Investment Performance Analysis Q1 2014 - Fairfax, VA

Investment Performance AnalysisQ1 2014

June 19, 2014

Keith Stronkowsky, CFASenior Consultant

Rhett Humphreys, CFAPartner

NEPC Updates

1

NEPC UPDATES

Highlights of First Quarter Happenings at NEPC

NEPC Research Recent White Papers Posted 4Q Market Thoughts — “1997,

2007, or Something Else Altogether?” (January 2014)

Moving in Different Directions:NEPC’s 2014 Asset Allocation Letter (January 2014), NEPC’s Asset Allocation Committee

Annual Chairman’s Letter(March 2014), Richard M. Charlton, Chairman

Overlay Strategies: IncreasingPortfolio Diversification Through Derivatives (March 2014), Brian Roberts, CAIA, Senior Consultant

The Alternative Route: A Smoother Ride for DefinedContribution Plans (April 2014), Rob J. Fishman, CFA, Partner; Aaron S. Keel, CFA, Senior Analyst; Deirdre L. Pomerleau, Analyst

First Quarter 2014

NEPC’s 19th Annual Client Conference May 13 and May 14, 2014 Boston Convention Center Headline Speakers:

David M. Rubenstein, Co-Founder and Co-CEO, The Carlyle Group

Perry M. Traquina, CFA, Chairman and CEO, Managing Partner, Wellington Management Company

Register at www.nepc.com

Professional Staff Updates Tim McCusker, CFA, CAIA, FSA

named Chief Investment Officer

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Q1 2014 Market Update

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Investment Market Update: As of March 31, 2014Domestic Equity Benchmarks Qtr. 1 Yr. 3 Yr. 5 Yr. 10 Yr.Large Core S&P 500 1.8% 21.9% 14.7% 21.2% 7.4%Small Core Russell 2000 1.1% 24.9% 13.2% 24.3% 8.5%Small Growth Russell 2000 Growth 0.5% 27.2% 13.6% 25.2% 8.9%Small Value Russell 2000 Value 1.8% 22.6% 12.7% 23.3% 8.1%Large Core Russell 1000 2.0% 22.4% 14.7% 21.7% 7.8%Large Growth Russell 1000 Growth 1.1% 23.2% 14.6% 21.7% 7.9%Large Value Russell 1000 Value 3.0% 21.6% 14.8% 21.8% 7.6%Mid Core S&P Mid Cap 400 3.0% 21.2% 13.4% 24.9% 10.1%REIT NAREIT Composite 8.8% 2.0% 10.2% 27.2% N/AInt'l Equity Benchmarks Qtr. 1 Yr. 3 Yr. 5 Yr. 10 Yr.International Developed MSCI EAFE 0.7% 17.6% 7.2% 16.0% 6.5%Emerging Equity MSCI EM -0.4% -1.4% -2.9% 14.5% 10.1%Small Cap Int'l S&P EPAC SmallCap 3.8% 23.9% 9.6% 21.2% 9.4%World ex-US MSCI ACWI ex-US 0.5% 12.3% 4.1% 15.5% 7.1%Domestic FI Benchmarks Qtr. 1 Yr. 3 Yr. 5 Yr. 10 Yr.Core Bonds Barclays Aggregate 1.8% -0.1% 3.7% 4.8% 4.5%Municipal Bond Barclays Municipal 3.3% 0.4% 5.8% 5.7% 4.5%High Yield Barclays US High Yield 3.0% 7.5% 9.0% 18.2% 8.7%Intermediate Gov/Cred Barclays Interm. Gov/Credit 1.0% -0.1% 3.1% 4.2% 3.9%Long Gov/Credit Barclays Long Gov/Credit 6.6% -0.9% 9.0% 9.1% 6.5%Long Credit Barclays Long Credit 6.3% 1.1% 9.2% 12.7% 6.6%Long Treasuries Barclays US 20+ Yr Treas 7.7% -4.5% 9.3% 4.4% 6.3%Cash BofA ML US 3-Month T-Bill 0.0% 0.1% 0.1% 0.1% 1.7%Inflation Barclays US TIPS 1-10 Yr 1.0% -4.9% 2.2% 4.0% 4.0%Global Inflation Barclays Global ILB 2.8% 0.4% 4.7% 6.9% 5.2%STRIPS Barclays 20+ Yr STRIPS 12.7% -5.8% 14.7% 5.3% N/AGlobal FI Benchmarks Qtr. 1 Yr. 3 Yr. 5 Yr. 10 Yr.World Gov. Bonds Citigroup WGBI 2.7% 1.4% 1.9% 3.8% 4.2%Em. Mkt. Bonds (Local) JPM GBI-EM Glob. Div. 1.9% -7.1% 1.1% 9.8% 9.3%Diversified Benchmark Qtr. 1 Yr. 3 Yr. 5 Yr. 10 Yr.Diversified Diversified* 1.5% 12.7% 9.2% 15.3% 6.7%Alternative Benchmarks Qtr. 1 Yr. 3 Yr. 5 Yr. 10 Yr.Commodities DJ UBS Commodity Index 7.0% -2.1% -7.4% 4.2% 0.4%Fund of Funds HFRI Fund of Funds 0.2% 5.7% 2.3% 4.8% 3.1%Hedge Fund DJCS HF Composite 0.9% 7.0% 4.4% 8.7% 6.1%Hedge Fund DJCS Equity Market Neutral -0.3% 8.2% 3.6% 4.2% -0.4%Hedge Fund DJCS Event Driven 2.9% 13.4% 5.1% 10.2% 7.7%Hedge Fund DJCS Long-Short 1.8% 13.8% 5.5% 9.3% 6.8%Real Estate NCREIF Property Index** 2.5% 11.0% 11.9% 5.7% 8.6%

* 35% LC, 10% SC, 12% Int'l, 3% Emerging, 25% FI, 5% HY, 5% Global FI, 5% REITS**As of 12/31/2013

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Investment Market Update: As of March 31, 2014PERFORMANCE THROUGH 3/31/2014

Sector Index 2008 2009 2010 2011 2012 2013 Jan Feb Mar 2014

Treasury STRIPS Barclays US Strips 20+ Yr 59.5% -36.0% 10.9% 58.5% 3.0% -21.0% 9.4% 1.2% 1.7% 12.7%

REITS Wilshire US REIT -39.2% 28.6% 28.6% 9.2% 17.6% 1.9% 3.9% 5.0% 0.9% 10.1%

Commodities DJ UBS Commodity -35.6% 18.9% 16.8% -13.3% -1.1% -9.5% 0.3% 6.2% 0.4% 7.0%

Long Govt/Credit Barclays US Govt/Credit Long 8.4% 1.9% 10.2% 22.5% 8.8% -8.8% 4.0% 1.7% 0.8% 6.6%

Long Credit Barclays US Long Credit -3.9% 16.8% 10.7% 17.1% 12.7% -6.6% 3.3% 2.1% 0.8% 6.3%

Muni Bonds Barclays Municipal -2.5% 12.9% 2.4% 10.7% 6.8% -2.6% 1.9% 1.2% 0.2% 3.3%

Large Cap Value Russell 1000 Value -36.8% 19.7% 15.5% 0.4% 17.5% 32.5% -3.6% 4.3% 2.4% 3.0%

High Yield Barclays US Corp High Yield -26.2% 58.2% 15.1% 5.0% 15.8% 7.4% 0.7% 2.0% 0.2% 3.0%

EMD USD Barclays EM USD Aggregate -14.7% 34.2% 12.8% 7.0% 17.9% -4.1% -0.3% 2.3% 0.8% 2.8%

Global Bonds Citi WGBI 10.9% 2.6% 5.2% 6.4% 1.6% -4.0% 1.3% 1.4% -0.1% 2.7%

SMID Cap Russell 2500 -36.8% 34.4% 26.7% -2.5% 17.9% 36.8% -2.3% 5.1% -0.4% 2.3%

Diversified Diversified* -24.5% 24.1% 13.5% 1.3% 12.7% 17.6% -1.5% 3.4% 0.3% 2.1%

Large Cap Russell 1000 -37.6% 28.4% 16.1% 1.5% 16.4% 33.1% -3.2% 4.7% 0.6% 2.0%

EMD Local JPM GBI EM Global Diversified -5.2% 22.0% 15.7% -1.8% 16.8% -9.0% -4.6% 3.9% 2.8% 1.9%

