Investment Cost Effectiveness Analysis (for the 5 years ending December 31, 2014) Kentucky Retirement Systems Table of contents 1 Executive summary 2 Research 3 Peer group and universe Peer group CEM global universe Universe subsets Implementation style, asset mix, policy mix: - by universe subset - trends from 2010 to 2014 Implementation style by asset class Actual asset mix - trends from 2010 to 2014 Policy asset mix - trends from 2010 to 2014 3- 2 3- 3 3- 4 33333- 5 6 7 8 9 4444444- 2 3 4 5 6 7 8 4- 9 4 - 10 4 - 11 4 - 12 4 - 13 4 - 14 5 Total cost and benchmark cost Comparisons of total investment cost - Trend - Detailed breakdown - Material changes 5555- 2 3 4 5 5- 6 5- 7 555555555- 8 9 10 11 12 13 14 15 18 6 Cost comparisons Total investment cost Oversight, Custodial & Other Costs Asset class costs by implementation style 4 Returns, benchmarks, value added Interpreting box and whisker graphs Net total returns Policy returns Net value added Net returns by asset class Benchmark returns by asset class Net value added by asset class Most frequently used benchmarks for: - Stock - Fixed Income - Hedge Funds, Real Assets and Private Equity Your policy return and value added calculation: - 2014 - 2010 to 2013 Profit/Loss on overlay programs Total cost versus benchmark cost Benchmark cost calculation Cost impact of: - differences in implementation style - overlays - lower cost styles - paying more/-less for similar services Why you are high/low cost by asset class Your cost effectiveness ranking Actual cost versus benchmark cost Benchmarking methodology Regression based benchmarks 6- 2 6- 3 6- 4 7 Risk Comparison of your risk levels to peers Calculation of asset risk Reduction in asset risk due to diversification Asset-liability risk Liability proxy portfolio Liability risk Projected worst case scenarios Worst case scenarios during the past 5 years Risk Trends - 2010 to 2014 Risk appendices 7777777777- 2 3 4 5 6 7 8 9 10 11 8 Appendices Appendix A - Data Summary Appendix B - Data quality Appendix C - Glossary of terms 8- 2 Prepared September 04, 2015. Although the information in this report has been based upon and obtained from sources we believe to be reliable, Cost Effectiveness Measurement Inc. ("CEM") does not guarantee its accuracy or completeness. The information contained herein is proprietary and confidential and may not be disclosed to third parties without the express written mutual consent of both CEM and Kentucky Retirement Systems. © Copyright 2015 by CEM Benchmarking Inc. Key takeaways Returns • Your 5-year net total return was 8.2%. This was below the U.S. Public median of 9.8% and below the peer median of 9.7%. • Your 5-year policy return was 9.2%. This was below the U.S. Public median of 9.7% and close to the peer median of 9.3%. Value added • Your 5-year net value added was -1.0%. This was below the U.S. Public median of 0.0% and below the peer median of 0.1%. Long term performance • Your 20-year net return of 8.3% was close to the U.S. Public median of 8.4% and equal to the peer median of 8.3%. Cost and cost effectiveness • Your investment cost of 81.6 bps was above your benchmark cost of 74.8 bps. This suggests that your fund was high cost compared to your peers. • Your fund was high cost because you had a higher cost implementation style and you paid more than peers for some services. • Your 2014 performance placed in the negative value added, high cost quadrant of the cost effectiveness chart. Risk • Your asset risk of 9.2% was below the U.S. median of 9.8%. Your asset-liability risk of 13.7% was above the U.S. median of 13.3%. © 2015 CEM Benchmarking Inc. Executive Summary 1 This benchmarking report compares your cost and return performance to CEM's extensive pension database. • 157 U.S. pension funds participate. The median U.S. fund had assets of $8.6 billion and the average U.S. fund had assets of $21.7 billion. Total participating U.S. assets were $3.4 trillion. • 76 Canadian funds participate with assets totaling $800 billion. • 61 European funds participate with aggregate assets of $2.4 trillion. Included are funds from the Netherlands, Norway, Sweden, Finland, Ireland, Denmark and the U.K. • 8 Asia-Pacific funds participate with aggregate assets of $771 billion. Included are funds from Australia, New Zealand, China and South Korea. Participating assets ($ trillions) 10.0 9.0 8.0 Total Database 7.0 6.0 5.0 4.0 3.0 The most meaningful comparisons for your returns and value added are to the U.S. Public universe which consists of 57 funds. 2.0 1.0 0.0 92 94 96 98 00 02 04 06 08 10 12 14 * 2014 reflects both received and expected data. © 2015 CEM Benchmarking Inc. Executive Summary 2 The most valuable comparisons for cost performance are to your custom peer group because size impacts costs. Peer group for Kentucky Retirement Systems • 18 U.S. public sponsors from $8.9 billion to $25.5 billion • Median size of $15.0 billion versus your $15.5 billion 30,000 25,000 $ millions 20,000 15,000 10,000 5,000 0 To preserve client confidentiality, given potential access to documents as permitted by the Freedom of Information Act, we do not disclose your peers' names in this document. © 2015 CEM Benchmarking Inc. Executive Summary 3 What gets measured gets managed, so it is critical that you measure and compare the right things: 1. Returns Why do total returns differ from other funds? What was the impact of your policy mix decisions versus implementation decisions? 2. Net value added Are your implementation decisions (i.e., the amount of active versus passive management) adding value? 3. Costs Are your costs reasonable? Costs matter and can be managed. 4. Cost effectiveness Net implementation value added versus excess cost. Does paying more get you more? 5. Risk How much risk was taken to obtain your value added? What is the risk of your policy mix? What is the risk of the mismatch between your assets and liabilities? © 2015 CEM Benchmarking Inc. Executive Summary 4 Your 5-year net total return of 8.2% was below both the U.S. Public median of 9.8% and the peer median of 9.7%. Total returns, by themselves, provide little insight into the reasons behind relative performance. Therefore, we separate total return into its more meaningful components: policy return and value added. Net total fund return - Policy return = Net value added U.S. Public net total returns - quartile rankings Your 5-year 8.2% 9.2% -1.0% This approach enables you to understand the contribution from both policy mix decisions (which tend to be the board's responsibility) and implementation decisions (which tend to be management's responsibility). 12% 25% 10% 20% 8% 15% 6% 10% 4% 5% 2% 0% 0% -5% Legend 90th 75th median 25th 10th your value peer med © 2015 CEM Benchmarking Inc. 5 year 2014 2013 2012 2011 2010 Executive Summary 5 Your 5-year policy return of 9.2% was below the U.S. Public median of 9.7% and close to the peer median of 9.3%. Your policy return is the return you could have earned passively by indexing your investments according to your policy mix. U.S. Public policy returns - quartile rankings 12% Having a higher or lower relative policy return is not necessarily good or bad. Your policy return reflects your investment policy, which should reflect your: 10% 15% 8% • Long term capital market expectations • Liabilities • Appetite for risk Each of these three factors is different across funds. Therefore, it is not surprising that policy returns often vary widely between funds. 20% 10% 6% 5% 4% Legend 90th 75th 0% 2% median 25th 10th your value peer med © 2015 CEM Benchmarking Inc. -5% 0% 5 year 2014 2013 2012 2011 2010 To enable fairer comparisons, the policy returns of all participants including your fund were adjusted to reflect private equity benchmarks based on lagged, investable, public-market indices. Prior to this adjustment, your 5-year policy return was 8.7%, 0.5% lower than your adjusted 5-year policy return of 9.2%. Mirroring this, without adjustment your 5-year total fund net value added would be 0.5% higher. Refer to the Research section pages 6-7 for details. Executive Summary 6 Differences in policy returns are caused by differences in benchmarks and policy mix. 5-Year returns for frequently used benchmark indices 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% US 5yr Private Equity¹ MSCI U.S. REIT Russell 1000 Russell 3000 Russell 2000 NCREIF MSCI World 17.4% 16.2% 15.6% 15.6% 15.5% 12.1% 10.5% Barclays Barclays MSCI EAFE High Yield Long Bond 9.0% 8.7% 5.4% Hedge Funds¹ Barclays Aggr. Bond Barclays TIPS MSCI Emerg. Market 4.8% 4.5% 4.1% 1.8% 1. The hedge fund benchmark is the average benchmark return reported by U.S. participants. The private equity benchmark is the average of the default private equity benchmark returns applied to U.S. participants. © 2015 CEM Benchmarking Inc. Executive Summary 7 Your 5-year policy return was below the U.S. Public median primarily because of: • Your lower policy allocation to Stock, one of the better performing asset classes, had a negative impact. Your 5-year average weight of 45% compares to a U.S. Public average of 52%. • Your higher policy allocation to Inflation Indexed Bonds, among the poorer performing asset classes, had a negative impact. Your 5-year average weight of 7% compares to a U.S. Public average of 2%. • Your higher policy allocation to Hedge Funds, among the poorer performing asset classes, had a negative impact as well. Your 5-year average weight of 8% compares to a U.S. Public average of 4%. Partially offsetting these negatives is the positive impact of your higher allocation to Private Equity. 5-Year average policy mix U.S. Stock EAFE Stock Emerging Market Stock ACWIxUS Stock Other Stock Total Stock Your Fund 22% 0% 3% 20% 0% 45% Peer Avg. 25% 4% 1% 13% 9% 52% U.S. Bonds Inflation Indexed Bonds High Yield Bonds Fixed Income - Emerging Global Bonds Cash Other Fixed Income Total Fixed Income 14% 7% 2% 1% 4% 2% 0% 30% 21% 4% 3% 1% 1% -1% 1% 29% 19% 2% 2% 1% 2% 0% 1% 27% 8% 7% 10% 100% 2% 9% 7% 100% 4% 9% 8% 100% Hedge Funds Real Assets¹ Private Equity Total U.S. Public Avg. 25% 7% 2% 9% 9% 52% 1. Real assets includes commodities, natural resources, infrastructure, REITS and real estate. © 2015 CEM Benchmarking Inc. Executive Summary 8 Over the last 5 years your policy mix changed. Trend in your policy asset mix 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2010 2011 2012 2013 2014 Stock 50.0 44.0 44.0 43.0 43.6 Fixed Income Real Assets* 38.0 0.0 0.0 30.9 10.0 5.0 31.0 10.0 5.0 27.0 10.0 10.0 21.9 10.0 14.6 Private Equity 12.0 10.0 9.9 10.0 10.0 Hedge Funds * Includes real estate and other real assets. © 2015 CEM Benchmarking Inc. Executive Summary 9 Net value added is the component of total return from active management. Your 5-year net value added was -1.0%. Net value added equals total net return minus policy return. U.S. Public net value added - quartile rankings 1% Value added for Kentucky Retirement Systems Net Year Return 2014 4.9% 2013 12.6% 2012 12.5% 2011 (1.0%) 2010 12.8% 5-year 8.2% Policy Return 6.2% 13.6% 14.2% 0.5% 12.1% 9.2% 3% Net value Added (1.3%) (1.0%) (1.7%) (1.5%) 0.7% (1.0%) Your 5-year net value added of -1.0% compares to a median of 0.1% for your peers and 0.0% for the U.S. Public universe. 4% 2% 0% 1% 0% -1% -1% Legend 90th -2% 75th median 25th 10th your value peer med -2% -3% 5 year 2014 2013 2012 2011 2010 To enable fairer comparisons, the value added for each participant including your fund was adjusted to reflect private equity benchmarks based on investable public market indices. Prior to this adjustment, your fund’s 5-year total fund net value added was -0.5%. Refer to the Research section, pages 6-7 for details as to why this adjustment may improve comparisons. © 2015 CEM Benchmarking Inc. Executive Summary 10 You had higher 5-year net returns in U.S. Stock, Emerging Market Stock and Private Equity relative to the U.S. Public average. 5-year average net returns by major asset class 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% U.S. Stock Emerging Market Stock ACWxU.S. Stock Fixed Income Real Estate Your fund 15.8% 3.8% 4.9% 3.4% 7.9% 3.2% 15.1% U.S. Public average 15.3% 2.2% 5.8% 5.8% 11.3% 6.1% 14.2% Peer average 15.3% 2.1% 5.9% 5.4% 12.2% 6.1% 13.9% © 2015 CEM Benchmarking Inc. Hedge Funds Private Equity Executive Summary 11 Your long-term net return of 8.3% was close to the U.S. Public median of 8.4% and equal to the peer median of 8.3%. • Your 20-year net return of 8.3% was close to the U.S. Public median of 8.4% and equal to the peer median of 8.3%. U.S. Public long term returns and value add - quartile rankings (20-year period ending Dec 31, 2014) 10% • Your 20-year policy return of 8.7% was above the U.S. Public median of 8.4% and above the peer median of 8.1%. 8% • Your 20-year net value added of -0.4% was slightly below the U.S. Public median of -0.1% and below the peer median of 0.2%. 6% 4% 2% Legend 90th 0% 75th median 25th 10th your value peer med -2% 20-yr net return 20-yr policy return 20-yr net value added © 2015 CEM Benchmarking Inc. Executive Summary 12 You had positive 20-year net returns in Stock, Fixed Income and Real Assets. 20-year average net returns by major asset class 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Stock Fixed Income Real Assets Your fund 9.1% 5.9% 5.3% U.S. Public average 8.8% 6.7% 8.5% Peer average 9.0% 7.0% 7.9% © 2015 CEM Benchmarking Inc. Executive Summary 13 The following cost types are included in the calculation of your total investment cost. Asset class Internal In-house total Transaction cost costs Manager base fees External Monitoring & Perform. fees other costs (active only) Transaction costs Public (Stock, Fixed income, commodities, REITs)       Derivatives/Overlays       - -         Private equity (Diversified private equity, venture capital, LBO, other private equity)   *    Private real assets (Infrastructure, natural resources, real estate ex-REITs, other real assets)       Hedge funds & Global TAA Hedge Funds Global TAA *External manager base fees represent gross contractual management fees. • • • "--" indicates that the cost type is not applicable. Green shading indicates that the cost type has been newly added for the 2014 data year. CEM currently excludes external private asset and derivative/overlay performance fees as well as all transaction costs from your total cost because only a limited number of participants are currently able to provide complete data. © 2015 CEM Benchmarking Inc. Executive Summary 14 Your investment costs were $126.2 million or 81.6 basis points in 2014. Asset management costs by asset class and style ($000s) Internal Mgmt External Management Perform. Passive Overseeing Passive Active fees ⁴ of external fees base fees U.S. Stock - Broad/All 2,035 U.S. Stock - Large Cap 90 276 U.S. Stock - Mid Cap 1,488 U.S. Stock - Small Cap 458 Stock - Emerging 207 2,582 Stock - ACWIxU.S. 854 5,852 Fixed Income - U.S. 3,022 Fixed Income - Emerging 626 Fixed Income - Global 1,776 Fixed Income - Inflation Indexed 60 184 Fixed Income - High Yield 3,720 Hedge Funds - Direct 886 Hedge Funds - Fund of Funds 30,691 ³ Real Estate - LPs 6,899 ² Other Real Assets 3,210 Diversified Private Equity 320 3,137 ¹ LBO 5,028 14,601 ² Venture Capital 340 4,661 ² Total asset management costs excluding private asset performance fees 2,035 366 1,488 458 2,789 6,707 3,022 626 1,776 244 1,160 4,880 940 ⁴ 1,827 26,021 ⁴ 56,713 1,997 ⁴ 6,899 3,702 3,210 -294 3,457 18,105 19,630 12,604 5,001 Oversight, custodial and other costs ⁵ Oversight of the fund Trustee & custodial Consulting and performance measurement Audit Other Total oversight, custodial & other costs Total investment cost (excluding transaction and private asset performance fees) © 2015 CEM Benchmarking Inc. Total 121,125 78.3bp 786 2,038 1,490 76 720 5,110 Footnotes ¹ CEM used a default cost because detailed costs by partnership were not provided for Private Equity. Without the details, we were unable to show your actual costs on the same (gross) basis as peers. The default for Diversified Private Equity was 165 bps. ² Cost derived from the partnership level detail you provided. Costs are based on partnership contract terms. ³ Default underlying costs added to provided top-layer costs. Refer to Appendix A for full details. ⁴ Total cost excludes carry/performance fees for real estate, infrastructure, natural resources and private equity. Performance fees are included for the public market asset classes and hedge funds. ⁵ Excludes non-investment costs, such as PBGC premiums and preparing checks for retirees. 3.3bp 126,235 81.6bp Executive Summary 15 Your total investment cost of 81.6 bps was above the peer median of 64.3 bps. Total investment cost Differences in total investment cost are often caused by two factors that are often outside of management's control: • Asset mix, particularly holdings of the highest cost asset classes: real estate (excl REITS), infrastructure, hedge funds and private equity. These high cost assets equaled 25% of your funds assets at the end of 2014 versus a peer average of 20%. • Fund size. Bigger funds have advantages of scale. excluding transaction costs and private asset performance fees 120 bp 100 bp 80 bp Therefore, to assess whether your costs are high or low given your unique asset mix and size, CEM calculates a benchmark cost for your fund. This analysis is shown on the following page. 60 bp 40 bp Legend 90th 20 bp 75th median 25th 10th your value peer avg © 2015 CEM Benchmarking Inc. 0 bp Peer U.S. Universe Executive Summary 16 Benchmark cost analysis suggests that, after adjusting for fund size and asset mix, your fund was high cost by 6.9 basis points in 2014. Your benchmark cost is an estimate of what your cost would be given your actual asset mix and the median costs that your peers pay for similar services. It represents the cost your peers would incur if they had your actual asset mix. Your cost versus benchmark Your total investment cost Your benchmark cost Your excess cost $000s 126,235 115,631 10,604 basis points 81.6 bp 74.8 bp 6.9 bp Your total cost of 81.6 bp was slightly above your benchmark cost of 74.8 bp. Thus, your excess cost was 6.9 bp. © 2015 CEM Benchmarking Inc. Executive Summary 17 Your fund was high cost because you had a higher cost implementation style and you paid more than peers for some services. Explanation of your cost status Excess Cost/ (Savings) $000s bps 1. Higher cost implementation style • Use of external active management (vs. lower cost passive and internal) • More fund of funds • Less overlays • Other style differences (1,391) (0.9) 10,061 (652) (150) 7,868 6.5 (0.4) (0.1) 5.1 1,036 54 1,646 2,736 0.7 0.0 1.1 1.8 2. Paying more than peers for some services • External investment management costs • Internal investment management costs • Oversight, custodial & other costs Total excess cost © 2015 CEM Benchmarking Inc. 10,604 6.9 Executive Summary 18 Differences in cost performance are often caused by differences in implementation style. Implementation style is defined as the way in which your fund implements asset allocation. It includes internal, external, active, passive and fund of funds styles. The greatest cost impact is usually caused by differences in the use of: Implementation style¹ 100% 90% 80% 70% 60% • External active management because it tends to be much more expensive than internal or passive management. You used more external active management than your peers (your 69% versus 65% for your peers). • Within external active holdings, fund of funds usage because it is more expensive than direct fund investment. You had more in fund of funds. Your 39% of hedge funds, real estate and private equity in fund of funds compared to 18% for your peers. 50% 40% 30% 20% 10% 0% Your Fund Peers U.S. Public Funds Internal passive 16% 4% 6% Internal active 3% 11% 10% External passive External active 11% 21% 19% 69% 65% 65% 1. The graph above does not take into consideration the impact of derivatives. © 2015 CEM Benchmarking Inc. Executive Summary 19 Differences in implementation style cost you 5.1 bp relative to your peers. Calculation of the cost impact of differences in implementation style Asset class Your avg holdings in $mils % External active Premium More/ vs passive & Peer You average (less) internal¹ (A) 374 100.0% 2,216 10.5% 495 68.6% 335 0.0% 495 66.7% 3,017 60.0% 1,367 100.0% 147 100.0% 574 100.0% 762 35.9% 724 100.0% 636 100.0% of which Ltd Partnerships represent: 636 100.0% 713 100.0% Other Real Assets 190 100.0% Diversified Private Equity 1,146 100.0% LBO 347 100.0% Venture Capital Impact of less/more external active vs. lower cost styles U.S. Stock - Broad/All U.S. Stock - Large Cap U.S. Stock - Mid Cap U.S. Stock - Small Cap Stock - Emerging Stock - ACWIxU.S. Fixed Income - U.S. Fixed Income - Emerging Fixed Income - Global Fixed Income - Inflation Indexed Fixed Income - High Yield Real Estate ex-REITs 26.9% 36.2% 72.8% 73.1% 85.3% 60.5% 67.0% 97.1% 100.0% 57.1% 93.9% 98.5% 70.7% 100.0% 100.0% 100.0% 98.7% (B) (C ) (A X B X C) 73.1% (25.7%) (4.3%) (73.1%) (18.6%) (0.5%) 33.0% 2.9% 0.0% (21.2%) 6.1% 1.5% 29.3% 0.0% 0.0% 0.0% 1.3% 38.4 bp 26.7 bp 47.7 bp 56.9 bp 46.3 bp 30.4 bp 15.0 bp Insufficient² 1,050 (1,519) (101) (1,391) (427) (43) 676 0 0 (208) 0 0 572 0 0 0 0 (1,391) (0.9) bp 13,344 0 (371) (2,236) (676) 10,061 6.5 bp (652) (150) 7,868 (0.4) bp (0.1) bp 5.1 bp Fund of funds % of LPs 1,617 95.3% Hedge Funds 636 0.0% Real Estate ex-REITs - LPs 190 0.0% Diversified Private Equity - LPs 1,146 0.0% LBO - LPs 347 0.0% Venture Capital - LPs Impact of less/more fund of funds vs. direct LPs 28.2% 1.1% 26.6% 26.6% 26.6% Cost/ (savings) $000s bps 67.1% (1.1%) (26.6%) (26.6%) (26.6%) 12.9 bp Insufficient² Insufficient² 30.7 bp Insufficient² vs. direct LP¹ 123.0 bp Insufficient² 73.4 bp 73.4 bp 73.4 bp Footnotes 1. The cost premium is the additional cost of external active management relative to the average of other lower cost implementation styles - internal passive, internal active and external passive. 2. A cost premium listed as 'Insufficient' indicates that there was not enough peer data to calculate the premium. 3. The 'Impact of mix of internal passive, internal active and external passive' quantifies the net cost impact of differences in cost between, and your relative use of, these 'low-cost' styles. Overlays and other Impact of lower use of portfolio level overlays Impact of mix of internal passive, internal active, and external passive³ Total impact of differences in implementation style © 2015 CEM Benchmarking Inc. Executive Summary 20 The net impact of paying more/less for external asset management costs added 0.7 bps. Cost impact of paying more/(less) for external asset management Your avg holdings Your in $mils Fund Cost in bps Peer More/ median (less) (A) U.S. Stock - Broad/All - Active 374 U.S. Stock - Large Cap - Active 232 U.S. Stock - Mid Cap - Active 339 U.S. Stock - Small Cap - Passive 335 Stock - Emerging - Passive 165 Stock - Emerging - Active 330 Stock - ACWIxU.S. - Passive 1,206 Stock - ACWIxU.S. - Active 1,811 Fixed Income - U.S. - Active 1,367 Fixed Income - Emerging - Active 147 Fixed Income - Global - Active 574 Fixed Income - Inflation Indexed - Active 274 Fixed Income - High Yield - Active 724 Hedge Funds - Active 77 Hedge Funds - Fund of Fund 1,540 Real Estate ex-REITs - Limited Partnership 636 Other Real Assets - Active 713 Diversified Private Equity - Active 190 LBO - Active 1,146 Venture Capital - Active 347 Total impact of paying more/less for external management Total in bps (B) 54.4 11.9 43.9 13.7 12.5 78.1 7.1 32.3 22.1 42.4 30.9 6.7 67.4¹ 238.8 368.3 108.5 45.0 181.8 171.3 144.3 40.9 27.4 47.7 4.3* 15.0* 61.4 5.8 36.2 17.2 48.5 26.3 14.8 52.2 239.5 362.5 112.5 48.8 165.8 165.4 211.0 13.5 (15.5) (3.8) 9.4 (2.5) 16.8 1.3 (3.9) 4.9 (6.1) 4.6 (8.1) 15.2 (0.7) 5.7 (4.0) (3.8) 16.0 5.9 (66.7) Cost/ (savings) in $000s (A X B) 506 (360) (128) 314 (41) 554 152 (704) 674 (90) 262 (222) 1,098 (6) 881 (251) (269) 304 673 (2,310) 1,036 0.7 bp *Universe median used as peer data was insufficient. ¹ You paid performance fees in these asset classes. © 2015 CEM Benchmarking Inc. Executive Summary 21 The net impact of paying more/less for internal asset management costs was immaterial. Cost impact of paying more/(less) for internal asset management Your avg holdings Your in $mils Fund Cost in bps Peer More/ median (less) (A) U.S. Stock - Large Cap - Passive U.S. Stock - Mid Cap - Passive 1,984 0.5 0.4 156 0.0 Excluded Fixed Income - Inflation Indexed - Passive 488 1.2 0.4* Total impact of paying more/less for internal management Total in bps © 2015 CEM Benchmarking Inc. Cost/ (savings) in $000s (A X B) (B) 0.1 13 0.8 41 54 0.0 bp Executive Summary 22 The net impact of differences in oversight, custodial & other costs added 1.1 bps. Cost impact of differences in oversight, custodial & other costs Your avg holdings Your in $mils fund Cost in bps Peer More/ median (less) (A) Oversight Consulting Custodial* Audit Other Total Total in bps 15,468 15,468 15,468 15,468 15,468 (B) 0.5 1.0 1.3 0.0 0.5 1.1 0.6 0.4 0.1 0.1 (0.6) 0.4 0.9 (0.0) 0.4 Cost/ (savings) in $000s (A X B) (941) 610 1,436 (18) 559 1,646 1.1 bp * Important additional information about your custodial fees relative to peers: 1. The peer median of 0.4 bps is unusually low. The U.S. universe median custodial cost was 0.9 bps. (See page 3 in Section 6). © 2015 CEM Benchmarking Inc. Executive Summary 23 In summary, your fund was high cost because you had a higher cost implementation style and you paid more than peers for some services. Explanation of your cost status Excess Cost/ (Savings) $000s bps 1. Higher cost implementation style • Use of external active management (vs. lower cost passive and internal) • More fund of funds • Less overlays • Other style differences (1,391) (0.9) 10,061 (652) (150) 7,868 6.5 (0.4) (0.1) 5.1 1,036 54 1,646 2,736 0.7 0.0 1.1 1.8 2. Paying more than peers for similar services • External investment management costs • Internal investment management costs • Oversight, custodial & other costs Total excess cost © 2015 CEM Benchmarking Inc. 10,604 6.9 Executive Summary 24 Your 2014 performance placed in the negative value added, high cost quadrant of the cost effectiveness chart. 