investment manager questionnaire

WILSHIRE ASSOCIATES Request for Proposal

Client: The Maryland-National Capital Park and Planning Commission Employees’ Retirement System

Asset Class: International Equity Asset Style: Core Non-U.S. Equity Mandate size: Approximately $25 Million Requirements:

• The ability to contract to act as a fiduciary;

• A dedicated portfolio management team with a minimum of five (5) years of experience managing institutional client assets;

• At least $500 million of client assets in Non-U.S. Equity or similar strategies;

• A product that is currently benchmarked to the MSCI ACWI ex-U.S. Index

• Dedicated risk management systems, tools and personnel.

The Maryland-National Capital Park and Planning Commission Employees’ Retirement System (ERS) is conducting a search for a Core Non-US Equity strategy, benchmarked to the MSCI ACWI ex-US Index. This Request for Proposal (“RFP”) is issued by the ERS for the purpose of selecting one or more firms (“Managers”) to provide international equity strategies for the ERS portfolios. The ERS seeks proposals from Managers who have expertise in managing these types of strategies in a well structured risk and trading environment. Responses are due: October 23, 2009 by 5:00 p.m. (EST) Finalists presentation date: December 1, 2009 Please send one hard copy and two electronic copies (MS Word document) of your completed questionnaire as specified below:

Andrea Rose (Electronic Copy Only) Marc Friedberg, CFA (Hard Copy) Administrator Managing Director The Maryland-National Capital Park and Planning Wilshire Associates Commission Employees’ Retirement System 210 Sixth Avenue, Ste. 3720 6611 Kenilworth Avenue, Suite 100 Pittsburgh, PA 15222 Riverdale, MD 20737 [email protected] Bradley Baker (Electronic Copy) Senior Analyst [email protected]

mailto:[email protected]


Wilshire Associates Investment Manager Questionnaire PRODUCT SPECIFIC – Core Non-U.S. Equity

WILSHIRE ASSOCIATES INVESTMENT MANAGER QUESTIONNAIRE

Product Specific – Core Non-U.S. Equity

Date of Response: Name of Firm: Contact: Title: Address: Telephone: Facsimile: E-Mail:

Asset Class: Non-U.S. Equity Style (e.g. Mortgage): Core Product Name:

Directions: The following questionnaire covers non U.S. equity products and not the general organization or broad asset class. All firms should answer this questionnaire only once for each Non-U.S. Equity product you manage. When completing the questionnaire, be sure to: 1. State the question in bold font with your answers stated in regular font. Responses should be

thorough and answer the specific question asked (including the issues addressed in the bullet points).

2. Answers should be thorough but concise.

3. Adhere to page and style formats. The responses must be submitted in Microsoft Word compatible format single-spaced with 1” page margins. Font should be 11 point, preferably Times New Roman.

GENERAL - All information should be provided as of the most recent quarter-end.


A. Organization / People 1. Describe the background and ownership of the firm.

• Year firm was formed and began managing assets. • The ownership structure. Indicate all entities that have an ownership stake in the firm (name

and percentage). • Affiliated companies or joint ventures. • Recent or planned changes to the ownership or organization structure. • Importance of asset management to your and your parent’s (if applicable) overall business

strategy. 2. Describe the structure of the group which manages the product.

• Describe the role of economists, portfolio managers, research analysts, traders, etc. • Who is responsible for investment strategy, asset allocation, country selection, portfolio

construction, research, security selection, trading, etc.? • Describe the communication links between the groups within the product area, and across

product areas.

ALSO COMPLETE APPENDIX I 3. Describe the compensation and incentive program for professionals directly involved in the

product. How are they evaluated and rewarded? What incentives are provided to attract and retain superior individuals? • Identify the percentage of compensation which is:

• base salary • performance bonus • equity incentives • other

• Do you offer direct ownership, phantom stock, profit sharing, and/or performance bonus? • Who is eligible to participate? • On what basis are these incentives determined - is compensation tied to success factors such

as asset growth, performance, or other factors? Please list and indicate the weight of each in determining total compensation.

• How does your compensation structure/levels compare with other firms in the industry?

4. Describe the background and role of executives. • Are executives generally brought in from the outside or promoted to their positions from

within the organization? • Is their prior experience in business management or in portfolio management/research? • Identify the responsibilities of executives, such as directing business strategy, promoting

corporate culture, allocating resources, etc. • Are executives involved in the setting of investment strategy, portfolio management, or

security selection? • In what sorts of ongoing educational programs do executives participate?

5. Describe the background of professionals directly involved in the asset class.


• Are they brought in from the outside or promoted to their positions from within the organization?

• Is their prior experience in portfolio management/research/trading, industry, consulting, or other business or technical areas?

• What sort of ongoing education programs (for example, the CFA program) are encouraged or required?

ALSO COMPLETE APPENDIX II and III

6. Discuss the causes and impact of any turnover (departures or hiring/promotions) within the

executive ranks or any professionals directly involved in the product you have experienced in the past five years. How long has the team been together?

ALSO COMPLETE APPENDIX IV

7. Describe the business and management philosophy of the firm.

• What does it take to be successful and is success defined? • What is the vision for the firm? How is it determined and how is it communicated to the

organization? • What are the firm’s comparative advantages and competitive pressures? • Include any formal “mission statement” under which the organization operates.

8. Describe the overall business objectives of your firm with respect to future growth.

• Identify reinvestment in the business to enhance the investment process and client service. • Discuss what new business lines, distribution channels or products you intend to add. • Discuss how the firm plans to make sure that future growth does not compromise the integrity

of your existing investment process and products. 9. Describe the objectives of your firm with respect to future growth in the product, commenting on:

• Additional resources for portfolio management, research, trading, client service and tools/models to enhance the investment process or manage growth; and

• Size limitations with respect to assets under management in the product. How did you arrive at those asset limits? Are companion retail mutual fund assets and assets in this category from broader mandates included in these limits?

• What are the firm assets under management (AUM) in $MM? What is the proposed product’s assets under management (AUM) in $MM?

10. Is your firm considered minority-owned? If so, identify the percentage of ownership by

minorities broken out by the following categories: • % Ownership African American • % Ownership Asian American • % Ownership Hispanic • % Ownership Native American • % Ownership Women • % Ownership Other


B. Philosophy / Process 1. Describe your firm’s investment philosophy for the product.

• What market anomaly or inefficiency are you trying to capture? • Why do you believe this philosophy will be successful in the future? Provide any evidence or

research which supports this belief. • How has this philosophy changed over time? • Do your philosophies for individual market segments (e.g. corporates, mortgages, etc.)

parallel each other? 2. Describe the sources and processing of information used to manage portfolio duration, yield

curve position and to select sectors and securities. • Are you seeking unique sources of information? • Are you applying unique methods to process the information? • What percent of resources and time does your firm devote to the top-down aspect of your

approach versus the bottom-up (security selection) aspect? 3. Describe your buy/sell disciplines.

• What country and security market capitalization and liquidity criteria meet the requirements of your buy/sell discipline?

• What valuation approaches are used in evaluating countries and stocks? • What specific fundamental factors (P/B, earnings, growth, sales margins, etc.) are integral to

the stock selection process? What is the relative importance of these factors? • What factors dictate your sell decision? • Under what circumstances would your firm deviate from these disciplines? Have you ever

deviated? If so, please describe. 4. Describe your portfolio construction process.

• What is the universe from which countries and securities are selected? • What types of securities are used (common, preferred, convertible, derivatives, etc.)? • How many issues are typically contained in a portfolio? • How are individual country and security weightings determined? • Discuss the quantitative and qualitative processes utilized. • What latitude is given to portfolio managers within the product team? Who has ultimate

decision making authority and accountability? • How important is benchmark tracking error in the portfolio construction? Is it measured and

managed? If so, how?

ALSO COMPLETE APPENDIX V 5. Describe how you address currency risk.

• How are you trying to add value from currency management? • What analysis and models do you use to evaluate currencies? • How is currency management incorporated into the portfolio construction process?

6. How is portfolio risk managed and monitored? Describe all risk management functions and tools

utilized.


• What is your firm’s definition of risk with respect to this product? If more than one, specify each with its percentage of importance.

• Describe how you monitor and manage: • residual risk versus the benchmark, • common factor risks, • security, sector/industry and country weightings, and • value at risk.

• Do you use cash or bonds (please specify) as a method of risk control? Indicate how much cash is generally held in the portfolio.

• Describe any risk measurement models (such as Wilshire Atlas, BARRA, etc.) used and how this analysis is incorporated in the portfolio management process.

7. How do you monitor the product’s adherence to its investment style and process? Specify who is

responsible. C. Resources 1. If you have internal research capability, which is dedicated to the product, describe the research

process. • What percentage of the research effort is conducted internally? • How do you organize the research assignments? Do analysts work in local country offices or

in the firm’s headquarters? • What are the sources of research? • What specific research is conducted? • What are the outputs of the research? • How is this information incorporated in the country and stock selection, and the portfolio

construction processes? 2. If you use external research in the management of the product, describe the external research.

• What percentage of the research effort is from external sources? • What are the sources of external research? • What specific research is acquired from external sources? • How is this information incorporated in the country and stock selection, and the portfolio

construction processes? 3. Describe the quantitative models and tools you utilize for research, portfolio construction and

trading. What enhancements are being contemplated? 4. Provide a description of your trading platform, including systems (proprietary and off-the-shelf)

for execution and processing. • Describe the allocation objectives and implementation procedures across all accounts. What

is the process by which trades are allocated across separate accounts as opposed to commingled accounts? Please describe both the tactic of allocating the initial trade as well as the strategy of building positions across accounts.

• Is trading segmented by investment product platforms? • What has been the product’s level of turnover? • How many traders are there and what is their experience?


• What steps have you taken to automate the trade flow process? What areas are still handled manually?

• How do you leverage your infrastructure to ensure firm-wide collaboration in execution (broker/dealer relationships) and capital market conditions (liquidity)? How does your firm manage to and monitor market liquidity?

• Describe how you measure trading costs (commissions and market impact). • Please make sure to provide biographical information of your senior trading officers in

Appendix II.

ALSO COMPLETE APPENDIX VI 5. Discuss your internal monitoring process for final price determination and trade order

management. Do you have dedicated committees overseeing these functions? If so, please list the members.

6. What processes do you have in place for ensuring pre- and post-trade guideline compliance?

What functions are automated? What process do you have in place for human verification? Who signs off on final trading? • Please describe the oversight procedures that would minimize the risk of traders acting

outside of their given latitude in executing trades. 7. If you have soft dollar relationships with broker-dealers, please disclose the following:

• Soft dollar policy and when last reviewed. • % of trades executed tied to soft dollar relationships. • List of resources funded by soft dollars that would normally be funded with hard dollars.

