NEPC Fund Tear Sheet Aurora Capital Group MCA

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NEPC Fund Tear Sheet

Aurora Capital Group

Written by NEPC Research as of October 10, 2014.

General Fund Information

Firm Name Aurora Capital Group (“Aurora”)

Master Custody Account (“MCA”) Agreement with San Bernardino County Employees Fund Name Retirement Association (“SBCERA”)

Firm Address 10877 Wilshire Blvd. / Suite 2100. Los Angeles, CA 90024

Target Fund The MCA will target approximately $10 million in commitments per year over a five year Size period

AUM Aurora has invested $3.5 billion in funds and co-investments since inception.

Inception Date 1991 Firm

Inception Date Aurora Equity Partners IV (2011 vintage), Aurora Resurgence Fund II (2013) Fund(s)

Closed or Open N/A

Expected Close N/A Date

THIS MEMO PROVIDES A SUMMARY OF INFORMATION AND DOCUMENTATION RECEIVED BY NEPC FROM THE MANAGER THROUGH PHONE CALLS AND MEETINGS. THE PRODUCT HAS NOT BEEN RATED BY NEPC’s ALTERNATIVE ASSETS COMMITTEE.

Firm & Strategy Evaluation

Aurora Capital Group (the “Firm”) is a Los Angeles-based Firm that was founded in 1991 by Gerald Parsky to invest in and improve the quality of middle market businesses. Aurora pursues two different strategies through two complementary investment products: the Aurora Equity Partners (“AEP”) line of funds and the Aurora Resurgence (“ARF”) line of funds. As of 3/31/14, Aurora was investing the fifth AEP fund, AEP IV, and was also investing the second Resurgence fund, ARF II. There are 22 Firm History investment professionals currently with the Firm. Six of the Aurora partners have been with the Firm for at least 10 years, and collectively the partners have over 140 years of relevant private equity experience. Since its founding in 1991, Aurora has invested approximately $3.5 billion of equity capital from its funds and co-investors in 21 platform companies and has completed over 100 add-on acquisitions. The AEP line of funds is led by 13 investment professionals, including Chairman Gerald Parsky and General Counsel Tim Hart. Aurora Resurgence is guided by a group of 10 professionals that also includes Mssrs. Parsky and Hart.

Aurora Private Equity and Aurora Resurgence share a common investment theme: the fundamental improvement of underlying portfolio companies. The AEP (buyout) funds strive for strategic and operational enhancements of growing, high-quality businesses in an attempt to help these businesses move from “good to great”. Target companies in the AEP funds are typically leaders of well-structured niches underpinned by stable demand drivers with low correlation to business cycles and conservative balance sheets. Companies that are targeted in the Resurgence (special situations) line of funds target complex situations in mature, durable industries with protection in price and structure. These investments are generally “distressed for control” investments that may involve turnaround situations. Aurora drives improvements in portfolio companies in part by bringing what the Firm considers world class governance and operational resources to middle market firms Investment Strategy which otherwise would not have access to such a caliber of resources. Aurora executes this strategy with a focus on downside protection in an effort to steadily improve companies and generate consistent returns in any economic environment. Prior to 2000, the Firm executed a roll-up strategy through which the AEP team would aim to generate value by consolidating a highly fragmented industry. From 2000 on, the Firm has followed a “platform” strategy whereby Aurora seeks to invest in companies that are leaders in a well-structured, niche within the US middle market. The Resurgence line of funds began in 2007 and follows a special situation, distressed for control strategy. In Resurgence, Aurora follows a strategy of investing in the equity and/or debt of middle market companies where it seeks to gain controlling positions in companies facing operational or financial challenges yet having strong underlying fundamentals in durable industries.

Of high importance to the success of Aurora’s strategy is Aurora’s executive board and executive network. This formal network of former CEOs proactively sources deals, implements governance plans across the Aurora portfolio, and serves on boards of directors of portfolio companies. The Aurora executive board, executive advisors and executive network provide the Firm with a wide range of expertise to improve Investment Process governance structures and implement operational changes of portfolio companies. Part of the process of improving Aurora portfolio companies includes establishing the “Aurora ecosystem”. The Aurora ecosystem custom tailors boards to the work streams necessary to drive value within stable assets. This governance program includes 100- day plans, annual budget reviews, quarterly reviews, annual strategic plans, CEO/CFO roundtables, and personnel reviews.

