United States Conference of Catholic Bishops Second Quarter 2013
Hewitt EnnisKnupp, Inc. 10 South Riverside Plaza, Suite 1600 Chicago, IL 60606 phone: 1-312-715-1700 fax: 1-312-715-1952 www.hewittennisknupp.com
CONTENTS 1
Long-Term Pool
9
U.S. Equity
17
International Equity
25
Fixed Income
31
Pension Fund
39
Short-Term Pool
43
Appendix
47
Market Environment
57
Investment Policy Statement
(This page left blank intentionally)
Long-Term Pool
Long-Term Pool
As of June 30, 2013
$266.2 Million and 100.0% of Fund
Highlights Major Markets Return Summary Ending June 30, 2013
S&P 500 Index MSCI EAFE Index MSCI Emerging Markets Barclays Aggregate Bond Index
Second Quarter 2.9 % -1.0 -8.1 -2.3
Year-To-Date 13.8 % 4.1 -9.6 -2.4
1 Year Ending 6/30/13 20.6 % 18.6 2.9 -0.7
3 Years Ending 6/30/13 18.5 % 10.0 3.4 3.5
5 Years Ending 6/30/13 7.0 % -0.6 -0.4 5.2
10 Years Ending 6/30/13 7.3 % 7.7 13.7 4.5
Investment Approach The Long-Term Pool, as its name implies, represents monies that the Conference does not anticipate spending in the immediate future. Therefore, the Long-Term Pool has a long-term, growth-oriented policy of investing approximately 65% in common stocks. The assets in the Long-Term Pool are invested with Investment Counselors of Maryland (U.S. stocks), State Street Global Advisors (SSgA) S&P 500 Index Portfolio (U.S. stocks), TCW/Metropolitan West Asset Management (bonds), SSgA Barclays Capital Index Portfolio (bonds), the Catholic United Investment Trust (CUIT) International Equity Fund (foreign stocks), and the Aberdeen EAFE Plus Portfolio (foreign stocks). The policy benchmark, used for the Long-Term Pool, represents what the Long-Term Pool would earn if the allocation among asset classes were in line with the policy and the managers performed in line with their respective broad market indices. Performance Commentary During the second quarter of 2013, the Long-Term Pool outperformed its policy benchmark by 0.3 of a percentage point. Over the one year period, the Long-Term Pool gained 12.2%, outperforming its policy benchmark by 0.1 of a percentage point. The Total Fund has fared well against its policy benchmark since inception. During the second quarter, Aberdeen EAFE Plus and TCW/MetWest lagged their respective benchmarks while CUIT International and ICM outperformed.
2
Long-Term Pool
As of June 30, 2013
Long-Term Pool Summary
3
$266.2 Million and 100.0% of Fund
Long-Term Pool
As of June 30, 2013
Long-Term Pool Performance Benchmark: Policy Benchmark
4
$266.2 Million and 100.0% of Fund
Long-Term Pool
As of June 30, 2013
$266.2 Million and 100.0% of Fund
Trailing Period Performance Ending June 30, 2013 Market Value ($)
Inception
% of Portfolio
Policy %
2013 Q2 (%)
100.0
100.0
0.6
6.3
12.2
11.4
5.5
6.4
10.5
Dec-80
0.3
6.2
12.1
12.0
5.7
6.5
10.1
Dec-80
3.8
13.3
17.4
13.7
5.3
6.6
11.6
Dec-80
2.9
13.8
20.6
18.5
7.0
7.3
10.9
Dec-80
2.8
13.5
20.2
18.3
7.3
7.7
10.2
Dec-86
2.9
13.8
20.6
18.5
7.0
7.3
9.9
Dec-86
-0.3
2.8
16.8
10.7
-1.2
5.9
5.4
Mar-96
-1.0
4.1
18.6
10.0
-0.6
7.7
4.3
Mar-96
-3.3
0.3
--
--
--
--
8.0
Jul-12
-3.1
0.0
--
--
--
--
12.0
Jul-12
-2.4
-1.6
3.5
5.8
7.9
6.4
6.8
Sep-98
-2.3
-2.4
-0.7
3.5
5.2
4.5
5.3
Sep-98
-2.4
-2.5
-0.8
3.4
5.2
--
4.8
Feb-05
-2.3
-2.4
-0.7
3.5
5.2
--
4.9
Feb-05
YTD (%)
1 Yr (%)
3 Yrs (%)
5 Yrs (%)
10 Yrs (%)
Return (%)
Since
_
Long-Term Pool
266,176,090
Policy Benchmark U.S. Equity ICM Common Stock
143,796,014
54.0
50.0
50,508,613
19.0
35.0
S&P 500 Index SSgA S&P 500 Index Portfolio
93,287,401
35.0
65.0
S&P 500 Index International Equity CUIT International Equity
38,997,571
14.7
19,167,528
7.2
15.0
MSCI EAFE Index Aberdeen EAFE Plus
19,830,043
7.4
MSCI All Country World ex-U.S. Index Fixed Income TCW/MetWest
83,382,505
31.3
43,404,734
16.3
Barclays Aggregate Bond Index SSgA Barclays Aggregate Bond Index Portfolio
39,977,771
15.0
Barclays Aggregate Bond Index XXXXX
5
35.0
Long-Term Pool
As of June 30, 2013
$266.2 Million and 100.0% of Fund
Calendar Year Performance
2012 (%)
2011 (%)
2010 (%)
2009 (%)
2008 (%)
2007 (%)
2006 (%)
2005 (%)
2004 (%)
2003 (%)
12.0
0.9
12.1
23.6
-25.8
6.4
12.5
3.9
9.1
21.7
12.1
2.1
11.5
20.2
-24.9
6.7
12.7
5.0
9.5
20.6
ICM Common Stock
10.2
0.0
10.8
35.4
-34.8
4.4
12.6
2.4
12.5
28.6
S&P 500 Index
16.0
2.1
15.1
26.5
-37.0
5.5
15.8
4.9
10.9
28.7
16.0
2.1
15.3
27.4
-36.1
5.7
16.0
5.6
10.4
29.6
16.0
2.1
15.1
26.5
-37.0
5.5
15.8
4.9
10.9
28.7
CUIT International Equity
19.7
-13.6
14.1
30.6
-46.2
9.7
26.2
6.9
13.2
33.3
MSCI EAFE Index
17.3
-12.1
7.8
31.8
-43.4
11.2
26.3
13.5
20.2
38.6
Aberdeen EAFE Plus
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
10.0
5.4
12.2
17.5
-1.6
8.0
5.2
2.6
5.2
10.9
4.2
7.8
6.5
5.9
5.2
7.0
4.3
2.4
4.3
4.1
4.1
7.7
6.6
5.9
5.4
6.8
4.2
--
--
--
4.2
7.8
6.5
5.9
5.2
7.0
4.3
--
--
--
_
Long-Term Pool Policy Benchmark U.S. Equity
SSgA S&P 500 Index Portfolio S&P 500 Index International Equity
MSCI All Country World ex-U.S. Index Fixed Income TCW/MetWest Barclays Aggregate Bond Index SSgA Barclays Aggregate Bond Index Portfolio Barclays Aggregate Bond Index XXXXX
6
Long-Term Pool
As of June 30, 2013
Risk Profile Benchmark: Policy Benchmark
7
$266.2 Million and 100.0% of Fund
Long-Term Pool
As of June 30, 2013
Asset Allocation
8
$266.2 Million and 100.0% of Fund
U.S. Equity
ICM Common Stock
As of June 30, 2013
$50.5 Million and 21.8% of Fund
Manager Performance Benchmark: S&P 500 Index
Investment Approach ICM's approach to managing stocks is known as a "value" approach, meaning that the manager seeks out stocks expected to perform well because the current price of the stock is deemed to be lower than what might be considered reasonable given its current financial characteristics. ICM selects and manages 40 to 50 stocks in a typical portfolio that is expected to perform better than the stock market as a whole, as measured by the S&P 500 Index.
