senator vicente (ben) c. pangelinan fund/dc performance evaluation fy09 q1.pdfaloaaaotf ooaooa...

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First Fiscal Quarter 2009

Defined Gontribution

Government of Guam401(a) and 457(b) Plans

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All seruices provided by Mercer lnvestment Consulting, lnc.

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Performance Eval uation

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Gontents

Appendix - Disclosures

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Economic EnvironmentFor Peiods Ending December 2008

GDP Growth Rate

GoP Growlh Rate

Theeconomydeteriorated rspidly.

JurF S6pl oec ll Jun- S€pt D€c Mrr Jun- Sspl 0€c l$sr Jun. S€pl Dec lrfi Jun- S€pt Dec04 05 06 07 06

Economic Profile

Govemment of Guam - 401(a) and 457(b) Plans

The economy ended the year with a rapid decline in all measuresof economic activity: declining consumer spending, decliningmanufacturing activity, and depressed capital markets. Thegovernment's initial estimate of GDP showed the economycontracted 3.8% in the fourlh ouarter.

The unemployment rate rose lo 7.2yo, its highest level sinceJanuary 1993. In 2008, a total of 2.6 million iobs were lost, lhelargest annual loss in more than six decades.

Consumer spending remained weak as holiday shoppers kepttheir oocketbooks closed. Retail sales fell 2.8% in December, thesixth strarght monthly decline.

The housing market remained frozen despite record"lowmortgage rates and lalling home prices. Nationally, home priceshave fallen 21"/o since their peak. The average 3o-year fixed-ralemortgage hit a s7-year low of 5.10% in December.

2.1%

\

Fivg-year avgrago:

I7

6

2

I0

-1

-2

.3

lnterest Rates and lnflation

Treasury Yields . The Fed lowered the federal tunds rate three times during thequarter, bringing it from 2.0% lo a range of between 07o ando.25"/", a historic low.

. Over the quarter, the z-year Treasury yield fell 124 basis points to0.76% and the 1o-year Treasury yield fell 160 basis points to2.25"/". The 2- to 1o-year yield slope narrowed by 36 basis points.

. The 3-month T-bill yield decreased 81 basis points to 0.11%,while the yield on 3o-year Treasuries fell 162 basis points to2.69"/".

. Gonsumer prices dropped for the third straight month inDecember because ol falling energy prices. In 2008, the CPI rose0.1olo, the smallest increase in 54 years. Core CPI was up 1.8%.

3-month yield dropped325 baaia pointE during

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ooooototto.oootoraatoooaaoaoooooDefined Contrlbution Pedormance Evaluation Report Government of Guam - 401(a) and 457(b) Plans

Domestic Equity Market Performance

. The stock market plummeted in the fourth quarter amid ongoingproblems in the credit markets and continued investor riskaversion. The S&P 500 Index lell 21.9"/" during the quarter andwas down 37.O"/" in 2008, its worst year since 1 937. The Russell1000 lndex lost 22.5% and 37.6"/. for the same oeriods.

. Small cap stocks, down 26.1%, underpertormed large cap stocksduring the quaner, but held up better over the year, losing 33.8"/..Mid cap stocks posted the weakest performance, declining 27.3%for the quarter and 41 .5% for the year.

. Value outpedormed growth across all market capitalizationsduring the quarter and year, though the margin was lesssignificant in the large cap space. For the year, losses were leastsevere for small cap value stocks, which fell 28.9%.

. Financials, the hardest hit sector, fell 35.1olo during lhe quarter.For the year, financial slocks sank 52.?o/o. Consumer staplesheld up best, falling 16.5%.

Equity Market PerformanceFor Periods Ending December 20O8

Market lndex Perlormance

-50

n00

Sector Qtr Return 2008 Rsturn

Energy -22.6

Materials -31.7 -47.3

Consumer Discretionary -24,6 -37.6

Consumer StaDles -13.0 - lo-5

Health Care -13.2 .22.8

Financials -35.1 -52.2

I nf ormation Technology -25.5 -42.4

Telecommunication Services -32.7

Utilities .10.8

lndustrials -24.1 -40.8

Russell 1000 Sector Returns S&P 500 Trailing 4-Quarter Earnings per UnitEarnin$ per S&P Unit

$110 Opereling €arningsgrowth projectionsremain weak,$100

$90

$80

$70

$60

$50

$40

$30

Feponed eaanings

3004 1005 3005 1006

down 10.5% in thethlad quadea,

Etrninga were

$20 1-1004Source: Fsums and s€curity data ior lh€ RLrss€ll indicss ar6 provided by Fuss€lvir€llon Analytical Sorvicss.

Fussell indic€s ar€ tradema*s/s€ruics ma.ks ol he Flank Fussell Company.

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Fixed lncome Market PedormanceFor Periods Ending December 2008

Fixed Income Market Performance

by Maturity and SectorPerformance

I I Trlg Year

Government of Guam - 401(a) and 457(b) Plans

. The bond market exoerienced continued investor risk aversaonand increased spread widening during the quarter. The BarclaysCapital Aggregate Bond Index advanced 4.6%, resulting in a5.2"/" gain for the year.

. Treasuries, up 8.8% for the quarter and 13.7"/" for the year,outperformed all spread sectors as investors' flight-to-qualitydrove yields down.

The Barclays Capital Credit lndex was up 4.0% for the quarter butended the year down 3.1%. In general, long-term bonds offeredthe best results during the quarter but trailed intermediate-termmaturity issues in 2008. By quality, BAA-rated securities were theweakest performers during the quarter and year. On average,credit spreads widened 102 basis points during the quarter-

The Barclays Capital MBS Index gained 4.3"/" for the quarter and8.3"/" for the year. The ABS and CMBS sectors posted lossesduring the quarter and declined 12.7"/" and 20.5% in 2008.

Performance by lssuer Treasury Yield Curves

t5

10

5

-10

-15

-20

The yield curved$€ended as yieldsdropped to new lows.

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Other MarketsFor Periods Ending December 2008

International Equity Market Performance

Governmenl of Guam - 401(a) and 457(b) Plans

Performance for the QuarterInternational equity markets continued on a downward spiral asthe MSCI EAFE Index fell 19.9% during the quarter, resulting in a43. 1% loss for the year in dollar terms- The Index was down18.5% and 39.9% in local currency terms for the same periods.

The Pacilic region lost 13.8% in the tourth quarter, ending theyear down 36.2"/o. Performance for the Pacific ex Japan regionwas bleaker, declining 24.9"/. and 50.0% for the same periods.

Stocks in the European region were down 22.7yo tor the quaterand declined 46.1"/" for the year, with all countries reportingdouble-digit losses.

. Emerging market stocks were hammered as the MSCI EM Indexplummeted 27.6% during the quarter. For the year, the Index wasOOWn 53.2-lo.

Jspan Pacific x Jspsn Emg Mkts

Regional

]=rLo;a-llCurr€ncy

Other Asset Glasses

High Yield Bonds. The Barclays Capital High Yield Bond lndex posted a solid gain

in December, but remained in negative territory tor the quarterand year, declining 17.9"/" and 26.20lo respectively. During thequarter, the average yield spread versus Treasuries widened700 basis points.

. In 2008, long-term bonds underperlormed intermediate-termissues and lower-quality bonds suffered greater losses thanhigher-rated bonds.

Real Estate. Equity REITS, as measured by the FTSE NAREIT Index,

declined 38.8"/o during the quarter, resulting in a 37.7% loss forthe year.

. The latest data available for the private real estate marketshowed a third-quarter loss of 0.2olo for the NCREIF Propertylndex.

Mercer

lnflation lndexed Bonds. Treasury Inf lation-Protected Securities (TIPS) were down 3.5"/o

for the quarter and lost 2.4"/o lor the year, underperformingTreasuries by 1 ,609 basis points.

Commodities. The S&P GSCI Index plunged 47.0% during the quarter, ending

the year with a loss ol 46.5%. Energy, down 52.4%, posted thesharpest decline in 2008. The Precious Metals Index, up 0.5olo,was the only sector to post a positive return for the year.

lntejnational Bonds. The Citigroup Non-U.S. Government Bond Index returned 8.87o

in U.S. dollar terms during the quarter, resulting in a 10.1% gainin 2008.

. The Barclays Capital Emerging Markets Index was down 9.37oin the fourth quarter and down 14.8% for the year. TheEmerging Middle East was the best-performing region in 2008.

toatoDefined Contrlbutlon

ooafotPe]|o]mance Evaluatlon R€port

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Market Returns SummaryFor Periods Ending December 2008

Equrty

1YR 3 YRS- sYBS" IOYRS'

Fixed lncome

lnte.national

Mlacollanqous

lnflation

OTR

_21.9

-22.2-22.4-27.3-27.2-27 -4-26.1_24.9

-27 -4-22-A-21.6-22.6-24.6-26.7

0.34.86.44.88.2

13.14.3

-17.S2.4

-1S.9-27.6

8.45.5

-20.6

s&P 500Russell 1000 ValueRussell 1000 GroMhRussell MidCapRussell Midcap ValueRussell Midcap GrovYthRussell 2000Russell 2000 ValueRussell 2000 GrowlhRussell 3000Mercer Larye Cap Value Equity Peat Grcup median"Mercer Larye Cap Grcwth Equity Peer Grcop madian'"Mercer Small Cap Value Eguily Peet G@up median"Mercer Small Cap Gtuwth Equity Peer Group fiediah'*

Ciligroup s-Month T-BillBarclay6 Capital Int. Govt/CreditBarclay6 Capital Gov'VorsditBarclays Capital AggregateBarclays Capital Intermediale Governm€nlBarclays Capital Long Gov't/CredilBarclays Capilal lvlodgagesBarclays Capital TIPSBarclays Capilal Corp High YieldMercer Corc Fixed lnaome Peet Group meclian"

MSCI EAFEMSCI Emerging MarketsCitigroup Non-US Govl BondCitigroup Non-US Gov'l Bond - HedgedMercet lntetntional Equity Univerce median'*

NCREIF Propeny Index...FTSE NAREIT (Equity REIIS)Merdll Lynch Inv. Grade ConvenibleGoldman Sachs Commodiiy Index

cPl

-37.0-36.9-38.4-41.5-38.4-44.3-33.8-28.9-38.5-37.3

-38.8-31.5-41-7

1.85.15.7

10-48.48.3

-43.1

10.18.0

-43.2

5.3-37.7

0.1

-37.O-36.9-38.4-41.5-38.4

-33.8-28.9-38.5-37.3

-38_8

-31.5-41.7

1.8

5.75.2

10.44.48.3

-26.2

-43.1

'10.1

8,0-43.2

5.3-37.7-15,1-,16.5

0.1

-8.4-8.3-9.1

-10.7-10-0-11_8

-8-3-7.5-9.3-8-6

-8-4-7 -7-9.8

3.8

5.5

3.1

4.1

-4.69.5

-10,8-0.6

-15,5

2.2

-0.8-3.4-o.70.3

.2.3-0.90.3

-2.4-2.O-0.'l-1.8o.7

-4.33.24.4

-o.23.O

6.1-0.8-0.82.9

-0.5

3.14.24.64.75.36.3

4.1-0.8

5.45.6

6.66.06.82.25-4

1.2

5,43.7

8.O

2.8

14.20.9o.7

-2.4

2.7

-o.2-38,8

-6,9-47.O

-3.9

11.87.42.57.4

' Annualized" Proliminary". The NCREIF Property retums are one quarter in arrears.

