arizona state retirement system

ARIZONA STATERETIREMENT SYSTEM

PROFESSIONALISMWe promote, strive for and expect individuals, teams, and divisions to possess professional qualities and skills to lead the organization.

• Displays a friendly, respectful and courteous demeanor even when confronted by adversity • Has proactive and responsive approach to internal and external customer needs• Possesses good communication and active listening skills •• Is a trusted contributor (manager, leader, SME, analyst, teammate)• Takes personal accountability • Has subject matter expertise• Has critical thinking skills • Has an honest, fair, non-judgmental mind-set• Is adaptable to beneficial change • Adheres to the ASRS Code of Conduct

RESULTSWe treasure the achievements of individuals, teams, divisions and the agency that energizethe organization.

•• Meets goals and objectives • Satisfies customers• Completes projects • Attains individual accomplishments• Produces quality work products • Manages risks successfully

IMPROVEMENTWe appreciate individuals, teams or divisions who drive the agency forward with new,innovative ideas and solutions.

• Promotes new ideas • Enhances morale•• Enhances outcomes and performance • Improves relationships• Solves problems • Increases efficiency, effectiveness or reduces costs

DIVERSITYWe recognize that utilizing different talents, strengths and points of view, strengthens the agency and helps propel outcomes greater than the sum of individual contributors.

• Encourages an attitude of openness and a free flow of ideas and opinions• Treats others with dignity and respect •• Works effectively to accomplish goals with teams comprised of dissimilar individuals• Recognizes and promotes skills in others attained on and off the job EXCELLENCEWe celebrate individuals, teams and divisions who exceed expectations and deliver service with a PRIDE that permeates the organization.

• Surpasses member, stakeholder and associate expectations•• Demonstrates a willingness to go the extra mile to engender a positive public image• Embraces change in a manner that inspires others• Accepts responsibility and challenges with enthusiasm • Takes a personal interest in promoting teamwork through effective use of communication (verbal, non-verbal, written and technological techniques)• Creates a motivated, healthy and productive work environment that celebrates and rewards the accomplishments of others

How...ASRS Employees Deliver Service With PRIDE!

3300 NORTH CENTRAL AVENUE • PO BOX 33910 • PHOENIX, AZ 85067-3910 • PHONE (602) 240-2000 4400 EAST BROADWAY BOULEVARD • SUITE 200 • TUCSON, AZ 85711-3554 • PHONE (520) 239-3100

TOLL FREE OUTSIDE METRO PHOENIX AND TUCSON 1 (800) 621-3778

ARIZONA STATE RETIREMENT SYSTEM Paul Matson

Director

AGENDA

NOTICE OF COMBINED PUBLIC MEETING AND POSSIBLE EXECUTIVE SESSION OF THE ARIZONA STATE RETIREMENT SYSTEM INVESTMENT COMMITTEE

3300 North Central Avenue, 14th Floor Conference Room

Phoenix, Arizona 85012

March 27, 2017 2:30 p.m.

Pursuant to A.R.S. § 38-431.02(F), notice is hereby given to Trustees of the Arizona State Retirement System (ASRS) Investment Committee (IC) and to the general public that the ASRS IC will hold a meeting open to the public on Monday, March 27, 2017, beginning at 2:30 p.m. in the 14th Floor Conference Room of the ASRS offices at 3300 N. Central Avenue, Phoenix, Arizona 85012. Trustees of the Committee may attend either in person or by telephone conference call. This is a regularly scheduled meeting of the IC; however, due to possible attendance by other ASRS Board Trustees, this meeting may technically become a meeting of the Board or one of its Committees. Actions taken will be consistent with IC governance procedures. Actions requiring Board authority will be presented to the full Board for final decision. The Chair may take public comment during any agenda item. If any member of the public wishes to speak to a particular agenda item, they should complete a “Request to Speak” form indicating the item and provide it to the Committee Administrator. Pursuant to A.R.S. § 38-431.03(A)(3), the ASRS IC may vote to go into executive session, which will not be open to the public, for the purpose of obtaining legal advice on any item on the Agenda. This meeting will be teleconferenced to the ASRS Tucson office at 4400 East Broadway Boulevard, Suite 200, Tucson, Arizona 85711. The conference call to Tucson will be disconnected after 15 minutes if there are no attendees in the Tucson audience. The Agenda for the meeting is as follows: 1. Call to Order; Roll Call; Opening Remarks (estimated time 4 min.)............... Prof. Dennis Hoffman

Acting Chair 2. Approval of the January 20, 2017 Summary of Discussion by Non-Quorum ASRS IC Members,

ASRS Staff, Presenters and Public (Action item; estimated time 1 min.) ......................................... ........................................................................................................................ Prof. Dennis Hoffman

IC Meeting March 27, 2017 Page 2 of 4

3. Presentation, Discussion, and Appropriate Action Regarding the ASRS House Views and

General Discussion (Informational and discussion item; estimated time 20 min.) ........................... .................................................................................................................................... Mr. Karl Polen

Chief Investment Officer, ASRS ................................................................................................................................. Ms. Kerry White

Assistant Chief Investment Officer for Reporting, Compliance & Administration, ASRS ..................................................................................................................................... Mr. Al Alaimo

Sr. Portfolio Manager of Fixed Income, Cash, and Liquid Alternatives, ASRS .................................................................................................................................... Mr. Eric Glass

Sr. Portfolio Manager of Private Markets, ASRS ............................................................................................................................. Ms. Lupita Breland

Senior Portfolio Analyst, ASRS .................................................................................................................................. Mr. John Doran

Assistant Portfolio Manager of Fixed Income, Cash and Liquid Alternatives, ASRS ................................................................................................................................... Mr. Cole Smith

Portfolio Manager of Equities, ASRS ........................................................................................................................ Mr. Micheal Copeland

Assistant Portfolio Manager of Real Estate, ASRS ................................................................................................................................... Mr. John Kwon

Portfolio Manager of Equities, ASRS Objective: The IC and the ASRS team will discuss House Views and other matters of interest. No action is expected on this item, but the IC may express views or offer guidance on the matters discussed.

Pursuant to A.R.S. §§ 38-431.03(A)(2) and 38-718(P), the IC may vote to discuss the following matter in executive session, which will not be open to the public, to consider specific investment manager data that is confidential proprietary commercial information and a record exempt by law from public inspection. 4. Presentation, Discussion, and Appropriate Action Regarding the Portfolio Position and

Performance (Informational and discussion item; estimated time 15 min.) ........... Mr. Paul Matson Director, ASRS

.................................................................................................................................... Mr. Karl Polen ..................................................................................................................................... Mr. Al Alaimo .................................................................................................................................... Mr. Eric Glass ................................................................................................................................. Ms. Kerry White Objective: The IC and the ASRS team will discuss portfolio positioning, current tactical views and investment performance. No action is expected on this item, but the IC may express views or offer guidance on the matters discussed.

5. Presentation, Discussion, and Appropriate Action Regarding State Street’s Risk Management

Reporting (Informational and discussion item; estimated time 10 min.) .................... Mr. Steve Kim Assistant Vice President, Risk Services, State Street Analytics

Objective: State Street will present a risk analysis report on the ASRS total fund investments. No action is expected on this item, but the IC may express views or offer guidance on the matters discussed.

IC Meeting March 27, 2017 Page 3 of 4 6. Presentation, Discussion, and Appropriate Action Regarding the ASRS Investment Compliance

and Monitoring of Public Market Investments (Informational and discussion item; estimated time 10 min.) .......................................................................................................... Mr. Stephen Reynolds

Officer of Compliance, State Street Objective: State Street will present the results of their compliance monitoring for public markets portfolios. No action is expected on this item, but the IC may express views or offer guidance on the matters discussed.

Pursuant to A.R.S. §§ 38-431.03(A)(2) and 38-718(P), the IC may vote to discuss the following matter in executive session, which will not be open to the public, to consider specific investment manager data that is confidential proprietary commercial information and a record exempt by law from public inspection. 7. Presentation, Discussion, and Appropriate Action Regarding ASRS Independent Reporting,

Monitoring and Oversight (Informational and discussion item; estimated time 30 min.) .................. ................................................................................................................................. Mr. Allan Martin

Partner, NEPC Objective: NEPC will report on their monitoring of IMD activities. No action is expected on this item, but the IC may express views or offer guidance on the matters discussed.

8. Presentation, Discussion, and Appropriate Action Regarding IMD activities and Asset Class

Committee Reports (Informational and discussion item; estimated time 10 min.) ............................ ................................................................................................................................ Mr. Paul Matson .................................................................................................................................... Mr. Karl Polen Objective: The CIO will present recent activities and work plans for IMD. The chairs of the asset class committee will report on any activity since the last IC meeting. No action is expected on this item, but the IC may express views or offer guidance on the matters discussed.

9. Presentation, Discussion, and Appropriate Action Regarding Securities Lending Review

(Informational and discussion item; estimated time 15 min.) ...................................... Mr. Al Alaimo .................................................................................................................................. Mr. John Doran Objective: A report on the securities lending program will be made to the investment committee. No action is expected on this item, but he IC may express views or offer guidance on the matters discussed.

10. Presentation, Discussion, and Appropriate Action Regarding Private Equity Asset Class Review (Informational and discussion item; estimated time 20 min.) ..................................... Mr. Eric Glass Objective: Mr. Glass will provide an update on the private equity investment program. No action is expected on this item, but the IC may express views or give guidance on the matters discussed.

IC Meeting March 27, 2017 Page 4 of 4

11. Request for Future Agenda Items (Discussion item; estimated time 5 min.) ....................................

........................................................................................................................ Prof. Dennis Hoffman .................................................................................................................................... Mr. Karl Polen

12. Call to the Public ............................................................................................. Prof. Dennis Hoffman Those wishing to address the ASRS IC are required to complete a Request to Speak form before the meeting indicating their desire to speak. Request to Speak forms are available at the sign-in desk and should be given to the IC Administrator. Trustees of the Committee are prohibited by A.R.S. § 38-431.01(H) from discussing or taking legal action on matters raised during an open call to the public unless the matters are properly noticed for discussion and legal action. As a result of public comment, the IC may direct staff to study and/or reschedule the matter for discussion and decision at a later date.

13. The next ASRS IC Meeting is tentatively scheduled for Monday, April 24, 2017 at 2:30 p.m., at

3300 N. Central Avenue, 14th Floor Conference room, Phoenix, Arizona. 14. Adjournment of the ASRS IC Meeting. A copy of the agenda background material provided to IC Trustees (with the exception of material relating to possible executive sessions) is available for public inspection at the ASRS offices located at 3300 North Central Avenue, 14th Floor, Phoenix, Arizona, and 4400 East Broadway Boulevard, Suite 200, Tucson, Arizona. The agenda is subject to revision up to 24 hours prior to meeting. These materials are also available on the ASRS website https://www.azasrs.gov/content/board-and-committee-meetings approximately 48 hours prior to the meeting. Persons with disabilities may request a reasonable accommodation such as a sign language interpreter or alternate formats of this document by contacting Tracy Darmer, ADA Coordinator at (602) 240-5378 in Phoenix, at (520) 239-3100, ext. 5378 in Tucson or 1-800-621-3778, ext. 5378 outside metro Phoenix or Tucson. Requests should be made as early as possible to allow time to arrange the accommodations. Dated March 20, 2017 ARIZONA STATE RETIREMENT SYSTEM Signed Copy on File Signed Copy on File Alicia Guzman Karl Polen Committee Administrator Chief Investment Officer

https://www.azasrs.gov/content/board-and-committee-meetings

https://www.azasrs.gov/content/board-and-committee-meetings

3300 NORTH CENTRAL AVENUE • PO BOX 33910 • PHOENIX, AZ 85067-3910 • PHONE (602) 240-2000 4400 EAST BROADWAY BOULEVARD • SUITE 200 • TUCSON, AZ 85711-3554 • PHONE (520) 239-3100

TOLL FREE OUTSIDE METRO PHOENIX AND TUCSON 1 (800) 621-3778

ARIZONA STATE RETIREMENT SYSTEM Paul Matson

Director

S

SUMMARY OF DISCUSSION BY NON-QUORUM ARIZONA STATE RETIREMENT SYSTEM (ASRS) INVESTMENT

COMMITTEE MEMBERS, ASRS STAFF, PRESENTERS AND THE PUBLIC

Monday, January 20, 2017 2:30 p.m.

A non-quorum of the ASRS Investment Committee (IC) met in the 14th Floor Conference Room, 3300 N. Central Avenue, Phoenix, Arizona. Prof. Dennis Hoffman, Acting Chair of the IC, called the discussion to order at 2:31 p.m. The discussion was teleconferenced to the ASRS office at 4400 E. Broadway Boulevard, Suite 200, Tucson, Arizona 85711. 1. Call to Order; Roll Call; Opening Remarks Present: Prof. Dennis Hoffman Two vacant positions. A quorum was not present for the purpose of conducting business and as such, no IC meeting occurred. A discussion then proceeded among the remaining Trustee, staff, and the public to ensure the materials prepared for the discussion were disseminated to members of the public and the remaining IC Trustee, as well as to ensure members of the public could ask questions. Prof. Hoffman requested that the former IC Chair, Mr. Tom Connelly, facilitate the discussion. 2. Approval of the Minutes of the October 24, 2016 Public Meeting of the ASRS Mr. Paul Matson, ASRS Director, suggested Prof. Hoffman accept the October 24, 2016 public meeting minutes. Prof. Hoffman concurred with Mr. Matson, and confirmed his acceptance of the minutes. 3. Approval of the November 28, 2016 Summary of Discussion by Non-Quorum ASRS IC

Members, ASRS Staff, Presenters and Public Mr. Matson, accepted the November 28, 2016 Summary of Discussion. 4. Presentation, Discussion, and Appropriate Action Regarding the ASRS House Views and

General Discussion

Mr. Karl Polen, Chief Investment Officer, provided a brief overview of the House Views, noting the dollar is currently strong against all major currencies. He provided additional commentary on his views of the market and turned the discussion over to the Investment Management Division (IMD) Portfolio Managers. Mr. Eric Glass, Senior Portfolio Manager of Equities and Real Estate, presented on Equities and Commodities. Mr. Glass gave an overview of the Relative Valuation of Global Indices and

Non-quorum IC Discussion Summary January 20, 2017 Page 2 of 3

Currency Forecasts. Mr. Al Alaimo, Sr. Portfolio Manager of Fixed Income, presented on Fixed Income and Private Debt. 5. Presentation, Discussion, and Appropriate Action Regarding the Portfolio Position and

Performance Mr. Polen briefly introduced the topic of Total Fund Fiscal Year Performance and noted the year to date return is approximately 6.0%. He further reviewed the Brinson Return Attribution Chart and noted the ASRS is adding value to both selection and allocation. Mr. Polen further reviewed the Public Equity performance and noted it has underperformed, and discussed actions being undertaken to improve portfolio performance. He discussed the attribution and style factor attribution performance reports for total Public Equity, Domestic Equity and International Equity portfolios. Mr. Polen further reviewed the Public Equities Performance Charts, which included a detailed analysis of every manager and strategy for Public Equities. Mr. Polen also presented a summary of the Private Markets performance. 6. Presentation, Discussion, and Appropriate Action Regarding State Street’s Risk

Management Reporting Mr. Steve Kim, State Street Investment Analytics, presented the State Street Risk Report. He discussed the monthly reallocation summary including portfolio reductions and additions in total Domestic Equity, month-end risk profile, and Total Fund overview exposure. In aggregate, the Total Fund risk increased 4 bps over the prior month, with increases in U.S. Equity and Global Inflation Linked allocations. Mr. Kim noted the interim policy benchmark risk decreased by 3 bps. Surplus risk under the interim policy benchmark is now 19 bps.

7. Presentation, Discussion, and Appropriate Action Regarding the ASRS Investment Compliance and Monitoring of Public Market Investments

Mr. Stephen Reynolds, State Street Officer of Compliance provided the group with a brief overview of the services provided by State Street. State Street works closely with the IMD to interpret investment guidelines and advise on different monitoring approaches. State Street provides the IMD with daily and monthly compliance testing, which is done on a post-trade and pre-settlement environment. Alerts and warnings are provided as a means to ensure investments are in compliance with the ASRS’ investment guidelines and Plan provisions. Alerts include compliance rules, which set strict limits and/or prohibitions according to the Letters of Discretion. Warnings include compliance rules which have been designed as soft notifications or informational flags to the IMD. Mr. Reynolds reviewed the results of the warnings and alerts for October and November, all of which were resolved and deemed to comply with the Plan provisions and statutes. 8. Presentation, Discussion, and Appropriate Action Regarding IMD Activities and Asset Class

Committee Reports

Mr. Polen provided the group with the ongoing activities of the IMD. He referenced The Asset Class Committee Schedule during 2016, and provided a summary of IMD Working Group Projects. He noted future meetings of the combined public and private markets committee are anticipated monthly or more frequently as needed.

9. Presentation, Discussion, and Appropriate Action Regarding IMD’s Tax and Legal Processes

Ms. Kerry White, Assistant Chief Investment Officer for Reporting, Compliance & Administration provided information on the activities devising new procedures for legal, tax, financial reporting and

Non-quorum IC Discussion Summary January 20, 2017 Page 3 of 3

other matters. Ms. White presented information about automation and quality control for reporting processes. 10. Presentation, Discussion, and Appropriate Action Regarding the New Strategic Asset

Allocation for the LTD Program

Ms. Lupita Breland, Senior Portfolio Analyst, presented a proposal for the unitization of the Long Term Disability (LTD) assets in combination with Plan’s assets in order to achieve lower investment costs, improved operational efficiency and improved liquidity. The proposal included three recommendations for Board approval: 1) Approve the proposed updated Strategic Asset Allocation Policy for LTD; 2) Amendment to the Strategic Investment Policies SIP001 and SIP002, and 3) The request to repeal SIP003 and SIP004. Also a request was presented to modify the language in the SIPs and the proposal memo to the Board to indicate that although the current recommendation is to manage the LTD assets with the same allocations as the retirement plan, it will be evaluated periodically and if appropriate, a different allocation for LTD assets will be recommended.

11. Presentation, Discussion, and Appropriate Action Regarding the 2017 IC Meeting

Schedule

Mr. Karl Polen presented the proposed 2017 IC meeting schedule. He noted a couple of dates may need to change, thus, the calendar was not accepted. 12. Request for Future Agenda Items

There were no requests for future agenda items. 13. Call to the Public

No members of the public requested to speak. 14. Adjournment The discussion adjourned at 4:04 p.m. Respectfully submitted by: Alicia Guzman Investment Committee Administrator ARIZONA STATE RETIREMENT SYSTEM

Summary View and PositioningMacro Environment

EquitiesFixed IncomeReal Estate

CommoditiesHistoric Data

House Views and Portfolio Positioning

Arizona State Retirement System

March 27, 2017

03/27/2017 House Views and Portfolio Positioning 1 / 77




Outline1 Summary View and Positioning2 Macro Environment3 Equities

CommentaryTrendsValuationPrivate Equity

4 Fixed IncomeCommentaryInterest Rate Sensitive Fixed IncomeHigh Yield and Private Debt

5 Real EstateCommentaryTrendsSupply and DemandCapital Markets Dynamics

6 Commodities7 Historic Data





Summary View

We are very close to policy weights throughout the portfolio

Domestic equity is about 2% overweight (including opportunistic positions)International equity less than 2% underweightWe are slightly overweight credit and slightly underweight rates

Notwithstanding the recent surge in equities, we remain cautious

Valuations are stretched in U.S.International equities have substantial headwind with more than half of theirrecent gains o�set by currency depreciation





Portfolio Position

Total Fund Positioning March 10, 2017

All Private Markets asset classes' market values are reported on a quarter-lag basis and adjusted to include the current quarter's cash flow.

Interest Rate Sensitive 11%

US High Yield 3%

Opportunistic Debt 4%

Private Debt 9%

Domestic Equity 25%

International Equity 22%

Private Equity 8%

Private Opportunistic Equity

1%

Public Opprtunistic Equity

1% Commodities

1%

Real Estate 9%

Farmland & Timber 1%

Infrastructure 1%

Risk Factors 2%

Multi-Asset Class Strategies

3%

Cash 0%

Total Fund Composition

-0.9%

-1.1%

3.8%

0.5%

-1.6%

0.9%

0.6%

-1.1%

0.5%

0.9%

0.0%

-3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0%

Interest Rate Sensitive

US High Yield

Opportunistic Debt

Private Debt

Domestic Equity

International Equity

Private Equity


Public Opportunistic Equity

Commodities

Real Estate

Farmland & Timber

Infrastructure

Risk Factors


Cash

Variance from Interim SAA Policy *





Commentary

Growth below potential globally

Employment improving and becoming tight in some marketsChina growth is slowingUS growth approaching potential with strong consumer and business sentiment

In�ation generally low

Wage in�ation appearing in US causing uptick in US in�ationBut moderated by low commodity costsPossible increase in in�ation if government pursues stimulative policies





Macro Indicators

Slow to moderate growth, strong employment, in�ation generally low but

increasing in US

3/13/2017

Economy 2 Yr. 1 Yr.EHUPUS Index US Unemp 4.7 5.3 5.0EHUPEUN Index EUR Unemp 8.4 9.5 9.1EHUPGB Index UK Unemp 4.8 5.7 5.3EHUPJP Index Japan Unemp 3.1 3.4 3.3GDP CYOY Index US GDP 1.9 2.3 1.7EHGDEUR Index EUR GDP 1.8 1.6 1.9EHGDGB Index UK GDP 2.0 2.4 2.0EHGDJP Index Japan GDP 1.2 0.7 0.6EHGDCN Index China GDP 6.8 7.0 6.9CPI YOY Index US CPI 2.5 0.8 0.4CPI XYOY Index US CPI X fd nrg 2.3 1.9 2.0CPEXEUYY Index EU CPI X fd nrg 0.9 0.9 0.9JCPNEFEY Index Jpn CPI X fd nrg 0.1 1.5 0.8CNCPIYOY Index China CPI 0.8 1.7 1.7

Moving Average





Global Interest Rates

Rates moving up in US, but soft elsewhere

March 13, 2017

Price

100 day moving average


relative strength

indexHurst

Exponent

Global Interest RatesUSGG3M Index US 3 Month 0.74 0.50 0.55 73 98USGG10YR Index US 10 Year 2.61 2.36 2.44 60 67GETB1 Index German 3 Month ‐0.91 ‐0.88 ‐0.88 45 98GDBR10 Index German 10 Year 0.47 0.30 0.35 59 26GUKG3M Index UK 3 Month 0.19 0.28 0.25 45 66GUKG10 Index UK 10 Year 1.25 1.32 1.30 49 42GJTB3MO Index Japan 3 Month ‐0.38 ‐0.32 ‐0.31 41 50JGBS10 Index Japan 10 Year 0.09 0.04 0.08 54 57





Currency

Strong dollar against all major currencies

March 13, 2017

Price




relative strength

indexHurst

Exponent6 month return

6 month volatility

annualizedMomentum

IndexCurrency

EURUSD Curncy Euro/USD 1.07 1.09 1.07 1.06 51 15 ‐5.00 7.45 ‐0.67GBPUSD Curncy GBP/USD 1.22 1.28 1.24 1.24 44 65 ‐7.37 11.03 ‐0.67JPYUSD Curncy Yen/USD 0.0087 0.0093 0.0089 0.0088 46 51 ‐10.88 11.81 ‐0.92CNY BGN Curncy CNY/USD 0.1446 0.1480 0.1455 0.1451 56 63 ‐3.42 3.36 ‐1.02





Consensus Economic Forecasts

ContributorComposite

Period

17 18 19 17 18 19 17 18 19 17 18 19 17 18 19LatAm 1.54 2.65 37.48 20.14 9.99 10.26 ‐2.05 ‐2.14 ‐6.62 ‐6.34

E. Europe & Africa 2.27 2.64 5.31 5.08 8.86 8.69 ‐0.28 ‐0.89 ‐2.82 ‐2.44Middle East 2.31 2.68 4.84 4.28 ‐0.25 ‐0.2 ‐6.05 ‐5.11

Asia 5.74 5.69 2.57 2.64 4.05 4.02 2.53 2.21 ‐2.93 ‐2.91China 6.4 6.1 2.2 2.2 4.1 4.1 2.13 1.9 ‐3.5 ‐3.5

G‐10 1.76 1.83 1.76 1.92 6.05 5.9 ‐0.12 ‐0.12 ‐2.78 ‐2.67USA 2.2 2.3 2.3 2.4 4.7 4.5 ‐2.6 ‐2.7 ‐3.3 ‐3.3Japan 1 0.8 0.6 1 3 2.9 3.6 3.7 ‐5.1 ‐4.8Euro 1.4 1.5 1.3 1.45 9.7 9.5 2.8 2.8 ‐1.7 ‐1.55United Kingdom 1.2 1.3 2.4 2.5 5.2 5.5 ‐4.1 ‐3.5 ‐3.4 ‐3Canada 1.8 1.8 1.9 1.9 6.9 6.75 ‐2.7 ‐2.15 ‐1.45 ‐1.5Australia 2.6 2.7 2 2.2 5.65 5.6 ‐2.8 ‐2.8 ‐2.2 ‐1.6Sweden 2.2 2.25 1.5 1.9 6.7 6.6 4.5 4.5 ‐0.2 0.1New Zealand 2.9 2.6 1.7 1.9 5.05 4.9 ‐3.5 ‐3.3 0.3Switzerland 1.5 1.6 0.3 0.7 3.4 3.3 9.5 9 ‐0.05 0.15Denmark 1.1 1.5 1.1 4.3 6.35 ‐1.95Norway 1.55 1.9 2.5 2.1 4.8 4.75 6.3 7 5.7 6Germany 1.4 1.5 1.6 1.7 6.1 6.2 8.1 7.9 0.3 0.2France 1.2 1.3 1.2 1.4 9.9 9.55 ‐1 ‐1.2 ‐3.1 ‐3.05Italy 0.8 1 0.9 1.2 11.3 10.9 2.3 1.85 ‐2.4 ‐2.4

Europe 1.44 1.52 1.47 1.63 8.37 8.31 2.7 2.73 ‐1.66 ‐1.48

Real GDP (yoy %) CPI (yoy %) Unemployment (%) Curr Acct (% of GDP) Budget (% of GDP)

See Previous forecasts

See Last Actuals

Yearly






Commentary

We are 0.5% overweight US public equities and have 0.6% in MLPs(opportunistic public equity)

0.9% in private opportunistic equity, which is predominantly US equityexposure1.6% underweight international equity, 3/4 of which is emerging markets

On a valuation basis, US looks expensive vs ROW

However. . .

Economic fundamentals of Europe are weak and Japan continues to try tostimulateLikelihood of continued strength of the dollar is negative for internationalequitiesEM has shown signs of improvement while China remains a concern

Consumer con�dence in the US remains strong and fund �ows have favoredUS vs ROW

Comparatively strong economic fundamentals justify, to some extent, thedi�erential valuation between US and international equities






Equity Price Trends

Favorable price trends across the world

March 13, 2017

Price




relative strength

indexHurst

Exponent6 month return

6 month volatility

annualizedMomentum

IndexStocks

SPX Index S&P 500 2371 2195 2249 2310 65 49 10.83 9.40 1.15MID Index S&P Mid 1713 1590 1649 1703 53 62 12.32 12.73 0.97SML Index S&P Small 830 775 815 842 49 41 12.28 15.67 0.78MXEA Index EAFE 1764 1681 1695 1735 60 56 5.24 9.67 0.54MSDLEAFE Index EAFE Local 1077 992 1027 1055 64 42 12.33 8.87 1.39MXEASC Index EAFE Small 217 207 208 213 60 66 4.52 9.62 0.47NCLDEAFE Index EAFE Small Local 335 306 317 326 67 56 12.95 8.18 1.58MXEF Index EM 926 885 892 916 55 14 4.41 12.47 0.35NDLEEGF Index EM Local 475 453 461 471 56 84 4.86 9.37 0.52






Relative Valuation of Global Indices






Relative Valuation of Global Indices (Continued)






Cyclically Adjusted PEs

●

●

●

●

●

●

●

●

●

●

●●● ●

25

50

75

China EAFE EM Germany Japan UK US (Large) US (Small)

Shi

ller/

CA

PE

PE

Comparative Shiller/CAPE PEs(red dot is value at 02/2017)






Currency Forecasts






Consumer Con�dence






Fund Flows






Private Equity Fund Raising

Pace of fundraising remains moderate

Deal volume & size are in line with the past couple years

Exit volume and values are down slightly

Dry powder has steadily risen as the asset class has grown

Deal multiples continue to tick up while debt levels remain steady






Private Equity Fund Raising






Private Equity M&A Deal Volume






Private Equity Exits






Private Equity AUM






Private Equity AUM by Fund Type






Private Equity Dry Powder






Private Equity Buyout Multiples






Private Equity Debt Levels





CommentaryInterest Rate Sensitive Fixed IncomeHigh Yield and Private Debt











Commentary

Fixed Income • We maintain an overweight allocation to Fixed Income with a recent weighting of

27.2% vs. the interim SAA target of 25.3%. Following the US presidential election, we lowered our allocation to Fixed Income by cutting back our holdings of Interest Rate Sensitive Fixed Income assets.

• The overweight in Fixed Income reflects an overweight in Opportunistic Debt (3.8% vs. a 0.0% target) offset by underweights in Interest Rate Sensitive Fixed Income (11.3% vs. a 12.1% target) and High Yield Fixed Income (3.3% vs. a 4.3% target).

• We continue to believe that the Private Debt asset class offers the most attractive opportunity in fixed income. Effective March 31, the SAAP target for Private Debt will be raised to 12% from 10% with a range of 8-16%. Investments in Private Debt represent approximately 8.9% of the total fund while our partnership commitments represent approximately 14.0% of the total fund.






Rates

Interest Rate Sensitive Fixed Income • We are underweight Interest Rate Sensitive Fixed Income (11.3% vs. a 12.1% target). • The US presidential election led to a spike in long-term interest rates which effectively

reversed a sharp decline in rates that occurred earlier in 2016. The jump in rates reflects initial perceptions that Trump Administration policies (aggressive tax cuts, heavy infrastructure and defense spending, less regulation) could be a paradigm shift that will lead to faster economic growth and higher inflation.

• In addition, on March 15th, the Federal Reserve announced a 25 basis point hike in the Federal Funds rate target with a likelihood that it may raise rates two more times later this year. Over the coming years, it is also possible that the Fed could begin to reduce its holdings of U.S. Treasury bonds and agency mortgage backed securities accumulated during its aggressive quantitative easing programs implemented following the 2008-2009 credit crisis. Although unlikely in the near-term, the unwinding of this portfolio could put additional upward pressure on long term interest rates.

• We do see a heightened risk that rates may continue to rise over the intermediate term. With this view, we reduced our weighting in Interest Rate Sensitive Fixed Income to an underweight position following the election.

• While long-term U.S. interest rates may rise further, we believe that rates will likely remain relatively low by historical standards as global growth is relatively slow and U.S. rates remain attractive in the global sovereign bond market (see charts below of German and Japanese bond yields).






Long Treasury

Barclays U.S. Long Treasury Index Yield 2016 – 2017

3






German Bund

10 Year German Bund Yield 2016 - 2017

4






Japanese Bonds

10 Year Japanese Government Bond Yield 2016 - 2017

5






High Yield

High Yield • After a weak 2015, the high yield market had a strong rally in 2016 with a return of over

17%. The rally was due to a number of factors including a recovery in oil prices and other commodities off their lows, strong global demand for higher yielding assets, and continued low default rates outside of the energy sector.

• Yields and credit spreads in the high yield bond market compressed significantly in 2016. As a result, the market is no longer cheap and, more likely, fairly valued.

• We have had an unusually long credit cycle, which began with an upturn in 2009. With an improved business outlook and strong global demand for yield buoying the high yield market, we believe that defaults will likely remain low for the foreseeable future and the credit cycle will be elongated.

• We are underweight High Yield with a weighting of 3.3% vs. an interim SAA target of 4.3%. Our underweight reflects our view that the Opportunistic Debt asset class will likely deliver higher returns than the high yield bond market over the long-term, particularly following the recent compression in spreads. ASRS’ investments in Opportunistic Debt are primarily in distressed corporate debt both in the U.S. and Europe that tends to exhibit a correlation with the broader credit markets. Overall, we believe we have ample exposure to credit in the total fund.






High Yield Credit Spread

Barclays US Corporate High Yield Index Option Adjusted Spread (OAS) 2016 – 2017

7






High Yield Yield-to-Worst

Barclays US Corporate High Yield Index Yield-to-Worst 2016 – 2017

8






Private Debt

Private Debt • We believe the Private Debt asset class offers the most attractive opportunity in the fixed

income markets with double-digit yields readily available for investors willing to accept illiquidity. The market opportunity is principally driven by regulatory constraints that make it unattractive for banks to hold illiquid loans or other debt of below investment-grade credit quality.

