Section_M_6-6-14.docx

M.1 BEST VALUE PROCUREMENT - RELATIVE IMPORTANCE OF TECHNICAL VERSUS COST/PRICE FACTORS The Government will make award to the responsible Offeror whose offer conforms to the Solicitation and is most advantageous to the Government (i.e., that which represents the best value to the Government), price and other factors considered. Appropriate consideration given to the Mandatory Requirements and the following four (4) evaluation factors: (1) Corporate Experience, (2) Past Performance, (3) Technical Approach, and (4) Price. Technical Approach is the most important factor, followed by Corporate Experience, which is more important than Past Performance. Evaluation factors 1, 2, 3, when combined are, significantly more important than price. In evaluating the Offeror’s price proposal, PBGC shall not assign the price proposal a numerical or adjectival rating. Instead, PBGC will consider price as a factor in its overall evaluation of the proposal. Price will be evaluated to determine if the proposed price is complete and reasonable.

PBGC will conduct a two phased evaluation approach for the evaluation. During Phase 1, Offerors are required to provide answers to the Mandatory Requirements and supporting documentation. Offerors will only receive a “Pass” rating if the supporting documentation provides convincing evidence of how each Mandatory Requirement is met. Proposals that do not include supporting documentation with convincing evidence of how it meets the Mandatory Requirement will receive a “Fail” rating and will not advance to Phase 2. Offerors must receive a “Pass” rating for EVERY question in order to advance to Phase 2. Offerors receiving one or more “Fail” ratings will be removed from further evaluation and will NOT advance to Phase 2. During Phase 2, a rating of no less than “Acceptable” must be achieved for each technical evaluation factor (excluding price) in order for a proposal be considered for award.

The Government is more concerned with obtaining a superior Technical Approach than with making an award at the lowest overall price to the Government. As non-price factors approach equality, price will become a more significant factor.

The Corporate Experience, Past Performance and Technical approach evaluation factors will be evaluated using adjectival ratings.

Further, price offers will not be point scored, assigned a numerical weight, or adjectivally rated. Price offers will be evaluated for reasonableness and appropriateness of proposed amounts and for the Offerors understanding of the proposal requirements. Price will be evaluated for the period of performance - one base year and a nine option years.

Potential risk to the Government will also be evaluated. Technical and performance risk, based upon the Offeror’s evaluated technical proposal and past performance, will be considered during the evaluation as well as any possible pricing risk. Subjective judgment on the part of the Government evaluators is implicit in the entire process.

As permitted by the provisions of FAR 15.101-1, a tradeoff process among price and non-price factors shall be followed in order to ensure that the selected offers will provide the best value to the Government. Offerors are cautioned that the award may not necessarily be made to the lowest priced Offeror or to the highest technically-rated Offeror. The Government reserves the right to conduct discussions during the evaluation process, if later determined by the Contracting Officer to be necessary.

M.2 EXCHANGES WITH OFFERORS

The Government intends to evaluate proposals and award a contract after conducting discussions with offerors whose proposals have been determined to be within the competitive range. If the Contracting Officer determines that the number of proposals that would otherwise be in the competitive range exceeds the number at which an efficient competition can be conducted, the Contracting Officer may limit the number of proposals in the competitive range to the greatest number that will permit an efficient competition among the most highly rated proposals. Therefore, the Offeror’s initial proposal should contain the Offeror’s best terms from a price and technical standpoint.

M.3 COMPETITIVE RANGE DETERMINATION

Pursuant to FAR Part 15.306(c), if discussions are held, the Contracting Officer shall establish a competitive range of the most highly rated proposals. If the number of most highly rated proposals exceeds the number at which an efficient competition can be conducted, the Contracting Officer may limit the number of proposals in the competitive range. Discussions with Offerors in the competitive range will include a site visit. Prior to the site visit, the PBGC will provide the Offerors a list of its proposal’s weaknesses. All Offerors will be required to respond to these weaknesses in writing prior to the site visit. In addition, each Offeror will be given a set number of days after the site visit to provide final proposals.

M.4 PBGC-15-0111 REFERENCE AND EVALUATION (OCT 2004)

The PBGC reserves the right to contact any or all references cited by the Offeror for the purpose of verifying the accuracy and completeness of the information provided. Information obtained from reference checks will be used in evaluation and scoring, as described above.

ATTACHMENT A

M.5 VOLUME II - PHASE 1- MANDATORY REQUIREMENTS/QUALIFICATION COMPLIANCE

Proposals for this solicitation shall meet ALL of the following mandatory requirements in Phase 1 in order to be further evaluated in Phase 2. Offerors shall provide documentation to demonstrate compliance with the mandatory requirements, circle the appropriate response and sign this cover sheet below to certify that they meet all the Mandatory Requirements. Offerors shall document compliance with these Mandatory Requirements in Volume (II), which also includes the Technical Proposal. The Mandatory Requirements Volume (II) shall include documentation for each mandatory requirement, and include the signed cover sheet with the appropriate response circled (Y/N).

