The PRIT Fund

C. LaRoy Brantley
Appointee of the Governor, Non-State Employee or Official Member

Mr. Brantley is currently an investment consultant for Cambridge Associates, LLC in Boston, MA.  He advises endowments, foundations, pension funds and private clients on various topics of portfolio optimization and management.  Prior to 2002, Mr. Brantley worked as an Associate in the Investment Banking group at Boston-based Adams, Harkness & Hill where he performed strategic analysis for mergers and acquisitions, assisted on a range of public and private offerings, and managed banking client relationships.  Directly prior to business school, he was an instructor in Classical Greek and Latin at Roxbury Latin School for several years.  Mr. Brantley earned an MBA at the MIT Sloan School of Management and received his BA from Amherst College.

Greg Mennis
Designee of the Governor, Ex Officio Member

Greg Mennis is the Director of Infrastructure Programs and Financial Policy in the Executive Office for Finance and Administration (“ANF”) for the Commonwealth of Massachusetts and has over 17 years of experience in positions of financial leadership.  His responsibilities at ANF include managing the Commonwealth’s Infrastructure Investment Incentive Program, ANF policy development on pensions, and leading the Office of Transition Management for transportation reform.  He also serves on the Pension Reserves Investment Management (PRIM) Board and is the Chairman of the Board of Trustees for the Commonwealth’s Health Care Security Trust.  

Mr. Mennis joined ANF in 2009 from JP Morgan Chase where he served as Global Head of Pricing for Worldwide Security Services and as the Chief Financial Officer for Fund Service Operations.  He has an extensive background in the retirement services industry and spent six years as the Executive Vice President of Corporate Development and CFO for Pyramid Digital Solutions, the market leading provider of 401(k) internet software, where he led the sale of the company to SunGard Data Systems in 2005.  Prior to Pyramid, Greg worked for Citigroup and affiliate companies in a variety of corporate finance functions including corporate treasury, mergers & acquisitions, and strategic business development.

 Mr. Mennis is a Chartered Financial Analyst (CFA) and holds a B.S from Syracuse University and a Master of Public Administration degree from the John F. Kennedy School of Government, Harvard University.   He lives in Belmont with his wife and two sons.

Theresa McGoldrick, Esq.
Elected member of the State Employees' Retirement Board

Theresa McGoldrick is currently the President of SEIU/NAGE Unit 6, representing over 3,500 members statewide.  Theresa is also the National Auditor for SEIU/NAGE.  Prior to her involvement with SEIU/NAGE, she spent over 7 years as an attorney for The Mass.  Department of Revenue, Child Support Enforcement Division.  During that time Theresa earned the American Jurisprudence Award for Excellence in Family Law.  She is a graduate of both the New England School of Law and Stonehill College.

Robert Brousseau
Elected Member, State Teachers’ Retirement System Representative; Retired Teacher, Town of Wareham School System

Mr. Brousseau is one of the Fund’s longest serving Board members, initially elected in 1987. Now serving his seventh term, he is the Chair of the Administration Committee. Mr. Brousseau retired in 1994, after 34 years of dedicated service as a classroom teacher in the Wareham School System where he taught U.S. History, French, English, and Social Studies. He is currently Chairman of the Wareham School Committee. Mr. Brousseau is a member of the National Education Association (NEA) and has been a long-time activist with the Massachusetts Teachers’ Association (MTA). He served on the Board of Directors and Executive Committee of the MTA from 1973 to 1985. Mr. Brousseau graduated from Fitchburg State College with a BS in Education, majoring in Social Studies and English. He received his Masters in Education from Bridgewater State College. Mr. Brousseau also has completed 30 credits of postgraduate work.

