November 26, 2002 – Board Agenda

Public Session – The Board will meet in Public Session at 1:00 p.m.

1.

Call to Order

2.

Roll Call

3.

Approval of the Minutes

4.

Oral Communication

4.1

Oral Communications From the Board

4.2

Oral Communications From the Public

5.

Benefit Services

5.1

Adoption of Consent Calendar

5.2

Consideration of items removed from Consent Calendar

6.

Investment Services Report – The Investment Committee will not meet this month.

6.1

Acceptance of Monthly Portfolio Performance Report

6.2

Acceptance of Quarterly Investment Performance Analysis for periods ending September 30^th

6.3

Annual Investment Manager Review – Bank of Ireland Asset Management

6.4

Approval of amendments to SamCERA’s Investment Plan

7.

Audit Committee Report – The Committee will meet in Public Session at 12:00 Noon

7.1

Acceptance of Monthly Financial Reports

7.2

Acceptance of William M. Mercer Active and Retired Experience Analysis

7.3

Adoption and/or Reaffirmation of Actuarial Assumptions

7.4

Acceptance of SamCERA's Audited Financial Statements & Accompanying Notes

7.5

Acceptance of SamCERA’s Response to the 6/30/2002 Audit’s Management Letter

7.6

Introduction of SamCERA’s Comprehensive Annual Financial Report

7.7

Adoption of Board Procedure for Approval of ad hoc Education Requests

7.8

Introduction of Amendments to SamCERA’s Administrative Budget

7.9

Consideration of Issuance of Request for Proposals for Audit Services

8.

Board & Management Support Services

8.1

Review and Reaffirmation of Committee Charters

8.2

Consideration of SCORPA request for the addition of an Alternate Retiree Trustee

8.3

Approval of request for permission (1) to exceed $5,000 annual education expenditure limit and (2) to participate in the Information Management Network’s Super Bowl of Indexing, Phoenix

9.

Approval or Acceptance of Reports

9.1

Chief Executive Officer's Report

9.2

County Counsel's Report

9.3

Investment & Finance Manager’s Report

9.4

Information Technology Manager’s Report

10.

Adjournment

November 26, 2002 – Board Minutes as corrected

0211.1

Call to Order:  Mr. Bryan, Chair, called the Public Session of the Board of Retirement to order at 1:04 p.m., November 26, 2002 in SamCERA’s Board Room, Suite 280, 702 Marshall, Redwood City.

0211.2

Roll Call:  Mr. Bryan, Mr. Buffington, Ms. Colson, Mr. Cottle, Mr. Lewis, Mr. McMahon, Ms. Salas, Ms. Stuart & Ms. Tonsfeldt.  Ms.Tonsfeldt departed at 3:30 during discussion of the Experience Study.  Mr.Cottle was away from 3:30 – 3:55.  The meeting was recessed from 4:00 to 4:48 so that the Investment Committee could meet with the Board of Supervisors’ Retirement Committee.  Alternate Board Member:  Ms. Arnott was also present.  Staff:  Mr. McCausland, Mr. Clifton, Mr. Hood & Ms. Lamica.  Counsel:  Ms. Carlson.  Consultants:  Ms. Chapman, Dr. Fracchia, Ms. Jadallah, Mr. Thomas & Mr. Yeung.  Retirees: 2, Actives: 1, County: 1.

0211.3

Approval of the Minutes:  Mr. Cottle & Ms. Arnott noted that 0210.3 ¶1, line 3 is missing two words:  “…partnerships at a discount be included.”   Motion by Salas, second by Stuart, carried unanimously, to approve the Minutes as corrected.

0211.4.1

Oral Communications From the Board:  Ms. Salas reported that Mr. Cosgrove has been undergoing aggressive medical treatment and has been staying very active. 

Ms. Stuart, Ms. Tonsfeldt, Ms. Colson & Mr. Bryan reported on the SACRS Fall Conference, noting that many of the sessions were excellent, but that the organization once again needs to curb marketing efforts.

0211.4.2

Oral Communications From the Public:  John Murphy encouraged trustees to become affiliate members of SCORPA.  He reported that SCORPA had voted to aggressively pursue the addition of the Retiree Alternate to the Board of Retirement.

0211.5

0211.5.1

Adoption of Consent Calendar:  Without objection, Mr. Bryan removed the disability applications from the Consent Calendar at the request of Mr. Lewis.

Motion by Lewis, second by Stuart, carried unanimously, to adopt the Consent Calendar as amended.

