1,, GA 400 -Al LOYEES' TIREMENT SYSTEM OF GEORGIA TAgLE OF CONTENTS EMPLOYEES' RETIREMENT SYSTEM INTRODUCTION Boards of Trustees 2 Letter of Transmittal 3 Legislation 4 ACTUARIAL SUMMARY Employees' Retirement System 6 Public School Employees Retirement System 9 Legislative Retirement System 12 Georgia Judicial Retirement System 15 Group Term Life Insurance (GTLI) 18 INVESTMENTS Pooled Investment Fund 21 Structural Analysis 21 Temporary Investments 22 Bonds 22 Common Stock Holdings 23 Mortgage 23 Real Estate Investment 23 AUDITED FINANCIAL STATEMENTS Table of Contents Independent Auditor's Report Balance Sheets, Historical Trend Information, Supplementary Information, Additional Information, 24 25 26-44 2002 - Employees Retirement System of Georgia L'iOARDS OF TRUSTEES Ray Crawford, Jr. Executive Director State Properties Commission Employees' Retirement System Public School Employees Retirement System Georgia Judicial Retirement System Legislative Retirement System State Social Security Trust Fund Georgia Defined Cont;ibution Plan Russell W. Hinton, ex-officio \lice-Chc1irma11 State Auditor Employees' Retirement System Public School Employees Retirement System Georgia Judicial Retirement System Legislative Retirement System State Social Security Trust Fund Georgia Defined Contribution Plan State Employees' Assurance Department Michael D. Kennedy Chairman Korn/Ferry International Employees' Retirement System Public School Employees Retirement System Georgia Judicial Retirement System Legislative Retirement System State Social Sccuritv Trust Fund Georgia Defined Cont;ibution Plan State Employees' Assurance Department Michael Thunnond, ex-officio Commissioner of Labor State Employees' Assurance Department Dan Ebersole, ex-officio Director Office of'f'rearnry 6 Fiscal Sen,ices Employees' Retirement System Public School Employees Retirement System Georgia Judicial Retirement System Legislative Retirement System State Social Security Trust Fund Georgia Defined Contribution Plan State Employees' Assurance Department Robert E. Keller District Attorney Claytn11 Judicial Circuit Georgia Judicial Retirement System William E Roberts Retired Director, Georgia State Fi11a11ce 6 Investment Commission Employees' Retirement System Public School Employees Retirement System Georgia Judicial Retirement System Legislative Retirement System State Social Security Trust Fund Georgia Defined Contribution Plan Kellv D. Turner Stat~ Court Judge Lowndes County Georgia Judicial Retirement System Barbara Ward Fi11a11cial Ma11ager City of Athmtci, Departme11t of Finance Employees' Retirement System Public School Employees Retirement System Georgia Judicial Retirement System Legislative Retirement System State Social Security Trust Fund Georgia Defined Contribution Plan Cynthia D. Wright Superior Court Judge Superior Court of Fulton County Georgia Judicial Retirement System 2 Bonnie T. Wright Attorney-at-Law Schulte,, Ward 6 'li,mer State Employees' Assurance Department Marjorie Young, ex-officio Commissioner State Merit System Employees' Retirement System Public School Employees Retirement System Georgia Judicial Retirement System Legislative Retirement System State Social Securitv Trust Fund Georgia Defined C~ntribution Plan State Employees' Assurance Department 2002 - Employees Retirement System of Georgia LETTER OF TRANSMITTAL Cecelia Corbin Hunter Director Employees' Retirement System It is my pleasure to join the Boards of Trustees and staff in presenting the 2002 Annual Report on the systems and programs administered by the Employees' Retirement System (ERS). By statute, the staff of ERS administers seven separate and distinct systems: Employees' Retirement System of Georgia Public School Employees Retirement System Legislative Retirement System Georgia Judicial Retirement System Georgia Defined Contribution Plan State Employees' Assurance Department (CTLI) State Social Security contracts with political subdivisions This annual report includes letters from our actuary, Buck Consultants, Inc., on the funding of the retirement systems and the Croup Term Life Insurance Program with highlights from the most recent valuation of each system; an investment report, including a listing of the Pooled Investment Fund Portfolio; and the auditors' report from Deloitte & Touchc. INVESTMENTS At ERS' inception, legislation authorized a 50/50 split between equities and bonds. Thus, the investments of ERS have been forward thinking and always have included a diverse portfolio of bonds and equities. In the early clays, trust funds were managed by a sole custodian bank. In 1974, the in-house Division of Investment was created; and in 1983 multiple outside advisers became a part of the investment team. The Division of Investment has maintained a policy of "conservatism" and "preservation of capital," and has successfully outperformed the market. At the encl of 1982 the trust funds had a market value of $1.017 billion; ten years later, 1992, the market value was $5.6 billion; and, ten years later, at thecnd of 2002, the market value was$ I2.8 billion. The ERS staff joins me in expressing our sincere thanks to the Boards of Trustees for their leadership. In addition, we appreciate the support of the Governor, Lieutenant Governor, Retirement Committee Chairmen of the Georgia General Assembly House of Representatives and Senate, respectively, and departmental officials. With this continued support, and the diligence of our staff, we can assure our members and retirees that we have a successful operation and are providing protection and financial soundness to the retirement system. Cecelia Corbin Hunter, Director 2002 - Employees Retirement System of Georgia [_ _ LEGISLATION ACT 950 (SB 62) EMPLOYEES' RETIREMENT SYSTEM Amends O.C.C.A. 47-l-14(a) relating to the exemption from public inspection to redefine "retirement system" to include any association of like political subdivisions, the purpose of which is the pooling of funds for retirement or pension purposes. Amends 47-2-96(j) to allow Old and New Plan members to receive credit for up to two years of military service, which began during the draft period (September 16, 1940 to Mach 31, 1947 and June 24, 1948 to July I, 1973) and extends past military draft cut-off elate. Member shall pay the regular employee contribution of 5 percent of compensation last paid as an employee before entering military service or 5 percent first paid as an employee after returning from military service, plus 4 1/2 percent interest. Application must be made prior to December 31, 2003. ACT 918 (SB138) PUBLIC SCHOOL EMPLOYEES RETIREMENT SYSTEM Amends 47-4-101 to increase the maximum benefit multiplier from $12.00 up to $15.00 to the extent funds are appropriated. Minimum benefit multiplier increases from $9.50 to $12.00. The General Assembly appropriated and Governor Barnes approved an increase from $12.00 to $12.50 times the years of creditable service. The increase was effective in retiree checks for the month of July, which were deposited or mailed on the last business day of July 2002. ACT 998 (HB 254) EMPLOYEES' & GEORGIA JUDICIAL RETIREMENT SYSTEMS Amends 47-23-64 to allow state court judges and solicitors general to transfer ERS active service to CJRS or establish ERS refunded service under CJRS by paying back contributions plus regular interest (4%). ERS must be notified not later than December 3I, 2002 or within 90 clays of first becoming a member of CJRS, whichever elate is later. No service can be credited that will create any accrued unfunded liability on this system. ACT 895 (HB 552) GEORGIA JUDICIAL RETIREMENT SYSTEM Amends O.C.C.A. 47-23-21 to allow the Board of Trustees from time to time to adopt a method or methods to establish an employee contribution rate lower than as established in Article 5, provided such rate shall not be lower than 6 1/2 %. Such method shall be based on (I) recommendation of actuary, (2) actuarial soundness of fund, and (3) other factors as Board deems relevant. ACT 997 (HB 557) EMPLOYEES' & GEORGIA JUDICIAL RETIREMENT SYSTEMS Amends O.C.C.A. 47-23-29 to establish Croup Term Life Insurance (CTLI) for active members of CJRS on or after July I, 2002 and to be administered via contract by the ERS Board of Trustees. The CTLI coverage will be basically the same as that in effect for ERS members. ACT 931 (HB 227).EMPLOYEES' RETIREMENT SYSTEM Creates the Georgia Military Pension Fund under O.C.C.A. 4724 for members of the Georgia National Guard effective July I, 2002. Board of Trustees of ERS shall administer the fund. ACT 994 (HB 666) EMPLOYEES' RETIREMENT SYSTEM Amends O.C.C.A. 47-2-263 to allow any member subject to 47-2-262 up to four years prior service as a full-time law assistant for a judicial circuit employed pursuant to O.C.C.A. 15-6-28 by paying an amount determined by the actuary as necessary to grant prior service without creating any accrued actuarial liability to the System. Payment must be made not later than July I, 2003, or within six months of first or again becoming a member, whichever is later. 4 2002 - Employees Retirement System of Georgia ACT 959 (H B 785) EMPLOYEES' RETIREMENT SYSTEM Amends O.C.G.A. 47-2-326 to allow employees of the Georgia Rail Passenger Authority to become members of ERS effective July 1, 2002 or on the date of employment, whichever is later. ACT 69 (HB 1372) INVESTMENT OF PENSION FUNDS Creates the Joint Study Committee on Economic Development Through the Investment of State Pension Funds into Private Equities. ACT 958 (HB931) EMPLOYEES' RETIREMENT SYSTEM Amends O.C.G.A. 47-2-ll0(c) to provide that benefits of a retired member who retired on a normal service retirement with at least l 0 years of actual service as an officer or trooper of the Uniform Division of the Department of Public Safety shall not be suspended if he or she accepts full-time or parttime employment with the Department of Public Safety or the Department of Motor Vehicle Safety as a radio operator or a driver's license examiner. No employee benefits shall accrue, including retirement credits. This provision would no longer apply on or after July 1, 2007. OTHER. LEGISLATION OF INTER.EST ACT 928 (HB 1313) ALL SYSTEMS Increases the amount of retirement income exclusion to $14,000 for taxable years beginning on or after January 1, 2001 and prior to January 1, 2002; $14,500 for taxable years beginning on or after January 1, 2002 and prior to January I, 2003; $15,000 for taxable years beginning on or after January I, 2003. Also amends 47-2-334(c) to state that employee contributions shall not be less than I% nor greater than 1 1/2%, with .25% credited to GTLI. Any reduction in percentage shall be based upon (1) recommendation of actuary, (2) actuarial soundness of fund in accordance with standards provided in 47-20-10 or higher standards adopted by Board, and (3) other factors deemed relevant by the Board. Acids 47-2-299 to allow an employee of a Community Service Board created pursuant to 37-2-6 to obtain prior service as an employee of a private nonprofit hospital deemed to be the community health center through a contract with the Department of Human Resources and which was authorized to bill Medicaid for outpatient clinic option services under the state community mental health program prior to December 31, 1991, and who, without a break in service, became an employee of the Community Service Board in the same position held in the private hospital. Applies to both Old and New Plan members. Member must pay amount deemed by the actuary to grant such benefit without creating any accrued actuarial liability to the retirement system. Application must be made by December 31, 2002. 