Opers/Ursjj Investment Management Review Report

OPERS/URSJJ INVESTMENT MANAGEMENT REVIEW REPORT

BLACKROCK U.S. ENHANCED INDEX FIXED INCOME MANAGER – EXECUTIVE SUMMARY August 2017 OPERS/URSJJ Investment Manager Review Report BlackRock—U.S. Enhanced Index Fixed Income Manager June 2017 Table of Contents

Section A 2 - OPERS Fact Sheet Section B 5 - Onsite Manager Summary Section C 9 - OPERS Firm review Section D 9 - OPERS Portfolio management Section E 15 - OPERS Policy compliance Section F 17 - OPERS Product and account performance evaluation Section G 21 - OPERS Recommendation Section H 22 - URSJJ – Fact Sheet Section I 25 - URSJJ Policy Compliance Section J 25 - URSJJ Product and account performance evaluation Section K 27 - URSJJ Recommendation Appendix ― Exhibit I – Most Favored Nation Fee Statement 28 ― Exhibit II – Compliance Statement

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A. Fact Sheet

Initial Funding date and amount The account funded with a combination of cash and securities valued at $1,026,309,285 on June 16, 2000. BlackRock and Baird competed in a finals presentation.

Benchmark (identification and description) Bloomberg Barclays U.S. Aggregate Bond Index represents securities that are U.S. domestic, taxable, and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. These major sectors are subdivided into more specific indices that are calculated and reported on a regular basis. On November 1, 2008 the benchmark name was changed to the Barclays U.S. Aggregate Bond Index from the Lehman Brothers U.S. Aggregate Bond Index. In August 2016, Bloomberg announced its acquisition of Barclays Risk Analytics and Index Solutions and the index name was changed to the Bloomberg Barclays U.S. Aggregate Bond Index.

Historical Performance—Annualized

OPERS Historical Performance: Gross of Fees ($) As of March 31, 2017

Since Since 9 months Inception Inception 1 Year 3 Years 5 Years 10 Years (annual) (annualized) (cumulative) 6/16/2000 6/16/2000

Oklahoma PERS -1.33 0.99 3.03 2.80 4.47 5.36 141.52

Bloomberg Barclays US -1.73 0.44 2.68 2.33 4.27 5.09 129.82 Aggregate

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Historical Performance—Cumulative

Historical Relative Performance As of March 31, 2017 Gross of Fees As supplied from BlackRock—Inception Date June 2000

Historical Cumulative Performance 100 90 80 70 60 50 40 30 20 10 0 9/1/2000 5/1/2001 1/1/2002 9/1/2002 5/1/2003 1/1/2004 9/1/2004 5/1/2005 1/1/2006 9/1/2006 5/1/2007 1/1/2008 9/1/2008 5/1/2009 1/1/2010 9/1/2010 5/1/2011 1/1/2012 9/1/2012 5/1/2013 1/1/2014 9/1/2014 5/1/2015 1/1/2016 9/1/2016

OPERS Barclays US Agg

Historical Performance—Calendar Years

OPERS Since Inception Performance: As of March 31, 2017 Calendar year since inception performance returns, gross and net of fees (%)

Year OPERS (g) OPERS (n) BC Aggregate Alpha (g) Alpha (n) (ANN.) 2000* 7.78% 7.77% 7.34% 0.43 0.43 2001 9.00% 9.02% 8.44% 0.57 0.57 2002 10.62% 10.66% 10.26% 0.40 0.40 2003 4.65% 4.61% 4.10% 0.50 0.50 2004 4.73% 4.84% 4.34% 0.50 0.50 2005 2.69% 2.60% 2.43% 0.27 0.17 2006 4.45% 4.35% 4.34% 0.18 0.08 2007 7.07% 6.95% 6.97% 0.02 -0.10 2008 -0.74% -0.84% 5.24% -6.29 -6.39 2009 10.64% 10.56% 5.93% 5.67 5.64 2010 7.49% 7.39% 6.54% 0.79 0.68

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2011 7.67% 7.57% 7.84% -0.17 -0.24 2012 5.28% 5.20% 4.21% 1.11 1.02 2013 -1.65% -1.77% -2.02% 0.43 0.31 2014 6.20% 6.08% 5.97% 0.17 0.05 2015 0.93% 0.87% 0.55% 0.41 0.34 2016 3.07% 2.98% 2.65% 0.44 0.36 2017 (YTD) 0.93% 0.91% 0.82% 0.14 0.20

*Inception Date June 30, 2000

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B. Site Visit Summary

Verus Attendees Margaret Jadallah – Managing Director Margaret McRae, CFA – Associate Director | Public Markets

BlackRock Attendees Azim Hilmy, CFA, CAIA, Director – Global Consultant Relations Diane Parish, Managing Director – Institutional Client Business Erik Moss, CFA, Director – Product Strategy Xavier Goss, CFA, Director – Securitized Asset Specialist Matthew Wang, Managing Director – Risk & Quantitative Analysis Myles Ojala, Vice President – Portfolio Compliance Group Shane Andrews, Associate – Portfolio Compliance Group Greg Kirk, Analyst – Product Strategy

Overview

Asset Class U.S. Core Fixed Income

Investment Style Enhanced Index

Firm Ownership 21.7% owned by PNC Financial Services Group, Inc.; 78.3% owned by employees, public and institutional investors.