The Board ratifies the Routine Actions taken by staff pursuant to the Board’s Delegation of Authority and the Regulations of the Board of Retirement:

Service Retirements:

Eufusia, Linda

October 12, 2002

District Attorney Office

Chandler, Ollie

October 26, 2002

San Mateo Medical Center

Starobin, Coral

October 26, 2002

Probation Department

Mahe, Paula

October 30, 2002 (from deferred)

San Mateo Medical Center

Givens, Mary

November 1, 2002 (Pending SCD)

Human Services Department

Granucci, James

November 3, 2002 (from deferred)

Sheriff’s Department

Continuance of Benefits:

Rex, Phyllis

Beneficiary of Rex

Deferred Retirements:

Altamirano, Yolanda

G2 vested

Atwood, Kathleen

3/G2 vested

Besson, Tamar

G2 vested

Yee, Myrrha

G2 vested

Moffatt, Barbara

G2 vested

Per Section 37100

Withdrawal Refunds:

Croce, Keith

G2 vested

$10,784.82

Guiao, Maria

G4 non-vested

$71.04

Hacke, Michael

G4 non-vested

$4,481.02

Hayes, Roxanne

G4 non-vested

$1,975.15

Lim, Ma Evelyn

G4 non-vested

$1,117.51

Neter, Barbara

G2 vested

$13,307.47

Nguyen, Hoan

G4 non-vested

$915.09

Schermerhorn, Russell

G4 non-vested

$698.81

Total Refunds for November, 2002

$33,350.91

Withdrawal Rollovers:

DeMonet, Gail

G4 non-vested

$3,686.19

Joseph, Tamara

G4 non-vested

$416.22

Neter, Barbara

G2 vested

$35,941.85

Sabin, Terri

G4 non-vested

$9,850.31

Stenson, Leticia

G4 non-vested

$7,025.18

Tzuang, Gloria

G4 non-vested

$6,023.43

Valle, Robin

G4 non-vested

$6,023.43

Total Rollovers for November, 2002

$69,847.04

0211.5.2

Consideration of items removed from Consent Calendar:  Dr. Fracchia reviewed the application of Edward Lopez, noting that Mr. Lopez is eligible for a safety heart presumption service connected disability benefit, but had chosen to pursue the orthopedic application due to its tax advantages.  Dr. Fracchia noted that Mr. Lopez had returned to work several years ago following recovery from his orthopedic injuries, but that the medical record was sufficient to demonstrate that Mr. Lopez was no longer able to perform the usual and customary duties of a Deputy Sheriff because the condition of his left knee had worsened as a result of his cardiac rehabilitation program.  Motion by Salas, second by Colson, carried unanimously, (1) to find that Edward Lopez is unable to perform his duties as a Deputy Sheriff, (2) to find that his disability is Service-Connected and (3) to grant his application for Service-Connected Disability Retirement.

Dr. Fracchia reviewed the application of Brenda Lee Snell, noting that a work-related injury to her wrist in 2001 has led to chronic radial nerve neuropathy and ulnar nerve mononeuropathy.  The Board noted that Ms. Snell is relatively young and could recover in the future.  Therefore, the Board expressed its intent to have Ms. Snell evaluated annually.   Motion by Lewis, second by Stuart, carried unanimously, (1) to find that Brenda Less Snell is unable to perform her duties as a Medical Services Assistant II, (2) to find that her disability is Service-Connected, (3) to grant her application for Service Connected Disability Retirement and (4) to instruct staff to schedule annual medical re-evaluations for Ms. Snell.

0211.6

0211.6.1

Acceptance of Monthly Portfolio Performance Report:  Mr. Clifton noted that the Retirement Fund outperformed its Policy Benchmark by 0.33% over the trailing twelve months.  For the trailing one year (11/1/01-10/31/02) the return was –6.03% vs. –6.36% for the policy benchmark.  SamCERA’s return for October was 4.12%, while the policy benchmark return was 4.32%.  Market value and performance for the month ending October 31^st were as follows:

Asset Class

Market Value

1-Month

1-year TTWRR

5-year TTWRR

Domestic Equity

$  552,444,928

7.31%

-13.94%

-1.01%

International Equity

159,720,130

6.98%

-12.07%

0.21%

Total Equity

$  712,165,058

7.23%

-13.57%

-1.68%

Fixed Income

355,161,858

-0.72%

6.08%

7.22%

Real Estate Aggregate

88,664,760

0.61%

1.64%

7.37%

Cash Equivalents

380,846

0.17%

2.84%

Total Fund

$1,156,372,522

4.12%

-6.03%

2.16%

Benchmark

4.32%

-6.36%

1.84%

Without objection, Mr. Bryan accepted the report.