2002 - Employees Retirement System of Georgia 5 ACTUARIAL SUMMARY EMPLOYEES' RETIREMENT SYSTEM ACTUARY'S CERTIFICATION LETTER A Mellon Consulting Company 200 Galleria Parkway, N.W. Suite 1900 Atlanta, Georgia 30339-5945 August 6, 2002 Board of Trustees Employees Retirement System of Georgia Two Northside 75, Suite 300 Atlanta, GA 30318 Attention: Ms. Cecelia Corbin Hunter, Executive Director Members of the Board: Section 47-2-26 of the law governing the operation of the Employees' Retirement System of Georgia provides that the actuary shall make periodic valuations of the contingent assets and liabilities of the Retirement System on the basis of regular interest and the tables last adopted by the Board of Trustees. We have submitted the report giving the results of the actuarial valuation of the System prepared as of June 30, 2001. The report indicates that annual employer contributions at the rate of 5.66% of active payroll for Old Plan members and 10.41% of active payroll for New Plan members for the fiscal year ending June 30, 2003 are sufficient to support the benefits of the System. In preparing the valuation, the actuary relied on data provided by the System. While not verifying data at the source, the actuary performed tests for consistency and reasonableness. Our firm, as actuary, is responsible for all of the actuarial trend data in the financial section of the annual report and the supporting schedules in the actuarial section of the annual report. Since the previous valuation, the actuarial assumptions have been revised to reflect the results of the experience investigation adopted by the Board on June 20, 2002. In our opinion, the valuation is complete and accurate, and the methodology and assumptions used are reasonable as a basis for the valuation. The valuation takes into account the effect of all amendments to the System enacted through the 2002 session of the General Assembly as well as the 1.5% Ad Hoc COLAs effective July 1, 2002 and January 1, 2003. The System is funded on an actuarial reserve basis. The actuarial assumptions recommended by the actuary and adopted by the Board are in the aggregate reasonably related to the experience under the System and to reasonable expectations of anticipated experience under the System. The assumptions and methods used for funding purposes meet the parameters set for the disclosures presented in the financial section by Governmental Accounting Standards Board (GASB) Statement Nos. 25 and 27. The funding objective of the plan is that contribution rates over time will remain level as a percent of payroll. The valuation method used is the entry age normal cost method. The normal contribution rate to cover current cost has been determined as a level percent of payroll. Gains and losses are reflected in the unfunded accrued liability which is negative and being amortized as a level percent of payroll within a 20-year period. The Retirement System is being funded in conformity with the minimum funding standard set forth in Code Section 47-20-10 of the Public Retirement Systems Standards Law. In our opinion the System is operating on an actuarially sound basis. Assuming that contributions to the System are made by the employer from year to year in the future at the rates recommended on the basis of the successive actuarial valuations, the continued sufficiency of the retirement fund to provide the benefits called for under the System may be safely anticipated. This is to certify that the independent consulting actuary is a member of the American Academy of Actuaries and has experience is performing valuations for public retirement systems, that the valuation was prepared in accordance with principles of practice prescribed by the Actuarial Standards Board, and that the actuarial calculations were performed by qualified actuaries in accordance with accepted actuarial procedures, based on the current provisions of the retirement system and on actuarial assumptions that are internally consistent and reasonably based on the actual experience of the System. Sincerely, Edward A. Macdonald Principal, Consulting Actuary EAM:sr Buck Consultants, Inc. 770 I955-2488 Fax 770 I933-8336 6 2002 - Employees Retirement System of Georgia ACTUARIAL SUMMARY EMPLOYEES' RETIREMENT SYSTEM VALUATION BALANCE SHEET - as of June 30, 2001 - dollar amounts in thousands ACTUARIAL LIABILITIES (1) Present value of prospective benefits payable on account of present retired members, beneficiaries of deceased members, and members entitled to deferred vested benefits: Service and disability benefits Death and survivor benefits Deferred vested benefits Total $ 4,875,973 407,503 138 156 (2) Present value of prospective benefits payable on account of present active members: Retirement and survivor allowances Refunds of members' contributions Total $ 8,977,154 61 276 (3) Total Actuarial Liabilities $ 5,421,632 9 038 430 $ 14,460,062 PRESENT AND PROSPECTIVE ASSETS (4) Actuarial value of assets (5) Present value of total future contributions= (3) - (4) (6) Present value of future member contributions and employer paid member contributions (7) Present value of future employer contributions = (5) - (6) (8) Employer normal contribution rate (9) Present value of future payroll (1%) (10) Prospective normal contributions = (8) x (9) (11) Prospective unfunded accrued liability contributions = (7) - (10) (12) Total Present and Prospective Assets $ 2,709,438 $ 1,311,432 6.24% $ 241,154 $ 11,750,624 1,398,006 1,504,801 (193,369) $ 14,460.062 2002 - Employees Retirement System of Georgia 7 A C T U A R I A L S U M M A I~ Y EMPLOYEES' RETIREMENT SYSTEM SUMMARY OF PRINCIPAL RESULTS - as of June 30, 2001 - dollar amounts in thousands VALUATION DATE JUNE 30, 2001 JUNE 30, 2000 Active members: Number Annual Compensation Retired members and beneficiaries: Number Annual allowances Assets: Market Value Actuarial Value Unfunded actuarial accrued liability Amortization Period 75,132 $ 2,397,169 25,889 $ 538,890 $ 12,343,625 11,750,624 $ (193,369) 20 years 75,318 $ 2,304,289 24,488 $ 480,380 $ 13,301,163 10,999,901 $ (426,493) 40 years For Fiscal Year Ending Annual required employer contribution rates (ARC): Old Plan Normal Accrued Liability Total New Plan Normal (includes 4.75% paid for member) Accrued liability Total June 30, 2003 June 30, 2002 6.24% _j_Qj_fil 5.66% 10.99% _j_Qj_fil 10.41% 6.51% (0.85) 5.66% 11.26% (0.85) l 0.41 % '/'he valuation reflects 1.5% Ac/ l-loc COLAs effective fuly 1, 2002 and famwry 1, 2003 and the effect of amendments to the System enacted through the 2002 session of the General Assembly. 8 2002 - Employees Retirement System o(Ceorgia ACTUARIAL SUMMARY PUBLIC SCHOOL EMPLOYEES RETIREMENT SYSTEM ACTUARY'S CERTIFICATION LETTER BUC' CONSULTANTS A Mellon Consulting Company 200 Galleria Parkway, N.W. Suite 1900 Atlanta, Georgia 30339-5945 July 15, 2002 Board of Trustees Georgia Public School Employees' Retirement System Two Northside 75, Suite 300 Atlanta, GA 30318 Attention: Ms. Cecelia Corbin Hunter, Executive Director Members of the Board: Section 47-4-60 of the law governing the operation of the Georgia Public School Employees' Retirement System provides that the employer contributions shall be actuarially determined and approved by the Board. We have submitted the report giving the results of the actuarial valuation of the System prepared as of June 30, 2001. The report indicates that annual employer contributions at the rate of $105.67 per active member for the fiscal year ending June 30, 2003 are sufficient to support the benefits of the System. In preparing the valuation, the actuary relied on data provided by the System. While not verifying data at the source, the actuary performed tests for consistency and reasonableness. Our firm, as actuary, is responsible for all of the actuarial trend data in the financial section of the annual report and the supporting schedules in the actuarial section of the annual report. Since the previous valuation, the actuarial assumptions have been revised to reflect the results of the experience investigation approved by the Board on June 20, 2002. In our opinion, the valuation is complete an accurate, and the methodology and assumptions used are reasonable as a basis for the valuation. The valuation takes into account the effect of amendments to the System enacted change the 2002 session of the General Assembly. Since the previous valuation, the benefit multiplier for active and retired members has been increased by $0.50, from $12.00 to $12.50. The System is funded on an actuarial reserve basis. The actuarial assumptions recommended by the actuary and adopted by the Board are in the aggregate reasonably related to the experience under the System and to reasonable expectations of anticipated experience under the System. The assumptions and methods used for funding purposes meet the parameters set for the disclosures presented in the financial section by Governmental Accounting Standards Board (GASB) Statement Nos. 25 and 27. The funding objective of the plan is that contribution rates over time will remain level as a dollar per active member. The valuation method used is the entry age normal cost method. The normal contribution rate to cover current cost has been determined as a dollar per active member. Gains and losses are reflected in the unfunded accrued liability which is negative and being amortized as a level dollar per member within a 40-year period. The valuation has been prepared in accordance with the parameters set forth in Statement Nos. 25 and 27 of the Governmental Accounting Standards Board. The annual required contribution (ARC) of the employer under GASB for the fiscal year ending June 30, 2003 is $4,120,677, which will liquidate the unfunded accrued liability over a 40-year period. The System has a negative Net Pension Obligation (NPO) because more than the annual required contribution under GASB 25/27 was made for the fiscal years ending June 30, 1998, June 30, 1999, June 30, 2000, and June 30, 2001. Since the appropriation amounts for fiscal years 2002 and 2003 are greater than the ARC for the respective years, the plan will continue to increase the negative NPO. The Retirement System is being funded in conformity with the minimum funding standard set forth in Code Section 47-20-10 of the Public Retirement Systems Standards Law. In our opinion the System is operating on an actuarially sound basis. Assuming that contributions to the System are made by the employer from year to year in the future at the rates recommended on the basis of the successive actuarial valuations, the continued sufficiency of the retirement fund to provide the benefits called for under the System may be safely anticipated. This is to certify that the independent consulting actuary is a member of the American Academy of Actuaries and has experience is performing valuations for public retirement systems, that the valuation was prepared in accordance with principles of practice prescribed by the Actuarial Standards Board, and that the actuarial calculations were performed by qualified actuaries in accordance with accepted actuarial procedures, based on the current provisions of the retirement system and on actuarial assumptions that are internally consistent and reasonably based on the actual experience of the System. Edward A. Macdonald Principal, Consulting Actuary EAM:sr Buck Consultants, Inc. 770 I955-2488 Fax 770 I933-8336 2002 - Employees Retirement System of Georgia 9 ACTUARIAL SUMMARY PUBLIC SCHOOL EMPLOYEES RETIREMENT SYSTEM VALUATION BALANCE SHEET- as oflune 30, 2001 ACTUARIAL LIABI LIT! ES (1) Present value of prospective benefits payable on account of present retired members, beneficiaries of deceased members, and terminated members entitled to deferred benefits (2) Present value of prospective benefits payable on account of present active members: Service retirement allowances Disabilitv retirement allowances Refunds 'of members' contributions Total (3) Total Actuarial Liabilities $ 354,945,717 $ 299,933,891 16,522,5 5I 5 663 828 322,120,270 $ 677,065,987 PRESENT AND PROSPECTIVE ASSETS (4) Actuarial value of assets (5) Present value of total future contributions = (3) - (4) (6) Present value of future member contributions to the Members' Contributions Fund (7) Present value of future employer contributions to the Pension Accumulation Fund = (5) - (6) (8) Employer normal contribution rate (9) Present value of future membership service (10) Prospective normal contributions = (8) x (9) (11) Prospective unfunded accrued liability contributions= (7) - (10) (I2) Total Present and Prospective Assets $ (31,325,013) $ (38,394,441) $ 288.48 I 96,373 $ 708,391,000 7,069,428 56,649,683 (95,044.124) $ 677,065.987 JO 2002 - Employees Retirement System of Georgia - -------- ACTUARIAL SUMMARY PUBLIC SCHOOL EMPLOYEES RETIREMENT SYSTEM SUMMARY OF PRINCIPAL RESULTS - as of June 30, 2001 VALUATION DATE Active members: Number Retired members and beneficiaries: Number Annual allowances Assets: Market Value Actuarial Value Unfunded actuarial accrued liability Amortization Period JUNE 30, 2001 JUNE 30. 2000 38,997 36,182 11,661 11,394 $ 34,151,616** $ 29,388,547* $ 748,571,000 708,391,000 $ (95,044,124) 40 years $ 813,296,000 667,642,000 $ (52,285,329) 40 years For Fiscal Year Ending Employer contribution rate per active member: Normal Accrued Liability Total Annual required employer contributions (ARC): Normal Accrued Liability Total Annual appropriation June 30, 2003 $ 288.48 (182.81} $ 105.67 $ 11,249,855 (7,129.178) 4,120,677 $ 15,258,226 June 30, 2002 $ 429.36 (108.39} $ 320.97 $ 15,535,104 (3,921.878) 11,613,226 $ 12,874,104 Qoes not include increase in benefit accrual rate effective July I, 2000. The results of the valuation have been ad;usted to incl11de this increase. Does not include increases in benefit accrual rate effective July I, 2002. The results of the val11atio11 have been adi11sted to include this increase. The valuation takes into acco11nt the effect of amendments to the System enacted through the 2002 session of the General Assembly. Since the previous valuation, the benefit multiplier for active and retired members has been increased by $0.50, from $12.00 to $12.50. 