T. Rowe Price Presentation - Granicus

T. Rowe Price Presentation - Granicus

Presentation To: J. David Wagner, CFA Portfolio Manager Imperial County Employees’ Retirement System Michele Ward, CFA Portfolio Specialist US Sma...

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Presentation To:

J. David Wagner, CFA Portfolio Manager

Imperial County Employees’ Retirement System

Michele Ward, CFA Portfolio Specialist

US Small-Cap Value I Equity Strategy 20 May 2015

John D. Plowright, CFA Institutional Client Service, North America 415-772-1117 [email protected]

Australia Level 31 120 Collins Street Melbourne VIC 3000 Australia +61.03.9225.5434

Australia Level 50, Governor Phillip Tower 1 Farrer Place, Suite 50B Sydney NSW 2000 Australia +61.2.8667.5700

Canada Brookfield Place - TD Canada Trust Tower 161 Bay Street, Suite 2700 Toronto, ON M5J 2S1 Canada +1.416.572.2580

Denmark Tuborg Havnevej 19 DK-2900 Hellerup Denmark +45.33.36.05.00

Hong Kong 1 Connaught Place Room 2101-2120 Jardine House, 21st Floor Central Hong Kong +852.2536.7800

Italy Via Torino 2 20123, Milan Italy +39.02.72546615

Japan GranTokyo South Tower 7F 9-2, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-6607, Japan +81.3.6758.3800

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the Netherlands Strawinskylaan 1047 1077 XX Amsterdam the Netherlands +31.20.333.62.00

Singapore 501 Orchard Road 10-02 Wheelock Place Singapore 238880 +65.6836.0098

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United Arab Emirates Dubai International Financial Centre The Gate, Level 15, Office 24 PO Box 482023 Dubai United Arab Emirates +971.4.4019266

United Kingdom 60 Queen Victoria Street London, EC4N 4TZ United Kingdom +44.20.7651.8200

United States 100 East Pratt Street Baltimore, MD 21202 United States +1.410.345.2000

Important Information This document, including any statements, information, data and content contained therein and any materials, information, images, links, sounds, graphics or video provided in conjunction with this document (collectively “Materials”) are being furnished by T. Rowe Price for your general informational purposes only. The Materials are not intended for use by persons in jurisdictions which prohibit or restrict the distribution of the Materials and in certain countries these Materials are only provided upon specific request. It is not intended for distribution to retail investors in any jurisdiction. Under no circumstances should the Materials, in whole or in part, be copied, redistributed or shown to any person without consent from T. Rowe Price. The Materials do not constitute a distribution, an offer, an invitation, recommendation or solicitation to sell or buy any securities in any jurisdiction. The Materials have not been reviewed by any regulatory authority in any jurisdiction. The Materials do not constitute investment advice and should not be relied upon. Investors should seek independent legal and financial advice, including advice as to tax consequences, before making any investment decision. Issued in Australia by T. Rowe Price International Ltd (“TRPIL”) (ABN 84 104 852 191), Level 50, Governor Phillip Tower, 1 Farrer Place, Suite 50B, Sydney, NSW 2000, Australia. TRPIL is exempt from the requirement to hold an Australian Financial Services license (“AFSL”) in respect of the financial services it provides in Australia. TRPIL is authorized and regulated by the UK Financial Conduct Authority (the “FCA”) under UK laws, which differ from Australian laws. For Wholesale Clients only. Issued in Canada by T. Rowe Price (Canada), Inc. T. Rowe Price (Canada), Inc. enters into written delegation agreements with affiliates to provide investment management services. T. Rowe Price (Canada), Inc. is not registered to provide investment management business in all Canadian provinces. Our investment management services are only available for use by Accredited Investors as defined under National Instrument 45-106 in those provinces where we are able to provide such services. Issued in the Dubai International Financial Centre by TRPIL. This material is communicated on behalf of TRPIL by the TRPIL Representative Office which is regulated by the Dubai Financial Services Authority. For Professional Clients only. Issued in the EEA by T. Rowe Price International Limited (“TRPIL”), 60 Queen Victoria Street, London EC4N 4TZ which is authorized and regulated by the Financial Conduct Authority. For Qualified Investors only. Issued in Hong Kong by T. Rowe Price Hong Kong Limited (“TRPHK”), 21/F, Jardine House, 1 Connaught Place, Central, Hong Kong. TRPHK is licensed and regulated by the Securities & Futures Commission. For Professional Investors only. Issued in Japan by T. Rowe Price International Ltd, Tokyo Branch (“TRPILTB”) (KLFB Registration No. 445 (Financial Instruments Service Provider), JIAA Membership No. 011-01162), located at GranTokyo South Tower 7F, 9-2, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-6607. This material is intended for use by Professional Investors only and may not be disseminated without the prior approval of TRPILTB. Issued in New Zealand by T. Rowe Price International Ltd (“TRPIL”). TRPIL is authorized and regulated by the UK Financial Conduct Authority under UK laws, which differ from New Zealand laws. This material is intended only for use by persons who are not members of the public, by virtue of section 3(2)(a)(ii) of the Securities Act 1978. Issued in Singapore by T. Rowe Price Singapore Private Limited (“TRP Singapore”), No. 501 Orchard Rd, #10-02 Wheelock Place, Singapore 238880. TRP Singapore is licensed and regulated by the Monetary Authority of Singapore. For Institutional and Accredited Investors only. Issued in Switzerland by T. Rowe Price (Switzerland) GmbH (“TRPSWISS”), Talstrasse 65, 6th Floor, 8001 Zurich, Switzerland. For Qualified Investors only. Issued in the USA by T. Rowe Price Associates, Inc., 100 East Pratt Street, Baltimore, MD, 21202, which is regulated by the U.S. Securities and Exchange Commission. For Institutional Investors only. T. ROWE PRICE, INVEST WITH CONFIDENCE and the Bighorn Sheep design are, collectively and/or apart, trademarks or registered trademarks of T. Rowe Price Group, Inc. in the United States, European Union, and other countries. This material is intended for use only in select countries.

T. Rowe Price — Presenters

Portfolio Management J. David Wagner, CFA Vice President — Portfolio Manager • 16 years of investment experience; • 15 years with T. Rowe Price.

Portfolio Specialist Michele Ward, CFA Vice President — Portfolio Specialist: U.S. Equities • 31 years investment of experience; • <1 year with T. Rowe Price.

Client Service John D. Plowright, CFA Vice President — Institutional Client Service, North America • 23 years of investment experience; • 10 years with T. Rowe Price.

1

Table of Contents

1

Overview

2

Investment Team and Process

3

Performance Review

4

Portfolio Review

5

Market Environment

6

Exhibits • Fee Schedule • Total Return Performance • GIPS® Disclosure • Monitoring and Risk Management Elements • Your Institutional Team • Biographical Backgrounds

95770 (8/2010)

2

Overview

3

T. Rowe Price Global Investment Platform

43

166 105

25

LONDON 6

BALTIMORE

17

4

TOKYO

HONG KONG 4 SINGAPORE

7 SYDNEY

As of 31 March 2015

T. Rowe Price Investment Office

Equity Teams1

Fixed Income Teams1

Trading Desk

Proprietary fundamental research is the key driver of our value-added active management • Over 400 investment professionals and over 200 analysts globally • Analysts and sector specialists are evaluated on near- and long-term performance and on their record of communicating ideas affecting and impacting client portfolios • Active analyst recruitment program in all regions

4

1

Includes global research professionals, portfolio managers, economists and traders that are directly involved with the investment process.

6

Perspectives and Research As of 31 March 2015

The 2015 T. Rowe Price Investment Symposium will be held in Baltimore from September 30 - October 2, 2015. At the Symposium, you will gain timely insights into the global investment environment, engage with our seasoned investment professionals, and hear from global macro, economic and cyber security experts. We hope you can join us for this unique exchange of ideas held exclusively for our clients.

Perspectives Highlight – International Equities: Combining Diversified and Concentrated Strategies May Improve Performance Despite an uncertain global economic and political environment, developed international equities appear attractively priced relative to the U.S. market and their own long-term valuation averages. However, careful analysis is required to identify the traits historically associated with active management success. By combining diversified strategies and quality-oriented concentrated strategies, investors may be able to improve absolute and risk-adjusted returns. For additional insights, visit troweprice.com/institutional. Recent pieces include: – Traveling the Frontier Markets: Sri Lanka – U.S. Equities: Steady As She Goes!

PRICE PERSPECTIVE April 2015

In-depth analysis and insights to inform your decision-making.

International Equity. COMBINING DIVERSIFIED AND CONCENTRATED STRATEGIES MAY IMPROVE PERFORMANCE. EXECUTIVE SUMMARY

Som Priestley Strategic Resources Group

Q

Concerns over slow global growth and relatively high equity market valuations have left many institutional investors seeking strategies to help them achieve their return objectives. An area we believe warrants consideration is international equity, where valuations remain below long-term averages, corporate earnings still have room to recover, and a commitment to more aggressive economic stimulus in Europe and Japan—as well as other policy adjustments—may promote economic growth and support asset prices.