0211.6.2

Acceptance of Quarterly Investment Performance Analysis for periods ending September 30^th:  Margaret Jadallah and Patrick Thomas of Strategic Investment Solutions presented the quarterly report, noting that equities had continued their downward spiral during the three months ending September 30^th.  The Russell 1000 Index declined -16.9% during the quarter, while the Russell 2000 Index was down –21.4% and the MSCI All Country World ex US-Free Index lost –19.3%.  Meanwhile, the Lehman Aggregate bond index returned 4.6% during the same period. 

Based on the large fund component of SIS comparison universe, SamCERA trailed its peers.  The Median ICC universe Fund greater than $100 Million returned –8.79% for the quarter, while SamCERA’s benchmark gave up –10.68% and the Fund returned –9.59%. 

Returns and ICC large fund universe percentile rankings as of September 30^th were reported as follows:

Asset Class

1-Quarter

1-year TTWRR

5-year TTWRR

Large Cap Equity

-16.88%

47

-19.48%

47

-1.50%

65

Small Cap Equity

-21.24%

66

-9.14%

55

International Equity

-20.24%

58

-15.81%

74

-2.70%

56

Total Equity

-18.56%

-17.17%

-4.01%

Passive Fixed Income

4.48%

38

8.70%

26

7.92%

41

Active Fixed Income

5.24%

9

9.34%

12

8.24%

22

Total Fixed Income

4.82%

8.96%

7.72%

Real Estate

2.47%

20

1.84%

66

7.24%

76

Cash Equivalents

0.84%

9

2.93%

14

Total Fund

-9.59%

71

-7.66%

81

0.79%

89

Benchmark

-10.68%

91

-8.03%

85

0.53%

95

Deutsche Asset Management added value through holdings in undervalued structured mortgages, positive security selection in utility and finance and an overweight to industrials.  Bank of Ireland Asset Management trailed in its universe of peers due in part to holdings in financial services and insurance securities.  Barclay Global Investors’ Russell 1000 and US Debt Index Funds outperformed the active managers in their respective peer groups.

On a total portfolio policy basis, a slight under weighting in equity and slight over weighting in fixed income and real estate allowed the fund to out perform its benchmark by 1.09%.

Without objection, Mr. Bryan accepted the report.

0211.6.3

Annual Investment Manager Review – Bank of Ireland Asset Management:  Padraig Connolly, Vice President Client Services, and Michael McCarthy, Portfolio Specialist, were present for the review.  Mr. Bryan noted that BIAM had been present in May for a special review of its underperformance.  He asked the presenters to bring the Board up to date on what had happened since the May review.  After a quick review of BIAM’s equity investment style and stock selection process, Mr. McCarthy noted that the BIAM Group Trust continues to lag its peer group due in large part to its selection of stocks which coincidentally turn out to be in countries which have been lagging the market.  While ancillary currency returns have been positive, the underlying stocks have trailed.  Worst performers for the 12-months ending September 30^th were ING Groep (Netherlands), Ahold (Netherlands), Swiss RE (Switzerland), Vodafone (U.K.) and GlaxoSmithKline (U.K.).  Mr. McCarthy noted that the firm has reaffirmed its commitment to its investment philosophy and process and believes that the market will reward those who stay the course.  Mr. Cottle reminded Mr. Connolly and Mr. McCarthy that BIAM is SamCERA’s only active equity manager and that the Board will be watching closely to make certain that BIAM adds value to SamCERA’s portfolio.  Mr. Cottle reminded the two that the Board had expressed concern during the May meeting regarding the apparent absence of a BIAM sell discipline.  Trustees reviewed several holdings and transactions with Mr. McCarthy.

0211.6.4

Approval of amendments to SamCERA’s Investment Plan:  Mr. Clifton reminded the Board that the Investment Committee had recommended amendments to the Real Estate Guidelines following the August workshop with INVESCO.  He also noted that the sale of Tysons Office Center will alter the percentage of the real estate portfolio attributable to each property.  Following extensive discussion, motion by Cottle, second by Salas, carried unanimously (Buffington not present), to allocate the net proceeds of the sale of Tysons Office Center to benefit & operating expenses and to the rebalancing the equity portfolio.  Motion by Colson, second by Tonsfeldt, carried seven ayes (Buffington, Colson, Cottle, Lewis, McMahon, Stuart & Tonsfeldt) to two noes (Bryan and Salas), to amend SamCERA’s Investment Plan’s Real Estate Guidelines, as follows:

12.3.a.2  At acquisition, no No individual property shall constitute more than 20% of the market value of SamCERA’s assets under a manager’s supervision.  Through market movement should a property exceed 33% of the assets under a manager’s supervision, the manager will present a report to the Board recommending a course of action regarding that asset.