Firm Assets $5.42 trillion

Strategies ― U.S. Enhanced Index Fixed Income ($1.37 billion as of 3/31/2017).

Summary On June 29, 2017 Margaret Jadallah and Margaret McRae of Verus conducted an onsite visit to BlackRock’s headquarters in New York City and Brad Tillberg, OPERS CIO, participated via phone conference. Representing BlackRock were Azim Hilmy, CFA, CAIA, Director, Global Consultant Relations; Diane Parish, Managing Director, Institutional Client Business; Erik Moss, CFA, Director, Product Strategy; Xavier Goss, CFA, Director, Securitized Asset Specialist; Matthew Wang, Managing Director, Risk & Quantitative Analysis; Myles Ojala, Vice President, Portfolio Compliance Group; Shane Andrews, Associate, Portfolio Compliance Group; and Greg Kirk, Analyst, Product Strategy. During the visit, we reviewed recent organizational and team updates, investment philosophy and process, risk management and compliance.

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An overview and update on the firm, investment process and portfolio/performance is outlined below. Verus remains comfortable with BlackRock following this onsite visit and recommends that OPERS retain BlackRock for its core enhanced index fixed income exposure.

Team Description BlackRock’s Core Bond Enhanced Index strategy is managed by BlackRock’s Customized Multi-Sector team which resides within the firm’s integrated Global Fixed Income platform. The Multi-Sector team is led by Akiva Dickstein, who manages the OPERS portfolio. Dickstein has been with the firm for 9 years and has been head of the team for 3 years. He is supported by David Antonelli, Robert Daly and Harrison Segall, who also serve as back-ups on the OPERS portfolio. The team utilizes a relative value approach and seeks to add incremental value through macro strategies, sector allocation and security selection. Portfolio managers are responsible for allocating alpha-generating ideas across portfolios. The portfolio management team leverages research from the firm’s Fundamental Fixed Income platform, which is composed of global sector specialists based around the globe who are responsible for sector oversight, research, analysis, security selection and trade execution. They work with a large dedicated trading team that helps to improve execution using both electronic and traditional trading strategies. Capital markets professionals and portfolio solutions (e.g., portfolio optimization) professionals also support the team.

We discussed the restructuring of the fixed income platform since OPERS’ last onsite review to accommodate a more integrated global effort, with Tim Webb and Rick Reider serving as co-leads of the platform. Mr. Webb, Global Head of Fixed income, provides strategic leadership while Mr. Rieder, CIO of Global Fixed Income, sets investment strategy. The total platform covers $1.63 trillion in assets across fundamental, model-based, index and ETF strategies.

Key Investment Professionals

AKIVA DICKSTEIN, MANAGING DIRECTOR, PORTFOLIO MANAGER Akiva Dickstein, Managing Director, is a member of the Multi-Sector & Mortgages Investment Management Group within BlackRock Fundamental Fixed Income. Prior to joining BlackRock in 2009, Mr. Dickstein spent eight years at Merrill Lynch, where he served as Managing Director and head of the U.S. rates and structured credit research group. He was responsible for the team that produced MBS, ABS, CMBS, Treasuries, swaps, and interest rates derivatives research. Mr. Dickstein also worked at Lehman Brothers in mortgage derivatives trading. Mr. Dickstein earned a BA degree in economics from Yale University and an MA degree in physics from Princeton University.

DAVID ANTONELLI, DIRECTOR, PORTFOLIO MANAGER David Antonelli, Vice President, is a member of the Multi-Sector & Mortgages Group within BlackRock Fundamental Fixed Income. He is a portfolio manager on the Institutional Multi-Sector Portfolio Team. Mr. Antonelli assumed his current responsibilities in 2006. He joined BlackRock in 2002 as a member of the Operations group. Mr. Antonelli earned a BS degree in finance and accounting from Georgetown University in 2002.

ROBERT DALY, PORTFOLIO MANAGER Robert Daly, Vice President, is a portfolio manager on the Multi-Sector Fixed Income team within BlackRock's Global Fixed Income group. Prior to assuming his current responsibilities in 2007, Mr. Daly worked as an analyst in BlackRock’s Investment Operations Group. Mr. Daly has an MBA specializing in accounting and finance from Columbia and a BA degree in government from Dartmouth College.

