PACIFIC PENSION & INVESTMENT INSTITUTE ANNUAL REPORT 2016

VIEW IT ONLINE www.ppi.institute/annual-report-2016 March 9, 2017

Dear PPI Members and Friends:

Your support over the past year has been very strong and well appreciated. We wish to express to our thanks for participating in our programs and being part of the PPI community in 2016.

In the execution of PPI’s Strategic Plan 2015-2017, we strengthened our programming for PPI’s third decade, as well as consolidating the PPI community of members, and our financial future. We are very confident now that PPI’s powerful perspective adds true value to the investment decisions of our members.

Programming for PPI’s Third Decade. The programming at PPI is the hallmark of this organization. In 2016, PPI’s leadership worked diligently to bring insights from a range of leaders, government, and the NGO community—while maintaining interactive, peer-to-peer, education. We put a premium on program partnerships and creating new channels for members to provide recommendations for different types of topics, and we remain open to new ideas and initiatives.

Strengthening the PPI Community of Members. Throughout the year, we dedicated ourselves to growing PPI’s membership without compromising on quality. These efforts have borne fruit, as our numbers have continued to improve as well as the quality of participation in programs among our member representatives. We added 21 institutional members, bringing our total to 104 by the end of the year. We also moved toward greater parity between our principal membership categories, and have widened our geographic diversity.

Securing PPI’s Financial Future. PPI is on solid footing thanks to our membership strategy and well-attended roundtable programs. Membership dues currently provide approximately 80 percent of PPI’s annual operating budget, and we are actively working to diversify our revenue stream and build up our reserves as a buffer against unexpected events.

PPI’s Powerful Perspective. Our PPI community continues to be—by virtue of our impressive global membership —a powerful force in the global economy. The board of directors and management team have worked closely to best ensure we can all have new insights into investment opportunities, and the corresponding political, security, financial, and economic risks. We invite your continued support and active participation, both in-person at our signature programs and on-line via the PPI Community Site: the community is only as strong as each member’s input and perspective.

We would like to thank Theresa Whitmarsh for her excellent leadership of the board and team over the recent years as chair. We would also like to thank the staff of PPI for their significant insight, assistance, and professionalism over the last year, keeping PPI great.

Sincerely,

Adrian Orr, Board Chair Lionel C. Johnson, President

2 PROGRAMMING FOR PPI’S THIRD DECADE

PPI’s members expect serious, timely conversations with their peers and other experts at our flagship roundtables. Our 2016 programs delivered — blending political analysis with financial assessments, deep-dives into regional developments, and broad surveys on conditions in the global marketplace. We invited subject matter experts, well-known personalities, and PPI members to offer their thoughts and to lead interactive discussions on a diverse set of issues.

Though attendance at our programs remained at full capacity throughout 2016, we worked hard to keep the sessions conversational in nature to allow for the intimate exchange of ideas for which PPI is known. In addition, we upgraded the PPI App with features that facilitate direct connectivity among participants at our events and during the months between them.

Our dynamic global community also includes important partnerships and programs outside our core offerings. The relationships with the Asian Development Bank (ADB), Global Aging Institute (GAI), and other partners remain important to us. In 2016, we began to explore new and different options for the continuation of our programming specific to developing Asia in 2017 and 2018.

Our 2016 Program Lineup

Winter Roundtable Summer Roundtable Executive Seminar Asia Roundtable

February 24-26, 2016 July 27-29, 2016 October 23-25, 2016 October 26-28, 2016 Los Angeles, CA Cambridge, MA 3 Hong Kong & Shenzhen 3 INVESTING IN A LOW-GROWTH WORLD CAN INNOVATION ALTER OUR TRAJECTORY?

2016 Winter Roundtable in Los Angeles, CA February 24-26, 2016

As PPI convened its 2016 Winter Roundtable, global markets continued their rough start to the year. Equities in both low- and high-income economies tumbled; ’s slowdown continued to disturb exporting countries such as Brazil and Australia, and the European Union’s structural weaknesses were again exposed. While the recovery has been felt unevenly, the global economy has mostly emerged from the recession. Between 2008 and mid-2015, worldwide unemployment rates went down and the US S&P 500 grew 92%. This improvement can be attributed in part to unorthodox monetary policy and government bailouts. These measures cannot, however, support the real economy forever, and economic fundamentals must at some point catch up. That time may be upon us. , commodities and beaten down sectors have seen impressive rebounds, but that does not necessarily mean smooth sailing during the coming months. Some observers predict another global recession – political disruptions, market bubbles, and central bank ineffectiveness – while others have signaled the arrival of a new low-growth environment. The 2016 Winter Roundtable focused on the latter scenario, in which this “new normal” could see expected returns dampened for institutional investors for years to come. How will investors approach this environment? How will they manage return expectations? How can innovation – both technological innovation and innovative investment approaches – help investors navigate this new terrain?