Mr. Aikens joined the PRIM Board in May 2001.  He spent the majority of his distinguished career at the former BankBoston (now Fleet Bank).  Prior to his retirement, he was a Managing Director in the Portfolio Management unit where he increased profitability and returns on the $25 billion Wholesale Bank Portfolio.  During his tenure at BankBoston, Mr. Aikens held many other key positions, including Managing Director, Emerging Markets Investment Banking (1995- 1996); Director of the U.S. Multinational Division (1993-1995); Group Senior Credit Officer & Senior Vice President of Global Banking Group (1990-1992), and Senior Credit Officer in the International Group (1987-1990).  Mr. Aikens also provided technical consulting services to executives of BankBoston’s lending organizations to improve deteriorating lending relationships (1985-1987); he was the senior workout officer for various transportation, industrial and international bankruptcies and restructurings (1983- 1985); and he managed domestic loan commitments (1980-1983).  Prior to joining BankBoston, he was a Lender in the Chemicals and Rubber Division of the Corporate Banking Department of Chase Manhattan Bank in New York (1974-1976) where he developed expertise in specialty chemical companies.  Mr. Aikens is a graduate of Harvard University School’s Professional Management Development Program and earned his Juris Doctorate at Northeastern Law School.  He also holds a B. A. in Economics from Brandeis University.  Mr. Aikens is currently a Professor at Brandeis University.  He is also a member of the board at Wheelock College and serves on the board of Boston Acoustics, Inc.

John "Jay" Dow
Elected Member of the State Teachers’ Retirement Board; Retired Teacher, Town of Marblehead School System

John “Jay” Dow, a retired Marblehead teacher, has served on the Massachusetts Teachers’ Retirement Board since 1972. As the MTRB’s senior member, Mr. Dow brings a wealth of knowledge and experience to the PRIM Board’s decision-making process.

Mr. Dow began his teaching career in the Boston public schools, taught in Ipswich for a few years and then transferred to Marblehead, where he remained for 35 years. While President of the Massachusetts Teachers Association (MTA) in the early 1970s, he learned the importance of the pension system and a strong retirement board. He is committed to addressing the issues facing retirement systems today: improving benefits for both active and retired members; protecting our defined benefit plan; developing a strategy to protect the purchasing power of our long-term retirees’ pensions; and, repealing the Social Security offsets (GPO/WEP).

Dana Pullman
Appointee of the Governor, Public Safety Union Member

A member of the Massachusetts Department of State Police 68th RTT, 1987, Dana Pullman is the current Treasurer of the State Police Association of Massachusetts ("SPAM"). 

Mr. Pullman's current duties include the oversight and management of the funds of the organization as well as the development of new and expanded benefits for the members of SPAM.  While Chairman of the Finance and Oversight Committee and the Details Committee, Mr. Pullman also serves as a member of the Labor Management and Bargaining Committee.

On a national level, Mr. Pullman serves as the National Trooper Coalition Regional Coordinator, bringing the national organization to the Commonwealth in 2010 for the first time in 30 years.

Paul E. Shanley
Elected Member, State Employees’ Retirement System Representative; Director of Professional Liability, Amity Insurance, Quincy, MA

Paul Shanley has thirty plus years of experience in all phases of public pension plans, including employee rights and benefits and pension fund investment. Responsibilities included statutory interpretation, medical disability appeals, litigation, legislation drafting and investment manager selection. 

As Deputy State Treasurer/General Counsel he represented the State Retirement Board in hundreds of administrative appeals, numerous Superior Court cases, including two cases he presented to the Massachusetts Supreme Judicial Court.  Paul also served as the State Treasurer’s designee as Chairman of the State Retirement Board and served on the transition team that implemented the prudent man rule for the investment program of the State and Teachers Retirement Systems that today is PRIM.  Currently he serves as the Director of Professional Liability for Amity Insurance. In that capacity he is responsible for the coordinating and placing of the Fiduciary and Fidelity insurance coverage for the majority of the public pension systems in Massachusetts, including the MACRS Policy. The MACRS policy provides blanket coverage for 90 public pension systems in the Commonwealth. Additionally, Paul provides Fiduciary and Fidelity coverage individually for the Boston, MBTA, Middlesex, Cambridge and Brockton Retirement Systems.

Advisory Committees

Investment Committee

PRIM Board members C. LaRoy Brantley and Paul E. Shanley serve on PRIM's Investment Committee.  An investment professional from the private sector who serves on the committee is Glenn Strehle who is currently serving as Treasurer Emeritus at MIT.

