BAY COUNTY EMPLOYEES RETIREMENT SYSTEM

www.loomissayles.com | One Financial Center Boston, MA 02111617 482-2450 | BOSTON DETROIT SAN FRANCISCO LONDON SINGAPORE

BAY COUNTY EMPLOYEESRETIREMENT SYSTEM

PRESENTED BY:Todd Needham, CFAVP, Client Portfolio Manager

October 17, 2017

loomis sayles at a glance

As of 6/30/2017. *Includes the assets of both Loomis, Sayles & Co., LP, and Loomis Sayles Trust Company, LLC. ($20.1 billion for the Loomis Sayles Trust Company). Loomis Sayles Trust Company is a wholly owned subsidiary of Loomis, Sayles & Company, L.P. **As of 12/31/2016. 283 investment professionals. 82% of CFA charterholders are investment professionals and 18% are non-investment professionals.

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A RICH INVESTMENT TRADITION WHAT DEFINES US

Serving clients with integrity since 1926 Core attributes: integrity, transparency and a team-oriented culture

$257.6 billion assets under management* Rigorous fundamental analysis complemented by robust macro and market insight

Expertise across all major asset classes Portfolio managers, strategists, research analysts and traders collaborating to identify our best ideas

75% of investment professionals dedicated to research & trading; 159 CFA® charterholders**

Small, accountable product teams implementing portfolio decisions

Global perspective: investors in Boston, San Francisco, Detroit, London and Singapore

Disciplined risk awareness integrated into a high conviction investment process

$257.6 US billion

WHERE WE INVEST AUM BY GLOBAL ACCOUNTS

US retail ($70.9 b)

US institutional ($120.4 b)

Non-US institutional ($60.5 b)

Non-US retail ($5.9 b)

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A SOUND PHILOSOPHY

A RIGOROUS, REPEATABLE PROCESS

PROPRIETARY RESEARCH

DISCIPLINED PORTFOLIO CONSTRUCTION

INTEGRATED RISK MANAGEMENT

a common foundation lies at the heart of all our investment strategies

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deep insight fuels our pursuit of alpha

As of 6/30/2017; Years experience indicates industry experience. FO0118 MALR016803

MACRO STRATEGIES CREDIT RESEARCH QUANTITATIVE RESEARCH

& RISK ANALYSIS TRADING

• Director 37 years experience • Associate Director/Senior Global

Macro Strategist 22 years experience • Senior Equity Strategist 32 years experience • Economist

37 years experience • Senior Commodities Analyst

9 years experience • 2 Research Analysts

8 years experience

• Director 34 years experience • 32 Senior Credit Analysts 19 years average experience • 7 Credit Analysts 8 years average experience • 6 Research Associates • 9 Research Assistants • Proprietary credit rating system

since the 1930s

• 2 Associate Directors 21 years average experience • Quantitative Strategist 22 years experience • Senior Strategist, LDI & Solutions 11 years experience • 3 Senior Quantitative Analysts

14 years average experience • 7 Quantitative Analysts

6 years average experience

• Head of Trading 29 years experience • 4 Trading Directors 24 years average experience • 34 Traders (incl. 4 directors above) 16 years average experience • Dir. of Portfolio Implementation 11 years experience • 19 Portfolio Specialists 20 years average experience • Dir. of Operational Trading Risk Mgmt. 16 years experience • Risk Analyst 10 years experience • 10 distinct asset class teams

SOVEREIGN RESEARCH MORTGAGE & STRUCTURED

FINANCE CONVERTIBLES & SPECIAL

SITUATIONS EQUITY RESEARCH

• 5 Senior Sovereign Analysts 17 years average experience • 2 Analysts 7 years average experience • 2 Research Associates

• Director 20 years experience • 3 Strategists 19 years average experience • 4 Senior Analysts 18 years average experience • Senior Portfolio Analyst 9 years experience • Research Analyst

6 years experience • Research Associate

• Director 32 years experience • 5 Senior Research Analysts 16 years average experience • Research Analyst 6 years experience

• 22 Senior Analysts 20 years average experience • 6 Analysts 7 years average experience

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comprehensive expertise

As of 6/30/2017. Due to rounding, pie chart total may not equal 100%. Sector level assets include all accrued interest, cash and unrealized gain/loss on currency forwards. Other includes municipals, cash & equivalents, and derivatives. Includes the assets of both Loomis, Sayles & Co., LP, and Loomis Sayles Trust Company LLC.

