1
Board of Regents, State of IowaExecutive Summary of Investment Performance
Quarter Ending March 31, 2007
2
Market Observations US Stock Market
Market Review (Periods Ending March 31, 2007)
The Federal Reserve continued to keep rates constant at 5.25% during the 1st quarter of 2007. The yield on the 10-year Treasury dropped narrowly from 4.71% to 4.65% despite hitting a high of 4.91% and low of 4.51% during the quarter.
Real GDP growth rebounded to 2.5% in the 4th quarter of 2006, up from 2.0% during the 3rd quarter. GDP grew at an annual rate of 3.3% in 2006 (vs. 3.2% in 2005, 3.9% in 2004, and 2.5% in 2003).
Since peaking at 2.9% in Sept. 2006, core CPI has stabilized at a more moderate 2.6% to 2.7% level from Oct. 2006 through Feb. 2007. Energy prices realized renewed volatility as a barrel of crude oil traded below $53 in mid Jan. before spiking to the high $60’s in late March, closing the quarter at $65.7.
Job growth slowed a bit in the first two months of 2006, with an estimated 146,000 and 97,000 jobs created in Jan. and Feb respectively.
Data signals received from the housing market have beenmixed. Existing home sales for Feb. hit their highestseasonally-adjusted level since April 2006. However, sales of new homes in Feb. declined for a second consecutive month, suggesting that a bottom in housing may not yet have been reached.
Despite experiencing its worst single day sell-off in nearly four years in late February, the U.S. stock market, as measured by the DJ Wilshire 5000, returned 1.40% during the first quarter of 2007. The -3.40% drop on February 27th served as a stark reminder of market risk and contributed to a -1.58% return in February, which marked only the second down month since July 2006 and the first since May to exceed a -0.12% decline.
Small capitalization stocks out-paced large stocks by a wide margin during the quarter with the DJW Small Cap index up 3.81% versus 1.07% for the DJW Large Cap index. Micro Cap stocks held up surprisingly well during February’s turbulence, as they posted a 0.20% return for the month and finished the quarter up 1.59%. Growth stocks showed impressive strength for the quarter, especially in the small cap segment, chipping away at some of the relative performance it had surrendered to value stocks in recent years. For the quarter, the DJW Large and Small Growth indexes were up 1.26% and 4.68%, respectively, versus 0.93% and 2.96% for the DJW Large and Small Value indexes, respectively. Looking back over the past year however, value still dominates growth by a wide margin across both size universes.
A growing level of defaults in the sub-prime loan market fueled concerns regarding a potential tightening of liquidity, helping to pressure the Financials industry lower by - 2.42%.
3
T-BILL
Citigroup Non-US Govt
Lehman Aggregate
MSCI EAFE Index MSCI EMF IndexS&P 500
Wil. Real Estate Sec.
0
5
10
15
0 5 10 15 20 25 30
Risk
Tot
al R
etur
n
Major Asset Class Returns (%)
Risk versus Return (3/31/97 - 3/31/07) Risk versus Return (3/31/87 – 3/31/97)
Capital Markets Review (Periods Ending March 31, 2007)
QTR 1 yr 3 yr 5 yr 10yrEquity Dow Jones - Wilshire 5000 1.4 11.3 11.0 7.7 8.7 Standard and Poor's 500 0.7 11.9 10.1 6.3 8.2 International Stock (MSCI EAFE)(USD) 4.1 20.2 19.8 15.8 8.3 Emerging Markets (MSCI EMF)(USD) 2.4 21.0 28.0 24.8 8.8 Dow Jones - Wilshire Real Estate Securities 3.7 22.0 24.4 22.8 15.2
Fixed Income Lehman Aggregate Bond 1.5 6.6 3.3 5.4 6.5 First Boston High Yield 3.0 11.9 8.7 11.2 7.3 International Bonds (Citigroup Non-US) 1.1 8.3 2.7 10.2 5.4 Treasury Bills (91 Day) 1.2 5.1 3.4 2.6 3.8
Consumer Price Index 1.8 2.8 3.1 2.8 2.5
T-BILL
Citigroup Non-US GovtLehman Aggregate
MSCI EAFE Index
S&P 500
Wil. Real Estate Sec.
0
5
10
15
20
0 2 4 6 8 10 12 14 16 18
Risk
Tot
al R
etur
n
4
-45.0
-25.0
-5.0
15.0
35.0
55.0
3/97 9/97 3/98 9/98 3/99 9/99 3/00 9/00 3/01 9/01 3/02 9/02 3/03 9/03 3/04 9/04 3/05 9/05 3/06 9/06 3/07
10.1
9.2
5.9
3.4
2.6
2.3
0.0
-2.4
0.8
1.3
Materials
Utilities
TelecommunicationServices
Energy
Consumer Staples
Industrials
Health Care
ConsumerDiscretionary
InformationTechnology
Finance
QTR 1 yr 3 yr 5 yr 10yr
DJ Wilshire 4500 4.1 9.6 13.8 12.6 10.5DJ Wilshire 5000 1.4 11.3 11.0 7.7 8.7DJ Wilshire Real Est. Secs 3.7 22.0 24.4 22.8 15.2DJ Wilshire Large Cap 1.1 12.1 10.8 7.0 8.5DJ Wilshire Mid Cap 5.1 9.8 14.1 11.9 11.9DJ Wilshire Small Cap 3.8 7.8 13.6 12.8 11.8DJ Wilshire Micro Cap 1.6 2.5 8.8 17.3 14.8
DJ Wilshire Large Growth 1.3 6.8 8.3 4.7 6.2DJ Wilshire Large Value 0.9 17.2 13.1 9.3 10.3DJ Wilshire Mid Growth 5.1 7.1 15.4 12.1 8.8DJ Wilshire Mid Value 5.2 12.9 12.8 11.4 13.4DJ Wilshire Small Growth 4.7 4.5 13.5 11.4 8.7DJ Wilshire Small Value 3.0 10.9 13.6 14.0 13.9
-40.0
-20.0
0.0
20.0
40.0
60.0
3/97 9/97 3/98 9/98 3/99 9/99 3/00 9/00 3/01 9/01 3/02 9/02 3/03 9/03 3/04 9/04 3/05 9/05 3/06 9/06 3/07
US Equity Returns (%) Large Cap Vs. Small Cap
DJ Wilshire 5000 Sector Returns (%)Growth Stocks Vs. Value Stocks
Domestic Equity Markets (Periods Ending March 31, 2007)
Growth Stocks
Value Stocks
Large Cap
Small Cap
Represents DJ Wilshire 5000 Quarterly Return
5
US Fixed Income Returns (%) Treasury Yield Curve
Historical Yield Spread Comparison to Treasuries
Domestic Fixed Income Markets (Periods Ending March 31, 2007)
0.00
2.00
4.00
6.00
8.00
10.00
12.00
Leh Mortgage Leh Long Agencies Leh AAA Long
Leh BAA Long FB High Y ield
The Federal Open Market Committee (FOMC) continued to leave short
term interest rates unchanged at the end of the first quarter as it kept
the federal funds rate at 5.25% while the yield on the 10-year Note
continued to experience some notable volatility but finished the quarter
at 4.65, six basis points lower than where it ended last quarter. While
the spread between the 10-year Note and the 91-day T-Bill widened by
8 basis points to 39 basis points from last quarter, the sub-prime
turmoil had a large impact on the spreads of mortgage backed
securities as investors flocked away from the sector towards higher
rated bonds. The FOMC noted in their March statement that core
inflation remains somewhat elevated and the high level of resource
utilization has the potential to sustain those inflationary pressures.
