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=RNMENT EMPLOYEES RETIREMENT SYS rE OVERVIEW OF OPERATIONS ua to Fre] © ah ~ | mR sists eee ie. - aug ee ee eal Presented to the Committee on Finance of the Twenty-Seventh Legislature of the Virgin Islands by Austin L. Nibbs, CPA Administrator Fritz E. Lawaetz Conference Room August 8, 2008 4:00 PM Frederiksted, St. Croix, USVI Government Employees Retirement System August 8, 2008 Overview of Operations Page 2 GOVERNMENT EMPLOYEES RETIREMENT SYSTEM Overview of Operations — Fiscal Year 2008 TABLE OF CONTENTS Tate le 0 (et (0) seer 3 Organizational Structure ......... 00.6... cc cece cee cec ccc eee eee cee ceecesesueseeseeeee terse saeeneee tenes 4 Operational Goals Through End of Fiscal Year 2008 ....0.0..0.0..0 0c cece cee eec eee eceeeeeees 5 Accomplishments for Fiscal Year 2008 ................0c ccc ccc ccc eec ccc eece cee saeceeaeeeeeeeneneaees 6 Projected Goals and Objectives for Fiscal Year 2009 oo... eee seesessseceseenseeee 7 Membership ................:. ccc cee cee eec eee eee cee cee eee eee ees eee cee sueseeseeveeeesesceesnaeenteteneered 9 Actuarial Valuation Information ............ 0.0... .cc ccc ccc cc ceeeee ces cceceeeescesesueeeeeueaneteaeaeneey 10 Contribution/FUunding ............... 0c ccc cc cece cee ee cee eee eee ece cee see sueueeeeeseeer sea saesevaeeeeeenes 12 INVESEMENES «2.2... eee cece cece eee nee eee eee e ee eee eu ea ee eee see seeeee ce seseettesnveeueseneaeesenenes 15 Stock Market and Portfolio Performance ............... 06. ccc ccc ccc cee cee ceeceeceeeeee tes eensaeeeeees 18 LOANS 20. ccc eee ence een eee e ete ee eee tee ee eee stata ease sea sueaee tee vaesabeesataeatetenenenes 19 Real Estate 0.00.0... ccc ecc cece cee eee eee eee eee cee ee nee eee bee cee eee tassetu state see eeetaeneegee nea gs 20 a0 =e ee 21 Scholarship FUN ......... 0.0... ccc cece ce ccc ccc ee cee cence en ee see sueuee ccs sunaeetescancerencaeavaeeseaeaenss 21 a K-To: alate) (ole) (A ©) ole le- (0 |e 22 Annual Audit..... 0.2... ccc ccc cece renee cece ee cee eee nee cee tueueebeaeeeaeeesesaesiececneaeaeesenenenenes 23 Cash Management ............ 02. .cccceecc eee ccc eee eee eee nee eee eeeceeeseueeueeuessesseseeeeaseaeeaeeness 23 SUMIMALY...... eee ccc cece cece cence cee eee cea eee ee esse ee ee eee ese csesueseeaeseeseeeseneeneaeaseneeeeasd 24 Appendices Organizational Chart - System ............ ccc ccc ccc ccc ccc cee cee seeseeeetaeeeeseeneuneneaees Exhibit A Organizational Chart — Accounting and Finance Division ...............0....0..0.0.08. Exhibit B Treasurer's Report (Statement of Cash Flows — June 30, 2008 ..........00.00000.. . Exhibit C Schedule of Budget vs. Actual — Fiscal Year 2008 .............00.0000 cece eee eee Exhibit D Schedule of Administrative Expenses — Fiscal Year 2008 ..............0.0000.0000008. Exhibit E Schedule of Investment FUN ........... 0... ccc ccc ccc cccccccuccuccuccececccccusuueuvenvaceunens Exhibit F Government Employees Retirement System August 8, 2008 Overview of Operations Page 3 GOVERNMENT EMPLOYEES RETIREMENT SYSTEM OVERVIEW OF OPERATIONS Good afternoon, Honorable Senator Terrence Nelson, members of the Committee on Finance and other distinguished senators who are present in the chambers. My name is Austin L. Nibbs, Administrator of the Government Employees Retirement System of the Government of the Virgin Islands (GERS). Appearing with me today is senior management.) Mr. Chairman, before | begin my presentation | would like to extend my appreciation to you for approving my request for rescheduling our appearance before the Committee. | felt the extension was needed in order to adequately prepare and respond to the requirements that were requested. | note that this report is a compilation of nine months of activity covering the period of the three quarters for fiscal year October 1, 2007 through June 30, 2008. INTRODUCTION The Government Employees Retirement System is a statutorily created defined benefit pension plan (DB) that is sponsored by the Virgin Islands Government. The statutory mandate of the GERS is to encourage qualified employees to enter and remain in the service of the government by establishing an orderly means whereby those members who become Superannuated or incapacitated as a result of disability may retire without suffering economic hardship. The System was created by Act 479, and it became operative on October 1, 1959, when contributions by employees and the Virgin Islands Government commenced. In accordance with the mandatory provisions of the Act, all regular employees of the Virgin Islands Government, except those individuals who are excluded, must become members of the Retirement System, within thirty (30) days of service, as a condition of their employment. Government Employees Retirement System August 8, 2008 Overview of Operations Page 4 ORGANIZATIONAL STRUCTURE The organizational chart for the system is presented as Exhibit A. The System is comprised of a seven member Board of Trustees who is mandated by law to set policies for the system and oversee the investment portfolio. The System is managed by an Administrator who is charged with oversight of five Divisions. The Divisions are: 1). 2). 5). Administration. Provides administrative, technical, personnel and legal support and direction to all divisions. Accounting & Finance. Responsible for cash management and the preparation of the financial reports for auditing purposes, budget preparation, administrative payroll processing, accounts payable and the procurement and inventory functions. Benefits. Processes and services the member contributions, annuitant’s payroll, recalculation of benefits and pre-retirement and post-retirement counseling. Loans. Responsible for the processing and servicing of personal, auto and mortgage loans. Facility Property Management and Operations. Oversees the management and maintenance of properties and the collection of rents and parking fees. The System’s main office of business is located on the 3rd Floor of the GERS Complex which is located at 48B-50C Kronprindsens Gade on St. Thomas, with another office located at #5 Orange Grove on St. Croix. The staff consists of a total of 82 individuals. The classified component of the staff is comprised of 59 individuals who are represented by two different labor unions. A total of 48 individuals are represented by the United Steelworkers Union (USW) and 11 supervisors are represented by the Seafarers International Union (SIU). Additionally, there