Investment Grade

Corporates 28%

Equities 20%

Developed Country

Treasuries 14%

High Yield Corporates

11%

Mortgage & Structured

Finance 9%

Emerging Market Debt

7%

Bank Loans 4%

Other 3%

Government Related

2% Convertible Bonds

2% By Global Sector

Assets ($ Millions)

Investment Grade Corporates 73,799

Equities 51,283

Developed Country Treasuries 36,072

High Yield Corporates 28,775

Mortgage & Structured Finance 24,297

Emerging Market Debt 17,259

Bank Loans 11,462

Other 7,406

Government Related 4,380

Convertible Bonds 4,121

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our investment platform

As of 6/30/2017. * Co-managed investment strategy

MIKE GILES Chief Investment Risk Officer

JAE PARK Chief Investment Officer

DAVID WALDMAN Deputy CIO

GLOBAL EQUITY OPPORTUNITIES GROWTH

LARGE CAP CORE

SMALL CAP GROWTH

SMALL CAP VALUE VALUE

Global Equity & Income

Global Equity Opportunities

All Cap Growth

Global Growth

Large Cap Growth

Long/Short Equity

Large Cap Core Small Cap Growth

Small/Mid Cap Growth

Small Cap Value

Small/Mid Cap Core

Dividend Income

Focused Value

Large Cap Value

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ALPHA STRATEGIES BANK LOANS

DISCIPLINED ALPHA

EMERGING MARKET DEBT

FULL DISCRETION GLOBAL

RELATIVE RETURN

MORTGAGE & STRUCTURED

FINANCE

Credit Long/Short

Credit Asset

World Credit Asset

Multi-Asset Income

Senior Loans

Senior Floating Rate and Fixed Income

Credit Opportunities

Core

Corporate

Long Corporate

Long Credit

Global Disciplined Alpha*

Corporate

Local Currency

Short Duration

Hard/Local Currency Blend

Multisector

Core Plus

High Yield Full Discretion

Global High Yield

US High Yield

High Yield Conservative

Strategic Alpha

Global Bond

Global Credit

Global Debt Unconstrained

Global Disciplined Alpha*

Short Duration

Inter. Duration

Core

Core Plus

IG Corporate

Long Corporate

Long Credit

Long Gov’t/Credit

Custom LDI

Agency MBS

Investment Grade

Securitized Credit (ERISA)

High Yield

Private Debt and Equity

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product overview HIGHLY EXPERIENCED, SEASONED TEAM

As of 6/30/2017.

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PRODUCT TEAM CAROL EMBREE, CFA Portfolio Manager

RICK RACZKOWSKI Portfolio Manager

KURT WAGNER, CFA, CIC Portfolio Manager

Yrs of industry experience: 32 28 39

Yrs with firm: 32 16 23

GENE MORRISON, CFA Product Manager

EJ TATEOSIAN, CFA Product Manager

KRISTY HERGRUETER Assoc. Product Manager

MICHAEL MCDADE, CFA Investment Grade

Sector Analyst PRAMILA AGRAWAL, PhD, CFA

Strategist

Yrs of industry experience: 22 19 7 18 10

Yrs with firm: 3 1 5 11 9

DAN PLOFSKY, CFA Portfolio Specialist

DAN CONKLIN, CFA Investment Analyst

ANNA WANG Investment Analyst

JEFF BIENIEK Investment Associate

MICHAEL CROWELL Assoc. Director,

Fixed Income QRRA

Yrs of industry experience: 18 7 5 4 12

Yrs with firm: 18 5 2 3 10

FIRMWIDE RESOURCES Investment Grade Sector Team P. Agrawal N. Burke J. DeVoy C. Embree B. Kennedy M. McDade J. McIntosh R. Raczkowski L. Royer S. Service D. Simmons K. Wagner

Credit Research Director 32 Senior Analysts 7 Analysts 6 Research Associates 9 Research Assistants

Convertibles & Special Situations Director 5 Senior Analysts Research Analyst

Quant. Research & Risk Analysis 2 Associate Directors Quantitative Strategist Senior Strategist, LDI & Solutions 3 Senior Quantitative Analysts 7 Quantitative Analysts

Fixed Income Trading 28 Traders/TAs Director, Portfolio Implementation 16 Portfolio Specialists Director, Operational Trading Risk Mgt. Risk Analyst

Macro Strategies Director Assoc. Director/ Senior Global Macro Strategist Senior Equity Strategist Economist Senior Commodities Analyst 2 Research Analysts

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guideline summary

Benchmark

• Bloomberg Barclays US Corporate Investment Grade Bond Index

Limitations

• Credit Quality: Account may not hold more than 10% MV in securities rated below Moody or S&P Baa3/BBB-. The highestrating will govern split rated securities. Account may not hold any securities with a Moody or S&P rating below B3/B-, attime of purchase. Downgrades below B3/B- can be held if advantageous.