QTR YTD 1 yr 3 yr 5 yr 10yr
Lehman Aggregate 1.5 1.5 6.6 3.3 5.4 6.5
Lehman ABS 1.4 1.4 5.9 3.0 4.7 6.1
Lehman Credit 1.5 1.5 7.1 3.2 6.3 6.8
Lehman Gov't 1.5 1.5 5.9 2.7 5.1 6.2
Lehman Gov / Credit 1.5 1.5 6.4 2.9 5.6 6.5
Lehman Long Treasury 1.1 1.1 6.8 3.9 7.5 8.1
Lehman Mortgage 1.6 1.6 6.9 4.1 5.0 6.3
Lehman Agency 1.4 1.4 6.1 2.9 5.0 6.3
First Boston High Yield 3.0 3.0 11.9 8.7 11.2 7.3
Salomon Bros World Gov't Bond 1.2 1.2 7.8 2.7 9.0 5.8
Salomon Bros Non-US Bond 1.1 1.1 8.3 2.7 10.2 5.4Lehman US TIPS 2.5 2.5 5.3 3.0 7.4
Market Commentary
N U G G E T T A G :u s e rN a me = n u ll& p lo tN a me = n u ll
4.6
4.8
5
YIELD
0 5Y 10Y 15Y 20Y 25Y 30Y
Source: LehmanLive.com
One Year Ago [31Mar2006:31Mar2006]
Previous Quarter [29Dec2006:29Dec2006]Current Quarter [30Mar2007:30Mar2007]
6
5.8
4.0
8.0
10.4
2.8
5.6
-0.9
0.9
7.6
7.1
4.6
4.4
4.0
2.5
3.0
3.9
9.2
0.5
3.5
1.0
10.3
4.6
6.8
Austria
Belgium
Denmark
Finland
France
Germany
Greece
Ireland
Italy
Netherlands
Norway
Portugal
Spain
Sweden
Switzerland
UK
Total Europe
Australia
Hong Kong
Japan
New Zealand
Singapore
Total Pacific
International Index Returns (%)
Market Commentary
MSCI EAFE IndexQuarterly Returns in USD
International Equity Markets (Periods Ending March 31, 2007)
Equity (in U.S. $) QTR 1 yr 3 yr 5 yr 10yr
Non U.S. (ACWI X U.S) 3.8 20.3 21.4 17.4 9.0
Developed (EAFE) 4.1 20.2 19.8 15.8 8.3
Emerging (EMF) 2.4 21.0 28.0 24.8 8.8
Europe 3.9 25.4 22.1 15.8 10.4
Pacific 4.6 10.0 14.9 16.0 4.8
France 2.8 22.1 21.8 14.9 11.1
Germany 6.8 27.6 24.8 14.8 8.4
Japan 3.5 3.0 11.6 14.0 3.8
United Kingdom 3.0 24.2 19.3 14.2 9.0
Currencies (% change)
Euro vs Dollar 1.0 10.0 2.7 8.8 --
Yen vs Dollar 0.9 -0.1 -4.1 2.3 0.5
Pound vs Dollar 0.2 13.1 2.2 6.6 1.8
Country Weight
Austria 0.6
Belgium 1.3
Denmark 0.9
Finland 1.5
France 9.5
Germany 7.6
Greece 0.7
Ireland 0.9
Italy 3.8
Netherlands 4.1
Norway 0.9
Portugal 0.4
Spain 4.0
Sweden 2.6
Switzerland 6.7
UK 23.2
Total Europe 68.6
Australia 5.9
Hong Kong 1.6
Japan 22.5
New Zealand 0.2
Singapore 1.0
Total Pacific 31.2
Other Countries 0.2
Similar to the U.S. equity market, the non-U.S. equity market experienced some notable
volatility during the first quarter of 2007. The non-U.S. equity market ended the first
quarter with a 3.75% advance as the availability of abundant liquidity came into question
during the quarter. Until the late-February sell-off, the availability of abundant liquidity
combined with the low volatility environment, allowed many market participants to keep
their “yen-carry trade” going. In this trade, yield hungry participants borrow a low
yielding currency, in this case the Japanese yen, convert it into a higher yielding
currency, in this case the U.S. dollar, and buy a bond for the equivalent amount. As long
as the exchange rate does not change between the two countries, the “yen-carry” trader
stands to make a profit of approximately 4.5% (US bond yield: ~4.5% - Japanese bond
yield: ~0.0%). It was estimated that as much as $1 trillion may be staked on the “yen-
carry trade.” The return of volatility in late February was also the result of some
unwinding of this trade and thus caused a 0.94% windfall for unhedged U.S. investors as
traders sold dollars and bought back their borrowed yen positions. Although emerging
markets bounced back from the February sell-off and led the way in March with a 3.98%
USD based advance, it lagged the field during the quarter.
