bay county retirement board of trustees agenda … · factset uses timeweighted returns to measure...

BAY COUNTY RETIREMENT BOARD OF TRUSTEES

AGENDA

TUESDAY, OCTOBER 15, 2019 @ 9:00 A.M.

COMMISSIONERS CHAMBERS

515 CENTER AVENUE - 4TH

FLOOR

BAY CITY, MI 48708

PAGE I. CALL TO ORDER

II. ROLL CALL

III PUBLIC INPUT

IV. PETITIONS & COMMUNICATIONS

MONEY MANAGER SYMPOSIUM

9:00 SYMPOSIUM Q&A

10:00 BREAK

1-2…………………. 10:15 BAIRD (DOMESTIC FIXED INCOME) – JEFF SIMMONS

3-6…………………. 10:30 COLUMBIA (LARGE CAP) – PATRICK OLK & RICK TAFT

7-12………………… 10:45 GENEVA (MID CAP GROWTH) – SCOTT PRIEBE

13-19……………….. 11:00 HOTCHKIS & WILEY (SMALL CAP VALUE) – JIM MILES

20-24……………….. 11:15 PRUDENTIAL/PRISA (REAL ESTATE) - KEVIN SMITH &

LEXI WOOLF

V. ANNOUNCEMENTS

A. NEXT REGULAR MEETING - NOVEMBER 12, 2019 AT 1:30

P.M., COMMISSIONERS CHAMBERS, 515 CENTER AVENUE

4TH

FLOOR, BAY CITY, MI 48708

VI. UNFINISHED BUSINESS

VII. NEW BUSINESS

VIII. MISCELLANEOUS BUSINESS

IX. ADJOURNMENT

1

Bay County Employees’ Retirement System

The performance is presented on a cumulative basis and does not reflect the deduction of investment advisory fees. Return would be reduced by advisory fee and other fees such as custodial expenses. The maximum fee found in Baird Advisors form ADV is 30 basis points. All returns are calculated on a time weighted, total return basis. The results shown should not be considered representative of future investment returns. The 50% Barclays Government & 50% Barclays MBS Index is an unmanaged portfolio of specific securities. The portfolio does not invest in all the securities traded in the index. Direct investment in the index is not available. Client should review all account statements provided by its custodian and compare those account statements to any account statement provided by Baird Advisors. Baird Advisors relies on securities valuations provided by client's custodian for purposes of performance reports. The Baird Advisors Brochure, which serves as a substitute for Form ADV Part II, is available upon request.

Fixed Income Portfolio Gross of Fees

Customized Benchmark

2006 (April-Dec) 5.04% 4.85%

2007 7.20% 7.78%

2008 9.13% 10.36%

2009 3.72% 1.79%

2010 5.63% 5.46%

2011 7.91% 7.62%

2012 3.05% 2.32%

2013 -2.59% -2.00%

2014 5.79% 5.50%

2015 1.31% 1.18%

2016 1.82% 1.37%

2017 2.44% 2.39%

2018 -1.08% -1.17%

2019 YTD 6.89% 6.64%

1 Year 9.47% 9.10%

3 Years Annualized 2.48% 2.31%




Since Inception

Cumulative Return 76.12% 72.26%

Annualized Return 4.28% 4.11%

Performance as of September 30, 2019

1

2

Bay County Employees’ Retirement System Portfolio Characteristics as of September 30, 2019

Yield to Maturity 2.05% 2.08%

Average Coupon 2.99% 3.00%

Duration 4.62 years 4.62 years

Average Maturity 6.03 years 6.24 years

Portfolio Customized Benchmark

Portfolio Customized Benchmark

Nominal Weighted Composition Duration Weighted Composition

Quality Breakdown (%)

U.S. Treasury 40.3 48.5 57.4 69.2

U.S. Govt Agency 55.7 51.5 42.6 30.8

Aaa 4.0 0.0 0.0 0.0

Aa 0.0 0.0 0.0 0.0

A 0.0 0.0 0.0 0.0

Baa 0.0 0.0 0.0 0.0

Below Baa 0.0 0.0 0.0 0.0

100.0% 100.0% 100.0% 100.0%

Sector Breakdown (%)

U.S. Treasury 40.3 48.5 57.4 69.2

U.S. Agency (Non-MBS) 0.0 1.5 0.0 1.3

U.S. Agency RMBS 41.5 50.0 26.2 29.5

U.S. Agency CMBS 14.2 0.0 16.4 0.0

Cash 4.0 0.0 0.0 0.0

100.0% 100.0% 100.0% 100.0%

Number of Issues 116 1,006

Market Value $29,072,484

*The custom benchmark is of comprised of 50% Bloomberg Barclays U.S. Government/50% Bloomberg Barclays U.S. MBS.

2

Second Quarter 2019

Quarterly Investment Review

1 Asset values can differ slightly due to rounding.

2 Inception Date: 01/27/2001

Source: Columbia Management Investment Advisers, LLC, FactsetPast performance does not guarantee future results. Please refer to the Disclosures at the end of this presentation for more information.

For Existing Institutional Client Use Only. © 2019 Columbia Management Investment Advisers, LLC. All rights reserved. 1

Bay County Employees Retirement System

Reconciliation of Assets1

Beginning Market Value 04/01/2019 $ 35,165,156

Net Contributions/Withdrawals $ -

Income Earned $ 217,350

Change in Market Value $ 907,882

Ending Market Value 06/30/2019 $ 36,290,387

Performance

3 Month (%)

Year-to-Date (%)

1 Year (%)

3 Year (%)

5 Year (%)

10 Year (%)

Since Inception

2

(%) Bay County Employees Retirement System (Gross)

3.20 15.28 3.84 12.74 8.49 14.58 7.81

Bay County Employees Retirement System (Net) 3.08 15.01 3.35 12.20 7.97 14.02 7.28