Core Bonds Barclays US Agg Bond 5.2% 5.9% 6.5% 7.8% 4.2% -2.0% 1.5% 0.5% -0.2% 1.8%

Large Cap S&P 500 -37.0% 26.5% 15.1% 2.1% 16.0% 32.4% -3.5% 4.6% 0.8% 1.8%

Small Cap Value Russell 2000 Value -28.9% 20.6% 24.5% -5.5% 18.1% 34.5% -3.9% 4.6% 1.2% 1.8%

Interm Core Bonds Barclays US Agg Interm 4.9% 6.5% 6.1% 6.0% 3.6% -1.0% 1.1% 0.4% -0.3% 1.2%

Large Cap Growth Russell 1000 Growth -38.4% 37.2% 16.7% 2.6% 15.3% 33.5% -2.9% 5.1% -1.0% 1.1%

Small Cap Russell 2000 -33.8% 27.2% 26.9% -4.2% 16.3% 38.8% -2.8% 4.7% -0.7% 1.1%

Interm Govt/Credit Barclays US Govt/Credit Interm 5.1% 5.2% 5.9% 5.8% 3.9% -0.9% 0.9% 0.4% -0.3% 1.0%

Int'l Developed MSCI EAFE -43.4% 31.8% 7.8% -12.1% 17.3% 22.8% -4.0% 5.6% -0.6% 0.7%

Small Cap Growth Russell 2000 Growth -38.5% 34.5% 29.1% -2.9% 14.6% 43.3% -1.7% 4.8% -2.5% 0.5%

Govt/Credit Barclays Govt/Credit 1-5 Yr 5.1% 4.6% 4.1% 3.1% 2.2% 0.3% 0.4% 0.2% -0.3% 0.4%

Govt/Credit Barclays US Govt/Credit 1-3 Yr 5.0% 3.8% 2.8% 1.6% 1.3% 0.6% 0.2% 0.1% -0.1% 0.2%

Emerging Equities MSCI EM -53.3% 78.5% 18.9% -18.4% 18.2% -2.6% -6.5% 3.3% 3.1% -0.4%

* 35% LC, 10% SC, 12% Intl Equity, 3% Emerging Equity, 25% Core Bonds, 5% HY, 5% Global Bonds, 5% REITS

Source: Morningstar Direct

March 31, 2014

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• Continued slow and steadyeconomic growth

– A bit slower in the first quarter due toweather (maybe offset in Q2?)

– Deleveraging continuing

• Early stages of Taper generallyaccepted by marketplace

– Though priced in “normalization” ofrates appears optimistic

• Developed world inflation is low– Allows Fed continued flexibility to

work through Taper

• Emerging markets made someprogress on adjustments

– Finally experiencing positive flows andearly signs of positive performance

• Volatility remains subdued andmarkets relatively stable

• Potential geopolitical instability– Russian invasion of Crimea has minimal

economic impact– But tensions between Russia and West

could have spillover effects

• Benign market environment inEurope obscures challengingunderlying economic conditions

• Inflation is low…maybe too low– Global monetary stimulation has offset

deflationary pressures

• Continued slowing growth in Chinahas global implications

– Could bring Chinese credit issues toforefront

• Valuations beginning to stretchabove long-term averages

– Developed Equity P-Es above median– Credit spreads approaching 2006-07

levels

First Quarter 2014 Market Review

Positives Negatives

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Markets Were Mostly Up (A Little Bit) In the First Quarter

Source: Bloomberg, NEPC as of 3/31

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• Markets have generally shown resiliency so far in 2014– Withstood adjustments in balance of payment challenged EM countries– Limited market reaction to Russia/Ukraine issues

• US taper has generally been accepted by markets– Already reduced from $85 billion to $55 billion in monthly purchases– Rates remain low and accommodating

• Slow and steady economic growth continues– Inflation remains subdued

• Continued low volatility may obscure underlying economic challenges– European peripheral countries continue to face high unemployment– Many EM countries face further balance of payment adjustments– China faces slowing growth and potential credit issues

• Valuations beginning to move beyond fair value– While not stretched, equity P-E ratios are now above long-term averages– Credit spreads continue to move tighter

• Ex: European peripheral debt

• NEPC themes remain consistent– Rebalance – remain diversified and balanced– Look for opportunities to be dynamic – particularly in credit– Allocate to emerging markets and private markets for higher returns in low return world

Outlook

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Q1 2014 Performance Update

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• Plan Assets as of March, 2014 totaled $121.3 million

• Asset valuation increased $981.7 thousand over the quarter.– Net distributions ~ $-1.7 million– Portfolio appreciation ~ 1.6 million

• The Plan increased 1.4% for the quarter and 9.8% for the trailingone-year period.

– During these periods the Plan ranked in the 69th and 79th percentiles of IF Public DBplans.

– For the 5 and 10-year trailing periods, the Plan returned 12.6% and 5.7%,respectively, and ranked in the 72nd and 91st percentile of IF Public DB Plans.

• Active management was in line with the policy index for the quarter.– The strongest absolute returns came from the Total Real Assets portfolio, returning

2.5% for the quarter.• PIMCO was the best performing manager on an absolute basis, returning 2.5% and ranking

in the 20th percentile and outperforming the CPI + 5% (Seasonably adjusted) index by 80bps.

– GMO was the worst performing manger on an absolute basis, returning -0.9% andranking in the 84TH percentile relative to their peers.

Executive Summary

March 31, 2014

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March 31, 2014

Fiscal Year ends June 30th.

The City of Fairfax Retirement PlanTotal Fund Performance Detail (Gross)

Market Value($)

% ofPortfolio Policy % 3 Mo

(%) RankFiscal

YTD(%)

Rank 1 Yr(%) Rank 3 Yrs

(%) Rank 5 Yrs(%) Rank 7 Yrs

(%) Rank 10 Yrs(%) Rank Return

(%) Since_

Composite 121,360,481 100.0 100.0 1.4 69 11.6 56 9.8 79 6.8 93 12.6 72 4.0 93 5.7 91 6.0 Sep-99Allocation Index 1.2 86 10.0 88 9.8 79 6.7 93 10.7 90 4.0 93 5.6 93 4.7 Sep-99Policy Index 1.4 72 9.9 88 10.0 77 7.1 90 11.4 81 4.3 89 5.8 89 -- Sep-99

InvestorForce Public DB GrossMedian 1.6 11.9 11.8 8.6 13.7 5.6 6.7 6.0 Sep-99

Total Equity 49,761,270 41.0 45.0 0.2 80 18.8 47 19.1 50 8.2 78 17.6 77 3.0 80 6.1 93 --Total Domestic Equity 29,116,835 24.0 25.0 1.0 72 20.8 50 23.3 59 12.0 82 21.3 70 6.4 78 7.9 83 --

The Boston Company(Standish) 19,359,951 16.0 20.0 0.8 89 19.4 50 21.6 66 11.3 94 20.0 65 6.0 85 7.5 85 10.9 Sep-81

S&P 500 1.8 62 18.4 66 21.9 64 14.7 55 21.2 38 6.3 80 7.4 88 11.6 Sep-81eA US Large Cap CoreEquity Gross Median 2.1 19.4 22.9 15.0 20.8 7.2 8.6 14.2 Sep-81

Batterymarch 9,756,884 8.0 5.0 1.4 51 23.7 36 27.1 43 13.8 65 25.3 64 6.7 86 8.6 87 12.7 Mar-03Russell 2000 1.1 59 21.2 65 24.9 68 13.2 75 24.3 73 7.1 80 8.5 89 12.7 Mar-03

eA US Small Cap CoreEquity Gross Median 1.4 22.5 26.2 14.6 26.1 8.5 10.1 13.9 Mar-03

Total International Equity 20,644,435 17.0 20.0 -0.8 82 16.1 67 13.4 71 3.4 93 12.9 99 -1.8 99 4.7 99 --GMO International Equity 15,651,539 12.9 12.0 -0.9 84 19.0 58 19.9 51 6.9 78 14.8 92 1.0 89 6.7 87 8.3 Apr-02

MSCI EAFE 0.7 59 18.7 61 17.6 66 7.2 74 16.0 80 1.3 86 6.5 92 7.1 Apr-02eA All EAFE Equity GrossMedian 1.1 19.9 19.9 9.0 18.1 3.0 8.2 9.0 Apr-02

DFA Emerging Markets 4,992,896 4.1 8.0 -0.5 50 7.9 51 -3.0 79 -5.2 94 -- -- -- -- -- -- -2.1 Oct-10MSCI Emerging Markets -0.4 47 7.2 60 -1.4 64 -2.9 79 14.5 79 3.4 72 10.1 78 0.1 Oct-10

eA Emg Mkts Equity GrossMedian -0.6 8.0 -0.4 -0.8 16.8 4.6 11.5 1.7 Oct-10

Total Domestic Fixed Income 27,069,768 22.3 20.0 2.0 75 3.5 69 0.4 86 5.1 61 9.0 42 6.3 44 5.9 36 --Wellington 27,069,768 22.3 20.0 2.0 75 3.5 69 0.4 86 5.1 61 9.0 42 6.3 44 5.6 53 5.9 Mar-03

Barclays Aggregate 1.8 85 2.3 97 -0.1 93 3.7 97 4.8 98 5.0 90 4.5 93 4.5 Mar-03eA US Core Plus Fixed IncGross Median 2.3 3.9 1.4 5.3 8.5 6.2 5.6 5.9 Mar-03

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Fiscal Year ends June 30th.Mariner is liquidating and the remaining funds will be distributed to existing and new managers in the plan.