8. What resource constraints exist? What is the basis for obtaining additional resources to support

each function for this particular product? 9. Provide a copy of your most recent ADV? 10. Please provide a sample contract of your Investment Management Agreement? D. Performance 1. a) What is the most appropriate benchmark for your product? Why? b) What is the most appropriate excess return for your product? How is this determined? 2. Describe how you analyze and evaluate the performance of the product. Include a discussion of

your performance attribution analysis. • Describe how you conduct performance attribution analysis, indicating any models or tools

used. • How do you incorporate the results of the performance attribution analysis in the

management of the product? • Describe the causes for portfolio return deviation (both positive and negative) from the stated

benchmark return in each of the past five years.


3. Describe the causes of return differences between portfolios managed in the strategy for different clients but with similar guidelines and objectives. How much is attributable to individual portfolio manager’s decisions?

4. Make sure to complete the AIMR Information section for your products on Wilshire’s Odyssey

website. Make sure to include a short description of the product composite. 5. If your composite complies with AIMR-PPS and/or GIPS Standards, include a copy of your

AIMR PPS report disclosure that you include in your marketing presentations. Reference the AIMR Performance Presentation Standards (AIMR-PPS) report located on AIMR’s website at www.aimr.org.

6. If your product composite does not comply with AIMR-PPS, provide a brief description on why

the composite does not comply with AIMR-PPS. 7. Consistent with Section 4.B. – Disclosures Recommendations of the AIMR-PPS, please answer

the following questions: • Portfolio valuation sources and methods used by the firm. • Any significant events within the firm (such as ownership or personnel changes) that would

help a prospective client interpret the performance record.

8. To receive consideration in this search, your firm must submit either monthly or quarterly returns and quarterly holdings for this product to the Wilshire Compass database. If this product’s returns and holdings have not been submitted previously, you must provide this information no later than the due date for this RFP. There is no cost to be included in this database.

Instructions for entering data into the Wilshire Compass database are as follows: 1. Send an email to [email protected], requesting a username and password 2. Log on to http://www.wilshire.com/Manager/Consulting/Odyssey/ 3. Enter username and password to begin inputting data

E. Fees 1. Describe how fees are determined for this product. Are fees a function of the expected alpha of

the strategy? 2. Describe any performance fee structures you have in place. If you do not, would you be willing

to incorporate a performance fee? 3. What is the minimum account size? 4. What is the proposed fee schedule for this mandate? Are you proposing a separate account?

Commingled/mutual fund? F. Proposed Contract Revisions


http://www.wilshire.com/Manager/Consulting/Odyssey/


The ERS proposes use of the Investment Management Agreement in Appendix VII (if a

separately managed account). Please provide any comments, reservations, objections and contract revisions you require with your response to the RFP. If a commingled account, attach a standard contract for the ERS’ review. Please do not complete any additional information in Appendix VII, as this will be completed at fulfillment of the mandate.


APPENDIX I. Organizational Chart – Product Structure & Key Professionals

Provide an organizational chart that diagrams the different functions (research, trading, etc.) dedicated to the product area. Professionals should be identified over their areas of responsibility.

II. Key Professionals PORTFOLIO MANAGEMENT

Name

Title/ Responsibilities

Yrs Exp

Yrs @ Firm

Degrees/ Designations

Sponsoring Body/School

RESEARCH

Name


Yrs Exp

Yrs @ Firm



TRADING

Name


Yrs Exp

Yrs @ Firm



Provide here biographies, no longer than ½ page, on each of the persons listed in above. III. Responsibilities

Indicate in the table below the percentage of time spent by each professional involved in the product on the activities identified in the table.

Name Manageme

nt %

Marketing %

Client Servic

e %

Investment –

Research %

Investment – Portfolio Manageme

nt %

Investment –

Trading %

Compliance %

Other %


IV. Turnover

Indicate when and why any professional dedicated to the product left or joined the firm in the past three years. What were/are their job responsibilities? For personnel who have left indicate job titles and years with the firm and who replaced them.

JOINED

Date Name/Title Responsibilities

DEPARTED

Date

Name/Title

Responsibilities

Yrs @ Firm

Reason for leaving

Replaced by (name/title)

SUMMARY

Total # Professionals

# Joined

# Departed

% Turnover

V. Investment Process Flow Chart

Illustrate the investment process in a flow chart identifying the decision making steps, decision makers and outcomes.

VI. Trading Process Flow Chart

Provide an organizational chart of your trading functions. Provide a process flow diagram between the portfolio management groups entering a trade order to final implementation in client portfolios.

VII.


INVESTMENT MANAGEMENT AGREEMENT

This INVESTMENT MANAGEMENT AGREEMENT (“Agreement”) is made and effective as of _____ _____, by and between the Board of Trustees ("Board") of the Maryland National Capital Park and Planning Commission Employees’ Retirement System ("ERS"), and __________________ (the “Manager”).

WHEREAS, the Board has determined that it is in the best interests of the ERS, its members, and beneficiaries to contract with Manager to invest and manage certain assets administered by ERS; and

WHEREAS, the Manager desires to provide such investment and management services to the ERS;

NOW, THEREFORE, in consideration of the above stated recitals, the mutual promises, covenants, representations and conditions contained herein, and the mutual benefits to be derived therefrom, the Board and Manager agree as follows:

1. Appointment as Manager and Acceptance of Appointment. The Board hereby appoints the Manager as a fiduciary of ERS and authorizes the Manager to invest and manage certain assets which are specifically set forth in the Investment Guidelines (Exhibit A) in the amount allocated by the Board in an account in ERS’ designated custodian bank ("Custodian"). The ERS assets allocated to the Manager, together with all interest, earnings, accruals and capital growth thereon are hereinafter referred to collectively as the “Managed Assets”.

The Manager hereby accepts such appointment, assumes full responsibility for the investment and management of the Managed Assets, and agrees to execute its duties according to the terms, conditions and standards set forth in this Agreement.

2. Fiduciary Status of Manager; Standard of Care. The Manager acknowledges that this Agreement places it in a fiduciary relationship with the ERS and expressly agrees to comply with all standards and obligations pertaining to fiduciaries under ERISA. As a fiduciary, the Manager shall discharge each of its duties and exercise each of its powers under this Agreement with the competence, care, skill, prudence and diligence prevailing in the investment management industry and which a prudent person acting in a like capacity and familiar with investment management would use in the conduct of a like enterprise with like aims (“Standard of Care”). The Manager shall cause any and all of its employees, agents and representatives (“Agents”) providing services in connection with this Agreement to exercise the same Standard of Care. Manager shall be liable to ERS for any Claim (as defined in Section 22 hereof), which arises from or relates to any failure by the Manager or any of its Agents to exercise this Standard of Care. As used herein, Agents does not include independent service providers, including but not limited to broker-dealers and securities pricing services.

3. Manager as Independent Contractor. Manager shall at all times be acting in the capacity of an independent contractor. This Agreement is not intended, and shall not be construed, to create the relationship of agent, servant, employee, partnership, joint venture, or association as between ERS and the Manager.

4. Authorized Board and ERS Personnel. Upon execution of this Agreement, the Board shall provide Manager with a list of authorized ERS personnel (“Authorized Persons”) who will be permitted to advise, inform and direct the Manager on the Board's behalf, together with signature


specimens of certain Authorized Persons who may execute specific tasks under this Agreement. The list of Authorized Persons and any changes to such list shall be made in writing to Manager and signed by the ERS’ Administrator or designee. Until notified of any such change and subject to the provisions of Section 5 below, the Manager may rely on and act upon instructions and notices received from an Authorized Person identified on the then current list furnished by the Board.

5. Authorized Instructions. All directions and instructions to the Manager

from any Authorized person (“Authorized Instructions”) shall be in writing and transmitted as provided in Section 30 hereof (Notices); provided, however, that Manager may, in its discretion, accept verbal Authorized Instructions subject to written confirmation of same from such Authorized Person. Such Authorized Instructions shall bind the Manager upon receipt. ERS shall fully protect the Manager against all Claims which result from the Manager acting according to Authorized Instructions, or for misrepresentations made by any Authorized Person. If the Manager receives instructions or notices from a source other than an Authorized Person, the Manager shall not comply with them and shall immediately notify the ERS’ Administrator and the Board, in writing of such unauthorized instructions or notices.

6. Custody of Managed Assets. The Board shall instruct the Custodian to: (a) establish a separate custody account on its books and records in the Manager’s name (“Account”) and (b) maintain the Account in a manner that enables Custodian to account for the Managed Assets, and transactions with respect thereto.

Immediately following the execution of this Agreement, the Board will notify the Custodian that the Account is subject to the discretion and control of the Manager within the terms of this Agreement, including applicable Exhibits A, B C, and D.

Ownership of the Managed Assets shall remain with ERS. The Manager shall not, under any circumstances, take possession, custody, title, or ownership of any Managed Assets. Manager shall not have the right to have securities in the Account registered in its own name or in the name of its nominee, nor shall the Manager in any manner acquire or become possessed of any income or proceeds distributable by reason of selling, holding or controlling any Managed Assets in the Account. Accordingly, the Manager shall have no responsibility with respect to the collection of income, reclamation of withheld taxes, physical acquisition or the safekeeping of the Managed Assets. All such duties of collection, physical acquisition or safekeeping shall be the sole obligation of the Custodian.

7. Investment Duties of Manager. As a fiduciary, the Manager shall have complete

discretion to manage, invest and reinvest the Managed Assets in the Account according to the terms of this Agreement and all applicable laws, rules and regulations governing the investment of such assets.

All interest, dividends, appreciation, depreciation and other income of the Account are deemed to be part of the Account and subject to the Manager’s full investment supervision.

