TEACHERS RETIREMENT SYSTEM OF GEORGIA COMPREHENSIVE ANNUAL FINANCIAL REPORT A Component Unit of the State of Georgia F i s c a l Y e a r E n d e d J u n e 3 0 , 2000 Jeffrey L. Ezell Executive Director Teachers Retirement System of Georgia Two Northside 75, Suite 400 Atlanta, Georgia 30318 (404) 352-6500 (800) 352-0650 (Within Georgia) www.trsga.com IN MEMORY OF GERALD S. GILBERT 1943 - 2000 Gerald S. Gilbert, former Executive Director of the Teachers Retirement System of Georgia (the "System"), died August 7, 2000 just eight months after his retirement. Those who worked with Mr. Gilbert knew him for his compassion and integrity. He was known for his fairness, mutual respect for others, and his principles - ever mindful and protective of the System and the fiduciary responsibilities associated with managing the assets and benefits of its members and retirees. Born in 1943, Mr. Gilbert began his professional career with the System in 1967 after graduating from the Georgia Institute of Technology with a Bachelor of Science degree in Industrial Management and the Georgia State University with a MBA in Finance. He advanced through the System and in 1981 was appointed its Executive Director. Mr. Gilbert served as the System's Executive Director longer than any of his predecessors until his retirement on January 1, 2000. Through his patience and diplomacy, he guided the growth of the System's assets from $2 billion to $41.0 billion by the time of his retirement. He diligently worked with the Governors and the members of the Legislature in Georgia to help guarantee the security of Georgia's educators while watching the annual retirement payments grow from $104 million to over $1 billion annually. Mr. Gilbert not only was concerned about the welfare of educators and the preservation of their retirement benefits in Georgia but also across the nation. He was an active member of the National Council on Teacher Retirement serving on its executive committee from 1986 to 1991, and as its president from 1991 to 1992. With gratitude for his distinguished service to the Teachers Retirement System of Georgia and to all educators and their families of Georgia, we extend our condolences to the family and friends of Gerald S. Gilbert. He will be greatly missed. 2 Teachers Retirement System of Georgia Teachers Retirement System of Georgia 3 INTRODUCTORY SECTION TABLE OF CONTENTS INTRODUCTORY SECTION Certificate of Achievement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Board of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Letter of Transmittal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Administrative Staff and Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Summary of Plan Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 FINANCIAL SECTION Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 General Purpose Financial Statements: Statements of Plan Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Statements of Changes in Plan Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Required Supplementary Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Additional Information - Administrative Expenses . . . . . . . . . . . . . . . . . . . . . . . 25 INVESTMENT SECTION Investment Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Time-Weighted Rates of Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Asset Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Portfolio Detail Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 ACTUARIAL SECTION Actuary's Certification Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Summary of Actuarial Assumptions and Methods . . . . . . . . . . . . . . . . . . . . . . . . 31 Actuarial Valuation Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 STATISTICAL SECTION Participating Employers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Member Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Benefit Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Revenues and Expenses Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Retired Members by Type of Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 4 Teachers Retirement System of Georgia INTRODUCTORY SECTION CERTIFICATE OF ACHIEVEMENT Teachers Retirement System of Georgia 5 INTRODUCTORY SECTION BOARD OF TRUSTEES *Dr. Robert J. Puckett, Sr. CHAIRMAN Principal Coosa Middle School 5041 Alabama Highway Rome, Georgia 30165 *Mr. W. Daniel Ebersole *Ms. Carolyn H. Baldwin Dr. Sandra G. Gustavson Director VICE CHAIRMAN Associate Dean for Faculty & Research Office of Treasury & Fiscal Services Vice President, The Coca Cola Company McFadden Professor Suite 1202, West Tower, Floyd Bld. President, Coca Cola Financial Corporation Terry College of Business Atlanta, Georgia 30334 1 Coca Cola Plaza The University of Georgia Atlanta, Georgia 30313 Athens, Georgia 30602 Dr. Gloria J. Hardiman Instructional Coordinator DeKalb County School System 1995 Wommack Drive Dunwoody, Georgia 30338 *Mr. Russell W. Hinton State Auditor 254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334 Mrs. Marjorie M. Holt Teacher Henry County Middle School 166 Holly Smith Drive McDonough, Georgia 30253 *Dr. John A. Hulsey, Jr. Executive Director Georgia Retired Educators Association 615-C Oak Street Gainesville, Georgia 30501 Mrs. Bobby Jean Moore Teacher Creekland Middle School 170 Russell Road Lawrenceville, Georgia 30043 6 Teachers Retirement System of Georgia *Mr. Charles E. Sward Retired Businessman 1837 Cedar Canyon Drive Atlanta, Georgia 30345 *Investment Committee Member INTRODUCTORY SECTION LETTER OF TRANSMITTAL Teachers Retirement System of Georgia November 7, 2000 Board of Trustees Teachers Retirement System of Georgia Atlanta, Georgia O n behalf of the Board of Trustees, I am pleased to present the Comprehensive Annual Financial Report of the Teachers Retirement System of Georgia for the fiscal year ended June 30, 2000. Responsibility for both the accuracy of the data, and completeness and fairness of the presentation, including all disclosures, rests with the management of the System. To the best of our knowledge and belief, the enclosed data is accurate in all material respects and is reported in a manner designed to present fairly the financial position and results of operations of the System. I trust that you will find this report helpful in understanding your retirement system. The comprehensive annual financial report is presented in five sections: introductory, financial, investment, actuarial and statistical. The introductory section includes this transmittal letter, principal officials, consultants and advisors and a summary of plan provisions. The financial section includes the auditors' report, the System's financial statements and required supplementary information. The investment section includes a report on investment activity, investment policies, investment results, and various investment schedules. The actuarial section includes the actuary's certification letter and actuarial assumptions, methods and valuation data. The statistical section includes selected retirement data and includes significant data pertaining to the System presented on a multi-year basis. Certificate of Achievement The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the Teachers Retirement System of Georgia for its comprehensive annual financial report for the fiscal year ended June 30, 1999. This was the twelfth consecutive year that the Teachers Retirement System Jeffrey L. Ezell Executive Director of Georgia has achieved this prestigious award. In order to be awarded a Certificate of Achieve- ment, a government unit must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe our current comprehensive annual financial report continues to meet the Certificate of Achievement Program's requirements, and we are submitting it to the GFOA to determine its eligibility for another certificate. Legislation The Georgia General Assembly during its 2000 session passed five pieces of legislation that were signed by the Governor that substantially impacted the System. Unless otherwise noted these changes were effective July 1, 1999. First, the amount of exclusion of retirement income used in the computation of Georgia taxable net income was increased. The current exclusion amount of $13,000 will be increased to $13,500 for taxable year 2000 and to $14,000 for taxable years 2001 and subsequent years. Second, an active member may establish credit for graduate study which was interrupted solely for a period of active military service begun during a period in which the military draft was in effect. Previously, credit could not be established for the entire period of graduate study if it was interrupted by military service. Third, the investment authority of public retirement funds was established in the statutes governing the State's retirement systems. Previously, the investment authority was located in statutes which governed the State's domestic life insurance companies. Also, the authority to invest in corporations or in obligations of Teachers Retirement System of Georgia 7 INTRODUCTORY SECTION LETTER OF TRANSMITTAL corporations of a foreign country was increased from 5 percent to 10 percent and the authority to invest in domestic equities was increased from 50 percent to 60 percent. This legislation became effective January 31, 2000. Fourth, the "Public Retirement Systems Standard Law" was changed to bring it in conformance with Governmental Accounting Standards Board Statements No. 25 and 27 and subsequent applicable statements. Fifth, the deadline was changed for any vested member of the System who became an employee of an employer normally covered by the Employees' Retirement System of Georgia (ERS) between January 1, 1997 and July 1, 1998 to elect to remain a member of the System. The