Q

Continued international uncertainty demands a prudent investment approach. Investors should be aware of the diverse range of active investment strategies in the international equity space and carefully analyze the unique traits of each strategy before investing.

Q

In this paper, we organize the universe of active international equity strategies into two broad cohorts: diversified and concentrated. We then analyze both groups to understand the characteristics that have tended to be associated with investment success.

Q

We find that diversified international equity strategies have shown the ability to generate higher risk-adjusted returns over time and, on average, have tended to follow a more stable investment approach—providing the appropriate ballast for an international equity allocation.

Q

Concentrated strategies have shown broader cross-sectional dispersion in returns but, on average, have provided higher absolute returns1. Managers of concentrated strategies have also shown the ability to invest successfully across investment styles. A long-term quality bias appears to be especially helpful for these managers to support durable underlying performance.

Q

International equity allocations that invest across both diversified and concentrated strategies historically have provided better absolute and risk-adjusted returns over the long term1.

Developed international equity markets have presented a challenging environment for investors in recent years. Stagnant growth, deflation fears, and heavy debt burdens in the eurozone’s peripheral countries prompted the European Central Bank to announce a new round of aggressive stimulus

measures in early 2015. In Japan, GDP growth turned negative during the second and third quarters of 2014, leading the Bank of Japan to escalate its own quantitative easing program. Due to this uncertainty, we believe international equities offer potential

1

– EM Corporate Debt: A Bubble of Growing Opportunity

Certain of the above materials were prepared by T. Rowe Price Associates, Inc., a Registered Investment Advisor. T. Rowe Price Associates, Inc. and T. Rowe Price Investment Services, Inc. are affiliated companies.

Source: eVestment for source data; final data in Figure 7, page 5, for absolute returns and Figure 11, page 6, risk-adjusted returns calculated using our end note methodology.

8 5

Client Objective Imperial County Employees’ Retirement System Total Assets = $27,935,773 Inception Date: 1 December 1995 As of 31 March 2015

Objective • Invest in a broadly diversified portfolio of small-cap value stocks with the potential for long-term capital appreciation and below market risk. Mandate • US Small-Cap Value I Equity Strategy: Separately Managed Portfolio Strategy Assets as of 31 March 2015: $12.3 Billion1 Benchmark • Russell 2000 Value Index

1

The combined U.S. small-cap value assets of the T. Rowe Price group of companies. Russell Investment Group is the source and owner of the trademarks, service marks, and copyrights related to the Russell indexes. Russell® is a trademark of Russell Investment Group.

6

Assets Under Management US Small-Cap Value Equity Strategy: $12.3 Billion As of 31 March 2015 Figures Shown in U.S. Dollars

Institutional Accounts and Other1 27.7%

Small-Cap Value Fund 72.3%

1

Other represents amounts invested in the strategy through an asset allocation portfolio. Strategy assets under management for the T. Rowe Price Mutual Funds and Common Trust Funds are calculated based on the closing price of the security in its respective market and may differ from the net asset value of the fund.

44 7

Investment Team and Process

8

Investment Team1 As of 31 March 2015

Small-Cap Value I Equity Strategy Portfolio Management Team Stability | Depth | Collaboration

J. David Wagner, CFA Lead Portfolio Manager US Small-Cap Value I

Gregory A. McCrickard, CFA Portfolio Manager Small-Cap Stock Fund

Preston G. Athey, CFA, CIC Portfolio Manager Equity Strategy

Equity Strategy

Michele A. Ward, CFA Portfolio Specialist US Small-Cap Value I

Brian C. Dausch, CFA Portfolio Specialist US Small-Cap Value I

Equity Strategy

Equity Strategy

• 16 years of investment experience

• 30 years of investment experience

• 37 years of investment experience

• 31 years of investment experience

• 17 years of investment experience

• 15 years with T. Rowe Price.

• 28 years with T. Rowe Price.

• 36 years with T. Rowe Price.

• <1 year with T. Rowe Price.

• 16 years with T. Rowe Price.

- B.A., College of William and Mary

- B.A., University of Virginia

- B.A., Yale University

- B.A., Yale University

- B.S., University of Delaware

- M.B.A., Tuck School of Business, Dartmouth College

- M.B.A., Stanford University

- M.B.A., Yale School of Management

- M.B.A., The Darden School, University of Virginia

Equity Research Team 140 Research Analysts | Industry Specialists1

Extensive collaboration among investment professionals enhances idea generation. 9

1

11 sector portfolio managers, 82 research analysts, 34 associate research analysts, 6 quantitative analysts, and 7 specialty analysts as of 31 March 2015.

Investment Team As of 31 March 2015

US Small-Cap Value I Equity Strategy Investment Advisory Committee Stability | Depth | Collaboration Years with T. Rowe Price

Years of Experience

14

14

Small- and Mid-Cap Financials Analyst

9

10

Nina P. Jones, CPA

Small- and Mid-Cap Real Estate Analyst

7

7

Curt J. Organt, CFA

Small- and Mid-Cap Generalist; Industrials Analyst

19

23

Timothy E. Parker, CFA

Small- and Mid-Cap Natural Resources Portfolio Manager

13

17

Name

Role

Frank M. Alonso

Portfolio Manager, US Smaller Companies Core Equity Strategy Associate Portfolio Manager, US Small-Cap Core Strategy

Christopher T. Fortune, CFA

Provide industry perspective and stock ideas in areas most meaningful for this strategy.

10

Equity Research Team As of 1 April 2015

HEAD OF EQUITY

DIRECTORS OF EQUITY RESEARCH

William Stromberg, CFA

Jason Polun, CFA

BAL

North America

Eric Veiel, CFA North America

HEALTH CARE

Ziad Bakri, CFA, MD U.S. Biotech

Melissa Gallagher, Ph.D. O.U.S. Pharma

Adam Poussard, CFA

INDUSTRIALS

BAL LON BAL

Peter Bates, CFA1 U.S. Conglomerates

Andrew Davis U.S. Transports

Ryan Ferro U.S. Smid Industrials

U.S. Services & Equipment

Joel Grant

Kyle Rasbach, Ph.D., Pharm.D.

U.S. Autos

U.S. Pharma/Biotech

Taymour Tamaddon, CFA1 U.S. Pharma/Biotech

Jon Wood, CFA

BAL BAL BAL

Curt Organt, CFA

Jeneiv Shah

Rouven Wool-Lewis, Ph.D.

European Industrials

BAL

U.S. Services & Hospitals

BUSINESS SERVICES

Michael Flanagan, CFA BAL U.S. Bus. Serv./Industrials

Clark Shields

BAL

U.S. Trans. Processors/Other

Rhett Hunter

BAL

Tobias Mueller, CFA

Eunbin Song, CFA Asia Ex Japan Auto/C&E

U.S. Hardware/Software

Japan Generalist

BAL

Joshua Spencer, CFA

TOK

Alan Tu

BAL

Thomas Watson, CFA

LON

Alison Yip

HKG

1

U.S. Semi./Equipment U.S. Software U.S. Software Asia Ex-Japan Hardware

CONSUMER/RETAIL

BAL

Paulina Amieva

LON

Ira Carnahan, CFA

Jim Friedland U.S. Advertising/Internet

Jacqueline Liu Asia Ex-Japan Internet

Corey Shull, CFA U.S. Media/Internet

Justin White, CFA U.S. Infra./Distribution

Christopher Whitehouse Europe Media/Telecom

Wenli Zheng Asia Ex-Japan Internet

Latin America Generalist

Eric DeVilbiss, CFA

BAL

Barry Henderson

BAL

Michael Jacobs

HKG

Sridhar Nishtala

Europe Consumer

Asia Ex-Japan Staples

Robert Quinn, Jr. U.S. Consumer Staples

BAL

Sebastian Schrott

BAL

Amit Seth

HKG

Vivian Si

European Luxury/Retail U.S. Brands/Footwear

Christopher Fortune, CFA

BAL

LON BAL TOK SGP BAL LON BAL BAL

U.S. Mass Merch. / Apparel

BAL

EMEA Banks

BAL

U.S. Hard Goods/Gaming Japan Retail/Leisure

FINANCIAL SERVICES

Hari Balkrishna

U.S. Restaurants/Agriculture

BAL

North America

Malik Asif

BAL

U.S. Consumer Discretionary

Amanda Hall, CFA

U.S. Conglomerates/Content

Paul Greene1

EMEA Generalist/Consumer

BAL

MEDIA/TELECOM

Andrew Davis

BAL

Viral Patel Australia

Europe Banks & Autos

Haider Ali

LON

Sheena Barbosa, CFA HKG

BAL

U.S. Small Cap Banks

BAL

Jon Friar U.S. Banks/Payment

TOK

Tetsuji Inoue, CPA Japan Banks/REITs

BAL

Nina Jones, CPA1 U.S. Real Estate

Yoichiro Kai, CMA Asia Banks/Insurance

SGP BAL

Gregory Locraft, Jr. U.S. P&C Insurance

BAL

Ian McDonald, CFA U.S. Exchanges/Life Ins.