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aaoaooaoo oooafooof Guam - 401(a) and 457(b) Plans

25 Larg€st Nsgaiive Contributo.s

Stock

OOGovernment

Domestic Equity - Largest Positive & Negative Gontributors to S&P 5OOFor Fou,Ih Quarlet 2008

S&P 500 Ouartorly R€turn = -21.94%

25 Largest Posilive Contributors

Stock Return("/"1

End ot QuarlWeisht

capBank

caPRank

Helurn(%l

End of OuarlerWeiqht

EXXON MOBIL CORP

VERIZON COI/MUNICATIONS COM

BRISTOL MYERS SQUIBB CO COM

AT&TINCCOMGILEAD SCIENCES INC COM

ARCHER DANIELS MIDLAND CO COM

WACHOVIA CORP NEW COT/i|

NUCOR CORP

APOLLO GROUP INC CL A

UNITEDHEALTH GROUP INC COi/WYETH COIU

WASTE MGMT INC DEL COM

suNoco rNc corvlNEWMONT IVIINING CORP HOLDING CO

OWEST COMITUNICATIONS INTL INC

C H ROBINSON WORLDWIDE INC

AUTOZONE INC COM

PG&E CORP COM

UST INC COM

MOLSON COORS BREWING CO CL B

FAMILY DLR STORES INC

SHERWIN WILLIAMS CO COM

FIRST HORIZON NATIONAL CORP

KING PHARMACEUTICALS INC COM

AON CORP COM

Dala Sourcer Compustat

BANK OF AMERICA COFP

GENERAL ELEC CO COIV

CITIGROUP INC COM

JPMORGAN CHASE & CO COM

MICROSOFT CORP COM

IBM CORP CO[,il

SCHLUMBERGER LTD COM

ctsco sYs rNc coMCONOCOPHILLIPS

WELLS FARGO & CO NEW COM

APPLE INC

PEPSTCO tNC COt/JOHNSON & JOHNSON COIVI

HEWLETT PACKARD CO COIV

PROCTER & GAMBLE CO COM

GOOGLE INC CL A

INTEL CORP

MERRILL LYNCH & CO INC

MEDTRONIC INC COM

AMERICAN EXPRESS CO COM

GOLDMAN SACHS GROUP INC COM

US BANCORP DEL COI/| NEW

PRUDENTIAL FINL INC

l\,lETL|FE INC COM

CHEVRON CORPORATION COM

3.3170

7.2870

14.700/"

3.60"/"

12.M"/o

32.210/"

59.69%

17.4570

29.21"/"

4.77Vo

2.3y/o

6.210/o

23.0770

5.26vo'15.51%

4.460/o

13.08%

4.41Vo

5.21%

5.110/o'10.530/.

5.15%

15.000,4

10.860/.

1.96%

5.17"/o

1.23%

0.s9%

2.14"/"

0.60%

0.241"

0,15%

0,1870

0.10%

0.419

0.64%

0.21v"

0.06%

0.247"

o.o7"a

0.120/4

0.07%

0.18%

0.13%

0,09%

0.050/"

o.o7%

0.03%

0.03%

0.16%

-58.86%

-35.25V"

-66.90%

-31-86%

-26.700/o

-27.60%

-45.52y"

-27.750/"

-24.64"/"

-20.53%

'24.910/o

-22.56%

-12.960/"

-21.3s%

-10.74yo

-23.1y/o

-20.940/"

-52.77Vo

-36.62./"

-47.300/"

-&3.42v"

-29.390/"

-56.85%

-36_15%

-9.58%

0.90%

2.177"

o.471"

1.50%

1.89%

1.44./o

o.u%1.22%

0.9870

1.420,6

0.970/0

1.O4"/"

2.110/.

1.131"

2.35yo

0.94.4

1.040/

0.24v.

0.450h

0.270/"

o.441"

0.560,4

0.160/.

0.35%

1.91"/"

Repod Datei

1

13

37

4

149

126

54

114

297

242

190

281

129

173

228

361

258

432

4'15

147

3

48

10

7

11

82

14

2l

22

18

23

20

94

50

76

46

139

63

6

Januafy 16, m09

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Summary - Investment Option Array

Theoretical Return and Risk Chart

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ilbrtgage B.ck.d Securatac$I ntermedaate Duration Bondg

Strort lhration BondsStable Valuo Insurance,/Bank Products (Galliard Wells Fargo stable R€turn)

t llunicipal BondsMarkst Duration Bonds (American Funds Bond Fund of America A)

Rerl EstateIntcrnational Bonds (Standish Melton I nternational Fixed- Inc)

' Long Duration gondsHigh Yaeld Eonds

Global Bonds

Small/Mid Cap Value Equitylntornataonal Large Gap Equity (Thornburg International Value R3)

./- llicro Cap Equity'- Small/Mid Cap Growth Equity (Franklin SmalFMid Cap Growth A)Small/Mid Cap Core Equity (Baron Small Cap. BlackRock Aurora lnv A)

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Vsnturo Capital r Gompany StockEmerging llarketc Equity (Pioneer Emerging Markets A")

Precbus lletals- Emerging Harkets BondInternational Small Cap Equity

-O\ ./- Global Equity.49 { Large Cap Growth Equity (American Funds Amcap R4)F // Large Cap Gore Equity (Vanguard 5OO Index Signal)

/ Large Cap Value Equity (Vanguard Windsor ll)

Exp€cted Rlsk (standard Devlatlon)

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ooooooooooofoooocoooooooooooooooDefined Cont.ibution Pertolmance Evaluatlon Report Govemment ol Guam - 401(a) and 457(b) Plans

Summary - Plan Highlights

Assets in the Plan

401(a) PIan

. 401 (a) Plan assets totaled $139.8 million at December 31 , 2008, representing a decrease of $16.3 million f rom September 30, 2008.

. The Plan's assets were invested 31 .4"/. in Conservative Profile, 12.9o/o in Moderate Prof ile, 9.5% in Moderately Aggressive Prof ile, 7.1ol. in GalliardWells Fargo Stable Relurn, 6.47o in Vanguard 500 Index, 5.9% in Aggressive Profile, 5.2% in Dodge & Cox Balanced, and 5.2"/" in ThornburgInternational Value. All other investment ootions each had less than 5% of the Plan's total assets.

. The Pioneer Emerging Market Fund is not available to participants in this Plan.

457(b) Plan

. 457(b) Plan assets totaled $ 10. 1 million at December 31 , 2008, representing a decrease of $1 .2 million f rom September 30, 2008.

. The Plan's assets were invested 14.5"/o in Galliard Wells Fargo Stable Return, 10.070 in Vanguard 500 Index, 8.0% in Vanguard Windsor 11,7.5"/. inThornburg International Yalue,6.7"/" in Conservative Profile, 6.1% in Franklin Small-Mid Cap GroMh, 6.0% in American Funds Amcap, 5.7% inModerate Aggressive Profile, 5.5% in lvloderate Protile, 5.2o/o in American Funds Bond Fund of America, 5.0% in Drefus/Standish InternationalFixed Income, and 5.0% in Dodge & Cox Balanced. All other investment options each had less than 5% of the Plan's total assets.

Mercer

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I nvestment Manager Updates

Dodge & Cox - Research Note for Fixed lncome Strategies, January 20,2(N9, cont'd

Highlights

. In 2Q08, Dodge & Cox shifted primary lixed income oversight responsibility trom the firm's broad Investment Policy Committee to the Fixed IncomeInvestment Policy Committee. The former contains the most senior members of the firm, but skews to equity investment professionals. The firmbelieved it would be more efficient for fixed income professionals to directly set and review portfolio strategy, approve new types of securilies andissuers, oversee the research process, and oversee strategy implementation. As a result, Dana Emsry, the longest-tenured fixed incomeprofessional, Peter Lambert, and Tom Dugan shifted off the firm's Investment Policy Committee. Dodge & Cox CIO Charles Pohl is the onlymember of bolh committees. We believe this shift makes sense, as it puts fixed income protessionals in a better position to make efficienl, well-informed decisions.

. Larissa Roesch and Anthony Brekke demonstrated a mastery of the team's corporate holdings. The firm's industry analysts create their ownfinancial statement models lor their covered companies, and these models are used by both the equity and fixed income teams. The fixed incometeam's corporate bond specialists work with the industry analysts to build an investment thesis for each credit, with a focus on downside risk. Thefirm's typical investment horizon is three to five year. This plays to the tirm's strength as company analysts and buy-and-hold long-term investors.This contrasts with active fixed income managers that conduct a lot of relative-value trading.

. Despite the longer-term philosophy, we are impressed with the firm's focus on liquidity and short-term survivability of issuers given the difficultcredit environment. In addition to the tundamental investment thesis for each credit, Brekke was extremely well versed in the maturity schedules,bond covenants, access lo credit lines, and asset values of the team's retail and REIT holdings. The firm has stepped up the haircuts it gives toissuers'assets, using recessions in the early 1990s and early 2000s as a staning point for modeling liquidation values.

. We are impressed with the depth of analysis around the team's inveslment in Kaupthing Bank, which nonetheless detracted meaningfully fromperformance in the third and fourth quarters of 2008. The position was initiated at new issue in May 2006, with a 75 bp position across eligibleaccounts. The position peaked at roughly 88 bps in 1Q07, primarily due to price appreciation.

. The team specifically selected Kaupthing and avoided investments in lceland's other two banks, Glitnir and Landsbanki, based on fundamental andbalance sheet research. For example, Boesch explained that Kaupthing had deposits representing 50% of its outstanding loans, maintained thebest international diversification of assets o{ the three banks, and had the smallest market share within lceland. All of this was viewed positively inDodge & Cox's downside risk scenario, as the bank would have been in a good position to sell foreign assets. Kaupthing had also hedged againstlcelandic cunency depreciation, which would have produced exceptional results in 30.