• In the past several years, regulatory constraints limiting the ability of banks to make below investment-grade, illiquid loans (typically to middle market companies) have become more severe due to a number of policies: the adoption of Basel III, Dodd-Frank financial regulation and new “Leveraged Lending Guidelines” of US bank regulators.

• It is possible that the new Trump administration may ease some regulatory burdens on banks that could result in fewer opportunities for private lenders in some situations. However, we believe that the primary regulatory constraints on banks, which are driven by international banking requirements, will remain intact.

• Business Development Companies (“BDCs”), a competing source of illiquid loans, have pulled back on lending due to their depressed equity valuations. However, a rally this year in the stock prices of BDC’s has enabled some to raise additional equity for new lending.





CommentaryTrendsSupply and DemandCapital Markets Dynamics











Commentary

Property markets are generally moving to the latter stages of the real estatecycle but expansionary �scal policies may extend this for the foreseeablefuture

Fundamentals leads us to emphasize apartments, industrial properties,medical o�ce buildings, senior housing, self-storage, and student housing fordemographic and macro policy reasons

Certain retail categories require a substantial discount because of weakdemand fundamentals and the rapid growth of e-commerce salesFor sale housing remains a potential target for opportunistic investing because�nancing and entitlement constraints have kept the market under-suppliedSingle-family residential rental market is a potential target for investing due tonew household formations reaching 2001 levels, low availability of mortgagecredit, and an under-supplied market

CMBS spreads have narrowed but this is generally due to increasing Treasuryyields, particularly since the presidential election

Dry powder remains at cyclical highs globally and North America representingmore than half of total






Real Estate Cyle Overview






New Household Formation






Occupancy Trends and New Supply

Multifamily (As of 12/31/16)







O�ce (As of 12/31/16)







Retail (As of 12/31/16)







Industrial (As of 12/31/16)






Cap Rate Trends






Credit Availability






Real Estate Dry Powder





Commentary

Bottoms up model shows a modest expected decrease

�at/down across groups

Top down model also shows a moderate expected decline

projected global growth, o�set by dollar strength is negative for commodities





Bottoms up model





Top down model

1

1http://libertystreeteconomics.newyorkfed.org/2016/03/what-tracks-commodity-prices.html03/27/2017 House Views and Portfolio Positioning 66 / 77




ASRS Returns

−0.2

0.0

0.2

0.4

1980 1990 2000 2010

Ann

ual R

etur

n series

roll_1

roll_10

roll_20

ASRS Total Fund One Ten and Twenty Year Rolling Returns





Asset Class One Year Returns

−8.75 −27 38.8 19.52 −15.65 37.54 20.7 8.91 7.11 10.74 31.31 −50.27 26.45 24.33 −10.86 −7.66 −1.84 −22.77 −26.5 15.95

12.49 0.37 1.25 2.79 −4.03 3.87 25.33 10.79 3.68 12.13 −3.3 −22.07 56.26 17.51 6.94 11.83 8.38 2.8 −8.3 21.83

10.88 5.82 0.01 12.51 7.96 11.17 8.06 3.21 1.72 6.2 3.6 −7.43 22.92 7.93 10.37 6.41 1.42 6.54 −1.49 6.42

18.71 7.76 −0.84 17.35 4.41 17.37 3.18 6.82 6.22 3.42 9.56 12.34 −5.67 4.74 32.53 3.33 −5.45 22.8 3.72 −4.64

10.37 6.27 1.1 13.44 7.67 9.91 4.54 2.43 2.74 5.54 7.3 2.06 9.32 4.93 8.37 3.12 0.15 5.05 1.5 1.42

70.64 −28.85 −2.42 −13.57 74.3 26.44 36.5 17.05 33.21 −56.17 91.63 20.91 −0.11 0.28 −6.01 5.01 −23.41 29.46

25.95 −9.1 −13.97 −9.2 78.31 28.37 25.54 17.36 −8.06 −52.16 68.74 28.84 −6.4 11.25 26.26 −2.42 −5.45 17.53

15.48 4.74 25.58 −17.4 −18.98 −17.46 53.58 18.68 17.41 21.07 0.84 −50.22 54.58 20 −7.45 9.84 19.28 −0.03 −15.18 15.75

34.95 −17.11 37.46 −0.37 7.86 −19.51 55.69 17.6 15.2 8.64 −9.46 −42.54 64.66 31.07 5.14 14.65 32.3 7.75 −9.1 34.97

36.53 2.13 30.98 8.93 2.71 −18.66 49.72 12.14 17.35 9.68 −4.74 −42 67 32.76 2.55 14.57 26.58 11.14 −9.99 31.73

35.01 19.74 11.73 −8.2 −9.51 −22.68 38.52 6.98 8.4 11.97 −3.6 −43.32 53.62 22.57 5.12 13.46 25.37 15.51 −6.19 24.98

Commodities

High Yield

Investment Grade

Long Treasury

Barclays Agg

EM

EAFE Small

EAFE

S&P 600 (small)

S&P 400 (mid)

S&P 500

Feb

199

8

Feb

199

9

Feb

200

0

Feb

200

1

Feb

200

2

Feb

200

3

Feb

200

4

Feb

200

5

Feb

200

6

Feb

200

7

Feb

200

8

Feb

200

9

Feb

201

0

Feb

201

1

Feb

201

2

Feb

201

3

Feb

201

4

Feb

201

5

Feb

201

6

Feb

201

7

Date

−50

0

50

Return

One Year Returnsfor indicated end dates





Asset Class Hold Period Returns

15.95/1.16 −13.02/0.66 −9.82/0.6 −5.87/0.55 0.98/1.18 0.44/1.09

21.83/1.22 4.72/1.15 6.84/1.39 7.49/2.06 7.48/3.41 7.03/3.89

6.42/1.06 3.76/1.12 3.81/1.21 5.4/1.69 6.14/2.75 6.04/3.23

−4.64/0.95 6.69/1.21 3.48/1.19 6.7/1.91 7.33/3.33 7.47/4.22

1.42/1.01 2.64/1.08 2.24/1.12 4.28/1.52 5.21/2.37 5.3/2.81

29.46/1.29 1.35/1.04 −0.37/0.98 2.86/1.33 6.25/2.8 NA/NA

17.53/1.18 2.74/1.08 8.78/1.52 3.15/1.36 7.21/3.26 NA/NA

15.75/1.16 −0.62/0.98 5.16/1.29 1.03/1.11 2.75/1.59 4.49/2.41

34.97/1.35 9.75/1.32 14.93/2.01 9/2.37 9.52/4.69 10.39/7.21

31.73/1.32 9.64/1.32 13.83/1.91 9.15/2.4 9.56/4.72 11.37/8.62

24.98/1.25 10.63/1.35 14.01/1.93 7.62/2.08 5.3/2.41 7.62/4.35

Commodities

High Yield

Investment Grade

Long Treasury

Barclays Agg

EM

EAFE Small

EAFE

S&P 600 (small)

S&P 400 (mid)

S&P 500

1 Year 3 Year 5 Year 10 Year 17 Year 20 Year

Hold Period

Ann

ualiz

ed R

etur

n/G

row

th o

f $

−10

0

10

20

30

Return

Annualized Returns and Growth of a Dollarfor hold periods ending Feb 2017





Asset Class Volatility

11.84 13.63 13.28 17.93 16.61 16.36

5.01 6.07 5.38 10.75 9.69 9.18

5.03 4.12 4.21 6.05 5.56 5.38

11.98 11.61 11.83 14.15 12.65 12.07

3.49 2.94 2.9 3.29 3.47 3.44

16.09 16.14 15.37 23.51 22.42

13.28 12.06 12.94 19.83 18.34

10.5 12.13 13.18 18.64 16.96 16.91

15.12 14.78 13.6 19.49 18.57 19.05

11.29 12.1 11.65 18.07 17.1 17.72

8.1 10.4 10.24 15.3 14.84 15.26

Commodities

High Yield

Investment Grade

Long Treasury

Barclays Agg

EM

EAFE Small

EAFE

S&P 600 (small)

S&P 400 (mid)

S&P 500

1 Year 3 Year 5 Year 10 Year 17 Year 20 Year

Hold Period

Vo

latilit

y

5

10

15

20

Volatility

Volatilityfor hold periods ending Feb 2017





One Year Correlation

−1 −0.8 −0.6 −0.4 −0.2 0 0.2 0.4 0.6 0.8 1

S&

P 5

00

S&

P 4

00 (

mid

)

S&

P 6

00 (

smal

l)

EA

FE

EA

FE

Sm

all

EM

Bar

clay

s A

gg

Long

Tre

asur

y

Inve

stm

ent G

rade

Hig

h Y

ield

Com

mod

ities

S&P 500

S&P 400 (mid)

S&P 600 (small)

EAFE

EAFE Small

EM

Barclays Agg

Long Treasury

Investment Grade

High Yield

Commodities

1 Year Correlation Matrix





Three Year Correlation

−1 −0.8 −0.6 −0.4 −0.2 0 0.2 0.4 0.6 0.8 1

S&

P 5

00

S&

P 4

00 (

mid

)

S&

P 6

00 (

smal

l)

EA

FE

EA

FE

Sm

all

EM

Bar

clay

s A

gg

Long

Tre

asur

y

Inve

stm

ent G

rade

Hig

h Y

ield

Com

mod

ities

S&P 500

S&P 400 (mid)

S&P 600 (small)

EAFE

EAFE Small

EM

Barclays Agg

Long Treasury

Investment Grade

High Yield

Commodities






Five Year Correlation

−1 −0.8 −0.6 −0.4 −0.2 0 0.2 0.4 0.6 0.8 1

S&

P 5

00

S&

P 4

00 (

mid

)

S&

P 6

00 (

smal

l)

EA

FE

EA

FE

Sm

all

EM

Bar

clay

s A

gg

Long

Tre

asur

y

Inve

stm

ent G

rade

Hig

h Y

ield

Com

mod

ities

S&P 500

S&P 400 (mid)

S&P 600 (small)

EAFE

EAFE Small

EM

Barclays Agg

Long Treasury

Investment Grade

High Yield

Commodities






Ten Year Correlation

−1 −0.8 −0.6 −0.4 −0.2 0 0.2 0.4 0.6 0.8 1

S&

P 5

00

S&

P 4

00 (

mid

)

S&

P 6

00 (

smal

l)

EA

FE

EA

FE

Sm

all

EM

Bar

clay

s A

gg

Long

Tre

asur

y

Inve

stm

ent G

rade

Hig

h Y

ield

Com

mod

ities

S&P 500

S&P 400 (mid)

S&P 600 (small)

EAFE

EAFE Small

EM

Barclays Agg

Long Treasury

Investment Grade

High Yield

Commodities






Seventeen Year Correlation

−1 −0.8 −0.6 −0.4 −0.2 0 0.2 0.4 0.6 0.8 1

S&

P 5

00

S&

P 4

00 (

mid

)

S&

P 6

00 (

smal

l)

EA

FE

EA

FE

Sm

all

EM

Bar

clay

s A

gg

Long

Tre

asur

y

Inve

stm

ent G

rade

Hig

h Y

ield

Com

mod

ities

S&P 500

S&P 400 (mid)

S&P 600 (small)

EAFE

EAFE Small

EM

Barclays Agg

Long Treasury

Investment Grade

High Yield

Commodities






Twenty Year Correlation

−1 −0.8 −0.6 −0.4 −0.2 0 0.2 0.4 0.6 0.8 1

S&

P 5

00

S&

P 4

00 (

mid

)

S&

P 6

00 (

smal

l)

EA

FE

Bar

clay

s A

gg

Long

Tre

asur

y

Inve

stm

ent G

rade

Hig

h Y

ield

Com

mod

ities

S&P 500

S&P 400 (mid)

S&P 600 (small)

EAFE

Barclays Agg

Long Treasury

Investment Grade

High Yield

Commodities



Portfolio PositioningTotal Fund Attribution

Public Fixed Income PerformancePublic Equity Performance

Private Markets PerformancePublic Markets Returns

LTD Plan

Investment Report


March 31, 2017

Investment Report 1 / 76




LTD Plan

Outline

1 Portfolio Positioning

2 Total Fund Attribution

3 Public Fixed Income Performance

4 Public Equity Performance

5 Private Markets Performance

6 Public Markets Returns

7 LTD Plan





LTD Plan

Fiscal Year Performance

‐2.00%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

$33.50

$34.00

$34.50

$35.00

$35.50

$36.00

$36.50

Total Fund Fiscal Year Performance

Market Value FY Return





LTD Plan

Total Fund Positioning

Total Fund Positioning March 10, 2017

All Private Markets asset classes' market values are reported on a quarter-lag basis and adjusted to include the current quarter's cash flow.

Interest Rate Sensitive 11%

US High Yield 3%

Opportunistic Debt 4%

Private Debt 9%

Domestic Equity 25%

International Equity 22%

Private Equity 8%


1%

Public Opprtunistic Equity

1% Commodities

1%

Real Estate 9%

Farmland & Timber 1%

Infrastructure 1%

Risk Factors 2%


3%

Cash 0%

Total Fund Composition

-0.9%

-1.1%

3.8%

0.5%

-1.6%

0.9%

0.6%

-1.1%

0.5%

0.9%

0.0%

-3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0%


US High Yield

Opportunistic Debt

Private Debt

Domestic Equity


Private Equity


Public Opportunistic Equity

Commodities

Real Estate

Farmland & Timber

Infrastructure

Risk Factors


Cash

Variance from Interim SAA Policy *





LTD Plan

Asset Allocation

Total Fund

Active Passive Active Passive

Master Cash Operating Cash (non-assetized) 2,601,828 2,601,828 0.01%

Cash Total $2,601,828 0.01%

Total Cash 0.00%

Treasuries (Long Duration) Total $0 0.00%

Long Treasuries (Range: 0% - 10%) 0.00%

ASRS: Phoenix Enhanced Passive F2 1,861,969,453 1,861,969,453 5.19%

Blackrock: San Francisco Passive (US Debt Index) 1,969,810,317 1,969,810,317 5.49%

Assetized Cash US Treasuries (Treasury Basket) 77,274,287 77,274,287 0.22%

Core Fixed Income Total $3,909,054,057 10.89%

Interest Rate Sensitive $3,909,054,057 10.89%

Interest Rate Sensitive Policy 11.00%

Columbia: Minneapolis Active 761,430,928 761,430,928 2.12%

JP Morgan: Indianapolis Active 398,901,969 398,901,969 1.11%

High Yield Fixed Income Total $1,160,332,904 3.23%

High Yield Policy 4.00%

Opportunistic Debt 1,347,595,719 $1,347,595,719 3.76%

Opportunistic Debt Policy 0.00%

Private Debt Total 3,204,106,840 $3,204,106,840 8.93%

Private Debt (Range: 8% - 12%) 10.00%

Fixed Income Total $9,621,089,520 26.82%

Total Fixed Income (Range: 18% - 35%) 25.00%

LSV: Chicago Active (Value) 671,893,979 671,893,979 1.87%

ASRS: Phoenix Passive E2 5,074,555,504 5,074,555,504 14.14%

ASRS: Phoenix Enhanced Passive E7 471,108,138 471,108,138 1.31%


Assetized Cash S&P 500 77,274,287 77,274,287 0.22%

Large Cap Equity Total $6,877,526,578 19.17%

U.S. Equity Large Cap Policy 20.00%

Wellington: Boston Active (Core) 228,462,584 228,462,584 0.64%

ASRS: Phoenix Passive E3 (Growth) 345,607,298 345,607,298 0.96%

ASRS: Phoenix Passive E4 (Value) 348,911,124 348,911,124 0.97%

Mid Cap Equity Total $922,981,006 2.57%

U.S. Equity Mid Cap Policy 3.00%

TimesSquare: New York Active (Growth) 353,019,396 353,019,396 0.98%

DFA: Santa Monica Active (Value) 280,895,459 280,895,459 0.78%

ASRS: Phoenix Passive E6 369,951,767 369,951,767 1.03%

Assetized Cash Russell 2000 25,758,096 25,758,096 0.07%

Small Cap Equity Total $1,029,624,718 2.87%

U.S. Equity Small Cap Policy 3.00%

U.S. Equity Total $8,830,132,301 24.61%

U.S. Equity (Range: 16% - 36%) 26.00%

Brandes: San Diego Active (EAFE) 603,815,012 603,815,012 1.68%

American Century Active (EAFE) 552,513,997 552,513,997 1.54%

Trinity Street Active (EAFE) 343,614,262 343,614,262 0.96%

Thompson Siegel Walmsley Active (EAFE) 316,121,203 316,121,203 0.88%

Blackrock: San Francisco Passive (EAFE) 4,293,103,880 4,293,103,880 11.97%

Assetized Cash MSCI EAFE 77,274,287 77,274,287 0.22%

Large Cap Developed Non-US Equity Total $6,186,959,198 17.24%

Large Cap Developed Policy 17.00%

AQR: Greenwich Active (EAFE SC) 103,987,198 103,987,198 0.29%

DFA: Santa Monica Active (EAFE SC) 118,348,807 118,348,807 0.33%

Franklin Templeton: San Mateo Active (EAFE SC) 111,643,848 111,643,848 0.31%

Blackrock: San Francisco Passive (EAFE SC) 136,677,006 136,677,006 0.38%

Small Cap Developed Non-US Equity Total $470,659,210 1.31%

Small Cap Developed Policy 2.00%

William Blair: Chicago Active (EM) 502,273,031 502,273,031 1.40%

Eaton Vance: Boston Active (EM) 307,126,045 307,126,045 0.86%

LSV: Chicago Active (EM) 139,138,407 139,138,407 0.39%

Blackrock: San Francisco Passive (EM) 414,650,570 414,650,570 1.16%

Emerging Markets Equity Total $1,363,188,052 3.80%

Emerging Markets Policy 5.00%

Non-US Equity Total $8,020,806,460 22.35%

Non-US Equity (Range: 14% - 34%) 24.00%

ASRS: Phoenix Risk Factor Portfolio 661,098,258 661,098,258 1.84%

Public Equity Total $17,513,438,207 48.81%

Private Equity Total 2,880,575,109 $2,880,575,109 8.03%

Private Equity (Range: 6% - 10%) 8.00%

Private Opportunistic Equity 330,909,184 $330,909,184 0.92%

Private Opportunistic Equity Policy: 0.00%

Public Opportunistic Equity 211,971,469 $211,971,469 0.59%

Public Opportunistic Equity Policy: 0.00%

Equity Total $20,936,893,969 58.35%

Total Equity (Range: 48% - 65%) 58.00%

Gresham: New York 428,473,444 428,473,444 1.19%

Commodities Total $428,473,444 1.19%

Commodities (Range: 0% - 4%) 2.00%

Real Estate Total 3,200,043,945 $3,200,043,945 8.92%

Real Estate (Range: 8% - 12%) 10.00%

Infrastructure Total 336,307,595 $336,307,595 0.94%

Infrastructure (Range: 0% - 3%) 0.00%

Farmland & Timber Total 188,287,532 $188,287,532 0.52%

Farmland & Timber (Range: 0% - 3%) 0.00%

Inflation Linked Total $4,153,112,517 11.58%

Inflation Linked (Range: 10% - 16%) 12.00%

Bridgewater 1,165,758,172 1,165,758,172 3.25%

Multi-Asset Class Strategies 1,165,758,172 3.25%

Multi-Asset Class (Range: 0% - 12%) 5.00%

$5,712,035,463 $3,911,655,885 $8,056,484,925 $12,880,409,044 $4,153,112,517 $1,165,758,172

15.92% 10.90% 22.45% 35.90% 11.58% 3.25%

ASRS Market Value Report Friday, March 10, 2017

Account Manager Account Manager StyleFixed Income Equity Inflation

LinkedMulti-Asset Market Value %

TOTAL Amounts$35,879,456,006 100.00%

TOTAL Percent





LTD Plan

Asset Allocation (Continued)

Total Fund

Active Passive Active Passive

Master Cash Operating Cash (non-assetized) 2,601,828 2,601,828 0.01%

Cash Total $2,601,828 0.01%

Total Cash 0.00%

Treasuries (Long Duration) Total $0 0.00%

Long Treasuries (Range: 0% - 10%) 0.00%

ASRS: Phoenix Enhanced Passive F2 1,861,969,453 1,861,969,453 5.19%

Blackrock: San Francisco Passive (US Debt Index) 1,969,810,317 1,969,810,317 5.49%

Assetized Cash US Treasuries (Treasury Basket) 77,274,287 77,274,287 0.22%

Core Fixed Income Total $3,909,054,057 10.89%

Interest Rate Sensitive $3,909,054,057 10.89%

Interest Rate Sensitive Policy 11.00%

Columbia: Minneapolis Active 761,430,928 761,430,928 2.12%

JP Morgan: Indianapolis Active 398,901,969 398,901,969 1.11%

High Yield Fixed Income Total $1,160,332,904 3.23%

High Yield Policy 4.00%

Opportunistic Debt 1,347,595,719 $1,347,595,719 3.76%

Opportunistic Debt Policy 0.00%

Private Debt Total 3,204,106,840 $3,204,106,840 8.93%

Private Debt (Range: 8% - 12%) 10.00%

Fixed Income Total $9,621,089,520 26.82%

Total Fixed Income (Range: 18% - 35%) 25.00%

LSV: Chicago Active (Value) 671,893,979 671,893,979 1.87%

ASRS: Phoenix Passive E2 5,074,555,504 5,074,555,504 14.14%



Assetized Cash S&P 500 77,274,287 77,274,287 0.22%

Large Cap Equity Total $6,877,526,578 19.17%

U.S. Equity Large Cap Policy 20.00%

Wellington: Boston Active (Core) 228,462,584 228,462,584 0.64%

ASRS: Phoenix Passive E3 (Growth) 345,607,298 345,607,298 0.96%

ASRS: Phoenix Passive E4 (Value) 348,911,124 348,911,124 0.97%

Mid Cap Equity Total $922,981,006 2.57%

U.S. Equity Mid Cap Policy 3.00%

TimesSquare: New York Active (Growth) 353,019,396 353,019,396 0.98%

DFA: Santa Monica Active (Value) 280,895,459 280,895,459 0.78%

ASRS: Phoenix Passive E6 369,951,767 369,951,767 1.03%

Assetized Cash Russell 2000 25,758,096 25,758,096 0.07%

Small Cap Equity Total $1,029,624,718 2.87%

U.S. Equity Small Cap Policy 3.00%

U.S. Equity Total $8,830,132,301 24.61%

U.S. Equity (Range: 16% - 36%) 26.00%

Brandes: San Diego Active (EAFE) 603,815,012 603,815,012 1.68%

American Century Active (EAFE) 552,513,997 552,513,997 1.54%

Trinity Street Active (EAFE) 343,614,262 343,614,262 0.96%

Thompson Siegel Walmsley Active (EAFE) 316,121,203 316,121,203 0.88%

Blackrock: San Francisco Passive (EAFE) 4,293,103,880 4,293,103,880 11.97%

Assetized Cash MSCI EAFE 77,274,287 77,274,287 0.22%

Large Cap Developed Non-US Equity Total $6,186,959,198 17.24%

Large Cap Developed Policy 17.00%

AQR: Greenwich Active (EAFE SC) 103,987,198 103,987,198 0.29%

DFA: Santa Monica Active (EAFE SC) 118,348,807 118,348,807 0.33%

Franklin Templeton: San Mateo Active (EAFE SC) 111,643,848 111,643,848 0.31%

Blackrock: San Francisco Passive (EAFE SC) 136,677,006 136,677,006 0.38%

Small Cap Developed Non-US Equity Total $470,659,210 1.31%

Small Cap Developed Policy 2.00%

William Blair: Chicago Active (EM) 502,273,031 502,273,031 1.40%

Eaton Vance: Boston Active (EM) 307,126,045 307,126,045 0.86%

LSV: Chicago Active (EM) 139,138,407 139,138,407 0.39%

Blackrock: San Francisco Passive (EM) 414,650,570 414,650,570 1.16%

Emerging Markets Equity Total $1,363,188,052 3.80%

Emerging Markets Policy 5.00%

Non-US Equity Total $8,020,806,460 22.35%

Non-US Equity (Range: 14% - 34%) 24.00%

ASRS: Phoenix Risk Factor Portfolio 661,098,258 661,098,258 1.84%

Public Equity Total $17,513,438,207 48.81%

Private Equity Total 2,880,575,109 $2,880,575,109 8.03%

Private Equity (Range: 6% - 10%) 8.00%

Private Opportunistic Equity 330,909,184 $330,909,184 0.92%

Private Opportunistic Equity Policy: 0.00%

Public Opportunistic Equity 211,971,469 $211,971,469 0.59%

Public Opportunistic Equity Policy: 0.00%

Equity Total $20,936,893,969 58.35%

Total Equity (Range: 48% - 65%) 58.00%

Gresham: New York 428,473,444 428,473,444 1.19%

Commodities Total $428,473,444 1.19%

Commodities (Range: 0% - 4%) 2.00%

Real Estate Total 3,200,043,945 $3,200,043,945 8.92%

Real Estate (Range: 8% - 12%) 10.00%

Infrastructure Total 336,307,595 $336,307,595 0.94%

Infrastructure (Range: 0% - 3%) 0.00%

Farmland & Timber Total 188,287,532 $188,287,532 0.52%

Farmland & Timber (Range: 0% - 3%) 0.00%

Inflation Linked Total $4,153,112,517 11.58%

Inflation Linked (Range: 10% - 16%) 12.00%

Bridgewater 1,165,758,172 1,165,758,172 3.25%

Multi-Asset Class Strategies 1,165,758,172 3.25%

Multi-Asset Class (Range: 0% - 12%) 5.00%

$5,712,035,463 $3,911,655,885 $8,056,484,925 $12,880,409,044 $4,153,112,517 $1,165,758,172

15.92% 10.90% 22.45% 35.90% 11.58% 3.25%

ASRS Market Value Report Friday, March 10, 2017

Account Manager Account Manager StyleFixed Income Equity Inflation

LinkedMulti-Asset Market Value %

TOTAL Amounts$35,879,456,006 100.00%

TOTAL Percent





LTD Plan

Asset Allocation (Continued)

Actual Policy Band check

Asset Class Portfolio Target Range Adj Policy Range % diff $ diff Actual - Adj Policy

Tactical Cash 0.00% 0% (0-3%) 0.00% (0-3%) 0.00% 0

Cash 0.01% 0% 0.00% 0.01% 2,601,828

Total Cash 0.01% 0% (0-3%) 0.00% (0-3%) 0.01% $2,601,827.84

Interest Rate Sensitive 10.89% 11% 11.78% -0.89% -319,167,862

High Yield 3.23% 4% 4.29% -1.05% -$377,202,339

Opportunistic Debt 3.76% 0% 0.00% 3.76% $1,347,595,719

Private Debt 8.93% 10% (8-12%) 8.93% (7-11%) 0.00% $0

Total Fixed Income 26.82% 25% (18-35%) 25.00% (18-35%) 1.82% $651,225,519 OK

Large Cap 19.17% 20% 18.40% 0.77% $277,491,455

Mid Cap 2.57% 3% 2.76% -0.19% -$67,459,901

Small Cap 2.87% 3% 3.00% -0.13% -$46,758,962

US Equity 24.61% 26% (16-36%) 24.16% (14-34%) 0.46% $163,272,592 OK

Developed Large Cap 17.24% 17% 17.00% 0.25% $88,152,271

Developed Small Cap 1.31% 2% 2.00% -0.69% -$246,929,910

Emerging Markets 3.80% 5% 5.00% -1.20% -$430,784,748

Non-US Equity 22.35% 24% (14-34%) 24.00% (14-34%) -1.64% -$589,562,388 OK

Total Equity Transition 0.00% 0% 0.00% 0.00% $0

Risk Factors 1.84% 0% 1.84% 0.00% $0

Total Public Equity 48.81% 1.85% 0.00% $0

Private Equity 8.03% 8% 8.00% (6-10%) 0.03% $10,218,628 OK

Private Opportunistic Equity 0.92% 0% 0.00% 0.92% $330,909,184

Public Opportunistic Equity 0.59% 0% 0.00% 0.59% $211,971,469

Total Equity 58.35% 58% (48-65%) 58.00% (48-65%) 0.35% $126,809,486 OK

Commodities 1.19% 2% (0-4%) 2.00% (0-4%) -0.81% -$289,115,676 OK

Real Estate 8.92% 10% (8-12%) 10.00% (8-12%) -1.08% -$387,901,655 OK

Infrastructure 0.94% 0% (0-3%) 0.00% (0-3%) 0.94% $336,307,595 OK

Farmland & Timber 0.52% 0% (0-3%) 0.00% (0-3%) 0.52% $188,287,532 OK

Opportunistic I/L 0.00% 0% 0.00% 0.00% $0

Total Inflation Linked 11.58% 12% (10-14%) 12.00% -0.42% -$152,422,204 OK

Multi-Asset Strategies 3.25% 5% (0-12%) 5.00% (0-12%) -1.75% -$628,214,628 OK

Total 100.00% 100.00% 100.00% 0.00% $0

Internally Managed Portfolios:

*Interim SAA includes a proration of unfunded Private Equity, Private Debt, and Real Estate $9,054,708,996 25%

**Private Equity is prorated to domestic equity; Real Estate is prorated to equity, commodities,

and fixed income; Private Debt is prorated to Interest Rate Sensitive and High Yield

Opportunistic definitions:

An investment in a category that is not included in the ASRS Asset Allocation

policy and represents an investment opportunity that is tactical in nature.

Opportunistic investments have a 0% target (0%-10% range), regardless of asset class.

