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2006 Police and Fire Retirement System Investment Performance Review 1-2
Police and Fire Retirement System Investment Performance Review Document: Police and Fire Retirement System Investment Performance Review 112 2006 Permanent #W* ASSET CONSULTING GROUP, INC. 231 South Bemiston Avenue, 14th Floor St. Louis, Missouri 63105 WWW.ACGNET.COM Investment Performance Review City ofLansing Employees' Retirement System For the Periods Ending March 31, 2006 1-3 �'11' 3tAIGMI .� )AA ilZ �VAWZ m m m r� r M= m m m m=== m m M IM City ofLansmg Employees' Retirement System Table of Contents Tab 1 Market Environment Tab 2 Executive Summary Report Card Tab 3 Equity Analysis Tab 4 Fixed Analysis Tab 5 Real Estate Analysis Appendix Securities Lending 1 I I 1 1 ti M, s Ow on � M go N ' O M M M M an w M M M City ofLansingEmployees'Retirement System Market Environment 0 2006Asset Consulting Group, Inc. All Rights Reserved 1 so City ofLansing Employees' Retirement System Market Overview For the Periods Ending March 31, 2006 Overview of Capital Markets (FirstQuartet) * First quarter GDP (advance report) increased by 4.8%. The fourth quarter GDP has been revised upward to 1.7% from 1.6%. Continuing its behavior into 2006, the Federal Reserve raised short- term interest rates 25 basis points for both January and March. This marks the 15th time that the Fed has increased short-term interest rates since June 2004. The Federal Funds rate now stands at 4.75%, the highest level since March 2001. The March 2006 meeting was noteworthy since it was the first chaired by its new Chairman of the Federal Reserve, Ben Bernanke. The March meeting concluded with a 25bps rise with the minutes stating that "some further policy firming may be needed to keep the risks to the attainment of both sustainable economic growth and price stability roughly in balance, but reiterated that it would respond to changes in economic prospects as needed to foster its objectives." Whether the Fed is reaching the end of its rate -tightening cycle remains to be seen. * The trade deficit (import/export of goods & services) registered a $65.1 billion increase at the end of December which was slightly higher than the November deficit of $64.2 billion. The deficit increased further in January 2006 to $68.6 billion, but narrowed in February to $65.7 billion. For the final quarter of 2005, the trade deficit increased to $197.4 billion; for the entire year the deficit came in at $723.9 billion. Crude oil prices continued their see -saw in the first quarter of 2006. January crude prices continued to climb to $65.43, falling back in February to $60.05, and finally continuing their climb in March to $64.94. In the first quarter, the U.S. dollar weakened against the three major currencies: falling 2.5% against the Euro, 0.3% against the Yen, and 1.2% against the British pound. * With a monthly increase of 0.7%, January 2006 had the first monthly increase in the CPI (CPI-U) in two months. Energy costs increased in January and this accounted for 70% of January's rise. The January 2006 level of the CPI was 4.0% higher than January 2005. February's CPI number moderated to an increase of only 0.1% due to a tempering of energy costs. The CPI for February was 3.6% higher than February 2005. March's monthly figure of 0.4% saw an acceleration of inflation stemming from a large increase in the cost of apparel and shelter and a moderate increase in energy. The March level of the CPI was 3.4% higher than a year earlier. * Monthly industrial production fell -0.4% in January, but rebounded in February and March with increases of 0.5% and 0.6% respectively. For the first quarter as a whole, industrial production rose at an annualized rate of 4.5%. In tandem, capacity utilization for total industry moved up every month in the first quarter with the March reading of 81.3%, a rate that was 0.3% above its 1972-2005 average. Capacity utilization was 1.8% higher from March 2005 to March 2006. * Business inventories for December and January were $1,303.7 and $1,313.7 billion respectively. February saw a slight decline to $1,313.6 billion although the level of inventories is 3.7% higher than in 2005. The inventory/sales ratio stood at 1.26 in February 2006, down from the year earlier reading of 1.31, suggesting that the expansion in inventories was met by an even greater expansion in sales. In the fourth quarter, productivity (non -farm business sector) rose 2.9%, year -over -year. Unit labor costs in the non -farm business sector rose 3.1% on an annualized basis. * The first quarter opened with a decline in the unemployment rate to 4.7% from December's number of 4.9%. The job growth in January was relatively widespread with increases in construction, mining, food services, health care, and financial activities. February's rate had little change with an unemployment rate of 4.8%. March's rate declined to 4.7% with job growth widespread in the service -providing sector. * The U.S. consumer continued enthusiastic spending into the first quarter of 2006 with a blistering increase in January's monthly retail sales of 3.0%. February saw a decline in retail sales of -0.8%, but rebounded in March to an increase of 0.6%. Retail sales were 7.9% higher in March 2006 than in March 2005. Personal consumption expenditures in December, January, and February were $8.98, $9.05, and $9.07 trillion respectively. February's increase in personal expenditures was $13.1 billion. Personal savings as a percentage of disposable income was negative for December through February, registering -0.3%, -0.5%, and -0.5% respectively. It appears that the strong increases in retail sales and personal consumption expenditures were supported by a large reduction in consumers' piggy banks. Consumer credit outstanding stood relatively stable at $2.16 trillion for the first two months of 2006. * Housing starts lost momentum in the first quarter of 2006. January began with 2.31 million units, falling to 2.13 units in February, and finally 1.96 units in March. Conventional 30-year residential mortgage rates had a monthly average of 6.49% in March, up from the February and January rates of 6.19% and 6.20% respectively. * The PMI Index (an indicator of manufacturing activity) remained relatively stable in the first quarter with values ranging from a low of 54.8 to a high of 55.2. Any reading above 50 usually indicates growth in the goods -producing sector of the economy. The Conference Board consumer confidence survey increased to 106.8 at the end of January, fell to 102.7 in February, and moved higher in March to 107.5. 0 2006 Asset Corzrulting Gmup, Inc. All Bzghts Besemed M M M M M M M M M M M ' M M M M M r City ofLansing Employees' Retirement System Equity Index Returns * .All domestic indices posted positive returns for the first quarter of 2006. The S&P 500 Index returned 4.2%. * From a style perspective, the Russell 1000 Value outperformed its counterpart, the Russell 1000 Growth by 282 basis points. A broader style perspective showed that the Russell 2000 Growth outperformed the Russell 2000 Value by 87 basis points. * International equities had another strong quarter with the MSCI SAFE returning 9.5% in the first quarter of 2006. © 2006 Asset Consulting Group, Inc. All Kzghts Reserved 3 M W M M M r M M r M M M M r M M M M M City ofLansing Employees' Retirement System Equity Sector Returns * Nine of the ten economic sectors had positive returns with Utilities turning in the only negative quarterly return of -1.2%. * The Communications and Energy sectors were the strongest quarterly performers with a 13.1% and a 9.1% return respectively. * With the exception of Utilities, the weakest quarterly performers were Health Care, 1.3%, and Consumer Staples, 1.6%. * From a yearly perspective, Energy came in first place with a 21.8% return followed by Financials with a 17.6% return. All sectors showed positive returns from a one year. 45.00% 30.00% 15.00% 0.00% (15.00°%0) Equity Sector Returns For the Periods Ending March 31, 2006 (V M 0 o 0 " o 0 N FAO 1� C�, M N c N N P G1 0 u1 0 M M co r vIn ° e5 cab .