• Issuer: Account may not hold more than 5% MV in any one Issuer, excluding US Treasuries, Govt agencies and GSE's.

• Issue: Account may not hold more than 5% of the outstanding fixed income obligations of any one issue, excluding USGovernment and Agency securities.

• Country: Account may not purchase foreign fixed income securities, excluding Yankee Bonds. This includes all non-USDdenominated securities.

• Duration: +/- 1 year relative to the Bloomberg Barclays US Corporate Investment Grade Bond Index.

• Account may not invest in securities issued by Bay County.

Guideline summary is not a complete restatement of guidelines. The slide is intended to be a summary to aid in the review process.

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performanceTRAILING RETURNS AS OF 09/30/2017 (%)

QTD YTD 1 Year 2 Years 3 Years 5 Years 10 YearsSince

Inception01/31/1997

Excess Return (Gross) 0.23 0.72 0.78 1.03 0.53 0.86 0.85 0.66

PORTFOLIO VALUATION (USD)

Portfolio

Total 40,342,438

Benchmarks: Citigroup Broad Inv-Grade (BIG) ( 01/31/1997 - 06/30/1999 ). BBG BARC Credit ( 06/30/1999 - 02/29/2012 ). BBG BARC U.S. Corporate Investment Grade ( 02/29/2012 - 09/30/2017 ).The current benchmark is Bloomberg Barclays Corporate.

Sources: Loomis, Sayles & Company, L.P. and others For Institutional Investor Use Only. Not for Further Distribution September 30, 20179

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performanceCALENDAR YEAR RETURNS AS OF 09/30/2017 (%)

2016 2015 2014 2013 2012 2011 2010 2009 2008 2007

Excess Return (Gross) 1.07 -0.05 0.63 1.14 2.50 0.26 2.43 7.35 -5.24 -0.84

Benchmarks: Citigroup Broad Inv-Grade (BIG) ( 01/31/1997 - 06/30/1999 ). BBG BARC Credit ( 06/30/1999 - 02/29/2012 ). BBG BARC U.S. Corporate Investment Grade ( 02/29/2012 - 09/30/2017 ).The current benchmark is Bloomberg Barclays Corporate.


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performance attribution by sector12/31/2016 TO 09/30/2017 (%)

TOTAL RETURNS

Total Return

Portfolio Return 5.91

Benchmark Return 5.19

Excess Return 0.72

Figures on the bar chart may not add up to total excess return as they exclude impact of trading and pricing differences. Excess Return by sector excludes yield curve impact. Values shown include impact of hedging if utilized. Unless otherwisenoted, the performance shown is gross of management fees.The current benchmark is Bloomberg Barclays Corporate.


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attribution analysis12/31/2016 TO 09/30/2017 (%)

Sector Distribution PortfolioFinal Weight

BenchmarkFinal Weight

PortfolioAverageWeight

BenchmarkAverageWeight

PortfolioReturn

BenchmarkReturn Total Effect

Cash & Equivalents 0.35 0.00 0.90 0.00 0.63 5.19 -0.03US Treasuries 0.28 0.00 2.81 0.00 -1.19 5.19 -0.07Agencies 0.00 0.00 0.14 0.00 13.49 5.19 0.01Gov Related 1.09 0.00 0.85 0.00 10.40 5.19 0.02IG Corporate 91.93 100.00 89.49 100.00 5.83 5.19 0.46

IG - Financials 36.70 31.40 35.83 31.39 4.69 4.80 0.04IG - Industrials 52.56 61.73 51.56 61.46 6.45 5.35 0.34IG - Utilities 2.67 6.87 2.10 7.15 9.99 5.61 0.08

HY Corporate 6.35 0.00 5.81 0.00 9.51 5.19 0.29HY - Financials 1.36 0.00 1.56 0.00 11.08 5.19 0.10HY - Industrials 4.68 0.00 3.85 0.00 9.01 5.19 0.18HY - Utilities 0.31 0.00 0.41 0.00 8.17 5.19 0.01

Total Effects are impacted by sector returns and allocation shifts. Returns reflect the entire period. Total Effect excludes yield curve impact. Values shown include impact of hedging if utilized. Unless otherwise noted, the performance shown isgross of management fees.The current benchmark is Bloomberg Barclays Corporate.


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attribution analysis12/31/2016 TO 09/30/2017 (%)

Figures on the bar chart may not add up to total excess return as they exclude impact of trading and pricing differences. Excess Return by sector excludes yield curve impact. Values shown include impact of hedging if utilized. Unless otherwisenoted, the performance shown is gross of management fees.The current benchmark is Bloomberg Barclays Corporate.


