A Message from

Eric L. Holoman, Board President

On behalf of the Board, I’d like to take this opportunity to wish you a Happy New Year. I hope your holidays were pleasant and full of good cheer.

I am pleased to report that our LACERS fund continues to perform well, ranking in the top quartile of public pension funds for five consecutive years based on our returns. For the fiscal year ending June 30, 2006, our fund grew over $1 billion — from $8.3 billion to $9.3 billion — while posting positive returnsand consistently outperforming our policy benchmarks in the long term.

In addition, for the calendar year ending December 31, 2006, LACERS portfolio closed at $10.4 billion. Our strong investment performance was primarily due to the success of our asset allocation mix. With our asset mix, we were able to diversify our portfolio in various investments to maximize our returns while reducing the overall volatility of our portfolio. We will continue to seek new investment opportunities consistent with this strategy.

Also, as a result of the diligent oversight of the Benefits Administration Committee chaired by Commissioner Ken Spiker, the Board was able to reduce the overall costs of the plans without eliminating any current benefits.

Be assured that the LACERS Board is actively engaged in long-range planning to insure the sustainability of our healthcare program and to continue to offer health benefits that you and LACERS can afford.

We wish you all the best for 2007.