REQUEST FOR PROPOSALS
                FOR
DOMESTIC FIXED INCOME MANAGEMENT
       CORE AND CORE PLUS



  Alabama Prepaid ...
Section I
                              GENERAL INFORMATION


        1. Purpose
This Request for Proposal (RFP) has been ...
3. Scope of Services
        (a) The Manager shall develop a domestic fixed income investment portfolio of
statutorily acc...
5. Fees
Managers shall be entitled to receive quarterly compensation. Fees shall be payable based upon
the fair market val...
After the review and evaluation of the proposals, the Board may conduct interviews. Finalists
chosen for interviews, if ne...
6. Provide details of all SEC fidelity bonds, errors and omissions coverage, and any other
   fiduciary insurance, which y...
2.2 INVESTMENT MANAGEMENT.

A. Investment Philosophy and Style
1. Describe the guidelines and risk control measures employ...
5. Total Firm Assets Under Management as of December 31, 2004.

                          $ Equity         $ Other        ...
C. Performance. All performance data presented should be subjected to a Level 1 verification
of results and composite. Lev...
EXHIBIT A

                    SAMPLE INVESTMENT MANAGEMENT AGREEMENT

        This Investment Management Agreement (the “...
(d) “Investment Policy” means the Investment Policies and Guidelines Statement of the
           Trust Fund adopted by the...
regulations of its domicile, and wherever performance occurs, as is necessary to and
           during the performance of ...
(d)     The Manager shall provide quarterly management reports in its customary format
       or such other frequency or f...
(c)     Manager will be liable for actual damages to the extent they result from Manager’s
       negligent, reckless, wil...
date of the termination, resignation, or removal. There shall be no sale or purchase of securities
during the 30-day notic...
such disputes, to utilize appropriate forms of non-binding alternative dispute resolution
including, but not limited to, m...
Notices sent to Manager will be addressed to:


       (Voice
       (Facsimile)
       (E-mail)


Notices sent to the Boa...
Fund, or to recommend for purchase or sale by the Trust Fund, any security that the Manager, its
principals, affiliates, o...
EXHIBIT B
       MINIMUM QUALIFICATIONS AND MISCELLANEOUS INFORMATION
1. Information Regarding Manager
       Name:
      ...
11. My Company has a company policy and practice of equal employment opportunity and
non-discrimination based on race, cre...
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REQUEST FOR PROPOSALS

  1. 1. REQUEST FOR PROPOSALS FOR DOMESTIC FIXED INCOME MANAGEMENT CORE AND CORE PLUS Alabama Prepaid Affordable College Tuition Program (PACT) May 2005 Kay Ivey, State Treasurer Alabama State Capitol 600 Dexter Avenue Montgomery, Alabama 36104 1
  2. 2. Section I GENERAL INFORMATION 1. Purpose This Request for Proposal (RFP) has been issued by State Treasurer Kay Ivey (Treasurer), at the direction of the Prepaid Affordable College Tuition (PACT) Trust Fund Board of Directors (Board). The Treasurer solicits proposals from qualified professional firms interested in providing active domestic fixed income investment management services (“the Manager”) to the Prepaid Affordable College Tuition (“PACT”) Trust Fund. This Request for Proposals (hereinafter “RFP”) is issued in accordance with the requirements of Section 41-16-72(4), Code of Alabama (1975). This RFP is not an offer to contract but seeks the submission of proposals from qualified, professional firms that may form the basis for negotiation of an Investment Management Agreement with one or more Investment Managers. The Board reserves the right to reject any or all proposals and to solicit additional proposals if that is determined to be in the best interests of the PACT Program. The PACT investment consultant, Callan Associates, will be receiving and analyzing all responses from this manager search. All candidate firms should have their information in the Callan manager database. There is no charge associated with this process. Please contact Michael Wolpert at 415-291-4199 to receive information about this process. It is the intent of the Treasurer to do business with Alabama firms that pay Alabama taxes and employ Alabama citizens. When all factors are equal, corporations located in Alabama will be given preference. The Treasurer shall post the RFP on the treasury website www.treasury.alabama.gov. 2. Program Information PACT is a qualified 529 prepaid college savings program. Prepaid contracts are sold to purchasers to pay in advance the basic four years of college tuition and qualified fees for beneficiaries. The PACT Trust Fund holds the program assets which include payments made by purchasers and earnings. The Trust Fund has assets, as of March 31, 2004, of approximately $657 million. The current allocation to domestic fixed income is 26% or approximately $172 million. Callan Associates assists the PACT Board with asset allocation, investment policy and manager selection and monitoring. Information about the PACT program, including the current Investment Policy, is available at the Treasurer’s website which is www.treasury.alabama.gov. 2
