City of Cupertino
PARS 115 Trust – OPEB Prefunding Program &
Pension Rate Stabilization Program Plan Client Review
October 24, 2022
City of Cupertino ▎ 2
Contacts
Angela Tang, CEBS
Senior Coordinator, Client Services
(800) 540-6369 x159
[email protected]
Ryan Maxey
Vice President, Sr. Relationship Manager
(503) 464-3789
[email protected]
Mitch Barker
Executive Vice President
(949) 310-4876
[email protected]
Rick Rosenthal
Vice President , Senior Portfolio Manager
(213) 359-7954
[email protected]
City of Cupertino ▎ 3
Pars Trust Team
Trust Administrator & Consultant
• Serves as record-keeper, consultant,
and central-point of contact
• Record-keeping/account valuations
• Monitors contributions
• Processes disbursements
• Handles all agency/participant inquiries
• Ongoing plan compliance
Corporate Experience
Dollars under Administration
38 years (1984-2022)
Over $6.1 billion
Investment Manager & Trustee
• Safeguard and Oversight of Plan
Assets
• Investment Fiduciary
• Manage Program Portfolios
• Investment Policy Assistance
• Open Architecture with Active
and Index Investments
Corporate Experience
Dollars under Trust Custody
159 years (1863–2022)
Over $9.0 trillion
City of Cupertino ▎ 4
Subaccounts
OPEB and pension assets are
individually sub-accounted,
and can be divided by dept.,
bargaining group, or cost center.
Assets in the PARS Section 115
Combination Trust can be used
to address unfunded liabilities.
Financial Stability
Allows separate investment
strategies for OPEB and
pension subaccounts.
Flexible Investing
OPEB and pension assets
aggregate and reach lower fees
on tiered schedule sooner –
saving money!
Economies-of-ScaleAnytime Access
Trust funds are available
anytime; OPEB for OPEB
and pension for pension.
No set-up costs, no minimum
annual contribution amounts,
and no fees until assets are added.
No Set Up Cost or Minimums
Retiree Medical Benefits
Prefund OPEB GASB 75
OPEB
$29.8M
Reimburse agency; or
Pay benefits provider
Pension Rate Stabilization Program
Prefund Pension (PRSP) GASB 68
Pension
$16.4M
Reimburse agency; or
Pay retirement system
Assets can be used to: Assets can be used to:
prefund
either or both
General Fund
PARS IRS -Approved Section 115 Trust
City of Cupertino ▎ 5
Plan Type: IRC Section 115 Irrevocable Exclusive Benefit Trust Trustee Approach: Discretionary
Plan Effective Date: February 17, 2010
Plan Administrator: Director of Administrative Services Current Investment Strategy: U.S. Bank Balanced Multi-Manager (Active) Strategy; Individual Account Summary of Agency’s opeb Plan
AS OF SEPTEMBER 30, 2022:
Initial Contribution: June 2010: $7,000,000
Additional Contributions: $12,300,000
Total Contributions: $19,300,000
Disbursements: $0
Total Investment Earnings: $11,591,726
Account Balance: $29,792,835
City of Cupertino ▎ 6
Summary of Agency’s opeb Plan
*Plan Year Ending June 2010 is based on 1 month of activity. **Plan Year Ending June 2023 is based on 3 months of activity.
HISTORY OF CONTRIBUTIONS, DISBURSEMENTS, AND TOTAL ASSETS AS OF SEPTEMBER 30, 2022:
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
$40,000,000
Plan Year Ending
Contributions
Disbursements
Total Assets
Year Contributions Disbursements Total Assets
Jun-10* $7,000,000 $0 $6,985,379
Jun-11 $2,000,000 $0 $9,742,816
Jun-12 $900,000 $0 $10,810,484
Jun-13 $1,400,000 $0 $13,358,376
Jun-14 $0 $0 $15,054,002
Jun-15 $8,000,000 $0 $23,113,331
Jun-16 $0 $0 $22,834,090
Jun-17 $0 $0 $25,745,075
Jun-18 $0 $0 $28,056,145
Jun-19 $0 $0 $29,218,234
Jun-20 $0 $0 $29,370,249
Jun-21 $0 $0 $38,025,046
Jun-22 $0 $0 $31,339,861
Jun-23** $0 $0 $29,792,835
City of Cupertino ▎ 7
Plan Type: IRC Section 115 Irrevocable Exclusive Benefit Trust Trustee Approach: Discretionary
Plan Effective Date: May 15, 2018
Plan Administrator: Director of Administrative Services Current Investment Strategy: U.S. Bank Balanced Multi-Manager (Active) Strategy; Individual Account Summary of Agency’s Pension Plan
AS OF SEPTEMBER 30, 2022:
Initial Contribution: March 2019: $8,000,000
Additional Contributions: $8,000,000
Total Contributions: $16,000,000
Disbursements: $0
Total Investment Earnings: $555,977
Account Balance: $16,385,602
City of Cupertino ▎ 8
Summary of Agency’s pension Plan
*Plan Year Ending June 2019 is based on 4 months of activity. **Plan Year Ending June 2023 is based on 3 months of activity.
HISTORY OF CONTRIBUTIONS, DISBURSEMENTS, AND TOTAL ASSETS AS OF SEPTEMBER 30, 2022:
$0
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
$16,000,000
$18,000,000
$20,000,000
Jun-19 Jun-20 Jun-21 Jun-22 Jun-23
Plan Year Ending
Contributions
Disbursements
Total Assets
Year Contributions Disbursements Total Assets
Jun-19* $8,000,000 $0 $8,119,289
Jun-20 $4,000,000 $0 $12,725,224
Jun-21 $2,000,000 $0 $18,491,004
Jun-22 $2,000,000 $0 $17,240,051
Jun-23** $0 $0 $16,385,602
City of Cupertino ▎ 9
Miscellaneous
Group
Valuation as of
June 30, 2020
Valuation as of
June 30, 2021 Change
Actuarial Liability $157.6 M $168.4 M 6.9% ↑
Assets $103.8 M $127.1 M 22.5% ↑
Unfunded Liability $53.8 M $41.3 M 23.3% ↓
Funded Ratio 65.9% 75.5% 14.6% ↑
Employer Contribution Amount $6.2 M
(FY 21-22)
$6.9 M
(FY 22-23) 11.5% ↑
Employer Contribution Amount – Projected* --- $6.0 M
(FY 28-29) 12.2% ↓
Pension Funding Status
As of June 30, 2021, City of Cupertino’s CalPERS pension plan is funded as follows*:
* Data through 2028-29 from Agency’s latest CalPERS actuarial valuation.
