APFC.ORGTo learn more about the Alaska Permanent Fund, and the Corporation that manages and invests it, please visit our website at apfc.org.

Principal = Pro-Rata Shareof Cost Basis of Investment

ERA = Pro-Rata Shareof Cost Basis of Investment

Unrealized Gains and LossesAccounted for in Principaland ERA (pro-rata share)Once Realized – to ERA

Net Investment Earnings Statutory Net Income per AS 37.13.140

Realized Gains and Losses Cash Flow Income: Stock Dividends, Bond Interest, Real

Estate Leases, Alternative Investment Distributions

Management and Investment of the FundAlaska Permanent Fund Corporation

Single Asset Allocation (pro-rata shares)Stocks, Bonds, Real Estate, Alternatives

Earnings Reserve Account Available for Appropriation

Alaska Statutes AS 37.13.145(a)

Operating and Investment ExpensesInflation Proofing of Principal

Transfers for PFD PayoutsState Government

Royalties Inflation Proofing

Special Appropriations

Principal Constitutionally Protected

Alaska Constitution, Article IX, Section 15

HOW THEFUND WORKS

AN AMENDMENT TO THE ALASKA STATE CONSTITUTION ESTABLISHED THE ALASKA PERMANENT FUND

In an historic 1976 vote, Alaskans amended the Constitution to establish the Alaska Permanent Fund (Fund) and directed that at least 25 percent of Alaska’s non-renewable mineral royalties be deposited into the Fund and used for income-producing investments. The Constitution does not allow the Principal of the Fund to be spent, leaving only net investment earnings that are deposited into the Earnings Reserve Account available for appropriation by the Legislature.

ALASKA CONSTITUTION ARTICLE IX, SECTION 15Alaska Permanent Fund.At least twenty-five percent of all mineral lease rentals, royalties, royalty sale proceeds, federal mineral revenue sharing payments and bonuses received by the State shall be placed in a permanent fund, the principal of which shall be used only for those income-producing investments specifically designated by law as eligible for permanent fund investments. All income from the permanent fund shall be deposited in the general fund unless otherwise provided by law.

APFC – ALASKA PERMANENT FUND CORPORATION

The Alaska Permanent Fund Corporation (APFC) manages and invests the assets of the Alaska Permanent Fund on behalf of current and future generations of Alaskans. APFC’s investment model has been recognized globally for its ability to create and grow value on a sustainable basis for Alaska.

Under the direction of the Board of Trustees, our APFC team of dedicated professionals manages a long-term, diversified portfolio comprised of stocks, bonds, real estate, and alternative investments. All investments must balance expected returns with any risks that are undertaken, ensuring that the APFC portfolio provides a compelling overall risk-adjusted return for Alaska.

ONE FUND – TWO ACCOUNTS

The Alaska Permanent Fund has two separate accounts: the Principal (non-spendable/permanent savings) and the Earnings Reserve Account (spendable/available for appropriation), both of which are invested in one comprehensive investment strategy.

The Principal is constitutionally established and permanently protected; it can only be used for income-producing investments.

The Earnings Reserve Account (ERA) is established in Alaska Statutes as an account to hold the realized earnings from the Permanent Fund’s investment portfolio. The ERA can be appropriated (spent) by the Alaska State Legislature for any state purpose. Historically, the ERA has been used to support the investment management and operations of the Fund, other state agencies involved with collecting royalties and distributing dividends, and to pay dividends to eligible Alaskans.

TRANSFORMAT IO N

“

Created as a promise for future generations, the Alaska Permanent Fund is now in its fifth decade. As stewards of the Fund’s well-being, our team at the Alaska Permanent Fund Corporation manages a portfolio worth more than 60 billion dollars for our Alaskan neighbors.

This is no small undertaking. Our staff includes accountants, IT experts, administrative and trade operations professionals, and investment strategists who work together to grow and protect one of Alaska’s most important resources. We understand the tremendous privilege and responsibility that comes with managing these assets. The Fund generates important income for our State, and we hold our mission of serving fellow and future Alaskans in the front of our minds as we enter the office each morning.