2002 - Employees Retirement System of Georgia 11 [ _ ~ ___ A~ T U A R. l A L S U _M M A_ RY _ LEGISLATIVE RETIREMENT SYSTEM ACTUARY'S CERTIFICATION LETTER BUC' CONSULTANTS A Mellon Consulting Company 200 Galleria Parkway, N.W. Suite 1900 Atlanta, Georgia 30339-5945 July 17, 2002 Board ofTrustees Legislative Retirement System of Georgia Two Northside 75, Suiie 300 Atlanta, GA 30318 Attention: Ms. Cecelia Corbin Hunter, Executive Director Members of the Board: Section 47-6-22 of the law governing the operation of the Georgia Legislative Retirement System provides that the actuary shall make periodic valuations of the contingent assets and liabilities of the Retirement System on the basis of regular interest and the tables last adopted by the Board of Trustees. We have submitted the report giving the results of the valuation of the System prepared as of June 30, 2001. The report indicates that no annual employer contributions for the fiscal year ending June 30, 2003 are required to support the benefits of the System. In preparing the valuation, the actuary relied on data provided by the System. While not verifying data at the source, the actuary performed tests for consistency and reasonableness. Our firm, as actuary, is responsible for all of the actuarial trend data in the financial section of the annual report and the supporting schedules in the actuarial section of the annual report. Since the previous valuation, the post-retirement mortality tables have been revised to reflect the results of the experience investigation adopted by the Board on June 20, 2002. In our opinion the valuation is complete and accurate, and the methodology and assumptions used are reasonable as a basis for the valuation. The valuation takes into account all amendments to the System enacted through the 2002 session of the General Assembly. The System is funded on an actuarial reserve basis. The actuarial assumptions recommended by the actuary and adopted by the Board are in the aggregate reasonably related to the experience under the System and to reasonable expectations of anticipated experience under the System. The assumptions and methods used for funding purposes meet the parameters set for the disclosures presented in the financial section by-Governmental Accounting Standards Board (GASB) Statement Nos. 25 and 27. The funding objective of the plan is that contribution rates over time will remain level as a dollar per active member. The valuation method used is the unit credit cost method. The normal contribution rate to cover current cost has been determined as a dollar per active member. Gains and losses are reflected in the unfunded accrued liability which is negative and being amortized as a level dollar per active member. The valuation has been prepared in accordance with the parameters set forth in Statement Nos. 25 and 27 of the Governmental Accounting Standards Board. The annual required contribution (ARC) of the employer under GASB for the fiscal year ending June 30, 2003 is $0. The System has a negative Net Pens1on Obligation (NPO) because more than the annual required contribution under GASB 25/27 was made for the fiscal years ending June 30, 1998, June 30, 1999, June 30, 2000, and June 30, 2001. Since the contribution amounts for fiscal years 2002 and 2003 are greater than the ARC, the plan will continue to increase the negative NPO. The Retirement System is being funded in conformity with the minimum funding standard set forth in Code Section 47-20-10 of the Public Retirement Systems Standards Law. In our opinion the System is operating on an actuarially sound basis. Assuming that contributions to the System are made by the employer from year to year in the future at the rates recommended on the basis of the successive actuarial valuations, the continued sufficiency of the retirement fund to provide the benefits called for under the System may be safely anticipated. This is to certify that the independent consulting actuary is a member of the American Academy of Actuaries and has experience is performing valuations for public retirement systems, that the valuation was prepared in accordance with principles of practice prescribed by the Actuarial Standards Board, and that the actuarial calculations were performed by qualified actuaries in accordance with accepted actuarial procedures, based on the current provisions of the retirement system and on actuarial assumptions that are internally consistent and reasonably based on the actual experience of the System. ~ftt( Edward A. Macdonald Principal, Consulting Actuary EAM:sr Buck Consultants, Inc. 770 I955-2488 Fax 770 I933-8336 12 2002 - Employees Retirement System ofGeorgia LEGISLATIVE RETIREMENT SYSTEM VALUATION BALANCE SHEET - as oflune 30, 2001 ACTUARIAL LIABILITIES Present value of prospective benefits payable on account of: (1) Present retired members and beneficiaries of deceased members and members entitled to deferred vested benefits (2) Present active members: Service retirement allowances Disability retirement allowances Survivor allowances Refunds of members' contributions Total (3) Total Actuarial Liabilities $15,614,337 $ 7,754,271 549,926 316,573 347,327 $ 8,968,097 $ 24.582,434 PRESENT AND PROSPECTIVE ASSETS (4) Actuarial value of assets (5) Present value of total future contributions = (3) - (4) (6) Present value of future member contributions (7) Present value of future employer contributions = (5) - (6) (8) Prospective normal contributions (9) Prospective unfunded actuarial accrued liability contributions = (7) - (8) (10) Total Present and Prospective Assets $ (1,451,566) $ (3,047,716) $ 26,034,000 1,596,150 1,376,103 $ (4,423,819) $ 24,582,434 2002 - Employees Retirement System of Georgia 13 ACTUAl<..IAL SUMMARY LEGISLATIVE RETIREMENT SYSTEM SUMMARY OF PRINCIPAL RESULTS -as oflune 30, 2001 VALUATION DATE Number of active members Retired members and beneficiaries: Number Annual allowances Assets: Market Value Actuarial Value Unfunded actuarial accrued liability Amortization Period JUNE 30. 2001 JUNE 30. 2000 212 210 192 $ 1,108,552 189 $ 1,056,360 $ 27,777,000 26,034,000 $ (4,423,819) NIA* $ 29,525,000 24,666,000 $ (3,038,310) N/A* For Fiscal Year Ending Employer contribution rate per active member: Normal Accrued Liability Total Annual required employer contributions (ARC): Normal Accrued Liability Total June 30, 2003 $ 429.86 (429.86) $ 0.00 $ 91,130 (91,130) 0 June 30, 2002 $ 780.23 (780.23) $ 0.00 $ 163,848 (163,848) 0 * If the annual required employer contribution (ARC) is based on 40 year amortization of the unfunded accrued liability, the ARC is less than $0, which is not allowed under GASB 25/27. Therefore, the accrued liability contribution has been set such that the total ARC equals $0. The valuation takes into account the effect of amendments to the System enacted through the 2001 session of the General Assembly. 14 2002 - Employees Retirement System of Georgia ACTUARIAL SUMMARY GEORGIA JUDICIAL RETIREMENT SYSTEM ACTUARY'S CERTIFICATION LETTER BUC' CONSULTANTS A Mellon Consulting Company 200 Galleria Parkway, N.W. Suite 1900 Atlanta, Georgia 30339-5945 July 9, 2002 Board of Trustees Georgia Judicial Retirement System Two Northside 75, Suite 300 Atlanta, GA 30318 Attention: Ms. Cecelia Corbin Hunter, Executive Director Members of the Board: Section 47-23-21 of the law governing the operation of the Georgia Judicial Retirement System provides that the actuary shall make periodic valuations of the contingent assets and liabilities of the Retirement System on the basis of regular interest and the tables last adopted by the Board of Trustees. We have submitted the report giving the results of the actuarial valuation of the System prepared as of June 30, 2001. The report indicates that no annual employer contributions for the fiscal year ending June 30, 2003 are required to support the benefits of the System. In preparing the valuation, the actuary relied on data provided by the System. While not verifying data at the source, the actuary performed tests for consistency and reasonableness. Our finm, as actuary, is responsible for all of the actuarial trend data in the financial section of the annual report and the supporting schedules in the actuarial section of the annual report. Since the previous valuation, the post-retirement mortality tables have been revised to reflect the results of the experience investigation adopted by the Board on June 20, 2002. In our opinion the valuation is complete and accurate, and the methodology and assumptions used are reasonable as a basis for the valuation. The valuation takes into account the effect of amendments to the System enacted through the 2002 session of the General Assembly, as well as the 1.5% Ad Hoc COLA's effective July 1, 2002 and January 1, 2003. The System is funded on an actuarial reserve basis. The actuarial assumptions recommended by the actuary and adopted by the Board are in the aggregate reasonably related to the experience under the System and to reasonable expectations of anticipated experience under the System. The assumptions and methods used for funding purposes meet the parameters set for the disclosures presented in the financial section by Governmental Accounting Standards Board (GASB) Statement Nos. 25 and 27. The funding objective of the plan is that contribution rates over time will remain level as a percent of payroll. The valuation method used is the entry age nonmal cost method. The normal contribution rate to cover current cost has been detenmined as a level percent of payroll. Gains and losses are reflected in the unfunded accrued liability which is negative and being amortized as a level percent of payroll within a 10-year period. The valuation has been prepared in accordance with the parameters set forth in Statement Nos. 25 and 27 of the Governmental Accounting Standards Board. Although there was an annual required contribution (ARC) of the employer under GASB for the fiscal year ending June 30, 2001 of 4.62% of payroll, the employer contribution made was less than that amount, and the System barely met the minimum funding standards set forth in Code Section 47-20-10. The System will have a Net Pension Obligation (NPO) because less than the ARC contributions were made for the fiscal year ending June 30, 2001. The NPO will be paid off by higher future contributions. The Retirement System is being funded in conformity with the minimum funding standard set forth in Code Section 47-20-10 of the Public Retirement Systems Standards Law. In our opinion, the system is operating on an actuarially sound basis. Assuming that contributions to the System are made by the employer from year to year in the future at the rates recommended on the basis of the successive actuarial valuations, the continued sufficiency of the retirement fund to provide the benefits called for under the System may be safely anticipated. This is to certify that the independent consulting actuary is a member of the American Academy of Actuaries and has experience is perfonming valuations for public retirement systems, that the valuation was prepared in accordance with principles of practice prescribed by the Actuarial Standards Board, and that the actuarial calculations were performed by qualified actuaries in accordance with accepted actuarial procedures, based on the current provisions of the retirement system and on actuarial assumptions that are internally consistent and reasonably based on the actual experience of the System. ~Jtau Edward A. Macdonald Principal, Consulting Actuary EAM:sr Buck Consultants, Inc. 770 I955-2488 Fax 770 I933-8336 2002 - Employees Retirement System of Georgia 15 ACTUARIAL SUMMARY GEORGIA JUDICIAL RETIREMENT SYSTEM VALUATION BALANCE SHEET-as ofluly 1, 2001 ACTUARIAL LIABILITIES Present value of prospective benefits payable on account of: (1) Present retired members and beneficiaries of deceased members and members entitled to deferred vested benefits (2) Present active members (3) Total Actuarial Liabilities $ 51,093,721 205 169 443 $ 256,263,164 P!USENT AND PROSPECTIVE ASSETS (4) Actuarial value of assets (5) Present value of total future contributions= (3) - (4) (6) Present value of future member contributions (7) Present value of future employer contributions = (5) - (6) (8) Employer normal contribution rate (9) Present value of future payroll (1%) (10) Prospective normal contributions = (8) x (9) (11) Prospective unfunded actuarial accrued liability contributions = (7) - (10) (12) Total Present and Prospective Assets $ 36,975,164 $ 8,701,184 20.33% $ 3,536,935 $ 219,288,000 28,273,980 71,905,889 $ (63,204,705) $ 256,263.164 16 2002 - Employees Retirement System of Georgia ACTUARIAL SUMMARY GEORGIA JUDICIAL RETIREMENT SYSTEM SUMMARY OF PRINCIPAL RESULTS - as of fuly 1, 2001 VALUATION DATE Active members: Number Annual compensation Retired members and beneficiaries: Number Annual allowances Assets: Market Value Actuarial Value Unfunded actuarial accrued liability Amortization Period JULY 1. 2001 JULY 1. 2000 435 $ 37,687,700 130 $ 5,615,022 $ 225,173,000 219,288,000 $ (63,204,705) 10 years 416 $ 34,855,836 116 $ 4,561,959 $ 239,644,000 204,136,000 $ (65,708,156) 12 years For Fiscal Year Ending Annual required employer contribution rates (ARC): Normal Accrued Liability Total June 30, 2003 June 30, 2002 20.33% (20.33) 0.00% 19.98% (19.98) 0.00% The valuation takes into account the effect of amendments to the System enacted through the 2002 session of the General Assembly. The valuation reflects the 1.5% Ad Hoc COLA's effective fuly I, 2002 and fanuary I, 2003. 2002 - Employees Retirement System of Georgia 17 ACTUARIAL SUMMARY GR.OUP TER.M LIFE INSUR.ANCE ACTUAR.Y'S CER.TI FICATION LETTER. BUC' CONSULTANTS A Mellon Consulting Company 200 Galleria Parkway, N.W. Suite 1900 Atlanta, Georgia 30339-5945 September 30, 2002 Board of Trustees Employees Retirement System of Georgia Two Northside 75 Atlanta. GA 30318 Attention: Ms. Cecelia Corbin Hunter, Executive Director Members of the Board: Chapters 47-2 and 47-19 of the Code of Georgia which govern the operation of the Georgia Employees' Group Term Life Insurance Plan provide that the actuary shall make periodic valuations of the contingent assets and liabilities of the Insurance Plan on the basis of regular interest and the tables last adopted by the Board of Trustees. We have submitted the report giving the results of the valuation of the Plan prepared as of June 30, 2001. The report indicates that combined employer and employee contributions at the rate of 0.75% of active payroll for Old Plan members and 0.50% of active payroll for New Plan members are sufficient to support the benefits of the Plan. Since the previous valuation, the actuarial assumptions have been revised to reflect the results of the experience investigation adopted by the Board on June 20. 