November 22, 2005 – Board Agenda

Call to Order: Mr. Lewis, chair, called the Public Session of the Board of Retirement to order at 9:31 a.m., November 22, 2005, in SamCERA’s Board Room, Suite 125, 100 Marine Parkway, Redwood Shores.

0511.2

Roll Call: Mr. Bryan, Ms. Arnott for Mr. Buffington, Ms. Colson (arr. 9:35 a.m., dep. 10:35 a.m., ret. 1:03 p.m.), Mr. Hackleman, Mr. Hooley (dep. 11:54 a.m.), Mr. Lewis, Ms. Salas, Ms. Stuart & Ms. Tashman (arr. 9:32 a.m.). Staff: Mr. Bailey, Mr. Clifton, Ms. Palu, Ms. Amacker & Ms. Dames. Consultants: Ms. Jadallah, Dr. Fracchia & Ms. Carlson. Retirees: 1, County: 0.

0511.3

Approval of the Minutes: Ms. Arnott submitted the following correction to the October board meeting minutes: 0510.7.5: ¶5 L14: “…for which recovery is to be calculated. Be if it further…” Motion by Arnott, second by Salas, carried unanimously to approve the board meeting minutes of October 25, 2005, as amended.

Ms. Stuart requested that the names of the members of the public in attendance be included in the board meeting minutes under “Roll Call.” Ms. Carlson stated that government code does not require the members of the public identify themselves when attending board meetings. The board agreed to continue to note the number of public members in attendance under “Roll Call” without identifying the individuals.

0511.4.1

Oral Communications From the Board: At the request of Mr. Buffington, Ms. Arnott informed staff that he would prefer that no agenda items be added to the draft agenda following the initial board mailing, however, he did not object to agenda items being removed. Mr. Buffington also requested that the second board mailing be sent out a little earlier so that trustees may have adequate time to review its contents. Mr. Lewis then instructed staff to make every effort to send board packets sooner.

Ms. Salas said that she attended a conference which included an informative session concerning proper preparation for retirement and the exceedingly high costs of medical premiums. Following the conclusion of the county’s GASB 45 analysis, Mr. Hackleman stated that the county is looking towards opening up a new tax-deferred vehicle so that members may be encouraged to save towards future health benefits. Mr. Hackleman and Ms. Stuart agreed that members need education about health insurance costs to adequately illustrate the importance of preparing for the cost of medical benefits costs during an individual’s retirement. Mr. Bailey stated that SamCERA’s educational seminars will contain such information to appropriately inform and educate its members. Ms. Stuart added that many retirees have had to move out of the area due to the rising costs of medical benefits.

Mr. Lewis announced that there shall be a special board meeting to be held on December 16^th at 1:30 p.m. to conduct interviews of candidates for actuarial services and to select an actuarial firm to offer a contract.

0511.4.2

Oral Communications From the Public: Ted Kai introduced himself to the board. He was a former employee in the San Mateo County Sheriff’s Department as well as the County Library.

Mr. Lewis then took up agenda item 6.1.

0511.5

Benefit & Actuarial Services

0511.5.1

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

The board finds that Arlene Silvera is not disabledfrom performing her usual and customary duties as a Deputy Court Clerk II and DENIES her 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:

Harris-Payne, Patricia

October 1, 2005

(from deferred)

Chope Hospital

Blumberg, Catherine

October 15, 2005

(from deferred)

Library

Milk, Martha

November 5, 2005

Department of Public Health

Krause, Caroline

November 18, 2005
(from deferred)

Department of Mental Health

Rose, Patricia

November 19, 2005

Human Services Agency

Olson, James

November 30, 2005

Department of Public Health

Continuance of Benefits:

Justimbaste, Laureta

Beneficiary of Cesar

Mayo, Charles

Beneficiary of Shirley

Noyer, Clarence

Beneficiary of Elizabeth

Deferred Retirements:

Codori Gregory J.

G4 vested

Reciprocity

Magett Patricia W.