U.S. Bank Confidential
U.S. Bank Confidential
Investment and insurance products and services including annuities are:
NOT A DEPOSIT ● NOT FDIC INSURED ● MAY LOSE VALUE ● NOT BANK GUARANTEED ● NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY PARS/CITY OF CUPERTINO 115P
OPEB & PENSION ACCOUNTS
U.S. Bank Institutional Asset Management
September 30, 2022
U.S. Bank Confidential
Table of Contents
Section 1 – PORTFOLIO REVIEW
PARS/CITY OF CUPERTINO 115P - OPEB (X9600)
• History of Asset Growth
• Account Performance
• Asset Allocation
• Holdings
PARS/CITY OF CUPERTINO 115P – PENSION (X9601)
• History of Asset Growth
• Account Performance
• Asset Allocation
• Holdings
Section 2 – ECONOMIC OUTLOOK
Section 3 – DISCLOSURES, DEFINITIONS, DESCRIPTIONS
U.S. Bank Confidential
PORTFOLIO REVIEW
PARS/CITY OF CUPERTINO OPEB AGG
ACCOUNT XXXXX
9600 Period Ending: 09/30/2022
History of Asset Growth Graphs
Ending Market Values Over Time
Annual Portfolio Values
Allocation Over Time
Jan 2017- Jan 2018- Jan 2019- Jan 2020- Jan 2021- Jan 2022- Consolidated Dec 2017 Dec 2018 Dec 2019 Dec 2020 Dec 2021 Sep 2022 Beginning Portfolio Value 23,808,269 23,808,269 27,914,893 25,771,054 31,154,264 35,029,500 38,702,738 Contributions 28,325,739 2 15 28,325,715 2 1 3
Withdrawals -28,983,953 -106,702 -113,476 -28,432,997 -110,991 -128,524 -91,264 Income Earned 3,113,145 452,364 548,841 695,433 482,644 640,255 293,609 Gain/Loss 3,538,567 3,760,960 -2,579,219 4,795,058 3,503,582 3,161,506 -9,103,319 Ending Portfolio Value 29,801,767 27,914,893 25,771,054 31,154,264 35,029,500 38,702,738 29,801,767 Total Return 4.31 17.73 -7.30 20.89 12.85 10.86 -22.79
Principal 2.47 15.74 -9.15 18.08 11.09 9.00 -23.47
Income 1.79 1.74 1.99 2.42 1.59 1.72 .86
2017 2018 2019 2020 2021 2022
0 20
40 60
80 100
Total Equity Total Fixed Income
Total Real Assets Total Cash Eqv %
2017 2018 2019 2020 2021 2022
24M
26M
28M
30M
32M
34M
36M
38M
40M
42M
$
U.S. Bank Confidential
Custom Benchmark
Asset Class Benchmark Range Target Actual
Equities MSCI AC World Free Index 50%‐70% 63% 65.7%
Fixed Income BBARC Global Aggregate Index 20% ‐40% 29% 28.2% Real Estate S&P Global REIT TR USD 0%‐15% 5% 5.1%
Commodities S&P GSCI Commodity Index 0%‐10% 2% 0%
Cash FTSE 3‐Mo US T‐Bill Index 0%‐10% 1% 1%
CITY OF CUPERTINO
PARS/CITY OF CUPERTINO OPEB AGG
Period Ending: 09/30/2022
Selected Period Performance
Year Inception
to Date to Date
Market Value 3 Months (9 Months) 1 Year 3 Years 5 Years 101 Months 07/01/2010 Total Portfolio Gross of Fees 29,801,767 -4.85 -22.79 -20.37 .87 2.42 3.76 5.22 Total Portfolio Net of Fees 29,801,767 -4.89 -22.90 -20.52 .69 2.22 3.55 City of Cupertino -6.94 -22.83 -19.18 1.29 2.95 3.48 5.89 Total Equity 18,705,130 -5.49 -27.01 -24.34 4.62 4.80 6.55 9.72 MSCI ACWI (Net) -6.82 -25.63 -20.66 3.75 4.44 5.48 8.20 U.S. Equity 13,954,491 -3.46 -25.72 -21.11 5.28 6.23 8.18 S&P 500 Index (Total Return) -4.88 -23.87 -15.47 8.16 9.24 10.03 12.92 S&P MidCap 400 Index -2.46 -21.52 -15.25 6.01 5.82 7.62 11.36 S&P SmallCap 600 Index -5.20 -23.16 -18.83 5.48 4.84 7.52 11.59 Developed Markets Equity 2,982,512 -10.27 -29.82 -31.97 5.84 3.56 3.76 MSCI EAFE Index (Net) -9.36 -27.09 -25.13 -1.83 -.84 .84 4.54 Emerging Markets Equity 1,768,127 -11.30 -31.68 -34.45 -3.88 -3.90 -1.10 MSCI Emerging Markets Index (Net) -11.57 -27.16 -28.11 -2.07 -1.81 .92 2.06 Total Fixed Income 9,615,289 -2.79 -12.45 -12.34 -4.61 -1.48 -.18 1.18 BBARC Global Aggregate Index -6.94 -19.89 -20.43 -5.74 -2.32 -1.15 .54 BBARC US Aggregate Bond Index -4.75 -14.61 -14.60 -3.26 -.27 .96 1.77 Total Real Assets 1,183,510 -9.99 -28.26 -17.87 -2.36 1.88 Real Estate 1,183,510 -9.99 -28.26 -17.87 -2.36 2.29 4.73 S&P Global REIT Index (Gross) -10.89 -28.71 -19.75 -4.27 1.22 3.43 7.38 S&P GSCI Index -10.31 21.80 23.64 12.19 7.75 -4.57 -1.42 Total Cash Equivalents 297,839 .47 .62 .62 .46 .96 .67 .47 ICE BofAML US 3-Month Treasury Bill Index .46 .61 .62 .59 1.15 .80 .58 Pending Cash 0 .00 .00 .00 .00 .00 .00 .00
ACCOUNT XXXXX
9600
PARS/CITY OF CUPERTINO 115P - OPEB
Portfolio Holdings
Account: XXXXXX9600 Holdings Method: Direct Report Date: 09/30/2022 © 2019 FactSet Research Systems Inc. All rights reserved. Past Performance is no guarantee of future results.
Not A Deposit | Not FDIC Insured | May Lose Value | Not Bank Guaranteed | Not Insured By Any Federal Government Agency Material is based on data from sources deemed to be reliable, accuracy/completeness is not guaranteed.
Holdings Date: 9/30/2022
Symbol
% of
Port. Price
Shares/
Units
Portfolio
Value
Cost
Basis
Unrealized
Gain/Loss
Current
Yield
Projected
Annual
Income
Total 100.0 29,773,926 29,560,525 213,401 2.01 599,666
Cash 1.00 297,199 297,199 .00 2.73 8,122
Cash Equivalents 1.00 297,199 297,199 .00 2.73 8,122
FIRST AM GOVT OB FD CL Z 31846V567 1.00 1.00 297,199 297,199 297,199 .00 2.73 8,122 Fixed Income 32.20 9,588,088 8,501,484 1,086,604 3.26 312,670 Investment Grade 27.21 8,102,343 6,764,485 1,337,859 2.68 217,020 Mutual Funds & ETFs 27.21 8,102,343 6,764,485 1,337,859 2.68 217,020 DoubleLine Total Return Bond Fund Class I DBLTX 9.03 8.87 303,272 2,690,024 2,338,633 351,391 3.69 99,170 Fidelity U.S. Bond Index Fund FXNAX 9.07 10.08 267,918 2,700,616 1,638,601 1,062,016 2.28 61,621 TIAA-CREF Short-Term Bond Fd Institutio… TISIX 9.11 9.79 276,987 2,711,703 2,787,251 -75,548 2.07 56,228 High Yield 4.99 1,485,744 1,736,999 -251,255 6.44 95,650 Mutual Funds & ETFs 4.99 1,485,744 1,736,999 -251,255 6.44 95,650 Artisan High Income Fund - Institutional Sh… APHFX 4.99 8.45 175,828 1,485,744 1,736,999 -251,255 6.44 95,650 Equity 62.82 18,705,130 19,134,225 -429,095 1.26 235,370 Large Cap U.S. Equity 29.90 8,902,283 10,534,506 -1,632,223 0.56 49,880 Mutual Funds & ETFs 29.90 8,902,283 10,534,506 -1,632,223 0.56 49,880 Harbor Capital Appreciation Fund - Retire … HNACX 14.90 63.82 69,501 4,435,579 5,039,805 -604,226 0.00 0 John Hancock Fds III Disciplined Value Fu… JVLIX 15.00 19.88 224,683 4,466,704 5,494,701 -1,027,997 1.12 49,880 Mid Cap U.S. Equity 11.96 3,562,401 1,466,435 2,095,966 1.52 54,236 Mutual Funds & ETFs 11.96 3,562,401 1,466,435 2,095,966 1.52 54,236 Fidelity Mid Cap Index Fund FSMDX 11.96 24.04 148,186 3,562,401 1,466,435 2,095,966 1.52 54,236 Small Cap U.S. Equity 5.00 1,489,807 1,555,728 -65,921 0.35 5,161 Mutual Funds & ETFs 5.00 1,489,807 1,555,728 -65,921 0.35 5,161 Boston Trust Walden Small Cap Fund BOSOX 5.00 14.69 101,416 1,489,807 1,555,728 -65,921 0.35 5,161 Developed Markets Equity 10.02 2,982,512 3,932,032 -949,520 4.23 126,093 Mutual Funds & ETFs 10.02 2,982,512 3,932,032 -949,520 4.23 126,093 Fidelity International Index Fund FSPSX 10.02 35.74 83,450 2,982,512 3,932,032 -949,520 4.23 126,093 Emerging Markets Equity 5.94 1,768,127 1,645,524 122,602 0.00 0 Mutual Funds & ETFs 5.94 1,768,127 1,645,524 122,602 0.00 0 Baron Emerging Markets Fd Inst Shs BEXIX 5.94 12.01 147,221 1,768,127 1,645,524 122,602 0.00 0
PARS/CITY OF CUPERTINO 115P - OPEB
Portfolio Holdings
Account: XXXXXX9600 Holdings Method: Direct Report Date: 09/30/2022 © 2019 FactSet Research Systems Inc. All rights reserved. Past Performance is no guarantee of future results.
Not A Deposit | Not FDIC Insured | May Lose Value | Not Bank Guaranteed | Not Insured By Any Federal Government Agency Material is based on data from sources deemed to be reliable, accuracy/completeness is not guaranteed.
