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  • 1. REQUEST FOR PROPOSALS ON BEHALF OF THE PENSION RESERVES INVESTMENT MANAGEMENT BOARD April 14, 2008 Pension Reserves Investment Management Board 84 State Street Boston, MA 02109 PENSION RESERVES INVESTMENT MANAGEMENT BOARD
  • 2. 84 State Street, Suite 250, Boston, MA 02109 Timothy P. Cahill, Chair Michael Travaglini, Executive Director REQUEST FOR PROPOSALS REAL ESTATE AND TIMBER INVESTMENT CONSULTING SERVICES April 2008 -2-
  • 3. Table of Contents APRIL 14, 2008............................................................................................................................................................1 1. INTRODUCTION...................................................................................................................................................4 2. BACKGROUND INFORMATION.......................................................................................................................5 A. LEGAL STRUCTURE OF PRIM............................................................................................................................5 B. PRIM’S CONSULTANTS....................................................................................................................................5 C. GENERAL DESCRIPTION OF PRIM’S ASSETS .........................................................................................................6 D. Tobacco Divestiture..........................................................................................................................................9 3. SCOPE OF SERVICES..........................................................................................................................................9 4. CONTRACT..........................................................................................................................................................11 5. PROPOSAL SPECIFICATIONS........................................................................................................................11 A. PROPOSAL DEADLINE. ....................................................................................................................................11 B. REQUIRED ATTACHMENTS AND ENCLOSURES ........................................................................................................12 C. PUBLIC RECORD......................................................................................................................................13 D. WITHDRAWAL/IRREVOCABILITY OF RESPONSES ...................................................................................................13 E. WAIVER/CURE OF MINOR INFORMALITIES, ERRORS AND OMISSIONS .........................................................................13 F. COMMUNICATIONS WITH PRIM........................................................................................................................13 G. QUESTIONS RELATING TO THIS RFP...................................................................................................................14 H. INCURRING COSTS.........................................................................................................................................14 I. REJECTION OF PROPOSALS ................................................................................................................................14 A. NON-QUALIFYING PROPOSALS . ........................................................................................................................14 B. SELECTION OF FINALISTS .................................................................................................................................14 C. SELECTION OF CONSULTANTS...........................................................................................................................14 7. TENTATIVE TIME TABLE...............................................................................................................................15 8. MINIMUM CRITERIA........................................................................................................................................15 9. SELECTION CRITERIA.....................................................................................................................................16 C. FEE PROPOSALS..............................................................................................................................................20 10. QUESTIONS AND REQUESTS FOR INFORMATION..............................................................................21 (a) a brief history of the firm, including its year of organization;......................................................................22 (b) the location of your headquarters and branch offices;.................................................................................22 (c) the number of years the firm has provided real estate investment consulting services to tax exempt clients and to public pension funds, and a description of the categories of services available to clients during this period....................................................................................................................................................................22 (d) the ownership structure of the firm, including any parent, affiliated companies or joint ventures;...........22 (e) any recent and significant developments.......................................................................................................22 EXECUTIVE SUMMARY. (TO BE COMPLETED BY ALL FIRMS SUBMITTING PROPOSALS ).........................................................30 11. FEE PROPOSAL.................................................................................................................................................30 XII. REPRESENTATIONS AND WARRANTIES................................................................................................32 EXHIBITS..................................................................................................................................................................33 -3-
  • 4. Pension Reserves Investment Management Board REQUEST FOR PROPOSALS REAL ESTATE AND TIMBER INVESTMENT CONSULTING SERVICES 1. INTRODUCTION The Massachusetts Pension Reserves Investment Management (PRIM) Board is soliciting proposals from firms interested in providing Real Estate and Timber Consulting Services for PRIM and the Pension Reserves Investment Management Trust (PRIT), a $52 billion public pension plan managed in accordance with the provisions of the Massachusetts General Laws, Chapter 32. More detailed descriptions of these services are set forth in Section 3 and contract Schedule A, "SCOPE OF SERVICES". Please note that PRIM has retained the services of a general investment and alternative investment consultant, and this RFP is not requesting responses for general or alternative consulting services. PRIM will accept and evaluate separate proposals for General Real Estate and Timber Investment Consulting Services and Project Consulting Services. Decisions will be based on the criteria set forth under the heading “SELECTION CRITERIA" in Section 9 hereof. -4-
  • 5. 2. BACKGROUND INFORMATION. A. Legal Structure of PRIM. The Pension Reserves Investment Management (PRIM) Board is charged with the responsibility of investing and reinvesting the assets of the Pension Reserves Investment Trust (PRIT) Fund. The PRIT Fund is a pooled investment fund consisting of the funds of the State Employees' and Teachers' Retirement Systems as well as assets of other public employee retirement systems in the Commonwealth of Massachusetts (referred to as participating and purchasing systems). The PRIT Fund's primary investment objective is to accumulate assets through investment earnings and other revenue sources to meet future pension liabilities. As of January 31, 2008, the PRIT Fund had assets of approximately $52 billion. PRIT funds are generally invested with a longer-term perspective and at higher target returns than most public retirement systems. The Fund was originally established to address the unfunded liability of the Commonwealth’s pension system. The nine-member PRIM Board is chaired by the State Treasurer and Receiver-General of the Commonwealth. The Governor or his designee is also a member of the Board. Other members include appointees of both the Governor and Treasurer, and four representatives of state employees and teachers. All members serve without compensation. The Board oversees the Fund under the terms of its Operating Trust dated July 15, 1988 and most recently amended on September 22, 1998. The members of the Board, in conjunction with the Executive Director, who serves at the pleasure of the Board, determine policies and make decisions concerning the administrative and investment operations of the Fund. The PRIM Board has established advisory committees -- Investment, Administrative/Audit, and Real Estate/Timber -- to provide a broad range of advice to the Board. These committees are generally comprised of two or three Board members and private citizens from the investment or business community. PRIM's consultants deal primarily with the staff, Committees, and Board. All policies and investments are ultimately approved by the Board. Refer to PRIM’s website at www.mapension.com for more information. B. PRIM’s Consultants. Outside consultants are engaged for their particular expertise and retained to assist the Board and its staff in the areas of General Portfolio Strategy and Investments, Real Estate and Private Markets. Cliffwater LLC is PRIM's current general and absolute return consultant, Hamilton Lane is the current alternative investment consultant, and The Townsend Group provides real estate and timber consulting services. KPMG is the Fund’s auditor. In addition, Deloitte & Touche is the Real Estate/Timber auditor. -5-
  • 6. Mellon Trust is the Fund's custodian and is responsible for providing record-keeping and analytic performance valuations for the Fund. C. General Description of PRIM’s Assets. Real Estate PRIT’s target real estate allocation on January 31, 2008 was 10% of plan assets. At the February 5th, 2008 Board Meeting, the Board approved an increase in the REIT target by 1%, effectively increasing the total real estate allocation to 11% of plan assets, or approximately $5.7 billion. As of January 31, 2008, PRIT was 9.5% invested in real estate, as compared to its updated 11% general real estate allocation, invested as follows: Real Estate Portfolio As of January 31, 2008 Market Value % 80.6 Direct U.S. Properties* $3,927,695,000 % Global REITs $924,983,000 18.9 % Closed End Fund Investments $18,982,000 0.5% Total Real Estate Portfolio $4,871,660,000 100% *Net of approximately $200 million in property level debt The real estate separate account investment program began in 1994 and is currently conducted through five discretionary separate accounts. All five managers are permitted to make Core investments with one manager of the five overseeing a Value Add mandate as well. PRIT’s separate accounts are currently limited to investments in the office, residential, retail, and industrial/flex property types. The maximum amount that may be invested in one property is $200 million. Direct property level mortgages of approximately $207 million are currently in place. PRIM began investing in REITs in 1998 and the REIT investments are currently made through five discretionary separate accounts. In January of 2008, PRIM initiated a global REIT program with an initial investment of $200 million. Exhibit A includes a list of all of PRIM’s real estate advisors. Exhibit B contains detailed information on PRIT’s current real estate portfolio. This information is dated as of January 31, 2008. As can be seen from this information, PRIM has generally adopted a more conservative real estate investment policy than its peer group. Debt Program Historically, PRIT has incurred limited amounts of mortgage indebtedness in its separate account program. Beginning in 2002, the PRIM Board revised its debt policy -6-