°fi �{ifi �{' �4` a5` ��e ��ro4 fi0 o cc;c C �,c Go o CI°fi5� ti ■ Quarter 0 Two Quarters 0 One Year ■ Three Years M Five Years © 2006 Asset Con ulting Gmup, Inc. All Rtghts Resen)ed 4 M M M M M M r M M M M w= M M w= M r City ofLansmg- Employees' Retirement System Managed Equity Portfolios - Style Spectrum Returns - ......... ----...... -- -................. -- -. _...._- ...... ----.. — ...................... ----....... . ---- ....... --....... ....... .. � Equity Style Spectrum - Median Returns For the Periods Ending March 31, 2006 35.0% 30.0% M - aC �•� � e - - - -- ---� N W �. N r N N a ry pp N e 25.0% Z et N N N c r C� r N N o N 20.0% � e � o Z 0 00 0 O r 0 0 0 15.0%- e .2 o ' N o GD c 10.0% c .2 - - ., a_:e _ x o e - - cc oq ui o o6 5.0% M 0.0% Go;��� o� Lots J a � el ti b��t stiff wA ■ Quarter M Two Quarters ■ One Year ■ Three Years M Five Years © 2006 Asset Consulting Group, Inc. All Rights Reserved 5 M M M M M r M M M M M w M r M M M M M City ofLansing Employees' Retirement System International Index Returns International Index Returns For the Periods Ending March 31, 2006 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% G� ■ Quarter 0 Two Quarters ■ One Year ■ Three Years 0 Five Years © 2006 Asset Con ulting Group, Inc. All Rzghts Reserved 6 M M M r ■■r M M r M M M M M M M M M M M City ofLansing Employees' Retirement System Fixed Income Index Returns 15.00% 10.00% 5.00% 0.00% (5.0011110) (10.00° O) 01 v Fixed Income Index Returns For the Periods Ending March 31, 2006 0 t °s °5 t L� ■ Quarter E3 Two Quarters ■ One Year ■ Three Years E3 Five Years © 2006 Asset Con ulting Group, Inc. All Rights Reserved 7 City ofLansing Employees' Retirement System Treasury Yield Curve * Since last quarter, the Federal Reserve raised the Federal Funds rate twice for a combined increase of 50 basis points (bps). This is reflected by an approximate parallel shift of the March 31, 2006, yield curve relative to the December 30, 2005, yield curve. * The current yield curve has experienced a flattening since a year ago. * The Lehman Brothers Government Bond Index had a return of -0.9% in the first quarter. 6.00% 5.00% 4' 4.00% 2.00% 1.00% 0.00% Interest Rate Term Structure Government Issues - 3 Months to 30 Year Maturity 0 5 10 15 20 25 30 Years -to -Maturity Mar 31, 2006 , 1Dec 31, 2005 -- Mar 31, 2005 © 2006 Asset Consulting Group, Inc. All Rrghts Reserved 8 M M M M M M M S M! M r M M M M M M M City ofLansing Employees' Retirement System Market Environment For the Periods Ending March 31, 2006 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% v Quarter ■Treasury Bills 1.0% ® Lehman Intermediate G/C -0.4% ■Lehman Govt/Credit -1.0% ■ S&P 500 4.2% 13 Russell 2000 13.9% ■ EAFE 9.5% 2 Quarters 1 Year 3 Years 5 Years 1.9% 3.5% 2.1% 2.2% 0.1% 2.1% 2.3% 4.7% -0.4% 2.0% 2.8% 5.2% 6.4% 11.7% 17.2% 4.0% 15.2% 25.8% 29.5% 12.6% 14.0% 24.9% 31.7% 10.0% © 2006 Asset Con ulting Group, Inc. All Rights Reserved 9 r rr rr rr rr rr rr rr rr rr rr rr rr rr �r rr rr rr rr Citv ofLansine Emnlovees'Retirement Svstem Monthly Indices Report Periods Ending March 31, 2006 Returns Index Name Style Month Qtr 2 Qtrs FTD 1 Year 3 Years 5 Years 10 Years Domestic Equity Indices S&P 500 Large Cap Core 1.24% 4.20% 6.38% 4.20% 11.72% '17.22% 3.97% 8.96 % S&P Equal Weighted Large Cap Core 1.84% 6.25% 8.95% 6.25% 17.39% 25.60% 10.13% 12.37 % Russell 1000 Large Cap Core 1.42% 4.49% 6.71% 4.49% 13.19% 18.30% 4.74% 9.18 % Russell 1000 Growth Large Cap Growth 1.48% 3.10% 6.18% 3.10% 13.16% 14.80% 1.66% 6.50 % Russell 1000 Value Large Cap Value 1.35% 5.92% 7.26% 5.92% 13.29% 21.77% 7.79% 10.97 % Russell Mid Cap Mid Cap Core 2.48% 7.62% 10.15% 7.62% 21.55% 27.87 % 12.53% 12.66 % Russell 2000 Small Cap Core 4.85% 13.94% 15.22% 13.94% 25.84% 29.53% 12.59 % 10.15 % Russell 2000 Growth Small Cap Growth 4.86% 14.37% 16.20% 14.37% 27.83% 28.14% 8.58% 5.51 % Russell 2000 Value Small Cap Value 4.84% 13.50% 14.26% 13.50% 23.76% 30.74 % 16.24 % 14.02 % Wilshire 5000 Broad Equities 1.84% 5.43% 7.77% 5.43% 14.71% 19.67% 5.95% 9.14 % HFRI Equity Hedge Long Short Equity 2.32% 6.47% 9.87% 6.47% 17.58% 15.65% 8.44% N/A International Equity Indices MSCI World Broad Global 2.24 % 6.72 % 10.09 % 6.72 % 18.62 % 23.95 % 6.84 % 7.71 % MSCI EAFE Developed Markets Intl 3.34% 9.47% 13.99% 9.47% 24.93% 31.65% 10.04% 6.83% MSCI EAFE Growth Developed Markets Intl Growth 3.92% 9.09% 13.86% 9.09% 24.99% 27.59% 7.86% 4.20% MSCI EAFE Value Developed Markets Intl Value 2.78% 9.85% 14.10% 9.85% 24.92% 35.71% 12.16% 9.32% MSCI Emerging Markets Free Emerging Market 0.90% 12.12% 20.19% 12.12% 47.98% 46.66% 23.57% N/A Domestic Fixed Income Indices Treasury Bills Cash 0.38 % 1.02 % 1.95 % 1.02 % 3.53 % 2.09 % 2.24 % 3.83 % Merrill Lynch 1-3 Yr Treasuries Treasuries 0.14 % 0.39 % 1.08 % 0.39 % 2.32 % 1.42 % 3.18 % 4.79 % Lehman Muni 5 Yr 5 Yr Municipal Bonds (0.39)% 0.02% 0.32% 0.02% 2.15% 2.21% 4.03% 4.78% Merrill Lynch High Yield High Yield Bonds 0.60% 2.85% 3.55% 2.85% 7.30% 11.72% 8.06% 6.93% Lehman Aggregate Core Bonds (0.98)% (0.64)% (0.05)% (0.64)% 2.25% 2.92% 5.11% 6.29% Lehman Government Government Bonds (0.90)% (0.91)% (0.24)% (0.91)% 2.14% 2.15% 4.67% 6.08% Lehman U.S. Credit Index Corporate Bonds (1.40)% (1.16)% (0.68)% (1.16)% 1.83% 3.71% 5.97% 6.61% Lehman Muni 10 Yr 10 Yr Municipal Bonds (1.03)% (0.13)% 0.64% (0.13)% 3.30% 3.72% 4.93% 5.74% HFRI FOR Conservative Index Low Volatility 0.92% 3.60% 5.12% 3.60% 7.95% 7.17% 6.02% N/A Real Estate Indices NCREIF Property Real Estate 3.62% 3.62% 9.25% 3.62% 20.19% 15.07% 11.68% 12.19% NCREIF Classic Property Real Estate 3.63% 3.63% 8.87% 3.63% 20.73% 14.44% 10.81% 12.16% NAREIT Real Estate 5.05% 14.74% 16.50% 14.74% 38.46% 32.13% 22.30% 15.82% © 2006Asset Consulting Group, Inc. Alllir8hts lieseived 10 r = = i M " = = M = = = = = = = = = M City ofLansing Employees' Retirement System Monthly Indices Report Index Name Domestic E gity Indices S&P 500 S&P Equal Weighted Russell 1000 Russell 1000 Growth Russell 1000 Value Russell Mid Cap Russell 2000 Russell 2000 Growth Russell 2000 Value Wilshire 5000 HFRI Equity Hedge International Etl'w Indices MSCI World MSCI EAFE MSCI EAFE Growth MSCI EAFE Value MSCI Emerging Markets Free Domestic Fixed Income Indices Treasury Bills Merrill Lynch 1-3 Yr Treasuries Lehman Muni 5 Yr Merrill Lynch High Yield Lehman Aggregate Lehman Government Lehman U.S. Credit Index Lehman Muni 10 Yr HFRI FOR Conservative Index Real Estate Indices NCREIF Property NCREIF Classic Property NAREIT Periods EndingApril 3O, 2006 Returns Style Month Qtr 2 Qtrs YTD 1 Year 3 Years 5 Years 10 Years Large Cap Core 1.34% 2.87% 9.64% 5.60% 15.41% 14.68% 2.70% 8.94 % Large Cap Core 1.06% 3.13% 12.94% 7.37% 22.42% 22.03% 8.65% 12.17 % Large Cap Core 1.20% 2.86% 9.91% 5.74% 16.70% 15.73% 3.38% 9.14 % Large Cap Growth (0.14)% 1.18% 7.07% 2.96% 15.19% 12.05% (0.76)% 6.20 % Large Cap Value 2.54% 4.56% 12.85% 