Disaster prepairdedness committee thmpt cochair which is myself. The ddpc had 2 meetings and i did have notes from september and november because of time constraints ill review the november notes. Hold on, please. Mayor Disabilities Council subcommittee on disaster prepareardsness met november 6, 2015 and focused on el 9o. The meeting was well attended and included memberoffs city deerment pas, public helt, emergency management, human sunchss as well as Community Organizations in home support services, public support, sf card, aging and disability, friendly sf. The first part the meeting including a presentation from roger [inaudible] from National Weather service in monterey who shared the updates on the el 9ee information. We cant be concern certain on the mass of storms expected from late december and up to manch. For San Francisco some of the implications can include lands slide power outage due to fallen trees or flooding, city aijss pg e and Public Utilities are hard at work preparing for increased rain. The Human Service ages talked about efforts topoid Emergency Support for the Homeless Population that resist comes into the homeless filter system. Some of the ideas included ericting temporary structures that provide a dry and warm place for anyone to come in during days of anticipated storems. The next meeting will be helds friday january 8, 2016 from 1 30 to thre3 30. Room 141. This will include information on for superbowl 50. Everyone is welcome to attend. For more information about the disability Disaster Preparedness Committee Contact the Mayors Office on disability at 14155546789. Email, mod San Francisco gov. Org. Thank you. This concludes the reports. Now well go on to item 12, Public Comment. Is there any Public Comment on todays agenda but within the jurisdiction of the Mayors Disability Council . Anyone on the bridge line . Any Public Comment . No . Okay. Thank you. We will go ahead and close Public Comment. We will go to information item 13 any correspondence no correspondence item 14, discussion. Council member wong. It is a very simple comment just like to wish everybody happy holidays and looking forward to seeing you all in 2016. Cochair supanich. I believe there will be no ndc meeting in december in lou of that there may or may not be a holiday party, we have yet to decide, but call mod office the number we have given you 10 times today, 5546789. And many of you will receive invitations as well so look forward to that. Thank you. Thank you everyone. So, the last agenda item which i know there wont be changing is to adjourn and thank you everyone for being here and have a nice weekend. [meeting adjourned] general Public Comment item no. 3. Please come on up. I have one card in front of me. Mr. John furlan okay thank you, president cohen. First off, im disturbed about the trend of moving closed session to the front of the agenda and having members of the public have to wait for an hourandahalf and two hours to wait for you to get through the investment calendar. And i would respectfully request that you move the investment calendar back to the agenda, so members of the public dont have to cool their heels while you are dealing with that. Okay. If necessary if you could move it to a special meeting each month, rather than jampack your agenda, so you are not out of here before 5 00 or 6 00 or 7 00; that would be even better. I would like to correct the record last month, ke walker inappropriately and inaccurately quoted that the program for the dalt investment would yield 9. 4 . She misread bob shaws analysis. She was quoting percentage for the loans that have already been repaid, and i believe more accurate number of 5. 2 yield on that proposed investment. Im also a little disturbed that you guys have not scheduled a threshold vote on whether that investment in mohcd is even appropriate to be considered . You will remember that i testified about this several times already. That i think its a conflict of interest for this retirement board to be investing in other city departments. I think you should have that conversation as the preliminary threshold matter even before you go back to considering the soundness of such an investment. Thank you. Thank you. Next speaker is john farland. I dont have a statement. I will reiterate two or three themes i have made over the past five, sich meetings. No. 1, regarding hedge funds, i again urge you to proceed with all due haste in implementing the february resolution to increase invest 5 of those funds and i would encourage you to look into increasing that to 10 . Since there has been since there was a very strenuous opposition to the 5 resolution. I would encourage you to figure out a way to reach out to what would be opponents of the 10 allocation. And try to head that off before it gets rolling again. No. 2 hedge funds are not an asset class. They can invest in any asset class. So in theory, if they really were as good as they purport to be, you should be 80 invested in hedge funds and 20 in private equity, and venture capital. But that is not going to happen. So you have 50 of your public funded equities and the big risk your pension fund issue faces is not the hedge funds, but how to hedge the 50 equity. I would again encourage you to think outside of the box and not think of the yale model per se, but to keep on increasing the alternative assets. Think of a way to directly hedge that 50 public equity. And i would encourage you to consider hiring an expert to do so. You can use put spreads, calls, whatever. It would be far more Cost Effective to do it that way than to pay fees to hedge funds. No. 3 the point i want to make, i would encourage you to strongly consider for example the position i just mentioned about hedging your public equity exposure. Strongly consider paying Incentive Fees to your staff. Your fund has been in the top quartile according to your documents, the first quartile over the past 1,3, 5, and 10 years. You should figure out some way of rewarding that performance, and encouraging 30 seconds. And encouraging that performance. For example, the private equity portion is doing great than figure out some way to pay for that performance. That is it for now. Thank you. Thank you very much. Mr. Clark, let me ask you a question, are you able to turn up the volume on this microphone, so everyone can hear . Do we have that ability . We have it up as far as it will go right now. Thank you very much. Next speaker is ms. Martha hawthorne followed by david williams. Dont count this to my 3 minutes, please. Hi, Martha Hawthorne from seiu 101 and fossilfree San Francisco. I share the first speakers disappointment that there is say closed session all of a sudden. We are busy people and come to attend a meet and not comment and leave and i hope you will reconsider the closed session and put it at the end instead of the beginning of the meeting. That is the first point. Second point, as you know most of the members of our union were in favor of the zero hedge funds. So i respectfully disagree with the last speaker that the increase should be from 5 up. 5 is actually too much. So keep that in mind, and dont go back to increasing it. Third point, divestment from fossil fuels. Our union passed a resolution i think two years ago hoping that this would be a fast process. Climate change, i dont need to remind you is really, really bad. Im commenting on this because i see on the agenda no. 10 and 11 is divestment report from sudan, sudan and tobacco, i believe. I look forward, actually, to that discussion although i cant return for it, unless you change the agenda. But want to know what the progress is on fossil fuel divestment . Our union passed a resolution supporting level 2 and we havent heard a report as a recall on the progress lately. And level 3 is what we really want and we want it quickly. I also look forward to tomorrow at the board of supervisors rules and means committee, i believe. A Committee Meeting has requested the attendance of the board to report to the board or supervisors on the progress of divestment and there will be members and interested members members of the union and members of the Community Interested in hearing your report. Thank you. Thank you. Mr. Williamsing work. David williams seiu 1022 and i want to echo what martha just had to say, but the main thing i wanted to menace mention the last two meetings you have manufactured into closed session after the comments at the beginning of the meeting which were very concerned about. Its disconcerting because there are those of us who think its actually an attempt, an attempt to make it so that members of the system cannot participate in open discussion. We come to a meeting and then were going to have wait for an hourandahalf, four hours . How long will it be in these close d meetings that we have to wait to make comments on particular agenda items and were very upset that you have done this twice in a row and hope that you do not do it again. Thank you. Thank you, next speaker. Yes, i echo what martha said, seiu and i intend to work with seiu about the hedge funds. I dont know about the background of this gentleman, but think he might have ties with the hedge funds because according to all of the research i have done, you can look at the internet. I have remailed to all of you that the largest hedge funds yeartodate they have lost 17 and a lot of them have gone out of business. So im definitely strongly against hedge funds, and i just cannot accept that. I will work with seiu and reject that because even 1 is 1 billion. This gentleman was talking about 5 , 8 , 10 , that is ridiculous, that is our hardearned money going down the drain. Secondly, i remain concerned about the performance of deferred compensation. I dont know what our consultant angeline is doing. We would like to the deferred compensation manager who is working with angeline . The performance is just terrible, okay . The goalmaker prudential claim they are not responsible they are what . Just Record Keeping and who is responsible, okay . I honestly believe the Interest Rate increase in september, but they will not save us forever. Next year according to all of the reports that we see, a recession is coming. Even though they dont increase the Interest Rate, but its going to go down. They cant even handle a minor correction, 10 last time. Its coming back up and its going back down again, okay . So what are they doing . Angeline . I would like to know what is the topten holdings in the mutual fund . And are they doing anything to conserve cash . I am doing it myself for myself. I have raised cash in stable value. I have raised questions about the stable value . Why the insurance cost is sew high . So high . You can negotiate with all of the alternatives im sure there are alternative money market funds out there that we can invest in and increase the yield and lower lower Expense Ratio of 38 basis points. That is ridiculous. Why cant someone do anything about it . Its our hardearned money. As far as the pension goes, i talked to malia about the pension. I dont think 30 seconds. I dont think San Francisco city is going to go bankrupt and, in fact were doing very well. I wish we could do better, because its your duty and your responsibility and getting the hedge fund is absolutely disaster for all of us. Thank you. Thank you. Is there any other member of the public who wishes to comment at this time . Seeing none, Public Comment is closed. Thank you, ladies and gentlemen for your comments, mr. Clerk please call the me item. Item 4 action item closed session. Thank you. How long will this closed session last . Closed session doesnt have a time limit on it. You need to put a time limit that is unfair to us. Thank you. Were going into closed session now. [ inaudible ] i cannot. [ gavel ] good afternoon everyone were about to resume our meeting. All right ladies and gentlemen, thank you for bearing with us. We have completed our closed session. Is there a motion not to disclose what was discussed in closed session . Is there a motion not to disclose what was shared in closed session . All right, ill make the motion not to disclose what was shared in closed session. I will make the motion and i move that we do not disclose what was discussed closed doors in closed session. I will second the motion. All those in favor, say aye . Aye. All those opposed say no . Thank you the ayes have it and motion passes unanimously. Mr. Clerk, could you please call the next item, thank you. Item 5, action item approval of the minutes of september 9th, 2015 retirement Board Meeting. Thank you very much. Is