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portfolio summary12/31/2016 TO 09/30/2017

PORTFOLIO SUMMARY

12/31/2016 09/30/2017

Portfolio Benchmark Difference Portfolio Benchmark Difference

Yield to Worst (%) 3.55 3.34 0.22 3.36 3.14 0.22

Maturity (years) 10.79 10.55 0.24 10.99 10.76 0.23

Effective Duration (years) 7.40 7.23 0.17 7.67 7.50 0.18

Coupon (%) 4.10 4.07 0.04 4.02 4.00 0.03

Average Quality BAA1 A3 - BAA1 A3 -

OAS (bps) 139 121 18 119 101 18

QUALITY SUMMARY (% OF TOTAL MARKET VALUE)

12/31/2016 09/30/2017


AAA 4.17 2.17 2.00 2.20 2.48 -0.28

AA 7.82 15.13 -7.31 8.33 13.89 -5.56

A 38.20 40.01 -1.82 36.56 38.81 -2.25

BAA 44.11 42.63 1.47 47.51 44.83 2.68

BA 5.55 0.03 5.52 5.17 0.00 5.17

B & Below 0.17 0.00 0.17 0.23 0.00 0.23

NR 0.00 0.02 -0.02 0.00 0.00 0.00

OAS is option adjusted spread.Client Guideline Quality Methodology presented.The current benchmark is Bloomberg Barclays Corporate.


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sector allocation12/31/2016 TO 09/30/2017 (% OF TOTAL MARKET VALUE)

12/31/2016 09/30/2017


Agencies 0.14 0.00 0.14 0.00 0.00 0.00

Cash & Equivalents 0.13 0.00 0.13 0.35 0.00 0.35

Gov Related 0.42 0.00 0.42 1.09 0.00 1.09

HY Corporate 6.18 0.02 6.15 6.35 0.00 6.35

HY - Financials 1.73 0.00 1.73 1.36 0.00 1.36

HY - Industrials 4.02 0.02 4.00 4.68 0.00 4.68

HY - Utilities 0.42 0.00 0.42 0.31 0.00 0.31

IG Corporate 90.16 99.98 -9.82 91.93 100.00 -8.07

IG - Financials 35.29 31.28 4.01 36.70 31.40 5.30

IG - Industrials 52.88 60.99 -8.11 52.56 61.73 -9.16

IG - Utilities 1.99 7.71 -5.72 2.67 6.87 -4.20

US Treasuries 2.98 0.00 2.98 0.28 0.00 0.28

The current benchmark is Bloomberg Barclays Corporate.


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sector allocation12/31/2016 TO 09/30/2017 (% OF TOTAL MARKET VALUE)



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beta historyAS OF 09/30/2017

Relative Credit Excess Return Beta captures the excess return sensitivity of credit holdings to excess returns of the credit index.The current benchmark is Bloomberg Barclays Corporate.


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maturity & duration break-downAS OF 09/30/2017



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appendix - industry level 4AS OF 09/30/2017

09/30/2017

Portfolio % Benchmark % Relative CTB %

Cash 0.35 0.00 0.000Financial Institutions 38.06 31.40 0.038

Banking 29.81 22.77 0.027Brokerage Asset Managers 0.00 0.87 -0.007Finance Companies 1.61 1.02 0.009Financial Other 0.84 0.02 0.007Insurance 5.12 4.29 0.018

Life 2.43 1.48 0.009P&C 1.64 1.69 0.012Health Insurance 1.06 1.12 -0.003

Reits 0.67 2.44 -0.016Office Reits 0.00 0.27 -0.002Retail Reits 0.46 0.77 -0.003Apartment Reits 0.00 0.32 -0.003Healthcare Reits 0.21 0.60 -0.004Other Reits 0.00 0.48 -0.004

Industrial 57.24 61.73 0.080Basic Industry 3.56 3.34 0.019

Metals And Mining 1.51 1.12 0.008Paper 0.45 0.52 0.003Chemicals 1.60 1.70 0.009

Capital Goods 6.68 4.78 0.028Aerospace/Defense 2.59 1.18 0.010Building Materials 1.08 0.31 0.008Diversified Manufacturing 2.35 2.29 0.005Packaging 0.00 0.04 0.000Construction Machinery 0.66 0.75 0.007Environmental 0.00 0.22 -0.001

Communications 7.27 9.79 -0.006Media Entertainment 2.08 2.32 -0.003Cable Satellite 1.43 1.83 0.003Wireless 0.55 0.96 -0.004Wirelines 3.21 4.68 -0.002