8.62% 18.29% 19.39% 7.30% 11.21 % Mid Cap Core 0.70% 3.07% 14.35% 8.37% 26.43% 25.21 % 10.85% 12.43 % Small Cap Core (0.02)% 4.54% 18.90% 13.91% 33.46% 25.67% 10.90 % 9.57 % Small Cap Growth (0.29)% 4.00% 20.31% 14.04% 36.12% 24.21% 6.04% 4.70 % Small Cap Value 0.27% 5.11% 17.51% 13.81% 30.84% 26.96 % 15.25 % 13.75 % Broad Equities 1.11% 2.94% 11.01% 6.60% 18.61% 17.00% 4.52% 8 99 % Long Short Equity 2.60% 4.92% 14.50% 9.24% 23.39% 15.71% 8.49% N/A Broad Global 3.09 % 5.29 % 16.29 % 10.01 % 24.92 % 21.70 % 5.91 % 7.78 % Developed Markets Intl 4.85% 8.14% 23.10% 14.78% 33.99% 29.60% 9.59% 7.02% Developed Markets Intl Growth 4.59% 7.47% 22.43% 14.10% 33.19% 25.93% 7.39% 4.42% Developed Markets Intl Value 5.10% 8.79% 23.75% 15.46% 34.82% 33.25% 11.73% 9.50% Emerging Market 7.14% 7.99% 37.77% 20.12% 62.88% 45.86% 24.09% N/A Cash 0.37 % 1.08 % 2.06 % 1.40 % 3.68 % 2.18 % 2.23 % 3.82 % Treasuries 0.31 % 0.53 % 1.41 % 0.70 % 2.07 % 1.46 % 3.19 % 4.82 % 5 Yr Municipal Bonds 0.22% 0.01% 0.96% 0.24% 1.20% 2.13% 4.19% 4.81% High Yield Bonds 0.59% 1.84% 4.90% 3.46% 9.07% 9.91% 8.42% 6.98% Core Bonds (0.18)% (0.83)% 0.56% (0.82)% 0.71% 2.58% 5.16% 6.33% Government Bonds (0,28)% (1.02)% 0.18% (1.19)% 0.25% 1.90% 4.83% 6.12% Corporate Bonds (0.37)% (1.33)% 0.04% (1.53)% 0.12% 2.95% 5.97% 6.66% 10 Yr Municipal Bonds (0.18)% (0.63)% 1.22% (0.31)% 1.16% 3.41% 5.15% 5.76% I.ow Volatility 1.08% 2.58% 7.06% 4.71% 10.24% 7.17% 6.09% N/A Real Estate 0.00% 3.62% 9.25% 3.62% 20.19% 15.07% 11.50% 12.11% Real Estate 0.00% 3.63% 8.87% 3.63% 20.73% 14.44% 10.63% 12.06% Real Estate (3.72)% 2.95% 14.89% 10.47% 26.57% 28.61% 20.80% 15.32% *For comparison purposes prior quarter returns are used. 0 2006 Asset Consulting Group, Inc. All &ghts Reserved 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 f N m Mi M M MM M M MM M City ofLansingEmployees'Retirement System Executive Summary © 2006 Asset Con ulting Getup, Inc. Al! &ghts Reserved 12 M = = M = = = = M = M City ofLanswg Employees' Retirement System Executive Summary As of March 31, 2006 Total Fund The Total Pension Fund generated a 3.4% return in the first quarter and outperformed the Policy Index but underperformed the median peer. This resulted in a total net gain of $6.5 million for the quarter and a market value of $199 million. The domestic equity, international equity and real estate portfolios posted positive results while the fixed income portfolio generated a slightly negative return. Over the three and ten year periods, the portfolio has generated returns in excess of the 8% actuarial required rate of return but lags the actuarial assumed rate of return over the five year period. Domestic Equities The Northern Trust's S&P 500 Index Fund gained 4.2% for the quarter. This was the strongest first quarter rally for the S&P 500 Index in seven years. The energy sector was the S&P's strongest performer based on weighted excess return. The sector gained 9.1 % and contributed over one-third of the S&P's positive performance. Healthcare was the weakest performing sector. BGI's enhanced index strategy continued to post solid results in the first quarter and outperformed the S&P 500 Index by 40 basis points (4.6% vs. 4.2%, respectively). This ranked the portfolio in the 27th percentile for the quarter among other large cap core managers. BGI's quantitative process, which places an emphasis on earnings quality and sentiment continued to contribute to the overall results of the portfolio. Small and mid cap stocks continued to outperform large cap stocks and have for three consecutive years now. In the first quarter, Ariel's portfolio posted a 2.8% return vs. the Russell Midcap Value Index at 7.6%. The lack of exposure to energy related stocks and cyclicals is the primary reason for the underperformance as stocks in both of these sectors have done well. Ariel's process focuses on high quality names and has always avoided holdings within the energy and utilities sectors. Their approach is more conservative than their peers and Ariel views commodities as being very cyclical and thus risky investments to hold in their portfolio. ACG will continue to monitor their portfolio closely and report back to the Board each quarter. NorthPointe Capital was funded on January 31, 2006. Since inception, NorthPointe's portfolio has outperformed the Index with a 5.4% return vs. the Russell 2000 Growth at 4.3% as of March 31, 2006. 1 International Equities International equities continued to post strong results in the first quarter. INVESCO's international equity portfolio generated a 9.1% in the first quarter vs. the MSCI EAFE at 9.5%. INVESCO has participated in the strong returns of the international market but they have lagged on a relative basis. Approximately half of the shortfall in INVESCO's performance versus the MSCI EAFE benchmark over the past three years is attributable to their underweight allocations to smaller and mid capitalization stocks. Over the past three years smaller and mid capitalization stocks in the international markets have generated consistent excess returns relative to large cap stocks. In negative market environments, INVESCO's more conservative approach has protected (as evidenced by a down capture ratio of less than 100%) assets and serves as a good compliment to Julius Baer's more aggressive investment style and approach. Julius Baer's international equity portfolio returned 12.4% in the first quarter alone and outperformed the MSCI EAFE Index at 9.5%. The energy, financial and industrial 0 2006 Asset Consulting Group, Inc. All Rights Reserved. 13 City ofLansmg Employees' Retirement System sectors had the largest positive impact on quarterly performance. Julius Baer's opportunistic approach to investing in emerging markets also continued to contribute positively to the overall relative results. As of March 31, 2006, Julius Baer's international equity portfolio had approximately a 20% allocation to emerging markets. Fixed Income Returns for the US bond market were generally negative in the first quarter as rates rose another 50 basis points. The fined income composite declined 0.6% vs. the Lehman Aggregate Index at -0.6%. Western Asset Management's allocation to high yield bonds provided some protection on the down side as these securities generally outperformed investment grade issues. Western Asset Management was funded in January with the assets that were previously held in Loomis Sayles' portfolio. Northern Trust was hired as the transition manager to liquidate the portfolio and coordinate the transfer of assets to Western Asset Management (WAMCO). MD Sass' core portfolio posted a -0.7% return in the first quarter vs. the Lehman Aggregate Index at -0.6%. MD Sass' concentration in high quality US Government or Government sponsored agencies contributed to their underperformance as these issues lagged mortgages, corporates and asset -backed securities in the first quarter. Real Estate The Lion Properties Fund managed by Clarion posted a total return of 5.0% vs. the NCREIF Property Index at 3.6%. This included approximately 1.5% of income and 3.4% of price appreciation. UBS' Real Estate Separate Account portfolio gained 3.1 % vs. the NCREIF Property Index at 3.6%. This ranked the portfolio in the 54th percentile in the real estate universe. 0 2006 Asset Consulting Group, Inc. All Bights Reserved. 