Comprehensive annual financial report / Elected Officials' Retirement Plan fy 2007

              Elected Officials’
Retirement Plan
26th COMPREHENSIVE ANNUAL FINANCIAL REPORT
A PENSION TRUST FUND OF THE STATE OF ARIZONA
For the Fiscal Year ended June 30, 2007
Our Vision, Mission & Values
Vision
Invest, secure and manage responsibly the retirement funds of its members in accordance with all
legal, investment and financial requirements and in a manner consistent with the quality to which
its members have become accustomed.
Mission
• To be a low cost, highly personalized quality service provider of funds management and benefit
services
• To manage long-term investments with the goal of consistently outperforming over time the
composite weighted market return benchmark net of all investment-related costs so as to assure
the financial integrity of the funds and the security of the benefits these funds provide
Values
• Do what’s best for our members and financial health and integrity of the System
• Proactive
• Committed to high quality, uniform, sustainable service
• Innovative and cost effective in Plan administration and services
• Use best practices in Human Resource management
Twenty-Sixth
Comprehensive Annual Financial Report
For the Fiscal Year Ended
June 30, 2007
Prepared by the Staff of PSPRS
Public Safety Personnel Retirement System
3010 E Camelback Road, Suite 200
Phoenix, Arizona 85016
Phone 602-255-5575 Fax 602-255-5572 www.psprs.com
Elected Officials’
Retirement Plan
A Pension Trust Fund of the State of Arizona
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Table of Contents
Introductory Section
Certificate of Achievement 8
Fund Manager Report 9
Letter of Transmittal 13
Fund Manager 18
Executive Staff and Organizational Chart 19
Professional Advisors 20
Financial Section
Independent Auditor Report 22
Management Discussion and Analysis 24
Basic Financial Statements
Statement of Plan Net Assets 30
Statement of Changes in Plan Net Assets 31
Notes to the Financial Statements 32
Required Supplementary Information
Schedule of Funding Progress 43
Schedule of Employer Contributions 43
Notes to the Required Supplementary Information 44
Supporting Schedules
Schedule of Changes in Fund Balance Reserves 45
Schedule of Receipts and Disbursements 46
Schedule of Administrative Expenses 47
Schedule of Consultant Expenses 47
Other Supplemental Information - Agency Fund Statement of Changes in
Asset & Liabilities 48
Investment Section
Investment Advisor’s Letter 50
Fund Investment Objectives 51
Investment Performance
Investment Returns 52
Asset Allocation 52
Ten Year Cumulative Return, Benchmark & Indices 53
Top 10 Investment Holdings 54
Summary of Change to Investment Portfolios 55
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Investment Section (continued)
Schedule of Commissions & Investment Management Costs 55
Equity Portfolio 56
Equity Acquired 60
Equity Sold 62
Bond Portfolio 66
Bonds Acquired 71
Bonds Sold 73
Corporate Note Portfolio 74
Alternate Investments Portfolio 75
Alternative Investments Acquired 76
Alternative Investments Sold 77
Actuarial Section
Actuary’s Certification Letter 80
Actuarial Balance Sheet 81
Summary of Valuation Assumptions 82
Solvency Test 84
Summary of Active Member Data 85
Summary of Retirants and Inactive Members 86
Schedule of Experience Gain/loss 87
Statistical Section
Financial Trends 90
Demographics 92
Operating Information 94
Participating Employers 95
Introductory Section
Certificate of Achievement 8
Fund Manager Report 9
Letter of Transmittal 13
Fund Manager 18
Executive Staff and Organizational Chart 19
Professional Advisors 20
Introductory Section
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Introductory Section
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Fund Manager Report
PUBLIC SAFETY PERSONNEL RETIREMENT SYSTEM
CORRECTIONS OFFICER RETIREMENT PLAN
ELECTED OFFICIALS’ RETIREMENT PLAN
3010 East Camelback Road, Suite 200
Phoenix, Arizona 85016-4 16
www.psprs.com
TELEPHONE: (602) 255-5575
FAX: (602) 255-5572
February 8, 2008
The Honorable Janet Napolitano
Governor of the State of Arizona
State Capitol
Phoenix, Arizona 85007
Dear Governor Napolitano:
The Fund Manager of the Public Safety Personnel Retirement System (PSPRS) respectfully submits the Twenty-
Sixth Comprehensive Annual Financial Report (CAFR) for the Elected Officials Retirement Plan (EORP) for the
fiscal year ended June 30, 2007 (FY’07), in accordance with the provisions of A.R.S. Section 38-803.
The EORP’s Funding Ratio
As of fiscal year-end, we must report that the financial status of the EORP, as reflected in its funding ratio, has
declined significantly relative to what it was one year earlier. At June 30, 2006, that funding ratio was 89.9%;
at June 30, 2007, it was down to 74.6%. But before summarizing the Plan’s fiscal year-end funding situation
and the factors that occurred during the fiscal year that led to the year-end results, we must first provide some
historical perspective.
As you recall, during the 1990s, PSPRS annually generated investment returns well in excess of the System’s
actuarially assumed rate of 9%. As a result, throughout the decade and through FY’04, the EORP was more
than 100% funded. It appeared that all was well. In reality, however, that was not the case. The financial health
of the Plan was predicated on an investment strategy that entailed an extraordinary degree of risk.
During the last half of the 1990’s, the Plan’s portfolios were increasingly concentrated and invested in “high
tech” securities. But in March, 2000, the “tech” bubble began to deflate. From June 30, 2000 to June 30, 2002, the
asset value of the EORP declined from $355.3 million to $242.2 million – an asset value loss of over 31.8%. Even
as of June 30, 2007, with the EORP’s market value of asset at $339 million, the Plan has still not fully recovered
its asset value loss. To make matters worse, from June 30, 2000 through June 30, 2007, the liability for present
and promised future benefits has increased 78.0%.
Since the System uses a seven year averaging process to determine its fiscal year-end actuarial value of assets,
the effects of the 2000-2002 asset value loss will not be fully reflected in the Plan’s funding ratio until the end of
FY’09.
Although the 2000-2002 asset value loss has been by far the major cause of the Plan’s funding ratio erosion,
other factors also contributed. Some of these include: the less favorable investment environment that caused
us to reduce the actuarial expected rate of return on assets from 9.0% to 8.5%; and the statutory provisions that
require us to divert 50% of investment returns in excess of 9% into the Plan’s Benefit Increase Reserve such that
the Reserve assets are not taken into account for funding ratio and employer contribution rate calculations.
Still other factors contributed to the significant funding ratio deterioration from FY’06 to FY’07. In this most recently
completed fiscal year, the System was required to make a variety of changes in actuarial technique and demographic
assumptions. These changes, which significantly increased the Plan’s unfunded liability, were necessitated by
actuarial audits conducted by the Legislature’s actuarial auditing firm, Segal & Co. and by the System’s actuarial
James M Hacking
Administrator
Ryan Parham Tracey D. Peterson
Interim CIO Assistant Administrator-COO
Carter Olson
Fund Manager Chairman
Billy Shields
Fund Manager Vice Chairman
Fritz Beesemyer 	 Mike Galloway
Fund Manager Member Fund Manager Member
Brian Delfs 	 James Gentner
Fund Manager Advisor 	 Fund Manager Advisor
Introductory Section
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auditing firm, Milliman Consultants and Actuaries. Also, a large portion of the participants in the Plan received a
significant increase in compensation that will increase future benefit awards and, therefore Plan liability. Finally,
the System settled potential litigation by allowing the retirement benefits of those who began to participate in the
Plan prior to July 1, 1994 and who are retiring now or in the future to be calculated using final annual compensation
rather than the average of the highest three consecutive years of compensation. This calculation method will mean
higher benefits for many of those affected and increased liability for the Plan.
Employer Contribution Rates
When times were good and the EORP was over-funded, the Plan’s employer contribution rates were rather
reasonable. For example, early in the decade the employer contribution was only 7.55%.
But with the decline in the Plan’s funding ratio, the employer contribution requirements have been increasing
year-by-year. The current EORP employer contribution requirement is 20.2%. But as a result of the Plan’s FY’07
lower funding ratio, that aggregate rate will increase to 28.0%, effective July 1, 2008.
As we move into the new fiscal year, the System’s Administrator will undertake consultations with
representatives of the System’s constituency groups and the contributing employers to determine whether a
consensus exists with respect to any of a variety of options that could be employed to limit, in the short term,
the degree to which the employer rates will increase next July 1st.
FY’07 Investment Results
The FY’07 rate of return on the invested assets of the EORP was 17.0% -- a rate of return that compares
favorably with the 15.1% weighted composite rate of return benchmark for the Plan and with its 8.5% actuarial
assumed rate of return. In addition, since the return was in excess of 9%, significant new assets flowed into
the Plan’s Reserve for Future Benefit Increases. However, when compared to the median returns of a variety
of large public pension fund “peer groups” for the same time period, the EORP’s investment results were only
3rd quartile. This less-than-median-return result underscores the continuing need to move ahead with the
restructuring of the System’s asset management function that began during this last fiscal year.
The very disappointing FY’06 rate of return results (i.e., 7.87%) brought us to the realization that we could not
reasonably expect to achieve our long-term rate of return objectives if we simply continued to manage the Plan’s
assets as has been done in the past. The past practice of managing all the System’s publicly traded portfolios
internally has severely limited the Plan’s asset diversification and caused the Plan to underperform its public
retirement system “peer” groups. In order to better position the Plan to achieve its rate of return expectations,
enhance returns, control risk and diversify the Plan’s assets through exposure to a wider mix of financial markets,
we began in FY’07 an asset management restructuring. During the fiscal year, the following was accomplished:
A new independent investment consulting firm (Ennis, Knupp & Associates) was retained in December,
2006;
A new and more diversified asset allocation was adopted in February;
A plan for implementing the new asset allocation was adopted in May;
The Fund Manager accepted the retirement resignation of the System’s CIO and authorized a nation-wide
search for a new CIO using an executive search firm;
A new custodian bank (BNY Mellon Bank) was hired in August (effective October 1st); and
Barclay Global Investors (BGI) was approved in May to manage the transition of the System’s equity
assets into U.S. and non-U.S index accounts at BGI with the asset transfer expected to occur after the 2007
holiday season.
Had the Plan had its new asset allocation fully implemented throughout FY’07, and had it just gotten market
returns for the various asset classes reflected in the new allocation, the Plan’s rate of return would have been
19.25%, as opposed to the 17.0% the Plan actually received. Certainly, given the Plan’s financial status, we can
ill afford to miss out on such additional investment return potential.
As FY’08 proceeds, the asset management restructuring plan contemplates the following:
Completing the contract negotiations with BGI;
Transitioning the System’s equity assets into index accounts at BGI;
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Introductory Section
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Fund Manager Report
Completing the CIO search and selection process;
Modifying the System’s asset allocation to incorporate asset types that have relatively low correlations to
equities;
Conducting searches for portfolio managers that can actively manage equity portfolios with global
mandates and for managers that can construct portfolios that have relatively low correlations to equity
portfolios;
Reviewing the internally managed bond portfolio and making changes as appropriate; and
Increasing commitments to real estate and private equity to achieve greater diversification in those areas.
Expectations for the Financial Status of the EORP in the Future
The funding ratio for the Plan should begin to improve and the employer contribution rates should begin to
decline once the 2000-2002 asset value losses drop out of the calculation of the actuarial value of assets (i.e.,
after the close of Plan FY’09). The fact that, for the first time since June 30, 2000, the Plan had a market value of
assets greater than the actuarial value of assets at June 30, 2007 would seem to be a harbinger of an improving
trend. The implementation of the System’s new asset allocation and the achievement of better-than-expected
rates of return on invested assets would serve to accelerate and magnify the expected improving trend.
However, there are two things that could delay the expected improvement:
A sharp and sustained downturn in the U.S. and global economies and financial markets; and
Having to reduce the System’s actuarial rate of return assumption from 8.5% to 8.0% as was
recommended by the actuarial auditing firms, Segal & Co. and Milliman Consultants and Actuaries.
System Governance, Administrative and Internal Control Changes
Developments during the twelve months ending June 30, 2007 that strengthened System governance, increased
administrative efficiency and productivity or improved internal controls were as follows:
First, a search process was conducted for a new external audit firm to do a very thorough audit of all aspects
of System operations. That process resulted in the selection of the certified public accounting firm of Heinfeld,
Meech & Co. P.C. for the external audit role, replacing the firm of Barrows & Schatza.
Second, the Board’s Governance Policies were reviewed for compliance once again by Cortex Applied
Research. Only a few minor variations were identified; some of these may require amendments to the policies.
Third, the System’s Compliance Officer/Internal Auditor initiated a project, the object of which is the
development of detailed written procedures for all of the System’s processes, including those that relate to asset
management as well as benefit determination.
Fourth, the firm of Cost Effective Measurement (CEM) was retained to do an evaluation of the System’s
historical asset management cost effectiveness in relation to the System’s peer group. The report will be made
public in December.
Fifth, as indicated above, the System carried out its first actuarial audit and implemented all the immediately
necessary changes in actuarial technique and demographic assumptions. These are reflected in the EORP’s
FY’07 actuarial valuation results.
Sixth, as indicated above, the Board retained a new investment consulting firm, Ennis, Knupp & Associates,
to provide the Board with advice and analysis with respect to the management of the System’s assets that is
independent of that received from the System’s professional investment staff.
Seventh, the management staff conducted a search process for a firm to do an independent IT assessment. The
staff search committee created for that purpose recommended, and the Board approved, the selection of the
Torus Business Group for this assignment. The IT assessment will include, among other things, a focus on the
options available for improving the System’s position with respect to business continuity and disaster recovery.
Finally, the System implemented a new web site to enable EORP contributing employers to transmit
electronically payroll deduction records to accelerate the process and improve efficiency.
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Introductory Section
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Conclusion
As a Board, we intend to continue our commitment to make the changes that are necessary to improve the
financial status of the EORP, moderate the required contributions of the Plan’s participating employers and
faithfully serve the interests of the Plan’s participants and beneficiaries.
We appreciate having the opportunity to serve the State of Arizona, its political subdivisions and its EORP
stakeholders and we look forward to continuing to serve as members of the Fund Manager for this System.
Respectfully submitted,
Introductory Section
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PUBLIC SAFETY PERSONNEL RETIREMENT SYSTEM
CORRECTIONS OFFICER RETIREMENT PLAN
ELECTED OFFICIALS’ RETIREMENT PLAN
3010 East Camelback Road, Suite 200
Phoenix, Arizona 85016-4 16
www.psprs.com
TELEPHONE: (602) 255-5575
FAX: (602) 255-5572
February 8, 2008
The Fund Manager
Public Safety Personnel Retirement System
State of Arizona
Phoenix, Arizona
Gentlemen:
There is presented, herewith, the Twenty-Sixth Comprehensive Annual Financial Report (CAFR) of the
operations and financial conditions of the Elected Officials Retirement Plan (EORP), State of Arizona, for the
fiscal year ended June 30, 2007. The Plan is a uniform statewide retirement system that provides retirement,
disability and survivor benefits, post retirement adjustments and health insurance subsidies for judges and
state, county and local elected officials of participating governmental employer units.
Arizona Revised Statutes Title 38 requires the Fund Manager to transmit to the Governor and the Legislature
this annual report within six months of the close of each fiscal year. Incorporated in this report are the audited
financial statements, management’s discussion and analysis, and other financial data from the June 30, 2007
report of Heinfeld, Meech & Co. P.C., Certified Public Accountants and auditors for the System. Also included
are the actuarial certi­fication
statement and the actuarial balance sheet from the June 30, 2007 actuarial
valuation prepared by the System’s actuary, Rodwan Consulting Company.