there any comments or discussion on the minute from the september 9th Board Meeting . All right, lets take Public Comment. Public comment . All right, Public Comment is closed on this item. Is there a motion to approve the minutes . So moved. Thank you. Thank you. All those in favor . Aye. Excuse me, is there a second . Second. Seconded by commissioner bridges. All those in favor, say aye . Aye. All those opposed . Excellent. Ayes have it and this motion passes. Mr. Clerk, could you please call item no. 6. Item no. 6, an action item on the consent calendar. Is there any discussion, colleagues, on the consent calendar . Any concerns . Any member of the public who wishes to comment on the consent calendar at this time . Seeing none, Public Comment is closed. May i have a motion to accept item 6 . So moved. Is there a second . Is there a second . Second. Thank you. Commissioner bridges. Can you do a lets do all those in favor say aye . Aye. All those opposed . Thank you this motion passes unanimously. Mr. Clerk would you call item no. 7. Action item recommendation to issue revised request for proposals for Global Custody and securities lending. Mr. Coaker. Thank you, mr. Coaker. [ inaudible ] thank you, chairwoman. This custody was original back in 2013, and then approved by the board or reapproved . January 2014 and canceled last month and were bringing back to the board for approval this month and we also have our colleagues. Robert shaw managing director of public markets. To my left isbu, and mark from Cowan Associates who are assistinging as you consultants for this particular rfp. With that i think well open for questions regarding the revised rfp with the only comment being throughout the rfp you will see the highlighted yellow sections. These are the new questions added as a result of feedback we received from the board at the last Board Meeting. Thank you. Colleges colleagues any discussion for staff on this item . No . Well, lets go to Public Comment. Thank you, president cohen. I was glad that commissioner meiberger served with me to report the black swan. I didnt bring it with me to have the full title of it. Im hoping that some of you may have read it. Its a jawdropping, edgeofyourseat report. I was shocked to reading it in 2008 Northern Trust closed our cash account and that the retirement system had to sell off securities to raise oh, yeah, cash to pay pensions. Imagine being in a cashcrunch when a retiree wants their check . In the process the system lost 27 million bucks. And combine that 27 million with the 62 million loss in the concepts hedge fund investment, which people now want to wave the emperors new clothes and retend sfs concepts was not a hedge fund. So were up to 89 million. Plus problems you are having with the deferred comp. I mind myself wondering, reading the black swan report, whether commissioner paskinjordan cuts the relationship with Northern Trust, who furloughs our assets in 2008. It caused me to lose a lot of sleep for several nights. Im surprised at this rfp issued two years ago and nothing has progressed with it. And you only got around last month to canceling it and requesting a new rfp. So im hoping that the outcome of this process is said Northern Trust will not earn your trust again, and that the relationship that the retirement system has had with them will come to an end. After all, how do you lose 27 million and then climb back into bed . 30 seconds. Thank you. Thank you. Is there anyone else who would like to speak on this item . Seeing no further Public Comment, Public Comment is closed. At this time, colleagues this is an action item. Is there any other discussion for staff . Yes, i have one. Yes . I heard the statement before, i do know the step fund was frozen. Did we have to sell any assets to pay pension checks . Did we have to sell any assets to make the commitments to our real estate or general partnerships . Did we have to sell any assets or our managers have to sell to do any of the stuff that they wanted to buy . I was with the retirement system at that point in time and joined one month prior, and my recollection is no. We maintained usually 23 months worth of cash for benefit payments. That is a separate line item you will see in the monthly reports and there was no selling of assets such that we could or had to in order to pay benefits, or operating expenses. The freeze is correct, but the impact is not as what was described by our audience or by another board member here as well. Thank you very much. Commissioner meiberger. I beg to differ. My recollection is that the chief Investment Officer at that time, mr. Dave kushner if you would kindly respond and followup on that would be most appreciative because as it turned out that was the absolute worst time to sell anything because of the cash and its not just the fact that you didnt have to sell assets or did have to sell assets to fund benefits. Its because you lost liquidity. You want cash to take advantage of the markets falling to hell in a hand basket and the fact of the matter is that since our cash was frozen, we did not have those opportunities. So again, if i could just followup on that, on a factual basis, to followup did we have to liquidate emerging markets equity fund to pay benefits . And what other funds we did have to liquidate to pay benefits . Clarification, question, please. Please. At that point in time, my recollection is that we did not have investments in emerging funds equities and all were separate. Anyway, well followup and i believe we had a commingled investment in emerging markets that we had to sell. That is my recollection. At that pointed in time if you could followup with that. One of the reasons that you have cash to take advantage of the markets and if your cash is frozen, you cant take advantage of the market. Warren buffett talks about in 2008, he had cash and didnt have his accounts frozen in cash and just for those who are not aware of what were talking about, the issue is that we had Securities Lending Program and Northern Trust the custodial bank invested in longterm and among lehman brothers, and we did not have cash to the tune of roughly 250 million. Across all of our cash accounts. That is fact of the matter, my recollection. Our cash account was frozen. That is why i asked that to go in this rfp, what other cash accounts were frozen . So anyway, i think its a very, very substantive issue to freeze an account for crash cash for a pension fund not to have it available i think it a very, very substantive issue. And just to followup, the publication that patrick shaw wrote was one of my graduate students. Very detailed analyses of the securitieslending program and provided a tremendous amount of depth on all of the investments that did go south, that were downgraded to single d, c and other substantive credit downgradings, which is why the account was frozen. All right . So again, for those who are interested in that, there is a publication and maybe we should give it to staff, so they can read them also and find out precisely what happened to our cash account . Again it was a very big deal. I do have a couple of questions about the specific rfp. I noticed that all of the pages are not included. For example, i see page 68 of 111. Where are pages 69 through 111 . We routinely do not provide the Investment Management or the agreement, the consult agreement. We also dont include the required vendor forms. Wed be happy to provide those for you. Were just trying to save paper, but we routinely do not include those because the rest are standard boilerplate of consultant agreement or Investment Management agreement. If you could obviously that is a big deal. Thank you for the clarification. Wed be happy to youll be able to see it when its published and the remaining 100 questions is just how to get to the standard vendor forms and the form of the proposed contract that they would have to enter into if they were selected. I did have since this has gone since the blackout period was lifted we should also state for the record that the blackout period has existed for the last two years, which did preclude any board member from talking to any vendor in the securities lending or the custody arena. So i think that should be said for the record. So for the last week was the first time in several years, certainly in two years that i had a chance, that any board member has had a chance to contacts any of the vendors in this arena. I think its also a very substantive issue that the public should be aware of. I do have a couple of further inquiries regarding the rfp. Since we talked so much about hedge funds, i think at least we should put on the table the difficulties in accounting for hedge funds. So for example, i think of a substantive area of inquiry is do the custody banks have their own software to investigate the hedge funds . To analyze their investments . And to do the accounting workforce . So do the Service Providers have their own software, their internal projects, their internal infrastructure if you will, to analyze, to investigate, to report on hedge funds . Because im sure as were all aware of the fact that hedge funds, there was some major disclosure issues in supporting reporting securitis or other instruments that are difficult to hire . Or do they hire out to an outside ventor, if you will. I would like that further inquiry [tkphoplt ] whether or not the Service Provider has their own software or their own inhouse infrastructure for software to analyze hedge funds . Or are they simply buying a package and using that for someone else . The other area of inquiry is in terms of the custodial bank doing the accounting for hedge funds directly . If one of the candidates, for example, does have a hedge fund as one of their clients obviously they will have a lot more disclosure in that arena. So i would like to have lines of inquiry in terms of candidates . Do they directly have hedge funds as their clients . Because to me, that is another level of disclosure. Because as we will eventually find out, hedge funds become a black hole, if you will, in terms of reports for information, the reporting of with holdsings and disclosure, all of those kinds of things that i want to make sure that we have as much disclosure on hedge funds as humanly possible. To me that is a very very important issue. The other issue i want to address generally is the accounting for our assets. Okay . Well come to one of our managers, prima, that had a lot of trouble reconciling with the custodial bank. So i want further inquiry in terms of what kind of discrepancies does our custodial bank have with the reported statements of the managers . Okay . What kind of discrepancies are there between what the manager reports, and what the custodial bank reports . Okay . Because again, i will defer my comments later on. But i dont have a largelevel of comfort with the level that is currently being done reporting the assets of certain of the managers. Okay . Those are my areas of emphasis on this rfp. Thank you. I would like to address the concerns is that was been raises. On appendix a, we go through question 18, 19, 20, 21 dedicated to look at transparency. And it delineates there everything from real estate commoditis, alternative investments, private equity, returns and hedge funds as part of the questions. If you could add their software, whether its internal or a purchased kind of software on that . Okay. Then on page 33 of 111, under the performance investment guideline and Risk Analytics. Because hedge funds requires a lot of modeling, and proxy type were asking for the tools. So question 8, 9, 10, 11, 12, and 13 are basically dedicated to for example what are the private equity tracking software you are using . For hedge funds on question 10, how do you handle hedge funds within our reporting performance . Do you have a hedge Fund Transparency tool or tracking capabilities . Please explain. Do you monitor portfolios for investment guidelines . That is how we tried to handle it, given that hedge funds, because of the relative lack of transparency. So were now looking at the Risk Analytics to capture that portion of advance modeling of portfolios. Then in terms of the third item, that was raised with regards to the reconciliation of the Investment Managers and your custodial bank is page 29 of 111, section h. The first thing we ask what are your investment manager reconciliation policies and procedures prior to issuing audited statements to clients . So we wanted them about investment manager reconciliation process. And then the third question there is the rigorous