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HomeMy WebLinkAbout2006 Police and Fire Retirement System Investment Performance Review 2-2Document: 2006 Police and Fire Retirement System Investment Performance Review 212 Police and Fire Retirement System Investment Performance Review 2006 Permanent Z ! ! ASSET CONSULTING GROUP, INC. 231 South Bemiston Avenue, 14th Floor St. Louis, Missouri 63105 WWW.ACGNET.COM Investment Performance Review City ofLansing Police & Fire Retirement System For the Periods Ending March 31, 2006 I I I I I I I I I I I I I I I I I I = r=== M M M w M M M = = M r= M M City ofLansing Police & Fire 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 r M M M M M M M M M r� M M M M M M M City ofLansing Police & Fire Retirement System Market Environment © 2006 Asset Consulting Group, Inc. All Rights Reserved M M M M W M r M M M r M W M M M M M M City ofLansing Police & Fire Retirement System Market Overview For the Periods Ending March 31, 2006 Overview of Capital Markets (FirstQuarter) * 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 fuming 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. © 2006 Asset Consulting Group, Inc. All Rights Reserved 2 M w M M M M M r M M r M M M M M M M M City ofLansin.q Police & Fire 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 EAFE returning 9.5% in the first quarter of 2006. 0 2006 Asset Consulting Group, Inc. All Rights Reserved 3 City ofLansing Police & Fire 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% (1 5.00`%0) Equity Sector Returns For the Periods Ending :March 31, 2006 0 M 0 0 0 0 o O N .�\. G� c^ ° M N N ^ vi uj c0 N o cIg N r 7 c cc ,, o a ~ c� ^ o a "� " o " ^ r N o � e, c (,{• 4 0 e o�'�� �0 c ti9 ■ Quarter 0 Two Quarters ■ One Year ■ Three Years M Five Years © 2006 Asset Consulting Group, Inc. All Rights Reserved 4 City ofLansina Police & Fire Retirement System Managed Equity Portfolios - Style Spectrum Returns Equity Style Spectrum - Median Returns For the Periods Ending March 31, 2006 35.0% 0 M M o 30.0% ° G7 ° r - 25.0%- N N ° N 20.0% r O -- m ° o - - V .- � r o o 15.0% o .2 ° c c � 00 M 10.0% o O � x � v ^ r r COrq c r o v , 5.0% M - 4 M 0.0% �O� 0 O� G G0 O �e, wa ■ Quarter 13 Two Quarters ■ One Year ■ Three Years EM Five Years © 2006 Asset Consulting Group, Inc. All Bights Reserved 5 r r M M M M M M� M M s M M M M M M r City ofLansing Police & Fire 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% oar Gti ■ Quarter 0 Two Quarters ■ One Year ■ Three Years M Five Years © 2006 Asset Consulting Group, Inc. All I�ghts Reserved 6 r M= M M M M M M M M M= s M M M M City ofLansing Police & Fire Retirement System Fixed Income Index Returns 15.00% 10.00% 5.00% 0.00% (5.00°"oi Fixed Income Index Returns For the Periods Ending March 31, 2006 o �t 5 C? ti 4o ■ Quarter GO Two Quarters M One Year ■ Three Years EM Five Years On* f� © 2006 Asset Consulting Group, Inc. All Rzgbts Reserved 7 M r M M M M M M M M M M M M M M M M M City ofLansing Police & Fire 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. Interest Rate Term Structure Government Issues - 3 Months to 30 Year Maturity 6.00% 5.00% 4.00% � 3.00% 0 .?! 2.00% 1.00% o 0 5 10 15 20 25 30 Years -to -Maturity Mar 31, 2006 - - `° Dec 31, 2005 -- --Max 31, 2005 © 2006 Asset Con ulting Group, Inc. All Rights Reserved 8 M M ! M r M M M M M M M= M M M M M City ofLansmg Police & Fire 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% �a a MINI! =a { Quarter ■Treasury Bills 1.0% ® Lehman Intermediate G/C -0.4% ■ Lehman Govt/Credit -1.0% ■S&P 500 4.2% * 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 M M M M M M r M M M M M M M M M M M M City ofLansing Police & Fire Retirement System Monthly Indices Report Periods Ending March 31, 2006 Returns Index Name Domestic Eouitv 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 Equity 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 FOF: Conservative Index Real Estate Indices NCREIF Property NCREIF Classic Property NAREIT Style Month Qtr 2 Qtrs YTD 1 Year 3 Years 5 Years 10 Years Large Cap Core 1.24% 4.20% 6.38% 4.20% 11.72% 17.22% 3.97% 8.96 % Large Cap Core 1.84% 6.25% 8.95% 6.25% 17.39% 25.60% 10.13% 12.37 % Large Cap Core 1.42% 4.49% 6.71% 4.49% 13.19% 18.30% 4.74% 9.18 % Large Cap Growth 1.48% 3.10% 6.18% 3.10% 13.16% 14.80% 1.66% 6.50 % Large Cap Value 1.35% 5.92% 7.26% 5.92% 13.29% 21.77% 7.79% 10.97 % Mid Cap Core 2.48% 7.62% 10.15% 7.62% 21.55% 27.87 % 12.53% 12.66 % Small Cap Core 4.85% 13.94% 15.22% 13.94% 25.84% 29.53% 12.59 % 10.15 % Small Cap Growth 4.86% 14.37% 16.20% 14.37% 27.83% 28.14% 8.58% 5.51 % Small Cap Value 4.84% 13.50% 14.26% 13.50% 23.76% 30.74 % 16.24 % 14.02 % Broad Equities 1.84% 5.43% 7.77% 5.43% 14.71% 19.67% 5.95% 9.14 % Long Short Equity 2.32% 6.47% 9.87% 6.47% 17.58% 15.65% 8.44% N/A Broad Global 2.24 % 6.72 % 10.09 % 6.72 % 18.62 % 23.95 % 6.84 % 7.71 % Developed Markets Intl 3.34% 9.47% 13.99% 9.47% 24.93% 31.65% 10.04% 6.83% Developed Markets Intl Growth 3.92% 9.09% 13.86% 9.09% 24.99% 27.59% 7.86% 4.20% Developed Markets Intl Value 2.78% 9.85% 14.10% 9.85% 24.92% 35.71% 12.16% 9.32% Emerging Market 0.90% 12.12% 20.19% 12.12% 47.98% 46.66% 23.57% N/A Cash 0.38 % 1.02 % 1.95 % 1.02 % 3.53 % 2.09 % 2.24 % 3.83 % Treasuries 0.14 % 0.39 % 1.08 % 0.39 % 2.32 % 1.42 % 3.18 % 4.79 % 5 Yr Municipal Bonds (t).39j°'„ 0.02% 0.32% 0.02% 2.15% 2.21% 4.03% 4.78% High Yield Bonds 0.60% 2.85% 3.55% 2.85% 7.30% 11.72% 8.06% 6.93% Core Bonds (0.98)% (0.64)'',o (0.05)% (0.64)`% 2.25% 2.92% 5.11% 6.29% Government Bonds (0?