. Unfortunately, the chain ol events that led to Kaupthing's receivership was highly unexpected. Roesch admits thal the swiftness of the eventscaught the firm off guard, despite frequent communication with bank management. lceland's linancial services agency took all three banks intoreceivership following a seizure of Glitnir's UK assets by UK's Chancellor of the Exchequer and a lack of new lending in global credit mad(ets forKaupthing to tap lor liquidity. The conservatorship prohibits bondholders/creditors lrom forcing the bank into bankruptcy following its technicaldefault (lrom a missed coupon payment).

ooooaoooooo ooootoooooooooooaooooDetined Gontribution Portormance Evaluatlon Report Government ol Guam - 401(a) and 457(b) Plans


Key Observations and Recommendations

American Funds Bond Fund of America. For all periods evaluated, the fund continued to underperform its index and place in the bottom quartile of its universe. Overweight allocation to the

two lowest-performing sectors, CMBS and ABS, was the most significant detractor for the quaner. Underweight position to Treasury and agencyholdings also weighed on returns. The portfolio restriction is to have no more than 15"/o allocalion to lower-rated bonds (BB and below); however,given the downgrades in the bond market, higher-grade bonds are moving to non-investment-grade levels and thus pushing their holdings abovethe maximum level. Current allocations to BBB-rated and high-yield bonds are al 17.7o/. and 6.21" respectively, and this might be of concern if theportfolio counselors decide to sell positions at a loss to meet the guidelines, if the underlying securities ratings were to decline further. Continue tomonitor.

Standish Mellon lnternational Fixedr Effective December 1, 2008, the name on the Trust will be changed to Dreylus Investmenl Funds and the name of Standish Mellon International

Fixed will be changed to Dreyfus/Standish International Fixed Income Fund. Dreyfus and Standish are affliliates of each other and subsidiaries ofBNY Mellon. We see no immediate impact to the fund as fees and the management structure/team remain unchanged. The portfolio manager willcontinue to use Standish's proprietary investment process to manage the fund. Retain.

Dodge & Cox Balanced. The fund underperformed its index and placed in the bottom quartile of its universe for all periods. This quarter's weakness was largely attributed to

an overweight allocation to equities (66.9olo versus 60% for the index) in an environment where equities drastically underperformed lixed income.Within equity, stock selection in the energy sector suffered large losses. Within fixed income, overweight to poorpedorming corporate and noexposure to Treasuries also contributed to weaker results. Dodge & Cox has a strong track record of adding value over the longer time horizon andthey have demonstrated this through their investment discipline in order to stay true to their investment philosophy. However, given the currentenvironment and potential value traps when entering positions in oversold names too early, we remain cognizant of the downside risk associatedwith investing in distressed assets. Also, because Dodge & Cox may invest in oufol-benchmark securities such as CMO and non-investment-gradecorporates, the fixed income portion of the portfolio may exhibit higher tracking error. (See research note in prior section). Continue to monilor.

Vanguard Windsor ll. For all penods except 3 years, the fund outpedormed its index. lt placed close to its universe median lor all periods except 5 years, where it placed

at the 33rd percentile. The health care sector was a significant contributor to performance. Stock selection within the industrials andtelecommunication services sectors also benefited results. No signlflcant development occurred during the quarter for lhe subadvisors (includingHotchkis & Wiley), and we'll continue to monitor for any changes to the underlying investment strategies. Continue to monitor,

American Funds Amcap. The fund outpedormed both its index and its universe median for all periods except 3 years. lt placed at the 51st percentile for 3 years. Security

selection in consumer discretionary, health care, and financral services added to return. Underweight allocation to energy and informationtechnology was also very positive for relative returns. A significant cash position of 15.8% was the largest contributor as the Russell 1000 Growthreturned -22.8% for the quarter. Given the team's selectivity and patience, this fund has been more conservative than many of its counterparts andhas demonstrated that it generates lower tracking error (top quartile) and lower standard deviation (top decile) relative to its peers. W€ recommendtaking this f und ott monitor. Retain,

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oooaoatooaoooooaoooooooooooaooooDefin€d Contribution P€domance Evaluation Reporl covemment of Guam - 401(a) and 457(b) Plans

Summary - Plan HighlightsKey Observations and Recommendations

Franklin Small-Mid Cap Growth. For all periods except the recent quarter, the fund underperformed both its index and its universe median. Favorable allocations to information

technology, telecommunication services, and financials aided per{ormance lor the quarter. Cash holdings of 5.7% also helped during a roughequities market. Total assets in the fund have continued to decline (mainly because of market losses), from $4.3 billion to $3.0 billion over thequarter. Pertormance for all periods has been hovering around the median and has been generally close to the index's return. Although the fund islooking more favorable in terms of capacity and performance, we will maintain a monitor status until these two factors stabilize lor several morequarters. Continue to monitor.

BlackBock Aurora. The lund underperformed both its index and its universe median for all periods except the recent quarter. Positively impacting perlormance for the

quarter came from the overweight allocation to the linancials and consumer staples sectors coupled with the underweight position to inlormationtechnology and energy. A manager search is being conducted to potentially replace BlackRock Aurora in the small cap core or small + mid capcore space. Replace.

Thornburg lnternational Value. For all periods evaluated, the fund outperformed its index and placed in the top half of the universe. lt placed in the top decile for the two longer-

term periods evaluated. Strong performance 6an be seen from the fund's favorable allocation to financials, telecommunication services, and healthcare. A sizable overweight to strong-performing Switzerland and an out-of-index exposure to China added substantially to the quarter's return. ltshould be noted that this fund may take considerable bets outside the benchmark, overweighting in a particular country or sector, or may have asubstantial allocation to emerging markets. Although standard deviation is low (sitting close to the top quartile), tracking error relative to the MSCIEAFE Value is moderately high at the 22nd percentile. Performance has been strong relative to its benchmarks for the past couple of periods, eventhough the fund is very concentrated, holding roughly 50 to 60 stocks. For this reason we recommend removal of the monitor status. Retain.

Pioneer Emerging Markets. For all periods, the fund underperformed its index and placed below the universe median. Portfolio manager Christopher Smart utilizes an

approach that blends bottom-up, fundamental research emphasizing robust balance sheets and management quality with top-down,macroeconomic themes. Because of his willingness to build oversized country and sector posilions, the lund could be exposed to additional risks.We may conlinue to express our concerns with the fund's methods of portfolio construction, and that lhe fund's significanl macro bets against thebenchmark may generate high volatilily. This lund is only available in the 457(b) plan. Monitor.

M€rcer

aoooooaooooooaoooaoaoooooooaooooD€tined Contribution Pgrfomanca Evaluation Repori Gove.nmeni of Guam - ,+01(a) and 457(b) Plans

Current Asset Allocalion - Ibcember 31, 2008

I Stable Value

I US Fixed

tr Internalional Fxed

tr Balanced

I Lilecycle

I US Large Cap quity

I LE Snlall + Md Cap qury

E t S SrEll Cap Ruity

I International quity

I Slable Value

I US Fixed

tr lnternational Fo(€d 1i

tr Balanced

I Ufecycle

I US Larg€ Cap Euity

I US SrBll + Mid Cap quity

tr US SnBll Cap Euity

I hternational qu y

Summary - Asset Allocation

401(a) Plan

Prior Asset Allocation - September 30,200860/. 29.

1oh ,. ',, eV" I , Oy.

627. 65%

Investment Option Asset Cla6s Fund Balance "/o ol Plan % Chg vs. Prior

Galliard Wells Farqo Stable Return Stable Value $9.876.489 1.10/.

American Funds Bond Fund of Amer A Domestic Fixed $3.100.613 2.20/" 0.2"/"

Drevfus/Standish Internaional Fix-lnc lnternational Fixed $560,320 o.4/" 0.10/"

Dodoe & Cox Balanced Balanced $7,323,858 5.270 -0.3",6

Conservative Prolile Lilecvcle s43.575.742 31.4"/" 2.0"/.

Moderate Conservative Prof ile Lilecvcle $6,213,707 4.40/6 0.24"

Moderate Protile Lilecycle $18,066,665 12.9v" 0.5"/"

Moderate Aoqressive Prof ile Lifecvcle $13,237,903 9.5"/. -0.30/"

Aggressive Profile Lilecycle $8,270,508 5.90/" -o.t"a

Vanguard 500 lndex Signal US Larqe Cap Equitv $8,967,504 6.4"/" -0.9"/"

Vanouard Windsor ll US Laroe Cao Eouitv $716.184 0.5"/o -0.1"

American Funds AMCAP R4 US Laroe Cao Eouitv $5,344,076 3.8"/o -0.570

Franklin Small-l,lid Cao GroMh A US Small + Mid CaD Equitv $6.160.837 4.4"/" -o.9"/"

Baron Small Cap US Small CaD Eouitv $509,348 o.4"/" o.o"/"

BlackRock Aurora lnv A US Small CaD Eouitv $314.426 o.2"/" o.o"/"

Thomburo lntemational Valu€ R3 Intemational Equitv $7.221.173 5.2"/" -o.5"/"

Total Plan $139,759,351 1000/0

Mercer 13

oaoooooooaoooooooaooao oooooo aoooDotined Coniribution Perfonnanc€ Evaluation R€port Government of Guam - 401(a) and 457(b) Plans

Summary - Asset Allocation

457(b) Plan

Prior Asset Allocation - Saptember 30, m08

I Stable Value

I LJS Fixed

tr International Fixed

tr Balanced

I Litecycle

I US Large Cap qufty

I US SnEll + Md Cap Equity

tr LE Srtall Cap Ruity

I International Euity

I BrErging [rarkeh quity

Current Asset Allocation - December 31, 2008

I Stable Value

I LJS Fixed

tr International Fixed

tr Balanced

I Lifecycle

I US Large C€p quity

I US SnBll + Mid Cap Euity

tr US SnEll Cap Euity

I lnternational quty

I EnErging t\rarkets quity

Inv€atment Option Asset Class Fund Balance % ol Plan % Chg vs. Prior

Galliard Wells Farao Stable Return Stable Value $1.460.'r57 14.5"/" 3.070

Amedcan Funds Bond Fund ol Amer A Domestic Fixed $520,349 5.216 0.3%

Drevfus/Standish lrnernalional Fix-lnc lnternational Fix€d $508,687 5.Oo/o 1.1"/"

Dodoe & Cox Balanced Balanced $502,239 5.O"/, 0.0"/.