Market Value($)

% ofPortfolio Policy % 3 Mo

(%) RankFiscal

YTD(%)

Rank 1 Yr(%) Rank 3 Yrs

(%) Rank 5 Yrs(%) Rank 7 Yrs

(%) Rank 10 Yrs(%) Rank Return

(%) Since_

Total Global Asset Allocation 38,505,074 31.7 30.0 2.4 16 10.4 68 7.8 62 7.2 55 10.6 88 4.2 74 -- -- 4.8 Nov-0560% MSCI ACWI (Net) / 40%BC Agg 1.4 53 11.0 57 9.7 47 6.9 57 12.8 65 4.6 65 6.3 79 6.2 Nov-05

eA Global Balanced GrossMedian 1.5 11.3 9.4 7.4 13.6 5.8 7.9 7.5 Nov-05

GMO Real Return GlobalBalanced 20,247,557 16.7 15.0 2.1 28 10.8 59 11.3 32 9.9 19 11.3 80 -- -- -- -- 7.6 Aug-08

60% MSCI World (Net) / 20%BC Agg / 20% 91 Day T-Bill 1.2 60 11.3 51 11.2 32 7.1 56 12.0 73 3.8 79 5.6 89 5.1 Aug-08

eA Global Balanced GrossMedian 1.5 11.3 9.4 7.4 13.6 5.8 7.9 6.9 Aug-08

Mariner HFOF 42,315 0.0 0.0 91 Day T-Bill + 3%

Putnam Total Return 18,215,202 15.0 15.0 2.7 15 10.0 73 4.2 77 7.1 56 14.7 41 -- -- -- -- 7.7 Sep-0891 Day T-Bill + 3% 0.8 73 2.3 99 3.0 83 3.1 82 3.1 99 3.7 80 4.6 99 3.1 Sep-0860% S&P 500 / 40% BC Agg 1.9 35 11.8 39 12.7 29 10.4 11 14.6 43 6.1 41 6.5 73 8.0 Sep-08

eA Global Balanced GrossMedian 1.5 11.3 9.4 7.4 13.6 5.8 7.9 7.2 Sep-08

Total Real Assets 5,603,986 4.6 5.0 2.5 -- 3.8 -- -2.0 -- -- -- -- -- -- -- -- -- -3.4 Dec-12PIMCO ALL Asset 5,603,986 4.6 5.0 2.5 20 3.8 89 -2.0 91 -- -- -- -- -- -- -- -- -3.4 Dec-12

CPI + 5% (SeasonallyAdjusted) 1.7 63 5.0 84 6.6 40 6.9 33 7.2 84 7.1 23 7.4 57 6.5 Dec-12

eA Global TAA Gross Median 1.8 9.8 5.4 5.5 11.3 5.7 7.7 6.8 Dec-12Cash Account 420,383 0.3 0.0 -- 0.0 -- 0.0 -- -- -- -- -- -- -- -- -- 0.2 Jul-12

91 Day T-Bills 0.0 -- 0.0 -- 0.0 -- 0.1 -- 0.1 -- 0.7 -- 1.5 -- 0.1 Jul-12XXXXX

March 31, 2014

The City of Fairfax Retirement PlanTotal Fund Performance Detail (Gross)

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March 31, 2014

Quarter Ending March 31, 2014

BeginningMarket Value Withdrawals Contributions Net Cash Flow Fees Net Investment

ChangeEnding

Market Value_

Batterymarch $9,622,893 $0 $0 $0 -$21,614 $133,991 $9,756,884Cash Account $420,363 $0 $0 $0 $0 $20 $420,383DFA Emerging Markets $5,027,493 $0 $0 $0 -$7,345 -$34,597 $4,992,896GMO International Equity $15,829,630 $0 $0 $0 -$29,887 -$178,091 $15,651,539GMO Real Return Global Balanced $19,832,451 $0 $0 $0 -$49,872 $415,106 $20,247,557Mariner HFOF $42,315 $0 $0 $0 $0 $0 $42,315PIMCO ALL Asset $5,514,857 -$33,947 $0 -$33,947 -$12,500 $123,076 $5,603,986Putnam Total Return $17,731,277 $0 $0 $0 -$45,018 $483,925 $18,215,202The Boston Company (Standish) $19,820,898 -$1,680,569 $1,079,670 -$600,898 -$22,191 $139,951 $19,359,951Wellington $26,536,596 $0 $0 $0 -$20,277 $533,172 $27,069,768Total $120,378,773 -$1,714,516 $1,079,670 -$634,845 -$208,704 $1,616,553 $121,360,481

XXXXX

The City of Fairfax Retirement PlanTotal Fund Asset Growth Summary by Manager

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Total Fund Asset Allocation vs. Policy Targets

March 31, 2014

The City of Fairfax Retirement Plan

20.8%

8.8%

18.5

5.5%

28.7

3.2%3.3%

9.0%

5.7%

‐3.9%

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March 31, 2014

Cash represents transitional cash.

The City of Fairfax Retirement PlanTotal Fund Asset Allocation History

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3 Years Ending March 31, 2014Anlzd Ret Rank Anlzd Std Dev Rank

_

Composite 6.81% 93 8.26% 57Allocation Index 6.72% 93 6.41% 13Policy Index 7.12% 90 6.20% 10S&P 500 14.66% 1 12.47% 99Barclays Aggregate 3.75% 99 2.84% 2InvestorForce Public DB Gross Median 8.63% -- 7.91% --

XXXXX

March 31, 2014

The City of Fairfax Retirement PlanTotal Fund Risk/Return - 3 Years

3 Years Ending March 31, 2014

Sharpe Ratio Rank Sortino RatioRF Rank

_

Composite 0.82 93 1.24 86Allocation Index 1.04 60 1.55 48Policy Index 1.14 33 1.69 26S&P 500 1.17 28 1.89 17Barclays Aggregate 1.30 13 1.91 16InvestorForce Public DB Gross Median 1.09 -- 1.53 --

XXXXX

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March 31, 2014

The City of Fairfax Retirement PlanTotal Fund Risk/Return - 5 Years

5 Years Ending March 31, 2014Anlzd Ret Rank Anlzd Std Dev Rank

_

Composite 12.56% 72 8.81% 52Allocation Index 10.67% 90 6.87% 17Policy Index 11.43% 81 7.29% 24S&P 500 21.16% 1 13.99% 99Barclays Aggregate 4.80% 99 2.82% 1InvestorForce Public DB Gross Median 13.74% -- 8.74% --

XXXXX

5 Years Ending March 31, 2014

Sharpe Ratio Rank Sortino RatioRF Rank

_

Composite 1.42 92 2.33 76Allocation Index 1.54 62 2.63 40Policy Index 1.56 57 2.67 34S&P 500 1.51 72 2.61 43Barclays Aggregate 1.67 21 2.40 67InvestorForce Public DB Gross Median 1.59 -- 2.57 --