•1) %o (0.91)'-0 2.14% 2.15% 4.67% 6.08% Corporate Bonds (1.40)% (1.16}°-0 (0.68)°•u (l.lG)t'/o 1.83% 3.71% 5.97% 6.61% 10 Yr Municipal Bonds (1.03)"ro (0.13)°,0 0.64% (0.13)°%0 3.30% 3.72% 4.93% 5.74% Low Volatility 0.92% 3.60% 5.12% 3.60% 7.95% 7.17% 6.02% N/A Real Estate 3.62% 3.62% 9.25% 3.62% 20.19% 15.07% 11.68% 12.19% Real Estate 3.63% 3.63% 8.87% 3.63% 20.73% 14.44% 10.81% 12.16% Real Estate 5.05% 14.74% 16.50% 14.74% 38.46% 32.13% 22.30% 15.82% cC 2006 Asset Consulting Group, Inc. All Rights Reserved 10 M M M ! M a ! M M M M M M r M M M M M Citv ofLansm�-- Police & Fire Retirement Svstem Monthly Indices Report Periods Ending Apr1130, 2006 Returns Index Name Style Month Qtr 2 Qtrs YTD 1 Year 3 Years 5 Years 10 Years Domestic Ecluity 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 Eouity 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 FOF: Conservative Index Real Estate Indices NCREIF Property NCREIF Classic Property NAREIT 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) !,0 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)`4, 0.56% (0.82)% 0.71% 2.58% 5.16% 6.33% Government Bonds (0 28)(Yu (1.02)°=b 0.18% (1.19)`-,� 0.25% 1.90% 4.83% 6.12% Corporate Bonds (0.37)"-,, (1.33)"-0 0.04% (1.53)"-. 0.12% 2.95% 5.97% 6.66% 10 Yr Municipal Bonds (0.18)% (0.63)"k, 1.22% (0.31)"-0 1.16% 3.41% 5.15% 5.76% Low 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)°'0 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 Rrghts Reserved > > I 11 1 N M w M M M M ■ram M M M M M r M M M M M M City ofLansing Police & Fire Retirement System Executive Summary 0 2006 Asset Consulting Group, Inc. All Rights Beserued 12 M M M M M M = = M M = = = = = M i M M City ofLansing Police & Fire Retirement System Executive Summary As of March 3 /, 2006 Total Fund The Total Pension Fund generated a 3.3% return in the first quarter and outperformed the Policy Index but underperformed the median peer. This resulted in a total net gain of $8.8 million for the quarter and a market value of $276 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 sector. 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 5.6% return vs. the Russell 2000 Growth at 4.3% as of March 31, 2006. International Equities International equities continued to post strong results in the first quarter. Delaware's international equity portfolio returned 8.2% in the first quarter and underperformed the MSCI SAFE Index (+9.59/6). This ranked the portfolio in the 71s, percentile in the international developed market equity universe for the first quarter. The underperformance can be attributed to underweight positions in the Norwegian and Swedish markets as well as stock selection in Germany, Australia, and New Zealand. Norway's stock market gained 23.5% in the first quarter as it is dominated by a 52% composition of energy and related services companies that benefited from the strength of crude oil prices. Delaware has participated in the strong returns of the international market but they have lagged on a relative basis. However, on a risk adjusted the portfolio is outperforming the MSCI EAFE Index (as evidenced by the Sharpe ratio). Delaware's approach is more conservative in their approach and will generally participate in the positive market environments but protect more in the down markets. This serves as a good compliment to Artisan's style and approach, which is the exact opposite. Artisan's international c0 2006 Asset Consulting Group, Inc. All &gbts Reserved. 13 ■■r m r m M M M M M M= rM m w m m m City ofLansing Police & Fire Retirement System equity portfolio returned 10.7% in the first quarter alone and outperformed the MSCI EAFE Index at 9.5%. This ranked the portfolio in the top quartile among their peers. Fixed Income Returns for the US bond market were generally negative in the first quarter as rates rose another 50 basis points. The fixed 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 —0.8% 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. © 2006Asset Con ulting Group, Inc. All Rights Reserved. 