Choice Plan Trading Restrictions

Choice Plan 401(k) Trading Restrictions

MARKET TIMING AND EXCESSIVE TRADING PRACTICES ADVERSELY AFFECT OTHER PARTICIPANTS

In December 2003 and again in February 2004 we sent letters to participants who were investing in the two international funds offered by the PERSI Choice 401(k) Plan. The topic of those letters was the fact that some participants have been engaging in market timing and/or excessive trading practices in those funds (Mellon International and Brandes International). While this is not illegal, it skews the performance of those funds, increases the costs to all of the participants in those funds, and dilutes the returns of the long-term shareholders in the funds.

The Choice Plan is designed to give our members a low-cost, long-term retirement savings vehicle to supplement their PERSI Base Plan benefit. It is not designed to be used for market timing and/or day trading.

The Investment Policy was changed on December 16, 2003 to address the concerns raised by these practices. View the full text of the policy.

TRADING LIMITATIONS TO BE IMPOSED

The February 2004 letter announced certain trading restrictions that would be in place by May 1, 2004 . Since then additional alternatives have emerged as this issue has been addressed by the Securities and Exchange Commission (SEC) and the mutual fund industry as a whole. These alternatives provide a different approach that would be more effective in targeting the issue. As a result, the restrictions previously announced will not be implemented. Instead, the PERSI Retirement Board has elected to take the action described below:

Effective August 1, 2004 , the number of trades (transfers) into and out of the two international funds, Mellon International and Brandes International, will be limited to two (2) trades per fund in a 90-day period. The 90-day period will be based on calendar days and will be calculated on a rolling period from the current date back 90 days. Systematic purchases and redemptions, such as payroll deferrals, rollovers, and scheduled periodic distributions, are exempt from this limitation.

SUMMARY

The market timing/excessive trading issue affects many plans throughout the country and has also caught the attention of the media and regulatory agencies, so you may have read articles in various publications or heard about this on the news. In response, the SEC is preparing proposals to address the issue for funds under its control. Other plan sponsors are evaluating the issue and beginning to make changes to their plans as well. Likewise, the Retirement Board has decided it must take such steps to protect the assets of all plan participants.

If you have any questions concerning this issue, or the PERSI Choice Plan, please call the Choice Plan Department at (208) 287-9294 or (208) 287-9297. We appreciate your understanding and cooperation.