9 I WY@h69-d@-. 28-135.pdf · 9 I WY@h69-d@- \$&y P.O. Box 2950 HagHtfia, Guam 96932 TEL: (611) 472-8931 FAX: (671) 477-4826 EMAIL: governo&nail.govgu Felix Perez Carnacho Ga,ernm

$Page 1: 9 I WY@h69-d@-. 28-135.pdf · 9 I WY@h69-d@- \$&y P.O. Box 2950 HagHtfia, Guam 96932 TEL: (611) 472-8931 FAX: (671) 477-4826 EMAIL: governo&nail.govgu Felix Perez Carnacho Ga,ernm$
9 I

WY@h69-d@- P.O. Box 2950 HagHtfia, Guam 96932

\$&y TEL: (611) 472-8931 FAX: (671) 477-4826 EMAIL: governo&nail.govgu

Felix Perez Carnacho Ga,ernm

Kaleo Scott Moylan LKUteMt2tGovm

The Honorable Mark Forbes Speaker Mina' Bente Ocho Na Liheslaturan Gudhan 155 Hessler Street Hag&na, Guam 96910

Dear Mr. Speaker:

Transmitted herewith is Bill No. 295(EC), "AN ACT TO AMEND SECTION 8158, ARTICLE 1, CHAPTER 8, TITLE 4 OF THE GUAM CODE ANNOTATED, RELATIVE TO AUTHORIZING THE BOARD OF TRUSTEES TO INVEST UP TO THIRTY PERCENT (30%) OF RETIREMENT FUND ASSETS AT COST IN INVESTMENT FUNDS SUCH AS INVESTMENT TRUSTS, MUTUAL FUNDS, COMMON TRUST FUNDS AND COMMINGLED FUNDS," which I signed into law on July 11,2006, as Public Law 28-135.

Sinseru yun Mugdhet, e FELIX P. CAMACHO I Mugu'liihen Gudhan Governor of Guam

Attachment: copy attached of signed bill

cc: The Honorable Eddie Baza Calvo Senator and Legislative Secretary

~ a f e : ?/Prjcr Time: c{ ." : m 9 w -.

Wec'd bl;: r2 v .' -.".__----.I.. _ -. ._ _ Print i'<a;.:ip: &p -- ----

Senator Edwerd J.B. Calve i SECRETARY OF 'I'E IE I,EGISLA'TURE

! RECI31 PT I

\kb !

Rcv'd by: --

Print Name & Initial i

Time: 3 JSS L , ; t r. >-% hL

MINA? BENTE OCHO NA LIHESLATURAN GUAHAN TWENTY-EIGHTH GUAM LEGISLATURE

155 Hessler Place, Hagitiia, Guam 969 10

FILE COPY June 28,2006

The Honorable Felix P. Camacho I Maga'lahen Guiihan Ufisinan I Maga'lahi HagBtfia, Guam 96910

Dear Maga'lahi Camacho:

Transmitted herewith are Bill Nos. 182(EC), 256(LS), 268(EC), 278(EC), 295(EC), 296(EC), 308(EC), 309(EC) & 314(EC); and Substitute Bill Nos. 134(EC), 236(EC) & 307(EC) which were passed by I Mina'Benfe Ocho N a Liheslaturan GuBhan on June 26,2006.

Sincerely,

EDWARD J . B CALVO Senator and Secretary of the Legislature

Enclosures (12)

Director 472-3409 Fax: 472-35 l0 Chief Fiscal Officer 472-3484 Personnel 472-3520 . Protocol 472-3499 Archives 472-3465 Clerk of Legislature 472-3464

I MINA'BENTE OCHO NA LIHESLATURAN GUAHAN 2006 (SECOND) Regular Session

CERTIFICATION OF PASSAGE OF AN ACT TO I MAGA'LAHEN GU&ZAN

This is to certify that Bill No. 295 (EC), "AN ACT TO AMEND SECTION 8158, ARTICLE 1, CHAPTER 8, TITLE 4 OF THE GUAM CODE ANNOTATED, RELATIVE TO AUTHORIZING THE BOARD OF TRUSTEES TO INVEST UP TO THIRTY PERCENT (30% OF RETIREMENT FUND ASSETS AT COST IN INVESTMENT FUNDS SUCH AS INVESTMENT TRUSTS, MUTUAL FUNDS, COMMON TRUST FUNDS AND COMMINGLED FUNDS," was on the 26th day of June, 2006, duly and regularly passed.

Attested: 1 Speaker

Edward J.B. Calvo Senator and Secretary of the Legislature

This Act was received by I Maga'lahen Gudhan this day of ,2006,at

1

Assistant Staff Officer Maga'lahi's Office

/ FELIX P. CAMACHO I Maga'lahen Gudhan

Date: 0/ qd& Public Law No. 28-135

MINA'BENTE OCHO NA LIHESLATURAN G U ~ N 2006 (SECOND) Regular Session

Bill No. 295 (EC) As amended on the Floor

Introduced by: Mark Forbes A. R. Unpingco B. J.F. Cruz F. B. Aguon, Jr. J. M.S. Brown Edward J.B. Calvo Mike Cruz L. F. Kasperbauer R. Klitzkie J. A. Lujan A. B. Palacios, Sr. R. J. Respicio Ray Tenorio J. T. Won Pat

AN ACT TO AMEND SECTION 8158, ARTICLE 1, CHAPTER 8, TITLE 4 OF THE GUAM CODE ANNOTATED, RELATIVE TO AUTHORIZING THE BOARD OF TRUSTEES TO INVEST UP TO THIRTY PERCENT (30%) OF RETIREMENT FUND ASSETS AT COST IN INVESTMENT FUNDS SUCH AS INVESTMENT TRUSTS, MUTUAL FUNDS, COMMON TRUST FUNDS AND COMMINGLED FUNDS.

