QuarterlyJ A N U A R Y 2 0 0 1

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Quarterly

Jay Shoemaker,Executive Secretary

T H E R E T I R E M E N T A S S O C I A T I O N

I N S I D E

stocks and stock mutual fundsstocks at unprecedented rates.

In the nineties the trend continued,with even more of these historicallyconservative investors becomingwilling to “taste” the market, inpursuit of higher returns.Technology enhanced the tradingand information capabilities of bothindividual and institutional

investors. Add this to corporationsexpanding their markets globally tobecome multi-nationals and you geta true stock market evolution.

While all of these topics are perti-nent to CCOERA’s evolution, it’s theexpanding foreign markets - that isthe relative topic for this article.

As you can see in the chart above,

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In the future, financial historianswill probably look back at the last20 years of the stock market as oneof the most significant periods in itshistory. Prior to the 1980s, mostindividual investors were satisfiedwith single-digit, conservativeinvestment returns. Beginning in the80’s, the period labeled as “thedecade of greed,” conservativeinvestments, such as CDs andmoney market accounts, beganpaying double-digit returns near20% annually. Investors grewaccustomed to these high returnsand began pouring money into

Global MarketMaturity Leads toAddition of New Fund:Janus Overseasby: Rick Rodgers,Director of Marketing and Client Services

J A Y S H O E M A K E R ’ S Q U A R T E R L Y R E P O R T

A Shift in StyleMajor US stock indexes stumbled through the worst year in many years. The Dow JonesIndustrial suffered its worst loss since 1981 (-4.85%), the S&P 500 its worst since 1977(-9.10) and the NASDAQ its worst-ever (-39.29%). Another measurement of small-capstocks, the Russell 2000 lost 3.03% this year (and -6.91% for the quarter). Despite thissignificant loss year, all these indices post at least double-digit returns over the last fiveyears, with the NASDAQ Composite posting a high 18.62%, and the Russell 2000 posting thelowest of the bunch with a five-year return of 10.32%. continued on page 2

WORLDWIDE STOCK MARKET CAPITALIZATION

1980 2000

Janus Overseas Fund Profile 3-4 4th Quarter 2001 Investment Results 5

United States Foreign

74%

26%

52%48%

One of the reasons for the “risky”label assigned to foreign stockfunds is the broad array of stockscontained in their portfolios,everything from the larger, moreestablished multi-nationals, to theunknowns from under-developednations. While the trend in domesticmutual funds has been to focus on aspecific style of stock picking, suchas growth versus value, or companiesof a particular size (large-cap, mid-cap, small-cap), many foreign fundshave continued to mix styles andcapitalization sizes - until recently.

As the global market matures, agreater variety of investmentopportunities have been presentedto us. We are now seeing foreign

continued from cover

one of the most significant changesduring the past twenty years hasbeen the transformation from astock market dominated by domestic(US) companies to a more global-oriented market. As a result, thereare now more investment oppor-tunities outside the United Statesthan there are within our boundaries.

Historically, foreign investmentshave been regarded as much moreaggressive and risky than domesticstocks. But you would probably finda large number of residents in foreigncountries that feel a lot more com-fortable investing in Nintendo,Phillips Electronics, Nokia, or thelike, over a U.S. dot-com stock.

funds with historicallyblended approaches beginningto target specific strategies,much like their domesticscounterparts. As a result ofthe changing environmentCCOERA has added JanusOverseas to the investmentmenu to offer participantsgreater choice with respectto foreign investing.

For example, the AmericanAAdvantage InternationalEquity Fund (offered toCCOERA participants), hasdrifted from a blend-style toan absolute “value-only”approach, with a “limited-exposure”policy to emerging markets.

“Value-only” refers to the price ofthe stocks that the managers arepermitted to choose for the fund. A

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Compariso

Janus OverNTT DoCoMoVodaphone AChina MobileNokiaTelfonos de Check Point Furukawa EleNortel NetwoBanco BibaoTyco

Fund Assets

Total Stocks

N E W F O R E I G N F U N D : J A N U S O V E R S E A S

continued from cover

Each of you needs to continue your long-terminvesting resolution because for most, retirementinvesting is longer than even a 5-year horizon.