deadline was extended from September 30, 1998 to September 30, 2000. The Georgia General Assembly during its 1999 session did not pass any legislation that substantially impacted the System. However, it did fully fund the 1998 legislation allowing the System to grant service credit for accrued sick leave which a member has not used or been paid. This funding level allows the awarding of one month of credit for each 20 days of unused sick leave for those members retiring on or after July 1, 1999. Financial Information The management of the System is charged with the responsibility of maintaining a sound system of internal accounting controls. The objectives of such a system are to provide management with reasonable assurance that assets are safeguarded against loss from unauthorized use or disposition, that transactions are executed in accordance with management's authorizations and that they are recorded properly to permit the preparation of financial statements in accordance with generally accepted accounting principles. Even though there are inherent limitations in any system of internal control, the management of the System makes every effort to insure that through systematic reporting and internal reviews, errors or fraud are quickly detected and corrected. ACCOUNTING METHOD -- Financial transactions of the System are reported on the accrual basis of accounting. Employee and employer contributions are recognized as revenues in the period in which employee services are performed and expenses are recorded when the corresponding liabilities are incurred, regardless of when payment is made. Invest- ment income is recognized as earned by the System. The investments of the System are reported at fair value. ADDITIONS -- The funds necessary to finance retirement benefits are accumulated through the collection of employee and employer contributions and through income on investments. Contributions and investment income for fiscal year 2000 totaled nearly $4.0 billion. At June 30, 2000 total assets of the System were $41.8 billion. DEDUCTIONS -- Recurring benefit payments prescribed in the System's plan of retirement, refunds of contributions to terminated employees and the cost of administering the System comprise the total deductions. Deductions for fiscal year 2000 totaled $1.1 billion. This is an increase of 16.3% over fiscal year 1999. This increase resulted primarily from a growth in the number of retirees and in the amount of the average benefit payment. Additions of $4.0 billion exceeded deductions of $1.1 billion by approximately $2.9 billion during fiscal year 2000. FUNDING -- The System's funding policy provides for periodic employer contributions at rates which, expressed as percents of annual covered payroll, are sufficient to provide resources to pay benefits when due without being increased for future generations of taxpayers. A useful indicator of the funded status of a retirement system is the relationship between the assets and the actuarial accrued liabilities. The greater the level of funding, the larger the ratio of assets accumulated to the actuarial accrued liabilities. The System continues to make progress by increasing the ratio of assets accumulated to the actuarial accrued liabilities. In fact, this ratio increased from 96.9% in 1998 to 97.2% in 1999. The ultimate test of the financial soundness of a retirement system is its ability to pay all promised benefits when due. I am proud to say that through the continued wisdom and the support of the General Assembly of the State of Georgia and the support of Governor Roy Barnes, the System has been and continues to be funded on an actuarially sound basis thus providing the membership the comfort and security they expect from their retirement system. 8 Teachers Retirement System of Georgia INTRODUCTORY SECTION LETTER OF TRANSMITTAL Other Information INDEPENDENT AUDIT -- The Board of Trust- ees requires an annual audit of the financial statements of the System by independent certified public accountants. The accounting firm of Deloitte & Touche LLP was selected by the Board. The independent auditors' report on the statements of plan net assets and the related statements of changes in plan net assets is included in the financial section of this report. ACKNOWLEDGMENTS -- The compilation of this report reflects the combined effort of the staff under the leadership of the Board of Trustees. It is intended to provide complete and reliable information as a basis for making management decisions, as a means of determining compliance with legal provisions, and as a means for determining responsible stewardship of the assets contributed by the System's members, their employers, and the State of Georgia. The report is being mailed to all employers who have members covered by the System. They form the link between the System and its membership. Their cooperation contributes significantly to the success of the System. On behalf of the Board of Trustees, I would like to take this opportunity to express my gratitude to Governor Roy Barnes, members of the Georgia General Assembly, the staff, the advisors, and to the many people who have worked so diligently to ensure the successful operation of the Teachers Retirement System of Georgia. Sincerely, Jeffrey L. Ezell Executive Director Teachers Retirement System of Georgia 9 INTRODUCTORY SECTION YOUR RETIREMENT SYSTEM Financial Highlights Employee Contributions Employer Contributions Net Appreciation in Fair Value of Investments Interest and Dividend Income Benefits Paid to Retired Members Member Withdrawals Interest Credited to Employee Contributions June 30, 2000 1999 $ 355,948,000 $ 779,571,000 $ 330,517,000 $ 776,178,000 % Change + 7.7 + 0.4 $ 1,494,190,000 $ 1,325,886,000 $ 1,011,568,000 $ 44,718,000 $ 2,700,878,000 $ 1,217,663,000 $ 865,191,000 $ 42,911,000 - 44.7 + 8.9 + 16.9 + 4.2 $ 157,695,000 $ 151,038,000 + 4.4 Statistical Highlights Active Membership Members Leaving the System Retired Members Average Monthly Annuity 191,908 9,923 47,105 $ 1,790 186,822 + 2.7 9,828 + 1.0 43,732 + 7.7 $ 1,649 + 8.6 10 Teachers Retirement System of Georgia INTRODUCTORY SECTION THE SYSTEM ASSETS Growth of Total System Assets ($'s in billions) Total System Assets at June 30, ($'s in thousands) 1995 1996 1997 Equities $10,033,833 $12,831,101 $16,850,878 Fixed Income 8,723,703 9,243,863 10,504,465 Receivables 323,000 368,215 400,502 Cash, Short-Term Securities & Other 513,269 259,424 366,353 Total System Assets $19,593,805 $22,702,603 $28,122,198 1998 $20,685,510 13,268,987 426,167 490,089 $34,870,753 1999 $23,093,979 14,807,428 409,188 641,047 $38,951,642 2000 $25,288,274 15,642,757 463,968 415,265 $41,810,264 Teachers Retirement System of Georgia 11 INTRODUCTORY SECTION ADMINISTRATIVE STAFF AND ORGANIZATION Jeffrey L. Ezell Executive Director Cecelia Corbin Hunter Deputy Executive Director Stephen J. Boyers Controller Accounting & Membership Division Charles W. Cary, Jr. Director Investment Services Division Susan E. Garrett Manager Refund & Service Division M. Cathy Hart Manager Counseling & Information Division Consulting Services Actuary Buck Consultants, Inc. Auditor Deloitte & Touche LLP Medical Advisors Gordon J. Azar, M.D. Atlanta, Georgia Arthur S. Booth, Jr. Atlanta, Georgia Joseph W. Stubbs, M.D. Albany, Georgia J. Gregory McQueen Manager Information Technology Division Dianne J. Rogers Manager Retirement Division Investment Advisors Albritton Capital Management Atlanta Capital Management Banc of America Capital Management Diaz-Verson Capital Investments INVESCO Capital Management Montag & Caldwell Earnest Partners NCM Capital Management Group Synovus Trust 12 Teachers Retirement System of Georgia INTRODUCTORY SECTION SUMMARY OF PLAN PROVISIONS Purpose The Teachers Retirement System of Georgia (the "System") was established in 1943 by an act of the Georgia General Assembly for the purpose of providing retirement allowances and other benefits for teachers of this state. The System has the power and privileges of a corporation, and the right to bring and defend actions. The major objectives of the System are (1) to soundly invest retirement funds to insure adequate financing for future benefits due and for other obligations of the System, (2) to provide statewide counseling services for System members, (3) to accurately account for the status and contributions of all active and inactive members, and (4) to process refunds and monthly benefits due terminated and retired members, respectively. Administration The statutes provide that the administration of the System be vested in a ten member Board of Trustees comprised as follows: Ex officio members: the State Auditor, the Director of the Office of Treasury and Fiscal Services, Governor's appointees: two active members of the System who are class- room teachers and not employees of the Board of Regents, one active member of the System who is a public school administrator, one active member of the System who is not an employee of the Board of Regents, one member to be selected by the Governor, Board of Regents appointee: one active member of the System who is an em- ployee of the Board of Regents, Trustee appointees: one member who has retired under the System, and one individual who is a citizen of the state, not a member of the System and experienced in the investment of money. A complete listing of the current Board of Trustees is included on page 4 of this report. Management of the System is the responsibility of the Executive Director who is appointed by the Board and serves at their pleasure. On behalf of the Board, the Executive Director is responsible for the proper operation of the System, engaging such actuarial and other services as shall be necessary to transact business, setting the compensation of all