2014 net value added versus excess cost (Your 2014: net value added -130.5bps, excess cost 6.9 bps*) 800bp 600bp Global U.S. Your Peers Net Value Added 400bp Your Results 200bp 0bp -200bp -400bp -600bp -800bp -60bp -40bp -20bp 0bp 20bp 40bp 60bp Excess Cost © 2015 CEM Benchmarking Inc. Executive Summary 25 Comparison of risk levels Your asset risk of 9.2% was below the U.S. median of 9.8%. Asset risk is the standard deviation of your policy return. It is based on the historical variance of, and covariance between, the asset classes in your policy mix. U.S. risk levels at December 31, 2014 16% 14% Your asset-liability risk of 13.7% was above the U.S. median of 13.3%. Asset-liability risk is the standard deviation of funded status caused by market factors. It is a function of the standard deviations of your asset risk, your marked-to-market liabilities and the correlation between the two. 12% 10% 8% 6% 4% Legend 2% 90th 75th median 25th 10th your value peer med © 2015 CEM Benchmarking Inc. 0% Asset Risk Asset-Liability Risk Executive Summary 26 During the 5-year period ending 2014, U.S. funds were rewarded for taking risk. More risk resulted in better performance. Higher asset-liability risk was associated with positive changes in marked-to-market funded status. Higher asset risk was associated with higher policy returns. There was no meaningful relationship between tracking error and net value added. Asset risk versus policy return Tracking error versus net value added 14% 8% 6% 12% 6% 4% 10% 2% 0% -2% -4% 8% 6% 4% -6% 2% -8% 0% 0% 10% 20% 30% 5yr Net Value Added 8% 5yr Policy Return Change in Marked-to-Market Funded Status (5yr) Asset-liability risk versus change in funded status 2% 0% -2% -4% 0% 10% 0% 20% 5 yr N et V… 5.0% Global 0.0% U.S. Peers vs Value Added You Implementation Risk 0% 1% 2% Implementation Risk 5% 10% Tracking Error Asset Risk (5yr avg) Asset-Liability Risk (5yr avg) © 2015 CEM Benchmarking Inc. 4% Linear (U.S.) Executive Summary 27 Key takeaways Returns • Your 5-year net total return was 8.2%. This was below the U.S. Public median of 9.8% and below the peer median of 9.7%. • Your 5-year policy return was 9.2%. This was below the U.S. Public median of 9.7% and close to the peer median of 9.3%. Value added • Your 5-year net value added was -1.0%. This was below the U.S. Public median of 0.0% and below the peer median of 0.1%. Long term performance • Your 20-year net return of 8.3% was close to the U.S. Public median of 8.4% and equal to the peer median of 8.3%. Cost and cost effectiveness • Your investment cost of 81.6 bps was above your benchmark cost of 74.8 bps. This suggests that your fund was high cost compared to your peers. • Your fund was high cost because you had a higher cost implementation style and you paid more than peers for some services. • Your 2014 performance placed in the negative value added, high cost quadrant of the cost effectiveness chart. Risk • Your asset risk of 9.2% was below the U.S. median of 9.8%. Your asset-liability risk of 13.7% was above the U.S. median of 13.3%. © 2015 CEM Benchmarking Inc. Executive Summary 28 2 Research and Trends Net value added - By region - Trends - By asset class - By style Private equity benchmarks Implementation style - U.S. trends - Global Policy asset mix - U.S. trends - Global Risk by type Risk versus return Impact of inflation sensitivity on policy asset mix decisions Cost trends Performance of defined benefit versus defined contribution plans 2 3 4 5 6 8 9 10 11 12 13 14 15 16 The region with the highest net value added was Europe. Value added by region¹ (period ending December 31, 2014) Total return - Policy return - Costs = Net value added # of annual observations Median fund size ($ billion) All funds 24-year average³ 9.70% 9.11% 0.42% 0.17% U.S. funds 24-year average³ 9.94% 9.28% 0.47% 0.19% Canadian funds 24-year average³ 9.51% 9.00% 0.37% 0.14% European funds 21-year² average³ 7.70% 6.97% 0.30% 0.43% Asia-Pacific funds 15-year² average³ 7.98% 7.80% 0.49% -0.31% 7,065 6.3 4,032 9.6 2,262 1.9 647 8.8 109 18.0 1. Only regions with more than four participating funds are separately disclosed. Funds from regions with fewer than four participating funds are included in Global/ All Funds. 2. The shorter time periods for European and Asia-Pacific funds reflect the dates that CEM started collecting data in those regions. 3. Averages are the arithmetic average of annual averages. Research and Trends 2 In the U.S., net value added averaged 0.2% over the past 24 years ending 2014. Net value added (U.S. universe 1991-2014) 4.0% 3.0% % Net value added 2.0% 1.0% 0.0% -1.0% -2.0% 91 Total Return 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 24-yr avg 22.9 7.1 13.7 -0.2 24.9 14.3 19.2 15.2 16.0 1.0 -4.1 -9.0 23.7 12.4 8.8 14.3 9.1 -24.3 19.4 14.0 4.4 13.5 13.5 13.0 9.9 less: Policy Return 21.5 5.6 12.1 0.3 25.4 12.9 19.2 16.5 14.7 -0.9 -5.0 -9.2 23.1 11.9 7.9 13.9 8.5 -23.1 17.5 12.5 4.3 12.3 12.3 12.2 9.3 less: Costs 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 Net value added 1.1 1.2 1.3 -1.0 -0.9 0.9 -0.4 -1.7 0.9 1.6 0.5 -0.3 0.1 0.1 0.5 -0.1 0.1 -1.7 1.3 0.4 0.4 0.4 0.4 0.4 0.4 0.5 0.5 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.5 0.9 -0.5 0.6 0.6 0.2 0.2 Value added analysis is based on 4,032 annual fund total performance observations from the CEM U.S. universe for the 24-year period ending 2014. The 24-year average is an arithmetic average of the annual averages. Research and Trends 3 The asset class that had the highest net value added in the U.S. universe over the past 24 years was Foreign Stock. 0.8% Net value added (U.S. universe 1991-2014) 0.6% % Net value added 0.4% 0.2% 0.0% -0.2% -0.4% -0.6% -0.8% U.S. Large U.S. Small Cap Cap Net value added³ -0.07 0.56 Foreign Stock 0.67 Emerging Stock 0.34 Fixed Income 0.40 Real Estate -0.61 Hedge Fund¹ 0.17 Private Equity² -0.57 1. Hedge Fund gross value added performance reflect data for the 15 year period from 2000 to 2014. 2. The net value added calculation for private equity uses the average benchmark of all U.S. participants. 3. Value added analysis is from 4,032 annual fund performance observations from the CEM U.S. universe for the 24-year period ending 2014. Value added reflects the asset weighted value added of all mandates in each asset category including indexed holdings. Averages shown above are the arithmetic average of the annual averages of all observations of funds with holdings in the asset category for each year. Research and Trends 4 Costs matter - Lower cost internal investment in private equity outperformed direct LPs. Direct LPs outperformed fund of funds. Private equity net returns and value added (1996-2012) 12% 10% 8% 6% 4% 2% 0% -2% Internal Direct LPs Fund of Funds Annualized net return¹ 12.21% 9.64% 7.15% Annualized benchmark 8.69% 9.36% 8.77% Net value added 3.52% 1.73 0.28% 0.56 -1.63% -3.20 t-score (NVA) 1. To compare the performance of private equity implementation styles over long periods, Monte Carlo simulations were used to capture differences in risk between styles. For details, see "How Implementation Style and Costs Affect Private Equity Performance", Alex Beath, Chris Flynn, and Jody MacIntosh, International Journal of Pension Management pp. 50, vol. 7, issue 1, Spring 2014. Research and Trends 5 Private equity benchmarks used by most funds are flawed. A high proportion of the benchmarks used for illiquid assets by participants in the CEM universe are flawed. Flaws include: Venture Capital vs. Russell 2000 (no lag: correlation = 29%) 50% • Un-investable peer-based benchmarks. Peer based benchmarks reflect the reporting lags in peer portfolios so they have much better correlations than un-lagged investable benchmarks. But their relationship statistics are not as good as for lagged investable benchmarks. • Aspirational premiums (i.e., benchmark + 2%). Premiums cannot be achieved passively, and evidence suggests that a fund has to be substantially better than average to attain them. More importantly, when comparing performance to other funds, they need to be excluded to ensure a level playing field. Return 25% 0% 1999 2004 2009 2014 -25% -50% Venture Capital (U.S. funds) Russell 2000 lagged 0 days Venture Capital vs. Russell 2000 (lagged 86 trading days: correlation = 91%) 50% 25% Return • Timing mismatches due to lagged reporting. For example, as the graphs on the right demonstrate, reported venture capital returns clearly lag the returns of stock indices. Yet most funds that use stock indices to benchmark their private equity do not use lagged benchmarks. The result is substantial noise when interpreting performance. For example, for 2008 the Russell 2000 index return was -33.8% versus -5.6% if lagged 86 trading days. Thus if a fund earned the average reported venture capital return for 2008 of -1.6%, they would have mistakenly believed that their value added from venture capital was 32.2% using the un-lagged benchmarks versus 4.0% using the same benchmark lagged to matched the average 86 day reporting lag of venture capital funds. 0% 1999 2004 2009 2014 -25% -50% Venture Capital (U.S. funds) Russell 2000 lagged 86 days Research and Trends 6 To enable fairer comparisons, CEM uses default private equity benchmarks. Benchmarks used for private equity by most participants in the CEM universe are flawed (see previous page). So to enable fairer comparisons, CEM replaced reported private equity benchmarks with defaults. The defaults are: • Investable. They are comprised of lagged small cap benchmarks. • Custom lagged for each participant. Your default benchmark had a lag of 90 trading days. Different portfolios had different lags. CEM estimated the lag on private equity portfolios with multi-year histories by comparing annual private equity returns to public market proxies with 1 day of lag, 2 days of lag, 3 days of lag, etc. At some number of days lag, correlation between the two series is maximized. The median lag was 93 trading days (i.e., approximately 131 calendar days or 4.3 calendar months) • Regional mix adjusted based on the average estimated mix of regions in private equity portfolios for a given country. The region mix of your default benchmark was 20% Europe ex-UK , 10% Global , 70% U.S. Private equity returns versus reported and default benchmark returns - Global median 40% 30% 20% 10% 0% -10% -20% -30% -40% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Reported BM 23.6 0.9 -8.8 -12.7 26.7 14.5 12.5 15.9 9.8 -24.4 16.3 16.0 4.6 15.9 24.6 12.3 Default BM 23.0 29.0 -1.9 -5.0 18.4 21.4 23.7 12.8 17.6 -13.3 -17.8 15.9 13.0 14.3 28.9 12.9 Return 24.1 25.0 -15.8 -12.5 3.5 13.8 20.6 17.6 21.9 -8.8 -7.9 13.5 11.8 11.0 15.7 13.4 The result is the default benchmarks are superior to most self-reported benchmarks. Correlations improve to a median of 82% for the default benchmarks versus 43% for self-reported benchmarks. Other statistics such as volatility were also much better. Research and Trends 7 For U.S. plans, external active management increased from 72% to 73% over the past 10 years. Implementation style by year - U.S. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% % Internal passive 2005 4% 2006 4% 2007 4% 2008 3% 2009 3% 2010 3% 2011 3% 2012 3% 2013 4% 2014 3% % Internal active 7% 7% 7% 7% 7% 6% 6% 6% 6% 6% % External passive 17% 16% 14% 14% 14% 15% 16% 16% 17% 17% % External active 72% 74% 76% 77% 76% 75% 75% 74% 73% 73% • This analysis is based on 68 U.S. funds with 10 consecutive years of data. Research and Trends 8 U.S. funds have more externally managed active assets than funds in most other regions. Implementation style by region - 2014 average 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% % Internal passive All funds 4% U.S. 4% Canadian 4% European 4% Asia-Pacific 4% % Internal active 13% 7% 17% 25% 14% % External passive 18% 66% 266 6.3 19% 71% 145 9.6 14% 65% 74 1.9 21% 50% 41 8.8 22% 60% 5 18.0 % External active Number of funds Median fund in $ billions Research and Trends 9 For U.S. plans, combined policy weights for real assets, private equity and hedge funds increased from 11.7% in 2005 to 23.1% in 2014. Policy mix by year - U.S. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Stock 2005 59% 2006 58% 2007 55% 2008 52% 2009 50% 2010 49% 2011 47% 2012 46% 2013 45% 2014 44% Fixed Income 29% 30% 31% 31% 32% 32% 33% 33% 33% 33% Real Assets 5% 6% 6% 7% 7% 7% 7% 8% 9% 9% Priv. Equity & Hedge Funds 6% 7% 8% 10% 10% 11% 12% 13% 14% 14% • This analysis is based on 68 U.S. funds with 10 consecutive years of data. Research and Trends 10 U.S. funds have less fixed income but more private equity than funds in other regions. Policy asset mix by region - 2014 average 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% All funds 44% U.S. 44% Canadian 47% European 41% Asia-Pacific 49% Fixed Income 38% 35% 40% 43% 29% Real Assets 8% 7% 9% 10% 14% Priv. Equity & Hedge Funds 10% 14% 4% 6% 8% Number of funds 266 145 74 41 5 Median fund in $ billions 6.3 9.6 1.9 8.8 18.0 Stock Research and Trends 11 Risk by type Your asset risk of 9.2% was below the U.S. median of 9.8%. Asset risk is the standard deviation of your policy return. It is based on the historical variance of, and covariance between, the asset classes in your policy mix. U.S. risk levels at December 31, 2014 18% Legend maximum 16% 75th median Asset-liability risk is the standard deviation of funded status caused by market factors. It is a function of the standard deviations of your asset risk, your marked-to-market liabilities and the correlation between the two. Your tracking error of 0.8% was below the U.S. median of 1.2%. Tracking error is the risk of active management. It equals the standard deviation of your annual net value added. 14% 25th minimum 12% your value peer med 10% 8% 6% 4% 2% 0% Asset Risk Asset-Liability Risk Tracking Error (5-yr) Research and Trends 12 Risk versus return Higher asset-liability risk was associated with positive changes in marked-to-market funded status. There was no meaningful relationship between tracking error and net value added. Tracking error versus net value added Asset risk versus policy return 8% 6% 12% 6% 4% 10% 2% 0% -2% -4% 8% 6% 4% -6% 2% -8% 0% 0% 10% 20% 30% Asset-Liability Risk (5yr avg) 5yr Net Value Added 14% 5yr Policy Return 8% 5 yr N et V… Change in Marked-to-Market Funded Status (5yr) Asset-liability risk versus change in funded status Higher asset risk was associated with higher policy returns. 4% 2% 0% -2% -4% 0% 10% 0% 20% Asset Risk (5yr avg) 5.0% Global0.0% U.S. Peers vs Implementation Risk 0% 1% 2% Implementation Risk Value You Added 5% 10% Tracking Error Linear (U.S.) Research and Trends 13 Impact of inflation sensitivity on policy asset mix decisions One would expect plans with more inflation sensitivity to have more inflation hedging assets and fewer nominal bonds than plans with less inflation sensitivity. Although this is true, the difference is small: inflation hedging assets represent 11.2% of assets at plans with high inflation sensitivity versus 7.5% at plans with lower inflation sensitivity. Average policy asset mix: Plans with above vs. below average inflation sensitivity 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% High: 84% average total inflation sensitivity 31.4 Low: 36% average total inflation sensitivity 36.3 Inflation Hedging¹ 11.2 7.5 Stocks 57.4 56.2 Bonds & Cash 1. Inflation hedge assets include inflation-indexed bonds, commodities, real estate & REITs, infrastructure and natural resources. Research and Trends 14 U.S. fund costs have grown by 23 basis points on average over the last 10 years. Reasons for the increase in costs include: • Allocation to the more expensive asset classes - hedge funds, real assets and private equity- increased from 6% to 12% on average. • Use of the most expensive implementation style, external active management, increased from 72% to 73% on average. U.S. total costs¹ 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Cost in bps 42.4 45.5 47.2 56.1 61.3 61.2 60.1 60.1 59.0 65.5 1. This analysis is based on 68 U.S. funds with 10 consecutive years of data. Research and Trends 15 U.S. defined benefit plans have outperformed defined contribution plans. DB versus DC return and value added - U.S. U.S. defined benefit plans have outperformed defined contribution plans. Total return - Policy return1 18-yr average ending 2014² DB DC Difference 7.99% 6.88% 1.11% 7.43% 6.46% 0.97% - Costs = Net value added Number of observations 0.49% 0.08% 3,207 0.40% 0.01% 2,143 0.09% 0.07% DB versus DC asset mix - U.S. Differences in asset mix have been the primary reason for the outperformance of U.S. defined benefit plans. 1. DC policy return = weights of holdings X benchmarks 2. Returns are the geometric average of annual averages. 3. 18 years ending 2014. Equals arithmetic average of annual asset mix weights. 4. 18 years from 1997 to 2014. Returns are the geometric average of the annual averages for each asset class. Hedge funds were not treated as a separate asset class until 2000, so 60% stock, 40% bond returns were used as a proxy for 1997-1999. n/a= insufficient data. Asset class Asset mix3 (Ranked by returns) Private Equity Real Assets Small Cap Stock Employer Stock DB 4% 5% 6% 0% DC n/a n/a 8% 20% DB 11.1% 9.5% 8.8% n/a DC n/a n/a 9.8% 8.6% Fixed Income Hedge Funds Stock U.S. Large Cap or Broad Stock Non U.S. or Global Stable Value/GICs 31% 2% 26% 23% n/a 10% n/a 30% 8% 17% 7.5% 7.6% 6.4% 4.5% n/a 6.1% n/a 7.9% 6.6% 4.6% Cash 2% 8% 2.6% 2.9% 100% 3,207 100% 2,143 8.0% 6.9% Total Number of observations Returns4 Research and Trends 16 3 Description of peer group and universe Peer group CEM global universe Universe subsets Implementation style, actual mix and policy mix: - by universe subset - trends from 2010 to 2014 Implementation style by asset class Actual mix from 2010 to 2014 Policy mix from 2010 to 2014 2 3 4 5 6 7 8 9 Peer group Your peer group is comprised of 18 U.S. public funds, with assets ranging from $8.9 billion to $25.5 billion versus your $15.5 billion. The median size is $15.0 billion. Your peer group is selected such that your fund size is usually close to the median of your peer group. Size is the primary criteria for choosing your peer group, because size greatly impacts how much you pay for services. Generally, the larger your fund, the smaller your unit operating costs (i.e., the economies of scale impact). In order to preserve client confidentiality, we do not disclose your peers' names in this document due to the Freedom of Information Act. Total fund assets ($ millions) - you versus peers 25,455 8,899 Min 14,969 15,365 15,493 16,941 Med Average You 75th %ile 11,513 25th %ile 2 Description of peer group and universe Max CEM global universe CEM has been providing investment benchmarking solutions since 1991. The 2014 survey universe is comprised of 302 funds representing $7.4 trillion in assets. The breakdown by region is as follows: • 157 U.S. pension funds with aggregate assets of $3.4 trillion. • 76 Canadian pension funds with aggregate assets of $800 billion. • 61 European pension funds with aggregate assets of $2.4 trillion. Included are funds from The Netherlands, Norway, Sweden, Finland, Denmark, UK, and Ireland. • 8 Asia-Pacific pension funds with aggregate assets of $771 billion. CEM global universe 8.0 7.0 Assets in $ trillions 6.0 Asia-Pacific Europe 5.0 4.0 Canada U.S. 3.0 2.0 1.0 0.0 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 Description of peer group and universe 3 Universe subsets CEM's global survey universe is comprised of 302 funds with total assets of $7.4 trillion. Your fund's returns and costs are compared to the following two subsets of the global universe: • Peers - Your peer group is comprised of 18 U.S. public funds ranging in size from $8.9 - $25.5 billion. The peer median of $15.0 billion compares to your $15.5 billion. • U.S. Public - The U.S. Public universe is comprised of 57 funds ranging in size from $0.9 - $295.0 billion. The median fund is $16.5 billion. Universe subsets by number of funds and assets U.S. by type Peer group¹ # of funds 2014 2013 2012 2011 2010 Corp. Public Other Total U.S. Global by Country AsiaCanada Europe Pacific Total 18 17 17 18 17 90 115 122 125 123 57 62 67 67 72 9 12 13 12 12 157 191 202 204 207 157 191 202 204 207 76 90 89 88 96 61 85 78 76 55 8 7 12 12 9 302 373 381 380 367 # of funds with uninterrupted data for: 1 yr 18 2 yrs 17 3 yrs 16 4 yrs 16 5 yrs 16 6 yrs 14 90 86 81 80 74 72 57 50 49 47 43 39 9 8 8 7 6 5 156 144 138 134 123 116 157 144 138 134 123 116 76 71 66 58 57 53 61 53 38 22 19 15 8 6 6 6 4 4 302 274 248 220 203 188 Total assets ($ billions) 2014 277 2013 254 2012 229 2011 217 2010 210 975 1,054 1,010 965 910 2,334 2,236 2,236 2,025 1,804 103 104 95 63 63 3,415 3,450 3,288 3,053 2,777 3,415 3,450 3,288 3,053 2,777 800 993 881 800 756 2,393 2,168 1,822 1,784 1,530 771 697 700 625 419 7,379 7,309 6,692 6,262 5,483 10.8 40.9 295.0 47.6 16.5 6.2 0.9 21.7 295.0 20.9 8.6 2.9 0.4 21.7 295.0 20.9 8.6 2.9 0.4 2014 asset distribution ($ billions) Avg 15.4 Max 25.5 75th %ile 16.9 Median 15.0 25th %ile 11.5 Min 8.9 11.4 10.5 39.2 96.4 24.4 1. Peer group statistics are for your 2014 peer group only as your peer group may have included different funds in prior years. 4 Description of peer group and universe Implementation style, actual mix and policy mix by universe subset Implementation style, actual mix and policy mix - 2014 (as a % of year-end assets) U.S. by type Your fund Peer group Corp. Public Other Total U.S. Global by Country AsiaCanada Europe Pacific Total Implementation style External active 57.6 Fund of funds 9.8 External passive 12.4 Internal active 3.4 Internal passive 16.9 Total 100.0 62.0 3.0 20.5 11.0 3.5 100.0 71.4 4.6 17.3 4.6 2.0 100.0 62.6 2.6 18.8 10.0 5.9 100.0 71.9 4.0 21.7 0.3 2.1 100.0 68.3 3.9 18.1 6.3 3.4 100.0 68.3 3.9 18.1 6.3 3.4 100.0 64.3 1.4 14.3 16.1 4.0 100.0 46.3 4.3 27.9 18.9 2.6 100.0 51.6 2.1 16.8 26.2 3.3 100.0 62.4 3.3 19.1 11.8 3.4 100.0 Actual asset mix Stock Fixed income Global TAA Real assets Hedge funds Private equity Total 45.2 25.2 0.0 9.5 10.7 9.4 100.0 49.2 27.1 1.9 9.9 5.3 6.7 100.0 38.4 43.7 2.9 4.8 6.0 4.3 100.0 50.0 25.9 2.2 9.3 5.0 7.6 100.0 42.8 31.0 4.9 10.5 6.1 4.6 100.0 43.0 36.4 2.7 6.8 5.7 5.5 100.0 43.0 36.4 2.7 6.8 5.7 5.5 100.0 47.7 39.2 0.9 8.0 1.8 2.3 100.0 38.5 47.2 1.7 7.7 2.8 2.1 100.0 41.2 40.3 1.8 10.4 3.1 3.3 100.0 43.2 39.4 2.0 7.4 4.0 3.9 100.0 Policy asset mix Stock Fixed income Global TAA Real assets Hedge funds Private equity Total 43.6 21.9 0.0 14.6 10.0 10.0 100.1 48.7 26.5 2.5 12.0 2.5 7.8 100.0 39.1 43.0 2.5 4.7 6.0 4.7 100.0 48.7 25.4 2.5 10.6 4.2 8.6 100.0 42.4 30.4 4.9 12.7 4.8 4.8 100.0 42.9 35.8 2.6 7.3 5.2 6.1 100.0 42.9 35.8 2.6 7.3 5.2 6.1 100.0 46.6 40.3 1.0 8.6 1.3 2.2 100.0 37.4 47.1 1.8 8.4 2.9 2.2 99.8 45.9 34.1 1.8 12.4 2.0 3.9 100.0 42.8 39.2 2.0 8.0 3.7 4.2 100.0 Description of peer group and universe 5 Implementation style, actual mix and policy mix trends Implementation style, actual mix and policy mix - 2010 to 2014 (as a % of year-end assets) Your fund Peer average¹ U.S. Public average¹ 2014 2013 2012 2011 2010 2014 2013 2012 2011 2010 2014 2013 2012 2011 2010 Implementation style External active 67.4 71.2 74.3 74.6 63.9 66.5 65.5 67.4 67.9 68.6 62.9 63.0 63.7 64.4 64.5 External passive 12.4 9.5 5.5 6.8 6.4 22.9 23.7 22.1 21.0 19.5 21.3 21.1 20.5 19.4 19.1 Internal active 3.4 3.4 3.0 3.9 3.5 8.0 7.9 6.9 7.4 7.3 10.3 10.2 10.1 10.6 10.5 Internal passive 16.9 16.0 17.2 14.7 26.2 2.7 2.9 3.7 3.7 4.6 5.6 5.7 5.7 5.6 5.9 Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Actual asset mix Stock Fixed income Global TAA Real assets Hedge funds Private equity Total 45.2 46.5 44.5 41.9 57.4 50.3 52.5 51.1 50.9 53.8 49.9 51.7 50.0 50.3 53.7 25.2 26.6 32.4 35.9 28.7 26.3 26.6 29.6 31.6 30.5 26.0 26.2 28.5 29.6 29.1 0.0 0.0 0.0 0.0 0.0 1.5 1.3 0.6 0.2 0.4 1.7 1.5 1.4 1.2 1.1 9.5 7.9 2.5 1.5 0.6 9.8 8.7 7.8 6.9 5.6 9.6 8.7 8.4 7.7 6.4 10.7 10.1 10.4 10.0 0.7 5.7 5.0 5.1 5.3 4.3 5.2 4.6 4.1 3.8 2.9 9.4 8.9 10.3 10.7 12.7 6.5 5.9 5.9 5.2 5.3 7.6 7.2 7.7 7.4 6.9 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Policy asset mix Stock 43.6 43.0 Fixed income 21.9 27.0 Global TAA 0.0 0.0 Real assets 14.6 10.0 Hedge funds 10.0 10.0 Private equity 10.0 10.0 Total 100.1 100.0 44.0 31.0 0.0 5.0 10.0 9.9 99.9 44.0 50.0 48.9 50.3 51.3 52.7 53.2 48.5 49.2 50.1 50.9 52.3 30.9 38.0 26.2 27.1 29.1 30.9 32.3 25.5 26.9 27.8 28.8 29.6 0.0 0.0 2.2 2.3 0.7 0.2 0.1 2.0 2.0 1.4 1.2 1.0 5.0 0.0 11.8 10.2 9.2 7.9 6.9 10.8 9.9 9.4 8.5 7.8 10.0 0.0 2.8 2.4 2.8 2.5 2.1 4.3 3.4 3.4 3.1 2.2 10.0 12.0 8.1 7.7 6.9 5.8 5.4 8.9 8.6 8.0 7.5 7.1 99.9 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 1. Trends are based on the 43 U.S. Public and 16 peer funds with 5 consecutive years of data ending 2014. 6 Description of peer group and universe Implementation style by asset class Implementation style impacts your costs, because external active management tends to be more expensive than internal or passive (or indexed) management and fund-of-funds usage is more expensive than direct fund investment. Implementation style by asset class - 2014 (as a % of average assets) U.S. Stock - Broad/All U.S. Stock - Large Cap U.S. Stock - Mid Cap U.S. Stock - Small Cap Stock - EAFE Stock - ACWIxU.S. Stock - Emerging Stock - Global Stock - Other Total Stock Fixed Income - U.S. Fixed Income - U.S. Gov't Fixed Income - U.S. Credit Fixed Income - Long Bonds Fixed Income - EAFE Fixed Income - Emerging Fixed Income - Global Fixed Income - Inflation Indexed Fixed Income - High Yield Fixed Income - Mortgages Fixed Income - Private Debt Fixed Income - Other Cash Total Fixed Income Commodities Infrastructure Natural Resources REITs Real Estate ex-REITs Other Real Assets Total Real Assets Hedge Funds Global TAA Diversified Private Equity Venture Capital LBO Other Private Equity Total Private Equity Total Fund - Avg. Holdings Total Fund - Yr.-End Holdings Your fund % Peer average % External Internal External Internal Active FOFs Index Active Index Active FOFs Index Active Index 100.0 0.0 0.0 0.0 26.9 73.1 0.0 0.0 10.5 0.0 0.0 89.5 36.2 37.6 4.6 21.6 68.6 0.0 0.0 31.4 72.8 4.3 7.2 15.7 0.0 100.0 0.0 0.0 73.1 4.9 16.4 5.6 73.8 25.7 0.0 0.5 60.0 40.0 0.0 0.0 60.5 39.5 0.0 0.0 66.7 33.3 0.0 0.0 85.3 8.9 5.8 0.0 26.7 0.0 73.3 0.0 73.2 22.7 4.1 0.0 44.5 24.6 0.0 30.9 48.9 35.6 8.8 6.7 100.0 0.0 0.0 0.0 67.0 11.0 21.6 0.