this is through last 20· ·common. 20· ·evening's close -- we estimate by 40 or 50 basis 21· · · · There are some consistent tilts in global 21· ·points.· And so we are modestly protecting 22· ·equity that have benefited our active performance 22· ·capital during this challenging period. 23· ·over time, particularly during periods when 23· · · · Absolute equity valuations are arguably 24· ·markets are negatively impacted by concerns about 24· ·good, particularly when viewed on a mid- to 25· ·poor future economic growth and even in periods 25· ·long-term basis.· We've seen a significant

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Page 27 Page 28 ·1· ·sell-off.· We've taken the opportunity, as Ash ·1· ·Goetz.· Could I follow up with Tim on another ·2· ·mentioned, to add selectively to the asset class, ·2· ·question? ·3· ·with an emphasis on active managers that may ·3· · · · MR. BOBBY JONES:· Of course. ·4· ·strategically capitalize on opportunities in the ·4· · · · MR. GOETZ:· Tim, the 1.3 billion, can you ·5· ·present environment.· And, Ash, those are ·5· ·break that down into where -- you mentioned ·6· ·comments I have right now. ·6· ·active, which makes sense.· Can you break that ·7· · · · MR. WILLIAMS:· Thank you, Tim.· Questions, ·7· ·down a little bit more in terms of where you put ·8· ·comments? ·8· ·the 1.3 billion? ·9· · · · MR. COLLINS:· Yeah.· Mr. Chairman, this is ·9· · · · MR. TAYLOR:· I would say that where we've 10· ·Peter Collins.· Tim, how much rebalancing has 10· ·been active are U.S. small cap -- actually, we've 11· ·there been in terms of total dollar volume in 11· ·been -- we put money to work active everywhere. 12· ·equities?· How much have you guys put back into 12· ·There has been some passive.· It's gone into U.S. 13· ·the market on an opportunistic basis so far and 13· ·large cap.· You could argue that maybe, you know, 14· ·over what period of time?· Has it just been the 14· ·we've got good valuations now, so any beta is 15· ·last week?· Has it been the last two weeks?· Did 15· ·going to be good mid-, long-term. 16· ·you start three weeks ago?· Just give us some 16· · · · But we put active to work really everywhere. 17· ·feedback on that. 17· ·U.S. small cap was involved, developed standard 18· · · · MR. TAYLOR:· Sure.· And if my numbers and 18· ·or non-U.S. large cap.· We put some into 19· ·dates are incorrect, John Benton, please or, Ash, 19· ·emerging.· We put a little into emerging market 20· ·please correct me.· We've rebalanced and added 20· ·small cap as well.· For example, emerging market 21· ·back to global equity approximately 1.3 billion. 21· ·small cap, at the time we were putting money in, 22· ·And it's been over the last two weeks, I would 22· ·was off 40 to 45 percent year to date, so a 23· ·say. 23· ·really significant sell-off. 24· · · · MR. COLLINS:· Thanks. 24· · · · So, Mr. Goetz, most of what we've put to 25· · · · MR. GOETZ:· Mr. Chairman, this is John 25· ·work has been active, and it's been active

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Page 29 Page 30 ·1· ·everywhere.· Probably it's a little biased to ·1· ·equity now after the investment and the ·2· ·where we're already most active, the more ·2· ·rebalancing? ·3· ·inefficient areas.· But a little bit of it has ·3· · · · MR. TAYLOR:· I'll try to pull up some ·4· ·been some U.S. large cap beta.· But we've really ·4· ·numbers.· But if I can, maybe John Benton, if you ·5· ·been, I think, thoughtful, talking to the team ·5· ·have that available, chime in. ·6· ·about which managers at this point in time are ·6· · · · MR. BENTON:· Yeah.· Ambassador Cobb, this is ·7· ·seeing really good opportunities. ·7· ·John Benton.· After the rebalancing, we'll be at ·8· · · · And, you know, we've heard a couple of times ·8· ·about 51 percent of the total fund, and our ·9· ·now that you don't get an opportunity to purchase ·9· ·target is 53 percent.· So we're just a couple of 10· ·excellent companies at excellent prices.· And, 10· ·percentage points -- 11· ·yeah, the short-term is going to be a little bit 11· · · · MR. COBB:· I don't hear John, if he's 12· ·rocky, but you don't get an opportunity like this 12· ·talking. 13· ·very often.· So hopefully we're taking advantage 13· · · · MR. BENTON:· Ambassador Cobb, can you hear 14· ·of this opportunity. 14· ·me? 15· · · · MR. GOETZ:· Thank you. 15· · · · MR. COBB:· I can hear you now. 16· · · · MR. TAYLOR:· You're welcome.· Thank you. 16· · · · MR. BENTON:· Okay.· After the rebalance, 17· · · · MR. WILLIAMS:· All right.· Do we want to 17· ·we'll be approximately about 51, at 51 percent of 18· ·move on -- 18· ·the total fund, and our target is 53.· So we're 19· · · · MR. COBB:· Mr. Chairman, this is Chuck Cobb. 19· ·only 2 percent below our long-term policy weight. 20· ·Tim, I'd like to ask a follow-up on both of these 20· · · · MR. COBB:· And where were we at the low? 21· ·questions in terms of a percentage.· What were 21· · · · MR. BENTON:· We were probably around 22· ·we, in our equity, global equity percentage at 22· ·48 percent at the low, and that was around 23· ·the low and what are we now after this investment 23· ·March 19th.· And we had -- 24· ·and the market return?· What is our market 24· · · · MR. COBB:· Thank you.· That answers my 25· ·percentage of our total portfolio in global 25· ·question.

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Page 31 Page 32 ·1· · · · MR. BENTON:· Thank you. ·1· · · · MR. GOETZ:· With respect to the deviations ·2· · · · MR. COBB:· Thank you.· That answers my ·2· ·that Ash mentioned earlier, the truly dramatic ·3· ·question.· 48 to 51.· Thank you. ·3· ·significance of this 11 standard deviation move, ·4· · · · MR. WILLIAMS:· Thank you, Ambassador.· Other ·4· ·in looking at spreads between different portions ·5· ·questions? ·5· ·of the equity market, I know there are some big ·6· · · · MR. COLLINS:· Ash, Peter Collins.· Just one ·6· ·dislocations at a record level as well, ·7· ·more.· So as we're below our overall target still ·7· ·particularly on valuation, 4 standard deviation ·8· ·and the market's come back -- I'm assuming that ·8· ·type events. ·9· ·51 percent is as of yesterday -- are we still ·9· · · · By the way, the anti-leverage that you've 10· ·looking to add?· You know, going back to the 10· ·espoused, you know, that's fantastic.· You 11· ·comment it's difficult to buy excellent companies 11· ·mentioned, you know, the focus on growth.· I'm 12· ·at good prices, I mean, we're still down 12· ·just wondering if you have a way of looking at 13· ·significantly in the equity markets from our 13· ·the degree of deviation in valuation and consider 14· ·peak.· Are we still looking to add, or are you 14· ·some incremental moves just from that 15· ·guys just taking a breather? 15· ·perspective. 16· · · · MR. WILLIAMS:· No, we're not really taking a 16· · · · You mentioned being underweight in 17· ·breather.· We've got the powder there to get the 17· ·financials and energy, but now energy is 18· ·job done, and we have the plans in place to move 18· ·massively dislocated.· I'm just wondering how you 19· ·the money.· And it's a question of largely the 19· ·might think about that going forward over the 20· ·absorption and implementation through our 20· ·coming weeks. 21· ·partners and through our internal portfolio. 21· · · · MR. TAYLOR:· Thank you for that question. 22· · · · MR. COLLINS:· Okay.· Thanks. 22· ·One of the interesting things that we've observed 23· · · · MR. GOETZ:· Tim, this is John Goetz.· Can I 23· ·is it has been a notable sell-off, a significant 24· ·ask one more question, please? 24· ·sell-off.· It hasn't been entirely 25· · · · MR. TAYLOR:· Yes, sir. 25· ·indiscriminate, from what I can tell.· And what

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Page 33 Page 34 ·1· ·is sort of interesting is what was outperforming, ·1· ·back into favor unless we get some really ·2· ·growth, which has outperformed, as we know, value ·2· ·positive news on economic growth, positive ·3· ·for a long time, even during the sell-off, it's ·3· ·economic growth and some certainty of getting ·4· ·growth that is continuing to beat value.· Value ·4· ·back to business as normal. ·5· ·is actually underperforming in the sell-off. ·5· · · · So I don't know if I'm answering your ·6· · · · And the spreads you mentioned were at ·6· ·question entirely, but we have elements in our ·7· ·historically large levels even before.· So it's ·7· ·portfolio that have been challenged for a while. ·8· ·perhaps not surprising.· You think about, you ·8· ·They've continued.· And some of our managers who ·9· ·know, some value stocks, perhaps they really need ·9· ·have underperformed, and our value managers, are 10· ·some economic good news in a recovery to start 10· ·continuing to underperform, even in this 11· ·coming back.· And with so much uncertainty in the 11· ·environment.· And so that's been a little bit 12· ·market, people are perhaps stepping away even a 12· ·surprising but understandable.· So it's something 13· ·little bit more from that. 13· ·we're certainly thinking about.· And we don't 14· · · · So, Mr. Goetz, we've seen that spread 14· ·want to be too underexposed if indeed value were 15· ·continue to widen, the spread we're talking 15· ·to start -- at some point investors are going to 16· ·about, growth to value.· Some are arguing that it 16· ·favor those stocks. 17· ·could be a long time before value recovers.· And 17· · · · I remember in 2009, I think it was, in 18· ·I'm one to believe in an element of mean 18· ·March 2009, coming out of the global financial 19· ·reversion.· And, boy, this has been out of favor 19· ·crisis, what did really well when people 20· ·for a long time, and sometime it's going to be -- 20· ·understood or came to the conclusion that the 21· ·value will be in favor. 21· ·world wasn't going to end were the worst quality 22· · · · And we do have some managers that will 22· ·companies, the dash to trash, the trash rally. 23· ·benefit and will do well if value -- when value 23· ·Companies who had no earnings, highly levered, 24· ·starts coming back.· There is a good bit of 24· ·all of the things that don't define quality, 25· ·concern that it may be a while before value comes 25· ·those stocks did really well and they raced and

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Page 35 Page 36 ·1· ·we underperformed, but it was fairly short-lived. ·1· ·managers or disparity strategies, et cetera, we ·2· ·And then what came back into favor were investors ·2· ·saw fixed income markets start to seize up, which ·3· ·starting to think more about fundamentals again ·3· ·created a lot of challenges.· We even saw seizing ·4· ·and say, well, these things are important to us. ·4· ·up in the money market space and also (inaudible) ·5· · · · So I hope that's responsive to your ·5· ·Treasuries.· This presented some challenges in ·6· ·question.· We're certainly -- we're continuing to ·6· ·the fact that we were reaching quarter end, when ·7· ·see the spreads continue to widen.· And that's ·7· ·banks are trying to meet capital ratios. ·8· ·something we'll keep an eye on. ·8· · · · So the Fed, as you all know, stepped in. ·9· · · · MR. GOETZ:· Thank you. ·9· ·They stepped in dramatically with an alphabet 10· · · · MR. TAYLOR:· Thank you. 10· ·soup of programs to really support liquidity in 11· · · · MR. WILLIAMS:· Are we ready to move on to 11· ·all aspects of the market.· So there certainly 12· ·fixed income? 12· ·are numerous dislocations, but things have 13· · · · MS. ROMANO:· Ash, it's Alison Romano. I 13· ·started to improve.· The perspective is the Fed 14· ·think Katy is unable today to cover the fixed 14· ·is throwing everything it can at this so that the 15· ·income space, so I'll go ahead and do that. 15· ·machine essentially can be running again. 16· ·Hopefully everyone can hear me clearly. 16· · · · We continue though, however, to see wider 17· · · · MR. WILLIAMS:· Thank you, Alison. 17· ·spreads maybe sort of one data point BPs 18· · · · MS. ROMANO:· It's certainly been a 18· ·(inaudible).· Bid-ask spreads roughly for 19· ·challenging time in the fixed income markets, but 19· ·investment grade precrisis, call it below 5 BPs. 20· ·one way that I would characterize it in this 20· ·At the height of the crisis, it was above 30 BPs, 21· ·crisis versus the 2008 crisis is what we've seen 21· ·and now we're back down to call it 8. 22· ·more is a liquidity issue as opposed to a 22· · · · So the Fed has taken action.· It has helped 23· ·liquidity and solvency issue. 23· ·the markets, but we are still seeing the wider 24· · · · So as various players in the market were 24· ·basis spread.· And it is probably also important 25· ·forced to delever, whether CTAs or systematic 25· ·to note that what they have been throwing at the

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Page 37 Page 38 ·1· ·system is much more than what occurred during the ·1· · · · There has been sharper pricing in the ·2· ·global financial crisis. ·2· ·corporate credits.· In some cases maybe it's not ·3· · · · The good news is that the fixed income team ·3· ·enough.· In other cases it's already priced in. ·4· ·has been able to provide the liquidity that they ·4· ·So, again, this is where active management can ·5· ·need.· And maybe to provide a good example of how ·5· ·pay off. ·6· ·all the asset classes coordinate in this time of ·6· · · · As you all know, the fixed income team also ·7· ·stretched markets, Katy and her team, along with ·7· ·is a very low-risk asset class.· They manage ·8· ·Tim and his team, John Benton and I, we're ·8· ·tightly to their risk parameters.· In doing so, ·9· ·talking multiple times a day to understand where ·9· ·they were able to weather this challenge very 10· ·there was liquidity on the fixed income side, 10· ·well, but they also have some dry powder such 11· ·what the opportunity was on the equity side, how 11· ·that they can put money to work where they see 12· ·we could raise liquidity from fixed income 12· ·that opportunity.· Does anybody have any 13· ·without pushing on a market that was challenged 13· ·questions? 14· ·and opportunistically moving into equity.· We 14· · · · MS. CANIDA:· This is Tere Canida.· Where 15· ·were, as others have said, able to successfully 15· ·have you seen the greatest dislocations in the 16· ·do that. 16· ·fixed income market? 17· · · · Just like equities, in terms of looking 17· · · · MS. ROMANO:· There was definitely 18· ·forward, we think it is a good time for active 18· ·dislocation in mortgage-backeds, some pressure 19· ·management.· There absolutely will be winners and 19· ·related to REITs, even on the CP side and on the 20· ·losers, and we look to active managers to be able 20· ·repo market as well.· In terms of lots of risk 21· ·to do that.· Likewise, from an internal 21· ·appetite on the -- we really haven't seen a 22· ·perspective, the team is going to be active and 22· ·return on the high yield side.· We've seen some 23· ·be opportunistic, but they're also keeping in 23· ·recovery in some of the other markets.· High 24· ·mind that they may be tapped for future liquidity 24· ·yields are -- I think there's only been one 25· ·if the equity markets were to go down. 25· ·issuance, Yum Brands, over the last few weeks.

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Page 39 Page 40 ·1· ·And EM debt also continues to be quite ·1· ·to cover a few things with my PE update, first ·2· ·challenged. ·2· ·our positioning on what the portfolio looked like ·3· · · · MS. CANIDA:· Okay.· Thank you.· And a ·3· ·headed into this crisis.· With that, I can touch ·4· ·follow-up to that.· Where are you guys taking ·4· ·on some bright spots and some hot spots and ·5· ·advantage of that dislocation?· I mean, have you ·5· ·challenges in the portfolio.· And then I'll also ·6· ·increased your risk yet, or are you kind of ·6· ·touch on our current focus today, so how are we ·7· ·staying where you were prior to the crisis? ·7· ·positioning ourselves when we do come out of ·8· · · · MS. ROMANO:· We have a risk budget, but we ·8· ·this.· I'm also happy to go through any of the ·9· ·haven't necessarily been actively increasing ·9· ·prepared PE slides in your book if there are any 10· ·risk.· In some cases, just given where the market 10· ·questions. 11· ·is at and the volatility of the market, risk 11· · · · So, with that, I'll start with our current 12· ·overall has increased.· We would expect to see 12· ·positioning.· Coming into this month or, let's 13· ·that.· I can't speak to the individual decisions 13· ·say, pre-coronavirus, our asset class had a 14· ·that our external active managers are making in 14· ·sizable overweight to growth and technology. 15· ·terms of where specifically they're finding those 15· ·Investments in technology currently account for 16· ·pockets of opportunity. 16· ·44 percent of the asset class by market value. 17· · · · MS. CANIDA:· Okay.· Thank you. 17· ·This is a 7 percent overweight relative to our PE 18· · · · MR. WILLIAMS:· Thanks, Alison.· So normally 18· ·benchmark and a 19 percent overweight relative to 19· ·the next asset class by size would be real 19· ·our public market benchmark. 20· ·estate, but as we said at the outset, since 20· · · · And while still early, we expect the 21· ·that's a deep dive focus today, why don't we hold 21· ·majority of investments in this segment of our 22· ·that one and go to private equity, please.· John 22· ·portfolio to fare better on a relative basis in 23· ·Bradley, are you with us? 23· ·this current environment and when the recovery 24· · · · MR. BRADLEY:· I am.· I am.· Thanks, Ash, and 24· ·begins.· We have long, long been investing behind 25· ·good afternoon, everyone.· My thoughts today are 25· ·very powerful secular themes in technology,

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Page 41 Page 42 ·1· ·things like cloud computing, AI and big data, ·1· ·grocery and food businesses that are benefiting, ·2· ·SaaS, e-commerce, fintech.· And the broader trend ·2· ·all examples of things that are working today. ·3· ·is companies using technology to lower cost and ·3· · · · But there are absolutely challenges in the ·4· ·increase productivity.· We believe these things ·4· ·portfolio.· Almost 9 percent of our portfolio is ·5· ·are resilient, and their adoption, innovation, ·5· ·invested in the energy sector.· This matches the ·6· ·and disruption will only increase as the market ·6· ·weighting of our private equity benchmark, but ·7· ·and economy recover. ·7· ·it's over 3 percent more than our public market ·8· · · · I don't remember who to attribute this to, ·8· ·benchmark. ·9· ·so I apologize in advance, but one of our GPs ·9· · · · Energy exposure in our portfolio will 10· ·said, as a result of this global pandemic, we 10· ·undoubtedly be a challenge.· Oil demand 11· ·will undoubtedly see a much more sophisticated 11· ·contraction due to the coronavirus, coupled with 12· ·and flexible use of technology by governments, 12· ·the Saudi-Russia-OPEC spat, has caused the price 13· ·consumers and businesses alike.· I think that is 13· ·of oil to collapse, with no real relief in sight. 14· ·spot-on, and we will continue to invest behind 14· ·And I would say a world where oil trades in the 15· ·these themes.· So this is a bright spot in our 15· ·20s and 30s is an extremely difficult one for our 16· ·portfolio. 16· ·energy managers to operate. 17· · · · And I'd also say, as we work through our 17· · · · I can report today that the majority of our 18· ·calls with our partners, there are bright spots 18· ·energy managers do hedge their production, with 19· ·in every fund we are investors in.· So some of 19· ·most being hedged through the end of this year. 20· ·these include things like mission critical, 20· ·However, many of our oil and gas GPs do not see 21· ·recurring revenue tech companies, online 21· ·the price increasing materially by the time their 22· ·retailers, whose sales have doubled.· And so I 22· ·hedges expire and thus will spend the majority of 23· ·think the term that's being coined today is 23· ·their time this year trying to lessen the impact 24· ·retail therapy for the quarantine.· There are 24· ·come year end. 25· ·certain areas in health care that are benefiting, 25· · · · Other challenges are obvious.· So any

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Page 43 Page 44 ·1· ·companies doing business in the travel, ·1· ·down all revolvers and universally eliminating ·2· ·hospitality sector, brick and mortar retail, live ·2· ·all nonessential spend.· Second, operations, so ·3· ·events, live events ticketing businesses and ·3· ·that's securing distribution and supply chains, ·4· ·restaurants, these are all areas that we have ·4· ·daily calls between businesses, prioritizing ·5· ·exposure and where the impact is instant and ·5· ·resources and implementing crisis management ·6· ·material. ·6· ·agendas. ·7· · · · Our largest sector underweights today are ·7· · · · And then finally, (inaudible) playing ·8· ·financials, manufacturing and consumer retail. ·8· ·offense, and so while still early, and the time ·9· ·So I do like how our portfolio is positioned, but ·9· ·is absolutely not now, our GPs are beginning to 10· ·it's much, much too early to draw any conclusions 10· ·line up targets for M&A and add-ons in order to 11· ·or make any projections. 11· ·strengthen portfolio companies. 12· · · · Our current focus today, so both mine and 12· · · · The second focus of our team today is on our 13· ·our private equity team, is twofold.· First is 13· ·forward calendar, so managing what is a full 14· ·continuous monitoring of our portfolio.· This 14· ·pipeline of new opportunities.· I remind our team 15· ·involves calls and videoconferencing with every 15· ·daily that funds raised during the peak of the 16· ·GP.· Our discussions revolve around business 16· ·GFC in 2008 and 2009 were some of the strongest 17· ·continuity plans, the immediate status and health 17· ·returners over the last 20 years.· And so we are 18· ·of our portfolio companies and liquidity needs of 18· ·very mindful that the commitments we make today 19· ·portfolio companies. 19· ·will provide the foundation for our 20· · · · I would let the group know that the response 20· ·outperformance in the future. 21· ·from our GPs has been universal.· All are 21· · · · And so we are in the process of also closing 22· ·focusing on what we think are the right areas. 22· ·on a few new co-investment vehicles, ones focused 23· ·First and foremost is liquidity, and so 23· ·on traditional co-investments in companies 24· ·maximizing available cash at our companies.· GPs 24· ·alongside our GPs, and then the second, to 25· ·are tightening cash management.· They are drawing 25· ·co-invest in secondary transactions, so possibly

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Page 45 Page 46 ·1· ·buying from distressed sellers should the ·1· ·definitely happen.· That's all I have. ·2· ·opportunity arise.· These vehicles will be ready ·2· · · · MR. WENDT:· Question from Wendt.· Have you ·3· ·to be put to work once markets and economies ·3· ·spoken enough to your partners, to your GPs, to ·4· ·begin to recover.· But what's important is that ·4· ·know whether they think most of their or many of ·5· ·we are getting them in place and ready today. ·5· ·their companies will be aided by this government ·6· · · · And then, lastly, one of my slides in the ·6· ·program that is designed for small business? ·7· ·book shows our commitment activity for 2019, for ·7· · · · MR. BRADLEY:· I think that's still in ·8· ·the last calendar year.· What I think is notable ·8· ·discussion.· I think there are thoughts that that ·9· ·is that last year we committed $515 million to ·9· ·will happen.· I think there are -- for those of 10· ·five distressed funds.· It was our second highest 10· ·you who are unaware, there is some language in 11· ·year of distressed fund commitment since the 11· ·the legislation that says for companies that 12· ·inception of our asset class, dating back to 12· ·might be PE-backed or backed by financial 13· ·1999. 13· ·sponsors, that all those companies' employees are 14· · · · And so while we had no idea the world would 14· ·aggregated across the entire portfolio, and so a 15· ·experience a pandemic, we were acutely aware that 15· ·company with 50 employees might get added to 16· ·we were late in the cycle and starting to plan 16· ·every other company in the GP's portfolio. 17· ·for an eventual downturn.· As we sit here today, 17· · · · We've had talks with our GPs who have been 18· ·20 percent of our dry powder, so that would be 18· ·in discussions with their legislators that say 19· ·our committed but not yet invested capital, sits 19· ·that wasn't the intent, wasn't to exclude those 20· ·in distressed strategies. 20· ·companies.· And so the hope is that that will get 21· · · · So, to sum it up, I think we are positioned 21· ·worked out and those companies will be -- that 22· ·to continue outperforming our benchmark over the 22· ·aid will be available. 23· ·short-term and then accelerate that 23· · · · MR. WENDT:· I have spoken to some both 24· ·outperformance once the world comes out of their 24· ·lawyers and people in the business who believe 25· ·homes and economies start to recover, which will 25· ·that it was done intentionally, that it was done

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Page 47 Page 48 ·1· ·to not permit private equity companies who have ·1· · · · MR. WILLIAMS:· Tere, this is Ash.· I would ·2· ·multiple owners, multiple properties, to be able ·2· ·add to that.· I spoke with the CEO of one of the ·3· ·to use the funds.· You're the first person I've ·3· ·very, very large fixed income firms last evening, ·4· ·heard say that they think they'll change it. ·4· ·and this is one of the things we talked about. ·5· · · · MS. CANIDA:· This is Tere Canida.· I have a ·5· ·And his sense was that being early in distressed ·6· ·question.· When you talk to your distressed fund ·6· ·is usually a mistake, and it's better to wait ·7· ·partners, what are they telling you?· Are they ·7· ·until things are a little more defined and the ·8· ·beginning to take advantage of opportunities, and ·8· ·opportunity set is more exposed and then to go ·9· ·are you beginning to get calls on your ·9· ·in. 10· ·investments? 10· · · · And you don't really give anything up by 11· · · · MR. BRADLEY:· So on the capital calls, those 11· ·doing that, but you avoid a lot of potential 12· ·have, for the most part, started to decrease.· So 12· ·mistakes.· And I think we saw a good example of 13· ·they are still coming in for deals that were 13· ·that being played out with leveraged loans back 14· ·closed but not yet funded.· But for the most 14· ·in the onset of the great financial crisis.· If 15· ·part, all new deals or activity has dried up.· On 15· ·you remember the number of firms that were -- 16· ·the distressed side, our GPs are starting to 16· ·funds that were formed to go after that 17· ·position themselves to capitalize on any distress 17· ·opportunity set, many of them jumped in with 18· ·that might occur. 18· ·loans priced in the upper eighties, thinking they 19· · · · I think the feedback we're getting is that 19· ·were getting great deals, only to see those same 20· ·it's still too early.· They're still in the 20· ·loans go substantially south from there, and it 21· ·process of just trying to figure out what revenue 21· ·created a lot of misery over the ensuing couple 22· ·and EBITDA will be or what it could be before 22· ·of years. 23· ·there can be any kind of price discovery in the 23· · · · MS. CANIDA:· I do remember that well. 24· ·market today. 24· · · · MR. WILLIAMS:· Yeah.· So I think we're 25· · · · MS. CANIDA:· Okay.· Thank you. 25· ·mindful of that, too.· Other questions on fixed

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Page 49 Page 50 ·1· ·income?· Or private equity, sorry.· All right. ·1· ·hedge funds.· We do some eclectic equity.· And ·2· ·Mr. Chairman, is it time to move on to strategic ·2· ·then we do some other things that are outside ·3· ·investments? ·3· ·most other normal asset allocations, such as ·4· · · · MR. BOBBY JONES:· Yes, sir. ·4· ·insurance and the like. ·5· · · · MR. WILLIAMS:· Mr. Webster? ·5· · · · So we have four objectives in policy.· The ·6· · · · MR. WEBSTER:· Hi, everyone.· My name is ·6· ·first one is to generate the real return targets ·7· ·Trent Webster.· I'm the senior investment officer ·7· ·of the FRS for the total fund, and that's ·8· ·for strategic investments, and I'm going to do a ·8· ·currently 4 percent.· We're here to dampen the ·9· ·bit of a spiel here that most members of the IAC ·9· ·volatility, improve the risk-adjusted returns of 10· ·have heard, but we've got a few new members on 10· ·the FRS.· We're also here to outperform the FRS 11· ·here, so please bear with me. 11· ·during periods of significant market declines. 12· · · · So strategic investments you can think of as 12· · · · And I'm pretty sure that most members of the 13· ·the alternative asset class.· So we're set up 13· ·IAC, the question will be popping up about that 14· ·like a typical pension plan, where we've got 14· ·one here in a minute, so I'll address that here 15· ·allocations to stocks, bonds, private equity and 15· ·in a bit.· And finally it's to increase portfolio 16· ·real estate equity.· And one day some very smart 16· ·flexibility by investing in new strategies and 17· ·people at the board said, well, what if we have 17· ·opportunistically across our mandate. 18· ·opportunities that don't fit nice and neatly into 18· · · · So I asked everyone on our staff to reach 19· ·those other asset classes?· So they created this 19· ·out on a weekly basis, at least at the beginning 20· ·thing called strategic investments. 20· ·of March, to get the most up-to-date performance 21· · · · And so whereas the other four asset classes 21· ·from our hedge funds as well as taking calls from 22· ·are your purebreds, we're kind of like your mutt. 22· ·a whole bunch of other of our private market 23· ·We can do a little bit of everything.· But if you 23· ·funds. 24· ·were to boil it down, what we do is primarily 24· · · · And just as a thumbnail sketch, or thumbnail 25· ·private credit.· We do some real assets.· We do 25· ·estimate, my apologies, is on March 20th, which I

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Page 51 Page 52 ·1· ·believe was the day before -- that was a Friday. ·1· ·credit and equity, and then you've got this thing ·2· ·I think it bottomed on the 23rd.· But the market, ·2· ·called diversifying strategies, which is meant to ·3· ·the stock market, the S&P 500 and the MSCI ACWI ·3· ·diversify the asset class.· And our hedge funds, ·4· ·was down 25 percent.· And on a thumbnail ·4· ·which include both economically sensitive and ·5· ·estimate, just in making estimates on a mark to ·5· ·these diversifying strategies, as of March 20th, ·6· ·market basis, using comps and information that we ·6· ·we estimate were down by about 5 percent versus ·7· ·had garnered from our managers, we think we were ·7· ·25 percent for the S&P 500.· And those strategies ·8· ·down 10 percent, whereas the stock market was ·8· ·that were specifically designed to diversify from ·9· ·down 25. ·9· ·equity risk were down 2 percent. 10· · · · And long-time members of the IAC might 10· · · · So it appears that that part of the 11· ·remember that in the past, as I have said, is 11· ·portfolio is working well.· We'll see how that 12· ·that we estimate that if the stock market were to 12· ·shakes out at the end of the quarter.· But it 13· ·have a big, giant decline, we would probably fall 13· ·appears that the portfolio has held up fairly 14· ·by somewhere between 25 and 40 percent.· And it 14· ·well through this crisis. 15· ·appears that from an estimated mark to market 15· · · · So the last objective about being 16· ·basis, that's probably where we were at. 16· ·opportunistic, again, long-time members of the 17· · · · Now, we don't mark to market, so there will 17· ·IAC will know that I would come in quarter after 18· ·be a bit of a lag there.· Our performance may 18· ·quarter after quarter saying we're building up 19· ·actually be better than it actually looks, 19· ·our diversifying strategies.· And so over the 20· ·because the private markets tend to be -- they 20· ·last six years, we've gone from about 0 percent 21· ·tend to be -- there tends to be a lag in the 21· ·to about 26, 27 percent at the end of the fourth 22· ·valuation. 22· ·quarter. 23· · · · So the next question that should be popping 23· · · · And we had also been saying for years that 24· ·up is, okay, so you've got part of the portfolio 24· ·we had been cautious on credit.· Just straight 25· ·are in economically sensitive strategies, such as 25· ·vanilla credit, we probably had about 10 percent

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Page 53 Page 54 ·1· ·of our entire book in it, and we had flagged all ·1· ·a vaccination.· We will learn how to deal with ·2· ·sorts of problems in covenant-like loans, with ·2· ·social isolating, and you will have an incredible ·3· ·adjusted EBITDA, and all the things that made ·3· ·amount of pent-up consumer demand, and you will ·4· ·credit markets, in our mind, pretty risky. ·4· ·have 0 percent interest rates, or close to it ·5· · · · So the types of credits that we were adding ·5· ·across the curve, and massive fiscal stimulus. ·6· ·tended to be special opportunities or ·6· ·So we think that's very good for risk assets. ·7· ·asset-backed lending, or within our own funds ·7· · · · Not necessarily -- the S&P could go to 2000 ·8· ·that we add, we were telling our managers we want ·8· ·or 1500, don't know.· But as we look out over ·9· ·to get more conservative with our investments. ·9· ·three to five years, we think that the markets 10· · · · And so as we grew the diversifying 10· ·are going to be significantly higher.· And my 11· ·strategies and reduced our economically sensitive 11· ·staff has joked with me that I had been waiting 12· ·strategies, we were waiting for an event 12· ·for the great bear market of 2015, the great bear 13· ·something like this.· Like John had said, John 13· ·market of 2016, the great bear market of 2017, 14· ·Bradley said, we had no idea it would be this big 14· ·et cetera, et cetera, et cetera.· We finally got 15· ·or this would be the thing that triggered it. 15· ·it.· And now we're starting to adjust and look 16· · · · But as we look out three to five years -- 16· ·forward on what we want to be looking at. 17· ·and that's what we do.· In our asset class, we're 17· · · · So what are we looking at?· Well, every year 18· ·like a battleship.· We can't turn on a dime.· We 18· ·we typically put out 2 to $3 billion in 19· ·don't know what's going to happen in three 19· ·investments, investment activity.· And I don't 20· ·months.· But when we look out three to five 20· ·want to exclude anything else, any other 21· ·years, we're actually quite bullish on risk 21· ·interesting opportunities, but it would not be 22· ·assets, even though the next quarter or two or 22· ·surprising to me if 12 months from now we had 23· ·three or four could get really choppy. 23· ·committed 2 to $3 billion in distressed 24· · · · And the reason for that is we kind of look 24· ·investing. 25· ·forward.· We will get through this.· We will get 25· · · · We think this is probably the best

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Page 55 Page 56 ·1· ·distressed opportunity perhaps ever.· By some ·1· ·putting it into the more defensive areas of the ·2· ·estimates, the distressed opportunity is twice ·2· ·market. ·3· ·that of the global financial crisis, which is ·3· · · · So, you know, it's a very, very interesting ·4· ·utterly astonishing, considering that that was ·4· ·time.· But we think, as you look through the ·5· ·the closest we came to another great depression ·5· ·valley, that there are going to be some really, ·6· ·in our lifetime.· So we think that that's a very ·6· ·really good opportunities in our strategies.· Any ·7· ·good opportunity. ·7· ·questions? ·8· · · · And we've been very, very busy over the last ·8· · · · MR. WENDT:· This is Gary Wendt again.· This ·9· ·couple of weeks, thanks to Katy and John and ·9· ·isn't really a question, Trent, but after the 10· ·Alison, who have been supplying liquidity.· We 10· ·last meeting, you promised me that you would send 11· ·signed nearly $500 million in capital calls in 11· ·me an electronic version of what in the last 12· ·April.· We are seeing some bang-the-table 12· ·presentation was slide 16. 13· ·bargains in credit, in senior credit, in some of 13· · · · MR. WEBSTER:· Yes, yes. 14· ·the senior bonds, our managers are.· And so we 14· · · · MR. WENDT:· You haven't done that.· So when 15· ·expect the $500 million to go out at the end or 15· ·you're doing that, you might as well send me, 16· ·in April as well.· So we expect a billion dollars 16· ·from this year's -- this month's presentation, 17· ·over these two months, compared to 2 to 17· ·slides 3 and 4.· They look good, too. 18· ·$3 billion in a typical year. 18· · · · MR. WEBSTER:· Okay.· I will do that today. 19· · · · So what we expect to do to fund that is that 19· ·I'll send that to Ash, Gary, and then Ash can 20· ·we do expect to redeem from some of our more -- 20· ·send it to you. 21· ·or at least deemphasize some of our more 21· · · · MR. WENDT:· I don't care how it gets here, 22· ·defensive strategies.· We'll take a look at those 22· ·as long as it gets here.· Thank you very much. 23· ·funds which we thought would have been more 23· · · · MR. WEBSTER:· My pleasure. 24· ·defensive but weren't, and then look at 24· · · · MR. WILLIAMS:· We will get it there, Mr. 25· ·reallocating from some of the strategies and 25· ·Wendt.· You have our word.· Thank you.· Other

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Page 57 Page 58 ·1· ·questions for Trent Webster in strategic ·1· ·total fund, it's a relatively small amount that ·2· ·investments? ·2· ·has moved. ·3· · · · MR. BOBBY JONES:· I do want to thank all of ·3· · · · EY, who are the financial planners, and they ·4· ·the council members for identifying themselves. ·4· ·take the calls from our members when they call in ·5· ·And thank you so much, Trent, and thank you, ·5· ·about -- asking questions, they are receiving ·6· ·Executive Director. ·6· ·quite a bit of calls just due to the market ·7· · · · MR. WILLIAMS:· You're most welcome, ·7· ·volatility.· However, what they've told us is ·8· ·Mr. Chairman.· Thank you.· Are we at a point that ·8· ·that once they're able to talk to the member, ·9· ·we want to go into real estate?· Oh, I'm sorry. ·9· ·calm the member down, then look at it long-term 10· ·I'm out of order.· Pardon me, folks.· I'm not 10· ·versus short-term, many are not taking any 11· ·following my own agenda here.· Shall we go ahead 11· ·action.· And I think that is -- we can see that 12· ·and cover DC? 12· ·by the small amount that has actually moved into 13· · · · MR. BOBBY JONES:· Executive Director, this 13· ·the money market fund. 14· ·is Chairman Jones.· I think that would be very 14· · · · Most of the decrease in our total assets 15· ·appropriate.· Thank you so much. 15· ·under management has really been from market 16· · · · MR. WILLIAMS:· Dan Beard, are you ready to 16· ·losses.· So members are staying put, which is 17· ·go on DC? 17· ·what we want them to do, and not trade out and 18· · · · MR. BEARD:· Yes, sir.· Good afternoon, 18· ·lock in any losses. 19· ·everyone.· Just a quick update on DC and where 19· · · · The other thing that we have seen is, if you 20· ·we're at.· We started off probably on March 4th 20· ·look at the second highest fund that members are 21· ·at about 11.3 billion.· Since that, at market 21· ·transferring their money into, it's the 22· ·close Friday, we were at 9.8 billion.· One of the 22· ·self-directed brokerage account.· So we've had 23· ·things that we're seeing on our side is that, of 23· ·approximately 16 million that has moved into 24· ·course, most of the money is moving into our 24· ·that, into the self-directed brokerage account. 25· ·money market fund.· However, when you look at the 25· ·And these are really, you know, your savvy

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Page 59 Page 60 ·1· ·investors, who are looking to take advantage of ·1· ·actually acted on that very natural human ·2· ·the market decline, so they're moving funds into ·2· ·response driven by fear is de minimis.· And the ·3· ·that. ·3· ·vast, vast majority of our investors have stayed ·4· · · · So overall we've had probably about a ·4· ·put, either in target date funds or in allocation ·5· ·14 percent drop in our assets since the beginning ·5· ·vehicles of their own choice.· So I think that ·6· ·of March.· But other than that, EY is taking the ·6· ·speaks well to the quality of our advice process. ·7· ·calls.· We have very few who are actually taking ·7· · · · Other questions or comments related to ·8· ·action, so they've been able to help the members. ·8· ·defined contribution for Mr. Dan Beard?· All ·9· ·So I think all in all we're functioning as well ·9· ·right.· Thank you.· Mr. Chairman, do you want to 10· ·as we can be during this time.· And I'll be glad 10· ·now go ahead with real estate? 11· ·to answer any additional questions. 11· · · · MR. BOBBY JONES:· Yes, sir.· Thank you. 12· · · · MR. WILLIAMS:· Thank you, Dan.· One thing 12· · · · MR. WILLIAMS:· All right.· Mr. Spook and 13· ·Dan touched on that I just wanted to amplify -- 13· ·company. 14· ·this is Ash Williams, Executive Director -- is 14· · · · MR. SPOOK:· All right.· Good afternoon, 15· ·that we've really seen a difference between DB 15· ·everyone.· I'll follow the same format the other 16· ·and DC.· A lot of DC beneficiaries have called in 16· ·asset classes followed, so I'll give an update on 17· ·on the advice line and have been understandably 17· ·the current state of the markets as it relates to 18· ·rattled by the sudden, violent and repeated 18· ·real estate, and then we can move into our 19· ·volatility in public markets and have considered 19· ·previously scheduled deep dive into real estate. 20· ·going to cash. 20· · · · MR. WILLIAMS:· Steve? 21· · · · And I think a lot of those people have 21· · · · MR. SPOOK:· Yes. 22· ·benefited from being in touch with very 22· · · · MR. WILLIAMS:· Sorry to interrupt.· This is 23· ·qualified, objective advisers who have told them 23· ·Ash.· For benefit of everyone following this, 24· ·that is about the least desirable thing to do. 24· ·either hard copy or on the web, when you start 25· ·And as a result, the amount of money that has 25· ·using the slides that are in the presentation,

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Page 61 Page 62 ·1· ·could you refer to those, please? ·1· · · · So the worst hit areas in the REIT sector ·2· · · · MR. SPOOK:· We will. ·2· ·are hotels.· No cash flow coming in there. ·3· · · · MR. WILLIAMS:· Thank you.· Sorry for the ·3· ·They're shut down.· Malls, they're all shut down. ·4· ·interruption. ·4· ·Shopping centers, so both malls and shopping ·5· · · · MR. SPOOK:· No problem.· All right.· So real ·5· ·centers, were already suffering from structural ·6· ·estate certainly has not been spared any pain ·6· ·issues going into the crisis that we're in. ·7· ·from this crisis, like the asset classes you just ·7· · · · Also suffering is senior housing, which has ·8· ·heard from.· We have two main sectors in our ·8· ·been prominently featured in the news, with ·9· ·portfolio, public, or REITs, and the private real ·9· ·patients being afflicted by the COVID-19, 10· ·estate portfolio. 10· ·particularly in Washington State.· But that kind 11· · · · So while the REITs are targeted to be only 11· ·of fear and contagion in the market has spread 12· ·10 percent of our asset class, they've responded, 12· ·throughout the senior housing market. 13· ·from a valuation point of view, much more rapidly 13· · · · Student housing, you know, we all know 14· ·than private real estate.· The REIT response to 14· ·colleges and universities are shut down.· We're 15· ·the altered economic and capital markets 15· ·in the middle of leasing season for next fall. 16· ·landscape has been a drastic correction in 16· ·And there is a lot of uncertainty in the 17· ·underlying asset values.· That's given the 17· ·marketplace as to when colleges and universities 18· ·anticipation of lower demand for properties, for 18· ·are going to reopen, when international students, 19· ·property (inaudible), and cash flows. 19· ·which have become a bigger and bigger part of 20· · · · The private real estate is slower to 20· ·that property type, reliance on that property 21· ·respond, given that there's an inherent lag in 21· ·type, when they'll be able to travel again to 22· ·appraisal valuations.· Therefore, you know, from 22· ·come to school here. 23· ·a valuation point of view, we have to look at the 23· · · · And then office is also rather poorly 24· ·various REIT sectors for any kind of insight into 24· ·performing, historically one of the more volatile 25· ·valuations on the private side. 25· ·property types, and pricing in, you know, reduced

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Page 63 Page 64 ·1· ·demand, given prospects of greater unemployment ·1· ·of some of the drops in stock value from, say, ·2· ·going forward, and I think to a lesser degree, ·2· ·starting at February 19th through last Friday, ·3· ·you know, fear that this work-at-home thing might ·3· ·data centers were down only 2.63 percent, self ·4· ·be a permanent shift.· I personally don't believe ·4· ·storage down 12.7 percent, but then you go down ·5· ·that, but I hear that a lot in the marketplace. ·5· ·to malls, down 56 percent.· These are share ·6· ·And the demise from this crisis, this crisis has ·6· ·prices.· Hotels down 47 percent.· So you can see ·7· ·hastened the demise of the WeWork model, so ·7· ·there, there is a lot of bifurcation within the ·8· ·coworking, which relies on long-term leases and ·8· ·property types. ·9· ·short-term sources of revenue. ·9· · · · And we do look, to some extent, to the 10· · · · Retail obviously was suffering before this, 10· ·public markets to get an idea of what's going to 11· ·and any tenants who were on the brink before 11· ·happen valuation-wise in the private markets, 12· ·this, this might be the death knell for them. 12· ·which we likely won't start seeing true valuation 13· ·The better-performing sectors are data centers 13· ·downwards until Q2, given that most appraisals 14· ·and cell towers, both tech heavy.· And, frankly, 14· ·were pretty much done when everything hit the fan 15· ·demand for their services has gone up in this 15· ·in the U.S. at least. 16· ·crisis, as people work from home. 16· · · · So going to private real estate, you know, 17· · · · Then most areas of residential other than 17· ·where we are seeing issues on a pretty immediate 18· ·student housing, so multifamily, single family 18· ·basis within our portfolio, and I think most 19· ·residential, manufactured housing, all benefiting 19· ·asset owners, is requests for rent relief. 20· ·on a relative basis.· Industrial, self storage, 20· ·Especially given that tomorrow is the first of 21· ·medical office buildings, all of those are 21· ·the month, April 1st, we are going to see some 22· ·probably less impacted from the social distancing 22· ·pretty good information coming in from our 23· ·that we're seeing going on and had structural 23· ·multifamily properties. 24· ·tailwinds going into the downturn. 24· · · · With requests for rent relief, our position 25· · · · So just to give you some idea of the scale 25· ·right now is we're going to handle each of those

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Page 65 Page 66 ·1· ·on a case-by-case basis, so our property managers ·1· ·plans. ·2· ·will be very busy.· But in general, we are going ·2· · · · Another issue that we are dealing with ·3· ·to be asking for documentation of hardship.· And ·3· ·already and will continue to deal with is ·4· ·as opposed to granting outright rental waivers, ·4· ·development.· Fortunately, development is a ·5· ·we are more likely to work with our tenants on ·5· ·rather small part of our portfolio, but it does ·6· ·rent deferrals and payment plans. ·6· ·take a lot of our staff's efforts, particularly ·7· · · · So then also going to commercial, which is ·7· ·now. ·8· ·mostly office, industrial and retail, we already ·8· · · · Construction in various jurisdictions has ·9· ·have been receiving requests for rent relief ·9· ·been shut down by the various governments due to 10· ·there.· At this point we have been directing our 10· ·shelter-in-place issues, which trickles down to 11· ·legal counsel to correspond with these people 11· ·also getting inspections from city staff, getting 12· ·requesting rent relief, asking them to look into 12· ·permits issued by city staff, getting frankly 13· ·government programs which may be of assistance to 13· ·documents recorded.· So even closings are kind of 14· ·them for small businesses in particular, to check 14· ·in question at this time. 15· ·their insurance policies for potential business 15· · · · And labor and materials are going to be an 16· ·interruption insurance.· Although early 16· ·issue going forward, particularly to the extent 17· ·indications coming in on business interruption 17· ·that we have materials -- say we're doing a 18· ·insurance is, after the SARS outbreak and 18· ·multifamily development.· If you're ordering 19· ·everything, most policies have an exclusion for 19· ·countertops from Italy or China, those are going 20· ·viruses, so I don't think there's going to be a 20· ·to be delayed. 21· ·lot of relief for them there. 21· · · · So we've got legal counsel.· We've asked 22· · · · Again, we'll be asking for documentation of 22· ·them to review all force majeure provisions in 23· ·hardship, financial statements.· And any relief 23· ·our leases, in our contracts, given that we are 24· ·will likely be in the form of payment relief in 24· ·likely to see late deliveries of properties and 25· ·exchange for extension of leases or payment 25· ·space to tenants with pre-leased space.· We are

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Page 67 Page 68 ·1· ·going to be dealing with contractors who have ·1· ·It's hard to say what the opportunities are going ·2· ·delays due to materials or labor, and we need to ·2· ·to be.· However, I think we are well-positioned ·3· ·know our rights with regard to force majeure ·3· ·to take advantage of any opportunities that may ·4· ·provisions in those cases as well. ·4· ·present themselves.· We are very ·5· · · · The transaction market in private real ·5· ·well-capitalized.· We know that there are going ·6· ·estate is pretty much frozen up.· In our ·6· ·to be recapitalizations in the marketplace for ·7· ·portfolio, we had a number of properties that we ·7· ·probably quite some time to come.· It will be ·8· ·were marketing for sale.· For the most part, ·8· ·distressed sales, and we can provide liquidity in ·9· ·those are, if not -- if they haven't been dropped ·9· ·a market where it is sorely needed. 10· ·by prospective buyers, the buyers have come to us 10· · · · So we are ready to act on those.· I don't 11· ·and asked for a delay in closing while they look 11· ·think it's going to be immediate.· I think it 12· ·at the market and try to get a little more 12· ·will behoove us to sit back and watch markets for 13· ·visibility as to where pricing really is going. 13· ·a bit.· Perhaps one area where opportunity is 14· · · · And in many cases it's beyond their control, 14· ·actionable on a more urgent basis would be 15· ·as they have lenders who are doing the same 15· ·certain public REIT strategies, where -- you 16· ·thing, saying, We're taking a step back.· And to 16· ·heard some of the numbers.· Some of those 17· ·the extent that the buyers are relying on a 17· ·well-capitalized, good balance sheet, quality 18· ·lender to close, that's going to delay things as 18· ·names have been punished dearly and, in our 19· ·well. 19· ·opinion, may be punished beyond what is 20· · · · Any commingled funds that we have that we 20· ·justified. 21· ·have not committed to and are not hard committed 21· · · · Overall, we feel our real estate portfolio 22· ·to, we are taking a step back as well and waiting 22· ·is well positioned.· We have very low leverage. 23· ·to get more visibility and price discovery before 23· ·We have seen from the public REIT markets that 24· ·we go ahead and commit there. 24· ·the REITs that have been punished the worst have 25· · · · As far as opportunities, it is early days. 25· ·been those REITs that have higher levels of

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Page 69 Page 70 ·1· ·leverage.· And I think we can extrapolate that to ·1· · · · Having said that, that's my comments for the ·2· ·our private portfolio. ·2· ·current situation.· If you have any questions on ·3· · · · The vast majority of our portfolio is core ·3· ·the current situation, happy to answer those now, ·4· ·assets, high quality assets.· And while they ·4· ·or we do have our in-depth annual review of the ·5· ·will, together with the rest of the market, see ·5· ·real estate asset class, where we can also touch ·6· ·challenges and downgrades in value, over time ·6· ·upon things that we're seeing in the marketplace ·7· ·they are going to maintain their value, we ·7· ·given the current crisis.· And Michael Fogliano ·8· ·believe, just fine. ·8· ·and Lynne Gray, two senior portfolio managers who ·9· · · · So the asset types that we have in the ·9· ·head up sections within real estate, will join me 10· ·portfolio that we believe are well positioned for 10· ·for that in-depth dive into real estate.· However 11· ·this downturn, we've owned agriculture for a very 11· ·you want to proceed, I'm willing to take 12· ·long time, since the late 1990s.· That is, I 12· ·direction. 13· ·would expect, going to hold up very well.· Over 13· · · · MR. BOBBY JONES:· This is Bobby Jones. 14· ·the last few years, anticipating late cycle 14· ·First, thanks, Steve.· I do think it might be a 15· ·investments, we have gone fairly strongly into 15· ·good idea if we could limit it to maybe five 16· ·asset types such as self storage, medical office 16· ·minutes, where you have one of the consultants 17· ·buildings.· We think those will serve us well. 17· ·give us a quick overview and then open it up 18· · · · And in the development side, I think I 18· ·further to any questions.· I would propose that, 19· ·mentioned, we're mostly multifamily, which is, if 19· ·unless any of the council members oppose. 20· ·you are going to be in the development cycle, 20· · · · MR. WENDT:· I just have a question.· This is 21· ·that is the place to be.· You can always rent 21· ·Gary Wendt.· I have a question on the real 22· ·those units out at some price.· And in any case, 22· ·estate.· We just finished that, and I wanted to 23· ·most of our deliveries are staggered so as to be 23· ·ask the question while it was still on our minds. 24· ·not in the near term and hopefully to deliver 24· ·Steve, over the last few years, you've been 25· ·when the worst of this crisis is over. 25· ·encouraged, if not in fact chided, often to

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Page 71 Page 72 ·1· ·leverage some of our portfolio.· Are we now in ·1· ·is -- the agencies Fannie and Freddie have ·2· ·any risk that we could be foreclosed on in some ·2· ·announced programs where they will offer mortgage ·3· ·of these mortgages? ·3· ·payment forbearance to the extent that landlords ·4· · · · MR. SPOOK:· No.· We are in pretty good shape ·4· ·downstream that benefit to their tenants.· And so ·5· ·here.· As we speak, our managers are projecting ·5· ·to the extent that we can take advantage of that, ·6· ·cash flows and any potential cash shortfalls.· In ·6· ·we are certainly going to look into that.· You ·7· ·most cases, we have the ability to make up any ·7· ·know, as far as rental forbearance for tenants, ·8· ·cash shortfalls at the property level, given our ·8· ·we're going to do the right thing anyway as far ·9· ·liquidity situation. ·9· ·as, you know, from an ethical point of view. 10· · · · There may be -- as this crisis unfolds, 10· · · · We are constantly analyzing our cash flows 11· ·there may be some cases where we may have to make 11· ·at the property level to see where there may be 12· ·the decision to continue servicing that debt, but 12· ·currently or upcoming stresses, and there's 13· ·it's way too early to really go down that path. 13· ·nothing significant on the horizon. 14· ·But there is no -- in no significant way are we 14· · · · MR. COLLINS:· Hey, Steve, it's Peter 15· ·impaired by leverage, other than leverage, as you 15· ·Collins.· Two questions.· One, on any student 16· ·know, any leverage that we have amplifies 16· ·housing in the portfolio, I think we're out. 17· ·valuation decline, but it also amplifies anything 17· ·And, two, on the senior living, have we gotten 18· ·coming out of this correction. 18· ·out of the senior living altogether already? 19· · · · MR. WENDT:· Good.· I'm glad to hear we 19· · · · MR. SPOOK:· On student housing, we still 20· ·haven't had any threats yet.· And I suspect it's 20· ·have a significant position in that and no 21· ·also too early to ask if you've gone to any of 21· ·intention, prior to this correction or currently, 22· ·the lenders and asked for any concessions.· Too 22· ·to exit that sector.· We did enter that sector 23· ·early? 23· ·with a defensive posture in mind that's more 24· · · · MR. SPOOK:· No.· Too early to tell.· The 24· ·demographically driven than GDP driven, same as 25· ·most likely place that we are apt to do that 25· ·some of the other alternatives that we're

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Page 73 Page 74 ·1· ·invested in, medical office and agriculture and ·1· ·the extent that the buyer needs leverage to buy ·2· ·self storage. ·2· ·these things (inaudible). ·3· · · · However, this correction is different than ·3· · · · MR. COLLINS:· Okay.· Thank you. ·4· ·anything we anticipated in that, you know, ·4· · · · MR. OLMSTEAD:· This is Vinny Olmstead. ·5· ·(inaudible) and as a result, universities are ·5· ·Steve, real quick, obviously there's maybe some ·6· ·pretty much shut down.· As you know, in the GFC, ·6· ·sort of transition in, whether it be folks ·7· ·university enrollment actually went up, as people ·7· ·working at home and data centers.· How do you ·8· ·decided to go back to school in the absence of ·8· ·guys approach sort of a shift in assets or ·9· ·any employment. ·9· ·valuations going forward? 10· · · · So, yeah, we do have that.· And the second 10· · · · MR. SPOOK:· Well, you know, I think the 11· ·property type, Peter, was senior housing.· We 11· ·industry as a whole, and I don't think we are any 12· ·were in the process of disposing of all of our 12· ·different, has been -- for instance, take a look 13· ·senior housing investments.· We do have a small 13· ·at office.· There has been, over the last several 14· ·amount compared to what we went into.· Our 14· ·years, a densification of employees in office, so 15· ·disposition process, we sold off most of our 15· ·less square feet per employee.· So that has 16· ·sub-portfolios.· We have a couple of 16· ·been -- and plus the move to open floor plans has 17· ·sub-portfolios that are under contract right now 17· ·pretty drastically reshaped the office 18· ·where we're not sure -- despite the fact that 18· ·environment.· So that is something that we are 19· ·you're under contract with hard money deposits, 19· ·always taking into consideration. 20· ·we're not sure if the buyers are going to be able 20· · · · The work at home which we're seeing coming 21· ·to perform. 21· ·up now, like I said, I think that may be 22· · · · MR. COLLINS:· Gotcha. 22· ·overblown.· Maybe on the margins you'll see some 23· · · · MR. SPOOK:· And in those cases, it's 23· ·more work at home as employers realize, hey, this 24· ·partially because the buyers -- lenders have 24· ·worked pretty good during the COVID-19 crisis, 25· ·stepped in and said, We need to step back.· So to 25· ·but I also believe, if you talk to anyone who's

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Page 75 Page 76 ·1· ·got kids or, you know, spouses and everything at ·1· ·down to a certain debt service coverage, you need ·2· ·home or live in apartments, they probably cannot ·2· ·to have dialogue with the lender to get waivers. ·3· ·wait to get back to the office environment. ·3· · · · And in this environment, as long as you're ·4· · · · And like I said earlier also, I think the ·4· ·servicing the debt, it's highly likely, as a good ·5· ·coworking environment is going to blow up.· We ·5· ·credit like the State Board is, that the lenders ·6· ·saw the WeWork explosion just a couple of months ·6· ·will work with us to the extent that any loan ·7· ·ago.· And, you know, what we're seeing here, I ·7· ·covenants are breached.· We have not received ·8· ·think, is going to have a dramatic effect on ·8· ·notice or, in our review of loan covenants and ·9· ·coworking.· I hope that answers your question. ·9· ·anything, noted any situations that are of any 10· · · · MR. OLMSTEAD:· Thanks. 10· ·concern to us. 11· · · · MR. WILLIAMS:· Steve, do you want to go 11· · · · MR. COLLINS:· Okay.· Thanks. 12· ·ahead and move into the remainder of your 12· · · · MR. BOBBY JONES:· This is Bobby Jones. 13· ·presentation, or do we have other questions? 13· ·Thank you very much, Steve.· If there are no 14· · · · MR. COLLINS:· One last question.· Peter 14· ·further questions, rather than going to the 15· ·Collins.· Going back to Mr. Wendt's comment on 15· ·consultants, I would like to turn it back over to 16· ·the leverage, do we -- are you having people 16· ·Ash and ask him to go forward, knowing that we 17· ·calculate their debt service coverage ratios 17· ·will have Aon giving us an overall perspective 18· ·under stress situations, and what is it normally 18· ·during this conference call. 19· ·and what is it after the stressing? 19· · · · MR. SPOOK:· We do have Townsend available, 20· · · · MR. SPOOK:· On any leverage we have, we are 20· ·if you would like, for any more commentary from a 21· ·looking to the loan documents, because it isn't a 21· ·consultant point of view. 22· ·waive necessarily, can you service the debt from 22· · · · MR. WILLIAMS:· Thank you.· And -- 23· ·a cash flow point of view.· There, as you know, 23· · · · MR. BOBBY JONES:· Any thoughts from -- 24· ·are covenants in all of the loan documents as far 24· · · · MR. WILLIAMS:· Go ahead, Mr. Chairman. 25· ·as if you go down to certain occupancy or you go 25· · · · MR. BOBBY JONES:· I was going to say, any

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Page 77 Page 78 ·1· ·thoughts from the council?· My biggest goal is to ·1· ·Cleveland and Dick from Denver.· So go ahead, ·2· ·make sure we get out as much information that's ·2· ·guys. ·3· ·relevant as we go forward and in the most ·3· · · · MR. MARCUS:· Sure.· And this is Seth Marcus ·4· ·efficient manner, and again knowing that we have ·4· ·from Townsend, so I appreciate the opportunity to ·5· ·also -- Aon is going to later give us an ·5· ·chime in and talk for just a couple of minutes. ·6· ·overview.· If any of the council members have a ·6· ·I'll keep it brief.· The first thing I'll say is, ·7· ·strong opinion on hearing from Townsend for five ·7· ·while there's a lot of good information out ·8· ·minutes or not, I would look for your guidance. ·8· ·there, what Steve mentioned and the way you all ·9· ·Thank you. ·9· ·are approaching the market in your portfolio 10· · · · MR. COBB:· Mr. Chairman, this is Chuck Cobb. 10· ·today is exactly what we're looking at across our 11· ·It seems to me that since we have Townsend here, 11· ·client base and across other investors. 12· ·maybe it's not five minutes but maybe at least a 12· · · · Now, I will say that the SBA is in a -- 13· ·minute to give us their view of what they're 13· ·probably in a slightly better situation than some 14· ·advising their clients with their real estate 14· ·others.· And I'll go through why in just a 15· ·portfolios, how that may be the same or different 15· ·moment.· But there's a lot of summation on the 16· ·than the advice they're giving us, and just take 16· ·near term and potentially longer term impact the 17· ·advantage of these experienced real estate people 17· ·pandemic will have on real estate.· The reality 18· ·to give us -- since we've paid the cost, let's 18· ·is that the environment is dynamic, continues to 19· ·hear their report. 19· ·change daily, and we continue to really monitor 20· · · · MR. BOBBY JONES:· Thank you, Mr. Ambassador. 20· ·the markets and provide thoughts and insight 21· ·You always led me better, and I appreciate that. 21· ·directly to your staff. 22· ·And please proceed, Steve, if you would lead and 22· · · · Specifically to SBA's real estate portfolio, 23· ·introduce our guests. 23· ·having a higher leverage or a higher core 24· · · · MR. SPOOK:· For Townsend we have Seth Marcus 24· ·exposure within the portfolio has benefited over 25· ·and Dick Brown.· Seth is calling in from 25· ·the longer term.· As you see in some of the

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Page 79 Page 80 ·1· ·materials we presented in the past, over the last ·1· ·that liquidity is not as -- is in need for some ·2· ·ten years, we may have lagged some of our peers ·2· ·plans, whether it's corporate clients that need ·3· ·and been more of a median type performer, as more ·3· ·to pay beneficiaries or less-funded, lower ·4· ·investors reach for return in the opportunistic ·4· ·funding ratios of the public sector. ·5· ·space.· But having a lower opportunistic non-core ·5· · · · So we will see redemptions from other -- for ·6· ·exposure versus core will benefit the SBA going ·6· ·our institutional investors through the core ·7· ·forward. ·7· ·open-ended fund positions.· However, that's ·8· · · · So if we look at the portfolio, as we look ·8· ·something that can be managed appropriately by ·9· ·at it today, about 75 percent of the portfolio is ·9· ·those open-ended funds and may -- the gates are 10· ·allocated to its core investments.· While those 10· ·likely to go up and limit the amount of capital 11· ·portfolios will experience a value adjustment, to 11· ·able to leave those funds. 12· ·a lesser degree than non-core, where there's 12· · · · The one point I did want to make -- and 13· ·renovation, leasing and construction. 13· ·there's a lot of good information within the 14· · · · There's also a considerable amount of 14· ·presentation that both Steve, Lynne and Michael 15· ·unfunded capital in the portfolio today.· So of 15· ·put together -- is one of the slides that 16· ·the recent commitments made, obviously capital 16· ·Townsend has in our presentation.· This goes back 17· ·has been drawn and is invested in the current 17· ·to Chairman Cobb's comment at the beginning 18· ·market.· And there's approximately a billion 18· ·about -- or, sorry, Chairman Jones, your comment 19· ·dollars of uncalled, unfunded capital that can be 19· ·at the beginning about looking back at how the 20· ·used that's already committed to make new 20· ·portfolio was positioned during other crises. 21· ·investments and to take advantage of 21· · · · So I hate to just go all the way through the 22· ·dislocations, distress in the market, which again 22· ·presentation, but on slide 211, which is slide 5 23· ·puts the SBA in a positive position. 23· ·of Townsend's presentation, it's titled Real 24· · · · The other thing we are hearing from some of 24· ·Estate Gross Annual Return, and the subtitle is 25· ·the other institutional investors we represent is 25· ·called Risk Sector and Control - Long-Term 20

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Page 81 Page 82 ·1· ·Years.· You'll see here on this chart that ·1· ·the core portfolio.· But to look back and see ·2· ·there's -- that on the left-hand side, we show ·2· ·where are we today and what are we looking at or ·3· ·both the ODCE index, which is the private market ·3· ·what do we anticipate going forward, is we still ·4· ·index, as well as the SBA's portfolio's income ·4· ·anticipate positive income on this portfolio. ·5· ·and appreciation return on an annual basis.· And ·5· ·However, anticipate revaluations and depreciation ·6· ·this goes back 20 years, so year in and year out ·6· ·from a mark to market perspective. ·7· ·what the income and appreciation was within the ·7· · · · However, income is the primary driver of why ·8· ·portfolio. ·8· ·we invest in real estate.· So, yes, all these ·9· · · · Obviously, you'll see the negative impact on ·9· ·slides are dated considerably as of 3Q '19, but 10· ·appreciation during the '08, '09 crisis, as well 10· ·the overall theme is still expanding.· I'll stop 11· ·as 2001, 2002.· But importantly, across every 11· ·there and see if there are any questions. 12· ·year for the last 20 years, income has remained 12· · · · MR. BOBBY JONES:· That's perfect.· Any 13· ·positive.· So the chart on the right-hand side 13· ·questions? 14· ·shows the average income and appreciation over 14· · · · MR. WILLIAMS:· Mr. Chairman? 15· ·this 20-year period. 15· · · · MR. BOBBY JONES:· Yes.· Please proceed and 16· · · · So we invest in real estate.· We utilize 16· ·identify yourself, please. 17· ·real estate as an income component for the 17· · · · MR. WILLIAMS:· This is Ash Williams.· Just a 18· ·overall portfolio, collecting hard, you know, 18· ·question for Steve Spook.· Steve, were you done 19· ·rents associated with only (inaudible) assets. 19· ·with the review, or did you need to bring Lynne 20· ·And the income over this 20-year period has been 20· ·or Michael into it? 21· ·6.2 percent for the SBA, outpacing the index from 21· · · · MR. SPOOK:· I was done with the immediate 22· ·about a 5.9 percent level. 22· ·reaction to the current crisis review.· Lynne and 23· · · · Appreciation has also outpaced the index. 23· ·Michael were going to join me to the extent that 24· ·That is due to the non-core component of the 24· ·we were going to do our prepared slides on the 25· ·portfolio, as well as active management within 25· ·deep dive into the asset class.· But to the

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Page 83 Page 84 ·1· ·extent that anyone has questions for Michael on ·1· ·that would be item 8 on your agenda, which gets ·2· ·the commingled fund and REIT side or Lynne on our ·2· ·us to Katie Comstock.· Katie, are you with us? ·3· ·direct-owned portfolio side, right now, without ·3· · · · MS. DOYLE:· Ash, this is Kristen Doyle.· I'm ·4· ·going into the deep dive, they are available on ·4· ·going to actually go ahead and take that.· Can ·5· ·the line as needed. ·5· ·you all hear me? ·6· · · · MR. WILLIAMS:· It sounds like there aren't ·6· · · · MR. WILLIAMS:· Yes.· Thank you, Kristen. ·7· ·any questions for Lynne or Michael.· This is Ash ·7· · · · MS. DOYLE:· Okay, great.· And so Ash is ·8· ·Williams again.· So, Mr. Chairman, I guess the ·8· ·right.· We have our regular major mandates review ·9· ·next question would be, do you want to proceed ·9· ·in the book.· I really wasn't planning to go 10· ·with the real estate dive now, or having just 10· ·through that, just given how outdated the returns 11· ·heard from Townsend, might it make sense to go 11· ·are, but happy to answer any questions if you've 12· ·ahead and talk about -- go ahead and get Aon in 12· ·had a chance to take a look at that. 13· ·and do the major mandate review and just have Aon 13· · · · You know, themes coming into the first 14· ·give a general view of what they're seeing their 14· ·quarter of 2020 were very strong equity markets, 15· ·clients do and whether SBA's actions, as we've 15· ·very strong performance from private markets and 16· ·heard them described in this look at the total 16· ·the continued sort of low interest rate 17· ·fund and walk around the asset classes, what 17· ·environment.· And a lot of that has -- the low 18· ·their view of our actions is relative to what 18· ·interest rate environment remains in some parts 19· ·they're seeing with other clients and relative to 19· ·of the fixed income world, but obviously equity 20· ·best practice? 20· ·valuations and credit spreads look very different 21· · · · MR. BOBBY JONES:· Ash, I think your 21· ·today than they did even as of the end of 22· ·suggestion, unless there's any objection from the 22· ·February. 23· ·council members, I would proceed with your 23· · · · So what I'm going to do instead is just give 24· ·suggestion of going to Aon. 24· ·sort of a general overview of how we're advising 25· · · · MR. WILLIAMS:· All right.· Thank you.· So 25· ·clients through this tumultuous time.· We have,

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Page 85 Page 86 ·1· ·as you know, a global team, not only from a ·1· ·the program and the nature of the liabilities. ·2· ·manager resource perspective but also in the ·2· ·And so we don't want to lose sight of that, even ·3· ·areas of asset allocation, investment policy.· So ·3· ·in volatile times like now. ·4· ·we feel very grateful that we have teams on the ·4· · · · So in general, our advice is to stick to ·5· ·ground in the various markets. ·5· ·your investment policy statement, don't make ·6· · · · We have investment committees in the various ·6· ·knee-jerk reactions to your targets to things ·7· ·markets that are meeting, in some cases, on a ·7· ·like public equities and fixed income and other ·8· ·daily basis to keep track of what's happening in ·8· ·areas, but keep an eye on rebalancing.· And Ash ·9· ·the markets, as things are evolving so quickly, ·9· ·mentioned some of the rebalancing activity, and 10· ·and then use all of that information to advise 10· ·the IAC members were asking about that earlier on 11· ·our clients. 11· ·the call. 12· · · · So in general -- and a lot of what I'm going 12· · · · And so our advice to clients is then don't 13· ·to say -- and Ash, the executive director, and I 13· ·necessarily rebalance as to target but certainly 14· ·have been in contact -- is going to be very 14· ·take advantage of selling high and buying low, in 15· ·consistent with what your team is doing, in terms 15· ·terms of selling fixed income assets and buying 16· ·of what we're seeing other clients do but also 16· ·equities.· Similarly to what the SBA has done, we 17· ·just what we think is best practice in an 17· ·have suggested that you rebalance maybe back up 18· ·environment, in an unprecedented environment like 18· ·to the bottom of your policy range rather than 19· ·this. 19· ·all the way to the target, because we know that 20· · · · So in general, we want to remember that in 20· ·there's going to be continued volatility and 21· ·the public pension space in particular, most 21· ·likely continued weak returns in the equity 22· ·public pension plans, if not all, are long-term 22· ·markets, but to also maybe save that end. 23· ·investors and take considerable time and effort 23· · · · So Tim was talking about doing this over a 24· ·to set a long-term strategy based on the 24· ·two-week period of time, and we think that's 25· ·circumstances of the plan, the cash flow needs of 25· ·definitely the prudent thing to do with the

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Page 87 Page 88 ·1· ·rebalancing discipline in this space.· And your ·1· ·a very few, are flush with liquidity.· But ·2· ·team at the SBA has a very robust process for ·2· ·obviously you want to be careful about where ·3· ·evaluating when to rebalance and then how much at ·3· ·you're searching out liquidity, obviously not to ·4· ·certain points in time. ·4· ·realize losses. ·5· · · · The other thing to keep in mind -- and this ·5· · · · So the one comment I wanted to make around ·6· ·hasn't been touched on too much today, but ·6· ·liquidity, especially for the SBA, is those of ·7· ·trading costs have obviously been very elevated ·7· ·you that have been part of our asset allocation ·8· ·during this period, and they've been elevated ·8· ·setting process that we go through each year, ·9· ·across the spectrum.· So we've seen high trading ·9· ·where we look at the asset-liability component of 10· ·costs even in Treasuries, and even some liquidity 10· ·the program and then we look at asset allocation 11· ·challenges even in a place in the market where we 11· ·specifically in the context of the liabilities, 12· ·would expect to see higher levels of liquidity 12· ·we talked a lot about how much should we -- 13· ·and higher levels of trading. 13· ·what's our risk tolerance around how much to put 14· · · · So this has been an area where we've advised 14· ·in return-seeking assets versus risk-reducing 15· ·clients, again, around rebalancing or if they had 15· ·assets. 16· ·a major transition plan, to back off of that and 16· · · · And what we've defined as risk-reducing 17· ·really keep in mind what you might end up paying 17· ·assets and what we think is best practice is 18· ·in terms of transaction cost.· We're seeing two 18· ·investment grade credit and Treasuries really are 19· ·to three times the transaction cost.· So keep 19· ·the parts of the market where we would expect to 20· ·that in mind when you're thinking about being in 20· ·see either positive returns or less negative 21· ·the market and trading publicly traded 21· ·returns than you would see from other parts of 22· ·securities. 22· ·the return-seeking portfolio, things like 23· · · · So liquidity is another obviously really 23· ·equities, real estate, private equity, et cetera. 24· ·important issue.· The SBA, as in my opinion do 24· · · · And it's been -- it's paid a price to have 25· ·most public pension plans, with the exception of 25· ·that 18 percent allocation to investment grade

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Page 89 Page 90 ·1· ·fixed income over the past ten years, but this is ·1· ·coming out of this crisis. ·2· ·the exact environment which is where it pays off. ·2· · · · Those are the high-level comments I was ·3· ·And so not only does that portfolio enjoy better ·3· ·going to make, just around what the SBA is doing ·4· ·valuations and better returns during this period ·4· ·and how that sort of compares to what we're ·5· ·of time than it does enjoy, even though we've ·5· ·seeing other large public pension systems doing ·6· ·seen problems in liquidity, there is more ·6· ·and what we view as best practice in this ·7· ·liquidity in that particular market. ·7· ·environment. ·8· · · · And so having that insurance policy has ·8· · · · MR. WILLIAMS:· Thank you, Kristen.· That's ·9· ·really helped in this environment.· I wanted to ·9· ·helpful.· Questions from members of the council? 10· ·make sure that I pointed that out, because 10· · · · MR. WENDT:· One quick question.· I just want 11· ·there's been a lot of discussion about that over 11· ·to make sure I got this right, because it seemed 12· ·the past couple of years. 12· ·to me you had some very good advice there.· Did 13· · · · And then the last point that I will make 13· ·you say buying high and selling low? 14· ·is -- and this has been discussed already today 14· · · · MS. DOYLE:· No.· The exact opposite. 15· ·as well.· A huge advantage that the SBA has is 15· · · · MR. WENDT:· Oh, that's what I've been doing 16· ·having a governance structure and the 16· ·wrong.· I'm sorry.· I wish I would have had your 17· ·sophistication of your investment team to take 17· ·advice earlier. 18· ·advantage of the opportunities that will 18· · · · MR. WILLIAMS:· Well, that's the tax 19· ·certainly arise from this crisis. 19· ·strategy.· You don't want to confuse that with 20· · · · So Trent talked about those opportunities. 20· ·the investment game strategy. 21· ·Steve talked about those opportunities.· So 21· · · · MS. DOYLE:· That's right. 22· ·having that dry powder that's ready to go and 22· · · · MR. WILLIAMS:· Other questions?· All right. 23· ·where you have a team that has the ability to 23· ·Very good.· Mr. Chairman, what is your pleasure 24· ·move quickly and be nimble as these opportunities 24· ·for our next order of march?· Do you want to go 25· ·arise is going to be very fruitful for the SBA 25· ·perhaps into the Florida Growth Fund review?