are 23 exempt employees and one (1) contract employee. Government Employees Retirement System August 8, 2008 Overview of Operations Page 5 The System has always maintained a well-trained and highly-skilled professional staff to meet the requirements of our statutory mandates. Today, a total of 60 of the 82 employees are college graduates (11 graduate degrees, 49 hold a combination of undergraduate and associate degrees.) Thus, a total of 73% of our employees are college graduates. Also, there are 3 certified public accountants (CPAs) on staff. We are proud of the level of professional training attained by our employees and we continue to support and encourage them to enhance their career objectives through our educational reimbursement incentive program. Our objective is to recruit, educate and maintain a qualified professional staff to service the needs of the members. OPERATIONAL GOALS THROUGH THE END OF FISCAL YEAR 2008 To complete the quality control of the Census (member's personal and _ historical information) in order that the actuarial valuation can be completed and the actuarial unfunded liability determined for the period September 30, 2006. To complete the Fiscal Year 2007 audit by September 30, 2008. To correct all outstanding internal control weaknesses cited in the Fiscal Year 2006 audit and develop written policies and procedures. To complete the imaging pilot quality assurance project process of the loans and benefits files by September 30, 2008. To resume the construction of the new GERS office and retail complex on St. Croix by the middle of September 2008. To implement the full use of the MAS 90 accounting software-- especially the budget and inventory modules. Government Employees Retirement System August 8, 2008 Overview of Operations Page 6 ACCOMPLISHMENTS FOR FISCAL YEAR 2008 The major accomplishments during Fiscal Year 2008 are: Kicked off the upgrade of the new benefits and loan administration software in March 2008. Completed the Fiscal Year 2006 Annual Financial Audit and started the Fiscal Year 2007 Annual Financial Audit which is scheduled to be completed by September 30, 2008. Completed the census data for Fiscal Year 2006 which is necessary for completion of the actuarial valuation report. In accordance with Act 6959, the System paid out $4,434, 187.06 in cost of living bonuses on November 21, 2007 to 5,403 retirees who retired between January 1, 1990 and September 30, 2006. Note: On October 30, 2006, in accordance with Act 6868, the System paid out $1,499, 999.60 to 1,268 retirees who retired before 1990. Re-instituted the Financial Planning Workshop after approximately four (4) years hiatus. ' For the first time, transmitted the 1098 mortgage interest statements electronically to the Bureau of Internal Revenue. Instituted a procedure for collection of delinquent loans in the Superior Court (Small Claims). For the first time, employees of the Loan Division were afforded the opportunity to observe the processing of the small claims and appeared in court on two occasions to present GERS’s arguments. The GERS was successful in both cases. Renovated the old First Bank space on the 1*' floor to stage the new Technology Project. After the completion of the project, the area will be used by the loans and benefits divisions to accommodate our senior members who have health challenges from coming to the 3" floor to obtain these services. Government Employees Retirement System August 8, 2008 Overview of Operations Page 7 e Since January 1, 2008 collected $1.2 Million in outstanding rents and utilities due to the System. e Hired an Internal Auditor who reports to the Audit Committee of the Board of Trustees. PROJECTED GOALS AND OBJECTIVES FOR FISCAL YEAR 2009 To revisit the Mission Statement, develop a Vision Statement and develop a Strategic Plan for the System by March 31, 2009. To decrease the period of time to submit and have an approved annual budget. To decrease the period of time to issue the annual certified financial statements and the annual report. To complete the recalculation of retiree’s annuity payments by December 31, 2008. To improve on the timeliness of processing member benefits. To provide timely and accurate information to our members. To continue to promote direct deposit for retiree’s annuity payments. To strengthen procedures to minimize the possibility of a deceased member receiving an annuity payment, and the length of time to remove a deceased member from the payroll. To provide members with educational services in Estate Planning and Financial Services to assist them with planning and managing their retirement. To develop a coordinated communications effort to include production of a system quarterly newsletter and workshops concerning GERS’ benefits and processes. To develop a plan to increase the preparedness to process retiree’s checks in the Territory in the event of a natural disaster. Government Employees Retirement System August 8, 2008 Overview of Operations Page 8 To provide system-wide customer service training in order to decrease the number of complaints reported by the members. To improve on the technology infrastructure to support the internal and external operations. To complete the elevator refurbishing project, install a public announcement (PA) system for emergency purposes and develop a refurbishing plan to address energy saving measures in our buildings. To continue the implementation of the new loans and benefits software which will improve the delivery of services to the members of the System. Make recommendations to the Board of Trustees on the development of the 120 acres of property located at Estate Huffman & Nullyburg. To increase oversight of the investment managers performance. To begin to implement sections of Act No. 6794 (The Retirement System Reform Act of 2005) and amendments Act No. 6905 and Act No. 6917. MEMBERSHIP Overall membership in the System is as follows: a 2007 2,008 embe 10,543 11,067 524 4.73% ee 6,827 6,926 99 1.43% bership 17,370 17,993 623 3.46% Both of these numbers continue to increase and the benefit payments continue to rise. For example, in 1991 benefit payments were approaching $55 million, while for fiscal year 2008 Government Employees Retirement System August 8, 2008 Overview of Operations Page 9 payments are expected to total approximately $162 million. This reflects a 194.5% overall increase in the level of benefit payments paid annually over the period of the last 17 years. Of the 6,926 retirees and beneficiaries in the System, 5,833 retirees or 84% are Virgin Island residents. With the projected benefit payments approaching $162 million this represents a significant infusion of cash that impacts the economy of the Territory. The chart below shows the progress made in recruiting the retirees and beneficiaries to utilize direct deposit services. Over the period of the last 5 years, we have had an increase of 775 payees receiving retirement annuities. At the same time, retirees receiving checks have decreased by 1,562 and retirees on direct deposit have increased by 2,337 individuals. Our ultimate goal is to have 100% of the retirees receiving their annuity payments via direct deposit. To date, we have achieved 77% participation. Direct Deposit Subscription Statistics 2003 | 2004 | 2005 | 2006 2007 Retirees on . ; 2,917 3,332 3,800 3,982 5,254 | Direct Deposit Retirees Receivi Chocks? 