2002. The valuation takes into account the effect of all amendments to the System enacted through the 2002 session of the General Assembly. The Plan is funded on an actuarial reserve basis. The actuarial assumptions used are in the aggregate reasonably related to the experience under the Plan and to reasonable expectations of anticipated experience under the Plan. In our opinion the Plan is operating on an actuarially sound basis and the sufficiency of the funds to provide the benefits called for by the Plan may be safely anticipated. Sincerely yours, ~~ Edward A. Macdonald Principal, Consulting Actuary EAM:sr Buck Consultants, Inc. 770 I955-2488 Fax 770 I933-8336 18 2002 - Employees Retirement System of Georgia ACTUARIAL SUMMARY - - -- GROUP TERM LIFE INSURANCE VALUATION BALANCE SHEET - as oflune 30, 2001 ACTUARIAL LIABILITIES (1) Present value of prospective benefits payable on account of present retired members (2) Present value of prospective benefits payable on account of present active members (3) Total Actuarial Liabilities PRESENT AND PROSPECTIVE ASSETS (4) Actuarial value of assets (5) Present value of future member premiums (6) Present value of future employer contributions (7) Total present assets and present value of future employee premiums and employer contributions (8) Actuarial Deficit (9) Total Present and Prospective Assets $ 237,817,358 415300388 $ 653,117,746 $ 753,964,000 $73,813,379 67 840 582 $ 895,617,961 (242,500,215) $ 653,117,746 2002 - Employees Retirement System of Georgia 19 ACTUARIAL SUMMARY GROUP TERM LIFE INSURANCE SUMMARY OF PRI N_CI PAL RESULTS - as of June 30, 2001 VALUATION DATE Active members: Number Annual Compensation Retired members: Number Insurance amount Assets: Market Value Actuarial Value Actuarial deficit Contribution rates: Old Plan Members Employee Employer Total New Plan Members Employee Employer Total JUNE 30, 2001 JUNE 30, 2000 75,132 $ 2,397,168,519 75,318 $2,304,289,449 20,621 $ 652,905,949 18,964 $ 580,395,780 $ 790,700,000 753,964,000 $ (242,500,215) $ 846,072,000 700,123,000 $ (65,691,207) 0.50%* ----1Ll2 0.75% 0.25% 0.25 0.50% 0.50%* _ill 0.75% 0.25% ----1Ll2 0.50% * 0.25% paid by employer 20 2002 - Employees Retirement System of Georgia INVESTMENTS POOLED INVESTMENT FUND- fiscal year 2002 $ 11,472,726,000 748,633,000 693,991,000 25,363,000 925,000 26,722,000 212 151 000 Employees' Retirement System State Employees' Assurance Department Public School Employees Retirement System Legislative Retirement System Superior Court Judges Retirement Fund* Georgia Defined Contribution Plan Georgia Judicial Retirement System $13,180,511,000 Total Pooled Investments at Fair Value * The Superior Court Judges Retirement Fund was closed on December 31, 1976. As of June 30, 2002 there were two active members remaining in the Fund with retirement payments fimded through Department of Administrative Services appropriations. STR.UCTURAL ANALYSIS OF INVESTMENTS AT FAIR. VALUE Type of Investment June 30, 2002 Short Term Investments 2% Bonds 44% Common Stocks 54% Mortgages and Real Estate 100% 2002 - Employees Retirement System of Georgia 21 INVESTMENTS TEMPORARY INVESTMENTS - as oflune 30, 2002 FACE AMOUNT ISSUER $ 228,003,000 United States Government and Corporate Obligations (subject to repurchase agreements due 7/01/02) FAIR VALUE $ 228,003,000 U.S. GOVERNMENT, CORPORATE AND OTHER BONDS -as oflune 30, 2002 FACE AMOUNT ISSUER INTEREST RATE% YEAR OF MATURITY FAIR MARKET VALUE $ 3,964,130.63 125,000,000.00 120,000,000.00 224,000,000.00 790,000,000.00 445,000,000.00 1,045,000,000.00 205,000,000.00 385,000,000.00 1,010,000,000.00 220,000,000.00 242,000,000.00 120,000,000.00 360,000,000.00 205,000,000.00 140,000,000.00 $ 5,639,964,130.63 General Electric General Electric Cap Corp FNMA US Treas. Note US Treas. Note US Treas. Note US Treas. Note US Treas. Note US Treas. Note US Treas. Note US Treas. Bond US Treas. Bond US Treas. Bond US Treas. Bond US Treas. Bond US Treas. Bond 8.350 5.375 6.375 5.875 4.625 3.500 4.375 5.000 5.000 4.875 7.250 6.250 6.875 6.125 5.250 6.250 2004 $ 4,232,898.69 2007 127,842,500.00 2009 129,787,200.00 2004 238,069,440.00 2006 813,700,000.00 2006 437,074,550.00 2007 l ,059,368,750.00 2011 208,460,400.00 2011 390,293,750.00 2012 1,013,787,500.00 2022 262,075,000.00 2023 259,317,520.00 2025 138,300,000.00 2027 380,700,000.00 2029 192,829,150.00 2030 151,638,200.00 $ 5,807,476,858.69 22 2002 - Employees Retirement System of Georgia - - - INVESTMENTS COMMON STOCK HOLD! NGS - as of fune 30, 2002 SHARES COMPANY 4,654,525 Pfizer Inc. 3,868,028 Exxon Mobil Corp. I 3,994,139 Citigroup Inc. ! 2,691,800 Microsoft I 2,122,995 American International Group 2,631,500 vVal-Mart Stores Inc. 2,634,520 Johnson & Johnson 1,450,460 Proctor & Gamble Co. 4,313,300 General Electric Co. 3,196,250 Home Depot 2,053,700 Coca Cola Co. 2,383,460 Pepsico Inc. 2,309,800 Medtronic 1,738,170 Wells Fargo Co. 1,182,523 Bank of America Corp. 1,076,500 United Technologies 3,815,000 Intel Corp. 1,230,800 Merck & Co. Inc. 1,836,344 Gillette Co. 841,300 Federal National Mortgage Association Total - 20 Largest Holdings Total - All Holdings A complete listing of all stock holdings will be available upon written request. FAIR MARKET VALUE $ 162,908,375.00 158,279,705.76 I 54,772,886.25 147,241,460.00 144,851,948.85 144,758,815.00 137,680,015.20 129,526,078.00 125,301,365.00 117,398,262.50 115,007,200.00 114,882,772.00 98,974,930.00 87,012,790.20 83,202,318.28 73,094,350.00 69,700,050.00 62,327,712.00 62,196,971.28 62,045,875.00 $ 2,251,163,880.32 $ 7,140,706,275.10 MORTGAGE - as oflune 30, 2002 BORROWER.AND MORTGAGED PROPER.TY West & Abbitt Bent Creek Col Apts INTEREST RATE% 9.5 YEAR LAST BALANCE PAYMENT DUE OUTSTANDING ON LOAN 2004 $582,074 $582,074 REAL ESTATE INVESTMENT - as offune 30, 2002 DESCRIPTION OF PROPER.TY Beta Building Two Northside 75, Atlanta (Constitutes one-half interest in property) FAIR VALUE $ 3,744,225 COMMENTS Presently houses the offices of Employees' and Teachers Retirement Systems. The Employees' Retirement System on 7/1/76 acquired a 50% interest in the building. 2002 - Employees Retirement System of Georgia 23 I 1; AUDITED FINANCIAL STATEMENTS TABLE OF CONTENTS EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA (Including All Funds and Systems Administered by the Employees' Retirement System of Georgia) Page INDEPENDENT AUDITORS' REPORT 25 MANAGEMENT'S DISCUSSION AND ANALYSIS 26 COMBINED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED JUNE 30, 2002 AND 2001: Combined Statements of Net Assets 28 Combined Statements of Changes in Net Assets 29 Notes to Combined Financial Statements 30 REQVIRED SUPPLEMENTARY SCHEDULES: Schedule of Funding Progress 37 Schedule of Employer Contributions 38 Notes to Required Supplementary Schedules 39 ADDITIONAL INFORMATION AS OF AND FOR THE YEARS ENDED JUNE 30, 2002 AND 2001: Combining Statements of Net Assets 40 Superior Court Judges and District Attorneys Retirement Funds - Combining Statements of Net Assets 41 Combining Statements of Changes in Net Assets 42 Superior Court Judges and District Attorneys Retirement Funds - Combining Statements of Changes in Net Assets 43 Administrative Expense Fund - Contributions and Expenses 44 24 2002 - Employees Retirement System of Georgia AUDITED FINANCIAL STATEMENTS IN DEPENDENT AUDITORS' REPORT VALUATION BALANCE SHEET - as of June 30, 2001 - dollar amounts in thousands Deloitte &Touche Deloitte & Touche LLP 191 Peachtree Street, N.W. Suite 1500 Atlanta, Georgia 30303-1924 www.us.deloitte.com Board of Trustees Employees' Retirement System of Georgia: \,Ve have audited the accompanying combined statements of net assets of the Employees' Retirement System of Georgia, including all plans and funds administered by the Employees' Retirement System of Georgia (collectively, the "System"), a component unit of the state of Georgia, as of June 30, 2002 and 2001, and the related combined statements of changes in net assets for the years then ended. These combined financial statements are the responsibility of the System's management. Our responsibility is to express an opinion on these combined financial statements based on our audits. \,\fe conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement presentation. \Ve believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial status of the System as of June 30, 2002 and 2001, and the changes in financial status for the years then ended in conformity with accounting principles generally accepted in the United States of America. As discussed in Note 3 to the financial statements, as of July 1, 2001, the System adopted the provisions of the Governmental Accounting Standards Board Statements No. 34, Basic Financial Statements - and Management's Disrnssion and Analysis - for State and Local Governments, and No. 38, Certain Financial Statement Note Disclosures. Management's Discussion and Analysis and the required supplementary schedules listed in the Table of Contents are not a required part of the basic financial statements but are supplementary information required by the Governmental Accounting Standards Board. This information is the responsibility of the System's management. \,\fe have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of supplementary information. However, we did not audit such information, and we do not express an opinion on it. Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The additional information listed in the Table of Contents is presented for purposes of additional analysis and is not a required part of the basic financial statements. This additional information is the responsibility of the System's management. Such information has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects when considered in relation to the basic financial statements taken as a whole. ~ -f- ?;,ct....~ Deloitte& Touchc LLP November 27, 2002 2002 - Employees Retirement System of Georgia 25 I' AUDITED FINANCIAL STATEMENTS MANAGEMENT'S DISCUSSION & ANALYSIS This discussion and analysis of the Employees' Retirement System of Georgia (the "System") provides an overview of the financial performance during the fiscal year ended June 30, 2002. It is intended to be a narrative supplement to the financial information that begins on page 26, and should be read within the context of the accompanying financial statements, notes to the financial statements and disclosures, supplementary schedules, and additional information. The System is responsible for administering a cost-sharing multipleemployer defined benefit pension plan for various employer agencies of Georgia, along with five other defined benefit pension plans, a defined contribution plan, and a life insurance plan. The defined benefit pension plans include: Employees' Retirement System ("ERS") Legislative Retirement System ("LRS") Public School Employees' Retirement System ("PSERS") Georgia Judicial Retirement System ("GJRS") Superior Court Judges Retirement Fund ("SCJRF") District Attorneys Retirement Fund ("DARF") The required supplementary schedules include a schedule of funding progress and a schedule of employer contributions. DESCRIPTION OF THE FINANCIAL STATEMENTS TI1e Combined Statement of Net Assets is the statement of financial position presenting information that includes all of the System's assets and liabilities with the balance representing the Net Assets Held in Trust for Pension Benefits. The statements are presented as of June 30, 2002 and June 30, 2001 for comparative purposes. These statements are presented on page 28. The Combined Statement of Changes in Net Assets reports the changes in net assets during the fiscal years ended June 30, 2002 and June 30, 2001 for comparative purposes. Additions and deductions of net assets are summarized in this statement. Additions include contributions to the retirement plans from employers and members, group life insurance premiums, and investment loss, which includes interest and dividends and the net depreciation in the fair value of investments. Deductions include retirement payments, life insurance death benefit payments, refunds of member contributions, and administrative expenses. These statements are presented on page 29. The defined contribution retirement plan is the Georgia Defined Contribution Plan ("GDCP"). The life insurance plan is the State Employees' Assurance Department ("SEAD"). FINANCIAL HIGHLIGHTS The following highlights are discussed in more detail later in this analysis: The net assets of the System decreased by $884 million, or 6.2%, from $14.2 billion to $13.3 billion for the year ended June 30, 2002. The decrease was primarily clue to the downturn in equity markets. Net investment loss (interest and dividend income, reduced by net depreciation in the fair value of investments and investment expenses) was $562 million for the year ended June 30, 2002 - an