Jihong Min Southeast Asia Banks

SGP BAL

Preeta Ragavan U.S. Real Estate

Frederick Rizzo, CFA Europe Banks

LON BAL

Matt Snowling, CFA U.S. Asset Managers/ Brokers 1

Gabriel Solomon LON

U.S. Money Center/Insur.

HKG

Europe Insur./Financials

Zenon Voyiatzis

NATURAL RESOURCES

LON

BAL

LON

Asia Ex-Japan Oil & Gas

Baltimore London Sydney Singapore Hong Kong Tokyo

HKG

Asia Ex-Japan Utilities/Infra.

Ryan Burgess, CFA U.S. Chemicals/Utilities

Chris Driessen Metals & Mining 1

Shawn Driscoll U.S. E&P

Ryan Hedrick, CFA U.S. Coal/Utilities

Shinwoo Kim U.S. Energy Services

Ryan Martyn 1

Heather McPherson U.S. Forest Products

Chris O’Neill U.S. E&P

Timothy Parker, CFA1 U.S. E&P

Rick de los Reyes1 Metals & Mining

Thomas Shelmerdine

BAL

Laurent Del Grande

BAL

Vishnu Gopal

BAL

Ben Griffiths, CFA

SYD

Randal Jenneke1

BAL

Jai Kapadia

BAL

Aden Lau

BAL

Mark Lawrence, CFA

BAL BAL SYD

LON

European Chemicals/Indus. U.S. Refining/Pipelines

Latin America

Archibald Ciganer, CFA TOK

Australian Metals & Mining

John Sherman

LON

Martin Baylac

BAL

Energy Majors

U.S. Equip. & Services/ Waste

LON

EMEA

Simon Cheng, CFA

Craig Pennington, CFA LON Vivek Rajeswaran

REGIONAL GENERALISTS

Ulle Adamson, CFA1

BAL

Australia Energy/Industrials

John Williams, CFA

BAL LON SYD SGP HKG TOK

SYD

Asia

Gbemi Adeniyi-Williams LON

TOK

Hiroaki Owaki, CFA

LON

LON Kes Visuvalingam, CFA SGP

BAL

U.S. Smid-Cap Generalist Europe Semi./Software

BAL Mitchell Todd, CA Developed Europe

EMEA and Latin America

BAL

U.S. Aerospace & Defense

U.S. Medical Devices/Tools

Kamran Baig

North America

TECHNOLOGY

Japan Manufaturing/Autos

David Rowlett, CFA

BAL

Kennard Allen1

U.S. Small Cap Generalist

Austin Powell, CFA

Thomas Watson, CFA

BAL

BAL

ASSOCIATE DIRECTORS OF EQUITY RESEARCH

BAL

BAL

Greater China Small-Cap

HKG

1

Japan Transports/Consumer

LON

Japan Natural Resources

HKG

India & ASEAN Small-Cap Europe Small-Cap

LON SYD

Australia Media/Consumer

HKG

Asia Real Estate/Conglom.

SGP

Asia Ex-Japan Telecom/Fin. EMEA

Oxana Lyalina EMEA

Paul O’Sullivan Australia Financials/H.C.

Seun Oyegunle, CFA EMEA

Viral Patel Australia REITS/Retail

Sin Dee Tan, CFA Europe Small-Cap

LON LON SYD LON SYD LON

Verena Wachnitz, CFA1 LON Latin America

Hiroshi Watanabe, CFA TOK Japan Smid-Cap

Marta Yago Latin America

LON

140 Equity Research Professionals worldwide.2 1

11

2

Also has portfolio management responsibilities. 11 sector portfolio managers, 82 research analysts, 34 associate research analysts, 6 quantitative analysts, and 7 specialty analysts as of 31 March 2015.

1

Equity Research — A Formula for Consistency

• Fundamentally driven research approach built around industry expertise • Intensive M.B.A. recruiting effort centered upon rigorous summer intern program • Talents honed via thorough mentoring and evaluation processes • Collegial culture marked by a strong team orientation • Key retention tools include performance-based compensation, equity participation, and advancement opportunities • Multiple career paths have fostered stability — career analyst, sector specialist, or portfolio manager

Intensive recruiting effort, coupled with thorough mentoring and feedback, fosters a successful “grow-from-within” culture.

12 10

Investment Philosophy Small-Cap Value Fund US Small-Cap Value I Equity Strategy

• A contrarian bottom-up approach to investing can identify underfollowed companies that are inefficiently priced

• Fundamental research, anchored by face-to-face meetings with company management, is critical to uncovering successful investment opportunities

• A long-term orientation allows for full exploitation of valuation anomalies

• Broad diversification helps to manage portfolio risk

16 13

Investment Process US Small-Cap Value I Equity Strategy Universe

Market cap below upper end of Russell 2000 Index 



t"QQSPYJNBUFMZ DPNQBOJFT

Idea Generation TRP analysts, industry contacts, niche regional brokers, screens

Value Assessment Target companies with a compelling relative valuation t1SJDFUPBTTFUT FBSOJOHT CPPLWBMVF DBTInPX  PSQSJWBUFUSBOTBDUJPOWBMVF

Fundamental Analysis Qualitative criteria

Identify catalyst for value realization

t.BOBHFNFOUDPNQFUFODF

t.BOBHFNFOUDIBOHF

t#VTJOFTTTUSBUFHZ

t3FTUSVDUVSJOH

t$PNQFUJUJWFFOWJSPONFOU

t*OEVTUSZDPOTPMJEBUJPO

t'JOBODJBMGVOEBNFOUBMT

t*ODSFBTFEJOWFTUPS attention

Portfolio Construction Balance opportunity versus risk 150–175 stock portfolio

Russell Investment Group is the source and owner of the trademarks, service marks, and copyrights related to the Russell indexes. Russell® is a trademark of Russell Investment Group.

14

Investment Process US Small-Cap Value I Equity Strategy

• Target undervalued companies not widely followed to increase opportunity potential – Compelling low relative valuation – Low institutional ownership/Wall Street coverage • Perform relative valuation assessment – Assess relevant valuation metrics • Pursue collaborative approach to fundamental research to identify companies possessing – Quality, shareholder-oriented management – Viable business strategy – Rational industry structure and market position – Sound financial fundamentals – Potential catalyst for value realization • Promote full value realization – Employ low turnover and patient trading strategy

18 15

Investment Process US Small-Cap Value I Equity Strategy

• Portfolio Construction – 150–175 securities – Position sizes typically range between 0.25%–2.50% – Benchmark aware — sector diversification is the result of opportunistic relative valuation opportunities – Fully invested strategy — cash reserves typically 3% or less • Sell Discipline – True valuation realized – Market cap exceeds $4.0 billion – Deteriorating fundamentals – Change in investment thesis – Catalyst no longer apparent – Loss of confidence in management – Displacement by a better idea

16

Portfolio Turnover Investors, not traders

Imperial County Employees’ Retirement System Morningstar Small-Cap Value Funds Average

1

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

11%

10%

22%

12%

16%

26%

14%

11%

9%

24%

96

82

96

98

108

89

86

86

91

84

High turnover can create unnecessary trading costs and negatively impacts returns.

1

Source: Morningstar, December 2014.

17

Performance Review

18

Account Status and Performance Periods Ended 31 March 2015 Figures Shown in U.S. Dollars

Annualized Three Months

One Year

Three Years

Five Years

Ten Years

Since Client Inception 1 December 1995

Imperial County Employees’ Retirement System (Gross of Fees)

1.40%

-0.01%

12.92%

13.20%

9.33%

13.00%

Imperial County Employees’ Retirement System (Net of Fees)

1.22

-0.72

12.13

12.39

8.57

12.20

Russell 2000 Value Index

1.98

4.43

14.79

12.54

7.53

10.29

Calendar Years 2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Imperial County Employees’ Retirement System (Gross of Fees)

9.75%

19.09%

-0.46%

-28.30%

25.91%

25.65%

0.95%

17.12%

34.68%

-0.55%

Imperial County Employees’ Retirement System (Net of Fees)

9.01

18.30

-1.14

-28.82

25.06

24.79

0.18

16.28

33.76

-1.25

Russell 2000 Value Index

4.71

23.48

-9.78

-28.92

20.58

24.50

-5.50

18.05

34.52

4.22

19

Attribution Analysis Imperial County Employees’ Retirement System vs. Russell 2000 Value Index One Year Ended 31 March 2015 Figures Shown in U.S. Dollars