Real Estate Committee

PRIM’s Real Estate Committee is chaired by PRIM Board member Alexander Aikens, III.  Prim Board member John "Jay" Dow also serves on this Committee.  Four real estate and timber professionals who generously donate their time and expertise to the Committee are William (Bill) McCall, Jr. of McCall & Almy, Inc., Peter O'Connell of Marina Bay Company, Gar Morse of Morris and Morse Company, Inc., and Dr. Jack Lutz of the Forest Research Group.

Administration and Audit Committee

PRIM Board trustee Robert Brousseau chairs the Administration and Audit Committee. PRIM Board member Theresa McGoldrick also serves on this Committee. In Addition, Ted Alexiades, the Hingham Director of Finance, Patrick Brock, Chairman of the Hampshire County Retirement Board, and Bob Foy, Retired Quincy City Auditor, are all dedicating their time on this Committee.

PRIM Staff

The PRIM Board employs a professional staff to manage the day-to-day operations of the PRIT Fund and report to the Board. PRIM’s staff is comprised of individuals with strong backgrounds in financial management and pension fund administration, as well as legal, accounting, and client servicing expertise. Listed on the page that follows are a few of the key staff people at PRIM.

Michael G. Trotsky, CFA
Executive Director

Michael G. Trotsky, CFA is an investment management professional with over 20 years of experience.  Prior to joining PRIM as its Executive Director, Mr. Trotsky was the Executive Director of the Massachusetts Health Care Security Trust (“HCST”), the state government agency charged with the dual responsibility of 1) managing and investing payments Massachusetts receives from the tobacco litigation settlement, and 2) managing and investing the State Retiree Benefits Trust Fund (“SRBTF”), the fund that invests assets allocated by state and local government agencies to fund the health care benefits of retired government employees. Prior to joining the HCST, Mr. Trotsky was a Senior Vice President and Portfolio Manager for 5 years at PAR Capital Management, a Boston-based absolute return strategy fund, where he was directly responsible for investment decisions, research, trading, and administration of an investment fund.  Before that, Mr. Trotsky spent nearly 5 years at Greenberg-Summit Partners in Boston, serving as Senior Analyst responsible for technology investments.  Before that, that Mr. Trotsky spent over 7 years as Principal and Senior Vice President at Independence Investment Associates in Boston, where he served as both a portfolio manager and senior analyst, and also served on the firm’s valuation committee. Mr. Trotsky entered the investment management profession in 1990 after 6 years at Intel Corporation, where he was a Senior Field Sales Engineer.  Mr. Trotsky received his BS in Electrical Engineering from the University of Pennsylvania in 1985, and his MBA (with a concentration in Finance) from The Wharton School, University of Pennsylvania, in 1990.  Mr. Trotsky has served on the Dean’s Advisory Committee at the University of Pennsylvania’s College of Engineering and Applied Sciences since 2007.  Mr. Trotsky earned his Certified Financial Analyst (CFA) charter in 1994.  Mr. Trotsky lives in Belmont with his wife, Amy, and their son, Benjamin.   Their community activities support local institutions including the Dana Farber Cancer Institute and the Friends of Titus Sparrow Park.  Mr. Trotsky also serves on the Finance Committee at the Shady Hill School in Cambridge.

Karen E. Gershman, CPA
Chief Operating Officer and Chief Financial Officer

Karen serves as Chief Operating Officer and Chief Financial Officer since joining the PRIM Board in 2001.  In addition to being COO and CFO, she was appointed as Interim Executive Director from February 3, 2004 until March 8, 2004 and again from June 14, 2010 to August 18, 2010.  Karen is a Certified Public Accountant with over twenty-five years experience in managerial, operational and technical financial management in both the public and private sectors. Prior to joining PRIM, Karen was the Chief Financial Officer at WorldWinner.com, where she was hired to build the company’s corporate infrastructure. Before WorldWinner.com, she held the position of Senior Manager at KPMG for over six years, providing audit and business advisory consulting services for the Northeast Practice. Karen’s consulting services experience at KPMG included an operational review of the Massachusetts State Lottery for the Massachusetts State Treasurer. Before that, she was Director of Finance for Nature Food Centres, Inc., a large, privately owned specialty consumer retailer that successfully went through both IPO and acquisition stages. Prior to her five-year stint at Nature Food Centres, Karen held various growth positions at KPMG, culminating in her promotion to Manager level after three years. Karen holds a Bachelor of Science in Business Administration from Merrimack College in North Andover, MA, graduating Magna Cum Laude. Her professional affiliations include Member of the American Institute of Certified Public Accountants, Member of the Massachusetts Society of Certified Public Accounts, and Associate Member of the Certified Fraud Examiners Association.