Account Information Account Name Account Structure Investment Style Inception Date Account Type Benchmark Universe
ICM Common Stock Separate Account Active 12/31/80 US Stock S&P 500 Index
10
ICM Common Stock
As of June 30, 2013
Risk Profile Benchmark: S&P 500 Index
11
$50.5 Million and 21.8% of Fund
ICM Common Stock
As of June 30, 2013
$50.5 Million and 21.8% of Fund
Manager Analysis Benchmark: S&P 500 Index Characteristics Actual $ Actual % $48,897,227 96.8% $0 0.0% $0 0.0% $0 0.0% $0 0.0% $0 0.0% $1,611,386 3.2% $0 0.0% $50,508,613
US Equity Non-US Equity US Fixed Inc. Non-US Fixed Inc. Alternative Real Estate Cash Other Total
Portfolio 43 93.79 34.72 17.48 3.07 1.85 19.66 1.77 1.04 0.94
Number of Holdings Weighted Avg. Market Cap. ($B) Median Market Cap. ($B) Price To Earnings Price To Book Price To Sales Return on Equity (%) Yield (%) Beta R-Squared
S&P 500 500 102.69 14.56 18.90 3.39 2.13 18.36 2.18 1.00 1.00
_
Top Holdings Weight % BERKSHIRE HATHAWAY 'B' APPLE WELLS FARGO & CO OCEANEERING JP MORGAN CHASE & CO. WALT DISNEY LOWE'S COMPANIES CAPITAL ONE FINL. WAL MART STORES APTARGROUP Total
4.9% 4.7% 4.1% 3.7% 3.6% 3.4% 3.2% 3.2% 3.1% 3.1% 37.0%
Best Performers Portfolio Index Weight % Weight % Return % WELLPOINT HARMAN INTL.INDS. MICROSOFT CISCO SYSTEMS HOSPIRA CAPITAL ONE FINL. WELLS FARGO & CO INTEL JP MORGAN CHASE & CO. WALT DISNEY
2.4% 2.3% 1.6% 1.9% 0.9% 3.1% 4.0% 1.5% 3.5% 3.3% _
0.2% 0.0% 1.8% 0.9% 0.0% 0.3% 1.4% 0.8% 1.4% 0.8%
24.2% 21.8% 21.6% 17.4% 16.7% 14.9% 12.4% 12.0% 11.9% 11.2%
Worst Performers Portfolio Index Weight % Weight % Return % CIMAREX EN. FTI CONSULTING BIG LOTS INTERNATIONAL BUS.MCHS. APPLE WHITING PTL. COVIDIEN SIEMENS SPN.ADR 1:1 NUCOR CH ROBINSON WWD.
1.3% 1.6% 1.2% 2.3% 4.6% 1.9% 0.0% 0.0% 1.7% 1.3% _
_
12
1.4% 2.6%
0.1% 0.1%
-13.7% -12.7% -10.6% -10.0% -9.8% -9.3% -7.0% -6.0% -5.3% -4.7%
ICM Common Stock
As of June 30, 2013
Sector Attribution Benchmark: S&P 500 Index
13
$50.5 Million and 21.8% of Fund
SSgA S&P 500 Index Portfolio
As of June 30, 2013
$93.3 Million and 40.2% of Fund
Manager Performance Benchmark: S&P 500 Index
Investment Approach State Street Global Advisors (SSgA) invests in a broad sample of all stocks of the S&P 500 that are not prohibited by the Conference's socially responsible investment guidelines. SSgA's role is to provide broad diversification while matching the rate of return of the S&P 500 Index. SSgA reported that 7.6% of the S&P 500 Index is excluded from the portfolio as a result of the social screens that are employed.
Account Information Account Name Account Structure Investment Style Inception Date Account Type Benchmark Universe
SSgA S&P 500 Index Portfolio Separate Account Passive 12/31/86 US Stock S&P 500 Index
14
SSgA S&P 500 Index Portfolio
As of June 30, 2013
Risk Profile Benchmark: S&P 500 Index
15
$93.3 Million and 40.2% of Fund
(This page left blank intentionally)
International Equity
CUIT International Equity
As of June 30, 2013
$19.2 Million and 8.3% of Fund
Manager Performance Benchmark: MSCI EAFE Index
Investment Approach The CUIT International Equity Fund is a socially screened international stock fund established and overseen by Christian Brothers Investment Services (CBIS). Historically, Capital Guardian, a Los Angeles-based firm, was the sole manager of the CUIT International Fund. Effective April 2, 2001, CBIS added a second investment manager, Jarislowsky Fraser Limited, to the CUIT International Fund, with the objective of managing 40% of the Fund. Effective February 1, 2005, Causeway Capital Management replaced Capital Guardian as a manager for the CUIT International Equity Fund with the objective of managing approximately 50% of the Fund. In May of 2007 Principal Global Investors was hired to replace Jarislowsky Fraser Limited. Principal manages approximately 50% of the Fund. CBIS has decided to allow both managers to extend their portfolio holdings beyond the developed markets of the MSCI EAFE Index and Canada and to selectively invest in emerging markets, subject to a maximum allocation of 15%.
Account Information Account Name Account Structure Investment Style Inception Date Account Type Benchmark Universe
CUIT International Equity Commingled Fund Active 3/31/96 Non-U.S. Stock - All MSCI EAFE Index
18
CUIT International Equity
As of June 30, 2013
Risk Profile Benchmark: MSCI EAFE Index
19
$19.2 Million and 8.3% of Fund
CUIT International Equity
As of June 30, 2013
$19.2 Million and 8.3% of Fund
Manager Analysis Benchmark: MSCI EAFE Index Characteristics MSCI EAFE Gross 304 908 41.71 54.53 8.66 7.62 16.38 17.47 2.40 2.07 1.53 1.66 15.64 13.49 2.82 3.15 1.03 1.00 0.98 1.00
Portfolio Number of Holdings Weighted Avg. Market Cap. ($B) Median Market Cap. ($B) Price To Earnings Price To Book Price To Sales Return on Equity (%) Yield (%) Beta R-Squared
Actual $ Actual % $5,745 0.03% $18,596,849 97.02% $0 0.00% $0 0.00% $0 0.00% $0 0.00% $564,934 2.95% $0 0.00% $19,167,528
US Equity Non-US Equity US Fixed Inc. Non-US Fixed Inc. Alternative Real Estate Cash Other Total _
Weight % TOYOTA MOTOR CASH - USD REED ELSEVIER (AMS) SIEMENS AKZO NOBEL KDDI NESTLE 'R' JGC HSBC HOLDINGS SAP Total
Size Distribution
Sector Distribution
Top Holdings
3.4% 2.9% 1.7% 1.7% 1.5% 1.4% 1.4% 1.4% 1.3% 1.3% 18.0%
MSCI EAFE Portfolio Gross INDUSTRY SECTOR DISTRIBUTION (% Equity) Energy Materials Industrials Consumer Discretionary Consumer Staples Health Care Financials Information Technology Telecommunications Utilities
_
20
8.92 11.45 15.83 12.80 10.26 6.50 19.49 4.73 4.55 2.46
6.96 7.98 12.48 11.71 11.76 10.49 25.02 4.57 5.20 3.79
Portfolio COMPANY SIZE DISTRIBUTION Weighted Ave. Market Cap. ($B) Median Market Cap. ($B) Large Cap. (%) Medium/Large Cap. (%) Medium Cap. (%) Medium/Small Cap. (%) Small Cap. (%)
41.71 8.66 18.07 28.46 29.82 14.05 9.60
CUIT International Equity
As of June 30, 2013
$19.2 Million and 8.3% of Fund
Manager Analysis Benchmark: MSCI EAFE Index Versus MSCI EAFE Gross - Quarter Ending June 30, 2013
Versus MSCI EAFE Gross - Quarter Ending June 30, 2013 Manager Ending Allocation (USD)
Index Ending Allocation (USD)
Manager
Index
Return (USD)
Return (USD)
Manager Ending Allocation (USD)
Index Ending Allocation (USD)
Manager
Index
Return (USD)
Return (USD)
_
_
AsiaPacific
Americas Brazil*
0.9%
0.0%
-17.2%
-18.7%
Canada
5.4%
0.0%
-6.5%
-6.1%
Chile*
0.0%
0.0%
-15.7%
-12.0%
--
--
Colombia*
Australia
2.4%
8.0%
-18.7%
-13.9%
China*
1.5%
0.0%
-10.2%
-7.8%
Hong Kong
2.2%
3.0%
-9.7%
-4.7%
India*
0.2%
0.0%
-14.1%
-9.4%
Indonesia*
0.3%
0.0%
-5.3%
-8.6%
Mexico*
0.6%
0.0%
-3.5%
-9.3%
Peru*
0.1%
0.0%
-15.0%
-17.7%
Japan
18.2%
22.6%
0.3%
4.4%
United States
0.0%
0.0%
29.1%
0.6%
Korea*
1.8%
0.0%
-14.9%
-7.8%
Total-Americas
7.2%
0.0%
-7.9%
--
Malaysia*
0.3%
0.0%
0.1%
1.5%
New Zealand
0.4%
0.1%
-6.7%
-10.4%
Europe Austria
0.5%
0.3%
4.8%
-2.5%
Philippines*
0.0%
0.0%
-24.2%
-11.1%
Belgium
0.9%
1.1%
-5.3%
-4.4%
Singapore
1.4%
1.7%
-5.9%
-6.3%
--
--
Taiwan*
0.8%
0.0%
-4.8%
-2.3%
0.5%
0.0%
-0.9%
-11.4%
30.1%
35.4%
-4.4%
-1.7%
--
--
0.0%
0.5%
--
-3.7%
Czech Republic* Denmark
1.1%
1.1%
1.4%
-3.9%
Thailand*
Finland
0.2%
0.8%
-3.7%
1.3%
Total-AsiaPacific
France
7.3%
9.5%
0.2%
3.6%
Other
Germany
9.1%
8.7%
-2.4%
3.3%
Egypt*
Greece
0.0%
0.1%
--
-8.4%
Israel
--
--
--
--
Ireland
1.8%
0.3%
15.2%
-1.6%
South Africa*
0.6%
0.0%
-9.6%
-7.2%
Italy
2.4%
2.0%
-0.7%
1.3%
Turkey*
0.2%
0.0%
-21.9%
-17.1%
Netherlands
4.7%
2.6%
-1.6%
2.7%
Total-Other
0.8%
0.5%
-13.1%
-3.7%
Norway
0.4%
0.8%
-14.4%
-5.1%
Totals
Poland*
0.1%
0.0%
-9.4%
-5.5%
Developed
88.4%
100.0%
-2.9%
-0.7%
0.0%
Emerging*
8.6%
0.0%
-10.6%
--
0.0% 2.9%
Hungary*
Portugal
0.1%
0.2%
0.5%
Morocco*
Russia*
0.5%
0.0%
-9.4%
-6.7%
Other
Spain
1.1%
2.8%
-4.5%
0.0%
Cash
Sweden
1.8%
3.1%
-7.3%
Switzerland
8.1%
9.2%
-3.1%
0.1%
United Kingdom
18.7%
21.6%
-4.3%
-2.2%
Total-Europe
58.9%
64.1%
-2.5%
-0.1%
-0.0% _
-5.2%
_
21
Aberdeen EAFE Plus
As of June 30, 2013
$19.8 Million and 8.6% of Fund
Manager Performance Benchmark: MSCI All Country World ex-U.S. Index
Investment Approach The objective of the Aberdeen Delaware Business Trust (DBT) EAFE Plus Ethical Fund is to achieve a total return in excess of the MSCI All Country Ex U.S. Index through investing in a diversified portfolio of international equities while taking into consideration the generally accepted principles of the Catholic Church in selecting investments for the portfolio. The fund will avoid investing in any companies which conflict with those principles. Typically, most investments will be made in the developed international markets, but up to 30% of the fund may be invested in emerging stock markets as defined by the International Finance Corporation (IFCat any point in time (prior to 2010, the maximum emerging markets exposure was 20%). The Fund employs a bottom up value driven process, and utilizes 3 major screening criteria: 1) Quality, 2) Price, and 3) Ethical screening metrics.
