.....well, at least it was prompt!

Linda Meinelt to John Curry, October 25, 2008
Subject: Fw: Re: Bonuses

John, I may have sent this to you already -- can't recall.

In my mind, the only thing acceptable about this is the promptness of the reply. In my mind, it should have said, we have received so much mail from unhappy retirees, we are going to shelve the bonus policy.

From Laura Ecklar, October 24, 2008
Subject: Re: Bonuses

Dear Ms. Meinelt, Ms. Ker, Ms. Snyder, Mr. Snyder, Ms. Schoenhoff, Ms. Wampler, Mr. Wampler, Mr. Shoemaker and Ms. Shoemaker:

The chair of the Retirement Board, Mrs. Mary Ann Quilter Cervantes, has asked me to respond to your recent e-mail to ensure you receive a timely response.

We appreciate you voicing your opinion about the payment of bonuses to Investment staff. In case you have not seen it, I have taken the liberty of attaching a message that our executive director, Michael Nehf, posted on our Web site yesterday, talking about this very issue.

It is certainly true that the market value of STRS Ohio's investment assets did decline during fiscal year 2008. However, there was additional revenue generated for the pension fund during this time period than if assets were passively indexed. Please let me explain.

Fiscal year 2008 covers the period of July 1, 2007-June 30, 2008. During that 12 months, the total investment fund return was a negative 5.44%, However, the benchmark return was a negative 5.79%. When markets decline, the value of our investment assets decline. Conversely, when markets go up, the value of our investment assets goes up. Our goal throughout is to minimize losses and maximize returns beyond the markets' performance. So, in the case of fiscal year 2008, our total fund return beat the composite benchmark return by +.35%. In other words, active management by our STRS Ohio Investment associates and external managers resulted in an additional $215 million for the pension fund than if assets were passively indexed - and your pension plan benefited.

In the STRS Ohio newsletter that you receive from us this month, you will see a chart that shows the performance of each asset class against its benchmark, resulting in the net value added that I refer to above. For example, the benchmark return for fixed-income investments was +6.22% for fiscal year 2008. However, the return on our fixed-income investments was +6.82%. In summary, bonus payments were made to 87 Investment associates in September 2008 based on the goals that were met for fiscal year 2008. However, because not all goals were met, the total payment was $3.4 million less than the maximum potential amount.

The board annually reviews the PBI program in March. However, given the extraordinary market downturn we are experiencing, the Retirement Board has accelerated its annual review of the PBI Program and has been conducting discussions this fall. We will continue to use our newsletters and Web site to convey the results of these discussions to our members.

Again, thank you for sharing your viewpoint with us. We greatly appreciate it.

Laura Ecklar
Director, Communication Services