NEPC Fund Tear Sheet Aurora Capital Group MCA

Projected Number of 1-3 investments per year Investments

The MCA mandate allows Aurora to invest in Aurora funds, co-investments alongside those funds, as well as direct Types of investment opportunities in mezzanine financing, senior Investments indebtedness, real estate transactions, venture capital transactions, and infrastructure projects. Portfolio Construction One investment may not exceed 20% of the aggregate Portfolio Constraints capital available to invest by SBCERA.

Expected / Maximum Pursuant to the MCA, Aurora may not borrow on SBCERA’s Use of Leverage behalf against the security of the investments.

Preliminary Observations

• Track Record – Aurora Capital Group, since 2000 when a shift in strategy was implemented, has invested over $2.5 billion of capital. The Firm has realized over $3.8 billion with a total value of over $4.7 billion, resulting in a 19.0% net IRR to investors and a 1.88x multiple on invested capital. • Executive Board, Network, and Advisors – Aurora has a wide network of former high- level executives who perform a variety of roles for the various portfolio companies. The four Executive Board members add value through active oversight and direct involvement in portfolio companies, including: leading portfolio strategic reviews, serving on the boards of directors, sourcing deals, and executive mentoring. The broader network of Preliminary professionals allied with Aurora assist in sourcing, due diligence efforts, leading initiatives Positives in their respective areas of expertise, and recruiting for C-level positions in portfolio companies. • Focus on Downside Protection – Aurora’s focus on operations and governance has allowed the Firm to successfully invest through various types of markets. Importantly, the Firm’s affinity for companies with leading and defensible market positions, stable demand drivers, and strong underlying fundamentals (i.e. stable balance sheets) should bode well for future investors. • Fees – The MCA provides for an attractive fee arrangement for SBCERA. Management fees are 1.50% on drawn capital with carried interest calculated at the account level across all of the investments.

NEPC Fund Tear Sheet Aurora Capital Group MCA

• Concentration - In building a portfolio for each fund, Aurora prefers to make fewer, larger investments to focus resources in an attempt to add maximum value to each portfolio company. Aurora generally builds a portfolio of 8-10 companies per fund in a control or shared-control structure. This concentration will carry over into the MCA, but should be mitigated in SBCERA’s total portfolio context. • Broad Mandate – Outside of the buyout and distressed for control investments, the MCA mandate allows Aurora to invest in real estate transactions, venture capital transactions, and infrastructure products, which are not a part of Aurora’s core competency. Preliminary • Bankrupcty Risk – Aurora’s distressed investments may be in companies that are Negatives financially stressed, in distress, or are facing bankruptcy. These investments may be negatively impacted should the economic environment erode or a company be unable to survive financial strains. • Liquidity – Due to the high concentration strategy Aurora employs, as well as the distressed nature of some of the investments, liquidity for the investments in the MCA may be limited. Previously, Aurora conducted a cross-fund transaction between ARF I and ARF II, where ARF II bought four existing portfolio companies from ARF I. Investors were offered cash or the option to roll over their interests to ARF II. This is a generally less attractive liquidity option than selling the portfolio companies to outside entities.

NEPC Fund Tear Sheet Aurora Capital Group MCA

Key Biographies

Yrs with Firm Name / Position Experience / Experience Gerald Parsky/ 21/32 Gerald L. Parsky is the Chairman of Aurora Capital Group. Previously, Mr. Chairman Parsky served as Assistant Secretary of the Treasury for International Affairs from 1974-1977. For the next 14 years, Mr. Parsky was affiliated with the law firm of Gibson, Dunn & Crutcher, where he was a Senior Partner and member of the Executive and Management Committees. In 1991, Mr. Parsky founded Aurora Capital Group. Past activities include: Regent, University of California; Trustee, Princeton University. Present activities include: Trustee, The Salk Institute; Trustee, George Bush Presidential Library Foundation; Trustee, Ronald Reagan Presidential Foundation; Board of Directors, The Irvine Company. Mr. Parsky is a graduate of Princeton University and the University of Virginia Law School.