Total Opportunistic

Opportunistic Debt $1,347,595,719 3.8%

Private Opportunistic Equity $330,909,184 0.9%

Public Opportunistic Equity $211,971,469 0.6%

Opportunistic IL $0 0.0%

$1,890,476,373 5.3%

SAA Policy Interim SAA Actual - Interim SAA





LTD Plan

Total Fund Return vs Benchmark

0.9

1.2

1.5

1.8

Jan 2008 Jan 2010 Jan 2012 Jan 2014 Jan 2016

Gro

wth

of a

Dol

lar

Policy.Benchmark

Total.Fund

Total Fund & Interim Policy Benchmark Performance





LTD Plan

Total Fund Attribution

−2%

0%

2%

4%

Jan 2008 Jan 2010 Jan 2012 Jan 2014 Jan 2016

Cum

ulat

ive

Exc

ess

Ret

urn

(Lin

e)

Attribution

Allocation

Selection

Interaction

Residual

Total Fund Brinson Attribution

$0

$500

$1,000

One Year Three Year Five Year Ten Year

Period

in M

illio

ns

Total

One Year

Three Year

Five Year

Ten Year

Total Fund $ Value Add by Trailing Periods





LTD Plan

Total Fund Allocation & Selection A�ect

−0.5%

0.0%

0.5%

Jan 2010 Jan 2012 Jan 2014 Jan 2016

Allo

catio

n A

ffect

Total Fund Allocation Affect Rolling 3 Year

−0.25%

0.00%

0.25%

0.50%

Jan 2010 Jan 2012 Jan 2014 Jan 2016

Sel

ectio

n A

ffect

Total Fund Selection Affect Rolling 3 Year





LTD Plan

Historical Strategic Asset Allocation

0%

25%

50%

75%

100%

1980 1990 2000 2010

Targ

et W

eigh

t

Asset Class

Domestic.Equity

International.Equity

Multi.Asset.Class

Private.Debt

Private.Equity

Public.Fixed.Income

Public.Inflation.Linked

Real.Estate

Historical Strategic Asset Allocation





LTD Plan

Allocation & Active Weights

0%

25%

50%

75%

100%

Jan 2008Jan 2010Jan 2012Jan 2014Jan 2016

Wei

ght

Asset Class

Domestic Equity


Public Inflation−Linked

Public Fixed Income

Cash

Multi−Asset Class

Private Markets

Quarterly Weights by Asset Class

−10%

−5%

0%

5%

10%

Jan 2008Jan 2010Jan 2012Jan 2014Jan 2016

Act

ive

Wei

ght

Asset Class

Cash

Domestic Equity

Farmland & Infrastructure


Multi−Asset Class

Opportunistic Debt

Private Debt

Private Equity


Public Fixed Income

Public Inflation−Linked

Real Estate

Total Fund Active Weights Relative to Interim SAA Benchmark





LTD Plan

Private Markets Since Inception IRR

0%

5%

10%

15%

20%

Private E

quity

Current P

rivate E

quity

Legacy P

rivate E

quity

Private O

pp. Equity

Real Esta

te

Current R

eal Esta

te

Legacy R

eal Esta

te

Opp. Debt

Private D

ebt

Farmland

IRR Benchmark

IRR

Since Inception IRR and Dollar Matched Benchmark IRR





LTD Plan

Private Markets Public Market Equivalent

Private Equity

Real Estate

Opp. Equity

Opp. Debt

Private Debt

Farmland

Current Real Estate

Legacy Real Estate

Legacy Private Equity

Current Private Equity

PME is > 1.2

PME is 1.05 to 1.2

PME is .95 to 1.05

PME is .8 to .95

PME is < .8

5

10

15

20

1.1 1.2 1.3 1.4 1.5 1.6

TVPI

Fund

IRR

Private Markets Summary





LTD Plan

Public Equity Commentary

Public equity had modest negative allocation e�ect and a larger negativeselection e�ect

The negative allocation e�ect was driven by an underweight to EM, whichoutperformed the total fund

The risk-factor portfolio outperformed the total fund and had a positive

allocation e�ect which o�set a slight underweight to US Large Cap which also

outperformed the total fund

The selection e�ect was driven by underperforming managers across equitysub-asset classes except US Large Cap

ASRS is reviewing its active manager roster and implementation strategy

Team has focused on improving the performance of the Internal portfolios

with meaningful results





LTD Plan

Public Equity Attribution

−0.50%

−0.25%

0.00%

2016.00 2016.25 2016.50 2016.75 2017.00

Date

Gro

wth

_of_

Dol

lar

Attribution

Selection

Allocation

Interaction

Brinson Return Attribution





LTD Plan

Public Equity Breakdown

−5%

0%

5%

2016.00 2016.25 2016.50 2016.75 2017.00

Date

Act

ive

Exp

osur

e / A

lloca

tion

Exc

ess

Ret

urn

Sub−Asset Class

EM

Intl.Dev

Pu.Opp

RFP

US.LC

US.MC

US.SC

Over/Under Weights & Cumulative Allocation Effect (Line)

−0.5%

0.0%

2016.00 2016.25 2016.50 2016.75 2017.00

Date

Sel

ectio

n E

ffect

Exc

ess

Ret

urn

Selection

EM

Intl.Dev

Pu.Opp

RFP

US.LC

US.MC

US.SC

Cumulative Selection Effect





LTD Plan

Internal �E� Portfolios 3 Year Performance

●

●

●

●

●●

●

●

●

●

●

●

● ●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●●

●

●

−8

−6

−4

−2

0

01/2015 01/2016 01/2017

Exc

ess

Ret

urn

in b

ps

E Portfolios Cumulative Excess Performance





LTD Plan

Public Fixed Income 10 Year Excess Performance

−3%

0%

3%

6%

2008 2010 2012 2014 2016

Exc

ess

Ret

urn

Public Fixed Income Cumulative Excess Return





LTD Plan

Total Public Fixed Income Performance

Public Fixed Income Performance Chart PackInvestment Management Division

Performance through January 31, 2017

Table 1: Table of Contents

Contents Manager PageTotal Public Fixed Income 2Interest Rate Sensitive 6

F2 8High Yield 11

Columbia 13JP Morgan 16

1





LTD Plan

Public Fixed Income Performance (Continued)

Total Public Fixed Income

12

510

20

Public Fixed IncomeBenchmark

Cumu

lative

Retur

n

Public Fixed Income Performance Summary

−0.04

0.00

0.04

Month

ly Retu

rn

Jul 75 Jan 80 Jan 84 Jan 88 Jan 92 Jan 96 Jan 00 Jan 04 Jan 08 Jan 12 Jan 16

−0.15

−0.10

−0.05

0.00

Drawd

own

Jan 97 Jan 00 Jan 03 Jan 06 Jan 09 Jan 12 Jan 15

0.98

1.00

1.02

1.04

1.06

Excess

Retur

n

Public Fixed Income Cumulative Relative Performance

Public Fixed Income/Benchmark

2





LTD Plan


0.00

0.02

0.04

0.06

0.08

0.10

Public Fixed IncomeBenchmark

Annua

lized R

eturn

Public Fixed Income Rolling 3 Year Performance

0.00

0.01

0.02

0.03

0.04

Annua

lized S

tandar

d Devi

ation

Jan 97 Jan 99 Jan 01 Jan 03 Jan 05 Jan 07 Jan 09 Jan 11 Jan 13 Jan 15 Jan 17

0.00.5

1.01.5

2.02.5

3.03.5

Annua

lized S

harpe

Ratio

0%

5%

10%

2007.5 2010.0 2012.5 2015.0 2017.5

Date

Growth

_of_D

ollar

Attribution

Selection

Allocation

Interaction


3





LTD Plan


−10%

0%

10%

2007.5 2010.0 2012.5 2015.0 2017.5

Date

Active

Expos

ure / A

llocatio

n Exce

ss Re

turn

Sub−Asset Class

IRS

HY

EMD


−2%

0%

2%

4%

2007.5 2010.0 2012.5 2015.0 2017.5

Date

Selec

tion Ef

fect E

xcess

Retur

n

Selection

IRS

HY

EMD

Cumulative Selection Effect

4





LTD Plan


−0.9%

−0.6%

−0.3%

0.0%

2007.5 2010.0 2012.5 2015.0 2017.5

Date

Interac

tion Ef

fect E

xcess

Retur

n

Interaction

IRS

HY

EMD

Cumulative Interaction Effect

0.0%

0.5%

1.0%

1.5%

2.0%

2010 2012 2014 2016

Date

36 Mo

nth An

nualize

d Exce

ss Re

turn

Attribution

Selection

Allocation

Interaction

Rolling 36 Month Attribution Analysis

5





LTD Plan



12

510

20

Interest.Rate.SensitiveBenchmarkF2BR.USDEBT

Cumu

lative

Retur

n

Interest Rate Sensitive Performance Summary

−0.04

0.00

0.04

Month

ly Retu

rn


−0.15

−0.10

−0.05

0.00

Drawd

own


0.98

0.99

1.00

1.01

1.02

1.03

Excess

Retur

n

Interest Rate Sensitive Cumulative Relative Performance

Interest.Rate.Sensitive.BenchmarkF2.BenchmarkBR.USDEBT.Benchmark

6





LTD Plan


Return Distribution Comparison

Return

BR.USDEBT

F2

Benchmark

Interest.Rate.Sensitive

−0.05 0.00 0.05 0.10

0.00

0.05

0.10

0.15

0.20

0.25

Interest.Rate.SensitiveBenchmarkF2

Annua

lized R

eturn

Interest Rate Sensitive Rolling 3 Year Performance

0.00

0.04

0.08

0.12

Annua

lized S

tandar

d Devi

ation


01

23

4

Annua

lized S

harpe

Ratio

7





LTD Plan


Oct 00 Jan 03 Jan 05 Jan 07 Jan 09 Jan 11 Jan 13 Jan 15 Jan 17

0.995

1.000

1.005

1.010

1.015

1.020

1.025

ln(Valu

e)

F2 Cumulative Relative Performance

F2/LBA

1.00

1.02

1.04

2000 2005 2010 2015

Monthly Data

Excess

Retur

n

F2 Actual Excess vs Expected Excess +/−1 & 2 Std Dev

8





LTD Plan


0.00

0.02

0.04

0.06

0.08

F2LBA

Annua

lized R

eturn

F2 Rolling 3 year Performance

0.00

0.01

0.02

0.03

0.04

0.05

Annua

lized S

tandar

d Devi

ation

Oct 00 Jan 02 Jan 04 Jan 06 Jan 08 Jan 10 Jan 12 Jan 14 Jan 16

0.00.5

1.01.5

2.02.5

3.0

Annua

lized S

harpe

Ratio

−0.5%

0.0%

0.5%

1.0%

1.5%

Jan 2000 Jan 2005 Jan 2010 Jan 2015

Year

Rolling 12 Month Excess Return (Blue) & Tracking Error (Orange)

9





LTD Plan


−2

−1

0

1

2

3

Jan 2000 Jan 2005 Jan 2010 Jan 2015

Year

Inform

ation R

atio

F2 Rolling 12 Month Information Ratio

−1

0

1

2

Jan 2000 Jan 2005 Jan 2010 Jan 2015

Year

Inform

ation R

atio

F2 Rolling 36 Month Information Ratio

10





LTD Plan


High Yield

1.01.2

1.41.6

1.82.0

High.Yield.Fixed.IncomeBenchmarkColumbia.HYJPM.HY

Cumu

lative

Retur

n

High Yield Fixed Income Performance Summary

−0.04

0.00

0.02

0.04

0.06

Month

ly Retu

rn

Sep 09 Sep 10 Sep 11 Sep 12 Sep 13 Sep 14 Sep 15 Aug 16

−0.10

−0.06

−0.02

Drawd

own

Sep 09 Sep 10 Sep 11 Sep 12 Sep 13 Sep 14 Sep 15

0.92

0.94

0.96

0.98

1.00

1.02

1.04

Excess

Retur

n

High Yield Fixed Income Cumulative Relative Performance

High.Yield.Fixed.Income.BenchmarkColumbia.HY.BenchmarkJPM.HY.Benchmark

11





LTD Plan


Return Distribution Comparison

Return

JPM.HY

High.Yield.Fixed.Income

Columbia.HY

Benchmark

−0.04 −0.02 0.00 0.02 0.04 0.06

0.00

0.05

0.10

0.15

High.Yield.Fixed.IncomeBenchmarkColumbia.HYJPM.HY

Annua

lized R

eturn

High Yield Fixed Income Rolling 3 Year Performance

0.00

0.02

0.04

0.06

0.08

Annua

lized S

tandar

d Devi

ation

Sep 09 Sep 10 Sep 11 Sep 12 Sep 13 Sep 14 Sep 15 Aug 16

0.00.5

1.01.5

2.0

Annua

lized S

harpe

Ratio

12





LTD Plan


Oct 09 Oct 10 Oct 11 Oct 12 Oct 13 Oct 14 Oct 15 Sep 16

0.98

1.00

1.02

1.04

ln(Valu

e)

Columbia.HY Cumulative Relative Performance

Columbia.HY/BC HY

1.00

1.05

1.10

1.15

1.20

2011 2013 2015 2017

Monthly Data

Excess

Retur

n

Columbia.HY Actual Excess vs Expected Excess +/−1 & 2 Std Dev

13





LTD Plan


0.00

0.04

0.08

0.12

Columbia.HYBC HY

Annua

lized R

eturn

Columbia.HY Rolling 3 year Performance

0.00

0.02

0.04

0.06

Annua

lized S

tandar

d Devi

ation

Oct 09 Apr 10 Oct 10 Apr 11 Oct 11 Apr 12 Oct 12 Apr 13 Oct 13 Apr 14 Oct 14 Apr 15 Oct 15 Apr 16

0.00.5

1.01.5

2.0

Annua

lized S

harpe

Ratio

−6%

−3%

0%

3%

6%

Jan 2010 Jan 2012 Jan 2014 Jan 2016

Year


14





LTD Plan


−2

0

2

Jan 2010 Jan 2012 Jan 2014 Jan 2016

Year

Inform

ation R

atio

Columbia.HY Rolling 12 Month Information Ratio

−1

0

1

2

3

Jan 2010 Jan 2012 Jan 2014 Jan 2016

Year

Inform

ation R

atio

Columbia.HY Rolling 36 Month Information Ratio

15





LTD Plan


Jul 13 Jan 14 Jul 14 Jan 15 Jul 15 Jan 16 Jul 16 Dec 16

0.995

1.000

1.005

1.010

1.015

ln(Valu

e)

JPM.HY Cumulative Relative Performance

JPM.HY/BC HY

1.00

1.02

1.04

1.06

1.08

2014 2015 2016 2017

Monthly Data

Excess

Retur

n

JPM.HY Actual Excess vs Expected Excess +/−1 & 2 Std Dev

16





LTD Plan


−0.05

0.05

0.10

0.15

0.20

JPM.HYBC HY

Annua

lized R

eturn

JPM.HY Rolling 1 year Performance

0.00

0.02

0.04

0.06

0.08

Annua

lized S

tandar

d Devi

ation

Jul 13 Jan 14 Jul 14 Jan 15 Jul 15 Jan 16 Jul 16 Dec 16

−10

12

34

Annua

lized S

harpe

Ratio

−2%

−1%

0%

1%

2%

Jan 2014 Jan 2015 Jan 2016 Jan 2017

Year


17





LTD Plan


−2

−1

0

1

2

3

Jan 2014 Jan 2015 Jan 2016 Jan 2017

Year

Inform

ation R

atio

JPM.HY Rolling 12 Month Information Ratio

18





LTD Plan

Public Equity Performance

Public Equity PerformanceInvestment Management Division

Performance through January 31, 2017

Contents

Total Public Equity Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Public Equity Trailing Return Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Public Equity Decomposition of Excess Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Domestic Equity Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Domestic Equity Trailing Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Domestic Equity Decomposition of Excess Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

International Equity Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

International Equity Trailing Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

International Equity Decomposition of Excess Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

1





LTD Plan

Public Equity Performance (Continued)

Total Public Equity Performance


1.0

2.0

3.0 Public Equity

Benchmark

Gro

wth

of a

Dol

lar

Cumulative Performance


1.00

1.10

Exce

ss R

etur

n G

row

th o

f a D

olla

r

Cumulative Relative Performance

Public Equity/Benchmark

2





LTD Plan


Public Equity Trailing Return Performance

0%

5%

10%

One Year 3 Year 5 Year 10 Year

Annu

aliz

ed R

etur

n

Composite

Public Equity

Blended BM

Trailing Period Returns

0%

5%

10%

15%


Annu

aliz

ed S

tand

ard

Dev

iatio

n

Composite

Public Equity

Blended BM

Trailing Period Standard Deviation

3





LTD Plan


Public Equity Decomposition of Excess Return

−2%

0%

2%

4%

2007.5 2010.0 2012.5 2015.0

Date

Gro

wth

of a

Dol

lar

Attribution

Selection

Allocation

Interaction


−10%

−5%

0%

5%

10%

2007.5 2010.0 2012.5 2015.0

DateActiv

e Ex

posu

re /

Allo

catio

n Ex

cess

Ret

urn

Sub−Asset Class

US.LC

US.MC

US.SC

Intl.Dev

EM

RFP


4





LTD Plan


−2%

−1%

0%

1%

2014 2015 2016 2017

Date

Cum

ulat

ive E

xces

s R

etur

n (L

ine)

Attribution

Country

Currency

Industry

Risk.Indices

Specific

World

Style Factor Attibution

−0.25%

0.00%

0.25%

0.50%

2014 2015 2016 2017

DateCum

ulat

ive S

tyle

Fac

tors

/ Ex

cess

Ret

urn

Factor

Value

Size

Momentum

Volatility

Quality

Yield

Growth

Liquidity

Style Factor Breakout

5





LTD Plan


Domestic Equity Performance


12

34

5

Domestic EquityBenchmark

Gro

wth

of a

Dol

lar

Domestic Equity Cumulative Performance


1.00

1.10

Exce

ss R

etur

n G

row

th o

f a D

olla

r

Domestic Equity Cumulative Relative Performance

Domestic Equity/Benchmark

6





LTD Plan


Domestic Equity Trailing Returns

0%

5%

10%

15%


Annu

aliz

ed R

etur

n

Composite

Domestic Equity

Benchmark


0%

5%

10%

15%


Annu

aliz

ed S

tand

ard

Dev

iatio

n

Composite

Domestic Equity

Benchmark


7





LTD Plan


Domestic Equity Decomposition of Excess Return

−2%

−1%

0%

2014 2015 2016 2017

Date

Cum

ulat

ive E

xces

s R

etur

n (L

ine)

Attribution

Country

Currency

Industry

Risk.Indices

Specific

World


−0.3%

0.0%

0.3%

0.6%

0.9%

2014 2015 2016 2017

DateCum

ulat

ive S

tyle

Fac

tors

/ Ex

cess

Ret

urn

Factor

Growth

Liquidity

Momentum

Quality

Size

Value

Volatility

Yield


8





LTD Plan


International Equity Performance


1.0

2.0

3.0

International EquityBenchmark

Gro

wth

of a

Dol

lar

International Equity Cumulative Performance


1.00

1.10

1.20

Exce

ss R

etur

n G

row

th o

f a D

olla

r

International Equity Cumulative Relative Performance

International Equity/Benchmark

9





LTD Plan


International Equity Trailing Returns

0.0%

2.5%

5.0%

7.5%


Annu

aliz

ed R

etur

n

Composite


Benchmark


0%

5%

10%

15%

20%


Annu

aliz

ed S

tand

ard

Dev

iatio

n

Composite


Benchmark


10





LTD Plan


International Equity Decomposition of Excess Return

−2%

−1%

0%

1%

2%

2014 2015 2016 2017

Date

Cum

ulat

ive E

xces

s R

etur

n (L

ine)

Attribution

Country

Currency

Industry

Risk.Indices

Specific

World


−0.5%

0.0%

0.5%

2014 2015 2016 2017

DateCum

ulat

ive S

tyle

Fac

tors

/ Ex

cess

Ret

urn

Factor

Value

Size

Momentum

Volatility

Quality

Yield

Growth

Liquidity


11





LTD Plan

Private Markets Performance

Private Markets PerformanceInvestment Management Division

Performance through March 10, 2017

ContentsPrivate Markets Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2Private Markets NAVs and Active Weights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Private Markets Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4Private Equity Benchmark Comparison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Private Equity Value and Cash Activity from Inception . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6Real Estate Benchmark Comparison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7Real Estate Value and Cash Activity from Inception . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8Private Opportunistic Equity Benchmark Comparison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Private Opportunistic Equity Value and Cash Activity from Inception . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Opportunistic Fixed Income Benchmark Comparison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11Opportunistic Fixed Income Value and Cash Activity from Inception . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12Private Debt Benchmark Comparison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13Private Debt Value and Cash Activity from Inception . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14Farm & Infrastructure Benchmark Comparison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15Farm & Infrastructure Value and Cash Activity from Inception . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

1





LTD Plan

Private Markets Performance Summary

Private Markets NAVs and Active Weights

0

1000

2000

3000

2016−09−30 2017−02−28

$ in

Milli

ons

Portfolio

Farmland

Opp. Debt

Opp. Equity

Private Debt

Private Equity

Real Estate

Private Markets NAVs @ 2016−09−30 & Est @ 2017−02−28

−1%

0%

1%

2%

3%

4%

2016−09−30 2017−02−28

Activ

e W

eigh

ts

Portfolio

Farmland

Opp. Debt

Opp. Equity

Private Debt

Private Equity

Real Estate

Active Weights @ 2016−09−30 & Est @ 2017−02−28

3





LTD Plan

Private Markets Performance Summary (Continued)


Private Equity

Real Estate

Opp. Equity

Opp. Debt

Private Debt

Farmland

Current Real Estate

Legacy Real Estate

Legacy Private Equity

Current Private Equity

PME is > 1.2

PME is 1.05 to 1.2

PME is .95 to 1.05

PME is .8 to .95

PME is < .8

5

10

15

20

1.1 1.2 1.3 1.4 1.5 1.6

TVPI

Fund

IRR


4





LTD Plan

Private Equity Performance

Private Equity Benchmark Comparison

−40%

−20%

0%

20%

2008 2010 2012 2014 2016

IRR Russell 2000

Private Equity

Private Equity IRRs compared to Russell 2000Inception through indicated date

5





LTD Plan

Private Equity Performance (Continued)

Private Equity Value and Cash Activity from Inception

2008 2010 2012 2014 2016

050

010

0015

0020

0025

0030

00

$ M

illion

s

Private Equity Cumulative Net Capital ContributedCompared to Value

Cumulative Net Cash FlowNet Asset Value

2008 2010 2012 2014 2016

−150

−100

−50

050

100

$ m

illion

s

Private EquityQuarterly Draws and Distributions

DistributionNetDraw

6





LTD Plan

Real Estate Performance

Real Estate Benchmark Comparison

−40%

−20%

0%

20%

2006 2008 2010 2012 2014 2016

IRR ODCE

Real Estate

Real Estate IRRs compared to ODCEInception through indicated date

7





LTD Plan

Real Estate Performance (Continued)

Real Estate Value and Cash Activity from Inception

2006 2008 2010 2012 2014 2016

050

010

0015

0020

0025

0030

00

$ M

illion

s

Real Estate Cumulative Net Capital ContributedCompared to Value


2005 2007 2009 2011 2013 2015 2017

−300

−200

−100

010

020

030

0

$ m

illion

s

Real EstateQuarterly Draws and Distributions

DistributionNetDraw

8





LTD Plan

Private Opportunistic Equity Performance

Private Opportunistic Equity Benchmark Comparison

0%

10%

20%

30%

40%

2012 2013 2014 2015 2016

IRR Absolute 8% Return

Opportunistic Equity

Opportunistic Equity IRRs compared to Absolute 8%Inception through indicated date

9





LTD Plan

Private Opportunistic Equity Performance (Continued)

Private Opportunistic Equity Value and Cash Activity from Inception

2012 2013 2014 2015 2016 2017

010

020

030

040

050

0

$ M

illion

s

Opportunistic Equity Cum. Net Capital ContributedCompared to Value


2012 2013 2014 2015 2016 2017

−50

050

100

$ m

illion

s

Opportunistic EquityQuarterly Draws and Distributions

DistributionNetDraw

10





LTD Plan

Opportunistic Fixed Income Performance

Opportunistic Fixed Income Benchmark Comparison

−60%

−30%

0%

2010 2012 2014 2016

IRR Absolute 8% Return

Opportunistic Debt

Opportunistic Debt IRRscompared to Absolute 8%

11





LTD Plan

Opportunistic Debt Performance

Opportunistic Fixed Income Value and Cash Activity from Inception

2008 2010 2012 2014 2016

020

040

060

080

010

0012

0014

00

$ M

illion

s

Opp. Debt Cum. Net Capital ContributedCompared to Value


2008 2010 2012 2014 2016

−300

−200

−100

010

020

030

0

$ m

illion

s

Opportunistic DebtQuarterly Draws and Distributions

DistributionNetDraw

12





LTD Plan

Opportunistic Debt Performance (Continued)

Private Debt Benchmark Comparison

0%

5%

10%

15%

20%

2013 2014 2015 2016

IRR Lev. Loan+250

Private Debt

Private Debt IRRscompared to Lev Loan+250

13





LTD Plan

Private Debt Performance

Private Debt Value and Cash Activity from Inception

2013 2014 2015 2016 2017

050

010

0015

0020

0025

0030

00

$ M

illion

s

Private Debt Cumulative Net Capital ContributedCompared to Value


2013 2014 2015 2016 2017

−400

−300

−200

−100

010

0

$ m

illion

s

Private DebtQuarterly Draws and Distributions

DistributionNetDraw

14





LTD Plan

Farmland and Infrastructure Performace

Farm & Infrastructure Benchmark Comparison

−2.5%

0.0%

2.5%

5.0%

7.5%

2013 2014 2014 2015 2015 2016 2016

IRR Core CPI+350

Farm Infrastructure

Farmland and Infrastucture IRRs compared to CPI+350Inception through indicated date

15





LTD Plan

Farmland and Infrastructure Performance (Continued)

Farm & Infrastructure Value and Cash Activity from Inception

2014 2015 2016 2017

010

020

030

040

050

0

$ M

illion

s

Farm Infra Cum. Net Capital ContributedCompared to Value


2014 2015 2016 2017

−300

−250

−200

−150

−100

−50

0

$ m

illion

s

Farm InfraQuarterly Draws and Distributions

DistributionNetDraw

16





LTD Plan

Total Public Equity Returns as of January 31, 2017

1. Total Domestic and International Equity market value includes $2,036,292 remaining in terminated manager and transition accounts.2. Performance of ASRS Total Domestic and International Equity includes the performance of the ASRS Domestic Equity and ASRS International Equity asset classes and the Equity Risk Factor Portfolio with an inception date of 6/1/2013. NEPC began calculating Total Domestic and International Equity performance in January 2009. Monthly performance data from January 1998 - December 2008 was provided by State Street.Note: Performance is based on net of fee performance data.Composition of ASRS Custom Total Equity Benchmark can be found in the appendix.

January 31, 2017

Arizona State Retirement SystemTotal Domestic and International Equity Performance Summary

Market Value($)

% ofPortfolio

1 Mo(%)

3 Mo(%)

FiscalYTD(%)

1 Yr(%)

3 Yrs(%)

5 Yrs(%)

10 Yrs(%)

Return(%) Since

_

Total Domestic and International Equity 17,029,967,521 48.03 2.47 6.33 9.60 17.94 6.32 10.26 5.18 6.56 Jan-98ASRS Custom Total Equity Benchmark 2.51 6.53 10.36 19.17 6.50 10.45 5.33 6.00 Jan-98

Over/Under -0.04 -0.20 -0.76 -1.23 -0.18 -0.19 -0.15 0.56 Equity Risk Factor Portfolio 632,786,782 1.78 1.67 7.00 8.64 19.00 10.79 -- -- 11.95 Jun-13

ASRS Custom Total Equity Benchmark 2.51 6.53 10.36 19.17 6.50 10.45 5.33 7.92 Jun-13Over/Under -0.84 0.47 -1.72 -0.17 4.29 4.03

Total Domestic and Int'l Equity ex-Equity Risk Factor Portfolio 16,397,180,739 46.24 2.51 6.31 9.64 17.91 6.22 10.21 5.16 6.54 Jan-98ASRS Custom Total Equity Benchmark 2.51 6.53 10.36 19.17 6.50 10.45 5.33 6.00 Jan-98

Over/Under 0.00 -0.22 -0.72 -1.26 -0.28 -0.24 -0.17 0.54





LTD Plan

Total Domestic Equity Returns as of January 31, 2017

1. Total Domestic Equity includes $88,899 in terminated manager and transition accounts2. In mid-December, 2005 the S&P/Citigroup style indices replaced the S&P/Barra style indices. Returns are a blend of S&P/Barra indices prior to mid-December 2005 and S&P/Citigroup indices going forward.Note: Performance is reported net of fees.Composition of ASRS Custom Domestic Equity Benchmark can be found in the appendix.

January 31, 2017

Arizona State Retirement SystemDomestic and Large Cap Equity Performance Summary

Market Value($)

% ofPortfolio

1 Mo(%)

3 Mo(%)

FiscalYTD(%)

1 Yr(%)

3 Yrs(%)

5 Yrs(%)

10 Yrs(%)

Return(%) Since

_

Total Domestic Equity 8,608,420,950 24.28 1.63 8.93 10.59 22.28 10.51 14.13 7.65 11.21 Jul-75ASRS Custom Domestic Equity Benchmark 1.61 9.22 11.34 22.81 10.80 14.28 7.53 11.29 Jul-75

Over/Under 0.02 -0.29 -0.75 -0.53 -0.29 -0.15 0.12 -0.08 Total Large Cap Equity 6,534,361,617 18.43 1.63 7.68 9.26 20.06 10.93 13.98 7.03 8.14 Jul-02

S&P 500 1.90 7.76 9.87 20.04 10.85 14.09 6.99 8.07 Jul-02Over/Under -0.27 -0.08 -0.61 0.02 0.08 -0.11 0.04 0.07

Active Large Cap Equity LSV 649,115,320 1.83 0.41 11.70 15.96 25.49 9.51 15.22 6.67 10.81 Jan-03

S&P/Citigroup 500 Value 0.66 9.72 11.23 24.24 10.24 13.75 5.38 8.97 Jan-03Over/Under -0.25 1.98 4.73 1.25 -0.73 1.47 1.29 1.84

Enhanced/Passive Large Cap Equity Internally Managed E2 4,873,904,059 13.75 1.90 7.77 9.91 20.10 10.85 14.07 7.01 7.77 Apr-97

S&P 500 1.90 7.76 9.87 20.04 10.85 14.09 6.99 7.71 Apr-97Over/Under 0.00 0.01 0.04 0.06 0.00 -0.02 0.02 0.06

Internally Managed E7 451,413,261 1.27 0.86 5.38 5.90 19.58 12.18 -- -- 13.41 Aug-12MSCI USA High Dividend Yield Index 0.85 5.29 5.80 19.47 12.29 13.96 8.08 13.41 Aug-12

Over/Under 0.01 0.09 0.10 0.11 -0.11 0.00 Internally Managed E8 559,928,966 1.58 1.33 4.44 0.39 13.70 12.46 -- -- 13.18 Aug-12

MSCI USA Minimum Volatility Index 1.32 4.40 0.31 13.71 12.48 13.65 8.24 12.92 Aug-12Over/Under 0.01 0.04 0.08 -0.01 -0.02 0.26





LTD Plan

Total Domestic Equity Returns as of January 31, 2017 (Continued)

January 31, 2017

Arizona State Retirement SystemMid Cap Equity Performance Summary

1. In mid-December, 2005 the S&P/Citigroup style indices replaced the S&P/Barra style indices. Returns are a blend of S&P/Barra indices prior to mid-December 2005 and S&P/Citigroup indices going forward.Note: Performance is reported net of fees.

Market Value($)

% ofPortfolio

1 Mo(%)

3 Mo(%)

FiscalYTD(%)

1 Yr(%)

3 Yrs(%)

5 Yrs(%)

10 Yrs(%)

Return(%) Since

_

Total Mid Cap Equity 902,974,807 2.55 2.05 11.96 13.33 28.96 9.92 14.32 8.89 10.34 Jul-02S&P 400 MidCap 1.68 12.22 13.74 30.17 10.43 14.24 8.95 10.39 Jul-02

Over/Under 0.37 -0.26 -0.41 -1.21 -0.51 0.08 -0.06 -0.05 Active Mid Cap Equity

Wellington 220,957,833 0.62 3.15 11.37 12.11 25.65 9.17 14.93 9.28 11.10 Jul-02S&P 400 MidCap 1.68 12.22 13.74 30.17 10.43 14.24 8.95 10.39 Jul-02

Over/Under 1.47 -0.85 -1.63 -4.52 -1.26 0.69 0.33 0.71 Passive Mid Cap Equity

Internally Managed E3 335,738,660 0.95 2.01 10.54 10.96 24.79 9.71 13.48 10.10 8.78 Dec-00S&P/Citigroup 400 Growth 1.95 10.44 10.75 24.25 9.64 13.35 9.53 8.29 Dec-00

Over/Under 0.06 0.10 0.21 0.54 0.07 0.13 0.57 0.49 Internally Managed E4 346,278,315 0.98 1.39 13.75 16.45 35.95 10.89 14.93 8.53 10.58 Jul-02

S&P/Citigroup 400 Value 1.38 13.68 16.34 35.81 10.92 14.97 8.27 10.40 Jul-02Over/Under 0.01 0.07 0.11 0.14 -0.03 -0.04 0.26 0.18





LTD Plan

Total Domestic Equity Returns as of January 31, 2017 (Continued)

January 31, 2017

Arizona State Retirement SystemSmall Cap Equity Performance Summary

Note: Performance is reported net of fees.Composition of ASRS Custom Small Cap Equity Blended Benchmark, Times Square Blended Benchmark and DFA Blended Benchmark can be found in the appendix.

Market Value($)

% ofPortfolio

1 Mo(%)

3 Mo(%)

FiscalYTD(%)

1 Yr(%)

3 Yrs(%)

5 Yrs(%)

10 Yrs(%)

Return(%) Since

_

Total Small Cap Equity 1,006,609,070 2.84 0.75 14.20 16.59 30.26 8.38 14.07 8.50 10.51 Jul-02ASRS Custom Small Cap Equity Blended Benchmark -0.40 15.88 18.66 34.34 10.77 15.05 8.77 10.44 Jul-02

Over/Under 1.15 -1.68 -2.07 -4.08 -2.39 -0.98 -0.27 0.07 Active Small Cap Equity

TimesSquare 352,078,566 0.99 2.19 10.42 10.87 22.77 6.21 13.28 10.22 11.21 Apr-05Times Square Blended Benchmark 1.62 12.23 14.96 26.87 7.04 12.78 8.18 9.34 Apr-05

Over/Under 0.57 -1.81 -4.09 -4.10 -0.83 0.50 2.04 1.87 Active Small Cap Equity

DFA - US Small Cap 283,305,993 0.80 0.51 16.89 21.52 35.73 8.55 14.66 7.51 11.82 Sep-98DFA Blended Benchmark -1.10 15.67 19.42 37.99 10.59 14.87 7.83 11.19 Sep-98

Over/Under 1.61 1.22 2.10 -2.26 -2.04 -0.21 -0.32 0.63 Passive Small Cap Equity

Internally Managed E6 371,224,511 1.05 -0.39 15.89 18.78 34.06 10.75 15.01 9.05 9.05 Feb-07S&P 600 SmallCap -0.40 15.88 18.66 34.34 10.77 15.05 8.77 8.77 Feb-07

Over/Under 0.01 0.01 0.12 -0.28 -0.02 -0.04 0.28 0.28





LTD Plan

Total Public Opportunistic Equity Returns as of January 31, 2017

January 31, 2017

Arizona State Retirement SystemPublic Opportunistic Equity Performance Summary

1. Tortoise Capital Advisors was funded in late August 2016. Inception date for performance reporting purposes is September 1, 2016.Note: Performance is reported net of fees.Composition of ASRS Custom Domestic Equity Benchmark can be found in the appendix.