7
Total Fund Results University of Iowa
1.6
10.2 9.5 7.3 10.111.5 9.7 8.1 10.4
1.9
-40.0
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
40.0
1 Quarter 1 Year 3 Years 5 Years Inception3/31/89
Ret
urn
(%)
Endow ment Policy Index
263,665
260,019
4,467
-821
Beginning Value
Cash Flow
Gains/Losses
Ending Value
28.3
16.1
5.10.0
30.0
15.0
50.5
0.05.0
50.0
0.0
20.0
40.0
60.0
U.S. Equity Fixed Income Intl Equity Real Estate Cash
Pe
rce
nta
ge
Actual Policy
Asset Allocation vs. Policy
Investment Performance
Quarter Results
($’000)
• The University of Iowa Endowment assets totaled $263.7 million at the close of the first quarter
• During the quarter, investment gains totaled $4.5 million
• Contributions totaled $0.6 million
• Distributions and fees totaled $1.5 million.
• The Endowment fund returned 1.56% for the first quarter, underperforming the benchmark by 0.38%.
(Periods Ending March 31, 2007)
Note: At the direction of the Board of Regents, slight adjustments have been made to composite market values to account for rounding.
$'000s Actual P olicy
U.S. Equity 133,153 131,832
Fixed Income 74,609 79,100
Intl Equity 42,338 39,550
Real Estate 13,565 13,183
Cash 0 0
Total 263,665 263,665
8
-862
3,034
173,031
175,203
Beginning Value
Cash Flow
Gains/Losses
Ending Value
Total Fund Results Iowa State University
1.6
9.9 9.6 8.0 10.211.5 9.7 8.1 10.4
1.9
-40.0
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
40.0
1 Quarter 1 Year 3 Years 5 Years Inception3/31/89
Ret
urn
(%)
Total Fund Composite Policy Index
29.1
16.5
5.4
0.0
30.0
15.0
5.00
49.1 50.0
0.0
20.0
40.0
60.0
U.S. Equity Fixed Income Intl Equity Real Estate Cash
Pe
rce
nta
ge
Actual Policy
$'000s Actual P olicy
U.S. Equity 85,999 87,601
Fixed Income 50,944 52,561
Intl Equity 28,824 26,280
Real Estate 9,436 8,760
Cash 0 0
Total 175,203 175,202
Asset Allocation vs. Policy
Investment Performance
Quarter Results
($’000)
• The Iowa State Endowment assets totaled $175.2 million at the close of the first quarter
• During the quarter, investment gains totaled $3.0 million
• Total contributions were $0.6 million
• Total fees and distributions were $1.5 million
• The Endowment fund returned 1.59% for the first quarter, underperforming the benchmark by 0.35%
(Periods Ending March 31, 2007)
Note: At the direction of the Board of Regents, slight adjustments have been made to composite market values to account for rounding.
9
Total Fund Results
$'000 Qtr 1 Yr 3 Yrs 5 Yrs Inception% % % % %
Domestic Equity Composite (3/31/89) 131,578 0.7 8.4 10.3 5.7 11.5Dow Jones Wilshire 5000 1.4 11.3 11.0 7.7 11.5
Fixed Income Composite (3/31/89) 74,609 1.7 7.4 3.7 5.2 7.5 Custom Policy* 1.5 6.6 3.3 5.4 7.6
Int'l Equity Composite (9/30/94) 42,338 3.8 19.7 20.3 19.0 8.8 MSCI EAFE (N) 4.1 20.2 19.8 15.8 7.8
Real Estate Composite (12/31/05) 13,565 2.8 15.9 -- -- 18.8 NCREIF Property Index 3.6 16.6 -- -- 16.3
Private Equity Composite (12/31/06) 1,575 -2.8 -- -- -- -2.8Dow Jones Wilshire 5000 1.4 -- -- -- 1.4
Total Endowment (3/31/89) 263,665 1.6 10.2 9.5 7.3 10.1 Policy Index* 1.9 11.5 9.7 8.1 10.4
Iowa State
University of Iowa
$'000 Qtr 1 Yr 3 Yrs 5 Yrs Inception% % % % %
Domestic Equity Composite (3/31/89) 85,015 0.7 7.9 10.2 5.5 11.2 Wilshire 5000 1.4 11.3 11.0 7.7 11.5
Fixed Composite (3/31/89) 50,944 1.7 7.3 3.8 5.3 6.9 Custom Policy* 1.5 6.6 3.3 5.4 7.6
Int'l Equity Composite (9/30/94) 28,824 3.8 19.7 20.3 18.3 8.6 MSCI EAFE (N) 4.1 20.2 19.8 15.8 7.8
Real Estate Composite (12/31/05) 9,436 2.8 15.9 -- -- 18.8 NCREIF Property Index 3.6 16.6 -- -- 16.3
Private Equity Composite (12/31/06) 984 -2.8 -- -- -- -2.8Dow Jones Wilshire 5000 1.4 -- -- -- 1.4
Total Endowment (3/31/89) 175,203 1.6 9.9 9.6 8.0 10.2 Policy Index* 1.9 11.5 9.7 8.1 10.4
(Periods Ending March 31, 2007)
Note: At the direction of the Board of Regents, slight adjustments have been made to composite market values to account for rounding.
*Please see Glossary for policy specifications.
