i see inflation coming back eventually. you can't put a trillion dollars out there and not expect inflation to come back. for those in favor of this, one of the issues you have to reflect upon is is how to deal with all the inflation sensitivity that you are giving up. which is why i'm saying if you can have renewables that can substitute for the fossil fuels that can move in that direction. i think we need to look at the sensitivity with inflation. jed, i talked to you several times and your colleagues about where we would get this back and there is no word whatsoever. going forward i would like to hear a legitimate argument stating how we would recover the

inflation sensitivity we are giving up selling our oil stock. the other point regarding the worst offenders. that gets my attention because we can't pull put this in put all of these oil stocks in the same arena we have to deal with those and single out the worst offenders. we have to look at the companies and voting out our proxies. i would like the comments about getting together with the other bigger pension funds and maybe with the shares maybe we'll create our own oil company, who knows. something like that. >> or our alternative source of negligent. >> -- energy. >> i think this is a complicated issue and certain issues we have to deal with with regard to performance for

the sake of the fund. those are my thoughts. thank you for the chance to >> public speaker: -- the maker of the motion. this is in no way any sort of a you turn. this is really about trying to slow things down so what we do is effective. as a board, the board voted for level two. engagement. i thought it was premature. i thought we should slow it down to see how we are at level one. that said, the board voted for level two. level two is not going to be effective if we sell away our stocks and we don't have a seat at the table. if you want a seat at the table you have to buy a ticket. we need to have the ability to vote. this board needs to make a decision, because what i'm hearing, we are all over the place.

this feels good, let's do this. as a board we voted for level 2. let's do level 2 and do it well. we have started with a committee that can look at things as a way of the board that has not. i know it seems like we are running from this and all of a sudden we are doing the opposite of with a we have done in the last couple of years. you voted for level 2. let's do it. let's not make a u-turn and level two. let's do that and give the committee a chance to do the work and identify the worst offenders and have a real strategy. i'm going to give you a story here. there is a group here in san francisco. i'm not going to give their names. >> why not? >> it called the center for environmental health and they have been working with various groups including firefighters and what they have

said is look, there are all of these toxic chemicals called fire retardants and now firefighters are being exposed to these chemicals when they go into these houses. their cancer risk is higher. what they said is how do you fix this? you can't go to washington and complain about and sell stocks. >> you have to change the behavior. you can go to facebook and google and tell people not to buy fire retardant furniture. now consumers can get furniture without fire retardant and that's a way to look at it. i think that's what thissesg is trying

to do is is trying to get a better way to go after this. maybe there are other ways of doing this and really being successful at level 2 to reassesses. this is not a u-turn but a way to be effective to vote what we have already voted to do. that's why it's important to table this to talk about these issues. >> what we talked about is if we can have much larger of a voice to discuss these issues. if we do something small, we don't have that much of a voice. if we have a billion dollars, we can do it more than one way. stanford, it's not making the i am in fact we could. not to say it isn't making a

statement but we can put this impact together. we took the lead to go to the conference and say all of you large $200 billion pension funds, we should be having your money and your voice with us to do it together. that doesn't happen over night and jed, that's exactly what we talked about. so i think we are moving forward in that way and i think that will be a better way. it will have a much larger impact and it maybe that we all believe that we want to dives outed of the three most e egregious companies and the ability to do that. again t dialogue is if we leave, we want to make sure we have a voice. we are trying to understand what do we do if we do that. i think we are moving in the right direction. actually it's a big step to get these people

together. >> commissioner bridges? >> just to address jordan's comments. i think that's great. but what would a year about -- be at no level commitment. >> i think stanford has invested in a company. i have always said is that is to divest the world's kochlz companies. i think if we do it together. it will have a bigger impact than just randomly including all of these companies in an index fund than

the money we could be moving in one direction. >> factually, we are not divesting. is that correct. the calendar item does not say we are getting out of oil to put the $100 million into this fund. it's silent to that. is that accurate? that's how i'm reading the calendar fund? >> you make a good point. if the funds came from cash, then i believe would you be correct. if the funds came from sp 5 or with oil investments. >> the calendar as presented does not have a divestment component to it. so where it's coming from is field and facts. your calendar does not have that information, is that correct? >> that is accurate.