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Page 91 Page 92 ·1· · · · MR. BOBBY JONES:· Yes, sir.· I think that ·1· ·SBA.· I've said this before and I'll repeat it ·2· ·would be a good next step.· Thank you. ·2· ·here again, but any success that we've enjoyed ·3· · · · MR. WILLIAMS:· Thank you.· This is Ash ·3· ·through this program has really been a shared ·4· ·Williams again.· So we have several folks with us ·4· ·one, as we've worked closely with the Florida SBA ·5· ·from Hamilton Lane this afternoon.· Nayef, I ·5· ·staff, so I do want to acknowledge that. ·6· ·believe you're going to lead the parade for ·6· · · · As Ash introduced us, my name is Nayef ·7· ·Hamilton Lane, and Rob Cousin for J.P. Morgan. ·7· ·Perry, and I'm the managing director on our ·8· ·Why don't we open with Hamilton Lane and Nayef, ·8· ·investment team.· I am joined by my colleagues ·9· ·and if you want to introduce your colleagues and ·9· ·Katie Moore, managing director of our client 10· ·walk us through the presentation and remember to 10· ·team, as well as Ankur Dadhania, who is a senior 11· ·identify the slides you're talking about and each 11· ·associate on our investment team. 12· ·speaker to identify themselves, that would be 12· · · · So with that, I'll turn it over to my 13· ·helpful.· Thank you. 13· ·partner Katie just to kick things off, but we'll 14· · · · MR. PERRY:· My pleasure, Ash.· Well, thank 14· ·basically be providing just an update on the 15· ·you for having us.· Let me just open by thanking 15· ·Florida Growth Fund program, talk about the 16· ·Florida SBA and the Investment Advisory Council 16· ·impact it's having on the state.· And we will 17· ·for inviting us back to present.· It's obviously 17· ·make a couple of brief remarks related to just 18· ·unfortunate that we couldn't all be together in 18· ·the recent environment around COVID-19. 19· ·person, but these are extraordinary times, so we 19· · · · MS. MOORE:· Great.· Thanks, Nayef.· And good 20· ·do hope that you and your families are safe and 20· ·afternoon to everyone.· Appreciate the time.· And 21· ·well. 21· ·it's been an interesting two hours of discussion, 22· · · · This marks the 11th year for the Florida 22· ·especially from us and just hearing from such 23· ·Growth Fund, so we are honored to continue to 23· ·smart people.· It's really enlightening.· So 24· ·manage this capital and certainly very 24· ·hopefully we can be helpful today, and we'll be 25· ·appreciative of the partnership with the Florida 25· ·really quick going through the presentation.

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Page 93 Page 94 ·1· · · · So I'll start on page 2 and give everyone a ·1· · · · But I can tell you that it's working really ·2· ·quick update on our firm and talk a little bit ·2· ·well.· The technology is helping us to ·3· ·about how we're responding to today's ·3· ·communicate in such fascinating and interesting ·4· ·environment.· As a reminder, Hamilton Lane is one ·4· ·ways, and we're constantly adapting.· We have ·5· ·of the largest allocators and investors in the ·5· ·systems for reporting, for tracking GP and ·6· ·private markets.· And that's across a very large ·6· ·company information, for benchmarking analysis. ·7· ·and diversified client base. ·7· ·We also have an internal messaging tool called ·8· · · · As you heard from your team today, almost ·8· ·Slack, which is wonderful because we have our own ·9· ·all of the things that we purchase and allocate ·9· ·Florida Growth Fund channel. 10· ·to, they're in really long-only illiquid assets 10· · · · And so as you can imagine, there's lots of 11· ·or structures.· We're also, though, at our core, 11· ·information traded back and forth, and we need to 12· ·we're a firm that's set up with a lot of data and 12· ·be able to sort of constantly have an update 13· ·information to help clients and investors who -- 13· ·there.· So all of that has been helpful.· And 14· ·you know, we definitely need -- we are in need of 14· ·from a business continuity standpoint, I think 15· ·both of those things right now. 15· ·that we are, as are a lot of firms, very prepared 16· · · · So as the other consultants have said on the 16· ·for something like this and able to redirect some 17· ·call today, we too are very much in discovery 17· ·people around the organization to be more 18· ·mode, and the paramount concern right now for us 18· ·responsive, to create content and to be very 19· ·is our people, our clients and the existing 19· ·communicative. 20· ·portfolios.· We do have a global team, about 400 20· · · · So I can tell you that we will remain highly 21· ·employees.· The page says that we have 16 global 21· ·focused on safeguarding your interests here in 22· ·offices, but I have to laugh because right now we 22· ·the Florida Growth Fund.· And while the impact on 23· ·actually have about -- we have about 400 home 23· ·the private markets and your portfolio is 24· ·offices.· So obviously that footprint has 24· ·absolutely still developing -- Nayef will go into 25· ·expanded a little bit. 25· ·it a little bit.· He'll talk about how our

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Page 95 Page 96 ·1· ·investment teams are evaluating the impact on the ·1· ·levels and skill sets.· So we are the team ·2· ·current environment and how we're going to ·2· ·responsible for constructing the portfolio, for ·3· ·position the portfolio to really take advantage ·3· ·investing and managing the fund.· And I think ·4· ·of the next cycle. ·4· ·you've met most of the people on this page, on ·5· · · · The last thing I'd mention on page 2 is that ·5· ·page 3.· David has been sort of a long-term ·6· ·I want to reiterate, private markets investing is ·6· ·senior member of our co-investment team and a ·7· ·really the thing that we focus on all the time, ·7· ·part of the Florida Growth Fund program since its ·8· ·and we've done it through lots of cycles.· So we ·8· ·inception. ·9· ·think we are well prepared for this one.· We have ·9· · · · In addition, Nayef, Ankur and Dan are down 10· ·five investment verticals, the first of which is 10· ·there holding the fort down in Miami.· And then 11· ·our primary investment team, so that's limited 11· ·you've got Ben and myself in the Philadelphia 12· ·partner commitments to other funds.· And then we 12· ·office to sort of -- our job is to be the 13· ·have dedicated teams to investing in the things 13· ·relationship managers and bring the best tools, 14· ·you heard today, secondaries, real assets and 14· ·technology and all that sort of good research to 15· ·then equities and credit co-investments. 15· ·your program. 16· · · · So from our point of view, having these 16· · · · As I turn to page 4, this is really a 17· ·teams, it really gives us unique access into 17· ·history of the program.· So if you recall back, 18· ·funds, into co-investments.· And that's really 18· ·it was launched in 2009.· It was a $250 million 19· ·the engine that drives the opportunity that comes 19· ·tranche.· The strategy was to invest in both fund 20· ·to both Hamilton Lane and then ultimately down to 20· ·managers with a Florida track record and to do 21· ·the Florida Growth Fund. 21· ·sort of equity co-investments across the state, 22· · · · Turning to page 3, quick snapshot of the 22· ·with that objective that Trent mentioned about 23· ·team.· As a very important client to us, the 23· ·generating attractive risk-adjusted return. 24· ·program has a dedicated team, with a lot of 24· · · · So three years later, the second tranche was 25· ·cross-functional expertise across different 25· ·added, with a very similar dual strategy,

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Page 97 Page 98 ·1· ·followed by two years later a $100 million credit ·1· · · · But if you look at performance and ·2· ·sleeve, all of which has been invested.· And then ·2· ·liquidity, I'd just say that we've been very ·3· ·in 2015, the second tranche of the program was ·3· ·pleased up through this point on how the program ·4· ·launched, another $250 million tranche.· And we ·4· ·is performing.· Hope you are as well.· I just ·5· ·mentioned last year, but we were sort of getting ·5· ·highlight that all the funds are outperforming ·6· ·to the tail end of fully committing that fund, ·6· ·their benchmark as of this date.· 450 million of ·7· ·and so sort of really worked with John Mogg over ·7· ·capital has now been returned to Florida SBA. ·8· ·2/2, 2/3 of this year and got approval for the ·8· ·And if you look at our direct investment ·9· ·second part of that Fund II, so another ·9· ·portfolio, we've had 20 full realizations in the 10· ·$125 million sleeve. 10· ·fund.· So feeling very good about our position 11· · · · So this is where our team is spending time 11· ·thus far. 12· ·today.· I will say that this page is a bit 12· · · · I would be obviously remiss if I didn't kind 13· ·misleading in that it's as of 9/30.· So I think 13· ·of dive into the COVID piece.· I'll just touch on 14· ·I'll turn it to Nayef to talk a little bit about 14· ·that now.· I'd say, look, this is a long-term 15· ·recent activity, because we have begun committing 15· ·asset class, and it is still very early to tell. 16· ·that tranche, and also have him highlight the 16· ·It is our view that duration will be a very large 17· ·performance of the various tranches. 17· ·determinant of just how deep this impact is on 18· · · · MR. PERRY:· Thanks, Katie.· Why don't we 18· ·any portfolio, frankly.· But we did conduct a 19· ·turn to page 5, which is titled FGF Program 19· ·phase one bottoms-up analysis of the portfolio 20· ·Highlights.· And just before I dive into the 20· ·over the last few weeks.· We drove into things 21· ·individual funds, which we'll move through 21· ·like revenue drivers, supply chain dynamics, 22· ·quickly, just some of the program highlights I 22· ·liquidity, et cetera. 23· ·wanted to mention.· So, again, this is all as of 23· · · · And I think our preliminary assessment 24· ·9/30.· We'll talk about the COVID piece in a 24· ·coming out of that, which we (inaudible) 25· ·second. 25· ·presented to Florida SBA, was that risk

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Page 99 Page 100 ·1· ·assessment across the Florida Growth Fund ·1· ·ecosystem, we think that the Florida Growth Fund ·2· ·portfolio was generally low.· We don't have any ·2· ·thesis is well intact.· The market continues to ·3· ·energy exposure.· We don't have very much, if ·3· ·grow, as you will see, and we think that the ·4· ·any, retail exposure.· And so a lot of the ·4· ·program is very, very well positioned. ·5· ·fundamentals in terms of the sectors, the ·5· · · · And so with that, if everybody would turn to ·6· ·underlying portfolio companies, still feel pretty ·6· ·page 6 of the presentation, we'll look at Florida ·7· ·good. ·7· ·Growth Fund I, which excludes the credit tranche, ·8· · · · We did kick off a phase two analysis this ·8· ·and look at that overview very briefly.· These ·9· ·past week.· And so as Ash alluded to at the top ·9· ·are basically two tranches of capital, a 2009 10· ·of the call, the velocity of change has just been 10· ·vintage and a 2012 vintage.· Both are fully 11· ·unbelievable.· And so in light of that, we will 11· ·committed, totaling 400 million in size.· And so 12· ·continue to iterate and go through the portfolio 12· ·as of 9/30, we had invested in 48 investments, 13· ·and extract information on the companies and our 13· ·had distributed about 380 million of capital back 14· ·general partners.· And so we will be sharing on 14· ·to Florida SBA. 15· ·an ongoing basis further updates with SBA as we 15· · · · And of the 25 direct investments that we've 16· ·complete those further analyses.· So I did want 16· ·made in the fund, 16 of those investments have 17· ·to touch on that. 17· ·now been fully realized, or as of 9/30.· And so 18· · · · In terms of the Florida impact, back to page 18· ·if you look at the aggregate performance of those 19· ·5, we continue to see a very, very positive 19· ·16 investments alone, they have resulted in a 20· ·impact on the state.· So we've seen over 20,000 20· ·gross IRR and MOIC of 23.8 percent and 2.4x.· So 21· ·jobs now having been created as a result of 21· ·we're very pleased with the realized performance 22· ·Florida Growth Fund dollars, at what are very 22· ·of the fund thus far. 23· ·attractive annual salaries.· Ankur will touch on 23· · · · If we look at the fund level aggregate, so 24· ·that in a minute. 24· ·if you just move to the top right-hand part of 25· · · · And then finally, as we look at the PE 25· ·the page, as of 9/30, the fund was performing --

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Page 101 Page 102 ·1· ·Fund I was performing at a 1.8x gross and a 1.6x ·1· ·22.4 percent gross IRR. ·2· ·net MOIC.· On an IRR basis, 14.2 percent gross ·2· · · · In the upper right-hand side, if you look at ·3· ·and 12.1 percent net.· And then from a DPI ·3· ·the returns, looking at the overall fund ·4· ·perspective, 1x as of 9/30, or said differently, ·4· ·performance, 1.3x gross MOIC and a 1.2x net.· On ·5· ·the fund has now returned about 100 percent of ·5· ·an IRR basis, 13.7 percent gross and an ·6· ·capital back to Florida SBA. ·6· ·8.6 percent net.· And, again, as of 9/30, the ·7· · · · If you look in the bottom right-hand side of ·7· ·fund has now distributed over 50 percent of the ·8· ·the page, the fund has outperformed its ·8· ·capital back to Florida SBA. ·9· ·since-inception benchmark by about 200 basis ·9· · · · Just finally, on the performance piece on 10· ·points.· And so on a relative basis, we're also 10· ·the bottom right, the credit tranche as of 9/30 11· ·pleased with the continued performance in that 11· ·is outperforming its benchmark by about 440 basis 12· ·program. 12· ·points.· So, again, on an unlevered basis, we 13· · · · Turning to page 7, we'll just look at the 13· ·feel very good about the relative performance of 14· ·Florida credit tranche for a quick second.· This 14· ·the credit tranche. 15· ·is a 2014 vintage.· It's unlevered.· It's 100 15· · · · Moving along to page 8, now we'll step into 16· ·million in size.· The investment period for this 16· ·Florida Growth Fund II.· And so this year we 17· ·fund ended at the end of August of 2019.· And as 17· ·profiled the first tranche, which is a 2015 18· ·of 9/30, we've made 14 investments in the fund 18· ·vintage.· This tranche is a size of 250 million. 19· ·and distributed back 54.3 million to Florida SBA. 19· ·And as of 9/30, we had made 26 investments and 20· · · · And of the 14 investments, we've had six 20· ·distributed 24.4 million back to Florida SBA. 21· ·full and partial realizations and four full 21· · · · If you look at the overall returns on the 22· ·realizations.· So those four full realizations 22· ·right-hand side, the fund was performing at a 23· ·are highlighted on the page.· And if you 23· ·1.3x MOIC on a gross basis and a 1.2x on a net 24· ·aggregate the performance of those four 24· ·basis.· From an IRR perspective, 12.3 gross and 25· ·realizations, they tally up to about a 1.2x and a 25· ·8.7 percent net.· And then as of 9/30, the fund

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Page 103 Page 104 ·1· ·had returned about 10 percent of capital back to ·1· ·driver of the opportunities that we see.· And so ·2· ·Florida SBA. ·2· ·the field that Katie highlighted within our ·3· · · · Finally, just on the performance relative to ·3· ·platform is really benefiting the Florida Growth ·4· ·benchmark, again, this tranche has also ·4· ·Fund in our view. ·5· ·outperformed its since-inception benchmark.· And ·5· · · · And so just to translate that to numbers, if ·6· ·as Katie mentioned at the top of the ·6· ·you look in the top half of the page, we deployed ·7· ·conversation, September of last year we ended up ·7· ·in 2019 alone $30.6 billion as a limited partner ·8· ·making our final commitments and turned on the ·8· ·into the private markets.· If you look at how ·9· ·next tranche of capital, which is now 125 million ·9· ·that translated into deal opportunities for 10· ·of tranche two.· And so we are actively deploying 10· ·Florida Growth Fund in the global firm, in the 11· ·that. 11· ·orange you have the equity stuff, so we saw 12· · · · I think we have certainly hit a pause in 12· ·almost 22 billion in opportunities on the equity 13· ·this environment in terms of new deployment 13· ·side, almost a billion in 2019 alone for Florida 14· ·activity for the time being, just as we assess 14· ·Growth Fund.· So it's a really rich opportunity 15· ·sort of what's going on in the market.· But I 15· ·set from us from which we can pick from. 16· ·think the positive is we were ahead on deployment 16· ·Similarly on the credit side, we saw about 6 17· ·coming into this crisis. 17· ·billion in opportunities last year alone, 18· · · · If you turn to page 9, just one last thing 18· ·515 million of those relative to Florida. 19· ·I'll highlight before turning it over to Ankur. 19· · · · MR. DADHANIA:· We'll turn to page 10. 20· ·This is really our direct investment deal flow. 20· ·Again, this is Ankur Dadhania.· As we discussed 21· ·And as I'm sure many of you can appreciate, this 21· ·in prior years, the private equity ecosystem 22· ·is the lifeblood of the platform.· And so simply 22· ·continues to grow in Florida, both in terms of 23· ·said, the deal flow continues to be pretty robust 23· ·the number of companies that receive private 24· ·for us.· And the primary commitments, or the LP 24· ·equity backing and the number of general partners 25· ·commitments, really continue to be the core 25· ·based in the state.· In 2019, we believe the

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Page 105 Page 106 ·1· ·output projection from 2018 will continue into ·1· ·continues to outpace median and mean salaries for ·2· ·'19. ·2· ·the state. ·3· · · · If you look at the graph on the left, what's ·3· · · · Lastly, capital expenditures within the ·4· ·not captured here are the number of top tier ·4· ·state have continued to ramp, with every dollar ·5· ·out-of-state GPs that are investing in the state, ·5· ·the SBA has invested resulting in $1.15 of capex. ·6· ·which gives us additional conviction that Florida ·6· ·Overall, we continue to be extremely proud of our ·7· ·has the quality of companies that rivals any ·7· ·economic impact we have on the state. ·8· ·other state. ·8· · · · MR. PERRY:· Ash, I think that concludes our ·9· · · · If you look at the graph on the right, we ·9· ·portion of the presentation, but we just do want 10· ·also see the institutionality of Florida GPs 10· ·to say thank you and just open up for any 11· ·increase as they mature in their respective life 11· ·questions that the Investment Advisory Council 12· ·cycles and the breadth of Florida GPs grow as 12· ·may have for us. 13· ·they raise capital through complementary 13· · · · MR. WILLIAMS:· Thank you all from Hamilton 14· ·strategies, just credit and small cap buyout. 14· ·Lane.· Good job.· And, Mr. Chair and members of 15· ·(Inaudible) operates in a private equity ecosytem 15· ·the committee, if I could, may I ask an opening 16· ·(inaudible). 16· ·question? 17· · · · As we turn to page 11, you'll see the 17· · · · MR. BOBBY JONES:· Yes, please do. 18· ·Hamilton Lane specific OPPAGA statistics as it 18· · · · MR. WILLIAMS:· I'd like to come back to the 19· ·relates to the Florida Growth Fund program.· Just 19· ·question Gary Wendt asked earlier and inquire as 20· ·to frame this slide, these statistics are as of 20· ·to what the perception is at Hamilton Lane on, A, 21· ·June 30th, 2019.· We're happy to report that job 21· ·whether any of our portfolio companies might be 22· ·creation continued to remain strong.· We've 22· ·potential beneficiaries of any of the federal 23· ·officially eclipsed the 20,000 jobs mark over the 23· ·largess that's recently been passed in the form 24· ·course of the program.· We're also very proud 24· ·of stimulus and, B, whether there's any 25· ·that the average annual salary for the new jobs 25· ·intelligence as to whether there's been an active

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Page 107 Page 108 ·1· ·effort to bar private-equity-owned companies from ·1· · · · MR. WILLIAMS:· No doubt. ·2· ·participating in the stimulus initiative. ·2· · · · MR. BRADLEY:· Ash, this is John Bradley, ·3· · · · MR. PERRY:· So on part B of your question, ·3· ·just to also update that.· While we've been ·4· ·Ash, we have not been active on that front.· Part ·4· ·talking, we got notice that the ILPA, which is ·5· ·A I think is still to be determined.· So ·5· ·the Institutional Limited Partners Association, ·6· ·unfortunately we don't have any good guidance at ·6· ·so an organization of all large public pension ·7· ·this point. ·7· ·funds and LPs really around the globe, they ·8· · · · MR. WILLIAMS:· Thank you very much.· Other ·8· ·actually sent a letter today to the Treasury and ·9· ·questions from members of the IAC? ·9· ·SBA on behalf of the CARES Act and revolving 10· · · · MR. OLMSTEAD:· Ash, this is Vinny Olmstead. 10· ·around what we're talking about, which is to make 11· ·I don't have a question but a comment on -- I've 11· ·sure that small businesses and businesses owned 12· ·looked very closely at all this SBA stuff and the 12· ·by PE firms and VC firms do get to participate in 13· ·relief and the payment release, and there's a lot 13· ·that relief. 14· ·of ambiguity going on.· And as alluded to with 14· · · · MR. WILLIAMS:· Thank you, John.· And for the 15· ·John Bradley, there's a lot of ambiguity with 15· ·benefit of the group, the SBA has long been 16· ·regards to, quote, unquote, affiliates.· So the 16· ·active in the Institutional Limited Partners 17· ·larger venture and PE firms are still trying to 17· ·Association, and they're a helpful group to us 18· ·wade their way through. 18· ·broadly.· Any other questions?· Or, Mr. Chair, if 19· · · · I think Gary alluded to the fact that there 19· ·not, perhaps the appropriate play would be to 20· ·are some that feel the PEs and VCs shouldn't be 20· ·move on to J.P. Morgan and Mr. Cousin. 21· ·getting this.· And then there's a whole other 21· · · · MR. COUSIN:· Thanks, Ash.· If there are no 22· ·group that think that this will actually come 22· ·more questions, good afternoon, everyone.· This 23· ·true.· But it's very fluid.· I'm sure that 23· ·is Rob Cousin.· I'm one of the founders of the 24· ·Hamilton Lane, all of your private equity guys 24· ·private equity group at J.P. Morgan, and I wish 25· ·are looking very closely at all of that. 25· ·we were there in person.· It was just a year ago

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Page 109 Page 110 ·1· ·we were there in person when we were kicking off ·1· · · · Briefly turning to page 2, again, just ·2· ·this program.· For you who are new, you may not ·2· ·because there are some new members, just to ·3· ·know, we were recently added to the Florida ·3· ·reintroduce our platform briefly, our platform, ·4· ·Growth Fund, and we started investing in the ·4· ·we oversee 27 billion in assets across the ·5· ·first quarter of last year. ·5· ·private markets.· That's global.· That's ·6· · · · I want to just briefly, along with my ·6· ·everything from venture to buyouts.· Importantly, ·7· ·colleagues Tyler Jayroe and Patrick Miller, who ·7· ·though, we only manage money for external ·8· ·are on the line with me here today, give you some ·8· ·clients.· We don't manage any of the bank balance ·9· ·flavor for what we've done the first year, give ·9· ·sheet capital.· We're in the asset management 10· ·you some overview on what we're seeing in the 10· ·division of J.P. Morgan, so we manage money 11· ·markets, which obviously are changing pretty 11· ·primarily for institutions, everything from large 12· ·rapidly. 12· ·family offices to college endowments to space in 13· · · · But I think the first thing I would lead off 13· ·corporate pension funds to sovereign wealth 14· ·with is to echo something John Bradley said 14· ·funds. 15· ·earlier, that timing is very important in the 15· · · · And we do so through a series of either 16· ·private equity industry, and the data is very 16· ·commingled funds or strategic custom separate 17· ·concrete in that. 17· ·accounts.· This would be considered a custom 18· · · · And, you know, only 15 percent of the 18· ·separate account.· You might also be interested 19· ·capital that we manage for this mandate has been 19· ·to know that of the well over 100 institutional 20· ·drawn and invested to date.· So to the extent you 20· ·investors that we have, we do have separate 21· ·think coming out of this crisis there's going to 21· ·accounts, custom accounts with other state plans. 22· ·be a lot of opportunities -- and we share that 22· ·And then in our commingled funds, we happen to 23· ·view -- we feel very fortunate to be starting 23· ·manage capital for several municipal plans in the 24· ·this program at what should be a very opportune 24· ·state of Florida. 25· ·time going forward. 25· · · · We have 47 investment professionals located

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Page 111 Page 112 ·1· ·in New York, London, Hong Kong, Beijing, New ·1· ·adding value. ·2· ·Delhi, India, and then I am based in Palm Beach ·2· · · · So to give you just a realtime example, we ·3· ·Gardens, Florida, and I'm the lead contact on the ·3· ·just, I think, two weeks ago committed to a very ·4· ·Florida Growth Fund mandate, and that's where I'm ·4· ·large direct investment.· We'll see if it closes ·5· ·calling you from today. ·5· ·in the next couple of months, if it can get ·6· · · · Turning to page 3, briefly, you just see ·6· ·financing.· But the point of it is, it's merging ·7· ·some stats here on our team.· I think what I'd ·7· ·two large companies in the state of Florida.· The ·8· ·point out here is just a couple of things. ·8· ·sponsor happens to be a firm up in New England. ·9· ·Tremendous continuity, as you can see from the ·9· ·It wasn't a relationship with anybody that's 10· ·tenures, that we've all worked together.· I can 10· ·talking to you today.· It was a relationship with 11· ·speak for myself and tell you this is the only 11· ·someone else on our team in New York, but we were 12· ·job I've ever had, been working with this group 12· ·able to take advantage of that opportunity. 13· ·since I was a college intern.· And we'd put the 13· · · · And that's what you get with everyone on 14· ·continuity and the experience and the network of 14· ·this page really canvassing the opportunities 15· ·this team up against anybody. 15· ·down here.· So with that, I'll briefly turn it 16· · · · And as I know many of you are aware, in 16· ·over to Tyler to talk a bit about the mandate. 17· ·private equity that's very important because it's 17· · · · MR. JAYROE:· Thanks, Rob.· My name is Tyler 18· ·all a relationship business, and every 18· ·Jayroe.· I'm one of the portfolio managers in the 19· ·professional has their own reputation and their 19· ·private equity group.· I've been with the team 20· ·own network of deal flow.· And what I would tell 20· ·for 15 years and focus primarily on making and 21· ·you is we don't manage the Florida Growth Fund in 21· ·monitoring investments across our platform. 22· ·a silo.· While the three of us you'll hear from 22· · · · Page 4 of the presentation provides a brief 23· ·today are the main day-to-day contacts with the 23· ·overview of the mandate, more of a recap.· From a 24· ·SBA team, everyone on this page is responsible 24· ·terminology perspective, an entity we created to 25· ·for being at the disposal of this mandate and 25· ·manage this portion of the Florida Growth Fund

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Page 113 Page 114 ·1· ·mandate is called Florida Sunshine State Fund, in ·1· ·if recent market volatility and economic ·2· ·case you're wondering about references to that ·2· ·conditions persist.· But we'll, of course, be ·3· ·name in this deck. ·3· ·very selective in pursuing and underwriting those ·4· · · · The mandate is 125 million in size and ·4· ·opportunities. ·5· ·focused on creating a return-enhancing private ·5· · · · Turning to page 5, we view this mandate ·6· ·equity portfolio of funds in companies with a ·6· ·really as (inaudible) of the close partnership ·7· ·significant presence in Florida.· The investment ·7· ·between our two organizations.· We have a very ·8· ·period is up to four years in length, which would ·8· ·transparent and collaborative relationship with ·9· ·last through 2022, although our anticipation is ·9· ·SBA staff in which we share our investment memos, 10· ·that it will be committed in closer to three 10· ·compare notes frequently on opportunities as well 11· ·years, depending on investment pace and market 11· ·as the market environment and sometimes even 12· ·conditions. 12· ·attend the diligence and monitoring meetings 13· · · · From a construction perspective, we are 13· ·together. 14· ·putting together a portfolio that will be 14· · · · In addition to the investment focused 15· ·diversified by investment type, strategy and 15· ·personnel from our team, all of whom are made 16· ·vintage year, with appropriate concentration 16· ·available at any time, several members of our 17· ·limits as described on this page.· It's really 17· ·client service team are also focusing a 18· ·too soon to determine what the ultimate mix of 18· ·meaningful amount of time on the account. 19· ·investments will be, but our expectation is that 19· · · · And finally, given the breadth of 20· ·the bulk of the capital will be invested in 20· ·relationships across our network, we can serve as 21· ·partnership and direct investments, focused 21· ·a sounding board and potential source of 22· ·primarily on small and mid buyouts, as well as 22· ·additional opportunities being considered across 23· ·growth-oriented investments. 23· ·our broader platform and yours.· I will now turn 24· · · · We will opportunistically review secondary 24· ·it over to my colleague Patrick Miller to discuss 25· ·opportunities, which could become more attractive 25· ·our Florida-focused sourcing efforts in

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Page 115 Page 116 ·1· ·particular. ·1· ·given the favorable business conditions in ·2· · · · MR. MILLER:· Great.· Thank you, Tyler.· My ·2· ·Florida. ·3· ·name is Patrick Miller.· I'm an associate at J.P. ·3· · · · MR. COUSIN:· So turning to slide 8, just to ·4· ·Morgan's private equity group and one of the main ·4· ·get to a snapshot of what the portfolio in the ·5· ·point of contacts for this mandate. ·5· ·first year actually looks like, as you can see, ·6· · · · Slide 6, this is a slide that we also ·6· ·we've committed $40 million, which would be ·7· ·included last year.· One of the reasons we're ·7· ·32 percent of the mandate, but importantly much ·8· ·excited about this mandate is that the private ·8· ·of that is, on the direct side, buy and build ·9· ·equity group has a long history of investing in ·9· ·strategies or in funds that have not yet called 10· ·the state of Florida. 10· ·capital.· So, again, only about 19 million, or 11· · · · Throughout our history we've invested in 11· ·15 percent, have been called to date. 12· ·over $1 billion in companies that are 12· · · · In terms of the profile of the portfolio, of 13· ·headquartered in Florida, and that's directing 13· ·the eight deals done last year, there were five 14· ·the companies as well as through our 14· ·directs and three funds.· And that's pretty 15· ·representative list of GPs.· And this ranges 15· ·consistent with what we've always strove to do 16· ·throughout the state, from Miami to Tampa to 16· ·here.· And we've always said to the team at SBA, 17· ·Jacksonville and everywhere in between. 17· ·you know, this would be a tremendous opportunity 18· · · · And to that point, if you move to slide 7, 18· ·for direct investing here in the state.· We have 19· ·slide 7 highlights the pipeline of opportunities 19· ·a very good record of doing that. 20· ·that we've seen in the last year or so 20· · · · And the great thing about directs is you get 21· ·(inaudible) the mandate.· The deal flows come 21· ·a second level of underwriting, because we're 22· ·from a number of different channels, fundless 22· ·looking at deals and diligencing them as opposed 23· ·sponsors, family offices, existing GPs.· And a 23· ·to a fund on a blind pool basis.· But also, if 24· ·number of these GPs have recently relocated to 24· ·you invest directs appropriately, you can really 25· ·the state.· We expect this deal flow to continue, 25· ·get J curve mitigation in the early years of a

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Page 117 Page 118 ·1· ·vehicle because you can get more capital to work ·1· · · · So it's just another sign of our conviction ·2· ·and more results earlier.· So we're pretty ·2· ·level on these deals and why we view this mandate ·3· ·excited about the direct activity that we saw ·3· ·so attractively.· And we're seeing just ·4· ·last year. ·4· ·tremendous transactions in Florida, tremendous ·5· · · · The other thing I'd point out on this slide, ·5· ·talent in Florida.· And as I mentioned earlier, ·6· ·probably the most important thing I could point ·6· ·we're investing all throughout the world. ·7· ·out for you today is on page 8, the bottom right ·7· · · · Probably as good a time as any to talk a ·8· ·of that table, you see PEG platform commitment. ·8· ·little bit about just kind of what we've seen in ·9· ·And so when we undertook this mandate, we always ·9· ·the last month, because the world really did 10· ·said, you know, we wouldn't do this if it was 10· ·change.· And, again, it's very early.· We were, 11· ·just finding good deals for Florida. 11· ·before the COVID crisis really took on, trying to 12· · · · We said Florida is such a robust economy and 12· ·just canvass our funds and our managers and our 13· ·a growing economy, from a private equity 13· ·deals, just to get an idea of kind of the 14· ·standpoint in particular, that we're already 14· ·year-end marks, because as you know, year-end 15· ·doing things, as Patrick mentioned, in Florida, 15· ·marks for private equity don't come in for a 16· ·and we're going to do deals that are good 16· ·while because they have to be audited and there's 17· ·relative to the world that just happen to be in 17· ·a lag. 18· ·Florida. 18· · · · And what we were finding is the portfolio 19· · · · So what you see on the far right is, while 19· ·was in very good shape.· There was not one 20· ·we've committed $40 million to the eight deals so 20· ·company written down at year end.· Several were 21· ·far in the mandate, we've created almost a half a 21· ·already written up, even though they were pretty 22· ·billion dollars across our platform in those same 22· ·early, because of progress in the investments. 23· ·deals.· And these are other investors who don't 23· ·And so we think the portfolio is in very good 24· ·have any particular connection or affinity to 24· ·shape.· Obviously, 3/31 marks are a mystery, just 25· ·Florida.· They just want to make money. 25· ·simply given comps will come down and everyone is

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Page 119 Page 120 ·1· ·going to have to revalue based on that. ·1· ·million software company.· It provides tools that ·2· · · · But I would say we have canvassed everybody, ·2· ·allow people to broadcast audio content on the ·3· ·and fortunately we have no restaurants, no ·3· ·internet or social media.· So for example, if ·4· ·retail, no energy, none of the things that have ·4· ·you've ever listened to a podcast of a sports ·5· ·been in the absolute tip of the spear here of the ·5· ·personality or an interview on social media, most ·6· ·correction or the dislocation.· I think everyone ·6· ·likely this company's tool was used to post that. ·7· ·feels pretty good.· Everyone has been drawing ·7· · · · The other end of the spectrum, a larger ·8· ·their revolvers, making sure their supply chain ·8· ·deal, Project Lighthouse, is a very large, ·9· ·is in order.· Everyone is working remotely.· All ·9· ·probably $700 million deal that was done last 10· ·the businesses, by the way, are considered 10· ·year in the tower, cell tower space.· Someone 11· ·essential businesses, so nothing has shut down. 11· ·mentioned that earlier, I think in the real 12· · · · I think the question everybody has and which 12· ·estate review.· That market is doing very well, 13· ·we can't answer and only time will tell is just, 13· ·just given how much global mobile usage is 14· ·when we come out of this, how long will it take 14· ·growing.· We feel pretty good about that. 15· ·for the economy to improve.· I think businesses 15· · · · And that's one that's likely to be written 16· ·might be a bit gun shy to spend again, just given 16· ·up at year end, and then we'll obviously look at 17· ·the pain they're feeling right now.· So that's 17· ·it again in March, depending upon the comps.· But 18· ·obviously a big unknown.· But we're pretty 18· ·we have $180 million in that deal across our 19· ·comforted by the fact that the portfolio is 19· ·platform, so a pretty big conviction level for 20· ·pretty solid. 20· ·us. 21· · · · And then just to give you a real high-level 21· · · · And then lastly, FPG is a more mature 22· ·flavor, on page 9, some of the earlier directs 22· ·industry.· It's the fifth largest funeral home 23· ·that we did do, they really show the breadth of 23· ·operator in the country.· It happens to be based 24· ·opportunity we're seeing here.· Starting on the 24· ·in Orlando, Florida.· Florida is its largest 25· ·left with Project Pond, that's a very small $25 25· ·market.· And here again, here's a company that

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Page 121 Page 122 ·1· ·you would think would be really hit because in ·1· · · · Since moving to Florida, they've continued ·2· ·many locales you can't have any social gatherings ·2· ·to recruit additional professionals to the state ·3· ·more than ten people at your funeral. ·3· ·and build out their local networks to help with ·4· · · · But this company always focused on the more ·4· ·sourcing and managing their portfolios.· Those ·5· ·value end of the market, where you see a lot of ·5· ·funds are early in their deployment periods and ·6· ·digital memorials and things of that nature and ·6· ·have ample capital to commit at what could be a ·7· ·used technology even before this.· So they ·7· ·good time to make new investments.· And the deals ·8· ·certainly didn't foresee COVID, but they're ·8· ·they have on the ground so far are tracking well ·9· ·actually gaining share because of that.· And so ·9· ·to date and operate in less cyclical industries. 10· ·it just gives you an example of how everybody is 10· · · · The third, Fund C, is one that's been 11· ·kind of experiencing this situation differently. 11· ·approved but has not yet closed, pending our 12· ·With that, I'll turn it back over to Tyler. 12· ·legal review.· We've been tracking this 13· · · · MR. JAYROE:· Thanks, Rob.· Just flipping to 13· ·Tampa-based lower mid market buyout firm for the 14· ·page 10, we provide brief descriptions of some of 14· ·past year.· We're encouraged by the initial 15· ·this mandate's partnership investments to date. 15· ·portfolio they put together.· That represents 16· ·The first two funds, Funds A and B, are 16· ·roughly half the fund. 17· ·emblematic of a broader trend we have seen over 17· · · · Moving to slide 11, we'd like to close our 18· ·the past few years that actually got us excited 18· ·prepared remarks with a brief recap of what we 19· ·about the opportunity set in the state of 19· ·feel differentiates our platform, mainly the 20· ·Florida, in that both are staffed by 20· ·depth and experience of our team, which has been 21· ·well-respected, lower mid market buyout 21· ·making private equity investments, as Rob 22· ·professionals who have relocated major portions 22· ·mentioned, for the past four decades and includes 23· ·of their teams to Florida from the Northeast, 23· ·an average tenure of 16 years across the firm. 24· ·establishing offices in Jacksonville and West 24· ·We believe this serves us well in times like 25· ·Palm Beach respectively. 25· ·these, where we can leverage experience from

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Page 123 Page 124 ·1· ·prior downturns and multiple investment cycles. ·1· ·new addition to the mandate last year.· So we ·2· · · · We also have strong long-term performance ·2· ·have 125 million committed, and 40 million of ·3· ·and alignment of interests in the form of ·3· ·that we've committed out and only 19 million have ·4· ·meaningful personal investments made alongside ·4· ·been drawn and actually invested in transactions. ·5· ·our clients.· And we bring a partnership ·5· · · · MR. WENDT:· Thank you.· I wanted to make ·6· ·mentality to investing this mandate on your ·6· ·sure I understood that. ·7· ·behalf and very much appreciate the opportunity ·7· · · · MR. WILLIAMS:· Yeah.· This is Ash again. ·8· ·to do so.· With that, I'll open it up to any ·8· ·The background on that, as Rob just suggested, is ·9· ·closing remarks my colleagues might have or, if ·9· ·we diversified the Florida Growth Fund with the 10· ·not, to open it up to questions. 10· ·addition of the J.P. Morgan mandate last year, 11· · · · MR. BOBBY JONES:· Do we have any questions 11· ·and that's why it's relatively new and relatively 12· ·from any of the council members? 12· ·small compared to Hamilton Lane, who has been 13· · · · MR. WENDT:· I think I have one, but it's 13· ·there since inception in June of 2009.· Other 14· ·only because -- this is Gary Wendt -- because I 14· ·questions? 15· ·guess I'm confused.· Our friends from Morgan have 15· · · · MR. OLMSTEAD:· Mr. Chairman, this is Vinny 16· ·only one co-commitment fund from us, 125 million, 16· ·Olmstead.· Rob, I assume in future presentations 17· ·and you're only about a third of the way through 17· ·you'll have all the, you know, typical returns, 18· ·that, is that right, or did I miss something? 18· ·et cetera, for us to take a look at also. 19· · · · MR. WILLIAMS:· You're correct. 19· · · · MR. COUSIN:· Yeah, of course, of course.· We 20· · · · MR. WENDT:· How much do we have committed to 20· ·didn't do it this time -- 21· ·your activities, Morgan? 21· · · · MR. OLMSTEAD:· It's early. 22· · · · MR. COUSIN:· Ash, do you want me to take 22· · · · MR. COUSIN:· Yeah.· And it would have been 23· ·that? 23· ·misleading just because, you know, we see things 24· · · · MR. WILLIAMS:· Sure.· Go ahead, Rob. 24· ·written up, but it's just too early to make any 25· · · · MR. COUSIN:· So as I mentioned, we were a 25· ·judgments.

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Page 125 Page 126 ·1· · · · MR. OLMSTEAD:· Makes sense. ·1· ·the Florida State Department of Environmental ·2· · · · MR. WILLIAMS:· Mr. Chairman, this is Ash ·2· ·Protection for debt conduit.· But most of our ·3· ·again.· So if I'm reading the agenda correctly, I ·3· ·daily activities are spent on corporate ·4· ·think we have two items to go before we get to ·4· ·governance activities. ·5· ·audience questions, those being the corporate ·5· · · · So the next slide, slide 4, I've kind of ·6· ·governance review and review of changes to the ·6· ·included a definition of governance, some kind of ·7· ·Florida Retirement System investment plan policy ·7· ·key bullets points and perspective.· But ·8· ·statement. ·8· ·essentially for -- so the SBA, our -- to us, ·9· · · · MR. BOBBY JONES:· Yes, sir.· If you would ·9· ·corporate governance really translates into the 10· ·lead the way and pass it over to Michael. 10· ·interaction that we have with owned companies. 11· · · · MR. WILLIAMS:· Very well.· Mr. McCauley. 11· ·And that interaction usually involves dialogue, 12· · · · MR. McCAULEY:· Okay.· Thank you, Chairman 12· ·engagement with members of the board of 13· ·Jones and Ash.· I'm on tab 5, slide 3, and I'll 13· ·directors, senior executives, CEOs and other 14· ·go through the slides as quickly as I can, but if 14· ·lower named executive officers, and then to a 15· ·you have questions, just stop me along the way. 15· ·lesser degree other institutional investors who 16· ·Slide 3 has just a quick overview of investment 16· ·also own shares in the same company. 17· ·programs and governance.· This is one of the 17· · · · And we've kind of taken a pretty consistent 18· ·smaller units within the SBA.· We have three 18· ·approach over the last 10, 15-plus years.· We 19· ·full-time staff, and predominantly we focus on 19· ·focus on two areas.· One for advocacy, where we 20· ·corporate governance issues, but as Ash noted in 20· ·focus on corporate governance practices that are 21· ·his introductory remarks, we also have some 21· ·associated with reducing risks.· So for example, 22· ·management activities related to Florida PRIME. 22· ·we advocate for stringent auditing and internal 23· · · · And last but actually least, we have some of 23· ·control, so think of financial quality in 24· ·the legacy non-pension client mandates.· And we 24· ·general, lowering takeover barriers, such as 25· ·work with a couple of special corporations with 25· ·classified boards.· We were very active a few

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Page 127 Page 128 ·1· ·years ago in the S&P 500 space for companies that ·1· ·but they essentially highlight some of the -- a ·2· ·had classified boards. ·2· ·few of the key issues that are tied to corporate ·3· · · · And then other kind of anti-takeover devices ·3· ·governance, really the market's focus over the ·4· ·that can fall into like supermajority ·4· ·last few years especially on ESG practices, or ·5· ·requirements and the like, anything that can ·5· ·environmental, social and governance practices. ·6· ·support an efficient market of control, we ·6· ·Those two -- you know, corporate governance and ·7· ·generally advocate for that, either eliminating ·7· ·ESG, they kind of molded together.· They're ·8· ·those types of practices or minimizing those if ·8· ·essentially synonymous at this point. ·9· ·they're viewed in a negative way. ·9· · · · And today it's pretty routine for companies 10· · · · So it's kind of risk reduction, but it's 10· ·to engage shareowners on their ESG practices.· It 11· ·also -- we've also advocated on governance 11· ·wasn't always the case five, ten years ago.· It's 12· ·practices that are associated with increased firm 12· ·very routine now for companies to approach the 13· ·performance.· So, for example, overboarded 13· ·SBA, and they're very in tune with how ESG rating 14· ·directors or directors that serve on multiple 14· ·firms have rated the company and the 15· ·boards simultaneously, that's probably one of our 15· ·methodologies that are involved in a variety of 16· ·primary drivers in terms of board discussion and 16· ·consultants.· I'll go into a little bit more 17· ·director voting.· Director quality and skill set, 17· ·detail on that in the next few slides.· And also 18· ·just think of experience, industry and otherwise, 18· ·the investor views on specific governance 19· ·for the members of the board. 19· ·characteristics. 20· · · · And then other things, like pay design we 20· · · · So these are things that we're spending a 21· ·spend a fair amount of our time on with respect 21· ·lot more of our time on, not just from a proxy 22· ·to the incentive arrangements or long-term 22· ·voting perspective but also from a company 23· ·incentive plans, annual incentive plans, too, but 23· ·engagement perspective.· And that's probably a 24· ·generally the longer term pay vehicles. 24· ·good segue into the next slide, slide 5.· So just 25· · · · I won't go through all the bullet points, 25· ·again kind of a high level.· I've included the

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Page 129 Page 130 ·1· ·definitions between voting and engagement.· I'll ·1· ·here in the next couple of slides. ·2· ·try to go through this pretty quickly. ·2· · · · I'm on slide 6.· So the main document that ·3· · · · Essentially, we treat proxy voting as an ·3· ·we use to execute votes and analyze votes is our ·4· ·asset like any other financial asset, and that's ·4· ·corporate governance principles and voting ·5· ·pursuant to fiduciary regulations, predominantly ·5· ·guidelines.· These are reviewed at least annually ·6· ·the Department of Labor, to some extent SEC ·6· ·by the IAC.· And before it even gets to the IAC, ·7· ·guidance.· And the two, voting and engagement, ·7· ·we have a proxy committee that it's reviewed and ·8· ·engagement is really coupled with voting by many ·8· ·vetted in, and then it goes to the IAC, and then ·9· ·investors.· That's the approach that's taken. ·9· ·ultimately it's approved by the trustees. 10· · · · We don't differ from that approach 10· · · · So we typically do this every year.· I've 11· ·necessarily.· Although we do -- I would kind of 11· ·done it more often than that in a handful of 12· ·draw a distinction.· There are two separate 12· ·cases, but it's rare.· For 2020 we actually don't 13· ·activities or two distinct components for 13· ·have any proposed edits or changes.· There hasn't 14· ·investors to participate in, even though one can 14· ·been really anything that's risen to that level, 15· ·inform the other.· You know, we'll have an 15· ·the need for that. 16· ·engagement dialogue with a company.· We may learn 16· · · · And the next slide, on slide 7, we've listed 17· ·new things that can inform voting and vice versa. 17· ·a table with some of the changes.· So for the 18· · · · They are also both included, engagement and 18· ·longer-serving IAC members, some of these will 19· ·voting, included in a variety of global 19· ·look familiar.· But every year we make like three 20· ·regulatory codes that are stewardship or 20· ·or four or five edits that -- the last few years 21· ·corporate governance codes, national codes of 21· ·anyway.· They've been fairly incremental. 22· ·governance.· The U.S. doesn't really have one, 22· · · · Slide 8, I've got just a listing of some of 23· ·per se, but most of the Asian countries and 23· ·the major partners, some of the firms that we 24· ·European countries have had that for years.· I'll 24· ·use.· I'll just go from left to right.· These are 25· ·touch on some of the -- what forms as a U.S. code 25· ·just the main partners that SBA staff works with,

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Page 131 Page 132 ·1· ·essentially cross-voting, engagement and even to ·1· ·body.· So it's almost like a market, ·2· ·some degree divestment-related analysis, so the ·2· ·self-regulated form of a U.S. governance code. ·3· ·Protecting Florida's Investments Act, state ·3· ·And we've been very active in that.· We were part ·4· ·statutes. ·4· ·of the founding group of asset owners that were ·5· · · · So on the investor advocacy side, first and ·5· ·involved in that.· We've also worked pretty ·6· ·foremost is the Council of Institutional ·6· ·heavily over the years with the CFA Institute, ·7· ·Investors.· Ash is the current chair on that ·7· ·and the Harvard Law School has a corporate ·8· ·board.· We've been very active over the years, ·8· ·governance program. ·9· ·since the late eighties, with NCII, a very ·9· · · · I'll go into a little more detail on the 10· ·influential group, primarily focused on U.S. 10· ·proxy advisers here in the next couple of slides, 11· ·issues but also some non-U.S. global issues as 11· ·but the two primary proxy providers that we use 12· ·well.· And kind of their counterpart on a global 12· ·are Glass Lewis and ISS.· Equilar Insight is more 13· ·basis is the ICGN, the International Corporate 13· ·of a compensation consultant, more of a boutique, 14· ·Governance Network.· We've been very active in 14· ·a little bit narrower in terms of the range. 15· ·the ICGN as well. 15· · · · And then all the way on the right side are 16· · · · And then the ISG stands for the Investor 16· ·essentially generic ESG ratings providers.· They 17· ·Stewardship Group, which is a -- kind of a group 17· ·provide corporate governance data analysis, 18· ·of -- just kind of a select group of asset owners 18· ·thematics, you know, white papers, that sort of 19· ·and asset managers that formed about three years 19· ·thing.· We use a variety of these.· And most of 20· ·ago, three or four years ago now, putting out a 20· ·these are -- all of these that are listed on the 21· ·code about two years ago. 21· ·right-hand side are also providing company 22· · · · And I say code because it's -- some people 22· ·research for some of the divestment research that 23· ·don't really view it as a code, but it 23· ·we do at the company level. 24· ·essentially is a U.S. code of corporate 24· · · · So switching to slide 9, just some 25· ·governance.· It's just not issued by a regulatory 25· ·description, a little bit more detail on proxy

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Page 133 Page 134 ·1· ·advisers.· So we use Institutional Shareholder ·1· ·voting procedures, if you will. ·2· ·Services, as well as Glass Lewis.· We use Glass ·2· · · · And essentially what we've done since fiscal ·3· ·Lewis for voting agency, is what it's called.· So ·3· ·year 2018, we've substantially increased our use ·4· ·they actually -- we use their system to help ·4· ·of automated voting rules that are based on SBA ·5· ·execute the vote.· So when we cast a proxy vote, ·5· ·voting policies.· And we've used the term ·6· ·we're using the Glass Lewis Viewpoint system to ·6· ·"automated voting."· I think the market is ·7· ·actually cast the vote.· We used to be on the ISS ·7· ·evolving more towards the use of a tailored ·8· ·system.· A few years ago we switched. ·8· ·approach, because I think most people hear ·9· · · · So right now we only use ISS for the core ·9· ·automated and think of like a robo or a blind 10· ·proxy research, which covers all U.S. equities, 10· ·vote, and that's not what it is at all. 11· ·primarily the larger end of the developed 11· · · · For us and for most of the other large asset 12· ·international space and then some of the material 12· ·managers that do this, automated voting occurs 13· ·or kind of more high -- exceptional non-U.S. 13· ·within markets that are characterized by smaller 14· ·meetings and some smaller markets as well, and 14· ·dollar investments.· So kind of mid-level and 15· ·then a range of kind of data screening and, 15· ·smaller country allocations, those are more 16· ·again, thematic advice and white paper sort of 16· ·likely to be auto voted.· Routine ballot items, 17· ·research from ISS.· Glass Lewis, we use all of 17· ·dividend approvals, financial statement 18· ·their U.S. and foreign equity research, as well 18· ·approvals, procedural issues that are considered 19· ·as their Viewpoint system to execute votes. 19· ·routine are much more likely to be auto voted. 20· · · · ISS is the larger of the two, but they're 20· · · · And then also lower meeting volume.· We have 21· ·both pretty big.· There are a couple of other 21· ·some countries, given the kind of broad 22· ·like midsize firms in the space that we just have 22· ·diversification in the global equity portfolio, 23· ·not used historically.· And then at the bottom, 23· ·where we don't actually own a lot in terms of the 24· ·with the blue shading, kind of just describes 24· ·absolute number of securities and the dollar 25· ·some of the automated voting or some of the 25· ·amount.· And those are the types of markets that

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Page 135 Page 136 ·1· ·we're more likely to auto vote. ·1· · · · So slide 11 is -- slide 11 is actually ·2· · · · Most of the countries have a mix of both ·2· ·available now.· This is one of the existing ·3· ·manual and automated voting execution though. ·3· ·tables, which we've kind of tweaked it a little ·4· ·And the reason for that is you always have ·4· ·bit.· But it's just providing new voting ·5· ·exceptions.· There are material meetings.· There ·5· ·information, like top voted companies.· I'm on ·6· ·could be mergers.· There could be kind of one-off ·6· ·slide 12, top voted companies.· You can drill ·7· ·ad hoc meetings that occur in an otherwise auto ·7· ·down into resolution types, categories.· The ·8· ·voting market but that don't get auto voted and ·8· ·chart on the right is kind of a tree map or a ·9· ·that get manually voted.· And we always like to ·9· ·heat map of some of the top voting categories. 10· ·kind of point out that for all North American 10· ·So it's designed, frankly, for our own use, but 11· ·meetings, we vote those manually.· So no U.S. 11· ·we wanted to kind of also just be more 12· ·company is auto voted, Canadian companies 12· ·transparent in how we approach proxy voting and 13· ·likewise. 13· ·related activities. 14· · · · The next few slides, I'll go through these 14· · · · And then on slide 13, just to give a 15· ·real quickly.· The next few slides are just some 15· ·quick -- I won't go into a lot of detail -- a 16· ·screen shots of our voting dashboard, which we 16· ·quick overview of the 2020 proxy season.· We've 17· ·rolled out last year, and we're working on kind 17· ·listed kind of the three main themes that we can 18· ·of a version 2.0 of this.· But we're trying to 18· ·kind of envision coming out this year, despite 19· ·provide more granularity and more data as well to 19· ·the kind of economic backdrop and COVID-19 20· ·kind of slice and dice.· So this isn't yet on the 20· ·effect. 21· ·SBA's website.· It's still on our internal site. 21· · · · But director elections are increasingly 22· ·But we plan to roll this out by the end of April 22· ·fragile.· So we've seen a lot more active 23· ·and then also continue to work on it through the 23· ·managers voting against management for a variety 24· ·remainder of calendar year 2020, to add some new 24· ·of reasons, to some extent overboarded directors, 25· ·data figures. 25· ·but probably the number one reason is board

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Page 137 Page 138 ·1· ·diversity and board refreshment, succession, ·1· ·investor who wants to advocate for different ·2· ·primarily gender diversity.· But just a lot of ·2· ·things and become an activist, they may not have ·3· ·asset managers and asset owners, too, to some ·3· ·the budget or the capacity to do something like a ·4· ·degree have really strengthened their policies on ·4· ·large active hedge fund does, they pursue exempt ·5· ·director elections.· And you're starting to see ·5· ·solicitations, most commonly in the form of "just ·6· ·that year-over-year increase.· So we expect 2020 ·6· ·vote no" campaigns, but it can also lead into ·7· ·to be no different. ·7· ·resolution advocacy and the like. ·8· · · · And then kind of along the same lines, more ·8· · · · The last slide, slide 14 just has -- I've ·9· ·of a focus on smaller companies.· So the -- not ·9· ·touched on the first two of these already. I 10· ·necessarily the nano or micro cap companies in 10· ·won't go into much more detail.· This is the work 11· ·the U.S. space, but larger small cap companies, 11· ·plan for the next fiscal year.· The last bullet 12· ·smaller mid cap companies, as a lot of influence 12· ·is another one that we hope to integrate not only 13· ·and change that occurred at the large end of the 13· ·to the dashboard but more of our internal 14· ·market cap spectrum, we've been right there for 14· ·researches, coming up with essentially a house 15· ·the last several years.· A lot of large companies 15· ·view on corporate governance or an ESG -- a 16· ·have made very dramatic improvements in their 16· ·proprietary ESG rating using all of the 17· ·corporate governance practices.· And as a result, 17· ·information that we have.· And we're exploring 18· ·investors are starting to focus on the smaller 18· ·doing that either on some of the existing systems 19· ·names.· So we would expect that to continue next 19· ·like Aladdin or BNY Mellon's new system and/or 20· ·year. 20· ·FactSet. 21· · · · And then last but not least, exempt 21· · · · And then there's an appendix with a few 22· ·solicitations have been on the rise over the last 22· ·slides.· I won't go into any detail on those 23· ·several years.· I don't see that changing, 23· ·unless there are questions or an interest.· And I 24· ·despite a more robust activist landscape over the 24· ·will stop there. 25· ·last several years.· But for your average 25· · · · MR. PETER JONES:· Mr. Chairman, this is

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Page 139 Page 140 ·1· ·Peter Jones.· I have a question, if I may. ·1· ·time we tried to recall was about this time last ·2· · · · MR. BOBBY JONES:· Please, yes, sir. ·2· ·year, maybe even a year and a half ago.· It's ·3· · · · MR. PETER JONES:· Thank you.· Yeah, thank ·3· ·very exceptional, and it's just done on a -- any ·4· ·you, Michael.· In your securities lending ·4· ·kind of approach that we have, if it's considered ·5· ·program, do you request the securities staff to ·5· ·material or we definitely want to vote, we might ·6· ·vote those shares, or how would that work when ·6· ·have a very large stake in a company, could be a ·7· ·the securities are on loan? ·7· ·very important issue, those types of issues can ·8· · · · MR. McCAULEY:· We can do that.· The best way ·8· ·bubble up and generate either a request to ·9· ·to describe it is it's on a very limited basis ·9· ·prohibit the security from going on loan, if it's 10· ·and exception basis approach.· So if we -- the 10· ·not already on loan, or an actual recall if it is 11· ·problem is, the reason we do this, the problem is 11· ·on loan. 12· ·not only do we have an opportunity loss in sec 12· · · · MR. PETER JONES:· Okay, good.· Well, thank 13· ·lending revenue, if you kind of in a broad brush 13· ·you.· Appreciate the color around that. 14· ·recall or prohibit sec lending activity, you can 14· · · · MR. BOBBY JONES:· Are there any other 15· ·reduce your financial take on that.· And we don't 15· ·questions? 16· ·want to do that unless it's a material voting 16· · · · MR. GOETZ:· Michael, this is John Goetz. 17· ·item or we have some direct involvement in 17· ·This is John Goetz.· May I ask one question? 18· ·something. 18· · · · MR. BOBBY JONES:· Yes, sir. 19· · · · So I mentioned the classified board advocacy 19· · · · MR. GOETZ:· Thank you.· Michael, could you 20· ·that we did a few years back.· Those companies 20· ·explain the evolution of the scoring systems like 21· ·that we filed a resolution at, we did prohibit 21· ·Sustainalytics and MSCI?· Are you actually doing 22· ·sec lending activity for a finite window around 22· ·anything with the scoring, or is it just more of 23· ·the record date and the meeting date. 23· ·an issue identification process to you? 24· · · · We don't do that unless -- it's just not 24· · · · MR. McCAULEY:· It's more the latter.· But 25· ·something that's commonly done.· I think the last 25· ·when you say "doing with," what do you mean?· I'm

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Page 141 Page 142 ·1· ·not sure I understand what the -- ·1· ·are other questions, we may be down to item 6, ·2· · · · MR. GOETZ:· How are you using it in your ·2· ·reviewing changes to the retirement system ·3· ·voting? ·3· ·investment plan policy statement, followed by the ·4· · · · MR. McCAULEY:· In the voting, it's another ·4· ·election of officers. ·5· ·input alongside the proxy advice.· We technically ·5· · · · MR. BOBBY JONES:· That's the way I read it ·6· ·don't use Sustainalytics.· Sustainalytics ·6· ·as well.· So if we would go to the policy ·7· ·provides the ESG ratings to us.· We're not ·7· ·statement that's all been sent to the council ·8· ·technically paying them for that data.· The ·8· ·members, and if you could introduce Aon to give ·9· ·contract that we have with Sustainalytics is ·9· ·the background, and then we can all ask questions 10· ·actually for the company-level research for the 10· ·and then either approve the new policy or answer 11· ·divestment, and they've kind of just thrown that 11· ·any questions. 12· ·in pro bono.· We don't really use the 12· · · · MR. WILLIAMS:· All right.· Thank you.· So by 13· ·Sustainalytics ESG data, per se. 13· ·way of backup -- this is Ash Williams again -- we 14· · · · We do contract with MSCI.· It's kind of the 14· ·periodically review what we're doing in our 15· ·800-pound gorilla in the space.· To some extent 15· ·defined contribution offerings to make sure 16· ·ISS as well.· So those are ratings and company 16· ·they're efficient, effective and consistent with 17· ·write-ups and analysis.· You can see the 17· ·best practice as understood by the industry.· So 18· ·historical trend, where they're changing. 18· ·with that, we have Aon Hewitt present, and of 19· ·There's obviously been changes to the methodology 19· ·course Dan Beard is still around.· So, Dan, how 20· ·over the period, but that all gets incorporated 20· ·would you like to handle this? 21· ·as part of a company analysis and vote execution. 21· · · · MR. BEARD:· Yes.· I will ask Aon Hewitt to 22· ·We also use it as part of company engagement. 22· ·go over the structural review. 23· ·There's parachutes, et cetera. 23· · · · MS. DOYLE:· This is Kristen Doyle again. 24· · · · MR. GOETZ:· Thank you. 24· ·I'm just going to introduce Aaron Chastain, who 25· · · · MR. WILLIAMS:· Mr. Chairman, unless there 25· ·is on the line, who is going to help provide an

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Page 143 Page 144 ·1· ·overview of what Ash just described, which was ·1· ·contribution team on this study. ·2· ·the outcome of an annual review that we do for ·2· · · · So we have taken hundreds of pages of ·3· ·the investment plan. ·3· ·analysis and consolidated them into just a couple ·4· · · · We have a number of slides in section 6A. ·4· ·of summary slides to provide the IAC just with a ·5· ·We won't go through them all.· We're going to hit ·5· ·high-level overview of what the conclusions and ·6· ·the first three and then see if there are ·6· ·recommendations were out of that study. ·7· ·questions, if anyone wants to -- if any of the ·7· · · · And I've asked the team to put some of this ·8· ·IAC members want to dive deeper into any of the ·8· ·in context of what's actually going on in the ·9· ·recommendations, we have some supporting slides ·9· ·market environment, started out the call with 10· ·behind the section 2. 10· ·some good information from Dan in particular 11· · · · So we have Katie Comstock as well.· Most of 11· ·around how the SBA is helping Florida's DC 12· ·you know Katie has been working with the SBA for 12· ·participants navigate this difficult market, 13· ·a number of years.· Aaron Chastain is a senior 13· ·which can be really challenging for inexperienced 14· ·investment consultant with Aon's investment 14· ·non-investment people.· So with that, Aaron, I'm 15· ·practice.· He's out of our Atlanta, Georgia 15· ·going to turn it over to you. 16· ·office.· He is a lead consultant on a number of 16· · · · MR. CHASTAIN:· Thanks, Kristen, and thanks, 17· ·defined contribution plans, as well as a few 17· ·everyone, for having me on.· I hope you all are 18· ·other types of institutional investor programs. 18· ·personally doing well (inaudible) changing 19· · · · Notably, he served as our head of North 19· ·environment that's unprecedented.· So thanks for 20· ·America Defined Contribution Multi-Asset 20· ·having us on.· With that, I'll be on slide 4 21· ·Solutions.· It's a manager research team that's 21· ·behind tab 6, just to kick off at a high level 22· ·responsible for rating target date funds, managed 22· ·our general thought process as we're going 23· ·accounts, balanced funds and target risk funds. 23· ·through this and sort of the direction that we're 24· ·And he was the co-lead with myself and Katie, 24· ·moving in here. 25· ·working with Dan and the SBA's defined 25· · · · So on slide 4 we're laying out here that

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Page 145 Page 146 ·1· ·essentially -- two drivers of investment outcomes ·1· ·times, make sure that they're avoiding the ·2· ·for plan members are going to be, on the one ·2· ·knee-jerk reactions, as well as helping them ·3· ·hand, their savings and, on the other hand, the ·3· ·determine what's appropriate for their portfolio ·4· ·investment choices.· The investment choices were ·4· ·today and moving forward. ·5· ·the main focus out of this exercise with staff. ·5· · · · So, with that, moving on to what the main ·6· · · · Really a couple of comments on that is, one, ·6· ·primary focus of this review was were the ·7· ·that the plan is in really good shape overall, ·7· ·investment choices for those DIY type investors, ·8· ·very sophisticated sort of plan that offers great ·8· ·the investors building their portfolios out of ·9· ·fund options and investment options to plan ·9· ·key building blocks in the plan.· So as we think 10· ·members.· And particularly, as we think about 10· ·through this, the one thing we want to make sure 11· ·what we look like in today's market environment, 11· ·we're doing is focusing on streamlining those 12· ·two key items that are offered to plan members 12· ·investment options to help participants and plan 13· ·are the retirement date funds, which are really 13· ·members avoid behaviors that can be detrimental 14· ·for the (inaudible) participants, the participant 14· ·to them, which is naive diversification, chasing 15· ·who wants the one-stop-shop type of portfolio. 15· ·returns and performance, difficulty 16· · · · It includes a lot of great diversification 16· ·differentiating between types of options and lack 17· ·as well as dynamically adjusts allocation between 17· ·of diversification simply because of familiarity 18· ·stocks, bonds and other diversifying assets as 18· ·with certain investment options. 19· ·they age, as well as automatically rebalances 19· · · · So we want to use that to move towards 20· ·portfolios for those participants along that 20· ·facilitating smart decisions by streamlining 21· ·glide path. 21· ·those investment options and promote positive 22· · · · The other item, as Dan mentioned earlier, 22· ·inertia for plan members. 23· ·the advice that's offered to participants through 23· · · · And one of the ways that the plan does that 24· ·EY and the financial planners available there to 24· ·is through what we lay out on slide 5, which are 25· ·really work with participants during these tough 25· ·through what we'll call white label funds here or

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Page 147 Page 148 ·1· ·multi-manager portfolios overall.· So really ·1· ·observations were, as well as the enhancements we ·2· ·using, first and foremost, the size and scale of ·2· ·thought of for the plan moving forward, knowing ·3· ·the plan to benefit plan members.· Building these ·3· ·that the plan is in a great spot (inaudible). ·4· ·custom multi-manager portfolios for easy naming ·4· · · · MS. COMSTOCK:· Thank you, Aaron.· I'm on ·5· ·and understanding for participants so they know ·5· ·page 6 of our presentation, and I just plan to ·6· ·exactly what type of investment options they're ·6· ·highlight the findings that came out of this ·7· ·choosing, giving diversification to plan members ·7· ·in-depth analysis.· And consistent with what ·8· ·that may otherwise not be available to them ·8· ·you've heard from Aaron and what you've heard ·9· ·outside of the plan or may only be available at a ·9· ·from us in the past is that the FRS investment 10· ·very expensive cost, such as investment in 10· ·plan continues to be aligned with what we see as 11· ·private real estate that's generally only 11· ·best practices in the defined contribution space. 12· ·available to high network investors or comes at a 12· · · · And the plan has continued to evolve in the 13· ·very high cost.· So you're able to incorporate 13· ·marketplace in structuring the plan to put 14· ·those within the investment plan as a core focus. 14· ·participants in a successful place for saving for 15· · · · Consistency and use of strong managers, 15· ·their retirement.· We did have three main 16· ·relying on the investment staff to select strong 16· ·recommendations that came out of this analysis. 17· ·managers to manage those portfolios, and then 17· ·And Aaron highlighted many of the best practices 18· ·also using that size and scale of the plan to 18· ·that the FRS is currently doing, and there's one 19· ·integrate those same managers throughout the core 19· ·that is more like an underlying theme to each of 20· ·line of building blocks, as well as in the 20· ·these three recommendations. 21· ·retirement date funds, to really leverage the 21· · · · And that is the notion of having a 22· ·scale of the plan and reduce costs of the 22· ·streamlined investment structure, one that is 23· ·investments to participants. 23· ·straightforward and simple and that moves from 24· · · · So that's -- I'll turn it over to Katie at 24· ·more choice to less choice.· And we list these 25· ·this point to go over what our high-level 25· ·recommendations here next to that middle hexagon.