Holdings Date: 9/30/2022
Symbol
% of
Port. Price
Shares/
Units
Portfolio
Value
Cost
Basis
Unrealized
Gain/Loss
Current
Yield
Projected
Annual
Income
Real Assets 3.97 1,183,510 1,627,618 -444,108 3.68 43,503 U.S. Listed Real Estate 3.97 1,183,510 1,627,618 -444,108 3.68 43,503 iShares Core U.S. REIT ETF USRT 3.97 47.50 24,916 1,183,510 1,627,618 -444,108 3.68 43,503
PARS/CITY OF CUPERTINO 115P - OPEB
Fixed Income Holdings
Account: XXXXXX9600 Holdings Method: Direct Report Date: 09/30/2022 © 2019 FactSet Research Systems Inc. All rights reserved. Past Performance is no guarantee of future results.
Not A Deposit | Not FDIC Insured | May Lose Value | Not Bank Guaranteed | Not Insured By Any Federal Government Agency Material is based on data from sources deemed to be reliable, accuracy/completeness is not guaranteed.
Holdings Date: 9/30/2022
Symbol
% of
Fixed
Income
Portfolio
Value
Projected
Annual
Income
Current
Yield
Yield to
Maturity
Effective
Duration
Effective
Maturity
Avg.
Quality
Total 100.00 9,588,088 312,670 3.26 4.38 4.08 4.62 BBB- Investment Grade 84.50 8,102,343 217,020 2.68 3.91 4.34 4.62 BBB+ Mutual Funds & ETFs 84.50 8,102,343 217,020 2.68 3.91 4.34 4.62 BBB+ DoubleLine Total Return Bond Fund Class I DBLTX 28.10 2,690,024 99,170 3.69 4.45 5.06 7.21 BB Fidelity U.S. Bond Index Fund FXNAX 28.20 2,700,616 61,621 2.28 NA 6.41 NA AA TIAA-CREF Short-Term Bond Fd Institutional Cl... TISIX 28.30 2,711,703 56,228 2.07 3.37 1.57 2.06 BBB High Yield 15.50 1,485,744 95,650 6.44 6.12 2.64 NA B
Mutual Funds & ETFs 15.50 1,485,744 95,650 6.44 6.12 2.64 NA B Artisan High Income Fund - Institutional Shar... APHFX 15.50 1,485,744 95,650 6.44 6.12 2.64 NA B
PARS/CITY OF CUPERTINO 115P- PENSION
Period Ending: 09/30/2022
History of Asset Growth Graphs
Ending Market Values Over Time
Annual Portfolio Values
Allocation Over Time
May 2019- Jan 2020- Jan 2021- Jan 2022-
Consolidated Dec 2019 Dec 2020 Dec 2021 Sep 2022
Beginning Portfolio Value 8,073,518 8,073,518 8,657,991 15,177,347 18,820,778 Contributions 8,000,006 1 4,000,002 2,000,000 2,000,002 Withdrawals -169,055 -20,472 -43,099 -59,572 -45,912
Income Earned 800,678 155,938 193,205 301,788 149,747
Gain/Loss -314,633 449,006 2,369,247 1,401,215 -4,534,101 Ending Portfolio Value 16,390,515 8,657,991 15,177,347 18,820,778 16,390,515 Total Return 2.15 7.51 17.09 10.54 -22.72
Principal .38 5.52 15.31 8.69 -23.40
Income 1.76 1.91 1.55 1.70 .86
2019 2020 2021 2022
0 20
40 60
80 100
Total Equity Total Fixed Income
Total Real Assets Total Cash Eqv %
2019 2020 2021 2022
8M
10M
12M
14M
16M
18M
20M
$
ACCOUNT XXXXX
9601
U.S. Bank Confidential
Custom Benchmark
Asset Class Benchmark Range Target Actual
Equities MSCI AC World Free Index 50%‐70% 63% 65.7%
Fixed Income BBARC Global Aggregate Index 20% ‐40% 29% 28.2% Real Estate S&P Global REIT TR USD 0%‐15% 5% 5.1%
Commodities S&P GSCI Commodity Index 0%‐10% 2% 0%
Cash FTSE 3‐Mo US T‐Bill Index 0%‐10% 1% 1%
CITY OF CUPERTINO
PARS/CITY OF CUPERTINO 115P- PENSION
Period Ending: 09/30/2022
Selected Period Performance
Year Inception
to Date to Date
Market Value 3 Months (9 Months) 1 Year 3 Years 05/01/2019 Total Portfolio Gross of Fees 16,390,515 -4.86 -22.72 -20.30 2.05 2.15 Total Portfolio Net of Fees 16,390,515 -4.91 -22.82 -20.44 1.87 1.97 City of Cupertino -6.94 -22.83 -19.18 1.29 1.69
Total Equity 10,287,402 -5.48 -27.01 -24.34 4.66 3.81
MSCI ACWI (Net) -6.82 -25.63 -20.66 3.75 3.34
U.S. Equity 7,674,688 -3.45 -25.72 -21.10 5.28 4.66
S&P 500 Index (Total Return) -4.88 -23.87 -15.47 8.16 7.74 S&P MidCap 400 Index -2.46 -21.52 -15.25 6.01 4.94
S&P SmallCap 600 Index -5.20 -23.16 -18.83 5.48 4.14
Developed Markets Equity 1,640,321 -10.27 -29.82 -31.97 5.84 4.16 MSCI EAFE Index (Net) -9.36 -27.09 -25.13 -1.83 -1.68
Emerging Markets Equity 972,392 -11.30 -31.68 -34.45 -3.88 -4.48 MSCI Emerging Markets Index (Net) -11.57 -27.16 -28.11 -2.07 -3.47 Total Fixed Income 5,288,189 -2.80 -12.45 -12.34 -4.58 -2.89 BBARC Global Aggregate Index -6.94 -19.89 -20.43 -5.74 -3.87 BBARC US Aggregate Bond Index -4.75 -14.61 -14.60 -3.26 -1.36 Total Real Assets 650,893 -9.89 -28.17 -17.77 -2.29 .50 Real Estate 650,893 -9.89 -28.17 -17.77 -2.29 .50
S&P Global REIT Index (Gross) -10.89 -28.71 -19.75 -4.27 -1.55 S&P GSCI Index -10.31 21.80 23.64 12.19 7.91
Total Cash Equivalents 164,032 .39 .48 .48 .41 .62
ICE BofAML US 3-Month Treasury Bill Index .46 .61 .62 .59 .82 Pending Cash 0 .00 .00 .00 .00 .00
ACCOUNT XXXXX
9601
PARS/CITY OF CUPERTINO 115P- PENSION
Portfolio Holdings
Account: XXXXXX9601 Holdings Method: Direct Report Date: 09/30/2022 © 2019 FactSet Research Systems Inc. All rights reserved. Past Performance is no guarantee of future results.
Not A Deposit | Not FDIC Insured | May Lose Value | Not Bank Guaranteed | Not Insured By Any Federal Government Agency Material is based on data from sources deemed to be reliable, accuracy/completeness is not guaranteed.
Holdings Date: 9/30/2022
Symbol
% of
Port. Price
Shares/
Units
Portfolio
Value
Cost
Basis
Unrealized
Gain/Loss
Current
Yield
Projected
Annual
Income
Total 100.0 16,375,216 17,789,274 -1,414,059 2.01 329,810 Cash 1.00 163,655 163,655 .00 2.73 4,473
Cash Equivalents 1.00 163,655 163,655 .00 2.73 4,473
FIRST AM GOVT OB FD CL Z 31846V567 1.00 1.00 163,655 163,655 163,655 .00 2.73 4,473 Fixed Income 32.20 5,273,267 5,517,855 -244,588 3.26 171,962 Investment Grade 27.21 4,456,137 4,575,006 -118,868 2.68 119,357 Mutual Funds & ETFs 27.21 4,456,137 4,575,006 -118,868 2.68 119,357 DoubleLine Total Return Bond Fund Class I DBLTX 9.03 8.87 166,794 1,479,464 1,392,249 87,216 3.69 54,542 Fidelity U.S. Bond Index Fund FXNAX 9.07 10.08 147,350 1,485,290 1,651,874 -166,584 2.28 33,891 TIAA-CREF Short-Term Bond Fd Institutio… TISIX 9.11 9.79 152,337 1,491,383 1,530,883 -39,500 2.07 30,924 High Yield 4.99 817,129 942,849 -125,720 6.44 52,606
Mutual Funds & ETFs 4.99 817,129 942,849 -125,720 6.44 52,606 Artisan High Income Fund - Institutional Sh… APHFX 4.99 8.45 96,702 817,129 942,849 -125,720 6.44 52,606 Equity 62.82 10,287,402 11,234,683 -947,281 1.26 129,449 Large Cap U.S. Equity 29.90 4,896,076 5,874,894 -978,818 0.56 27,433 Mutual Funds & ETFs 29.90 4,896,076 5,874,894 -978,818 0.56 27,433 Harbor Capital Appreciation Fund - Retire … HNACX 14.90 63.82 38,224 2,439,479 2,904,173 -464,695 0.00 0 John Hancock Fds III Disciplined Value Fu… JVLIX 15.00 19.88 123,571 2,456,597 2,970,720 -514,123 1.12 27,433 Mid Cap U.S. Equity 11.96 1,959,249 1,305,598 653,651 1.52 29,829 Mutual Funds & ETFs 11.96 1,959,249 1,305,598 653,651 1.52 29,829 Fidelity Mid Cap Index Fund FSMDX 11.96 24.04 81,500 1,959,249 1,305,598 653,651 1.52 29,829 Small Cap U.S. Equity 5.00 819,364 855,569 -36,205 0.35 2,838 Mutual Funds & ETFs 5.00 819,364 855,569 -36,205 0.35 2,838 Boston Trust Walden Small Cap Fund BOSOX 5.00 14.69 55,777 819,364 855,569 -36,205 0.35 2,838 Developed Markets Equity 10.02 1,640,321 2,113,068 -472,746 4.23 69,349 Mutual Funds & ETFs 10.02 1,640,321 2,113,068 -472,746 4.23 69,349 Fidelity International Index Fund FSPSX 10.02 35.74 45,896 1,640,321 2,113,068 -472,746 4.23 69,349 Emerging Markets Equity 5.94 972,392 1,085,556 -113,163 0.00 0 Mutual Funds & ETFs 5.94 972,392 1,085,556 -113,163 0.00 0 Baron Emerging Markets Fd Inst Shs BEXIX 5.94 12.01 80,965 972,392 1,085,556 -113,163 0.00 0
PARS/CITY OF CUPERTINO 115P- PENSION
Portfolio Holdings
Account: XXXXXX9601 Holdings Method: Direct Report Date: 09/30/2022 © 2019 FactSet Research Systems Inc. All rights reserved. Past Performance is no guarantee of future results.