14 M M M M M M M M M M M M M w M M City ofLansing Police & Fire Retirement System Report Card © 2006 Asset Con ulting Group, Inc. All Rights Reserved 15 r M r M M W M M M M M M w= M M i M M City ofLansing Police & Fire Retirement System City of Lansing Police & Fire Retirement System Performance vs. Objectives* For the Period Ending March 31, 2006 Benchmark Police & Fire Obiective Met? ♦ The Pension Fund's annualized total return should exceed the annualized rate of inflation as indicated by the Consumer Price 3.6% 5.8% YES Index by at least 1%. ♦ The Pension Fund's annualized total return should equal or 8.0% 5.8% NO exceed the Fund's actuarial interest rate assumption (currently 8.0% for Police & Fire). ♦ The Pension Fund's total return should exceed the total return of an index composed as follows: 6.2% 5.8% NO 40% S&P 500 Stock Index 10% Russell Mid Cap 10% MSCI EAFE Index 40% Lehman Brothers Aggregate Bond Index ♦ The Pension Fund's total return should rank at median or 7.5% 5.8% NO above when compared to a universe of total fund portfolios 50th 88th with a similar allocation to equities (55% - 70%). * All benchmark and actual returns shown are for five years ending March 31, 2006 © 2006 Asset Con ulting Group, Inc. All Rights Reserved 16 == M = = = = M M M M= r= M City ofLansing Police & Fire 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 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. © 2006 Asset Consulting Group, Inc. All Krghts Reserved 17 = M M M M M M M M M M M M M W r M M M City ofLansing Police & Fire Retirement System Compliance with Investment Guidelines For the Period Ending March 31, 2006 Guidelines I Guideline Met? ♦ Diversification - Avoid risk by diversifying the investment portfolio. I Yes ♦ Safety of Principal - Avoid investing in securities whose issuer defaults or I Yes who has compromised their integrity. ♦ Cash Flow and Liquidity - A current yield of 3.5% should be maintained I Yes on investments. ♦ Securities Lending - Collateral must equal 100% of market value of Yes loaned security at time of loan, cannot drop below 95% of market value, and cannot be more than $100,000 less than market value of a loaned security. ♦ 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 Group, Inc. All Rights Reserved 18 � M M M M M M M M M M M M M M M M M M M City ofLansing Police & Fire Retirement System Asset Allocation Current vs. Target Allocation For the Period Ending March 31, 2006 Asset Class Target Range Allocation Domestic Equity 50.0% 45% - 55% 51.3% Large Cap 40.0% 35% - 45% 40.5% Small/Mid Cap 10.0% 5% - 15% 10.8% International Equity 10.0% 5% -15% 10.0% Domestic Bonds 35.0% 30% - 40% 33.3% Real Estate 5.0% 0% - 7% 5.0% Cash 0.0% 0.0% 0.4% © 2006Asset Con ulting Group, Inc. All fights Reserved 19 r M i = M i M M= i M r = = = M = = M City ofLansing Police & Fire Retirement System City of Lansing P&F Composite Asset Allocation For the Period Ending March 31, 2006 Domestic Equity $141,801,026 51.3% Intl Equity Real Estate e�nn roo RLA 092 n2•7 Al) Total Assets: $276,446,675 Bonds $91,996,671 33.3% © 2006 Asset Consulting Group, Inc. All Rights Reserved 20 M = = = = ' M = M = M = = r M City ofLansing Police & Fire Retirement System City of Lansing P&F Composite Manager Allocation For the Period Ending March 31, 2006 Ariel Ca- 5.7° Western Asset Management 15.5% NT Index Equity 1 17.3% NorthPointe Capital Delaware Total Market Value: $276,446,675 17.8% Brinson i.5% Clarion Lion Properties Fund, LLC 1.6% serve 4% irclay's Global Investors 23.2% ates © 2006 Asset Consulting Group, Inc. All &ghts Reserved 21 City ofLansing Police & Fire Retirement System City of Lansing P&F Composite For the Periods Ending March 31, 2006 Beginning Market Value Net Additions Return on Investment Income Received Gain/Loss Ending Market Value This Quarter $274,022 -6,420 8,844 1,531 7,313 276,447 Year -To -Date Last Twelve Months $274,022 $266,140 -6,420-18,249 8,844 1,531 7,313 276,447 28,556 5,673 22,883 276,447 Since 07/98 $248,810 -98,288 125,924 58,269 67,655 276,447 © 2006 Asset Consulting Group, Inc. All Rights Reserved 22 r M M M= M M = = = M M M M M M r= M Citv oFLansintt Police & Fite Retirement Svstem 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 Policg Index 3.1% 4.9% 10.1% 13.8% 6.2% 8.4% 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 4.2% 74 6.4% 80 11.7% 83 17.2% 83 4.0% 83 9.0% 83 Median Overall Equity Fund 5.7% 8.4% 16.1 % 22.4% 7.8% 11.1 MSCI EAFE 9.5% 47 14.0% 61 24.9% 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% a Aggregate -0.6% 99 0.0% 83 2.3% 84 2.9% 80 5.1% 76 6.3% 81 Core Bond Fund -0.4% 0.2% 2.6% 3.5% 5.5% 6.6% NCREIF Property 3.6% 46 9.3% 39 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 between 55% and 70° u while the second number shown represents the ranking in the total public fund universe. Universe ranking percentiles range from 1 (best performing) to 100 (worst performing). (2) Polity Index consists of: 40% S&P 500, 10% Russell Mid Cap, 10% MSCI EAFE, and 40% Lehman Aggregate. © 2006 Asset Consulting Group, Inc. All Rights Reserved 23 City ofLansing Police & Fire Retirement System City of Lansing P&F Composite Policy Index Median Total Fund (Between 55-70% EguiP) Master Trust Funds - Public Funds Risk vs. Return Analysis Five Years Ending March 31, 2006 Annuanzea return 5.78 6.21 7.49 7.22 manaara iievtatton anarpe natto 9.20 0.37 9.73 0.40 10.06 0.51 9.71 0.50 © 2006 Asset Consulting Group, Inc. All I�gbts Reserved 24 M M M City ofLansing Police & Fire Retirement System Equity Analysis © 2006 Asset Con ulting Group, Inc. All Rzghts Reserved 25 M M M M = = = A City ofLansing Police & Fire Retirement System NT Index Equity Fund For the Periods Ending March 31, 2006 Asset Allocation Total Assets: $47,772,960 ♦ S&P 500 Index Fund , STIF $1 ).0% Domestic r-yuny $47,772,959 100.0% Allocation History D. 40. J' QPc rl ✓4S1 6 + '�40 rA dPc A. O.