FROM: Lisa Sorani, Manager of HR Employee Services LS -

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POSSIBLE OUTCOMES: ALTERNATIVE SCENARIO 2 r • The non-partisan Congressional Budget Office sees continued growth in Government Debt as entitlement programs expand as the population ages Pension Consulting Alliance, Inc. ││ EBMUD Fixed Income Discussion │ 38
POSSIBLE OUTCOMES: ALTERNATIVE SCENARIO 2 r • The outcome for Fixed Income investors in this alternative ti scenario greatly depends d on the actions of the Government and the Fed • If the Government decides to accommodate the increase in debt service cost through austerity then investors may be in for a prolonged period of ultra-low interest rates o As mentioned, such an outcome would put extreme pressure on Plan Sponsors • If the Government chooses to accommodate the higher debt service cost with additional borrowings then investors face a more perilous situation o o o This method of accommodation creates a more unstable situation in which debt service costs grow more quickly In this scenario, investors’ risk tolerance plays an important role If investors become more adverse to holding the debt they may begin to sell their holdings or at least slow or stop their purchase of additional securities ♦ This would drive up interest rates, possible quickly and in a disorderly fashion • In such a scenario, investors would face capital losses as interest rates rise o Such losses could be extremely high if the situation unfolds disorderly Pension Consulting Alliance, Inc. ││ EBMUD Fixed Income Discussion │ 39
Page 21 and 22:
M E M O R A N D U M Date: April 29,
Page 23 and 24: Recent Investment Performance Barro
Page 25: Additional Considerations Barrow Ha
Page 29 and 30: For example, as of the most recent
Page 31 and 32: Q1 - 2013 Preliminary Recent Invest
Page 33 and 34: Q1 - 2013 Preliminary Periods endin
Page 35: Q1 - 2013 Preliminary Fixed Income
Page 38 and 39: AGENDA ITEMS Section Tab Current In
Page 40 and 41: THE CURRENT INTEREST RATE ENVIRONME
Page 50 and 51: SECTION 2 LOOKING FORWARD Source: W
Page 52 and 53: LOOKING FORWARD: INTRODUCTION r •
Page 54 and 55: LOOKING FORWARD: POSSIBLE OUTCOMES
Page 56 and 57: POSSIBLE OUTCOMES: ALTERNATIVE SCEN
Page 78 and 79: LOOKING FORWARD: CONCLUSIONS r •
Page 80 and 81: INVESTMENT OPTIONS r • In light o
Page 82 and 83: INVESTMENT OPTION 2 r • Option 2:
Page 84 and 85: INVESTMENT OPTION 4 r • Option 4:
Page 86 and 87: INVESTMENT OPTION 4-A r • Option
Page 88 and 89: INVESTMENT OPTION 4-B r • Option
Page 90 and 91: INVESTMENT OPTION 4-C r • Option
Page 92 and 93: CONCLUSIONS r • There are a few a
Page 95 and 96: Considering a Real Return Class Eas
Page 97 and 98: Defining Inflation • Inflation is
Page 99 and 100: Expert Views 5
Page 101 and 102: Expert Views: Inflation Doves • B
Page 103 and 104: Expert Views: Inflation Doves The E
Page 105 and 106: Expert Views: Inflation Hawks • B
Page 107 and 108: Expert Views: Inflation Hawks The E
Page 109 and 110: Expert Views: Summary • Experts a
Page 111 and 112: Institutional Investor Response •
Page 113 and 114: Modeling the Real Return Class •
Page 115 and 116: Modeling the Real Return Class •
Page 117 and 118: Implementing a Real Return Class
Page 119 and 120: Appendix 25 25
Page 121 and 122: Modeling a Real Return Class SUMMAR
Page 123 and 124: A Brief Description of Global Infla
Page 125 and 126:
A Brief Description of Absolute Ret
Page 127 and 128:
A Brief Description of Absolute Ret
Page 129 and 130:
A Brief Description of Commodities
Page 131 and 132:
A Brief Description of Oil & Gas RE
Page 133 and 134:
A Brief Description of Oil & Gas RE
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FROM: Lisa Sorani, Manager of HR Employee Services LS -

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