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Home My WebLink AboutCOMM - Meeting Minutes - 152 - 7-25-1996 - RETIREMENTM" Sold By IMR Limited Form 825 E417350 Minute No. 152 Washington County Retirement Board Washington, Pa., July 25, 1996 The monthly meeting of the Washington County Retirement Board was held at approximately 10:51 a.m. on Thursday, July 25, 1996, in the Public Meeting Room, Courthouse Square Office Building, Washington, Pennsylvania, with the following members being present: Commissioners Ford, Irey and Burns; and Controller Paul Belcastro. Absent being: Treasurer Francis King. Also being present: Chief Clerk Dallatore; Attorney Pat McCune, Interim County Solicitor; Claudia Hargrove, Deputy Treasurer; Don Herrington, Smith Barney; Norm Allan, C.S. McKee; Roger Metcalfe, Budget Director; Jon Azzarello, Harry Sabatasse, Anthony Turriziani and Kirk Holman, interested citizens; Joe Smydo, Observer - Reporter; Kathy Thomas, Valley Independent; Chris Haines, Herald Standard; Vince Ponzio, WJPA; and Dennis Bastian, CUTV. Approval of Minutes Chairman Ford entertained a motion to approve Minute No. 151 dated June 27, 1996. Moved by Mrs. Irey, seconded by Mr. Belcastro, that Minute No. 151 dated June 27,1996, be approved as presented. Roll call vote taken: Mr. Belcastro - Yes; Mrs. Hargrove - Yes; Mr. Burns - Yes; Mrs. Irey - Yes; Mr. Ford - Abstain (due to the fact that he was absent from that meeting). Motion carried. Treasurer's Report RETIREMENT SYSTEM REPORT Bank Balance as of June 1, 1996 $174,458.69 Deposits to Checking Account $107,027.36 Transfers from Investment Account $207,290.54 Less: Cancelled Checks $222,233.12 Less: Transfers to Investment Account $113,077.50 Bank Balance as of July 1, 1996 $153,465.97 Less: Outstanding Checks $ 77,062.22 Less: Retirement Check Run - June 30, 1996 $ 76,403.75 Reconciled Balance as of July 25,1996 $ -0- Moved by Mr. Belcastro, seconded by Mrs. Irey, that the Treasurer's Report be approved as submitted. Roll call vote taken: Mr. Belcastro - Yes; Mr. Burns - Yes; Mrs. Irey - Yes; Mr. Ford - Yes. Motion carried unanimously. (NOTE: Chairman Ford declared that since Mrs. Hargrove is not an elected official, she is not entitled to cast a vote.) Requisitions Moved by Mr. Belcastro, seconded by Mr. Burns, that the following Requisitions be approved: Check No. Payee Amount 1597 James E. Henry $ 4,861.65 1598 Trustee of Putnam Fiduciary Funds $ 70,741.18 FBO James E. Henry 1599 Vanguard Fiduciary Trust Co. as $ 5,410.13 trustee of Individual Retirement Account of Leonard P. Kerestes 1600 Kevin A. Meyer $ 223.96 1601 Paul Weiss $ 136.02 1602 Stacey A. Zukowski $ 70.32 1603 Nancy J. Ellis $ 1,349.64 1604 PNC Bank $ 0.00 1605 Wash. Co. Cash Disbursement $ 11,963.01 Transfer: Wash. Co. Retirement Allowance $ 97,556.54 Total To Be Transferred $192,312.45 Roll call vote taken: Mr. Belcastro - Yes; Mr. Burns - Yes; Mrs. Irey - Yes; Mr. Ford - Yes. Motion carried unanimously. 37 Sold By IMR Limited Form 825 E417350 1 1 1 Old Business Chairman Ford entertained a motion to specifically indicate an amount and date for realizing current unrealized equity gains as directed by the Board at the meeting held on June 27,1996 (see p. 31 for further reference). Moved by Mrs. Irey, seconded Mr. Burns, to realize current unrealized equity gains in the amount of $2,485,000 by September 30, 1996. Roll call vote taken: Mr. Belcastro - Yes; Mr. Burns - Yes; Mrs. Irey - Yes; Mr. Ford - Yes. Motion carried unanimously. Chairman Ford asked Commissioner Irey if she wanted Norm Allan to address any issues contained in her letter to him dated April 10, 1996. She stated that all of her questions were answered in Mr. Allan's response to her dated May 28, 1996. Norm Allan introduced to the Board Walter Bean, C.S. McKee's Executive Vice -President, who is in charge of the firm's equity and investment process. Mr. Bean gave the Board a brief overview of the equity market during the first two quarters of 1996 and his forecast for the next twelve months. Norm Allan provided to the Board a quarterly report detailing the topics of Economic Perspective, Portfolio Structure, Performance, Interest Rate Forecasts, Year -to -Date Capital Gains and Portfolio Summary as of 6/30/96. He reported that the realized gains and losses that his firm has taken year-to-date (6/30/96) total $944,462. He asked for the Board's clarification of its desire for his firm to realize unrealized equity gains in the amount of $1,245,000 as contained in Don Herrington's letter dated July 11,1996 (i.e. does the Board desire his firm to realize a total of $1,245,000 or an additional $1,245,000 above the $944,462). Chairman Ford stated that the total amount that the Board desires his firm to realize is $1,245,000. Don Herrington of Smith Barney commented that there has been a significant change in the market area of technologies wherein they have been crushed in the past three weeks or so. He asked Walter Bean to report on these investments since about 16% of the portfolio is in technologies. I Walter Bean stated that there