formal monthly reconciliation process that San Francisco ers has implemented ever since . So we have tried to address all three items, really, at the backbone of this rfp. Just one followup, i would like it reconciled to audited Financial Statements. That i did not see here. I want audited Financial Statements is what i want to see. That has not been done. I dont want a he said we said. I want a signature and some liability behind it. Thank you. Mr. Makras. [ inaudible ] i believe before we go forward with the rfp we really should do a reasonable investigation on what went sideways with this . And how we can be offtrack for two years . Its really just think about it two worths of a blackout period. So did we do it intentionally . Did it happen by default . Is it an error . What really went sideways for an rfp that should have been concluded in six months . Were still looking at it a few months later. So we issue it, we evaluate it, we get a shortlist. We approve the shortlist and then it goes into the black hole for 20 months. So two years later, there is no amendment to the rfp. There is really no reporting back to us. There wasnt a cancelation of the rfp. Until we canceled it last month. And more importantly, there wasnt a recommendation to go forward with someone. So the reality of what we did 20 months ago we killed the rfp and we have silent to that task until last month. The concerns i have is one company is benefiting from that. We must have given them two 1year extensions to be where we are at today. So looking in the rear view mirror we now have a company that has been working for us for 19 years, and may have the most oneyear extensions to their contracts than anybody i know. That is not why we implement our Governance Guidelines so say every three years we go out to bid with extensions, there is an outside date for these. I promise you there is no 19 years in any of our documents. So when we de facto kill an rfp, and someone gets two years extension on the contract for free, i think were saying if i think were saying that the rfp process isnt that important to us and our governance issues are not that important to us and maybe were telling the world were really happy with Northern Trust . And maybe that is not bad. But i am really not happy with Northern Trust collectively. And everyone should have a free shot at our business. So the business world, the way i understand it, if someone has a fiveyear contract and they are interested in our business, four years into it, they are going to contact us and say is the rfp going to hit the street . Wed like your business. Were ready to compete with you. But if you start giving oneyear extensions, unilaterally out there, eventually you are wearing down the people who are interested interested in our business and i think we have a culture at the end of the day at 19 years, that is not right. And were doing it elsewhere, too. Lets go to hedge funds a little further away, and this body voted to allocate hedge funds, so we have an rfp out there and once again we have contractors and managers that have given us their proposals, and they are in the black box and were doing nothing with it. When we approved the hedge fund allocation, we were promised we would be investing money by november. Well, next month is november. So once again there is a culture around this rfp process that is troubling to me. And what is troubling to me is you open it up, people get the bid. We have a Selection Panel and the best person pops out of the slot. That person you dont know who is going to jump out of the slot at the end of the line and the best way you can control results is not let someone pop out at the other end. So by default were stuck with a contractor defiant to all that we stand by fair bidding. Everyone has a shot and after so many years everyone should be able to bid and earn our business as a whole. So for me i think we have have a lessoned learned for an rfp process for something that is so important. At the end of the day, this is a big mistake or its engineered. I truly hope its not engineered, but a 20month mistake is a management issue that we should deal with squarely before we go forward. Because if we go forward with the rfp, you put a gagorder on us again. We have had one for two years. So do you want to put one immediately on us, and we cant talk to other competitors . Now what i did in the 30day period from last month, i flew out to Northern Trust. Securities lending has been a big issue with me. I have raised it over years, 2008 incident. I went back in 2012, i went on a Trading Floor at Northern Trust and asked them to show me the line of trade. I wasnt able to see one. They wouldnt show it to me. They would not, they could not, whatever the story was. I said please show it to me and they did not. So for two years i have a gagorder on me. It was lifted last month and the first thing i did was reach out to jay and said im going back to Northern Trust. I have one objective only and that is to see a live trade. I flew out there. I sat for three hours and lo and behold i didnt see a live trade. Was that a mistake or was that also engineered . I want to know how we get our trades . I want to know how it comes in . How San Francisco gets their allocation . And how it posts to our account . And i dont think its asking a lot for any representative of staff, or this commission, to ask their custodian to show us a live trade on anything. Like chicago i told jay with all fairness, why would i fly to chicago to have a Board Meeting, talk about securities lending that i could have done with a Conference Call or on skype . There is only one reason i flew there is to see a live trade and that is a transparency issue. Did you see it . No, i did not see it. So we not only have an rfp issue, we have a transparency issue at least with this one individual representative of us. So the rfp process is pushed out a little bit and im going to ask jay who was our shortlist . And i want to go to every one of those company and see if they will show me a live trade . In 2008 we lot lost a lot of money with the crash that happened and i think its freudent prudent to see how our custodian operates so we can come out of slot and protect our interests. I will open up to questions if anyone has. Colleagues, any questions or concerns or feedback . Yes, commissioner paskinjordan . To ask whether the staff why with he couldnt see a trade . Are there rules at Northern Trust or a reason he couldnt see an actual trade . As commissioner makras indicated i was the one who arranged the most recent trip and i specifically requested Northern Trust to provide him the opportunity to see a live, on the floor, trade, as well as how to process it through reporting. I was assured repeatedly that that was going to be what they focused on. They asked if they could also take the opportunity to show him the custody side . And my reply was as along as he gets what he is asking for, which is the opportunity to see a live trade. Now i didnt fly back with him. I condition i cant control Northern Trust anymore than to repeatedly have them assure me that they understood that the sole purpose of his trip back there was to be able to see a live trade and commissioner makras reported to me shortly after the meeting that in fact,ed or, in fact, they waited what they told me my recollection is that they waited until they knew he needed to leave for the airport before they offered him the opportunity to go to the Trading Floor. So there is some disconnect here. An rfp that wants our business and we have a commissioner fly out. Seems to me there is some disconnect, if we have a commissioner who is flying out, obviously Northern Trust wants to keep the business, why did that not happen . And i think somebody should reportback on staff why that didnt occur . And they need to talk to Northern Trust and find out what happened . I would say this is definitely part of consideration of our experience with our current custodian as we would go through the evaluation of people, prospective bidders. This item, katie can correct me, but this item is whether to issue an rfp and i assume that commissioner makras is asking that we delay it to give him an opportunity in particular to go and visit the other finalists, which were approved in, i believe january of 2014. I wouldnt put them as the finalists. If we lift out the black out period im free to go to the players and there is only four o r five big players and we lost a lot, a lot of money and i want to understand it 100 . Commissioner when you contact the other four or five companies and what happens when you learn that is Standard Operating Procedure to not show a live trade . That i would imagine through your discussions with the other companies it begins to answer some of the questions that you may have or concerns . You are on a factfinding mission, just trying to understand. Northern trust in how they are managing our assets and my belief is any member of staff or any member of this commission should be able to sisee at any given moment what they are and how they are reported . If they are not going to show me a live trade, that is what my focus is. A request for a trade comes in. If its electronic, i want to know how it posts on our account . And i want to know the priority of who gets that trade is . Now just in continuing the questioning, leona and i have been in this business and we have this before and have seen this with a lot of custodians these kind of trades. I want to stay onpoint with the rfp, which is the agenda item. Just on the rfp item if you could get back to us why a trade didnt oqur at the time or what the reason is . It sounds like we need a motion to either accept the recommendation, to issue the revised request or do not accept it and we extend and push out the date on this . I dont know if there is a motion i move to continue the item to the call of the chair. Ly i will second that motion. The motion is to continue this item to the call of the chair, which means that the chair has the authority to direct staff to put it on the agenda. So there is no datecertain time. Okay . Lets take Public Comment. Im sorry, did we take Public Comment on this item already . We did. We did. Public comment is done. Its on the item, not on the motion. Sorry. [laughter ] good try. Just a minute. I see we have a couple of comments. Commissioner bridges. I do want to go back and [ inaudible ] commissioner makras concern and if delaying it will give Board Members the opportunity to dot research i think is important. The securities piece is very important to get it right and to make sure that everyone is comfortable with the process and i think that is key here and you that is what were talking about. I would support that. The whole board needs to be comfortable because its that important the asset liability function of the board. I would support that. Thank you. Mr. Driscoll. Its going to be a series of questions. Im come back to the question in a moment, but since the representative from cowan is here you have had experience with your other clients who actually have hedge funds or absolute return strategies in their funds . Yes. So your experience dealing with the answers to those questions that you highlighted, you actually have real experience seeing how these custodians operate their systems to deal with things, like private equity and or special situations . Yes. Thank you for adding those questions to the rfp to start with. The thing about this motion then, if i remember correctly about this original rfp, because i do remember the first time it came to the board, the board pulled it off the calendar. That happened about two years ago. The board did that. Secondly, this is a twopart rfp. There is the custodial operation and there is the securitylending operation. The first time we had four people bid on the custodian plus i think they plus bid on the securities lending and maybe five, six, nine separate bids. So are we going to tie these together again and look at another 1920month freeze on proceedings. Is that what were talking about here or go ahead with the custodian and talk about the securities lending issue . I would be willing to say that you could go watch a trading execution step without violating the blackout at all. Three, some of these statements being made, i think commissioner makras, either accident or mistake or engineered and there may be a third answer. We need an answer because that is serious allegations against the consultant and the board. Because i think mr. Huish told us a month or two ago on a priority basis that