1 California Employers’ Retiree Benefit Trust Eastern Municipal Water District Annual Update August 19, 2015

2 Annual Update for Eastern Municipal Water District Discussion overview Employer summaries – OPEB valuation – CERBT account Investment management – Asset allocation – Investment performance Looking ahead – ASOP & GASB Looking back – CERBT

3 Employer summaries

4 Annual Update for Eastern Municipal Water District Valuation summary Valuation dated June 30, 2013 – Joseph D’Onofrio, Bartel Associates, LLC Actuarial Accrued Liability (AAL)*$89,538,000 Present Value of Benefits (PVB)*$118,137,000 Annual Required Contribution (ARC)**$8,716,000 Normal Cost**$3,291,000 Amortization of Unfunded Actuarial Accrued Liability**$5,425,000 Pay-as-you-go**$3,082,000 Implicit Rate Subsidy**$137,000 Total Covered Lives (Active & Retiree)*971 Asset Allocation Strategy SelectionStrategy 1 Discount Rate6.85% *Amounts as of Valuation date, ** Amounts for FY

5 Annual Update for Eastern Municipal Water District Contribution summary by fiscal year *FY is through June 30, 2015

6 Annual Update for Eastern Municipal Water District Account summary Account summary as of June 30, 2015 Initial contribution (7/24/2012)$5,740,000 Additional contributions$14,965,666 Disbursements($8,861,577) CERBT expenses($39,889) Investment earnings$2,400,137 Total assets$14,204,337 Average annualized internal rate of return (7/24/2012-6/30/2015) 8.04% As of the District’s prior Annual Update through June 30, 2014, the Average Annualized Internal ROR was 16.34% Agreement effective date: 6/12/2012

7 Annual Update for Eastern Municipal Water District Funded status comparison Fiscal Year EndingEstimated AAL* Market Value of Assets Funded Ratio 6/30/2014$95,802,630$8,444, % 6/30/2015$102,496,240$17,20, % * Estimated AAL represents roll forward projections of AAL to fiscal year end

8 Investment management

9 Annual Update for Eastern Municipal Water District CERBT asset allocation strategies Strategy 1Strategy 2Strategy 3 Expected Long Term Rate of Return (General Inflation Rate Assumption of 2.75%) 7.28%6.73%6.12% Standard Deviation of Expected Returns 11.74%9.32%7.14% All CERBT asset allocation strategies share the same public market asset classes –Allocation strategies differ only to the extent to which they participate in each of the asset classes

10 Annual Update for Eastern Municipal Water District CERBT asset class target allocations Asset Classification Investment Management Strategy 1Strategy 2Strategy 3 Global Equity Passive MSCI All Country World Index 57%40%24% Fixed Income Active Barclays Capital Long Liability Index 27%39% Global Real Estate (REITs) Passive FTSE EPRA/NAREIT Developed Liquid Index 8% Treasury Inflation Protected Securities (TIPS) Active Barclays Capital Global Real: US TIPS Index 5%10%26% Commodities Active S&P GSCI Total Return Index 3%

11 Annual Update for Eastern Municipal Water District Funded Status by Asset Allocation Strategy * Certain agencies excluded As of June 30, 2015

12 Annual Update for Eastern Municipal Water District CERBT investment results – time weighted Periods Ended June 30, 2015 Time weighted return reports the performance of the investment vehicle, not of the employer assets. Returns are gross. Historical performance is not necessarily indicative of actual future investment performance or of future total program cost. Current and future performance may be lower or higher than the historical performance data reported here. Investment return and principal value may fluctuate so that your investment, when redeemed, may be worth more or less than the original cost. The value of an employer’s CERBT fund shares will go up and down based on the performance of the underlying funds in which the assets are invested. The value of the underlying funds’ assets will, in turn, fluctuate based on the performance and other factors generally affecting the securities market. FundAssets1 Month3 MonthsFYTD1 Year3 Years5 YearsITD CERBT Strategy 1 (Inception June 1, 2007 ) $3,626,191, %-0.93%-0.11% 9.79%10.62%4.19% Benchmark-2.23%-1.07%-0.57% 9.43%10.46%3.74% CERBT Strategy 2 (Inception October 1, 2011) $641,802, %-1.52%-0.34% 7.84%-9.17% Benchmark-2.16%-1.65%-0.73% 7.46%-8.94% CERBT Strategy 3 (Inception January 1, 2012) $167,259, %-1.81%-0.03% 5.88%-6.49% Benchmark-1.96%-1.91%-0.57% 5.35%-6.13%