10
-1,213
1,462
93,637
93,388Beginning Value
Cash Flow
Gains/Losses
Ending Value
Total Fund Results University of Iowa Quasi
**Quasi Composite vs .Custom Policy
6.9
3.55.1 5.36.6
3.35.4 5.7
1.5 1.5
-15.0
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
25.0
1 Quarter 1 Year 3 Years 5 Years Inception 6/30/98
Ret
urn
(%)
Quasi Composite Custom Policy
100.0
0
100.0
00.0 0.00.0
20.0
40.0
60.0
80.0
100.0
U.S. Equity Fixed Income Cash
Pe
rce
nta
ge
Actual Policy
$'000s Actual P olicy
U.S. Equity 0 0
Fixed Income 93,637 93,637
Cash 0 0
Total 93,637 93,637
• The Quasi Endowment portfolio returned 1.48% during the first quarter, underperforming the benchmark by 0.02%
• The Quasi total fund has total assets of $93.6 million
• There were no contributions this quarter
• Total distributions and fees totaled $1.21 million
• The Quasi fund had investment gain of $1.5 million
Asset Allocation vs. Policy
Investment Performance
Quarter Results
($’000)
(Periods Ending March 31, 2007)
Note: At the direction of the Board of Regents, slight adjustments have been made to composite market values to account for rounding.
11
Quasi Endowment Review
$'000 Investment Comp Qtr 1 Yr 3 Yrs 5 Yrs InceptionFee $'000 % % % % % %
Dodge & Cox (3/31/04) 47,986 54 51.2%Gross of Fee Return 1.6 7.2 3.9 -- 3.9Net of Fee Return 1.4 6.7 3.5 -- 3.5 Lehman Aggregate 1.5 6.6 3.3 -- 3.3
Reams Asset Management Quasi (9/30/01) 45,651 28 48.8%Gross of Fee Return 1.6 7.4 3.8 5.2 4.8Net of Fee Return 1.5 7.1 3.5 4.9 4.6 Lehman Aggregate 1.5 6.6 3.3 5.4 4.9
Quasi Composite (6/30/98) 93,637 82 100% 1.5 6.9 3.5 5.1 5.3 Custom Policy* 1.5 6.6 3.3 5.4 5.7
(Periods Ending March 31, 2007)
Note: At the direction of the Board of Regents, slight adjustments have been made to composite market values to account for rounding.
*Please see Glossary for policy specifications.
12
Domestic Equity Composite ReviewUniversity of Iowa $'000 Investment Comp Qtr 1 Year 3 Years 5 Years Inception
Fee $'000 % % % % % %
Goldman Sachs Large Cap (3/31/05) 52,840 50 40.2%Gross of Fee Return 0.1 10.2 -- -- 13.3Net of Fee Return 0.0 9.8 -- -- 12.8 S&P 500 0.7 11.9 -- -- 11.8
Lotsoff Large Cap Equity (3/31/05) 52,811 47 40.1%Gross of Fee Return 0.6 10.3 -- -- 12.0Net of Fee Return 0.5 9.9 -- -- 11.6 S&P 500 0.7 11.9 -- -- 11.8
LSV Asset Mgm't (6/30/02) 13,563 23 10.3%Gross of Fee Return 4.8 11.4 13.8 -- 13.7Net of Fee Return 4.6 10.6 13.0 -- 13.0 Russell 2500 Value 3.1 12.2 15.2 -- 16.0
Artisan Small Cap Growth (3/31/05) 12,364 35 9.4%Gross of Fee Return 0.7 -3.7 -- -- 11.0Net of Fee Return 0.4 -4.7 -- -- 9.9 Russell 2000 Growth 2.5 1.6 -- -- 13.9
Domestic Equity Composite (3/31/89) 131,578 155 100.0% 0.7 8.4 10.3 5.7 11.5 Wilshire 5000 1.4 11.3 11.0 7.7 11.5
Manager Returns – Iowa State University
Manager Returns – University of Iowa
Iowa State University $'000 Investment Comp Qtr 1 Year 3 Years 5 Years InceptionFee $'000 % % % % % %
Goldman Sachs Large Cap (3/31/05) 32,846 34 38.6%Gross of Fee Return 0.0 9.3 -- -- 12.3Net of Fee Return -0.1 8.9 -- -- 11.9 S&P 500 0.7 11.9 -- -- 11.8
Lotsoff Large Cap Equity (3/31/05) 32,987 29 38.8%Gross of Fee Return 0.6 10.2 -- -- 12.0Net of Fee Return 0.5 9.9 -- -- 11.7 S&P 500 0.7 11.9 -- -- 11.8
LSV Asset Mgm't (6/30/02) 9,736 17 11.5%Gross of Fee Return 5.0 11.6 14.4 -- 14.1Net of Fee Return 4.8 10.8 13.6 -- 13.4 Russell 2500 Value 3.1 12.2 15.2 -- 16.0
Artisan Small Cap Growth (3/31/05) 9,446 27 11%Gross of Fee Return 0.7 -3.7 -- -- 10.9Net of Fee Return 0.4 -4.7 -- -- 9.9 Russell 2000 Growth 2.5 1.6 -- -- 13.9
Domestic Equity Composite (3/31/89) 85,015 107 100.0% 0.7 7.9 10.2 5.5 11.2 Wilshire 5000 1.4 11.3 11.0 7.7 11.5
(Periods Ending March 31, 2007)
Note: At the direction of the Board of Regents, slight adjustments have been made to composite market values to account for rounding.