>> when he said where is the money coming from, you said most likely from cash because they put the contribution in it. i just want to be straight. no one should be persuaded their own way by being categorized if we are divesting. the right way to put the $100 million is to take the $100 million for oil and move it over. but staff does not want to do that. i have been assignment to that. the only thing i will add, i think this whole thing about us starting to work with other agencies and having a voice together. in the long run, i really like the associations, but those are big leaps. we have to have real direction

from this body to say we are going to join in with them. we are going to decide who the representative is either staff or us. we have to decide whether we are going to fund the organization or not. but let me a sure you something, if we are going to go down that road, let's go down that road in both angles, one and two how to make money and double our efforts to lower fees. i bet if we are going down that road, we are going to have a bigger debate because staff is not going to want to share with calpers. everyone wants independence on investment, if you want independence on investment to make a statement and do things rights, i think our statement should be independent. let's make our statement and join those groups and sent the representative from here to sit on their bodies and advocate what we want. nobody should show up in some

meeting on their own and try to figure out what we want. we will tell our representative what we expect that person to advocate on those groups. so it's a much bigger thing and at the end of the day, i promise you these groups are not going to form in 60 or 90 days. i will keep pushing you and at the next meeting going forward as i push this on the table, i will ask staff for a time to be. i have a list on the table of the worst offenders and would like to chief to give me an idea of when we expect to see the worst offenders. >> all right, we are going to continue on this motion. we've already

had public comment. the motion is to table this discussion in the the esg committee meets. can you do a roll call. >> commissioner cohen, no, commissioner bridges, no, mei berger, no, driscoll, no, commissioner make ras, no, jordan, no, stans bury. >> the motion fails. >> i will put a motion for staff consideration. >> could you please do a roll call on this vote. >> commissioner cohen, mei berger, jordan, pakras, stans bury. >> could you recount the vote for me. >> i don't have that. >> i'm sorry. >> thank you, motion passes 4-3.

all right. mr. clerk, could you call the next item, please. >> item seven. an action item review and approval of amended proxy voting policy, policy on environmental related shareholder proposals. >> colleague, at the last meeting you asked staff to come forward on how to amend to give the voters more flexibility to vote for shareholder proposals around environmental issues and the proxy consultant on iss what you see before you is their recommended policy to cover a broad range of esg issues on the proxy voting process. what this is is a top level screen sets that if the proxy item touches on environmental issues, the

preponderance of evidence of us having the retirement system before the proposal with more information and so on. it is staff's recommendation that this amendment to proxy policy be approved and when it's time to review the existing policies we will amend the individual policies on environmental issues. >> thank you. any comments?

>> we brought to you in february, march, april some discussions about the proxy guidelines as expressed and as they are implemented we think this is good and we support your adopting it. also in february when we were looking at the point by point policy i remember there were triple digits of those. i did want to point out the kind of shaming that we were doing relative to the proxy guidelines was pointing out that despite adopting level one and fossil fuels in february 2014 that we were still taking proxy votes even as recently as a month ago and the board wasn't doing anything about that and the staff wasn't doing anything about that and it took someone like me to do something about that and it's not way

you want this agency to work. one 1/2 years later we are finding what level one was meant to do with this vote today. i would hope that you keep that perspective in mind when thinking about how you are acting on level two and how you are taking seriously the kinds of actions like the ones we just saw. 4 months later after the level 2 vote as far as i know nothing has happened except for applying for membership on ncr. no other report to levee on the assets for the next proxy season. no comment on other engagements on public statements we are going to be making. to let's do it good. i agree with that.

with level one we are narrowing it down a year 1/2 after the vote. i'm concerned about level two and how that's implemented in a more expeditious fashion. these guidelines are a good step to making sure we aren't moving back ward and we keep moving forward and i appreciate it, thank. >> thank you. any other public comment? >> are most of these topics going to be discussed? >> we'll be sending out the agenda by friday and there will be a discussion. the first meeting of the committee and to discuss the goals and approach to take which could include these types of discussions. karen and i are

taking copious notes because i think it needs to be condominium -- continued at the committee. >> to decide who and how is our best bet. >> thank you, is there a motion to accept staff's recommendation. excuse me. is there a motion to accept staff's recommendation. >> so, did i hear you correctly. did i hear you say you are taking copious notes because you are taking this to the gsg committee? >> if it appears to us there is interest in certain topics from the board and we want to make sure that esg committee is the place to entertain these types of ideas. at the first meeting we had some information we wanted to present, we'll also make sure we schedule an open item agenda

to direction you want staff to take. >> i don't have any problem with this as it's written. again, i think that some of these things could have waited a week for the esg to have taken up and we are a little erratic on some of the things we do. we don't have a sharp focus. if we want to wait on this is fine. at the end of the day it's great to get more information on the companies that we have invested to make better decisions and forces them to make better decisions to be accountability. if someone wants to make the motion, i will support that. >> is there a motion and second? all right. we have a motion and second. all in favor say, "aye". >> aye. >> any opposed? all right. the ayes have it. the motion passes. let's take

a 10-minute break, everyone. we will resume at the end of the meeting to verify that because the numbers i have seen they have done a superb job. >> they can. and we can get back to them. >> the 5-year number is 11.76 and 10-year number is 7.47. how about the benchmark for those. >> for the 5 years 4.94 for the barclays year advocate. so that's the performance related issue. in terms of changing ownership. this was reported to the board in 2011. this was 4 years ago. and just so we are clear on this, they sold at 50 percent interest to the

trident fund. can you tell me why this is resurfacing now four 1/2 years later. >> absolutely, if you look at the paragraph or two, you will see the investment period has ended. there is a prohibition on sale of which we and this was discussions with the partner at stone capital. the point he was making that in not too short a period of time they will be able to sell their interest from prima. without prima. this is an abundance of caution. we are aware of it. >> according to your report there is an absolute prohibition to sell their interest until january 2018. >> that is correct.