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 100.0 0.0 0.0 0.0 100.0 0.0 0.0 0.0 97.1 0.0 2.9 0.0 100.0 0.0 0.0 0.0 100.0 0.0 0.0 0.0 35.9 0.0 0.0 64.1 57.1 33.8 0.0 9.1 100.0 0.0 0.0 0.0 93.9 0.0 6.1 0.0 100.0 0.0 0.0 0.0 100.0 0.0 0.0 0.0 100.0 0.0 0.0 0.0 0.0 0.0 100.0 0.0 12.7 0.0 87.3 0.0 75.4 0.0 12.7 11.9 66.7 8.9 23.5 0.9 100.0 0.0 0.0 0.0 n/a n/a 98.4 0.0 n/a 1.6 n/a n/a n/a 99.4 0.0 n/a 0.6 n/a 64.5 0.0 16.5 12.0 7.0 100.0 0.0 n/a 0.0 n/a 97.7 0.5 n/a 1.8 0.0 100.0 0.0 n/a 0.0 n/a 100.0 0.0 n/a 0.0 n/a 100.0 0.0 0.0 0.0 0.0 94.7 0.0 1.8 2.7 0.8 4.7 95.3 n/a 0.0 n/a 71.8 28.2 n/a 0.0 n/a n/a n/a 100.0 0.0 n/a 0.0 n/a 100.0 0.0 n/a 0.0 n/a 69.2 30.8 n/a 0.0 n/a 100.0 0.0 n/a 0.0 n/a 81.7 16.5 n/a 1.8 n/a 100.0 0.0 n/a 0.0 n/a 98.6 1.4 n/a 0.0 n/a n/a n/a 100.0 0.0 n/a 0.0 n/a 100.0 0.0 n/a 0.0 n/a 82.7 17.3 n/a 0.0 n/a 59.3 10.0 10.9 3.4 16.4 61.7 2.8 20.9 11.0 3.6 57.6 9.8 12.4 3.4 16.9 62.0 3.0 20.5 11.0 3.5 U.S. Public average % External Internal Active FOFs Index Active Index 26.3 55.5 4.4 13.8 41.6 33.6 7.4 17.4 69.2 5.2 10.6 15.1 84.3 4.5 7.8 3.4 58.0 28.8 5.3 7.9 68.1 31.1 0.8 0.0 76.0 15.3 5.1 3.6 53.5 17.5 24.8 4.1 58.7 24.8 7.5 9.0 53.0 30.5 7.1 9.4 55.4 17.0 24.1 3.5 100.0 0.0 0.0 0.0 100.0 0.0 0.0 0.0 77.6 0.0 0.9 21.5 90.6 0.0 9.4 0.0 98.2 1.1 0.7 0.0 76.0 0.0 24.0 0.0 40.0 30.0 11.0 19.0 94.2 2.4 3.5 0.0 48.3 1.5 46.2 4.0 88.5 0.0 11.5 0.0 93.8 0.0 4.2 2.0 31.6 0.0 68.4 0.0 60.4 12.2 23.1 4.3 92.0 0.0 3.9 4.1 95.8 2.1 n/a 2.2 n/a 99.8 0.0 n/a 0.2 n/a 73.2 0.0 15.1 7.1 4.5 94.4 0.4 n/a 5.1 0.0 100.0 0.0 n/a 0.0 n/a 93.4 0.0 1.4 4.6 0.6 74.5 25.5 n/a 0.0 n/a 99.1 0.0 n/a 0.9 n/a 77.2 22.8 n/a 0.1 n/a 84.3 15.3 n/a 0.5 n/a 99.0 1.0 n/a 0.0 n/a 92.7 0.0 n/a 7.3 n/a 84.7 14.9 n/a 0.4 n/a 62.7 2.6 18.8 9.9 6.0 62.6 2.6 18.8 10.0 5.9 Description of peer group and universe 7 Actual mix Actual asset mix - 2010 to 2014 (as a % of year-end assets) Your fund % Peer average % U.S. Public average % 2014 2013 2012 2011 2010 2014 2013 2012 2011 2010 2014 2013 2012 2011 2010 Employer Stock U.S. Stock - Broad/All U.S. Stock - Large Cap U.S. Stock - Mid Cap U.S. Stock - Small Cap Stock - EAFE Stock - ACWIxU.S. Stock - Emerging Stock - Global Stock - Other Total Stock Fixed Income - U.S. Fixed Income - U.S. Gov't Fixed Income - U.S. Credit Fixed Income - Long Bonds Fixed Income - EAFE Fixed Income - Emerging Fixed Income - Global Fixed Income - Inflation Indexed Fixed Income - High Yield Fixed Income - Mortgages Fixed Income - Private Debt Fixed Income - Other Cash Total Fixed Income Commodities Infrastructure Natural Resources REITs Real Estate ex-REITs Other Real Assets Total Real Assets Hedge Funds Global TAA Div. Private Equity Venture Capital LBO Other Private Equity Total Private Equity Total Fund Count Median Assets ($ billions) 0.0 2.4 14.5 4.3 2.2 0.0 18.6 3.2 0.0 0.0 45.2 9.0 0.0 0.0 0.0 0.0 1.0 3.8 3.7 4.4 0.0 0.0 0.0 3.4 25.2 0.0 0.0 0.0 0.0 4.7 4.8 9.5 10.7 0.0 0.8 2.2 6.4 0.0 9.4 100 1 15.5 0.0 2.5 14.2 0.0 6.4 0.0 20.4 3.0 0.0 0.0 46.5 8.7 0.0 0.0 0.0 0.0 0.9 3.6 5.0 4.9 0.0 0.0 0.0 3.4 26.6 0.0 0.0 0.0 0.0 3.5 4.4 7.9 10.1 0.0 1.4 2.0 5.5 0.0 8.9 100 1 15.4 8 Description of peer group and universe 0.0 12.8 1.4 0.0 5.6 0.0 20.7 4.1 0.0 0.0 44.5 9.9 0.0 0.0 0.0 0.0 1.1 4.1 8.4 5.9 0.0 0.0 0.0 2.9 32.4 0.0 0.0 0.0 0.0 2.4 0.1 2.5 10.4 0.0 1.8 2.3 6.3 0.0 10.3 100 1 14.0 0.0 11.7 1.7 0.0 6.9 0.0 18.0 3.5 0.0 0.0 41.9 14.5 0.0 0.0 0.0 0.0 1.1 0.0 10.6 5.9 0.0 0.0 0.0 3.9 35.9 0.0 0.0 0.0 0.0 1.5 0.1 1.5 10.0 0.0 2.0 2.4 6.2 0.0 10.7 100 1 13.4 0.0 21.4 5.3 0.0 7.8 0.0 19.2 3.6 0.0 0.0 57.4 15.5 0.0 0.0 0.0 0.0 0.3 0.0 7.6 1.9 0.0 0.0 0.0 3.4 28.7 0.0 0.0 0.0 0.0 0.5 0.1 0.6 0.7 0.0 3.9 1.9 6.9 0.0 12.7 100 1 14.3 0.0 8.5 14.2 1.2 2.3 4.6 10.8 2.8 3.9 0.9 49.2 15.5 0.0 0.0 0.0 0.1 0.6 1.1 1.8 3.3 0.0 0.0 0.8 3.8 27.1 0.1 0.5 0.7 1.1 6.9 0.6 9.9 5.3 1.9 4.4 0.2 1.8 0.3 6.7 100 18 15.0 0.0 10.6 12.4 0.3 3.6 4.4 13.5 2.5 4.8 0.8 52.8 16.4 0.0 0.0 0.0 0.2 0.5 0.9 2.2 2.1 0.0 0.0 0.8 3.0 26.1 0.1 0.4 0.6 0.9 6.4 0.6 9.0 4.7 1.3 4.2 0.2 1.4 0.3 6.1 100 17 15.4 0.0 10.3 12.9 0.2 3.5 4.9 12.5 3.1 2.6 0.4 50.4 19.6 0.0 0.0 0.0 0.3 0.6 0.9 3.2 3.1 0.1 0.0 0.3 1.7 29.8 0.2 0.4 0.4 1.1 5.4 0.3 7.8 5.1 0.9 3.9 0.2 1.5 0.3 5.9 100 17 13.8 0.0 10.4 12.6 0.2 3.6 4.7 11.2 2.1 5.4 0.1 50.3 21.5 0.0 0.0 0.0 0.3 0.4 0.4 3.8 2.7 0.3 0.0 0.4 1.4 31.2 0.2 0.3 0.3 1.0 5.2 0.3 7.3 5.1 0.5 3.8 0.2 1.4 0.3 5.6 100 18 12.0 0.0 12.0 12.2 0.2 3.8 6.1 11.6 1.8 5.9 0.1 53.8 21.5 0.0 0.0 0.1 0.3 0.1 0.4 3.4 2.1 0.3 0.0 0.4 1.3 29.9 0.3 0.1 0.2 1.0 4.2 0.3 6.1 4.1 0.5 3.6 0.2 1.7 0.2 5.7 100 17 12.1 0.0 7.3 14.8 0.7 3.4 6.9 8.2 3.2 4.7 0.9 50.0 14.5 0.1 0.0 1.0 0.1 0.8 2.0 1.8 2.2 0.2 0.2 0.7 2.2 25.9 0.5 0.3 0.6 0.9 6.6 0.5 9.3 5.0 2.2 5.7 0.3 1.3 0.4 7.6 100 57 16.5 0.0 10.1 13.4 0.1 4.1 7.3 9.2 3.0 3.8 0.8 51.8 15.9 0.0 0.0 0.0 0.2 0.8 1.9 1.7 1.6 0.2 0.1 0.7 2.7 25.9 0.5 0.2 0.4 0.7 6.2 0.4 8.5 5.2 1.2 5.6 0.4 1.1 0.4 7.4 100 62 15.6 0.0 7.5 14.7 0.1 4.4 7.0 8.3 3.4 3.8 0.6 49.7 17.5 0.0 0.0 0.2 0.2 0.7 2.2 2.0 2.0 0.2 0.2 0.6 1.9 27.8 0.6 0.4 0.4 0.7 6.3 0.3 8.6 4.8 1.4 6.0 0.3 1.1 0.4 7.8 100 67 14.0 0.0 7.2 14.6 0.1 4.6 7.7 6.4 2.9 4.3 0.5 48.2 18.4 0.0 0.0 0.3 0.2 0.6 2.0 2.2 2.2 0.3 0.0 0.7 1.9 28.8 0.6 0.5 0.3 0.8 6.2 0.3 8.6 5.2 1.4 5.9 0.2 1.2 0.5 7.8 100 67 12.8 0.0 11.0 14.9 0.1 5.0 9.0 7.4 2.6 4.2 0.2 54.3 19.4 0.0 0.0 0.3 0.3 0.4 1.9 1.7 1.8 0.2 0.0 0.5 1.7 28.3 0.6 0.3 0.2 0.7 5.1 0.1 7.0 3.3 1.1 4.5 0.2 1.0 0.3 6.0 100 72 10.4 Policy mix Policy asset mix - 2010 to 2014 (as a % of average assets) Your fund % Peer average % U.S. Public average % 2014 2013 2012 2011 2010 2014 2013 2012 2011 2010 2014 2013 2012 2011 2010 Employer Stock U.S. Stock - Broad/All U.S. Stock - Large Cap U.S. Stock - Mid Cap U.S. Stock - Small Cap Stock - EAFE Stock - ACWIxU.S. Stock - Emerging Stock - Global Stock - Other Total Stock Fixed Income - U.S. Fixed Income - U.S. Gov't Fixed Income - U.S. Credit Fixed Income - Long Bonds Fixed Income - EAFE Fixed Income - Emerging Fixed Income - Global Fixed Income - Inflation Indexed Fixed Income - High Yield Fixed Income - Mortgages Fixed Income - Private Debt Fixed Income - Other Cash Total Fixed Income Commodities Infrastructure Natural Resources REITs Real Estate ex-REITs Other Real Assets Total Real Assets Hedge Funds Global TAA Div. Private Equity Venture Capital LBO Other Private Equity Total Private Equity Total Fund Count 0.0 20.4 0.0 0.0 0.0 0.0 20.0 3.2 0.0 0.0 43.6 0.0 0.0 0.0 0.0 0.0 0.0 19.5 0.0 0.0 0.0 0.0 0.0 2.4 21.9 0.0 0.0 0.0 0.0 4.6 10.0 14.6 10.0 0.0 10.0 0.0 0.0 0.0 10.0 100 1 0.0 5.6 6.7 0.0 6.7 0.0 20.0 4.0 0.0 0.0 43.0 13.0 0.0 0.0 0.0 0.0 0.5 1.5 5.0 5.0 0.0 0.0 0.0 2.0 27.0 0.0 0.0 0.0 0.0 5.0 5.0 10.0 10.0 0.0 3.3 3.3 3.4 0.0 10.0 100 1 0.0 3.3 6.7 0.0 10.0 0.0 20.0 4.0 0.0 0.0 44.0 10.0 0.0 0.0 0.0 0.0 5.0 0.0 10.0 5.0 0.0 0.0 0.0 1.0 31.0 0.0 0.0 0.0 0.0 5.0 0.0 5.0 10.0 0.0 3.3 3.3 3.3 0.0 9.9 100 1 0.0 6.6 6.7 0.0 6.7 0.0 20.0 4.0 0.0 0.0 44.0 19.9 0.0 0.0 0.0 0.0 0.0 0.0 10.0 0.0 0.0 0.0 0.0 1.0 30.9 0.0 0.0 0.0 0.0 5.0 0.0 5.0 10.0 0.0 5.9 1.9 2.2 0.0 10.0 100 1 0.0 20.0 6.0 0.0 4.0 0.0 18.0 2.0 0.0 0.0 50.0 25.0 0.0 0.0 0.0 0.0 0.0 0.0 10.0 0.0 0.0 0.0 0.0 3.0 38.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 12.0 0.0 0.0 0.0 12.0 100 1 0.0 12.6 8.9 0.4 0.8 3.5 11.9 1.8 8.1 0.6 48.7 17.3 0.0 0.0 2.1 0.1 0.4 1.3 5.0 3.8 0.0 0.0 0.6 -4.1 26.5 1.2 1.0 0.8 0.7 6.9 1.4 12.0 2.5 2.5 6.7 0.1 0.6 0.3 7.8 100 18 0.0 13.9 8.1 0.3 1.0 3.5 13.1 1.4 8.8 0.6 50.6 19.4 0.0 0.0 1.5 0.2 0.4 0.3 4.5 3.3 0.0 0.0 0.4 -2.8 27.2 0.9 0.6 0.8 0.6 6.5 0.8 10.2 2.3 2.2 6.1 0.3 0.8 0.4 7.7 100 17 0.0 15.0 9.8 0.2 1.1 4.4 14.3 1.6 3.9 0.3 50.7 21.7 0.0 0.0 0.0 0.2 1.2 0.2 2.1 2.9 0.0 0.0 0.5 0.5 29.4 0.2 0.8 0.6 1.1 5.9 0.6 9.1 3.1 0.9 5.3 0.3 0.8 0.4 6.8 100 17 0.0 15.1 8.8 0.2 1.3 3.6 14.9 1.2 7.2 0.0 52.3 22.8 0.0 0.0 0.0 0.3 0.6 0.3 3.3 2.7 0.0 0.0 0.1 0.8 31.0 0.3 0.2 0.7 0.7 5.7 0.3 7.9 2.6 0.4 4.5 0.1 0.7 0.4 5.7 100 18 0.0 16.5 9.4 0.2 1.7 5.6 12.1 0.9 7.1 0.0 53.4 24.9 0.0 0.0 0.0 0.3 0.0 0.4 3.2 2.1 0.1 0.0 0.3 0.7 31.9 0.4 0.1 0.2 0.5 5.5 0.4 7.0 2.0 0.4 4.3 0.0 0.6 0.4 5.4 100 17 0.0 10.5 10.4 0.3 1.8 5.7 9.1 2.2 8.3 0.4 48.7 16.5 0.0 0.0 1.6 0.1 0.7 2.0 2.8 2.3 0.0 0.1 0.4 -1.0 25.4 0.9 0.4 0.6 0.6 7.2 0.9 10.6 4.2 2.5 7.3 0.3 0.7 0.4 8.6 100 57 0.0 13.2 9.4 0.1 2.1 6.4 8.1 2.0 8.4 0.5 50.1 18.5 0.0 0.0 0.4 0.2 0.7 1.4 2.6 2.1 0.0 0.1 0.7 -0.2 26.5 0.9 0.5 0.7 0.7 6.5 0.5 9.8 3.8 1.6 6.8 0.2 0.8 0.3 8.2 100 62 0.0 12.5 11.0 0.0 2.6 6.6 9.0 2.0 6.3 0.2 50.3 19.0 0.0 0.0 0.2 0.1 0.8 2.0 1.8 1.8 0.0 0.0 0.7 0.7 27.2 0.7 0.6 0.4 0.7 6.4 0.6 9.4 3.9 1.3 6.6 0.2 0.8 0.3 7.8 100 67 0.0 12.0 10.1 0.0 3.0 6.4 9.2 2.2 6.3 0.1 49.2 20.5 0.0 0.0 0.3 0.2 0.7 1.4 2.2 1.9 0.0 0.0 0.4 0.9 28.5 0.7 0.5 0.5 0.5 6.8 0.3 9.3 4.1 1.2 6.4 0.1 0.7 0.4 7.6 100 67 0.0 14.2 10.8 0.0 3.3 7.6 8.7 1.6 5.9 0.0 52.2 21.6 0.0 0.0 0.3 0.4 0.3 1.7 1.7 1.4 0.0 0.0 0.3 1.0 28.8 0.6 0.5 0.2 0.5 6.5 0.2 8.3 2.8 1.0 6.0 0.0 0.4 0.3 6.9 100 72 Description of peer group and universe 9 4 Returns, Benchmarks and Value Added Interpreting box and whisker graphs Net total returns Policy returns Net value added Net returns by asset class Benchmark returns by asset class Net value added by asset class Most frequently used benchmarks by asset class in 2014: - Stock - Fixed Income - Hedge Funds, Real Assets and Private Equity Your policy return and value added calculation: - 2014 - 2010 to 2013 Profit/Loss on overlay programs 2 3 4 5 6 7 8 9 10 11 12 13 14 Interpreting box and whisker graphs Box and whisker graphs are used extensively in this report because they show visually where you rank relative to all observations. At a glance you can see which quartile your data falls in. Legend for box and whisker graphs 90th percentile top of whisker line 75th percentile top of white box Your plan's data green dot Peer average red dash Median line splitting box (50% of observations are lower) 25th percentile bottom of white box 10th percentile bottom of whisker 2 Returns, Benchmarks and Value Added Net total returns Your 5-year net total return of 8.2% was below the peer median and below the median of the U.S. Public universe. Comparisons of total return do not help you understand the reasons behind relative performance. To understand the relative contributions from policy asset mix decisions and implementation decisions we separate total return into its more meaningful components - policy return and implementation value added. Net total returns - You versus peers 20% 15% 10% 5% 0% -5% 2014 2013 90th % 7.8 18.5 75th % 7.2 17.4 Median 6.5 16.4 25th % 5.9 14.3 10th % 5.2 10.4 Average 6.5 15.7 Count 18 17 Kentucky Retirement Systems Your Value 4.9 12.6 %ile Rank 6% 19% 2012 14.4 14.0 13.2 12.5 11.9 13.1 17 2011 2.1 1.6 0.5 0.0 -0.9 0.6 18 2010 15.7 14.1 12.8 11.5 11.4 13.1 17 3 yrs 12.9 12.7 11.9 10.5 9.5 11.5 16 4 yrs 9.8 9.4 8.7 8.1 7.0 8.7 16 5 yrs 10.6 10.3 9.7 8.8 8.0 9.5 16 12.5 25% -1.0 0% 12.8 50% 9.9 13% 7.1 13% 8.2 13% Net total returns - You versus U.S. Public universe 25% 20% 15% 10% 5% 0% -5% 2014 2013 90th % 8.2 19.4 75th % 7.7 17.5 Median 6.6 15.8 25th % 5.6 13.4 10th % 4.7 11.9 Average 6.7 15.6 Count 57 62 Kentucky Retirement Systems Your Value 4.9 12.6 %ile Rank 14% 18% 2012 14.3 14.0 13.3 12.4 11.8 13.1 67 2011 2.9 2.1 0.7 -0.1 -0.9 0.9 67 2010 15.5 14.3 13.1 12.3 11.5 13.3 72 3 yrs 12.9 12.6 11.9 10.9 10.0 11.6 49 4 yrs 9.8 9.6 8.9 8.1 7.4 8.8 47 5 yrs 10.6 10.2 9.8 9.1 8.4 9.6 43 12.5 27% -1.0 8% 12.8 38% 9.9 8% 7.1 4% 8.2 5% Returns, Benchmarks and Value Added 3 Policy returns Your 5-year policy return of 9.2% was close to the peer median and below the median of the U.S. Public universe. Policy return is the return you would have earned had you passively implemented your policy asset mix decision through your benchmark portfolios. Policy Returns - You versus peers 20% 15% 10% 5% 0% -5% 2014 2013 90th % 7.4 18.3 75th % 6.7 16.6 Median 6.4 15.1 25th % 6.0 13.6 10th % 5.3 11.0 Average 6.4 14.8 Count 18 17 Kentucky Retirement Systems Your Value 6.2 13.6 %ile Rank 41% 31% 20% 2012 13.7 13.3 13.1 12.0 10.9 12.6 17 2011 2.4 2.1 0.8 0.0 -0.5 1.0 18 2010 13.3 12.9 12.2 11.6 10.8 12.1 17 3 yrs 12.7 12.0 11.3 10.3 9.5 11.2 16 4 yrs 9.6 9.4 8.6 8.0 7.1 8.5 16 5 yrs 10.4 10.0 9.3 8.4 8.0 9.2 16 14.2 94% 0.5 41% 12.1 44% 11.3 47% 8.5 47% 9.2 47% Policy returns - You versus U.S. Public universe 15% 10% 5% 0% -5% 2014 2013 90th % 8.7 18.4 75th % 7.6 17.1 Median 6.6 15.5 25th % 5.9 13.6 10th % 5.1 11.6 Average 6.8 15.2 Count 57 62 Kentucky Retirement Systems Your Value 6.2 13.6 %ile Rank 34% 26% 2012 13.8 13.3 12.7 11.8 10.9 12.6 67 2011 3.6 2.6 1.4 0.4 -0.3 1.5 67 2010 14.0 13.2 12.6 11.8 11.3 12.4 72 3 yrs 12.8 12.3 11.6 10.6 9.8 11.5 49 4 yrs 10.0 9.5 8.9 8.0 7.5 8.8 47 5 yrs 10.6 10.2 9.7 8.9 8.4 9.5 43 14.2 94% 0.5 27% 12.1 34% 11.3 40% 8.5 37% 9.2 36% To enable fairer comparisons, the policy returns of all participants including your fund were adjusted to reflect private equity benchmarks based on lagged, investable, public-market indices. Prior to this adjustment, your 5-year policy return was 8.7%, 0.5% lower than your adjusted 5-year policy return of 9.2%. Mirroring this, without adjustment your 5-year total fund net value added would be 0.5% higher. Refer to the Research section pages 6-7 for details. 4 Returns, Benchmarks and Value Added Net value added Your 5-year net value added of -1.0% was below the peer median and below the median of the U.S. Public universe. Net value added is the difference between your net total return and your policy return. Net value added - You versus peers 4% 3% 2% 1% 0% -1% -2% -3% 2014 2013 90th % 1.7 2.6 75th % 0.7 1.7 Median 0.1 0.8 25th % -0.5 -0.6 10th % -1.3 -1.2 Average 0.2 0.8 Count 18 17 Kentucky Retirement Systems Your Value -1.3 -1.0 %ile Rank 6% 19% 2012 1.5 1.0 0.6 0.0 -0.5 0.5 17 2011 1.6 0.2 -0.5 -1.3 -1.8 -0.3 18 2010 3.6 1.4 0.7 -0.1 -0.6 1.0 17 3 yrs 1.2 0.7 0.4 0.1 -0.5 0.3 16 4 yrs 0.9 0.3 0.2 0.0 -0.7 0.1 16 5 yrs 1.0 0.6 0.1 0.0 -0.4 0.2 16 -1.7 0% -1.5 18% 0.7 56% -1.4 0% -1.4 0% -1.0 0% Net value added - You versus U.S. Public universe 4% 3% 2% 1% 0% -1% -2% -3% 2014 2013 90th % 1.6 2.9 75th % 0.3 1.3 Median -0.2 0.6 25th % -0.7 -0.7 10th % -1.3 -1.8 Average -0.1 0.4 Count 57 62 Kentucky Retirement Systems Your Value -1.3 -1.0 %ile Rank 11% 20% 2012 1.7 1.2 0.6 0.1 -0.5 0.6 67 2011 1.0 0.2 -0.6 -1.5 -2.1 -0.6 67 2010 3.0 1.4 0.7 -0.1 -0.8 0.9 72 3 yrs 1.1 0.7 0.3 -0.2 -0.8 0.2 49 4 yrs 0.6 0.3 0.0 -0.3 -0.8 0.0 47 5 yrs 0.6 0.3 0.0 -0.2 -0.6 0.1 43 -1.7 3% -1.5 24% 0.7 49% -1.4 4% -1.4 4% -1.0 0% Returns, Benchmarks and Value Added 5 Net returns by asset class Your fund % Asset class U.S. Stock - Broad/All U.S. Stock - Large Cap U.S. Stock - Mid Cap U.S. Stock - Small Cap Stock - EAFE Stock - Emerging Stock - ACWIxU.S. Stock - Global Stock - Other Stock - Total Fixed Income - U.S. Fixed Income - U.S. Gov't Fixed Income - U.S. Credit Fixed Income - EAFE Fixed Income - Emerging Fixed Income - Global Fixed Income - Long Bonds Fixed Income - Inflation Indexed Fixed Income - High Yield Fixed Income - Mortgages Fixed Income - Private Debt Fixed Income - Other Cash Fixed Income - Total Commodities Infrastructure REITs Natural Resources Real Estate ex-REITs Other Real Assets Real Assets - Total Hedge Funds Global TAA Diversified Private Equity LBO Venture Capital Other Private Equity Private Equity - Total Total Fund Return Peer average % U.S. Public average % 2014 2013 2012 2011 2010 5-yr 2014 2013 2012 2011 2010 5-yr 2014 2013 2012 2011 2010 5-yr 11.5 13.6 6.5 6.3 35.6 32.8 16.1 16.8 2.9 0.1 16.0 15.9 11.1 14.4 34.4 16.3 0.4 29.1 16.6 -3.3 -3.8 -3.1 23.3 -15.2 17.7 15.7 -12.1 23.0 10.2 3.8 3.9 22.8 16.7 -2.7 5.7 -4.6 1.3 15.3 10.3 6.8 3.0 3.1 2.6 -9.4 -2.4 17.0 -0.6 -0.3 11.7 4.0 3.2 5.4 -8.2 7.2 9.1 15.6 5.7 6.4 0.6 14.7 3.1 8.5 0.2 3.3 0.5 -2.1 0.4 7.8 0.3 2.3 0.5 5.9 0.4 3.4 8.0 3.6 5.7 4.5 8.3 2.1 5.6 11.4 7.2 0.0 6.9 6.6 7.6 0.0 7.1 -3.2 8.5 0.0 6.6 -2.5 7.9 1.1 6.4 3.2 8.9 10.7 6.9 18.4 18.1 13.2 21.2 20.8 -3.6 8.2 18.0 26.3 16.3 18.2 13.4 14.5 17.1 10.8 9.6 4.9 17.0 12.6 15.5 12.5 17.0 -1.0 16.6 12.8 15.1 8.2 3.8 4.9 11.3 13.4 8.4 5.3 -3.2 -0.9 -3.9 4.6 8.3 5.1 5.1 34.1 33.3 37.2 39.0 24.4 -1.3 18.6 27.2 20.2 26.7 -1.5 16.3 1.2 16.1 1.5 16.3 1.3 16.7 -3.0 17.2 -11.8 18.6 -20.0 18.1 -11.6 16.4 -5.0 9.0 -5.6 16.9 -4.9 6.6 7.0 17.7 14.8 18.0 24.0 8.5 19.5 12.0 13.0 27.4 15.2 8.3 15.6 15.4 15.6 15.5 6.2 2.1 5.9 10.7 11.3 11.3 5.1 -1.1 -0.1 3.8 -4.1 -7.9 -1.7 1.5 16.6 5.3 4.6 8.6 15.4 24.3 5.8 1.5 7.9 28.8 14.1 3.6 1.1 4.2 11.8 9.7 12.1 7.5 14.3 22.9 1.2 4.0 4.9 5.5 8.8 11.3 21.0 0.2 8.0 1.8 6.1 18.5 3.5 9.6 3.9 10.6 6.4 5.8 13.2 15.3 2.9 14.9 12.8 13.1 -0.9 0.2 7.3 -5.7 8.6 1.5 0.6 12.8 -2.2 9.8 3.2 12.6 10.8 14.4 36.9 14.1 11.7 0.6 18.1 0.4 8.7 13.4 1.9 24.2 2.2 11.6 2.2 12.9 8.3 5.5 12.0 16.6 14.5 6.2 12.4 13.1 11.0 0.2 5.4 -3.9 7.7 13.1 4.4 12.2 3.3 11.6 6.1 6.6 13.7 16.8 13.9 12.6 13.9 9.7 6.1 -7.7 3.8 7.5 4.2 6.2 -7.3 11.5 9.1 9.1 0.1 -0.1 4.6 -1.0 -16.2 -10.2 9.7 12.4 18.9 3.9 9.7 6.4 13.1 13.8 4.8 8.4 13.2 11.8 3.4 9.6 5.3 3.7 15.5 17.3 15.1 22.8 4.8 13.4 16.7 11.3 15.6 16.9 6.5 15.7 11.2 12.7 8.6 5.1 -4.0 -1.2 -3.4 4.2 5.1 5.1 5.8 1.0 6.6 -2.6 -0.5 3.5 23.0 4.6 3.9 6.4 0.0 5.5 0.3 5.7 -16.4 13.1 19.8 11.1 12.5 7.8 11.5 4.5 5.7 16.3 14.3 16.2 14.3 15.7 6.7 32.8 33.6 37.2 39.0 23.2 -1.1 18.6 23.3 19.3 26.3 -1.5 16.2 0.7 16.2 1.4 16.3 1.3 16.0 -3.4 16.8 -11.7 18.7 -19.4 17.8 -12.3 15.1 -7.2 11.7 -6.7 16.7 -5.1 6.8 8.4 17.5 15.2 18.0 26.7 10.3 19.5 12.2 12.9 21.2 15.8 8.7 15.2 15.4 15.7 15.7 6.1 2.2 5.8 9.1 9.6 11.2 5.6 -3.1 -7.4 -0.4 4.7 -6.6 7.1 5.0 6.8 7.8 0.4 -0.9 -4.4 9.7 4.5 6.6 12.4 10.1 10.3 10.0 0.6 17.8 18.4 17.4 18.0 17.7 15.6 0.9 15.8 8.0 10.2 7.9 15.7 11.9 7.5 13.1 0.9 8.0 0.9 6.3 20.9 1.8 10.4 4.0 10.1 6.5 10.5 13.1 13.8 9.0 8.5 12.8 13.1 7.0 13.3 8.4 12.2 6.8 14.2 13.8 1.6 4.1 4.9 15.4 5.0 8.8 8.0 19.5 0.7 9.2 15.0 6.3 23.6 2.4 7.9 6.5 10.0 9.0 14.1 13.8 13.2 12.3 17.1 13.7 13.3 9.4 0.7 5.8 -3.1 7.4 13.8 4.9 11.3 6.2 10.4 6.1 7.1 14.4 14.2 14.7 11.8 14.2 9.8 6.4 1.0 5.2 28.3 13.2 3.7 3.6 3.5 1.9 1.3 7.4 -7.8 1.8 2.0 3.0 13.4 2.7 10.0 0.6 4.9 11.1 11.6 18.9 2.1 11.2 0.9 You were not able to provide full year returns for all of the components of returns shown in italics. The default is to set the unavailable return equal to the benchmark return. 6 Returns, Benchmarks and Value Added Benchmark returns by asset class Your fund % Asset class U.S. Stock - Broad/All U.S. Stock - Large Cap U.S. Stock - Mid Cap U.S. Stock - Small Cap Stock - EAFE Stock - Emerging Stock - ACWIxU.S. Stock - Global Stock - Other Stock - Total Fixed Income - U.S. Fixed Income - U.S. Gov't Fixed Income - U.S. Credit Fixed Income - EAFE Fixed Income - Emerging Fixed Income - Global Fixed Income - Long Bonds Fixed Income - Inflation Indexed Fixed Income - High Yield Fixed Income - Mortgages Fixed Income - Private Debt Fixed Income - Other Cash Fixed Income - Total Commodities Infrastructure REITs Natural Resources Real Estate ex-REITs Other Real Assets Real Assets - Total Hedge Funds Global TAA Diversified Private Equity¹ LBO¹ Venture Capital¹ Other Private Equity¹ Private Equity¹ - Total Total Policy Return Peer average % U.S. Public average % 2014 2013 2012 2011 2010 5-yr 2014 2013 2012 2011 2010 5-yr 2014 2013 2012 2011 2010 5-yr 12.6 13.7 8.2 4.9 33.6 32.4 16.4 16.4 1.0 1.0 16.4 15.1 15.5 15.3 38.8 16.4 1.0 26.9 16.8 -1.8 -3.4 -2.3 15.8 18.6 -18.2 16.8 -13.3 19.2 12.4 2.1 4.9 4.2 6.0 22.6 -2.0 16.8 4.2 -7.2 8.1 15.7 6.5 9.9 4.5 17.4 8.1 12.3 5.6 -5.3 -2.2 2.6 2.5 -8.6 7.4 7.0 15.8 5.7 8.1 6.3 15.1 2.4 9.7 0.0 5.0 0.1 -1.4 0.1 9.0 0.1 7.1 0.0 6.0 0.0 5.1 11.4 2.9 5.6 4.7 12.0 2.3 7.1 8.5 10.9 0.0 10.9 3.1 15.3 0.0 15.3 -2.5 13.1 0.0 11.3 5.3 12.5 1.0 10.0 3.8 18.2 29.2 29.2 29.2 18.8 18.8 18.8 7.8 7.8 7.8 12.2 12.2 12.2 17.0 18.2 6.2 29.2 13.6 18.8 14.2 7.8 0.5 12.2 12.1 17.0 9.2 12.6 13.4 10.1 6.2 -4.0 -1.4 -3.7 4.9 5.1 5.5 5.8 33.5 32.7 33.5 37.9 21.9 -0.7 15.6 24.7 20.2 25.2 -1.9 -0.3 -1.6 -2.0 -6.2 4.9 -1.6 24.9 -12.8 5.4 -6.7 2.4 7.0 3.8 -1.2 4.2 15.3 8.6 9.8 0.0 0.1 8.7 -3.3 -20.0 -5.4 7.3 5.1 20.6 4.0 6.4 8.6 13.0 10.3 5.9 6.4 8.4 8.7 4.1 5.9 5.4 4.7 15.2 31.3 9.3 32.5 9.9 32.2 8.3 32.1 15.1 31.5 6.4 14.8 16.4 1.1 16.2 1.7 17.9 -1.7 16.5 -2.5 17.4 -12.0 17.9 -18.3 17.0 -13.6 16.0 -6.2 11.7 -5.9 16.6 -5.5 4.4 7.8 17.0 15.6 26.6 24.2 8.3 19.1 11.3 12.5 18.8 14.3 6.7 15.6 15.5 16.6 15.6 5.5 2.4 4.6 9.9 9.5 10.7 4.5 3.5 16.9 5.0 3.4 7.7 14.7 7.9 4.7 5.6 6.4 33.8 13.3 5.3 6.0 -0.8 12.2 9.9 9.4 6.3 15.2 7.1 1.1 5.0 4.8 10.5 5.0 8.8 4.7 12.5 0.1 6.3 -0.3 7.1 22.3 7.9 11.2 5.3 11.6 4.2 7.9 15.4 17.3 17.3 19.1 15.3 12.6 3.0 0.1 7.9 -5.2 8.9 3.8 6.1 14.9 7.5 12.2 1.1 1.7 11.6 6.9 6.9 6.7 11.4 1.0 11.0 0.1 7.2 11.6 8.3 25.3 2.8 10.6 4.3 11.3 5.9 4.8 13.2 13.3 13.3 13.7 13.4 12.1 8.9 0.1 5.3 -4.4 7.3 14.8 6.4 12.0 5.9 10.4 4.2 4.9 17.2 15.5 15.6 15.6 17.1 9.3 12.7 13.2 10.4 6.2 -4.2 -1.7 -3.7 3.5 2.9 5.3 6.2 0.8 5.8 -3.1 0.0 3.8 20.0 4.5 2.8 4.1 4.6 5.9 0.2 7.6 -18.0 6.8 21.9 6.8 12.0 7.5 9.3 4.0 5.3 16.2 12.3 12.9 13.7 16.1 6.8 32.7 32.9 33.5 37.9 21.9 -1.3 16.3 21.5 18.3 25.2 -2.1 16.3 1.2 16.2 1.6 17.9 -1.7 16.9 -3.2 17.2 -12.4 18.2 -18.5 17.0 -13.8 15.0 -7.3 11.8 -8.2 16.6 -5.5 4.9 8.1 16.8 15.8 26.6 25.8 9.4 19.1 11.7 12.9 15.8 14.8 6.7 15.5 15.5 16.7 15.8 5.6 2.2 4.8 8.7 7.6 10.8 4.7 -3.8 -6.4 -1.4 -6.4 -5.8 6.7 0.2 7.2 5.2 0.3 -2.2 -4.2 6.8 3.6 7.9 11.6 9.9 9.3 9.0 9.3 30.4 30.9 31.5 30.9 30.4 15.2 2.0 16.8 4.3 4.6 7.4 13.8 7.3 6.1 9.2 0.4 6.0 1.3 7.1 22.4 7.2 11.1 5.6 10.4 6.1 9.3 13.6 15.1 16.0 15.3 13.5 12.6 5.3 12.5 5.9 9.4 6.1 14.3 6.1 1.0 5.0 3.8 10.0 4.8 8.5 4.4 15.7 0.2 7.0 13.7 7.9 24.4 3.5 10.8 5.7 11.7 5.5 8.0 15.6 12.9 15.9 12.7 15.5 12.4 7.8 0.3 5.2 -3.4 7.3 14.8 6.0 12.1 7.6 10.5 4.8 6.9 17.4 15.8 16.7 16.0 17.3 9.6 5.1 3.8 6.5 25.4 12.7 5.2 4.6 3.9 3.4 0.3 8.0 -7.2 8.1 3.8 4.9 15.1 9.2 11.7 -0.2 2.5 11.9 8.9 8.5 8.7 11.9 1.5 1. To enable fairer comparisons, the policy returns of all participants including your fund were adjusted to reflect private equity benchmarks based on lagged, investable, public-market indices. Prior to this adjustment, your 5-year policy return was 8.7%, 0.5% lower than your adjusted 5-year policy return of 9.2%. Mirroring this, without adjustment your 5-year total fund net value added would be 0.5% higher. Refer to the Research section pages 6-7 for details. Returns, Benchmarks and Value Added 7 Net value added by asset class Your fund % Asset class U.S. Stock - Broad/All U.S. Stock - Large Cap U.S. Stock - Mid Cap U.S. Stock - Small Cap Stock - EAFE Stock - Emerging Stock - ACWIxU.S. Stock - Global Stock - Other Stock - Total Fixed Income - U.S. Fixed Income - U.S. Gov't Fixed Income - U.S. Credit Fixed Income - EAFE Fixed Income - Emerging Fixed Income - Global Fixed Income - Long Bonds Fixed Income - Inflation Indexed Fixed Income - High Yield Fixed Income - Mortgages Fixed Income - Private Debt Fixed Income - Other Cash Fixed Income - Total Commodities Infrastructure REITs Natural Resources Real Estate ex-REITs Other Real Assets Real Assets - Total Hedge Funds Global TAA Diversified Private Equity¹ LBO¹ Venture Capital¹ Other Private Equity¹ Private Equity¹ - Total Total fund Peer average % U.S. Public average % 2014 2013 2012 2011 2010 5-yr 2014 2013 2012 2011 2010 5-yr 2014 2013 2012 2011 2010 5-yr -1.1 -0.1 -1.7 1.4 2.0 0.4 -0.3 0.4 1.9 -0.9 -0.4 -4.0 0.4 -0.9 -4.4 -0.1 -0.6 2.2 -0.2 -1.4 -0.4 -0.8 1.9 4.7 -1.1 3.0 1.1 3.8 -2.2 1.7 -0.1 -0.3 -2.0 0.2 -0.7 -0.1 1.4 2.7 -6.8 -0.5 0.3 0.5 -1.5 -0.4 -8.4 -0.6 -3.0 -4.1 -0.2 0.6 2.9 0.4 -0.3 2.1 -0.2 -0.1 -7.5 0.1 -0.4 0.6 -1.1 0.2 -1.7 0.5 -0.7 0.3 -1.2 0.2 -4.8 0.5 -0.1 0.3 -1.7 -3.3 0.7 0.1 -0.2 -3.7 -0.2 -1.6 2.8 -3.7 0.0 -4.0 3.5 -7.6 0.0 -8.2 -0.7 -4.6 0.0 -4.8 -7.8 -4.6 0.1 -3.6 -0.6 -9.3 -10.8 2.4 -11.1 2.0 -16.0 -22.4 0.4 10.3 18.6 4.0 6.0 1.2 -2.5 -8.6 -12.2 -1.3 -1.0 9.3 -1.5 4.4 0.7 -1.9 -1.0 -3.3 -1.7 -1.2 0.1 -1.8 -1.0 0.8 0.5 -0.1 -0.5 3.2 -0.4 -0.7 0.7 0.6 3.7 1.0 2.6 -0.7 3.1 2.1 0.0 1.5 0.4 0.0 -0.1 -1.6 0.2 -0.2 0.8 1.1 0.4 -4.9 0.3 2.2 0.1 -0.2 3.0 -0.5 0.2 -1.8 2.0 1.2 0.3 0.6 -0.8 0.7 -0.8 -8.6 -0.2 0.2 0.3 0.7 0.6 8.6 0.9 1.5 0.0 -0.1 -1.0 -0.2 0.7 -0.3 1.3 0.8 1.7 0.5 0.5 -0.7 1.4 -0.2 -2.5 -1.7 0.0 -2.0 -0.3 3.3 1.2 0.9 0.6 16.4 1.2 -4.0 1.5 -5.0 0.7 -1.7 -4.9 5.0 -0.5 -0.2 2.7 1.2 -0.8 15.8 0.2 -1.0 0.1 -4.0 0.1 -0.6 -0.5 -0.4 -2.2 -5.5 -2.2 -8.0 -2.4 2.1 11.0 -0.9 7.4 29.9 11.3 0.3 -0.3 7.0 0.3 1.4 1.8 -6.4 -1.0 -0.7 1.0 2.3 1.6 2.6 0.7 -1.2 3.9 3.4 -9.5 -1.0 1.0 2.1 0.1 0.2 0.5 0.3 -1.7 -2.0 0.2 -2.6 1.2 1.9 1.7 -3.4 1.3 -1.7 -3.0 -3.3 0.4 0.3 1.4 4.5 -18.5 0.5 0.1 -4.2 0.8 2.4 -1.7 3.2 0.1 -1.2 4.9 -0.7 -0.1 0.3 6.7 -5.7 8.4 0.5 0.2 -1.3 0.6 7.4 -3.8 -0.7 8.5 -0.2 0.1 2.3 1.8 -0.7 2.1 7.3 -1.0 -0.1 -1.9 -3.1 -4.5 3.4 -1.5 1.9 -1.5 3.1 -1.0 3.7 2.2 -1.1 -2.1 -14.0 -2.2 -9.7 -2.0 -18.7 -14.4 -20.9 -4.1 -14.5 -2.5 0.8 0.5 0.5 0.0 6.7 -1.6 -0.5 -1.8 -1.1 0.3 0.5 0.3 0.7 2.3 -0.2 -0.3 0.2 0.8 0.4 -0.7 -0.1 4.6 -0.1 1.1 3.2 -4.5 -0.4 0.2 -1.9 1.2 6.3 -2.1 4.3 0.5 0.3 2.2 0.4 0.4 0.1 2.3 4.0 0.6 -0.4 -0.1 0.1 0.7 3.7 1.1 1.4 0.2 2.3 2.0 0.4 1.1 0.5 -0.1 0.0 -1.6 -0.8 0.1 0.6 0.7 0.1 -0.7 0.1 2.0 -0.5 -0.2 3.0 -0.2 0.3 -0.9 1.5 0.1 1.6 0.4 0.3 0.7 -0.3 -8.6 0.9 1.1 0.3 0.8 0.0 3.7 1.0 2.0 -0.3 -0.2 -1.0 -0.1 0.6 0.1 1.0 0.5 2.0 0.5 0.9 0.7 -1.0 1.1 4.8 -1.0 0.5 4.8 -0.4 2.2 0.1 1.2 -0.5 2.9 0.9 -1.6 0.8 -1.1 1.0 0.9 -8.7 -12.5 -12.6 -14.1 -13.0 -12.8 0.4 -1.1 -0.2 4.6 5.6 0.5 1.6 4.5 2.5 3.2 0.4 2.2 -0.3 -0.8 -0.8 -5.4 -0.8 -2.0 -0.2 0.5 1.2 -0.5 -1.3 -6.9 -6.8 -0.7 0.6 1.0 -3.0 -1.3 0.2 0.5 -1.6 -1.3 -0.4 -1.6 1.1 -0.6 -0.9 -6.3 -1.9 -1.8 -1.8 -4.2 -1.6 0.8 2.4 -0.8 2.7 10.5 -6.2 -0.7 -0.6 1.7 0.8 3.0 2.9 0.7 0.0 7.1 0.6 -0.9 1.1 5.3 0.2 0.3 3.6 5.0 0.5 2.2 1.4 -1.6 -0.8 -1.1 -2.8 2.3 -1.7 3.7 6.1 -1.8 0.7 -3.0 3.5 -1.8 0.9 1.6 0.4 0.6 0.4 0.1 -1.0 -1.1 -0.8 -1.4 -0.1 1.2 0.2 -3.0 -1.6 -2.0 -4.2 -3.1 0.2 Total net value add is determined by both actual and policy allocation. It is the outcome of total net return (page 6) minus total benchmark return (page 7). Aggregate net returns are an asset weighted average of all categories that the fund has an actual allocation to. Aggregate benchmark returns are a policy weighted average and includes only those categories that are part of your policy fund's mix. You were not able to provide full year returns for all of the components of returns of asset classes with values shown in italics. The default is to set the unavailable return equal to the benchmark return. 1. To enable fairer comparisons, the policy returns of all participants including your fund were adjusted to reflect private equity benchmarks based on lagged, investable, public-market indices. Prior to this adjustment, your 5-year policy return was 8.7%, 0.5% lower than your adjusted 5-year policy return of 9.2%. Mirroring this, without adjustment your 5-year total fund net value added would be 0.5% higher. Refer to the Research section pages 6-7 for details. 