3,135 2,926 2,758 2,267 1,573 Number of Payees 6,052 6,258 6 558 | 6,649 6,827 In an effort to better assist our retiring members, we have strived to continually revise and update our pre-retirement workshops and counseling sessions to ensure that we provide the most current and up-to-date information to aid in the smooth transition from the career to retirement track. We continue to solicit workshop participants from the government and private sectors to make presentations at our monthly workshops. Today, the list of participants include representatives from Social Security; Medicare; Bureau of Internal Revenue; Group Health Government Employees Retirement System August 8, 2008 Overview of Operations Page 10 Insurance; Department of Health; Department of Human Services; Seslia Securities; Credit Bureau and the Credit Union. Our workshops are held on all three islands at least once a month. We currently conduct scheduled workshop presentations namely, Mini Quests, New Employee Orientations, Departmental Workshops, and benefit fairs throughout the Territory. ACTUARIAL VALUATION INFORMATION Title 3, Chapter 27, Section 718 (a) of the Virgin Islands Code mandates that the Employees Retirement System of the Government of the Virgin Islands be financed on an “actuarial reserve basis.” An “actuarial reserve basis” generally means that the retirement benefits are funded during employees active years of employment so that by the time they retire, the benefits would have been fully funded in advance of their retirement date. The actuarial valuation, which is conducted by the System’s Actuary, determines the contribution rate necessary to meet the cost of benefits being accrued and a corresponding amount to pay down a portion of the unfunded liabilities. The most recent actuarial valuation estimate as of September 30, 2006 was determined by The Segal Company. The Actuary is presently reviewing other data in order to recommend the bi-annual actuarial valuation report as of September 30, 2006. However, the estimate as of September 30, 2006 shows that the current statutory employer and member contribution rates are not sufficient to meet the cost of funding the System on an actuarial reserve basis, as required by law. The System’s estimated unfunded accrued liability (UAL) has increased since the period of the last actuarial valuation and is estimated to be $1,136,153,570 for the fiscal year ending September 30, 2006. Government Employees Retirement System August 8, 2008 Overview of Operations Page 11 Currently, the contribution rates are set by statute’. The current combined contribution rates for employees employed prior to October 1, 2005 as of October 1, 2007 is 25.5% of total payroll, and the current combined contribution rates for employees employed after October 1, 2005 (Tier II) is 26.0% of total payroll. The current combined rates are not sufficient to meet the 43% of payroll cost of the System, which is the amount necessary to maintain the operations of the retirement benefit structure on an actuarial reserve basis, as mandated by the provisions of the Virgin Islands Code. To meet the full actuarial costs, the contribution rates must be increased so that in total, the System would have to receive additional contributions of 17.5% (pre-October 1, 2005) and 17.0% (Tier Il) in order to meet the 43% of payroll cost of the System. The outstanding employer's contributions (excluding delinquency fee and interest) due to the GERS from the central government and other government agencies for fiscal year 2008 (as of June 30, 2008) are as follows: Regular 3% Total Central Government $ - $7,973,495.96 $7,973,495.96 Instrumentalities 431,101.64 1,092,578.17 1,523,679.81 Total $431,101.64 $9,066,074.13 $9,497,175.77 Contributions due from the Central Government excluding the increase to 3% are current to date. Contributions due from the instrumentalities excluding the increase to 3% are current to date except for the V.I. Water and Power Authority (WAPA). The schedule below tracks the growth in the unfunded liability (deficit) over a 14-year period. The lack of a consistent funding plan for the GERS places a massive constraint on the ' Title 3, Chapter 27, Section 718, Subsection (b), Virgin Islands Code Government Employees Retirement System August 8, 2008 Overview of Operations Page 12 resources of the System to meet future pension benefit obligations. Proper funding by the Plan Sponsor is critical to the future survival of the Plan for the benefit of the members, retirees, and beneficiaries. Actuarial Value Unfunded Funded Year of Assets Deficit Ratio 30-Sep-91 $281,299, 295 69.79% 30-Sep-93 $236,505,572 74.49% 30-Sep-94 $243, 591,097 75.55% 30-Sep-95 $352 562,359 70.1% 30-Sep-97 $1,031 ,369,518 $296 600,030 77.67% 30-Sep-98 $1,078,291,775 $307 300,371 77.82% 30-Sep-99 $1,255,210,585 $518,081,040 70.78% 30-Sep-00 $1,330,089, 822 $525,608, 964 71.68% 30-Sep-01 $1,342 ,894,336 $731 ,727,064 64.73% 30-Sep-02 $1,337 ,676,064 $815,884,419 62.11% 30-Sep-03 $1,346,906 862 $898, 500,506 59.98% 30-Sep-04 $1,360,288 336 $977 502,024 58.19% 30-Sep-05 $1, 366,982,183 $1 ,088,574,553 55.67% 30-Sep-06 $1,421 ,825,127 $1,136,153,570 55.58% Estimated CONTRIBUTIONS/FUNDING The System's funding objective is to meet long-term benefit promises through employer and employee contributions that remain level as a percentage of the members’ payroll. Currently employer contributions are determined by the Legislature. This is the single most detrimental feature of the plan design that handicaps growth in the fund. The System was designed to be funded on an actuarial reserve