>> i don't see why it's relevant that they can't sell it until 2018. tell me why it's relevant now. >> we want more information and what is required for the staff to do more than due diligence and puts it on the manager to provide more information. what we want to make sure of is we are aware of all the fact even though you are correct on this is two 1/2 years away before that event. we feel it is prudent not only to inform senior management of staff and myself because mr. cue is the investment officer but to provide the opportunity for the board to be aware of these issues. that is to my perspective the primary purpose under design or review is that it is designed for staff and the manager to help us alleviate

concerns specific fully this case around organizational issues. >> do you have any concerns that greg white will no longer manage this portfolio. to me the issue is the cloth that to manage the portfolio that have achieved this. over the last 20 years, do you have any anxiety or concerns that he will no longer manage the portfolio in the future. >> what i understand there is a clause in the contract between prima and stone point that steven and his partner have remained for, i have to get back to you on the number of years. once that period ends, yes, that's going to be a concern because we are aware of greg's age also and something we are going to be exploring further when we do our complete due diligence with our consultant on prima. >> what do you mean about

greg's age. do you think at some point he's not going enjoy this anymore and giving it up. >> that's what we all do with fixed income managers. >> you have some anxiety that greg will no longer manage this portfolio. >> i don't have anxiety but he was the key person for this portfolio. >> it not based on any kind of discussions that you've had with him. >> right. >> moving on to the other comments of reporting. you state that the okay i'm reading on page 3 of staff's memo that says requirement for management agreement and investment plan to provide staff with reports regarding the portfolio, these reports have been late in and incomplete and you

cite the packet for the portfolio. can you expand on that and who is involved in that and the compliance for the full report and who is involved with that. if you can just walk us through that in terms of the way it is. >> sure, this was a request made to all the fixed income separate account managers around august and september of 2009. pima has sending these supports and two parts first with the compliance officer basically confirming that our portfolio is in the consultation of the guidelines. sometimes there are down grades. so the portfolio technically is out of compliance and it's supported by what typical in itself is a

spread she'd and what is out of compliance and reduce the amount of action. >> are you saying their mandate is investment grade and if it falls below that. >> this is an example of our high yield, the breakdown. the example is they would have to send a compliance letter which their cfo signs off on whether our portfolio is in compliance with the guidelines. if it's not in compliance with the guidelines they are required to disclose what is out of compliance. so prima has sthent to us in the past on a monthly basis. we have asked them to send it to us on a monthly basis. but over the past few months i have had to remind them to send us these reports. i had a discussion about the lateness and incompleteness of this report. >> that what you were talking about, does it relate to the service?

>> no. the fact that the service has been delayed is not related to the servicer for the mortgage? >> no. >> do you have an indication of what the cause was in terms of the delays? >> as far as the remittance report there was a change -- the compliance report? >> no, i don't know why. it's been late. i have had to follow up with them several times but i don't know why. >> have they been forthcoming with their responses? >> once i followed up, yes. >> were they involved. >> we asked them to be in the distribution earlier this year. >> let's talk about the remittance report which states prima is required to include the report and report the information to staff. can you

state specifically why this is included in your memo, please. >> sure. this is a report where prim an is required to have severance go and this is included in the ima dated to 1995. investment management agreement. they south africa -- serve a report and to staff. we have not received a report for 6 months. i had followed up with prima asking why we have not received this. it turnout the reason we had not is there was a change in staff at midland. the person responsible for this report had left and did not notify them that san francisco was to

receive this report. >> once it was pointed out, they were forthcoming going through the remittance report. >> yes, but this kird -- occurred with the the last month. >> the other issue, page 3 of your memo regarding the price are differences between the two parties. the pricing doesn't concern me because if it's a high price, it adjust over time particularly if it's sold. the concern i have is having to do with the different reporting between northern trust, the bank and between prima. prima has provided -- for the year-ending 2012-2013-2014 prima has provided audited financial

statements. there were no caveats audit statements and no caveats. i forget the terminology. unqualified financial statement. do you have any information as them being stated as qualified financial statement? >> no. i do not. we rely on northern trust to provide, northern trust is our custodian and therefore we have to rely on them to provide the pricing on our portfolio for prima and in the prima's report is more important to receive to help us monitor the differences. >> it's not so much the pricing of the issue because over time they are going to resolve themselves and the