8 Returns, Benchmarks and Value Added Most frequently used benchmarks by asset class - 2014 - Stock How many of your peers use the most frequently used benchmarks by universe # Using Benchmark Description U.S. Stock - Broad/All Russell 3000 S&P 500 Wilshire 5000 DJ US Total Stock Market Other Total # Using U.S. Public Return¹ Peers 12.6 13.7 12.7 12.5 13.1 12.7 6 U.S. Stock - Large Cap S&P 500 Russell 1000 Russell 3000 Custom Other Total 13.7 13.2 12.6 13.2 12.8 13.2 4 2 1 U.S. Stock - Small Cap Russell 2000 RUSSELL 2500 Custom Russell 3000 Other Total 4.9 6.9 7.1 12.6 6.6 5.9 Stock - EAFE MSCI EAFE Net Custom MSCI EAFE MSCI EAFE gross Other Total -4.9 -3.8 -4.3 -4.5 -3.4 -4.1 1 2 9 3 10 6 1 1 4 12 4 1 3 8 43 4 4 2 15 68 Benchmark Description Stock - Emerging MSCI Emerging Market net MSCI Emerging Market gross Custom MSCI Emerging Markets Other Total Return¹ Peers -2.1 -1.8 -0.6 -2.0 -1.3 5 2 1 3 11 U.S. Public 46 11 8 8 37 110 38 29 9 5 23 104 Stock - ACWIxU.S. MSCI ACWI xUS net MSCI ACWI xUS gross MSCI ACWI xUS IMI net MSCI ACWI ex US IMI Other Total 56 12 7 3 26 104 Stock - Global MSCI ACWI net MSCI World Net Custom MSCI ACWI IMI Other Total 4.2 4.8 2.6 3.8 4.7 4.3 Stock - Asia-Pacific MSCI ACWI 4.8 1 Total 4.8 1 36 10 6 5 37 94 Stock - Europe MSCI ACWI 4.8 1 Total 4.8 1 -3.9 -3.5 -3.9 -3.6 -3.5 -3.6 5 1 1 5 12 2 2 1 1 6 27 7 3 2 38 77 14 14 8 4 33 73 1. Return reflects the average return provided to CEM for the described benchmark. Often, different returns for the same described benchmark are provided due to revisions (particularly for real estate benchmarks), rounding and differences in calculation methodology (particularly for hedged returns). Returns, Benchmarks and Value Added 9 Most frequently used benchmarks by asset class - 2014 - Fixed Income Benchmark Description Fixed Income - U.S. Barclays US Aggregate Custom Barclays US Universal Barclays aggregate Other Total # Using U.S. Return¹ Peers Public 6.0 9.7 6.2 6.0 6.9 6.6 11 2 4 17 53 9 5 3 35 105 # Using U.S. Return¹ Peers Public Benchmark Description Fixed Income - High Yield Barclays US Corp High Yield Custom Barclays US Corp High Yield 2% Capped Citigroup High Yield Bond Other Total 1 1 1 7 10 9 7 4 3 47 70 Fixed Income - EAFE Fixed Income - Inflation Indexed Barclays Global Aggregate ex US -3.4 1 Barclays US TIPS 5 20 CalPERS Barclays International Fixed Income -5.4 Index GDP weighted 1 ex-US Barclays Global Inflation Linked 2 Citigroup Non-U.S. World Government -0.3 Bond 50% Hedged 1 1 Custom 1 2 Custom 9.1 1 50% BC Global Inflat Linked:US TIPS, 50% BC World Inflat-Linked 1 Hedged Other 4 14 Total 0.0 1 4 Total 10 39 Fixed Income - Global Barclays US Aggregate 6.0 1 7 Barclays Global Aggregate 3.4 1 5 77% Barclays Aggregate/23% Citigroup World 4.5 Gov't Bond 1 Barcap Global Corp TR Hedged / GLADI DM 7.8 AA-&Above Hedged 1 Other 1.9 2 18 Total 3.3 4 32 Fixed Income - Mortgages Custom 3 95% BC US Agg x-Tobacco x-firearm + 5% US HY Cash Pay 2% 1 Issuer Cons Barclays Mortgage Index 1 Barclays Mortgage Index Lagged 1 1 Other 8 Total 1 14 Fixed Income - Emerging JP Morgan EMBI Global Diversified Custom JPM EMBI Global Diversified JPMorgan GBI-EM Global Diversified Other Total Fixed Income - Long Bonds Custom Barclays US Long G/C Barclays Long Corporate Barclays US Long Credit Other Total 10 Returns, Benchmarks and Value Added 7.4 0.1 6.0 -5.7 0.7 1.2 1 6 7 4 3 3 3 30 43 1 1 20 14 3 3 38 78 Most frequently used benchmarks by asset class - 2014 - Hedge Funds and Real Assets² # Using U.S. Peers Public # Using U.S. Peers Public Benchmark Description Return¹ Benchmark Description Return¹ Global TAA Infrastructure Custom 4.5 1 14 Custom 7.6 2 7 3 Month LIBOR + 200 bps 2.2 2 CPI + 5% 6.0 1 5 20% S&P 500; 40% Barclays Treasury, 40% 4.7Citigroup 3-Month 1 Tbill [Domestic CPI+4%]×w3 + Actual Return on 8.0Legacy Investment×(1-w3) 1 (D 35.72% Russell 3000, 28.56% Barclays US4.6 Universal, 35.72%1MSCI AC Actual World return ex USA 0.0 1 Other 5.6 3 24 Other 6.8 4 19 Total 5.1 4 42 Total 6.7 7 33 Hedge Funds Custom HFRI Fund of Funds Composite Index 3 Month LIBOR + 200 bps HFRI Equity Hedge Index Other Total Commodities Dow Jones UBS Commodity Index Custom Bloomberg Commodity Index Goldman Sachs Commodities Index Other Total REITs Your REIT benchmark Custom Wilshire REIT DJ Select Real Estate Securities Other Total 4.7 3.5 2.2 0.3 3.2 3.6 4 7 11 -17.0 -11.9 -17.0 -33.1 -20.1 -18.6 1 18.3 17.0 31.8 31.8 23.9 21.2 6 4 5 1 3 10 30 5 2 2 62 101 14 5 2 2 20 43 Natural Resources Custom CPI + 5% NCREIF TIMBERLAND NCREIF Timberland Index Other Total 7.9 5.7 10.5 10.2 5.2 6.5 1 1 1 7 10 9 4 3 2 24 42 Real Estate ex-REITs Custom NCREIF NCREIF qtr lag NCREIF ODCE Other Total 10.6 11.8 11.3 11.2 11.5 11.4 3 1 2 12 18 21 17 11 9 70 128 24 6 4 1 15 50 2. In order to eliminate the substantial noise caused by inconsistent and often inappropriate private equity benchmarks (see Research section page 6), the private equity benchmarks of all participants were adjusted to reflect investable private equity benchmarks based on lagged, small-cap stock. As a result of this adjustment, the most commonly used private equity benchmarks are not shown. Returns, Benchmarks and Value Added 11 Your policy return and value added calculation - 2014 2014 Policy Return and Value Added Asset class U.S. Stock - Broad/All U.S. Stock - Large Cap Policy weight Description Benchmark Net Value Return return added 20.4% Russell 3000 0.0% S&P 500 Total Return 12.6% 13.7% 11.5% 13.6% -1.1% -0.1% U.S. Stock - Mid Cap 0.0% S&P Mid Cap Index 8.2% 6.5% -1.7% U.S. Stock - Small Cap 0.0% Russell 2000 Stock - Emerging Stock - ACWIxU.S. Fixed Income - U.S. Fixed Income - Emerging Fixed Income - Global Fixed Income - Inflation Indexed Fixed Income - High Yield Cash 3.2% 20.0% 0.0% 0.0% 19.5% 0.0% 0.0% 4.9% 6.3% 1.4% MSCI Emerging Market MSCI ACWI xUS Barclays US Aggregate -1.8% -3.4% 6.0% -1.4% -0.4% -2.0% Barclay's Universal Barclays US TIPS Barclays Corp High Yield 5.6% 2.6% 2.5% -3.3% -3.8% 3.9% 3.1% 2.6% 3.2% 5.4% 0.0% 0.2% 0.2% 11.4% 2.9% 4.7% 18.2% 8.0% 3.6% 4.5% 8.9% 10.7% 6.9% -3.3% 0.7% -0.2% -9.3% 2.4% Citi Group3 Month T bill Real Estate ex-REITs 4.6% NCREIF NFI-ODCE Other Real Assets 10.0% Custom CPI +300 bps Hedge Funds 10.0% HFRI Diversified Fund of Funds Diversified Private Equity 10.0% Default (see section 2) LBO 0.0% Venture Capital 0.0% Total 100.0% Net Actual Return (reported by you) Calculated Policy Return = sum of (policy weights X benchmark returns) Adjustment to reflect rebalancing and overlay impacts Policy Return (adjusted for CEM default private equity benchmark) Net Value Added (Net Return - Policy Return) 12 Returns, Benchmarks and Value Added -3.0% 0.6% 2.9% 4.9% 6.0% 0.2% 6.2% -1.3% Your policy return and value added calculations - 2010 to 2013 2013 Policy Return and Value Added 2012 Policy Return and Value Added Benchmark Policy Net Value Asset class Return return added weight Description U.S. Stock 5.6% Russell 3000 33.6% 35.6% 2.0% U.S. Stock - Large Cap 6.7% S&P 500 Total Return32.4% 32.8% 0.4% U.S. Stock - Mid Cap 6.7% Russell 2000 38.8% 34.4% -4.4% U.S. Stock - Small Cap 6.7% Russell 2000 38.8% 34.4% -4.4% Stock - Emerging 4.0% MSCI Emerging Market -2.3% -3.1% -0.8% Stock - ACWIxU.S. 20.0% MSCI ACWI xUS 15.8% 17.7% 1.9% Fixed Income - U.S. 13.0% Barclays US Aggregate -2.0% -2.7% -0.7% Fixed Income - Emerging 0.5% JP Morgan EMBI Global -5.3% Diversified -9.4% -4.1% Fixed Income - Global 1.5% Barclays Multiverse Index -2.2% -2.4% -0.2% Fixed Income - Inflation Indexed 5.0% Barclays US TIPS -8.6% -8.2% 0.4% Fixed Income - High Yield 5.0% Barclays US Corp High7.4% Yield 7.2% -0.3% Cash 2.0% 3 Month T bill 0.1% 0.5% 0.5% Real Estate ex-REITs 5.0% Custom (NCREIF Blend) 12.0% 8.3% -3.7% Other Real Assets 5.0% Custom (actual) 2.3% 2.1% -0.2% Hedge Funds 10.0% HFR FOF Diversified Lagged 8.5% 11.4% 2.8% Diversified Private Equity 3.3% Russell 3000 + 400 (lagged 29.2% 1Q)18.4% -10.8% LBO 3.4% Russell 3000 + 400 (lagged 29.2% 1Q)18.1% -11.1% Venture Capital 3.3% Russell 3000 + 400 (lagged 29.2% 1Q)13.2% -16.0% Total 100.0% Net Return (reported by you) 12.6% Calculated policy return (sum: Policy weights x benchmarks) 16.4% Adjustment to reflect rebalancing and overlay impacts -2.8% Policy Return 13.6% Net Value Added (Net Return - Policy Return) -1.0% Benchmark Policy Net Value Asset class Return return added weight Description U.S. Stock 3.3% Russell 3000 16.4% 16.1% -0.3% U.S. Stock - Large Cap 6.7% Russell 3000 16.4% 16.8% 0.4% U.S. Stock - Mid Cap 10.0% Russell 3000 16.4% 16.3% -0.1% U.S. Stock - Small Cap 10.0% Russell 3000 16.4% 16.3% -0.1% Stock - Emerging 4.0% MSCI Emerging Market 18.6% gross 23.3% 4.7% Stock - ACWIxU.S. 20.0% MSCI ACWI xUS net 16.8% 15.7% -1.1% Fixed Income - U.S. 10.0% Barclays US Aggregate4.2% 5.7% 1.4% Fixed Income - Emerging 5.0% JP Morgan EMBI Global 17.4% Diversified 17.0% -0.4% Fixed Income - Global 0.0% -0.6% Fixed Income - Inflation Indexed 10.0% Barclays US TIPS 7.0% 9.1% 2.1% Fixed Income - High Yield 5.0% Barclays US Corp High 15.8% Yield 15.6% -0.2% Cash 1.0% 3 Month T bill 0.1% 0.4% 0.3% Real Estate ex-REITs 5.0% Custom (NCREIF Blend) 10.9% 7.2% -3.7% Other Real Assets 0.0% Custom (actual) 0.0% 0.0% 0.0% Hedge Funds 10.0% HFR FOF Diversified Lagged 3.1% 6.6% 3.5% Diversified Private Equity 3.3% Russell 3000 + 400 (lagged 18.8% 1Q)21.2% 2.4% LBO 3.3% Russell 3000 + 400 (lagged 18.8% 1Q)20.8% 2.0% Venture Capital 3.3% Russell 3000 + 400 (lagged 18.8% 1Q) -3.6% -22.4% Total 100.0% Net Return (reported by you) 12.5% Calculated policy return (sum: Policy weights x benchmarks) 14.5% Adjustment to reflect rebalancing and overlay impacts -0.3% Policy Return 14.2% Net Value Added (Net Return - Policy Return) -1.7% 2011 Policy Return and Value Added 2010 Policy Return and Value Added Benchmark Policy Net Asset class weight Description Return return U.S. Stock 6.6% Russell 3000 1.0% 2.9% U.S. Stock - Large Cap 6.7% Russell 3000 1.0% 0.1% U.S. Stock - Mid Cap 6.7% Russell 3000 1.0% 0.4% U.S. Stock - Small Cap 6.7% Russell 3000 1.0% 0.4% Stock - Emerging 4.0% MSCI Emerging markets -18.2% gross-15.2% Stock - ACWIxU.S. 20.0% MSCI ACWI xUS gross -13.3% -12.1% Fixed Income - U.S. 19.9% Barclays US Aggregate8.1% 1.3% Fixed Income - Emerging 0.0% Barclays Universal Index 8.1% -0.3% Fixed Income - Inflation Indexed 10.0% CPI + 300 bps 5.7% 5.7% Fixed Income - High Yield 0.0% Barclays Universal Index 8.1% 0.6% Cash 1.0% 3 Month T bill 0.1% 0.3% Real Estate ex-REITs 5.0% NCREIF ODCE 15.3% 7.6% Other Real Assets 0.0% Custom (Actual) 0.0% 0.0% Hedge Funds 10.0% HFR FOF Diversified Lagged -2.5% -3.2% Diversified Private Equity 5.9% Russell 3000 + 400 (lagged 7.8% 1Q) 8.2% LBO 2.2% Russell 3000 + 400 (lagged 7.8% 1Q)18.0% Venture Capital 1.9% Russell 3000 + 400 (lagged 7.8% 1Q)26.3% Total 100.0% Net Return (reported by you) Calculated policy return (sum: Policy weights x benchmarks) 0.4% Adjustment to reflect rebalancing and overlay impacts 0.1% Policy Return Net Value Added (Net Return - Policy Return) Value added 1.9% -0.9% -0.6% -0.6% 3.0% 1.1% -6.8% -8.4% -0.1% -7.5% 0.2% -7.6% 0.0% -0.7% 0.4% 10.3% 18.6% -1.0% 0.5% -1.5% Benchmark Policy Net Value Asset class weight Description Return return added U.S. Stock 20.0% S&P 1500 16.4% 16.0% -0.4% U.S. Stock - Large Cap 6.0% S&P 500 15.1% 11.1% -4.0% U.S. Stock - Mid Cap 4.0% Russell 2000 26.9% 29.1% 2.2% U.S. Stock - Small Cap 4.0% Russell 2000 26.9% 29.1% 2.2% Stock - Emerging 2.0% MSCI Emerging Market 19.2% gross 23.0% 3.8% Stock - ACWIxU.S. 18.0% Custom (MSCI World12.4% xUS, MSCI 10.2% ACWI xUS, -2.2% MSCI ACWI xUS Fixed Income - U.S. 25.0% Barclays US Aggregate6.5% 6.8% 0.3% Fixed Income - Emerging 0.0% JP Morgan Emerging 12.3% Market Bond 11.7% (default) -0.6% Fixed Income - Inflation Indexed 10.0% Barclays US TIPS 6.3% 6.4% 0.1% Fixed Income - High Yield 0.0% Barclays US Corp High 15.1% Yield 14.7% -0.4% Cash 3.0% Citigroup 3 month T bill 0.0% 0.5% 0.5% Real Estate ex-REITs 0.0% NCRIEF Property Blend 13.1% Index 8.5% -4.6% Other Real Assets 0.0% Custom (actual) 0.0% 0.0% 0.0% Hedge Funds 0.0% Libor +500 bps 5.3% -2.5% -7.8% Diversified Private Equity 12.0% Custom (Alternative Blended 12.2% Index) 16.3% 4.0% LBO 0.0% Custom (Alternative Blended 12.2% Index) 18.2% 6.0% Venture Capital 0.0% Custom (Alternative Blended 12.2% Index) 13.4% 1.2% Total 100.0% Net Return (reported by you) 12.8% Calculated policy return (sum: Policy weights x benchmarks) 12.7% Adjustment to reflect rebalancing and overlay impacts -0.5% Policy Return 12.1% Net Value Added (Net Return - Policy Return) 0.7% Returns, Benchmarks and Value Added 13 Profit/Loss on overlay programs Overlay type Int. Discretionary Currency Ext. Discretionary Currency Internal Global TAA External Global TAA Internal PolicyTilt TAA External PolicyTilt TAA Internal Commodities External Commodities Internal Long/Short External Long/Short Internal Other External Other Total Profit/Loss Your fund 2014 2013 bps bps Peer median 2014 2013 bps # bps # -1 -1 U.S. Public median 2014 2013 bps # bps # 3 2 0 2 2 2 0 2 0 1 -1 1 1 -54 1 0 2 -54 1 1 0 -1 1 3 0 5 1 1 2 7 0 0 0 1 5 9 Profit/loss in basis points was calculated using total fund average holdings. This was done to measure the impact of the program at the total fund level. 14 Returns, Benchmarks and Value Added 5 Total cost and benchmark cost Comparisons of total investment cost Trend in total investment cost Types of costs included in your total investment cost Detailed breakdown of your total investment cost Changes in your investment costs Total cost versus benchmark cost Benchmark cost calculation Cost impact of: - differences in implementation style - overlays - lower cost styles - paying more/-less for similar services Summary of why you are high or low cost by asset class Your cost effectiveness ranking Actual cost versus benchmark cost Appendix A: Benchmarking methodology formulas and data Appendix B: Regression based benchmarks 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 18 Comparisons of total investment cost Your total investment cost, excluding transaction costs and private asset performance fees, of 81.6 bps was above the peer median of 64.3 bps. Differences in total investment cost are often caused by two factors that are usually outside of management's control: asset mix and fund size. Therefore, to assess whether your fund's total investment cost is high or low given your unique asset mix and size, CEM calculates a benchmark cost for your fund. Benchmark cost analysis begins on page 7 of this section. Total investment cost excluding transaction costs and private asset performance fees 120 bp 100 bp 80 bp 60 bp 40 bp 20 bp 0 bp Peer CTotalbp Peer 90th %ile 112.8 75th %ile 88.5 Median 64.3 25th %ile 38.8 10th %ile 29.2 — Average 68.0 Count 18 Med. assets 14,840 Kentucky Retirement Systems 81.6 ● You %ile 65% 2 Total cost and benchmark cost U.S. Public U.S. Public Universe Universe 110.2 85.2 59.6 40.5 29.2 65.1 157 8,261 81.6 72% Trend in total investment cost Your total investment cost, excluding transaction costs and private asset performance fees, increased from 43.7 bps in 2010 to 81.6 bps in 2014. Trend in total investment cost (excluding transaction costs and private asset performance fees) 90bp 80bp 70bp 60bp 50bp 40bp 30bp 20bp 10bp 0bp 2010 2011 2012 2013 2014 Your fund 43.7 52.3 58.3 61.0 81.6 Peer avg 51.9 53.2 56.7 56.9 64.9 U.S. avg 59.1 58.6 58.7 57.4 64.6 Trend analysis is based on the 123 U.S. funds and the 16 peer funds with 5 or more consecutive years of data. Total cost and benchmark cost 3 Types of costs included in your total investment cost The table below outlines the types of costs included in your total investment cost. Internal External Monitoring Perform. & other fees Transaction costs (active only) costs In-house total cost Transaction costs Manager base fees       Derivatives/Overlays       Hedge funds & Global TAA Hedge Funds Global TAA - -         Private real assets (Infrastructure, natural resources, real estate exREITs, other real assets)       Private equity (Diversified private equity, venture capital, LBO, other private equity)   *    Asset class Public (Stock, Fixed income, commodities, REITs) *External manager base fees represent gross contractual management fees. • • • "--" indicates that the cost type is not applicable. Green shading indicates that the cost type has been newly added for the 2014 data year. CEM currently excludes external private asset performance fees and all transaction costs from your total cost because only a limited number of participants are currently able to provide complete data. 4 Total cost and benchmark cost Detailed breakdown of your total investment cost Your 2014 total investment cost, excluding transaction costs and private asset performance fees, was 81.6 bp or $126.2 million. Your investment costs Internal Passive Active External Passive Monitoring Fees & Other Base Fees External Active Perform. Monitoring Fees1 & Other Asset management U.S. Stock - Broad/All 2,035 U.S. Stock - Large Cap 90 276 U.S. Stock - Mid Cap 1,488 U.S. Stock - Small Cap 458 Stock - Emerging 207 2,582 Stock - ACWIxU.S. 854 5,852 Fixed Income - U.S. 3,022 Fixed Income - Emerging 626 Fixed Income - Global 1,776 Fixed Income - Inflation Indexed 60 184 Fixed Income - High Yield 3,720 Real Estate ex-REITs - LPs³ 6,899 Other Real Assets 3,210 Hedge Funds 886 Hedge Funds - Fund of Funds 8,993 Underlying Fund of Fund Fees² 21,699 Diversified Private Equity² 3,137 LBO³ 14,601 Venture Capital³ 4,661 Total asset management costs excluding private asset performance fees 1,160 1,997¹ 3,702¹ 940 10,379 15,642 -294¹ 18,105¹ 12,604¹ Oversight, custodial & other asset related costs Oversight of the Fund Trustee & Custodial Consulting and Performance Measurement Audit Other Total oversight, custodial & other costs Total investment costs excluding transaction costs and private asset performance fees 320 5,028 340 Total $000s bps % of Total 2,035 366 1,488 458 2,789 6,707 3,022 626 1,776 244 4,880 8,896 6,912 1,827 19,372 37,340 3,163 37,735 17,605 121,125 2% 0% 1% 0% 2% 5% 2% 0% 1% 0% 4% 7% 5% 1% 15% 30% 3% 30% 14% 96% 78.3bp 786 2,038 1,490 76 720 5,110 126,235 1% 2% 1% 0% 1% 3.3bp 4% 81.6bp 100% ¹ For cost benchmarking purposes, all transaction costs and performance fees on real estate, infrastructure, natural resources and private equity have been excluded. ² Default costs added. Refer to Appendix A. ³ Base fees derived from the partnership level detail you provided. Total cost and benchmark cost 5 Changes in your investment costs The table below shows how your investment costs have changed from year to year by asset class. Change in your investment costs (2014 - 2010) 2014 Asset management U.S. Stock - Broad/All U.S. Stock - Large Cap U.S. Stock - Mid Cap U.S. Stock - Small Cap Stock - Emerging Stock - ACWIxU.S. Fixed Income - U.S. Fixed Income - Emerging Fixed Income - Global Fixed Income - Inflation Indexed Fixed Income - High Yield Real Estate ex-REITs - LPs³ Other Real Assets Hedge Funds Hedge Funds - Fund of Funds Underlying Fund of Fund Fees² Diversified Private Equity² LBO³ Venture Capital³ Total excl. private asset perf. fees 2,035 366 1,488 458 2,789 6,707 3,022 626 1,776 244 4,880 6,899 3,210 1,827 19,372 37,340 3,457 19,630 5,001 121,125 Investment costs ($000s) 2013 2012 2011 Change ($000s) Change (%) 2010 2014 2013 2012 2011 2014 2013 2012 2011 2,076 1,991 914 204 383 263 803 849 0 0 0 0 3,554 533 2,137 1,327 2,710 3,747 3,654 3,092 5,849 6,010 6,914 6,770 2,896 2,922 3,727 3,627 805 629 592 150 2,036 1,874 0 0 302 317 386 318 3,188 3,575 1,369 904 3,498 3,442 1,813 495 4,438 0 0 0 0 0 1,484 739 10,177 8,753 6,207 0 21,223 18,938 8,746 0 3,781 4,274 6,808 25,307 14,219 14,096 15,007 8,117 6,259 6,325 5,926 2,748 87,392 77,689 70,542 58,701 -41 -16 1,488 -3,096 79 858 126 -179 -261 -59 1,692 3,401 -1,228 1,827 9,195 16,118 -324 5,410 -1,258 33,733 85 120 1,077 -540 3,021 -1,038 -161 -26 176 162 -15 -387 55 4,438 -1,604 94 -905 -805 37 1,874 -69 2,206 1,629 1,424 2,285 -494 123 -66 9,703 Oversight, custodial & other asset related costs Oversight of the Fund 786 590 580 528 461 196 10 Trustee & Custodial 2,038 516 250 250 250 1,522 266 Consulting and Performance Measurement 1,490 997 997 945 945 493 Audit 76 0 0 0 58 76 Other 720 225 225 0 0 495 Total oversight, custodial & other costs 5,110 2,330 2,054 1,724 1,715 2,780 276 Total investment costs¹ 126,235 89,781 79,800 72,317 60,458 36,454 9,981 Total in basis points 81.6bp 61.0bp 58.3bp 52.3bp 43.7bp -1,484 2,546 10,192 -2,534 -911 399 7,147 52 52 710 -46 -2% -4% 4% 118% 349% 46% -67% -5% 810 -87% 567% -75% 61% 561 3% -28% 3% 18% 145 15% -3% -13% 2% 100 4% -1% -22% 3% 442 -22% 28% 6% 295% -13% 9% 68 -19% -5% -18% 21% 465 53% -11% 161% 51% 1,318 97% 2% 90% 266% -28% 745 -100% 101% 6,207 90% 16% 41% 8,746 76% 12% 117% -18,499 -9% -12% -37% -73% 6,890 38% 1% -6% 85% 3,178 -20% -1% 7% 116% 11,841 39% 12% 10% 20% 67 33% 2% 295% 106% 49% 0% -58 225 220% 329 9 119% 7,483 11,859 41% 10% 15% 0% 0% 6% 0% -100% 0% 13% 13% 19% 1% 10% 20% ¹ For cost benchmarking purposes, all transaction costs and performance fees on real estate, infrastructure, natural resources and private equity have been excluded. ² Default costs added. Refer to Appendix A. ³ Base fees derived from the partnership level detail you provided. 6 Total cost and benchmark cost Total cost versus benchmark cost Your fund's total investment cost, excluding transaction costs and private asset performance fees, was 6.9 bps above your benchmark cost of 74.8 bps. This implies that your fund was high cost by 6.9 bps compared to the peer median, after adjusting for your fund's asset mix. Your cost versus benchmark $000s Your fund's total cost - Your fund's benchmark = Your fund's excess cost 126,235 115,631 10,604 bps 81.6 bp 74.8 bp 6.9 bp Your benchmark cost is an estimate of your total costs assuming that you paid the peer median cost for each of your investment mandates and fund oversight. The calculation of your benchmark cost is shown on the following page. The reasons why your fund's total cost was above your benchmark are summarized in the table below. Details of each of the impacts below are provided on pages 9 to 12. Reasons why your fund was high cost Cost/-Savings impact $000s bps Differences in implementation style: External active vs. low cost styles Fund of funds vs. external direct Mix of internal and passive styles Style impact of overlays Total style impact -1,391 10,061 -150 -652 7,868 -0.9 bp 6.5 bp -0.1 bp -0.4 bp 5.1 bp Paying more/-less for similar services: External investment management Internal investment management Oversight, custodial and other Total impact of paying more /-less 1,036 54 1,646 2,736 0.7 bp 0.0 bp 1.1 bp 1.8 bp 10,604 6.9 bp Total excess cost Total cost and benchmark cost 7 Benchmark cost calculation Your 2014 benchmark cost was 74.8 basis points or $115.6 million. It equals your holdings for each asset class multiplied by the peer median cost for the asset class. The peer median cost is the style weighted average for all implementation styles (i.e., internal passive, internal active, external passive, external active). Calculation of your 2014 benchmark cost Asset class Your average assets (A) Weighted peer median Benchmark cost¹ $000s (B) (A X B) Asset management costs U.S. Stock - Broad/All U.S. Stock - Large Cap U.S. Stock - Mid Cap U.S. Stock - Small Cap Stock - Emerging Stock - ACWIxU.S. Fixed Income - U.S. Fixed Income - Emerging Fixed Income - Global Fixed Income - Inflation Indexed Fixed Income - High Yield Real Estate ex-REITs Other Real Assets Hedge Funds (External) Diversified Private Equity LBO Venture Capital Overlay Programs² Benchmark for asset management 374 2,216 495 335 495 3,017 1,367 147 574 762 724 636 713 1,617 190 1,146 347 15,468 15,468 12.8 bp 10.4 bp 34.7 bp 45.9 bp 54.5 bp 24.2 bp 12.2 bp 48.5 bp 26.3 bp 9.3 bp 52.2 bp 103.5 bp 48.8 bp 274.2 bp 185.3 bp 184.9 bp 230.5 bp 0.4 bp 72.5 bp 479 2,306 1,717 1,536 2,702 7,302 1,672 716 1,514 709 3,782 6,577 3,480 44,320 3,524 21,193 7,987 652 112,167 15,468 15,468 15,468 15,468 15,468 1.1 bp 0.4 bp 0.6 bp 0.1 bp 0.1 bp 2.2 bp 1,727 602 880 94 161 3,464 74.8 bp 115,631 Oversight, custody and other costs Oversight of the Fund Trustee & Custodial Consulting Audit Other Benchmark for oversight, custody & other Total benchmark cost 1. The weighted peer median cost for asset management is the style-weighted average of the peer median costs for all implementation styles (i.e., internal passive, internal active, external passive, external active, fund of fund). It excludes performance fees on private assets. The style weights by asset class for your fund and the peers are shown on page 17 of this section. 2. Total fund average holdings is used as the base when calculating the relative cost impact of the overlay programs. 8 Total cost and benchmark cost Cost impact of differences in implementation style Differences in implementation style (i.e., external active management versus lower cost indexed and internal management, fund of funds versus lower cost direct LPs, and overlay usage) relative to your peers cost you 5.1 bps. Calculation of the cost impact of differences in implementation style Your avg % External active Peer More/ holdings average -Less You (mils) (A) (B) U.S. Stock - Broad/All 374 100% 27% 73% U.S. Stock - Large Cap 2,216 10% 36% -26% U.S. Stock - Mid Cap 495 69% 73% -4% U.S. Stock - Small Cap 335 0% 73% -73% Stock - Emerging 495 67% 85% -19% Stock - ACWIxU.S. 3,017 60% 61% 0% Fixed Income - U.S. 1,367 100% 67% 33% Fixed Income - Emerging 147 100% 97% 3% Fixed Income - Global 574 100% 100% 0% Fixed Income - Inflation Indexed 762 36% 57% -21% Fixed Income - High Yield 724 100% 94% 6% Real Estate ex-REITs 636 100% 98% 2% of which Partnerships represent: 636 100% 71% 29% Other Real Assets 713 100% 100% 0% Hedge Funds 1,617 100% 100% 0% Diversified Private Equity 190 100% 100% 0% LBO 1,146 100% 100% 0% Venture Capital 347 100% 99% 1% Total impact of differences in external active management usage Premium vs. Cost/ internal and -Savings³ passive¹ ² $000s bps (C) (A X B X C) 38 bp 1,050 27 bp -1,519 48 bp -101 57 bp -1,391 46 bp -427 30 bp -43 15 bp 676 Insufficient 0 0 13 bp -208 Insufficient 0 Insufficient 0 31 bp 572 0 0 0 0 Insufficient 0 -1,391 -0.9 bp Fund of fund % of external LPs Hedge Funds LPs 1,617 95% 28% 67% Diversified Private Equity LPs 190 0% 27% -27% LBO LPs 1,146 0% 27% -27% Venture Capital LPs 347 0% 27% -27% Total impact of differences in fund of fund usage Premium vs. direct LPs¹ ² 123 bp 73 bp 73 bp 73 bp 13,344 -371 -2,236 -676 10,061 6.5 bp Overlay usage Impact of lower use of portfolio level overlays (see page 10) -652 -0.4 bp Mix of low cost styles Impact of mix of internal indexed, internal active, external indexed (see page 11) -150 -0.1 bp 7,868 5.1 bp Total 1. The external active cost 'premium vs internal and passive' is the additional cost of external active management and fund of funds relative to the average of the other lower cost implementation styles: internal passive, internal active and external passive. These calculations are specific to your peer group. The fund-of-funds 'premium vs. direct LPs' is the peer-median cost of fund-of-funds minus the peer median cost for direct external active management. 2. 'Insufficient' indicates there is insufficient peer data to determine the cost premium. Total cost and benchmark cost 9 Cost impact of overlays As summarized on the previous page, the style impact of overlays saved you 0.4 bps. If you use more overlays than your peers, or more expensive types of overlays, then it increases your relative cost. Calculation of the cost impact of differences in the use of portfolio level overlays Your avg Overlay notional amounts as Median a % of avg total holdings cost as a total Peer More/ holdings % of You Average -Less (mils) notional (A) (C) (B) Your cost as a % of total holdings¹ Average cost as a % of total holdings Cost/ -Savings Impact (000s) (A X B X C) External Overlays Currency - Hedge Currency - Discretionary Passive Beta - Hedge Duration - Hedge Dur. Mgmt Swaption - Hedge Global TAA - Discretionary Policy Tilt TAA - Discretionary Commodity Futures - Discretionary Long/Short - Discretionary Other - Discretionary Total impact in 000s Total impact in basis points 15,468 15,468 15,468 15,468 15,468 15,468 15,468 15,468 15,468 15,468 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.1% 0.3% 5.2% 0.0% 0.0% 0.0% 0.0% 0.7% 0.1% 0.1% -0.1% -0.3% -5.2% 0.0% 0.0% 0.0% 0.0% -0.7% -0.1% -0.1% 1.7 bp 14.0 bp 6.2 bp 5.8 bp 3.4 bp N/A 21.7 bp 4.7 bp 9.3 bp 7.0 bp -3 -75 -504 0 0 0 0 -50 -15 -6 -652 -0.4 bp 1. For overlay programs (primarily certain internal, profit seeking programs) where no clear notional value is defined or provided, these types of overlays are compared in terms of cost relative to total holdings. 