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9 <br />Duration <br />The manager will maintain the portfolio duration within +/- 25% of the ICE BofA 1-3 Year <br />Govt/Credit Bond Index duration at all times for the individual securities portfolio. <br />Diversification <br />•No more than 30% of the portfolio may be invested in securities issued under Rule 144A* <br />without registration rights (no limit on Rule 144a securities with registration rights). <br />* Note: Rule 144A is an administrative rule under the SEC allowing, under certain circumstances, for <br />qualified institutional investors to trade certain securities with other institutional investors without <br />registering the trade with the SEC. Specifically, the rule allows private companies, both domestic and <br />international, to sell unregistered securities, also known as Rule 144 securities, to qualified institution <br />buyers (QIBs) through a broker-dealer. <br />OTHER ASSETS (ALTERNATIVES) <br />Alternatives may consist of non-traditional asset classes such as hedge funds, private equity, private debt <br />and real assets, when deemed appropriate. The total allocation to this category may not exceed 30% of <br />the overall portfolio. <br />Diversifying Liquid Alternatives): Primary objective shall be to enhance the risk-return profile of the <br />overall portfolio. This can be accomplished by using liquid alternative strategies that may enhance <br />returns at a reasonable level of risk or reduce volatility while providing a reasonable level of return. <br />These asset classes may differ from traditional public market asset classes due to the use of certain <br />strategies including short-selling, leverage, and derivatives. Liquid alternatives may also invest across <br />asset classes. For purposes of asset allocation targets and limitations, liquid alternatives funds will be <br />categorized under the specific asset class of the fund. For example, a long/short U.S. equity fund will <br />be categorized as “Other” in the Growth Assets category while a long/short credit fund will be <br />categorized as “Other” in the Income Assets category. Multi-strategy liquid alternatives funds that cannot <br />be easily categorized under one asset class will be included in “Other” under either the Growth Assets <br />or Income Assets category depending on the risk-return profile of the strategy. <br />Real Assets: Real assets are typically physical assets that have intrinsic worth due to their substance and <br />properties. Real assets are primarily used for their lower correlation to traditional assets (i.e. stocks and <br />bonds) and their inflation hedging properties. Categories of real asset investments include, but are not <br />limited to, real estate, infrastructure, land, farmland, timberland, precious metals, and commodities. <br />Public real assets are publicly traded and liquid. The benefit of lower correlation investments is that, <br />when implemented correctly, these investments can potentially improve a portfolio’s expected risk- <br />adjusted return over the long-term. The real assets category can be extended to include other forms of <br />assets that offer similar inflation hedging properties such as pooled vehicles holding: commodities <br />contracts, Treasury Inflation Protected Securities (“TIPS”), index-linked derivative contracts, certain <br />forms of intellectual property, and the equity of companies in businesses thought to hedge inflation. For <br />purposes of asset allocation targets and limitations, real assets may be categorized as “Other” under <br />Page 132 of 658