1 BE IT ENACTED BY THE PEOPLE OF GUAM:

2 Section 1. Legislative Findings and Intent I Liheslaturan Guiihan finds

3 that the statutory restrictions governing investment of funds held in trust for the

4 benefit of Defined Benefit Plan members and beneficiaries effectively exclude

investments in lower cost investment vehicles such as passively-managed index funds.

I Liheslaturan GuHhan hrther finds that institutional investments in common trust

funds and commingled funds often have lower costs than investments in mutual fbnd

vehcles, with lower or little added risk.

I Liheslaturan Guhhan therefore intends to authorize the Trustees of the

Defined Benefit Plan to invest up to thirty percent (30%) of Retirement Fund assets at

cost in investments held in lower-cost investment vehicles to improve the overall

return of the investment portfolio for the benefit of the Retirement Fund as a whole. I

Liheslaturan GuHhan further intends that the thirty percent (30%) quantitative

limitation will pertain solely to those investment vehcles described in Section 8 158

(investment funds) and is not intended to apply to, or impose further limits on, any of

the other quantitative limitations in the Defined Benefit Plan statute pertaining to

direct investments in specific asset classes such as common or capital stock, preferred

stock, or bonds. Conversely, none of the quantitative limitations (e.g., maximum

percentage investments) or qualitative requirements (e.g., dividend payout

requirements) expressly applicable to direct investments in common or capital stock,

preferred stock, or bonds are intended to apply to, or impose further limits on, the

quantitative limitations (thirty percent (30%) maximum) or qualitative requirements

for assets held in the investment fund vehicles described in Section 8 158.

Section 2. Section 8158, Article 1, Chapter 8, Title 4 of the Guam Code

Annotated is hereby amended to read:

"$8158. Investment Funds. (a) Common or capital shares

of any investment trust or mutual fund registered with the Securities

and Exchange Commission under the Investment Company Act of

1940, as from time to time amended, provided that the cost of the

shares acquired is no greater than their net asset value on the date of

acquisition.

(b) Units in any common trust fund or commingled fund

maintained by a custodian meeting the requirements of Title 4 G.C.A.

88144 and advised or sub-advised by an investment management

organization meeting the requirements of Title 4 G.C.A. $8 145.

(c) Preferred shares of any investment trust or mutual h n d

registered with the Securities and Exchange Commission under the

Investment Company Act of 1940, as from time to time amended,

provided that:

(1) The number of issued and outstanding common or

capital shares multiplied by their asset value per share, plus;

(2) The number of issued and outstanding preferred

shares multiplied by thelr par or stated value, is at least fifty percent

(50%) greater than the number of issued and out-standing preferred

shares multiplied by their par or stated value. For purposes of this

Section, the number of issued and outstanding shares shall be taken as

of the latest available public report of such investment trust or mutual

fund. Preferred shares as described in this Subsection shall not be

subject to the provisions of $8 156.

(d) The term 'net asset value' as used in t h s Section shall

mean the total quoted or estimated market value of all securities or

other assets owned, less that total of all determinable liabilities, as

reported by such common trust fund, commingled fund, investment

trust or mutual fund.

(e) Limitation:

(1) The investment in units, preferred, common and

capital stock of any one common trust fund, commingled fund,

investment trust or mutual find shall not exceed five percent (5%) of

the Fund at cost; and

(2) The aggregate of all investments under this Section

shall not exceed thirty percent (30%) of the Fund at cost."

Section 3. Effective Date. This Act shall become effective upon enactment.

Section 4. Severability. Ifany provision of this Act or its application to any

person or circumstances is held invalid, the invalidity shall not affect other provisions

or applications of this Act which can be given effect without the invalid provision or

application, and to t h s end the provisions of t h s Act are severable.

I MINA'BENTE OCHO NA LIHESLATURAN GUAHAN 2006 (SECOND) Regular Session

VOTING SHEET Date: b[2&b&7

Bill No. c?+?S(LZ]

Resolution No. Question:

NOT OUT VOTING! DURING ABSENT

NAME ABSTAINED ROLL CALL lJ

J , "% -:

AGUQN, Frank B., Jr. -*-

,* LA-

BROWN, Joanne M.S.

TOTAL

CERTIFIED TRUE AND CORRECT:

Clerk of the Legislature

* 3 Passes = No vote

EA = Excused Absence

1 Mina' Bente Ocho Na Liheslaturan Guahan The 28th Guam Legislature

155 Hesler Place Hagatna, Guam 9691 0

Office (671) 472-3407 a Fax (671) 472-3510

Speaker Mark Forbes

Speaker Mark Forbes I Mina' Bente Ocho Na Liheslaturan Guahan 155 Hesler Place Hagatna, Guam 96910

The Committee on General & Omnibus Matters to which Bill No. 295 was referred, wishes to report its findings and recommendations TO DO PASS BILL No. 295 (EC): "An Act To Amend Section 8158, Article I , Chapter 8, Title 4 Of The Guam Code Annotated Relative To Authorizing The Board Of Trustees To Invest Up To Thirty Percent (30%) Of Retirement Fund Assets At Cost In Investment Funds Such As Investment Trusts, Mutual Funds, Common Trust Funds And Commingled Funds".