FINANCIAL INFORMATION
The primary responsibility for the integrity and objectivity of the financial statements and related financial
data rests with the management of the System. The financial statements were prepared in conformity with
generally accepted accounting principles appropriate for government-sponsored defined benefit pension plans.
Management believes that all other financial information included in this annual report is consistent with those
financial statements.
It is the System’s policy to have and maintain an effective system of accounting controls. We believe our
controls are adequate to provide reasonable assurance that assets are safeguarded against loss or unauthorized
use and to produce the records necessary for the preparation of financial information. There are limits inherent
in all systems of internal control based on the recognition that the costs of such systems should be related to the
benefits to be derived. Management believes the System’s controls provide this appropriate balance.
The System uses the accrual basis of accounting for both revenues and expenses. Contributions to the System
are based on principles of level-cost financing with current service financed as a level percent of payroll on a
current basis and prior service amortized as a level percent of payroll over a period of at least twenty but not
more than thirty years.
REVENUES
Revenues to the System are derived from four sources: member contributions, employer contributions, a
portion of judicial filing fees and returns on the invested assets of the Plan. As shown by the Schedule of
Revenues by Source included in the Statistical Section later in this report, the System had a positive investment
return this fiscal year that was further enhanced by member contributions, direct employer contributions and
fee income. Please refer to the Statistical Section for a ten-year history of revenues and expenses.
James M Hacking
Administrator
Ryan Parham Tracey D. Peterson
Interim CIO Assistant Administrator-COO
Carter Olson
Fund Manager Chairman
Billy Shields
Fund Manager Vice Chairman
Fritz Beesemyer 	 Mike Galloway
Fund Manager Member Fund Manager Member
Brian Delfs 	 James Gentner
Fund Manager Advisor 	 Fund Manager Advisor
Letter of Transmittal
Introductory Section
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ADMINISTRATIVE AND INVESTMENT EXPENSES
The EORP FY’07 administrative and investment-related expenses totaled $449.3 thousand, up from the $308.4
thousand during the prior year. Administrative and investment expenses were approximately 12 basis points
of the total assets managed. This is very low compared with other public retirement systems. A dedicated staff
and constantly improving internal expertise has enabled management to keep costs relatively low even though
assets managed have been increasing and service needs have been escalated due to increasing numbers of
participants and beneficiaries.
INVESTMENTS
The total rate of return on the EORP assets for the fiscal year was 17.0%. The Investment Section of this
Report contains graphs depicting the Plan’s performance, a detailed summary of the investment portfolio, all
investment transactions, and commissions paid to investment professionals who provide services to EORP. All
Plan investments were held in trust by the Arizona subsidiary of Wells Fargo, the System’s custodian bank.
SYSTEM FINANCIAL OUTLOOK
The following is a summary of the principal trends, and the reasons for those trends, with respect to the
financial status of the EORP.
Financial Trends With Respect to Funding Ratios and Employer Contribution Requirements
As Table 1 below shows, the funding ratio of the EORP has declined over the past ten years. During that time,
the Plan has gone from an overfunded to an underfunded situation. Table 1 shows the funding ratio calculated
using fiscal year-end actuarial value of assets (i.e., an average of the market value of assets over the four years
ending June 30th through June 30, 2004 and over the seven years ending June 30th for subsequent fiscal years)
and also fiscal year-end market value of assets.
As the funding ratio of the Plan has declined, the employer contribution rate has escalated, as Table 2
illustrates. (The employee rate is fixed by statute and is currently 7.0%.)
EORP
Table 1 – Funding Ratios of the EORP (Actuarial Value & Market Value)
Actuarial Value
Fiscal Year 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
EORP 121.1% 124.8% 130.1% 141.7% 125.5% 118.7% 104.4% 92.3% 89.9% 74.6%
Market Value
EORP 141.0% 140.5% 140.2% 116.2% 86.5% 84.3% 81.5% 77.1% 79.4% 75.1%
Reasons for the Funding Ratio Decline and the Contribution Rate Increase
The principal reasons for the Plan’s funding ratio decline and the employer contribution rate increase are:
The $113.1 million asset value loss sustained by the Plan during fiscal years 2001 and 2002;
The expected less favorable investment environment that caused the System to reduce the actuarial
expected rate of return on assets from 9.0% to 8.5%;
The statutorily required allocation of investment returns in excess of 9% (that are generated on the
EORP’s assets that support the benefits being paid to eligible beneficiaries) to the EORP’s Benefit Increase
Reserve and the fact that the Reserve assets are not taken into account for funding ratio and employer
contribution rate calculations;
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Table 2 – Aggregate Employer Contribution Rate By Employer Fiscal Year
Fiscal Year 2003 2004 2005 2006 2007 2008 2009
EORP Rate 7.55% 13.49% 14.54% 20.54% 18.55% 20.21% 28.0%
Introductory Section
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The net increase in liability resulting from the System’s having to make a variety of changes in actuarial
technique and demographic assumptions as recommended by the State Legislature’s actuarial auditing
firm, Segal & Co. and by the System’s actuarial auditing firm, Milliman Consultants and Actuaries;
The significant increase in compensation for EORP-participating judges that was provided this past fiscal
year that will increase future benefit awards and, therefore, Plan liability; and
The increase in Plan liability that results from the System’s settlement of potential litigation such that
benefits for participants who commenced participation in the Plan prior to July 1, 1994 will be calculated
based on final annual compensation rather than the highest three consecutive years of compensation.
Rates of Return on Investments
Table 3 below shows the rates of return of the EORP over the one year ending June 30, 2007 and the annual
average returns over the three, five and ten years ending June 30, 2007 relative to the Plan’s weighted
composite market return benchmarks for the same periods.
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Table 3 – Investment Portfolio Returns
1 Year 3 Year 5 Year 10 Year
EORP 17.0% 11.4% 11.15% 6.75%
Benchmark* 15.13% 9.89% 9.55% 8.03%
*Benchmark 50% S&P 500, 10% S&P 400, 5% S&P 600, 20% Lehman Gov/Credit, 10% Alternative Investments and 5% 91-Day T-Bill.
PSPRS Asset Management Restructuring
The past practice of managing all the Plan’s publicly traded portfolios internally has severely limited its asset
diversification and caused the Plan to underperform its public retirement system “peer” group. In order
to better position the Plan to achieve its rate of return objectives, enhance returns and limit risk through
diversification of its assets across a wider mix of financial markets, the System has begun an asset management
restructuring. To date the following has occurred:
A new independent investment consulting firm (Ennis, Knupp & Associates) was retained last December;
A new and more diversified asset allocation was adopted in February;
A plan for implementing the new asset allocation was adopted in May;
The governing Board (i.e., the “Fund Manager”) accepted the retirement resignation of the System’s CIO
and authorized a nation-wide search for a new CIO using an executive search firm;
A new custodian bank (BNY Mellon Bank) was hired in August (effective October 1st); and
Barclay Global Investors (BGI) was approved in May to manage the transition of the Plan’s equity assets
into U.S. and non-U.S index accounts at BGI.
Future steps in the restructuring process include:
Completing the contract negotiations with BGI;
Transitioning the System’s equity assets into index accounts at BGI;
Completing the CIO search and selection process;
Further modifying the asset allocation to incorporate asset class portfolios that have relatively low
correlations with equities;
Commencing searches for portfolio managers that can actively manage equity portfolios with global
mandates and for managers that can manage portfolios that have relatively low correlations with equities;
Reviewing the internally managed bond portfolio and making changes as appropriate;
Increasing commitments to real estate and private equities to achieve greater diversification in those
areas.
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Introductory Section
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ENACTED LEGISLATION
The only legislation enacted during the 2007 session of the Arizona Legislature that impacted the EORP was
a minor bill that defines a qualified domestic relations order (DROs) and establishes a specific procedure for
processing such DROs.
ACTUARIAL AND FUNDING INFORMATION
Funding a retirement system on a sound actuarial reserve basis involves the accumula­tion
of substantial
reserves to guarantee the payment of promised benefits. These reserves are invested and the rate of investment
earnings, over time, is a major factor in determining the employer contribution requirement to meet the
calculated level cost of the System.
The System is funded through a statutory member contribution of 7.0% of gross payroll, an employer
contribution that is expressed as a level percent of gross payroll and reset annually, depending on the results
of the Plan’s actuarial valuation, a portion of judicial filing fees and the realized and unrealized returns on the
invested assets of the Plan.
The contribution rate for participating employers that will take effect as of July 1, 2008 and that results from the
Plan’s FY’07 valuation is 28.0%. This rate represents a substantial increase over the 20.2% rate that is currently
in effect.
There is no single all-encompassing test to measure a retirement system’s funding prog­ress
and current status.
A traditional measure is the ratio of the actuarial value of assets to actuarial accrued liability, often referred to
as the “percent funded.” The percent funded for the EORP has been declining over time and was 74.6% as of
June 30, 2007. This funding ratio is substantially less than the 89.9% ratio for the Plan as of June 30, 2006.
The reasons for the erosion in the Plan’s funding ratio are set forth in the “System Financial Outlook” section
above. However, the two factors that are principally responsible for the decline in the ratio from FY’06 to FY’07
are: 1) the $113.1 million asset value loss that the Plan sustained during the 2001-2002 fiscal year timeframe
(the effects of which will not be fully reflected until the end of Plan year 2009 because of the seven year
averaging method that is used in calculating the actuarial value of assets); and 2) the additional unfunded
liability that resulted from the changes in actuarial technique and demographic assumptions necessitated by
the recommendations from the Legislature’s actuarial audit firm, Segal & Company and from the System’s
actuarial audit firm, Milliman Consultants and Actuaries.
POST RETIREMENT BENEFIT INCREASES
State law provides for an annual benefit increase for retirees or their survivors two years after retirement,
regardless of age, or when the retiree or survivor attains age 55 and has been retired for a year. These increases
are limited to four percent by state law. A benefit increase schedule can be found in the Statistical Section of
this CAFR.
These post retirement increases are funded from a portion of the investment returns in excess of 9% that are
accumulated in the EORP Reserve for Future Benefit Increases. These reserves are invested along with all other
assets of the Plan. The reserve balance, after subtracting the $9.3 million needed to fund the July 1, 2007 post
retirement increase, was $30.8 million. The reserve balance reflects a significant increase over the prior year’s
balance of $16.5 million. The increase is the result of the Plan’s FY’07 17.0% investment return.
CERTIFICATE OF ACHIEVEMENT
The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate
of Achievement for Excellence in Financial Reporting to the System for the EORP Comprehensive Annual
Financial Report for the fiscal year ended June 30, 2006. This was the twelfth consecutive year that the Plan has
achieved this prestigious award. In order to be awarded a Certificate of Achievement, a government unit must
publish an easily readable and efficiently organized comprehensive annual financial report. This report must
satisfy both generally accepted accounting principles and applicable legal requirements.
A Certificate of Achievement is valid for a period of one year only. We believe our FY’07 Comprehensive
Annual Financial Report continues to meet the Certificate of Achievement Program’s requirements and we are
submitting it to the GFOA to determine its eligibility for a certificate.
Introductory Section
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STRATEGIC INITIATIVES
During this past fiscal year, the EORP governing board (i.e., the Fund Manager) undertook a category of
strategic initiatives that will change the way in which the Plan’s assets are managed and invested. (See the
“System Financial Outlook” section above for details.) In addition, the System’s management implemented a
number of initiatives to increase the level of service and resources available to meet the growing needs of the
EORP stakeholders. These initiatives fall into the following four categories:
Financial Performance: Initiatives in this category are intended to enable the EORP to achieve its rate
of return objectives consistently over time. They include the approval of a new and more diversified
asset allocation and a plan to transition the Plan’s equity assets to external investment managers and the
commencement of the process to retain a new Chief Investment Officer to lead the asset management
change agenda.
Customer Service: Implemented initiatives in this category included the augmentation of staffing levels in
the Member Services Division and Information Technology Departments to improve the quality, level and
timeliness of customer service.
Product, Process and Service Improvement: Initiatives in this category included a continuation of the
System’s document imaging process, the implementation of new safeguards to protect participant records
and data, an IT data base conversion, the automation of the System’s payroll process and the addition of
a new employer web site to facilitate the transmission of participant contribution deductions.
Learning and Growth: Initiatives in this category, which includes a new staff orientation training
program, address the need to attract and retain highly qualified employees who are committed to
continuously increasing their ability and desire to produce required results, developing and sustaining
effective leadership, and fostering a capable and motivated workforce.
SUMMARY
This report is a product of the collective efforts of the System’s staff, under the direction of the PSPRS Fund
Manager. It is intended to provide complete and reliable information that will facilitate the management decision
process and it serves as a means for determining compliance with the System’s governance and investment
policies and legal requirements. Copies of this report are provided to the Governor, State Auditor, Legislature and
all our member constituency groups. We hope all recipients of this report find it informative and useful.
I would like to take this opportunity to express my gratitude to the members of the Fund Manager, the staff, the
System’s advisors, and all others who have worked so diligently to assure the continued successful operation
of the System. I look forward to the challenge of moving the System forward with a program of constructive
and comprehensive change that will maintain high quality customer service and restore the EORP to a path of
improving financial status.
Respectfully submitted,
James M. Hacking
Administrator
•
•
•
•
Introductory Section
- 18 -
Fund Manager
Carter Olson
Chairman
Fritz Beesemyer
Member
James Gentner
Advisor
Billy Shields
Vice Chairman
Brian Delfs
Advisor
Mike Galloway
Member
Introductory Section
- 19 -
Executive Staff and Organizational Chart
James M. Hacking
Administrator
Tracey D. Peterson
Assistant Administrator
Chief Operations Officer
Introductory Section
- 20 -
Professional Advisors
Cortex Applied Research Governance Consultant
Ennis Knupp & Associates Investment Advisor
Heinfeld Meech & Co, P.C. Independent Auditors
Kutak Rock, LLP General Counsel
McLagan Partners, Inc Human Resource Consultant
Rodwan Consulting Grooup Actuary
Rose & Allyn Public Relations Communications Consultant
Standard & Poor’s Investment Advisory Services LLC Investment Consultant
Wells Fargo Bank Custodian
A schedule of Administrative Consultant fees may be found in the Financial Section. A schedule of Investment Consultant fees,
Brokerage Commissions and Research Expense may be found in the Investments Section.
Financial Section
Independent Auditor Report 22
Management Discussion and Analysis 24
Basic Financial Statements
Statement of Plan Net Assets 30
Statement of Changes in Plan Net Assets 31
Notes to the Financial Statements 32
Required Supplementary Information
Schedule of Funding Progress 43
Schedule of Employer Contributions 43
Notes to RSI 44
Supporting Schedules
Schedule of Changes in Fund Balance Reserves 45
Schedule of Receipts and Disbursements 46
Schedule of Administrative Expenses 47
Schedule of Consultant Expenses 47
Supplemental Information - Agency Fund Statement of
Changes in Asset & Liabilities 48
Financial Section
- 22 -
Financial Section
- 23 -
Financial Section
- 24 -
Management Discussion and Analysis
The Elected Officials’ Retirement Plan’s discussion and analysis is designed to assist the reader in focusing on
significant financial issues, provide an overview of the Plan’s financial activity, identify changes in the Plan’s
financial position and identify any issues or concerns.
Since the Management’s Discussion and Analysis (MD&A) is designed to focus on the current year’s activi-ties,
resulting changes and currently known facts, it is intended to be read in conjunction with the Transmittal
Letter, Financial Statements and Notes to the Financial Statements.
Financial Highlights
Key financial highlights for 2007 are as follows:
The Elected Officials’ Retirement Plan (EORP) had a total rate of return of 17.01% this year. Our eq-uity
portfolio had a return of 20.53%, which outperformed the stock index by 58 basis points. Our fixed
income portfolio had a return of 7.29%, which outperformed the index by 127 basis points.
