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Telephone numbers: (502) 573-7925 or (800) 542-2667

April 2000

Join us on the “WEB” at http://www.kentuckydcp.com or http://www.state.ky.us/agencies/personnel/pershome.htm or e-mail us at persdeferredcomp@mail.state.ky.us.

Telephone number (502) 573-7925 or 800-542-2667

CAREER HIGHLIGHTS

Ms. Palmore became Secretary ofthe Personnel Cabinet on May 4, 1998.Prior to that time she had served as

Deputy Secretary of the newly elevatedPersonnel Cabinet and in 1986 wasappointed Secretary of Labor by

Governor Martha Layne Collins. Sheserved in that position until resigningto become a candidate for Secretary of

State.

EDUCATION

• Graduate of Murray State

University with a double-major in history and political science.

• Juris Doctorate from the University of Kentucky College of Law

PROFESSIONAL AND CIVIC ACTIVITIES

Ms. Palmore has served on theAlliant Health System Adult OperatingBoard, as President of the Kentucky

Bar Foundation, as a member of theKentucky Bar Association House ofDelegates, Program Chairman for the

Frankfort Rotary Club, and was in theInaugural Class of Kentucky Women’sLeadership Network. She has also been

a presenter on the subject of LaborLaw at legal seminars sponsored by theUniversity of Kentucky, the University of

Louisville, and the Legislative ResearchCommission.

Secretary Palmore resides with her

husband, former Supreme Court ChiefJustice John Palmore in FranklinCounty.

Meet Your Board of Trustees

Carol M. PalmoreSecretary, Personnel Cabinet

FIXED CONTRACT FUND RATE A blended net crediting rate that will yield 6.00 % will be credited for the Second Quarter of 2000. The rate was 5.75% for the previous quarter.

With this issue, we continue ourFeature Section called “Meet your Board of Trustees”This issue features

Carol M. PalmoreSecretary, Personnel Cabinet

Fund Spotlight

Newsletter Page 2

Invesco Telecommunications Fund (ISWCX)Basic Fund InformationCategory: Specialty-CommunicationsFamily: Invesco Family of FundsNet Assets: $2.37 billionMorningstar Rating: ***** Turnover: 55%Expense Ratio: 1.32%Manager: Brian B. Hayward, CFA Vice President,INVESCO Funds Group. Has managed this fund since1997.

Returns (%) as of 3/31/20003 mo. 1 yr . 3 yr. avg. 5 yr. avg.

ISWCX 24.75 137.20 80.31 51.39S&P 500 2.19 17.16 27.39 26.52Diff. +22.56 +120.04+52.92 +24.87

Portfolio Characteristics (%) Stocks 90.56 Bonds 0.00Preferred 0.26Convertibles 0.00Cash 9.18

Sector Weightings (%)Industrial Cyclicals 10.31Services 34.12Retail 0.85Technology 54.71

Top 10 Stock Holdings (%)JDS Uniphase 3.24EchoStar Communications Class A 3.08Nokia Corp 3.01Mannesmann AG 2.79Gemstar International Group LTD 2.77Cisco Systems 2.49EMC Corp 2.27COLT Telecom Group ADR 2.07Qualcomm Inc 1.98SDL Inc 1.97

The fund's goal and general investment strategyInvesco Telecommunications Fund seeks total return.The fund ordinarily invests at least 65% of its assets inforeign and domestic companies that are involved inthe production or distribution of communicationsservices and equipment. It may invest the balance ofassets in companies that are engaged in developing,constructing, or operating infrastructure projectsthroughout the world. The fund typically invests in atleast three countries.

Federated International Small CompanyFund (Class A) (ISCAX)Basic Fund InformationCategory: Foreign StockFamily: Federated FundsNet Assets: $628.30 millionMorningstar Ratings: *****Turnover: 380%Expense Ratio: 1.95%Manager: Leonardo A. Vila, manager since 7/99 andanalyst since 2/96.

Returns (%) as of 3/31/20003 mo. 1 yr . 3 yr. avg.

