ABOUT LACERA

BOARD OF INVESTMENTS MINUTES 4-22-09

PRESENT

• William R. Pryor, Chair
• Herman Santos, Vice Chair
• Diane Sandoval, Secretary
• John M. Barger
• Simon Russin
• Mark J. Saladino
• Michael Schneider

ABSENT

• Paul C. Hudson
• Leonard Unger

STAFF, ADVISORS, PARTICIPANTS

• Gregg Rademacher, Chief Executive Officer
• Robert Hill, Assistant Executive Officer
• Janice Golden, Assistant Executive Officer
• Lisa Mazzocco, Chief Investment Officer
• John McClelland, CRE, Principal Investment Officer, Real Estate
• Vache Mahseredjian, CFA, Principal Investment Officer
• Christopher J. Wagner, Senior Investment Officer, Private Equity
• June Kim, Senior Investment Officer, Equities
• Trina Sanders, Investment Officer, Real Estate
• Robert Z. Santos, Investment Officer, Fixed Income
• Gerald Flintoft, Investment Officer, Private Equity
• Stuart Mesnik, Senior Investment Analyst
• Shelly P. Tilaye, Senior Investment Analyst, Private Equity
• Shannon O’Connell, Senior Investment Analyst
• Dale Johnson, Senior Investment Analyst, Equities
• Shannon O’Connell, Senior Investment Analyst
• David L. Muir, Chief Counsel
• Earl W. Buehner, Senior Staff Counsel
• Johanna M. Fontenot, Senior Staff Counsel
• Michael D. Herrera, Senior Staff Counsel
• Cynthia Lau, Legislative Affairs Officer

1. APPROVAL OF THE MINUTES
   1. APPROVAL OF THE MINUTES OF THE REGULAR MEETING OF THE BOARD OF INVESTMENTS OF MARCH 11, 2009.

      A motion was made by Mr. Santos, seconded by Ms. Sandoval, to approve the Minutes of the regular meeting of the Board of Investments of March 11, 2009. The motion carried by unanimous vote.

2. PUBLIC COMMENT

   None

3. REPORT ON CLOSED SESSION ITEMS

   None

4. CONSENT AGENDA

   Mr. Buehner addressed IV. Consent Agenda Item B. and pointed out that LACERA’s Travel Policy no longer allows LACERA to accept gifts of travel. The Conference materials indicate that the conference fee for pension plan sponsors is $100.00. Other attendees may pay up to $1,550.00 to attend the same conference and there are at least three meals being provided. It is likely that the cost of meals would exceed the $100.00 registration fee. Thus, LACERA will need to reimburse the conference sponsor for the difference between the actual cost of the meals and the $100.00 paid by LACERA, otherwise the LACERA representatives at the conference will be deemed to have a received a gift for the difference.

   The following agenda items were placed on the consent agenda and unanimously approved upon a motion by Ms. Sandoval, seconded by Mr. Santos. The motion carried without objection.

   1. Recommendation as submitted by Gregg Rademacher, Chief Executive Officer: Approve attendance of Board members, and staff to attend the Credit Suisse 2009 Private Equity Conference at the Westin Book Cadillac Hotel in Detroit, Michigan; and approve the reimbursement of all travel costs incurred in accordance with LACERA’s Education and Travel Policy. (Memo dated March 18, 2009.)

   2. Recommendation as submitted by Gregg Rademacher, Chief Executive Officer: Approve attendance of Board members and staff as designated by the Chief Executive Officer, to attend NASP’s (National Association of Securities Professionals) 20th Annual Pension Conference; and approve reimbursement of all travel costs incurred in accordance with LACERA’s Education and Travel Policy. (Memo dated April 17, 2009.) (Placed on the Agenda at the request of Mr. Santos.)

5. ACTION ITEMS

   1. Recommendation as submitted by Gregg Rademacher, Chief Executive Officer: Approve attendance of Board members, and staff as designated by the Chief Executive Officer, at the World Pension Forum Conference in Washington, D.C. on May 17-19, 2009; and approve reimbursement of all travel costs incurred in accordance with LACERA’s Education and Travel Policy, except that reimbursement for lodging will be limited to $280 per night, plus taxes. (Memo dated April 15, 2009.)

      A motion to approve the recommendation was made by Mr. Santos, seconded by Ms. Sandoval. The motion carried by unanimous vote.

   2. Recommendation as submitted by Gregg Rademacher, Chief Executive Officer: Adopt a Retirement Benefit Funding Policy. (Memo dated April 15, 2009.)