improvement over the loss of $9 I I million for the prior fiscal year. Contributions from employers declined by $89 million, or 26.5% for the year ended June 30, 2002. The decline was primarily due to a planned reduction in the contribution rate of approximately 30%. Retirement payments increased by $58 million, or 10.4% for the year ended June 30, 2002. OVERVIEW OF THE FINANCIAL STATEMENTS The financial statement include: (1) the combined statements of net assets, (2) the combined statements of changes in net assets, (3) notes to the financial statements, (4) required supplementary schedules, and (5) additional information. The financial statements are prepared on an accrual basis in accordance with accounting principles generally accepted in the United States of America promulgated by the Government Accounting Standards Board. Notes to the financial statements are presented to provide the information necessary for a full understanding of the financial statements. The notes to the financial statements begin on page 30 of the report. There are two Required Supplementary Schedules included in this report. These required schedules are applicable to the four defined benefit plans: ERS, PSERS, LRS, and GJRS. The Schedule of Funding Progress presents historical trend information about the actuarially-determined funded status of the plans from a long-term, on-going plan perspective, and the progress made in accumulating sufficient assets to fund benefit payments as they become due. The Schedule of Employer Contributions presents historical trend information about the annual required contributions of employers and percentage of such contributions in relation to actuarially-determined requirements for the years presented. The required supplementary schedules begin on page 37. Notes to Required Supplementary Schedules are presented to provide the information necessary for a full understanding of the supplementary schedules. The notes to required supplementary schedules begin on page 39. Additional information is presented, beginning on page 40. There are three statements included in this section of the report. They arc: (1) Combining Statements of Net Assets, (2) Combining Statements of Changes in Net Assets, and (3) Administrative Expense Fund Statement. The combining statements present the financial position and change in financial position for each of the plans and funds administered by the System, including the Pooled Investment Fund that holds and invests funds from each of the participating plans and funds. The Administrative Expense Fund Statement presents the 26 2002 - Employees Retirement System of Georgia AUDITED FINANCIAL STATEMENTS MANAGEMENT'S DISCUSSION & ANALYSIS expenses incurred in the administration of these plans and funds, and the contributions from each plan and fund to provide for these expenses. FINANCIAL ANALYSIS Net Assds(in thousands) lune 30, 2002 2001 Assets: Cash and receivables Investments Capital assets, net Total assets $ 10s,7;3 13,195,741 _ _ _3_3 13,304,527 $ 132,488 14,055,934 14,188,422 Liabilities: Accounts payable and other Net assets 10 684 --1.!lliJl $13,293,843 $14 177,992 Amount Percentage Change Change $ (23,73;) (860,193) _ _3_3 (883,895) (17.9)% (6.1)% -- (6.2)% ~ ~ The alloca!ion of investments by type at June 30, 2002 and 2001 are as follows: Asset Allocation at lune 30 /in percentages) Eyuities Fixed income Short-term securities* 2002 54.1% 44.1% l.8% 2001 57.0% 41.4% l.6% An explanation of the significant components of the changes in net assets follows: Additions - The System accumulates resources needed to fund benefit payments through contributions and returns on invested funds. Employer contributions decreased 26.5%, primarily because of a reduction in the ERS employer contribution rate of approximately 30%. The fiscal year ended June 30, 2001 employer contribution rate was higher than the employer contribution rate recommended by the actuary and was approved by the System's Board of Trustees. Member contributions increased 4.5%, primarily because of increased ERS membership participation from 151,393 in 2001 to 153,687 in 2002, and increases in average compensation levels in 2002. The net investment loss is the result of the continuing unfavorable market conditions, as previously discussed. Deductions - Deductions increased 9.6%, primarily because of a I 0.4% increase in retirement payments. '171is is partly due to an increase of approximately 4% in the number of retirees receiving benefit payments across all defined benefit plans. Administrative expenses increased by approximately $1 million, an increase of 12% over the prior year due primarily to costs related to the reengineering of the System's business processes. Asset Allocation at lune 30 /in thousands) Equities Fixed income Short-term securities* Includes mortgage and real estate $ 7,140,706 5,815,140 239 39; $13,195,741 $ 8,014,283 5,822,463 219 188 ~14,055.934 The total investment portfolio decreased by approximately $860 million. The decline was primarily due to unfavorable conditions in the equity markets. The investment rate of return in fiscal year ended June 30, 2002 was (4.0%), with a (14.5%) return on equities and a 10.9% return on fixed income investments. '171c five year annualized rate of return on investments at June 30, 2002 was 5.7%, with a 2.9% return on equities, and a 9.3% return on fixed income investments. Changes in Net Assets{in thousands) Ammmt Percentage 2002 2001 Change Change Additions: Employer contributions 1'.1Iembcr contributions $ 247,101 75,704 $ 335,988 72,448 $ (88,887) (26.5)% 3,256 4.5% Insurance premiums 14,364 l 3.813 551 4.0% Net investment loss (562,199) (910,655) 348,456 38.3% Other Total additions ~ (224 090) 94Q (487466) --- 263 376 54.0% Deductions: Retirement payments Refunds Death benefits Administrative expenses Total deductions Net decrease in net assets 618,682 13,704 18,227 _.'.2.!fi 660 0;9 $(884.149) 560,572 14,998 18,017 8 425 602 012 ~(l 089 478) 58,110 (1,294) 210 ___!_fill -2M11 $ 205,329 10.4% (8.6)% 1.2% 12.1% 9.6% 18.8 FUNDING STATUS The schedules of funding progress and employer contributions provide information regarding how the plans arc performing and funded from an actuarial perspective. The information is based upon actuarial valuations conducted by certified actuaries. The funding ratio, which is presented on the schedule of funding progress, indicates the ratio of the actuarial value of assets and the actuarial accrued liabilities. The higher this ratio, the better position the System is in with regards to its funding requirements. The June 30, 2001 and June 30, 2000 actuarial valuations, the latest valuations available, indicate the actuarial value of assets and funding ratios for the four defined benefit retirement plans were as follows: ACTUARIAL VALUE or PI.AN ASSETS (IN THOUSANDS) June 30, 2001 June 30, 2000 ERS $1 I,rnl,624 $10,999,901 PSERS 708,391 667,642 LRS 26,034 24,666 CJRS 219,288 204,136 FUNDING RATIO June 30, 2001 June 30, 2000 101.7% 104.0% 115.5% 108.5% 120.5% 114.0% 140.5% 147.5% The System continues to be in a strong financial position as evidenced by the funding ratios, and it remains financially sound, despite the unfavorable investment results in the current fiscal year. /\ funding ratio over I 00% indicates the plans, from an actuarial perspective, have more assets available than will be necessary to satisfy the obligations of the plans. 2002 - Employees Retirement System of Georgia 27 AUDITED FINANCIAL STATEMENTS EMPLOYEES' RETIREMENT SYSTEM (Including All Plans and Funds Administered by the Employees' Retirement System of Georgia) COMBINED STATEMENTS OF NET ASSETS -June 30, 2002 and 2001 - in thousands 2002 ASSETS CASH $ 5,044 2001 $ 1,546 RECEIVABLES: Employer and member contributions Interest and dividends Total receivables 28,600 75 109 103,709 36,986 93 956 130,942 INVESTMENTS - at fair value: Short-term Obligations of the U.S. Government and its agencies, corporate, and other bonds Common stocks Mortgage loans and real estate 235,569 5,815,140 7,140,706 4 326 214,837 5,822,463 8,014,283 4 351 Total investments 13,195,741 14,055,934 CAPITAL ASSETS, net 33 Total assets 13,304,527 14,188,422 LIABILITIES Accounts payable and other Total liabilities NET ASSETS HELD IN TRUST FOR PENSION BENEFITS (A schedule of funding progress is presented on page 37.) See notes to combined financial statements. 10 684 10 684 $ 13,293,843 10 430 10 430 $ 14,177,992 28 2002 - Employees Retirement System of Georgia AUDITED FINANCIAL STATEMENTS EMPLOYEES' RETIREMENT SYSTEM (Including All Plans and Funds Administered by the Employees' Retirement System of Georgia) COMBINED STATEMENTS OF CHANGES IN NET ASSETS - fune 30, 2002 and 2001 - in thousands 2002 2001 NET ASSETS HELD IN TRUST FOR PENSION BENEFITS - Beginning of year $ 14,177,992 $ 15,267,470 ADDITIONS: Contributions: Employer Member Insurance premiums Administrative expense allotment Investment loss: Net depreciation in fair value of investments Interest and dividends Total investment loss 247,101 75,704 14,364 940 (991,765) 441 176 (550,589) 335,988 72,448 13,813 940 (1,379,000) 479 631 (899,369) Less investment expenses 11 610 11 286 Net investment loss (562,199) (910,655) Total additions (224,090) (487,466) DEDUCTIONS: Retirement payments Refunds of member contributions and interest Death benefits Administrative expenses 618,682 13,704 18,227 9 446 560,572 14,998 18,017 8 425 Total deductions 660 059 602,012 NET DECREASE /884,149) /1.089.478) NET ASSETS HELD IN TRUST FOR PENSION BENEFITS - End of year $ 13,293.843 $ 14.177.992 See notes to combined financial statements. 2002 - Employees Retirement System of Georgia 29 i I' AUDITED FINANCIAL STATEMENTS EMPLOYEES' RETIREMENT SYSTEM (Including All Plans and Funds Administered by the Employees' Retirement System of Georgia) NOTES TO COMB IN ED Fl NANCIAL STATEMENTS - as of and for the years ended June 30, 2002 and 2001 I. GENERAL The accompanying combined financial statements of Employees' Retirement System of Georgia, including all plans and funds administered by the Employees' Retirement System of Georgia (collectively, the "System"), is comprised of the Employees' Retirement System of Georgia ("ERS"), Public School Employees' Retirement Systems ("PSERS"), Legislative Retirement System ("LRS"), Georgia Judicial Retirement System ("GJRS"), Superior Court Judges Retirement Fund ("SCJRF"), District Attorneys Retirement Fund ("DARF"), Georgia Defined Contribution Plan ("GDCP"), and State Employees' Assurance Department ("SEAD"). All significant accounts and transactions among the various systems, departments, and funds have been eliminated. In evaluating how to define the System for financial reporting purposes, the management of the System has considered all potential component units. The decision to include a potential component unit in the reporting entity is made by applying the criteria set forth by Governmental Accounting Standards Board ("GASB") Statement of Governmental Accounting Standards ("SGAS") No. 14. The concept underlying the definition of the reporting entity is that elected officials are accountable. Based on these criteria, the System has not included any other entities in its reporting entity. The System is a component unit of the State of Georgia. Although the System is a component unit of the State of Georgia's financial reporting entity, it is accountable for its own fiscal matters and presentation of its separate, combined financial statements. The Boards of Trustees, comprised of active and retired members and ex-officio state employees, are ultimately responsible for the administration of the System. 2. AUTHORIZING LEGISLATION AND PLAN DESCRIPTIONS Each plan and fund, including benefit and contribution provisions, was established by state law. The following summarizes authorizing legislation and the plan description of each retirement fund: a. ERS is a single-employer, public employee, defined benefit pension plan established by the Georgia General Assembly during the 1949 Legislative Session for the purpose of providing retirement allowances for employees of the State of Georgia and its political subdivisions. ERS is directed by a Board of Trustees and has the powers and privileges of a corporation. Membership - As of June 30, 2002, participation in ERS is as follows: Retirees and beneficiaries currently receiving benefits 27,272 Terminated employees entitled to benefits but not yet receiving benefits 59,796 Active plan members 73 924 Total 160,992 Employers -----2..lli Benefits -The benefit structure of ERS was significantly modified on July I, 1982. Unless the employee elects otherwise, an employee who currently maintains membership with ERS based upon state employment that started prior to July I, 1982 is an "old plan" member subject to the plan provisions in effect prior to July I, 1982. All other members are "new plan" members subject to the modified plan provisions. Under both the old and new plans, a member may retire and receive normal retirement benefits after completion of I0 years of creditable service and attainment of age 65. Additionally, there are some provisions allowing for retirement after 25 years of creditable service regardless of age. Retirement benefits paid to members arc based upon the monthly average of the member's highest 24 consecutive calendar months multiplied by the number of years of creditable service multiplied by the applicable benefit factor. Postrctirement cost-of-living adjustments are also made to members' benefits. The normal retirement pension is payable monthly for life; however, options are available for distribution of the member's monthly pension at reduced rates to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS. Contributions and Vesting - Member contributions under the old plan arc 4% of annual compensation up to $4,200 plus 6% of annual compensation in excess of $4,200. Under the old plan, the state pays member contributions in excess of 1.25% of annual compensation. Under the old plan, these state contributions are included in the members' accounts for refund purposes and arc used in the computation of the members' earnable compensation for the purpose of computing retirement benefits. Member contributions under the new plan are 1.25% of annual compensation. The state is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation. 