HARRISON SEGALL, PORTFOLIO MANAGER

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Harrison Segall, Vice President, is a portfolio manager for the Portfolio Solutions team within BlackRock's Global Fixed Income group. Prior to assuming his current responsibilities in 2011, Mr. Segall was an associate in BlackRock Solution's Portfolio Analytics Group, where he began his career as an analyst in 2008. Mr. Segall earned a BS in Commerce, with a concentration in finance, and a BA in Economics from the University of Virginia.

Strategy Description The Core Bond Enhanced Index fixed income strategy employs a fundamental, diversified, relative value approach that seeks alpha through the strategic allocation to three main alpha categories. These alpha categories are macro strategies (ex., duration, yield curve, volatility), sector allocation (top-down relative value), and security selection (bottom-up relative value).

The return objective for the OPERS Core Enhanced Index mandate is to exceed the Bloomberg Barclays U.S. Aggregate Bond Index by 40 basis points annually with a risk range of 40–80 basis points of tracking error. The total portfolio duration is to be within +/- 0.5 years of the benchmark’s duration. The minimum portfolio quality is A. All securities must be investment grade, and the minimum issue quality is BBB-. All portfolio holdings must be denominated in U.S. dollars. OPERS’ investment guidelines do not allow for investment in derivatives. In general, OPERS’ Core Bond Enhanced Index portfolio represents a low risk, plain vanilla approach to fixed income investing.

Process Implementation BlackRock’s investment approach represents collaboration between the portfolio management team, which is responsible for setting the top-down asset allocation framework for portfolio construction, and the sector specialists and traders, who are responsible for bottom-up idea generation, including research, analysis, security selection and trade execution.

The investment process is centered on a handful of forums designed to thoroughly explore the macro economy, risk appetite and allocation views as well as sector themes and trade ideas. Those discussions combine the top-down and bottom-up research and insights to ultimately build portfolios that meet client-specific guidelines. Over a full market cycle, the team expects the contribution to relative performance from top-down and bottom-up investment processes to be equal. Central to the strategy is the multi-sector allocation meeting, where the team meets with senior sector specialists and risk professionals to discuss any new information in the markets, and decide whether to alter the capital allocations and risk levels across the portfolios. In recent years, there has been a push to enhance macro inputs into the process, including increased communication between BlackRock’s global investment professionals, the incorporation of external macro speakers for additional insights and a general increase in macro resources. Along those lines, the firm recently hired its first fixed income economist who has prior experience with the Federal Reserve.

The portfolio management team establishes the portfolio strategy, which the sector specialists and traders subsequently implement with respect to security selection, timing and execution, and in accordance with portfolio investment objectives and guidelines. While investment themes are discussed formally on a weekly basis, the process is dynamic with ongoing discussion and modifications as needed. As an example, a security might be sold to realize a gain after strong performance; in anticipation of changing prepayment speeds or a credit downgrade; to modify the yield curve biases, duration or convexity characteristics of the overall portfolio; or to move into a sector or security which has been targeted by the portfolio management team and sector specialists for the relative value it offers. All

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decisions to buy and sell are made after consideration of quantitative research and credit analysis and client guidelines. Portfolios are broadly diversified with over 900 securities and approximately 285 issuers represented.

Risk Factors and Potential Red Flags Risk management is embedded throughout the investment process, with various risks managed daily, weekly, quarterly and on an ad hoc basis. Active risk management is set during the portfolio construction process using the client’s allocated risk budget. The Fund is managed in a benchmark-aware manner, so tracking error is an important risk factor. The strategy’s tracking error for the past three- and five-year annualized period is 26 bps and 27 bps, respectively, which is well within OPERS’ allowable range. Within the Core Enhanced Index risk budget, portfolio manager Akiva Dickstein can determine where to take risks in the portfolio. While BlackRock’s portfolio managers participate in many of the same meetings and receive the same information and insights, portfolio managers have the latitude to make their own strategic alpha decisions. In other words, there is no “house view” that must be adhered to. Dickstein is especially conservative on the fixed income market at this time and has incorporated a more bearish view than some of his fixed income counterparts at BlackRock. One key element of this view is that volatility is unusually low so he has been actively stress testing how the portfolio would react if volatility increases and has repositioned the portfolio ahead of such an event. We did not identify any “red flags” during our onsite visit that would impede BlackRock’s ability to properly manage the OPERS portfolio.