Alaska has reached a transformative moment, looking toward the Fund to answer budget challenges in new ways. Our team is also changing and adapting. This year has been one of internal growth as we updated programs and developed new infrastructure. We also expanded our talent pool, especially in our IT

APFC is committed to meeting the performance objectives established by the Board of Trustees and achieving the goals set forth in APFC’s Strategic Plan to develop and fully implement best-in-class asset allocation and investment capabilities to produce target long-term total returns. Strategic performance benchmarks are an integral part of our portfolio management and allow for the evaluation of asset class performance relative to passive and peer comparisons.

The APFC team works diligently to actively manage the Fund and for fiscal year 2017 (FY17) successfully outperformed the Total Fund performance benchmarks and the strategic return objective established by the Board of Trustees. The outperformance of the Total Fund versus the Passive Index Benchmark represents $1.2 billion in FY17 and over $4.3 billion over 5 years in value added growth that the APFC staff generated in higher returns through active asset allocation and portfolio management. The Fund’s investments gained 12.57% in FY17 and the Fund ended June 30, 2017 with a total record value of $59.8 billion, comprised of $47.0 billion in the Principal of the Fund and $12.8 billion in the Earnings Reserve Account. Following the FY17 year-end close, the

department, an area that becomes increasingly important in global finance. While we have a history of success based on steady, solid investment practices, we also strive to be open-minded and innovative, especially when it comes to how we do business and how we work together as a team and in partnership with other organizations. Efficient procedures, transparent communication, and dedicated teamwork allow us to make savvy and profitable investments.

Another transformation is our updated website, apfc.org. Transparency is one of our core values, and the new design makes information easier to access and understand. As we have always done, each day the daily market value of the Fund is posted on the website, meaning that all Alaskans can check in on how we are doing. We’ve also updated our logo to reflect who we are—a blend of modern creativity and steady, time-tested approaches. As an international finance group that partners with peers around the world, our online presence must reflect the professionalism and passion that we put toward our work each day.

The Alaska Permanent Fund is made up of stocks, bonds, real estate, and other investments from around the world. The Alaska Permanent Fund Corporation’s thoughts and decisions behind the Fund’s success, however, are Alaskan through-and-through. Alaskans have always done more with less in tougher conditions, and our team is no different. The Fund has consistently exceeded benchmarks established by the Board of Trustees. Under APFC’s stewardship, the Fund’s investments gained 12.57 percent over the 2017 fiscal year, and over the last three years, added 4.4 billion dollars in additional value over a passive benchmark. These increases are thanks to active management by our hardworking team.

Total Fund value has continued climbing to record highs and is now over $63 billion. Monthly financial statements and performance reports are posted on our website at apfc.org.

Long-Term Projected Returns Callan Associates has served as the Alaska Permanent Fund Corporation’s investment consultant for almost three decades, offering a professional suite of consulting services for the Board of Trustees and APFC staff including extensive review of the Fund’s performance and updates on capital market conditions. Callan develops long-term capital market projections on an annual basis, including expectations for return, volatility, and

The Fund was created by Alaskans in 1976, who voted to amend the State constitution. By law, a portion of certain mineral royalties each year go to the Fund and are used to secure investments that will produce income. The Fund is divided into two categories: the Principal, which cannot be spent, and the realized earnings, which can be used by the Legislature for any public purpose, including the Permanent Fund Dividend distributed to Alaska residents. Realized earnings are the income from bond interest, real estate rent payments, stock dividends, and alternatives cash flow, as well as profits from selling assets that have increased in value. Any losses from selling assets that have decreased in value are subtracted from the realized earnings. Unrealized gains are the changes in value of assets that the Permanent Fund currently holds. These are pro-rated between principal and earnings reserve until the asset is sold, and then any net realized gains (or losses) are recorded in the Earnings Reserve Account. Given the recent focus on the Fund, we designed this publication to offer our Alaska stakeholders an overview of the structure, current investment strategy, and performance of the Fund.

Created by Alaskans for a prosperous future, the Alaska Permanent Fund is one of our most valuable resources. While our team works hard to increase the Fund’s value, I encourage all Alaskans to learn more about the process."