A. The Offeror is registered with the SEC as an investment advisor or can provide proof of bank exemption. A link to the complete Form ADV, Parts I and II including all Disclosure Reporting Pages is requested.

Y/N

B. The Offeror must be willing to benchmark the proposed product against the MSCI Emerging Markets Index Standard

C. The proposed product must be offered to PBGC in a commingled fund format acceptable to tax-exempt investors rather than a separate account.

D. The proposed product must have a GIPS compliant track record of at least three years.

E. The proposed product’s rolling 36-month information ratio over the past seven years, or since inception if track record is less than seven years, through 3/31/14 must be at least 0.40. The acceptable format for calculating the information ratio is found in section M6 under Performance.

F. The Offeror shall act as a fiduciary under this contract.

G. The Offeror has a minimum of $2 billion in assets under investment management in the proposed product as of 3/31/14. Asset in the same product managed in either a commingled fund format or separate account may be included. Emerging market assets managed as part of an ACWI or EAFE strategy may not be included. Please list below the total assets in the proposed product.

The Offeror hereby certifies that it meets all of the mandatory requirements.

Signature:_______________

Title: __________________

Date: __________________

ATTACHMENT B

M.6 VOLUME II - PHASE 2 - TECHNICAL PROPOSAL

· I. CORPORATE EXPERIENCE

· II. PAST PERFORMANCE

· III. TECHNICAL APPROACH

PLEASE RESPOND TO EACH OF THE QUESTIONS IN THE

FORMAT BELOW

I. CORPORATE EXPERIENCE

Offerors will be rated on whether they have similar work experience, personnel, organization, and stability necessary to provide the required investment management services. Offerors will also be rated on the sustained, stable and diversified growth in their client assets.

The Offeror shall describe its Corporate Experience of similar work, and the experience of its major subcontractors and/or joint venture partners, if any, that demonstrates experience and expertise for this requirement. Information on the Offeror's size, experience, organizational structure, lines of authority, and resources available to enable the Offeror to fulfill the requirements shall be provided. When demonstrating experience, the Offeror shall provide the relevance of actual experience, complexity of the work, and comparability of experience of similar size and scope to that required by this Statement of Objectives. Additionally, the following areas listed below will be a component of the corporate experience evaluation factor. The offerors response shall provide the government with a high level of confidence of successful performance.

A. BACKGROUND

1. Provide the year the organization was founded and a brief history of the firm, including the date the firm was registered with the SEC as a registered investment advisor. Provide a link to the latest ADV Part I and Part II. If bank exempt, provide proof of bank exemption.

2. Provide the location and functions of each of your firm's investment management offices including the number and type of professionals in each office.

3. Describe the ownership structure of your organization. List any affiliated companies. Please provide an organization chart, and please also diagram the interrelationships between any parent-subsidiary, affiliate, or joint venture entities.

4. Within the past three years, have there been any significant developments in your organization (changes in ownership, personnel reorganization, divestiture of business, lift outs of investment teams, etc.)? If so, please describe.

5. Do you anticipate any near-term changes in your organization’s basic ownership structure or any other significant changes in your organization? If so, please explain.

6. Please list your firm’s lines of business and approximate contributions of each business to your organization’s total revenue.

a. If you are an affiliate or subsidiary of an organization, what percentage of the parent firm’s total revenue does your subsidiary or affiliate generate?

b. What percentage of revenues is derived from investment management?

c. What other services or products are offered by the parent?

7. Provide the most recent annual (10-K) and quarterly financial statements (10-Q) filed with the SEC, if applicable. If the firm does not currently file financial statements with the SEC, provide audited financial statements for the most recent fiscal year plus the period from the most recent fiscal year through 3/31/14. If audited financial statements are not available, please provide unaudited financials. If the firm does not provide its non-SEC financial statements, provide a letter that confirms a positive net worth for the firm from an independent CPA firm and provides details on the financial condition of the firm. Lastly, a description of any recent material changes to the firm since the most recent financial statement provided must be included.

8. Is your firm or its parent or affiliate a broker/dealer? Does your firm trade for client accounts through this broker/dealer?

9. Explain in detail any potential issues that could be created by the firm’s representation of PBGC, including issues with other client relationships, other services that your firm provides, or other revenue sources. Include other relationships that may inhibit services to PBGC.

10. Has your organization or any officer or principal been involved in any business litigation or other legal proceedings relating to your investment management activities or other activities of the firm? If so, provide a brief explanation and indicate the current status.

11. Has your firm been the subject of any Attorney General, SEC or regulatory inquiries, investigations or audits in the last five years? If so, provide an explanation and indicate the current status.