basis. Regular Benefit Contributions In accordance with the 1994 Modified Consent Judgment issued by the U.S. District Court, the payment of regular contributions from the Department of Finance is required to be transmitted to GERS within 21 days after each payroll. Although contributions due from the Central Government and the instrumentalities excluding the increase to 3% are current to date, Government Employees Retirement System August 8, 2008 Overview of Operations Page 13 with the exception of WAPA, the current regular benefit contributions by the Central Government have not kept pace with the percentage required by the Actuarial Reserve Method of funding this plan design. In addition, no regular payments are being made, by the plan sponsor on the $1,136,153,570 unfunded liability. The System cannot survive another ten years of escalating benefit expenditures without the respective concurrent incremental contribution increases or a significant cash infusion in the form of Pension Obligation Bonds. As | indicated in my presentation on June 13, 2008 before the Committee on Government Operations and Consumer Protection regarding the outstanding annuities owed to retirees by the GERS pursuant to ACT 6781, there are twenty-two years of unfunded legislative mandates totaling $161,001,000 where the System has distributed unfunded benefits, for which there has been no reimbursement to the GERS. These unfunded mandates have negatively impacted the unfunded liability of the Fund. Also, the GERS is owed a cumulative total of approximately $37,000,000 for unpaid administrative expenses for Fiscal Years 1987 through 1998. This debt has been brought to the attention of the Legislature, and cannot be forgiven or dismissed without payment to the fund, because the debt is a blended component of the actuarial valuation and it was created by the enabling plan design. The following chart depicts the unfunded mandates for which the System has distributed unfunded benefits which negatively impacts the unfunded liabilities of the Fund. Government Employees Retirement System August 8, 2008 Overview of Operations Page 14 UNFUNDED MANDATES | ACT NO. | YEAR Legislative Mandates Omnibus Authorization Act of 1984 4877 10/25/1983 To Provide for Early Retirement of Dept. of Education Personnel 4896 2/21/1984 Early Retirement Incentive Training & Promotion Act of 1994 6007 8/16/1994 To Extend Act 6007 6088 12/5/1995 To Fund Salary Increases for Retirees & Eligible Employees 6415 6/18/2001 To Place Employees on Step 6427 6/19/2001 Expansion of Eligible Members of Early Retirement Program 6429 9/24/2001 To Provide Early Retirement Benefits Options & To Reduce Expenditures 6361 10/19/2000 To Increase Retirement Benefits for Superior Court Judges 6391 2/1/2001 Other Unfunded Measures Annual and Sick Leave Benefits Paid Past Due Administrative Expenses 1987-1998 Over the years, GERS has interacted with other major public retirement systems such as the New York Retirement System, the District of Columbia Retirement System and the Florida Retirement System in an effort to determine what strategies or programs were considered or implemented to correct their unfunded liabilities. Each of these Systems had experienced severe unfunded liabilities similar to the GERS. They were able to turn around the deficit in their unfunded liabilities by a combination of the Plan Sponsor: 1). Floating Pension Obligation Bonds; 2). Making substantial lump sums payments to the Systems; 3). Paying the entire actuarial annual normal cost; 4). Incrementally adjusting the contribution rates to keep pace with the increasing levels of benefit payments. In addition to: 1). Legislative elimination of unfunded enhanced benefits; and 2). Legislative empowerment of the System to make BBB rated and alternative investments. Government Employees Retirement System August 8, 2008 Overview of Operations Page 15 Mr. Chairman, the Statement of Objectives of the System cannot be achieved or sustained unless adequate provisions are made to actuarially fund current and future cost in the annual budget of the Central Government. In order to have an adequately funded retirement system, the following conditions must be met: 1). A realistic actuarial determination of the required contributions: 2). Investments based on a clear concise Statement of Objectives, derived from long- term asset liability studies; 3). Use of realistic assumptions for modeling assets and liabilities; and 4). Control of cost both on the investment and benefits sides. | am pleased to say that the GERS does all of the above. However, without a commitment from the employer to make timely actuarially required contributions, the benefits promised to the retirees cannot be sustained. INVESTMENTS The investment fund portfolio is managed with the specific goal to grow the assets to meet the System's pension liability and ensure a reliable cash flow that provides for the funding requirements of near-term pension obligations. To achieve these goals, the Board allocates the Fund's assets to a variety of asset types and strategies in consultation with the Investment Consultant. Generally, equity investments are included for their long-term return and growth characteristics, and fixed income assets are added for their ability to control investments risk and provide for a reliable cash flow that meets the System's funding requirements. The Fund’s successful long-term performance confirms the importance of asset diversification and controlling investment risk within each asset class. Government Employees Retirement System August 8, 2008 Overview of Operations Page 16 INVESTMENT FUND A schedule of the Investment Fund as of June 30, 2008 is presented as Exhibit F. The System's investment fund is presently managed by fifteen (15) investment Managers. They are listed below: Alliance Bernstein, LP Pacific Investment Management Co., LLC Bjurman, Barry & Associates Silvant Capital Management, LLC Fisher Investments Institutional Group State Street Global Advisors Global Currents Investment Management, LLC The Attilanus Fund !, LP LSV Asset Management Turner Investment Partners, Inc. NWQ Investment Management Company, LLC Union Heritage Capital Management, Inc. Oberweis Asset Management, Inc. U.S.V.I. Lending Securities Oechsle International Advisors, LLC The fund’s custodian is the State Street Bank and Trust Company. Trading Partners, Inc. is the Fund’s transition manager. Segal Advisors, Inc. provides investment consulting and analytical