Russell 1000 Value Index 3.84 16.24 8.46 10.19 7.46 13.19 6.79

Sector Allocation as of 06/30/2019

0%

5%

10%

15%

20%

3 Month Year-to-Date 1 Year 3 Year 5 Year 10 Year Since Inception²

Bay County Employ Ret (Gross) Bay County Employ Ret (Net) Russell 1000 Value

0%

5%

10%

15%

20%

25%

CommServices

ConsumerDiscretionary

ConsumerStaples

Energy Financials HealthCare

Industrials InformationTechnology

Materials RealEstate

Utilities Cash

Bay County Employ Ret Russell 1000 Value

3

Second Quarter 2019

Quarterly Investment ReviewBay County Employees Retirement System

Characteristics1 Bay County Employ Ret Russell 1000 Value

Number of Holdings 37 722

Weighted Median Market Cap (mil.) $47,518.5 $67,957.2

Weighted Average Market Cap (mil.) $89,065.9 $124,401.2

Return on Equity 17.0% 14.1%

Price/Earnings (forward 12 mo.) 12.6x 14.2x

Dividend Yield 2.4% 2.6%

Price/Book 1.8x 2.0x

Average Quarterly Sector Allocation

Sector Performance

1 Weighted Harmonic Average.

Source: FactsetPast performance does not guarantee future results. Factset uses timeweighted returns to measure performance by utilizing the portfolio’s beginning of day security weights and end of day security prices, then geometrically links the daily returns across the measurement period. This method for calculating a portfolio’s return removes the impact of cash flows on portfolio performance. Factset attribution is intended to provide insight into directional market forces but not intended to provide realized portfolio performance. Please refer to the Disclosures at the end of this presentation for more information.


0%

10%

20%

30%

CommServices


ConsumerStaples




Utilities Cash


-20%-15%

-10%-5%

0%5%

10%

15%

CommServices


ConsumerStaples




Utilities Cash


Attribution Analysis

Stock Selection

(%)

Sector Weighting

(%)

Net Contribution

(%)

Comm Services -0.39 -0.06 -0.46

Consumer Discretionary -1.08 0.01 -1.07

Consumer Staples 0.19 0.03 0.22

Energy 1.33 -0.27 1.06 Financials 0.37 -0.02 0.35 Health Care -0.51 0.03 -0.48

Industrials -0.15 0.04 -0.11

Information Technology 0.31 0.00 0.30

Materials -0.29 0.02 -0.27

Real Estate 0.00 0.14 0.14 Utilities -0.21 -0.01 -0.22

Cash 0.00 -0.12 -0.12

Total -0.43 -0.21 -0.64

4

Second Quarter 2019

Quarterly Investment ReviewBay County Employees Retirement System

1 Contribution to return is relative to the benchmark by total effect. Comparison is versus securities held in your portfolio.

Source: FactsetPast performance does not guarantee future results. Factset uses timeweighted returns to measure performance by utilizing the portfolio’s beginning of day security weights and end of day security prices, then geometrically links the daily returns across the measurement period. This method for calculating a portfolio’s return removes the impact of cash flows on portfolio performance. Factset attribution is intended to provide insight into directional market forces but not intended to provide realized portfolio performance. Please refer to the Disclosures at the end of this presentation for more information.


Top 5 Absolute Contributors SectorContribution

to Return

Anadarko Petroleum Corporation Energy 1.01

QUALCOMM Incorporated Information Technology 0.79

American International Group, Inc. Financials 0.66

Tyson Foods, Inc. Class A Consumer Staples 0.58

Applied Materials, Inc. Information Technology 0.52

Top 5 Absolute Detractors SectorContribution

to Return

Qurate Retail, Inc. Class A Consumer Discretionary -0.70

Teradata Corporation Information Technology -0.64

Halliburton Company Energy -0.35

Livent Corporation Materials -0.25

Philip Morris International Inc. Consumer Staples -0.24

Top 5 Relative Contributors SectorContribution

to Return1

Anadarko Petroleum Corporation Energy 1.00

QUALCOMM Incorporated Information Technology 0.52

American International Group, Inc. Financials 0.48

Tyson Foods, Inc. Class A Consumer Staples 0.41

Applied Materials, Inc. Information Technology 0.37

Top 5 Relative Detractors SectorContribution

to Return1

Qurate Retail, Inc. Class A Consumer Discretionary -0.78

Teradata Corporation Information Technology -0.76

Halliburton Company Energy -0.40

Freeport-McMoRan, Inc. Materials -0.32

Lowe's Companies, Inc. Consumer Discretionary -0.31

5

Second Quarter 2019

Quarterly Investment Review

2454305 (04/19)


Disclosures

Past performance does not guarantee future results. Results are for the client's own account and are not composite results. Performance is

based on time-weighted, daily calculation using values that are determined in good faith by Columbia Management Investment Advisers, LLC and is

calculated based on trade date, net of transaction costs and reflects accrued interest. Gross performance does not reflect the deduction of

management fees. The net performance reflects the deduction of management fees as of the most recent quarter end. If you have any questions

regarding the above information, or if there are any changes in your investment objectives or guidelines, please contact your client relationship

manager.

This performance report is separate from the custodial brokerage statement that is delivered to you identifying the securities and other assets held in

your account at the end of the reporting period and setting forth all transactions in the account during that period. Transaction and valuation

information reflected in this report may be inconsistent with the information presented in your custodial brokerage statement due to settlement dates

and other factors. We urge you to compare the account statements from your custodian with those that you receive from Columbia Management

Investment Advisers, LLC.

Any client portfolio holdings information provided is proprietary and confidential. In receiving holdings data, clients and their authorized agents agree

that the data is not being obtained in order to effect securities transactions based upon such information or to provide such information to another

party. References to specific securities should not be considered a recommendation to purchase or sell a particular security but rather an illustration

of investment management strategy. Complete holdings information is available in client statements.

Information provided by third parties is deemed to be reliable but may be derived using methodologies or techniques that are proprietary or unique to

the third party source.

Entity Definitions and Disclosures

Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies.

Columbia Management Investment Advisers, LLC (“CMIA”) is an investment adviser registered with the U.S. Securities and Exchange Commission.