As of the close of the fiscal year 2007, the Future Benefit Increase Reserve was $30.8 million. This will
enable another 4% post-retirement adjustment for qualifying retirees or their survivors for the twelfth
consecutive year.
Retirement benefits paid totaled $28.7 million for the current year, compared to $27.9 for the previous
year. This represents a 9% increase from the prior year. The majority of this increase is the result of the
cost of post-retirement adjustments paid to the retirees or their survivors of the Plan.
Overview of the Financial Statements
Using this Comprehensive Annual Financial Report (CAFR)
This annual report consists of a series of financial statements and notes to those financial statements. These
statements are organized so the reader can understand the Plan as an operating entity. The statements and
notes then proceed to provide an increasingly detailed look at specific financial activities.
The Statement of Plan Net Assets and The Statement of Changes in Plan Net Assets
These statements include all assets and liabilities of the Plan using the accrual basis of accounting, which is
similar to the accounting used by most private-sector companies.
These two statements report the Plan’s net assets and changes in them. Net assets are the difference between
assets and liabilities, one way to measure the financial health, or financial position. Over time, increases or
decreases in the net assets are one indicator of the financial health of the Plan.
Notes to the Financial Statements
The notes provide additional information that is essential to a full understanding of the data provided in the
financial statements. The notes can be found immediately following The Statement of Plan Net Assets and
The Statement of Changes in Plan Net Assets.
Required Supplemental Information
The basic financial statements are followed by a section of required supplemental information. This section
includes the Schedule of Funding Progress and the Schedule of Employer Contributions.
The Schedule of Funding Progress shows the ratio of assets as a percentage of the actuarial accrued liability
(funding ratio) and the ratio of unfunded actuarial accrued liabilities to member payroll. The trend in these
two ratios provides information about the financial strength of the Plan. Improvement is indicated when the
funding ratio is increasing and the ratio of the unfunded actuarial accrued liability to payroll is decreasing.
•
•
•
Financial Section
- 25 -
The Schedule of Employer Contributions shows the Annual Required Contributions by fiscal year. The pur-pose
of this schedule is to provide information about the required contributions of the employers and the
extent to which those contributions are being made. The information should assist users in understanding the
changes and possible reasons for the changes in the Plan’s funding status over time.
Supporting Schedules and Supplemental Information
The Supporting Schedules and Supplemental Information Section includes the Supporting Schedule of
Changes in Fund Balance Reserves, Supporting Schedule of Administrative Expenses and Payments to Con-sultants,
and the Supplemental Schedule of Cash Receipts and Cash Disbursements and the Agency Fund
statement of changes in Assets & Liabilities (see Note 7). The total columns and information provided on
these schedules carry forward to the applicable financial statement.
Financial Analysis of the Plan
SUMMARY COMPARATIVE STATEMENTS OF PLAN NET ASSETS
As of 6/30/2007 As of 6/30/2006 Change % Change
Cash and Short-Term
Investments
$285,869 $915,265 $(629,396) (68.77%)
Total Receivables 3,257,498 2,216,057 1,041,441 47.00%
Total Investments 370,388,553 323,825,500 46,563,053 14.38%
Securities on Loan 103,894,449 72,192,390 31,702,059 43.91%
Net Capital Assets 274,898 239,499 35,399 14.78%
Total Plan Assets 478,101,267 399,388,710 78,712,557 19.71%
Accrued Accounts Pay-able
359,857 44,399 315,457 710.49%
Investment Purchases
Payable 4,006,316 - 4,006,316 -
Securities Lending Col-lateral
103,894,449 72,192,390 31,702,059 43.91%
Total Plan Liabilities 108,260,622 72,236,790 36,023,832 49.87%
Net Assets held in Trust $369,840,645 $327,151,921 $42,688,725 13.05%
Comparative Statements are included to provide additional analysis of the changes noted on those schedules.
The total net assets held in trust for benefits at June 30, 2007 were $369.8 million, a 13.05% increase from
$327.1 million at June 30, 2006. The increase in net assets is primarily due to an increase in the financial
markets during the fiscal year. The net increase in cash and receivables is attributable to normal fluctuations
in investment income receivables during the year. EORP is fully deploying cash in other investments vehicles
like exchange traded funds, equities, fixed income and private equity. Detailed information regarding the
Plan’s investment portfolio is included in the investment section of this report. The increase in security lend-ing
collateral is due to normal fluctuations in the lending program. The investment of the collateral fluctuated
in a similar manner and benefited from the market gains as well.
Financial Section
- 26 -
SUMMARY COMPARATIVE STATEMENTS OF CHANGES IN PLAN NET ASSETS
ADDITIONS 2007 2006 Change % Change
Total Contributions $16,105,040 $17,721,139 $(1,616,099) (9.12%)
Net Investment Income 54,598,524 24,408,222 30,190,302 123.69%
Miscellaneous Income 1,190,489 1,703,177 (512,688) (30.10%)
Total Additions 71,894,053 43,832,537 28,061,516 64.02%
DEDUCTIONS
Benefits 28,717,547 27,908,934 808,613 2.90%
Service Transfers and Refunds 147,906 18,339 129,567 706.52%
Administrative Expenses 339,875 247,595 92,281 37.27%
Total Deductions 29,205,329 28,174,867 1,030,462 3.66%
Net (Decrease) Increase 42,688,724 15,657,671 27,031,054 172.64%
Balance Beginning of Year - July 1 327,151,921 311,494,251 15,657,670 5.03%
Balance End of Year - June 30 $369,840,645 $327,151,921 $42,688,724 13.05%
Employer and employee contributions decreased $1.6 million due to a temporary reduction in the employer
contribution rates from 20.54% to 18.55%. The governing board adopted a number of actuarial changes
that included extending the period over which unfunded liabilities could be amortized from 20 to 30 years,
reducing the salary growth assumption from 6% to 5% and changing the method for calculating the accrued
liability from entry age normal method to the projected unit credit method. The combination of these actu-arial
assumption changes resulted in a slight reduction of the employer contribution rate for FY 2007. For
FY 2007, EORP recognized net investment income of $54.6 million which compares to $24.4 million in the
previous year. This 123.69% increase was due to the positive returns in the financial markets during the fiscal
year. Deductions from the EORP net assets held in trust for benefits consist primarily of pension, disability,
health insurance subsidies, survivor benefits, member refunds and administrative expenses. For FY 2007, these
deductions totaled $29.2 million, an increase of 3.66% from the $28.1 million paid during FY 2006.
Financial Section
- 27 -
Investment Activities
During FY 2007, the Fund Manager adopted a more diversified asset allocation policy which resulted in an
investment total rate of return of 17.01%. At June 30, 2007, EORP held $270.9 million in equities. The FY
2007 rate of return for EORP equities was 20.53% versus a benchmark rate of return of 19.95%. At June 30,
2007, EORP held $74.6 million in fixed income securities. The FY 2007 rate of return for EORP fixed in-come
securities was 7.29% versus a benchmark rate of return of 6.02%. The benchmarks for both equities and
fixed income securities are representative of the returns that could be expected in a similar investing environ-ment.
More detailed information regarding the Plan’s investment portfolio can be found in the investment
section of this report.
EORP earns additional income by lending investment securities to brokers. This is done on a pooled basis by
our custodial bank, Wells Fargo. The brokers provide collateral and generally use the borrowed securities to
cover short trades and failed trades.
Financial Section
- 28 -
Historical Trends
Accounting standards require that the “Statement of Plan Assets” reflect investment asset values at fair market
value and include only benefits and refunds due to plan members and beneficiaries and accrued investment
and administrative expenses as of the reporting date. Information regarding the actuarial funding status of
the plan is provided in the “Schedule of Funding Progress.” The asset value stated in the “Schedule of Fund-ing
Progress” is the actuarial value of assets as determined by calculating the ratio of the market value to book
value of assets with the actuarial gains/losses smoothed over a seven year period. Actuarial valuations of the
EORP assets and benefit obligations for the retirement plan are performed annually. The most recent actuarial
valuation available is as of June 30, 2007.
At June 30, 2007, the total funded status of the EORP decreased to 74.6% from 89.9% at FYE 2006. This
decrease in funded status is related primarily to recognition of investment losses in fiscal years 2001 and 2002.
These losses should be fully reflected by FYE 2009. A more detailed discussion of the funding status can be
found in the Administrator’s Letter of Transmittal in the Introductory section of this report.
Implementation of GASB No. 43
Historically, the contributions, pension benefits, including the health insurance premium subsidy payments,
actuarial accrued liabilities and the funded ratio were reported by the Plan as a single, combined pension
benefit. However, for FY ’07, the Plan was required to implement Government Accounting Standards Board
(GASB) Statement No. 43. This statement requires that the system separately report the assets and liabilities
associated with the health insurance premium subsidy by discretely presenting the assets and the liabilities
separately from the retirement plan.
The Plan is not statutorily authorized to separately account for the assets, income and/or benefit payments of
a supplemental health care benefit. Additionally, the Plan does not administer the health insurance premium
subsidy through a separate health care plan as defined by the Internal Revenue Code §401 (h). As mentioned
earlier, the Plan has always recognized, reported and funded the actuarial accrued liability for the health insur-ance
premium benefit as another form of postemployment benefit, similar to the disability benefit. Assets and
liabilities are not discretely presented for the disability benefits or any other benefits provided under the plan.
The characteristics of the plan have resulted in unique and unusual reporting of the benefit under the require-ments
of GASB Statement No. 43. Complying with this new statement will result in the following changes
to the financial statements and actuarial disclosures for the Plan’s pension benefits:
Contributions and benefits paid totaling $850,915 for the health insurance premium subsidy will no
longer be reported on the Statement of Changes in Plan Net Assets with the financial information for
the retirement plan. This information will be reported separately as an “Agency Fund” (unaudited) and
•
Financial Section
- 29 -
can be found in the Statement of Changes in Assets & Liabilities in the Other Supplemental Informa-tion
section included in the Financial Section of the report.
The Schedule of Funding Progress will no longer include the liability for the health insurance premium
subsidy. This will increase the System’s funded ratio. The funded ratio without the health insurance
premium subsidy liability is calculated as 76.8%. If the liability associated with the health insurance
premium subsidy were to be included, the funded ratio is calculated as 74.6%.
The Schedule of Employer Contributions will include the annual required employer contributions for
the retirement plan plus the difference between the annual required contributions calculated for the
health insurance premium subsidy and the benefits paid. For FY ’07, this amounted to a difference of
$672,204 added back to the employer contributions, which gives the “appearance” that the contribu-tions
for the retirement plan were over funded and the contributions for the health insurance premium
subsidy were under funded. If a portion of the system assets were allocated to both the retirement and
health insurance subsidy benefits, the percentage contributed for both benefits would be 100% funded.
Beginning FY ’08, the participating employer groups will implement GASB Statement No. 45. This
statement will require the participating employers to report the liabilities associated with the health
insurance premium subsidy as well as any other supplemental healthcare benefits provided to the retiree
under the healthcare plans that they administer (sponsor).
The management of the Plan maintains that the reporting described above has limitations and decreases the
reporting transparency of the health insurance premium subsidy. Management will continue to evaluate op-tions
to enhance the reporting of the health insurance premium subsidy benefit payments, employer contribu-tions,
and actuarial required disclosures.
Request for Information
This report is designed to provide a general overview of the Elected Officials’ Retirement Plan’s finances.
Questions concerning any of the information provided in this report or requests for additional financial in-formation
should be addressed to: Elected Officials’ Retirement Plan, 3010 E. Camelback Road, Suite 200,
Phoenix, AZ 85016.
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Financial Section
- 30 -
Statement of Plan Net Assets At June 30, 2007
with Comparative Totals for 2006
Retirement Plan
2007 2006
ASSETS
Cash and Short-Term Investments $285,869 $915,265
Receivables
Members’ Contributions 106,488 82,576
Employers’ Contributions 170,936 157,305
Court Fees 364,387 341,382
Interest and Dividends 1,396,074 1,314,794
Investment Sales 1,201,913 –
Other 17,700 320,000
Total Receivables 3,257,498 2,216,057
Investments at Fair Value (Notes 2 and 3)
U.S. Government Securities 35,243,541 27,927,449
Corporate Bonds 39,395,289 41,363,374
Corporate Notes 11,588,779 13,342,942
Equities 270,935,457 230,181,065
Alternative Investments 13,225,489 11,010,670
Total Investments 370,388,554 323,825,500
Securities Lending Collateral 103,894,449 72,192,390
Capital Assets (Note 4)
Land 33,145 33,145
Building 216,546 201,815
Furniture, Fixtures & Equipment 50,875 18,767
Total Capital Assets 300,566 253,727
Accumulated Depreciation (25,668) (14,228)
Net Capital Assets 274,898 239,499
Total Plan Assets 478,101,267 399,388,710
LIABILITIES
Accrued Accounts Payable 359,857 44,399
Investment Purchases Payable 4,006,316 –
Securities Lending Collateral 103,894,449 72,192,390
Total Plan Liabilities 108,260,622 72,236,790
Net Assets Held in Trust for Pension Benefits 369,840,645 327,151,921
Net Asset Reserves
Refundable Members’ Reserve 39,760,374 36,639,094
Employers’ Reserve 299,252,390 273,989,707
Future Benefit Increase Reserve 30,827,881 16,523,120
Total Net Asset Reserves $369,840,645 $327,151,921
A schedule of funding progress is presented immediately following the notes to the financial statements.
The accompanying notes are an integral part of these financial statements.
Financial Section
- 31 -
STATEMENT OF CHANGES IN PLAN NET ASSETS FOR THE YEAR
ENDED JUNE 30, 2007 WITH COMPARATIVE TOTALS FOR 2006
Retirement Plan
2007 2006
Additions
Contributions
Members’ Contributions (Notes 2 and 5) $4,089,699 $3,811,179
Employers’ Contributions (Notes 2 and 5) 6,080,175 7,624,960
Court Fees 3,977,740 3,855,007
Member Service Purchase 1,957,426 2,429,992
Total Contributions 16,105,040 17,721,139
Net (Depreciation) Appreciation
in Fair Value of Investments (Notes 2 and 3) 43,614,635 14,717,527
Interest 6,114,333 5,882,681
Dividends 4,800,479 3,781,356
Securities Lending Activities
Securities Lending Income $4,533,193 $3,490,145
Borrower Rebates (4,278,264) (3,365,267)
Agents Share of Income (76,457) (37,445)
Net Securities Lending Income (Note 3) $178,472 $87,433
Investment Income 54,707,919 24,468,997
Less Investment Expense (109,396) (60,776)
Net Investment Income 54,598,524 24,408,222
Amounts Transferred from Other State-
Sponsored Pension Plans and 1,190,489 1,703,177
Total Additions 71,894,053 43,832,537
Deductions
Retirement Benefits (Note 1) 28,717,547 27,908,934
Refunds to Terminated Members (Note 1) 127,738 7,246
Administrative Expenses 339,875 247,595
Amounts Transferred to Other State-
Sponsored Pension Plans 20,169 11,093
Total Deductions 29,205,329 28,174,867
Net (Decrease) Increase 42,688,724 15,657,671
Net Assets Held In Trust for Pension Benefits
Beginning of Year - July 1 327,151,921 311,494,251
End of Year - June 30 $369,840,645 $327,151,921
The accompanying notes are an integral part of these financial statements.
Financial Section
- 32 -
Notes to the Financial Statements
Note 1-Plan Description:
Organization-The Elected Officials’ Retirement Plan (EORP), a pension trust fund of the State of Arizona, is
a cost sharing multiple-employer public employee retirement plan established by Title 38, Chapter 5, Article
3 of the Arizona Revised Statutes, to provide benefits for elected officials and judges of certain state, county
and local governments. The Fund Manager of the Public Safety Personnel Retirement System (PSPRS) ad-ministers
the EORP Plan.