are a lot of technology stocks that are very exciting and represent extremely good investments and he is not at all thinking of reducing them. He noted that this is a philosophy of C.S. McKee's value manager style. Don Herrington provided to the Board the following investment performance report for the period ending June 30,1996: TOTAL FUND QUARTER ENDING 6/30/96 YTD 1996 Entire Fund 3.11 4.74 McKee 2.99 4.22 RRZ 3.22 5.26 50 SP/50 LB G/C 2.47 3.97 EEQUITIES Entire Fund 5.10 McKee 4.75 RRZ 5.41 S&P 500 4.49 Russell 1000 Growth 6.36 Russell 1000 Value 1.72 FIXED INCOME Entire Fund 0.33 McKee 0.34 RRZ 0.30 LB G/C Bonds 0.46 CS McKee Beginning Value $21,872,570 Ending Value $22,370,749 Difference $ + 498,179 RRZ $21,601,629 $22,139,586 $ + 537,957 Cumulative Period of 6/30/94 - 6/30/96 (Annualized Time -Weighted Rates in Percent) Ufrj Total Fund 17.18 Equities 25.40 Fixed Income 8.00 Composite 17.84 S&P 500 Index 26.04 Russell 1000 Growth 29.16 Russell 1000 Value 22.51 50 SP/50 LB/GC 17.10 LB Govt/Corp Bonds 8.63 90-Day T-Bills 5.27 CPI 2.90 C.S. McKee 15.44 21.53 8.45 17.77 26.04 29.16 22.51 17.10 8.63 5.27 2.90 10.48 9.62 11.30 10.10 12.07 7.48 -2.59 -2.87 -2.30 -1.89 Difference $ 270,941 $ 231,163 $ 39,778 1 1 WWO nm Sold By IMR Limited Form 825 E417350 1 Don Herrington stated that his main concern is with C.S. McKee's equities and feels it is an area which needs to be discussed. He noted the percentage difference of -4.51 in C.S. McKee's equities compared to the S&P 500 Index and stated that if C.S. McKee had met the S&P 500 Index, the difference is close to $1 million out of an $11 million portfolio. Chairman Ford asked Mr. Herrington if he had a recommendation for the Board. Mr. Herrington stated that he is very uncomfortable with C.S. McKee's equity performance in that they missed the benchmark by a substantial amount for the past two years and he suggested that it may be prudent for the Board to view performances of other managers in order to re-evaluate investment styles. Chairman Ford asked Norm Allan if he would like to respond to Mr. Herrington's comments. Norm Allan stated that he can appreciate the Board's concern of his firm's equity performance over the last two years, but he feels that he has provided an explanation to the Board of why this occurred. He stated that he feels it is extremely important for the Board to look at the longer term as opposed to the shorter term. He noted that his firm is not an index manager in that they do not try to replicate the performance of the S&P 500, but over time they try to exceed it by utilizing other investment approaches such as the inclusion of small cap stocks, mid cap stocks and ADR's. He noted that over a 5-year basis, their equity performance was 15.58 as compared to the S&P at 15.73 in spite of the fact that they trailed so markedly in 1995. He feels this is absolute testimony to the fact that their investment philosophy works and they are achieving the overall objectives. He feels that the Board has to conclude that C.S. McKee is doing a better job than RRZ relative to their respective management styles. Chairman Ford questioned Don Herrington as to why he is evaluating C.S. McKee on a 2-year cycle when in the past he has suggested that the managers be evaluated on a 3-5 year cycle. Mr. Herrington stated that he is suggesting that the Board prepare itself if it feels a need to look at other managers and to become educated with what other managers can provide. He stated that it is very difficult to define C.S. McKee's style because of their multiple types of investments as opposed to RRZ's style which is very specific. Discussion followed. M Chairman Ford expressed to Norm Allan his concern with C.S. McKee's equity performance, but stated that he is willing to give them more time in accordance with the investment objectives (market cycle of 3-5 years). He stated that he is not in support of Don Herrington's continuing advice and would be supportive of an RFP for a new investment monitor because he is not happy with Mr. Herrington's track record. Discussion followed. Moved by Mrs. Irey that the Board solicit RFP's for money managers. Motion died for lack of a second. Moved by Mr. Burns, seconded by Mr. Ford, that the Board solicit RFP's for a new investment monitor. Roll call vote taken: Mr. Belcastro - Yes; Mr. Burns - Yes; Mrs. Irey - Yes; Mr. Ford - Yes. Motion carried unanimously. Disability Retirement Allowances Moved by Mr. Belcastro, seconded by Mr. Burns, approving Disability Retirement Allowances for Samuel B. Reihner, a correctional officer at the Jail, effective July 1, 1996, and _Shirley Loar, a housekeeper at the Health Center, effective July 10, 1996; proof of their respective Social Security Disability Award Letters have been provided to Employee Relations. Roll call vote taken: Mr. Belcastro - Yes; Mr. Burns - Yes; Mrs. Irey - Yes; Mr. Ford - Yes. Motion carried unanimously. There being no further business, Chairman Ford declared the meeting adjourned at 12:00 Noon. THE FOREGOING MINUTES ATTEST: SECRETARY ✓ FOR APPROVAL: ✓' 1996 1 1