Not A Deposit | Not FDIC Insured | May Lose Value | Not Bank Guaranteed | Not Insured By Any Federal Government Agency Material is based on data from sources deemed to be reliable, accuracy/completeness is not guaranteed.
Holdings Date: 9/30/2022
Symbol
% of
Port. Price
Shares/
Units
Portfolio
Value
Cost
Basis
Unrealized
Gain/Loss
Current
Yield
Projected
Annual
Income
Real Assets 3.97 650,893 873,082 -222,189 3.68 23,925
U.S. Listed Real Estate 3.97 650,893 873,082 -222,189 3.68 23,925 iShares Core U.S. REIT ETF USRT 3.97 47.50 13,703 650,893 873,082 -222,189 3.68 23,925
PARS/CITY OF CUPERTINO 115P- PENSION
Fixed Income Holdings
Account: XXXXXX9601 Holdings Method: Direct Report Date: 09/30/2022 © 2019 FactSet Research Systems Inc. All rights reserved. Past Performance is no guarantee of future results.
Not A Deposit | Not FDIC Insured | May Lose Value | Not Bank Guaranteed | Not Insured By Any Federal Government Agency Material is based on data from sources deemed to be reliable, accuracy/completeness is not guaranteed.
Holdings Date: 9/30/2022
Symbol
% of
Fixed
Income
Portfolio
Value
Projected
Annual
Income
Current
Yield
Yield to
Maturity
Effective
Duration
Effective
Maturity
Avg.
Quality
Total 100.00 5,273,267 171,962 3.26 4.38 4.08 4.62 BBB- Investment Grade 84.50 4,456,137 119,357 2.68 3.91 4.34 4.62 BBB+ Mutual Funds & ETFs 84.50 4,456,137 119,357 2.68 3.91 4.34 4.62 BBB+ DoubleLine Total Return Bond Fund Class I DBLTX 28.10 1,479,464 54,542 3.69 4.45 5.06 7.21 BB Fidelity U.S. Bond Index Fund FXNAX 28.20 1,485,290 33,891 2.28 NA 6.41 NA AA TIAA-CREF Short-Term Bond Fd Institutional Cl... TISIX 28.30 1,491,383 30,924 2.07 3.37 1.57 2.06 BBB High Yield 15.50 817,129 52,606 6.44 6.12 2.64 NA B
Mutual Funds & ETFs 15.50 817,129 52,606 6.44 6.12 2.64 NA B Artisan High Income Fund - Institutional Shar... APHFX 15.50 817,129 52,606 6.44 6.12 2.64 NA B
U.S. Bank Confidential
ECONOMIC OUTLOOK
[ 1 ] Important disclosures provided on page 4.
Market analysis
At a glance
Equities bounced to start the fourth quarter, but higher interest rates and a strong jobs market tempered weekly gains. Inflation pressures remain a key factor in asset class trends.
Term of week
OPEC+ – The Organization of the Petroleum Exporting
Countries (OPEC) is a group consisting of 14 of the world’s major oil-exporting nations. OPEC+ also includes 10 OPEC allies, the largest of which are Russia, Mexico and
Kazakhstan.
October 11, 2022
This informational
material is provided by
U.S. Bank Asset
Management Group who
provides analysis and
research to U.S. Bank and
its affiliate U.S. Bancorp
Investments. Contact
your wealth professional
for more details.
Number of the week
10.1 million
The number of job openings in
August, down 1.1 million from July.
“Jobs data remains solid. Nonfarm payrolls gained 263,000 jobs in September, mostly driven by service sector hiring, and the unemployment rate fell to 3.5%. While the monthly gain was the lowest since April of 2021, the pace of hiring remains strong. However, robust wage gains, with average hourly earnings rising 5% for the past year, may weigh on future hiring.” - Robert Haworth, Senior Vice President, Senior Investment Strategy Director, U.S. Bank usbank.com
Investment products and services are:
NOT A DEPOSIT • NOT FDIC INSURED • MAY LOSE VALUE • NOT BANK GUARANTEED • NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
[ 2 ] Important disclosures provided on page 4.
Global economy
Quick take: The U.S. jobs market remains solid, but global manufacturing activity continues to slow, with recessionary indications for Europe and China.
Our view: Our U.S. Health Check highlights positive but below-trend economic activity and decelerating momentum as the Federal Reserve (Fed) tightens monetary policy to combat elevated inflation.
Outside the U.S., our foreign scores are below median and slowing. Jobs data remains solid. Nonfarm payrolls gained 263,000 jobs in September, mostly driven by service sector hiring, and the unemployment rate fell to 3.5%. While the monthly gain was the lowest since April of 2021, the pace of hiring remains strong.
However, robust wage gains, with average hourly earnings rising 5% for the past year, may weigh on future hiring. Job openings of
10.1 million in August slipped 1.1 million from July. While still 170% higher than the number of unemployed persons, the
decrease indicates companies may be trimming their hiring plans. The Institute of Supply Management Index, which measures U.S. activity for manufacturing and services, eased in
September. While results for both are slowing, manufacturing appears closer to contraction, with new orders and employment declining. In contrast, the services index saw acceleration in employment and slowing growth in new orders. The results seem to indicate the economy is faltering, though still growing at a modest rate.
S&P Global Purchasing Managers Index for foreign
manufacturing slipped toward recession. The broad index is contracting for China, the Eurozone, the United Kingdom and Taiwan, while Japan and India are among the few major
economies where the activity is expanding. Broadly, new orders and output remain challenging while business continue to hire as they are best able.
Equity markets
Quick take: Equities traded in seesaw fashion in October, largely over how much Fed actions will slow the economy and drive a
recessionary decline in corporate profitability. This week, an update on the pace of inflation and the unofficial launch of the third quarter reporting period will weigh on sentiment and equity prices.
Our view: Inflation, interest rates and earnings are key to equity returns. At present, inflation continues to run hot, interest rates are rising and consensus earnings projections seem high. To be determined is when or if inflation peaks, how soon the Fed stops hiking rates and if valuations already discount a slower pace of earnings growth in 2023. In aggregate, these scenarios would present a compelling risk/reward profile for equities.
Third quarter reporting period unofficially begins this week, with release on Friday of quarterly results from several money center banks. Investors will watch revenue and earnings growth trends, the extent to which profit margins are trending lower, the resilience and duration of consumer spending on “experiences,” the outlook for holiday sales, retailer inventory levels and business spending trends.
Consensus analysts’ expectations are for growth in both revenue and earnings. As of September 30, expectations for third quarter revenue and earnings are year-over-year growth of
8.5% and 2.7%, respectively, according to FactSet Research Systems. So far, 4% of S&P 500 companies have released results, and they are in line with to above expectations. Sales are advancing approximately 12.5% over year-ago levels and earnings increasing 3.0%, according to Bloomberg.