13 Annual Update for Eastern Municipal Water District Total service cost Total service cost of participation is 10 basis points of assets under management – Consists of administrative and investment management expenses borne by CalPERS and paid to State Street Global Advisors – CERBT is a self-funded trust – Employer account charged daily – CERBT does not profit – Rate can be changed without prior notice and may be higher or lower in the future

14 Looking ahead

15 Annual Update for Eastern Municipal Water District Looking ahead Employers will report the Net OPEB Liability on their financials – For many, this will be the largest reported liability Measurement date is detached from actuarial valuation date – Adds more flexibility for employers to deal with actuary’s workload – Triennial valuations will not be allowed The ARC is no longer relevant for accounting purposes GASB 74 & 75 overview:

16 Annual Update for Eastern Municipal Water District Looking ahead Annual expenses will be based on the change in Net Liability between Measurement Dates Amortization periods likely to be substantially shorter – More volatile in expenses Significant increase in Note Disclosures and Required Supplementary Information – Ultimately 10 years of historical reporting GASB 74 & 75 overview:

17 Annual Update for Eastern Municipal Water District Looking ahead Effective dates for implementation GASB 74 & 75 overview: Employer Fiscal Year EndEffective Dates December12/31/2018 March03/31/2019 June06/30/2018 September09/30/2018

18 Annual Update for Eastern Municipal Water District Looking ahead Implicit Subsidy may be recognized by employers due to recent changes in the Actuarial Standards of Practice – Effective for actuarial work after March 31, 2015 – Provides additional guidance concerning OPEB programs participating in a pooled health plan (Community Rated Plans) – May result in an increase in OPEB Liability; significant increase for some employers Actuarial Standards of Practice (ASOP) No. 6

19 Annual Update for Eastern Municipal Water District Cost-sharing of OPEB Employee shared contributions must be mandatory and uniform – May vary by bargaining unit only No voluntary or elective contributions No one-time irrevocable elections Assets contributed to the CERBT belong to the employer – Employees, former employees, retirees and dependents have no reversion rights Conditions that may allow for employee sharing of employer OPEB costs in an IRC Section 115 trust fund

20 Annual Update for Eastern Municipal Water District Submission of 2015 OPEB Cost Report To comply with GASB 57 the measurement date of your current OPEB cost report must be June 30, 2015 (or July 1, 2015) Documents Required for OPEB Cost Report Renewal: – Actuarial Valuation Report or AMM Report – Summary of Actuarial Information – Certification of Actuarial Information (Valuation), or Affirmation of OPEB Cost Analysis Report (AMM) – Certification of Funding Policy Please provide CERBT with renewal OPEB documents as soon as possible

21 Looking back

22 Annual Update for Eastern Municipal Water District CERBT FY highlights 462 – Total CERBT contracts $594 million – Net contributions during the FY $4.5 billion – FY-end assets under management 15.1% – Growth of trust assets during the FY CERBT fee rate decreased by three basis points In FY the CERBT experienced a number of significant milestones

23 Annual Update for Eastern Municipal Water District CERBT employers cumulative growth As of June 30, 2015

24 Annual Update for Eastern Municipal Water District CERBT employer cumulative net contributions * Accruals not included in FY 14/15 As of June 30, 2015

25 Annual Update for Eastern Municipal Water District CERBT cumulative assets under management * Accruals not included in FY 14/15 As of June 30, 2015

26 Annual Update for Eastern Municipal Water District CERBT employers under contract State of California 118 Cities or Towns 14 Counties 39 Schools 20 Courts 270 Special Districts and other Public Agencies – (80 Water, 32 Sanitation, 28 Fire, 21 Transportation) 462 Total As of June 30, 2015

27 Annual Update for Eastern Municipal Water District Questions? Where to get information? John Swedensky – (916) (Desk) – (916) (Cell) – Dave Saavedra – (916) (Desk) – (916) (Cell) – – Matt Goss – (916) (Desk) – (916) (Cell) – Alisa Perry – (916) (Desk) – (916) (Cell) – CERBT Website –