Private Equity – Process and Review March 2012

Andrew Junkin, CFA, CAIA Managing Director

Tom Toth, CFA Managing Director

Introduction – Key Terms

• (VC) – Illiquid investments in high potential, high risk businesses. Generally minority equity interests in young, very rapidly growing companies with the potential to become large, public companies • – Equity or equity-like investments in public or private companies with sustainable businesses. The investment is used to expand the operations of the company • Leveraged (LBO’s) – Equity-like investments in public or privately owned companies utilizing leverage, or borrowed funds, to purchase a significant portion or majority control of their ownership • Mezzanine – Invests in the subordinated debt and/or equity of privately owned companies. Investors in subordinated instruments stand behind those with senior instruments – like bonds. To enhance investment returns, the subordinated instrument may have stock conversion features such as rights, warrants or options. • Distressed Debt – Investments in debt securities of a firm that has declared or is about to declare bankruptcy. Investment strategies include bankruptcy workouts and turnarounds • Secondary Investment – Involves the purchase of an existing interest in a from the original investor who is looking for an exit before the partnership terminates • Internal Rate of Return (IRR) – Performance measured utilized for private equity investments which takes into account the timing of cash flows and the speed with which capital is returned to investors • – The year in which a private equity investment is made. Vintage year diversification is a key pillar of Wilshire’s private equity investment philosophy

1 Private Equity Pacing Model

• Wilshire modeled the Tacoma private equity portfolio to determine an appropriate yearly commitment level to reach the target private equity investment of 10% • Factors taken into account – Total fund size and expected growth – Current remaining commitments – Drawdown schedule for currently committed capital

> Moderate (25%/year) ) increase in drawdowns versus the standard assumption of 20%/year

– Current market value of private equity investments – Expected return on private equity investments of 10.25% – Distributions from the private equity portfolio

Distributions

Future Commitments Cumulative Current Commitments Cumulative Yr 1 0% 0% 20% 20% Yr 2 5% 5% 10% 30% Yr 3 5% 10% 20% 50% Yr 4 10% 20% 15% 65% Yr 5 10% 30% 15% 80% Yr 6 20% 50% 10% 90% Yr 7 15% 65% 10% 100% Yr 8 15% 80% Yr 9 10% 90% Yr 10 10% 100% 2 Private Equity Commitment Pacing Schedule

Year End Year 1 Year 2 Year 3 Year 4 Year 5 Total Fund $1,163,365 $1,204,083 $1,246,226 $1,289,844 $1,334,988 Private Equity Investment Policy $116,337 $120,408 $124,623 $128,984 $133,499

Beginning Total Private Equity Investments 28,781 $56,504 $82,085 $109,582 $117,699 Distributions of Appreciated Drawdowns ($11,301) ($22,826) ($43,414) ($44,762) ($40,296) Drawdowns $26,248 $32,248 $44,248 $44,749 $49,499 Ending Total Private Equity Investments including inv. Gains $56,504 $82,085 $109,582 $117,699 $129,912 Current Year Commitments $60,000 $60,000 $60,000 $50,000 $50,000 Remaining Commitments 44,994 72,745 $88,497 $93,748 $94,248

Total Invested + Remaining Commitments $101,498 $154,830 $198,079 $211,447 $224,161 As a Percent of Total Fund 9% 13% 16% 16% 17%

Invested % Total Fund 4.9% 6.8% 8.8% 9.1% 9.7% Over (under) Allocated ($87,556) ($38,323) ($15,041) ($11,285) ($3,586)

Footnotes: (1) Distributions are calculated over a ten year period (starting in the year after initial commitment) (2) Drawdowns are accelerated for remainder of past commitments and 20%/year for future commitments (3) Total Fund grows at 3.5% per year (4) Private Equity Investments grows at 10.25% per year • Pacing of commitments modeled with a target of 10% invested capital • Importantly, future commitments are not set and can be adjusted as market conditions dictate and only when compelling opportunities are present

3 Private Equity Fund-of-Funds Review March 31, 2012 Manager Structure

Valuation Date is December 31, 2011 Performance Since Inception Investable Calculated Vintage 2 Total Cumulative Capital Cumulative 1 Wilshire 5000 + Fund Inception Market Value Multiple 3 Year Commitment Called Distributions IRR 300 bps 4 2009 HarbourVest Dover Street VII Q2 09 20,000,000 16,550,000 83% 1,529,379 19,488,517 1.27 21.6% 27.2% 2010 HarbourVest Int'l PEP VI 5 Q3 10 7,789,173 1,012,592 13% - 894,274 0.88 -14.5% 25.0% Pantheon Global Secondary Fund IV Q4 10 20,000,000 3,900,000 20% - 4,618,632 1.18 20.0% 20.3% 2011 Hamilton Lane Fund VII (Series A) Q2 11 9,000,000 2,340,000 26% 270,000 2,052,120 0.99 -4.2% 10.2% Hamilton Lane Fund VII (Series B) Q2 11 6,000,000 1,980,000 33% 510,000 1,461,950 1.00 -4.5% 10.2% HarbourVest IX - Venture Q3 11 2,200,000 110,000 5% - 100,872 0.92 -19.4% N/A HarbourVest IX - Q3 11 4,500,000 135,000 3% - 116,123 0.86 -45.09 N/A HarbourVest IX - Credit Opps Q3 11 800,000 48,000 6% - 48,204 1.00 4.4% N/A