is why it was held up. Its not like staff has been sitting here doing nothing in 20 months, but with other investment works going on. So i dont know the whole reason why this rfp was held up, but its a combination of issues. Why the hedge fund wasnt held up . I believe the issue, the rfp could have been held up until the managing director hiring, that is another issue i followed up, the parallel tracks that affect the whole rfp process. To answer two of your questions and i heard two questions. One is as presented we are offering prospective proposers the opportunity to bid the securities lending and custody together. For custody alone or securitieslending alone, which is a decision that we made a couple of years ago and we have no reason to believe it wouldnt be wise to continue with the rfp with the same idea. We want to be able to position ourselves to potentially have two providers. Custody provider and then a separate, distinct securitieslending agent. The last question, the rfps for the hedge funds are not in a black hole. They are being reviewed by four of the five members of the committee. And that we intend to once we have hired the managing director, it will be fulltime employment for that person. And we believe that that person will be able to catch up with the rest of the evaluation team. That son the absolute return hedge fund issue, not the custodian search. That wasure last im sorry, i connected them. Commissioner makras brought it up as an example of staffs performance on rfps. I forget how many searches we have underway right now, but these are two big ones. Okay. Any other discussion . This is sort of an unknown. Were tabling it to a timeuncertain. Should we do the investigation or proceed with the rfp . I think we should do the investigation before we proceed with the rfp. The question was asked do we proceed with the investigation or do we go on with the rfp . And i would vote to proceed with the investigation before we go in further with an rfp. Madame president , that is based on the fact that when this rfp started, there were some of us not on the board at the time it started. So coming into the middle of this process, i think is what commissioner driscoll is referring to. When i read through this and i want to go back to what our executive director said. I read it as if you could bid on this either bundled or unbundled. Yes. Again i had to go back and piece the history together because i wasnt here when it started. I think that is part of the disconnect as well. This has gone on so long that part of the pieces are missing. So if you are coming in the middle of the stream, you get it in piece only because im familiar with the process its easier to piece together. Im not sure everyone is as comfortable with that. I think we still should do its a bundle, versus unbundle. Commissioner makras could you restate your motion, so we can vote on it . Yes. Continue the item to the call of the chair. Thank you. Motion made by commissioner makras and i seconded that motion. My question, so to the call of the chair, fine. What are we going to do in the meantime about this subject . Obviously northern is going to continue as our custodian with those functions let alone the securities lending. Is it going to sit another 20 months or when you say investigate, that means someone must take an action and what is the action and who shall take it . Sending sounds like that is specific to the call of the chair and to figure out they want to present it to us im a little confused. We are delaying this in ordertor for staff to answer some of the questions that were just asked . That is correct okay. Can i ask another question and maybe have staff get back to us . Commissioner meiberger had brought up the point that when the account when this occurred and supposedly we didnt have the ability to trade on the account and liquidity was an issue. So i would like you to come back to us and let us know, because i believe mr. Shaw has that background on that. Did we miss making a trade . Were we going to make a trade and were we prevented from doing this due to a liquidity issue . That is no. 1. And did anybody in zephyrs, we they harmed . We know what the amount of money, the loss of money, but were they further harmed by any liquidity issue . And i believe commissioner driscoll had stated that he did not think that they were harmed; that you had plenty of liquidity at the time to make to make any distributions or do anything at the time. So just get back to us and let us know if liquidity had indeed caused a issue to make a trade that we would have otherwise made, except we couldnt due to liquidity issues . Okay . Okay. I would say the substance of some of the questions that you have requested answers is how we would evaluate prospective bidders or perceived as an invitation not to bid . So i would warn that we should stay to the motion that is on the floor. The subjectmatter which is whether we issue this rfp . Or whether we continue it to the call of the chair . I will work with president cohen to determine what level of information well bring back and the timing of bringing this back as an action item to reissue the rfp. So the point i was making was commissioner meiberger made a point, and this has nothing to do with the rfp. Its just i want to know if that was true . Okay . So you dont have to tie it to whether its an issue for the rfp. Understood. Okay. President cohen, first i would support the motion to delay the rfp. Regarding the kind of questions, since commissioner makras i believe has the most familiarity with this, i would welcome if he would address some questions that he feels would be important to identify before we move forward on this . He has done his Due Diligence and i certainly vent havent been to chicago to see the operations or anything else and i think of all at table, commissioner makras has the strongest understanding of this and excuse me, probably in the best position to ask the questions Going Forward op this. I would welcome your questions to go forward with this and think it would be very constructive for this. I will put something together. Thank you very much. Im aware of other public Pension Funds excuse me that are doing a custody search. So it gives us the opportunity to seek out other Plan Sponsors that are doing this. Im aware of other public Pension Funds doing a search and another reason why it makes sense to delay that to speak to other public funds in terms of what they are looking for and what their experiences are as well . So i think it would be very constructive to having a very important solution to this. I think we all want the best outcome from this and i think delaying it gives us the opportunity to ask questions and i want to applaud commissioner makras doing his Due Diligence going to chicago and doing this. Because obviously its a very complicated thing and i dont know if the audience understands what were talking about with, what is custody . Its a banker that holds our assets and does other things, but its a very involved and detailed process. So i dont think the layman has a deep understanding of this and i would welcome your questions on this. Again, thank you for your efforts. On the motion, if were expecting the president of the board and executive director to sit down and figure out how to proceed, what is the question, let alone time to find out the answer and how we come back and deal with the actual rich rfp process for the two functions . I will assume the president and executive director would have the resources for that without doing another rfp to bring someone in to help with the factgathering investigation report, concluding thing . I say that so we dont spend another month before the work starts. Side question going back to what i was trying to do earlier, as cowan had experience dealing with prime brokers and they are reporting methodologies, getting from the prime banker and not the absolute return hedge fund managers. Yes. Thank you. All right. There has been a motion made and seconded already. So lets do a roll call vote. Lets do a roll call vote on the motion that has been made and if there is another motion if there is another motion that wants to be made to address item no. 7 about suspending the proposal indefinitely im sorry, im trying to parapraise when you said jay in over, roll call vote. To continue to the call of the chair. Yes, sir. Commissioner bridges . Aye. Commissioner cohen. Aye. Commissioner drisckal. Drisckal . Aye. Motion passes unanimously. Thank you. Next item. Item no. 8 a discussion item report on the Investment Performance for the retirement board for the Quarter Ended june 30, 2015, mr. Shaw. Commissioners you have before you our quarterly performance. This is for the june 30, 2015 performance period and it also includes fair amount of commentary with regard to the fiscal year. Just to start it off, im going to move the presentation forward to page 18. We want to point out one thing. Normally speaking when were looking at performance across the quarter its difficult to narrow it down to a specific factor. Our goal obviously is to retract our return assumption. We fell short this year. Will you notice the negative performance for international. The dollar was strong and appreciated approximately 20 not only against the euro, but also the yen. Without this impact we would estimate that the fund would have returned something closer to 7, maybe 7. 5 . That is one of the highlights. Its not an abnormality. Over the last 20 years we have seen very similar performance patterns with u. S. Equities outperforming international by exceptionally wide margins. As we go further into the book, we continue to have exceptional performance verse our peers. A lot of this relates to the fact that we have very heavy allocations due to our early investments not only into private equity, but also into real estate. Our allocations tend to be much higher than our peers. So when you look at strong performance, which we have had over the last year or so. In private equity and real assets its not surprising to see ours in the top percentile. Some of the peers are not perfectly applestoapples. I also always like to point out this chart. Our risk profile is very appealing. Were getting the returns were after. Were doing it with substantially less risk. And then in u. S. Equities, youll see the same trend and i wont go into on international, but you see the same trend within u. S. Equities and nonu. S. Large cap did better than small cap. Growth did better than value. These things will move back and forth across time, but overall we had good performance during the fiscal year. When we look at fixed income, the nice thing about fixed income is that you can narrow down performance to a couple of characteristics and one is whether Interest Rates have risen or fallen and whether credit has widened out . We saw them come down. They did rise again during the 4th quarter of fiscal year. So that is why you see negative performance mostly in the quarter. But positive importance across the fiscal year. And i will conclude my comments with that and open it up to see whether or not the board has specific questions they want to cover . You might want to introduce the members of your team that are here, too. Thank you very much. For potential questions. To my left i think everyone knows allen martin and our senior Portfolio Manager for public equities and then to her left is vicky owens. Vicky is a senior Portfolio Manager also, handling Due Diligence matters. Thank you. Any discussion . Mr. Meiberger. A couple of questions. Expand on your point earlier, mr. Shaw. Credit spreads, this is page 34 of Northern Trusts report. Im seeing that oak tree with a negative return for the oneyear ending june 30 of 2015. So obviously i would assume credit spreads have widened throughout the year. That is correct. Credit spreads widen across the board and the area we saw the most widening, which is between 15100 basis points was emerging markets. Right below there on that page. The Investment Grade less so. Also i want to expand on your point about the tuft universe that stands for trust universe comparison survey. These are other public funds and as you mentioned 1 billion and higher. Is it possible for us, maybe i should be asking Northern Trust, is it possible for us to get more funds that are closer to us . Lets say 5 billion to 20 billion as opposed to their universe of greater than 1 billion . We could do that. The universe would be very small. I would like to see that. We will see what we can pull together for you. Okay. Is Northern Trust Northern Trust produces these statements; right . . We basically use the tuft universe and report to the city, the Mayors Office. So we could provide it as a subset of the tuft universe of people above 10 million or 20 10 billion, 20 billion to show the distinction. As far as the reporting history, its always been against and commonly used the tuft universe i will rephrase, can they do it for a size of range . [ inaudible ] they publish their results. So it might be contacting well, well find out. The point in terms of large funds like us in this range, we have a targeted allocation for private equity. Whereas the smaller funds wont. So it would be nice to see those distinctions. If i could add a quick comment . Actually im going let allen he has a number as i think you are aware a number of public funds. We have looked at some of his data. Again we are one of his larger clients, but if allen wants to chime in on some of the work he has done with peer groups. We certainly maintain a universe we would share with you and whether or not you continue to use northern. The comparable are within 2 basis points and not dramatically different and indeed we could cut the universe with any level of fineness you want. With bobs comment, once you get above 20, there arent that many observations, but it can certainly be done. 5 billion muss. Because i think at that sweet point. Could you rephrase the 2 basis points . I just looked at median numbers for our universe compared to what you see here off and on page 22. And so for the oneyear, our universe median is 3. 