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Presented on May 3, 2006

Mike MartelNeil Tremblay

A presentation to:

Click to edit Master subtitle style

Fresno County Employees’ Retirement Association

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Table of Contents

1 FCERA Overlay Solution

2 SSgA Overview

3 SSgA Exposure Management Services

4 SSgA Compliance and Risk Management

5 SSgA Advantages in Exposure Management

6 Fees

Appendix A: SSgA Advanced Research Center

Appendix B: Sample Futures Baskets

Appendix C: Exposure Reports

Appendix D: Presenter Biographies

Appendix E: Legal Disclosures

FCERA Overlay Solution

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FCERA Cash Equitization Program - Initial Strategy

Invest in S&P 500 Index futures or index to equitize administrative cash

Adjust futures position each month as necessary to fund benefit payments and expenses after accounting for anticipated contributions

SSgA calculates new S&P 500 exposure

SSgA receivesfrom custodian the

cash balances and plan flows

SSgA comparesnew S&P 500 exposurewith current exposure

SSgAdetermines and executes trades

with futures brokers

SSgA confirms tradesand updates portfolio

in nightly cycle

Step 2Step 1

Step 3

Step 4

Step 5

5

6.90%

18.80%

2.70%

30.80%

39.70%

1.00%

4.10%

0.00%

-1.10%

0.00%

0.00%

0.30%

-0.05 0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35 0.40 0.45

11% Private Equity

18% International Equity

3% Global Fixed Income

30% U.S. Fixed Income

38% U.S. Equity

0% Cash

FCERA Asset Allocation (12/31/05) Potential Overlay Position

FCERA Cash Equitization Program - Long-Term Potential Solution

Invest in a mix of index futures, forwards, and index funds across asset classes

Overlay portfolio customized to FCERA allocation and any policy constraints

Can go long only or long/short

Provides strategic rebalancing and liquidity

Rebalancing and cash flows occur with futures and forward contractsor index funds

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Fifth Third/BONY

SSgA Global AssetAllocation Group

Calculate trades needed

FCERA Cash Equitization Program - Flow Chart for All Solutions

Daily balances & plan flows

Clearing Broker (Margin for futures

exposure sent to/from)

Trade details

SSgA directs cash between Custodian & Clearing Broker to optimize cash returns

SSgA Trading Desk

SSgA Operations & Accounting Groups

ExecutingFutures Broker 1

Executing Futures Broker 2

SO

FCERAFlows & Reports

Flows and reports Reconciled positions updated

AdjustExposures

Trade details

Futures trades

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FCERA Cash Equitization Program – Key Decisions

Determine which indexes will be used to create the desired benchmark

Current FCERA benchmarks as follows:

Cash: 91 day T Bills

U.S. Fixed Income: Lehman Aggregate Index

Global Fixed Income JPM Global Government Bond Index

U.S. Equity: S&P 500 Index

Non-U.S. Equity: MSCI EAFE Index

Real Estate: NCREIF

Alternatives: S&P 500 + 447 basis points

Discuss and design proxies for the underlying asset classes

Determine cash requirements of each instrument and how will they be addressed

Establish contingency plan in the event of large market moves/disruptions

Establish portfolio equitization approach in line with FCERA’s objectives

Determine method of information exchange between FCERA, custodian, and manager

Complete agreements and associated paperwork

Investment management agreement and clearing broker futures agreement

Daily trading by portfolio managers driven by decisions regarding the aforementioned points

SO

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FCERA Cash Equitization Program - Exposure Options

SO

Pros

Available across all major markets

Tight tracking

Less expensive over longer periods

Can accommodate daily cash in/out flows

Pros

No disruption to underlying managers

Can be used to equitize plan receivables and underlying manager cash

Low transactions costs

Low capital requirement — margin and variationmargin only

Pros

Complete customization yields low tracking error

No upfront capital commitment

Transactions costs comparable to futures and stocks in some markets

Cash payments follow scheduled reset dates

Cons

Funding for index funds may come from alpha managers, reducing overall plan alphas

Notification requirements may prohibit same day cash availability

Cannot be used to expose manager cash and receivables

Cons

Not available in all markets

Tracking error between local index futures contracts and asset class benchmark

Cons

Not traded through an exchange

Counterparty risk

Less liquid

Index Funds Futures Swaps

SSgA Overview

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Global Advisors

$435 billion in assets on loan

Lend across multiple asset classes in 30+ markets

Deliver services to 350 institutional investors and 130+ borrowers worldwide

State Street Corporation:Focused On Serving the Needs of Institutional Global Investors

$1.4 trillion* in assets under management

1,600+ employees in 26 offices globally

#1 worldwideinstitutional assets**

Investment management solutions across the risk/return spectrum

Fiduciary heritage began in 1792 More than 20,900 employees in 26 countries Core business is managing and servicing

financial assets

AA- senior debt rating 28 consecutive years of operating EPS growth Ten year annualized return to stockholders of 23%

$10.1 trillion* in assets under custody

Help clients control costs, develop and launch new investment products, and expand globally