12. Is your firm and/or the firm’s key personnel covered by insurance policies (or bonded) against liability for violations of fiduciary duty and/or for errors and omissions: If the answer is “yes,” please supply the name of the insurance carrier or carriers and the type and amount of coverage afforded by each policy. If the answer is “no,” how would the PBGC be protected against such occurrences?

13. Disaster Recovery - Do you have a plan and arrangements in place for an alternative work site should your facilities become inoperative because of fire, earthquake, etc.? Provide a summary of your firm’s most recent disaster recovery plan, and indicate the frequency of testing and the date of the last test. Please provide the results of the last test. If you are precluded from providing detail on the results, please provide a high level summary.

14. Has your firm ever been subjected to an independent evaluation of its internal control policies and procedures such as an SSAE 16 or SOC1 review? If so, please provide a copy. Have any of your clients had such an evaluation conducted on their behalf? If available, please provide copies. Please indicate whether such evaluations have identified any weaknesses within the firm and describe any corrective actions that have been implemented.

15. Does your firm claim compliance with the CFA Institute Asset Manager Code of Professional Conduct? If no, please explain why your firm has not adopted, or cannot claim compliance with, the Code. Does your firm maintain a written code of conduct, a “Code of Ethics” or a set of standards for professional behavior? If so, please provide this document.

a. In addition, describe your firm’s policies and procedures related to personal securities transactions by firm personnel, and identify the person responsible for monitoring compliance.

b. Explain what steps the firm has taken to eliminate conflicts of interest between client portfolios and securities transactions by firm personnel.

16. Discuss your organization’s succession plan. Does the firm anticipate any significant changes in its organizational leadership?

17. Will you acknowledge in writing that you have an ERISA fiduciary obligation as an investment adviser to PBGC?

B. STAFFING

1. List the total number of persons employed by discipline as of 3/31/14. Please provide the chart for the entire firm. Use the following format:

Personnel

Total U.S. Tax-Exempt Defined Benefit Plan Clients

Insurance Clients

Other Clients

Specify ‘Other’

Portfolio Managers

Research Analysts

Quantitative Analysts

Economists

Traders

Administration, Operations

Compliance

Client Service

Marketing, Sales

Other (Specify)

Total

2. Indicate whether the emerging market equity investment management capability was developed in-house or derived through acquisition of investment talent from another firm. If the latter, indicate when this occurred.

3. List all principal officers, portfolio managers, research analysts, and client service officers involved with the emerging markets equity product and provide biographies for each individual in an attachment. In the table below, highlight the person(s) who would be responsible for PBGC’s account including the lead and back-up portfolio managers and client-service professional(s).

Name

Title Responsibilities

With Firm Years With Product

Education/ Degree/Year

School

Professional Designations

4. Please list all other products the investment professionals in the chart above are also responsible for or associated with or provide advice for.

5. Are there other investment professionals buying emerging market equity securities that are not part of the team listed above, such as EAFE or ACWI portfolio managers? If so, how do they interact with the team listed above? What is the amount of these emerging markets equity assets as of 3/31/14?

6. To the extent there are any formal teams or committees (e.g., investment committee, T-cost committee, etc...) involving investment professionals, provide the names of the persons on each committee. Describe the purpose of the meeting, its frequency and duration.

7. Fill out the tables below and indicate when and why any key investment personnel (e.g., portfolio managers, analysts, and traders) left or joined the firm in the last five years. List by asset class and function.

8. Describe your firm’s backup procedures and persons involved in the event the key investment professional assigned to this account should leave the firm.

9. Discuss your organization's compensation and incentive program for investment professionals, including details of how bonuses are determined. How are professionals evaluated and rewarded? What metrics are most important in determining compensation? What incentives are provided to attract and retain superior individuals? If equity ownership is possible, on what basis is it determined and distributed?

10. Briefly describe your firm’s back office divisions covering general compliance, information technology, client service/portfolio accounting, and marketing. Provide an organizational chart of your firm’s back office divisions covering general compliance, information technology, client service/portfolio accounting, and marketing in an attachment.

a. Provide a schematic of the reporting channel between back office and senior management in an attachment.

b. Make sure to include biographical information on key back office executives handling general compliance, information technology, client service/portfolio accounting, and marketing in an attachment.

c. Do you have a Chief Compliance Officer? If so, provide a biography and describe the individual’s reporting channel.

11. Describe how you monitor compliance with client and firm guidelines, including systems/software you use.

12. Has your firm violated an investment guideline over the past three years? Explain the violation(s) and how the issue(s) was (were) resolved.

13. Which of your firm's offices would service this account? What services would specifically be provided by each office? PBGC prefers to have its client service professionals located in the same office as the investment professionals managing our account.