30 2002 - Employees Retirement System of Georgia AUDITED FINANCIAL STATEMENTS NOTES TO COMBINED FINANCIAL STATEMENTS -as of and for the years ended June 30, 2002 and 2001 Employer contributions required for fiscal year 2002 were based on the June 30, 2000 actuarial valuation as follows: Employer: Normal Employer paid for member Accrued liability Total Old Plan New Plan 6.24 % 6.24 % 4.75 % .(_Q_jfil% (0.58)% 5.66 % 10.41 % Employer contributions for fiscal year 2001, as approved by the System's Board of Trustees, were as follows: Employer: Normal Employer paid for member Accrued liability Total Old Plan New Plan 6.66 % 6.66 % 4.75 % 3.09 % 3.09 % 9.75 % 1450 % Members become vested after ten years of membership service. Upon termination of employment, member contributions with accumulated interest are refundable upon request by the member. However, if an otherwise vested member terminates and withdraws his/her member contributions, the member forfeits all rights to retirement benefits. The employer contributions arc projected to liquidate the actuarial accrued funding excess within 20 years based upon the actuarial valuation at June 30, 2001, on the assumption that the total payroll of active members will increase by 3.5% each year. On November 20, I997, the ERS Board of Trustees created the Supplemental Retirement Benefit Plan of ERS ("SRBP"). SRBP was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code ("!RC S4 l 5") as a portion of ERS. The purpose of the SRBP is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by !RC S4 l 5. Beginning January 1, 1998, all members and retired former members in ERS arc eligible to participate in this plan whenever their benefits under ERS exceed the limitation on benefits imposed by !RC S415. There were 132 and 256 members eligible to participate in this portion of ERS as of June 30, 2002 and 2001, respectively. Employer contributions of $2,802,000 and $2,780,000 and retirement payments of $2,509,000 and $2,742,000 under the SRBP arc included in the combined statements of changes in net assets for the years ended June 30, 2002 and 2001, respectively. Cash of $542,000 and $114,000 and employer receivable of $96,000 and $205,000 under the SRBP are included in the combined statements of net assets for the years ended June 30, 2002 and 2001, respectively. b. PSERS is a defined benefit pension plan established by the Georgia General Assembly in 1969 for the purpose of providing retirement allowances for public school employees who are not eligible for membership in the Teachers Retirement System of Georgia. PSERS is administered by the ERS Board of Trustees plus two additional trustees. Membership - As of June 30, 2002, participation in PSERS is as follows: Retirees and beneficiaries currently receiving benefits Terminated employees entitled to benefits but not yet receiving benefits Active plan members Total Employers 11,917 40,873 46 551 99 341 ____lfil Benefits - A member may retire and elect to receive normal monthly retirement benefits after completion of ten years of creditable service and attainment of age 65. A member may choose to receive reduced benefits after age 60 and upon completion of ten years of service. Upon retirement, the member will receive a monthly benefit of $12.50 multiplied by the number of years of creditable service. Death, disability, and spousal benefits are also available through PSERS. Additionally, PSERS makes periodic cost-of-living adjustments to the monthly benefits. Contributions and Vesting - Members contribute $4 per month for nine months each fiscal year. The State of Georgia, although not the employer of PSERS members, is required by statute to make employer contributions actuarially determined and approved and certified by the PSERS Board of Trustees. Employer contributions required for the years ended June 30, 2002 and 2001 were $320.97 and $391.33 per active member, respectively, and were based on the June 30, 2000 and I999 actuarial valuations, respectively. 2002 - Employees Retirement System of Georgia 31 AUDITED FINANCIAL STATEMENTS NOTES TO COMBINED FINANCIAL STATEMENTS-as of and for the years ended fune 30, 2002 and 2001 Members become vested after ten years of creditable service. Upon termination of employment, member contributions with accumulated interest are refundable upon request by the member. However, if an otherwise vested member terminates and withdraws his/her member contributions, the member forfeits all rights to retirement benefits. Members become vested after eight years of creditable service. Upon termination of employment, member contributions with accumulated interest are refundable upon request by the member. However, if an otherwise vested member terminates and withdraws his/her member contributions, the member forfeits all rights to retirement benefits. The employer contributions are projected to liquidate the aGtuarial accrued funding excess within 40 years based upon the actuarial valuation at Junc 30, 200 I. c. LRS is a defined benefit plan established by the Georgia General Assembly in 1979 for the purpose of providing retirement allowances for all members of the Georgia General Assembly. LRS is administered by the ERS Board of Trustees. Membership - As of June 30, 2002, participation in LRS is as follows: d. The GJRS is a system created to serve the members and beneficiaries of the Trial Judges and Solicitors Retirement Fund, the Superior Court Judges Retirement System, and the District Attorneys Retirement System (collectively, the "Predecessor Retirement Systems"). As of June 30, 1998, any person who was an active, inactive, or retired member or beneficiary of the Predecessor Retirement Systems was transferred to GJRS in the same status effective July 1, 1998. All assets of the Predecessor Retirement Systems were transferred to GJRS as of July 1, 1998. GJRS is administered by the ERS Board of Trustees and three additional trustees. Retirees and beneficiaries currently receiving benefits Terminated employees entitled to benefits but not yet receiving benefits Active plan members Total Employers 193 130 --1Jl. _ill _1 GJRS is a defined benefit pension plan established by the Georgia General Assembly for the purpose of providing retirement allowances for trial judges and solicitors of certain courts in Georgia, and their survivors and other beneficiaries, superior court judges of the State of Georgia, and district attorneys of the State of Georgia. Benefits - A member's normal retirement is after eight years of creditable service and attainment of age 65, or eight years of membership service (four legislative terms) and attainment of age 62. A member may retire early and elect to receive a monthly retirement benefit after completion of eight years of membership service and attainment of age 60; however, the retirement benefit is reduced by 5% for each year the member is under age 62. Upon retirement, the member will receive a monthly service retirement allowance of $32 multiplied by the number of years of creditable service reduced by age reduction factors, if applicable. Death, disability, and spousal benefits arc also available through the plan. Contributions and Vesting - Member contributions are 8.5% of annual salary. The state pays member contributions in excess of 4.75% of annual compensation. Employer contributions are actuarially determined and approved and certified by the ERS Board of Trustees. Membership - As of June 30, 2002, participation in GJRS is as follows: Retirees and beneficiaries currently receiving benefits Terminated employees entitled to benefits but not yet receiving benefits Active plan members Total Employers 136 43 458 637 _ _4 Benefits -The normal retirement for GJRS is age 60 with 16 years of creditable service; however, a member may retire at age 60 with a minimum of 10 years of creditable service. Retirement benefits paid to members are computed as 66 2/3% of annual salary plus 1% for each year of credited service over 16 years, not to exceed 24 years. Early retirement benefits paid to members are computed as the pro rata portion of the normal retirement benefit, based on service not to exceed 16 years. Death, disability, and spousal benefits arc also available. There were no employer contributions required for the years ended June 30, 2002 and 2001 based on the June 30, 2000 and 1999 actuarial valuations, respectively. Contributions and Vesting - Members are required to contribute 7.5% of their annual salary plus an additional 2.5% of their annual salary if spousal benefit is elected. 32 2002 - Employees Retirement System of Georgia AUDITED FINANCIAL STATEMENTS - - - - NOTES TO COMBINED FINANCIAL STATEMENTS -as of and for the years ended June 30, 2002 and 2001 Employer contributions are actuarially determined and approved and certified by the GJRS Board of Trustees. There were no employer contributions required for the year ended June 30, 2002 based on the June 30, 2000 actuarial valuation. The employer contribution required for the year ended June 30, 2001 was 4.62% of active members' compensation, which was based on the June 30, 1999 actuarial valuation. Members become vested after ten years of creditable service. Upon termination of employment, member contributions with accumulated interest are refundable upon request by the member. However, if an otherwise vested member terminates and withdraws his/her member contributions, the member forfeits all rights to retirement benefits. The employer contributions arc projected to liquidate the actuarial accrued funding excess within ten years based upon the actuarial valuation at July 1, 2001 assuming that the amount of accrued liability payment increases 3.5% each year. e. SCJRF is a defined benefit pension plan established by the Georgia General Assembly in 1945 for the purpose of_ providing retirement benefits to the superior court judges of the State of Georgia. SCJRF is directed by its own Board of Trustees. The Boards of Trustees for ERS and SCJRF entered into a contract for ERS to administer the plan effective July 1, 1995. Membership - As of June 30, 2002, participation in SCJRF is as follows: Retirees and beneficiaries currently receiving benefits Terminated employees entitled to benefits but not yet receiving benefits Active plan members Total Employers 32 4 _]_ -18. _ _l Contributions and Vesting - Member contributions are 5.0% of their salary plus an additional 2.5% for the spousal coverage benefit if elected. The state pays member contributions of 5.0% of the member's annual salary. Additional employer contributions are not actuarially determined but are provided on an as-needed basis to fund current benefits. f. DARF is a defined benefit pension plan established by the Georgia General Assembly in 1949 for the purpose of providing retirement benefits to the district attorneys of the State of Georgia. DARF is directed by its own Board of Trustees. The Boards of Trustees for ERS and DARF entered into a contract for ERS to administer the plan effective July 1, 1995. Membership - As of June 30, 2002, DARF had eight retirees and beneficiaries currently receiving benefits. Benefits - Persons appointed as district attorney emeritus shall receive an annual benefit of $15,000 or one-half of the state salary received by such person as a district attorney for the calendar year immediately prior to the person's retirement, whichever is greater. Contributions and Vesting - Member contributions were 5.0% of their annual salary plus an additional 2.5% for the spousal coverage benefit if elected. TI1e state paid member contributions of 5.0% of the member's annual salary. Additional employer contributions are not actuarially determined but are provided on an as-needed basis to fund current benefits. g. GDCP is a defined contribution plan established by the Georgia General Assembly in July 1992 for the purpose of providing retirement allowances for state employees who arc not members of a public retirement or pension system. GDCP is administered by the ERS Board of Trustees. Membership - As of June 30, 2002, participation in GDCP is as follows: Benefits - The normal retirement for SCJRF is age 68 with 19 years of creditable service with a benefit of two-thirds the salary paid to superior court judges. A member may also retire at age 65 with a minimum of 10 years of creditable service with a benefit of one-half the salary paid to superior court judges. Death, disability, and spousal benefits arc also available. Terminated employees entitled to benefits but not yet receiving benefits Active plan members Total Employers 70,225 32 540 102.765 _____ill! 2002 - Employees Retirement System of Georgia 33 l, I. AUDITED FINANCIAL STATEMENTS NOTES TO COMBINED FINANCIAL STATEMENTS -as of and for the years ended June 30, 2002 and 2001 Benefits - A member may retire and elect to receive periodic payments after attainment of age 65. The payments will be based upon mortality tables and interest assumptions to be adopted by the ERS Board of Trustees. If a member has less than $3,500 credited to his/her account, the ERS Board of Trustees has the option of requiring a lump-sum distribution to the member. Upon the death of a member, a lump-sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Contributions - Members are required to contribute 7.5% of their annual salary. There are no employer contributions. Earnings will be credited to each member's account as adopted by the ERS Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member. h. SEAD was created in 195 3 by the Georgia General Assembly to furnish survivors' benefits for eligible members of ERS. SEAD contracts with ERS and LRS to provide group term life insurance coverage for their participants. Death benefit payments are payable to the beneficiary or estate of the insured individual. 