XXXXX

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March 31, 2014

The City of Fairfax Retirement PlanTotal Fund Asset Growth Summary

Last ThreeMonths Year-To-Date Fiscal Year-To-Date One Year Three Years

_

Beginning Market Value $120,378,773 $120,378,773 $112,144,154 $113,900,570 $110,189,704- Withdrawals -$1,714,516 -$1,714,516 -$7,080,321 -$10,400,163 -$52,875,941- Fees -$208,704 -$208,704 -$650,765 -$939,458 -$1,603,448+ Contributions $1,079,670 $1,079,670 $3,677,311 $7,174,775 $43,294,015= Net Cash Flow -$634,845 -$634,845 -$3,403,010 -$3,225,388 -$9,581,926+ Net Investment Change $1,616,553 $1,616,553 $12,619,337 $10,685,299 $20,752,703= Ending Market Value $121,360,481 $121,360,481 $121,360,481 $121,360,481 $121,360,481

_

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March 31, 2014

The City of Fairfax Retirement PlanTotal Fund Return Summary vs. Peer Universe

19

March 31, 2014

The City of Fairfax Retirement PlanTotal Fund Return Summary vs. Peer Universe

20

March 31, 2014

The City of Fairfax Retirement PlanTotal Fund Allocations vs. Peer Universe

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Q1 2014 Performance Standards Update

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Performance Standards

Managers Standard #1 Standard #2 Standard #3

The Boston Company– Large Cap No Yes Yes

Batterymarch – SMID Cap Yes No No

GMO - International No No Yes

DFA - EME No N/A Yes

Wellington – Fixed Income No No No

GMO RRGB - GAA No No No

Putnam Total Return - GAA No No No

PIMCO All Asset - GAA Yes N/A N/A

Standard #1: Have there been any extraordinary events, including: ownership changes, key people leaving the firm, changes to the investment strategy or process, litigation or fraud, or material client-servicing problems?

Standard #2: Long-term performance: Do the manager’s since-inception and rolling five-year returns underperform the manager’s respective benchmark and peer group universe?

Standard #3: Shorter-term performance: Does the manager’s three-year performance underperform the manager’s respective benchmark and peer group universe?

March 31, 2014

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Due Diligence Events

March 31, 2014

Investment Firm Event Date

Event Event Summary* Investment Product On FPL NEPC Recommendation

City of Fairfax Retirement Plan

Batterymarch Financial Management, Inc.

3/5/2014Batterymarch-Integrating with QS Investors

Batterymarch will be integrating their teams and products with QS Investors

US Small Capitalization Equity

Client Review

PIMCO 1/29/2014Organization Changes/Marc Seidner Departure

PIMCO announces several organization changes and Marc Seider's departure

All Asset All Authority Watch (Searches OK)

PIMCO 2/5/2014PIMCO On-Site Visit PIMCO On-Site Visit All Asset All Authority Watch (Searches OK)

Putnam Investments 3/3/2014Putnam Total Return: DD Status Change

Upgrade from Client Review to Watch on Total Return following Jeff Knight departure

Putnam Total Return Watch (Searches OK)

*See client memos previously sent for comprehensive event summaries.

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To: The City of Fairfax Retirement Plan

From: Keith Stronkowsky, CFA, Sr. Consultant

Date: March 4, 2014

Subject: Legg Mason to acquire QS Investors - Combine with Batterymarch’s Developed Markets

Background: As of January 31, 2014, The City of Fairfax had approximately $9.3 million invested with the Batterymarch US Small Capitalization Equity, representing 7.9% of the total portfolio.

Summary: Legg Mason recently announced a planned transaction where they will acquire a competing quant firm, QS Investors. The transaction will bring key elements of Batterymarch’s developed markets team and process together with QS Investors (QS). QS is currently more macro focused than Batterymarch and has a heavy emphasis on smart beta.

The transaction is expected to close July 1st, and once it does, the existing Batterymarch developed markets products will stay in place under the current investment process and philosophy. The emerging markets product and team are not part of the transaction and will not exist after July 1st.

Batterymarch does not expect any changes to their developed markets senior investment professionals, philosophy or alpha signal as a result of the transaction. To ensure the consistent delivery of their alpha engine, all of their investment teams will remain in place through closing. Additionally, a number of senior investment professionals on their developed markets team have accepted permanent positions with the newly combined platform. Batterymarch is also in the process of working with QS’ senior management to identify additional developed markets investment professionals to further round out the team.

It is not certain how many of the existing Batterymarch employees are included in the transaction and to what extent the long term impact of the investment process and philosophy will be at the new firm.

Recommendation: NEPC will continue to monitor the situation and provide updates as necessary.

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Manager Details

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March 31, 2014

The City of Fairfax Retirement PlanTotal Equity

Regional AllocationTotal Equity

Region WeightingNorth America ex U.S. 0.00United States 59.47Europe Ex U.K. 16.11United Kingdom 6.40Pacific Basin Ex Japan 2.03Japan 4.90Emerging Markets 11.09Other 0.00

Equity CharacteristicsPortfolio MSCI ACWI

Number of Holdings 2,667 2,433Weighted Avg. Market Cap. ($B) 57.5 81.6Median Market Cap. ($B) 0.5 8.5Price To Earnings 19.7 18.9Price To Book 2.7 3.0Price To Sales 2.2 2.3Return on Equity (%) 14.8 16.5Yield (%) 2.0 2.5Beta 1.0R-Squared 1.0

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March 31, 2014

The City of Fairfax Retirement PlanTotal Equity

Top Negative ContributorsRelative

Contribution% Return %

SUMITOMO MITSUI FINL.GP. -0.1% -15.7%ABERDEEN ASSET MAN. -0.1% -21.4%MITSUBISHI UFJ FINL.GP. -0.1% -15.5%BEST BUY -0.1% -33.3%MAZDA MOTOR -0.1% -13.9%COSTCO WHOLESALE -0.1% -5.9%OAO GAZPROM SPN.ADR 1:2 0.0% -10.2%NU SKIN ENTERPRISES 'A' 0.0% -39.8%CELGENE 0.0% -17.4%FEDEX 0.0% -7.7%

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Top Positive ContributorsRelative


PROSHARES ULTRA SEMICS. 0.2% 15.0%MEDIOBANCA BC.FIN 0.1% 30.5%XILINX 0.1% 18.8%GDF SUEZ 0.1% 16.2%EMC 0.1% 9.8%REGIONS FINL.NEW 0.1% 12.6%RF MICRO DEVICES 0.0% 52.7%MACY'S 0.0% 11.5%ENEL 0.0% 29.4%PFIZER 0.0% 5.8%

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Equity Sector AttributionAttribution Effects Returns Sector Weights

Total Selection Allocation InteractionEffects Effect Effect Effects Portfolio Benchmark Portfolio Benchmark

_

Energy 0.2% 0.2% 0.0% 0.0% 3.4% 1.1% 8.6% 9.7%Materials -0.1% -0.1% 0.0% 0.0% -0.3% 1.1% 6.7% 6.1%Industrials -0.1% 0.0% 0.0% 0.0% -0.3% 0.0% 13.1% 11.0%Cons. Disc. -0.3% -0.2% -0.1% 0.0% -3.4% -1.6% 13.8% 12.0%Cons. Staples 0.0% 0.0% 0.0% 0.0% 0.0% 0.5% 7.0% 9.8%Health Care -0.4% -0.4% -0.1% 0.0% 2.2% 5.9% 9.0% 10.2%Financials -0.4% -0.4% 0.0% 0.0% -1.2% 0.6% 23.8% 21.6%Info. Tech 0.0% 0.1% 0.0% 0.0% 2.6% 2.2% 11.8% 12.5%Telecomm. 0.1% 0.0% 0.1% 0.0% -0.4% -2.5% 2.1% 4.1%Utilities 0.0% 0.1% -0.1% 0.0% 10.2% 7.8% 2.1% 3.1%Cash 0.0% 0.0% 0.0% 0.0% 0.0% -- 0.5% 0.0%Portfolio -0.8% = -0.8% + 0.1% + 0.0% 0.4% 1.2% 98.5% 100.0%

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Top Ten HoldingsPFIZER 1.3%EXXON MOBIL 1.2%GOOGLE 'A' 1.1%PROSHARES ULTRA SEMICS. 1.1%MICROSOFT 1.0%OCCIDENTAL PTL. 1.0%JP MORGAN CHASE & CO. 1.0%CASH - USD 0.9%BANK OF AMERICA 0.9%WALT DISNEY 0.9%