Account Information Account Name Account Structure Investment Style Inception Date Account Type Benchmark Universe
Aberdeen EAFE Plus Commingled Fund Passive 7/31/12 Non-U.S. Stock - All MSCI All Country World ex-U.S. Index
22
Aberdeen EAFE Plus
As of June 30, 2013
$19.8 Million and 8.6% of Fund
Manager Analysis Benchmark: MSCI All Country World ex-U.S. Index
Characteristics Portfolio Number of Holdings Weighted Avg. Market Cap. ($B) Median Market Cap. ($B) Price To Earnings Price To Book Price To Sales Return on Equity (%) Yield (%) Beta (holdings; global) R-Squared
Top Holdings
4.1% 3.9% 3.6% 3.6% 3.5% 3.2% 3.0% 2.9% 2.8% 2.8% 33.2%
_
23
Actual % 0.00% 97.22% 0.00% 0.00% 0.00% 0.00% 2.78% 0.00%
_
Size Distribution MSCI ACWI Portfolio ex USA
INDUSTRY SECTOR DISTRIBUTION (% Equity) Energy Materials Industrials Consumer Discretionary Consumer Staples Health Care Financials Information Technology Telecommunications Utilities
Actual $ $0 $19,278,232 $0 $0 $0 $0 $551,830 $0 $19,830,063
US Equity Non-US Equity US Fixed Inc. Non-US Fixed Inc. Alternative Real Estate Cash Other Total
Sector Distribution Weight %
TAIWAN SEMICON.SPN.ADR 1:5 BRITISH AMERICAN TOBACCO ZURICH INSURANCE GROUP VODAFONE GROUP CENTRICA SAMSUNG ELTN.PREF. TENARIS ADS. 1:2 STANDARD CHARTERED SHIN-ETSU CHEMICAL CASH - USD Total
52 41.59 28.41 16.36 2.40 2.21 16.43 3.44 0.96
MSCI ACWI ex USA 1,823 48.02 6.13 17.09 2.20 1.83 15.05 3.07 0.96 1.00
9.03 7.57 12.72 2.12 13.69 2.52 23.68 10.67 9.75 5.47
9.33 8.63 10.74 10.49 10.66 7.98 26.42 6.57 5.62 3.53
Portfolio COMPANY SIZE DISTRIBUTION Weighted Ave. Market Cap. ($B) Median Market Cap. ($B) Large Cap. (%) Medium/Large Cap. (%) Medium Cap. (%) Medium/Small Cap. (%) Small Cap. (%)
41.59 28.41 17.77 53.69 18.72 5.72 4.10
Aberdeen EAFE Plus
As of June 30, 2013
$19.8 Million and 8.6% of Fund
Manager Analysis Benchmark: MSCI All Country World ex-U.S. Index Versus MSCI ACWI ex USA - Quarter Ending June 30, 2013 Manager Ending Allocation (USD)
Index Ending Allocation (USD)
Versus MSCI ACWI ex USA - Quarter Ending June 30, 2013
Manager
Index
Return (USD)
Return (USD)
Manager Ending Allocation (USD)
_
Manager
Index
Return (USD)
Return (USD)
_
Americas
AsiaPacific
Brazil*
3.9%
2.5%
-21.2%
-17.2%
Canada
5.2%
7.2%
-5.5%
-7.3%
Chile*
0.0%
0.4%
--
Colombia*
0.0%
0.3%
Mexico*
2.5%
Peru*
0.0%
Australia
1.4%
5.7%
-1.9%
-13.9%
China*
0.0%
4.0%
0.8%
-6.5%
-14.6%
Hong Kong
3.5%
2.1%
-2.0%
-4.7%
--
-13.1%
India*
0.0%
1.5%
--
-5.5%
1.2%
-8.4%
-10.8%
Indonesia*
0.0%
0.7%
--
-5.8%
0.1%
--
-27.4%
Japan
11.1%
16.0%
0.2%
4.4%
--
--
Korea*
3.2%
3.2%
-1.7%
-10.0%
-12.1%
-10.6%
Malaysia*
0.0%
0.9%
--
6.1%
New Zealand
0.0%
0.1%
--
-10.4%
United States Total-Americas
Index Ending Allocation (USD)
11.6%
11.7%
Europe Austria
0.0%
0.2%
--
-2.5%
Philippines*
0.0%
0.2%
--
-8.2%
Belgium
0.0%
0.8%
--
-4.4%
Singapore
6.9%
1.2%
-2.9%
-6.3%
Czech Republic*
0.0%
0.1%
--
-6.5%
Taiwan*
5.8%
2.6%
8.6%
1.6%
Denmark
0.0%
0.8%
--
-3.9%
Thailand*
0.0%
0.6%
--
-7.3%
Finland
0.0%
0.5%
--
1.3%
Total-AsiaPacific
31.9%
38.8%
0.5%
-3.0%
France
7.1%
6.7%
-1.8%
3.6%
Other
Germany
1.5%
6.1%
1.6%
3.3%
Egypt*
0.0%
0.1%
--
-7.3%
Greece
0.0%
0.1%
--
-8.4%
Israel
0.0%
0.4%
--
-3.7%
Hungary*
0.0%
0.1%
--
13.1%
Morocco*
0.0%
0.0%
--
-2.7%
Ireland
0.0%
0.2%
--
-1.6%
South Africa*
1.0%
1.6%
--
-7.2%
Italy
2.8%
1.4%
-6.2%
1.3%
Turkey*
0.0%
0.4%
--
-15.3%
Luxembourg
3.0%
0.0%
0.1%
-2.9%
Total-Other
1.0%
2.4%
--
-8.2%
Netherlands
0.0%
1.8%
--
2.7%
Totals
Norway
0.0%
0.6%
--
-5.1%
Developed
80.8%
78.0%
-3.1%
-1.4%
Poland*
0.0%
0.3%
--
-4.5%
Emerging*
16.4%
22.0%
-4.9%
-7.9%
Portugal
0.0%
0.1%
--
0.0%
Other
0.0%
Russia*
0.0%
1.3%
--
-8.2%
Cash
2.8%
Spain
1.6%
2.0%
-3.3%
0.0%
Sweden
4.7%
2.2%
-6.6%
-5.2%
Switzerland
6.1%
6.5%
-2.2%
0.1%
United Kingdom
26.0%
15.3%
-3.9%
-2.2%
Total-Europe
52.7%
47.1%
-3.4%
-0.4%
-0.0% _
_
24
Fixed Income
TCW/MetWest
As of June 30, 2013
$43.4 Million and 18.7% of Fund
Manager Performance Benchmark: Barclays Aggregate Bond Index
Investment Approach TCW/Metropolitan West Asset Management (MetWest) uses all sectors of the broad bond market, including high yield and foreign securities, but is limited to U.S. dollar-denominated securities such as Yankee and eurodollar bonds. The manager makes limited use of derivative securities for hedging purposes. The manager controls interest rate risk in client portfolios by managing the portfolio's duration within one year of the Barclays Aggregate Bond Index.