10 Total cost and benchmark cost Cost impact of lower cost styles As summarized on page 9, your mix of 'lower-cost' internal and passive styles saved you 0.1 bps. Details are shown below. Cost impact of differences in your mix of 'lower-cost' implementation styles Your nonexternal active holdings (mils) U.S. Stock - Large Cap 1,984 U.S. Stock - Mid Cap 156 U.S. Stock - Small Cap 335 Stock - Emerging 165 Stock - ACWIxU.S. 1,206 Fixed Income - Inflation Indexed 488 Cash 520 Hedge Funds 0 Total impact in 000s Total impact in basis points Percent holdings (of non-external-active) Cost/ Internal passive Internal active External passive -Savings1 You Peers You Peers You Peers (000s) 100% 34% 0% 7% 0% 59% -73 100% 58% 0% 26% 0% 16% 0 0% 21% 0% 61% 100% 18% 0 0% 0% 0% 40% 100% 60% 0 0% 0% 0% 0% 100% 100% 0 100% 21% 0% 0% 0% 79% -76 0% Excluded 100% Excluded 0% Excluded 0 0 -150 -0.1 bp 1. Cost/-savings for each asset class equals non-external active holdings within each asset class X cumulative impact from the three lower cost styles. By formula: [ (peer median cost for the style - peer weighted average cost of lower cost styles) X (your weight for the style - peer weight for the style) ]. Peer median costs for each style are shown on page 18. Total cost and benchmark cost 11 Cost impact of paying more/-less for similar services Differences in what you paid relative to your peers for similar asset management and related oversight and support services cost you 1.8 bps. Calculation of the cost impact of paying more/-less Style Your avg holdings (mils) (A) Your Cost in bps Peer More/ median -less (B) Cost/ -Savings $000s bps (A X B) External asset management U.S. Stock - Broad/All U.S. Stock - Large Cap U.S. Stock - Mid Cap U.S. Stock - Small Cap Stock - Emerging Stock - Emerging Stock - ACWIxU.S. Stock - ACWIxU.S. Fixed Income - U.S. Fixed Income - Emerging Fixed Income - Global Fixed Income - Inflation Indexed Fixed Income - High Yield Real Estate ex-REITs Other Real Assets Hedge Funds Hedge Funds - Fund of Funds Diversified Private Equity LBO Venture Capital Total for external management active active active passive passive active passive active active active active active active LP active active F. of F. active active active 374 232 339 335 165 330 1,206 1,811 1,367 147 574 274 724 636 713 77 1,540 190 1,146 347 54.4 11.9 43.9 13.7 12.5 78.1 7.1 32.3 22.1 42.4 30.9 6.7 67.4 108.5 45.0 238.8 368.3 181.8 171.3 144.3 40.9 27.4 47.7 4.3* 15.0* 61.4 5.8 36.2 17.2 48.5 26.3 14.8 52.2 112.5 48.8 239.5 362.5 165.8 165.4 211.0 13.5 -15.5 -3.8 9.4 -2.5 16.8 1.3 -3.9 4.9 -6.1 4.6 -8.1 15.2 -4.0 -3.8 -0.7 5.7 16.0 5.9 -66.7 506 -360 -128 314 -41 554 152 -704 674 -90 262 -222 1,098 -251 -269 -6 881 304 673 -2,310 1,036 0.7 bp 13 0 41 54 0.0 bp -941 610 1,436 -18 559 1,646 1.1 bp 2,736 1.8 bp Internal asset management U.S. Stock - Large Cap passive U.S. Stock - Mid Cap passive Fixed Income - Inflation Indexed passive Total for internal asset management 1,984 156 488 0.5 0.0 1.2 0.4 0.0* 0.4* 0.1 0.0 0.8 Oversight, custodial, other Oversight of the Fund Consulting and Performance Measurement Trustee & Custodial Audit Other Total for oversight, custodial, other Total *Universe median used as peer data was insufficient. 12 Total cost and benchmark cost 15,468 15,468 15,468 15,468 15,468 0.5 1.0 1.3 0.0 0.5 1.1 0.6 0.4 0.1 0.1 -0.6 0.4 0.9 0.0 0.4 Summary of why you are high or low cost by asset class The table below summarizes where you are high and low cost by asset class. It also quantifies how much is due to differences in implementation style (i.e., differences in the mix of external active, external passive, internal active, internal passive and fund of fund usage) and how much is due to paying more or less for similar services (i.e., same asset class and style). Summary of why you are high or low cost by asset class Your cost¹ (A) Benchmark = peer Your weighted More/ average median cost¹ -less assets (B) (C = A - B) (D) More/ -less ($000s) (C X D) Due to Impl. style ($000s) Due to paying more/less ($000s) Asset management costs U.S. Stock - Broad/All U.S. Stock - Large Cap U.S. Stock - Mid Cap U.S. Stock - Small Cap Stock - Emerging Stock - ACWIxU.S. Fixed Income - U.S. Fixed Income - Emerging Fixed Income - Global Fixed Income - Inflation Indexed Fixed Income - High Yield Cash Real Estate ex-REITs Other Real Assets Hedge Funds (External) Diversified Private Equity LBO Venture Capital Overlay Programs2 Total asset management 54.4 bp 1.7 bp 30.1 bp 13.7 bp 56.3 bp 22.2 bp 22.1 bp 42.4 bp 30.9 bp 3.2 bp 67.4 bp 0.0 bp 108.5 bp 45.0 bp 362.1 bp 181.8 bp 171.3 bp 144.3 bp 0.0 bp 78.3 bp 12.8 bp 10.4 bp 34.7 bp 45.9 bp 54.5 bp 24.2 bp 12.2 bp 48.5 bp 26.3 bp 9.3 bp 52.2 bp 0.0 bp 103.5 bp 48.8 bp 274.2 bp 185.3 bp 184.9 bp 230.5 bp 0.4 bp 72.5 bp 41.6 bp -8.8 bp -4.6 bp -32.2 bp 1.7 bp -2.0 bp 9.9 bp -6.1 bp 4.6 bp -6.1 bp 15.2 bp 0.0 bp 5.1 bp -3.8 bp 88.0 bp -3.5 bp -13.6 bp -86.2 bp -0.4 bp 5.8 bp 374 2,216 495 335 495 3,017 1,367 147 574 762 724 520 636 713 1,617 190 1,146 347 15,468 15,468 1,556 -1,939 -229 -1,078 87 -595 1,350 -90 262 -465 1,098 0 321 -269 14,219 -67 -1,563 -2,986 -652 8,958 1,050 -1,592 -101 -1,391 -427 -43 676 0 0 -284 0 0 572 0 13,344 -371 -2,236 -676 -652 7,868 506 -347 -128 314 514 -552 674 -90 262 -181 1,098 0 -251 -269 876 304 673 -2,310 0 1,090 0.5 bp 1.3 bp 1.0 bp 0.0 bp 0.5 bp 3.3 bp 1.1 bp 0.4 bp 0.6 bp 0.1 bp 0.1 bp 2.2 bp -0.6 bp 0.9 bp 0.4 bp 0.0 bp 0.4 bp 1.1 bp 15,468 15,468 15,468 15,468 15,468 15,468 -941 1,436 610 -18 559 1,646 n/a n/a n/a n/a n/a n/a -941 1,436 610 -18 559 1,646 81.6 bp 74.8 bp 6.9 bp 15,468 10,604 7,868 2,736 Oversight, custody and other costs Oversight of the Fund Trustee & Custodial Consulting Audit Other Total oversight, custody & other Total 1. The weighted peer median cost for asset management is the style-weighted average of the peer median costs for all implementation styles (i.e., internal passive, internal active, external passive, external active, fund of fund). It excludes performance fees on private assets. The style weights by asset class for your fund and the peers are shown on page 17 of this section. 2. Total fund average holdings is used as the base when calculating the relative cost impact of the overlay programs. Total cost and benchmark cost 13 Your cost effectiveness ranking Being high or low cost is neither good nor bad. The more important question is, are you receiving sufficient value for your excess cost? At the total fund level, we provide insight into this question by combining your value added and your excess cost to create a snapshot your cost effectiveness performance relative to that of the survey universe. For the 2014 year, your fund ranked in the negative value added, high cost quadrant. 2014 Net Value Added vs Excess Cost¹: Your Net Value Added -1.3% versus excess cost 7 bps 6% Net Value Added 4% 2% 0% -2% -4% -6% -40bp All Funds Peer Funds Your Value -20bp 0bp 20bp 40bp Excess cost 1 Benchmark cost and excess cost calculations are based on regression analysis (see Appendix B in this section) for all funds except your fund. Your fund's benchmark cost is based on peer-median costs (per page 7 of this section). 14 Total cost and benchmark cost Actual cost versus benchmark cost 2014 Actual Cost vs Benchmark Cost¹: Your actual cost was 81.6 bps and your benchmark cost was 74.8 bps 200bp 180bp Actual cost 160bp 140bp 120bp 100bp 80bp 60bp All Funds 40bp Peer Funds 20bp Your Value 0bp 0bp 50bp 100bp 150bp 200bp Benchmark cost 1 Benchmark cost calculations are based on regression analysis (see Appendix B in this section) for all funds except your fund. Your fund's benchmark cost is based on peer-median costs (per page 7 of this section). Total cost and benchmark cost 15 Appendix A: Benchmarking methodology formulas and data a) Formulas Example calculations are for U.S. Stock - Broad/All unless otherwise indicated. Asset class peer cost = Weighted average by peer average style of peer median costs for asset class = [(0.00 X 0.0bp) + (0.00 X 0.0bp) + (0.73 X 2.5bp) + (0.27 X 40.9bp)] / (0.00 + 0.00 + 0.73 + 0.27) = 12.8bp Peer average low cost (by asset class) = Weighted average by peer average style of peer median costs for internal passive, internal active and external passive management for asset class = [(0.00 X 0.0bp) + (0.00 X 0.0bp) + (0.73 X 2.5bp)] / (0.00 + 0.00 + 0.73) = 2.5bp External active cost premium (by asset class) = Peer median external active cost - peer average low cost = 40.9bp - 2.5bp = 38.4bp Fund of funds premium (by asset class) = Peer median fund-of-funds cost - peer median external active cost = (For private equity) 239.2bp - 165.8bp = 73.4bp Impact from other differences in implementation style (by Asset Class)= = [ (Your int. pass. % - average peer int. pass. %) X (peer median int. pass. cost - peer average low cost) + (your int. act. % - peer average int. act. %) X (peer median int. act. cost - peer average low cost) + (your ext. pass. % - average peer ext. pass. %) X (median peer ext. pass. cost - peer average low cost) ] X your average holdings b) Insufficient peer data All peer data is adjusted to ensure comparisons are made only when sufficient data is available. When too few peers have the asset class or style in question, peer costs are replaced with your fund's cost, neutralizing the effect of your cost. Major implementation styles (external active, fund of funds and combined "low cost") that you do not hold are ignored if they have insufficient data to draw major style impact conclusions. Throughout this section, 'peer median' and 'average peer style' always refer to these adjusted values. The following page shows the adjusted data used in this section. 16 Total cost and benchmark cost Appendix A: Benchmarking methodology formulas and data (page 2 of 2) c) 2014 cost data used to calculate weighted peer median costs and impact of mix differences. Your costs (basis points) Asset Class Internal Passive U.S. Stock - Broad/All U.S. Stock - Large Cap U.S. Stock - Mid Cap U.S. Stock - Small Cap Stock - Emerging Stock - ACWIxU.S. Stock - Other Fixed Income - U.S. Fixed Income - Emerging Fixed Income - Global Fixed Income - Inflation Indexed Internal Active External Passive External Active Limited Parner. Peer median costs (basis points) Fund of Funds 54.4 11.9 43.9 0.5 0.0 13.7 12.5 7.1 1.2 Internal Active 0.4 0.0 bp¹ 4.3 0.8 0.0 4.3 15.0 2.2 2.4 48.5 78.1 32.3 22.1 42.4 30.9 6.7 67.4 Fixed Income - High Yield Real Estate ex-REITs Other Real Assets Hedge Funds Diversified Private Equity LBO Venture Capital Internal Passive 0.4 bp¹ External Active 2.5 1.0 0.0 4.3 bp¹ 15.0 bp¹ 5.8 40.9 27.4 47.7 61.2 61.4 36.2 1.7 17.2 48.5 26.3 14.8 52.2 81.8 48.8 239.5 165.8 165.4 211.0 2.4 52.2 103.5 108.5 45.0 238.8 181.8 171.3 144.3 External Passive 368.3 230.5 Limited Partner. Fund of Funds 112.5 112.5 362.5 239.2 238.8 284.4 Weighted Median 12.8 10.4 34.7 45.9 54.5 24.2 0.0 12.2 48.5 26.3 9.3 52.2 103.5 48.8 274.2 185.3 184.9 230.5 ¹Universe median used as peer data was insufficient. d) 2014 Style weights used to calculate the weighted peer median costs and impact of mix differences. You (%) Style Weights Internal Passive U.S. Stock - Broad/All U.S. Stock - Large Cap U.S. Stock - Mid Cap U.S. Stock - Small Cap Stock - Emerging Stock - ACWIxU.S. Fixed Income - U.S. Fixed Income - Emerging Fixed Income - Global Fixed Income - Inflation Indexed Fixed Income - High Yield Cash Real Estate ex-REITs Other Real Assets Hedge Funds Diversified Private Equity LBO Venture Capital 0.0% 89.5% 31.4% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 64.1% 0.0% Internal Active 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 100.0% 0.0% 0.0% 0.0% 0.0% 0.0% External Passive 0.0% 0.0% 0.0% 100.0% 33.3% 40.0% 0.0% 0.0% 0.0% 0.0% 0.0% External Active 100.0% 10.5% 68.6% 0.0% 66.7% 60.0% 100.0% 100.0% 100.0% 35.9% 100.0% 0.0% 0.0% 100.0% 4.7% 100.0% 100.0% 100.0% Peer average (%) Limited Partner. 100.0% Fund of Funds Internal Passive Internal Active External Passive External Active Limited Partner. Fund of Funds 0.0% 0.0% 73.1% 26.9% 21.6% 4.6% 37.6% 36.2% 15.7% 7.2% 4.3% 72.8% 5.6% 16.4% 4.9% 73.1% 0.0% 5.8% 8.9% 85.3% 0.0% 0.0% 39.5% 60.5% 0.4% 21.6% 11.0% 67.0% 0.0% 2.9% 0.0% 97.1% 0.0% 0.0% 0.0% 100.0% 9.1% 0.0% 33.8% 57.1% 0.0% 6.1% 0.0% 93.9% Excluded Excluded Excluded Excluded Excluded Excluded 0.0% 1.5% 28.9% 68.8% 0.8% 0.0% 100.0% 95.3% 71.8% 28.2% 0.0% 0.0% 73.4% 26.6% 0.0% 0.0% 73.4% 26.6% 0.0% 1.3% 72.5% 26.2% The above data was adjusted as noted when there were insufficient peers, or for other reasons where direct comparisons were inappropriate. Total cost and benchmark cost 17 Appendix B: Regression based benchmarks Regression Benchmark Cost Equations Constant Size in millions (Log 10) 2014 Coeff. "t" 80.1 18.8 -14.8 -14.0 2013 Coeff. "t" 76.8 18.2 -14.2 -13.3 2012 Coeff. "t" 73.2 18.9 -13.7 -13.8 2011 Coeff. "t" 72.5 18.8 -13.3 -13.8 2010 Coeff. "t" 65.1 14.4 -13.1 -11.6 Percentage of assets in: Stocks Domestic stocks Foreign stocks Real estate Private equity & hedge funds 15.7 n/a n/a 62.8 203.7 19.6 n/a n/a 56.9 203.3 19.0 n/a n/a 55.1 208.1 14.8 n/a n/a 50.8 210.4 n/a 27.0 25.8 46.5 225.8 Country variable (1 if Cdn) Standard error R-squared F statistic Sample size -6.4 All 14.1 68% 190.2 466 3.7 4.2 27.6 -3.8 -8.1 All 14.6 65% 175.1 466 4.5 3.8 26.9 -4.7 -6.4 All 13.1 71% 219.0 454 4.6 4.2 30.5 -4.1 -4.9 All 13.2 70% 231.8 487 3.6 3.9 31.5 -3.3 -5.2 All 15.5 67% 154.1 457 4.7 3.1 3.1 29.0 -2.6 In order to compare your fund's cost effectiveness to the survey universe, a benchmark cost for all participants is required. The benchmark operating cost for all other funds is determined using regression analysis. The regression equation coefficients and "t statistics" are shown in the table above. An absolute "t" of greater than 2 indicates that the coefficient is statistically significant in predicting the dependent variable, in this case, the benchmark cost. The benchmark equations have been remarkably robust. Although the coefficients change every year, primarily because of changes in the composition of the survey universe, they remain similar in relative magnitude and direction. Most importantly, the R-squareds have been high. In 2014, the R-squared was 68% which means that fund size, asset mix and nationality explain more than 68% of the differences in costs between funds. This is good explanatory power. Below is a description of the coefficients: • Size = Log10 (fund size in millions) • % Stocks = proportion in stocks (coefficient changed in 2011) • % Domestic stocks = proportion in domestic stocks • % Foreign stocks = proportion in foreign stocks. • % Real estate = proportion directly invested in real estate and infrastructure. • % Private equity = proportion in direct and fund-of-funds venture capital, other private equity and hedge funds. • Country variable = 1 if your country of origin is Canada, otherwise 0. 18 Total cost and benchmark cost 6 Cost comparisons Total fund cost Governance, operations & support Public asset classes - Stock - Fixed Income - Commodities - REITs Real asset classes - Real estate ex-REITs - Infrastructure - Natural resources - Other real assets Private equity - Diversified private equity - LBO - Venture capital - Other private equity Global TAA Hedge Funds Overlays 2 3 4 13 25 26 27 28 29 30 31 32 33 34 35 36 37 Total fund cost Total costs are benchmarked in the previous section. In this section, your fund's costs are compared on a lineitem basis to your peers. This enables you to understand better why you may be a high or low cost fund and it also identifies and quantifies major cost differences that may warrant further investigation. The 25th to 75th percentile range is the most relevant since higher and lower values may include outliers caused by unusual circumstances, such as performance-based fees. Count refers to the number of funds in your peer group that have costs in this category. It enables you to gauge the statistical significance. Total cost and components Your fund versus peers - 2014 120 bp 100 bp 80 bp 60 bp 40 bp 20 bp 0 bp Total 90th %ile 112.8 75th %ile 88.5 Median 64.3 25th %ile 38.8 10th %ile 29.2 — Average 68.0 Count 18 Avg. assets 15,127M Kentucky Retirement Systems 81.6 ● You %ile 65% Total assets 15,468M 2 Cost Comparisons Asset management (excluding private asset perform. fees) 108.5 84.8 60.9 36.5 26.3 64.5 18 15,127M Oversight, Custodial, Other 4.8 3.6 3.0 2.0 1.6 3.1 18 15,127M 78.3 65% 15,468M 3.3 59% 15,468M Governance, operations & support Cost as a % of total plan assets 10.0bp 9.0bp 8.0bp 7.0bp 6.0bp 5.0bp 4.0bp 3.0bp 2.0bp 1.0bp 0.0bp Consulting & Oversight¹ Perf. Meas. Custody Audit Other Peer US Peer US Peer US Peer US Peer US Peer US 90th %ile 4.8 8.9 3.1 2.6 1.2 2.3 1.1 2.5 0.1 0.4 0.8 2.3 75th %ile 3.6 6.0 2.2 2.0 0.9 1.4 0.6 1.6 0.1 0.3 0.3 1.2 Median 3.0 4.3 1.1 1.5 0.6 0.7 0.4 0.9 0.1 0.1 0.1 0.5 25th %ile 2.0 2.7 0.8 0.8 0.3 0.3 0.3 0.4 0.0 0.1 0.1 0.1 10th %ile 1.6 1.2 0.5 0.4 0.2 0.2 0.2 0.2 0.0 0.0 0.1 0.0 — Average 3.1 4.8 1.6 1.8 0.6 1.1 0.5 1.2 0.1 0.2 0.4 1.0 Count 18 157 18 157 18 141 18 153 15 139 12 111 Avg. assets 15,127M 21,449M 15,127M 21,449M 15,127M 21,449M 15,127M 21,449M 15,127M 21,449M 15,127M 21,449M Kentucky Retirement Systems 3.3 3.3 0.5 0.5 1.0 1.0 1.3 1.3 0.0 0.0 0.5 0.5 ● You %ile 59% 34% 6% 14% 82% 63% 100% 67% 36% 21% 82% 51% Plan assets 15,468M 15,468M 15,468M 15,468M 15,468M 15,468M 15,468M 15,468M 15,468M 15,468M 15,468M 15,468M Total 1. Oversight costs include the salaries and benefits of executives and their staff responsible for overseeing the entire fund or multiple asset classes and the fees/salaries of the Board or Investment Committee. All costs associated with the above including fees/salaries, travel, director's insurance and attributed overhead are included. Given fiduciary obligations, having the lowest oversight costs is not necessarily optimal. Some sponsors with lower-than-average executive and administration costs compensate by having-higher-than average consulting costs. Cost Comparisons 3 U.S. Stock - Broad/All Cost by implementation style 80.0bp 70.0bp 60.0bp 50.0bp 40.0bp 30.0bp 20.0bp 10.0bp 0.0bp External Active¹ Peer US 90th %ile 51.1 69.1 75th %ile 46.1 52.1 Median 40.9 37.6 25th %ile 37.4 28.1 10th %ile 35.8 22.3 — Average 42.7 41.6 Count 4 44 Avg. assets 1,703M 2,108M Avg. mandate 190M 288M Kentucky Retirement Systems 54.4 54.4 ● You %ile 100% 79% Assets 374M 374M Avg. mandate 62M 62M External Passive Peer US 4.8 4.6 3.6 3.2 2.5 1.5 1.7 0.9 1.0 0.6 2.8 2.1 7 33 2,597M 2,872M n/a n/a Peer Average 39.5 2.9 0.4 42.7 US Average 36.1 5.2 0.3 41.6 1. Breakdown of external active fees Base fees Performance fees Internal and other Total 4 Cost Comparisons You 54.4 0.0 0.0 54.4 Internal Active Peer US #N/A 11.0 #N/A 8.9 #N/A 6.9 #N/A 4.4 #N/A 2.7 #N/A 6.9 0 8 #N/A 3,098M n/a n/a Internal Passive Peer US #N/A 10.0 #N/A 6.7 #N/A 2.1 #N/A 0.9 #N/A 0.3 #N/A 4.1 0 8 #N/A 10,336M n/a n/a U.S. Stock - Large Cap Cost by implementation style 70.0bp 60.0bp 50.0bp 40.0bp 30.0bp 20.0bp 10.0bp 0.0bp External Active¹ Peer US 90th %ile 51.5 62.3 75th %ile 45.0 49.2 Median 27.4 36.6 25th %ile 12.5 26.1 10th %ile 10.7 16.6 — Average 29.2 39.8 Count 8 75 Avg. assets 1,735M 1,528M Avg. mandate 734M 311M Kentucky Retirement Systems 11.9 11.9 ● You %ile 14% 1% Assets 232M 232M Avg. mandate 0M 0M External Passive Peer US 1.1 4.6 1.0 2.9 1.0 2.0 0.9 1.0 0.8 0.8 1.0 2.5 6 68 2,423M 1,581M n/a n/a Peer Average 28.4 0.4 0.5 29.2 US Average 35.0 4.5 0.3 39.8 Internal Active Peer US 6.1 27.6 6.1 18.2 6.1 7.3 6.1 4.5 6.1 4.0 6.1 11.6 1 10 2,975M 4,249M n/a n/a Internal Passive Peer US 0.5 1.9 0.5 0.7 0.4 0.2 0.3 0.1 0.2 0.1 0.3 1.1 4 16 2,157M 9,660M 0.5 67% 1,984M 0.5 60% 1,984M 1. Breakdown of external active fees Base fees Performance fees Internal and other Total You 11.9 0.0 0.0 11.9 Cost Comparisons 5 U.S. Stock - Mid Cap Cost by implementation style 90.0bp 80.0bp 70.0bp 60.0bp 50.0bp 40.0bp 30.0bp 20.0bp 10.0bp 0.0bp External Active¹ Peer US 90th %ile 65.5 80.5 75th %ile 56.5 71.5 Median 47.7 61.5 25th %ile 39.9 52.7 10th %ile 32.9 43.9 — Average 48.7 63.4 Count 4 21 Avg. assets 667M 573M Avg. mandate 317M 160M Kentucky Retirement Systems 43.9 43.9 ● You %ile 33% 10% Assets 339M 339M Avg. mandate 0M 0M External Passive Peer US 8.5 7.0 8.5 5.4 8.5 4.3 8.5 2.6 8.5 2.0 8.5 4.4 1 6 84M 288M n/a n/a Peer Average 48.4 0.0 0.4 48.7 US Average 59.5 3.5 0.4 63.4 1. Breakdown of external active fees Base fees Performance fees Internal and other Total 6 Cost Comparisons You 43.9 0.0 0.0 43.9 Internal Active Peer US 11.7 19.6 11.7 16.6 11.7 11.7 11.7 8.1 11.7 6.0 11.7 12.6 1 3 366M 645M n/a n/a Internal Passive Peer US 1.0 8.6 1.0 5.8 1.0 1.0 1.0 0.8 1.0 0.7 1.0 4.1 1 3 533M 1,683M n/a n/a U.S. Stock - Small Cap Cost by implementation style 100.0bp 90.0bp 80.0bp 70.0bp 60.0bp 50.0bp 40.0bp 30.0bp 20.0bp 10.0bp 0.0bp External Active¹ Peer US 90th %ile 78.8 92.9 75th %ile 70.8 79.7 Median 61.2 68.7 25th %ile 30.6 53.6 10th %ile 23.3 33.8 — Average 54.3 66.6 Count 9 89 Avg. assets 570M 672M Avg. mandate 272M 154M Kentucky Retirement Systems n/a n/a ● You %ile Assets Avg. mandate External Passive Peer US 14.0 13.9 13.9 6.0 13.9 4.3 13.8 2.4 13.7 1.0 13.9 5.8 2 25 170M 612M 13.7 0% 335M 13.7 88% 335M Peer Average 52.2 2.0 0.1 54.3 US Average 64.8 1.7 0.1 66.6 Internal Active Peer US 9.9 20.4 9.8 13.9 9.6 8.7 9.5 3.2 9.4 2.1 9.6 10.9 2 11 609M 764M n/a n/a Internal Passive Peer US 1.0 6.6 1.0 2.7 1.0 1.9 1.0 1.2 1.0 0.9 1.0 3.1 1 6 455M 749M n/a n/a 1. Breakdown of external active fees Base fees Performance fees Internal and other Total You n/a n/a n/a n/a Cost Comparisons 7 Stock - EAFE Cost by implementation style 70.0bp 60.0bp 50.0bp 40.0bp 30.0bp 20.0bp 10.0bp 0.0bp External Active¹ Peer US 90th %ile 59.7 64.5 75th %ile 53.9 59.0 Median 41.9 47.8 25th %ile 30.7 36.8 10th %ile 26.0 28.9 — Average 42.3 49.5 Count 8 86 Avg. assets 1,228M 1,929M Avg. mandate 376M 370M Kentucky Retirement Systems n/a n/a ● You %ile Assets Avg. mandate External Passive Peer US 4.5 10.5 3.0 7.0 2.9 4.7 2.0 2.7 1.3 1.3 2.8 7.6 5 38 643M 1,804M n/a n/a Peer Average 40.8 1.6 0.0 42.3 US Average 46.9 2.5 0.1 49.5 1. Breakdown of external active fees Base fees Performance fees Internal and other Total 8 Cost Comparisons You n/a n/a n/a n/a Internal Active Peer US #N/A 20.6 #N/A 7.5 #N/A 4.4 #N/A 4.3 #N/A 3.9 #N/A 9.8 0 5 #N/A 5,084M n/a n/a Internal Passive Peer US 24.5 16.0 24.5 7.2 24.5 2.4 24.5 0.2 24.5 0.0 24.5 5.5 1 11 67M 5,489M n/a n/a Stock - Emerging Cost by implementation style 120.0bp 100.0bp 80.0bp 60.0bp 40.0bp 20.0bp 0.0bp External Active¹ Peer US 90th %ile 80.0 100.3 75th %ile 78.0 85.5 Median 61.4 69.2 25th %ile 54.3 54.2 10th %ile 41.1 45.4 — Average 62.0 71.4 Count 10 95 Avg. assets 630M 957M Avg. mandate 303M 215M Kentucky Retirement Systems 78.1 78.1 ● You %ile 78% 65% Assets 330M 330M Avg. mandate 165M 165M External Passive Peer US 12.0 26.3 11.2 21.9 9.9 15.0 8.5 9.1 7.7 7.1 9.9 17.7 2 24 230M 460M 12.5 100% 165M 12.5 43% 165M Peer Average 60.3 1.7 0.0 62.0 US Average 70.2 0.8 0.3 71.4 Internal Active Peer US 12.8 94.2 12.8 12.8 12.8 10.9 12.8 3.9 12.8 2.7 12.8 32.6 1 9 749M 1,152M n/a n/a Internal Passive Peer US #N/A 7.4 #N/A 3.6 #N/A 0.7 #N/A 0.6 #N/A 0.6 #N/A 3.1 0 5 #N/A 1,518M n/a n/a 1. Breakdown of external active fees Base fees Performance fees Internal and other Total You 78.1 0.0 0.0 78.1 Cost Comparisons 9 Stock - ACWIxU.S. Cost by implementation style 90.0bp 80.0bp 70.0bp 60.0bp 50.0bp 40.0bp 30.0bp 20.0bp 10.0bp 0.0bp External Active¹ Peer US 90th %ile 56.5 77.3 75th %ile 50.5 59.9 Median 36.2 48.8 25th %ile 33.0 41.1 10th %ile 29.4 34.0 — Average 40.5 51.9 Count 10 62 Avg. assets 1,991M 1,504M Avg. mandate 468M 285M Kentucky Retirement Systems 32.3 32.3 ● You %ile 22% 8% Assets 1,811M 1,811M Avg. mandate 302M 302M External Passive Peer US 8.0 12.2 6.9 8.2 5.8 6.1 4.6 3.8 3.7 3.2 5.8 6.5 6 38 2,117M 1,233M 7.1 80% 1,206M 7.1 70% 1,206M Peer Average 37.1 2.7 0.6 40.5 US Average 50.4 1.3 0.3 51.9 1. Breakdown of external active fees Base fees Performance fees Internal and other Total 10 Cost Comparisons You 32.3 0.0 0.0 32.3 Internal Active Peer US #N/A 1.5 #N/A 1.5 #N/A 1.5 #N/A 1.5 #N/A 1.5 #N/A 1.5 0 1 #N/A 2,808M n/a n/a Internal Passive Peer US #N/A 10.8 #N/A 10.8 #N/A 10.8 #N/A 10.8 #N/A 10.8 #N/A 10.8 0 1 #N/A 93M n/a n/a Stock - Global Cost by implementation style 80.0bp 70.0bp 60.0bp 50.0bp 40.0bp 30.0bp 20.0bp 10.0bp 0.0bp External Active¹ Peer US 90th %ile 71.3 74.6 75th %ile 52.7 63.7 Median 50.0 48.2 25th %ile 49.8 37.8 10th %ile 45.7 31.4 — Average 55.8 50.9 Count 5 58 Avg. assets 706M 1,448M Avg. mandate 262M 333M Kentucky Retirement Systems n/a n/a ● You %ile Assets Avg. mandate External Passive Peer US #N/A 26.9 #N/A 7.4 #N/A 5.9 #N/A 4.0 #N/A 2.3 #N/A 10.7 0 17 #N/A 1,220M n/a n/a Peer Average 54.3 1.6 0.0 55.8 US Average 47.8 3.0 0.1 50.9 Internal Active Peer US 17.1 26.9 16.1 17.9 14.3 10.6 12.4 5.5 11.4 4.5 14.3 14.9 2 9 3,656M 2,375M n/a n/a Internal Passive Peer US #N/A 14.4 #N/A 10.2 #N/A 3.0 #N/A 3.0 #N/A 3.0 #N/A 7.7 0 3 #N/A 1,203M n/a n/a 1. Breakdown of external active fees Base fees Performance fees Internal and other Total You n/a n/a n/a n/a Cost Comparisons 11 Stock - Other Cost by implementation style 140.0bp 120.0bp 100.0bp 80.0bp 60.0bp 40.0bp 20.0bp 0.0bp External Active¹ Peer US 90th %ile 71.9 127.3 75th %ile 68.9 78.5 Median 63.9 63.9 25th %ile 47.0 34.2 10th %ile 36.9 23.4 — Average 56.0 73.9 Count 3 13 Avg. assets 567M 646M Avg. mandate 339M 171M Kentucky Retirement Systems n/a n/a ● You %ile Assets Avg. mandate External Passive Peer US 13.4 16.8 13.4 14.6 13.4 9.7 13.4 5.0 13.4 3.1 13.4 9.9 1 4 392M 534M n/a n/a Peer Average 56.0 0.0 0.0 56.0 US Average 58.8 12.9 2.2 73.9 1. Breakdown of external active fees Base fees Performance fees Internal and other Total 12 Cost Comparisons You n/a n/a n/a n/a Internal Active Peer US 3.1 21.6 3.1 19.6 3.1 11.2 3.1 3.7 3.1 3.4 3.1 12.1 1 4 163M 2,247M n/a n/a Internal Passive Peer US #N/A 2.9 #N/A 2.7 #N/A 2.4 #N/A 1.5 #N/A 1.0 #N/A 2.0 0 3 #N/A 713M n/a n/a Fixed Income - U.S. Cost by implementation style 35.0bp 30.0bp 25.0bp 20.0bp 15.0bp 10.0bp 5.0bp 0.0bp External Active¹ Peer US 90th %ile 32.3 31.6 75th %ile 22.1 25.1 Median 17.2 18.8 25th %ile 15.2 13.8 10th %ile 8.3 10.8 — Average 19.0 20.2 Count 14 83 Avg. assets 2,269M 2,260M Avg. mandate 575M 430M Kentucky Retirement Systems 22.1 22.1 ● You %ile 77% 62% Assets 1,367M 1,367M Avg. mandate 0M 0M External Passive Peer US 2.9 6.2 2.3 4.0 1.7 2.8 1.4 2.0 1.2 1.0 1.9 3.5 4 36 1,040M 862M n/a n/a Peer Average 18.1 0.6 0.3 19.0 US Average 19.7 0.4 0.2 20.2 Internal Active Peer US 3.0 8.9 2.7 4.4 2.4 2.5 2.1 2.1 1.7 1.4 2.4 4.6 4 20 2,529M 8,059M n/a n/a Internal Passive Peer US 0.6 0.9 0.6 0.9 0.6 0.6 0.6 0.4 0.6 0.3 0.6 0.6 1 5 204M 9,604M n/a n/a 1. Breakdown of external active fees Base fees Performance fees Internal and other Total You 22.1 0.0 0.0 22.1 Cost Comparisons 13 Fixed Income - U.S. Gov't Cost by implementation style 40.0bp 35.0bp 30.0bp 25.0bp 20.0bp 15.0bp 10.0bp 5.0bp 0.0bp External Active¹ Peer US 90th %ile #N/A 36.3 75th %ile #N/A 19.0 Median #N/A 13.0 25th %ile #N/A 9.3 10th %ile #N/A 8.5 — Average #N/A 19.3 Count 0 6 Avg. assets #N/A 2,054M Avg. mandate #N/A 593M Kentucky Retirement Systems n/a n/a ● You %ile Assets Avg. mandate External Passive Peer US #N/A 2.2 #N/A 1.9 #N/A 1.5 #N/A 1.0 #N/A 0.7 #N/A 1.5 0 2 #N/A 1,397M n/a n/a Peer Average n/a n/a n/a n/a US Average 19.2 0.0 0.0 19.3 1. Breakdown of external active fees Base fees Performance fees Internal and other Total 14 Cost Comparisons You n/a n/a n/a n/a Internal Active Peer US #N/A 1.7 #N/A 1.7 #N/A 1.7 #N/A 1.7 #N/A 1.7 #N/A 1.7 0 1 #N/A 290M n/a n/a Internal Passive Peer US #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A 0 0 #N/A #N/A n/a n/a Fixed Income - U.S. Credit Cost by implementation style 100.0bp 90.0bp 80.0bp 70.0bp 60.0bp 50.0bp 40.0bp 30.0bp 20.0bp 10.0bp 0.0bp External Active¹ Peer US 90th %ile #N/A 94.6 75th %ile #N/A 63.2 Median #N/A 50.2 25th %ile #N/A 13.6 10th %ile #N/A 9.7 — Average #N/A 47.5 Count 0 9 Avg. assets #N/A 942M Avg. mandate #N/A 213M Kentucky Retirement Systems n/a n/a ● You %ile Assets Avg. mandate External Passive Peer US #N/A 11.0 #N/A 9.6 #N/A 7.2 #N/A 4.8 #N/A 3.4 #N/A 7.2 0 2 #N/A 113M n/a n/a Peer Average n/a n/a n/a n/a US Average 47.5 0.0 0.0 47.5 Internal Active Peer US #N/A 1.3 #N/A 1.3 #N/A 1.3 #N/A 1.3 #N/A 1.3 #N/A 1.3 0 1 #N/A 933M n/a n/a Internal Passive Peer US #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A 