DirectionsA source of news and ideas for the Taft-Hartley community

800.562.6674 | service@mcmorgan.com | www.mcmorgan.comONE FRONT STREET | SUITE 500 | SAN FRANCISCO, CALIFORNIA 94111

VOLUME 15, NUMBER 2 | FALL 2013

As the one-year anniversary of McMorgan & Company’s newly independent status has come and gone, I am pleased to report the firm is a busy, thriving entity. We are continuing to work collaboratively with our former boutique partners inside New York Life Investment Management, as well as endeavoring to build out a wider array of investment offerings by forming new relationships. All of these efforts are being engaged in with the goal of continuing to deliver top flight investment management services to the Taft-Hartley clients and consultants we so appreciatively serve.

In that light, you will read in this edition about Private Advisors, a New York Life Investment boutique, specializing in the Alternatives space. There is also information with regard to our new found partnership with AllianceBernstein as well as the return to McMorgan of Patrick Worley. After a six-year hiatus doing terrific work in the Taft-Hartley investment space, Patrick has excitedly re-joined our team…and we’re thrilled to have him back! And, there is information about the first consummated transaction in our new proprietary vehicle, the McMorgan Northern California Value Add/Development Fund.

The annual educational conference of the International Foundation of Employee Benefit Plans will take place in Las Vegas, Nevada the third full week of October this year. As has been our custom, we plan to participate fully in both a business and social fashion. Whether at our booth on the floor of the Convention Hall, or at our party on Monday night (October 21st), John Santaguida, I, and the entire McMorgan team look forward to seeing as many of our clients, consultants and friends as possible.

Brian Morton President, Managing Partner

Brian Morton President, Managing Partner

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Strategy News

Northern California Fund Moves Forward

With its first projects launched and others on the way, the McMorgan Northern California Value Add/ Development Fund is putting Taft-Hartley investors’ capital to work. The result: a pipeline of developments designed to meet robust market demand for commercial facilities and to create jobs in the building trades.

Napa Wine Warehouse Complex

The Fund has completed the purchase of a 19.4 acre site in the city of Napa for the construction of two warehouses designed to serve the needs of the region’s wine industry. Warehouse facilities are scarce and vacancy rates low within California’s premier wine-producing region. The purchased property commands a prime strategic location with high-visibility and ready access to two main highways and the regional airport.

Devcon Construction of Milpitas, California has been selected as the contractor on the initial building, a 226,000 square foot facility, suitable for a large, multi-brand wine distributor. Construction is scheduled to commence in early 2014, creating jobs for many trades including carpenters, engineers, laborers, roofers, glazers, floor coverers, painters and tapers, some of whose pension plans are among the six investors in the $91 million Fund. The site will support development of a second warehouse, providing about 69,000 square feet of space, and which is planned for the second phase of development. Colliers International is representing the Fund in recruiting charter tenants for the facilities.

Silicon Valley R&D Facility

The Fund has purchased a second investment property; a 110,000 square foot research and development flex building on a seven-acre site in San Jose. The building serves multiple small to mid-sized tenants

CAPITAL AT WORK

The McMorgan Northern California Value Add/Development Fund is preparing to build a 226,000 square foot wine warehouse and distribution facility on this prime 19.4 acre site in the city of Napa. Construction is scheduled to commence in early 2014. The project will create jobs for many trades including carpenters, engineers, laborers, roofers, glazers, floor coverers, painters and tapers, some of whose pension plans are among the six investors in the $91 million Fund.

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800.562.6674 | service@mcmorgan.com | www.mcmorgan.comONE FRONT STREET | SUITE 500 | SAN FRANCISCO, CALIFORNIA 94111

in the electronics and computer industries. Plans for the property include an overall upgrade to the facility, aimed at stabilization of occupancy and improved leasing revenues.

Additional investments are being evaluated by the Fund, including a Bay Area office facility intended for renovation. Purchase of that property is targeted to close in October.

