California State Teachers’ Retirement System

1. California State Teachers’ Retirement System April 25, 2006

2. Overview of CalSTRS • Largest teachers pension fund in the U.S. • $145 billion in assets under management • Over 776,000 California teachers and benefit recipients

3. Current Allocation Target Allocation Overview of CalSTRS

4. Asset Allocation @ March 31, 2006 Market Value Domestic Equity Portfolio: $ 62 Billion Active Management $16 Billion Developing Manager Program $ 1 Billion(6% of the active management component) Passive Management $ 45 Billion Active Mgmt is 26% of the U.S. Portfolio, of which 6% allocated to the Developing Manager Program Passive Mgmt is 74% of the U.S. Portfolio

5. Program Definition: • Firms with <$2 Billion AUM ProgramObjective: • Construct a complement of developing managers that, in aggregate, represent the components of the Russell 3000 Performance Objective: • Russell 3000 + 150 bps

6. June 2003 – Issued Request for Proposals December 2003 – Selected 3 Fund of Funds Managers to implement the allocation • Delegated Manager Selection Process to Fund of Funds Managers

7. FUNDING HISTORY Funded the Program with a $600 Million Allocation ManagerFunding DateInitial Allocation FIS April 2004 $150 Million Frank Russell June 2004 $200 Million Northern Trust July 2004 $250 Million August 2005: Increased funding by $225 Million TOTAL PROGRAM COMMITMENT: $825 MILLION

8. Market Value of the Program as of February 28, 2006: $996 Million Market Value ManagerFebruary 28, 2006 Northern Trust $310 Million FIS $339 Million Frank Russell $347 Million

9. 3 Fund of Funds Managers 1 minority woman-owned firm 32 Underlying Developing Manager Firms 19 Woman and Minority Firms PORTFOLIO COMPOSITION

10. Add Portfolio Performance Chart

11. NEXT STEP: • ISSUE AN RFP TO ADD TO THE FUND OF FUNDS MANAGER ROSTER

12. California State Teachers’ Retirement System Thank you!