Account Information Account Name Account Structure Investment Style Inception Date Account Type Benchmark Universe
TCW/MetWest Separate Account Active 9/30/98 U.S. Fixed Income Barclays Aggregate Bond Index
26
TCW/MetWest
As of June 30, 2013
Risk Profile Benchmark: Barclays Aggregate Bond Index
27
$43.4 Million and 18.7% of Fund
TCW/MetWest
As of June 30, 2013
$43.4 Million and 18.7% of Fund
Manager Analysis Benchmark: Barclays Aggregate Bond Index
Quality Ratings
Characteristics
Sectors
28
SSgA Barclays Aggregate Bond Index Portfolio
As of June 30, 2013
$40.0 Million and 17.2% of Fund
Manager Performance Benchmark: Barclays Aggregate Bond Index
Investment Approach The objective of the State Street Global Advisors (SSgA) Socially Responsible Aggregate Bond Fund is to match the total rate of return of the Barclays Aggregate Bond Index during a calendar year. The Fund invests in a well-diversified portfolio that is representative of the domestic investment grade bond market. The portfolio is comprised of the Screened Credit Index Common Trust Fund, Passive U.S. Government Bond Index Common Trust Fund, Asset-Backed/Commercial Mortgage Backed Index Common Trust Fund, and the Mortgage Backed Index Common Trust Fund. The weights of each underlying fund are rebalanced at the end of every month to match the weights of the Aggregate Index.
Account Information Account Name Account Structure Investment Style Inception Date Account Type Benchmark Universe
SSgA Barclays Aggregate Bond Index Portfolio Separate Account Passive 2/28/05 U.S. Fixed Income Barclays Aggregate Bond Index
29
SSgA Barclays Aggregate Bond Index Portfolio
As of June 30, 2013
Risk Profile Benchmark: Barclays Aggregate Bond Index
30
$40.0 Million and 17.2% of Fund
Pension Fund
Pension Fund
As of June 30, 2013
$50.27 Million and 100.0% of Fund
Highlights Performance Commentary The Pension Fund outperformed its policy benchmark by 0.4 percentage points during the second quarter. Over the one year period, the Pension Fund matched its policy benchmark. The relatively small size of the Pension Fund puts constraints on the number of securities that its underlying managers can hold in their respective portfolios. At times, differences in holdings and weightings may cause the Pension Fund portfolios to produce returns that slightly differ from those corresponding portfolios in the Long-Term Pool.
32
Pension Fund
As of June 30, 2013
Pension Fund Summary
33
$50.27 Million and 100.0% of Fund
Pension Fund
As of June 30, 2013
Pension Fund Performance Benchmark: Policy Benchmark
34
$50.27 Million and 100.0% of Fund
Pension Fund
As of June 30, 2013
$50.27 Million and 100.0% of Fund
Trailing Period Performance Ending June 30, 2013 Market Value ($)
Inception
% of Portfolio
Policy %
2013 Q2 (%)
100.0
100.0
0.7
6.3
12.1
11.3
5.5
6.4
8.7
Jan-89
0.3
6.2
12.1
12.0
5.7
6.5
8.5
Jan-89
3.8
13.3
17.5
13.9
5.3
6.7
10.2
Dec-90
2.9
13.8
20.6
18.5
7.0
7.3
9.5
Dec-90
2.8
13.5
20.1
18.2
7.3
7.4
8.1
Oct-95
2.9
13.8
20.6
18.5
7.0
7.3
7.9
Oct-95
-0.3
2.8
16.8
10.7
-1.1
6.0
5.4
Mar-96
-1.0
4.1
18.6
10.0
-0.6
7.7
4.3
Mar-96
-3.3
0.3
--
--
--
--
8.0
Jul-12
-3.1
0.0
--
--
--
--
12.0
Jul-12
-2.1
-1.4
3.8
5.7
8.2
6.7
6.7
Sep-98
-2.3
-2.4
-0.7
3.5
5.2
4.5
5.3
Sep-98
-0.8
-1.0
0.8
4.0
5.4
--
4.9
Feb-05
-2.3
-2.4
-0.7
3.5
5.2
--
4.9
Feb-05
YTD (%)
1 Yr (%)
3 Yrs (%)
5 Yrs (%)
10 Yrs (%)
Return (%)
Since
_
Pension Fund
50,268,668
Policy Benchmark U.S. Equity ICM Common Stock
27,120,460
54.0
9,061,277
18.0
50.0
S&P 500 Index SSgA S&P 500 Index Portfolio
18,059,184
35.9
S&P 500 Index International Equity CUIT International Equity
7,541,167
15.0
4,113,810
8.2
15.0
MSCI EAFE Index Aberdeen EAFE Plus
3,427,357
6.8
MSCI All Country World ex-U.S. Index Fixed Income TCW/MetWest
15,607,041
31.0
8,590,546
17.1
Barclays Aggregate Bond Index SSgA Barclays Aggregate Bond Index Portfolio
7,016,495
14.0
Barclays Aggregate Bond Index XXXXX
35
35.0
Pension Fund
As of June 30, 2013
$50.27 Million and 100.0% of Fund
Calendar Year Performance
2012 (%)
2011 (%)
2010 (%)
2009 (%)
2008 (%)
2007 (%)
2006 (%)
2005 (%)
2004 (%)
2003 (%)
11.6
0.9
11.1
24.3
-25.2
6.4
12.4
3.7
9.5
21.2
12.1
2.1
11.5
20.2
-24.9
6.7
12.7
5.0
9.5
20.6
ICM Common Stock
10.2
0.3
10.9
35.5
-35.4
4.4
12.5
3.1
14.1
27.5
S&P 500 Index
16.0
2.1
15.1
26.5
-37.0
5.5
15.8
4.9
10.9
28.7
15.4
2.2
15.4
27.3
-35.9
5.5
15.7
4.8
10.1
28.8
16.0
2.1
15.1
26.5
-37.0
5.5
15.8
4.9
10.9
28.7
CUIT International Equity
19.7
-13.6
14.1
30.6
-46.3
9.5
27.7
6.8
13.2
32.1
MSCI EAFE Index
17.3
-12.1
7.8
31.8
-43.4
11.2
26.3
13.5
20.2
38.6
Aberdeen EAFE Plus
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
9.7
6.0
12.4
18.2
-0.5
7.9
5.2
2.5
5.2
11.7
4.2
7.8
6.5
5.9
5.2
7.0
4.3
2.4
4.3
4.1
4.1
7.8
6.4
5.7
5.2
6.8
4.1
--
--
--
4.2
7.8
6.5
5.9
5.2
7.0
4.3
--
--
--
_
Pension Fund Policy Benchmark U.S. Equity
SSgA S&P 500 Index Portfolio S&P 500 Index International Equity
MSCI All Country World ex-U.S. Index Fixed Income TCW/MetWest Barclays Aggregate Bond Index SSgA Barclays Aggregate Bond Index Portfolio Barclays Aggregate Bond Index XXXXX