Market Value($)

% ofPortfolio

1 Mo(%)

3 Mo(%)

FiscalYTD(%)

1 Yr(%)

3 Yrs(%)

5 Yrs(%)

10 Yrs(%)

Return(%) Since

_

Total Public Opportunistic Equity 164,386,567 0.46 4.71 12.37 -- -- -- -- -- 8.03 Sep-16ASRS Custom Domestic Equity Benchmark 1.61 9.22 11.34 22.81 10.80 14.28 7.53 6.80 Sep-16

Over/Under 3.10 3.15 1.23 Tortoise Capital Advisors 164,386,567 0.46 4.71 12.37 -- -- -- -- -- 8.03 Sep-16

Alerian MLP Index 4.89 12.02 8.18 39.60 -4.48 2.83 8.04 9.02 Sep-16Over/Under -0.18 0.35 -0.99





LTD Plan

Total International Equity Returns as of January 31, 2017

1. Total International Equity market value includes $519,185 in terminated manager and transition accounts. 2. Total International Developed Markets Equity market value includes $179,376 in terminated manager accounts. 3. American Century, Trinity Street and TS&W were funded in mid-June 2014. Inception date for performance reporting purposes is July 1, 2014.Note: Performance is reported net of fees.Composition of ASRS Custom Int'l Equity Benchmark, ASRS Custom Int'l Developed Markets Equity Benchmark, and Brandes Custom Benchmark can be found in the appendix.

January 31, 2017

Arizona State Retirement SystemInternational Developed Markets Equity Performance Summary

Market Value($)

% ofPortfolio

1 Mo(%)

3 Mo(%)

FiscalYTD(%)

1 Yr(%)

3 Yrs(%)

5 Yrs(%)

10 Yrs(%)

Return(%) Since

_

Total International Equity 7,787,331,582 21.96 3.50 3.54 8.71 13.30 1.12 4.80 1.13 5.78 Apr-87ASRS Custom Int'l Equity Benchmark 3.49 3.52 9.12 15.09 1.23 5.18 1.91 5.51 Apr-87

Over/Under 0.01 0.02 -0.41 -1.79 -0.11 -0.38 -0.78 0.27 Total International Developed Markets Equity 6,453,533,237 18.20 3.04 4.26 8.93 12.05 1.26 6.51 1.88 6.04 Apr-87

ASRS Custom Int'l Developed Markets Equity Benchmark 2.97 4.21 8.80 12.34 1.01 6.70 2.67 5.77 Apr-87Over/Under 0.07 0.05 0.13 -0.29 0.25 -0.19 -0.79 0.27

Active Large Cap International Equity Brandes 594,593,603 1.68 1.87 4.16 10.39 11.62 2.16 7.22 1.50 8.27 Oct-98

Brandes Custom Benchmark 2.90 4.30 8.74 12.03 0.71 6.23 2.26 5.55 Oct-98Over/Under -1.03 -0.14 1.65 -0.41 1.45 0.99 -0.76 2.72

American Century 547,220,692 1.54 3.47 2.96 4.16 4.57 -- -- -- -2.73 Jul-14MSCI EAFE 2.90 4.30 8.74 12.03 0.71 6.23 1.30 -2.54 Jul-14

Over/Under 0.57 -1.34 -4.58 -7.46 -0.19 Trinity Street 340,728,458 0.96 5.43 5.63 12.82 13.29 -- -- -- -1.49 Jul-14

MSCI EAFE 2.90 4.30 8.74 12.03 0.71 6.23 1.30 -2.54 Jul-14Over/Under 2.53 1.33 4.08 1.26 1.05

TS&W International 309,710,461 0.87 2.69 2.92 9.88 11.86 -- -- -- -1.33 Jul-14MSCI EAFE 2.90 4.30 8.74 12.03 0.71 6.23 1.30 -2.54 Jul-14

Over/Under -0.21 -1.38 1.14 -0.17 1.21





LTD Plan

Total International Equity Returns as of January 31, 2017 (Continued)

January 31, 2017

Arizona State Retirement SystemInternational Developed Markets Equity Performance Summary

Note: Performance is reported net of fees.

Market Value($)

% ofPortfolio

1 Mo(%)

3 Mo(%)

FiscalYTD(%)

1 Yr(%)

3 Yrs(%)

5 Yrs(%)

10 Yrs(%)

Return(%) Since

_

Passive Large Cap International Equity BlackRock EAFE Equity Index 4,200,718,714 11.85 2.90 4.34 8.84 12.50 1.03 6.35 -- 6.98 Jul-09

MSCI EAFE 2.90 4.30 8.74 12.03 0.71 6.23 1.30 6.94 Jul-09Over/Under 0.00 0.04 0.10 0.47 0.32 0.12 0.04

Active Small Cap International Equity DFA - International Small Cap 116,769,776 0.33 4.03 7.34 18.47 23.58 2.67 9.17 2.54 5.52 Sep-05

MSCI EAFE Small Cap 3.53 3.51 9.26 14.82 3.82 9.71 3.34 5.81 Sep-05Over/Under 0.50 3.83 9.21 8.76 -1.15 -0.54 -0.80 -0.29

Franklin Templeton 107,911,056 0.30 3.84 7.79 9.63 8.50 -0.54 8.85 -- 5.39 Apr-11MSCI EAFE Small Cap 3.53 3.51 9.26 14.82 3.82 9.71 3.34 6.05 Apr-11

Over/Under 0.31 4.28 0.37 -6.32 -4.36 -0.86 -0.66 AQR Capital 102,072,537 0.29 3.83 2.48 7.55 11.17 4.10 -- -- 8.06 Jun-13

MSCI EAFE Small Cap 3.53 3.51 9.26 14.82 3.82 9.71 3.34 7.42 Jun-13Over/Under 0.30 -1.03 -1.71 -3.65 0.28 0.64

Passive Small Cap International Equity BlackRock EAFE Small Cap Equity Index 133,628,564 0.38 3.56 3.58 9.46 15.34 4.09 9.73 -- 10.10 Jun-10

MSCI EAFE Small Cap 3.53 3.51 9.26 14.82 3.82 9.71 3.34 10.11 Jun-10Over/Under 0.03 0.07 0.20 0.52 0.27 0.02 -0.01





LTD Plan

Total International Equity Returns as of January 31, 2017 (Continued)

January 31, 2017

Arizona State Retirement SystemInternational Emerging Markets Equity Performance Summary

Note: Performance is reported net of fees.

Market Value($)

% ofPortfolio

1 Mo(%)

3 Mo(%)

FiscalYTD(%)

1 Yr(%)

3 Yrs(%)

5 Yrs(%)

10 Yrs(%)

Return(%) Since

_

Total International Emerging Markets Equity 1,333,458,535 3.76 5.77 0.16 8.04 22.82 0.84 0.68 -- -0.27 Oct-10MSCI Emerging Markets 5.47 0.84 10.20 25.41 1.44 0.32 2.71 -0.09 Oct-10

Over/Under 0.30 -0.68 -2.16 -2.59 -0.60 0.36 -0.18 Active Emerging Markets Equity

Eaton Vance 302,825,397 0.85 5.37 3.01 8.94 24.49 0.17 0.90 -- -0.10 Dec-10MSCI Emerging Markets 5.47 0.84 10.20 25.41 1.44 0.32 2.71 -0.13 Dec-10

Over/Under -0.10 2.17 -1.26 -0.92 -1.27 0.58 0.03 LSV Emerging Market 134,888,002 0.38 5.43 3.44 16.29 32.97 2.00 0.94 -- 0.53 Dec-10

MSCI Emerging Markets 5.47 0.84 10.20 25.41 1.44 0.32 2.71 -0.13 Dec-10Over/Under -0.04 2.60 6.09 7.56 0.56 0.62 0.66

William Blair 489,246,902 1.38 6.37 -2.87 3.77 17.28 1.61 2.15 -- 0.58 Nov-10MSCI Emerging Markets 5.47 0.84 10.20 25.41 1.44 0.32 2.71 -0.55 Nov-10

Over/Under 0.90 -3.71 -6.43 -8.13 0.17 1.83 1.13 Passive Emerging Markets Equity

BlackRock Emerging Markets Equity Index 406,498,234 1.15 5.46 0.80 10.04 25.08 1.22 -0.03 -- -0.45 Oct-10MSCI Emerging Markets 5.47 0.84 10.20 25.41 1.44 0.32 2.71 -0.09 Oct-10

Over/Under -0.01 -0.04 -0.16 -0.33 -0.22 -0.35 -0.36





LTD Plan

Total Public Fixed Income Returns as of January 31, 2017

January 31, 2017

Arizona State Retirement SystemFixed Income and Interest Rate Sensitive Fixed Income Performance Summary

1. Total Public Markets Fixed Income market value includes $366 remaining in terminated manager accounts.2. BlackRock US Debt Index was funded in mid-April 2014. Inception date for performance reporting purposes is May 1, 2014.Note: Performance is reported net of fees.Composition of ASRS Custom Public Markets Fixed Income Benchmark can be found in the appendix.

Market Value($)

% ofPortfolio

1 Mo(%)

3 Mo(%)

FiscalYTD(%)

1 Yr(%)

3 Yrs(%)

5 Yrs(%)

10 Yrs(%)

Return(%) Since

_

Total Public Markets Fixed Income 5,008,921,770 14.13 0.43 -1.00 -0.23 4.84 3.25 2.51 4.80 8.14 Jul-75ASRS Custom Public Markets Fixed Income Benchmark 0.54 -0.74 0.61 6.39 2.61 2.15 4.39 -- Jul-75

Over/Under -0.11 -0.26 -0.84 -1.55 0.64 0.36 0.41 Total Interest Rate Sensitive Fixed Income 3,850,986,732 10.86 0.19 -1.96 -2.18 2.16 3.02 2.42 4.65 8.10 Jul-75

BBgBarc US Aggregate TR 0.20 -2.04 -2.34 1.45 2.59 2.09 4.37 -- Jul-75Over/Under -0.01 0.08 0.16 0.71 0.43 0.33 0.28

Core Fixed Income BlackRock US Debt Index 1,980,243,308 5.58 0.21 -2.03 -2.31 1.49 -- -- -- 2.52 May-14

BBgBarc US Aggregate TR 0.20 -2.04 -2.34 1.45 2.59 2.09 4.37 2.39 May-14Over/Under 0.01 0.01 0.03 0.04 0.13

Internally Managed F2 1,870,743,065 5.28 0.16 -1.86 -2.18 1.63 2.80 2.33 4.63 5.17 Oct-00BBgBarc US Aggregate TR 0.20 -2.04 -2.34 1.45 2.59 2.09 4.37 5.00 Oct-00

Over/Under -0.04 0.18 0.16 0.18 0.21 0.24 0.26 0.17





LTD Plan

Total Public Fixed Income Returns as of January 31, 2017 (Continued)

January 31, 2017

Arizona State Retirement SystemTotal High Yield Fixed Income Performance Summary

1. Total High Yield Fixed Income includes $8 in terminated manager and transition accounts.Note: Performance is reported net of fees.

Market Value($)

% ofPortfolio

1 Mo(%)

3 Mo(%)

FiscalYTD(%)

1 Yr(%)

3 Yrs(%)

5 Yrs(%)

10 Yrs(%)

Return(%) Since

_

Total High Yield Fixed Income 1,157,935,039 3.27 1.25 2.41 7.40 15.59 5.21 6.83 -- 8.29 Oct-09BBgBarc US High Yield TR 1.45 2.83 8.96 20.77 4.92 7.03 7.49 8.81 Oct-09

Over/Under -0.20 -0.42 -1.56 -5.18 0.29 -0.20 -0.52 Active High Yield Fixed Income

Columbia Management 761,262,434 2.15 1.21 2.16 6.80 13.99 5.44 7.08 -- 8.59 Oct-09BBgBarc US High Yield TR 1.45 2.83 8.96 20.77 4.92 7.03 7.49 8.81 Oct-09

Over/Under -0.24 -0.67 -2.16 -6.78 0.52 0.05 -0.22 JP Morgan High Yield 396,672,597 1.12 1.34 2.90 8.56 18.81 4.81 -- -- 5.86 Jul-13

BBgBarc US High Yield TR 1.45 2.83 8.96 20.77 4.92 7.03 7.49 6.00 Jul-13Over/Under -0.11 0.07 -0.40 -1.96 -0.11 -0.14





LTD Plan

Total In�ation Linked Returns as of January 31, 2017

January 31, 2017

Market Value($)

% ofPortfolio

1 Mo(%)

3 Mo(%)

FiscalYTD(%)

1 Yr(%)

3 Yrs(%)

5 Yrs(%)

10 Yrs(%)

Return(%) Since

_

Total Inflation-Linked Assets 446,228,529 1.26 0.58 5.04 1.71 16.77 -11.17 -8.80 -- -4.67 Feb-10ASRS Custom Inflation-Linked Benchmark 0.14 3.30 -1.18 13.83 -11.31 -9.37 -2.14 -5.90 Feb-10

Over/Under 0.44 1.74 2.89 2.94 0.14 0.57 1.23 Total Commodities 446,228,529 1.26 0.58 5.04 1.71 16.77 -11.17 -8.80 -- -4.68 Sep-10

Bloomberg Commodity Index 0.14 3.30 -1.18 13.83 -11.31 -9.37 -5.58 -5.95 Sep-10Over/Under 0.44 1.74 2.89 2.94 0.14 0.57 1.27

Gresham 446,228,529 1.26 0.58 5.04 1.71 16.77 -11.17 -8.98 -- -4.43 Sep-10Bloomberg Commodity Index 0.14 3.30 -1.18 13.83 -11.31 -9.37 -5.58 -5.95 Sep-10

Over/Under 0.44 1.74 2.89 2.94 0.14 0.39 1.52

Arizona State Retirement SystemInflation-Linked Assets Performance Summary

Note: Performance is reported net of fees.Composition of ASRS Custom Inflation-Linked Benchmark can be found in the appendix.





LTD Plan

Total Multi-Asset Class Returns as of January 31, 2017

January 31, 2017

Market Value($)

% ofPortfolio

1 Mo(%)

3 Mo(%)

FiscalYTD(%)

1 Yr(%)

3 Yrs(%)

5 Yrs(%)

10 Yrs(%)

Return(%) Since

_

Total Multi-Asset Class Strategies 1,135,396,739 3.20 -0.89 1.85 9.27 0.38 2.54 6.19 5.70 6.61 Jan-04Multi-Asset Class Strategies Custom Benchmark 0.04 0.09 0.19 0.29 2.69 6.44 4.09 5.49 Jan-04

Over/Under -0.93 1.76 9.08 0.09 -0.15 -0.25 1.61 1.12 Bridgewater 1,135,396,739 3.20 -0.89 1.85 9.27 0.38 3.52 7.12 6.83 7.68 Jan-04

ASRS Bridgewater Custom Benchmark 0.04 0.09 0.19 0.29 3.24 6.78 4.25 5.62 Jan-04Over/Under -0.93 1.76 9.08 0.09 0.28 0.34 2.58 2.06

Arizona State Retirement SystemMulti-Asset Class Strategies Performance Summary

Note: Performance is reported net of fees.Composition of Multi-Asset Class Strategies Custom Benchmark and ASRS Bridgewater Custom Benchmark can be found in the appendix.





LTD Plan

LTD Plan

rebalancingtrading window check range LTD OW/UW TF OW/UW vs TF Rebalance

Cash $6,058,515 $6,058,515 3.20% 3.20%Fixed Core (Passive) $36,342,517 $36,342,517 19.22% 19% daily (T-2, T+3) 0.22%Fixed High Yield (Passive) $14,438,819 $14,438,819 7.64% 7% weekly (T-2, T+3) 26.86% 12% 41% US Fixed Income 0.64%

30.07% 26% (19-36%) 30.07% 19% 36% Total Fixed Income 0.86% 1.82% -0.95% 1,804,362.26$ Russell 1000 (Passive) $40,330,189 $40,330,189 21.33% 24% daily (T-1, T+3) -2.67%Russell 2000 (Passive) $26,369,946 $26,369,946 13.95% 12% daily (T-1, T+3) 1.95%

35.28% 36% (26-46%) 35.28% 26% 46% US Equity -0.72% 0.46% -1.17% 2,219,949.96$ EAFE (Passive) $31,065,281 $31,065,281 16.43% 18% weekly (T-3, T+3) -1.57%EAFE SC (Passive) $3,860,852 $3,860,852 2.04% 2% weekly (T-3, T+3) 0.04%Emerging Markets (Passive) $8,228,707 $8,228,707 4.35% 5% weekly (T-3, T+3) -0.65%

22.83% 25% (15-35%) 22.83% 15% 35% Non-US Equity -2.17% -1.64% -0.53% 1,002,388.23$ Dow Jones UBS Commodities (Passive) $1,692,337 $1,692,337 0.90% 2% (0-4%) weekly (T-2, T+1) 0.90% 0% 4% Commodities -1.10% -0.81%US Real Estate (Passive) $20,667,765 $20,667,765 10.93% 11% (9-13%) daily (T-1, T+3) 10.93% 9% 13% Real Estate -0.07% -1.08%

11.83% 13% (10-16%) 11.83% 10% 16% Total Inflation Linked -1.17% -0.42% -0.75% 1,413,901.05$ TOTAL Amounts $56,839,852 $109,854,975 $22,360,101 $189,054,928 100.00%Actual Portfolio 30.07% 58.11% 11.83%

Policy 26% (19-36%) 61% (51-68%) 13% (10-16%) 2,500,000.00$ 1.32%

Account Manager Style Fixed Income Equity Total Pct of Fund Target (Range)

Monthly Cash Raise

Friday, March 10, 2017Inflation Linked


STATE STREET INVESTMENT ANALYTICS

Executive Presentation To: Arizona State Retirement System truView Risk Report January 31, 2017

Produced by State Street Global Exchange, Risk Services

2


Europe

> Dublin

> Frankfurt

> New York

> Boston

> Austin

> Alameda

North America

> Toronto

Monthly Reallocation Summary* Month Ending December 31, 2016

Portfolio Reductions

• TOTAL DOMESTIC EQUITY

• $12.1M – E2 (Large Cap)

• $2.7M – E3 (Mid Cap)

• $2.0M – E4 (Mid Cap)

• $4.2M – E6 (Small Cap)



• $0.0M – EQUITY TRANSITION

• TOTAL CASH

• $.13M – CASH – ASSETIZED

• TOTAL REDUCTIONS**

• $24.7M

Asia

> Australia

Portfolio Additions


• $0.0 – DFA US EQUITY

• TOTAL ADDITIONS**

• $0.0M

*Based on State Street accounting records for public markets and therefore exclude private market drawdowns.

**Reductions and additions do not include plan distributions.

3


Europe

> Dublin

> Frankfurt

> New York

> Boston

> Austin

> Alameda

North America

> Toronto

Monthly Reallocation Summary* Month Ending January 31, 2017

Portfolio Reductions


• $3.3M – E3 (Mid Cap)

• $.7M – E4 (Mid Cap)

• $1.3M – E6 (Small Cap)

• TOTAL REDUCTIONS**

• $5.3M

Asia

> Australia

Portfolio Additions

• NONE

• TOTAL ADDITIONS**

• $0.0M

*Based on State Street accounting records for public markets and therefore exclude private market drawdowns.

**Reductions and additions do not include plan distributions.

4


-7.7%-7.5%-7.3%-7.3%-7.3%-7.2%-6.9%-7.1%-7.1%-6.9%-6.7%-6.7%-6.8%-6.7%-6.8%-6.7%-6.2%-6.4%-6.4%-6.3%-6.3%-6.3%-6.4%-6.5%

-7.2%-7.2%-6.8%-6.8%-6.8%-6.9%-6.9%-6.9%-6.7%-6.7% -6.6%-6.8%-6.7%-6.6%-6.6%-6.6%-6.5%-6.5%-6.5%-6.5%-6.6%-6.5%-6.5%-6.5%

-0.5%-0.2%-0.5%-0.5%-0.5%-0.3% 0.0% -0.2%-0.3%-0.2%-0.1% 0.1% -0.1% 0.0% -0.2%-0.1% 0.3% 0.1% 0.1% 0.2% 0.3% 0.2% 0.1% 0.0%

-14.0%

-12.0%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

Monthly Absolute & Relative Risk VaR (95% Confidence Level)

TOTAL ASRS FUND POLICY BENCHMARK EXCESS

Europe

> Dublin

> Frankfurt

> New York

> Boston

> Austin

> Alameda

North America

> Toronto

Monthly Risk Summary Month Ending January 31, 2017

Asia

> Australia

Month-end Risk Profile

• Historical Risk (95% VaR) for all asset classes remain relatively constant from prior months. In aggregate, Total Plan risk

increased 7 bps over prior month with increase in US Equity and International Equity allocations. The Interim Policy

Benchmark risk decreased by 1 bp.

• Surplus risk under the Interim Policy Benchmark is now 1 bp.

5


ARIZONA STATE RETIREMENT SYSTEM TOTAL EQUITY EXPOSURE OVERVIEW

As of January 31, 2017

Country Category (Public Equities) $ Value % Value*Blended TOTAL BMDifference Market Cap (Public Equities) $ Value % Value *Blended TOTAL BM Difference

NORTH AMERICA 9,451,168,440$ 54.4% 51.2% 3.2% 1) 0 - 100M 1,587,725$ 0.0% 0.0% 0.0%

EUROPE DEVELOPED 4,242,813,380$ 24.4% 24.4% 0.0% 2) 100M - 500M 83,326,483$ 0.5% 0.4% 0.1%

ASIA DEVELOPED 2,241,272,120$ 12.9% 14.8% (1.9%) 3) 500M - 1B 219,107,072$ 1.3% 1.6% (0.3%)

ASIA EM 951,097,010$ 5.5% 6.9% (1.5%) 4) 1B - 5B 2,177,631,680$ 12.7% 13.1% (0.5%)

LATIN AMERICA 257,827,037$ 1.5% 1.3% 0.1% 5) 5B - 10B 2,067,448,335$ 12.0% 10.7% 1.3%

AFRICA 105,874,400$ 0.6% 0.7% (0.1%) 6) 10B - 50B 6,100,886,969$ 35.5% 33.0% 2.5%

MIDDLE EAST 87,480,761$ 0.5% 0.5% 0.0% 7) >50B 6,558,156,340$ 38.1% 41.2% (3.1%)

EUROPE EM 47,105,520$ 0.3% 0.2% 0.1% Cash and Other 176,494,063$

GRAND TOTAL 17,384,638,667$ 100.0% 100.0% 0.0% GRAND TOTAL 17,384,638,667$ 100.0% 100.0% 0.0%

Top 20 Issuer (Total Plan) $ Value % Value Market Cap Sector Industry Group

1 US TREASURY N/B 1,429,264,671$ 4.0% GOVERNMENT SOVEREIGN

2 CASH*** 1,173,919,050$ 3.3% CASH CASH

3 FANNIE MAE 616,690,077$ 1.7% MORTGAGE SECURITIES FNMA COLLATERAL

4 TREASURY BILL 428,257,690$ 1.2% GOVERNMENT SOVEREIGN

5 FREDDIE MAC 252,835,077$ 0.7% MORTGAGE SECURITIES FGLMC COLLATERAL

6 APPLE INC 178,585,301$ 0.5% 7) 50B+ TECHNOLOGY COMPUTERS

7 TSY INFL IX N/B 170,307,212$ 0.5% GOVERNMENT SOVEREIGN

8 MICROSOFT CORP 160,421,657$ 0.5% 7) 50B+ TECHNOLOGY SOFTWARE

9 ISHARES MSCI EMERGING MARKETS ETF 146,391,518$ 0.4% 6) 10B - 50B FUNDS EQUITY FUND

10 GOVERNMENT NATIONAL MORTGAGE A 133,508,395$ 0.4% MORTGAGE SECURITIES GNMA2 COLLATERAL

11 EXXON MOBIL CORP 133,074,267$ 0.4% 7) 50B+ ENERGY OIL&GAS

12 JOHNSON & JOHNSON 132,149,210$ 0.4% 7) 50B+ CONSUMER NON-CYCLICAL PHARMACEUTICALS

13 ALPHABET INC 128,755,456$ 0.4% 7) 50B+ COMMUNICATIONS INTERNET

14 AT&T INC 123,745,472$ 0.3% 7) 50B+ COMMUNICATIONS TELECOMMUNICATIONS

15 JPMORGAN CHASE & CO 102,309,337$ 0.3% 7) 50B+ FINANCIAL BANKS

16 BERKSHIRE HATHAWAY INC 93,869,586$ 0.3% 7) 50B+ FINANCIAL INSURANCE

17 PROCTER & GAMBLE CO/THE 88,309,115$ 0.2% 7) 50B+ CONSUMER NON-CYCLICAL COSMETICS/PERSONAL CARE

18 PFIZER INC 87,637,629$ 0.2% 7) 50B+ CONSUMER NON-CYCLICAL PHARMACEUTICALS

19 FACEBOOK INC 86,274,112$ 0.2% 7) 50B+ COMMUNICATIONS INTERNET

20 AMAZON.COM INC 84,128,622$ 0.2% 7) 50B+ COMMUNICATIONS INTERNET

*Blended TOTAL BM: 21% SP500, 3% SP400, 3% SP600, 8% R2000, 18% MSCI EAFE, 5% MSCI EM, 2% MSCI Sml Cap, 15% BC US AGG, 4% BC US HY, 8% FTSE NAREIT GLOBAL, 2% DJ-UBS COMMODITY,

5% CUSTOM MULTI-ASSET CLASS, 6% S&P/LSTA LEVERED LOAN.

***Cash does not represent an IMD tactical view; Cash includes the ASRS Cash balance, manager- level portfolio cash & equivalents and cash collateralizing sundry portfolio-level futures contracts.

6


ARIZONA STATE RETIREMENT SYSTEM US EQUITY EXPOSURE OVERVIEW


Sector (Public US Equity) $ Value % Value*Blended

NON-US BMDifference

Market Cap (Public US

Equity)$ Value % Value

*Blended

NON-US BMDifference

CONSUMER NON-CYCLICAL 2,131,410,497$ 22.9% 21.1% 1.8% 1) 0 - 100M 266,574$ 0.0% 0.0% 0.0%

FINANCIAL 1,793,891,519$ 19.3% 19.9% (0.6%) 2) 100M - 500M 25,946,460$ 0.3% 0.4% (0.1%)

TECHNOLOGY 1,165,047,456$ 12.5% 12.9% (0.3%) 3) 500M - 1B 117,187,897$ 1.3% 1.8% (0.6%)

INDUSTRIAL 1,035,828,502$ 11.2% 11.8% (0.6%) 4) 1B - 5B 1,320,293,006$ 14.3% 14.5% (0.2%)

COMMUNICATIONS 960,481,646$ 10.3% 11.5% (1.1%) 5) 5B - 10B 886,562,488$ 9.6% 8.2% 1.4%

CONSUMER CYCLICAL 942,857,674$ 10.2% 10.0% 0.1% 6) 10B - 50B 2,617,065,447$ 28.4% 25.5% 2.8%

ENERGY 581,513,421$ 6.3% 6.4% (0.2%) 7) >50B 4,261,685,729$ 46.2% 49.6% (3.4%)

UTILITIES 352,081,358$ 3.8% 3.3% 0.5% Cash and Other 59,296,609$

BASIC MATERIALS 263,551,023$ 2.8% 3.0% (0.2%) GRAND TOTAL 9,288,304,209$ 100.0% 100.0% 0.0%

CASH 55,426,901$ 0.6% 0.0% 0.6%

GOVERNMENT 3,891,159$ 0.0% 0.0% 0.0%

DIVERSIFIED 2,321,403$ 0.0% 0.0% (0.0%)

GRAND TOTAL 9,288,304,209$ 100.0% 100.0% 0.0%

Top 20 Industry Groups

(Public US Equity)$ Value % Value

*Blended

NON-US BMDifference

1 BANKS 643,356,038$ 6.9% 8.1% (1.2%)

2 RETAIL 533,679,418$ 5.7% 5.9% (0.1%)

3 PHARMACEUTICALS 497,065,687$ 5.4% 5.1% 0.3%

4 INSURANCE 482,240,749$ 5.2% 4.3% 0.9%

5 OIL&GAS 446,319,515$ 4.8% 4.8% (0.0%)

6 SOFTWARE 443,451,607$ 4.8% 4.9% (0.1%)

7 INTERNET 408,931,052$ 4.4% 5.7% (1.3%)

8 COMPUTERS 402,097,568$ 4.3% 4.8% (0.4%)

9 TELECOMMUNICATIONS 316,483,828$ 3.4% 3.1% 0.4%

10 REITS 311,015,006$ 3.3% 3.9% (0.6%)

11 ELECTRIC 295,613,214$ 3.2% 2.6% 0.6%

12 SEMICONDUCTORS 286,880,028$ 3.1% 3.2% (0.1%)

13 HEALTHCARE-PRODUCTS 281,318,977$ 3.0% 3.1% (0.1%)

14 DIVERSIFIED FINAN SERV 273,097,243$ 2.9% 3.1% (0.2%)

15 COMMERCIAL SERVICES 255,458,472$ 2.8% 2.2% 0.6%

16 MEDIA 198,629,133$ 2.1% 2.6% (0.5%)

17 HEALTHCARE-SERVICES 193,829,340$ 2.1% 2.0% 0.1%

18 FOOD 188,385,399$ 2.0% 1.9% 0.1%

19 CHEMICALS 186,150,765$ 2.0% 2.2% (0.2%)

20 AEROSPACE/DEFENSE 181,754,213$ 2.0% 2.0% (0.1%)

*Blended US BM: 78% SP500, 11% SP400, 11% SP600.

7


ARIZONA STATE RETIREMENT SYSTEM INTERNATIONAL EQUITY EXPOSURE OVERVIEW


Sector (Public Intl Equity) $ Value % Value*Blended

NON-US BMDifference

Country Category (Public Intl


*Blended

NON-US BMDifference

FINANCIAL 1,878,396,131$ 23.7% 24.9% (1.2%) EUROPE DEVELOPED 4,076,384,751$ 51.4% 48.9% 2.5%

CONSUMER NON-CYCLICAL 1,578,657,195$ 19.9% 20.0% (0.1%) ASIA DEVELOPED 2,237,323,112$ 28.2% 30.7% (2.5%)

CONSUMER CYCLICAL 1,126,644,470$ 14.2% 12.3% 1.9% ASIA EM 950,297,652$ 12.0% 14.4% (2.4%)

INDUSTRIAL 976,029,716$ 12.3% 12.1% 0.2% LATIN AMERICA 253,841,216$ 3.2% 2.8% 0.4%

COMMUNICATIONS 669,888,106$ 8.4% 8.7% (0.3%) AFRICA 105,874,400$ 1.3% 1.5% (0.2%)

BASIC MATERIALS 477,488,772$ 6.0% 7.1% (1.1%) MIDDLE EAST 87,480,761$ 1.1% 1.0% 0.2%

ENERGY 450,211,472$ 5.7% 5.6% 0.1% NORTH AMERICA 174,841,054$ 2.2% 0.4% 1.8%

TECHNOLOGY 378,133,263$ 4.8% 5.3% (0.5%) EUROPE EM 46,863,838$ 0.6% 0.4% 0.1%

UTILITIES 239,100,178$ 3.0% 3.1% (0.1%) GRAND TOTAL 7,932,906,784$ 100.0% 100.0% 0.0%

INDEX 18,013,509$ 0.2% 0.0% 0.2%

CASH 86,711,089$ 1.1% 0.0% 1.1%

DIVERSIFIED 51,492,953$ 0.6% 0.8% (0.2%)

FUNDS 2,145,662$ 0.0% 0.0% 0.0%

GRAND TOTAL 7,932,906,784$ 100.0% 100.0% 0.0%

Top 20 Industry Groups

(Public Intl Equity)$ Value % Value

*Blended

NON-US BMDifference

Market Cap (Public Intl


*Blended

NON-US BMDifference

1 BANKS 975,670,998$ 12.3% 13.1% (0.8%) 1) 0 - 100M 1,321,151$ 0.0% 0.0% 0.0%

2 PHARMACEUTICALS 516,393,550$ 6.5% 6.6% (0.1%) 2) 100M - 500M 57,380,023$ 0.7% 0.4% 0.4%

3 OIL&GAS 405,267,476$ 5.1% 5.1% 0.0% 3) 500M - 1B 101,919,176$ 1.3% 1.3% 0.0%

4 INSURANCE 379,921,359$ 4.8% 4.9% (0.1%) 4) 1B - 5B 843,310,935$ 10.8% 11.7% (0.9%)

5 TELECOMMUNICATIONS 367,025,250$ 4.6% 4.9% (0.3%) 5) 5B - 10B 1,122,915,687$ 14.4% 13.4% 1.0%

6 FOOD 344,658,098$ 4.3% 4.1% 0.2% 6) 10B - 50B 3,408,216,305$ 43.6% 41.1% 2.5%

7 RETAIL 293,400,325$ 3.7% 2.8% 0.9% 7) >50B 2,282,799,006$ 29.2% 32.2% (3.0%)

8 AUTO MANUFACTURERS 275,592,073$ 3.5% 3.4% 0.1% Cash and Other 115,044,501$

9 CHEMICALS 223,675,617$ 2.8% 3.6% (0.7%) GRAND TOTAL 7,932,906,784$ 100.0% 100.0% 0.0%

10 DIVERSIFIED FINAN SERV 211,973,427$ 2.7% 2.5% 0.1%

11 SEMICONDUCTORS 194,068,461$ 2.4% 2.8% (0.3%)


13 ELECTRIC 164,221,459$ 2.1% 2.1% 0.0%

14 INTERNET 157,394,994$ 2.0% 2.3% (0.4%)

15 MINING 155,803,693$ 2.0% 2.3% (0.4%)

16 BUILDING MATERIALS 148,752,513$ 1.9% 1.5% 0.4%

17 REAL ESTATE 143,443,255$ 1.8% 2.0% (0.2%)

18 BEVERAGES 129,304,305$ 1.6% 1.9% (0.3%)

19 TRANSPORTATION 127,156,853$ 1.6% 1.6% (0.0%)

20 AUTO PARTS&EQUIPMENT 122,543,122$ 1.5% 1.4% 0.2%

*Blended NON-US BM: 72% MSCI EAFE, 20% MSCI EM, 8% MSCI Sml Cap.