ISCAX 8.70 123.36 49.97 S&P 500 2.19 17.16 27.39 Diff. +6.51 +106.20 +22.58

Portfolio Characteristics (%) Stocks 91.55Bonds 0.00Preferred 0.16Convertibles 0.00Cash 8.21

Sector Weighings (%)Utilities 0.17Energy 1.48Financials 9.55Industrial Cyclicals 18.65Consumer Durables 4.61 Consumer Staples 5.13 Services 20.12Retail 10.75 Health 2.64 Technology 26.92

Top 10 Stock Holdings (%)Vestas Wind Sys 1.39Kamps 1.29Trend Micro 1.27Yamada Denki 1.24Datacraft Asia 1.22Trafficmaster 1.10Japan Radio 1.09Matalan 0.92ARM Hldgs ADR 0.91Rokas (Reg) 0.90

The fund's goal and general investment strategyFederated International Small Company Fund Class Aseeks long-term capital growth. The fund normallyinvests at least 65% of assets in equity securities offoreign companies with market capitalizations of lessthan $1.5 billion. It typically maintains investments inat least three countries. In selecting investments, theadvisor focuses on industry trends, a company'sfinancial strength, competitive position, technology,and profitabilty. The fund may also purchase U.S. andforeign debt.

Munder NetNet Fund (MNNAX) (Class A)Basic Fund InformationCategory: Specialty-TechnologyFamily: The Munder FundsNet Assets: $2.94 billionMorningstar Rating: *****Turnover: 22%Expense Ratio: 1.59%Manager: Management Team; since 8/19/1996

Returns (%) as of 3/31/20003 mo. 1 yr. 3 yr avg.

MNNAX 13.46 102.96 115.34 S&P 500 2.19 17.16 27.39Diff. +11.27 +85.80 +87.95

Portfolio Characteristics (%) Stocks 91.58Bonds 0.00Preferred 0.00Convertibles 0.00Cash 8.42

Sector Weightings (%)Financials 1.52Services 19.75Retail 2.70Technology 76.04

Top 10 Stock Holdings (%)InfoSpace.com Inc 5.82VerticalNet Inc 3.19Exodus Communcations 3.01TMP Worldwide 2.86Verisign Inc 2.61DoubleClick Inc 2.55Cisco Systems Inc 2.46JDS Uniphase 2.29CMGI Inc 2.12Spectra Diode Lab 2.10

The fund's goal and general investment strategyMunder NetNet Fund-Class A seeks long-term capitalappreciation. The fund normally invests at least 65%of assets in equities issued by companies that areengaged in the research, design, development,manufacturing, or distribution of products, processes,or services for use with the Internet and Intranetrelated businesses. It may invest the balance in short-term money-market instruments. The fund may alsoinvest a portion of assets in foreign securities issued bysmaller, unseasoned companies.

Board administered mutual funds added to the current Spectrum of Investment Options effective April 3, 2000

Page 3Newsletter

Invesco Small Company Growth Fund(FIEGX)Basic Fund InformationCategory: Small-Cap GrowthFamily: Invesco Family of FundsNet Assets: $876.00 MillionMorningstar Rating: ****Turnover: 203%Expense Ratio: 1.51%Manager: Stacie A. Cowell, Vice President, INVESCOfunds group. Manager since 1996

Returns (%) as of 3/31/20003 mo . 1 yr . 3 yr avg. 5 yr. avg.

FIEGX 12.89 107.56 45.97 31.29S&P 500 2.19 17.16 27.39 26.52Diff. +10.70 +90.40 +18.58 +4.77

Portfolio Characteristics (%)Stocks 87.68Bonds 0.00Preferred 0.00Convertibles 0.00Cash 12.31

Sector Weightings (%)Energy 5.27Financials 3.54Industrial Cyclicals 0.58Consumer Durables 2.67Consumer Staples 1.22 Services 22.11 Retail 7.50 Health 7.25Technology 49.85

Top 10 Stock Holdings (%)BindView Dev 1.43Pinnacle Holdings 1.26Iona Tech ADR 1.21Intranet Solutions Inc 1.18Insight Enterprises Inc 1.12Remec Inc 1.12DSET Corp 1.1124/7 Media Inc 1.10Natural Microsystems Corp 1.08Citadel Communications 1.06

The fund's goal and general investment strategyInvesco Small Company Growth Fund seeks long-termgrowth of capital. The fund normally invests at least65% of assets in equities of companites with marketcapitalizations of less than $1 billion. Managementtypically selects undervalued companies it judges tohave the potential or accelerating earnings growthresulting from management changes, rapid salesgrowth, or new products.