36
Pension Fund
As of June 30, 2013
Risk Profile Benchmark: Policy Benchmark
37
$50.27 Million and 100.0% of Fund
Pension Fund
As of June 30, 2013
Asset Allocation
38
$50.27 Million and 100.0% of Fund
Short-Term Pool
Short-Term Pool
As of June 30, 2013
Short-Term Pool Performance Benchmark: Hewitt EnnisKnupp STIF Index
40
$4.0 Million* and 100.0% of Fund
Short-Term Pool
As of June 30, 2013
$4.0 Million* and 100.0% of Fund
Short-Term Pool Performance Benchmark: Hewitt EnnisKnupp STIF Index Ending June 30, 2013 Market Value ($)
Inception
% of Portfolio
2013 Q2 (%)
YTD (%)
1 Yr (%)
3 Yrs (%)
5 Yrs (%)
10 Yrs (%)
Return (%)
Since
100.0
0.0
0.0
0.1
0.0
0.3
1.8
5.3
Dec-80
0.0
0.0
0.1
0.1
0.3
1.8
5.2
Dec-80
_
Short-Term Pool
542,568
Hewitt EnnisKnupp STIF Index XXXXX
Ending June 30, 2013 2012 (%)
2011 (%)
2010 (%)
2009 (%)
2008 (%)
2007 (%)
2006 (%)
2005 (%)
2004 (%)
2003 (%)
0.0
0.1
0.1
0.4
2.8
5.4
5.1
3.1
1.2
1.0
0.1
0.1
0.1
0.4
2.6
5.3
5.0
2.8
1.2
1.2
_
Short-Term Pool Hewitt EnnisKnupp STIF Index XXXXX
41
(This page left blank intentionally)
Appendix
Long-Term Pool
Fee Schedule Account
Fee Schedule
U.S. Equity
No Fee
Market Value As of 6/30/2013
% of Portfolio
Estimated Annual Estimated Annual Fee ($) Fee (%)
$143,796,014
54.0%
--
--
_
ICM Common Stock
0.42% of Assets
$50,508,613
19.0%
$213,651
0.42%
SSgA S&P 500 Index Portfolio
0.07% of Assets
$93,287,401
35.0%
$67,167
0.07%
No Fee
$38,997,571
14.7%
--
--
CUIT International Equity
1.08% of Assets
$19,167,528
7.2%
$207,009
1.08%
Aberdeen EAFE Plus
0.80% of Assets
$19,830,043
7.4%
$158,640
0.80%
No Fee
$83,382,505
31.3%
--
--
TCW/MetWest
0.30% of Assets
$43,404,734
16.3%
$131,950
0.30%
SSgA Barclays Aggregate Bond Index Portfolio
0.11% of Assets
$39,977,771
15.0%
$43,976
0.11%
$266,176,090
100.0%
$822,394
0.31%
International Equity
Fixed Income
Investment Management Fee XXXXX
44
Pension Plan
Fee Schedule Account
Fee Schedule
U.S. Equity
No Fee
Market Value As of 6/30/2013
% of Portfolio
Estimated Annual Estimated Annual Fee ($) Fee (%)
$27,120,460
54.0%
--
--
_
ICM Common Stock
0.44% of Assets
$9,061,277
18.0%
$39,688
0.44%
SSgA S&P 500 Index Portfolio
0.07% of Assets
$18,059,184
35.9%
$13,003
0.07%
No Fee
$7,541,167
15.0%
--
--
CUIT International Equity
1.08% of Assets
$4,113,810
8.2%
$44,429
1.08%
Aberdeen EAFE Plus
0.80% of Assets
$3,427,357
6.8%
$27,419
0.80%
$15,607,041
31.0%
--
--
International Equity
Fixed Income
No Fee
TCW/MetWest
0.35% of Assets
$8,590,546
17.1%
$30,067
0.35%
SSgA Barclays Aggregate Bond Index Portfolio
0.11% of Assets
$7,016,495
14.0%
$7,718
0.11%
$50,268,668
100.0%
$162,324
0.32%
Investment Management Fee XXXXX
45
Market Returns Second Quarter Domestic Stock Indices: Dow Jones US Total Stock Index S&P 500 Index Russell 3000 Index Russell 1000 Value Index Russell 1000 Growth Index Russell MidCap Value Index Russell MidCap Growth Index Russell 2000 Value Index Russell 2000 Growth Index Domestic Bond Indices: Barclays Capital Aggregate Index Barclays Capital Govt/Credit Index Barclays Capital Long Govt/Credit Index Barclays Capital 1-3 Year Govt/Credit Index Barclays Capital U.S. MBS Index Barclays Capital High Yield Index Barclays Capital Universal Index Real Estate Indices: NCREIF Property Index NCREIF ODCE Index Dow Jones Real Estate Securities Index FTSE NAREIT US Real Estate Index Foreign/Global Stock Indices: MSCI All Country World Index MSCI All Country World IMI MSCI All Country World ex-U.S. Index MSCI All Country World ex-U.S. IMI MSCI All Country World ex-U.S. Small Cap Index MSCI EAFE Index MSCI EAFE IMI MSCI EAFE Index (in local currency) MSCI Emerging Markets IMI Foreign Bond Indices: Citigroup World Gov't Bond Index Citigroup Hedged World Gov't Bond Index Cash Equivalents: Treasury Bills (30-Day) Hewitt EnnisKnupp STIF Index Inflation Index: Consumer Price Index
1-Year
Annualized Periods Ending 6/30/13 3-Year 5-Year 10-Year
15-Year
2.8 2.9 2.7 3.2 2.1 1.7 2.9 2.5 3.7
21.5 20.6 21.5 25.3 17.1 27.7 22.9 24.8 23.7
18.7 18.5 18.6 18.5 18.7 19.5 19.5 17.3 20.0
7.4 7.0 7.2 6.7 7.5 8.9 7.6 8.6 8.9
8.1 7.3 7.8 7.8 7.4 10.9 9.9 9.3 9.6
4.8 4.2 4.7 5.5 3.1 8.6 6.3 7.8 4.8
-2.3 -2.5 -6.1 -0.1 -2.0 -1.4 -2.4
-0.7 -0.6 -4.7 0.7 -1.1 9.5 0.2
3.5 3.9 7.0 1.3 2.5 10.7 4.1
5.2 5.3 8.5 2.5 4.8 10.9 5.5
4.5 4.4 6.2 2.9 4.7 8.9 4.8
5.5 5.6 7.0 4.1 5.5 6.9 5.7
-3.7 -1.3 -2.1
-11.1 7.7 10.2
-13.9 18.0 18.5
--1.1 6.8 7.7
-6.0 10.8 11.0
-6.9 9.6 9.7
-0.4 -0.5 -3.1 -3.3 -4.4 -1.0 -1.2 1.2 -8.0
16.6 17.1 13.6 13.9 15.9 18.6 18.9 24.9 3.7
12.4 12.6 8.0 8.1 9.2 10.0 10.3 9.0 3.4
2.3 2.8 -0.8 -0.4 2.6 -0.6 -0.3 1.2 0.2
7.6 8.0 8.6 9.0 11.3 7.7 8.0 6.1 13.8
4.0 4.5 4.6 4.9 7.4 3.6 4.0 2.1 8.7
-3.4 -1.3
-5.7 3.0
2.6 3.1
2.6 4.5
4.8 4.0
5.3 4.9
0.0 0.0
0.0 0.2
0.0 0.2
0.1 0.5
1.3 2.0
2.1 2.8
0.3
1.8
2.3
1.3
2.4
2.4
46
Market Environment Second Quarter 2013
To protect the confidential and proprietary information included in this material, it may not be disclosed or provided to any third parties without the approval of Aon Hewitt.