individuals engaged by the System and paying expenses necessary for operations. A listing of the administrative staff is included on page 10 of this report. Membership All personnel in covered positions of the state's public school systems, vocational-technical schools, RESA units and all colleges and universities comprising the University System of Georgia who are employed one-half time or more, except those professors and principal administrators electing to participate in the Board of Regents of the University System of Georgia Optional Retirement Plan, are required to be members of the System as a condition of employment. Covered positions include teachers, administrators, supervisors, clerks, teacher aides, secretaries, paraprofessionals, public school nurses, employees of the Agricultural Extension Service, and county and regional librarians. Public school lunchroom, maintenance, warehouse and transportation managers and supervisors are eligible for membership. Any individual first employed at age 60 or after may elect not to join the System. Eligibility Service Retirement Active members may retire and elect to receive monthly retirement benefits after one of the following conditions: 1) completion of 10 years of creditable service and attainment of age 60 or 2) completion of 25 years of creditable service. Disability Retirement Members are eligible to apply for monthly retire- ment benefits under the disability provision of the law if they are an active member, have at least 9-1/2 years of creditable service, and are permanently disabled. Teachers Retirement System of Georgia 13 INTRODUCTORY SECTION SUMMARY OF PLAN PROVISIONS The Formula Normal Retirement Any member who has at least 30 years of creditable service or who has at least 10 years of creditable service and has attained age 60 will receive a benefit calculated by using the percentage of salary formula. Simply stated, two percent (2%) is multiplied by the member's years of creditable service established with the System, including partial years (not to exceed 40 years). The product is then multiplied by the average monthly salary for the two highest consecutive years of service. This two year period must include at least two years of service. (Please note that any nine (9) or more months of service within a fiscal year constitutes a full year of service and a full year of salary). In the event the member does not have credit for two years of service within the two year salary period, additional salaried months are included to complete two years of service. The resulting product is the monthly retirement benefit under the maximum plan of retirement. Early Retirement Any member who has between 25 and 30 years of creditable service will receive a reduced benefit. The benefit will be calculated using the percentage of salary formula explained above. It will then be reduced by the lessor of 1/12 of 7% for each month the member is below age 60, or 7% for each year or fraction thereof the member has less than 30 years of creditable service. The resulting product is the monthly retirement benefit under the maximum plan of retirement. Disability Retirement Disability retirement benefits are also calculated using the percentage of salary formula -- two percent (2%) times the years of creditable service times the average monthly salary for the two highest consecutive years of service. As with service retirements, this two year period must include at least two years of creditable service, with any nine (9) or more months of service within a fiscal year constituting a full year of service and a full year of salary. The resulting product is the monthly disability retirement benefit under the maximum plan. There is no age requirement for disability retirement. Plan A Maximum Plan of Retirement This plan produces the largest possible monthly benefit payable to the member only during his or her lifetime. If the death of the retired member occurs prior to his or her having been paid total retirement benefits equal to the member's accumulated contributions including interest, the balance of the retired member's accumulated contributions (including interest) will be paid in a lump sum to the beneficiary or beneficiaries designated by the member on the application for retirement. If there are no surviving beneficiaries at the time of the member's death after retirement, any refund of contributions and interest would be made in a lump sum to the deceased member's estate. A member who has selected Plan A, the Maximum Plan of retirement, may change beneficiary designations after retirement. Plan B Optional Plans of Retirement Upon retirement a member of the System may elect one of six optional plans under Retirement Plan B. The election of an optional form of payment is made upon application for retirement and it becomes irrevocable upon distribution of the first benefit check. The six options are as follows: Option 1 The retiring member accepts a relatively small reduction from the maximum monthly benefit in order to guarantee to the estate, beneficiary or beneficiaries named on the retirement application, a lump sum refund of any remaining portion of member contributions and interest that are not used to pay the annuity portion of the monthly benefit during the member's lifetime. Option 2 This plan offers the retiring member a reduced monthly benefit, based on the ages of the member and the beneficiary, payable for life. It further provides a guarantee to the beneficiary named on the retirement application that, at the death of the retired member, and if the beneficiary is still living, of the same basic monthly retirement allowance the member received at the date of retirement plus any cost-of-living increases the member received up to the time of death. 14 Teachers Retirement System of Georgia INTRODUCTORY SECTION SUMMARY OF PLAN PROVISIONS Plan B Optional Plans of Retirement (continued): Option 2 Pop-Up Any member may elect a reduced retirement allowance to be designated "Option 2 Pop-Up" with the provision that if the beneficiary dies prior to the retiree that the basic benefit payable to the retiree shall increase to an amount as though the retiree had not selected an optional plan of retirement. Option 3 This plan of retirement involves a reduced monthly benefit which is based on the ages of the member and the beneficiary. The resulting benefit is paid to the retired member for life, with the guarantee to the beneficiary that at the time of the retired member's death, the named beneficiary will receive a payment for life of one-half of the initial monthly benefit received by the member at the time of retirement plus one-half of any cost-of-living increases the member received up to the time of death. Option 3 Pop-Up Any member may elect a reduced retirement allowance to be designated "Option 3 Pop-Up" with the provision that if the beneficiary dies prior to the retiree that the basic benefit payable to the retiree shall increase to an amount as though the retiree had not selected an optional plan of retirement. Option 4 This plan allows the retiring member to select a specific monthly amount other than provided for in the other options , which will be paid for life following a retiree's death to the living beneficiary. The beneficiary would also receive a pro-rata share of any cost-ofliving increases the member received up until the time of death, or the benefit will be divided among the beneficiaries in accordance with the percentage or specific dollar designations made by the member at the time of retirement. One major difference in this plan is that the retiring member may actually elect that following his or her death, a certain amount of money can be paid monthly to a beneficiary rather than a percentage. Financing the System The funds to finance the System come from the following sources: 1) Member contributions -- the System member contributes 5% of annual salary, 2) Employer contributions -- current employer contributions are 11.29% of annual salary, and 3) Investment income -- funds may be invested in government bonds, corporate bonds, mortgages, and common and preferred stock. Teachers Retirement System of Georgia 15 FINANCIAL SECTION INDEPENDENT AUDITORS' REPORT Board of Trustees Teachers Retirement System of Georgia Deloitte & Touche LLP Suite 1500 Telephone: (404) 220-1500 191 Peachtree Street, N.E. Facsimile: (404) 220-1583 Atlanta, Georgia 30303-1924 W e have audited the accompanying statements of plan net assets of the Teachers Retirement System of Georgia (the "System") as of June 30, 2000 and 1999, and the related statements of changes in plan net assets for the years then ended. These financial statements are the responsibility of the System's management. Our responsibility is to express an opinion on these financial statements based on our audits. We 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 audits 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. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the plan net assets of the System as of June 30, 2000 and 1999, and the changes in plan net assets for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The required supplementary schedules and additional information listed in the Financial Section of the Table of Contents are presented for purposes of additional analysis and are not a required part of the basic financial statements. These required supplementary schedules and additional information are 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, are fairly stated in all material respects when considered in relation to the basic financial statements taken as a whole. The Introductory, Investment, Actuarial and Statistical Sections listed in the Table of Contents are presented for purposes of additional analysis and are not a required part of the basic financial statements of the System. Such additional information has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on it. September 8, 2000 16 Teachers Retirement System of Georgia FINANCIAL SECTION STATEMENTS OF PLAN NET ASSETS (Thousands of dollars) ASSETS CASH RECEIVABLES: Interest and dividends Due from Fulton County School Employees Pension Fund Employee and employer contributions Total receivables 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 Total investments Total assets LIABILITIES ACCOUNTS PAYABLE AND OTHER NET ASSETS HELD IN TRUST FOR PENSION BENEFITS (A Schedule of Funding Progress is presented on page 24.) June 30, 2000 1999 $ 2,841 $ 1,394 284,511 87,138 92,319 463,968 228,764 90,250 90,174 409,188 408,674 15,642,757 25,288,274 3,750 635,893 14,807,428 23,093,979 3,760 41,343,455 38,541,060 41,810,264 38,951,642 2,446 2,201 $41,807,818 $38,949,441 See notes to financial statements. Teachers Retirement System of Georgia 17 FINANCIAL SECTION STATEMENTS OF CHANGES IN PLAN NET ASSETS (Thousands of dollars) NET ASSETS HELD IN TRUST FOR PENSION BENEFITS - Beginning of year 2000 Year Ended June 30, 1999 $38,949,441 $34,868,731 ADDITIONS: Contributions: Employer Employee Investment Income: Net appreciation in fair value of investments Interest and dividends Total Less investment expense Net investment income Total additions DEDUCTIONS: Retirement payments Refunds of employee contributions Administrative expenses, net Total deductions NET INCREASE NET ASSETS HELD IN TRUST FOR PENSION BENEFITS - End of year 779,571 355,948 1,494,190 1,325,886 2,820,076 31,874 2,788,202 3,923,721 1,011,568 44,718 9,058 1,065,344 2,858,377 $41,807,818 776,178 330,517 2,700,878 1,217,663 3,918,541 28,614 3,889,927 4,996,622 865,191 42,911 7,810 915,912 4,080,710 $38,949,441 See notes to financial statements. 18 Teachers Retirement System of Georgia FINANCIAL SECTION NOTES TO FINANCIAL STATEMENTS Years Ended June 30, 2000 and 1999 A. Plan Description: The Teachers Retirement System of Georgia (the "System") was created in 1943 by an act of the Georgia Legislature (the "Act"), to provide retirement benefits for teachers who qualify under the Act. The System is administered as a cost-sharing multiple-employer plan as defined in Governmental Accounting Standards Board Statement ("GASB") 25. On October 25, 1996, the Board of Trustees created the Supplemental Retirement Benefit Plan of the Georgia Teachers ("SRBP"). SRBP was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code ("IRC 415") as a portion of the System. The purpose of the SRBP is to provide retirement benefits to employees covered by the System whose benefits are otherwise limited by IRC 415. 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 financial statements. A Board of Trustees comprised of active and retired members and ex-officio State employees is ultimately responsible for the administration of the System. 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 GASB 14. The concept underlying the definition of the reporting entity is that elected officials are accountable. Based on those criteria, the System has not included any other entities in its reporting entity. Eligibility and Membership: All teachers in the State public schools, the University System of Georgia (except those professors and principal administrators electing to participate in an optional retirement plan), and certain other designated employees in educational-related work are eligible for membership. As of June 30, 2000, participation in the System is as follows: Retirees and beneficiaries currently receiving benefits 47,105 Terminated employees entitled to benefits but not yet receiving benefits 33,006 Active plan members 191,908 Total 272,019 Employers 346 Retirement Benefits: The System provides service retirement, disability retirement, and survivor's benefits. Title 47 of the Official Code of Georgia assigns the authority to establish and amend the benefit provisions of the System to the State Legislature. A member is eligible for normal service retirement after 30 years of creditable service, regardless of age, or after 10 years of service and attainment of age 60. A member is eligible for early retirement after 25 years of creditable service. Normal retirement (pension) benefits paid to members are equal to 2% of the average of the member's two consecutive highest paid years of service multiplied by the number of years of creditable service up to 40 years. Early retirement benefits are reduced by the lessor of 1/12 of 7% for each month the member is below age 60, or by 7% for each year or fraction thereof by which the member has less than 30 years of service. It is also assumed that certain cost-of-living adjustments, based on the CPI, will be made in future years. Retirement benefits are payable monthly for life. Options are available for distribution of the member's monthly pension at a reduced rate to a designated beneficiary on the member's death. Teachers Retirement System of Georgia 19 FINANCIAL SECTION NOTES TO FINANCIAL STATEMENTS Years Ended June 30, 2000 and 1999 A. Plan Description: Death and Disability Benefits: Retirement benefits also include death and disability benefits whereby the disabled member or surviving spouse is entitled to receive annually an amount equal to the member's service retirement benefit or disability retirement, whichever is greater. The benefit is based on the member's creditable service (minimum of 10 years of service) and compensation up to the time of disability. The death benefit is the amount that would be payable to the member's beneficiary had the member retired on the date of death on either a service retirement allowance or a disability retirement allowance, whichever is larger. The benefit is based on the member's creditable service (minimum of 10 years of service) and compensation up to the date of death. Contributions: The System is funded by member and employer contributions as adopted and amended by the Board of Trustees. Contributions required for fiscal year 2000 were based on the June 30, 1998 actuarial valuation as follows: Member Employer: Normal Unfunded accrued liability Expenses 5.00% 8.79% 2.35% .15% Total 11.29% Members become fully vested after ten years of service. If a member terminates with less than ten years of service, no vesting of employer contributions occurs, but the member's contributions are refunded with interest. Member contributions with accumulated interest are reported as net assets held in trust designated for that purpose. Based on the latest actuarial valuation, the employer contributions at a rate of 2.33% are expected to liquidate the unfunded accrued liability over approximately seven years on the assumption that the aggregate amount of unfunded accrued liability contribution will increase by 3.25% each year. SRBP: Beginning July 1, 1997, all members and retired former members in the System are eligible to participate in this Plan whenever their benefits under the System exceed the limitation on benefits imposed by IRC 415. At June 30, 2000 and 1999, there were 21 and seven members, respectively, eligible to participate in this portion of the System. Employer contributions of $176,000 and $93,000 and retirement payments of $118,000 and $93,000 under the SRBP are included in the Statement of Changes in Plan Net Assets for the years ended June 30, 2000 and 1999, respectively. B. Summary of Significant Accounting B. Policies and Plan Asset Matters: Basis of Accounting: The System's financial statements are prepared on the accrual basis of accounting. Contributions from the employers and the members are recognized as additions in the period in which the members provide services. Retirement and refund payments are recognized as deductions when due and payable. Investments: Investments are reported at fair value. Short-term investments are reported at cost, which approximates fair value. Securities traded on a national or international exchange are valued at the last reported sales price. 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 which is included in mortgage loans and real estate is owned equally by the System and the Employees' Retirement System of Georgia.The System incurred approximately $613,000 and $529,000 in rental expense for the years ended June 30, 2000 and 1999, respectively, which is included in administrative expenses. The remainder of the building is leased to outside parties, and this rental revenue is included in interest and dividends. 20 Teachers Retirement System of Georgia FINANCIAL SECTION NOTES TO FINANCIAL STATEMENTS Years Ended June 30, 2000 and 1999 B. Summary of Significant Accounting B. Policies and Plan Asset Matters: Use of Estimates: The preparation of financial statements in con- formity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and changes therein and disclosure of contingent assets and liabilities. Actual results could differ from those estimates. New Accounting Pronuncement: The GASB has issued its Statement No. 34, Basic Financial Statements-and Management's Discussion and Analysis-for State and Local Governments, which is effective for periods beginning after June 15, 2001. This Statement establishes new financial reporting requirements for State and local governments throughout the United States. Management is currently analyzing the effects that the adoption of this standard will have on the System's financial statements. C. 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 U.S. 