Retirement Plan for CTA Employees
and
Retiree Health Care Trust
Updated September 22, 2016

CTA Retiree Healthcare Trust Investment Policy

The Retiree Healthcare Trust (the "Trust") is a Section 115 Trust, which is considered a "going concern." The Board of Trustees (the "Trustees") of the Trust, which is responsible for setting investment policy, which is responsible for setting investment policy, takes a long-term investment perspective in planning policy, and employs an independent Investment Consultant to assist with the formulation and implementation of an investment policy in a systematic manner.

The Trust will be expected to pay health care benefits as the need arises. Since total funding is constrained by design, while the liabilities are unlimited, the investment return assumes a greater importance than in a pension plan. The investment policy asset allocation will be designed to minimize the magnitude, frequency and duration of under-performance and especially negative returns.

The implementation of the investment policy is accomplished through the use of outside investment professionals; no money is managed "in house." Outside investment managers are hired to implement specific aspects of the investment policy and have fiduciary responsibility in this capacity. Investment managers have discretion to buy and sell assets within the scope of written guidelines.

The present investment policy has been developed from a comprehensive study and evaluation of many alternatives, and reflects a commitment by the fiduciaries to act as prudent person would be expected to act, with discretion and intelligence, in fulfilling their responsibility to invest the Trust’s assets. The Trustees of the Trust and the Trust’s fiduciaries operate subject to all applicable state, federal and common law. As such, the investment policy reflects the requirements, among other things, that the fiduciaries administer the funds solely in the interest of the participants in the Trust and for the exclusive purpose of providing benefits to participants and their beneficiaries. Therefore, this investment policy is not and cannot be guided by the interests of a third party.

This policy presents a consensus of input from the Board of Trustees, Trust Staff, Investment Consultant, Legal Counsel, and certain actuarial considerations.

The primary objective of the policy is to provide a documented structure for the implementation of investment strategies which suggests the highest probability of maximizing the level of investment return within acceptable parameters for the total Trust’s volatility and risk.

The Board of Trustees understands that the investment return of the Trust must exceed the rate of inflation and therefore, it must consider investment alternatives which are not riskless. It is also understood, however, that diversifying among various assets classes lowers risk without necessarily a commensurate expectation of lower return.

DELEGATION OF RESPONSIBILITIES

Responsibilities of the Committee

Pursuant to Section 12b of the bylaws, the Board of Trustees has appointed a Committee with responsibilities which include, but are not limited to, the following:

  • Developing policy and investment recommendations that are designed to achieve the policy, strategic and tactical goals of the Trust.
  • Reviewing policy recommendations made by the Trustees, Trust Staff and Investment Consultant.
  • Periodically reviewing policies and making recommendations for amendments as appropriate.
  • Issuing a Request for Proposal (RFP) for investment consultant services every 5 years.

Responsibilities of the Investment Consultant

The Investment Consultant has responsibilities which include, but are not limited to, the following:

  • In conjunction with the Committee, developing policies that are designed to achieve the policy, strategic, and tactical goals of the Trust.
  • Conducting asset allocation studies and performance reviews as appropriate.
  • In conjunction with the Committee, periodically reviewing policies and making recommendations for amendment as appropriate.
  • Designing an investment manager program and structure to achieve the performance goals of the Trust.
  • Conducting investment manager searches, in accordance with the Trust’s procurement policies, to identify the most appropriate managers to achieve the Trust’s investment performance goals and making recommendations accordingly.
  • Conducting quarterly investment performance reviews for the total Trust and for each investment manager, on a gross and net return basis.
  • Providing educational and training materials and presentations for Trustees and Trust Staff as needed.

Responsibilities of the Investment Manager(s) Investment managers shall:

  • Comply with all applicable laws, regulations, rulings, and its investment management agreement/guidelines and shall promptly inform Trust Staff and the Investment Consultant regarding any instance of material non-compliance directly related to the Trust’s investment.
  • Act as a fiduciary to the Trust and shall discharge its fiduciary responsibilities in accordance with all applicable state, federal and common laws.
  • Maintain sufficient levels of insurance coverage (Errors & Omissions, Fiduciary and/or Professional Liability insurance). At the request of the Trust, each manager shall provide proof of such coverage and certify that the coverage is up-to-date.
  • Manage the portion of the Trust’s investments under its control in accordance with the policy objectives and guidelines as established.
  • Exercise full investment discretion, within the policies and guidelines as established, to buy, hold, and sell the assets under management.
  • Diversify Trust assets within their portfolio so as to minimize the risk of large losses.
  • On at least a quarterly basis, reconcile the account’s positions with the Trust’s custodian.
  • Promptly inform Trust Staff and the Investment Consultant regarding significant matters pertaining to the investment of the Trust’s assets, including, but not limited to changes in ownership, organizational structure, investment strategy, portfolio design, configuration of the investment team, notice of any investment-related litigation, investment-related investigations or disciplinary action by any regulatory or governmental body, or any other pertinent information that might be material to the Trust.
  • Meet with the Trustees as requested to discuss their investment results as well as the objectives and policies that influence the results achieved in the account that they manage on behalf of the Trust.
  • Notify Trust Staff and the Investment Consultant in writing if, in the investment manager’s judgment, it is imprudent to manage the assets within any of these guidelines.

Responsibilities of Custodian The Trust’s custodian shall:

  • Act in accordance with its custodial agreement.
  • Hold, safeguard, and accurately price the assets of the Trust.
  • Collect the interest, dividends, distributions, redemptions, or any other amounts due.
  • Report all necessary investment activity to the Trust’s fiduciaries including Trust Staff and the Investment Consultant.
  • Prepare periodic summaries of transactions, asset valuations, and other related information as deemed appropriate.
  • All cash, interest earned, and dividend payments shall be swept on a daily basis into an investment-grade short-term money market fund.

ASSET ALLOCATION

The Trustees recognize that an asset allocation policy reflects a target for the allocation of assets. The Trustees recognize that since the market value of securities will fluctuate, it is not possible to meet these specific targets at all times. Trust Staff and the Investment Consultant will monitor this allocation and report to the Trustees on a quarterly basis at a minimum. A formal asset allocation study and presentation will be completed every 3 to 5 years, unless extraordinary Trust or market circumstances compel an earlier analysis.

Traditional: Minimum Target Maximum
 
U.S. Fixed Income 25 30 35
Non-U.S. Fixed Income 0 5 10
Emerging Markets Debt 0 5 10
Total Fixed Income 35 40 45
 
Large-Cap Equities 10 15 20
Mid-Cap Equitie 5 10 15
Small-Cap Equities 5 10 15
Total U.S. Equity 30 35 40
 
Large-Cap, Non-U.S. Equity 0 5 10
Small-Cap, Non-U.S. Equity 0 5 10
Emerging Markets Equity 0 3 8
Emerging Markets Small Cap Equity 0 2 7
Total Non-U.S. Equity 10 15 20
 
Alternative:
 
Real Estate Equity 5 10 15
Total Alternatives 5 10 15
 
Cash or Cash Equivalents 0 0 10
 
Total:   100  

PORTFOLIO REBALANCING

The portfolio will be rebalanced as needed to bring the asset allocation of the Trust in-line with the above targets and ranges. The Trustees, with the assistance of the Investment Consultant, will review the asset allocation of the Trust on a regular basis and adjust the portfolio to comply with the aforementioned guidelines.

LIQUIDITY

Contributions are not expected to cover the benefits and expenses of the Trust. Consequently it will be necessary to occasionally withdraw and hold cash from the Trust’s managers to cover these liabilities.

The Trust’s Staff will estimate the amount of cash needed to meet the Trust’s expenditures each month and will aim to hold no more than 2 months worth of benefit payments in cash. Cash will be drawn from each manager in a manner to improve compliance with the Trust’s target asset allocation as described above.

INVESTMENT GOALS AND OBJECTIVES

The Trustees set the goals and objectives of the investment portfolio solely in the interest of the Trust, its participants and their beneficiaries. The performance objectives of the Trust are to:

  1. Meet or exceed the Trust’s return assumption of 7.0% on a net-of-fees basis over time with a level of risk deemed appropriate by the Trustees while maintaining liquidity sufficient to cover benefit payments and other obligations.
  2. Outperform the risk-adjusted return, net-of-fees, of the policy benchmark corresponding to the target allocations outlined above. This objective should be met over a market cycle typically defined as a period of three to five years.

Investment manager goals and objectives are outlined below:

  1. Each investment manager is expected to outperform the agreed-upon benchmark on a risk-adjusted basis over a market cycle typically defined as a period of three to five years.
  2. The total net-of-fees return of each investment manager should rank at or above the median within the respective peer universe.
  3. The investment manager shall attempt to achieve its return objectives while maintaining an appropriate level of risk.