Total Value Added

Value Added from Sector Weight

Value Added from Stock Selection

Value Added - Percent

1 0 -1 -2 -3 -4 -5

Over (Under) Weight

20

Total

Energy

Telecom Services

-

-0.2

-0.7

Consumer Staples

Health Care

Utilities

0.2

1.0

-1.7

Financials

Information Technology

Materials

-11.6

-0.3

2.7

Industrials & Business Consumer Services Discretionary 9.6

0.4

Portfolio Weight (Ending)

100.0

3.4

0.0

3.0

7.0

5.2

29.3

9.3

7.1

22.5

12.6

Index Weight (Ending)

100.0

3.6

0.7

2.8

6.0

6.9

40.9

9.6

4.4

12.9

12.2

Portfolio Performance

0.1

-46.6

-22.9

3.4

21.3

11.5

9.7

2.2

-9.5

-1.5

-1.9

Index Performance

4.4

-46.4

-7.3

8.6

25.7

15.5

8.9

7.0

-4.9

-0.7

11.7

Numbers may not add to 100% due to rounding; all numbers are percentages. Analysis represents the equity-only performance of the portfolio as calculated by the Wilshire Atlas attribution model and is exclusive of cash, trusts, mutual funds, delisted securities, and other non-equity holdings. Returns will not match official T. Rowe Price performance because Wilshire uses different pricing and exchange rate sources and does not capture intraday trading or fair-value pricing. Performance for each security is obtained in the local currency and, if necessary, is converted to U.S. dollars using an exchange rate determined by an independent third party. Source: Wilshire Atlas, MSCI/S&P Global Industry Classification Standard (GICS) sectors; analysis by T. Rowe Price Associates, Inc. T. Rowe Price uses the MSCI/S&P GICS for sector and industry reporting. Each year, MSCI and S&P review the GICS structure. The last change occurred on February 28, 2014. T. Rowe Price will adhere to all future updates to GICS for prospective reporting. Figures are shown gross of fees. Past performance cannot guarantee future results.

Performance Attribution Imperial County Employees’ Retirement System — Significant Absolute Contributors One Year Ended 31 March 2015

Stock

% of Portfolio

Industry

Business Descriptions

West Pharmaceutical Services

1.4%

Health Care Equipment & Supplies

West Pharmaceutical Services is a manufacturer company. The Company is engaged in manufacturing of components and systems for the packaging and delivery of injectable drugs as well as delivery system components for the pharmaceutical, healthcare and consumer products industries.

Belden

1.4

Electronic Equip, Instr & Cmpts

Belden is a signal transmission solutions provider. The Company’s signal transmission solution provides industry leading secure and reliable transmission of data, sound and video for mission critical applications.

Middleby

1.7

Machinery

The Middleby through its operating subsidiary Middleby Marshall Inc. (Middleby Marshall) and its subsidiaries, is engaged in the design, manufacture, marketing, distribution, and service of a line of cooking and warming equipment used in all types of commercial restaurants and institutional kitchens, and food preparation, cooking and packaging equipment for food processing operations.

Methode Electronics

0.5

Electronic Equip, Instr & Cmpts

Methode Electronics is a manufacturer of component and subsystem devices.

Landstar System

1.4

Road & Rail

Landstar System is an asset-light provider of integrated transportation management solutions.

Imperial County Employees’ Retirement System — Significant Absolute Detractors One Year Ended 31 March 2015

Stock

% of Portfolio

Industry

Business Descriptions

Raven Industries

0.7%

Industrial Conglomerates

Raven Industries is a diversified technology company providing a variety of products to customers within the industrial, agricultural, energy, construction and military/aerospace markets.

CARBO Ceramics

0.2

Energy Equipment & Services

CARBO Ceramics is an oilfield services technology company. CARBO is a supplier of ceramic proppant, including resin-coated sand.

Northern Oil & Gas

0.0

Oil, Gas & Consumable Fuels

Northern Oil & Gas is an independent energy company.

American Vanguard

0.4

Chemicals

American Vanguard operates as a holding company. The Company is primarily a chemical manufacturer that develops and markets products for agricultural and commercial uses.

Cloud Peak Energy

0.0

Oil, Gas & Consumable Fuels

Cloud Peak Energy is a holding company that manages its wholly owned subsidiary Cloud Peak Energy Resources LLC (CPE Resources). It is the producer of coal in the United States and in the Powder River Basin.

Business Description sourced from Thomson Reuters Worldscope Fundamentals, Copyright©, Thomson Reuters, 1999–2015. All Rights Reserved. The specific securities identified and described above do not represent all of the securities purchased, sold, or recommended for the portfolio, and no assumptions should be made that the securities identified and discussed were or will be profitable. The information shown does not reflect any exchange-traded funds that may be held in the portfolio. Numbers may not total due to rounding.

21

Total Relative Performance Value Added in Imperial County Employees’ Retirement System vs. Russell 2000 Value Index — Quarterly (Net of Fees) Calculated Quarterly from 31 March 2005 through 31 March 2015 Figures Shown in U.S. Dollars

Percentage Points 15 Value Added vs. Russell 2000 Value Index

10

5

0

-5 3/08

22

3/10

3/12

3/14

3/15

Each bar measures the difference in performance between the portfolio and the benchmark for the calendar years shown at the bottom of the chart. Figures shown net of fees. Past performance cannot guarantee future results.

Total Return Performance Three-Year Rolling Returns (Annualized Net of Fees) — Imperial County Employees’ Retirement System vs. Russell 2000 Value Index Calculated Quarterly from 31 March 2005 through 31 March 2015 Figures Shown in U.S. Dollars Percent 40

Imperial County Employees’ Retirement System

Portfolio Outperformance 30

20

10 Portfolio Underperformance

-40

-30

-20

-10

0

-10

10

20

30

40

Russell 2000 Value Index

-20

-30

-40 Each point represents the performance of the portfolio and its benchmark for a three-year annualized period. Points above the diagonal represent outperformance relative to the benchmark. Points below the diagonal represent relative underperformance. Figures shown net of fees. Past performance cannot guarantee future results.

23

Performance Statistics Risk/Return Characteristics Three Years Ended 31 March 2015 Figures Shown in U.S. Dollars 25

Average Annual Return (%)

20

15

O

Russell 2000 Value Index

Imperial County Employees’ Retirement System

10

5

0 5

10

20

15

Average Annual Standard Deviation (%)

Three Years Imperial County Employees’ Retirement System Annualized Total Return

12.92%

14.79%

Annualized Standard Deviation

12.27%

12.93%

Historical Tracking Error

2.55%

0.00%

Beta

0.93

1.00

R-Squared Alpha Sharpe Ratio Information Ratio

24

Russell 2000 Value Index

0.96 -0.74%

1.00 0.00%

1.03

1.12

-0.73

0.00

Statistics are based on monthly net returns. Past performance cannot guarantee future results.

Performance Statistics Risk/Return Characteristics Five Years Ended 31 March 2015 Figures Shown in U.S. Dollars

Average Annual Return (%)

15

Imperial County Employees’ Retirement System

O

Russell 2000 Value Index

12

9 15 20 Average Annual Standard Deviation (%)

25

Five Years Imperial County Employees’ Retirement System

Russell 2000 Value Index

Annualized Total Return

13.20%

12.54%

Annualized Standard Deviation

16.90%

17.35%

Historical Tracking Error

3.19%

0.00%

Beta

0.96

1.00

R-Squared

0.97

1.00

Alpha

1.08%

0.00%

Sharpe Ratio

0.77

0.71

Information Ratio

0.21

0.00

Statistics are based on monthly net returns. Past performance cannot guarantee future results.

25

Performance Statistics Risk/Return Characteristics Since Inception1 through 31 March 2015 Figures Shown in U.S. Dollars 20

Average Annual Return (%)

15

Imperial County Employees’ Retirement System

O

10

Russell 2000 Value Index

5

0 5

10

20

15

25

30

35

Average Annual Standard Deviation (%)

Since Inception1 Imperial County Employees’ Retirement System

Russell 2000 Value Index

Annualized Total Return

12.87%

10.20%

Annualized Standard Deviation

17.07%

17.92%

Historical Tracking Error

5.45%

0.00%

Beta

0.91

1.00

R-Squared

0.91

1.00

Alpha

3.13%

0.00%

Sharpe Ratio

0.60

0.43

Information Ratio

0.49

0.00

1

1 December 1995. Statistics are calculated as of first full month end, 31 December 1995. Statistics are based on monthly net returns. Past performance cannot guarantee future results.

26

Performance Statistics Glossary Active Share – Active Share is a holdings based measure of active management representing the percentage of a portfolio’s holdings that differ from those in its benchmark. Compared to tracking error, which measures the standard deviation of the difference in a manager’s returns versus the index returns, Active Share allows investors to get a clearer understanding of what a manager is doing to drive performance, rather than drawing conclusions from observed returns. The greater the difference between the asset composition of a product and its benchmark, the greater the active share is. Alpha – A measure of a strategy’s risk-adjusted performance. Alpha represents the difference between a strategy’s actual returns and its expected performance, given its level of risk as measured by beta. The difference is expressed as an annualized percentage.