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Page 149 Page 150 ·1· · · · The first theme, integrating the FRS ·1· ·stock fund, it creates symmetry across the ·2· ·intermediate bond fund within the FRS core plus ·2· ·passive tier, where there's a single passive U.S. ·3· ·fund.· And what this essentially is doing is ·3· ·option, as well as the other asset classes, where ·4· ·consolidating the two actively managed fixed ·4· ·there -- based on these recommendations would be ·5· ·income funds in the plan into one.· And by ·5· ·a single U.S. fixed income option as well as ·6· ·integrating the intermediate fund into the core ·6· ·non-U.S. equity and global equity options. ·7· ·plus fund, what we're expecting is, one, lower ·7· · · · And then the third recommendation or main ·8· ·investment management cost for that option; two, ·8· ·recommendation that came of this surrounds the ·9· ·greater diversification around interest rates; ·9· ·inflation adjusted multi-assets fund.· And there 10· ·and then ultimately a better risk-return profile 10· ·are a few recommendations that are surrounding 11· ·for that option. 11· ·this fund.· The first thing, changing the name, 12· · · · The second recommendation is along a similar 12· ·we felt that simplifying it to inflation 13· ·scheme, but it has to do with the U.S. equity 13· ·sensitive fund will help participants better 14· ·fund.· And that's consolidating the large cap 14· ·understand what the objective is of this fund. 15· ·stock fund and the U.S. small/mid cap stock fund 15· ·And that objective is to, on a long-term real 16· ·into a single U.S. broad cap stock option. 16· ·return, that will protect the purchasing power of 17· · · · Typically, when we see funds that are 17· ·those assets.· And so having a more simplified 18· ·segmented by capitalization, it often leads to 18· ·name we think will help them better understand 19· ·unintended biases or inefficient portfolios.· It 19· ·that objective. 20· ·can also -- Aaron mentioned this at the outset. 20· · · · The second recommendation that we want to 21· ·It can also encourage chasing returns, given the 21· ·highlight has to do with the underlying 22· ·(inaudible) of some of these markets.· And so by 22· ·allocation of this fund.· And the main allocation 23· ·consolidating these two funds, we can eliminate 23· ·difference that I want to highlight here is the 24· ·some of those tendencies. 24· ·addition of private real estate.· As you all 25· · · · And also by offering a single broad U.S. 25· ·know, private real estate can add a long-term

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Page 151 Page 152 ·1· ·inflation hedge, in addition to an income ·1· ·things to be aware of that we are continually ·2· ·component and some benefits of a diversified ·2· ·working with Dan and his team and looking at that ·3· ·return. ·3· ·we may bring forward at a future time. ·4· · · · Given that the FRS does currently offer ·4· · · · But I will pause there.· As Kristen ·5· ·private real estate within the custom target date ·5· ·mentioned, we do have additional slides and we do ·6· ·fund and that that framework and platform already ·6· ·have Aaron on the line.· So to the extent that ·7· ·exists, we thought that it was a natural ·7· ·there are questions on any of the recommendations ·8· ·extension to add to this portfolio and that it ·8· ·or you'd like more detail, we are happy to do ·9· ·can provide benefits to the risk-return profile ·9· ·that.· But I will pause and see, Mr. Chairman, 10· ·and the objective of the inflation sensitive 10· ·how you would like to proceed. 11· ·fund. 11· · · · MR. BOBBY JONES:· Are there any questions 12· · · · So those are the three main recommendations 12· ·from any council members before we consider the 13· ·that came out of this review.· We also list at 13· ·suggested revisions to the investment policy 14· ·the bottom some things that you may see from us 14· ·statement? 15· ·in the future.· We're constantly looking to the 15· · · · MS. CANIDA:· I have a quick question just 16· ·marketplace and assessing what are best practices 16· ·before we go there.· Given the environment, does 17· ·and what makes sense for the FRS plan.· One of 17· ·that alter your view here, I mean, what's 18· ·these surrounds the money market option and 18· ·happened in the last month? 19· ·contemplating swapping that out with a stable 19· · · · MR. CHASTAIN:· That's a great question. 20· ·value.· There are more things that we want to 20· ·This is Aaron speaking.· So I would say at a high 21· ·look at to see if that makes sense. 21· ·level, the answer to that is no, since we're 22· · · · And then the other two things surround the 22· ·looking at long-term investors with this, similar 23· ·white labeling approach that the FRS has and 23· ·to Kristen's comments earlier today on the 24· ·other ways to take advantage of that structure 24· ·pension plan.· We want to make sure that these 25· ·that you all have in place.· (Inaudible) as 25· ·plan members have a long-term focus and the

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Page 153 Page 154 ·1· ·investment options for them have a long-term ·1· ·us what they recommend, any changes that they ·2· ·focus. ·2· ·recommend. ·3· · · · However, I will say some of the enhancements ·3· · · · MR. BEARD:· This is Dan Beard.· I'll respond ·4· ·where we're looking to combine asset classes or ·4· ·to that question.· We do this investment plan ·5· ·change asset class weightings, that is something ·5· ·structure review -- about every two to three ·6· ·that, based on the market environment conditions, ·6· ·years we do this exercise.· And as far as the ·7· ·could take a period of time for the investment ·7· ·recommendations that Katie just went through, we ·8· ·staff to leg into over a period of time. ·8· ·actually adopted all three recommendations that ·9· · · · That's one of the key benefits of that white ·9· ·they put forth that she mentioned. 10· ·label multi-manager structure that I mentioned 10· · · · And then as far as some of the future 11· ·earlier.· Typically defined contribution plans, 11· ·enhancements, we'll definitely look at some of 12· ·these would all be point-in-time changes. 12· ·those.· For example, the -- you know, going from 13· ·However, with this sophisticated multi-manager 13· ·money market to a single value, those are things 14· ·structure, staff is able to make changes over a 14· ·we want to look at over a longer period, but 15· ·period of time to reduce point-in-time risk such 15· ·we'll take like the next year to look at that. 16· ·as the current market environment and be more 16· ·And then as they come to us with other 17· ·thoughtful about it. 17· ·recommendations that they (inaudible) we'll also 18· · · · MS. CANIDA:· Okay.· Thank you. 18· ·look at those. 19· · · · MR. WENDT:· Gary Wendt has a question and an 19· · · · MR. WENDT:· So the SBA has already made 20· ·observation.· The first question is how often do 20· ·these changes? 21· ·we do this type of an exercise.· And I don't 21· · · · MR. BEARD:· No, sir.· So these changes will 22· ·remember what the second question is now.· It's 22· ·be effective July 1.· Those in the investment, 23· ·been a while since I thought about it.· But the 23· ·the revised investment policy statement, those 24· ·observation is that I think this information 24· ·changes are effective July 1.· So we will make 25· ·should be -- the staff should take this and tell 25· ·these changes July 1.· However, as Aaron

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Page 155 Page 156 ·1· ·mentioned, depending on market conditions at that ·1· · · · MR. WENDT:· Thank you.· So we're supposed to ·2· ·time, that's when we will start merging some of ·2· ·say yes or no to this list of things? ·3· ·these together, doing some fund reallocations. ·3· · · · MR. BOBBY JONES:· If there is a motion to ·4· · · · Depending on market conditions, we may ·4· ·approve the suggested revisions to the investment ·5· ·actually push back on some of those until there's ·5· ·policy, I would certainly accept a motion and ·6· ·a more stable market environment, so we don't ·6· ·listen for a second. ·7· ·have our managers selling and buying in an ·7· · · · MS. CANIDA:· This is Tere Canida.· I move. ·8· ·unstable market.· But these changes will be ·8· · · · MR. BOBBY JONES:· Do we have a second? ·9· ·effective July 1. ·9· · · · MR. PETER JONES:· Second.· Peter Jones. 10· · · · MR. WENDT:· Please tell me who was just 10· · · · MR. BOBBY JONES:· All in favor please say 11· ·talking.· Was that an Aon person talking? 11· ·aye. 12· · · · MR. WILLIAMS:· No.· That was Dan Beard, 12· · · · (Ayes) 13· ·who's the director of defined contribution 13· · · · MR. BOBBY JONES:· Motion passed.· I think 14· ·programs here at the State Board.· This is Ash 14· ·literally -- I'm going to confirm with our 15· ·Williams again.· And procedurally, as Dan said, 15· ·executive director.· I believe we have covered 16· ·we go through this exercise regularly.· We did 16· ·virtually everything that we need to in light of 17· ·work closely with Aon on this, and we are 17· ·the current situation.· And just first opening it 18· ·embracing the changes recommended.· And the 18· ·up to any council members, what my thoughts are, 19· ·purpose -- the reason this is coming before the 19· ·to move to the election of officers now, but only 20· ·IAC today is this will entail some adjustments to 20· ·after any questions and answers. 21· ·investment policy for the defined contribution 21· · · · But then after the election of officers, 22· ·plan.· And by law, those need to be brought to 22· ·both the chairman and the vice-chair, which is 23· ·the IAC, reviewed in a public meeting and 23· ·always done at this meeting, then to adjourn the 24· ·affirmed by the IAC prior to going to the 24· ·meeting, while letting them take their positions 25· ·trustees.· So that's what the exercise is today. 25· ·at our next meeting, which will be announced by

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Page 157 Page 158 ·1· ·the SBA staff, based on what the conditions are ·1· ·of four years?· Tell me how long the term of ·2· ·at that time.· Are there any questions and ·2· ·these offices are for. ·3· ·conversations that we need to have before taking ·3· · · · MR. WILLIAMS:· It's an annual exercise. ·4· ·those steps? ·4· · · · MR. WENDT:· Okay.· Thank you. ·5· · · · MR. WILLIAMS:· Mr. Chairman, it's Ash ·5· · · · MR. BOBBY JONES:· Gary, this is Bobby Jones. ·6· ·Williams again.· One thing we need to do is ·6· ·Just kind of to clarify, for example, usually the ·7· ·clarify who seconded Tere Canida's motion on the ·7· ·terms are for one year.· While I will be leaving ·8· ·DC policy changes. ·8· ·as chair, much like all of our other members who ·9· · · · MR. BOBBY JONES:· Peter Jones is what I ·9· ·are serving four-year terms, I will still be on 10· ·heard. 10· ·the council until February 1st of 2023, God 11· · · · MR. PETER JONES:· That's correct. 11· ·willing, but more -- this is something we need to 12· · · · MR. WILLIAMS:· Peter Jones.· Excellent. 12· ·do by statutory regulation.· And please correct 13· ·Okay, very good.· And, Mr. Chairman, thank you 13· ·me, Executive Director, if I'm wrong. 14· ·for that.· The only other thing would be to 14· · · · MR. WILLIAMS:· No.· I believe you're right. 15· ·remind you that we have the audience comment 15· ·So that brings us then, I believe, unless there 16· ·opportunity here.· So why don't we go ahead and 16· ·are other questions, to having perhaps a motion 17· ·do the election of the chair, who will fill the 17· ·from the group for the chair and the vice-chair 18· ·big shoes the current chair will be vacating, and 18· ·positions. 19· ·the vice-chair on a going-forward basis. 19· · · · MR. BOBBY JONES:· Is there a motion or a 20· · · · So commonly the way the mechanics work on 20· ·nomination for chair? 21· ·that is the existing vice-chair, Mr. Olmstead, 21· · · · MR. PETER JONES:· I make a -- 22· ·would become chair, and we would have a motion 22· · · · MR. BOBBY JONES:· Sorry.· Please repeat. 23· ·from the group on a vice-chair. 23· · · · MR. PETER JONES:· I make a motion to 24· · · · MR. WENDT:· Wendt has a question, of course. 24· ·nominate Vinny Olmstead to the chair. 25· ·Do we do this periodically, or is this for a term 25· · · · MR. BOBBY JONES:· Do we have a second?

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Page 159 Page 160 ·1· · · · MR. COLLINS:· This is Peter Collins. I ·1· · · · MR. BOBBY JONES:· Motion so carried.· With ·2· ·second that. ·2· ·that, I'd like to turn it back over to the ·3· · · · MR. BOBBY JONES:· All in favor, please say ·3· ·executive director if there are any questions ·4· ·aye. ·4· ·that you think we should address prior to ·5· · · · (Ayes) ·5· ·adjournment. ·6· · · · MR. BOBBY JONES:· Without any opposed, ·6· · · · MR. COBB:· Mr. Former Chairman, this is ·7· ·congratulations, Vinny.· And now I'd like to open ·7· ·Chuck Cobb.· I'd like to say two things.· First, ·8· ·the floor for nominations for a vice-chair.· Do ·8· ·I'd like to thank you for your great leadership, ·9· ·we have any nominations?· I'm asking for a ·9· ·and you've been a terrific leader.· But number 10· ·nomination for a vice-chair of the Investment 10· ·two, I suspect this is my last meeting, and so I 11· ·Advisory Council. 11· ·want to thank all of my fellow board members and 12· · · · MR. COLLINS:· This is Peter Collins. I 12· ·the outstanding team that I've had a chance to 13· ·would nominate Peter Jones. 13· ·work with the last about seven years. 14· · · · MR. BOBBY JONES:· Do we have a second? 14· · · · And I apologize for all of my challenges, 15· · · · MS. CANIDA:· I second it.· Tere Canada 15· ·but I want everybody to know how much I 16· ·seconds it. 16· ·appreciate it.· And I hope -- and I look forward 17· · · · MR. BOBBY JONES:· Thank you, Tere.· All in 17· ·to seeing all of you in other venues. 18· ·favor -- 18· · · · MR. WENDT:· I would hope that we could put 19· · · · MR. WENDT:· Is that for Bobby Jones? 19· ·(inaudible) to both Bobby and Cobb out in front 20· · · · MR. BOBBY JONES:· Peter Jones, the handsome 20· ·of (inaudible.) 21· ·one. 21· · · · MR. WILLIAMS:· This is Ash Williams again. 22· · · · MR. PETER JONES:· Oh, goodness.· All right. 22· ·I'll just say on behalf of the whole staff 23· · · · MR. BOBBY JONES:· All in favor, please say 23· ·here -- 24· ·aye. 24· · · · MR. BOBBY JONES:· Thank you all so much. I 25· · · · (Ayes) 25· ·was going to say, this is Bobby, and I want to

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Page 161 Page 162 ·1· ·thank the staff, much as the ambassador did, ·1· ·in the audience have questions, you should have ·2· ·particularly in light of the fluid circumstances, ·2· ·emailed -- we've not received any emails or ·3· ·and particularly the consultants that have helped ·3· ·texts, so I think we're good. ·4· ·us so much.· And I think I speak for all of us, ·4· · · · And unless somebody in the audience has a ·5· ·that our thoughts and prayers are with all of the ·5· ·question and can follow the protocol on the ·6· ·people with the SBA, with the state of Florida, ·6· ·website, I think we are good and ready to ·7· ·with all of you.· And I feel so very blessed to ·7· ·adjourn. ·8· ·be working with all of you.· So with that, I'd ·8· · · · MR. BALLARD:· Executive Director, David ·9· ·like to ask for -- is there a motion for ·9· ·Ballard with Representative Tommy Gregory here. 10· ·adjournment? 10· ·At the chair's pleasure, I would love to give a 11· · · · MR. WILLIAMS:· Wait a minute.· Wait a 11· ·comment here. 12· ·minute.· Hold it, folks.· We have to do audience 12· · · · MR. WILLIAMS:· Go ahead, presuming the -- 13· ·questions.· It's a public meeting.· Remember? 13· · · · MR. BOBBY JONES:· Please do. 14· ·Apologies for jumping in.· This is Ash Williams 14· · · · MR. WILLIAMS:· -- chair is good with that. 15· ·again.· I just want to say, on behalf of the 15· · · · MR. BALLARD:· Yes.· Thank you all so much. 16· ·staff, thank you for your kind remarks, and we 16· ·First of all, Executive Director, Chair, well, 17· ·appreciate your service.· And your questions, 17· ·new chair, thank you for including us.· And our 18· ·challenges, et cetera, even if they relate to 18· ·office has already expressed to the executive 19· ·revisiting real estate leverage, are always 19· ·director our willingness to try to look forward 20· ·welcome and help keep us on our toes, so thank 20· ·and try to adjust some of the things that we 21· ·you. 21· ·already know are issues, including the 22· · · · Now, we had Representative Gregory, we had 22· ·anticipated rate of return. 23· ·Senator Neal, and we had Mr. Chris Williams, I 23· · · · And I think that this will be a great 24· ·believe, in the audience earlier.· If any of them 24· ·reminder to the legislature about being a little 25· ·have questions or any of our other people who are 25· ·bit more constrained in the budgetary process.

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Page 163 Page 164 ·1· ·It's a stark reminder, obviously, but one that ·1· · · · · · · · · CERTIFICATE OF REPORTER ·2· ·must happen.· So I just wanted to thank you all ·2· ·STATE OF FLORIDA

·3· ·for inviting us and including us, and thanks for ·3· ·COUNTY OF LEON

·4· ·all of your hard work.· That's all.· Thank you ·4

·5· ·all. ·5· · · · · · ·I, JO LANGSTON, RPR, certify that I was

·6· · · · MR. WILLIAMS:· Excellent.· Thank you. ·6· ·authorized to and did stenographically report the ·7· · · · MR. BOBBY JONES:· We so much appreciate ·7· ·foregoing proceedings, and that the transcript is a ·8· ·that.· Thank you for being there.· That's so ·8· ·true and complete record of my stenographic notes. ·9· ·important.· With that being said, I would welcome ·9· · · · · · ·Dated this 27th day of April 2020. 10· ·a motion to adjourn.· Is there a motion? 10 11· · · · MR. COLLINS:· Peter Collins, so move. 11 12· · · · MR. BOBBY JONES:· Do we have a second? 12· · · · · · · · · · · · · · · · ______13· · · · MS. CANIDA:· Tere Canida.· Second. · · · · · · · · · · · · · · · · · JO LANGSTON, RPR 13 14· · · · MR. BOBBY JONES:· All in favor please say 14 15· ·aye. 16· · · · (Ayes) 15 17· · · · MR. BOBBY JONES:· Thank you all so very 16 18· ·much, and I can't wait to see all of you again 17 19· ·and, again, prayers to all.· Bye-bye. 18 20· · · · (Thereupon, the meeting concluded at 4:30 19

21· ·p.m.) 20

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STATE BOARD OF ADMINISTRATION Audit Committee Open Meeting Agenda April 27, 2020 9:30 A.M. – Conclusion of Business

1. Call to Order

2. Approve minutes of open meeting held on January 27, 2020

3. SBA Executive Director & CIO status report  SBA Update: investment performance, risks, opportunities and challenges

4. Presentation on the results of the OPPAGA Report

5. Presentation of Crowe’s audit plan for the financial statement audits of FRS Pension Plan and FRS Investment Plan for the year ending June 30, 2020

6. Chief Risk & Compliance Officer Quarterly Report  Enterprise Risk Management Update

7. Office of Internal Audit Quarterly Report

8. Proposed FY 2020-2021 Internal Audit Budget

9. Office of Inspector General Quarterly Report

10. Other items of interest

11. Closing remarks of the Audit Committee Chair and Members

12. Adjournment

April 27, 2020 • Internal Audit and Advisory Engagements 4

Status of the FY 2019-20 • External Engagement Oversight 5 Annual Audit Plan • Special Projects, Risk Assessment, and Other Activities 6

• Enterprise-Wide Key Risk Indicator Advisory 8

• New and Closed Action Plans and Recommendations 9 OIA Projects Completed and Status of Management Action Plans/ Recommendations • Details of open items – Audit Projects 10

• Details of open items – Advisory Projects 11

• Status of FY 19-20 Department Goals 13 Other OIA Activities • Other Items for Discussion 14

Appendices Open Audit Recommendations and Action Plans Appendix A

2 33 Internal Audit and Advisory Engagements

Planned Projects Status Type Timing Not Yet Completed Started FHCF ACH Process Flow Update OIA Advisory Q1 In Progress 6% Continuous Monitoring - Accounts Payable Continuous Monitoring Q1 41% Continuous Monitoring - P-cards and Travel Continuous Monitoring Q1 Strategic Investments OIA Operational Audit Carryover Periodic Follow-up Audit OIA Follow-up Audit Q1 Continuous Monitoring - Procurement Continuous Monitoring Q2 FHCF Tableau Assistance OIA Advisory Q1-Q3 Enterprise-wide KRI Collaboration OIA Advisory Q1-Q3 CIS CSC Framework Gap Assessment OIA Advisory Q1-Q3 In Progress Completed Continuous Monitoring - General Continuous Monitoring 53% Data Analytics - Strategy Continuous Monitoring Ongoing Action Plan Monitoring Project Management Procure to Pay Operational Audit OIA Audit Q2-Q3 Proxy Voting Data Analytics - Phase 2 OIA Advisory Q2-Q3 Highlighted: Completed since prior quarterly report. Periodic Follow-up Audit OIA Follow-up Audit Q2-Q3 Real Estate - Direct Owned OIA Operational Audit Q2-Q4 Not Started Continuous Monitoring - Trade Activity Continuous Monitoring Q1 4 Logical Physical Access Control OIA Operational Audit FY19-20 Network and Application Change Control OIA Operational Audit FY19-20 External Engagement Oversight

In Progress Project Status Service Provider Type Planned Timing 22% Completed Network Security, outsourced BDO External IT Audit Q1/Q2 Florida Retirement System (FRS) Trust Fund Crowe External Financial Statement Audit for FY18-19 Q1/Q2 FRS Investment Plan Trust Fund Crowe External Financial Statement Audit for FY18-19 Q1/Q2 Florida Hurricane Catastrophe Fund KPMG External Financial Statement Audit for FY18-19 Q1/Q2 Florida PRIME Auditor General External Financial Statement Audit for FY18-19 Q1/Q2 Part of the Statewide CAFR Auditor General External Financial Statement Audit for FY18-19 Q2/Q3 Florida Growth Fund Initiative OPPAGA External Review Q1/Q2 In Progress AG PRIME and ITGC Operational Audit Auditor General External Operational Audit Q2/Q3 Completed AG Operational Audit Auditor General External Operational Audit Q3/Q4 78% Not Started None

Highlighted: Completed since prior quarterly report.

5 Special Projects, Risk Assessments, and Other Activities

Completed Project Status Type Planned Timing 8% Completed Assistance with Aladdin Implementation OIA Special Projects Carryover Ongoing/In Progress Integrated Risk Management Solution Implementation OIA Special Projects Q1-Q3 Robotics Process Automation Assistance OIA Special Projects Q1-Q4 Data Analytics Tools Enhancements - Tableau OIA Special Projects Complimentary User Entity Control Testing Validation OIA Special Projects Special requests from SBA management and/or Audit Committee OIA Special Projects Ongoing WorkSmart Portal Enhancements OIA Special Projects Ongoing / Audit Committee Related Activities OIA Audit Committee In Progress OIA process improvement initiatives, including QAR identified initiatives OIA Quality Assurance 92% Annual Quality Assessment Review - Self-Assessment OIA Quality Assurance Q4 Annual Risk Assessment OIA Risk Assessment Q4 Annual Audit Plan OIA Risk Assessment Q4 Not Yet Started Highlighted: Completed since prior quarterly report. None

6 77 Risk Management and the Compliance (RMC) and Chief Operating Officer/Chief Financial Officer (COO/CFO) engaged the OIA to assist in developing enterprise-wide key risk indicators (KRIs). Our primary objectives were to identify and recommend the following: 1. A set of existing and potential metrics that should be monitored on an enterprise-wide level 2. Risk tolerance levels or monitoring standards for metrics, if applicable 3. Monitoring structure and responsibility for metrics

In total, the OIA identified 311 metrics and 26 enterprise-wide key risk indicators. The OIA completed this engagement and provided identified KRIs for all the business model areas of the SBA, including OIA’s analysis of the quality of the KRIs, the source and type of reporting, and tolerance levels, when possible.

Business Model Area (Top-down) Metrics by Area 20 Risks to 162 150 Goals/ achieving Controls to Objectives Goals/ Mitigate Risks 15 Objectives 100 10 64 KCI

KPI Risk Driver 59 5 50 5 4 15 1 26

KRI 0 0 Enterprise Investment Organizational Trust & Overisght & Management Operations Administrative Governance Services

8 Enterprise-Wide Metrics Total Metrics Audit and Advisory Engagements

# of Recs Source New action plans and recommendations: 20 CIS CSC Framework Gap Assessment Advisory 20 Total action plans/recommendations added to the database 20 Total change for both audit and advisory action plans/recommendations

9 Risk Rating Status 16

14 Report Title Report Date High Med Low Total NYI PIRP OTV Total

12 Fixed Income Trading Activities Operational Audit 1/29/2016 0 1 0 1 0 1 1

10 Global Equity Internal Trading Operational Audit 1/18/2017 1 0 1 1 1 Low 8 Internally Managed Derivatives Operational Audit 3/31/2017 1 1 0 2 2 0 2 Med AG - Operational Audit 2017 11/13/2017 0 1 1 2 0 2 2 6 High AG - IT Operational Audit 2017 4/5/2017 0 9 0 9 0 9 9 4 Incentive Compensation Program Operational Audit 4/10/2018 0 2 1 3 1 2 3 2 Report Externally Managed Derivatives Operational Audit 10/31/2018 1 1 2 1 1 2 0 Performance & Risk Analytics Operational Audit 2/21/2019 1 4 5 4 1 5 NYI PI OTV Strategic Investments Operational Audit 8/19/2019 2 2 1 1 2

6 19 2 27 9 3 15 27 For details, see Appendix A. Legend: 22% 70% 7% 33% 11% 56% NYI - Not Yet Implemented PIRP - Partially Implemented and the Remainder is in Progress OTV - OIA to Verify

Management Action Plans relating to findings from audits performed by internal or external auditors. The 10 OIA monitors and performs follow-up procedures on the management action plans in accordance with the IIA Standard 2500. A1. In certain cases, follow-up procedures are performed by external auditors. Status

Report Title Report Date NYI PI IMP PIRN NA Total Governance, Risk Management, and Compliance Assessment (Funston)1 1/15/2018 7 19 24 9 3 62 Network Security Assessment 2018 (BDO)2 11/15/2018 5 5 Review Critical Financial Reporting Spreadsheets1 4/22/2019 7 7 BDO Security Assessment 20192 11/21/2019 103 1 104 CIS CSC Framework Gap Assessment Advisory1 3/19/2020 20 20 142 19 25 9 3 198

Legend: NYI - Not yet implemented PI - Partially Implemented, as represented by SBA management IMP - Implemented, as represented by SBA management PIRN - Partially Implemented, as represented by SBA management, and the remainder will not be implemented NA - Not accepted by SBA management

Advisory Recommendations made by OIA or external consultants resulting from an assessment of a program or activity such as governance, risk management, compliance, ethics, disaster recovery preparedness program, etc. The OIA monitors the disposition of these recommendations in accordance with the IIA Standard 2500.C1.

1At the advice of the Audit Committee, the OIA closes Advisory Recommendations that management represented as “complete” once the OIA has considered those in the annual risk assessment. 11 2Recommendations will be reviewed for remediation and closure by BDO as part of the 2019 Network Security Assessment. 1212 AS OF QUARTERLY REPORT TOPIC ACTIVITIES IMPLEMENTATION EFFORTS STATUS Develop a process to be used for OIA's continuous risk assessment, for example using data analytics and KRIs. In Progress (Process improvement - STD 1220 from QAR) Engaged ITCI for a Direct-Owned RE Engage consultants (co-source or outsource) to assist with high risk areas relating to investments and IT audits. Complete audit; also BDO SOW for 2019-20

Move from Level 2 to Level 3 on the Data Analytics Maturity Model per our Strategic Plan. Complete

Take the initiative to develop a formalized SBA data analytics workgroup. In progress

Develop a five-year audit plan based on the risk-based assessment of the audit universe and develop frequencies of audits based on risk rankings. (Process improvement – STD 2020 from QAR) Instead of 5-year plan, moving toward In progress Note: This has been changed to move toward an ongoing risk assessment vs. a 5-year plan as communicated at the an ongoing risk assessment process. April Audit Committee Meeting. INTERNAL INTERNAL AUDIT PROCESSES Update the risk assessment process to align with the new framework and business model in coordination with RMC In progress and BC. OIA has the Server version and in the Transition to the Server version of Tableau for dashboard and data management. In progress process of transitioning. Request IT manpower resources (Approximately 4 weeks of assistance from applications staff) for the activities Complete related to IIAMS and Tableau. USE OF OF USE In collaboration with ERM and BC to implement the Integrated Risk Management Solution through the vendor LogicManager selected and starting with

TECHNOLOGY In progress selected. (Process improvements - STDS 2110, 2340, and 2500 from QAR) implementation of BC plan.

Request training budget based on knowledge gaps in the internal audit staff and develop a training plan for each Approved Complete member of the OIA to close those gaps. Planned to attend Nov 2019 in Lake At least one OIA member attend each APPFA meeting. Tahoe – too expensive; attending May Not started 2020 in DC Have at least one team building event during the fiscal year to enhance the team. Team building event April 2020 Complete PEOPLE Requested and denied; downgraded Mgr Request an additional FTE for an IT Senior Audit Analyst III. Complete position to this position 13 Based on the AAP, determine whether an intern would be a useful resource throughout the year. Intern to start in January 2020 Complete  Logic Manager Update  Annual Risk Assessment Update  2020 Audit Committee Meeting Dates ◦ Monday, August 3 ◦ Monday, November 30

14

RON DESANTIS STATE BOARD OF ADMINISTRATION GOVERNOR OF FLORIDA CHAIR

JIMMY PATRONIS 1801 HERMITAGE BOULEVARD, SUITE 100 CHIEF FINANCIAL OFFICER TALLAHASSEE, FLORIDA 32308 ASHLEY MOODY (850) 488-4406 ATTORNEY GENERAL

POST OFFICE BOX 13300 ASHBEL C. WILLIAMS EXECUTIVE DIRECTOR & 32317-3300 CHIEF INVESTMENT OFFICER

MEMORANDUM

To: Ash Williams From: Michael McCauley Date: June 5, 2020 Subject: Quarterly Standing Report - Investment Programs & Governance

GLOBAL PROXY VOTING & OPERATIONS During the first quarter of 2020 SBA staff cast votes at 1,306 companies worldwide, voting on ballot items including director elections, audit firm ratification, executive compensation plans, mergers & acquisitions, and a variety of other management and shareowner proposals. These votes involved 10,527 distinct voting items—voting 80.6% “For’’ and 17.3% “Against/Withheld”, with the remaining 2.1% involving abstentions. The table below provides the SBA’s global voting breakdown across all major proposal categories during the first quarter of 2020.

Of all votes cast, 18.5% percent were “Against” the management-recommended vote. SBA proxy voting was conducted across 57 countries, with the top five countries comprised of the United States (1,609 votes), Japan (1,518), China (1,182), the United Kingdom (574), and India (67). The SBA actively Quarterly Standing Report—June 5, 2020

engages portfolio companies throughout the year, addressing corporate governance concerns and seeking opportunities to improve alignment with the interests of our beneficiaries.

CORPORATE GOVERNANCE & PROXY VOTING OVERSIGHT GROUP The most recent meeting of the Corporate Governance & Proxy Voting Oversight Group (Proxy Committee) occurred on March 25, 2020, and the Committee will meet next on June 11, 2020. The Proxy Committee continues to review ongoing governance issues including the volume and trends for recent SBA proxy votes, company-specific voting scenarios, corporate governance policies, governance- related investment factors, major regulatory developments and individual company research related to the Protecting Florida’s Investments Act (PFIA) and other statutory investment requirements related to Israel and Venezuela.

KEY VOTES The Walt Disney Company—at its annual shareowner meeting held on March 11, 2020, executive compensation practices and a lack of alignment with performance were again concerns for investors, with the company receiving only 53% Say-on-Pay support after all ballots were counted. SBA voted against the advisory vote on compensation due to a lack of alignment between compensation and performance, especially with regard to peers. In addition, the company failed to provide full disclosure as to the performance metrics and goals that led to payouts. SBA staff voted against board members on the compensation committee due to the long-standing nature of compensation concerns and lack of responsiveness to investor feedback in prior years. The SBA supported all other directors at the AGM.

GCP Applied Technologies—for the May 28, 2020 annual meeting, Starboard Value won election of their full proposed slate of eight directors through a proxy contest waged at GCP Applied Technologies, while two company directors were also elected in the plurality contest for a total of ten directors. In 2019, Starboard had placed two directors on the board through a settlement that was reached after threat of a proxy contest due to several years of the company missing earnings expectations and continually lowering earnings guidance. This year Starboard proposed a majority slate of dissident candidates who were elected by a wide margin, with several of the company’s candidates receiving less than a quarter of the votes received by the least-vote earning dissident candidates. Starboard holds 9% of the company’s stock and is a manager within SBA’s strategic investments asset class. Starboard has a lengthy track record of making beneficial operating changes at companies and running several successful proxy contests, including a contest at Darden Restaurants where the full board was replaced, a rare occurrence at public companies.

While the company instituted both a restructuring and a spin-off in the last several years, the success of these moves had not clearly materialized, with negative earnings and revenue changes and a nearly 50% one- and three-year share price decline. SBA staff voted in favor of all eight candidates proposed by the dissidents. We were prevented from voting for the full board complement of ten members because the company declined the optional use of a “universal proxy card” until it was too late to practically implement, which would have allowed investors to vote for any ten candidates they wished from both proposed slates. As is seen often in proxy contests, the vast majority of SBA shares were on loan over the record date (90%). Due to the large amount of time between record date and ballot distribution, SBA and other investors in the market are often unaware of a coming important vote until

SBA Investment Programs & Governance (IP&G) Page 2

Quarterly Standing Report—June 5, 2020

it is too late to recall shares. SBA voted against a say-on-pay advisory proposal due to a lack of disclosure of compensation metrics and targets and also against a shareholder rights plan (“poison pill”) proposal.

ACTIVE OWNERSHIP & CORPORATE ENGAGEMENT From late March 2020 through early June 2020, SBA staff conducted engagement meetings with several companies owned within Florida Retirement System (FRS) portfolios, including General Motors, Sinopec Century Bright Capital, Annaly Capital Management, JP Morgan, and Goldman Sachs.

LEADERSHIP & SPEAKING EVENTS Staff periodically participates in investor and corporate governance conferences. Typically, these events include significant involvement by corporate directors, senior members of management, and other key investor or regulatory stakeholders. The following items detail involvement at events that occurred recently:

• In early March, SBA staff participated in the Spring Conference of the Council of Institutional Investors (CII), discussing a range of corporate governance issues and participating as speakers during both the conference agenda and an educational masterclass offered to CII members.

NOTABLE RESEARCH & GOVERNANCE TRENDS State of Washington Requires Board Gender-Diversity—according to the recently amended Washington Business Corporation Act (WBCA), which goes into effect on June 11, 2020, public corporations subject to the WBCA will be required to either have a “gender-diverse board” by January 1, 2022 or comply with new board diversity disclosure requirements. The law considers a board to be gender diverse if, for at least 270 days of the fiscal year preceding a public company’s annual meeting of shareowners, the board is comprised of at least 25% of individuals who self-identify as women.

Covid 19 Triggers Many U.S. Companies to Adopt “Poison” Pills As detailed in a new corporate governance research report by the CII Research and Education Fund (CII REF), U.S. public companies have been aggressively adopting shareowner rights plans (a.k.a. “poison” pills) during the first half of 2020. The report finds that from January 1, 2020 through May 6, 2020, there were 46 pill adoptions, with 42 (91%) adopted after March 10th as the Covid-19 pandemic initially started to expand. Of the total number of pills adopted so far in 2020, 37 of the 46 (80%) pills expire in one year or less, compared to many pre-2020 rights plans including expiration periods of 10 years. CII REF found that trigger thresholds in about 20% of the adopted pills were set at relatively low levels, at around 5% share ownership. A portion of the newly adopted pills are designed to protect net operating losses (a.k.a. “NOL” pills), which are viewed more favorably by investors. CII REF found that two of the adopted pills include dead-hand provisions, whereby the rights plans can only be removed by incumbent directors. About half of the newly adopted pills exhibited 10% ownership thresholds, with many of the remaining pills having 15% or 20% triggers.

SBA Investment Programs & Governance (IP&G) Page 3

SBA Proxy Voting Overview | Period: 1/2/2020 to 3/31/2020 Vote Status: All

1,306 3,134 10,527 1,206 57 67 1,250 Meetings Ballot Votes Companies Countries Portfolios Proxy Paper ID

Map of Proposal Market Vote Decision (All) # of Individual Proposals By Month with Year ● Set a Period (Click on map to filter other charts) over Year Comparison (All) 1/1/2020 to 3/31/2020 Developed Market 55.95% Other Votes Meeting Date - Fiscal Year Start July 0.70% Against & Withhold 30K 17.30% ● Fiscal Year Emerging Market 42.49% 20K 10K FY 2017

Select a Mea.. FY 2018 Undesignated 1.37% Market Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun FY 2019 FY 2020 Fiscal Year of Meeting Date Frontier Market 0.19% FY 2017 FY 2018 FY 2019 FY 2020 For Abstain 80.56% 1.43% Select a Measure ● Vote Status 0K 5K 10K # of Individual Proposals NotCounted # of Individual Ballots Take No Action © Mapbox © OSM Distinct Count o.. # of Individual Meetings Unvoted Voted Top 15 Issuers (All) Support for Management (Country: All) Treemap of Issues (Country: All) Click on a box to drill down to issue description Sydbank 43 43 Issue Code Category Board Related 81.96% 17.33% Aier Eye Hospital .. 43 43 5,343 1,406 1,355 Audit/Financials 77.24% 22.05% Mobile Telesyste.. 42 42 Board Related Audit/Financials Compensation Commercial Inter.. 34 5 40 Compensation 74.69% 24.65% Capital Management 83.58% 15.78% Livzon Pharmaceu.. 32 6 38 Changes to Company Statu.. 80.55% 18.36% Tui AG 35 2 37 Meeting Administration 88.80% Siemens AG 36 36 Other 62.50% 15.73% 21.77% Osram Licht AG 36 36 M&A 91.24% Verso Corp 13 4 17 34 SHP: Governance 17.86% 44.64% 37.50% 938 393 TE Connectivity Ltd 30 4 0 20 40 SHP: Social 87.50% Capital Management 34 Distinct count of Individual .. SHP: Compensation 50.00% 50.00% 30 3 SHP: Environment 50.00% 50.00% Top N Issuer 15 18 13 SHP: Misc 33.33% 33.33% 33.33% 550 30 217 Vote Decisi.. For Against & .. AbstainLegend With Management Against Management Other 29 Executive Compensation & Say on Pay Summary| Period: 7/1/2016 to 3/31/2020 (Country: *)

Year of Meeting Date Country of Origin Issue Group View Chart by Meeting Date All All Executive Compensation & Say on Pay Quarter 7/1/2016 to 6/5/2020

Executive Compensation & Say on Pay Issue Count and Percent (By Quarter) Percent Vote in Favor of Executive Compensation & Say on Pay Issue (By: Quarter)

4.72% 1.0 Management 92.67% 90.54% 93.21% 3K 3.50% 4.00% 88.37% GL 77.26% 80.15% 79.75% 79.63% 2.78% 2.82% Custom 62.75% 64.71% 63.29% 64.86% 60.67% 60.69% 59.52% 62.35% 2K 2.18% 2.91% 0.5 56.98% 2.58% 1.85% 1.85% Value 2.00% SBA Vote Count 39.34% 38.60% 37.04% 33.94% 34.18% 32.43% 1K 1.66% Issue Percentage 31.75% 29.66% 30.00% 29.41% 31.97% 1.45% 1.55% 1.54% 27.72% 27.38% 1.06% 1.22% 0.0 0K 0.00% FY 2 FY FY FY 2 FY 2 FY FY 2 FY 2 FY 2 FY FY 2 FY 2 FY FY FY 2 FY 2 FY 2 FY 2 FY FY 2 FY 2 FY 2 FY 2 FY 2 FY 2 FY 2 FY FY 2 FY 2 FY 2 017.. 017.. 017.. 201.. 018.. 018.. 018.. 018.. 019.. 019.. 019.. 201.. 020.. 020.. 020.. 017.. 201.. 201.. 017.. 018.. 201.. 018.. 018.. 019.. 201.. 019.. 019.. 202.. 202.. 020..

Executive Compensation & Say on Pay Issue Vote Decision (All) Executive Compensation & Say on Pay Vote Note (Vote Decision: All) Click pie chart to filter vote note Vote Note Year of Meeting Date .. Abstain Null FY 2017 3,360 0.02% FY 2018 2,033 Other Votes FY 2019 1,804 25.96% Against & Withhold FY 2020 320 40.23% poor alignment between pay and FY 2017 1 performance. FY 2018 561 For FY 2019 574 33.79% FY 2020 108 An annual advisory vote on FY 2017 201 executive compensation is in the Executive Compensation & Say on Pay Decision Compare Executive Compensation & Say on Pay Compare with Executive Compensation & Say on Pay Compare with best interests of shareholders with GL Recommendation (All) Management Recommendation (All) Custom Recommendation (All)

SBA Against, Glass Lewis For SBA For, Management AgainstBoth Against & Withhold SBA Against, Custom For SBA For, Custom Against 28.91% 0.01% 0.01% 19.38% 0.03% Both Against & Withhold SBA Against, Management For Both Against & Withhold 11.30% Both For 40.10% Others 20.84% Others 33.76% Others Both For 26.02% 26.03% 26.23% 33.73% Director Election Summary| Period: 7/1/2016 to 3/31/2020 (Country: *)

Year of Meeting Date Country of Origin Issue Group View Chart by Meeting Date All All Director Election Quarter 7/1/2016 to 6/5/2020

Director Election Issue Count and Percent (By Quarter) Percent Vote in Favor of Director Election Issue (By: Quarter)

49.76% 49.33% 47.85% 1.0 Management 99.52% GL 39.20% 37.76% 37.72% 37.63% Custom 30K 40.00% SBA 41.58% 82.10% 78.36% 79.52% 78.26% 76.22% 78.50% 76.31% 78.34% 39.22% 38.36% 39.05% 39.02% 37.56% 75.49% 36.29% 35.54% 70.50% 68.96% 67.74% 20K 0.5 Value 20.00% Vote Count

10K Issue Percentage

0.0 0K 0.00% FY 2 FY FY FY 2 FY 2 FY FY 2 FY 2 FY 2 FY FY 2 FY 2 FY FY FY 2 FY FY 2 FY 2 FY 2 FY 2 FY 2 FY 2 FY 2 FY 2 FY 2 FY 2 FY 2 FY 2 FY 2 FY 201.. 017.. 017.. 017.. 018.. 018.. 018.. 018.. 019.. 019.. 019.. 019.. 020.. 020.. 202.. 017.. 201.. 201.. 017.. 018.. 201.. 018.. 018.. 019.. 201.. 019.. 019.. 202.. 202.. 020..

Director Election Issue Vote Decision (All) Director Election Vote Note (Vote Decision: All) Click pie chart to filter vote note Vote Note Year of Meeting Date .. Abstain Null FY 2017 40,212 Other Votes 0.92% FY 2018 38,597 0.53% Against & Withhold FY 2019 39,366 21.17% FY 2020 8,973 Votes against if director serves on FY 2017 1,442 more than 3 boards. FY 2018 3,244 For FY 2019 3,239 77.38% FY 2020 937 Board is not sufficiently FY 2017 1,099 independent Director Election Decision Compare with GL Director Election Compare with Management Director Election Compare with Custom Recommendation Recommendation (All) Recommendation (All) (All)

SBA For, Glass Lewis Against SBA Against, Glass Lewis For SBA For, Management AgainstBoth Against & Withhold SBA Against, Custom For SBA For, Custom Against 0.01% 9.12% 0.00% 0.02% 4.07% 0.08% SBA Against, Management For Others Both Against & Withhold 1.94% Others 21.09% Both Against & Withhold 11.58% Others 1.96% 16.67% Both For 1.68% Both For Both For 77.32% 77.21% 77.24% SHP Summary| Period: 7/1/2016 to 3/31/2020 (Country: *)

Year of Meeting Date Country of Origin Issue Group View Chart by Meeting Date All All SHP Quarter 7/1/2016 to 6/5/2020

SHP Issue Count and Percent (By Quarter) Percent Vote in Favor of SHP Issue (By: Quarter)

1000 1.74% 65.00% 1.39% 0.6 1.33% 1.28% 1.50% 54.03% 55.37% 55.22% SBA 1.09% 1.10% 1.02% GLCustom 0.91% 0.4 43.68% 0.85% 1.00% 37.31%

500 Value 32.29% 32.84% 31.03% 29.79% Vote Count 0.84% 0.79% 0.69% 0.72% 0.2 25.00% 0.62% 0.50% Issue Percentage 16.67% 0.39% 11.76% 0.0 4.08% 1.60% 5.82% 6.10% 5.75% 2.25% 10.00% 2.99% 7.80% 4.72% 7.46% Management5.26% 0 0.00% FY 2 FY FY FY 2 FY 2 FY FY 2 FY 2 FY 2 FY FY 2 FY 2 FY FY FY 2 FY 2 FY 2 FY 2 FY FY 2 FY 2 FY 2 FY 2 FY 2 FY 2 FY 2 FY FY 2 FY 2 FY 2 017.. 017.. 017.. 201.. 018.. 018.. 018.. 018.. 019.. 019.. 019.. 201.. 020.. 020.. 020.. 017.. 201.. 201.. 017.. 018.. 201.. 018.. 018.. 019.. 201.. 019.. 019.. 202.. 202.. 020..

SHP Issue Vote Decision (All) SHP Vote Note (Vote Decision: All) Click pie chart to filter vote note Vote Note Year of Meeting Date .. Abstain Null FY 2017 643 Other Votes 3.20% FY 2018 562 3.10% FY 2019 654 FY 2020 125 Against & Withhold For Not in shareholders' best interests FY 2017 237 48.25% 45.45% FY 2018 39 FY 2019 18 FY 2020 5 Insufficient information provided FY 2017 101 by the Company SHP Decision Compare with GL Recommendation (All) SHP Compare with Management Recommendation (All) SHP Compare with Custom Recommendation (All)

SBA For, Glass Lewis Against SBA Against, Glass Lewis For SBA Against, Custom For SBA For, Custom Against 10.81% 0.57% SBA For, Management Against Both Against & Withhold 0.57% 10.81% 35.70% 31.20% Others Others 10.15% Both Against & Withhold Both Against & Withhold 10.18% Both For Both For 44.83% SBA Against, Management For Both For 44.85% Others 2.80% 33.61% 1.95% 33.61% 28.35%

RON DESANTIS STATE BOARD OF ADMINISTRATION GOVERNOR OF FLORIDA CHAIR

JIMMY PATRONIS 1801 HERMITAGE BOULEVARD CHIEF FINANCIAL OFFICER TALLAHASSEE, FLORIDA 32308 ASHLEY MOODY (850) 488-4406 ATTORNEY GENERAL

POST OFFICE BOX 13300 ASHBEL C. WILLIAMS EXECUTIVE DIRECTOR & 32317-3300 CHIEF INVESTMENT OFFICER

MEMORANDUM

DATE: June 4, 2020

TO: Ash Williams, Executive Director & CIO

FROM: Sooni Raymaker, Chief Risk & Compliance Officer SR

SUBJECT: Trustees Report – June 2020

The role of the Risk Management and Compliance (RMC) unit is to assist the Executive Director & CIO in maintaining an appropriate and effective risk management and compliance program to identify, monitor and mitigate key investment and operational risks. RMC plays a critical role in developing and enhancing the enterprise-wide system of internal controls. RMC proactively works with the Executive Director & CIO and designees to ensure issues are promptly and thoroughly addressed by management.

SBA senior management has created a culture of risk management and compliance through the governance structure, allocation of budgetary resources, policies, and associated training and awareness. Management is committed to ethical practices and to serving the best interests of the SBA’s clients.

Included below is a brief status report of RMC activities and initiatives completed or in progress from March 2020 to the current period. The RMC team began working remotely mid-March 2020 due to COVID 19. The transition to remote work has been seamless and all RMC activities, reviews, controls and processes are working as intended.

Compliance Exceptions No material compliance exceptions were reported during the period.

Enterprise Risk Management (ERM) The quarterly Risk & Compliance Committee (RCC) was conducted telephonically on May 21, 2020. The RCC was given an update of new and on-going mitigation efforts in the Management Plan of top risk events identified in last year’s enterprise-wide risk assessment. The RCC also reviewed compliance exceptions by type and personal investment activity over the past quarter. Updates were also provided related to External Manager Operational Risk Oversight and Public Market Compliance.

Additionally, during the period, the ERM team worked with Dr. Jay Rayburn, FSU College of Communication, to conduct an SBA Organizational Colleague Survey. Research studies have shown that positive organizational health and culture result in good performance. Despite the

A. Williams Page 2

interruption of shifting to remote work due to COVID 19, there was an excellent survey response rate. The sample distribution of all variables matched the SBA employee population. The survey results confirmed the SBA has a very positive culture in the areas of trust and integrity, leadership, accountability and engagement, and risk awareness and decision making. While there were many positive results, the survey also noted areas where additional feedback from potential focus groups could further improve the SBA. Focus groups will be conducted once it is safe to convene in-person group meetings.

Due to the financial market volatility caused by the global pandemic, ERM heightened their daily review of counterparties, by monitoring beginning and end-of day counterparty exposure data, and communicating via email to ensure traders and senior leaders had access to the most current information available. ERM also launched a new Trading & Investment Oversight Group internal website page for enhanced and streamlined reporting. The Trading, Investment Oversight and Compliance Group met telephonically and discussed exposure levels as well as collateral stress testing results in light of the stressed environment. Additionally, a cross functional group involved in SBA trading, counterparty monitoring and collateral operations met to address counterparty and exposure monitoring in light of the market downturn. No recommendation was made to change or limit trading with authorized counterparties, but to closely monitor for changes in financial condition.

External Manager Operational Due Diligence (ODD) During the period, the ODD team reviewed and commented on 23 consultant operational due diligence reports on alternative investment managers as part of the investment approval process which represents over $3 billion in potential investments. The ODD team conducted 5 desk reviews on external managers and noted areas of operational considerations. Follow-up onsite reviews are postponed until travel restrictions are lifted. The ODD team also participated in the virtual manager interviews conducted by Global Equity for the Developed Standard manager search.

Mercer was engaged to conduct onsite operational due diligence visits on four managers. Due to the pandemic, Mercer conducted virtual operational due diligence and final reports are pending for three of the four managers. The fourth manager’s review has been deferred until late summer.

The ODD team telephonically conducted their quarterly meeting with all the asset classes and provided an update on the status of manager reviews. The team also provided an update of consultant reports available on the internal Manager Operational Risk Oversight website page.

The ODD team has also been in the process of implementing a customized investment vendor management module in Logic Manager, an integrated risk management system. This module is anticipated to be a tool to provide a dynamic risk assessment and risk ranking of all SBA external managers based on criteria inputted by the team. Criteria such as Organization, Oversight, Compliance, Violations, and Service Providers will be reviewed and assessed for each external manager.

A. Williams Page 3

The ODD team is also in the process of receiving the 2019 Annual Certifications using the Florida Asset Manager Evaluation (FLAME) system. The certifications were due May 31, 2020.

Public Market Compliance (PMC) The PMC team continues to work on automating compliance rules and effectively using the various compliance systems. The team is continuously updating the compliance matrix to assist in a gap analysis of rules that are automated versus manual reviews as well as risk ranking of compliance rules. The automation process has resulted in 93% of the Fixed Income compliance reviews being performed daily compared to only 36% in May 2019. The few remaining monthly manual reviews have transitioned to daily reviews. Additionally, the majority of internal Global Equity compliance reviews are also done on an automated daily basis.

The BlackRock Aladdin compliance system project for the PRIME account is nearing completion to finalize the remaining rules.

Performance and Risk Analytics (PRA) The PRA database management team is working to improve the current performance dashboard by incorporating additional functionality for smaller asset composites and additional risk statistics across asset classes. PRA continues to create models to ensure data accuracy and reconcile monthly and quarterly performance data. Procedures continue to be reviewed and updated for accuracy and efficiency as well as to add additional controls where necessary

Policy Activity During the period two internal policies were revised. Efforts to consolidate policies and eliminate duplication continues, for example, with the proposed combination of the Investment Portfolio Guideline and Private Market Investment Guideline policies.

Revisions were also implemented to the investment portfolio guidelines for nine internally managed portfolios. Updates included SIO staffing changes; Prohibited Securities language and Implementation Narratives; condensing the Permitted Securities list into more broad categories and revising rating and treasury limits. One new investment guideline was developed for the FRS Cash Enhanced portfolio, which is a Fixed Income short duration government/credit strategy.

Personal Investment Activity During the period, there were 98 requests for pre-clearance by SBA employees. One request required additional analysis due to the updated $20,000k/5% ownership threshold reporting requirement that became effective in February 2019. All requests were approved. There were no new employees reporting during the period.

Attorneys at Law llw-law.com

Reply To: Tallahassee

June 4, 2020

SUMMARY OF STATUTORY COMPLIANCE REVIEW, 2020

This review finds that the Local Government Surplus Funds Trust Fund, Florida PRIME™, (Fund) is in compliance with the requirements of Sections 218.40 – 218.412, Florida Statutes.

Scope – The time period reviewed is May 16, 2019 through May 15, 2020.

Methodology – The review included analysis of the applicable statute, interviews with State Board of Administration personnel, review of materials provided by SBA personnel and materials posted to the Florida PRIME™ and State Board of Administration websites.

Additional Specific Findings – Auditor General Report No. Report No. 2020-064 noted no deficiencies in internal control over Florida PRIME’s financial reporting that were considered to be material weaknesses, and no instances of noncompliance or other matters required to be reported under Government Auditing Standards.

The current Investment Policy Statement for the fund was approved by the Trustees on July 25, 2019 and adopted by amendment to Rule 19-7.002, Florida Administrative Code on April 8, 2020.

Disclosure: Anne Longman currently serves on the Leon County Research and Development Authority (Authority) Board of Governors, which had some of its funds in a PRIME™ account during the review period. This is an unpaid position, and the Authority’s participation in PRIME™ predates her service on its board or as chair. Her analysis, in which the SBA General Counsel concurs, indicates that this relationship does not pose a conflict or compromise the impartiality of this review.

Anne Longman Glenn E. Thomas

JACKSONVILLE ST. PETERSBURG TALLAHASSEE TAMPA WEST PALM BEACH 245 Riverside Ave., Suite 510 100 Second Ave., South 315 South Calhoun St., Suite 830 301 West Platt St. 515 North Flagler Dr., Suite 1500 Jacksonville, Florida 32202 Suite 501-S Tallahassee, Florida 32301 Suite 364 West Palm Beach, Florida 33401 T: 904.353.6410 St. Petersburg, Florida 33701 T: 850.222.5702 Tampa, FL 33606 T: 561.640.0820 F: 904.353.7619 T: 727.245.0820 F: 850.224.9242 T: 813.775.2331 F: 561.640.8202 F: 727.290.4057

See Things Differently® Attorneys at Law llw-law.com

Reply To: Tallahassee

June 4, 2020

LOCAL GOVERNMENT SURPLUS FUNDS TRUST FUND STATUTORY COMPLIANCE REVIEW

The Local Government Surplus Funds Trust Fund (Trust Fund or Fund) administered by the State Board of Administration (Board) was created in 1977, is governed by Part IV of Chapter 218, Florida Statutes, titled Investment of Local Government Surplus Funds, and is now known as Florida PRIME™.

THE STATUTE

Pursuant to section 218.405(3), the trustees (meaning the trustees of the State Board of Administration, section 218.403(10), constituted per section 215.44(1)) must make a two part annual certification:

The trustees shall annually certify to the Joint Legislative Auditing Committee that the trust fund is in compliance with the requirements of this part and that the trustees have conducted a review of the trust fund and determined that the management of the trust fund is in accord with best investment practices. (Emphasis added.)

This is the eleventh annual statutory review of the Fund under section 218.405(3). There were no substantive amendments to Part IV, Chapter 218, Florida Statutes, during the 2020 Legislative session.

SCOPE OF REVIEW

This review addresses the first part of the annual certification and examines whether the Trust Fund, defined at section 218.403(9) as “the pooled investment fund created by Section 218.405 and known as the Local Government Surplus Funds Trust Fund,” is “in compliance with the requirements of this part.” “This part” refers to Part IV of Chapter 218, Florida Statutes, which includes sections 218.40 – 218.415, Florida Statutes.

JACKSONVILLE ST. PETERSBURG TALLAHASSEE TAMPA WEST PALM BEACH 245 Riverside Ave., Suite 510 100 Second Ave., South 315 South Calhoun St., Suite 830 301 West Platt St. 515 North Flagler Dr., Suite 1500 Jacksonville, Florida 32202 Suite 501-S Tallahassee, Florida 32301 Suite 364 West Palm Beach, Florida 33401 T: 904.353.6410 St. Petersburg, Florida 33701 T: 850.222.5702 Tampa, FL 33606 T: 561.640.0820 F: 904.353.7619 T: 727.245.0820 F: 850.224.9242 T: 813.775.2331 F: 561.640.8202 F: 727.290.4057

See Things Differently® June 4, 2020 Page 2

The scope of this review is compliance with sections 218.40 – 218.412, Florida Statutes during the time period May 16, 2019 through May 15, 2020. The remainder of Part IV, Chapter 218 covers local government investment policies, which are not within the scope of this review.

The second part of the certification required by section 218.405(3), the determination that the Fund is in accord with best investment practices, is being performed separately by Aon Hewitt Investment Consulting, Inc.

PURPOSE

As set out at section 218.401, Florida Statutes, the intent of Part IV of Chapter 218 is:

[T]o promote, through state assistance, the maximization of net interest earnings on invested surplus funds of local units of government, based on the principles of investor protection, mandated transparency, and proper governance, with the goal of reducing the need for imposing additional taxes.

The definition of surplus funds, found at section 218.403(8), includes:

[A]ny funds in any general or special account or fund of a unit of local government, or funds held by an independent trustee on behalf of a unit of local government, which in reasonable contemplation will not be immediately needed for the purposes intended.

By its terms, the Fund is limited to units of local government, defined at section 218.403(11) as:

… any governmental entity within the state not part of state government and shall include, but not be limited to, the following and the officers thereof: any county, municipality, school district, special district, clerk of the circuit court, sheriff, property appraiser, tax collector, supervisor of elections, authority, board, public corporations, or any other political subdivision of the state.

This broad definition covers not just “any governmental entity…not a part of state government,” but includes also authorities, boards and public corporations, and is specifically not limited to the enumerated bodies.

Fund participants are charged by statute with determining whether it is in their interest to participate in the Fund. §218.407(2). The enrollment materials require the participant to certify that it has determined it is authorized to invest in the Fund. They also state that the SBA is not responsible for independently verifying that the participant is so authorized.

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CREATION, OBJECTIVES

The Trust Fund is created at section 218.405, Florida Statutes,

(1) There is hereby created a Local Government Surplus Funds Trust Fund to be administered by the board and to be composed of local government surplus funds deposited therein by units of local government under the procedures established in this part. The board may contract with a professional money management firm to manage the trust fund.

The Board has contracted with a professional money management firm, Federated Investment Counseling, Inc. (Federated), to manage the Trust Fund.

(2) The primary objectives, in priority order, of investment activities shall be safety, liquidity, and competitive returns with minimization of risks. (3) (Certification requirement, cited above) (4) The board may adopt rules to administer the provisions of this section.

RULES

Both sections 218.405(4) and 218.412 make rulemaking to administer the Trust Fund permissive rather than mandatory. The Board has adopted rules for the Fund at Chapter 19-7, Florida Administrative Code. The majority of these rules were enacted in 1982, with substantial revisions in 2002 and 2010. Rule 19-7.002 was amended to adopt the current Investment Policy Statement for the Fund on April 8, 2020 as approved by the Trustees effective July 25, 2019.

INTERACTION WITH LOCAL GOVERNMENT AUTHORITIES

Section 218.407 sets out the requirements that must be met before a unit of local government may deposit surplus funds in the Trust Fund:

(1) Prior to any determination by the governing body that it is in the interest of the unit of local government to deposit surplus funds in the trust fund, the board or a professional money management firm must provide to the governing body enrollment materials, including a trust fund profile containing impartial educational information describing the administration and investment policy of the trust fund, including, but not limited to: (a) All rights and conditions of participation, including potential restrictions on withdrawals.

01252875-1 June 4, 2020 Page 4

(b) The historical performance, investment holdings, credit quality, and average maturity of the trust fund investments. (c) The applicable administrative rules. (d) The rate determination processes for any deposit or withdrawal. (e) Any fees, charges, penalties, and deductions that apply to the account. (f) The most recently published financial statements or independent audits, if available, prepared under generally accepted accounting principles. (g) A disclosure statement for signature by the appropriate local government official.

The Board, with Federated, has created enrollment materials which include a Trust Fund profile and education information which appear to be impartial and to accurately describe the administration and investment policies of the Trust Fund and which meet the specific requirements of the above section.

All materials are provided to participants and potential participants at the Board’s web site: www.sbafla.com at the Florida PRIME link, or directly at www.sbafla.com/prime. The New Participant Enrollment Guide, the current Investment Policy Statement, the Earnings Allocation description and the applicable rules are included under the “Enrollment Materials” tab, as are two form documents that must be executed by a new participant: the Disclosure Statement and the Authorizing Resolution. These materials track the statutory information required by section 218.407(1) cited above, and were last updated on April 7, 2018 to reflect the most recent statutory changes.

(2) Upon review of the enrollment materials and upon determination by the governing body that it is in the interest of the unit of local government to deposit surplus funds in the trust fund, a resolution by the governing body and the signed acceptance of the disclosure statement by the local government official, who may be the chief financial or administrative officer of the local government, shall be filed with the board and, if appropriate, a copy shall be provided to a professional money management firm authorizing investment of its surplus funds in the trust fund established by this part. The resolution shall name: (a) The local government official, who may be the chief financial or administrative officer of the local government, or (b) An independent trustee holding funds on behalf of the unit of local government, responsible for deposit and withdrawal of such funds.

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Section 218.407 was substantially amended in 2008 to include the safeguards set forth in paragraphs (1) and (2) above. Most of these requirements are intended to assure that the participant is fully informed about the nature, purpose, stability and processes of the Fund. Signed disclosure statements are on file for all participants in the Fund who have enrolled since the 2008 amendment; and all Fund participants have putative and actual knowledge of the information included in the disclosure statement, through the Monthly Summary Reports and materials posted to the website.

(3) The board or a professional money management firm shall, upon the filing of the resolution, invest the moneys in the trust fund in the same manner and subject to the same restrictions as are set forth in s.215.47. All units of local government that qualify to be participants in the trust fund shall have surplus funds deposited into a pooled investment account

Section 215.47, Florida Statutes details the types of investments permitted for all Board funds, including Florida PRIME. Pursuant to section 218.409(2)(a), the Fund also must be invested in accordance with the current written investment policy, which must be updated annually. Part two of the certification required by section 218.405(3), being conducted by Aon Hewitt Investment Consulting, Inc., determines whether the Fund’s management is in accord with best investment practices and whether the specific holdings of the Fund are in accord with all statutory requirements including section 215.47 (cross-referenced in 218.405(3)) as implemented in the current PRIME Investment Policy Statement, adopted in rule 19-7.002.

ADMINISTRATION OF THE TRUST FUND, ADVISORY COUNCIL

218.409 Administration of the trust fund; creation of advisory council.— (1) Upon receipt of the items specified in s. 218.407 from the local governing body, the board or a professional money management firm shall accept all wire transfers of funds into the trust fund. The board or a professional money management firm shall also wire-transfer invested local government funds to the local government upon request of the local government official named in the resolution.

A clearing account maintained by Bank of America, which is a qualified public depository, accepts money transmitted to the Board and transfers to BNY Mellon, as the custodian, as discussed further below.

(2)(a) The trustees shall ensure that the board or a professional money management firm administers the trust fund on behalf of the participants. The board or a professional money management firm shall have the power to invest such funds in accordance with a written investment policy. The

01252875-1 June 4, 2020 Page 6

investment policy shall be updated annually to conform to best investment practices. The standard of prudence to be used by investment officials shall be the fiduciary standards as set forth in s. 215.47(10), which shall be applied in the context of managing an overall portfolio. Portfolio managers acting in accordance with written procedures and an investment policy and exercising due diligence shall be relieved of personal responsibility for an individual security’s credit risk or market price changes, provided deviations from expectations are reported in a timely fashion and the liquidity and the sale of securities are carried out in accordance with the terms of this part.

The Board administers the Trust Fund on behalf of the participants and handles accounting, statements, monthly reporting and compiling and maintaining enrollment materials, and has contracted with professional money management firm Federated to act as the Investment Manager and to invest the Trust Fund funds in accordance with the Investment Policy Statement. Federated also interacts with participants to answer inquiries and facilitates Standard and Poor’s ratings. BNY Mellon acts as custodian of all assets of the Fund, processes all trades made by Federated, and does valuation and pricing for the Fund. The Investment Policy Statement has been updated and approved by the Trustees effective July 25, 2019. It is posted at the Fund website tab “Risk Management and Oversight,” and at the “Enrollment Materials” tab as a separate item and as part of the New Participant Enrollment Guide.

(2)(b) Officers and employees involved in the investment process shall refrain from personal business activity that could conflict with the proper execution and management of the investment program or that could impair their ability to make impartial decisions. Employees and investment officials shall disclose any material interests in financial institutions with which they conduct business on behalf of the trust fund. They shall further disclose any personal financial or investment positions that could be related to the performance of the investment portfolio. Employees and officers shall refrain from undertaking personal investment transactions with the same individual with whom business is conducted on behalf of the board.

All Board employees are required to complete training sessions to assure that Board officers and employees involved in the investment process are not engaged in personal business activity that could conflict with the Trust Fund program or impair their ability to make impartial decisions. The SBA Inspector General monitors completion of all mandatory policy courses and confirms that all courses required in the applicable fiscal year rotation have been completed.

A course cycle, which was updated in October 2018, sets out when the mandatory courses must be completed. For 2020, the following mandatory course cycle applies: Cybersecurity Awareness, Ethics, Harassment Prevention, Incident Management Framework, Insider Trading, and Personal Investment Activity are required every year; Public Records and Sunshine Law are required every two years; and Fiduciary Duties is required every four years. All training is done

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on line and all new employees are required to take all 9 mandatory courses at the time they start working for the SBA. Human Relations notifies the Inspector General of any training non- compliance and he then follows up to assure that training is complete.

Employees and investment officials are required to disclose material interests in financial institutions with which they also conduct Trust Fund business, and any personal financial or investment positions that could be related to performance of the Trust Fund portfolio. Policy 10- 041 on Personal Investment Activity, as updated February 26, 2020, guides the Board on these issues. The Inspector General assures that any trading or investment activity by individual employees is in compliance with applicable policies.

The Board has developed a process and document to be used by professional money manager Federated to certify that it is in compliance with statutory ethics requirements. Federated Vice President M. Cole Dolinger executed a certification of accredited investor/qualified purchaser status on April 21, 2020, and Federated Chief Compliance Officer, Stephen Van Meter executed an annual Compliance Certification for the period January 1, 2019 through December 31, 2019.

(2)(c) The board or a professional money management firm and all employees have an affirmative duty to immediately disclose any material impact to the trust fund to the participants. To ensure such disclosure, a system of internal controls shall be established by the board, which shall be documented in writing as part of the investment policy. The controls shall be designed to prevent the loss of public funds arising from fraud, employee error, and misrepresentation by third parties, unanticipated changes in financial markets, or imprudent actions by employees and officers of the board or a professional money management firm. The controls shall also include formal escalation reporting guidelines for all employees. The guidelines shall establish procedures to address material impacts on the trust fund that require reporting and action.

Policy 10-040, Ethics, as revised February 26, 2020, sets out comprehensive ethical requirements for all employees of the SBA, including PRIME, which are more stringent than the statutory requirements under Chapter 112, Part III, Florida Statutes. SBA management and staff have an affirmative duty to immediately escalate and report directly to the Executive Director & CIO, the Inspector General, or the General Counsel any “employee or contractual party fraud or misconduct (whether actual or suspected), employee or contractual party material error that adversely affects SBA or client assets or interests, misrepresentation or omission of material information in internal and external reporting and client communications, and violations of laws, rules or SBA policies.” The Inspector General then is required to investigate.

The Board internet and intranet home pages include an employee toll-free fraud hotline number which allows all employees to anonymously report any concerns with regard to any aspect of Board functions, including the Trust Fund. This number also is provided in all contracts with

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external service providers, in order to reach any potential problems in these relationships. The hotline is operated by an independent company and is available 24 hours a day, 7 days a week. The Inspector General receives any reports from the hotline and copies these to the Chief Risk and Compliance Officer. There were no fraud reports to the hotline number during the review period.

The Investment Policy Statement at Section IX, Controls and Escalation Procedures, imposes extensive reporting, monitoring and escalation requirements on the executive director, all employees, the Fund custodian, the Investment Manager, an independent investment consultant and any third party used to materially implement the Fund.

The IPS requires the Executive Director to develop policies and procedures to maintain an appropriate and effective risk management and compliance program, which identifies, evaluates and manages risks within business units and at the enterprise level. The Executive Director is required to appoint a Chief Risk and Compliance Officer, whose selection, compensation, and termination are to be affirmed by the Board. This position assists the Executive Director in fulfilling the Controls and Escalation Procedures, and has been staffed.

Also in accordance with the IPS, the executive director of the Board has organized an Investment Oversight Group (IOG) to regularly review and formally escalate exceptions or events that might have a material impact on the Trust Fund. The minutes of its meetings, with a list of participants, are posted to the Fund website. The IOG meets and reports monthly to the Executive Director.

As discussed below, the Auditor General conducts an annual financial audit of PRIME, and the IPS states that this audit “will include testing for compliance with this Policy,” (the IPS.)

The IPS also requires the Trustees to review and approve management summaries of material impacts on the Fund and any actions or escalations, along with any required actions thereon. The Monthly Summary Reports, which are provided on the website, constitute these management summaries. (See further discussion on the contents of this Report under section 218.409(6).) As reflected in the quarterly reports to the Joint Legislative Auditing Committee, the Trustees have reviewed and approved the monthly summary reports.

The above safeguards assure that the administration of the Trust Fund is in accordance with stringent standards of disclosure designed to prevent the loss of funds from fraud, error, misrepresentation, market changes or imprudent actions by the Board or a money manager, and in some aspects exceed what is required by statute.

(2)(d) The investment policy shall be reviewed and approved annually by the trustees or when market changes dictate, and in each event the investment policy shall be reviewed by the Investment Advisory Council.

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As set out above, the Investment Policy Statement was readopted, endorsed by the Investment Advisory Council and approved by the Trustees on July 25, 2019.

(3) The board or a professional money management firm may purchase such surety or other bonds as may be necessary for its officials in order to protect the trust fund. A reserve fund may be established to fulfill this purpose. However, any reserve must be a portion of the management fee and must be fully disclosed, including its purpose, in the enrollment materials at the time a unit of local government considers participation. Further, any change in the amount to be charged for a reserve must have a reasonable notice period to allow any participant to withdraw from the trust fund prior to the new reserve charge being imposed.

No surety or other bonds have been purchased to protect the Trust Fund, and there is no reserve fund.

(4) The board or a professional money management firm shall purchase investments for a pooled investment account in which all participants share pro rata in the capital gain, income, or losses, subject to any penalties for early withdrawal. Any provisions for penalties, including their purpose, must be disclosed in the enrollment materials. Any change in the amount to be charged for a penalty must have a reasonable notice period to allow any participant to withdraw from the trust fund prior to the new penalty charge being imposed. A system shall be developed by the board, and disclosed in the enrollment materials, subject to annual approval by the trustees, to keep account balances current and to apportion pooled investment earnings to individual accounts.

All participants in the Trust Fund share pro rata in all capital gains, income or losses, as set out in the Description of Investment Pool Earnings Allocation, posted to the website. This system is designed to keep account balances current and to apportion pooled investment earnings to individual accounts.

(5) The board shall keep a separate account, designated by name and number of each participating local government. A maximum number of accounts allowed for each participant may be established by the board. Individual transactions and totals of all investments, or the share belonging to each participant, shall be recorded in the accounts.

Separate accounts are kept for each participant. The Board has not established a limit on the number of accounts a participant may have

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(6)(a) The board or a professional money management firm shall provide a report, at a minimum monthly or upon the occurrence of a material event, to every participant having a beneficial interest in the trust fund, the board’s executive director, the trustees, the Joint Legislative Auditing Committee, and the Investment Advisory Council. The report shall include: 1. Reports of any material impacts on the trust fund and any actions or escalations taken by staff to address such impacts. The trustees shall provide quarterly a report to the Joint Legislative Auditing Committee that the trustees have reviewed and approved the monthly reports and actions taken, if any, to address any impacts. 2. A management summary that provides an analysis of the status of the current investment portfolio and the individual transactions executed over the last month. This management summary shall be prepared in a manner that will allow anyone to ascertain whether investment activities during the reporting period have conformed to investment policies. Such reporting shall be in conformance with best market practices. The board or a professional money management firm shall furnish upon request the details of an investment transaction to any participant, the trustees, and the Investment Advisory Council.

A document titled Monthly Summary Report is produced monthly to address the above requirements and made available at the Florida PRIME website. The most recent Monthly Summary Report was posted for April 30, 2020.

The quarterly reports of the Trustees to the Joint Legislative Auditing Committee showing that the Trustees have reviewed and approved the monthly reports and taken responsive action, per the above, are memorialized in the agendas of the meetings of the Trustees of the State Board of Administration, posted to the SBA website.

(6)(b) The market value of the portfolio shall be calculated daily. Withdrawals from the trust fund shall be based on a process that is transparent to participants and will ensure that advantages or disadvantages do not occur to parties making deposits or withdrawals on any particular day. A statement of the market value and amortized cost of the portfolio shall be issued to participants in conjunction with any deposits or withdrawals. In addition, this information shall be reported monthly with the items in paragraph (a) to participants, the trustees, and the Investment Advisory Council…

The market value of the Fund portfolio is calculated daily by BNY Mellon and posted on the website the next day. The Information Statement and Operating Procedures, posted to the

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website as part of the New Participant Enrollment Guide, sets out the operating procedures for the Fund, including hours of operation, holidays and timing of transactions. These procedures are transparent and appear to ensure, to the extent possible, that disadvantages do not occur to parties making deposits or withdrawals on particular days, as each participant has equal access to the transaction system. A statement of the market value and amortized cost of the portfolio is available at all times to participants on the website, and participants receive monthly individual account statements.

…The review of the investment portfolio, in terms of value and price volatility, shall be performed with practices consistent with the GFOA Recommended Practice on "Mark-to-Market Practices for State and Local Government Investment Portfolios and Investment Pools." In

Compliance with the above part of section 218.409(6)(b) will be determined in part two of the annual certification, conducted by Aon Hewitt Investment Consulting, Inc.

…Additional reporting may be made to pool participants through regular and frequent ongoing multimedia educational materials and communications, including, but not limited to, historical performance, investment holdings, amortized cost and market value of the trust fund, credit quality, and average maturity of the trust fund investment

Additional materials are available on the Trust Fund website and are provided through the monthly reports. Board staff are available for direct communication with participants for any questions regarding their accounts.