  • 7. to permit debt in the financing of its real estate activities under the following guidelines: (i) all leverage must be positive when incurred. Positive leverage is calculated by comparing the projected quarterly weighted average five year cash flow at the time of purchase of properties acquired (after manager asset management fees of .4%) to the five year average debt and/or swap rate during that quarter, (ii) floating rate debt without swaps and/or caps and debt maturing within one year should not exceed the greater of $200 million or 40% of the outstanding debt, or swaps as applicable, (iii) the debt term, or swap term as applicable, may not exceed fifteen years, and (iv) total outstanding debt may not exceed 50% of the overall unleveraged market value of the real estate portfolio. The 50% debt limitation limit can be temporarily exceeded by an additional 15% for up to one year in order to facilitate debt repayments required, portfolio rebalancing, administrative, or accounting needs. The use of floating rate debt should be minimized as practical when PRIT’s floating interest rate paid exceeds 6%. If swaps are entered into, such swap counterparties must be A- rated or better. An independent consultant must be retained by PRIM to oversee its real estate debt activities. Beginning in July 2002, PRIT began to implement its leveraged strategy at the portfolio level by borrowing short-term from Goldman Sachs and subsequently entering into longer term fixed rate interest swap arrangements. At the end of 2005, PRIM began to unwind the current swaps and initiated the repayment of debt which was completed in 2006. The Project Real Estate Consultant will be responsible for the management of the portfolio level debt program under the oversight of PRIM’s staff. The prior Project Real Estate Consultant retained a third party to assist it in the negotiation, placement, and monitoring of debt swaps. The portfolio debt program requires continual monitoring by PRIM staff, and consultants and is formally reviewed annually by the PRIM Board and the Real Estate Committee. -7-
  • 8. Real Estate Program Returns as of January 31, 2008 1 Year 3 Year 5 Year 10 Year Unleveraged Real Estate Returns 15.4% 17.5% 15.7% 13.0% Positive Impact of Leverage 0.7% 3.8% 4.4% 2.1% Leveraged Real Estate Returns 16.1% 21.3% 20.1% 15.1% REITs* -24.07% 12.11% 20.84% - Total Real Estate Returns 6.32% 19.78% 20.14% 15.02% Benchmarks: NCREIF Index (One Quarter Lag) 17.31% 18.04% 14.80% 13.07% NAREIT Equity REIT Index -23.04% 11.33% 18.63% * First REIT investments were made in June 1998. ** Implementation of the Portfolio Debt program began July 1, 2002. Timber In January 2001 the Pension Reserves Investment Management Board established a new allocation to timberland investments of 2% of total plan assets. As the result of an RFP search, PRIM hired The Campbell Group and Forest Investment Associates as discretionary separate account timber managers. These managers have constructed an unleveraged timber portfolio located in the United States that is diversified by location, tree species, end use of timber, and stand age. Subsequently PRIM increased its timber allocation to 6% of total plan assets. In 2006, this target was lowered to 4% and in 2008, lowered to 2% again. PRIM’s current timber investment is $1.06 billion or 2.0% of the overall portfolio. A summary of the current timber portfolio is attached in Exhibit B. -8-
  • 9. Timber Program Returns as of January 31, 2008 One Year Three Year Total Timber Returns 38.44% 22.54% Benchmark NCREIF Timber Index (One Quarter Lag) 14.17% 15.81% D. Tobacco Divestiture On October 7, 1997, the Massachusetts Legislature enacted legislation, H 3905, that forbids the PRIT Fund from purchasing securities “of any company that derives more than 15 per cent of its revenues from the sale of tobacco products”. The legislation also required the PRIT Fund to divest itself of all such securities within three years. This divestment was largely completed before the end of 1997. 3. SCOPE OF SERVICES. The purpose of this RFP is to select one or more real estate and timber consultants. A firm may propose to be either PRIM’s General Real Estate and Timber Consultant, PRIM’s Project Real Estate Consultant, or to provide both services. The PRIM Board may select a real estate consultant or consultants based on the Board’s evaluation of the Proposals in accordance with the Selection Criteria contained in Section 9 of this RFP. Please see contract Schedule A for a more detailed Scope of Services description. A. General Real Estate and Timber Consultant Under the direction of the PRIM Board, the Real Estate/Timber Committee and staff, the General Real Estate and Timber Consultant will furnish PRIM with the services of qualified, professional staff to provide general real estate and timber investment consulting services to PRIM. More specifically, the General Real Estate and Timber Consultant’s services will include, but not be limited to the following: Strategic Services: • Advice and technical support concerning the establishment, review and refinement of asset-type allocation goals for all or designated portions of the PRIM Real Estate -9-
  • 10. and portfolios. (defined herein to include both PRIM’s real estate and timber activities) • Evaluation of real estate investment strategies including but not limited to core, value enhanced, opportunity, REIT’s, affordable housing, timber, economically targeted investments and other investment alternatives; and development of an appropriate strategy for each. • Implementation of Real Estate investment strategies including developing Requests for Proposals, evaluating Proposals received, participating in manager search presentations, and recommending managers. • Annually, a written comprehensive analysis of the PRIM Real Estate investment portfolio strategy. This shall include a review of all aspects of PRIM’s investment goals and objectives for Real Estate, the alternatives available for real estate and timber investment, and the results of the current strategy. This comprehensive analysis shall be presented as consultant’s recommendations concerning the appropriate strategy to be adopted and implemented by the PRIM Board. Portfolio Services: • Advice and technical support in evaluating acquisition efforts and accomplishments of discretionary separate account managers relative to PRIM’s strategies and goals for the multi-manager program; reviewing managers’ tactical plans (“manager investment plans”) on at least an annual basis relative to PRIM’s portfolio strategies and goals, and advising PRIM’s staff about the appropriateness investment guidelines including property type and regional asset allocation ranges; and communicating with staff and managers concerning the allocation goals and acquisition program results on an ongoing basis. • Performing ongoing, systematic review of performance of the portfolio, real estate managers, and underlying investments and properties; identifying current or anticipated under-performance within the portfolio and recommending corrective action; and assisting in implementation of recommendations. • The consultant will review investment manager compliance with contractual investment objects and guidelines and prepare appropriate reports. Reporting Services. • The consultant will provide written reports on the status and performance of PRIM’s Real Estate and Timber portfolios on an annual basis as requested by PRIM. Non-Core Disposition Efforts: • Advice and direct assistance on commingled fund terminations, redemption requests, proposed amendments or other changes in commingled fund agreements or fund objectives, and on any situations in which the judgment or actions of investment managers may compromise PRIM’s position as an investor or fiduciary. - 10 -
  • 11. Insurance Review: • Conduct a review of the insurance policies carried by PRIM’s managers and advising PRIM as to their adequacy as necessary. Other Services: • Provide other services including such matters as identification and recommendations of opportunities for new investment; attendance at meetings of the PRIM Board and Real Estate Committee (six meeting each per year) availability of the consultants for telephone communication regarding inquiries by the PRIM Board or designated staff; annual review of PRIM’s Real Estate investment policies; and other miscellaneous real estate consulting services as generally provided by a general real estate consultant. B. Project Real Estate Consultant Under the direction of the PRIM Board, the Real Estate Committee and staff, the Project Real Estate Consultant will furnish PRIM with the services of qualified, professional staff to be generally available to PRIM and its representatives to provide specific project real estate investment consulting services to PRIM. More specifically, it is anticipated that the Project Real Estate Consultant’s services will be in the areas of transactional related services, problem investment workouts, and other specialized real estate consulting services. These services will be provided on an as needed basis as requested by the Executive Director of PRIM. In addition, a Project Consultant may be retained to be contractually responsible to oversee PRIM’s real estate portfolio debt program. 4. CONTRACT. PRIM will enter into a three year consulting agreement(s) in the form attached to this RFP as Exhibit C (the "Contract"), which provides that, among other things, a consultant to PRIM will act as a fiduciary. Each firm responding to this RFP shall be required to state under the Warranties, set forth in Section 12 hereof that it will agree to and execute a contract in the form set forth in Exhibit C. 5. PROPOSAL SPECIFICATIONS. A. Proposal Deadline. The completed proposal, which must include all attachments, must be delivered either in hard copy or electronically via e-mail, in one Word or PDF file, to tschlitzer@mapension.com by 3:00 p.m. EST on Friday, May 23, 2008 (the "Proposal Deadline"). Any Proposal not meeting the Proposal Deadline will not be accepted or considered. In addition, an original and two copies of the Proposal (one copy must be unbound and ready to photocopy) are to be sent to the attention of: Mr. Timothy Schlitzer Senior Investment Officer Pension Reserves Investment Management Board - 11 -
  • 12. 84 State Street, Suite 250 Boston, MA 02109 Copies of this RFP can be obtained electronically through the PRIM Board website at www.mapension.com . The proposal response should contain the questions and requests for information in Section 10 of this RFP and should be duplicated in their entirety in the Proposal with each question and/or request repeated before the answer or response. B. Required Attachments and Enclosures. In addition to the responses to the RFP questions, the following information will be attached to the firm’s response. 1. Cover Letter. The Proposal should include an original and two (2) copies (one unbound) of a cover letter and one copy sent via e-mail, which will be considered an integral part of the Proposal, and which shall be signed by at least one individual who is authorized to bind the firm contractually. In addition a Word or PDF file of the Proposal should be delivered electronically to PRIM. This cover letter must include: (a) the firm name, address and telephone/fax numbers; (b) the primary client contact; (c) the title or position which the signer of the cover letter holds in the firm; and (d) a statement to the effect that the Proposal is a firm and irrevocable offer of the firm. 2. Representations and Warranties. The Warranties contained in Section 12 hereof, signed by an authorized officer of the firm, must be included as an attachment to the cover letter referenced in (1) above. 3. Disclosure Statement. Attached to this RFP as Exhibit D are two Disclosure Statements, one for PRIM and one for PERAC. Each firm submitting a Proposal must complete the two disclosure forms and submit as an attachment to the cover letter referenced in (1) above. YOU MUST COMPLETE BOTH PRIM AND PERAC DISCLOSURE FORMS OR YOUR SUBMISSION MAY NOT BE PROCESSED. 4. Fee Proposal. The original and four (4) copies of the fee proposals (one copy must be unbound and ready to photocopy) of the proposing firm, on the forms contained in Section 11 hereof (the "Fee Proposals") must be placed in a separate, sealed envelope, clearly identified on the outside as "Fee Proposal for Real Estate Consultant[s], submitted by [COMPANY NAME]." 5. Any other material must be submitted separate from the response. - 12 -