Transmitted herewith for your consideration and action is our committee report on the above subject matter.

The voting record is as follows:

TO PASS

,@ NOTTO PASS

,& TO REPORT OUT ONLY

(d ABSTAIN

-6 INACTIVE FILE

Copies of the Committee Report and ot Yu'os ma'ase for your attention to this

Attachments Il

MEMORANDUM

TO: Committee

FROM: Chairman

SUBJECT: Committee deport- BILL No. 295 (EC): "An Act To Amend Section 8 158, Article 1, Chapter 8, Title 4 Of The Guam Code Annotated Relative To Authorizing The Board Of Trustees To Invest Up To Thirty Percent (30%) Of Retirement Fund Assets At Cost In Investment Funds Such As Investment Trusts, Mutual Funds, Common Trust Funds And Commingled Funds".

Transmitted herewith for your information and action is the report on Bill No. 295 (EC) from the Committee on General and Omnibus Matters.

This memorandum is accompanied by the following:

1. Committee Voting Sheet 2. Committee Report 3. BILL No. 295 (EC) 4. Public Hearing Sign-In Sheet 5. Fiscal Note/ Fiscal Note Waiver 6. Notice of Public Hearing

Please take the appropriate action on the voting sheet. Your attention and cooperation in this matter is greatly appreciated.

Should you have questions regarding the report or accompanying documents, please do not hesitate to contact me.

Thank you and si Yu'os ma'ase.

MARK FORBES

Attachments

COMMITTEE ON GENERAL AND OMNIBUS MATTERS

I M I N A ' B E N T E OCHO N A L I H E S L A T U R A N GUAHAN 155 HESLER PLACE, HAGATNA, GUAM 96910

An Act To Amend Section 8158, Article 1, Chapter 8, Title 4 Of The Guam Code Annotated Relative To Authorizing The Board Of Trustees To Invest Up To Thirty Percent (30%) Of Retirement Fund Assets At Cost In Investment Funds Such As

Investment Trusts, Mutual Funds, Common Trust Funds And Commingled Funds.

VOTING SHEET

SIGNATURE TO PASS

Mark Forbes, Chairman

ABSTAIN

J I Edward J.B. Calvo

Lawrence F. Kasperbauer, Ph.D.

MACTIVt FILE

NOT TO PASS

T O REPORT OUT OF

COMMITTEE

Jesse A. Lujan

Ray Tenorio

Michael Cruz, M.D.

Lou A. Leon Guerrero

Judith T. Won Pat

Benjamin J.F. Cruz

-

L

7 3(

1 Mina' Bente Ocho Na Liheslaturan Guahan The 28th ~ u a m Legislature

155 Hesler Place Hagatna, Guam 96910

Office (671) 472-3407 Fax (671) 472-351 0

Speaker Mark Forbes

WAIVER OF FISCAL NOTE

In accordance with 59 105 Title 2 GCA, I hereby certify that prompt committee action on Bill 295 is necessary to the proper conduct of legislative business. Therefore, I am waiving requirement of a fiscal note on Bill 295.

Speaker Bnd Chairman, Committee on General and Omnibus Matters

I MINA' BENTE OCHO NA LIHESLATURAN GUAHAN COMMITTEE ON GENERAL & OMNIBUS MATTERS

SPEAKER MARK FORBES, CHAIRMAN

COMMITTEE REPORT

ON

BILL NO. 295 (EC)

AN ACT TO AMEND SECTION 8158, ARTICLE 1, CHAPTER 8, TITLE 4 OF THE GUAM CODE ANNOTATED RELATIVE TO AUTHOMZING THE BOARD OF TRUSTEES TO INVEST UP TO THIRTY PERCENT (30%) OF RETIREMENT FUND ASSETS AT COST IN INVESTMENT FUNDS SUCH AS INVESTMENT TRUSTS, MUTUAL FUNDS, COMMON TRUST FUNDS AND COMMINGLED FUNDS.

I. OVERVIEW

The Committee on General and Omnibus Matters held a public hearing at 9:00 a.m. on May 03, 2006 in the Session Hall, I Liheslaturan GuAhan. Public notice was given to all media (see facsimile confirmation page) on April 26 and May 01,2006.

Senators present at the public hearing were:

Speaker Mark Forbes, Chairman Senator Benjamin J.F. Cruz, Member Senator Robert Klitzkie

11. SUMMARY OF TESTIMONY Individuals that appeared before the Committee to present oral and written testimony on the bill were as follows:

Ms. Paula Blas, Acting Director, Guam Retirement Fund, oral and written testimony in support of Bill No. 295. Ms. Blas said that Bill 295 will increase opportunity for investment and will also reduce the risk for diversifying funds. Ms. Blas presented written testimony (see attachments).

Mr. Terry Dennison, Investment Consultant, Mercer Investments, oral and written testimony in support of Bill 295. Mr. Dennison said that the intent of Bills 295 and 296 is to assist the fund by allowing additional investment vehicles to be part of the Retirement Fund's portfolio. Currently the Retirement Fund is using investment vehicles that have not changed since the 1950's. He further explained that since the passage of the current investment mandates the introduction of new investment vehicles that can provide better diversification and lower cost should be allowed to be part of the Retirement Fund's investment selection. He said that back then, people used to collect from dividends, today, that practice has changed. Mr. Dennison presented supporting documents in reference to investment opportunities.