Private Equity Composite 70,289,173 26,075,592 37% 2,309,379 28,780,692 1.19 18.8% 27.2%

1 Multiple calculation = (market value + distributions) / capital called 2 Inception date shown here is the quarter in which the first cash flow () occurred, marking the start of when Wilshire began calculating performance; inception date is not the date when manager accepts Subscription Agreement. 3 Internal Rate of Return shown here is calculated by Wilshire based on cumulative cash flows and annualized since inception. 4 The performance shown here is the annualied return of the Wilshire 5000 Index since the quarter of inception for each fund, plus a 3% hurdle rate. Shown only for performance periods of one-year and greater. 5 The initial total commitment to HarbourVest Int'l Private Equity Partners VI is €6.0m. The valuations are converted to $USD using the 12/31/11 EUR/USD spot rate of 0.7703.

Note: Performance is calculated using one-quarter lagged valuations. 5 Capital Deployment

Capital Deployment

1% TERS Total PE FoFs Program 15% 2% 26% 18% 37% 1%

PGSF IV 19% 58% 23%

HL Fund VII (A&B) 8% 16% 8% 68%

2% HV Int'l PEP VII 3% 2% 7% 1% 86%

HV Fund IX 8% 92%

HV Dover Street VII 1% 27% 2% 40% 8% 21%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% 75% 80% 85% 90% 95% 100%

Undisclosed Prior to 2007 2007 2008 2009 2010 2011 2012 Unfunded

Holdings as of June 30, 2011. 6 Includes primary and secondary investments. Private Equity J-Curve

• The investment cycle of a private equity investment is very long and exhibits a pattern that is referred to as the ‘J-Curve’ – Long term investment strategies

– Accounting methodology

– Fee structures are based on committed capital, not invested capital

Expected Cumulative Value of a $5 million commitment Annualized IRR of 18.6% $12,000 Return of Capital is 1.88 times $10,000 the amount invested $8,000

$6,000

$4,000 ($000's) $2,000

$-

$(2,000)

$(4,000) Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11

7 Internal Rate of Return

Private Equity Fund-of-Funds IRRs over Time 35% 33% 30% 28% 25% 23% HV Dover Street VII 20% PGSF IV 18% 15% Wilshire Expectations 13% HV Dover Street VII 10% HV Int'l PEP VI 8% HV IX-Venture

IRR % 5% HV IX-Buyout 3% HV IX-Credit Opps 0% -3% HL Fund VII-Series A -5% HL Fund VII-Series B -8% PGSF IV -10% -13% HV Int'l PEP VI -15% -18% -20% -23% 6 12 18 24 30 36 42 48 54 60 66 72 78 84 90 96 102 108 114 120 Number of Months

Note: IRR Curve is smoothed and estimated over the four quarters, with starting position at zero. 8 TERS Fund-of-Funds Program Holdings Analysis (Aggregated Total)

Region of Investment Strategy Vintage Year By Total Commitment By Total Commitment By Total Commitment

Undisclosed Other/RoW Global Other 2007 3% Secondary Asia/Pacific 1% 11% 2% 2008 1% 21% 12% 18% 2011 Distressed 36% Debt 2009 1% 7%

Buyout North 51% America Europe 37% 35% Venture Capital 25% South 2010 America 38% 1%

Region of Investment Strategy Vintage Year By Amount Invested By Amount Invested By Amount Invested

Undisclosed Other Undisclosed 2007Undisclosed Other/RoW Global Asia/Pacific 3% 2% 1% 1% 1% 1% 15% 9% 2008 2011 Secondary 24% 28% 26%

Buyout 50% Europe 2009 31% Distressed 4% North Debt America 1% 41% Venture South Capital 2010 America 20% 42% 0.2%

Holdings as of June 30, 2011. 9 Includes primary and secondary investments, aggregated for all managers in the program. HarbourVest HarbourVest Dover Street VII

Region of Investment Strategy Vintage Year By Total Commitment By Total Commitment By Total Commitment

Asia/Pacific Venture Other 2007 2011 9% Capital - All 2% 2% 13% 32% North 2008 America 33% 49%

Europe 42% 2009 2% 2010 Buyout - All 50% 66%

Region of Investment Strategy Vintage Year By Amount Invested By Amount Invested By Amount Invested