Conservative Profile Lifecycle $679,529 6.7"/" o.1"/"

Moderate Conservalivg Profile Lifecycle $197.2A2 2.O"/" 0,3"/.

Moderate Profile Lilecvcls s557,599 5.5"/" o.4"/"

Moderate Aaqressive Profile Litecycle s576,592 5.7" o.20/a

Aggressive Protile Lilecvcle $400,8,13 4.016 -o.21

Vanouard 500 Index Siqnal US Large Cap Equity $1,005,019 10.0"/. .0.77"

Vanquard Windsor ll US Large Cap Equity $810,300 8.0Ph -o.7"/.

American Funds AMCAP R4 US Large Cap Equity s608.763 6.e/" -1.3./"

Franklin Small-lvlid Cao Growth A US Small + Mid Cao Equitv $620,927 6.1y. -0.3%

Baron Small CaD US Small Cao Eauitv $174,784 1.70/. o.v/o

BlackRock Aurora lnv A US Small Cao Eauitv $322,075 3.2v" -0.5"h

Thomburo lntemational Value R3 International Eouitv $758,008 7.5"/" -0.7"h

Pioneer Emerqino lvlarkets A Emergino Markets Equity $396,650 3.9"/. -0.9"/,

Total Plan $10,099,803 100%

Mercer 14

a aaoolotaoooDefined Contributaon Pertomance Eyaluation Report

oooooaoaoooaoooooooaGovernment of Guam - 401(a) and 457(b) Plans

Summary - Investment Expense Analysis

Fund Style Fund Balance Estimaled FundExpenae

Fund NetExpenseRaiio

Average NelExpenaeRatio

NetExpens6Ditf.

Galliard Wells Fargo Stable Retum Stable Value $11,336,645 $62,3s2 0.55"/o N/A N/A

American Funds Bond Fund of Amer A US Fixed $3,620,962 $22,088 o.61"/" 0.65% -0.04"/"

Dreluvstandish Int€rnational Fix-lnc lntemational Fixed $1,069,008 $7,483 0.70"/" o.77"/" -o.o77"

Dodge & Cox Balanced Balanced s7,826,097 $41,478 0.53% 0.96"/. -0.437"

Conservative Prolilet Lifecycle $44,555,272 $360,898 0.81% t\YA

i,loderate Conservativ€ Prof iler Lifecycle $6,410,989 $5s,135 0.86% N/A N/A

Moderate Profiler Lifecycle $18,624,263 $175,068 0.947" N/A N/A

Moderate Aggressive Profiler Lifecycle $13,814,495 $145,0s2 1.O5"/" N/A tvA

Aggressive Profiler Litecycle $8,671,351 $97,986 't.130/" N/A N/A

Vanguard 500 lndex Signal US Large Cap Equity 69,972,523 $6,981 o.o7"h 0.280/" -0.210/"

Vanguard Windsor ll US Large Cap Equity $1,526,4a4 $s,037 0.33% 0.88% -0.55%

American Funds AIVCAP R4 US Large Cap Equity $5,952,839 $41,670 0.70"/" 0.96% -o.26"/"

Franklin Small-Mid Cao Growth A US Small + l',rid Cap Equity $6,781,765 $69,852 1.03% 1.106/o -o.o7v"

Baron Small Cap US Small Cap Equity $684,131 $8,962 1.31t" 1.06% o.251"

BlackRock Aurora Inv A US Small Cap Equity $636,500 $8,911 1.40"/" 1.06% o.34"/"

Thomburg International Value R3 International Equity $7,979,181 $r 15,698 1.45"/" 0.92"/" 0,53"/.

Pioneer Emerging Markeb A Emerging irarkets Equity $396,650 $7,100 1.79"/" 1.317" 0,48"/"

Total $149,859,155 $1,231,751 o,a2c/.

Av€rage longest share class net expense ratio as defined by lrercer Mutual Fund Universet Fees for underlying funds provided in page 29.Mercer 15

o ooooooooaoooaoaoaoaoooaaaoaaaaoDetined Gontributlon Perlormance Evaluatlon Report Government of Guam - 401(a) and 457(b) Plans

Summary - Gompliance Table

Annualized Periods Ending December 31, 2008

y' = Oqtperformed or matched performan@

T = lndex tund tracked benchmark

* = Underperformed

3 Yeara 5 YaarsComments

lndex Universe Median lndex UniveJse Medlan

Galliard Wells Faroo Stable Return Betain

American Funds Bond Fund of Amer A T15 consecutive ouarlers)

T(5 consecutive ouarters)

Tl3 consecutive ouaners)

,(2 consecutiv€ ouarters)

Monilor

Dreytus/Standish Intemational Fix-lnc x{1 ouarter)

Retain

Dodge & Cox Balanced s(4 consecutive ouarters)

u{4 consecutive ouarters)

,12 consecutive ouaders)

a{2 consecutive ouarters)

Monilor

Conservative Profil€ u{'1 ouarter)

,ll ouarter)

N/A Retain

Moderate Conservative Prof ile * N/A Retain

Moderate Prolile N/A Retain

Moderate Aggr€ssive Profile t{1 ouarter)

N/A Retain

Aggressive Prolile I{1 ouarter)

Retain

Vanguard 500 Ind€x Signal T Retain

Vanguard Windsor ll tl9 consecutive ouarters)

T14 consecutive ouarlers)

Monitol

American Funds AtulCAP R4 t'{6 consecutive ouarters)

TC

{ l ouader)

Becommend iakingoll monitol

Franklin Small-Mid Cao Growth A ,15 cons€cutive ouartersl

t{5 consecutive ouarters)

I/9 consecutive ouaatersl

T{5 consecutive ouarters)

Monitol

Baron Small Cap r{3 consccutive ouarters)

Retain

BlackRock Aurora lnv A I(9 consecutive ouartersl

*19 conseariiva ol]encrsl

I1g consmuiive ouarlercl

tlg consecutive ouartersl

Replace; search inprogre99

Thornburg Iniernational Value R3Recomm€nd taking

off monilol

Pioneer Emerging Markets A *(1 ouarter)

*[1 ouarter)

T/2 consecutive ouartersl

I[1 ouarter]

Monitor

Mercer 16

oaoaooaoooooaoDelined Contribrtion Performance Evaluation Report

Summary - Performance Summary

Periods Ending December 31, 2008

Stable Value

oaoooaoooooooaaoooGovernmsnt of Guam - ,+01(a) and 4571b) Plans

Fed numbers indicate fund underDerformed both benchmarksBlue numbers indicate lund matched or oerformed between benchmarksGreen numbers indicate fund oulDerformed or matched both benchmarksBlack numbers indicate fund tracked the index

Market Value % of AllPlans

1 Ouarter 1 Year 3 Years 5 Years

Galliard Wells Fargo Stable Return

Citigroup 3-tvlonf| T-Bill

$11,336,e45 7.6"/o 1.Oto

o,vh

4.2"/o

1.S%

43%

3.4"/"

4.1%

3.10/.

Domestic Fixed

Market Value '/c ol AllPlans

1 Ouarter 1 Year 3 Yeara 5 Years

American Funds Bond Fund ot Amer A

Barclays Capital US Aggregato

Mercer Mutua! Fund US Fixed Core Univerce Median

Fund Rank in Universe

$,6m,962 2.4% -5.2"/"

4.6"/"

0.90/"

9l

-12.4"h

5.2"4

-2.1%

-'1.7%

5.5"/"

2.6%

90

0.5%

4.7"/"

2.8%

87

International Fixed

Market Valu€ %otAlPlans

1 Ouartel 1 Yeal 3 Years 5 Years

Dreytus/Standish International Fix-lnc

Ciiigroup Non-US WGBI HDG

Mercer Mutual Fund lntl Fixed Univerce Median

Fund Rank in Univerce

$1,069,008 o.7v" 5.7%

2.5%

4.1%

8.0v"

0.8%

16

5.6%

5_3%

4.2"/"

34

53%

5.4"/"

3.5%

t5

BalancedMarket Value "6 of All

Plans1 Ouarter 1 Yeal 3 Years 5 Years

Dodge & Cox Balanced

S&P 500 60"/. / 40% BC Aggregate

Mercer Mutual Fund US Balanced Unive6e Median

Fund Rank in Unive6e

$7,826,097 5.2% 16.4%

1l.9"/"

13.3%

77

€3.6%

-22.10/"

-25.2%

-8.4.h

-2.70/"

-4.00/"

92

-1.5.h

0.77"

0.2%

78

arataaooaaoaaaDellned Gontrlbutlon P€rtormanco Evaluation Report



Lifecycle

ooooaaaooooooaoooGovernment ot Guam - 401(a) and 457(b) Plans

Red numbers indicate fund underpedormed both benchmarksBlue numbers indicat€ lund matched or performed between benchmarkscreen numbers indicate tund outperformed or matched both benchmalksBlack numbers indicate fund tracked the index

a

Market Value "/o ol AllPlens

1 Quarter 1 Year 3 Years 5 Years

Conaervative Protile

Conservative Profi le Customized Benchmad(

s44,555,272 29.7"h -7.O"h

-5.114

-13.7'/o

-'to.5"/"

{.5%

o.s"/"

1,96/o

2.6"/"

Moderate Conaeryatlve Prolile

Moderate ConsBrvative Profile Customized Benchmark

$6,410,989 4.3"h -9.2"/c

-8.9"/o

-18,0%

-17.4"/"

-1.3%

-1.0"/"

2.3Xo

1,9./"

Moderate Profile

Moderate Profile Customized Benchmarl

918,524,253 12.4v" -11.v

-12.4"/"

-23.2%

.23.70/.

-2.67o

-2.9"4

1.9"h

1.370

Moderate Aggressive Prolile

Moderaie Aggressive Prolile Customized Benchmark

$13,8r4,495 9.2"/" -16.6%

-'r 6.00/.

-30.2%

-29.57.

-5.1%

4.4"/"

0.9%

0.5%

Aggressive Profile

Aggressive Prolile Customized Benchmark

$8,671,351 5.8% -24.0o/.

-22.1"/"

-39.9%

-38.8%

"s.3%

-8_3%

-1.O%

-1.0"/"

Domestic EquityMarket Value % ot All

Plans1 Ouarler 1 Year 3 Years 5 Years

Vanguard 500 Index Slgnal

s&P 500

$s,972,523 6.7"h -21.97o

-21.9"/"

-37.0%

-37.0%

4.4ch

-8.404

-2.3%

-2.2L

Vanguard Windsor ll

Russell 100O Value

Mercet Mutual Fund US Equiv Larye Cap Value Univerce Median


$1,526,484 1.Oq" -21.6%

-22.2./"

-21.4",4

-36.7"/"

.36.8"2

-36.40/.