Mr. Vicente Pangelinan, private citizen, oral testimony in support of Bill 295. Mr. Pangelinan said he is a member of the DC plan. Mr. Pangelinan said that he supports the theory behind Bills 295 and 296. He said he expects that there should be a greater fiduciary responsibility on the Retirement Fund, given the opportunity to invest in other investment vehicles, however, he cautioned lawmakers to act with due diligence when deliberating on these bills.

FINDINGS AND RECOMMENDATION The Committee on General and Omnibus Matters finds that Bill 295 lifts the restrictions on investment Funds held in trust by the Fund. Specifically, allowing the Fund to invest in lower cost investment vehicles such as index funds, common trust funds, and co-mingled funds that provide lower costs with little added risk to the Fund.

Accordingly, the Committee on General and Omnibus Matters to which BILL No. 295 (EC) was referred does hereby submit its findings and recommendations to 1 Mina' Bente Ocho Na Liheslaturan

Gufihan TO DO PASS BILL No. 295 (EC), "An Act To Amend Section 8 158, Article 1, Chapter 8, Title 4 Of The Guam Code Annotated Relative To Authorizing The Board Of Trustees To Invest Up To Thirty Percent (30%) Of Retirement Fund Assets At Cost In Investment Funds Such As Investment Trusts, Mutual Funds, Common Trust Funds And Commingled Funds."

MINA'BENTE OCHO NA LIHESLATURAN GUAHAN 2006 (SECOND) Regular Session

Bill ~ 0 . 2 6 yg

Introduced by: Mark ~ o r b e s g

AN ACT TO AMEND SECTION 8158, ARTICLE 1, CHAPTER 8, TITLE 4 OF THE GUAM CODE ANNOTATED RELATIVE TO AUTHORIZING THE BOARD OF TRUSTEES TO INVEST UP TO THIRTY PERCENT (30%) OF RETIREMENT FUND ASSETS AT COST IN INVESTMENT FUNDS SUCH AS INVESTMENT TRUSTS, MUTUAL FUNDS, COMMON TRUST FUNDS AND COMMINGLED FUNDS.

1 BE IT ENACTED BY THE PEOPLE OF GUAM:

2 Section 1. Legislative Findings and Intent. I Likeslaturan Gudhan finds

3 that the statutory restrictions governing investment of fi~nds held in trust for

4 benefit of Defined Benefit Plan members and beneficiaries effectively exclude

5 investments in lower cost investment vehicles such as passively-managed

6 index funds. I Liheslaturan Gudknn further finds that institutional investments

7 in common trust funds and commingled funds often have lower costs than

8 investments in mutual fund vehicles, with lower or little added risk.

I Liheslaturan GuBhan therefore intends to authorize the Trustees of the

Defined Benefit Plan to exercise their discretion to invest up to thirty percent

(30%) of Retirement Fund assets at cost in investments held in lower-cost

investment vehicles, providing the additional opportunity to improve the

overall risklreturn of the investment portfolio for the benefit of the Retirement

Fund as a whole. I Liheslaturan Guihan further intends that the thirty percent

(30%) quantitative limitation is to pertain solely to those investment vehicles

described in Section 8158 (investment funds) and is not intended to apply to,

or impose further limits on, any of the other quantitative limitations in the

Defined Benefit Plan statute pertaining to direct investments in specific asset

classes such as common or capital stock, preferred stock, or bonds.

Conversely, none of the quantitative limitations (e.g., maximum percentage

investments) or qualitative requirements (e.g., dividend payout requirements)

expressly applicable to direct investments in common or capital stock,

preferred stock, or bonds are intended to apply to, or impose further limits on,

the quantitative limitations (thirty percent (30%) maximum) or qualitative

requirements for assets held in the investment fund vehicles described in

Section 8158.

SECTION 2. Section 8158, Article 1, Chapter 8, Title 4 of the Guam

Code Annotated is amended to read:

§ 8158. Investment Funds. (a) Common or capital shares of any

investment trust or mutual fund registered with the Securities and Exchange

Commission under the Investment Company Act of 1940, as from time to time

amended, provided that the cost of the shares acquired is no greater than their

net asset value on the date of acquisition.

(b) Units in anv common trust fund or commingled fund maintained

at a custodian meeting the requirements of 68144 - (Custodian) and advised or

sub-advised bv an investment management organization meeting the

requirements of 68145 (Investment Agent).

(bc) Preferred shares of any investment trust or mutual fund registered

with the Securities and Exchange Commission under the Investment

Company Act of 1940, as from time to time amended, provided that:

(1) The number of issued and outstanding common or capital

shares multiplied by their asset value per share, plus;

(2) The number of issued and outstanding preferred shares

multiplied by their par or stated value, is at least fifty percent (50%)

greater than the number of issued and out-standing preferred shares

multiplied by their par or stated value. For purposes of this Section, the

number of issued and outstanding shares shall be taken as of the latest

available public report of such investment trust or mutual fund.

Preferred shares as described in this Subsection shall not be subject to

the provisions of 98156.

(d) The term "net asset value" as used in this Section shall mean the

total quoted or estimated market value of all securities or other assets owned,

less that total of all determinable liabilities, as reported by such common trust

fund, commingled fund, investment trust or mutual fund.

(&) Limitation:

(1) The investment in units, preferred, common and capital stock

of any one common trust fund, commingled fund, investment trust or

mutual fund shall not exceed five percent (5%) of the Fund at cost; and

(2) The aggregate of all investments under this Section shall not

exceed +ee thirty percent (44330%) of the Fund at cost.

SECTION 3. Effective Date. The provisions contained within this

Chapter shall become effective upon enactment.