8


ARIZONA STATE RETIREMENT SYSTEM TOTAL FIXED INCOME EXPOSURE OVERVIEW


Sector (Public Fixed Income) $ Value % Value*Blended

FI BMDifference

Top 20 Industry Groups (Public

Fixed Income)$ Value % Value

*Blended FI

BMDifference

GOVERNMENT 1,694,581,895$ 32.6% 33.7% (1.1%) 1 SOVEREIGN 1,593,199,615$ 30.7% 31.5% (0.8%)

MORTGAGE SECURITIES 1,135,544,455$ 21.9% 23.5% (1.6%) 2 FNMA COLLATERAL 640,053,647$ 12.3% 9.7% 2.6%

FINANCIAL 439,427,410$ 8.5% 9.1% (0.6%) 3 FGLMC COLLATERAL 253,454,491$ 4.9% 6.1% (1.2%)

COMMUNICATIONS 379,803,844$ 7.3% 6.4% 0.9% 4 BANKS 243,380,902$ 4.7% 5.4% (0.7%)

CONSUMER NON-CYCLICAL 357,929,186$ 6.9% 6.8% 0.1% 5 OIL&GAS 183,643,283$ 3.5% 3.4% 0.1%

ENERGY 289,392,766$ 5.6% 5.2% 0.4% 6 TELECOMMUNICATIONS 178,645,001$ 3.4% 3.2% 0.3%

CONSUMER CYCLICAL 220,775,289$ 4.3% 4.4% (0.2%) 7 MEDIA 162,285,162$ 3.1% 2.8% 0.3%

INDUSTRIAL 200,260,559$ 3.9% 3.5% 0.3% 8 GNMA2 COLLATERAL 140,343,960$ 2.7% 5.6% (2.9%)

TECHNOLOGY 141,828,492$ 2.7% 2.5% 0.3% 9 ELECTRIC 105,523,530$ 2.0% 2.0% 0.1%

UTILITIES 110,709,951$ 2.1% 2.2% (0.0%) 10 DIVERSIFIED FINAN SERV 97,973,537$ 1.9% 1.6% 0.3%

BASIC MATERIALS 88,192,923$ 1.7% 2.3% (0.6%) 11 PIPELINES 94,982,719$ 1.8% 1.4% 0.5%

CASH 64,392,188$ 1.2% 0.0% 1.2% 12 HEALTHCARE-SERVICES 89,984,369$ 1.7% 1.6% 0.1%

BANK LOANS 37,632,834$ 0.7% 0.0% 0.7% 13 PHARMACEUTICALS 86,307,879$ 1.7% 1.4% 0.2%

ASSET BACKED SECURITIES 19,114,458$ 0.4% 0.4% 0.0% 14 COMMERCIAL MBS 73,999,493$ 1.4% 1.3% 0.1%

INDEX 10,133,801$ 0.2% 0.0% 0.2% 15 RETAIL 73,858,557$ 1.4% 1.5% (0.1%)

DIVERSIFIED 668,427$ 0.0% 0.1% (0.0%) 16 SOFTWARE 71,128,806$ 1.4% 1.0% 0.3%

GRAND TOTAL 5,190,388,479$ 100.0% 100.0% 0.0% 17 Cash 64,392,188$ 1.2% 0.0% 1.2%


19 MUNICIPAL 51,169,150$ 1.0% 0.7% 0.3%

20 CHEMICALS 49,141,513$ 0.9% 0.9% 0.1%

$ Value % Value*Blended

FI BMDifference

Maturity Bucket (Public Fixed

Income)$ Value % Value

*Blended FI

BMDifference

01) AAA 2,839,696,336$ 54.7% 55.1% (0.4%) 0-1Y 178,324,060$ 3.4% 1.6% 1.8%

02) AA 177,506,826$ 3.4% 3.4% (0.0%) 1Y-3Y 791,472,693$ 15.2% 18.4% (3.2%)

03) A 442,578,021$ 8.5% 8.2% 0.3% 3Y-5Y 850,280,215$ 16.4% 18.0% (1.6%)

04) BBB 630,917,918$ 12.2% 11.7% 0.5% 5Y-10Y 1,693,259,230$ 32.6% 27.4% 5.2%

05) BB 457,132,223$ 8.8% 10.2% (1.4%) 10Y-15Y 180,958,169$ 3.5% 4.5% (1.0%)

06) B 497,061,565$ 9.6% 7.8% 1.8% 15Y+ 1,494,774,970$ 28.8% 30.0% (1.2%)

07) CCC 98,235,147$ 1.9% 2.1% (0.3%) GRAND TOTAL 5,190,388,479$ 100.0% 100.0% 0.0%

08) CC 149,801$ 0.0% 0.1% (0.1%)

09) C 999,799$ 0.0% 0.0% (0.0%)

10) D 958,482$ 0.0% 0.0% 0.0%

11) Not Rated 45,152,361$ 0.9% 1.3% (0.4%)

GRAND TOTAL 5,190,388,479$ 100.0% 100.0% 0.0%

*Blended TOTAL BM: 79% BC US AGG, 21% BC US HY.

Credit Rating Group** (Public Fixed Income)

9


ARIZONA STATE RETIREMENT SYSTEM TOTAL PLAN RISK OVERVIEW


Strategy $ Value % ValueHistorical

VaR 95%

HVaR

Contri 95%

HVaR Contri

% to Total

Parametric

VaR 95%

PVaR

Contri 95%

PVaR Contri

% to TotalExp Tail Loss 95%

Exp Tail Loss

Contri 95%

Exp Tail Loss

Contri % to

Total

Max

Loss Std Dev

Downside

Risk (8%)

Downside

Risk Contri

(8%)

Downside Risk

Contri (8%) to

Total

PUBLIC FIXED INCOME 5,197,021,154$ 15% (2.1%) (0.0%) (0.2%) (2.0%) 0.0% 0.1% (2.8%) 0.1% 0.6% (4.0%) 1.2% (1.2%) (0.0%) (0.1%)

US EQUITY 9,288,304,209$ 26% (8.0%) (2.1%) (32.4%) (7.9%) (2.0%) (31.0%) (13.9%) (3.6%) (32.3%) (29.9%) 5.5% (4.0%) (1.0%) (31.0%)

INTERNATIONAL EQUITY 7,932,906,784$ 22% (9.7%) (2.1%) (31.6%) (9.3%) (2.0%) (30.7%) (14.6%) (3.1%) (27.8%) (36.1%) 6.1% (4.5%) (1.0%) (29.8%)

REAL ESTATE 3,123,883,656$ 9% (9.6%) (0.9%) (13.3%) (10.4%) (0.9%) (13.1%) (18.0%) (1.5%) (13.2%) (39.2%) 6.7% (5.1%) (0.4%) (12.9%)

FARMLAND & TIMBER 188,287,535$ 1% (10.0%) (0.1%) (0.8%) (10.9%) (0.1%) (0.8%) (18.9%) (0.1%) (0.8%) (40.8%) 7.1% (5.4%) (0.0%) (0.8%)

PRIVATE EQUITY 2,868,071,066$ 8% (10.3%) (0.8%) (12.8%) (9.9%) (0.7%) (11.5%) (16.9%) (1.3%) (12.1%) (35.4%) 6.5% (4.9%) (0.4%) (11.7%)

PRIVATE DEBT 3,171,917,584$ 9% (2.2%) (0.0%) (0.5%) (3.8%) (0.2%) (3.4%) (7.3%) (0.5%) (4.3%) (17.4%) 2.6% (2.1%) (0.1%) (3.8%)

OPPORTUNISTIC EQUITY 495,742,399$ 1% (7.7%) (0.1%) (1.1%) (6.7%) (0.1%) (1.3%) (11.8%) (0.2%) (1.4%) (23.7%) 4.6% (3.5%) (0.0%) (1.3%)

OPPORTUNISTIC DEBT 1,358,113,265$ 4% (6.6%) (0.2%) (2.7%) (7.8%) (0.2%) (3.8%) (12.5%) (0.4%) (3.9%) (27.3%) 5.0% (3.7%) (0.1%) (3.8%)

GLOBAL INFLATION LINKED 439,910,826$ 1% (8.1%) (0.1%) (0.9%) (7.9%) (0.1%) (1.0%) (11.9%) (0.1%) (1.0%) (27.3%) 4.9% (4.0%) (0.0%) (1.1%)

INFRASTRUCTURE 336,307,602$ 1% (9.2%) (0.1%) (1.3%) (8.7%) (0.1%) (1.2%) (14.6%) (0.1%) (1.2%) (35.1%) 5.5% (4.4%) (0.0%) (1.3%)

MULTI-ASSET CLASS 1,135,732,759$ 3% (6.6%) (0.2%) (2.3%) (6.5%) (0.1%) (2.2%) (10.1%) (0.3%) (2.4%) (19.9%) 3.9% (3.3%) (0.1%) (2.5%)

GRAND TOTAL 35,536,198,838$ 100% (6.5%) (6.5%) (100.0%) (6.5%) (6.5%) (100.0%) (11.1%) (11.1%) (100.0%) (26.7%) 4.4% (3.3%) (3.3%) (100.0%)

INTERIM POLICY BENCHMARK (6.5%) (6.4%) (10.8%) (26.0%) 4.4% (3.2%)

PUBLIC FIXED INCOME 5,197,021,154$ 15% (7.4%) (0.0%) (0.2%) (6.8%) 0.0% 0.1% (9.7%) 0.2% 0.6% N/A 4.3% (4.2%) (0.0%) (0.1%)

US EQUITY 9,288,304,209$ 26% (27.7%) (7.3%) (32.4%) (27.5%) (7.0%) (31.0%) (48.0%) (12.4%) (32.3%) N/A 19.2% (13.9%) (3.6%) (31.0%)

INTERNATIONAL EQUITY 7,932,906,784$ 22% (33.8%) (7.1%) (31.6%) (32.2%) (6.9%) (30.7%) (50.7%) (10.7%) (27.8%) N/A 21.2% (15.5%) (3.4%) (29.8%)

REAL ESTATE 3,123,883,656$ 9% (33.2%) (3.0%) (13.3%) (36.0%) (2.9%) (13.1%) (62.5%) (5.1%) (13.2%) N/A 23.4% (17.7%) (1.5%) (12.9%)

FARMLAND & TIMBER 188,287,535$ 1% (34.8%) (0.2%) (0.8%) (37.8%) (0.2%) (0.8%) (65.4%) (0.3%) (0.8%) N/A 24.5% (18.6%) (0.1%) (0.8%)

PRIVATE EQUITY 2,868,071,066$ 8% (35.7%) (2.9%) (12.8%) (34.4%) (2.6%) (11.5%) (58.5%) (4.7%) (12.1%) N/A 22.6% (17.1%) (1.3%) (11.7%)

PRIVATE DEBT 3,171,917,584$ 9% (7.6%) (0.1%) (0.5%) (13.2%) (0.8%) (3.4%) (25.3%) (1.7%) (4.3%) N/A 9.1% (7.4%) (0.4%) (3.8%)

OPPORTUNISTIC EQUITY 495,742,399$ 1% (26.7%) (0.3%) (1.1%) (23.2%) (0.3%) (1.3%) (40.9%) (0.5%) (1.4%) N/A 15.9% (12.0%) (0.2%) (1.3%)

OPPORTUNISTIC DEBT 1,358,113,265$ 4% (22.7%) (0.6%) (2.7%) (26.9%) (0.9%) (3.8%) (43.4%) (1.5%) (3.9%) N/A 17.3% (13.0%) (0.4%) (3.8%)

GLOBAL INFLATION LINKED 439,910,826$ 1% (28.1%) (0.2%) (0.9%) (27.5%) (0.2%) (1.0%) (41.3%) (0.4%) (1.0%) N/A 16.8% (13.7%) (0.1%) (1.1%)

INFRASTRUCTURE 336,307,602$ 1% (31.9%) (0.3%) (1.3%) (30.1%) (0.3%) (1.2%) (50.6%) (0.5%) (1.2%) N/A 19.2% (15.3%) (0.1%) (1.3%)

MULTI-ASSET CLASS 1,135,732,759$ 3% (23.0%) (0.5%) (2.3%) (22.3%) (0.5%) (2.2%) (34.9%) (0.9%) (2.4%) N/A 13.4% (11.6%) (0.3%) (2.5%)

GRAND TOTAL 35,536,198,838$ 100% (22.5%) (22.5%) (100.0%) (22.5%) (22.5%) (100.0%) (38.4%) (38.4%) (100.0%) N/A 15.1% (11.5%) (11.5%) (100.0%)

INTERIM POLICY BENCHMARK (22.5%) (22.1%) (37.3%) N/A 15.2% (11.2%)

Strategy $ Value % ValueBeta

SP500Corr SP500

Beta MSCI

EAFE

Corr MSCI

EAFEDuration Convexity Notional Exposure

Gross Exposure

Gross

Leverage

PUBLIC FIXED INCOME 5,197,021,154$ 15% (0.02) (0.08) 0.00 0.01 5.33 0.128 4,978,202,875$ 5,197,021,154$ 100.0%

US EQUITY 9,288,304,209$ 26% 1.07 0.99 0.82 0.89 0.85 0.007 9,318,542,990$ 9,288,634,399$ 100.0%

INTERNATIONAL EQUITY 7,932,906,784$ 22% 1.07 0.90 1.01 0.99 7,936,582,079$ 7,957,624,660$ 100.3%

REAL ESTATE 3,123,883,656$ 9% 1.15 0.88 0.98 0.88 3,123,883,656$ 3,123,883,832$ 100.0%

FARMLAND & TIMBER 188,287,535$ 1% 1.19 0.86 1.02 0.87 188,287,535$ 188,287,535$ 100.0%

PRIVATE EQUITY 2,868,071,066$ 8% 1.20 0.94 0.91 0.84 2,868,071,066$ 2,868,077,317$ 100.0%

PRIVATE DEBT 3,171,917,584$ 9% 0.31 0.61 0.26 0.60 0.73 0.010 3,164,671,111$ 3,172,221,090$ 100.0%

OPPORTUNISTIC EQUITY 495,742,399$ 1% 0.82 0.91 0.63 0.82 495,742,399$ 495,742,399$ 100.0%

OPPORTUNISTIC DEBT 1,358,113,265$ 4% 0.74 0.76 0.63 0.76 1,358,113,265$ 1,358,113,265$ 100.0%

GLOBAL INFLATION LINKED 439,910,826$ 1% 0.29 0.61 0.26 0.64 0.19 0.000 888,223,303$ 439,910,826$ 100.0%

INFRASTRUCTURE 336,307,602$ 1% 1.04 0.96 0.90 0.98 336,307,602$ 336,307,602$ 100.0%

MULTI-ASSET CLASS 1,135,732,759$ 3% 0.03 0.69 0.02 0.66 11.24 1.666 (22,006,418,731)$ 3,807,066,196$ 335.2%

GRAND TOTAL 35,536,198,838$ 100% 0.80 0.96 0.67 0.95 5.02 0.173 12,650,209,148$ 44,483,817,449$ 125.2%

ANNUALIZED RISK

MONTHLY RISK

10


ARIZONA STATE RETIREMENT SYSTEM TOTAL PLAN STRESS TESTS


Strategy $ Value % Value Bla

ck M

onday - 5

Day

Gulf W

ar

- 5 D

ay

Bond C

rash: Feb 9

4 -

May 9

4A

sia

n C

risis

97-9

8 - 5

day

Russia

n C

risis

- 5

Day

Nasdaq C

orr

ection: July

98 - A

ug 9

8R

ussia

n D

ebt C

risis

Aug-

Oct

IR S

teepenin

g: S

ept 98 -

Nov 9

8E

merg

ing M

ark

ets

Rally:

Jan 9

9 - M

ay 9

9

Fed T

ighte

nin

g: A

pri

l -

June 9

9N

asdaq R

ally: N

ov 9

9 -

Jan 0

09/1

1 A

ttack - 5

Day

09-1

0-2

008

S&

P 5

00 -20%

IR P

ara

llel S

hift +100bps

Spre

ad U

p 1

00bps

Inflation +

1%

Gold

Shock -20%

Oil S

hock -20%

Historical Scenarios Predictive Scenarios

PUBLIC FIXED INCOME 5,197,021,154$ 14.6% 1.0 (0.5) (6.6) 0.7 0.5 1.0 6.9 0.0 (0.9) (0.8) (1.3) 1.4 (13.9) (0.0) (5.4) (2.5) 0.9 (0.0) 0.5

US EQUITY 9,288,304,209$ 26.1% (28.6) (6.3) (8.1) (8.6) (12.6) (19.9) (16.2) 8.9 8.2 2.9 4.4 (12.2) (26.1) (21.0) 0.0 0.0 (0.0) 4.4 (2.4)

INTERNATIONAL EQUITY 7,932,906,784$ 22.3% (15.1) (7.6) (3.3) (8.0) (4.6) (14.3) (14.1) 10.4 12.7 (0.4) 5.7 (6.6) (27.3) (15.0) 0.0 0.0 (0.0) 6.1 (2.5)

REAL ESTATE 3,123,883,656$ 8.8% (17.6) (3.9) (5.0) (5.3) (7.8) (12.4) (10.0) 5.6 5.1 1.8 2.7 (7.5) (28.4) (13.0) 0.0 0.0 0.0 0.0 (1.1)

FARMLAND & TIMBER 188,287,535$ 0.5% (17.1) (3.8) (4.9) (5.2) (7.5) (12.0) (9.7) 5.4 4.9 1.8 2.6 (7.3) (29.0) (12.5) 0.0 0.0 0.0 0.0 (1.0)

PRIVATE EQUITY 2,868,071,066$ 8.1% (33.5) (7.4) (9.3) (10.1) (14.7) (23.5) (18.5) 10.6 9.3 3.4 5.0 (14.2) (26.0) (24.6) 0.0 0.0 0.0 0.0 (2.5)

PRIVATE DEBT 3,171,917,584$ 8.9% (0.9) (0.2) (0.3) (0.3) (0.4) (0.7) (0.5) 0.3 0.3 0.1 0.1 (0.4) (15.9) (0.7) (0.0) (0.1) 0.0 0.0 (0.2)

OPPORTUNISTIC EQUITY 495,742,399$ 1.4% (28.4) (6.3) (8.1) (8.6) (12.6) (20.0) (16.1) 9.0 8.2 2.9 4.3 (12.1) (23.0) (20.9) 0.0 0.0 0.0 2.2 (3.6)

OPPORTUNISTIC DEBT 1,358,113,265$ 3.8% (9.8) (2.2) (2.8) (3.0) (4.4) (6.9) (5.6) 3.1 2.8 1.0 1.5 (4.2) (25.8) (7.2) 0.0 0.0 0.0 0.0 (1.4)

GLOBAL INFLATION LINKED 439,910,826$ 1.2% (0.0) 0.0 0.1 (0.0) (0.0) (0.0) (0.1) (0.0) 0.0 0.0 0.0 (0.0) (16.9) 0.0 0.0 0.0 0.0 (2.2) (6.0)

INFRASTRUCTURE 336,307,602$ 0.9% (24.2) (5.3) (6.9) (7.3) (10.7) (17.1) (13.8) 7.7 7.0 2.5 3.7 (10.3) (28.3) (17.8) 0.0 0.0 0.0 0.0 (2.3)

MULTI-ASSET CLASS 1,135,732,759$ 3.2% (1.4) (4.5) (5.2) (3.8) (5.4) (6.5) (18.4) 0.4 9.9 1.6 2.5 (4.3) (26.0) (5.9) 8.7 (1.1) (0.0) 2.8 (2.6)

GRAND TOTAL 35,536,198,838$ 100.0% (16.2) (4.8) (5.5) (5.7) (6.8) (12.3) (10.0) 6.4 6.7 1.2 3.1 (6.9) (23.7) (13.0) (0.5) (0.4) 0.1 2.6 (1.7)

INTERIM POLICY BENCHMARK (16.1) (5.0) (5.8) (6.1) (6.4) (12.5) (9.1) 7.2 7.3 1.0 3.3 (6.7) (21.3) (13.1) (1.1) (0.5) 0.2 3.4 (1.7)

PUBLIC FIXED INCOME 5,197,021,154$ 14.6% 0.1 (0.1) (1.0) 0.1 0.1 0.1 1.0 0.0 (0.1) (0.1) (0.2) 0.2 (2.0) (0.0) (0.8) (0.4) 0.1 (0.0) 0.1

US EQUITY 9,288,304,209$ 26.1% (7.5) (1.6) (2.1) (2.3) (3.3) (5.2) (4.2) 2.3 2.2 0.8 1.1 (3.2) (6.8) (5.5) 0.0 0.0 (0.0) 1.2 (0.6)

INTERNATIONAL EQUITY 7,932,906,784$ 22.3% (3.4) (1.7) (0.7) (1.8) (1.0) (3.2) (3.1) 2.3 2.8 (0.1) 1.3 (1.5) (6.1) (3.4) 0.0 0.0 (0.0) 1.4 (0.6)

REAL ESTATE 3,123,883,656$ 8.8% (1.5) (0.3) (0.4) (0.5) (0.7) (1.1) (0.9) 0.5 0.4 0.2 0.2 (0.7) (2.5) (1.1) 0.0 0.0 0.0 0.0 (0.1)

FARMLAND & TIMBER 188,287,535$ 0.5% (0.1) (0.0) (0.0) (0.0) (0.0) (0.1) (0.1) 0.0 0.0 0.0 0.0 (0.0) (0.2) (0.1) 0.0 0.0 0.0 0.0 (0.0)

PRIVATE EQUITY 2,868,071,066$ 8.1% (2.7) (0.6) (0.8) (0.8) (1.2) (1.9) (1.5) 0.9 0.8 0.3 0.4 (1.1) (2.1) (2.0) 0.0 0.0 0.0 0.0 (0.2)

PRIVATE DEBT 3,171,917,584$ 8.9% (0.1) (0.0) (0.0) (0.0) (0.0) (0.1) (0.0) 0.0 0.0 0.0 0.0 (0.0) (1.4) (0.1) (0.0) (0.0) 0.0 0.0 (0.0)

OPPORTUNISTIC EQUITY 495,742,399$ 1.4% (0.4) (0.1) (0.1) (0.1) (0.2) (0.3) (0.2) 0.1 0.1 0.0 0.1 (0.2) (0.3) (0.3) 0.0 0.0 0.0 0.0 (0.1)

OPPORTUNISTIC DEBT 1,358,113,265$ 3.8% (0.4) (0.1) (0.1) (0.1) (0.2) (0.3) (0.2) 0.1 0.1 0.0 0.1 (0.2) (1.0) (0.3) 0.0 0.0 0.0 0.0 (0.1)

GLOBAL INFLATION LINKED 439,910,826$ 1.2% (0.0) 0.0 0.0 (0.0) (0.0) (0.0) (0.0) (0.0) 0.0 0.0 0.0 (0.0) (0.2) 0.0 0.0 0.0 0.0 (0.0) (0.1)

INFRASTRUCTURE 336,307,602$ 0.9% (0.2) (0.1) (0.1) (0.1) (0.1) (0.2) (0.1) 0.1 0.1 0.0 0.0 (0.1) (0.3) (0.2) 0.0 0.0 0.0 0.0 (0.0)

MULTI-ASSET CLASS 1,135,732,759$ 3.2% (0.0) (0.1) (0.2) (0.1) (0.2) (0.2) (0.6) 0.0 0.3 0.1 0.1 (0.1) (0.8) (0.2) 0.3 (0.0) (0.0) 0.1 (0.1)

GRAND TOTAL 35,536,198,838$ 100.0% (16.2) (4.8) (5.5) (5.7) (6.8) (12.3) (10.0) 6.4 6.7 1.2 3.1 (6.9) (23.7) (13.0) (0.5) (0.4) 0.1 2.6 (1.7)

INTERIM POLICY BENCHMARK (16.1) (5.0) (5.8) (6.1) (6.4) (12.5) (9.1) 7.2 7.3 1.0 3.3 (6.7) (21.3) (13.1) (1.1) (0.5) 0.2 3.4 (1.7)

Stress Test Stand Alone

Stress Test Contribution

Historical Scenarios Predictive Scenarios

-22%

-18%

-14%

-10%

-6%

-2%

2%

6%PUBLIC FIXED INCOME

US EQUITY

INTERNATIONAL EQUITY

REAL ESTATE

FARMLAND & TIMBER

PRIVATE EQUITY

PRIVATE DEBT

OPPORTUNISTIC EQUITY

OPPORTUNISTIC DEBT

GLOBAL INFLATION LINKED

INFRASTRUCTURE

MULTI-ASSET CLASS

11


GLOSSARY DEFINITION INTERPRETATION

Historical VaR 95%

A risk metric that is derived from a full revaluation historical simulation of the risk

factors impacting a portfolio, making no assumption of the tail distribution, and

reporting the largest loss likely to be suffered over a holding period (1Month for ASRS) 5

times out of 100, or 1 month out of 20

Value at Risk is a number, measured in price units or as percentage of

portfolio value, which tells you that in a defined large percentage of

cases (usually 95% or 99%) your portfolio is likely to not lose more

than that amount of money. Or said the other way around, in a defined

small percentage of cases (5% or 1%) your loss is expected to be

greater than that number.

HVaR Contri 95%This is the decomposition of the VaR, making it an additive measure, showing positive

values where risk is decreased and correlations are negative.

HVaR Contri % to Total This is the VaR contribution displayed in percent.

Parametric VaR 95%

A risk metric that is derived from a full revaluation historical simulation of the risk

factors impacting a portfolio, making a Normal distribution assumption of the tail

distribution, and reporting the largest loss likely to be suffered over a holding period

(1Month for ASRS) 5 times out of 100, or 1 month out of 20.

Value at Risk is a number, measured in price units or as percentage of

portfolio value, which tells you that in a defined large percentage of

cases (usually 95% or 99%) your portfolio is likely to not lose more

than that amount of money. Or said the other way around, in a defined

small percentage of cases (5% or 1%) your loss is expected to be

greater than that number.

PVaR Contri 95%This is the decomposition of the VaR, making it an additive measure, showing positive


PVaR Contri % to Total This is the VaR contribution displayed in percent.

Exp Tail Loss 95%

Also known as Conditional VaR or ETL, it is derived by taking a weighted average

between the VaR and losses exceeding the VaR. If VaR is reported at 95.0%, then ETL

will average the losses between 95.1% to 99.9%. It is a risk measure that assesses the

risk beyond VaR and into the tail end of the distribution of loss.

A measure that produces better incentives for traders than VaR is

expected shortfall. This is also sometimes referred to as Conditional

VaR, or tail loss. Where VaR asks the question 'how bad can things

get?', expected shortfall asks 'if things do get bad, what is our

expected loss?

Exp Tail Loss Contri 95%This is the decomposition of the ETL making it an additive measure, showing positive


Exp Tail Loss Contri % to Total This is the ETL contribution displayed in percent.

Max Loss The maximum projected loss.

Downside Risk (8.7%)

A risk metric that distinguishes between "good" and "bad" returns by assigning risk

only to those returns below a return specified by an investor. Downside risk is

considered a more effective risk measure than standard deviation (volatility) for two

important reasons: 1) it is investor specific, and 2) it identifies return distributions that

have higher probabilities for negative ("left tail") market events. Downside risk is also

referred to as downside deviation or target semi-deviation.

A 5 % downside risk with an 8.7% MAR means that the conditional

average underperformance (below 8.7% annual) is 5%, adjusted for a

positive skew (greater than the MAR). Effectively, downside risk

amplifies a big loss (by squaring the distance of that loss to the target)

and smoothes out the risk measure by taking into account the gains

setting them up to be equal to the target MAR.

Downside Risk Contri (8.7%)This is the decomposition of the downside risk, making it an additive measure, showing

positive values where risk is decreased and correlations are negative.

Downside Risk Contri (8.7%) to Total This is the downside risk contribution displayed in percent.

State Street Global Exchange℠ and truView® are trademarks of State Street Corporation (incorporated in Massachusetts) and are registered or have registrations pending in multiple jurisdictions.

This document and information herein (together, the “Content”) is subject to change without notice based on market and other conditions and in any event may not reflect the views of State Street Corporation and its subsidiaries and affiliates (“State Street”). The Content provided is for informational, illustrative and/or marketing purposes only; it does not constitute investment research or investment advice. The Content provided was prepared and obtained from sources believed to be reliable at the time of preparation, however it is provided “as-is” and State Street makes no guarantee, representation, or warranty of any kind including, without limitation, as to its accuracy, suitability, timeliness, merchantability, fitness for a particular purpose or otherwise. State Street disclaims all liability, whether arising in contract, tort or otherwise, for any claims, losses, liabilities, damages (including direct, indirect, special or consequential), expenses or costs arising from or connected with the Content. The Content provided does not constitute any binding contractual arrangement or commitment for State Street of any kind. The Content provided is not intended for retail clients, nor is intended to be relied upon by any person or entity, and is not intended for distribution to or use by any person or entity in any jurisdiction where such distribution or use would be contrary to applicable law or regulation.

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State Street Global Services: Investment Compliance Review

Limited Access

Arizona State Retirement

System

Information Classification 2

Arizona State Overview

For background purposes, following is a brief description of the compliance services provided for the ASRS investment portfolios:

Service Overview:

State Street works closely with the Plan to interpret investment guidelines and advise on different monitoring approaches. The compliance specialists will maintain the existing tests and add new tests as requested by the customers. Testing is for the ASRS’s portfolios is provided on a daily and monthly basis in a post-trade, pre-settlement environment. This includes:

• Clarification of rules • Set up and ongoing modification of rules • Validation and exception research • Reporting provided daily or monthly. • Comments and research posted within the Compliance Dashboard

(MySS.com)

Additional Services:

To satisfy the needs of more sophisticated customers, like Arizona, State Street provides additional assistance with the below:

• Alert validation with Investment Managers • Quarterly governance meetings

3

Report Card: Summary & Projects

• December: 2 Alerts – 2 Recurring / 5 Warnings – 4 Recurring • January: 5 Alerts – 4 Recurring / 5 Warnings – 4 Recurring

• December: New Warnings

• Flag all warrants and rights (Informational Warning) o Brandes Invst Part Int Eq- REPSOL SA RIGHT (Cusip

ACI0RGTY5 ). Shares were sold on 1/12/17.

• January: New Alerts • Allowed securities and Securities contained on Index Only

o E8 Model - Varex Imaging Corp (Cusip 92214X106 ) was acquired through the corporate action spinoff from Varian Medical Systems Inc. Shares were subsequently sold.

New Warnings

• Flag all warrants and rights (Informational Warning) o Franklin Templeton - ELIS SA RIGHT (Cusip BYX7SZ9).

Shares were sold on 2/3/17.

Alerts & Warnings December 2016 – January 2017

Alert: includes compliance rules which are hard limits and /or prohibition according to the Letters of Direction

Warning: includes compliance rules which have been designed as soft notification or flags (informational flag)

Note: Alerts and Warnings do not necessarily mean a violation has occurred. They could be a result of any of the following: 1. A data error/omission 2. A future action needs to occur to prevent a violation from taking place (i.e. future benchmark inclusion) 3. A violation has occurred

Breakdown

New Alerts/Warnings**

0

2

4

6

8

10

12/31/2016 1/31/17

Alert

Warning

** All alerts/warnings were researched and resolved to both State Street & Arizona's satisfaction. Alerts/warnings have valid responses/actions.