3. SIGNIFICANT ACCOUNTING POLICIES AND SYSTEM ASSET MATTERS Basis of Accounting -The System's combined financial statements are prepared on the accrual basis of accounting. Contributions from the employers and members arc recognized as additions in the period in which the members provide services. Retirement and refund payments arc recognized as clccluctions when clue and payable. Investments - Investments arc reported at fair value. Shortterm investments are reported at cost, which approximates fair value. Securities traded on a national or international exchange arc valued at the last reported sales price. Investment income is recognized as earned by the System. No investment in any one organization except the U.S. Government represents 5% or more of the net assets available for pension benefits. There are no investments in, loans to, or leases with parties related to the System. Real Estate Investments - An office building that is incluclecl in mortgage loans and real estate is owned equally by the System and the Teachers Retirement System of Georgia. The System incurred approximately $341,000 in rental expense for the years ended June 30, 2002 and 2001, which is incluclecl in administrative expenses. The remainder of the building is leased to outside parties, and the rental revenue is included in interest and dividends. Use of Estimates - The preparation of financial statements in conformity with accounting principles generally acccptccl in the United States of America requires management to make estimates and assumptions that affect the reported amounts of net assets and changes therein. Actual results could differ from those estimates. The System utilizes various investment instruments. Investment securities, in general, are exposed to various risks, such as interest rate, credit, and overall market volatility. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the combined financial statements. New Accounting Pronouncements - The GASB has issued SGAS No. 34, Basic Financial Statements - and Mcmagement's Discussion and Analysis - for State and Local Governments, as amended by SCAS No. 37, Basic Financial Statements - and Management's Discussion and Analysis - State and Local Governments: Omnibus - an amendment of GASB Statements No. 21 and No. 34, and SCAS No. 38, Certain Financial Statement Note Disclosures. The System adopted these statements on July 1, 2001. In general, these statements required the_ System to present a Management's Discussion and Analysis ("/VID&A") and to depreciate capital assets. The !VID&A is considered to be required supplementary information and precedes the financial statements. The adoption of these statements did not have a material effect on the financial status of the System. See Note 7 for information regarding capital assets. 4. INVESTMENT PROGRAM The System maintains sufficient cash to meet its immediate liquidity needs. Cash not immediately needed is invested in either short-term or long-term investment securities as directed by management. All investments are held by agent custodial banks in the name of the System. Cash - Cash balances are fully insured through the Federal Deposit Insurance Corporation, an agency of the US. Government. Fiduciary accounts, such as those of the System, are granted $100,000 of insurance coverage per participant in the System. Temporary cash on hand not committed for a specific purpose is invested overnight. Investments - SGAS No. 3 requires governmental entities to categorize investments as an indication of the level of custodial credit risk assumed by the System at year-encl. Category I includes investments that are insured or registered or for which the securities are held by the System or its agent in 34 2002 - Employees Retirement System of Georgia AUDITED FINANCIAL STATE/v\ENTS NOTES TO COMBINED FINANCIAL STATEMENTS -as of and for the years ended June 30, 2002 and 2001 the System's name. Category 2 includes uninsured and unregistered investments for which the securities are held by the counterparty's trust department or agent in the System's name. Category 3 includes uninsured and unregistered investments for which the securities are held by the counterparty, or by its trust department or agent but not in the System's name. All of the securities held by the System at June 30, 2002 and 2001 are of Category 1 risk level. The System is authorized by its Board of Trustees (through statutes) to invest in a variety of short-term and long-term securities, as follows: (a) Short-Term: Short-term investments are authorized in the following instruments: Repurchase and reverse repurchase agreements, whereby the System and a broker exchange cash for direct obligations of the U.S. Government or in obligations unconditionally guaranteed by the agencies of the U.S. Government or U.S. corporations. The System or broker promises to repay the cash received plus interest at a specific date in the future in exchange for the same securities. The System held repurchase agreements of $235,569,000 and $214,837,000 at June 30, 2002 and 2001, respectively. U.S. Treasury obligations with varying terms up to 360 days. Other short-term securities authorized, but not currently used, arc: Commercial paper, with a maturity of 180 days or less. Commercial paper is an unsecured promissory note issued primarily by corporations for a specific amount and maturing on a specific day. The System considers for investment only commercial paper of the highest quality, rated P-1 and/or A-1 by national credit rating agencies. Master notes, an overnight security administered by a custodian bank and an obligation of a corporation whose commercial paper is rated P-1 and/or A-1 by national credit rating agencies. Investments in commercial paper or master notes arc limited to no more than $25 million in any one name. (b) Long-Term: Fixed income investments are authorized in the following instruments: Corporate bonds with at least an ''JI:.' rating by a national rating agency and limited to no more than 5% of total System assets in any one name. Maturities of these securities vary up to a period of 40 years to provide the System with flexibility necessary to meet changing market conditions. The System held corporate bonds of $132,075,000 and $6,139,000 at June 30, 2002 and 2001, respectively. U.S. and foreign government obligations with terms up to 30 years. Quality and call requirements of corporate bonds arc applicable. The System held U.S. government obligations of $5,683,065,000 and $5,816,324,000 at June 30, 2002 and 2001, respectively. Private placements are authorized under the same general restrictions applicable to corporate bonds. Mortgage investments are authorized to the extent that they arc secured by first mortgages on improved real property located in the State of Georgia having a loan-tovaluc ratio no higher than 75%. Mortgages, as a group cannot exceed I 0% of total assets or I% for any one loan. Equity securities arc also authorized (in statutes) for investment as a complement to the System's fixed-income portfolio and as a long-term inflation hedge. By statute, no more than 60% of the total invested assets may be placed in equities and no more than 5% in any one corporation. Equity holdings in any one corporation may not exceed 5% of the outstanding equity of the issuing corporation. The equity portfolio is managed by the Investment Services Division (the "Division") in conjunction with independent advisors. Buy/sell decisions are based on securities meeting rating criteria established by the Board of Trustees, in-house research considering such things as yield, growth, and sales statistics, and analysis of independent market research. Equity trades arc approved and executed by the Division's staff. Common stocks eligible for investment are approved by the Investment Committee of the Board of Trustees before being placed on an approved list. Substantially all of the investments of ERS, PSERS, LRS, SCJRF, CJRS, SEAD, and certain investments of GDCP are pooled into one common investment fund. Investments of approximately $15,231,000, held by GDCP, are not included in the investment pool. Units in the pooled investment fund are allocated to the respective funds based upon the cost of assets contributed, and additional units are allocated to the participating funds based on the market value of the pooled investment fund at the elate of contribution. Net income of the pooled investment fund is allocated monthly to the participating funds based upon the number of units outstanding during the month. 2002 - Employees Retirement System of Georgia 35 AUDITED FINANCIAL STATEMENTS NOTES TO COMBINED FINANCIAL STATEMENTS - as of and for the years ended June 30, 2002 and 2001 The units of the pooled investment fund at June 30, 2002 and 2001 were allocated as follows (in thousands): Employees' Retirement System Public School Employees Retirement System Legislative Retirement System Georgia Judicial Retirement System State Employees' Assurance Department Superior Court Judges Retirement Fund Georgia Defined Contribution Plan 2002 6,950 420 15 129 454 I _______J_Q 7,985 2001 7,118 433 16 130 459 _ _13 8,170 5. INVESTMENTS LENDING PROGRAM State statutes and board of trustees policies permit the System to lend its securities to broker-dealers with a simultaneous agreement to return the collateral for the same securities in the future. The System is presently involved in a securities lending program with major brokerage firms. The System lends equity and fixed income securities for varying terms and receives a fee based on the loaned securities' value. During a loan, the System continues to receive dividcncls and interest as the owner of the loaned securities. The brokerage firms pledge collateral securities consisting of U.S. Government and agency securities, mortgage-backed securities issued by a U.S. government agency, and U.S. corporate bonds. The collateral value must be equal to at least 102% to 110% of the loaned securities' value, depending on the type of collateral security. Securities loaned totaled $5,675,299,000 and $5,993,645,000 at fair value at June 30, 2002 and 2001, respectively. The collateral value was equal to 104.9% and 104.2% of the loaned securities' value at June 30, 2002 and 2001, respectively. The loaned securities arc classified as Category I investments (sec Note 4) based on the custodial arrangements for the collateral securities. Loaned securities are included in the accompanying combined statements of net assets since the System maintains ownership. 'n1c related collateral securities arc not recorded as assets on the System's combined statements of net assets, and a corresponding liability is not recorded, since the System is deemed not to have the ability to pledge or trade the collateral securities. In accordance with the criteria set forth in SGAS No. 28, the System is deemed not to have the ability to pledge or sell the collateral securities since the System's lending contracts do not address whether the lender can pledge or sell the collateral securities without a borrower default, the System has not previously demonstrated that ability, and there arc no indications of the System's ability to pledge or sell the collateral securities. 6. SEAD ACTUARIAL VALUATION According to the SEAD policy terms covering the lives of members, insurance coverage is provided on a monthly, renewable term basis, and no return premiums or cash value arc earned. The net assets represent the excess accumulation of investment income and premiums over benefit payments and expenses and is held as a reserve for payment of death benefits under existing policies. The most current actuarial valuation of SEAD is as of June 30, 200 I. The valuation indicated that the employee contribution rate of .50% and .25% and the employer contribution rate of .25% and .25% of members' salaries for old plan members and new plan members, respectively, as of June 30, 2001 was appropriate. Oki plan members were hired prior to July 1, I982, and new plan members were hired on or after July I, I982. 