Detailed information about our portfolio, performance, and philosophy can be found at our website, apfc.org. I thank you for entrusting my team with the honor and responsibility of growing wealth for Alaska. I am proud to lead my hardworking team, and I am confident that the Alaska Permanent Fund is poised to meet the needs of Alaskans for many years to come.

correlation for all of the broad asset classes. Callan’s 10-year total return projection for the Fund, based on the current asset allocation, is anticipated to be 6.50%, reflecting a decrease of 45 basis points (0.45%) from the previous forecast. This reduction of long-term expected returns is a natural result of changes in global market conditions based on the combination of recent exceptional returns in the public equities market, the persistence of low interest rates, and the shift of growth toward emerging markets that have fewer developed investment opportunities. These projections represent Callan’s best thinking regarding a longer-term, market outlook and are incorporated by APFC for strategic planning purposes.

LETTER FROM THE CEO

FUND TOTALS AND RETURNS

PE

RF

OR

MA

NC

E

0

-5%

-10%

-15%

0%

-20%

-25%

$10B

5%

$20B

10%

$30B

15%$40B

20%$50B

25%

$60B 30%

1978

1980

1982

1992

20022012

1984

1994

20042014

1986

1996

20062016

1988

1998

200819

902000

2010

Angela M. Rodell

Total Principal Total ERA Return

Assets Under Management $61.5B $59.8B $52.8B Initial Deposit = $734,000

Principal $48.1B $47.0B $44.2B

Earnings Reserve Account - ERA $13.4B $12.8B $8.6B

Total Fund Return 4.15% 12.57% 1.02% 8.78%

Constitutional Deposits from Mineral Revenues $16.5B

Transfers from the ERA for Inflation Proofing $16.2B

Other Appropriations from the ERA and General Fund by the Legislature $7.1B

FY18 Q1 FY17 FY16 SINCE INCEPTION

CONTRIBUTIONS TO PRINCIPAL

APFC’s investment management strategy relies on the combination of an effective asset allocation and active investment of each asset class. APFC employs a combination of internally-managed direct investments, alongside externally-managed fund investments, in order to secure access to high-quality, global opportunities. The goal is to have well-diversified investments that distribute risk and generate the highest possible, long-term returns within the mandate given by the Board of Trustees.

The Board of Trustees’ goal is to preserve the Fund’s Principal and limit risk while maximizing returns for both current and future generations of Alaskans. By adhering to an investment practice which ensures investment efficiency, APFC strives to continue its history as being among the best-managed sovereign wealth funds in the world. Public Equities – Stocks: Represent a share of ownership in exchange-traded, publicly-traded companies. The Public Equities allocation is comprised of U.S., international, and global stocks. The Permanent Fund owns shares in more than 10,000 publicly-traded companies around the world.

Fixed Income Plus – Bonds: A form of loan. A bond “issuer”—a corporation or government—borrows money at a preset interest rate for

a preset period of time. The Fixed Income Plus portfolio acts as an anchor to the Fund. During volatile market cycles, these assets provide stability and a source of liquidity to take advantage of market dislocations.

Real Estate: The portfolio is comprised of partial or complete ownership of 56 residential, retail, industrial, and office buildings in the United States and abroad. The Michael J. Burns Building in Juneau, Alaska is part of the Real Estate portfolio and houses our APFC office.

Private Income – Infrastructure, Private Credit, & Income Opportunities: Aims to provide the Fund with a high level of income and limited volatility, through investments in infrastructure, private credit, and other income opportunities. Infrastructure investments are often long-lived, with inflation protection characteristics and include: power generation, timber, electric utility, midstream energy, transportation, water and waste, telecommunications, and other infrastructure.

Private Equity & Growth Opportunities:Investments are made directly into private companies (not publicly-traded in the stock markets) and into funds that invest into them. They include a broad range of investment strategies, investment structures, and underlying assets linked by common characteristics. These investments are accessed through long-term commitments to funds managed by our investment partners.

Asset Allocation Strategies: Portfolios invested in a variety of asset classes with a similar risk/return profile and a specific asset allocation/risk management role as the entire Fund.

Absolute Return: Partnerships that use stock, bond, currency, and commodity investment strategies to achieve a target return on investments with tightly controlled risk-of-loss. Also known as hedge funds, these assets offer better liquidity than most alternative investments, while incorporating a diversified range of geographies, securities, and strategies.