  3. 3. 3. Scope of Services (a) The Manager shall develop a domestic fixed income investment portfolio of statutorily acceptable securities. It is expected that the initial funding will be approximately $172 million. The Board shall establish the portion of assets to be managed and may, from time- to-time, change such portions. (b) The Manager shall have independent discretionary authority with respect to the investment of that portion of the assets managed by the Manager, subject to the Code of Alabama, Investment Guidelines and such other written limitations as the Board may impose upon the Manager. (c) The Manager shall provide reporting, to include monthly valuation, monthly performance reports, and significant changes in corporate structure, and other data to the Consultant. (d) The Manager shall document all investment transactions with the Custodian in accord with usual and customary standards of practice, and confirm all executed transactions for custodial account records. (E) Core and Core Plus Managers will be evaluated. Please clearly denote which mandate best fits your style. 4, Minimum Qualifications In order to be considered for selection as a Manager, the Proposer must provide Exhibit B as documented proof that the following minimum qualifications listed below are met. • Company is duly registered with the Securities & Exchange Commission pursuant to the Investment Advisors Act of 1940, as amended, and the registration is current. • Company is qualified with the Secretary of State to conduct business in the State of Alabama. (To download the form for a “Certificate of Existence”, access www.sos.state.al.us, corporations division, or call 334-242-5324 to request the form.) • The portfolio manager assigned to the account has managed domestic fixed income portfolios for at least three (3) years, as of December 31, 2004. • Company has managed domestic fixed income portfolios for at least three (3) years, as of December 31, 2004. • Company does manage at least $350,000,000 (preferably $500 million) in domestic fixed income portfolios as of December 31, 2004. • Company and its personnel have all authorizations, permits, licenses, and certifications as may be required under federal, state or local law to perform the services specified in this RFP at the time it submits a response to the RFP. • Company will carry errors and omissions insurance or comparable instrument to cover negligent acts or omissions. • Company does comply with all applicable AIMR performance presentation standards. • Company maintains sufficient procedures and capabilities to ensure the timely and accurate backup and full recovery for all computers and other data storage systems related to the PACT account. • Company has a company policy and practice of equal employment opportunity and non- discrimination based on race, creed or gender. 3
  4. 4. 5. Fees Managers shall be entitled to receive quarterly compensation. Fees shall be payable based upon the fair market value on the last business day of each quarter as reported by the PACT Trust Fund Custodian. The proposal must state the fees charged for this service according to the following schedule: Market Value Basis Points (per Annum) $25,000,000 $50,000,000 $50,000,000 and above 6. Proposal Required Information Proposals should be as thorough and detailed as possible so that capabilities to provide the required services can be properly evaluated. To be considered, responses to this RFP must include a cover page, Exhibit B, Section II of this RFP, a statement of fees, and Disclosure Statement. All proposals submitted in response to this RFP must include a completed Disclosure Statement as required by Section 41-16-80, et seq., Code of Alabama (1975). Copies of the Disclosure Statement, and information, may be downloaded from the Alabama Attorney General’s web site at www.ago.state.al.us/ag_items.cfm. 7. Submission of Proposals Proposals must be received at the following address no later than the close of business on June 2, 2005. Provide the original plus three (3) copies. Attention: Bud Pellecchia Callan Associates 163 Madison Avenue 6th Floor Morristown, NJ 07960 It is the responsibility of the Proposer to ensure that its proposal is timely delivered and received in the proper office on or before the deadline for responding to this RFP. All proposals received will be subject to public disclosure in accordance with Alabama public records laws. All questions concerning this RFP should be directed to Bud Pellecchia at Callan Associates as follows: Phone: 973-993-9595 Email: pellecchia@callan.com 8. Evaluation and Selection All proposals timely received will be reviewed and evaluated by the Investment Consultant. The Consultant will recommend proposals to the Investment Committee that most closely meet the requirements of the RFP. 4