22. For the threeyear period, our median universe is 10. 8. And for the 5 years it is 10. 91. Can you expand what you mean by our universe . We maintain a universe that is approximately the same size of this and do it in cooperation with others. Both of the universes that we maintain have approximately the same number of funds in it, 90120. All together. And then when you that is for the greater than a billion. When you go smaller, it gets down into the 30, 40, 50, range, we can certainly share. I hope you get the same number with the universe and my quinnir, to look at those. Thank you all very much. I appreciate that. Can i ask a question . Yes, please. When commissioner meiberger is asking whether Northern Trust can provide that, dont we have a Northern Trust person in the audience . Are they allowed to answer that question or not . I am looking at one in the audience and you are not responding. We need you to come to the mic, im sorry. Im the executive sponsor for San Francisco employees retirement system and i also head Capital Market. I have been with northern for 3 years and Capital Market is our brokerage and securities lending business and my role is to facilitate the connectivity of the board, of the staff, at a higherlevel than gary, the normal relationship manager, who is here. Answer to the question would be if you ask us if we can do something, well go back and research it and try to produce an answer that will suit commissioner meibergers needs. When commissioner makras is asking why he did not see that trade, can you answer that . Katie its not within the scope [inaudible] okay. We have got that taken care of. I met with the representative from Northern Trust and we had lunch before todays meeting. It was very enjoyable. Im sure it was. So lets keep moving. I want to go back to commissioners if you have any questions about this particular item or any other this is just a discussion item. We can take Public Comment on it. Im sorry, before we take Public Comment, i didnt see mr. Driscoll. Thank you. As a question, i will do the universe, tuft universe is notice owned by northern . Its owned by wilshire and groups like calpers got involved without doing the reports [speaker not understood] the question has to do with associates. I understand their balanced approach is different than advents. And you up markets versus down markets and my question the opportunity cost with convertibles as opposed to pure equities, its been on ours. Commissioner, i would take the first stab and ask i think they have been onboard three months. Starting in july. Twoandahalf months. She and vicky have conducted varyinglevels of Due Diligence on every manager in the public Equity Program. Some more complete than others. They are both going to do onsite Due Diligence before the end of the year. I cant specifically answer your question right now except to say that im not really sure i should say anything. Ill say this, im very discouraged. I think hahn is very discouraged and were going to do Due Diligence is that fair to say . I would say and these numbers are as june 30th and converts will i wasnt in a rush because the market would be volatile. Can i look i can look at their 5year and 10year numbers and i asked the question good why are we retaining them . Continue your work and tell us next quarter. Just as a quick followup, has staff taken money away from them . As i look at the account balance now, i believe the answer is no. Really . All right, any other discussion . Question for any specific manager . Yes. Okay. Tell me about what is going on with oak tree . You know, Everybody Loves howard marks and its great, but im not seeing a lot of longer performance, is it due to the cycle . Commissioner, id like to comment on that real quickly. More about the state of the highyield market in general. Eunice is not here right now. She is on 17day travel doing due difference for the core plus search. But we executed some trades to reduce our highyield exposure in august. And it is very surprising to find how illliquid that market is. There are no buyers. Nobody wants to buy highyield bonds right now, because if you fear recession, if you fear economic weakness, you definitely dont want to own highyield bonds. If you fear Interest Rates are going to rise, you know, you also dont want to own bonds. So the market for bond trading right now is surprisingly illliquid, which is say concern to me. It took us a while to ease out of this position once we moved 8 billion in a period of two months, this was, like, Something Like i dont know it might have been 700 million, maybe it was 400 million. Its a couple of months now. Its an illliquid market right now. When you look at their performance longer term, this is gross of fees, net of fees . Net. When you look at net and say its really been underperforming the 5year, 10year benchmark, what are your comments on that for howard marks, for oak tree . How i would describe this is we are in the middle innings of revisiting our entire fixed income strategy. Okay . We are not pleased with the state of the highyield market. We see opportunity in private debt, okay . So what you see here in terms of opportunistic debt, where we have 224 million is we would like to see that number meaningfully higher by hundreds of millions of dollars, okay . At the same time, i dont see regardless of where you invest in fixed income, that you are going to make pretty good returns. So what im reading from you you would like to make some moves, but frankly its pretty illliquid right now and were not going to be moving quickly because of that . No, would i say that i would say that over the course of the next six months, maybe a year we need to button this down further with allen. He has only been with us for three months. Eunice and i have a strategy and we think that allen is very much onbord of building more of a barbelled approach, in which you have highquality, highlyliquid assets, think treasury and very highquality corporate bounds. We will know its stable and we will know were not going lose money on that. So that is one piece. Then on the other end is this illliquid, and by illliquid i think 2, 3, 4 years, not 6,7, 8 years where you have a shallow curve earning good income, of 5, 6, 7, 8 and significantly reduced, like the core plus and the highyield and these things where we think our best days are behind us. Can you have the liquidity to move out of those . Do you have the liquidity to move out of highyield . You need do it over the period did. That the point i was making, you would like to do that, but we cant move that quickly because of the bad timing in the market to do that. I just spoke unexpectedly and bob and allen heard me and id just like them to offer their own comments. That is eunice and i, that is the strategy we would like to go forward with. I like that strategy. I that i is really smart. Go ahead. I will make a brief comment on bills thoughts on trading volumes. He is absolutely right. When you look at the predodd frank banking days and wall street taking items in for solid inventory as opposed to working the trade has meaningfully dropped off. Spread especially in volatile markets were seeing the ability to move positions of volume are severely limited. That is mostly on the fixed income side. Equities usually not a problem. Allen, i would add that we have long felt with the dislocations arising out of the greatgression and regulations passed that restrict traditional lenders from lending, that the opportunity in private debt is extraordinary and it continues. Ill be speaking on this topic at zackers next month and feel that is one of the fee few areas where giving liquidity is return accretive. It generates libor plus income and while you are liquid you are getting an income stream. And the periods that were talking about here as bill said are nothing near what private equity and others would be. Do we think this strategy right now you will see our 5year return at 6. 2 and 10year at 5. 2 and if we stick with this strategy we think our 57year return is more in the range of that. That is what we have incurred over the last year or so. So we need to change our strategy. We think there are decent returns here. Thank you. Any other questions or concerns from the board . Lets take Public Comment on this item. What an education. Just shocker sometimes another member of the public shared with me while you are in closed session, you have apparently upgrade our website and are now posting materials online. Yes. I commend you for moving in the right direction. I will have to go home and poke around and see about the interface. Because i hadnt noticed it. I wondered, dodd frank or go back to gladys its eyeopening. How thank you. Any other members . Madame president , a chart showing the fiveyear ratio of the s p 500 to the bnd total bond index, okay . Madame president , keep it, because i want to describe it. What im trying to show is the grade out performance to the bonds over the five years by 70 . As you can see, that ratio has now turned down, right . Correct. You can see the 40 week, the red line has turned down and 10week of the ratio has turned down and also see the increase of volatility. Now the volatility is due to the crisis in emerging markets, in china, and to lack of liquidity, which has been referenced here in the fixed income markets. You are treading on thin ice here. Okay . You are 6. 