John T. Mapes / 18/20 John T. Mapes is a Partner of Aurora Capital Group and is the Managing Partner Partner of Aurora's Private Equity Practice and Chairman of the Firm’s Investment Committee. He joined Aurora in 1992 and then rejoined the firm in 1995 after earning a Master of Business Administration from Harvard's Graduate School of Business Administration. Previously, Mr. Mapes was in the Corporate Finance Group at Salomon Brothers Inc. where he specialized in the evaluation of companies for potential financings and mergers. Before graduating from Harvard's Graduate School of Business Administration, Mr. Mapes graduated with a Bachelor of Arts in Economics and Business from UCLA. Mr. Mapes was formerly a Director of Ames Taping Tools, Autocam Corporation, Coast Gas Industries, Douglas Dynamics, K&F Industries, Mitchell International, RBC Bearings, RecoverCare and Western Nonwovens.

Timothy J. Hart/ 5/19 Timothy J. Hart is a Partner and the General Counsel of Aurora Capital Partner Group. Mr. Prior to joining Aurora in 2007, Mr. Hart was a Partner in the Los Angeles office of Gibson, Dunn & Crutcher LLP. Mr. Hart's practice at Gibson Dunn consisted of counseling private equity firms in mergers and acquisitions, capital markets transactions, and general portfolio company matters. Mr. Hart also represented other public and private clients in various corporate transactions. Mr. Hart is a graduate of Merrimack College and the University of San Diego School of Law.

Josh R. Klinefelter 12/14 Josh R. Klinefelter is a Partner in Aurora's Private Equity practice. He joined Aurora in 1999 and then rejoined the firm after earning an M.B.A. from Harvard Business School. Previously, Mr. Klinefelter was in the Investment Banking Division of Bear Stearns & Co. in both the New York and Los Angeles offices. Mr. Klinefelter graduated with a B.A. in Spanish and Latin American Studies from Tulane University. Mr. Klinefelter currently serves on the Board of Directors of Market Track and Zywave.

Michael J. Marino 10/12 Michael J. Marino is a Partner in Aurora's Private Equity practice. He joined Aurora in 2003 and then rejoined the firm after earning an M.B.A. from Harvard Business School. Previously, Mr. Marino was in the Investment Banking Division at Goldman, Sachs & Co. where he was a member of the Mergers & Strategic Advisory/Industrials Group in New York. Mr. Marino received a B.A. in Economics, cum laude, from Boston College. Mr. Marino currently serves on the Board of Directors of Joerns RecoverCare and National Technical Systems.

NEPC Fund Tear Sheet Aurora Capital Group MCA

Mark D. 11/15 Mark D. Rosenbaum is a Partner in Aurora's Private Equity practice. Prior Rosenbaum/ Partner to joining Aurora in 2001, Mr. Rosenbaum was an Associate at Summit Partners where he focused on investments in middle market growth companies. Prior to that, he was in the Investment Banking Division of Montgomery Securities. Mr. Rosenbaum graduated cum laude with a B.S. in Economics from The Wharton School at the University of Pennsylvania. He earned an M.B.A. with honors from the John E. Anderson Graduate School of Management at UCLA where he was a Carter Fellow. Mr. Rosenbaum currently serves on the Board of Directors of DuBois Chemicals and Industrial Container Services. David A. Alpern 6/12 Mr. Alpern is a Partner in Aurora's Private Equity practice. Mr. Alpern joined Aurora in 2006 following the completion of an M.B.A. from Harvard Business School. Previously, Mr. Alpern served as an Associate with GTCR Golder Rauner, a Chicago-based private equity firm, and prior thereto in the Investment Banking Division of Credit Suisse First Boston where he was a member of the Global Industrial & Services practice. Most recently, Mr. Alpern worked for Microsoft Corporation serving as a Manager in its Corporate Development/Merger & Acquisition Group. Mr. Alpern graduated from the University of Michigan with a B.A. in History.

William J. Coughlin 12/16 Mr. Coughlin is a Partner in Aurora's Private Equity practice. Prior to joining Aurora in 2000, Mr. Coughlin was on fellowship at Harvard Business School developing a course on international finance. Mr. Coughlin was associated with Merrill Lynch & Co. for several years, most recently as a member of their internal private equity fund. Prior to that, he worked in London as a part of the European Corporate Finance team and in Los Angeles in the Industrials Group. Mr. Coughlin received an M.B.A. from Harvard Business School and a B.A. in Political Philosophy and Economics from Claremont McKenna College.

