Washington State Investment Board
Recent Press Releases
On
ENRON Bankruptcy

February 4, 2002
ENRON IMPACT Q&A

Question: Will the state's investments in Enron reduce my retirement benefit?

No. Retirement benefit payments of retired members, and future retired members, of defined benefit
retirement plans are not impacted in any way by the Enron bankruptcy (or the bankruptcy of any other
company).

There are both class action and bankruptcy cases. The Investment Board will seek to participate
actively in the class action, and is assessing the bankruptcy case, working through the State Attorney
General's Office.

The retirement benefits for members of defined benefit retirement plans are not affected by the
investment return of the funds (positive or negative). The retirement benefits in defined benefit plans are
calculated on a formula based on years of service and salary. The benefit level is guaranteed by the
state and the retiree does not take on any investment risk. Therefore, the retirement benefit payments
received by retirees are not reduced in any way due to Enron investments in the retirement fund
portfolio.

The state's defined benefit retirement plans are: Teachers' Retirement System (TRS) Plans 1 and 2,
Public Employees' Retirement System (PERS) Plans 1 and 2, School Employees' Retirement System
(SERS) Plan 2, Law Enforcement Officers' and Firefighters' (LEOFF) Plans 1 and 2, the Washington
State Patrol Retirement Plan, and the Volunteer Firefighters' Retirement Plan.

Question: What is the impact of the Enron bankruptcy on the funding status of the state's
defined benefit retirement funds?

Due largely to tremendously strong investment returns over the past 20 years, averaging in excess of 13
percent annually, the funding status of the state's defined benefit retirement plans is sound.

The defined benefit retirement funds of the state are invested together in a single investment portfolio
known as the retirement commingled trust fund (CTF). The CTF is invested across six major asset
classes: U.S. equity, non-U.S. equity, fixed income, real estate, private equity, and cash equivalents.
Only about one-third of the fund is invested in U.S. equity (Enron stock falls under the category of U.S.
equity). The CTF portfolio owns no company stock outright, thus never has held any Enron stock
directly. However, the U.S. equity portion of the portfolio is passively invested in a broad market U.S.
stock index fund (Wilshire 5000). Up until November 2001, Enron was one of the nearly 5000 companies
represented in the U.S. Stock Market Index Fund. While we estimate that the loss to the index fund
relative to Enron's failure was about $13 million (out of a $16.1 billion U.S. equity portfolio, or about eight
one-hundredths of one percent), it was easily overwhelmed by the fourth quarter gain in this fund of 11.7
percent.

The retirement CTF's larger exposure to Enron is in the form of three bonds held in the fixed income
asset class. These bonds had a face value of $70 million and have a current market value of about $13.3
million. The $56 million decline in market value of these bonds represents a very small portion of the
$10.1 billion bond portfolio.

The total $69 million loss (estimated impact on stock index plus loss of value in the bonds) represents
0.17 percent of the total value ($41.2 billion) of the retirement CTF, a figure which was overwhelmed by
the strong fourth quarter CTF investment gain of 4.56 percent.

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December 20, 2001
Enron Corp. Bankruptcy

The Washington State Investment Board has decided to seek co-lead plaintiff status in class action
suits against Enron Corp. and related persons and organizations. Enron declared bankruptcy on
December 2, after disclosing accounting and financial problems. Subsequently, Enron has announced
plans to sell up to $6 billion in assets.

The Investment Board had both stock (at one time valued at about $12 million, now less than $1 million)
and bonds of $112 million (worth approximately $20 million today). About $70 million of the bonds were
in various retirement funds managed by the Board.

Since the stock was part of an index fund managed by Barclay's Global Investors, after the S&P 500
index dropped Enron, so did Barclay's - hence the Board currently has no exposure to Enron stock .

There are both class action and bankruptcy cases. The Investment Board will seek to participate
actively in the class action, and is assessing the bankruptcy case, working through the State Attorney
General's Office.

The WSIB will seek to do all it can to re-coup what it can in this extremely appalling situation," said
Executive Director James Parker. "In terms of the entire $54 billion portfolio, the Enron exposure
actually was relatively small. Pension participants, the vast majority of whom are in defined benefit
plans, can be assured that their pensions will not be affected as a result of the Enron bankruptcy."