Besides investing for the long-term, CCOERAGroup Presentations also emphasize diversification.This year is a classic example of the benefits ofdiversification. Diversification means investingin different asset classes, as well as differenttypes of investment styles. For example,although the major stock market indices shownabove experienced losses, bonds had a very goodyear. The Lehman Brothers IntermediateGovernment/Corporate index had a positive10.10% annual return for 2000. CCOERA'sbond option, PIMCO's Total Return produced anabove-average 11.81%.

Further diversification among equity investmentstyles would also have mitigated losses.

The Russell 2000 Value index posted a 22.81%return. CCOERA's small-cap value alternative,Fidelity's Low-Priced Stock Fund nearly equaledthese returns with a one-year 18.83% return.Another index, BARRA's large-cap value indexhad a one-year return of 6.09%. CCOERA'slarge-cap value fund, Davis NY Venture beat thisindex with a 9.92% return. Our mid-cap valuealternative, MAS Mid-cap Value bettered Davis'performance with a 11.59% return.

As you assess the performance of your account,and the various CCOERA investment options, notehow in 2000 all value funds performed betterthan growth funds, yet reviewing the 3-yearreturns, you'll note that most growth funds holdthe edge. My point is this - diversify so that youraccount is not over-exposed to any one invest-ment style, and most important - invest for thelong-term.

Jay Shoemaker’s Quarterly Report: A Shift in Style

share. Meaning, for each share ofoutstanding stock, the company has$10 in assets. If investors arecurrently willing to pay $34 for one

share of this stock, it has a price tobook ratio of 3.4.

In contrast, Janus Overseas has anaverage price to book ratio of 13.1,indicating a growth-style of stockselection, making it a much moreaggressive fund.

The other statisticshown in thechart above isthe “price-to-earnings” ratio,which is anothermeasure of thefund’s preferencetoward growthor value stocks.Again, the higher

number represents a growth styleof stock-picking, and a lowernumber indicates a value style.

However, the price-to-earningsratio is a measure of the currentprice of a company’s stock comparedto the earnings of that companyover the last twelve months. Theearnings are divided by the numberof outstanding shares of stock. Inthis case, the average stock held inJanus Overseas has a price/earningsratio of 29.8, meaning the averagestock owned by the fund is currentlytrading for 29.8 times more thanthe companies earned for eachoutstanding share.

Additionally, the fund may invest agreater portion of its assets inemerging markets (companieslocated in countries with newly

developing stock markets)Currently, Janus Overseas has 24%of assets invested in emergingmarkets, compared to only 6% inAmerican AAdvantage. Finally,notice that over one-third ofOverseas’ assets are invested injust 10 stocks, and you can see whythis fund is expected to be muchmore volatile than AmericanAAdvantage Intl.

In summary, the addition of JanusOverseas represents CCOERA’songoing effort to provide a verycomprehensive, yet diverse array ofinvestment alternatives. As theglobal markets continue to mature,so will the investment menu offeredto participants.

value stock is one in which theprice of the company’s stock is lowas compared to the value of thecompany’s tangible assets and itsearnings. On average, the stockscurrently owned by AmericanAAdvantage International Equityfund are selling for prices that areonly 3.4 times the value of theunderlying company assets. This isreferred to as the “price-to-bookratio” of the stock. In other words,if you totaled the value of a particularcompany’s assets and divided thatby the number of outstandingshares of stock, you woulddetermine the “book value” of eachshare. Let’s say the number derivedfrom this calculation is $10 per

Price/Book Ratio Price/Earnings Ratio

American AAdvantage Intl. 3.4 15.7

Janus Overseas 13.1 29.8

Value vs. Growth

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Country Exposure Comparison

Janus OverseasUnited Kingdom 14%Japan 11%United States 7%France 6%Canada 5%

Emerging Markets 24%

Total Countries 21

American AAdvantageUnited Kingdom 24%Japan 15%France 9%Germany 7%Netherlands 6%

Emerging Markets 6%

Total Countries 24

on of Top-Ten Holdings

rseaso Japan ServicesAirtouch UK Servicese China Services

Finland TechnologyMexico Mexico ServicesSoftware Isreal Technologyec Japan Industrialsorks Canada Technologyo Spain Financials