Read the full Insights report Review the agenda View the gallery

4 4 RISK IN AN AGE OF UNCERTAINTY HOW ARE INVESTORS UNDERSTANDING AND MANAGING IT?

2016 Summer Roundtable in Cambridge, MA July 27-29, 2016

The Chaos Theory could provide a useful means of understanding the world in 2016. Simply stated, the theory accounts for the infinite possibilities that are created from minimal changes in the environment. Understanding chaos has allowed for a deeper appreciation for the complexities of our atmosphere, ecosystems and social systems, to name a few fields. Financial markets and economic systems also adhere to this theory. As PPI members know well, slight changes to the external environment could have a monumental impact on markets. Understanding and measuring these changes and how they impact markets is a critical responsibility of institutional investors and shaped PPI Summer Roundtable discussions in Cambridge, Massachusetts, July 27-29, 2016.

At the February PPI Winter Roundtable in Los Angeles, we considered the characteristics of the present low- growth, low-return environment. The challenge of understanding the “chaos” of the markets in the current setting is key. In Cambridge, we continued with discussions on risk in a period where chaos—in our markets, politics, and societies—has dominated. The Summer Roundtable featured robust discussions on how institutional investors are navigating this opaque landscape; what risks are on their minds; and where, if anywhere, do they see opportunities. While opportunities do exist, the pessimism of the markets was reflected in the outlook of institutional investors and summarized in one question we asked the audience: “What nominal rate of return do you believe is possible over the next business cycle?” Ninety- four percent of respondents indicated that they don’t believe that a 7% return is possible.

Many participants noted that while return expectations will remain low in the coming years, the need to meet liabilities is ever present. Meeting return shortfalls and understanding the associated risks in an environment marked by overvaluations and equity volatility, will be a key challenge for many institutional investors in the years to come.

While the roundtable focused on the myriad risks facing institutional investors today, many participants commented on investment opportunities that still exist. The realities of the “new normal” environment of lower equity and bond returns were reflected by participants, but many pointed to opportunities in markets and asset classes further afield. How these opportunities are accessed—particularly by investors who do not have the capacity or mandate to invest extensively in alternatives or emerging markets—will be another obstacle to overcome.

Read the full Insights report Review the agenda View the gallery 5 5 HONG KONG GROWTH AND ADAPTATION

2016 Executive Seminar in Hong Kong October 23-25, 2016

Hong Kong has long benefited from its open economy, stable institutions, and position as a gateway to China. It has also demonstrated a great capacity to adapt: beginning as a regional entrepôt, developing as a manufacturer, and now as a global financial center. Hong Kong investors helped turn the Pearl River Delta into the world’s workshop. Chinese companies list in Hong Kong, and the -Hong Kong Connect allows investors to access Shanghai-listed stocks through Hong Kong’s exchange. As China’s financial system evolves, how will Hong Kong further adapt? What are the implications for the broader region?

The PPI Executive Seminar (October 23-25, 2016) provided PPI’s asset owner members a closer look at the drivers of Asia’s economies. This program focused on the unique path that Hong Kong has taken and its plan for the future in light of China’s market liberalization process. Additionally, the program addressed investment opportunities in the region, including through real assets and consumption-driven investing. As the program is designed for asset owners, the Executive Seminar also looked at how two of PPI’s members utilize their Hong Kong offices to advance their investment strategies while remaining consistent with their respective missions at home. Finally, participants discussed some of the key trends affecting the future of Asia’s trade and foreign relations.

Read the full Insights report Review the agenda View the gallery

6 6 CHINA’S FINANCIAL LIBERALIZATION ARE FURTHER IMPROVEMENTS IN CORPORATE GOVERNANCE NEEDED?

2016 Asia Roundtable in Hong Kong and Shenzhen October 26-28, 2016

Institutional investors place a high priority on investing in companies with world-class governance structures to best ensure optimal financial performance through greater transparency and accountability. What efforts are being made by governments and long-term investors to strengthen corporate governance in Asia? How will the Shenzhen-Hong Kong Stock Connect and the rapid opening of bond markets improve governance of Chinese companies and make them more attractive to overseas investors? The Asia Roundtable, held in both Hong Kong and Shenzhen, addressed these issues, other recent reforms in China, and the investment outlook for the broader Asia-Pacific region.