The Fund focuses on projects in the 46 Northern California counties, with special emphasis on San Francisco Bay Area locations. Fund investments are chosen opportunistically and may include large or small projects comprising new developments or rehabilitations and upgrades of existing properties. Investment properties may include industrial, office, retail

or multi-family residential developments. Co-general partners, McMorgan & Company and New York Life Investments, are investors in the Fund alongside pension plans representing the region’s building trades unions.

Manager Spotlight: Private Advisors, LLC

Growing and Strengthening America’s Small Companies

McMorgan & Company is proud to provide its clients with the opportunity to participate in the growth of dynamic, young North American businesses through our partnership with Private Advisors, LLC, one of the country’s leading private equity managers specializing in the development of small companies.

Manager Spotlight

Manager Private Advisors, LLC

Headquarters Richmond, Virginia

Focus Small Company Private Equity

AUM $5.1 billion

Employees Over 70, including 29 investment professionals

Founded 1997

Affiliation New York Life

HIGH TECH RENOVATION

The Northern California Value Add/Development Fund purchased and is preparing for a sweeping upgrade of this research center in the heart of Silicon Valley. The 110,000 square foot flex building sits on seven-acres in San Jose. It provides a superb location for small to mid-sized tenants in the electronics and computer industries.

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The firm serves as the investment advisor to a small company buyout strategy in both a funds of funds and co-investment format. Private Advisors’ small company investment focus and business-building approach differentiate it from some of the more widely known, large company focused buyout managers. These managers sometimes rely more on financial engineering and liquidation than on organic growth for the generation of investment gains.

The Private Advisors’ approach is different. It recognizes that small, successful companies hold significant investment potential as they transition from founder-driven, entrepreneurial concerns into institutionally strong and professionally managed companies.

There are other fundamental advantages that favor investments in small companies. The small company universe offers significantly more target opportunities for purchasers, and there are also fewer potential buyers in the market. This combination of better selection and a more favorable negotiating position serves to improve investors’ potential for gains. Investors’ realization of this potential is well documented as returns for buyout funds specializing in small companies have historically exceeded those of funds targeting larger firms (see chart on the right).

Private Advisors approaches these small company investment opportunities with a style that is conservative in nature, one focused on preserving capital and positioning portfolios for future excess returns.

The company brings valuable experience, market presence and investment infrastructure to the specialized and nuanced small company market. The Richmond, Virginia-based manager is one of the New York Life-affiliated companies. It manages $5.1 billion in private equity and hedge fund assets as of June 30, 2013 with a team of 29 investment professionals tasked with sourcing, analyzing, negotiating and monitoring portfolio investments. The organization has delivered solid results for clients over more than a decade of operation. The firm works with a number of Taft-Hartley clients, including funds providing for workers in the IBEW, Plumbers and Pipefitters, Trowel Trades and Sheet Metal Workers unions, among others.

For more information on Private Advisors, please visit our website or contact your McMorgan & Company representative.

PERFORMANCE OF PRIVATE EQUITY FUNDS BY SPECIALTY 1979-2013

Source: VentureExpert (Thompson)

Performance reflects average annual internal rates of returns for U.S. based buyout funds through March 31, 2013.

Size ranges are defined as follows: Small, $0 - $400mm; medium, $400mm - $1B; large $1B - $5B; mega, $5B+

17.4%

14.5%

9.2% 9.3%

SmallCompany Funds

MediumCompany Funds

LargeCompany Funds

MegaCompany Funds

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800.562.6674 | service@mcmorgan.com | www.mcmorgan.comONE FRONT STREET | SUITE 500 | SAN FRANCISCO, CALIFORNIA 94111

Organizational Update

Patrick Worley Returns

We are pleased to welcome back Patrick Worley, who returns to our sales and client service team after serving as director of AllianceBernstein’s Taft-Hartley Group. Patrick has more than 20 years of Taft-Hartley experience including his previous tenure as Vice President at McMorgan from 1998 to 2006. In his new role as Director, New Business

Development, Patrick will promote McMorgan offerings across the country from his base in Portland, Oregon. Please visit our website for Patrick’s full biography and contact information.