� O.i O,i OA OA OA Oy QS OS 0.5• OS OG ♦ 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 45,833 52,678 Net Additions 0-10,057 Return on Investment 1,940 5,152 Income 0 0 Gain/Loss 1,940 5,152 Ending Market Value 47,773 47,773 © 2006 Asset Consulting Group, Inc. All Rights Reserved 26 M = = = M City ofLansing Police & Fire Retirement System NT Index Equity Fund As of March 31, 2006, NT Index Equity Fund held 500 securities in the fund. Cbaracteristics Holdings and portfolio characteristics are as follows: ENT Index Equity Fund ®S&P 500 EXXON MOBIL CORP 3.2% PROCTER & GAMBLE 1.6./ GENERAL ELECTRIC CO 3.1% PFIZER INC 1.6 % MICROSOFT CORP 2.1 % JOHNSON & JOHNSON 1.5 % CITIGROUP INC 2.0% AMERICAN INTL GROUP 1.5% BANK OF AMERICA CORP 1.8% ALTRIA GROUP INC 1.3% JDS UNIPHASE CORP 76.7% NUCOR CORP 58.1% CIENA CORP 75.4% NVIDIA CORP 56.6°% ■ ALLEGHENY TECHNOLOGIES 69.9% TELLABS INC 45.9% PMC-SIERRA INC 59.4% LSI LOGIC CORP 44.5% 25 APPLIED MICRO CIRCUI 58.4% ALLIED WASTE INDS 40.1% 20 WorstTen i / 15 DANA CORP -85.8% YAHOOINC -17.7/ 10 AMAZON COM INC -22.6% SYMBOL TECHNOLOGIES -17.4% INTEL CORP -221°/ GOODYEAR TIRE & RUBR -16.7% 5 TYSON FOODS -19.49/ CENTEX CORP -13.2% 0 ST JUDE MED INC -18.3% APOLLO GROUP -13.2% *Characteristic data provided by manager. Avg Mkt Cap Historic Emgs P/B P/E Yield Grth ENT Index Equity Fund MS&P 500 lam,% g�'b © 2006Asset Con ulting Group, Inc. All Rtgbts Reserved 27 M City ofLansing Police & Fire Retirement System NT Index Equity Fund For the Periods Ending March 31, 2006 Risk vs. Return (10 1 �mr Annualized) 8.99% 8.98% E 9.98% v 0 8.97or, x 8.97% 8.96% 8 96% Standard Deviation Sharpe Ratio Beta Alpha Up Capture Down Capture Correlation 15.6V/o 15.62% 15.62oG) 15.63% 15.63% 15.64"o 15.64° R Square Standard Deviation Tracking Error ENT Index Equity Fund MS&P 500 30 26 26 25 20 1616 16 15 1414 li 15 I Lld 10I7 77 55 1rM 5 MEN )4 �o io 'Jo q� /O fearer ss�� ot� o`� Xo 'o orb 0`0 o�O Jg o�U2� orG.% otO Fo orUSo So 0 Number of Months Highest Monthly Return Lowest Monthly Return Number of Pos. Months Number of Neg. Months % Positive Months 10 Years NT Index Equity Fund 15.62 0.35 1.00 0.00 99.95 99.82 100.00 99.99 0.12 NT Index Equity Fund 173 11.75% -14.42% 112 61 64.74% S&P 500 15.63 0.35 1.00 S&P 500 173 11.42% -14.46% 112 61 64.74% *All information calculated u ing monthly data 0 2006 Asset Consulting Group, Inc. All Rzghts Resermd 28 M City ofLansing Police & Fire Retirement System NT Index Equity Fund - Total Fund For the Periods Ending March 31, 2006 Ranldng 46 69 73 67 72 66 N N N 7 � 7 O p ^ c C, 1 Quarter 2 Quarters 1 Year 3 Years 5 Years 10 Years ■ NT Index Equity Fund 0 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 rankingfor 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 Rights Reserved 29 = = = M = = M M = = = s = = M M = = M City ofLansmg Police & Fire Retirement System Barclay's Global Investors For the Periods Ending March 31, 2006 1 Total Assets: $64,233,882 STIF $6 1.0% Domestic cyuny $64,233,876 100.0% Allocation History D. O ✓ If Pc0 �O G"os 11 s "-,g of0 v 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 61,388 55,872 Net Additions 0 0 Return on Investment 2,846 8,362 Income 0 359 Gain/Loss 2,846 8,003 Ending Market Value 64,234 64,234 © 2006 Asset Con ulting Group, Inc. All Rights Reserved 30 M= r M= M M M= M = = = = M= M City ofLansmg Police & Fire 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 21.7o 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 -15.20/. AT&T INC BRIJ OUTH CORP -12.5% CATERPILLAR INC APPLE COMPUTER INC -11.8% AUTODESK INC HEWLETT-PACKARD CO -11.0%° ALCON INC *Represents the average weights of the security held during 1Q 2006 Characteristic data provided by manager. 2.3% 2.2% 2.1 % 2.0% 1.9% ■ Barclay's Global Investors 13 S&P 500 Avg Mkt Cap Emgs Grth P/B P/E Yield 17.7% 16.1% 15.3% ■ Barclay's Global Investors M S&P 500 15.2% 30 14.4% 25 N 20 �O -9.6% 15 c� ^ -8.8% 10 �� V^0 c -8.5% c� 5 �� -1 v� �� K c, C\N1 NMd I,=,' cj M -7.7% im WMW]k -7.0°!