Leading investment services provider

* As of December 31, 2005** Pension & Investments, May 30, 2005

Global MarketsSecurities LendingInvestor Services

• $11 trillion in value traded across asset classes in 2005

• $380 billion is assets transitioned in 2005

• Trading relationships with 80%+ of the world’s largest money managers

Asset Servicing Asset Management

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New York

MunichParisZurich

Hong Kong

Singapore

Tokyo

London

Milan

Atlanta

San Francisco

Brussels

Dubai

MelbourneSantiago

Los Angeles

Montreal

Chicago

Toronto

Vancouver

Sydney

Bangkok

Seoul

Clearwater

StamfordBoston

State Street Global Advisors:Global Scale, Local Presence

Investment Center Client Service Office Global Alliance Company

1600+ employees, 400 investment professionals

26 offices, 11 investment centers

Nine Global Alliance companies

Common Global Technology PlatformGlobal Compliance and Risk Management

Three regional trading desks — Boston, London, Hong Kong with 24 hour trading capability

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State Street Global Advisors:Strength of Relationships and Product Diversity

50% of clients have two or more SSgA strategies 73% of new business comes from existing clients

As of December 31, 2005* Assets in Asset Allocation are not counted in their underlying asset class above and do not count total overlay assets.** Includes Real Estate, Private Equity, Commodities and Hedge Funds

$1.4 Trillion in Assets Under Managementas of December 31, 2005

International equity$203,606 million/ 14.1%

Global equity$141,222 million/ 9.8%

Alternative**$11,265 million/ 0.7%

Asset allocation / Balanced accounts*$50,033 million/ 3.5%

Company stocks / ESOPs$76,343 million/ 5.3%

Currency$34,467 million/ 2.4%

Assets passed to sub-advisors$4,730 million/ 0.3%

Global fixed income and cash$572,905 million/ 39.8%

US equity$346,487 million/ 24.0%

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Connecticut (cont’d)Town of ManchesterTown of RidgefieldTown of StratfordTown of West HartfordTown of Woodbridge

FloridaCity of Deerfield Beach FirefightersCity of Delray BeachCity of Fort PierceCity of Gainesville EmployeesCity of Hialeah PoliceCity of Jacksonville Police & Fire City of Lauderhill FirefightersCity of MiamiCity of Miami General Employees

and Sanitation EmployeesCity of Miami Police & FireCity of Pembroke Pines Police & FireCity of Sanford PoliceCity of SanibelCity of Sanibel PoliceCity of Sunrise FireCity of Tamarac Employees & PoliceCity of TampaFlorida Board of Administration Florida League of CitiesFlorida Municipal Investment TrustOrlando Utilities CommissionTown of Palm Beach General & Public

Safety

GeorgiaCity of SavannahCity of ThomasvilleFulton CountyGeorgia FirefightersGeorgia Municipal AssociationGwinnett County Employees & Board of

Education

HawaiiState of Hawaii Employees Retirement

System

IdahoPublic Employees Retirement System of

the State of Idaho

IllinoisCity of Harvey Police & Firemen’s Pension

FundCity of RockfordCollege IllinoisIllinois State TeachersMetropolitan Pier & Exposition AuthorityMetropolitan Water Reclamation DistrictRegional Transportation Authority Wilmette Police & Fire

Massachusetts (cont’d)Norfolk County RetirementPension Reserves Investment

Management Board (PRIM)Plymouth CountyTown of AmesburyTown of AndoverTown of ArlingtonTown of BraintreeTown of BrooklineTown of ClintonTown of FalmouthTown of GreenfieldTown of NatickTown of NorwoodTown of PlymouthTown of ShrewsburyTown of WatertownTown of WellesleyTown of WeymouthTown of WinchesterWorcester Regional

MichiganBerrien CountyCity of Ann ArborCity of FlintCity of JacksonCity of Sterling HeightsCity of Westland Police and FireJackson CountyMacomb CountyMichigan Farm BureauMichigan Treasury Dept.Waterford TownshipYpsilanti Police & Fire

MinnesotaMinneapolis Employees Retirement Minneapolis PoliceMinnesota State Board of Investments

MississippiMississippi Public Employees

MissouriCity of St. LouisCounty Employees Retirement FundMissouri Investment TrustMissouri Public School &

Non-Teachers Retirement Systems

MontanaState of Montana Investment Board

NebraskaDouglas CountyOmaha Public PowerState of Nebraska

New HampshireCity of Manchester

New MexicoPublic Employees Retirement Association of New Mexico

New YorkNY City Board of Education Ret. FundNY City Employees Retirement SystemNY City Firefighters Pension FundNY City Police Retirement FundNY State Teachers’ Ret. System

North CarolinaCharlotte Firefighters Retirement State of North Carolina

OhioOhio Highway PatrolOhio Police & FireOhio Public Employees Deferred Compensation ProgramOhio State TeachersOhio School Employees

OklahomaCompSource Oklahoma Oklahoma CityOklahoma FirefightersOklahoma Police PensionOklahoma State Insurance FundTulsa County Tulsa Municipal Employees Retirement System

OregonOregon State Treasury

PennsylvaniaAllegheny CountyButler County Employees’ Retirement System Delaware CountySoutheastern Pennsylvania Transportation AuthorityPennsylvania Municipal RetirementPennsylvania State Employee Retirement SystemPort Authority of Allegheny County