  • 13. C. Public Record. In accordance with Chapter 66, Section 10 and Chapter 4 of the Massachusetts General Laws, upon the expiration of the Proposal Deadline, all Proposals shall be deemed a public record and shall be subject to requests for public disclosure. D. Withdrawal/Irrevocability of Responses. A proposer may withdraw and resubmit a Proposal prior to the Proposal Deadline. No withdrawals or re-submissions will be allowed after the Proposal Deadline. E. Waiver/Cure of Minor Informalities, Errors and Omissions. PRIM reserves the right to waive or permit cure of minor informalities, errors or omissions prior to the selection of finalists, and to conduct discussions with any qualified proposers and to take any other measures with respect to this RFP in any manner necessary to serve the best interest of PRIM and its beneficiaries. F. Communications with PRIM. PRIM’s Procurement Officer for this RFP is: Mr. Timothy Schlitzer Senior Investment Officer Pension Reserves Investment Management Board 84 State Street, Suite 250 Boston, MA 02109 Telephone: (617) 946-8452 Facsimile: (617) 946-8472 tschlitzer@mapension.com As of April 14, 2008, firms which intend to submit a Proposal should not contact any PRIM staff, members of the Investment Committee, members of the PRIM Board, or employees of the Massachusetts Treasury, other than the Procurement Officer. An exception to this rule applies to firms which currently do business with PRIM, such as PRIM’s current general consultant or alternative investments consultant, but any contact made by such firms with persons other than the Procurement Officer should be limited to that business, and should not relate to this RFP. In addition, such firms should not discuss this RFP with any employee of PRIM’s custodian, outside managers, real estate consultant, or PRIM’s legal counsel or other advisors. FAILURE TO OBSERVE THIS RULE IS GROUND FOR DISQUALIFICATION. - 13 -
  • 14. G. Questions Relating to this RFP. All questions concerning this RFP must be received by the Procurement Officer by 4:00 p.m. EST on Friday, May 2, 2008 (the "Question Deadline") via e-mail to tschlitzer@mapension.com. Questions received in accordance with this section will be answered and circulated by e-mail to all firms who have proposed a question or who request in writing a copy of the questions and the responses. Questions submitted after the Question Deadline will not be considered. H. Incurring Costs. PRIM will not be liable for any costs incurred prior to entering into the Contract with the successful proposer or proposers. I. Rejection of Proposals. PRIM reserves the right to reject any non-qualifying Proposal, as well as the right to reject all Proposals. 6. SELECTION PROCESS. The Selection Process under this RFP will be as follows: A. Non-Qualifying Proposals. PRIM will evaluate each Proposal to determine if it was submitted in accordance with the requirements set forth in this RFP, including whether the proposing firm meets the minimum criteria. All non-qualifying Proposals not subject to the waiver of minor information will be rejected at this time and the proposing firm so notified. B. Selection of Finalists. The Proposals will be evaluated by a Search Committee to be formed by the PRIM Board. The Search Committee may include a member of the Real Estate Committee or its representative, as well as members of PRIM staff. Proposers may be invited to a due diligence interview with the Search Committee. Based on the Selection Criteria set forth in Section 9 of this RFP (including the Fee Proposals), the Search Committee will select finalists for further consideration. C. Selection of Consultants. The Search Committee will rank the finalists and make its recommendations for selecting a consultant or consultants to the PRIM Investment Committee and the PRIM Board. - 14 -
  • 15. The finalists selected by the Search Committee may make an oral presentation to the Real Estate Committee, the PRIM Board or both. The Real Estate Committee may accept the recommendations of the Search Committee or, based on the Selection Criteria set forth in Section 9 of this RFP, may rank the firms differently from the Search Committee and recommend another firm or firms to provide consulting services to PRIM. Final selection shall be made by the PRIM Board. 7. TENTATIVE TIME TABLE. The following is the tentative time schedule for PRIM’s search for firms to provide consulting services. All dates are subject to modification by PRIM with notice. Issuance of RFP: April 14, 2008 12:00 p.m. EST Question Deadline: May 2, 2008 (Firm) 4:00 p.m. EST Response Deadline: May 23, 2008 (Firm) 3:00 p.m., EST Finalist Interviews: (Tentative) Week of June 23, 2008 Real Estate Committee July 23, 2008 Interviews: (Tentative) PRIM Board Meeting: August 6th, 2008 (Tentative) Projected Commencement Date: August 6th, 2008 (Tentative) 8. MINIMUM CRITERIA. A Proposer must meet the following minimum qualifications to be given further consideration in PRIM’s search for real estate consultant(s). Failure of a firm to meet the minimum qualifications applicable to the real estate consulting services for which it is submitting a Proposal will result in the Proposal’s immediate rejection. A. Minimum Criteria: General Real Estate Consultant. 1. The firm must provide real estate consulting services (defined herein to include real estate properties, REIT, and timber consulting services) to major institutional clients with aggregate Real Estate investment portfolios of at least $500 million (committed and/or invested). These services must include: - 15 -
  • 16. (a) Counsel on real estate investment by a pension fund; and (b) Advice on development and implementation of investment strategies for Real Estate investment portfolios, including individually managed account programs. 2. The firm must assign at least two senior consultants to PRIM. While one may be designated Primary Consultant for the account, the Secondary Consultant must be fully capable of handling all aspects of the account in the absence of the Primary Consultant. 3. As of January 31, 2008, the Primary Consultant must have had at least three (3) years’ experience in direct consulting on Real Estate investments for major institutional investors with aggregate real estate investment assets of at least $500 million. B. Minimum Criteria: Project Real Estate Consultant. 1. The firm must provide Real Estate consulting services to institutional clients. These services must include: (a) Specialized transactional advice. (b) Troubled asset workouts. (c) Real estate financing advice. 2. The firm must assign a Primary Consultant to PRIM. The Primary Consultant for the account must be fully capable of handling all aspects of the account. 3. As of January 31, 2008, the Primary Consultant must have had at least three (3) years’ experience in specialized consulting on real estate investments for institutional investors with expertise in specialized transactions, real estate financings and workouts. 9. SELECTION CRITERIA. The PRIM Board will apply the following criteria in the selection of a real estate consultant(s). The Search Committee will assign a rating of either "Highly Advantageous", "Advantageous", "Acceptable", "Not Advantageous" or "Unacceptable" to all qualifying Proposals in each of the categories listed below. Any Proposal receiving a rating of "Unacceptable" in any applicable category will not be considered further. Using the assigned ratings as a guide, the Search Committee will both select and rank finalists and recommend the retention of a real estate consultant(s) to the PRIM Board. For a more detailed description of the Selection Process, see Section 6 hereof. - 16 -
  • 17. A. Selection Criteria Applicable to General Real Estate Consultants General Qualifications and Management. 1. Stability and General Experience of the Firm. a. Stability of the firm as measured by the length of tenure of principals and other senior professionals dedicated to the consulting function; the organizational structure of the firm; and the existence of, or potential for, significant developments in the firm. b. Experience of the firm in providing real estate consulting services to institutional clients, as measured by the firm's history of providing such services; and the similarity of a firm's clients to the PRIM Board. c. Adverse organizational issues, such as the existence of litigation or other investigations; and the existence of financial problems. d. Potential for conflicts of interest, as measured by the provision of services or information to investment managers for any form of compensation; sponsoring any investment management funds as manager of record; or managing money or funds for clients. 2. Quality, Stability, Depth and Experience of Personnel. a. Experience of the Primary Consultants and other consultants of the firm in providing real estate consulting services to institutional investors similar to PRIM; as measured by the length of time the Primary Consultants has served as a consultant to such investors; the prior experience of such individuals in establishing, overseeing and reporting on institutional real estate programs for institutional investors comparable to PRIM; the capacity of the Primary Consultant for providing services to PRIM. b. Experience of other professionals in providing Real Estate consulting services to institutional investors similar to PRIM, as measured by the depth and experience of such staff; and the length of time such staff have provided such services to institutional investors. c. Depth of personnel, as measured by the firm's consultant to account personnel ratios; and back-up procedures for providing services to the PRIM Board in the absence of the Primary and Secondary Consultants. d. Stability of the firm's professional base, as measured by personnel turnover since January 1, 2005. - 17 -
  • 18. 3. Consulting Capabilities of the Firm. a. The firm’s experience in providing investment policy, guideline and general real estate (both institutional real estate, REIT and timber) consulting services to institutional investors similar to PRIM, as measured by the firm’s process and procedures for developing, reviewing and overseeing a real estate program. b. The firm’s experience and capabilities in manager searches and evaluations, as measured by the size and depth of the firm’s manager search staff; the size, coverage and frequency of update of the manager databases; the number and types of searches completed by the firm in the last twelve months; and the staff, process and procedures used by the firm to evaluate, select and monitor investment managers on behalf of institutional investors. c. The firm’s performance measurement and analysis capabilities, including the quality, accuracy and timing of the reporting of performance data; the ability to provide customized reporting to PRIM; and the size, depth and breadth of the universe of investments monitored by the firm. d. The research capability of the firm, as measured by the presence of a dedicated research function and the experience and tenure of the professionals dedicated to such function; the quality of published research relevant to institutional real estate investment programs and the process by which research is integrated into the consulting function; and the ability to provide educational programs for clients. e. The firm’s experience and qualifications in the selection of appraisers and overseeing the appraisal process. 4. Client Relations and References. a. Stability of the firm's client base, as measured by the number of accounts gained or lost since January 1, 2005. b. The similarity of the firm’s client base to PRIM, as measured by the size and type of the firm’s 10 largest clients. c. Quality of references from clients, as measured by responses relating to quality and responsiveness of investment management services; knowledge and accessibility of the consultant(s); and the quality of client services. 5. Fees - 18 -