14 City ofLansing Employees' Retirement System Report Card 0 2006 Asset Consulting Group, Inc. All Bights Reserved 15 City ofLansingEmployees'Retirement System City of Lansing Employees Retirement System Performance vs. Objectives* For the Period Ending March 31, 2006 Benchmark Emvlovees Obiective Met? ♦ The Pension Fund's annualized total return should exceed the annualized rate of inflation as indicated by the Consumer Price 3.6% 6.3% YES Index by at least 1%. ♦ The Pension Fund's annualized total return should equal or 8.0% 6.3% NO exceed the Fund's actuarial interest rate assumption (currently 8.0% for the General Employees). ♦ The Pension Fund's total return should exceed the total return of an index composed as follows: 6.3% 6.3% NO 35% S&P 500 Stock Index 10% Russell Mid Cap 10% MSCI EAFE Index 45% Lehman Brothers Aggregate Bond Index ♦ The Pension Fund's total return should rank at median or 6.8% 6.3% NO above when compared to a universe of total fund portfolios 50th 66th with a similar allocation to equities (40% - 55%) *All benchmark and actual returns shown are forfrveyears ending March 31, 2006. 0 2006 Asset Consulting Group, Inc. A// Ri hts Reserved 16 M w M w M M M M M M M M M M M ww M r M City ofLansing Employees' Retirement System Compliance with Michigan Public Act 314 of 1965 as amended For the Period Ending March 31, 2006 Restrictions Restriction Met? Yes No ♦ Written objectives, policies and strategies with clearly defined x responsibilities should be in place. ♦ No more than 70% of the System's assets should be invested in stock. x ♦ The Plan should not invest in any more than 5% of the outstanding stock x of any one corporation, not invest more than 5% of the System's assets in the stock of any one corporation. ♦ At least 90% of the fixed income portfolio must be rated "Investment x Grade" (graded in the top four major grades determined by two national rating services). ♦ No more than 20% of the total investment portfolio should be invested in x foreign securities. ♦ No more than 5% of the total investment portfolio should be invested in x real estate. © 2006Asset Consulting Group, Inc. All Bights Reserved 17 M M W M M M M M M M M M M r r M M M City ofLansing Employees' Retirement System Compliance with Investment Guidelines For the Period Ending March 31, 2006 Guidelines I Guideline Met? ♦ Diversification of Assets - Assets should be diversified by general type I Yes and individual issue. ♦ Safety of Principal - Avoid investing in securities whose issuer defaults or Yes who has compromised their integrity. ♦ Maintain Portfolio Assets in a highly marketable form - to provide for Yes cash flow needs, portfolio restructuring needs. ♦ Fixed Income Portfolio - Up to 10% of the total portfolio may be Yes invested in or with below investment grade fixed income investments with a rating no lower than B3/B-. ♦ Regulatory Requirements - Must adhere to Michigan Law (Michigan Yes Public Act 314 of 1965 as amended), and ordinances of the City of Lansing. © 2006Asset Con ulting Gmup, Inc. A11 Atghts Reserved 18 City ofLaasmgEmployees 'Retirement System Asset Allocation Current vs. Target Allocation For the Period Ending March 31, 2006 Asset Class Target Ragge Allocation Domestic Equity 45.0% 40% - 50% 48.2% Large Cap 35.0% 30% - 40% 39.4% Small/Mid Cap 10.0% 5% -15% 8.8% International Equity 10.0% 5% -15% 13.0% Domestic Bonds 40.0% 35% - 45% 33.4% Real Estate 5.0% 0% - 7% 5.0% Cash 0.0% 0.0% 0.3% 0 2006Asset Consulting Group, Inc. Al! Ra�hts Reserved 19 City ofLansing Employees' Retirement System City of Lansing ERS Composite Asset Allocation For the Period Ending March 31, 2006 Domestic Equity $96,107,200 48.2% Intl Equity Real Estate Q7G 027 702 S90.040.505 Total Assets: $199,288,017 STIF $672,786 0.3% Bonds ;66,635,243 33.4% © 2006 Asset Consulting Group, Inc. All Bzghts Reserved 20 r M M M M M M M M M M M M M M r M City ofLansing Employees' Retirement System City of Lansing ERS Composite Manager Allocation For the Period Ending March 3 1, 2006 Julius 6.8' Western Asset Management 14.6% NT Index Equity 18.2% INVESCO NorthPointe Capital Ariel Capital Brinson 3.5% Total Market Value: $199,288,017 18.9% Clarion Lion Properties Fund, LLC 1.6% verve 3% arclay's Global Investors 21.2% © 2006 Asset Consulting Group, Inc. All Rights Reserved 21 r== M M M M i M M M M M M M M M r City ofLansing Employees' Retirement System City of Lansing ERS Composite For the Periods Ending March 3 1, 2006 This Quarter Year -To -Date Last Twelve Months Beginning Market Value $191,453 $191,453 $187,045 Net Additions 1,261 1,261 -8,243 Return on Investment 6,574 6,574 20,486 Income Received 1,090 1,090 4,162 Gain/Loss 5,484 5,484 16,325 Ending Market Value 199,288 199,288 199,288 Since 07/98 $165,055 -57,884 92,116 42,471 49,646 199,288 © 2006 Asset Con ulting Group, Inc. All Rights Reserved 22 M M M M M M M M M M M M M M M M M Citv ofLansinq Emnlovees' Retirement Swarn Total Fund Rates of Return Summary & Universe Rankings For the Periods Ending March 31, 2006 1QTR Rank 2QTRS Rank 1YR Rank 3YRS Rank 5YRS Rank 10YRS Rank Policy Index 2.9% 1 7.3% 9.6% 13.0% 6.3% 8.3% Median with Equity Allocation 40-55% 3.7% 5.5% 11.2% 13.2% 6.8% 8.1 % Median with Equity Allocation 55-70% 4.4% 6.9% 13.5% 15.8% 7.5% 9.0% Median Public Fund 4.3% 6.5% 13.0% 15.7% 7.2% 8.8% S&P 500 Median Overall Equity Fund 4.2% 5.7% 74 6.4% 8.4% 80 11.7% 16.1 % 83 17.2% 83 22.4% 4.0% 7.8% 83 9.0% 83 11.1 % MSCI EAFE 9.5% 47 14.0% 62 24.9% 1 58 31.7% 60 10.0% 81 6.8% 93 Median Overall International Equity Fund 9.4% 15.1 % 26.7% 32.5% 12.3% 11.3% Total Fund Fixed Income Lehman Aggregate 1 -0.6% 84 -0.1% 86 2.3% 83 2.9% 80 5.1% 76 6.3% 81 Median Core Bond Fund -0.4% 0.2% 2.6% 3.5% 5.5% 6.6% NCREIF Property 3.6% 46 9.3% 37 20.2% 41 15.1% 42 11.7% 39 12.2% 49 Median Overall Real Estate Fund 3.4% 7.9% 19.1 % 13.2% 10.4% 12.1 % Note: (1) Each return is ranked in the appropriate universe for comparison purposes. *The first number shown is the ranking versus other funds with a similar equity allocation of 40-55%, while the second number shown represents the ranking versus other funds with a similar equity allocation of 55-70%. (2) Policy Index consists of: 35% S&P 500, 10% Russell Mid Cap, 10% MSCI SAFE, and 45 Lehman Aggregate. 0 2006 Asset Consulting Group, Inc.All litgbis Reserved 23 M M M M M M M M M M M M M M M M City ofLansing Employees' Retirement System City of Lansing ERS Composite Policy Index Median Total Fund (Between 40-55% Equity) Median Total Fund (Between 55-70% Equity) Master Trust Funds - Public Funds Risk vs. Return Analysis Five Years Ending March 31, 2006 tU1I1Ua1ILCU 1lCLUrI1 6.26 6.28 6.84 7.49 7.22 JL"anuaru uevia LIUn anarpe Kano 8.74 0.46 8.82 0.46 8.90 0.52 10.06 0.52 9.71 0.51 © 2006 Asset Consulting Group, Inc. All Brgbts Reserved 24 M 1 �I M M M M M M M r M M M M M M M w M M M City ofLansing Employees' Retirement System Equity Analysis © 2006 Asset Con ulting Group, Inc. All Kzghts Reserved 25 City ofLansing Employees' Retirement System NT Index Equity Fund For the Periods Ending March 3 1, 2006 Asset Allocation Total Assets: $36,369,120 ♦ S&P 500 Index Fund Domestic -4U..y $36,365,120 100.0% ■ Domestic Equity 0STIF 100"'11 90°/ s0". 