Consumer Cyclical 7.98 7.47 0.025Automotive 3.94 2.40 0.010Home Construction 0.48 0.06 0.011Lodging 0.28 0.15 0.001Consumer Cyclical 1.41 1.42 0.007Leisure 0.00 0.04 0.000Restaurants 0.19 0.43 -0.001Retailers 1.67 2.99 -0.003

09/30/2017


Consumer Non Cyclical 12.64 15.94 0.016Tobacco 1.85 1.22 0.007Supermarkets 0.10 0.29 -0.001Consumer Products 0.74 1.01 -0.001Healthcare 2.87 3.32 0.008Food And Beverage 3.09 4.28 0.008Pharmaceuticals 3.99 5.83 -0.004

Energy 7.75 9.44 -0.040Independent 4.25 2.04 0.017Refining 0.64 0.47 -0.002Oil Field Services 0.17 0.38 -0.003Integrated 1.52 2.72 -0.004Midstream 1.17 3.83 -0.048

Industrial Other 0.73 0.36 0.004Technology 5.56 8.51 0.007Transportation 5.07 2.12 0.027

Airlines 2.76 0.37 0.013Transportation Services 1.13 0.47 0.010Railroads 1.19 1.28 0.004

Utility 2.98 6.87 -0.024Electric 2.66 6.30 -0.022Natural Gas 0.32 0.46 0.000Utility Other 0.00 0.12 -0.002

Agencies 0.60 0.00 0.016Owned No Guarantee 0.60 0.00 0.016

Sovereign 0.49 0.00 0.008Treasuries 0.28 0.00 0.000

The industry breakout in this chart utilizes the Barclays Industry Level 4 scheme, which may differ from other sector breakouts in the presentation material, due to different methodologies. Relative CTB is relative contribution to beta.The current benchmark is Bloomberg Barclays Corporate.


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appendix - country of riskAS OF 09/30/2017

09/30/2017


WB Developed 99.20 98.78 0.113Americas 76.32 85.54 0.029

Bermuda 0.23 0.09 0.007Canada 2.08 3.14 0.000Chile 0.29 0.08 0.003United States 73.72 82.23 0.019

Asia 2.75 1.01 0.017Hong Kong 0.49 0.00 0.005Japan 2.26 0.99 0.012South Korea 0.00 0.01 0.000

Europe / Non-Eurozone 8.11 5.81 0.020Norway 0.42 0.00 0.008Sweden 0.00 0.25 0.000Switzerland 1.11 1.12 0.003United Kingdom 6.58 4.44 0.010

Eurozone Core 8.67 4.48 0.033Belgium 1.37 1.50 0.009Finland 0.35 0.00 0.006France 3.14 0.90 0.010Germany 1.46 0.48 0.002Luxembourg 0.26 0.00 0.002Netherlands 2.10 1.59 0.003

Eurozone Periphery 0.18 0.45 -0.001Ireland 0.00 0.01 0.000Italy 0.00 0.05 0.000Spain 0.18 0.39 -0.001

Middle East 1.37 0.32 0.013Israel 0.88 0.32 0.005Saudi Arabia 0.49 0.00 0.008

Oceania 1.79 1.17 0.002Australia 1.79 1.17 0.002

09/30/2017


EM 0.80 1.22 0.004Africa 0.00 0.02 0.000

South Africa 0.00 0.02 0.000Americas 0.80 0.95 0.006

Brazil 0.80 0.43 0.016Colombia 0.00 0.02 0.000Mexico 0.00 0.37 -0.006Peru 0.00 0.14 -0.004

Asia 0.00 0.25 -0.002China 0.00 0.25 -0.002

NON-USD EXPOSURE

09/30/2017

Portfolio % Benchmark %Total Non-USD 0.00 0.00

Relative CTB is relative contribution to beta.The current benchmark is Bloomberg Barclays Corporate.


Data as of 8/7/2017: Loomis Sayles Macro Strategies Group. This material is provided for informational purposes only and should not be construed as investment advice. The forecasted views and opinions expressed reflect those of the authors and do not necessarily reflect the views of Loomis, Sayles & Company L.P. All statements are made as of the date of the presentation and are subject to change at any time without notice.

THE ECONOMIC EXECUTION WE HAVE BEEN LOOKING FOR IS NOW OCCURRING

WITH THE GLOBAL ECONOMY ON MORE SURE FOOTING, OPTIMISM REMAINS HIGH • A widely expected twenty five basis point Fed Funds rate hike took place last

June, and balance sheet run off is expected to begin in early October 2017. • We believe a September pause in the Fed’s hiking cycle is likely as the

framework for balance sheet run off is more formally announced. • Gradually increasing caps on the US dollar amount of securities allowed to roll

off the balance sheet should have minimal impact on treasury yields over time. • Although in the fairly distant future, we find the Fed’s method of balance sheet

reduction a likely framework for other central banks that have engaged in QE to begin removing accommodation.