5 years into a bull market. The stuff about hedge funds is not the point. The people who talk about hedge funds from the public are totally missing the point. Ironically and tragically, you have to derisk this portfolio fast or as fast as the Public Pension Fund can move. Moving to 510 on hedge funds is because it seems to be the only thing that you guys can think of. Because of the endowment model. I think you should think beyond that, but its going it take a long time to put spreads and calls to get you to think that way. Your risks are increasing, significantly, right now. Do not underestimate the risks that are created by illliquid bond markets. From the public members have no idea what they are talking about about hedge funds. And im not a big fan of them thank you. Im not a big fan of them, i share commissioner meibergers concerns about them. But as expedient to do something quickly, you can move that allocation up. Regardless of what you do, you are going to have to educate the public quickly. Because if you get into an emergency situation again, and you need to derisk your portfolio somewhat, the lack of understanding of what the risks of what the members face with their pension right now is zero, from what i can hear in these meetings since i have been here, okay . That public stock portfolio is 50 . Its twice as risky as hedge funds, okay . Its ten times the size of that 5 hedge fund allocation. That is 20 times more risk in that public stock sector. And nobody is talking about it, okay . You have got to somehow think about how you derisk that. I would leave you with this think of some way of creating an Educational Campaign to educate the Union Members and the Pension Fund Members about these issues. I wouldnt even be talking about this stuff if the tenyear bond yield right now was 56 , but its 2 . So you have no easy choices. And people have to come to grips with it and saying all of this ridiculous stuff about hedge funds i would suggest also and have said before the members should read book risk hedging. From an expert at pimco. Thank you. Any other speakers . Public comment is closed. Thank you very much. This was a discussion item. Please call the next item. Next item, item 9, discussion item, report on managers under review. Mr. Shaw. Robert shaw, managing director for public markets. Before you is our quarterly managers under review report. In quick summary we have neither added to the list, nor subtracted any names from the list and were here to address any questions that you may have. Thank you. Thank you, i appreciate that. Mr. Meiberger. I do have a question on page 11. Of managers under review. This is regarding prima stating that prima was placed on investment review. Under review in 2 1 15 due to ongoing concerns regarding reporting which has been eped episodic and incomplete. Currently engaged in a detailed review of prima. So if i could ask allen if you could expand on what your detailed review of prima has entailed and what you have learned from the process . We are not complete with the process, but it will be onsite visit and addressing the issues raised as concerns. And examining that against other managers similarly situated, but we have not finished by any means that review. It says you are currently engaged, anything that you could share with us now . No. We have a plan to go see them. I dont have detail on the plan. We can certainly share the plan to see them and the issues have you met with them yet . No. Oh, that makes sense. We have met with prima several times including just last week. Weekandahalf ago. Do you have any indication we talk [pwrort ]ing in about the reporting and in terms of reporting reconciling to primas audited statements . I can say that we have conveyed our concerns to prima. They have been very receptive to our questions and to our concerns. And i think that they are working in good faith to satisfy our concerns. Thank you. Is that fair to say . Yes. Im waiting with baited breath until you have your preview completed. Thank you. Colleagues any other questions . None . Okay. Lets take Public Comment. All right seeing no Public Comment, discussion item. Well move on. Mr. Clerk, please call the next item. Item 10, an action item annual report on u. S. Tobacco divesture and restricted companies level 3 of the investment policy. Mr. Coaker. Commissioners ill let bob make comments in a moment. Just to put this in terms of measurement, over 17 years at say 3 basis points that is cumulatively compound of about 60 basis points. That on part of portfolio that is currently u. S. Tobacco is roughly about 5 billion and maybe over 17, 18 years, its maybe averaged 2, or 2. 5 billion or Something Like that. So you could say that this reading between the tea leaves, looks like the policy has perhaps cost us perhaps 100 million, 200 million. Okay. Bob. This is is an action item. I have a question or two. First of all it says, is this a sunset decision . Because how was the phrasing . We have this policy in place and we have to reaffirm it over every time . Is that the way its set . [ inaudible ] the other issue about the dollar loss. Were talking about dollars lost and not talking about risk. I see a tremendous higher risk in tobacco than in nontobacco. Tobacco is not a viable product. Its killing people. Are we clear on this . Clearly the way i see this, this is a higher risk. So none of these reports show the risk. Another way i would say portfolio includes tobacco i perceives a higherrisk product. Regardless of what you say the betas are for this. Beta is the correlation with the broad stock market. But to me these Tobacco Companies are riskier, because they are killing people. Again, i would just like to see some way of developing or assessing the risk of this . Because i see as i mentioned i see higher risk in holding tobacco. I see as time progresses, it wouldnt surprise me down the road, it would be illegal to smoke at some point. Bob whispered i was off with a decimal point. 10 million to 20 million. Dont you think that is reflected in the underlying stock value . Is the risk reflected in the underlying stock value . How about a yesorno answer, since you like them . I dont think its a no. Okay. Absolutely. Thank you. That is all i have. Thank you. Ill move the item. Thank you. Is there a second . Ill second. Thank you. Lets do all those in favor . Aye. Excuse me, im sorry, we have to take Public Comment. We didnt take it. Forgive me. Lets take Public Comment on item no. 10, the annual report. Hi. Good afternoon. Claire, president of retired city employs employees and my question if you are divesting from tobacco and i appreciate its 10 million rather than 100 to 200 million, what alternatives have taken those investments have taken the place of those investments . Because i think these are doubleedged sword. You look at divesting from things that create problems whether its south africa or tobacco or sudan as well talk about in the next item. What are you replacing those investments with in because i think what were looking for as members is the replacement investments would bring in comparable returns or even better returns. But they would be more socially responsible investments with our money. So its not just a divestment and the money sits there. Its some other action that takes place that really enhances the fund. So that is basically my point and my question. Thank you any other members from the public . None . Okay. Public comment is closed. A motion made by commissioner makras and seconded by commissioner meiberger. All those in favor, say aye . Aye. All those opposed . The ayes have it unanimously. Mr. Clerk, could you please call item no. 11 . Item 11, action item, annual report on targeted divestment in sudan and restricted companies, level iii of the sfers social investment policy. Mr. Coaker. I will try and be as brief as we were with the tobacco item. This is an annual report where we ask you to review the restricted list, and to reaffirm those restricted lists. Thank you. If i could just ask, do you have a relative performance of the sudanfree versus with sudan as you did with tobacco . I have never seen a benchmark, because in the u. S. Tobacco is the example. The major index providers in it case, russell and s p generally produce those. What we have observed in sudan is that everybodys list be it ours or some other organizations, vary in terms of what can be or what is inclusive . So the short answer is no, we do not have an exsudan benchmark. Just to expand on the question, im looking at the names for the companies on the sudan list and i dont recognize too many of them. So im guessing these are small companies, im guessing that they are mostly international companies. So maybe we could just get what would you guess is the total market size of these companies, versus the market size with these companies . How much are we talking about excluding on a market value basis . I will get you that analysis. I did it a couple of years ago. Just round numbers. Im just looking for a rule of thumb. How large is the world market 740 . 40 trillion. Basis point, maybe 2. So certainly less than 1 . Ballpark, substantially ballpark number. I think we should clarify that the Sudan Companies are less than 1 of the International Benchmark and not going to affect the performance. So now i see why you dont have a sudanfree index, so you dont have to followup with that. It makes sense. I atempted it one year. I can see why. Thank you very much. Thank you. Colleagues, is there any other discussion . Ill move the item. Lets take Public Comment first. Then well take the motion. Is there any member of the public who would like to comment on this item . Please do so . Seeing none, Public Comment is closed. There is a motion moved by commissioner makras. Is there a second . I will second. Seconded by commissioner meiberger. All those in favor, say aye . Aye. All those opposed . Ayes have it unanimously, mr. Clerk. Please call item 12. Item 12 discussion item, chief Investment Officer, mr. Coaker. Thank you. The commissioners, looking at the front page were off to a difficult start in terms of performance for the first three months of the year. We have lost a little over 4 . Its all on the equity market. Particularly u. S. Is down 7. 5, international is down more than 11. Fixed income though is also not earning positive returns, which we would hope for in a difficult market. Moving on to the narrative. On page 2, we do describe that we did some portfolio repositioning as i mentioned earlier this terms of reducing the risk portfolio and plan and what we learned is the experience firsthand experience of illliquidity going on in large portions of the fixed income market. To summarize some previous items approved by the board in closed session, that have since closed is we requested 50 million in august which the board approved. We actually got 30 million that closed just after last months Board Meeting. We expected Something Like that. We knew it was going to be extremely oversubscribed and i think we went into that thinking we might get 20 or 25. Searchlight though we did request 50. We did get 50 million. The board approved that last month and it was closed three weeks later. Sfg secured lending, the board approved in august. This is a private debt example of one of example. We asked 50 million and also got 50 million. Regarding china, hahn and vicky and i have done extensive Due Diligence, bob as well. I think we have met with 20 managers in various form, whether by phone, or here. Many of those we have met with more than once. Many of those we have met with more than twice. Bob, eunice and i traveled to the region in july. Art just returned from the region. He is returning again here in a couple of weeks. And hahn and i are going in november. We anticipate that we are close to where we would describe were doing final stages of complete Due Diligence on seven firms. Who knows whether it will actually when you are on the ground, learning whether or not this is truly complete Due Diligence or do we have additional questions . But that is what we anticipate. Once that is done and we have hardcoded one or two we might like to invest is well turn to nacp and ask them to do complete dd on the firms that we might be recommending to the board. Okay . And so that is where that stands. Its moving along pretty well. I have a question. Looking at seven firms for what role . Its a china specialist. Chinas equity specialist. Public securities or private . Its either going to be mostly or entirely public. Okay . Okay. There are managers in china that they dont look at the distinction as public and private. They look at it as equity. So some have some sort of mix of both, but it will either be mostly or entirely public. Okay. I do recall the board made a commitment to do something in china. I want to say the level security a type. I didnt know that we had actually initiated an rfp. There is no rfp. [ inaudible ] is there an rfi . We did issue one and well be getting that back, yes. The process, commissioner, this is considered by policy in the public equity portfolio. Its considered an Opportunistic Equity strategy. I understand the role then. Okay. As a result, our duty is when the processes are complete is to convey with transparency to the board what the process has been. To clarify, the board did not authorize a share specifically. We are working with managers to determine whether or not we would get use their ashare allocation . Whether we would get our own . Or whether we would give them a broader mandate that would include ashares . Were starting with who are the best managers and the best strategy. It sounds like this falls under what you originally called about ayearandahalf ago, the alternative equity issue. We did not put a separate silo in the allocation model. Is that alternate Equity Program to improve returns, i guess it. Thank you. Yes. Thank you. Any other discussion . Yes. Just to comment on the ashares, just to clarify, for those who watch this. Listed ashares we can petition to have allocation directly from government, the peoples republic of china, qualifieded foreign institutional investment. We have an educational session on this about two years ago. I