      Milliman Consultants
      Karen I. Steffen, FSA, EA, MAAA, Consulting Actuary
      Nick J. Collier, ASA, EA, MAAA, Consulting Actuary

      Mr. Rademacher provided an executive summary on the proposed adoption of the Retirement Benefit Funding Policy. He reported that the purpose of the Retirement Benefit Funding Policy is to document the Board of Investments’ funding goals and to provide an action plan when actual experience either falls short or exceeds the funding goals. LACERA needs to adopt a Retirement Benefit

      Funding Policy so the plan actuary can perform the June 30, 2009 actuarial valuation. He also reported that the Board agreed to meet in March to discuss and adopt a Retirement Funding Policy, but the County of Los Angeles (“County”) had asked for additional time to complete their evaluation and analysis on the exclusion of the STAR Reserve in calculating the actuarial value of assets.

      Mr. Rademacher reported that LACERA could give the County until June 30, 2009 to provide their comments without jeopardizing LACERA’s statutory obligations with respect to completing the actuarial valuation.

      A motion was made by Ms. Sandoval, seconded by Mr. Russin to take action on adopting the Retirement Benefit Funding Policy today, rather than discussing it as an information item. The motion failed with Ms. Sandoval and Mr. Russin voting yes and with Messrs. Santos, Schneider, Saladino, Barger and Chair Pryor, voting no.

      A second motion was made by Mr. Barger, seconded by Mr. Santos, that the County of Los Angeles be required to respond by June 30, 2009, so the Board may take appropriate action under the required obligations. The motion carried by unanimous vote.

      Mr. Collier and Ms. Steffan provided an overview on the proposed Retirement Benefit Funding Policy’s thought process and key concepts of the policy. Their presentation demonstrated how the funding policy would actually play out in practice under a couple of theoretical scenarios. The two key goals of the funding policy are to provide benefit security for the members and to provide low and stable employer contribution rates. The ultimate funding goal is to set the assets equal to the accrued liabilities, which is what the actuaries call a funding ratio of 100%. However, there are trade-offs with these two goals. Higher employer contribution rates generally provide a better funding ratio, therefore a higher benefit security. Consequently a lower benefit security would be in line with a lower contribution rate.

      Currently the funding ratio is less than 100%. The current Funding Policy requires an employee contribution rate equal to the normal cost rate for the year, plus an amount required to amortize any unfunded accrued actuarial liability (UAAL). When the funding ratio is grater than 100%, the Funding Policy allows the Board to consider additional actions as permitted under the County Employee Retirement Law (CERL) using funds in excess of the amount needed to meet the 100% Funding Goal. This would include adjustments to the employer’s normal contributions and/or funding for discretionary benefits. Ms. Steffan noted that in any year in which the Funding Goal has been met and previously unallocated Excess Earnings are used for discretionary benefits, the actuarial assumed earnings rate will need to be assessed regarding the projected net earnings available to fund future benefits as part of the next scheduled investigation study.

   3. Recommendation as submitted by Earl W. Buehner, Senior Staff Counsel: Consent to the assignment of the Investment Management Agreement from Lehman Brothers Asset Management Inc. to a newly registered investment adviser that is or becomes a subsidiary of Neuberger Berman Group, LLC, and authorize staff to execute such consents and other documents to effect the assignment as reviewed and approved by the LACERA Legal Office. (Memo dated April 8, 2009 attached.)

      Mr. Buehner provided a brief overview on the proposed consent to the assignment of the Investment Management Agreement from Lehman Brothers. A brief discussion followed on the management team. A motion to approve the recommendation was made by Mr. Santos, seconded by Mr. Barger. The motion carried by unanimous vote.

   4. Recommendation as submitted by Earl W. Buehner, Senior Staff Counsel: Consent to the assignment of the Domestic Investment Manager Agreement from Berkeley Capital Management LLC to M & I Investment Management Corp., and authorize staff to execute such consents and other documents to effect the assignment as reviewed and approved by the LACERA Legal Office. (Memo dated April 8, 2009 attached.)

      A motion to approve the recommendation was made by Ms. Sandoval, seconded by Mr. Santos. The motion carried by unanimous vote.

   5. Recommendation as submitted by the Corporate Governance Committee: Adopt LACERA’s revised Domestic Proxy Voting Guidelines and Corporate Governance Principles. (Memo dated March 26, 2009.)

      Dale Johnson provided a brief overview on LACERA’s revised Domestic Proxy Voting Guidelines and Corporate Governance Principles. A brief discussion followed.

      A motion to Adopt LACERA’s revised Domestic Proxy Voting Guidelines and Corporate Governance Principles was made by Mr. Santos, seconded by Mr. Russin. The motion carried with Mr. Barger abstaining.