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: GASB 3 requires governmental entities to cat- egorize investments as an indication of the level of custodial credit risk assumed by the System at year- end. Category 1 includes investments that are insured or registered or for which the securities are held by the System or its agent in 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, 2000 and 1999 are of Category 1 risk level. The System is authorized by its Board of Trustees (through statutes) to invest in a variety of shortterm 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 obligations unconditionally guaranteed by 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. U.S. Treasury obligations with varying terms up to 360 days. Other short-term securities authorized, but not currently used, are: 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 admin- istered by a custodian bank and an obligation of a corporation whose commercial paper is rated P-1 or A-1 by national credit rating agencies. Teachers Retirement System of Georgia 21 FINANCIAL SECTION NOTES TO FINANCIAL STATEMENTS Years Ended June 30, 2000 and 1999 C. Investment Program: Short-Term (continued): Investments in commercial paper or master notes are 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 "A" 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. U.S. and foreign government obligations with varying terms up to 30 years. Quality and call requirements of corporate bonds are applicable. Private placements are authorized under the same general restrictions applicable to corporate bonds. Mortgage investments are authorized to the extent that they are secured by first mortgages on improved real property located in the State of Georgia having a loan-to-value ratio no higher than 75%. Mortgages as a group cannot exceed 10% of total assets or 1% for any one loan. Equity securities are 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 10% 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 are 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. D. Investments Lending Program: 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 dividends 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 $16,202,326,000 and $15,245,513,000 at market value at June 30, 2000 and 1999, respectively. The collateral value was equal to 103.9% and 103.1% of the loaned securities value at June 30, 2000 and 1999, respectively. The loaned securities are classified as Category 1 investments (See Note C) based on the custodial arrangements for the collateral securities. Loaned securities are included in the accompanying Statements of Plan Net Assets since the System maintains ownership. The related collateral securities are not recorded as assets on the System's Statements of Plan Net Assets, and a corresponding liability is not recorded, since the System does not pledge or trade the collateral securities. 22 Teachers Retirement System of Georgia FINANCIAL SECTION NOTES TO FINANCIAL STATEMENTS Years Ended June 30, 2000 and 1999 E. Administrative Expenses: Administrative expenses are reported in the financial statements; however, the actual accounting for the expenses is performed in a separate Expense Fund. Administrative expenses paid out of System earnings are as follows: Year Ended June 30, 2000 1999 Salaries and Employee Benefits $ 7,122,485 Other Operating Expenses 3,305,448 Total Administrative Expenses 10,427,933 $ 5,917,905 2,987,299 8,905,204 Less Reimbursement by other State Retirement Systems for services rendered on their behalf 1,369,743 Net Administrative Expenses $ 9,058,190 1,095,560 $ 7,809,644 F. Due From Fulton County School H.Employees Pension Fund: As of July 1, 1988, substantially all members of the Fulton County School Employees Pension Fund became members in the System. The transfer involved 3,990 members at a total cost to the Fulton County School Employees Pension Fund of $168,976,347. The employer's portion of contributions plus accrued interest (maximum 9%) is payable over 28 remaining annual installments. Teachers Retirement System of Georgia 23 FINANCIAL SECTION REQUIRED SUPPLEMENTARY INFORMATION (Thousands of dollars) (See Independent Auditors' Report) Schedule of Funding Progress The actuarial value of assets recognized a portion of the difference between the market 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 market value and expected actuarial value. The actuarial value of the assets is limited to a range of between 80% and 120% of market value. Actuarial Valuation Date 6/30/95 6/30/96 6/30/97 6/30/98 6/30/99 Actuarial Value of Plan Assets (a) $ 16,335,944 18,750,568 22,496,125 27,894,985 31,832,431 Actuarial Accrued Liability (AAL) -Entry Age (b) $ 19,771,740 22,163,755 24,895,047 28,798,984 32,763,470 Unfunded AAL (UAAL) (b-a) $ 3,435,796 3,413,187 2,398,922 903,999 931,039 Funding Ratio (a/b) 82.6% 84.6 90.4 96.9 97.2 Annual Covered Payroll (c) $ 4,712,292 5,086,924 5,467,905 5,951,898 6,832,674 UAAL as a Percentage of Covered Payroll [(b-a)/c] 72.9% 67.1 43.9 15.2 13.6 Information prior to 1995 is not available in accordance with the parameters of GASB 25. Schedule of Employer Contributions The required employer contributions and percent of those contributions actually made are presented in the schedule. State Year Ended Annual Required Percentage June 30, Contribution Contributed 1994 1995 1996 1997 1998 1999 $ 512,429 556,522 600,766 652,928 710,409 776,178 100% 100 100 100 100 100 Notes to Required Supplementary Information The information presented in the required supplementary schedules was determined as part of the actuarial valuations at the dates indicated. Additional information as of the latest actuarial valuation follows: Valuation Date Actuarial Cost Method Amortization Method Remaining Amortization Period Asset Valuation Method June 30, 1999 Entry Age Level Percent of Pay, open 7 Years 5-Year Smoothed Market Actuarial Assumptions: Investment Rate of Return 7.00% Projected Salary Increases 3.25% to 6.00% Inflation Rate 3.25% Post-Retirement Cost of Living Adjustment 3% Annually 24 Teachers Retirement System of Georgia FINANCIAL SECTION ADDITIONAL INFORMATION ADMINISTRATIVE EXPENSES (See Independent Auditors' Report) Year Ended June 30, Personal Services: Salaries and wages Retirement contributions FICA Health insurance Miscellaneous Total personal services 2000 $5,238,572 1,099,820 686,606 59,821 37,666 7,122,485 1999 $4,353,016 916,539 547,124 64,831 36,395 5,917,905 Communications: Postage Publications and printing Telecommunications Travel Total communications 181,413 127,839 341,538 12,891 663,681 167,481 75,998 233,848 20,006 497,333 Professional Services: Computer services Actuarial services Audit fees Legal services Medical services Total professional services Rentals: Office space Office equipment Total rentals Other Services and Charges: Temporary services Board member expenses Repairs and maintenance Supplies and materials Information storage Courier services Miscellaneous Total other services and charges Total Administrative Expenses 1,307,806 79,109 46,866 36,149 85,989 1,555,919 611,330 1,242 612,572 226,188 19,521 55,036 60,087 15,565 6,210 90,669 473,276 10,427,933 1,389,167 94,922 37,800 36,080 97,564 1,655,533 527,355 1,209 528,564 109,235 28,855 41,770 54,466 16,572 5,292 49,679 305,869 8,905,204 Less reimbursement by other State Retirement Systems for services rendered on their behalf Net Administrative Expenses 1,369,743 $9,058,190 1,095,560 $7,809,644 Teachers Retirement System of Georgia 25 INVESTMENT SECTION INVESTMENT OVERVIEW T he Teachers Retirement System (the System) experienced a very good year in the fiscal period ended June 30, 2000. During the year the total investments of the System grew from $38.5 billion to $41.3 billion. Income for the period was over $1.3 billion. As in previous years, assets increased without any deterioration in quality. "Conservation of Capital" and "Conservatism" continue to be the principal guides in investment decisions. The Board of Trustees continued to use a diversified portfolio to accomplish this objective. Returns for rolling three and five year periods are presented in this section. These longer time periods, in our opinion, allow for more valid evaluation of returns, both in absolute terms and relative to an asset class index, by reducing emphasis on the short term volatility of markets. Rates of return are calculated by using a modified "Dietz time-weighted method" which is in accordance with the Association for Investment Management and Research (AIMR) objectives. Studies undertaken to evaluate the investment returns of pension funds over very long time horizons indicate that the asset allocation decision has the most impact on the fund's returns. Although the returns for the various asset categories may vary from year to year, over the long term equities have outperformed fixed income and cash by a very wide margin. For that reason, the System has maintained a maximum equity exposure with the remainder of the fund in fixed income securities designed to generate income and preserve capital. The U.S. economy continued to grow at a steady pace, exceeding expectations in most areas, with continued very low unemployment rates. Inflation remained modest but began to rise primarily as a reaction to oil price increases. While volatile, the equity market continued its unprecedented rise, producing positive returns in most indexes for the twelfth straight year, and again some averages delivered returns well in excess of the long-term historical averages. Among individual companies, returns varied perhaps even more than usual depending upon the company's size, industry and exposure to global markets. Index returns at the extremes varied from +48% for the NASDAQ Composite, which is heavily weighted in technology stocks to -4% for the Dow Jones Industrial representing a more diverse industry basis. The S&P 500 returned 8% while smaller companies and foreign companies as represented by the Standard & Poor's MidCap 400 Index and