  • 19. The total cost of performing real estate consulting services as measured by the Fee Proposal. B. Selection Criteria Applicable to Project Real Estate Consultants General Qualifications and Management. 1. Stability and General Experience of the Firm. a. Stability of the firm as measured by the length of tenure of principals and other senior professionals dedicated to the consulting function; the organizational structure of the firm; and the existence of, or potential for, significant developments in the firm. b. Experience of the firm in providing real estate consulting, debt advisory services, workout and transactional services to institutional clients, as measured by the firm's history of providing such services. c. Adverse organizational issues, such as the existence of litigation or other investigations; and the existence of financial problems. d. Potential for conflicts of interest, as measured by the provision of services or information to investment managers for any form of compensation from investment managers. 2. Quality, Stability, Depth and Experience of Personnel. a. Experience of the Primary and Secondary Consultants in providing real estate consulting services to institutional investors; as measured by the length of time the Primary and Secondary Consultants have served as a consultant to such investors; the capacity of the Primary and Secondary Consultants for providing services to PRIM. b. Depth of personnel. c. Stability of the firm’s professional base, as measured by personnel turnover since February 1, 2005. 3. Consulting Capabilities of the Firm. a. The firm’s experience in providing real estate investment consulting services to institutional investors similar to PRIM, as measured by the firm’s experience in providing oversight of a real estate portfolio debt program, workout, transactional, and other specialized real estate consulting services. 4. Client Relations and References. - 19 -
  • 20. a. Stability of the firm's client base, as measured by the number of accounts gained or lost since February 1, 2005. b. Quality of references from clients, as measured by responses relating to quality and responsiveness of investment management services; knowledge and accessibility of the consultant(s); and the quality of client services. 5. Fees The total cost of performing real estate consulting services as measured by the Fee Proposal. C. Fee Proposals The Fee Proposals will be opened and analyzed by the Search Committee, and will be taken into account as a factor in its selection of finalists and in its recommendations to the Real Estate and Timber Committee and the PRIM Board. The Search Committee will consider the relative benefits of having (1) "combined" or "separate" fees for the services to be rendered; and (2) a flat fee or an hourly fee with a cap. The selection of a firm or firms to act as consultant(s) to PRIM will not necessarily be based on which firm(s) submits the lowest Fee Proposal, as the Fee Proposal is only one of the Selection Criteria. - 20 -
  • 21. 10. QUESTIONS AND REQUESTS FOR INFORMATION. FIRM NAME: _____________________________________ ADDRESS: _____________________________________ _____________________________________ TELEPHONE #: _____________________________________ FASCIMILE #: _____________________________________ E-MAIL ADDRESS: _____________________________________ CLIENT CONTACT: _____________________________________ SIGNED: _____________________________________ NAME (print): _____________________________________ TITLE: _____________________________________ DATE: _____________________________________ - 21 -
  • 22. The following questions and requests for information are separated according to the categories set forth under "SELECTION CRITERIA" in Section 9 of this RFP. 10.1 GENERAL QULAIFICATIONS, ORGANIZATIONS AND MANAGEMENT (to be filled out by all Proposers) A. Stability and Experience of the Firm. 1. Please provide the following information with respect to the firm: (a) a brief history of the firm, including its year of organization; (b) the location of your headquarters and branch offices; (c) the number of years the firm has provided real estate investment consulting services to tax exempt clients and to public pension funds, and a description of the categories of services available to clients during this period. (d) the ownership structure of the firm, including any parent, affiliated companies or joint ventures; (e) any recent and significant developments 2. Is your firm registered as an investment advisor under the Investment Advisers Act of 1940? Please provide a copy of your most recent Form ADV. If not registered, what is your fiduciary classification? Please state whether your firm is or is not a fiduciary (as the term is defined by the Employee Retirement Income Security Act of 1974 “ERISA”). 3. Please state whether or not your employees comply with the Code of Ethics and Standards of Professional conduct of the Association of Investment management and Research “AIMR”. 4. What are your primary business objectives and plans for growth over the next five years? Do you have a limitation on the number of clients you intend to accept? 5. What services, if any, does your firm or any affiliate(s) offer in addition to pension fund consulting services? What is the percentage of total revenue generated for your firm (or your firm’s parent) by consulting services? 6. Has your firm or any officer or principal of your firm been involved in any litigation relating to consulting activities or investigations by regulatory organizations (other than routine examinations)? If so, please describe and provide the current status of these matters. - 22 -
  • 23. 7. What bonding and liability insurance does your firm maintain? Please describe the levels of coverage for errors and omissions insurance and any fiduciary or professional liability insurance your firm carries. Please list the insurance carriers. B. Other Affiliations/Services. 1. Detail any financial relationships which exist with affiliated or other organizations, e.g., brokerage firms, insurance companies, commercial banks, investment management firms, real estate investment management or operating companies, etc. Does your firm provide any services for which it is compensated by these organizations? What percentage of your clients utilize investment managers or other service providers from which you receive fees? Describe in detail, including the managers, products and services provided. 2. Does your firm manage real estate investment funds as manager of record (i.e. solicits for others or accepts investment funds in pooled, separate account or REIT portfolios)? Please describe any circumstances under which your firm receives fees or other compensation from investment managers. 3. Does your firm manage money for clients? Does your parent or any subsidiary or affiliate of the parent firm manage money for clients? Please describe any circumstances under which your firm receives fees or other compensation from investment managers. 4. Is your firm, its parent or any subsidiary or affiliate a broker/dealer? Does your firm trade for client accounts through this broker/dealer? Does your firm ever get paid in "soft dollars"? If so, please describe the details of each such relationship. 5. Do you sell information or any other services to investment managers? 6. Describe your policies and procedures to prevent possible conflicts of interest: a) With other client interests. b) Which may result from other investment products or services provided by your firm or affiliated organizations. C. Proposer's Independence of Judgment and Freedom from Conflicts of Interest. 1. Does the firm or any affiliate serve as an investment manager for clients? 2. Does the firm or any affiliate act as a securities broker-dealer? 3. Does the firm accept soft dollars as a method of payment for services? - 23 -
  • 24. 4. Does the firm have any potential conflicts of interest with PRIM? D. Real Estate Consulting Services Experience & Knowledge. 1. Please provide a detailed organizational chart for your consulting unit. 2. Identify all principals of the firm that are active in your real estate consulting activities. Include the length of their experience in advising pension funds, any specialty or expertise, and highest educational degree/professional designation attained. 3. List the names and locations of personnel who would be responsible for the PRIM account (include the Primary Consultant and the Secondary Consultant). Include their biographies, including their titles, functions, length of experience in pension consulting services, other clients for whom such individuals provide primary real estate consulting services, any specialty expertise they possess, and the educational degrees and professional designations they have attained. 4. Identify and explain the role of other consulting or professional personnel in your consulting functions. Include biographies on those that would provide consulting and research services to PRIM. 5. Please explain how the team dedicated to the PRIM account would function. 6. Describe your firm’s back-up procedures in the event the key personnel assigned to this account should leave the firm. 7. Please provide a brief description of your firm’s compensation arrangements for senior management including incentives, profit sharing and other bonuses. Does staff participate in equity ownership? What incentives are in place to encourage key professionals to remain with the firm? 8. What policies are in effect to control workload? Is there a limit on the number of accounts that a consultant may handle? What is the average number of clients per consultant within the real estate consulting unit of your firm? 9. Provide detail on the professional staff that has left since January 1, 2005. Include: • Person • Position/Function • Date left • Reason for leaving • Replaced by - 24 -
  • 25. - 25 -
  • 26. 10.2 GENERAL CONSULTING CAPABILITIES (to be filled out only by General Real Estate Consulting Proposers) A. General 1. Explain your firm’s philosophy of the role real estate within a large institutional portfolio. What does your firm typically recommend for an allocation percentage? Does this involve all real estate, including opportunistic, mortgages, timber, REITs, CMBS, and international? 2. Describe your view of the current state of the real estate market and the impact on investment strategies. 3. Describe your view of the REIT market, and its impact on real estate investing today and in the future. 4. Describe your view of the timber markets, and the role that you believe timber investing should play in a pension fund of PRIM’s size. 5. What is your assessment of PRIM’s current real estate and timber portfolios and managers? 6. What improvements would you recommend that PRIM consider. B. Investment Policy Guidelines and Risk Management 1. Describe the process you would use to work with the PRIM investment staff to review or develop an overall real estate investment policy statement, including goals and objectives, for presentation to and approval by the Board. 2. Describe your methodology for analyzing the current manager structure, including allocations, the mix and type of managers and the optimal number of managers for billion dollar plus pension funds. 3. Describe your approach to creating appropriate risk management structures for a billion dollar plus real estate portfolio. C. Manager Search and Evaluation Describe the manager search database you use including: 1. Whether it is an internal or external database. 2. The size and composition of the database. 3. How often the database is updated. 4. A description of how you research managers who are not included in your database, when asked to do so by a client. - 26 -