SECTION 4. Severability. If any provision of this Act or its

application to any person or circumstances is held invalid, the invalidity shall

not affect other provisions or applications of this Act which can be given effect

without the invalid provision or application, and to this end the provisions of

this Act are severable.

Committee on General & Omnibus Matters Executive Committee

Public Hearing May 03,2006

9:00 a.m.. 1 Liheslaturan Guahan, HagAtRa

Bill No. 295 (EC): An Act To Amend Section 8158, Article 1, Chapter 8, Title 4 Of The Guam Code Annotated Relative To Authorizing The Board Of Trustees To Invest Up To Thirty Percent (30%) Of Retirement Fund Assets At Cost In Investment Funds Such As Investment Trusts, Mutual Funds, Common Trust Funds And Commingled Funds.

AGENDA COMMITTEE ON GENERAL & OMNIBUS MATTERS

EXECUTIVE COMMITTEE

Public Hearing Wednesday, May 3,2006,9:00 a.m.

Session Hall

The followina Aupointments & Bills will be lreard by the Committee on General & Omnibus Matters;

Appointments:

Governor's appointment of Jay L. Lather to serve as a member of the Guam Land Use Commission

Governor's appointment of Lisa P. Aniola to serve as a member of the Guam Land Use Commission

Governor's appointment of Lawrence S. Rivera to serve as a member of the Guam Land Use Commission

Governor's appointment of Keith L. Camacho to serve as a member of the Guam Historic Preservation Review Board

Bills: - Bill No. 259 (EC)- by R. Klitzkie An Act To Request The United States Congress To Add A New Subsection (C) To Section 7 Of The Organic Act Of Guam To Patriate The Organic Act And To Amend 3 Gca Ch. 17 Art. 4 To Provide The Means To Amend The Patriated Organic Act.

Bill No. 278 (EC )- by Mark Forbes An Act To Create A New Zone And To Zone Lot No. 101 55-6 And Lot No. 10 155-7 Municipality Of Dededo.

Bill No. 293 (EC) - Mark Forbes An Act To Amend Sections 820 l(M), 8206, 8206.1, And 8207 Of Article 2, Chapter 8, Title 4 Of The Guam Code Annotated, Relative To Clarifying Eligibility For Membership In The Defined Contribution Retirement System And Suspending Annuities Of Defined Benefit Plan Retirees Enrolled In The Defined Contribution Retirement System; To Amend Sections 8210 And 821 1 To Clarify Vesting And Distribution Provisions; To Amend Section 8216 To Authorize Assignments Pursuant To Court Ordered Child Support And Alimony Payments; And To Amend Section 821 7 To Clarify That Administrative Fees, Charges, And Forfeitures May Be Applied To Offset The Defined Contribution Retirement System Start Up Costs.

Bill No. 295 (EC) - Mark Forbes An Act To Amend Section 81 58, Article 1, Chapter 8, Title 4 Of The Guam Code Annotated Relative To Authorizing The Board Of Trustees To Invest Up To Thirty Percent (30%) Of Retirement Fund Assets At Cost In Investment Funds Such As Investment Trusts, Mutual Funds, Common Trust Funds And Commingled Funds.

Bill No. 296 (EC) - Mark Forbes An Act To Amend Section 81 57 Of Article 1, Chapter 8, Title 4 Of The Guam Code Annotated, Relative To Permitting Limited Investments In Companies Lacking Multi-Year Track Records For Profit And Dividends So As To Allow The Defined Benefit Plan To Own Stock In Multi-Sized And Growth Companies In Rough Proportion To The Weight They Collectively Represent In The Overall Market.

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emote s t a t I o n Mode

(. 1 Mina' Bente Ocho Na Liheslaturan Guahan

The 28th ~ u a m Legislature

155 Hesler Place Hagatna, Guam 96910

Office (671 ) 472-3407 Fax (671) 472-3510

Speaker Mark Forbes

Facsimile

Date: May 0 1,2006 Time:

Fax No.: 477-3079 No. of Pages:

To: PDN Government Meetings

From: The Oflice of Speaker Mark Forbes

Re: Public Hearing Notice- Wednesday, May 3,2006

Note: We would like to reserve space in the government meeting notice section of the Pacific Daily News for Tuesday, May 02, and Wednesday, May 03,2006 to read:

"Committee on General & Omnibus Matters: Public Hearing, Wednesday, May 3,2006, 9:00 a.m., Session Hall, Temporary Legislative Building, Hagatiia, Guam. The following Appointments & Bills will be heard;

Appointments:


Governor's appointment of Lisa P. Arriola to serve as a member of the Guam Land Use Commission



Bills:

Bill No. 259 (EC)- by R. Klitzkie An Act To Request The United States Congress To Add A New Subsection (C) To Section 7 Of The Organic Act Of Guam To Patriate The Organic Act And To Amend 3 Gca Ch. 17 Art. 4 To Provide The Means To Amend The Patriated Organic Act.