14. The PBGC conducts in-person meetings at either it’s offices or the investment manager’s offices at minimum twice a year. Who shall be the client service officer assigned to the PBGC relationship? How often would he/she be available for client meetings? How often would the portfolio manager be available for client meetings? How often would the chief investment officer and/or other senior personnel in the organization (e.g., CEO) be available for client meetings?

15. Explain how the client service team dedicated to the PBGC account would function, including lead person, back-up, quality control, and support services. Is there one individual who will be responsible for quality control for all work done for the PBGC?

16. What is the current number of accounts managed and serviced by each professional (client service and portfolio management) servicing this specific product?

17. What is your firm’s policy on the maximum allowable accounts serviced by portfolio management and client-service professionals? Explain how the firm controls the quality of service provided to the clients and the average number of clients assigned a) per portfolio manager and b) per client service professional(s) including articulation of the specific factors considered in client account allocation.

18. Provide samples of a standard client reporting package in an attachment (e.g., performance, strategy reviews, attribution, etc.) and indicate their frequency.

19. Describe any on-line information or reporting capabilities you make available for client use. Can you provide client reports on various electronic formats such as CD-ROM, e-mail or internet as well as hard copy?

20. Do you or your custodian distribute monthly electronic holdings and transaction reports to third party risk management systems providers and T-cost consultants? Would you have any problems doing this for PBGC?

21. What other communication is provided to clients (include a description and/or samples of newsletters, seminars, etc.)?

C. STABILITY AND GROWTH

1. Provide the following, adhering to the following format.

(a) Total assets under management (all products, $ in mils.)

(b) Total equity assets under management (all products, $ in mils)

Total # of Accounts

Average Account Size

# Accounts gained

$ Gained

# Accounts lost

$ Lost

(c) Total assets managed in all emerging market equity strategies ($ in mils)

Total # of Accounts

Average Account Size

# Accounts gained

$ Gained

# Accounts lost

$ Lost

(d) Total assets managed in the proposed emerging market equity strategy ($ in mils.)

Total # of Accounts

Average Account Size

# Accounts gained

$ Gained

# Accounts lost

$ Lost

(e) ) Total assets managed in the proposed emerging market equity strategy for U.S. tax-exempt clients ($ in mils.)

Total # of Accounts

Average Account Size

# Accounts gained

$ Gained

# Accounts lost

$ Lost

(f) Total assets managed in the proposed emerging market equity commingled fund ($ in mils.)

Total # of Accounts

Average Account Size

# Accounts gained

$ Gained

# Accounts lost

$ Lost

2. Provide the names of the major (i.e., greater than $100 million) U. S. tax-exempt pension, insurance, and other client accounts currently invested in the proposed strategy (3/31/2014 market value). Using the following format, rank clients from largest to smallest by assets under management:

(3/31/2014) Commingled Fund or SA

Ensure all information requested above is provided. If you need to secure permission from the client before releasing this information, do so before submitting proposal.

3. What are the minimum and maximum account sizes your firm shall accept for both a commingled and a separate account basis for the proposed strategy? State the reasons why.

4. Does the firm anticipate closure of the proposed fund or strategy in the future? What criteria would induce the firm to take such action? If total assets in the strategy is a factor, identify the approximate asset levels at which the strategy would have a hard closure (i.e. no new investments from new or existing investors) as well as a soft closure (i.e. allows new investments from existing investors only).

5. List all other products offered with total assets managed in each, regardless of client type.

6. Identify all emerging market equity clients that have terminated accounts with your organization over the past three years. Provide the firm name, fund account value, and reason for termination.

II. PAST PERFORMANCE

0.

The PBGC is seeking to determine whether each Offeror consistently delivers quality products and/or services in a timely manner with a reasonable degree of customer satisfaction. Therefore, this factor will be evaluated based on relevant Past Performance. Accordingly, the PBGC will evaluate the proposed Past Performance Information (PPI) based on information received from the prospective contractor (references), and from any other reliable source available to the PBGC; sources such as an official Past Performance database and/or other Government and local agencies.

As stipulated under FAR Part 15.3, Offeror’s without a record of relevant Past Performance or for who information on Past Performance is not available, the Offeror may not be evaluated favorably or unfavorably on Past Performance. Thus, Offerors without a record of relevant Past Performance will be given a neutral rating. Past Performance will be evaluated using the Adjectival Rating Scale.