support to the Board. Over the past 20 years, GERS has generated an average annual rate of return on its investments between 8% and 11%”. We note that the investment portfolio value has declined since the last overview presentation mainly because of the volatility in the market. (See Exhibit F). We feel that the market will rebound in the near future. We are confident that the assets of the System have not been significantly impaired. The System has exceeded the established benchmarks twenty-two times in the last twenty-five years. The growth in the portfolio assets demonstrates that the Board in conjunction with the Investment Advisor has made the proper prudent investments over the years. The following table shows GERS’s investment managers ranking compared to managers worldwide. Refers only to investments in stocks and bonds. Government Employees Retirement System Overview of Operations August 8, 2008 Funds Under Management 1 State Street Global $1,766,182 Million 11 PIMCO $610,222 Million 13 Alliance Bernstein Institutional $508,081 Million 71 Ridge Worth Capital(Silvant Capital Management) $73,843 Million 74 LSV Asset Management $72,477 Million 147 Turner Investment $23,205 Million 171 NWQ Investment $17,089 Million 199 Oechsle International $12,918 Million 14 LSV Asset Management $28,905 Million 24 Turner Investment $17,418 Million 35 NWQ Investment $15,631 Million 43 Ridge Worth Capital(Silvant Capital Management) $12,846 Million 74 State Street Global $6,330 Million 2 PIMCO $158,926 Million 16 Alliance Bernstein Institutional $25,464 Million Source: Pensions Investments - May 26, 2008 Issue In addition, the table below demonstrates the growth in the portfolio over the past 10 years. Ten years ago, the equity and fixed income portfolios were $1,046,467,000 and through prudent investment management, these portfolios have grown steadily over the years. The net market value of these investments as of June 30, 2008 is $1,138,278,000. Government Employees Retirement System August 8, 2008 Overview of Operations Page 18 GOVERNMENT OF THE VIRGIN ISLANDS EMPLOYEES’ RETIREMENT SYSTEM CASH FLOW ANALYSIS ENDING JUNE 30, 2008 QUARTER ONE YEAR THREE YEARS FIVE YEARS TEN YEARS BEGINNING MARKET VALUE NET CASH FLOW INVESTMENT EARNINGS ENDING MARKET VALUE NET CHANGE $1,170,803,000 -20,858,000 -11,667,000 1,138,278,000 -$32,525,000 $1,283,378,000 -82,205,000 -62,895,000 1,138,278,000 -$145,100,000 $1,216,660,000 -283,526,000 205,143,000 1,138,278,000 -$78,382,000 $1,069,293,000 -395,914,000 464,897,000 1,138,278,000 $68,985,000 $1,046,467,000 -550, 187,000 641,996,000 1,138,278,000 $91,811,000 The table below shows the growth in the investment portfolio's net plan assets for the years 2001-2006.° Year Net Plan Assets Increase/Decrease Percentage Change 1998 $1,146,019, 705 30-Sep-99 $1,225,210,585 $79,190,880 6.91% 30-Sep-00 $1,330,089,822 $104,879,237 8.56% 30-Sep-01 $1,214,182,996 ($115,906,826) -8.71% 30-Sep-02 $1,136,973,678 ($77,209,318) -6.36% 30-Sep-03 $1,275,775,907 $138,802,229 12.21% 30-Sep-04 $1,350,305,464 $74,529,557 5.84% 30-Sep-05 $1,434,633,117 $84,327,653 6.25% 30-Sep-06 $1,477,477,550 $42,844,433 2.99% STOCK MARKET AND PORTFOLIO PERFORMANCE For the period ending June 30, 2008, the total fund assets were at $1.2 billion which represents a decrease of $138.7 million from October 1, 2007, the beginning of fiscal year 2008. This decrease represents $61.8 million of depreciation in the market value of the fund due to the *The schedule of total net plan assets incorporates the assets in the Investment Stock Portfolio, the Havensight Mall, the Loan Portfolio, and the Real Estate Properties on St. Thomas and St. Croix. Government Employees Retirement System August 8, 2008 Overview of Operations Page 19 present volatility in the marketplace; $28.2 million net losses from current operations and $48.7 million drawn down from the investment fund to finance the retiree payroll and the System's loan operations during the first three quarters of this fiscal year. We are pleased with the performance of our investment managers at this time. We credit our performance, in part, to the skill of our investment managers, the strategic allocations made to our portfolio as part of our diversification strategy, and the due diligence of the Board of Trustees and management. Because of the volatility in the market the GERS’ investments (with the exception of Fixed Income and Alternative Investments) for the first three quarters of this fiscal year has underperformed our benchmarks. We note that all major indexes have been down 12% - 14%. We have confidence in our investment managers and the due diligence of management and the Board of Trustees to protect the System's investment interests. LOANS In addition to providing regular retirement benefits, the System also provides personal, auto, land and mortgage loans to qualified members and retirees. The existing interest rates for loans along with loan balances as of June 30, 2008 are as follows: Loan Interest | Interest | Interest | Interest Category Rates Rates Rates Rates As of June 30, 2008 2005 2006 2007 2008 Number Amount AutoLoans |: 9.75% | 9.25% | 9.25% | 8.75% $340,820 Land 8% | 8% 8% | 8% | 42] $1,002,265 1st Priority Mortgage 8% 8% 8% 8% 499 $12,357,433 2™ Priority Mortgage 9% 9% 9% 9% 5 $83,458 Retiree Loans _ 9% 9% 9% 8% 1,667 16,412,554 Total Loan Portfolio 8,065 $124,770,158 Government Employees Retirement System August 8, 2008 Overview of Operations Page 20 REAL ESTATE (A) GERS Complexes The System owns the GERS Complex on St. Thomas, which is the location of the GERS principal place of business. The tenants are the Division of Personnel, the Department of Justice, Rescare (Job Corp) and First Bank. GERS also owns an additional 2.9 acres located at Parcels No. 5 and 6 Estate Orange Grove, St. Croix, which houses the St Croix Branch Office operations and the Casino Control Commission. In December 2005, ground was broken for the new St. Croix Complex. The new complex will house a 22,000 square foot two-story building which will augment the existing facilities now located on the site. The construction was due to be completed in January 2007. However, the contractor, Best Construction, ran into financial difficulties and the Board terminated the contract in January 2008. The GERS is presently in litigation with Best Construction, Inc. and the surety Edmund C. Scarborough/International Bonding & Construction Services, Inc. d/b/a The IBCS Group, Inc. The contractors who