(7) Costs incurred in carrying out the provisions of this part shall be deducted from the interest earnings accruing to the trust fund. Such deductions shall be prorated among the participant local governments in the percentage that each participant’s deposits bear to the total trust fund. The remaining interest earned shall be distributed monthly to participants according to the amount invested. Except for costs, the board or a professional money management firm may not transfer the interest or use the interest for any other purpose, including, but not limited to, making up investment losses.

The above statutory requirement was present in the law before the 2008 revisions and has been discussed in previous reviews because it is theoretically problematic: If fund investment values were to decline sufficiently in a given month, there would be no interest from which to pay costs, and the literal requirements of this provision could not be met within a given month. Staff have reviewed this issue and updated last year’s analysis in the following statement:

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The Florida PRIME total expense ratio is approximately 3.23 basis points (or 0.0323%), with the SBA’s portion of the total fees equal to 1.0 basis point (or 0.01%). Historical asset levels with an average annual balance of $8.9 billion over the last 5 years have been more than sufficient to generate adequate fees to cover all administrative, operational, compliance and investment management charges. All pool charges have continued to be reported within the Monthly Summary Report, including the actual monthly line-item fees.

(8)(a) The principal, and any part thereof, of each and every account constituting the trust fund shall be subject to payment at any time from the moneys in the trust fund. However, the executive director may, in good faith, on the occurrence of an event that has a material impact on liquidity or operations of the trust fund, for 48 hours limit contributions to or withdrawals from the trust fund to ensure that the board can invest moneys entrusted to it in exercising its fiduciary responsibility. Such action shall be immediately disclosed to all participants, the trustees, the Joint Legislative Auditing Committee, and the Investment Advisory Council. The trustees shall convene an emergency meeting as soon as practicable from the time the executive director has instituted such measures and review the necessity of those measures. If the trustees agree with such measures, the trustees shall vote to continue the measures for up to an additional 15 days. The trustees must convene and vote to continue any such measures prior to the expiration of the time limit set, but in no case may the time limit set by the trustees exceed 15 days.

In the time period covered by this review, the principal of all accounts in the Trust Fund has been paid at any time requested by a participant and there have been no events causing the Executive Director to limit contributions or withdrawals.

(8)(b) An order to withdraw funds may not be issued upon any account for a larger amount than the share of the particular account to which it applies; and if such order is issued, the responsible official shall be personally liable under his or her bond for the entire overdraft resulting from the payment if made.

In the time period covered by this review, there have been no orders to withdraw funds for a larger amount than the share of a particular account.

(9) The Auditor General shall conduct an annual financial audit of the trust fund, which shall include testing for compliance with the investment policy. The completed audit shall be provided to the participants, the board, the trustees, the Investment Advisory Council, and the Joint Legislative Auditing Committee. As soon as practicable, but no later than 30 days after

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completion of the audit, the trustees shall report to the Joint Legislative Auditing Committee that the trustees have reviewed the audit of the trust fund and shall certify that any necessary items are being addressed by a corrective action plan that includes target completion dates.

The Auditor General annual financial audit of the Trust Fund, Report No. 2020-064, for the fiscal years ended June 30, 2019 and June 30, 2018, was completed in November 2019. The audit did not disclose any deficiencies in internal control over Florida PRIME’s financial reporting that were considered to be material weaknesses. The report noted no instances of noncompliance or other matters required to be reported under Government Auditing Standards, and included as audit objectives determining if the SBA had complied with various provisions of laws, rules, contracts, the IPS, and other guidelines that are material to the financial statements.

AUTHORIZATION TO PROVIDE ASSISTANCE

218.411 Authorization for state technical and advisory assistance. (1) The board is authorized, upon request, to assist local governments in investing funds that are temporarily in excess of operating needs by: (a) Explaining investment opportunities to such local governments through publication and other appropriate means. (b) Acquainting such local governments with the state’s practice and experience in investing short-term funds. (c) Providing, in cooperation with the Department of Economic Opportunity, technical assistance to local governments in investment of surplus funds. (2) The board may establish fees to cover the cost of such services, which shall be paid by the unit of local government requesting such service. Such fees shall be deposited to the credit of the appropriation or appropriations from which the costs of providing the services have been paid or are to be charged.

The education offerings of the Fund have been discontinued, and there have been no instances of the SBA providing technical assistance to a fund participant in this review period.

218.412 Rulemaking authority.—

The board may adopt rules as it deems necessary to carry out the provisions of this part for the administration of the trust fund.

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As noted above, the Board has adopted rules for the administration of the Fund at Chapter 19-7, Florida Administrative Code, which are up to date.

OTHER SECTIONS OF PART IV, CHAPTER 218

Part IV of Chapter 218, Florida Statutes covers other facets of investment of local government funds, such as local government investment policies (Section 218.415.) Because this review, as mandated by Section 218.405, is of the pooled investment fund created by 218.405 only, these sections are not a part of this review.

01252875-1 Florida PRIME™ Best Practices Review

State Board Administration of Florida

June 30, 2020

Aon

Investment advice and consulting services provided by Aon Investments USA Inc., an Aon Company. Introduction

▪ An annual review of Florida PRIME is required under Florida state law to determine whether the management of the Fund is aligned with best practices

▪ Aon’s 2020 annual review includes the following: − Review of the 2020 participant survey responses − Performance update in light of COVID-19 pandemic − Florida PRIME Business Case Review Update − Securities Lending Discussion − Annual Investment Policy Statement review

▪ Florida PRIME continues to be managed in a manner consistent with best practices and in consideration of participants’ best interests

Aon Investment advice and consulting services provided by Aon Investments USA Inc., an Aon Company. 2 FL PRIME Performance Update

▪ Throughout this unprecedented time of humanitarian and economic stress due to COVID-19, FL PRIME has continued to function fluidly and without disruption

▪ Investment perspective: ─ Managed to preserve capital and provide liquidity without interruption

─ Proactive in increasing weekly liquidity in anticipation of potentially greater liquidity needs from participants ▪ Administrative/Service perspective:

─ Functioned without disruption; normal hours of operation, no limitation on participant functionality

─ Active communication via website, direct mail and live member calls ▪ Overall, the FL PRIME program has managed this current crisis seamlessly, maintaining focus on objectives of the portfolio while continuing to provide strong customer service and uninterrupted administration of the pool

Aon Investment advice and consulting services provided by Aon Investments USA Inc., an Aon Company. 3 Business Case Review Update

▪ Business case review underway as part of the Florida PRIME Strategic Plan “evaluate the business case for insourcing and/or outsourcing of pool operations, investment management, user interface (web), need for additional funds, and other general administrative issues.” ▪ Review commenced in the Fall of 2019 and since that time the SBA Review team has primarily been in an information gathering phase – Insight into outsourcing and hybrid models – Peer Practices – Risk Assessment of FL PRIME ▪ Information gathered thus far has helped identify areas to further investigate and administrative aspects that may benefit or may be hindered via outsourcing ▪ Request for information is being drafted and tailored to garner needed information ▪ The team is evaluating all viable avenues in order to identify the most efficient management of the pool while providing the greatest security and value to current and potential participants

Aon Investment advice and consulting services provided by Aon Investments USA Inc., an Aon Company. 4 Business Case Review: Tentative Timeline

Next Steps Tentative Timeframe

Complete RFI and Send to Candidates Summer 2020

Receive RFI Responses and Evaluate Fall 2020

Complete Internal Risk Assessment Fall 2020

Conduct Follow-ups Winter 2020-2021

Present Findings and Recommended Spring 2021 Changes

Aon Investment advice and consulting services provided by Aon Investments USA Inc., an Aon Company. 5 Aon

Florida PRIME™ Best Practices Review Florida State Board of Administration (SBA)

June 2020

Risk. Reinsurance. Human Resources. Aon

Table of Contents

Executive Summary 1

2020 Participant Survey Results 2

Pool Performance Update 3

Business Case Review Update 4

Securities Lending Discussion 5

Investment Policy Statement Review 6

Florida PRIME™ Best Practices Review June 2020 Aon

Executive Summary

Aon Investments (Aon) conducts a Best Practices Review of Florida PRIME on an annual basis. In this report, we review the 2020 Participant Survey responses, provide a performance update given the recent market turmoil, provide an update on the Business Case Review, offer a discussion on Securities Lending and cover the annual Investment Policy Statement Review.

Based on our review, we continue to believe that Florida PRIME is being managed in a manner consistent with best practices and in consideration of participants’ best interests and do not have any recommendations at this time.

Florida PRIME™ Best Practices Review June 2020 Aon

2020 Participant Survey Results

On a regular basis, the SBA conducts a survey of Florida PRIME participants to gain a better understanding of the participant base, current usage of available services, and overall satisfaction. The survey also seeks to gauge interest in various enhancements and to ensure awareness of participant needs and preferences. The 2020 survey attracted 88 respondents which is in line with the previous rate of response.

A diversified group of governmental units responded to the survey, primarily representing counties, municipalities, school boards and special districts, with respondents roughly evenly split between investment decision-makers and personnel in account operations. Of the respondents, 55% have one account with Florida PRIME and 22% have either 2 or 3 accounts. Approximately half of respondents have over $10 million of cash assets available for short-term investment, with another 21% having between $1 million and $10 million of cash assets available. The survey indicated that approximately 52% of respondents indicated having a balance of over $10 million with Florida PRIME, and 28% indicated having between $1 million and $10 million with the pool. The survey revealed that 26% of respondents maintained greater than 75% of their cash surplus in Florida PRIME over the past year, which is an increase from the previous survey (19%). An additional 21% maintain between 50% and 75% in FL PRIME. On the other end of the spectrum, 23% indicated they have maintained less than 25% with Florida PRIME, which is the same as the previous survey.

The survey includes questions that relate to how and why participants utilize other competing and complementary liquidity vehicles. Of the respondents, 37 indicated that their organization has a policy that dictates a maximum allowable allocation to Florida PRIME and 27, or 73% of those with policies, are restricted to allocating 50% or less to any single governmental investment pool or money market fund. Relatedly, when asked what prevents an organization from using Florida PRIME as the primary source of cash management, 53% of the 76 respondents to this question indicated that investment policy restrictions were a reason for not using Florida PRIME as a primary source of cash management. The next greatest response was 41% of respondents indicating that diversification needs of the cash portfolio was a major or moderate reason. Inadequate participant disclosures was noted as not a reason at all by 82% of respondents. Costs, functionality/operational features and lack of additional investment product offerings were all highly selected as not reasons at all for not using Florida PRIME as a primary source of cash management (70%, 69%, and 68%, respectively). Slightly different than last year, current level of yield was listed as a moderate reason at 17% and a minor reason at 21% of respondents.

When asked about other investment vehicles used in the past 12 months for cash management, results reverted to responses seen a few years back. Respondents indicated the most commonly used vehicles aside from Florida PRIME are SEC registered money market funds at 24%. This diverged from last year’s survey when money market funds were less utilized which we attributed to the recent reforms that went into effect. Previous to the reforms, money market funds were often used. Next most common vehicles were Bank Certificates of Deposits at 23% of respondents, followed by peer funds, and specifically the Florida Education Investment Trust Fund and the Florida Local Government Investment Trust at 17% and 15%, respectively. The survey also asked respondents to rank how competing investment services have

Florida PRIME™ Best Practices Review June 2020 Aon

added value to the respondent organizations’ investment goals from the following list: yield, cost, risk, client service, available funds, and ease of use. Respondents indicated that yield was the most appealing feature, followed by risk, defined as perceived risk levels adjusted for the level of return. Client service and ease of use were ranked the lowest in terms of value add from competing investment services.

The survey questions surrounding current services related to Florida PRIME continue to receive strong feedback. Related to the Florida PRIME website, 80% of respondents indicated that they visit the site at least once a month and 96% responded that they find the website functionality as very easy to use. The survey also indicated that the clear majority of participants continue to utilize the website primarily to access account balances and statements, and approximately 72% and 43% of respondents utilize the website to make transactions and to access the Monthly Summary Reports, respectively. When asked about the usefulness of multiple communication pieces, the responses also continue to be favorable. The survey indicated that over 70% of respondents rated the following communications as very useful: monthly account statements (94%), e-mail notifications of withdrawals (87%) and changes to bank instructions (84%). Further, over 75% of respondents found the following to be at least somewhat useful: Periodic eNotices (97%), Monthly Summary Reports (95%), and Weekly Market Commentary (86%). Lastly, respondents indicated great satisfaction with the Florida PRIME representatives, with over 95% indicating the representatives were very courteous, very knowledgeable and very responsive.

Overall, the survey results continue to be positive from both operational and service-related perspectives. Responses related to the use of competing investment vehicles continue to be mixed, with indications of yield and risk being top of mind, but notably, that a large percentage of respondents’ organizations have investment policies limiting available funds to invest in a single entity and/or seek diversification from a single cash management source. Generally, the survey indicates a strong level of satisfaction with the management of the Florida PRIME portfolio. 90% of respondents indicated that they are very likely or extremely likely to recommend Florida PRIME to a colleague or other governmental investor. We continue to believe the survey is a great mechanism to obtain feedback from Florida PRIME participants, as well as to express the SBA’s awareness and receptiveness to the participant’s needs and wants.

Florida PRIME™ Best Practices Review June 2020 Aon

FL PRIME Performance Update

Beginning in the first quarter of 2020, the novel Coronavirus (COVID-19) has wreaked havoc from both a humanitarian and economic perspective. Markets experienced the swiftest equity bear market on record, U.S. investment grade spreads above U.S. treasuries reached levels not seen outside the financial crisis and unemployment numbers have reached unprecedented numbers. The vigorous policy response triggered a strong snapback in equity markets, but volatility and uncertainty remain. Given the significant level of stress on organizations throughout the world and the impact on global capital markets, we thought it was important to provide an update on how Florida PRIME has performed during this time.

The ongoing disruption from COVID-19 from both a personal and business perspective has provided unique challenges to navigating the current environment. We are happy to communicate that FL PRIME has continued to function fluidly and without disruption through this unprecedented time.

From an investment perspective, the portfolio has continued to achieve its primary goals of preserving capital and providing liquidity without interruption. As money markets faced significant liquidity issues prior to the Federal Reserve’s intervention, Federated was able to take advantage of certain conditions to earn attractive yields while maintaining the stability of the FL PRIME portfolio. During 1Q 2020, FL PRIME earned 0.41% and outperformed its benchmark. The portfolio’s gross yield declined to 1.21% at the end of the quarter as a result of the Fed’s rate cuts. Additionally, in anticipation of potentially greater liquidity needs from participants during this uncertain time, Federated has been proactive in increasing the weekly liquidity of the portfolio to ensure ample liquidity for any increased redemption demand.

From a servicing perspective, the SBA’s administration of the portfolio has functioned smoothly during this time. As many transitioned to remote workplaces and navigated outside stresses due to the pandemic, participants have not experienced disruption to transactions, reporting or client service. The program maintains normal hours of operation with no limitation on participant functionality. The SBA has pledged to support participants to the best of their ability in instances of financial stress or unforeseen circumstances. Further, the SBA team and Federated have been very active in providing portfolio and market updates to current and potential members. Federated has posted multiple updates every week (sometimes daily) on the website as well as sent directly to participants. The SBA and Federated have also hosted participant calls to provide verbal commentary and to air questions and/or concerns.

Overall, the FL PRIME program has managed this current crisis seamlessly, achieving the preservation and liquidity objectives of the portfolio, in addition to strong investment results, with the backdrop of strong customer service and uninterrupted administration of the pool. The ongoing success of the investment and operational aspects of FL PRIME speak to the strong risk management and governance structure that has been reviewed and reinforced over the years.

Florida PRIME™ Best Practices Review June 2020 Aon

Florida PRIME Business Case Review Update

As noted in our 2019 Best Practices Report, the SBA is conducting a business case review of FL PRIME according to the Florida PRIME Strategic Plan. The business case review is intended to evaluate the case for insourcing and/or outsourcing all or a portion of the pool’s administration, management and investment services.

Currently, Florida PRIME outsources the investment management to Federated Investment Counseling (“Federated”) to manage the pool’s assets in accordance with the Investment Policy Statement. Federated also conducts investment related risk management procedures and reporting to ensure compliance and the safety of pool assets.

The Florida SBA handles all other services in house for administering the FL PRIME program. These responsibilities and services are broadly defined below: • Administration: recordkeeping, trade execution, position monitoring and reporting • Client Service: call center, website/user interface, participant communication and experience • Risk Management and Compliance: policies and guidelines, monitoring, reporting, escalation procedures, participant communication, business continuity

The SBA began the Business Case Review (the Review) in the fall of 2019. The initial phase was largely an information gathering exercise. Below we highlight the most prominent topics discussed thus far:

• Insight into Outsourcing model: The SBA Review team has had multiple discussions with various parties to understand the functionality and pros and cons of a full service model. Discussions were held with potential full service model providers as well as with other local government investment pools (LGIPs) that currently use a full or partial outsourced service model. These discussions have provided insight into how the pool’s administration and services may be mapped from the current state to a potentially fully outsourced state. These conversations helped the SBA identify areas that may pose challenges in an outsourced model or areas that need additional investigation. • Peer Practices: The SBA team sought information from other comparable LGIPs to help better understand the landscape of insourcing vs. outsourcing among peer plans. The results are mixed and the greatest take-away, especially for large pools such as FL PRIME, is that the decision is mostly a unique one. There is no one-size fits all and thus the exercise that is currently underway at the SBA is the best path forward. • Risk Assessment: An internal risk assessment is underway with the objective of clearly understanding and defining the risks that the FL PRIME program presents to the SBA. The risk assessment will evaluate the functional areas noted above (administration, client service, risk

Florida PRIME™ Best Practices Review June 2020 Aon

management) on whether the risk of outsourcing is neutral, lower or higher than the current state. Consideration is also being given to whether to bundle services with the current investment manager versus using another provider for the administrative functions. This assessment will help identify the areas where outsourcing or different approaches to insourcing may help alleviate some of the risks the program poses. The criteria being applied is based on the following: o Neutral – The risk to the SBA is the current level of risk or administrative oversight. o Lower – The risk to the SBA is lower/decreased due to operational risk being shifted to the service provider assuming the same level of control and processes currently in place at the SBA and the service provider may be able to leverage operational scale and best practices. o Higher – The risk to the SBA is higher/increased due to additional monitoring required by the SBA to ensure service provider is performing adequately and controls are in place and effective or the possible lack of visibility into the processes and controls or the lack of timely flow of information to internal and external stakeholders.

Current Status The SBA Review team has garnered a great deal of information that has assisted in identifying the areas where the SBA has an advantage and where there may be room for improvement via a different approach. The exercises thus far have also highlighted some areas where outsourcing could present challenges for the SBA and require some additional investigation. Some of those areas include fund accounting, certain risk management and compliance procedures and annual reporting where the SBA has some distinctive processes in place. Given some of the challenges outsourcing certain functions could present, the SBA is also reviewing potential approaches to improve existing internal operations. One consideration to this approach is a potential increase to the FL PRIME management fee, all of which would be reinvested into enhancing the program. FL PRIME has historically offered among the lowest fees in the industry for an LGIP offering. A modest increase of even one basis point could offer the SBA a notable amount of resources to add value to participants. As noted earlier, the SBA is still in the information gathering phase and thus continues to evaluate all aspects and potential avenues for enhancements to the FL PRIME program.

The Review team is also in the process of drafting a Request for Information (RFI) to be sent out later this year. The team is working through specific questions that will help evaluate the various components of the business review. The information gathering phase is also assisting the Review team in determining if all or only a portion of the administrative and service solutions should be put out for bid, which will impact the RFI.

Florida PRIME™ Best Practices Review June 2020 Aon

Next Steps and Timeline The table below highlights the broad next steps for the Business Case Review and the tentative timeframe for when they will take place.

Next Steps Tentative Timeframe Complete RFI and Send to Candidates Summer 2020 Receive RFI Responses and Evaluate Fall 2020 Complete Internal Risk Assessment Fall 2020 Conduct Follow-ups Winter 2020-2021 Present Findings and Recommended Changes Spring 2021

The ultimate goal of the Business Case Review is to ensure that the FL PRIME program is being administered in the most efficient way possible while providing the greatest security and value to current and potential participants.

Florida PRIME™ Best Practices Review June 2020 Aon

Securities Lending Discussion Securities lending activities involve the temporary lending of securities in exchange for cash collateral that is then reinvested in a conservatively managed pool (typically in accordance with 2a-7-like guidelines). The attractiveness of the securities sought to be borrowed varies and corresponds with the amount of exchanged collateral (typically 102% - 105%). Securities lending programs are intended to provide a modest level of income at a low level of risk that can help entities offset other investment fees (investment management, custodial, etc.). Many institutional investors participate in securities lending programs, including the FRS Pension Plan. FL PRIME participated in a securities lending program that ended in 2008.

As part of the FL PRIME business case review, we also revisited the merits of a securities lending program. Overall, given the added complexity and monitoring, we do not believe the expected income would make the reinstatement of the securities lending program a worthwhile endeavor at this time.

Background In the past, FL PRIME participated in a securities lending program. The program used three lending agents and loaned Federal Agency issues and U.S. obligation securities (such as Freddie Mac, U.S. Treasuries, FHLMC, etc.). The program ended in January of 2008 and avoided the turmoil caused by the Global Financial Crisis (GFC).

Since the fallout of securities lending programs due to the GFC, the combination of self-regulation and industry regulation (Money Market Reform/2a-7 Guidelines) have come together to dramatically reduce the risk associated with the cash collateral reinvestment guidelines. Below we highlight the main risks that hurt investors in 2008 (which were centered around reinvestment of the cash collateral) and the actions that have since been taken: • Reinvestment Risk: Cash collateral pools have removed or significantly reduced investment in assets that had potential to be extended 15+ years • Liquidity: Cash collateral pool guidelines shifted to shorter maturities/weighted average life. Also, non-cash collateral is becoming more prevalent • Portfolios “broke the buck”: Overall movement to more conservative cash collateral pool guidelines to help prevent 2008 issues from happening in the future. Some have moved to a floating NAV • Imposed gates: Increased quality and shorter duration of collateral pool investments have reduced the contributing factors that caused the impairments

Today, given the significantly enhanced regulatory environment and the focus on mitigating reinvestment risks, many institutional investors run successful securities lending programs that offer a level of income that offset other investment management costs. Aon’s focus for securities lending programs are those geared towards minimizing risks and not maximizing income.

Florida PRIME™ Best Practices Review June 2020 Aon

Securities Lending Right for FL PRIME? The benefits of engaging in a securities lending program for FL PRIME would center around the potential to earn a modest level of income that could be used to offset other costs. Given the significantly increased regulatory environment and ability to minimize reinvestment risks, a securities lending program provides some merit for consideration.

That said, the general demand for the securities FL PRIME has available for lending is very low. FL PRIME’s portfolio primarily invests in very short-term and highly liquid securities, mostly comprised of asset-backed and corporate commercial paper and fixed and floating rate bank instruments. Under the existing reinvestment guidelines and current anticipated demand, BNY Mellon estimated FL PRIME could earn approximately 2 basis points on the lendable assets. After accounting for the existing revenue sharing arrangement, this equates to approximately $83,000 per year, or less than 0.1 basis points on the total portfolio. Given these expectations, we do not find the trade-off between potential income and the resources needed to manage risks and oversee a securities lending program as a worthwhile endeavor at this time. Further, depending on the nature of lending program, it is expected it would add complexities to the existing risk monitoring and reporting.

At this time, we do not find the trade-off between the expected income and required program costs and resources appealing enough to reimplement a securities lending program within FL PRIME. We do believe it is worthwhile to revisit the merits of securities lending on a periodic basis, or as market conditions change and if income potential increases.

Florida PRIME™ Best Practices Review June 2020 Aon

Investment Policy Review

As part of Aon’s Best Practices review of Florida PRIME we conduct a review of the Florida PRIME Investment Policy Statement (IPS). The objective of the IPS is to set forth the objectives, strategy, guidelines, and overall responsibilities for the oversight and prudent investment of Florida PRIME assets. The purpose of the periodic review is to ensure the document reflects the evolving investment portfolio, current legal and regulatory developments, and best practices. A well-written and unambiguous document is critical to the success of any investment program

Over the past several years there have been modest updates to the IPS that have kept it up-to-date with the current regulatory, legal, and investment environments. The SBA is prudent with staying current with overall best practices in managing the Florida PRIME assets and thus the updates to the IPS have been seamless.

Overall, Aon continues to find the IPS to be comprehensive and appropriate for the management and oversight of Florida PRIME. The topics covered continue to be relevant and critical to the success of the management of Florida PRIME assets. The investment objective of the pool and the roles and responsibilities are clearly defined. The IPS provides the necessary specifics and supplemental guidelines for a clear understanding of the investment strategy, making direct and clear reference to the appropriate GASB guidelines for appropriate fiduciaries to follow and understand. We believe the IPS thoroughly defines the risks that are associated with investing in Florida PRIME and find the detailed control procedures provide the comfort of prudent safe-keeping and oversight of assets.

While it is not expected that the IPS will change frequently, it is a living, breathing document that should be reviewed periodically to ensure it remains appropriate and relevant. Overall, we continue to believe the Florida PRIME IPS is robust and in line with the goals and objectives of the investment pool and continue to find the Policy to be an effective guiding document for the management of Florida PRIME.

Florida PRIME™ Best Practices Review June 2020 2020 Florida PRIME Participant Satisfaction Survey

Q1 What is your role in managing your Florida PRIME account(s)?

Answered: 88 Skipped: 0

Investment Decision-Maker

Account Operations

Back Up Account...

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

ANSWER CHOICES RESPONSES

Investment Decision-Maker 40.91% 36

Account Operations 44.32% 39

Back Up Account Operations 7.95% 7

TOTAL 88

# OTHER (PLEASE SPECIFY) DATE 1 Bookkeeper 5/29/2020 11:41 AM

2 Account Holder 4/27/2020 7:39 AM

3 I record the monthly interest payment deposited into the City's LGSF Trust Fund account. 4/22/2020 11:53 AM

4 Treasurer 4/22/2020 11:17 AM

5 I print the online SBA statements and use the official statements received through the mail for 4/6/2020 3:53 PM the District's monthly bank reconciliations.

6 Accounting, Financial Reporting, Compliance. 4/6/2020 3:48 PM

1 / 49 2020 Florida PRIME Participant Satisfaction Survey

Q2 How would you classify your governmental organization?

Answered: 88 Skipped: 0

College or University

Constitutional Officer

County

Municipality

School Board

Special District

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

ANSWER CHOICES RESPONSES

College or University 7.95% 7

Constitutional Officer 4.55% 4

County 19.32% 17

Municipality 26.14% 23

School Board 21.59% 19

Special District 18.18% 16

TOTAL 88

# OTHER (PLEASE SPECIFY) DATE 1 Government 5/29/2020 11:25 AM

2 Municipal utility 5/11/2020 12:06 PM

3 Clerk of Court & Comptroller for County 4/6/2020 3:48 PM

2 / 49 2020 Florida PRIME Participant Satisfaction Survey

Q3 Please indicate the size of your organization.

Answered: 88 Skipped: 0

Greater than 25,000...

Between 1,000 and 25,000...

Between 100 and 1,000...

Less than 100 employees.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

ANSWER CHOICES RESPONSES

Greater than 25,000 employees. 1.14% 1

Between 1,000 and 25,000 employees. 32.95% 29

Between 100 and 1,000 employees. 31.82% 28

Less than 100 employees. 32.95% 29

TOTAL 88

# OTHER (PLEASE SPECIFY) DATE 1 We have no employees 5/11/2020 10:32 AM

2 1,000 to 2,000 depending on when school is in session. 4/23/2020 10:27 AM

3 Total of five employees. 4/23/2020 7:39 AM

3 / 49 2020 Florida PRIME Participant Satisfaction Survey

Q4 What is your approximate account balance in Florida PRIME? If you maintain more than one account, please include the aggregate dollar value across all of your pool accounts.

Answered: 88 Skipped: 0

Less than $1,000.

Between $1,000 and $10,000.

Between $10,000 and...

Between $100,000 and...

Between $1,000,000 a...

Between $10,000,000 ...

Greater than $100,000,000.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

ANSWER CHOICES RESPONSES

Less than $1,000. 0.00% 0

Between $1,000 and $10,000. 0.00% 0

Between $10,000 and $100,000. 9.09% 8

Between $100,000 and $1,000,000. 10.23% 9

Between $1,000,000 and $10,000,000. 28.41% 25

Between $10,000,000 and $100,000,000. 32.95% 29

Greater than $100,000,000. 19.32% 17

TOTAL 88

# OTHER (PLEASE SPECIFY) DATE There are no responses.

4 / 49 2020 Florida PRIME Participant Satisfaction Survey

Q5 Florida PRIME participants are allowed to maintain numerous accounts. How many accounts does your organization currently maintain within Florida PRIME?

Answered: 87 Skipped: 1

1 Account.

2 Accounts.

3 Accounts.

Between 3 and 5 Accounts.

Between 5 and 10 Accounts.

More than 10 Accounts.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

ANSWER CHOICES RESPONSES

1 Account. 55.17% 48

2 Accounts. 13.79% 12

3 Accounts. 8.05% 7

Between 3 and 5 Accounts. 10.34% 9

Between 5 and 10 Accounts. 9.20% 8

More than 10 Accounts. 3.45% 3

TOTAL 87

# OTHER (PLEASE SPECIFY) DATE 1 In addition, our Trustee BNY Mellon maintains accounts for our COPs issues. 5/28/2020 9:11 AM

5 / 49 2020 Florida PRIME Participant Satisfaction Survey

Q6 What is the level of your total cash assets available for short-term investment?

Answered: 87 Skipped: 1

Less than $1,000.

Between $1,000 and $10,000.

Between $10,000 and...

Between $100,000 and...

Between $1 million and ...

Between $10 million and...

Greater than $100 million.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

ANSWER CHOICES RESPONSES

Less than $1,000. 0.00% 0

Between $1,000 and $10,000. 3.45% 3

Between $10,000 and $100,000. 6.90% 6

Between $100,000 and $1,000,000. 19.54% 17

Between $1 million and $10 million. 20.69% 18

Between $10 million and $100 million. 33.33% 29

Greater than $100 million. 13.79% 12

TOTAL 87

# OTHER (PLEASE SPECIFY) DATE 1 I am working from home and do not have access to our investment policy. 4/22/2020 11:53 AM

2 not sure 4/6/2020 3:53 PM

6 / 49 2020 Florida PRIME Participant Satisfaction Survey

Q7 How likely would you be to recommend Florida PRIME to a colleague or other governmental investor?

Answered: 79 Skipped: 9

S

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Not at all likely to recommend. Not very likely to recommend. Neutral recommendation. Very likely to recommend. Extremely likely to recommend.

NOT AT ALL NOT VERY NEUTRAL VERY LIKELY EXTREMELY TOTAL WEIGHTED LIKELY TO LIKELY TO RECOMMENDATION. TO LIKELY TO AVERAGE RECOMMEND. RECOMMEND. RECOMMEND. RECOMMEND. S 0.00% 1.27% 8.86% 24.05% 65.82% 0 1 7 19 52 79 4.54

7 / 49 2020 Florida PRIME Participant Satisfaction Survey

Q8 How often does your organization initiate financial transactions in your Florida PRIME account(s)?

Answered: 88 Skipped: 0

Daily

Weekly

Monthly

Quarterly

Other

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

ANSWER CHOICES RESPONSES

Daily 10.23% 9

Weekly 19.32% 17

Monthly 26.14% 23

Quarterly 15.91% 14

Other 28.41% 25

TOTAL 88

8 / 49 2020 Florida PRIME Participant Satisfaction Survey

# COMMENTS DATE 1 At this time we are not initiating financial transactions. 5/29/2020 12:05 PM

2 As needed, usually quarterly or less. 5/29/2020 11:41 AM

3 ALMOST DAILY ACCORDING TO OUR FUNDING NEEDS 5/29/2020 11:19 AM

4 Transactions based upon the financial position each week. 5/28/2020 12:30 PM

5 Invest and hold account for us until needed. 5/28/2020 9:03 AM

6 1-2 times a year. 5/28/2020 9:00 AM

7 Depends. Sometimes 2-3 X per week. Sometimes more. Sometimes less. 5/27/2020 9:28 PM

8 As needed 5/12/2020 10:04 AM

9 As needed 5/11/2020 12:40 PM

10 Two or three tranactions per month, excluding transferring the monthly interest. 5/11/2020 12:06 PM

11 rarely 5/11/2020 10:56 AM

12 Varies, but typically is several times per year 5/11/2020 10:32 AM

13 The City rarely transacts in Florida PRIME. 4/27/2020 7:39 AM

14 Yearly or semi-yearly. 4/23/2020 2:25 PM

15 When needed, not often. 4/23/2020 7:39 AM

16 Only as needed 4/22/2020 4:00 PM

17 Not often. 4/22/2020 3:45 PM

18 1 to 2 transactions per month 4/22/2020 1:35 PM

19 We have not initiated a transaction since 2015. 4/22/2020 11:53 AM

20 almost daily 4/6/2020 3:53 PM

21 Transactions are initiated as frequently as needed. 4/6/2020 3:48 PM

22 It varies 4/6/2020 3:43 PM

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Q9 How often do you utilize the Florida PRIME Website?

Answered: 88 Skipped: 0

Daily

Weekly

Monthly

Quarterly

Other

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

ANSWER CHOICES RESPONSES

Daily 17.05% 15

Weekly 22.73% 20

Monthly 39.77% 35

Quarterly 7.95% 7

Other 11.36% 10

TOTAL 88

# COMMENTS DATE 1 Quarterly 5/29/2020 11:41 AM

2 To get statements 5/28/2020 9:03 AM

3 Depends. Sometimes 2-3 X per week. Sometimes more. Sometimes less. 5/27/2020 9:28 PM

4 As needed 5/12/2020 10:04 AM

5 As needed, but a few times per year 5/11/2020 10:32 AM

6 Only when information needed 4/22/2020 4:00 PM

7 I have not utilized the website 4/22/2020 11:53 AM

8 I like calling. Your people are so helpful and I like that personal connection! 4/10/2020 12:11 PM

9 Do not access 4/6/2020 6:31 PM

10 As needed for transactions. 4/6/2020 3:48 PM

10 / 49 2020 Florida PRIME Participant Satisfaction Survey

Q10 Please mark all items that you routinely access on the Florida PRIME website:

Answered: 88 Skipped: 0

Account Balances/Sta...

Transactions

Monthly Summary Repo...

Market Commentary

Performance Benchmarking

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

ANSWER CHOICES RESPONSES

Account Balances/Statements 90.91% 80

Transactions 71.59% 63

Monthly Summary Report (MSR) 43.18% 38

Market Commentary 13.64% 12

Performance Benchmarking 17.05% 15

Total Respondents: 88

# OTHER (PLEASE SPECIFY) DATE 1 Daily NAV and total balance for Florida Prime 5/11/2020 12:06 PM

2 receive monthly statement through mail 5/11/2020 10:56 AM

3 Interest rates are monitored. 4/23/2020 10:27 AM

4 None of the above 4/22/2020 11:53 AM

5 na 4/10/2020 12:11 PM

6 Do not access 4/6/2020 6:31 PM

7 also access Financial Information - cash flows on a monthly basis 4/6/2020 3:53 PM

11 / 49 2020 Florida PRIME Participant Satisfaction Survey

Q11 When using the Florida PRIME website, would you describe the functionality as:

Answered: 85 Skipped: 3

Very easy to use

Not very easy to use

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

ANSWER CHOICES RESPONSES

Very easy to use 96.47% 82

Not very easy to use 1.18% 1

TOTAL 85

# COMMENTS DATE 1 don't really use website 5/11/2020 10:56 AM

2 na 4/10/2020 12:11 PM

12 / 49 2020 Florida PRIME Participant Satisfaction Survey

Q12 What other items, topics or changes would improve the usefulness of the Florida PRIME website?

Answered: 27 Skipped: 61

# RESPONSES DATE 1 List of assets held by percent on main page 5/30/2020 9:55 AM

2 NA 5/29/2020 8:02 PM

3 Its easy to navigate and we appreciate that feature 5/29/2020 1:59 PM

4 No Comment 5/29/2020 12:05 PM

5 Being able to initiate an ACH debiting our bank account and depositing funds into our Florida 5/28/2020 5:58 PM Prime Account instead of having to fund via wire transfer only.

6 Current position is adequate 5/28/2020 12:30 PM

7 n/a 5/28/2020 11:00 AM

8 Prefer to receive an email notification for deposits. 5/28/2020 9:26 AM

9 None 5/28/2020 9:05 AM

10 I'd like to see transaction history. 5/27/2020 9:28 PM

11 N/A Presently satisfied with Florida Prime website 5/12/2020 10:49 AM

12 Nothing, very easy to maneuver 5/11/2020 1:19 PM

13 I might be good to increase the security by adding dual factor authentication. 5/11/2020 12:06 PM

14 Investments alternatives 5/11/2020 10:42 AM

15 none at this time 5/11/2020 10:41 AM

16 The website is very user friendly as is; therefore, no other comments. 4/27/2020 7:39 AM

17 N/A 4/23/2020 2:25 PM

18 none 4/23/2020 10:27 AM

19 None 4/23/2020 8:43 AM

20 All good. 4/23/2020 7:39 AM

21 N/A We are very satisfied with Florida Prime 4/22/2020 1:35 PM

22 none 4/22/2020 11:05 AM

23 na 4/10/2020 12:11 PM

24 Can you automatically email monthly statements? 4/6/2020 4:15 PM

25 N/A 4/6/2020 3:53 PM

26 I wish the accounts would have the names associated to account numbers. 4/6/2020 3:45 PM

27 I am extremely happy with the service. I would like to receive a one page summary market 4/6/2020 3:43 PM report

13 / 49 2020 Florida PRIME Participant Satisfaction Survey

Q13 How often do you call or email your SBA Florida PRIME service representative?

Answered: 88 Skipped: 0

Daily

Weekly

Monthly

Quarterly

Other

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

ANSWER CHOICES RESPONSES

Daily 0.00% 0

Weekly 0.00% 0

Monthly 6.82% 6

Quarterly 11.36% 10

Other 77.27% 68

TOTAL 88

14 / 49 2020 Florida PRIME Participant Satisfaction Survey

# COMMENTS DATE 1 once or twice a year 5/29/2020 3:57 PM

2 As needed 5/29/2020 2:27 PM

3 Only when necessary to resolve issues. Probably 2-3 x / yr 5/29/2020 12:25 PM

4 Haven't needed to. 5/29/2020 12:05 PM

5 Seldom 5/29/2020 11:41 AM

6 ONLY WHEN NEEDED REGARDING A CHANGE IN THE DEPOSIT/WITHDRAWAL AMOUNT 5/29/2020 11:19 AM

7 Based upon financial need 5/28/2020 12:30 PM

8 I've never had to contact them. 5/28/2020 9:05 AM

9 Never 5/28/2020 9:03 AM

10 Not often 5/28/2020 9:00 AM

11 1-2 times per year. 5/28/2020 9:00 AM

12 When needed; maybe 2-3 X per month 5/27/2020 9:28 PM

13 As needed 5/12/2020 11:20 AM

14 As needed 5/12/2020 10:04 AM

15 Only if I have problems 5/12/2020 9:51 AM

16 Maybe once a year 5/11/2020 1:19 PM

17 As needed 5/11/2020 12:40 PM

18 As needed. Maybe once or twice per year. 5/11/2020 12:06 PM

19 not often 5/11/2020 11:46 AM

20 never 5/11/2020 10:56 AM

21 a couple times a year if I have questions 5/11/2020 10:39 AM

22 Varies, but several times per year 5/11/2020 10:32 AM

23 As needed. 5/11/2020 10:26 AM

24 Annually 4/29/2020 11:40 AM

25 infrequent, as needed. 4/27/2020 7:39 AM

26 Semi-yearly 4/23/2020 2:25 PM

27 As needed and they are very pleasant; helpful and quick to respond. 4/23/2020 10:27 AM

28 As needed 4/23/2020 9:51 AM

29 I do not think I have ever called for assistance. 4/23/2020 8:43 AM

30 When needed. 4/23/2020 7:39 AM

31 Do not call 4/22/2020 4:00 PM

32 Annually 4/22/2020 3:45 PM

33 Rarely 4/22/2020 2:02 PM

34 When needed 4/22/2020 12:16 PM

35 Not applicable 4/22/2020 11:53 AM

36 as needed 4/22/2020 11:20 AM

37 When needed 4/22/2020 11:17 AM

15 / 49 2020 Florida PRIME Participant Satisfaction Survey

38 once or twice a year 4/22/2020 11:06 AM

39 Have not had to call at all 4/22/2020 11:05 AM

40 As needed 4/16/2020 8:45 AM

41 You staff is the greatest! and always available! 4/10/2020 12:11 PM

42 once or twice a year 4/7/2020 7:31 AM

43 Do not contact 4/6/2020 6:31 PM

44 only as needed 4/6/2020 3:53 PM

45 As needed. It has been rarely. 4/6/2020 3:48 PM

46 I work with Donna Owens for years. She is very professional and prompt with any questions 4/6/2020 3:45 PM and requests.

47 Not often 4/6/2020 3:43 PM

48 As needed, a few times a year. 4/6/2020 3:24 PM

16 / 49 2020 Florida PRIME Participant Satisfaction Survey

Q14 Please rate your SBA Florida PRIME representative in each of the following areas.

Answered: 78 Skipped: 10

Courteous

Knowledgeable

Responsive

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Very Somewhat Not very Not at all

VERY SOMEWHAT NOT VERY NOT AT ALL TOTAL Courteous 98.70% 1.30% 0.00% 0.00% 76 1 0 0 77

Knowledgeable 98.68% 1.32% 0.00% 0.00% 75 1 0 0 76

Responsive 98.72% 1.28% 0.00% 0.00% 77 1 0 0 78

17 / 49 2020 Florida PRIME Participant Satisfaction Survey

# COMMENTS DATE 1 Can not answer item 14 due to not having any contact with the SBA Florida PRIME 5/29/2020 12:05 PM representative.

2 Donna is excellent, always so friendly and helpful 5/29/2020 11:19 AM

3 Haven't had to use them. 5/28/2020 9:05 AM

4 Donna Owens is awesome! I could not ask for a better rep. 5/27/2020 9:28 PM

5 Always very helpful, a wonderful group of ladies. 5/12/2020 9:51 AM

6 We have always had our questions answered in a timely fashion. 5/11/2020 1:19 PM

7 not apllicable 5/11/2020 10:56 AM

8 Donna Owens is supremely knowledgeable, always courteous, and highly efficient 5/11/2020 10:32 AM

9 When I do call, I work with Donna. She is always so helpful and very professional. 4/23/2020 7:39 AM

10 Donna Owens is an excellent representative for the SBA 4/22/2020 1:35 PM

11 Donna Owens is amazing! She is so friendly, helpful, and extremely courteous. She is a 4/22/2020 12:00 PM fantastic representation for Florida Prime!

12 She was very helpful when setting up our accounts and initiating our first transaction. 4/22/2020 11:20 AM

13 not applicable 4/22/2020 11:05 AM

14 the BEST! 4/10/2020 12:11 PM

15 Always professional 4/6/2020 4:15 PM

16 I am very happy with the service. I normally do not complete surveys, but I felt you deserved. 4/6/2020 3:43 PM

18 / 49 2020 Florida PRIME Participant Satisfaction Survey

Q15 How would you characterize your monthly Florida PRIME account statement?

Answered: 88 Skipped: 0

Comprehensive

Adequate

Deficient

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

ANSWER CHOICES RESPONSES

Comprehensive 51.14% 45

Adequate 47.73% 42

Deficient 1.14% 1

TOTAL 88

# COMMENTS DATE 1 Please dont change our statement 5/28/2020 9:05 AM

2 I would like to see more detailed information on the statements in regard to transfers. For 5/27/2020 9:28 PM example, "ACH Transfer to XYZ Bank", or "Internal Transfer from Acct#A to Acct#B".

19 / 49 2020 Florida PRIME Participant Satisfaction Survey

Q16 How useful do you find the following types of participant communications?

Answered: 88 Skipped: 0

Periodic eNotices

Monthly Summary Repo...

Monthly Account...

Weekly Market Commentary

Email

20 / 49 2020 Florida PRIME Participant Satisfaction Survey

Notification...

Changes to Bank...

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Very useful Somewhat useful Not very useful Not at all useful

VERY SOMEWHAT NOT VERY NOT AT ALL TOTAL USEFUL USEFUL USEFUL USEFUL Periodic eNotices 52.33% 44.19% 1.16% 2.33% 45 38 1 2 86

Monthly Summary Report 65.48% 29.76% 1.19% 3.57% (MSR) 55 25 1 3 84

Monthly Account Statement 94.32% 5.68% 0.00% 0.00% 83 5 0 0 88

Weekly Market Commentary 35.44% 50.63% 8.86% 5.06% 28 40 7 4 79

Email Notification of 87.36% 12.64% 0.00% 0.00% Withdrawals 76 11 0 0 87

Changes to Bank Instructions 84.34% 12.05% 3.61% 0.00% 70 10 3 0 83

# COMMENTS DATE 1 Haven't had any changes to Bank. 5/29/2020 12:05 PM

2 Not sure what the MSR and Weekly Market Commentary is. 5/27/2020 9:28 PM

21 / 49 2020 Florida PRIME Participant Satisfaction Survey

Q17 Please check the box which best describes your organization’s use of Florida PRIME.

Answered: 86 Skipped: 2

We have maintained...

We have maintained...

We have maintained...

We have maintained l...

We are not currently...

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

ANSWER CHOICES RESPONSES

We have maintained greater than 75% of our surplus funds in Florida PRIME during the last year. 25.58% 22

We have maintained between 50% and 75% of our surplus funds in Florida PRIME during the last year. 20.93% 18

We have maintained between 25% and 50% of our surplus funds in Florida PRIME during the last year. 29.07% 25

We have maintained less than 25% of our surplus funds in Florida PRIME during the last year. 23.26% 20

We are not currently invested in Florida PRIME. 0.00% 0

TOTAL 86

# COMMENTS DATE 1 unknown to me 4/23/2020 10:27 AM

22 / 49 2020 Florida PRIME Participant Satisfaction Survey

Q18 Please select any other investment vehicles your organization used over the past 12 months (check any that apply)

Answered: 66 Skipped: 22

Special Purpose...

Florida Municipal...

Florida Education...

Florida Local Government...

Florida Local Government...

Florida Surplus Asse...

Certificate of Deposit Acco...

Certificate of Deposit offe...

An SEC-register...

An SEC-register...

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

23 / 49 2020 Florida PRIME Participant Satisfaction Survey

ANSWER CHOICES RESPONSES

Special Purpose Investment Accounts ("SPIA") offered by the State of Florida, Division of Treasury. 10.61% 7

Florida Municipal Investment Trust ("FMiVT - 0-2 Year High Quality Bond Fund") offered by the Florida League of Cities. 4.55% 3

Florida Education Investment Trust Fund ("FEITF") offered by the Florida School Boards Association and the Florida 16.67% 11 Association of District Superintendents.

Florida Local Government Investment Trust ("Day to Day Fund") offered the Florida Assocation of Court Clerks & 15.15% 10 Comptrollers (FACC).

Florida Local Government Investment Trust ("Investment Trust") offered the Florida Assocation of Court Clerks & 10.61% 7 Comptrollers (FACC).

Florida Surplus Asset Fund Trust ("FLSAFE") offered by Florida Management and Administrative Services. 6.06% 4

Certificate of Deposit Account Registry Service ("CDARS") offered by Promontory Interfinancial Network. 1.52% 1

Certificate of Deposit offered by a Bank (any term or maturity) 22.73% 15

An SEC-registered money market fund offered by Federated Investors. 4.55% 3

An SEC-registered money market fund offered by any other financial services provider. 24.24% 16 Total Respondents: 66

24 / 49 2020 Florida PRIME Participant Satisfaction Survey

# OTHER (PLEASE SPECIFY) DATE 1 PRIME only 5/29/2020 12:25 PM

2 FLCLASS, FLPALM 5/28/2020 5:58 PM

3 FLFIT, FLCLASS 5/28/2020 9:26 AM

4 Fl Palm, QPDs, FDIC insured accounts 5/28/2020 9:11 AM

5 None 5/28/2020 9:05 AM

6 FLCLASS 5/28/2020 9:03 AM

7 Money Market for our PTA Account. 5/12/2020 10:49 AM

8 We also invest in FLCLASS 5/11/2020 1:19 PM

9 Florida FIT 5/11/2020 10:41 AM

10 none of the above 5/11/2020 10:41 AM

11 None 5/11/2020 10:32 AM

12 unknown 4/23/2020 10:27 AM

13 None 4/23/2020 7:39 AM

14 None 4/22/2020 4:00 PM

15 FL-FIT & FL CLASS 4/22/2020 1:37 PM

16 Money Market for one of our bank account balances 4/22/2020 1:35 PM

17 FLCLASS, FLFIT 4/22/2020 12:00 PM

18 QPD Money Market 4/22/2020 11:08 AM

19 FIT - Florida Fixed Income Trust 4/22/2020 11:06 AM

20 FLCLASS, FLFIT, NOW accounts, Treasury and Agency notes 4/16/2020 8:45 AM

21 Florida Palm 4/8/2020 9:52 AM

22 None 4/6/2020 6:31 PM

23 Public Trust Advisors 4/6/2020 3:53 PM

24 The money market funds are held through the custodian for securities (for temporary holdings 4/6/2020 3:48 PM of cash, such as between trades).

25 Florida Fit & Florida Class 4/6/2020 3:43 PM

25 / 49 2020 Florida PRIME Participant Satisfaction Survey

Q19 How have competing investment services added value to your organization's investment goals? (rank each feature from 1 to 6, with 1 being the most appealing characteristic)

Answered: 71 Skipped: 17

Yield (level of interest...

Cost (value delivered fo...

Risk (perceived r...

Client Service (level of...

Available Funds (other...

Ease of use (participant...

012345678910

1 2 3 4 5 6 TOTAL SCORE Yield (level of interest income, return 50.00% 12.07% 15.52% 6.90% 3.45% 12.07% potential)? 29 7 9 4 2 7 58 4.62

Cost (value delivered for given service)? 0.00% 26.32% 26.32% 22.81% 17.54% 7.02% 0 15 15 13 10 4 57 3.47

Risk (perceived risk levels adjusted for level of 29.51% 26.23% 24.59% 9.84% 3.28% 6.56% return)? 18 16 15 6 2 4 61 4.49

Client Service (level of services provided, 3.28% 8.20% 13.11% 22.95% 37.70% 14.75% unique services)? 2 5 8 14 23 9 61 2.72

Available Funds (other complementary 11.86% 25.42% 15.25% 13.56% 10.17% 23.73% investment vehicles to choose from)? 7 15 9 8 6 14 59 3.44

Ease of use (participant interface, 14.71% 4.41% 10.29% 16.18% 23.53% 30.88% convenience, system functionality)? 10 3 7 11 16 21 68 2.78

26 / 49 2020 Florida PRIME Participant Satisfaction Survey

Q20 When working with your investable funds, what prevents you from using Florida PRIME as a primary source of cash management services?

Answered: 77 Skipped: 11

Investment policy...

Current level of yield is...

Costs (expenses) a...

Participant disclosures ...

Concerns about

27 / 49 2020 Florida PRIME Participant Satisfaction Survey risks embodi...

Functionality and operatio...

Diversification needs of cas...

Lack of additional...

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Major Reason Moderate Reason Minor Reason Not a Reason At All

28 / 49 2020 Florida PRIME Participant Satisfaction Survey

MAJOR MODERATE MINOR NOT A TOTAL WEIGHTED REASON REASON REASON REASON AT AVERAGE ALL Investment policy restricts (caps) 27.63% 11.84% 13.16% 47.37% allocation to Florida PRIME? 21 9 10 36 76 2.80

Current level of yield is unattractive? 6.67% 17.33% 21.33% 54.67% 5 13 16 41 75 3.24

Costs (expenses) are too high? 0.00% 6.85% 23.29% 69.86% 0 5 17 51 73 3.63

Participant disclosures are not adequate? 1.35% 2.70% 13.51% 82.43% 1 2 10 61 74 3.77

Concerns about risks embodied by 5.41% 12.16% 35.14% 47.30% portfolio holdings? 4 9 26 35 74 3.24

Functionality and operational features? 4.05% 6.76% 20.27% 68.92% 3 5 15 51 74 3.54

Diversification needs of cash portfolio? 22.97% 17.57% 27.03% 32.43% 17 13 20 24 74 2.69

Lack of additional investment products 5.41% 10.81% 16.22% 67.57% offered by SBA? 4 8 12 50 74 3.46

# OTHER (PLEASE SPECIFY) DATE 1 Florida PRIME is currently our primary source of cash management services. 4/23/2020 2:25 PM

2 unknown 4/23/2020 10:27 AM

3 We were members in 2008 - 2009. 4/23/2020 9:51 AM

4 This is our primary 4/7/2020 7:31 AM

5 Decisions made at a higher level 4/6/2020 4:15 PM

29 / 49 2020 Florida PRIME Participant Satisfaction Survey

Q21 Many organizations maintain investment policies governing the asset allocation of their cash management programs. If your organization has a relevant investment policy covering your cash management program, please select the maximum amount your organization can allocate to Florida PRIME to comply with your investment policies?

Answered: 82 Skipped: 6

Less than 10% allocation t...

Between 10% and 25%...

Between 25% and 50%...

Between 50% and 75%...

Greater than 75% to any...

No current percentage...

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

ANSWER CHOICES RESPONSES

Less than 10% allocation to any single governmental investment pool (or money market fund). 0.00% 0

Between 10% and 25% allocation to any single governmental investment pool (or money market fund). 10.98% 9

Between 25% and 50% allocation to any single governmental investment pool (or money market fund). 21.95% 18

Between 50% and 75% allocation to any single governmental investment pool (or money market fund). 4.88% 4

Greater than 75% to any single governmental investment pool (or money market fund). 2.44% 2

No current percentage restriction. 54.88% 45

TOTAL 82

30 / 49 2020 Florida PRIME Participant Satisfaction Survey

# OTHER (PLEASE SPECIFY) DATE 1 Guidelines are 50% for LGIP 5/28/2020 9:26 AM

2 No more than 80% 4/27/2020 7:39 AM

3 not my area 4/23/2020 10:27 AM

4 100% to FL Prime; 20% Florida Local Government Investment Trust Products; 50% SEC 4/22/2020 11:08 AM Registered money market fund

5 we don't have hard code maximums in our policy by more flexible target amounts 4/16/2020 8:45 AM

6 75% specifically to the Florida Prime Fund 4/13/2020 8:42 AM

31 / 49 2020 Florida PRIME Participant Satisfaction Survey

Q22 Please offer any additional suggestions to improve Florida PRIME's value to your organization.

Answered: 14 Skipped: 74

# RESPONSES DATE 1 No Comment 5/29/2020 12:05 PM

2 n/a 5/28/2020 11:00 AM

3 None at the moment. 5/28/2020 9:05 AM

4 Higher return. Later cut-off for ACHs and Wire Transfers. 5/27/2020 9:28 PM

5 Please offer a list of entities that invest in Florida Prime. 5/11/2020 12:06 PM

6 none at this time 5/11/2020 10:41 AM

7 None. The service is greatly appreciated. 5/11/2020 10:32 AM

8 No other comments 4/27/2020 7:39 AM

9 N/A 4/23/2020 2:25 PM

10 N/A We are very satisfied with Florida Prime 4/22/2020 1:35 PM

11 none 4/22/2020 11:05 AM

12 N/A 4/6/2020 3:53 PM

13 Keep interest income high. 4/6/2020 3:45 PM

14 I receive a market report from a similar entity as Fl Prime. It truly adds value to our 4/6/2020 3:43 PM organization. It comes directly to my email, and I appreciate a point of view from experts and analysts.

32 / 49 2020 Florida PRIME Participant Satisfaction Survey

Q23 May we contact you if we have additional questions? If so, please fill out the following information:

Answered: 41 Skipped: 47

ANSWER CHOICES RESPONSES

Name: 97.56% 40

Company: 95.12% 39

Address: 97.56% 40

Address 2: 12.20% 5

City/Town: 95.12% 39

State: 97.56% 40

Zip Code: 100.00% 41

Country: 0.00% 0

Email Address: 100.00% 41

Phone Number: 95.12% 39

33 / 49 2020 Update

1 Relationship Overview

Florida PRIME Assets: $16.0 billion (as of 3/31/20)

743 Participants

1,382 Accounts

Investment Manager Paige Wilhelm Senior Vice President Senior Portfolio Manager Federated Investment Counseling

• Weekly Market Commentary • Monthly Newsletter • Quarterly Review • Marketing Support

2

IAC Meeting Rates

3.00% Participant Yield Max of Fed Funds Range

2.50%

2.00%

1.50%

1.00%

0.50%

0.00%

3

IAC Meeting Growing the Brand

Throughout the past year, ads for Florida PRIME were featured in the FACC directory, FCCMA directory and the FASBO publication:

4

IAC Meeting Participant Engagement

Two conference calls were held for participants in 2020. Portfolio manager Paige Wilhelm spoke on the Pool’s investments as well as other money market impacts from recent Fed interest rate changes and Covid-19 market disruption.

Call Details:

Tuesday, March 17 3:00 p.m. ET Result: 100+ Participants Listen in

Tuesday, April 28 3:00 p.m. ET Result: 75+ Participants Listen in

5

IAC Meeting 2020 Conference Plan

Date Event Location

February 5, 2020 February 7, 2020 Winter COBA Conference

May 27, 2020 May 30, 2020 FCCMA 2020 Annual Conference – Cancelled

May 30, 2020 June 3, 2020 2020 Annual FGFOA Conference - Cancelled

June 15, 2020 June 19, 2020 FASD 2020 Annual Conference - Cancelled

June 9, 2020 June 12, 2020 2020 FSFOA Summer Conference - Cancelled

June 9, 2020 June 12, 2020 2020 FAC Annual Conference – Cancelled

June 23, 2020 June 25, 2020 2020 FL Court Clerks & Comptroller (FCCC) Summer Conference - Cancelled

August 13, 2020 August 15, 2020 2020 FL League of Cities Annual Conference

We will continue to seek opportunities to support local organizations throughout the year as events are rescheduled or cancelled. Opportunities may include providing educational materials and commentary for publications or digital initiatives.

6

IAC Meeting Florida PRIME Portfolio Review

7

IAC Meeting Year in Review March 31, 2020

The broad liquidity sector garnered substantial inflows in 2019, despite falling rates, as The year ended with the U.S. economy seeming to retreat from previous indications it political and economic uncertainties enhanced its traditional attractiveness as an asset might slip into recession in 2020. Key data included the continued strength of the labor class. The year opened with a government shutdown, drawn-out U.S.-Chinese trade market and robust consumer confidence. Fed officials signaled strongly that, absent a negotiations and a shift in Federal Reserve policy. After raising rates in December of material change in the outlook for the economy, they were unlikely to alter the target 2018, Fed authorities did an about-face, essentially taking a 2019 rate hike off the table in range in 2020. That change did come to pass as the coronavirus outbreak dominated the their March meeting projections. markets.

Investor concern that the U.S. economy was downshifting increased in spring as trade As it became clear In early March 2020 that the Covid-19 epidemic would damage the talks between the U.S. and China broke down and the U.S. Treasury and London global economy as it tragically spread, policymakers lowered the Fed funds target range interbank offered rate (LIBOR) yield curves inverted. Historically, inverted curves have by 50 basis points to 1-1.25% and increased the amount of overnight and term lending. tended to signal a coming recession, and that appeared to be the case as household But in the middle of the month, the Fed went into overdrive, slashing rates to a range of 0- spending moderated, manufacturing activity decelerated, business investment softened 0.25%. The unprecedented flight-to-safety into Treasuries and the increase in Fed and inflation remained stubbornly low. However, it was not to be the case this time, in part purchases exacerbated the supply-demand imbalance and caused yields to plummet, because of aggressive Fed action. After steadily raising it for several years, in July the pushing those of the shortest bills below zero at times. The prime money market sector Fed reduced its Federal funds rate for the first time since the financial crisis in an attempt faced security pricing hampered by wide spreads. to normalize policy and spur inflation. Policymakers lowered the target range twice more in the reporting period, ending it at 1.5-1.75%. In response, the yield curve began to To counter these dislocations and ensure ample liquidity, the Fed created, or committed flatten and eventually steepen. to creating, several programs: the Money Market Mutual Fund Liquidity Facility (MMLF), Commercial Paper Funding Facility (CPFF) and Primary Dealer Credit Facility (PDCF). September saw a rare case of volatility in the overnight repo market. It resulted from a These and the anticipation of the federal government’s increased issuance of Treasury confluence of technical factors—including corporate quarterly tax payments and a large bills to fund its $2 Trillion fiscal stimulus package, helped secondary market yields return settlement of net new Treasury supply—not a credit event. The Fed intervened and the to positive territory and spreads on commercial paper and similar instruments to narrow. volatility subsided. With the help of the Fed, money markets met the challenge of the tremendous volatility with a constant provision of liquidity. The U.S. and China reached a truce in their trade war late in the year. This lifted worries the conflict would continue to be a drag on the two economies. In Europe, the drawn-out affair of the negotiations for the U.K. to leave the EU finally received the necessary political will, as the pro-Brexit party won a decisive victory in a snap election.

8

IAC Meeting Liquidity Market Commentary June 1, 2020

Investors have been given plenty of alphabet soup since the onset of the Committee revealed this was the Fed’s consensus. If anything, the Fed seems to coronavirus. Among the first servings were special purpose vehicles such as the be quietly formulating a withdrawal strategy. Policymakers have reduced daily Money Market Mutual Fund Liquidity Facility (MMLF), Commercial Paper Funding and weekly purchases of Treasuries. And, they know that some of the new Facility (CPFF) and Primary Dealer Credit Facility (PDCF). Then came Congress’ facilities, especially the CPFF, are not getting much usage, as bid/ask spreads CARES Act and a slew of others. have normalized.

More recently, new letters have turned up to forecast the shape of the GDP curve The Fed has been anything but quiet in its pushback on negative rates. In May, as the U.S. economy recovers from recession. They range from an optimistic policymakers repeated many times they are satisfied that their present tools, such prediction of a V-shaped curve to the pessimistic L-shaped one. Our base case is as forward guidance, quantitative easing and lending programs, are effective and for a U. As communities continue to lower restrictions, we think the economy can that pushing rates below zero is not on the table. Unlike the novel nature of many recover sooner than many expect. If there are too many hiccups or false starts— of its new facilities, there is plenty of evidence of the ineffectiveness of negative or if we see a resurgence of Covid-19 infections—the bottom of the U will be rates from the European Central Bank and the Bank of Japan. Fed officials know longer. But what we have seen in the last month as the U.S. and other countries the score. But many in the marketplace simply aren’t listening (don’t fight the begin to open up is encouraging. Fed!) as seen in the recent trading of the Fed funds futures contracts in negative territory for early 2021. If you know anything about cash managers, you know we No matter the shape of the curve, we aren’t expecting a return to the extended are a conservative bunch, so it should come as no surprise the money fund zero-rate time frame of 2008 to 2016, but one best measured in quarters, adding industry has been exploring what operational changes would be needed if rates up to a couple of years at most. The minutes of the April Federal Open Market did slip below zero.

9

IAC Meeting Libor Curve

6/30/2019 9/30/2019 12/31/2019 3/31/2020 6/4/2020 2.8 2.6 2.4 2.2 2.0 1.8 1.6 % 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 1 Month 3 Month 6 Month 12 Month

Source: Bloomberg Past performance is no guarantee of future results. This chart is for illustrative purposes only. 10

IAC Meeting Daily Assets 3/31/19 – 6/5/20

$19

$16 Billions

$13

$10 Mar '19 May '19 Jul '19 Sep '19 Nov '19 Jan '20 Mar '20 May '20

11

IAC Meeting Portfolio Characteristics Period Ending 3/31/20

Portfolio Composition Top Country Exposure Top 10 Holdings (ex Repos)

United States 27.6 Sumitomo Mitsui Financial Group, Inc. 4.9

5.3 Japan 18.4 Mitsubishi UFJ Financial Group, Inc. 4.9 0.2 ABCP - Fixed 4.5 Canada 15.5 Federated Institutional Prime Value Obligations Fund 4.9 29.7 ABCP - Floating Australia 8.9 Bank Instrument - Fixed Credit Suisse Group AG 4.9

Bank Instrument - Floating Luxembourg 8.6 14.1 Australia & New Zealand Banking Group, Melbourne 4.7 Corporate CP - Fixed France 7.8 Canadian Imperial Bank of Commerce 4.7 Corporate CP - Floating Switzerland 4.9 Corporate Notes - Floating Barton Capital S.A. 4.3 4.0 Germany 4.2 Mutual Funds - Money Market Bank of Montreal 3.6 Finland 16.4 2.2 Repo Mizuho Financial Group, Inc. 3.6 20.6 Netherlands 1.3

United Kingdom 0.6 Sheffield Receivables Company LLC 3.6

Total % of Portfolio 100 Total % of Portfolio: 44.0

Credit Quality Effective Maturity Schedule Weighted Average Weighted Average Life Maturity (WAM) (WAL) A-1+ 62.2% 1-7 days 8-30 days 31-90 days 91-180 days 181+ days 39 days 73 days A-1 37.8% 47.4% 15.8% 25.5% 8.4% 2.9%

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IAC Meeting Performance vs. Index Period Ending 3/31/20

Net Returns (%) as of 3/31/20

Since Jan. 1-month 3-month 1-year 3-years 5-years 10-years 1996

Annualized Net 1.37% 1.65% 2.16% 1.99% 1.42% 0.83% 2.57% Participant Yield1

S&P AAA/AA Rated GIP 1.31% 1.52% 1.99% 1.73% 1.16% 0.62% 2.35% All 30-Day Net Index2

Above (Below) 0.06% 0.14% 0.17% 0.27% 0.26% 0.20% 0.22% Benchmark

1 Net of fees. Participant yield is calculated on a 365-day basis and includes adjustments for expenses and other accounting items to reflect realized earnings by participants. 2 Net of fees. Notes: Annualized 1-month and 3-month performance figures

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IAC Meeting Performance vs. Index Period Ending 4/30/20

Net Returns (%) as of 4/30/20

Since Jan. 1-month 3-month 1-year 3-years 5-years 10-years 1996

Annualized Net 0.95% 1.35% 2.02% 1.99% 1.43% 0.83% 2.56% Participant Yield1

S&P AAA/AA Rated GIP 0.85% 1.24% 1.86% 1.73% 1.17% 0.63% 2.34% All 30-Day Net Index2

Above (Below) 0.10% 0.11% 0.16% 0.26% 0.26% 0.20% 0.22% Benchmark

1 Net of fees. Participant yield is calculated on a 365-day basis and includes adjustments for expenses and other accounting items to reflect realized earnings by participants. 2 Net of fees. Notes: Annualized 1-month and 3-month performance figures

14

IAC Meeting Stress Test Results as of 3/31/20

15

IAC Meeting IAC Meeting Stress Test Footnotes as of 3/31/20

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IAC Meeting IAC Meeting RON DESANTIS STATE BOARD OF ADMINISTRATION GOVERNOR OF FLORIDA CHAIR JIMMY PATRONIS 1801 HERMITAGE BOULEVARD, SUITE 100 CHIEF FINANCIAL OFFICER TALLAHASSEE, FLORIDA 32308 ASHLEY MOODY (850) 488-4406 ATTORNEY GENERAL

POST OFFICE BOX 13300 ASHBEL C. WILLIAMS EXECUTIVE DIRECTOR & 32317-3300 CHIEF INVESTMENT OFFICER

To: Ash Williams From: Michael McCauley C C : Senior Leadership Group Date: June 8, 2020 Subject: Annual Review and Approval of Florida PRIME Investment Policy Statement (IPS)

With respect to Florida PRIME, Section 218.409 Florida Statutes requires:

The trustees shall ensure that the board or a professional money management firm administers the trust fund on behalf of the participants. The board or a professional money management firm shall have the power to invest such funds in accordance with a written investment policy. The investment policy shall be updated annually to conform to best investment practices. [s. 218.409(2)(a), Florida Statutes]

The investment policy shall be reviewed and approved annually by the trustees or when market changes dictate, and in each event the investment policy shall be reviewed by the Investment Advisory Council. [s. 218.409(2)(d), Florida Statutes]

There are no recommended changes at this time for the Florida PRIME Investment Policy Statement (IPS) (attached).

Let me know if you have any questions.

Attachment To Be Approved by SBA Trustees on August 11, 2020

Investment Policy Statement Local Government Surplus Funds Trust Fund (Non-Qualified) To Be Effective August 11, 2020

I. Purpose and Scope

The purpose of this Investment Policy Statement (“Policy”) is to set forth the investment objective, investment strategies, and authorized portfolio securities for the Local Government Surplus Funds Trust Fund (“Florida PRIME”). The Policy also describes the risks associated with an investment in Florida PRIME.

II. Overview of Florida PRIME

The Local Government Surplus Funds Trust Fund was created by an Act of the Florida Legislature effective October 1, 1977 (Chapter 218, Part IV, Florida Statutes). The State Board of Administration (“SBA”) is charged with the powers and duties to administer and invest Florida PRIME, in accordance with the statutory fiduciary standards of care as contained in Section 215.47(10), Florida Statutes. The SBA has contracted with Federated Investment Counseling (the “Investment Manager”) to provide investment advisory services for Florida PRIME.

Florida PRIME is governed by Chapters 215 and 218, Florida Statutes, and Chapter 19-7 of the Florida Administrative Code (collectively, “Applicable Florida Law”).

III. Roles and Responsibilities

The Board of Trustees of the SBA (“Trustees”) consists of the Governor, as Chairman, the Chief Financial Officer, as Treasurer, and the Attorney General, as Secretary. The Trustees will annually certify that Florida PRIME is in compliance with the requirements of Chapter 218, Florida Statutes, and that the management of Florida PRIME is in accord with best investment practices.

The Trustees delegate the administrative and investment authority to manage Florida PRIME to the Executive Director of the SBA, subject to Applicable Florida Law. The Trustees appoint an Investment Advisory Council. The Council will, at least annually, review this Policy and any proposed changes prior to its presentation to the Trustees and will undertake other duties set forth in Applicable Florida Law.

IV. Amortized Cost Accounting

In March 1997, the Governmental Accounting Standards Board (“GASB”) issued Statement 31, titled “Accounting and Financial Reporting for Certain Investments and for External Investment Pools.” GASB 31 applies to Florida PRIME.

GASB 31 outlines the two options for accounting and reporting for money market investment pools as either “2a-7 like” or fluctuating net asset value (“NAV”). GASB 31 describes a “2a-7 like” pool as an “external investment pool that is not registered with the Securities and Exchange Commission (“SEC”) as an investment company, but nevertheless has a policy that it will, and does, operate in a manner consistent with Rule 2a-7 under the Investment Company Act of 1940 (the “1940 Act”).” Rule 2a-7 is the rule that permits money market funds to use amortized cost to maintain a constant NAV of $1.00 per share, provided that such funds meet certain conditions.

In December 2015, GASB issued Statement 79, “Certain External Investment Pools and Pool Participants,” which delinks the accounting treatment of external investment pools from Rule 2a-7, and establishes criteria for the use of amortized cost to value portfolio assets of an external pool. GASB 79

1 To Be Approved by SBA Trustees on August 11, 2020

also made clear that rounding unit value up or down to the nearest penny to maintain a stable NAV of $1.00 per share for issuances and redemptions of units is an operational decision for an external investment pool, rather than an accounting matter. GASB 79 also specifies, however, that seeking to maintain a stable price of $1.00 per share is one of the criteria that an external investment pool must meet as a condition to valuing all portfolio assets at amortized cost for financial reporting purposes.

Florida PRIME will seek to operate in a manner consistent with the criteria and requirements in GASB 79, including diversification, credit quality and maturity conditions. Accordingly, it is thereby permitted to value portfolio assets at amortized cost method.

V. Investment Objective

The primary investment objectives for Florida PRIME, in priority order, are safety, liquidity, and competitive returns with minimization of risks. Investment performance of Florida PRIME will be evaluated on a monthly basis against the Standard & Poor’s U.S. AAA & AA Rated GIP All 30 Day Net Yield Index. While there is no assurance that Florida PRIME will achieve its investment objectives, it endeavors to do so by following the investment strategies described in this Policy.

VI. Investment Strategies & Specific Limitations

The Investment Manager will invest Florida PRIME’s assets in short-term, high-quality fixed income securities. All Florida PRIME assets (100 percent) will be U.S. dollar-denominated. To be considered high-quality, a security must be rated in the highest short-term rating category by one or more nationally recognized statistical rating organizations (“NRSROs”), or be deemed to be of comparable quality thereto by the Investment Manager, subject to Section 215.47(1)(j), Florida Statutes. The Investment Manager also may enter into special transactions for Florida PRIME, like repurchase agreements. Each repurchase agreement counterparty must have an explicit issuer or counterparty credit rating in the highest short-term rating category from Standard & Poor's. Certain of the fixed -income securities in which Florida PRIME invests pay interest at a rate that is periodically adjusted (“Adjustable Rate Securities”).