Evidence of past performance as measured by the following factors:

1. Quality of products and services as well as technical support provided, including quality of personnel.

1. Cost control.

1. Timeliness of performance.

1. Business relations including problem responsiveness.

1. Customer satisfaction.

0. The Offeror shall provide the client name, address, phone number, contact name and title for three of the firm’s clients invested in the proposed strategy. Please include at least one public fund client. Indicate the length of your relationship and assets under management for each reference. The Offeror shall provide the dollar amount and length of each contract referenced. In addition to evidence of the Offeror’s (i.e., firm’s or organization’s ) past performance, the Offeror shall include evidence of meeting delivery dates and schedules the same as, or substantially similar to that required by the solicitation. The government will accept three past performance references within the past 5 years. Should the Offeror submit more than three references, the government will accept the first three received in chronological order. Relevant past performance pertains to work that is similar with regard to scope, magnitude and nature to the solicited effort. As described in Section C, Statement of Objectives. The Government will accept past performance for ongoing work and for completed work.

III. TECHNICAL APPROACH

The Offeror shall submit a proposal that describes the Offeror’s technical methods and approach to performing the requirements specified in the solicitation and whether the Offeror’s methods and approach to meeting the solicitation requirements provide the Government. The Offeror’s proposal must clearly describe the relationship between the proposed technical approach and the requirements of Statement of Objectives and map it to the Statement of Objectives.

Offeror’s will be evaluated based upon their experience and ability to provide investment portfolio management services in emerging market equities. Each offer will be evaluated based upon the Offeror’s understanding of and capability to accomplish the work as stated in the solicitation. The PWS and QASP will be evaluated based on PBGC’s needs as specified in the SOO. The quality, depth, and relevance of PWS and QASP shall be evaluated, including the plan to monitor and meet performance goals and regularly communicate project status. The offeror shall propose performance measures and be evaluated to successfully achieve the proposed PWS and QASP. Proposed performance measures shall allow PBGC to effectively evaluate the contractor’s performance. Additionally, the following areas listed below will be a component of the technical approach evaluation factor. The offerors response shall provide the government with a high level of confidence of successful performance.

A. INVESTMENT PHILOSOPHY

1. Describe your investment philosophy, including your basic investment beliefs and assumptions reflected in your investment strategy.

2. Describe your investment strategy (e.g., bottom-up, top-down, fundamental, quantitative, etc.) in detail, the investment style (i.e., growth, value, or core) that best describes your strategy, the performance objectives the strategy seeks to achieve, the benchmark against which the strategy is managed, and the benchmark with the highest correlation to the 1, 3, and 5 year performance record of the strategy.

3. Explain how you earn excess return. Describe the unique competencies of your firm. What are the sources of value-added performance (e.g., security selection, sector selection, country allocation, foreign currency management, factor exposure management, market timing, information advantage, etc.) of this strategy? What is your expected excess return over your benchmark? What tracking error range do you maintain to achieve your target excess return?

4. Describe the circumstances or market conditions that would favor the prospective return, on both a relative and absolute basis, of your investment strategy. Under what conditions would you expect diminished prospective return potential for your investment strategy, and how would you position your portfolio in such an environment?

B. INVESTMENT PROCESS

1. Describe how you source investment ideas:

a. What is the universe of securities considered for investment? Please discuss sector, country and region criteria for your universe. What is the market capitalization size of companies that you would invest in for the subject product?

b. What securities do you exclude from investment universe, i.e. what is the market cap or average daily volume that is too small to invest in? What countries, sectors or industries do you exclude?

c. What types of securities (common, preferred, convertibles, ADRS, etc.) are used?

d. Describe how you generate investment ideas and what sources are used. Do you identify major secular trends to guide the search process? What proportion of total investment ideas are identified internally? To what extent do you use external sources to generate investment ideas and, if so, what are those sources?

e. Describe any quantitative screening used, the factors (e.g., sales growth, earnings growth, financial leverage, P/E, P/B, etc.) screened, and why those factors are considered important in identifying superior investments.

2. Describe your investment research process.

a. What are the specific purposes of internal research activities (e.g., confirm intrinsic value, forecast earnings growth, estimate free cash flow, estimate expected total return, perform stress tests on earnings, etc.)?

b. Describe the structure and organization of your firm’s research capability. Are the research analysts centralized or dedicated to this mandate or team? If research coverage is specialized, please indicate the segregation of coverage within the team. State the location(s) where such research is carried out and what specific research is conducted at each location. If the entire research team used by your product was not listed in the staffing section above, please list them below with the requested biographical information.

c. What research activities (e.g., rigorous financial analysis, company visits, market analysis, etc.) are conducted to evaluate investment ideas? Please be specific. What output is produced (e.g., investment reports, financial forecast spreadsheets, etc.)? Is a detailed financial model prepared and updated for each investment candidate and portfolio company? Please provide a representative sample of your research product.

d. How is research disseminated and evaluated? Are there recurring meetings to review investment recommendations or is the process more ad hoc and fluid. What recurring meetings/disciplines support the investment process?

e. Does your research process incorporate top-down macroeconomic information used to determine portfolio positioning or factor exposure such as beta, style, or size? If so, please describe.

f. Describe how you cover your investable universe. How is ongoing monitoring conducted once invested?

g. If your strategy relies on quantitative models or screens to generate research ideas, alpha signals or to assist in portfolio construction, please answer the following questions concerning data collection.

