January 25, 2005 – Board Agenda

Call to Order: Mr. Lewis, Vice Chair, called the Public Session of the Board of Retirement to order at 1:03 p.m., January 25, 2005, in SamCERA’s Board Room, Suite 125, 100 Marine Parkway, Redwood Shores.

0501.2

Roll Call: Mr. Lewis, Mr. Bryan, Mr. Buffington, Ms. Colson (1:14pm), Ms. Stuart & ms. Tashman. Excused: Mr. McMahon, Mr. Hooley & Ms. Salas. Alternate Board Member: None. Staff: Mr. Bailey, Mr. Hood, Mr. Clifton, Ms. Lamica & Ms. Dames. Counsel: Ms. Carlson. Consultants: Dr. Fracchia, Mr. Summer, Ms. Jadallah & Mr. Thomas. Retirees: 0, County: 2.

0501.3

Approval of the Minutes: Motion by Bryan, second by Stuart, carried unanimously to approve the Board Meeting Minutes of November 23, 2004, as submitted.

0501.4.1

Oral Communications From the Board: Having asked for a clarification regarding the location of the Investment Committee meeting held on January 24^th, Ms. Stuart opined that the Board should take full advantage of SamCERA’s Board Room and hold all meetings in this facility. The rest of the Board concurred.

Mr. Lewis made note that Mr. McMahon, trustee, has been hospitalized due to a car accident. He wished him a full and speedy recovery on behalf of Board and Staff. Mr. Lewis also welcomed David Bailey, SamCERA’s new Chief Executive Officer, to his first Board Meeting.

0501.4.2

Oral Communications From the Public: None.

0501.5

Benefit & Actuarial Services

0501.5.1

Adoption of Consent Calendar: Motion by Bryan, second by Buffington, carried unanimously to adopt the Consent Calendar, as submitted, as follows:

Disability Retirements:

The Board finds that David Zahradnik is unable to perform his duties as a Deputy Sheriff, finds that his disability is Service-Connected and, GRANTS his application for a Service-Connected Disability.

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

Service Retirements:

Lappin, Delbert

November 30, 2004

Sheriff’s Office

Johnson, Laron

December 1, 2004

Superior Court

Mackitarian, Marlyn

December 11, 2004 (from deferred)

Department of Social Services

Hauff, Debra

December 15, 2004 (from deferred)

Sheriff’s Office

Jones, Christine

December 25, 2004 (from deferred)

Mental Health Department

Palmer, Katherine

December 25, 2004

Department of Human Services

Wiggins, Jesse

January 2, 2005

Probation Department

Djafari, Maliheh

January 3, 2005

Human Services Agency

Johnson, Walter

January 4, 2005

Probation Department

King, Deborah

January 4, 2005

Department of Human Services

Klinger, Steven

January 4, 2005

Probation Department

Kostielney, Mark

January 4, 2005 (from deferred)

Department of Public Health

Morrell, Sandra

January 4, 2005

Probation Department

Stevens, Keith

January 4, 2005

Probation Department

Chaves, Lawrence

January 7,2005

Sheriff’s Office

Rosengart, James

January 8, 2005

Sheriff’s Office

Walker, James

January 8, 2005

Sheriff’s Office

Zahradnik, David

January 12, 2005

Sheriff’s Office

Chambers, Diane

January 29, 2005(from deferred)

Superior Court

Baughman, Kim

January 29, 2005

Probation Department

Brown-Dean, Elizabeth

January 30, 2005

Human Services Agency

Chong, Jonathan

January 31, 2005

Sheriff’s Office

Continuance of Benefits:

Rudiger, Gert

Beneficiary of Faye

Deferred Retirements:

Shah, Jayesh

G2 vested

9 years 3 months 20 days

Refunds For December 2004:

Camp, Angela

G2 vested

$21,746.83

Faalau, Dorothy

G4 non vested

$7,389.30

Felipe, Jona

G4 non vested

$91.62

Kwee, Ferry

G4 non vested

$1,059.98

Nova, Anamarie

G4 non vested

$291.63

Paniagua, Ana

G4 non vested

$5,797.15

Ridgway, Richard

G4 non vested

$433.86

Rouse, Mary

G4 non vested

$2,798.12

Weitz, Lara

G4 non vested

$153.60

Total Refunds December 2004:

$39,762.09

Rollovers for December 2004:

Kerro, Margaret

G4 non vested

$8,118.93

Louie, Johnny Jr.