12.3 (d) Leverage:  The use of leverage is permitted only for the purpose of enhancing returns and is limited to no more than 50% of  an individual property, nor 25% of the aggregate portfolio as calculated at the time the leverage was put in place. 

0211.7

Audit Committee Report

0211.7.1

Acceptance of Monthly Financial Reports:  Mr. Clifton reviewed the comprehensive Monthly Financial Reports for periods ending October 31^st.  Total assets declined during the first four months of the fiscal year.  The County’s pre-payment of its $31.960 million annual employer contribution in July was more than offset by a net decline in the market value of investments of -$79.062 million between July 1^st and October 31^st.  Through October 31^st member contributions totaled $4.972 million, investment income totaled $5.736 million, benefit payments totaled $22.874 million, refunds totaled $0.543 million, administrative expenses totaled $0.407 million and professional expenses totaled $0.227 million.  The market value of assets has changed year-over-year, as reflected in the following table:   

Market Value

June 30th

October 31^st

2001

$1,307,971,618

$1,242,748,571

2002

$1,207,483,580

$1,147,046,951

Without objection, Mr. Bryan accepted the report.

0211.7.2

Acceptance of William M. Mercer Active and Retired Experience Analysis:  Marcia Chapman and Andy Yeung of Mercer presented the results of the triennial experience analysis. 

The Experience Study tested each of the Board’s Economic and Non-economic Actuarial Assumptions against SamCERA’s actual experience of the last three years.  Where the actual experience seems to indicate that the actuarial assumptions are overstating or understating an actuarial exposure, the actuary recommends revisions to the assumptions.

The actuary recommended revision to the following assumptions:

Non-Economic Assumptions:  The actuary recommended modifications to non-economic assumptions that are estimated to increase aggregate employer costs by ~1.94% and the average member’s costs by 0.07% of pay next fiscal year. (See Analysis pages 2-3 & 28-84)

•  General Member Service Connected Disability assumptions are increased.
•  Service Retirement Rate assumptions are increased.
•  Post Retirement Mortality assumptions are decreased.
•  Ordinary Death while still Active assumptions are increased.
•  Withdrawal assumptions are increased marginally resulting in minor savings.
•  Vested termination assumptions are revised, with General Member increases and Safety & Probation Member decreases.

Economic Assumptions:  The actuary recommended no changes to the economic assumptions at this time. 

However, the actuary did recommend that the Board adopt a corridor for the Market Stabilization Account, noting that the variance between the actual market value of assets and the actuarially smoothed value of assets should be constrained.  The actuary recommended a 20% limit that would allow actuarial values to range between 80% and 120% of market value. 

Mr. Buffington noted that the cumulative gap between the negative portfolio returns and the actuary’s expected 8.25% return had become so great that the Board could not realistically expect investment performance to overcome the shortfall.  He recommended that the Board consider eliminating the Market Stabilization Account.

The triennial analysis noted that prior to the analysis employer contribution rates would have increased ~2.09% due primarily to the amortization of the Market Stabilization Account and that the changes in non-economic assumptions would increase employer contribution rates an additional ~1.94%, while the assumption changes would increase member contributions ~0.07%. 

Mr. McCausland noted that the amortization of the Market Stabilization Account was likely to double the employer’s contribution rate over the next several years.  Mr. McCausland also noted that during November the County tentatively approved union agreements granting benefit improvements that will significantly increase employer and member contribution rates over and above the levels required to amortize the Market Stabilization Account.

Ms. Tonsfeldt left the meeting during this agenda item.

0211.7.3

Adoption and/or Reaffirmation of Actuarial Assumptions:  Mr. Bryan then took up a series of resolutions addressing the actuarial issues 

Motion by Buffington, second by Salas, carried unanimously, to adopt Resolution 02-03-05, accepting the Experience Analysis & adopting the Non-economic Actuarial Assumptions, as follows:

Whereas, Government Code§31453 mandates that...an actuarial valuation shall be made...at intervals not to exceed three years.  The valuation shall be conducted under the supervision of an actuary and shall cover the mortality, service, and compensation experience of the members and beneficiaries...; and

Whereas, the Board has received the San Mateo County Employees' Retirement Association Active and Retired Experience Analysis, July 1, 1999 to June 30, 2002 from its actuary, William M. Mercer, Incorporated, dated November 19, 2002 and has received the recommendation of the Chief Executive Officer that the Board adopt the actuary's recommendations; and

Whereas, the County Manager and the unions representing the majority of SamCERA’s General Members have proposed new retirement formulas for the Board of Supervisors’ consideration on December 3^rd. Therefore, be it