The Fund Manager is a five member board. Effective August 6, 1999, it became the Governor’s responsibility
to appoint all members of the Fund Manager, who serve a fixed three-year term. The Fund Manager is respon-sible
for the investment of the Plan’s assets, setting employer contribution rates in accordance with an actuarial
study, adopting a budget, hiring personnel to administer the Plan, setting up records, setting up accounts for
each member, paying benefits and the general protection and administration of the System. Senate Bill 1378,
which was enacted August 12, 2005, requires substantial investment experience for the member of the Fund
Manager that represents the state as an employer and the public member of the Fund Manager.
The addition or deletion of eligible groups does not require the approval of the other participating employers.
The Fund Manager approves new eligible groups for participation. The EORP is reported as a component unit
of the State of Arizona.
The Fund Manager of the EORP is also responsible for the investment and general administration of two
other statewide retirement plans-the Corrections Officer Retirement Plan and the Public Safety Personnel
Retirement System. The investments and expenses of these plans are held and accounted for separately from
those of the EORP.
Since none of the plans have the authority to impose their will on any of the other plans, each plan is reported
as its own stand-alone government.
At June 30, 2007 and 2006, the number of participating local government employer groups were:
2007 2006
Cities and Towns 21 20
Counties 15 15
State Agencies 1 1
Total Employers 37 36
All state and county elected officials and judges are members of the Plan. Any city or town in the State of
Arizona may elect to have its elected officials covered by EORP. At June 30, 2007 and 2006, statewide EORP
membership consisted of:
Retirement Plan
Health Insurance
Subsidy
2007 2006 2007 2006
Retirees 826 797 453 426
Terminated vested employees 86 85
Current Employees:
Vested 513 517
Non-vested 300 283
Total Members 1,725 1,682 453 426
Financial Section
- 33 -
EORP provides retirement benefits as well as health insurance subsidy, death and disability benefits. Gener-ally,
all benefits vest after five years of credited service.
A summary of benefit and plan provisions follows:
Summary of Benefits:
Purpose (A.R.S. §38-810.02.B)
To provide a uniform, consistent, and equitable statewide program for those eligible elected officials as defined
by the Plan.
Eligibility (A.R.S. §38-801 and §38-804.A)
All elected officials are members of the Plan, except that an elected official who is subject to term limits may elect
not to participate in the Plan for that specific term of office. An elected official means every elected official of this
state, every elected official of each county of this state, every justice of the supreme court, every judge of the court
of appeals, every judge of the superior court, every full-time superior court commissioner, the administrator of
the fund manager if the administrator is a natural person and each elected official of an incorporated city or town
whose employer has executed a proper joinder agreement for coverage of its elected officials.
Contributions (A.R.S. §38-810.A)
Each member shall contribute 7% of salary to the Plan on a pre-tax basis. Each employer shall contribute the
following:
For state and county employers, a designated portion of certain fees collected by the Clerks of the
Superior Courts, Courts of Appeals and the Supreme Court plus additional contributions as deter-mined
by actuarial valuation to ensure proper funding for the Plan, but not less than 10% of salary.
For incorporated city or town employers, a level per cent of salary as determined by actu-arial
valuation to ensure proper funding for the Plan but not less than 10% of salary.
Credited Service (A.R.S. §38-801.3)
Means the number of whole and fractional years of a member’s service as an elected official after the elected
official’s effective date of participation for which member and employer contributions are on deposit with the
fund, plus credited service as an elected official transferred to the Plan from another retirement system or plan for
public employees of this state, plus service as an elected official before the elected official’s effective date of partici-pation
which is being funded pursuant to a joinder agreement or which was redeemed pursuant to §38-816.
Average Yearly Salary (A.R.S. §38-801.2)
Means the highest average total salary over a period of three consecutive years within the last 10 completed
years of credited service which was paid to the elected official at the time of death or retirement or at the time
the elected official ceases to hold office.
Normal Retirement (No Reduction for Age) (A.R.S. Sections 38-805.A and 38-808.B.1)
An elected official may retire upon meeting one of the following age and service requirements:
1. Age 65 years, with 5 or more years of credited service.
2. Age 62 years, with 10 or more years of credited service.
3. Twenty or more years of credited service regardless of age.
The amount of a normal retirement pension is 4% of the member’s average yearly salary multiplied by the years
of the member’s credited service. Maximum is 80% of the member’s average yearly salary.
Early Retirement (Reduction for Age) (A.R.S. §38-805.B and §38-808.B.1)
An elected official who has five or more years of credited service may retire before meeting the age or service
requirement for normal retirement. The amount of an early retirement pension is computed by determining
Financial Section
- 34 -
the amount of accrued normal retirement pension and then reducing the amount determined by three-twelfths
of one percent for each month early retirement precedes the member’s normal retirement age as noted above.
The maximum reduction is 30%.
Vested Termination (Deferred Retirement)
An elected official with five or more years of credited service retains entitlement to deferred pension, upon
ceasing to be an elected official, if the elected official’s accumulated contributions are left on deposit in the
retirement plan. The amount of pension is determined in the same manner as a normal or early pension,
whichever is applicable.
Disability Retirement (A.R.S. §38-806 and §38-808.B.2)
The Fund Manager may retire an elected official who becomes incapacitated for the purpose of performing the
duties of the member’s office based on a certification by a majority of the board of physicians that the member
is mentally or physically incapacitated, the incapacity occurred during the member’s term of office, and quali-fies
for a disability retirement. The amount of pension is 80% of member’s average yearly salary if the elected
official has ten (10) or more years of credited service or 40% of the member’s average yearly salary if the elected
official has five (5) but less than ten (10) years of credited service or 20% of the member’s average yearly salary
if the elected official has fewer than five (5) years of credited service.
Survivor Pension (A.R.S. §38-807)
Payable to the eligible beneficiary of a retired member or an active or inactive member who dies before retire-ment.
An eligible beneficiary is a surviving spouse who was married to the retired or active or inactive member
for at least two years; or, if there is no eligible spouse, then to a minor child. A surviving spouse’s pension
terminates upon death. A surviving child’s pension terminates upon marriage, adoption or death or upon
attainment of age 18 years, unless the child is a full-time student under the age of 23 or the child is under a
disability which began before the child attained the age of 23. The amount of a surviving spouse’s pension is
three-fourths of the pension being paid the deceased retired elected official or three-fourths of the pension
which the member would have received assuming he had retired under a disability. The amount of a surviving
child���s pension is an equal share of the amount of a surviving spouse’s pension.
Death Benefit (A.R.S. §38-807.E)
If a member dies and no pension is payable on account of the member’s death, the deceased member’s accu-mulated
contributions shall be paid to the beneficiary named by the member.
Termination Refund (A.R.S. §38-804.B)
Upon termination of employment for any reason other than death or retirement, a member shall, within 20
days after filing an application with the Fund Manager, receive a lump-sum payment, equal to the accumulated
contributions, as of the date of termination, less any benefits paid or any amounts owed to the Plan. A member
forfeits all membership rights and credited service in the Plan upon receipt of refund of contributions. If the
member has 5 or more years of credited service upon termination they shall receive an additional amount ac-cording
to the schedule below:
5 to 5.9—25% of member contributions deducted from the member’s salary pursuant to ARS 38-810.A
6 to 6.9—40% of member contributions deducted from the member’s salary pursuant to ARS 38-810.A
7 to 7.9—55% of member contributions deducted from the member’s salary pursuant to ARS 38-810.A
8 to 8.9—70% of member contributions deducted from the member’s salary pursuant to ARS 38-810.A
9 to 9.9—85% of member contributions deducted from the member’s salary pursuant to ARS 38-810.A
10 or more—100% of member contributions deducted from the member’s salary pur-suant
to ARS 38-810.A plus interest at 3% if left on deposit after 30 days.
Financial Section
- 35 -
Reemployment And Repayment Of Contributions (A.R.S. §38-804.F)
An elected official who terminates membership in the Plan and takes a refund of his contributions and is later
re-employed as an elected official may restore prior service credits, if the elected official signs a written election
within 90 days after re-employment to reimburse the Plan within one year after the date of re-employment.
The reimbursement will equal the amount previously withdrawn plus interest from the date of withdrawal to
the date of repayment at the rate of 9% compounded annually.
Reemployment After Retirement (A.R.S. §38-804.G and H)
If a retired member subsequently becomes an elected official, contributions shall not be made to the Plan nor shall
additional years of credited service accrue. Additionally, if a retired member, by reason of election or reelection, be-comes
an elected official of the same office from which the member retired within a time period that is less than one
full term for that office, the member shall not receive a pension until the member ceases to hold the same office.
Redemption Of Prior Service (A.R.S.§38-816) (Use Form E2)
Active members who had previous service in this state as an elected official with an employer now covered by the
Plan before the effective date of participation and who received a refund of accumulated contributions from the
applicable retirement system upon termination or who was not covered by a retirement system or plan during the
elected official’s prior elected official service may elect to redeem any part of the prior service by paying into the Plan
the amounts required in A.R.S. §38-816.B. In addition, active members can also elect to redeem prior employment
they may have had with the U.S. Government, a state of the U.S. or a political subdivision of a state of the U.S.
Purchase Of Prior Active Military Service (A.R.S. §38-820) (Use Form 18)
A member may purchase up to four years of prior active military time even if the member will receive a mili-tary
pension. The member must pay the actuarial present value of the increase of credited service resulting
from this purchase.
Transfer Between State Retirement Systems (A.R.S. §38-921 and §38-922) (Use Form U-2)
Members of any of the four Arizona state retirement systems or plans who have credited service under another
Arizona state retirement system or plan may transfer or redeem the credited service to their current Arizona state
retirement system or plan by paying or transferring the actuarial present value of the credited service into their cur-rent
Arizona retirement system or plan to the extent funded on a market value basis as of the most recent actuarial
valuation with approval of the Fund Manager or retirement boards involved. A reduced credited service amount
may be transferred based on the transfer of the actuarial present value of the credited service under the prior Ari-zona
state system or plan to the extent funded on a market value basis as of the most recent actuarial valuation.
Cola Benefit Increases (A.R.S. §38-818)
Effective July 1 of each year, each retired member or survivor of a retired member may be entitled to a perma-nent
benefit increase in their base benefit. The maximum amount of the increase is 4% of the EORP benefit
being received on the preceding June 30 and is contingent upon sufficient excess investment earnings for the
fund. To be eligible for the increase the member or survivor must be age 55 or older on July 1 of the current
year and was receiving benefits on or before July 31 of the previous year. A member or survivor is also eligible
if they were receiving benefits on or before July 31 of the two previous years regardless of age.
Health Insurance Premium Subsidy (A.R.S. §38-817) (See Note 7)
For EORP retirees who have elected group health and accident insurance coverage provided and administered
by the state or another EORP employer and who had eight or more years of credited service, the EORP will
pay up to the following amounts. Those retired members who had between five and eight years of credited
service will receive a proportionate share of the subsidies:
Single:
Not Medicare Eligible $150.00
Medicare Eligible $100.00
Financial Section
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Family:
All Medicare Eligible $170.00
One with Medicare $215.00
All Not Medicare Eligible $260.00
State Taxation of EORP Benefits (A.R.S. §38-811 and §43-1022)
Effective tax year commencing January 1, 1989, all EORP retirement benefits in excess of $2500 annually will
be subject to Arizona state tax.
Note 2-Summary of Significant Accounting Policies and Plan Asset Matters:
Basis of Accounting
EORP financial statements are prepared using the accrual basis of accounting. Member and employer contribu-tions
are recognized when due, pursuant to formal commitments, as well as statutory or contractual requirements.
Pension and Health Insurance subsidy benefits are recognized when due and payable in accordance with the
terms of the Plan. Refunds are due and payable by state law within 20 days of receipt of a written application for
a refund. Refunds are recorded when paid. Furniture, fixtures and equipment purchases costing $5,000 or more,
when acquired, are capitalized at cost.
Improvements, which increase the useful life of the property, are also capitalized. Investment income net of
administrative and investment expenses are allocated to each employer group based on the average relative
fund size for each employer group for that year.
By state statute, the Plan is required to provide information in the financial statements used to calculate Net
Effective Yield. Net Effective Yield includes only realized gains and losses. The Net Realized Gains (Losses)
used in this calculation totaled $24,425,002 for FYE 2007 and $21,475,437 for FYE 2006. This calculation
is independent of the calculation of the change in the fair value of investments and may include unrealized
amounts from prior periods.
Note 3 - Cash and Investments
Custodial credit risk for deposits is the risk that in the event of a bank failure, the Plan’s deposits may not be
returned. The deposits are held in one financial institution with a balance of up to $100,000 insured by the
Federal Deposit Insurance Corporation (FDIC). The Plan mitigates custodial credit risk for deposits by re-quiring
the financial institution to pledge securities from an acceptable list in an amount at least equal to 102%
of the aggregate amount of the deposits on a daily basis.
In addition to the FDIC insurance coverage on the operating and money market accounts of EORP, Wells
Fargo pledged the following securities to EORP, Public Safety Personnel Retirement System and the Correc-tion
Officers Retirement Plan on June 30, 2007, as collateral:
$24,638,000 FNIONP878442 6.00% Maturity Date 07/01/36
$3,135,000 FNIONP256327 6.00% Maturity Date 7/01/36
$670,000 FNIONP256327 6.00% Maturity Date 7/01/36
All monies shall be secured by the depository in which they are deposited and held to the same extent and in
the same manner as required by the general depository law of the state.
Cash balances represent both operating and cash accounts held by the bank and investment cash on deposit
with the investment custodian. All deposits are carried at cost plus accrued interest. The following table is a
schedule of the aggregate book and bank balances of all cash accounts as of June 30, 2007:
The difference between the reported balance and the bank balance is a dividend payment recorded by EORP
on June 29, 2007; the cash was received by Wells Fargo on July 2, 2007.
Financial Section
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Reported Amount Bank Balance
Collateralized $285,869 $248,693
Uncollateralized -0- -0-
Total Deposits $285,869 $248,693
Investments
EORP investments are reported at Fair Value. Fair Values are determined as follows: Short-term investments
are reported at Fair Value, which approximates Cost. Equity securities are valued at the last reported sales price.
Fixed-income securities are valued using the last reported sales price or the estimated fair market value. Direct-ed
real estate and venture capital investments are reported at cost. Investment income is recognized as earned.
Statutes enacted by the Arizona Legislature authorize the Fund Manager to make investments in accordance
with the “Prudent Man” rule. The Fund Manager is not limited to so-called “Legal Investments for Trustees.”
In making every investment, the Fund Manager shall exercise the judgment and care under the circumstances
then prevailing which men of ordinary prudence, discretion and intelligence exercise in the management of
their own affairs, not in regard to speculation but in regard to the permanent disposition of their funds, con-sidering
the probable income from their funds as well as the probable safety of their capital, provided:
1. That not more than seventy percent of the pension fund shall be invested at any given time in corpo-rate
stocks, based on cost value of such stocks irrespective of capital appreciation.
2. That not more than five percent of the pension fund shall be invested in securities issued by any one
institution, agency or corporation, other than securities issued as direct obligations of and fully guar-anteed
by the United States Government.
3. That not more than five percent of the voting stock of any one corporation shall be owned.
4. That corporate stocks eligible for purchase shall be restricted to stocks that, except for bank stocks and
insurance stocks, are either:
A) Listed or approved on issuance for listing on an exchange registered under the Securities Ex-change
Act of 1934, as amended (15 United States Code §78a through §7811);
B) Designated or approved on notice of issuance for designation on the national market system of a
national securities association registered under the Securities Exchange Act of 1934, as amended
(15 United States Code §78a through §7811)
C) Listed or approved on issuance for listing on an exchange registered under the laws of this [Ari-zona]
state or any other state; or
D) Listed or approved on issuance for listing on an exchange registered of a foreign country with which
the United States is maintaining diplomatic relations at the time of purchase, except that no more than
ten percent of the pension fund shall be invested in foreign equity securities on these exchanges, based
on the cost value of the stocks irrespective of capital appreciation. A.R.S. §38-848.D.