G4 non vested

$12,008.32

Serrano, Heralio

G4 non vested

$9,921.03

Taylor, JoAnne

G4 non vested

$16,213.97

Total Rollovers for December:

$46,262.25

Refund for January 2005:

Goulet, Veronica

G2 vested

$13,773.51

Total Refund for January:

$13,773.51

0501.5.2

Consideration of items removed from Consent Calendar: None.

0501.5.3

Approval of June 30, 2004, Actuarial Valuation: Ira Summerof Public Pension Professionals was present to review the actuarial valuation. (The Actuarial Valuation is available for review on SamCERA’s website at www.samcera.org.) He reported that he had a discussion with Mercer Human Resources Consulting regarding the discrepancies in their actuarial methodologies. Mr. Summer assured the Board that the overall impact of these disparities was relatively slight.

Motion by Buffington, second by Colson, carried unanimously, to accept the June 30, 2004, Actuarial Valuation as submitted by Public Pension Professionals.

Summary of the Results of SamCERA’s Last Three Actuarial Valuations

Valuation Date

6/30/2004

6/30/2003

6/30/2002

Market Value of Assets

$1,435,359,423

$1,233,272,000

$1,207,484,000

minus Market Stabilization Account

(48,785,679)

(154,249,000)

(241,497,000)

equals Actuarial Value of Assets

1,484,145,102

1,387,521,000

1,448,980,000

Valuation Assets

1,452,621,000

1,353,941,000

1,416,821,000

Actuarial Value of Liabilities

1,921,328,000

1,781,544,000

1,660,566,000

Funding Ratio (V Assets / AV Liabilities)

75.6%

76.0%

85.3%

Unfunded Actuarial Accrued Liability

468,707,000

427,603,000

243,746,000

Contribution Rates Effective in Fiscal Year:

2005-2006

2004-2005

2003-2004

Employer Rate (Actuary’s Estimated Aggregate)

21.22%

22.84%

18.69%

% Increase

-7.1%

22.2%

60.3%

Member Rate (Actuary’s Estimated Aggregate)

7.09%

8.38%

7.10%

% Increase

-15%

18.0%

21.2%

0501.5.4

Discussion & Recommendation regarding the 2005-2006 Fiscal Year Employer & Member Contribution Rates: Ira Summer of Public Pension Professionals was present to review the recommended contribution rates. Following the Board’s review, motion by Buffington, second by Bryan, carried unanimously, to adopt Resolution 04-05-20, as follows:

Whereas, Government Code §31453 mandates the periodic actuarial valuation of the Retirement Fund and requires that the Board...shall, at least 45 days prior to the beginning of the succeeding fiscal year, recommend to the Board of Supervisors such changes in the rates of interest, in the rates of contributions of members, and in the county and district appropriations as are necessary...; and

Whereas, the County of San Mateo has entered into agreements to implement new Member benefit formulas in Fiscal Year 2004-2005; and

Whereas, the Board has received, reviewed and approved the reports and recommendations from its actuary, Public Pension Professionals, Inc, and the Chief Executive Officer setting forth the changes necessary to assure the actuarial soundness of the Retirement Fund. Therefore, be it

Resolved that the Board hereby recommends that the Board of Supervisors adopt the actuary's recommended Employer Contribution Rates for Fiscal Year 2005-2006 for the County and Mosquito Abatement District in accordance with the following schedule, as a percentage of covered salaries:

	Plan 1		Plan 2		Plan 3			Plan 4
Effective July 3, 2005
General Member Rates:
Normal Cost	11.78%		10.04%		10.56%			9.08%
Contribution to Unfunded Accrued Actuarial Liability	18.54%		8.88%		6.83%			5.94%
Total General Member Rates	30.32%		18.92%		17.39%			15.02%