G2 vested

Reciprocity

Extended Purchase:

None

Refunds For November 2005:

Castillo, Antonio

G4 non-vested

Greensides, Dana

G4 non-vested

McMahon, Patrick

Beneficiary of Michael McMahon

Navat, Mario

G4 non-vested

Pachinger, Aura

3/G4 vested

Queisert, Dorothy

G4 non-vested

Redmond-Hunter, Laverne

G4 non-vested

Roberts, Michael

Beneficiary of Darlee Roberts

Tuazon, Blandida

G4 non-vested

Valino, Getulio

G4 non-vested

Rollovers for November 2005:

Duranczyk, Roman

G4 non-vested

Elboom, David

G4 non-vested

Gunkel, Patricia

G4 non-vested

Ramirez, Lucy

G4 non-vested

Reed, Catherine

G4 non-vested

0511.5.2

Consideration of Items Removed from Consent Agenda: None.

0511.5.3

Consideration of Waiver of Reciprocity Six-Month Requirement: Mr. Bailey introduced Jack Stroppini to the board. Mr. Stroppini requested that the board waive the requirement that states that he must be reemployed within six months in order to establish reciprocity with PERS based on the contention that SamCERA failed to inform him about the six-month requirement when he left San Mateo County employment in 1991. He claimed that a retirement analyst had assisted him in completing a Disposition of Retirement Contributions form at his request in which he indicated in writing about possible reciprocity. He stated, however, that the analyst had failed to inform him about the six-month limitation. Regarding a letter sent to Mr. Stroppini informing him of the six-month requirement during that time frame, he said that the letter was mailed to a residence he owned but did not physically reside in and, therefore, did not physically receive it. In response to a question from Mr. Bryan, Ms. Carlson stated that there is no statutory duty to inform members of their rights; however, case law holds that one should provide consultation to its members so that they may understand their rights and benefits. Mr. Bailey contends that SamCERA had made a reasonable effort to inform Mr. Stroppini of the six-month requirement as illustrated in the written correspondence, pamphlets and other evidence provided to the board.

Motion by Arnott, second by Bryan, carried unanimously to find that: (1) more than six months elapsed between Jack Stroppini’s active membership with SamCERA and his active membership in the PERS system; (2) Government Code §31831-31840.4 conditions the establishment of reciprocity on recommencement of active service in no more than six months; (3) SamCERA gave Mr. Stroppini documents notifying him in a timely manner of the requirements to be granted reciprocity; (4) Mr. Stroppini’s allegation that he was unaware of the six-month requirement is not an excuse to waive the six-month requirement, and (5) Mr. Stroppini is not entitled to reciprocity.

Mr. Lewis then took up agenda item 8.1.

0511.5.4

Report on Reviews of Disability Beneficiaries: Mr. Bailey reported on the procedure of reviewing disability benefit recipients. The objective of the review would be to determine whether or not the recipient is still incapacitated for the service in the department and position in which he or she was employed. He said that the most significant obstacle to canceling a recipient’s disability benefit is that the employer must agree to provide the member with re-employment. This proves difficult when the member’s previous position has already been filled. The employer may also express concern that the member may become disabled again. Mr. Hooley stated the he did not find it productive from a cost-benefit perspective to spend extensive time and money to pursue this issue. Ms. Tashman requested that the topic be tabled and that the board be kept informed on what other 1937 Act counties are doing regarding the process of reviewing disability recipients. Ms. Carlson said that deferring the topic would not preclude the board from reviewing a disability recipient should the need arise. The board agreed to defer the item for future discussion.

Mr. Lewis then recessed the meeting at 11:54 a.m. The board meeting resumed at 1:01 p.m. Mr. Lewis then took up agenda item 5.1.