Stanley P. Mavromates, Jr.
Chief Investment Officer

Stan Mavromates joined PRIM on February 1, 2000.  His responsibilities are to provide the overall investment strategy and asset allocation for the fund and to evaluate, select, monitor and manage external investment managers.  As CIO, he supervises internal investment professionals, support staff and outside consultants and advises the Investment and Real Estate/Timber Committees and Board.  Prior to joining PRIM, Stan was an investment consultant for John Hancock Financial Services, responsible for investment oversight, due diligence, and selection of investment mangers for Hancock's variable products, 401K, and pension plans. He is a graduate of Bentley College’s MBA program and a graduate of Northeastern University, with a concentration in international business and finance.  He also served in the U.S. Marine Corps for 5 years.

Paul Todisco
Senior Client Service Officer

Paul Todisco returned to the PRIM staff on September 15, 2008 after a six-year hiatus.  During that time, Paul served as the Executive Director of Health Care Security Trust (“HCST”), the endowment created by the Commonwealth to invest a portion of the annual payments Massachusetts receives from the landmark 1998 tobacco settlement that arose from a class action suit between 46 states and the big tobacco manufacturers.  Between his service at HCST and PRIM, Paul has 24 years experience in the public investment fund arena.  Having originally joined PRIM in 1984 as a seminal member of the staff, Paul played an integral role in developing PRIM’s modern client service program, in particular, working on legislative strategy that led to the passage of a bill that created the highly successful “Segmentation” program.  Prior to joining PRIM, Paul served as Staff and Research Director for the Joint Committee on Public Service in the Massachusetts Legislature from 1982-1984, where he advised the Committee members on legislation concerning public pensions, collective bargaining, civil service, and state and municipal administrative matters.  He is a graduate of Suffolk University (B.S. cum laude 1976).

Wayne D. Smith, CFA
Senior Investment Officer - Private Equity

Wayne Smith manages and formulates strategy for Massachusetts Pension Reserves Investment Management Board's (PRIM) $4.5 billion private equity program. Mr. Smith generates deal flow, conducts due diligence and recommends investments for domestic and international venture capital, buyout and distressed debt limited partnerships.  He also monitors an existing portfolio of over 150 limited partnerships.  Prior to joining PRIM in 2000, Mr. Smith was a Senior Investment Associate in the private markets group of Liberty Mutual Group in Boston. He received his MBA at the F.W. Olin Graduate School of Business at Babson College in Wellesley, MA and holds a Bachelor of Arts Degree in Management from Assumption College, Worcester, MA. Mr. Smith is also a Chartered Financial Analyst Charterholder.

Timothy Schlitzer
Senior Investment Officer - Real Estate and Timber 

Tim Schlitzer directs the investment activities for PRIM’s allocation to real estate and timberland. Tim’s responsibilities include portfolio oversight and manager selection for PRIM’s direct real estate, REIT and timberland investments. He also oversees 13 current manager relationships in both the private and public real estate and timber markets.  Tim joined PRIM in 2005 and was previously employed by Grubb & Ellis, a publicly traded commercial real estate services company. He has received an MBA from Northeastern University in Boston, MA and holds a Bachelor of Arts Degree from the University of Massachusetts in Amherst, MA.

Hannah G. Commoss
Senior Investment Officer - Public Markets 

Hannah Commoss is responsible for PRIM’s Public Markets investment programs, which includes oversight, monitoring and due-diligence for the PRIT Fund's Domestic Equity, International Equity, Emerging Markets Equity, Core Fixed Income, Value-Added Fixed Income and Hedge Fund of Funds asset classes.  Prior to joining PRIM in August of 2004, Hannah was with HarbourVest Partners, a global private equity investment firm, in Boston.  Hannah graduated cum laude from Northeastern University with a Bachelor of Arts Degree in Economics, and received her MBA from Suffolk University in Boston, MA. 