Safety Member Rates:
Normal Cost	15.56%		16.83%		None			13.24%
Contribution to Unfunded Accrued Actuarial Liability	52.49%		23.08%		None			18.17%
Total Safety Member Rates	68.05%		39.91%					31.41%

Probation Member Rates:
Normal Cost	19.58%	17.41%		None			14.77%
Contribution to Unfunded Accrued Actuarial Liability	22.78%	17.07%		None			12.86%
Total Probation Member Rates	42.36%	34.48%					27.63%

Mosquito Abatement
General Member Rates:
Total General Member Rates	24.42%	13.92%		17.39%		10.69%

Be it further

Resolved that the Board hereby recommends that the Board of Supervisors adopt the actuary's recommended Entry Age Member Contribution Rates for the County and Mosquito Abatement District in accordance with the schedule set forth in the Attachment entitled Member Contribution Rates, as a percentage of covered salaries, effective July 3, 2005.

Be it further

Resolved that the Chief Executive Officer is hereby authorized to transmit these rates, requests and certifications to the Board of Supervisors and to take all actions necessary to provide for their implementation effective July 3, 2005.

Entry Age Member Contribution Rates
General			Safety		Probation		Mosquito Abatement
Entry Age	Plans 1 & 2	Plan 4	Plans 1 & 2	Plan 4	Plans 1 & 2	Plan 4	General Plans 1 & 2	General Plan 4
16	0.0667	0.0637					0.0561	0.0536
17	0.0667	0.0637					0.0561	0.0536
18	0.0667	0.0637					0.0561	0.0536
19	0.0667	0.0637					0.0561	0.0536
20	0.0667	0.0637	0.0836	0.0797	0.0710	0.0677	0.0561	0.0536
21	0.0668	0.0638	0.0835	0.0797	0.0710	0.0677	0.0562	0.0537
22	0.0668	0.0638	0.0836	0.0797	0.0710	0.0677	0.0563	0.0538
23	0.0669	0.0639	0.0837	0.0798	0.0711	0.0678	0.0564	0.0539
24	0.0670	0.0640	0.0838	0.0799	0.0712	0.0679	0.0566	0.0541
25	0.0672	0.0642	0.0840	0.0801	0.0714	0.0681	0.0568	0.0543
26	0.0674	0.0644	0.0843	0.0803	0.0716	0.0683	0.0570	0.0545
27	0.0677	0.0646	0.0846	0.0797	0.0719	0.0685	0.0573	0.0548
28	0.0679	0.0649	0.0849	0.0810	0.0722	0.0688	0.0576	0.0551
29	0.0682	0.0652	0.0854	0.0814	0.0726	0.0692	0.0579	0.0554
30	0.0686	0.0655	0.0859	0.0819	0.0730	0.0696	0.0583	0.0557
31	0.0689	0.0658	0.0864	0.0824	0.0734	0.0700	0.0586	0.0561
32	0.0693	0.0662	0.0870	0.0830	0.0740	0.0705	0.0591	0.0565
33	0.0698	0.0667	0.0877	0.0836	0.0745	0.0711	0.0595	0.0569
34	0.0703	0.0671	0.0885	0.0841	0.0752	0.0717	0.0600	0.0574
35	0.0709	0.0677	0.0893	0.0851	0.0759	0.0723	0.0606	0.0579
36	0.0715	0.0683	0.0902	0.0860	0.0766	0.0731	0.0611	0.0584
37	0.0721	0.0689	0.0911	0.0869	0.0774	0.0738	0.0618	0.5900
38	0.0728	0.0695	0.0921	0.0878	0.0783	0.0746	0.0624	0.5970
39	0.0736	0.0702	0.0932	0.0888	0.0792	0.0755	0.0631	0.6030
40	0.0743	0.0710	0.0943	0.0899	0.0801	0.0764	0.0639	0.6100
41	0.0751	0.0718	0.0954	0.0910	0.0811	0.0774	0.0646	0.0618
42	0.0760	0.0726	0.0967	0.0922	0.0822	0.0783	0.0654	0.0625
43	0.0769	0.0734	0.0979	0.0934	0.0832	0.0794	0.0663	0.0633
44	0.0778	0.0743	0.0992	0.0946	0.0844	0.0804	0.0671	0.0642
45	0.0788	0.0752	0.1006	0.0959	0.0855	0.0815	0.0680	0.0650
46	0.0798	0.0762	0.1020	0.0973	0.0867	0.0827	0.0690	0.0659
47	0.0808	0.0772	0.1035	0.0986	0.0879	0.0838	0.0700	0.0669
48	0.0819	0.0782	0.1050	0.1025	0.0892	0.0871	0.0710	0.0679
49	0.0831	0.0793	0.1065	0.1065	0.0905	0.0905	0.0720	0.0689
50	0.0843	0.0805					0.0731	0.0699
51	0.0855	0.0817					0.0743	0.0710
52	0.0868	0.0829					0.0755	0.0721
53	0.0881	0.0861					0.0767	0.0733
54	0.0895	0.0895					0.0779	0.0744
55	0.0895	0.0895					0.0791	0.0756
56	0.0895	0.0895					0.0804	0.0768
57	0.0895	0.0895					0.0817	0.0781
58	0.0895	0.0895					0.0830	0.0811
59 +	0.0895	0.0895					0.0843	0.0843



