March 28, 2006 – Board Agenda

Call to Order: Mr. Lewis, chair, called the Public Session of the Board of Retirement to order at 1:03 p.m., March 28, 2006, in SamCERA’s Board Room, Suite 125, 100 Marine Parkway, Redwood Shores.

0603.2

Roll Call: Mr. Bryan, Ms. Colson (arr 1:10 p.m.), Mr. Hooley, Mr. Lewis, Ms. Salas & Ms. Stuart. Board Alternate: Ms. Arnott for Mr. Buffington. Excused: Mr. Hackleman & Ms. Tashman. Staff: Mr. Bailey, Mr. Clifton, Ms. Dames, Ms. Palu & Ms. Wong. Consultants: Ms. Carlson, Mr. Collier & Mr. Thomas. Retirees: 1, County: 1.

0603.3

Approval of the Minutes: In reference to a comment made by John Murphy at the last board meeting and recorded in the minutes, Ms. Stuart recommended that the board reconsider the approval of a retiree alternate. Motion by Arnott, second by Bryan, carried unanimously to approve the board meeting minutes of February 28, 2006, as submitted.

0603.4.1

Oral Communications From the Board: Mr. Bryan reported that he attended the CALAPRS General Assembly and found the event informative. He submitted copies of agenda materials for trustees’ use.

0603.4.2

Oral Communications From the Public: John Murphy, representing SCORPA, said that increasing health care costs far exceed the cost of living increase every year. He noted that the Medicare Part-B reimbursement program requires that the association have a funded ratio of at least 80%. He then said that SamCERA’s former actuary calculated a funded ratio of 79.6% for the June 30, 2005, actuarial valuation versus the lower funded ratio of 74.2%, calculated by SamCERA’s current actuary. He said the association should project when it expects to reach 80%.

0603.5

Benefit & Actuarial Services

0603.5.1

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

Disability Retirements:

None.

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

Service Retirements:

Jordan, Karel

March 2, 2006

Human Services Agency

Goins, Cynthia

March 11, 2006

San Mateo County Courts

Miriam, George Jr.

March 12, 2006

Office of County Counsel

Tang, Chung

March 12, 2006

Department of Public Works

Nakamura, George

March 21, 2006

(from deferred)

Department of Public Health

Malmin, Mark

March 23, 2006

Sheriff’s Office

D’Angelo, Joseph

March 25, 2006

Department of Public Works

Doberstein, Richard

March 25, 2006

Department of Public Works

Nebiolini, Juanita

March 25, 2006

Employee & Public Services

Waters, John

March 25, 2006

Department of Public Works

Whitney, Melinda

March 25, 2006

(from deferred)

Department of Public Health

Williams, Donald

March 28, 2006

Department of Public Works

Huang, Victoria

March 30, 3006

Human Services Agency

Parry, Cheryl

March 30, 3006

San Mateo Medical Center

Bennett, Nancy

March 31, 2006

Department of Public Health

Brinkman, John

March 31, 2006

Probation Department

Brown, David

March 31, 2006

Human Services Agency

Brunk, Leslie

March 31, 2006

Human Services Agency

DeMeo, Geraldine

March 31, 2006

San Mateo County Courts

Duignan, James

March 31, 2006

Department of Public Works

Edstrom, Vera

March 31, 2006

Department of Public Health

Elkins, Kathleen

March 31, 2006

Human Services Agency

Fuata, Sheryl

March 31, 2006

Aging & Adult Services

Galicia, Marcelo

March 31, 2006

Department of Public Health

Graff, Joan

March 31, 2006

Human Services Agency

Gruber, Joseph

March 31, 2006

San Mateo County Courts

Ho, Irene

March 31, 2006

Department of Public Health

Jones, Peggy

March 31, 2006

Information Services Division

Klingel, Friedhelm

March 31, 2006

Sheriff’s Department

Lloyd, Irene

March 31, 2006

Department of Public Health

Nelson, Marie

March 31, 2006

San Mateo County Courts

O’Driscoll, Cheryl

March 31, 2006

Information Services Division

Pacheco, Armida

March 31, 2006

San Mateo County Medical

Pangilinan, Aurora

March 31, 2006

Department of Mental Health

Rios, Elvira

March 31, 2006

Dept. of Child Support Services

Ruiz, Christina

March 31, 2006

Department of Public Works

Sheehan, Marie

March 31, 2006

San Mateo County Courts

Simmons, Charles

March 31, 2006

Department of Public Works

Smith, Joann

March 31, 2006

Human Services Agency

Vanoli, Louis

March 31, 2006

San Mateo County Medical Ctr.