How to Invest in the PRIT Core

Retirement systems may elect to invest in the PRIT Core in the following manner:

• A "Participating System" transfers title and control of all assets to PRIM. Following an affirmative vote to join the PRIT Fund, the local retirement board must notify the Chief Executive Officer and Legislative Body having jurisdiction over the retirement system of its decision on or before May 1 of each calendar year. The decision is deemed to be approved unless both the Chief Executive Officer and the Legislative Body act to disapprove the decision by July 1. A system's decision to participate under this provision may not be revoked for five years. Participating systems are also eligible to receive any money appropriated by the state for the purpose of reducing unfunded pension liabilities (M.G.L., c.32 § 22B).

• A "Purchasing System" may invest all or a portion of its assets in the PRIT Core simply by an affirmative vote of the retirement board. A purchasing system may make additional payments to or withdrawals from the Core at any time, and is not bound by the five-year participation requirement. The retirement board must provide thirty (30) days notice to the PRIM Board of its intention to withdraw funds from the PRIT Core. A purchasing system is not eligible for the state appropriation.  This election is most widely used by all new systems making both "Full" and "Segmented" investments.

PRIT Core Performance

Since inception, the PRIT Core annualized return, January 1, 1985 through June 30, 2010, gross of expenses, was 9.39%, which represents 114 basis points or 1.14% in excess performance over the 8.25% target of return assumption contained in the Commonwealth’s pension funding schedule.

PRIT Core Portfolio
Investment Performance Summary (Gross Returns)
For periods ending June 30, 2010

* The policy benchmark assumes that the PRIT Fund's actual asset allocation is identical to its asset allocation targets with several asset classes being tied to actual weightings in the portfolio.

Costs of Operation

The total costs for fiscal 2009 inclusive of all investment management, custodial, consulting, and overhead expenses (the total PRIM operating budget) were 51 basis points or 0.51% of the average net asset value of the PRIT Fund. More than 95% of the total PRIM/PRIT operations budget was comprised of fees to external investment managers in fiscal 2009.

Most investment management fees for Private Equity and real estate are charged by the managing general partners to the investment partnership and not to the limited partners (e.g., PRIM) directly. Therefore, these partnerships incur the expense and report income to the limited partners net of those fees. Most pension funds do not include these "non-cash" management fees as part of their overall costs. Historically, PRIM has reported all investment management fees, including those charged at the partnership level, as part of its operating expenses. Excluding these "non-cash" management fees (the way most public pension funds report), the total cost of operation for fiscal year 2009 was approximately 10 basis points or 0.10%.

Consultants, Custodian, and Independent Accountant

The PRIM Board utilizes four consultants to assist it in making decisions about the investment direction of the PRIT Core: Ennis Knupp and Associates, Callan Associates Inc., and Hamilton Lane.

Ennis Knupp and Associates, located in Chicago, IL, is the general fund consultant and is responsible for making recommendations regarding asset allocation, manager selection and termination, and providing other advisory services that the Board may deem necessary. Ennis Knupp also works with the PRIM staff in monitoring the performance of managers and ensuring that managers are in compliance with their contractual guidelines.  Ennis Knupp is also responsible for recommendations regarding PRIM's Hedge Funds Strategy.

Callan Associates Inc., located in San Francisco, CA, assists PRIM in monitoring its Real Estate Portfolio. Callan makes recommendations with respect to manager selection, the divestment of non-core assets, the development of an annual investment strategy, strategies that complement the Core Separate Account Program, and the overall implementation of the Real Estate Investment Policy.

Hamilton Lane, located in Bala Cynwyd, Pennsylvania, serves as PRIM’s Private Equity consultant. Hamilton Lane recommends a strategic plan for the annual deployment of assets committed to special equity (buy-outs) and venture capital, assists PRIM staff in performing due diligence with respect to selection of partnerships, and conducts a quarterly and annual review of the Private Equity portfolio.