Market Highlights SHORT TERM RETURNS AS OF 06/30/2013
30%
24.21%
25%
20.60%
18.62%
20% 15%
9.50%
10% 5%
3.09%
2.91%
2.87%
0% -0.98%
-5% -10%
Second Quarter 2013
-2.33%
One-Year
-0.67%
-1.99% -5.71%
-8.08%
-8.18%
-1.43%
-6.33% -9.45%
-15% S&P 500
Russell 2000
MSCI EAFE
Source: Russell, MSCI, Barclays, DJ-UBS
MSCI Emerging Markets
LONG TERM ANNUALIZED RETURNS AS OF 06/30/2013
7.01%
7.30%
8.77%
Barclays Long Gov't
Barclays Long Credit
Barclays High Dow Jones-UBS Yield Commodity
13.66%
15% 10%
Barclays Aggregate
-8.01%
9.53%
7.67%
7.50% 5.20%
5%
4.53%
10.94%
9.15% 6.08%
8.91% 6.25% 2.39%
0% -0.63%
-5% -10%
Five-Year
-0.43%
Ten-Year -11.61%
-15% S&P 500 Source: Russell, MSCI, Barclays, DJ-UBS
Russell 2000
MSCI EAFE
MSCI Emerging Markets
Barclays Aggregate
2
Barclays Long Gov't
Barclays Long Credit
Barclays High Dow Jones-UBS Yield Commodity
Market Highlights Returns of the Major Capital Markets Periods Ending 06/30/2013
Equity MSCI All Country World IMI MSCI All Country World Dow Jones U.S. Total Stock Market Russell 3000 S&P 500 Russell 2000 MSCI All Country World ex-U.S. IMI MSCI All Country World ex-U.S. MSCI EAFE MSCI EAFE (100% Hedged) MSCI EAFE (Local Currency) MSCI Emerging Markets Fixed Income Barclays Global Aggregate Barclays Aggregate Barclays Long Gov't Barclays Long Credit Barclays Long Gov't/Credit Barclays US TIPS Barclays High Yield SSB Non-U.S. WGBI JP Morgan EMBI Global (Emerging Markets) Commodities Dow Jones-UBS Commodity Goldman Sachs Commodity Hedge Funds HFRI Fund-Weighted Composite2 HFRI Fund of Funds2 Real Estate NAREIT U.S. Equity REITS NCREIF ODCE3 Private Equity Thomson Reuters VentureXpert4 Infrastructure Macquarie Global Infrastructure - North America
Second Quarter
Year-toDate
-0.47% -0.42% 2.79% 2.69% 2.91% 3.09% -3.27% -3.12% -0.98% 0.00% 1.21% -8.08%
1-Year
3-Year1
5-Year1
10-Year1
6.40% 6.05% 14.18% 14.06% 13.82% 15.86% 0.18% -0.04% 4.11% 8.79% 11.01% -9.57%
17.08% 16.57% 21.46% 21.46% 20.60% 24.21% 13.91% 13.63% 18.62% 20.96% 24.93% 2.87%
12.60% 12.36% 18.70% 18.63% 18.45% 18.67% 8.13% 7.99% 10.04% 5.91% 8.97% 3.38%
2.79% 2.30% 7.41% 7.25% 7.01% 8.77% -0.41% -0.80% -0.63% -1.23% 1.16% -0.43%
8.02% 7.59% 8.07% 7.81% 7.30% 9.53% 8.93% 8.62% 7.67% 3.84% 6.07% 13.66%
-2.78% -2.33% -5.71% -6.33% -6.11% -7.05% -1.43% -3.44% -6.06%
-4.82% -2.45% -7.84% -8.01% -7.97% -7.39% 1.42% -7.14% -8.22%
-2.17% -0.67% -8.18% -1.99% -4.69% -4.77% 9.50% -5.72% 1.25%
3.55% 3.53% 6.18% 7.55% 7.01% 4.63% 10.75% 2.57% 7.85%
3.68% 5.20% 7.50% 9.15% 8.50% 4.40% 10.94% 2.55% 8.63%
4.79% 4.53% 6.08% 6.25% 6.22% 5.19% 8.91% 4.78% 8.85%
-9.45% -5.93%
-10.47% -5.41%
-8.01% 2.04%
-0.26% 4.73%
-11.61% -15.22%
2.39% 1.41%
-0.02% -0.03%
3.59% 3.28%
8.29% 7.18%
4.92% 2.97%
2.54% -0.63%
6.17% 3.44%
-1.57% 3.91%
6.49% 6.71%
9.42% 12.24%
18.18% 14.98%
7.57% -0.14%
10.88% 6.95%
3.33%
13.18%
13.18%
13.25%
4.99%
13.16%
-2.94%
8.71%
9.42%
17.01%
4.93%
11.08%
MSCI Indices and NCREIF ODCE show net retuns. MSCI EAFE (100% Hedged) shows price return. All other indices show total returns. 1 Periods are annualized. 2 Latest 5 months of HFR data are estimated by HFR and may change in the future. 3 Second quarter results are preliminary. 4 Benchmark is as of 12/31/2012.
3
Global Equity Markets GLOBAL MSCI IMI INDEX RETURNS AS OF 06/30/2013 50% Second Quarter 2013
One-Year
40% 30% 23.27%
21.28%
20.57% 17.08%
20%
13.91%
13.57%
13.35%
11.27%
10% 3.40%
2.59%
3.66%
2.93%
0.46%
0% -0.47%
-1.89%
-3.27%
-10%
-3.10% -7.93%
-8.01% -11.56%
-20% ACWI IMI
50.8% ACWI ex-U.S. IMI
49.2% USA IMI
7.8% UK IMI
8.3% Japan IMI
3.8% Canada IMI
0.2% Israel IMI
14.9% Europe exUK IMI
4.6% 11.2% Pacific exEmerging Japan IMI Markets IMI
Source: MSCI
 Global equity markets were volatile over the quarter. Members of the Federal Reserve began to openly discuss tapering QE in the second half of the year, triggering weakness in U.S. equity prices towards the end of the quarter. Continued concerns around the strength of the economic recovery outside of the United Stated negatively impacted international equity markets. The USA, Europe ex-UK, and Japan were the only markets to post positive, albeit muted, returns.  Japan proved to be the best performing region as the improving trend in Japanese economic data continued. The worst performing region was Pacific ex-Japan IMI.
4
Global Equity Markets
MSCI ALL COUNTRY WORLD EX-U.S. IMI INDEX GEOGRAPHIC ALLOCATION AS OF 06/30/2013 Europe ex-UK 29.3%
 The two exhibits on this slide illustrate the percentage that each country/region represents of the global equity market as measured by the MSCI All Country World IMI Index and the MSCI All Country World ex-U.S. IMI Index.
Israel 0.4% Latin America 4.2%
Japan 16.4% Emerging Markets 22.1%
Pacific ex-Japan 9.1% Canada 7.4% Source: MSCI
5
UK 15.3%
Asia 14.2% Eastern Europe, Middle East & Africa 3.7%
U.S. Equity Markets RUSSELL STYLE RETURNS AS OF 06/30/2013 50% Second Quarter 2013 One-Year 40%
RUSSELL GICS SECTOR RETURNS AS OF 06/30/2013 50% Second Quarter 2013 One-Year 40% 33.83%
31.17% 27.40%
30%
25.20%
17.53%
20%
24.29%
18.38% 13.08% 5.18%
2.69%
4.06%
8.82%
0.97%
2.18%
20%
23.67%
14.85%
1.99%
1.49%
10%
0% -0.84%
-10%
24.77%
22.88%
21.46%
13.08%
8.72%
7.27%
10%
27.65%
30%
21.46%
Russell 3000
13.1% Cons. Disc.
9.6% Energy
9.3% Cons. Stap.
17.7% Financials
12.4% Healthcare
11.3% Industrials
17.1% IT
3.7% Materials
2.69%
-2.11%
-2.73% 2.5% Telecomms
3.92%
2.87%
1.74%
1.65%
31.3% Large Growth
15.0% 12.8% Medium Value Medium Growth
2.47%
3.74%
0%
3.3% Utilities
Russell 3000
Source: Russell Indexes
33.1% Large Value
4.0% Small Value
3.8% Small Growth
Source: Russell Indexes
The first quarter rally extended into the first half of Q2. However, mid-May announcements by the Fed on the potential for tapering its QE program caused the markets to give up most of the gains accumulated up to that time in 2013. The Russell 3000 rose 2.69% during the quarter and returned 21.46% over the one-year period. During the second quarter, the Consumer Discretionary, Financials, Healthcare, and Industrials sectors were the best performing sectors, posting returns of 7.27%, 5.18%, 4.06%, and 2.18%, respectively. The Materials and Utilities sectors were the worst performing sectors, producing returns of -2.73% and -2.11%, respectively. Overall, small cap outperformed both mid cap and large cap modestly during the second quarter. Value outperformed growth in the large cap sectors but growth prevailed over value in the small- and mid-cap sectors.
6
U.S. Fixed Income Markets BARCLAYS AGGREGATE RETURNS BY QUALITY AND HIGH YIELD RETURNS AS OF 06/30/2013 12% 10% 8%
9.49%
Second Quarter 2013 One-Year
6% 4% 1.97%
2%
0.95%
0% -2% -1.91%
-0.58%
-1.28%
-4%
-1.44% -2.76%
-3.27%
-3.87%
-6% Aaa
Aa
A
Baa
High Yield
Source: Barclays Live
The Barclays Aggregate Bond Index returned -2.32% in the second quarter as bond yields were pushed higher on comments made by the Federal Reserve.
BARCLAYS AGGREGATE RETURNS BY MATURITY AS OF 06/30/2013 2%
Asset-backed securities was the strongest performing sector, returning -0.80%.
0% -1%
In the investment grade market, higher quality bonds outperformed lower quality bonds.
-2%
High yield bonds marginally outperformed investment grade bonds.
-4%
From a maturity perspective, shorter term bonds outperformed, with the 1-3 yr. and 3-5 yr. posting returns of -0.17% and -1.38%, respectively, during the second quarter.
0.68%
1%
0.11% -0.15%
-0.17%
-3%
-5%
-6%
-1.02%
-1.38% -2.40%
-3.84%
Second Quarter 2013 One-Year
-4.55%
-5.96%
-7% 1-3 Yr. Source: Barclays Live
7
3-5 Yr.
5-7 Yr.
7-10 Yr.
>10 Yr.
U.S. Fixed Income Markets U.S. TREASURY YIELD CURVE 4.0% 06/30//2012 3.5% 3/31/2013 3.0% 6/30/2013
U.S. 10-YEAR TREASURY AND TIPS YIELDS
2.5%
3.0%
2.0%
2.0%
1.5%
1.0%
1.0%
0.0%
0.5%
-1.0%
6.0%
10Y Treasury Yield 5.0% 4.0%
0.0% 0
5
Source: U.S. Department of Treasury
10Y TIPS Yield
10
15
20
25
30
-2.0% Jun 03 Jun 04 Jun 05 Jun 06 Jun 07 Jun 08 Jun 09 Jun 10 Jun 11 Jun 12 Jun 13
Maturity (Years)
Source: U.S. Department of Treasury
The Treasury yield curve steepened during the quarter; the intermediate (1 to 10 years) and long-term segments of the yield curve rose. The 10-year U.S. Treasury yield ended the quarter at a yield of 2.52%, roughly 65 basis points higher than its level at the beginning of the quarter. 10-year TIPS yields broke into positive territory for the first time since the second half of 2011; 10-year TIPS yield rose 117 basis points to 0.53% over the quarter.