Performance Performance of the investment mandate has been additive relative to the benchmark on a gross of fee basis (as of 3/31/2017) over the 1-year, 3-year, 5-year and 10-year trailing periods and since inception period by 60 bps, 36 bps, 49 bps, 24 bps and 32 bps, respectively. Thus, BlackRock is meeting OPERS’ return expectations. At the time of our onsite, for the trailing 1-year period ended 5/31/17, yield curve positioning, selection and positioning in CMBS and ABS, and credit selection were positive contributors to performance. In terms of portfolio positioning, the portfolio was slightly overweight CMBS and ABS, with slight underweights to Treasuries and investment grade credit. The team was becoming more comfortable with credit fundamentals and was anticipating the possibility of corporate tax cuts and pro-growth oriented policies to provide a benefit to credit. The team remained conservative with regard to ABS and CMBS security selection and credit quality. Portfolio duration and average credit quality were comparable to that of the Bloomberg Barclays US Aggregate Index (portfolio duration 5.5 v. 5.6 years; portfolio credit quality AA-/Aa2 v. AA/Aa2.

Other Considerations During our visit, we met briefly with members of BlackRock’s Risk & Quantitative Analysis (RQA) team (Matthew Wang) and the compliance group (Myles Ojala and Shane Andrews). Mr. Wang discussed the capabilities of BlackRock’s Aladdin system, and how the RQA team uses Aladdin to help portfolio managers with quantitative analysis, including trade sizing and stress testing. Aladdin has been very useful to the team in conducting stress test prior to major event risks. Aladdin has over 2,400 risk factors that the team can utilize for analyses. The firm is working on improving the tool’s regime-based risk models and ease of use for mobile and web applications. Aladdin is an extremely robust risk analysis, trading and operational tool that is used by external managers and pension plans as well as internal to BlackRock.

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We also discussed the compliance process for the strategy; the portfolio compliance group (PCG) is responsible for implementing controls and processes to ensure the portfolio is compliant with all regulatory and portfolio-issued guidelines. We walked through the daily pre- and post-trade reporting process, and the ongoing maintenance for guideline compliance through Aladdin. Compliance is a global effort with professionals in multiple locations around the globe.

C. Firm Review

Total Firm Assets As of 31 March 2017, BlackRock managed $5.42 trillion across equity, fixed income, alternatives, multi-asset, and cash management strategies for institutional and retail clients.

Product Assets BlackRock managed $10,852 million in Core Bond Enhanced Index assets for 14 accounts as of 31 March 2017.

D. Portfolio Management

Organization Ownership and Key Personnel

Ownership BlackRock, Inc. (“BlackRock”) is the ultimate parent company for the BlackRock contracting entity, BlackRock Financial Management, Inc. (“BFM”). BlackRock is an independent, publicly traded company, with no single majority shareholder and over two-thirds of its Board of Directors consisting of independent directors. As of 31 March 2017, The PNC Financial Services Group, Inc. (“PNC”) owned 21.7% of BlackRock and institutional investors, employees and the public held economic interest of 78.3%. With regard to voting common stock, PNC owned 21.2% and institutional investors, employees and the public owned 78.8% of voting shares.

Global Executive Committee The BlackRock Global Executive Committee (“GEC”) sets and communicates the strategic vision of the firm; to define, implement and instill the firm’s culture; and to oversee operations and business performance. The GEC will also identify and develop a strong, diverse bench of future leaders and work to strengthen and promote the firm’s reputation, regulatory posture and relations with strategic stakeholders. Members of the GEC include:

Global Executive Committee Chairman & Chief Executive Global Head of Multi-Asset Laurence Fink Richard Kushel Officer Strategies Head of Americas & Global Robert Kapito President Mark McCombe Head of BlackRock Alternative Investors

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Philipp Christopher Vice Chairman Chief Legal Officer Hildebrand Meade Barbara Head of Trading, Liquidity and Vice Chairman Richard Prager Novick Investments Platform Linda Vice Chairman Gary Shedlin Chief Financial Officer Robinson Head of Europe, Middle East & Global Head of Human David Blumer Jeffrey Smith Africa Resources Geraldine Global Head of Corporate Global Head of Business Derek Stein Buckingham Strategy Operations & Technology Frank Cooper Chief Marketing Officer Ryan Stork Head of Asia Pacific Robert Global Head of iShares and Senior Managing Director Mark Wiedman Fairbairn Index Investments Chief Operating Officer & Global Head of Active Rob Goldstein Global Head of BlackRock Equities & Chairman of Mark Wiseman Solutions® BlackRock Alternative Ben Golub Chief Risk Officer Investors Biographies for members of the GEC are available at: http://www.blackrock.com/corporate/en-us/about- us/leadership

Portfolio Management Personnel

BlackRock’s Customized Core Bond Enhanced Index strategy is managed by BlackRock’s Customized Multi-Sector team (the “Team”). Below is an overview of the Team.

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Portfolio Management Key Changes There has been no material investment professional turnover within the Customized Multi-sector Investment Team over the past year ending 31 March 2017.