Baillie Gifford is a growth oriented manager.  The firm’s investment style primarily uses a bottom-up, stock driven approach to country and asset allocation, with the objective to select stocks that can sustain an above-average growth rate and trade at a reasonable price. They believe it is easier to make money by assessing a company’s prospects for sustainable earnings and free cash flow growth, than by predicting its short-term share price movement.  Inception 7/31/2004.

Marathon, based in London, is wholly owned by its three partners who are the three portfolio managers.  The firm focuses on small/mid cap companies and investments have a value bias.  The firm focuses on the return on capital employed in each sector of the economies in its universe, and purchases those securities where return on equity is low but likely to increase due both to competitive pressures and some catalyst unique to the company.  Marathon sells securities as the return on capital increases to the mean for the sector.  The currency exposure in this portfolio is not hedged.  Inception 9/30/1996.

The firm fully replicates the index except for tobacco company securities, which has produced some positive tracing error.  One quarter of the assets in this asset class are passively managed by State Street.  Inception 2/29/1992.

Pyramis is an indirect wholly-owned subsidiary of FMR LLC (Fidelity Investments). Pyramis’ Select International strategy combines active, fundamental-research driven stock selection with disciplined quantitative risk management to consistently add value over the benchmark in a highly efficient manner.  Inception 5/1/2008.

Mondrian’s Large Cap International Equity Ex-Emerging Markets product is an active, value-oriented, concentrated portfolio that holds approximately 30-40 stocks. It aims to deliver approximately 2-3% per annum over the benchmark in a full market cycle, with low volatility.  Inception 5/1/2008.

PRIM International Equity Portfolio
Investment Performance Summary (Gross Returns)
For periods ending June 30, 2010

	One Year	Three Years	Five Years	Ten Years
International Equity Portfolio Returns	9.74%	-12.00%	1.87%	1.50%
MSCI World Ex-US IMI Net Divs Index*	7.43%	-12.89%	1.22%	0.33%

* The Portfolio Benchmark indicated above is the current benchmark for this asset class.  Over the past ten-year period, these benchmarks have evolved; therefore, the performance history embedded in these benchmark returns include historical data from benchmarks that are no longer used by PRIM.

Total expenses as a percentage of the average International Equity Portfolio assets for the fiscal year 2009 amounted to 0.29%, or 29 basis points.

The PRIM Board invested approximately $5.8 billion in the Core Fixed Income Portfolio, representing 14.0% of the PRIT Fund as of June 30, 2010.  The Core Fixed Income Portfolio is invested using the following strategies:

• 77% in core Barclay's Capital Aggregate active and passively managed portfolios;

• 8% in Treasury Inflation Protected Securities (TIPS);

• 15% in Global Active Inflation-Linked Bonds (ILBs).

The core strategy is benchmarked to the Barclay's Capital Aggregate Bond Index, which replicates the investment grade bond market. The index is composed of corporate, government, and mortgage-backed securities. The index fund is designed to approximate the performance of the Lehman Aggregate, while the active managers’ mandate is to exceed the index return. The core strategy is designed to reduce the long-term volatility of the overall portfolio.

Risks. As in the case of equities, the prices of Core Fixed Income securities increase and decrease in value. Price fluctuations in bonds result from rising and falling interest rates (as well as stock price fluctuations for convertible bonds), changes in market conditions, and other economic and political developments. Lower-quality securities typically offer higher yields, but also carry more risk. Although investment in credit markets has been traditionally perceived as a "conservative" investment, erosion in principal value can result from these price fluctuations, and can adversely effect portfolio returns.

Benefits of Investing through PRIM. The structure of the Core Fixed Income Portfolio is designed to reduce risk by investing in diversified sectors within Core Fixed Income.  Other benefits include the following:

• professional staff that aggressively monitors managers and has general portfolio oversight with regard to key investment issues such as compliance;

• multiple manager strategy designed to reduce overall risk; and

• economies of scale, including low fees in relation to assets under management

Manager Roster. The current roster of managers, their mandate, and the percentage of the Core Fixed Income Portfolio they manage, and a brief description follows.