  5. 5. After the review and evaluation of the proposals, the Board may conduct interviews. Finalists chosen for interviews, if necessary, will be notified. The Board reserves the right to request a best and final offer for fees from finalists. The Board will select the Manager(s) the Board determines, in their sole discretion, to be fully qualified and best suited among those submitting proposals on the basis of the evaluation factors, including fees, to best meet the needs of the PACT Program. All proposals received in response to this RFP may be rejected and the Board may solicit additional proposals. Upon identification of the selected Manager, if any, the Board may initiate negotiations for contract terms and conditions. The contract will incorporate reference to the requirements of the RFP and the Manager’s proposal as negotiated. It is expected that the term of the contract be for a period of five (5) years. The Treasurer shall post the RFP and the notice of award on the Treasury website www.treasury.alabama.gov. It is expected that the notice of award shall be posted by September 1 , 2005, and will remain posted for at least two weeks. Interested parties may monitor the progress and status of this RFP process on the Treasurer’s website. 9. Investment Management Agreement All duties of the Manager shall be set forth in the Investment Management Agreement between the selected firm and the Board. A sample Investment Management Agreement is attached as Exhibit A for informational purposes only, and is subject to changes and revisions. If the Respondent opposes any language in the sample agreement, this should be addressed in the Proposal. Section II PROPOSAL 2.1 CORPORATE INFORMATION A. Corporate Information - Provide an overview of your firm, including the following: Corporate profile, including the financial condition of the firm, overall business objectives, strategic plans for growth, and ownership. Are there any changes pending in this profile?; 1. Information on all “related” or “affiliated” firms; 2. List all office locations and the functions performed at each location; 3. List all investment management services offered by the firm (i.e. Domestic Equity, Foreign Equity, Domestic Fixed Income, etc). Does the firm provide any other product or service other than portfolio management? Please list. 4. Provide details of any past or pending litigation relating to your firm, individual personnel, or to the management of client assets. 5. Provide details of any SEC, state regulatory, self-regulatory organization, or professional organization action taken against your firm or any of its owners, principals, or personnel. 5
  6. 6. 6. Provide details of all SEC fidelity bonds, errors and omissions coverage, and any other fiduciary insurance, which your firm carries. 7. Describe all arrangements or understandings (written or oral) between your firm and any advisor, broker, law firm, or other individual or entity in connection with the solicitation or referral of clients between the firms. 8. Has your firm adopted policies consistent with AIMR trade management/soft dollar guidelines? If so, provide details. B. Personnel 1. Attach an organizational chart and biographies of key personnel assigned to this account, including length of experience and expected retention. Key personnel includes investment officers, portfolio managers, and analysts. 2. Complete the following chart: Firm Domestic Total Fixed Income Total Full-time Employees Portfolio Managers Research Analysts Market Strategists/Economists Other Research Customer Service Marketing/Sales Trading Account Supervision/Performance Administration/Office Management Other __________________ TOTAL 3. Provide the number of key employees added/lost over the last 3 years and explain any departures. #Added #Lost #Domestic Fixed Income Employees (added/lost) 2004 / 2003 / 2002 / C. Clients 1. Provide the organization name, address, contact name and phone number of at least three clients for whom similar services as described in this RFP are provided. 2. Provide a representative list of domestic fixed income clients. 6
  7. 7. 2.2 INVESTMENT MANAGEMENT. A. Investment Philosophy and Style 1. Describe the guidelines and risk control measures employed relative to your benchmark. For Core Plus managers please explain your philosophy for non-benchmark sectors and the maximum allocation. 2. What decision factors add growth in the performance of your portfolio? Provide attribution analysis for 1 and 3 year periods ending December 31, 2004. 3. Describe your investment philosophy and style. Include a discussion of the following: a. Universe of securities considered b. Diversification/number of securities held in each portfolio c. Investment time horizon/portfolio turnover policy 4. Compare your U. S. Domestic fixed income Composite with the Lehman Aggregate benchmark as of December 31, 2004. Avg Account Lehman Aggregate Duration Effective Maturity Effective Yield Coupon Rate Option Adjusted Convexity % in high yield %in Other Non- Benchmark Sectors 5. How much discretion is given each portfolio manager to buy/sell securities or to construct a portfolio? 6. Describe any quantitative/qualitative factors used in a buy decision. In a sell decision. 7. What is the main source of research used in the portfolio management process? If applicable, describe your reliance on in-house research in the context of personnel skills and experience. B. Assets and Account Management 1. Will the PACT Trust Fund account be managed by an individual or team of portfolio managers? 2. Provide the minimum, maximum, and average number of accounts managed by domestic fixed income portfolio managers. What is your firm’s policy regarding this number? 3. Account Size Largest Fixed Income Separate Account $__________ Smallest Fixed Income Separate Account $__________ Average Fixed Income Separate Account $__________ 4. What is the minimum account size for a separate account? $__________ 7
