1. New England Pension Consultants

2. 1 Table of Contents > Market Environment > Asset Allocation / Investment Policy Targets > Performance Summary > Performance Detail 1. Teachers 2. PERS 3. Firefighters 4. Police 5. Law Enforcement 6. Judges & Justices 7. Department of Wildlife

3. New England Pension Consultants 2 DOMESTIC MARKETSINTERNATIONAL MARKETS Market Environment – First Quarter 2001 Domestic equity markets suffered through a dismal first quarter following a host of earnings warnings and negative economic news. The S&P 500 lost 11.9%, while the NASDAQ Composite suffered one of its worst quarterly declines of 25.5%, as technology stocks continued to get punished. Small cap stocks, lost 6.5% for the quarter outperforming their large cap counterparts, which lost 12.6%. Value continued its dominance over growth in the small cap sector as the Russell 2000 Value Index advanced slightly with a 1.0% return versus the 15.2% decline in the Russell 2000 Growth Index. Growth stocks continued to underperform value stocks during the first quarter as evidenced by the 5.9% loss in the Russell 1000 Value Index versus the 20.9% decline in the Russell 1000 Growth Index. Short-term Treasury rates fell rapidly in the quarter, while the thirty-year Treasury rate remained unchanged creating an upward sloping yield curve. International equity markets had a tough first quarter due to slowing global economic growth and downward corporate earnings revisions. Global economic growth slowed further than expected even though Japan, the United States and the United Kingdom cut interest rates during the quarter. The MSCI EAFE Index closed down 13.6% for the quarter. –Technology and telecom stocks once again led the downturn, as investors were still concerned with equity valuations. –Consumer cyclicals and energy were the top- performing sectors. –International growth stocks returned –17.3% during the quarter. In the European markets, most major markets experienced losses as numerous corporate profit warnings were announced during the quarter. The MSCI Emerging Markets Index declined 5.5% for the quarter despite a strong gain of 13.7% in January. Global bonds returned –3.1% for the quarter primarily due to the strength of the US Dollar.

4. New England Pension Consultants 3 Growth versus Value

5. New England Pension Consultants 4 Market Environment – First Quarter 2001

6. New England Pension Consultants 5 Market Environment - First Quarter 2001

7. New England Pension Consultants 6 Market Environment - First Quarter 2001

8. New England Pension Consultants 7 Investment Policy Asset Allocation Targets

9. New England Pension Consultants 8 Relative Size - All Funds (Dollars in 000,000)

10. New England Pension Consultants 9 Equity Commitment (as of 3/31/01)

11. New England Pension Consultants 10 Risk / Return Analysis Total Public Funds – Total Return vs. Risk - 5 Years Ending 3/31/01 S&P 500 LB Aggregate Teachers PERS Firefighters Police Law Judges Wildlife

12. New England Pension Consultants 11 Composite Performance Periods Ending March 31, 2001

13. New England Pension Consultants 12 Composite Performance Years Ending March 31, 2001

14. New England Pension Consultants 13 For each Total Fund actual return we report to you, if we have available information, we also construct two hypothetical returns: A Policy Index return and an Allocation Index return. These two hypothetical returns are useful in diagnosing to what factors the total return can be attributed. The Policy Index is merely the return the Fund would have had if the policy target allocation had been strictly adhered to and each asset class investment would have been in an index fund for that class, rather than with an active manager. The Allocation Index is the return the Fund would have had using the actual allocation of the Fund and index returns, as above with the Policy Index. NOTE: These tools are most useful over longer time periods and are not particularly useful over the short run. Looking at the Policy Index for longer term returns gives us a base-line. What part of the Funds return can be attributed to being in the right asset classes? For example, the Teachers Fund ( following page) Policy Index return of 10.1% for the last five years accounted for the majority of the actual return of 11.8% for that time period. This is not surprising and is as it should be. Policy decisions (what asset classes to be in and to what extent) are the most important decisions a Funds Board makes. Turning to the Allocation Index. What information does this add? Remember, that the only difference between it and the Policy Index is that we let the allocation drift away from the target to the same extent as actually occurred. Then, the difference in return (in this example 11.7%-10.1%) can be attributed to this allowed drift. In this time period, letting asset classes drift beyond their targets added considerable value. Lastly, we compare actual return to the hypothetical Allocation Index return to see what contribution was made by active management.. Here we see that very little value was added during this time period (11.8%- 11.7%). This is not an indictment of the Funds managers but a reflection of the type of market that we have just been through, where indexing was a very successful strategy, as was letting ones winners run (asset class drift). Customized Indices: Policy and Allocation

15. New England Pension Consultants 14 Teachers Total Return Periods Ending March 31, 2001 Years Ending March 31, 2001

16. New England Pension Consultants 15 Teachers Total Return vs. Risk Total Public Funds 5 Years Ending March 31, 2001

17. New England Pension Consultants 16 PERS Total Return Periods Ending March 31, 2001 Years Ending March 31, 2001

18. New England Pension Consultants 17 PERS Total Return vs. Risk Total Public Funds 5 Years Ending March 31, 2001

19. New England Pension Consultants 18 Firefighters Total Return Periods Ending March 31, 2001 Years Ending March 31, 2001

20. New England Pension Consultants 19 Firefighters Total Return vs. Risk Total Public Funds 5 Years Ending March 31, 2001