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March 31, 2014

The City of Fairfax Retirement PlanTotal Domestic Equity

Equity CharacteristicsPortfolio Russell 3000

Number of Holdings 396 2,992Weighted Avg. Market Cap. ($B) 71.2 94.8Median Market Cap. ($B) 1.5 1.4Price To Earnings 21.9 20.8Price To Book 3.4 3.6Price To Sales 2.8 2.8Return on Equity (%) 16.0 17.3Yield (%) 1.4 1.8Beta 1.0R-Squared 1.0

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The City of Fairfax Retirement PlanTotal Domestic Equity



PROSHARES ULTRA SEMICS. 0.3% 15.0%XILINX 0.1% 18.8%EMC 0.1% 9.8%REGIONS FINL.NEW 0.1% 12.6%MACY'S 0.1% 11.5%RF MICRO DEVICES 0.1% 52.7%APPLIED MATS. 0.1% 16.1%SCHLUMBERGER 0.1% 8.7%PFIZER 0.1% 5.8%BANK OF AMERICA 0.1% 10.5%

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BEST BUY -0.1% -33.3%COSTCO WHOLESALE -0.1% -5.9%CELGENE -0.1% -17.4%FEDEX -0.1% -7.7%NU SKIN ENTERPRISES 'A' -0.1% -39.8%AMAZON.COM -0.1% -15.7%NASDAQ OMX GROUP -0.1% -6.9%PVH -0.1% -8.2%MEDICINES COMPANY -0.1% -26.4%GENERAL MOTORS -0.1% -15.0%

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_

Energy 0.3% 0.4% 0.0% 0.0% 5.6% 1.6% 8.3% 9.4%Materials 0.0% 0.0% 0.0% 0.0% 3.0% 3.0% 4.4% 3.8%Industrials -0.2% -0.2% 0.0% 0.0% -1.3% 0.5% 12.5% 11.7%Cons. Disc. -0.2% -0.2% 0.0% 0.0% -3.8% -2.1% 13.6% 13.4%Cons. Staples -0.1% -0.2% 0.0% 0.1% -1.9% 0.6% 6.4% 8.5%Health Care -0.4% -0.4% 0.0% 0.0% 2.4% 5.7% 13.4% 12.5%Financials -0.3% -0.3% 0.0% -0.1% 1.0% 2.8% 21.0% 17.5%Info. Tech 0.2% 0.2% 0.0% 0.0% 3.4% 2.2% 16.2% 18.2%Telecomm. 0.1% 0.4% 0.0% -0.4% 22.3% 0.4% 0.2% 2.0%Utilities -0.2% -0.1% -0.2% 0.1% 4.3% 9.3% 0.8% 2.9%Cash 0.0% 0.0% 0.0% 0.0% 0.0% -- 0.7% 0.0%Portfolio -0.7% = -0.5% + 0.2% + -0.4% 1.3% 2.0% 97.4% 100.0%

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Top Ten HoldingsPFIZER 2.2%EXXON MOBIL 2.1%GOOGLE 'A' 1.9%PROSHARES ULTRA SEMICS. 1.9%MICROSOFT 1.8%OCCIDENTAL PTL. 1.7%JP MORGAN CHASE & CO. 1.7%BANK OF AMERICA 1.6%WALT DISNEY 1.5%EMC 1.4%

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March 31, 2014

The City of Fairfax Retirement PlanThe Boston Company (Standish)

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March 31, 2014


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March 31, 2014




BEST BUY -0.2% -33.3%COSTCO WHOLESALE -0.1% -5.9%CELGENE -0.1% -17.4%AMAZON.COM -0.1% -15.7%FEDEX -0.1% -7.7%NASDAQ OMX GROUP -0.1% -6.9%PVH -0.1% -8.2%PREC.CASTPARTS -0.1% -6.1%GENERAL MOTORS -0.1% -15.0%INGERSOLL-RAND -0.1% -6.7%

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_

Energy 0.3% 0.3% 0.0% 0.0% 3.9% 0.9% 9.6% 10.4%Materials 0.0% 0.0% 0.0% 0.0% 3.8% 2.9% 4.3% 3.5%Industrials -0.3% -0.3% 0.0% 0.0% -2.7% 0.1% 11.4% 10.9%Cons. Disc. -0.4% -0.2% -0.1% 0.0% -4.7% -2.8% 14.8% 12.5%Cons. Staples -0.2% -0.3% 0.0% 0.0% -2.0% 0.6% 8.3% 9.8%Health Care -0.6% -0.6% 0.0% 0.0% 1.1% 5.8% 13.0% 12.9%Financials -0.1% -0.1% 0.0% 0.0% 1.9% 2.7% 20.1% 16.3%Info. Tech 0.4% 0.5% 0.0% -0.1% 4.9% 2.3% 14.7% 18.6%Telecomm. 0.0% -- 0.0% -- -- 0.4% 0.0% 2.1%Utilities -0.2% -- -0.2% -- -- 9.9% 0.0% 2.8%Cash 0.0% -- -- -- -- -- 0.0% 0.0%Portfolio -0.7% = -0.7% + 0.2% + -0.2% 1.1% 1.8% 96.1% 100.0%

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PROSHARES ULTRA SEMICS. 0.5% 15.0%XILINX 0.2% 18.8%EMC 0.2% 9.8%REGIONS FINL.NEW 0.1% 12.6%BANK OF AMERICA 0.1% 10.5%MACY'S 0.1% 11.5%PFIZER 0.1% 5.8%SCHLUMBERGER 0.1% 8.7%APPLIED MATS. 0.1% 16.1%MYLAN 0.1% 12.5%

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CharacteristicsPortfolio S&P 500

Number of Holdings 74 500Weighted Avg. Market Cap. ($B) 105.7 115.1Median Market Cap. ($B) 49.5 16.9Price To Earnings 21.3 19.9Price To Book 3.5 3.7Price To Sales 2.8 2.7Return on Equity (%) 16.1 18.3Yield (%) 1.7 2.0Beta 1.1 1.0R-Squared 1.0 1.0

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March 31, 2014

The City of Fairfax Retirement PlanBatterymarch

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March 31, 2014


35

March 31, 2014




NU SKIN ENTERPRISES 'A' -0.3% -39.8%OCWEN FINL. -0.1% -29.3%MEDICINES COMPANY -0.1% -26.4%PEGASYSTEMS -0.1% -28.2%PRESTIGE BRANDS HOLDINGS -0.1% -23.9%HERCULES OFFSHORE -0.1% -29.6%HCI GROUP -0.1% -31.5%FXCM CLASS A -0.1% -16.9%IGATE -0.1% -21.5%COMFORT SYS.USA -0.1% -21.1%

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RF MICRO DEVICES 0.2% 52.7%EXTERRAN HOLDINGS 0.1% 28.8%EPL OIL & GAS 0.1% 35.4%NETSCOUT SYS. 0.1% 27.0%MANHATTAN ASSOCS. 0.1% 19.3%PHARMERICA 0.1% 30.1%MATADOR RESOURCES 0.1% 31.4%VONAGE HOLDINGS 0.1% 28.2%NEUROCRINE BIOSCIENCES 0.1% 72.4%ASHFORD HOSPLTY.TST. 0.1% 37.6%

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Characteristics

Portfolio Russell2000

Number of Holdings 322 1,976Weighted Avg. Market Cap. ($B) 1.8 1.9Median Market Cap. ($B) 1.2 0.7Price To Earnings 23.1 23.8Price To Book 3.4 3.0Price To Sales 2.7 2.7Return on Equity (%) 15.9 11.0Yield (%) 1.0 1.1Beta 1.0 1.0R-Squared 1.0 1.0



_

Energy 0.4% 0.3% 0.0% 0.0% 11.4% 5.0% 5.6% 5.4%Materials 0.0% 0.0% 0.0% 0.0% 1.4% 0.8% 4.8% 4.9%Industrials 0.0% 0.0% 0.0% 0.0% 1.0% 0.9% 14.7% 14.6%Cons. Disc. 0.4% 0.3% 0.1% -0.1% -1.2% -3.3% 11.0% 13.7%Cons. Staples -0.1% -0.1% 0.0% 0.0% -1.1% 1.7% 2.6% 3.7%Health Care 0.3% 0.2% 0.0% 0.0% 4.8% 3.0% 14.1% 13.0%Financials -0.4% -0.5% 0.0% 0.0% -0.5% 1.4% 22.8% 22.9%Info. Tech 0.1% 0.1% 0.0% 0.0% 0.9% 0.4% 19.1% 18.0%Telecomm. 0.1% 0.1% 0.0% 0.0% 22.3% 3.0% 0.7% 0.7%Utilities -0.1% 0.0% 0.0% 0.0% 4.3% 5.4% 2.3% 3.0%Cash 0.0% 0.0% 0.0% 0.0% 0.0% -- 2.3% 0.0%Portfolio 0.7% = 0.6% + 0.1% + 0.0% 1.7% 1.0% 100.0% 100.0%