  • 27. Regarding your manager search process and ongoing monitoring: 5. What types of quantitative and qualitative factors do you look for in a manager search? What criteria do you use in evaluating managers? 6. How do you verify the validity of the managers’ performance, style, etc.? 7. How often do you meet with managers? How often do you visit their offices? 8. Provide an example of a report that you have recently presented to a client that provides a recommendation on a potential new advisor and/or investment opportunity. 9. Describe the experience and capabilities of your firm in analyzing and monitoring real estate investment managers specializing in: (i) core properties; (ii) value properties; (iii) publicly traded real estate securities; (iv) commercial mortgage backed securities; (v) opportunistic real estate investing and (vi) timber investing. 10. Please provide a list of all real estate and timber investment manager searches you have conducted since January 1, 2005. Indicate the type of managers sought, and, to the extent you are able to disclose, the managers chosen. 11. Describe the internal decision-making process for recommending or selecting investment managers. Who (or what group) has responsibility for making the investment decision? If there is an investment committee, identify the members. 12. What fees or other consideration do you receive from managers who wish to be maintained on your database? What fees do you receive from managers for providing quantitative output regarding their performance? D. Performance Measurement and Analysis 1. Describe how your performance measurement reporting process evolves from data supplied by the manager, to the rate of return calculations, to the printing of the final report. 2. Indicate the types of analysis and benchmarking normally provided with your performance measurement packages. 3. Describe your ability to provide customized reports. 4. What quality controls are in effect to assure the accuracy of client reports? 5. Does your process differ from AIMR standards? If so, how? - 27 -
  • 28. E. Research Capabilities 1. Describe your firm’s research capabilities. 2. Describe the type, subject matter and frequency of research provided to clients. 3. Describe your process for monitoring the real estate industry and market affecting institutional investors. F. Insurance Review Services 1. Describe how your firm would conduct an annual review of PRIM’s real estate portfolio coverage and your firm’s expertise in conducting such a review. 10.3 PROJECT CONSULTING CAPABILITIES (to be filled out by all Project Consulting Proposers) 1. Explain your firm’s philosophy of the role real estate should play within a large institutional portfolio. 2. Describe your view of the current state of the real estate market and the impact on investment strategies. 3. Discuss your views on PRIM’s current real estate portfolio. 4. Discuss how your firm could assist the Board in the management of PRIM’s real estate portfolio. 5. Discuss how you firm could assist the PRIM Board in the management of PRIM’s portfolio level debt program. 6. Provide examples of the different types of specialized real estate services that your firm has provided. 7. List services that you provide to real estate investors that you feel distinguish your firm from your competitors. - 28 -
  • 29. 10.4 CLIENTS (to be filled out completely by all Proposers) 1. Please indicate in the chart below the composition of your client base. Client Type Number of Clients Percent Public Pension Funds Corporate Pension Funds Endowments Other (Specify) TOTAL 2. Please provide a current list of your 10 largest clients (measured by real estate portfolio market value) including name, location, contact, telephone number, market values of real estate and timber portfolios and total portfolio, number of years the client has retained your firm and the products or services that the client uses. If your 5 largest public funds are not included please add them to the end of this list. 3. Provide a list of all of your clients, including the name, location, market values of real estate and timber portfolios and total portfolio, number of years the client has retained your firm and the products or services that the client uses. 4. Please give details on the number, name(s), contact name(s) and telephone number(s), and asset values of any client relationships that were either terminated or not renewed since January 1, 2005, with reasons for the termination or non-renewal. 5. Please provide, in an appendix to the RFP, details on the number, name(s), contact name(s) and telephone number(s), date of hiring, and asset values of any new client relationships gained since January 1, 2005. 6. List three (3) references for clients for which you do real estate and timber consulting. For each reference listed include client name, address, telephone number, and name of contact person. Also, note the type of relationship, length of relationship and each client's total amount of real estate assets, both those for which you consult and the total. - 29 -
  • 30. Executive Summary. (To be completed by all firms submitting proposals) Please submit an executive summary consisting of not more than 3 one-sided pages which summarizes the contents of the Proposal with the firm’s name identified on the top of the first page. If the firm is selected for a finalist interview, this summary will be provided to the Investment Committee in advance of any interview. Please be aware that all members of the Investment Committee may not have read your complete Proposal, which will be evaluated by the Search Committee. 11. FEE PROPOSAL As the term of the Contract shall be three (3) years, the Fee Proposal shall be guaranteed for a period of not less than three (3) years from the effective date of the Contract. Proposers seeking to provide more than one consulting service must complete both Sections A and B of this Fee Proposal in the format presented below. The services detailed under “SCOPE OF SERVICES” in Section 3 and contract Schedule A of this RFP should form the basis for the proposed fees and both sections should be referred to for a detailed description of the services required of the successful proposer or proposers. PRIM reserves the right to compensate the successful proposer or proposers using either the combined services fees as contained in Section A, or the separate services fees contained in Section B. The method of payment will be set forth in the Contract. Once the consultant(s) is (are) selected, the fee may be negotiated further depending on the variance from the other Proposals. In no case will the negotiated fee be higher than the fee contained in the Proposal. FEE PROPOSALS MUST BE SUBMITTED IN A SEPARATE, SEALED ENVELOPE AS DESCRIBED IN SECTION 5.B.4. A. General Consulting Service Fees. Proposers seeking to provide General Consulting Services must submit an all-in-cost annual fee for all services as described under "SCOPE OF SERVICES" in Section 3 and contract Schedule A of this RFP. The Annual Consulting Fee should be a fixed fee per year paid quarterly in arrears. This fee should cover all costs and expenses incurred in providing the services listed in this RFP and as further outlined in the sample contract contained as Exhibit C. Please use the following format in your proposal. - 30 -
  • 31. 1. Flat Fees – General Consulting All-Inclusive Flat Fee - Year 1 $________________________ All-Inclusive Flat Fee - Year 2 $________________________ All-Inclusive Flat Fee - Year 3 $________________________ TOTAL FEES (Years 1-3) $_____________________ At this time, the Board does not anticipate issuing any real estate related request for proposals over the next year. You may either include your fee proposal for such RFP related services as part of your overall fee quote or separately state your fees for RFP related services. B. Project Real Estate Consulting Services In addition to a General Real Estate Consultant, the PRIM Board may also retain a Project Real Estate Consultant that will have contractual responsibility for oversight of PRIM real estate portfolio debt program. PRIM will entertain fee proposals on either/or a fixed or hourly basis. In addition, from time to time, the Board may require additional project real estate consulting services as described in this Request For Proposals. Please provide an hourly rate for each person that would provide such services. Other than for the real estate debt program related activities, please note that there will be no commitment by the PRIM Board for any minimum annual fees for the Project Real Estate Consultant. - 31 -
  • 32. XII. REPRESENTATIONS AND WARRANTIES. All proposers are required to submit an executed copy of this exhibit as an attachment to the cover letter described in Section 5 of the RFP: A. Proposer warrants that it meets, or will meet before the award of the Contract, the bonding requirement provided by Section 412 of the Employment Retirement Income Security Act of 1974 (ERISA) or that it carries at least an equivalent fidelity bond that will be applicable to proposer's actions under that Contract (unless exempt, and explanation of exemption is attached). B. Proposer warrants that it maintains an errors and omissions insurance policy providing a prudent amount of coverage for negligent acts or omissions and that such coverage will be applicable to proposer's actions under the Contract. C. Proposer warrants that it will not delegate its fiduciary responsibilities assumed under the Contract. D. Proposer warrants that it has completed, obtained, and performed all registrations, filings, approvals, authorizations, consents or examinations required by a government or governmental authority for acts contemplated by the Contract. Proposer warrants that it will agree to the provisions of the Contract which are set forth in Exhibit C to this RFP. F. Proposer warrants that it meets all of the minimum criteria applicable to the firm under this RFP as follows: [Please list each applicable minimum requirement and specifically describe how your firm meets the applicable minimum qualifications specified in Section 8.] _________________________________________________ _____________________ Name of Firm Date _________________________________________________ _____________________ Signature Title - 32 -
  • 33. Exhibits - 33 -
  • 34. Exhibit A – PRIM Real Estate Managers - 34 -
  • 35. SEPARATE ACCOUNT MANAGERS INVESCO Realty Advisors, Inc. J. P. Morgan Investment Management, Inc. LaSalle Advisors Capital Management, Inc. RREEF America LLC TA Associates Realty REAL ESTATE SECURITIES SEPARATE ACCOUNT MANAGERS INVESCO Realty Advisors, Inc. European Investors Inc. (EII) RREEF America LLC Urdang Capital Management Wellington Management Company LLC ECONOMICALLY TARGETTED INVESTMENTS (ETI) New Boston Fund Intercontinental Real Estate Canyon Johnson Partners TIMBER SEPARATE ACCOUNT MANAGERS The Campbell Group LLC Forest Investment Associates, L.P. - 35 -
  • 36. Exhibit B – Real Estate and Timber Portfolio Information - 36 -
  • 37. Real Estate Portfolio Information Core and Value Added Real Estate Diversification by Property Type As of 1/31/08 Gross Current Target Property Number of Market Investment Allocation Type Properties Value Allocation Range Retail 21 $929,338,589 22% 15% to 35% Office 18 1,426,347,199 34% 15% to 35% Industrial 26 644,283,750 16% Flex 6 160,517,840 4% 37 626,941,625 20% 20% to 40% Apartment 20 986,227,068 24% 10% to 30% Totals 91 $4,146,714,445 100% 100% Core and Value Added Real Estate Diversification By NCREIF Region As of 1/31/08 Number Gross Percent NCREIF of Market Investment Region* Propertie Value Allocation s East North Central 10 $248,946,324 6.0% Mideast 12 757,081,888 18.3% Mountain 9 281,742,286 6.8% Northeast 10 634,186,715 15.3% Pacific 30 1,413,408,945 34.1% Southeast 12 510,986,210 12.3% Southwest 6 202,045,061 4.9% West No. Central 2 98,317,017 2.4% Total 91 $4,146,714,445 100% - 37 -