Welch, Mary

March 31, 2006

Employee and Public Services

Continuance of Benefits:

Gardner, Mary

Beneficiary of John

McGee, Christine

Beneficiary of Jeanette

Morales, Helen

Beneficiary of Philip

Deferred Retirements:

Aguilar, Carlos R.

G4 vested

Buxton, Stephen L.

G4 vested

Cervantes, Steve

G4 vested

Frey, Lance

G4 vested

Sato, Kathy J.

G2 vested

Extended Purchase:

None

Refunds For March 2006:

Murti, Shivani

G4 non vested

Gay, Blanca

Beneficiary of Rommel Gay

Gamper, Gabriel

G4 non vested

Devitt, Edward

Beneficiary of Ana Devitt

Vaughn, Judith

G4 non vested

Townsend, Stephen

G2 vested

Schroeder, Mary

G4 non vested

Puentes, Raquel

G4 non vested

Pablico, Alisa

G4 non vested

Murillo, Elieth

G4 non vested

King, Terri Ann

G4 non vested

Mudge, James

G4 vested

Rollovers for March 2006:

Witschger, Tammy

G4 non vested

Sioson, Michell

G4 non vested

Pasqual, Mary Jane

G4 non vested

Kelly, Richard

G4 non vested

Fallen, Nicole

G4 non vested

0603.5.2

Consideration of Items Removed from Consent Agenda: None.

0603.5.3

Approval of Milliman’s Review and Determination of the June 30, 2005, Actuarial Valuation: Nick Collier of Milliman, Inc. was present to review the actuarial valuation as well as discuss the actuarial audit of Public Pension Professionals’ valuation. Mr. Collier compared the outcome of the actuarial valuations and clarified the differences between P3 and Milliman’s results. When replicating P3’s June 30, 2005, actuarial valuation, Mr. Collier stated that data, assets and member rates did not have any material issues. However, he stated that liabilities were understated by P3, mainly in the calculation of normal cost. Mr. Collier indicated that P3 did not take into account the cost for benefits for active members who may someday become future deferred vested members eligible for benefits. Mr. Collier also recommended a revised mortality table which reflects longer life expectancies, lowering the rates of mortality compared to those of P3. Taking these two main differences into account and other minor assumption changes, Milliman recommends an approximate 4% increase in employer contribution rates vs. the 4% decrease that P3 recommended.

Motion by Lewis, second by Stuart, carried with five ayes to two nays (Bryan and Salas), to defer agenda item 5.3, 5.4 and 7.3 to the April board meeting in consideration of the county’s request for more time to examine SamCERA’s recent actuarial valuation and recommended employer and member contribution rates.

0603.5.4

Discussion & Recommendation Regarding the 2006-2007 Fiscal Year Employer & Member Contribution Rates: This agenda item was deferred to the April board meeting, in consideration of the county’s request for more time to examine SamCERA’s recent actuarial valuation and recommended employer and member contribution rates.

0603.6

Investment Services

0603.6.1

Monthly Portfolio Performance Report: Mr. Clifton presented the monthly portfolio performance report for the period ending February 28, 2006. SamCERA’s 0.18% Total Fund Return for February 2006 outperformed the Total Plan Policy Benchmark return of 0.11%. The Fund’s Fiscal Year to Date (FYTD) return of 9.63% is 437 basis points above the FYTD Actuarial Discount Rate of 5.26% and 7 basis points above SamCERA’s Total Plan Policy Benchmark of 9.37%.

Mr. Clifton reported that DanaCorp in the Brandes portfolio has filed for bankruptcy. He has spoken with Brandes who still expressed their confidence in the auto components industry.