The Investment Manager will manage credit risk by purchasing only high quality securities. The Investment Manager will perform a credit analysis to develop a database of issuers and securities that meet the Investment Manager’s standard for minimal credit risk. The Investment Manager monitors the credit risks of all Florida PRIME’s portfolio securities on an ongoing basis by reviewing periodic financial data, issuer news and developments, and ratings of certain NRSROs. The Investment Manager will utilize a “new products” or similar committee to review and approve new security structures prior to an investment of Florida PRIME’s assets in such securities. The Investment Manager will periodically consider and follow best practices in connection with minimal credit risk determinations (e.g., such as those described in Appendix I of the Investment Company Institute's 2009, Report of the Money Market Working Group).

The Investment Manager will manage interest rate risk by purchasing only short-term fixed income securities. The Investment Manager will target a dollar-weighted average maturity range for Florida PRIME based on its interest rate outlook. The Investment Manager will formulate its interest rate outlook by analyzing a variety of factors, such as current and expected U.S. economic growth; current and expected interest rates and inflation; and the Federal Reserve Board’s monetary policy. The Investment Manager will generally shorten Florida PRIME’s dollar-weighted average maturity when it expects interest rates to rise and extend Florida PRIME’s dollar-weighted average maturity when it expects interest rates to fall. In order to meet the investment grade ratings criteria of Standard & Poor’s for a pool, the remaining maturity of securities purchased by the Investment Manager shall not exceed 762 days for government floating rate notes/variable rate notes and will not exceed 397 days for all other securities; provided, however, that if not required by the ratings criteria of the applicable NRSRO that is providing an investment grade rating to the pool and to the extent consistent with the portfolio criteria of GASB 79,

2 To Be Approved by SBA Trustees on August 11, 2020

longer term floating rate/variable rate notes that are U.S. government securities may be owned by Florida PRIME.

The Investment Manager will exercise reasonable care to maintain (i) a dollar weighted average maturity (“DWAM”) of 60 days or less; and (ii) a maximum weighted average life (WAL) within the range of 90- 120 days, depending on the levels of exposure and ratings of certain Adjustable Rate Securities. The maximum WAL will depend upon the percentage exposures to government and non-government Adjustable Rate Securities, with sovereign (government) Adjustable Rate Securities rated AA- and higher allowed a 120-day limit, and non-sovereign (corporate) Adjustable Rate Securities (and sovereign Adjustable Rate Securities rated below AA-) restricted to a 90-day limit. The portfolio’s maximum WAL will be based on a weighted average of the percentage exposures to each type of floating-rate instrument.

For purposes of calculating DWAM, the maturity of an Adjustable Rate Security generally will be the period remaining until its next interest rate adjustment. For purposes of calculating WAL, the maturity of an Adjustable Rate Security will be its stated final maturity, without regard to interest rate adjustments; accordingly, the WAL limitation could serve to restrict Florida PRIME’s ability to invest in Adjustable Rate Securities.

The Investment Manager will exercise reasonable care to limit exposure to not more than 25% of Florida PRIME’s assets in a single industry sector, with the exception that the Investment Manager may invest more than 25% in the financial services industry sector, which includes banks, broker-dealers, and finance companies. This higher limit is in recognition of the large outstanding value of money fund instruments issued by financial services firms. Government securities are not considered to be an industry.

The Investment Manager will exercise reasonable care to not acquire a security, other than (i) a Daily Liquid Asset, if immediately after the acquisition Florida PRIME would have invested less than 10% of its total assets in Daily Liquid Assets; (ii) a Weekly Liquid Asset, if immediately after the acquisition Florida PRIME would have invested less than 30% of its total assets in Weekly Liquid Assets. Daily Liquid Assets include cash, direct obligations of the U.S. government and securities that convert to cash in one business day. Weekly Liquid Assets include cash, direct obligations of the U.S. government, certain government securities with remaining maturities of 60 business days or less and securities that convert to cash in five business days.

Florida PRIME shall seek to hold liquid assets sufficient to meet reasonably foreseeable redemptions, based upon knowledge of the expected cash needs of participants.

The Investment Manager will exercise reasonable care to not acquire securities that cannot be sold or disposed of in the ordinary course of business within five business days at approximately the value ascribed to them by Florida PRIME if, immediately after the acquisition, Florida PRIME would have invested more than 5% of its total assets in such securities.

In buying and selling portfolio securities for Florida PRIME, the Investment Manager will comply with (i) the diversification, maturity and credit quality criteria in GASB 79, (ii) the requirements imposed by any NRSRO that rates Florida PRIME to ensure that it maintains a AAAm rating (or the equivalent) and (iii) the investment limitations imposed by Section 215.47, Florida Statutes except to the extent, as permitted by Section 215.44(3), the trust instrument of Florida PRIME and this investment policy statement specifically authorize investments in addition to those authorized by Section 215.47.

The Investment Manager generally will comply with the following diversification limitations that are additional to those set forth in GASB 79. First, at least 50% of Florida PRIME assets will be invested in securities rated “A-1+” or those deemed to be of comparable credit quality thereto by the Investment Manager (i.e., so long as such deeming is consistent with the requirements of the NRSRO’s AAAm (or equivalent) rating criteria), subject to Section 215.47(1)(j), Florida Statutes. The Investment Manager will

3 To Be Approved by SBA Trustees on August 11, 2020

document each instance in which a security is deemed to be of comparable credit quality and its basis for such a determination. Second, exposure to any single non-governmental issuer (other than a money market mutual fund) will not exceed 5% and exposure to any single money market mutual fund will not exceed 10% of Florida PRIME assets.

VII. Portfolio Securities and Special Transactions

The Investment Manager will purchase only fixed income securities for Florida PRIME, and may engage in special transactions, for any purpose that is consistent with Florida PRIME’s investment objective.

Fixed income securities are securities that pay interest, dividends or distributions at a specified rate. The rate may be a fixed percentage of the principal or adjusted periodically. In addition, the issuer of a short- term fixed income security must repay the principal amount of the security, normally within a specified time. The fixed income securities in which Florida PRIME may invest include corporate debt securities, bank instruments, asset backed securities, U.S. Treasury securities, U.S. government agency securities, insurance contracts, municipal securities, foreign securities, mortgage backed securities, and shares of money market mutual funds. However, Florida PRIME is not permitted to buy such fixed income securities to the extent that they require Florida PRIME to be a qualified institutional buyer.

Special transactions are transactions into which Florida PRIME may enter, including, but not limited to, repurchase agreements and delayed delivery transactions.

For a more detailed description of Florida PRIME’s portfolio securities and special transactions, please see “Additional Information Regarding Florida PRIME’s Principal Securities” at Appendix A.

VIII. Risks Associated with Florida PRIME

An investment in Florida PRIME is subject to certain risks. Any investor in Florida PRIME should specifically consider, among other things, the following principal risks before making a decision to purchase shares of Florida PRIME.

Risk that Florida PRIME will not Maintain a Stable Net Asset Value

Although the Investment Manager attempts to manage Florida PRIME such that it maintains a stable NAV of $1.00 per share, there is no guarantee that it will be able to do so. Florida PRIME is not registered under the 1940 Act or regulated by the SEC.

Interest Rate Risks

The prices of the fixed income securities in which Florida PRIME will invest rise and fall in response to changes in the interest rates paid by similar securities. Generally, when interest rates rise, prices of fixed income securities fall. However, market factors, such as demand for particular fixed income securities, may cause the price of certain fixed income securities to fall while the price of other securities rise or remain unchanged. Interest rate changes have a greater effect on the price of fixed income securities with longer maturities.

Credit Risks

Credit risk is the possibility that an issuer of a fixed income security held by Florida PRIME will default on the security by failing to pay interest or principal when due. If an issuer defaults, Florida PRIME will lose money.

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Liquidity Risks

Trading opportunities are more limited for fixed income securities that are not widely held. These features make it more difficult to sell or buy securities at a favorable price or time. Consequently, Florida PRIME may have to accept a lower price to sell a security, sell other securities to raise cash or give up an investment opportunity, any of which could have a negative effect on Florida PRIME’s performance.

Concentration Risks

A substantial part of Florida PRIME may be comprised of securities issued by companies in the financial services industry, companies with similar characteristics, or securities credit enhanced by banks or companies with similar characteristics. As a result, Florida PRIME may be more susceptible to any economic, business, or political risks or other developments that generally affect finance companies. Developments affecting companies in the financial services industry or companies with similar characteristics might include changes in interest rates, changes in the economic cycle affecting credit losses and regulatory changes.

Risks of Foreign Investing

Foreign securities pose additional risks because foreign economic or political conditions may be less favorable than those of the United States. Securities in foreign markets also may be subject to taxation policies that reduce returns for U.S. investors.

Call Risks

If a fixed income security is called, Florida PRIME may have to reinvest the proceeds in other fixed income securities with lower interest rates, higher credit risks or other less favorable characteristics.

Prepayment Risks

Unlike traditional fixed income securities, which pay a fixed rate of interest until maturity (when the entire principal amount is due), payments on asset-backed securities include both interest and a partial payment of principal. Partial payment of principal may be comprised of scheduled principal payments as well as unscheduled payments from voluntary prepayment, refinancing, or foreclosure of the underlying loans. If Florida PRIME receives unscheduled prepayments, it may have to reinvest the proceeds in other fixed income securities with lower interest rates, higher credit risks or other less favorable characteristics.

Risks Associated with Amortized Cost Method of Valuation

Florida PRIME will use the amortized cost method to determine the value of its portfolio securities. Under this method, portfolio securities are valued at the acquisition cost as adjusted for amortization of premium or accumulation of discount rather than at current market value. Accordingly, neither the amount of daily income nor the NAV is affected by any unrealized appreciation or depreciation of the portfolio. In periods of declining interest rates, the indicated daily yield on shares computed by dividing the annualized daily income on Florida PRIME’s portfolio by the NAV, as computed above, may tend to be higher than a similar computation made by using a method of valuation based on market prices and estimates. In periods of rising interest rates, the opposite may be true.

Changing Distribution Level Risk

There is no guarantee that Florida PRIME will provide a certain level of income or that any such income will exceed the rate of inflation. Further, Florida PRIME's yield will vary. A low interest rate environment may prevent Florida PRIME from providing a positive yield or paying expenses out of current income.

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Throughout this section, it shall be understood that actions described as being taken by Florida PRIME refer to actions taken by the Investment Manager on behalf of Florida PRIME.

For additional information regarding Florida PRIME’s principal securities and associated risks, please see Appendix A.

IX. Controls and Escalation Procedures

Section 218.409(2), Florida Statutes requires this Policy to document a system of internal controls designed to prevent the loss of public funds arising from fraud, employee error, misrepresentation by third parties, unanticipated changes in financial markets, or imprudent actions by employees and officers of the board or a professional money management firm. The controls include formal escalation reporting guidelines for all employees to address material impacts on Florida PRIME that require reporting and action.

The SBA has engaged BNY Mellon (“Custodian”) to provide asset safekeeping, custody, fund accounting and performance measurement services to Florida PRIME. The Custodian will mark to market the portfolio holdings of Florida PRIME on a daily basis and will daily communicate both amortized cost price and mark to market price, so that the SBA and the Investment Manager can monitor the deviations between the amortized cost price and market price. By contractual agreement, the Investment Manager will reconcile accounting and performance measurement reports with the Custodian on at least a monthly basis, under the supervision of the SBA.

The NRSRO that rates Florida PRIME will perform regular independent surveillance of Florida PRIME. The SBA and an independent investment consultant will regularly monitor the Investment Manager with respect to performance and organizational factors according to SBA manager monitoring policies.

The SBA and third parties used to materially implement Florida PRIME will maintain internal control, fraud and ethics policies and procedures designed to prevent the loss of public funds.

The Executive Director will develop policies and procedures to:

• Identify, monitor and control/mitigate key investment and operational risks. • Maintain an appropriate and effective risk management and compliance program that identifies, evaluates and manages risks within business units and at the enterprise level. • Maintain an appropriate and effective control environment for SBA investment and operational responsibilities. • Approve risk allocations and limits, including total fund and asset class risk budgets.

The Executive Director will appoint a Chief Risk and Compliance Officer, whose selection, compensation and termination will be affirmed by the Board, to assist in the execution of the responsibilities enumerated in the preceding list. For day-to-day executive and administrative purposes, the Chief Risk and Compliance Officer will proactively work with the Executive Director and designees to ensure that issues are promptly and thoroughly addressed by management. On at least a quarterly basis, the Chief Risk and Compliance Officer will provide reports to the Investment Advisory Council, Audit Committee and Board, and is authorized to directly access these bodies at any time as appropriate to ensure the integrity and effectiveness of risk management and compliance functions.

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Pursuant to written SBA policy, the Executive Director will organize an Investment Oversight Group to regularly review, document and formally escalate compliance exceptions and events that may have a material impact on Florida PRIME. The Investment Oversight Group will meet as necessary based on the occurrence and resolution of compliance exceptions or upon the occurrence of a material event. Minutes of any meeting held by the Investment Oversight Group and a listing of meeting participants shall be timely posted on the Florida PRIME website.

The SBA and the Investment Manager have an affirmative duty to immediately disclose any material impact on Florida PRIME to the participants, including, but not limited to:

1. When the deviation between the market value and amortized cost of Florida PRIME exceeds 0.25%, according to pricing information provided by the Custodian, the Investment Manager will establish a formal action plan. The Investment Oversight Group will review the formal action plan and prepare a recommendation for the Executive Director’s consideration.

2. When the deviation between the market value and amortized cost of Florida PRIME exceeds 0.50%, according to pricing information provided by the Custodian, the Executive Director will promptly consider what action, if any, will be initiated. Where the Executive Director believes the extent of any deviation from Florida PRIME's amortized cost price per share may result in material dilution or other unfair results to investors or existing shareholders, he will cause Florida PRIME to take such action as he deems appropriate to eliminate or reduce to the extent reasonably practicable such dilution or unfair results.

3. The Investment Manager will perform daily compliance monitoring to ensure that investment practices comply with the requirements of this Policy, according to documented compliance procedures. The Investment Manager will provide regular compliance reports and will communicate compliance exceptions within 24 hours of identification to the Investment Oversight Group. Additionally, the Investment Oversight Group will periodically conduct independent compliance reviews.

4. In the event that a security receives a credit rating downgrade and ceases to be in the highest rating category, or the Investment Manager determines that the security is no longer of comparable quality to the highest short-term rating category (in either case, a “Downgrade”), the Investment Manager will reassess whether the security continues to present minimal credit risk and will cause Florida PRIME to take any actions determined by the Investment Manager to be in the best interest of Florida PRIME; provided however, that the Investment Manager will not be required to make such reassessments if Florida PRIME disposes of the security (or the security matures) within five business days of the Downgrade.

5. In the event that a security no longer meets the criteria for purchase due to default, event of insolvency, a determination that the security no longer presents minimal credit risks, or other material event (“Affected Security”), the Investment Manager must dispose of the security as soon as practical, consistent with achieving an orderly disposition of the security, by sale, exercise of a demand feature or otherwise, and the requirements of GASB 79. An Affected Security may be held only if the Executive Director has determined, based upon a recommendation from the Investment Manager and the Investment Oversight Group, that it would not be in the best interest of Florida PRIME to dispose of the security taking into account market conditions that may affect an orderly disposition.

6. The Investment Manager will monthly stress test Florida PRIME and at least quarterly report the results of the stress tests to the Investment Oversight Group. Stress tests must be conducted for at least the following events, or combinations of events (i) a change in short-term interest rates; (ii) an increase in net shareholder redemptions; (iii) downgrades or defaults; and (iv)

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changes between a benchmark overnight interest rate and the interest rates on securities held by Florida PRIME.

The Investment Manager will at least annually provide the Investment Oversight Group with: (i) their documented compliance procedures; (ii) an assessment of Florida PRIME's ability to withstand events reasonably likely to occur in the coming year and (iii) their list of NRSROs utilized as a component of the credit risk monitoring process.

The Executive Director’s delegated authority as described in this section is intended to provide him with sufficient authority and operating flexibility to make professional investment decisions in response to changing market and economic conditions. Nonetheless, the Trustees will at least monthly review and approve management summaries of material impacts on Florida PRIME, any actions or escalations taken thereon, and carry out such duties and make such determinations as are otherwise necessary under applicable law, regulation or rule.

Pursuant to Florida law, the Auditor General will conduct an annual financial audit of Florida PRIME, which will include testing for compliance with this Policy.

X. Deposits and Withdrawals

Investors should refer to the separate Florida PRIME Operating Procedures for detailed descriptions regarding how to make deposits in and withdrawals from Florida PRIME, including (1) any fees and limitations that may be imposed with respect thereto; and (2) reports provided to participants.

XI. Management Reporting

The Executive Director will be responsible for providing the formal periodic reports to the Trustees, legislative committees and other entities:

1. An annual report on the SBA and its investment portfolios, including that of Florida PRIME. 2. A monthly report on performance and investment actions taken. 3. Special reports pursuant to Chapter 218, Florida Statutes.

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Appendix A Additional Information Regarding Florida PRIME’s Principal Securities

Throughout this appendix it shall be understood that actions described as being taken by Florida PRIME refer to actions taken by the Investment Manager on behalf of Florida PRIME.

FIXED INCOME SECURITIES

Corporate Debt Securities

Corporate debt securities are fixed income securities issued by businesses. Notes, bonds, debentures and commercial paper are the most prevalent types of corporate debt securities. Florida PRIME also may purchase interests in bank loans to companies.

COMMERCIAL PAPER

Commercial paper is an issuer’s obligation with a maturity of generally less than 270 days. Companies typically issue commercial paper to pay for current expenditures. Most issuers constantly reissue their commercial paper and use the proceeds (or bank loans) to repay maturing paper. If the issuer cannot continue to obtain liquidity in this fashion, its commercial paper may default.

DEMAND INSTRUMENTS

Demand instruments are corporate debt securities that the issuer must repay upon demand. Other demand instruments require a third party, such as a dealer or bank, to repurchase the security for its face value upon demand. Florida PRIME treats demand instruments as short-term securities, even though their stated maturity may extend beyond one year.

Bank Instruments

Bank instruments are unsecured interest bearing deposits with banks. Bank instruments include, but are not limited to, bank accounts, time deposits, certificates of deposit and banker’s acceptances. Yankee instruments are denominated in U.S. dollars and issued by U.S. branches of foreign banks. Eurodollar instruments are denominated in U.S. dollars and issued by non-U.S. branches of U.S. or foreign banks.

Florida PRIME will not invest in instruments of domestic and foreign banks and savings and loans unless they have capital, surplus, and undivided profits of over $100,000,000, or if the principal amount of the instrument is insured by the Bank Insurance Fund or the Savings Association Insurance Fund which are administered by the Federal Deposit Insurance Corporation. These instruments may include Eurodollar Certificates of Deposit, Yankee Certificates of Deposit, and Euro-dollar Time Deposits.

Florida PRIME shall further limit its investments in bank instruments consistent with the requirements of GASB 79.

Asset Backed Securities

Asset backed securities are payable from pools of obligations, most of which involve consumer or commercial debts. However, almost any type of fixed income assets (including other fixed income securities) may be used to create an asset backed security. Asset backed securities may take the form of commercial paper, notes or pass-through certificates.

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Government Securities

Government security means any security issued or guaranteed as to principal or interest by the United States, or by a person controlled or supervised by and acting as an instrumentality of the Government of the United States pursuant to authority granted by the Congress of the United States; or any certificate of deposit for any of the foregoing.

U.S. Treasury Securities

U.S. Treasury securities are direct obligations of the federal government of the United States. U.S. Treasury securities are generally regarded as having the lowest credit risks.

Agency Securities

Agency securities are issued or guaranteed by a federal agency or other government sponsored entity (GSE) acting under federal authority. Some GSE securities are supported by the full faith and credit of the United States. These include securities issued by the Government National Mortgage Association, Small Business Administration, Farm Credit System Financial Assistance Corporation, Farmer's Home Administration, Federal Financing Bank, General Services Administration, Department of Housing and Urban Development, Export-Import Bank, Overseas Private Investment Corporation, and Washington Metropolitan Area Transit Authority.

Other GSE securities receive support through federal subsidies, loans or other benefits. For example, the U.S. Treasury is authorized to purchase specified amounts of securities issued by (or otherwise make funds available to) the Federal Home Loan Bank System, Federal Home Loan Mortgage Corporation, Federal National Mortgage Association, Student Loan Marketing Association, and Tennessee Valley Authority in support of such obligations.

A few GSE securities have no explicit financial support, but are regarded as having implied support because the federal government sponsors their activities. These include securities issued by the Farm Credit System, Financing Corporation, and Resolution Funding Corporation.

Investors regard agency securities as having low credit risks, but not as low as Treasury securities. Florida PRIME treats mortgage-backed securities guaranteed by a GSE as if issued or guaranteed by a federal agency. Although such a guarantee protects against credit risks, it does not reduce market risks.

Insurance Contracts

Insurance contracts include guaranteed investment contracts, funding agreements and annuities. Florida PRIME treats these contracts as fixed income securities.

Municipal Securities

Municipal securities are issued by states, counties, cities and other political subdivisions and authorities.

Foreign Securities

Foreign securities are U.S. dollar-denominated securities of issuers based outside the United States. Florida PRIME considers an issuer to be based outside the United States if:

• it is organized under the laws of, or has a principal office located in, another country; • the principal trading market for its securities is in another country; or

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• it (or its subsidiaries) derived in its most current fiscal year at least 50% of its total assets, capitalization, gross revenue or profit from goods produced, services performed or sales made in another country.

Mortgage Backed Securities

Mortgage backed securities represent interests in pools of mortgages. The mortgages that comprise a pool normally have similar interest rates, maturities and other terms. Mortgages may have fixed or adjustable interest rates. Interests in pools of adjustable rate mortgages are known as ARMs.

Zero Coupon Securities

Certain of the fixed income securities in which Florida PRIME invests are zero coupon securities. Zero coupon securities do not pay interest or principal until final maturity, unlike debt securities that provide periodic payments of interest (referred to as a “coupon payment”). Investors buy zero coupon securities at a price below the amount payable at maturity. The difference between the purchase price and the amount paid at maturity represents interest on the zero coupon security. Investors must wait until maturity to receive interest and principal, which increases the interest rate and credit risks of a zero coupon security.

Callable Securities

Certain of the fixed income securities in which Florida PRIME invests are callable at the option of the issuer. Callable securities are subject to reinvestment risks.

144A Securities

The SBA has determined that Florida PRIME constitutes (i) an “accredited investor” as defined in Rule 501(a)(7) promulgated under the Securities Act of 1933, as amended (the “Securities Act”), as long as Florida PRIME has total assets in excess of $5,000,000 and (ii) a “qualified purchaser” as defined in Section 2(a)(51)(A)(iv) of the 1940 Act, as long as Florida PRIME in the aggregate owns and invests on a discretionary basis not less than $25,000,000 in investments, but does not constitute a “qualified institutional buyer” as defined in Rule 144A(a)(1) promulgated under the Securities Act. Florida PRIME is restricted from purchasing or acquiring securities or investments that would require Florida PRIME to represent in connection with such purchase or acquisition that it is a “qualified institutional buyer” as defined in Rule 144A(a)(1) promulgated under the Securities Act.

Money Market Mutual Funds

Florida PRIME may invest in shares of registered investment companies that are money market mutual funds, including those that are affiliated with the Investment Manager, as an efficient means of implementing its investment strategies and/or managing its uninvested cash. These other money market mutual funds are managed independently of Florida PRIME and incur additional fees and/or expenses that would, therefore, be borne indirectly by Florida PRIME in connection with such investment. However, the Investment Manager believes that the benefits and efficiencies of this approach should outweigh the potential additional fees and/or expenses. The Investment Manager must obtain prior written consent of the SBA to invest Florida PRIME in money market mutual funds that are “affiliated persons” of the Investment Manager.

SPECIAL TRANSACTIONS

The Investment Manager on behalf of Florida PRIME may engage in the following special transactions.

11 To Be Approved by SBA Trustees on August 11, 2020

Repurchase Agreements

A repurchase agreement is a transaction in which Florida PRIME buys a security from a dealer or bank and agrees to sell the security back at a mutually agreed-upon time and price. The repurchase price exceeds the sale price, reflecting Florida PRIME’s return on the transaction. This return is unrelated to the interest rate on the underlying security. Florida PRIME will enter into repurchase agreements only with banks and other recognized financial institutions, such as securities dealers, deemed creditworthy by the Investment Manager. The securities that are subject to the repurchase transactions are limited to securities in which Florida PRIME would be permitted to invest, except that such securities may have a maturity longer than would otherwise be permitted for Florida PRIME to own.

Florida PRIME’s custodian or subcustodian will take possession of the securities subject to repurchase agreements. The Investment Manager or subcustodian will monitor the value of the underlying security each day to ensure that the value of the security always equals or exceeds the repurchase price.

Repurchase agreements are subject to credit risks.

Delayed Delivery Transactions

Delayed delivery transactions, including when-issued transactions, are arrangements in which Florida PRIME buys securities for a set price, with payment and delivery of the securities scheduled for a future time. During the period between purchase and settlement, no payment is made by Florida PRIME to the issuer and no interest accrues to Florida PRIME. Florida PRIME records the transaction when it agrees to buy the securities and reflects their value in determining the price of its units. Settlement dates may not be more than seven business days after entering into these transactions; nonetheless, the market values of the securities bought may vary from the purchase prices. Therefore, delayed delivery transactions create interest rate risks for Florida PRIME. Delayed delivery transactions also involve credit risks in the event of a counterparty default.

Asset Coverage

In order to secure its obligations in connection with special transactions, Florida PRIME will either own the underlying assets, enter into an offsetting transaction or set aside readily marketable securities with a value that equals or exceeds Florida PRIME’s obligations. Unless Florida PRIME has other readily marketable assets to set aside, it cannot trade assets used to secure such obligations without terminating a special transaction. This may cause Florida PRIME to miss favorable trading opportunities or to realize losses on special transactions.

12 State Board of Administration

Private Equity Asset Class Review John Bradley, SIO Private Equity

Investment Advisory Council June 30, 2020 Agenda

• PE Policy, Benchmarking and Structure – Goals/Objectives – Benchmarks – Staffing • Asset Class Investment Process – Annual Investment Plan – Sourcing – Due Diligence – Monitoring – Fees • Asset Class Portfolio – Performance/Cash Flows – Allocations/Targets – Portfolio Composition/Exposures • Asset Class Sub-Strategies – Buyouts/Growth Equity – Venture Capital – Distressed/Turnaround – Secondary

3 Private Equity Policy

• Policy target allocation: 6% of total fund • Allocation range: 2% - 9% of total fund • 5/29/20 allocation: 7.8% of total fund

Per Policy: ∼ • Private Equity shall utilize a prudent process to maximize long-term access to attractive risk-adjusted investment opportunities through use of business partners with appropriate: – Financial, operational and investment experience and resources – Alignment of interests – Transparency and repeatability of investment process, and – Controls on leverage

4 Goals/Objectives

• Asset Class Goals/Objectives – Create a portfolio that outperforms both our primary and secondary benchmarks while remaining within the bounds of our asset class risk budget – Construct the program to avoid concentrated exposure to a particular vintage year, manager, strategy or geography – Establish prudent portfolio diversification while minimizing proliferation of manager relationships

5 Benchmarks • Benchmark – Primary: MSCI ACWI IMI + 300bps premium • Current benchmark of the Global Equity asset class plus an illiquidity premium • Opportunity cost benchmark – Secondary: Cambridge Associates Benchmark • Cambridge Associates Global Private Equity and Venture Capital Index • Peer benchmark • Measures effectiveness of staff in selecting managers

6 Staffing

• Staff of six investment professionals – Senior Investment Officer – Three Senior Portfolio Managers – One Portfolio Manager (currently vacant) – One Senior Analyst – Administrative Assistant • Cambridge Associates – Dedicated global team of 5 Investment Directors and 7 Associates/Analysts – Market research – Fund due diligence – Operational due diligence – Quarterly performance review – Semi-Annual strategy review

7 Private Equity Investment Process

•Pacing model •Proactive •Portfolio priorities •Reactive •GP focus list •Forward calendar Annual Investment Sourcing Plan

Due Monitoring Diligence

•Annual meetings •Initial screening •Advisory Boards •Full diligence •Cambridge review •Legal negotiation •SBA compliance •Closing

8 Private Equity Process • Annual Investment Plan – Serves as the roadmap for the future • Numerous inputs, including: – Portfolio Const. Model

Large Mid-Mkt Small Growth Venture Distre sse d / – Priority Rankings Geography Buyout Buyout Buyout Equity Capital Turnaround Medium Medium Medium Medium Medium North America Low Priority Priority Priority Priority Priority Priority Medium Medium Medium Medium Medium Europe Low Priority – Focus List Priority Priority Priority Priority Priority Medium High Medium Asia Low Priority High Priority High Priority Priority Priority Priority

– Forward Calendar ROW Low Priority Low Priority Low Priority Low Priority Low Priority Low Priority

9 Private Equity Process • Sourcing – Vast majority of investments sourced proactively – Invested in four funds in 2019 managed by general partners that were new to the PE program – Not for a lack of effort: 234 - meetings/calls

220 – funds reviewed

24 - diligence 4 investments 10 Private Equity Process • Due Diligence – Goal: leverage SBA resources and staff expertise to create an effective and consistent investment decision-making process – Keys to success: people, process, and plumbing – Stages of Due Diligence • Initial Screening • Full Diligence • Legal Negotiations • Closing

11 Private Equity Process

DUE DILIGENCE

Due Diligence Fund Overview Questionnaire

Quantitative Data Meeting with GP at SBA office Request (Excel)

Preliminary Diligence Summary Reference Calls

Onsite Visit Interim Diligence Summary (IDS) Consultant Memo

Legal Terms Investment Approval Memo Review

12 Private Equity Process

DUE DILIGENCE – Due Diligence Questionnaire – 112 questions – Quantitative Data Request / Analysis – 71 data points • Exposure, Portfolio Construction, Dispersion, Attribution, Risk, Value Drivers, Public Market Equivalent, and Loss Ratios – Legal Terms Review and Negotiation • Identifies legal red flags and key terms to negotiate

• Focus on alignment of interests between LP and GP 13 Private Equity Process • Monitoring – Review of all capital calls and distributions – Bi-weekly calls with Cambridge Associates – Portfolio management/CRM system – Attendance at annual meetings – Participation on advisory boards – Quarterly update calls – In-person updates – Cambridge Associates strategy meetings – SBA Risk Management and Compliance

14 Private Equity Program Performance As of December 31, 2019 • Since inception the Total PE Asset Class Portfolio ($M) $40,000 asset class has 1.6x $35,000 committed over $28b to $13.1 billion 273 funds $30,000 “value creation” • $21.6b called to date $25,000 $28,199 $21,892 • $21.9b distributed; 1.0x $20,000 DPI $15,000 • $12.8b in remaining $10,000 $21,642

$12,817 value; 1.6x TVPI $5,000 • Value creation to date $0 Cumulative Commitment NAV Cumulative Distributions Cumulative Paid In of $13.1b

15 Private Equity Performance Asset Class - Net Managed and Benchmark Returns (IRRs) as of December 31, 2019

35.0%

30.0% 29.3% 25.0%

20.0% 18.7% 16.5% 15.3% 14.7% 14.7% 14.3% 13.2%

15.0% 11.9% 10.9% 10.0% 5.0% 0.0% -5.0% -10.0% 1 Year 3 years 5 years 10 years Since Inception

Private Equity Asset Class Benchmark

Note: Asset class IRR performance data is provided by Cambridge Associates. Benchmark IRRs are provided by the Florida State Board of Administration. The PE benchmark is currently the Custom Iran- and Sudan-free ACWI IMI + 300bps. From July 2010 through June 2014 the benchmark was the Russell 3000 + 300 bps. Prior to July 2010 , the benchmark was the Russell 3000 + 450 bps. Prior to November 1999, Private Equity was part of the Domestic Equities asset class and its benchmark was the Domestic Equities target index + 750 bps.

Please see Appendix for performance of the Legacy or pre-asset class portfolio. 16 Vintage Year Performance As of December 31, 2019

35.0%

30.0%

25.0%

20.0%

15.0% IRR 10.0%

5.0%

0.0%

-5.0%

-10.0% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

FSBA IRR CA Median

• Since inception of the asset class, the SBA has outperformed vintage year benchmarks in 18 out of 21 years (86%)

*Light shading (2017,2018) indicates vintages too young to have meaningful performance 17 Cash Flow History

4,000 3,370.8

2,729.6 3,000 2,598.4 2,408.6 2,232.5 1,899.2 2,000 1,734.7 1,343.1 1,139.1 979.0 904.7 916.0 931.0 826.0 1,000 589.6 613.4 454.7 346.0 309.4 391.3 395.5 Cash Flow ($M) 0

-378.0 -342.4 -529.9 -520.4 -1,000 -727.1 -729.6 -687.7 -965.7 -976.7 -1,086.1 -1,063.9 -1,036.0 -1,186.4 -1,243.1 -2,000 -1,489.4 -1,919.0 -1,879.9 -1,951.8 -2,032.7 -2,177.6 -2,116.9 -3,000 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Cash Fl ows ( $mm) Yea r : 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Net: -417.7 76.7 247.2 -338.3 374.8 228.4 162.4 -155.1 -237.9 -124.9 -422.6 -207.4 -146.3 491.7 230.9 679.5 -52.6 696.9 1,254.0 352.7 Cum : -2,184.7 -2,108.0 -1,860.8 -2,199.1 -1,824.3 -1,596.0 -1,433.5 -1,588.6 -1,826.5 -1,951.4 -2,374.0 -2,581.4 -2,727.7 -2,236.1 -2,005.1 -1,325.7 -1,378.3 -681.4 572.6 925.2 18 Current Allocations and Targets

Secondary, 4% Distressed, 10% Venture Capital, 23%

Buyouts (incl. co- inv.), 63%

+ ($ millions) 12/31/19 NAV % Total Exposure % Target Allocation Buyouts* $ 8,099 63% $ 12,178 62% 65% Venture Capital $ 2,927 23% $ 3,518 18% 10% Distressed $ 1,233 10% $ 2,636 13% 15% Secondary $ 557 4% $ 1,264 6% 10% Total $ 12,817 $ 19,596

*Buyout sub-target: 85% funds 15% co-investments +Total Exposure equals NAV + unfunded commitments 19 Portfolio Composition

PE Portfolio • $12.8b NAV (12/31/19) • $6.8b Unfunded • 204 funds • 67 GPs (48 core)

Geographic Focus* Sector Focus* • 9 - Global • 30 - Generalist • 25 - U.S. • 9 - Technology • 10 - Europe • 4 - Energy • 2 – Consumer/Retail • 4 - Asia • 1 – Financials • 2 – Health Care *Geographic and sector focus of our 48 core managers 20 GP Concentration

General Partner 12/31/19 NAV % of PE Portfolio Lexington Partners 1,365,166,615 11% • Total portfolio is diversified by GP SVB Capital 946,533,531 7% TrueBridge Ventures 807,128,683 6% • The largest 15 exposures Grove Street Advisors 766,364,825 6% Thoma Bravo 720,470,413 6% represent 63% of portfolio NAV Hellman & Freidman 520,902,009 4% Fairview Capital 468,500,529 4% • Lexington Partners is the largest Ares Management 382,746,845 3% GP relationship in the portfolio Warburg Pincus 347,529,908 3% Insight Venture Partners 324,943,685 3% (11%) Blackstone Group 310,582,554 2% Ardian 306,124,283 2% – 77% co-investments Asia Alternatives 288,667,764 2% Advent Intl. 273,779,687 2% – 23% secondary TPG Capital 236,731,099 2% Total $ 8,066,172,430 63%

21 Total Geographic Exposure As of December 31, 2019

100% 9% 90% 14% 20% 80% 17% 20% Africa 70% 18% Middle East 60% Latin America 50% Other Geo 40% 72% Asia 63% 30% 60% Europe 20% North America 10% 0% PE NAV Cambridge PE/VC Bmrk MSCI ACWI IMI

• The portfolio remains overweight North America. We continue to search for opportunities in Europe and Asia and expect exposures in those geographies to grow over time. Source: Cambridge Associates 22 Total Sector Exposure As of December 31, 2019

100% 8% 8% 90% 14% 9% 9% 80% 4% Other 12% 16% 70% 13% Financials 12% 60% 15% 19% Energy/Nat. Resources 50% 13% 15% Healthcare 40% 18% Mfg/Industrials 30% Consumer/Retail 44% 20% 36% 27% IT/Media 10% 0% PE NAV Cambridge PE/VC Bmrk MSCI ACWI IMI • Portfolio sector exposure is similar to that of the Cambridge PE/VC benchmark • Relative to the asset class primary benchmark, the PE portfolio has a large overweight to technology (+17%) and underweights to the financials (-6%) and manufacturing (-7%) sectors. Source: Cambridge Associates

23 COVID-19 Impact Assessment Sector Exposure As of December 31, 2019

Other, 2% Financials, 8% Energy/Nat. Resources, 9% Positive or no impact 18% Positive or no impact 23% Limited to medium impact 28% Healthcare, 12% Limited to medium impact 52% Medium to high impact 54% Medium to high impact 25% Mfg/Industrials, 12%

Consumer/Retail, 13%

Positive or no impact 43% Positive or no impact 35%

Limited to medium impact 49% Limited to medium impact 58% IT/Media, 44% Medium to high impact 7% Medium to high impact 7%

PE Sector Exposure (by NAV)

24 Buyout Portfolio Targets

Venture Capital Secondary 10% 10%

Large Buyout, Distressed Small Buyout, 25% 15% Buyout 40% 55% Middle-Market Buyout, 35%

Co- investments 10%

25 Buyout Portfolio

Geographic Geographic Geographic Firm Focus Sector Focus Firm Focus Sector Focus Firm Focus Sector Focus Advent International Europe Generalist Charlesbank U.S. Generalist Accel KKR U.S. Technology Blackstone Group Global Generalist Denham U.S. Energy Asia Alternatives Asia Generalist The Carlyle Group U.S. Generalist EnCap U.S. Energy Carnelian U.S. Energy CVC Europe Generalist FS Equity U.S. Consumer Cressey & Co. U.S. Health Care Hellman & Friedman U.S. Generalist Hahn & Co. Korea Generalist Deutsche Beteiligungs Europe Generalist Silver Lake U.S. Technology InvestIndustrial Europe Generalist Equistone Europe Generalist Thoma Bravo U.S. Technology MBK Asia Generalist Falfurrias U.S. Generalist Montagu Europe Generalist Francisco Partners U.S. Technology Siris U.S. Technology Livingbridge Europe Generalist Stone Point U.S. Financials Post Oak U.S. Energy TowerBrook Global Generalist Rubicon U.S. Technology Summa Europe Generalist Thoma Bravo U.S. Technology TPG Global Generalist Warburg Pincus Asia Generalist Waterland Europe Generalist WindRose U.S. Health Care Large Middle-Market Small

• 7 GPs – Target of 6 • 11 GPs – Target of 12 • 17 GPs – Target of 18 • Fund sizes range from $14b - $20b • Fund sizes range from $1.0b-$6.5b • Fund sizes range from $400m - $4.3b • Avg. EV greater than $750m • Avg. EV less than $250m • $200m target commitment • Avg. EV between $250m-$750m • $25m - $100m target commitment • $75m - $200 target commitment 26 Buyout Portfolio

Exposure by Sector Other, 2% Exposure by Size Energy/Nat Resources, 9% Health Care, 11% Large Buyout, Mfg/Industrials, 12% Small Buyout, 29% 38%

Financials, 8%

Consumer/Retail, Information Technology, 48% 11% Middle-Market Buyout, 32%

Exposure by Geography Other, 3% Asia, 11% Portfolio Commentary • Information Technology is almost 50% of the portfolio

Europe, 16% • Manufacturing/industrial, health care, and consumer/retail represent another 34% of the portfolio • Buyout exposure continues to shift smaller and away North from large buyout America, 71% • Portfolio weighted heavily towards North America, but exposure to Europe and Asia continue to grow 27 *Exposure weightings by NAV as of 12/31/19 Buyout Portfolio – Recent Activity

March 2020 – Conv. Senior Notes

April 2020 – Conv. Senior Notes

April 2020 – Debt & Equity

April 2020 – Pref. Stock & Warrants

May 2020 – Term Loan & Equity

28 Buyout Portfolio Performance As of December 31, 2019

1yr 3yr 5yr 10yr S.I. • Overall outperformance vs. the benchmark U.S Buyouts 19.5% 17.0% 15.7% 15.9% 12.6% • Greater convergence between U.S. Buyouts, Non-U.S. Buyouts 17.9% 18.1% 16.0% 14.7% 11.8% Non-U.S. Buyouts, and U.S. Growth Equity U.S. Growth Equity 18.7% 17.8% 16.5% 16.5% 14.1% • Alpha over public markets (PME) of 530 bps Non-U.S. Growth Equity 5.9% 9.2% 8.6% 6.7% 7.0% • DPI of 1.0x and TVPI of 1.6x Total Buyouts 18.5% 17.0% 15.6% 15.6% 12.5% CA Benchmark 17.2% 16.3% 13.4% 14.1% 13.5% Public Market Equivalent (PME) Comparison (Since Inception)

Distributed/Paid-In Total Value/Paid-In 6.0% 5.3% 5.0% 2.0 1.7x 1.6x 1.6x 4.0% 1.4x 1.5 1.2x 1.1x 3.0% 0.9x 1.0x 1.0 0.8x 2.0% 1.0% 0.5 0.3x 0.0% 0.0 Alpha over MSCI U.S. Growth Non-U.S. U.S. Buyouts Non-U.S. Total Buyouts ACWI IMI (IRR%) Equtiy Growth Equity Buyouts 29 Venture Capital Portfolio

Exposure by Sector Portfolio Commentary 100% 4% 5% 10% 10% 80% • Three active separate account/fund-of-fund relationships: TrueBridge, Other Silicon Valley Bank and Tiger Iron 60% 47% 49% Healthcare • Majority of the venture portfolio is focused on IT with an overweight to 40% enterprise 20% 38% 36% IT-Enterprise • Over half the portfolio is located in centers of innovation (Silicon Valley, Boston and NYC) 0% IT-Consumer NAV Total Exposure • 83% of the VC portfolio is invested in early stage or expansion stage (NAV+Unfunded) companies Exposure by Geography Exposure by Stage 100% 4% 4% 100% 9% 9% 4% 3% 5% 4% Other 13% 13% 80% 80% Public/Other 25% 31% Europe 60% 32% 34% Asia 60% Late Stage (Series D or 8% 7% 7% 6% later) 40% Other US 40% Expansion (Series B-C) 43% NYC 51% 51% 20% 40% 20% New England 0% 0% Early NAV Total Exposure Silicon Valley/CA (Angel/Seed/Series A) NAV Total Exposure (NAV+Unfunded) (NAV+Unfunded) 30 *Exposure weightings by NAV as of 12/31/19 Venture Capital Portfolio Performance As of December 31, 2019 • Overall outperformance vs. the benchmarks 1yr 3yr 5yr 10yr S.I. • Underperformance vs. the PME by 350 bps Venture Capital 22.5% 18.2% 14.3% 15.4% 12.6% • Distributions (0.7x DPI) starting to catch-up CA Benchmark 18.6% 16.8% 12.9% 15.1% 16.5% with other strategies • 1.9x TVPI leads other strategies

Distributed/Paid-In Total Value/Paid-In 2.0 1.9x Public Market Equivalent (PME) Comparison (Since Inception) 0.0% -0.5% 1.5 -1.0% -1.5% -2.0% 1.0 -2.5% 0.7x -3.0% 0.5 -3.5% -4.0% -3.5% Alpha over S&P 500 IT 0.0 Index (IRR%) Venture Capital 31 Distressed/Turnaround Portfolio

Firm Geographic Focus Exposure by Sector Other, 1% American Industrial Partners U.S. Energy/Nat Resources, Apollo Global Management Global 12% Health Care, Ares Management Global 20% Atlas Holdings U.S. KPS Capital Partners U.S. Information LightBay U.S. Mfg/Industrial Technology, s, 30% 12% OpCapita Europe Peak Rock U.S. Financials, 3% Consumer/Retail, Searchlight Capital Partners U.S./Europe 23% Towerbrook Capital Partners U.S./Europe Exposure by Geography • Distressed/turnaround funds remain attractive Asia, 1% Europe, • Manufacturing/industrials, consumer/retail, and health care account for roughly 17% 73% of the portfolio • Focus on control and driving value through operations - not a trading strategy • Variety of strategies represented: debt-for-control, purchasing assets out of a bankruptcy process (363 sale), out-of-court restructurings, negative EBITDA North companies, carve-outs of underperforming businesses, and complex situations America, 82%

*Sector and Geographic weightings by NAV as of 12/31/19 32 Distressed/Turnaround Portfolio Performance As of December 31, 2019

• Overall outperformance vs. the benchmarks Alpha over the public markets (PME) of 1,140 1yr 3yr 5yr 10yr S.I. • Distressed/Turnaround 16.6% 11.6% 12.0% 14.7% 19.4% bps CA Benchmark 7.4% 7.7% 7.2% 10.2% 10.7% • 1.2x DPI leads overall PE portfolio

Distributed/Paid-In Total Value/Paid-In Public Market Equivalent (PME) Comparison (Since Inception) 2.0 1.6x 12.0% 11.4% 1.5 10.0% 1.2x 8.0% 1.0 6.0% 4.0% 0.5 2.0% 0.0% 0.0 Alpha over MSCI ACWI Distressed/Turnaround IMI (IRR%) 33 Secondary Portfolio

Firm Strategy/Market Geographic Focus • Highly diversified portfolio with positions in Ardian Large Global more than 1,000 underlying private equity funds Lexington Partners Large Global • Secondary market pricing was elevated prior to % of Secondary Portfolio (by NAV) COVID-19 – Only forced sellers transacting right now • Leveraging secondary relationships to operate more tactically Ardian, 35%

Lexington Partners, 65%

34 Secondary Portfolio Performance As of December 31, 2019 • Performance consistent or somewhat 1yr 3yr 5yr 10yr S.I. below the benchmark (excl. 1-year) Secondary 8.6% 12.0% 10.2% 12.7% 15.4% Alpha over public markets (PME) of CA Benchmark 10.6% 13.2% 10.2% 12.3% 12.9% • 680 bps • DPI of 1.1x and TVPI of 1.5x

Distributed/Paid-In Total Value/Paid-In Public Market Equivalent (PME) Comparison (Since Inception) 1.6 1.5x 8.0% 1.4 6.8% 7.0% 1.2 1.1x 6.0% 1.0 5.0% 0.8 4.0% 0.6 3.0% 2.0% 0.4 1.0% 0.2 0.0% 0.0 Alpha over MSCI ACWI Secondary IMI (IRR%) 35 Appendix

36 Private Equity Aggregates Dollar-Weighted Performance (IRRs) as of December 31, 2019

Market Value (in Since Inception Date Millions) 1yr 3yr 5yr 10yr Inception

Total Private Equity 1/27/1989 $12,820 18.7% 16.5% 14.7% 14.3% 9.9%

Custom Iran- and Sudan-free ACWI IMI +300bps 29.3% 14.7% 10.9% 14.3% 10.9%

Private Equity Legacy Portfolio 1/27/1989 $3 -9.3% -7.4% -12.6% -11.7% 3.7%

Custom Iran- and Sudan-free ACWI IMI +300bps 39.0% 14.9% 11.2% 14.7% 10.0%

Private Equity Asset Class Portfolio 8/31/2000 $12,817 18.7% 16.5% 14.7% 15.3% 13.2%

Custom Iran- and Sudan-free ACWI IMI +300bps 29.3% 14.7% 10.9% 14.3% 11.9%

Note: Asset class IRR performance data is provided by Cambridge Associates. Benchmark IRRs are provided by the Florida State Board of Administration. The PE benchmark is currently the Custom Iran- and Sudan-free ACWI IMI + 300bps. From July 2010 through June 2014 the benchmark was the Russell 3000 + 300 bps. Prior to July 2010 , the benchmark was the Russell 3000 + 450 bps. Prior to November 1999, Private Equity was part of the Domestic Equity asset class and its benchmark was the Domestic Equity target index + 750 bps.

37 Private Equity Partnership Performance As of December 31, 2019

Private Investments Partnerships Commitment ($) Current NAV ($) TVPI Net IRR 3i Europartners Vb, L.P. 77,440,017 0 0.97 -0.6% 3i Growth Capital Fund, L.P. 54,440,286 0 0.93 -2.0% ABRY Partners VII, L.P. 75,000,000 0 1.78 14.8% ABRY Partners VIII, L.P. 75,000,000 0 1.26 10.8% Accel-KKR Capital Partners V 50,000,000 16,530,242 1.06 5.0% Accel-KKR Structured Capital Partners II, LP 25,000,000 18,483,354 1.21 14.1% Advent International Global Private Equity VIII-D 150,000,000 108,313,523 1.11 9.0% Advent International GPE VI-D, L.P. 58,000,000 12,983,606 2.12 17.1% Advent International GPE VII-D, L.P. 102,335,815 88,385,317 1.70 15.7% American Industrial Partners Capital Fund VI, L.P. 50,000,000 41,345,580 1.04 3.3% Apax VIII-B, L.P. 157,584,000 0 1.50 13.7% Apollo Investment Fund IX, L.P. 200,000,000 0 NA NA Apollo Investment Fund V, L.P. 150,000,000 0 2.66 38.8% Apollo Investment Fund VI L.P. 200,000,000 0 1.70 9.5% Apollo Investment Fund VII, L.P. 200,000,000 0 1.94 23.0% Apollo Investment Fund VIII, L.P. 200,000,000 169,045,978 1.21 9.7% Ardian LBO Fund VI, L.P 98,905,446 65,217,346 1.06 5.0% Ardian Secondary Fund VI, L.P. 150,000,000 95,108,337 1.39 13.0% Ares Corporate Opportunities Fund III, L.P. 100,000,000 71,841,511 2.49 21.7% Ares Corporate Opportunities Fund IV, L.P. 200,000,000 181,405,792 1.43 12.0% Ares Corporate Opportunities Fund V 200,000,000 79,659,667 0.98 -2.0% ASF VII, L.P. 150,000,000 59,211,156 1.23 15.6% ASF VIII B L.P. 200,000,000 1 0.00 NA

Note: Manager IRR performance data is provided by Cambridge Associates. 38 Private Equity Partnership Performance As of December 31, 2019

Private Investments Partnerships Commitment ($) Current NAV ($) TVPI Net IRR 3i Europartners Vb, L.P. 77,440,017 0 0.97 -0.6% 3i Growth Capital Fund, L.P. 54,440,286 0 0.93 -2.0% ABRY Partners VII, L.P. 75,000,000 0 1.78 14.8% ABRY Partners VIII, L.P. 75,000,000 0 1.26 10.8% Accel-KKR Structured Capital Partners II, LP 25,000,000 15,462,670 1.43 20.7% Accel-KKR Capital Partners V 50,000,000 22,216,467 1.44 27.2% Accel-KKR Capital Partners VI, LP 45,000,000 0 NA NA Advent International GPE VI-D, L.P. 58,000,000 9,171,815 2.11 16.8% Advent International GPE VII-D, L.P. 102,335,815 76,370,468 1.68 13.6% Advent International Global Private Equity VIII-D 150,000,000 172,613,918 1.29 15.0% Advent International GPE IX Limited Partnership 150,000,000 15,623,486 0.91 NA American Industrial Partners Capital Fund VI, L.P. 50,000,000 56,340,131 1.24 11.6% American Industrial Partners Capital Fund VII, L.P. 75,000,000 683,071 0.61 NA Apax VIII-B, L.P. 157,584,000 0 1.50 13.7% Apollo Investment Fund V, L.P. 150,000,000 0 2.66 38.8% Apollo Investment Fund VI L.P. 200,000,000 0 1.70 9.5% Apollo Investment Fund VII, L.P. 200,000,000 0 1.94 23.0% Apollo Investment Fund VIII, L.P. 200,000,000 171,265,216 1.37 11.9% Apollo Investment Fund IX, L.P. 200,000,000 32,361,724 0.87 NA AXA Secondary Fund V, L.P. 100,000,000 1,555,692 1.60 16.4% AXA LBO Fund V, L.P. 76,858,858 31,203,896 1.60 12.6% Ardian Secondary Fund VI, L.P. 150,000,000 77,088,253 1.42 12.3% ASF VII, L.P. 150,000,000 72,360,523 1.27 14.3%

Note: Manager IRR performance data is provided by Cambridge Associates. 39 Private Equity Partnership Performance As of December 31, 2019

Private Investments Partnerships Commitment ($) Current NAV ($) TVPI Net IRR Ardian LBO Fund VI, L.P 98,905,446 103,765,819 1.16 9.4% ASF VIII B L.P. 200,000,000 20,150,100 1.50 5941.4% Ares Corporate Opportunities Fund III, L.P. 100,000,000 20,537,759 2.61 21.7% Ares Corporate Opportunities Fund IV, L.P. 200,000,000 191,283,590 1.55 12.6% Ares Corporate Opportunities Fund V 200,000,000 170,925,496 1.10 8.7% Asia Alternatives FL Investor, LP 200,000,000 204,402,790 1.37 12.8% Asia Alternatives FL Investor II, LP 270,000,000 84,264,974 0.96 -5.3% Asia Alternatives FL Investor III, LP 100,000,000 0 NA NA Atlas Capital Resources II 20,000,000 18,383,905 1.47 20.3% Atlas Capital Resources III, L.P. 40,000,000 13,424,620 1.35 NA BC European Capital IX, L.P. 101,118,077 0 1.09 5.8% Berkshire Fund VIII, L.P. 60,000,000 0 1.70 16.1% Berkshire Fund IX, L.P. 110,000,000 0 1.24 22.3% Blackstone Capital Partners V, L.P. 150,000,000 0 1.60 7.1% Blackstone Capital Partners VI, L.P. 200,000,000 150,780,212 1.62 12.1% Blackstone Capital Partners VII, L.P. 180,000,000 159,802,342 1.26 19.4% Blackstone Capital Partners VIII L.P. 100,000,000 0 NA NA Carnelian Energy Capital II 40,000,000 17,767,590 1.14 11.9% Carnelian Energy Capital III, L.P. 75,000,000 111,751 0.15 NA Charlesbank Equity Fund VII, L.P. 75,000,000 27,115,499 2.23 23.7% Charlesbank Equity Fund VIII, L.P. 85,000,000 74,969,269 1.49 18.4% Charlesbank Equity Fund IX, L.P. 105,000,000 32,187,066 0.93 -8.7% Charlesbank Fund IX Overage Allocation Program 20,000,000 9,800,037 1.06 3.9%

Note: Manager IRR performance data is provided by Cambridge Associates. 40 Private Equity Partnership Performance As of December 31, 2019

Private Investments Partnerships Commitment ($) Current NAV ($) TVPI Net IRR Charterhouse Capital Partners IX, L.P. 90,366,890 0 1.35 13.7% Cortec Group Fund V, L.P. 50,000,000 80,155,293 4.30 32.2% Cortec Group Fund VI, L.P. 75,000,000 67,186,638 1.14 8.1% Cressey & Company Fund IV, L.P. 50,000,000 17,235,019 2.21 22.2% Cressey & Company Fund V LP 75,000,000 84,686,554 1.56 18.6% Cressey & Company Fund VI LP 100,000,000 23,823,136 1.08 10.8% Cressey & Company Overage Fund VI LP 10,000,000 3,617,852 1.25 24.3% CVC European Equity Partners V, L.P. 102,826,253 11,933,780 2.03 16.5% CVC Capital Partners VI, L.P. 102,645,517 90,305,162 1.50 17.2% CVC Capital Partners VII 102,163,598 59,864,390 1.08 19.4% Denham Commodity Partners Fund VI, L.P. 100,000,000 59,357,776 1.09 3.2% DCPF VI Oil and Gas Coinvestment Fund LP 50,000,000 14,846,264 1.65 17.4% Denham Oil & Gas Fund LP 100,000,000 37,261,007 1.03 1.8% European Private Equity Opportunities I LP 49,181,385 20,798,082 0.85 -16.4% European Private Equity Opportunities II LP 77,094,209 0 NA NA EnCap Energy Capital Fund VIII, L.P. 75,000,000 15,585,032 0.76 -8.0% EnCap Energy Capital Fund IX, L.P. 75,000,000 38,546,113 1.23 8.0% EnCap Flatrock Midstream Fund III 50,000,000 41,966,665 1.17 11.7% EnCap Energy Capital Fund X, L.P. 100,000,000 88,733,351 1.19 8.3% EnCap Energy Capital Fund XI, L.P. 100,000,000 23,520,059 0.80 -24.6% EnCap Flatrock Midstream Fund IV 65,000,000 24,533,770 1.12 13.1% Energy Capital Partners II, L.P. 100,000,000 7,049,607 1.48 8.9% Energy Capital Partners III, L.P. 150,000,000 132,761,414 1.20 8.1%

Note: Manager IRR performance data is provided by Cambridge Associates. 41 Private Equity Partnership Performance As of December 31, 2019 Private Investments Partnerships Commitment ($) Current NAV ($) TVPI Net IRR EnerVest Energy Institutional Fund XII, Ltd 60,000,000 272,225 0.64 -19.4% EnerVest Energy Institutional Fund XIII, Ltd. 100,000,000 1 0.09 -97.0% EnerVest Energy Institutional Fund XIV 100,000,000 69,253,975 1.15 5.5% Equistone European Fund V 74,366,455 74,760,627 1.21 6.5% Equistone Partners Europe Fund VI 88,195,865 26,842,300 1.11 18.7% Fairview Ventures Fund II, L.P. 50,000,000 0 1.34 3.9% Fairview Ventures III, L.P. 75,000,000 0 1.83 11.8% Fairview Special Opportunities Fund, L.P. 220,000,000 344,350,083 2.37 20.7% Fairview Special Opportunities Fund II 87,000,000 124,150,446 1.59 19.9% Falfurrias Capital Partners IV, LP 60,000,000 9,844,589 0.97 NA First Reserve Fund XI, L.P. 100,000,000 4,097,890 0.67 -8.1% First Reserve Fund XII, L.P. 200,000,000 30,138,848 0.62 -10.2% Francisco Partners III, L.P. 75,000,000 57,627,816 2.56 21.1% Francisco Partners IV, LP 75,000,000 97,829,781 2.16 29.8% Francisco Partners V, L.P. 75,000,000 43,848,909 1.14 12.7% FS Equity Partners V, L.P. 50,000,000 0 2.10 16.1% FS Equity Partners VI, L.P. 75,000,000 53,188,339 3.03 23.5% FS Equity Partners VII, L.P. 100,000,000 96,948,456 1.14 5.4% FS Equity Partners VIII, L.P. 100,000,000 8,927,193 0.88 NA Grove Street Partners Ventures, L.P. 200,000,000 0 1.56 7.2% Grove Street Partners Buyout, L.P. 150,000,000 30,961,188 1.62 10.3% Grove Street Partners Ventures II, L.P. 200,000,000 311,057,257 2.72 20.2% Grove Street Partners Buyout II, L.P. 200,000,000 180,240,743 1.46 12.3%

Note: Manager IRR performance data is provided by Cambridge Associates. 42 Private Equity Partnership Performance As of December 31, 2019

Private Investments Partnerships Commitment ($) Current NAV ($) TVPI Net IRR Grove Street Partners Ventures III, L.P. 150,000,000 244,105,637 1.79 16.8% Hellman & Friedman Capital Partners V, L.P. 75,000,000 0 2.74 29.4% Hellman & Friedman Capital Partners VI, L.P. 100,000,000 0 1.79 12.6% Hellman & Friedman Capital Partners VII, L.P. 200,000,000 300,534,852 2.92 25.2% Hellman & Friedman Capital Partners VIII, L.P. 200,000,000 220,367,157 1.19 11.8% Hellman & Friedman Capital Partners IX, L.P. 250,000,000 0 NA NA Inflexion Buyout Fund IV, L.P. 52,587,527 42,860,216 1.32 12.3% Inflexion Partnership Capital Fund I, L.P. 26,372,724 19,373,175 1.24 12.9% Inflexion Enterprise Fund IV 19,982,149 22,587,143 1.18 15.6% Insight Venture Partners VIII, L.P. 75,000,000 75,626,007 2.26 18.6% Insight Venture Partners IX, L.P. 75,000,000 154,903,771 2.27 28.9% Insight Venture Partners Growth-Buyout Coinvestment Fund, L.P. 50,000,000 94,413,908 2.42 32.4% Investindustrial VI, L.P. 55,802,326 46,701,441 0.99 -0.8% Investindustrial VII L.P. 76,982,294 664,587 0.57 NA J.H. Whitney VII, L.P. 75,000,000 70,767,235 1.75 13.1% Hahn & Company III L.P., 50,000,000 9,166,241 0.86 NA Hicks, Muse, Tate & Furst Equity Fund V, L.P. 25,000,000 0 1.77 21.0% Kelso Investment Associates VII, L.P. 50,000,000 0 1.73 12.2% Kelso Investment Associates VIII, L.P. 100,000,000 0 1.58 13.8% Kohlberg Investors V, L.P. 45,000,000 0 1.06 1.2% Kohlberg Investors VI, L.P. 50,000,000 0 1.67 15.8% KKR European Fund III, L.P. 58,757,859 0 1.05 1.8% KKR Asian Fund II, L.P. 100,000,000 104,442,186 1.47 12.6%

Note: Manager IRR performance data is provided by Cambridge Associates. 43 Private Equity Partnership Performance As of December 31, 2019 Private Investments Partnerships Commitment ($) Current NAV ($) TVPI Net IRR KKR Asian Fund III, L.P. 150,000,000 88,574,788 1.31 33.2% KPS Special Situations Supplemental Fund III, L.P. 50,000,000 390,273 2.67 22.6% KPS Special Situations Fund IV, L.P. 150,000,000 108,000,600 1.23 16.7% KPS Special Situations Mid-Cap Fund, LP 50,000,000 4,225,134 0.96 NA KPS Special Situations Fund V (A), LP 200,000,000 0 NA NA Green Equity Investors IV, L.P. 100,000,000 0 1.78 10.7% Green Equity Investors V, L.P. 100,000,000 0 1.94 17.4% Green Equity Investors VI, L.P. 200,000,000 0 1.25 12.3% Lexington Co-Investment Partners (Pools I & II), L.P. 500,000,000 0 1.35 6.3% Lexington Co-Investment Partners II (Pools III & IV), L.P. 500,000,000 19,720,969 2.20 23.5% Lexington Capital Partners IV, L.P. 200,000,000 0 1.78 20.2% Lexington Capital Partners V, L.P. 100,000,000 564,029 1.68 18.9% Lexington Capital Partners VI, L.P. 100,000,000 7,913,401 1.36 6.5% Lexington Co-Investment Partners 2005 (Pools I & II), L.P. 500,000,000 83,567,879 1.43 5.2% Lexington Capital Partners VII, L.P. 200,000,000 46,317,178 1.58 13.9% Lexington Co-Investment Partners 2005 (Pool III), L.P. 500,000,000 365,174,546 1.83 17.5% Lexington Middle Market Investors III, L.P. 100,000,000 54,059,904 1.46 15.9% Lexington Capital Partners VIII, L.P. 250,000,000 178,204,207 1.33 17.1% Lexington Co-Investment Partners 2005 Pool IV 500,000,000 488,098,489 1.27 20.3% LCP FSBA Co-Invest Account 200,000,000 90,102,003 1.46 28.2% Lexington Capital Partners IX, L.P. 250,000,000 31,444,010 1.78 NA Lexington Co-Investment Partners V, L.P. 150,000,000 0 NA NA Lightbay Investment Partners LP 50,000,000 12,168,402 0.84 -38.8%

Note: Manager IRR performance data is provided by Cambridge Associates. 44 Private Equity Partnership Performance As of December 31, 2019

Private Investments Partnerships Commitment ($) Current NAV ($) TVPI Net IRR Lindsay, Goldberg & Bessemer II, L.P. 100,000,000 0 1.48 8.0% Lindsay, Goldberg & Bessemer III, L.P. 100,000,000 0 1.18 6.8% Livingbridge Enterprise 3 LP 32,305,168 0 NA NA Montagu Private Equity IV, L.P. 56,819,796 9,248,255 1.59 13.7% Montagu V 111,109,877 85,759,213 1.21 13.3% Montagu VI L.P. 85,323,261 0 NA NA New Mountain Partners II, L.P. 50,000,000 536,443 2.04 13.6% New Mountain Partners III, L.P. 100,000,000 78,089,775 2.20 13.5% New Mountain Partners IV, L.P. 100,000,000 0 1.59 22.1% OpCapita Consumer Opportunities Fund II 38,251,366 31,097,313 1.11 6.4% OpCapita Consumer Opportunities Fund III, L.P. 38,682,154 1 0.00 NA OpenView Venture Partners IV, L.P. 25,000,000 41,295,020 1.75 20.2% OpenView Venture Partners V, L.P. 25,000,000 25,273,585 1.45 38.6% OpenView Venture Partners VI, L.P. 30,000,000 0 NA NA PAI Europe V, L.P. 42,563,071 0 1.30 7.0% Pantheon Venture Partners II, L.P. 100,000,000 0 1.52 6.8% Pantheon Global Secondary Fund IV, L.P. 100,000,000 17,945,823 1.59 13.5% Peak Rock Capital Credit Fund II 20,000,000 1,699,310 0.95 -11.8% Peak Rock Capital Fund II, L.P. 80,000,000 22,119,725 1.26 29.9% Permira European Fund IV, L.P. 64,037,705 0 1.56 8.3% Permira V, LP 136,860,690 141,452,235 2.34 23.6% Platinum Equity Capital Partners, L.P. 50,000,000 0 2.91 60.2% Platinum Equity Capital Partners II, L.P. 75,000,000 5,391,869 1.64 12.5% Note: Manager IRR performance data is provided by Cambridge Associates. 45 Private Equity Partnership Performance As of December 31, 2019

Private Investments Partnerships Commitment ($) Current NAV ($) TVPI Net IRR Platinum Equity Capital Partners III, L.P. 200,000,000 105,835,663 1.85 29.3% Pomona Capital VI (Combined), L.P. 50,000,000 2,322,405 1.31 4.6% Pomona Capital VII (Combined), L.P. 50,000,000 0 1.31 7.9% Post Oak Energy Partners II, LP 25,000,000 28,931,224 1.58 19.9% Post Oak Energy Partners III, LP 60,000,000 32,209,419 1.28 15.5% Post Oak Energy Partners IV, LP 60,000,000 16,819,366 0.84 -20.8% Providence Equity Partners VI, L.P. 50,000,000 0 1.46 7.3% Providence Equity Partners VII, L.P. 200,000,000 0 1.61 21.2% RCP Advisors Fund IV, L.P. 50,000,000 6,049,344 1.91 13.3% RCP Advisors Fund V, L.P. 50,000,000 15,432,853 1.89 15.1% RCP Advisors Fund VI, L.P. 50,000,000 25,253,561 2.03 16.3% RCP Advisors Fund VII, L.P. 50,000,000 43,307,143 2.00 18.4% RCP Advisors Fund VIII, L.P. 50,000,000 47,201,029 1.65 17.6% RCP Advisors Fund IX, L.P. 50,000,000 49,324,425 1.40 15.0% RCP Advisors Fund X 50,000,000 41,441,212 1.12 6.7% Ripplewood Partners II, L.P. 100,000,000 0 1.19 6.2% Rubicon Technology Partners L.P. 50,000,000 29,894,374 1.79 20.6% Rubicon Technology Partners II 76,000,000 56,108,336 1.26 23.3% Searchlight Partners II, L.P. 100,000,000 86,274,700 1.31 15.3% Searchlight Capital III, L.P. 150,000,000 0 NA NA Silver Lake Partners IV, L.P. 100,000,000 131,844,491 1.91 25.0% Silver Lake Partners V, L.P. 140,000,000 74,243,522 1.16 15.3% Siris Partners III 75,000,000 50,848,836 1.21 11.5%

Note: Manager IRR performance data is provided by Cambridge Associates. 46 Private Equity Partnership Performance As of December 31, 2019

Private Investments Partnerships Commitment ($) Current NAV ($) TVPI Net IRR Siris Partners IV, L.P. 75,000,000 40,265,786 1.16 NA Snow Phipps II, L.P. 50,000,000 0 1.37 14.6% Trident V, L.P. 75,000,000 46,106,201 1.77 11.9% Trident VI Fund, L.P. 75,000,000 87,537,133 1.78 21.7% Trident VII, L.P. 75,000,000 69,884,514 1.23 19.3% Trident VIII, L.P. 100,000,000 0 NA NA Summa Equity Fund II 31,350,747 0 NA NA Summit Partners Growth Equity Fund VIII-A, L.P. 125,000,000 0 1.52 32.0% Silicon Valley Bank SIF V, L.P. 125,000,000 182,584,005 2.50 18.2% Silicon Valley Bank SIF V-A Opportunity, L.P. 50,000,000 98,905,437 3.31 23.5% Silicon Valley Bank SIF VI-A 125,000,000 204,397,329 2.02 18.0% Silicon Valley Bank Capital Partners III, L.P. 22,500,000 36,364,950 1.75 16.7% Silicon Valley Bank SIF VII, L.P. 125,000,000 189,797,548 1.71 20.5% Silicon Valley Bank Overage Fund 100,575,334 111,449,581 1.46 9.5% Silicon Valley Bank SIF VIII 100,000,000 93,415,017 1.35 23.9% Silicon Valley Bank Capital Partners IV 25,000,000 12,817,255 1.03 2.6% SVB Strategic Investors Fund IX, L.P. 75,000,000 16,802,409 0.93 -11.6% TA Associates XI, L.P. 100,000,000 0 1.55 19.7% Carlyle Partners III, L.P. 200,000,000 0 2.30 22.8% Carlyle Partners IV, L.P. 75,000,000 1,940,353 2.03 13.1% Carlyle Europe Partners III, L.P. 66,000,377 0 1.61 12.9% Carlyle Partners V, L.P. 200,000,000 0 1.81 13.5% Carlyle Asia Growth Partners IV, L.P. 75,000,000 15,720,296 1.13 2.9% Note: Manager IRR performance data is provided by Cambridge Associates. 47 Private Equity Partnership Performance As of December 31, 2019 Private Investments Partnerships Commitment ($) Current NAV ($) TVPI Net IRR Carlyle Partners VI, L.P. 133,400,000 126,248,372 1.39 12.3% Carlyle Partners VII 100,000,000 23,273,948 0.92 -11.8% The Energy & Minerals Group Fund III, L.P. 85,000,000 53,115,622 0.73 -7.2% Gores Capital Partners, L.P. 50,000,000 0 1.30 8.4% Gores Capital Partners II, L.P. 50,000,000 0 1.14 3.8% Gores Capital Partners III, L.P. 125,000,000 0 1.00 -0.1% Riverside Capital Appreciation Fund 2008, L.P. 75,000,000 0 1.32 8.2% Riverside Europe Fund IV, L.P. 49,699,937 0 1.04 1.5% Riverside Capital Appreciation Fund VI, L.P. 75,000,000 0 1.43 14.4% Thoma Cressey Fund VIII, L.P. 50,000,000 0 2.93 18.3% Thoma Bravo Fund IX, L.P. 50,000,000 511,237 4.08 48.1% Thoma Bravo Fund X, L.P. 100,000,000 65,978,351 3.56 39.0% Thoma Bravo Overage Fund, L.P. 45,000,000 44,515,126 3.28 34.1% Thoma Bravo Fund XI, L.P. 100,000,000 176,683,741 2.52 28.5% Thoma Bravo Special Opportunities Fund II, L.P. 50,000,000 62,082,190 2.08 22.3% Thoma Bravo Discover Fund, L.P. 50,000,000 63,973,664 1.93 34.7% Thoma Bravo XII 150,000,000 209,917,442 1.48 19.3% Thoma Bravo Discover Fund II L..P. 75,000,000 38,442,927 1.01 1.8% Thoma Bravo Fund XIII, L.P. 150,000,000 58,365,737 1.08 NA Thomas H. Lee Equity Fund V, L.P. 50,000,000 0 1.63 13.4% Thomas H. Lee Equity Fund VI L.P. 75,000,000 0 1.89 12.3% Tiger Iron Special Opportunities Fund, L.P. 191,877,777 120,539,890 1.13 10.1% Tiger Iron Special Opportunities Fund II, L.P. 61,000,000 15,608,867 1.20 NA Note: Manager IRR performance data is provided by Cambridge Associates. 48 Private Equity Partnership Performance As of December 31, 2019

Private Investments Partnerships Commitment ($) Current NAV ($) TVPI Net IRR Paul Capital Top Tier Investments II, L.P. 120,000,000 0 1.34 4.3% Paul Capital Top Tier Investments III, L.P. 75,000,000 10,991,654 1.36 5.0% Paul Capital Top Tier Investments IV, L.P. 100,000,000 0 2.00 13.9% Paul Capital Top Tier Special Opportunities Fund, L.P. 12,450,000 2,983,165 0.76 -3.9% TowerBrook Investors II, L.P. 75,000,000 909,549 1.80 9.4% TowerBrook Investors III, L.P. 150,000,000 12,550,442 1.43 8.9% TowerBrook Investors IV, L.P. 190,000,000 167,426,753 1.47 23.2% TowerBrook Investors V, L.P. 200,000,000 0 NA NA TPG Partners IV, L.P. 50,000,000 0 1.89 14.3% TPG Partners V, L.P. 100,000,000 0 1.18 2.6% TPG Partners VI, L.P. 200,000,000 0 1.42 11.3% TPG Growth Fund II, L.P. 100,000,000 83,192,702 1.88 15.4% TPG Growth Fund III, L.P. 100,000,000 83,145,271 1.40 19.6% The Rise Fund I, L.P. 25,000,000 18,498,409 1.12 10.9% TPG Growth IV, L.P. 100,000,000 51,894,717 0.99 -0.6% The Rise Fund II, L.P. 50,000,000 0 NA NA CVE-Kauffman Fellows Endowment Fund II, L.P. 100,000,000 182,758,268 2.57 15.5% TrueBridge FLSBA Special Purpose, LLC 47,972,078 86,183,989 2.83 19.9% TrueBridge-Kauffman Fellows Fund III, L.P. 125,000,000 214,000,813 1.96 16.3% TrueBridge Special Purpose II (F) 22,500,000 39,894,350 2.28 23.0% TrueBridge Capital FSA, LLC 69,650,000 76,931,159 1.40 26.1% Truebridge-Kauffman Fellows Endowment Fund IV 125,000,000 165,627,618 1.49 23.5% TrueBridge Capital Partners Fund V, L.P. 100,000,000 41,069,953 1.03 4.2% Note: Manager IRR performance data is provided by Cambridge Associates. 49 Private Equity Partnership Performance As of December 31, 2019

Private Investments Partnerships Commitment ($) Current NAV ($) TVPI Net IRR TrueBridge Capital Partners Fund VI, L.P. 100,000,000 662,533 0.66 NA W Capital Partners III, L.P. 75,000,000 47,284,860 1.37 9.8% Warburg Pincus Private Equity IX, L.P. 75,000,000 3,460,474 1.74 9.8% Warburg Pincus Private Equity X, L.P. 150,000,000 43,190,478 1.69 9.0% Warburg Pincus Private Equity Fund XI, L.P. 200,000,000 125,353,218 1.64 12.8% Warburg Pincus Private Equity Fund XII, L.P. 87,000,000 99,337,200 1.27 13.6% Warburg Pincus China 68,000,000 74,168,766 1.29 17.8% Warburg Pincus China-Southeast Asia II, L.P. 68,000,000 2,019,772 0.85 NA Waterland Private Equity VI Overflow Feeder Fund L.P. 28,974,931 0 0.00 -100.0% Waterland Private Equity VI, L.P. 61,110,432 46,596,024 1.41 17.2% Waterland Private Equity Fund VII C.V. 113,659,612 13,672,028 0.91 -10.8% Wellspring Capital Partners III, L.P. 50,000,000 0 2.19 27.1% Wellspring Capital Partners IV, L.P. 75,000,000 0 1.40 6.6% Wellspring Capital Partners V, L.P. 150,000,000 0 1.57 16.3% Willis Stein & Partners III, L.P. 100,000,000 0 1.01 0.1% WindRose Health Investors V, L.P. 50,000,000 5,698,706 0.90 NA

Note: Manager IRR performance data is provided by Cambridge Associates. 50 Private Equity Partnership Performance As of December 31, 2019 Private Investments Partnerships (Legacy Portfolio) Commitment ($) Current NAV ($) TVPI Net IRR Apollo Investment Fund IV, L.P. 250,000,000 0 1.52 6.8% Carlyle Partners II, L.P. 200,000,000 0 2.30 20.1% Centre Capital Investors II, L.P. 200,000,000 0 0.81 -4.1% Chartwell Capital Investors II, L.P. 50,000,000 0 1.34 4.7% Corporate Partners, L.P. 149,192,410 0 2.13 12.4% Cypress Equity Group Trust 15,000,000 0 2.15 16.1% Green Equity Investors III, L.P. 60,000,000 0 2.31 21.9% Hicks, Muse, Tate & Furst Equity Fund III, L.P. 200,000,000 0 0.89 -1.8% Hicks, Muse, Tate & Furst Equity Fund IV, L.P. 400,000,000 0 0.63 -8.8% Liberty Partners Pool I 205,686,600 0 2.35 20.7% Liberty Partners Pool II 359,789,821 0 1.61 10.7% Liberty Partners Pool III 506,208,481 0 1.02 0.4% Liberty Partners Pool IV 195,075,745 0 0.67 -19.2% Liberty Partners Pool V 329,664,359 0 1.14 2.7% Liberty Partners Pool VI 595,484,687 13,000 0.86 -6.6% Liberty Partners Pool VII 290,808,542 2,559,626 0.85 -7.3% Liberty Partners Group II, L.P. 9,766,830 0 0.00 -100.0% Ripplewood Partners, L.P. 100,000,000 0 1.74 13.6% Thomas H. Lee Equity Fund IV, L.P. 100,000,000 0 0.87 -2.6% TSG Capital Fund III, L.P. 100,000,000 0 0.54 -13.7% Willis Stein & Partners II, L.P. 40,000,000 0 0.58 -9.7% Note: Manager IRR performance data is provided by Cambridge Associates. 51 STATE BOARD OF ADMINISTRATION OF FLORIDA PRIVATE EQUITY UPDATE

JUNE 2020 STATE BOARD OF ADMINISTRATION OF FLORIDA PRIVATE EQUITY UPDATE

JUNE 2020 PORTFOLIO PERFORMANCE Performance Meeting Long-Term Objectives As of December 31, 2019

 The FSBA PE Portfolio has strongly outperformed the benchmark across 3 and 5 year time periods on both a time- weighted and dollar-weighted basis.