Custodial Credit Risk
Custodial Credit Risk is the risk that EORP will not be able (a) to recover deposits if the depository financial
institution fails or (b) to recover the value of the investment or collateral securities that are in the possession of
an outside party if the counterpart to the investment or deposit transaction fails. As of June 30, 2007, EORP
had no fund or deposits that were not covered by depository insurance or collateralized with securities held by
Wells Fargo Bank’s trust department or agent. Nor does EORP have any investments that are not registered
in the name of EORP and are either held by the counterpart or the counterpart’s trust department or agent.
Credit Risk
Credit Risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligation to the
System. As of June 30, 2007, the Plan’s fixed income assets that were not government guaranteed represented
89% of the fixed income portfolio.
Financial Section
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Each portfolio is managed in accordance with investment guidelines that are specific as to permissible credit
quality ranges, exposure levels within individual quality tiers, and the average credit quality of the overall
portfolios. According to those guidelines, the fixed income portfolio must have a minimum weighted average
quality rating of A3/A-. Fixed income securities must have a minimum quality rating of Baa3/BBB– at the
time purchase. The portion of the bond portfolio in securities rated Baa3/BBB– through Baa1/BBB+ must be
20% or less of the fair value of the fixed income portfolio.
Included in the fixed income portfolio are cash equivalents or commercial paper.
Commercial Paper must have a minimum quality rating of A-1/P-1 at the time of purchase.
Investments in derivatives are limited to collateralized mortgage obligations (CMO), collateralized bond ob-ligations
(CBO), collateralized debt obligations (CDO), and asset-backed securities (ABS).
In preparing this report, collateral for securities lending has been excluded because it is invested in a securities
lending collateral investment pool.
The following tables summarize the Plan’s fixed income portfolio exposure levels and credit qualities.
Average Credit Quality and Exposure Levels of
Non-government Guaranteed Securities
Fixed Security Type
Fair Value
June 30, 2007
% of all Fixed
Income Assets
Weighted
Avg. Credit
Dispersion Requiring
Further Exposure
Corporate Bonds $35,658,357 42% A See below
Mortgages 350,916 0% AA None
Agencies 26,218,290 31% AAA None
CBO 2,740,856 3% A See below
CDO 645,159 0% A See below
Commercial Paper 11,588,779 13% A1P1 See below
Total $77,202,357 89%
Ratings Dispersion Detail
Credit Rating Level
Corporate
Bonds CBO CDO
Commercial
Paper
AAA $1,621,407
AA 3,395,406
A 19,871,914 1,894,856 480,000 11,588,779
BBB 9,789,145 846,000 165,159
BB 490,225
B 490,230
Total $35,658,357 $2,740,856 $645,159 $11,588,779
Concentration of credit risk
Concentration of credit risk is the risk of loss that may be attributed to the magnitude of a government’s
investment in a single issue. Other than bonds used as direct obligations of and fully guaranteed by the U.S.
Government, not more than 5% of the Fund or its fixed income portfolio at fair value shall be invested in
bonds issued by any one institution, agency or corporation.
Interest rate risk
Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. This
risk is managed within the portfolio using segmented time distributions. It is widely used in the management of
fixed income portfolios in that it quantifies the risk of interest rate changes. The Plan does invest in fixed income
securities with floating rates that contain coupon adjustment mechanisms in a rising interest rate environment.
Financial Section
- 39 -
The following tables quantify, to the fullest extent possible, the interest rate risk of the Plan’s fixed income assets.
Foreign Currency Risk
Foreign currency risk is risk that changes in exchange rates will adversely impact the fair value of an investment.
Because it has no direct international holdings, EORP does not have any foreign currency risk exposure.
Security Lending Program
The Plan is party to a securities lending agreement with a bank. The bank, on behalf of the Plan, enters into
agreements with brokers to loan securities and have the same securities returned at a later date. The loans are
fully collateralized primarily by cash. Collateral is marked-to-market on a daily basis. Non-cash collateral can
be sold only upon borrower default. The Plan requires collateral of at least 102% of the fair value of the loaned
U.S. Government or corporate security. Securities on loan are carried at fair value.
Segmented Time Distribution by Security Type
(including Government Guaranteed Securities)
Fixed Income Security <1 1 -5 6 – 10 11 - 15 16 - 20 >20 Totals
Corporates 4,057,110 4,319,516 4,866,314 5,700,000 16,715,418 35,658,358
Agencies 398,089 7,151,366 7,046,324 2,579,908 9,042,603 26,218,290
CBO 846,000 737,158 1,157,698 2,740,856
CDO 480,000 165,159 645,159
Commercial Paper 11,588,779 11,588,779
Totals $11,986,868 $4,903,110 $11,950,881 $12,649,796 $8,279,908 $27.080.878 76,851,442
Callable Bonds by Security Type
(including Government Guaranteed Securities)
Fixed Income Security Type
Fair Value
June 30, 2007
% of All Fixed
Income Assets
Corporates $6,642,472 8%
Agencies 12,523,644 15%
Totals $19,166,116 23%
Asset Class Out on Loan
Total Available
to Loan
% of Available
to Loan
Equities 69,279,223 270,935,457 26%
Agencies 16,724,459 26,218,290 64%
Treasuries 9,025,251 9,025,251 100%
Corporate Bonds 6,517,948 39,395,288 17%
Totals 101,546,881 345,574,286 29%
As of June 30, 2007 the fair value of securities on loan was $101,546,881 and the collateral was $103,894,449.
The Plan receives a negotiated fee for its loan activities and is indemnified for broker default by the securities
lending agent.
The Plan participates in a collateral investment pool. All security loans may be terminated on demand by ei-ther
the lender or the borrower.
All matched loans shall have matched collateral investments.
The total cash collateral investments received for unmatched loans (any loan for which the cash collateral has
not been invested for a specific maturity) will have a maximum effective duration of 233 days. Additionally, at
Financial Section
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least 20% of total collateral investments shall be invested on an overnight basis. At June 30, 2007, the weighted
average maturity was 15 days for all investments purchased with cash collateral from unmatched loans. The
Plan has no credit risk because the amounts owed to the borrowers exceed the amounts the borrowers owe to
the Plan. Under this program, the Plan has not experienced any defaults or losses on these loans.
Note 4 –Capital Assets
These assets are stated at cost, and depreciable assets are depreciated using the straight-line method over the
estimated life of the asset. Repairs and maintenance are charged to expense as incurred. Depreciation expense
for June 30, 2007 was $11,440. A new office facility located at 3010 E. Camelback Road was purchased in
June of 2004. The property consists of a two-story building, the bottom floor of which is fully leased. The
administrative staff of the System occupies the second floor.
The table below is a schedule of the capital asset account balances as of June 30, 2006, and June 30, 2007, and
Schedule of Capital Asset Account Balances
Capital Assets Land
Building and
Improvements
Furniture, Fixtures
and Equipment
Total Capital
Assets
Balance June 30, 2006 33,145 201,815 18,767 253,727
Additions 14,731 32,108 46839
Deletions -0- -0- -0- -0-
Balance June 30, 2007 33,145 216,546 50,875 300,566
Accumulated Depreciation
Balance June 30, 2006 -0- (10,195) (4,033) (14,228)
Additions -0- (5,294) (6,146) (11,440)
Deletions -0- -0- -0- -0-
Balance June 30, 2007 -0- (15,489) (10,179) (25,668)
Net capital assets 33,145 201,057 40,696 274,898
changes to those account balances during the year ended June 30, 2007.
NOTE 5-Contributions Required and Contributions Made
The Plan’s funding policy provides for periodic employer contributions at actuarially determined rates that, ex-pressed
as percentages of annual covered payroll, are designed to accumulate sufficient assets to pay all benefits
when due. The normal cost and actuarial accrued liability are determined using projected unit credit actuarial
funding method. Unfunded actuarial accrued liabilities and assets in excess of actuarial accrued liabilities are
being amortized as a level percent of payroll over a closed thirty (30) year period (29 years remaining as of June
30, 2007). Assets in excess of actuarial accrued liabilities are amortized over an open period of twenty (20)
years. Beginning July 1, 2006, the minimum employer contribution rate increased from 5% to 10%.
During the year ended June 30, 2007, contributions totaling $14,147,614 ($6,080,175 employer [$5,407,971
pension and $672,204 health insurance subsidy contributions in excess of benefits paid], $3,977,740 court
fees and $4,089,699 member) were made in accordance with contribution requirements determined by an
actuarial valuation of the System as of June 30, 2005. The employer contributions consisted of approximately
$9,271,932 for normal cost [$8,654,451 pension and $617,481 health insurance subsidy] plus $1,636,898 for
amortization of the unfunded actuarial accrued liability in aggregate [$731,259 pension and $905,639 health
insurance subsidy]. Employer contributions represented 18.55% of covered payroll. [15.87% for normal costs
(14.82% pension and 1.05% health insurance) and 2.68% for amortization of assets in excess of the actuarial
accrued liability in aggregate 1.14% pension and 1.54% health insurance subsidy)]. Member contributions
represented 7.00% of covered payroll and are attributable to normal costs.
Financial Section
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Note 6 – Other Benefits
The PSPRS adopted a supplemental defined contribution plan for all contributing members of an eligible group.
An eligible group is defined as the employees of the Fund Manager, PSPRS, the EORP and the Corrections Of-ficer
Retirement Plan. The employees of any of these eligible groups must make an election to participate within
two years after the employee first meets the eligibility requirements to participate in the plan. The election to
participate is irrevocable and continues for the remainder of the employee’s employment with the employer. If
an employee elects to participate, the employee must contribute at least 1% of the employee’s gross compensa-tion.
The IRS maintains that the Employers designate the amounts contributed by each employee. All amounts
contributed are subject to the discretion and control of the Employer. Employee contributions and earnings to
the plan are immediately vested. Employer contributions, if any, are vested based on the following schedule:
Less than one year of service 0%
One year but less than two 20%
Two years but less than three 40%
Three years but less than four 60%
Four years but less than five 80%
Five years or more 100%
PSPRS administers the supplemental defined contribution plan through a third party administrator. All con-tributions
are sent directly to the third party administrator from the participating employer groups.
NOTE 7 – Health Insurance Subsidy
The plan description, summary of significant accounting policies, and contributions required for the health
insurance subsidy are the same as the retirement plan and can be found under Notes 1, 2 and 3. The health
insurance premium subsidy provided by A.R.S. § 38-817 consists of a fixed dollar amount set by statute and
paid by the System on behalf of eligible retired members. The subsidized health benefits are provided and
administered by the Arizona State Retirement System, Arizona Department of Administration or the partici-pating
employer of the retired member. According to Governmental Accounting Standards Board (GASB)
Statement No. 43, the health insurance subsidy paid by the Plan represents other post employment benefits.
The Plan does not administer a separate healthcare plan as defined under IRC § 401(h) or an equivalent ar-rangement.
In addition, the Plan is not statutorily authorized to maintain a separate account for the health
insurance subsidy assets and benefit payments. Therefore, in accordance with GASB No. 43, the healthcare
subsidy is reported as an Agency Fund. All assets of the Plan are available to pay both pension benefits and
the health insurance subsidy. The pension benefits and health insurance subsidy are funded through employer
contributions based on an annual actuarial valuation. Contributions are separately accounted for by employer
but are not segregated by contribution type. Contributions in excess of the health benefit subsidy payments
are reported in the retirement plan. Therefore, no accumulated assets or liabilities to participating employ-ers
are reported in the Agency Fund. For FY ’07, contributions collected for the health insurance subsidy
amounted to $1,523,119 and the health benefit subsidy payments were $850,915. The excess contributions
of $672,204 were added to the retirement plan for reporting purposes. Effective FY ’08, each participating
employer is required by GASB Statement No. 45 to disclose additional information with regard to funding
policy, the employer’s annual OPEB cost and contributions made, the funded status and funding progress of
the employer’s individual plan and actuarial methods and assumptions used.
Note 8 – Plan Termination
EORP and its related plans are administered in accordance with Arizona statutes. These statutes do provide
for termination of the plans under A.R.S. 41-3016.18. The plans are scheduled to terminate on July 1, 2016.
Financial Section
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Note 9 – Contingencies
Some of our real estate partners in the investments categorized as “other investments” have obtained third
party financing, which is secured by real property. The Plan has entered into Capital Call Agreements with
regards to these third party financing arrangements. The Capital Call Agreements, in the unlikely event of de-fault,
limit the Plan to the amount of the defaulted payment or the original terms of the investment approved
by the Fund Manager, whichever is less.
NOTE 10 – Funding Status and Progress
The Plan’s funded status as of the most recent valuation data is as follows:
(in thousands)
Actuarial
Valuation
Date
Actuarial Value
of Assets
(a)
Actuarial
Accrued
Liability (AAL)
EANC/PUC*
(b)
Unfunded
(Excess) AAL
(UAAL)
(b-a)
Funded
Ratio
(a/b)
Covered
Payroll
(c)
UAAL as a
Percentage
of Covered-
Payroll
((b-a)/c))
RETIREMENT PLAN
6/30/07 $336,717 $438,229 $101,512 76.8% $61,308 165.6%
The required schedule of funding progress immediately following the notes to the financial statements pres-ents
multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing
over time relative to the actuarial accrued liability for benefits.
The actuarial methods and assumptions used for the pension benefits are as follows:
Valuation Date: 		 June 30, 2007
Actuarial Cost Method: 	 Projected Unit Credit
Amortization Method: 	 Level percent of Payroll, Closed
Remaining Amortization Period: 29 years closed for unfunded actuarial
				 accrued liability, 20 years open for excess
Asset Valuation Method: 	 7-Year Smoothed Market Value
Investment Rate of Return: 	 8.50%
Projected Salary Increases: 	 5.50% - 9.00%, which includes inflation at 5.00%
Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability
of events far into the future, and the actuarially determined amounts are subject to continual revision as actual
results are compared to past expectations and new estimates are made about the future.
Actuarial calculations reflect a long-term perspective. Consistent with this perspective, actuarial methods and
assumptions used include techniques that are designed to reduce short-term volatility in actuarial accrued li-abilities
and the actuarial value of assets. The actuarial calculations are based on the benefits provided under
the terms of the Plan in effect at the time of each valuation. These benefits are described in Note 1 under
“Summary of Benefits.”
NOTE 11 – Required Schedules
The Schedule of Funding Progress and the Schedule of Employer Contributions are presented immediately
following the notes to the financial statements.
Financial Section
- 43 -
Required Supplementary Information
SCHEDULE OF FUNDING PROGRESS
(in thousands)
Actuarial
Valuation
Date
Actuarial
Value of
Assets
(a)
Actuarial
Accrued
Liability (AAL)
EANC/PUC1
(b)
Unfunded
(Excess)
AAL
(UAAL)
(b-a)
Funded
Ratio2
(a/b)
Covered
Payroll
(c)
UAAL as a
Percentage of
Covered
Payroll
((b-a)/c))
RETIREMENT PLAN
6-30-98 $241,884 $199,662 $(42,222) 121% $40,441 -104%
6-30-99 $283,337 $227,100 $(56,237) 125% $43,087 -131%
6-30-00 $329,777 $253,478 $(76,299) 130% $45,382 -168%
6-30-01 $355,768 $250,987 $(104,781) 142% $48,669 -215%
6-30-02 $351,349 $279,947 $(71,402) 126% $48,729 -147%
6-30-03 $353,463 $297,891 $(55,572) 119% $49,351 -113%
6-30-04 $343,376 $328,921 $(14,455) 104% $50,624 -29%
6-30-05 $344,604 $373,341 $28,737 92% $53,449 54%
6-30-06 $351,701 $391,403 $39,702 90% $54,696 73%
6-30-07 $336,717 $438,229 $101,512 77% $61,308 166%
1Entry Age Normal Cost method though 6-30-2004. Projected Unit Credit method from 6-30-2005.