Batting Average – A statistical measure used to determine the percentage of months where the portfolio’s performance exceeded or matched the return of the index. Beta – A measure of the market risk of a strategy showing how responsive the strategy is to a given market index, such as the S&P 500 Index (an index for equity strategies) or the Barclays Government/ Corporate Bond Index (an index for fixed income strategies). By definition, the beta of the benchmark index is 1.00. A strategy with a 1.10 beta is expected to perform 10% better than the index in up markets and 10% worse in down markets. Usually, higher betas represent riskier investments. Earnings Growth Rate (Current Fiscal Year) – Measures the annualized percent change in earnings per share from the prior fiscal year to the current fiscal year. Earnings Growth Rate (Next Fiscal Year) – Measures the annualized percent change in earnings per share from the current fiscal year and the forecast for the next fiscal year. Enterprise Value to EBITDA – A financial ratio that measures a company’s return on investment. The EBITDA/EV ratio may be preferred over other measures of return because it is normalized for differences between companies. Using EBITDA normalizes for differences in capital structure, taxation and fixed asset accounting. Meanwhile, using enterprise value also normalizes for differences in a company’s capital structure. Historical Tracking Error – Standard deviation of the strategy’s excess return over the market benchmark. Information Ratio – A measure of the significance or quality of alpha. It is defined as the ratio of alpha to the standard deviation of alpha. A larger number is better – either a very strong alpha score or a consistent alpha with low standard deviation. Market Capitalization – A measure of a company’s total value and is equal to the total dollar value of all outstanding shares. Median – Represents the midpoint of market capitalization of stocks in a portfolio where 50% of holdings are above the value. Investment-Weighted Median – Represents the breakpoint where 50% of the weights are above the value. Investment-Weighted Average – Sum of each holding’s market capitalization multiplied by its weight in the portfolio. Net Debt to EBITDA – A measurement of leverage, calculated as a company’s interest-bearing liabilities minus cash or cash equivalents, divided by its EBITDA. The net debt to EBITDA ratio is a debt ratio that shows how many years it would take for a company to pay back its debt if net debt and EBITDA are held constant. If a company has more cash than debt, the ratio can be negative. Price to Book Ratio – Used to compare a stock’s market value to its book value. It is calculated by dividing the current closing price of the stock by the latest quarter’s book value (book value is simply total assets minus intangible assets and liabilities). Price-to-Earnings Ratio (12 Months Forward) – P/E is a valuation measure calculated by dividing the price of a stock by the analysts’ forecast of the next 12 months expected earnings. The ratio is a measure of how much investors are willing to pay for the company’s future earnings. The higher the P/E, the more investors are paying for a company’s earnings growth in the next 12 months. Price-to-Earnings Ratio (Current Fiscal Year) – P/E is a valuation measure calculated by dividing the price of a stock by its reported earnings per share from the latest fiscal year. The ratio is a measure of how much investors are willing to pay for the company’s earnings. The higher the P/E, the more investors are paying for a company’s current earnings. Price-to-Earnings Ratio (Next Fiscal Year) – P/E is a valuation measure calculated by dividing the price of a stock by its estimated earnings for the next fiscal year. The ratio is a measure of how much investors are willing to pay for the company’s future earnings. The higher the P/E, the more investors are paying for the company’s expected earnings growth in the next fiscal year. Price to FFO – A figure used by real estate investment trusts (REITs) to define the cash flow from their operations. It is calculated by adding depreciation and amortization expenses to earnings, and sometimes quoted on a per share basis. Projected Earnings Growth Rate (IBES) – A company’s expected earnings per share growth rate for a given time period based on the forecast from the Institutional Broker’s Estimate System, which is commonly referred to as IBES. Return on Equity – ROE is a valuation measure calculated by dividing the company’s current fiscal year net income by shareholders’ equity (i.e., the company’s book value). Return on equity measures how much a company earns on each dollar that common stock investors have put into the company. It indicates how effectively and efficiently a company and its management are using stockholder investments. Return on Invested Capital – Measures how well a company generates cash flow relative to the amount invested. The return on invested capital measures how efficiently a company is using its money to generate returns. It is calculated by dividing net income minus dividends by the sum of long-term debt and common equity. R-Squared – Measures the percentage of a strategy’s movement that is explained by movements in the benchmark index. R-Squared helps indicate the accuracy of a strategy’s alpha and beta. Sharpe Ratio – A risk-adjusted measure, which is calculated using standard deviation and excess return to determine reward per unit of risk. The higher the Sharpe ratio, the better the strategy’s historical risk-adjusted performance. Standard Deviation – Indicates the volatility of a strategy’s total returns as measured against its mean performance. Unlike alpha, beta, and R-Squared, which are compared with a benchmark index, standard deviation is strategy-specific. In general, the higher the standard deviation, the greater the volatility or risk. Turnover – A measurement of how frequently assets within a fund are bought and sold by the managers. Up and Down Capture – A statistical measure used to quantify the percentage of market gains captured by the portfolio in either up or down markets. It is expressed as a percentage.

27 1

Portfolio Review

28

Style Consistency Zephyr StyleADVISOR: T. Rowe Price Associates, Inc.

Zephyr StyleADVISOR: T. Rowe Price Associates, Inc.

36-Month Moving Windows, Computed Monthly April 2005 - March 2015 Large Large Value

Large Growth

Zephyr Size Coordinate

Russell 1000 Value

Russell 1000 Growth

1

IMPERIAL COUNTY RETIREMENT SYSTEM (3539) Russell Generic Corners

0

-1 Russell 2000 Value

Small Value Small

-1

Russell 2000 Growth

0

1

Small Growth

Zephyr Style Coordinate

29

Zephyr StyleADVISOR performs a constrained quadratic optimization to determine the portfolio’s (style, size) coordinate relative to the indices shown. This rolling window analysis displays the smaller data points to represent the oldest time period and larger data points to represent the most recent time period. T. Rowe Price Associates, Inc., and Zephyr Associates, Inc., are not affiliated companies. Supplemental information.

Portfolio Characteristics Imperial County Employees’ Retirement System As of 31 March 2015 Market Capitalization Shown in U.S. Dollars

Imperial County Employees’ Retirement System 5-Year Projected EPS Growth Rate1

Russell 2000 Value Index

11.0%

10.0%

12 Months Forward

19.2X

18.5X

Relative to Russell 2000 Value Index (12 Months Forward)

1.04

1.00

Return on Equity (Last 12 Months)

11.4%

8.6%

Price to Book

2.1X

1.7X

Long-Term Debt as % of Capitalization

28.7%

34.4%

Unweighted Median Market Capitalization (Millions)

$1,342

$667

Investment Weighted Median Market Capitalization (Millions)

$1,559

$1,633

Investment Weighted Average Market Capitalization (Millions)

$2,071

$1,829

Number of Holdings

169

1,357

20 Largest Holdings

26.2%

8.5%

Turnover (Last 12 Months)

23.8%

N/A

Price to Earnings

1

Source: IBES. Statistics are investment-weighted median unless otherwise noted.

30

Sector Diversification Imperial County Employees’ Retirement System As of 31 March 2015

Industrials and Business Services

Materials

Health Care

Consumer Staples

Consumer Discretionary

Energy

Information Technology

Telecommunication Services

Utilities

Financials -20

0

20 Percent

40

60

Imperial County Employees’ Retirement System Russell 2000 Value Index Over/Underweight

Source for MSCI data: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed, or produced by MSCI. T. Rowe Price uses the MSCI/S&P Global Industry Classification Standard (GICS) for sector and industry reporting. Each year, MSCI and S&P review the GICS structure. The last change occurred on February 28, 2014. T. Rowe Price will adhere to all future updates to GICS for prospective reporting.

31

10 Largest Absolute Portfolio Holdings Imperial County Employees’ Retirement System As of 31 March 2015

% of Portfolio

P/E (12 Months Forward)1,2

Price/Book Ratio

Market Capitalization (Millions)

Home Bancshares

2.4%

17.0X

2.3X

$2,290

Genesee & Wyoming

1.8

20.4

2.2

5,210

Middleby

1.7

26.1

5.8

5,879

ProAssurance

1.7

16.1

1.2

2,562

SVB Financial Group

1.5

21.8

2.3

6,482

East West Bancorp

1.5

15.3

2.0

5,819

Aaron's

1.5

14.0

1.7

2,053

Landstar System

1.4

19.2

6.1

2,970

West Pharmaceutical Services

1.4

32.6

4.5

4,332

Belden

1.4

17.3

4.9

3,978

20.0X

3.3X

Company

Total Average

32

16.4%

The specific securities identified and described above do not represent all of the securities purchased, sold, or recommended for the portfolio, and no assumptions should be made that the securities identified and discussed were or will be profitable. The information shown does not reflect any exchange-traded funds that may be held in the portfolio. Numbers may not total due to rounding.