Janus Global Technology Fund (JAGTX)Basic Fund InformationCategory: Specialty-TechnologyFamily: JanusNet Assets: $9.08 billionMorningstar Rating: Not RatedTurnover: 31%Inception: 12/31/1998Expense Ratio: 1.01%Manager: Mike Lu, Janus Funds Group. Has managedthis fund since 12/31/1998.

Returns (%) as of 3/31/20003 mo. 1 yr.

JAGTX 19.24 185.98 S&P 500 2.19 17.16 Diff. +17.05 +168.82

Portfolio Characteristics (%) Stocks 79.30Bonds 5.34Preferred 0.19 Convertibles 0.98 Cash 14.18

Sector Weightings (%)Energy 0.59Financials 0.46Industrial Cyclicals 1.67Services 18.70Retail 1.94Health 1.08Technology 75.55

Top 10 Stock Holdings (%)JDS Uniphase 4.21Nokia CI A ADR 4.19Veritas Software Corp 2.90Sun Microsystems Inc 2.64Sapient Corp 2.4412 Technologies 2.33China Telecom HK ADR 2.13Verisign Inc. 2.03Exodus Communications Inc 1.98Cisco Systems 1.93

The fund's goal and general investment strategyJanus Global Technology Fund seeks long-term growthof capital. The fund normally invests at least 65% ofassets in foreign and domestic securities of companiesthe manager believes will benefit significantly fromadvances or improvements in technology.

One Group Mid Cap Value Fund (OGDIX)(Class A)Basic Fund InformationCategory: Mid-Cap ValueFamily: One GroupNet Assets: $952.20 millionMorningstar Rating: **Turnover (1999): 116%Inception: 02/19/1992Expense Ratio: 1.21%Manager: Kathy Cole, since 4/1995.

Returns (%) as of 3/31/20003 mo . 1 yr . 3 yr avg. 5 yr. avg.

OGDIX 7.30 15.66 15.21 15.81S&P 500 2.19 17.16 27.39 26.52Diff. +5.11 -1.50 -12.18 -10.71

Portfolio Characteristics (%)Stocks 94.13Bonds 0.00Preferred 0.00Convertibles 0.00Cash 5.86

Sector Weightings (%)Utilities 15.16Energy 11.07Financials 18.62Industrial Cyclicals 15.56Consumer Durables 4.29Consumer Staples 4.31Services 14.45Retail 3.50Health 5.07Technology 7.96

Top 10 Stock Holdings (%)S & P 500 Dep Rec SPDR 1.98Telephone & Data Systems 1.82Marshall & Ilsley Corp 1.56First Security Corp 1.45Noble Drilling Corp 1.42Montana Power Co. 1.29Weatherford Int'l 1.25Ambac, Inc 1.21DST Systems Inc. 1.18Charter One Financial, Inc 1.11

The fund's goal and general investment strategyOne Group Mid Cap Value Fund-Class A seeks capitalappreciation; current income is secondary. The fundnormally invests at least 80% of assets in equitysecurities valued at price/earnings and price/bookrations below market averages and with marketcapitalizations of $500 million to $10 billion.

Newsletter Page 4

NEW FUND ACTIONSThe Authority Board has voted to add the

following Board Administered mutual fundsto the current Spectrum of InvestmentOptions effective April 3, 2000.

1. Janus Global Technology Fund2. INVESCO Telecommunications Fund3. One Group Mid Cap Value Fund

(Class A)4. Munder NetNet Fund (Class A)5. INVESCO Small Company Growth Fund6. Federated International Small Company

Fund (Class A)(See pages 2 and 3 of this newsletter for more information.)

NEUBERGER BERMAN PARTNERS TRUST TERMINATION

The Board also acted to close, effectiveApril 3, 2000, the Neuberger BermanPartners Trust. This fund was closed becauseof its style drift from mid cap value to largecap value where there was sufficientrepresentation already available. TheAuthority will advise participants of theirvalues in the Partners Trust and what likefunds will be available for reinvestment.They will also be advised that if they have notfully redirected their Partners Trust value,and any future deferrals, by July 13, 2000,the remaining balance in the Partners Trustwill default to the Davis New York Venture(Class A) Fund.