6

Bay County Employees’ Retirement System

Account Overview- as of 9/30/19

23.4

4.5

14.6

11.7 12.1

22.8

3.8

13.8

10.9 11.4

25.2

5.2

14.5

11.1

13.4

0

5

10

15

20

25

30

YTD 1 Year 3 Year 5 Year SinceInception

% R

etu

rn

BCERS (Gross of Fees) BCERS (Net of Fees) Russell Midcap Growth

AUM as of September 30, 2019: $21,230,477

Account inception: January 17, 2013

0% 10% 20% 30%

Utilities

Energy

Materials & Processing

Consumer Staples

Financial Services


Health Care

Producer Durables

Technology

US Mid Cap Growth

Russell Midcap® Growth

Source: Geneva Capital Management, 9/30/19, Based on Russell Global Sector classifications

Note: This information is shown as supplemental information to the US Mid Cap Growth composite Annual Disclosure Presentation in the Appendix.

Past performance is not a guarantee of future results. One cannot invest directly in an index.

7

2019 underperformance

A difficult period for high quality

P/E Quintile Return (%)

Q1 (Lowest) 16.9

Q2 19.4

Q3 29.3

Q4 29.6

Q5 (Highest) 29.3

Nonearners 23.9

Beta Quintile Return (%)

Q1 (Lowest) 22.8

Q2 26.0

Q3 24.3

Q4 29.4

Q5 (Highest) 28.6

ROE Quintile Return (%)

Q1 (Highest) 22.2

Q2 28.1

Q3 29.0

Q4 25.5

Q5 (Lowest) 29.8

P/E Quintile Return (%)

Q1 (Lowest) 16.0

Q2 10.5

Q3 9.3

Q4 8.6

Q5 (Highest) 13.1

Nonearners 19.9

Beta Quintile Return (%)

Q1 (Lowest) 5.4

Q2 9.3

Q3 9.5

Q4 12.9

Q5 (Highest) 15.7

ROE Quintile Return (%)

Q1 (Highest) 9.9

Q2 10.3

Q3 9.9

Q4 12.3

Q5 (Lowest) 15.7

January 2019

YTD 2019

Source: BofAML as of 9/30/19, data represents Russell Mid Cap Growth Index.

8

FOR INSTITUTIONAL OR HIGH NET WORTH INVESTOR USE ONLY / NOT FOR PUBLIC VIEWING OR DISTRIBUTION

US Mid Cap Growth Strategy Holdings As of June 30, 2019

This information is shown as supplemental information to the US Mid Cap Growth composite Annual Disclosure Presentation in the Appendix.

Past performance is not indicative of future results. One cannot invest directly in an index.

Security Ticker % of Assets

ABIOMED INC abmd 1.85

ALIGN TECHNOLOGY INC algn 1.56

AMPHENOL CORP CLASS A aph 2.69

ANSYS INC anss 2.44

BLACKLINE INC bl 0.66

BROADRIDGE FINANCIAL SOLUTIONS INC br 2.74

BURLINGTON STORES INC burl 2.11

CARTERS INC cri 1.36

CERNER CORP cern 1.05

CHURCH & DWIGHT INC chd 2.51

COGNEX CORP cgnx 1.12

COOPER COS INC coo 2.30

COPART INC cprt 2.98

COSTAR GROUP INC csgp 3.43

EAST WEST BANCORP INC ewbc 1.50

EPAM SYSTEMS INC epam 0.68

FASTENAL CO fast 1.02

FISERV INC fisv 2.74

FORTUNE BRANDS HOME & SECURITY INC fbhs 1.24

GARTNER INC it 2.03

GLOBAL PAYMENTS INC gpn 2.01

GRAND CANYON EDUCATION INC lope 2.02

HASBRO INC has 1.33

HEALTHEQUITY INC hqy 0.96

HUBSPOT INC hubs 0.38

JB HUNT TRANSPORT SERVICES INC jbht 1.14

IDEX CORP iex 2.49

IDEXX LABS INC idxx 2.87

INTERCONTINENTAL EXCHANGE INC ice 2.31

INTUIT intu 3.16

LIGAND PHARMACEUTICALS INC lgnd 0.91

Security Ticker % of Assets

MASIMO CORP masi 1.07

MEDIDATA SOLUTIONS INC mdso 2.27

MICROCHIP TECHNOLOGY INC mchp 1.46

NATIONAL INSTRUMENTS CORP nati 1.48

O’REILLY AUTOMOTIVE INC orly 2.26

POOL CORP pool 2.34

RAYMOND JAMES FINANCIAL INC rjf 1.91

REALPAGE INC rp 1.87

ROPER TECHNOLOGIES INC rop 2.15

SIGNATURE BANK NEW YORK NY sbny 1.13

SNAP-ON INC sna 0.94

SS&C TECHNOLOGIES HOLDINGS INC ssnc 1.74

STERIS PLC ste 2.67

TELEFLEX INC tfx 1.90

TEXAS ROADHOUSE INC txrh 1.35

TRIMBLE INC trmb 1.86

TYLER TECHNOLOGIES INC tyl 2.45

ULTA BEAUTY INC ulta 1.25

VARIAN MEDICAL SYSTEMS INC var 1.32

VERISK ANALYTICS INC vrsk 2.59

WABCO HOLDINGS INC wbc 1.08

WATSCO INC wso 1.30

95.96

ACCRUED DIVIDENDS divacc 0.03

CASH ACCOUNT cash 4.01

0 4.04

TOTAL PORTFOLIO 100.00

9


Annual Disclosure Presentation

US Mid Cap Growth

Total Firm Composite

Year

End

Assets

USD

(millions)

Assets

USD

(millions)