Resolved that the Board hereby accepts the San MateoCounty Employees' Retirement Association Active and Retired Experience Analysis, July 1, 1999 to June 30, 2002.  Be it further

Resolved that the Board hereby reaffirms SamCERA's economic actuarial assumptions, as follows:  the inflation assumption shall continue to be 4.25%, the real rate of investment return assumption shall continue to be 4.00%, and the salary increase assumptions shall continue to be as set forth in the Analysis.  Be it further

Resolved that the Board hereby adopts the actuary's recommended changes to SamCERA's noneconomic actuarial assumptions relating to Withdrawal, Vested Terminations, Disability, Service Retirement Rates, Ordinary Death and Post Retirement Mortality, as set forth in the Analysis.  Be it further

Resolved that William M. Mercer, Inc. is hereby authorized to utilize the new actuarial assumptions and the new proposed retirement formulas in the preparation of the Actuarial Valuation of June 30, 2002.

Motionby Salas, second by Stuart, failed four ayes (Bryan, Cottle, Salas & Stuart) to four noes (Buffington, Colson, Lewis & McMahon), to adopt a resolution that would have limited the difference between the smoothed market value and the actual market value to 20% of market value. 

Motion by Colson, second by Lewis, carried unanimously, to adopt Resolution 02-03-06, providing for the inclusion of GC §31592 Reserves in the Actuarial Valuation Assets, as follows:

Whereas, Government Code §31453 mandates “An actuarial valuation…conducted under the supervision of an actuary and shall…evaluate the assets and liabilities of the retirement fund…” and

Whereas, Government Code §31592 establishes a Reserve for Deficiencies in Interest Earnings and Other Contingencies, as follows:

Earnings in the retirement fund during any year in excess of the total interest credited to contributions and reserves during such year shall remain in the fund as a reserve against deficiencies in interest earnings in other years, losses on investments and other contingencies, except as provided in Sections 31529.5 and 31592.2”; and

Whereas, GC§31592 Reserve balances are currently excluded from Valuation Assets; and

Whereas, Board Resolution 96-97-06 adopted William M. Mercer’s recommended changes to SamCERA’s Asset Valuation Method as set forth in pages 75-77 of the Experience Analysis – July 1, 1993 to June 30, 1996, which stated in pertinent part, as follows:

In 1993 the Actuarial Standards Board issued Standard of Practice No. 4…[which] states, in part, that the Actuarial Value of Assets should generally reflect some function of market value; however, it may be appropriate to use methods which smooth out the effects of short-term volatility in market value.

In Mercer’s opinion, the use of smoothing methods are especially important for employers with limited budgetary flexibility, such as governmental entities…

We are recommending that the Board adopt a new method that smoothes only the deviation of total market return from the [8.25%] target return.  This method will continue to use a five-year smoothing process, thus has the exact same level of “smoothness” as the current method…; and

Whereas, the Board’s Interest Crediting Rate Policy Resolution 98-99-20 as amended February 26, 2002 provides for the allocations to the GC§31592 Reserve, including the following:

…(b) Second on June 30th, to the Reserve for Deficiencies in Interest Earnings and Other Contingencies, established pursuant to GC§31592, the positive or negative amount necessary to maintain such Reserve at 1% of the fair market value of the assets in the Retirement Fund.…; and

Whereas, the Chief Executive Officer and the Actuary recommend that the Board include the unencumbered balance in the GC§31592 Reserve in Valuation Assets.  Therefore be it

Resolved that the Board hereby finds that the Market Stabilization Account smoothing process implemented with the adoption of Resolution 96-97-06 provides greater stability for employer contribution rates than that provided by GC§31592.  Be it further

Resolved that the Board intends to maximize the assets included in the annual Actuarial Valuation.  Be it further

Resolved that the Board hereby excludes from the Valuation Assets any funds in the GC§31592 Reserve designated for the payment of Medicare Part-B Premium Reimbursements per Board Resolutions 97-98-11 and 98-99-20 as amended February 26, 2002.  Be it further 

Resolved that the Board hereby includes in Valuation Assets all other funds in the GC§31592 Reserve on the date of the Actuarial Valuation.

Following extensive discussion, motion by Buffington, second by Colson, carried unanimously, to instruct the actuary to prepare matrices of the impact of alternative variables for the Board’s consideration, as follows: (a) interest assumptions:  a set of valuations based on the current 8.25% interest assumption and an alternative 8.00% interest assumption; (b) funding period:  a set of valuations based on the current December 31, 2011 actuarial funding period, a June 30, 2023 20-year funding period, a June 30, 2033 30-year funding period and the longest period that will not include periods of negative amortization of the UAAL principal; (c) MSA corridor:  a set of valuations based on a 0%, 10% and 20% range for the MSA corridor.  Following consideration of the many alternatives on January 28^th, the Board will instruct the actuary on which parameters to use for the preparation of the final detailed valuation.

