1. Peter Palfrey, CFA Vice President, Portfolio Manager Ken Johnson Vice President, Client Portfolio Manager FRESNO COUNTY EMPLOYEES RETIREMENT ASSOCIATION May 3, 2006

2. 2 CONTENTS Guideline Summary / Investment Results Portfolio Characteristics Market Review & Outlook Account Team Appraisal of Holdings

3. 3  Benchmark: Lehman Brothers US Aggregate Index  Position Limits: 5% per issuer (excluding Governments and GSE’s)  Below Investment Grade: up to 20% permitted  Minimum Quality: “B3” by Moody’s or Standard & Poor’s  Non-Investment Grade EMG: not permitted  Duration: +/- 30% to the Benchmark  Non-Dollar: not permitted GUIDELINE SUMMARY Fresno County Employees Retirement Association

4. 4 INVESTMENT RESULTS

5. 5 CHARACTERISTICS SUMMARY AS OF 03/31/2006 Characteristics

6. 6 FIXED INCOME PORTFOLIO STATISTICS: Period ending 03/31/2006 Fresno County Employees Retirement Assn. Lehman Aggregate Bond Index Portfolio Overview

7. 7 Maturity Distribution FIXED INCOME PORTFOLIO STATISTICS: Period ending 03/31/2006 Portfolio Overview Quality Distribution

8. 8 HISTORICAL US TREASURY YIELD CURVES Bond Market Environment Data source: Lehman Brothers 03/31/06 03/31/05

9. 9 Data Source: Lehman Brothers Fixed Income Research Bond Market Environment BOND MARKET SECTOR RETURNS

10. 10 SECTOR YTD TOTAL RETURNS through March 2006 Bond Market Environment

11. 11 SECTOR YTD EXCESS RETURNS through March 2006 Bond Market Environment

12. 12 US CORPORATES: INVESTMENT GRADE OAS Bond Market Environment

13. 13 US CORPORATES: HIGH YIELD OAS Bond Market Environment

14. 14 HIGH YIELD CREDIT QUALITY TRENDS Bond Market Environment

15. 15 US DEFAULT TRENDS Bond Market Environment

16. 16 MBS: ZV OAS Through March 2006 Bond Market Environment Source: Lehman Brothers; History Through 3/31/2006

17. 17 Current Situation and Outlook Inflation Overall CPI inflation increased 3.6% year-to- year in February. Relatively stable energy prices should trim inflation in 2006 and 2007. Employment The labor market improved as the disruptions from the hurricane faded. Initial jobless claims have dropped to pre-recession levels. Monetary Policy The Federal Reserve has tightened by 375 bp since June 2004 to a funds rate of 4.75% on March 28. Expect Fed Chairman Ben Bernanke to tighten two more times by 25 bp each. Investment Conclusions and Concerns The 10-year Treasury yield has trended up since mid-January 17 as economic prospects seemed to improve. The current yield is about 5.00%, our target for the end of June and the highest since June 2002. PORTFOLIO THEME Updated as of 04/10/06 by LS Economics 8 Bond Market Environment REAL GDP Quarterly Change Annualized INITIAL UNEMPLOYMENT CLAIMS Four-Week Moving Average Seasonally Adjusted; Weekly Data

18. 18 Bond Market Environment According to revised estimates, real GDP rose a sluggish 1.7% in Q4:2005, seemingly because of hurricane disruption and an energy shock. Rebuilding in the Southeast and lower energy prices should boost growth in early-2006. The budget deficit will remain huge. Inflation should ease in 2006 and 2007 as energy prices stabilize. ECONOMIC FORECAST Calendar year – Average basis. 2006 & 2007 are projected by LS Economics as of 04/10/06.

19. 19 PORTFOLIO THEME – NON US DOLLAR The currencies of countries that run current account deficits greater than 5% of GDP often depreciate significantly. The U.S. deficit was 6.4% of GDP in 2005 and is forecasted to be 6.9% in 2006 and 6.7% in 2007. Bond Market Environment Updated by LS economics as of 04/10/06 The current account deficit points to long-term weakness in the US dollar.

20. 20 Bond Market Environment

21. 21 Duration/Yield Curve Sector Security/Industry Specific PORTFOLIO THEMES – CORE PLUS We are maintaining duration at 100% of benchmark, reflecting our expectation that yields on longer maturities are likely to remain range- bound over the near term. The Federal Reserve Bank has already raised short rates by 375 basis points since the most recent monetary tightening process began in June, 2004, and is expected to tighten an additional 25- 50 basis points in 2006. The FOMC has indicated that it is nearing the end of the current tightening cycle, and will likely become more “data dependent” regarding future FOMC actions. Our emphasis on a combination of shorter and longer maturities (barbelled) remains in place, in anticipation of some additional curve flattening, or potentially, yield curve inversion. Tactical use of TIPS (recently exited position) Reduced underweight to Government market. Reduced overweight to corporate bonds –Yield advantage versus Treasurys approaching fair value –Emphasis within the credit allocation is to higher yielding BBB-rated and HY securities that have stable to improving credit trends and/or deleveraging situations Approximately market-neutral weight to mortgages –Mortgages currently offer an attractive nominal yield advantage versus cash and Treasurys. –Potential extension/prepayment risk needs to be managed through security and maturity sector selection Overweight to AAA-rated ABS and CMBS sectors Shifting exposure to those industries that we believe will perform best in the present “mid-economic cycle” environment Bond Market Environment

22. 22 ACCOUNT TEAM Contact Information Patricia Bednarek Administrative Assistant Email pbednarek@loomissayles.com Phone 312-346-9750 Fax 312-346-4061 Kenneth M. Johnson Vice President, Client Portfolio Manager Email kjohnson@loomissayles.com Phone 312-346-9750 Fax 312-346-4061 Peter W. Palfrey, CFA Vice President, Portfolio Manager Email ppalfrey@loomissayles.com Phone 617-482-2450 Fax 617-542-1358