CURRENTINVESTMENT STRATEGY

The successful stewardship of the Fund, one of Alaska’s cherished resources and a symbol of long-term prosperity, has been built upon decades of experience and the establishment of sound investment, governance, accounting, and transparency practices by APFC.

Alaskans can be extremely proud of the Fund, which has gained world-wide recognition as a

model for converting a non-renewable natural resource into a renewable financial resource.

The Alaska Permanent Fund Corporation now has well over $60 billion of assets under management and in response to Alaska’s shifting fiscal climate is central to public dialogue pertaining to the composition of state funding.

ASSETS UNDER MANAGEMENT

Renewable Resource The creation and prudent management of the Alaska Permanent Fund represents one of Alaska’s major achievements towards real and lasting economic stability. In a state with primarily non-renewable resources, the Fund generates renewable revenue for Alaska—as oil and gas revenues are diminishing, the Fund continues to grow.

USE OF FUND EARNINGS FROM THE ERA SINCE INCEPTIONas of June 30, 2017

Paid out to Current Generations | $24.3BSaved for Future Generations | $20.5BTransfers to PrincipalUnspent Realized Earnings | $10.9B

2018 TARGET ASSET ALLOCATION

Public Equities

Fixed Income Plus

Private Equity & Growth Opportunities

Real Estate

Asset Allocation Strategies

Absolute Return

Infrastructure, Credit, & Income Opportunities

5%

22%

6%

39%

6%

11%

11%

44%

36%

20%

BALANCE SHEETS

JUNE 30 JUNE 30

2017 2016

Assets

Cash and temporary investments $ 2,653,513,000 2,213,105,000

Receivables, prepaid expenses, and other assets 544,753,000 456,509,000

Investments:

Marketable debt securities 10,114,640,000 9,800,116,000

Preferred and common stock 25,354,335,000 20,938,177,000

Real estate 6,886,835,000 7,048,144,000

Absolute return 4,567,024,000 5,495,915,000

Private equity 6,818,147,000 5,531,425,000

Infrastructure 2,458,345,000 1,760,701,000

Public-private credit 1,111,752,000 1,080,408,000

Total investments 57,311,078,000 51,654,886,000

Securities lending collateral invested 1,314,953,000 1,022,398,000

Total assets $ 61,824,297,000 55,346,898,000

Liabilities

Accounts payable $ 699,180,000 841,048,000

Income distributable to the State of Alaska 25,067,000 713,765,000

Securities lending collateral 1,314,953,000 1,022,398,000

Total liabilities 2,039,200,000 2,577,211,000

Fund balances

Nonspendable:

Permanent Fund corpus - contributions and appropriations 39,814,299,000 39,449,405,000

Not in spendable form - unrealized appreciation on invested assets 7,155,294,000 4,750,262,000

Total nonspendable 46,969,593,000 44,199,667,000

Assigned for future appropriations:

Realized earnings 10,863,205,000 7,649,016,000

Unrealized appreciation on invested assets 1,952,299,000 921,004,000

Total assigned 12,815,504,000 8,570,020,000

Total fund balances 59,785,097,000 52,769,687,000

Total liabilities and fund balances $ 61,824,297,000 55,346,898,000

STATEMENTS OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES

YEAR ENDED JUNE, 30

2017 2016

Revenues

Interest $ 310,709,000 306,801,000

Dividends 563,012,000 526,482,000

Real estate and other income 380,346,000 360,981,000

Total interest, dividends, real estate, and other income 1,254,067,000 1,194,264,000

Net increase (decrease) in the fair value of investments:

Marketable debt securities (62,397,000) 376,568,000

Preferred and common stock 4,125,607,000 (1,314,898,000)

Real estate 102,594,000 534,661,000

Absolute return 351,810,000 (57,332,000)

Private equity 1,056,562,000 (35,017,000)

Infrastructure 259,221,000 274,766,000

Public-private credit 85,281,000 (33,063,000)

Emerging markets total opportunities — 15,029,000

Foreign currency forward exchange contracts and futures 69,069,000 (27,677,000)