54

-4.5"h

-8.3v.

4.4%

52

-0.6%

-0.8%

-1.4%

33

Am€rican Funds AMCAP R4

Russell 1000 GroMh

Mercet Mutual Fund US Equity LaEe Cap Growth Universe Median


$5,952,839 4.Oc/o -22.5%

-22.4"/"

-23.1"1

40

47.71o

-3I3.47"

-40.4%

-10.110

-9.1%

-10.0"t

5l

-3.1.h

-3.47"

-3.2"/"

48

Franklln Small-Mld Cap Growth A

Russell2500 Grolvth

Mercer Mutual Fund US Equity Sma +Mid Growth Unive6e Median


$6,78t,765 4.5"h -263%-27.80/.

-26.40,4

49

42.57o

-41.5"/"

-42.0"/o

53

11.67o

10.4"/"

10.5%

63

-2.9%

-2.2",6

-2.40/"

56

Mercer 18

ooaalaoaaoooooDeflned Contributlon P€rfomance Evaluatlon Report



Domestic Equityr, conttd

laoaaooorooooaaooGovemment of Guam - 401(a) and ,157(b) Plans

Rad numbers indicate lund underDedormed both benchmarksElue numbers indicate fund matched or Derlormed between benchmarksGreen numbers indicate fund outDertomed or matched both benchmarksBlack numbers indicate tund tracked the index

o

Mark€t Valu€ %olAlPlans

'I Quartel I Yeal 3 Years 5 Years

Baron Small Cap

Russell 2000

Mercet Mutual Fund US Equity Sma Cap Corc UniverEe Median


$684,131 0.5% -23.5%

-26.10/"

-26.1%

20

40.2%

-33.8%

-36.2%

-93%

-8.3%

-10.3%

39

4.?h-0.90/.

-t.4yo

BlackRock Aurora Inv A

Russell2000

Mercer Mutual Fund US Equity Small Cap Corc Univerce Median

Fund Bank in Univerce

$636,500 o.4"h -25.1"h

-26.1"/"

-26.1%

-39.4v"

-33.8"/.

-36.2Yo

74

"11.5%

-8.3%

-t0.3",6

-3.9%

-0.9%

-1.4%

84

International EquityMarket Value % of All

Plans1 Ouarler 'l Year 3 Years 5 Years

Thornburg International Value R3

t'rscl EAFE Value

Mercer Mutual Fund lntt Equity Larye Cap Value UniveEe Median

Fund Bank in Univerce

$7,979,181 5.3c/o -19.4c/o

-19.70/"

-20.3%

42

42.070

-43.7"h

42.7",6

41

-2.5"/o

,7.r/o

-6.60,4

5.2"/o

2.30/"

2,2"/"

Pioneer Emerging Markeb A

MSCI EM

Mercet Mutual Fund Emeeing Makets Equity Univerce Median


$396,650 0.3% .33.opl.

-27.6"/"

-29.0%

.59.0%

-53.?/"

-54.67.

-7.3%

-4.6"/"

-6.270

5.5%

8.0%

6.4%

ooaoooaooooaooooaaoaao coaooa oa ooOefl ned Gontrlbutlon Performance Evaluation Report

Fund Profile

$table Value - Galliard Wells Fargo Stable Return

Government ol Guam - 401(a) and 457(b) Plans

Share Class: l,l/A Benchmark: Citigroup 3-Month T-Bill

Investment Philosophy

The tund is designed for lhe consenr'alive investor seeking more income than money market funds provide, while preserving the safety of principal and consislency ofreturns with minimal volalility. The fund invesls in linancial instruments issued by hlghly rated companies. These include guaranteed investment contracls (GlCs),security backed contracts (synthetic GlCs) and cash equivalent.

Portlolio Analysis & Key Observations Fund Composition as ot December 31, 2008

Duration Dlstribution

Less than 1 Year 16.0'/.

1 to 2 Years 25.1'/.

2 to 3 Years 26.4"/"

3 to 4 Years 32.5"/"

4 to 5 Years 0.0"/o

Contract Ouality Distribution

18.6./.

71 .5Vo

9.9%

Top 5 Contract lgsuers

Monumental Life lnsurance Co.

JPMorgan Chase Bank

Pacific Life lnsurance Co.

Bank of America

StateStreet Bank and Trust Co.

ABSI axaDE

municipats 4a%

1.4%

CMBS6.30/.

MBS Non.Agency

2.3%

Treasu ry,/Agency4.O"k

Corporale613.4%

GlCs3.20h

Other US Gov't't1.4to

Key Facts and Figures

Portfolio Manager: Galliard Capilal Management

Porlfolio Manager Average Tenure: N/A

Total Fund Assets: $14,731 Nlillion Expense Ratio (Net): 0.55%

lVercer Average Expense Ratio (Net): N/A

Mercer 20

oaoooorraaoaaoorotooa o o aoo o oaoooDgtln€d Gontrlbuilon Prffo.mrncr Evrlurtlon R.port

Fund Profile

Domestic Fixed - Amerlcan Funds Bond Fund of Amer A

Gov€rnmeflt of Guam - 401(a) and 457(b) Plans

Share Class: A Bonchmark: Barclays Capital Us Aggregate

Inveatment Philosophy

The Bond Fund of Amstica soeks to provide as high a level ol current income as is consistent with preservation ol capilal. lt is a broadly diversified lixed-incoms fund,giving the managers great flexibility in responding to bond markat conditions. The fund is a core strategy thal invests in dollardenominated bonds. WheJe allowed,lhe tirm will allocale opportunistically to non-investment-grade and non-dollar bonds.

Portfolio Analysis & Ksy Obssrvationg Sector Allocation as ol December31.2008

Positive lmpact on Performance

. Exposure to higher-quality holdings in the corporats sector

Negative lmpact on Pertormance

. Ovenveight botiom-performing sectors CMBS (5.6% versus 3.6% for theindex) and ABS (6.60% versus 0.60/" for the index)

. Underueight to Treasury & agency holdings

. Overweight lo BBB-rated credit

so.0

45.0

1rc0

30.0

25'0

20.0

15.0

10.0

5.0

0.0MolEag€ & Assst OtiBr

. Ame can FfEs Eord FwE ol Am€f A . BarchF Capiral US AggBgats

Key Facts and Figurss

Portolio Manager: Multiple

Portlolio Manager Average Tenure: 17.4 Years

Total Fund Assets: $32,196 Million

Total Share Class Assets: $21,980 Million

Expense Ratio (Neo: 0.61%

Mercer Average Expense Ratio (Nel): 0.65%

Mercer

to ooaooooaoolooootDetined Contribution Portocfi anco Evaluation Report

Fund Profile

Domestic Fixed - American Funds Bond Fund of Amer A

oooooooooaooGovernment of Guam - 401(a) and 457(b) Plans

oo

Comp!rison rith th. Mercei Muru!l Fund US Fir.d Cor. Unh.r3eP. t'ume. .ft. r t .r l|d P. r.ni|} Lrnl|.* rq. p. rtd.tl .n.hd lrsc!6.. l0rr3

lu Jf,![a i ljr !|'\( l

Conpe.ison *ith thc Me.c€. Muturl Furd US f ixed Co.. UniyeBet'[cUsA(;rldPDNennlgRrn|i4

Conurri!r. rnh rht M.rc.r Mu.!,1Fund lrs

i .,-nai liir Nlira r( '1^l

Exc.sr Rclurn vs BCUSAC in lht Mercer Muturl tutrd US lird Co.. Utriyf.seAn.ricun futrd! Bond rund ufAmr.A liu Ji.200,1ro D.. !008 ilfter feet)

Mercer

aoooaoooaoooooloaooaoloaotooooooDefl ned Gontrlbotlon Podormrnca E!.rlurtion Rlport

Fund Profile

International Fixed - Drelilus/$tandish International Fix-lnc

Government ol Guam - ,101(a) and 457(b) Plans

Share Class: lnat Benchmark: Citigroup Non-US WGBI HDG


SSRM believes consistenl, above-average returns require active management and that the firm should exploit all available sources of value added. Those sourcesinclude: duralion, yield curve positioning, seclor rotation, and credit and option analysis, SSRM believes in-depth research is the key to success.

Porltolio Analysis & Key observations Country Allocalion as of December 31, 2008

Poaitiva lmpacl on Psrformance

. Eposure to US fixed income

. Unds]weight to poor-performing Japan

Negative lmpact on Performance

. Unde eight loreign/govemmental securities

. Overweight corporate credit

50.0

45.0

40.0

- 35.06

.9< 25.0

E 2o.o

I ts.o

10.0

5.0

0.0

Canada Latn OtaerAne ca

r slandbh lvlellon hllFix6d hcofiB

r Oligroup lbn-U.S. WGBI (ti6dg€d)

o JP i,brgan l$n-US. Governnenl Eond hder {l-ledgEd)


Portfolio Manager: Multiple

Portfolio Manager Average Tenure: 2.8 Yaars

Total Fund Assetsi $59 Million

Total Share Class Assets: S59 Million

Expense Ratio (Net): 0.70%

Mercer Average Expense Ratio (Net): 0.77%

i,rercer ta

oo ooooooooooaDefined Coniributior Pertormanqe Evaluation Reoort

Fund Profile

International Fixed - Drefus/Standish lnternational Fix-lnc

ooooaoaaooaoooooaooGovemment of Guam - 401(a) and 457(b) Plans

ConpariroD viah lhe Me.c.r Mltuil Fund Inrernllionll Fix€d Utriv€.s€nrlL *ririq ..tr tctl'd! e.dtd lrt(.mlxr1008

'",rrii$iir,il llii

.;

Compsrbon qith the Ntercer Murusl Fund lnc.nittunal Filed UnircB.rllx* ro.lh. 5 te,B.ti.d D..103

ti

I iu!d!r !nLo Lr !a r,\ 's

N,jNtr

nx(t$ A.rur! y! CINUSWCBH ir rhf M.rrfr Muluil Fu.d Inkrn!|n'.rl Fi!.d Unir(rcShidish M.lhn Inll tircdJn. rfu Jrn 1lro,l I' oc. toux (!tt.rfeds)

Mercer 24

ooaaoaf ooooooooooooooaaoooolooooDotlnod Gontdbuilon P.rfonnrnc. Eyaluatlott Repqt

Fund Profile

Balanced - Dodge & Gox Balanced

covernmant of Guam - 401(a) and 457(b) Plans

Share Cla$: No Load Benchmark: S&P 500 60% / 4070 BC Aggregate

Inv6stment Philosophy

Dodge & Cox's investment philosophy for equity and fixed income is predicated on a long-term investmsnt horizon and the conlrol ot downside risk. The equityslrategy is bottom-up and value driven. The fixed income strategy is a core stralegy that invests exclusively in inveslment-grade issues.