° 0 2006 Asset Con ulting Group, Inc. All Rtgbts Reserved 31 M City ofLansing Police & Fire Retirement System Barclay's Global Investors For the Periods Ending March 31, 2006 19.00% 18.00% 17.00% E v 16.00% 15.00% 0 14.00% Barclay's Global a13.00% Investors 12.00% S&P 500 11.00% 10.00% 6.80% 6.90% 7.00% 7.10% 7.20% 7.30% 7.40% 7.50% 7.60% 7.70% 7.8011,,. Standard Deviation ■Barclay's Global Investors ®S&P 500 5 4 4 3 3 3 3 2 2 2 2 2 2 2 1 1 1 1 I 1 0 0 0 0 0 0 0 0 0 0 0 ss �J o`O otG :�� o�0 oCG �co •I� p� o�0 Jo orG or0 �� orG Vo orG S� Pdt(° t� s, 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 using monthly data © 2006Asset Consulting Group, Inc. All Raghts Reserved 32 City ofLansing Police & Fire Retirement System Barclay's Global Investors - Total Fund For the Pen'ods Ending March 31, 2006 Ranking 27 15 18 20 1 Quarter 2 Quarters 3 Quarters I Year ■ Barclay's Global Investors 13 S&P 500 M 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 bars is the ranking for this portfolio versus the large cafe core universe. The rankings are on a scale of 1 to 100 with 1 being the best. © 2006 Asset Consulting Group, Inc. All Rights Reserved 33 M City ofLansing Police & Fire Retirement System Ariel Capital For the Periods Ending March 3 1, 2006 Total Assets: $19, 693, 647 STIF ?14,087 1.8% Domestic Equity $15,419,560 98.3% ■Domestic Equity ®STIF low/ 21 f ® ® d f f J` dPc � ✓�O J� QPC rLl ✓�O J� dPc rLl G'�.i Aoi O� OA 19 19 OS/ O3. 19 19 �S �G ♦ Mid Cap "Value" Equity ♦ 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 Value Index and the Russell Mid Cap Index, and (2) rank above median versus all mid cap value equity managers. This Quarter Last 12 Months Beginning Market Value 15,272 14,345 Net Additions 2 2 Return on Investment 420 1,347 Income 60 229 Gain/Loss 360 1,118 Ending Market Value 15,694 15,694 © 2006Asset Canrulting Group, Inc. All Rrghtr Reserved 34 M i M M M M M M M M M M M M M M M M City ofLansing Police & Fire 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 ACCENTURE LTD 4.8% FRANKLIN RES INC PITNEY BOWES 4.40/ FISHER SCIENTIFIC INTL INC NORTHERN TRUST CORP 4.3 % BLACK & DECKER CORP CAREER ED CORP 4.1% BAXTER INTL INC TRIBUNE CO 4.1 % YUM BRANDS INC JANUS CAP GROUP INC 24.4% SERVICEMASTER CO WASTE MGMT INC 17.1 % FISHER SCIENTIFIC INTL INC MATTEL INC 14.6% PRICE T ROWE GROUP INC DUN & BRADSTREET CORP 14.5% ARAMARK CORP CAREER ED CORP 11.9% CLOROX CO MCCLATCHY NEWSPAPER INC -17.1% EQUIFAX INC BLOCK H & R INC -11.3% OMNICOM GROUP CARNIVAL CORP -11.0% POPULAR INC TRIBUNE CO -8.8% INTERPUBLIC GROUP COS MOHAWK INDS INC -7.20/ BLACK & DECKER CORP * Inclusion on these lists requires securities to be held the entire quarter. 3.6% 3.5% 3.5% 3.4% 3.2/0 Avg Mkt Cap Erngs Grth P/B P/E Yield 10.8 % 10.0% Sector Allocation 9.0% ■ Ariel Capital ®Russell Mid Cap Value ■Russell Midcap Index 6.6% 40 r o 5.7% 35 M M 30 ■�? N 25 N -2.0 % 20 c M 15 �! Cl! r o 10 r c. n -1.01/o r N'. 7v1 -0.9°lo 0 0 0 000 0 0 0 2006 Asset Consulting Group, Inc. All Knights Reserved 35 w== r M r r M = = M= M M= M City ofLansing Police & Fire Retirement System Ariel Capital .For the Periods Ending March 31, 2006 Risk vs. RetIIT17 (5 1earAnnualized) Portfolio Statistics 16.00% 14.00% 12.00% 2 10.W/o v a 8.00% 0 x 6.00% 4.00% 2.0o io 0 00% 91 5 Years Russell Mid Cap Ariel Capital Value Standard Deviation 14.29 13.72 Sharpe Ratio 0.63 0.92 Beta 0.95 1.00 Alpha -0.21 -- Up Capture 89.42 -- Down Capture 103.13 -- 28 Correlation -- 13.60% 13.80% 14.00"o 14.20% 14.40% 14.60% 14.80% 15.00% 15.2W"o 15AM/o 15.60% R Square 83.32 -- Standard Deviation ■Ariel Capital ®Russell Mid Cap Value ®Russell Mid Cap 12 10 9 9 8 8 88 8 8 8 5 AlS 5� S 55 4 4 4 4 4 4 3 33 2 2 11 I i 0 �P `5 Voi�o `lo Oo9 to --I—.o .�o Fo Q. sstl' a0 o"G o ot0 �0 o!G 2 o or0 Flo �o t0 l0 �`O 20 oe. �0 90 So 0 PdrP r�� So 0 Number of Months Highest Monthly Return Lowest Monthly Return Number of Pos. Months Number of Neg. Months % Positive Months Ariel Capital 63 10.16% -11.56% 44 19 69.84% Russell Mid Cap Value 63 8.80% -10.10% 40 23 63.49% *All information calculated using monthly data © 2006 Asset Consulting Group, Inc. All Rights Reserved 36 = = = = M w City ofLansing Police & Fire Retirement System Ariel Capital -Total Fund For the Periods Ending March 31, 2006 Ranldng 97 92 25 20 a w C' 15 E a 89 89 94 87 N N � r � _.. N � N 1 Quarter 2 Quarters 1 Year 2 Years 3 Years 5 Years ■ Ariel Capital 0 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 The number above the bars is the ranking for this portfolio versus the mica cap value universe. The rankings are on a scale of 1 to 100 with 1 being the best. 42 29 © 2006 Asset Con ulting Group, Inc. All Krghts Reserved 37 M M M = M = W City ofLansmg Police & Fire Retirement System Northpointe For the Periods Ending March 31, 2006 C Total Assets: $14,118,497 STIF Domestic Equity $13,723,643 97.2% ■Domestic Equity OSTIF �o c ♦ Small Cap "Growth" Equity ♦ Inception date: January 1, 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 13,370 13,370 Return on Investment 749 749 Income 6 6 Gain/Loss 743 743 Ending Market Value 14,118 14,118 © 2006 Asset Con ulting Group, Inc. All Rights Reserved 38 M M r err M M M M M M r M M M M M M r M City ofLansing Police & Fire Retirement System NorthPointe As of March 31, 2006, NorthPointe held 74 securities in their portfolio. Holdings and portfolio characteristics are as follows: I■NorthPointe ®Russell 2000 ■ Russell 2000 Growth VENTIV HEALTH INC 20% ]ARDEN CORP 1.8% ANDERSONS INC 2.0% SMITH MICRO SOFTWARE INC 1.8% SHUFFLE MASTER INC 1.9% BUFFALO WILD WINGS INC 1.8% FIRST HORIZON PHARMACEUTICAL CO] 1.8% MEDALLION FINL CORP 1.8% WORLD FUEL SVCS CORP 1.8% SUNOPTA INC 1.8% * Inclusion on these lists requires securities to be held the entire quarter. 