  8. 8. 5. Total Firm Assets Under Management as of December 31, 2004. $ Equity $ Other $ Fixed $ Total Public Corporate Endow/Found Taft-Hartley Other TOTAL 6. Domestic Fixed Income Assets Under Management as of December 31, 2004. Tax- Exempt Taxable Other TOTAL 7. Provide a breakdown of large cap growth Separate Accounts by asset size as of December 31, 2004. Size of Account $ Total Assets # Accounts Under $10 million $10 to $50 million $50 to $100 million Over $100 million 8. Provide the following information regarding Client Gains (separate accounts). $ Total Assets # Accounts $ Domestic # Domestic Fixed Income Fixed Income Accounts 2004 2003 2002 9. Provide the following information regarding Client Departures (separate accounts). $ Total Assets # Accounts $ Domestic # Domestic Fixed Income Fixed Income Accounts 2004 2003 2002 8
  9. 9. C. Performance. All performance data presented should be subjected to a Level 1 verification of results and composite. Level 2 verification of performance results and composite is preferable. Performance will be evaluated using the Lehman Aggregate Index. 1. Provide performance data for your Active Domestic Core Fixed Income/Core Plus Fixed Income Composite. % 12MO % 1Q % 2Q % 3Q % 4Q # Assets Dispersion Accts 12/31 (Standard Deviation) 2004 2003 2002 2001 2000 2. Provide trailing performance data for your Active Domestic Core Fixed Income/Core Plus Fixed Income Composite for the periods 1 year, 3 years, 5 years and 10 years ending December 31, 2004. 3. Provide the following statistics when fully invested for 3-year period ending 12/31/04: Beta ____________________ Source _________________ Lehman Aggregate ___________ R2 ____________________ Source _________________ Lehman Aggregate ___________ Alpha ____________________ Source _________________ Lehman Aggregate ___________ Tracking Error______________ Source _________________ Lehman Aggregate ___________ Information Ratio ___________ Source _________________ Lehman Aggregate ___________ 4. Describe the composite used to compute performance results reported in answering #1, #2, and #3 above. 5. Discuss turnover in the portfolios you currently manage and your tolerance for volatility. 9
  10. 10. EXHIBIT A SAMPLE INVESTMENT MANAGEMENT AGREEMENT This Investment Management Agreement (the “Agreement”) is made and entered into between the Board of the Prepaid Affordable College Tuition Program (the “Board”) and _______ (the “Manager”), on the 1st day of _________ 2005. Manager acknowledges that this Agreement is not effective until it has received all requisite state government approvals. Manager shall not begin performing work under this Agreement until notified to do so by Board. Manager is not entitled to compensation for work performed prior to the confirmed effective date of the Agreement." WITNESSETH WHEREAS, the Board is charged with the oversight of the PACT Trust Fund by Section 16-33C-5 of the Code of Alabama; and, WHEREAS, the Board has determined that it is in the best interest of the PACT Trust Fund to engage qualified professionals as authorized under Section 16-33C-5 (7) to manage ________________ of the Trust Fund in strict compliance with this Agreement, the Investment Policy of the Board; and all applicable federal and Alabama laws; and, WHEREAS, the State Merit System does not provide an appropriate job classification to perform the services described in this Agreement at this time; and WHEREAS, the Manager has presented with the requisite expertise, ability and professional skill necessary to perform the services of a ____________ Investment Manager; now, THEREFORE, for good and valuable consideration and in consideration of the services to be performed and payments to be made, together with the mutual terms, covenants and conditions hereinafter set forth, and promises hereinafter stipulated, the parties mutually agree as follows: Section 1. Definitions. When used in this Agreement, the words and terms defined below shall have the following meanings: (a) “Board” means the Board of Trustees of the Prepaid Affordable College Tuition Program. (b) “Trust Fund” means the PACT trust fund created in Section 16-33C-6 (b) of the Code of Alabama (c) “Permitted Investments” means the investments that may be made with assets of the PACT Trust Fund authorized by Section 16-33C-5 (3) of the Code of Alabama that constitute legal investments for public funds in the state, including legal investments for the State Treasurer and the Alabama Trust Fund and as provided in the Investment Policy. 10
  11. 11. (d) “Investment Policy” means the Investment Policies and Guidelines Statement of the Trust Fund adopted by the Board of Trustees on August 25, 2004 and as may be amended from time to time. Changes to the investment policy will be binding on the Manager upon receipt of notice specified in Section 24 hereof. A complete copy of the Investment Policy is available on the Treasurer’s website and incorporated by reference as if fully set out herein. The Manager shall execute the Investment Manager Acknowledgement included in the Investment Policy as a condition precedent to the validity of this Agreement. Section 2. Representations and Warranties: The Manager shall furnish, within ten days of the date of this contract, a certificate of good standing to do business in Alabama, or such other evidence from the Office of the Alabama Secretary of State, attesting to its qualifications to do business in the