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Portfolio Management Process

The Team’s investment process is systematic, disciplined, research-driven and rooted in the firm’s culture of teamwork and information sharing. BlackRock’s investment approach represents collaboration between the Team, which is responsible for setting the top-down asset allocation framework for portfolio construction, and the sector specialists and traders, who are responsible for bottom-up idea generation, including research, analysis, security selection and trade execution.

Central to the Strategy is the Multi-Sector Allocation Meeting, where the Team meets with senior sector specialists and risk professionals to discuss any new information in the markets, and decide whether to alter the capital allocations and risk levels across the portfolios.

The sector specialists and traders then implement the Team’s relative value outlook with respect to security selection, timing and execution, and in accordance with portfolio investment objectives and guidelines. In this way, the Team establishes the policy, which the sector specialists and traders subsequently implement. While the investment themes are discussed formally on a weekly basis, the process is dynamic with ongoing discussion and modifications as needed.

BlackRock's security selection process is based on the relative value outlook and the quantitative assessment of the security and portfolio. When superior relative value is found, a security will be considered by the relevant sector specialists and portfolio managers. If consistent with strategy and client guidelines, a holding is sold and a more attractive security purchased. A security might be sold to realize a gain after strong performance; in anticipation of changing prepayment speeds or a credit downgrade; to modify the yield curve biases, duration or convexity characteristics of the overall portfolio; or to move into a sector or security which has been targeted by the portfolio team and sector specialists for the relative value it offers. There is no automatic sell process. All decisions to buy and sell are made after consideration of quantitative research and credit analysis and client guidelines. At all times, the portfolio’s overall allocation will remain consistent with a Core Plus risk budget and the agreed upon alpha target.

The investment process, outlined in the following figure, shows how these forums fit along the various steps of the investment process and is directly related to the accountability of the Team.

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Implementation of an Investment Idea Example

Please note that the example provided below is an example only and does not reflect current view:

The idea: Global rates sector specialists believe the front end of the yield curve is likely to experience low volatility and remain at low rate levels. An assessment of likely policy decisions and market expectations leads the Team to determine that front end securities with favorable yield will generate attractive carry and perform well.

Action 1: Multi-Sector Team agrees to explore implementation of this idea at the weekly Allocation Meeting.

Action 2: Team polls each sector specialist present in the Allocation Meeting to determine available securities that fit its investment theme, reflect clients’ risk appetite and meet client guidelines.

Action 3: Team discusses and decides upon proper sizing of the suggested trades, taking into account alpha targets and risk budgets of portfolios.

Trade and positioning review: Multi-Sector Team reviews the transaction in the trade and positioning review forum, and will revisit trade to ensure it is generating expected returns, adjusting accordingly as it achieves desired return and/or if markets and relative value change.

Sector specialist traders execute trades, leveraging their experience and market knowledge. They are responsible for obtaining multiple bids/offers or negotiating a price to seek to obtain best execution; trades typically are aggregated into block orders. All trades are allocated at the time of purchase (based on a percent of investable assets), and as such, are monitored by BlackRock's Portfolio Compliance Department.

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E. Policy Compliance

Disclosures Please refer to Exhibit 3 (Compliance Statement) for details regarding compliance as of March 31, 2017.

Constraints Notify client and recommend course of action: • 144(a) securities shall not be rated below investment grade by any NRSO • Securities must be rated > = BBB- by Moodys, S&P or Fitch (Hi splits) • Average portfolio rating > = A/A2 by M/S (lo) • Short-term securities must be rated A1/P1 by Moodys/S&P (Splits: Hi) • Commercial paper must be rated > = A-1 or P-1 • Base currency exposure must be between 98 and 102% • Single trade cannot contribute more than +/- 1 year of duration to the portfolio • Portfolio's duration must be within +/- 0.50Y of the benchmark's duration (on an absolute basis). • No AMT (Alternative Minimum Tax) securities. • NO CDOs (CLOs + CBOs) • No Credit default swaps • No Contingent Convertible Capital (CoCos). • No securities from emerging market countries (Sov Rating < BBB by 2 of 3) Non-Global Acct • No Leverage (Market value basis) • No non-USD denominated securities. • No Reverse Repos. • No uncovered short sales • No Swaps • No interest-rate swaps allowed • No tri-party repos allowed • Private placements must be < = 20% • The %NAV of the portfolio must be +/- 20% (absolute) of the benchmark value in sector: Mortgages ex. CMBS. • The %NAV of the portfolio must be +/- 20% (absolute) of the benchmark value in sector: All Corporates + ABS. • Yankees should be limited to 1.5 times the benchmark weight. • Single issuer must be < = 5% (excluding US Government and Agency securities) • Single non-US issuer max 0.5% • Total Yankee bond exposure in the portfolio should not increase beyond its current level of 9.8%

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Objectives

OKERS & OKERS-J Core Enhanced Index Return Objective Total Return that exceeds the return of the benchmark by 40 bps annually.

