BOT Minutes

Members Present: John Hammond, Howard Brown, William Brown, Dennis Callahan, Jay Cuccia, Andrea Fulton, Jennifer Gilbert-Duran, Frank Marzucco, Jay Middleton, M. Kathleen Sulick, Douglas Willis.

Members Excused: LeRoy Wilkison, Hunter Calloway

Staff Present: Brenda Minatee, John Peterson, Kellie Smyers

Guest: Rhett Humphreys

Recorder: Laura C. Jackson, Audio Associates

The meeting of the Board of Trustees of the Anne Arundel County Retirement and Pension System (Board) was called to order at 12:15 p.m. by John Hammond, Chair.

Minutes

Mr. Bill Brown moved to approve the minutes for the December 13, 2007, Board of Trustees meeting. The motion was seconded by Mr. Callahan and approved unanimously.

Investment Committee

TCW was not able to attend the January 10 meeting. Mr. Hammond said TCW would be worked into the schedule of manager interviews that has been established for 2008.

New England Pension Consultants

Rhett Humphreys of New England Pension Consultants discussed the county’s performance report for the period ending December 31, 2007. The nation’s financial difficulties experienced in January have carried over to global markets. Nevertheless, he reported good news for Anne Arundel County. Despite the tumultuous results of July, August, November and December, the county’s year-to-date financial composite was 10.5 percent net of fees. In comparison, the S&P 500 had a year-to-date performance of 5.5 percent, and the LB Aggregate Bond reported 7.0 percent.

Further, only one fund manager, Buckhead, underperformed during the calendar year. All other managers outperformed their benchmarks. Chartwell Investments had a year-to-date performance of 12.6 percent. Its benchmark, Russell 2000 Growth, was 7 percent. In mid/large cap equity, ING Equity and Sands reported year-to-date returns of 19.2 percent and 19 percent, respectively, over a benchmark of 11.8 percent.

The board also rotated money into growth funds during the year because the county was overweighted in value funds. The board’s policy-driven decision to rebalance worked in the county’s favor, Mr. Humphreys said.

On the fixed-income portion of the report, Mr. Humphreys noted that ING and Western Asset Management have underperformed recently due to problems in the credit market and the mortgage industry. However, Wellington’s year-to-date performance is 18.4 percent compared to a benchmark of 6.1 percent. Bridgewater had year-to-date results of 11.8 percent over a benchmark of 9.2 percent.

Mr. Humphreys also discussed his firm’s outlook on the possibility of a recession. Although credit and the housing market are down, he said, a hugely depreciating dollar means increased exports.

Mr. Peterson reported the arrival of two new employees. The staff is preparing for actuarial valuation as well as a pension audit with Clifton Gunderson.

Regarding the ongoing issue with Prudential, Mr. Hammond said the board will wait and see if Prudential executives will come forward and make a proposal regarding the money they believe the county owes them. Because Prudential has ceased making payments to about 23 surviving spouses, the board decided to make sure the survivors get their benefits beginning January 1. Mr. Hammond reported that the process went smoothly and all the beneficiaries received their checks. The cost to the board is about $60,000 per month.

Mr. Hammond said the number of beneficiaries is expected to grow as retirees die. Mr. Peterson said a restricted number of people are eligible to come back to the county as survivor beneficiaries. The board is still getting a handle on what that exact number will be. This issue with Prudential potentially involves about 75 people. Of those, the county doesn’t know how many have existing spouses.

Mr. William Brown said that auditors will report to the Office of Personnel during the week of January 28 to begin gathering documents. On March 10 the auditors will begin reviewing financial statements.

The meeting adjourned at 12:45 p.m. The next meeting is scheduled for February 14, 2008, at 12 p.m.