7W 60"% 50o 40%- 30%- 200o- 10%- W/o-i 4 114 "Z I SO OS d� -✓4� ✓` SO 6 OS oO% OS 'Os OS OS � ♦ Inception date: September 1, 1973 ♦ Over a full market cycle (usually three to five years), this manager is expected to mirror the performance of the S&P 500 Index. / • /// This Quarter Last 12 Months Beginning Market Value 34,889 32,537 Net Additions 0 0 Return on Investment 1,476 3,828 Income 0 2 Gain/Loss 1,476 3,825 Ending Market Value 36,365 36,365 © 2006 Asset Con ulting Group, Inc. All I�ghts Reserved 26 M M M M City ofLansing Employees' Retirement System NT Index Equity Fund As of March 31, 2006, NT Index Equity Fund held 500 securities in the fund. Holdings and portfolio characteristics are as follows: ENT Index Equity Fund MS&P 500 EXXON MOBIL CORP GENERAL ELECTRIC CO MICROSOFT CORP CITIGROUP INC BANK OF AMERICA CORP JDS UNIPHASE CORP CIENA CORP ALI EGHENY TECHNOLOGIES PMC-SIERRA INC APPLIED MICRO CIRCUI DANA CORP AMAZON COM INC INTEL CORP TYSON FOODS ST JUDE MED INC 3.2% PROCTER & GAMBLE 3.1 % PFIZER INC 2.1 % JOHNSON & JOHNSON 2.0% AMERICAN INTL GROUP 1.8% ALTRIA GROUP INC 76.7% NUCOR CORP 75.40/. NVIDIA CORP 69.9% TELLABS INC 59.4% LSI LOGIC CORP 58.4/a ALLIED WASTE INDS -85.8°'4 YAHOOINC -22.6% SYMBOL TECHNOLOGIES -22.1% GOODYEAR TIRE & RUBR -19.4/. CENTEX CORP -18.3°/ APOLLO GROUP *Characteristic data provided by manager. Avg Mkt Cap I Iistoric Erngs P/B P/E Yield Grth 58.1% 56.6'7u 45.9% ■NT Index Equity Fund ®S&P 500 44.5% 25 40.1 % 20 o N UK 17.7% 10 17.4 16.7% 5 13.2% 0 13.2/ OF 3i. Q N . %, i O 2006 Asset Consulting Group, Inc. All Riigbts Reserved 27 City ofLansing Employees' Retirement System NT Index Equity Fund For the Periods Ending March 31, 2006 Risk vs. Return (10 1 ��ar Annualized) Portfolio Statistics 9.00'i„ 8.99% 8.99% E8.98"% v 8.98% 0 R s.97'ro x 8.97/0 8.96'�/o 8 96% 10 Years NT Index Equity Fund S&P 500 Standard Deviation 15.62 15.63 Sharpe Ratio 0.35 0.35 Beta 1.00 1.00 Alpha 0.00 -- Up Capture 99.98 -- Down Capture 99.80 -- Correlation 100.00 -- 15.62% 15.62"o 15.63% 15AY'o 15.64o/o 15.64°/4 R Square 99.99 -- Standard Deviation Tracking Error 0.12 -- ENT Index Equity Fund 13S&P 500 30 2626 25 20 1616 1414 1313 1�'15 1 1 1 15 10 7 77 66 6 66 5 5 5 5 EM 0 �� •Fa ?!� �� �� �o 'o`G .�o Fa C ss,`fj PTO A� nC0 otG NCO o�G '`O, J6 orG orG 10a`N �So 0 Number of Months Highest Monthly Return Lowest Monthly Return Number of Pos. Months Number of Neg. Months % Positive Months NT Index Equity Fund 173 11.86% -14.42% 112 61 64.74% S&P 500 173 11.42% -14.46% 112 61 64.74% *All information calculated u ing montbydata © 2006 Asset Con ulting Group, Inc. All Raghts Reserved 28 City ofLansing Employees' Retirement System NT Index Equity Fund - Total Fund For the Periods Ending March 31, 2006 Ranking 30 25 20 5 46 0 69 v 't � � 61 61 69 o � v c 64 1 Quarter 2 Quarters 1 Year 3 Years 5 Years 10 Years ■ NT Index Equity Fund ® S&P 500 ® Median Lg Core Mgr 1 Quarter 2 Quarters 1 Year 3 Years 5 Years 10 Years 5th Percentile 6.51 9.35 18.35 22.75 9.02 12.57 25th Percentile 4.75 7.51 14.41 19.48 5.61 10.25 50th Percentile 4.22 6.43 11.87 17.31 4.07 9.07 75th Percentile 4.00 6.37 11.71 17.22 3.99 8.96 95th Percentile 2.62 4.25 7.70 14.16 2.61 8.45 Observations 869 839 777 541 375 159 The number above the bars is the ranking for thin portfolio versus the large cap core universe. The rankings are on a scale oft to 100 with 1 being the best. © 2006 Asset Consulting Group, Inc. All Bights Keserved 29 M M M M M i M M r== M = = M= M M M City ofLansing Employees' Retirement System Barclay's Global Investors For the Periods Ending March 31, 2006 i Total Assets: $42,193,838 STIF $5 1.0% Domestic r.quiry $42,153,833 100.0% ■Domestic I?quity GSTIR �l ✓` J�, O �l F S S G ♦ Large Cap Core Enhanced Index Strategy ♦ Inception date: November 30, 2004 ♦ Over a full market cycle (usually three to five years), this manager is expected to outperform the S&P 500 Index by 100-200 bps with tracking error of less than 200 bps. This Quarter Last 12 Months Beginning Market Value 40,286 36,666 Net Additions 0 0 Return on Investment 1,868 5,488 Income 0 274 Gain/Loss 1,868 5,214 Ending Market Value 42,154 42,154 © 2006Asset Consulting Group, Inc. All Rights Reserved 30 M= M M M M M M M M r M M M M M M M M City ofLansing Employees' Retirement System Barclay's Global Investors As of March 31, 2006, Barclay's Global Investors held 221 securities in the fund. Holdings and portfolio characteristics are as follows: MICROSOFT CORP 3.1% JPMORGAN CHASE & CO CITIGROUP INC 3.0 % CISCO SYSTEMS INC BANK OF AMERICA CORP 2.6% GENERAL ELECTRIC CO JOHNSON & JOHNSON 2.5 % PFIZER INC EXXON MOBIL CORP 2.3% VERIZON COMMUNICATIONS INC ARCHER-DANIELS-MIDLAND CO 32.9% VALERO ENERGY CORP CISCO SYSTEMS INC 26.0% OCCIDENTAL PETROLEUM CORP NUCOR CORP 21.7% AMERICAN EAGLE OUTFITTERS GILEAD SCIENCES INC 18.2% QUALCOMM INC LOCKHEED MARTIN CORP 18.0% VERIZON COMMUNICATIONS INC INTEL CORP -23.1% CORNING INC SCHLUMBERGER LTD -15.2% AT&T INC BELLSOUTH CORP -12.5% CATERPILLAR INC APPLE COMPUTER INC -11.8% AUTODESK INC HEWLETT-PACKARDCO -11.011/ ALCON INC *Represents the average weights of the security held during 1 Q 2006 Characteristic data provided by manager. 2.3% 2.2% 2.1 % 2.0 % 1.9"/0 ■Barclay's Global Investors ®S&P 500 120 N M d 100 x x Avg Mkt Cap Emgs Grth P/B P/E Yield 17.7% 16.1% SectorAllocation 15.3% ■ Barclay's Global Investors ® S&P 500 15.2% 30 I 14.4% ^ 25 N N fV I ■ 20 Ln -9.6% 15 cl V: -8.8% 10 no cc rr .6m -8.5% %� c 5 �O M� G ! CAM fVM cVM �..- -7.To 0 -7.o% C• C T M Ell Mai 4 s a� '$ `%•2a '� °n 2006 Asset Consulting Group, Inc. All Rtgbts Reserved 31 M City ofLansing Employees' Retirement System Barclay's Global Investors For the Periods Ending March 31, 2006 LV.VV %o 19.00"lo 18.00% 17.00% E r? 16.00% v a 15.00" 1. 0 14.00"/o Barclay's Global 13.00!u Investors 12.00'/o p,,M, S&P 500 11.00% I0.00"/o 6.80% 6.90% 7.00% 7.10% 7.20"/, 7.30°hi 7.40"U 7.50% 7.60% 7.70% 7.80% Standard Deviation ■Barclay's Global Investors E3S&P 500 5 4- 4- 3 3 3 3 I I 2 2 2 2 2 2 1 1 1 t 1 1 0 0 0 0 0 0 j 0 0 0 0 0 rPdtP �Stlj ot0 `yo oC0 'o otU orG or0 Jo o o'0 'o 0�0 0 oeo 0 o'IQ 0 o So 0 Standard Deviation Sharpe Ratio Beta Alpha Up Capture Down Capture Correlation R Square Tracking Error Number of Months Highest Monthly Return Lowest Monthly Return Number of Pos. Months Number of Neg. Months % Positive Months 1 Year Barclay's Global Investors 7.55 1.52 1.07 0.18 115.01 87.56 98.50 97.02 1.40 Barclay's Global Investors 16 4.42% -1.93% 10 6 62.50% S&P 500 6.93 1.19 1.00 S&P 500 16 3.78% -2.44% 11 5 68.75% *All information calculated u ing montbly data © 2006 Asset Consulting Group, Inc. All RiSks Reserved 32 M M M M M M M M M M M M w M M M M M M City ofLansing Employees' Retirement System Barclay's Global Investors - Total Fund For the Periods Ending March 31, 2006 Ranking 27 15 18 20 18 , O 16 n 14 N M 12 C O -. O E 1 0 o0 0 8 6 4, 2 0 I Quarter 2 Quarters 3 Quarters I Year ■ Barclay's Global Investors M S&P 500 0 Median Lg Core Mgr 1 Quarter 2 Quarters 3 Quarters 1 Year 5th Percentile 6.51 9.35 15.47 18.35 25th Percentile 4.75 7.51 12.16 14.41 50th Percentile 4.22 6.43 10.34 11.87 75th Percentile 4.00 6.37 10.21 11.71 95th Percentile 2.62 4.25 6.68 7.70 Observations 869 839 813 777 The number above the barn is the ranking for this portfolio versus the large cap core universe. The rankings are on a scale of 1 to 100 with 1 being the best. © 2006 Asset Consulting Group, Inc. All Kzghts Reserved 33 M= M M M M M= M M= r M M = = M City ofLansing Employees' Retirement System Ariel Capital For the Periods Ending March 31, 2006 Total Assets: $8,492,643 ♦ Mid Cap "Value" Equity STIF Domestic Equity $8,389,503 98.8% ■ Domestic Equity 13S1TP A Pc ar, �. A �c; �i; O, A Pc, �+ O� O� O� OF OQ OF pF OS O� O� 0 OG ♦ Inception date: December 31, 2000 ♦ Over a full market cycle (usually three to five years), this manager is expected to: (1) outperform the Russell Mid Cap Index and the Russell Mid Cap Value Index, and (2) rank