Rhode IslandCity of NewportCity of ProvidenceCity of WarwickCity of WoonsocketRhode Island Employees

South CarolinaSouth Carolina Retirement Systems

IndianaIndiana State PoliceState of Indiana

IowaIowa Municipal Fire & Police

Iowa Peace Officers’ RetirementState of Iowa

KansasWichita Employees’

Retirement System

LouisianaCity & Parish of East Baton RougeCity of New Orleans FirefightersCity of New Orleans Fire TrustLouisiana AssessorsLouisiana Municipal Employees Louisiana Municipal PoliceLouisiana State EmployeesLouisiana State PoliceParochial Employees Retirement

System

MarylandAnne Arundel CountyState of MarylandUS Enrichment Corporation

MassachusettsBristol CountyCity of AttleboroCity of BostonCity of BrocktonCity of CambridgeCity of ChicopeeCity of EverettCity of Fall RiverCity of LynnCity of LowellCity of MarlboroCity of New BedfordCity of NewtonCity of PittsfieldCity of QuincyCity of SalemCity of Waltham City of WoburnCity of Worcester Dukes CountyFranklin CountyHampshire County Massachusetts Bay Transit Authority

(MBTA) Retirement FundMassachusetts Housing

Finance AgencyMassachusetts Port AuthorityMassachusetts Turnpike Authority Middlesex Regional

AlabamaCity of Anniston Police & FireCity of Mobile Police & Fire

AlaskaAlaska State Pension Investment Board

America SamoaAmerican Samoa Government Employees’ Retirement Plan

ArizonaState of Arizona Retirement System

ArkansasArkansas Municipal LeagueArkansas Teachers Retirement System

CaliforniaAlameda Contra Costa Rapid TransitCalifornia LegislatorsCALPERSCALSTRSLos Angeles City Employees Retirement SystemFresno County Employees Retirement AssociationKern County Employees’ Retirement AssociationOrange County Transportation Authority Orange County Employees Retirement SystemSacramento County Employees’ Retirement SystemSacramento Municipal Utility DistrictSan Bernardino County Employees Retirement AssociationSanta Barbara County Employees Retirement SystemSanta Clara County Valley TransitSan Joaquin County Employees Retirement SystemTulare County Employees Retirement Association

ColoradoAdams CountyColorado Fire & PoliceEl Paso CountyWeld County

ConnecticutCity of GrotonCity of HartfordCity of Stamford City of Stamford Police Pension FundTown of CantonTown of GreenwichTown of Hamden

TennesseeCity of KnoxvilleKnox County Knoxville Utilities BoardMet. Gov’t. of Nashville and Davidson CountyState of TennesseeTennessee Deferred CompensationTennessee Baccalaureate Education System Trust

TexasAustin Firefighters Relief and Ret. FundBeaumont Firemen Relief & Ret. FundCorpus Christi FirefightersDallas Area Rapid Transit AuthorityDallas Deferred CompensationDallas Police & FireTexas County & District

UtahUtah Retirement Systems

VermontState of Vermont

VirginiaAir Force Aid SocietyCity of CharlottesvilleCity of Danville City of Newport News City of NorfolkCity of RichmondCity of RoanokeFairfax CountyNavy Mutual Aid AssociationUS Army NAFVirginia Retirement System

WashingtonMunicipal Employees’ Benefit TrustWashington State Investment BoardWA State Department of Retirement Systems

Washington, D.C.Organization of American StatesPension Benefit Guaranty CorporationThe World Bank

West VirginiaWest Virginia Inv. Mgmt. Board

WyomingState of Wyoming Treasury

US Virgin IslandsVirgin Islands Employee Retirement

Puerto RicoGov’t Development Bank of Puerto Rico Puerto Rico Employees & Judiciary Ret. SystemsPuerto Rico Teachers Retirement

State Street Global Advisors:Public Fund Clients

As of December 31, 2005

SSgA Exposure Management Services

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SSgA Experience In Overlay and Exposure Management Programs

Overlay and exposure management is a core business for SSgA

SSgA has managed overlay and exposure management strategies since 1995

$118 billion of overlay and exposure assets as of December 31, 2005

Manage overlay and exposure management mandates in 5 investment centers worldwide

Strategy Profile

Derivatives Based EM$79.1 Billion

Portable Alpha$1.2 Billion

Physical Based EM$38.5 Billion

Client Profile

Corporate$46.1 Billion

Taft-Hartley$14.1 Billion

Public Funds$58.3 Billion

Foundation/Endowment$0.3 Billion

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SSgA Global Asset Allocation Group

As of January 2006

EuropeNorth America

LondonRick LacailleLawrence DrydenRichard Hannam

Global Asset Allocation Group

Alistair LoweDirector

ParisFrederic Dodard, CFALudovic BrancourtGregory Taieb

SydneyCraig SlaterSimon Sukhaseume

BostonEduardo BorgesDan Farley, CFARob GuilianoDavid Ireland, CFAMichael LearStacey Marino, CFAMike MartelChuck McGinnDan Peirce, Ph.D.