  • 38. Core and Value Added Real Estate Diversification By Metro Region As of 1/31/08 Metro MSA # of Market Region Rank Prop Value % New York-North NJ 1 5 $347,013,353 8.4% Los Angeles 2 10 $444,372,546 10.7% Chicago 3 9 $216,878,740 5.2% Philadelphia 4 3 $142,687,435 3.4% Dallas-Ft. Worth 5 1 $27,610,035 0.7% Miami-Ft. Lauderdale 6 4 $157,264,408 3.8% Washington DC 7 5 $543,691,483 13.1% Houston 8 3 $86,485,023 2.1% Detroit 9 1 $32,067,584 0.8% Boston 10 3 $199,144,157 4.8% Atlanta 11 5 $176,409,708 4.3% San Francisco 12 5 $280,336,894 6.8% Riverside-Ontario 13 6 $200,991,202 4.8% Phoenix-Mesa 14 2 $41,516,819 1.0% Seattle 15 2 $118,923,665 2.9% Minneapolis 16 2 $98,317,017 2.4% San Diego 17 4 $202,627,230 4.9% Baltimore 19 5 $122,496,202 3.0% Tampa 21 1 $42,645,093 1.0% Denver-Boulder 22 7 $240,225,466 5.8% Sacramento 27 3 $166,157,409 4.0% Orlando 30 2 $134,667,000 3.2% Austin 40 2 $87,950,003 2.1% Stamford 51 1 $36,235,973 0.9% Total 91 $4,146,714,445 100.0% - 38 -
  • 39. Real Estate Separate Account Manager Allocations as of 1/31/08 Currently Allocations Invested Available Total Manager Advisor (at mkt) To Invest Commitment Percentage INVESCO $566 $44 $610 13% J.P. Morgan 488 92 580 13% LaSalle 936 104 1,040 23% RREEF 970 360* 1,330 29% TA Associates 1,037 0 1,037 22% Total $3,997 $600 $4,597 100% *Includes $285 million for value add mandate awarded in 2007 REIT Manager Investments as of January 31, 2008 Market Value Currently Manager Advisor Invested Percentage INVESCO (U.S.) $92 10% Wellington (U.S.) 331 36% Urdang (U.S.) 80 9% RREEF (Global) 320 35% European 102 10% (International) Total $925 100% - 39 -
  • 40. Timber Portfolio Information US Timber Portfolio Diversification By State As of 1/31/2008 Market State # of Properties Value % Alabama 2 $126,181,518 12% Arkansas 1 12,758,636 1% Florida 1 137,232,854 13% Georgia 1 37,320,732 4% Mississippi 2 166,007,234 15% North Carolina 2 118,036,307 11% Pennsylvania 1 190,936,878 18% South Carolina 2 216,542,828 20% Texas 1 69,696,114 6% Total 13 $1,074,713,100 100.0% Timber Manager Allocations as of 1/31/08 Allocations Currently Available Total Manager Advisor Invested To Invest Commitment Percentage Forest Investments $1,075 $0 1,075 100% Campbell Group* 0 0 0 0% Total $1,075 $0 $1,075 100% *In September 2007, the Campbell Group completed the sale of PRIM’s Northwest timber portfolio. Due to a timber target allocation decrease from 4% to 2% in January 2008, proceeds from the sale have been moved to a natural resource allocation that does not fall under the scope of this RFP. - 40 -
  • 41. Exhibit C – Consulting Services Agreement - 41 -
  • 42. GENERAL REAL ESTATE CONSULTING SERVICES AGREEMENT THIS AGREEMENT, dated as of August 1, 2008, is made by and between the Pension Reserves Investment Management Board ("PRIM"), as trustee of the Pension Reserves Investment Trust (“PRIT”), and (the "Consultant"). This agreement supersedes any and all prior understandings with Consultant. Introduction. Under Massachusetts General Laws, Chapter 32, Section 23, PRIM has general supervision of the investment and reinvestment of the PRIT Fund created by Chapter 32, Section 22 of such laws. PRIT has been established for the purpose of depositing, investing and disbursing amounts set aside to meet further liabilities of various public retirement systems in Massachusetts. PRIM is responsible for the administration of PRIT and enters into this Agreement pursuant to its authority under Massachusetts General Laws, Chapter 32, Section 23, subdivision (2A), paragraph (e), clause (iii). 1. Appointment of the Consultant. PRIM hereby appoints and retains the Consultant, and the Consultant agrees to provide consulting services, upon and subject to the terms hereof, beginning at the opening of business on August 1, 2008 (the “Effective Date”) and continuing until this Agreement is terminated in accordance with the terms hereof. The Consultant agrees to provide services in accordance with (a) this Agreement, and (b) the “Scope of Services” set forth in Schedule A hereto. 2. Confidentiality. The Consultant will maintain in strictest confidence the investment advice and information it furnishes to or receives from PRIM or from PRIT’s custodian bank or investment managers in connection with this Agreement; provided, however, that the Consultant will be permitted to disclose or communicate to a proper party any information received from PRIM or from PRIT’s custodian bank or investment managers or developed by the Consultant under the terms of this Agreement, if such disclosure or communication is necessary to carry out the purposes of this Agreement or is required by law. Before such disclosure or communication, the Consultant, unless prohibited by law, will notify PRIM of the information to be disclosed or communicated and the party to whom that information will be disclosed or communicated. The terms of this paragraph shall not be interpreted so as to prevent the Consultant from providing investment advice to other clients who share comparable investment objectives with PRIM, or to prohibit the Consultant from utilizing the Consultant’s investment experience on an undisclosed basis for use in composite presentations. - 42 -
  • 43. 3. Personnel. The Consultant shall allocate such personnel and devote such efforts as are necessary for it to carry out its duties under this Agreement. The Consultant shall at all times maintain not less than two individuals to act as primary consultants to the PRIM account (each a “Primary Consultant”), and shall not change any Primary Consultant without the prior written consent of PRIM. The Primary Consultants shall be _________ and ______________. 4. Reports. The Consultant shall promptly notify PRIM in writing (1) of any change in the Consultant’s representations in this Agreement during the term of this Agreement; (2) of any change in the senior management or key professionals, or material changes in ownership of the Consultant’s organization; (3) of any change in the Primary Consultants assigned to PRIM; (4) of any other material change in the Consultant’s business activities or circumstances; (5) of any action taken by the Consultant that is contrary to or inconsistent with this Agreement; and (6) of the commencement by any governmental regulatory or law enforcement agency of any investigation, examination or other proceeding directly involving the Consultant, its owners, or employees, except such investigations, examinations or other proceedings as are routinely conducted in the ordinary course of the Consultant’s business. 5. Fees and Expenses. The Consultant will be entitled to receive from PRIM as complete compensation for services rendered hereunder the fees set forth in Schedule B hereto. The Consultant will not be paid or reimbursed for any expenses except to the extent authorized by PRIM in advance and in writing. 6. Services Not Exclusive. The services of the Consultant and its personnel to be provided under this Agreement are not exclusive, and the Consultant may provide services to others and engage in other activities, but the Consultant will allocate such personnel and devote such efforts as are necessary for it to carry out its duties under this Agreement. 7. Representations by the Consultant. The Consultant represents and warrants that it has completed, obtained or performed all registrations, filings, approvals, authorizations, consents or examinations required by any government or governmental authority for the performance of the acts contemplated by this Agreement. The Consultant will deliver documentation of such compliance annually or as PRIM may reasonably request. 8. Termination. The term of this Agreement shall be for the three year period from August 1, 2008 until July 31, 20011. Notwithstanding the foregoing, this Agreement may be terminated by PRIM for any reason upon not less than thirty (30) days’ written notice to Consultant. In addition, PRIM may terminate this Agreement immediately upon notice to Consultant (i) upon any material breach by Consultant of its obligations hereunder; (ii) if Consultant files for bankruptcy or state law receivership; (iii) if in the reasonable judgment of PRIM, Consultant becomes financially unstable so as to jeopardize its ability to perform the services required under this Agreement; (iv) if Consultant is the subject of criminal investigation, indictment or conviction, when in PRIM’s sole judgment such action jeopardizes Consultant’s ability to perform the services required under this Agreement; or (v) in the event of any material change in the control of Consultant or a change in or departure of any Primary Consultant. Upon termination of this Agreement, Consultant will immediately and in all cases within ten (10) business days, deliver to PRIM all property and documents pertaining to PRIM - 43 -
  • 44. then in the custody of Consultant, including PRIM’s portfolio status on a disk that may be retained by PRIM or transferred to another monitoring agent. A pro rata determination of fees, if appropriate, will be made for any quarter in which this Agreement has been terminated. 9. Fiduciary Status of The Consultant; Chapter 268A. With respect to the performance of its duties and responsibilities hereunder for the Account, the Consultant acknowledges that it is a "fiduciary" within the meaning of Chapter 32 of the Massachusetts General Laws. The Consultant will discharge its duties and responsibilities under this Agreement in accordance with the fiduciary standards of conduct and other requirements as they apply to the Consultant. The Consultant is advised of the existence of Massachusetts General Laws, Chapter 268A (the Massachusetts "Conflict of Interest" statute), and is expected to act and perform its duties in accordance with such provisions. The Consultant acknowledges that PRIM has delivered a copy of Chapters 32 and 268A of the Massachusetts General Laws as currently in effect to the Consultant. In addition, copies of these laws are available at http://www.state.ma.us/legis. 10. Disclosure Statements and Conflicts. The Consultant shall advise the Executive Director of PRIM of any arrangements with third party individuals, brokers, or money management firms who may have received or shared in the payment of fees for services provided to the Consultant in connection with the securing or the continuation of this Agreement. The Consultant shall not directly or indirectly receive any benefit from recommendations or advice made to PRIM and shall disclose to PRIM any personal investment or economic interest that may be enhanced by the recommendations made to PRIM. In any situation in which the interests of PRIM may be in material conflict with the interests of the Consultant or with those of other clients of the Consultant, the Consultant will immediately inform PRIM of these conflicts. Consultant currently does not have any soft dollar arrangements. At least annually, the Consultant will provide PRIM with a description of any soft dollar arrangements to which the Consultant is party. 11. Liability. In addition to those requirements set forth in Section 9, at all times the Consultant shall exercise the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent expert acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of like character and with like aims. The Consultant shall not be subject to liability for any act, omission or mistake of judgment in the course of, or connected with, the performance of its responsibilities hereunder, except for its own negligence, willful misconduct or lack of good faith. The Consultant shall in no way be responsible for guaranteeing the financial success of any investment or investment strategy. While Consultant will make recommendations to PRIM regarding investments, nothing in this Agreement shall delegate to the Consultant any investment decision or any of PRIM’s duties and responsibilities under applicable law. Nothing herein shall be construed to waive any liability that the Consultant has under applicable federal or state securities laws, or ERISA. 12. Authority. Each of the parties to this Agreement represents that it is duly authorized and empowered to execute, deliver and perform this Agreement, that such action does not materially conflict with or violate any provision of law, rule or regulation, contract, deed of trust, or other instrument to which it is a party or to which any of its property is subject, and that - 44 -