10 Largest Absolute Portfolio Holdings Imperial County Employees’ Retirement System As of 31 March 2015

Company

Case for Inclusion

Home Bancshares

Home Bancshares is an Arkansas-based bank with some operations in Florida. The bank went public in 2006 and has been expanding by acquiring a number of struggling banks around the state of Florida.

Genesee & Wyoming

Genesee & Wyoming is a short-haul and regional railroad operator. The company has benefited from steady growth in transportation of commodities by rail, including coal, grain, and forest products. The company is also a shrewd acquirer of other businesses.

Middleby

Middleby is a leading manufacturer of cooking and packaging equipment used in commercial restaurants and food processing plants. The company generates strong margins and has a capable management team focused on continuing growth.

ProAssurance

ProAssurance is a leading medical malpractice insurer with a strong balance sheet.

SVB Financial Group

SVB Financial Group is a niche bank that caters to venture capital-funded firms. Due to a strong balance sheet and very minimal exposure to housing and construction, the bank was relatively sheltered from the financial fallout of the global financial crisis.

East West Bancorp

East West Bancorp is a California-based regional bank with a strong presence in the Asian-American market. The bank has emerged from the economic downturn in a considerably stronger competitive position after some large-scale acquisitions of struggling banks.

Aaron's

Aaron’s is one of the largest home and office furnishings rental firms in the U.S. We believe that strong revenue and cash flow growth are not fully reflected in Aaron’s valuation.

Landstar System

Landstar System is primarily a non-asset-based trucking company delivering specialized transportation services to customers in North America. We are attracted to the company’s shareholder-oriented management team and its asset-light business model.

West Pharmaceutical Services

Pennsylvania-based West Pharmaceutical Services makes packaging and delivery systems for injectable drugs and other packaging, delivery, and safety components for pharmaceuticals, medical devices, and consumer products.

Belden

Belden manufactures and markets cable, connectivity, and networking products. The firm has been improving margins by repositioning its product portfolio toward an emphasis on higher-margin networking and connectivity end markets, as well as other restructuring actions. The firm’s end markets in Europe also appear to be improving, which should help drive further growth.

The manager’s views and portfolio holdings are historical and subject to change. This material should not be deemed a recommendation to buy or sell any of the securities mentioned. The information shown does not reflect any exchange-traded funds that may be held in the fund. Numbers may not total due to rounding.

33

Recent Portfolio Changes Imperial County Employees’ Retirement System Three Months Ended 31 March 2015

Major Purchases

2

Ending Weight

Dorman Products1

0.0%

0.7%

Matthews International1

0.0

0.5

1,699

National Bank Holdings1

0.0

0.5

693

Post Holdings1

0.0

0.5

2,680

Ethan Allen Interiors1

0.0

0.5

800

Major Sales

1

Beginning Weight

Market Capitalization (Millions)

Beginning Weight

Ending Weight

$1,772

Market Capitalization (Millions)

Business Description Dorman Products is a supplier of replacement parts and fasteners for passenger cars, light trucks and heavy trucks in the automotive aftermarket. Matthews International is a designer, manufacturer and marketer of memorialization products and brand solutions. National Bank Holdings is a bank holding company. The Company’s primary operations are conducted through its wholly owned subsidiary, NBH Bank, N.A., through which it provides a variety of banking products to both commercial and consumer clients. Post Holdings is a consumer packaged goods holding company operating in the center-ofthe-store, refrigerated, active nutrition and private label food categories. Ethan Allen Interiors through its wholly owned subsidiary, Ethan Allen Global, Inc., is an interior design company.

Business Description

Shoretel2

0.5%

0.0%

Raven Industries

1.4

0.7

779

Raven Industries is a diversified technology company providing a variety of products to customers within the industrial, agricultural, energy, construction and military/ aerospace markets.

Northern Oil & Gas2

0.4

0.0

471

Northern Oil and Gas is an independent energy company.

Cavco Industries

1.0

0.5

665

Cavco Industries is a producer of manufactured homes in the United States.

Hub Group

1.4

0.9

1,443

$438

Shoretel provides business communication solutions consisting of integrated voice, video, data and mobile applications based on Internet Protocol (IP) technologies.

Hub Group is an asset-light freight transportation management companies.

New holding. Eliminated. Business Description sourced from Thomson Reuters Worldscope Fundamentals, Copyright©, Thomson Reuters, 1999–2015. All Rights Reserved. The information shown does not reflect any exchange-traded funds that may be held in the fund. Numbers may not total due to rounding.

34

Market Capitalization Range Imperial County Employees’ Retirement System As of 31 March 2015 Market Capitalization Shown in U.S. Dollars

Percent 60 Imperial County Employees’ Retirement System Russell 2000 Value Index 50

40

30

20

10

0 $0–250

$250–500

$500–750

$750–1,000 Millions

35

$1,000–2,000

$2,000+

Market Capitalization of Newly Purchased Securities US Small-Cap Value Equity I Representative Portolio1 One Year Ended 31 March 2015 Market Capitalization Shown in U.S. Dollars

Percent 40

Percent of New Securities Purchased1 Percent of the Number of New Securities Purchased2

30

20

10

0 $0–250

$250–500

$500–750

$750–1,000

$1,000–2,000

$2,000+

Millions

1

The representative portfolio is an account in the composite we believe most closely reflects current portfolio management style for the strategy. Performance is not a consideration in the selection of the representative portfolio. Information regarding the representative portfolio and, where applicable, the other accounts in the composite is available upon request. Please see the GIPS® Disclosure page for additional information on the composite. 2 Percentage is the trade size of new securities in the market cap range divided by the total trade size of new securities purchased during the period. 3 Percentage is the number of new securities in the market cap range divided by the total number of new securities purchased during the period. Market capitalization at time of initial purchase.

36

Market Environment

37

Small-Cap Cycle Analysis As of 31 March March 31,2015 2015

Small-Cap Stocks vs. Large-Caps (Total Returns)

Source: Leuthold Group, March 2014. All rights reserved. Reprinted with permission.

Large-Caps

Small-Caps Duration (In Years)

Annualized Return

Annual Excess Return1

Annualized Return

1932–37

4.8

62.5%

16.0%

40.1%

1940–45

6.0

36.0

13.9

19.4

1963–68

6.0

24.2

10.8

12.1

1975–83

8.5

33.6

14.5

16.7

1991–94

3.3

30.8

11.3

17.5

1999–06

7.0

13.6

12.6

0.9

3/09–3/11

2.1

55.2

16.4

33.4

7/12–9/13

1.9

35.9

11.7

21.7

Average

5.4

36.6%

13.6%

20.0%

Small-caps have outperformed large-caps over the long run, but experienced extended cycles of outperformance and underperformance, which typically run five or more years. After underperforming large-cap stocks since September 2013, small-caps have generally outperformed their large-cap counterparts, for the past two quarters. 1

38 18

Excess return is versus the large-caps. Current period is cumulative. Updated as of March 2015. Sources: CRSP, The University of Chicago; BofA Merrill Lynch Small Cap Research.

Past performance cannot guarantee future results.

Russell 2000 Relative Valuation Relative Valuation vs. Russell Top 200 Through 31 March March 31,2015 2015

Times 3.00

Russell 2000 Index Relative P/E (trailing) Russell 2000 Index Relative Price/Book

Max of 11.29 in 4Q09

2.25

Long-term Average = 1.47 1.50

Long-term Average = 0.78

0.75

All-time lows

0.00 3/80

3/83

3/87

3/91

3/95

3/99

3/03

3/07

3/11

3/15

(Quarterly observations.)

On a trailing P/E basis, small-cap valuations compared to large-caps are above long-term averages. Valuations remain at reasonable levels on other metrics, such as price-to-book value. 63

Sources: BofA Merrill Lynch Small-Cap Research, Russell Investment Group.

39

Small-Cap Relative Valuations As of 31 March 2015 As of March 31, 2015

Relative Small- to Large-Cap — Price to Sales 1.1

LT LT Average: 0.80 Average: .80

1.0 0.9 0.8 0.7

0.75 0.75

0.6 0.5 0.4 0.3 0.2

87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Relative Small- to Large-Cap — Price to Cash Flow 1.4

LTLTAverage: Average: 0.97 .97 1.2 1.0

0.95 0.95

0.8 0.6 0.4 0.2

87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Small-cap valuations on price-to-sales and price-to-cash flow measures relative to large-caps are near their long-term averages. Source: BofA Merrill Lynch Small-Cap Research.

