1. Oklahoma Municipal Retirement Fund Asset Allocation Discussion
August 28, 2008
231 South Bemiston Avenue 14th Floor
St. Louis, Missouri

2. The Effect of Volatility on Compound Returns
The two investments below have the same average return for any single year. On average, both of these investments would be expected to return 25% in any given year.
Over a multi-year period of time, the two investments would be expected to deliver different annualized compound rates of return due to their different levels of volatility (standard deviations). The table below details the growth of separate $100 allocations to Investment A and Investment B. On a compounded basis, the year-to-year volatility in Investment B lowers its annualized return by 5.9% relative to Investment A.

3. Capital Market Assumptions
The table below details ACG’s 2008 long-term capital market assumptions for asset classes included in this analysis.
“10-Year Median Return” – The 50th percentile annualized return as calculated using ACG’s Monte Carlo simulation model and stated capital market assumptions for return and risk in any given year as of the date of this presentation.

4. Portfolio Mixes
The mixes considered in this analysis are detailed below. The 10-year median return is the expected 50th percentile annualized return over 10 years (the 10-year return with the highest probability of occurrence).
OMRF Current

5. Simulated Return Percentiles
The chart and table below illustrate the annualized return probability distributions for each asset mix considered in the analysis over multiple time periods.

6. Simulated Wealth Growth
The chart and table below illustrate the simulated ending portfolio value given a beginning balance of $279 million.

7. Simulated Inflation-Adjusted Wealth Growth
The tables below illustrate the present value of the simulated ending portfolio value at fixed inflation rates given a beginning balance of $279 million.

8. Simulated Loss Probabilities
The chart and table below illustrate the expected probability of achieving annualized returns of 0%, -5%, -10%, and -15% or less over multiple time periods for each asset mix considered in the analysis.

9. Disclosures and Legal Notice
The information presented herein is presented solely to assist you in creating a portfolio structure and forming investment guidelines and investment allocations. 
Please be aware that there are inherent limitations to all financial models, including Monte Carlo Simulations. Monte Carlo Simulations are a tool used to analyze a range of possible outcomes and assist in making educated asset allocation decisions. Monte Carlo Simulations cannot predict the future or eliminate investment risk. The output of the Monte Carlo Simulation is based on ACG’s capital market assumptions that are derived from proprietary models based upon well-recognized financial principles and reasonable estimates about relevant future market conditions. Capital market assumptions based on other models or different estimates may yield different results. ACG expressly disclaims any responsibility for (i) the accuracy of the simulated probability distributions or the assumptions used in deriving the probability distributions, (ii) any errors or omissions in computing or disseminating the probability distributions and (iii) and any reliance on or uses to which the probability distributions are put.
This material is presented with the understanding that it is not rendering accounting, legal or tax advice. Please consult your legal or tax advisor concerning such matters. No assurance can be given that the investment objectives described herein will be achieved and investment results may vary substantially on a quarterly, annual or other periodic basis. There is no representation or warranty as to the current accuracy of, nor liability for, decisions based on such information.
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