0211.7.4

Acceptance of SamCERA's Audited Financial Statements & Accompanying Notes:  Mr. Clifton noted that the audited financial statements were still undergoing peer review.  The following sentence in the management discussion and analysis that had been used in prior years, but which was no longer accurate given the present size of the Market Stabilization Account, was deleted at Mr. Buffington request:  “In general, this indicates that for every dollar of accrued benefits SamCERA has approximately $0.99 of assets available for payment.”  Mr. Lewis encouraged trustees to provide staff with their comments as soon as possible.  Without objection, Mr. Bryan put the item over to the next meeting.

0211.7.5

Acceptance of SamCERA’s Response to the 6/30/2002 Audit’s Management Letter:  Mr. Lewis reported that the Audit Committee had reviewed the Management Letter and staff response.  He noted that the current audit did not generate any new items and that staff is continuing to work on the methodology for reconciling the General Ledger and PensionGold reports of Member Reserves, a Prior Audit Recommendation.  Ms. Wong, SamCERA’s Senior Accountant, will be reporting regularly on the progress of the project.  Without objection, Mr. Bryan accepted SamCERA’s Response to the Management Letter.

0211.7.6

Introduction of SamCERA’s Comprehensive Annual Financial Report:  Mr. Clifton noted that the CAFR can not be completed until the audited financial statements are released by the auditors and the actuarial valuation is completed.  Without objection, Mr. Bryan put the item over to the next meeting.

0211.7.7

Adoption of Board Procedure for Approval of ad hoc Education Requests:  Mr. Lewis reported that the Audit Committee had reviewed the proposed amendments to the Education Policy Resolution and recommended adoption.  Motion by Lewis, second Stuart, carried unanimously, to amend Resolution 98-99-12, as follows:

Whereas, Article XVI, §17(c) of the Constitution of the State of California states in part that

The members of the retirement board...shall discharge their duties with respect to the system with the care, skill, prudence, and diligence...that a prudent person acting in like capacity and familiar with these matters would use in the conduct of an enterprise of like character and with like aims; and

Whereas, Government Code §31520 vests the management of SamCERA in the Board; and

Whereas, the Board acknowledges the vital importance of making informed judgments on all matters which come before it and has adopted a Code of Fiduciary Conduct to guide its actions; and

Whereas, Associations and institutes exist which offer specialized training for pension fund trustees and staff; and

Whereas, the Board wishes to encourage its trustees and staff to become as expert as is cost-effective in the matters of pension fund investments, service and disability retirements and plan administration.  Now, therefore, be it

Resolved, that the Board hereby stipulates that all trustees and staff shall participate to the fullest extent possible in approved educational activities, and that each trustee and staff member shall be expected to complete at least three endorsed educational activities each year.  Be it further

Resolved, that the Board hereby authorizes the participation of trustees and staff in the educational activities of the State Association of County Retirement Systems (SACRS), the California Association of Public Retirement Systems (CALAPRS), the Government Finance Officers Association (GFOA), the Institute for Fiduciary Education (IFE), International Foundation of Employee Benefit Plans (IFEBP), The City of Fresno Retirement Systems’ Education Conference, the California Retired County Employees’ Association, the Pacific Pension Institute (PPI) and the Wharton program for pension fiduciaries, to the extent that the budget provides funds for such participation.  Be it further

Resolved, that the Board hereby approves the following recommended progression of courses for new trustees to complete within their first three-year term:  (1) SACRS Fall or Spring Conference &/or CALAPRS General Assembly, (2) CALAPRS’ Trustee Roundtables, (3) CALAPRS @ Stanford Principles of Pension Management, (4) IFEBP Certificates of Achievement in Public Plan Policy and (5) Wharton Pension Fund and Investment Management Program.  Be it further

Resolved, that the Board hereby also approves the following programs for trustees with the recommendation that trustees complete the programs listed above prior to participation in the following:  Fiduciary Institute @ Stanford, IFEBP Public Funds Annual Conference, GFOA Annual Conference and US-based programs of IFE & PPI.  Be it further

Resolved, that the Board hereby authorizes the participation of trustees and staff in the educational activities of the Institute for International Research, the Public Pension Fund Forum, Investors Press, the Investment Risk Institute and the Institutional Investor Institute, when such activities are conducted in California, to the extent that the budget provides funds for such participation.  Be it further

Resolved, that participants shall provide the Board with a summary oral report on the content of educational activities, including a recommendation regarding SamCERA's participation in future activities offered by the same sponsor.  Be it further