were unsuccessful bidders on the initial project and others were invited to bid on the completion of the building. Five responses were received and we are presently negotiating with the successful bidder. The building is approximately 50% completed. We expect construction to resume by the end of the month or early in September. In late 2006, the System purchased 120 acres of land at Estates Hoffman and Nullyberg on St. Thomas. This purchase was made primarily as an additional real estate investment for our members. Our Architect has done a conceptual drawing on the best comprehensive use for this land. The Board has not made a decision on the proposal. (B) Havensight Shopping Mall Government Employees Retirement System August 8, 2008 Overview of Operations Page 21 GERS also owns the Havensight Shopping Mall, a premier tourist destination commercial shopping center, located alongside The West Indian Company Dock and the new Yacht Haven Grande development. The Havensight Mall is managed by The West Indian Company, Ltd. (WICO). This property was purchased on June 30, 1993, for $32 million. In November 2006, the mall was appraised at $80 million. Today, we are receiving approximately $4 million in net dividend payments from the mall. However, we are mindful of the potential loss in dividend payments due to the increased competition from the new Crown Bay development. The dividends received from the Havensight Mall are a vital component of our overall budget. The Board will continue to discuss with WICO the steps that may be needed to protect this vital investment. INSURANCE The GERS fully insures against all risks of loss on all of its properties, facilities, equipment, furnishings, and automobiles. This year we sent out a Request for Proposal and was able to reduce the premiums in excess of $100,000 with increased coverage and lower deductibles with a Class A+ rated company. GERS SCHOLARSHIP FUND Commencing in 1998, the GERS began to award four-year undergraduate scholarships to students of the V.I. Education System. The source of funding for these scholarships originates from our investment managers, corporations, and concerned local citizens of the territory. The Community Foundation of the Virgin Islands (CFVI) evaluates the candidates and the final selection is made by the GERS Board of Trustees based on the recommendation of the Government Employees Retirement System August 8, 2008 Overview of Operations Page 22 Foundation’s Scholarship Committee. The table below shows the scholarship recipients for 2008. | GERS SCHOLARSHIP AWARDS u I ate of Recipient a Institution raduati Joel Walker St. Croix University of Tampa 2012 Anwar Gregory St. Thomas University of Pittsburgh 2012 No Applicants St. John N/A N/A TECHNOLOGY UPGRADE The GERS entered into a contract with Vitech Systems, Inc. of New York in December 2007 to implement a comprehensive retirement system software solution known as V3. The objective of this software implementation is to merge the GERS’ current benefits and loan administration systems into a state-of-the-art, web-based, business solution that provides the technology foundation to enable and sustain the business agility of the GERS in addition to being fully integrated with the central government and the other government instrumentalities that interface with the GERS. The project consists of three rollouts (phases): » Rollout 1: Digital Conversion of GERS’ member files > Rollout 2: V3 Imaging and Line of Business Implementation 7 Rollout3: V3 Self-Service Implementation The project is expected to be completed in approximately 24 - 30 months. We are currently in the Rollout 1 phase. When the software is fully implemented, customer service to retirees, active government personnel and the public-at-large will be greatly enhanced through the ability of V3 to facilitate electronic, web-based transactions and communications. Other expected results of this upgrade are: Government Employees Retirement System August 8, 2008 Overview of Operations Page 23 Online loan applications and payments Ability for members to estimate benefit calculations Improved ability of GERS to produce member statements Improved data quality and security Digitized member data for improved access, retrieval and protection Greatly reduced processing time for requested services Improved identification of receivables from government agencies Improved work flow tracking and processes VVVVVVWVN ANNUAL AUDIT The System's most recent audited financial statements by Bert Smith & Company are as of September 30, 2006. This report, confirmed that the System’s Plan Net Assets amounted to $1,477,477,550. This reflects an increase of $42,844,433 over Fiscal Year 2005. For the audited year ending September 30, 2006 the GERS reported combined employer and employee contributions of $99,271,301 and paid benefits of $147,800,767 resulting in a net deficit of $48,529,466. This compares to the audited year ending September 30, 2005 combined employer and employee contributions of $81,957,717 and paid benefits of $141,383,334 with a net deficit of $59,425,617. As the annual benefits paid out continue to exceed contributions received, we are forced to liquidate invested assets to fund the annuity payroll. For the fiscal years ended September 30, 2006 and September 30, 2007, and the nine (9) months ending June 30, 2008, $61.2 million, $90 million and $48.7 million were liquidated respectively. CASH MANAGEMENT In order to stabilize the significant drawdowns from our investment fund, we have established a cash management procedure which allows the System to preserve the integrity of its investment vehicles by removing the need to make untimely periodic withdrawals from the Government Employees Retirement System August 8, 2008 Overview of Operations Page 24 investment portfolio to meet our short term cash needs. However, we are currently reviewing this option to determine if this option is best for the System. SUMMARY A great part of the future of the Government Employees Retirement System will depend on whether the Government of the Virgin Islands (Plan Sponsor) funds the contributions to the System based on an actuarial reserve basis, and/or a combination of floating Pension Obligation Bonds and making substantial lump sum payments to the System. The significant unfunded liability still lingers. Until real funding is identified, established and consistently maintained, the Plan Sponsor's inability to pay the Normal Annual Cost of Operations will continue to