2011 - Division of Administration - Louisiana

State of LouisianaRisk DisclosuresCredit Risk: As of June 30, 2011, TRSLA’s credit risk hadnot increased with the use of the overlay strategy becausethe futures based overlay program uses exchange tradedfutures contracts. Likewise, LSER’s has no direct creditrisk exposure from the equity futures or fixed incomefutures because the futures are settled daily by theexchange, which is the counterparty for all transactions.Foreign Currency Risk: As of June 30, 2011, LSER’s fixedincome futures and LASER’s forward currency forwardswere exposed to foreign currency risk. At June 30, 2011the fixed income futures, which are denominated in Britishpounds, Australian dollars, and Canadian dollars had a fairvalue of $-0-.The following table illustrates LASER’s total exposure toforeign currency risk at June 30, 2011 of $(444,590) bycurrency denomination:Fair Value(U.S. dollars)CurrencyValueAustralian dollar $(58,208)British pound (295)Euro (385,010)Mexican peso (641)Singapore dollar 10,536 1,222Swiss franc (1,658)Total $(444,590)At June 30, 2011 foreign currency risk has been reducedby use of the futures based overlay program. The use ofthe overlay program reduced the variance of TRSLA’sactual return to the benchmark return.Interest Rate Risk: At June 30, 2011 LSERS is exposed tointerest rate risk on the fixed income futures. The valuesof the futures are directly linked to interest rate indiceswhich increase and decrease as interest rates change.- 67 -