April 15, 2003

The following letter was sent to approximately 1,800 companies in CalPERS U.S. equity portfolio.

RE: CalPERS' actions to ensure: 1) independence of the external auditor; and, 2) that shareholders be given the opportunity to vote on all equity-based compensation plans

I am writing to you on behalf of the California Public Employees' Retirement System (CalPERS). As you are aware, the Securities and Exchange Commission (SEC) recently adopted rules related to auditor independence as a result of the Sarbanes-Oxley Act. The SEC is also in the process of considering rules related to shareowner approval of equity-based compensation plans. The purpose of the letter is to communicate our concerns related to the implementation of rules or standards related to these issues and to notify you of specific actions we intend to take. At its March 2003 meeting, CalPERS' Board of Administration voted unanimously to withhold our vote for directors if necessary and take additional actions to help ensure: 1) the independence of the external auditor; and, 2) that shareholders be given the opportunity to vote on all equity-based compensation plans. We are also asking that you take a few moments to respond to the attached survey regarding the implementation of the Sarbanes-Oxley Act.

Auditor Independence

In regards to the recently adopted rules regarding auditor independence, CalPERS has concerns over specific areas that were not addressed. It has been our position that a bright line test should be applied to audit independence. As an investor, we rely heavily on the accuracy and objectivity of the external auditor. We feel strongly that the auditor should not be engaged in any consulting work with audit clients outside the scope of the audit .

The recently adopted rules leave open the possibility that external auditors may perform certain forms of tax related consulting and information systems design and implementation services. Despite requirements for Audit Committee pre-approval, we continue to feel that these types of services are inappropriate for the external auditor and lead to the potential for significant conflicts of interest.

We are requesting that your Audit Committee take steps to ensure that your external auditor remain independent related to these specific concerns. Through our corporate governance program, CalPERS will monitor proxy disclosures related to the use of your external auditor. In cases where companies use their auditor for these non-audit services, CalPERS will take the following actions at a minimum:

1. Withhold our vote for all Audit Committee members
2. Post a periodic list on CalPERS' website listing the companies and directors for which we are withholding our vote for this purpose
3. We will also review the data aggregated through this process and give special consideration for inclusion in CalPERS' Focus List process for the worst offenders in relation to this issue.

Equity-based Compensation Plans

The second issue of significant concern to us is related to shareowner approval of equity based compensation plans. The SEC is currently considering rules related to this issue, however, no action will be taken that is likely to be applicable to the 2003 season. Our position, consistent with most investors, is that any equity based compensation plan should be shareowner approved. We are not supportive of any exceptions to this position. We are also not in favor of counting broker votes toward approval of equity based compensation plans.

We are specifically requesting that your Board seek shareowner approval of any equity based compensation plan of a material change to any existing plan despite the delay in implementing this rule at the SEC. Should your board adopt any plan or amend any existing plan without shareowner approval, CalPERS will take the following steps at a minimum:

1. Withhold our vote for any director up for re-election
2. Highlight through our web site the actions taken by your company and potentially promote a withhold campaign against existing directors
3. Give special consideration to your company in our Focus List program

We are also interested in assessing the impact and effectiveness of the Sarbanes-Oxley Act. We recognize that it will take several years to get a full understanding of how companies are implementing the new rules and just how effective they are at improving the governance of public corporations. However, we would like early feedback specifically from your Audit Committee regarding the implementation of the Sarbanes-Oxley Act. Attached to this letter is a short survey form with some specific questions as well as space for general feedback. Please take a few moments to complete the survey. We value your input.

Thank you for your attention to these critical issues. Should you have any questions, please feel free to contact Ted White, Director, Corporate Governance at (916) 341-2731. We look forward to your response to the attached survey.

Sincerely,

Mark Anson
Chief Investment Officer