The Manager agrees that key personnel ("Key Personnel") have primary responsibility with respect to the management of the Account. If any of the Key Personnel are unable to devote sufficient time to maintain primary responsibility for the Account, the Manager must give the Board advance written notice of the name of the person designated by the Manager to replace such person. In addition, the Manager must give the Board advance written notice of the intent to replace anyone else employed by the Manager who has supervisory responsibility for any of the Key Personnel or their superiors, or who has responsibility for setting investor business policy.


a. Investment Guidelines. The Manager shall have the authority to make such purchases and sales or to direct the Custodian to make such purchases and sales of securities or other property, or interests or part-interests therein, as the Manager may deem appropriate, subject to the policies, guidelines, standards and objectives set forth in the Board’s current Investment Guidelines, attached hereto as Exhibit A. The Manager hereby acknowledges that it has reviewed and is familiar with Exhibit A. The Manager further acknowledges and understands that the Board may periodically revise Exhibit A and, in such event, the Manager agrees to be bound by any such revisions upon receipt of written notice from the Administrator. The Manager must specify in writing to the Board within 30 days any objections the Manager has to such revisions. Notwithstanding the foregoing sentence, the Manager must comply with all revisions to ERS policies unless the Board grants an exception to such policies specifically for the Manager.

b. Trading Procedures. All transactions authorized by this Agreement shall be settled through ERS’ Custodian, or sub-custodian arrangement for mutual or commingled funds, who shall retain sole possession of and have complete custodial responsibility for the Managed Assets. The Manager shall be the sole entity to notify and instruct the Custodian on: (1) orders which the Manager places for the sale or purchase of any Managed Assets and the management or disposition of such Managed Assets, and (2) the purchase or acquisition of other securities or property for the Account. In selecting a broker-dealer for a particular transaction involving Managed Assets, the Manager shall seek to obtain best execution, considering such factors as execution capabilities required by a transaction, cost, speed, efficiency or confidentiality, and other relevant factors. The Manager shall provide the Custodian with such trade information as the Custodian may require to effect settlement, within the time frames as the Custodian may designate.

c. Managers Not Acting as Principal. The Manager shall not act as a principal in

sales and/or purchases of Managed Assets, unless the Manager shall have received prior written approval from an Authorized Person for each such transaction.

d. Broker/Dealers. The Manager shall have complete authority and discretion to establish accounts with one or more duly registered broker/dealers. Consistent with ensuring the safety of the Managed Assets, the Manager shall engage in a prudent and diligent broker/dealer selection process. The Manager shall ensure that all orders are placed with only reputable, qualified and financially sound broker/dealers. The Manager’s primary objective shall be to select broker/dealers who will provide the most favorable net price and execution for the Account, but this requirement shall not obligate the Manager to recommend any broker/dealer solely on the basis of obtaining the lowest commission rate if the other standards set forth herein are satisfied.

e. Trade Confirmation and Settlement. The Manager agrees to instruct all brokers

to send the Manager and the Custodian a copy of all confirmations, statements and other notices relating to the purchase, sale or retention of the cash, securities, and other property held in Account. In the case of equity securities, the Manager agrees to notify the Custodian of the receipt of any stock dividend unless the Custodian has already reported the stock dividend to the Manager. The Manager shall cooperate with ERS’ Custodian and other parties to the trade to promptly resolve any trade settlement discrepancies or disputes.

f. Discretionary Rights and Powers Affecting the Managed Assets. The Board shall

direct the Custodian to transmit to the Manager all written information it receives concerning the Managed Assets held in the Account, including without limitation, conversion rights, subscription rights, warrants, options, pendency of calls, maturities of securities, expirations of rights, tender and exchange


offers, and any other right or power requiring a discretionary decision by the Manager. The Manager shall be responsible for timely directing the Custodian as to the exercise of such rights and/or powers where the Manager has actual knowledge of same, whether by written notice or otherwise.

g. Acting on Illegal Information. The Manager shall not place orders to purchase and/or sell any Managed Assets on the basis of any material information obtained, or utilized, by the Manager in violation of the securities laws of the United States, or any other country in which the Manager transacts business on ERS’ behalf.

8. Valuations

a. The Manager agrees to reconcile the Account with the Custodian on a monthly basis, and notify the Board of any material valuation differences between the Manager’s valuation and reporting system, and that of the Custodian’s.

b. The Manager agrees to furnish the Board with monthly valuations of the Account. If the Agreement does not commence at the beginning of a calendar month, the first valuation will be for the period beginning with the signing of the Agreement and concluding at the end of the month in which the Agreement commences.

c. Any security held in the Account which is listed on a national exchange or is traded in an over the counter market must be valued at the last sales price on the valuation date, or if no sale occurred on such date, at the last bid price on such date. Any other security or property shall be valued in a manner determined in good faith by the Manager and the Custodian, to most accurately reflect the fair market value.

9. Shareholder Actions.

a. On behalf of ERS as shareholder, the Manager must vote proxies and take any

other shareholder actions requested of shareholders by the issuer of any security held in the Account by the Manager. The Manager must take action which in its best judgment is in the best interest of the ERS. Shareholder action may be taken in attendance at any shareholder meeting or by proxy.

b. At least annually, the Manager must report to the Board on all proxy voting activity and any other major shareholder actions it has taken on behalf of ERS.

10. Written Reports. The Manager shall provide the Board with the periodic written reports

described in Manager Reporting Requirements (Exhibit D) in a form or forms to be mutually agreed upon from time to time by the Board and the Manager, and in such quantity as required by the Board. An authorized officer of the Manager shall sign all reports and shall certify that such reports are accurate and consistent with all applicable Investment Guidelines (Exhibit A). ERS agrees that the Manager, in the maintenance of its records and preparation of its reports, does not assume responsibility for the accuracy of any information furnished by the Custodian.

11. Meetings. The Manager shall be available to answer questions by ERS staff and Board members from time to time as needed, without additional charge. 12. Fees. ERS shall compensate the Manager quarterly for the services performed under this Agreement according to the Annual Fee Schedule, Exhibit B. The Manager agrees that all fees to the


ERS in conjunction with the services and investments contemplated by the Agreement shall be as favorable as the most favorable terms provided to any other client.

13. Seminars and Training Programs. In the event the Manager conducts seminars, training sessions or similar events which are generally made available to the Manager’s clients, ERS shall be invited to attend upon the same terms and conditions as such other clients. If the Manager offers to pay the cost of such events and/or the travel or lodging expenses incurred by its clients in connection with attending such events, the Manager shall reimburse ERS for such expenses on the same basis as the Manager reimburses the expenses of its other clients.

14. Term. From the date of execution of this Agreement until this Agreement is terminated by the Board pursuant to the provisions of Sections 15 and 16 below, or by the Manager pursuant to the provisions of Section 17 below, the Board agrees to retain Manager as a discretionary investment adviser and Manager agrees to act as a discretionary investment adviser by rendering continuous and regular investment advice, and supervisory and management services with respect to the Managed Assets. In the event of termination by either party, fees will be prorated to the date of termination.

15. Termination by ERS’. The Board may terminate all or any part of this Agreement without cause by delivering notice to the Manager at least thirty days prior to the date of termination ("Effective Termination Date"); provided that, the Board may at any time without prior notice order the Manager to cease activity, subject to its obligation to complete execution of directions or instructions already acted upon, with respect to the Managed Assets. Unless the Board terminates this Agreement for default under Section 16, below, the Manager shall be entitled to compensation up to the Effective Termination Date, even if the Board directs the Manager to cease activity before the Effective Termination Date. In no event shall the Board’s termination of this Agreement under this Section 15 be deemed a waiver of ERS’ right to make a claim against the Manager for damages resulting from any default by the Manager.

16. Termination by ERS for Default. The Board may immediately terminate this Agreement for default. If the Board terminates this Agreement for default pursuant to this Section 16, ERS shall be entitled to recover from the Manager all reasonable damages resulting from such default. For purposes of this Section 16, direct damages shall be deemed to include the reasonable transaction costs associated with converting all or a portion of the Managed Assets to an appropriate index type portfolio and reestablishing such assets into any actively managed portfolio pursuant to alternative arrangements made by the Board for the management of the Managed Assets. For purposes of this Section 16, default includes, but is not limited to any one of the following circumstances:

a. If the Manager materially fails to perform or cause to be performed the services

required under this Agreement, or any of the other provisions of this Agreement, within the time specified therefore (or within a reasonable time if no time is specified);

b. If the Manager materially breaches any of the warranties, representations and covenants made in Section 22 below;

c. If the Manager files for bankruptcy, becomes insolvent or generally cannot pay its debts as they become due;


d. If the Manager is subject to criminal investigation, indictment or conviction, or is found civilly or criminally liable by a trial court, jury or administrative body in connection with any matter involving breach of trust, breach of fiduciary duty, fraud, theft, or moral turpitude; or

e. If the Manager attempts or purports to assign this Agreement, or any portion hereof, or any of its rights or obligations hereunder, except in accordance with Section 39 below.

17. Termination by the Manager. The Manager may terminate this Agreement in its entirety

without cause by delivering notice to the Board at least 90 days prior to the Effective Termination Date. The Effective Termination Date shall be agreed upon by the Manager and the Board, but shall not exceed ninety (90) calendar days after the notice of termination is delivered to the Board. The Manager shall cause ERS to honor any trades agreed to but not settled before the Effective Termination Date.

18. Rights, Remedies and Responsibilities upon Termination. In the event of any termination of this Agreement, all of the terms and conditions herein shall continue to apply through the Effective Termination Date and through any period following such date, during which the Manager shall continue to perform the services required under this Agreement in order to complete any transactions pending on the Effective Termination Date and to facilitate an orderly transition to a successor manager (“Transition Period”). Such Transition Period shall not exceed three (3) months after the Effective Termination Date. The following provisions shall also apply to any termination of this Agreement.

a. Post-Termination Responsibilities. If either party terminates this Agreement, and unless otherwise expressly directed by the Board, the Manager shall take all necessary steps to stop services under this Agreement on the Effective Termination Date.

b. Termination Invoice. Following the Effective Termination Date of this Agreement, the Manager shall submit to the Board, in the form and with any reasonable certifications as may be prescribed by the Board, the Manager’s final invoice (“Termination Invoice”). The Termination Invoice shall prorate the Manager’s quarterly fees based upon a fraction, the numerator of which is the number of days in the quarter that the Manager managed the Managed Assets and the denominator of which is the number of days in the quarter, for work already performed but for which the Manager has not been compensated through the Effective Termination Date, in accordance with the Manager’s then current compensation level. The Manager shall submit such Termination Invoice no later than sixty (60) days after the Effective Termination Date. Upon the Manager’s failure to submit its Termination Invoice within the time allowed, the Board may determine, on the basis of information available to it, the amount, if any, due to the Manager and such determination shall be deemed final. Subject to the provisions of paragraph 18.c. below, after the Board has made such determination, or after the Manager has submitted its Termination Invoice, the Board shall authorize payment to the Manager.

c. Payment Withheld for Default. The Board shall not authorize and shall withhold payment for services provided if the Board terminates this Agreement for default pursuant to Section 16 above. Payment for services that ERS received prior to such default will be determined according to the provisions of paragraph 18.b. above.

d. Excusable Default. If, after the Board issues a Notice of Termination for Default to the Manager pursuant to Section 16 above, it is determined for any reason that the Manager was not in default, or that such default was excusable, then the rights and obligations of the Manager shall be the same as if a Notice of Termination for Default had not been given.


e. Good Faith Transfer. Upon any termination of this Agreement by either party and to the extent directed by the Board, the Manager shall continue to serve as a manager hereunder at the then existing compensation level for the duration of the Transition Period. The Manager shall cooperate with ERS in good faith to effect a smooth and orderly transfer of such services and all applicable records. Upon termination of this Agreement, the Manager shall retain all ERS Records (as that term is defined in Section 27 below) according to the record retention provisions set forth in Section 27 below.

f. Cumulative Nature of Rights and Remedies. The rights and remedies of the parties provided by this Section 18 are not exclusive, but cumulative and in addition to any other rights and remedies provided by law, in equity or under any of the provisions of this Agreement.