35 N � 30 M eV N � tl1 N 25 20 15 10 oo r °* r- eq OP :`'? M M M N G� 7 5 0 o d d N, 0 Avg Mkt Cap F.mgs Grth P/B P/1i Yield ■NorthPointe 0Russell 2000 ■ Russell 2000Growth 35 30 25 20 15 10 5 0 0o c� do 6 Sg� °n �Oo 'N" 13\ s 11 © 2006 Asset Consulting Group, Inc. All Kaghts Reserved 39 City ofLansmg Police & Fire Retirement System Delaware For the Periods Ending March 31, 2006 Total Assets: $13,433,397 Int'1 $13,433,357 100.0% ■ Int'l Equity 100`9 90% 801i1 70% 60% 50% 40% 30% 20% 10% 0% f40 S� dPc � ✓40 S� ��'c � ✓4� S� dPC O� O� O� OA OQ Op OA OS OS OS OS OG ♦ International Value Equity ♦ Delaware is primarily a "bottom -up" value style manager; i.e., they look for stocks of companies that are underpriced as compared to their true values. ♦ Inception date: October 25, 1996 ♦ 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 17,128 15,329 Net Additions -5,000 -5,000 Return on Investment 1,305 3,104 Income 0 0 Gain/Loss 1,305 3,104 Ending Market Value 13,433 13,433 © 2006 Asset Consulting Group, Inc. All Rzghts Reserved 40 r M r M M r M M M M M M= M = = City ofLansing Police & Fire Retirement System Delaware As of March 31, 2006, Delaware held 53 securities in their portfolio. Holdings and portfolio characteristics are as follows: TOYOTA MOTOR 3.5% TAKEDA PHARMACEUTICAL 3.1% TELEFONICA 3.5% RWE 3.1% BANCA INTESA 3.4% GLAXOSMITHKLINE 3.1% TOTAL 3.3% NAB 3.0% ING-GROEP 3.2% BHBOS 2.9% i i i % of holding EAFE AUSTRALIA 10.0%u 5.1% 4.9% AUSTRIA 0.0% 0.5% -0.5%u BELGIUM 2.3% 1.2%n 1.1% DENMARK 0.0% 0.7% -0.7% FINLAND 1.8% 1.50% 0.3% FRANCE 8.1% 9.8% -1.7% GERMANY 5.1% 7.1% -2.0% GREECE 0.0% 0.6% -0.6% HONG KONG 2.8% 1.6% 1.2% IRELAND 0.0% 0.8% -0.8% ITALY 5.3% 3.8% 1.5% JAPAN 16.0% 25.4% -9.40/. NETHERLANDS 5.2% 3.5% 1.7% NEW ZEALAND 1.4% 0.2% 1.2% NORWAY 0.0% 0.8%u -0.8% PORTUGAL 0.0% 0.3% -0.3% SINGAPORE 2.0% 0.8% 1.2% SPAIN 8.3% 3.8% 4.5% SWEDEN 0.0% 2.4% -2.4% SWITZERLAND 0.0%u 6.7% -6.7% UNITED KINGDOM 27.0% 23.4% 3.6% EMERGING MARKETS 3.1% 0.0% 3.1% OTHER 1.6% 0.0% 1.6% *Characteristic data provided by manager. 35 30 25 20 15 10 5 0 ■Delaware ®MSCI EAFE Avg Mkt Cap P/B P/E Yield ■ Delaware M MSCI EAFE r) © 2006Asset Consulting Group, Inc. All Rights Reserved 41 M M M M r M W City ofLansing Police & Fire Retirement System 12.00% 10.00% 8.0a/o u 6.00% 0 a 4.00% 2.000/ 0 00% Delaware For the Periods Ending March 31, 2006 ® MSCI EAFE Value ♦ Delaware Gross w'•?:+ MSCI EAFE 14.20% 14.70% 15.20% 15.70oG, 16.20% 16.70'90 17.20'% Standard Deviation ■Delaware OMSCI EAFE ■MSCI EAFE Value Gross zs zo 20 17 18 16 1 13 12 13 1 15 3 � it 10 1 10� 9 10 10 1 1 0 9 9 8 8 jk�L3 I 65 5�' 65 5' 5 2 I 0 I I sf`� ot0 oCG o�G or0 or0 I oC0 20 0�� 11�1 o`O Fo or0 s6 Party r o o So 0 Standard Deviation Sharpe Ratio Beta Alpha Up Capture Down Capture Correlation R Square Number of Months Highest Monthly Return Lowest Monthly Return Number of Pos. Months Number of Neg. Months % Positive Months 9 Years Delaware 14.38 0.39 0.85 0.21 88.00 75.48 92.42 85.41 Delaware 110 10.04% -11.01% 67 43 60.91 % MSCI EAFE 15.60 0.26 1.00 MSCI EAFE 110 10.45% -12.37% 71 39 64.55% *A I/ information calculated using monthly data 42 © 2006 Asset Consulting Group, Inc. All Rights Reserved M M M M M M M M M M City ofLansing Police & Fire Retirement System Delaware -Total Fund For the Periods Ending March 31, 2006 Ranking 71 91 82 70 33 78 45 �n ', r 40 M r � � M 35 oM M r 30 c c N I N � N I G� 25 c o 15 oC ? 10 5- 0/".. 4 1 Quarter 2 Quarters 1 Year 3 Years 5 Years 9 Years ■ Delaware ® MSCI EAFF. ■ MSCI EAFF, Value ■ Medn Intl Dev Mkt Eqty 1 Quarter 2 Quarters 1 Year 3 Years 5 Years 9 Years 5th Percentile 13.28 18.90 36.51 38.87 17.99 15.99 25th Percentile 10.52 16.52 31.30 34.08 14.20 12.28 50th Percentile 9.39 15.08 26.71 32.46 12.34 10.59 75th Percentile 8.06 12.61 21.97 29.76 10.57 9.26 95th Percentile 6.80 9.30 16.36 26.38 7.91 6.89 Observations 1494 1430 1276 822 523 257 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 with 1 being the best. © 2006 Asset Consulting Group, Inc. All &ghts Reserved 43 M M M M M M M M M City ofLansing Police & Fire Retirement System Artisan Partners For the Periods Ending March 31, 2006 Total Assets: $14,255,007 Int'1 1-1 $14,255,007$14,255,007 100.0% 01nt'1 Equity S sec rL ✓�� sA dPc G� �R A197 0 0S �S 19S �S �6' ♦ 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 15,687 13,398 Net Additions -3,000 -3,000 Return on Investment 1,568 3,857 Income 0 0 Gain/Loss 1,568 3,857 Ending Market Value 14,255 14,255 44 © 2006 Asset Consulting Group, Inc. All Rrghts Reserved = M M = W = = = M M City ofLansing Police & Fire Retirement System Artisan Partners As of March 31, 2006, Artisan Partners held 97 securities in their