March 24, 2000 – Investment Committee Agenda

Call to Order: Ms. Colson called the Public Session of the Investment Committee of the Board of Retirement to order at 10:00 A.M., April 23, 2002, in SamCERA’s Board Room, Suite 280, 702 Marshall Street, Redwood City, California.

2.0

Roll Call: Mr. Buffington, Mr. Bryan, Mr. Cottle and Ms. Colson. Board Members in Attendance: Mr. McMahon and Ms. Stuart Alternate Board Member: Ms. Arnott Staff: Mr. Clifton and Mr. McCausland. Consultant: Ms. Jadallah and Mr. Dennis Investment Manager Mr. Heiskell, Mr. Wanie and Mr. Waring Custodian: Ms. Jacob (10:10) Public: One (10:30) Retirees: One

3.0

Approval of the Minutes: Ms Arnott and Mr. Cottle submitted corrections to the November 27, 2001 Minutes. Approval of those minutes had been held over from the prior meeting. There were no modifications to the February 26, 2002 minutes.

Action: By consensus the Committee approved the minutes for November 27, 2002 and February 26, 2002 minutes.

4.0

Oral Communications From the Committee None

5.0

Oral Communications From the Public: Mr. Murphy inquired on the attendance of other Board Members at the Committee. Mr. McCausland noted that the meeting is posted as a Meeting of the Board of Retirement as the Investment Committee. The members may comment, but votes will be polled from the committee members.

6.1

Acceptance of Monthly Portfolio Performance Report: Staff noted that INVESCO valued SamCERA's properties on March 31^st. The result is a large variance between INVESCO's performance and that of the benchmark, NCREIF. Ms. Colson pointed out the INVESCO values SamCERA's properties once a year while NCREIF values properties throughout the year. Perhaps NCREIf will continue to value properties down.

BIAM continued to underperform the MSCI ACWI ex US Free. Attribution indicates that BIAM is underweight in Emerging Markets, which has done well this year. In addition BIAM's stock selection contributed to the underperformance. The Committee's discussed whether the benchmark was appropriate considering BIAM's historically low weighting to emerging markets.Below are the composite returns and target allocations for the period ending March 31, 2002.

March 31, 2002		One Month	Trailing Three Months	Trailing Six Months	Trailing Twelve Months
Equity Aggregate	$813,961,538	5.05%	1.06%	13.24%	1.42%
Equity Composite Benchmark		5.02%	1.47%	13.75%	1.30%
*Variance*		*0.03%*	*-0.41%*	*-0.51%*	*0.12%*
Fixed Income Aggregate	$384,572,175	-1.66%	0.10%	0.22%	5.72%
Fixed Income Composite Benchmark		-1.66%	0.10%	0.14%	5.34%
*Variance*		*0.00%*	*0.00%*	*0.08%*	*0.38%*
Real Estate Aggregate (1)	$88,331,498	-6.45%	-5.34%	-3.02%	0.88%
NCREIF (one quarter lag)		0.74%	0.74%	2.36%	7.41%
*Variance*		*-7.19%*	*-6.08%*	*-5.38%*	*-6.53%*
Cash Aggregate	$7,982,627	0.21%	0.55%	1.24%	3.41%
91 Day Treasury Bill		0.15%	0.43%	1.07%	3.31%
*Variance*		*0.06%*	*0.12%v*	*0.17%*	*0.10%*
Total Fund Returns	$1,294,847,838	2.08%	0.33%	7.66%	3.18%
Total Plan Policy Benchmark		2.82%	1.08%	9.08%	3.26%
*Variance*		*-0.74%*	*-0.75%*	*-1.42%*	*-0.08%*

Asset Allocation As of 3/31/2002	Market Value	Allocation		Percentage Off Target	Rebalance Range
Asset Allocation As of 3/31/2002	Market Value	Current	Target	Percentage Off Target	Rebalance Range
BGI Russell 1000	$500,702,582	38.67%	40.00%	-1.33%	±5%
BGI Russell 2000	$143,559,139	11.09%	10.00%	1.09%	±5%
BIAM	$169,699,817	13.11%	15.00%	-1.89%	±5%
*Total Equity*	*$813,961,538*	*62.86%*	65.00%	*-2.14%*
BGI US Debt	$208,728,427	16.12%	16.00%	0.12%	±3%
DAMI	$175,843,748	13.58%	13.00%	0.58%	±3%
Total Fixed Income	*$384,572,175*	*29.70%*	*29.00%*	*0.70%*
Real Estate	$88,331,498	6.82%	6.00%	0.82%	±2%
Cash	$7,982,627	0.62%	0.00%	0.62%
*Total*	$1,294,847,838	*100.00%*	*100.00%*

Action: The Committee unanimously accepted the Monthly Performance Report. The Committee will recommend to the Board of Retirement that it accept the report.

6.2

Acceptance of Barclays Global Investors’ Compliance Certification Statement: Mr. Waring was present to introduce Trey Heiskell and Lee Wanie as SamCERA's new Client Service Representatives. They are succeeding Mark Friebel who has been reassigned to investment management group to better use his asset allocation background.