40 64 3

Small-Cap Growth vs. Value Through 31 March 31, 2015 2015 Through March Performance of Russell 2000 Value versus Russell 2000 Growth

Geometric Excess Returns 50.0

21.4

30.0 20.0

45.3

Excess Returns Russell 2000 Growth Versus Russell 2000 Value

40.0

4.50

11.4

18.6 6.9 6.7 5.6

10.0 0.0

0.0 -3.6 -5.9 -3.6 -13.3 -7.0 -17.7 -21.0

-10.0 -20.0 -30.0

4.2

11.6

8.2

-16.5

3.7

1.7 -0.5 -6.5 -8.2

-0.9 -8.5

4.00

-8.3 -14.3

2.7

6.5 4.6 1.3

3.50 3.00 2.50

-2.9

2.00

-13.5

1.50

-20.5 -21.3

-40.0

Russell 2000 Value versus Russell 2000 Growth.

1.00 0.50

-36.8

-50.0 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

0.00 Mar-79

Mar-82

Mar-85

Mar-88

Mar-91

Value Cycles

Mar-94

Mar-97

Dates

Mar-03

Mar-06

Mar-09

Mar-12

Mar-15

Growth Cycles

Cumulative Duration (Months)

Mar-00

Cumulative

2000 Value

2000 Growth

Duration (Months)

2000 Value

2000 Growth

-23.4%

38.3%

Differential

1/79–11/80

23

72.5%

141.8%

-31.0

69.3%

32.0

9/82–6/83

10

74.7

96.2

21.6 25.9

Differential

Dates

12/80–8/82

21

15.0%

7/83–11/84

17

0.9

1/92–4/93

16

38.3

2.5

35.8

3/89–12/91

34

17.6

43.6

6/96–8/98

27

18.1

-22.0

40.1

5/93–5/96

37

57.4

82.5

25.1

3/00–7/02

29

23.9

-59.6

83.5

9/98–2/00

18

17.3

138.0

120.7

12/03–5/07

42

68.0

48.4

19.6

8/02–11/03

16

36.7

47.5

10.8 47.5

1

Average

25.3

27.4

-14.2

41.6

06/07–Present

94

39.0

86.5

Median

24.0

21.0%

-22.7%

37.1%

Average

23.0

46.0

91.6

45.5

Median

20.5

47.0%

89.3%

25.5%

Small-cap value stocks outperformed small-cap growth by a record margin from 2000–2002. In recent years, leadership has frequently changed. In March 2015, growth significantly outperformed value. 1

March 31, 2015. 2015. 31 March Note: The average and median figures for Growth Cycles do not include the last outperformance cycle, June 2007 to June 2013. Once the cycle is complete it will be included. Sources: Russell Investment Group; BofA Merrill Lynch Small-Cap Research.

Past performance cannot guarantee future results.

41

37

Growth vs. Value Performance Trends

Total Return Performance for Calendar Years 1981

1982

1983

1984

1985

1986

Russell 2000 Growth Index

-9.24%

20.98%

20.13%

-15.83%

30.97%

3.58%

-10.48% 20.37%

20.17%

Russell 2000 Value Index

14.85

28.52

38.64

2.27

31.01

7.41

-7.11

29.47

1998

1999

2000

2001

2004

Russell 2000 Growth Index

1.23%

43.09%

-22.43%

-9.23%

-30.26% 48.54%

Russell 2000 Value Index

-6.45

-1.49

22.83

14.02

-11.43

Past performance cannot guarantee future results.

2002

2003

46.03

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

-17.41% 51.19%

7.77%

13.37%

-2.43%

31.04%

11.26%

12.95%

12.43

-21.77

41.70

29.14

23.77

-1.54

25.75

21.37

31.78

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

14.31%

4.15%

13.35%

7.05%

-38.54%

34.47%

29.09%

-2.91%

14.59%

43.30%

5.60%

22.25

4.71

23.48

-9.78

-28.92

20.58

24.50

-5.50

18.05

34.52

4.22

42

Small-Cap Growth vs. Value Valuations Small-cap growth valuations are comparable to those of small-cap value 31 March Through March 31, 2015 2015 2.5 2.0

5.5

Relative Forecast P/E

Relative Trailing P/E* 12/14

4.5 3.5

1.5 2.5 1.0

1.5

0.5 1Q79

4.5

1Q83

1Q87

1Q91

1Q95

1Q99

1Q03

1Q07

1Q11

1Q15

0.5 1Q79 1Q83 1Q87 1Q91 1Q95

4.0

Relative Price/Book

3.5

3.0

2.5

2.0

1.5 1Q79

1Q83

1Q87

1Q91

1Q95

1Q99 2.5

1Q03

1Q07

1Q11

1Q15

1Q99 1Q03 1Q07 1Q11 1Q15

Relative Price/Sales

1.0 1Q79 1Q83 1Q87 1Q91 1Q95 1Q99 1Q03 1Q07 1Q11 1Q15

Relative P/E To Growth

2.0 1.5 1.0 0.55 4Q81 1Q79

4Q85 1Q87 4Q89 1Q91 4Q93 1Q95 4Q97 1Q99 4Q011Q03 4Q051Q074Q09 1Q83 1Q114Q13 1Q15

By many measures, growth and value have comparable valuations. Only on a price-to-sales basis is small-cap growth more attractive than small-cap value. 1

66

P/E excluding negative earnings. Note: The valuation data are for the Russell 2000 Growth index relative to the Russell 2000 Value Index. Sources: BofA Merrill Lynch Small Cap Research, Russell Investment Group.

43

Exhibits Fee Schedules Total Return Performance GIPS® Disclosure Monitoring and Risk Management Elements Your Institutional Team Biographical Backgrounds

44

Fee Schedule Imperial County Employees’ Retirement System — U.S. Small-Cap Value I Strategy

First $20 million

75 basis points

Above $20 million

60 basis points

Minimum account size

$50 million

45

Fee Schedule US Small-Cap Value I Equity Composite Current Quarter-End As of 31 March 2015 Figures Shown in U.S. Dollars

The US Small-Cap Value I Equity Composite seeks long-term capital appreciation primarily through investment in small-cap companies that appear to be undervalued. The strategy includes a significant concentration in the lowest third of distribution in terms of market capitalization. (Created September 1993) First $20 million

75 basis points

Above $20 million

60 basis points

Minimum separate account size

$50 million

100 46

Total Return Performance US Small-Cap Value I Equity Composite Periods Ended 31 March 2015 Figures Shown in U.S. Dollars

Annualized Three Months

One Year

Three Years

Five Years

Seven Years

Ten Years

13.58%

13.51%

9.68%

9.22%

US Small-Cap Value I Equity Composite (Gross of Fees)

1.52%

US Small-Cap Value I Equity Composite (Net of Fees)1

1.33

-0.59

12.74

12.66

8.87

8.41

Russell 2000 Value Index

1.98

4.43

14.79

12.54

8.94

7.53

2011

0.16%

Calendar Years

2005

1

2006

2007

2008

2009

2010

2012

2013

2014

YTD 2015

US Small-Cap Value I Equity Composite (Gross of Fees)

9.42%

18.74%

-1.60%

-28.95%

27.05%

25.66%

-0.06%

19.48%

34.31%

-0.22%

1.52%

US Small-Cap Value I Equity Composite (Net of Fees)1

8.60

17.87

-2.34

-29.50

26.11

24.74

-0.80

18.60

33.33

-0.97

1.33

Russell 2000 Value Index

4.71

23.48

-9.78

-28.92

20.58

24.50

-5.50

18.05

34.52

4.22

1.98

Net-of-fees performance reflects the deduction of the highest applicable management fee (Model Net Fee) that would be charged based on the fee schedule appropriate to you for this mandate, without the benefit of breakpoints. Please be advised that the composite may include other investment products that are subject to management fees that are inapplicable to you but are in excess of the Model Net Fee. Therefore, the actual performance of all the portfolios in the composite on a net-fee basis will be different and may be lower than the Model Net Fee performance. However, such Model Net Fee performance is intended to provide the most appropriate example of the impact management fees would have by applying management fees relevant to you to the gross performance of the composite. Past performance cannot guarantee future results. Supplemental information. See “GIPS® Disclosure” for additional performance information.