  • 45. this Agreement is a valid and binding obligation, enforceable against such party in accordance with its terms. 13. Bonding. The Consultant agrees to maintain during the term of this Agreement any fidelity bond with respect to the assets of the Account that it would have to maintain to satisfy Section 412 of ERISA and the regulations thereunder if PRIM or PRIT were subject to the terms of ERISA. 14. Communication. Any approvals, instructions, directions, notices or other communications pursuant to this Agreement will be mailed or delivered: a) to PRIM at: Pension Reserves Investment Management Board 84 State Street Boston, Massachusetts 02109 Attention: Michael Travaglini, Executive Director b) to the Consultant at: Either party may change the address for notices or other communications to it by written notice to the other stating the new address. Notices from either party to the other will be effective when received by the addressee. 15. Assignment, etc. The Consultant will not assign this Agreement without the prior written consent of PRIM. This Agreement constitutes the entire Agreement of the parties with respect to its subject matter and may only be amended by a written amendment signed by both parties. - 45 -
  • 46. 16. Headings; Attachments. Headings are for convenience only, and the text of this Agreement will govern the rights and obligations of the parties. Each of the Attachments hereto is incorporated herein by reference. Capitalized items used hereto have the same meanings as in this Agreement. 17. Disputed Matters. With respect to any controversy or dispute arising out of this Agreement, interpretation of any of the provisions hereof, or the actions of the Consultant or PRIM hereunder, each of the parties consents to the non-exclusive jurisdiction of all of the federal and state courts in the Commonwealth of Massachusetts, agrees that venue with respect to any action in such Commonwealth shall lie exclusively in Suffolk County, Massachusetts, and waives any defense of forum non conveniens; provided, however, that at the sole election of PRIM, any such controversy or dispute shall be submitted to arbitration before the American Arbitration Association under the Commercial Arbitration Rules then obtaining of said Association, such arbitration to be held in Boston, Massachusetts, and judgment upon any award thus obtained may be entered in any court having jurisdiction thereof. In any such arbitration each party to the arbitration shall bear its own expenses, including expenses of attorneys, financial experts and other witnesses; any arbitration fees and expenses of the arbitrators shall be divided equally between the disputing parties. Service of process on either party shall be deemed effective if made in the manner prescribed for the giving of notice in Section 14. 18. Massachusetts Law. This Agreement will be considered to be an instrument made under seal in the Commonwealth of Massachusetts and it will be construed and the rights and obligations of the parties determined in accordance with the laws of said Commonwealth, without giving effect to conflicts of laws principles. IN WITNESS WHEREOF, the Consultant and PRIM have executed this Agreement as of the date first above written. PENSION RESERVES INVESTMENT MANAGEMENT BOARD By:_____________________________ Michael Travaglini, Executive Director Consultant By:_____________________________ Title:_____________________________ - 46 -
  • 47. Schedule A - Scope of Services The Consultant shall furnish PRIM with the services of qualified, professional staff to be generally available to PRIM and its representatives to provide general Real Estate and Timber investment consulting services to PRIM. As referred to herein, Real Estate shall include all real estate assets owned by PRIM including but not limited to core, value added, REIT’s, timber, and commingled assets. More specifically, the Consultant’s services will include, but not be limited to the following: A. Strategic Services: 1. Advice and technical support concerning the establishment, review and refinement of asset- type allocation goals for all or designated portions of the PRIM Real Estate (defined herein to include PRIM’s real estate and timber activities) portfolio. 2. Evaluation of complementary strategies including but not limited to value enhanced, opportunity, REIT’s, international, affordable housing, timber and other investment alternatives; and development of an appropriate strategy for each. 3. Implementation of complementary strategies including developing Requests for Proposals, evaluating Proposals received, participating in manager search presentations, and recommending managers. The base annual compensation payable to Consultant in Schedule B includes two general searches, one real estate appraiser search and a timber appraisal search during the three-year life of this contract. For any other RFP services provided to PRIM during the three-year life of this contract, Consultant shall be compensated as provided in Schedule B. 4. Annually, a written comprehensive analysis of the PRIM Real Estate and Timber investment portfolio strategy. These reports shall include a review of all aspects of PRIM’s investment goals and objectives for Real Estate and Timber, the alternatives available for Real Estate and Timber investment, and the results of the current strategy. This comprehensive analysis shall be presented as Consultant’s recommendations concerning the appropriate strategy to be adopted and implemented by the PRIM Board. It is currently anticipated that Consultant will present this plan to the Real Estate and Timber Committee and the PRIM Board at their December meetings. 5. The Consultant will recommend performance benchmarks for PRIT’s total Real Estate portfolio and for each investment type within the portfolio. B. Portfolio Services: 1. Advice and technical support in evaluating acquisition efforts and accomplishments of discretionary separate account managers relative to PRIM’s strategies and goals for the multi-manager program; reviewing managers’ tactical plans (“manager investment plans”) on at least a semi-annual basis relative to PRIM’s portfolio strategies and goals, and advising PRIM’s staff about the appropriateness investment guidelines including property type and regional asset allocation ranges; and communicating with staff and managers concerning the allocation goals and acquisition program results on an ongoing basis. - 47 -
  • 48. 2. Performing ongoing, systematic review of performance of the portfolio, investment Real Estate and Timber managers, and underlying investments and properties; identifying current or anticipated under-performance within the portfolio and recommending corrective action; and assisting in implementation of recommendations. 3. The Consultant will review investment manager compliance with contractual investment objects and guidelines and prepare appropriate reports. 4. Developing, with PRIM staff, an appropriate methodology for conducting a “hold/sell” analysis for any commingled funds in the PRIM Real Estate investment portfolio; and conducting a “hold/sell” analysis for such investments which shall include establishing priorities for liquidating such investments along with specific recommendations to the PRIM Board for liquidating such investments within a reasonably narrow range of values. Such strategy reviews shall be limited to one review per year. C. Reporting Services. 1. The Consultant will provide written reports on the status of PRIM’s Real Estate portfolio on an annual basis as requested by PRIM. Such reports shall also be provided at PRIM’s request in an electronic file format compatible with PRIM’s software. Reports will include the following information: Annual Report: The Consultant shall review and report on the performance of PRIM’s Real Estate and Timber portfolio on an annual calendar year basis against established investment objectives and policies and institutional real estate and timber performance benchmarks. The Performance Measurement Report shall provide a review of property type and geographical diversification, portfolio mix and investment strategy. The annual report shall detail current annual cash flows, market and historical cost valuations; annual performance and historical performance at the portfolio level, manager level, property level and commingled fund level; a concise summary of key changes in the portfolio and organizational changes within the investment advisers managing PRIM’s Real Estate portfolio; and recommendations concerning the then current “Hold/Sell” status of each property, commingled fund or REIT investment. More specifically, the report should include 1) An analysis of PRIM’s real estate portfolio’s performance for the quarter, one, three, five, and ten year and since inception periods 2) A comparison of PRIM’s managers and portfolio to relevant benchmarks, manager composites, and/or relevant plan sponsor universes. 3) For REIT managers, an analysis of risk-adjusted return comparisons of long-term performance based on Sharpe ratio, information ratio, standard deviation, alpha and tracking error. 4) For direct real estate, an analysis of performance by property for the periods listed above. 5) A performance attribution analysis by manager, property type and region relevant to the NCREIF Property or Timber Index. 6) An analysis of the compliance of PRIM’s real estate portfolio as compared to policy guidelines, including compliance with investment style, diversification, lifecycle, leverage and other risk management guideline measures 7) An analysis that compares (where relevant) the regional and property type diversification of the PRIM real estate portfolio to the NPI for private real estate separate accounts, the NTI for the timber separate accounts, and the NAREIT Equity Index for the REITs 8) An analysis of new - 48 -
  • 49. investments committed to on behalf of PRIM by manager and investment style, as well as dispositions of current investments. 9) Market analysis including a review of the prior quarter market performance and any significant market events. In order to prepare this report, it is anticipated that the Consultant will rely upon the reports furnished by PRIM’s managers. Consultant is not required to maintain an independent database from that maintained by PRIM, its outside managers and PRIT’s custodian. The Performance Measurement Report shall be delivered to PRIM within ninety (90) days of the close of each calendar year. D. Non-Core Real Estate and Timber Efforts: 1. PRIM does not currently invest in commingled funds or limited partnerships within its real estate and timber portfolio. In the event that these types of investments become a component of PRIM’s real estate and/or timber strategy, the Consultant will provide assistance in the selection of managers and funds, detailed written recommendations and ongoing monitoring and reporting. Investment selection will include the screening of potential investment managers and access to the Consultant’s database of potential investments. The Consultant will assist with analysis and due diligence including evaluation of investment strategy and management qualifications, site visits, reference checks and negotiation of terms. If requested, the Consultant will also assist with a review of the fund’s legal documents (at PRIM’s expense). PRIM understands that a significant commitment to limited partnerships or commingled fund vehicles may cause additional fees to be incurred. 2. Advice and direct assistance on fund terminations, redemption requests, proposed amendments or other changes in fund agreements or fund objectives, and on any situations in which the judgment or actions of investment managers may compromise PRIM’s position as an investor or fiduciary. The Consultant will proactively seek to learn and inform PRIM of any actions or situations that might harm PRIM’s Real Estate investment portfolio or compromise its position as a fiduciary with respect to such investments. The Consultant will provide its opinion and recommendation on the disposition of any such assets as requested by PRIM. 3. Attendance at annual meetings of commingled funds on an “as needed” basis. Such attendance shall be limited to two such meetings per year if requested to attend a meeting by PRIM. E. Insurance Review: 1. Conduct a review as needed of the insurance policies carried by PRIM’s managers and advising PRIM in writing as to their adequacy. F. Other Services: 1. Identification and recommendations of opportunities for new investment. 2. Distribution to PRIM staff of relevant materials produced by the Consultant such as white papers, topical research and market reports, newsletters, reviews of funds in which PRIM has invested or firms managing those funds, and the like. - 49 -