8
European Fixed Income Markets EUROZONE PERIPHERAL BOND SPREADS (10-YEAR SPREADS OVER GERMAN BUNDS) 45% 40% 35% Spain Portugal Ireland
30% 25%
Italy Greece
20% 15% 10% 5% Jun 13
Apr 13
Feb 13
Oct 12
Dec 12
Jun 12
Aug 12
Apr 12
Feb 12
Oct 11
Dec 11
Jun 11
Aug 11
Apr 11
Feb 11
Oct 10
Dec 10
Aug 10
Jun 10
Apr 10
Feb 10
Oct 09
Dec 09
Jun 09
Aug 09
Apr 09
Feb 09
Oct 08
Dec 08
Jun 08
Aug 08
0%
Source: DataStream
Q2 of 2013 brought the sixth straight negative quarter of GDP for the Eurozone, making the current recession the longest on record for the bloc. Acknowledging the impact of lower than expected economic growth on structural budget reform, the European Commission extended the deadline for half a dozen states that are working on reducing their excessive budget deficits to rein in those deficits. Spreads remained constant during the quarter.
9
Credit Spreads Spread (bps) U.S. Aggregate Long Gov't Long Credit Long Gov't/Credit MBS CMBS ABS Corporate High Yield Global Emerging Markets
6/30/2013 61 6 198 124 60 150 58 152 492 345
3/31/2013 56 4 183 113 58 133 49 139 457 287
6/30/2012 77 5 228 130 76 235 59 199 615 408
Quarterly Change (bps) 5 2 15 11 2 17 9 13 35 58
1-Year Change (bps) -16 1 -30 -6 -16 -85 -1 -47 -123 -63
Source: Barclays Live
Credit spreads rose across all markets during the quarter. The Global Emerging Markets segment experienced the largest increase in spreads during the quarter. As of June 30, 2013, credit spreads across most segments were lower relative to a year ago; the sole exception was Long Gov’t, for which the credit spread rose by 1 basis point.
10
UNITED STATES CONFERENCE OF CATHOLIC BISHOPS INVESTMENT POLICY FOR THE LONG-TERM INVESTMENT POOL (With all revisions through July 31, 2012)
Introduction The purpose of these guidelines is to establish the investment policy for the management of the assets of the Long-Term Investment Pool (the Pool) of the United States Conference of Catholic Bishops.
Distinction of Responsibilities The Conference’s Committee on Budget and Finance assumes the responsibility for the development, review and monitoring of the investment policy. This responsibility includes (1) determining acceptable levels of market risk, (2) determining the allocation of assets among common stock, fixed income instruments and such other types of investments as the Committee determines are appropriate and (3) selection and review of external investment managers. The investment managers appointed to execute the policy shall invest the Pool’s assets in accordance with the policy and their judgments concerning relative investment values. In particular, the investment managers are accorded full discretion, within policy limits, to (1) select individual securities, (2) adjust the maturity mix, where applicable, and (3) diversify the Pool's assets. As an overriding principle, the investment managers shall not invest in securities deemed inappropriate by the Conference and indicated as such by a list provided and periodically updated by the Conference.
Allocation of Assets It is the Committee's policy to invest the Long-Term Pool’s assets in the following proportions: Target
Range
U.S. Stock
50%
46-54%
Foreign Stock
15%
13-17%
Total Stock
65%
61-69%
Fixed Income
35%
31-39%
Ordinary cash flows will be used to maintain the allocation as close as practical to the normal allocation. If cash flows are insufficient to maintain the allocation within the permissible ranges as of any calendar quarter-end, the Conference's finance staff shall transfer balances as necessary between stocks and fixed income securities to bring the allocation back within the allowable ranges. For purposes of asset allocation review, any cash held in the common stock managers’ portfolios will be counted as common stock.
Diversification The Long-Term Investment Pool is to be broadly diversified to reduce the impact of large losses in individual investments in a manner that is in keeping with fiduciary standards. To further this end, the Conference will use multiple investment managers and a common stock indexed portfolio.
Proxy Voting The Committee on Budget and Finance delegates the responsibility for voting proxies to the individual investment managers employed to manage assets. The Committee expects proxies to be voted vigorously and in the best interests of the Conference and in a manner consistent with the teachings of the Church.
Liquidity Investment managers employed are to assume no need to maintain cash reserves for liquidity purposes unless advised to do so by the Conference’s finance staff. When managers do hold cash in their accounts, such cash will be invested in the short-term investment fund of the custodian bank, with the exception of any direct cash investments by investment managers, limited to the following:
U.S. Treasury securities
Commercial paper that carries the highest rating from at least two major rating agencies
Repurchase agreements that are at least 100% collateralized by U.S. Treasury securities
Investment Objectives The investment objective of the Long-Term Investment Pool is to equal or exceed the rate of return of a benchmark consisting of 50% of the S&P 500 Stock Index, 7.5% of the Morgan Stanley Capital International Europe, Australasia and Far East (EAFE) Stock Index, 7.5% of the Morgan Stanley Capital International All Country World ex-U.S. Index and 35% of the Barclays Aggregate Bond Index and to achieve an abovemedian ranking in a universe of balanced funds with similar investment policies over reasonable measurement periods. The investment objective of the domestic equity investments will be to exceed the rate of return of the S&P 500 Stock Index and to achieve an above-median ranking in a universe of equity funds over reasonable measurement periods. The investment objective of the foreign stock investments will be to exceed the rate of return of a blended foreign stock benchmark consisting of 50% of the Morgan Stanley EAFE Stock Index and 50% of the Morgan Stanley Capital International All Country World ex-U.S. Index and to achieve an above-median ranking in a universe of foreign stock funds over reasonable measurement periods. The investment objective of the fixed income investments will be to exceed the rate of return of the Barclays Aggregate Bond Index and to achieve an above-median ranking in a universe of fixed income funds over reasonable measurement periods. Each manager’s performance will be evaluated after the impact of investment management fees. When evaluating investment results, consideration shall be given to the possible effect of investment restrictions.
Use of Derivatives Derivative instruments may be used for any of the purposes listed below. Derivative instruments shall be defined as any contract or investment vehicle whose performance, risk characteristics, or value is based on a specific asset, interest rate, or index value.
To gain broad stock or bond market exposure in a manner that does not create the effect of leverage in the overall portfolio.
To convert financial exposure in a given currency to that of another currency (e.g., to hedge Japanese yen exposure back to the U.S. dollar).
To adjust the duration of a bond portfolio in a manner that is consistent with the accepted approach of the manager and other policies and guidelines provided to the manager.
To make other portfolio adjustments that are consistent with other elements of the Long-Term Pool’s investment policies and guidelines and that, when viewed from a total portfolio standpoint, do not increase risk or expected volatility of rate-of-return in the portfolio.
All other uses of derivatives are prohibited unless specifically approved by the Committee on Budget and Finance. Investment managers are expected to have internal risk management programs in place to ensure that derivative-based strategies do not result in magnified risks to the portfolio.
Common Stocks The common stock portfolio should be diversified by the number of stocks, industry and economic sector exposure and other appropriate investment characteristics.
Fixed Income Investments Fixed income investments should not be exposed to significant levels of interest rate risk or credit risk relative to those inherent in the benchmark. The effective duration of the fixed income segment of the portfolio should remain within one year of the effective duration of the Barclays Aggregate Bond Index.
I.
There are no limitations on the Pool’s investment in the following categories of fixed income securities:
Bonds or notes issued by the U.S. Government or U.S. Government Agencies.
Mortgage-backed pass-through securities issued by U.S. Government Agencies and commercial mortgage-backed securities with a minimum credit quality of BBB (or equivalent) by at least one major rating agency.
Derivative mortgage securities, such as collateralized mortgage obligations (CMOs), with volatility characteristics less than or equal to those of the underlying collateral securities.
Investment-grade corporate bonds or notes issued in the U.S. and denominated in U.S. dollars. Investment grade issues shall be defined as those rated BBB (or equivalent) or higher by at least one major rating agency.
Asset-backed securities (e.g., those backed by credit card, auto or home equity loans) that are rated AAA (or equivalent) by at least one major rating agency.
Securities issued under SEC Rule 144A (subject to the credit quality restrictions cited later in this policy).
II.
In order to take advantage of opportunities for diversification and higher risk-adjusted returns, the Pool may invest up to 25% of total fixed income assets in a combination of the types of securities listed below.