13
Domestic Equity Composite Review
-170
-145
-120
-95
-70
-45
-20
5
30
55
80
105
130
155
-150 -125 -100 -75 -50 -25 0 25 50 75 100 125 150
Value/Growth
Siz
e
Domestic Equity Comp
Goldman
Lotsoff
LSV
S&P 500
Russell 2000 Growth
Russell 2500 Value
Wilshire 5000
Artisan
(Periods Ending March 31, 2007)
14
Domestic Equity Review – Goldman Sachs
11.812.8
0.0
9.8
0.7
11.9
-20.0
-15.0
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
Last Quarter One Year Inception
Per
cent
age
Goldman Sachs S&P 500
University of Iowa -- Value Added (Vs. S&P 500)
Iowa State University -- Value Added (Vs. S&P 500)
Attribution
• Stock selection within the Health Care, Consumer Discretionary, and Information Technology sectors detracted from the value of portfolio during the first quarter
• Stock selection within the Energy and Industrial sectors added value to the portfolio
• An underweight to Utilities relative to the benchmark also diminished the return
Manager Overview
• Style: Large Capitalization Core Equity
• Construction Process: Optimization
• Investment Philosophy: Enhanced Index
• Selection Method: Quantitative valuation
11.8
8.9
0.1-
11.911.9
0.7
-20.0
-15.0
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
Last Quarter One Year Inception
Per
cent
age
Goldman Sachs S&P 500
(Periods Ending March 31, 2007)
15
Domestic Equity Review – Lotsoff
11.89.9
0.5
11.611.9
0.7
-20.0
-15.0
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
Last Quarter One Year Inception
Per
cent
age
Lotsoff S&P 500
University of Iowa -- Value Added (Vs. S&P 500)
Iowa State University -- Value Added (Vs. S&P 500)
Attribution
• Stock selection within the Industrials and Energy sectors added value to the portfolio
• An underweighting to both the Utilities and Telecommunications sectors relative to the benchmark were causes of underperformance
• Poor stock selection within the Financials and Consumer Discretionary sectors were primary drivers of underperformance.
Manager Overview
• Style: Large Capitalization Core Equity
• Construction Process: Optimization
• Investment Philosophy: Active Bottom Up
• Selection Method: Quantitative valuation
11.89.9
0.5
11.711.9
0.7
-20.0
-15.0
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
Last Quarter One Year Inception
Per
cent
age
Lotsoff S&P 500
(Periods Ending March 31, 2007)
16
Domestic Equity Review – LSV Asset Mgmt.
15.210.6 13.0
4.6
13.012.216.0
3.1
-25.0
-15.0
-5.0
5.0
15.0
25.0
35.0
45.0
55.0
65.0
Last Quarter One Year Three Years Inception
Per
cen
tage
LSV Russell 2500 Value
University of Iowa -- Value Added (Vs. Russell 2500 Value)
Iowa State University -- Value Added (Vs. Russell 2500 Value)
Attribution
• Stock selection was the primary driver of LSV’s out performance this quarter
• Stock selection within the Consumer Staples and Consumer Discretionary sectors added value to the portfolio
• An underweight to Financials and an overweight to Consumer Staples were sources of LSV’s out performance
Manager Overview
• Style: Mid Capitalization Value Equity
• Construction Process: Optimization
• Investment Philosophy: Active - Bottom up
• Selection Method: Quantitative valuation
15.210.8 13.4
4.8
13.612.216.0
3.1
-25.0
-15.0
-5.0
5.0
15.0
25.0
35.0
45.0
55.0
65.0
Last Quarter One Year Three Years Inception
Per
cent
age
LSV Russell 2500 Value
(Periods Ending March 31, 2007)
17
Domestic Equity Review – Artisan
13.9
4.7-
0.4
9.9
1.62.5
-35.0
-25.0
-15.0
-5.0
5.0
15.0
25.0
35.0
Last Quarter One Year Inception
Per
cent
age
Artisan Russell 2000 Growth
University of Iowa -- Value Added (Vs. Russell 2000 Growth)
Iowa State University -- Value Added (Vs. Russell 2000 Growth)
Attribution
• Poor stock selection within the Information Technology, and Consumer Discretionary sectors were the main contributors to Artisan’s underperformance for the quarter
• Stock selection within the Healthcare sector had a positive impact on performance
Manager Overview
• Style: Small Capitalization Growth Equity
• Construction Process: Optimization
• Investment Philosophy: Active - Bottom up
• Selection Method: Fundamental valuation
13.9
4.7-
0.4
9.9
1.62.5
-35.0
-25.0
-15.0
-5.0
5.0
15.0
25.0
35.0
Last Quarter One Year Inception
Per
cent
age
Artisan Russell 2000 Growth
(Periods Ending March 31, 2007)
18
International Equity Composite Review
University of Iowa $'000 Investment Qtr 1 Yr 3 Yrs 5 Yrs Inception
Fee $'000 % % % % %
Grantham, Mayo, Van Otterloo Foreign Fund (3/31/04) 42,338 87Gross of Fee Return 4.0 20.7 21.2 -- 21.2Net of Fee Return 3.8 19.7 20.3 -- 20.3 MSCI EAFE Index (N) 4.1 20.2 19.8 -- 19.8
Int'l Equity Composite (9/30/94) 42,338 87 3.8 19.7 20.3 19.0 8.8 MSCI EAFE Index (N) 4.1 20.2 19.8 15.8 7.8
Iowa State University $'000 Investment Qtr 1 Yr 3 Yrs 5 Yrs Inception
Fee $'000 % % % % %
Grantham, Mayo, Van Otterloo Foreign Fund (3/31/04) 28,824 59Gross of Fee Return 4.0 20.7 21.2 -- 21.2Net of Fee Return 3.8 19.7 20.3 -- 20.3 MSCI EAFE Index (N) 4.1 20.2 19.8 -- 19.8
Int'l Equity Composite (9/30/94) 28,824 59 3.8 19.7 20.3 18.3 8.6 MSCI EAFE Index (N) 4.1 20.2 19.8 15.8 7.8
19.820.3
8.83.8
19.019.7
7.84.1
15.820.2
-40.0
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
Last Quarter One Year Three Years Five Years Inception 9/30/94
Per
cent
age
Int'l Equity Comp MSCI EAFE (N)
University of Iowa -- Manager Returns Iowa State University -- Manager Returns