1. What data sources do you rely on for 1) financial data; 2) company-specific information; 3) market valuation tools (e.g. HOLT); 4) market technicals (e.g. price momentum, STARMINE for consensus estimates); 5) other investment data such as bond prices or underlying derivatives; 6) other (e.g. S&R rankings)?

2. Are you accessing proprietary data not available to the outside public?

3. Please articulate what makes your information gathering process unique relative to other strategies that rely on quantitative models.

4. What kind of back-end checks do you incorporate to ascertain the quality and the meaningfulness of the data?

h. Describe the major research and technology initiatives implemented in the past three years. How did these initiatives enhance your firm’s capabilities?

i. Describe how the firm evaluates its internal investment research effort and ensures consistent and uniform adherence to high due diligence standards by all its analysts. Describe how the firm achieves and maintains an information advantage through its research effort.

3. Describe your security selection and divestment process.

a. What has been the idea generation rate for each of the past 3 years (since 3/31/10)? Specifically, how many eligible investment recommendations were made by analysts supporting the portfolio in each of the past 3 years?

b. Describe the decision-making process for the purchase of a security. Who is involved in considering the security for purchase? What information is considered? Is technical analysis considered? What criteria must be satisfied to purchase a security? Who makes the final decision to invest in or reject a proposed investment?

c. Describe the decision-making process for the sale of a portfolio holding. Who is involved in considering the sale of a position? What information is considered? Is technical analysis considered? What criteria must be satisfied to sell a security? Who makes the final decision to sell a security? Describe your sell discipline.

4. Describe the role of quantitative modeling within the investment process.

a. Provide a brief description of the underlying factors used to model return expectations along with the forecasting techniques used to process the data.

b. How dynamic is the process with respect to weightings, factor choices and modeling techniques?

c. Why do you believe your approach to modeling publicly available information is superior to your competitors? How are you processing information in such a fashion that can be considered proprietary versus a straight factor-loading approach?

d. What qualitative information or subjective judgments do you incorporate into the modeling process? If applicable, please provide an example of a past qualitative input or instance where the model was overridden.

e. Does your process seek to formulate investment rationales for highly-ranked or bottom-ranked securities or assets before portfolio implementation? How do you treat information that is not easily ‘captured” by the model?

f. How often are model forecasts generated?

g. Please describe the process for enhancing your quantitative model(s).

h. With what frequency is the model(s) reviewed for enhancements:

i. Please provide a timeline of past enhancements to your model(s).

5. Describe your portfolio construction and management process.

a. How many securities are typically held in your portfolio? What is the average equity position size? What is the average holding period for an individual security?

b. Describe how your firm’s investment process evaluates liquidity constraints for the subject product’s universe of stocks. What rules does the firm employ in its process to ensure an appropriate level of liquidity exists for the portfolio holdings? Does liquidity affect the level of turnover in the portfolio? In the past, has there been any adjustment to the firm’s process to address liquidity limitations due to growth of the size of its assets under management?

c. What has been the annual turnover rate of your portfolio for each of the past 5 years (as of 12/31/13)?

d. Describe the quantitative and qualitative process used to establish and manage exposure levels in a portfolio to maximize risk-adjust returns. Who determines security, sector, and country weightings? How are those exposures established and changed? What factors are considered in making those decisions?

e. Describe how you use benchmark tracking error to construct and manage a portfolio.

f. Describe in detail your use of derivative instruments (e.g., options, futures, forwards, ETFs, etc.) to manage portfolio exposures, achieve performance objectives, or modify portfolio or security risk. Discuss how such instruments contribute to implementing successfully your investment strategy. Explain the risks involved in using derivatives.

g. Provide details of your firm’s currency management strategies. Does your firm employ hedging or cross hedging strategies? If so, what hedging instruments does your firm use? Are active currency positions managed separately or are currency positions managed in conjunction with country or security selection?

1. Does your investment strategy include the active management of currency exposure as a way to add value over the benchmark?

2. If yes, please explain the process you employ in active currency management, the research that backs the opportunity for active currency management, and support your claim that the return exceeds transaction costs.

3. If no, please explain why your strategy does not include active currency management as a way to add value over the benchmark.

h. What is the role of cash in your portfolio? Do you adjust cash levels to manage portfolio risk? Would you accept a 5% cash constraint? If not, why? Please fill in the table below:

Average %

Maximum %

Minimum %

i. To what extent, and in what form, does your strategy rely on the use of financial leverage to achieve its objectives, if at all?

6. Describe your portfolio monitoring and evaluation process.

a. Describe what activities and analysis you conduct to evaluate the performance of your portfolio and to improve your investment process. How frequent is this self-evaluation conducted?

b. Provide the portfolio characteristics for both the proposed product and its benchmark in the table below for the given periods. Please specify the benchmark used.