Asia-Pacific

SingaporeHon Cheung

Hong KongAdelina Romanelli

TokyoPeter MorganKensuke NiiharaMariko Tsugane

MunichWolfgang HoetzendorferMatthias Schueller

MontrealCarl Bang, CFALouis Basque, CFADavid Greenleaf, CFA

Global team focused solely on research and implementation of asset allocation, overlay and exposure management strategies

SSgA Global Structured Products Group

SSgA Global Fixed Income Group

SSgA Global Economist Team

SSgA Global Order Trading Group

SSgA Advanced Research Center

ContributingSSgA Investment, Trading and

Research Groups

17SP5

Contributing SSgA Investment Groups Provide Overlay Resources

Overlay resources from contributing SSgA investment groups

Index Funds$577 Billion in equity index funds across 170 benchmarks

$100 Billion in global index bonds

Currency Forwards$73 Billion in currency assets managed via forward transactions

$18 Billion in equity and commodities futures

$9 Billion in fixed income futuresFutures

$6 Billion in fixed income total return swaps

$390 Million in equity and commodities swapsSwaps

As of December 31, 2005

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Global Order Trading Group

London 5Boston

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Hong Kong 4

SSgA Global Order Trading Group Assures Best Execution

SSgA Global trading network

Three regional trading desks

19 trading professionals; 24 hour trading

4000+ trade tickets per day on average

Trade more than $80 billion/year of futures

Seek all sources of liquidity to minimize transactions costs

Internal/external crossing

Futures, EFPs, Swaps

Agency and principal trades

Regular execution analysis

Process for internal transaction cost analysis

$266 billion in equity transactionsas of December 31, 2005

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SSgA Advanced Research Center Provides Research and Guidance

SSgA Advanced Research Center (ARC)

Research team comprised of diverse and talented individuals located in major SSgA investment centers worldwide

24 researchers located in Boston, London and Sydney

14 with PhD degrees, in Finance and Economics as well as Physics, Engineering, and other sciences

Significant experience in quantitative modeling across all asset classes

Organizational structure closely aligned with investment teams

ARC assists the Global Asset Asset Allocation Group

Research on separation of alpha and beta

Strategic asset allocation rebalancing policy study (for U.S. State pension fund)

Transaction cost estimation and reduction

Use of REITs as real estate proxy

20SP5

SSgA Exposure Management Philosophy

Exposure and overlay management is an investment management function

Requires an understanding of how asset classes interact and how to best create desired exposures

Every plan has different needs and requirements

Experience and a robust analysis framework is required to evaluate alternatives and tailor solutions

Reporting should be customized to the plan requirements

Decisions should be driven by trade-offs between costs and risks

Expected transaction costs vary over time, and actual transaction costs are always different

Which synthetic methods are practical?

Every cost matters

The ability to trade cost effectively and to tap liquidity in adverse conditions is key

Ongoing monitoring of exposures is critical

Daily monitoring of exposures

Daily reconciliation with brokers and other parties

An investment management function requiring customization, practicality and risk control

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SSgA Exposure Management Applications

Manage excess cash

Securitize all sources of excess cash (liquidity pools, manager cash, capital commitments, receivables, transitions) using overlay portfolio of synthetic or physical instruments

Facilitate regularly scheduled and unexpected cash flows via overlay portfolio without disrupting manager portfolios

Maintain strategic asset allocation

Excess cash management

Periodic rebalancing of exposures via cost effective overlay portfolio minimizes turnover in manager portfolios and reduces overall tracking error to client’s strategic benchmark

Facilitate tactical asset allocation shifts

Client directed or based on SSgA’s tactical asset allocation views

Provide market (beta), active (alpha) or both exposures within portable alpha program

SP5

Exposure management and overlay strategies can take on many forms

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Performance Expectations are Key

Asset Class Breakdown

Portfolio

Asset Class Physicals Overlay Total Benchmark Difference

Equity 57.36% 2.64% 59.99% 60.00% -0.01%Fixed Income 35.67% 4.29% 39.96% 40.00% -0.04%Cash 6.97% -6.92% 0.05% 0.00% 0.05%

Total 100.00% 0.00% 100.00% 100.00% 0.00%

Regional Breakdown Portfolio

Asset Class Physicals Overlay Total Benchmark Difference

Equity

US Large Cap 41.29% 3.70% 45.00% 45.00% 0.00%US Small Cap 6.73% 0.25% 6.99% 7.00% -0.01%International Developed 6.23% -1.32% 4.91% 5.00% -0.09%Emerging Markets 3.10% 0.00% 3.10% 3.00% 0.10%

Fixed Income

Domestic Fixed Income 35.67% 4.29% 39.96% 40.00% -0.04%Cash 6.97% -6.92% 0.05% 0.00% 0.05%

Total 100.00% 0.00% 100.00% 100.00% 0.00%

Objective is to invest cash to stay closer to the strategic benchmark

Note that if benchmark declines, the program should have a negative return

Regardless of the form of exposure management, returns will vary in the short term

SSgA Compliance and Risk Management

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Compliance Monitoring and Risk Controls