University of Iowa -- Value Added (Vs. MSCI EAFE (N))
Iowa State University -- Value Added (Vs. MSCI EAFE (N))
19.819.7 18.3
3.88.6
20.320.215.8
4.17.8
-40.0
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
40.0
Last Quarter One Year Three Years Five Years Inception 9/30/94
Per
cent
age
Int'l Equity Comp MSCI EAFE (N)
(Periods Ending March 31, 2007)
Note: At the direction of the Board of Regents, slight adjustments have been made to composite market values to account for rounding
19
International Equity Review – Grantham, Mayo, Van Otterloo
19.820.3
3.8
19.7
4.1
20.2
-40.0
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
Last Quarter One Year Inception
Per
cen
tage
GMO MSCI EAFE (N)
University of Iowa -- Value Added (Vs. MSCI EAFE Index)
Iowa State University -- Value Added (Vs. MSCI EAFE Index)
Attribution
• GMO underperformed the benchmark in the first quarter
• Stock selection within Germany was a primary driver of underperformance for the quarter
• An underweighting to the Australian markets detracted from overall performance
Manager Overview
• Style: International Value Equity
• Construction Process: Valuation measures
• Investment Philosophy: Active - Bottom up
• Selection Method: Fundamental Earnings Forecast
19.819.7
3.8
20.320.2
4.1
-40.0
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
40.0
Last Quarter One Year Inception
Per
cen
tage
GMO MSCI EAFE (N)
(Periods Ending March 31, 2007)
20
Fixed Income Composite Review
Iowa State University $'000 Investment Comp Qtr 1 Yr 3 Yrs 5 Yrs InceptionFee $'000 % % % % % %
Dodge & Cox Income Fund (3/31/04) 20,686 23 40.6%Gross of Fee Return 1.6 7.2 3.9 -- 3.9Net of Fee Return 1.4 6.7 3.5 -- 3.5 Lehman Aggregate 1.5 6.6 3.3 -- 3.3
Reams Asset Mgm't (9/30/02) 21,106 16 41.4%Gross of Fee Return 1.6 6.9 3.8 -- 4.5Net of Fee Return 1.5 6.5 3.4 -- 4.2 Lehman Aggregate 1.5 6.6 3.3 -- 4.1
Post Advisory (3/31/06) 9,152 13 18.0%Gross of Fee Return 3.1 10.8 -- -- 10.8Net of Fee Return 2.9 10.5 -- -- 10.5 Merrill Lynch High Yield Master II 2.7 11.6 -- -- 11.6
Fixed Income Composite (3/31/89) 50,944 52 100% 1.7 7.3 3.8 5.3 6.9 Custom Policy* 1.5 6.6 3.3 5.4 7.6
University of Iowa $'000 Investment Comp Qtr 1 Yr 3 Yrs 5 Yrs Inception
Fee $'000 % % % % % %
Dodge & Cox Income Fund (3/31/04) 30,871 35 41.4%Gross of Fee Return 1.6 7.2 3.9 -- 3.9Net of Fee Return 1.4 6.7 3.5 -- 3.5 Lehman Aggregate 1.5 6.6 3.3 -- 3.3
Reams Asset Mgm't (6/30/02) 29,880 19 40.0%Gross of Fee Return 1.6 6.9 3.7 -- 4.4Net of Fee Return 1.5 6.7 3.4 -- 4.1 Lehman Aggregate 1.5 6.6 3.3 -- 4.1
Post Advisory (3/31/06) 13,858 21 18.6%Gross of Fee Return 3.1 10.9 -- -- 10.9Net of Fee Return 2.9 10.5 -- -- 10.5 Merrill Lynch High Yield Master II 2.7 11.6 -- -- 11.6
Fixed Income Composite (3/31/89) 74,609 75 100% 1.7 7.4 3.7 5.2 7.5 Custom Policy* 1.5 6.6 3.3 5.4 7.6
(Periods Ending March 31, 2007)
Note: At the direction of the Board of Regents, slight adjustments have been made to composite market values to account for rounding
*Please see Glossary for policy specifications.
21
Fixed Income Review – Dodge and Cox
3.3
6.7
1.4
3.5
6.6
1.5
-3.0
-1.0
1.0
3.0
5.0
7.0
9.0
Last Quarter One Year Inception
Per
cent
age
Dodge & Cox Custom Policy
Attribution
University of Iowa -- Value Added (Vs. Lehman Aggregate)
• Dodge & Cox underperformed the benchmark by 0.07% in the first quarter
• The average quality of bonds within the portfolio is AA, compared to Lehman Aggregate’s AAA rating
• The portfolio has a duration of 3.82 years, versus the Lehman Aggregate’s duration of 4.50 years
• Style: Market Core
• Construction Process: Build Portfolios with Higher Yield than Market Portfolio
• Investment Philosophy: Active - Bottom up
• Selection Method: Quantitative and Qualitative valuation
Manager Overview
Iowa State University -- Value Added (Vs. Lehman Aggregate)
3.3
6.7
1.4
3.5
6.6
1.5
-3.0
-1.0
1.0
3.0
5.0
7.0
9.0
Last Quarter One Year Inception
Per
cen
tage
Dodge & Cox Custom Policy
(Periods Ending March 31, 2007)
22
Fixed Income Review - Reams
3.3
6.7
4.1
1.5
3.4
6.6
4.1
1.5
-3.0
-1.0
1.0
3.0
5.0
7.0
9.0
Last Quarter One Year Three Years Inception
Per
cent
age
Reams Asset Mgmt Custom Policy
Attribution
University of Iowa -- Value Added (Vs. Lehman Aggregate)
• Reams’ return was slightly greater than the benchmark by 0.02% in the first quarter.
• The average quality of bonds within the portfolio is AA, compared to Lehman Aggregate’s AAA rating
• The portfolio has a duration of 3.71 years, versus the Lehman Aggregate’s duration of 4.50 years.
• Style: Market Core
• Construction Process: Optimization
• Investment Philosophy: Active - Bottom up
• Selection Method: Quantitative and Qualitative valuation
Manager Overview
Iowa State University -- Value Added (Vs. Lehman Aggregate)
3.3
6.5
4.2
1.5
3.4
6.6
4.1
1.5
-3.0
-1.0
1.0
3.0
5.0
7.0
9.0
Last Quarter One Year Three Years Inception
Per
cen
tage
Reams Asset Mgmt Custom Policy
(Periods Ending March 31, 2007)
23
Fixed Income Review – Post Advisory
Attribution
University of Iowa -- Value Added (Vs. ML High Yield Master II)
• Post Advisory out performed its benchmark by 0.20% in the first quarter
• The average quality of bonds within the portfolio is B, a slightly lower rating than the Merrill Lynch High Yield Master II’s rating of BB
• The portfolio has a duration of 3.73 years, versus the benchmark duration of 4.67 years.