portfolio. I loldings and portfolio characteristics are as follows: ■Artisan Partners ®MSCI EAFE ®MSCI EAFE Growth CREDIT SAISON CO., LTD. 3.6% SEGA SAMMY HOLDINGS 2.6% UBS AG 3.5% MIZUHO FINANCIAL GROUP 2.5% ORIX CORP 2.7 % KOOKMIN BANK 2.3% FORTIS 2.7% SAIPEM 2.2% LUKOIL 2.6% CHINA MOBILE 2.1% i i i % of holding EAFE AUSTRALIA 0.0° 0 5.1 % -5.1% AUSTRIA 0.6% 0.5% 0.1% BELGIUM 1.0°% 1.2 % -0.2% CANADA 2.0% 0.0% 2.0°% DENMARK 0.2% 0.7% -0.5°% FINLAND 0.9% 1.5% -0.6% FRANCE 7.4% 9.8% -2.4% GERMANY 12.4°% 7.1% 5.3°% GREECE 0.0% 0.6% -0.6% HONG KONG 1.9% 1.6 % 0.3% IRELAND 0.0% 0.8% -0.8% ITALY 4.9% 3.8% 1.1% JAPAN 24.5% 25.4% -0.9% LUXEMBOURG 0.5°% 0.0% 0.5% NETHERLANDS 6.3 % 3.5% 2.8% NEW ZEALAND 0.0% 0.2% -0.2%, NORWAY 1.9% 0.8% 1.1% PORTUGAL 0.8°% 0.3% 0.51/6 SINGAPORE 2.6% 0.8% 1.8% SPAIN 1.2% 3.8% -2.6° o SWEDEN 0.0% 2.4% -2.4% SWITZERLAND 11.0°% 6.7% 4.3°% UNITED KINGDOM 3.9% 23.41% -17.5% EMERGING MARKETS 14.0% 0.0°% 14.0% *Characteristic data provided by manager. Wtd Avg Mkt Cap Erngs Grth* P/B (WA) P/E** Yield (WA) * Estimated 35 yr, weighted average. ** Last 12 months, weighted harmonic average, excluding EPS<0. ■Artisan Partners 0MSCIEAFE ■MSCIEAFE Growth 40 35 I 30 25 I 20 15 10 _ I I - 5 i n 1 4 rc © 2006Asset Consulting Group, Inc. All Rights Reserved 45 M M M M M r M M M M M M M M M M M M City ofL msing Police & Fire Retirement System Artisan Partners For the Period Ending March 31, 2006 30.00% 29.00% C 28.00% E v 27.00% 0 ro 9 26.00% 25.00% 24 00% MSCI EAFE MSCI EAFE ♦ Growth Gross Artisan 9.40% 9.60% 9.80% 10.00% 10.20% 10.40% 1 AW/. 10.80% Standard Deviation ■Artisan Partners GMSCI EAFE ■MSCI EAFE Growth Gross 5 4- 4- 3 3 2 2 2 2 22 2 2 2 z 2 1 1 1] 1 1 1 1] 1 ] 1 1 1 1 1 1 000 100 00 0 0 0 Fo ,% i?o Vo rCoar( J�,�t J8� or0 oo o`O 30 ot0 oCU ,� .Ji o�G po Ji 0 ono 20 o�O .�of'<3 0 oto 0 ot0 0 sa 0 Standard Deviation Sharpe Ratio Beta Alpha Up Capture Down Capture Correlation R Square Number of Months Highest Monthly Return Lowest Monthly Return Number of Pos. Months Number of Neg. Months % Positive Months 1 Year Artisan Partners MSCI EAFE 10.65 9.60 2.45 2.23 1.10 1.00 0.14 -- 114.09 -- 103.05 -- 98.73 -- 97.48 -- Artisan Partners MSCI EAFE 22 22 6.99% 6.86% -4.27% -3.23% 15 16 7 6 68.18% 72.73% * All information calculated using monthly data © 2006 Asset Consulting Group, Inc. All Rights Reserved 46 M i M M M M M M M M M M ! M M M M M M City ofLansing Police & Fire Retirement System Artisan Partners -Total Fund For the Periods Ending March 31, 2006 Ranking 23 0 E 21 21 37 1 Quarter 2 Quarters 3 Quarters I Year ■ Artisan Partners 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 with 1 being the best. © 2006Asset Consulting Group, Inc. All Rights Reserved 47 I i m m m m® m r m r m m= m = = = m e City ofLansmg Police & Fire Retirement System Fixed Analysis 0 2006 Asset Consultin,g Group, Inc. All Rights Reserved 48 = M w r M = W r = _ = = w� City ofLansing Police & Fire Retirement System M D Sass Associates For the Periods Ending March 31, 2006 Total Assets: $49,278,209 STIF BoL__ $49,257,388 100.0% ✓4� S� dPc � ✓40 J� d�c �� ✓p� S� QPc O� O� OS Oy Oy OQ OF QS OS O� ,gs g ♦ 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 48,046 43,720 Net Additions 1,600 4,400 Return on Investment -368 1,159 Income 604 2,088 Gain/Loss -972 -929 Ending Market Value 49,278 49,278 49 © 2006 Asset Consulting Group, Inc. All Rights Reserved M= W M M= M M W= M M M w M" M City ofLansing Police & Fire Retirement System M D Sass Associates As of March 31, 2006, M D Sass Associates held 154 securities in their portfolio. Holdings and portfolio characteristics are as follows: ■ M D Sass Associates ■Lehman Aggregate v O L j w - 1; Q v v 00 r0 o v L ■ M D Sass Associates ®Lehman Aggregate GOVT AAA AA A BAA ■ M D Sass Associates ®Lehman Aggregate 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. Al! Rzghts Reserved 50 M M W= W W M M = = W W= M M r= M City ofLansing Police &Fire Retirement System M D Sass Associates For the Periods Ending March 31, 2006 0.41 /u 6.39% 6.37% 6.35% v 6.3Y/o 0 m 6.31% a 6.29% 6.27% 6 25% 3.60% 3.65% 3.70% 3.75% 3.80% 3.85% 3.90% 3.95% 4.00% Standard Deviation ■M D Sass Associates 0Lehman Aggregate 50 44 45 j 40 3 35 35 2930 1 30 25 20 15 � I 1108 10 7 5 5 0 0 1 1 2 1 0 0 0 0 0 0 0 fPdr Fo 'o ° °ro °ro °ro S ,rGi , .So 6 Standard Deviation Sharpe Ratio Beta Alpha Up Capture Down Capture Correlation R Square Number of Months Highest Monthly Return Lowest Monthly Return Number of Pos. Months Number of Neg. Months % Positive Months 10 Years M D Sass Associates 3.93 0.75 1.02 0.00 101.35 100.44 94.94 90.14 M D Sass Associates 175 3.96% -3.17% 121 54 69.14% Lehman Aggregate 3.65 0.78 1.00 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 = M r == M M M i M M M M M w M M M M City ofLansing Police & Fire Retirement System M D Sass Associates - Total Fund For the Periods Ending March 31, 2006 Ranking 91 75 42 92 81 74 s P 1 Quarter 2 Quarters 1 Year 3 Years 5 Years 10 Years ■ M D Sass Associates M Lehman Aggregate ■ Median Core Bd 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 barn 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. 