19. Measure of Damages. Damages arising from any default, act or omission under this Agreement shall be determined under the laws of the State of Maryland, without regard to special circumstances or condition of the parties, provided that such damages are reasonably foreseeable at the time of entering into this Agreement. Subject to Section 16, neither party to this Agreement shall be liable to the other party for consequential damages under any provision of this Agreement.

20. Indemnification of ERS. The Manager shall indemnify, defend and hold harmless the Board and ERS, its officers, fiduciaries (excluding the Manager), employees and agents, from and against any and all claims, damages, direct losses, liabilities, suits, costs, charges, reasonable expenses (including, but not limited to, reasonable attorneys’ fees and court costs), judgments, fines, and penalties, of any nature whatsoever (“Claims”), arising from or relating to any bad faith, negligence, willful misconduct, improper or unethical practice, infringement of intellectual property rights, breach of fiduciary duty, breach of trust, breach of confidentiality, breach of contract, or violation of any Legal Requirement (as that term is defined in Section 23 below) by the Manager or any of its Agents acting in connection with this Agreement. This indemnification shall survive the expiration or earlier termination of this Agreement.

21. Insurance. Without limiting the Manager’s indemnity obligations under Section 20 above, for the duration of this Agreement, the Manager shall provide and maintain at its own expense the insurance policies described in this Section 21 to cover the Manager and the services which the Manager performs pursuant to this Agreement. Such insurance shall be provided by insurer(s) rated “A-VIII”, by A.M. Best & Company, or otherwise approved in writing by the Board. On or before the commencement date of this Agreement, evidence of such insurance shall be provided to ERS’ Administrator or designee, in the form of a certificate of insurance. Such certificate shall describe the nature, amount and term of the insurance provided, and shall be provided on an annual basis as evidence of continuous coverage of the types and amounts of insurance provided for in this Section 21. The Manager represents and warrants that the Board shall be given at least thirty (30) days advanced written notice of any material modification or termination of any policy of insurance. Failure by the Manager to procure or maintain the insurance described in this Section 21 shall constitute a material breach upon which the Board may immediately terminate this Agreement for default, pursuant to Section 16 above.

a. Commercial General Liability. The Manager shall provide and maintain a Commercial General Liability insurance policy. Such policy shall be primary to and not contributing with any other insurance maintained by ERS. Such policy shall cover legal liability for bodily injury and property damage arising out of the Manager’s business operations and services that the Manager provides pursuant to this Agreement. Such policy shall include, without limitation, endorsements for Property Damage, Premises-Operations, Products/Completed Operations, Contractual, and Personal Injury with a


limit of at least Two Million Dollars ($2,000,000) per occurrence and an annual aggregate of at least Five Million Dollars ($5,000,000). The Manager must submit a certificate of insurance to the Board annually, as evidence of compliance with this provision. The Manager will provide for prior written notice to the Board of the cancellation of any policy described herein or the change in any material degree in the policies. In no event may the insurance coverage be less the amounts set forth above unless specifically waived by the Board in writing.

b. Workers’ Compensation. The Manager shall bear sole responsibility and liability

for furnishing Workers’ Compensation benefits to Manager’s employees for injuries arising from or connected with any services provided to ERS under this Agreement. The Manager shall provide and maintain a program of Workers’ Compensation and Employer’s Liability insurance, in an amount and form to meet all applicable statutory requirements, to cover all of the Manager’s employees.

c. Professional Liability. The Manager must obtain, at its own cost and expense, and keep in force and effect during the term of this Agreement, professional liability insurance for errors, omissions, and negligent acts. The insurance must be in the amount of at least $5,000,000 per occurrence and $5,000,000 in the aggregate with a maximum deductible of $400,000.

22. Manager’s Representations, Warranties and Covenants. The Manager acknowledges, represents, warrants, covenants and agrees that:

a. Authorization. The Manager has duly authorized, executed and delivered this Agreement and this Agreement constitutes the legal, valid and binding agreements and obligations of the Manager, enforceable against the Manager in accordance with its terms, except insofar as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar limitations on creditors’ rights generally and general principles of equity. The Manager is not subject to or obligated under any law, rule or regulation of any governmental authority, or any order, injunction or decree, or any agreement, that would be breached or violated by the Manager’s execution, delivery or performance of this Agreement.

b. Quality of Services. All services which the Manager provides hereunder shall

meet the requirements and standards set forth in the body of this Agreement and any Exhibits, Schedules and Appendices attached hereto.

c. Contingent Fees. The Manager has not employed or retained any person or selling agency to solicit or secure this Agreement under any agreement or understanding for a commission, percentage, brokerage, or contingent fee, except for bona fide employees of the Manager and the Manager’s affiliates or bona fide established commercial or selling agencies maintained by the Manager for the purpose of securing business. If the Manager in any way breaches or violates this warranty, the Board shall have the right to immediately terminate this Agreement for default and, in the Board's sole discretion, to deduct from the Manager’s compensation under this Agreement, or otherwise recover, the full amount of such commission, percentage, brokerage or contingent fee.

d. Gratuities. The Manager has not offered or given any gratuities in the form of gifts, entertainment or otherwise, to any officer, fiduciary, or employees of the ERS with a view toward securing this Agreement or securing any favorable determination made concerning the award of this


Agreement. The Manager covenants that no such gratuities will be given to any such person with a view toward securing any favorable treatment concerning the performance and/or continuation of this Agreement. If it is found that the Manager has offered or given such gratuities, the Board may terminate this Agreement upon one (1) calendar day’s written notice; provided, however, that the facts upon which the Board bases such findings shall be at issue and may be reviewed in any competent court sitting in the State of Maryland.

e. Conflict of Interest. The Manager shall not knowingly employ in any capacity: (1) any ERS employee or fiduciary who either could influence the award of this Agreement or any competing agreement, or who does or will have any direct or indirect financial interest in this Agreement (“Interested Person”) and (2) any spouse or economic dependent of any Interested Person. ERS shall, on a quarterly basis, advise the Manager of its fiduciaries.

f. Intellectual Property. In connection with its performance under this Agreement, the Manager shall not knowingly develop, provide or use any program, process, composition, writing, equipment, appliance or device, or any trademark, service mark, logo, idea, or any other work or invention of any nature, or any other tangible or intangible assets, that infringe on any patent, copyright, or trademark of any other person or entity, or is or will be a trade secret of any other person or entity.

g. Annual Audited Financial Statement. The Manager shall annually provide the Board with copies of its annual financial statement, if applicable.

h. Changes. The Manager shall notify the Board in writing within five (5) business days of any of the following changes: (1) the Manager becomes aware that any of its representations, warranties and covenants set forth herein cease to be materially true at any time during the term of this Agreement; (2) there is any change in the Manager’s senior personnel assigned to perform services under this Agreement, or in the Manager’s key personnel within their organization; (3) there is any change in ownership or control of the Manager; or (4) the Manager becomes aware of any other material change in its business organization, including without limitation the filing for bankruptcy relief.

i. Investigations and Complaints. To the extent permitted by applicable law, the

Manager shall promptly advise the Board in writing of any extraordinary investigation, examination, complaint, disciplinary action or other proceeding relating to or affecting the Manager’s ability to perform its duties under this Agreement or involving any investment professional employed by the Manager who has performed any service with respect to ERS’ account in the twenty-four (24) preceding months, which is commenced by any of the following: (A) the Securities and Exchange Commission of the United States, (B) the New York Stock Exchange, (C) the American Stock Exchange, (D) the National Association of Securities Dealers, (E) any Attorney General or any regulatory agency of any state of the United States, (F) any U.S. Government department or agency, or (G) any governmental agency regulating securities of any country in which the Manager is doing business. Except as otherwise required by law, ERS shall maintain the confidentiality of all such information until the investigating entity makes the information public.

j. Registered Investment Advisor. The Manager hereby represents that it is a registered investment advisor under the Investment Advisers Act of 1940. The Manager shall immediately notify the Board if at any time during the term of this Agreement it is not so registered or if its registration is suspended.


k. Investment Manager. The Manager hereby represents that it is an “Investment Manager”, as that term is defined in the Employee Retirement Income Security Act of 1974, as amended, for ERS with respect to the Managed Assets allocated to the Manager for investment, and that the Manager will maintain that status as long as this Agreement is in effect.

l. Manager’s Agents. The Agents of the Manager who will be responsible for performing under this Agreement are individuals experienced in the performance of the various functions contemplated by this Agreement and have not been convicted of any felony, found liable in a civil or administrative proceeding, pleaded no contest, or agreed to any consent decree with respect to any matter involving breach of trust, breach of fiduciary duty, fraud, securities law violations or bankruptcy law violations.

m. Disclosure Statement. The Manager warrants that it has delivered to the Board, at least five (5) business days prior to the execution of this Agreement, the Manager’s current Securities and Exchange Commission Form ADV, Part II (Manager’s “Disclosure Statement”).

n. Ethical Conduct Requirements. The Manager shall comply with the provisions set forth in Exhibit C, Code of Ethics, attached hereto.

o. QPAM. The Manager satisfies the requirements to be a "qualified professional

asset manager," as described by U.S. Department of Labor Prohibited Transaction Exemption 84-14, and will furnish to the Board, from time-to-time, such evidence as the Board may reasonably request that it meets such requirements.

The Manager understands that the Board and ERS have relied upon the foregoing acknowledgments, representations, warranties, covenants and agreements and that the same constitute a material inducement to ERS' decision to enter into this Agreement.

23. Compliance with Legal Requirements. The Manager shall comply with all applicable

foreign, international, federal, state, county and local laws, regulations, ordinances, registrations, filings, approvals, authorizations, consents and examinations ("Legal Requirements"), and all provisions required by such Legal Requirements to be included in this Agreement are hereby incorporated by reference.

24. Assurance of Compliance with Civil Rights Laws. The Manager hereby assures ERS that the Manager shall comply with Subchapter VII of the Civil Rights Act of 1964, 42 U.S. Code Sections 2000(e) through 2000(e)(17), to the end that no person shall, on grounds of race, creed, color, sex, or national origin, be excluded from participation in, be denied the benefits of, or be otherwise subjected to discrimination under this Agreement or under any project, program, or activity undertaken pursuant to this Agreement. The Manager also specifically agrees to comply with any applicable state or local civil rights law.