FED LAYING THE FRAMEWORK FOR REMOVING ACCOMODATION

U.S. REAL GDP SHOULD REMAIN STABLE HEADING INTO 2018 • On a year over year basis real economic growth in the United States is expected

to remain decent albeit at slightly slower rates than past expansions. • Single family housing starts should rise steadily throughout next year. • The unemployment rate may slowly move below the historical NAIRU, non

accelerating inflation rate of unemployment, which is between 4.0% and 5%. • The labor force participation rate has risen a bit, but is likely to level off over the

coming quarters as nonfarm payroll growth begins to moderate. • Annual productivity growth, measured by output per hour worked, is expected

to improve marginally over the next twelve months. • Headline inflation is expected to rise this year but declines to 1.9% in 2018.

• The US corporate profits recession ended during the fourth quarter of 2016 and profits are estimated to grow throughout the remainder of this year and next, providing an important tailwind to credit markets.

• A corporate tax cut, regulation rollbacks and slightly better nominal GDP would likely provide an additional boost to corporate profits in 2018.

• Late cycle leverage trends persist but the overall credit trend is largely stable as most corporates inch further along within the expansion phase of this cycle.

• Three commodity centric industries, independent energy, metals & mining, and pipelines/MLP’s, are now firmly in the credit repair phase.

macroeconomic environment and outlook

• Manufacturing PMI indicators in developed and emerging market countries have stabilized and remain at levels consistent with economic expansion.

• GDP growth and inflation measures have improved modestly around the world, but economic fundamentals do not suggest a sharp rate rise is imminent.

• For the first time in many years, Washington could prove to be a positive source of corporate earnings catalysts in the quarters ahead.

• Although business sentiment and consumer confidence have improved, it is unlikely that new fiscal policies will meaningfully enhance bottom line U.S. GDP until 2018.

YEAR-END FORECAST US DOMESTIC GLOBAL WESTERN EUROPE ASIA PACIFIC LATIN AMERICA

2017 2018 2017 2018 2017 2018 2017 2018 2017 2018

REAL GDP GROWTH 2.2% 2.3% 3.4% 3.4% 1.7% 1.5% 5.4% 5.2% 1.4% 2.0% HEADLINE CPI INFLATION 2.0% 1.9% 3.1% 2.9% 1.6% 1.5% 2.9% 2.9% 6.5% 5.3% CURRENT ACCOUNT BALANCE (% GDP) -2.6% -3.3% - - 2.8% 2.7% 1.6% 1.5% -2.1% -2.2% INTEREST RATES (10-YEAR); END OF YEAR 2.5% 3.3% - - - - - - - -

Figures shown are estimates and are subject to change at any time.

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Data source: Barclays Capital, Bloomberg.

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8/31/2015 0.00% 0.23% 0.38% 0.74% 1.55% 2.22% 2.96%

8/31/2016 0.33% 0.46% 0.59% 0.81% 1.20% 1.58% 2.23%

8/31/2017 0.99% 1.07% 1.22% 1.33% 1.70% 2.12% 2.73%

Yield Change (bps.) 99 84 84 59 15 -10 -24

Annualized Total Return (%)

8/31/2015 - 8/31/2017 0.45 0.72 0.71 0.58 1.18 1.93 4.26

bond market environment HISTORICAL US TREASURY YIELD CURVES

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Data source: Barclays Capital, Bloomberg.

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12/31/2016 0.50% 0.61% 0.81% 1.19% 1.93% 2.44% 3.07%

8/31/2017 0.99% 1.07% 1.22% 1.33% 1.70% 2.12% 2.73%

Yield Change (bps.) 49 46 41 14 -23 -33 -34

Total Return (%)

12/31/2016 - 8/31/2017 0.50 0.63 0.53 0.73 2.25 4.07 8.58

bond market environment HISTORICAL US TREASURY YIELD CURVES

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2.65 3.05 1.04 1.67 1.503.60 4.67

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bond market environment US MARKET RETURNS BY QUALITY 2016 VS 2017 YTD