Asset Class

Market Value

1-Month

1-year TTWRR*

5-year TTWRR*

Domestic Equity

$897,156,274

-0.20%

11.62%

4.83%

International Equity

290,256,412

1.03%

20.81%

6.91%

Total Equity

$1,187,412,686

0.10%

13.75%

5.32%

Fixed Income

498,197,144

0.39%

3.33%

5.92%

Real Estate Aggregate

105,291,362

0.00%

20.98%

13.08%

Cash Equivalents

853,629

0.32%

3.27%

2.94%

Total Fund

$1,791,754,822

0.18%

10.66%

6.59%

Benchmark

0.11%

10.80%

6.29%

* Total Time-Weighted Rate of Return

0603.6.2

Approval of Amendment #2 to the Second Amended and Restated Limited Liability Company Agreement of INVESCO Core Real Estate- U.S.A., LLC.: Mr. Clifton presented the amendment to the second amended and restated limited liability company agreement of INVESCO Core Real Estate. He stated that the amendment makes the agreement more investor-friendly. Motion by Bryan, second by Arnott, carried unanimously to approve the amendment.

0603.6.3

Approval of Topics for Manager Review – Aberdeen Asset Management: Mr. Clifton presented the investment manager questionnaire for Aberdeen Asset Management’s annual review to the board. Mr. Clifton recommended that the board perform Aberdeen’s review while delegating the annual reviews of Fidelity Management Trust Company and Western Asset Management to the Investment Committee. He recommended that Aberdeen be reviewed by the full board due to the fact that the firm has recently switched from Deutsche Asset Management and that operational changes should be discussed. Without objection, the board accepted Mr. Clifton’s recommendation.

Motion by Colson, second by Bryan, carried unanimously to approve the list of questions for Aberdeen Asset Management which will be forwarded to them prior to their annual review.

0603.6.4

Approval of Topics for Manager Review – Fidelity Management Trust Company: Mr. Clifton presented the investment manager questionnaire for Fidelity Management Trust Company’s annual review to the board. Mr. Clifton recommended that the board delegate the annual review of Fidelity Management Trust Company to the Investment Committee. Without objection, the board accepted Mr. Clifton’s recommendation.

Motion by Colson, second by Bryan, carried unanimously to approve the list of questions for Fidelity Management Trust Company which will be forwarded to them prior to their annual review.

0603.6.5

Approval of Topics for Manager Review – Western Asset Management: Mr. Clifton presented the investment manager questionnaire for Western Asset Management’s annual review to the board. Mr. Clifton recommended that the board delegate the annual review of Western Asset Management to the Investment Committee. Without objection, the board accepted Mr. Clifton’s recommendation.

Motion by Colson, second by Bryan, carried unanimously to approve the list of questions for Western Asset Management which will be forwarded to them prior to their annual review.

0603.6.6

Acceptance of Semi-Annual Compliance Certification Statement – Julius Baer Investment Management: Mr. Clifton presented the semi-annual compliance certification statement for Julius Baer. He mentioned that the statement had nothing extraordinary worthy of note. Without objection, the board accepted Julius Baer Investment Management’s semi-annual compliance certification statement.

0603.6.7

Acceptance of Semi-Annual Compliance Certification Statement – Mondrian Investment Partners: Mr. Clifton presented the semi-annual compliance certification statement for Mondrian. Without objection, the board accepted Mondrian Investment Partners’ semi-annual compliance certification statement.

0603.7

Board & Management Support Services

0603.7.1

Monthly Financial Reports: Mr. Clifton presented the SamCERA monthly financial report for the period ending February 28, 2006. SamCERA’s Net Assets Held in Trust for Pension Benefits as of February 28, 2006, totaled $1,788,655,145.

0603.7.2

Review of SamCERA’s Sources, Uses & Budget for Fiscal year 2006/2007: Mr. Clifton discussed the status of SamCERA’s budget. He stated that a main item on next year’s budget will be a relocation expense. He also reviewed trustee educational conferences. A detailed budget will be brought to the board for review at a future board meeting.