Independent teams provide layers of checks and balances

Global Asset Allocation Group Portfolio Management

Global Asset Allocation Group Operations

SSgA Trading

SSgA Trading Operations

Daily oversight

Daily mark-to-market of futures position

Daily allocation analysis and reconciliation

Counterparty credit risk management

SSgA Global Fixed Income Group Credit Team reviews all counterparties

Compliance and Risk Management Group review

SSgA compliance team comprises 23 professionals

Corporate internal audit team comprises 95 professionals

SP5

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Global Compliance Structure

SSgA Chief Compliance andRisk Management Officer

UnitedStates

Julie PiatelliJoseph HedrickElizabeth Shea

Margaret NelsonMing Wong

Tim CoxTan Eng

Andrew GrilloJustin Hearon

Chandra ManibogYining Gu

John LonghurstAndrew ChanHolly Sabourin

Sasha Abramson

CanadaViolaine Des Roches

Edith RathéThomas DiStefano

UnitedKingdomSam Stewart

Tanya BarvenikSean McLeod

Christopher Peacock

FranceAngdy Ma

Hong KongYanYan Li

Doris LeungShalong So

JapanKoichi Iwabuchi

Toshio OhyaEiko Okumura

AustraliaJo Proud

Tania NguyenKatherine Crawford

GermanyMartina Schroedel

BelgiumTBD

Singapore

Korea

As of September 30, 2005Note: Violaine Desroches, Yan Yan Li and Jo Proud are also local legal counsel

SwitzerlandAndreas Nicoli

ItalyMarcello Gramegna

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SSgA Compliance and Risk Management

Compliance and Risk Management function has an independent reporting structure

Report directly to SSgA CEO

Significant interaction with State Street Corporate Audit and Enterprise Risk Management

Strong corporate governance — SSgA Code of Ethics

Staffed with highly experienced compliance and risk management professionals

Operates globally and within a complex regulatory environment:

US Securities and Exchange Commission (SEC)

Federal Reserve Bank (Federal Reserve)

Commodity Futures Trading Commission (CFTC)

Office of the Comptroller of the Currency (OCC)

Internal Revenue Service (IRS)

National Futures Association (NFA)

US Department of Labor (DOL)

Multiple foreign regulatory authorities

(e.g., Financial Services Authority, UK, Australian Securities & Investment Commission, etc.)

SSgA Advantages in Exposure Management

28SP5

SSgA Advantages in Exposure Management

Experience

Exposure management and overlay is a core business for SSgA

SSgA has managed overlay strategies since 1995

$118 billion of overlay mandates managed by Global Asset Allocation team in 5 investment centers worldwide

Consider overlay an asset management function, understand how to asset classes interact and how best to obtain inexpensive exposure to them

Customization is the norm – we typically work with clients on any level they desire

Resources

Global Asset Allocation Group has a wide array of resources

Global Trading Desk handles more than $80 billion of derivative transactions per year

Global Equity Index and Global Fixed Income Groups routinely develop or use derivatives for cash exposures

Advanced Research Center assists with client-related projects and overlay research

SSgA can implement the most appropriate overlay investments at the lowest cost available

Futures, Index Funds, Swaps

Infrastructure

All portfolio managers worldwide use the same systems and resources

Dedicated operations staff

Electronic links to custody and trading

Comprehensive risk and compliance oversight

Fees

30SP5

Fees

Cash Equitization of Administrative Cash (S&P 500 Index only)

8 basis points on the first $100,000,000

5 basis points thereafter

Minimum annual fee: $50,000

Strategic Overlay and Rebalancing

9 basis points on the first $100,000,000

7 basis points on the next $100,000,000

5 basis points thereafter

Minimum annual fee: $100,000

Appendix A: SSgA Advanced Research Center

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SSgA Advanced Research CenterOverview

Research team comprised of diverse and talented individuals located in major SSgA investment centers worldwide

24 researchers located in Boston, London and Sydney

14 with PhD degrees, in Finance and Economics as well as Physics, Engineering, and other sciences

Recruiting to add several new staff members to strengthen team in all areas

Significant experience in quantitative modeling across all asset classes

Organizational structure closely aligned with investment teams

Published in major academic and practitioner journals

Advanced Research CenterMark Hooker, PhD Director

Market NeutralEquity and Trading

Vladimir Zdorovtsov, PhDMarket Neutral Equity

Andrea AuZhan Onayev, PhD

TradingStuart Hall, CFA*Eldar Nigmatullin, PhD*

Mama Attiglah, (L)*Alejandro Gaba*Ron Guido, PhD (L)*Ami Teruya*Wilson Thong (S)Jonathan Whiteoak, PhD (S)Tim Ye, PhD (S)

Alejandro Gaba*Stuart Hall, CFA*Eldar Nigmatullin, PhD*

V.T. Alaganar, PhD (S)Ron Guido, PhD (L)*Carlos Morales, PhDRitika PuriThomas Tziortziotis* (L)

Fixed Income Asset AllocationOverlay and Currency

Ralph Smith, CFA (L)Asset Allocation/OverlayMama Attiglah, (L)*

Craig Edwards, PhD*Andrei Serjantov, PhD (L)Ritirupa Samanta, PhD*Ami Teruya*

CurrencyCraig Edwards, PhD*Ritirupa Samanta, PhD*

Thomas Tziortziotis* (L)

US Active Equity Non-US ActiveEquity

Enhanced Equity

Ying Becker, PhDPeng Fei, PhDRaul Rivera, Jr.