The Manager will include provisions of this paragraph and Section 25 of this Agreement below in

all subcontracts entered into for the purpose of performing the obligations of this Agreement. 25. Nondiscrimination in Employment. The Manager shall take all necessary action to ensure

that job applicants are employed, and that its employees are treated during employment, without regard to their race, color, religion, sex, age, marital status, sexual orientation, disability, medical condition, ancestry or national origin. For purposes of this Section 25, the term "employment" shall include, without limitation, the following: employment, upgrading, promotion, demotion or transfer; recruitment or


recruitment advertising; layoff or termination; rates of pay or other forms of compensation; and selection for training, including apprenticeship.

26. Replacement of Manager's Agents. Upon demand by the Board, the Manager shall

replace any Agent assigned to perform services under this Agreement who the Board determines is unable to effectively execute the responsibilities required by this Agreement.

27. Record Retention and Inspection.

a. Record Maintenance. The Manager shall keep and maintain all records related to

the Managed Assets, including but not limited to any pertinent transaction, activity, time sheets, cost, billing, accounting and financial records, proprietary data, electronic recordings, and any other records created in connection with this Agreement ("ERS Records"), according to the Manager's record retention standards. The Manager agrees to immediately notify the Board of any change in such standards. The Manager shall keep and maintain ERS Records according to the Manager's record retention schedule for no less than six (6) years following the expiration or earlier termination of this Agreement.

b. Record Review and Audit. The Manager agrees that the Board, or any duly authorized representative of the Board or ERS, shall have access to and the right to examine, audit, excerpt, copy or transcribe any ERS Records at any time during the term of this Agreement, or at any time for up to seven (7) years after the expiration or earlier termination of this Agreement. Upon the Board's ' request and on reasonable notice, the Manager shall make such records available for review during normal business hours at the Manager's business office. The Manager shall make the persons responsible for creating and maintaining ERS Records available to ERS during such review for the purpose of responding to ERS' reasonable inquiries.

28. Confidentiality. Any information supplied to the Manager by ERS in connection with the performance of the Manager's obligations hereunder, which is not otherwise in the public domain or previously known to the Manager, is to be regarded as confidential and for use only by the Manager or such persons the Manager may designate in connection with the Managed Assets. The Manager shall maintain the confidentiality of all ERS Records according to all applicable federal, state, county and local laws, regulations, ordinances and directives relating to confidentiality. The Manager shall inform all of its Agents of the confidentiality provisions of this Agreement.

29. Audit Settlement. If an error is discovered as a result of an audit performed by the Manager or ERS, or if the Manager becomes aware of any error affecting the Account or Managed Assets through any other means, the Manager shall use its best efforts to promptly correct such error or to cause the appropriate party to correct such error. The Manager shall pay any Claims resulting from such error to ERS, pursuant to Section 20 above.

30. Notices. All notices, requests, demands or other communications required or desired to be given hereunder or under any law now or hereafter in effect shall be in writing. Such notices shall be deemed to have been given if delivered by facsimile with telephone confirmation of receipt, or by overnight courier, or if mailed by first class registered or certified mail, postage prepaid, and addressed as follows (or to such other address as either party from time to time may specify in writing to the other party in accordance with this notice provision):

If to: Board of Trustees If to Manager: of the Maryland-National


Capital Park and Planning Commission Employees’ Retirement System Attn: Administrator 6611 Kenilworth Avenue, Suite 100 Riverdale, MD 20737 Telephone: 301-454-1415 Fax: 301-454-1420

Notwithstanding the foregoing, the Manager's invoices shall be addressed as provided in Section

30 above.

The Manager agrees to comply with the following communication policy adopted by the Board:

All formal notices required to be given to the Board or ERS by a service provider pursuant to the service provider's contract with ERS shall be addressed and delivered in accordance with the terms and conditions of the contract.

A service provider, or person or entity related to a service provider, shall provide to ERS' Board Chairman a copy of all written communications to ERS (other than purely personal or social correspondence, routine announcements, generally-distributed newsletters, and the like) related to the ERS' business. If the communication relates to investment-related services provided to ERS, a copy shall also be provided to ERS' Administrator.

The addresses for ERS' Board Chairman and Administrator are stated in Section 30 above.

31. Section Headings; Interpretation. Caption and paragraph headings used in this Agreement

are for convenience and reference only and shall not affect in any way the meaning, construction or interpretation of this Agreement. Each party hereto and its counsel have participated fully and equally in the review and negotiation of this Agreement. The language in all parts of this Agreement shall in all cases be construed according to its fair meaning, and not strictly for or against any party hereto. Any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not apply in interpreting this Agreement.

32. Entire Agreement. This Agreement, and any and all Exhibits, Schedules and Appendices attached hereto, contains the entire and exclusive statement of the terms of the agreement between the parties pertaining to the subject matter of this Agreement, and supersedes all previous oral and written agreements or understandings, and all contemporaneous oral and written negotiations, commitments, understandings and communications between the parties relating to the subject matter of this Agreement. No party has been induced to enter into this Agreement by, nor is any party relying on, any representation or warranty outside those expressly set forth in this Agreement.

33. Exhibits, Schedules and Appendices. The Exhibits, Schedules and Appendices attached hereto are incorporated in and made a part of this Agreement by reference. If any conflicts, inconsistencies or ambiguities should arise between or among this Agreement and the incorporated documents, the following precedence shall be used to interpret the requirements of this Agreement:


(1) The terms of this Agreement; and (2) the terms of the Exhibits, Schedules and

Appendices according to the order in which they appear.

34. Severability. If any provision of this Agreement is held by any court to be invalid, void or unenforceable, in whole or in part, the other provisions shall remain unaffected and shall continue in full force and effect.

35. Waiver. No waiver of a breach, failure of any condition, or any right or remedy contained in or granted by the provisions of this Agreement shall be effective unless it is in writing and signed by the party waiving the breach, failure, right, or remedy. No waiver of any breach, failure, right or remedy shall be deemed a wavier of any other breach, failure, right or remedy, whether or not similar, or preceding or subsequent, nor shall any waiver constitute a continuing waiver unless the writing so specifies.

36. Amendments in Writing. This Agreement may be amended or modified only by a written instrument executed by both parties hereto and making specific reference to this Agreement and the intent of the parties that it be modified or amended by such writing.

The parties shall meet and confer in good faith on any modification of this Agreement that may become necessary to make its provisions consistent with any investment policy of ERS, or any foreign, international, federal, state, county or local statute, rule, regulation or ordinance which governs any aspect of this Agreement.

37. Governing Law and Venue. This Agreement shall be governed by, and construed and

enforced in accordance with the laws of the State of Maryland without regard to principles of conflicts of laws. Should either party initiate a lawsuit or other dispute resolution proceeding over any matter relating to or arising out of this Agreement, such lawsuit or other proceeding shall be filed and conducted in a court of competent jurisdiction within the state of Maryland, and all parties hereto hereby consent to such venue and the personal jurisdiction of all courts sitting within such location.

38. Joint and Several Liability. If the Manager (or any permitted assignee) consists of more

than one person or entity, the liability of each such person or entity signing this Agreement as the Manager shall be joint and several.

39. Assignment and Delegation. The Manager may not assign any of its rights or delegate

any of its duties under this Agreement without the prior written consent of the Board, which consent may be granted or withheld in its sole discretion. Despite the Board's consent, no assignment shall release the Manager of any of its obligations or alter any of its primary obligations to be performed under the Agreement, unless such consent expressly provides for such release of the Manager. Any attempted assignment or delegation in violation of this provision shall be void and shall entitle the Board to terminate this Agreement for default.

40. Word Usage. Unless the context clearly requires otherwise, (i) the plural and singular

number shall each be deemed to include the other; (ii) the masculine, feminine, and neuter genders shall each be deemed to include the others; (iii) "shall," "will," or "agrees" are mandatory, and "may" is permissive; (iv) "or" is not exclusive; (v) "includes" and "including" are not limiting; and (vi) "hereof," "herein," and other variants of "here" refer to this Agreement as a whole.


41. Execution in Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the Board of Trustee of ERS has caused this Agreement to be

executed on behalf of ERS and the Manager has caused this Agreement to be executed by its duly authorized officer as of the date first above written.

"ERS" "MANAGER" Board of Trustees The Maryland-National Capital Park and Planning Commission Employees’ Retirement System By: _ By: ______________________ Samuel J. rker Pa , Jr. Chairman, Board of Trustees Date: ____ Date: __________________ Attest: By: ___________________________ Andrea L. Rose Administrator Date: ________________________


EXHIBIT A INVESTMENT GUIDELINES Manager specific guidelines determined following award of mandate.


EXHIBIT B ANNUAL FEE SCHEDULE Fee Schedule determined following award of mandate.


EXHIBIT C CODE OF ETHICS

Employee Retirement System

Ethics Policy

I. PREAMBLE

The Board of Trustees of the Maryland-National Capital Park and Planning Commission Employees’ Retirement System Board (the Board) is responsible for managing the Employees’ Retirement System (ERS). The Board manages the ERS under a Trust Agreement dated July 26, 1972 and amended June 13, 1979 and a Memorandum of Understanding dated February 11, 1982. The ERS’s principle responsibility, through the Board of Trustees, is to hold in Trust all funds for the sole benefit of participants and their beneficiaries; to administer the Plan and collection of contributions to the Plan; to invest and reinvest the Trust Fund; to maintain an ongoing evaluation of retirement provisions; and to recommend amendments to the ERS as are necessary for sound management. Members of the Board hold positions of public trust.

The members of the Board are mindful of the positions of trust and confidence held by them. They adopt this Ethics Policy to ensure the proper administration of the ERS, and to foster unquestioned public confidence in the ERS’s integrity as a prudently managed pension plan and fiduciary to its members. This policy is intended to eliminate to the extent reasonable any perception or appearance of impropriety on behalf of the ERS Board, Administrator, employees and among their respective business relationships. II. SCOPE OF POLICY

This Ethics Policy provides a fiduciary framework for the proper conduct of the ERS’s Board, Administrator, employees, and vendors and a basis for the evaluation of that conduct. However, this policy should not be relied upon as an exclusive or comprehensive list of applicable legal or fiduciary requirements of conduct. It does not attempt to specify every possible activity that might be inappropriate or prohibited under applicable laws and regulations. Nothing in this policy shall exempt any person from any federal or state law or regulation. The standards of conduct set forth in this policy are in addition to any such law or regulation. III. THE FIDUCIARY DUTY The ERS’s fiduciary duty is owed to its participants, including plan members and beneficiaries. In fulfilling this duty, the ERS must serve the interests of all participants when feasible, and, when the interests of the various participants come in conflict with each other, the Board must balance conflicting interests of its participants to achieve the fairest overall results. The ERS is mindful that it is accountable to all of its stakeholders to exercise this fiduciary duty in an ethical and legal manner. The ERS’s stakeholders are all who contribute to the ERS and all who benefit from the ERS’s mission. This includes the ERS’s sponsor, its members, their beneficiaries, and the general public, since public resources are often used to provide the ERS sponsor’s contributions. The ERS’s fiduciary duty rests with the Board. Each member of the Board shall discharge his or her duties with respect to the ERS solely in the interests of, and for the exclusive purposes of providing


benefits to participants, minimizing and stabilizing employer contributions thereto, and defraying reasonable expenses of administering the ERS, with the duty to the participants taking precedence over any other duty. From the Board, the fiduciary duty cascades down to all those who assist the Board in serving the ERS. Accordingly, the following parties, who are collectively referred to hereafter as “COVERED PARTIES”, share some responsibility to help the Board meet their fiduciary duty:

• Members of the Board of Trustees. • All Management and designated Staff of the ERS as determined by the Administrator. • All External Associates of the ERS, such as attorneys and investment managers and

consultants, who have discretionary authority over the ERS’s assets or operations.