Resolved, that, in addition to the organizations listed above, other educational activities which may be counted toward the Board's educational requirement are subscriptions to Pensions & Investments, the Public Retirement Journal, or other pension, investment or financial publications; completion of recommended readings from SACRS or SamCERA reading lists; participation in due diligence activities to meet with and monitor service providers; and/or participation in SACRS or SamCERA sponsored mentoring programs.  Be it further,

Resolved, that the Board authorizes the Chief Executive Officer to enroll SamCERA as a pension fund member of the organizations set forth above and the National Conference of Public Employees Retirement Systems and to submit recommendations to the Board for additional educational activities, to the extent that the budget provides funds for such activities.  Be it further,

Resolved, that the Board hereby authorizes the Chief Executive Officer to allocate $10,000 for each new trustee’s education during each of his or her first two years in office and $5,000 for each trustee’s education during each subsequent year.  Trustees who wish to exceed these allocations may request Board approval for their participation in additional educational activities when placed on the agenda of a public meeting of the Board.  The Board reserves unto itself sole authority to authorize expenditures in excess of the annual expenditure limits.  Be it further

Resolved, that each Trustee and Staff member shall submit his or her list of proposed educational activities to the Investment & Finance Manager during the annual budget process on a form provided by the Investment & Finance Manager.  The Chief Executive Officer shall assure that the proposed activities as included in the budget do not exceed the annual expenditure limits set forth above.  Be it further 

Resolved, that, if subsequent to adoption of the budget, a Trustee or Staff member wishes to participate in an educational activity that was not included in the list submitted during the budget process, an Education Request Form provided by the Investment & Finance Manager shall be completed by the Trustee or Staff member.  The Education Request Form shall be submitted to the Investment & Finance Manager, who shall certify that the request does not exceed the annual expenditure limit.  The Investment & Finance Manager shall forward the completed Education Request Form to the Chief Executive Officer, who shall submit a Trustee request to the Chair for approval or denial.  If the request would exceed the annual limit, the Chief Executive Officer shall so advise the Trustee, who may request that the matter be set for Board consideration.

Resolved, that the Board hereby authorizes the Chairman to approve the participation and associated travel for Trustees, the Treasurer’s Constitutional Alternate and the Chief Executive Officer in the educational activities of the organizations set forth above, to the extent that the budget provides funds for such activities.  Such approval must be solicited and granted prior to participation in the educational activity.  Be it further,

Resolved, that the Board hereby authorizes the Chief Executive Officer to approve a progression of courses for staff, to approve the participation and associated travel of staff in the educational activities of the organizations set forth above, to the extent that the Chief Executive Officer finds that such participation will contribute to the staff member’s ability to perform her or his duties and the budget provides funds for such activities.  Such approval must be solicited and granted prior to participation in the educational activity.  Be it further,

Resolved, that the Board may approve participation in additional educational activities when placed on the agenda of a public meeting of the Board. 

0211.7.8

Introduction of Amendments to SamCERA’s Administrative Budget:  Mr. McCausland noted that the Budget as approved included a note that “there are no monies budgeted for the eventuality that SamCERA’s negotiated lease requires relocation to a new site.”  He reviewed the history of the negotiations, highlighting the fact that the new lease represented a potential savings of ~$155,000.  However, he noted that even if SamCERA had not moved, it would have needed to budget for a new Board Room and staff offices.  The move to 100 Marine accelerates into one year a variety of projects that could otherwise have been spread over the next several years.  He presented a preliminary estimate of the cost of the projects he had authorized:  Board Room ~$59,029; Relocation ~$39,875; Records Preservation ~$36,094; Reception & Commons ~$28,651; ADA & Ergonomic Upgrades ~$20,618; Library & Information Technology Analyst office equipment ~$11,836 and Conference Room ~$1,770.  The current Budget has approximately $83,500 that can be redirected to help defray the costs of the relocation project.  He noted that once actual construction was under way, additional change orders might be required.

The Board discussed the pros and cons of equipping the Board Room with a sound system and a projection system.  Following an extensive discussion, without objection, Mr. Bryan instructed Mr. McCausland to install an audiovisual system suitable for the work of the Board.

Mr. McCausland noted that he would present the Board with a final recommended amendment to the Budget when the projects are complete.

0211.7.9

Consideration of Issuance of Request for Proposals for Audit Services:  Mr. Clifton noted that the Audit Committee has consistently recommended that the Board solicit proposals for independent audit services.  He submitted a proposed request for proposals which had been reviewed by the Audit Committee.  Motion by Colson, second by Lewis, carried unanimously, to instruct staff to issue a request for proposals for audit services. 