above median versus all mid cap value equity managers. This Quarter Last 12 Months Beginning Market Value 8,263 11,592 Net Additions 0 -4,023 Return on Investment 230 925 Income 32 149 Gain/Loss 198 776 Ending Market Value 8,493 8,493 © 2006 Asset Con ulting Group, Inc. All I�ghts Reserved 34 M= M= M M M= M= w== M City of Lansing Employees' Retirement System Ariel Capital As of March 31, 2006, Ariel Capital held 34 securities in their portfolio. Holdings and portfolio characteristics are as follows: ■ Ariel Capital ®Russell Mid Cap Value ■Russell Midcap Index 25 ACCENTURE LTD 4.9% FRANKLIN RES INC 3.G r r o0 20 M V. PITNEY BOWES 4.4% SLACK &DECKER CORP 3.5" �� c 15 o cc NORTHERN TRUST CORP 4.3% FISHER SCIENTIFIC INTL INC 3.5% n M c CAREER ED CORP 4.1% BAXTER INTL INC 3.4% 10 00 TRIBUNE CO 4.1% YUM BRANDS INC 3.3% 6 o JANUS CAP GROUP INC 24.4% SERVICEMASTER CO WASTE MGMT INC 17.1% FISHER SCIENTIFIC INTL INC MATTEL INC 14.69/a PRICE T ROWE GROUP INC DUN & BRADSTREET CORP 14.5% ARAMARK CORP CAREER ED CORI' 11.9% CLOROX CO MCCLATCHY NEWSPAPER INC -17.1"5, EQUIFAX INC BLOCK H & R INC -11.3°i OMNICOM GROUP CARNIVAL CORP -11.0% POPULAR INC TRIBUNE CO -8.8% INTERPUBLIC GROUP COS INC MOHAWK INDS INC -7.29/o BLACK & DECKER CORP * Inclusion on these lists requires securities to be held the entire quarter. Avg Mkt Cap Erngs Grth P/B P/E Yield 10.8% 10.0 9.0%: ■ Ariel Capital ®Russell Mid Cap Value ■Russell Midcap Index 6.6° 0 40 00 0 5.7% 35 M M 30 10 ■ "' N M v 25 -2.0% 20 I 75 10 c n -1.0% r o dn -0.9%. 0 o d �1 oa6 0 0 0.4% o c% �,� o y goo. 60 4,Is © 2006Asset Consulting Group, Inc. All Krghts Reserved 35 City ofLansing Employees' Retirement System Ariel Capital For the Periods Ending March 31, 2006 IWlu'% Russell Mid Cap 14.00"o Value 12.00° o e ♦ Ariel Capital Russell Mid Cap � 10.00% v a 8.00'/o 0 ro 6.oWio a 4.00% 2.00% 0.00% 13.60% 13.80% 14.00'/,) 14.20"o 14.40% 14.60% 14.80% 15.00% 15.20% 15.40% 15.600/ Standard Deviation ■Ariel Capital GRussell Mid Cap Value ®Russell Mid Cap 14 I I 12 1 i I i 11 I i i i ll 10 9 s 8 s 8 8 8 7 6 6 6 116 6 55 5' 5 5 5 5 55 1 41 41 4I 41 .4 3 33 3 2 2 11 j 0 � J% Q c •F� d ?sue 5 Years Russell Mid Cap Ariel Capital Value Standard Deviation 14.27 13.72 Sharpe Ratio 0.64 0.92 Beta 0.95 1.00 Alpha -0.20 -- Up Capture 89.77 -- Down Capture 102.67 -- Correlation 91.27 -- R Square 83.30 -- Russell Mid Cap Ariel Capital Value Number of Months 63 63 Highest Monthly Return 10.17% 8.80% Lowest Monthly Return -11.57% -10.10% Number of Pos. Months 45 40 Number of Neg. Months 18 23 % Positive Months 71.43% 63.49% * All information calculated using monthly data © 2006 Asset Consulting Group, Inc. All Kaghts Reserved 36 M M M M M M M M M City ofLansing Employees' Retirement System Ariel Capital - Total Fund For the Period Ending March 31, 2006 Ranking 97 92 89 89 94 86 1 Quarter 2 Quarters 1 Year 2 Years 3 Years 5 Years ■ Ariel Capital 13 Russell Mid Cap Value ® Russell Midcap Index ■Median Mid Value 1 Quarter 2 Quarters 1 Year 2 Years 3 Years 5 Years 5th Percentile 14.54 18.52 36.21 21.47 35.92 22.87 25th Percentile 7.55 10.06 19.49 18.90 28.66 17.35 50th Percentile 6.37 8.80 17.00 15.63 26.75 15.14 75th Percentile 5.61 6.75 13.61 14.36 24.14 13.13 95th Percentile 3.23 3.62 7.42 3.14 18.54 9.72 Observations 73 71 67 51 42 29 The number above the Garr is the ranking for this portfolio versus the mid cap value universe. The rankings are on a scale of 1 to 100 With 1 being the best. © 2006 Asset Consulting Group, Inc. All Rzghts Reserved 37 M M M M = M = M M M = = M M = M M City ofLansing Employees' Retirement System NorthPointe For the Periods Ending March 31, 2006 Total Assets: $9, 080, 893 STIF Q'a ,966 1.0% Domestic Equity $8,720,927 96.0% ■Domestic Equity ®SI'IF ♦ Small Cap "Growth" Equity ♦ Inception date: January 31, 2006 ♦ Over a full market cycle (usually three to five years), this manager is expected to: (1) outperform the Russell 2000 and Russell 2000 Growth Indices, and (2) rank above median in a universe of small cap growth equity managers. This Quarter Last 12 Months Beginning Market Value 0 0 Net Additions 8,614 8,614 Return on Investment 467 467 Income 4 4 Gain/Loss 463 463 Ending Market Value 9,081 9,081 © 2006 Asset Consulting Group, Inc. All Rights Deserved 38 M City of LaDsipg Employees' Retirement System NorthPointe As of March 31, 2006, NorthPointe held 74 securities in their portfolio. Holdings and portfolio characteristics are as follows: ■NorthPointe 13Russell 2000 ■Russell 2000 Growth ANDERSONS INC 2.0% JARDEN CORI' 1.8% VENTIV HEALTH INC 2.0% SMITH MICRO SOFTWARE INC 1.8% SHUFFLE MASTER INC 1.91/. MEDALLION FINL CORP 1.8% BUFFALO WILD WINGS INC 1.8% SUNOPTA INC 1.8% WORLD FUEL SVCS CORP 1.8° o SALIX PHARMACEUI7CAIS LTD 1.7% 35 30 25 20 15 10 5 0 * Inclusion on these lists requires securities to be held the entire quarter. Avg Mkt Cap Emgs Grth P/B P/E Yield Sector Allocation ■NorthPointe ®Russell 2000 ■Russell 2000 Growth r © 2006 Asset Consulting Group, Inc. All Brghts Reserved 39 r M = M M M = M M = M City ofLansing Employees' Retirement System INVESCO For the Periods Ending March 31, 2006 Total Assets: $12,221,285 Int'1 $12,221,285 100.0% ■Int'I FgLity l4 SP Q + ✓V SO d � 4 JP d O� Ou1,110u OQ Oy OQ OQ OS O3 O� OS OG ♦ International Core/Value Equity ♦ Inception date: September 21, 2001 ♦ Over a full market cycle (usually three to five years), this manager is expected to: (1) outperform the MSCI EAFE Index and MSCI EAFE Value Index, and (2) rank above median in a universe of international developed markets equity managers. This Quarter Last 12 Months Beginning Market Value 11,228 10,106 Net Additions -24 -72 Return on Investment 1,017 2,187 Income 0 0 Gain/Loss 1,017 2,187 Ending Market Value 12,221 12,221 © 2006 Asset Consulting Group, Inc. All Kzghtr Reserved 40 M M M M r r M M M M M M r M M M M M City ofLansing Employees' Retirement System INVESCO As of March 31, 2006, INVESCO held 63 securities in their portfolio. Holdings and portfolio characteristics are as follows: ■INVESCO 0MSCI EAFE ROYAL BANK OF SCOTLAND 3.0°5, VODAFONE GROUP 2.4"/° NOVARTIS AG 2.8",, CANON INC 2.3°'° GLAXOSMITHKLINE PLC 2.8% TNT NV 2.3% NOKIA OYJ 2.7% NOMURA HOLDINGS 2.2% BAE SYSTEMS 2.7 % Z.URICH FINANCIAL SERVICES 2.2% % of holding EAFE AUSTRALIA 1.6"/ 5.1% -3.5% AUSTRIA 0.0% 0.5% -0.5% BELGIUM 1.3'i„ 1.2% 0.1". CANADA 1.5% 0.0% 1.5% DENMARK 1.5% 0.7%° 0.8% FINLAND 5.4% 1.5% 3.9% FRANCE 5.8% 9.8% -4.0% GERMANY 4.0% 7.1% -3.1% GREECE 0.0% 0.7 L -0.7 % HONG KONG 1.91vo 1.6% 0.3% IRELAND 0.0% 0.8% -0.8% ITALY 1.4% 3.8% -2.494 JAPAN 22.6° 0 25.3% -2.7°%, NETHERLANDS 8.5% 3.5% 5.0% NEW ZEALAND 0.0% 0.2% -0.2/0 NORWAY 1.3% 0.8% 0.5% PORTUGAL 0.0% 0.3% -0.3% SINGAPORE 0.0% 0.8% -0.8% SPAIN 1.0% 3.8% -2.8 % SWEDEN 1.4% 2.4% -1.0% SWITZERLAND 9.2% 6.7% 2.5% UNITED KINGDOM 26.9% 23.4% 3.5° a EMERGING MARKETS 4.1% 0.0% 4.1°/ CASH 0.6% 0.0% 0.6% *Characteristic data provided by manager. Avg Mkt Cap 1 Year Avg. ROE P/B Current P/E Yield ■INVESCO 0MSCI EAFE 35 i 30 25 5 0 © 2006 Asset Consulting Group, Inc. All Rights Reserved 41 M M M = = M = = r= M = = M M i City ofLansing Employees' Retirement System INVESCO For the Periods Ending March 31, 2006 zu.VV %0 18.00'?