All COVERED PARTIES must comply with this Ethics Policy. In addition to COVERED PARTIES, related parties (as defined in the section entitled “Nepotism”) of COVERED PARTIES must comply with this policy to the extent that their involvement with the ERS or its COVERED PARTIES creates a possible conflict of interest. However, accountability for compliance in this instance lies primarily with the ERS’s COVERED PARTIES rather than their related parties. All others who conduct business with the ERS must comply with legal and professional standards that require the ethical and good faith performance of their duties. However, they generally do not owe a fiduciary duty to the ERS, and, therefore, are not required to adhere to this ethics policy. IV. STANDARDS OF ETHICAL CONDUCT COVERED PARTIES are to strive for the Best Performance on behalf of the ERS and are to perform their duties solely for the benefit of the ERS and its participants and beneficiaries. Best Performance is defined here as actions, counsel or decisions that best further the objectives of the ERS and its participants or protect their interests. Best Performance requires professional competence and due diligence. COVERED PARTIES are to avoid Conflicts of Interest, both in actuality and in appearance. A conflict of interest exists when a COVERED PARTY has a personal interest that may impair the COVERED PARTY’S loyalty to the ERS or performance on behalf of the ERS. The conduct of COVERED PARTIES is always to be both Legal and Ethical. The demeanor of COVERED PARTIES is always to be Professional and Respectful. Such a positive demeanor fosters trust and cooperation. COVERED PARTIES are to maintain Accountability and Transparency before the ERS’s stakeholders. That is, they must be forthcoming and candid in their disclosures to the Stakeholders regarding any matters pertaining to the ERS, unless maintaining confidentially is legally required, or both legal and in the best interests of the ERS and its stakeholders. ETHICAL STANDARDS APPLIED A. GENERAL RULES


1. Addressing Conflicts of Interest COVERED PARTIES who become aware of a personal conflict of interest that affects their duty owed to the ERS have an obligation to disclose that conflict to the Chairman or alternative individual as stated by policy, and the COVERED PARTIES must cure the conflict. Disclosure will be prior to any action being taken that may be considered as presenting a conflict of interest but no later than 3 business days after discovery. A person may cure a conflict of interest by promptly addressing it in the following manner. Prudently withdrawing from action on a particular matter in which a conflict exists whenever possible. The conflict will typically be cured in that manner provided:

a) The person may be and is effectively separated from influencing the action taken.

b) The action may properly be taken by others, and the nature of the conflict is not such that the person must regularly and consistently withdraw from decisions which are normally his or her responsibility with respect to the ERS.

If a conflict cannot be cured in the manner described above, the affected COVERED PARTY must work with the Chairman and the ERS’s appropriate management to resolve the conflict of interest in a manner consistent with governing law and the traits and standards of ethical conduct espoused in this Ethics Policy and may include any action up to and including separation when the conflicts require regular and consistent withdrawal from decisions which are normally his or her responsibility with respect to the ERS. 2. Nepotism For purposes of this policy, related parties to COVERED PARTIES include any child, step-child, foster child, grandchild, parent, step-parent, grandparent, spouse, brother, sister, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, domestic partners, and any member of the household, whether or not related. To prevent related party conflicts of interest, the ERS may not employ a person who is related to:

a) A Board member;

b) The Administrator or other designated ERS staff; or

c) A Vendor.

This does not prevent the continued employment of a person who has already been working for the ERS for thirty consecutive days prior to the date that the Board member, executive staff, or vendor acquired their position, or the related party became a related party.

Parties related to other Plan employees may be considered for employment by the ERS provided the applicant possesses all the qualifications for employment. A Plan employee may not exercise discretionary authority to hire, evaluate or promote their related party. A related party may not be hired if such employment would:

1. Create either a direct or indirect supervisor/subordinate relationship between the related party and the related COVERED PARTY; or

2. Create either an actual conflict of interest or the appearance of a conflict of interest.


These criteria will also be considered when assigning, transferring, or promoting an employee. No COVERED PARTIES may utilize the services of other COVERED PARTIES or close personal associates for ERS business without disclosing such relationship to the Chairman or other party assigned this function prior to execution and obtaining the approval to do so. Any such approved arrangements shall be reported to the Board. 3. Hiring and Contracting The hiring of employees, vendors, and consultants should not create either an actual or the appearance of conflict of interest. COVERED PARTIES should not unnecessarily retain employees, vendors, or consultants. The hiring of such employees, vendors and consultants shall be based purely on merit. The compensation of such employees, vendors and consultants shall not exceed the fair value of the services rendered. Whenever the ERS commences search procedures or RFP’s, or directs such activity be undertaken by any other entity for the retention of an outside service provider (including but not limited to investment managers, attorneys, consultants, accountants, auditors, etc.) clear direction to prospective respondents concerning the proper form of communication and allowable point of contact with the ERS shall be given. All candidates, upon their submission, shall be advised in writing and provided written acknowledgement of this prohibition and the potential of disqualification. This will ensure the integrity of the decision-making process and will avoid any and all appearances of conflict. The Board and all other ERS staff not designated as the point of contact will refrain from having any contact with the candidates, their representatives, and supporters unless and until it is desired that specific candidates should be interviewed by the Board or designated committees as part of the selection process. Any contacts including unintended incidental interactions should be reported in accordance with the procedure set forth under the incident reporting section. All COVERED PARTIES are to avoid any decision-making practices, particularly with respect to hiring, contracting, or investments, that are or appear to be “kickbacks” or “pay-to-play,” practices.

a) “Kickbacks” are transactions where candidates seeking to do business with THE ERS provide some personal benefit to the COVERED PARTY to influence a decision.

b) A “Pay-to-play” transaction is one where a solicitor, in order to participate in a business process such as a bidding competition, or to influence a Plan decision, or to maintain an existing contract or business association, provides a benefit unrelated to the ERS’s business requirements for that decision.

Any violation of this policy must be immediately reported to the Chairman or alternative individual as stated under the incident reporting section. Such violation may result in the removal of such vendor’s proposal from consideration and additional actions against Board or ERS employees. 4. Employment Negotiations and Post Employment Restrictions A Board Member or employee of the ERS must disclose to the Chairman or alternative individual as stated by policy any employment negotiations with firms that do business with the ERS. Any vendor or contractor currently doing business with the ERS, or in the process of seeking to do business with the ERS, that has received a copy of this policy, shall also be obligated to disclose to the Chairman or


alternative individual as stated by policy any employment negotiations with a Board Member of the ERS. It shall also be an obligation Employment negotiations means participating in an employment interview, discussing an offer of employment, and accepting an offer of employment, even if precise terms of employment are not yet defined. A Board Member or employee of the ERS, after termination of his or her term of office or employment with the ERS, shall not appear before the ERS or receive compensation for any services rendered on behalf of any person in relation to any business dealing with the ERS or application therefore, or any case, proceeding, determination or any other matter upon which he or she took any discretionary act during his or her term of office or employment with the ERS for a period of two (2) years. This does not preclude a Board Member or ERS Employee from being hired by the ERS through appropriate means as consultant, vendor, or other related supporting position after their separation from the ERS Board. 5. Gifts A gift is any payment, thing or other benefit provided to a COVERED PARTY for which the COVERED PARTY did not provide goods or services of equal or greater value, including a discount or a rebate that is not available to the general public including travel expenses, lodging and meals, even if the travel is in connection with official ERS business.

Cash gifts are strictly prohibited in all cases.

A COVERED PARTY shall not accept or solicit any gift, favor, or service clearly distinguishable as such in the discharge of official duties, or that the affected person knows, or should know, is being offered with the intent to influence the affected person’s official conduct. Notwithstanding the aforementioned prohibition a COVERED PARTY may accept a gift valued below “nominal value” as defined by Commission Notice No. 06-03 as it applies on the date the gift was received. Generally speaking meals and hotel accommodations offered as part of the packages pricing are acceptable, while optional outings and services such as golf passes, sightseeing trips, sports events, etc. would not be considered acceptable. It is recognized that this distinction is sometimes less than clear, especially in the area of educational and networking conferences and seminars where the items are bundled together in the pricing plans. This shall not apply where:

a) The Board has determined in advance that registration or similar fees are adequate for the inclusive meals and services offered as part of any educational or networking conferences/seminars and when the same offer is available for all attendees without regard to an existing business relationship.

b) In cases of novelties that are of no practical value and when they are available for all attendees without regard to an existing business relationship.

6. Travel and Incidental Reimbursements The ERS’s board members and employees are reimbursed for out-of-pocket job-related expenses, particularly travel, lodging and meals. Public funds should be prudently expended. Therefore, The Board and ERS employees should be reimbursed for expenses that meet the “actual,” “reasonable” and “necessary” tests. All travel and accounting of travel shall be done in compliance with the ERS Travel


Policy. Waivers or Exceptions to this policy shall be vetted through the Administrative and Oversight Committee.