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March 31, 2014

The City of Fairfax Retirement PlanTotal International Equity

Regional AllocationTotal International Equity

Region WeightingNorth America ex U.S. 0.00United States 3.05Europe Ex U.K. 38.54United Kingdom 15.24Pacific Basin Ex Japan 4.86Japan 11.73Emerging Markets 26.57Other 0.00

Equity Characteristics

Portfolio MSCI ACWI exUSA

Number of Holdings 2,272 1,824Weighted Avg. Market Cap. ($B) 38.2 54.2Median Market Cap. ($B) 0.4 6.8Price To Earnings 16.6 17.6Price To Book 1.8 2.3Price To Sales 1.4 1.9Return on Equity (%) 13.0 14.7Yield (%) 2.8 2.9Beta 1.0R-Squared 1.0

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March 31, 2014




MEDIOBANCA BC.FIN 0.2% 30.5%GDF SUEZ 0.2% 16.2%ENEL 0.1% 29.4%WEIR GROUP 0.1% 19.7%MEDIASET 0.1% 17.8%MICHELIN 0.1% 17.5%AHOLD KON. 0.1% 12.2%RHEINMETALL 0.1% 15.0%TYMAN 0.1% 32.2%THYSSENKRUPP 0.1% 9.6%

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SUMITOMO MITSUI FINL.GP. -0.3% -15.7%ABERDEEN ASSET MAN. -0.2% -21.4%MITSUBISHI UFJ FINL.GP. -0.2% -15.5%MAZDA MOTOR -0.1% -13.9%OAO GAZPROM SPN.ADR 1:2 -0.1% -10.2%HONDA MOTOR -0.1% -13.9%SHINSEI BANK -0.1% -18.9%ARCELORMITTAL -0.1% -9.8%ROLLS-ROYCE HOLDINGS -0.1% -15.2%SBERBANK RUSSIA ADR 1:4 -0.1% -22.3%

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Energy 0.0% -0.1% 0.0% 0.1% 0.5% 0.7% 9.1% 9.1%Materials -0.3% -0.2% 0.0% 0.0% -2.4% 0.3% 9.8% 8.7%Industrials 0.1% 0.0% 0.0% 0.0% 0.9% 0.4% 13.9% 11.2%Cons. Disc. -0.3% -0.2% -0.1% 0.0% -2.8% -0.9% 14.1% 10.8%Cons. Staples 0.1% 0.2% 0.0% -0.1% 2.3% 0.4% 7.7% 9.9%Health Care -0.4% -0.4% -0.3% 0.2% 1.4% 6.0% 2.9% 7.8%Financials -0.9% -0.9% 0.0% 0.0% -3.5% -0.4% 27.9% 26.8%Info. Tech -0.1% -0.1% 0.0% 0.0% -0.8% 1.6% 5.6% 6.6%Telecomm. 0.1% 0.0% 0.0% 0.0% -2.0% -3.4% 4.7% 5.8%Utilities 0.3% 0.2% 0.0% 0.0% 11.8% 6.1% 4.1% 3.3%Cash 0.0% 0.0% 0.0% 0.0% 0.0% -- 0.2% 0.0%Portfolio -1.4% = -1.5% + -0.3% + 0.4% -0.9% 0.5% 100.0% 100.0%

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Top Ten HoldingsTOTAL 1.8%SUMITOMO MITSUI FINL.GP. 1.6%ENI 1.6%BRITISH AMERICAN TOBACCO 1.5%MITSUBISHI UFJ FINL.GP. 1.3%GMO U.S. TREASURY FUND 1.2%ROCHE HOLDING 1.1%BBV.ARGENTARIA 1.1%GLAXOSMITHKLINE 1.1%E ON 1.1%

38

Country AllocationManager Index Manager Index

Allocation (USD) Allocation (USD) Return (USD) Return (USD)_

AsiaPacificAustralia 4.5% 2.8% 1.3% 6.0%China* 3.6% 2.1% -4.9% -5.9%Hong Kong 2.0% 1.1% -2.7% -3.4%India* 1.7% 0.7% 9.4% 8.2%Indonesia* 0.5% 0.2% 25.8% 21.2%Japan 15.7% 7.8% -9.9% -5.6%Korea* 4.7% 1.7% -4.3% -2.9%Malaysia* 1.0% 0.4% 3.3% -0.3%Philippines* 0.2% 0.1% 12.0% 10.5%Taiwan* 3.9% 1.2% -1.3% 1.1%Thailand* 0.9% 0.2% 0.7% 7.5%Total-AsiaPacific 38.8% 18.9% -4.2% -1.8%OtherIsrael 0.0% 0.2% 19.0% 18.7%South Africa* 1.7% 0.8% 9.0% 4.9%Turkey* 0.8% 0.2% 8.4% 4.8%Total-Other 2.5% 1.1% 8.8% 7.0%TotalsDeveloped 73.7% 89.4% -0.9% 1.4%Emerging* 26.1% 10.6% -0.9% -0.5%Cash 0.2% 0.0%

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March 31, 2014


Country AllocationVersus MSCI ACWI Gross - Quarter Ending March 31, 2014

Manager Index Manager IndexAllocation (USD) Allocation (USD) Return (USD) Return (USD)

_

AmericasBrazil* 2.6% 1.1% -6.3% 2.8%Chile* 0.4% 0.2% -2.1% -1.9%Colombia* 0.0% 0.1% 4.2% 5.2%Mexico* 1.8% 0.6% -2.9% -5.0%United States 0.4% 48.6% -8.7% 1.9%Total-Americas 5.3% 54.3% -4.9% 1.8%EuropeAustria 0.3% 0.1% -3.8% -1.5%Belgium 1.0% 0.4% -1.5% 2.4%Czech Republic* 0.0% 0.0% -3.7% 7.6%Finland 0.7% 0.3% -7.4% 0.2%France 12.8% 3.7% 1.9% 3.0%Germany 5.9% 3.5% 2.6% -0.3%Greece* 0.0% 0.1% 23.6% 18.1%Hungary* 0.1% 0.0% 0.0% -8.7%Ireland 0.3% 0.1% 9.7% 14.2%Italy 5.5% 0.8% 10.6% 14.6%Luxembourg 0.0% 0.0% 1.0% 1.2%Netherlands 2.8% 1.0% 1.8% 1.2%Norway 0.4% 0.3% 16.5% 2.2%Poland* 0.4% 0.2% 8.2% 3.4%Russia* 1.6% 0.6% -13.2% -14.4%Spain 1.4% 1.2% 0.4% 4.8%Sweden 1.1% 1.2% 2.8% 3.0%Switzerland 2.6% 3.3% 6.3% 5.1%United Kingdom 16.1% 8.1% -1.9% -0.9%Total-Europe 53.2% 25.7% 1.5% 1.8%

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39

International Equity Performance AttributionReturns and Weights Attribution Effects

Manager Index Manager Index Selection Allocation Currency Interaction TotalReturn Return Weight Weight Effect Effect Effect Effect Effects