Data Source: Barclays Capital Index Returns. Information through 8/31/2017. 24

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Dec-

02Ap

r-03

Aug-

03

Dec-

03

Apr-

04

Aug-

04

Dec-

04Ap

r-05

Aug-

05

Dec-

05Ap

r-06

Aug-

06

Dec-

06Ap

r-07

Aug-

07

Dec-

07

Apr-

08

Aug-

08

Dec-

08Ap

r-09

Aug-

09

Dec-

09Ap

r-10

Aug-

10

Dec-

10Ap

r-11

Aug-

11

Dec-

11

Apr-

12

Aug-

12

Dec-

12Ap

r-13

Aug-

13

Dec-

13Ap

r-14

Aug-

14

Dec-

14Ap

r-15

Aug-

15

Dec-

15

Apr-

16

Aug-

16

Dec-

16Ap

r-17

Aug-

17

bps

U.S Credit - OAS U.S. Credit A - OAS U.S. Credit Baa - OAS U.S. Corporate High Yield - OAS

Source: Barclays Capital, OAS data through 08/31/2017. We believe this information to be reliable but do not guarantee it’s accuracy. Past performance is not an indicator of future performance.

MTD Total Return

YTD Total Return

Total Return 3 Month

Excess Return 3 Month

Excess Return YTD

U.S. Credit 0.84 5.31 1.84 0.56 1.60U.S. Credit A 0.93 5.14 1.91 0.58 1.25U.S. Credit Baa 0.76 6.18 2.00 0.65 2.27U.S. Corporate High Yield (0.04) 6.05 1.20 0.51 3.86U.S. Long Term Credit 1.46 8.91 3.36 0.85 1.99U.S. Intermediate Agg. 0.65 2.74 0.85 0.10 0.37U.S. Intermediate Credit 0.57 3.82 1.19 0.45 1.45U.S. Aggregate 0.90 3.64 1.23 0.16 0.49

bond market environment OAS & EXCESS RETURN IN THE RECENT MARKET

25

0

100

200

300

400

500

600

700

Aug-

01

Feb-

02

Aug-

02

Feb-

03

Aug-

03

Feb-

04

Aug-

04

Feb-

05

Aug-

05

Feb-

06

Aug-

06

Feb-

07

Aug-

07

Feb-

08

Aug-

08

Feb-

09

Aug-

09

Feb-

10

Aug-

10

Feb-

11

Aug-

11

Feb-

12

Aug-

12

Feb-

13

Aug-

13

Feb-

14

Aug-

14

Feb-

15

Aug-

15

Feb-

16

Aug-

16

Feb-

17

Aug-

17

IG Corporates 10yr Avg 15yr Avg

8/31/2017 10 Yr Average 15 Yr AverageCurrent Spread to

10 Yr AvgCurrent Spread to

15 Yr AvgIG Financials 101 217 175 (116) (73)IG Industrials 116 170 153 (55) (38)IG Utilities 105 173 154 (68) (49)

IG Corporates 110 188 161 (78) (51)

Source: Barclays Capital; data through 8/31/2017.

bond market environment INVESTMENT GRADE SECTOR SPREADS

26

0

100

200

300

400

500

600

700Au

g-01

Aug-

02

Aug-

03

Aug-

04

Aug-

05

Aug-

06

Aug-

07

Aug-

08

Aug-

09

Aug-

10

Aug-

11

Aug-

12

Aug-

13

Aug-

14

Aug-

15

Aug-

16

Aug-

17

OAS

(bps

)

US Corp IG 10yr avg 15yr avg

8/31/201710 Yr

Average15 Yr

AverageCurrent Spread

to 10 Yr AvgCurrent Spread to

15 Yr AvgUS Corp IG 110 188 161 (77) (51)

Aaa 67 94 84 (27) (17)Aa 65 125 105 (60) (39)A 87 167 143 (80) (55)

Baa 139 234 206 (95) (67)Data source: Barclays Capital. Averages computed by Loomis Sayles. Data through 08/31/2017.

bond market environment US HIGH GRADE CORPORATE SPREADS

27

0

50

100

150

200

250

300

350

400

450

500

Aug-

01

Aug-

02

Aug-

03

Aug-

04

Aug-

05

Aug-

06

Aug-

07

Aug-

08

Aug-

09

Aug-

10

Aug-

11

Aug-

12

Aug-

13

Aug-

14

Aug-

15

Aug-

16

Aug-

17

basis

poi

nts

LT Credit 10yr Avg 15yr Avg

Data source: Barclays Capital. Averages computed by Loomis Sayles. Data through 08/31/2017.