Proxy Voting There were no proxies voted.

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F. Product & Account Performance Evaluation

Relative to Objectives—As of March 31, 2017

Alpha: measures the difference between a portfolio’s actual return and the return of a benchmark for that manager adjusted for risk. In this instance, it is the difference between the returns of the OPERS portfolio managed by BlackRock and the Bloomberg Barclays U.S. Aggregate Index.

As of March 31, 2017 BlackRock has produced a three-year annualized excess return of +36 bps and a five-year annualized excess return of +48 bps.

As of March 31, 2017 Blackrock has produced a three- year annualized alpha of 1.02 and a five-year alpha of 0.82.

Tracking error: defined as the percentage difference in total return between an index fund (Bloomberg Barclays US Aggregate) and a portfolio (BlackRock). Tracking error as defined in the context of an active manager evaluation is defined as active manager risk, and is defined as the standard deviation of two return series (BlackRock and the BC Aggregate Index). That is, of a manager’s series versus a benchmark series is the quotient of the annualized excess return (alpha) and the standard deviation of excess returns (tracking error).

As of March 31, 2017 BlackRock has produced a three-year annualized tracking error of 26 bps and a five-year annualized tracking error of 27 bps.

Information ratio: is defined as the alpha (numerator) divided by information ratio (denominator). The information ratio is considered a risk-adjusted measure of performance.

As of March 31, 2017 BlackRock has produced a three-year information ratio of 1.35 and a five-year information ratio of 1.71.

Statistical demonstration of skill vs. benchmark: The T-Statistic of a manager series vs. benchmark series is the information ratio (see definition above), multiplied by the square root of the number of periods in a year. The T- Statistic is used to calculate the significance level. The significance level of a manager series vs. a benchmark series indicates the level of confidence with which the statement “the manager’s annualized excess return over the benchmark is positive” holds true.

T-stat = Info Ratio x square root of performance tenure

As of March 31, 2017 BlackRock has produced a three-year T-Statistic of 3.54 As of March 31, 2017 BlackRock has produced a five-year T-Statistic of 4.71

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Relative to Peer Group Universe

As of March 31, 2017, BlackRock has a ranking versus its peer group of U.S. Core Fixed Income Managers of:

1-year 55th percentile 3-year 50th percentile 5-year 57th percentile

Portfolio Turnover

Average annual turnover has generally ranged from 200-500% since inception and over the past five calendar years. Turnover calculation excludes To Be Announced (TBA) and Treasury rolls.

In recent years, the majority of portfolio turnover occurred in Treasury bonds which are the most liquid sector in the bond market. The Multi-Sector Portfolio Management team uses Treasuries to adjust the portfolio’s duration and yield curve exposure. Given how tight spreads have become in most sectors of the fixed income market, the Team believes that one of the best ways to drive alpha going forward is by tactically managing duration and yield curve positioning. Treasury turnover could also spike higher due to an inability to utilize interest rate derivatives, which provide a more capital efficient means of managing rate risk than buying/selling cash securities. Generally speaking, turnover is highest in the very liquid Treasury and agency MBS sectors, where tactical trades can be implemented with minimal transactions costs. Please note that turnover from non-government sectors, such as credit and securitized assets is typically significantly lower.

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Portfolio Top 10 versus benchmark

Total Return Fixed Income Top Ten Positions As of March 31, 2017

Position Description CUSIP Maturity % Mkt NAV TREASURY NOTE 912828C32 3/15/2017 8.91 TREASURY NOTE 912828C65 3/31/2019 4.97 TREASURY NOTE 912828C57 3/31/2021 3.92 TREASURY NOTE 912828B82 2/29/2016 3.7 FNMA 30YR TBA(REG A) BRSL66ZW6 4/10/2014 3.46 TREASURY NOTE 912828B90 2/28/2021 2.48 TREASURY BOND 912810RE0 2/15/2044 2.19 GNMA2 30YR TBA BRSL677A3 4/22/2014 1.43 TREASURY NOTE 912828A75 12/31/2018 1.4 FNMA 30YR TBA BRSKW1BH9 4/10/2014 1.3

Portfolio Concentration Top Ten Positions: 33.76% Next Twenty Positions: 9.75% (Cumulative: 43.51%)

Portfolio Sector Comparison

Total Return Fixed Income—Sector Comparison vs. Bloomberg Barclays Aggregate

OPERS As of March 31, 2017 Bloomberg Barclays Agg. Sector BLACKROCK Benchmark Difference Treasury 31.54% 35.61% -4.07% MBS 30.03% 29.20% 0.83% CMBS 6.97% 1.69% 5.28% Corporates 23.19% 29.19% -6.00% Agencies 2.34% 3.83% -1.49% Asset-Backed 5.68% 0.48% 5.20% Cash 0.25% 0% 0.25%