_

AsiaPacific Australia 1.3% 6.0% 4.5% 2.8% -0.1% 0.0% 0.1% -0.1% -0.1%China* -4.9% -5.9% 3.6% 2.1% 0.0% -0.1% 0.0% 0.0% -0.1%Hong Kong -2.7% -3.4% 2.0% 1.1% 0.0% 0.0% 0.0% 0.0% 0.0%India* 9.4% 8.2% 1.7% 0.7% 0.0% 0.0% 0.0% 0.0% 0.1%Indonesia* 25.8% 21.2% 0.5% 0.2% 0.0% 0.0% 0.0% 0.0% 0.1%Japan -9.9% -5.6% 15.7% 7.8% -0.3% -0.7% 0.1% -0.3% -1.2%Korea* -4.3% -2.9% 4.7% 1.7% 0.0% -0.1% 0.0% 0.0% -0.2%Malaysia* 3.3% -0.3% 1.0% 0.4% 0.0% 0.0% 0.0% 0.0% 0.0%New Zealand -- 16.8% 0.0% 0.0% -- 0.0% 0.0% -- 0.0%Philippines* 12.0% 10.5% 0.2% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0%Singapore -- -0.9% 0.0% 0.5% -- 0.0% 0.0% -- 0.0%Taiwan* -1.3% 1.1% 3.9% 1.2% 0.0% 0.1% -0.1% -0.1% -0.1%Thailand* 0.7% 7.5% 0.9% 0.2% 0.0% 0.0% 0.0% 0.0% 0.0%Other Egypt* -- 9.2% 0.0% 0.0% -- 0.0% 0.0% -- 0.0%Israel 19.0% 18.7% 0.0% 0.2% 0.0% 0.0% 0.0% 0.0% 0.0%Luxembourg 1.0% 1.2% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%South Africa* 9.0% 4.9% 1.7% 0.8% 0.0% 0.0% 0.0% 0.0% 0.1%Turkey* 8.4% 4.8% 0.8% 0.2% 0.0% 0.0% 0.0% 0.0% 0.1%Totals Developed -0.9% 1.4% 73.7% 89.4% -2.5% 0.0% 0.4% 0.4% -1.7%Emerging* -0.9% -0.5% 26.1% 10.6% 0.0% -0.2% 0.0% -0.1% -0.3%Cash 0.0% -- 0.2% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

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March 31, 2014


International Equity Performance AttributionReturns and Weights Attribution Effects

Manager Index Manager Index Selection Allocation Currency Interaction TotalReturn Return Weight Weight Effect Effect Effect Effect Effects

_

Europe Austria -3.8% -1.5% 0.3% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0%Belgium -1.5% 2.4% 1.0% 0.4% 0.0% 0.0% 0.0% 0.0% 0.0%CzechRepublic* -3.7% 7.6% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Denmark -- 16.5% 0.0% 0.4% -- -0.1% 0.0% -- -0.1%Finland -7.4% 0.2% 0.7% 0.3% 0.0% 0.0% 0.0% 0.0% -0.1%France 1.9% 3.0% 12.8% 3.7% 0.0% 0.2% 0.0% -0.1% 0.0%Germany 2.6% -0.3% 5.9% 3.5% 0.1% 0.0% 0.0% 0.1% 0.1%Greece* 23.6% 18.1% 0.0% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0%Hungary* 0.0% -8.7% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%Ireland 9.7% 14.2% 0.3% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0%Italy 10.6% 14.6% 5.5% 0.8% 0.0% 0.6% 0.0% -0.2% 0.4%Netherlands 1.8% 1.2% 2.8% 1.0% 0.0% 0.0% 0.0% 0.0% 0.0%Norway 16.5% 2.2% 0.4% 0.3% 0.0% 0.0% 0.0% 0.0% 0.1%Poland* 8.2% 3.4% 0.4% 0.2% 0.0% 0.0% 0.0% 0.0% 0.0%Portugal -- 9.7% 0.0% 0.1% -- 0.0% 0.0% -- 0.0%Russia* -13.2% -14.4% 1.6% 0.6% 0.0% -0.1% 0.0% 0.0% -0.1%Spain 0.4% 4.8% 1.4% 1.2% -0.1% 0.0% 0.0% 0.0% -0.1%Sweden 2.8% 3.0% 1.1% 1.2% 0.0% 0.0% 0.0% 0.0% 0.0%Switzerland 6.3% 5.1% 2.6% 3.3% 0.0% 0.0% 0.0% 0.0% 0.0%UnitedKingdom -1.9% -0.9% 16.1% 8.1% -0.1% -0.2% 0.1% -0.1% -0.3%

Americas Brazil* -6.3% 2.8% 2.6% 1.1% -0.1% 0.0% 0.0% -0.1% -0.2%Canada -- 1.8% 0.0% 3.7% -- -0.2% 0.1% -- 0.0%Chile* -2.1% -1.9% 0.4% 0.2% 0.0% 0.0% 0.0% 0.0% 0.0%Colombia* 4.2% 5.2% 0.0% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0%Mexico* -2.9% -5.0% 1.8% 0.6% 0.0% -0.1% 0.0% 0.0% 0.0%Peru* -- 4.4% 0.0% 0.0% -- 0.0% 0.0% -- 0.0%United States -8.7% 1.9% 0.4% 48.6% -5.1% -0.4% 0.0% 5.1% -0.5%

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The City of Fairfax Retirement PlanGMO International Equity

41

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42

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Energy 0.1% 0.1% 0.0% 0.0% 3.2% 1.7% 6.8% 6.8%Materials -0.3% -0.2% 0.0% -0.1% -2.2% 1.0% 8.0% 8.1%Industrials 0.1% 0.1% 0.0% 0.0% 1.3% 0.6% 14.5% 12.9%Cons. Disc. -0.3% -0.1% -0.1% 0.0% -3.1% -1.9% 16.7% 11.9%Cons. Staples 0.2% 0.3% 0.0% -0.1% 2.8% 0.7% 8.5% 10.9%Health Care -0.6% -0.5% -0.4% 0.3% 1.2% 6.1% 3.7% 10.0%Financials -1.1% -1.1% 0.0% 0.0% -4.7% -0.3% 26.0% 25.6%Info. Tech -0.1% -0.1% 0.0% 0.0% -2.9% -0.5% 4.9% 4.5%Telecomm. 0.1% 0.0% 0.0% 0.0% -1.7% -2.6% 5.8% 5.7%Utilities 0.4% 0.2% 0.1% 0.1% 12.5% 7.1% 4.8% 3.5%Cash 0.0% 0.0% 0.0% 0.0% 0.0% -- 0.3% 0.0%Portfolio -1.6% = -1.4% + -0.4% + 0.2% -0.9% 0.7% 100.0% 100.0%

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SUMITOMO MITSUI FINL.GP. -0.4% -15.7%ABERDEEN ASSET MAN. -0.3% -21.4%MITSUBISHI UFJ FINL.GP. -0.3% -15.5%MAZDA MOTOR -0.2% -13.9%HONDA MOTOR -0.1% -13.9%SHINSEI BANK -0.1% -18.9%ARCELORMITTAL -0.1% -9.8%ROLLS-ROYCE HOLDINGS -0.1% -15.2%SBERBANK RUSSIA ADR 1:4 -0.1% -22.3%WPP -0.1% -9.8%

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MEDIOBANCA BC.FIN 0.3% 30.5%GDF SUEZ 0.2% 16.2%ENEL 0.1% 29.4%WEIR GROUP 0.1% 19.7%MEDIASET 0.1% 17.8%MICHELIN 0.1% 17.5%AHOLD KON. 0.1% 12.2%RHEINMETALL 0.1% 15.0%TYMAN 0.1% 32.2%THYSSENKRUPP 0.1% 9.6%

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CharacteristicsPortfolio MSCI EAFE

Number of Holdings 134 906Weighted Avg. Market Cap. ($B) 44.7 61.6Median Market Cap. ($B) 18.1 9.0Price To Earnings 17.5 17.8Price To Book 2.2 2.3Price To Sales 1.4 1.9Return on Equity (%) 14.0 13.6Yield (%) 2.8 3.0Beta 1.0 1.0R-Squared 1.0 1.0

43



AsiaPacific Australia 5.9% 7.5% 1.3% 6.0%Hong Kong 2.4% 2.8% -2.0% -3.4%Japan 20.8% 20.9% -9.9% -5.6%Korea* 0.9% 0.0% 0.7% -2.2%Taiwan* 0.0% 0.0% 5.4% 1.1%Thailand* 0.3% 0.0% 6.2% 7.4%Total-AsiaPacific 30.4% 32.8% -6.6% -2.5%Other Turkey* 0.3% 0.0% 20.5% 4.8%Total-Other 0.3% 0.4% 20.5% 18.7%Totals Developed 97.3% 100.0% -0.8% 0.7%Emerging* 2.4% 0.0% -1.6% --Cash 0.3% 0.0%