GPVA CLOSINGIn a separate action, the Board

unanimously approved staff'srecommendation to first suspend andsecondly to terminate the NationwideGovernmental Plans Variable Annuity(GPVA). This action is expected to result in atotal annual fee reduction of at least$140,000 for all participants currentlyinvesting in the GPVA. The target date for thistermination is May 25, 2000.

With the impending termination of theGPVA contracts, the Board also moved tosuspend the GPVA and establish the followingGPVA fund options on the BoardAdministered Mutual Fund side of theSpectrum of Investment Options effectiveApril 3, 2000:

1. Nationwide Fund (Class D)2. Putnam Investors Fund (Class A)3. Putnam Voyager Fund (Class A)4. Franklin Small Cap Growth Fund

(Class A)5. T. Rowe Price International Stock Fund

By adding these funds April 3rd,participants will be able to continue deferralsinto these funds without interruption whenthe GPVA contracts terminate. Also, anyparticipant values remaining in these fundson the termination date will be automaticallytransferred to the same fund on the BoardAdministered side.

Additionally, the Board acted to close theNationwide Money Market Fund andOppenheimer Capital Appreciation Fund(Class A) simultaneously with thesuspension and termination of the GPVAcontracts. The Authority will provideparticipants advance notice of theseimpending actions and explain any valuesremaining on the termination date in: 1) theNationwide Money Market Fund will defaultto the Federated Prime Obligations MoneyMarket Fund and 2) the OppenheimerCapital Appreciation Fund (Class A) willdefault to the MFS Massachusetts InvestorsGrowth Stock Fund (Class A).

When the movement from the GPVA iscomplete, participants previouslyparticipating in the GPVA should see animmediate reduction in fees of at least 15basis points (bps). In addition, all futurevaluations and reporting will be conductedutilizing shares instead of the units used bythe GPVA. This will make the Plans easier tounderstand and should facilitate the use ofoutside software to value accounts on homecomputers. Upon termination of the GPVAcontracts, the Nationwide purchased annuitywill no longer be an available payout option.This has not been a popular participantpayout option. Participants currently usingthis payout option will not be affected.

FIXED CONTRACT FUND CHANGEAs a part of the Authority's ongoingcommitment to provide well diversifiedinvestment products of high quality to Plan

participants, the Board has contracted withPrimco Capital Management, Louisville,KY, to serve as the discretionary manager forthe Fixed Contract Fund (FCF) assets.Primco is a leading manager of stable valueassets, with over $24 billion undermanagement for major corporations andgovernmental entities throughout thecountry. Primco was selected by the Board,with assistance from a nationally recognizedinvestment consulting firm, after carefullyevaluating a universe of highly qualifiedcandidates as part of a Request for Proposal(RFP) process. Primco is expected toprovide the FCF a higher credit qualityportfolio of securities, increaseddiversification, interest rate responsiveness,and lower costs than the previous FCFstructure.

Primco's approach to managing the FCFwill be consistent with Board policy and whatwe have previously communicated toparticipants. Primco will purchase a portfolioof highly rated fixed income securities thatwill be held in a separate custodial accountfor the benefit of the Plan and itsparticipants. Additionally, PRIMCO willcombine these assets with guarantees fromseveral top rated insurance companies toprovide the FCF with benefit responsivenessfeatures that make stable value funds, likethe FCF, distinct from other fixed incomealternative investments, such as bond funds.

RECORD KEEPING AND INVESTMENTCONSULTANT SERVICES

Following an RFP process, and based uponrecommendations from staff, on February23, 2000, the Board awarded contracts forRecord keeping and Investment ConsultantServices (excluding only the FCF) toNational Deferred Compensation (NDC).NDC is the incumbent for both theseservices. Both the contracts are for three(3) years, with two (2), one (1) yearextensions possible, and will becomeeffective July 1, 2000. FCF InvestmentConsulting Services will continue to beprovided by William M. Mercer, Inc. throughthe FCF structural transition. An RFP for aFCF Investment Consultant will be conductedin 2001.

IMPORTANT ANNOUNCEMENTS