7. CAPITAL ASSETS As the result of the adoption of SGAS No. 34 discussed in Note 3, the System has included capital assets and depreciation expense in the accompanying financial statements. The following is a summary of capital assets and depreciation information as of June 30, 2002 and for the year then ended: Balance Balance at June 30, 2001 Additions Disposals at June 30, 2002 Capital assets: Equipment s - $41,597 $ - $41,597 Vehicles ----- 20 551 62 148 ----- 20 551 62 148 Accumulated depreciation for: Equipment Vehicles ----- (18,639) (10 276) (28 915) ----- Capital assets, net ~ $33,233 L..=._ (18,639) (10 276) /28 915) $33,233 36 2002 - Employees Retirement System of Georgia AUDITED FINANCIAL STATEMENTS REQ!) IRED SUPPLEMENTARY SCH EDU LES (In thousands) SCHEDULE OF FUNDING PROGRESS PAYROLL ACTUARIAL VALUATION DATE Employees' Retirement System 6130197 6130198 6130199 6130100 6130101 ACTU,\IUAL VALUE OF PLAN ASSETS (A) 7,432,306 8,613,575 9,848,723 10,999,901 11,750,624 ACTUARIAL ACCRUED LIABILITY ("AAL:') ENTRY ACE (B) 8,159,345 9,093,758 9,695,614 10,573.408 11,557,255 UNFUNDED AALl(FUNDINC EXCESS) (B-/\) 727,039 480,183 (153,109) (426,493) (193,369) FUNDING RATIO (NB) 91.1% 94.7% 101.6% 104.0% 101.7% ANNUAL COVERED PAYROLL UNFUNDED AAI.J (FUNDINC EXCESS) AS A PERCENTAGE OF COVER (C) [(B-A)/C] 1,977,928 2,055,966 2,152,072 2,304,289 2,397,169 36.8% 23.4% (7.1)% (18.5)% (8.1)% Public School Employees' Retirement System1 6130197 6130198 6130199 6130100 6130101 462,639 528,770 599,464 667,642 708,391 465,764 504,779 586,352 615,357 613,347 3,125 (23,991) (13,112) (52,285) (95,044) 99.3% 104.8% 102.2% 108.5% 115.5% NIA NIA NIA NIA NIA NIA NIA NIA NIA NIA Legislative Retirement System 6130197 6130198 6130199 6130100 6130101 18,197 20,375 22,679 24,666 26,034 18,086 19,272 20,129 21,628 21,610 ( 111) (1,103) (2,550) (3,038) (4,424) !00.6% 105.7% 112.7% 114.0% 120.5% 2,340 2,363 2,411 2,411 3,567 (4.7)% (46.7)% (105.8)% (126.0)% (124.0)% Georgia Judicial Retirement System 711/98 711199 7/1/00 711/01 160,171 183,249 204,136 219,288 117,771 129,233 138,427 156,083 (42,400) (54,016) (65,709) (63,205) 136.0% 141.8% 147.5% 140.5% 26,226 29,594 34,856 37,688 (161.7)% (182.5)% (188.5)% (167.7)% This data, except for annual covered payroll, was provided by the System's actuary. Information is shown only for the years available in accordance with the parameters of SCAS No. 25. Additional years will be added as data become available. 1 No statistics regarding covered payroll are available. Contributions are not based upon members' ;-alaries, but are simply $4.00 per member per month for nine months each fiscal year. See notes to required supplementary schedules. 2002 - Employees Retirement System of Georgia 37 AUDITED FINANCIAL STATEMENTS REQ!) I RED SUPPLEMENTARY SCHEDULES (In thousands) SCH EDU LE OF EMPLOYER CONTRIBUTIONS Year Ended June 30, State Annual Required Contribution Percentage Contributed Employees' Retirement System 1997 1998 1999 2000 2001 282,249 286,794 304,461 302,332 315,505 100% 100% 100% 100% 100% Public School Employees' 1997 13,645 100% Retirement System 1998 13,638 107% 1999 10,839 158% 2000 9,789 184% 2001 12,874 132% Legislative Retirement System 1997 1998 1999 2000 2001 159 100% 164 126% 84 108% 22 436% NIA Georgia Judicial Retirement System 1999 2000 2001 694 834 1,741 100% 100% 11% Information is shown only for the years available in accordance with the parameters of SGAS No. 25. Additional years will be added as data become available. See notes to required supplementary schedules. 38 2002 - Employees Retirement System of Georgia AUDITED FINANCIAL STATEMENTS EMPLOYEES' RETIREMENT SYSTEM (Including All Plans and Funds Administered by the Employees' Retirement System of Georgia) NOTES TO REmJIRED SUPPLEMENTARY SCHEDULES 1. Schedule of Funding Progress - The actuarial value of assets recognizes a portion of the difference between the fair value of assets and the expected actuarial value of assets, based on the assumed valuation rate of return. The amount recognized each year is 20% of the difference between fair value and expected actuarial value. 2. Schedule of Employer Contributions - The required employer contributions and percent of those contributions actually made are presented in the schedule. 3. Actuarial Assumptions - The information presented in the required supplementary schedules was determined as part of the actuarial valuations at the elates indicated. Additional information from the actuarial valuations for the most recent two-year period are as follows: Employees' Retirement System: Valuation date June 30. 2001 Actuarial cost method Entry age Amortization method Level percent of pay, open Rcn1aini11g amortization period of the Funding Excess 20 years Asset valuation method 5-ycar smoothed market Ac_tuarial assumptions: Investment rate of return 1 Projected salary incrcn."ics 1 7% 5.20-9 00% Post-retirement cost-of-living adjustment None June 30. 2000 Entrv age Level percent of pay. open 40 years ;-year smoot-l1cd market 7% 5.20-9.00% None Legislative Retirement System: Valuation date Actuarial cost method Amortization method Remaining amortization period of the Funding Excess Asset valuation method Actuarial assumptions: Investment rntc of return 1 Projected salary incn.:ases 1 Postrctircmcnt cost-of-living adjustment June 30. 2001 Unit credit Level dollar. open NIA 5-ycar smoothed market 7% 5.20% 3% annually June 30. 2000 Unit credit Level dollar, open Nii\ 5-ycar smoothed market 7% 5.20% 3% annually Georgia Judicial Retirement System: Valuatio11 date July I. 2001 1\ctuarial cost method Entry .igc Amortization nH.:thod Le\'cl percent of pay, open Remaining arnortizatistretiremcnt cost-of-living adjustment None July I, 2000 Entry age Level percent of pay. open 12 years 5-year smoothed market 7% 5.20% None 1Inclucles inflation rate of 3.50% Public School Employees' Retirement System: Valuation date Actuarial cost method Amortization method Remaining amortization period of the Funding Excess Asset valuation method Actuarial assumptions: Investment rate of return I Projected salary increases I Postrctiremcnt cost-of-living adjustment June 30. 2001 Entry age Level dollar, open 40 years 5-year smoothed market 7% N/A 3% annuallv June 30, 2000 Entry age Level dollar. open 40 years 5-year smoothed market 7% N/A 3% annually 2002 - Employees Retirement System of Georgia 39 c!3 I ASSETS Employees' Retirement System CASII RECEIVABLES, Employee and employer contributions Interest and dividends Unremitted insurance premiums Total receivables $ 4,353 27,144 ---- 27,144 INVESTMENTS - at fair value, Short-term Obligations of the U.S. Government and its agencies, corporate and other bonds Common stocks Mortgage loans and real estate 3,744 Equity in pooled investment fund 11 534 275 10tal investments 11.538 019 CAPITAL ASSETS, net Total assets - - - -33 11,569,549 N a a LIABII.ITIES N I ~ Accounts payable and other ~ Insurance premiums payable ~ " ~ Total liabilities ;,, ~ NET ASSETS HELO IN TRUST ~ FOR PENSION BENEFITS :l C, ~ C/J 1 :"l' -0.., 0 C, 0 ~. "" 10.09] _l..!IB.!_ __j__[_J]Q $ 11 558.373 Public School F.mployccs' Retirement System $ (73) 4 --- 4 697 942 697 942 --- 697,873 412 ---- _ _41_2 $ 697461 PENSION TRUST FUNDS Legislative Retirement System Georgia Judicial Retirement System Stale Employees Assurance Department Superior Court Judges and District Attorneys Retirement Funds Pooled Investment Fund $ (17) $ 86 $ 36 $ 90 30 -- 30 273 --- 273 ---1...ill. 1,123 3 -- 3 $75,015 ---- 75,015 25 507 25.507 -- 25,520 213 359 213,359 --- 213,718 752 895 752.895 --- 754.054 -----2iQ -21!) -- 1,023 228,003 5,807,476 7,140.706 582 ---- 13 176 767 ---- 13,251,782 II ~ _2l $ 25 467 107 --- ____Jfil_ ----- 45 -- _ _4_5 ------- 5..1.!M!l $ 754 054 .......L.2N $ 13,251.782 Georgia Defined Contribution Plan Eliminations $569 1,146 94 -- 1,240 iD..Jll.l (1,123) 7,566 7,664 26 874 42.104 -- 43,913 (13 251 782) 03 251,782) (13,252,905) 14 -- _ _1_4 {I 123) (I 123) $ 43.899 $ /13 251 782 1n 0 3: O::l -z -z Cl Vl -l Total ~ m All Srstems 2002 2001 3: m z $ 5044 -l $1,546 Vl 28,600 75,109 ---- 103,709 235,569 5,815,140 7,140,706 4,326 ---- 13.195 741 _ _ _3_3 13,304,527 10,684 ---- 10 684 $ 13.293.843 0 'Tl 36,986 93,956 z m ---- -l 130,942 Vl Vl m -l Vl 214,837 5,822,463 -I i:: 8,014,283 ~ 4,351 VJ ---- .a 14.055 934 a a N N ---- :si:.. 14,188,422 18 3 ".0.'.. 10,430 ---- 10 430 :.0.;.:..;. "...'.. "s0~' b... ' $ 14,177.992 aa,N_ ;:; ..... ;:i-< 0 i:: "0'. ;:l Q. "' 2 ("') 2 ;Q:;. C7t:, ~ "i:) E, ;:l "' 0. ;:l Q. '-:rjm 3: Q." >"' Q. or--<- . m ".;.~..:..'l.-. m ~ ;,:, ~-"' Q. m - l ..... ;,:, ;:i-a m "' 3: .gt;.:lm z ~ -l """''' Vl --< Vl ~ -l ~m ~- 3: 3 ";..:.'l.. VJ '<"...'.. -"3 ' 0 0 "0 ' d3 i:t '-- - - - - A U D I T E D F I N A N C I A.L S TAT E M E N T S SUPERIOR COURT JUDGES AND DISTRICT ATTORNEYS RETIREMENT FUNDS COMBINING STATEMENTS OF NET ASSETS -June 30, 2002 with comparative totals for 2001 in thousands ASSETS PENSION TRUST FUNDS Superior Court District Judges Attorneys Retirement Retirement Fund Fund TOTAL 2002 2001 CASH RECEIVABLES: Employee and employer contributions Total receivables $ 87 _ _3 3 $ 3 $ 90 $ 59 _ _3 3 INVESTMENTS .:... at fair value: Equity in pooled investment fund -------2.N -------2.N --1.W. Total assets 1,020 3 1,023 1,784 LIABILITIES ACCOUNTS PAYABLE AND OTHER Total liabilities NET ASSETS HELD IN TRUST FOR PENSION BENEFITS ------12. -------11 i....:ill _3 45 ------12. _3 45 ------12. ~ $1,739 (A schedule of funding progress is presented on page 37.) 2002 - Employees Retirement System of Georgia 41 .ti Employees' Retirement System Public School Employees' Retirement System NET ASSETS I JELi) IN TRUST FOR PENSION BENEFITS - Beginning of year $ 12,3-13,625 ADDITIONS: Contributions: Employer Member Jnsuram:c premiums Administrativeexpenscallotment lnve.~tment loss:_ Net appreciation in fair value of investments Interest and dividends Le.ssinvestmentexpenses Allocation of imestmenl earnings 233,229 57,920 60 (730) (487 728) Net investment lo.ss /488 398) Total additions (197 249) $748,571 11,623 1,275 . 625 (58) (28 8951 (28 951) ....ill..:UQJ. DEDUCTIONS: Retirement payments Rehmds of employee contribution~ and interest Death benefits N A ;:::: ""O E;- ~ i::, N ;pC.... ~ 2,_ ""O r er.i >, Q "' -< ::: . m ;:! . ~ ~ -<;,::, ~ m ,S" j ,.:. ;,::, ";:;- m g-; $ m -5- Z O -l ~ v, ~ -< ~ ~ " m ::; $ ;~:: ...,_ ~ -8~ ' 3 a ~ ::; ~-. ~ i:::. u F N s I A D I T E D I A N C I A L s T -A T E M E N T - -- - - - - -- - -~- SUPERIOR COURT JUDGES AND DISTRICT ATTORNEYS RETIREMENT FUNDS COMBINING STATEMENTS OF CHANGES IN NET ASSETS - fune 30, 2002 with comparative totals fc1r 2001 (in thousands) PENSION TRUST FUNDS Superior Court District Judges Attorneys Retirement Retirement Fund Fund TO'li\L 2002 2001 NET ASSETS HELD IN TRUST FOR PENSION BENEFITS - Beginning of year ADDITIONS: Contributions: Employer Member Administrative expense allotment Investment loss: Interest and dividends Less investment expenses Allocation of investment earnings Net investment loss Total additions $1,739 2,042 13 30 (3) Jlli.l JZ1fil. 1,337 $ 117 117 $1,739 2,159 13 30 (3) _illi.l --1Z1fil 1,454 $1,896 2,087 12 30 -1lill -1lill 2,018 DEDUCTIONS: Retirement payments Administrative expenses 2,068 ____J_Q_ 117 2,185 2,145 ~ __3_Q Total deductions 2,098 _ill 2,215 2,175 NET INCREASE (DECREASE) NET ASSETS HELD IN TRUST FOR PENSION BENEFITS - End of year .ilill .L.21.11 L....=._ .ilill 1......211!. -1llli $1,739 2002 - Employees Retirement System of Georgia 43 AUDITED FINANCIAL STATEMENTS EMPLOYEES' RETIREMENT SYSTEM (Including All Plans and Funds Administered by the Employees' Retirement System of Georgia) ADMINISTRATIVE EXPENSE FUND- Contributions and Expenses for the years ended June 30, 2002 and 2001 (in thousands) 2002 2001 Contributions: Employees' Retirement System Public School Employees' Retirement System Legislative Retirement System Georgia Judicial Retirement System State Employees' Assurance Department Georgia Defined Contribution Plan Superior Court Judges Retirement Fund $ 7,971 625 110 175 225 310 _ _3_0 $ 6,950 625 110 175 225 310 _ _3_0 Total contributions Expenses: Personal services: Salaries and wages Retirement contributions FICA Health insurance Miscellaneous 9 446 1,947 204 138 254 ----12 2,572 8 425 1,805 310 125 236 _ _4_3 __lil2 Communications: Postage Publications and printing Telecommunications Travel 155 82 83 _ _2_3 _ill IOI 40 78 __fl ------1lf2 Professional services: Accounting and investment services Computer services Consulting services Actuarial services Medical services Professional fees Legal services 1,758 1,026 1,603 305 168 87 _ _6_8 ----2....!lli. 1,474 1,879 826 I 55 192 61 _ _3_7 _____._ill Rentals: Office space Office equipment $ 341 _ _3 ______l.11 $ 341 _ _I ____]fl Other services and charges: Equipment Temporary services Supplies and materials Repairs and maintenance Courier services Board member expenses Depreciation Miscellaneous Total expenses 99 580 85 335 11 14 29 _ _1_9 ----1.Jll 9 446 4 218 29 441 5 5 _ _2 ------1.Q 8 425 Net Income Balance: Beginning of year End of year ~ 44 2002 - Employees Retirement System of Georgia ,, -- PLOYEES' IREMENT SYSTEM OF GEORGIA T,vo Northsidc Seventy-Five I Suite 300 I Atlanta, Georgia 30318-7778 404-352-6400 I 1-800-805-4609 I Fax 404-352-6431