US Industrials

in Top-Ten Holdings 36%

111

American AAdvantage Intl. EquityAventis France HealthE.On AG ADR Germany ServicesTotal Fina France EnergyAzko Nobel Netherlands IndustrialsING Groep Netherlands FinancialsZurich Finan. Switzerland FinancialsUnilever UK StaplesBAE Systems UK TechnologyUnited Overseas Singapore FinancialsTelefonica Spain Services

Fund Assets in Top-Ten Holdings 20%

Total Stocks 209

J A N U S O V E R S E A S F U N DD E C E M B E R 3 1 , 2 0 0 0

The fund seeks long-term capital appreciation by investingin foreign securities.

I N V E S T M E N T S T R A T E G Y

The fund normally invests at least 65% of its total assets insecurities of issuers from at least five different countries,excluding the U.S. However, it may at times invest in U.S.issuers and it may invest all of its assets in fewer than fivecountries. The fund may invest without limit in foreign equi-ty and debt securities. The portfolio managers apply a“bottom-up” approach in choosing investments. They lookfor companies with earnings growth potential one at a time.

P O R T F O L I O D I V E R S I F I C A T I O N

Cash 12.5%

Foreign Stock 75.2%

F U N D I N F O R M A T I O N

Fund Category: Foreign StockFund Family: JanusAssets: $8.2 billionInception Date: May 1994Ticker: JAOSX

Services 27.6%

Technology 25.6%

Industrial Cyclicals 8.7%

Consumer Durables 8.3%

Health 7.3%

Financials 5.4%

Energy 2.8%

Consumer Staples 1.5%

Retail 0.0%

Utilities 0.0%

F U N D M A N A G E M E N T

Lead Manager: Helen Young-Hayes, CFATenure: 6 YearsEducation: B.A., Yale University, 1984

Co-Manager: Brent Lynn

I N V E S T M E N T O B J E C T I V E

S E C T O R W E I G H T I N G SA S O F 1 0 / 3 1 / 0 0

P O R T F O L I O C O M P O S I T I O NA S O F 1 0 / 3 1 / 0 0

Lower RISK Higher

Janus Overseas

U.S. Stocks12.0%

PRIMARYINVESTMENTS

SELECTIONSTYLE

MANAGEMENTSTYLE

Foreign Stock Large Growth Active

Bonds 0.3%

O P E R A T I N GE X P E N S E S

S&P 500 Wil. 4500R-squared 24 64Beta 0.78 0.81Alpha 11.85 13.61

3 Yr. 5 Yr.Sharpe Ratio 0.50 0.51Standard Deviation 34.96 28.32Mean 20.69 21.78

M O D E R N P O R T F O L I OT H E O R Y S T A T I S T I C S

Management Fee 0.65%

Other Expenses 0.26%

Total Expense Ratio 0.91%

Foreign Stock Avg. Expense Ratio 1.68%

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American AAdvantage Intl. Equity 2.89% -4.15% 10.77% 12.27% N/A 14.94%

International Equity Mutual Fund Average -4.63% -15.92% 10.04% 9.35% 9.64% 18.62%

Janus Overseas Fund -13.74% -18.57% 20.69% 21.78% N/A 28.32%

International Equity Mutual Fund Average -4.63% -15.92% 10.04% 9.35% 9.64% 18.62%

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Ryan Labs GIC Index 1.58% 6.35% 6.22% 6.25% 6.57% 0.14%