0 0 #N/A #N/A n/a n/a 1. Breakdown of external active fees Base fees Performance fees Internal and other Total You n/a n/a n/a n/a Cost Comparisons 15 Fixed Income - EAFE Cost by implementation style 40.0bp 35.0bp 30.0bp 25.0bp 20.0bp 15.0bp 10.0bp 5.0bp 0.0bp External Active¹ Peer US 90th %ile 36.3 34.5 75th %ile 36.3 31.9 Median 36.3 28.0 25th %ile 36.3 24.8 10th %ile 36.3 23.2 — Average 36.3 28.6 Count 1 4 Avg. assets 272M 789M Avg. mandate 0M 303M Kentucky Retirement Systems n/a n/a ● You %ile Assets Avg. mandate External Passive Peer US #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A 0 0 #N/A #N/A n/a n/a Peer Average 35.2 1.1 0.0 36.3 US Average 23.8 4.6 0.2 28.6 1. Breakdown of external active fees Base fees Performance fees Internal and other Total 16 Cost Comparisons You n/a n/a n/a n/a Internal Active Peer US #N/A 3.7 #N/A 3.7 #N/A 3.7 #N/A 3.7 #N/A 3.7 #N/A 3.7 0 1 #N/A 1,653M n/a n/a Internal Passive Peer US #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A 0 0 #N/A #N/A n/a n/a Fixed Income - Emerging Cost by implementation style 120.0bp 100.0bp 80.0bp 60.0bp 40.0bp 20.0bp 0.0bp External Active¹ Peer US 90th %ile 95.4 82.8 75th %ile 64.1 69.7 Median 48.5 58.8 25th %ile 43.5 44.0 10th %ile 36.5 37.8 — Average 61.7 58.5 Count 7 40 Avg. assets 234M 483M Avg. mandate 208M 205M Kentucky Retirement Systems 42.4 42.4 ● You %ile 17% 23% Assets 147M 147M Avg. mandate 0M 0M External Passive Peer US #N/A 17.8 #N/A 17.8 #N/A 17.8 #N/A 17.8 #N/A 17.8 #N/A 17.8 0 1 #N/A 202M n/a n/a Peer Average 54.3 7.4 0.0 61.7 US Average 55.9 2.5 0.1 58.5 Internal Active Peer US 21.7 26.9 21.7 26.1 21.7 24.6 21.7 23.2 21.7 22.3 21.7 24.6 1 2 80M 211M n/a n/a Internal Passive Peer US #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A 0 0 #N/A #N/A n/a n/a 1. Breakdown of external active fees Base fees Performance fees Internal and other Total You 42.4 0.0 0.0 42.4 Cost Comparisons 17 Fixed Income - Global Cost by implementation style 50.0bp 45.0bp 40.0bp 35.0bp 30.0bp 25.0bp 20.0bp 15.0bp 10.0bp 5.0bp 0.0bp External Active¹ Peer US 90th %ile 31.9 45.7 75th %ile 30.9 41.2 Median 26.3 32.6 25th %ile 19.2 29.5 10th %ile 7.7 22.9 — Average 21.8 36.1 Count 5 29 Avg. assets 737M 637M Avg. mandate 379M 206M Kentucky Retirement Systems 30.9 30.9 ● You %ile 75% 36% Assets 574M 574M Avg. mandate 82M 82M External Passive Peer US #N/A 23.5 #N/A 21.4 #N/A 17.9 #N/A 14.4 #N/A 12.3 #N/A 17.9 0 2 #N/A 88M n/a n/a Peer Average 21.8 0.0 0.0 21.8 US Average 35.1 1.0 0.0 36.1 1. Breakdown of external active fees Base fees Performance fees Internal and other Total 18 Cost Comparisons You 30.9 0.0 0.0 30.9 Internal Active Peer US #N/A 3.3 #N/A 3.0 #N/A 2.6 #N/A 2.1 #N/A 1.8 #N/A 2.6 0 2 #N/A 11,243M n/a n/a Internal Passive Peer US #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A 0 0 #N/A #N/A n/a n/a Fixed Income - Inflation Indexed Cost by implementation style 25.0bp 20.0bp 15.0bp 10.0bp 5.0bp 0.0bp External Active¹ Peer US 90th %ile 16.7 21.4 75th %ile 16.1 17.1 Median 14.8 14.6 25th %ile 8.7 8.7 10th %ile 3.4 6.2 — Average 11.6 14.8 Count 6 20 Avg. assets 545M 664M Avg. mandate 512M 430M Kentucky Retirement Systems 6.7 6.7 ● You %ile 20% 11% Assets 274M 274M Avg. mandate 0M 0M External Passive Peer US 3.4 8.1 3.0 5.2 2.4 3.6 2.3 2.3 2.3 1.2 2.8 4.0 3 13 542M 437M n/a n/a Peer Average 11.6 0.0 0.0 11.6 US Average 14.4 0.3 0.0 14.8 Internal Active Peer US #N/A 3.0 #N/A 2.7 #N/A 2.7 #N/A 2.3 #N/A 1.1 #N/A 2.3 0 5 #N/A 2,986M n/a n/a Internal Passive Peer US 1.2 1.0 1.2 0.8 1.2 0.4 1.2 0.1 1.2 0.1 1.2 0.5 1 4 488M 5,574M 1.2 100% 488M 1.2 100% 488M 1. Breakdown of external active fees Base fees Performance fees Internal and other Total You 6.7 0.0 0.0 6.7 Cost Comparisons 19 Fixed Income - High Yield Cost by implementation style 180.0bp 160.0bp 140.0bp 120.0bp 100.0bp 80.0bp 60.0bp 40.0bp 20.0bp 0.0bp External Active¹ Peer US 90th %ile 156.4 70.8 75th %ile 68.3 55.7 Median 52.2 49.1 25th %ile 38.5 38.8 10th %ile 20.7 30.1 — Average 81.4 58.4 Count 10 67 Avg. assets 682M 618M Avg. mandate 210M 227M Kentucky Retirement Systems 67.4 67.4 ● You %ile 67% 88% Assets 724M 724M Avg. mandate 0M 0M External Passive Peer US #N/A 41.0 #N/A 41.0 #N/A 41.0 #N/A 41.0 #N/A 41.0 #N/A 41.0 0 1 #N/A 119M n/a n/a Peer Average 55.6 25.6 0.2 81.4 US Average 47.7 10.3 0.3 58.4 1. Breakdown of external active fees Base fees Performance fees Internal and other Total 20 Cost Comparisons You 51.4 16.0 0.0 67.4 Internal Active Peer US 9.5 62.6 9.1 22.3 8.4 8.4 7.8 6.8 7.4 6.7 8.4 22.2 2 8 402M 502M n/a n/a Internal Passive Peer US #N/A 17.2 #N/A 17.2 #N/A 17.2 #N/A 17.2 #N/A 17.2 #N/A 17.2 0 1 #N/A 20M n/a n/a Fixed Income - Mortgages Cost by implementation style 180.0bp 160.0bp 140.0bp 120.0bp 100.0bp 80.0bp 60.0bp 40.0bp 20.0bp 0.0bp External Active¹ Peer US 90th %ile 24.0 155.0 75th %ile 24.0 66.4 Median 24.0 46.5 25th %ile 24.0 22.6 10th %ile 24.0 11.0 — Average 24.0 73.3 Count 1 11 Avg. assets 138M 285M Avg. mandate 37M 140M Kentucky Retirement Systems n/a n/a ● You %ile Assets Avg. mandate External Passive Peer US #N/A 0.0 #N/A 0.0 #N/A 0.0 #N/A 0.0 #N/A 0.0 #N/A 0.0 0 1 #N/A 81M n/a n/a Peer Average 24.0 0.0 0.0 24.0 US Average 54.0 18.6 0.7 73.3 Internal Active Peer US #N/A 12.3 #N/A 11.9 #N/A 11.7 #N/A 10.1 #N/A 7.4 #N/A 10.4 0 4 #N/A 3,357M n/a n/a Internal Passive Peer US #N/A 4.3 #N/A 4.3 #N/A 4.3 #N/A 4.3 #N/A 4.3 #N/A 4.3 0 1 #N/A 856M n/a n/a 1. Breakdown of external active fees Base fees Performance fees Internal and other Total You n/a n/a n/a n/a Cost Comparisons 21 Fixed Income - Private Debt Cost by implementation style 3500.0bp 3000.0bp 2500.0bp 2000.0bp 1500.0bp 1000.0bp 500.0bp 0.0bp External Active¹ Peer US 90th %ile 3142.7 250.6 75th %ile 2058.1 169.6 Median 250.6 101.2 25th %ile 160.3 54.1 10th %ile 106.1 26.6 — Average 1395.4 291.4 Count 3 21 Avg. assets 260M 698M Avg. mandate 10M 139M Kentucky Retirement Systems n/a n/a ● You %ile Assets Avg. mandate External Passive Peer US #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A 0 0 #N/A #N/A n/a n/a Peer Average 1,395.0 0.0 0.4 1,395.4 US Average 282.5 8.5 0.4 291.4 1. Breakdown of external active fees Base fees Performance fees Internal and other Total 22 Cost Comparisons You n/a n/a n/a n/a Internal Active Peer US #N/A 40.6 #N/A 32.9 #N/A 20.0 #N/A 14.9 #N/A 11.9 #N/A 25.2 0 3 #N/A 365M n/a n/a Internal Passive Peer US #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A 0 0 #N/A #N/A n/a n/a Fixed Income - Long Bonds Cost by implementation style 35.0bp 30.0bp 25.0bp 20.0bp 15.0bp 10.0bp 5.0bp 0.0bp External Active¹ Peer US 90th %ile #N/A 29.8 75th %ile #N/A 23.1 Median #N/A 19.0 25th %ile #N/A 14.5 10th %ile #N/A 10.9 — Average #N/A 21.6 Count 0 70 Avg. assets #N/A 3,581M Avg. mandate #N/A 619M Kentucky Retirement Systems n/a n/a ● You %ile Assets Avg. mandate External Passive Peer US #N/A 8.2 #N/A 5.1 #N/A 4.2 #N/A 3.6 #N/A 2.2 #N/A 5.6 0 20 #N/A 491M n/a n/a Peer Average n/a n/a n/a n/a US Average 20.0 1.6 0.0 21.6 Internal Active Peer US #N/A 4.2 #N/A 4.1 #N/A 3.1 #N/A 2.0 #N/A 1.4 #N/A 2.9 0 4 #N/A 874M n/a n/a Internal Passive Peer US #N/A 1.5 #N/A 1.2 #N/A 0.6 #N/A 0.2 #N/A 0.2 #N/A 0.8 0 4 #N/A 5,812M n/a n/a 1. Breakdown of external active fees Base fees Performance fees Internal and other Total You n/a n/a n/a n/a Cost Comparisons 23 Fixed Income - Other Cost by implementation style 200.0bp 180.0bp 160.0bp 140.0bp 120.0bp 100.0bp 80.0bp 60.0bp 40.0bp 20.0bp 0.0bp External Active¹ Peer US 90th %ile 144.3 89.9 75th %ile 114.4 60.0 Median 64.5 49.6 25th %ile 46.6 39.4 10th %ile 35.8 14.6 — Average 85.8 54.7 Count 3 28 Avg. assets 661M 870M Avg. mandate 222M 318M Kentucky Retirement Systems n/a n/a ● You %ile Assets Avg. mandate External Passive Peer US #N/A 186.2 #N/A 21.9 #N/A 16.3 #N/A 14.9 #N/A 9.0 #N/A 70.8 0 5 #N/A 388M n/a n/a Peer Average 62.9 22.9 0.0 85.8 US Average 46.0 8.4 0.2 54.7 1. Breakdown of external active fees Base fees Performance fees Internal and other Total 24 Cost Comparisons You n/a n/a n/a n/a Internal Active Peer US #N/A 53.1 #N/A 31.8 #N/A 11.9 #N/A 3.7 #N/A 3.7 #N/A 23.7 0 4 #N/A 1,146M n/a n/a Internal Passive Peer US #N/A 0.5 #N/A 0.5 #N/A 0.5 #N/A 0.5 #N/A 0.5 #N/A 0.5 0 1 #N/A 795M n/a n/a Commodities Cost by implementation style 120.0bp 100.0bp 80.0bp 60.0bp 40.0bp 20.0bp 0.0bp External Active¹ Peer US 90th %ile 69.8 101.0 75th %ile 67.0 87.3 Median 62.5 64.9 25th %ile 58.0 51.0 10th %ile 55.2 29.8 — Average 62.5 79.8 Count 2 34 Avg. assets 103M 298M Avg. mandate 78M 96M Kentucky Retirement Systems n/a n/a ● You %ile Assets Avg. mandate External Passive Peer US #N/A 42.1 #N/A 36.9 #N/A 28.2 #N/A 19.4 #N/A 14.2 #N/A 28.2 0 2 #N/A 97M n/a n/a Peer Average 62.0 0.5 0.0 62.5 US Average 77.7 1.8 0.3 79.8 Internal Active Peer US #N/A 23.3 #N/A 14.9 #N/A 0.8 #N/A 0.7 #N/A 0.7 #N/A 10.1 0 3 #N/A 1,126M n/a n/a Internal Passive Peer US #N/A 1.6 #N/A 1.6 #N/A 1.6 #N/A 1.6 #N/A 1.6 #N/A 1.6 0 1 #N/A 963M n/a n/a 1. Breakdown of external active fees Base fees Performance fees Internal and other Total You n/a n/a n/a n/a Cost Comparisons 25 REITs Cost by implementation style 90.0bp 80.0bp 70.0bp 60.0bp 50.0bp 40.0bp 30.0bp 20.0bp 10.0bp 0.0bp External Active¹ Peer US 90th %ile 61.1 83.7 75th %ile 57.2 64.7 Median 48.2 51.3 25th %ile 41.6 43.4 10th %ile 38.1 36.5 — Average 49.7 57.5 Count 9 43 Avg. assets 236M 354M Avg. mandate 138M 152M Kentucky Retirement Systems n/a n/a ● You %ile Assets Avg. mandate External Passive Peer US 12.9 84.5 12.7 40.1 12.5 14.2 12.2 12.7 12.1 12.3 12.5 38.6 2 4 240M 154M n/a n/a Peer Average 49.7 0.0 0.0 49.7 US Average 56.5 0.9 0.1 57.5 1. Breakdown of external active fees Base fees Performance fees Internal and other Total 26 Cost Comparisons You n/a n/a n/a n/a Internal Active Peer US 5.0 11.6 5.0 9.2 5.0 5.0 5.0 4.5 5.0 3.3 5.0 6.8 1 7 577M 288M n/a n/a Internal Passive Peer US 0.7 0.6 0.7 0.6 0.7 0.5 0.7 0.4 0.7 0.3 0.7 0.5 1 2 145M 388M n/a n/a Real Estate ex-REITs Cost as a % of the amount fees are based on¹ Cost as a % of NAV 400bp 800bp 350bp 700bp 300bp 600bp 250bp 500bp 200bp 400bp 150bp 300bp 100bp 200bp 50bp 100bp 0bp 0bp Fund of Funds Mgmt fees (Top layer) Peer US Perf. fees (Top layer) Peer US 90th %ile 52.9 144.4 6.1 75th %ile 52.9 127.4 6.1 Median 52.9 102.3 6.1 25th %ile 52.9 67.5 6.1 10th %ile 52.9 53.3 6.1 — Average 52.9 96.5 6.1 Count 1 14 1 Avg. assets 185M 151M 185M Kentucky Retirement Systems n/a n/a n/a ● You %ile Assets Underlying mgmt. & perf.² External (not LP) Direct LP Total³ incl. perf. Peer US Total³ excl. perf. Peer US Peer US 153.5 133.3 112.5 98.7 77.9 110.3 17 831M 199.9 133.5 108.8 94.7 73.7 128.5 72 Peer US 10.9 10.9 9.3 7.9 6.3 11.9 14 151M 157.6 157.6 157.6 157.6 157.6 157.6 1 185M 217.9 216.6 194.0 169.6 137.1 186.3 14 151M 216.6 216.6 216.6 216.6 216.6 216.6 1 185M 355.6 337.9 300.3 268.5 228.2 296.2 14 151M 134.7 134.7 134.7 134.7 134.7 134.7 1 185M 226.2 209.2 185.5 154.1 135.1 179.8 14 151M n/a n/a n/a n/a n/a n/a n/a Mgmt fees Perf. fees Peer 138.4 136.1 112.0 85.3 57.1 108.7 17 1,749M 831M US 136.9 136.1 124.9 85.6 50.8 116.2 72 Total³ incl. perf. Peer US 275.2 267.6 226.6 185.7 147.3 219.8 17 1,749M 831M Mgmt fees Peer 350.7 268.1 229.8 181.3 140.1 246.2 72 98.4 88.2 81.8 69.0 53.1 78.8 10 1,749M 623M 108.5 108.5 31.4 31.4 139.9 139.9 44% 48% 0% 7% 6% 10% 636M 636M 636M 636M 636M 636M n/a US Perf. fees Peer 117.5 99.1 80.0 62.1 45.0 82.7 83 35.3 35.3 35.3 35.3 35.3 35.3 1 1,220M 623M n/a n/a US Direct LP Funds Total³ incl. perf. Peer US Total³ incl. perf. Peer US 1,220M 388.6 388.6 388.6 388.6 388.6 388.6 1 103M 722.1 389.4 359.7 340.7 324.4 436.4 14 86M 338.0 320.7 285.6 256.9 200.5 286.1 17 618M n/a n/a n/a Total³ incl. perf. Peer US 58.3 22.8 9.2 3.4 1.0 24.5 20 106.7 99.0 88.0 69.4 57.7 83.6 10 1,220M 623M n/a Fund of n/a 135.4 103.1 84.3 67.2 48.0 89.8 83 External (not LP) Total³ incl. perf. Peer US 470.7 321.4 272.4 241.0 181.7 300.7 72 106.8 102.0 88.0 69.4 61.6 85.4 10 1,608M 7M 139.9 139.9 6% 8% 636M 636M n/a Oper. Sub. Internal Total Total Peer 148.8 103.4 84.6 69.6 46.9 104.6 83 28M #N/A #N/A #N/A #N/A #N/A #N/A 0 #N/A n/a n/a US Peer #N/A 25.0 #N/A 25.0 #N/A 25.0 #N/A 25.0 #N/A 25.0 #N/A 25.0 0 1 #N/A 382M n/a n/a US 43.8 39.1 26.9 25.0 21.3 30.7 6 2,237M n/a 1. The base for fees is usually the committed amount during the commitment period, and unreturned invested capital afterwards. 2. The fees of fund of funds include both the top layer fees paid to the fund of funds manager and the underlying fees paid to the 'underlying partnerships' held by the fund of funds. Most funds were unable to provide the underlying fees so defaults of 82 bps (on amount fees are based on) for underlying management fees and 136 bps (on NAV) for underlying performance fees were used. 3. The total cost also includes the internal cost of monitoring and selecting real estate investments. Your cost of monitoring and selecting was 0.0 bps for LPs. The peer average cost of monitoring and selecting was 0.0 bps for fund of funds, 0.9 bps for LPs and 1.3 bps for external (not LPs). Real Estate Limited Partnerships: Fees are the weighted average management fee of 109 bps per the partnership level detail provided by you. This replaces the cost you provided on the main survey of 115 bps (7.3 million). Cost Comparisons 27 Infrastructure Cost as a % of the amount fees are based on¹ Cost as a % of NAV 300bp 1400bp 250bp 1200bp 1000bp 200bp 800bp 150bp 600bp 100bp 400bp 50bp 200bp 0bp 0bp Fund of Funds Mgmt fees (Top layer) Peer US 90th %ile #N/A 150.1 75th %ile #N/A 149.6 Median #N/A 96.0 25th %ile #N/A 27.4 10th %ile #N/A 10.9 — Average #N/A 84.7 Count 0 5 Avg. assets #N/A 90M Kentucky Retirement Systems ● You n/a n/a %ile Assets Perf. fees (Top layer) Peer US External (not LP) Direct LP Underlying Total³ mgmt. & perf.² incl. perf. Peer US Peer US Total³ excl. perf. Peer US Mgmt fees Peer #N/A #N/A #N/A #N/A #N/A #N/A 0 #N/A 2.3 2.3 1.5 0.3 0.1 1.3 5 90M #N/A #N/A #N/A #N/A #N/A #N/A 0 #N/A 104.6 100.6 100.3 95.0 90.3 98.1 5 90M #N/A #N/A #N/A #N/A #N/A #N/A 0 #N/A 252.8 252.5 183.4 126.4 115.4 184.7 5 90M #N/A #N/A #N/A #N/A #N/A #N/A 0 #N/A 235.1 234.6 181.0 114.9 97.4 170.3 5 90M 154.6 150.0 141.3 132.5 108.3 134.7 5 345M n/a n/a n/a n/a n/a n/a n/a n/a n/a US Perf. fees Peer US 157.9 17.8 28.1 150.0 16.6 22.3 134.8 16.0 18.8 109.3 14.3 13.0 101.9 5.7 0.0 126.2 13.1 39.8 20 5 20 369M 345M 369M n/a n/a n/a Mgmt fees Perf. fees Fund of Direct LP Total³ incl. perf. Peer US Funds Total³ incl. perf. Peer US Total³ incl. perf. Peer US #N/A 1326.9 335.5 454.3 160.9 175.8 #N/A 370.0 247.9 398.6 153.8 153.8 #N/A 361.8 232.3 205.9 141.9 104.4 #N/A 280.9 200.4 140.9 130.1 73.7 #N/A 177.2 159.9 128.4 123.0 68.9 #N/A 617.1 241.5 272.2 141.9 115.0 0 5 5 20 2 10 #N/A 53M 224M 289M 34M 236M Total³ incl. perf. Peer US Peer US Peer US 162.9 158.2 157.7 149.1 126.1 148.3 5 345M 205.6 167.5 156.4 131.7 121.1 170.9 20 369M 163.0 155.5 143.1 130.7 123.2 143.1 2 34M 175.8 155.5 99.7 71.8 68.9 113.8 10 226M #N/A #N/A #N/A #N/A #N/A #N/A 0 34M 31.1 31.1 31.1 31.1 31.1 31.1 1 226M 163.0 155.5 143.1 130.7 123.2 143.1 2 34M 175.8 160.8 109.1 73.7 68.9 118.3 10 226M n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a External (not LP) Total³ incl. perf. Peer US n/a n/a Internal Total Peer US 7.2 7.2 7.2 7.2 7.2 7.2 1 22M 22.9 20.3 15.9 11.6 8.9 15.9 2 260M n/a n/a 1. The base for fees is usually the committed amount during the commitment period, and unreturned invested capital afterwards. 2. The fees of fund of funds include both the top layer fees paid to the fund of funds manager and the underlying fees paid to the 'underlying partnerships' held by the fund of funds. Most funds were unable to provide the underlying fees so defaults of 85 bps (on amount fees are based on) for underlying management fees and 22 bps (on NAV) for underlying performance fees were used. 3. The total cost also includes the internal cost of monitoring and selecting infrastructure investments. The peer average cost of monitoring and selecting was 0.5 bps for LPs and 0.0 bps for external (not LPs). 28 Cost Comparisons Natural Resources Cost as a % of the amount fees are based on¹ Cost as a % of NAV 250bp 600bp 500bp 200bp 400bp 150bp 300bp 100bp 200bp 50bp 100bp 0bp 0bp Fund of Funds Mgmt fees (Top layer) Peer US 90th %ile #N/A 90.6 75th %ile #N/A 85.4 Median #N/A 76.6 25th %ile #N/A 67.9 10th %ile #N/A 62.6 — Average #N/A 76.6 Count 0 2 Avg. assets #N/A 216M Kentucky Retirement Systems ● You n/a n/a %ile Assets Perf. fees (Top layer) Peer US External (not LP) Direct LP Underlying Total³ mgmt. & perf.² incl. perf. Peer US Peer US Total³ excl. perf. Peer US Mgmt fees Peer #N/A #N/A #N/A #N/A #N/A #N/A 0 #N/A 0.0 0.0 0.0 0.0 0.0 0.0 2 216M #N/A #N/A #N/A #N/A #N/A #N/A 0 #N/A 97.9 97.9 97.9 97.9 97.9 97.9 2 216M #N/A #N/A #N/A #N/A #N/A #N/A 0 #N/A 188.5 183.3 174.5 165.8 160.5 174.5 2 216M #N/A #N/A #N/A #N/A #N/A #N/A 0 #N/A 187.9 182.7 173.9 165.2 159.9 173.9 2 216M 150.0 143.6 124.2 115.8 100.2 124.8 6 139M n/a n/a n/a n/a n/a n/a n/a n/a n/a US Perf. fees Peer US 151.3 0.6 0.6 143.7 0.6 0.6 124.7 0.4 0.5 104.8 0.0 0.2 83.3 0.0 0.1 120.2 0.3 0.8 18 6 18 749M 139M 749M n/a n/a n/a Total³ incl. perf. Peer US Mgmt fees Peer 151.8 144.2 124.8 116.0 100.2 125.6 6 139M 153.5 144.1 126.9 105.2 86.2 121.8 18 749M 217.6 144.1 48.4 114.9 226.6 180.1 100.6 100.0 40.3 79.8 123.1 128.4 97.3 83.4 26.9 1.4 100.6 100.0 74.8 69.3 13.4 0.0 97.3 74.8 71.5 48.0 5.4 0.0 83.8 48.0 127.5 94.1 26.9 41.4 138.3 108.5 5 25 2 7 5 25 247M 255M 247M 255M 247M 255M n/a n/a n/a US n/a Perf. fees Peer n/a US n/a Total³ incl. perf. Peer US n/a n/a Fund of Direct LP Funds Total³ incl. perf. Peer US #N/A #N/A #N/A #N/A #N/A #N/A 0 #N/A n/a Total³ incl. perf. Peer US External (not LP) Total³ incl. perf. Peer US Internal Peer US 188.5 183.3 174.5 165.8 160.5 174.5 2 216M 354.8 180.6 151.4 131.8 125.0 210.4 6 75M 541.8 236.7 151.4 127.3 118.1 229.1 18 476M 227.9 125.0 123.1 93.6 85.1 143.5 5 218M 197.8 131.6 99.9 79.4 48.0 133.3 25 221M 13.7 13.7 13.7 13.7 13.7 13.7 1 12M 13.7 13.7 13.7 13.7 13.7 13.7 1 12M n/a n/a n/a n/a n/a n/a n/a Total 1. The base for fees is usually the committed amount during the commitment period, and unreturned invested capital afterwards. 2. The fees of fund of funds include both the top layer fees paid to the fund of funds manager and the underlying fees paid to the 'underlying partnerships' held by the fund of funds. Most funds were unable to provide the underlying fees so defaults of 97 bps (on amount fees are based on) for underlying management fees and 1 bps (on NAV) for underlying performance fees were used. 3. The total cost also includes the internal cost of monitoring and selecting natural resources investments. The peer average cost of monitoring and selecting was 0.5 bps for LPs and 0.0 bps for external (not LPs). Cost Comparisons 29 Other Real Assets Cost as % of NAV by implementation style 180.0bp 160.0bp 140.0bp 120.0bp 100.0bp 80.0bp 60.0bp 40.0bp 20.0bp 0.0bp External1 Peer US 90th %ile 107.4 162.8 75th %ile 85.4 118.0 Median 48.8 89.9 25th %ile 46.9 56.3 10th %ile 45.8 46.8 — Average 72.0 101.8 Count 3 23 Avg. assets 476M 257M Avg. mandate 150M 101M Kentucky Retirement Systems 45.0 45.0 ● You %ile 0% 5% Assets 713M 713M Avg. mandate 79M 79M 1. Breakdown of external fees Your Plan Base fees 45.0 Internal and other 0.0 Total* 45.0 Performance fees 9.6 Peer Average 72.0 0.0 72.0 17.3 Internal Peer US #N/A 170.7 #N/A 170.7 #N/A 170.7 #N/A 170.7 #N/A 170.7 #N/A 170.7 0 1 #N/A 57M #N/A #N/A n/a n/a US Average 100.0 1.8 101.8 2.3 * Total cost excludes performance fees because most participants did not provide performance fees for other real assets. 30 Cost Comparisons Diversified Private Equity Cost as a % of the amount fees are based on¹ Cost as a % of NAV 600bp 800bp 500bp 700bp 600bp 400bp 500bp 300bp 400bp 200bp 300bp 100bp 200bp 0bp 100bp -100bp 0bp Fund of Funds Mgmt fees Perf. fees (Top layer) (Top layer) Peer US Peer US 90th %ile 179.2 147.0 61.3 38.1 75th %ile 105.0 109.6 28.6 37.2 Median 74.2 90.0 25.5 25.9 25th %ile 53.9 66.0 19.7 18.9 10th %ile 51.9 45.4 17.8 13.0 — Average 95.2 93.6 39.0 28.6 Count 9 64 9 64 Avg. assets 545M 590M 545M 590M Kentucky Retirement Systems n/a n/a n/a n/a ● You %ile Assets Underlying mgmt. & perf.² Peer 275.4 250.1 241.4 239.1 223.4 246.0 9 545M US 275.5 275.4 247.4 223.5 217.6 250.9 64 590M n/a n/a Direct LP Total³ incl. perf. Peer US 547.1 452.5 372.2 402.6 332.2 362.6 317.9 325.6 298.9 289.4 383.9 374.9 9 64 545M 590M n/a n/a Total³ excl. perf. Peer US 350.3 312.0 270.0 279.7 239.2 255.0 218.9 234.9 216.9 210.9 264.0 260.5 9 64 545M 590M n/a n/a Mgmt fees Peer 171.4 165.0 165.0 165.0 157.1 163.6 14 919M US 172.6 165.0 165.0 165.0 138.5 163.8 87 2,817M Perf. fees Total³ incl. perf. Peer US Peer US 107.4 110.4 284.7 290.4 82.4 110.4 260.0 275.4 67.7 88.1 234.4 244.3 52.3 59.8 216.1 219.8 34.3 28.2 199.1 195.9 67.3 83.4 240.8 250.5 14 87 14 87 919M 2,817M 919M 2,817M Direct LP & Co-Inv.⁴ Total excl. perf Peer US 181.0 182.6 172.2 169.1 165.8 165.0 165.0 165.0 162.9 145.1 173.2 166.9 14 88 922M 2,830M Total³ incl. perf. Peer US 284.7 290.4 260.0 275.4 234.1 244.3 216.1 219.3 199.1 193.9 240.4 249.8 14 87 922M 2,830M 165.0 165.0 -15.4 -15.4 166.4 166.4 181.8 181.8 166.4 166.4 23% 24% 0% 1% 0% 3% 92% 90% 0% 3% 190M 190M 190M 190M 190M 190M 190M 190M 190M 190M Fund of Funds Total³ incl. perf. Peer US 576.5 699.4 552.8 581.5 537.8 489.9 473.8 408.0 450.1 386.0 522.4 528.0 9 64 389M 427M n/a n/a Direct LP & Co-Inv.⁴ Total³ incl. perf. Peer US 482.0 550.6 409.2 406.0 365.3 299.6 343.7 275.4 298.2 271.2 391.0 409.3 14 87 512M 2,168M 191.0 191.0 0% 1% 166M 166M Internal Total Peer US #N/A 25.3 #N/A 25.1 #N/A 23.4 #N/A 21.5 #N/A 20.8 #N/A 23.1 0 4 #N/A 173M n/a n/a 1. The base for fees is usually the committed amount during the commitment period, and unreturned invested capital afterwards. 2. The fees of fund of funds include both the top layer fees paid to the fund of funds manager and the underlying fees paid to the 'underlying partnerships' held by the fund of funds. Most funds were unable to provide the underlying fees so defaults of 165 bps (on amount fees are based on) for underlying management fees and 110 bps (on NAV) for underlying performance fees were used. 3. The total cost also includes the internal cost of monitoring and selecting private equity investments. Your cost of monitoring and selecting was 16.8 bps for LPs. The peer average cost of monitoring and selecting was 3.8 bps for fund of funds and 9.9 bps for LPs. 4. Co-investment is included with direct LPs because it can only be done alongside direct LPs. CEM uses this combined style in its benchmark cost analysis to ensure funds that reduce their costs by using co-investment receive benchmark credit. Co-investment is done by none of your peers and 4 of the U.S. funds. Diversified Private Equity Direct LPs: A default of 165 bps was used because you were unable to provide support for your unusually low cost of 141 bps (2.7 million). Cost Comparisons 31 LBO Cost as a % of the amount fees are based on¹ Cost as a % of NAV 600bp 2500bp 500bp 2000bp 400bp 1500bp 300bp 1000bp 200bp 500bp 100bp 0bp 0bp Fund of Funds Mgmt fees Perf. fees (Top layer) (Top layer) Peer US Peer US 90th %ile 43.0 156.3 36.3 36.3 75th %ile 36.3 101.4 30.7 29.6 Median 25.2 72.9 21.3 21.1 25th %ile 14.1 52.5 11.9 19.5 10th %ile 7.4 25.2 6.2 10.7 — Average 25.2 84.8 21.3 22.7 Count 2 6 2 6 Avg. assets 46M 178M 46M 178M Kentucky Retirement Systems n/a n/a n/a n/a ● You %ile Assets Underlying mgmt. & perf.² Peer 270.6 253.3 224.3 195.4 178.0 224.3 2 46M US 315.1 281.8 279.5 269.6 216.6 270.4 6 178M n/a n/a Direct LP Total³ incl. perf. Peer US 351.0 500.0 322.8 404.4 275.9 368.4 228.9 364.8 200.8 273.0 275.9 380.5 2 6 46M 178M n/a n/a Total³ excl. perf. Peer US 195.5 310.4 190.4 256.8 181.8 224.5 173.2 204.0 168.0 181.8 181.8 238.9 2 6 46M 178M n/a n/a Mgmt fees Peer 170.0 165.0 151.5 127.4 122.5 147.3 5 US 173.3 165.0 165.0 151.5 127.4 159.5 21 Perf. fees Peer 149.7 137.3 123.0 102.1 77.6 116.3 5 US 196.5 158.0 123.0 98.5 61.3 123.8 21 Direct LP & Co-Inv.⁴ Total³ incl. perf. Peer US 318.6 361.5 302.6 317.4 288.8 288.8 267.5 263.5 216.3 223.4 274.1 286.9 5 21 Total excl. perf Peer US 176.3 174.5 171.3 171.3 165.4 165.0 151.5 165.0 133.1 150.3 157.7 162.8 5 21 Total³ incl. perf. Peer US 318.6 361.5 302.6 317.4 288.8 288.8 267.5 247.9 216.3 223.4 274.1 286.2 5 21 1,784M 2,772M 1,784M 2,772M 1,784M 2,772M 1,817M 2,839M 1,817M 2,839M 127.4 127.4 158.0 158.0 329.2 329.2 171.3 171.3 329.2 329.2 25% 10% 100% 75% 100% 80% 75% 75% 100% 80% 1,146M 1,146M 1,146M 1,146M 1,146M 1,146M 1,146M 1,146M 1,146M 1,146M Fund of Funds Total³ incl. perf. Peer US 2210.5 1514.3 1934.8 631.0 1475.1 602.6 1015.5 571.7 739.8 561.8 1475.1 892.9 2 6 20M 111M n/a n/a Direct LP & Co-Inv.⁴ Total³ incl. perf. Peer US 556.3 583.9 514.9 514.9 483.5 423.4 409.5 368.0 384.6 361.5 471.9 565.9 5 21 867M 2,014M 409.5 409.5 25% 45% 921M 921M Internal Total Peer #N/A #N/A #N/A #N/A #N/A #N/A 0 #N/A US #N/A #N/A #N/A #N/A #N/A #N/A 0 #N/A n/a n/a 1. The base for fees is usually the committed amount during the commitment period, and unreturned invested capital afterwards. 2. The fees of fund of funds include both the top layer fees paid to the fund of funds manager and the underlying fees paid to the 'underlying partnerships' held by the fund of funds. Most funds were unable to provide the underlying fees so defaults of 152 bps (on amount fees are based on) for underlying management fees and 196 bps (on NAV) for underlying performance fees were used. 3. The total cost also includes the internal cost of monitoring and selecting private equity investments. Your cost of monitoring and selecting was 43.9 bps for LPs. The peer average cost of monitoring and selecting was 5.1 bps for fund of funds and 10.5 bps for LPs. 4. Co-investment is included with direct LPs because it can only be done alongside direct LPs. CEM uses this combined style in its benchmark cost analysis to ensure funds that reduce their costs by using co-investment receive benchmark credit. Co-investment is done by none of your peers and none of the U.S. funds. LBO Direct LPs: Fees are the weighted average management fee of 127 bps per the partnership level detail provided by you. This replaces the cost you provided on the main survey of 121 bps (14 million). 32 Cost Comparisons Venture Capital Cost as a % of the amount fees are based on¹ Cost as a % of NAV 800bp 900bp 700bp 800bp 600bp 700bp 600bp 500bp 500bp 400bp 400bp 300bp 300bp 200bp 200bp 100bp 100bp 0bp 0bp Fund of Funds Mgmt fees Perf. fees (Top layer) (Top layer) Peer US Peer US 90th %ile 4.9 117.1 7.1 11.8 75th %ile 4.9 80.5 7.1 11.8 Median 4.9 61.0 7.1 8.8 25th %ile 4.9 56.6 7.1 7.5 10th %ile 4.9 53.5 7.1 7.1 — Average 4.9 76.3 7.1 8.9 Count 1 11 1 11 Avg. assets 161M 415M 161M 415M Kentucky Retirement Systems n/a n/a n/a n/a ● You %ile Assets Underlying mgmt. & perf.² Peer 436.4 436.4 436.4 436.4 436.4 436.4 1 161M US 632.9 589.4 530.1 469.5 441.0 537.0 11 415M n/a n/a Direct LP Total³ incl. perf. Peer US 456.7 722.1 456.7 689.5 456.7 657.1 456.7 535.0 456.7 515.4 456.7 623.1 1 11 161M 415M n/a n/a Total³ excl. perf. Peer US 220.4 324.3 220.4 288.2 220.4 268.2 220.4 263.8 220.4 261.2 220.4 284.4 1 11 161M 415M n/a n/a Mgmt fees Peer 219.2 214.7 207.2 170.9 149.1 188.0 3 208M US 211.7 200.0 200.0 200.0 170.0 196.6 28 337M Perf. fees Peer 322.1 259.5 155.3 76.1 28.6 172.0 3 208M US 382.2 382.2 365.4 177.9 84.6 291.7 28 337M Direct LP & Co-Inv.