Asset classes and the appropriate benchmarks are detailed in Addendum A.

ONGOING INVESTMENT MANAGER REVIEW

The Committee with assistance from the Investment Consultant will conduct a critical review of investment managers as necessary and provide recommendations to hire, modify, or terminate relationships. These recommendations will be brought to the Trustees for a final decision. In the event the Trustees elect to move money from one active account to another, the Trustees may choose to utilize an appropriate passive index fund on an interim or emergency basis until the replacement process has been completed. Once it has been determined that an investment manager is going to be replaced, the Committee, with the Investment Consultant’s assistance, will follow, at minimum, the criteria outlined below during the manager RFP process when evaluating investment managers for inclusion in the selection process.

  • Investment manager organization strength.
  • Investment professional tenure.
  • Well articulated and consistent application of investment philosophy and process.
  • Portfolio characteristics relative to style benchmark.
  • Sector weightings relative to style benchmark.
  • Consistent long-term performance relative to style benchmark and industry style universe.
  • Portfolio’s long-term risk/reward profile compared to style benchmark and industry style universe.
  • Investment management fee in-line, or below, industry average.

INVESTMENT MANAGER EVALUATION TERMINOLOGY

The following terminology has been developed to facilitate communication among the investment manager(s), investment consultant, the Committee and the Trustees. Each term signifies a particular status with the Trust and any conditions that may require improvement. In each case, a change in investment manager status is made only after consultation with the Committee, Plan Staff and the Trustees

"In-Compliance" – The investment manager is in accordance with its Investment Policy Guidelines.

"Alert" – The investment manager is notified of a problem in performance (usually related to a benchmark or volatility measure), a change in investment characteristics, an alteration in management style or key investment professionals, and/or any other irregularities.

"On Notice" – The investment manager is notified of continued concern with one or more "Alert" issues. Failure to improve upon stated issues within a specific time frame justifies termination.

"Termination" – The Trustees have voted to terminate the investment manager. The investment manager is notified and transition plans are in place.

INVESTMENT GUIDELINES

General Guidelines (U.S. Equity, Non-U.S. Equity, and Fixed Income)

  1. The investment manager shall discharge its fiduciary responsibilities in accordance with all applicable state, federal and common laws.
  2. Each manager must seek to be fully invested at all times and minimize cash exposure
  3. No use of private placements, venture capital, margin, leverage, securities not publicly traded, options, commodities, short sales, interest only, principal only, stripped mortgagebacked securities, forward contracts, future contracts, and any other high risk/leveraged derivative investments unless written permission is expressly granted by the Trustees and unless otherwise noted.
  4. Each investment manager should inform Trust Staff and the Investment Consultant regarding all significant matters pertaining to the investment of assets. Trust Staff and the Investment Consultant should be notified of major changes in investment strategy, portfolio structure, market value of the assets, and other matters affecting the investment of the assets. Trust Staff and the Investment Consultant should also be informed of any significant changes in the ownership, affiliation, organizational structure, financial condition, or professional personnel staffing of the investment management organization.
  5. The investments shall be made for the exclusive benefit of the Trust and its participants and beneficiaries.
  6. All cash, interest earned, and dividend payments shall be swept on a daily basis into an investment-grade short-term money market fund. A sweep vehicle at the custodian will be used for this purpose.
  7. U.S. equity investment managers only: No investment shall be made in a foreign security without the prior, specific consent of the Board, unless the security is available in American Depository Receipts (ADRs) on a U.S. exchange, is primarily or exclusively traded on a U.S. exchange, or is included in the assigned benchmark. A foreign security means a security issued by, or for the benefit of any corporation, government, agency, or other organization that is not based in the United States, regardless of whether the return is payable in United States currency. Foreign security also means investment in a mutual fund or collective fund that invests primarily in the securities of foreign governments, agencies, or corporations. If the Trustees authorize an investment in any foreign security, the security shall be held in custody within the jurisdiction of the United States District Courts.
  8. U.S. and non-U.S. equity investment managers only: Managers are selected based on their style of management such as Value, Growth and Core. It is expected that these Managers will adhere to their style.
  9. The Trustees have adopted a Brokerage Policy (separate attachment) with the overall goal of requiring managers to obtain best price and best execution for the Trust with respect to securities transactions.
  10. It is the duty of each investment manager to notify Trust Staff and the Investment Consultant in writing whenever they believe the current Investment Policy Statement should be altered. If at any time an investment manager believes that the objectives cannot be met or that the guidelines constrict its performance, Trust Staff and the Investment Consultant should be so notified in writing. No deviation from guidelines and objectives established in the Investment Policy should occur until after such communication has occurred and the Trustees have approved such deviations.

