Without objection, Mr. Hoffman accepted the certifications of the County Elections Officer.

Election of Officers:Ms. Colson reported that the Ad Hoc Nominating Committee, comprised of Mr. Hoffman, Mr. Bryan, Ms. Stuart & Ms. Colson, had met on June 26^th.On behalf of the Committee, motion by Colson, second by Bryan, carried unanimously, to elect Mr. Cottle, Chair.On behalf of the Committee, motion by Stuart, second by Cottle, carried unanimously, to elect Mr. Bryan, Vice Chair.On behalf of the Committee, motion by Bryan, second by Arnott, carried unanimously, to elect Ms. Stuart, Secretary.

Mr. Hoffman passed the gavel to Mr. Cottle and thanked the Board for the opportunity to serve as Chair.

Adoption of Consent Calendar:In response to a request from Mr. McMahon and without objection, Mr. Cottle removed the application of Donald Jones from the Consent Calendar so it could be discussed by the Board.

Motion by Bryan, second by Hoffman, carried unanimously, to adopt the Consent Calendar, as amended, as follows:

The Board finds that Thomas Berriman is unable to perform his usual and customary duties as a Construction Carpenter, finds that his disability is service-connected and grants his application for Service Connected Disability Retirement.

Acceptance of Monthly Portfolio Performance Report:The custodian reports that as of June 30^thSamCERA’s return for June was -0.42% (benchmark: -0.88%); trailing 12-months: –4.25% (–6.01%); trailing 3-years: 3.61% (4.04%) and trailing 5-years: 9.03% (8.65%).

Mr. Clifton reported that SamCERA’s Equity performance in the aggregate is –13.54% for the year.Fixed Income (11.75%), Real Estate (13.14%) and Cash (5.17%) contributed positively to the Plan.He noted that it is little solace that over the past year active management helped SamCERA outperform the plan benchmark in each asset class.Total Plan Return for the fiscal year outperformed the Plan Policy Benchmark by 1.76%.

Ms. Colson noted that the Investment Committee had instructed Mr. Clifton to research the Deutsche Asset Management reconciliation and the reporting of the Transitional Fund Aggregate.

Mr. Hoffman requested that staff survey other California systems to find out what their performance was for the past fiscal year.

Without objection, Mr. Cottle accepted the report.

Annual Investment Consultant Review - Strategic Investment Solutions:Ms. Colson noted that the Investment Committee had taken up 0107.6.3 first and then held the Strategic Investment Solutions review.

Ms. Colson reported that the Investment Committee had concluded that, since Gray & Company has resigned, the Board should interview the two remaining firms (Strategic Investment Solutions and Wurts & Associates) that had been finalists in the original consultant search.Mr. Hoffman recalled that the Board had retained SIS as Special Projects Consultant so that they would be in place in the event that Gray & Company was unable to meet the Board’ needs and, therefore, he argued against holding new interviews.  Ms. Colson concurred with Mr. Hoffman’s recollection.  Mr. Bryan noted that he did not share Mr. Hoffman’s understanding and that while he might vote for SIS after the interviews, he prefers to see the Board build a consensus before proceeding. 

Motion by Hoffman, second by Colson, failed 3 ayes (Colson, Hoffman & McMahon) to 5 noes (Arnott, Bryan, Cottle, Salas, Stuart), to amend the contract with Strategic Investment Solutions to provide for a full retainer relationship, subject to review and approval of the amended contract terms by the Board.

Adoption of Amendment to SamCERA’s Investment Plan Real Estate Guidelines: Ms. Colson noted that the Investment Committee had determined that there is a technical error in SamCERA’s Investment Plan that the Committee recommends the Board correct in order to conform to standard institutional investor practice.

Motion by Bryan, second by Stuart, carried unanimously, to amend SamCERA’s Investment Plan as follows:  “12.1 Real Estate Performance Objectives:  The investment manager(s) retained by SamCERA shall be accountable for generating total time-weighted rates of return (TTWRR), net of fees, which equal or exceed , net of fees, the NCREIF Index.

Introduction of Topics for the January Planning Retreat:Ms. Colson noted that the Investment Committee recommends that the Board hold a planning retreat in January. She noted that in addition to investment topics proposed by staff, Ms. Stuart had recommended an education session on post-retirement benefits offered by ‘37 Act counties; Mr. Bryan had recommended a cost-effectiveness analysis of whether SamCERA should lease or purchase when its current lease expires next year; and Mr. Cottle had suggested a review of alternative investments and rebalancing.