% 16.00% MSCI 1:AFls MSCI EANE Value E 14.00 /o � INVESCO 12.00"/0 v 10.00% 0 y 8.00% 6.00% 4.00% 2.00'/" 0.00'r� 13.60"/ 13.80"/0 14.00"/" 14.20% 14.40"% 14.60"u 14.80'9" 15.00°� 15.20'Yo Standard Deviation NfSFfJ O% A �F "F "F �F "FO°FG "o °FG rPdF �So o 4 Years INVESCO MSCI EAFE Standard Deviation 13.78 14.10 Sharpe Ratio 0.85 0.94 Beta 0.96 1.00 Alpha -0.06 -- Up Capture 93.29 -- Down Capture 96.15 -- Correlation 98.20 -- R Square 96.43 -- INVESCO MSCI EAFE Number of Months 54 54 Highest Monthly Return 8.60% 9.92% Lowest Monthly Return -12.00% -10.71% Number of Pos. Months 38 38 Number of Neg. Months 16 16 % Positive Months 70.37% 70.37% *All information calculated using monthly data © 2006 Asset Consulting Group, Inc. All Rights Reserved 42 M M M M M M M M M M City ofLansing Employees' Retirement System INVESCO -Total Fund For the Periods Ending March 3 1, 2006 Ranking 53 74 77 67 84 81 4 4 3 3 1 Quarter 2 Quarters 1 Year 2 Years 3 Years 4 Years ■ INVESCO 13 MSCI F?AFE M MSCI EAFF Valuc ■ Medn Intl Dev Mkt Fgty 1 Quarter 2 Quarters 1 Year 2 Years 3 Years 4 Years 5th Percentile 13.28 18.90 36.51 25.85 38.87 21.68 25th Percentile 10.52 16.52 31.30 21.90 34.08 17.77 50th Percentile 9.39 15.08 26.71 20.57 32.46 16.03 75th Percentile 8.06 12.61 21.97 19.04 29.76 14.55 95th Percentile 6.80 9.30 16.36 15.25 26.38 11.19 Observations 1494 1430 1276 1051 822 643 The number above the bars is the ranking for this portfolio versus the international developed markets equity universe. The rankings are on a scale of Ito 100 with 1 being the best. 43 © 2006 Asset Consulting Group, Inc. All Rights Reserved M = r = = = M M = M = = = M City ofLansing Employees' Retirement System Julius Baer For the Pen'ods Ending March 31, 2006 Total Assets: $13,610,998 Int'1 1-1 $13,610,998$13,610,998 100.0% ■ Int'1 Equity 100% ✓4 SP do 4 r ✓o,� sA �Pc "0' QOA �sr �S OS OS �S OG ♦ International Growth Equity ♦ Inception date: June 1, 2004 ♦ Over a full market cycle (usually three to five years), this manager is expected to: (1) outperform the MSCI EAFE Index and MSCI EAFE Growth Index, and (2) rank above median in a universe of international developed markets equity managers. This Quarter Last 12 Months Beginning Market Value 12,107 10,420 Net Additions 0 0 Return on Investment 1,504 3,191 Income 0 0 Gain/Loss 1,504 3,191 Ending Market Value 13,611 13,611 © 2006 Asset Consulting Group, Inc. All Rrghts Reserved 44 M M M M M M r M M M M M M M= r City ofLansing Employees' Retirement System Julius Baer As of March 31, 2006, Julius Baer held 435 securities in their portfolio. Holdings and portfolio characteristics are as follows: PKO BANK POLSKI SA 1.4% VODAFONE GROUP PLC 1.2% SANOFI-AVENTIS SA 1.4% FRAPORT AG 1.1% KOMERCNI BANKA AS 1.2%u GLAXOSMITHKLINE PLC 1.1% KBC GROUP NV 1.2% TOTAL SA 1.1% BANK PEKAO SA 1.2% MITSUBISHI UFJ FINANCIAL. 1.0% % of holding MSCI EAFE AUSTRALIA 2.1% 5.1% -3.0% AUSTRIA 2.9% 0.5% 2.4% BELGIUM 1.9% 1.2% 0.7% DENMARK 0.5% 0.7% -0.2% FINLAND 2.2% 1.5% 0.7% FRANCE 10.9% 9.8% 1.1% GERMANY 9.7% 7.1% 2.6% GREECE 0.9%u 0.7% 0.3% HONG KONG 1.1% 1.6% -0.5% IRELAND 0.4% 0.8% -0.4% ITALY 5.3% 3.8% 1.5% JAPAN 13.0% 25.4% -12.4% NETHERLANDS 2.3% 3.5% -1.1% NEW ZEALAND 0.1% 0.2% -0.1% NORWAY 2.4% 0.8% 1.6% PORTUGAL 0.3%m 0.3% 0.0% SINGAPORE 0.00/4 0.8% -0.8%n SPAIN 1.1% 3.8% -2.7%u SWEDEN 3.4% 2.4%n L.0% SWITZERLAND 5.9% 6.7% -0.8% UNITED KINGDOM 9.7% 23.4% -13.7% EMERGING MARKETS 20.6° 0 0.0% 20.6% CASH 2.1% 0.0% 2.1% OTHER 1.2% 0.0% 1.2% ■Julius Baer ®MSCI EAFE 60 50 40 30 20 10 0 Weighted Avg Mkt Cap P/B Current P/E Yield ■Julius Baer ®MSCI EAFE ui 35 30 25 20 15 10 I h o� *Characteristic data provided by manager. © 2006 Asset Consulting Group, Inc. All &ghts Reserved. 45 A M = M City ofLansing Employees' Retirement System Julius Baer For the Periods Ending March 31, 2006 32.00% 31.00 30.00% E 29.00" 28.00% w 27.00" S x 26.00'r, 25.00"/0 24.00'% 23 00% Julius Baer MSCI SAFE 'ANlSCI SAFE G rowth 0.00°/o 2.00% 4.001/0 6.000/,, 8.00% 10.0011/" 12.00"/o 14.00"/0 Standard Deviation �)ulius Baer ®MSCI SAFE ■MSCI SAFE Growth 4 3 3 it 3 � 2 2 2 2 22 1 22 2 2 2 2 1 1 1 00 000 0() 0 0 0 rNar lj `?JJ G V. G G G 'I0 40 ot0 oC0 ,e0 Pfrt �S 0 1 Year Julius Baer MSCI EAFE Standard Deviation 11.99 9.60 Sharpe Ratio 2.26 2.23 Beta 1.20 1.00 Alpha 0.01 -- Up Capture 119.87 -- Down Capture 115.37 -- Correlation 96.39 -- R Square 92.91 -- Number of Months Highest Monthly Return Lowest Monthly Return Number of Pos. Months Number of Neg. Months % Positive Months Julius Baer 22 8.21 % -4.55% 17 5 77.27% MSCI EAFE 22 6.86% -3.23% 16 6 72.73% * All information calculated using montbydata © 2006 Asset Consulting Group, Inc. All 1�ghts Keserued 46 M = = = = s = = M M = M City ofLansing Employees' Retirement System Julius Baer -Total Fund For the Periods Ending March 31, 2006 Ranking 9 43 22 30 0 1 Quarter 2 Quarters 3 Quarters 1 Year ■ Julius Baer 13 MSCI EAFE ■ MSCI EAFE Growth ■ Medn Intl Dev Mkt Eqty 1 Quarter 2 Quarters 3 Quarters 1 Year 5th Percentile 13.28 18.90 34.33 36.51 25th Percentile 10.52 16.52 30.81 31.30 50th Percentile 9.39 15.08 27.41 26.71 75th Percentile 8.06 12.61 22.99 21.97 95th Percentile 6.80 9.30 17.91 16.36 Observations 1494 1430 1364 1276 The number above the bars is the ranking for this portfolio versus the international developed markets universe. The rankings are on a scale of 1 to 100 ivitb 1 being the best. © 2006 Asset Con ulting Group, Inc. All Rights Reserved 47 I I I M w i M M M M M M M M M M M r ■■ M M M City ofLansing Employees' Retirement System Fixed Analysis 48 © 2006 Asset Consulting Group, Inc. Al! Rights Reserved M M M M M M City ofLansing Employees' Retirement System M D Sass Associates For the Periods Ending March 31, 2006 Total Assets: $37,576,301 STIF °18,123 0.1% Bo $37,558,178 100.0% ■ Bonds 0 STIF too°/. 4` J' QPc + 4 SO 6 d r 'l44 Sq d�,�`� A�� OF "g`s �s os "'Os OS Off. ♦ Domestic Fixed Income ♦ M. D. Sass "swaps" between U. S. Government bond and mortgage -backed securities in this portfolio, depending on which sector is most attractive at the time. ♦ Inception date: October 22, 1984 ♦ Over a full market cycle (usually three to five years), this manager is expected to: (1) outperform the Lehman Brothers Aggregate Index, and (2) rank above median in a universe of bond managers employing a similar style of management. This Quarter Last 12 Months Beginning Market Value 36,542 33,023 Net Additions 1,300 3,700 Return on Investment -265 853 Income 515 1,645 Gain/Loss -780 -792 Ending Market Value 37,576 37,576 © 2006 Asset Con ulting Group, Inc. All Rightf Reserved 49 M City ofLansing Employees' Retirement System M D Sass Associates As of March 31, 2006, M D Sass Associates held 151 securities in their portfolio. Holdings and portfolio characteristics are as follows: 1 ■ M D Sass Associates ® Lehman Aggregate 60.0% 50.0% 40.00/o M 0 e M N 30.0% N c I N n 20.00lo c o 0 0 10.0% o N N o o 0 0 0 0 00/6 •� x V U o p a o w o ■ M D Sass Associates ®Lehman Aggregate GOVT -10-\ AA A BAA ■ M D Sass Associates ®Lehman Aggregate Avg Maturity Current Cpn Duration Quality YTM ■ M D Sass Associates M Lehman Aggregate 60.0° S- 50.0" b 40.0" - o 0 r 30.0" 'o ,0 3' 0 20.0% 10.0% pp e N N O 0-2 Year 2-4 Years 4-6 Years 6-8 Years 8-10 Years 10-12 Years 12+ Years © 2006 Asset Consulting Group, Inc. All Rights Reserved 50 M M M M M = M City ofLansing Employees' Retirement System M D Sass Associates For the Periods Ending Mar6h 31, 2006 V.YG /o 6.40'% M D Sass Associates 6.38% 6.36°/0 v a 6.34% 0 ee G.32'% a 6.30% 6.28% Lehman Aggregate 6.26%/0 3.60`% 3.65 % 3.70 % 3.75% 3.80% 3.85% 3.90% 3.95° 0 4.00% 4.05% 4A 0'% 415% Standard Deviation ■M D Sass Associates 0Lehman Aggregate 50 44 1 45 40 3 35 2430 3231 30 25 A 20 15 10 8 10 7 5 3 5 00 1 1 1 1 p o0 0 0 Am `Fo V6 20 Flo Jy, �G F° lG IG tG G l' G2 G� G F GS, r�r rso 0 10 Years M D Sass