⁴ Total³ incl. perf. Peer US 479.7 607.7 437.2 583.1 366.3 550.3 292.7 382.3 248.6 284.6 364.5 490.2 3 28 208M 337M Total excl. perf Peer US 220.0 214.4 216.6 204.1 211.0 200.0 177.7 194.4 157.7 163.9 192.5 190.6 3 28 208M 338M Total³ incl. perf. Peer US 479.7 607.7 437.2 583.1 366.3 528.1 292.7 364.1 248.6 235.6 364.5 467.2 3 28 208M 338M 134.5 134.5 363.7 363.7 508.1 508.1 144.3 144.3 508.1 508.1 0% 0% 100% 48% 100% 41% 0% 4% 100% 44% 347M 347M 347M 347M 347M 347M 347M 347M 347M 347M Fund of Funds Total³ incl. perf. Peer US 761.5 805.1 761.5 785.8 761.5 775.5 761.5 658.2 761.5 646.4 761.5 736.3 1 11 96M 371M n/a n/a Direct LP & Co-Inv.⁴ Total³ incl. perf. Peer US 827.9 821.6 717.6 623.1 533.9 582.2 413.2 546.1 340.8 328.5 576.0 633.2 3 28 150M 261M 533.9 533.9 50% 22% 330M 330M Internal Total Peer 15.0 15.0 15.0 15.0 15.0 15.0 1 11M US 15.0 15.0 15.0 15.0 15.0 15.0 1 11M n/a n/a 1. The base for fees is usually the committed amount during the commitment period, and unreturned invested capital afterwards. 2. The fees of fund of funds include both the top layer fees paid to the fund of funds manager and the underlying fees paid to the 'underlying partnerships' held by the fund of funds. Most funds were unable to provide the underlying fees so defaults of 207 bps (on amount fees are based on) for underlying management fees and 382 bps (on NAV) for underlying performance fees were used. 3. The total cost also includes the internal cost of monitoring and selecting private equity investments. Your cost of monitoring and selecting was 9.8 bps for LPs. The peer average cost of monitoring and selecting was 8.3 bps for fund of funds and 4.5 bps for LPs. 4. Co-investment is included with direct LPs because it can only be done alongside direct LPs. CEM uses this combined style in its benchmark cost analysis to ensure funds that reduce their costs by using co-investment receive benchmark credit. Co-investment is done by none of your peers and 2 of the U.S. funds. Venture Capital Direct LPs: Fees are the weighted average management fee of 135 bps per the partnership level detail provided by you. This replaces the cost you provided on the main survey of 155 bps (5.4 million). Cost Comparisons 33 Other Private Equity Cost as a % of the amount fees are based on¹ Cost as a % of NAV 400bp 600bp 350bp 500bp 300bp 400bp 250bp 200bp 300bp 150bp 200bp 100bp 100bp 50bp 0bp 0bp Direct LP Mgmt fees Peer US 90th %ile 144.6 165.0 75th %ile 137.9 150.0 Median 126.7 129.7 25th %ile 115.5 99.8 10th %ile 108.8 76.1 — Average 126.7 125.5 Count 2 21 Avg. assets 1,084M 652M Kentucky Retirement Systems n/a n/a ● You %ile Assets Perf. fees Peer 255.3 218.8 158.0 97.2 60.8 158.0 2 1,084M US 108.3 106.9 78.8 60.8 36.5 90.0 21 652M n/a n/a Direct LP & Co-Inv.³ Total² incl. perf. Peer US 364.3 291.5 335.0 269.3 286.0 212.7 237.0 187.6 207.6 151.5 286.0 218.2 2 21 1,084M 652M n/a n/a Total excl. perf Peer US 146.8 172.1 139.7 151.5 127.9 129.7 116.2 102.4 109.1 88.2 127.9 127.5 2 21 #N/A #N/A n/a n/a Total² incl. perf. Peer US 364.3 291.5 335.0 269.3 286.0 206.0 237.0 187.6 207.6 151.5 286.0 217.1 2 21 #N/A #N/A n/a n/a Direct LP & Co-Inv.³ Total² incl. perf. Peer US 533.5 400.7 507.3 376.3 463.7 278.1 420.0 268.4 393.8 222.0 463.7 312.5 2 21 #N/A #N/A n/a n/a Internal Total Peer #N/A #N/A #N/A #N/A #N/A #N/A 0 #N/A US 7.1 6.8 6.1 3.7 2.3 4.9 3 393M n/a n/a 1. The base for fees is usually the committed amount during the commitment period, and unreturned invested capital afterwards. 2. The total cost also includes the internal cost of monitoring and selecting private equity investments. The peer average cost of monitoring and selecting was 1.3 bps for 3. Co-investment is included with direct LPs in CEM’s benchmark cost analysis because it reduces the cost of investing in direct LPs. Co-investment is done by none of your peers and 1 of the U.S. funds. 34 Cost Comparisons Global TAA Cost by implementation style 180bp 160bp 140bp 120bp 100bp 80bp 60bp 40bp 20bp 0bp External1 Peer US 90th %ile 127.0 152.6 75th %ile 99.6 89.5 Median 83.0 58.9 25th %ile 73.4 43.5 10th %ile 58.5 30.4 — Average 90.0 82.0 Count 4 40 Avg. assets 848M 767M Avg. mandate 238M 303M Kentucky Retirement Systems n/a n/a ● You %ile Assets Avg. mandate 1. Breakdown of External fees Your Plan Base fees n/a Performance fees n/a Internal and other n/a Total n/a Peer Average 72.5 17.5 0.0 90.0 Internal Peer US #N/A 35.3 #N/A 29.3 #N/A 19.5 #N/A 13.7 #N/A 10.2 #N/A 22.2 0 3 #N/A 593M #N/A #N/A n/a n/a US Average 66.1 14.7 1.2 82.0 Cost Comparisons 35 Hedge Funds Cost by implementation style 450bp 400bp 350bp 300bp 250bp 200bp 150bp 100bp 50bp 0bp Fund of Funds Mgmt fees Perf. fees (Top layer) (Top layer) Peer US Peer US 90th %ile 96.8 103.4 51.9 36.4 75th %ile 82.3 95.6 34.4 28.5 Median 72.0 79.5 28.5 28.5 25th %ile 61.7 62.6 22.6 3.6 10th %ile 41.6 47.9 18.9 0.0 — Average 70.1 81.2 33.1 82.7 Count 6 61 6 61 Avg. assets 582M 529M 582M 529M Kentucky Retirement Systems 58.4 58.4 67.4 67.4 ● You %ile 20% 18% 100% 97% Assets 1,540M 1,540M 1,540M 1,540M Underlying mgmt. & perf.¹ Peer 242.5 242.5 242.5 242.5 242.5 242.5 6 582M US 242.5 242.5 242.5 242.5 242.5 242.5 61 529M External direct Total² incl. perf. Peer US 369.6 402.3 367.3 368.3 362.5 339.1 338.6 318.8 313.6 304.2 348.6 407.4 6 61 582M 529M Total² Mgmt fees excl. perf. Peer US Peer US 239.6 248.7 178.1 180.4 229.5 236.7 155.7 160.3 219.6 223.3 140.9 149.6 202.6 203.5 125.6 124.2 182.5 188.8 96.8 69.2 213.9 223.1 139.6 138.9 6 61 8 67 582M 529M 1,032M 1,772M 242.5 242.5 368.3 368.3 199.3 199.3 115.9 40% 37% 80% 75% 20% 18% 14% 1,540M 1,540M 1,540M 1,540M 1,540M 1,540M 77M 115.9 20% 77M Perf. fees Total² incl. perf. Peer US Peer US 113.1 163.4 253.3 333.9 103.4 127.7 246.8 277.7 101.6 101.6 239.5 249.9 96.8 82.3 230.7 217.2 57.6 59.6 203.7 155.1 90.0 108.6 230.5 249.6 8 67 8 67 1,032M 1,772M 1,032M 1,772M 122.9 100% 77M 122.9 70% 77M 238.8 43% 77M 238.8 35% 77M 1. The fees of fund of funds include both the top layer fees paid to the fund of funds manager and the underlying fees paid to the 'underlying partnerships' held by the fund of funds. Most funds were unable to provide the underlying fees so defaults of 141 bps (on NAV) for underlying management fees and 102 bps (on NAV) for underlying performance fees were used. 2. The total cost also includes the internal cost of monitoring and selecting hedge fund investments. Your cost of monitoring and selecting was 0.0 bps for fund of funds and 0.0 bps for external direct. The peer average cost of monitoring and selecting was 2.9 bps for fund of funds and 0.9 bps for external direct. Hedge Funds - Fund of Funds ('bottom layer'): For comparability with other styles, a default for management fees paid to the 'bottom layer' underlying managers of 141 bps was used. Hedge Funds - Fund of Funds ('bottom layer'): For comparability, a default for performance fees paid to the 'bottom layer' underlying managers of 102 bps (on NAV) was used. 36 Cost Comparisons Overlays: currency, duration Cost by implementation style 35.0bp 30.0bp 25.0bp 20.0bp 15.0bp 10.0bp 5.0bp 0.0bp Currency Hedge Internal External % of notional % of notional Peer US Peer US 90th %ile #N/A 0.2 0.2 6.8 75th %ile #N/A 0.2 0.2 3.7 Median #N/A 0.2 0.2 1.7 25th %ile #N/A 0.2 0.2 1.2 10th %ile #N/A 0.2 0.2 0.2 — Average #N/A 0.2 0.2 3.4 Count 0 1 1 11 Avg. notional #N/A 4,225M 227M 2,486M Kentucky Retirement Systems n/a n/a n/a n/a ● You %ile Notional Discretionary Currency Duration Management Internal External Internal External % of notional % of notional % of notional % of notional Peer US Peer US Peer US Peer US #N/A 0.8 13.2 32.3 #N/A 0.3 #N/A 7.2 #N/A 0.8 13.2 22.2 #N/A 0.3 #N/A 6.6 #N/A 0.6 13.2 14.0 #N/A 0.3 #N/A 5.8 #N/A 0.5 13.2 13.1 #N/A 0.3 #N/A 4.9 #N/A 0.4 13.2 12.0 #N/A 0.3 #N/A 4.4 #N/A 0.6 13.2 19.4 #N/A 0.3 #N/A 5.8 0 2 1 7 0 1 0 2 #N/A 12,461M 1,000M 1,676M #N/A 1,800M #N/A 834M n/a n/a n/a n/a n/a n/a n/a n/a Cost Comparisons 37 Overlays: passive beta/rebalancing, global TAA, policy tilt TAA Cost by implementation style 25.0bp 20.0bp 15.0bp 10.0bp 5.0bp 0.0bp Passive Beta/Rebalancing Internal External % of notional % of notional Peer US Peer US 90th %ile #N/A 3.8 4.6 23.7 75th %ile #N/A 3.4 4.4 12.9 Median #N/A 1.1 4.1 6.2 25th %ile #N/A 0.8 3.9 3.3 10th %ile #N/A 0.3 3.7 2.9 — Average #N/A 1.9 4.1 11.5 Count 0 5 2 16 Avg. notional #N/A 974M 4,290M 1,419M Kentucky Retirement Systems n/a n/a n/a n/a ● You %ile Notional 38 Cost Comparisons Global TAA Internal External % of notional % of notional Peer US Peer US #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A 0 0 0 0 #N/A #N/A #N/A #N/A n/a n/a n/a n/a Policy Tilt TAA Internal External % of notional % of notional Peer US Peer US #N/A #N/A #N/A 21.7 #N/A #N/A #N/A 21.7 #N/A #N/A #N/A 21.7 #N/A #N/A #N/A 21.7 #N/A #N/A #N/A 21.7 #N/A #N/A #N/A 21.7 0 0 0 1 #N/A #N/A #N/A 32M n/a n/a n/a n/a Overlays: commodity, long/short, other Cost by implementation style 100.0bp 90.0bp 80.0bp 70.0bp 60.0bp 50.0bp 40.0bp 30.0bp 20.0bp 10.0bp 0.0bp Commodity Internal External % of notional % of notional Peer US Peer US 90th %ile #N/A #N/A 4.7 4.7 75th %ile #N/A #N/A 4.7 4.7 Median #N/A #N/A 4.7 4.7 25th %ile #N/A #N/A 4.7 4.7 10th %ile #N/A #N/A 4.7 4.7 — Average #N/A #N/A 4.7 4.7 Count 0 0 1 1 Avg. notional #N/A #N/A 1,076M 1,076M Kentucky Retirement Systems n/a n/a n/a n/a ● You %ile Notional Long/ Short Other Internal External Internal External % of notional % of notional % of notional % of notional Peer US Peer US Peer US Peer US #N/A #N/A 9.3 9.3 #N/A 8.4 90.6 26.8 #N/A #N/A 9.3 9.3 #N/A 8.4 77.5 12.9 #N/A #N/A 9.3 9.3 #N/A 8.4 55.6 7.0 #N/A #N/A 9.3 9.3 #N/A 8.4 33.8 4.6 #N/A #N/A 9.3 9.3 #N/A 8.4 20.6 3.5 #N/A #N/A 9.3 9.3 #N/A 8.4 55.6 17.3 0 0 1 1 0 1 2 10 #N/A #N/A 298M 298M #N/A 77M 64M 653M n/a n/a n/a n/a n/a n/a n/a n/a Cost Comparisons 39 7 Risk Comparison of your risk levels to the U.S. Public universe Calculation of asset risk Reduction in asset risk due to diversification Asset-liability risk Liability proxy portfolio Liability risk Projected worst case scenarios Historic worst case scenarios during the past 5 years Risk Trends - 2010 to 2014 Appendix - Risk methodology 2 3 4 5 6 7 8 9 10 11 Comparison of your risk levels to the U.S. Public universe Asset Risk, Asset-Liability Risk & Tracking Error (at December 31, 2014 - U.S.) 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Asset Risk¹ AssetLiability Risk² 90th % 12.1% 75th % 11.0% Median 10.3% 25th % 9.8% 10th % 9.3% Average 10.4% Count 56 Peer Average 10.4% Kentucky Retirement Systems Your Value 9.2% Your Percentile 9% Tracking Error³ 15.9% 14.7% 14.2% 13.8% 13.5% 14.3% 47 14.4% 1.8% 1.5% 1.1% 0.8% 0.4% 1.2% 43 1.1% 13.7% 22% 0.8% 24% 1 Asset risk is the expected volatility of your policy return. It is based on the historical variance of, and covariance between, the asset classes in your asset mix policy. It is expressed as an annual standard deviation. 2 Asset-liability risk is the expected volatility of surplus returns. Surplus returns are the changes in a plan's marked-to-market funded status caused by market factors. Asset liability risk is a function of the volatility of policy returns (asset risk), the volatility of surplus returns (surplus risk) and the correlation between policy returns and surplus returns. 3 Tracking error is the risk of active management. It equals the standard deviation of your annual net value added over 5-years. 2 Risk Calculation of asset risk Before considering the benefit of diversification, the weighted average risk of the asset classes in your asset mix policy was 12.1%. Calculation of your weighted asset class risk Asset Class Stock: U.S. Broad/All Stock: Emerging Stock: ACWI x U.S. Bonds: Global Bonds: Cash Real Estate Other Hedge Fund Private Equity: Diversified or All Weighted Total Policy weight (A) 20.4% 3.2% 20.0% 19.5% 2.4% 4.6% 10.0% 10.0% 10.0% Risk¹ (B) 15% 22% 14% 6% 1% 15% 6% 6% 24% Weighted risk (A X B) 3.1% 0.7% 2.9% 1.1% 0.0% 0.7% 0.6% 0.6% 2.4% 12.1% 1 Risk is the standard deviation of returns for the asset class based on standard benchmarks used by CEM. See page 15 of this section for benchmark details. Risk 3 Reduction in asset risk due to diversification Your asset risk is less than your weighted asset risk because of the benefit of diversification. Diversification reduces risk because when one asset class has a negative return, it might be offset by another asset class with a positive return. The lower the correlation between your policy asset classes, the greater the diversification benefit. The correlation between your policy asset classes is shown on page 17 of this section. Diversification benefit: U.S. Public 1.8% Min 2.4% 25th 2.7% Median 2.8% 2.8% Your Value Peer Avg. 6.6% 3.0% 75th Max The benefit of diversification equals weighted asset risk minus asset risk. Components of asset risk You Weighted asset risk Benefit of diversification Asset risk 12.1% 2.8% 9.2% Peer median* 13.0% 2.7% 10.3% Peer average 13.3% 2.8% 10.4% U.S. Public U.S. Public median* average 13.1% 2.7% 10.3% 13.2% 2.8% 10.4% * Comparisons of components of asset risk should be interpreted with caution because it is not always possible to separate the diversification benefit from the weighted asset risk. For example, global stock as an asset class includes the diversification benefit of its geographic components within its asset risk. 4 Risk Asset-liability risk Your plan would not have any asset-liability risk if your assets perfectly matched your liabilities. If they matched, then the correlation between asset returns and liability returns would be 100%. If liabilities increased, assets would increase by a like amount (and vice versa). Thus higher correlation between your asset returns and liability returns reduces your asset-liability risk. Correlation between policy returns and liability returns: U.S. Public 41.7% 6.8% 10.2% 10.8% 11.9% 14.1% Your Value Med Peer Avg. 75th -1.5% Min 25th Max In addition to the correlation between asset returns and liability returns, asset-liability risk is also a function of the volatility of asset returns (asset risk) and the volatility of liability returns1 (liability risk = ). Components of asset-liability risk You Peer median Peer average U.S. Public U.S. Public median average Asset risk (RA) Liability risk (RL) Correlation between policy returns and liability returns (ρAL) 9.2% 11.2% 10.3% 11.1% 10.4% 10.9% 10.3% 11.2% 10.4% 11.0% 10.2% 10.8% 11.9% 10.8% 11.6% Asset-liability risk 13.7% 14.2% 14.4% 14.2% 14.3% 1. Liability returns equal the changes in your marked-to-market liabilities caused by market factors. These are assumed to equal the return on your liability proxy portfolio (see next page). Risk 5 Liability proxy portfolio Your liability proxy portfolio is the portfolio of nominal and inflation-indexed bonds that best matches the sensitivity of your liabilities to changes in real and nominal interest rates. Comparisons of liability proxy portfolio Your fund Peer average U.S. Public % of % of % of Duration Assets Duration Assets Duration Assets Inflation Indexed Bonds Nominal Bonds Total 14.8 10.0 90% 10% 100% 12.3 13.7 68% 32% 100% 12.5 13.9 68% 32% 100% Your liability proxy portfolio is a tool that: a) Helps you understand how the unsmoothed market value of your liabilities responds to changes in real and nominal interest rates. b) Helps you make better asset mix policy decisions by providing an understanding of which assets will decrease your asset-liability risk (i.e., assets that behave similarly to the neutral asset mix) and which assets will increase your risk. c) Helps you understand how your liabilities are different from your peers. Differences in liabilities mean that the same asset will have different risk / reward characteristics for different funds. For example, the risk of a nominal bond for a fund with 100% inflation sensitivity is much higher than it is for a fund with less than 100% inflation sensitivity. Asset-liability risk could theoretically be eliminated if your actual asset mix matched the liability proxy portfolio. However, we recognize that this is neither an option nor a goal for most funds because: ● The supply of inflation-indexed assets is limited. These assets are required to match the obligations of pension liabilities. ● This low-risk strategy also has a lower expected return, implying either higher future funding costs or lower future benefits. The methodology and formula used to determine your liability proxy portfolio are provided on pages 11-13 of this section. 6 Risk Liability risk Differences in liability risk are due to differences in inflation sensitivity and member demographics. A plan's inflation sensitivity depends on: a) The type of plan Final and highest average plans have more inflation sensitivity than career average plans. Conversely, career average plans have more inflation sensitivity than flat benefit plans. Your plan type is flat benefit. Plan type Flat Benefit Career Average Final/Highest/Best Avg Other Total # of plans 1 49 5 55 % of Total 2% 0% 89% 9% 100% b) Contractual inflation protection for retired members Your retired members get 100% contractual inflation protection. Your retiree inflation protection is subject to a cap of Cap 5%. Retiree inflation protection 0% >0% and <50% 50% >50% and <100% 100% Total Corporate 101 2 0 2 77 182 # of plans Public 25 1 2 5 55 88 Other 5 0 0 0 2 7 c) Member demographics Member demographics impacts both inflation sensitivity and the duration of plan liabilities. The survey asks for your plan's percentage of liabilities that relate to retired members from your actuarial reports. If you did not provide this number, then it is estimated (see page 12 of this section). Your percentage of liabilities that relate to retired members was 55%. Active Members Retired Members Total Your fund Peer Average U.S. Average 59% 58% 59% 41% 42% 41% 100% 100% 100% Risk 7 Projected worst case scenarios We can convert your asset risk and asset-liability risk into worst case outcomes for policy returns and funded status if we make the following simplifying assumptions: a) Returns are normally distributed. b) Historic return volatility and correlations will continue in the future. c) No change in your policy asset mix or liabilities. a) Worst case policy returns Every year there is a 5% probability that your policy return will be worse than your expected policy return by more than -15.2% (-15.2% equals -1.65 X your asset risk of 9.2%). -15.2% is the starting point of worst case outcomes. They could be much worse. Projected policy returns (normal frequency distribution) Worst case: 5% of occurences will be more than -15.2% Expected return b) Worst case impact on funded status Every year, there is a 5% probability that changes in your mark-to-market funded status caused by market factors ("Surplus Returns") will be worse than expected by more than -22.7%. (-22.7% equals -1.65 X your assetliability risk of 13.7%). -22.7% is the starting point of worst case outcomes. They could be much worse. Projected change in funded status due to market factors Worst case: 5% of occurences will be more than -22.7% below the expected. (normal frequency distribution) Expected surplus return 8 Risk Historic worst case scenarios during the past 5 years a) Historic worst case policy returns During the past 5 years, your lowest policy return was 0.4% in 2011. Historic policy returns - U.S. 90th % 75th % Median 25th % 10th % Average Count Peer Avg Your Value 2014 2013 2012 2011 2010 8.7% 7.6% 6.6% 5.9% 5.1% 6.8% 57 6.4% 6.2% 18.3% 17.0% 15.5% 13.6% 11.6% 15.2% 62 14.8% 13.6% 13.8% 13.3% 12.7% 11.8% 10.9% 12.6% 67 12.6% 14.2% 3.7% 2.7% 1.4% 0.4% -0.3% 1.6% 67 1.0% 0.4% 14.0% 13.2% 12.6% 11.8% 11.3% 12.5% 72 12.1% 12.5% b) Historic worst case changes in funded status During the past 5 years, your worst change in marked-to-market funded status caused by market factors ("Surplus Returns") was -21.1% in 2011. Historic changes in funded status caused by market factors - U.S. 90th % 75th % Median 25th % 10th % Average Count Peer Avg Your Value 2014 2013 2012 2011 2010 -4.9% -6.2% -7.6% -9.5% -11.1% -7.7% 47 -7.5% -7.9% 36.9% 33.5% 31.2% 27.4% 25.7% 31.0% 51 31.5% 30.6% 10.5% 9.7% 7.7% 5.8% 5.0% 7.8% 58 8.1% 5.3% -17.2% -18.7% -20.1% -21.3% -23.2% -20.2% 55 -20.7% -21.1% 6.6% 5.3% 4.1% 2.9% 2.2% 4.2% 63 4.4% 3.1% Risk 9 Risk Trends - 2010 to 2014 a) Asset risk trends Asset risk will only change if policy asset mix changes. Between 2010 and 2014 the asset risk for your fund decreased from 9.8% to 9.2%. Asset only risk 10.6% 10.4% 10.2% 10.0% 9.8% 9.6% 9.4% 9.2% 9.0% 8.8% 8.6% You 2010 2011 2012 2013 2014 9.8% 9.6% 10.4% 9.8% 9.2% Peer Average 9.8% 9.9% 10.1% 10.4% 10.4% U.S. Public Average 10.1% 10.1% 10.2% 10.4% 10.4% b) Asset-liability risk trends Asset-liability risk will change if policy asset mix changes, or if the nature of your liabilities changes. Between 2010 and 2014 the asset-liability risk for your fund decreased from 13.9% to 13.7%. Asset liability risk 14.6% 14.4% 14.2% 14.0% 13.8% 13.6% 13.4% 13.2% 10 Risk 2010 2011 2012 2013 2014 You 13.9% 14.0% 14.4% 13.9% 13.7% Peer Average 14.2% 14.3% 14.5% 14.4% 14.4% U.S. Public Average 14.4% 14.4% 14.4% 14.3% 14.3% Appendix A - Methodology and formula used to calculate liability return and liability proxy portfolio Risk calculation descriptions CEM would like to recognize and thank Malcolm Hamilton previously of Mercer for providing the key formulas used to calculate liability returns. We would also like to thank Stijn Oude Brunink previously of ORTEC Consultants in the Netherlands who provided the proofs and made adjustments to Mr. Hamilton's formulas. These formulas and this section use several simplifying assumptions that could cause your fund's individual results to differ from actual. We encourage you to pursue more precise calculations of your liability returns. Step 1 - Inflation sensitivity The first step in estimating your liability return is to determine your liabilities' inflation sensitivity. The degree of total inflation sensitivity determines the proportion of inflation-indexed bonds versus nominal bonds that belong in your liability proxy portfolio. Total inflation sensitivity = Inflation protection retirees X % liabilities relating to retirees + Inflation protection for active members X (1 - % liabilities relating to retirees) Inflation protection for retirees On the survey we asked for the amount of contractual inflation protection provided to retirees. Your response was 100% which compares to an average of 51% for your peers and 24% for U.S. funds. Ad hoc inflation protection is not considered because it is not a contractual liability. However, many funds are managed to maintain historic levels of ad hoc increases. If this is the case with your fund, then your inflation protection may have been understated. Please ask for CEM to make that adjustment for you. Inflation protection for active members We inferred inflation protection for your active members to be 77% based on your plan type of Flat Benefit. Final and highest average plans have less than 100% inflation protection because during the averaging period, inflation protection is only 50%, not 100%. This is a natural function of taking an average of more than one year's earnings. Thus the weighted average inflation protection for active members in a 5-year final average plan is around 86% and in a 3-year average plan, 93%. These weighted averages are lower than intuition might suggest because the active members associated with the largest liabilities (i.e., the highest weights) are the ones closest to retirement. Flat Benefit and Career Average plans are assumed to have 77% inflation protection. Contractually, flat benefit plans have zero inflation protection but negotiated increases tend to closely track inflation. However, just as with Final Average plans, inflation protection between negotiated increases is less than full inflation. Risk 11 Step 2 - Proportion of liabilities relating to retirees The second step is to determine how much of your liabilities relate to your retirees versus your active members. This number is used to weight the liability proxy portfolio's obligations to retirees and active members. This ratio depends on several factors including the ratio of retired and active members, member demographics and the inflation sensitivity of the promise made to these two member groups. Deferred (also known as inactive) members are ignored because even if they are large in number they tend to represent only a very small fraction of the future liability. Equivalency Table Retirees as a % of Active + Retirees 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% % Liabilities Relating to Retirees 0% 22% 35% 45% 55% 63% 71% 79% 86% 93% 100% Most funds have provided the actual ratio from their actuarial reports (as requested on the survey). If the ratio is not provided, it is estimated based on the "Equivalency" table above. Your percentage of liabilities that relates to retirees was 55%. The percentage of liability that relates to retirees is higher than the retirees as a percentage of active and retired members because retirees have accrued a higher benefit. Step 3 - Determining your duration relative to real and nominal yields Duration enables you to determine the change in value of a cash flow, such as your pension liabilities, caused by a change in interest rates. The relationship between duration and cost of your pension liability is as follows. Percentage change in pension liability cost = (- Modified duration relative to change in real yields X change in real yields) + (- Modified duration relative to change in nominal yields X change in nominal yields) The modified duration of your liabilities with respect to changes in real and nominal yields is determined by the following two formulas. Modified duration relative to changes in real yields = 10 X [Inflation protection for active members X (1 - % of liabilities relating to retirees) + Inflation protection for retirees X (1 - % of liabilities relating to retirees/4) + (Inflation protection for retirees/10) X (1.5 - 0.5 X % liabilities relating to retirees)] Modified duration relative to changes in nominal yields = 10 X [(2 - 5 X % Liabilities relating to retirees/4 - inflation protection for actives X (1- % liabilities relating to retirees) - (Inflation protection for retirees/10) X (8.5 - 2 X % liabilities relating to retirees) - (Inflation protection for retirees/10) X (1.5 - 0.5 X % liabilities relating to retirees)] 12 Risk Step 4 - Determining the liability proxy portfolio Knowing the sensitivity of your pension liabilities to real and nominal interest rates enables you to construct a liability proxy portfolio using a combination of nominal bonds and inflation-indexed bonds. Duration of inflation-indexed bonds in your liability proxy portfolio = Modified Duration Relative to Change in Real yields ÷ Proportion of inflation-indexed bonds in your liability proxy portfolio (this is the total inflation sensitivity) Duration of nominal bonds in your liability proxy portfolio = Modified Duration Relative to Change in Nominal Yields ÷ Proportion of nominal bonds in your liability proxy portfolio (this is 1 minus the total inflation sensitivity) Proportion of inflation-indexed bonds in your liability proxy portfolio = total inflation sensitivity Proportion of nominal bonds in your liability proxy portfolio = 1 - total inflation sensitivity Step 5 - Liability returns The return earned on your liability proxy portfolio is the liability return and matches the change in your plan's liabilities in response to changes in market factors. It uses a true market valuation rather than a smoothed actuarial valuation. See page 17 for benchmark details. Liability Return = Proportion indexed bonds in liability proxy portfolio X (CPI + average real yield) + Proportion nominal bonds in liability proxy portfolio X average long bond yield - Modified duration relative to change in real yields X change in real yields - Modified duration relative to change in nominal yields X change long yields 2014 2013 2012 2011 2010 2009 Long Nominal Inflation Indexed Bonds Bonds Year end Change Year end Change yield in yield yield in yield 2.83 -1.06 0.89 -0.72 3.89 0.94 1.61 1.46 2.95 0.06 0.15 -0.38 2.89 -1.45 0.53 -1.06 4.34 -0.29 1.59 -0.44 4.63 1.94 2.03 -0.13 CPI 0.80 1.50 1.70 3.00 1.50 2.70 Risk 13 Appendix B - Methodology used to calculate asset and asset-liability risk Asset mix Your asset only mix is a function of your policy asset mix, your currency hedging policy and the presence of any duration overlays. CEM does not use your specific policy benchmarks. Standard asset class proxies (shown on the next page) are used for each given asset class. Monthly, historical data is used to construct an asset class variance/covariance table. Your specific policy weights are then used to calculate an expected monthly volatility for your policy mix using the following formula, which takes current asset class variances and covariances as expected future variances and covariances. Expected monthly variance of policy mix = ∑∑w XwYCov(X, Y) = ∑∑wXwYσXσYρX,Y where wX = policy weight of asset class X wY = policy weight of asset class Y Cov(X, Y) = covariance of X and Y σX = standard deviation of monthly returns for asset class X σY = standard deviation of monthly returns for asset class Y ρX,Y = Pearson's correlation of the returns for X and Y Each sum is over all asset classes. Assuming normal distribution of returns, we then solve for expected annual standard deviation as: Expected annual standard deviation of policy mix = (Expected monthly variance of policy mix)1/2 X (12)1/2 Hedged and unhedged asset classes are treated as separate asset classes in the model. Funds with hedging policies between 0% and 100% have their policy weight allocated between the hedged and unhedged asset classes according to the proportion hedged. Duration overlays are also treated as a separate asset class. Their weight is taken as notional value divided by total plan assets. For funds with duration overlays, the sum of weights will be greater than 100%. Rather then calculating a return for every possible duration, CEM's total variance/covariance matrix includes bonds with a continual duration of each whole number. A given fund's duration overlay is then represented by the two constant duration bonds closest to the duration of the overlay, with the total weight divided proportionately between them. Asset-liability risk Asset-liability risk is calculated in exactly the same way as asset risk with the addition of a short position in the liability proxy portfolio. This portfolio will typically be represented by up to four bonds with continual duration whose summed weights will equal -100%, and whose real and nominal duration match the liability proxy portfolio. 