would support that rather than try og trying to get an allocation from a manager. We have flexibility in terms of managers, versus the manage that have that from the government. I might want to at least expand on that if we would have lower fees and a qfc license directly. Commissioner, we have talked to rudy many times, five or six and we have talked to probably i would say hahn has talked to ten, if she is still here. She has probably talked to ten intentional investors, as well as consultants and others. And were still weighing everything. The viewpoints are all over the map. Can you just explain would it be better fees if we had our own qfc license . Sure because my preliminary discussions indicate to me that there would be a fee concession, that is we get lower fees with the allocation directly from the government. Of the peoples republic of china. Commissioners, regardless of what form this will take in terms of ashare or not or public and private, regardless its going to be mostly public, if not all. Is this is a really inefficient market. Were not looking for one or two percent outperformance. Were looking for high singledigits, doubledigits and to managers that we hired at uc have outperformed in excess of 15 and 25 annualized and the second one is over an 8 year period 25. I dont expect anything like that Going Forward because they have to own bigger companies, but it gives you a flavor for the level of inefficiency and value of good, fundamental research in china. Very good. Thank you. Lets take Public Comment. With respect to china, mr. Taylor napc was introduced a few sessions ago, i think he said his biggest regret over the past few years was in emerging markets is that correct . That would be correct. So it is something i would just tread carefully in emerging markets. Id show you the chart, but my 4g isnt working here, but take my word for it. Its a treacherous you area. I respect the Due Diligence and i would just say wait until the relative strength charts its a treacherous, treacherous area. Secondly i keep on harking about the risks and you have to do things. Its a profound tendency from november through january, these wall street guys have to get their bonuses. So the markets have to go up. After january, they are going to go down, probably. Its just a pattern, unless you have a Strong Equity market. So if you can get through october, you have got three more months to rerisk, however you want to do it. You with buy put spreads, buy calls if the volatility goes out i dont think can you could that right now. You can go hire hedge fund managers, but you have three months. After three months, good luck. Thank you very much, next speaker. Seeing none, Public Comment is closed at this time. Is there a motion on this item . No motion, discussion only. Mr. Clerk, would you please call the next item. All right 13, discussion item, Deferred Compensation Committee report. Mr. Driscoll. I dont think we had a meeting since the last Board Meeting. We had one september 16th. We had so many meetings we talked about it i reported last month. Tab 13. We can accept it as submitted. There were a couple of things we discovered at the conference when there is the rfp for the target date which is going to be before us. Two, we discovered some information about significant improvement in the stable value does not yet apply to us. Were trying to do research on that to find out if its something that we could adapt as well . Because its a very significant part correction, its a very significant part of the Deferred Comp Program and third another manager we met with an opportunity to improve the glide path by inclusion of private equity. We have not gathered information yet to bring it back to the point where the board could decide whether or not and the board would have to do this to change the allocation decisions we would make and whether or not to improve our line up of managers in the Deferred Comp Program to increase participation . So were working on those definitions to have a successful program. Ill start with that report. Thank you, we appreciate that report. Lets take Public Comment on this report. Seeing none, Public Comment is closed. This is a discussion item. Mr. Clerk, could you please call item 14. Item 14, action item review and approve proposed rfp for target date fund Investment Management services. Thank you very much. Excuse me, karen bortnick. Deferred compensation manager. It was my understanding that we would take this under submission. Is there something that you wanted to share. The current manager is russell in[srefplts ]s N Investments and last week we received notice that russell i think we reported was up for sale. And that there is a pending purchase by Ta Associates and we anticipate if that goes through it will be in early 2016. All right. Thank you. Is there any discussion on this item . Lets go to Public Comment. See nothing Public Comment, Public Comment is closed. Thank you for your report. We will accept it as submitted. We need to approve issuing the rfp by motion. I was jumping ahead to item 15, forgive me. You are right. This is an action item. Let me open back up to colleagues to see if there is any more discussion. Yes, on page 4 of staffs report. These are the different categories for the target date fund. The question i have, are they are the different funds going to be from our current existing line up of funds . So these are a mixture of funds that are in core lineup, such as u. S. Large cap s p fund and components such as dedicated global reit fund and commodsity commodity fund. Let me ask the question this way, i think cy came earlier and voiced concerns about the fund and high fees of the fund and the point welltaken should Interest Rate rise as surely they must, bonds will do poorly. If someone is close to retirement and have a higher percentage of bonds and Interest Rates rise, theyll do poorly. Cy mentioned the high fees on the short on the Stable Value Fund. So the question i have, short bond funds, we do have a shortduration bond fund in the existing lineup. So my concern is if we do targetdate funds i want to see a shortterm bond fund in the lineup. There is such a fund in the lineup. Which one is that . If you look, that is its the line right above what is labeled as total capital. I see that. What fund is that the Short Duration Bond Fund . Its managed by wells fargo i cant remember the exact name. I can get it for you. Is it one of our existing funds now . It is not a core fund. No . No participate participant could go directly to buy that. We dont have that bond fund, but in the target date it will be available to be invested. It is currently available inside the target date fund. That clarifies. I get the answer. In the target date fund the member does not pick the funds. You just pick the target date fund. Maybe there is a slightly different issue than what is being talked about. Okay. Thank you. Just as an aside, even a Short Duration Bond Fund will of course have less Interest Rate risk than the core bond funds. But will be vulnerable to losses if rates when rates rise. So the duration might be one to two years. So its less than a 45year duration such as in the core bond fund. That is a distinct contrast to the Stable Value Fund. Which because of the book value accounting that is permitted those market values are smoothed and there can be a guaranteed rate and losses there will be a positive crediting rate on that fund. What is true generally is not true specifically. For example, you could have cds roll them over and have no price risk. No. 1. No. 2 you could have adjustable rates. So they are not going to be as sensitive to changes in price. So if i could finish, please . So you can structure a shortterm bond fund with very minimal price risk when Interest Rates rise such as the two examples i have given you. I have put it in front of staff, the interim manager, in terms of looking at what are called laddered certificates of deposits that are insured and have much higher rates of return than stable funds and virtually no fees because the insurance is guaranteed by ftic. Fdic. That is an example of where there would be virtually zero price risk. That would be a specific exampleful minimal price risk. Laddered certificates of deposit. Mr. Orr mentioned 38 basis points to have a 1. 3 net return to the members. That is a very, very High Percentage of fees going to the managers and the insurance that typically we dont need. So that is the kind of thing that i would like to see in this kind of fund. Also, shortterm adjustable rate bonds with the coupon adjusts. So that the price doesnt. So there are ways to minimize the volatility of the fund and not losses. I think going on to mr. Coakers point, i think we have to get smarter when we do this. Rather than blanketly say there is a thoughtful way do this to protect the members from losing money in their funds and i would encourage you to followup on laddered certificates of deposit and those kind of things. I walked through my neighborhood and shared with cds 2 , net of fees and i would challenge you to come up with Something Like that to serve the members. Thank you. Thank you. We have been looking at that on an ongoing basis. Thank you. Thank you. Mr. Makras. How many bids do you expect to get . Last time rfps came in 2011, and there were ten. I think there are probably seven or eight, maybe ten new people. Its possible some of the formers dropped out as well. So its probably 20 or less. Okay. On page 9, you set out your schedule of events. Schematics from start to finish, a fivemonth process and in light of my discussion on the other rfp that had a lot of months. Is that enough to do it competently . I think for this for this project, it is. You know, we have got the holiday period in the middle of this, which sort of adds a little bit of a gap. But yes, i feel very confident we can do this analysis in this period. Thank you. Okay. Did we take Public Comment . Yes. I will move this. Second by commissioner meiberger. All those in favor, say aye . Aye. Those opposed . Ayes have it and this motion passes unanimously. Would you please call item 15. Item 15, discussion item, deferred compensation manager report. Ms. Horton. Please. I just wanted to say that we have i did want to make a reportout at the last Board Meeting, commissioner makras had asked us to survey plans, large plans to find out if any providers had paid out and i wanted to property bac that we did conduct a survey and we were unable to find eight providers that paid out we were told anecdotally one did dxm i think we should calendar the item and have a real discussion and whether that means that we selfinsure or choose to continue to buy insurance, it has to be an equal item at the table. My full belief they never pay out when i say never, ever, i cant find a sole and 30 basis points were increasing every turn by 25 . That is significant. I guess i would just ask, lets look at the full array of issues. Im not driver by not having insurance, as much as im driven i want value for my insurance. If there is no value in it, then i think im openminded to looking at the other options we definitely had discussions related to all of the issues. One issue i just want to clarify for members of the public is when we talk about selfinsurance, were looking tort to the city as a plan sponsor because its all participant money. So there is no employer money in the department deferred Compensation Plan and we would have to approach the city to make sure they are willing to selfinsure. We have had this discussion. The cap, an umbrella of 50 million. A large umbrella, so were not totally selfinsured. Correct. Where we are now, were less than 20 basis points from par. Where we have been would be significant money that would be how much would it be . 