STATE OF CONNECTICUT 2017 ANNUAL REPORT OF THE TREASURER For the fi scal year ended June 30, 2017 STATE OF CONNECTICUT Offi ce of the State Treasurer The State Motto, “Qui Transtulit Sustinet” (He Who Transplanted Still Sustains), has been associated with various versions of the State Seal from the creation of the Saybrook Colony Seal. STATE OF CONNECTICUT 2017 ANNUAL REPORT OF THE TREASURER For the fi scal year ended June 30, 2017 O S T, D L. N 1 2 F Y 2017 A R TABLE OF CONTENTS ANNUAL REPORT OF THE TREASURER Introduction ’ .........................................................................7 .............................................................................10 Division Operations Investment Advisory Council Chair’s Letter to the Governor ............................................13 Investment Advisory Council .............................................................................................15 Division Overview .............................................................................................................16 The Year in Review ...........................................................................................................20 Total Fund Performance ......................................................................................20 2017 Management Initiatives ..............................................................................22 Corporate Governance ........................................................................................22 Asset Recovery and Loss Prevention .................................................................24 Combined Investment Funds Total Return Analysis ...........................................27 Liquidity Fund ...................................................................................................................28 Alternative Investment Fund .............................................................................................31 Mutual Equity Fund ...........................................................................................................34 Core Fixed Income Fund ..................................................................................................38 Infl ation Linked Bond Fund ...............................................................................................43 Emerging Market Debt Fund .............................................................................................47 High Yield Debt Fund ........................................................................................................51 Developed Market International Stock Fund .....................................................................55 Emerging Market International Stock Fund .......................................................................59 Real Estate Fund ..............................................................................................................63 Private Investment Fund ...................................................................................................68 Division Overview .............................................................................................................73 The Year in Review ...........................................................................................................73 Division Overview .............................................................................................................78 The Year in Review ...........................................................................................................79 Short-Term Investment Fund ............................................................................................80 Division Overview .............................................................................................................84 The Year in Review ...........................................................................................................84 Division Overview .............................................................................................................86 The Year in Review ...........................................................................................................86 Second Injury Fund Advisory Board ..................................................................................87 Trust Overview ..................................................................................................................88 The Year in Review ...........................................................................................................89 CHET Advisory Committee ...............................................................................................90 ABLE Program ..................................................................................................................92 O S T, D L. N 3 TABLE OF CONTENTS Financial Statements ...................................................................... F-1 ’ ...................................................F-5 ’ ....................................................................................... F-12 Statement of Net Position................................................................................. F-13 Statement of Changes in Net Position ............................................................. F-14 Notes to Financial Statements ......................................................................... F-16 Financial Highlights .......................................................................................... F-35 - Statement of Net Position................................................................................. F-37 Statement of Changes in Net Position ............................................................. F-38 Notes to Financial Statements ......................................................................... F-39 List of Investments .......................................................................................... F-46 Schedule of Annual Rates of Return ................................................................ F-50 Schedule of Quarterly Rates of Return ............................................................ F-51 Schedule of Cash and Investments, Balances and Activity ............................. F-52 - Statement of Net Position (at Fair Value) ......................................................... F-53 Statement of Revenues and Expenditures ....................................................... F-53 Statement of Changes in Net Position ............................................................. F-53 Statement of Cash Flows ................................................................................. F-54 Statement of Net Position (at Cost) .................................................................. F-55 Notes to Financial Statements ......................................................................... F-56 Statement of Net Position................................................................................. F-57 Statement of Revenues, Expenses and Changes in Net Position ................... F-58 Statement of Cash Flows ................................................................................. F-59 Notes to Financial Statements ......................................................................... F-60 - Independent Auditors’ Report ........................................................................... F-64 Management’s Discussion and Analysis .......................................................... F-66 Statement of Fiduciary Net Position ................................................................. F-68 Statement of Changes in Fiduciary Net Position .............................................. F-69 Notes to Financial Statements ......................................................................... F-70 Financial Highlights .......................................................................................... F-74 - Independent Auditors’ Report ........................................................................... F-76 Management’s Discussion and Analysis .......................................................... F-78 Statement of Fiduciary Net Position ................................................................. F-80 Statement of Changes in Fiduciary Net Position .............................................. F-81 Notes to Financial Statements ......................................................................... F-82 Financial Highlights .......................................................................................... F-88 4 F Y 2017 A R TABLE OF CONTENTS Supplemental Information - Total Net Position Value by Pension Plans and Trusts ..................................... S-1 Schedule of Net Position by Investment Fund ................................................. S-2 Schedule of Changes in Net Position by Investment Fund .............................. S-4 Statement of Investment Activity by Pension Plan ........................................... S-8 Statement of Investment Activity by Trust ........................................................ S-12 Summary of Operations ................................................................................... S-18 Pension and Trust Funds Balances.................................................................. S-18 Investment Summary ......................................................................................