loans that can be made. Effective July 1, 1999, the Plan changed master custodians, and to facilitate
the change, securities lending activity was curtailed at June 30, 1999, and during the transition period.
Provisions of the securities lending program are the same under both custodians unless otherwise
noted. During 2000 and 1999, the types of securities loaned were primarily U.S. Government and
corporate bonds, domestic equity securities and international equity securities. Certain securities of
the Plan are loaned to participating brokers, who must provide collateral in the form of cash, U.S.
Treasury or Government Agency securities, or letters of credit issued by approved banks.
Under the terms of the securities lending agreement, collateral is required to be provided in the
amount of 102% of the fair value of U.S. securities loaned, and 105% of the fair value of non-U.S.
securities loaned. At June 30, 2000 and 1999, the Plan has no credit risk exposure to borrowers
because the amounts the Plan owes the borrowers exceed the amounts the borrowers owe the Plan.
The master custodian provides for full indemnification to the Plan for any losses that might occur in the
program due to the failure of a broker to return a security that was borrowed (and if the collateral is
inadequate to replace the securities lent) or failure to pay the Plan for income of the securities while
on loan. The Plan cannot pledge or sell collateral securities unless the borrower defaults. The loan
premium paid by the borrower of the securities is apportioned between the Plan and its custodial
agent in accordance with the securities lending agreement. All securities loans can be terminated on
demand by either the lender or the borrower.
Under the terms of the securities lending agreement in effect for the year ended June 30, 2000, cash
collateral is invested in the custodial agent's short-term investment pool. Under the terms of the
agreement in effect for 1999, cash collateral was invested in a dedicated short-term investment fund
for the benefit of the Plan combined with the cash collateral of a separate retirement fund also
administered by OPERS. The securities lending agreement sets forth credit quality standards,
acceptable investments, diversification standards, and maturity and liquidity constraints for the
investment fund. The Plan's investment guidelines do not require a matching of investment maturities
with loan maturities, but do establish minimum levels of liquidity and other investment restrictions
designed to minimize the interest rate risk associated with not matching the maturities of the
investments with the loans. The cash collateral investments had an average weighted maturity of 33
and 7 days, respectively, at June 30, 2000 and 1999. Under the terms of the agreement in effect for
2000, the relationship between the maturities of the custodial agent's investment pool and the Plan's
loans is affected by the maturities of the securities loans made by other entities that use the agent's
pool, which the Plan cannot determine. The Plan's non-cash collateral is represented by its allocated
share of a pool administered by the agent for the Plan and other pool participants.
At June 30, 2000 and 1999, the Plan's investments in real estate are in funds managed by two
managers, which invest in commercial, retail, office and industrial real estate properties. During 1996,
the Plan informed the existing real estate managers of its intention to withdraw from the investments in
real estate pursuant to the provisions of the applicable investment contracts, which set forth
redemption payment terms at market values in accordance with cash availability in the funds. During
2000 and 1999, cash distributions of approximately $11.1 million and $14.3 million, respectively, were
The Plan's actively-managed international equity securities are recorded at fair value, which includes
foreign currency gains and losses attributable to fluctuations in the exchange rate between the foreign
denominated currency of the investment and the U.S. Dollar. This translation gain or loss is
calculated based on month-end exchange rates. Cumulative unrealized translation losses for the
years ended June 30, 2000 and 1999, were approximately $4.5 million and $12.0 million, respectively.
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