cause the unfunded liability to escalate. By not funding the Plan on an actuarial reserve basis creates significant problems for the System. The consequences of not increasing the contribution rates to the actuarially required amounts can result in: e Having to increase the actuarially required contribution rates in future years to make up for the shortfall in the current and future years’ contribution deficits. e Acontinual decrease in the funding ratio, which measures the progress being made towards the funding of benefits accruing from year to year. e The benefit security to participants and the System's ability to pay the promised benefits will be at risk, with the long-term viability of the System being in jeopardy. e The unfunded actuarial liabilities of the Plan continuing to increase. The lack of a consistent funding plan places a strain on the System's resources to meet future pension benefit obligations. Therefore, adequate funding of the Plan is vital for the future survival of the Plan for the benefit of the members, retirees and the beneficiaries. The objective Government Employees Retirement System August 8, 2008 Overview of Operations Page 25 of the System is to fund the Plan to meet long-term benefits promised to its members and retires by making adequate employer and employee contributions. On August 27", 28" and 29", the Board of Trustees will meet at the GERS Complex on St. Thomas to hear presentations from all of our investment managers on their performance. We invite members of this Committee and the general public to attend. 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DissursevenTs 17,.262.572 16.915.315 163.351164 153.733.748 | i ] Net Recarrs ( O) (52,539,750) (50.211.505) ES] BRS 2735605} Cash Surpuus/(Dencm) S SESS xe whey) (32,539,750) (50,211,505) 9EOLZE'Z9L'8 $ GOOLE CEL‘ LLZesoscers $ v9°01LS'S6'6 969 2LL'Z Ge LLO'CEO'E 62 €67'0Z6'9 00°188'611'8L $ OZ €8S' Ly 66'619'097 9E°8L0'ver 6S°629' LEZ 8E6SE ‘SEL v6'60S'8r LL €€6'88 EL LVL Bee 00°S22'6Zp 22°080'SZ 68°S07 LLY 70°22 8L9'7 OO'VEE'POL'S OO'LyS'SSE'ZL $ GL9E9'CCL'7 08°L76'86 LO'O8€' p97 v9'ZLZ'70'L Ly ZSO'ZLL 29° €89'091 90°226'67Z 68'res Llp LOLLE PLL €7 6LY 28 LL v6Z'bL 00°0v9'06E'S Ol 2S6'0EL GO96A9 1661 $ GC OL Crz'7 00°SZS'9r1 00°000'SZZ 00°1S€'99r'L 00°Z89'6rE 00°€v0'9SE 00°LEr'86z 00°892'99S 00°6S0'E1LS 00°S2Z'6Zp 00°00S'ZOL 00°000'2Er SOURBLIEA yobpng 06°292'096 GE LOS'L8Z'€ $ 00°206'796'9 80/0€/9 ~ LO/LO/OL GLA [enjoy 00°022'169'L OO'Z8L'EL7's $ 8002 JB9A JeoSI4 (junoooVy Ag) 8002 AS yabpng jenjoy sa jaBpng jo ajnpeyss WALSAS LNSWSxILaY SA3A0 1d LNSIWNYSAOD sasuedxy [e}0OL ue|d ABojouysea,, Syd wee, sosuedxy Buneiodo [ejo, (1e}0}qnS) sasuedxy Hunesado¢ 10N}0 sabieyy 9 S9DIAIBS 19YIO aoueINSU] SODIAIBS [BUOISSIJOIg Buruiesy JeaesL uonesiunwiwos senian SOUBUdUIEW 9 sleday yuowidinby syed 9 saijddng ‘jewajey Aepno jeydep (1230}qNg) 3sOD jJouAeg sjyeueg e6un4 SODIAIVS [BUUOSI9g uondiioseg GOVERNMENT EMPLOYEES RETIREMENT SYSTEM ADMINISTRATIVE EXPENSES OCTOBER 1, 2007 - JUNE 30, 2008 Description Salaries & Wages Fringe Benefits Professional Services Actuarial Services - Segal Investment Advisory Services - Segal Legal Fees Interim Legal Counsel Bert Smith and Company Buck Consultants ADP - Payroll Processing Services ° Accounting Services Medical Service/Consulting Stenographic Services Security Services Team GERS Maintenance and Repairs Supplies Insurance Property and Casualty/General Liability Directors and Officers/General Liability Travel Policy Vehicles Utilities Other Operating Expenses Advertising Board Stipend Catering Communication Equipment Rental Miscellaneous Services Training Travel Capital Expenditures Total 75,000.00 232,500.00 91,068.00 55,917.56 95,000.00 33,942.21 230,132.16 44,395.24 10,150.00 15,487.50 20,943.00 137,736.97 1,042,272.64 128,020.09 123,500.00 6,260.92 6,599.00 264,380.01 34,468.20 12,825.00 20,010.09 249,927.06 1,954.08 29,684.43 112,052.41 160,683.62 621,604.89 10/1/07 - 6/30/08 3,281,507.35 960,762.90 1,042,272.64 3,032,017.35 174,917.27 82,419.23 264,380.01 477,834.89 621,604.89 14,794.11 $9,952,510.64 U.S VIRGIN ISLANDS GOVERNMENT EMPLOYEES RETIREMENT SYSTEM Investment Fund Comparison June 30, 2008 vs September 30, 2007 Employees Retirement System Fund - All Seg AllianceBernstein - Fixed Income Core § 206.746.071.88 | $ 150.408.684.33 56,337,387.55 37.46% AmeriCap Advisors - Large Cap Growth 24,289,324.17 30.706.751.27 (6.417,427.10) -20.902%5| Attil Fund I - Alternative Investment 67,450.336.00 58.854.677.00 8.595.659.00 14.60% Bjurman, Barry - Small Cap Growth 30,880.769.48 42,194,304.52 (11,313.535.04) -26.81% Brandywine - Fixed Income International 134.495.321.33 128,976.410.20 5.518,911.13 4.28%) Brandywine - Intemational Value $5,023,085.28 72,680.752.82 (17,657,667.54) -24.29% Fisher Investments - Small Cap Value 46.924.758.01 50.613,691.39 (3.688.933.38) -7.29%| GeoNet LLC 8,038.507.61 - 8.038,507.61 - GeoNet LLC Escrow 2.654, 124.88 : 2,654, 124.88 - GERS Self Insurance Fund 2,880,699.94 - 2.880.699.94 - LSV - Large Cap Value 99,290,989.66 129,687,722.28 (30,396,732.62) -23.44% MDL - Fixed Income Core* - 55,663,748.79 (55.663.748.79) -100.00% NWQ - Large Cap Growth 93,938,097.74 115,831,520.74 (21,893,423.00) -18.90% Oberweis - Micro Cap 36,199,272.54 50,818, 185.10 (14,618,912.56) -28.77% Oechsle - International Growth 51,064,266.05 65,265,.627.15 (14,201,361.10) -21.76% PIMCO - Fixed Income Intermediate 122,030,843.78 119,423,067.64 2,607,776. 14 2.18% SSgA - Large Cap Core 2,427,998.90 3,162,379.28 (734,380.38) -23.22% Silvant Capital M. - Large Cap Growth 113,199,391.72 147,001,859.64 (33,802,467.92) -22.99% Tumer investment Partners 87,676,428. 19 99,915,523.45 (12,239,095.26) - 12.25% Union Henittage - Large Cap Core 34,304,007.96 37,405,539.93 (3,101,531.97) -8.29% USVI Securities Lending Income 1,301,356.60 945,461.83 355,894.77 37.64% Total Fund $ 1,220,815,651.72 | $ 1,359,555,907.36 (138,740,255.64) -10.20% Equity Seg 55.31% 62.17% Change in Value Overall EQ% AmeniCap Advisors - Large Cap Growth $ 24,289,324.17 | $ 30,706, 751.27 (6,417,427. 