21. New England Pension Consultants 20 Police Total Return Periods Ending March 31, 2001 Years Ending March 31, 2001

22. New England Pension Consultants 21 Police Total Return vs. Risk Total Public Funds 5 Years Ending March 31, 2001

23. New England Pension Consultants 22 Law Total Return Periods Ending March 31, 2001 Years Ending March 31, 2001

24. New England Pension Consultants 23 Law Total Return vs. Risk Total Public Funds 5 Years Ending March 31, 2001

25. New England Pension Consultants 24 Judges Total Return Periods Ending March 31, 2001 Years Ending March 31, 2001

26. New England Pension Consultants 25 Judges Total Return vs. Risk Total Public Funds 5 Years Ending March 31, 2001

27. New England Pension Consultants 26 Wildlife Total Return Periods Ending March 31, 2001 Years Ending March 31, 2001

28. New England Pension Consultants 27 Wildlife Total Return vs. Risk Total Public Funds 5 Years Ending March 31, 2001

29. New England Pension Consultants 28 Each domestic equity managers portfolio is loaded into NEPCs system (stock by stock) and the portfolio is compared to all other portfolios in the universe. The portfolio receives a score based on the overall size and style of its holdings. Why?… --Size and style are two of the most important decisions a manager makes. --Acts as a check on manager consistency over time. --Offers an opportunity to compare relative performance with peers. --Assists in diversifying the overall fund equity exposure. Calculations… --Size is measured by how far above or below the universe median a managers portfolio falls. --Style gives consideration to: book to price, earnings growth, earnings to price and yield. Each these factors is captured from the latest reported data. Results… --The size and style scores allow each manager (or fund Composite, when summarizing) to be placed into one of nine peer groups (three by size times three by style). Comment… --No methodology captures all of the complex decisions a manager makes but this exercise offers one more analytical tool. Size and Style

30. New England Pension Consultants 29 Style Analysis Equity Style Analysis as of March 31, 2001

31. New England Pension Consultants 30 Teachers Performance Periods Ending March 31, 2001

32. New England Pension Consultants 31 PERS Performance Periods Ending March 31, 2001

33. New England Pension Consultants 32 Firefighters Performance Periods Ending March 31, 2001

34. New England Pension Consultants 33 Police Performance Periods Ending March 31, 2001

35. New England Pension Consultants 34 Law Performance Periods Ending March 31, 2001

36. New England Pension Consultants 35 Judges Performance Periods Ending March 31, 2001

37. New England Pension Consultants 36 Dept of Wildlife Performance Periods Ending March 31, 2001

38. New England Pension Consultants 37 Teachers Retirement System Assets in ($000)

39. New England Pension Consultants 38 Teachers Performance Periods Ending March 31, 2001

40. New England Pension Consultants 39 Teachers Performance Periods Ending March 31, 2001

41. New England Pension Consultants 40 Teachers Performance Equity Managers Ranked Against Their Peer Groups Periods Ending March 31, 2001

42. New England Pension Consultants 41 PERS Assets in ($000)

43. New England Pension Consultants 42 PERS Performance Periods Ending March 31, 2001

44. New England Pension Consultants 43 PERS Performance Periods Ending March 31, 2001

45. New England Pension Consultants 44 PERS Performance Periods Ending March 31, 2001

46. New England Pension Consultants 45 PERS Performance Equity Managers Ranked Against Their Peer Groups Periods Ending March 31, 2001

47. New England Pension Consultants 46 Firefighters Assets in ($000)

48. New England Pension Consultants 47 Firefighters Performance Periods Ending March 31, 2001

49. New England Pension Consultants 48 Firefighters Performance Periods Ending March 31, 2001

50. New England Pension Consultants 49 Firefighters Performance Equity Managers Ranked Against Their Peer Groups Periods Ending March 31, 2001

51. New England Pension Consultants 50 Police Assets in ($000)

52. New England Pension Consultants 51 Police Performance Periods Ending March 31, 2001

53. New England Pension Consultants 52 Police Performance Periods Ending March 31, 2001

54. New England Pension Consultants 53 Police Performance Periods Ending March 31, 2001

55. New England Pension Consultants 54 Police Performance Equity Managers Ranked Against Their Peer Groups Periods Ending March 31, 20001

56. New England Pension Consultants 55 Law Enforcement Assets in ($000)

57. New England Pension Consultants 56 Law Performance Periods Ending March 31, 2001

58. New England Pension Consultants 57 Law Performance Periods Ending March 31, 2001

59. New England Pension Consultants 58 Law Performance Equity Managers Ranked Against Their Peer Groups Periods Ending March 31, 2001

60. New England Pension Consultants 59 Judges & Justices Assets in ($000)

61. New England Pension Consultants 60 Judges & Justices Performance Periods Ending March 31, 2001

62. New England Pension Consultants 61 Periods Ending March 31, 2001 Judges & Justices Performance

63. New England Pension Consultants 62 Equity Managers Ranked Against Their Peer Groups Periods Ending March 31, 2001 Judges & Justices Performance

64. New England Pension Consultants 63 Department of Wildlife Assets in ($000)

65. New England Pension Consultants 64 Wildlife Performance Periods Ending March 31, 2001

66. New England Pension Consultants 65 Equity Managers Ranked Against Their Peer Groups Periods Ending March 31, 2001 Wildlife Performance