State of Alabama. The Manager represents and warrants as follows: (a) That it is duly registered with the Securities and Exchange Commission pursuant to the Investment Advisers Act of 1940 as amended, and that such registration is currently effective. (b) That it is qualified with the Alabama Secretary of State to conduct business in the State of Alabama. (c) That it currently carries, and will maintain in full force and effect errors and omissions insurance covering negligent acts or omissions, which adequately covers it under this Agreement. (d) That it is a stable organization that offers appropriate incentives to investment professionals with one goal being to minimize professional turnover. (e) That its policy and practice is for equal employment opportunity and non- discrimination based on race, creed or gender. (f) It is lawfully organized and constituted under all federal, state, and local laws, under ordinances of other authorities of its domicile, and is otherwise in full compliance with all legal requirements of its domicile as is necessary to perform is obligations under this Agreement. (g) It possesses the legal authority and capacity to enter into and perform this Agreement. (h) It has been duly authorized to operate and to do business in all places where it will be required to conduct business under this Agreement; that it has obtained, at no cost to the Board, all necessary licenses and permits required in connection with this Agreement, and that it will fully comply with all laws, decrees, labor standards, and 11
  12. 12. regulations of its domicile, and wherever performance occurs, as is necessary to and during the performance of this Agreement. (i) It has no present interest, nor shall it acquire any interest, which would conflict in any manner with its duties and obligations under this Agreement, provided that nothing in this Agreement shall limit or restrict the right of any director, officer, or employee of the Manager to engage in any other business or to devote his or her time and attention in part to the management or other aspects of any other business or to render services of any kind to any other corporation, firm, individual, or association. (j) All investments shall constitute Permitted Investments as defined in Section 1(c) of this Agreement and shall be made pursuant to the Investment Policy as defined in Section 1(d) of this Agreement. (k) It has in place and will maintain sufficient procedures and capabilities to ensure the timely and accurate backup and full recovery for all computers and other data storage systems related to this Agreement. (l) That all representations of the Manager contained it its proposal dated *** **, 2005 to the Treasurer are incorporated by reference as a part hereof the same as if fully set out herein. Section 3. Effective Date and Term: The effective date of this contract is ________ 1, 2005, and it will continue in effect until ___________ 31, 2010, or when terminated according to Section 10 of this Agreement, whichever shall first occur. Section 4. Manager Services. (a) The Manager shall serve as a ________________ Manager for the Trust Fund and shall develop investment portfolios and make recommendations to the Board relating to the direction and management of the investment and reinvestment of that portion of the Trust Fund assets managed by the Manager and any additions thereto. The services of the Manager shall be rendered in accordance with the Investment Policy of the Board and all applicable Alabama statutes and constitutional provisions. The Manager shall have only such duties with respect to the Trust Fund as are set forth in this Agreement and the Investment Policy. (b) The Manager shall have independent discretionary authority with respect to investment of the ___________ portion of the Trust Fund subject to the Investment Policy and such other written limitations as the Board may impose. The Board shall establish the portion to be managed and from time to time may modify such portion. (c) The Manager shall provide performance and other data pertaining to the Trust Fund that can be used by the Board and any consultants retained by the Board to evaluate the Manager’s services. This data shall be furnished to the Consultant quarterly or more often if requested by the Board or its Chairman. 12
  13. 13. (d) The Manager shall provide quarterly management reports in its customary format or such other frequency or format as may be reasonably required by the Board. The Manager shall include in these reports all financial and performance information and data as specified in the Investment Policy. (e) The Manager shall keep and maintain comprehensive records of all transactions relating to the Trust Fund assets under its management, and such records shall be made available at all reasonable times to the Board and persons designated by the Board. . (f) The Manager shall document all investment transactions with the Custodian in accord with usual and customary standards of practice, the terms of this Agreement and to confirm all executed transactions for custodial account records. (g) The Manager shall utilize specific brokers or dealers as may be directed by the Board, provided that such direction shall be for the exclusive purpose of providing benefits to account participants and beneficiaries and shall not violate federal or state