1Q14

4Q13

3Q13

2Q13

1Q13

4Q12

3Q12

2Q12

1Q12

4Q11

3Q11

2Q11

1Q11

4Q10

3Q10

2Q10

1Q10

4Q09

3Q09

2Q09

1Q09

4Q08

c. Provide the sector allocations of the subject product portfolio and its benchmark at the end of the periods indicated in the following table:

1Q14

4Q13

3Q13

2Q13

1Q13

4Q12

3Q12

2Q12

1Q12

4Q11

3Q11

2Q11

1Q11

4Q10

3Q10

2Q10

1Q10

4Q09

3Q09

2Q09

1Q09

4Q08

d. Provide a percentage breakdown for the holdings in the subject product and its benchmark at the end of the periods indicated in the following table:

1Q14

4Q13

3Q13

2Q13

1Q13

4Q12

3Q12

2Q12

1Q12

4Q11

3Q11

2Q11

1Q11

4Q10

3Q10

2Q10

1Q10

4Q09

3Q09

2Q09

1Q09

4Q08

C. PORTFOLIO RISK MANAGEMENT

1. Briefly describe your risk control procedures for the total portfolio. Please distinguish the portfolio management process from the security selection process.

2. Describe any risk measurement models used and how this analysis is incorporated in the portfolio management process. Do you explicitly constrain systematic factor risk (e.g. market risk, size, style, etc)?

3. Describe the use of stress testing or scenario analysis in managing the portfolio.

4. Does the investment process incorporate discreet risk parameters (e.g., standard deviation, drawdown potential, etc.)? If so, describe any acceptable tolerances for those parameters for this Product.

5. Describe the use of any other quantitative tools or models (not covered above) used in managing and monitoring the portfolio.

6. Do you use an optimizer for portfolio construction? If so, please discuss your optimization process. How often is the portfolio rebalanced and what is the process for doing so?

7. Who is responsible for risk monitoring? Do you maintain an internal, dedicated risk team? If so, who does that team report to and what is the process for monitoring and effecting portfolio changes when necessary? Please describe the interaction between risk professionals within your firm and the investment team responsible for this strategy.

8. Describe your process for managing and monitoring liquidity.

D. TRADING

1. Is your firm, its parent, or other affiliates a broker/dealer?

a. Does your firm trade for client accounts through this broker/dealer?

b. If so, state how much trading, and the reason for trading with this related party.

2. Outline your internal trading capabilities, as follows:

a. Number and experience of trading staff. Is the trading staff segmented by product/asset class?

b. Number of dedicated active international equity and FX traders. Describe their experience and tenure at the firm as well as the sector(s) they are responsible for trading. Provide biographical information of the senior trading personnel in an attachment.

c. Current actual trading volume.

d. Current capability for trading volume and asset levels.

e. Procedures for monitoring and minimizing trading costs of securities and foreign currencies. Are external transactions cost analysis firms used? Which ones?

3. Provide your estimate of average commissions per share, market impact per share, and any other transaction and custodian costs incurred for the different types of trades you have executed for this subject product.

4. How do you choose to access restricted markets and what types of securities do you utilize? In what instances would you use proxy securities to build your desired portfolio (e.g. ADRs, ETFs, p-notes)?

5. Discuss your policy regarding, and current use of, "soft dollars", directed trades and recapture programs. If you have soft dollar relationships with broker-dealers, disclose the percent of trades executed tied to soft dollar relationships and a list of resources funded by soft dollars.

6. Provide a description of your trading platform, including systems (proprietary and off-the-shelf) for execution and processing. Describe the allocation objectives and implementation procedures across all accounts. What is the process by which trades are allocated? Describe both the tactic of allocating the initial trade as well as the strategy of building positions across accounts.

7. What processes do you have in place for ensuring pre- and post-trade guideline compliance? What functions are automated? What process do you have in place for human verification? Who signs off on final trading? Describe the oversight procedures that would minimize the risk of traders acting outside of their given latitude in executing trades.

8. Indicate any enhancements your firm is contemplating to its active equity trading capabilities.

9. Does your firm affirm its own trades? If not, who does and why?

10. For this subject product, provide a summary of trade execution performance over the last year. Describe how performance is measured and indicate if this is evaluated internally or externally. If externally, what service or services are used? Include details on how this information is integrated into the overall trading strategy.

11. FX

a. Do you manage your FX process actively or via a custodian? How do you measure FX transaction cost?

b. What methods do you use to validate you are receiving competitive rates from your FX providers?

c. PBGC considers you a fiduciary for all trades including FX. Do you have any concerns about this?

E. FUND FLOWS

1. Describe your requirements for the acceptance of transfers of assets in-kind into the respective proposed index funds.