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CP 14.4

1 Mina' Bente Ocho Na Liheslaturan Guahan The 2ath ~ u a m Legislature

Off ice

1 5 5 Hesler Place Hagatna, Guam 96910

(671 ) 472-3407 Fax (671 ) 472-351 0

Speaker Mark Forbes

May 01,2006

MEMORANDUM

TO: All Media: Pacific Daily News; 477-3079 KUAM; 637-9870 Marianas Variety; 648-2007 K-571Power 98; 477-3982 K-Stereo; 477-641 1 Hit Radio 100; 472-7663 Glimpses-Gu. Business 649-8883 Adventist World Radio 565-2983 Harvest Family Radio 477-71 36 KPRG 734-2958 KISH 477-641 1 Rlene Live ABC 14 637-88 19

FROM: on General & Omnibus Matters

SUBJECT: Notice of Public Hearing- Wednesday May 3,2006

Please be informed that I have scheduled a public hearing on Wednesday, May 3,2006, 9:00 a.m. at the Session Hall, Temporary Legislative Building, on the following appointments & bills:

TIte followinn Appointments & Bills will be heard bv the Committee on General & Omnibus Matters;

Appointments:


Governor's appointment of Lisa P. Arriola to serve as a member of the Guam Land Use Commission



Bills: - Bill No. 259 (EC)- by R. Klitzkie An Act To Request The United States Congress To Add A New Subsection (C) To Section 7 Of The Organic Act Of Guam To Patriate The Organic Act And To Amend 3 Gca Ch. 17 Art. 4 To Provide The Means To Amend The Patriated Organic Act.

Bill No. 278 (EC)- by Mark Forbes An Act To Create A New Zone And To Zone Lot No. 10155-6 And Lot No. 10 155-7 Municipality Of Dededo.

~ i r t e / ~ I me

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C : E r r o r C o r r e c t R E : Resend PO: P O I l e d by Remote M B : R e c e i v e t o M a l ~ b o x C : B r o a d c a s t Send MP: M u l t l - P o l l PG: P O I 1 l n y a Remote P I : Power l n t e r r u p t l o n P : C o m p l e t e d RM: R e c e i v e t o Memory OR: 00cument Removed TM: T e r m i n a t e d by u s e r S : H o s t s c a n HP: ~ o s t P r i n t F O : F o r c e d O u t p u t WT: W a 1 t I ng T r a n s f e r F : H o s t F a x H R : H O S ~ ~ e c e l v e F M : F o r w a r d M a l l b o x Doc. W S : W a l t l n g Send

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Comments

Felix P. Camacho Governor

Kaleo S. Moylan M e n a n t Gmmor

G O V E R N M E N T OF G U A M

RETIREMENT FUND Paula M. Blas ~ ~ s t e e s : S T A B I L I T Y . S E C U R i T Y . R E W A R D S Acting Director

Joe T. San Agustin Chahan

March 29,2006 Office of the Speakg~

Date MAT

, v . WiI5d P. Leon Guerrero

F RBES ,--- 3 a? bL

. Chairman

Time: 3: o ipm v ~~S J. Taylor, Ph.D. The Honorable Mark Forbes Rec'd by: .. m

I- comlkwe, V i & r m n

Speaker Print Name: % Chairnlan, Committee on General and Omnibus Matters h Katherine T.E. Taitano I Mina 'Bente Ocho Na Liheslctruran Guhhan r~slee

Treaurrer 324 W. Soledad Avenue HagWia, Guam 969 10

George A. Santos TNshse

Re: Government of Guam Retirement Fund Omnibus Bill Members'&Benefits-,-

to 4 G.C.A., Chapter 8, Article 1 (Defined Bsnefit Plan) and Article 2 (Defined Contribution Plan) Anthony TIZI- C. Blaz

A M 8 Operetia?s Cmm&m, Chamnan

ilear Speaker Forbes: Gerard A. Cmz T-

At its March 10,2006 Board Meeting, the Govemnent of Ciilan Retirement Fund Board of Trustees passed Resolution No. 2006-001 in support of the attached omnibus bill. I am transmitting the necessary statutcry amendments as approved by the Retirement Fund Board of Trustees to be considered and passed by the 28th Guam Legislature.

Ellclosed is the required statutory language:

AN ACT TO AMEND SECTIONS 8201(m), 8206,8206.1. ,4ND 8207 OF, ARTICLE 2, CHAPTER 8, TITLE 4 OF THE GUAM CODE ANNOTATED RELATIVE TO CLARlFYING ELIGIBILITY FOR MEMBERSHIP IN THE DEFINED CONTRIBUTION RETIREMENT SYSTEM AND SUSPENDDTG ANNUITIES OF DEFINED BENEFIT PLAN kETIREES ENROLLED 1N THE DEFINED BENEFIT PLAN RETE'2ES ENROLLED IN THE DEFINED COKTlUBIJTION RETIREMENT SYSTEM; 7'0 AMEND SECTIONS 8210 AI\;D 821 1 TO CLARIFY VESTING AND DISTRIBUTION PROVISIONS; TO AMEND SECTIGN 8216 TO AUTHORIZE ASSIGNMENTS PUKUSANT TO COUR'1' ORDERED CHlLD SUPPORT -4ND AL.IMONY PAYTvIEhTS; AND 'I'O Ah4END SECTION 8217 TO CI,ARIFY THAT ,4DMINISTRATN-E FEES. CHARGES, AND FORFEITURES MAY