4

Report Card: Summary & Projects (cont’d)

Max 80% equity test (Law 38-718 H) – All Passes December 2016 58.63% of Market Value 55.09% of Cost January 2017 59.32% of Market Value 55.50% of Cost Max 40% foreign investments test (Law 38-718 I) – All Passes December 2016 32.39% of Market Value 36.63% of Cost January 2017 33.01% of Market Value 36.80% of Cost

Arizona Statutes on Investment Limits Max 60% internally managed assets test (Law 38-718 J) – All Passes December 2016 26.55% of Market Value 21.32% of Cost January 2017 26.55% of Market Value 21.38% of Cost Max 5% Issuer test (Law 38-718 K) Test Results: December 2016: Largest holding – Apple Inc. 0.460% - Pass January 2017: Largest holding – Apple Inc 0.470% - Pass Max 10% Debt of Multinational Development Banks (Law 38-718 L) Test Results: December 2016: 0.020% - Pass January 2017: 0.020% - Pass Arizona Restricted Country List As of December 31, 2016 and January 31, 2017 the Arizona funds were not invested in countries that support terrorism.

Additional Items • Additional compliance testing and reporting:

o Downgrades reporting o Non-Testable Rules Summary & Testing Coverage

• Explore Additional Applicable Regulatory Testing

• Report Alerts & Warnings by Asset Classes

Arizona State Retirement SystemIndependent ASRS Investment Program Oversight

for the Period Ending December 31, 2016

March 27, 2017

Allan Martin, Partner, NEPCDon Stracke, Sr. Consultant, NEPC

Michael Malchenko, Sr. Analyst, NEPC

•ASRS Investment Objectives/Performance

•Independent Oversight/Compliance

•SAA Policy Compliance•Total Fund and Asset Class Analysis•Asset Class Committee Monitoring

•Market Environment Update and Outlook

•Appendix: SAA Policy History


December 31, 2016

Contents

2

ASRS Investment Objectives/PerformanceNote: All of the data shown on the following pages is as of December 31, 2016 and reflects the deduction of investment manager fees, unless otherwise noted.

3

• Objective #1: Achieve a twenty-year rolling annual total fund net rate of return equal to or greater than the actuarial assumed interest rate.

• Objective #2: Achieve one- and three-year rolling annual total fund net rates of return equal to or greater than the return of the ASRS Strategic Asset Allocation Policy (SAAP) Benchmark.

• Objective #3: Achieve one- and three-year rolling annual net rates of return for ASRS strategic asset classes that are equal to or greater than their respective strategic asset class benchmarks.

• Objective #4: Ensure sufficient monies are available to meet pension benefits, health insurance, member refunds, administrative payments, and other cash flow requirements.

Macro

Micro

Source: ASRS Strategic Plan, March 2013

Arizona State Retirement SystemASRS Investment Objectives

December 31, 2016

4

20 Year Annualized

Return

Total Fund 7.2%

Constant 8% 8.0%

Excess Return (0.8)%

• Objective #1: Achieve a twenty-year rolling annual total fund net rate of return equal to or greater than the actuarial assumed interest rate.

Arizona State Retirement SystemTotal Fund Performance

December 31, 2016

Goal Met: No

5

• Objective #2: Achieve one- and three-year rolling annual total fund net rates of return equal to or greater than the return of the ASRS Strategic Asset Allocation Policy (SAAP) Benchmark.

Quarter 1 Year 3 Years 5 Years 10 Years

Since Inception (6/30/75)

Total Fund 1.8% 8.1% 5.2% 9.2% 5.5% 9.7%

Interim SAA Policy1 1.9% 8.8% 4.2% 8.6% 5.1% 9.4%

Excess Return -0.1% -0.7% 1.0% 0.6% 0.4% 0.3%

1Composition of SAA Policy can be found in the appendix.


1 Year Goal Met: No 3 Year Goal Met: Yes

Total Fund Performance

December 31, 2016

6

Arizona State Retirement SystemTotal Fund Attribution Analysis

Total Plan 1 Year 3 Years 5 Years

Allocation Effect1 -0.38% 0.16% 0.42%

Manager Selection Effect2 -0.35% 0.79% 0.23%

Residual3 -0.03% 0.01% -0.04%

Excess Return -0.76% 0.96 0.61

December 31, 2016

The Brinson-Fachler Attribution model explains excess return by identifying the size of contributors or detractors from excess return based on the three effects defined below:

1. Allocation Effect: Measures the impact of the decision to over/under weight asset classes relative to Interim SAAP benchmark weights. (Return Asset Class Index –Total Interim Policy Index Return) × (Weight Asset Class Portfolio − Weight Asset Class Interim Policy Index).

2. Manager Selection Effect: Measures the impact of over/under performance of asset classes in the portfolio relative to the asset class benchmarks in the Interim SAAP benchmark. [Weight Asset Class Benchmark × (Return Portfolio Asset Class − Return Asset Class in Interim Policy Index)] + Interaction Effect: Measures the impact of over/under weighting decisions and over/under performance. (Return Asset Class Portfolio (Weight Asset Class Portfolio − Weight Asset Class Policy Index))−(Return Asset Class Index (Weight Asset Class Portfolio − Weight Asset Class Index)).

3. Residual: Contribution to excess return not captured in Allocation Effect and Manager Selection Effect.

7

Arizona State Retirement SystemTotal Fund Attribution Detail

1 Year Excess Return: -0.76%

• Allocation Effect: -0.38%– Domestic Equity tactical underweight (-0.17%)– Assetized Cash overweight (-0.15%)– Public Markets Fixed Income tactical underweight (-0.11%)– Inflation-Linked Assets underweight (-0.05%)– Private Equity underweight (-0.03%)– Infrastructure underweight (-0.03%)– Multi-Asset Class Strategies underweight (+0.17)

• Manager Selection Effect: -0.35%– Private Equity underperformed due to various managers (-0.44%)– International Equity underperformed due to various managers (-0.34%) – Opportunistic Debt underperformed (-0.21%)– Real Estate outperformed (+0.36%)– Private Debt outperformed (+0.17%)– Opportunistic equity outperformed (+0.11%)

• Residual: -0.03%

December 31, 2016


Allocation Effect: Measures the impact of the decision to over/under weight asset classes relative to Interim SAAP benchmark weights. (Return Asset Class Index – Total Interim Policy Index Return) × (Weight Asset Class Portfolio − Weight Asset Class Interim Policy Index).

Manager Selection Effect: Measures the impact of over/under performance of asset classes in the portfolio relative to the asset class benchmarks in the Interim SAAP benchmark. [Weight Asset Class Benchmark × (Return Portfolio Asset Class − Return Asset Class in Interim Policy Index)] + Interaction Effect: Measures the impact of over/under weighting decisions and over/under performance. (Return Asset Class Portfolio (Weight Asset Class Portfolio − Weight Asset Class Policy Index))−(Return Asset Class Index (Weight Asset Class Portfolio − Weight Asset Class Index)).

Residual: Contribution to excess return not captured in Allocation Effect and Manager Selection Effect.

Allocation EffectManager Selection EffectExcess Return

8

Total Fund Attribution DetailArizona State Retirement System

3 Year Excess Return: +0.96%

• Allocation Effect: +0.16%– Inflation-Linked Assets tactical underweight (+0.25%)– Public Markets Fixed Income tactical underweight (+0.08%)– Multi-Asset Class Strategies underweight (+0.06)– Domestic Equity tactical underweight (-0.15%)– Assetized Cash overweight (-0.08%)

• Manager Selection Effect: +0.79%– Private Equity outperformed due to various managers (+0.24%)– Private Debt outperformed due to various managers (+0.21%)– Real Estate outperformed due to various managers (+0.16%)– Opportunistic Equity outperformed (+0.13%)– Public Markets Fixed Income outperformed (+0.07%)

• Residual: +0.01%

December 31, 2016






9

Total Fund Attribution DetailArizona State Retirement System

5 Year Excess Return: +0.61%

• Allocation Effect: +0.42%– Public Markets Fixed Income tactical underweight (+0.52%)– Inflation-Linked Assets tactical underweight (+0.21%)– Domestic Equity tactical underweight (-0.17%)– International Equity tactical overweight (-0.11%)

• Manager Selection Effect: +0.23%– Private Debt outperformed due to various managers (+0.17%)– Real Estate outperformed due to various managers (+0.15%)– Opportunistic Equity outperformed (+0.10%)– Private Equity underperformed (-0.13%)– International Equity underperformed (-0.09%)

• Residual: -0.04%

December 31, 2016






10

1 Year Return 3 Year Return

ASRS Total Domestic and Int'l Equity1 8.2% 4.1%ASRS Custom Total Equity Benchmark 9.1% 4.3%

Excess Return -0.9% -0.2%

ASRS Domestic Equity 14.2% 8.7%ASRS Custom Domestic Equity Benchmark 14.6% 9.0%


ASRS International Equity 1.8% -1.6%ASRS Custom Int'l Equity Benchmark 3.3% -1.4%


ASRS Public Markets Fixed Income 5.6% 3.1%ASRS Custom Fixed Income Benchmark 6.4% 2.5%

Excess Return -0.8% 0.6%

ASRS Inflation-Linked 12.7% -11.5%ASRS Custom Inflation-Linked Benchmark 11.8% -11.3%

Excess Return 0.9% -0.2%

ASRS Multi-Asset Class Strategies 1.9% 2.0%ASRS Multi-Asset Class Strategies Benchmark 0.3% 2.0%

Excess Return 1.6% 0.0%


1Performance of ASRS Total Domestic and Int’l Equity includes the performance of the ASRS Domestic Equity and ASRS International Equity asset classes and theEquity Risk Factor Portfolio with an inception date of 6/1/2013.

Note: Composition of ASRS Custom Asset Class Benchmarks can be found in the appendix.

Arizona State Retirement SystemAsset Class Performance vs. Benchmark – Public Markets

December 31, 2016

Goal Met: Partially

11

1 Year Return 3 Year Return IRR Since Inception Inception Date

ASRS Private Equity 10.9% 10.7% 11.3% Oct-07Russell 2000 14.0% 5.2% 10.3%

Excess Return -3.1% 5.5% 1.0%

ASRS Private Opportunistic Equity2 18.2% 22.6% 22.5% Apr-11

ASRS Private Debt 10.8% 10.5% 11.1% Jul-12S&P/LSTA Leveraged Loan Index + 250 bps 8.8% 6.5% 6.6%

Excess Return 2.0% 4.0% 4.5%

ASRS Opportunistic Debt2 3.3% 4.6% 9.3% Jan-08

ASRS Real Estate 11.4% 12.9% 8.1% Oct-05NFI - ODCE Index 10.7% 11.9% 7.3%

Excess Return 0.7% 1.0% 0.8%

ASRS Farmland and Timber 5.0% 4.3% 3.7% Jul-13CPI ex-Food and Energy + 350 bps 5.8% 5.6% 5.6%

Excess Return -0.8% -1.3% -1.9%

ASRS Total Infrastructure 6.7% -- 6.3% Dec-14CPI ex-Food and Energy + 350 bps 5.8% -- 5.6%

Excess Return 0.9% 0.7%


1Performance of private markets portfolios and corresponding benchmarks is reported on a one quarter lag. Performance shown as of September 30, 2016.2Net absolute rate of return expectations range from 10-14% per annum.Note: Due to the drawdown nature of private markets portfolios in which the investment managers call capital over time, dollar-weighted performance,or internal rate of return (IRR), is a more appropriate measure of the performance of ASRS private markets portfolios.

Arizona State Retirement SystemAsset Class Performance vs. Benchmark – Private Markets1

December 31, 2016

Goal Met: Partially

12

Cash Management

December 31, 2016


• Objective #4: Ensure sufficient monies are available to meet pension benefits, health insurance, member refunds, administrative payments, and other cash flow requirements.

*Includes assetized & unassetized cash balances (Inception of 1/26/15); represents monies to be used for funding needs that occur in subsequent month(s). Generally, monthly pension payments occur on the first day of month.

Goal Met: Yes

Month External CFs Last day of the Month Ending Balance*

Dec – 15 ($65.4) $966.1

Jan – 16 ($108.6) $788.9

Feb – 16 ($109.2) $545.2

Mar - 16 ($94.4) $517.3

Apr – 16 ($77.5) $394.7

May - 16 ($91.4) $425.5

Jun - 16 ($62.9) $274.6

Jul – 16 ($150.5) $512.3

Aug – 16 ($147.7) $467.9

Sep - 16 ($73.2) $209.5

Oct – 16 ($102.1) $436.3

Nov – 16 ($99.9) $663.2

Dec - 16 ($79.8) $620.1

13

Arizona State Retirement SystemTotal Fund Risk Statistics vs. Peer Universe

December 31, 2016

Total Fund vs. InvestorForce Public DB > $1B Gross (USD) (peer)1 Year

Note: The information contained herein is for comparison purposes only and is not a Total Fund benchmark. Peer universe comparisons are subject to several limitations, including: peer groups are not comprehensive; several funds are included in multiple peer groups; peer groups are constructed using gross of fee returns; and survivorship bias in that poorly performing funds may no longer report results.Universes are constructed using gross of fee returns; therefore, ASRS rank is based on gross of fee returns.Rankings are from highest (1) to lowest (100) in the InvestorForce Public Funds > $1 Billion Gross Universe.The InvestorForce Public Funds > $1 Billion Gross Universe contains 97 observations for the period ending December 31, 2016, with total assets of $1.5 trillion.Composition of Interim SAA Policy can be found in the appendix.

14

December 31, 2016




15

December 31, 2016




16

December 31, 2016




17

Independent Oversight/ComplianceNote: All of the data shown on the following pages is as of December 31, 2016 and reflects the deduction of investment manager fees, unless otherwise noted.

18

Total Equity 57.5%

Total Fixed

Income 27.6%

58%

25%

12%

Total Inflation-Linked11.7%

Current Allocation

Interim SAAP

1Domestic Equity, International Equity and Public Markets Fixed Income market values include residual values remaining in terminated manager accounts.2Values shown for private markets portfolios include cash flows that occurred during 4Q 2016.3Aggregate Opportunistic asset classes not to exceed 10%.4Assetized cash market value is allocated to asset classes in its policy benchmark.

Note: Interim SAA Policy includes proration of 1.2% Private Debt which is unfunded. Effective April 1, 2017 the Private Debt allocation increases to 12% with a range of +/-4% and High Yield reduces to 2% with a range of 0%-6% in the Interim SAA Policy.

Policy Ranges shown are relative to the long-term SAAP and may cause some asset classes to be out of range while implementation of the long-term SAAP is in process.

Market values include manager held cash.

Arizona State Retirement SystemSAA Policy Compliance

December 31, 2016

Current Mkt ValueCurrent

Allocation Interim SAAPInterim SAAP

Difference Policy Range Within Range SAAP

Total Domestic and International Equity 4 $17,064,147,654 48.6% 50% -1.4% 50%Equity Risk Factor Portfolio $622,403,784 1.8% 0% 1.8% 0%

Domestic Equity1,4 $8,728,976,150 24.9% 26% -1.1% 16% - 36% Yes 26%U.S. Large Cap $6,429,181,136 18.3% 20% -1.7% 20%

U.S. Mid Cap $888,831,140 2.5% 3% -0.5% 3%U.S. Small Cap $1,000,389,797 2.8% 3% -0.2% 3%

Public Opportunistic Equity $156,997,858International Equity1,4 $7,711,374,171 22.0% 24% -2.0% 14% - 34% Yes 24%

Developed Large Cap $5,817,699,247 16.6% 17% -0.4% 17%Developed Small Cap $443,356,701 1.3% 2% -0.7% 2%

Emerging Markets $1,259,872,047 3.6% 5% -1.4% 5%

Private Equity2 $2,854,238,756 8.1% 8% 0.1% 6% - 10% Yes 8%Private Opportunistic Equity2,3 $266,433,014 0.8% 0% 0.8% 0%

Total Equity $20,184,819,425 57.5% 58% -0.5% 48% - 65% Yes 58%

Public Markets Fixed Income1 $5,177,579,549 14.7% 17% -2.3% 15%Treasuries Long Duration 4 $190,115,538 0.5% 0% 0.5% 0% - 10% Yes 0%

Interest Rate Sensitive $3,843,853,824 10.9% 13% -2.1% 11%High Yield $1,143,610,187 3.3% 4% -0.7% 4%

Private Debt2 $3,195,457,051 9.1% 8% 1.1% 8% - 12% Yes 10%Opportunistic Debt2,3 $1,309,678,887 3.7% 0% 3.7% 0%

Total Fixed Income $9,682,715,487 27.6% 25% 2.6% 18% - 35% Yes 25%

Commodities $443,670,572 1.3% 2% -0.7% 0% - 4% Yes 2%Real Estate2 $3,149,479,355 9.0% 10% -1.0% 8% - 12% Yes 10%Infrastructure2 $335,794,008 1.0% 0% 1.0% 0% - 3% Yes 0%Farmland and Timber2 $188,287,609 0.5% 0% 0.5% 0% - 3% Yes 0%Opportunistic Inflation-Linked3 $0 0.0% 0% 0.0% 0%

Total Inflation-Linked $4,117,231,544 11.7% 12% -0.3% 10% - 16% Yes 12%

Multi-Asset Class Strategies $1,140,575,554 3.2% 5% -1.8% 0% - 12% Yes 5%

Operating Cash (Non Assetized)4 $3,353 0.0% 0%Total $35,125,345,364 100% 100% 100%

19

Asset Class Performance Summary - Public MarketsArizona State Retirement System

December 31, 2016

Market Value ($)

% of Portfolio

3 Mo (%) Rank

Fiscal YTD (%)

Rank 1 Yr (%) Rank 3 Yrs

(%) Rank 5 Yrs (%) Rank 10 Yrs

(%) Rank Inception (%) Since

Total Fund 35,125,345,363 100.0 1.8 -- 5.3 -- 8.1 -- 5.2 -- 9.2 -- 5.5 -- 9.7 Jul-75Interim SAA Policy 1.9 -- 5.8 -- 8.8 -- 4.2 -- 8.6 -- 5.1 -- 9.4 Jul-75Over/Under -0.1 -0.5 -0.7 1.0 0.6 0.4 0.3 Actual Benchmark 1.8 -- 5.3 -- 8.3 -- 4.5 -- 8.9 -- 5.0 -- -- Jul-75

Total Domestic and International Equity1 16,620,544,732 47.3 1.7 37 7.0 55 8.2 46 4.1 21 10.9 15 5.1 22 6.4 Jan-98ASRS Custom Total Equity Benchmark 1.9 24 7.7 43 9.1 29 4.3 14 11.1 8 5.2 19 5.9 Jan-98Over/Under -0.2 -0.7 -0.9 -0.2 -0.2 -0.1 0.5 InvestorForce Public DB > $1 Billion Total Equity Net Median 1.3 7.1 8.1 3.4 10.1 4.5 5.9

Total Domestic Equity 8,475,488,766 24.1 4.8 44 8.8 75 14.2 28 8.7 7 14.9 15 7.7 6 11.2 Jul-75ASRS Custom Domestic Equity Benchmark 5.1 33 9.6 59 14.6 22 9.0 3 15.1 5 7.6 9 11.3 Jul-75Over/Under -0.3 -0.8 -0.4 -0.3 -0.2 0.1 -0.1 InvestorForce Public DB > $1 Billion US Equity Net Median 4.7 9.9 12.8 7.6 14.3 6.9 11.2 Jul-75

Total International Equity 7,521,258,633 21.4 -1.6 37 5.0 37 1.8 86 -1.6 79 5.4 68 0.8 62 5.7 Apr-87ASRS Custom Int'l Equity Benchmark -1.6 37 5.4 31 3.3 71 -1.4 71 5.8 56 1.6 30 5.4 Apr-87Over/Under 0.0 -0.4 -1.5 -0.2 -0.4 -0.8 0.3 InvestorForce Public DB > $1 Billion Global ex-US Equity Net Median -2.2 4.6 4.1 -0.9 6.1 1.0 5.6 Apr-87

Total Public Markets Fixed Income 4,987,464,011 14.2 -2.0 68 -0.7 62 5.6 62 3.1 47 2.7 83 4.8 64 8.1 Jan-00ASRS Custom Public Markets Fixed Income Benchmark -1.7 49 0.1 54 6.4 45 2.5 69 2.2 95 4.3 79 -- Jul-75Over/Under -0.3 -0.8 -0.8 0.6 0.5 0.5 InvestorForce Public DB > $1 Billion Fixed Income Net Median -1.8 0.5 6.0 3.1 3.5 5.1 8.1 Jul-75

Total Inflation-Linked Assets 443,670,572 1.3 5.3 10 1.1 56 12.7 35 -11.5 90 -8.4 99 -- -- -4.8 Feb-10ASRS Custom Inflation-Linked Benchmark 2.7 40 -1.3 96 11.8 38 -11.3 89 -9.0 99 -2.1 99.0 -6.0 Feb-10Over/Under 2.6 2.4 0.9 -0.2 0.6 1.2 InvestorForce Public DB > $1 Billion Real Assets/Commodities Net Median 2.0 1.4 9.1 -0.4 1.9 4.4 5.0 Feb-10

Total Multi-Asset Class Strategies 1,140,575,554 3.2 9.0 1 10.2 1 1.9 95 2.0 62 7.1 1 5.9 1 6.7 Jan-04Multi-Asset Class Strategies Custom Benchmark 0.1 32 0.2 82 0.3 97 2.0 62 7.2 1 4.2 56 5.5 Jan-04Over/Under 8.9 10.0 1.6 0.0 -0.1 1.7 1.2 InvestorForce Public DB > $1 Billion Global Tactical Net Median -1.2 2.2 8.3 2.2 4.5 4.4 5.9 Jan-04

Operating Cash (Assetized) 633,718,461 1.8 -1.0 -- -2.5 -- -0.5 -- -- -- -- -- -- -- -1.6 Feb-15ASRS Cash Assetization Custom Benchmark -0.8 -- -1.7 -- 0.2 -- -- -- -- -- -- -- -4.3 Feb-15Over/Under -0.2 -0.8 -0.7 2.7

Note: Performance, ranks and medians are based on net of fee performance data. Rankings are from highest (1) to lowest (100) in the eVestment Universe.

Composition of Interim SAA Policy and ASRS Custom Asset Class Benchmarks can be found in the appendix.

1Performance of ASRS Total Domestic and International Equity includes the performance of the ASRS Domestic and International Equity asset classes and the Equity Risk Factor Portfolio with an inception date of 6/1/2013. NEPC began calculating Total Domestic and International Equity performance in January 2009. Monthly performance data from January 1998 - December 2008 was provided by State Street.

Universe shown for Total Public Markets Fixed Income includes all U.S. fixed income strategies and does not accurately represent the exposures of the ASRS Public Markets Fixed Income allocation, which has included allocations ranging from 10% - 25% to emerging markets debt historically.

20

Arizona State Retirement SystemAsset Class Performance Summary - Private Markets

December 31, 2016

Market Value ($)

% of Portfolio

3 Mo (%)

1 Yr (%)

3 Yrs (%)

5 Yrs (%)

Inception (%)

Since

Total Fund 35,125,345,363 100.0 1.8 -- 8.1 -- 5.2 -- 9.2 -- 9.7 Jul-75Interim SAA Policy 1.9 -- 8.8 -- 4.2 -- 8.6 -- 9.4 Jul-75Over/Under -0.1 -0.7 1.0 0.6 0.3 Actual Benchmark 1.8 -- 8.3 -- 4.5 -- 8.9 -- -- Jul-75

Total Private Equity 2,914,670,344 8.3 4.2 10.9 10.7 12.5 11.3 Oct-07Russell 2000 1 QTR Lagged 8.7 14.0 5.2 12.9 10.3 Oct-07Over/Under -4.5 -3.1 5.5 -0.4 1.0

Total Private Opportunistic Equity1 287,683,218 0.8 2.0 18.2 22.6 22.5 Apr-11

Total Private Debt 3,155,227,212 9.0 3.5 10.8 10.5 -- 11.1 Jul-12S&P/LSTA Leveraged Loan Index + 250 bps 1 QTR Lagged 3.7 8.8 6.5 -- 6.6 Jul-12Over/Under -0.2 2.0 4.0 -- 4.5

Total Opportunistic Debt1 1,362,033,308 3.9 4.9 3.3 4.6 7.3 9.3 Jan-08

Total Real Estate 3,182,296,997 9.1 1.2 11.4 12.9 13.1 8.1 Oct-05NCREIF ODCE 1 QTR Lagged (net) 1.9 10.7 11.9 11.6 7.3 Oct-05Over/Under -0.7 0.7 1.0 1.5 0.8

Total Farmland and Timber 190,395,952 0.5 0.8 5.0 4.3 -- 3.7 Jul-13CPI ex-Food and Energy + 350 bps 1 QTR Lagged 1.3 5.8 5.6 -- 5.6 Jul-13Over/Under -0.5 -0.8 -1.3 -- -1.9

Total Infrastructure 335,794,008 1.0 1.4 6.7 -- -- 6.3 Dec-14CPI ex-Food and Energy + 350 bps 1 QTR Lagged 1.3 5.8 -- -- 5.6 Dec-14Over/Under 0.1 0.9 -- -- 0.7

1Net absolute rate of return expectations range from 10-14% per annum.

Note: Performance in private markets asset classes is based on net of fee dollar-weighted performance data.

Composition of Interim SAA Policy can be found in the appendix.

Performance of private markets portfolios and corresponding benchmarks is reported on a one quarter lag. Performance shown as of June 30, 2016. Performance data and market values provided by State Street.Prior to 3Q 2012, performance of the Total Private Debt and Total Opportunistic Debt asset classes was reported in aggregate. Effective 6/30/2012, the Fund's allocations to Private Debt and Opportunistic Debt were separated and will be reported separately going forward.

Due to the drawdown nature of private markets portfolios in which the investment managers call capital over time, dollar-weighted performance, or internal rate of return (IRR), is a more appropriate measure of the performance of ASRS private markets portfolios.

21

December 31, 2016

Arizona State Retirement SystemPublic Market Asset Class Analysis

3 Years Ending December 31, 2016

% of Tot Anlzd Ret Rank Anlzd StdDev Rank Tracking

Error Rank Info Ratio Rank Anlzd AJ Rank Beta SharpeRatio

_

Total Fund 100.0% 5.2% 19 6.4% 59 1.4% 72 0.7 4 1.0% 10 1.0 0.8

Interim SAA Policy -- 4.2% 49 6.3% 58 -- -- -- -- -- 41 -- 0.6

Total Domestic and InternationalEquity 47.3% 4.1% 21 10.9% 40 0.6% 1 -0.3 67 -0.1% 45 1.0 0.4

ASRS Custom Total EquityBenchmark -- 4.3% 14 11.2% 78 -- -- -- -- -- 38 -- 0.4

Total Domestic Equity 24.1% 8.7% 7 10.8% 17 0.5% 8 -0.6 51 -0.1% 20 1.0 0.8

ASRS Custom DomesticEquity Benchmark -- 9.0% 3 11.1% 33 -- -- -- -- -- 15 -- 0.8

Total International Equity 21.4% -1.6% 79 12.4% 81 0.9% 3 -0.2 87 -0.2% 82 1.0 -0.1

ASRS Custom Int'l EquityBenchmark -- -1.4% 71 12.6% 88 -- -- -- -- -- 75 -- -0.1

Total Public Markets FixedIncome 14.2% 3.1% 47 3.1% 54 0.9% 15 0.7 18 0.8% 43 0.9 0.9

ASRS Custom Public MarketsFixed Income Benchmark -- 2.5% 69 3.3% 56 -- -- -- -- -- 79 -- 0.7

Total Inflation-Linked Assets 1.3% -11.5% 90 14.4% 86 2.5% 13 -0.1 76 -0.3% 76 1.0 -0.8

ASRS Custom Inflation-LinkedBenchmark -- -11.3% 89 14.3% 85 -- -- -- -- -- 67 -- -0.8

Total Multi-Asset ClassStrategies 3.2% 2.0% 62 8.0% 99 6.0% 73 0.0 23 -0.4% 51 1.2 0.2

Multi-Asset Class StrategiesCustom Benchmark -- 2.0% 62 4.3% 4 -- -- -- -- -- 39 -- 0.4

Note: Performance is reported net of fees.Underlying composites do not add up to 100% because the chart excludes private market composites.Ranks for statistics shown above are based on the respective universe against which the portfolio is ranked on the asset class performance summary that precedes this section of the analysis.Rankings are from highest (1) to lowest (100) in the eVestment Universe.Composition of Interim SAA Policy and ASRS Custom Benchmarks can be found in the appendix.

22

December 31, 2016

Arizona State Retirement SystemPublic Market Asset Class Analysis

Note: Performance is reported net of fees.Underlying composites do not add up to 100% because the chart excludes private market composites.Ranks for statistics shown above are based on the respective universe against which the portfolio is ranked on the asset class performance summary that precedes this section of the analysis.Rankings are from highest (1) to lowest (100) in the eVestment Universe.Composition of Interim SAA Policy and ASRS Custom Benchmarks can be found in the appendix.

5 Years Ending December 31, 2016

% of Tot Anlzd Ret Rank Anlzd StdDev Rank Tracking

Error Rank Info Ratio Rank Anlzd AJ Rank Beta SharpeRatio

_

Total Fund 100.0% 9.2% 12 6.8% 68 1.3% 64 0.5 16 0.7% 14 1.0 1.3

Interim SAA Policy -- 8.6% 30 6.7% 65 -- -- -- -- -- 51 -- 1.3

Total Domestic and InternationalEquity 47.3% 10.9% 15 10.8% 30 0.6% 1 -0.3 83 0.1% 71 1.0 1.0

ASRS Custom Total EquityBenchmark -- 11.1% 8 11.1% 60 -- -- -- -- -- 78 -- 1.0

Total Domestic Equity 24.1% 14.9% 15 10.5% 17 0.5% 8 -0.3 49 0.1% 16 1.0 1.4

ASRS Custom DomesticEquity Benchmark -- 15.1% 5 10.7% 31 -- -- -- -- -- 17 -- 1.4

Total International Equity 21.4% 5.4% 68 13.1% 78 0.8% 3 -0.5 98 -0.3% 92 1.0 0.4

ASRS Custom Int'l EquityBenchmark -- 5.8% 56 13.4% 90 -- -- -- -- -- 84 -- 0.4

Total Public Markets FixedIncome 14.2% 2.7% 83 3.5% 58 0.8% 12 0.6 63 0.4% 82 1.0 0.7

ASRS Custom Public MarketsFixed Income Benchmark -- 2.2% 95 3.4% 52 -- -- -- -- -- 91 -- 0.6

Total Inflation-Linked Assets 1.3% -8.4% 99 13.5% 99 2.4% 17 0.2 68 0.5% 59 1.0 -0.6

ASRS Custom Inflation-LinkedBenchmark -- -9.0% 99 13.4% 99 -- -- -- -- -- 69 -- -0.7

Total Multi-Asset ClassStrategies 3.2% 7.1% 1 8.1% 99 4.7% 64 0.0 19 -0.9% 55 1.1 0.9

Multi-Asset Class StrategiesCustom Benchmark -- 7.2% 1 6.0% 8 -- -- -- -- -- 31 -- 1.2

23

December 31, 2016

Arizona State Retirement SystemAsset Class Analysis - Total Domestic and International Equity

24

December 31, 2016

Arizona State Retirement SystemAsset Class Analysis - Total Domestic Equity

25

December 31, 2016


26

December 31, 2016


27

December 31, 2016

Arizona State Retirement SystemAsset Class Analysis - Total International Equity

28

December 31, 2016


29

December 31, 2016


30

December 31, 2016

Arizona State Retirement SystemAsset Class Analysis - Total Public Markets Fixed Income

31

December 31, 2016


32

December 31, 2016


33

December 31, 2016

Arizona State Retirement SystemAsset Class Analysis - Total Inflation-Linked Assets

34

December 31, 2016


35

December 31, 2016


36

December 31, 2016

Arizona State Retirement SystemAsset Class Analysis - Total Multi-Asset Class Strategies

37

December 31, 2016


38

December 31, 2016


39

• Five Asset Class Committee meetings have been held since the last time we providedan update on the ASRS Asset Class Committee Meetings.