2. Describe, in detail, the timing (dates the proposed fund is open) and procedures involved in accommodating a client’s cash flows. What are the charges and notice requirements for purchases and redemptions? How are transaction costs assessed to the client transacting?

3. Describe the typical fund flow for each product at each opening, delineating openings which have greater or lesser flow than the average in dollars and the reasons why. Describe the seasonality of client fund flows if applicable (i.e., is there a month or quarter that client flow is greater?).

F. CUSTODY

1. Where is the proposed fund custodied?

2. Is the custodian affiliated with you? How many years has the firm been in the custody business? Provide total assets and equity assets in custody by year, for each of the past 5 calendar years. Submit a copy of the custodian agreement for the proposed fund.

3. Describe your firm’s pricing and your custodian’s pricing (if appropriate) of individual securities for fund valuation, including source of price information. If a discrepancy exists between your pricing and the custodian’s, how is the discrepancy reconciled?

4. Describe the internal and external (custodian) accounting audit and statement reconciliation process. Note the staff involved and their specific duties.

5. Describe the controls over the trade settlement process and the income collection/reinvestment process and how your firm monitors the custodian bank in these areas.

6. Do you guarantee crediting of all dividends on payment date?

7. Describe any procedures you use for ensuring the security of your system and that of the custodian.

G. PROXY VOTING

1. Describe your proxy voting process.

2. Do you use third parties to assist in the process?

3. Do you have a committee that sets proxy voting policies? If so, name the members, their titles and provide bios.

4. Do you have a separate committee that addresses proxy votes? If so, name the members, their titles and provide bios.

5. Please provide your most recent proxy voting policies.

H. SECURITIES LENDING

1. Does the proposed fund participate in a securities lending program? If so, who administers the program and what has been the gross and net return to the fund (annualized in basis points) attributed to the lending function for each of the years for which you have provided return history? Indicate the lending split to the firm/fund and detail how lending program costs are absorbed.

2. Describe the nature and scope of the securities lending program in the proposed fund (intrinsic value program only, or what type of reinvestment vehicle is used). Include a detailed description of the controls and a list of firms to which the respective proposed commingled fund currently lends.

I. COMMINGLED FUND DOCUMENTATION

1. Provide copies of all commingled vehicle documentation for our review (declaration of trust, participating trust agreement, etc.).

2. Also provide any documentation that identifies internal constraints that are utilized in managing the proposed product, but are not identified in the documentation provided above.

3. Provide the most recent fund audit results.

J. SAMPLE PORTFOLIO

1. Submit a sample portfolio (preferably an actual portfolio) as of 3/31/14, in the following format. Provide in an Excel or comparable format spreadsheet. Preferably, the following list should sort the holdings by country.

CUSIP #

Cost

Total Market Value Percentage of Total Portfolio

K. BENCHMARK

1. What index/benchmark is recommended for performance evaluation purposes for the subject product you would manage for PBGC?

a. What specific factors led to the selection of this recommended index/benchmark?

b. State the associated pros and cons of the recommended benchmark.

c. Do you manage against a gross or net of taxes benchmark? Why?

d. State whether you manage against a hedged or unhedged benchmark? Why?

2. What is the expected annualized tracking error for the anticipated portfolio over a one-year period and over a market cycle (i.e., 3 to 5 years)? How is tracking error measured and managed?

L. PERFORMANCE (Simulated results are not acceptable.)

(Note: All performance data must also be provided on a computer disk in a Microsoft Excel file where all formulas are visible.)

1. For your proposed international equity product, please provide:

Provide quarterly and annual performance on a total return basis GROSS OF FEES for the equity product. Indicate if returns are net or gross of custody costs. Certify that all performance is GIPS compliant and provide required disclosures. If they are not compliant, explain why not. Simulated returns are not acceptable and the proposed active equity strategy must include a continuous track record. In the table, please provide data to at least two decimal places. Please present all performance data against the MSCI EM Standard net.

2. Provide the same information on an annualized basis over the following periods.

Provide in the format below the annual returns for the best and worst performing accounts contained in the above composite. Please use GIPS standards.

Subject Product Performance

High

Low

3. Provide the average of all rolling 36- month Information Ratios over the last seven years, or since inception if track record is less than seven years through 3/31/14, using the methodology below: (Please attach a spreadsheet formatted as follows.)

The rolling 36-month average Information Ratio must be calculated as follows: calculate the monthly geometric[footnoteRef:1] excess return for each month of performance. Then, calculate the annualized 36-month excess return for each rolling 36-month period. Divide this by the annualized standard deviation[footnoteRef:2] of excess returns for each rolling 36-month period. Finally, calculate a simple average of these results. For example, if a product has 24 rolling 36-month periods since inception, provide the simple average of those 24 Information Ratios.