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SSgA Advanced Research CenterResearch and Model Building Process

Idea Generation

Research Agenda

Research Process

Technical and Investment Committee

Evaluation

Market insights

Academic research

SSgA research

Priorities jointly established by ARC, PM teams, and Chief Investment Officers

Analysis conducted by ARC research staff

Ongoing involvement of PMs and senior ARC staff

Bi-weekly research meetings — peer review and feedback

SSgA’s senior investment professionals

Review for process integrity and strategy consistency

ImplementationSystems / Testing

Shared responsibility of ARC and PM teams to facilitate IT implementation

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SSgA Advanced Research CenterSelected Client-Specific Research — Current and Recent

For U.S. State Public Fund:

Quantitative calculation of appropriate “bands” around strategic asset allocation (that still enable them to meet their strategic return objectives) and triggers for the timing and magnitude of rebalancing, taking into account projected returns, risk and correlation, and transaction costs

For two European Pension Plans:

Asset allocation study using Monte Carlo analysis

Report on the diversification and hedging benefits of commodity investments

For State Street Corporation:

Basel II economic capital risk modeling

For Charitable Gift Annuity Plan:

Dynamic Asset Allocation research

For International Corporate Client:

Development of multi-asset class absolute return strategy

35As of January 2006

SSgA Advanced Research CenterSelected Internal Projects - Current and Recent

Equity

Disposition Effect and Momentum(US Active Equity)

EAFE Growth Factors and Model

Emerging Markets Stock Selection

Estimate Revision Sensitivity(US, International, Enhanced)

Global Sentiment (Enhanced)

Global Alpha Plus (130/30)

Hong Kong Equity Model

Natural Language Processing (with MIT)

Order Flow Imbalances and Earnings Announcements

Portfolio Construction with Transactions Costs

Short Sales Hot and Cold Issues

Socially Responsible Investing

US Biotech Industry Genetic Programming Research

Fixed Income, Currency, Asset Allocation/Overlay

Asset/Liability-Based Dynamic Risk Allocation Modeling

Breakeven Inflation Models (US, UK, France)

Core Plus Australia

Credit Issuer Selection (US, Euro, UK, Japan)

Credit Portfolio Risk Modeling

Developed Markets Country Selection(Equity/TAA)

Enhanced Carry Modeling (Currency)

Euro Term Spread Model

Equity/Bond/Cash TAA Model Review

Factor Combination/Portfolio Construction for Currency

Fixed Income Hedge Fund Portfolio Construction

Fundamental Trend Model Review (Currency)

Portfolio Flows for Currency

Appendix B: Sample Futures Baskets

37

S&P 500® Index

As of February 2006

StandardS&P 500® E-Mini S&P

Based on a $100 Million Portfolio Contract 500® Contract

Entry Costs (bps) Commission 0.11 0.36

One Way Mkt. Impact 5.00 3.00

Annual Holding Costs Calendar Spread Mis-pricing 1.24 0.83

Additional Commission from Rolling 0.66 2.16

Total Cost of LongPosition Over 1 Year 7.01 6.35

Exit Costs Commission 0.11 0.36

One Way Mkt. Impact 5.00 3.00

Total with Exit Costs 12.12 9.71

Expected Annual Tracking Error vs. Cash Benchmark: 6 bps

38

Russell 2000® Index

As of February 2006

Standard E-MiniRussell 2000® Russell 2000®

Based on a $100 Million Portfolio Contract Contract

Entry Costs (bps) Commission 0.10 0.31

One Way Mkt. Impact 52.00 34.00

Annual Holding Costs Calendar Spread Mis-pricing -98.03 -99.76

Additional Commission from Rolling 0.60 1.86

Total Cost of LongPosition Over 1 Year -45.33 -63.59

Exit Costs Commission 0.10 0.31

One Way Mkt. Impact 52.00 34.00

Total with Exit Costs 6.77 -29.28

Expected Annual Tracking Error vs. Cash Benchmark: 20-25 bps

39

MSCI EAFE® Index

Estimated TE of Basket of Local Indexes vs. MSCI EAFE: 137 bpsAs of February 2006

EuroBased on a FTSE® STOXX CAC SPI S&P/ EAFE$100 Million Portfolio 100 TOPIX 50 40 DAX 200 AEX MIB Basket

% in EAFE Basket 30.74% 22.66% 21.63% 5.33% 3.90% 8.75% 3.38% 3.61% 100.00%

# of Contracts 332 214 562 103 29 112 37 18

Entry Costs (bps) Commission 1.04 3.31 2.72 1.27 0.67 1.49 0.99 0.45 1.93

One Way Mkt. Impact 7.84 4.85 1.83 1.22 0.51 5.83 2.02 0.66 4.59

Annual Holding Costs Calendar Spread Mis-pricing -7.00 -22.00 23.00 -7.00 -2.00 -95.00 14.00 10.00 -10.09