Asia/Pacific Other 2007 2011 6% 2% 2% 10% Venture Capital - All 2008 29% 35%

Europe 42%

2010 North 2009 50% America Buyout - All 3% 52% 69%

Holdings as of June 30, 2011. 11 Includes primary and secondary investments. HarbourVest Fund IX ¹

Region of Investment Strategy Vintage Year By Total Commitment By Total Commitment By Total Commitment

Other Debt 2010 5% 10% Buyout 28%

Venture Capital 67% North 2011 America 90% 100%

Region of Investment Strategy Vintage Year By Amount Invested By Amount Invested By Amount Invested

Buyout Undisclosed 31% Undisclosed 38% 37%

2011 63%

Other Debt 4% North Venture America Capital 100% 27%

Holdings as of June 30, 2011. 12 Includes primary and secondary investments. ¹ Aggregate of all HarbourVest Fund IX sub-strategies: (1) Buyout; (2) Venture; (3) Credit Opportunities HarbourVest Fund IX – Buyout Fund

Region of Investment Strategy Vintage Year By Total Commitment By Total Commitment By Total Commitment

Buyout (Small) 32%

Buyout (Mid) 68% North 2011 America 100% 100%

Region of Investment Strategy Vintage Year By Amount Invested By Amount Invested By Total Commitment

North 2011 Buyout (Mid) America 100% 100% 100%

Holdings as of June 30, 2011. 13 Includes primary and secondary investments. HarbourVest Fund IX – Venture Fund

Region of Investment Strategy Vintage Year By Total Commitment By Total Commitment By Total Commitment

Buyout - All 2010 6% Venture (Early) 14% Venture 11% (Balanced) 38%

Venture (Growth) 2011 North 45% 86% America 100%

Region of Investment Strategy Vintage Year By Amount Invested By Amount Invested By Amount Invested

Buyout - All Undisclosed 18% Undisclosed 48% 48% Venture (Growth) 13%

2011 52%

Venture North (Balanced) America 21% 100%

Holdings as of June 30, 2011. 14 Includes primary and secondary investments. HarbourVest Fund IX – Credit Opportunities Fund

Region of Investment Strategy Vintage Year By Total Commitment By Total Commitment By Total Commitment

Buyout - All 16%

Other North 84% 2011 America 100% 100%

Region of Investment Strategy Vintage Year By Amount Invested By Amount Invested By Amount Invested

Buyout - All 44%

Other 56%

North 2011 America 100% 100%

Holdings as of June 30, 2011. 15 Includes primary and secondary investments. HarbourVest International Private Equity Partners VI

Region of Investment Strategy Vintage Year By Total Commitment By Total Commitment By Total Commitment

South Other/RoW America 2008 Undisclosed 3% 5% Venture 3% 1% Capital - All Asia/Pacific 25% 27% 2009 32% 2011 45%

Europe Buyout - All 65% 75% 2010 19%

Region of Investment Strategy Vintage Year By Amount Invested By Amount Invested By Amount Invested

South America Undisclosed 2011 Other/RoW 2% 22% Undisclosed 6% 22% 2010 22% 11% Venture Capital - All 6%

Europe 2008 48% 13%

Asia/Pacific Buyout - All 28% 72% 2009 48%

Holdings as of June 30, 2011. 16 Includes primary and secondary investments. Hamilton Lane Hamilton Lane Private Equity Fund VII ¹

Region of Investment Strategy Vintage Year By Total Commitment By Total Commitment By Total Commitment

Special Situations / Asia/Pacific Global Turnaround Secondary Europe 1% 6% 1% 2% Distressed Buyout - All 2009 18% Debt 48% 21% 34% 2011 South 37% America 8%

Venture North (Growth) America 2010 1% Venture 67% 42% Capital - All 14%

Region of Investment Strategy Vintage Year By Amount Invested By Amount Invested By Amount Invested

Special Situations / Asia/Pacific Secondary Global Turnaround 3% 13% 3% Buyout - All 3% 2009 2011 Europe 44% 21% Distressed 24% 25% Debt 44%

South America 13% North America 50% Venture Venture 2010 (Growth) Capital - All 51% 3% 3%

Holdings as of June 30, 2011. 18 Includes primary and secondary investments. ¹ Includes both Series A and Series B. Pantheon Pantheon Global Secondary Fund IV ¹

Region of Investment Strategy Vintage Year By Total Commitment By Total Commitment By Total Commitment

Undisclosed Other 14% 5% 2010 26% Asia/Pacific 15%

Global 51% Europe 3% 2011 North 74% America United Secondary 17% States 95% 0%

Region of Investment Strategy Vintage Year By Amount Invested By Amount Invested By Amount Invested

Undisclosed Other 13% 4% 2010 24% Asia/Pacific 16%

Global Europe 53% 2%

North 2011 America 76% 16% United Secondary States 96% 0%

Holdings as of June 30, 2011. 20 Includes primary and secondary investments. ¹ Pantheon Secondary Fund breaks out only list of deals, not list of underlying funds. Important Information

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