• Style: High Yield
• Construction Process: Subjective
• Investment Philosophy: Active - Bottom up
• Selection Method: Scoring model based on quantitative and quantitative inputs
Manager Overview
Iowa State University -- Value Added (Vs. ML High Yield Master II)
10.5
2.9
11.6
2.7
-3.0
-1.0
1.0
3.0
5.0
7.0
9.0
11.0
Last Quarter One Year
Per
cent
age
Post High Yield ML High Yield Master II
10.5
2.9
11.6
2.7
-3.0
-1.0
1.0
3.0
5.0
7.0
9.0
11.0
Last Quarter One Year
Per
cent
age
Post High Yield ML High Yield Master II
(Periods Ending March 31, 2007)
24
Real Estate Composite Review
Note: At the direction of the Board of Regents, adjustments have been made to composite market values to account for rounding
(Periods Ending March 31, 2007)
University of Iowa $'000 Investment Qtr 1 Yr 3 Yrs 5 Yrs Inception
Fee $'000 % % % % %
Principal Global Investors Enhanced Property Fund (12/31/05) 13,565 -- 2.8 15.9 -- -- 18.8 NCREIF Property Index 3.6 16.6 -- -- 16.3
Real Estate Composite (12/31/05) 13,565 -- 2.8 15.9 -- -- 18.8 NCREIF Property Index 3.6 16.6 -- -- 16.3
Iowa State University $'000 Investment Qtr 1 Yr 3 Yrs 5 Yrs Inception
Fee $'000 % % % % %
Principal Global Investors Enhanced Property Fund (12/31/05) 9,436 -- 2.8 15.9 -- -- 18.8 NCREIF Property Index 3.6 16.6 -- -- 16.3
Real Estate Composite (12/31/05) 9,436 -- 2.8 15.9 -- -- 18.8 NCREIF Property Index 3.6 16.6 -- -- 16.3
25
Private Equity Composite Review
Note: At the direction of the Board of Regents, adjustments have been made to composite market values to account for rounding
(Periods Ending March 31, 2007)
Iowa State University $'000 Investment Qtr 1 Yr 3 Yrs 5 Yrs Inception
Fee $'000 % % % % %
Lehman Brothers Crossroads Fund XVIII (12/31/06) 984 33 -2.8 -- -- -- -2.8 Dow Jones Wilshire 5000 1.4 -- -- -- 1.4
Private Equity Composite (12/31/06) 984 33 -2.8 -- -- -- -2.8 Dow Jones Wilshire 5000 1.4 -- -- -- 1.4
University of Iowa $'000 Investment Qtr 1 Yr 3 Yrs 5 Yrs Inception
Fee $'000 % % % % %
Lehman Brothers Crossroads Fund XVIII (12/31/06) 1,575 53 -2.8 -- -- -- -2.8 Dow Jones Wilshire 5000 1.4 -- -- -- 1.4
Private Equity Composite (12/31/06) 1,575 53 -2.8 -- -- -- -2.8 Dow Jones Wilshire 5000 1.4 -- -- -- 1.4
Appendix
27
Domestic Equity Manager Detail – Goldman Sachs
(Periods Ending March 31, 2007)
-5
0
5
10
15
Quarter One Year Tw o Years
An
nu
aliz
ed T
ota
l R
etu
rn (
Qu
arte
rly
Ret
urn
s)
Universe AnalysisUniverse AnalysisPeriods as of March 31, 2007Periods as of March 31, 2007
-0.59
0.31
1.21
1.84
2.74
5.07
7.13
9.89
11.57
13.30
8.06
10.25
11.89
13.02
14.63
Universe: Wilshire Large CorePercentiles: 10, 25, 50, 75, 90
Quarter One Year Two Years Goldman Sachs - Iowa -0.12 (83) 8.87 (61) 11.87 (50)Goldman Sachs - Univ 0.00 (81) 9.76 (51) 12.83 (29)S&P500 Official 0.64 (63) 11.84 (23) 11.78 (52)# of Products 259 259 259
28
Domestic Equity Manager Detail – Lotsoff
(Periods Ending March 31, 2007)
-5
0
5
10
15
Quarter One Year Tw o Years
An
nu
aliz
ed T
ota
l R
etu
rn (
Qu
arte
rly
Ret
urn
s)
Universe AnalysisUniverse AnalysisPeriods as of March 31, 2007Periods as of March 31, 2007
-0.59
0.31
1.21
1.84
2.74
5.07
7.13
9.89
11.57
13.30
8.06
10.25
11.89
13.02
14.63
Universe: Wilshire Large CorePercentiles: 10, 25, 50, 75, 90
Quarter One Year Two Years Lotsoff Capital - Io 0.52 (67) 9.86 (50) 11.66 (54)Lotsoff Capital - Un 0.49 (69) 9.91 (50) 11.63 (54)S&P500 Official 0.64 (63) 11.84 (23) 11.78 (52)# of Products 259 259 259
29
Domestic Equity Manager Detail – LSV
(Periods Ending March 31, 2007)
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
11.00
12.00
13.00
14.00
15.00
16.00
17.00
18.00
19.00
20.00
21.00
22.00
23.00
Quarter One Year Three Years 06/2002-03/2007
An
nu
aliz
ed T
ota
l R
etu
rn (
Qu
arte
rly
Ret
urn
s)Universe AnalysisUniverse Analysis
Periods as of March 31, 2007Periods as of March 31, 2007
2.73
3.03
3.60
4.30
5.00
12.63
13.93
15.50
17.57
20.12
9.38
13.73
14.85
18.34
19.81
11.14
11.81
15.32
17.17
19.52
Universe: Wilshire Mid ValuePercentiles: 10, 25, 50, 75, 90