Additional Commission from Rolling 6.22 19.88 16.30 7.59 4.02 8.95 5.93 2.71 11.59

Total Cost of Long Position Over 1 Year 8.10 6.04 43.85 3.08 3.20 -78.73 22.94 13.82 8.02

Exit Costs Commission 1.04 3.31 2.72 1.27 0.67 1.49 0.99 0.45 1.93

One Way Mkt. Impact 7.84 4.85 1.83 1.22 0.51 5.83 2.02 0.66 4.59

Total With Exit Costs 16.98 14.20 48.40 5.57 4.38 -71.41 25.95 14.93 14.54

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MSCI ACWI® ex-US Index

Estimated TE of Basket of Local Indexes vs. MSCI ACWI ex US: 166 bpsAs of February 2006

Euro ACWIBased on a FTSE® STOXX CAC SPI S&P/ S&P MSCI ex-US$100 Million Portfolio 100 TOPIX 50 40 DAX 200 AEX MIB TSE 60 Taiwan Basket

% in ACWI ex US Basket 26.27% 20.26% 21.58% 2.17% 2.46% 9.59% 3.00% 3.08% 8.11% 3.48% 100.00%

# of Contracts 284 191 560 42 18 123 32 15 96 148

Entry Costs (bps) Commission 1.04 3.31 2.72 1.27 0.67 1.49 0.99 0.45 0.96 6.36 2.06

One Way Mkt. Impact 7.84 4.85 1.83 1.22 0.51 5.83 2.02 0.66 3.42 1.38 4.44

Annual Holding CalendarCosts Spread

Mis-Pricing -7.00 -22.00 23.00 -7.00 -2.00 -95.00 14.00 10.00 -4.00 -340.00 -22.07

Additional Commissionfrom Rolling 6.22 19.88 16.30 7.59 4.02 8.95 5.93 2.71 5.76 139.90 15.90

Total Cost of Long Position Over 1 Year 8.10 6.04 43.85 3.08 3.20 -78.73 22.94 13.82 6.14 -192.36 0.33

Exit Costs Commission 1.04 3.31 2.72 1.27 0.67 1.49 0.99 0.45 0.96 6.36 2.06

One Way Mkt. Impact 7.84 4.85 1.83 1.22 0.51 5.83 2.02 0.66 3.42 1.38 4.44

Total With Exit Costs 16.98 14.20 48.40 5.57 4.38 -71.41 25.95 14.93 10.52 -184.62 6.83

41

Lehman Aggregate Bond Index

* As of March 2006The Lehman Index names are trademarks of Lehman Brothers, Inc.

Lehman Aggregate Futures Basket

ApproximateMarket Futures Contract Weight*

0-2 years UST US 2-year Note 5.84%

2-5 years UST US 5-year Bond 8.68%

5-8 years UST US 10-year Bond 5.52%

8+ years UST US 30-year Bond 4.99%

0-2 years Corp/Mort 2-year Eurodollar Bundle 8.25%

2-5 years Corp/Mort 4-year Eurodollar Bundle 48.71%

5-8 years Corp/Mort 10-year Swap Future 12.35%

8+ years Corp/Mort US 30-year Bond 5.66%

Cost ~ 6 BPS

Expected Tracking Error vs. Cash Benchmark 85-90 bps

Appendix C: Exposure Reporting

43

Reporting Capabilities

Customized reporting for each client

Risk report generated daily and delivered to client monthly

Total exposure by broad and sub-asset classes

Breakdown between physical and derivatives exposure

Total exposure by manager

Portfolio weights versus benchmark weights

Tracking error by manager

Currency exposures and benchmark weights

Performance reporting provided monthly

44

Sample Exposure Report

Futures Overlay

Asset Class Breakdown

Portfolio

Asset Class Physicals Overlay Total Benchmark Difference

Equity 57.36% 2.64% 59.99% 60.00% -0.01%Fixed Income 35.67% 4.29% 39.96% 40.00% -0.04%Cash 6.97% -6.92% 0.05% 0.00% 0.05%

Total 100.00% 0.00% 100.00% 100.00% 0.00%

Regional Breakdown

Portfolio

Asset Class Physicals Overlay Total Benchmark Difference

Equity

US Large Cap 41.29% 3.70% 45.00% 45.00% 0.00%US Small Cap 6.73% 0.25% 6.99% 7.00% -0.01%International Developed 6.23% -1.32% 4.91% 5.00% -0.09%Emerging Markets 3.10% 0.00% 3.10% 3.00% 0.10%

Fixed Income

Domestic Fixed Income 35.67% 4.29% 39.96% 40.00% -0.04%Cash 6.97% -6.92% 0.05% 0.00% 0.05%

Total 100.00% 0.00% 100.00% 100.00% 0.00%

45

Sample Exposure Report (continued)

Manager Breakdown

As Percent of

Description Plan Class Assets

US Large CapManager A Active Large Cap 14.57% 32.39% $109,187,279Manager B Active Large Cap Growth 12.14% 26.99% $90,989,399Manager C Active Large Cap Value 4.86% 10.80% $36,395,760Manager D Passive Large Cap 9.72% 21.59% $72,791,519Overlay Futures Large Cap Futures Basket 3.70% 8.23% $27,754,387Total 45.00% 100.00% $337,118,345