NEPC Fund Tear Sheet Aurora Capital Group MCA

Fund Terms & Provisions

Investment Vehicle Master Custody Account

Fund Structure Master Custody Account

Manager Aurora Management Partners

Investment Period Five years

Fund Term Five years

Minimum Investment Size N/A

Annual Management Fee 1.50% on drawn capital

Performance Fee 25% then 20% calculated at the account level (see distribution waterfall)

Organizational/Administrative Up to $50,000 per fiscal year for administrative expenses associated with the Costs operation and administration of the account

Preferred Return 8% IRR compounded annually

i. First, to SBCERA until SBCERA's total net capital contributions attributable to an investment, including allocable capital contributions to pay management fees and expenses, have been reduced to zero; ii. Second, to SBCERA until it has received distributions equal to its pro rata share of realized losses on other investments; iii. Third, to SBCERA until it has received distributions equal to its aggregate capital contributions to pay management fees and expenses; iv. Fourth, to SBCERA until it has received distributions equal to its pro rata Distribution Waterfall share of unrealized losses (net of unrealized gains) on other investments; v. Fifth, to SBCERA until SBCERA shall have received an 8% internal rate of return compounded annually on SBCERA's capital contributions attributable to the investment and all other realized investments; vi. Sixth, 50% to the Manager and 50% to SBCERA until the Manager has received an amount equal to 25% of the amount distributed to SBCERA pursuant to clause (v) and this clause; and vii. Thereafter, 80% to SBCERA and 20% to the Manager.

Other Fees None

Lock Up SBCERA may terminate the agreement at any time

Redemptions N/A

NEPC Fund Tear Sheet Aurora Capital Group MCA

Fund Level Returns

TVPI DPI Vintage Capital Capital Total Current Fund Name Multiple Multiple Year Committed Funded Value (net) (net) Net IRR

Aurora Equity Partners III 2005 $900 $850 $1,555 1.8x 1.7x 14.1%

Aurora Resurgence Fund I 2007 $636 $377 $631 1.7x 1.7x 17.1%

Aurora Equity Partners IV 2011 $535 $328 $413 1.1x 0.0x 8.1%

Vintage Year Benchmarking Analysis

Net IRR 0.00 Vintage Year Benchmark Net IRR Comparison Upper Lower Vintage Year Fund Current Net IRR Quartile # Funds Quartile Median Quartile 2005 Aurora Equity Partners III 14.1% 2 65 15.0% 10.4% 6.3% 2011 Aurora Equity Partners IV 8.1% 3 47 18.0% 11.0% 3.9%

DPI Multiple 0.00 Vintage Year Benchmark DPI Multiple Comparison DPI Upper Lower Vintage Year Fund Multiple Quartile # Funds Quartile Median Quartile 2005 Aurora Equity Partners III 1.7x 1 65 1.4x 0.9x 0.7x 2011 Aurora Equity Partners IV 0.0x 4 47 0.2x 0.1x 0.0x

TVPI Multiple 0.00 Vintage Year Benchmark TVPI Multiple Comparison TVPI Upper Lower Vintage Year Fund Multiple Quartile # Funds Quartile Median Quartile 2005 Aurora Equity Partners III 1.8x 2 65 1.8x 1.5x 1.3x 2011 Aurora Equity Partners IV 1.1x 3 47 1.3x 1.2x 1.1x

Net IRR 0.00 Vintage Year Benchmark Net IRR Comparison Upper Lower Vintage Year Fund Current Net IRR Quartile # Funds Quartile Median Quartile 2007 Aurora Resurgence Fund I 17.1% 1 31 8.4% 6.1% (2.2%)

DPI Multiple 0.00 Vintage Year Benchmark DPI Multiple Comparison DPI Upper Lower Vintage Year Fund Multiple Quartile # Funds Quartile Median Quartile 2007 Aurora Resurgence Fund I 1.7x 1 31 0.8x 0.6x 0.3x

TVPI Multiple 0.00 Vintage Year Benchmark TVPI Multiple Comparison TVPI Upper Lower Vintage Year Fund Multiple Quartile # Funds Quartile Median Quartile 2007 Aurora Resurgence Fund I 1.7x 1 31 1.4x 1.3x 0.9x

Comments For benchmarking purposes, we compared Aurora’s AEP funds’ performance to the Burgiss US Buyout universe and Aururoa’s Resurgence Fund I to the Burgiss Global Distressed universe .