Net Managed and Benchmark Returns Net Managed and Benchmark Returns Time Weighted IRRs Dollar Weighted IRRs

30.0 30.0

20.0 20.0

10.0 10.0

0.0 0.0 Return(%) Return(%) -10.0 -10.0

-20.0 -20.0

-30.0 -30.0 Since Inception Last 10 Years Last 5 Years Last 3 Years Since Inception Last 10 Years Last 5 Years Last 3 Years

PE Portfolio Benchmark PE Portfolio Benchmark

| 4 Note: Time weighted performance data (above left graph) is provided by the Florida State Board of Administration and BNY Mellon. Dollar weighted performance data (above right graph) is provided by C|A. Benchmark performance data – both time weighted and dollar weighted – is provided by the Florida State Board of Administration. The Private Equity benchmark is currently the Custom Iran- and Sudan-free ACWI IMI + 300 basis points. From July 2010 through June 2014, the benchmark was the Russell 3000 + 300 basis points. Prior to July 2010, the benchmark was the Russell 3000 + 450 basis points. Prior to November 1999, Private Equity was part of the Domestic Equities asset class and its benchmark was the Domestic Equities target index + 750 basis points. Performance By Sub Asset Class - IRRs As of December 31, 2019

 Strong performance across strategies; non-U.S. growth equity, continues to emerge from the j-curve.

Since Inception 10 Years 5 Years 3 Years 25.0%

20.0% 19.4 18.217.8 18.1 16.5 16.5 17.0 16.5 15.4 15.9 15.716.0 15.4 14.714.7 15.3 14.7 15.0% 14.1 14.3 12.6 12.6 13.2 12.7 11.8 12.0 11.612.0 10.2 10.0% 8.6 9.2 7.0 6.7

5.0% 3.7

0.0%

-5.0%

-7.4 -10.0%

-11.7 -12.6 -15.0%

■ U.S. Venture Capital ■ U.S. Growth Equity ■ Non-U.S. Growth Equity ■ U.S. Buyouts ■ Non-U.S. Buyouts ■ Distressed Securities ■ Secondaries ■ Legacy ■ Total PE Asset Class Portfolio

| 5 Note: Asset class IRR performance data is provided by C|A, dollar weighted, and net of fees. Performance by Vintage Year - IRRs As of December 31, 2019

35.0%

30.0%

25.0%

20.0%

15.0% IRR

10.0%

5.0%

0.0%

-5.0%

-10.0% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

FSBA IRR CA Median | 6 Note: IRR performance data is provided by C|A, dollar weighted, and net of fees. Light shading indicates vintage years too young to have meaningful performance. CA median represents a weighted average of fund medians based on paid in capital per vintage year. Performance Relative to C|A Clients As of September 30, 2019

 The PE Asset Class Portfolio has consistently outperformed relative to other C|A client private investment portfolios

10 Years 5 Years 3 Years 1 Year FSBA Total PE Asset Class Portfolio 15.5% 14.5% 16.4% 12.1% Quartile Ranking 1st 1st 1st 2nd FSBA PE Total Portfolio 14.5% 14.5% 16.4% 12.1% Quartile Ranking 1st 1st 1st 2nd

S&P 500 AACR 13.2% 10.8% 13.4% 4.3% MSCI ACWI AACR 8.3% 6.7% 9.7% 1.4%

Sample Size 420 480 507 531

Notes: AACR refers to the Average Annual Compound Return of the index, which represents the annualized rate at which capital has compounded over time. For quartile rankings, FSBA returns are compared to CA client returns. All returns are End-to-End IRRs. CA client private investment returns include private investment fund programs with a least 10 private investment funds per portfolio that received | 7 performance reports as of 09/30/2019. Terminated client returns are not included due to unavailability of data. The performance of CA’s clients may be attributable to factors other than CA’s advice because CA’s clients may or may not follow this advice. Similarly, client performance may include investments made prior to client’s relationship with CA. Past performance is not necessarily a guide to future performance. The performance data is net of investment managers’ fees but has not been adjusted to reflect CA’s advisory fees and other expenses that a client may incur. EXPOSURES AND PACING PE Portfolio Currently At Target As of December 31, 2019

 The PE Portfolio’s NAV exposure stood at ~8.2% of FRS total assets, above the 6% target allocation due to an uptick in NAV and a slightly lower total pool value.

14%

NAV 12% Target

NAV + Unfunded 10%

8%

6%

4%

2%

0%

Source: FRS annual market values were provided by FSBA as of December 31, 2019. | 9 Note: This data is based on aggregating cash flows for paid-in capital and distributions as tracked by C|A. Unfunded capital amounts may not match C|A performance reports due to fees, recallable distributions, and secondary sale transactions. Based on December 31, 2019 data. Includes subsequent commitments through March 31, 2020. Total PE Asset Class Portfolio: $1.75 billion Pacing Exposure Modeling

10%

Policy High 9% Total AssetPEClass Portfolio (as % of FRS PensionPlan) $5000.0 Downturn No Growth 8%

$4000.0 7% Base Case Policy 6% Target

$3000.0 5%

4% $2000.0 3%

Policy Low 2% $1000.0

1%

$0.0 0%

Historical Commitments ($mil) Modeled Commitments ($mil)

Note(s): Assumptions used in C|A’s private equity exposure modeling are proprietary. Estimates provided by the modeling are illustrative only (not predictive) and intended to help guide (not strictly determine) commitment pacing decisions. Historical data as of December 31, 2019. Commitments made during 1Q are assumed to be 100% unfunded as of March 31, 2020. | 10 FSBA Private Equity Program Status As of December 31, 2019

Total PE Asset Class Portfolio ($M) $40,000  1.6x Since the PE Asset Class Portfolio’s inception, $28.2 $35,000 billion has been committed to 273 funds. $30,000 $13.1 billion “value creation”  Managers have called ~77% of commitments ($21.6 $25,000 $28,199 $21,892 billion) and distributed $21.9 billion, representing a D/PI $20,000 (Distributions to Paid In) ratio of 1.01X. $15,000  $10,000 $21,642 “Value Creation” represents the dollar amount in excess $12,817 of paid in capital, generated by the portfolio in the form $5,000 of distributions and NAV. Since inception, the PE Asset $0 Class Portfolio has created $13.1 billion of “value”. Cumulative Commitment NAV Cumulative Distributions Cumulative Paid In

Total Private Equity Portfolio ($M) $45,000 1.5x $40,000

$35,000 $13.7 billion “value creation”  Since inception, the Total PE Portfolio has committed $30,000 $32,180 $32.2 billion to 312 funds. $25,000 $27,713 $20,000  Managers have called ~83% of total commitments, or

$15,000 $26.8 billion, and distributed $27.7 billion, for a DPI of $26,788 $10,000 1.03X. $12,820 $5,000  Since inception, the total program has created $13.7 $0 billion of “value”. Cumulative Commitment NAV Cumulative Distributions Cumulative Paid In Note: This data is based on aggregating cash flows for paid-in capital and distributions as tracked by C|A. Difference between cumulative commitment and cumulative paid-in represents unfunded capital. Unfunded capital | 11 amounts may not match C|A performance reports due to recallable distributions and secondary sales (Project Prime, Project Spear, Project Buccaneer, and Project Palace). Based on final December 31, 2019 data. Includes subsequent commitments through March 31, 2020. Private Equity Cash Flows As of December 31, 2019

3,750 3,370.8 3,500 3,250 3,000 2,729.6 2,750 2,598.4 2,408.6 2,500 2,232.5 2,250 1,899.2 2,000 1,734.7 1,750 1,500 1,343.1 1,139.1 1,250 904.7 916.0 931.0 979.0 1,000 826.0 589.6 613.4 750 454.7 Cash Flow ($M) 391.3 395.5 500 346.0 309.4 250 0 -250 -500 -378.0 -342.4 -750 -529.9 -520.4 -1,000 -727.1 -729.6 -687.7 -965.7 -976.7 -1,250 -1,086.1 -1,063.9 -1,036.0 -1,500 -1,186.4 -1,243.1 -1,750 -1,489.4 -2,000 -1,919.0 -1,879.9 -2,250 -1,951.8 -2,032.7 -2,116.9 -2,500 -2,177.6 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Cash Fl ows ( $mm) Yea r : 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Net: -417.7 76.7 247.2 -338.3 374.8 228.4 162.4 -155.1 -237.9 -124.9 -422.6 -207.4 -146.3 491.7 230.9 679.5 -52.6 696.9 1,254.0| 12 352.7 Cum : -2,184.7 -2,108.0 -1,860.8 -2,199.1 -1,824.3 -1,596.0 -1,433.5 -1,588.6 -1,826.5 -1,951.4 -2,374.0 -2,581.4 -2,727.7 -2,236.1 -2,005.1 -1,325.7 -1,378.3 -681.4 572.6 925.2 Total PE Asset Class Portfolio Exposure As of December 31, 2019

EXPOSURE BY GEOGRAPHY COMMENTARY

 100% 1% 1% 1% 1% The Total PE Asset Class portfolio is overweight North 9% 10% 90% 14% 20% America vs. other geographies relative to benchmarks. 80% 17% 19% Asia, in particular, is underweight. 20% 70% 18% Africa 60%  Latin America Sector exposures are roughly aligned with the CA PE/VC 50% Middle East benchmarks. Healthcare exposure has become a larger 40% 72% 69% Other Geo portion of the benchmarks. 30% 63% 60% Asia 20%  Europe The portfolio is mostly in line across investment stages 10% North America relative to the CA PE/VC Benchmark. --- FSBA NAV FSBA CA PE/VC MSCI ACWI IMI NAV+Unfunded Benchmark EXPOSURE BY SECTOR EXPOSURE BY STAGE

100% 100% 1% 3% 2% 1% 2% 2% 4% Special Situations/Other Stage 8% 8% 8% 90% 90% 14% 17% 14% 19% 9% 9% 9% Fund of Funds 80% 4% 80% 12% 11% 16% Other 19% 70% 13% 70% 21% Secondaries Financials 23% 12% 14% 60% 60% 15% Credit/Debt 19% Energy/Natural Resources 50% 13% 50% 15% Healthcare Public 15% 40% 40% 18% Consumer/Retail Early Stage 30% 58% 63% 30% Mfg/Industrial 54% 44% 20% Late Stage/Growth 20% 40% 36% IT/Media 27% 10% 10% Buyout ------FSBA NAV FSBA NAV+UnfundedCA PE/VC Benchmark MSCI ACWI IMI FSBA NAV FSBA CA PE/VC NAV+Unfunded Benchmark Sources: Cambridge Associates and MSCI, Inc. 13 Note: Excludes exposures to Project Buccaneer, Project Spear, Project Palace, Project Prime, and Legacy funds. CA PE/VC Benchmark represents the Cambridge Associates Global Private Equity and Venture Capital Benchmark. Benchmark weights are calculated based on aggregated underlying investment positions. These positions are tracked for Venture Capital, Growth Equity, Buyout, Mezzanine, and Private Equity Energy funds only. Includes subsequent commitments through March 31, 2020. “Other” includes exposure categorized as Real Estate, Fund of Funds, Secondaries, and Other. As NAV has grown over the past five years, portfolio has Increasingly Diversified Across Sub-Asset Classes become increasingly diversified by geography and asset class.

FSBA’s PI Asset Allocation by NAV Over Time As at December 31, 2019. Calculated in USD.

100% $13.0

$12.0 90% $11.0 80% $10.0

70% $9.0

60% $8.0 $7.0 50% $6.0 NAV (%) NAV NAV ($B)

40% $5.0

30% $4.0

$3.0 20% $2.0 10% $1.0

0% $.0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Distressed U.S. Growth Equity Secondaries U.S. Venture Capital

Non-U.S. Buyouts Non-U.S. Growth Equity U.S. Buyouts Total NAV | 14 Note: Drop in 2018 due to recent secondary sale. Excludes exposures to Project Buccaneer, Project Spear, Project Palace, and Project Prime. Current NAV of $12.8B. Look Through on Energy Exposure As of December 31, 2019

ENERGY NAV BY SUB-SECTOR COMMENTS Service Related 5% Other 17%  Across the Total PE Asset Class portfolio, energy Exploration 17% Mining exposure accounts for 8% of NAV. 2%  Exposures are generally in-line with C|A’s Private Equity Mid/ Downstream Energy benchmark. Services and mining are 16% underweight due to the volatility associated with those sectors.

Acquisition 43% ENERGY NAV + UNFUNDED BY SUBSECTOR C|A PRIVATE EQUITY ENERGY BENCHMARK BY SUB-SECTOR Service Related Other 5% Service Related Other 15% 20% 20% Exploration Mining 17% 4% Mining 6% Mid/ Downstream 15% Exploration 23% Mid/ Downstream 19%

Acquisition Acquisition 44% 12% Note: Generalist funds without an energy exposure breakdown have been included in “Acquisition.” FSBA data uses market values and exposures as of December 31, 2019. Benchmark weights are calculated based on aggregated 15 underlying investment positions. Excludes exposures to Project Buccaneer, Project Spear, Project Palace, Project Prime, and Legacy funds. Includes subsequent commitments through March 31, 2020. Source: Cambridge Associates. CURRENT MARKET ENVIRONMENT Its still early to determine impact on PE

CUMULATIVE TIME TO RECOVERY- USPE Tech Wreck: Vintages 1994–1999  GFC: Vintages 2001–2006 30%

20%

10% We are here.

USPE GFC USPE TECH WRECK 0%

-10% Cumulative Percent Change

-20%

-30% 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 Quarters Since Initial Decline Sources: Cambridge Associates LLC Private Investments Database. Notes: Data as of September 30, 2019. Returns are net of fees, expenses and carried interest. Private equity includes buyout and growth equity funds. Cumulative TVPI represents total change in pooled TVPI over the period for US buyout and growth equity funds. Tech wreck cumulative return calculated for vintage years 1994-1999, starting 17 with quarter ending 3/31/2000; initial decline (quarter zero) occurred in quarter ending 6/30/2000. GFC cumulative return calculated for vintage years 2001-2006, starting with quarter ending 3/31/2007; initial decline (quarter zero) occurred in quarter ending 9/30/2007. Copyright © 2020 by Cambridge Associates LLC. All rights reserved. Yet, in times like these, PE has performed well

US PRIVATE EQUITY: NET POOLED IRRS AND MEDIAN FUND IRRS BY VINTAGE YEAR As of September 30, 2019 45%

40%

35% 1993

30% 2009 25% U.S. PE POOLED RETURN 2001

20% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Net IRR by Vintage Year Vintage by IRRNet 15%

10% U.S. PE MEDIAN RETURN

5%

0% U.S. PE Pooled Return U.S. PE Median Return

Source: Cambridge Associates LLC Private Investments Database. 18 Notes: Pooled and median net internal rates of return of US private equity funds by vintage year. Private equity includes buyouts and growth equity. Vintage year funds after 2016 are considered too young to have produced meaningful results. Private equity includes growth equity and buyout. Copyright © 2020 by Cambridge Associates LLC. All rights reserved. Recession-era investments have performed well

MULTIPLE OF INVESTED CAPITAL CAPITAL LOSS RATIO

2.3x 1.8x US BUYOUTS 23%

11%

3.0x 48%

37%

US VENTURE 1.9x CAPITAL

Pre-Crisis Recessionary Periods

Source: Cambridge Associates LLC Private Investments Database. 19 Notes: Data as of September 30, 2019. Analysis is based on 1,930 realized investments made by US buyout funds and 6,764 realized investments made by US venture capital funds in years considered to be pre-crisis or recessionary periods. “Pre-crisis” years are 1989, 1990, 2006, and 2007 and recessionary periods represent 1991, 1992, 2009, and 2010. Capital Loss Ratio is defined as the percentage of capital in deals realized below cost, net of any recovered proceeds, over total invested capital. Returns are gross of fees and expenses. Copyright © 2020 by Cambridge Associates LLC. All rights reserved. Notes: Notes: Sources: Sources: Vintages: CUMULATIVE During the GFC, v return return 3/31/2007 3/31/2007 represents represents Data Data Cumulative Percent - - - - - 10% 20% 50% 40% 30% 20% 10% Cambridge Cambridge Change 0% for for as as 2001– US US of of 2012 07 07 07 07 08 08 08 08 09 09 09 09 00 00 00 00 01 01 01 01 2012 2011 2011 2011 2011 2010 2010 2010 2010 2009 2009 2009 2009 2008 2008 2008 2008 2007 2007 2007 2007 - Jun Mar September September total total private private - 2006 TIME Associates gain/loss gain/loss - Sep 2012 2012 - Jun equity equity TO 30, 2019. 2019. 30, Time - Sep in in enture and venture venture and LLC value value RECOVERY eid 2007– period: Dec 2012 S&P Private Investments Investments Private Dec Returns are Returns of of - $1 - capital 500 invested invested capital capital Mar Cumulative - net net - funds funds 2012 USPE, at at - Jun of of returns the the fees, fees, Database Database in in beginning of of beginning vintage vintage - Sep expenses expenses USVC, Return suffered and Standard Standard and er 2001– years Dec the the and AND - period. Cumulative Cumulative period. carried carried Mar S&P - 2006. less & interest. interest. - Jun Poor's. 500 Cumulative Private equity Private - Sep represents TVPI represents Dec - TVPI includes includes Mar total total - USPE buyout buyout change change - Jun and growth and - Sep in in pooled pooled Dec equity funds. funds. equity TVPI over Cumulative - Mar - the the S&P - Jun period period 500 TVPI - Sep beginning beginning cumulative cumulative USVC Dec - Mar - 20 Capital calls declined significantly during the GFC

U.S. PRIVATE EQUITY: LP CASH FLOWS AND NAV – CALENDAR YEARS 2007-2012 As of September 30, 2019 45 500

40 450

400 35

350 Billions) (USD NAV LP 30 300 25 250 20 200 15 150 LP Cash Flows (USD (USD FlowsLP Billions) Cash 10 100

5 50

- - 3/31/2007 6/30/2007 9/30/2007 3/31/2008 6/30/2008 9/30/2008 3/31/2009 6/30/2009 9/30/2009 3/31/2010 6/30/2010 9/30/2010 3/31/2011 6/30/2011 9/30/2011 3/31/2012 6/30/2012 9/30/2012 12/31/2007 12/31/2008 12/31/2009 12/31/2010 12/31/2011 12/31/2012

LP Contributions (LHS) LP Distributions (LHS) LP Ending NAV (RHS)

Source: Cambridge Associates LLC. 21 Notes: Includes funds formed between 2000-2012 based on date of legal inception. Private equity includes buyout and growth equity funds. Cash flows are net of recallable returns of capital.

Copyright © 2020 by Cambridge Associates LLC. All rights reserved. FRS INVESTMENT PLAN and MyFRS FINANCIAL GUIDANCE PROGRAM FRS INVESTMENT PLAN REVIEW

Office of Defined Contribution Programs

Daniel Beard, Chief of Defined Contribution Programs Mini Watson, Director of Administration Walter Kelleher, Director of Educational Services

Investment Advisory Council Meeting June 2020 FLORIDA RETIREMENT SYSTEM (FRS) PENSION PLAN AND INVESTMENT PLAN

• The State of Florida offers its public employees the option of participating in one of two retirement plans.

Traditional Defined Benefit Plan 401(a) Defined Contribution Plan • Funded by mandatory employer and • Funded by mandatory employer and employee contributions employee contributions • Has been in existence since the early 1970’s • Has been in existence since July 2002 • Assets: $148 B (as of 3/31/20) • Assets: $10 B (as of 3/31/20)

4 PENSION PLAN AND INVESTMENT PLAN

• New employees, at the time of hire, make an initial choice to enroll in one of the two Plans – the Pension Plan or Investment Plan.

• The Division of Retirement within the Department of Management Services is responsible for the day-to-day administration of the Pension Plan.

• The State Board of Administration (SBA) is responsible for the day-to-day administration of the Investment Plan. – All major components – recordkeeping, custodian services, benefit payments are outsourced as mandated by Florida Statutes.

5 GOVERNANCE

• Section 121.4501 – Florida Legislature passed legislation in 2000 mandating the establishment of a defined contribution plan under the FRS. It also included provisions for an educational component for ALL FRS employees. – Directed that the State Board of Administration Trustees (Trustees) would be the responsible governing entity.

• Executive Director & Chief Investment Officer (ED & CIO) – Delegated authority by Trustees to oversee the implementation and ongoing oversight of the Investment Plan.

• Deputy Executive Director and Deputy Chief Investment Officer – Provide guidance and input on Investment Plan activities.

6 GOVERNANCE

• Chief of Defined Contribution Programs – Delegated authority by ED & CIO to oversee the administrative duties and responsibilities for the contract management of all service providers for the Investment Plan and the Financial Guidance Program.

• Investment Advisory Council (IAC) – Sections 121.4501(12) and (14) – states role of the IAC to the Investment Plan: • Assist the SBA with administering the Investment Plan. • May provide comments on recommendations on providers and investment products. • Will review any proposed changes to the Investment Policy Statement and present the result of the review to the Trustees.

7 OFFICE OF DEFINED CONTRIBUTION PROGRAMS Organizational Chart

Ashbel Williams ED & CIO

Kent Perez Alison Romano Deputy Executive Director Deputy Chief Investment Officer

Daniel Beard Chief of Defined Contribution Programs

Mini Watson Allison Olson Stephen Tabb Walter Kelleher Director of Director of Policy, Risk Director of Investment Director of Educational Administration Management & Compliance Management Services

Cindy Morea Ruthie Bianco Fiscal Analyst DC Specialist

8 FLORIDA RETIREMENT SYSTEM (as of March 31, 2020) Participating Employers • State – 57 • County Agencies – 396 • School Boards – 67 • State Colleges – 28 976 • Cities – 176 • Independent Hospitals – 2 • Special Districts – 136 • Charter Schools – 91 • Other – 23

Plan Members Retirees Investment Plan – 1 year vesting 229,118 147,887 (Defined Contribution) Pension Plan – 8 year vesting 494,780 429,897 (Defined Benefit) 9 OVERVIEW OF THE INVESTMENT PLAN ADMINISTRATION

Mini Watson Director of Administration FRS INVESTMENT PLAN SNAPSHOT (Inception to March 31, 2020)

11 INVESTMENT PLAN ADMINISTRATION SERVICE PROVIDERS

Alight Solutions • FRS Plan Choice Administrator/Choice Service Provider • Investment Plan Administrator (record keeper) • Self Directed Brokerage Account (SDBA) provider

BNY Mellon • Investment Plan Custodian Bank • Benefit Disbursements • Custody Separate Accounts

Division of Retirement • Pension Plan Administrator • Retirement payroll reporting • Health Insurance Subsidy (HIS) Program • Disability and In-Line of Duty death benefits for the Investment Plan 12 CHOICE STATISTICS (as of March 31, 2020)

Pension Plan Defaults Active Enrollments-Pension Plan Active Enrollments-Inv. Plan Investment Plan Defaults 59% 57% 57% 56% 54% 49% 48%

27% 26% 25% 25% 23% 23% 25% 20% 21% 20% 17% 17% 18% 17%

6% 8%

FY 13-14 FY 14-15 FY 15-16 FY 16-17 FY 17-18 FY 18-19 *FY 19-20 (thru 3/2020

*Default Change to Investment Plan (except for Special Risk) 13 INVESTMENT PLAN MEMBERSHIP GROWTH (% Membership Growth Year to Year) (as of March 31, 2020)

240,000 230,000 229,118 7% 220,000

210,000 213,213 12% 200,000 190,000 190,664 8% 180,000 177,218 170,000 5% 169,576 4% 160,000 163,456 4% 150,000

140,000 14 FY 14-15 FY 15-16 FY 16-17 FY 17-18 FY 18-19 FY 19-20 ADMINISTRATION STATISTICS (July 2019 through March 2020)

• Processed 1,544,366 member contributions postings totaling $404 M Alight • Sent an average of 221,137 quarterly statements • Generated 1,282,245 personalized Solutions communications • Received 71,985 telephone calls

• Mailed 15,271 distribution checks BNY Mellon • Direct deposited 36,431 distribution payments • Assets under custody $9.9 B

15 Requests for Intervention

• Total Complaints Fiscal Year to March 31, 2020: 404

• Total Complaints Inception to Date: 5,566

• Top 6 Reasons for Filing Complaint: – Election Rescinds – Distributions (Invalid/In-Service) – Criminal Forfeitures – Terminated Employment Prior to Election Receipt – Election Not Received – Requesting 3rd Election

16 OVERVIEW OF THE FINANCIAL GUIDANCE PROGRAM

Walter Kelleher Director of Educational Services FINANCIAL GUIDANCE PROGRAM SERVICE PROVIDERS

EY

• Financial planners • Provide unbiased financial planning guidance via telephone • Conduct retirement/financial planning workshops MyFRS Financial GuidedChoice Guidance Program • Online personal ADVISOR SERVICE For ALL FRS Pension and Alight Investment Plan Members • Design, printing, focus groups • Online 1st & 2nd Election Choice Services MetLife

• Fixed lifetime annuities 18 • Deferred lifetime annuities MyFRS FINANCIAL GUIDANCE PROGRAM

• Telephone

• MyFRS.com

• Print

• Videos

• Workshops/Webcasts

19 MyFRS FINANCIAL GUIDANCE PROGRAM (April 1, 2019-March 31, 2020)

INVESTMENT EDUCATION

EY FINANCIAL FINANCIAL ATTENDANCE WEBSITE PLANNER PLANNING FINANCIAL WEBSITE HITS CALLS WORKSHOPS WORKSHOPS CHATS 2,767,852 300,535 531 23,335 99,991

-4% +1% +22% +12% +63%

(% change from previous 12 months)

19 Annuities purchased last 12 months - $4.3 million 143 Total Annuities purchased inception to date - $19.2 million

20 Education Highlights

• Initiated surveys of active/default electors, and annual survey of participating FRS employers

• LexisNexis security added to MyFRS.com login

• Experian selected via ITN to provide breach response services to the SBA (includes any FRS data breached)

• EY to begin conducting “FRS Seminar” beginning July 1 (joint DOR/SBA workshops)

21 OVERVIEW OF THE INVESTMENT PLAN INVESTMENT FUND OPTIONS

Daniel Beard Chief of Defined Contribution Programs INVESTMENT PLAN AVAILABLE FUND OPTIONS as of March 31, 2020 (fees bps) 11 Core Funds – White Labeled 11 Target Date Funds – White Labeled  FRS Money Market Fund (.06)  FRS 2060 Retirement Date Fund (2060) (.11)  FRS Inflation Adj. Multi-Assets Fund (.45)  FRS 2055 Retirement Date Fund (2055) (.11)  FRS Intermediate Bond Fund (.12)  FRS 2050 Retirement Date Fund (2050) (.11)  FRS U.S. Bond Enhanced Index Fund (.05)  FRS 2045 Retirement Date Fund (2045) (.11)  FRS Core Plus Bond Fund (.24)  FRS 2040 Retirement Date Fund (2040) (.11)  FRS U.S. Stock Market Index Fund (.02)  FRS 2035 Retirement Date Fund (2035) (.13)  FRS U.S. Large Cap Stock Fund (.28)  FRS 2030 Retirement Date Fund (2030) (.15)  FRS U.S. Small/Mid Cap Stock Fund (.59)  FRS 2025 Retirement Date Fund (2025) (.17)  FRS Foreign Stock Index Fund (.03)  FRS 2020 Retirement Date Fund (2020) (.18)  FRS Foreign Stock Fund (.49)  FRS 2015 Retirement Date Fund (2015) (.19)  FRS Global Stock Fund (.49)  FRS Retirement Fund (2000) (.19)

23 INVESTMENT PLAN AVAILABLE FUND OPTIONS as of July 1, 2020 (fees bps) 9 Core Funds – White Labeled 10 Target Date Funds – White Labeled

 FRS Money Market Fund (.06)  FRS 2060 Retirement Date Fund (2060) (.10)  FRS Inflation Sensitive Fund (.36)  FRS 2055 Retirement Date Fund (2055) (.10)  FRS U.S. Bond Enhanced Index Fund (.05)  FRS 2050 Retirement Date Fund (2050) (.10)  FRS Core Plus Bond Fund (.21)  FRS 2045 Retirement Date Fund (2045) (.10)  FRS U.S. Stock Market Index Fund (.02)  FRS 2040 Retirement Date Fund (2040) (.12)  FRS U.S. Stock Market Fund (.38)  FRS 2035 Retirement Date Fund (2035) (.13)  FRS Foreign Stock Index Fund (.03)  FRS 2030 Retirement Date Fund (2030) (.15)  FRS Foreign Stock Fund (.49)  FRS 2025 Retirement Date Fund (2025) (.17)  FRS Global Stock Fund (.49)  FRS 2020 Retirement Date Fund (2020) (.19)  FRS Retirement Fund (2000) (.19)

24 FRS INVESTMENT PLAN AUM (by Asset Class—in $millions) (as of March 31, 2020)

Money Market Fund, Self-Directed $1,103, 11% Brokerage Accounts, $666, 7% Real Assets Fund, $100, 1%

Fixed Income Funds, $679, 7%

International/ Global Equities Funds, $572, 6%

Domestic Stock Funds, Retirement Date $2,339, 23% Funds, $4,538, 45%

Asset allocation is a result of member investment selection 25 Asset allocation is a result of member investment selection FRS INVESTMENT PLAN MULTI-MANAGER FUNDS (by % Allocations by Investment Manager)

FRS US Enhanced Bond Index FRS Core Plus Fixed Income Fund Fund Prudential High Quality Hi Yield, 20% Wells Cap Prudential BlackRock Prudential Montgomery Core Plus Core US Debt Fxd Inc , 50% Fxd Inc, 30% Conserv, 50% Index, 50%

FRS Inflation Adjusted Multi-Assets Fund

BlackRock US TIPS Principal Index, 30% Div. Real Asset Fund, 70%

26 FRS INVESTMENT PLAN MULTI-MANAGER FUNDS (by % Allocations by Investment Manager)

FRS Large Cap Stock Fund FRS Small-Mid Cap Stock Fund T Rowe BlkRck Stephens Price Small The 1000 Mid Cap Cap Stock, London Index F, Growth, 30% Company, 8% 20% 15% QMA Value Equity, 14% AJO, 25% QMA MidCap Quantitative, Fidelity Jennison American 25% Growth Growth Beacon SC Company, Equity, Value, 25% 19% 19%

27 CURRENT RETIREMENT DATE FUNDS ($ RDF Assets, % Members ) (as of March 31, 2020)

2055 RDF, $168, 4% 2060 RDF, $44, Retirement Fund, 1% $351, 8% 2050 RDF, $302, 7% 2015 RDF, $261, 6% 2045 RDF, $496, 11% 2020 RDF, $517, 11%

2040 RDF, $514, 11%

2025 RDF, $681, 15%

2035 RDF, $581, 13% 2030 RDF, $624, 14% 28 FRS RETIREMENT DATE FUNDS Investment Manager Allocations Effective July 1, 2020 100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0% FRS 2060 FRS 2055 FRS 2050 FRS 2045 FRS 2040 FRS 2035 FRS 2030 FRS 2025 FRS 2020 FRS Ret

FRS Stock Mkt Index FRS For. Stk Index QMA Mid Cap Quant. Stephens Mid Cap Growth T Rowe Price Small Cap Stock Prud. High Yield Wells Cap Core Fixed Inc. Prud. Core Plus Strategy FRS Enhcd Bond Index FIAM Int. Dur. BlackRock TIPS Principal Div. Real Assets Prud. RREF II 29 Asset Class Performance (as of March 31, 2020)

QTD FYTD 1 Year 3 Years 5 Years Inception

Total Fund -15.86% -10.27% -7.50% 2.13% 3.05% 5.99%

Money Market 0.40% 1.48% 2.14% 1.98% 1.39% 1.60% -1.22% Real Assets & TIPS -12.95% -7.32% -8.12% -0.75% -0.66% (7/1/14) Fixed Income -0.68% 2.05% 3.93% 3.24% 3.94% 4.75%

Domestic Equities -23.10% -15.81% -12.60% 2.35% 4.72% 8.63%

Global & Intl Equities -23.15% -17.20% -14.56% -0.81% 0.61% 6.49%

2.77% Retirement Date Funds -15.19% -9.66% -6.87% 2.13% 2.99% (7/1/14) 3.39% TF x RDFs -16.50% -10.28% -8.11% 2.12% 3.10% (7/1/14) 30 2020-21 INITIATIVES

Investment Option Updates  Rolldown in RDF Glidepath allocations effective July 1, 2020, 2015 RDF rolls in Retirement Fund.  Implement Aon Investment's Investment Plan structure review 3Q20  Combine Large Cap Stock Fund and Small-Mid Cap Stock Fund into US Stock Fund.  Remove Intermediate Bond Fund as separate investment option, combining into Core Plus Bond Fund.  Change name of Inflation Adjusted Multi-Assets Fund to Inflation Sensitive Fund. Add Commercial Real Estate to manager allocations.  Explore potential for offering a Stable Value Fund in lieu of a Money Market Fund.

Plan Administration Initiatives  Implement enhanced security by collecting mobile telephone numbers for multi-factor authentication.  Rollout updated education materials with updated operation hours.  Implement enhanced member experience: . Addition of estimated monthly income to Quarterly Statements and online distribution requests. . Develop and implement online election forms to include investment allocations.

31 QUESTIONS FRS INVESTMENT PLAN MULTI-MANAGER FUNDS Effective 7-1-2020 (by % Allocations by Investment Manager)

FRS US Enhanced Bond Index FRS Core Plus Bond Fund Fund Fidelity Intermediate Duration, 15% Wells Cap Mont. BlackRock Fixed Income, PGIM Total Prudential 35% Core US Debt Return Conserv, 50% Index, 50% Strategy, PGIM Hi 35% Quality High Yield, 15% FRS Inflation Sensitive Fund PGIM Ret Real Estate, 10% BlackRock Principal US TIPS Div. Real Index, 45% Assets, 45%

33 FRS INVESTMENT PLAN MULTI-MANAGER FUNDS Effective 7-1-2020 (by % Allocations by Investment Manager)

FRS U.S. Stock Fund AJO, 13% T Rowe Price Small Cap Stock, 13% BlackRock R 1000 Index, 4.80%

Stephens Mid Cap Growth, 9% Fidelity Growth Company, 8.40% QMA Mid Cap Core, 10%

American Beacon, 8%

Jennison Growth Equity, 17%

The London Company, 8.40% QMA Value Equity, 8.40% 34 FRS Investment Plan Self-Directed Brokerage Account (as of March 31, 2020) ETF 7% FIXED INCOME CASH AND 1% ($4.6 M) EQUIVALENTS 9% ($46.9 M)

($62.3 M)

EQUITY 23% MUTUAL FUNDS ($153.6 M) 61%

($409.9 M)

Total Assets = $677.4 M 35 TOTAL FUND ASSET ALLOCATION BY AGE AND GENDER (as of March 31, 2020)

Male 30% 27% 2% 23% 18%

Over 65 Over Female 33% 27% 2% 27% 11%

Male 43% 29% 2% 11% 16%

55-65 Female 46% 29% 2% 15% 8%

Male 51% 32% 1% 7% 10%

45-55 Female 53% 33% 2% 8% 5%

Male 23% 28% 2% 35% 12%

35-45 Female 23% 26% 2% 43% 6%

Male 58% 29% 1% 6% 6%

Female 66% 25% 1% 7% 1% Under 35 Under

Stocks Fixed Income Real Assets Money Market Real Estate (RDF only) SDBA

36 ASSET ALLOCATION BY GENDER (as of March 31, 2020)

60%

Female Male

50%

40%

30%

20%

10%

0% Retirement Date Funds Money Market Real Assets Fixed Income Domestic Equities International Equities SDBA 37 TOTAL FUND ASSET ALLOCATION BY AGE (as of March 31, 2020)

Over 65 37% 27% 9% 15% 3% 9%

55-65 52% 26% 5% 7% 3% 7%

45-55 66% 21% 3% 3% 3% 3%

35-45 27% 29% 14% 21% 3% 5%

Under 35 77% 13% 3% 2% 4% 1%

Stocks Fixed Income Real Assets Money Market Real Estate (RDF only) SDBA 38 Member Fund Selection % of Members (March 31, 2020)

80.0% 71.4% 70.0%

60.0%

50.0%

40.0%

30.0%

20.0% 12.0%

10.0% 4.8% 4.2% 4.1% 0.5% 1.7%

0.0% Single RDF Only 2 or More RDFs only 1 or More RDFs + Other Single Fund - No RDF 2 to 5 Funds - No RDFs More Than 5 Funds - No SDBA Funds RDFs

39 Florida State Board of Administration Investment Plan Structure Review

June 30, 2020

Investment advice and consulting services provided by Aon Investments USA Inc., an Aon Company. Table of Contents

Section 1: Executive Summary

Section 2: Custom Target Date Funds

Section 3: Self Directed Brokerage Window

Section 4: Appendix

Investment advice and consulting services provided by Aon Investments USA Inc., an Aon Company. 2 Section 1: Executive Summary

Investment advice and consulting services provided by Aon Investments USA Inc., an Aon Company. 3 Investment Structure – Why Structure Matters

Defined contribution participants are responsible for key actions that influence their own outcomes

Savings Behavior Investment Choices The structure of a DC investment menu can have a significant impact on the choices people make, and ultimately their success. For these reasons, Aon believes in 2 key principles relating to investment menu structure:

Streamline investment options Streamline as much as possible Investment . Target date funds as default where Facilitate smart decisions Options participants can choose one fund and “forget it” . Participants seek forms of help . for making decisions A core-lineup of passive and/or active strategies for participants . Systems can nudge participants to that want to build customized act in their best long-term interest investment portfolios . Structure can help the move into Facilitate distribution stage Smart Decisions . Good governance leads to a strong investment menu

Investment advice and consulting services provided by Aon Investments USA Inc., an Aon Company. 4 FRS Investment Plan Review Executive Summary

. Aon and the SBA’s ODCP completed a comprehensive Investment Plan Review this past fall that focused on the core investment structure. Results were presented to the IAC at the March meeting . Today, we focus on the custom target date funds and the self-directed brokerage window

. Core line-up streamlined and diversified across asset classes, investment styles (active / passive), and the risk/return spectrum Overall Plan . Covers the necessary and relevant asset classes and investment options Observations . Sophisticated and low cost structure, consistent with overall Aon views of a streamlined structure . White-label approach provides flexibility, efficiency and significant benefit to participants

. Integrate FRS Intermediate Bond Fund within the FRS Core Plus Fund Approved . Consolidate the FRS U.S. Large Cap Stock Fund and FRS U.S. Small/Mid Cap Stock Fund Enhancements . Rename the FRS Inflation Adjusted Multi-Assets Fund to the FRS Inflation Sensitive Fund, integrate private real estate to the allocation and increase TIPS exposure

. Custom Target Date Funds (CTDFs): Highly utilized, offering SBA-unique glidepath and custom Today’s built portfolios that are highly efficient, cost effective and diversified across skilled managers Discussion . Self-Directed Brokerage Account (SDBA): Offers participants investment flexibility where desired. Low utilization consistent with expectations.

Investment advice and consulting services provided by Aon Investments USA Inc., an Aon Company. 5 FRS Investment Lineup Areas of Focus

. At the last IAC meeting we focused on Tiers 2 and 3 . The recently approved core line-up is illustrated below . Today, our conversation focuses on Tiers 1 (Target Date Funds) and 4 (Self Directed Brokerage Widow)

Tier 1 Tier 2 Tier 3 Tier 4 Professionally Cost Aware Engaged Managed/Novice

Target Date Funds Fixed Income Index Capital Preservation Self-Directed FRS Retirement Date Funds FRS U.S. Bond Enhanced FRS Money Market Fund Brokerage Window Index Fund FRS SDBA Core Plus Fixed U.S. Stock Market Index Income Objective FRS U.S. Stock Market Index FRS Core Plus Bond Fund Fund Asset Allocation International Index U.S. All Cap FRS Foreign Stock Index Fund FRS U.S. All Cap Stock Fund Capital Preservation Non-U.S. Equity FRS Foreign Stock Fund Income Global Equity FRS Global Stock Fund Growth Inflation Protection FRS Inflation Sensitive Fund Approved changes Retirement Income Today’s Focus

Investment advice and consulting services provided by Aon Investments USA Inc., an Aon Company. 6 FRS Investment Plan: Summary Conclusions

. Overall, the Investment Plan structure is sophisticated and consistent with many aspects of Aon’s best thinking

. Sophisticated, streamlined, low cost structure

. Offers a diversified set of investment options across asset classes, investment styles (active / passive), and the risk/return spectrum

. White-label approach provides flexibility, efficiency and significant benefit to participants

. Custom TDFs are highly utilized and offer an SBA-unique glidepath and highly efficient, cost effective portfolios that are diversified across skilled managers

. Self-Directed Brokerage Account offers participants additional investment flexibility by providing access to a wide range of investment options

Investment advice and consulting services provided by Aon Investments USA Inc., an Aon Company. 7 Section 2: Custom Target Date Funds

Investment advice and consulting services provided by Aon Investments USA Inc., an Aon Company. 8 Default Investment Alternatives Target Date Funds are Widely Preferred by Plans Designating a Default

. Key benefits versus other types of default options: – Highly diversified, dynamic age-based asset allocation Types of Default Options . Target Date Funds 97% – Higher expected return at younger ages, lower expected . Balanced Funds Plan adoption risk at older ages as default . Target Risk Funds – Cost effective for those who are less engaged . Managed Accounts – High acceptance and usage by participants

TDFs Continue to Grow in Importance More Participants Use TDFs Appropriately 100% 4 100% 79% 85% 3.4 75% 75% 69% 57% 63%

50% 3 50% 46% 37% 36% 42% 55%

25% 25% 17% 13% 2.5 0% 7% 2 0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Participants Using TDFs Plan Contributions in TDFs Participants holding only 1 TDF as % of TDF Users Plan Assets in TDFs Average Number of Funds Held % of all participants holding only 1 TDF

______Source: Vanguard’s How American Saves, 2019

Investment advice and consulting services provided by Aon Investments USA Inc., an Aon Company. 9 Off-The-Shelf Versus Custom TDFs Custom Allows Control Over Portfolio Construction

Off-The-Shelf Target Date Funds Custom Target Date Funds Opportunities Designed by vendor for broad population, Customize to unique needs of sponsor and Glide Path Risk Level not customized to plan demographics demographics of participant population

Asset Class Chosen by vendor and may be constrained Use asset classes to enhance efficiency that Diversification by vendor capabilities or beliefs are usually unavailable to participants

Asset Class Chosen by vendor and may be constrained Use strategic combination of active and Implementation by vendor capabilities or beliefs passive investing to add value

Select skilled managers with the same due Chosen by vendor and may be limited to Manager Selection diligence processes and monitoring as core vendor skill in underlying mandates funds in lineup Benefit from plan scale with transparency of Fees Bundled and set by vendor fee structures and ability to control fee levels

$1B CTDFs may be most beneficial for plans with greater than $1B in plan assets

Source: PIMCO’s 13th Annual DC Consulting Support and Trends Survey indicated that 59% of consultants recommend custom TDFs for plans above $1B.

Investment advice and consulting services provided by Aon Investments USA Inc., an Aon Company. 10 Best Practices in Defined Contribution Portfolio Construction Aon’s Core Beliefs about Professionally Managed Investment Solutions

5-factor evaluation provides a flexible framework across multi-manager and multi-asset class structures

Glide Path Asset Class Asset Class Manager Fees Risk Level Diversification* Implementation Selection

Should fit Should be included Should be strategic For the underlying Should be participant goals, to enhance blend of active and funds should be reasonable for the demographics, risk-adjusted passive depending on open architecture; value provided and behaviors returns price and market multi-manager is (or be customized structure preferred over proprietary to fit)

FRS uses Plan scale FRS uses a custom FRS uses significant FRS uses an open FRS uses a strategic to provide the funds glide path based on diversifying assets, architecture approach, blended implementation at a competitive and Plan demographics including private real incorporating managers estate of active and passive from the core line-up efficient fee level

Investment advice and consulting services provided by Aon Investments USA Inc., an Aon Company. 11 Section 3: Self-Directed Brokerage Window

Investment advice and consulting services provided by Aon Investments USA Inc., an Aon Company. 12 Self Directed Brokerage Windows (SDBW) Overview

. SDBW can be an important supplement to a plan’s investment structure – Offers investment flexibility and allows access to an even broader range of investments – Additional diversification can add value to plans as a complement to tiered investment structures . Most common approach is to offer individual stocks and bonds in addition to mutual funds – Certain investments are excluded, including options and futures, short selling, and illiquid securities . Brokerage fees are typically borne in full by participants’ plan accounts . SDBW provider must be prudently selected and monitored; Proper disclosures necessary for participants entering windows . Participants normally receive a separate statement for the designated options and the SDBW

Payroll Contributions Payroll Contributions

Self-Directed Window 401(k) Account Transfers (Sweep Account) Sales Sales Purchases

Purchases Core Stocks, Bonds Investment Mutual Funds Options Other Investments Investment advice and consulting services provided by Aon Investments USA Inc., an Aon Company. 13 Self Directed Brokerage Windows Advantages/Disadvantages

Advantages/Reasons to Offer Disadvantages/Issues

. Provides a greater choice of investment . Limited usage by plan participants options to those participants who want it . Limits plan sponsor oversight on investment . Provides participants with broad discretion and choices within SDBW increased opportunity to diversify into . Higher cost to participants (e.g., more additional asset classes/fund types expensive share classes, transaction charges, . May increase participant satisfaction with etc.), particularly for smaller balances plan’s investment options . May focus participants on fund/security . Eliminates the need to evaluate, select and selection rather than asset allocation monitor numerous non-core options that may . May increase potential for inappropriate be specialized in nature and may be of interest investment decisions or churning to relatively few participants

Investment advice and consulting services provided by Aon Investments USA Inc., an Aon Company. 14 Self Directed Brokerage Windows Trends and Considerations

. Brokerage window access has grown quite 40% Plans Offering Self-Directed Brokerage Window1 34% substantially in recent years, but appears to have 35% plateaued 30% 28%

2 25% . 40% of plans currently offer a SDBW 21% 20% 17% . The FRS SDBA opened to participants in 2014 15% 13% 13%

. Currently $665.9M invested, approximately 6.7% of 10% 7% 5% 5% 3% Plan’s assets 2% 1% 2% 0% . DOL currently determining whether more extensive 1–49 50–199 200–999 1,000–4,999 5,000+ All Plans (605) regulation is needed for SDBWs Plan Size by Number of Participants % of Plan Offering % of Assets in Window

Aon recommended best-practices for SDBWs: . Given uncertainty surrounding DOL, important to document why the offering is a plan design benefit in participants’ best interests . Prudently select and monitor the provider of the SDBW . Aon prefers SDBWs exclude access to single issuer stocks or bonds (except government issues); however, single security issues are most common within industry . For mutual fund only windows, avoid offering a “limited window” (meaning excluding specific mutual funds) – this can imply monitoring . Encourage ongoing participant communication . Monitor evolving fiduciary landscape

¹Plan Sponsor Council of America “61st Annual Survey – PSCA’s Annual Survey of Profit Sharing and 401(k) Plans.” 2018. ²2015 Aon Hewitt Trends and Experience in Defined Contribution Plans Investment advice and consulting services provided by Aon Investments USA Inc., an Aon Company. 15 Section 4: Appendix

Investment advice and consulting services provided by Aon Investments USA Inc., an Aon Company. 16 DC Investment Menu Risk/Return Choice Spectrum

Small Cap Equity International FRS FOREIGN STOCK INDEX FRS U.S. ALL CAP STOCK FUND Equity FUND Global Equity FRS FOREIGN STOCK FUND Mid Cap FRS U.S. STOCK MARKET INDEX FUND Equity FRS GLOBAL STOCK FUND Large Cap Equity Inflation FRS INFLATION SENSITIVE FUND Sensitive Expected Return Expected

RDFs FRS RETIREMENT DATE FUNDS

Specialty Bond FRS CORE PLUS BOND FUND

Bonds FRS U.S. BOND ENHANCED INDEX FUND Active Options Capital Preservation FRS MONEY MARKET FUND Passive Options Risk (Variability of Returns)

Investment advice and consulting services provided by Aon Investments USA Inc., an Aon Company. 17 FRS Asset Allocation as of 3/31/2020

Market Value Percent of Participant ($M) Total Count Tier I: Target Date Funds $4,538 45.40% 194,703 FRS U.S. Bond Enhanced Index Fund $261 2.00% 15,040 FRS U.S. Stock Market Index Fund 890 9.7 37,147 FRS Foreign Stock Index Fund 217 2.6 20,708 Tier II: Index Funds $1,368 13.69% -- FRS Money Market Fund $1,103 8.60% 17,196 FRS Inflation Adjusted Multi-Assets Fund 100 1 9,808 FRS Intermediate Bond Fund 109 0.9 5,544 FRS Core Plus Fixed Income Fund 310 2.7 15,827 FRS U.S. Large Cap Stock Fund 802 9.3 32,787 FRS U.S. Small/Mid Cap Stock Fund 647 8.5 31,557 FRS Foreign Stock Fund 126 2.6 14,221 FRS Global Stock Fund 228 1.5 15,631 Tier III: Actively Managed Options $3,425 34.26% -- Tier IV: Self-Directed Brokerage Account $665 6.65% 3,877 Total Plan $9,996 100% --

Investment advice and consulting services provided by Aon Investments USA Inc., an Aon Company. 18 Total Investment Plan Returns

Periods Ending 3/31/2020*

Total Fund Total Plan Aggregate Benchmark Relative Performance 8.0%

6.0% 5.6% 5.3%

4.0% 3.1% 2.9% 2.1% 1.9% 2.0% 0.2% 0.2% 0.3% 0.0% -0.2% -2.0%

-4.0%

-6.0%

-8.0% -7.5% -7.3% -10.0% 1 Year 3 Years 5 Years 10 Years

*Returns shown are net of fees. Aggregate benchmark returns are an average of the individual portfolio benchmark returns at their actual weights Investment advice and consulting services provided by Aon Investments USA Inc., an Aon Company. 19 Investment Category Returns and Ranks

Periods Ending 3/31/2020* 1-Year 3-Years 5-Years 10-Years

Cash 2.1 (1) 2.0 (1) 1.4 (1) 0.8 (1) iMoneyNet 1st Tier Inst’l Net Index 1.8 (44) 1.6 (22) 1.1 (20) 0.6 (20)

Real Assets** -8.1 -0.8 -0.7 1.8 ------FRS Custom Real Assets Index -8.2 -0.5 0.1 1.6

Fixed Income 5.2 (17) 3.9 (1) 3.2 (1) 3.9 (4) Total Bond Index 6.5 (4) 4.2 (1) 3.3 (1) 3.9 (5)

Domestic Equity -12.6 (55) 2.3 (46) 4.7 (37) 9.9 (25) Total U.S. Equities Index -12.1 (51) 2.3 (47) 4.6 (38) 9.5 (34)

International/Global Equity -14.6 (37) -0.8 (31) 0.6 (28) 3.8 (26) Total Int’l / Global Equities Index -15.6 (44) -1.8 (38) -0.2 (36) 3.0 (39)

*Returns shown are net of fees **The returns for the Real Assets composite uses prehire data for all months prior to 7/1/2014, actual live data is used thereafter. Note: Composite returns for the Retirement Date Funds and the SDBA are unavailable. Investment advice and consulting services provided by Aon Investments USA Inc., an Aon Company. 20 Investment Option Relative Returns and Ranks

1 3 5 10 Year Years Years Years Relative Relative Relative Relative Asset Class Fund Option Rank Rank Rank Rank Performance Performance Performance Performance FRS Retirement Fund (2.3) 60 2.5 61 2.4 60 4.5 72 FRS 2015 Retirement Date Fund (2.6) 63 2.7 64 2.7 82 4.7 92 FRS 2020 Retirement Date Fund (3.7) 75 2.7 65 3.0 66 5.3 71 FRS 2025 Retirement Date Fund (5.2) 70 2.6 45 3.2 34 5.7 76 FRS 2030 Retirement Date Fund (6.7) 59 2.4 52 3.3 40 6.2 61 Retirement FRS 2035 Retirement Date Fund (7.9) 47 2.3 35 3.4 28 6.6 37 Date Funds FRS 2040 Retirement Date Fund (9.1) 38 2.0 33 3.3 30 6.6 49 FRS 2045 Retirement Date Fund (10.1) 35 1.6 37 3.1 31 6.5 47 FRS 2050 Retirement Date Fund (10.8) 39 1.4 48 3.0 42 6.4 55 FRS 2055 Retirement Date Fund (10.9) 36 1.3 48 2.9 45 -- -- FRS 2060 Retirement Date Fund (10.9) 36 ------Cash FRS Money Market Fund 2.1 1 2.0 1 1.4 1 0.8 1 Real Assets FRS Real Assets Fund (8.1) -- (0.8) -- (0.7) -- 1.8 -- FRS U.S. Bond Enhanced Index Fund 8.8 81 4.8 64 3.4 50 4.0 36 Fixed Income FIAM Intermediate Duration Pool Fund 4.6 23 3.1 10 2.6 2 3.3 16 FRS Core Plus Fixed Income Fund 3.9 72 3.8 60 3.3 34 4.6 37 FRS U.S. Stock Market Index Fund (9.1) 61 4.1 58 5.9 54 10.2 43 Domestic FRS U.S. Large Cap Equity Fund (11.6) 61 3.5 47 5.2 46 10.3 33 Equity FRS U.S. Small/Mid Cap Equity Fund (21.8) 49 (2.4) 42 1.8 34 9.0 28 FRS Foreign Stock Index Fund (16.0) 47 (2.0) 42 (0.4) 39 2.8 43 Int'l/Global FRS Global Stock Fund (6.3) 24 5.9 15 6.1 11 8.6 16 Equity FRS Foreign Stock Fund (12.7) 13 0.3 1 0.9 1 4.0 1

Note: Relative returns shown above are net of fees. The returns for the Retirement Date Funds, Real Assets Fund, Core Plus Fixed Income Fund, U.S. Large Cap Equity Fund, and U.S. Small/Mid Cap Equity Fund use prehire data for all months prior to 7/1/2014, actual live data is used thereafter.

Investment advice and consulting services provided by Aon Investments USA Inc., an Aon Company. 21 Expense Ratio Review

. The below table provides a comparison of the investments in the Plan versus investments of similar size and mandate

. The investment options in the Plan all have reasonable fees compared to similar alternatives\

. FRS Investment Plan appropriately uses its size and scale to integrate managers and reduce costs across the core funds and target date funds

Expense Peer Investment Option Ratio Median1 FRS Retirement Funds 0.15% 0.39% - 0.50% FRS Money Market Fund 0.06% 0.35% FRS Infl. Adjt Multi-Assets Fund 0.45% 0.69% FRS U.S. Bond Enhanced Index Fund 0.05% 0.12% FRS Intermediate Bond fund 0.12% 0.41% - 0.50% FRS Core Plus Bond Fund 0.24% 0.49% FRS U.S. Large Cap Stock Fund 0.28% 0.72% FRS U.S. Stock Market Index Fund 0.02% 0.04% FRS Small/Mid Cap Stock Fund 0.58% 0.95% FRS Foreign Stock Index Fund 0.03% 0.11% FRS Foreign Stock Fund 0.49% 0.91% FRS Global Stock Fund 0.49% 0.95%

1 Source: AHIC’s annual mutual fund expense analysis as of 12/31/2018. Dollar weighted median shown for passive mandates.

Investment advice and consulting services provided by Aon Investments USA Inc., an Aon Company. 22 Global Equity Update Tim Taylor, Senior Investment Officer

Investment Advisory Council June 30, 2020 Global Lock-Down & Equity Risk-Off

Global Markets Drawdown 1Q20: Market Favored Low Vol, Quality and Momentum Regional Returns Absolute Parent Return Low Vol Yield Quality Mom Value Low Size ACWI -21.4% 5.4% -0.8% 5.9% 6.3% -4.8% -2.5% World -21.1% 5.5% -0.8% 5.7% 6.6% -5.7% -4.8% -21.06% EM -23.6% 3.7% -2.9% 1.7% 0.0% -1.1% 2.1% -22.44% USA -19.8% 2.5% -1.7% 4.6% 4.8% -9.6% -6.8% -24.00% -24.40% Europe -24.3% 6.9% -2.8% 6.8% 9.0% -7.1% -3.6% ACWI IMI US Developed ex-US Emerging Markets Asia ex Jap -18.4% -0.5% -3.0% 1.5% 3.3% -2.3% 1.0% ACWI IMI US Developed ex-US Emerging Markets Japan -16.8% 2.9% -0.4% 6.9% 6.8% -3.6% -1.7% Defensives Lead Markets: Risk Taking Decreased 1Q20 Global Market Dynamics

ACWI IMI Returns by Sector 0% • A pandemic related to COVID-19 rocked equity markets as the

-10% global economy effectively came to a standstill. -12.0% -14.3% -14.6% • Governments locked-down countries and unprecedented levels -20% -16.9% -15.4% -30% -23.7% of monetary and fiscal stimulus were enacted. -27.3% -28.0% -26.0% -32.1% -40% • Despite the incredible selloff, market leadership did not change; relative outperformers continued to be large-cap, quality stocks -50% -45.3% Comm Cons Disc Staples Energy Financials Health Industrials Info Tech Materials Real Utilities with growth characteristics. Services Care Estate • Cyclical sectors were slammed, led by Energy and Financials. Q1 '20 3 Note: Q1 as of March 31, 2020. Based on Russell indices for domestic markets and MSCI IMI for Developed Ex-U.S. and Emerging Markets. Factor returns are based on standard MSCI. Aggregate Performance Summary

1Q20 FYTD 1 Yr 3 Yr 5 Yr Incept Total Asset Class Return -22.14 -15.06 -12.04 1.37 3.01 8.12 Benchmark -22.41 -15.52 -12.69 0.77 2.47 7.30 Excess Return 0.27 0.46 0.65 0.60 0.55 0.82 Tracking Error 0.34 0.44 0.48 Return / Risk (IR) 1.70 1.14 1.55

Cummulative Monthly Benchmark vs Total Asset Class Excess Returns Realized vs Predicted 1 Year Risk 70.00% 0.70% 1.00 60.00% 0.60%

50.00% 0.50%

40.00% 0.40% 0.45 30.00% 0.30% 0.50

20.00% 0.20% GE Excess Return 10.00% 0.10% 0.26 Custom MSCI ACWI IMI Return 0.00% 0.00% 0.00 -10.00% -0.10%

Custom MSCI ACWI IMI GE Excess Returns Realized Predicted

Note: All returns through 03/31/2020. Inception 7/1/10. Benchmark is Custom Iran Sudan Free ACWI IMI Index. Realized Risk is compared to prior 1 year Predicted Risk. 4 Active Strategy Performance Summary Excess Returns by Aggregate What Happened

Weight (% of Active Strategy Group Asset Class) Q1 2020 1 Year 3 Year 5 Year Recent Performance Drivers Foreign Developed Large Cap 21% 1.63% 2.12% 2.05% 1.79% Aggregate protected capital and was bolstered by defensive, quality and growth-oriented managers that offset the underperformance of value-oriented managers. Emerging Markets 11% -0.24% 1.99% 0.08% 0.56% Stock selection in India, Mexico and Brazil detracted. Financial holdings in those and other countries were the primary culprits.

Dedicated Global 8% 0.22% -0.66% 0.03% 0.02% Low beta, quality, momentum, large cap and cash holdings preserved capital during the violent selloff. Foreign Developed Small Cap 4% -0.25% 0.45% -0.32% -0.47% Underperformance driven by value-oriented holdings across several mandates. US Large Cap 5% -3.90% -6.70% -3.00% -3.13% The continued leadership of mega-cap and growth, underweights in this aggregate, combined with extremely concentrated benchmark leadership prompted underperformance. Currency 4% -0.83% -0.31% -0.40% -0.16% Poor quarter largely driven by long positions in emerging market currencies that were battered by COVID-19 concerns in addition to collapsing oil prices. US Small Cap 2% -0.42% -0.28% 0.34% -0.19% Underweight to Healthcare (Biotech) and Information Technology non-earners detracted, as some stocks in those sectors were perceived beneficiaries of the pandemic. Total Active Aggregate 52% 0.16% 0.48% 0.51% 0.37% Note: All returns through 03/31/2020. Excess returns are relative to strategy group benchmark. Currency weight reflects passively managed equity notional. Weights are relative to total equity assets under management. 5 Q2 2020 Market Update (through May)

ACWI IMI Returns by Sector

30% 23.4% 21.4% 21.9% 19.0% 20% 16.1% 17.0% 17.1% 15.4% 8.6% 8.8% 8.8% 10% 7.9%

0%

-10% -12.0% -14.3% -14.6% -20% -16.9% -15.4% -22.4% -23.7% -30% -26.0% -27.3% -28.0% -32.1% -40%

-50% -45.3% MSCI ACWI Comm Cons Disc Staples Energy Financials Health Care Industrials Info Tech Materials Real Estate Utilities IMI Services

Q1 '20 Q2 '20

6 Note: Q1 as of March 31, 2020. Q2 is preliminary and only reflects April and May. Update on Initiatives

Provide Alpha • Continue to implement aggregate structure enhancements – Completed funding of two new Emerging Market managers (January and February inception dates) • Ongoing analysis of active aggregates • Enhanced focus on non-traditional, opportunistic, strategies that may add alpha and/or diversify the asset class

Provide Liquidity • Continue to be significant provider of liquidity to support beneficiary payments – Provided $1.1 billion for liquidity in the first two months of 2020; implemented asset allocation rebalance and invested $1.3 billion across the Global Equity aggregate beginning in March

7 State Board of Administration Fixed Income Update Katy Wojciechowski Senior Investment Officer Fixed Income

Investment Advisory Council June 30, 2020 Fixed Income Review and Outlook June 2020

• 12 Month Returns for the Fixed Income benchmark – Barclays Intermediate Aggregate through 5/31/2020 were 7.18%, roughly the same as 12 month returns at the end of January. – Annual Absolute Returns were positive for all sectors – Following an incredibly volatile period in March, massive Fed intervention, as well as global central bank intervention, calmed the markets significantly. Treasuries have been relatively range bound while Fed Funds is priced to zero for the foreseeable future – Yield on the entire Benchmark is only 1.12% with a 3.54yr duration – now comfortably higher than 3 month LIBOR and Fed Funds currently at 0. – Asset class outperformed Benchmark over longer time periods. During the previous 3 months, fixed income markets froze for a period of massive de- levering and seeking safe harbor. Fed actions have calmed the waters and with consistent daily purchases have served as a backstop and markets have returned to relative normal activity. Extremely brisk corporate new issuance has become commonplace, even as there is much talk about possible future downgrades

3 Benchmark Comparison as of 5/31/2020

Benchmark Returns Risk Adjusted Returns 1.40% 10.00% 9.00% 1.20% 8.00% 1.00% 7.00% 6.00% 0.80% 5.00% 0.60% 4.00% 3.00% 0.40% 2.00% 0.20% 1.00% 0.00% 0.00% 1 Year 3 Year 5 Year 1 Year 3 Year 5 Year Returns Risk Adj. Returns

Int Agg Agg Int Agg Agg

4 Fixed Income Review June 2020 Massive volatility spike in March was following with Spreads to Treasuries widened significantly from very massive Fed intervention – opened the playbook tight levels with virus fears, but have settled and from 2009 and added several new effective tightened with the Fed backstop measures Treasury Volatility: Option Adjusted Spread:

5 Fixed Income Review June 2020 • Bigger Picture: Global negative yielding debt • Fed will own a very large portion of the stock continues but lower than March Benchmark

Source: Bloomberg Source: Blackrock

6 Fixed Income Review June 2020 • Portfolio continues to overweight Spread • But overall Active Risk continues low at total Product allocation level

Fixed Income Sector Allocation 5/31/2020

-11.00% Treasuries

MBS 0.90%

CMBS 2.10%

ABS 2.00%

Government Related-2%

Corporates 8.00%

-15.00% -10.00% -5.00% 0.00% 5.00% 10.00%

7 Fixed Income Review June 2020 Looking Forward: Pockets of Value • Continue to maintain active allocation – replenish Liquidity pockets used in March for active rebalancing between FI and GE • Add exposure to out of benchmark structured products or other in a dedicated strategy • Expanded guidelines with several managers, funded true Core Plus near beginning of increased volatility – took advantage of spread widening – Consider opportunity to reduce risk to a rising rate environment within overall allocation • Short Duration Credit manager funded/transitioned Core Conservative manager to Full Aggregate Core Plus mandate – Execute on tactical opportunities, especially in shorter duration securities • Continuing purchase of short duration securities within Active Core portfolio where possible

8 State Board of Administration

Real Estate Update Steve Spook Senior Investment Officer

Investment Advisory Council Meeting June 30, 2020 Real Estate Portfolio Sector Allocation as of 12/31/2019 Total RE Portfolio Florida Retirement System Defined Benefit Fund Public Private Equity 10.9% Cash 7.2% 1.2% Private Strategic Inv. 89.1% 8.3%

Real Estate 9.2% Private Market Global Equities 55.7% Non-Core 17.0%

Fixed Income Core 18.3% 83.0%

3 Source: IBP 12/31/19 Report Private Market Leverage as of 12/31/2019 Private Portfolio Market Value $20,120 M

Private Market Leverage Pooled Funds Leverage 29.7% Closed-End Funds 56.7%

Principal Pooled Funds Investments Open-End Funds 26.1% 40.1% 24.8%

Investment Portfolio Guidelines: - Private Market Portfolio leverage limited to 40% Loan to Value (LTV). - Principal Investments Portfolio leverage limited to 30% Loan to Value (LTV).