Number of

Accounts

Composite

Gross

Composite

Net

Russell

Midcap®

Growth

Russell

Midcap®

Composite

Dispersion Composite

Russell

Midcap®

Growth

Russell

Midcap®

2018 4,577 1,698 63 -1.92% -2.35% -4.75% -9.06% 0.2% 12.59% 12.82% 11.98%

2017 5,202 2,377 67 24.38% 23.82% 25.27% 18.52% 0.1% 10.61% 10.89% 10.36%

2016 5,327 2,299 108 3.08% 2.61% 7.33% 13.80% 0.2% 11.41% 12.18% 11.55%

2015 4,682 2,807 111 4.54% 4.08% -0.20% -2.44% 0.1% 11.13% 11.31% 10.85%

2014 4,892 3,247 128 5.90% 5.44% 11.90% 13.22% 0.2% 10.56% 10.87% 10.14%

2013 6,695 4,896 190 32.00% 31.46% 35.74% 34.76% 0.1% 13.69% 14.62% 14.03%

2012 3,774 2,860 168 11.51% 11.03% 15.81% 17.28% 0.2% 16.62% 17.91% 17.20%

2011 2,609 1,958 140 4.19% 3.73% -1.65% -1.55% 0.2% 18.86% 20.82% 21.55%

2010 1,872 1,297 119 30.83% 30.25% 26.38% 25.48% 0.4%

2009 1,393 928 96 36.89% 36.28% 46.29% 40.48% 0.4%

2008 979 618 96 -35.54% -35.86% -44.32% -41.46% 0.3%

2007 1,579 1,061 92 17.00% 16.50% 11.43% 5.60% 0.2%

2006 1,355 794 89 5.62% 5.15% 10.66% 15.26% 0.2%

2005 1,073 581 70 15.84% 15.39% 12.10% 12.65% 0.4%

2004 815 399 38 20.92% 20.47% 15.48% 20.22% 0.2%

2003 693 340 34 26.55% 26.10% 42.71% 40.06% 0.3%

2002 531 229 24 -14.05% -14.36% -27.41% -16.19% 0.4%

2001 537 244 24 -3.84% -4.18% -20.15% -5.62% 0.3%

2000 514 212 16 13.36% 13.00% -11.75% 8.25% 0.6%

1999 470 286 56 14.29% 13.19% 51.29% 18.23% 4.1%

1998 380 206 53 28.77% 27.56% 17.86% 10.09% 1.9%

1997 259 135 36 25.03% 23.85% 22.54% 29.01% 2.7%

1996 214 90 34 27.40% 26.20% 17.48% 19.00% 1.7%

1995 195 73 32 28.40% 27.20% 33.98% 34.45% 2.9%

1994 133 53 28 -0.50% -1.50% -2.16% -2.09% 1.3%

1993 120 28 26 5.02% 3.99% 11.19% 14.30% 1.6%

3 Year Ex-Post Standard Deviation

Not Required Prior to 2011

Annual Performance Results 3 Year Ex-Post Standard Deviation

Page 1 of 3

10



Compliance Statement

Geneva Capital Management claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the

GIPS® standards. Geneva Capital Management has been independently verified for the periods January 1, 1993 through March 31, 2019.

Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS® standards on a firm-wide basis and (2) the firm’s policies and

procedures are designed to calculate and present performance in compliance with the GIPS® standards. The US Midcap Growth composite has been examined for the periods

January 1, 1993 through March 31, 2019. The verification and performance examination reports are available upon request.

The Firm

Geneva Capital Management (formerly known as Henderson Geneva Capital Management) is a registered investment adviser and a wholly owned subsidiary of Janus Henderson

Group plc. On October 1, 2014 Henderson Global Investors Inc. acquired Geneva Capital Management LLC, and subsequently merged with Janus Capital Group Inc. on May 30,

2017 to form Janus Henderson Group plc.

Composite Description

The US Mid Cap Growth composite contains fully discretionary equity accounts invested in approximately 50-60 mid capitalization growth securities whose market capitalization

ranges generally fall between $2 billion to $15 billion at the time of purchase. Securities are selected using a “bottom-up” fundamental analysis of the company and supplemented by

“top-down” considerations of economic conditions. Prior to January 1, 2006, the composite was named Geneva Growth. Between January 1, 2006 and September 30, 2015 the

composite was named Geneva Midcap Growth Composite. The minimum account size for this composite is $500,000. As of January 1, 2004 accounts are removed annually if they

fall more than 20% below the minimum account size. Beginning January 1, 2006, composite policy requires the temporary removal of any portfolio incurring a client initiated

significant cash inflow or outflow of 30% portfolio assets or greater. The temporary removal of such an account occurs at the beginning of the month in which the significant cash flow

occurs and the account re-enters the composite the last day of the month in which the cash flow takes place. Prior to January 1, 2000, balanced portfolio segments were included in

this composite and performance reflects required total segment plus cash returns using a predetermined cash allocation percentage.

Composite Benchmark

For comparison purposes, the US Mid Cap Growth composite is measured against primary index Russell Midcap® Growth Index and secondary Russell Midcap® Index. The Russell

Midcap® Growth Index measures the performance of the mid-cap growth segment of the U.S. equity universe. It includes those Russell Midcap® Index companies with higher price-

to-book ratios and higher forecasted growth values (Source: www.ftserussell.com). The Russell Midcap® Index measures the performance of the mid-cap segment of the U.S. equity

universe. The Russell Midcap® is a subset of the Russell 1000® Index. It includes approximately 800 of the smallest securities based on a combination of their market cap and

current index membership. The Russell Midcap® represents approximately 31% of the total market capitalization of the Russell 1000® companies (Source: www.ftserussell.com).

Performance results in presentations prior to January 1, 2002 were measured against the S&P® 400. From January 1, 2002 through January 1, 2008 performance results were

primarily measured against the Russell Midcap® Index. The benchmark was changed to be more representative of the composite strategy and style. Information regarding the S&P

400® Index is available upon request.

Fee Information

The annual fee schedule for institutional clients is 75 bps (0.75%) on the first $100 million and 60 bps (0.60%) on the balance over $100 million. The annual fee schedule for retail

clients is 100 bps (1.00%) on the first $1.5 million, 85 bps (0.85%) on the next $8.5 million, and 70 bps (0.70%) on the balance over $10 million. Fees are billed or charged to the

account in arrears, at one quarter of the annual rate, on a quarterly basis - or as applicable based on the average month-end values for each of the three months comprising a

quarter. Actual investment advisory fees incurred by clients may vary.