laws related to “prohibited transactions” or “parties-in-interest.” (h) The Manager shall make decisions on proxy voting unless such decisions are expressly reserved to the Board or a named fiduciary of the Board. The Manager will promptly and timely furnish the Board any information or documents which concern lawsuits involving assets under its management or securities presently or formerly held in the Trust Fund, or the issuers thereof, including actions involving bankruptcy. Time is of the essence for all legal controversies and disputes. Section 5. Ownership of Data: The Board shall own all materials and data produced by or on behalf of the Board under this Agreement. Section 6. Taxes: The Manager, including its agents and assignees are solely responsible for, and shall pay all federal, state, or local taxes that become payable as a result of this Agreement; and, shall hold harmless, defend and indemnify the Board, it’s officers, and the State of Alabama in regard thereto. Section 7. Standard of Performance: (a) The Manager shall discharge its duties under this Agreement in accord with the Investment Policy including but not limited to recognition and performance of its role as a fiduciary of the Trust Fund. (b) The Manager shall discharge its duties under this Agreement and will use reasonable care in performing its obligations under this Agreement. 13
  14. 14. (c) Manager will be liable for actual damages to the extent they result from Manager’s negligent, reckless, willful misconduct, fraud, or deception in performing its duties as set out in this Agreement Section 8. Public Access /Confidentiality: All documents, papers, letters, or other materials relating to this Agreement that are made or received by the Manager in conjunction with this Agreement, and which are required by law to be maintained, shall be made available for public access and for audit purposes for the period of time so designated by law and by the Board during and after termination of this Agreement. In all other circumstances, all information furnished by either party to the other shall be treated as confidential and shall not be disclosed to third parties except as required by law or upon the written agreement signed by each party to this Agreement. Section 9. Compensation and Expenses: The Manager shall be entitled to receive quarterly compensation for its services as follows: Investment Per Annum First $25,000,000 Basis Points Over $25,000,000 Basis Points (a) Fees shall be payable based upon the fair market value on the last business day of each quarter as reported by the Custodian appointed in accordance with Section 26 of this Agreement. The fee for the initial period shall be prorated. If the Manager shall serve for less than the whole of any quarter period, its compensation as determined herein, shall be calculated and shall be payable on a pro rata basis for the period of the calendar quarter for which it has served as Manager. No cash or securities due to or held for the Trust Fund shall be paid or delivered to the Manager except in payment of the fees properly payable to the Manager pursuant to specific terms of this Agreement. (b) The Manager shall submit quarterly invoices for the fees agreed upon in this Agreement to the Custodian who shall promptly pay the Manager from the income earned on the Trust Fund_______________ under the Manager’s control. The Custodian is authorized to deduct such fees and to remit payment to the Manager before the Custodian pays the net income to the Trust Fund. The Manager shall provide a detailed accounting of its fees paid under this provision to the Director of College Savings Programs on a quarterly basis and at such other times and in such form as the Director of College Savings Programs may require. Section 10. Termination, Resignation, or Removal: The Manager may resign at any time by giving thirty (30) days written notice to the Board. The Board may remove the Manager and terminate this Agreement at any time by giving thirty (30) days written notice to the Manager. However, the contract may be terminated immediately in case of a breach of the contract by the Manager or notice of a prospective sale or merger of Manager. Upon termination, resignation, or removal the Manager shall fully account for the administration of the Trust Fund assets up to the effective date of the termination, resignation, or removal. The Manager shall be entitled to receive its fees for the period through and including the effective 14
  15. 15. date of the termination, resignation, or removal. There shall be no sale or purchase of securities during the 30-day notice period of this paragraph except upon the written authorization of the Board. Section 11. Disposition of Files: The Manager shall immediately upon request turn over and deliver to the Board copies of all data, reports, files, documents, and other tangible materials held by the Manager that contain data or other information relating to the Trust Fund upon termination of this Agreement. The Manager shall not directly or indirectly preserve or maintain any copies, images or other intangible embodiments of such data or other information in computer memory or other electronic applications or devices, or through any other information storage media of any kind or description except as may be required by applicable federal or State of