The 2016 Asia Roundtable provided participants the opportunity to meet with their peers across the industry and discuss some of the most pressing issues facing institutional investors today. Discussions focused on the implications of the current macroeconomic environment on investors’ Asia allocations as well as issues related to corporate governance. One member poll indicated that the majority (72%) of respondents are interested in increasing their allocation to Asian markets in the coming years, with many specifically saying that they are looking to increase their investments in China.

Read the full Insights report Review the agenda View the gallery

7 7 More 2016 Programs

India's Latest Reforms and Initiatives to Promote Foreign Investment June 2, 2016

PPI hosted in our San Francisco office on June 2, U.K. Sinha, chairman of the Securities and Exchange Board of India (SEBI), for a candid discussion with our members on the current macroeconomic and regulatory environment in India. His comments provided insight into India’s efforts to remove barriers to foreign investment and set the context for the broader discussion to come at the 2017 Asia programs in Mumbai and Delhi. The Insights report for this webinar is available here.

GAI-PPI Issue Brief: Meeting Hong Kong's Retirement Challenge September 27, 2016

Richard Jackson, president of the Global Aging Institute (GAI), discussed the findings of Meeting Hong Kong’s Retirement Challenge, the issue brief jointly published by GAI and PPI. During his presentation, Dr. Jackson discussed the forces that are pushing pension reform to the top of the policy agenda, evaluates the strengths and weaknesses of the Mandatory Provident Fund (MPF), and explores strategies for improving the overall adequacy and sustainability of Hong Kong’s retirement system.

Infrastructure Working Group October 25, 2016 • Hong Kong

The inaugural meeting of the Infrastructure Working Group was held October 25 on the margins of the programs in Hong Kong. Joe Cherian, director of the Center for Research, National University of Singapore, served as moderator. The working group brought together 28 participants, 15 of whom were PPI members, to discuss some of the barriers and challenges related to infrastructure investment globally. A summary report of the discussions is available here.

Strengthening Pension Systems in the Pacific November 2-3 • Suva, Fiji

We conducted, in partnership with the ADB and the Fiji National Provident Fund (FNPF), a program for the 14 member nations of the ADB’s Pacific region. The program was held November 2-3, with Jaoji Koroi, CEO of the FNPF, serving as chair. The opening keynote was given by Aiyaz Sayed-Khaiyum, attorney general and minister for Economy, Public Enterprises, Public Service, and Communications, Government of Fiji. There were 58 participants who attended the two days of programming.

8 STRENGTHENING THE PPI COMMUNITY OF MEMBERS

PPI welcomed 21 new member organizations in 2016, and by year-end we had 104 high-caliber organizations on PPI's membership roster. The new Asset Owner and Allocator members in 2016 were: Alaska Permanent Fund, British Columbia Pension Corporation, Cbus, Development Bank of Japan, Fremont Group, Japan Bank for International Cooperation, Massachusetts Pension Reserves Board, Minnesota State Board of Investment, PKA, Premji Invest, The City of New York Office of the Comptroller, The for Foundations, The Norinchukin Bank, and Universities Superannuation Scheme. The new Asset Manager and Advisor members were: Ascendent Capital Partners, Apollo Global Management, Barings, Bridgewater Associates, Carlyle Investment Management, Fidelity Institutional Asset Management, and IFC Asset Management Company.

PPI’s smart growth approach to membership recruitment and retention in 2016 emphasized the ability of an organization or individual to contribute and to actively participate in our programs, to share their insights, and to offer diverse points of view on relevant investment topics and market trends.

We also endeavored to strike a balance between asset owners and asset managers. We achieved roughly equal growth between these two membership categories since 2015, expect to achieve overall parity between them by the end of 2018, and reach our goal of no more than 120 PPI institutional members next year.

9 PPI's Membership Roster on December 31, 2016: (*new in 2016) Asset Owners and Allocators Pension Funds, Sovereign Wealth Funds, Endowments, and Foundations