Page 2 of 3

11



Basis of Returns

Results are based on fully discretionary accounts under management, including those accounts no longer with the firm. Returns are presented gross and net of management fees

and include the reinvestment of all income. Net of fee performance was calculated using actual management fees. Prior to January 1, 2000, net returns were calculated using the

highest fee per the fee schedule in the ADV which was 1.0%. Past performance is not indicative of future results.

Composite Dispersion

The annual composite dispersion presented is an asset-weighted standard deviation calculated for the accounts in the composite the entire year.

GIPS Policies and Procedures

The Firm maintains a complete list of composite descriptions, which is available upon request. Policies for valuing portfolios, calculating performance, and preparing compliant

presentations are available upon request.

Composite Creation Date

The US Mid Cap Growth composite creation date is January 1, 1988.

Composite Currency

The U.S. Dollar is the currency used to express performance.

Important Information

All investments involve risk, including possible loss of principal. Past performance is no guarantee of future results. The value of an investment and the income from it can fall as well

as rise and you may not get back the amount originally invested. Nothing in this document is intended to or should be construed as advice. This document is not a recommendation

to sell or purchase any investment.

Portfolio Management Changes

Effective July 10, 2017; Michelle Picard retired and left The Company. Jose Munoz has been promoted from Senior Analyst to Portfolio Manager.

Effective October 22, 2018; Amy Croen retired and left The Company.

Page 3 of 3

12

T: 213-430-1000

F: 213-430-1001

601 S. Figueroa Street

39th Floor

Los Angeles, CA 90017

www.hwcm.com

Private and Confidential

Presentation

Bay County Employees' Retirement System

October 15, 2019

Small Cap Value Portfolio Review

Jim MilesPortfolio ManagerPrincipal

13

16 Page 1HOTCHKIS & WILEY Page 1

2019 review

▪ Concerns about an economic slowdown/recession have battered value/ economically sensitive stocks. The

premium for “defensive” sectors is near record highs.

▪ Value stocks look attractive relative to growth stocks, as the valuation gap remains unusually wide

▪ The portfolio maintains large weights in financials and industrials because this is where we have found the most

compelling risk-adjusted valuation opportunities

▪ The portfolio trades at a large discount to the value benchmark and the broad market

Representative Small Cap Value portfolio. Client portfolio holdings may vary due to different restrictions, cash flows, and other relevant considerations; additional disclosures provided in Endnotes. Opinions expressed are those of the portfolio

managers as of September 30, 2019 and may not be an accurate reflection of their opinion after that date.

14


Stocks perceived as stable trade near record premiums

▪ Overpaying for stability can be counterproductive (i.e. can increase risk)

As of June 2019

Sources: Empirical Research Partners (Stability Score determined by Empirical Research Partners)

Certain information presented is based on proprietary or third-party estimates, which are subject to change and cannot be guaranteed.

0.3x

0.4x

0.5x

0.6x

0.7x

0.8x

0.9x

1.0x

1.1x

1.2x

1.3x

Jun-

99

Dec

-99

Jun-

00

Dec

-00

Jun-

01

Dec

-01

Jun-

02

Dec

-02

Jun-

03

Dec

-03

Jun-

04

Dec

-04

Jun-

05

Dec

-05

Jun-

06

Dec

-06

Jun-

07

Dec

-07

Jun-

08

Dec

-08

Jun-

09

Dec

-09

Jun-

10

Dec

-10

Jun-

11

Dec

-11

Jun-

12

Dec

-12

Jun-

13

Dec

-13

Jun-

14

Dec

-14

Jun-

15

Dec

-15

Jun-

16

Dec

-16

Jun-

17

Dec

-17

Jun-

18

Dec

-18

Jun-

19

Relative P/E Ratio of Stocks with the Highest "Stability Score"

Last 20 Years

Stability is Expensive

Stability is Inexpensive

15


Valuation Dispersion

▪ The market’s valuation dispersion is uncommonly wide

As of September 2019

10.0x

15.0x

20.0x

25.0x

30.0x

35.0x

40.0x

45.0x

50.0x

55.0x

60.0x

Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Sep-19

Price-to-Earnings (FY1 Consensus) Ratio

Russell 2000 Value

Russell 2000 Growth

Sources: Bloomberg, H&W

Past performance is no guarantee of future performance.

16


Energy (overweight)As of June 2019

▪ Energy stocks are deeply discounted relative to the overall market

Sources: Bloomberg, S&P, H&W

0.4

0.5

0.6

0.7

0.8

0.9

1

1.1

1.2

1.3

Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18 Jun-19

P/B Ratio

R2000 Energy P/B as a % of R2000 P/B

at parity

46%

17


Portfolio valuation

▪ The portfolio trades at a considerable discount to the market without assuming undue risk

Sources: Bloomberg, H&W

Representative Small Cap Value portfolio. Client portfolio holdings may vary due to different restrictions, cash flows, and other relevant considerations. Certain information presented is based on proprietary or third-party estimates, which are

subject to change and cannot be guaranteed. Past performance is no guarantee of future performance.

As of September 2019

6.4x

12.6x

21.2x

0.0x

5.0x

10.0x

15.0x

20.0x

25.0x

30.0x

H&W SCV R2000V R2000G

Price-to-Normal Earnings

+96%

+229%10.1x

12.2x

17.7x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

16.0x

18.0x

20.0x


Price-to-Consensus

Earnings (FY2)

+21%

+75%

1.1x

1.3x

3.8x

0.0x

0.5x

1.0x

1.5x

2.0x

2.5x

3.0x

3.5x

4.0x


Price-to-Book

+21%

+260%

18


Bay County Employees' Retirement System

Year-to-Date ended September 30, 2019

Past performance is no guarantee of future performance

Performance attribution returns can differ from actual client portfolio returns due to data differences, cash flows, trading, and other activity. Returns are calculated using daily holding information, gross of fees.