Earnings projections for 2022 and 2023 seem high and subject to downward revision. Consensus projections for 2022 and 2023 are roughly $223 and $240, respectively, representing year-over- year growth of approximately 7.5%, according to Bloomberg, FactSet and S&P Capital IQ. At present, the S&P 500 trades at roughly 16.0 and 15.0 times 2022 and 2023 estimates,
respectively, levels near historical norms during periods of similar economic conditions. Persistent inflation is among the reasons to expect projections for valuations in 2023 to be revised lower.
[ 3 ] Important disclosures provided on page 4.
Bond markets
Quick take: Treasury yields ended last week higher, pushing bond prices lower. Investors continue swinging from optimism the Fed will pivot from its interest rate hiking campaign to fearing it will continue lifting rates well into 2023. Fed speakers reiterated their call for further rate hikes last week.
Our view: We see the best opportunities in retaining above-normal exposure to high-quality bonds as restrictive monetary policy, slowing growth, high inflation and currency volatility continue to shake global markets.
Pressure remains on the Fed to continue its rate hiking campaign, contributing to market stress. Interest rate markets expect the Fed to increase its target funds rate by 0.75% at the next meeting in early November and 0.50% in December, bringing the year-end rate to 4.25%-4.50%. Expectations are for rates to peak in the first half of 2023 and fall slightly in the second half.
The current trajectory of investor expectations assumes inflation moderates and moves decisively toward the Fed’s 2% target.
Other central banks around the globe are also hiking, with 215 total net rate hikes this year across 60 central banks. More than three quarters of those hikes were larger than normal, highlighting the urgency policymakers feel around dampening inflation. The Bank of England announced additional emergency
measures to control its long-term government bond yields.
Two weeks ago, the Bank of England announced emergency
bond buying to control spiking long-term bond yields, which threatened pension plans. This week, it announced measures to broaden the campaign to include inflation-protected bonds and increased the amount it can buy. Investors largely ignored the announcements and 30-year U.K government bond yields (gilts) jumped again and are approaching the 5% level reached when the original emergency measures were announced.
Real assets
Quick take: Rising interest rates continue to pressure real asset prices.
Infrastructure performed the worst last week, with Utilities losing more than 2%. Commodities outperformed, driven by oil prices.
Our view: We continue to see value in Real Assets’ defensive sectors.
Infrastructure should outperform on a relative basis, with investors favoring tangible assets with stable cash flows as we move past peak earnings growth.
Real Estate trailed the S&P 500 by 4% last week as interest rates rose. The secular growth sectors faced selling pressure due to rising rates. Retail and industrial properties were the top- performing sectors while cell towers and data centers lagged.
Real Estate valuations are cheaper, but higher interest rates could pressure forward returns in the short term.
Infrastructure trailed the S&P 500 by 3% last week.
Performance was led by midstream energy and toll roads, which beat the S&P 500 by 2.5% and 1%, respectively. Utilities were the main detractor as interest rates rose, pressuring valuations. Crude oil prices rose 16.5% after OPEC+ agreed to a 2 million barrel per day production cut. OPEC+ is the Organization of the Petroleum Exporting Countries plus 10 oil-producing allies, including Russia. We see the crude market as undersupplied, which should be supportive for prices over a longer time horizon, but acknowledge downside exists if the economy continues to slow.
[ 4 ] ©2022 U.S. Bank.
This information represents the opinion of U.S. Bank Wealth Management. The views are subject to change at any time based on market or other conditions and are current as of the date indicated on the materials. This is not intended to be a forecast of future events or guarantee of future results. It is not intended to provide specific advice or to be construed as an offering of securities or recommendation to invest. Not for use as a primary basis of investment decisions. Not to be construed to meet the needs of any particular investor. Not a representation or solicitation or an offer to sell/buy any security. Investors should consult with their investment professional for advice concerning their particular situation. The factual information provided has been obtained from sources believed to be reliable, but is not guaranteed as to accuracy or completeness. U.S. Bank is not affiliated or associated with any organizations mentioned.
Based on our strategic approach to creating diversified portfolios, guidelines are in place concerning the construction of portfolios and how investments should be allocated to specific asset classes based on client goals, objectives and tolerance for risk. Not all recommended asset classes will be suitable for every portfolio.
Diversification and asset allocation do not guarantee returns or protect against losses.
Past performance is no guarantee of future results. All performance data, while obtained from sources deemed to be reliable, are not guaranteed for accuracy. Indexes shown are unmanaged and are not available for direct investment. The S&P 500 Index consists of 500 widely traded stocks that are considered to represent the performance of the U.S. stock market in general. The Institute of Supply Management Manufacturing Index, also called the Purchasing Manager's Index, measures manufacturing activity based on a monthly survey, conducted by the Institute for Supply Management, of purchasing managers at more than 300 manufacturing firms. The S&P Global Purchasing Managers' Index data are compiled by IHS Markit for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The Consumer Price Index is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care. It is one of the most frequently used statistics for identifying periods of inflation or deflation.
Equity securities are subject to stock market fluctuations that occur in response to economic and business developments. International investing involves special risks, including foreign taxation, currency risks, risks associated with possible differences in financial standards and other risks associated with future political and economic developments. Investing in emerging markets may involve greater risks than investing in more developed countries. In addition, concentration of investments in a single region may result in greater volatility. Investing in fixed income securities are subject to various risks, including changes in interest rates, credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications and other factors. Investment in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities. Investments in lower-rated and non-rated securities present a greater risk of loss to principal and interest than higher-rated securities. Investments in high yield bonds offer the potential for high current income and attractive total return, but involve certain risks. Changes in economic conditions or other circumstances may adversely affect a bond issuer's ability to make principal and interest payments. The municipal bond market is volatile and can be significantly affected by adverse tax, legislative or political changes and the financial condition of the issues of municipal securities. Interest rate increases can cause the price of a bond to decrease. Income on municipal bonds is free from federal taxes, but may be subject to the federal alternative minimum tax (AMT), state and local taxes.
There are special risks associated with investments in real assets such as commodities and real estate securities. For commodities, risks may include market price fluctuations, regulatory changes, interest rate changes, credit risk, economic changes and the impact of adverse political or financial factors. Investments in real estate securities can be subject to fluctuations in the value of the underlying properties, the effect of economic conditions on real estate values, changes in interest rates and risks related to renting properties (such as rental defaults).
U.S. Bank | Confidential
Important disclosures, definitions
of terms and index descriptions
If you have questions regarding this information or wish to receive definitions of any additional terms or indexes used in this report, please contact your Portfolio Manager .
U.S. Bank | Confidential
Important disclosures (page 1 of 4)
The information provided here is not intended to replace your account statement. Your account statement is the official record of your account.
Equal Housing Lender. Credit products are offered by U.S. Bank National Association and subject to normal credit approval.
Deposit products offered by U.S. Bank National Association. Member FDIC.
For use in one-on-one meetings/presentations.
This information represents the opinion of U.S. Bank. The views are subject to change at any time based on market or other conditions and are current as of the date indicated on the materials. This is not intended to be a forecast of future events or guarantee of future results. The factual information provided has been obtained from sources believed to be reliable but is not guaranteed as to accuracy or completeness.
U.S. Bank and its representatives do not provide tax or legal advice. Your tax and financial situation is unique. You should co nsult your tax and/or legal advisor for advice and information concerning your particular situation.
Past performance is no guarantee of future results. All performance data, while obtained from sources deemed to be reliable, are not guaranteed for accuracy. Indexes shown are unmanaged and are not available for direct investment, nor are they subject to fees and expenses.
Performance reports included may show performance results gross of fees and expenses. If fees and expenses were included, the performance would be lower. If you have any questions, please speak with your relationship manager for additional information.
Based on our strategic approach to creating diversified portfolios, guidelines are in place concerning the construction of portfolios and how investments should be allocated to specific asset classes based on client goals, objectives and tolerance for risk. Not all recommended asset classes will be suitable for every portfolio. Diversification and asset allocation do not guarantee returns or protect against losses.
U.S. Bank | Confidential
Important disclosures (page 2 of 4)
Equity securities are subject to stock market fluctuations that occur in response to economic and business developments. Stocks of small-capitalization companies involve substantial risk. These stocks historically have experienced greater price volatility than stocks of larger companies and may be expected to do so in the future. Stocks of mid-capitalization companies can be expected to be slightly less volatile than those of small-capitalization companies, but still involve substantial risk and may be subject t om o r e abrupt or erratic movements than large-capitalization companies. The value of large-capitalization stocks will rise and fall in response to the activities of the company that issued them, general market conditions and/or economic conditions. Growth investments focus on stocks of companies whose earnings/profitability are accelerating in the short term or have grown consistently over the long term. Such investments may provide minimal dividends, which could otherwise cushion stock prices in a market decline. Stock value may rise and fall significantly based, in part, on investors' perceptions of the company, rather than on fundamental analysis of the stocks. Investors should carefully consider the additional risks involved in growth investments. Value investments focus on stocks of income-producing companies whose price is low relative to one or more valuation factors, such as earnings or book value. Such investments are subject to risks th at their intrinsic values may never be realized by the market, or such stocks may turn out not to have been undervalued. Investors sh ould carefully consider the additional risks involved in value investments.