Large-Cap Growth Mutual Fund Average -16.49% -15.87% 13.66% 17.58% 16.27% 20.52%

General Equity Mutual Fund Average -8.14% -2.23% 11.99% 15.82% 16.00% 18.14%

Fidelity Magellan Fund -9.40% -9.31% 14.55% 16.27% 18.31% 18.63%

Fidelity Contrafund -6.56% -6.81% 15.30% 18.11% 21.04% 16.85%

Davis NY Venture - Class A 1.13% 9.93% 14.04% 20.04% 20.19% 16.62%

Domini Social Equity Index Fund -8.15% -15.07% 11.47% 18.11% N/A 17.92%

PIMCo StocksPLUS S&P 500 -7.22% -8.22% 12.26% 18.49% N/A 16.07%

PIMCo Total Return Fund 4.62% 11.83% 6.80% 6.94% N/A 3.97%

Fidelity Retirement Money Mkt. 1.61% 6.28% 5.54% 5.47% N/A 0.25%

CCOERA Book Value Fund 1.67% 6.90% 7.10% 7.31% 7.41% 0.16%

Black Rock Small-Cap Growth -20.50% -13.43% 16.71% 17.84% N/A 34.79%Small-Cap Growth Mutual Fund Average -19.03% -12.39% 11.92% 12.48% 17.91% 1.34%

Name 10/1/00-12/31/00 1/1/00-12/31/00 1/1/98-12/31/00 1/1/96-12/31/00 1/1/91-12/31/00 DeviationFund 4th Quarter 2000 3 Years 5 Years 10 Years Standard

Fidelity Low-Priced Stock Fund 5.73% 18.83% 7.87% 15.08% 19.60% 15.76%Small-Cap Value Mutual Fund Average 1.41% 13.90% 5.07% 11.90% 15.45% 17.46%

Large-Cap Value Mutual Fund Average 2.34% 4.96% 9.11% 15.03% 15.45% 14.44%

Core Equity Mutual Fund Average -5.18% -4.12% 11.06% 16.39% 15.44% 14.98%

S&P 500 Index -7.82% -9.10% 12.26% 18.33% 17.46% 16.22%

Core Bond Mutual Fund Average 4.02% 10.34% 5.34% 5.54% 7.33% 3.66%

90-Day Treasury Bill Average 1.63% 6.18% 5.43% 5.37% 4.93% 0.26%

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Pension Portfolio Five -3.98% -3.61% 10.58% 13.94% 14.33% 15.45%Risk Tolerance: Very Aggressive Average Age Group: 45 & under

Automatic Allocation Options 10/1/00-12/31/00 1/1/00-12/31/00 1/1/98-12/31/00 1/1/96-12/31/00 1/1/91-12/31/00 DeviationCCOERA Pension Portfolios 4th Quarter 2000 3 Years 5 Years 10 Years Standard

Pension Portfolio Four -2.31% -0.86% 10.05% 12.72% 13.17% 11.70%

Pension Portfolio Three -0.16% 1.96% 8.33% 10.65% 11.67% 7.08%

Pension Portfolio Two 1.92% 6.24% 9.00% 10.09% 10.47% 3.77%

Pension Portfolio One 1.53% 5.85% 7.55% 8.27% 8.38% 2.12%

Risk Tolerance: Aggressive Average Age Group: 46 - 55

Risk Tolerance: Moderate Average Age Group: 56 - 65

Risk Tolerance: Conservative Average Age Group: 66 - 75

Risk Tolerance: Very Conservative Average Age Group: 75+

INVESTMENT PERFORMANCE RESULTSFor the Period Ending December 31, 2000

Total Return of the investment funds offered through:CCOERA 401(a) Retirement Plan and CCOERA 457 Deferred Compensation Plan

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Source: InnoVest Portfolio Solutions, Inc.

Mid-Cap Growth Mutual Fund Average -18.59% -8.14% 17.38% 16.83% 17.26% 28.97%

MAS Mid-Cap Growth Fund -17.64% -7.57% 28.58% 27.57% 23.79% 30.80%

MAS Mid-Cap Value Fund -2.06% 11.59% 15.91% 25.07% N/A 19.84%Mid-Cap Value Mutual Fund Average 3.64% 10.30% 10.13% 15.92% 16.02% 16.01%

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