Performance Returns - Gross of Fees (%) Weighted Average Portfolio Characteristics

Portfolio Rus 2000 V Rus 2000

Projected P/E (FY2) 10.1x 12.2x 14.2x

Price / Normal Earnings 6.5x 12.6x 15.3x

Price / Cash Flow 5.9x 6.9x 8.7x

Price / Book 1.1x 1.3x 1.9x

Dividend Yield 2.1% 2.4% 1.6%

Market Capitalization (mm) $2,535 $2,013 $2,254Commencement of portfolio: 12/1/03. Periods over one year are average annualized returns. # of Holdings / 1-Yr Turnover 65 / 31%

Top and Bottom Five Contributors to Performance (%) Trading Data Top Ten Holdings - Total Portfolio (%)

Avg Wgt Ttl Ret. Contr. Major Buy(Sell) *New buy/final sell + / - End Wgt

Sonic Automotive Inc. 2.58 131.63 2.41 Arrow Electronics Inc. 2.2% * Enstar Group Ltd. 5.9

Seritage Growth Properties 5.69 32.16 1.47 Resideo Technologies Inc. 2.1% * Seritage Growth Properties 5.8

First Hawaiian Inc. 5.25 22.22 1.05 Bank of NT Butterfield & Son 2.0% First Hawaiian Inc. 4.6

Avnet Inc. 3.65 24.98 0.98 Lazard Ltd. 1.5% * Popular Inc. 3.9

Masonite Int'l Corp. 3.41 29.38 0.95 Office Depot Inc. 1.5% Masonite Int'l Corp. 3.8

Embraer SA 2.25 -22.05 -0.57 (TRI Pointe Group Inc.) -1.1% Bank of NT Butterfield & Son 3.8

Global Indemnity Ltd. 1.56 -29.26 -0.57 (Granite Real Estate Inv. Trust) -1.5% * Hanger Inc. 3.2

Office Depot Inc. 2.01 -29.43 -0.58 (Avnet Inc.) -1.7% First Horizon Nat'l Corp. 3.1

Nine Energy Service Inc. 0.40 -72.63 -0.67 (Sonic Automotive Inc.) -1.8% Frank's International 2.9

Whiting Petroleum Corp. 1.29 -64.61 -1.13 (Evergy Inc.) -2.2% * Matson Inc. 2.9

Equity Performance Attribution (%) Top Ten Industries - Total Portfolio (%)

Portfolio Russell 2000 Value Allocation

Avg Wgt Return Avg Wgt Return Sector Stock Total End Wgt

Consumer Discretionary 6.74 43.32 9.28 8.75 0.08 2.20 2.28 Banks 17.0

Health Care 3.16 7.55 4.44 -4.57 0.25 0.42 0.67 Insurance 11.1

Communication Services 1.30 8.05 2.94 0.02 0.18 0.27 0.45 Equity REITs 9.0

Consumer Staples 0.00 0.00 2.52 3.64 0.24 0.00 0.24 Specialty Retail 6.1

Materials 0.07 -0.82 4.30 9.25 0.17 -0.01 0.16 Electronic Equip. & Instr. 6.0

Financials 35.33 12.83 29.57 13.86 0.04 -0.35 -0.31 Building Products 5.7

Utilities 3.50 19.55 6.88 21.55 -0.39 -0.11 -0.51 Energy Equipment & Srvcs 4.7

Real Estate 9.54 21.11 11.85 25.76 -0.24 -0.34 -0.59 Capital Mkts 4.0

Information Technology 10.45 20.13 10.70 28.18 0.09 -0.78 -0.68 Oil Gas & Consumable Fuels 4.0

Industrials 19.81 3.74 11.70 14.85 0.20 -2.31 -2.11 Health Care Prov. & Srvcs 3.2

Energy 10.09 -22.91 5.82 -14.44 -1.18 -1.14 -2.32

-0.56 -2.16 -2.72

YTD 3 Yr 5 Yr 10 Yr Since Incept.

Portfolio - Total Return 9.0 6.6 4.8 12.7 8.6

Russell 2000 Value Index 12.8 6.5 7.2 10.1 7.6

Russell 2000 Index 14.1 8.2 8.2 11.2 8.1

S&P 500 Index 20.6 13.4 10.8 13.2 9.0

19

Second Quarter 2019

PRISA Composite outperformed NFI-ODCE6 on a total return basis by 49 bps for the quarter, and 129 bps for the trailing 1-year. Fund returns are also outperforming in the 3, 5, 7, 10-year, and since NFI-ODCE inception time periods, with income and appreciation outperformance across the board.

Industrial continues to deliver the strongest unlevered returns, primarily through appreciation, which is supported by healthy rent growth and strong leasing activity. These trends were most notable in Seattle and Los Angeles. During the quarter, we signed a full building lease for Rialto Fulfillment Center in Los Angeles, a 1.2M SF build-to-core distribution center that is nearing completion.

PRISA’s quarterly acquisition activity reflects the commencement of the vertical development of the third phase at Eastgate Industrial Park in Aberdeen, MD, which will total 2.3M SF at full build-out.

Four dispositions occurred during the quarter including the $228.5M Storage Post Portfolio sale which generated a favorable unlevered 12.6% IRR over its 7-year hold. The portfolio consisted of 1.2M SF across 12 assets in New York and Florida that were 92% leased. This sale, in conjunction with the acquisition of 5 newly built storage assets in New York City, represents the execution of our trade-up strategy within the Storage portfolio.

PRISA experienced positive net investor flows for the first half of 2019 and met all eligible withdrawal requests for the quarter.

OUTLOOK – Real estate fundamentals remain healthy. PRISA expects 2019 total returns in the range of 6.0% to 8.0%,7 with income returns continuing to exceed appreciation and income growth being the main driver of value gains.