2Beginning 6-30-07, funded ratio calculation does not include AAL for the health insurance premium subsidy. If the AAL for the health insurance
premium subsidy was included, the funded ratio would be 74.6%
SCHEDULE OF EMPLOYER CONTRIBUTIONS
Retirement Plan
Employer Contributions
Fiscal Year Ended
June 30
Annual Required
Contributions
Percentage
Contributed
1998 $3,941,018 100%
1999 $4,126,694 100%
2000 $3,851,940 100%
2001 $3,163,111 100%
2002 $3,656,604 100%
2003 $3,755,629 100%
2004 $6,976,772 100%
2005 $6,809,136 100%
2006 $11,479,967 100%
20071 $9,385,711 107%
See notes to the Schedules of Required Supplementary Information
¹Total Employer Contributions received during Fiscal Year Ended June 30, 2007 were $10,908,830.
GASB reporting requires discretely presenting the health insurance premium subsidy separately from
the retirement plan. As a result, the annual required contributions for the health insurance premium
subsidy were calculated to be $1,523,119. The benefits paid for the health insurance premium subsidy
were $850,915. The difference between the calculated annual required contributions and the benefits
paid of $672,204 were then added back to the annual required contributions for the retirement plan.
This required calculation resulted in a percent contributed of 107.1% for the retirement plan.
Financial Section
- 44 -
NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION:
The historical trend information for the pension benefits are presented as required supplemental information.
There were no significant factors affecting trends as of the June 30, 2007 valuation. Actuarial studies are com-pleted
in accordance with GASB Statements 25.
Actuarial valuations are prepared annually as of June 30 for each participating employer. To facilitate budget-ary
planning needs, employer contribution requirements are provided for each participating employer’s fiscal
year that commences after the following fiscal year end. For example, the contribution requirements for fiscal
year 2007 were determined by actuarial valuations as of June 30, 2005.
The actuarial methods and assumptions used for the pension benefits are as follows:
Valuation Date: 		 June 30, 2007
Actuarial Cost Method: 	 Projected Unit Credit
Amortization Method: 	 Level percent of Payroll, Closed
Remaining Amortization Period: 29 years closed for unfunded actuarial
				 accrued liability, 20 years open for excess
Asset Valuation Method: 	 7-Year Smoothed Market Value
Investment Rate of Return: 	 8.50%
Projected Salary Increases: 	 5.50% - 9.00%, which includes inflation at 5.00%
Required Supplementary Information
Financial Section
- 45 -
SCHEDULE OF CHANGES IN FUND BALANCE RESERVE
Refundable
Members’
Reserve
Employers’
Reserve
Future Ben-efit
Increase
Reserve
Balance - June 30, 2005 $31,849,614 $256,033,121 $23,611,516
Distribution of Revenues and Expenses
Members’ Contributions 3,811,179
Employers’ Contributions 11,479,967
Earnings (Loss) on Investments Net of Investment Expenses 24,408,221
Pension and Insurance Benefits (27,908,934)
Refunds to Terminated Members (7,246)
Administrative Expenses (247,595)
Distribution of Transfers
Excess Investment Earnings to be used for Future Benefit Increases
Earnings (Loss) on Excess Investment Earnings Account Assets (1,858,226) 1,858,226
Amount Utilized by Benefit Increases Granted 8,946,622 (8,946,622)
Net Transfers from Other State-Sponsored Pension Plans 3,088,633 1,033,445
Inter-System Transfers -- Member Account
Balances Transferred to Employers’ Reserve due to Retirement (2,103,086) 2,103,086
Balance - June 30, 2006 $36,639,094 $273,989,707 $16,523,120
Distribution of Revenues and Expenses
Members’ Contributions 4,089,699
Employers’ Contributions 10,908,830
Earnings (Loss) on Investments Net of Investment Expenses 54,598,524
Pension and Insurance Benefits (29,568,462)
Refunds to Terminated Members (107,258) (20,480)
Administrative Expenses (339,875)
Distribution of Transfers
Excess Investment Earnings to be used for Future Benefit Increases (20,886,734) 20,886,734
Earnings (Loss) on Excess Investment Earnings Account Assets (2,810,583) 2,810,583
Amount Utilized by Benefit Increases Granted 9,392,556 (9,392,556)
Net Transfers from Other State-Sponsored Pension Plans 422,547 747,773
Inter-System Transfers -- Member Account 1,957,427
Balances Transferred to Employers’ Reserve due to Retirement (3,241,134) 3,241,134
Balance - June 30, 2007 $39,760,374 $299,252,390 $30,827,881
Supporting Schedules Information
Financial Section
- 46 -
SCHEDULE OF RECEIPTS AND DISBURSEMENTS
FOR THE YEARS ENDED JUNE 30, 2007 AND 2006
2007 2006
RECEIPTS
Members’ Contributions $4,065,787 $3,769,044
Employers’ Contributions 6,917,459 7,508,427
Court Fees 3,954,735 3,856,141
Interest 6,104,124 5,650,090
Dividends 4,756,518 3,857,828
Real Estate Income (Net) (595) 6,795
Securities Lending Income 151,362 88,894
Amounts Transferred from Other State-Sponsored
Pension Plans 1,190,489 1,703,177
Purchase of Service Credits 1,957,426 2,429,992
Due to Other Pension Plans 3,578,711 -
Maturities and Sales of
U.S. Government Securities 1,734,982 1,905,187
Corporate Bonds 12,689,702 8,005,532
Corporate Notes 875,666,696 552,859,606
Alternative Investments 4,485,708 16,289,253
Equities 96,386,120 57,186,400
Total Receipts 1,023,639,225 665,116,365
DISBURSEMENTS
Pension Benefits 29,568,462 27,908,934
Refunds to Terminated Members 127,738 7,246
Investment and Administrative Expenses 449,270 308,370
Amounts Transferred to Other State-Sponsored
Pension Plans 20,169 11,093
Due From Other Pension Plans - 1,309,106
Acquisitions of:
U.S. Government Securities 8,938,193 12,765,095
Corporate Bonds 10,506,046 6,916,023
Corporate Notes 873,912,532 551,186,113
Alternative Investments 5,529,100 5,058,660
Equities 95,217,112 59,712,668
Total Disbursements 1,024,268,622 665,183,309
DECREASE IN CASH (629,397) (66,944)
BEGINNING CASH BALANCE - July 1 915,266 982,210
ENDING CASH BALANCE - June 30 $285,869 $915,266
Supporting Schedules Information
Financial Section
- 47 -
SCHEDULE OF ADMINISTRATIVE EXPENSES
Administrative Investment Total
Accounting and Auditing Services $4,850 $- $4,850
Actuarial Services 14,131 - 14,131
Communications 2,208 438 2,646
Computer Related Expense 11,708 2,321 14,029
Contractual Services 5,145 1,020 6,165
Depreciation Expense 9,562 1,896 11,458
Fund Manager Initiatives 2,465 489 2,953
Furniture and Equipment 700 139 839
Investment Services - 13,998 13,998
Local Board Training 190 38 227
Supplies & Service 4,261 845 5,106
Payroll Taxes and Fringe Benefits 36,896 11,243 48,139
Postage Expenses 3,094 613 3,708
Professional Services 120,316 29,594 149,910
Salaries and Wages 113,026 44,386 157,412
Training Expenses 11,323 2,376 13,699
$339,875 $109,396 $449,270
SCHEDULE OF CONSULTANT EXPENSES
Fees Paid
Barrows & Schatza, PLC $4,850
Clark Consulting, Inc. 1,473
Cortex Applied Research, Inc. 1,855
Kutak Rock, LLP 125,389
McLagan Partners, Inc. 250
Milliman 6,165
Pridestaff 854
Rodwan Consulting Group 14,131
Rose & Allyn Public Relations 2,525
Spinelli 473
Standard & Poor’s 1,973
Stivers Staffing Services 4,783
Systems Integration Solutions, Inc. 1,506
$166,227
Supporting Schedules Information
Financial Section
- 48 -
Other Supplemental Information
AGENCY FUND-HEALTH INSURANCE PREMIUM SUBSIDY
STATEMENT OF CHANGES IN ASSETS & LIABILITIES (unaudited)
FOR THE YEAR ENDED JUNE 30, 2007
Balance at
Beginning of
Year Additions Deletions
Balance
at End of
Year
Health Insurance Subsidy
Assets
Cash - 850,915 850,915 0
Total Assets 0 850,915 850,915 0
Liabilities
Benefits Payable - 850,915 850,915 0
Total Liabilities 0 850,915 850,915 0
HEALTH INSURANCE PREMIUM SUBSIDY
SCHEDULE OF FUNDING PROGRESS
(in thousands)
Actuarial
Valuation Date
Actuarial
Value of
Assets
(a)
Actuarial
Accrued
Liability (AAL)
EANC/PUC*
(b)
Unfunded
(Excess)
AAL
(UAAL)
(b-a)
Funded
Ratio
(a/b)
Covered
Payroll
(c)
UAAL as a
Percentage
of Covered
Payroll
((b-a)/c))
6/30/07 $- $13,070 $13,070 0.0% $61,308 21.3%
GASB reporting requires discretely reporting the health insurance premium subsidy separately from the retirement plan. As a result, the funded ratio for the
retirement plan on page 43 does not include this portion for the health insurance premium subsidy. If you include the actuarial accrued liabilities for the health
insurance premium subsidy with the retirement plan, the funded ratio is 74.6%.
Investment Section
Investment Advisor’s Letter 50
Fund Investment Objectives 51
Investment Performance
Investment Returns 52
Asset Allocation 52
Ten Year Cumulative Return, Benchmark & Indices 53
Top 10 Investment Holdings 54
Summary of Change to Investment Portfolios 55
Schedule of Commissions & Investment Management Costs 55
Equity Portfolio 56
Equity Acquired 60
Equity Sold 62
Bond Portfolio 66
Bonds Acquired 71
Bonds Sold 73
Corporate Note Portfolio 74
Alternate Investments Portfolio 75
Alternative Investments Acquired 76
Alternative Investments Sold 77
Investments Section
- 50 -
Investments Section
- 51 -
Fund Investment Objectives
The objective of the Fund is to ensure the integrity of the Elected Officials’ Retirement Plan, Public Safety
Personnel Retirement System and the Corrections Officer Retirement Plan in order to adequately fund ben-efit
levels for members as stated in Title 38, Chapter 5, articles 3, 4 and 6 of the Arizona Revised Statutes and
as amended from time to time by the Legislature. To achieve the objective, the Fund will do the following:
1. Maintain a goal for the Fund’s assets to be equal to the Fund’s liabilities within any twenty-year pe-riod;
2. Annually adjust the employer contribution rates based on the recommendations made by the annual
actuarial valuations;
3. Determine a reasonable contribution rate necessary to fund benefits approved by the legislature and
then reduce the variation in the employer contribution rate over time to the Fund;
4. Preserve and enhance the capital of the Fund through effective management of the portfolio in order
to take advantage of attractive opportunities various markets and market sectors have to offer;
5. Provide the opportunity for increased benefits for retirees as the legislature may from time to time
enact through systematic growth of the investments of the fund.
Consistent with the Fund objectives, the primary investment objective of the Fund is to maximize long-term
real investment returns (after inflation) recognizing established risk (volatility) parameters and the need to
preserve capital by:
1. Deriving a reasonable asset allocation model that attempts to fully achieve the primary investment
objective, over the long term;
2. Consistent with these policies and the direction of the Fund Manager, strategically allocating within
asset classes and investment styles in order to enhance investment returns. This strategic allocation
must at all times be within ranges set forth in these Policies;
3. Regularly reviewing the status of investments;
4. Regularly assessing the need to adjust the mix, type and composition of the investment classes within
the allocation ranges.
The possibility of short-term declines in the market value of the Fund or the Fund’s assets is a recognized
consequence of achieving potentially higher long-term investment returns.
The time horizon for evaluating total fund investment performance is long-term.
Investments Section
- 52 -
Asset Allocation
June 30, 2007
Annualized Rates of Return
1 Year 3 Year 5 Year 10 Year
EORP Total Fund 17.01% 11.40% 11.15% 6.75%
Balanced Index 15.13% 8.23% 7.84% 6.78%
EORP Domestic Equity 20.53% 11.90% 11.88% 5.67%
Equity Benchmark 19.95% 11.47% 10.59% 6.83%
EORP Fixed Income 7.29% 5.73% 6.65% 7.09%
Lehman Aggregate Index 6.02% 3.84% 4.70% 6.06%
91 Day T-Bill 5.19% 3.77% 2.75% 3.79%
*Time-weighted rate of return based on the market rate of return.