Alabama laws, rules and regulations. Section 12. Amendment: Any amendment to this Agreement shall be in writing executed by both parties with the same formality of this Agreement and in strict compliance with all applicable federal or State of Alabama laws. Section 13. Assignment: This Agreement is not assignable in any part, manner or circumstance. Any attempted assignment is simultaneously void and shall constitute the simultaneous termination of this Agreement. Section 14. Indemnification: (a) The Manager is designated and shall act as an independent contractor and not as an employee of the Board in the performance of all the tasks and duties of this Agreement. The Manager shall indemnify, defend, and hold harmless the Board, its members, officers, and the State of Alabama from all claims, suits, judgments, or damages including litigation costs and reasonable attorneys’ fees The Manager is entitled to prompt and timely notice of any third party claims for which indemnity is sought and shall be given the opportunity to participate in the defense of such claims. (b) No individual employee or agent of the State of Alabama shall be subject to or have any personal liability for the terms and conditions of this Agreement. The Manager, and on behalf of its assigns and successors, hereby waives, for all purposes, any claims now apparent or which may hereafter arise against any agent or employee of the State of Alabama for personal liability of said agent or employee on behalf of the State of Alabama including its various agencies, boards, commissions, and departments. Section 15. Jurisdiction and Venue: The validity, interpretation, and performance of this Agreement shall be controlled and construed under the laws of the State of Alabama. Jurisdiction and venue shall be in Montgomery County, Alabama for any action brought which relates to this Agreement. The sole remedy available to Manager for settlement of any and all disputes arising under the terms of this Agreement shall be limited to the filing of a claim with the Board of Adjustment for the State of Alabama. Any claims against Manager will be resolved in federal or state court in Montgomery, Alabama pursuant to Alabama law. Manager and Board agree that for any and all disputes arising under the Agreement, when considering settlement of 15
  16. 16. such disputes, to utilize appropriate forms of non-binding alternative dispute resolution including, but not limited to, mediation by and through the Attorney General’s Office of Administrative Hearings or where appropriate, private mediators. Section 16. Waiver. The failure of either party to object to, or to take affirmative action with respect to any conduct or performance of the other that is, or may be, in violation of the terms of this Agreement shall not constitute a waiver of the violation or breach, or of any future violation or breach. Section 17. Quality and Timeliness of Services: The Manager has ultimate responsibility for insuring and guaranteeing the quality and timeliness of the services to be performed under this Agreement, notwithstanding any prior approval requirements which may be reserved to the Board under this Agreement Section 18. Audits: The Board reserves the right to designate persons to conduct periodic audits of the Manager’s procedures and activities at the Board’s expense. Section 19. Intent: Time is of essence in undertaking the provisions of this Agreement. Section 20. Expenses: The Board shall not be responsible for the payment or reimbursement of any expenses, including travel, incurred by the Manager. Section 21. Captions: The captions or headings in this Agreement are for convenience only and in no way define, limit, or describe the scope or intent of any provisions or sections of this Agreement. Section 22. Publication: The Board is the only entity authorized to issue information for public knowledge or news releases for publication concerning the terms or performance of this Agreement. Section 23. Merit System Exclusion: The Manager is an independent contractor and nothing contained herein shall constitute or designate the Manager, or any of its agents or employees, as agents or employees of the State of Alabama or the Board. The Manager, it agents or employees shall not receive any fringe benefits afforded merit system, appointed, or other regular, full or part-time employees of the State of Alabama. Section 24. Notices: All notices, requests, demands or other instruments which may be, or are required to be, given by either party to this Agreement, shall be in writing and shall be deemed given if hand delivered with a signed receipt for the Board, or sent by facsimile, and confirmed as received for the Board, or served by an law enforcement officer or process server appointed by a valid court order, or by electronic communication (“e-mail”) with a received electronic receipt for the Board or, if mailed on the fifth business day following deposit of such notice in the U. S. Mail, postage prepaid, by certified or registered mail, return receipt requested, to the other person at the address listed below, or at such other address which either party may so notify the other of in writing. 16