47

GIPS® Disclosure USSmallͲCapValueIEquityComposite PeriodEndedMarch31,2015 FiguresShowninU.S.dollar          YTD  2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2005 GrossAnnualReturns(%)  9.42 18.74 Ͳ1.60 Ͳ28.95 27.05 25.66 Ͳ0.06 19.48 34.31 Ͳ0.22 1.52  8.60 17.87 Ͳ2.34 Ͳ29.50 26.11 24.74 Ͳ0.80 18.60 33.33 Ͳ0.97 1.33 NetAnnualReturns(%)1 Russell2000ValueIndex(%) 4.71 23.48 Ͳ9.78 Ͳ28.92 20.58 24.50 Ͳ5.50 18.05 34.52 4.22 1.98 Russell2000Index(%)  4.55 18.37 Ͳ1.57 Ͳ33.79 27.17 26.85 Ͳ4.18 16.35 38.82 4.89 4.32 Composite3ͲYrSt.Dev.  12.58 12.65 12.72 18.85 24.07 26.98 24.82 19.42 15.52 12.14 12.26 Russell2000ValueIndex3ͲYrSt.Dev. 14.09 12.33 12.59 19.14 25.62 28.37 26.05 19.89 15.82 12.79 12.93 Russell2000Index3ͲYrSt.Dev.  15.09 13.75 13.16 19.85 24.83 27.69 24.99 20.20 16.45 13.12 13.22 CompositeDispersion 0.26 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Comp.Assets(Millions)  559.8 440.7 349.3 246.9 316.4 386.8 282.3 286.0 262.4 249.1 251.4 6 5 5 5 5 5 5 4 4 4 4 #ofAccts.inComp. TotalFirmAssets(Billions)  268.9 333.8 397.5 275.7 395.2 485.0 493.1 579.8 696.3 749.6 775.4 1 Reflectsdeductionofhighestapplicablefeeschedulewithoutbenefitofbreakpoints.Investmentreturnandprincipalvaluewillvary.Pastperformancecannotguaranteefutureresults.Seebelowforfurtherinformation relatedtonetoffeecalculations.  T.RowePrice(“TRP”)haspreparedandpresentedthisreportincompliancewiththeGlobalInvestmentPerformanceStandards(GIPS®).TRPhasbeenindependentlyverifiedforthe10ͲyearperiodendedJune30,2014by KPMGLLP.Theverificationreportisavailableuponrequest.Verificationassesseswhether(1)thefirmhascompliedwithallthecompositeconstructionrequirementsoftheGIPSstandardsonafirmͲwidebasisand(2)the firm'spoliciesandproceduresaredesignedtocalculateandpresentperformanceincompliancewiththeGIPSstandards.Verificationdoesnotensuretheaccuracyofanyspecificcompositepresentation. TRPisaU.S.investmentmanagementfirmwithvariousinvestmentadvisersregisteredwiththeU.S.SecuritiesandExchangeCommission,theU.K.FinancialConductAuthority,andotherregulatorybodiesinvariouscountries andholdsitselfoutassuchtopotentialclientsforGIPSpurposes.TRPfurtherdefinesitselfunderGIPSasadiscretionaryinvestmentmanagerprovidingservicesprimarilytoinstitutionalclientswithregardtovarious mandates,whichincludeU.S.,international,andglobalstrategiesbutexcludingtheservicesofthePrivateAssetManagementgroup.Theminimumassetlevelforequityportfoliostobeincludedincompositesis$5million andpriortoJanuary2002theminimumwas$1million.Theminimumassetlevelforfixedincomeandassetallocationportfoliostobeincludedincompositesis$10million;priortoOctober2004theminimumwas$5million; andpriortoJanuary2002theminimumwas$1million.ValuationsarecomputedandperformancereportedinU.S.dollars. Grossperformancereturnsarepresentedbeforemanagementandallotherfees,whereapplicable,butaftertradingexpenses.Netoffeesperformancereflectsthedeductionofthehighestapplicablemanagementfeethat wouldbechargedbasedonthefeescheduleappropriatetoyouforthismandate,withoutthebenefitofbreakpoints.Grossandnetperformancereturnsarenetofnonreclaimablewithholdingtaxesondividends,interest income,andcapitalgains.EffectiveJune30,2013,portfoliovaluationandassetsundermanagementarecalculatedbasedontheclosingpriceofthesecurityinitsrespectivemarket.Previouslyportfoliosholdinginternational securitiesmayhavebeenadjustedforafterͲmarketevents.Policiesforvaluingportfolios,calculatingperformance,andpreparingcompliantpresentationsareavailableuponrequest.Dispersionismeasuredbythestandard deviationacrossassetͲweightedportfolioreturnsrepresentedwithinacompositeforthefullyear.Dispersionisnotcalculatedforthecompositesinwhichtherearefiveorfewerportfolios. Someportfoliosmaytradefutures,options,andotherpotentiallyhighͲriskderivativeswhichgenerallyrepresentlessthan10%ofaportfolio. Benchmarksaretakenfrompublishedsourcesandmayhavedifferentcalculationmethodologies,pricingtimes,andforeignexchangesourcesfromthecomposite. Compositepolicyrequiresthetemporaryremovalofanyportfolioincurringaclientinitiatedsignificantcashinfloworoutflowgreaterthanorequalto10%ofportfolioassets.Thetemporaryremovalofsuchanaccount occursatthebeginningofthemeasurementperiodinwhichthesignificantcashflowoccursandtheaccountreͲentersthecompositeonthelastdayofthecurrentmonthafterthecashflow.Additionalinformationregarding thetreatmentofsignificantcashflowsisavailableuponrequest. Thefirm'slistofcompositedescriptionsand/orapresentationthatadherestotheGIPS®standardsareavailableuponrequest. AportfoliomanagementchangeoccurredeffectiveJuly1,2014.Therewerenochangestotheinvestmentprogramorstrategyrelatedtothiscomposite.  

48

Monitoring and Risk Management Elements

• Equity Steering Committee Oversight – Periodic review by senior investment professionals promotes consistency of the strategy’s investment process and portfolio construction. • Quantitative Risk Management Tools – Wilshire Variance Analysis enables portfolio managers to review performance attribution versus benchmarks from a holdings-based perspective. – Barra risk analysis provides managers with a common risk factor tool to analyze their strategy versus a benchmark. – Zephyr returns-based style analysis allows portfolio managers to analyze the style and size consistency of their strategy versus a benchmark.

25 49

Your Institutional Team Imperial County Employees’ Retirement System

Primary Contact: John D. Plowright, CFA Institutional Client Service Executive Phone: 415-772-1117 Fax: 415-772-1111 E-mail: [email protected]

Serves as your main point of contact and provides a link to the resources of T. Rowe Price. Conducts portfolio reviews, coordinates reporting, and gets answers to your questions.

Secondary Contact: David B. Orlando Institutional Client Service Executive Phone: 415-772-1103 Fax: 415-772-1111 E-mail: [email protected]

Available to address your questions and concerns when your primary contact is unavailable.

Operations: Anne M. Fader Institutional Client Operations Manager Phone: 410-345-2268 Fax: 410-345-2829 E-mail: [email protected]

Addresses contributions and distributions to and from your account, works closely with your primary client service contact and investment support to resolve operational issues, and coordinates review of legal agreements.

Your client service team is your partner in getting you the information you need. 50

Biographical Backgrounds T. Rowe Price – Presenters

J. David Wagner, CFA David Wagner is the lead portfolio manager for T. Rowe Price’s U.S. Small-Cap Value Equity Strategy. He also serves on the Investment Advisory Committees of the U.S. Small-Cap Core Equity and U.S. Small-Cap Growth Equity Strategies. He is a vice president of T. Rowe Price Group, Inc and T. Rowe Price Associates, Inc. Mr. Wagner has 16 years of investment experience, 15 of which have been with T. Rowe Price. He joined the firm in 2000 as an analyst covering financial services after serving as a summer intern at T. Rowe Price in 1999. Prior to this, Mr. Wagner was employed as an associate analyst in the antitrust area by National Economic Research Associates, Inc. Mr. Wagner earned a B.A., summa cum laude, in economics from the College of William & Mary and an M.B.A. from the University of Virginia, Darden Graduate School of Business Administration. He has also earned the Chartered Financial Analyst designation. Michele A. Ward, CFA Michele Ward is a portfolio specialist in the U.S. Equity Division of T. Rowe Price. She acts as a proxy for equity portfolio managers with institutional clients, consultants, and prospects. Ms. Ward supports T. Rowe Price’s U.S. small- and mid-cap equity strategies. She is a vice president of T. Rowe Price Associates, Inc. Ms. Ward has more than 30 years of investment experience. Before joining the firm, she was most recently an associate partner at Hewitt EnnisKnupp. In this role, Ms. Ward advised and educated plan sponsor investment committees on investment policy, plan structure, and regulatory and fiduciary issues. Ms. Ward earned a B.A., magna cum laude, in political science from Yale University and an M.B.A. from the Yale School of Management. She has also earned the Chartered Financial Analyst designation.

51

Biographical Backgrounds T. Rowe Price – Presenters

John D. Plowright, CFA John Plowright is a North America client service executive for Global Investment Services, the organization responsible for the firm’s institutional business worldwide. He is a vice president of T. Rowe Price Group, Inc., and T. Rowe Price Associates, Inc. Mr. Plowright has 22 years of investment experience, nine of which have been at T. Rowe Price. Before joining T. Rowe Price in 2004, he was a director of client services with RCM Capital Management, and prior to that, he was a director and fixed income specialist with RCM Capital Management. Mr. Plowright earned a B.A. in religion from Earlham College, cum laude, and a master’s degree in international management from American Graduate School of International Management. Mr. Plowright has earned the Chartered Financial Analyst designation and is a Series 7 and 63 registered representative.

52