1. 2002 Gain (Loss) Analysis Gabriel, Roeder, Smith & Company Wisconsin Retirement System

2. -2- A Gain (Loss) Analysis measures differences between actual and assumed experience in each Risk Area.

3. -3- WRS Assumption Risk Areas There are other risk areas, but they are not germane to the Gain/Loss Analysis. Decrement Economic Normal retirement Salary increases Early retirement Investment return Death-in-service Disability Other separations

4. -4- u It is a year-by-year measure of the operation of assumptions u To understand the nature of risk u To determine when assumption changes are needed u To gain an understanding of reasons for contribution rate changes Why Have A Gain (Loss) Analysis?

5. -5- u Output file from last year’s active valuation u Output file from this year’s active valuation u Codes supplied by ETF saying what happened to people u Match files to produce side-by-side file Gain (Loss) Analysis Process

6. -6- u Output file from this year’s retiree valuation u Match to side-by-side file and fix inconsistent coding u Output file from this year’s inactive valuation u Match to side-by-side file and fix inconsistent coding u Result is a “perfect” side-by-side file Gain (Loss) Analysis Process

7. -7- u Side-by-side file has various information on what was expected to happen during the year to a person. u It also has all available information on what did in fact happen to the person. u Information is tabulated by a “simple but not easy” program to produce results. Gain (Loss) Analysis Process

8. -8- Financing Active & Inactive Participant Benefits at December 31 (see page 7)

9. -9- (see page 12) Investment Earnings in 2002 (Active Participants)

10. -10- Asset Gain (Loss) (Continued) Gross Gain (Loss) for Year $(1,604) Portion applied to Money Purchase &Variable Excess Effects (1,190) Net Fixed Fund Asset Gain (Loss)$ (414) Millions

11. -11- Asset Gain (Loss) in Depth u Gain (Loss) in Total: ($1,604 Million) u Gain (Loss) on Fixed fund: +5.0% credited (Mean Balance calc) u Gain (Loss) on Variable : (23.0)% credited (Mean Balance calc) u Total average crediting rate: 2.9% in 2002 vs. 6.7% in 2001

12. -12- Salary Related Gain (Loss) Pay Increases varied among groups producing a loss in total. (see page 11, 13, 14) * Excluding new entrants.

13. -13- Population Development During 2002 (see page 4)

14. -14- Population Development During 2002 (see page 5) Normal Retirements: Less than assumed for all groups. Early Retirements: More than assumed in most groups, especially in teacher groups. Death and Disabilities: Fewer than assumed. Other Separations: More than assumed for short service participants, less than assumed for long service participants.

15. -15- Comparative Schedule of Experience (see page 9)

16. -16- Concluding Remarks u This Gain (Loss) Analysis is the third in a regular 3-year experience cycle. u This study together with the 2000 and 2001 studies will form the basis for the next experience study. u The next experience study will be reported in December 2003. u The results of that study will first be used in the December 31, 2003 valuations.