International investing involves special risks, including foreign taxation, currency risks, risks associated with possible differences in financial standards and other risks associated with future political and economic developments. Investing in emerging markets may involve greater risks than investing in more developed countries. In addition, concentration of investments in a single region may result in greater volatility.
Investments in real estate securities can be subject to fluctuations in the value of the underlying properties, the effect of economic conditions on real estate values, changes in interest rates and risks related to renting properties (such as rental defaults). There are special risks associated with an investment in commodities, including market price fluctuations, regulatory changes, interest rate changes, credit risk, economic changes and the impact of adverse political or financial factors.
Investments in fixed income securities are subject to various risks, including changes in interest rates, credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications and other factors. Investment in fixe di n c o m e securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term securities. Investments in lower-rated and non-rated securities present a greater risk of loss to principal and interest than higher-rated securities. Investments in high yield bonds offer the potential for high current income and attractive total return, but involve certain risks. Changes in economic conditions or other circumstances may adversely affect a bond issuer's ability to make principal and interest payments.
U.S. Bank | Confidential
Important disclosures (page 3 of 4)
The municipal bond market is volatile and can be significantly affected by adverse tax, legislative or political changes and the financial condition of the issues of municipal securities. Interest rate increases can cause the price of a bond to decrease. In come on municipal bonds is free from federal taxes, but may be subject to the federal alternative minimum tax (AMT), state and local taxes.
Treasury Inflation-Protected Securities (TIPS) offer a lower return compared to other similar investments and the principal value may increase or decrease with the rate of inflation. Gains in principal are taxable in that year, even though not paid out until maturity.
Non-financial specialty assets, such as real estate, farm, ranch and timber properties, oil, gas and mineral interests or closely-held business interests are complex and involve unique risks specific to each asset type, including the total loss of value. Special risk considerations may include natural events or disasters, complex tax considerations and lack of liquidity. Specialty assets may not be suitable for all investors.
Alternative investments very often use speculative investment and trading strategies. There is no guarantee that the investment program will be successful. Alternative investments are designed only for investors who are able to tolerate the full loss of an investment. These products are not suitable for every investor ev en if the investor does meet the financial requirements. It is important to consult with your investment professional to determine how these investments might fit your asset allocation, risk profile and tax situation. Hedge funds are speculative and involve a high degree of risk. An investment in a hedge fund involves a substantially more complicated set of risk factors than traditional investments in stocks or bonds, including the risks of using derivatives, leverage and short sales, which can magnify potential losses or gains. Restrictions exist on the ability to redeem or transfer interests in a fund. Exchange-traded funds (ETFs) are baskets of securities that are traded on an exchange like individual stocks at negotiated prices and are not individually redeemable. ETFs are designed to generally track a market index and shares may trade at a premium or a discount to the net asset value of the underlying securities. Private equity investments provide investors and funds the potential to invest directly into private companies or participate in buyouts of public companies that result in a de listing of the public equity. Investors considering an investment in privat e equity must be fully aware that these investments are illiqui db y nature, typically represent a long-term binding commitment and are not readily marketable. The valuation procedures for these holdings are often subjective in nature. Private debt investments may be either direct or indirect and are subject to significant risks, including the possibility of default, limited liquidity and the infrequent availability of independent credit ratings for private companies.
Structured products are subject to market risk and/or principal loss if sold prior to maturity or if the issuer defaults on the security.
Investors should request and review copies of Structured Products Pricing Supplements and Prospectuses prior to approving or directing an investment in these securities.
U.S. Bank | Confidential
Important disclosures (page 4 of 4)
Mutual fund investing involves risk and principal loss is possible. Investing in certain funds involves special risks, such as those related to investments in small- and mid-capitalization stocks, foreign, debt and high-yield securities and funds that focus the ir investments in a particular industry. Please refer to the fund pros pectus for additional details pertaining to these risks. An investment in money market funds is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. Although these funds seek to preserve the value of an inve stment at $1.00 per share, it is possible to lose money by in vesting in these funds.
Holdings of First American Funds: U.S. Bancorp Asset Management, Inc. is a registered investment advisor and subsidiary of U.S. Bank National Association. U.S. Bank National Association is a separate entity and wholly owned subsidiary of U.S. Bancorp. U.S.
Bank is not responsible for and does not guarantee the products, performance or services of U.S. Bancorp Asset Management. U.S.
Bancorp Asset Management, Inc. serves as an investment advisor to First American Funds. Holdings of Nuveen mutual funds:
Firstar Capital Corporation (Firstar Capital), an affiliate of U.S. Bancorp, holds a less-than-10 percent ownership interest in Windy City Investments Holdings, LLC which was formerly the parent of Windy City Investment Inc. and the indirect parent of Nuveen Fund Advisors, LLC which is the investment advisor to the Nuveen Mutual Funds. On October 1, 2014, Windy City Investments, Inc. was sold to Teachers Insurance and Annuity Association of America. As a result of the sale, U.S. Bancorp no longer has an indirect ownership interest in Nuveen Fund Advisors, LLC. Depending on the outcome of certain factors, Firstar Capital might in the future receive an earn-out payment in respect of its interest in Wi ndy City Investment Holdings, LLC, under the terms of the sale. Non- proprietary mutual funds: U.S. Bank may enter into agreements with other no n-proprietary mutual funds or their service providers whereby U.S. Bank provides shareholder services and/or sub-transfer agency, custodial and other administrative support services and receives compensation for these services. Compensation received by U.S. Bank directly or indirectly from mutual funds does not increase fund fees and expenses beyond what is disclosed in the fund prospectuses. For more information, review the fund prospectus.
U.S. Bank | Confidential
Definitions of report and statement terms (page 1
of 5)
Accredited Investor: Private placement securities generally require that investors be accredited due to the additional risks and speculative nature of the securities. For natural persons, the cr iteria is met by a net worth of more than $1 million (excluding primary residence) or an income of more than $200,000 individually ($300,000 jointly) for the two most recent years and a reasonable expectation for the same in the current year. For other entities , such as corporations, partnerships, trusts and employee benef it plans, the criteria is met with at least $5 million in assets. See full definition in Rule 501 of Regulation D under the Securities Ac t of 1933.
Alpha: A measure of risk-adjusted performance. A statistic measuring that portion of a stock, fund or composite's total return attributable to specific or non-market risk. Alpha measures non-market return and indicates how much value has been added or lost.
A positive Alpha indicates the fund or composite has performed better than its Beta would predict (i.e., the manager has added value above the benchmark). A negative Alpha indicates a fund or composite has underperformed given the composite's Beta.
Alternative Investments: As used by U.S. Bank, an investment considered to be outside of the traditional asset classes of long-only stocks, bonds and cash. Examples of alternative investments include hedge funds, private equity, options and financial derivatives.
Annualized Excess Return: Shows the difference between the annualized linked returns of a portfolio and the model benchmark.
Performance reports provided annualize only periods greater than one year.
Annualized or Annual Rate of Return: Represents the average annual change in the value of an investment over the periods indicated.
Batting Average: Shows how consistently the portfolio return met or beat the market.
Beta: A measure of your portfolio's risk relative to a benchmark. A portfolio with a beta of 1.5, for example, would be expected to return roughly 1.5 times the benchmark's return. A high Beta indicates a riskier portfolio.
Bond Credit Rating: A grade given to bonds by a private independent rating service that indicates their credit quality. Ratings are the opinion of Standard & Poor's or other agencies as noted and not the opinion of U.S. Bank.
Consumer Price Index (CPI): A measure of the average change in prices over time in a market basket of goods and services and is one of the most frequently used statistics for identifying periods of inflation and deflation.
Convexity to Stated Maturity: A measure of the curvature in the relationship between bond prices and bond yields that demonstrates how the duration of a bond changes as the interest rate changes. Convexity is used as a risk-management tool and helps to measure and manage the amount of market risk to which a portfolio of bonds is exposed. This version of convexity measures the rate change in duration of a bond as the yield to (stated) maturity changes.
U.S. Bank | Confidential
Definitions of report and statement terms (page 2
of 5)
Cost basis/book value: The original value of an asset at the time it was acquired. This is normally the purchase price or appraised value at the time of acquisition. This data is for information purposes only.
Cumulative Excess Return: Shows the difference between the annualized linked returns of a portfolio and the model benchmark.
Performance reports provided use unannualized returns in period s up to one year, but annualized returns for periods exceeding on e year.