0603.7.3

Acceptance of Report on Prepayment of the County’s Contribution for FY 2006/2007: This agenda item was deferred to the April board meeting, in consideration of the county’s request for more time to examine SamCERA’s recent actuarial valuation and recommended employer and member contribution rates.

0603.7.4

Approval of Office Space Option: Mr. Bailey reported that staff has been researching three options to acquire additional SamCERA office space. He opined that the most reasonable option is to expand the office space currently adjacent to SamCERA. The space will fit the needs of the association. This option also will minimize the expense of relocation since half of staff will remain in SamCERA’s current office which will essentially remain physically the same. Mr. Bailey also noted Milliman’s projection of future retirements. The increase in future workload will be taken into consideration when creating a staffing plan to best predict the needs of the association within the next few years.

Motion by Stuart, second by Lewis, carried unanimously to authorize the Chief Executive Officer to negotiate with building management and the owner of the business adjacent to SamCERA to create a draft lease agreement.

0603.8

Management Reports

0603.8.1

Chief Executive Officer's Report: Mr. Bailey presented the Notice of Election for the Second and Seventh position on the board of retirement who shall serve terms from July 2006 – June 2009. The election will be held on Monday, June 12, 2006.

Mr. Bailey also distributed the most recent edition of the SamCERA newsletter which will be distributed to SamCERA’s active, deferred and retired members. He thanked members from SCORPA who assisted in the mailing of the newsletter. Access to a customer service survey for retirees has been included in the newsletter.

He then said that staff is working on SamCERA’s strategic plan which will be brought to the board in April.

Mr. Bailey also indicated that Reyna Ferrales from the County Manager’s office will be present at the April board meeting to discuss the county’s proposal regarding the county’s health insurance trust fund.

0603.8.2

Investment & Finance Manager’s Report: Mr. Clifton reiterated that DanaCorp in the Brandes portfolio has filed for bankruptcy. When speaking to Brandes staff, they still expressed their confidence in the auto component sector. Mr. Clifton also stated that there have been staff changes at Goldman Sachs Asset Management and Western Asset Management. He stated that the changes have no impact on SamCERA.

0603.8.3

County Counsel's Report: Ms. Carlson discussed a Fresno lawsuit in which there was a dispute over the retirement system’s calculation of Final Average Compensation. The system took any highest twenty-six pay periods of a member’s salary history to calculate FAC, despite whether or not the pay periods are consecutive. The 1937 Act states that these twenty-six pay periods must be consecutive. SamCERA has been following the 1937 Act appropriately.

0603.9

Report on Actions Taken in Closed Session: Ms. Carlson reported that Mr. Lewis convened the board in closed session at 3:12 p.m. with all trustees present for roll call in attendance. The board conferred with counsel on Jack Stroppini v. San Mateo County Employees' Retirement Association Board of Retirement (San Mateo County Superior Court Case No. 452620). No action was taken.

0603.10

Adjournment in Memory of the following Deceased Members: There being no further business, Mr. Lewis adjourned the meeting at 3:13 p.m., in memory of the following deceased members:

Shaver, George

December 19, 2005

Department Of Transportation

Hughes, Joseph

January 19, 2006

Beneficiary Of Juanita

Gardner, John

February 7, 2006

Assessor’s Office

Youngman, George

February 7, 2006

Beneficiary Of Kathleen

Burr, Blanche

February 10, 2006

Crystal Springs Rehab. Center

Camerotto, Louise

February 12, 2006

Beneficiary Of Odo

Quarg, Edward

February 16, 2006

Assessor’s Office

Crandall, Irene

February 20, 2006

Planning And Commission Dept.

Carswell, Melvin

February 21, 2006

Probation Department

Hackenberger, Leonore

February 23, 2006

Assessor’s Office

Duckett, Jody

February 25, 2006

Assessor’s Office

Laakso, Marylyn

March 8, 2006

Department Of Public Works

Wolfe, Janice

March 8, 2006

San Mateo County Clerk’s Office

Kenneth A. Lewis, Chair

Top
Minutes Index