0511.6

Investment Services

0511.6.1

Monthly Portfolio Performance Report: Mr. Clifton presented the Preliminary Monthly Performance Report for the period ending October 31, 2005. He stated that SamCERA’s
-1.93% Total Fund Return for October 2005 slightly underperformed the Total Plan Policy Benchmark return of -1.79%. The Fund’s Fiscal Year to Date return, 1.97%, is 63 basis points behind the Actuarial Discount Rate, 2.60%, and 6 basis points behind SamCERA’s Total Plan Policy Benchmark of 2.03%. Mr. Clifton also noted that the Investment Committee requested that Real Estate only indicate returns on a quarterly basis, with a 0.0% return during the two interim months.

Asset Class

Market Value

1-Month

1-year TTWRR

5-year TTWRR

Domestic Equity

$866,062,925

-2.06%

11.77%

0.51%

International Equity

278,134,030

-3.93%

20.18%

2.52%

Total Equity

$1,144,196,955

-2.52%

13.68%

0.94%

Fixed Income

475,306,607

-0.77%

2.06%

6.81%

Real Estate Aggregate

63,723,912

0.00%

23.59%

13.01%

Cash Equivalents

1,340,720

0.31%

3.43%

3.13%

Total Fund

$1,684,568,194

-1.93%

10.36%

4.07%

Benchmark

-1.79%

9.99%

3.68%

0511.6.2

Quarterly Investment Performance Analysis for Period Ended September 30, 2005: Margaret Jadallah, from Strategic Investment Solutions,reported that the composite fund returned 3.97% for the quarter, outperforming its policy index of 3.88% and ranking 49^th amongst its peers. She stated that all asset classes exceeded their relative policy benchmarks. The majority of investment managers added to SamCERA’s return. Hindrances resulted from a few managers, namely Brandes who ranked in the bottom third among small cap value managers. Brandes’ negative performance attribution primarily derived from stock selection in Industrials (Delta Airlines, TecumsehProducts) and no exposure in the best performing sector, Energy.

0511.6.3

Annual Investment Manager Review: Chartwell Investment Partners: Mr. Clifton introduced Dave Reidinger, Portfolio Manager, Senior Analyst, and David Gallagher, Vice President, Client Services & Marketingof Chartwell Investment Partners.

Mr. Gallagher provided a brief organizational update as well as a review of Chartwell’s investment philosophy and process. He then discussed the underperformance of growth stocks in 2004 but opined that the current economic environment is improving for the small cap growth strategy.

Mr. Reidinger then conducted a performance review of SamCERA’s account to its initial funding on November 30, 2004. He also provided a market overview and discussed various firms in SamCERA’s small cap growth portfolio. He also reported on the performances of varying sectors and its relative weight in the portfolio.

0511.6.4

Annual Investment Manager Review: Brandes Investment Partners: Mr. Clifton introduced Michael Israel, Portfolio Manager, of Brandes Investment Partners. Mr. Israel performed a review on Brandes’ organization, research process and contrarian-style investment philosophy. He also discussed the performance of the portfolio relative to the benchmark.

In response to a question from Ms. Tashman, Mr. Israel discussed its holdings in Delta Airlines which had filed for bankruptcy. He indicated that Brandes does not automatically sell its shares in a company once the firm files for bankruptcy. He stated that there are times in which value still exists for shareholders above the current market price. However, Brandes did not feel that there would be any equity leftover for Delta shareholders and, therefore, sold its Delta shares at a loss.

Mr. Israel indicated that Winn-Dixie, a grocery store chain, and DelPhi, an automotive corporation, are the only two securities in SamCERA’s small cap value portfolio that have filed for bankruptcy. In the case of Winn-Dixie, he stated that Brandes’ analysts believe that its stock value will eventually appreciate. He then stated that DelPhi’s allocation in the portfolio is relatively small. He discussed the appreciation in prices for Goodyear, Tommy Hilfiger, and Maytag despite their falling prices in previous years to illustrate the effectiveness of their investment philosophy over time.

Concerning Brandes’ lack of exposure to the Energy sector, Mr. Israel said that there exists a firm-wide pricing of oil and that it is set lower than the price of oil today. He stated that there is minimal exposure to oil and energy throughout the firm because its analysts believe that the returns that these companies are currently earning are unsustainable and that the price will eventually be competed away. In response to a question from Ms. Jadallah, Mr. Israel said that Brandes has had larger energy bets in the past. He maintained that his firm has no aversion to holding energy stocks once prices fall below the appropriate price.