Porttolio Analysis & Key Observations A$et Allocation as of Decsmber 31, 2008

Positive lmpact on Psrformance

. Overweight allocation and stock selection within the health care sector

.In the fixed income portfolio, corporate bond holdings perlormed well,padicularly within the linancials ssctor

Nogative lmpact on Performance

. Overweight exposure to equities (66.9% allocation)

. Stock selection within the energy sector

. On the tixed income side, overweight to the corporate sector; no exposure toU.S. Treasuries

. Individual detractors to performance: Sprint Nextel (-70.0% return), Citigroup(-€6.9o10 return), and Dow Chemical (-51.2% return)

Gl Domestic Equity

llnternalional Equity

I Fixed Income

I Cash & Equivalents

Key Facls and Figurgs

Portlolio Manager: Multiple

PoIdolio Manager Average Tenure: 10.1 Ysars

Total Fund Assets: $14.70o Million

Total Share Class Assets: $19,000 Million

Expense Ratio (Ne0: 0.53%


Mercer 25

oo oooaaooooooDgfined Gontrlbutlo[ P€rformtnce Evaluation ReDort

Fund Profile

Balanced - Dodge & Gox Balanced

oaoaaooooooooooooooGovernment of Guam - 401(a) and 457(b) Plans

ConpsriJotr Rilh lhe Meic.r Muturl IrDd US Brlsnced U.iv€rs€P.ftme..fterr..i rt'1| P.N.dir. RrrLlq n'rFddt.n&d D.{ErJx r 2adl

! ',tlqbl

J ll!\!1.

n:

CoDparison wirh th€ Merc.rMulull l_!nd US Brhtr.d Unir.6etlli r x.ruhchrnftftns y bsrorility..!.nrdu..tn03

CohDrriron rilh lh. rl.r.er Muru.l tunil US arlrn!cd uniY.rrt

r Dodr. & fd siri('asrto*,1o

Dxress R.r!rn y5 SP60BC,l0 In $c Mer.cr Mulu.l Fuld trs B!|lo(.d Unir.ntDodrc & Cox B.hncrd fronJ!n 2004 tu Drt 2004 (rft.rfsss)

I

i;

:

:::=Uj$ !Y{'b"' rt-P !r_shoru

Mercer

covernm€nt ol Gusm - ,101(a) and 457(b) Plans

r Inte rnational Equity

r Domestic Equity

I Fi)cd hcome

Stable Value

oaooooaooo ooooaooooolo ooooaoooooDcfln.d Conttlbutbn Feriolmrnco Evrlurtlon R.port

Fund Profile

Lifecycle - Llfecycle Funds'

100%

90%

W"/6

7W"

60p/"

whwk300/0

20v"

100h

0%3

Fund Number

{,.9Goe

Stable Value Fix€d Income Domastic Equity International Equity

1 Conservative Prolile 22.5"/o 47.5"4 25.0% 5.O"/"

2 Moderate Conservativs Prof ile 22.50/" 32.,Vo 35.0% 't0.0vo

3 Moderate Profile '15.0% 25.OV" 45.O% 15.0%

4 Moderate Aggressive Prof ile 5.tr/o 20.oo/" 57.sYo 17.5v"

Aggressive Protile 0.006 0.0% 75.0V" 25.O"/"

" Allocation data as of Dectrnber 31, 2008 not available at tim€ ol produclion. Allocation abovs is as of Ssplemb€t 30, 2008.

Mercer 27

aoooooootooaooooaooao oooaoooooooDefin€d Contrlbutlon Pertomanc€ Eyaluation Report

Fund ProfileLifecycle - Underlying Funds'

Government of Guam - 401(a) and 457(b) Plans

Allocation (%IConservativ

e Profile

ModerateConservativ

e PiofileModerate

Profile

ftlgderateAggressive

orotlleAggressive

orolile 4OO8 Heturn

4008Benchmark

Fetuan

UnderlyingFund Net

Fee

Stable Value 22.5"/o 22.so/. 15.io/a 5.0"6 o.o"h

Guaranteed Profile Fund 22.5"/" 22.5"/" 15.0"/. 5,0% 0.0% N,/A N/A N/A

Fixed lncome 47.50/o 32.s.h 25.O"/" 20.ov" 0.0%

Maxim Shon Duration Bond 7.5"/. 2.5v" 0.0% o.0% 0.0% 1.4"/" 2.77o 0.60%

Maxim U.S. Govt. Mortgage Securities 10.0% 7.5",6 7.5"/" 5.0"/. 0.0% ?.5./o 4.6"/" 0.60%

Maxim Global Bond 5.0% 5.0% 5.0% 5.0% o.o"/" 1,9% La"/. 1.30%

Maxim Federated Bond r 0.0"/. 7.5"/" 7.5"/" 5.0% o.v/ 1.4% 4.6% 0.707"

Putnam High Yield Adv 7.570 5.O"/. 2.5% 2.5"/" o.f/. -17.7% -17.57o 1.090,4

l\,laxim High Yield 7.5"/" 5.O"/" 2.5"/" 2.5"/" 0.0% -22.9"/" -17.5"4 I _10%

Domestis Equity 25-O./. 35.W" 45.O"h 57.5"/o 75.O.h

lvlaxim T. Row€ Price Eouitv Income 3.8% 3.8"/" 5.0% 7.5"/. 7.5./o -22.4",6 -21.V/o o.82"/"

Putnam Equity Income 3.8v" 3.8"/. 5.O"/" 7.5"/" 7.570 -19.2.,4 -22.21"

lvlaxim Janus Large Cap Growth 7.54o 7.5"/" 10.0"/" 10.0% 10.0"/. -26.17c -21.y/. 1.05"/.

Maxim Goldman Sachs Mid Cao 2.5"/" 2.5"/" 5.0% 7.5./. 'to.0"/" N/A N,/A N/A

Putnam Mid Cap Value 2.5"/" 2.5./. 5.O"/" 7.5"/. 10.0"/. -26-40/. .27.2./o 1.27"/"

[raxim T. Rowe Price [4id Cap GroMh 0.0% 5.V/" 5.O"k 5.0p/. 't0.0% -25.4"/o -25.6e/c 1.040/o

lraxim lnvesco Structured Small CaD Value 2.5"/" 5.0"/. 5.0% 3.8"/. 7.5% 1{/A N,/A ll/A

lvlaxim Loomis Savles Small Cao Value 2.574 5.V/" 5.0v" 3.4"/" 7.5"/" -24.21" -26.1"/o 't.07"/o

lraxim Small Cap Growth 0.0v. o.e/" o.o"/" 5.V/ 5.0"/. -28.7"4 -27.4v" 1.1r/.

International Equity 5.O% 10.010 '15.e/" 17.5"h 25.O7c

Maxim Bernstein International Eo 1.7"/" 3.3"/. 5.0% 5.8"/" 8.3% .30.2% -20.3"h 1.1?/"

tvlaxim INVESCO ADR 1.7"/" 3.tk 5.0v. 5.4"/" 8.3"/. -19.4"/" -20.30/o 1.08"/o

ilaxim MFS Internalional GroMh Portfolio 1.7"/" 3.3"/. 5.0% 5.8"k 8.3"/. -16.7"4 -20.3fl" 1.2e/o

Grand Total" 100.0% 't00.0% 100.0% 100.ocl" 1(X).0%

Allocation data as ol December 31, 2008 not available at time of production. Allocation above is as of September 30, 2008.

Mercer 2A

oooooaaoooootootoaaaotooooaaooooDafinad Contrlbutlon P.dormrnc. Eyrlu.tlon R.porl

Fund Profile

Lifecycle - Lifecycle Funds

Go\r€mment of Guam . 401(a) and 457(b) Plans

Conservative Profile ModerEte Conservativc Prof ile Moderale Profile

-50.0% -25.Wo 0.0% 25.4/.

5 Years

3 Yea6

l:::;

-o.uo"fo n*

.,;lffl;'.{{

Year

1 Ouarter

I ConservEtive Prolile Cuslomized Benchmark

I Con6ervative Prolile

-fi.vh -25.ek 0.e/" .ek

5 Years

3 Yearg

lHT"

i:Tl

;::#:f.a.v/6

-9.2.k

Year

Quarter

I lrbdergte Conservative Prolile Customized Benchmgrk

I l/bdeGle Consetuative Protile

5 Years

3 Years

Quarter

! l&derate Prolile Custornized Benchmark

! lvbderale Protile

ls;::T:;"1

It::1I

-23.7./o.n.2%

Modsrato Aggressiw Profi la Aggressive Profile

5 Years

3 Years

l::a

tffil

.1.:#I

Yeal

QuEatgr

! i/bderate &gressive Prolile Customized BenchmaR

I t\&defate &gressive Prolile

5 Yearc

3 Years

.1 3:i:l

;:;;l

:n:i:-Yal

I Aggressive Prolile Customized Benchmark

! Aogressive Protile

Quader

Mercer 29

oaoooaaooooaoDefi ned Contdbution Performance Evaluatlon Report

Fund Profile

Domestic EquiQr - Passive - Vanguard 5OO Index $ignal

oooooaoaooooooooafoGovernment ol Guam - 40'|(a) and 457(b) Plans

Share Class: Other Benchmark: S&P 500

Investm6nt Philosophy

The Vanguard 5OO lndex Fund attemptrs to provide investment results that parallel the performance of the S&P 500 Index. Given this objective, the portlolio isexpected to provide investors with long-term growth of capital and income as well as a reasonable level ol current income.

Ponfolio Analysis & Key Observations Tracking Error

Posilive lmpact on Performance

. Top-perfoming sectors were telecommunication services (-2.9% return)utilities (-12.0% return), and health care (-12.7y. rclurn)

. Top individual contributors to performance: Exxon Mobil (3.3o/. return),Verizon (7.3% return), Bristol Myers Squibb (14.7% return), AT&T (3.6%return), and Gilead Sciences (12.1% return)

Negative lmpacl on Performance

. The worst-perf orming sectors included financials (-37.6% return), malerials(-31.4% return), and technology (-26.0% return)

. Top individual detractors from performance; Bank of America (-58.9%return), GE (-35.3% return), Citigroup (-66,9% return), JPlvlorgan Chase(-31.9% return), and N'licrosoft (-26.7010 return)

5 YFAH PEFDO - VANGUARD 5M INDO( SIGML VS. S&P 5OO

0.05%

0.04%

0.04%

0.03/"

0.o?/"

0.o2/"

o.oT/"

0.01%

0.01%

0.00"/.