Assault Weapon Divestiture Resolution

The Board of Trustees recognizes that, as fiduciaries, it must act solely in the interest of the participants and beneficiaries of the Fund. The Trustees have an obligation to protect Trust’s assets and minimize the risk of investment losses. Consistent with the Trustee’s fiduciary duties, and subject to an investment manager's exercise of fiscal and fiduciary duty, an investment manager should refrain from purchasing or holding securities of an assault weapons manufacturer if the investment manager determines that the same investment goals concerning risk, return and diversification can be achieved through the purchase or holding of another security. For purposes of this policy, "assault weapon" shall mean a weapon identified as an assault weapon the civilian possession of which is prohibited by the Municipal Code of Chicago or the laws of the State of Illinois and "assault weapons manufacturer" shall mean any entity that derives revenue from the sale of such prohibited assault weapons for civilian use.

U.S. Equity Investment Manager Guidelines – Separate Account

  1. The portfolio should be invested in marketable equity securities only.
  2. The portfolio must seek to be fully invested at all times with a 10% maximum allowable cash exposure at any one point in time unless it would be prudent to hold more cash and upon approval by the Trustees.
  3. U.S. equity investments are limited, in any one company, to a maximum of 8% at time of purchase or on a cost basis of the total equity allocation being managed by a single investment manager. If a security exceeds 8% of the portfolio’s value based upon a case of price appreciation, the security does not have to be sold immediately. The manager should notify Trust Staff and Investment Consultant regarding their recommendation to either keep an overweight to the security or provide a plan of action to bring the weighting of the security back into compliance.
  4. No foreign security will be allowed in the portfolio unless available in American Depository Receipts (ADRs) on a U.S. exchange, is primarily or exclusively traded on a U.S. exchange, or is included in the assigned benchmark. ADRs are limited to no more than 10% of an individual investment manager’s portfolio on a market value basis.
  5. No holding in a portfolio managed by an individual investment manager for the Trust may represent more than 5% of the outstanding stock of the issuing company.

Non-U.S. Equity Investment Manager Guidelines – Separate Account

  1. International securities permitted in the portfolio are sponsored and unsponsored American Depository Receipts (ADR’s) or American Depository Shares (ADS’s), Global Depository Receipts (GDR’s) or other depository securities of non-U.S. based companies traded in the U.S. and closed-end country funds. Equities of foreign domiciled companies that are traded in the U.S. may also be purchased so long as the securities are registered (or filed) with the Securities and Exchange Commission, or equivalent foreign regulatory body, and traded on a recognized national exchange or over-the-counter market.
  2. The investment manager(s) are permitted to invest the portfolio in the common stock of non-U.S. corporations domiciled in countries represented in the agreed upon index.
  3. Non-U.S. equity investments are limited, in any one company, to a maximum of 5% at time of purchase or on a cost basis of the total equity allocation being managed by a single investment manager. If a security exceeds 8% of the portfolio’s value based upon a case of price appreciation, the security does not have to be sold immediately. The manager should notify Trust Staff and Investment Consultant regarding their recommendation to either keep an overweight to the security or provide a plan of action to bring the weighting of the security back into compliance.
  4. Certain investment managers have been given authority to invest up to 30% in emerging markets per the investment management agreement.
  5. Investments in securities of U.S. based companies or convertible into the securities of U.S. based companies are not permitted.
  6. The investment manager may concentrate portfolio holdings in a limited number of economic sectors. However, no more than 40%, at cost, shall be invested in any one sector as defined by the GICS classification structure.
  7. The use of currency hedging is allowed only for defensive purposes.
  8. Unless otherwise directed, the investment manager may only hold up to 10% of its portfolio in a money market fund, cash vehicle, or cash-equivalent vehicle unless it would be prudent to hold more cash and upon approval by the Trustees.