Actual expenses include those expenses that were incurred personally by the Board and ERS employees. If the board member or employee paid an expense that was somehow covered by another entity, it would not be reimbursable. Reasonable expenses include the costs of travel lodging, meals or supplies that enable the person to achieve their objectives in an efficient, safe and cost-effective manner. For example, travelers are not expected to lodge at the cheapest hotel, which may provide unclean or unsafe accommodations. But, at the other extreme, they are also not entitled to secure extravagant accommodations at luxury resorts. Public travelers, including board members, should locate and secure accommodations at moderately priced hotels. Hotels generally may be chosen in part to facilitate efficient conduct of business and to minimize daily travel time while at the business site, when reasonable costs are obtainable. Necessary expenses are those that are required to achieve the goals of the organization, and travel and associated expenses are often required to achieve those objectives. But with the communication methodologies available today, such as telephone, email, fax and video conferencing, travel is often avoidable. Therefore, the need for travel should be carefully evaluated. And when travel is deemed necessary, efforts should be made to keep the trip as short as possible. 7. Attendance at Functions All COVERED PARTIES are prohibited from attending functions paid for by vendors or potential vendors of the ERS, except as provided below. In particular, all persons responsible for investment decisions or involved in the management of the ERS’s assets are prohibited from accepting invitations to functions, the costs of which will be borne by brokers, investment managers, dealers or corporations except as provided herein. Exceptions to this rule are invitations to seminars, conferences or other educational meetings presenting topics pertinent to the management of the ERS or its assets that are not primarily intended to promote a certain business relationship or product. Further, such meetings must be openly available to other similarly situated retirement plans and systems and must not be reasonably perceived to cause a loss of independence or objectivity. The Chairman must approve attendance at all events paid for entirely or in part by entities other than the ERS. The Vice Chairman must approve all travel by the Chairman. This prohibition does not apply to business meals and receptions at which the sponsor is present, to conference events or ground transportation in connection with business meetings, meals, receptions and conference events. However, staff should use reasonable care and judgment to not place themselves in a situation that might cause, or be perceived to cause, a loss of independence or objectivity. 8. Use of the ERS’s Assets COVERED PARTIES may not utilize any property or resources of the ERS for personal gain. Public assets include, but are not limited to:

a) Physical assets, such as equipment, furniture, supplies, and facilities.

b) Computing resources, including hardware and software.

c) Financial resources, such as cash and checks.


d) Human resources, such as staff time.

e) Intangible assets, such as goodwill, political influence, and intellectual property.

Certain exceptions are commonly made for de minimus personal use, in unavoidable circumstances (e.g., phone call to child’s school that must be made during working hours), and in conformance with the ERS’s policies, MNCPPC practices, and Administrative Procedures. Assets of public funds are only to be used to achieve the business purposes of the ERS. The use of ERS assets for personal interest, pleasure or profit is not acceptable. It is also not acceptable to use public assets, however meritorious, to further the goals of an outside charitable organization with which the public employee might be affiliated. This includes organizations such as churches, scouting groups, athletic groups, etc. COVERED PARTIES are required to diligently protect the ERS’s assets from theft, loss, abuse, or waste. In addition the ERS Administrator shall ensure the ERS generally adheres to and follows the Commission’s Fixed Asset Policy found under Practice No. 3-14. 9. Accounting COVERED PARTIES responsible for financial accounting or other record keeping functions on behalf of the ERS are to follow established laws, policies, procedures and standards, and are to exercise prudent judgment to ensure that such accounting or record keeping are always accurate, reliable, appropriately transparent to the ERS’s stakeholders, and secured. COVERED PARTIES are strictly prohibited from falsifying or failing to record proper entries in any records of the ERS. 10. Confidentiality Although the ERS is an entity which fosters accountability and transparency before its stakeholders, the ERS is also entrusted with confidential information, which may be classified as follows:

a) Non-public, individually identifiable information of its members and staff.

b) Legally privileged information developed through the attorney-client relationship.

c) The ERS’s security information that must be kept confidential to protect the ERS’s assets.

d) The ERS’s specific investment transactions that are considered confidential, to protect the ERS’s assets and investment performance, and to comply with applicable laws.

All confidential information must be diligently safeguarded as required by law. COVERED PARTIES may not disclose or use confidential information acquired in their positions without proper authorization.

No private information, including, but not limited to, member retirement benefit and health insurance information, and non-public investment information, shall be provided to any other person or used in any way other than in the lawful performance ERS’s duties and responsibilities. Accessing information for any other purpose is prohibited.


Further, no COVERED PARTY shall accept employment or engage in any business or professional activity that will require him or her to disclose confidential information that he or she has gained by reason of his or her official position with the ERS.

11. Illegal Acts

No COVERED PARTIES may engage in illegal activities at any time, whether related to ERS matters or not. No COVERED PARTIES may knowingly become a party to, or condone, any illegal activity. No COVERED PARTY may engage in activities involving moral turpitude, such as dishonesty, fraud, deceit or misrepresentation. Illegal behavior is not tolerated and is subject to immediate discipline, including possible termination and prosecution.

B. RULES AND LAWS APPLICABLE SPECIFICALLY TO THE BOARD

1. General Each member of the Board shall exercise his or her duties with the care, skill, prudence, and diligence that a prudent person would exercise under similar circumstances. Each member of the Board shall not leave to the other members of the Board control over the administration of the affairs of such Board. A member of The ERS’s Board shall not engage in any employment, activity, or enterprise for compensation that is inconsistent, incompatible, in conflict with, or intertwined to his or her duties as a member of a Board, or with the duties, functions, or responsibilities of the Board. In any situation where there may be a conflict of interest or the appearance of a conflict the Board member shall seek the approval of the Board prior to the employment, activity, or enterprise. Board members must disclose to the Board any conflicts regarding matters that are before the Board and not vote on the matter. 2. Financial Interests ERS’s Board members are prohibited from making, participating in making, or using their positions to influence Board and ERS decisions in which they have a financial interest. A Board member is deemed to have a financial interest if all of the following are present:

a) It is reasonably foreseeable that the decision will have a financial effect;

b) The anticipated financial effect is on a financial interest of the Board member;

c) The anticipated financial effect is material; and

d) The decision's financial effect on the Board member's financial interest is distinguishable from its effect on the public generally.

In addition, this policy prohibits Board members from using their positions to influence Board and ERS decisions in which close associates and/or political associates have a financial interest. Each member of the ERS’s Board must disclose their financial interest fully and completely upon election or appointment and annually thereafter or as requested by the Chairman and otherwise required by law.


3. Investments A member of The ERS’s Board(s) shall not become an endorser, surety, or obligor on, or have any personal interest, direct or indirect, in the making of any investment for the Board, or in the gains or profits accruing therefrom. 4. Loans Each member of the ERS’s Board, the ERS Administrator and the ERS staff shall refrain from receiving personal loans from any officer, employee, member, consultant, or contractor with the ERS. 5. Contracts Members of the ERS Board are prohibited from being financially interested in any contract made by the ERS. 6. Board Interaction with Outside Parties Communications with service providers and other non-plan persons and entities: A Board member shall not correspond with a non-plan person or entity using the ERS’s letterhead or any other form or format that could lead the recipient to believe the communication may be official, either as an individual Board member or speaking collectively, unless the communication is authorized by the Board. Copies of all written communications from a Board member to a current service provider, or person or entity related to a current service provider, relating to the ERS’s business (other than purely personal or social correspondence not involving any ERS related issue or information) shall be provided to the Chairman for subsequent distribution to all members of the Board. A copy of any written communication (other than purely personal or social correspondence, routine announcements, generally distributed newsletters, and the like) received by a Board member from a current Plan service provider, or person or entity related to a current service provider, shall be forwarded to the Chairman or designee for subsequent distribution to all members of the Board. Unless authorized by the Board, no Board member or ERS staff shall disseminate or otherwise disclose any information obtained in the course and scope of his or her employment, which has not been released, announced, or otherwise made available publicly. In the event that personal or incidental contact with representatives of service providers and other non-plan persons and/or entities that turns to questions, inquiries or discussions involving ERS business the Board member shall immediately withdraw from the conversation. The involved Board member shall report the incident in writing to the Chairman or designee for further action as may be deemed appropriate. No Board member may speak for the pension fund without prior written authorization. If someone other than the authorized spokesman makes a statement without authorization, orally or in writing, they must explicitly acknowledge that it is not an authorized pension fund statement. A Board member shall be respectful of the Board and its decisions in all external communications, even if he or she disagrees with such decision.

7. Communications with Plan Members. Board members shall be aware of the risk of communicating inaccurate information to plan members (both active members and retirees), and the potential exposure to liability and possible harm to a plan member that may result from such miscommunications.


Board members shall mitigate the risk of miscommunication with plan members and thereby avoid creating additional plan liability by refraining from providing specific advice or counsel with respect to the rights or benefits to which a plan member may be entitled under the ERS. Where explicit advice or counsel, with respect to retirement plan provisions, policies or benefits is needed, Board members will refer inquiries to appropriate ERS management or staff. 8. Board Oversight of The ERS’s Management and Staff The Board is responsible for the oversight of the ERS’s operations. To accomplish this oversight, the ERS has established a chain of command and delegation of authority that promote operational effectiveness and accountability. The following guidelines help Board members to interact effectively and efficiently with the ERS’s management and staff within the framework of the established chain of command.

a) Collective Authority: The Board collectively is empowered to direct the ERS’s management and staff on all matters of its operations. Normally, this authority is exercised through the Chairman’s supervision of the ERS’s Administrator. The orderly conduct of the ERS’s operations requires that Board management directives be handed down through Chairman to the Administrator. The Administrator is then responsible for directing the actions of the ERS staff. Under extraordinary circumstances, if the Board determines that the ERS staff’s ability to faithfully serve the ERS’s interests has been compromised; the Board(s) may collectively initiate corrective actions that temporarily circumvent any part of this chain of command.

b) Individual Board Member Authority:

Each member of the Board shares in the Board’s oversight responsibility, but may issue directives to the ERS’s Administrator and staff only in conjunction with the full Board through the Chairman or one of its committees if so empowered to do so. However, an officer of the Board or of a committee of the Board may in extraordinary situations, when the Chairman or Vice-Chairman are unavailable and if the interests of the ERS justify urgent or confidential action, take emergency measures to protect the ERS’s interests without prior Board approval, on condition that full disclosure to the Board is made and Board approval is obtained in a timely manner.

Nothing in this policy prohibits a Board member from interacting with any management or staff member of the ERS in a non-managerial function which is consistent with all other rules in the ERS’s ethics policies, other ERS policies, the Board’s by-laws and other legal authority.