52 © 2006 Asset Consulting Group, Inc. All Azghts Reserved � M M M M= r r= M M = = w M= M r City ofLansing Police & Fire Retirement System Western Asset Management For the Periods Ending March 31, 2006 100.0% Total Assets: $42,739,441 STIF $158 0.0% ■ Bonds 0 STIP ♦ Core "Plus" Fixed Income ♦ Inception date: January 1, 2006 ♦ 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. This Quarter Last 12 Months Beginning Market Value 0 0 Net Additions 42,962 42,962 Return on Investment -223 -223 Income 17 17 Gain/Loss -240 -240 Ending Market Value 42,739 42,739 © 2006 Asset Consulting Group, Inc. All Raghts Reserved 53 M M M r M M M M M M w M M M M w M M r City ofLansing Police & Fire 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: ■ Westem Asset Management 0Lehman Aggregate ■ Westem Asset Management 13Lehman Aggregate 70.0% 12 M O G0.0% fV 10 M V1 c 50.0% o c 40.0% 8 30.00 o N G 20.0% N � .N.„".. 4 10.0% N N N, 7 O N v N ad7 0 2 0.04 0 Z x � " m Q G v U U o o N O Avg Life Current Coupon Duration Quality YTM U ■Western Asset Management 13Lehman Aggregate ■ M D Sass Associates 0Lehman Aggregate 0 AAA AA A BBB BB B CCC *Characteristic data provided by manager. <1 Year 1-3 Years 3-5 Years 5-7 Years 7-10 Years 10-15 Years 15+ Years © 2006 Asset Consulting Group, Inc. All Rights Reserved 54 City ofLansmg Police & Fire Retirement System Western Asset Management - Total Fund For the Periods Ending March 31, 2006 Ranking 55 / 76 0 E 3.5 2.5 -0.5 -1.5 1 Quarter 2 Quarters 3 Quarters 1 Year ■ Western Asset Management 13 Lehman Aggregate ® 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 6 / 269 515 / 263 504 / 261 492 / 249 The numbers 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 with 1 being the best. © 2006 Asset Consulting Group, Inc. All Rights Reserved 55 I ►n I d M M M r M M M M r M M M M M M M M M r City ofLansmg Police & Fire Retirement System Real Estate Analysis © 2006 Asset Con ulting Group, Inc. All Rights Reserved 56 M M M M s M M r r M M M M M M M M M M City ofLansing Police & Fire Retirement System Brinson For the Periods Ending March 31, 2006 Midwest South 26% Office 25.9% 32.6% Industrials *Characteristic data provided by manager. West 30% 35% Retail 24.4% ♦ 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 $9,589,338 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 ®Apartment ■Office ■Industrial 13 Flotel P`arrP r © 2006 Asset Consulting Group, Inc. All Rzghts Reserved 37 M M M M M M M M M M M M M M M M M City ofLansing Police & Fire Retirement System Brinson -Total Fund For the Periods Ending March 31, 2006 Ranldng 54 49 54 48 41 41 30 M � r 7 ri. i � M 15 v N 10 P M 5 M M 0 1 Quarter 2 Quarters 3 Quarters I Year 2 Years 3 Years ■ Brinson 0 NCRFIF Property Index ®Median Real Estate Fds 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 Garr is the ranking for thin por folio versus their real e tale peer . The rankings are on a siale of 1 to 100 with 1 being the hest. © 2006 Asset Con ulting Group, Inc. All Rights Reserved 58 City ofLansing Police & Fire Retirement System Clarion Lion Properties Fund, LLC For the Periods Ending March 31, 2006 Geqgraphic • Objective West ♦ Core Commingled Real Estate Fund 33% ♦ Exceed the total Return of the NCREIF Property Index and rank in the upper Midwest half in a universe of core commingled real estate fund peers. 13% South 14% 40% Industrial n.h- Office 42.0% 12.0% *Characteristic data provided by manager. Retail 22.0% Portfolio's Market Value $4,348,074 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 Particivants 113 ■Retail 13Residential ®Office ■Industrial 00ther © 2006 Asset Consulting Group, Inc. All Rights Reserved 59 M M M M M M M M M M M M M M M M M M M City ofLansmg Police & Fire Retirement System Clarion Lion Properties Fund, LLC - Total Fund For the Periods Ending March 31, 2006 Ranking 27 36 38 44 47 45 ............. 11.1. 1 .1 ........... ............................. 30- 25- Cq C, 00 20- ui 15- 10- 5- 1 Quarter 2 Quarters 3 Quarters 1 Year 2 Years 3 Years N Clarion Lion Properties Fund, LLC 13 NCR-EIF Property Index E Median Real Estate Fels 1 Quarter 2 Quarters 3 Quarters I 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 bars is the ranking this ponjoko versus their real estate peers. The ranking t. s are on a scale of I to 100 ;vith 1 being the best. (D 2006 Asset Consulting Group, Inc. All Riohls Reserved 60 LI 1 11 M M M M M M M M M M M M M M M M M M City ofLansing Police & Fire Retirement System 2004 Q1 Q2 Q3 Q4 2004 Total 2005 Q1 Q2 Q3 Q4 2005 Total 2006 Q1 Securities Lending Income Domestic Equity Fined Income Total 680 5,015 5,695 752 5,649 6,402 552 4,704 5,257 924 5,833 6,756 2,908 21,202 24,110 1,174 7,457 8,631 1,624 8,398 10,023 2,799 5,355 8,154 412 8,120 8,531 6,009 29,330 35,339 4,672 3,400 8,072 C 2006 Asset Consulting Group, Inc. All Rrghts Keserued