Investment Grade Fixed Income Manager Guidelines – Separate Account

  1. All Investment Guidelines apply at time of purchase.
  2. At no time may any derivative be used to leverage the portfolio for speculation.
  3. Acceptable investments may include (i) U.S. dollar denominated obligations of the United States Government and its Agencies and instrumentalities, and U.S. corporations, (ii) mortgage-backed securities including Collateralized Mortgage Obligations ("CMO’s"), (iii) Asset Backed Securities ("ABS’s"), (iv) municipal bonds, (v) short term securities, (vi) securities of foreign companies denominated in U.S. dollars, trading in the U.S. markets and capable of settlement in U.S. markets ("Yankee Bonds"), and (vii) dollar denominated obligations of U.S. companies or Foreign companies trading outside the U.S. ("Eurobonds").
  4. No securities with a credit rating below BBB- (Standard & Poor’s or Fitch) or Baa3 (Moody’s) may be purchased.
  5. A single non-government or non-agency security may not comprise more than 5% of the portfolio’s overall allocation after accounting for price appreciation.
  6. A non-government or non-agency security from any one issuer may not comprise more than 5% of the portfolio’s overall allocation after accounting for price appreciation.
  7. Investments in Rule 144a securities are permitted if i) the securities have registration rights requiring the issuer to swap the securities for fully registered publicly traded bonds, or ii) absent registration rights, a) the investment manager believes the securities to be as liquid as comparable publicly registered bonds, and b) the issuer or the issuer’s parent has publicly traded equity, or if the issuer or the issuer’s parent does not have publicly traded equity they are required by prospectus to make quarterly and annual financial statements available to bondholders that are substantially similar to the reporting requirements of a public company. Rule 144a securities may not make up more than 15% of the portfolio’s overall allocations after accounting for price appreciation.
  8. The average duration of the portfolio is not to vary more than +/-25% of the duration of the respective index.
  9. The investment manager will use the following methodology to determine compliance with quality:
    • If rated by Moody’s/Standard & Poor’s/Fitch, use middle ratings.
    • If only rated by two of the aforementioned agencies, use lower rating.
    • If only rated by one of the aforementioned agencies, use that rating.
  10. If a security is downgraded to below investment grade by any of the rating agencies, Trust Staff and the Investment Consultant must promptly (within 30 days) be informed as to the security’s information and the investment manager’s plan of action in regard to the security.
  11. No foreign securities will be allowed in the portfolio without prior consultation with, and approval by, the Trustees.
  12. Unless otherwise directed, the investment manager may only hold up to 10% of its portfolio in a money market fund, cash vehicle, or cash-equivalent vehicle.

Core Plus Fixed Income Manager Guidelines – Separate Account

  1. All Investment Guidelines apply at time of purchase.
  2. Non-Investment Grade (below Ba1 as defined by Moody’s, BB+ as defined by Standard Poor’s, and BB+ by Fitch) securities, preference shares, hybrid capital, and convertible securities, cannot exceed 25% of the portfolio’s overall allocation after accounting for price appreciation.
  3. Non-U.S. dollar denominated securities cannot exceed 10% of the portfolio’s overall allocations after accounting for price appreciation. Currency forwards are permitted. Currency forwards may be used for hedging purposes, as well as for outright active currency positions, irrespective of the underlying asset composition of the portfolio. Cross hedging is permitted. The net incremental aggregate sum of the currency exposures for non-hedging purposes, irrespective of whether they are long or short, cannot exceed 10% of the portfolio’s overall allocations after accounting for price appreciation.
  4. At no time may any derivative be utilized to leverage the portfolio for speculation.
  5. A non-government or non-agency single security may not comprise more than 5% of the portfolio’s overall allocation after accounting for price appreciation.
  6. A non-government or non-agency security from any one issuer may not comprise more than 5% of the portfolio’s overall allocation after accounting for price appreciation.
  7. Investments in Rule 144a securities are permitted if i) the securities have registration rights requiring the issuer to swap the securities for fully registered publicly traded bonds, or ii) absent registration rights, a) the manager believes the securities to be as liquid as comparable publicly registered bonds, and b) the issuer or the issuer’s parent has publicly traded equity, or if the issuer or the issuer’s parent does not have publicly traded equity they are required by prospectus to make quarterly and annual financial statements available to bondholders that are substantially similar to the reporting requirements of a public company. Rule 144a securities may not make up more than 15% of the portfolio’s overall allocations after accounting for price appreciation.
  8. Derivative instruments are permitted for hedging and efficient management of portfolio risk exposures subject to the investment policy and guidelines for the portfolio. Permitted derivative instruments include fixed income futures, swaps, options, and credit derivatives. Derivative instruments may be used for adjusting the duration, yield curve, volatility, sector, credit, market, or spread risk exposure of the portfolio. Swaps including credit derivatives may be used to adjust the portfolio’s exposure to a market sector and/or to sell or buy protection on the credit risk of individual issuers or a blanket of individual issuers. Derivatives may be used as a substitute for buying or selling securities and for non-hedging purposes seeking to enhance potential gains.
  9. The average duration of the portfolio is not to vary more than +/-25% of the duration of the respective index.
  10. Manager will use the following methodology to determine compliance with quality:
    • If rated by Moody’s/Standard & Poor’s/Fitch, use middle ratings.
    • If only rated by two of the aforementioned agencies, use lower rating.
    • If only rated by one of the aforementioned agencies, use that rating.
  11. Collateralized Mortgage Obligations ("CMOs") are limited to Planned Amortization Class ("PAC") and sequential issues. Specifically prohibited are companion tranches or support bonds, floaters, inverse floaters, income only, principal only CMOs, and structured notes. Principal leverage in CMOs or other structured bonds in the portfolio is prohibited.
  12. Pooled, commingled, or mutual funds managed by the investment manager that follow investment strategies that are generally consistent with these guidelines are permitted investments, but may not comprise more than 20% of the overall portfolio after accounting for price appreciation. The investment guidelines for the pooled, commingled, or mutual funds as outlined in the contract, prospectus, or Private Placement Memorandum will supersede these guidelines.
  13. Unless otherwise directed, the investment manager may only hold up to 10% of its portfolio in a money market fund, cash vehicle, or cash-equivalent vehicle.