MSCI EAFE respectively, both returned 17%. Returns for the fixed income markets also were moderate this year as yields on long term Treasury bonds moved from 6% in June 1999 and rose steadily to over 6% at the end of June 2000. The 10year U.S. Treasury Note returned 3% and the 30year U.S. Treasury Bond returned 4%. Our primary benchmark, the Lehman Government/Corporate Index, also returned 4%. It is a shorter maturity index containing higher yielding corporate bonds as well as Treasuries. The financial markets continued to be volatile, as has been the case over the last seven years. The System has continued to invest in high quality bonds and stocks as it historically has done. These types of investments have allowed the System to participate in these rising markets, while moderating the risks. New funds continue to be invested in high quality securities. It should be noted that returns in excess of the long-term historic trends will not always be the case; however, with a focus on high quality investments the overall risk profile should be lowered. In summary, the investment status of the System is excellent. The high quality of the System's investments is in keeping with the continued policy of "Conservatism" and "Conservation of Capital." Prepared by Investment Services Division 26 Teachers Retirement System of Georgia INVESTMENT SECTION TIME WEIGHTED RATES OF RETURN Equities Fixed Income 3-Year: Equities S&P 500 5-Year: Equities S&P 500 1998 1999 2000 29.3% 27.0% 17.8% 30.3% 29.1% 19.9% 22.7% 26.7% 22.7% 23.1% 27.9% 23.9% 3-Year: Equities S&P 500 5-Year: Equities S&P 500 1996 1997 17.4% 29.1% 17.2% 28.8% 14.8% 19.3% 15.7% 19.7% Total Portfolio 1998 1999 2000 3-Year: Fixed Income 10.2% 9.2% 8.6% Lehman Govt/Corp 7.9% 7.2% 6.0% 5-Year: Fixed Income 8.8% 9.8% 7.5% Lehman Govt/Corp 6.9% 7.8% 6.1% 1996 1997 3-Year: Fixed Income 5.5% 9.9% Lehman Govt/Corp 5.1% 8.3% 5-Year: Fixed Income 9.9% 8.2% Lehman Govt/Corp 8.5% 7.2% 1998 3-Year: Total Portfolio 20.6% CPI 2.0% 5-Year: Total Portfolio 16.2% CPI 2.5% 1999 2000 19.2% 13.8% 2.0% 2.4% 19.0% 15.9% 2.3% 2.5% 1996 3-Year: Total Portfolio 11.6% CPI 2.8% 5-Year: Total Portfolio 12.4% CPI 2.9% 1997 20.1% 2.7% 14.2% 2.7% Note Rates of return are calculated by using a modified "Dietz time-weighted method" which is in accordance with AIMR objectives. Teachers Retirement System of Georgia 27 INVESTMENT SECTION ASSET ALLOCATION Asset Allocation at Fair Value Asset AAllllooccaattiioonnaattJuJunnee303,0, Equities Fixed Income Short-Term Securities (1) 1995 1996 1997 1998 1999 2000 52.1% 45.3% 2.6% 57.5% 41.5% 1.0% 60.8% 37.9% 1.3% 60.1% 38.5% 1.4% 59.9% 38.4% 1.7% 61.2% 37.8% 1.0% AsseettAAllollcoactaiotnioant JautneJ3u0n,e(In30m, illi(oInns)millions) Equities $10,034 Fixed Income 8,724 Short-Term Securities (1) 487 Total Investments $19,245 $12,831 9,244 223 $22,298 $16,851 10,504 366 $27,721 $20,686 13,269 490 $34,445 $23,094 14,807 640 $38,541 $25,288 15,643 412 $41,343 (1) Short-term securities includes mortgages and real estate. 28 Teachers Retirement System of Georgia INVESTMENT SECTION PORTFOLIO DETAIL STATISTICS Twenty Largest Equity Holdings Shares Company 6,614,500 15,225,300 16,487,425 8,983,200 10,839,000 6,651,200 7,946,736 7,170,933 4,140,350 3,459,175 7,047,100 3,172,400 6,746,840 7,687,719 4,184,400 6,522,800 5,329,900 7,066,300 3,160,400 7,484,925 Intel Corp. General Electric Co. Pfizer, Inc. Microsoft Corp. Cisco Systems Oracle Corp. Lucent Technologies Citigroup Inc. Johnson & Johnson American International Group Wal-Mart Stores Hewlett-Packard Bristol-Myers Squibb Home Depot Sun Microsystems Coca Cola Co. Nortel Networks Schering Plough Intl Bus. Machines WorldCom Inc. Total of 20 Largest Equity Holdings Total Equity Holdings Fair Value $ 884,275,969 806,940,900 791,396,400 718,656,000 688,953,938 559,116,500 470,844,108 432,048,713 421,798,156 406,453,063 406,089,138 396,153,450 393,003,430 383,905,468 380,518,875 374,653,325 363,765,675 356,848,150 346,261,325 343,370,934 $ 9,925,053,517 $ 25,288,274,453 Ten Largest Fixed Income Holdings Description Maturity Date U.S. Treasury Note U.S. Treasury Bond U.S. Treasury Bond U.S. Treasury Note U.S. Treasury Bond U.S. Treasury Note U.S. Treasury Bond U.S. Treasury Bond U.S. Treasury Bond U.S. Treasury Bond 8/15/09 11/15/27 8/15/19 5/15/05 8/15/22 2/15/10 11/15/28 8/15/23 8/15/17 8/15/25 Total of 10 Largest Fixed Income Holdings Total Fixed Income Holdings Interest Rate (%) 6.000 6.125 8.125 6.750 7.250 6.500 5.250 6.250 8.875 6.875 Par Value $ 1,940,000,000 1,550,000,000 1,169,000,000 1,088,000,000 935,000,000 925,000,000 1,065,000,000 858,000,000 594,000,000 690,000,000 Fair Value $ 1,924,247,200 1,545,164,000 1,410,106,250 1,113,502,720 1,048,957,800 956,505,500 942,525,000 863,362,500 755,496,720 750,161,100 $ 11,310,028,790 $ 15,642,756,984 Teachers Retirement System of Georgia 29 ACTUARIAL SECTION ACTUARY'S CERTIFICATION LETTER 200 Galleria Parkway, N.W., Suite 1200 Atlanta, Georgia 30339-5945 October 20, 2000 Board of Trustees Teachers Retirement System of Georgia Suite 400, Two Northside 75 Atlanta, Georgia 30318 Attention: Mr. Jeffrey L. Ezell, Executive Director Ladies and Gentlemen: S ection 47-3-23 of the law governing the operation of the Teachers Retirement System of Georgia provides that the actuary shall make annual 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 fifty-second valuation of the System prepared as of June 30, 1999. The report indicates that employer contributions at the rate of 11.29% of compensation are sufficient to support the benefits of the System as in effect as of the valuation. 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 report and the supporting schedules in the actuarial section. 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 Government Accounting Standards Board (GASB) Statement Nos. 25 and 27. The funding objective of the plan is that contribution rates over time will remain level or decrease as a percent of payroll. The valuation method used in the most recent valuation 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 being amortized by regular contributions as a level percent of payroll within a 30-year period. On the basis of the recommended contribution rates, the Retirement System is being funded in conformity with the minimum funding standards 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 and the sufficiency of the retirement funds to provide the benefits called for by the System may be safely anticipated. Sincerely yours, Edward A. Macdonald Principal and Consulting Actuary 30 Teachers Retirement System of Georgia ACTUARIAL SECTION SUMMARY OF ACTUARIAL ASSUMPTIONS AND METHODS T he laws governing the Teachers Retirement System of Georgia (the "System") provide that an actuary perform an annual valuation of the contingent assets and liabilities of the System and perform at least once every five years an actuarial investigation of the mortality, service, and compensation experience of the members and beneficiaries of the System. The latest actuarial valuation of the System prepared as of June 30, 1999 was made on the basis of disability retirement mortality tables approved by the Board of Trustees on June 20, 1962, interest rate approved by the Board on May 26, 1999, and active service tables and service retirement mortality tables approved by the Board on May 22, 1996. The more pertinent facts and significant assumptions underlying the computations included in the June 30, 1999 report are as follows: a) Actuarial Method UsedThe actuarial cost method used to determine funding is the entry age actuarial cost method. Gains and losses are reflected in the unfunded accrued liability. Adopted December 30, 1976. b) Investment Return7% per annum, compounded annually. Adopted May 26, 1999. c) Earnings ProgressionSalaries are expected to increase 31/4% to 6% annually depending upon the employee's age. Includes inflation at 31/4%. Adopted May 26, 1999. d) Death, Disability and Withdrawal RatesDeath, disability and withdrawal rates for active employees and service retirement tables are based upon the System's historical experience. The death-after-retirement rates are based on the 1983 Group Annuity Mortality Table (set back one year for males). Adopted May 22, 1996. e) Asset Valuation Method5-year smoothed market actuarial value. The actuarial value of assets recognizes a portion of the difference between the market value of the assets and the expected value of assets, based on the assumed valuation rate of return. The amount recognized each year is 20% of the difference between market value and actuarial expected value. The actuarial value of assets is limited to a range between 80% and 120% of market value. Adopted May 26, 1996. f) Service Retirement BenefitThe service benefit (pension) paid to members is an annuity which is owed to them at retirement which will provide a total annual pension equal to 2% of the average of the member's two consecutive highest paid years of service multiplied by the number of years of creditable service up to 40 years. It is also assumed that certain cost-ofliving adjustments will be made in future years. g) Actuarially Determined Unfunded Accrued LiabilityThe present value of the actuarially determined unfunded accrued liability, based on unaudited data provided the actuary by the System, was approximately $931 million at June 30, 1999. The unfunded accrued liability has decreased as a percentage of assets. h) Required Contributions (% of compensation) Adopted May 17, 2000. Contributions required by the annual actuarial valuation as of June 30, 1999, to be made for the year ended June 30, 2001: (1) Member (2) Employer: 5.00% Normal Unfunded accrued liability Expenses 8.81% 2.33% .15% 11.29% The employer contributions to the unfunded accrued liability