INVESTMENTS Page 77
(continued)
Walton Street Real Estate Fund IV, L.P. (7/03) $65,380,039
Walton Street Real Estate Fund VI, L.P. (4/09) 63,690,883
Open-End Accounts
Hines U.S. Core Office Fund, L.P. (12/05) 157,751,662
Lion Industrial Trust (4/05) 153,502,161
International Real Estate Accounts
Carlyle Europe Real Estate Partners, L.P. (6/03) 10,639,923
Carlyle Europe Real Estate Partners III, L.P. (9/07) 40,520,982
CB Richard Ellis Strategic Partners Europe Fund III, L.P. (4/07) 35,428,127
CB Richard Ellis Strategic Partners UK Fund III, L.P. (5/07) 12,174,561
LaSalle Asia Opportunity Fund III, L.P. (11/07) 26,938,211
MGPA Asia Fund III, L.P. (12/07) 62,574,616
$4,062,261,189
Discussion of Real Estate
TRS’s real estate portfolio earned 17.8 percent during the fiscal year. Following a couple very challenging years
for the asset class due to the global financial crisis, commercial real estate markets have steadily improved
for the past several quarters. Market fundamentals such as property level income, rental rates, and sales have
been improving in core markets such as New York, Boston, and Washington D.C., while secondary and tertiary
markets have been slower to recover. Investors have demonstrated a flight to quality that has driven core values
higher and led to improving near term performance. The TRS investment portfolio maintains a long-term target
allocation of 14 percent to real estate and is currently 10.8 percent invested in the asset class. The portfolio will
continue its efforts to move toward the long-term allocation through strategic allocations and opportunistically
taking advantage of the property transaction market.
SECURITIES LENDING
TRS participates in securities lending with its custodian, State Street Bank and Trust Company, acting as the secu-rities
lending agent. The Board of Trustees’ policies permit TRS to use investments to enter into securities lending
transactions, which are loans of securities to broker-dealers or other entities. Additional information regarding
securities lending activity is included in the Notes to Financial Statements under “D. Investments.”
For the year ended June 30, 2011, TRS earned net income of $17.8 million through its securities lending pro-gram.
The income from this program was less than the prior fiscal year mainly due to a decrease in the average
on loan balance. The Securities Lending Summary table outlines the net income from securities lending activity,
the securities on loan, the amount of collateral for these securities, and the average utilization rate information.
Securities Lending Summary
FY11 FY10
Net securities lending income $17, 793,331 $21,111,429
Values as of fiscal year-end (June 30):
Total State Street collateral market value 3,217,193,460 3,568,594,875
Total market value of securities on loan at State Street 3,132,542,532 3,473,627,126
Total collateralized percentage 103% 103%
Fiscal year 12 month averages:
Average lendable 17,791,565,341 16,747,267,594
Average on loan 3,329,090,638 3,891,585,303
Average utilization 18.7% 23.2%
Source: State Street Bank and Trust
Note: Securities lending collateral reflected on the Statements of Plan Net Assets reflects the securities purchased with cash collateral.