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Portfolio Credit Diversification Comparison

Total Return Fixed Income—Sector Comparison vs. Bloomberg Barclays Aggregate

OPERS As of March 31, 2017 Bloomberg Barclays Agg. Quality BLACKROCK Benchmark Difference Government 59.05% 51.40% 7.65% AAA 13.88% 20.91% -7.03% AA 4.25% 3.95% 0.30% A 18.26% 10.23% 8.03% BBB 15.22% 13.51% 1.71% Below BBB 0.06% 0% 0.06%

Portfolio Weighted Average Summary Characteristics

Total Return Fixed Income—Sector Comparison vs. Bloomberg Barclays Aggregate

OPERS As of March 31, 2017 Bloomberg Barclays Agg. Category BLACKROCK Benchmark Difference Yield-to-Maturity 2.72% 2.60% 0.12% Quality Aa2/AA- Aa2/AA Maturity (WAL) 8.17 years 8.10 years 0.07 years Effective Duration 5.73 years 5.72 years -0.01 years

Effects of Parallel Interest Rate Changes on Total Return*

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G. Recommendation

From an investment management perspective, we believe BlackRock has the necessary experience and depth to continue to execute the OPERS Core Enhanced Fixed Income mandate successfully. The investment team is seasoned and well-resourced. The strategy provides exposure to the core fixed income market while incrementally adjusting positioning within typical core bond subsectors to provide positive excess returns. BlackRock has historically demonstrated the ability to generate positive excess returns as evidenced by their historical annualized performance. As such, we recommend that OPERS retain the relationship.

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H. URSJJ Fact Sheet

Initial Funding date and amount: $51,736,362 (cash and securities)

June 16, 2000—BlackRock and Baird Advisors competed in a finals presentation.

Benchmark (identification and description) Bloomberg Barclays Capital U.S. Aggregate Bond Index represents securities that are U.S. domestic, taxable, and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. These major sectors are subdivided into more specific indices that are calculated and reported on a regular basis. On November 1, 2008 the benchmark name was changed to the Barclays U.S. Aggregate Bond Index from Lehman Brothers. In August 2016, Bloomberg announced its acquisition of Barclays Risk Analytics and Index Solutions and the index name was changed to the Bloomberg Barclays U.S. Aggregate Bond Index.

Historical Performance—Annualized

URSJJ Historical Performance Gross of Fees (%) As of March 31, 2017

Since Since 9 months Inception Inception 1 Year 3 Years 5 Years 10 Years (annual) (annualized) (cumulative) 06/30/2000 06/30/2000 URSJJ -1.38 0.94 3.00 2.74 4.45 5.44 142.35 Barclays US -1.73 0.44 2.68 2.34 4.27 5.09 129.82 Aggregate

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Historical Performance—Cumulative

Historical Relative Performance As of March 31, 2017 Gross of Fees As supplied from BlackRock—Inception Date June 30, 2000

URSJJ Cumulative Historical Performance 100 90 80 70 60 50 40 30 20 10 0 9/1/2000 5/1/2001 1/1/2002 9/1/2002 5/1/2003 1/1/2004 9/1/2004 5/1/2005 1/1/2006 9/1/2006 5/1/2007 1/1/2008 9/1/2008 5/1/2009 1/1/2010 9/1/2010 5/1/2011 1/1/2012 9/1/2012 5/1/2013 1/1/2014 9/1/2014 5/1/2015 1/1/2016 9/1/2016

Portfolio Barclays US Agg

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Historical Performance—Calendar Years

URSJJ Since Inception Performance As of March 31,2017 Calendar year since inception performance returns, gross, and net of fees (%)

Year BB URSJJ (g) URSJJ (n) Alpha (g) Alpha (n) (ANN.) Aggregate

2000* 8.02% 8.02% 7.35% 0.67 0.67 2001 9.10% 9.10% 8.44% 0.65 0.65 2002 10.67% 10.67% 10.26% 0.42 0.42 2003 4.60% 4.60% 4.10% 0.49 0.49 2004 4.88% 4.88% 4.34% 0.54 0.54 2005 2.63% 2.63% 2.42% 0.28 0.19 2006 4.56% 4.46% 4.33% 0.22 0.12 2007 7.12% 7.00% 6.97% 0.09 -0.03 2008 -1.66% -1.77% 5.24% -7.19 -7.30 2009 11.78% 11.70% 5.93% 6.48 6.45 2010 7.53% 7.43% 6.54% 1.12 1.02 2011 7.65% 7.55% 7.84% -0.17 -0.24 2012 5.20% 5.13% 4.21% 1.02 0.94 2013 -1.73% -1.84% -2.02% 0.37 0.26 2014 6.18% 6.07% 5.97% 0.14 0.02 2015 0.92% 0.86% 0.55% 0.40 0.33 2016 3.07% 2.99% 2.65% 0.44 0.36 2017 (YTD) 0.88% 0.85% 0.82% 0.09 0.07