0501.6	Investment Services

0501.6.1	Acceptance of Monthly Portfolio Performance Report: Mr. Clifton presented the monthly performance for the period ending December 31, 2004. He noted the performance report’s slightly different format due to the inclusion of the Association’s new active managers. He reported that December out-performed the Total Plan Policy Benchmark by 20 basis points with a return of 2.86%.
	Asset Class		Market Value		1-Month	1-year TTWRR	5-year TTWRR
	Domestic Equity		$830,275,354		3.81%	13.83%	-0.09%
	International Equity		257,726,362		5.31%
	Total Equity		$1,088,001,716		4.16%	14.53%	-0.38%
	Fixed Income		457,005,408		0.94%	4.88%	7.83%
	Real Estate Aggregate		52,643,479		0.00%	13.05%	10.34%
	Cash Equivalents		4,249,517		0.23%	2.35%	3.43%
	Total Fund		$1,601,900,119		3.06%	11.67%	3.56%
	Benchmark				2.86%	11.65%	3.07%
	Without objection, Mr. Lewis accepted the report.

0501.6.2	Acceptance of Strategic Investment Solutions Report on Capital Market Assumptions: Patrick Thomas and Margaret Jadallah of Strategic Investment Solutions presented their report on Capital Market Conditions and SamCERA’s Portfolio Asset Allocation. Mr. Thomas performed a quick overview of the market conditions over the past 5 years, noting low equity and high bond returns. He stated that the significant disparity of 42 basis points between SIS’ previous and current expectations for SamCERA’s projected portfolio in the report was mainly due to the length of time since those earlier expectations were made (18 months to date). Without objection, Mr. Lewis accepted the report.

0501.6.3	Approval of Amendment Number One to INVESCO LLC Agreement: Mr. Clifton presented the amendment to INVESCO’s LLC Agreement, which is a revision to the definition of the “Lock-Out Expiration Date.” He noted that holders of 59% of the outstanding shares of INVESCO LLC have approved the document. Mr. Lewis raised the issue concerning the use of the word “and” in the amendment. Ms. Carlson assured the Board that the inclusion of the language “the earlier of:” prior to the two “Lock-out Expiration Date” conditions, defined the Expiration Date as being triggered when either of the two circumstances hold true without requiring both conditions to be true. Motion by Bryan, second by Tashman, carried unanimously, to adopt Resolution 04-05-21, as follows:

	Whereas, Article XVI, §17 of the Constitution of the State of California vests the Board with "plenary authority and fiduciary responsibility for the investment of moneys and the administration of the system"; and Whereas, Government Code §31595 vests in the Board “. . . exclusive control of the investment of the employees retirement fund.” and Whereas, Government Code §31596.1 (d) authorizes the Board to retain investment managers “. . . in connection with administration of the Board's investment program . . . "; and Whereas, The Board of Retirement opined that an open-end commingled fund real estate mandate would allow SamCERA to achieve the diversity of property type, geographical location and range of market values that the Plan could not achieve with its separate property mandate; and Whereas, Board Resolution 04-05-09 delegates full discretionary authority to the INVESCO Core Real Estate – U.S.A., LLC Fund to manage the assets of the Retirement Fund as allocated by the Board in accordance with the terms of the Amended and Restated Limited Liability Company Agreement (the “Operating Agreement”) of INVESCO Core Real Estate – U.S.A., LLC.; and Whereas, The Board expressed concern regarding the possible departure of INVESCO senior partners and wished assurances that the Association could exit the fund under those circumstances.; and Whereas, INVESCO proposed Amendment Number One to the Operating Agreement revising the definition of “Lock-out Expiration Date” as follows (with bold underlined text being added), effective as of the initial closing. “Lock-Out Expiration Date” means the earlier of: (a) the date when the Net Asset Value of the Fund reaches $500 million and (b) the date upon which three (3) or more of the following individuals, who are Global Partners, are no longer employed by and associated with INVESCO Institutional (N.A.), Inc. and its and its Affiliates: David Ridley, David Farmer, Paul Michaels, Joe Rodriguez, Scott Dennis and Max Swango.; and Whereas, the Board wishes to consent to Amendment Number One to the Amended and restated Limited Liability Company Agreement of the Fund dated as of September 30, 2004 (the “operating Agreement”). Therefore, be it Resolved that the Board hereby authorizes the Board Chair to execute Amendment Number One to the INVESCO Core Real Estate – U.S.A., LLC Fund Subscription Documents.

0501.6.4	Approval of Futures Agreement – Goldman Sachs Asset Management: Mr. Clifton reported that the Investment Committee, without objection, agreed to the execution of the Goldman Sachs Futures Agreement, permitting the equitization of cash. The Committee, however, would also like to forward the Agreement to Western Asset Management to ensure that the documentation is industry standard. Action on this agenda item will be postponed to a later board meeting following the results of further documentation review.


0501.7	Board & Management Support Services

0501.7.1	Acceptance of Monthly Financial Reports: Mr. Clifton presented the preliminary monthly financial report for the period ending December 31, 2004. He highlighted that SamCERA’s Net Assets totaled $1,600,564,684 at the end of December. Without objection, Mr. Lewis accepted the report.

0501.7.2	Acceptance of Second Quarter 2004-2005 Administrative & Professional Budget Reports: Mr. Clifton performed a brief overview of the Professional, Administrative and Ventura Budget Reports. He noted that nearly all current expenditures have been on or under budget. He then stated that SamCERA will be double-filling the Chief Executive Officer position for January, February and March, which had not been budgeted. Mr. Clifton indicated that staff will return with budget amendments in May. Without objection, Mr. Lewis accepted the report.

0501.7.3	*Acceptance of Auditor’s Report and Acceptance of SamCERA’s Financial Statements: Andrew Paulden, CPA, of Brown Armstrong, presented the process, significant areas and results of the June 30, 2004, audit. Mr. Paulden thanked Mr. Clifton and the rest of Staff for their assistance during the performance of the audit. He opined that SamCERA is “ahead of the curve” regarding the documentation of procedures. In response to a question from Mr. Lewis regarding information in Pension Gold being changed and overwritten by bi-weekly payroll uploads, Mr. Hood indicated that it might be possible to flag significant changes such as ones that impact employee contribution rates such as birthdate changes. Without objection*, Mr. Lewis accepted the report.