424 Route 8 Maite, Guam 96910 Tel: 671.475.8900 Fax 671.475.8922 www.ggd.com

Speaker Mark Forbes March 29,20061 pg. 2 of 2

BE APPLIED TO OFFSET THE DEFINED CONTRIBUTION RETIREMENT SYSTEM START UP COSTS; AND TO AMEND SECTIONS 8 140,s 140.1 AND 8 141 PERTAINING TO RETPREMENT FUND PERSONNEL; AND TO AMEND SECTION 81 57 OF ARTICLE 1, CHAPTER 8 TITLE 4 OF THE GUAM CODE ANNOTATED, RELATIVE TO PERMITTING LIMITED INVESTMENTS IN COMPANIES IN LACKING =TI-YEAR TRACK RECORDS FOR PROFIT AND DIVIDENDS SO AS TO ALLOW THE DEFINED BENEFIT PLAN TO OWN STOCK IN MULTI- SIZED AND GROWTH COMPANIES IN ROUGH PROPORTION TO THE WEIGHT THEY COLLECTIVELY REPRESENT IN THE OEVERALL MARKET; AND TO AMEND SECTION 81 58 ARTICLE 1, CHAPTER 8, TITLE 4 OF THE GUAM CODE ANNOTATED RELATIVE TO AUTHORIZING THE BOARD OF TRUSTEES TO INVEST UP TO THIRTY PERCENT (30%) OF RETIREMENT FUND ASSETS AT COST IN INVESTMENT FUNDS SUCH AS INVESTMENT TRUSTS, MUTUAL FUNDS, COMMON TRUST FUNDS AND COMMINGLED FUNDS

If you require additional information or have any questions please do not hesitate to contact me at 475-8900101 or by email at prnblas@,ite.net.

AULA M. BLAS Acting Director

GOVERNMENT OF GUAM RETIREMENT FUND

RESOLUTION NO. 2006 - 001

BE IT RESOLVED BY THE BOARD OF TRUSTEES OF THE GOVERNMENT OF GUAM RETIREMENT FUND:

WHEREAS, the Board of Trustees in its capacity as the Board of Trustees for the Defined Contribution Retirement System (DCRS), supports legislation to amend the DCRS statute to clarify participation in the DCRS, to minimize "double dipping" by GovGuarn retirees, to reflect the authorization of assignments pursuant to court-ordered child support and alimony payments, and to clarify that administrative fees, charges and forfeitures may be applied to offset DCRS start-up costs; and

WHEREAS, the Board of Trustees in its capacity as the Board of Trustees for the Defined Benefit Plan (DB Plan) supports legislation to amend the DB Plan to enhance their ability to attract and retain personnel for key positions; and

WHEREAS, the Board of Trustees in its capacity as the Board of Trustees for the DB Plan supports legislation to amend the DB Plan to increase the amount of hnds that may be invested in companies lacking multi-year track records for profit and dividends so as to allow the DB Plan to own stock in multi-sized and growth companies in rough proportion to the weight they collectively represent in the overall market; and

WHEREAS, the Board of Trustees in its capacity as the Board of Trustees for the DB Plan supports legislation to amend the DB Plan to increase the amount of funds that may be invested in investment hnds such as investment trusts, mutual funds, common trust h d s and commingled hnds, to provide the DB Plan with an opportunity to improve the overall risklreturn of the investment portfolio for the benefit of the Retirement Fund as a whole; and

NOW, THEREFORE, BE IT RESOLVED, that effective upon the adoption of this Resolution, the Board of Trustees of the Government of Guam Retirement Fund in exercise of its duties, hereby resolves to support the attached draft omnibus bill for the purposes set forth therein.

AND REGULARLY ADOPTED BY THE BOARD OF TRUSTEES OF THE OF GUAM RETIREMENT FUND, ON THE loth DAY OF MARCH, 2006.

Dr. Wilfred P. Leon Guerrero

h?hony C. ~ l x 4 - z

jPau M. Blas, Acting Director

Fellx P. Camacho Governor

Kaleo S. Moylan Lieotenant Govemw

May 2,2006

G O V E R N M E N T OF G U A M

RETIREMENT FUND

The Honorable Mark Forbes Speaker I Mina7 Bente Ocho Na Liheslaturan Gu5lm-1 155 Hesler Place Haggtiia, Guam 96910

Re: Testimony on Bills 295 and 296

Paula All. Blas TNstees: Acting Directw

Joe T. San Agustin

Dr. Wlfred P. Leon Guerrero

~ n t ~ , ~ ~

James J. Taylor, W.D.

Katherine T.E. Taltano Tt&9s freastrrer

George A Santos T W ~ 6 ~ C o m m W , C h C h a i m l

Mr. Speaker and Committee Members of the Committee on General and Omnibus Matters. I, Paula M. Blas, Acting Director along with members from the Board of F z y C. =Iaz

Trustees of the Government of Guam Retirement Fund, thank you for this A&? s Qxsf i~~ Gnnmtiee, ~haamsb

opportunity to appear before you in full support of Bills 295 and 296. Gerard A. Cruz Tnndee

These bills amend sections 8 157 and 8 158 and are intended to provide an increased opportunity for the defined benefit plan's portfolio to generate additional investment returns to improve the security of benefit payments while controlling the Fund's risk position. The Fund intends to control risk by diversifying its investments in a variety of different investment vehicles.

And, these bills address the issue of controlling risk though the use of diversification and to assist the Fund in reducing management fees while being able to provide options for short-tern1 investments.

When passed, Bill 295 will lift the restrictions of investment funcis held in trust by allowing the Fund to invest in lower cost in\-estment vehicles sr;c h as passively managed index funds. Additionally. this amendment allows the Fund to invest in common trust funds and co-mingled funds that also provide lower costs with little added risk.