4 Principal Investments Leverage

DEBT TYPE WEIGHTED AVG COST OF DEBT PI 5 YR LEVERAGE 12/31/19 12/31/19 $4.0 26.8% 26.2% 30.0% 100% 25.0% 24.8% Floating 4.12% $3.5 22.2% 25.0% 12% 21.4% 21.5% $3.0 Fixed 3.19% 20.0% $2.5 21.5% 88% 21.1% 21.5% 21.5% 21.5% Total PI 3.72% 18.5% 80% $2.0 15.0% 16.5% Fixed Rate Floating Rate 0.00% 2.50% 5.00% BILLIONS $1.5 10.0% $1.0 DEBT MATURITIES 5.0% 12/31/19 $.5 $800 $1.5 $1.8 $2.3 $3.2 $3.2 $3.3 $3.4 $13 $- 0.0% $700 06/30/15 06/30/16 06/30/17 06/30/18 06/30/19 12/31/19 12/31/19 $600 ADJ $13 PI DEBT PI LTV ODCE LTV $500 Investment Portfolio Guidelines $400 PI CORE AND NON CORE LEVERAGE

MILLIONS $728 $300 40.00% - Portfolio Leverage limited to 30% Loan To Value (LTV) $540 30.00% 37.32% $200 - Individual Asset Level limited to 50% LTV $185 $72 $341 20.00% 24.94% 24.88% - JV Individual Asset limited to 70% LTV $100 $187 $189 $195 22.51% $98 $132 10.00% $81 $112 - Nonrecourse to the SBA $- $20 0.00% 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 12/31/19 12/31/19 ADJ Fixed Rate Floating Rate Core Non Core 5 Total Real Estate Portfolio Performance Data Through December 31, 2019

Net Asset Value $15,782 14%

12%

10% 8.7% 8.1% 8.0% 8% 7.3% 6.3% 6.6% 6%

4%

2%

0% One Year Return Three Year Return Five Year Return

SBA RE Total Net Return SBA RE Primary Benchmark

Source: The Townsend Group 6 Principal Investments Performance Data Through December 31, 2019 Net Asset Value $9,901 M 16%

14%

12%

10% 8.2% 8.0% 8.0% 8% 6.3% 6.6% 5.7% 6.0% 6.1% 6% 4.4% 4%

2%

0% One Year Return Three Year Return Five Year Return

PI Total Net Return ODCE Total Net Return SBA Primary Benchmark

Source: The Townsend Group 7 Externally Managed Portfolio Performance Data Through December 31, 2019 Net Asset Value $5,880 M 14% 12.3% 12%

10% 9.5% 9.5% 9.6% 7.9% 8.0% 8% 7.3% 6.3% 6.6% 6%

4%

2%

0% One Year Return Three Year Return Five Year Return

EMP Total Net Return External Custom Benchmark Net Return SBAF Primary Benchmark

Source: The Townsend Group 8 Private Market Property Type Diversification as of 12/31/2019 Target NFI-ODCE +/- 15%

40% 35% 32.3% 33.4% 30% 25.2% 25.7% 25% 20.3% 20% 16.3% 14.4% 16.1% 15% 11.8% 10% 4.4% 5% 0% Apartment Industrial Retail Office Other *

SBA Exposure ODCE

* Other includes Agriculture, Senior Housing, Self-Storage, Hotel, Land 9 Private Market Geographic Diversification as of 12/31/2019 Target NFI-ODCE +/- 15%

50% 42.4% 41.2% 40% 30.3% 30% 26.1% 22.0% 18.8% 20%

8.5% 10% 4.3% 6.3% 0% 0% East Midwest South West Other *

SBA Exposure ODCE

* Other includes International Investments 10 Recent Activity (Since Last IAC Report) Direct Owned: Acquisitions (Price/Equity) - Self Storage $9 million/$9 million - Agriculture $26 million/$26 million Dispositions (Price/Equity) - Industrial $114 million/$72 million - Multifamily $109 million/$56 million - Senior Housing $44 million/$44 million - Medical Office $3 million/$3 million Financing (Proceeds) - Loan Payoffs $43 million - New Loan Proceeds $232 million Externally Managed: REITS - New Mandates $400 million

11 State Board of Administration

Strategic Investments Asset Class Review

Trent Webster Senior Investment Officer – Strategic Investments

Investment Advisory Council Meeting June 30, 2020 Portfolio

3 Performance

Strategic Investments Performance 10%

8%

6%

4%

2%

0%

-2%

-4%

-6%

-8% Quarter 1 Year 3 Year 5 Year 10 Year

Strategic Investments Benchmark Real Return Target 4 Recent Activity

• Quarterly cash outflow was $120 million • Fiscal year cash inflow was $158 million • Four funds totaling $625 million were closed in the most recent quarter • Four funds totaling $800 million have been closed this quarter • Twenty funds totaling $3.75 billion are in the pipeline

5 Pipeline

• Fifteen Debt funds – Eight Distressed, three Subordinated Capital, two Evergreen Debt, two Loans • Three Real Asset funds – Two Infrastructure, one SI Real Estate • One Flexible Mandates fund – Multi-Strategy • One Equity fund – Activist Equity

• Twelve new relationships • Sixteen private markets strategies • Three hedge funds

6 Investment Themes

• “All distressed, all the time” – Biggest distressed cycle yet – Most attention being spent here – Opportunistic mandate allows Strategic Investments to pivot – Most new opportunities being accessed through private markets – Mostly focused on US though that will change over time – Non-distressed mandates also taking advantage of distressed cycle

7 COVID-19 Fund Timeline

8

Memo

To Florida State Board of Administration (“SBA”)

From Katie Comstock, Kristen Doyle

Date May 8, 2020

Re Cash Benchmark Change Concurrence

Summary The Florida SBA requested Aon opine on the proposal to change the FRS Cash asset class primary benchmark from the Bank of America Merrill Lynch 3-Month U.S. Treasury Index to the Bloomberg Barclays 1–3 Month U.S. Treasury Index. Provided that the characteristics and risk/return profile of the two indices are very similar, improved efficiencies and cost savings provide substantive support for switching to the Bloomberg index.

Aon supports the SBA’s proposal to change the Cash benchmark to the Bloomberg Barclays 1-3 Month U.S. Treasury Index.

Background The SBA uses the Bank of America Merrill Lynch 3-Month U.S. Treasury Index as the primary benchmark for the FRS Cash accounts, which include the following: • Cash asset class composites • FRS Cash Short Term Investment Pool (STIP) • Cash & Central Custody • Global Equity Cash • Private market cash accounts

The Bank of America Merrill Lynch 3-Month U.S. Treasury Bill Index is an unmanaged index comprised of a single U.S. Treasury issue with approximately three months to final maturity.

The SBA has proposed moving the cash benchmark to the Bloomberg Barclays 1-3 Month U.S. Treasury Bill Index effective September 1, 2020.

May 8, 2020 State Board of Administration of Florida Page 2

The Bloomberg Barclays 1-3 Month U.S. Treasury Bill Index measures the performance of public obligations of the U.S. Treasury that have a remaining maturity of greater than or equal to 1 month and less than 3 months.

As shown in the appendix, the two indices have nearly identical risk/return profiles and investment characteristics.

Aon supports the switch to the Bloomberg index given the expected improved efficiencies and cost savings. The SBA uses Bloomberg to manage internal cash and fixed income portfolios and Bloomberg indices feed directly into the FRS Total Fund’s risk model, making the Bloomberg index a natural fit. Further, switching index providers is anticipated to reduce costs to the SBA on an annual basis.

Appendix

Risk and Return Profile 3-Years 5-Years 10-Years Return Risk Return Risk Return Risk BB 1-3 Month U.S. T-Bill Index 1.7% 0.2% 1.1% 0.3% 0.6% 0.2% BofA ML 3-Month U.S. T-Bill Index 1.8% 0.2% 1.2% 0.3% 0.6% 0.2%

Characteristics* ICE 3 Bloomberg

month 1-3 month As 4/8/20

Effective Maturity 0.13 0.12

Yield to Maturity 0.19 0.19

Option Adj Duration 0.13 0.12

Days to Maturity 48 43.61 Holdings 1 12

*Characteristics provided by the FL SBA Blacklined Draft for Review by IAC on June 30, 2020 Effective July 1, 2018September 1, 2020

FLORIDA RETIREMENT SYSTEM DEFINED BENEFIT PLAN INVESTMENT POLICY STATEMENT

I. DEFINITIONS

Absolute Real Target Rate of Return - The total rate of return by which the FRS Portfolio must grow, in excess of inflation as reported by the U.S. Department of Labor, Bureau of Labor Statistics (Consumer Price Index – All Urban Consumers), in order to achieve the long-run investment objective. Asset Class - An asset class is an aggregation of one or more portfolios with the same principal asset type.1 For example, all of the portfolios whose principal asset type was stocks would be aggregated together as the Global Equity asset class. As such, it would contain primarily—but not exclusively— the principal asset type. Asset Type - An asset type is a category of investment instrument such as common stock or bond. Portfolio - A portfolio is the basic organization unit of the FRS Fund. Funds are managed within portfolios. A portfolio will typically contain one principal asset type (common stocks, for example), but may contain other asset types as well. The discretion for this mix of asset types is set out in guidelines for each portfolio.

II. OVERVIEW OF THE FRS AND SBA

The State Board of Administration (Board) provides investment management of assets contributed and held on behalf of the Florida Retirement System (FRS). The investment of retirement assets is one aspect of the activity involved in the overall administration of the Florida Retirement System. The Division of Retirement (DOR), the administrative agency for the FRS, provides full accounting and administration of benefits and contributions, commissions actuarial studies, and proposes rules and regulations for the administration of the FRS. The State Legislature has the responsibility of setting contribution and benefit levels, and providing the statutory guidance for the administration of the FRS.

III. THE BOARD

The State Board of Administration has the authority and responsibility for the investment of FRS assets. The Board consists of the Governor, as Chairman, the Chief Financial Officer, and the Attorney General. The Board has statutory responsibility for the investment of FRS assets, subject to limitations on investments as outlined in Section 215.47, Florida Statutes.

The Board shall discharge its fiduciary duties in accordance with the Florida statutory fiduciary standards of care as contained in Sections 215.44(2)(a) and 215.47(10), Florida Statutes.

1 The Strategic Investments asset class is an exception, purposefully established to contain a variety of portfolios which may represent asset types and strategies not suitable for inclusion in other asset classes.

Blacklined Draft for Review by IAC on June 30, 2020 Effective July 1, 2018September 1, 2020

The Board delegates to the Executive Director the administrative and investment authority, within the statutory limitations and rules, to manage the investment of FRS assets. An Investment Advisory Council (IAC) is appointed by the Board. The IAC meets quarterly, and is charged with the review and study of general portfolio objectives, policies and strategies, including a review of investment performance.

The mission of the State Board of Administration is to provide superior investment management and trust services by proactively and comprehensively managing risk and adhering to the highest ethical, fiduciary and professional standards.

IV. THE EXECUTIVE DIRECTOR

The Executive Director is charged with the responsibility for managing and directing administrative, personnel, budgeting, and investment functions, including the strategic and tactical allocation of investment assets.

The Executive Director is charged with developing specific individual investment portfolio objectives and policy guidelines, and providing the Board with monthly and quarterly reports of investment activities.

The Executive Director has investment responsibility for maintaining diversified portfolios, and maximizing returns with respect to the broad diversified market standards of individual asset classes, consistent with appropriate risk constraints. The Executive Director will develop policies and procedures to:

• Identify, monitor and control/mitigate key investment and operational risks. • Maintain an appropriate and effective risk management and compliance program that identifies, evaluates and manages risks within business units and at the enterprise level. • Maintain an appropriate and effective control environment for SBA investment and operational responsibilities. • Approve risk allocations and limits, including total fund and asset class risk budgets.

The Executive Director will appoint a Chief Risk and Compliance Officer, whose selection, compensation and termination will be affirmed by the Board, to assist in the execution of the responsibilities enumerated in the preceding list. For day-to-day executive and administrative purposes, the Chief Risk and Compliance Officer will proactively work with the Executive Director and designees to ensure that issues are promptly and thoroughly addressed by management. On at least a quarterly basis, the Chief Risk and Compliance Officer will provide reports to the Investment Advisory Council, Audit Committee and Board and is authorized to directly access these bodies at

2 Blacklined Draft for Review by IAC on June 30, 2020 Effective July 1, 2018September 1, 2020

any time as appropriate to ensure the integrity and effectiveness of risk management and compliance functions.

Pursuant to written SBA policy, the Executive Director will organize an Investment Oversight Group(s) to regularly review, document and formally escalate guideline compliance exceptions and events that may have a material impact on the Trust Fund. The Executive Director is delegated the authority and responsibility to prudently address any such compliance exceptions, with input from the Investment Advisory Council and Audit Committee as necessary and appropriate, unless otherwise required in this Investment Policy Statement.

The Executive Director is responsible for evaluating the appropriateness of the goals and objectives in this Plan in light of actuarial studies and recommending changes to the Board when appropriate.

V. INVESTMENT OBJECTIVES

The investment objective of the Board is to provide investment returns sufficient for the plan to be maintained in a manner that ensures the timely payment of promised benefits to current and future participants and keeps the plan cost at a reasonable level. To achieve this, a long-term real return approximating 4.0% per annum (compounded and net of investment expenses) should be attained. As additional considerations, the Board seeks to avoid excessive risk in long-term cost trends. To manage these risks, the volatility of annual returns should be reasonably controlled.

The Board's principal means for achieving this goal is through investment directives to the Executive Director. The main object of these investment directives is the asset class. The Board directs the Executive Director to manage the asset classes in ways that, in the Board's opinion, will maximize the likelihood of achieving the Board's investment objective within an appropriate risk management framework. The Board establishes asset classes, sets target allocations and reasonable ranges around them for each and establishes performance benchmarks for them. In addition, it establishes a performance benchmark for the total portfolio.

3 Blacklined Draft for Review by IAC on June 30, 2020 Effective July 1, 2018September 1, 2020

VI. TARGET PORTFOLIO AND ASSET ALLOCATION RANGES

The Board's investment objective is an absolute one: achieve a specific rate of return, the absolute real target rate of return. In order to achieve it, the Board sets a relative objective for the Executive Director: achieve or exceed the return on a performance benchmark known as the Target Portfolio over time. The Target Portfolio is a portfolio composed of a specific mix of the authorized asset classes. The return on this portfolio is a weighted-average of the returns to passive benchmarks for each of the asset classes. The expectation is that this return will equal or exceed the absolute real target rate of return long-term and will thus assure achievement of the Board's investment objective.

This relative return objective is developed in a risk management framework. Risk from the perspective of the Board is any shortfall of actual investment returns relative to the absolute real target rate of return over long periods of time, and the asset mix is developed to manage this risk. In selecting the Target Portfolio, the Board considers information from actuarial valuation reviews and asset/liability studies of the FRS, as well as asset class risk and return characteristics. In addition, the timing of cash demands on the portfolio to honor benefit payments and other liabilities are an important consideration. Potential asset mixes are thus evaluated with respect to their expected return, volatility, liquidity, and other risk and return measures as appropriate.

The Target Portfolio defined in Table 2 has a long-term expected compound annual real return that approximates the absolute real target rate of return. To achieve the absolute real target rate of return or actuarial return, material market risk must be borne (i.e., year to year volatility of returns). For example, in 2008 the Trust Fund’s net managed real return was -26.81% compared to gains of 17.56% in 2009 and 21.48% in 2003. While downside risk is considerably greater over shorter horizons, the natural investment horizon for the Trust Fund is the long-term. Table 1 illustrates a modeled estimate of the Target Portfolio’s potential range of real returns that could result over longer-term investment horizons. Over a 15-year investment horizon there is an 80 percent probability that the Target Portfolio will experience a compound annual real return between 0.47% and 8.73% and a 90 percent probability that the Target Portfolio will experience a compound annual real return between -0.65% and 9.96%.

Table 1: Expected Risk in Target Portfolio’s Real Returns Time 5th Percentile 10th Percentile 90th Percentile 95th Percentile Horizon Real Return Real Return Real Return Real Return

10 Years -1.78% -0.42% 9.71% 11.22% 15 Years -0.65% 0.47% 8.73% 9.96% 20 Years 0.03% 1.00% 8.16% 9.22% 25 Years 0.49% 1.37% 7.77% 8.71% 30 Years 0.84% 1.64% 7.48% 8.34%

4 Blacklined Draft for Review by IAC on June 30, 2020 Effective July 1, 2018September 1, 2020

Although the Target Portfolio has an expected return and risk associated with it, it is important to note that this expected return is neither an explicit nor an implicit goal for the managers of the Florida Retirement System Trust Fund (FRSTF). These figures are used solely in developing directives for fund management that will raise the probability of success in achieving the absolute real target rate of return. The Executive Director is held responsible not for specifically achieving the absolute real target rate of return in each period, but rather for doing at least as well as the market using the Target Portfolio's mix of assets.

In pursuit of incremental investment returns, the Executive Director may vary the asset mix from the target allocation based on market conditions and the investment environment for the individual asset classes. The Executive Director shall adopt an asset allocation policy guideline which specifies the process for making these tactical decisions. The guideline shall concentrate on the analysis of economic conditions, the absolute values of asset class investments and the relative values between asset classes. The Board establishes ranges for tactical allocations, as shown in Table 2.

Table 2: Authorized Asset Classes, Target Allocations and Policy Ranges

Policy Range Asset Class Target Allocation Policy Range Low High

Global Equity 53% 45% 70% Fixed Income 18% 10% 26% Real Estate 10% 4% 16% Private Equity 6% 2% 9% Strategic Investments 12% 0% 16% Cash Equivalents 1% 0.25% 5% Total Fund 100% -- --

For purposes of determining compliance with these policy ranges, an asset class is considered to be an aggregation of one or more portfolios with substantially the same principal asset type.2 An asset type is a category of investment instrument such as common stock or bond. For example, all of the portfolios whose principal asset type is bonds would be aggregated together as the Fixed Income asset class. As such, it would contain primarily—but not exclusively—the principal asset type. As a standard management practice, portfolio managers are expected to meet their goals for all assets allocated to their portfolio.

2 The Strategic Investments asset class is an exception, purposefully established to potentially contain a variety of portfolios which may represent asset types and strategies not suitable for inclusion in other asset classes.

5 Blacklined Draft for Review by IAC on June 30, 2020 Effective July 1, 2018September 1, 2020

It is expected that the FRS Portfolio will be managed in such a way that the actual allocation mix will remain within these ranges. Investment strategies or market conditions which result in an allocation position for any asset class outside of the enumerated ranges for a period exceeding thirty (30) consecutive business days shall be reported to the Board, together with a review of conditions causing the persistent deviation and a recommendation for subsequent investment action.

The asset allocation is established in concert with the investment objective, capital market expectations, projected actuarial liabilities, and resulting cash flows. Table 3 indicates estimated net cash flows (benefit payments less employer and employee contributions) and associated probabilities that are implicit in this policy statement, assuming the Legislature adheres to system funding provisions in current law. Additionally, the annualized income yield of the fund is projected to approximate 2% to 3%.

Table 3: Estimated Net Cash Outflow ($ millions/ % Fund)

In 5 Years In 10 Years

10th Percentile $ 4,851 3.67% $ 3,497 3.14% 25th Percentile $ 6,776 4.15% $ 6,329 4.03% Median $ 7,466 4.54% $ 8,523 4.60% 75th Percentile $ 8,079 5.04% $ 11,561 5.22% 90th Percentile $ 10,690 5.96% $ 12,895 6.27%

6 Blacklined Draft for Review by IAC on June 30, 2020 Effective July 1, 2018September 1, 2020

VII. PERFORMANCE MEASUREMENT

Asset class performance is measured in accordance with a broad market index appropriate to the asset class. The indices identified in Table 4 are used as the primary benchmarks for the authorized asset classes.

Table 4: Authorized Target Indices Asset Class Index

Global Equity A custom version of the MSCI All Country World Investable Market Index (ACWI IMI), in dollar terms, net of withholding taxes on non- resident institutional investors, adjusted to reflect the provisions of the Protecting Florida’s Investments Act

Fixed Income The Barclays Capital U.S. Intermediate Aggregate Index

Real Estate The core portion of the asset class is benchmarked to an average of the National Council of Real Estate Investment Fiduciaries (NCREIF) Fund Index – Open-ended Diversified Core Equity, NET of fees, weighted at 76.5%, and the non-core portion of the asset class is benchmarked to an average of the National Council of Real Estate Investment Fiduciaries (NCREIF) Fund Index – Open-ended Diversified Core Equity, NET of fees, weighted at 13.5%, plus a fixed return premium of 150 basis points per annum, and the FTSE EPRA/NAREIT Developed Index, in dollar terms, net of withholding taxes on non-resident institutional investors, weighted at 10%3

Private Equity The MSCI All Country World Investable Market Index (ACWI IMI), in dollar terms, net of withholding taxes on non-resident institutional investors, adjusted to reflect the provisions of the Protecting Florida’s Investments Act, plus a fixed premium return of 300 basis points per annum

Strategic Investments A weighted-average of individual portfolio level benchmark returns

3 Core RE Non-Core RE Public RE

3 (76.5% * NFI-ODCE) + [13.5% * (NFI-ODCE + 150 bps)] + (10%* REIT Index)

7 Blacklined Draft for Review by IAC on June 30, 2020 Effective July 1, 2018September 1, 2020

Cash Equivalents Bank of America Merrill Lynch 3-Month US Treasury Index Bloomberg Barclays U.S. Treasury Bill: 1-3 Months Index

The return on the Target Portfolio shall be calculated as an average of the returns to the target indices indicated in Table 4 weighted by the target allocations indicated by Table 2, but adjusted for floating allocations. The policy allocations for the private market asset classes would all “float” against the public market asset classes (i.e., limited short-term liquidity available for rebalancing and benefit payments means that their policy allocations would equal their actual allocations) as identified in Table 5.

Table 5: Allocations of Private Market (Real Estate, Private Equity and Strategic Investments) Under and Overweights to Public Market (Global Equity, Fixed Income and Cash) Table 2 Target Allocations Float Private Market Asset Classes Public Market Allocation Real Private Strategic Asset Classes Limit Estate Equity Investments Global Equity N/A 50% 100% 75% Fixed Income N/A 50% 0% 25%

Measurement of asset allocation performance shall be made by comparing the actual asset allocation times the return for the appropriate indices to the target allocation times the index returns. For asset classes with floating allocations the basis of tactical measurement shall be the asset class’s actual share.

Performance measurement of the effectiveness of the implementation of the Private Equity asset class shall be based on an internal rate of return (IRR) methodology, applied over significant periods of time. Performance measurement of the effectiveness of the implementation of the Private Equity, Strategic Investments, and Cash Equivalents asset classes shall be assessed relative to both the applicable index in Table 4 and:

• For Private Equity, the joint Cambridge Associates Global Private Equity and Venture Capital Index pooled return at peer group weights. • For Strategic Investments, the CPI, as reported by the U.S. Department of Labor, Bureau of Labor Statistics (Consumer Price Index – All Urban Consumers), plus 4.0%. • For Cash Equivalents, the iMoneyNet First Tier Institutional Money Market Funds Net Index

VIII. ASSET CLASS PORTFOLIO MANAGEMENT

General Asset Class and Portfolio Guidelines

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The Executive Director is responsible for developing asset class and individual portfolio policies and guidelines which reflect the goals and objectives of this Investment Policy Statement. In doing so, he is authorized to use all investment authority spelled out in Section 215.47, Florida Statutes, except as limited by this Plan or SBA Rules. The Executive Director shall develop guidelines for the selection and retention of portfolios, and shall manage all external contractual relationships in accordance with the fiduciary responsibilities of the Board.

All asset classes shall be invested to achieve or exceed the return on their respective benchmarks over a long period of time. To obtain appropriate compensation for associated performance risks:

• Public market asset classes shall be well diversified with respect to their benchmarks and have a reliance on low cost passive strategies scaled according to the degree of efficiency in underlying securities markets, capacity in effective active strategies, and ongoing total fund liquidity requirements. • Private Equity, Real Estate and Strategic Investments asset classes shall utilize a prudent process to maximize long-term access to attractive risk-adjusted investment opportunities through use of business partners with appropriate:

o Financial, operational and investment expertise and resources; o Alignment of interests; o Transparency and repeatability of investment process; and o Controls on leverage.

Strategic Investments Guidelines

The objective of the asset class is to proactively identify and utilize non-traditional and multi-asset class investments, on an opportunistic and strategic basis, in order to accomplish one or more of the following:

• Generate long-term incremental returns in excess of a 4.0% annualized real rate of return, commensurate with risk. • Reduce the volatility of FRS Pension Plan assets and improve the FRS Pension Plan’s risk-adjusted return over multiple market cycles. • Outperform the FRS Pension Plan during periods of significant market declines. • Increase investment flexibility across market environments in order to access evolving or opportunistic investments outside of traditional asset classes and effective risk-adjusted portfolio management strategies.

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Strategic Investments may include, but not be limited to, direct investments authorized by s. 215.47, Florida Statutes or investments in capital commitment partnerships, hedge funds or other vehicles that make or involve non-traditional, opportunistic and/or long or short investments in marketable and nonmarketable debt, equity, and/or real assets (e.g., real estate, infrastructure, or commodities). Leverage may be utilized subject to appropriate controls.

Other Guidelines

The Executive Director shall develop and implement policies as appropriate for the orderly and effective implementation of the provisions of Chapter 2007-88, Laws of Florida, the “Protecting Florida’s Investments Act.” Actions taken and determinations made pursuant to said policies are hereby incorporated by reference into this Investment Policy Statement, as required by subsection 215.473(6), Florida Statutes.

The Executive Director shall develop and implement policies as appropriate for the orderly and effective implementation of the provisions of Chapter 2016-36, Laws of Florida, an act relating to companies that boycott Israel. Actions taken and determinations made pursuant to said policies are hereby incorporated by reference into this Investment Policy Statement, as required by subsection 215.4725(5), Florida Statutes.

The Executive Director shall develop and implement policies as appropriate for the orderly and effective implementation of the provisions of Chapter 2018-125, Laws of Florida, an act relating to state investments in or with the government of Venezuela. Actions taken and determinations made pursuant to said policies are hereby incorporated by reference into this Investment Policy Statement, as required by subsection 215.475(3)(a), Florida Statutes.

Subsection 215.475(3)(a) Florida Statutes is consistent with the Resolution adopted by the Trustees of the Board on August 16, 2017. At that meeting, the Board also included in the Resolution the specific direction that the SBA include in this Investment Policy Statement upon review of the IAC in accordance with Section 215.475(2) Florida Statutes, the following: “The SBA will not vote in favor of any proxy resolution advocating the support of the Maduro Regime in Venezuela.”

IX. REPORTING

The Board directs the Executive Director to coordinate the preparation of quarterly reports of the investment performance of the FRS by the Board's independent performance evaluation consultant.

The following formal periodic reports to the Board shall be the responsibility of the Executive Director:

• An annual report on the SBA and its investment portfolios, including that of the FRS.

10 Blacklined Draft for Review by IAC on June 30, 2020 Effective July 1, 2018September 1, 2020

• A monthly report on performance and investment actions taken. • Special investment reports pursuant to Section 215.44-215.53, Florida Statutes.

X. IMPLEMENTATION SCHEDULE

This policy statement shall be effective July September 1, 201820.

11 Final for Adoption by IAC on June 30, 2020 Effective September 1, 2020

FLORIDA RETIREMENT SYSTEM DEFINED BENEFIT PLAN INVESTMENT POLICY STATEMENT

I. DEFINITIONS

Absolute Real Target Rate of Return - The total rate of return by which the FRS Portfolio must grow, in excess of inflation as reported by the U.S. Department of Labor, Bureau of Labor Statistics (Consumer Price Index – All Urban Consumers), in order to achieve the long-run investment objective. Asset Class - An asset class is an aggregation of one or more portfolios with the same principal asset type.1 For example, all of the portfolios whose principal asset type was stocks would be aggregated together as the Global Equity asset class. As such, it would contain primarily—but not exclusively— the principal asset type. Asset Type - An asset type is a category of investment instrument such as common stock or bond. Portfolio - A portfolio is the basic organization unit of the FRS Fund. Funds are managed within portfolios. A portfolio will typically contain one principal asset type (common stocks, for example), but may contain other asset types as well. The discretion for this mix of asset types is set out in guidelines for each portfolio.

II. OVERVIEW OF THE FRS AND SBA

The State Board of Administration (Board) provides investment management of assets contributed and held on behalf of the Florida Retirement System (FRS). The investment of retirement assets is one aspect of the activity involved in the overall administration of the Florida Retirement System. The Division of Retirement (DOR), the administrative agency for the FRS, provides full accounting and administration of benefits and contributions, commissions actuarial studies, and proposes rules and regulations for the administration of the FRS. The State Legislature has the responsibility of setting contribution and benefit levels, and providing the statutory guidance for the administration of the FRS.

III. THE BOARD

The State Board of Administration has the authority and responsibility for the investment of FRS assets. The Board consists of the Governor, as Chairman, the Chief Financial Officer, and the Attorney General. The Board has statutory responsibility for the investment of FRS assets, subject to limitations on investments as outlined in Section 215.47, Florida Statutes.

The Board shall discharge its fiduciary duties in accordance with the Florida statutory fiduciary standards of care as contained in Sections 215.44(2)(a) and 215.47(10), Florida Statutes.

1 The Strategic Investments asset class is an exception, purposefully established to contain a variety of portfolios which may represent asset types and strategies not suitable for inclusion in other asset classes.

Final for Adoption by IAC on June 30, 2020 Effective September 1, 2020

The Board delegates to the Executive Director the administrative and investment authority, within the statutory limitations and rules, to manage the investment of FRS assets. An Investment Advisory Council (IAC) is appointed by the Board. The IAC meets quarterly, and is charged with the review and study of general portfolio objectives, policies and strategies, including a review of investment performance.

The mission of the State Board of Administration is to provide superior investment management and trust services by proactively and comprehensively managing risk and adhering to the highest ethical, fiduciary and professional standards.

IV. THE EXECUTIVE DIRECTOR

The Executive Director is charged with the responsibility for managing and directing administrative, personnel, budgeting, and investment functions, including the strategic and tactical allocation of investment assets.

The Executive Director is charged with developing specific individual investment portfolio objectives and policy guidelines, and providing the Board with monthly and quarterly reports of investment activities.

The Executive Director has investment responsibility for maintaining diversified portfolios, and maximizing returns with respect to the broad diversified market standards of individual asset classes, consistent with appropriate risk constraints. The Executive Director will develop policies and procedures to:

• Identify, monitor and control/mitigate key investment and operational risks. • Maintain an appropriate and effective risk management and compliance program that identifies, evaluates and manages risks within business units and at the enterprise level. • Maintain an appropriate and effective control environment for SBA investment and operational responsibilities. • Approve risk allocations and limits, including total fund and asset class risk budgets.

The Executive Director will appoint a Chief Risk and Compliance Officer, whose selection, compensation and termination will be affirmed by the Board, to assist in the execution of the responsibilities enumerated in the preceding list. For day-to-day executive and administrative purposes, the Chief Risk and Compliance Officer will proactively work with the Executive Director and designees to ensure that issues are promptly and thoroughly addressed by management. On at least a quarterly basis, the Chief Risk and Compliance Officer will provide reports to the Investment Advisory Council, Audit Committee and Board and is authorized to directly access these bodies at

2 Final for Adoption by IAC on June 30, 2020 Effective September 1, 2020

any time as appropriate to ensure the integrity and effectiveness of risk management and compliance functions.

Pursuant to written SBA policy, the Executive Director will organize an Investment Oversight Group(s) to regularly review, document and formally escalate guideline compliance exceptions and events that may have a material impact on the Trust Fund. The Executive Director is delegated the authority and responsibility to prudently address any such compliance exceptions, with input from the Investment Advisory Council and Audit Committee as necessary and appropriate, unless otherwise required in this Investment Policy Statement.

The Executive Director is responsible for evaluating the appropriateness of the goals and objectives in this Plan in light of actuarial studies and recommending changes to the Board when appropriate.

V. INVESTMENT OBJECTIVES

The investment objective of the Board is to provide investment returns sufficient for the plan to be maintained in a manner that ensures the timely payment of promised benefits to current and future participants and keeps the plan cost at a reasonable level. To achieve this, a long-term real return approximating 4.0% per annum (compounded and net of investment expenses) should be attained. As additional considerations, the Board seeks to avoid excessive risk in long-term cost trends. To manage these risks, the volatility of annual returns should be reasonably controlled.

The Board's principal means for achieving this goal is through investment directives to the Executive Director. The main object of these investment directives is the asset class. The Board directs the Executive Director to manage the asset classes in ways that, in the Board's opinion, will maximize the likelihood of achieving the Board's investment objective within an appropriate risk management framework. The Board establishes asset classes, sets target allocations and reasonable ranges around them for each and establishes performance benchmarks for them. In addition, it establishes a performance benchmark for the total portfolio.

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VI. TARGET PORTFOLIO AND ASSET ALLOCATION RANGES

The Board's investment objective is an absolute one: achieve a specific rate of return, the absolute real target rate of return. In order to achieve it, the Board sets a relative objective for the Executive Director: achieve or exceed the return on a performance benchmark known as the Target Portfolio over time. The Target Portfolio is a portfolio composed of a specific mix of the authorized asset classes. The return on this portfolio is a weighted-average of the returns to passive benchmarks for each of the asset classes. The expectation is that this return will equal or exceed the absolute real target rate of return long-term and will thus assure achievement of the Board's investment objective.

This relative return objective is developed in a risk management framework. Risk from the perspective of the Board is any shortfall of actual investment returns relative to the absolute real target rate of return over long periods of time, and the asset mix is developed to manage this risk. In selecting the Target Portfolio, the Board considers information from actuarial valuation reviews and asset/liability studies of the FRS, as well as asset class risk and return characteristics. In addition, the timing of cash demands on the portfolio to honor benefit payments and other liabilities are an important consideration. Potential asset mixes are thus evaluated with respect to their expected return, volatility, liquidity, and other risk and return measures as appropriate.

The Target Portfolio defined in Table 2 has a long-term expected compound annual real return that approximates the absolute real target rate of return. To achieve the absolute real target rate of return or actuarial return, material market risk must be borne (i.e., year to year volatility of returns). For example, in 2008 the Trust Fund’s net managed real return was -26.81% compared to gains of 17.56% in 2009 and 21.48% in 2003. While downside risk is considerably greater over shorter horizons, the natural investment horizon for the Trust Fund is the long-term. Table 1 illustrates a modeled estimate of the Target Portfolio’s potential range of real returns that could result over longer-term investment horizons. Over a 15-year investment horizon there is an 80 percent probability that the Target Portfolio will experience a compound annual real return between 0.47% and 8.73% and a 90 percent probability that the Target Portfolio will experience a compound annual real return between -0.65% and 9.96%.

Table 1: Expected Risk in Target Portfolio’s Real Returns Time 5th Percentile 10th Percentile 90th Percentile 95th Percentile Horizon Real Return Real Return Real Return Real Return

10 Years -1.78% -0.42% 9.71% 11.22% 15 Years -0.65% 0.47% 8.73% 9.96% 20 Years 0.03% 1.00% 8.16% 9.22% 25 Years 0.49% 1.37% 7.77% 8.71% 30 Years 0.84% 1.64% 7.48% 8.34%

Although the Target Portfolio has an expected return and risk associated with it, it is important to note that this expected return is neither an explicit nor an implicit goal for the managers of the Florida Retirement System Trust Fund (FRSTF). These figures are used solely in developing directives for

4 Final for Adoption by IAC on June 30, 2020 Effective September 1, 2020

fund management that will raise the probability of success in achieving the absolute real target rate of return. The Executive Director is held responsible not for specifically achieving the absolute real target rate of return in each period, but rather for doing at least as well as the market using the Target Portfolio's mix of assets.

In pursuit of incremental investment returns, the Executive Director may vary the asset mix from the target allocation based on market conditions and the investment environment for the individual asset classes. The Executive Director shall adopt an asset allocation policy guideline which specifies the process for making these tactical decisions. The guideline shall concentrate on the analysis of economic conditions, the absolute values of asset class investments and the relative values between asset classes. The Board establishes ranges for tactical allocations, as shown in Table 2.

Table 2: Authorized Asset Classes, Target Allocations and Policy Ranges

Policy Range Asset Class Target Allocation Policy Range Low High

Global Equity 53% 45% 70% Fixed Income 18% 10% 26% Real Estate 10% 4% 16% Private Equity 6% 2% 9% Strategic Investments 12% 0% 16% Cash Equivalents 1% 0.25% 5% Total Fund 100% -- --

For purposes of determining compliance with these policy ranges, an asset class is considered to be an aggregation of one or more portfolios with substantially the same principal asset type.2 An asset type is a category of investment instrument such as common stock or bond. For example, all of the portfolios whose principal asset type is bonds would be aggregated together as the Fixed Income asset class. As such, it would contain primarily—but not exclusively—the principal asset type. As a standard management practice, portfolio managers are expected to meet their goals for all assets allocated to their portfolio.

It is expected that the FRS Portfolio will be managed in such a way that the actual allocation mix will remain within these ranges. Investment strategies or market conditions which result in an allocation position for any asset class outside of the enumerated ranges for a period exceeding thirty

2 The Strategic Investments asset class is an exception, purposefully established to potentially contain a variety of portfolios which may represent asset types and strategies not suitable for inclusion in other asset classes.

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(30) consecutive business days shall be reported to the Board, together with a review of conditions causing the persistent deviation and a recommendation for subsequent investment action.

The asset allocation is established in concert with the investment objective, capital market expectations, projected actuarial liabilities, and resulting cash flows. Table 3 indicates estimated net cash flows (benefit payments less employer and employee contributions) and associated probabilities that are implicit in this policy statement, assuming the Legislature adheres to system funding provisions in current law. Additionally, the annualized income yield of the fund is projected to approximate 2% to 3%.

Table 3: Estimated Net Cash Outflow ($ millions/ % Fund)

In 5 Years In 10 Years

10th Percentile $ 4,851 3.67% $ 3,497 3.14% 25th Percentile $ 6,776 4.15% $ 6,329 4.03% Median $ 7,466 4.54% $ 8,523 4.60% 75th Percentile $ 8,079 5.04% $ 11,561 5.22% 90th Percentile $ 10,690 5.96% $ 12,895 6.27%

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VII. PERFORMANCE MEASUREMENT

Asset class performance is measured in accordance with a broad market index appropriate to the asset class. The indices identified in Table 4 are used as the primary benchmarks for the authorized asset classes.

Table 4: Authorized Target Indices Asset Class Index

Global Equity A custom version of the MSCI All Country World Investable Market Index (ACWI IMI), in dollar terms, net of withholding taxes on non- resident institutional investors, adjusted to reflect the provisions of the Protecting Florida’s Investments Act

Fixed Income The Barclays Capital U.S. Intermediate Aggregate Index

Real Estate The core portion of the asset class is benchmarked to an average of the National Council of Real Estate Investment Fiduciaries (NCREIF) Fund Index – Open-ended Diversified Core Equity, NET of fees, weighted at 76.5%, and the non-core portion of the asset class is benchmarked to an average of the National Council of Real Estate Investment Fiduciaries (NCREIF) Fund Index – Open-ended Diversified Core Equity, NET of fees, weighted at 13.5%, plus a fixed return premium of 150 basis points per annum, and the FTSE EPRA/NAREIT Developed Index, in dollar terms, net of withholding taxes on non-resident institutional investors, weighted at 10%3

Private Equity The MSCI All Country World Investable Market Index (ACWI IMI), in dollar terms, net of withholding taxes on non-resident institutional investors, adjusted to reflect the provisions of the Protecting Florida’s Investments Act, plus a fixed premium return of 300 basis points per annum

Strategic Investments A weighted-average of individual portfolio level benchmark returns

Cash Equivalents Bloomberg Barclays U.S. Treasury Bill: 1-3 Months Index

The return on the Target Portfolio shall be calculated as an average of the returns to the target indices indicated in Table 4 weighted by the target allocations indicated by Table 2, but adjusted for floating

3 Core RE Non-Core RE Public RE

3 (76.5% * NFI-ODCE) + [13.5% * (NFI-ODCE + 150 bps)] + (10%* REIT Index)

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allocations. The policy allocations for the private market asset classes would all “float” against the public market asset classes (i.e., limited short-term liquidity available for rebalancing and benefit payments means that their policy allocations would equal their actual allocations) as identified in Table 5.

Table 5: Allocations of Private Market (Real Estate, Private Equity and Strategic Investments) Under and Overweights to Public Market (Global Equity, Fixed Income and Cash) Table 2 Target Allocations Float Private Market Asset Classes Public Market Allocation Real Private Strategic Asset Classes Limit Estate Equity Investments Global Equity N/A 50% 100% 75% Fixed Income N/A 50% 0% 25%

Measurement of asset allocation performance shall be made by comparing the actual asset allocation times the return for the appropriate indices to the target allocation times the index returns. For asset classes with floating allocations the basis of tactical measurement shall be the asset class’s actual share.

Performance measurement of the effectiveness of the implementation of the Private Equity asset class shall be based on an internal rate of return (IRR) methodology, applied over significant periods of time. Performance measurement of the effectiveness of the implementation of the Private Equity, Strategic Investments, and Cash Equivalents asset classes shall be assessed relative to both the applicable index in Table 4 and:

• For Private Equity, the joint Cambridge Associates Global Private Equity and Venture Capital Index pooled return at peer group weights. • For Strategic Investments, the CPI, as reported by the U.S. Department of Labor, Bureau of Labor Statistics (Consumer Price Index – All Urban Consumers), plus 4.0%. • For Cash Equivalents, the iMoneyNet First Tier Institutional Money Market Funds Net Index

VIII. ASSET CLASS PORTFOLIO MANAGEMENT

General Asset Class and Portfolio Guidelines

The Executive Director is responsible for developing asset class and individual portfolio policies and guidelines which reflect the goals and objectives of this Investment Policy Statement. In doing so, he is authorized to use all investment authority spelled out in Section 215.47, Florida Statutes, except as limited by this Plan or SBA Rules. The Executive Director shall develop guidelines for the selection and retention of portfolios, and shall manage all external contractual relationships in accordance with the fiduciary responsibilities of the Board.

8 Final for Adoption by IAC on June 30, 2020 Effective September 1, 2020

All asset classes shall be invested to achieve or exceed the return on their respective benchmarks over a long period of time. To obtain appropriate compensation for associated performance risks:

• Public market asset classes shall be well diversified with respect to their benchmarks and have a reliance on low cost passive strategies scaled according to the degree of efficiency in underlying securities markets, capacity in effective active strategies, and ongoing total fund liquidity requirements. • Private Equity, Real Estate and Strategic Investments asset classes shall utilize a prudent process to maximize long-term access to attractive risk-adjusted investment opportunities through use of business partners with appropriate:

o Financial, operational and investment expertise and resources; o Alignment of interests; o Transparency and repeatability of investment process; and o Controls on leverage.

Strategic Investments Guidelines

The objective of the asset class is to proactively identify and utilize non-traditional and multi-asset class investments, on an opportunistic and strategic basis, in order to accomplish one or more of the following:

• Generate long-term incremental returns in excess of a 4.0% annualized real rate of return, commensurate with risk. • Reduce the volatility of FRS Pension Plan assets and improve the FRS Pension Plan’s risk-adjusted return over multiple market cycles. • Outperform the FRS Pension Plan during periods of significant market declines. • Increase investment flexibility across market environments in order to access evolving or opportunistic investments outside of traditional asset classes and effective risk-adjusted portfolio management strategies.

Strategic Investments may include, but not be limited to, direct investments authorized by s. 215.47, Florida Statutes or investments in capital commitment partnerships, hedge funds or other vehicles that make or involve non-traditional, opportunistic and/or long or short investments in marketable and nonmarketable debt, equity, and/or real assets (e.g., real estate, infrastructure, or commodities). Leverage may be utilized subject to appropriate controls.

9 Final for Adoption by IAC on June 30, 2020 Effective September 1, 2020

Other Guidelines

The Executive Director shall develop and implement policies as appropriate for the orderly and effective implementation of the provisions of Chapter 2007-88, Laws of Florida, the “Protecting Florida’s Investments Act.” Actions taken and determinations made pursuant to said policies are hereby incorporated by reference into this Investment Policy Statement, as required by subsection 215.473(6), Florida Statutes.

The Executive Director shall develop and implement policies as appropriate for the orderly and effective implementation of the provisions of Chapter 2016-36, Laws of Florida, an act relating to companies that boycott Israel. Actions taken and determinations made pursuant to said policies are hereby incorporated by reference into this Investment Policy Statement, as required by subsection 215.4725(5), Florida Statutes.

The Executive Director shall develop and implement policies as appropriate for the orderly and effective implementation of the provisions of Chapter 2018-125, Laws of Florida, an act relating to state investments in or with the government of Venezuela. Actions taken and determinations made pursuant to said policies are hereby incorporated by reference into this Investment Policy Statement, as required by subsection 215.475(3)(a), Florida Statutes.

Subsection 215.475(3)(a) Florida Statutes is consistent with the Resolution adopted by the Trustees of the Board on August 16, 2017. At that meeting, the Board also included in the Resolution the specific direction that the SBA include in this Investment Policy Statement upon review of the IAC in accordance with Section 215.475(2) Florida Statutes, the following: “The SBA will not vote in favor of any proxy resolution advocating the support of the Maduro Regime in Venezuela.”

IX. REPORTING

The Board directs the Executive Director to coordinate the preparation of quarterly reports of the investment performance of the FRS by the Board's independent performance evaluation consultant.

The following formal periodic reports to the Board shall be the responsibility of the Executive Director:

• An annual report on the SBA and its investment portfolios, including that of the FRS. • A monthly report on performance and investment actions taken. • Special investment reports pursuant to Section 215.44-215.53, Florida Statutes.

X. IMPLEMENTATION SCHEDULE

This policy statement shall be effective September 1, 2020.

10 State Board of Administration of Florida

Major Mandate Review First Quarter 2020

Aon | Retirement and Investment Inv estment advice and consulting services provided by Aon. 1

Table of Contents

1. Executive Summary 2. Pension Plan Review 3. Investment Plan Review 4. CAT Fund Review 5. Lawton Chiles Endowment Fund Review 6. Florida PRIME Review 7. Appendix

Aon | Retirement and Investment Investment advice and consulting services provided by Aon. 2 Executive Summary

ƒ The major mandates each produced generally strong returns relative to their respective benchmarks over both short- and long-term time periods ending March 31, 2020. ƒ The Pension Plan outperformed its Performance Benchmark over the trailing one-, three-, five-, ten-, and fifteen- year periods. – Over the trailing five-year period, Private Equity is the leading source of value added, followed by Global Equity, Strategic Investments, and Real Estate. – Over the trailing ten-year period, the Pension Plan’s return ranked within the median of the TUCS Top Ten Defined Benefit Plan universe. ƒ The FRS Investment Plan outperformed the Total Plan Aggregate Benchmark over the, three-, five-, and ten-year periods. ƒ The Lawton Chiles Endowment Fund outperformed its benchmark over the trailing three-, five-, and ten-year periods. ƒ The CAT Funds’ performance is strong over both short-term and long-term periods, outperforming the benchmark over the trailing three-, five-, and ten-year periods. ƒ Florida PRIME has continued to outperform its benchmark over both short- and long-term time periods.

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Aon | Retirement and Investment Investment advice and consulting services provided by Aon. 4 Pension Plan: Executive Summary

ƒ The Pension Plan assets totaled $148.1 billion as of March 31, 2020 which represents a $21.6 billion decrease since last quarter. ƒ The Pension Plan, when measured against the Performance Benchmark, outperformed over the trailing one-, three-, five-, ten-, fifteen-, twenty-, twenty-five-, and thirty-year periods. ƒ Relative to the Absolute Nominal Target Rate of Return, the Pension Plan outperformed over the trailing ten-, twenty-five-, and thirty-year periods, and underperformed over the trailing one-, three-, five-, fifteen-, and twenty-year time periods. ƒ The Pension Plan is well-diversified across six broad asset classes, and each asset class is also well-diversified. – Public market asset class investments do not significantly deviate from their broad market-based benchmarks, e.g., sectors, market capitalizations, global regions, credit quality, duration, and security types. – Private market asset classes are well-diversified by vintage year, geography, property type, sectors, investment vehicle/asset type, and investment strategy. – Asset allocation is monitored on a daily basis to ensure that the actual asset allocation of the Pension Plan remains close to the long-term policy targets set forth in the Investment Policy Statement. ƒ Aon Investment Consulting and SBA staff revisit the plan design annually through informal and formal asset allocation and asset liability reviews. ƒ Adequate liquidity exists within the asset allocation to pay the monthly obligations of the Pension Plan consistently and on a timely basis.

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FRS Pension Plan Change in Market Value Periods Ending 3/31/2020

Summary of Cash Flows

First Quarter Fiscal YTD*

Beginning Market Value $169,722,486,862 $163,135,205,913

+/- Net Contributions/(Withdrawals) $(1,758,234,702) $(5,515,517,763)

Investment Earnings $(19,849,752,875) $(9,505,188,864)

= Ending Market Value $148,114,499,286 $148,114,499,286

Net Change $(21,607,987,577) $(15,020,706,627)

*Period July 2019 – March 2020

Aon | Retirement and Investment Investment advice and consulting services provided by Aon. 6 Asset Allocation as of 3/31/2020 Total Fund Assets = $148.1 Billion

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FRS Pension Plan Investment Results Periods Ending 3/31/2020

Total FRS Pension Plan Performance Benchmark Absolute Nominal Target Rate of Return

18.0

13.0 7.1 6.6 6.7 8.0 5.6 6.3 6.4 6.0 6.2 5.4 4.1 4.6 2.5 3.4 3.0 1.4

-2.0 -3.1 -7.0 -6.1 -12.0 -11.7 -17.0 -14.3

-22.0 Quarter 1-Year 3-Year 5-Year 10-Year 15-Year

Aon | Retirement and Investment Investment advice and consulting services provided by Aon. 8 FRS Pension Plan Investment Results Periods Ending 3/31/2020

Long-Term FRS Pension Plan Performance Results vs. SBA's Long-Term Investment Objective

Total FRS Pension Plan Absolute Nominal Target Rate of Return

12.0 10.0 7.7 8.2 8.0 6.7 6.8 6.9 6.0 5.0 4.0 2.0 Annualized(%) Return 0.0 Last 20 Years Last 25 Years Last 30 Years

Aon | Retirement and Investment Inv estment advice and consulting services provided by Aon. 9

Comparison of Asset Allocation (TUCS Top Ten) As of 3/31/2020

FRS Pension Plan vs. Top Ten Defined Benefit Plans

FRS TOTAL FUND TUCS TOP TEN Cas h 2.7% Strategic Inv es tments Cas h 9.7% 1.3%

Alternatives 26.7%

Private Equity 8.5%

Global Equity** 41.8%

Real Estate Global Equity* 10.3% 50.2%

Fixed Income Real Estate 20.0% 8.4%

Fixed Income 20.5%

*Global Equity Allocation: 24.3% Domestic Equities; 19.8% Foreign Equities; **Global Equity Allocation: 26.3% Domestic Equities; 15.4% Foreign 5.0% Global Equities; 1.1% Global Equity Liquidity Account. Percentages are Equities. of the Total FRS Fund.

Note: The TUCS Top Ten Universe includes $1,527.8 billion in total assets. The median fund size w as $148.1 billion and the average fund size w as $157.8 billion. Note: Due to rounding, percentage totals displayed may not sum perfectly.

Aon | Retirement and Investment Investment advice and consulting services provided by Aon. 10 FRS Results Relative to TUCS Top Ten Defined Benefit Plans Periods Ending 3/31/2020

Total FRS (Gross) Top Ten Median Defined Benefit Plan Fund (Gross)

25.0

20.0

15.0

10.0 7.5 7.5 5.2 4.5 5.0 5.0 5.0

0.0 Rate of Return (%) Return of Rate -0.4 -5.0 -2.7

-10.0 -9.2 -11.7 -15.0 Quarter 1-Year 3-Year 5-Year 10-Year

Note: The TUCS Top Ten Universe includes $1,527.8 billion in total assets. The median fund size w as $148.1 billion and the average fund size w as $152.8 billion.

Aon | Retirement and Investment Inv estment advice and consulting services provided by Aon. 11

Top Ten Defined Benefit Plans FRS Universe Comparison (TUCS) Periods Ending 3/31/2020

Total FRS Top Ten Median Defined Benefit Plan Universe

20.0 18.0 16.0 14.0 12.0 10.0 8.0 6.0 Rateof Return (%) 4.0 2.0 0.0 -2.0 -4.0 1-Year 3-Year 5-Year 10-Year

FRS Percentile Ranking 100 99 62 62

Note: The TUCS Top Ten Universe includes $1,605.9 billion in total assets. The median fund size w as $120.8 billion and the average fund size w as $160.6 billion.

Aon | Retirement and Investment Investment advice and consulting services provided by Aon. 12 Investment Plan: Executive Summary

ƒ The FRS Investment Plan underperformed the Total Plan Aggregate Benchmark over the trailing one-year period and outperformed the Total Plan Aggregate Benchmark over the trailing three-, five-, and ten-year periods. This suggests strong relative performance of the underlying fund options in which participants are investing.

ƒ The FRS Investment Plan’s total expense ratio is slightly higher, on average, when compared to a defined contribution peer group and is lower than the average corporate and public defined benefit plan, based on year-end 2018 data. The total FRS Investment Plan expense ratio includes investment management fees, as well as administration, communication and education costs. Communication and education costs are not charged to FRS Investment Plan members; however, these and similar costs may be charged to members of plans within the peer group.

ƒ Management fees are lower than the median as represented by Morningstar’s mutual fund universe for every investment category.

ƒ The FRS Investment Plan offers an appropriate number of fund options that span the risk and return spectrum.

ƒ The Investment Policy Statement is revisited periodically to ensure that the structure and guidelines of the FRS Investment Plan are appropriate, taking into consideration the FRS Investment Plan’s goals and objectives.

Aon | Retirement and Investment Inv estment advice and consulting services provided by Aon. 13

Total Investment Plan Returns & Cost

Periods Ending 3/31/2020*

One-Year Three-Year Five-Year Ten-Year FRS Investment Plan -7.5% 2.1% 3.1% 5.6% Total Plan Aggregate Benchmark** -7.3% 1.9% 2.9% 5.3% FRS Investment Plan vs. Total Plan Aggregate -0.2 0.2 0.2 0.3 Benchmark

Periods Ending 12/31/2018*** Five-Year Average Five-Year Net Expense Return**** Value Added Ratio FRS Investment Plan 4.2% 0.1% 0.32%***** Peer Group 4.6 0.1 0.28 FRS Investment Plan vs. Peer Group -0.4 0.0 0.04

*Returns shown are net of fees. **Aggregate benchmark returns are an average of the individual portfolio benchmark returns at their actual weights. ***Source: 2017 CEM Benchmarking Report. Peer group for the Five-Year Average Return and Value Added represents the U.S. Median plan return based on the CEM 2017 Survey that included 123 U.S. defined contribution plans with assets ranging from $93 million to $60.3 billion. Peer group for the Expense Ratio represents a custom peer group for FSBA of 17 DC plans including corporate and public plans with assets between $2.3 -$18.6 billion. ****Returns shown are gross of fees. *****The total FRS Investment Plan expense ratio includes investment management fees, as well as administration, communication and education costs. These latter costs are not charged to FRS Investment Plan members; however, these and similar costs may be charged to members of plans within the peer group utilized above.

Aon | Retirement and Investment Investment advice and consulting services provided by Aon. 14 CAT Fund: Executive Summary

ƒ Returns on an absolute basis continue to be modest given the current low interest rate environment.

ƒ All CAT Funds are adequately diversified across issuers within the short-term bond market.

ƒ The Investment Portfolio Guidelines appropriately constrain the CAT Funds to invest in short-term and high quality bonds to minimize both interest rate and credit risk.

ƒ Adequate liquidity exists to address the cash flow obligations of the CAT Funds.

ƒ The Investment Portfolio Guidelines are revisited periodically to ensure that the structure and guidelines of the CAT Funds are appropriate, taking into consideration the CAT Funds’ goals and objectives.

ƒ Over long-term periods, the relative performance of the CAT Operating Funds has been favorable as they have outperformed the Performance Benchmark over the trailing three-, five-, ten-, and fifteen- year time periods.

Aon | Retirement and Investment Inv estment advice and consulting services provided by Aon. 15

CAT Operating Funds Investment Results Periods Ending 3/31/2020

6.00

5.00 3.93 4.01 4.00 CAT Operating Funds Composite* 3.00 2.62 2.58 1.79 1.73 Performance Benchmark** 2.00 1.51 1.57 1.09 0.91 1.00

0.00 1 Quarter 1 Year 3 Years 5 Years 10 Years

6.00 5.00 4.00 3.00 2.48 2.57 CAT Operating Liquidity Fund 1.94 1.89 BoA Merrill Lynch 3-6 month U.S. 2.00 1.39 1.33 0.74 0.77 0.89 0.71 1.00 0.00 1 Quarter 1 Year 3 Years 5 Years 10 Years 6.00

5.00 4.64 4.71 4.00 3.00 CAT Operating Claims Paying Fund 1.84 1.93 2.00 65% Treasury 35% Corporate Bond 1.00 0.00 1 Quarter 1 Year *CAT Operating Funds: Beginning March 2008, the returns for the CAT Operating Funds reflect marked-to-market returns. Prior to that time, cost-based returns are used. Beginning February 2018, the CAT Operating Funds were split into two different sub funds, the CAT Fund Operating LiquidityFund and the CAT Fund Operating Claims Paying Fund. Performance for each sub fund is shown below. **Performance Benchmark: Beginning February 2018, the CAT Fund Operating Liquidity Fund was benchmarked to the B of A Merrill Lynch 3-6 Month U.S. Treasury Bill Index, and the CAT Fund Operating Claims Paying Fund benchmark is a blend of 35% of the Bank of America Merrill Lynch 1-3 Year AA U.S. Corporate Bond Index and 65% of Bank of America Merrill Lynch 1-3 Year U.S. Treasury Index. Additional benchmark history can be found in the appendix.

Aon | Retirement and Investment Investment advice and consulting services provided by Aon. 16 Lawton Chiles Endowment Fund: Executive Summary

ƒ Established in July 1999, the Lawton Chiles Endowment Fund (LCEF) was created to provide a source of funding for child health and welfare programs, elder programs and research related to tobacco use. – The investment objective is to preserve the real value of the net contributed principal and provide annual cash flows for appropriation. – The Endowment’s investments are diversified across various asset classes including global equity, fixed income, inflation-indexed bonds (TIPS) and cash. ƒ The Endowment assets totaled $710.8 million as of March 31, 2020. ƒ The Endowment’s return outperformed its Target over the trailing three-, five-, and ten-year time periods and underperformed its Target over the trailing quarter and one-year.

Aon | Retirement and Investment Inv estment advice and consulting services provided by Aon. 17

Asset Allocation as of 3/31/2020 Total LCEF Assets = $710.8 Million

Aon | Retirement and Investment Investment advice and consulting services provided by Aon. 18 LCEF Investment Results Periods Ending 3/31/2020

Total LCEF Performance Benchmark

25.0

20.0

15.0

10.0 6.2 5.6 3.3 5.0 2.2 2.1 2.9

0.0

-5.0 Annualized Return (%) Return Annualized -6.7 -10.0 -7.7

-15.0 -16.3 -15.6 -20.0

-25.0 Quarter 1-Year 3-Year 5-Year 10-Year

Aon | Retirement and Investment Inv estment advice and consulting services provided by Aon. 19

Florida PRIME: Executive Summary

ƒ The purpose of Florida PRIME is safety, liquidity, and competitive returns with minimal risk for participants. ƒ The Investment Policy Statement appropriately constrains Florida PRIME to invest in short-term and high quality bonds to minimize both interest rate and credit risk. ƒ Florida PRIME is adequately diversified across issuers within the short-term bond market, and adequate liquidity exists to address the cash flow obligations of Florida PRIME. ƒ Performance of Florida PRIME has been strong over short- and long-term time periods, outperforming its performance benchmark during the quarter and over the trailing one-, three-, five-, and ten-year time periods. ƒ As of March 31, 2020, the total market value of Florida PRIME was $16.0 billion. ƒ Aon Investments USA Inc., in conjunction with SBA staff, compiles an annual best practices report that includes a full review of the Investment Policy Statement, operational items, and investment structure for Florida PRIME.

Aon | Retirement and Investment Investment advice and consulting services provided by Aon. 20 Florida PRIME Investment Results Periods Ending 3/31/2020

FL PRIME Yield 30-Day Average S&P AAA & AA GIP All 30-Day Net Yield Index**

3.0 2.56 2.5 2.35 2.16 1.99 2.00 2.0 1.73 1.42 1.5 1.16 1.0 0.83 0.62 Rate of Return (%) Return of Rate 0.5 0.41 0.37

0.0 First Quarter* 1-Year 3-Years 5-Years 10-Years Since Jan. 1996

*Returns less than one year are not annualized. **S&P AAA & AA GIP All 30-Day Net Yield Index for all time periods shown.

Aon | Retirement and Investment Inv estment advice and consulting services provided by Aon. 21

Florida PRIME Risk vs. Return 3 Years Ending 3/31/2020

2.50%

2.00% Florida PRIME

1 M LIBOR

90-Day T-Bill S&P US AAA & AA Rated GIP All 30-Day Net

1.50% Return Annualized

1.00%

0.50%

0.00% 0.00% 0.05% 0.10% 0.15% 0.20% 0.25% 0.30% Annualized Standard Deviation

Aon | Retirement and Investment Investment advice and consulting services provided by Aon. 22 Florida PRIME Risk vs. Return 5 Years Ending 3/31/2020

1.60%

1.40% Florida PRIME

1 M LIBOR 1.20% 90-Day T-Bill S&P US AAA & AA Rated GIP All 30-Day Net 1.00%

0.80%

Return 0.60% Annualized

0.40%

0.20%

0.00% 0.00% 0.05% 0.10% 0.15% 0.20% 0.25% 0.30%

Annualized Standard Deviation

Aon | Retirement and Investment Inv estment advice and consulting services provided by Aon. 23

Return Distribution Periods Ending 3/31/2020

Return Distribution 2.30%

2.10% 95th, 2.03% 75th, 1.94% 1.90% 95th, 1.82% 50th, 1.73% 75th, 1.73% 1.70% 25th, 1.61% 50th, 1.54% 1.50% 25th, 1.34% 1.30% 5th, 1.18% 95th, 1.20% 75th, 1.14% 1.10% 5th, 0.96% 50th, 0.97% 0.90% 25th, 0.83%

Rate of Return (%) Return of Rate 0.70% 5th, 0.59% 0.50% 0.30% 0.10% -0.10% 1-Year 3-Year 5-Year

FL PRIME S&P US AAA & AA Rated GIP All 30-Day Net 1 mo LIBOR Citigroup 90-day T-Bill

Aon | Retirement and Investment Investment advice and consulting services provided by Aon. 24 Standard Deviation Distribution Periods Ending 3/31/2020

Standard Deviation Distribution 0.30% 0.28% 95th, 0.27% 0.26% 75th, 0.25% 50th, 0.24% 0.24% 25th, 0.22%

0.22% 95th, 0.21% 75th, 0.19% 0.20% 5th, 0.18% 0.18% 50th, 0.17% 25th, 0.16% 0.16% 5th, 0.16% 0.14% 0.12% 0.10% 95th, 0.07% 0.08% 75th, 0.06%

Standard Deviation (%) 0.06% 50th, 0.04% 0.04% 25th, 0.03% 0.02% 5th, 0.03% 0.00% -0.02% 1-Year 3-Year 5-Year

FL PRIME S&P US AAA & AA Rated GIP All 30-Day Net 1 mo LIBOR Citigroup 90-day T-Bill

Aon | Retirement and Investment Inv estment advice and consulting services provided by Aon. 25

(This page is left blank intentionally)

Aon | Retirement and Investment Investment advice and consulting services provided by Aon. 26 Appendix

Aon | Retirement and Investment Inv estment advice and consulting services provided by Aon. 27

FRS Investment Plan Costs

Average Mutual Fund Investment Category Investment Plan Fee* Fee**

Large Cap Equity 0.14% 0.79%

Small-Mid Cap Equity 0.58% 0.99%

International Equity 0.32% 0.94%

Diversified Bonds 0.15% 0.53%

Target Date 0.15% 0.60%

Money Market 0.06% 0.39%

*Average fee of multiple products in category as of 3/31/2020. **Source: Aon’s annual mutual fund expense analysis as of 12/31/2018.

Aon | Retirement and Investment Investment advice and consulting services provided by Aon. 28 Investment Plan Fiscal Year End Assets Under Management

By Fiscal Year ($ millions) $14,000

$12,000 $11,241 $10,825 $9,996 $9,967 $10,000 $9,035 $9,129 $8,918 $7,879 $8,000 $7,136 $6,733

$6,000 $5,048 $4,365 $4,075 $4,000 $3,688

$2,306 $2,000 $1,426 $706 $333 $0 FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY 02-03 03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13 13-14 14-15 15-16 16-17 17-18 18-19 19-20*

*Period Ending 3/31/2020

Source: Investment Plan Administrator

Aon | Retirement and Investment Inv estment advice and consulting services provided by Aon. 29

Investment Plan Membership

240,000 229,118 220,000 213,213

200,000 190,664 177,218 180,000 169,576 163,456 157,227 160,000 150,721 144,299 136,661 140,000 127,940 116,531 121,522 120,000 98,070 100,000 75,377 80,000 56,034 60,000 38,347 40,000

20,000

0 FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY 03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13 13-14 14-15 15-16 16-17 17-18 18-19 19-20*

* Period Ending 3/31/2020

Source: Investment Plan Administrator

Aon | Retirement and Investment Investment advice and consulting services provided by Aon. 30 Florida Hurricane Catastrophe Funds Background and Details

ƒ The purpose of the Florida Hurricane Catastrophe Fund (FHCF) is to provide a stable, ongoing and timely source of reimbursement to insurers for a portion of their hurricane losses.

ƒ The CAT Operating Funds, along with CAT 2016 A Fund and CAT 2013 A Fund are internally managed portfolios.

ƒ As of March 31, 2020, the total value of: − The CAT Operating Funds was $13.2 billion − The CAT 2016 A Fund was $0.7 billion − The CAT 2013 A Fund was $1.0 billion

ƒ History of the CAT Funds Benchmarks: The CAT Operating Funds were benchmarked to the IBC First Tier through February 2008. From March 2008 to December 2009, it was the Merrill Lynch 1-Month LIBOR. From January 2010 to June 2010, it was a blend of the average of the 3-Month Treasury Bill rate and the iMoneyNet First Tier Institutional Money Market Funds Gross Index. From July 2010 to September 2014, it was a blend of the average of the 3-Month Treasury Bill rate and the iMoneyNet First Tier Institutional Money Market Funds Net Index. Effective October 2014, it is a blend of the average of the Merrill Lynch 1-Yr U.S. Treasury Bill Index and the iMoneyNet First Tier Institutional Money Market Funds Net Index. Beginning February 2018, the CAT Operating Funds were split into two different sub funds, the CAT Fund Operating Liquidity Fund and the CAT Fund Operating Claims Paying Fund. Beginning February 2018, the CAT Fund Operating Liquidity Fund was benchmarked to the B of A Merrill Lynch 3-6 Month U.S. Treasury Bill Index, and the CAT Fund Operating Claims Paying Fund benchmark is a blend of 35% of the Bank of America Merrill Lynch 1-3 Year AA U.S. Corporate Bond Index and 65% of Bank of America Merrill Lynch 1-3 Year U.S. Treasury Index.

Aon | Retirement and Investment Inv estment advice and consulting services provided by Aon. 31

CAT 2013 A and 2016 A Funds Investment Results Periods Ending 3/31/2020

5.00

4.00

3.00 2.72 2.72 2.08 2.02 CAT Fu nd 2013A 2.00 1.47 1.40 Performance Benchmark*

1.00 0.68 0.68

0.00 1 Quarter 1 Year 3 Years 5 Years

5.00

4.00 3.30 3.30

3.00 2.36 2.27 CAT Fund 2016A 2.00 Performance Benchmark* 1.05 1.05 1.00

0.00 1 Quarter 1 Year 3 Years

*Perf ormance Benchmark: Beginning February 2018, the CAT 2013 A and 2016 A Funds were benchmarked to themselves.

Aon | Retirement and Investment Investment advice and consulting services provided by Aon. 32 CAT Operating Funds Characteristics Period Ending 3/31/2020

Maturity Analysis 1 to 30 Days 0.38% 31 to 60 Days 0.00 61 to 90 Days 7.21 91 to 120 Days 9.49 121 to 150 Days 11.00 151 to 180 Days 1.15 181 to 270 Days 0.19 271 to 365 Days 1.97 366 to 455 Days 5.70 >= 456 Days 62.91 Total % of Portfolio: 100.00%

Bond Rating Analysis AAA 74.04% AA 21.83 A4.13 Baa 0.00 Other 0.00 Total % of Portfolio 100.00%

Aon | Retirement and Investment Inv estment advice and consulting services provided by Aon. 33

CAT 2013 A Fund Characteristics Period Ending 3/31/2020

Maturity Analysis 1 to 30 Days 5.28% 31 to 60 Days 6.03 61 to 90 Days 7.09 91 to 120 Days 81.60 121 to 150 Days 0.00 151 to 180 Days 0.00 181 to 270 Days 0.00 271 to 365 Days 0.00 366 to 455 Days 0.00 >= 456 Days 0.00 Total % of Portfolio: 100.00%

Bond Rating Analysis AAA 89.37% AA 5.34 A5.29 Baa 0.00 Other 0.00 Total % of Portfolio 100.00%

Aon | Retirement and Investment Investment advice and consulting services provided by Aon. 34 CAT 2016 A Fund Characteristics Period Ending 3/31/2020

Maturity Analysis 1 to 30 Days 1.75% 31 to 60 Days 2.04 61 to 90 Days 2.18 91 to 120 Days 3.49 121 to 150 Days 1.27 151 to 180 Days 1.89 181 to 270 Days 12.58 271 to 365 Days 18.92 366 to 455 Days 31.24 >= 456 Days 24.64 Total % of Portfolio: 100.00%

Bond Rating Analysis AAA 58.76% AA 28.38 A 12.86 Baa 0.00 Other 0.00 Total % of Portfolio 100.00%

Aon | Retirement and Investment Inv estment advice and consulting services provided by Aon. 35

Florida PRIME Characteristics Quarter Ending 3/31/2020

Cash Flows as of 3/31/2020 First Quarter Fiscal YTD* Opening Balance $16,099,402,852 13,435,399,194.00 Participant Deposits $6,394,024,049 $23,797,015,357 Gross Earnings $70,625,449 211,154,526.00 Participant Withdrawals ($6,610,337,868) ($21,487,785,390) Fees ($1,352,479) ($3,421,685) Closing Balance (3/31/2020) $15,952,362,003 $15,952,362,003

Change ($147,040,849) $2,516,962,809

*Period July 2019 –March 2020

Aon | Retirement and Investment Investment advice and consulting services provided by Aon. 36 Florida PRIME Characteristics Quarter Ending 3/31/2020

Portfolio Composition

4.5% 4.0% 0.2% 20.6%

29.7% 5.3%

14.1% 5.3% 16.4%

Aon | Retirement and Investment Inv estment advice and consulting services provided by Aon. 37

Florida PRIME Characteristics Period Ending 3/31/2020

Effective Maturity Schedule 1-7 Days 47.4% 8 - 30 Days 15.8% 31 - 90 Days 25.5% 91 - 180 Days 8.4% 181+ Days 2.9% Total % of Portfolio: 100.0%

S & P Credit Quality Composition A-1+ 62.2% A-1 37.8% Total % of Portfolio: 100.0%

Aon | Retirement and Investment Investment advice and consulting services provided by Aon. 38 )563HQVLRQ3ODQ_)LUVW4XDUWHU 4XDUWHUO\,QYHVWPHQW5HYLHZ Visit the 5HWLUHPHQWDQG,QYHVWPHQWV7KRXJKW/HDGHUVKLS6LWH (https://retirement-investment-insights.aon.com); sharing our best thinking.

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Market Highlights

SHORT TERM RETURNS First Quarter 2020 One-Year AS OF 03/31/2020

40.0% 32.3% 30.0% 20.6% 20.0% 8.9% 9.0% 10.0% 3.1% 0.0% -10.0% -7.0% -4.7% -6.9% -20.0% -14.4% -12.7% -19.6% -17.7% -30.0% -24.0% -22.8% -23.6% -23.3% -22.3% -30.6% -40.0% S&P 500 Russell 2000 MSCI EAFE MSCI Emerging Bloomberg Bloomberg Bloomberg Bloomberg Bloomberg Markets Barclays U.S. Barclays U.S. Barclays U.S. Barclays U.S. Commodity Index Source: Russell, MSCI, Bloomberg Barclays, Bloomberg Aggregate Long Gov't Long Credit High Yield MSCI Indices show net total returns throughout this report. All other indices show gross total returns..