14 Risk Appendix C - Asset class benchmarks used CEM uses the same asset class proxy benchmarks for all participants in calculating risk. The benchmarks used for asset classes in your policy mix and liability proxy portfolio are shown below, along with the annualized standard deviation of monthly returns. Different asset classes have different histories - the start date after which monthly data was used for the given asset class is also shown. Start Date Standard deviation of monthly return annualized (σ) Asset Class Proxy Benchmark Stock: U.S. Broad/All Russell 3000 Jan 1979 15.1% Stock: Emerging MSCI Emerging Jan 1988 22.4% Stock: ACWI x U.S. MSCI ACWI ex US Jan 1988 14.3% Bonds: Global BARCLAYS Global Aggregate Jan 1990 5.5% Bonds: Cash BofA ML U.S. T-BILL 3M Feb 1978 0.5% Real Estate MSCI US REIT Deleveraged Jan 1997 14.7% Other Barclay's TIPS* Modeled prior to 4/97 Apr 1997 6.0% Hedge Fund HFRI Fund Weighted Hedge Fund Jan 1990 6.4% Private Equity: Diversified or All S&P Listed Private Equity Dec 2003 24.1% Liability: Real Return Bond Duration 14 Real Bond Duration 14 Jan 1989 12.1% Liability: Real Return Bond Duration 15 Real Bond Duration 15 Dec 1994 12.0% Liability: Nominal Bond Duration 10 Nominal Bond Duration 10 Dec 1985 9.2% See page 17 of this section for benchmark details. Russell Investment Group is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of the Russell Investment Group. All MSCI indices and Barra data are the property of MSCI Barra. Real Estate is proxied by the MSCI US REIT deleveraged by adding back in a return to debtholders of the Barclays CMBS Inv. Grade Commercial index. Average debt/total assets of REIT index before deleveraging is estimated to be 40%. Risk 15 Common asset class benchmarks used in United States CEM uses the same asset class proxy benchmarks for all participants in calculating risk. Common benchmarks used for asset classes in your universe are shown below, along with the annualized standard deviation of monthly returns. Different asset classes have different histories - the start date after which monthly data was used for the given asset class is also shown. Start Date Standard deviation of monthly return annualized (σ) Russell 3000 Jan 1979 15.1% Stock: U.S. Large Cap S&P 500 Feb 1988 14.0% Stock: U.S. Small Cap Russell 2000 Jan 1979 19.2% Stock: EAFE (Currency Hedged) MSCI EAFE Hedged Exposure to Euro + Japan in ($US) Jan 1971 11.9% Stock: EAFE MSCI EAFE Jan 1970 16.6% Stock: Emerging MSCI Emerging Jan 1988 22.4% Stock: Global MSCI ACWI Jan 1988 14.5% Stock: ACWI x U.S. MSCI ACWI ex US Jan 1988 14.3% Bonds: U.S. Barclays US Aggregate Feb 1976 5.6% Bonds: High Yield Barclays High Yield Apr 1990 8.7% Bonds: Long Bonds Barclays U.S. Aggregate Long Government/Credit Feb 1973 9.4% Bonds: Cash BofA ML U.S. T-BILL 3M Feb 1978 0.5% REITs MSCI US REIT Feb 1997 21.2% Real Estate MSCI US REIT Deleveraged Jan 1997 14.7% Hedge Fund HFRI Fund Weighted Hedge Fund Jan 1990 6.4% Private Equity: Diversified or All S&P Listed Private Equity Dec 2003 24.1% Liability: Real Return Bond Duration 10 Real Bond Duration 10 Aug 1984 9.4% Liability: Real Return Bond Duration 11 Real Bond Duration 11 May 1985 10.3% Liability: Nominal Bond Duration 10 Nominal Bond Duration 10 Dec 1985 9.2% Liability: Nominal Bond Duration 14 Nominal US Bond Duration 14 Feb 1988 12.3% Asset Class Proxy Benchmark Stock: U.S. Broad/All Source: Datastream Russell Investment Group is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of the Russell Investment Group. All MSCI indices and Barra data are the property of MSCI Barra. Real Estate is proxied by the MSCI US REIT deleveraged by adding back in a return to debtholders of the Barclays CMBS Inv. Grade Commercial index. Average debt/total assets of REIT index before deleveraging is estimated to be 40%. 16 Risk Stock: Emerging Bonds: Global Bonds: Cash Real Assets: Real Estate Real Assets: Other Hedge Fund Nominal Bond: Duration 10 Real Return Bond: Duration 14 Real Return Bond: Duration 15 1.00 0.70 0.79 -0.05 -0.03 0.58 0.05 0.78 0.81 -0.03 0.04 0.02 0.70 1.00 0.77 -0.04 -0.08 0.48 0.11 0.81 0.74 -0.12 0.08 0.11 0.79 0.77 1.00 0.00 -0.03 0.49 -0.03 0.76 0.75 -0.11 0.00 -0.04 -0.05 -0.04 0.00 1.00 0.03 -0.15 -0.09 -0.07 -0.01 0.07 -0.04 -0.08 -0.03 -0.08 -0.03 0.03 1.00 0.03 0.06 -0.03 -0.03 0.17 0.01 0.00 Stock: ACWI x U.S. Stock: U.S. Broad/All Stock: U.S. Broad/All Stock: Emerging Stock: ACWI x U.S. Bonds: Global Bonds: Cash Real Assets: Real Estate Real Assets: Other Hedge Fund Private Equity: Diversified or All Nominal Bond: Duration 10 Real Return Bond: Duration 14 Real Return Bond: Duration 15 Private Equity: Diversified or All Appendix D - Correlation Matrix 0.58 0.48 0.49 -0.15 0.03 1.00 0.28 0.43 0.73 0.00 0.14 0.15 0.05 0.11 -0.03 -0.09 0.06 0.28 1.00 0.09 0.29 0.72 0.93 0.93 0.78 0.81 0.76 -0.07 -0.03 0.43 0.09 1.00 0.72 -0.07 0.09 0.07 0.81 0.74 0.75 -0.01 0.72 1.00 -0.11 -0.03 -0.12 -0.11 -0.03 0.73 0.29 0.07 0.17 0.00 0.72 -0.07 0.13 0.14 -0.11 1.00 0.51 0.55 0.04 0.08 0.00 -0.04 0.01 0.14 0.93 0.09 0.13 0.51 1.00 0.98 0.02 0.11 -0.04 -0.08 0.00 0.15 0.93 0.07 0.14 0.55 0.98 1.00 Risk 17 18 Risk Stock: EAFE (Currency Hedged) Stock: EAFE Stock: Emerging Stock: Global Bonds: U.S. Bonds: Cash Real Assets: Commodities Real Assets: REITs Real Assets: Real Estate Hedge Fund Private Equity: Diversified or All Stock: ACWI x U.S. Bonds: Long Bonds Real Return Bond: Duration 10 Nominal Bond: Duration 10 Nominal Bond: Duration 14 0.92 0.89 0.19 0.65 0.70 0.88 0.21 0.61 -0.03 0.18 0.03 0.58 0.78 0.81 0.79 0.21 0.10 0.09 -0.03 0.02 0.92 1.00 0.74 0.09 0.70 0.63 0.83 0.18 0.56 0.06 0.08 0.10 0.51 0.70 0.76 0.73 0.17 0.07 0.07 0.07 0.89 0.74 1.00 0.13 0.59 0.67 0.74 0.13 0.61 -0.08 0.19 0.03 0.61 0.82 0.79 0.70 0.13 0.06 0.04 -0.09 -0.06 0.19 0.09 0.13 1.00 0.15 0.13 0.23 0.09 0.07 0.13 -0.17 0.26 0.12 0.35 0.18 0.03 -0.02 0.01 -0.09 -0.07 0.65 0.70 0.59 0.15 1.00 0.67 0.94 0.16 0.53 -0.07 0.12 0.07 0.56 0.66 0.82 0.87 0.19 0.13 0.12 -0.01 0.70 0.63 0.67 0.13 0.67 1.00 0.77 0.01 0.62 -0.08 0.24 0.03 0.48 0.81 0.74 0.77 0.02 0.09 0.09 -0.12 -0.11 0.88 0.83 0.74 0.23 0.94 0.77 1.00 0.14 0.61 0.00 0.21 0.03 0.58 0.77 0.82 0.91 0.12 0.09 0.09 -0.05 -0.02 0.21 0.18 0.13 0.09 0.16 0.01 0.14 1.00 0.19 0.38 -0.03 -0.16 0.22 0.07 0.14 0.04 0.95 0.59 0.60 0.61 0.56 0.61 0.07 0.53 0.62 0.61 0.19 1.00 -0.06 0.64 0.67 0.06 -0.08 0.05 -0.07 -0.08 0.00 0.38 -0.06 0.18 0.08 0.19 0.13 0.12 0.24 0.21 -0.03 0.03 0.10 0.03 -0.17 0.07 0.03 0.03 -0.16 0.58 0.51 0.61 0.26 0.56 0.48 0.58 0.78 0.70 0.82 0.12 0.66 0.81 0.77 0.81 0.76 0.79 0.35 0.82 0.74 0.79 0.73 0.70 0.18 0.87 0.77 0.21 0.17 0.13 0.03 0.19 0.10 0.07 0.06 -0.02 0.09 0.07 0.04 -0.03 -0.03 0.02 0.01 0.05 Real Return Bond: Duration 11 Stock: U.S. Small Cap 1.00 Bonds: High Yield Stock: U.S. Large Cap Stock: U.S. Broad/All Stock: U.S. Large Cap Stock: U.S. Small Cap Stock: EAFE (Currency Hedged) Stock: EAFE Stock: Emerging Stock: Global Bonds: U.S. Bonds: High Yield Bonds: Cash Real Assets: Commodities Real Assets: REITs Real Assets: Real Estate Hedge Fund Private Equity: Diversified or All Stock: ACWI x U.S. Bonds: Long Bonds Real Return Bond: Duration 10 Real Return Bond: Duration 11 Nominal Bond: Duration 10 Nominal Bond: Duration 14 Stock: U.S. Broad/All Correlation Matrix of Common Asset Classes in United States 0.02 0.88 0.00 0.88 0.13 0.17 0.60 0.58 0.18 0.18 0.18 -0.06 -0.05 1.00 0.00 0.03 0.03 -0.03 -0.03 -0.03 0.27 0.07 0.09 0.13 0.00 1.00 0.15 0.21 0.30 0.41 0.16 -0.07 0.04 0.05 -0.06 -0.07 0.17 0.03 0.15 1.00 0.06 0.15 0.15 0.07 -0.14 -0.08 -0.08 -0.25 -0.24 0.22 0.60 0.03 0.21 0.06 1.00 0.43 0.73 0.49 0.22 0.13 0.13 0.07 0.64 -0.03 0.30 0.15 0.43 1.00 0.72 0.76 0.08 0.08 0.08 -0.07 -0.05 0.82 0.14 0.67 -0.03 0.41 0.15 0.73 0.72 1.00 0.75 0.08 0.12 0.11 -0.11 -0.13 0.91 0.04 0.58 -0.03 0.16 0.07 0.49 0.76 0.75 1.00 0.05 0.03 0.03 -0.11 -0.07 0.02 0.12 0.95 0.18 0.27 -0.07 -0.14 0.22 0.08 0.08 0.05 1.00 0.54 0.55 0.87 0.88 0.13 0.09 0.09 0.59 0.18 0.07 0.04 -0.08 0.13 0.08 0.12 0.03 0.54 1.00 1.00 0.53 0.53 0.12 0.09 0.09 0.60 0.18 0.09 0.05 -0.08 0.13 0.08 0.11 0.17 0.09 0.00 -0.01 0.03 0.55 1.00 1.00 0.52 0.52 0.02 -0.09 -0.09 -0.01 -0.12 -0.05 0.88 -0.06 0.17 -0.06 -0.25 0.00 -0.07 -0.11 -0.11 0.87 0.53 0.52 1.00 0.96 0.07 -0.06 -0.07 0.88 -0.05 0.09 -0.07 -0.24 -0.01 -0.05 -0.13 -0.07 0.88 0.53 0.52 0.96 1.00 0.00 -0.11 -0.02 8 Appendices Appendix A - Data Summary Appendix - Data quality Appendix - Glossary of terms Appendix A - Data Summary Kentucky Retirement Systems Plan Info 2014 David Peden 2013 David Peden 2012 TJ Carlson Type of fund (corporate, public, other) Public Public Public Total fund size (mils) as at December 31 15,555.8 15,451.5 14,356.3 Asset-class level holdings provided on survey are: year end or average? Year End Year End Year End Contact Total return for year ended Is the return net or gross? 4.96% 12.61% Net of manager Net of manager fees fees 12.71% Gross Total fund policy or benchmark return 6.07% 13.33% 13.45% Ancillary Data 2014 Yes 2013 Yes 2012 Yes 15 15 15 15 15 15 5,079 n/a 3,550 Yes 3,449 No Do you lend securities? If yes: % of income your custodian keeps for domestic lending? % of income your custodian keeps for foreign lending? Domestic net income in 000s Foreign net income in 000s Total net income (if breakdown not available) in 000s Do you use any enhanced passive or tilt strategies? What is your hedging policy for: Foreign Holdings Do you participate in directed brokerage programs (i.e., commission recapture and/or soft dollar?) If yes: Gross amount of directed commissions in 000s? Amount recaptured by the fund in 000s? Hard' cash value of invoices/services paid using soft dollars 000s? What were your actuarial fees in 000s? How many plan members/beneficiaries do you have: Active? Active (no-accrual)? Retired? Other? n/a No n/a n/a n/a 521 250 250 137,148 137,368 139,352 93,946 117,039 90,796 112,462 87,472 107,353 Cap 5% Cap 5% Cap 5% 4.5 7.8 7.8 What type of plan(s) do you have? To what extent are your retired members' benefits indexed to inflation? Contractual % Ad hoc % If the indexation is subject to a cap, describe the cap What % of the plan's liabilities pertain to retired members? Actuarial valuation assumptions for funding purposes: Liability discount rate Salary progression rate What was your actuarial assumption for expected rate of return? 2 Appendix 3 4.5 7.8 Appendix A - Data Summary: Policy Weights and Benchmarks Kentucky Retirement Systems Asset Class 2014 2013 2012 2014 U.S. Stock - Large 2013 Cap 2012 2014 U.S. Stock - Mid 2013 Cap 2012 2014 U.S. Stock - Small 2013 Cap 2012 2014 Stock - Emerging 2013 2012 Stock - ACWIxU.S. 2014 2013 2012 Fixed Income - U.S. 2014 2013 2012 2014 Fixed Income 2013 Emerging 2012 2014 Fixed Income 2013 Global 2012 2014 Fixed Income 2013 Inflation Indexed 2012 Fixed Income - High 2014 2013 Yield 2012 2014 Cash 2013 2012 2014 Hedge Funds 2013 2012 2014 Real Estate ex2013 REITs 2012 2014 Other Real Assets 2013 2012 Diversified Private 2014 2013 Equity 2012 2014 LBO 2013 2012 2014 Venture Capital 2013 2012 U.S. Stock Broad/All Benchmark Policy Weight 20.4 5.6 3.3 6.7 6.7 Description Russell 3000 Russell 3000 Russell 3000 S&P 500 Total Return S&P 500 Total Return Russell 3000 S&P Mid Cap Index Return 12.6 33.6 16.4 13.7 32.4 16.4 8.2 13.0 10.0 Russell 2000 Russell 2000 Russell 3000 MSCI Emerging Market MSCI Emerging Market MSCI Emerging Market gross MSCI ACWI xUS MSCI ACWI xUS MSCI ACWI xUS net Barclays US Aggregate Barclays US Aggregate Barclays US Aggregate 4.9 38.8 16.4 -1.8 -2.3 18.6 -3.4 15.8 16.8 6.0 -2.0 4.2 0.5 5.0 19.5 1.5 JP Morgan EMBI Global Diversified JP Morgan EMBI Global Diversified Barclay's Universal Barclays Multiverse Index -5.3 17.4 5.6 -2.2 10.0 3.3 3.3 Barclays US TIPS Barclays US TIPS Barclays US TIPS Barclays Corp High Yield Barclays US Corp High Yield Barclays US Corp High Yield Citi Group3 Month T bill 3 Month T bill 3 Month T bill HFRI Diversified Fund of Funds HFR FOF Diversified Lagged HFR FOF Diversified Lagged NCREIF NFI-ODCE Custom (NCREIF Blend) Custom (NCREIF Blend) Custom CPI +300 bps Custom (actual) Custom (actual) Russell 3000+400 bps Russell 3000 + 400 (lagged 1Q) Russell 3000 + 400 (lagged 1Q) 2.6 -8.6 7.0 2.5 7.4 15.8 0.0 0.1 0.1 4.7 8.5 3.1 11.4 12.0 10.9 2.9 2.3 0.0 16.6 26.3 11.2 3.4 3.3 Russell 3000 + 400 (lagged 1Q) Russell 3000 + 400 (lagged 1Q) 26.3 11.0 3.3 3.3 Russell 3000 + 400 (lagged 1Q) Russell 3000 + 400 (lagged 1Q) 26.3 11.2 6.7 10.0 3.2 4.0 4.0 20.0 20.0 20.0 5.0 10.0 5.0 5.0 2.4 2.0 1.0 10.0 10.0 10.0 4.6 5.0 5.0 10.0 5.0 Appendix 3 Appendix A - Data Summary: Public Market Assets, Returns and Costs Kentucky Retirement Systems Assets (millions) and Annual Gross Returns Asset Class Internally Managed Indexed Active Assets Return U.S. Stock - Broad/All U.S. Stock - Large Cap U.S. Stock - Mid Cap U.S. Stock - Small Cap Stock - Emerging Stock - ACWIxU.S. Fixed Income - U.S. Fixed Income - Global Fixed Income - Emerging Fixed Income - Inflation Indexed Fixed Income - High Yield Cash Hedge Funds 2014 2013 2012 1,484.0 2014 2,007.7 2013 1,960.8 2012 2014 311.0 2013 2012 2014 2013 2012 2014 2013 2012 2014 2013 2012 149.0 2014 2013 2012 2014 2013 2012 2014 2013 2012 2014 293.3 2013 505.6 2012 770.6 2014 2013 2012 2014 2013 2012 2014 2013 2012 Assets Return Assets Return 15.9 13.6 32.3 n/a n/a 3.1 -8.2 7.1 520.3 520.1 407.4 Investment Fees / Costs in 000s Externally Managed Indexed Active 336.6 332.8 6.4 39.3 178.9 125.3 -2.3 -2.3 1,407.1 1,004.0 764.1 -3.8 15.3 14.2 6.4 -2.2 Internally Managed Indexed Active # of Assets Return mgrs 367.8 12.0 6 380.2 36.2 3 299.0 17.9 3 232.7 13.2 231.3 35.3 1 189.0 17.0 1 350.0 6.1 663.1 788.6 323.1 337.8 567.0 1,481.0 2,140.9 1,975.9 1,388.8 1,344.3 1,377.2 587.4 561.4 578.1 153.2 141.7 155.1 275.4 272.0 403.0 687.1 761.0 830.0 33.0 n/a -2.9 -2.6 24.0 n/a 19.0 16.3 4.1 -2.8 5.8 2.9 -2.0 n/a 3.6 -8.8 17.4 3.4 -8.2 11.9 6.1 7.6 16.1 4 4 2 3 2 6 4 4 142.4 n/a 10 6 3 000s 118.6 90.0 105.0 bps¹ 000s bps¹ Externally Managed Fees Indexed Over- Total sight 000s bps¹ 0.9 0.5 1.1 16.3 2.0 60.0 115.2 115.2 1.2 1.8 1.5 458.4 459.3 458.4 459.3 13.7 16.1 206.9 150.4 206.9 150.4 12.5 24.0 854.4 552.2 235.2 854.4 552.2 235.2 7.1 6.2 4.7 2 2 7 1 1 1 1 1 4 5 0.2 0.5 0.4 Hedge Funds - Fund of Funds 1. Cost in basis points = total cost / average of beginning and end of year holdings 2. Default for fees paid to underlying partnerships have been applied. * Total cost for hedge funds includes performance fees in 2014 only. 4 Appendix Total 000s 2,034.9 2,075.5 1,872.1 276.4 277.5 262.5 1,487.6 bps¹ 54.4 61.1 59.1 11.9 13.2 12.6 43.9 3,094.7 532.6 2,581.8 2,559.1 3,747.4 5,852.4 5,296.7 5,758.4 3,021.8 2,895.6 2,922.0 1,775.6 2,036.2 1,874.1 625.8 804.5 628.7 183.5 186.8 201.7 3,720.2 3,188.4 3,575.0 3,094.7 532.6 2,581.8 2,559.1 3,747.4 5,852.4 5,296.7 5,758.4 3,021.8 2,895.6 2,922.0 1,775.6 2,036.2 1,874.1 625.8 804.5 628.7 183.5 186.8 201.7 4,879.9 3,188.4 3,575.0 42.6 13.7 78.1 56.6 72.2 32.3 25.7 27.9 22.1 21.3 17.6 30.9 35.7 64.8 42.4 54.2 41.7 6.7 5.5 3.7 67.4 40.1 44.2 1,159.7 n/a 886.4 Underlying* Base Perf. Fees Fees 2014 2013 2012 Active Base Perform Internal Fees Fees & Other 2,034.9 2,075.5 1,872.1 276.4 277.5 262.5 1,487.6 1,514.3 1,565.8 1,446.7 5.1 12.1 7.3 21,698.8 21,222.7 18,937.6 15,641.6 940.4 1,826.8 238.8 Base Perform Internal Total Fees Fees & Other 000s bps¹ 8,992.7 10,379.4 56,712.5 368.3 10,177.4 31,400.1 208.5 8,753.2 89,821.5 27,690.8 206.0 Appendix A: Assets, Returns and Costs (cont.) Kentucky Retirement Systems Assets (millions) and Annual Returns Asset Class Investment Fees / Costs in 000s¹ Internal & Co-Inv External # Amt fees Ext Assets Return based on Assets Return Mgrs Internal & Co-Inv Total 000s bps Base Fees External Perform Internal Fees & Other Total¹ 000s bps (% of fee basis) Real Estate ex-REITs 2014 2013 2012 Other Real Assets Diversified Private Equity LBO Venture Capital 2014 2013 2012 2014 2013 2012 2014 2013 2012 2014 2013 2012 2014 2013 2012 16 11 5 LPs 733.4 733.4 538.1 538.1 334.4 334.4 742.6 682.8 10.0 Under Oversight 9.1 9.1 8.5 4.1 3.4 9 5 LPs 6,898.5 3,497.6 3,442.5 3,210.4 4,438.0 1,996.7 6,898.5 3,497.6 3,442.5 3,210.4 4,438.0 108.5 80.2 130.0 45.0 130.0 3,137.5 (293.6) 319.7 3,457.2 3,780.7 3,780.7 4,274.4 4,274.4 14,601.4 18,105.0 5,028.3 19,629.7 14,219.2 14,219.2 14,096.2 14,096.2 4,660.8 12,603.6 340.0 5,000.8 6,259.1 6,259.1 6,325.5 6,325.5 181.8 165.0 165.0 171.3 165.0 165.0 144.3 200.0 200.0 3,702.0 0.0 166.4 213.9 244.4 1,442.1 850.1 873.4 381.8 311.2 314.7 117.4 213.9 244.4 992.9 850.1 873.4 348.3 311.2 314.7 9.1 18.4 21.2 11.2 18.1 20.8 7.0 13.2 -3.6 59 11 8 31 23 15 10 1. Cost in basis points = total cost / average of beginning and end of year holdings. Total cost excludes private asset performance fees because of comparability issues. Appendix 5 Appendix A - Data Summary: Oversight, Custodial and Other Costs Kentucky Retirement Systems Oversight, Custodial and Other Costs Oversight of the fund assets¹ Custodial total Custodial foreign (if available) Custodial domestic (if available) Consulting / performance measurement Audit Other (legal etc) Total 2014 2013 2012 2014 2013 2012 2014 2013 2012 2014 2013 2012 2014 2013 2012 2014 2013 2012 2014 2013 2012 2014 2013 2012 000s 786.0 590.0 580.0 2,038.0 516.0 250.0 bps 0.5bp 0.4bp 0.4bp 1.3bp 0.4bp 0.2bp 1,490.0 997.0 997.0 76.0 1.0bp 0.7bp 0.7bp 0.0bp 720.0 225.0 225.0 5,110.0 2,328.0 2,052.0 0.5bp 0.2bp 0.2bp 3.3bp 1.6bp 1.5bp Summary of All Asset Management Costs Investment Management Costs Overlay Costs Oversight, Custodial & Other Costs Total 000s 2014 121,125.3 2013 87,391.8 2012 77,689.2 2014 2013 2012 2014 5,110.0 2013 2,328.0 2012 2,052.0 2014 126,235.3 2013 89,719.8 2012 79,741.2 bps 78.3bp 59.4bp 56.8bp 3.3bp 1.6bp 1.5bp 81.6bp 61.0bp 58.3bp 1. Oversight includes the salaries and benefits of executives and their staff responsible for overseeing the entire fund or multiple asset classes and the fees / salaries of the board or investment committee. All costs associated with the above including fees / salaries, travel, director's insurance and attributed overhead should be included. 6 Appendix Appendix A - Data Summary: Comments and defaults As discussed with you during the data confirmation process, the following defaults and footnotes are applicable to your data: • Real Estate Limited Partnerships : Fees are the weighted average management fee of 109 bps per the partnership level detail provided by you. This replaces the cost you provided on the main survey of 115 bps (7.3 million). • Hedge Funds - Fund of Funds : For comparability with other styles, a default for management fees paid to the 'bottom layer' underlying managers of 141 bps was used. • Hedge Funds - Fund of Funds : For comparability, a default for performance fees paid to the 'bottom layer' underlying managers of 102 bps (on NAV) was used. • Diversified Private Equity : A default of 165 bps was used because you were unable to provide support for your unusually low cost of 141 bps (2.7 million). • Venture Capital : Fees are the weighted average management fee of 135 bps per the partnership level detail provided by you. This replaces the cost you provided on the main survey of 155 bps (5.4 million). • LBO : Fees are the weighted average management fee of 127 bps per the partnership level detail provided by you. This replaces the cost you provided on the main survey of 121 bps (14 million). Appendix 7 Appendix B - Data quality The value of the information contained in these reports is only as good as the quality of the data received. CEM's procedures for checking and improving the data include the following. Improved survey clarity Twenty years of feedback from survey participants has led to improved definitions and survey clarity. In addition to immediate feedback from participants, CEM has hosted user workshops to solicit additional feedback and to resolve issues, such as trade-offs between more information and effort on the part of participants. Computer and desktop verification Survey responses are compared to norms for the survey universe and to each sponsor's prior year data when available. This typically results in questions generated by our online survey engine as well as additional follow-up to clarify responses or with additional questions. In addition to these procedures, data quality continues to improve for the following reasons: Learning curve This is CEMs 23rd year of gathering this data and experience is teaching the firm and the participants how to do a better job. Growing universe As our universe of respondents continues to increase in size, so does our confidence in the results as unbiased errors tend to average themselves out. Any suggestions on how to futher improve data quality are welcome. Currency Conversions For reports where either the peer group or report universe includes funds from multiple countries, we have converted the returns back to the base currency of the fund we prepared the report for. For example, for a Euro zone fund with peers from the U.S. we converted U.S. returns to Euro based on the currency return for the year using December 31 spot rates. 8 Appendix Appendix C - Glossary of terms Average cost - Calculated by dividing actual annual costs by the average of beginning and end-of-year holdings. If beginning-of-year holdings are not available, they are estimated using end-of-year holdings before the effect of this year's return on investment. Benchmark return - Rate of return on a portfolio of investable assets (such as the S&P500) designated as the benchmark portfolio against which the fund measures its own performance for that asset class. F statistics - Measure of the statistical significance of the regression coefficients taken as a group. Generally, regression equations with 5 coefficients and sample sizes greater than 20 are statistically significant if its F statistic is greater than 3. Global TAA - Fully funded segregated asset pool dedicated to active asset allocation. Impact coefficient - Estimate of the impact on the dependent variable in a regression of a change in the value of a given explanatory variable Level of significance - Degree to which sample data explains the universe from which they are extracted. N-year peers - Subset of peer group that have participated in our study for at least the consecutive n years. Oversight of the fund - Resources devoted to the oversight of the fund. Overlay - Derivative based program (unfunded other than margin requirements), designed to enhance total portfolio return (such as a tactical asset allocation program) or to achieve some specific mandate such as currency hedging. Passive proportion - Proportion of assets managed passively, i.e., indexed to broad capital market benchmarks or dedicated to replicate market benchmarks. Policy mix - Reflects long-term policy or target asset weights. Policy asset mix is often established by a fund's investment committee or board and is determined by such long term considerations as liability structure, risk tolerance and long term capital markets prospects. Policy return - The return you would have earned if you had passively implemented your policy mix decision through your benchmark portfolios. Your policy return equals the sum of your policy weights multiplied by your asset class benchmarks for each asset class. R squared (coefficient of determination) - The percentage of the differences in the dependent variable explained by the regression equation. For example, an R squared of 1 means 100% of the differences are explained and an R squared of 0 means that none of the differences are explained. Value added - the difference between your total actual return and your policy return. It is a measure of actual value produced over what could have been earned passively. Appendix 9