Investments Section
- 53 -
$100
$120
$140
$160
$180
$200
$220
97 98 99 00 01 02 03 04 05 06 07
EORP Fixed Income Lehman T-Bill
$100
$110
$120
$130
$140
$150
$160
$170
$180
$190
$200
97 98 99 00 01 02 03 04 05 06 07
EORP Total Fund Benchmark
Total Fund
Equities
Fixed Income
Ten Year Cumulative Return, Benchmark & Indices
$100
$120
$140
$160
$180
$200
$220
$240
97 98 99 00 01 02 03 04 05 06 07
EORP Equities Stock Benchmark
Investments Section
- 54 -
TOP 10 CORPORATE BOND HOLDINGS
PAR VALUE DESCRIPTION FAIR VALUE
2,850,000 HUTCHISON WHAMPOA FINANCIAL 3,139,560
2,000,000 BAYER HYPO-VEREINSBANK 2,441,500
1,927,388 PREFERRED CPO 2,038,425
1,000,000 SECURITY MUTUAL LIFE NEW YORK 1,237,970
1,105,578 REG DIVERSIFIED FUNDING SR NOTES 1,228,596
1,000,000 BANC ONE CORP 1,194,590
1,000,000 LEHMAN BROTHERS HOLDINGS INC 1,170,740
1,000,000 UNION CENTRAL LIFE 1,069,280
941,804 MMCAPS FUNDING I LTD/INC 1,031,276
1,000,000 PROTECTIVE LIFE CPI+150 941,140
TOP 10 EQUITY HOLDINGS
SHARES DESCRIPTION FAIR VALUE
131,800 EXXON MOBIL CORP 11,055,384
64,675 VANGUARD TOTAL STOCK MARKET ETF 9,661,152
58,300 iSHARES MSCI EMERGING MARKET ETF 7,675,195
175,100 GENERAL ELECTRIC CO 6,702,828
123,500 CITIGROUP, INC. 6,334,315
102,300 BANK OF AMERICA CORPORATION 5,001,447
168,600 MICROSOFT CORPORATION 4,968,642
57,800 iSHARES EAFE INDEX ETF 4,668,506
73,100 PROCTER & GAMBLE COMPANY 4,472,989
51,300 CHEVRON CORP 4,321,512
Investments Section
- 55 -
SUMMARY OF CHANGES TO INVESTMENT PORTFOLIOS
(in thousands)
Balance June 30,
2006
Balance June 30,
2007
Description
Percent at
Fair Value
Fair
Value
Book
Value Acquisitions
Maturities
and Sales
(Premium)
Discount
Fair
Value
Book
Value
Percent at
Fair Value
U.S. Treasury Obliga-tions
2.30% 7,458 5,964 1,592 4 9,025 7,553 2.44%
Federal Agency Obliga-tions
6.32% 20,470 20,977 7,346 1,745 6 26,218 26,573 7.08%
Total Government
Securities 8.62% 27,927 26,942 8,938 1,745 10 35,244 34,126 9.52%
Corporate Bonds 12.77% 41,363 39,504 10,506 11,691 70 39,395 38,249 10.64%
Total Bond Portfolio 21.40% 69,291 66,445 19,444 13,435 79 74,639 72,375 20.15%
Corporate Notes 4.12% 13,343 13,343 873,913 875,667 11,589 11,589 3.13%
Equities 71.08% 230,181 181,604 95,217 74,241 270,935 202,580 73.15%
Alternative Investments 3.40% 11,011 11,011 5,529 3,314 13,225 13,225 3.57%
Total Portfolio 100.00% 323,826 272,403 994,103 966,657 79 370,389 299,770 100.00%
SCHEDULE OF COMMISSIONS &
INVESTMENT MANAGEMENT COSTS
Broker
Number Of
Shares Traded
Average
Commission
Total
Commissions
ABEL / NOSER CORP. 314,868 .015 $4,723
BLOOMBERG TRADEBOOK LLC 606,478 .010 $6,065
GREENBERG FINANCIAL GROUP 539,200 .020 $10,784
INVESTORS CAPITAL CORPORATION 316,100 .020 $6,322
ISI GROUP, INC. 340,300 .040 $13,612
MORGAN STANLEY DEAN WITTER 384,100 .020 $7,682
REGAL SECURITIES, INC. 133,660 .020 $2,673
SAMCO FINANCIAL SERVICES, INC. 321,150 .020 $6,423
SANFORD C. BERNSTEIN & CO., LLC 390,050 .040 $15,602
U.S. FINANCIAL INVESTMENTS INC. 275,099 .020 $5,502
UBS / PAINE WEBBER 673,132 .020 $13,463
WELLS FARGO BANK 94,828 .000 $-0-
TOTAL COMMISSIONS 4,388,965 .020 $92,851
Investments Section
- 56 -
EQUITY PORTFOLIO
SHARES DESCRIPTION PRICE FAIR VALUE
13,600 3M COMPANY 86.79 1,180,344
26,600 ABBOTT LABORATORIES 53.55 1,424,430
15,100 ABERCROMBIE & FITCH 72.98 1,101,998
18,600 ADOBE SYSTEMS 40.15 746,790
11,800 AETNA INC 49.40 582,920
25,000 AFLAC INC 51.40 1,285,000
6,400 ALCAN INC 81.30 520,320
6,100 ALLEGHENY TECHNOLOGIES INC 104.88 639,768
19,400 ALLIANZ AG HOLDING 23.27 451,438
39,400 ALLSTATE CORPORATION 61.51 2,423,494
53,000 ALTRIA GROUP INC 70.14 3,717,420
28,900 AMDOCS LTD 39.82 1,150,798
22,600 AMERICAN CAPITAL STRATEGIES LTD 42.52 960,952
56,900 AMERICAN INT’L GROUP 70.03 3,984,707
43,800 AMGEN 55.29 2,421,702
22,300 APACHE CORPORATION 81.59 1,819,457
21,100 APPLE COMPUTER INC 122.04 2,575,044
46,800 APPLIED MATERIALS 19.87 929,916
26,700 ARCH COAL INC 34.80 929,160
33,400 ARCHER-DANIELS-MIDLAND COMPANY 33.09 1,105,206
33,300 AUTOMATIC DATA PROCESSING 48.47 1,614,051
102,300 BANK OF AMERICA CORPORATION 48.89 5,001,447
4,575 BASF AG 130.71 597,998
26,700 BED BATH & BEYOND 35.99 960,933
45,000 BEST BUY CO INC 46.67 2,100,150
43,400 BOEING CO. 96.16 4,173,344
8,325 BROADBRIDGE FINANCIAL SOLUTIONS 19.12 159,174
2,300 BURLINGTON NORTHERN SANTE FE 85.14 195,822
15,840 CANADIAN NATIONAL RAILWAY 50.93 806,731
26,600 CAPITAL ONE FINANCIAL 78.44 2,086,504
15,000 CAREER EDUCATION CORP. 33.77 506,550
5,395 CARLISLE COMPANIES INC 46.51 250,922
1,700 CARPENTER TECHNOLOGY 130.31 221,527
23,100 CELGENE CORP 57.33 1,324,323
18,500 CENTEX CORP 40.10 741,850
5,200 CENTURY TELEPHONE INC 49.05 255,060
8,209 CHATTEM INC 63.38 520,286
14,900 CHESAPEAKE ENERGY 34.60 515,540
51,300 CHEVRON CORP 84.24 4,321,512
23,600 CHICO’S FAS INC 24.34 574,424
23,000 CHINA MOBILE LIMITED 53.90 1,239,700
20,700 CHUBB CORPORATION 54.14 1,120,698
17,800 CIMAREX ENERGY CO 39.41 701,498
Investments Section
- 57 -
SHARES DESCRIPTION PRICE FAIR VALUE
146,600 CISCO SYSTEMS 27.85 4,082,810
123,500 CITIGROUP, INC. 51.29 6,334,315
76,500 CITIZENS COMMUNICATIONS 15.27 1,168,155
48,300 CITRIX SYSTEMS INC 33.67 1,626,261
12,670 CLARCOR INC 37.43 474,238
21,740 COACH INC 47.39 1,030,259
35,000 COCA-COLA CO 52.31 1,830,850
21,600 COLGATE PALMOLIVE CO 64.85 1,400,760
37,600 COMCAST CORP-SPECIAL CL A 27.96 1,051,296
26,500 COMMERCE BANCORP, INC. 36.99 980,235
37,100 CONSTELLATION BRANDS 24.28 900,788
20,200 CONSTELLATION ENERGY GROUP INC 87.17 1,760,834
62,300 CORNING INCORPORATED 25.55 1,591,765
10,840 COVANCE INC 68.56 743,190
11,000 CULLEN/FROST BANKERS 53.47 588,170
69,539 CVS/CAREMARK CORP 36.45 2,534,697
23,400 DELL INC 28.55 668,070
21,800 DOW CHEMICAL 44.22 963,996
39,000 DUKE ENERGY CORPORATION 18.30 713,700
12,400 E.ON AG 55.64 689,936
60,500 EMC CORP 18.10 1,095,050
26,600 EMULEX CORP. 21.84 580,944
17,700 ENDO PHARMACEUTICAL HOLDINGS INC 34.23 605,871
5,600 ENERGEN CORP 54.94 307,664
16,800 EXELON CORP 72.60 1,219,680
14,800 EXPRESS SCRIPTS 50.01 740,148
131,800 EXXON MOBIL CORP 83.88 11,055,384
26,600 FEDEX CORPORATION 110.97 2,951,802
25,600 FISERV INC 56.80 1,454,080
6,200 FMC CORP 89.39 554,218
16,400 FRANKLIN RESOURCES INC 132.47 2,172,508
20,300 GARMIN LIMITED 73.97 1,501,591
20,100 GENENTECH, INC. 75.66 1,520,766
175,100 GENERAL ELECTRIC CO 38.28 6,702,828
26,600 GENZYME CORPORATION 64.40 1,713,040
70,600 GILEAD SCIENCES, INC 38.80 2,739,280
11,600 GLOBALSANTAFE CORP 72.25 838,100
13,000 GOLDMAN SACHS GROUP INC 216.75 2,817,750
13,400 GRAINGER (W W) INC 93.05 1,246,870
3,400 GUITAR CENTER INC 59.81 203,354
16,750 HARRIS CORPORATION 54.55 913,713
29,580 HARTFORD FINANCIAL SERVICES GROUP 98.51 2,913,926
63,200 HOME DEPOT 39.35 2,486,920
8,300 HOME PROPERTIES INC. 51.93 431,019
Investments Section
- 58 -
SHARES DESCRIPTION PRICE FAIR VALUE
61,300 INTEL CORPORATION 23.74 1,455,262
38,000 INTERNATIONAL BUSINESS MACH. 105.25 3,999,500
4,400 INTUITIVE SURGICAL INC 138.77 610,588
57,800 iSHARES EAFE INDEX ETF 80.77 4,668,506
58,300 iSHARES MSCI EMERGING MARKET ETF 131.65 7,675,195
7,600 ISHARES RUSSELL 3000 INDEX ETF 87.03 661,428
24,800 JACOBS ENGINEERING GROUP INC. 57.51 1,426,248
40,300 JOHNSON & JOHNSON CO 61.62 2,483,286
50,100 JP MORGAN CHASE & CO 48.45 2,427,345
11,700 KELLOGG CO 51.79 605,943
57,000 KING PHARMACEUTICALS INC 20.46 1,166,220
10,000 KOHL’S CORP 71.03 710,300
20,077 KRAFT FOODS INC 35.25 707,714
23,400 LANDSTAR SYSTEMS, INC 48.25 1,129,050
20,900 LEHMAN BROTHERS HOLDINGS 75.80 1,584,220
39,300 LILLY ELI 55.88 2,196,084
23,200 LINEAR TECHNOLOGY CORP 36.18 839,376
19,000 LOCKHEED MARTIN CORP 94.13 1,788,470
25,500 LOGITECH INTERNATIONAL SA 26.39 672,945
15,063 MANITOWOC COMPANY INC. 80.38 1,210,764
24,900 MCAFEE INC 35.20 876,480
28,700 MCDONALDS CORPORATION 50.76 1,456,812
26,700 MERRILL LYNCH & CO INC 83.58 2,231,586
25,000 METLIFE INC. 64.48 1,612,000
47,800 MICROCHIP TECHNOLOGY INC. 37.04 1,770,512
168,600 MICROSOFT CORPORATION 29.47 4,968,642
23,400 NABORS INDUSTRIES, LTD 33.38 781,092
41,300 NOKIA CORPORATION 28.11 1,160,943
15,000 NORDSTROM INC 51.12 766,800
21,514 ODYSSEY HEALTHCARE INC 11.86 255,156
19,000 OLIN CORP. 21.00 399,000
10,000 OMNICOM GROUP 52.92 529,200
16,800 ONEOK INC 50.41 846,888
48,400 PEPSICO INC. 64.85 3,138,740
42,000 PETSMART, INC 32.45 1,362,900
150,100 PFIZER INC. 25.57 3,838,057
15,800 PMI GROUP INC. 44.67 705,786
25,504 POOL CORPORATION 39.03 995,421
8,100 PPL CORP 46.79 378,999
73,100 PROCTER & GAMBLE COMPANY 61.19 4,472,989
16,757 PSYCHIATRIC SOLUTIONS INC 36.26 607,609
48,800 QUALCOMM INCORPORATED 43.39 2,117,432
46,600 QUIKSILVER, INC 14.13 658,458
14,700 RESMED INC 41.26 606,522
13,700 ROBERT HALF INTERNATIONAL 36.50 500,050
18,500 RPM INTERNATIONAL INC 23.11 427,535
Investments Section
- 59 -
SHARES DESCRIPTION PRICE FAIR VALUE
23,300 SANDISK CORPORATION 48.94 1,140,302
21,000 SAP AG 51.07 1,072,470
24,800 SATYAM COMPUTER SERVICES LTD 24.76 614,048
38,700 SCHLUMBERGER LTD 84.94 3,287,178
10,500 SCOTTS CO’A’ 42.94 450,870
18,850 SEALED AIR 31.02 584,727
23,960 SEI INVESTMENTS COMPANY 29.04 695,798
8,900 SEMPRA ENERGY 59.23 527,147
4,800 SOVRAN SELF STORAGE 48.16 231,168
19,500 SPECTRA ENERGY CORP 25.96 506,220
12,800 SPRINT NEXTEL CORPORATION 20.71 265,088
59,500 STAPLES, INC. 23.73 1,411,935
10,200 STERICYCLE INC 44.46 453,492
25,600 STRATEGIC HOTELS & RESORTS 22.49 575,744
17,700 SUPERIOR ENERGY SERVICES 39.92 706,584
32,200 T. ROWE PRICE GROUP INC 51.89 1,670,858
8,400 TARGET CORP 63.60 534,240
53,300 TELE NORTE LESTE PARTICIPACOES SA 18.97 1,011,101
31,600 TELEFONES DE MEXICO 37.89 1,197,324
42,000 TEVA PHARMACEUTICAL INDUSTRIES LTD 41.25 1,732,500
75,800 TEXAS INSTRUMENTS 37.63 2,852,354
21,000 TOTAL SA 80.98 1,700,580
15,000 TRINITY INDUSTRIES INC 43.54 653,100
22,300 UNITED TECHNOLOGIES CORP 70.93 1,581,739
8,700 URS CORP 48.55 422,385
4,850 VALERO ENERGY CORPORATION 73.86 358,221
41,800 VANGUARD EMERGING MARKETS ETF 91.29 3,815,922
23,200 VANGUARD SMALL CAP VALUE ETF 74.83 1,736,056
94,903 VANGUARD SMALL CAP VALUE MUTUAL FUND 17.94 1,702,558
64,675 VANGUARD TOTAL STOCK MARKET ETF 149.38 9,661,152
22,600 VARIAN MEDICAL SYSTEMS INC 42.51 960,726
59,900 VERIZON COMMUNICATIONS 41.17 2,466,083
19,000 VERTEX PHARMACEUTICALS 28.56 542,640
39,200 WACHOVIA CORP 51.25 2,009,000
33,400 WALGREEN COMPANY 43.54 1,454,236
18,320 WAL-MART STORES 48.11 881,375
26,300 WELLPOINT INC 79.83 2,099,529
48,100 WESTERN DIGITAL CORP 19.35 930,735
34,000 YUM BRANDS INC. 32.72 1,112,480
TOTAL EQUITY PORTFOLIO 270,935,457
Investments Section
- 60 -
EQUITY ACQUIRED
July 1, 2006 Through June 30, 2007
Description Shares Div Rate Income Yield Avg Cost Cost
3M COMPANY 13,600 0.48 6,528 0.63 76.32 1,037,914
AFFILIATED COMPUTER SERVICES 200 - 0 0.00 51.33 10,266
AFLAC INC 25,000 0.21 5,125 0.45 45.84 1,145,986
ALLEGHENY TECHNOLOGIES INC 6,100 0.13 793 0.13 97.82 596,721