When passed, Bill 296 will also address the issue of providing greater diversification options by removing its current restrictions, and allowing the Fund to invest in investment vehicles that have a potential for growth. 'To illustrats, the Fund currently can only invest in dividend paying companies, therefijre limiting the pool of companies from which our investment managers cm selzct. 'I'his is contrary to our objective of allowing true diversificatioc withi11 the Fund's portfolio, and 424 Route 8

Maite, Guam 96910 Tek 671.475.8900 fax: 671.475.8922 ww.ggrf.com

Testimony on Bills 295 & 296 May 2, 2006/pg. 2 of 2

limiting our potential rate of return. Although the Fund experience a positive rate of return of 9.3% per year for 3 years on investments as of 12.3 1.05, with the current investment restrictions, further evidence also shows that the performance of the GGRF portfolio continues to lag in comparison to its peers, US-based public pensions, where the median is 14.7%.

Thank you for your consideration and we look forward to your favorable response and passage of Bills 295 and 296.

ULAM.BLAS cting Director

The Govermement of Guam Retirement Fund (GGRF) purchased a total of 107,000 shares at a total cost of S2,116,096.80. GGRF bas sold 94,000 shares for a total of S6,505,556.51. The value of the remaining 60,000 s h a m (adjusted for stock split) held as of 3/31/06 is $3,763,200

Government of Guam Retirement Fund: AAPL Analysis

i , , a w a 13,000

8,000 $86.94

*Split-ad~urtedprice: stock splrr 2 for I on 02/25/2005

Total Return Analysis (by year):

Total Return Analysis (sinceAAPL/Irstpurchase):

A

- - s 0

S . - C

cn (I]

9 -

s C (I]

Q) c C

n aJ A U T





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Strategic Asset Allocation Review Summary of Process

Liability Factors

w Liability Structure

w Liability Sensitivity to lnterest Rate and Inflation Changes

w Funded Status

w Liquidity Needs

w Return Objectives

w Risk Tolerance

Mercer Investment Consulting

+ Asset Allocation Strategy f?

I . ,

Alternative Strategies . -:,; +

..I . L. A * ,. 1

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. La&iT&&k-Gk4;;%/&<&%? 2$*$7*k L *F* ,A~$#%@A~VLLT~ ,&* ,~ :

Capital Market Factors

w Appropriate Asset Classes

w Asset Class Return Projections

Asset Class Risk Projections

w Asset Class Correlations

w Asset Sensitivity to lnterest Rate and Inflation Changes

w Efficient Frontier Analysis -

cation - US Public Pension Plan

n Public Fund Dollar-Weighted ASS& ~ i $ of Defined Benefit Pension Plans

*Other: Real estate mortgages, guaranteed investment contracts, and short-term securities/cash are included in Other for 2000 Source: Greenwich Associates

.

Type of Investment

Active common stocks

Passive common stocks

~ o t a l domestic stocks

Active international stocks

Passive international stocks

Total international stocks

~ o t a ~ ~qui ty

Fixed income

Equity real estate

Private equity

Hedge funds

Other*

Total

Mercer Investment Consulting 10

Total

2004

20.8%

24.0%

44.8 %

11.8%

4.2%

16.0%

60.8 %

28.0%

5.3%

3.8%

0.6%

1.5%

1 ~ . 0 %

By Fund She (USD)

$1,001-5,000 Million

30.2%

13.6%

43.8 %

15.4%

1.2%

16.6%

60.4 %

29.1%

4.9%

2.5%

0.6%

2.5%

100.0 %

0001-1,000 Mllllon

35.8%

14.0% L

49.8 %

10.7%

1.5%

12.2 %

62.0 %

32.5%

3.2%

0.8%

0.5%

1.1%

100.0%

w Higher return volatility (or standard deviation) means higher uncertainty, even though the expected return is the same Uncertainty = Risk

Expected Return = 15 Standard Deviation = 5

Time

Expected Return = 15 Standard Deviation = 10

I I I 1 , Time




m o = s ==

8 3 P u a C , s m

A - cn a, ma, s 3 3 e 0 a, ==

3 cd L


g Capital Market Assumptions

Capital market evolution - Example: The Euro has changed the landscape for investments

in Europe 9

Consideration of history across markets, not merely as relates to one's home country - Example: The recent long-term bear market in Japan, and the

30+ year bear market in the U.S. in the late 1800s, are relevant history for all markets

Some aspects of history are relatively stable - Example: Correlations and standard deviations are relatively

stable over time, and while nominal returns are not, long term real returns can be


orwardmlooking Asset Class ns

H These are presented and explained in the accompanying document titled "October 2005 Capital Market Outlook"


rket Assumptions king Expected Return, Volatility and Correlation

/ Capital Market Assumptions Over Next 20 Years n

4. Aggregate Domestic Fixed Income 5.00 6.00 0.30 0.20 0.15 1.00 1.30 0.00 0.00 0.00 0.10 1.00

6. Real Estate - Private 7.30 13.50 0.40 0.50 0.25 0.25 0.10 1.00 7. Emerging Markets Equity 8.60 28.00 0.40 0.40 0.55 0.10 0.00 0.15 1.00 8. International Small Cap 8.40 26.00 0.55 0.45 0.65 0.10 0.00 0.20 0.60 1.00 9. High Yield Fixed Income 5.90 12.00 0.50 0.50 0.15 0.60 0.10 0.35 0.15 0.15 1.00 10. Inflation Indexed Domestic Bonds 4.20 4.50 0.20 0.20 0.15 0.50 0.40 0.25 0.10 0.10 0.50 1.00 1 1. Broad Non-U.S. Bonds


Documents

9 I WY@h69-d@-. 28-135.pdf · 9 I WY@h69-d@- \$&y P.O. Box 2950 HagHtfia, Guam 96932 TEL: (611) 472-8931 FAX: (671) 477-4826 EMAIL: governo&nail.govgu Felix Perez Carnacho Ga,ernm