Access Capital is a Boston-based economically-targeted Core Fixed Income investment manager.  PRIM invests via their commingled vehicle, Access Capital Strategies Community Investment Fund.  ACSCIF only invests in Core Fixed Income investments that are guaranteed by U.S. Government agencies, Fannie Mae, Freddie Mac or have AAA credit enhancements.  The Fund provides competitive, risk-weighted, high credit quality taxable returns through a double bottom line investment vehicle that fosters economic development in America’s underserved communities.  The Fund currently has over $130 M invested in Massachusetts, with investments in 13 counties and 254 cities and towns throughout the state. 

AFL-CIO HIT Fund is an economically targeted Core Fixed Income manager based in Washington, DC with a regional location in Boston, Ma. The AFL-CIO HIT is a Core Fixed Income fund that over weights credit enhanced Core Fixed Income securities, in particular, multifamily mortgage-backed securities that carry a U.S. government or agency guaranty. The HIT fund has created or preserved more than 80,000 units of housing across the country and generated approximately 50,000 union jobs in construction and related industries, including 1,500 housing units in Massachusetts and 2.4 million hours of work for union members in the Commonwealth. The HIT expects to invest at least $50 million in the Commonwealth over the next three years. AFL-CIO HIT Fund was hired by PRIM in July 2007.

Founded in 1988, BlackRock merged with PNC Bank to become the asset management arm of the bank in March of 1995 and also merged with Merrill Lynch Investment Managers in October of 2006.  BlackRock counts among its clients a large number of large state funds, including Illinois Teachers, the State of Florida, Minnesota, and Los Angeles County.  BlackRock uses a team approach to Core Fixed Income management.  The Investment Strategy Group sets the portfolio strategy; identifying duration, yield curve, convexity, sector exposure, credit quality, and liquidity targets.  The firm’s competitive advantage is its risk management focus with tremendous resources devoted to building a team of quantitative personnel who in turn have created superior proprietary quantitative analytical and risk management tools.  Hired by PRIM in March of 1999.

Community Capital Management is an economically-targeted Core Fixed Income investment manager based in Weston, Florida.  They manage a portfolio of high credit quality, fixed-income securities that support economic development in Massachusetts on behalf of PRIM.  The portfolio consists of economically-targeted investments financing home ownership for low- and moderate income Massachusetts families, affordable rental housing complexes and general economic development activities.  PRIM invests via a separately managed account.  Hired by PRIM in July 2006.

Pacific Investment Management Co. ("PIMCO") is based in Newport Beach, California.  PIMCO’s approach to Core Fixed Income management is a top-down, core approach which combines interest rate anticipation, active sector rotation, and sophisticated analytical capabilities to achieve consistently above market returns.  The firm’s objective is to add value without increasing risk by using innovative portfolio management techniques and by identifying superior sector and issue opportunities.  PIMCO operates within a modified duration range of plus or minus 1½ years of the duration of the market, utilizes all sectors of the bond market, but maintains a high average quality profile.  Hired by PRIM in September 1990.

Pacific Investment Management Co. ("PIMCO") is based in Newport Beach, California.  PIMCO’s approach to Core Fixed Income management is a top-down, core approach which combines interest rate anticipation, active sector rotation, and sophisticated analytical capabilities to achieve consistently above market returns.  The firm’s objective is to add value without increasing risk by using innovative portfolio management techniques and by identifying superior sector and issue opportunities.  PIMCO operates within a modified duration range of plus or minus 1½ years of the duration of the market, utilizes all sectors of the bond market, but maintains a high average quality profile.  Hired by PRIM in September 1990.

PRIM Core Fixed Income Portfolio
Investment Performance Summary (Gross Returns)
For periods ending June 30, 2010

	One Year	Three Years	Five Years	Ten Years
Core Fixed Income Portfolio Returns	11.74%	6.51%	4.78%	6.40%
77% BC Agg / 8% BC U.S. TIPS / 15% Commodities*	9.89%	6.25%	4.44%	6.16%

* The Portfolio Benchmark indicated above is the current benchmark for this asset class.  Over the past ten-year period, these benchmarks have evolved; therefore, the performance history embedded in these benchmark returns include historical data from benchmarks that are no longer used by PRIM.