Notes: 1. $ in millions; data as of June 20, 2014 and provided by the Manager. 2. Note: For benchmarking purposes, we compared fund performance to the Burgiss US Buyout universe and Burgiss Global Distressed universe, respectively, with data as of 3/31/14. 3. IRRs are net and are calculated after the deduction of carried interest and expenses charged directly to the respective Fund. TVPI multiples are calculated using Fund-level contributions and Fund-level distributions to date as well as the respective Fund's equity balance, net of promote. 4. GREEN shaded cells indicate that the Fund outperformed the benchmark. RED shaded cells indicate that the Fund underperformed the benchmark. Confidential Information – For NEPC Client Use Only. © Copyright 2014 NEPC, LLC. All Rights Reserved. 8

NEPC Fund Tear Sheet Aurora Capital Group MCA

Investment-Level Performance Analysis

Investment-Level Gross T VPI Multiple History 4.00x

9% of Deals >3.0x TVPI Multiple

3.00x Above Water

27% of Deals >2.0-3.0x TVPI Multiple

2.00x

45% of Deals >1.0-2.0x TVPI Gross TVPI Multiple Multiple

1.00x

Under 18% of Deals Water 0.0-1.0x TVPI Multiple

0.00x 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Initial Investment Date

Aurora Equity Partners III Aurora Equity Partners IV

The chart above shows the individual investment TVPI multiples for investments in AEP Funds III and IV. The size of the bubble Comments on the chart indicates the relative size of the equity commitment to a given investment. The average TVPI multiple for all investments is 1.72x.

Note: TVPI multiple represents the ratio of realized + current value to capital funded. Current value based on the fair market value. Investment-level data as of 6/30/14 and provided by the Manager .

NEPC Fund Tear Sheet Aurora Capital Group MCA

Aggregate Investments – Total Value to Paid-In-Capital (TVPI) Deal Frequency Analysis

Investment-Level Investment-Level Gross TVPI Multiple Dispersion for Investments, by # of Gross TVPI Multiple Dispersion for Investments, by Cost Investments Basis of Investments 45% Avg. Multiple: 1.7x 45% Wtd. Avg. Multiple: 1.8x Standard Deviation: 1.1x 81% of Cost 40% Basis Realized 40% 40% or Held Above 36% Cost

35% 35% 32%

30% 30% 27%

25% 25%

20% 20%

15% 15%

10% 10% 9% 9% 9% 9% 10% 9%

5% 5% 5% 4%

0% 0% 0% 0% 0% 0% <= 0.50x 0.51x to 1.00x 1.01x to 1.51x to 2.01x to 2.51x to > 3.00x <= 0.50x 0.51x to 1.00x 1.01x to 1.51x to 2.01x to 2.51x to > 3.00x <1.00x 1.50x 2.00x 2.50x 3.00x <1.00x 1.50x 2.00x 2.50x 3.00x

The charts above show the TVPI multiple deal frequency analysis for the investments in AEP Funds III and IV. These charts Comments are a summary of the data shown on the prior bubble charts.

NEPC Fund Tear Sheet Aurora Capital Group MCA

Disclaimer

• Past performance is no guarantee of future results. • The opinions presented herein represent the good faith views of NEPC as of the date of this report and are subject to change at any time. • The information in this report has been obtained from sources NEPC believes to be reliable. While NEPC has exercised reasonable professional care in preparing this report, we cannot guarantee the accuracy of all source information contained within. • This report may contain confidential or proprietary information and may not be copied or redistributed to any party not legally entitled to receive it.

In addition, it is important that investors understand the following characteristics of non- traditional investment strategies including hedge funds, real estate and private equity:

1. Performance can be volatile and investors could lose all or a substantial portion of their investment 2. Leverage and other speculative practices may increase the risk of loss 3. Past performance may be revised due to the revaluation of investments 4. These investments can be illiquid, and investors may be subject to lock-ups or lengthy redemption terms 5. A secondary market may not be available for all funds, and any sales that occur may take place at a discount to value 6. These funds are not subject to the same regulatory requirements as registered investment vehicles 7. Managers may not be required to provide periodic pricing or valuation information to investors 8. These funds may have complex tax structures and delays in distributing important tax information 9. These funds often charge high fees 10. Investment agreements often give the manager authority to trade in securities, markets or currencies that are not within the manager’s realm of expertise or contemplated investment strategy