will liquidate the accrued liability within a period of 7 years on the assumption that the aggregate amount of unfunded accrued liability contribution will increase by 31/4% each year. Teachers Retirement System of Georgia 31 ACTUARIAL SECTION SUMMARY OF ACTUARIAL ASSUMPTIONS AND METHODS Service Retirement: Adopted May 22, 1996 Annual Rate* Annual Rate* Age Men Women Age Men Women 50 20.0% 20.0% 65 45.0% 45.0% 55 20.0 20.0 66 30.0 30.0 60 20.0 20.0 67 30.0 30.0 61 20.0 20.0 68 30.0 30.0 62 30.0 30.0 69 30.0 30.0 63 20.0 25.0 70 100.0 100.0 64 20.0 25.0 *It is also assumed that 5% of eligible active members will retire each year with a reduced early retirement benefit and that an additional 15% of active members will retire in their first year of eligibility for unreduced retirement. Separation Before Service Retirement: Adopted May 22, 1996 Annual Rate of Age Death Disability 0-4 MEN 20 0.06% 0.06% 39.42% 25 0.06 0.06 22.2 30 0.06 0.09 13.46 35 0.07 0.09 8.46 40 0.10 0.12 5.25 45 0.18 0.15 4.12 50 0.29 0.33 3.46 55 0.47 1.05 5.14 60 0.84 -- -- 64 1.39 -- -- WOMEN 20 0.02% 0.04% 30.35% 25 0.02 0.05 18.71 30 0.02 0.06 12.99 35 0.03 0.08 8.83 40 0.05 0.11 6.59 45 0.08 0.18 4.44 50 0.10 0.39 3.86 55 0.15 0.79 4.49 60 0.24 -- -- 64 0.38 -- -- Withdrawal Years of Service 5-9 -- 16.52% 10.10 6.35 3.94 3.09 2.60 3.86 -- -- -- 14.03% 9.74 6.62 4.94 3.33 2.89 3.36 -- -- 10+ -- -- 9.42% 5.92 3.68 2.88 2.42 3.60 -- -- -- -- 9.09% 6.18 4.61 3.11 2.70 3.14 -- -- 32 Teachers Retirement System of Georgia ACTUARIAL SECTION ACTUARIAL VALUATION DATA Active Members Fiscal Year* 1994 1995 1996 1997 1998 1999 Members 157,356 163,890 168,961 173,599 180,417 186,822 Annual Payroll (000's) Active Members Average Pay $4,338,938 $27,574 4,712,292 28,753 5,086,924 30,107 5,467,905 31,497 5,951,898 32,990 6,832,674*** 36,573 % Increase 1.6%% 4.3 4.7 4.6 4.7% 10.9% Retiree and Beneficiary Data** Fiscal Year* 1994 1995 1996 1997 1998 1999 Number on Roll 34,208 35,714 37,326 39,278 41,420 43,732 Additions 2,431 2,632 2,805 3,152 3,388 3,614 Deletions 1,069 1,126 1,193 1,200 1,246 1,302 Annual Allowances (000's) $517,726 585,639 642,781 710,667 785,705 871,129 % Increase In Annual Allowances 9.9% 13.1 9.8 10.6 10.6 10.9% Average Annual Allowance $15,135 16,398 17,221 18,093 18,969 19,920 * * Fiscal year refers to the actuarial valuation performed as of June 30 of that year and determines the funding necessary for the subsequent fiscal year. An actuarial valuation for the fiscal year ended June 30, 2000 is currently in process and was not available for this analysis. ** Valuation data presented exclusive of local system retirees. *** Includes pay raises averaging 6% granted to teachers July 1, 1999. Teachers Retirement System of Georgia 33 ACTUARIAL SECTION ACTUARIAL VALUATION DATA Solvency Test (Thousands of dollars) Fiscal Year* 1995 1996 1997 1998 1999 Aggregate Actuarial Accrued Liabilities For (1) Active Member Contributions (2) Retirees and Beneficiaries (3) Active Members Actuarial (Employer Financed Value of Portion) Assets $ 2,959,297 $ 6,739,239 $10,073,204 $16,335,944 3,183,299 7,410,171 11,570,285 18,750,568 3,409,260 8,400,514 13,085,273 22,496,125 3,647,880 9,943,066 15,208,038 27,894,985 3,897,847 11,124,459 17,741,164 31,832,431 Portion of Accrued Liabilities Covered by Assets (1) (2) (3) 100.0% 100.0%%65.9%% 100.0% 100.0 70.5 100.0 100.0 81.7 100.0 100.0 94.1 100.0 100.0 94.8 Information prior to 1995 is not available in accordance with the parameters of GASB 25. * Fiscal year refers to the actuarial valuation performed as of June 30 of that year and determines the funding necessary for the subsequent fiscal year. An actuarial valuation for the fiscal year ended June 30, 2000 is currently in process and was not available for this analysis. Member and Employer Contribution Rates Fiscal Year 1995 1996 1997 1998 1999 2000 Member 5.00 5.00 5.00 5.00 5.00 5.00 Employer 11.81% 11.81 11.81 11.81 11.95 11.29 34 Teachers Retirement System of Georgia ACTUARIAL SECTION ACTUARIAL VALUATION DATA Analysis of Financial Experience (Millions of dollars) Item Interest added to previous unfunded accrued liability Accrued liability contribution Analysis of the Change in Unfunded Accrued Liability Increase (Decrease) During the Years Ended June 30, 1999 1998 1997 1996 1995 1994 $ 63.3 $ 173.9 $ 256.0 $ 257.7 $ 236.8 $ 225.4 (224.3) (235.2) (234.4) (218.0) (233.0) (247.3) Experience: Valuation Asset Growth Pensioners' Mortality Turnover and Retirements New Entrants Salary Increases Method Changes (1) Amendments (2) Assumption Changes (3) Total Increase (Decrease) (1,779.3) 9.0 639.9 111.1 1207.3 -- -- -- (3,567.4) 6.1 494.5 102.3 277.7 -- 550.4 702.8 $ 27.0 $(1,494.9) (2,140.1) 0.8 345.7 80.9 180.0 -- -- 496.8 $(1,014.3) (987.6) (3.5) 266.8 69.4 166.3 426.3 -- -- $ (22.6) (335.3) 17.0 298.8 75.4 24.7 (478.9) -- 673.5 $ 279.0 (222.8) 11.2 262.6 67.3 (158.0) -- 212.8 -- $ 151.2 (1) Method changes 1996 - Reflects taking into account a one-time 3% benefit increase at retirement. 1995 - Reflects asset valuation method change from book value to market related actuarial value. (2) Amendments 1998 - Reflects an Ad Hoc cost of living adjustment of 3% to 10% depending upon date of retirement and to provide credit for unused sick leave. 1994 - Amendments to reduce the employee contribution rate from 6% to 5% and to provide for a one-time 3% cost of living adjustment to retired members. (3) Assumption Changes 1998 - Reflects a reduction in interest rate assumption from 7-1/4% to 7% and a decrease in the salary increase assumption by 1/4% at each age. 1997 - Reflects a reduction in interest rate assumption from 7-1/2% to 7-1/4% and a decrease in the salary increase assumption by 1/4% at each age. 1995 - Rates of separation from active service, rates of salary increase and rates of post-retirement mortality revised to more closely reflect the actual and anticipated experience. Teachers Retirement System of Georgia 35 STATISTICAL SECTION PARTICIPATING EMPLOYERS Universities and Colleges Abraham Baldwin Agricultural College Albany State University Armstrong Atlantic State University Atlanta Metropolitan College Augusta State University Bainbridge College Clayton College and State University Coastal Georgia Community College Columbus State University Dalton State College Darton College East Georgia College Floyd College Fort Valley State University Gainesville College Georgia College and State University Georgia Institute of Technology Georgia Perimeter College Georgia Southern University Georgia Southwestern State University Georgia State University Gordon College Kennesaw State University Macon State College Medical College of Georgia Middle Georgia College North Georgia College and State University Savannah State University University System of Skidaway Institute South Georgia College Southern Polytechnic State University University of Georgia Valdosta State University Waycross College State University of West Georgia School Districts Appling County Schools Atkinson County Schools Atlanta City Schools Bacon County Schools Baker County Schools Baldwin County Schools Banks County Schools Barrow County Schools Bartow County Schools Ben Hill County Schools Berrien County Schools Bibb County Schools Bleckley County Schools Brantley County Schools Bremen City Schools Brooks County Schools Bryan County Schools Buford City Schools Bulloch County Schools Burke County Schools Butts County Schools Calhoun City Schools Calhoun County Schools Camden County Schools Candler County Schools Carroll County Schools Carrollton City Schools Cartersville City Schools Catoosa County Schools Charlton County Schools Chatham County Schools Chattahoochee County Schools Chattooga County Schools Cherokee County Schools Chickamauga City Schools Clarke County Schools Clay County Schools Clayton County Schools Clinch County Schools Cobb County Schools Coffee County Schools Colquitt County Schools Columbia County Schools Commerce City Schools Cook County Schools Coweta County Schools Crawford County Schools Crisp County Schools Dade County Schools Dalton City Schools Dawson County Schools Decatur City Schools Decatur County Schools DeKalb County Schools Dodge County Schools Dooly County Schools Dougherty County Schools Douglas County Schools Dublin City Schools Early County Schools Echols County Schools Effingham County Schools Elbert County Schools Emanuel County Schools Evans County Schools Fannin County Schools Fayette County Schools Floyd County Schools Forsyth County Schools Franklin County Schools Fulton County Schools Gainesville City Schools Georgia Military College Gilmer County Schools Glascock County Schools Glynn County Schools Gordon County Schools Grady County Schools Greene County Schools Griffin-Spalding County Schools Gwinnett County Schools Habersham County Schools Hall County Schools Hancock County Schools Haralson County Schools Harris County Schools Hart County Schools Heard County Schools Henry County Schools Houston County Schools Irwin County Schools Jackson County Schools Jasper County Schools Jeff Davis County Schools Jefferson City Schools Jefferson County Schools Jenkins County Schools Johnson County Schools Jones County Schools Lamar County Schools Lanier County Schools Laurens County Schools Lee County Schools Liberty County Schools Lincoln County Schools Long County Schools Lowndes County Schools Lumpkin County Schools Macon County Schools Madison County Schools Marietta City Schools Marion County Schools McDuffie County Schools McIntosh County Schools Meriwether County Schools Miller County Schools Mitchell County Schools Monroe County Schools Montgomery County Schools Morgan County Schools Murray County Schools Muscogee County Schools Newton County Schools Oconee County Schools Oglethorpe County Schools Paulding