Total expenses as a percentage of the average Core Fixed Income Portfolio for the fiscal year 2009 amounted to 0.14%, or 14 basis points.

The PRIM Board invests approximately 2.9 billion in the Value-Added Fixed Income Portfolio, representing 7.0% of the PRIT Fund as of June 30, 2010.  The Value-Added Fixed Income Portfolio is invested using the following strategies:

• 24% in actively managed High Yield bonds

• 20% in emerging market debt

• 39% in distressed debt

• 17% in bank loans.

High Yield bonds are securities that are rated below Investment Grade by Standard & Poor’s and Moody’s. These bonds are issued by companies without long track records of sales or earnings, or by those with questionable credit strength. This strategy also includes bonds that were Investment Grade at time of issue but have since declined in quality to below Investment Grade, referred to as "Fallen Angels". Despite the below Investment Grade rating, PRIM’s managers have successfully constructed portfolios and selected securities to generate substantial returns due to the equity-like characteristics of High Yield bonds and to mitigate risk by lowering the expected default rate.

Manager Roster. The current roster of managers, their mandate, and the percentage of the High Yield Bond Portfolio they manage, and a brief description follows.

As of June 30, 2010, PRIM invested approximately $2.3 billion in the Emerging Markets Portfolio, which represented 5.7% of the Pension Reserves Investment Trust Fund. Included in the Emerging Markets portfolio are the equity securities of companies in developing countries in the Far East, South America, Central America, and Central/Southern/Eastern Europe. These countries typically have less efficient securities markets where there is opportunity for substantial returns.

Risks.

Investing outside of the United States carries risks that are in addition to the typical risks of domestic equity investments. Foreign equity markets tend to be less efficient than U.S. markets, and therefore, are more volatile. In addition, foreign investments are subject to higher settlement and trading costs and greater economic and political risk, such as currency risk exchange control regulation, expropriation, confiscatory taxation, and social instability.

Benefits.

Benefits of investing in emerging markets through PRIM include:

• a professional staff that monitors managers and has general portfolio oversight of key investment issues such as compliance with detailed investment guidelines;

• a multiple manager strategy designed to reduce overall risk;

• economies of scale, including low fees in relation to assets under management; and

• an opportunity to achieve potentially high returns as a result of inefficiencies in the markets of these rapidly developing economies.

Manager Roster.

The current roster of managers, the percentage of the Emerging Markets Portfolio they manage, and a brief description of each company follows:

EMM focuses on small/mid cap companies with a value bias.  The firm uses a combination top-down, bottom-up approach to investing.  The process begins with an econometric model that allocates assets across countries.  Within countries, the firm’s analysts perform fundamental research on available investments, looking for securities that are undervalued on a price-to-earnings or price-to-book basis.  EMM also uses proprietary country funds to place assets in markets where illiquidity and custody issues make investing difficult.  Inception 1/31/1990.

GMO uses a top-down country allocation process combined with a disciplined value orientation that uses both fundamental investment principles and quantitative approaches to provide broad emerging market exposure.  The firm uses a blend of value and momentum investing techniques to exploit mis-pricings and employs quantitative models to evaluate countries, sectors, and stocks, as well as control risk.  80% of research is spent on country selection.  The portfolio has a value and mid/small cap bias.  Inception 9/30/2002.

As of June 30, 2010, PRIM had $3.8 billion invested in real estate, representing 9.1% of the PRIT fund "Core". The Real Estate Portfolio essentially consists of two components: Directly-owned properties and REITs.  PRIM invests in real estate because it provides the PRIT Fund with (i) diversification and (ii) attractive returns. Real estate returns do not have a strong correlation with stock and bond returns, therefore offering an element of diversification to reduce volatility. Real estate can also offer attractive current returns. A portfolio of well-leased, operating properties provides steady monthly cash flow to the investor from property-level rents.

Callan Associates Inc., a nationally respected real estate consulting firm, assists PRIM in managing its real estate investment efforts. Callan helps develop, refine, and implement PRIM’s real estate investment strategy. Callan also maintains on PRIM’s behalf a comprehensive performance measurement database that allows PRIM staff and Callan to evaluate manager performance and compare it to relevant benchmarks.