To prepare for an educational discussion at the January workshop, Mr. Cottle noted that a motion would be in order to authorize staff to work with INVESCO on a lease-or-purchase feasibility study.  Motion by Stuart, second by Bryan, withdrawn, to authorize staff to work with INVESCO on a lease or purchase feasibility study.  Mr. Hoffman spoke against the motion arguing that SamCERA is too small to need to own a headquarters building and it would not be a prudent or cost-effective use of Board or staff resources to do so.  Mr. Bryan noted that he is not a proponent of purchase, but that he thinks the Board should have all of the information before it so that when the current lease is up, the Board can be comfortable that it is making a well informed decision.  Mr. McMahon asked Mr. McCausland to look back at the studies done prior to moving to SamCERA’s current location.

Motion by Bryan, second by Hoffman, carried unanimously, to hold a Board planning retreat in January, with the formal list of topics to be determined at subsequent meetings.

Acceptance of Fourth Quarter 2000-2001 Administrative & Professional Budget Reports:Mr. McCausland reported that expenditures for professional services, including investment management, investment consulting, custody, actuary and real estate legal counsel, totaled ~$2,408,500 for the fiscal year ending June 30^th, which is equivalent to 18.3 basis points of SamCERA’s June 30^th assets.

He reported that expenditures for administrative services totaled ~$1,419,967 for the fiscal year, which is equivalent to 10.8 basis points of SamCERA’s June 30^th assets.Expenditures by major category were as follows:  Salaries & Benefits, $819,957; Services & Supplies, $584,542; and Fixed Assets, $15,468.

Without objection , Mr. Cottle accepted the report.

Acceptance of Phase 1 Report on Recruitment Plan for new Assistant Executive Officer:Mr. McCausland reported that, in preparation for Ms. Manning’s retirement, he had taken a look at compensation paid to staff in the County’s Treasury Division as well as the results of a survey of 21 California pension systems done by a consultant for the Sacramento CERS. He noted that, while he is well compensated, the compensation for the rest of SamCERA’s staff fell well below the comparison data.

He noted that he does not have staff with sufficient ’37 Act experience to promote into Ms. Manning’s position.He expressed concern about recruiting for a replacement for Ms. Manning without resolving the compensation issues first. He noted that the 1999 Corcoran decision makes it imperative that retirement boards exercise their fiduciary duty to classify and compensate their staff in accordance with their assigned duties.

Mr. Buffington and Mr. Hoffman opined that Mr. McCausland should abide by the results of Employee & Public Services’ 1998 reclassification study. Mr. Hoffman and Ms. Colson suggested that SamCERA does not need an Assistant Executive Officer at this time and that, when Mr. McCausland is preparing to retire, the Board should recruit nationally for someone who combines investment and benefits experience to come in six month’s before Mr. McCausland’s retirement.Mr. Cottle asked if the Board wanted to make any changes to the duty statement for the Assistant Executive Officer/Benefits Manager, but no changes were proposed at this time.

Mr. McMahon suggested that Mr. McCausland take appropriate advantage of the County’s merit increase system to improve the compensation for employees who are not yet at the top step in their grade.

Mr. McCausland noted that Employee & Public Services and he will make a joint recommendation to the Board in August.

Acceptance of Status Report on PensionGold:  Scott Hood, SamCERA’s Information Technology Manager noted that this was his first report to the Board since joining the staff.  He provided the Board with an overview of his problem management system, noting that at the present time, Levi, Ray & Shoup (LRS) is providing exceptional service and support for SamCERA’s PensionGold system and that he is satisfied that the system is adequate to meet SamCERA’s needs. 

He reported that since the Board authorized the acquisition of PensionGold in 1996, SamCERA has spent $113,572 on the License Fee, $129,761 for Enhancements (such as the health benefits premium management module) and $58,464 for Maintenance Fees; a total of $301,798.

Mr. Hood also reported that, while LRS continues to support its Microsoft Visual FoxPro clients, such as SamCERA, LRS is devoting all of its development efforts to its new client server version of PensionGold.  LRS has indicated that it has experienced some difficulty in recruiting programmers with Visual FoxPro expertise.  He sees this as an indication that there is a finite life expectancy for SamCERA’s current system. 

He noted that, as an inducement to transition to the new client server version of PensionGold, LRS has offered to waive the licensing fee if SamCERA will make a commitment prior to February 2002.  He indicated that he will be performing a cost-effectiveness analysis and consulting with other systems over the next several months to evaluate whether or not to recommend acceptance of the LRS offer.  He stated that he will provide the Board with regular progress reports on his efforts.