LONG TERM ANNUALIZED RETURNS Five-Year Ten-Year AS OF 03/31/2020

15.0% 10.5% 10.0% 8.9% 6.7% 6.9% 7.3% 7.3% 5.6% 3.9% 4.7% 5.0% 2.7% 3.4% 2.8% 0.7% 0.0% -0.2% -0.6% -0.4% -5.0%

-7.8% -6.7% -10.0% S&P 500 Russell 2000 MSCI EAFE MSCI Emerging Bloomberg Bloomberg Bloomberg Bloomberg Bloomberg Markets Barclays U.S. Barclays U.S. Barclays U.S. Barclays U.S. Commodity Index Source: Russell, MSCI, Bloomberg Barclays, Bloomberg Aggregate Long Gov't Long Credit High Yield

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 Market Highlights

Returns of the Major Capital Markets Period Ending 03/31/2020

1 1 1 First Quarter 1-Year 3-Year 5-Year 10-Year Equity MSCI All Country World IMI -22.44% -12.73% 0.76% 2.45% 5.80% MSCI All Country World -21.37% -11.26% 1.50% 2.85% 5.88% Dow Jones U.S. Total Stock Market -20.96% -9.28% 3.92% 5.70% 10.13% Russell 3000 -20.90% -9.13% 4.00% 5.77% 10.15% S&P 500 -19.60% -6.98% 5.10% 6.73% 10.53% Russell 2000 -30.61% -23.99% -4.64% -0.25% 6.90% MSCI All Country World ex-U.S. IMI -24.11% -16.32% -2.34% -0.66% 2.14% MSCI All Country World ex-U.S. -23.36% -15.57% -1.96% -0.64% 2.05% MSCI EAFE -22.83% -14.38% -1.82% -0.62% 2.72% MSCI EAFE (Local Currency) -20.55% -12.58% -1.80% -0.15% 4.36% MSCI Emerging Markets -23.60% -17.69% -1.62% -0.37% 0.68% Fixed Income Bloomberg Barclays Global Aggregate -0.33% 4.20% 3.55% 2.64% 2.47% Bloomberg Barclays U.S. Aggregate 3.15% 8.93% 4.82% 3.36% 3.88% Bloomberg Barclays U.S. Long Gov't 20.63% 32.28% 13.30% 7.32% 8.89% Bloomberg Barclays U.S. Long Credit -4.65% 9.05% 6.58% 4.67% 7.26% Bloomberg Barclays U.S. Long Gov't/Credit 6.21% 19.32% 9.68% 5.99% 8.07% Bloomberg Barclays U.S. TIPS 1.69% 6.85% 3.46% 2.67% 3.48% Bloomberg Barclays U.S. High Yield -12.68% -6.94% 0.77% 2.78% 5.64% Bloomberg Barclays Global Treasury ex U.S. -1.53% 2.02% 2.96% 2.44% 1.50% JP Morgan EMBI Global (Emerging Markets) -11.76% -5.28% 0.44% 2.85% 4.82% Commodities Bloomberg Commodity Index -23.29% -22.31% -8.61% -7.76% -6.74% Goldman Sachs Commodity Index -42.34% -41.01% -13.33% -12.82% -10.43% Hedge Funds 2 HFRI Fund-Weighted Composite -9.39% -5.11% 0.32% 1.09% 2.78% 2 HFRI Fund of Funds -7.30% -3.94% 0.50% 0.33% 1.91% Real Estate NAREIT U.S. Equity REITS -27.30% -21.26% -3.14% -0.35% 7.40% NCREIF NFI - ODCE 0.97% 4.87% 6.81% 8.46% 11.45% FTSE Global Core Infrastructure Index -17.89% -9.29% 3.94% 4.52% 8.30% Private Equity 3 Burgiss Private iQ Global Private Equity 11.61% 14.89% 11.58% 13.92%

MSCI Indices show net total returns throughout this report. All other indices show gross total returns. 1 Periods are annualized. 2 Latest 5 months of HFR data are estimated by HFR and may change in the future. 3 Burgiss Private iQ Global Private Equity data is as at June 30, 2019

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Global Equity Markets

GLOBAL MSCI IMI INDEX RETURNS (USD) First Quarter 2020 One-Year AS OF 03/31/2020 0%

-10% -7.5% -9.7% -12.7% -13.8% -13.3% -20% -16.3% -17.4% -18.9% -21.1% -21.0% -20.9% -22.4% -23.3% -23.3% -24.1% -24.5% -24.4% -30% -28.9% -28.4% -30.0%

-40% ACWI IMI 44.2% 55.8% 4.5% 8.1% 2.8% 0.2% 13.5% 3.3% 11.8% ACWI ex-U.S. USA IMI UK IMI Japan IMI Canada IMI Israel IMI Europe ex-UK Pacific ex-Japan Emergi ng Source: MSCI IMI IMI IMI Markets IMI  A decade-long bull market came to an abrupt halt as the Covid-19 outbreak in China turned into a global pandemic. After reaching all-time highs in mid-February, global equities sold off sharply as infection numbers grew and governments worldwide ramped up virus containment measures. With much of the economy shuttered, a deep global recession appears to be inevitable despite unprecedented fiscal and monetary stimulus measures. In local currency terms, the MSCI AC World Investable Market Index fell by 21.0%. Appreciation of the U.S. dollar further dragged down the returns to -22.4% in USD terms in Q1 2020.  UK equities were the worst performers (-30.0%) over the quarter where its sizeable resource sector (Oil & Gas and Basic Materials) underperformed due to a sharp drop in crude oil prices amidst the coronavirus outbreak. Brexit negotiations ran into difficulties as the UK and the European Union (EU) clashed on “level playing field” requirements. The UK Prime Minister Boris Johnson stated that Britain would be prepared to leave the EU on the World Trade Organization’s (WTO) terms if progress is not made by June 2020.

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 Global Equity Markets

MSCI ALL COUNTRY WORLD IMI INDEX MSCI ALL COUNTRY WORLD EX-U.S. IMI INDEX GEOGRAPHIC ALLOCATION AS OF 03/31/2020 GEOGRAPHIC ALLOCATION AS OF 03/31/2020 Pacific ex-Japan Is rael 3.3% Canada Japan 0.5% 8.1% Latin Latin America 2.8% Is rael America Europe ex-UK 2.2% UK Europe ex-UK 0.2% 1.0% 30.6% 4.5% 13.5%

Emerging Asia Emerging Asia Mar kets 9.3% Mar kets 21.0% Japan 26.7% 11.8% 18.3% Eastern Eas ter n Europe, Europe, USA Middle 55.8% Middle Eas t & Pacific ex- Eas t & Japan Canada Africa Africa 6.3% UK 1.5% 7.5% 10.2% 3.5% Source: MSCI Source: MSCI  The two exhibits on this slide illustrate the percentage that each country/region represents of the global and international equity markets as measured by the MSCI All Country World IMI Index and the MSCI All Country World ex-U.S. IMI Index, respectively.

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U.S. Equity Markets

RUSSELL STYLE RETURNS First Quarter 2020 RUSSELL SECTOR RETURNS First Quarter 2020 AS OF 03/31/2020 One-Year AS OF 03/31/2020 One-Year 10.0% 20.0% 3.7% 5.0% 10.0% 8.0% 0.0% 0.0% -5.0% -4.2% -3.2% -10.0% -2.1% -10.0% -9.1% -10.6% -9.1% -12.1% -12.9% -9.4% -20.0% -15.1% -15.6% -15.1% -15.0% -12.5% -19.2% -13.6% -20.9% -20.5% -19.7% -20.0% -30.0% -28.3% -20.0% -18.6% -27.8% -28.6% -25.0% -20.9% -24.2% -24.1% -25.8% -40.0% -30.0% -29.6% -31.7% -50.0% -35.0% -51.6% -35.7% -54.5% -40.0% -60.0% Russell 25.1% 15.1% 14.5% 6.2% 2.5% 3.0% 9.1% 18.9% 5.5% Russell 28.8% 42.1% 13.1% 10.2% 2.6% 3.2% 3000 Te chnology Healthcare Cons. Disc Cons. Energy Materials & Produ cer Financial Utilities 3000 Large Large Medium Medium Small Small Staples Processing Durables Services Value Growth Value Growth Value Growth Source: Russell Indexes Source: Russell Indexes  Three major U.S. equity indices (S&P 500, Dow Jones Industrial Average and Nasdaq Composite) entered bear market territory as the indices fell more than 20% below their mid-February peaks in the fastest bear market on record ending the 11-year bull market, the longest on record. Returns were on pace to be much worse before stock markets rallied to end the quarter. Large fiscal stimulus packages were credited as the major reason for improving risk sentiment. For the quarter, the Dow Jones US Total Stock Market Index returned -21.0%. The Russell 3000 Index fell 20.9% during the first quarter and 9.1% over the one-year period.  The CBOE Volatility Index (VIX), Wall Street’s “fear gauge,” set a new record peak of 82.7 in mid-March before ending the quarter slightly lower at 53.5 after having averaged 19.0 over the previous 12 months.  All sectors generated negative returns over the quarter. In particular, Energy (-51.6%) and Financial Services (-28.6%) were the worst performing sectors in Q1 2020.  Performance was negative across the market capitalization spectrum over the quarter. Small cap stocks underperformed both large and medium cap stocks over the quarter. Value stocks underperformed their Growth counterparts in Q1 2020 and over the last year.

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 U.S. Fixed Income Markets

BLOOM BERG BARCLAYS AGGREGATE RETURNS BY SECTOR BLOOM BERG BARCLAYS AGGREGATE RETURNS BY AS OF 03/31/2020 MATURITY AS OF 03/31/2020 25.0% 13.1% 14.0% 12.0% 20.0% 19.3% 8.9% 10.0% 8.1% 8.0% 7.0% 6.1% 15.0% 6.0% 5.0% 3.1% 2.8% 2.8% 4.0% 8.8% 2.0% 1.2% 10.0% 7.4% 7.0% 6.2% 0.0% 4.6% -2.0% -0.2% 5.0% 2.8% 2.7% 1.8% 2.1% -4.0% -3.6% -6.0% 0.0% Barclays Agg. 44.2% 25.2% 27.9% 0.4% 2.2% 1-3 Yr. 3-5 Yr. 5-7 Yr. 7-10 Yr. >10 Yr. Bond Govt Corp. MBS ABS CMBS

Source: FactSet First Quarter 2020 One-Year Source: FactSet First Quarter 2020 One-Year  The Bloomberg Barclays U.S. Aggregate Bond Index BLOOM BERG BARCLAYS AGGREGATE RETURNS BY QUALITY AND HIGH YIELD RETURNS AS OF 03/31/2020 rose by 3.1% over the quarter, supported by 15.0% Government bonds’ return of 8.1%. The risk asset sell- 10.5% 10.0% 7.5% 7.4% off which tormented equity markets was also evident in 5.8% 5.0% the corporate bonds space, as concerns over corporate 1.5% 1.9% leverage that were disregarded in more benign times 0.0% resurfaced. Corporate bonds underperformed with a -0.6% return of -3.6%. -5.0%  Performance was mixed across all credit grades. High -10.0% -7.4% -6.9%

yield bonds fell by 12.7%. Within investment grade -15.0% -12.7% bonds, Aaa bonds outperformed with a return of 5.8%. Aaa Aa A Baa High Yield First Quarter 2020 One-Year  Long-maturity bonds outperformed intermediate and Source: FactSet short-maturity bonds over the quarter. Long-maturity bonds returned 6.2% while short-maturity bonds

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U.S. Fixed Income Markets

U.S. TREASURY YIELD CURVE U.S. 10-YEAR TREASURY AND TIPS YIELDS 3.0% 5.0% 10Y TIPS Yield

2.5% 4.0% 10Y Treasury Yield

2.0% 3.0%

1.5% 2.0%

1.0% 3/31/2019 1.0% 12/31/2019 0.5% 0.0% 3/31/2020 0.0% -1.0% 0 5 10 15 20 25 30 -0.5% -2.0% Mar 10 Mar 12 Mar 14 Mar 16 Mar 18 Mar 20 Maturity (Years) Source: U.S. Department of Treasury Source: U.S. Department of Treasury  The U.S. nominal yield curve shifted downwards over the quarter as the combination of economic damage caused by the Pandemic and the response of easing monetary policy caused yields to fall across the curve.  The rate cuts, along with decreases in global output, caused 10-year US treasury yields to decrease by over 122 basis points to 0.70%, the first time in history it fell below 1.0%, and it remained there at the end of the quarter. The 30-year yield began the quarter at 2.39% and ended the quarter at 1.27%, a decline of 1.12%. The 30-year yield briefly closed below 1% on March 9, 2020, a sign of how stressed the outlook had become.  The 10-year TIPS yield fell by 32bps over the quarter to -0.17%.  The US Federal Reserve (Fed) announced two emergency rate cuts over the quarter, lowering the Fed Funds Rate target by a total of 150bps to 0.00%-0.25%. The Federal Reserve also launched unlimited QE, and an expansion of QE into other markets, such as corporate bonds and municipal bonds. In addition to this, Congress passed a $2.2tn stimulus package, the largest bailout in US history.

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 European Fixed Income Markets

EUROZONE PERIPHERAL BOND SPREADS (10-YEAR SPREADS OVER GERMAN BUNDS) 30% Spain Italy 25% Portugal Greece Ireland 20%

15%

10%

5%

0% 2012 2013 2014 2015 2016 2017 2018 2019 2020 Source: FactSet  European government bond spreads over 10-year German bunds rose across the Euro Area with core yields falling and peripheral yields rising (except Ireland). The European Central Bank (ECB) expanded its asset purchase programme and removed a self-imposed limit to buy no more than a third of any country’s eligible bonds, restoring some stability to the Euro Area’s government bond market.  German government bund yields fell in line with other developed market government bond yields, falling by 30bps to -0.49% over the quarter. Germany’s annual economic growth slowed to its lowest rate in six years at 0.6% whilst it posted zero growth in Q4, hit by falling household and government consumption while capital investment in machinery and equipment fell.  Italian government bond yields rose by 6bps to 1.48% over the quarter, retracting from a nine-month high of 2.3% after it spiked by 130bps mid-March and Spanish government bond yields rose by 18bps to 0.64%. Both the countries were the worst affected by novel coronavirus in Europe and were the first to impose quarantine measures.  Greek government bond yields rose by 18bps to 1.61% over the quarter which saw the country’s 10-year yield drop below 1% mid-February for the first time.

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Credit Spreads

One-Year Change Spread (bps) 03/31/2020 12/31/2019 03/31/2019 Quarterly Change (bps) (bps) U.S. Aggregate 95 39 44 56 51

Long Gov't 4 0 1 4 3

Long Credit 279 139 172 140 107

Long Gov't/Credit 151 79 99 72 52

MBS 60 39 35 21 25

CMBS 188 72 69 116 119

ABS 213 44 39 169 174

Corporate 272 93 119 179 153

High Yield 880 336 391 544 489

Global Emerging Markets 619 287 283 332 336

Source: FactSet, Bloomberg Barclays  The rapid reassessment of the economic outlook took a dramatic toll on credit assets during the quarter. Credit spreads over U.S. Treasuries widened over the quarter.  Riskier areas of credit, such as US high yield bonds and emerging market debt, saw double digit losses due to a decrease in investors’ risk appetite. High Yield bond spreads widened significantly in Q1 2020, increasing by 544bps. This was followed by Global Emerging Markets bonds spreads, which widened by 332bps.

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 Currency

TRADE WEIGHTED U.S. DOLLAR INDEX U.S. DOLLAR RELATIVE TO EUR, GBP AND JPY (1973 = 100) REBASED TO 100 AT 03/31/2014 140 125 Stronger Dollar 120 130 Weaker Dollar 115 110 120 105 110 100 95 100 EUR/USD 90 90 GBP/USD 85 JPY/USD 80 80 Mar 14 Mar 15 Mar 16 Mar 17 Mar 18 Mar 19 Mar 20 Mar 14 Mar 15 Mar 16 Mar 17 Mar 18 Mar 19 Mar 20 Source: Federal Reserve Source: FactSet  The U.S. dollar generally strengthened against major currencies over the quarter as it rose 7.1% on a trade-weighted basis. The U.S. dollar appreciated against euro and sterling but marginally depreciated against the Japanese yen.  Sterling fell sharply over the quarter amidst “risk-off” trade flows as the coronavirus outbreak escalated. The UK’s current account deficit and its status as a relatively small open economy means that sterling is particularly exposed to international fund flows. As investor concerns over economic growth and financial market stability grew, capital flows started to dry up from the UK as investors seek “safe haven” assets such as the U.S. dollar. Sterling depreciated by 6.4% against the U.S. dollar.  Alongside a more dovish ECB and a weaker economic outlook, the euro fell against both the U.S. dollar and the Japanese yen, depreciating by 2.2% and 2.9%, respectively. However, it rose by 4.2% against sterling.

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Commodities

COMMODITY RETURNS First Quarter 2020 AS OF 03/31/2020 One-Year -60.0% -50.0% -40.0% -30.0% -20.0% -10.0% 0.0% 10.0% 20.0% -23.3% Bloomberg Commodity Index -22.3% -11.5% Ex-Energy -8.3% Energy -51.1% -52.9% -18.5% Industrial Metals -22.7% Prec. Metals -1.1% -9.9% 15.7% Agric. -5.3% -16.8% Softs -13.7% -7.2% Grains -2.6% Livestock -28.1% -35.5% Source: Bloomberg Note: Softs and Grains are part of the wider Agriculture sector  Amidst the Covid-19 pandemic, commodities fell sharply over the quarter which saw the Bloomberg Commodity Index tumble by 23.3%.  Energy was the worst performing sector over the quarter with a return of -51.1% as crude oil prices fell sharply following Saudi Arabia’s plans to raise production and offer deep discounts to key markets in a bid to gain market share after Russia rejected a proposal by OPEC to cut oil production. The price of Brent crude oil fell by 65.5% to $23/bbl. and WTI crude oil spot prices fell by 66.5% to $20/bbl.  Livestock (-28.1%) was the second worst performing sector in Q1 2020.

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 Hedge Fund Markets Overview

HEDGE FUND PERFORMANCE First Quarter 2020 AS OF 03/31/2020 One-Year -20.0% -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% -3.4% Fixed Income/Convertible Arb. 1.4% 0.1% Global Macro 4.2% -12.9% Equity Hedge -8.0% -13.9% Emerging Markets -10.4% Event-Driven -15.3% -12.6% Distressed-Restructuring -12.2% -12.4% -7.0% Relative Value -3.8% -9.4% Fund-Weighted Composite Index -5.1% -7.3% Fund of Funds Composite Index -3.9% Note: Latest 5 months of HFR data are estimated by HFR and may change in the future. Source: HFR  Hedge fund performance was generally negative across all strategies in the first quarter.  Over the quarter, Global Macro was the only strategy to generate marginal positive return of 0.1%. Conversely, Event- Driven and Emerging Markets were the worst performers, falling 15.3% and 13.9%, respectively.  The HFRI Fund-Weighted Composite Index and the HFRI Fund of Funds Composite Index produced returns of -9.4% and -7.3%, respectively.

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Private Equity Market Overview – Q4 2019

LTM Global Private Equity-Backed Buyout Deal Volume

$600 Deal Value ($ Billions) 7,000

Number of Deals 6,000 $500

5,000

$400 # ofDeals

4,000 $300 3,000

Value ($ ValueBillions) ($ $200 2,000

$100 1,000

$0 0 Source: Preqin 3Q11 2Q12 1Q13 4Q13 3Q14 2Q15 1Q16 4Q16 3Q17 2Q18 1Q19 4Q19

 Fundraising: In 2019, $787.2 billion was raised by 1,725 funds, which was a decrease of 3.4% on a capital basis and a decrease of 19.2% by number of funds from the prior year. Dry powder stood at $2.2 trillion at the end of the year, an increase of 5.4% and 39.7% compared to year-end 2018 and the five year average, respectively.1  Buyout: Global private equity-backed buyout deals totaled $405.7 billion in 2019, which was down 19.9% and 5.6% from 2018 and the five year average, respectively.1 At the end of 2019, the average purchase price multiple for all U.S. LBOs was 11.5x EBITDA, up from year-end 2018’s average of 10.6x and up from the five-year average (10.6x).2 Large cap purchase price multiples stood at 11.4x, up compared to the full-year 2018 level of 10.6x.2 The weighted average purchase price multiple across all European transaction sizes averaged 11.1x EBITDA for year-end 2019, down slightly from the 11.3x multiple seen at year-end 2018. Purchase prices for transactions of €1.0 billion or more decreased from 11.7x in 2018 to 11.2x in 2019. Globally, exit value totaled $336.5 billion on 1,804 deals during the year, significantly lower than the $412.0 billion in exits from 2,369 deals during 2018.  Venture: During the year, 5,906 venture-backed transactions totaling $108.0 billion were completed, which was a decrease on a capital and number of deals basis over the prior year’s total of $118.4 billion across 6,452 deals. This was 34.7% higher than the five-year average of $80.2 billion.3 Total U.S. venture-backed exit activity totaled approximately $256.4 billion across 882 completed transactions in 2019, up notably from $130.2 billion across 1,015 exits in 2018.4  Mezzanine: 25 funds closed on $6.1 billion during the year. This was a significant decrease from the prior year’s total of $27.3 billion raised by 56 funds and represented a decrease of 71.5% from the five-year average of $21.1 billion. Estimated dry powder was $44.6 billion at the end of 2019, down by $18.5 billion from the prior year.

Sources: 1 Preqin 2 Standard & Poor’s 3 PwC/CB Insights MoneyTree Report 4 PitchBook/NVCA Venture Monitor 5 Fitch Ratings 6 Thomson Reuters 7 UBS Notes: FY=Fiscal year ended 12/31; YTD=Year to date; LTM=Last 12 months (aka trailing 12 months); PPM=Purchase Price Multiples: Total Purchase Price ÷ EBITDA. Aon Proprietary Investment advice and consulting services provided by Aon,QYHVWPHQWV86$,QF.

 Private Equity Market Overview – Q4 2019

U.S. LBO Purchase Price Multiples – All Transactions Sizes

12.0 x 11.5x 10.3x 10.6x 10.6x 9.8x 10.0x 10.0 x 8.5 x 8.8 x 8.7x 8.8x 8.0 x

6.0 x

4.0 x

2.0 x

0.0 x

Seni or Debt/EBITDA Sub Debt/EBITDA Equity/EBITDA Others Source: S&P

 Distressed Debt: The LTM U.S. high-yield default rate was 3.3% as of December 2018, which was up from December 2018’s LTM rate of 2.4%.5 This was the highest level seen since 2016. During the year, $52.6 billion was raised by 66 funds, higher than the $41.8 billion raised by 72 funds during 2018.1 Dry powder was estimated at $117.2 billion at the end of 2019, which was down 1.0% from year-end 2018. This remained above the five-year annual average level of $101.8 billion.1  Secondaries: 30 funds raised $23.2 billion during the year, down slightly from the $23.6 billion raised by 49 funds in 2018 and down significantly from the $43.1 billion raised by 61 funds in 2017.1 The average discount rate for all private equity sectors finished the year at 8.1%, lower than the 8.9% discount at the end of 2018.6  Infrastructure: $104.5 billion of capital was raised by 107 funds in 2019 compared to $91.8 billion of capital raised by 99 partnerships in 2018. At the end of the year, dry powder stood at $212.1 billion, up from last year’s record of $177.9 billion. Infrastructure managers completed 2,608 deals for an aggregate deal value of $469.1 billion in 2019 compared to 2,749 deals totaling $406.1 billion in 2018.1  Natural Resources: During 2019, 27 funds closed on $12.1 billion compared to 51 funds totaling $22.2 billion in 2018. Energy and utilities industry managers completed 156 deals totaling $17.0 billion in 2019, compared to $34.4 billion across 155 deals in 2018.1

Sources: 1 Preqin 2 Standard & Poor’s 3 PwC/CB Insights MoneyTree Report 4 PitchBook/NVCA Venture Monitor 5 Fitch Ratings 6 Thomson Reuters 7 UBS Notes: FY=Fiscal year ended 12/31; YTD=Year to date; LTM=Last 12 months (aka trailing 12 months); PPM=Purchase Price Multiples: Total Purchase Price ÷ EBITDA. Aon Proprietary Investment advice and consulting services provided by Aon,QYHVWPHQWV86$,QF.



U.S. Commercial Real Estate Markets

Office Industrial Retail Apartment PRIVATE VS. PUBLIC REAL ESTATE RETURNS Private (NFI-ODCE Gross)* AS OF 03/31/2020 Public (NAREIT 10.0% Gross) 15.0% 8.5% 11.5% 9.0% 10.0% 4.9% 6.8% 7.4% 5.0% 1.0% 8.0% 0.0% 7.0% -5.0% -0.3% -3.1% -10.0% 6.0% -15.0% -20.0% 5.0% -25.0% -21.3% 4.0% -27.3% -30.0% '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 Q1 2020 1-Year 3-Years 5-Years 10-Years *First quarter returns are preliminary Sources: NCREIF, FactSet

 U.S. Core Real Estate returned 0.97%* over the first quarter, equating to a 4.9% total gross return year-over-year, including a 4.2% income return. The industrial sector was once again the best performing sector, while retail continues to perform poorly relative to other major property types. E-commerce continues to be the primary force driving the bifurcation of performance between the industrial and retail sectors.  Global property markets, as measured by the FTSE EPRA/NAREIT Developed Real Estate Index, returned -28.3% (USD) in aggregate during the first quarter. REIT market performance was driven by Asia Pacific (-29.1% USD), North America (-29.2% USD) and Europe (-35.0% USD). The U.S. REIT markets (FTSE NAREIT Equity REITs Index) declined -27.3% in the first quarter. The U.S. 10-year treasury bond yield decreased 122bps to 0.70%.  The coronavirus fueled market volatility and decline in the stock and bond markets has created a situation of uncertainty for private real estate pricing. Public markets are searching for the right pricing level in light of the global pandemic, and how it will affect the regional and global economies. New information and the current assessments change literally daily and often in a material amount. Considering this situation, we are recommending that investments with pre-specified assets be postponed. Private market transactions based on appraisal valuations lag the most current information, and they do not fully reflect the current market conditions..  We are proactively evolving our strategy to seek such investments. In the post-coronavirus world, supply chains may move back to North America which will require corresponding real estate infrastructure. Demand for last mile logistics, already a key investment theme, will accelerate. Live and work preference changes will create opportunities. Interest rates are likely to remain lower for even longer, making real estate a very compelling alternative to fixed income investments.  Blind pool funds offer a potential to have capital available when the new opportunity set presents itself. Those strategies need careful review in light of the changing market dynamics. Strategies that worked previously in a growth-oriented market may not be appropriate for what may be more opportunistic style investing. Regions, countries and property types all need to be reevaluated.

*Indicates preliminary NFI-ODCE data gross of fees Aon Proprietary Investment advice and consulting services provided by Aon,QYHVWPHQWV86$,QF.

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 Total Fund As of March 31, 2020 Universe Asset Allocation Comparison

Total Fund BNY Mellon Public Funds > $1B Net Universe Cash 2.3% Cash StrategicStrategic InvestmentsInvestments 1.3% 9.7% Global Equity** 41.0% Alternatives 23.6%

Private Equity 8.5%

Real Estate Real Estate 8.3% Global Equity* 10.3% 50.2%

Fixed Income 20.0% Fixed Income 24.8%

*Global Equity Allocation: 24.3% Domestic Equities; **Global Equity Allocation: 23.8% Domestic Equities; 19.8% Foreign Equities; 5.0% Global Equities; 17.2% Foreign Equities. 1.1% Global Equity Liquidity Account. Percentages are of the Total FRS Fund.



Total Fund As of March 31, 2020 Attribution

Global Equity 65 Global Equity 42

-10 Fixed Income -1 Fixed Income

Real Estate 4 Real Estate 1

Private Equity 168 Private Equity 59

Strategic Investments 29 Strategic Investments 17

-2 Cash AA* -2 Cash AA*

TAA 49 TAA 9

Other** 0 Other** 0

Total Fund 302 Total Fund 125

-350 -250 -150 -50 50 150 250 350 -350 -250 -150 -50 50 150 250 350 Basis Points Basis Points

1-Year Ending 3/31/2020 5-Year Ending 3/31/2020

*Cash AA includes Cash and Central Custody, Securities Lending Account income from 12/2009 to 3/2013 and unrealized gains and losses on securities lending collateral beginning June 2013, TF STIPFRS NAV Adjustment Account, and the Cash Expense Account. **Other includes legacy accounts and unexplained differences due to methodology.

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Private Equity As of March 31, 2020 Overview

FRS Private Equity by Market Value* Preqin Private Equity Strategies Other*** by Market Value** 11.9%

LBO Other**** 43.3% 44.1% LBO 52.9%

[CATEGORYVenture NAME]Capital 35.2%35.2%

Venture Capital 12.6%

*Allocation data is as of March 31, 2020. **Allocation data is as of June 30, 2019, from the Preqin database. ***Other for the FRS Private Equity consists of Growth Capital, Secondary, PE Cash, and PE Transition. ****Other for the Preqin data consists of Distressed PE, Growth, Mezzanine, and other Private Equity/Special Situations. Preqin universe is comprised of 10,000 private equity funds representing $4.8 trillion.

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Private Equity Dollar-Weighted Investment Results As of December 31, 2019

Since Inception

25.0 20.0 13.7 15.0 9.7 10.9 10.0 11.9 10.0 4.4 5.0 0.0 -5.0

Rate of Return (%) Private Equity Legacy Portfolio* Post-AC Portfolio**

Private Equity Target

As of December 31, 2019

Since Inception 25.0 20.0 13.2 13.4 13.7 12.6 15.0 9.7 10.0 4.4 5.0 0.0 -5.0

Rate of Return (%) Private Equity Legacy Portfolio* Post-AC Portfolio**

Private Equity Secondary Target***

*The Inception Date for the Legacy Portfolio is January 1989. **The Inception Date for the Post-AC Portfolio is September 2000. ***The Secondary Target is a blend of the Cambridge Associates Private Equity Index and the Cambridge Associates Venture Capital Index based on actual ABAL weights. Secondary Target data is on a quarterly lag.

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Real Estate As of December 31, 2019 Overview

FRS* NFI-ODCE Index*

Other*** Other** 4.5% 11.9% Apartment Apartment 25.2% 25.7%

Office 33.4%

Office 32.5%

Industrial 16.1% Industrial 20.3%

Retail Retail 14.3% 16.1%

*Property Allocation data is as of December 31, 2019. The FRS chart i ncludes onl y the FRS pri vate real estate assets. Property type information for the REIT portfolios is not included. **Other for the FRS consists of Hotel, Land, Preferred Equity, Agriculture, Self-Storage and Senior Housing. ***Other for the NFI-ODCE Index consists of Hotel, Senior Living, Healthcare, Mixed Use, Single Family Residential, Parking, Tim ber/Agriculture, Land and Infrastructure. 48 5HDO(VWDWH $VRI0DUFK 5HDO(VWDWH3RUWIROLR2YHUYLHZ

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7KLVSDJHLVOHIWEODQNLQWHQWLRQDOO\ Table Of Contents

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7KLVSDJHLVOHIWEODQNLQWHQWLRQDOO\ FRS Investment Plan



As of March 31, 2020 Asset Allocation & Performance

Allocation Performance(%) Market 1 1 3 5 10 Value % Quarter Year Years Years Years ($) FRS Investment Plan 9,996,289,666 100.0 -15.9 -7.5 2.1 3.1 5.6 Total Plan Aggregate Benchmark -15.6 -7.3 1.9 2.9 5.3 Blank Retirement Date 4,537,997,984 45.4

Blank )565HWLUHPHQW)XQG             Retirement Custom Index -9.1 (56) -2.3 (61) 2.4 (63) 2.6 (58) 4.3 (76) ,05HWLUHPHQW,QFRPH 0) 0HGLDQ      )565HWLUHPHQW'DWH)XQG             2015 Retirement Custom Index -9.4 (54) -2.6 (62) 2.5 (69) 2.7 (81) 4.5(94) ,00L[HG$VVHW7DUJHW 0) 0HGLDQ      )565HWLUHPHQW'DWH)XQG             2020 Retirement Custom Index -10.8 (69) -3.7 (75) 2.5 (76) 3.0 (73) 5.1 (72) ,00L[HG$VVHW7DUJHW 0) 0HGLDQ      )565HWLUHPHQW'DWH)XQG             2025 Retirement Custom Index -13.0 (64) -5.4 (75) 2.4 (64) 3.1 (63) 5.5 (79) ,00L[HG$VVHW7DUJHW 0) 0HGLDQ      )565HWLUHPHQW'DWH)XQG             2030 Retirement Custom Index -14.9 (58) -6.8 (61) 2.2 (61) 3.1 (60) 5.9 (71) ,00L[HG$VVHW7DUJHW 0) 0HGLDQ      )565HWLUHPHQW'DWH)XQG             2035 Retirement Custom Index -16.5 (42) -8.1 (49) 2.0 (49) 3.0 (54) 6.3 (61) ,00L[HG$VVHW7DUJHW 0) 0HGLDQ      )565HWLUHPHQW'DWH)XQG             2040 Retirement Custom Index -18.0 (33) -9.2 (41) 1.8 (45) 3.0 (47) 6.3 (63) ,00L[HG$VVHW7DUJHW 0) 0HGLDQ      )565HWLUHPHQW'DWH)XQG             2045 Retirement Custom Index -19.2 (32) -10.2 (39) 1.5 (51) 2.9 (44) 6.3 (64) ,00L[HG$VVHW7DUJHW 0) 0HGLDQ      )565HWLUHPHQW'DWH)XQG             2050 Retirement Custom Index -20.1 (38) -11.0 (43) 1.2 (56) 2.7 (54) 6.2 (79) ,00L[HG$VVHW7DUJHW 0) 0HGLDQ      )565HWLUHPHQW'DWH)XQG            2055 Retirement Custom Index -20.2 (31) -11.2 (37) 1.1 (63) 2.7 (58) - ,00L[HG$VVHW7DUJHW 0) 0HGLDQ      )565HWLUHPHQW'DWH)XQG          2060 Retirement Custom Index -20.2 (31) -11.2 (37) - - - ,00L[HG$VVHW7DUJHW 0) 0HGLDQ     

 As of March 31, 2020 Asset Allocation & Performance

Allocation Performance(%) Market 1 1 3 5 10 Value % Quarter Year Years Years Years ($) Cash 1,102,588,621 11.0 0.4 (2) 2.1 (1) 2.0 (1) 1.4 (1) 0.8 (1)

,0867D[DEOH0RQH\0DUNHW 0) 0HGLDQ      )560RQH\0DUNHW)XQG             iMoneyNet 1st Tier Institutional Net Index 0.3 (66) 1.8 (44) 1.6 (22) 1.1 (20) 0.6 (20) ,0867D[DEOH0RQH\0DUNHW 0) 0HGLDQ      Real Assets 99,726,942 1.0 )56,QIODWLRQ$GMXVWHG0XOWL$VVHWV)XQG        FRS Custom Multi-Assets Index -13.0 -8.2 -0.5 0.1 1.6 Fixed Income 679,246,121 6.8 -0.7 (45) 5.2 (17) 3.9 (1) 3.2 (1) 3.9 (4) Total Bond Index 0.9 (17) 6.5 (4) 4.2 (1) 3.3 (1) 3.9 (5) ,086,QWHUPHGLDWH,QYHVWPHQW*UDGH 0) 0HGLDQ      )5686%RQG(QKDQFHG,QGH[)XQG             Blmbg. Barc. U.S. Aggregate 3.1 (87) 8.9 (80) 4.8 (64) 3.4 (52) 3.9 (36) ,086/RQJ7HUP7UHDVXU\*RYW%RQG 0) 0HGLDQ      )56,QWHUPHGLDWH%RQG)XQG             Blmbg. Barc. U.S. Intermediate Aggregate 2.5 (11) 6.9 (3) 3.9 (1) 2.8 (1) 3.2 (18) ,086,QWHUPHGLDWH,QYHVWPHQW*UDGH 0) 0HGLDQ      )56&RUH3OXV%RQG)XQG             FRS Custom Core-Plus Fixed Income Index 0.0 (41) 6.0 (44) 4.2 (42) 3.3 (34) 4.6 (37) ,086%URDG0DUNHW&RUH)L[HG,QFRPH 6$&) 0HGLDQ      Domestic Equity 2,339,077,884 23.4 -23.1 (58) -12.6 (55) 2.3 (46) 4.7 (37) 9.9 (25) Total U.S. Equities Index -22.8 (57) -12.1 (51) 2.3 (47) 4.6 (38) 9.5 (34) ,0860XOWL&DS(TXLW\ 0) 0HGLDQ      )56866WRFN0DUNHW,QGH[)XQG             Russell 3000 Index -20.9 (63) -9.1 (61) 4.0 (58) 5.8 (55) 10.1 (43) ,086/DUJH&DS(TXLW\ 0) 0HGLDQ      )5686/DUJH&DS6WRFN)XQG             Russell 1000 Index -20.2 (45) -8.0 (42) 4.6 (38) 6.2 (33) 10.4 (32) ,086/DUJH&DS(TXLW\ 6$&) 0HGLDQ      )56866PDOO0LG&DS6WRFN)XQG             FRS Custom Small/Mid Cap Index -29.7 (50) -22.5 (51) -3.1 (46) 0.8 (39) 6.5 (57) ,08660,'&DS(TXLW\ 6$&) 0HGLDQ     



As of March 31, 2020 Asset Allocation & Performance

Allocation Performance(%) Market 1 1 3 5 10 Value % Quarter Year Years Years Years ($) International/Global Equity 571,800,533 5.7 -23.1 (40) -14.6 (37) -0.8 (31) 0.6 (28) 3.8 (26) Total Foreign and Global Equities Index -23.7 (46) -15.6 (44) -1.8 (38) -0.2 (36) 3.0 (39) ,0,QWHUQDWLRQDO(TXLW\ 0) 0HGLDQ      )56)RUHLJQ6WRFN,QGH[)XQG             MSCI All Country World ex-U.S. IMI Index -24.1 (50) -16.3 (49) -2.3 (46) -0.7 (46) 2.5 (48) ,0,QWHUQDWLRQDO(TXLW\ 0) 0HGLDQ      )56*OREDO6WRFN)XQG             MSCI All Country World Index Net -21.4 (49) -11.3 (46) 1.5 (41) 2.8 (37) 6.0 (44) ,0*OREDO(TXLW\ 0) 0HGLDQ      )56)RUHLJQ6WRFN)XQG             MSCI All Country World ex-U.S. Index -23.4 (25) -15.6 (36) -2.0 (10) -0.5 (1) 2.4 (18) ,0,QWHUQDWLRQDO/DUJH&DS&RUH(TXLW\ 0) 0HGLDQ      FRS Self-Dir Brokerage Acct 665,851,581 6.7

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 As of March 31, 2020 Asset Allocation & Performance

Performance(%) 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 FRS Investment Plan 20.5 -5.7 16.4 8.0 -0.9 4.9 15.2 10.5 0.7 10.6 Total Plan Aggregate Benchmark 20.0 -5.8 15.5 8.5 -1.3 4.9 14.6 9.7 0.9 10.2 Blank Retirement Date

Blank )565HWLUHPHQW)XQG                     Retirement Custom Index 14.5 (42) -3.8 (55) 10.4 (58) 6.2 (59) -1.8 (98) 3.6 (89) 3.4 (96) 8.5 (78) 5.0 (1) 9.9 (84) ,05HWLUHPHQW,QFRPH 0) 0HGLDQ           )565HWLUHPHQW'DWH)XQG                     2015 Retirement Custom Index 14.8 (77) -3.9 (57) 11.2 (60) 6.5 (52) -1.8 (90) 3.7 (92) 5.7 (88) 9.6 (88) 3.2 (1) 10.4 (85) ,00L[HG$VVHW7DUJHW 0) 0HGLDQ           )565HWLUHPHQW'DWH)XQG                     2020 Retirement Custom Index 16.0 (60) -4.5 (55) 13.3 (47) 7.1 (32) -1.6 (80) 3.9 (88) 9.7 (75) 11.0 (74) 1.5 (21) 11.2 (86) ,00L[HG$VVHW7DUJHW 0) 0HGLDQ           )565HWLUHPHQW'DWH)XQG                     2025 Retirement Custom Index 17.8 (67) -5.3 (51) 15.5 (39) 7.6 (20) -1.5 (77) 4.2 (91) 13.8 (74) 12.4 (73) -0.3 (26) 11.8 (93) ,00L[HG$VVHW7DUJHW 0) 0HGLDQ           )565HWLUHPHQW'DWH)XQG                     2030 Retirement Custom Index 19.4 (72) -6.0 (45) 17.3 (48) 8.0 (33) -1.5 (67) 4.4 (83) 18.2 (52) 13.8 (53) -2.0 (49) 12.5 (91) ,00L[HG$VVHW7DUJHW 0) 0HGLDQ           )565HWLUHPHQW'DWH)XQG                     2035 Retirement Custom Index 20.8 (82) -6.8 (38) 18.9 (54) 8.3 (43) -1.7 (67) 4.3 (85) 22.0 (38) 15.2 (46) -3.1 (47) 13.3 (89) ,00L[HG$VVHW7DUJHW 0) 0HGLDQ           )565HWLUHPHQW'DWH)XQG                     2040 Retirement Custom Index 22.1 (82) -7.5 (39) 20.4 (45) 8.6 (43) -1.7 (69) 4.3 (84) 22.4 (48) 15.2 (50) -3.1 (38) 13.3 (85) ,00L[HG$VVHW7DUJHW 0) 0HGLDQ           )565HWLUHPHQW'DWH)XQG                     2045 Retirement Custom Index 23.0 (84) -8.0 (49) 21.2 (39) 8.9 (36) -1.7 (64) 4.3 (83) 22.4 (60) 15.2 (68) -3.1 (26) 13.3 (89) ,00L[HG$VVHW7DUJHW 0) 0HGLDQ           )565HWLUHPHQW'DWH)XQG                     2050 Retirement Custom Index 23.6 (78) -8.4 (55) 21.3 (52) 8.9 (37) -1.7 (65) 4.3 (82) 22.4 (53) 15.2 (58) -3.1 (20) 13.3 (87) ,00L[HG$VVHW7DUJHW 0) 0HGLDQ           )565HWLUHPHQW'DWH)XQG                   2055 Retirement Custom Index 23.7 (83) -8.4 (53) 21.3 (55) 8.9 (33) -1.7 (63) 4.3 (81) 22.4 (71) 15.2 (75) - - ,00L[HG$VVHW7DUJHW 0) 0HGLDQ           )565HWLUHPHQW'DWH)XQG      2060 Retirement Custom Index 23.7 (83)-8.4(53)------,00L[HG$VVHW7DUJHW 0) 0HGLDQ 



As of March 31, 2020 Asset Allocation & Performance

Performance(%) 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 Cash 2.4 (1) 2.2 (1) 1.2 (1) 0.6 (1) 0.2 (1) 0.1 (1) 0.2 (1) 0.3 (1) 0.2 (1) 0.3 (2)

,0867D[DEOH0RQH\0DUNHW 0) 0HGLDQ  )560RQH\0DUNHW)XQG                     iMoneyNet 1st Tier Institutional Net Index 2.1 (22) 1.8 (17) 0.9 (17) 0.3 (19) 0.0 (20) 0.0 (23) 0.0 (23) 0.1 (23) 0.1 (23) 0.2 (7) ,0867D[DEOH0RQH\0DUNHW 0) 0HGLDQ  Real Assets )56,QIODWLRQ$GMXVWHG0XOWL$VVHWV)XQG           FRS Custom Multi-Assets Index 13.0 -5.5 8.1 6.2 -5.0 1.8 -8.9 6.6 4.6 13.0 Fixed Income 9.8 (1) -0.1 (94) 4.4 (2) 4.7 (8) 0.3 (81) 4.7 (1) -1.1 (84) 6.0 (36) 6.7 (1) 7.6 (30) Total Bond Index 9.2 (1) -0.1 (94) 3.9 (3) 4.3 (9) 0.1 (89) 4.9 (1) -1.2 (87) 4.8 (62) 7.4 (1) 7.0 (35) ,086,QWHUPHGLDWH,QYHVWPHQW*UDGH 0) 0HGLDQ  )5686%RQG(QKDQFHG,QGH[)XQG                     Blmbg. Barc. U.S. Aggregate 8.7 (33) 0.0 (66) 3.5 (32) 2.6 (3) 0.5 (48) 6.0 (37) -2.0 (18) 4.2 (14) 7.8 (68) 6.5 (49) ,086/RQJ7HUP7UHDVXU\*RYW%RQG 0) 0HGLDQ           )56,QWHUPHGLDWH%RQG)XQG                     Blmbg. Barc. U.S. Intermediate Aggregate 6.7 (21) 0.9 (53) 2.3 (33) 2.0 (68) 1.2 (9) 4.1 (1) -1.0 (82) 3.6 (79) 6.0 (11) 6.1 (48) ,086,QWHUPHGLDWH,QYHVWPHQW*UDGH 0) 0HGLDQ  )56&RUH3OXV%RQG)XQG                     FRS Custom Core-Plus Fixed Income Index 10.0 (38) -0.4 (41) 4.2 (61) 4.9 (40) 0.2 (42) 5.1 (78) 0.8 (20) 7.8 (51) 7.6 (32) 9.1 (42) ,086%URDG0DUNHW&RUH)L[HG,QFRPH 6$&) 0HGLDQ           Domestic Equity 30.1 (41) -6.5 (45) 20.8 (48) 13.7 (29) 0.7 (34) 11.5 (42) 35.2 (43) 16.9 (33) 0.3 (38) 20.4 (20) Total U.S. Equities Index 30.0 (41) -6.5 (45) 19.6 (55) 14.9 (23) -0.5 (45) 11.1 (47) 34.0 (54) 16.5 (37) -0.1 (41) 19.3 (27) ,0860XOWL&DS(TXLW\ 0) 0HGLDQ           )56866WRFN0DUNHW,QGH[)XQG                     Russell 3000 Index 31.0 (48) -5.2 (58) 21.1 (56) 12.7 (27) 0.5 (55) 12.6 (35) 33.6 (40) 16.4 (40) 1.0 (39) 16.9 (21) ,086/DUJH&DS(TXLW\ 0) 0HGLDQ           )5686/DUJH&DS6WRFN)XQG                     Russell 1000 Index 31.4 (32) -4.8 (39) 21.7 (43) 12.1 (34) 0.9 (43) 13.2 (33) 33.1 (47) 16.4 (31) 1.5 (42) 16.1 (31) ,086/DUJH&DS(TXLW\ 6$&) 0HGLDQ           )56866PDOO0LG&DS6WRFN)XQG                     FRS Custom Small/Mid Cap Index 27.8 (55) -10.0 (45) 16.8 (52) 19.6 (27) -4.2 (70) 7.7 (34) 22.0 (98) 15.3 (53) 1.1 (22) 21.3 (85) ,08660,'&DS(TXLW\ 6$&) 0HGLDQ          

 As of March 31, 2020 Asset Allocation & Performance

Performance(%) 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 International/Global Equity 23.7 (37) -13.5 (28) 28.6 (50) 4.5 (42) -2.6 (49) -3.2 (42) 21.6 (33) 18.6 (53) -11.3 (23) 10.1 (74) Total Foreign and Global Equities Index 22.3 (46) -14.0 (33) 27.3 (60) 4.9 (38) -4.4 (56) -3.0 (41) 20.6 (39) 16.6 (72) -11.3 (23) 10.1 (74) ,0,QWHUQDWLRQDO(TXLW\ 0) 0HGLDQ           )56)RUHLJQ6WRFN,QGH[)XQG                     MSCI All Country World ex-U.S. IMI Index 21.6 (52) -14.8 (41) 27.8 (56) 4.4 (42) -4.6 (56) -4.2 (51) 21.0 (36) 16.4 (72) -12.2 (30) 8.9 (78) ,0,QWHUQDWLRQDO(TXLW\ 0) 0HGLDQ           )56*OREDO6WRFN)XQG                     MSCI All Country World Index Net 26.6 (45) -9.4 (46) 24.0 (40) 7.9 (46) -2.4 (56) 4.2 (39) 22.8 (60) 16.3 (38) -5.5 (35) 11.8 (60) ,0*OREDO(TXLW\ 0) 0HGLDQ           )56)RUHLJQ6WRFN)XQG                     MSCI All Country World ex-U.S. Index 21.5 (55) -14.2 (30) 27.2 (23) 5.0 (10) -5.3 (73) -3.4 (18) 15.8 (80) 17.4 (67) -13.3 (60) 11.6 (20) ,0,QWHUQDWLRQDO/DUJH&DS&RUH(TXLW\ 0) 0HGLDQ           FRS Self-Dir Brokerage Acct

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FRS Investment Plan As of March 31, 2020 Asset Allocation

Asset Allocation as of 3/31/2020 U.S. Equity Non-U.S. Equity U.S. Fixed Income Real Assets Cash Brokerage Total % of Total FRS Retirement Fund 51,594,131 47,382,365 115,121,598 136,882,388 350,980,483 3.5% FRS 2015 Retirement Date Fund 39,884,109 36,755,943 83,678,424 100,361,973 260,680,449 2.6% FRS 2020 Retirement Date Fund 97,194,553 89,956,661 150,961,753 178,879,338 516,992,305 5.2% FRS 2025 Retirement Date Fund 169,555,992 156,617,985 181,132,104 173,641,679 680,947,760 6.8% FRS 2030 Retirement Date Fund 187,700,361 172,734,220 144,672,704 118,481,956 623,589,241 6.2% FRS 2035 Retirement Date Fund 200,330,138 184,652,127 114,391,412 81,293,389 580,667,066 5.8% FRS 2040 Retirement Date Fund 198,430,314 183,008,269 81,222,771 51,406,817 514,068,170 5.1% FRS 2045 Retirement Date Fund 206,343,170 190,470,618 58,034,017 41,169,431 496,017,235 5.0% FRS 2050 Retirement Date Fund 131,085,810 120,816,414 24,163,283 25,975,529 302,041,036 3.0% FRS 2055 Retirement Date Fund 73,371,734 67,663,178 12,256,605 14,607,187 167,898,704 1.7% FRS 2060 Retirement Date Fund 19,278,489 17,778,560 3,220,434 3,838,052 44,115,535 0.4% Total Retirement Date Funds $ 1,374,768,800 $ 1,267,836,341 $ 968,855,105 $ 926,537,738 $ - $ - $ 4,537,997,984 45.4% FRS Money Market Fund 1,102,588,621 1,102,588,621 11.0% Total Cash $ - $ - $ - $ - $ 1,102,588,621 $ - $ 1,102,588,621 11.0% FRS Inflation Adjusted Multi-Assets Fund 99,726,942 - 99,726,942 1.0% Total Real Assets $ - $ - $ - $ 99,726,942 $ - $ - $ 99,726,942 1.0% FRS U.S. Bond Enhanced Index Fund 260,716,453 260,716,453 2.6% FRS Intermediate Bond Fund 108,784,478 108,784,478 1.1% FRS Core Plus Bond Fund 309,745,191 309,745,191 3.1% Total Fixed Income $ - $ - $ 679,246,121 $ - $ - $ - $ 679,246,121 6.8% FRS U.S. Stock Market Index Fund 890,387,952 890,387,952 8.9% FRS U.S. Large Cap Stock Fund 801,768,308 801,768,308 8.0% FRS U.S. Small/Mid Cap Stock Fund 646,921,623 646,921,623 6.5% Total Domestic Equity $ 2,339,077,884 $ - $ - $ - $ - $ - $ 2,339,077,884 23.4% FRS Foreign Stock Index Fund 217,107,904 217,107,904 2.2% FRS Global Stock Fund 228,451,083 228,451,083 2.3% FRS Foreign Stock Fund 126,241,546 126,241,546 1.3% Total International/Global Equity $ - $ 571,800,533 $ - $ - $ - $ - $ 571,800,533 5.7% FRS Self-Dir Brokerage Acct 665,851,581 665,851,581 6.7% Total Self-Dir Brokerage Acct $ 665,851,581 $ 665,851,581 6.7% Total Portfolio $ 3,713,846,684 $ 1,839,636,874 $ 1,648,101,227 $ 1,026,264,680 $ 1,102,588,621 $ 665,851,581 $ 9,996,289,666 100.0% Percent of Total 37.2% 18.4% 16.5% 10.3% 11.0% 6.7% 100.0%

The returns for the Retirement Date Funds, Inflation Adjusted Multi-Assets Fund, Core Plus Bond Fund, U.S. Large Cap Stock Fund, and U.S. Small/Mid Cap Stock Fund use prehire data for all months prior to 7/1/2014, actual live data is used thereafter. Note: The SDBA opened for members on 1/2/14. No performance calculations will be made for the SDBA.

 As of March 31, 2020 Multi Timeperiod Statistics

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As of March 31, 2020 Multi Timeperiod Statistics

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 Appendix



As of March 31, 2020 Benchmark Descriptions

Retirement Date Benchmarks $ZHLJKWHGDYHUDJHFRPSRVLWHRIWKHXQGHUO\LQJFRPSRQHQWV EHQFKPDUNVIRUHDFKIXQG iMoneyNet 1st Tier Institutional Net Index $QLQGH[PDGHXSRIWKHHQWLUHXQLYHUVHRIPRQH\PDUNHWPXWXDOIXQGV7KHLQGH[FXUUHQWO\UHSUHVHQWVRYHUIXQGVRU DSSUR[LPDWHO\SHUFHQWRIDOOPRQH\IXQGDVVHWV

FRS Custom Multi-Assets Index$PRQWKO\ZHLJKWHGFRPSRVLWHRIXQGHUO\LQJLQGLFHVIRUHDFK7,36DQG5HDO$VVHWVIXQG7KHVHLQGLFHVLQFOXGH%DUFOD\V867,36,QGH[ 06&,$&:RUOG,QGH[DQGWKH%ORRPEHUJ&RPPRGLW\7RWDO5HWXUQ,QGH[1$5(,7'HYHORSHG,QGH[6 3*OREDO,QIUDVWUXFWXUH,QGH[6 3*OREDO1DWXUDO5HVRXUFHV,QGH[

Total Bond Index$ZHLJKWHGDYHUDJHFRPSRVLWHRIWKHXQGHUO\LQJEHQFKPDUNVIRUHDFKERQGIXQG

Barclays Aggregate Bond Index $PDUNHWYDOXHZHLJKWHGLQGH[FRQVLVWLQJRIJRYHUQPHQWERQGV6(&UHJLVWHUHGFRUSRUDWHERQGVDQGPRUWJDJHUHODWHGDQGDVVHWEDFNHG VHFXULWLHVZLWKDWOHDVWRQH\HDUWRPDWXULW\DQGDQRXWVWDQGLQJSDUYDOXHRIPLOOLRQRUJUHDWHU7KLVLQGH[LVDEURDGPHDVXUHRIWKHSHUIRUPDQFHRIWKHLQYHVWPHQWJUDGH86 IL[HGLQFRPHPDUNHW

Barclays Intermediate Aggregate Bond Index $PDUNHWYDOXHZHLJKWHGLQGH[FRQVLVWLQJRI867UHDVXU\VHFXULWLHVFRUSRUDWHERQGVDQGPRUWJDJHUHODWHGDQGDVVHWEDFNHG VHFXULWLHVZLWKRQHWRWHQ\HDUVWRPDWXULW\DQGDQRXWVWDQGLQJSDUYDOXHRIPLOOLRQRUJUHDWHU

FRS Custom Core-Plus Fixed Income Index$PRQWKO\UHEDODQFHGEOHQGRI%DUFOD\V86$JJUHJDWH%RQG,QGH[DQG%DUFOD\V86+LJK

Total U.S. Equities Index$ZHLJKWHGDYHUDJHFRPSRVLWHRIWKHXQGHUO\LQJEHQFKPDUNVIRUHDFKGRPHVWLFHTXLW\IXQG

Russell 3000 Index $FDSLWDOL]DWLRQZHLJKWHGLQGH[FRQVLVWLQJRIWKHODUJHVWSXEOLFO\WUDGHG86VWRFNVE\FDSLWDOL]DWLRQ7KLVLQGH[LVDEURDGPHDVXUHRIWKHSHUIRUPDQFH RIWKHDJJUHJDWHGRPHVWLFHTXLW\PDUNHW

Russell 1000 Index $QLQGH[WKDWPHDVXUHVWKHSHUIRUPDQFHRIWKHODUJHVWVWRFNVFRQWDLQHGLQWKH5XVVHOO,QGH[

FRS Custom Small/Mid Cap Index$PRQWKO\UHEDODQFHGEOHQGRI6 3,QGH[5XVVHOO,QGH[5XVVHOO9DOXH,QGH[DQG5XVVHOO0LG&DS *URZWK,QGH[

Total Foreign and Global Equities Index$ZHLJKWHGDYHUDJHFRPSRVLWHRIWKHXQGHUO\LQJEHQFKPDUNVIRUHDFKIRUHLJQDQGJOREDOHTXLW\IXQG

MSCI All Country World ex-U.S. IMI Index $FDSLWDOL]DWLRQZHLJKWHGLQGH[RIVWRFNVUHSUHVHQWLQJGHYHORSHGFRXQWU\VWRFNPDUNHWVDQGHPHUJLQJFRXQWULHVH[FOXGLQJWKH 86PDUNHW

MSCI All Country World Index $FDSLWDOL]DWLRQZHLJKWHGLQGH[RIVWRFNVUHSUHVHQWLQJDSSUR[LPDWHO\GHYHORSHGDQGHPHUJLQJFRXQWULHVLQFOXGLQJWKH86DQG&DQDGLDQ PDUNHWV

MSCI All Country World ex-U.S. Index $FDSLWDOL]DWLRQZHLJKWHGLQGH[FRQVLVWLQJRIGHYHORSHGDQGHPHUJLQJFRXQWULHVEXWH[FOXGLQJWKH86

 As of March 31, 2020 Descriptions of Universes

Retirement Date Funds  7DUJHWGDWHXQLYHUVHVFDOFXODWHGDQGSURYLGHGE\/LSSHU

FRS Money Market Fund $PRQH\PDUNHWXQLYHUVHFDOFXODWHGDQGSURYLGHGE\/LSSHU

FRS U.S. Bond Enhanced Index Fund $ORQJWHUPERQGIL[HGLQFRPHXQLYHUVHFDOFXODWHGDQGSURYLGHGE\/LSSHU

FRS Intermediate Bond Fund $EURDGLQWHUPHGLDWHWHUPIL[HGLQFRPHXQLYHUVHFDOFXODWHGDQGSURYLGHGE\/LSSHU

FRS Core Plus Bond Fund $FRUHSOXVERQGIL[HGLQFRPHXQLYHUVHFDOFXODWHGDQGSURYLGHGE\/LSSHU

FRS U.S. Stock Market Index Fund $ODUJHFDSEOHQGXQLYHUVHFDOFXODWHGDQGSURYLGHGE\/LSSHU

FRS U.S. Large Cap Stock Fund $ODUJHFDSXQLYHUVHFDOFXODWHGDQGSURYLGHGE\/LSSHU

FRS U.S. Small/Mid Cap Stock Fund $VPDOOPLGFDSXQLYHUVHFDOFXODWHGDQGSURYLGHGE\/LSSHU

FRS Foreign Stock Index Fund $IRUHLJQEOHQGXQLYHUVHFDOFXODWHGDQGSURYLGHGE\/LSSHU

FRS Global Stock Fund $JOREDOVWRFNXQLYHUVHFDOFXODWHGDQGSURYLGHGE\/LSSHU

FRS Foreign Stock Fund$IRUHLJQODUJHEOHQGXQLYHUVHFDOFXODWHGDQGSURYLGHGE\/LSSHU



As of March 31, 2020 Notes

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 Disclaimer

Past performance is not necessarily indicative of future results.

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Table of Contents

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LCEF Total Fund

 LCEF Total Fund As of March 31, 2020 Total Plan Asset Summary

Change in Market Value From January 1, 2020 to March 31, 2020 



  

($)  Millions    

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Summary of Cash Flow

1 1 FYTD* Quarter Year LCEF Total Fund %HJLQQLQJ0DUNHW9DOXH    $GGLWLRQV:LWKGUDZDOV    ,QYHVWPHQW(DUQLQJV    = Ending Market Value 710,815,030 710,815,030 710,815,030

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LCEF Total Fund As of March 31, 2020 Total Plan Performance Summary

Return Summary 

         

 Return    

  

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Quarterly Excess Performance Ratio of Cumulative Wealth - 10 Years   

    

 

                       

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 As of March 31, 2020 Asset Allocation & Performance

Allocation Performance(%) Market 1 1 3 5 10 Value % Policy(%) FYTD Quarter Year Years Years Years ($) /&()7RWDO)XQG                Total Endowment Target -15.6 (65) -9.8 (54) -6.7 (50) 2.1 (35) 2.9 (31) 5.6 (33) $OO(QGRZPHQWV7RWDO)XQG0HGLDQ       *OREDO(TXLW\          Global Equity Target -22.5 -15.6 -12.7 0.9 2.5 6.8 Blank )L[HG,QFRPH                Blmbg. Barc. U.S. Aggregate 3.1 (11) 5.7 (6) 8.9 (5) 4.8 (4) 3.4 (7) 3.9 (46) $OO(QGRZPHQWV86)L[HG,QFRPH6HJPHQW0HGLDQ       7,36          Barclays U.S. TIPS 1.7 3.9 6.8 3.5 2.7 3.5 Blank &DVK(TXLYDOHQWV          S&P US AAA & AA Rated GIP 30D Net Yield Index 0.4 1.4 2.0 1.7 1.2 0.6

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As of March 31, 2020 Calendar Year Performance

Performance(%) 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 LCEF Total Fund 20.1 (18) -6.1 (62) 18.5 (4) 9.2 (9) -1.4 (48) 5.2 (47) 14.7 (39) 13.2 (23) 1.9 (20) 14.0 (15) Total Endowment Target 21.2 (11) -7.0 (79) 17.7 (9) 7.0 (39) -1.6 (51) 4.3 (59) 12.8 (57) 12.2 (45) 1.5 (24) 13.7 (17) $OO(QGRZPHQWV7RWDO)XQG0HGLDQ           *OREDO(TXLW\           Global Equity Target 26.4 -9.8 24.1 8.4 -2.4 3.9 24.1 19.4 -2.2 16.1 Blank )L[HG,QFRPH                     Blmbg. Barc. U.S. Aggregate 8.7 (27) 0.0 (48) 3.5 (40) 2.6 (62) 0.5 (35) 6.0 (18) -2.0 (74) 4.2 (89) 7.8 (43) 6.5 (82) $OO(QGRZPHQWV86)L[HG,QFRPH6HJPHQW0HGLDQ           7,36           Barclays U.S. TIPS 8.4 -1.3 3.0 4.7 -1.4 3.6 -8.6 7.0 13.6 6.3 Blank &DVK(TXLYDOHQWV           S&P US AAA & AA Rated GIP 30D Net Yield Index 2.2 1.8 0.9 0.4 0.1 0.00.10.10.20.3

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 As of March 31, 2020 Plan Sponsor Peer Group Analysis

All Endowments-Total Fund 







 Return







 1 1 3 5 10 FYTD 2019 2018 2017 Quarter Year Years Years Years  /&()7RWDO)XQG                    7RWDO(QGRZPHQW7DUJHW                  

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LCEF Total Fund As of March 31, 2020 Universe Asset Allocation Comparison

LCEF Total Fund BNY Mellon Endowment Universe

Cash Cash TIPS 1.6% 2.0% 11.6% Real Estate Alternative 4.4% Investments 12.1%

Fixed Income Global 18.4% Equity 48.9%

Global Equity 68.5% Fixed Income 32.5%

 LCEF Total Fund As of March 31, 2020 Attribution

-80 Global Equity Global Equity 46

-1 Fixed Income Fixed Income 0

-2 TIPS TIPS 1

Cash 1 Cash 1

-23 TAA -8 TAA

Other* 0 -1 Other*

-105 Total Fund Total Fund 39

-200 -150 -100 -50 0 50 100 150 200 -200 -150 -100 -50 0 50 100 150 200

Basis Points Basis Points

1-Year Ending 3/31/2020 5-Year Ending 3/31/2020

*Other includes differences between official performance value added due to methodology and extraordinary payouts.



Appendix

 As of March 31, 2020 Benchmark Descriptions

LCEF Total Fund 7RWDO(QGRZPHQW7DUJHW $ZHLJKWHGEOHQGRIWKHLQGLYLGXDODVVHWFODVVWDUJHWEHQFKPDUNV

Total Global Equity 06&,$&:,,0,H[7REDFFR)URPIRUZDUGDFXVWRPYHUVLRQRIWKH06&,$&:,,0,H[FOXGLQJWREDFFRUHODWHGFRPSDQLHV)URPWRDFXVWRP YHUVLRQRIWKH06&,$&:,,0,DGMXVWHGWRUHIOHFWDIL[HGZHLJKWLQWKH06&,86$,0,DQGDIL[HGZHLJKWLQWKH06&,$&:,H[86$,0,DQGH[FOXGLQJFHUWDLQHTXLWLHVRI WREDFFRUHODWHGFRPSDQLHV)URPWRDFXVWRPYHUVLRQRIWKH06&,$&:,,0,H[FOXGLQJWREDFFRUHODWHGFRPSDQLHV3ULRUWRWKHEHQFKPDUNLVD ZHLJKWHGDYHUDJHRIERWKWKH'RPHVWLF(TXLWLHVDQG)RUHLJQ(TXLWLHVKLVWRULFDOEHQFKPDUNV

Total Domestic Equities 5XVVHOO,QGH[H[7REDFFR3ULRUWRDQLQGH[WKDWPHDVXUHVWKHSHUIRUPDQFHRIWKHVWRFNVWKDWPDNHXSWKH5XVVHOODQG5XVVHOO,QGLFHVZKLOH H[FOXGLQJWREDFFRFRPSDQLHV

Total Foreign Equities 06&,$&:,H[86,0,H[7REDFFR3ULRUWRDFDSLWDOL]DWLRQZHLJKWHGLQGH[UHSUHVHQWLQJFRXQWULHVEXWH[FOXGLQJWKH8QLWHG6WDWHV7KHLQGH[LQFOXGHVGHYHORSHG DQGHPHUJLQJPDUNHWFRXQWULHVDQGH[FOXGHVWREDFFRFRPSDQLHV

Total Fixed Income %DUFOD\V$JJUHJDWH%RQG,QGH[$PDUNHWYDOXHZHLJKWHGLQGH[FRQVLVWLQJRIWKH%DUFOD\V&UHGLW*RYHUQPHQWDQG0RUWJDJH%DFNHG6HFXULWLHV,QGLFHV7KHLQGH[DOVRLQFOXGHV FUHGLWFDUGDXWRDQGKRPHHTXLW\ORDQEDFNHGVHFXULWLHV7KLVLQGH[LVWKHEURDGHVWDYDLODEOHPHDVXUHRIWKHDJJUHJDWHLQYHVWPHQWJUDGH86IL[HGLQFRPHPDUNHW

Total TIPS %DUFOD\V867,36$PDUNHWYDOXHZHLJKWHGLQGH[FRQVLVWLQJRI867UHDVXU\,QIODWLRQ3URWHFWHG6HFXULWLHVZLWKRQHRUPRUH\HDUVUHPDLQLQJXQWLOPDWXULW\ZLWKWRWDORXWVWDQGLQJ LVVXHVL]HRIPLOOLRQRUPRUH

Total Cash Equivalents 6 386$$$ $$5DWHG*,3'D\1HW



As of March 31, 2020 Universe Descriptions

LCEF Total Fund $XQLYHUVHFRPSULVHGRIWRWDOHQGRZPHQWSRUWIROLRUHWXUQVQHWRIIHHVFDOFXODWHGDQGSURYLGHGE\%1<0HOORQ3HUIRUPDQFH 5LVN$QDO\WLFVDQG,QYHVWPHQW0HWULFV $JJUHJDWHDVVHWVLQWKHXQLYHUVHFRPSULVHGELOOLRQDVRITXDUWHUHQGDQGWKHDYHUDJHPDUNHWYDOXHZDVPLOOLRQ

Total Fixed Income $XQLYHUVHFRPSULVHGRIWRWDOIL[HGLQFRPHSRUWIROLRUHWXUQVQHWRIIHHVRIHQGRZPHQWSODQVFDOFXODWHGDQGSURYLGHGE\%1<0HOORQ3HUIRUPDQFH 5LVN$QDO\WLFVDQG ,QYHVWPHQW0HWULFV$JJUHJDWHDVVHWVLQWKHXQLYHUVHFRPSULVHGELOOLRQDVRITXDUWHUHQGDQGWKHDYHUDJHPDUNHWYDOXHZDVELOOLRQ

 As of March 31, 2020 Explanation of Exhibits

Quarterly and Cumulative Excess Performance 7KHYHUWLFDOD[LVH[FHVVUHWXUQLVDPHDVXUHRIIXQGSHUIRUPDQFHOHVVWKHUHWXUQRIWKHSULPDU\EHQFKPDUN7KHKRUL]RQWDO D[LVUHSUHVHQWVWKHWLPHVHULHV7KHTXDUWHUO\EDUVUHSUHVHQWWKHXQGHUO\LQJIXQGV UHODWLYHSHUIRUPDQFHIRUWKHTXDUWHU

Ratio of Cumulative Wealth Graph $QLOOXVWUDWLRQRIDSRUWIROLR VFXPXODWLYHXQDQQXDOL]HGSHUIRUPDQFHUHODWLYHWRWKDWRILWVEHQFKPDUN$QXSZDUGVORSLQJOLQHLQGLFDWHV VXSHULRUIXQGSHUIRUPDQFHYHUVXVLWVEHQFKPDUN&RQYHUVHO\DGRZQZDUGVORSLQJOLQHLQGLFDWHVXQGHUSHUIRUPDQFHE\WKHIXQG$IODWOLQHLVLQGLFDWLYHRIEHQFKPDUNOLNH SHUIRUPDQFH

Performance Comparison - Plan Sponsor Peer Group Analysis $QLOOXVWUDWLRQRIWKHGLVWULEXWLRQRIUHWXUQVIRUDSDUWLFXODUDVVHWFODVV7KHFRPSRQHQW VUHWXUQLVLQGLFDWHGE\ WKHFLUFOHDQGLWVSHUIRUPDQFHEHQFKPDUNE\WKHWULDQJOH7KHWRSDQGERWWRPERUGHUVUHSUHVHQWWKHWKDQGWKSHUFHQWLOHVUHVSHFWLYHO\7KHVROLGOLQHLQGLFDWHVWKHPHGLDQZKLOH WKHGRWWHGOLQHVUHSUHVHQWWKHWKDQGWKSHUFHQWLOHV



As of March 31, 2020 Notes

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Past performance is not necessarily indicative of future results.

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 2020

January April July October S M T W T F S S M T W T F S S M T W T F S S M T W T F S 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 5 6 7 8 9 10 11 5 6 7 8 9 10 11 5 6 7 8 9 10 11 4 5 6 7 8 9 10 12 13 14 15 16 17 18 12 13 14 15 16 17 18 12 13 14 15 16 17 18 11 12 13 14 15 16 17 19 20 21 22 23 24 25 19 20 21 22 23 24 25 19 20 21 22 23 24 25 18 19 20 21 22 23 24 26 27 28 29 30 31 26 27 28 29 30 26 27 28 29 30 31 25 26 27 28 29 30 31

February May August November S M T W T F S S M T W T F S S M T W T F S S M T W T F S 1 1 2 1 1 2 3 4 5 6 7 2 3 4 5 6 7 8 3 4 5 6 7 8 9 2 3 4 5 6 7 8 8 9 10 11 12 13 14 9 10 11 12 13 14 15 10 11 12 13 14 15 16 9 10 11 12 13 14 15 15 16 17 18 19 20 21 16 17 18 19 20 21 22 17 18 19 20 21 22 23 16 17 18 19 20 21 22 22 23 24 25 26 27 28 23 24 25 26 27 28 29 24 25 26 27 28 29 30 23 24 25 26 27 28 29 29 30 31 30 31 March June September December S M T W T F S S M T W T F S S M T W T F S S M T W T F S 1 2 3 4 5 6 7 1 2 3 4 5 6 1 2 3 4 5 1 2 3 4 5 8 9 10 11 12 13 14 7 1 9 10 11 12 13 6 7 8 9 10 11 12 6 7 8 9 10 11 12 15 16 17 18 19 20 21 14 15 16 17 18 19 20 13 14 15 16 17 18 19 13 14 15 16 17 18 19 22 23 24 25 26 27 28 21 22 23 24 25 26 27 20 21 22 23 24 25 26 20 21 22 23 24 25 26 29 30 31 28 29 30 27 28 29 30 27 28 29 30 31

Blue is Proposed IAC Meeting Yellow is Proposed Cabinet Meeting