0501.7.4	*Introduction of SamCERA’s Sources, Uses and Budget Report* for the Fiscal Year 2005-2006:** Mr. Clifton presented the first draft of SamCERA’s Sources, Uses and Budget Report for the Fiscal Year 2005-2006. He requested that trustees inform staff as to suggested amendments to the report. He noted the trustee preference form for 2005-2006 Educational Conferences and requested that trustees return the completed form as soon as possible.

0501.7.5	Acceptance of SamCERA’s Comprehensive Annual Financial Report & Popular Annual Financial Report: Mr. Clifton presented SamCERA’s CAFR and PAFR to the Board and indicated that, without Board objection, Staff will begin production of the documents for public distribution. Motion by Bryan, second by Buffington, carried unanimously to approve SamCERA’s Comprehensive Annual Financial Report (CAFR) and Popular Annual Financial Report (PAFR).


0501.8	Approval or Acceptance of Reports

0501.8.1	Chief Executive Officer's Report: Mr. Bailey provided a brief overview of his activities during the first weeks as SamCERA’s new Chief Executive Officer. He then reported that he attended a County meeting regarding AB 55 and ARC time benefits. He stated that EPS is conducting a survey of how other counties have been dealing with the legislation. The results of the survey shall be completed sometime in February. Mr. Bailey also indicated that John Maltbie, County Manager, also made mention of pension obligation bonds and will be discussing the issue further at additional meetings. Mr. Bailey noted the Forward Looking Calendar provided to the Board containing probable agenda items for the next three Board meetings. He shall return to the February Board Meeting with a draft CEO performance review plan. Mr. Bailey also noted that he removed the agenda item regarding the purchasing of equipment for the Electronic Document Management Systemproject. He would like to address issues regarding future workload and cost/benefit analysis before moving forward.

0501.8.2	Assistant Executive Officers’ Report: Mr. Hood presented SamCERA’s Processing Statistics for the past 6 months. He reported that there are 16 retirements for January, 1 scheduled for February, and approximately 110 retirements scheduled for March. He then gave a brief overview of the Ventura processing progress, noting that the project is nearing its last stages. In response to a question from Ms. Tashman, Mr. Hood indicated that an aggregate of approximately $12-$14 million will be expended from the Ventura Reserve. He expects that all research will be completed by the end of February and all payments disbursed by the end of March.

0501.8.3	Investment & Finance Manager’s Report: Mr. Clifton indicated that Peter Laudin has left employment as head of BGI’s U.S. Institutional Business. He then reported that Mondrian has indicated that they are eliminating the use of “soft dollars.” Mr. Clifton stated that SamCERA granted INVESCO’s request to perform the audit of their property this year after a 15-month period.

0501.8.4	County Counsel's Report: None.


0501.9	Adjournment in Memory of Deceased Members: There being no further business, Mr. Lewis adjourned the meeting at 2:56 p.m. in memory of the following deceased members:

	Soares, Manuel	October 28, 2004		Department Of Public Works
	Aiello, Olga	November 7, 2004		Department Of Health Services
	Riddock, Josephine	November 14, 2004		Beneficiary Of Cushman
	Marquez, Robert	November 17, 2004		Library
	Lingeman, Inga	November 23, 2004		Beneficiary Of Reint
	Giorgi, Dennis	November 25, 2004		Department Of The District Attorney
	Napoli, Hope	November 26, 2004		Department Of Social Services
	Sardi, Helen	November 27, 2004		Beneficiary Of Vasto
	Geller, Virginia	December 4, 2004		Library
	Rudiger, Faye	December 5, 2004		Department Of Public Health
	Money, Ruth	December 12, 2004		Northern Municipal Court
	Fielding, Elizabeth	December 13, 2004		Central Municipal Court
	Fisk, Dorothy	December 13,2004		General Hospital
	Falling, Alton	December 24, 2004		Recorder’s Office
	Mc Kenna, Cynthia	December 26, 2005		Department Of Social Services
	Wakefield, James	December 31, 2004		Sheriff Department
	Gianocca, Mae	January 2, 2005		Beneficiary Of Peter
	Parker, Lillian	January 12, 2005		Probation Department

Kenneth A. Lewis, Vice Chair

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