Currency (436,392,000) (414,985,000)

Total net increase (decrease) in the fair value of investments 5,551,355,000 (681,948,000)

Total revenues 6,805,422,000 512,316,000

Expenditures

Operating expenditures (121,260,000) (105,264,000)

Other Legislative appropriations (8,578,000) (8,561,000)

Total expenditures (129,838,000) (113,825,000)

Excess of revenues over expenditures 6,675,584,000 398,491,000

Other financing sources (uses)

Transfers in - dedicated State revenues 364,893,000 284,462,000

Transfers out - statutory and Legislative appropriations (25,067,000) (713,765,000)

Net change in fund balances 7,015,410,000 (30,812,000)

Fund balances

Beginning of period 52,769,687,000 52,800,499,000

End of period $ 59,785,097,000 52,769,687,000

GUIDE TO ALASKA PERMANENT FUND FINANCIAL STATEMENTS

ASSETS: What the Fund owns. Cash and temporary investments are liquid investments with maturities less than one year. Receivables include interest, dividends, and proceeds from the sale of investments that are yet to be received. The Investments section lists the fair value of each type of investment in the Fund. Securities lending collateral is the cash held in the Fund from parties which have borrowed securities for short-term use.

LIABILITIES: What the Fund owes.Accounts payable includes amounts related to corporate operations as well as amounts owed for the purchase of investments yet to be paid. Income distributable to the State of Alaska represents the dividend transfer and other appropriations owed to the State. Securities lending collateral is the cash collateral listed above that is to be paid back to the lending counterpart.

FUND BALANCES: The assets remaining after the liabilities are paid.The non-spendable section represents the fair value of the deposits and other appropriations into the Fund since inception - the Principal. This amount is protected from spending by the Alaska Constitution. The assigned section represents the fair value of the Earnings Reserve Account, and the amount of net realized earnings available for appropriation.

BALANCE SHEETS

This financial statement shows the assets, liabilities, and fund balance of the Alaska Permanent Fund.

REVENUES: What the Fund earns. Revenues include interest, dividends, and other income generated by the investments of the Fund. This section also includes the change in the fair value of the investments in each area of the portfolio over the course of the fiscal year.

EXPENDITURES: What it costs.Expenditures are costs incurred to manage the Fund that are paid out of Fund earnings. Also included are expenses of other programs within the State of Alaska that are funded by the Fund revenues.

OTHER FINANCING SOURCES (USES): Transfers in and out of the Fund.Transfers in include dedicated mineral deposits as dictated by the Alaska Constitution and Statute as well as other legislative appropriations into the Fund. Subject to appropriation, transfers out are used to fund the dividend program and other State programs as designated by the Legislature.

FUND BALANCES: What is left after revenues, expenses, and transfers.This amount reflects assets under management, and includes both the Principal and the ERA.

STATEMENTS OF REVENUES, EXPENDITURES, & CHANGES IN FUND BALANCES

The Alaska Permanent Fund Corporation operates as a state investment manager under the oversight of an independent, highly-qualified Board of Trustees who serve as fiduciaries of the Alaska Permanent Fund. The APFC Board of Trustees sets investment policy, reviews the portfolio’s performance, and works together with management to determine the Corporation’s strategic direction.

In service to their fellow Alaskans, the Board of Trustees ensures that the Alaska Permanent Fund is managed and invested in a manner consistent with legislative findings in AS 37.13.020:

• The Permanent Fund should provide a means of conserving revenue from mineral resources to benefit all generations of Alaskans.

• The Permanent Fund’s goal should be to maintain safety of principal while maximizing total return.

• The Fund should be used as a savings device managed to allow the maximum use of disposable income from the Fund for the purposes designated by law.

The Board is composed of six governor-appointed Trustees. Two of the members must be heads of principal departments of state government, one of whom shall be the commissioner of revenue. Four public members fill the remaining seats, which have staggered, four-year terms.

APFC’S 2017 BOARD OF TRUSTEES

William G. Moran, ChairCarl Brady, Vice ChairLarry CashMarty RutherfordSheldon Fisher, Commissioner of Revenue Andrew Mack, Commissioner of Natural Resources

BOARD OFTRUSTEES