6. REPORTS

   1. Wilshire Associates
      Discussion relating to Westridge Capital Management

      Mr. Bensur (via video conference), Mr. Rice and Ms. Bonafede of Wilshire Associates provided a brief overview on external custody concerns and accusations relating to Westridge Capital Management’s alleged misappropriation of client assets. Staff reported that they would provide detailed terms on custody and related issues at the next Board meeting. A brief discussion followed. that staff would provide detailed terms on LACERA’s Manager Trust Agreements at the next Board meeting. A brief discussion followed.

   2. Public Markets Combined Educational Session
      Delta Asset Management and PIMCO
      Carl Goldsmith, Chief Investment Officer (Delta)
      Saumil Parikh, CFA, Executive Vice President and
      Senior Portfolio Manager (PIMCO)

      Ms. Mazzocco introduced Messrs. Goldsmith and Parikh of Delta Assets and PIMCO respectively, who provided an educational presentation on the current economic environment in the public markets, describing several scenarios for the economy in the short terms and their implications.

      A brief discussion followed and the Report was received and filed.

   3. Investing in Timber
      John D. McClelland, Principal Investment Officer, Real Estate
      Amit Aggarwal , Investment Officer, Real Estate
      (Memo dated April 15, 2009.)

      Chair Pryor indicated that due to time constraints the Timber Report would be pulled at this time. He also indicated that Item VIII. Good of the Order would be handled at this time and Item VII. Executive Session would follow.

7. GOOD OF THE ORDER (For discussion purposes only.)

   Ms. Sandoval reported that she attended the Wilshire Consulting Client Conference and indicated the sessions were excellent and very informative.

   Mr. Rademacher reminded the Board of the Budget hearings which are scheduled to be held on April 30, 2009, at 9:00 a.m. and on May 6, 2009, immediately following the Retirement Board meeting. He encouraged the Board to attend. Mr. Rademacher also provided a brief over on LACERA’s Media Policy.

   Ms. Mazzocco provided a brief overview of the Chief Investment Officer’s March 2009 Report.

8. EXECUTIVE SESSION
   1. Conference with Legal Counsel – Anticipated Litigation
      (Subdivision (b) of California Government Code Section 54956.9)
      
      
      1. One Case

   2. Pursuant to Government Code Section 54957 – Public
      Employee Performance Evaluation:

      MID-YEAR EVALUATION Title: Chief Executive Officer

      The Board met in Executive Session to discuss the above-anticipated litigation with its legal counsel. No further reporting is required.

      The Board also met in closed session pursuant to Government Code Section 54957 to consider the mid-year performance evaluation of the Chief Executive Officer. No reportable action was taken.

      Informational Items

      1. Chief Executive Officer’s Report. (Memo dated April 1, 2009.)
      2. Memo dated April 15, 2009, from John McClelland, Principal Investment Officer, Real Estate and Trina Sanders, Investment Officer, Real Estate regarding an update on New City Asia Partners, Update.
      3. Memo dated April 2, 2009, from Robert Z. Santos, Investment Officer, Fixed Income, regarding Goldman Sachs Asset Management.
      4. Memo dated April 13, 2009, from June Kim, Senior Investment Officer, Equities, regarding Goldman Sachs Asset Management – Quantitative Team.
      5. Memo dated April 2, 2009, from Robert Z. Santos, Investment Officer, Fixed Income, regarding Western Asset Management.
      6. Memo dated April 13, 2009, from Cynthia Lau, Legislative Affairs Officer, regarding Assembly Bill 1491 – Registry of Distinguished Women and Minorities.

      Green Folder Items

      1. Chief Investment Officer’s March 2009 Report – Revised.
      2. Copy of LACERA’s Media Policy.
      3. Copy of Bernstein Litowitz Berger & Grossmann’s October 2009, Conference Brochure.
      4. Copy of article from the Voice of San Diego dated April 20, 2009, entitled Pension Hawks Warn of ‘MP-3’.
9. ADJOURNMENT

   There being no further business, the meeting adjourned at 12:45 p.m.

Documents subject to public disclosure that relate to an agenda item for an open session of the Board of Investments that are distributed to members of the Board of Investments less than 72 hours prior to the meeting will be available for public inspection at the time they are distributed to a majority of the Board of Investments Members at LACERA’s offices at 300 N. Lake Avenue, Suite 820, Pasadena, CA 91101, during normal business hours of 9:00 a.m. to 5:00 p.m. Monday through Friday.

Listening Devices are available at days notice before the meeting date. Persons requiring an alternative format of this public notice pursuant to Section 202 of the Americans with Disabilities Act of 1990 may request one by contacting Cynthia Guider at (626) 564-6000, x3327 from 8:30 a.m. to 5:00 p.m. Monday through Friday, but no later than 48 hours prior to the time the meeting is to commence.