Downside Capture: The downside capture ratio reflects how a portfolio compares to a benchmark during periods when the benchmark is down. A downside capture ratio of 0.80 (or 80 percent) means the portfolio has historically declined only 80 percent as much as the benchmark during down markets.
Downside Deviation: The deviation of returns that fall below a minimum acceptable return (MAR). Although the numerator includes only returns below the MAR, the denominator includes all returns in the performance period. This risk statistic is similar to the downside standard deviation except the sum is restricted to returns less than the MAR instead of the mean.
Downside Standard Deviation: The deviation of returns that fall below the mean return. Although the numerator includes only returns below the mean, the denominator includes all returns in the performance period. This risk statistic is similar to the downside deviation except the sum is restricted to returns less than the mean instead of the minimum acceptable return (MAR).
Effective Maturity: The date of a bond’s most likely redemption, given current market conditions, taking into consideration the optional and mandatory calls, the optional, mandatory and recurring puts, and the stated maturity.
Estimated annual income: The amount of income a particular asset is anticipated to earn over the period indicted. The shares multiplied by the annual income rate.
Gain/loss calculation: If an asset was sold, the difference between the proceeds received from the sale compared to the cost of acquiring the asset. If the value of the proceeds is the higher of the two numbers, then a gain was realized. If the value of th e proceeds is the lower of the two numbers, a loss was incurred. This data is for information purposes only.
Information Ratio: The information ratio compares the average excess return of the portfolio over its associated benchmark divided by the tracking error.
M-Squared: The hypothetical return of the portfolio after it s risk has been adjusted to match a benchmark.
U.S. Bank | Confidential
Definitions of report and statement terms (page 3
of 5)
Market Value: Publicly traded assets are valued using market quotations or valuation methods from financial industry services believed by us to be reliable. Assets, that are not publicly traded, may be reflected at values from other external sources or special valuations prepared by us. Assets for which a current value is not available may be reflected as not valued, at par value, or at a nominal value. Values shown do not necessarily reflect prices at which assets could have been bought or sold. Values are updated based on internal policy and may be updated less frequently than statement generation.
Market Value Over Time: Many factors can impact the portfolio value over time, such as contributions to the account, distributions from the account, the investment of dividends and interest, th e deduction of fees and expenses, and market performance.
Modified Duration to Effective Maturity: A formula that expresses the measurable change in the value of a security in response to a change in interest rates. This version of Modified Duration takes into consideration a “horizon date/price” that is, given curr ent conditions, the most likely redemption date/price using the set of calls/puts, as well as stated maturity.
Modified Duration to Stated Maturity: A formula that expresses the measurable change in the value of a security in response to a change in interest rates. This version of Modified Duration uses stated maturity as the “horizon date/price” and ignores any potential call/put/pre- refunding, even if they are mandatory.
Price/Earnings Ratio (P/E): The P/E ratio of a company is calculated by dividing the price of the company’s stock by its trailing 12-month earnings per share. A high P/E usually indicates that the market is paying a premium for current earnings because it believes in the firm’s ability to grow its earnings. A low P/E indicates the market has less confidence that the company’s earnings will increase. Within a portfolio, P/E is the weighted average of the price/earnings ratios of the stocks in the portfolio.
Qualified Purchaser: Some private placement securities require that investors be Qualified Purchasers in addition to being Accredited Investors. For natural persons, the criteria is generally met when the client (individ ually or jointly) owns at least $5 million in investments. For other entities, such as corporations, partnerships, trusts and em ployee benefit plans, the criteria is met with at least $25 mi llion in investments though there are other eligibility tests that may appl y. See full definition in Section 2(a)(51) of the Investment Company Act of 1940.
R-Squared: Measures the portion of the risk in your portfolio th at can be attributed to the risk in the benchmark.
Realized and Unrealized Gains/Losses: Are calculated for individual tax lots based on the records we have available. Some data may be incomplete or differ from what you are required to report on your tax return. Some data used in these calculations may have beeno b t a i n e d from outside sources and cannot be verified by U.S. Bank. The da ta is intended for informational purposes only and should not be used for tax reporting purposes. Please consult with your tax or legal advisor for questions concerning your personal tax or financial situation.
U.S. Bank | Confidential
Definitions of report and statement terms (page 4
of 5)
Residual Risk: The amount of risk specific to the assets in a portfolio distinct from the market, represented by a benchmark.
Return: An indication of the past performance of your portfolio.
Sharpe Ratio: Measures of risk-adjusted return that calculates the return per unit of risk, where risk is the Standard Deviation of your portfolio. A high Sharpe ratio indicates that the portfolio is benefiting from taking risk.
Sortino Ratio: Intended to differentiate between good and bad volatility. Similar to the Sharpe ratio, except it uses downside deviation for the denominator instead of standard deviation, the use of which doesn't discriminate between up and down volatility.
Spread: The difference between the yields of two bonds with differing credit ratings (most often, a corporate bond with a certain amount of risk is compared to a standard traditionally lower risk Treasury bond). The bond spread will show the additional yield that could be earned from a bond which has a higher risk.
Standard Deviation: A measure of the volatility and risk of your portfolio. A low standard deviation indicates a portfolio with less volatile returns and therefore less inherent risk.
Time-weighted Return: The method used to calculate performance. Time-weighted return calculates period by period returns that negates the effect of external cash flows. Returns for periods of greater than one year are reported as an annualized (annual) rate of return. Returns of less than one year are reported on a cumulative return basis. Cumulative return is the aggregate amount an in vestment has gained or lost over time, independent of the period involved.
Tracking Error: A divergence between the price behavior of a position or a portfolio and the price behavior of a benchmark. This is often in the context of a hedge or mutual fund that did not wo rk as effectively as intended, creating an unexpected profit or loss instead.
Traditional Investments: As used by U.S. Bank, an investment made in equity, fixed income or cash securities, mutual funds or exchange- traded funds (ETFs) where the investor buys at a price with the goal that the investment will go up in value.
Top 10 Holdings: The 10 assets with the highest market values in the account.
Total Portfolio Gross of Fees: Represents all assets included in the calculation of the portfolio, before the deduction of trust and asset management fees, and is inclusive of all applicable third-party security fees and expenses. Details of those fees and expenses are provided in the security’s prospectus or offering documents.
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Definitions of report and statement terms (page 5
of 5)
Total Return: The rate of return that includes the realized and unrealized gains and losses plus income for the measurement period.
Treynor Ratio: Measures the performance of a sector relative to risk by dividing the return of the sector in excess of the risk-free return by the sector's Beta. The higher the Treynor ratio, the better the return relative to risk.
Turnover Percent: Indicates how frequently asset are bought and sold within a portfolio.
Turnover Ratio: The percentage of a mutual fund’s or other investment vehicle' s holdings that have been "turned over" or replaced with other holdings in a given year.
Unrealized gain (loss) — The difference between the current market value (at th e end of the statement period) and the cost to acquire the asset. If the current market value is higher than the cost, a gain is reflected. If the current market value is lower than the cost paid, a loss is reflected. This data is for information purposes only.
Upside Capture: The upside capture ratio reflects how a portfolio compares to the selected model benchmark during periods when the benchmark is up. An upside capture ratio of 1.15 (or 115 percent) means the portfolio has historically beat the benchmark by 15 percent during up markets.
Yield: The annual rate of return on an investment, expressed as a percentage. For bonds, it is the coupon rate divided by the market price.
For stocks, it is the annual dividend divided by the market price.
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Frequently used indexes (page 1 of 5)
Bloomberg Barclays 1-3 year U.S. Treasury Index: Measures the performance of the U.S. government bond market and includes public obligations of the U.S. Treasury with a maturity between one year and up to (but not including) three years.
Bloomberg Barclays 1-5 year U.S. Treasury Index: Includes all publicly issued, U.S. Treasury securities that have a remaining maturity of greater than or equal to one year and less than five years, are rated investment grade and have $250 million or more of outstanding face value.
The Bloomberg Barclays 1-5 year Municipal Index: Measures the performance of municipal bonds with time to maturity of more than one year and less than five years.
Bloomberg Barclays 7-year Municipal Index: Includes municipal bonds with a minimum credit rating of Baa that have been issued as part of a transaction of at least $50 million, have a maturity value of at least $5 million and a maturity range of four to six years.
Bloomberg Barclays Global Aggregate Index ex-U.S. Index: Measure of global investment grade debt from 24 local currency markets. This multi-currency benchmark includes Treasury, government-related, corporate and securitized fixed-rate bonds from both developed and emerging markets issuers.
Bloomberg Barclays Global Treasury ex-U.S. Index: Includes government bonds issued by investment-grade counties outside the United States, in local currencies, that have a remaining maturity of one year or more and are rated investment grade.
Bloomberg Barclays High Yield Municipal Bond Index: An unmanaged index made up of bonds that are non-investment grade, unrated or below Ba1 bonds.