Jan-Ot Jul44 JaD05 Jul-05 Jan-6 Jd{6 Jan'07 Jul-O/ JaftO8 JJ-08

- Rollirg 1 -Year Trackir{ Errcr

Key Facls and Figures

Portfolio Manager: l\richael H. Buek

Portfolio Manager Average Tenure: 3.8 Years


Total Share Class Assets: $23,009 Nlillion


Mercer Average Expense Fiatio (Net): 0.28%

Mercer 30

aaoaoooaaaoaoooooaoooaoooooatoooD.fin.d Conirlbutbn Pertornrnce Evalurtlon Report Govommont of Guam - 401(a) and 457(b) Plarls

Fund Profile

Domestic Equity - Vanguard Windsor llShare Class: lnv Bonchmark: Fussell 1000 Value

Inv63tment Philo3ophy

The lund seeks long-tem capital appreciation and income by investing in a broadly divsrsified universe of large- and mid-capitalization valus stocks. Th6 fundachieves diversification through a multi-manager structure, including both fundamental and quanlitative styles. The advisors woft independendy, each employing iisown process and strategy. While the fivs advisors have individual styles, the overall fund focuses on stocks with belo',v-average P/E ratios, above-average yiel6 andsolid relative-retum potential. The fund is subadvised by Banow, Hanley, Mewhinney & Strauss; Lazard Asset Management; Vanguard Quantitativs Equity Group;Hotchkis & Wiley Capital Managemenl; and Armstrong Shaw Associates.

Portfolio Analysis & l(ey Observationg Style Analy3is

Positive lmpact on Porformanco

. Ovorweight to and stock sslsclion within ths health care s€ctor

. Stock selection wilhin the induslrials and telecommunicationseMces sectors

. Individual contributors: Bristol-Meyers Squibb (14.7% retum),Wyelh (2.4% relurn), Verizon (7.3% return), and AT&T (3.60/0return)

Nogatiw lmpacl on Performance

. Siock selection within the energy and financial services seclors

. Individual detractors: JPMorgan Chas€ (-31.9% relurn), Bank otAmerica (-58.90[ return), Ciligroup (-66.9% retum), and ManulifeFinancial (-53.0% retum)

Mar-04 S€p{4 i/hr-06 Sep{s irar-6 SeF06 Mar{7 Sep07 llsr{8 Sop08

I Bussdl I m0 Value ! Russdl 1 000 Growth ! Ru8sell 2OO Valle I R.|6€e[ $S Grewlh

5 YEAR PERIOD . ROLLING 3 YEABS ENDING DEC 3I. 206

Kcy Facts and Figures

Portlolio Manager: Multiple

Porfiolio Manager Average Tenure: 6.2 Years

Tolal Fund Assets: $29,007 Million

Total Share Class Asseb: $23.700 Million


Mgrcer Average Expense Ratio (Net): 0.88%

Mercer 31

ao oaoaaooooooooooooDelinod Contribution P€rtormarcE Evaluatlon Report

Fund Profile

Dornestic Equity - Vanguard Windsor ll

oooaoooooooGovemmant of Guam - 401(a) and 457(b) Plans

ao

CodDfiilor 'i the ll.rcer Mltual Fond US Equitr L.rs€ Csp Y3lu. Unive6.d|l.Rr.|{iqrolFr|'r&rnd.dDtc.mb.r2003

ri "dr*,

r I

ConporboD vith th. Merce.Mnturl fud US Eqtrily Lr.gc Clp Vlls UniverseBlll!'d R..uBcbrdd.rrlns vs,ltUlooovcsD rnd P.r.dlk tr.llns rla rLl s rcrh cn&d Dcc1003

Cdmprrirdn rilh lh. M.rcer Mulurlftrnd l-S tquity I-rrEe Crp VrluB Utriysrsg Ii..!s Relorn $ RUliiooVUSD i! the Mcrrc. Muturl Fuld US Equitt l,!ryr C{p Vllue tlliyrEeVaqurrd Wind rll lronJ!n 200.1lu Der 2003 (3ft?rfcca)

t

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Ivlercer 1U

oooooaaoaaoooaDeflned Conlrlbutlon Partomarce Evall5tlon Report

Fund Profile

Domestic Equity - American Funds AMCAP R4

ooaaaaoaaoataaoaooGovemm€nt ol Guam - 401(a) and 457(b) Plans

Sharo Class: Rstiramont B€nchmark; Fussell 1000 Growth

lnvestment Philosophy

The lund focuses on high-quality, conservative growth companies that have a history of stable revenue groMh. ln addition, companies must show a record ol solidearnings growih. The Fund is managed in a fashion similar to that ol CR&M'S GroMh Fund of America, and many of lhe fund's holdings overlap. Unlike the GroMhFund, ths managers invest only in U.S. stocks. However, because of Amcap Fund's smaller asset base, ths managsrs ars able to invest more in small- and mid-capstocks, which account for about one-third of assets. The tund seeks to provide long-term growth ol capilal, investing in established growth companies of any size withproven records of sieady, above-average earnings and a laster groMh rate. Specialemphasis is given to companies wilh rapid groMh polential in expanding sectorsof the U.S. economy. The fund investrs primarily in U.S. common stocks, as well as convertible prelerred stocks and cash and equivalents.

Portfolio Analysis & Key Observations Style Anal)rsis

Posltlve lmpact on Pertormance

. Secufty selection in speciatly retail (sub-sector ol consumerdiscretionary), heallh care providers & services (health care),capital markets (financial services) and insurance (financialservices)

Underweight allocation to energy and inlormation technology

Cash position of 15.8%

Individual contributoF to perlomance: O'Reilly Automotive (14.8%retum), unitedHealth Group (4.8% retum), and Mentor Corp (29.670retum)

Negative lmpact on P€rformance

. Security selection in oil, gas & consumable luels (sub-seclor ofenergy)

. Underueight allocation to consumer discretionary and health care

. Ov6rw6ight allocation to financials

. A lack of exoosure to utilities

. Individual detractors to pedormance: Citigroup (-€6.906 retum),Qie€,o (-27.7% return), and Microsoft (-26.7% retum)

Jur{5 No/-05 Apr{6 S€p06 Feb-07 Jul-07 Dec.07 i/iay{8 ftt€

I Ruosell | 000 value I R!66€ll 1 000 Grorrth I Russ€ll 2000 vabe a Russol 20m Groyi,lh

I5 QUARTER PERIOD - ROITING 3 YEARS ENDING DEC 31, 2OO8

Key Facts and Figureg

Portfolio Manager: Multlple

Portlolio Managsr Average Tenure: 14.4 Years

Total Fund Assets: $15.472 Million

Total Share Class Assetrs: $288 Million


Mercer Average Expense Ralio (Ne|: 0.96%

Mgrcer 33

oa tooaaaaaaaoolr€fined Contribution P.rfo]mance Eyalu.tion Raport

Fund Profile

Domestic Equity - American Funds AMCAP R4

oooooaoatoaoolooGovemm€nt of Guam - 401(a) and 457(b) Plans

oo

CoDpriisor vith rhe Mercer Ntulurl l'und US Equily Lffge C3p Crowth UniteB€ntl|.R|nlbrforFrr,dlend.dD.*Dber200a

Conp..ison eith lhe MercerMDrusl fund US Eqlilr Larr. Cap Cdth Unh.6ei. ltU!0olX;LrsD. lf.E.!!|} *. h*rur F 5 ysrB.!dedlt..2urr

Cdbp!rGon rith lh. M.rc{. rl ulu{l Fund US Equil} l-!r[. C,p C ro* th Uniy.13r

I11

1

- u]$ l 1... }'." ki. I F|.l{,'Uudg, :,f;3'"'T,,,i:

Mercer 34

oaaooaooaataootaooo otcaaoaooaaloDeflned Contrlbutlon Perfo]m.nc. EvJurtlon R.port

Fund Profile

Domestlc Equlty - Franklin Small-illid Gap Growth A

Government ot Guam - 401(a) and 457(b) Plans

Share Class: A Benchmark: Russ€ll 2500 Growth

Invsstmont Philosophy

Franklin believes that employing a disciplined long-tem, bottom-up approach to small cap growth equity investing, backed by extsnsive fundamental analysis, canoroducg lavorable resulb over tims.

Portfolio Analysis & Key Observations St9e Analysis

Poaitive lmpact on Performance

. Overweight allocation to infomaliontelecommunication services

. UndeMeight to the financials sector

. Cash holdings of 5.7%

. Top l0 holdings Southwestern Energy (-5.1%(-1 1.0% return), and Cerner (-13.970 return)

Negative lmpact on Performance

. Ovemieighl lo the energy sector

. Underweighl lo health care and industdals

technology and

return), CR Bard

Mar-04 Sep{4 Mar{E S€p{5 Mar{6 Setr06 Maf{7 Sep07 Mar{8 S€P(I8

lRussoll l0O0 Value aRus€ell 1000 Grovi/th ERussell2000 Value lRu65€ll20()0 Grcwth

5 YEAR PERIOO - FOLLING 3 YEARS ENDING OEC 31, 2OO8

K6y Facts and Figureg

Pordolio Manager: Multiple

Porlfolio Manager Average Tenure: 12.0 Ysars


Total Share Class Assets: $2.190 Million

Expense Ratio (Net): 1 .03ol"

Mercer Average Expense Batio (Net); l.1O%

M9rc6r 35

faaaoaoooaaooaaooafo oaoaooaoooooDefined Conlribution Perfo.mance Evaluatlon Repori

Fund Profile

Domestic Equity - Franklin Small-Mid Gap Growth A

Govemment of Guam - 401(a) and 457(b) Plans

CoDp!ri3otr wili the Me.cei Mutusl Fund US Eqrlrt Sm!ll+Mid Ceath Unir.6.P.rromee.n.rt 6 rd P.r.nr. Rr rls forD.dodr..d.d D.c.Eb.r2003

''"lllt";l I.l

Compr.ieon{irh rnt M.ftrr Muh.l lund trs Equitt Srmll+Mid Grcwth Urir€rse

"'.'fr1!ik',1 11

ti

s Equii! SDrll+ M id

r *orr, \on/ v'd t a e'r!0'.