• November 16, 2016 – Combined Public and Private Markets Committee– Public and private markets monthly report review and deal flow discussion– Private Equity pacing plan approved by the committee

• December 5, 2016 – Special Combined Public and Private Markets Committee– Opportunistic Credit manager commitment renewal ($300mm commitment)

• Consistent with strategic plan at the Total Fund level• Due diligence process was followed in accordance with SIP 006 – Investment Manager, Partner, and Co-

Investment Selection and Oversight• Committee approved the recommendation

– Opportunistic Credit manager guidelines variance recommendation• Fixed Income team recommended a change to an investment criteria around leverage• Due diligence process was followed in accordance with SIP 006 – Investment Manager, Partner, and Co-


• December 29, 2016 – Combined Public and Private Markets Committee– Public and private markets monthly report review and deal flow discussion– Private Equity manager recommendation ($50mm)

• Consistent with strategic plan at the Total Fund level (SAAP Target is 8%)• Due diligence process was followed in accordance with SIP 006 – Investment Manager, Partner, and Co-


Asset Class Committee MonitoringArizona State Retirement System

December 31, 2016

40

• December 29, 2016 – Combined Public and Private Markets Committee– Private Equity manager recommendation ($80mm)



• January 17, 2017 – Special Meeting of Asset Class Committee– Public and private markets monthly report review and deal flow discussion– Real Estate pacing plan review

• Committee approved the recommended pacing plan– Real Estate manager recommendation ($150 mm)



• February 17, 2017 – Combined Public and Private Markets Committee– Public and private markets monthly report review and deal flow discussion– Private Equity manager recommendation ($75mm)



– Private Equity manager recommendation ($75mm)• Consistent with strategic plan at the Total Fund level (SAAP Target is 8%)• Due diligence process was followed in accordance with SIP 006 – Investment Manager, Partner, and Co-



December 31, 2016

41

• February 17, 2017 – Combined Public and Private Markets Committee– Real Estate manager recommendation

• RCLCo recommended an amendment to the operating agreement• Due diligence process was followed in accordance with SIP 006 – Investment Manager, Partner, and Co-


– Private Debt manager recommendation ($25mm)• Fixed Income team recommended an increase in commitment to an existing manager• Due diligence process was followed in accordance with SIP 006 – Investment Manager, Partner, and Co-


– Public Equity restructuring recommendation• Public Equity team recommended a restructuring of the internally managed equity program• Committee approved the recommendation

– Securities lending program recommendation• Fixed Income team recommended changes to the securities lending program that target higher income• Committee approved the recommendation


December 31, 2016

42

• The Fund continues to make significant progress moving the portfolio from the Interim SAAP toward the long-term SAAP.

– Current Interim SAAP includes proration of approximately 1.2% unfunded Private Debt. Interim SAAP Private Debt allocation raised to 12% effective 4/1/2017.

– Interim SAAP has achieved SAAP weight in Real Estate and Public Equity as of Q3 2016.– Continued build out of private markets asset classes provides opportunity to take advantage of illiquidity

premium to produce expected returns in excess of what we believe can be achieved in the public markets.

• The Equity program has contributed negatively to performance over the past five years.– Recent Public Markets Committee approval to restructure internally managed accounts results in targeting a

higher active risk budget versus capitalization weighted benchmarks.

• The Fixed Income program has contributed positively to performance over the past five years.– $2.23 billion in remaining commitments to private debt strategies equates to approximately 15% (NAV +

unfunded) of Total Fund assets vs. the SAAP target of 10%.

• Current tactical positioning is consistent with IMD House Views.

General ObservationsArizona State Retirement System

December 31, 2016

43

Independent Oversight/Compliance: LTDNote: All of the data shown on the following pages is as of December 31, 2016 and reflects the deduction of investment manager fees, unless otherwise noted.

44

1Cash includes money for the upcoming monthly pension distribution.

Note: Market values include manager held cash.

ASRS LTD rebalanced to the new SAA Policy in February 2016, with an effective date of 2/18/2016.

December 31, 2016

Arizona State Retirement SystemLong Term Disability SAAP Policy Compliance

Total Equity 56.9%

Total Fixed Income 29.2%

61%

26%

13%

Total Inflation-Linked12.2%

Current Allocation

LTD SAA Policy Current Mkt Value

Current Allocation LTD SAAP Difference

U.S. Equity $66,955,508 35.3% 36.0% -0.7%U.S. Large Cap $40,815,334 21.5% 24.0% -2.5%U.S. Small Cap $26,140,174 13.8% 12.0% 1.8%

International Equity $40,846,109 21.6% 25.0% -3.4%Developed Large Cap $29,549,576 15.6% 18.0% -2.4%Developed Small Cap $3,645,363 1.9% 2.0% -0.1%

Emerging Markets $7,651,169 4.0% 5.0% -1.0%

Total Equity $107,801,617 56.9% 61.0% -4.1%

U.S. Fixed Income $55,409,676 29.2% 26.0% 3.2%Core $41,188,880 21.7% 19.0% 2.7%

High Yield $14,220,795 7.5% 7.0% 0.5%

Total Fixed Income $55,409,676 29.2% 26.0% 3.2%

Real Estate $21,369,476 11.3% 11.0% 0.3%Commodities $1,754,794 0.9% 2.0% -1.1%

Total Inflation-Linked $23,124,270 12.2% 13.0% -0.8%

Cash1 $3,155,528 1.7% 0.0% 1.7%

Total $189,491,216 100.0% 100.0% 0.0%

45

1LTD SAA Policy composition can be found in the appendix.

Quarter 1 Year 3 Years 5 Years10

Years

SinceInception (July-02)

Long TermDisability 0.8% 8.9% 4.5% 8.7% 4.3% 6.3%

LTD SAA Policy1 1.0% 9.7% 4.4% 8.5% 4.8% 6.5%

Excess Return -0.2% -0.8% 0.1% 0.2% -0.5% -0.2%

Arizona State Retirement SystemLong Term Disability Performance Summary

December 31, 2016

46

Market Environment Update and Outlook

47

• Fourth quarter GDP growth rate (advance estimate) printed at a modest 1.9%.– Retail sales ended November at +3.7% on a YoY basis. In the same period last year the YoY growth rate was 1.0%.– The inventory-to-sales ratio ended November flat at 1.4 and has remained relatively flat since early 2010. – Corporate profits (ended July) as a percent of GDP increased to 9.0% from 8.5% (in April) and remain elevated relative to

historical levels.– The U.S. trade deficit widened ended November as the rate of change in imports increased to a 15 month high.

• The unemployment rate decreased to 4.7% in Q4 from 4.9% in Q3; U-6, a broader measure of unemployment, decreased to 9.1% during the fourth quarter from 9.7%.

• The Case-Shiller Home Price Index (ended October) increased to 185.06 from 183.3 in July and is at levels higher than that of pre-financial crisis levels of 150.9.

• Rolling 12-month seasonally adjusted CPI saw an uptick to 2.09% at the end of December; Capacity Utilization was flat at 75.5% ended Q4.

• Fed Funds rate was increased +0.25% to a targeted range of 0.50% - to - 0.75%. The 10-year Treasury Yield (constant maturity) finished Q4 at 2.5% up 0.9% from Q3.

• The Fed balance sheet decreased slightly during Q4 2016, while the European Central Bank balance sheet continues to increase.

– ECB held its benchmark refinance rate at 0%, deposit rates -0.4% and asset purchases at €80 billion per month of corporate and public securities, announced slowing of bond purchase pace in 2017.

• S&P valuations increased slightly in Q4 remaining above the 10-year and long-term averages.– Cyclically adjusted Shiller PE ratio (27.84x) is above the long-term average of 16.71x and above the 10-year average of

24.46x.

Economic Environment

December 31, 2016


48

Market Environment – Q4 2016 Overview

* As of 9/30/2016

December 31, 2016

Qtr. 1 Yr. 3 Yr. 5 Yr. 10 Yr.

World Equity Benchmarks

MSCI ACWI (Net) (USD) World 1.2% 7.9% 3.1% 9.4% 3.6%

MSCI ACWI (Local) World (Local Currency) 4.1% 8.8% 6.4% 11.9% 4.3%

Domestic Equity Benchmarks

S&P 500 Large Core 3.8% 12.0% 8.9% 14.7% 6.9%

Russell 1000 Large Core 3.8% 12.1% 8.6% 14.7% 7.1%

Russell 1000 Growth Large Growth 1.0% 7.1% 8.6% 14.5% 8.3%

Russell 1000 Value Large Value 6.7% 17.3% 8.6% 14.8% 5.7%

Russell 2000 Small Core 8.8% 21.3% 6.7% 14.5% 7.1%

Russell 2000 Growth Small Growth 3.6% 11.3% 5.1% 13.7% 7.8%

Russell 2000 Value Small Value 14.1% 31.7% 8.3% 15.1% 6.3%

International Equity Benchmarks

MSCI ACWI Ex USA World ex-US -1.3% 4.5% -1.8% 5.0% 1.0%

MSCI EAFE (Net) (USD) Int'l Developed -0.7% 1.0% -1.6% 6.5% 0.7%

MSCI EAFE (Local) Int'l Developed (Local Currency) 7.1% 5.3% 5.5% 11.8% 2.2%

S&P EPAC Small Cap Small Cap Int'l -3.3% 1.7% 2.4% 10.7% 3.1%

MSCI EM Emerging Equity -4.2% 11.2% -2.6% 1.3% 1.8%

Domestic Fixed Income Benchmarks

Barclays Aggregate Core Bonds -3.0% 2.6% 3.0% 2.2% 4.3%

Barclays US High Yield High Yield 1.8% 17.1% 4.7% 7.4% 7.5%

BofA ML US HY BB/B High Yield 1.3% 14.7% 4.9% 7.1% 6.9%

CSFB Levered Loans Bank Loans 2.3% 9.9% 3.8% 5.3% 4.3%

BofA ML US 3-Month T-Bill Cash 0.1% 0.3% 0.1% 0.1% 0.8%

Barclays US TIPS 1-10 Yr Inflation -1.5% 4.0% 1.5% 0.7% 3.8%

Global Fixed Income Benchmarks

Citigroup WGBI World Gov. Bonds -8.5% 1.6% -0.8% -1.0% 3.0%

Barclays Global Aggregate Global Core Bonds -7.1% 2.1% -0.2% 0.2% 3.3%

BC Global Credit Global Bonds -4.4% 3.7% 1.0% 2.6% 3.9%

JPM GBI-EM Glob. Diversified Em. Mkt. Bonds (Local Currency) -6.1% 9.9% -4.1% -1.3% 3.8%

JPM EMBI+ Em. Mkt. Bonds -5.3% 9.6% 5.8% 5.1% 6.6%

Alternative Benchmarks

Bloomberg Commodity Index Commodities 2.7% 11.8% -11.3% -9.0% -5.6%

Credit Suisse Hedge Fund Index Hedge Fund 1.1% 1.3% 1.6% 4.4% 3.8%

HFRI FoF Conservative Fund of Hedge Funds 2.0% 2.3% 1.9% 3.5% 1.3%

Cambridge PE Lagged* Private Equity 3.7% 8.6% 10.7% 13.1% 10.8%

NCREIF ODCE Net Lagged* Real Estate 1.8% 9.1% 11.4% 11.3% 5.0%

Wilshire REIT Index REIT -2.3% 7.2% 13.8% 12.0% 4.8%

CPI + 2% Inflation/Real Assets 1.3% 4.1% 3.2% 3.4% 3.8%


49

Global Equity

• U.S. equities posted modest gains in the fourth quarter (+3.8%) according to the S&P 500. Volatility related to political change and economic uncertainty continued in the quarter.

• Small cap stocks outperformed large cap stocks during the quarter, with the Russell 2000 Index returning 8.8% and the Russell 1000 Index returning 3.8%.

• International equities underperformed U.S. markets during the quarter, returning -1.3%, as measured by the MSCI ACWI ex-U.S. Index. Emerging markets returned -4.2% as measured by the MSCI Emerging Markets Index in U.S. dollar terms.

– Developed international markets returned -0.7% in USD terms, while in local currency terms returned +7.1% as measured by the MSCI EAFE Index.

Private Equity

• Total fundraising in 2016 was as follows:

– Private equity fundraising totaled $395.4 billion.

– Buyout and Special Situations fundraising totaled $219.7 billion. • While leverage multiples are nearly as high as pre-GFC levels, companies’ abilities to service their debt is

stronger than in prior years.

– Venture capital fundraising totaled $56.8 billion.• Fundraising continues to be strong, largest amounts since the dot-com era.

– Fund of fund and multi-manager co-investment fundraising totaled $52.8 billion.

– Growth equity fundraising totaled $23.9 billion.

Market Environment

December 31, 2016


50

Fixed Income

• The nominal yield curve steepened in Q4. Intermediate yields increased 79 –to- 85 basis points and long duration yields increased 74 basis points.

• The spread between two and 10-year rates increased to 125 basis points from 83 basis points in Q3. Treasury Inflation-Protected Securities, or TIPS, returned -1.5% during the quarter, as measured by the BBg Barclays US TIPS 1-10 Yr Index.

• The BBg Barclays Long Duration Credit Index lost -5.02% as the long end of the curve ended the quarter 74 basis points higher.

• Long Treasuries lost -11.67% and investment-grade US corporate debt lost -2.98%.

• The BBg Barclays 1-3 year Government/ Credit Index returned -0.39%. US high yield bonds gained +1.8% driven by Energy names and tighter spreads.

• Emerging markets debt sustained moderate losses. – US dollar-denominated debt, as measured by the JP Morgan EMBI Index, lost -5.3%; local currency

debt lost -6.1%, according to the JP Morgan GBI-EM BD Index.– Inflows in 2016 have not made up for outflows since 2013 in local currency EMD.

Market Environment

December 31, 2016


51

Real Assets/Inflation-Linked Assets

• Energy remains attractive. – Private equity and debt opportunities are attractive.

– Fire sale prices never materialized but focusing on assets outside of the hottest zip codes provides potential for strong returns as market normalizes.

• Infrastructure – select opportunities to access growth markets. – High quality assets are receiving premium bids from direct investors (Pension Funds and Sovereigns)

with low costs of capital and long hold horizons; focus on mismanaged or niche opportunities.

• Metals & Mining – have commodity prices bottomed?– Peak capex occurred in 2012, lagging commodity price drops that began in 2011.

– Diverse demand drivers for underlying commodity prices.

• Timber – low return potential and limited opportunity for outperformance.

• Agriculture – near-term slowdown in price appreciation creates opportunity to invest in a strong (very) long term outlook supported by demographic trends.

Market Environment

December 31, 2016


52

Commodities

• Commodities ended the quarter up +2.3% as measured by the Bloomberg Commodity Index.– Weakness in Gold (lost -12.5%) in the fourth quarter outweighed by positive performance in the

broader basket of commodities.

Real Estate

• NEPC continues to be neutral on core real estate in the US and remains positive on non-core real estate, that is, value-add and opportunistic strategies.

• Real estate fundamentals (rent growth, occupancy, net absorption) remain strong; however, valuations are high on an absolute and relative basis.

– Rising interest rates have been baked into existing valuations but excess cap rate expansion (beyond general expectations) will reset valuations.

• Overall, the non-core real estate investment environment in the U.S. is normalizing; however, select areas remain attractive.

• REITs, at Q4, are trading below NAV but have been volatile and are still at historically high FFOmultiples.

• Europe is viewed as the best place for a marginal dollar of non-core real estate investment. – Current US-dollar denominated investors with currency exposure will feel near-term impact of Brexit,

but new investors may benefit from a strong US-dollar. Long-term Brexit implications, however, are unclear.

Market Environment

December 31, 2016


53

NEPC Insights• NEPC’s Election Perspective: The Race to the Bottom (October 2016)

• Interest Rate Risk and Asset/Liability Management for CashBalance Plans (October 2016)

• 2016 3rd Quarter Market Thoughts (October 2016)

• Behind The Curtain: Operational Capabilities Are A Must forOCIOs (November 2016)

• NEPC’s 2016 Hedge Fund Operational Due Diligence SurveyResults (November 2016)

• NEPC Market Chatter: To PE or not to PE… That is the Question(November 2016)

• Caution: Construction Ahead – Healthcare Organizations UsePrivate Equity Investments to Support Innovation (December 2016)

Highlights of Fourth Quarter Happenings at NEPCDecember 2016

Upcoming EventsNEPC’s 22nd Annual Investment Conference will be held on May 9-10, 2017 at the InterContinental Hotel in Boston, MA. Details to come in the upcoming months!

Webinar Replays• Investor Insights – Perspectives on the 2016 US Election (November 2016)

• Defined Benefit Plan Trends Survey Results (December 2016)

• Digging Deeper on ESG (December 2016)

Client AwardsWe’d like to congratulate the following clients for their recent award wins at Chief Investment Officer’s 7th Annual 2016 Industry Innovation Awards:

• Texas Tech University System’s CIO, Tim Barrett as 2016recipient of the Endowment Award

• MoDot & Patrol Employees’ Retirement System’s CIO, LarryKrummen as the 2016 recipient of the Public Defined Benefit PlanBelow $15 Billion Award

• State of Wisconsin Investment Board’s CIO, David Villa as the2016 recipient of the Public Defined Benefit Plan Above $100Billion Award

NEPC Gives Back• NEPC employees sorted and prepared 6,853

pounds of food during a volunteer day at the Greater Boston Food Bank, an organization that works to end hunger in the area by providing people in need with healthy food and resources.

• During the month of November, NEPC’sMovember team raised over $5,000 to supportmen’s health research.

• In support of Breast Cancer Awareness Month,NEPC employees wore their favorite pair of jeanswith a purpose and participated in the AmericanCancer Society Denim Day by sporting denimand the color pink. Together, we raised over$2,500.

• As part of our Annual United Way campaign, over50 NEPC employees assembled Literacy Kits forchildren during the holiday season. The kitswere filled with developmental games, arts andcrafts supplies, and reading materials.

To download NEPC’s recent white papers and webinar replays, visit: www.NEPC.com/research

54

Appendix: SAA Policy History

55

• 7/1/75 – 12/31/79 – 40% S&P 500/60% Barclays Capital Aggregate



• 1/1/92 – 12/31/94 – 50% S&P 500/10% MSCI EAFE/40% Barclays Capital Aggregate




• 10/1/03 – 12/31/06 – 53% S&P 500/15% MSCI EAFE/ACWI ex-U.S.1/26% Barclays Capital Aggregate/6% NCREIF ODCE (lagged one quarter)

• 1/1/07 – 10/31/2009 – 31% S&P 500/7% S&P 400/7% S&P 600/18% MSCI ACWI ex-U.S./5% Russell 2000 (lagged one quarter)/26%Barclays Capital Aggregate/6% NCREIF ODCE (lagged one quarter)

• 11/1/2009 – 6/30/2012 – 28% S&P 500/6% S&P 400/6% S&P 600/13% MSCI EAFE/2% MSCI EAFE Small Cap/3% MSCI EmergingMarkets/7% Russell 2000 (lagged one quarter)/24% Barclays Capital Aggregate/2% Barclays Capital High Yield/6% NCREIF ODCE (lagged onequarter)/3% Dow Jones/UBS Commodities Index

• 7/1/2012 – 3/31/2015 – 23% S&P 500/5% S&P 400/5% S&P 600/14% MSCI EAFE/3% MSCI EAFE Small Cap/6% MSCI Emerging Markets/7%Russell 2000 (lagged one quarter)/13% Barclays Capital Aggregate/5% Barclays Capital High Yield/4% JP Morgan GBI-EM GlobalDiversified/3% S&P/LSTA Levered Loan Index + 250 basis points (lagged one quarter)/8% NCREIF ODCE (lagged one quarter)/4% DowJones/UBS Commodities Index

• 4/1/2015 - present – 20% S&P 500/3% S&P 400/3% S&P 600/17% MSCI EAFE/2% MSCI EAFE Small Cap/5% MSCI EmergingMarkets/8% Russell 2000 (lagged one quarter)/11% Barclays Capital Aggregate/4% Barclays Capital High Yield/10%S&P/LSTA Levered Loan Index + 250 basis points (lagged one quarter)/10% NCREIF ODCE (lagged one quarter)/2%Bloomberg Commodities Index TR/5% Multi-Asset Class Custom Index

• *Interim SAA Policy: 20% S&P 500/3% S&P 400/3% S&P 600/17% MSCI EAFE/2% MSCI EAFE Small Cap/5% MSCI Emerging Markets/8% Russell 2000 (lagged one quarter)/13% Barclays Capital Aggregate/4% Barclays Capital High Yield/8% S&P/LSTA Levered Loan Index + 250 basis points (lagged one quarter)/2% Bloomberg Commodity Index/5% Multi-Asset Class Custom Index/10% NCREIF ODCE (lagged one quarter)

• Note: Interim SAA Policy includes proration of 1.2% Private Debt which is unfunded. Recently approved Strategic Asset Allocation Policy effective April 1, 2017.

1MSCI EAFE/ACWI ex-U.S. Benchmark is the MSCI EAFE Index prior to 10/1/2005 and the MSCI ACWI ex-U.S. thereafter.

Note: All MSCI indices changed from Gross to Net dividend withholding taxes effective 1/1/2014.

Arizona State Retirement SystemStrategic Asset Allocation Policy (SAAP) History

December 31, 2016

56

• ASRS Custom Total Equity Benchmark was 77% S&P 500, 23% MSCI EAFE through 12/31/1999; 76% S&P 500, 24% MSCIEAFE through 9/30/2003; 78% S&P 500, 22% MSCI EAFE/ACWI ex-U.S.1 through 12/31/2006; 49% S&P 500, 11% S&P 400, 11%S&P 600, 29% MSCI ACWI ex-U.S. through 10/31/2009; 48% S&P 500, 10% S&P 400, 10% S&P 600, 23% MSCI EAFE, 4% MSCIEAFE Small Cap, 5% MSCI Emerging Markets through 6/30/2012; 41% S&P 500, 9% S&P 400, 9% S&P 600, 25% MSCI EAFE, 5%MSCI EAFE Small Cap, 11% MSCI Emerging Markets through 3/31/2015; 40% S&P 500, 6% S&P 400, 6% S&P 600, 34% MSCIEAFE, 4% MSCI EAFE Small Cap, 10% MSCI Emerging Markets thereafter.

• ASRS Custom Domestic Equity Benchmark was S&P 500 through 12/31/2006; 74% S&P 500, 13% S&P 400, 13% S&P 600through 12/31/2010; 70% S&P 500, 15% S&P 400, 15% S&P 600 through 3/31/2015.; 77% S&P 500, 11.5% S&P 400, 11.5%S&P 600 thereafter.

• ASRS Custom International Equity Benchmark was MSCI EAFE through 9/30/2005; MSCI ACWI ex-U.S. through 12/31/2010;72% MSCI EAFE, 11% MSCI EAFE Small Cap and 17% MSCI Emerging Markets through 6/30/2012; 61% MSCI EAFE, 13% MSCIEAFE Small Cap and 26% MSCI Emerging Markets through 3/31/2015; 71% MSCI EAFE, 8% MSCI EAFE Small Cap and 21% MSCIEmerging Markets thereafter.

• ASRS Custom Public Markets Fixed Income Benchmark was Barclays Capital U.S. Aggregate Index through 12/31/2010; 93%Barclays Capital U.S. Aggregate Index, 7% Barclays Capital U.S. High Yield Bond Index through 12/31/2012; 59% Barclays CapitalU.S. Aggregate Index, 23% Barclays Capital U.S. High Yield Bond Index, 18% JP Morgan GBI-EM Global Diversified through3/31/2015; 73% Barclays Capital U.S. Aggregate Index, 27% Barclays Capital U.S. High Yield Bond Index thereafter.

• ASRS Custom Inflation-Linked Benchmark was 100% Barclays Capital U.S. TIPS through 7/31/2010; 50% Barclays CapitalU.S. TIPS, 50% Bloomberg Commodity Index through 8/31/2010; 30% Barclays Capital U.S. TIPS, 70% Bloomberg CommodityIndex through 5/31/2011; 100% Bloomberg Commodity Index thereafter.

• Multi-Asset Class Strategies Custom Benchmark was 56% S&P 500, 16% MSCI EAFE, 28% Barclays Capital Aggregatethrough 9/30/2011; 50% S&P 500, 19% MSCI EAFE, 28% Barclays Capital Aggregate, and 3% Bloomberg Commodity Indexthrough 06/30/2012; 43% S&P 500, 25% MSCI EAFE, 28% Barclays Capital Aggregate, and 4% Bloomberg Commodity Indexthrough 3/31/2015; market value weighted average of the benchmarks for Bridgewater (91 Day T-Bill) and Windham (52% MSCIACWI net, 30% Citi WGBI, 9% DJ US REIT, and 9% Bloomberg Commodities Index) thereafter.

Arizona State Retirement SystemASRS Custom Asset Class Benchmark History


Note: All MSCI indices changed from Gross to Net of dividend withholding taxes effective 1/1/2014.

December 31, 2016

57

• ASRS Custom Small Cap Equity Blended Benchmark was the Russell 2000 Index through 12/31/2006; S&P 600 Indexthereafter.

• DFA Blended Benchmark was the Russell 2000 Value Index through 12/31/2006; S&P/Citigroup 600 Value Index thereafter.

• ASRS Custom Int’l Developed Markets Equity Index was MSCI EAFE through 9/30/2005; MSCI ACWI ex-U.S. through12/31/2010; 87% MSCI EAFE and 13% MSCI EAFE Small Cap through 6/30/2012; 82% MSCI EAFE and 18% MSCI EAFE Small Capthrough 3/31/2015; 89% MSCI EAFE and 11% MSCI EAFE Small Cap thereafter.

• Brandes Custom Benchmark was MSCI EAFE through 9/30/2005; MSCI ACWI ex-U.S. through 2/28/2011; MSCI EAFE thereafter.

• ASRS Cash Assetization Custom Benchmark is 33% S&P 500, 14% Russell 2000, 25% MSCI EAFE, 28% Barclays TreasuryIndex through 8/24/2015; 100% Barclays US Long Treasury Index through 11/13/2015; 15% S&P 500, 15% Russell 2000, 16% MSCI EAFE, 4% MSCI Emerging Markets Index, 50% Barclays US Treasury Index through 4/29/2016; 52% S&P 500, 18% Russell 2000, 30% Barclays US Long Treasury Index through 6/28/2016; 100% Barclays US Long Treasury Index through 9/15/2016; NYSE US 2 Year Treasury Futures Index through 12/21/2016; 30% S&P 500, 10% Russell 2000, 30% MSCI EAFE, 30% Barclays Treasury Index thereafter.

• ASRS Bridgewater Custom Benchmark was 56% S&P 500, 16% MSCI EAFE, 28% Barclays Capital Aggregate through 9/30/2011; 50% S&P 500, 19% MSCI EAFE, 28% Barclays Capital Aggregate, and 3% Bloomberg Commodity Index through 06/30/2012; 43% S&P 500, 25% MSCI EAFE, 28% Barclays Capital Aggregate, and 4% Bloomberg Commodity Index through 3/31/2015; Citigroup 3-Month Treasury Bill Index thereafter.

• Times Square Custom Benchmark was Russell 2500 Growth through 3/31/2015; Russell 2000 Growth thereafter.

ASRS Custom Asset Class Benchmark History

December 31, 2016




58

● 7/1/2002 – 12/31/2004 - 53% S&P 500/17% MSCI EAFE/30% Barclays Capital Aggregate Bond Index

● 1/1/2005 – 2/28/2007 - 53% Russell 3000/15% MSCI EAFE/26% Barclays Capital Aggregate Bond Index/6% DJ Wilshire Real Estate Securities Index

● 3/1/2007 – 12/31/2010 - 50% Russell 3000/18% MSCI EAFE/26% Barclays Capital Aggregate Bond Index/6% DJ Wilshire Real Estate Securities Index

● 1/1/2011 – 12/31/2012 - 40% Russell 1000/7% Russell 2000/13% MSCI EAFE/2% MSCI EAFE Small Cap/3% MSCI Emerging Markets/24% Barclays Capital Aggregate/2% Barclays Capital High Yield/6% DJ Wilshire Real Estate Securities Index/3% Bloomberg Commodity Index

● 1/1/2013 – 2/28/2016 - 34% Russell 1000/6% Russell 2000/14% MSCI EAFE/3% MSCI EAFE Small Cap/6% MSCI Emerging Markets/13% Barclays Capital Aggregate/8% Barclays Capital High Yield/4% JP Morgan GBI-EM Global Diversified/8% DJ Wilshire Real Estate Securities Index/4% Bloomberg Commodity Index

● 2/29/2016 – Present - 24% Russell 1000/12% Russell 2000/18% MSCI EAFE/2% MSCI EAFE Small Cap/5% MSCI Emerging Markets/19% Barclays Capital Aggregate/7% Barclays Capital High Yield/11% DJ Wilshire Real Estate Securities Index/2% Bloomberg Commodity Index

Arizona State Retirement SystemLong Term Disability Strategic Asset Allocation Policy (SAAP) History


December 31, 2016

59

Information Disclaimer

• Past performance is no guarantee of future results.

• All investments carry some level of risk. Diversification and other asset allocation techniques are not guaranteed to ensure profit or protect against losses.

• NEPC’s source for portfolio pricing, calculation of accruals, and transaction information is the plan’s custodian bank. Information on market indices and security characteristics is received from other sources external to NEPC. While NEPC has exercised reasonable professional care in preparing this report, we cannot guarantee the accuracy of all source information contained within.

• Some index returns displayed in this report or used in calculation of a policy, allocation or custom benchmark may be preliminary and subject to change.

• This report is provided as a management aid for the client’s internal use only. Information contained in this report does not constitute a recommendation by NEPC.

• This report may contain confidential or proprietary information and may not be copied or redistributed to any party not legally entitled to receive it.

Reporting Methodology

• The client’s custodian bank is NEPC’s preferred data source unless otherwise directed. NEPC generally reconciles custodian data to manager data. If the custodian cannot provide accurate data, manager data may be used.

• Trailing time period returns are determined by geometrically linking the holding period returns, from the first full month after inception to the report date. Rates of return are annualized when the time period is longer than a year. Performance is presented gross and/or net of manager fees as indicated on each page.

• For managers funded in the middle of a month, the “since inception” return will start with the first full month, although actual inception dates and cash flows are taken into account in all Composite calculations.

• This report may contain forward-looking statements that are based on NEPC’s estimates, opinions and beliefs, but NEPC cannot guarantee that any plan will achieve its targeted return or meet other goals.

Information Disclaimer and Reporting Methodology

60

Asset Class CommitteesWorking Groups

IMD Activities


March 27, 2017

IMD Activities 1 / 5


Asset Class Committee Schedule

The asset class committees met on the following days during 2017:

January 17 (combined public and private)February 17 (combined public and private)

Combined meetings of the public and private markets committee are

scheduled for:

March 17March 23April 27Future meetings anticipated monthly thereafter, or more frequently as needed



Combined Public and Private Markets Committee � January 17,

2017

Approved a new commitment for a Real Estate Separately Managed Account

Approved the Real Estate Strategy Implementation Plan for 2017

Discussed various periodic reports for the public and private markets portfolios



Combined Public and Private Markets Committee � February 17,

2017

Approved new investments for two Private Equity managers

Approved an amendment to the Operating Agreement for a Real Estate

manager

Approved an increase in commitment for a Private Debt manager

Approved updates to strategies for the internally managed portfolios

Approved new strategy for implementation of the risk factor portfolios

consolidating them to a single internally managed portfolio

Approved modi�cations to the Securities Lending Program

Discussed various periodic reports for the public and private markets portfolio



Summary of IMD Working Group Projects

Equity internal portfolio operation improvementsEquity factor portfolio strategy

Equities active managementMulti asset performance review

Mult asset strategy reviewCurrency strategy

Cash management operations improvementSecurities lending review

Dynamic risk management excel versionDynamic risk management stochastic version

Liquidity strategyInt l Equities Factor Strategy

Total fund factor strategyStrategic asset allocation review

LTD SAA and unitizationRRA Unitization

Signals for tactical viewsBayesian optimization with tactical views

Equities performance measurementFixed income performance measurement

Total fund performance measurementPrivate Debt Reporting Enhancements

Opportunistic Portfolios Reporting EnhancementsMigration to web based reporting and interactive graphics

Tickerize ASRS liquid holdingsRealtime performance estimation

Compliance systemsManger Fee SOP

Israel Boycott Divestment SOPLegal SOP

Tax SOPFacilities and technology improvements

Subscriptions and calendarsReal estate consulting RFP

Private equity consulting RFPProxy voting RFP

Legal RFPCustody RFP

2016

2017

2018

Date

Status

done

future

in process

ASRS Investment Management Division Projects


Operational OverviewCash Collateral Portfolio

Program ReviewProgram Modi�cations

Securities Lending Program Review

Investment Management Division


March 27, 2017

IMD Securities Lending Program Review 1 / 16



Table of Contents

1 Operational Overview

2 Cash Collateral Portfolio

3 Program Review

4 Program Modi�cations




Outline



3 Program Review





Eligible Securities

As �agent lender�, State Street lends eligible securities to approved borrowersand manages the corresponding collateral securing each loan.

Eligible securities include:

U.S. EquityNon-U.S. Developed Market EquityCertain Fixed Income Securities:

US Treasuries and AgenciesSovereign DebtInvestment Grade Corporates

At its sole discretion, the ASRS may restrict lending of specic accountsentirely, individual securities from eligible accounts, or a portion of any specicposition.




Securities Lending Collateral

State Street receives collateral for each loan with margins varying based onthe loaned security and the agreed upon collateral. For most transactions,initial and maintenance margins range from 102% to 108%.

State Street marks the value of the loan daily using closing prices and adjuststhe collateral to meet the maintenance margin within the next business day;except for non-material margin calls of $100,000 or less.

State Street accepts cash (U.S. Dollars only) and non-cash collateral asspeci�ed in Schedule B of the SLAA. Approved non-cash collateral includes�Rule 15c3-3� securities and developed market equity from major indices.