County Schools Peach County Schools Pelham City Schools Pickens County Schools Pierce County Schools Pike County Schools Polk County Schools Pulaski County Schools Putnam County Schools Quitman County Schools Rabun County Schools Randolph County Schools Richmond County Schools Rockdale County Schools Rome City Schools Schley County Schools Screven County Schools Seminole County Schools Social Circle City Schools Stephens County Schools Stewart County Schools Sumter County Schools Talbot County Schools Taliaferro County Schools Tattnall County Schools Taylor County Schools Telfair County Schools Terrell County Schools Thomas County Schools Thomasville City Schools Thomaston-Upson County Schools Tift County Schools Toombs County Schools Towns County Schools Treutlen County Schools Trion City Schools Troup County Schools Turner County Schools Twiggs County Schools 36 Teachers Retirement System of Georgia STATISTICAL SECTION PARTICIPATING EMPLOYERS Union County Schools Valdosta City Schools Vidalia City Schools Walker County Schools Walton County Schools Ware County Schools Warren County Schools Washington County Schools Wayne County Schools Webster County Schools Wheeler County Schools White County Schools Whitfield County Schools Wilcox County Schools Wilkes County Schools Wilkinson County Schools Worth County Schools Public Libraries Athens Regional Library Barnesville-Lamar County Library Bartow County Library Bartram Trail Regional Library Brooks County Library Brunswick Regional Library Chatham-Effingham-Liberty Regional Library Chatsworth-Murray County Library Chattooga County Library Cherokee Regional Library Chestatee Regional Library Clayton County Regional Library Coastal Plains Regional Library Cobb County Public Library Conyers-Rockdale Library Dalton Regional Library DeKalb County Public Library Desoto Trail Regional Library Dougherty County Public Library East Central Georgia Regional Library Elbert County Public Library Fitzgerald-Ben Hill County Library Flint River Regional Library Forsyth County Public Library Gwinnett County Public Library Hall County Library Hart County Library Hawkes Library Henry County Library Houston County Public Library Jefferson County Library Kinchafoonee Regional Library Lake Blackshear Regional Library Lee County Public Library Lincoln County Library M.E. Roden Memorial Library Mary Vinson Memorial Library Middle Georgia Regional Library Moultrie-Colquitt County Library Mountain Regional Library Newnan-Coweta Public Library Newton County Library Northeast Georgia Regional Library Ocmulgee Regional Library Oconee Regional Library Ohoopee Regional Library Okefenokee Regional Library Peach Public Library Piedmont Regional Library Pine Mountain Regional Library Roddenberry Memorial Library Sara Hightower Regional Library Satilla Regional Library Screven-Jenkins Regional Library Sequoyah Regional Library South Georgia Regional Library Southwest Georgia Regional Library Statesboro Regional Library Thomas County Public Library Toccoa-Stephens County Public Library Troup-Harris-Coweta Regional Library Uncle Remus Regional Library Victoria Evans Memorial Library Warren County Public Library West Georgia Regional Library Technical Schools Albany Technical College Altamaha Technical College Athens Technical College Atlanta Technical College Augusta Technical College Central GA Technical College Chattahoochee Technical College Columbus Technical College Coosa Valley Technical College DeKalb Technical College East Central Technical College Flint River Technical College Griffin Technical College Heart of Georgia Technical College Lanier Technical College Middle Georgia Technical College Moultrie Area Technical College North Georgia Technical College North Metro Technical College Northwestern Technical College Ogeechee Technical College Okefenokee Technical College Sandersville Technical College Savannah Technical College South Georgia Technical College Southeastern Technical College Southwest GA Technical College Swainsboro Technical College Valdosta Technical College West Central Technical College West Georgia Technical College Regional Educational Service Agencies Central Savannah River Area RESA Chattahoochee Flint RESA Coastal Plains RESA First District RESA Griffin RESA Heart of Georgia RESA Metro RESA Middle Georgia RESA North Georgia RESA Northeast Georgia RESA Northwest Georgia RESA Oconee RESA Okefenokee RESA Pioneer RESA Southwest Georgia RESA West Georgia RESA Other Agencies Board of Regents of the University System of Georgia Cooperative Extension Service Department of Industry, Trade and Tourism Department of Juvenile Justice Department of Natural Resources Georgia Association of Educators Georgia Department of Administrative Services Georgia Department of Education Georgia Department of Human Resources Georgia Department of Technical and Adult Education Georgia High School Association Georgia Public Telecommunications Georgia Regional Transportation Authority Georgia Student Finance Commission Office of School Readiness Professional Standards Commission Teachers Retirement System of Georgia 37 STATISTICAL SECTION MEMBER DATA Retirement Payment Statistics 38 Teachers Retirement System of Georgia STATISTICAL SECTION MEMBER DATA Member Withdrawal Statistics Teachers Retirement System of Georgia 39 STATISTICAL SECTION BENEFIT DATA Benefit Expense by Type (Thousands of dollars) Fiscal Year 1995 1996 1997 1998 1999 2000 Service $528,283 580,404 639,404 707,595 786,963 923,049 Type of Retirement Disability $20,642 22,187 24,861 27,700 30,302 34,160 Survivor Benefit $28,827 31,663 35,160 38,760 41,852 48,063 Supplemental Payments (1) $5,624 5,458 5,199 4,949 4,628 4,334 Lump Sum Death Settlement Total $ 913 $584,289 903 640,615 1,408 706,032 1,578 780,582 1,446 865,191 1,962 1,011,568 (1) Supplemental payments to retirees who belong to a local retirement system. Average Monthly Benefit Payments Effective Retirement Dates For Fiscal Years Ended June 30, 1995 Average monthly benefit Number of active retirees 1996 Average monthly benefit Number of active retirees 1997 Average monthly benefit Number of active retirees 1998 Average monthly benefit Number of active retirees 1999 Average monthly benefit Number of active retirees 2000 Average monthly benefit Number of active retirees 10-15 16-20 Years Credited Service 21-25 26-30 Over 30 Total $512.50 $873.54 $1,157.03 $1,941.45 $2,636.03 $1,621.56 467 356 387 689 733 2,632 $519.25 $883.14 $1,209.02 $2,017.10 $2,530.72 $1,666.52 425 376 396 830 778 2,805 $571.07 $923.75 $1,346.02 $2,075.97 $2,730.33 $1,765.78 487 390 480 947 848 3,152 $565.70 $943.93 $1,370.06 $2,197.00 $2,718.23 $1,784.64 575 419 485 1,013 896 3,388 $633.16 $995.24 $1,417.05 $2,265.15 $2,901.89 $1,889.58 591 426 522 1,147 928 3,614 $631.36 $1,074.51 $1,432.55 $2,373.56 $3,121.26 $2,076.92 687 414 657 1,819 1,237 4,814 40 Teachers Retirement System of Georgia STATISTICAL SECTION REVENUES AND EXPENSES DATA (Thousands of dollars) Revenues by Source Fiscal Year 1995 1996 1997 1998 1999 2000 Member Contributions $241,113 259,683 281,472 305,752 330,517 355,948 Expenses by Type Employer Contributions Dollar Amount Percentage Of Annual Covered Payroll $565,118 607,275 652,928 710,409 776,178 779,571 11.81% 11.81 11.81 11.81 11.95 11.29 Net Investment Income* $1,416,605 2,919,349 5,233,522 6,561,731 3,889,927 2,788,202 Total $2,222,836 3,786,307 6,167,922 7,577,892 4,996,622 3,923,721 Fiscal Year 1995 1996 1997 1998 1999 2000 Retirement Payments $ 584,289 640,615 706,032 780,582 865,191 1,011,568 Net Administrative Expenses $5,082 5,578 6,157 6,637 7,810 9,058 Refund Payments $31,184 31,778 36,415 42,098 42,911 44,718 Total $620,555 677,971 748,604 829,317 915,912 1,065,344 Contributions were made in accordance with actuarially determined contribution requirements. *Effective 1996, in accordance with parameters of GASB 25, Net Investment Income includes net appreciation in fair value of investments. Teachers Retirement System of Georgia 41 STATISTICAL SECTION RETIRED MEMBERS BY TYPE OF BENEFIT Amount of Number of Type of Retirement (1) Monthly Benefit Retirees A B C D Maximum Opt-1 Option Selected (2) Opt-2 Opt-3 Opt-4 Opt-2 Pop-Up Opt-3 Pop-Up $0,001 - 1,250 1,279 318 45 298 618 912 11 251 47 42 14 2 251 - 1,500 4,142 3,038 337 656 111 3,132 55 653 181 43 53 25 501 - 1,750 4,179 2,935 387 631 226 3,021 99 681 249 39 51 39 751 - 1,000 3,622 2,643 373 504 102 2,586 101 557 252 38 48 40 1,001 - 1,250 3,284 2,555 308 389 32 2,306 127 493 232 39 41 46 1,251 - 1,500 3,835 3,209 317 306 3 2,835 161 454 251 46 52 36 1,501 - 1,750 3,863 3,354 267 242 2,835 170 433 249 49 63 64 1,751 - 2,000 4,194 3,836 182 176 3,174 157 388 266 78 56 75 2,001 - 2,250 3,879 3,638 115 126 3,006 166 307 211 59 42 88 2,251 - 2,500 3,594 3,454 62 78 2,823 175 229 212 68 37 50 2,501 - 2,750 2,570 2,476 25 69 1,959 114 209 164 64 19 41 2,751 - 3,000 2,071 2,006 19 46 1,533 97 165 165 53 17 41 3,001 - 3,250 1,502 1,461 6 35 1,078 76 116 137 47 18 30 3,251 - 3,500 1,120 1,088 11 21 785 58 105 113 30 11 18 3,501 - 3,750 868 841 3 24 570 51 77 109 39 8 14 3,751 - 4,000 713 693 2 18 444 45 81 89 28 10 16 4,001 - 4,250 555 547 - 8 345 42 48 73 27 6 14 4,251 - 4,500 422 413 1 8 256 23 50 62 21 2 8 4,501 - 4,750 330 323 3 4 211 18 32 39 16 5 9 4,751 - 5,000 260 254 1 5 161 16 24 32 17 4 6 Over 5,000 823 798 1 24 470 43 95 120 60 12 23 Totals 47,105 39,880 2,465 3,668 1,092 34,442 1,805 5,448 3,253 903 569 685 (1) Type of Retirement A - Service B - Disability C - Survivor benefit D - Supplemental payments to retirees who belonged to a local retirement system. (2) Refer to INTRODUCTORY SECTION, pages 14 and 15 for descriptions of Options. 42 Teachers Retirement System of Georgia Teachers Retirement System of Georgia 43 44 Teachers Retirement System of Georgia