0211.8

Board and Management Support Services

0211.8.1

Review and Reaffirmation of Committee Charters:  Mr. McCausland noted that Counsel’s advice that trustees should not participate in the deliberation of committees upon which they do not serve, coupled with other concerns of specific trustees, had led to instructions for staff to put this item on the agenda.  Ms. Colson noted that the Committees have served a valuable function by allowing more in depth discussion of complex issues at the committee level.  Mr. Cottle noted that the prohibition on participation has a chilling effect.  Mr. Buffington suggested that the Board could serve as a committee of the whole on all issues.  Mr. Bryan has found that the committees have improved the Board’s efficiency.  Mr. Lewis and Ms. Salas opined that there is only a minimal threshold of work for the Audit Committee.  Ms. Colson noted that the Investment Committee works well and that the Audit Committee would play a major role in the selection of the auditor.  Ms. Salas and Ms. Carlson noted that an ad hoc committee could perform that function.  Mr. Cottle noted that he continues to advocate for the Board’s committee structure.  He noted that committees do not need to meet regularly, but only as the work requires.  He expressed support for standing committees as opposed to ad hoc committees.  Mr. McMahon noted that the amount of time for the Audit Committee meetings has been minimal.  Motion by Salas, second by McMahon, carried seven ayes (Bryan, Buffington, Colson, Lewis, McMahon, Salas & Stuart), one no (Cottle) to disband the Audit Committee.  Motion by McMahon, second by Lewis, failed two ayes (Lewis & McMahon) to five noes (Bryan, Colson, Cottle, Salas & Stuart) (Buffington not voting), to disband the Investment Committee.

0211.8.2

Consideration of SCORPA request for the addition of an Alternate Retiree Trustee:  At Mr. Murphy’s request and without objection, Mr. Bryan put the item over to the next meeting.

0211.8.3

Approval of request for permission (1) to exceed $5,000 annual education expenditure limit and (2) to participate in the Information Management Network’s Super Bowl of Indexing, Phoenix:  The Board reviewed Mr. McMahon’s education expenditures to date.  Mr. McMahon stated that he was canceling his scheduled participation in the CALAPR S General Assembly, the SACRS Spring Conference and the GFOA Annual Meeting.  Mr. McCausland noted that with those deletions and approval of the current request, he estimated that Mr. McMahon’s expenditures would total $5,558, with $573 of that total attributable to late processing of a reimbursement from the prior fiscal year.  Mr. McMahon noted that the $573 should have been recognized in the prior year.  Motion by Cottle, second by Buffington, carried unanimously (1) to authorize Mr. McMahon to exceed the Board’s Education Policy $5,000 annual expenditure limitation and (2) to authorize Mr. McMahon to participate in the Information Management Network’s Super Bowl of Indexing.

0211.9

Approval or Acceptance of Reports

0211.9.1

Chief Executive Officer's Report:  Mr. McCausland noted that Ms. Manning retired on November 9^th and that Mr. Hood has assumed all Assistant Executive Officer duties.  He reminded trustees that it was time to pay their fiduciary liability insurance individual non-recourse premium.

0211.9.2

County Counsel's Report:  Ms. Carlson distributed copies of the Reply to Briefs and Cross-Appellants Reply to Briefs in the Ventura II appeal.

0211.9.3

Investment & Finance Manager’s Report:  Mr. Clifton noted numerous staff changes at Deutsche Asset Management and stated that in the future he would only report on germane staff changes.  He distributed market commentaries from Deutsche Asset Management and Bank of Ireland, as well as BIAM’s portfolio valuations.

He noted that Ms. Wong had reviewed the status of the Member Reserve Reconciliation Project with the Audit Committee.

0211.9.4

Information Technology Manager’s Report:  Mr. Hood reported that nightly back-up of SamCERA’s remote server will commence during the month and will provide a hot-recovery server.  In response to a question from Mr. Bryan, Mr. McCausland noted that the relocation project has upstaged the business continuity exercise originally scheduled for December.

berry, jeanne

october 5, 2002

northern municipal court

pazandak, loucille

october 6, 2002

health and welfare

hedlund, elmer

october 6, 2002

beneficiary of ethel

wachter, frances

october 16, 2002

southern municipal court

lang, jeanette

october 18, 2002

social services department

ewert, florence

october 19, 2002

chope general hospital

kelty, helen

october 30, 2002

environmental management

renn, john

november 1, 2002

beneficiary of margaret

colombini, gloria

november 4, 2002

assessor’s office

hummel, joan

november 4, 2002

social services department

multon, fern

november 8, 2002

chope hospital

dinneen, mary

november 11, 2002

chope hospital