Er..st Rcru.n v! 8Ur500G in th. M{rftr Mu.url Fuld Us Equiry smrll+Mid corih Uni}edsFnlklh SmllrMid C.p Ctuwrh A rrof, Jrd 1004 to ltsc 2003 (rtur feer)

i

5

- Ldll::

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Mercer 36

ooaaoaooa aoaooao.ooooaooooolof a oDaflnad Codarlbutlon ffifmarEc Eyalu|tlon Raport

Fund Profile

Domestic Equity - Baron Small Gap

Govemmsnt ol Guam - ,l.Ol (a) and ,f57(b) Plans

Sharo Class: No Load Eenchmark: Russell 2000

Inv6stmenl Philosophy

Greenberg ss€ks lo invssl in companiss that ars currently undeNalued or ovedooked by th6 broad investment mad(et yet have strong growth potential. To b€considered tor the portfolio, such companies must have stable or improving lundamenlals, clear competitive advantagBs, and strong growth potential. ThB fim'sinvestmenl approach is long term in scope, and all funds will hold oul-of-lavor names provided lhe inveslment thesis remains compelling.

Portfolio Analysis & l(cy Obs.rvstions StYc Analysis

Positive lmpact on Pertormanca

. Stock seleclion within the industrials sector

. Allocation ol 8.970 lo cash

. Individual contribulors to perfomance: Capella Education (37.1%roturn), AECOM Tschnology (25.7% retu'n), and Asrovironmenl(15.2% retum)

Negatlw lmpacl on Performance

. An unde eight to and stock selection within the financials sectoj

. Stock selection wiihin the heallh care sector

. Individual detractoE to performance: Emoritus (-59.7% roturn), CBFicha.d Ellis Group (-€7.7y, retum), J. Crew Group (-57.3%rsturn, and L-1 ldsntity Solutions (-55.9% rsturn)

llsr{X S€p{4 l,lsr{5 S€p{5 i,lsr{E S€tr06 ffar.o7 SepOT Mar{8 S€p00

lRussell l00O Valu€ lRu€€dl lmo Grouth lRu68e[ 2m0 VabE lFlu866ll20S Aorrth

5 YEAR PERIOD . ROLLING 3 YEARS ENOING DEC 31. 2OO8

Key Facts and FigurEi

Portfolio Manager: Clilford Groenbsrg


Total Fund Asseb: $2,098 Million

Total Share Class Assels: $2,098 Million

Expsnse Ratio (N6t): 1.31%

I\rercer Average Expense Ratio (Net): 1.06%

Mercer 37

a aoa.ooooloaoooootoaolroorooaaooDetined Contribution Pertormanca Eyaluation Report

Fund Profile

Domestic Equity - Baron $mall Gap

Governm€nt ot Guam - 401(a)and 457(b) Plans

C.m9!rbon rirh th. Mercei llurul fund US tiquir! Sroll Ca! Cor. UniveBe ComFrisonwith the M.rce. Mulull Fund lis Equirt Smll C!p Core Universcl ltk a,i R..un chrddrre cs re. *!!000usD ,d P.E.n . rr

*li -rti'lir,t l

C onp, rison *irh thr M e.c. r V utu{l Fund !S Equity Sorll Crp C dr. Utriy.rr.

r B"^.s-,'r.e a rLr!roLsD

Exc.sr Return vs RU2000trsD in thc M€rcer lU urul Furd US Equily Sn!l| C{p Cor UnirsBeBx.on Sn3ll Crpl.omlln 1004 ro Dd.2003 (.ie. t t!)

::::= ijlJ} r tr tk4. kod G P) " s r!, ' r D

Mercer 38

f aoaaooaaaoaaoaoaa oat totooa aao aoD.fln d Contrlbutlon P.rforn.rE. Eyrlu.tlon R.Fort Govemmont ol Guam - 401(a) and 457(b) Plans

Fund Profile

Domestlc Equlty - ElackRock Aurora Inv ASha.e Class: A Bonchmark Ru8soll 2000

lnvcstmcnt Philosophy

This lund rFes straightlorward tundamental analysis that is highly dependent on portfolio manager Wayne Archambo's stock-picking acumen. He looks iorundervalued securities wilh sound business fundamentals and positive business momontum. Sincs ha raquires a catalyst for change, the portfolios will have more ota relative-value biaE. Porttolios are designed with rather broad seclor conslraints 6ven though he insists lhat slock selec'tion is the primary driver of pe ormancs.Archambo is quick to sell stocks il they rsadr targst valuations, lail to realize a calalyst, or simply grow too large. He will nol double down on stocks lhat are lalling,and typically takes a 6- to l2-month outook when determining a calalyst.

Portfolio Analysls & Key Observallong Styl€ Anal)rsls

Positiw lmpacl on Pertormance

. Overweight allocation to linancials and consumer staples

. UndeMeight position to infomation technology and energy

. Top 10 holdings First Niagara Financial (3.6% return), PHH (-4.2%retum), Platinum Underwritels (2.0plo return), and HanoverInsurance Group (-4.5olo rotum)

NcaatiYc lmp&t on Psrformance

. Ov6rwaight to the consumer discretionary s€ctor

. Undoru/€ight allocalion to h€alth cara and utiliti€s

. Top 10 holdings Hain Celestial Group (+0.77. return) and Skillsotl(-31.7% retum)

MaF04 S@{4 lr/taF06 S€pOS Ma.-G S€p{E liar{7 S€pO7 Mar{8 S6pOg

lRussdl 1m0 Valm lRuss€I ldn Grou,ih lRrlss6[ 2m0 Vabs lRussollAXD GrolrJtl

5 YEAR PERIOD - ROLLING 3 YEABS ENDING DECS'I. 2OO8

Key Facts and Figurss

Portfolio Manager: Mulliple

Porttolio Manager Averagts Tenure: 4.0 Years

Total Fund Asseb: $540 Million

Total Share Class Assets: $331 Million

E)pense Batio (Net): 1.4Oe/6

Mercsr Av€fago Expens€ Ratio (Net): 1.06%

Mercor 39

oa ooooooafofoooDetined Contributaon Pertomance Evaluation Report

Fund Profile

Domestic Equity - BlackRock Aurora Inv A

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Fund Profile

lnternational Equity - Thornburg International Value R3

Govemm€nl of Guam - 401(a)and 457(b) Plans

Share Class: Relirement Benchmark: MSCI EAFE Value


Thornburg b€lieves that a bottom-up approach to investing in undervalued securities will generale above-average returns with below-market risk. The idea of valuecenters on an assessment ol the intrinsic worth of an inveslment. Thornburg's goal is to uncover promising companies with sound business fundamenlals at a timewhen their intrinsic value is nol fully recognized by lhe malketplace.

Porttolio Analyeis & K€y Observations Country Analysis as ol December 31, 2008

Positive lmpact on Performance

. An undeftveight allocation to the financials sector

. OveMeight allocations to telecommunication services and health care

. OveMeight to Switzerland; out-of-index exposure to China

. Top conlributors: China Mobile (1.4% return), Vodafone Group (-6.6%return), Julius Baer Holding AG (-22.6% retum)

Nggativo lmpact on Pertormance

. UndeMeight allocations to lhe utilities, energy, and induslrials sectors

. SecuJity selection in the energy, ulilities, and consumer staples sectors

. Underweight to Japan; out-ol-index exposure to Canada and Denmark

. Top detractors: BNP Paribas (-54.7% retum), National Bank of Greece(-53.3% return), A)(A (-31.5% retum)

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Portfolio Manager: Multiple






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Fund Profile

International Equity - Thornburg International Value R3

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Fund Profile

International Equi$ - Pioneer Emerging Markets A

Governm€nt of Guam - 401(a)and 457(b) Plans

Share Class: A Benchmark: MSCI EM


Pioneer seeks long{erm capital appreciation using a value-oriented approach. The strategy uses top-down analysis to evaluate a country's political, sconomic,financial, and social situation, combined with extensive review ot individual holdings trom lhe bottom up, locusing on emerging markets.

Porttolio Analysis & Key Obs€rvaliong Country Analysis as ot December 31, 2008

Posilive lmpact on Pertolmance

. Slock selection within industrials and materials

. Out-ol-ind6x exposure to Hong Kong; overweight to South Africa

. Cash allocation ot 4.8%

. Top 10 holdings China Mobil (1.4% retum), Taiwan SemiconductorManufacturing ('1.2% return), TEVA Pharmeceutical (-5.4% return)

Nagativ€ lmpact on Pertormance

. Stock selection wilhin consumer discretionary, consumer staples, energy,and telecommunication services

. Overweight to Russia and Brazil

. Top 10 holdings Petroleo Brasileiro (-44.6% relurn), Cia Vale Do RioDoce (-35.9% return), and Gazprom (-54.1% retum)

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Key Facls and Figures

Portfolio Manager: Christopher Smart

Portfolio Nranager Average Tenure: 4.5 Years

Total Fund Assets: $322 Million


Expense Ratio (NeD: 1.79%


Mercer 43

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Fund Profile

International Equity - Pioneer Emerging Markets A

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Appendix - Disclosures

Mercer Investmont Consulting Relationships

. The parent corporationorganizations. We believe these relationships in no way alfect the objectivity of our analysis.

Universe Notes

.Merc€rd€termineslhetimeperiodsandspeci'icmutUa|fundsinc|udedineachdislributions are obtained from Morningstar, Inc., Chicago, lL.

.MercerManagerUniverSesareconstructedusingthecompositeportfo|iossubmittedbyi

eachuniquetimeperiodindependent|y'Thehighestreturnisassignedtherankofzero(0),andthe|owesttherankol100.Dependingonthenumberofobselvationsbetwnthesefopoints,theremainingresu|tsarenorma|izedtocreatepercenti|erankin9s-Percenti|erankingslormanagerspercentiles due to rounding.

Data Sources

. Although all data is gathered from sources believed to be reliable, data accuracy and completeness cannot be guaranteed by either the data providers or by l\,lercer.

this information. Past performance is no guarantee of luture results.

. Retums and security data for the Russell indices are provided by Buss€ll/Mellon Analytical Services.

.RuSSg||indicesaretrademarkvservicemarksoftheFrankRusse|lcompany'RUssel|@isatrademarkottheFrankRusse|lcompany.FrankRusse||compa

copying, disseminatiomaterid or for any inaccuracy in presentation thereof.

. Copyright MSCI 2009. Unpublished. All Righb Reserved. This inlormation may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be

used to create any financial instruments or pmakeorpermittob9madeofthisinformation'NeitherMSc|'anyolitsaffi|iatesoranyotherpersonexpr€ssorimp|i€dwarrantiesorrepresentiationswithrespecttosUchinformationortheresultob8obta|nedb

or il it might otherwise have anticipat€d, the possibility of such damages.

Miscellaneous Notes. Returns for periods greater than one year are annualized. Returns are calculated net of invesfnent management fess, unless noted.

Mercar 45

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