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Americas Brazil* 0.3% 0.0% -9.1% 2.8%United States 0.5% 0.0% -8.7% 1.7%Total-Americas 0.8% 0.0% -8.8% --Europe Austria 0.4% 0.3% -3.8% -1.5%Belgium 1.3% 1.2% -1.5% 2.4%Finland 1.0% 0.9% -7.4% 0.2%France 17.0% 10.1% 1.9% 3.0%Germany 7.9% 9.5% 2.6% -0.3%Ireland 0.4% 0.3% 9.7% 14.2%Italy 7.3% 2.2% 10.6% 14.6%Netherlands 3.8% 2.7% 1.8% 1.1%Norway 0.5% 0.8% 16.5% 2.2%Russia* 0.5% 0.0% -22.3% -14.4%Spain 1.9% 3.4% 0.4% 4.8%Sweden 1.5% 3.2% 2.8% 3.0%Switzerland 3.4% 8.9% 6.3% 5.1%United Kingdom 21.3% 21.9% -1.9% -0.9%Total-Europe 68.1% 66.8% 1.7% 2.2%

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The City of Fairfax Retirement PlanDFA Emerging Markets

45

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46

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OAO GAZPROM SPN.ADR 1:2 -0.5% -10.2%GERDAU PN SPN.ADR 1:1 -0.1% -17.9%PTRO.BRAO.ADR 1:2 -0.1% -5.6%KB FINANCIAL GP.ADR 1:1 -0.1% -13.2%HYUNDAI STEEL -0.1% -21.0%USIMINAS PNA -0.1% -24.7%POSCO ADR 4:1 -0.1% -11.0%CHINA UNIC.ADR 1:10 -0.1% -12.6%HANA FINANCIAL GROUP -0.1% -12.1%PTRO.BRAO.ADR 1:2 -0.1% -4.6%

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ICICI BK.ADR 1:2 0.1% 17.8%ANGLOGOLD ASHANTI SPN. ADR.1:1 0.1% 45.7%RELIANCE INDUSTRIES 0.1% 7.7%CEMEX SPN.ADR 1:10 0.1% 6.8%INDL.& COML.BK.OF CHINA 'H' 0.1% -9.0%STANDARD BK.GP. 0.1% 6.8%SIBANYE GOLD ADR 1:4 0.1% 78.4%BANK NEGARA INDONESIA 0.1% 34.5%STEINHOFF INTL. 0.1% 12.5%BARCLAYS AFRICA GROUP 0.1% 15.7%

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_

Energy 0.1% 0.0% -0.1% 0.2% -3.0% -4.5% 15.9% 11.3%Materials -0.1% 0.1% -0.2% 0.1% -2.8% -3.6% 15.4% 9.7%Industrials 0.0% 0.0% 0.0% 0.0% -0.7% -0.2% 12.1% 6.5%Cons. Disc. -0.3% -0.3% -0.1% 0.1% 0.3% 3.7% 6.3% 8.9%Cons. Staples 0.1% 0.1% 0.1% -0.1% -0.2% -1.5% 5.1% 8.6%Health Care 0.0% 0.1% 0.0% -0.1% 6.6% 1.6% 0.4% 1.7%Financials -0.1% 0.0% 0.0% -0.1% -0.8% -0.4% 33.9% 26.7%Info. Tech -0.4% 0.1% -0.4% -0.1% 3.6% 3.7% 7.5% 15.9%Telecomm. 0.3% 0.0% 0.3% 0.0% -5.9% -5.8% 1.3% 7.4%Utilities 0.0% 0.1% 0.0% -0.1% 6.3% 2.8% 1.9% 3.4%Cash 0.0% -- -- -- -- -- 0.0% 0.0%Portfolio -0.4% = 0.2% + -0.5% + -0.1% -0.9% -0.5% 100.0% 100.0%

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Characteristics

PortfolioMSCI

EmergingMarkets

Number of Holdings 2,142 822Weighted Avg. Market Cap. ($B) 18.1 34.8Median Market Cap. ($B) 0.4 4.8Price To Earnings 14.2 16.1Price To Book 1.2 2.4Price To Sales 1.3 2.0Return on Equity (%) 10.2 17.6Yield (%) 2.9 2.7Beta 1.1 1.0R-Squared 1.0 1.0

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Americas Brazil* 9.8% 10.7% -6.0% 2.8%Chile* 1.5% 1.6% -2.1% -1.9%Colombia* 0.2% 1.0% 4.2% 5.2%Mexico* 7.3% 5.4% -2.9% -5.0%United States 0.0% 0.0% 0.0% 1.7%Total-Americas 18.8% 19.1% -4.4% 0.4%Europe Czech Republic* 0.2% 0.2% -3.7% 7.6%Greece* 0.1% 0.5% 23.6% 18.1%Hungary* 0.5% 0.3% 0.0% -8.7%Luxembourg 0.0% 0.0% 1.0% -0.5%Poland* 1.7% 1.7% 8.2% 3.4%Russia* 5.0% 6.1% -10.4% -14.4%United Kingdom 0.0% 0.0% -0.2% -0.8%Total-Europe 7.5% 8.8% -5.0% -8.4%

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March 31, 2014




AsiaPacific China* 14.6% 19.8% -4.9% -5.9%Hong Kong 0.9% 0.0% -8.0% -3.4%India* 7.0% 6.3% 9.4% 8.2%Indonesia* 2.2% 2.2% 25.8% 21.2%Korea* 16.3% 16.1% -5.1% -2.9%Malaysia* 3.9% 3.8% 3.3% -0.3%Philippines* 1.0% 0.9% 12.0% 10.5%Taiwan* 15.9% 11.6% -1.4% 1.1%Thailand* 2.8% 2.2% -1.3% 7.5%Total-AsiaPacific 64.5% 63.0% -0.6% -0.4%Other Israel 0.0% 0.0% 19.0% 18.5%South Africa* 7.1% 7.4% 9.0% 4.9%Turkey* 2.2% 1.5% 2.6% 4.8%Total-Other 9.3% 9.1% 7.5% 5.0%Totals Developed 0.9% 0.0% -7.5% --Emerging* 99.1% 100.0% -0.8% -0.5%

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The City of Fairfax Retirement PlanWellington

49

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The City of Fairfax Retirement PlanWellington

50

Wellington Core Bond Plus

March 31, 2014

Characteristics

Quality Rating Sectors


51

March 31, 2014

The City of Fairfax Retirement PlanGMO Real Return Global Balanced

52

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The City of Fairfax Retirement PlanGMO Real Return Global Balanced

53

GMO Real Return Global Balanced

Source: GMO

March 31, 2014


Asset Allocation Historical Allocation

54

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The City of Fairfax Retirement PlanPutnam Total Return

55

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The City of Fairfax Retirement PlanPutnam Total Return

56

Putnam Total Return

March 31, 2014

Characteristics Risk Weight Summary

Risk Factor Weight (%)

Common factor risk

EQUITY 54.49

RATES -0.52

CREDIT 31.25

INFLATION 14.78

Total 100

Portfolio Weight Summary


Source: Putnam

57

Putnam Total Return

March 31, 2013


March 31, 2014

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%Putnam Total Return

Alternatives

Commodities

Emerging MarketEquityDeveloped MarketEquityEmerging MarketDebtHigh Yield

Investment GradeCreditGlobal InflationLinked BondsGlobal InterestRates

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March 31, 2014

The City of Fairfax Retirement PlanPIMCO All Asset

59

Source: PIMCO

March 31, 2014

The City of Fairfax Retirement PlanPIMCO All Asset

60

Appendix

61

Glossary of Investment Terminology – Risk Statistics

Source: Investor Force

March 31, 2014

62

Glossary of Investment Terminology

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65

• The client’s custodian bank is NEPC’s preferred data source unless otherwise directed. NEPC 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 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.

Reporting Methodology

66

• Past performance is no guarantee of future results.

• All investments carry some level of risk. Diversification and other asset allocationtechniques are not guaranteed to ensure profit or protect against losses.

• Some index returns displayed in this report or used in calculation of a policy, allocation orcustom benchmark may not be available from the source or may be preliminary andsubject to change.

• NEPC’s source for portfolio pricing, calculation of accruals, and transaction information isthe plans custodial bank. Information on market indices and security characteristics isreceived from other sources external to NEPC. While NEPC has exercised reasonableprofessional care in preparing this report, we cannot guarantee the accuracy of all sourceinformation contained within.

• This report is provided as a management aid for the client’s internal use only. Performancecontained in this report does not constitute a recommendation by NEPC.

• This report may contain confidential or proprietary information and may not be copied orredistributed to any party not legally entitled to receive it.

Information Disclaimer

67

Investment Performance Analysis Q1 2014 - Fairfax, VA

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