New to the Platform: AllianceBernstein

Select AllianceBernstein investment management capabilities are now available on the McMorgan investment platform. Our newest alliance pairs this premier investment manager with our 40-plus years of experience exclusively serving the needs of Taft-Hartley plans and their members. By offering select AllianceBernstein strategies, McMorgan has expanded the opportunity set for our clients and complemented the investment capabilities provided by our existing partners. You can learn more about our investment platform and the AllianceBernstein strategies we now proudly offer by visiting our website.

McMorgan Canada

McMorgan & Company is pleased to have successfully completed the Canadian registration process for our broker/dealer, enabling us to serve our clients more seamlessly across North America.

Out & About

Leadership Circle

McMorgan & Company is proud to support the work and the mission of National Labor College (NLC), an institute of higher education founded and operated to serve the needs of union officers and members.

NLC is regionally accredited and offers bachelor’s degrees, associate’s degrees and certificate programs targeted to job growth opportunities in a variety of fields, including construction management, emergency services management, business administration, labor organization management and more.

Since its founding in 1969, the college has provided instruction to more than 200,000 union officers and members and has awarded more than 1,100 B.A. degrees in labor studies. The College is headquartered

Investing in Human Capital McMorgan CEO John Santaguida discussed the educational mission of the labor movement with top union officials at the National Labor College’s second annual Leadership Circle Dinner. Pictured, from left, NLC president Dr. Paula Peinovich; AFL-CIO president Richard Trumka, who also serves as president of NLC’s board of trustees; former AFL-CIO president and current NLC Board member John Sweeney; and John Santaguida.

Patrick Worley Director, New Business Development

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in Silver Spring, Maryland and also offers instruction online and at academic centers and union facilities across the country.

National Labor College’s second annual Leadership Circle Dinner in June brought together union leaders and major benefactors of the college. McMorgan & Company CEO and Managing Partner John Santaguida participated in the event, meeting at AFL-CIO offices in Washington with AFL-CIO President Richard Trumka, NLC President Paula Peinovich and other union leaders and major donors from around the country.

The Leadership Circle’s goals are to preserve and enhance the College’s programs to strengthen unions and promote job advancement, financial stability, and family security for working people. Leadership Circle members show commitment to those goals by making significant contributions to the College.

Visit Us at the IFEBP Conference

McMorgan & Company will be an exhibitor at the 59th Annual U.S. Employee Benefits Conference in Las Vegas. Come meet our client service representatives and consultants at Booth 434, located one aisle away from the Health Island in the center of the Exhibit Hall,

Shorelines A. The hall is located on Level 2 of the South Convention Center, in the Mandalay Bay complex. The conference runs October 20-23.

Additionally, here are some of the recently attended events we have sponsored in support of union projects, causes, and people.

Date Event

08/05/13 Local 39 Scholarship Fund Event, Pleasanton, CA

08/10/13 NCCRC Central District Event, Sunol Valley, CA

08/17/13 IUOE Local 612 Charity Event, Lacey, WA

08/26/13 Sheet Metal Workers Local 104 Scholarship Event, Pleasanton, CA

09/09/13 B.U.L.L. Session Event, Portland, OR

09/13/13 Annual JC-7 Teamsters All Charities Event, Carmel, CA

09/18/13 UFCW 8-Golden State's Event – The Challenge 2013 benefiting the Loveall Foundation for Children, Granite Bay, CA

09/21/13 Theraplay Hoe Down Event, Carmel, IN

09/21/13 USA's 5th Annual Boilermakers Kansas City Sporting Clay Shoot Event, Lenexa, KS

09/26/13 California State Pipe Trades Annual Event, Lincoln, CA

9/30/13–10/02/13

National Coordinating Committee for Multiemployer Plans Conference, Hollywood, FL

DisclosureNothing presented herein is intended to constitute investment advice, nor sales material, and no investment decision should be made based on any information provided herein. Nothing herein constitutes an offer to sell or a solicitation of an offer to buy any security or other interest in a private investment vehicle. Offers and sales with respect to such vehicles will only be made to qualified investors who meet applicable eligibility and suitability requirements and who are comfortable with the substantial risks associated with an investment. No guarantee of investment performance is being provided and no inference to the contrary should be made. There are risks inherent in any investments, including the possible loss of principal.

DOFU 10/15/2013