Opportunistic Fixed Income Manager Guidelines – Separate Account

  1. All Investment Guidelines apply at time of purchase. The Trustees acknowledge that the opportunistic nature of these investments require additional due diligence and special considerations to manager guidelines.
  2. The Trustees acknowledge and the manager expects that the assets will be invested across global bond sectors with varying degrees of risk. The maximum limitations to each sector will be noted on each individual opportunistic fixed income manager’s guidelines.
  3. At no time may any derivative be utilized to leverage the portfolio for speculation.
  4. Derivative instruments are permitted for hedging and efficient management of portfolio risk exposures subject to the investment policy and guidelines for the portfolio. Permitted derivative instruments include fixed income futures, forwards, swaps, options, and credit derivatives. Derivative instruments may be used for adjusting the duration, yield curve, volatility, sector, credit, market, or spread risk exposure of the portfolio. Swaps including credit derivatives may be used to adjust the portfolio’s exposure to a market sector and/or to sell or buy protection on the credit risk of individual issuers or a blanket of individual issuers. Derivatives may be used as a substitute for buying or selling securities and for non-hedging purposes seeking to enhance potential gains.
  5. The average duration of the portfolio is not to vary more than +/- 1 year of the duration of the respective index.
  6. Pooled, commingled, or mutual funds managed by the investment manager that follow investment strategies that are generally consistent with these guidelines are permitted investments, but may not comprise more than the limits stated above for each security type. The investment guidelines for the pooled, commingled, or mutual funds as outlined in the contract, prospectus, or Private Placement Memorandum will supersede these guidelines.
  7. Unless otherwise directed, the investment manager may only hold up to 20% of its portfolio in a money market fund, cash vehicle, or cash-equivalent vehicle.

Short Term Investment Fund (STIF)

A short term investment fund ("STIF"), offered by the Trust’s custodian or its affiliate, will be used to invest cash not invested by the managers, employer contributions, and cash held for Trust benefit or expense payments. The Trust’s custodian is responsible for sweeping all manager accounts daily so that no cash is left uninvested each night.

Short term investments may include certificates of deposit, bankers acceptances and commercial paper of banks subject to regulation by the U.S. Government and having total assets of $1 billion or more, commercial paper rated A1/P1, repurchase agreements backed by U.S. Government and U.S. Federal Agency collateral, and U.S. Treasury Bills. Commingled short term investment funds may be used whose investment guidelines, as identified in the fund prospectus, are materially consistent with these guidelines.