Non-investment-grade corporate bonds or notes issued in the U.S. and denominated in U.S. dollars. Non-investment grade issues shall be defined as those that lack a rating of BBB (or equivalent) or higher from at least one major rating agency. No more than 10% of the total fixed income portfolio should be invested in such securities, and a minimum credit quality of BB applies. Moreover, the portfolio’s non-investment-grade holdings are limited to a maximum of 1% in any single issuer.
Bonds issued by non-U.S. entities of developed industrial countries that maintain a credit rating of A or higher from at least one major rating agency. No more than 20% of the total fixed income portfolio should be invested in such securities, and total foreign currency exposure may not exceed 10% of the fixed income portfolio.
Debt instruments issued by any non-U.S. entity that does not meet the above criteria, including those located in Eastern Europe, Latin America, and the Pacific Rim. No more than 5% of the total fixed income portfolio should be invested in such securities, with a maximum of 1% in any single issuer.
Investment-grade taxable or tax-exempt debt securities issued by U.S. municipalities. No more than 10% of the total fixed income portfolio should be invested in such securities.
Individual managers may be given guidelines that do not conform with the overall fixed income policy so long as the aggregate of the managers’ portfolios is in line with policy guidelines.
UNITED STATES CONFERENCE OF CATHOLIC BISHOPS INVESTMENT POLICY FOR THE PENSION FUND (With all revisions through July 31, 2012) Introduction The purpose of these guidelines is to establish the investment policy for the management of the assets of the pension fund (the Fund) of the United States Conference of Catholic Bishops.
Distinction of Responsibilities The Conference’s Committee on Budget and Finance assumes the responsibility for the development, review and monitoring of the investment policy. This responsibility includes (1) determining acceptable levels of market risk, (2) determining the allocation of assets among common stock, fixed income instruments and such other types of investments as the Committee determines are appropriate and (3) selection and review of external investment managers. The investment managers appointed to execute the policy shall invest the Fund’s assets in accordance with the policy and their judgments concerning relative investment values. In particular, the investment managers are accorded full discretion, within policy limits, to (1) select individual securities, (2) adjust the maturity mix, where applicable, and (3) diversify the Fund’s assets. As an overriding principle, the investment managers shall not invest in securities deemed inappropriate by the Conference and indicated as such by a list provided and periodically updated by the Conference.
Allocation of Assets It is the Committee's policy to invest the pension fund’s assets in the following proportions: Target
Range
U.S. Stock
50%
46-54%
Foreign Stock
15%
13-17%
Total Stock
65%
61-69%
Fixed Income
35%
31-39%
Ordinary cash flows will be used to maintain the allocation as close as practical to the normal allocation. If cash flows are insufficient to maintain the allocation within the permissible ranges as of any calendar quarter-end, the Conference's finance staff shall transfer balances as necessary between stocks and fixed income securities to bring the allocation back within the allowable ranges. For purposes of asset allocation review, any cash held in the common stock managers’ portfolios will be counted as common stock.
Diversification The pension fund is to be broadly diversified to reduce the impact of large losses in individual investments in a manner that is in keeping with fiduciary standards. To further this end, the Conference will use multiple investment managers and a common stock indexed portfolio.
Proxy Voting The Committee on Budget and Finance delegates the responsibility for voting proxies to the individual investment managers employed to manage assets. The Committee expects proxies to be voted vigorously and in the best interests of the plan participants and in a manner consistent with the teachings of the Church.
Liquidity Investment managers employed are to assume no need to maintain cash reserves for liquidity purposes unless advised to do so by the Conference’s finance staff. When managers do hold cash in their accounts, such cash will be invested in the short-term investment fund of the custodian bank, with the exception of any direct cash investments by investment managers, limited to the following:
U.S. Treasury securities
Commercial paper that carries the highest rating from at least two major rating agencies
Repurchase agreements that are at least 100% collateralized by U.S. Treasury securities
Investment Objectives The investment objective of the Long-Term Investment Pool is to equal or exceed the rate of return of a benchmark consisting of 50% of the S&P 500 Stock Index, 7.5% of the Morgan Stanley Capital International Europe, Australasia and Far East (EAFE) Stock Index, 7.5% of the Morgan Stanley Capital International All Country World ex-U.S. Index and 35% of the Barclays Aggregate Bond Index and to achieve an abovemedian ranking in a universe of balanced funds with similar investment policies over reasonable measurement periods. The investment objective of the domestic equity investments will be to exceed the rate of return of the S&P 500 Stock Index and to achieve an above-median ranking in a universe of equity funds over reasonable measurement periods. The investment objective of the foreign stock investments will be to exceed the rate of return of a blended foreign stock benchmark consisting of 50% of the Morgan Stanley EAFE Stock Index and 50% of the Morgan Stanley Capital International All Country World ex-U.S. Index and to achieve an above-median ranking in a universe of foreign stock funds over reasonable measurement periods. The investment objective of the fixed income investments will be to exceed the rate of return of the L Barclays Aggregate Bond Index and to achieve an above-median ranking in a universe of fixed income funds over reasonable measurement periods. Each manager’s performance will be evaluated after the impact of investment management fees. When evaluating investment results, consideration shall be given to the possible effect of investment restrictions.
Use of Derivatives Derivative instruments may be used for any of the purposes listed below. Derivative instruments shall be defined as any contract or investment vehicle whose performance, risk characteristics, or value is based on a specific asset, interest rate, or index value.
To gain broad stock or bond market exposure in a manner that does not create the effect of leverage in the overall portfolio.
To convert financial exposure in a given currency to that of another currency (e.g., to hedge Japanese yen exposure back to the U.S. dollar).
To adjust the duration of a bond portfolio in a manner that is consistent with the accepted approach of the manager and other policies and guidelines provided to the manager.
To make other portfolio adjustments that are consistent with other elements of the Long-Term Pool’s investment policies and guidelines and that, when viewed from a total portfolio standpoint, do not increase risk or expected volatility of rate-of-return in the portfolio.
All other uses of derivatives are prohibited unless specifically approved by the Committee on Budget and Finance. Investment managers are expected to have internal risk management programs in place to ensure that derivative-based strategies do not result in magnified risks to the portfolio.
Common Stocks The common stock portfolio should be diversified by the number of stocks, industry and economic sector exposure and other appropriate investment characteristics.
Fixed Income Investments Fixed income investments should not be exposed to significant levels of interest rate risk or credit risk relative to those inherent in the benchmark. The effective duration of the fixed income segment of the portfolio should remain within one year of the effective duration of the Barclays Aggregate Bond Index. I.
II.
There are no limitations on the Pool’s investment in the following categories of fixed income securities:
Bonds or notes issued by the U.S. Government or U.S. Government Agencies.
Mortgage-backed pass-through securities issued by U.S. Government Agencies and commercial mortgage-backed securities with a minimum credit quality of BBB (or equivalent) by at least one major rating agency.
Derivative mortgage securities, such as collateralized mortgage obligations (CMOs), with volatility characteristics less than or equal to those of the underlying collateral securities.
Investment-grade corporate bonds or notes issued in the U.S. and denominated in U.S. dollars. Investment grade issues shall be defined as those rated BBB (or equivalent) or higher by at least one major rating agency.
Asset-backed securities (e.g., those backed by credit card, auto or home equity loans) that are rated AAA (or equivalent) by at least one major rating agency.
Securities issued under SEC Rule 144A (subject to the credit quality restrictions cited later in this policy).
In order to take advantage of opportunities for diversification and higher risk-adjusted returns, the Pool may invest up to 25% of total fixed income assets in a combination of the types of securities listed below.
Non-investment-grade corporate bonds or notes issued in the U.S. and denominated in U.S. dollars. Non-investment grade issues shall be defined as those that lack a rating of BBB (or equivalent) or higher from at least one major rating agency. No more than 10% of the total fixed income portfolio should be invested in such securities, and a minimum credit quality of BB applies. Moreover, the portfolio’s non-investment-grade holdings are limited to a maximum of 1% in any single issuer.
Bonds issued by non-U.S. entities of developed industrial countries that maintain a credit rating of A or higher from at least one major rating agency. No more than 20% of the total fixed income portfolio should be invested in such securities, and total foreign currency exposure may not exceed 10% of the fixed income portfolio.
Debt instruments issued by any non-U.S. entity that does not meet the above criteria, including those located in Eastern Europe, Latin America, and the Pacific Rim. No more than 5% of the total fixed income portfolio should be invested in such securities, with a maximum of 1% in any single issuer.
Investment-grade taxable or tax-exempt debt securities issued by U.S. municipalities. No more than 10% of the total fixed income portfolio should be invested in such securities.
Individual managers may be given guidelines that do not conform with the overall fixed income policy so long as the aggregate of the managers’ portfolios is in line with policy guidelines.
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