US Small CapManager E Active Small Cap 3.37% 48.18% $25,229,682Manager F Active Small Cap 3.37% 48.18% $25,229,682Overlay Futures Russell 2000® Futures 0.25% 3.64% $1,906,478Total 6.99% 100.00% $52,365,842

International DevelopedManager G Active Developed Equity 3.54% 72.16% $26,541,029Manager H Passive Developed Equity 2.69% 54.79% $20,150,236Overlay Futures International CFTC Futures Basket -1.32% -26.95% $(9,912,984)Total 4.91% 100.00% $36,778,281

Emerging MarketsManager I Active Emerging Markets 1.94% 62.70% $14,551,635Manager J Active Small Cap Emerging Markets 1.16% 37.30% $8,657,244Total 3.10% 100.00% $23,208,879

Domestic Fixed IncomeManager K Active Domestic Fixed Income 8.39% 21.00% $62,881,822Manager L Active Domestic Fixed Income 8.39% 21.00% $62,881,822Manager M Active Domestic Fixed Income 8.39% 21.00% $62,881,822Manager N Passive Domestic Fixed Income 10.49% 26.26% $78,602,277Overlay Futures Domestic Fixed Income Futures Basket 4.29% 10.73% $32,125,487Total 39.96% 100.00% $299,373,229

CashCash STIF, Cash Accounts, Etc. 6.97% $52,256,284Cash Exposure Exposure from Futures -6.92% $(51,873,368)Total 0.05% $382,916

Appendix D: Biographies

47

Presenter Biographies

Neil Tremblay

Neil is a Principal of State Street Global Advisors, Director of Client

Service in the Western United States and a Senior Client Service

Officer in the firm's West Coast office. Neil is primarily responsible

for managing relationships within State Street Global Advisors'

existing client base with a particular focus on public funds. He was

formerly the Director of Sales and Marketing for the Firm's western

U.S. corporate, foundation and endowment business operations.

Neil joined SSgA in 1995 as a senior sales professional

responsible for marketing the firm's defined contribution services.

Prior to joining SSgA, Neil was with Wyatt Preferred Choice,

Watson Wyatt and Company's benefits outsourcing subsidiary. He

also spent four years as an Institutional Trust Officer with First

Colonial Bankshares and five years with Merrill Lynch.

Neil holds a BS degree in Finance from Marquette University and a

MBA from Marquette University

Mike Martel

Mike is as Principal of State Street Global Advisors and a

Portfolio Manager on the Global Asset Allocation team. He is

responsible for developing and implementing multi-asset class

solutions for clients, including strategic and tactical global

balanced funds, equitization and overlay strategies, and country

selection portfolios. In addition, Mike oversees the continued

development of proprietary trading systems and assists in

ongoing research efforts.

Previously, Mike was with SSgA's Global Structured Products

Group specializing in developed and emerging market index

strategies and the valuation of global derivatives. Prior to joining

SSgA in 1994, Mike worked for the Mutual Funds Division of

State Street Corporation. He has been working in the investment

management field since 1992.

Mike holds a Bachelor of Arts degree in Economics from the

College of the Holy Cross and Master degrees in both Finance

and Business Administration from the Carroll School of

Management at Boston College. He also holds a Series 3 license

from the National Futures Association.

Appendix E: Legal Disclosures

49

Trademarks

Dow Jones & Company, Inc. is the owner of the trademarks and copyrights relating to the Dow Jones Indexes.

“FTSE®”, "FT-SE®" and "Footsie®" are trade marks jointly owned by the London Stock Exchange Plc and The Financial Times Limited and are used by FTSE International Limited under licence. “All-World”, “All-Share” and “All-Small” are trade marks of FTSE International Limited.

GSCI® is a registered mark of Goldman, Sachs & Co.

The IFC Investable Indexes are service marks of International Finance Corporation.

The Lehman Index names are trademarks of Lehman Brothers, Inc.

The MSCI financial products described herein are indexed to an MSCI index. The MSCI financial products referred to herein are not sponsored, endorsed, or promoted by MSCI, and MSCI bears no liability with respect to any such financial products or any index on which such financial products are based.

The MSCI/Barra index names are trademarks of Barra, Inc.

Each Russell Index is a trademark of the Frank Russell Company. Russell™ is a trademark of the Frank Russell Company.

Each Standard & Poor’s Index is a trademark of The McGraw-Hill Companies, Inc. and has been licensed for use by State Street Bank and Trust Company. The product is not sponsored, endorsed, sold or promoted by Standard & Poor’s and Standard & Poor’s makes no representation regarding the advisability of investing in the Product.

Each Dow Jones/Wilshire Index is calculated by Dow Jones & Company, Inc. and licensed to State Street Bank and Trust Company. The financial products are not sponsored, endorsed, sold or promoted by Dow Jones and Dow Jones makes no representation regarding the advisability of investing in the financial products. Dow Jones bears no liability with respect to any such financial products or any index on which such financial products are based.