  17. 17. Notices sent to Manager will be addressed to: (Voice (Facsimile) (E-mail) Notices sent to the Board will be addressed to: The Honorable Kay Ivey Alabama State Treasurer State Capitol Building Room S-106 600 Dexter Avenue P.O. Box 302510 Montgomery, AL 36130-2510 334-242-7500(Voice) 334-242-7592(facsimile) With a copy to the Office of General Counsel J. Michael Manasco, General Counsel State Capitol Building S-106 600 Dexter Avenue P.O. Box 302510 Montgomery, AL 36130-2510 334-353-0050 (Voice) 334-353-0056 (Facsimile) Mike.manasco@treasury.alabama.gov Section 25. Personnel: The Manager represents that it has or will secure, at its own expense, all personnel required to perform the services to be preformed pursuant to this Agreement. Such personnel shall not be employees of, or have any contractual relationship with, the Board. The Manager shall perform all services required hereunder. The Manager and its personnel shall be fully qualified and shall hold such authorizations, permits, licenses, and certifications required to perform such services under federal, state, and local law, or as may reasonably be required by the Board. . Section 26. Custodian: The Board shall appoint a Custodian to take and have possession of the assets in the Trust Fund. The Manager shall not be the Custodian. The Manager shall promptly furnish copies of confirmations of all executed transactions to the Custodian for all assets managed by the Manager. Section 27. Non-Exclusive Contract. The Board recognizes that the Manager acts as adviser or manager to other clients and may give advice, and take action, with respect to any of those other clients that may differ from the advice given, or the timing or nature of action taken, with respect to the Trust Fund. The Manager has no obligation to purchase or sell for the Trust 17
  18. 18. Fund, or to recommend for purchase or sale by the Trust Fund, any security that the Manager, its principals, affiliates, or employees may purchase or sell for themselves or for other clients. Section 28. Beneficiary of Agreement: The execution and performance of this Agreement is for the benefit of the Trust Fund and not for any other person or entity. Section 29. Severability: If any provision of this Agreement shall be held to be void or inoperative by a court of competent jurisdiction, such provision shall be deemed severed from the remaining provisions of this Agreement, and the remaining provisions shall remain in full force and effect. Section 30. Entire Agreement This Agreement constitutes the entire understanding of the parties and supersedes any prior express or implied written or oral agreements between them. Section 31. Not a Debt of the State: This Agreement shall not be construed as a debt of the State of Alabama as prohibited by Section 213, Alabama Constitution 1901, as amended by Amendment 26. IN WITNESS WHEREOF the Board and the Manager have executed this instrument as of the day and year first below written. BOARD OF TRUSTEES OF THE PACT TRUST FUND By: ______________________________ DATE: ______________ Kay Ivey, State Treasurer and Its Chairperson INVESTMENT MANAGER By: ____________________________ DATE: _____________ Its ______________________________ APPROVED: _________________________________ DATE: ________________ Bob Riley, Governor, State of Alabama 18
  19. 19. EXHIBIT B MINIMUM QUALIFICATIONS AND MISCELLANEOUS INFORMATION 1. Information Regarding Manager Name: Address: Phone Number Fax Number: 2. My Company is duly registered with the Securities & Exchange Commission pursuant to the Investment Advisors Act of 1940, as amended, and the registration is current. Y Yes____ N No____ 3. My Company is qualified with the Secretary of State to conduct business in the State of Alabama. (To download the form for a “Certificate of Existence”, access www.sos.state.al.us, corporations division, or call 334-242-5324 to request the form.) Y Yes____ N No____ 4. The portfolio manager assigned to the Treasurer’s account has managed domestic fixed income portfolios for at least three (3) years, as of December 31, 2004. Y Yes____ N No____ 5. My Company has managed domestic fixed income portfolios for at least three (3) years, as of December 31, 2004. Y Yes____ N No____ 6. My Company does manage at least $350,000,000 (preferably $500 million) in domestic core fixed income/core plus fixed income as of December 31, 2004. Y Yes____ N No____ 7. My Company and its personnel have all authorizations, permits, licenses, and certifications as may be required under federal, state or local law to perform the services specified in this RFP at the time it submits a response to the RFP. Y Yes____ N No____ 8. My Company will carry errors and omissions insurance or comparable instrument to cover negligent acts or omissions. Y Yes____ N No____ 9. My Company does comply with all applicable AIMR performance presentation standards. Y Yes____ N No____ 10. My Company maintains sufficient procedures and capabilities to ensure the timely and accurate backup and full recovery for all computers and other data storage systems related to the Treasurer’s account. Y Yes____ N No____ 19
  20. 20. 11. My Company has a company policy and practice of equal employment opportunity and non-discrimination based on race, creed or gender. Y Yes____ N No____ 12. My company has an office location in Alabama. Y Yes____ Provide City ____________________ N No____ 13. Primary Contact Concerning the Proposal: Name: Address: Phone Number: Email: 20

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