6 million. But god. Ahead. About 6 million. For me my simpmathematical if we took all of our money we want to be liquid in a fiveyear rate, if that is better than everything were doing, we can divide our money into 365 bucket and have 1 365th expire every day for liquidity and know how much is coming and that is say simple mathematically equation to stay liquid and increase our return. If we cant have a goal of a 5 cd rate, its embarrassing at least to me that we cant deliver that. I think were just caught up in a way of doing business that is old and that has these Insurance Companies being our members partners for no advantage at the end of the game. That is why i want us to explore who benefits from the insurance . Then we know what our real value is. If there is no ben factor, im happy to take it offer the table. We have 900 million in the Stable Value Fund. Were paying 38 basis points. So if you do the math, that is about 36 million annually paying for insurance that we dont need. I think that is enough and going back to commissioner makras point in terms if you didnt have anyway payouts in 2008, i think that is as far as you have to look, frankly. I think Michael Rosen had the best summary of 2008. If you still believe in standard normal distributions, that should happen once in never. [ inaudible ]. I love that. I think its the most eloquent point. So if it doesnt happen in 2008, i think at least for us grayhaired folks its not going happen in our lifetime. I dont see that happening. Because 2008 was a one in 100year, 200year event. Commissioner meiberger, i really dont follow where you follow at the end of the day. Because we have to protect for the 100year flood as they say. But on the other end, if the Insurance Company isnt going to have money to give us, why am i giving them money they can never pay out . Yes. Tell me, what would you suggest then, if i could expand on your point, commissioner makras . Just tell us what you are thinking. When we did the last search we had the discussion stable value and stable income. We proceeded with stable value with the net returns. The spread difference was 80 points, 100 points, significant. That is one big issue. So what is the wrapper for . Were very familiar with the non how often do they pay out . Basically never. Lets say never. It affects how the manager, the rate of return they will guarantee and promise to the members. By the way, it is not 38 points is not the wrapper. The wrapper is 25. The other points are the service fee has it all members pay on their account. But still, 25 is a lot of points. So other things we looked at one the bids that came in was prudential bid their stable value, but also another product that was slightly longer duration. Looks like better returns, slightly higher fee. We do go back and look at net, how much is being for the member . I put it to the gentleman who says it, show me the money market accounts. I have seen the money market accounts best 80 points. Again, a significantly difference compared to the net fee our members are receiving at 130. In terms of laddering of other products and they told us what they were doing. We plan on a search to find out what they are doing and if we can copy it . In term of a fiveyear cd it it may be a reasonable goal. Term in terms of laddering, these are demand accounts. I dont know if we went that route that why we have so much managers. So whether to withdrew or swift to another fun fund option . You want an investigation to find out with we can improve this . Certainly. I have a question. Is oneyear concerns in a really horrible market the Insurance Company wont be around . To pay . Is that a concern . Yes. The only thing that comes to mind is Northern Trust and freezing our you account. If they have Insurance Programs that dont have enough to capitalize it, slow down and dust and see what we can pay out . I would imagine has staff looked to see if they have reinsured out a major part of the risk . One of the major things we accomplished when we hired galard for stable value is get a diversity of wrap providers. I think there are seven or eight now. When we include the subfunds and there was one we significantly lowered the credit risk. I was thinking a lot of people worry that the Insurance Company itself is going to fall under. What people dont realize is that they actually set a limit of say a loss of a billion or whatever it is. And then take the amount over and reinsure that out to get insurance for themselves. That is what Warren Buffett does. He does reinsurance. So a lot of times people think that Insurance Company wont be around, but if we have done good Due Diligence, they will have a large wrapper on it. Commissioners this is say little bit outside of the general managers report. So if there is interest to schedule to another meeting. To the manager, thank you. I dont think were beyond anything other than her report. Im afraid were starting to head that way. But i do understand the interest, and i understand the questions, and i understand the issues. And perhaps well talk with the committee and with the board chair, and maybe an education session would be in order really to talk about what a Stable Value Fund and wrap provider does in addition to providing that insurance policy . Thank you. Okay. Mr. Clerk, did you take Public Comment on this item . No . Lets open up to Public Comment for item 15. . R acc ff, a number of members came up to me and were discussing the deferred comp and gave me some written proposals with regard to how things might change because they are very concerned about the fact that they see at least when the quarterly reports come out or we get the letter from the deferred comp that a lot of investments are down and people feel they are losing money and when that happens they are feel antsy and look at what the performance looks like . Some people actually took their money out of deferred comp and rolled into some of the previous contractors or vendors, because they saw higher returns. So a lot of what you are discussing, including the issue of the insurance rings significantly with retirees who are looking at what they are getting out of their deferred comp. While they know their regular retirement doesnt really fluctuate that much, what they see in deferred cover comp and they are concerned that they see more negative returns. I would urge you to have further discussion about the insurance and reinsurance because that was brought up. Also what ways could be perhaps any changes might be made in deferred comp to bring about better returns when we see a lot of returns around us that seem to be significantly better . And whatever is going on in our own funds doesnt seem to match what people perceive in the marketplace . So thank you very much. Thank you. Are there any other members of the public at this time that would like to speak on item 15 . Seeing none, this Public Comment is closed this. Is a discussion item. Mr. Clerk, please call i. Item 16. Item 16 executive directors report. Mr. Huish. Only to clarify earlier in Public Comment there was a issue that the rules Committee Hearing on fossil divestment was tomorrow and, in fact its confirmed for thursday the 22nd of october and rules committee starts at 11 00 can we accept mr. Huishs report as submitted . Yes. Lets take Public Comment on item 16 . Seeing none, Public Comment is disclose closed. This is a discussion item. Please call the next item. Item 17 retirement Board Members commissioner meiberger. Mr. Furlan was talking about protecting the portfolio. Its a valid point and what this board and staff have signed up, that hedge funds are the best way or only way to protect in a down market and since we have a consultant here to engage you in some other thoughts. I have put some ideas in front of staff that i dont think have gotten a fair look at, such as covered options and buying protected puts. Because in essence were betting the entire ranch on hedge funds and what is said true generally is not true specifically. Certainly it might protect generally, but im seeing a lot of time with several different hedge funds with very negative returns recently. So i think we have to diversify our way of protecting the portfolio and not relying exclusively on hedge funds. So i would engage our consultant to look at protections in bear equities. Thank you to our executive director for publishers the materials online. You are welcome. Thank you. I want to thank you for your responsiveness to it. Its the first step to getting you ipads, where we can distribute your packages directly from a secured site. It wouldnt be stolen from my doorstep . Were concerned about people being there to accept the board packages that contain confidential materials. Thank you. Thank you very much, commissioner meiberger thank you for acknowledging our staff. Indeed always important acknowledge those good works. Many of the members expressed a desire to have closed session at the end. Well, im going to let you know that closed session will remain in the beginning part of the agenda. However, what were going to do is also have an assigned stop time. So that the public can anticipate when general Public Comment will happen. So for example, well have the agenda. Well open up with the pledge of allegiance and roll call. Well go immediately into closed session and id say about 2 30 well come out of closed session whether were done or whether we are not, and begin the rest of the agenda. So that members of the public can plan to come to offer and participate in the discussion at 2 30. Then if any of our closed session business is not complete well take care of at the end of the meeting. I think its a fair compromise and see how that goes thank you very much. You are very welcome. Any other members . Mr. Makras . I wouldnt mind calendaring an item or get something information on this group by united here. And their list of responsible and irresponsible private equity in real estate managers. I think it would interest me, since this is going on, how it affects us and how it affects the industry . And staffs ideas on how it may affect rates and investments or both . In line of our existing portfolio and future investments . Thank you, i think its an excellent idea. Staff, did you get that request . Yes. Perfect. Lets check on this end of the table. Mr. Driscoll. I have a question, are we on a particular item . Were on item 17, which is the good of the order. If you have introductions or staff requests . Let me make an add point then, because mr. Furlan had left and he was not ware of aware of the educational sections that we had that he thought we should get educated on. We did have public sessions and i think only four people came the next issue i think was asked about i cant remember the month. Maybe it was almost two years ago. The issue about covered call options was raised. You asked that question. I think at least three Board Members and i was not one of them said yes, that is part of this program. So its already been the motion we finally adopted in february, that was one of the considerations that well be looking at. Because this whole program was about managing risk. So in case you think they had forgotten your question or the point you made. If i could clarify that point, i have talked to many call option managers and they are not included in any hedge fund search. I have talked to at least five covered call managers and i will be specific if you would like specific name, but they are not involved in the hedge fund search. They are not included in that kind of thing. The hedge Fund Component of options is entirely different, and that is not what im talking about. No, its part of this Risk Management program. That is one the tools that we can use to manage risk. Thank you, gentlemen. Is there anyone else who would like to have other items . Okay. Lets take Public Comment on this item. Item 17. I just wanted to compliment what commissioner meiberger stated there are securitis that can get just as good returns as hedge funds without the additional costs. We have to remember that hedge funds can be a suicide pack. You locked into the funds for quite a time and cant pull out of them and in addition, to the high administrative costs to it, your returns are diminished. When i think of the volatility of this economy and i think that right now its very insecure, i dont know where its going to go . China is unpredictable. Its unpredictable worldwide. Maybe were doing relatively okay in the united states, but i think that the hedge funds pose some risks. And im for containing them at 5 . I dont want them to go any higher. I think we have to watch to see how they perform, and if they dont perform, i think we should scotch them. So those are my feelings about them. Thank you. Thank you. Any other members of the public wishing to speak . Seeing none, Public Comment is closed. Mr. Clerk, call item 18 item 18, discussion item, retirement Board Members reports and comments. Colleagues i would like to accept the reports that have been submitted. Is that okay . Yes. Excellent. Thank you. Lets take Public Comment on item 18. All right seeing none, Public Comment is closed. Mr. Clerk, what next . Item on the agenda . [ inaudible ] i didnt hear you, [laughter ]. Thank you, this meeting is adjourned [ gavel ]. Thank you, ladies and gentlemen. 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