  • 50. 3. Availability of the Primary Consultants for telephone communication regarding inquiries by the PRIM Board or designated staff. 4. Support to PRIM’s Real Estate investment management search efforts by recommending candidates, assisting in developing RFP’s (limited as set forth in A-3 above), and participating upon request in proposal and manager evaluations. 5. Support to PRIM’s search efforts to retain qualified real estate and timber appraisers, assisting in developing RFP’s, conducting appraiser searches, evaluation of firms, and recommendations. These types of searches are currently conducted once every three years. 6. Annual review of PRIM’s Real Estate investment policies. A full and complete analysis of existing policies and procedures and new recommended policies will be completed each year. Recommendation of changes as needed. 7. Provide any real estate and/or timber separate account or commingled fund return studies as compiled by Consultant when and if available. 8. Up to twelve trips per annum by Consultant to PRIM’s offices. One of the Primary Consultants must attend all PRIM Board and all Real Estate Committee meetings. Reasonable travel expenses incurred by Consultant in undertaking additional trips beyond that number requested by PRIM shall be reimbursed by PRIM subject to PRIM guidelines concerning expense documentation. In addition, PRIM shall only be responsible for its pro rata share of such trip expenses if the trip includes any other activity other than PRIM business. Approval of any such additional expenses must be received in writing prior to incurring such additional costs. - 50 -
  • 51. Schedule B - Compensation for Services For all General Services rendered (Sections A, B, C, D, and E above): August 1, 2008 - July 31, 2009 $_______ annual fee August 1, 2009 - July 31, 2010 $_______ annual fee August 1, 2010 – July 31, 2011 $_______ annual fee * This proposed fee shall include two general searches (as described generally in Section A.3 above) during the three year life of this contract. In addition, it shall include one search for an appraiser of PRIT’s real estate portfolio and one search for an appraiser of PRIT’s timber portfolio during the term. Additional searches over those set forth in the previous two sentences shall be at the rate of $________ per search. ** This proposed fee EXCLUDES the costs of engaging a third party to perform the annual insurance review as set forth in Section E. above. Consultant shall pay directly the costs and fees of the firm or firms engaged on behalf of PRIM, including any out of pocket costs that may be included in such services, and PRIM shall promptly reimburse Consultant for all such costs and fees paid. These additional costs will be determined at the time the risk management consultant is engaged. The general services fee will be billed in quarterly installments and payable in arrears. Upon termination, the general services fee will be prorated up to and including the date of termination. - 51 -
  • 52. For all Project Services rendered The Consultant shall furnish PRIM with the services of qualified, professional staff to be generally available to PRIM and its representatives to provide specific project based Real Estate investment consulting services to PRIM. As referred to herein, Real Estate shall include all real estate assets owned by PRIM including but not limited to core, value added, REIT’s, and commingled assets. These services will be provided on an as needed basis as requested by the Executive Director of PRIM. In addition, Consultant shall be contractually responsible to oversee all aspects of PRIT’s real estate debt program (when and where applicable). Such responsibilities shall include negotiating and placing all of PRIT’s real estate debt and making all decisions as to rates and terms of such debt placements. Consultant shall be paid for the services described above at the rate of $_____ per hour. Invoices shall be submitted to PRIM on a monthly basis and shall include a description of the amount of time expended by the Consultant for each specific project. Consultant shall not incur more than $10,000 of charges per month without the advance permission of PRIM. Consultant shall also be reimbursed for any reasonable out of pocket expenses incurred in connection with the rendering of the services described above. Such reimbursement shall be limited to travel expenses incurred at PRIM’s request and third party reports or services specifically requested by PRIM. There will be no travel expenses for meetings at PRIM’s offices or to any location within a one-hour drive of Boston. There will be no charges for administrative or office costs. Such expenses shall be described in the monthly invoice submitted by the Consultant. The consulting fee will be billed monthly as incurred and payable in arrears. - 52 -
  • 53. Exhibit D – Disclosure Forms COMMONWEALTH OF MASSACHUSETTS PENSION RESERVES INVESTMENT MANAGEMENT BOARD DISCLOSURE STATEMENT FIRM: _________________________ ADDRESS: _________________________ _________________________ _________________________ Firms seeking to provide investment management or consulting services (the “engagement”) to the Commonwealth of Massachusetts Pension Reserves Investment Management Board (“PRIM”) must complete a disclosure statement providing complete and accurate responses to the questions below. Firms selected to provide investment management or consulting services to PRIM have a continuing obligation to update responses to these questions, in writing, immediately upon any change to such responses. The questions in this Disclosure - 53 -
  • 54. Statement should be read broad, and any perceived ambiguity should be resolved in favor of disclosure. Any questions concerning the disclosures required should be directed to the PRIM Board’s Executive Director. 1. Describe in detail your firm’s organization structure, and identify any controlling stockholders, parents, subsidiaries, affiliates, partners, general partners, or principals (all such individuals or entities hereinafter collectively referred to as the “firm.”) 2. Identify any relationship of the firm, its joint ventures, consultants, lobbyists, subcontractors, agents, or placement agents that relate in any way to the engagement. 3. Aside from the engagement, describe any services provided by the firm to PRIM. 4. Aside from the services described in response to question no. 3, above, describe any services provided by the firm to the Office of the Treasurer or any trust, board, commission or authority of which the Treasurer is a member or trustee. (A list of such entities is attached.) 5. Aside from the services described in response to question nos. 3 and 4, above, describe any services provided by the firm to the Commonwealth of Massachusetts or any of its political subdivisions. 6. Did or will the firm provide or share, agree to provide or share, or arrange to provide or share any compensation or benefit, direct or indirect, to any individual or entity for assisting the firm in: a) obtaining the engagement; or, b) performing the services required by the engagement. If the answer to question no. 6 is “yes,” provide for each the individual or entity a) the name and address of such individual or entity; b) a description of the assistance provided; and c) the compensation or benefit. 7. Does the firm have any ongoing relationship, arrangement or agreement with any individual or entity with respect to sharing compensation for services to: a) PRIM; b) any trust, board, commission, or authority of which the Treasurer is a member or trustee; or c) Massachusetts or its political subdivisions? If the answer to question no. 7 is “yes,” provide for each such individual or entity a) the name and address of such individual or entity; b) a description of the relationship, arrangement or agreement; and, c) the compensation shared. - 54 -
  • 55. Signed under the pains and penalties of perjury on this day of _________, 2008. Name:____________________________ Title: ________________________________ Treasurer’s Principal Boards, Commissions and Authorities Finance Advisory Board – M.G.L. c.6, s97-8 State Comptroller’s Advisory Board – M.G.L. c.5A, s2 Investment Advisory Council – M.G.L. c.10, s5B State Retirement Board – M.G.L. c.10, s18 State Lottery Commission – M.G.L. c.10, s23 Emergency Finance Board – M.G.L. c.10, s47 Board of Bank Incorporation – M.G.L. c.26, s5 Water Pollution Abatement Trust – M.G.L. c.29, s2 Pension Reserves Investment Management – M.G.L. c.32, s23(2A) Massachusetts Convention Center Authority – Chapter 190 of the Acts of 1982 ss31-48 - 55 -
  • 56. The PERAC Disclosure Form may be found at the link listed below. http://www.mass.gov/perac/forms/0803disclosurestatementconsultants.pdf - 56 -
  • 57. Exhibit E – PRIM Investment Policy Please go to the link below to see the Investment Policy http://www.mapension.com/InvestmentProgram/InvestPolicy.html - 57 -
  • 58. Exhibit F – ETI Program - 58 -
  • 59. ECONOMICALLY TARGETED INVESTMENT PROGRAM Adopted 8/14/03 A. PRIM recognizes its obligations under Massachusetts law include a responsibility to seek out investment opportunities that will benefit the economic climate of the Commonwealth as a whole, provided that such investments are consistent with the Board’s obligations to the members and beneficiaries of its participating retirement systems. (See M.G.L. ch. 32, sec. 23(2A)(h)) Accordingly, in cases where investment characteristics, including returns, risk, liquidity, compliance with allocation policy, and others, are equal, PRIM will favor those investments that have a substantial, direct and measurable benefit to the economy of the Commonwealth. B. Such Economically Targeted Investments (“ETI’s”) must meet the following criteria: Investments must target risk-adjusted, market-rate returns and provide net returns equivalent to or higher than other available investments, at commensurate levels of risk. Economic or social benefits will not justify a lower return on any PRIM investment. When evaluating ETI opportunities, PRIM will discount projected returns for any subsidies, deferral of income, higher risk levels, and other concessions to reach a real rate of return for comparison with other ETI and non-ETI investment alternatives. Similarly, ETI benefits will not justify higher investment risk. However, where appropriate, the PRIM staff, its managers, and its consultants will actively seek out and develop guarantees, third party recourse, hedging, and other acceptable and customary risk management vehicles to reduce or eliminate risk in ETI investments. Investments must not exceed a reasonable weighting in the portfolio, including tracking the degree of exposure to the Massachusetts economy and ensuring appropriate geographic diversification. Investments should maintain the overall portfolio’s compliance with its asset allocation strategy. ETI benefits will not justify deviation from the Asset Allocation Plan adopted by the PRIM Board. Investments should be placed with an experienced and capable manager through an objective and transparent process. Investments should be managed by qualified discretionary investment managers. PRIM will not make any direct investments. Investments should target a “capital gap” where there are likely to be underserved markets. Investments must be tracked (both investment performance and collateral benefits) and managed with the same rigor and discipline imposed on other investments. Investments should be reviewed and monitored by PRIM staff and consultants without disproportionate expenditure of time and resources. - 59 -