Bloomberg Barclays Intermediate Aggregate Index: Consists of one- to 10-year governments, one- to 10-year corporate bonds, all mortgages and all asset-backed securities within the Aggregate Index.
Bloomberg Barclays Mortgage-Backed Securities Index: Covers agency mortgage-backed pass-through securities (both fixed-rate and hybrid adjustable-rate mortgages) issued by Ginnie Mae (GNMA), Fannie Mae (FNMA), and Freddie Mac (FHLMC).
Bloomberg Barclays U.S. Aggregate Bond Index: Measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasuries, government-related and corporate securities, mortgage-backed securities, asset-backed securities and commercial mortgage-backed securities.
Bloomberg Barclays U.S. Corporate Bond Index: Measures the investment grade, fixed-rate, taxable corporate bond market and includes U.S. dollar-denominated securities publicly issued by U.S. and non-U.S. industrial, utility and financial issuers.
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Frequently used indexes (page 2 of 5)
Bloomberg Barclays U.S. Corporate High Yield Bond Index: Measures the U.S. dollar denominated, high yield, fixed-rate corporate bond market.
Bloomberg Barclays U.S. Municipal Bond Index: Measures the investment grade, U.S. dollar-denominated, fixed tax-exempt bond market. The index includes state and local general obligation, revenue, insured and pre-refunded bonds.
Bloomberg Barclays U.S. Treasury Index: Measures U.S. dollar-denominated, fixed-rate, nominal debt issued by the U.S. Treasury.
Bloomberg Barclays U.S. Treasury Inflation-Protected Securities (TIPS) Index: An unmanaged index includes all publicly issued, U.S. TIPS that have at least one year remaining to maturity, are rated investment grade, and have $250 million or more of outstanding facev a l u e .
Cambridge U.S. Private Equity Index: This index is based on returns data compiled for U.S. private equity funds (including buyout, growth equity and mezzanine funds) that represent the majority of institutional capital raised by private equity partnerships formed since 1986. Returns may be delayed by up to six months. Quarterly performance is prorated based on the cube root for the months of the quarter.
Citigroup 3-Month Treasury Bills: An unmanaged index and represents monthly return equivalents of yield averages of the last three-month Treasury Bill issues.
Citigroup 6-Month Treasury Bills: An unmanaged index and represents monthly return equivalents of yield averages of the last six-month Treasury Bill issues.
Credit Suisse Leverage Loan Index: Represents tradable, senior-secured, U.S. dollar-denominated non-investment grade loans.
Dow Jones Industrial Average (DJIA): The price-weighted average of 30 significant U.S. stocks traded on the New York Stock Exchange and NASDAQ. The DJIA is the oldest and single most watched index in the world.
Dow Jones Select REIT Index: Measures the performance of publicly traded REITs and REIT-like securities in the U.S. and is a proxy for direct real estate investment, in part by excluding companies whose performance may be driven by factors other than the value of real estate.
HFRI Indices: The Hedge Fund Research, Inc. (HFRI) indexes are a series of benchmarks designed to reflect hedge fund industry performance by constructing composites of constituent funds, as reported by the hedge fund managers listed within the HFR Database.
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Frequently used indexes (page 3 of 5)
HFRI Equity Hedge Total Index: Uses the HFR (Hedge Fund Research) database and consists only of equity hedge funds with a minimum of $50 million assets under management or a 12-month track record and that reported assets in U.S. dollars.
HFRI Relative Value Fixed Income Corporate Index: Uses the HFR (Hedge Fund Research) database and consists of only relative value fixed income corporate funds with a minimum of $50 million assets under management or a 12-month track record and that reported assets in U.S. dollars.
ICE BofAML 1-3 Year Corporate Index: Tracks U.S. dollar-denominated investment grade public debt issued in the U.S. bond market with maturities of one to three years.
ICE BofAML 1-5 Year Corporate and Government Index: Tracks the performance of short-term U.S. investment grade government and corporate securities with maturities between one and five years.
ICE BofAML U.S. 7-10 Year Index: Tracks the performance of U.S. dollar denominated investment grade rated corporate debt publicly issued in the U.S. domestic market and includes all securities with a remaining term to maturity of greater than or equal to seven years and less than 10 years.
ICE BofAML Global Broad Market Index: Tracks the performance of investment grade public debt issued in the major domestic and Eurobond markets, including global bonds.
ICE BofAML U.S. High Yield Master II Index: Commonly used benchmark index for high yield corporate bonds and measures the broad high yield market.
J.P. Morgan Emerging Markets Bond Index Global (EMBI Global): Tracks total returns for traded external debt instruments in the emerging markets.
London Interbank Offered Rate (LIBOR) 3-months: The interest rate offered by a specific group of London banks for U.S. dollar deposits with a three-month maturity.
London Interbank Offered Rate (LIBOR) 9-months: The interest rate offered by a specific group of London banks for U.S. dollar deposits with a nine-month maturity.
MSCI All Country World Index (ACWI): Designed to measure the equity market performance of developed and emerging markets.
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Frequently used indexes (page 4 of 5)
Russell 2000 Value Index: Measures companies in the Russell 2000 Index having lower price-to-book ratios and lower forecasted growth values. The Russell 2000 Index includes the 2,000 firms fr om the Russell 3000 Index with the smallest market capitalizations.
Russell 3000 Index: Measures the performance of the 3,000 largest U.S. securities based on total market capitalization.
Russell Midcap Index: Measures the 800 smallest companies in the Russell 3000 Index.
Russell Midcap Growth Index: Measures companies in the Russell Midcap Index having higher price-to-book ratios and higher forecasted growth values.
Russell Midcap Value Index: Measures companies in the Russell Midcap Index having lower price-to-book ratios and lower forecasted growth values.
MSCI All County World ex-U.S. Index (ACWI, excluding United States): Tracks the performance of stocks representing developed and emerging markets around the world that collectively comprise most foreign stock markets. U.S. stocks are excluded from the index.
MSCI EAFE Index: Includes approximately 1,000 companies representing the stock markets of 21 countries in Europe, Australasia and the Far East.
MSCI Emerging Markets (EM) Index: Designed to measure equity market performance in global emerging markets.
MSCI World Index: Tracks equity market performance of developed markets through individual country indices.
NAREIT Index: Includes REITs (Real Estate Investment Trusts) listed on the New York Stock Exchange, NASDAQ and American Stock Exchange.
NASDAQ Composite Index: A market capitalization-weighted average of roughly 5,000 stocks that are electronically traded in the NASDAQ market.
NCREIF Property Index (NPI): Measures the investment performance of a very large pool of individual commercial real estate properties acquired in the private market for investment purposes only.
Russell 1000 Index: Measures the performance of the 1,000 largest companies in the Russell 3000 Index and is representative of the U.S. large capitalization securities market.
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Frequently used indexes (page 5 of 5)
Russell 1000 Growth Index: Measures companies in the Russell 1000 Index with higher price-to-book ratios and higher forecasted growth values. It includes the largest 1,000 firms in the Russell 3000 Index.
Russell 1000 Value Index: Measures companies in the Russell 1000 Index with lower price-to-book ratios and lower forecasted growth values. It includes the largest 1,000 firms in the Russell 3000 Index.
Russell 2000 Index: Measures the performance of the 2,000 smallest companies in the Russell 3000 Index and is representative of the U.S. small capitalization securities market.
Russell 2000 Growth Index: Measures companies in the Russell 2000 Index having higher price-to-book ratios and higher forecasted growth values. and is representative of U.S. securities exhibiting growth characteristics. The Russell 2000 Index in cludes the 2,000 firms from the Russell 3000 Index with the smallest market capitalizations.
S&P 500 Index: Consists of 500 widely traded stocks that are considered to represent the performance of the U.S. stock market.
S&P Global ex-U.S. Property Index: Measures the investable universe of publicly traded property companies domiciled in developed and emerging markets excluding the United States. The companies included are engaged in real estate related activities such as property ownership, management, development, rental and investment.
S&P GSCI: A composite index of commodity sector returns, representing an unleveraged, long-only investment in commodity futures that is broadly diversified across the spectrum of commodities.
S&P/Case-Shiller Home Price Indexes: A group of indexes that track changes in home prices throughout the United States. Case- Shiller produces indexes representing certain metropolitan statistical areas (MSA) as well as a national index.
Swiss Re Global Cat Bond Total Return Index: Tracks the aggregate performance of all U.S. dollar-denominated euros and Japanese yen-denominated catastrophe bonds, capturing all ratings, perils and triggers.
U.S. Dollar Index: Indicates the general international value of the U.S. dollar by averaging the exchange rates between the U.S. dollar and six major world currencies.
Wilshire 5000 Index: Composed of more than 6,700 publicly-traded U.S. companies and is designed to track the overall performance of the American stock markets.