ALLIANZ AG HOLDING 26,550 0.41 10,786 2.54 16.02 425,255
ALTRIA GROUP INC 53,000 0.69 36,570 0.85 81.22 4,304,648
AMDOCS LTD 10,000 - 0 0.00 35.37 353,732
APPLE COMPUTER INC 21,300 - 0 0.00 86.46 1,841,615
ARCH COAL INC 27,000 0.07 1,890 0.22 31.72 856,490
ARCHER-DANIELS-MIDLAND COMPANY 33,500 0.12 3,853 0.37 31.05 1,040,244
ARRIS GROUP 52,000 - 0 0.00 11.41 593,510
BASF AG 1,500 3.22 4,827 3.93 81.95 122,923
BJ SERVICES COMPANY 2,000 - 0 0.00 32.08 64,158
BOEING CO. 21,200 0.35 7,420 0.41 86.36 1,830,837
BURLINGTON NORTHERN SANTE FE 100 0.25 25 0.32 76.99 7,699
CAREER EDUCATION CORP. 30,500 - 0 0.00 25.77 785,954
CARLISLE COMPANIES INC 12,600 0.14 1,701 0.16 82.40 1,038,300
CARPENTER TECHNOLOGY 1,800 0.30 540 0.28 108.06 194,500
CELGENE CORP 23,500 - 0 0.00 56.70 1,332,543
CENTEX CORP 18,500 0.04 740 0.08 48.51 897,492
CHESAPEAKE ENERGY 200 0.07 14 0.22 30.23 6,046
CHEVRON CORP 8,000 0.58 4,640 0.89 64.96 519,694
CHINA MOBILE LIMITED 23,000 0.53 12,226 1.16 45.73 1,051,763
CIMAREX ENERGY CO 10,500 0.04 420 0.09 42.36 444,782
CITRIX SYSTEMS INC 36,800 - 0 0.00 30.24 1,112,728
COACH INC 10,000 - 0 0.00 28.52 285,198
COCA-COLA CO 8,500 0.34 2,890 0.64 53.31 453,118
CONSTELLATION BRANDS 400 - 0 0.00 19.25 7,700
CORNING INCORPORATED 62,300 0.05 3,115 0.23 21.67 1,350,186
CULLEN/FROST BANKERS 14,500 0.40 5,800 0.74 54.22 786,190
D. R. HORTON 10,500 0.15 1,575 0.59 25.43 267,058
DOW CHEMICAL 100 0.42 42 0.99 42.42 4,242
E.ON AG 12,500 1.51 18,904 4.08 37.02 462,804
EMULEX CORP. 200 - 0 0.00 17.75 3,550
ENDO PHARMACEUTICAL HOLDINGS INC 5,700 - 0 0.00 29.53 168,317
GARMIN LIMITED 20,300 0.50 10,150 1.01 45.62 926,172
GENERAL ELECTRIC CO 175,500 0.28 49,140 0.81 34.62 6,076,406
HARRIS CORPORATION 37,800 0.11 4,158 0.26 42.69 1,613,704
HOME PROPERTIES INC. 8,400 0.65 5,460 1.10 59.01 495,704
INDYMAC BANCORP INC 8,500 - 0 0.00 46.39 394,355
INTUITIVE SURGICAL INC 12,400 - 0 0.00 93.85 1,163,779
iSHARES EAFE INDEX ETF 57,800 1.53 88,634 1.91 80.18 4,634,559
iSHARES MSCI EMERGING MARKET ETF 58,500 1.57 91,992 1.36 115.35 6,748,194
Investments Section
- 61 -
Description Shares Div Rate Income Yield Avg Cost Cost
ISHARES RUSSELL 3000 INDEX ETF 7,600 0.33 2,477 0.37 88.04 669,086
JACKSON HEWITT TAX SERVICE INC 300 - 0 0.00 32.64 9,791
JP MORGAN CHASE & CO 10,500 0.38 3,990 0.75 50.90 534,498
KELLOGG CO 11,800 0.29 3,434 0.58 50.05 590,600
KING PHARMACEUTICALS INC 57,000 - 0 0.00 18.20 1,037,182
LABORATORY CORP OF AMERICA HOLDINGS 6,600 - 0 0.00 79.03 521,585
LINEAR TECHNOLOGY CORP 13,200 0.18 2,376 0.57 31.74 419,025
LOCKHEED MARTIN CORP 19,200 0.35 6,720 0.39 88.90 1,706,944
LOGITECH INTERNATIONAL SA 38,000 - 0 0.00 28.98 1,101,334
MANITOWOC COMPANY INC. 10,300 0.04 361 0.08 43.83 451,435
MCAFEE INC 7,700 - 0 0.00 24.26 186,807
MCDONALDS CORPORATION 29,000 1.00 29,000 2.80 35.73 1,036,112
MERRILL LYNCH & CO INC 5,500 0.35 1,925 0.38 91.68 504,216
MICROCHIP TECHNOLOGY INC. 21,200 0.28 5,936 0.88 31.70 672,071
NORDSTROM INC 5,000 0.14 675 0.29 46.47 232,344
ODYSSEY HEALTHCARE INC 38,000 - 0 0.00 13.18 501,024
PETSMART, INC 21,000 0.03 630 0.11 27.04 567,938
PFIZER INC. 24,000 0.29 6,960 1.23 23.56 565,530
PMI GROUP INC. 16,000 0.05 840 0.11 46.82 749,153
PPL CORP 8,100 0.31 2,471 0.86 35.64 288,659
PSYCHIATRIC SOLUTIONS INC 16,100 - 0 0.00 38.00 611,826
QUALCOMM INCORPORATED 26,500 0.14 3,710 0.38 37.06 982,139
RESMED INC 8,600 - 0 0.00 41.41 356,153
ROBERT HALF INTERNATIONAL 2,500 0.10 250 0.27 36.90 92,245
RPM INTERNATIONAL INC 6,000 0.18 1,050 0.92 19.01 114,083
SANDISK CORPORATION 23,500 - 0 0.00 42.94 1,009,035
SAP AG 21,000 0.62 13,016 1.28 48.37 1,015,810
SATYAM COMPUTER SERVICES LTD 12,550 0.04 447 0.10 34.78 436,499
SCHLUMBERGER LTD 38,900 0.18 6,808 0.28 62.39 2,427,096
SCOTTS CO’A’ 3,500 0.13 438 0.29 43.42 151,970
SPRINT NEXTEL CORPORATION 24,000 0.03 600 0.13 18.88 453,068
STAPLES, INC. 17,000 0.29 4,930 1.09 26.59 452,028
TARGET CORP 8,500 0.14 1,190 0.25 56.76 482,435
TELE NORTE LESTE PARTICIPACOES SA 53,300 0.04 2,058 0.29 13.54 721,731
TEVA PHARMACEUTICAL INDUSTRIES LTD 42,000 0.08 3,499 0.24 34.85 1,463,734
TEXAS INSTRUMENTS 23,000 0.08 1,840 0.26 30.29 696,644
TOTAL SA 21,000 1.14 23,990 1.75 65.22 1,369,629
TRINITY INDUSTRIES INC 15,000 0.06 900 0.18 33.83 507,495
UNITED TECHNOLOGIES CORP 22,300 0.32 7,136 0.51 62.62 1,396,532
VALERO ENERGY CORPORATION 100 0.12 12 0.21 57.84 5,784
VANGUARD EMERGING MARKETS ETF 42,100 1.34 56,372 1.82 73.58 3,097,928
VANGUARD SMALL CAP VALUE ETF 23,300 0.06 1,351 0.08 71.07 1,655,911
VANGUARD SMALL CAP VALUE MUTUAL FUND 94,903 0.32 30,654 1.90 17.04 1,617,428
VANGUARD TOTAL STOCK MARKET ETF 64,675 0.57 36,929 0.38 150.96 9,763,545
VARIAN MEDICAL SYSTEMS INC 22,600 - 0 0.00 46.05 1,040,652
Investments Section
- 62 -
Description Shares Div Rate Income Yield Avg Cost Cost
VCA ANTECH, INC. 7,000 - 0 0.00 32.12 224,831
VERTEX PHARMACEUTICALS 19,000 - 0 0.00 29.75 565,210
WACHOVIA CORP 12,500 0.56 7,000 1.04 53.94 674,305
WAL-MART STORES 300 0.22 66 0.46 48.04 14,412
WESTERN DIGITAL CORP 49,000 - 0 0.00 20.37 997,958
YUM BRANDS INC. 17,000 0.15 2,550 0.25 59.80 1,016,631
TOTAL EQUITIES ACQUIRED 2,050,078 654,544 46.45 95,217,112
EQUITY SOLD
JULY 1, 2006 THROUGH JUNE 30, 2007
Description Shares Sale Price Cost
Gain (Loss)
on Sale
% Gain
on Sale
ABBOTT LABORATORIES 200 52.8700 2,129 8,445 396.57%
ADOBE SYSTEMS 14,700 35.4752 255,994 265,196 103.59%
ADVANCED MICRO DEVICES 20,000 24.8170 577,498 (81,573) -14.13%
AETNA INC 41,500 42.6007 856,734 910,343 106.26%
AFFILIATED COMPUTER SERVICES 20,500 57.1864 1,115,764 56,202 5.04%
ALBERTO CULVER CO 13,400 30.2640 438,128 (32,947) -7.52%
ALCAN INC 7,100 81.2988 260,949 316,194 121.17%
ALLIANZ AG HOLDING 7,150 22.7713 114,523 48,224 42.11%
ALLSTATE CORPORATION 27,300 61.9983 649,071 1,042,812 160.66%
ALLTEL CORPORATION 16,700 62.7662 810,293 237,620 29.33%
ALTERA CORPORATION 33,500 17.3369 682,846 (102,747) -15.05%
AMDOCS LTD 400 34.1000 13,712 (72) -0.53%
AMERICAN CAPITAL STRATEGIES LTD 10,800 46.9919 372,440 134,959 36.24%
AMERICAN EXPRESS 16,700 58.5486 511,058 466,340 91.25%
AMERICAN INT’L GROUP 200 69.7400 8,405 5,543 65.95%
AMERICAN STANDARD COMPANY INC 30000 39.5434 765,643 419,891 54.84%
AMGEN 19,800 59.7544 768,386 414,216 53.91%
ANALOG DEVICES, INC. 11,800 33.1856 894,136 (502,794) -56.23%
ANHEUSER BUSCH COMPANY 8,400 48.8280 436,049 (26,074) -5.98%
APACHE CORPORATION 14,300 64.5312 329,917 592,567 179.61%
APPLE COMPUTER INC 200 88.1900 17,076 562 3.29%
APPLIED MATERIALS 200 18.1800 3,390 246 7.26%
ARACRUZ CELULOSE SA 7,000 50.2070 364,442 (13,284) -3.65%
ARCH COAL INC 300 30.0500 9,517 (502) -5.27%
ARCHER-DANIELS-MIDLAND COMPANY 100 32.9600 3,105 191 6.14%
ARRIS GROUP 52,000 13.4909 593,510 107,092 18.04%
AUTOMATIC DATA PROCESSING 100 48.8000 3,981 899 22.60%
AUTOZONE INC 6,700 118.6704 585,916 209,017 35.67%
BALL CORP 7,900 40.3879 328,135 (9,239) -2.82%
BANK OF AMERICA CORPORATION 24,700 52.2270 692,686 596,939 86.18%
BASF AG 1,425 123.3538 111,055 64,708 58.27%
BEAR STEARNS COMPANY 10,100 159.2312 913,850 694,054 75.95%
Investments Section
- 63 -
Description Shares Sale Price Cost
Gain (Loss)
on Sale
% Gain
on Sale
BED BATH & BEYOND 6,900 40.7135 269,386 11,261 4.18%
BEST BUY CO INC 100 46.5200 3,476 1,176 33.84%
BJ SERVICES COMPANY 25,400 30.8873 509,634 274,372 53.84%
BOEING CO. 100 87.8200 6,660 2,122 31.86%
BURLINGTON NORTHERN SANTE FE 18,800 79.0442 860,196 625,395 72.70%
CACI INTERNATIONAL 6,200 48.7504 374,916 (72,796) -19.42%
CANADIAN NATIONAL RAILWAY 14,460 42.9344 230,318 390,122 169.38%
CAPITAL ONE FINANCIAL 200 75.8600 16,945 (1,773) -10.46%
CAREER EDUCATION CORP. 15,500 35.3562 399,419 148,443 37.16%
CARLISLE COMPANIES INC 19,805 45.9365 816,013 93,548 11.46%
CARPENTER TECHNOLOGY 100 113.9900 10,806 593 5.49%
CELGENE CORP 400 51.2400 22,682 (2,186) -9.64%
CENTURY TELEPHONE INC 29,900 43.2449 1,000,574 291,988 29.18%
CEPHALON INC 6,000 55.2090 455,178 (124,054) -27.25%
CHATTEM INC 8,891 61.8843 330,233 219,888 66.59%
CHECK POINT SOFTWARE TECHNOLOGIES LTD 11,700 16.5901 221,448 (27,584) -12.46%
CHESAPEAKE ENERGY 7,000 33.0527 221,946 9,275 4.18%
CHEVRON CORP 200 67.6700 10,508 3,026 28.80%
CHICO’S FAS INC 8,500 18.9764 257,535 (96,409) -37.44%
CIMAREX ENERGY CO 4,200 40.5156 169,223 900 0.53%
CISCO SYSTEMS 13,900 18.2206 136,872 115,867 84.65%
CITIGROUP, INC. 500 50.5800 20,216 5,074 25.10%
CITIZENS COMMUNICATIONS 400 14.8100 5,012 912 18.20%
CLARCOR INC 5,730 36.7560 181,708 28,843 15.87%
COACH INC 18,760 51.3668 565,527 397,812 70.34%
COCA-COLA CO 100 46.9300 4,983 (290) -5.81%
COLGATE PALMOLIVE CO 100 66.5900 5,272 1,387 26.31%
COMCAST CORP-SPECIAL CL A 200 25.7300 4,326 820 18.96%
COMMERCE BANCORP, INC. 100 33.4700 2,142 1,205 56.28%
COMMUNITY HEALTH SYSTEMS INC 26,800 33.7229 1,061,615 (158,941) -14.97%
CONSTELLATION BRANDS 14,000 27.7364 217,487 170,530 78.41%
CON-WAY INC. 20,000 50.0545 970,153 30,427 3.14%
COVANCE INC 10,960 67.6226 473,507 267,517 56.50%
CULLEN/FROST BANKERS 3,500 52.9466 189,770 (4,494) -2.37%
CVS/CAREMARK CORP 200 31.3000 5,438 822 15.12%
D. R. HORTON 22,200 21.9257 487,389 (1,058) -0.22%
DANAHER CORP. 13,300 71.7400 769,226 184,484 23.98%
DEAN FOODS 35,000 44.0541 877,120 663,766 75.68%
DELL INC 10,000 21.1003 385,428 (174,632) -45.31%
DENTSPLY INTERNATIONAL INC 36,800 31.9946 1,048,079 128,594 12.27%
DEVON ENERGY CORPORATION 8,700 58.9330 362,276 150,251 41.47%
DOW CHEMICAL 8,500 39.6275 361,842 (25,358) -7.01%
DUKE ENERGY CORPORATION 200 19.5500 3,184 726 22.80%
E.ON AG 100 42.7100 3,702 569 15.36%
EMC CORP 26,400 15.4459 330,735 76,771 23.21%
EXELON CORP 100 64.8100 4,940 1,541 31.20%
Investments Section
- 64 -
Description Shares Sale Price Cost
Gain (Loss)
on Sale
% Gain
on Sale
EXPRESS SCRIPTS 19,500 67.1717 194,881 1,114,537 571.91%
EXXON MOBIL CORP 500 71.0000 17,127 18,373 107.28%
FEDEX CORPORATION 200 112.5700 14,097 8,417 59.71%
FISERV INC 14,500 48.3996 558,080 143,409 25.70%
FLEXTRONICS INTERNATIONAL 70,400 11.0918 972,983 (193,553) -19.89%
FMC CORP 5,600 87.6464 281,106 209,650 74.58%
FORTUNE BRANDS, INC. 26,700 80.6184 1,551,171 600,544 38.72%
FRANKLIN RESOURCES INC 3,700 118.6003 190,625 248,109 130.16%
GANNETT COMPANY 13,500 52.5159 988,617 (279,944) -28.32%
GENENTECH, INC. 100 82.2800 3,715 4,513 121.49%
GENERAL ELECTRIC CO 400 34.7200 13,726 162 1.18%
GENZYME CORPORATION 100 60.4800 5,759 289 5.02%
GILEAD SCIENCES, INC 14,600 69.5335 254,417 760,161 298.79%
GLOBALSANTAFE CORP 18,500 51.6393 638,830 315,929 49.45%
GOLDMAN SACHS GROUP INC 2,000 187.1962 238,655 135,686 56.85%
GUITAR CENTER INC 23,400 49.6235 1,200,622 (39,755) -3.31%
HARRIS CORPORATION 21,050 51.3571 898,637 182,209 20.28%
HARTFORD FINANCIAL SERVICES GROUP 7,820 102.4209 401,228 399,616 99.60%
HERSHEY FOODS CORPORATION 13,500 53.1280 708,516 8,421 1.19%
HOME DEPOT 200 38.8000 2,653 5,107 192.46%
HOME PROPERTIES INC. 100 55.9000 5,901 (311)