Quarter One Year Three Years 06/02-03/07 Lsv Asset Management 4.83 (16) 10.83 (94) 13.59 (78) 13.40 (64)Lsv Asset Management 4.57 (20) 10.58 (94) 12.97 (80) 12.98 (66)Russell 2500 Val 3.09 (70) 12.17 (92) 15.19 (48) 16.00 (48)# of Products 15 15 15 12
30
Domestic Equity Manager Detail – Artisan
(Periods Ending March 31, 2007)
-10
-5
0
5
10
15
20
25
Quarter One Year Tw o Years
An
nu
aliz
ed T
ota
l R
etu
rn (
Qu
arte
rly
Ret
urn
s)Universe AnalysisUniverse Analysis
Periods as of March 31, 2007Periods as of March 31, 2007
0.97
2.36
3.92
5.21
6.38
-4.54
-1.08
1.51
4.49
9.29 9.44
12.61
14.65
17.45
20.72
Universe: Wilshire Small Grow thPercentiles: 10, 25, 50, 75, 90
Quarter One Year Two Years Artisan Partners - I 0.44 (92) -4.74 (91) 9.87 (88)Artisan Partners - U 0.44 (92) -4.73 (91) 9.89 (88)Russell 2000 Gro 2.47 (74) 1.56 (49) 13.94 (57)# of Products 212 212 212
31
International Equity Manager Detail – Grantham, Mayo, Van Otterloo
(Periods Ending March 31, 2007)
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
11.00
12.00
13.00
14.00
15.00
16.00
17.00
18.00
19.00
20.00
21.00
22.00
23.00
24.00
25.00
26.00
27.00
28.00
29.00
30.00
31.00
Quarter One Year Three Years
An
nu
aliz
ed T
ota
l R
etu
rn (
Qu
arte
rly
Ret
urn
s)Universe AnalysisUniverse Analysis
Periods as of March 31, 2007Periods as of March 31, 2007
2.05
2.95
3.86
4.85
6.79
12.59
16.04
19.22
21.98
25.46
17.15
18.87
20.74
23.42
27.00
Universe: Wilshire EAFEPercentiles: 10, 25, 50, 75, 90
Quarter One Year Three Years Gmo - Iowa State 3.76 (54) 19.71 (46) 20.28 (57)Gmo - University Of 3.76 (54) 19.71 (46) 20.29 (57)Msci Eafe $n 4.07 (42) 20.19 (42) 19.82 (64)# of Products 312 312 302
32
Fixed Income Manager Detail – Dodge & Cox
(Periods Ending March 31, 2007)
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
Quarter One Year Three Years
An
nu
aliz
ed T
ota
l R
etu
rn (
Qu
arte
rly
Ret
urn
s)Universe AnalysisUniverse Analysis
Periods as of March 31, 2007Periods as of March 31, 2007
1.43
1.52
1.59
1.68
1.78
6.28
6.49
6.74
7.08
7.49
2.95
3.29
3.60
3.92
4.32
Universe: Wilshire CorePercentiles: 10, 25, 50, 75, 90
Quarter One Year Three Years Dodge And Cox (Q) - 1.44 (89) 6.73 (52) 3.49 (61)Dodge And Cox - Univ 1.43 (89) 6.69 (55) 3.48 (61)Lb Aggregate 1.50 (81) 6.59 (66) 3.31 (73)# of Products 343 343 340
33
Fixed Income Manager Detail – Reams
(Periods Ending March 31, 2007)
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
Quarter One Year 09/2002-03/2007
An
nu
aliz
ed T
ota
l R
etu
rn (
Qu
arte
rly
Ret
urn
s)Universe AnalysisUniverse Analysis
Periods as of March 31, 2007Periods as of March 31, 2007
1.43
1.52
1.59
1.68
1.78
6.28
6.49
6.74
7.08
7.49
3.74
4.08
4.50
5.19
6.03
Universe: Wilshire CorePercentiles: 10, 25, 50, 75, 90
Quarter One Year 09/02-03/07 Reams Asset Manageme 1.48 (84) 6.55 (71) 4.21 (66)Reams Asset Mgmt - U 1.52 (76) 6.67 (58) 4.14 (70)Lb Aggregate 1.50 (81) 6.59 (66) 4.07 (75)# of Products 343 343 333
34
Fixed Income Manager Detail – Post Advisory
(Periods Ending March 31, 2007)
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
11.00
12.00
13.00
14.00
15.00
Quarter One Year
An
nu
aliz
ed T
ota
l R
etu
rn (
Qu
arte
rly
Ret
urn
s)Universe AnalysisUniverse Analysis
Periods as of March 31, 2007Periods as of March 31, 2007
2.172.45
2.77
3.10
3.38
8.81
9.48
10.71
11.84
12.98
Universe: Wilshire High YieldPercentiles: 10, 25, 50, 75, 90
Quarter One Year Post High Yield - Is 2.92 (38) 10.44 (58)Post High Yield - U 2.92 (38) 10.44 (58)Ml Hy Master Ii 2.74 (53) 11.58 (30)# of Products 88 88
35
Glossary
Total Endowment Policy % Description
6/89 -6/99 60.00 S&P 50030.00 Lehman Gov't/Credit10.00 MSCI EAFE Index (N)
9/99 -6/01 63.00 S&P 50030.00 Lehman Gov't/Credit7.00 MSCI EAFE Index (N)
9/01 -3/02 63.00 S&P 50030.00 Lehman Aggregate7.00 MSCI EAFE Index (N)
6/02 -3/06 63.00 Wilshire 500030.00 Lehman Aggregate7.00 MSCI EAFE Index (N)
6/06 - Present 50.00 Wilshire 500030.00 Lehman Aggregate15.00 MSCI EAFE (N)5.00 NCREIF Property Index
Fixed Income/ Quasi Policy % Description
9/98 -6/01 100.00 Lehman Gov't/Credit
9/01 - Present 100.00 Lehman Aggregate