0) 3.60% Bjurman, Barty - Small Cap Growth 30,880,769.48 42, 194,304.52 (11,313,535.04) 4.57% Brandywine - International Value $5,023,085.28 72,680,752.82 (17,657,667.54) 8.15% Fisher Inv - Small Cap Value 46,924,758.01 $0,613,691.39 (3,688,933.38) 6.95% LSV - Large Cap Value 99,290,989.66 129,687,722.28 (30,396,732.62) 14.7 £%| NWQ - Large Cap Growth 93,938,097.74 115,831,520.74 (21,893,423.00) 13.91% Oberweis - Micro Cap 36, 199,272.54 $0,818, 185.10 (14,618,912.56) 5.36% Oechsle - International Growth 51,064,266.05 65,265,627.15 (14,201,361.10) 7.56%| SSgA - Large Cap Core 2,427,998.90 3,162,379.28 (734,380.38) 0.36% Silvant Capital Manag - Large Cap Growth 113, 199,391.72 147,001,859.64 (33,802,467.92) 16.76% Tumer In Partners 87,676,428.19 99,915,523.45 (12,239,095.26) 12.98% Union Heritage - Large Cap Core 34,304,007.96 37,405,539.93 (3,101,531.97) 5.08% Total Equity $ 675,218,389.70 | $ 845,283,857.57 (170,065,467.87) 100.00% Fixed I Seg 37.95% 33.43% Change in Value Overall FI% AllianceBemstein - Fixed Income Core $ 206,746,071.88 | $ 150,.408,684.33 56,337,387.55 44.63% Brandywine - Fixed Income International 134,495 ,321.33 128,976,410.20 5,518,911.13 29.03% MDL - Fixed Income Core* : 55,663.748.79 (55,663,748.79) 0.00% PIMCO - Fixed Income Intermediate 122.030,843.78 119,423,067.64 2,607,776.14 26.34% Total Fixed Income $ 463,272,236.99 | $ 454,471,910.96 8,800,326.03 100.00% |Alternative Investment Segment: 5.53% 4.33% Change in Value Overall AI% Attilanus Fund | - Alternative Investment $ 67,450.336.00 58,854,677.00 8,595,659.00 100.00%| Total Alternative Investment $ 67,450,336.00 | S 58,854,677.00 8,595,659.00 100.00% Other Segment: 1.22% 0.07% Change in Value Overall Other% USVI Securities Lending Income $ 1,301,356.60 | $ 945,461.83 355,894.77 8.75% GeoNet LLC 8.038.507.61 - 8,038.507.61 54.04%! GeoNet LLC Escrow 2.654,124.88 = 2,654,124.88 17.84% GERS Self Insurance Fund 2.880.699.94 : 2,880,699.94 19.37% Total Other $ 14,874,689.03 | $ 945,461.83 13,929,227,.20 100.00% * Manager terminated as of October 31, 2007 and funds transitioned to AllianceBernstein U.S VIRGIN ISLANDS GOVERNMENT EMPLOYEES RETIREMENT SYSTEM Investment Fund Month Ending June 30, 2008 Employees Retirement System Fund - All Segments AllianceBernstein - Fixed Income} $ 206.757.832.96 | $ 206.827.913.23 | $ (70.080.27) 16.94% AmeriCap Advisors - Large Cap ( 24,280,757.15 27,.225,726.20 (2.944.969.05) 1.99% Attilanus Fund I - Venture Capita 67.450.336.00 59.286.610.00 8.163,.726.00 5.52% Bjurman, Barry - Small Cap Grow 30.880.337.83 32.830,011.60 (1.949.673.77) 2.53% Brandywine - Fixed Income Intern 134,587.162.43 134,976.827.39 (389.664.96) 11.02% Brandywine - International Value 55.029.856.29 59.672.745.05 (4.642.888.76) 4.51% Fisher Investments - Small Cap V: 46.924.766.85 $0.673.948.99 (3.749, 182.14) 3.84% GeoNet LLC 8.038.507.61 8.038.507.62 (0.01) 0.66% GeoNet LLC Escrow 2.654,169.22 3.263.746.71 (609,577.49) 0.22% GERS Self Insurance Fund 2.880.746.83 2,.820.357.51 60.389.32 0.24% LSV - Large Cap Value 99.290.998.93 113.475,355.98 (14.184.357.05) 8.13%) NWQ - Large Cap Value 93.943.533.20 104.182.285.44 (10.238.752.24) 7.69% Oberweis - Micro Cap 36.196.684.80 38.127.217.05 (1.930,532.25) 2.96% Oechsle - International Growth 31.096.821.55 54,657,257.06 (3.560.435.51) 4.19% PIMCO - Fixed Income Intermedi 122.013.316.21 122.154.315.38 (140.999.17) 9.99% SSgA - Large Cap Core 2.340.725.26 2,651.098.65 (310,373.39) 0.19% Silvant Capital Management - Lar] 113.199.430.09 125.373,219.84 (12.173.789.75) 9.27% Turner Investment Partners - Larg 87.676.452.42 94.484.081.60 (6.807.629.18) 7.18% Union Heritage - Large Cap Core 34,304.021.68 36.759.447.60 (2.455.425.92) 2.81% USVI Securities Lending Income 1,303.611.14 992.786.25 310.824.89 0.11%) Total Fund $ 1,220,850,068.45 | $ 1,278,473,459.15 | $ (57,623,390.70) 100.00% Equity Segment: 55.30% 57.89% Change in Value | Overall EQ% AmeriCap Advisors - Large Cap $ — 24.280.757.15 | $ — 27.225,726.20 | $ (2.944.969.05) 3.60% Bjurman, Barry - Small Cap Grow 30.880,337.83 32.830.011.60 (1.949.673.77) 4.57% Brandywine - International Value 55.029.856.29 $9.672.745.05 (4.642,888.76) 8.15% Fisher Investments - Small Cap V 46.924.766.85 50.673,948.99 (3.749.182.14) 6.95% LSV - Large Cap Value 99.290.998.93 113,475,355.98 (14.184,357.05) 14.71% NWQ - Large Cap Growth 93.943.533.20 104.182.285.44 (10.238.752.24) 13.91% Oberweis - Micro Cap 36.196.684.80 38.127,217.05 (1.930,532.25) 5.36% Oechsle - International Growth 51,096,.821.55 54,657.257.06 (3.560.435.51) 7.57% SSgA - Large Cap Core 2,340.725.26 2,651.098.65 (310,373.39) 0.35% Silvant Capital Management - Lar 113.199,430.09 125.373.219.84 (12,173.789.75) 16.77% Turner Investment Partners - Larg 87.676.452.42 94.484.081.60 (6,807.629.18) 12.99% Union Heritage - Large Cap Core 34.304.02 1.68 36.759.447.60 (2.455,425.92) 5.08%! Total Equity $ _675,164,386.05 | $ 740,112,395.06 | $ (64,948,009.01) 100.00% Fixed Income Segment: 37.95% 36.29% Change in Value | Overall FI% AllianceBernstein - Fixed Income} $ —206.757.832.96 | $ 206.827.913.23 | $ (70.080.27) 44.62% Brandywine - Fixed Income Intern 134.587.162.43 134.976,827.39 (389.664.96) 29.05% PIMCO - Fixed Income Intermedi. 122.013.316.21 122.154.315.38 (140.999.17) 26.33% Total Fixed Income $ 463,358,311.60 | $ 463,959,056.00 | $ (600,744.40) 100.60% Alternative Investment Segment: 5.52% 4.64% Change in Value j Overall AI% Attilanus Fund I - Venture Capital $ 67.450,336.00 59.286.610.00 | $ 8.163.726.00 100.00% Total Alternative Investment |$ —67,450,336.00 | $ 59,286,610.00 | $ 8,163,726.00 100.00% Other Segment: 1.22% 0.93% Change in Value |Overall Other% USVI Securities Lending Income | $ 1.303.611.14 | $ 992.786.25 | $ 310,824.89 8.76% GeoNet LLC 8,038.507.61 8.077.000.00 (38.492.39) 54.03% GeoNet LLC Escrow 2,654,169.22 155.789.67 2,498.379.55 17.84% GERS Self Insurance Fund 2,880.746.83 2,640.311.63 240,435.20 19.36% Total Other $ 14,877,034.80 | $ —11,865,887.55 | $ — 2,770,712.05 100.00% Manager Allocation as of June 30, 2008 Union Heritage - Large Cap Core 2.81% Turner Investment Partners - Large Cap Growth — 7.18% Silvant Capital Management - USVI Securities Lending Income Large Cap Growth > \ r 0.11% 9.27% \ Attilanus Fund ! - Venture Capital \ AllianceBernstein - Fixed4ncome 5.52% SSgA - Large Cap Core _ Core -~ 5 0.19% \ 16,94% PIMCO - Fixed Income AmeriCap Advisors - Large Cap Intermediate - Growth 9.99% 1.99% Bjurman, Barry - Small Cap Growth Oechsle - {nternational Growth 2.53% Ly 4.19% Brandywine - Fixed Income Oberweis -Micro Cap | international 2.96% - 11.02% NWQ - Large Cap Value __ q > nN SS Brandywine - International Value 7.69% = ~S 451% Fisher Investments - Small Cap LSV - Large Cap Value _ sé Value 8.13% Xi 3.84% \ Se Senate GERS Self | Fund, Jet LLC Escrow : 0.24% ~ 0.22% Equity, 55.30% Asset Allocation as of June 30, 2008 Other, 1.22% Fixed Income, 37.95% Alternative Investments, 5.52%