*Inception Date June 30, 2000

Page 24 OPERS/URSJJ Investment Manager Review Report BlackRock—U.S. Enhanced Index Fixed Income Manager June 2017

I. URSJJ Policy Compliance

Disclosures Please refer to the attached memo Exhibit 2 (Compliance Statement) for details regarding compliance as of March 31, 2017

J. URSJJ Product & Account Performance Evaluation

Relative to Objectives—As of March 31, 2017

As of March 31, 2017 BlackRock has produced a 3-year annualized excess return of +32 bps and a five-year annualized excess return of +42 bps.

As of March 31, 2017 Blackrock has produced a three- year annualized alpha of 1.02 and a five-year alpha of 0.82.

Tracking error: defined as the percentage difference in total return between an index fund (Bloomberg Barclays U.S. Aggregate) and a portfolio (BlackRock). Tracking error as defined in the context of an active manager evaluation is defined as active manager risk, and is defined as the standard deviation of two return series (BlackRock and the BC Aggregate Index). That is, of a manager’s series versus a benchmark series is the quotient of the annualized excess return (alpha) and the standard deviation of excess returns (tracking error).

As of March 31, 2017 BlackRock has produced a three-year annualized tracking error of 41 bps and a five-year annualized tracking error of 118 bps.

Information ratio: is defined as the alpha (numerator) divided by information ratio (denominator). The information ratio is considered a risk-adjusted measure of performance.

As of March 31, 2017 BlackRock has produced a three-year information ratio of 0.87 and a five-year information ratio of 1.39.

Statistical demonstration of skill vs. benchmark: The T-Statistic of a manager series vs. benchmark series is the information ratio (see definition above), multiplied by the square root of the number of periods in a year. The T- Statistic is used to calculate the significance level. The significance level of a manager series versus a benchmark series indicates the level of confidence with which the statement “the manager’s annualized excess return over the benchmark is positive” holds true.

T-stat = Info Ratio x square root of performance tenure As of March 31, 2017 BlackRock has produced a three-year T-Statistic of 2.31 As of March 31, 2017 BlackRock has produced a five-year T-Statistic of 2.85

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Portfolio Top 10 versus benchmark

Total Return Fixed Income Top Ten Positions As of March 31, 2017

Portfolio Concentration Top Ten Positions: 33.76% Next Twenty Positions: 9.75% (Cumulative: 43.51%)

Relative to Peer Group Universe

As of March 31, 2014, BlackRock has a ranking versus its peer group of U.S. Core Fixed Income Managers of:

1-year 55th percentile 3-year 50th percentile 5-year 57th percentile

Portfolio Sector Comparison

Total Return Fixed Income—Sector Comparison vs. Bloomberg Barclays Aggregate

URSJJ As of March 31, 2017 Bloomberg Barclays Agg. Sector BLACKROCK Benchmark Difference Treasury 31.93% 35.61% -3.68% MBS 30.57% 29.20% 1.37% CMBS 6.90% 1.69% 5.21% Corporates 22.46% 29.19% -6.73% Agencies 1.92% 3.83% -1.91% Asset-Backed 5.98% 0.48% 5.50% Cash/Other 0.24% 0% 0.24%

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Portfolio Credit Diversification Comparison Total Return Fixed Income—Sector Comparison vs. Bloomberg Barclays Aggregate

URSJJ As of March 31, 2017 Bloomberg Barclays Agg. Quality BLACKROCK Benchmark Difference Government 61.44% 51.40% 10.04% AAA 12.34% 20.91% -8.57% AA 4.06% 3.95% 0.11% A 17.59% 10.23% 7.36% BBB 14.51% 13.51% 1.00% Below BBB 0.06% 0% 0.06%

Portfolio Weighted Average Summary Characteristics

Total Return Fixed Income—Sector Comparison vs. Bloomberg Barclays Aggregate

URSJJ As of March 31, 2017 Bloomberg Agg. Category BLACKROCK Benchmark Difference Yield-to-Maturity 2.68% 2.60% 0.08% Quality Aa2/AA- Aa2/AA Maturity (WAL) 8.08 years 8.10 years -0.02 year Effective Duration 5.72 years 5.72 years 0.00 years

Effects of Parallel Interest Rate Changes on Total Return*

K. URSJJ Recommendation

Page 27 OPERS/URSJJ Investment Manager Review Report BlackRock—U.S. Enhanced Index Fixed Income Manager June 2017

Exhibit 1

Page 28 OPERS/URSJJ Investment Manager Review Report BlackRock—U.S. Enhanced Index Fixed Income Manager June 2017

Exhibit 2

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