Under a standard lending transaction, the ASRS or borrower may terminateany loan on a daily basis. The recall of a terminated loan matches the normalsettlement timeframe for the security on loan.




Other Operational Considerations

Lending revenue is split 87% to the ASRS and 13% to State Street.

Approved borrowers are listed in Schedule D to the SLAA and modi�edperiodically based on State Street's credit review of counterparties.

The ASRS has periodically engaged in �Opportunistic Lending�, generallylarger transactions with a single borrower for a speci�ed duration. The loanedsecurities, collateral and margins are negotiated; requiring explicitdocumentation.

Blackrock lends securities within the commingled US Debt Index, EAFELarge Cap, and EAFE Small Cap. The Emerging Market Equity Fund isnon-lending.




Outline



3 Program Review





Cash Collateral Reinvestment

The ASRS bears the risk of de�ciencies or defaults in the cash collateralreinvestment program.

Under the current guidelines:

The ASRS accepts only U.S. Dollars as collateral.Cash balances are capped at $500 million.Eligible investments include:

US Treasury/Agency repoOutright purchases of U.S. Treasuries and Agency Discount NotesState Street's Navigator Prime - Navigator Prime is a `government only' moneymarket fund used solely by securities lending clients. Investment in Navigatorprime is limited to $150 million.

Liquidity restrictions specify that 10% of the portfolio be held in overnightinvestments with 25% of holdings maturing within 7 business days.Weighted average maturity of the cash collateral reinvestmet portfolio islimited to 30 days.




Securities Lending Spreads

Cash collateralized loans price based on a �rebate rate�, the negotiatedinterest rate that the ASRS pays to the borrower.

The rebate rate is inversely related to borrower demand for the security with�specials� regularly pricing at negative rebate rates.

The ASRS speci�es a maximum rebate rate paid to the borrower of FedFunds Target Lower Bound minus 10 bps, currently 40bps.

Net Spread = Reinvestment Spread + Demand Spread




Outline



3 Program Review





Lending Revenue

ASRS revenue with State Street asagent lender beginning October2009 has totaled nearly ~$47million.

Since securities lending wasreengaged in late 2014, revenue hastotaled ~$16 million.

Over this time, cash loans haveaccounted for almost 40% of totalrevenue but averaged only 10% ofbalances.




Lending Spreads

Utilization levels have declinedslightly over the last six monthswith both cash and non-cash loansfalling.

Lending spreads on cash loansindicate that market demand hasdeclined over the past six months.

Due to capital costs associated withUS Treasury/Agency repo and thetransition of Navigator Prime into agovernment only fund, the yield onthe cash collateral portfolio nowtrails the risk free rate by 10-15 bps.




Outline



3 Program Review





Approved Modi�cations

At the February 17, 2017 Combined Public and Private Market Asset ClassMeeting, the Committee approved the following changes to the Securities LendingProgram, pending �nal legal review. The pending modi�cations include theconservative guideline increases that are expected to generate additional annuallending revenue of approximately $5 million.

Operational - The Committee approved increasing caps on aggregate totallending, cash collateral balances and cash reinvestment in Navigator Prime.

Increasing the aggregate lending 'cap' from $2.5B to $3.5BIncreasing the cash collateral lending 'cap' from $500M to $1.5BIncreasing the Navigator Prime 'cap' from $150M to $500M

Cash Collateral Portfolio - the committee approved expanding the eligibleinvestment for the cash collateral reinvestment portfolio to include:

Overnight Time DepositsCorporate ObligationsState Street Alternative Repo




Additional Eligible Investments

Overnight Time Deposits:

Maximum Maturity of 1 dayMinimum Short Term Rating of A1/P1Minimum Long Term Rating of A-/A3

Corporate Obligations:

Bank Obligations, Certi�cates of Deposit, Commercial PaperFloating Rate and Fixed Rate eligibleUSD Denominated OnlyMaximum Maturity of 1 yearWAM of less than 9 monthsMinimum Short Term Rating of A1/P1Minimum Long Term Rating of A-/A3

State Street Alternative Repo:

Repo with approved counterparties collateralized by liquid �xed income anddeveloped equity securitiesRepo managed `tri-party' with either BNY Mellon or JP MorganIndemni�ed by State StreetMaximum Final Maturity of 9 monthsWAM of less than 6 months




State Street Credit Review Process

SSGA manages over $350 billion of short term portfolios covering moneymarket funds and securities lending cash collateral.

The dedicated credit research team focus on principal preservation throughoutthe issuer approval and continued monitoring process of approved credits.

Potential credits are subject to a lengthy initial review process that includesqualitative metrics such as capital levels, liquidity pro�le, asset base andearnings. Qualitative assessments of the corporate management team,industry risk factors and competitive environment are added to the approvaland monitoring process.

The ongoing fundamental assessment of credit worthiness and monitoringprocess generates a real time approved list for Portfolio Managers. If aborrower becomes restricted and the name is already held in the fund, StateStreet would contact the ASRS to determine if the security should be sold orremain in the portfolio.

Repo counterparties are subject to the same approval and monitoring process.


1


Securities Finance Program Update

January 2017

Source: Securities Finance Business Intelligence

Market Leading Securities Lending Program

2

Lendable Assets Total on Loan

$0

$400

$800

$1,200

$1,600

$2,000

$2,400

$2,800

$3,200

$3,600

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

$ Billions

Currency reflected in U.S. dollars

As of December 31, 2016

$0

$100

$200

$300

$400

$500

$600

$700

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Dec-16

$ Billions

NON-US CORP BOND & EQUITY

US CORP BOND & EQUITY

NON-US FIXED INCOME

US GOVERNMENT

Large and Diverse Program

3

Assets Available for Loan

Approximately $3.23 trillion

As of December 31, 2016

On Loan Balances

Approximately $364 billion

Currency reflected in U.S. dollars

11%

60%

7%

23%

US Government US Corp Bond & Equity

Non-US Fixed Income Non-US Corp Bond & Equity

38%

40%

12%

11%

US Government US Corp Bond & Equity

Non-US Fixed Income Non-US Corp Bond & Equity

Source: Securities Finance Business Intelligence

4

Market Overview US Equity Market

• Q4 has been eerily similar to Q1 with unexpected and uncharacterized events; while Q1 was the sell off sending the market down ~10%,

thankfully Q4 was a post election rally that has led the S&P 500 Index & Dow Jones Industrial Average to all time highs

• The overall softness in the hard to borrow space we have realized through the summer has very much continued through to the end of the

year; and the lone bright spot Tesla (TSLA) quickly eased off its highs post proxy at the end of September as the merger with SolarCity (SCTY)

was approved and completed. There continues to be demand on the short side, however nowhere near the levels we had witnessed for most

of the year

• There have been a few bright spots in the specials space there has been a resurgence of demand in the consumer space

– Sears (SHLD) again missed earnings and being heavily sought after as shorts continue to look for opportunity

– Under Armour and GoPro have come under pressure off lackluster performance and forecasting

• The remnants of the Proctor & Gamble spin off early in Q4 brought an end to what was a lucrative year in the M&A space. A few small deals

we saw come to market closing out the year were Johnson Controls which spun off Adient, and WebMD had a tender offer which closed mid

December

• As we entered December, and certain post Fed move there was an active effort to shore up balance sheet and take CASH loans off the book

and utilize US Treasury and/or equity collateral

• Given the overall stability the market realized in Q4 there was light activity in the IPO space, likely due to uncertainty around the election and

pending Fed hike. Two names of note that issued are Athene Holding (ATH) and Valvoline (VVV). VVV has already come under pressure

from short sellers, which should continue through lock up expiry. Coincidentally, this name has also been mentioned for a reverse spin off

similar to those we saw this year: Baxter International (BAX), Proctor & Gamble (PG), Lockheed Martin (LMT).

• Looking forward to 2017, it is loosely expected that financials continue a post-election rally, and it is likely Biotech stays in the crosshairs for

prescription drug prices. It will also be interesting to see to what extent the energy sector is in play, as the current government would like to

bring more oil onshore with OPEC cutting production. Another glut in oil prices in ‘17 would certainly bring up memories of early 2016 when

the sector was heavily under pressure – this sector would seemingly be ripe for consolidation as many domestic firms are still looking to firm

up their balance sheets

Past Performance is not a guarantee of future results

Commentary provided by State Street Securities Finance Trading Desks

AdReview: SF-2536

5

Market Overview International Equity Market

Past Performance is not a guarantee of future results

Commentary provided by State Street Securities Finance Trading Desks

AdReview: SF-2543

• Specials / Deals:

– Directional balances and revenues continued to trend slightly down over the course of Q4 (from 2016 Q1 highs) across Europe and

Asia.

– The diversity of the deep specials book with wide coverage across a number of sectors has continued over the last few month. At the

sector level, we’ve seen interest in banks (Unicredit Spa, UCG IM & Unione Di Banche Italiane Spa, UBI IM) generic pharma (Celltrion,

068270 KS), specialty pharma (Cyberdyne Inc 7779 JP) as well medical equipment (Canopy Growth Corp, CGC CN) and the mortgage

finance (Home Capital Group, HCG CN) sectors.

– As Trump prepares to take office in January, the market is awaiting for potential volatility domestically and what kind of ripple effect it

will have globally.

– China (trade) and the Middle East (oil) are regions that may be affected as well as the retail, banking, energy and pharma sectors

all areas of potential impact.

• Dividend Arbitrage / Yield Enhancement

– Price volatility remains a central theme in the dividend trading space. However, unlike the last several quarters there has been more

price stability, albeit at somewhat suppressed levels compared with historical averages.

– Demand has been streamlined to France, Sweden, Finland and Norway for the majority of borrowing brokers. Demand has

dropped significantly across the following markets, relative to past years: Italy, Netherlands, Spain and Austria.

• General Trends and Areas of Focus Looking Forward:

– Collateral flexibility in the alternative space is driving additional balances on our core book of business.

– Collaterals specifically in demand: euro cash, yen cash, JGBs, Equities (primary and secondary indices).

– Term trade structures are coming back into focus for multiple borrowers, mostly in an equity for equity capacity.

• Relationship with ASRS commenced in October 2009

• Earnings Overview

– Over $46.9M in client revenue since inception (October 2009 – December 2016)

– Lending program was restricted from September 2011 to October 2014, with limited term and dividend

season trading permitted

• Fee Split – 87% of Revenue - ASRS

– 13% of Revenue - State Street

• Cash Collateral

– Separately managed account with repurchase agreements of US Treasury and US Agency and Mortgage

Backed Securities obligations, and Navigator Securities Lending Prime Portfolio sweep

• Non - Cash Collateral

– 15c3-3 eligible securities

– US and Non-US equities

• Approved Borrowers

– State Street approved list

• Program Restrictions

– Agency Lending loan balances capped at $2.5B, with $500M limit on cash collateral

– Opportunistic Lending loan balances capped at $2.0B

– Minimum Demand/Intrinsic Spread: Cash collateral loans - 10 bps, Non-Cash collateral loans - 10 bps

• Borrower default indemnification provided by State Street

Program Summary

Source: my.statestreet.com

Performance data shown represents past performance and is not a guarantee of future results 6

7

Securities Lending Performance

Arizona State Retirement System Performance

2013 2014 * 2015 2016 % Change

Average Lendable Assets ($) 14,285,289,172 15,356,625,733 13,589,370,280 11,233,235,233 -17.3%

Average On Loan ($) 546,470,831 786,233,859 2,730,330,947 2,448,074,955 -10.3%

Utilization 3.83% 5.12% 20.09% 21.79% 8.5%

Earnings by Program ($)

US Equity 2,444,295 1,872,487 4,318,252 3,929,506 -9.0%

US Corporate Bond 154 1,370 16,448 63,926 288.7%

US Government - 735,174 1,906,124 698,508 -63.4%

Non-US Equity 709,514 663,333 1,402,161 1,468,618 4.7%

Non-US Fixed Income - 371 1,365 231 -83.1%

Total Earnings ($) 3,153,962 3,272,736 7,644,350 6,160,788 -19.4%

Components of Spread (bps)

Demand Spread 383 188 120 103 -14.0%

Reinvestment Spread 5 1 (3) (8) -191.0%

Net Spread 388 189 117 95 -18.6%

Non-Cash Collateral Spread (bps) 52 47 22 18 -19.8%

Return to Lendable Assets (bps) 2.2 2.1 5.6 5.5 -2.5%

Notes:

(1) Risk-Free rate used for spread calculat ions was Fed Funds Open, now Overnight Banking Funding Rate (OBFR) as of 9/19/2016

(2) Data represents past performance and is not a guarantee of future results

(3) Data Source: Securit ies Finance Business Intelligence

(4) Components of Spread encompass only " cash collateral" backed loans during the period

(5) ASRS employs a minimum spread on loans of 10 basis points for " Cash" , and 10 basis points for " Non-Cash"

* ASRS resumed full part icipat ion in the lending program in October 2014

8

Securities Lending Top Earners

Arizona State Retirement System Earnings by Security ID

Security Name Earnings ($)Net Spread

(bps)

Cal Maine Foods Inc 296,191 1,859

Mattress Firm Holding Corp 156,660 995

Us Treasury N/B Intr: 2.75 Matd: 11/15/23 112,769 32

Engie 102,142 374

Us Treasury N/B Intr: 3.125 Matd: 04/30/17 84,128 34

DNB ASA 69,698 1,081

WI Treasury Sec Intr: .01 Matd: 07/21/16 46,975 40

Noble Group Ltd 46,777 425

Abengoa SA 45,305 3,503

Total SA 45,191 276

Notes:

(1) Revenues stated are audited for the period of January 1 - December 31, 2016



9

Securities Lending Performance

Spread Type Categories

General Collateral < 25 basis points

Warm ≥ 25 basis points but < 200 basis points

Special ≥ 200 basis points but < 1000 basis points

Deep Special ≥ 1000 basis points

Notes:

(1) Loan balances and earnings stated are for the period of January 2016 – December 2016 and do not include offline/flatfee income


(3) Data Source: Securities Finance Business Intelligence C

lient

Earn

ings

Avera

ge L

oan B

ala

nce

GC Warm SpecialDeep

Special

Loan Balances 1,962,974,70 439,186,130 33,329,257 $4,890,650

Client Earnings $2,373,967 $1,760,754 $1,084,247 $697,544

$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

0

500,000,000

1,000,000,000

1,500,000,000

2,000,000,000

2,500,000,000

Loan Balances & Earnings by Spread Type

10

Securities Lending Performance by Portfolio

Arizona State Retirement System Performance by Fund: January - December 2016

Fund

Average

Lendable Assets

($)

Average on Loan

($)

ASRS

Revenue ($)

Return to

Lendable

Assets (bps)

E2 Model 4,569,320,334 781,324,909 $1,162,792 2.5

F2 Model 1,333,167,691 246,109,131 $642,547 4.8

Timessquare Capital Management 326,937,383 137,030,028 $482,657 14.8

E6 Model 292,413,881 123,488,228 $453,339 15.5

LSV-US Large Cap Value 598,677,077 148,166,874 $440,952 7.4

Brandes Investment Partners Int EQ 443,215,894 86,579,370 $373,849 8.4

American Century 483,170,839 78,324,732 $292,985 6.1

E4 Model 292,337,906 109,239,480 $276,918 9.5

Dimensional Fund Advisors EQ Fund 265,147,712 108,766,967 $267,279 10.1

AQR Capital 86,269,423 19,429,518 $233,846 27.1

Wellington Management Co 255,696,639 96,047,387 $224,688 8.8

Dimensional Fund Advisors Intl Sc 93,459,945 31,993,453 $199,487 21.3

E3 Model 305,483,671 114,153,788 $193,586 6.3

Trinity Street 258,245,578 33,990,714 $178,167 6.9

Thompson Siegel Walmsley 265,804,060 29,887,189 $170,526 6.4

E8 Model 492,955,142 125,653,329 $169,034 3.4

E7 Model 526,350,669 97,155,078 $163,604 3.1

Gresham Investment Management 163,906,581 40,480,054 $120,117 7.3

Franklin Templeton Investments 142,485,984 33,134,654 $114,413 8.0

Total 11,195,046,409 2,440,954,882 $6,160,788 5.5

Notes:

(1) Return to Lendable Assets (bps) = (ASRS Revenue / Average Lendable Assets) * 10,000 /360 * # days in the period



11

Securities Lending Performance Demand/Intrinsic Spreads


Jan-Dec 2015 Jan-Dec 2016 % Change

US Equity (bps) 114.88 90.98 -20.80%

US Corporate (bps) 35.61 60.56 70.08%

Non-US Equity (bps) 144.92 168.40 16.20%

US Government (bps) 59.99 67.08 11.81%

Non-US Fixed Income (bps) 18.52 20.07 8.39%

Notes:


(2) Data Source: my.statestreet.com and Securit ies Finance Business Intelligence

12

Securities Lending Earnings by Collateral Type

Arizona State Retirement System Earnings by Collateral Type

DescriptionASRS

Earnings ($)

% of

Total

Cash Collateral in separately managed account 2,798,915 45.43%

Tri-party Equities 2,551,360 41.41%

US Treasury Securities 509,079 8.26%

Sovereign Debt Securities 301,433 4.89%

Grand Total 6,160,788 100.00%

Notes:

(1) Revenues stated are audited for the period of January 1, 2016 - December 31, 2016



13

Borrower Diversification

Arizona State Retirement System Borrower Diversification

BorrowerOn-Loan Market

Value% of Total

National Bank Financial Inc. 536,271,999 24%

UBS AG 266,196,033 12%

Scotia Capital Inc. 261,486,634 12%

Barclays Capital Inc. 210,067,687 10%

Societe Generale 190,644,097 9%

Deutsche Bank AG 142,536,929 6%

Credit Suisse Securities (Europe) Limited 56,560,464 3%

Barclays Capital Securities Limited 53,837,903 2%

Goldman Sachs International 50,466,123 2%

Goldman Sachs & Co. 42,032,799 2%

All Others (44 Borrow ers) 392,242,374 18%

Total 2,202,343,043 100%

Notes:

(1) Base Currency (USD) Loan balance as of: December 31, 2016



National Bank Financial Inc.

UBS AG

Scotia Capital Inc.

Barclays Capital Inc.

Societe Generale

Deutsche Bank AG

Credit Suisse Securities (Europe)Limited

Barclays Capital SecuritiesLimited

Goldman Sachs International

Goldman Sachs & Co.

All Others (44 Borrowers)

14

Important Disclosures

This communication is not intended for retail clients, nor for distribution to, and may not be relied upon by, any person or entity in any jurisdiction or country where such distribution or use

would be contrary to applicable law or regulation. This publication or any portion hereof may not be reprinted, sold or redistributed without the prior written consent of State Street Bank and

Trust Company.

This document is a general marketing communication. It is not intended to suggest or recommend any investment or investment strategy, does not constitute investment research, nor

does it purport to be comprehensive or intended to replace the exercise of an investor’s own careful independent review regarding any investment decision. This document is confidential

and is intended for distribution to professional investors only.

This document and the information herein does not constitute investment, legal, or tax advice and is not a solicitation to buy or sell securities nor is it intended to constitute a binding

contractual arrangement or commitment by State Street of any kind. The information provided does not take into account any particular investment objectives, strategies, investment

horizon or tax status. The views expressed herein are the views of State Street Global Markets as of the date specified and are subject to change based on market and other conditions.

The information provided herein has been obtained from sources believed to be reliable at the time of publication, nonetheless, we make no representations or assurances that the

information is complete or accurate, and you should not place any reliance on said information. State Street Bank and Trust Company hereby disclaims all liability, whether arising in

contract, tort or otherwise, for any losses, liabilities, damages, expenses or costs arising, either direct or consequential, from or in connection with any use of this document and/or the

information herein.

This document may contain statements deemed to be forward-looking statements. These statements are based on assumptions, analyses and expectations of State Street Global

Markets in light of its experience and perception of historical trends, current conditions, expected future developments and other factors it believes appropriate under the circumstances. All

information is subject to change without notice.

Recipients should be aware of the risks of participating in securities lending, which may include counterparty, collateral, investment loss, tax and accounting risks. A securities lending

program description and risks statement is available.

Past performance is no guarantee of future results.

This document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on

dealing ahead of investment research.

State Street Global Markets is the marketing name and a registered trademark of State Street Corporation, used for its financial markets business and that of its affiliates. Products and

services may not be available in all jurisdictions.

© 2017 State Street Corporation

BackgroundPrivate Equity Performance

Portfolio Composition

Private Equity Program ReviewASRS Sta� Presentation

Eric Glass

March 27, 2016

IC March 2017 Private Equity Program Review 1 / 23



Outline

1 BackgroundPrivate Equity ProgramPrivate Equity Investment Approach

2 Private Equity Performance

3 Portfolio Composition




Private Equity ProgramPrivate Equity Investment Approach

Private Equity

ASRS has allocated 8% of total assets (+/- 2%) to privateequity as part of its strategic asset allocation

ASRS began investing in private equity in 2007

The NAV of PE assets was $ 2915 million on September 30,2016

This is 8.74% of total fund and the NAV is $ 247 million abovetarget funding

We update pacing plans annually to adjust investment levelsto achieve and maintain target funding

Investment pace for 2017 is $725 million in new commitments





Investment Philosophy

We believe successful private equity investing hinges on threeconsiderations

Strategy

Track Record

Organizational Dynamics





Strategy

Academic research provides evidence on the performance of private

equity1

Private Equity buyout funds outperform public markets by about20% in total value over the life of a fundVenture Capital has underperformed

A review of the ASRS portfolio leads to conclusions about comparative

performance

Mid sized buyout funds deliver the best and most consistent returnsFirms with specialized expertise in restructuring or an industrysector often do well

1Harris, Jenkinson and Kaplan. Private Equity Performance: What Do WeKnow? The Journal of Finance, October 2014.





Strategy

ASRS favors

Buyout strategies that emphasize organizational transformationinstead of mere �nancial engineeringInvestments in growing sectors with high revenue growth potential(technology, healthcare)Investments in sectors impacted by regulatory change (�nancialservices)Investments with sponsors having specialized expertise inrestructuring, bankruptcy and turnaround situations

ASRS is underweight

Venture CapitalEuropeEmerging Markets





Track Record

Private equity performance has a fairly high level of dispersion

�Top quartile� funds outperform median funds by 5% to 10%depending on vintageIt is exceedingly rare for managers to perform persistently in the topquartile, but we do �nd managers persistently above medianASRS implements private equity to provide diversi�cation bymanager, strategy and vintage year

ASRS utilizes �PME� methods for performance assessment

PME (public market equivalent) measurements compare privateequity returns to returns in public markets as if you invested in thepublic markets on the same days and in the same amounts as wereinvested in the PE fundASRS has been a leader in this realm, implementing software forPME methods nearly two years before it was commercially availablethrough Bloomberg and other services2

2For a detailed explanation of PME methods, see this conferencepresentation http://www.rin�nance.com/agenda/2014/talk/KarlPolen.pdf


http://www.rinfinance.com/agenda/2014/talk/KarlPolen.pdf




Performance Tracking

In connection with creation of the software for the PMEcalculations, ASRS has built a performance tracking andreporting system for private assets

State Street is the o�cial book of the record and the ASRSsystem works from information downloaded from the StateStreet system

The ASRS system generates

a monthly reporting packagea quarterly performance chart packan internal website with cash �ow and performance metrics oneach partnership





�Hunter, not hunted�

ASRS uses quantitative screens from the Preqin database andPME methods to discern private equity sponsors withpersistent excellent results

ASRS has established an outbound program to pursueinvestments with the most highly quali�ed sponsors





Organizational Dynamics

Although we place much emphasis on quantitative analysis to discern

performance

this analysis is not securities analysisthe new investor does not participate in the track record dealsprivate equity investing is best thought of as a team hiring decision

Traditional private equity diligence places emphasis on stability

But common sense suggests that the best �rms will by dynamic,evolving with changing conditions, weeding out weak performersand promoting high performersResearch has found that stability is a negative indicator ofperformance3

3Cornelli, Simintzi and Vig. Team Stability and Performance in Private Equity.

2014 Working Paper. http://www.collerinstitute.com/Research/Paper/264


http://www.collerinstitute.com/Research/Paper/264




Organization Assessment

ASRS has adopted a framework for

organizational assessment modeled from

Denison Consulting

Developed interview questions toexplore organizational attributesof adaptability, mission,involvement and consistencyOngoing work to explore deeperdive organizational assessment

ASRS will be looking tomaintain/establish GP relationships:

skills that match the investmentopportunity set & di�erentiatedin the marketplacebuilt to last with su�cientorganizational depthconsistent & forthrightengagement

willingness to o�erco-investments




Comparison to Russell 2000 (September 30, 2016)

IRR Compared to Russell 2000

One Quarter One Year Three Years Five Years Inception

Private Equity IRR 4.18% 10.91% 10.76% 12.64% 11.31%Russell 2000 IRR 8.67% 14.02% 5.22% 12.85% 10.26%

Current and Legacy Portfolios

Fund R2K PME Fund IRR R2K $Mtch IRR Fund TVPI

Total PE 1.03 11.31% 10.26% 1.41Total PE Legacy Portfolio 1.04 12.01% 11.01% 1.58Total PE Current Portfolio 1.02 9.30% 8.13% 1.19


2008 2010 2012 2014 2016

−40

−20

010

20

IRR

Private Equity IRRs compared to Russell 2000Inception through indicated date

Private EquityRussell 2000

2008 2010 2012 2014 2016

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

Gro

wth

of a

$

Russell 2000

2008 2010 2012 2014 2016

050

010

0020

0030

00

$ M

illio

ns

Private Equity Cumulative Net Capital ContributedCompared to Value

●●

● ● ●●

● ●●

●

●●

●●

●

●●

●

●

●●

●

●●

●

●●

●

●● ●

●

●●Cumulative Net Cash Flow

Net Asset Value

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

−15

0−

500

5010

0

$ m

illio

ns

Private EquityQuarterly Draws and Distributions

DistributionNetDraw



Performance Compared to Other PE (September 30, 2016)

Private Equity Comparative Performance


Private Equity IRR 4.18% 10.91% 10.76% 12.64% 11.31%Russell 2000 IRR 8.67% 14.02% 5.22% 12.85% 10.26%

Burgiss IRR 2.55% 7.89% 10.52% 11.43% 10.30%




Private Opportunistic Equity (September 30, 2016)

Private Opportunistic Performance


Private Opportunistic IRR 2.02% 18.21% 22.61% NA% 22.45%Absolute 8 IRR 1.96% 8.00% 8.00% NA% 8.00%

The NAV in private opportunistic equity assets was $288 million as ofSeptember 30, 2016

While we customarily compare opportunistic investments to an absolute

return benchmark

The inception to date dollar matched IRR for an investment inRussell 2000 would have been 7.65%




Performance Commentary

Performance above is reported for periods ending September 30, 2016

As of the date of preparation of this report, approximately 1/3 of

funds have year end results in the State Street back o�ce system

strong rebound in the performance of Energy funds andmoderate uplift in Distressed

most other reported returns are �at compared to Q3calculated performance

Russell 2000 was a challenging benchmark, returning 21% in 2016

up 17% from the election until year endOil bottomed at $26 in Q1 and doubled by the end of 2016




ASRS Portfolio Commitments by Vintage

Commitment Amount # of Funds Commitment per Fund

2006 50 1 50

2007 483 15 32

2008 688 15 46

2009 386 8 48

2010 370 8 46

2011 659 12 55

2012 325 5 65

2013 550 10 55

2014 620 11 56

2015 690 12 58

2016 700 13 54

5,521 110 50




ASRS Portfolio NAV by Vintage




ASRS Portfolio NAV by Age




ASRS Commitments by Size

Commitments Percentage

Mega 631 22%

Large 1263 44%

Medium 469 16%

Small 533 18%

Total Buyout 2,896Note: re�ects funds that have called capital




ASRS Commitments by Style

Commitments Percent of Commitments

Energy 828 16%

Info Tech 405 8%

Health Care 80 2%

Finance 103 2%

Consumer 80 2%

Defense 220 4%

Secondaries 174 3%

Mezzanine 100 2%

VC 115 2%

Generalist 2,351 46%Note: re�ects funds that have called capital




ASRS NAV by Style




ASRS PE Industry Sectors Compared to R2K

Russell 2000 PE Percent Di�erence

Financials 20% 7% -13%

Information Technology 18% 18% 1%

Industrials 14% 20% 6%

Health Care 13% 13% 0%

Consumer Discretionary 12% 13% -1%

Real Estate 8% 2% -6%

Materials 5% 6% 1%

Utilities 4% 1% -3%

Energy 3% 17% 14%

Consumer Staples 3% 2% -1%

Telecommunication Services 1% 1% 0%


1 Created June 2008; Revised June 2013

FRAME OF REFERENCE The following Investment Beliefs have been established to ensure the development of congruent and synergistic investment strategies, and to ensure the effective and efficient allocation of resources. These Investment Beliefs determine the general paradigm within which investment strategies are developed, investment ideas are reviewed, and investment decisions are implemented.

Modifications to these Investment Beliefs will occur if experiential, academic, conceptual, and/or practical perspectives suggest that a superior belief system exists.

INVESTMENT BELIEFS

1. Asset Class Decisions are Key

In general, decisions with respect to which asset classes and sub-asset classes to invest in, and the allocations to these asset classes and sub-asset classes, have a greater impact on total fund investment returns than decisions in which specific securities to invest.

2. Theories and Concepts Must be Sound

Over longer periods of time, investment outcomes (e.g. rates of return, volatility) conform to logical theories and concepts. Significant deviations (e.g. internet bubble, pre-subprime erosion of risk premiums) from theoretically and conceptually sound investment constructs are usually not sustainable and are typically self-reverting.

3. House Capital Market Views Are Imperative

The development and articulation of sound House Views (e.g. views on interest rates, corporate spreads, asset valuations) will ensure consistency among investment decisions, clarity of investment direction, baselines for debates, and conformity of understanding.

4. Investment Strategies Must be Forward Looking

Investment strategies will be developed based on forward-looking insights, rather than simply on successful strategies of the past.

Asset class valuations and security valuations are significantly affected by endogenous outcomes (e.g. earnings, GDP growth rates, competitive barriers) that are probabilistic, and these outcomes are typically well analyzed by the investment industry.

Asset class valuations and security valuations are also significantly affected by random outcomes (e.g. natural disasters, certain supply & demand shocks) that are virtually unpredictable, and these outcomes are typically not analyzed directly by the investment industry.

Asset class valuations and security valuations are also significantly affected by exogenous outcomes (e.g. foreign policies, global cultural interactions) that can possibly be modeled, and these outcomes are typically not analyzed by the investment industry.

5. Public Markets are Generally Informationally Efficient

Asset Class Valuations

Asset class valuations (e.g. stock market levels versus interest rate levels) are often in equilibrium with one another, but anomalous situations do occur which result in disequilibria between asset class valuations. These disequilibria offer valuable investment opportunities which we will pro-actively seek and capitalize on.

Arizona State Retirement System Investment Beliefs

2 Created June 2008; Revised June 2013

Security Valuations

Security valuations (e.g. IBM versus Cisco) are often in equilibrium with one another, but private markets and anomalous public market situations do occur which result in disequilibria between security valuations. These disequilibria offer valuable investment opportunities which we will pro-actively seek and capitalize on.

The extent of informational efficiency varies across asset classes.

Private markets offer significant opportunities for asset mispricing and manager excellence which we will pro-actively seek and capitalize on.

6. Market Frictions are Highly Relevant

Market frictions (e.g. management fees, carried interest, revenue sharing, expenses, costs, transaction spreads, market impacts, taxes, commissions) can be significantly detrimental to investment performance and as a result transactions will be initiated only to the extent there is a strong level of conviction that they will result in increased investment returns or decreased risks net of all market frictions.

7. Internal Investment Professionals are the Foundation of a Successful Investment Program

In-house investment management capability engaged in direct portfolio management results in superior investment decision-making.

In-house investment management pro-actively monitors capital markets in order to determine mispricing opportunities & allocate capital and will successfully increase risk adjusted returns.

In-house investment professionals are more closely aligned with, and have a better understanding of, the purpose and risk & reward tolerance of the ASRS than external parties.

In-house investment professionals will impact direct investment negotiations, better align economic interests, and influence investment industry conditions (e.g. private deal structures, fee levels, introduction of innovative products & strategies).

8. External Investment Management is Beneficial

External investment organizations can often offer greater expertise, resources, and/or flexibility than internal personnel for various investment strategies.

9. Investment Consultants

Investment consultants will be effectively utilized in the following four general categories, and utilization of consultants will be focused on situations where there is a demonstrable need in at least one of the four areas:

• Independence: When oversight or controls should be enhanced

• Perspective: When internal perspectives are not broad enough

• Special Skills: When internal skills are not deep enough

• Resource Allocation: When internal resources are not broad enough

10. Trustee Expertise

Trustees often have expertise in various areas of investment management, and this expertise should be utilized while ensuring separation between Board oversight and staff management.

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