PRISA1 PERFORMANCE REPORT

Confidential Information. Not For Further Distribution. 19MREYN-BE4JZA

2.10%4.28% 4.47% 4.67% 4.84% 5.33%

7.57%1.20%

3.31% 3.44%5.31% 5.69% 5.02% 1.34%

3.32%

7.69% 8.02%

10.15%10.74% 10.57%

8.99%

YTD 1 Year 3 Year 5 Year 7 Year 10 Year Inception

Income Appreciation

2Q19 Performance2,3 Composite LP SAIncome 1.05% 1.05% 1.05%Appreciation 0.43% 0.40% 0.44%Total Return 1.48% 1.45% 1.49%2Q19 Key Account MetricsGross Assets $25.9BNet Assets $20.5BCash $688.4MLeverage Ratio 20.6%Transaction Activity4 2Q19 YTDAcquisitions (gross) $73.9M $159.4MDispositions (gross) 414.6M 416.8MClient Activity 2Q19 YTDDeposits $358.7M $559.2MCash Flow Reinvested $76.0M $150.5MWithdrawals $376.5M $626.5MCash Flow Distributions $104.9M $199.3M

Composite Historical Performance3

Portfolio Highlights

Portfolio Diversification8

By P

rope

rty T

ype ■ 35.9% Office

■ 24.9% Apartment■ 16.0% Industrial■ 15.4% Retail■ 5.9% Storage■ 1.9% Other9

By G

eogr

aphy ■ 38.9% East

■ 35.3% West

■ 18.1% South

■ 7.7% Midwest

5

Eastgate A (Aberdeen, MD)

20

Second Quarter 2019

Confidential Information. Not For Further Distribution. 19MREYN-BE4JZA

1 ”PRISA”, or “PRISA Composite”, or “Composite” or the “Fund”, represents aggregate or composite of PRISA LP and PRISA Separate Account (“PRISA SA”). Although this is not an actual fund in which any client is invested or can invest, it is indicative of the overall performance of the PRISA investment strategy. The portfolio of PRISA LP, which co-invests in substantially all of the assets of PRISA SA through a REIT (“PRISA REIT”), differs somewhat from the portfolio of PRISA SA. Additionally, PRISA LP’s and PRISA SA’s interests in PRISA REIT are approximately 33.9% and 66.1%, respectively as of June 30, 2019. Accordingly, certain of the information presented in the prior page (e.g., Gross Assets, Net Assets and Leverage Ratio) may differ if it was presented only with respect to PRISA LP or PRISA SA. It is expected that performance and composition will be substantially the same

2 All returns are shown prior to deduction of manager compensation/fees. Second quarter gross returns are not annualized.

3 Additional return information for PRISA Composite, PRISA LP & PRISA SA

4 Based on Fund’s share of gross activity.

5 July 1970.

6 NFI-ODCE returns are based on the preliminary snapshot report published by NCREIF on July 12, 2019.

7 Total net target returns of 5.0% to 7.0%. Past performance is not a guarantee or a reliable indicator of future results. This is a projection based upon management expectations of future events, which are subject to change and not guaranteed.

8 Based on Fund’s share of gross market value in properties and debt investments.

9 Other includes Harbor Garage, Land, and tax incentive notes connected to real estate investments.

Note: Please refer to the PRISA Fund Review for additional details or for discussion of investment considerations. All data is preliminary and subject to modification.

PGIM is the primary asset management business of Prudential Financial, Inc. PGIM Real Estate is PGIM’s real estate investment advisory business and operates through PGIM, Inc., a registered investment advisor. Prudential, the Prudential logo, PGIM Real Estate and the Rock symbol are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.

The information contained herein is provided by PGIM Real Estate. This document may contain confidential information and the recipient hereof agrees to maintain the confidentiality of such information. Distribution of this information to any person other than the person to whom it was originally delivered and to such person’s advisers is unauthorized, and any reproduction of these materials, in whole or in part, or the divulgence of any of its contents, without the prior consent of PGIM Real Estate, is prohibited. Certain information in this document has been obtained from sources that PGIM Real Estate believes to be reliable as of the date presented; however, PGIM Real Estate cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not change. The information contained herein is current as of the date of issuance (or such earlier date as referenced herein) and is subject to change without notice. PGIM Real Estate has no obligation to update any or all such information; nor do we make any express or implied warranties or representations as to the completeness or accuracy. Any information presented regarding the affiliates of PGIM Real Estate is presented purely to facilitate an organizational overview and is not a solicitation on behalf of any affiliate. These materials are not intended as an offer or solicitation with respect to the purchase or sale of any security or other financial instrument or any investment management services. These materials do not constitute investment advice and should not be used as the basis for any investment decision.

These materials do not take into account individual client circumstances, objectives or needs. No determination has been made regarding the suitability of any securities, financial instruments or strategies for particular clients or prospects. The information contained herein is provided on the basis and subject to the explanations, caveats and warnings set out in this notice and elsewhere herein. Any discussion of risk management is intended to describe PGIM Real Estate’s efforts to monitor and manage risk but does not imply low risk.

All performance and targets contained herein are subject to revision by PGIM Real Estate and are provided solely as a guide to current expectations. There can be no assurance that any product or strategy described herein will achieve any targets or that there will be any return of capital. Past performance is not a guarantee or reliable indicator of future results. No representations are made by PGIM Real Estate as to the actual composition or performance of any account.

These materials do not purport to provide any legal, tax or accounting advice. These materials are not intended for distribution to or use by any person in any jurisdiction where such distribution would be contrary to local law or regulation.