0511.6.5

Report on Annual Custodian Review: State Street Bank and Trust: Mr. Clifton reported on the meeting between State Street and SamCERA staff held on September 7^th. He said that staff is completely satisfied with State Street’s services and the accuracy and timeliness of their reports. State Street’s main competition has shrunk to Mellon Bank, Northern Trust and The Bank of New York. Mr. Clifton opined that the board should conduct an RFP process at the end of State Street’s contract just to see how the competition bears.

0511.6.6

Approval of Investment Management Agreement (IMA) – Fidelity Management Trust Company: This agenda item was deferred to the December special meeting, following the completion of a due diligence visit to Fidelity’s Merrimack campus on December 2^nd.

0511.7

Board & Management Support Services

0511.7.1

Monthly Financial Reports: Mr. Clifton submitted the preliminary monthly financial report for the period ending October 31, 2005. SamCERA’s Net Assets Held in Trust for Pension Benefits totaled $1,683,185,785. Net assets decreased approximately $38.3 millions in October due primarily to the depreciation of portfolio assets.

0511.7.2

Appointment of Ad Hoc Committee – Chief Executive Officer Annual Review: Mr. Bailey stated that it was time for his annual Chief Executive Officer performance review. Mr. Lewis appointed Mr. Hooley, Chair; Ms. Stuart, Ms. Colson and Mr. Buffington to the Chief Executive Officer Performance Evaluation Committee.

0511.7.3

Cancellation of December 27 Board of Retirement Meeting: The SamCERA Board of Retirement does not normally hold a board meeting in December. However, a special meeting is scheduled for December 16^th at 1:30 p.m. to interview finalists for actuarial services. Motion by Bryan, second by Salas, carried unanimously to cancel the December 27, 2005 meeting of the Board of Retirement.

Mr. Lewis then took up agenda item 5.4.

0511.8

Management Reports

0511.8.1

Chief Executive Officer's Report: Mr. Bailey gave an update on the Request For Proposal process for actuarial services. He said that staff had sent out ten RFP’s on October 27^th and that he is in receipt of letters of intent from five actuarial firms. The deadline for all proposals is November 28^th at which time staff will narrow down the field to two or three finalists. The finalists will present their proposals at the special meeting to be held on December 16^th.

Mr. Bailey said that he attended the Wharton School with Mr. Hackleman and found the educational seminar to be well rewarding.

0511.8.2

Investment & Finance Manager’s Report: Mr. Clifton reported that Deutsche Asset Management will become Aberdeen Asset Management at the end of the month. He also stated that there is now a 100% probability that INVESCO will call all $40 million on January 4^th for full implementation of SamCERA’s real estate allocation. Lastly, Mr. Clifton stated that he thought that the SACRS event he attended contained one of the better programs it has had in the recent past. Not only did he find an increase in the level of topics but in the quality of presenters as well.

0511.8.3

County Counsel's Report: Ms. Carlson reported on a new statute, AB1234, that would require that trustees receive ethics training every two years. This statute does not apply to SamCERA’s board of trustees. However, Ms. Carlson stated that it would be beneficial that the board receive a brief presentation on certain topics such as gift limits and conflicts of interest sometime next year.

0511.9

Adjournment in Memory of the following Deceased Members: There being no further business, Mr. Lewis adjourned the meeting at 1:45 p.m., in memory of the following deceased members:

Dergan, Bernice

October 2, 2005

Assessor’s Office

Wobig, Earle

October 13, 2005

General Services Administration

Fielder, Jane

Octber 20, 2005

Crystal Springs Rehab. Center

Kamin, Isadore

October 27, 2005

Mental Health Department

Crouse, John

October 29, 2005

Beneficiary Of Vera

Kenneth A. Lewis, Chair

Top
Minutes Index