9. Conduct at Retirement Board Meetings The ERS’s Board shall provide fair and equal treatment for all persons and matters coming before the Board or any Board committee. Board members shall listen courteously to all discussions at meetings and abide by the rules of procedure and refrain from abusive or disruptive conduct, personal charges or verbal attacks upon the character, motives, ethics, or morals of others. V. ADMINISTRATION OF ETHICS POLICY


A. CHAIRMAN The Chairman is responsible for administering, implementing, promoting, interpreting and enforcing this policy. His or her duties include:

• Providing for ethics training for the ERS’s Board, administrator, and staff. • Issuing opinions with the assistance of legal counsel as needed on the proper interpretation of

this policy. • Determining if potential conflicts of interest should be disclosed, avoided or corrected. • Counseling Board and staff members regarding compliance and potential violations and

to make policy waivers that ultimately comply with governing law. • Ensuring that he or she is available to assist COVERED PARTIES with ethics questions or

problems. B. ETHICS QUESTIONS Questions on this policy should be referred to the ERS’s Chairman in a timely manner and in sufficient detail. In some cases the Chairman may respond or have legal counsel respond in writing concerning matters of interpretation of this policy. In all cases of written responses the response will be furnished to the ERS’s Board and when relevant ERS staff. Written opinions will be logged sequentially by the ERS Administrator for further reference and made available for review. The Chairman may use whatever resources reasonably needed to provide the proper opinion. All Covered persons may rely on such opinions to apply this policy and shall be deemed to be acting in good faith compliance with this Ethics Policy. In matters concerning potential Board, Chairman or Administrator impropriety and in their sole discretion, individual Board members or the ERS Administrator may seek advisory opinions from legal counsel to the ERS to aid in its application of the Ethics Policy to particular factual situations presenting an apparent ethical issue. The counsel’s opinion shall be advisory only, but any Board member or the ERS Administrator acting in reliance thereon shall be deemed to be acting in good faith compliance with this Ethics Policy. Nothing in this policy should be construed as limiting any COVERED PARTY’s right to contact any appropriate independent authority at any time for ethics advice or reporting. Such guidance should whenever possible be sought prior to the action in question. However, COVERED PARTIES of the ERS should follow the advice and reporting procedures contained in this policy when possible.

C. TRAINING The Chairman or designee will ensure via a signed receipt that the ethics policy is received within ten days of hiring, appointment or election of ERS Board members, an ERS Administrator or ERS staff. The respective Board member, administrator, or staff will not be permitted to have any active participation in ERS functions until they have signed for receipt of the Ethics Policy.

The Chairman or designee will ensure that training concerning ethics requirements is received within 60 days of hiring, appointment, or election and that said training can be adequately documented.

Contractors and vendors will be provided a copy of this Ethics Policy as soon as feasible depending upon the process being used and required to provide a signed acceptance of the policy prior to submission of a bid, interview or retention.


The Chairman is responsible for ensuring that additional classes are held periodically for all employees to reinforce and explain the provisions of and answer any questions pertaining to this policy. Board members shall receive periodic ethics training regarding governing ethics laws. D. CERTIFICATION All COVERED PARTIES agree to comply with this Ethics Policy at the commencement of their service or contract with the ERS and shall certify annually in writing their continuing compliance. These certifications are due as required annually by the Administrator who is responsible for collecting and maintaining these documents. The compliance statement will state that they have received, read and understand this policy, that they will comply with its provisions, that it is their duty to report any acts by others when they have knowledge of potential violations of this policy, and that adherence to the policy is a condition of their appointment, employment or continued business with the ERS. The statement will also include a disclosure of any conflicts of interest or violations of the policy of which they are aware and a reminder that they are required to update their statements if a change in circumstances occurs which would require reporting under this policy.

E. DISCLOSURES 1. Public Disclosure of Board Economic Interests When a potential conflict is known prior to any Board action that may present a conflict of interest the Board member shall disclose an actual or potential conflict in detail sufficient to be understood by the public, recuse himself or herself from acting on the matter, and, except in the case of consent agenda items, leave the room until the matter is concluded. Disclosure during Board meetings may be made 1) orally or 2) by handing a written statement to the Chair of the Board, with a copy to all Board Members and the Administrator. Such a disclosure shall be reflected in the official record of the meeting and a copy kept in a disclosure file maintained by the Administrator. In the event of an oral disclosure the disclosing Board member shall follow-up the oral statement with a written statement to the Board Chair within 72 hours. The follow-up statement will be kept in the aforementioned disclosure file. 2. Disclosures COVERED PARTIES are required to disclose the following activities to the Chairman or alternative individual as stated by policy:

a) Any official action on matters that will result in a benefit to COVERED PARTIES, related parties, or their business associates, where such benefit is greater than that which accrues to a large class, such as across-the-board retirement benefit increases.

b) Any transaction wherein a COVERED PARTY, related party, or their business associate is selling or providing goods or services to the ERS.

c) Employment negotiations between a COVERED PARTY and firms that do business with the ERS. Employment negotiations means participating in an employment interview, discussing an offer of employment, and accepting an offer of employment, even if precise terms of employment are not yet defined.

d) Any gift received.


e) Any perceived or actual conflict of interest should be disclosed to the Chairman to ensure that the existence of the conflict is verified and addressed appropriately.

F. INCIDENT REPORTING Not reporting knowledge of a possible violation of the Ethics Policy may result in sanctions including any action deemed appropriate up to and including dismissal, separation or removal of ERS Board members, the administrator, or staff. Reporting violations may also result in cancellation of business relationships for contractors and vendors. 1. General Any person with knowledge of a violation of any part of the Ethics Policy or related laws shall report such information to the Chairman in a timely manner and in sufficient detail. No retaliatory action will be taken for any such report made in good faith. 2. Alternative Any member of the Board, the Administrator or ERS staff with knowledge of a violation of any part of the Ethics Policy involving the Chairman that has not been properly disclosed may report that conduct to the Vice-Chairman or the General Counsel. No retaliatory action will be taken for any such report made in good faith. 3. Board Member Disputes or Reports of Board Member Misconduct The ERS’s Board is responsible for governing the conduct of individual members. In adopting this policy, the Board seeks to promote the orderly, ethical and professional resolution of disputes, as well as alleged Board member misconduct. Disputes or reports of misconduct within the ERS Board or with the Administrator are to be addressed in an executive session of the full Board. Any person authorized to receive a complaint in accordance with the aforementioned reporting procedures may bring the matter before an executive session of the full Board. In this executive session, appropriate actions may be taken, including:

a) Resolving the matter within the current or future meetings of the Board. b) Referring the matter to an existing or ad-hoc committee for further action. c) Appointing appropriate staff or outside consultants for further action. d) Referring the matter to outside agencies, such as law enforcement or a prosecuting

attorney. The proceedings of this executive session and the results of any follow-up actions must be disclosed in an open session of the Board in a manner and at a time that the Board deems appropriate to fulfill its fiduciary duty to its members. G. ENFORCEMENT Violation of any of the provisions of the Ethics Policy may result in proceedings to remove a Board member, termination of employment, or other disciplinary action as the situation may warrant. The Board will enforce this policy through the Chairman, who is responsible for implementation of the Board’s decisions, with respect to COVERED PARTIES other than the Board. Inquiries and investigations under this policy will be handled in accordance with policies and procedure developed by the Board for such matters.


In matters concerning individual or multiple members of the Board (including the Chairman) the remaining members of the Board who are not in violation of the Ethics Policy will enforce this policy with respect to individual or multiple members found in violation.

Enforcement will be through any measures the enforcing Board member(s) deem appropriate including resolutions of reprimand, censure, or other appropriate parliamentary measures, including requests for resignation. This includes possibly removing the offender from the position of Chair or Vice-Chair of the ERS’ Board, or from any other assignment on behalf of the Board. Nothing in this policy prohibits the Board from also pursing any and all legal remedies available against any member of the Board who violates the provisions of this Policy.

Business with contractors and vendors who violate this policy may be terminated immediately. Even when such parties do not technically owe a fiduciary duty to the ERS, the ERS reserves the right to terminate business with any contractor or vendor that does not loyally serve the ERS’ interests or live up to the ERS’ Standards of Ethical Conduct.

EFFECTIVE DATE This policy shall become effective December 4, 2007 and shall remain in effect until amended.


EXHIBIT D

MANAGER REPORTING REQUIREMENTS for EQUITY MANAGERS

Monthly Requirements. The Manager is required to submit a report to the Employees’ Retirement System and Investment Consultant on or before the twenty-fifth (25) calendar day of each month on the investment status and performance of the Managed Assets in the Account during the preceding month. The monthly report shall include, without limitation, the following information: • Daily purchase and sales report • Transaction Summary • Statement of Managed Assets as of month end Performance Report • Statement of Asset Performance for the Account Reported Net of Fees Quarterly Requirements. The Manager is required to submit a report to the Employees’ Retirement System and Investment Consultant on or before the thirtieth (30) calendar day of each quarter on the investment status and performance of the Managed Assets in the Account for the preceding quarter. The quarterly report shall include, without limitation, the following information:

A. Review of Organizational Structure 1. Organizational changes (i.e. ownership) 2. Departures/additions to investment staff 3. Assets under management

a. Total institutional assets and accounts for the product managed for ERS b. Product asset and account growth

i. Gains -accounts/assets ii. Losses -accounts/assets iii. Current Year iv. Prior Year v. Second Prior Year

B. Summary of Investment Guidelines

1. Summarize guidelines and objectives 2. Discuss adherence to guidelines 3. Provide any comments and suggestions regarding policy constraints, guidelines, etc.

C. Performance Review

1. Present the returns (net of fees) for the last quarter, year-to-date, previous-year, three years, five-years, and since inception versus designated benchmarks, also present year-by year fiscal returns.

2. Discuss performance relative to benchmarks. [Global bond and international equity managers provide attribution analysis, which identifies returns due to country allocation, stock selection, and duration and currency decisions].

3. Provide portfolio characteristics relative to benchmark


D. Provide Portfolio Holdings

1. Present book value and current market value 2. List individual securities by:

• Standard and Poor's sectors for domestic equities • Sector for fixed domestic income • Country for global bonds

E. Other Business

1. Include any other comments or information 2. A summary of transactions which lists brokers used and commissions generated 3. Contact Administrator with any information of an important nature, which is causing or

could cause material impact on the fund or the investment management organization. Annual Requirements. A. Annual Report. The Manager is required to submit an annual report to the Employees’ Retirement System and Investment Consultant on the performance of the Account for the preceding year. This report is due sixty (60) days after year-end and includes records of brokerage and soft-dollar use, Proxy Voting Record, Form ADV, Insurance Confirmation and Affirmative Action Profile. The annual report should also cover a review of investment and evaluation of portfolio management processes which includes:

1. Brief review of investment process 2. Discussion of any changes to the investment process 3. Investment strategy used over the past year and underlying rationale 4. Evaluation [in hindsight] of strategy's appropriateness 5. Evaluation of strategy's success/disappointments 6. Current investment strategy and underlying rationale

B. Proxy Voting. Responsibility for the exercise of ownership rights through proxy solicitations shall rest solely with the Manager, who shall exercise this responsibility strictly for the economic benefit of the ERS and its participants. Managers shall annually report to the ERS Board, standing policies with respect to proxy voting, including any changes that have occurred in those policies, and not any instances where proxies were not voted in accordance with standing policies. Additionally, Managers shall provide a written annual report of the proxy votes for all shares of stock held in the ERS' investment program within two months after the end of the calendar year. These reports shall specifically note any instances where proxies were not voted in accordance with standing policy.

investment manager questionnaire

Documents