Endnotes Important Information

PRISA Composite

Performance 2Q19 1-Year 3-Year 5-Year 7-Year 10-Year Inception5

Total Net Return 1.27% 6.83% 7.15% 9.31% 9.89% 9.67% 7.90%

PRISA LP


Income 1.05% 4.27% 4.48% 4.68% 4.85% 5.35% 7.57%Appreciation 0.40% 3.13% 3.38% 5.18% 5.64% 4.99% 1.34%

Total Gross Return 1.45% 7.50% 7.98% 10.04% 10.70% 10.54% 8.98%

Total Net Return 1.24% 6.62% 7.09% 9.11% 9.76% 9.58% 7.89%

PRISA SA


Income 1.05% 4.28% 4.47% 4.66% 4.83% 5.33% 7.57%Appreciation 0.44% 3.38% 3.46% 5.33% 5.71% 5.04% 1.35%

Total Gross Return 1.49% 7.76% 8.04% 10.17% 10.75% 10.58% 8.99%

Total Net Return 1.29% 6.90% 7.17% 9.34% 9.91% 9.68% 7.91%

21

Confidential information. Not for further distribution.

PRISA

22

PGIM Real Estate | PRISA | REF: 19MREYN-BGRKNY

1 NAV as of June 30, 2019 is $3,604M. 2 Based upon PRISA’s share of GMV in properties and debt investments. 3 Diversification as of 2Q19 is based on NFI-ODCE gross market value in the NCREIF Performance Attribution Report. Data is preliminary and subject to change. 4 Projected movement over the 2019-2021 time period. There is no guarantee that these targets will be achieved. 5 NFI-ODCE does not publish detailed market information. Market information is based on CSA definitions and calculated by extracting NFI-ODCE property data from the NCREIF Research Database. Data as of June 30, 2019.

2

PRISA Retail UpdateAs of June 30, 2019

PRISA2

Existing Portfolio

Gross Assets1 $3,876M

Total SF 12.3M

PRISA Weighting2 15.4%

NFI-ODCE Weighting3 16.7%

Strategic Direction4 ▼

Avalon | Alpharetta, GA

46% Lifestyle/Mixed Use 29% Power 25% Neighborhood/Community 0% Regional Malls

Valuation Metrics

Direct Cap Rate 5.6%

Discount Rate 7.0%

PRISA Retail Portfolio Positioning

PRISA Retail Portfolio Highlights

Retail underweight benefits performance

Focus on necessity-based and experiential centers

Income return outperformance – stable occupancy and NOI

78%Grocer Present

0%Malls and TraditionalDepartment Stores

36% Regional Malls 28% Neighborhood/Community 18% Lifestyle/Mixed Use 15% Power 3% Other

NFI-ODCE5

23

PGIM Real Estate | PRISA | REF: 19MREYN-BGRKNY

DisclosuresPGIM is the primary asset management business of Prudential Financial, Inc. PGIM Real Estate is PGIM’s real estate investment advisory business and operates through PGIM, Inc., a registered investment advisor. Prudential, the Prudential logo, PGIM Real Estate and the Rock symbol are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.

The information contained herein is provided by PGIM Real Estate. This document may contain confidential information and the recipient hereof agrees to maintain the confidentiality of such information. Distribution of this information to any person other than the person to whom it was originally delivered and to such person’s advisers is unauthorized, and any reproduction of these materials, in whole or in part, or the divulgence of any of its contents, without the prior consent of PGIM Real Estate, is prohibited. Certain information in this document has been obtained from sources that PGIM Real Estate believes to be reliable as of the date presented; however, PGIM Real Estate cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed. The information contained herein is current as of the date of issuance (or such earlier date as referenced herein) and is subject to change without notice. PGIM Real Estate has no obligation to update any or all of such information; nor do we make any express or implied warranties or representations as to its completeness or accuracy. Any information presented regarding the affiliates of PGIM Real Estate is presented purely to facilitate an organizational overview and is not a solicitation on behalf of any affiliate. These materials are not intended as an offer or solicitation with respect to the purchase or sale of any security or other financial instrument or any investment

management services. These materials do not constitute investment advice and should not be used as the basis for any investment decision.

All performance and targets contained herein are subject to revision by PGIM Real Estate and are provided solely as a guide to current expectations. There can be no assurance that any product or strategy described herein will achieve any targets or that there will be any return of capital. Past performance is not a guarantee or a reliable indicator of future results. No representations are made by PGIM Real Estate as to the actual composition or performance of any account.

NCREIF Fund Index-Open End Diversified Core Equity (NFI-ODCE): The NFI-ODCE, short for NCREIF Fund Index —Open End Diversified Core Equity, is a capitalization-weighted, gross of fee, time-weighted return index with an inception date of December 31, 1977. Other supplemental data such as equal-weight and net of fee returns are also provided by NCREIF for informational proposes and additional analysis. To be eligible for NFI-ODCE membership, each member fund must be marketed as an open-end fund with a diversified core investment strategy primarily investing in private equity real estate. All members funds must adhere to the following index inclusion criteria: At least 80% of market value of net assets must be invested in real estate (20% cap on cash and equivalents); (2) At least 80% of market value of real estate net assets must be invested in private equity real estate properties (20% cap on assets invested in but not limited to, property debt, public company equity/debt or private company equity/debt); (3) At least 95% of real estate net assets must be located in U.S. markets; (4) At least 80% of market value of

real estate net assets must be invested in office, industrial, apartment and retail property types; (6) No more than 65% (+/-for market forces) of market value of real estate net assets in one property type or region as defined by the NCREIF Property Index (NPI); and (5) No more than 40% leverage. Each member fund must also comply with the NCREIF PREA Reporting standards. Note: A benchmark Index is not professionally managed. Investors cannot invest directly in an index.

These materials do not take into account individual client circumstances, objectives or needs. No determination has been made regarding the suitability of any securities, financial instruments or strategies for particular clients or prospects. The information contained herein is provided on the basis and subject to the explanations, caveats and warnings set out in this notice and elsewhere herein. Any discussion of risk management is intended to describe PGIM Real Estate efforts to monitor and manage risk but does not imply low risk. These materials do not purport to provide any legal, tax or accounting advice. These materials are not intended for distribution to or use by any person in any jurisdiction where such distribution would be contrary to local law or regulation.

These materials are for informational or educational purposes. In providing these materials, PGIM (i) is not acting as your fiduciary and is not giving advice in a fiduciary capacity and (ii) is not undertaking to provide impartial investment advice as PGIM will receive compensation for its investment management services.

324

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