*Alaska Permanent Fund *Massachusetts Pension Reserves Investment Alberta Investment Management Corporation Management Board AustralianSuper *Minnesota State Board of Investment British Airways Pension Investment Management Municipal Employees’ Retirement System of Ltd. Michigan British Columbia Investment Management National Council for Social Security Fund, P.R. Corporation China *British Columbia Pension Corporation National Pension and Provident Fund, Bhutan California Public Employees’ Retirement System National Railroad Retirement Friends of PPI California State Teachers’ Retirement System New York State Common Retirement Fund Canada Pension Plan Investment Board New Zealand Super Fund Oliver Bolitho *Cbus Ontario Teachers’ Pension Plan Board *Susan J. Carter Citizen Investment Trust, Nepal Oregon State Treasury Howard Chao City and County of San Francisco Employees’ PGGM Roy Doumani Retirement *PKA Ltd. *Varel Freeman System *Premji Invest *Sandra Haas CN Investment Division Public Employee Retirement System of Idaho Geoffrey A. Hirt Colorado Public Employees’ Retirement QIC Limited Howard L. Hull III Association Second Swedish National – AP2 JETRO, New York *Development Bank of Japan South Dakota Investment Council *Wayne Kozun Employees Provident Fund, Nepal *The City of New York Office of the Comptroller Arthur Mitchell *Fremont Group *The Investment Fund for Foundations Ambassador Clark T. Randt GIC Private Limited *The Norinchukin Bank Kazuo Seki Government Pension Fund, Thailand Third Swedish National Pension Fund – AP3 Peter H. Sullivan *Japan Bank for International Cooperation *Universities Superannuation Scheme James Timmins Kaiser Permanente University of California Regents Yuelin T. Yang Los Angeles City Employees’ Retirement System University of Southern California Endowment Los Angeles County Employees Retirement Washington State Investment Board Association Williams College Investment Office Margaret A. Cargill Philanthropies

Asset Managers and Advisors Asset Management Firms and Other Investment Experts

Aberdeen Asset Management HarbourVest Partners Actis Hermes Investment Management Affinity Equity Partners IDFC AllianceBernstein *IFC Asset Management Company Angelo, Gordon & Co. Institutional Real Estate, Inc. *Apollo Global Management Jasper Ridge Partners *Ascendent Capital Partners Kohlberg Kravis Roberts Asia Asia Alternatives Management Macquarie Infrastructure and Real Assets MBK Partners Baring Partners India Meridiam *Barings Mitsubishi Corporation Lifetime Members *Bridgewater Associates Morgan Stanley Campbell Lutyens & Co. Nikko Asset Management Ronald E. Bornstein Capital Group Olympus Capital Asia Margaret Carpenter *Carlyle Investment Management Ortec Finance Ambassador Chas W. Freeman Jr. Cartica Management Perella Weinberg Partners Ta-lin Hsu CDH Investments Quantum Advisors/Primary Real Estate Advisors Larry Hull CLSA Limited Siguler Guff & Company Takeshi Kadota Corston-Smith Asset Management Sit Investment Associates, Inc. Doug Pearce Dimensional Fund Advisors Sumitomo Mitsui Trust Bank Shelley I. Smith *Fidelity Institutional Asset Management Tata Group Ambassador Linda Tsao Yang FountainVest Partners (Asia) The Abraaj Group Global Environment Fund The TCW Group Global Strategic Associates TIAA Asia Tokio Marine Asset Management Co. Grove Street Advisors Unison Capital Hamilton Lane Advisors Wellington Management Company SECURING PPI’S FINANCIAL FUTURE

PPI demonstrated sound fiscal management and accountability measures, as demonstrated by the audited financial statements completed as of December 31, 2016 by Good & Fowler, LLP. The following Statement of Activities reflects total Revenue and Support of $2,531,551, an increase of $217,536 or 9% from the prior year. Total Expenses were $2,436,073, an increase of $316,326 or 15% from the prior year. The total change in 2016 net assets is $95,478.

Our goal is to undergird PPI’s financial future through strong and diversified revenue flows and effective expense management. In 2016, membership dues, roundtable registration, and sponsorships by PPI members were our lead revenue sources. We gratefully acknowledge the support of our Asia Roundtable sponsors: Asia Alternatives; Campbell Lutyens & Co.; Capital Group; FountainVest Partners (Asia) Limited; Goldman Sachs Asset Management; IDFC; Macquarie Infrastructure and Real Assets; MBK Partners; Meridiam; Mitsubishi Corporation; Nikko Asset Management Co. Ltd; and Quantum. PPI also appreciates the contributions of our 2016 Asia Roundtable partners—the Hong Kong Monetary Authority and the Shenzhen Stock Exchange.

PPI's solid financial position in 2016 enabled us to make investments in programs, people, and member service technology, while also shoring up PPI reserves to weather unforeseen turbulence.