Lehman Associates Aggregate Standard Deviation 4.09 3.65 Sharpe Ratio 0.72 0.78 Beta 1.06 1.00 Alpha -0.02 -- Up Capture 104.89 -- Down Capture 111.23 -- Correlation 94.56 -- R Square 89.41 -- Number of Months Highest Monthly Return Lowest Monthly Return Number of Pos. Months Number of Neg. Months % Positive Months M D Sass Associates 175 3.72% -3.10% 120 55 68.57% Lehman Aggregate 175 3.87% -3.36% 123 52 70.29% *All information calculated using monthly data © 2006 Asset Consulting Group, Inc. All Rights Reserved 51 City ofLansing Employees' Retirement System M D Sass Associates - Total Fund For the Period Ending March 31, 2006 Ranking 89 68 47 91 80 70 1 Quarter 2 Quarters 1 Year 3 Years 5 Years 10 Years ■ M D Sass Associates Q Lehman Aggregate M Median Core Hd Mgr 1 Quarter 2 Quarters 1 Year 3 Years 5 Years 10 Years 5th Percentile 0.18 0.90 3.76 5.35 6.65 7.57 25th Percentile -0.27 0.36 3.02 4.02 5.91 6.98 50th Percentile -0.43 0.18 2.64 3.45 5.51 6.61 75th Percentile -0.57 0.03 2.36 3.01 5.15 6.37 95th Percentile -0.89 -0.32 1.95 2.42 4.56 5.96 Observations 526 515 492 387 305 145 The number above the Gars is the ranking far this portfolio versus the core bond universe. The rankings are on a scale of 1 to 100 with 1 Being the best. © 2006 Asset Con ulting Group, Inc. All Rights Reserved 52 M M M M M M M M M M City of Lansing Employees' Retirement System Western Asset Management For the Periods Ending March 31, 2006 AssetAllocation Total Assets: $29,077,179 ♦ Domestic Fixed Income: "Core Plus", with a 10% maximum allocation to STIF domestic high yield bonds. $110 ♦ Inception date: January 1, 2006 0.0% 100.0% ■ Bonds U Sl'IF orrnance Cc, ♦ Over a full market cycle (usually three to five years), this manager is expected to: (1) outperform the Lehman Aggregate Index, and (2) rank above median in a universe of bond managers employing a similar style of management. / i /// This Quarter Last 12 Months Beginning Market Value 0 0 Net Additions 29,229 29,229 Return on Investment -151 -151 Income 12 12 Gain/Loss -163 -163 Ending Market Value 29,077 29,077 © 2006 Asset Consulting Group, Inc. All &ghts Reserved 53 City ofLansing Employees' Retirement System Western Asset Management As of March 31, 2006, Western Asset Management held 781 securities in their portfolio. Holdings and portfolio characteristics are as follows: ■ Western Asset Management 13Lehman Aggregate 100.0% ■Westem Asset Management 0Lehman Aggregate AAA AA A BBB BB B *Characteristic data provided by manager. ■ Western Asset Management ®Lehman Aggregate Avg Life Current Coupon Duration Quality YTM ■ Western Asset Management 13 Lehman Aggregate 100.0% 80.0% e 0 Ln Ln 60.0% 0 0 � o c1i 40.0 ``n 16 o � M N 'n 0.0`% <1 Year 1-3 Years 3-5 Years 5-7 Years 7-10 Years 10-15 Years 15+ Years © 2006Asset Consulting Group, Inc. All RiShts Reserved 54 M M M M M M M M i M M M M M M M M M M City ofLansing Employees' Retirement System Western Asset Management - Total Fund For the Periods Ending March 31, 2006 Ranldng 55 / 76 3.5 2.5 0 E I Quarter 2 Quarters 3 Quarters 1 Year ■ Western Asset Management G Lehman Aggregate M Median Core Bd Mgr ■ Median Core Plus Bond Manager 1 Quarter 2 Quarters 3 Quarters 1 Year 5th Percentile 0.18 / 0.26 0.90 / 0.78 0.89 / 1.10 3.76 / 3.91 25th Percentile -0.27 / -0.12 0.36 / 0.23 -0.01 / -0.02 3.02 / 3.11 50th Percentile -0.43 / -0.41 0.18 / 0.16 -0.25 / -0.22 2.64 / 3.07 75th Percentile -0.57 / -0.43 0.03 / 0.07 -0.53 / -0.30 2.36 / 2.97 95th Percentile -0.89 / -0.58 -0.32 / -0.38 -1.09 / -0.63 1.95 / 2.50 Observations 526 / 269 515 / 263 504 / 261 492 / 249 The Humbert above the bars are the ranking for this portfolio versus the listed universes. The first number represents the manager's ranking versus the core bond universe and the second represents their ranking versus the core plus bond universe. The rankings are on a scale of 1 to 100 nnth 1 being the best. © 2006 Asset Consulting Group, Inc. All Aaghts Reserved 55 �' I I^ M M M M M M M M M M M M M M M M M City of Lansing Employees' Retirement System © 2006 Asset Consulting Group, Inc. All Brghts Reserved M i = = = = M = = M _ = = M = M M M City of Lansing Employees' Retirement System Brinson For the Period Ending March 31, 2006 Geograplitc Region Allocation Strategy & Objective Midwest West ♦ Core Commingled Real Estate Fund 9% 30% ♦ Exceed the total Return of the NCREIF Property Index and rank in the upper half in a universe of core commingled real estate fund peers. South 26% 35% Office 25.9% Industrials Retail 24.4% 32.6% *Characteristic data provided by manager. Portfolio's Market Value $6,882,859 Portfolio's Inception Date 6/27/2002 Gross Fund Value $7,475,008,000 Net Fund Value $6,946,500,000 Qtr / 1 Year Income Return 1.54% / 6.71% # of Properties 137 # of Participants 170 ■ Retail 13 Apartment ®office ■ Industrial U Hotel 35 30 25 20 15 10 5 0 PP�r l� er d'' © 2006 Asset Consulting Group, Inc. All Ragbts Reserved 57 City ofLansing Employees' Retirement System Brinson -Total Fund For the Periods Ending March 31, 2006 Ranking 30 25 20 I~ 15 w C U 10 5 0� _1' 54 M, M Ni 49 .... .__... _.. n P P C1 r � 54 48 C11 C1i o C; N 41 41 M x r 1 Quarter 2 Quarters 3 Quarters 1 Year 2 Years 3 Years ■ Brinson 13 NCREIF Property Index ■Median Real Estate Ids 1 Quarter 2 Quarters 3 Quarters 1 Year 2 Years 3 Years 5th Percentile 16.38 26.95 37.96 57.95 38.77 37.10 25th Percentile 5.76 12.32 17.89 25.12 24.14 19.54 50th Percentile 3.38 7.89 12.98 19.13 17.10 13.22 75th Percentile -0.02 4.51 8.98 13.72 12.03 8.36 95th Percentile -0.41 -1.88 -2.04 -1.47 -0.63 -4.11 Observations 519 511 480 446 361 301 The number above the Gars is the ranking for this portfolio versus their real estate peers. The rankings are on a scale of 1 to 100 with 1 being the best. © 2006 Asset Con ulting Group, Inc. All Rights Reserved 58 M City of Lansing Employees' Retirement System Clarion Lion Properties Fund, LLC For the Periods Ending March 31, 2006 West Midwest 13% South 14% 40% Property Type Allocation Industrial Office 42.0% 12.0% *Characteristic data provided by manager. Retail 22.0% ♦ Core Commingled Real Estate Fund ♦ Exceed the total Return of the NCREIF Property Index and rank in the upper half in a universe of core commingled real estate fund peers. Portfolio's Market Value $3,157,646 Portfolio's Inception Date 7/1/2002 Fund's Gross Market Value $4,245,000,000 Fund's Net Market Value $2,865,000,000 Cash Balance of Fund $51,900,000 Qtr / Since Inception Income Return 1.52% / 7.76% # of Properties 116 # of Particinants 113 ■ Retail ® Residential ®Office ■ Industrial 0 Other 3 3 2 2 1 1 Q4a kI, 17�r a, © 2006 Asset Consulting Group, Inc. All Krghts Reserved 59 M M M M M M City ofLansing Employees' Retirement System Clarion Lion Properties Fund, LLC - Total Fund For the Periods Ending March 3 1, 2006 Ranking 27 36 38 44 47 45 M �n C\ CP r Observations 519 511 480 446 361 301 The number above the barn is the ranking for this por folio versus their real estate peers. The rankings are on a scale of 1 to 100 with 1 being the beet. © 2006 Asset Consulting Group, Inc. All Rights Reserved 60 F�l City ofLansing Employees' Retirement System 2004 Q1 Q2 Q3 Q4 2004 Total 2005 Q1 Q2 Q3 Q4 2005 Total 2006 Q1 Securities Lending Income Domestic Equity Fixed Income Total 446 4,221 4,666 455 4,713 5,168 358 3,912 4,269 579 4,875 5,454 1,837 17,720 19,558 835 6,544 7,379 1,147 6,945 8,092 1,828 4,211 6,039 173 5,784 5,957 3,982 23,484 27,467 2,760 2,869 5,629 © 2006 Asset Con ulting Group, Inc. All Rights Reserved