Specific Guidelines for Other Commingled Funds, Mutual Funds, and Limited Partnerships

Commingled funds, mutual funds and limited partnerships may be used from time to time. The funds and limited partnerships used by the Trust must adhere to the written objectives and guidelines as established in the contract, prospectus, or Private Placement Memorandum. If at any time the fund or limited partnership deviates from these guidelines or investment objectives, liquidity permitting, a new fund, limited partnership or separate account manager will be substituted for the current option.

SECURITIES LENDING

The Board of Trustees may utilize a Securities lending provider to create income through the lending of the assets of the Trust. Securities lending providers will provide reports on a periodic basis to all necessary parties. The securities lending provider will be responsible for ensuring that adequate collateral be provided to the Trust for the securities that are lent and that the interest rate generated by the securities lending program is fair and reasonable. Furthermore, the securities lending provider will attempt to return all lent securities to the Trust’s appropriate account before any transactions on the lent securities are executed. The securities lending provider retained by the Board of Trustees will exercise discretion within the parameters set forth in these guidelines on behalf of the Trust. The collateral pool of the program must be managed in such a manner consistent with the risk/return characteristics of the Trust with the predominant focus being capital preservation.

PROXY VOTING

Each investment manager shall have full discretionary authority and responsibility to exercise the proxy voting rights related to securities held on behalf of the Trust. As fiduciaries, investment managers shall exercise voting rights in a manner consistent with the economic best interests of the Trust, its participants, and their beneficiaries. Each investment manager shall avoid conflicts-of-interest in exercising voting rights.

Each investment manager shall provide the Trust with a copy of its proxy voting policy and on, or about, January 31st of each year provide a report detailing each proxy vote made during the prior calendar year.

PORTFOLIO EVALUATION

The Trust will be evaluated by the independent Investment Consultant on a quarterly basis. The Investment Consultant will meet with the various investment managers and the Trustees on a regular basis to review any changes to the investment guidelines and analyze the investment performance and structure of the Trust. The investment manager(s) shall also provide written reports to Trust Staff and the Investment Consultant on a quarterly basis detailing at minimum the following:

  • Financial Market Outlook
  • Market values and all cash flows into and out of the portfolio
  • Performance of most recent quarter, year-to-date, and annualized returns, as well as calendar year returns, for all periods since inception compared to the policy benchmark
  • General characteristics of the portfolio compared to the policy benchmark
  • Investment fees for period

The Investment Consultant will promptly review any sizable shortfall in performance relative to objectives with the Trustees. Moreover, the investment managers and/or Investment Consultant will inform the Trustees of any compelling reason to change any of these guidelines due to investment market outlook or a change in plan structure or funding.

ENFORCEMENT

The Trustees expects each investment manager to comply with this statement. If any investment manager concludes that any aspect of this statement is inappropriate or will unnecessarily inhibit performance, the investment manager is obligated to notify the Trustees rather than fail to comply with the statement.

Each investment manager shall promptly notify the Trustees, in writing, of any violation of the investment guidelines.

The Investment Consultant shall promptly notify Trust Staff and the Trustees, in writing, of any violation of the investment guidelines.

AMENDMENT

The Trustees may, in its discretion, modify or withdraw this statement at any time.

Adopted and Approved on _September 22, 2016__ as reflected in the meeting minutes of the Board of Trustees.

Addendum A

Asset Class Relative Index #1 Relative Index #2
 
Core/Core Plus Fixed Income BarCap U.S. Aggregate  
Opportunistic Fixed Income BarCap U.S. Aggregate BarCap Universal
Emerging Market Debt JP Morgan EMBI Global  
International Fixed Income BarCap Global ex U.S.  
Total Fixed Income BarCap Universal  
 
Large-Cap Core S&P 500 
Large-Cap Value Russell 1000 Value 
Mid-Cap Core S&P 400 
Mid Cap Growth Russell Mid-Cap Growth  
Small-Cap Growth Russell 2000 Growth 
Small-Cap Value Russell 2000 Value 
Total U.S. Equity Wilshire 5000  
 
Large-Cap, Non-U.S. Equity MSCI ACWI ex U.S. 
Small-Cap, Non-U.S. Equity MSCI ACWI ex US Small Cap  
Emerging Markets Equity MSCI Emerging Markets  
Emerging Markets Small Cap MSCI Emerging Markets Small Cap  
Total Non-U.S. Equity MSCI ACWI ex US  
 
Real Estate NFI ODCE 
Total Real Estate NFI ODCE  
 
Cash or Cash Equivalents 91-Day T-Bill 

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