8/31/201710 Yr

Average15 Yr

AverageCurrent Spread

to 10 Yr AvgCurrent Spread

to 15 Yr AvgLT Credit 161 207 182 (46) (22)

LT Aaa 88 105 94 (17) (6)LT Aa 111 150 124 (38) (13)LT A 130 188 161 (58) (32)

LT Baa 200 248 224 (48) (24)

bond market environment LONG TERM CREDIT SPREADS

28

0

200

400

600

800

1000

1200

1400Re

its

Fina

nce

Brok

erag

e

Insu

ranc

e

Basi

c In

dust

ry

Bank

ing

Nat

ural

Gas

Cons

umer

Cyc

lical

Com

mun

catio

ns

Tran

spor

tatio

n

Tech

nolo

gy

Elec

tric

Ener

gy

Capi

tal

Goo

ds

Cons

umer

Non

cycl

ical

bps

August 31, 2017 OAS June 30, 2007 OAS 10-Yr Range

bond market environment US IG CREDIT SECTORS: CURRENT SPREAD LEVELS VS. 10-YR HIGH AND LOW

Data source: Barclays Capital, history through 08/31/2017. 29

167

194

151

137

90

68

9887 90

131 127

147

236

283

168

115127

111 113

296

218

68 77

9280

59

89

108

21

82

4956 52

67

89

105116

99108 107 109 104

40 42

5867

8187

59

33

53

7066

76

120 115

54

19

0

1

2

3

4

5

6

7

8

0

50

100

150

200

250

300

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Dow

ngra

de/U

pgra

de R

atio

# of

Upg

rade

s &

Dow

ngra

des

Each

Yea

r

Downgrades

Upgrades

Downgrade/Upgrade Ratio

bond market environment US INVESTMENT GRADE CREDIT QUALITY TRENDS

Yearly Data. Source: Moodys, history through June 30, 2017. 30

175

241

201

9064

92123

97114

226

317 325

409370

336

252 272

303

421

716

812

243

312

375370

303

438

557

189

57 50 6484 97 94 100

167 167 153137

100 11592

178

258246

274298

199

357 363326 329

299 284 298

257

168

0

1

2

3

4

5

6

7

0

50

100

150

200

250

300

350

400

450

500

550

600

650

700

750

800

850

900

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Dow

ngra

de/U

pgra

de R

atio

# of

Upg

rade

s &

Dow

ngra

des

Each

Yea

r

Downgrades

Upgrades

Downgrade/Upgrade Ratio

Yearly Data. Source: Moodys, history through June 30, 2017.

bond market environment US HIGH YIELD CREDIT QUALITY TRENDS

31

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Jul-8

2

Jul-8

3

Jul-8

4

Jul-8

5

Jul-8

6

Jul-8

7

Jul-8

8

Jul-8

9

Jul-9

0

Jul-9

1

Jul-9

2

Jul-9

3

Jul-9

4

Jul-9

5

Jul-9

6

Jul-9

7

Jul-9

8

Jul-9

9

Jul-0

0

Jul-0

1

Jul-0

2

Jul-0

3

Jul-0

4

Jul-0

5

Jul-0

6

Jul-0

7

Jul-0

8

Jul-0

9

Jul-1

0

Jul-1

1

Jul-1

2

Jul-1

3

Jul-1

4

Jul-1

5

Jul-1

6

Jul-1

7

Jul-1

8

Trailing 12 month US Speculative Grade Issuer Default Rates Baseline Forecast

bond market environment US SPECULATIVE GRADE DEFAULT TRENDS

Source: Moodys, history through July 2017. Moodys Forecast through July 2018. 32

0

500

1000

1500

2000Au

g-07

Feb-

08

Aug-

08

Feb-

09

Aug-

09

Feb-

10

Aug-

10

Feb-

11

Aug-

11

Feb-

12

Aug-

12

Feb-

13

Aug-

13

Feb-

14

Aug-

14

Feb-

15

Aug-

15

Feb-

16

Aug-

16

Feb-

17

Aug-

17

bps

High Yield OAS Investment Grade OAS US IG 10-Year Average US High Yield 10-Year Average

bond market environment US INVESTMENT GRADE AND HIGH YIELD OPTION-ADJUSTED SPREADS

Data source: Barclays Capital, history through 08/31/2017. 33

Bay

Cou

nty

Empl

oyee

s Ret

Sys

tem

contactsRELATIONSHIP MANAGEMENT

Todd Needham, CFA

Client Portfolio Manager

617-960-2092

[email protected]

Albert Wong

Client Portfolio Analyst

617-960-4490

[email protected]

Carrie Cameron

Administrative Assistant

617-535-5403

[email protected]

John Trydahl

Institutional Services

312-339-2726 (cell)

[email protected]

Sources: Loomis, Sayles & Company, L.P. and others For Institutional Investor Use Only. Not for Further Distribution34

BAY COUNTY EMPLOYEES RETIREMENT SYSTEM

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