Presently, BGI manages strategies benchmarked against the Russell 1000 Index, Russell 2000 Index and Lehman Brothers Aggregate Bond Index. On March 31st, BGI managed in passive strategies 65.9% of SamCERA's portfolio at an approximate cost of 3.5 basis points in the following asset classes:

Asset Class

Book Value

Market Value

% of Portfolio

Domestic Large Cap

$390.6

$500.7

38.7%

Domestic Small Cap

$136.8

$143.6

11.1%

Domestic Bonds

$159.8

$208.7

16.1%

Total (in millions)

$687.2

$802.6

65.9%

Ms Colson noted that the US Debt Index Fund contains 1.79% of the portfolio in 144A Securities, which is the index weighting, Mr. Heiskell stated that this Fund utilizes stratified sampling, which means that the Fund contains about one half of the approximately 7000 securities in the Lehman Index. BGI carves the Index into smaller cells with various maturity ranges. Each cell is held in its exact weight to the broader index. Then the portfolio managers populate each individual cell through a sampling technique. In aggregate the portfolio looks like the Lehman Index with an exposure to approximately 3500 bonds. The US Debt Index has a small positive tracking error, which BGI attributes to economies of scale in trading and incremental income from security lending. Mr. Heiskell clarified that the Russell 1000 Index Fund is a fully replicating fund. It holds all of the securities in their exact weights that are held in the Index. The Russell 2000 Index Fund utilizes optimization software. It is problematic to replicate all 2000 names in the Russell 2000 Index due to the illiquid nature on the smallest names. The optimization results in a 25 to 30 basis point tracking error. Mr. Waring added that optimization adds a small amount of volatility, but allows one to avoid many of the costs. The average return should be higher over time.

Mr. Cottle asked Mr. Waring to comment on recent press reports concerning the acquisition of BGI. Mr. Waring reminded the Board that BGI is a publicly traded corporation and as such must be careful regarding the comment policy. BGI's consistent comment policy is to not comment either negative or positive on these issues. That being said recent speculation is the BGI may be in the midst of some sort of a transaction that would result in a change of management. It is one of BGI's management goals to achieve broader and deeper employee ownership of BGI. If there is something to be announced, BGI management will issue a release. Mr. Waring explained that management currently has a small ownership participation in BGI for the Managing Directors. BGI is a subsidiary of the Barclays and as such is not publicly traded so a "shadow stock" is used to value the interest. Under the existing plan there is a maximum of 20% of BGI's value that could go to employees. About one-half of that amount has currently been set up in a vesting schedule. The ownership participation program includes approximately 100 Managing Directors. BGI would like to extend the program to its Principal of which there are approximately 400. Under the existing program, like many other executive compensation programs, it is an option with an initial strike price. BGI's value must exceed the strike price before the vesting has value for the employee.

Action: The Committee unanimously accepted Barclay Global Investor’s Semi-Annual Compliance Certification Statement and will recommend that the Board of Retirement accept the Compliance Certification Statement and BGI's response to SamCERA's review questions.

6.3

Approval of Annual Shareholder Written Consent Form. Ms. Colson briefly reviewed the corporate structure for SamCERA's properties. A corporate entity is formed, such entity shall be exempt from taxation under Section 501(a) of the Internal Revenue Code by virtue of being described in either Section 501(c) 2 or Section 501(c) 25 of the Code. Bob Stein, SamCERA’s Real Estate Counsel, advises the Board that the marginal cost of establishing a corporation such as the annual tax filings and corporate minutes is well spent when considering that it insulates each of the assets in the portfolio should a catastrophic loss or liability occur at any other asset. The Written Consent of Sole Shareholder in Lieu of Annual Meeting and Written Consent of Directors in Lieu of Annual Meeting specify actions that shall constitute valid corporate action on behalf of the Company and shall have the same force and effect as if such action had been authorized and taken at a formal meeting. These documents are obligations of SamCERA under California General Corporate Law.

Action: Motion by Mr. Bryan, second by Mr. Buffington, passed unanimously to recommend that the Board of Retirement authorize the Chair to execute the Annual Shareholder Consent Forms and direct staff to forward them to INVESCO Realty Advisors for inclusion in the Corporate Minutes.

6.4

Acceptance of Report on the Market Valuation of SamCERA’s Real Estate Portfolio. Every three years SamCERA has an independent appraisal of its properties. In the interim INVESCO performs the appraisals utilizing the income approach to evaluation. The Audit Committee suggested that the Investment Committee review INVESCO's property appraisals. Ms. Colson suggests that if the Committee has detailed questions, INVESCO should be present to respond. Mr. Bryan noted that INVESCO used a valid approach to evaluation as long as the data used is correct, which it appears to be.

The Board discussed the quality of the portfolio and asked Strategic Investment Solutions to prepare peer comparisons for INVESCO's next review. The Committee agreed that the review would also be the appropriate time to discuss the methodology for determining the percentage of assets allocated to real estate. (IE cost, market or net asset value.) Many questions also arose regarding the make up of the portfolio.

Action: By consensus the Investment Committee will recommend to the Board of Retirement that it accept INVESCO's appraisal report.

7.0

Other Business:

8.0

Adjournment: There being no further business Mr. Colson adjourned the Committee at 11:22 A.M.

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