11 11 Statement of Activities

For the Year Ended December 31, 2016 With Comparative Totals (USD) for the Year Ended December 31, 2015

2016 2015 2016 Revenue Sources

REVENUE 2%2% 1% 6% Membership Dues 1,975,150 1,749,775 11% Roundtable Registration 287,490 266,055

Asian Development Bank Grant 40,505 60,758

Executive Seminar Registration 57,523 88,857

Investment Income 12,133 7,170 78% Other Income - 100

Total Revenue 2,372,801 2,172,715

SUPPORT

Sponsorships 158,750 141,300

Total Support 158,750 141,300

TOTAL REVENUE & SUPPORT 2,531,551 2,314,015 2016 Expense Allocation

21% EXPENSES

Program Services 1,922,817 1,628,190

Support Services 513,256 491,557

Total Expenses 2,436,073 2,119,747

79% CHANGE IN NET ASSETS 95,478 194,268

NET ASSETS AT BEGINNING OF YEAR 1,877,487 1,683,219

NET ASSETS AT END OF YEAR $1,972,965 $1,877,487

The financial information presented is from the audited financial statements. Interested parties can obtain a complete copy of the audited financial statements by contacting our office. 12 12 PPI’S POWERFUL PERSPECTIVE

We began 2016 in a low-return environment, but the situation became increasingly complex as elections in the United States, Europe, and Asia toppled paradigms and cast doubt on long-held assumptions and beliefs. Those unprecedented developments left in their wake disruption and a high degree of uncertainty. In response to these changing conditions, we adjusted the roundtable themes and refocused the conversations to meet the needs of the PPI Community.

PPI’s leaders—our global Board of Directors and Advisory Council, and the management team based in San Francisco—are dedicated to fostering the powerful perspective that is gained when PPI members gather to discuss and debate the most relevant and pressing issues for institutional investors. We recognize that the PPI membership represents a powerful force in the global economy, and we understand that it is our duty to support the work of our members who are assessing investment opportunities and risks every day.

In 2016, we were also fortunate to have worked with PPI Fellow Takashi Endo, who worked with the management team on the 2016 Summer Roundtable and Asia programs, and Bob Burlingame, an attorney with Pillsbury Winthrop Shaw Pittman who helped us to secure the trademarks and certificates for PPI’s name and logo. We are also enormously grateful our Advisory Council, to Jonathan Kaufman, co-founder and principal at Third Plateau, Dr. Martha Summerville, president, Summerville Consulting, and Gabe Ross, senior counsel, Global Policy Initiatives, for their many contributions to PPI’s programs and institutional development in 2016.

13 PPI Leadership Teams on December 31, 2016: (*new in 2016) ADVISORY COUNCIL

BOARD OF DIRECTORS Doug Pearce, Chair

Theresa J. Whitmarsh, Chair Henry Jones, Secretary Teresa C. Barger Executive Director Vice President/Chair, Investment Washington State Investment Board Committee Christopher K. B. Brotchie CalPERS Board of Administration Wayne Kozun, Vice Chair Former Senior Vice President, Public Bryan Thomson, Treasurer Roy Doumani Equities Senior Vice President, Public Equities Ontario Teachers’ Pension Plan Board British Columbia Investment Larry Hull Management Corporation Takeshi Kadota

Herb Meiberger Oliver Bolitho *Robert Maynard President Chief Investment Officer James R. Timmins Old Peak Limited Public Employee Retirement System of Idaho Ambassador Linda Tsao Yang Else Bos Chief Executive Officer Adrian Orr PGGM Chief Executive Officer New Zealand Super Fund Jeb Burns MANAGEMENT TEAM Chief Investment Officer Sheila Patel Municipal Employees’ Retirement CEO, International Lionel C. Johnson System of Michigan Goldman Sachs Asset Management President Susan J. Carter John Skjervem Former President & CEO Chief Investment Officer Kris Greenville Commonfund Capital, Inc. Oregon State Treasury Vice President

Howard Chao Ambassador Paul W. Speltz Gwen Bough Private Investor Chairman and CEO Executive Assistant Doon Capital Global Strategic Associates

Ajit Dayal Frank K. Tang Sabina Ong Gotuaco Founder and Director Chief Executive Officer & Managing Finance & Human Resources/ Quantum Advisory Private Limited Partner Administration Director FountainVest Partners Gordon J. Fyfe *Piin Fen-Kok CEO and CIO Leslie Teo British Columbia Investment Chief Economist/Director Senior Program & Knowledge Director Management Corporation Economics & Investment Strategy GIC Private Limited Nicholas Sramek Takajiro Ishikawa Program & Knowledge Director Senior Vice President Industrial Finance, *Conrad Yan Logistics & Development Group Partner Evie Fong Mitsubishi Corporation Campbell Lutyens & Co., Ltd. Programs & Logistics Coordinator Melissa J. Ma — Co-Founder and Managing Partner Mark Mancao Asia Alternatives Management Larry Hull, Founder & Chair Emeritus Communications and Technology Director 14 14 15 PACIFIC PENSION & INVESTMENT INSTITUTE

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