DCRB ReportDCRB ReportHonoring the Past, Looking to the Fu t u re

A Publication of the DC Retirement Board for Active and Retired Fire Fighters, Police Officers and Teachers

S P R I N G 2 0 0 4

At the February meeting of the D.C. Retirement Board I was honoredto be selected by my fellow Trustees to serve as Chairman of theBoard for the year ahead. I began my term by thanking Mary

Collins for her two and a half years of leadership in that role, and bythanking all of my colleagues for the time, effortand seriousness that they devote to carrying outtheir fiduciary duties. The Board elected as the otherofficers Judith Marcus, Secretary; Shireen Dodson,Treasurer; Brian Lee, Parliamentarian; and GeorgeSuter, Sergeant-at-Arms.

The funds managed by the D.C. RetirementBoard come from contributions made by membersof the Metropolitan Police Department, D.C. FireFighters, D.C. Teachers and the DistrictGovernment. The twelve member Board is made upof one active and one retired D.C. Police Officer, Firefighter and Teacher,who are elected by these groups, and three appointees each from theMayor’s Office and City Council. Each member of the Board serves afour year term. All of the money that is paid out to its members is solelygenerated from the income paid into the fund by its members, the returnsmade on the investments and the money paid into the fund by theDistrict Government. It is my pleasure to have the opportunity to servethe Police Officers, Fire Fighters and Teachers in this capacity.

The Board works through its committees to examine issues and makerecommendations to the full Board for adoption. Because it is so centralto the Board’s mission all Trustees serve on the Investment Committee.The Committee chairmen for the coming year are Investment Committee,Barbara Davis Blum; Operations Committee Shireen Dodson; EmergingEnterprises Committee, Judith Marcus; Benefits Committee George Suter;and Legislative Committee Lyle Blanchard. Lyle Blanchard is the Trusteemember of the Fiduciary Committee and Brian Lee and Judith Marcusare the Trustee members of the Securities Litigation Panel.

Congratulations to Mary Collins on her re-election to the Board ofDirectors of the Council of Institutional Investors at its spring meeting inMarch. The Council of Institutional Investors is an organization of pub-lic, Taft-Hartley, and corporate pension plan sponsors which seeks toaddress corporate governance issues that affect the investment returnsand security of plan assets. Ms. Collins serves as a special liaison for theBoard on developments regarding corporate governance at the Council ofInstitutional Investors, Securities and Exchange Commission, and otherpension funds and organizations.

The mission of the District of

Columbia Retirement Board is

to invest, control, and manage

the assets of the Teachers’

Retirement Fund and the

Police Officers’ and

Firefighters’ Retirement Fund.

S P R I N G 2 0 0 4

Chairman’s Corner

At a Glance

The D.C. Retirement Funds supportbenefits earned on or after July 1,1997. The U.S. Treasury is responsiblefor benefits earned before that date. As of September 30, 2003 the averageDistrict share and total combinedDistrict and federal share benefitreceived by retired (non-disability)members was:

Total District Share

Teachers $34,687 $4,244Police Officers $41,938 $4,787Firefighters $49,564 $6,745

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DCRB Report • Spring 2004

The Board publishes a lengthyand detailed Annual Reporteach spring. The completereport for the fiscal year

that ended on September 30, 2003is posted to the Board’s website,at www.dcrb.dc.gov. As requiredby the Retirement Reform Act,the Board is also pleased to pro-vide participants and beneficiarieswith the following summary ofthe Annual Report narrative andschedules.

Investment PerformanceHighlightsThe D.C. Retirement Board con-tinued to deliver solid long-terminvestment returns in fiscal year2003, guided by our commitmentto ethics, integrity and the highestinvestment fiduciary standards. Tothis end, political agendas are nota factor in the investment deci-sion-making process.

For fiscal year 2003, the D.C.Retirement Board’s investmentprogram (or Total Fund) delivereda stellar return of 16.3%, despitethe sluggish economic recoveryfrom the recession.

To ensure there are adequatefunds available to cover paymentof retirement benefits over the lifeof the plan, the D.C. RetirementBoard’s investment objective forthe Total Fund is to achieve along-term return of at least7.25%, the actuarial assumed rateof return target. The Total Fund’slong-term performance continuedto exceed the investment objec-tive, with the Total Fund return-ing an annualized 8.3% over the10-year period ended September30, 2003. The Total Fund’s 1-year,3-year, 5-year, and 10-year invest-ment performance versus thereturns of the Total FundBenchmark and the Board’s actu-arial assumed rate of return areshown on the following chart.

been in effect for more than threeyears. Asset class targets wererevised to better meet futureretirement benefits.

• Adoption of a new real estateasset class, bringing the total assetclasses to five across the invest-ment risk-reward spectrum.Reductions in the target alloca-tions for U.S. equities and fixedincome and an increase in theallocation for private equity weremade to reduce overall volatilityand enhance investment returns.

• Completion of a new assetliability study and adoption of anew Rebalancing Plan, allowingactual asset classes to vary withinspecified ranges from target allo-cations. During the fiscal year,U.S. and non-U.S. equities werenear their target allocations, whilefixed income was overweight atthe expense of real estate and pri-vate equity.

• Enactment of new Watch Listprocedures, establishing theframework for a formal reviewprocess for the Board’s investmentmanagers.

• Hiring Sands Capital Manage-ment, active large cap growth man-a g e r, in the summer of 2003 toi m p rove asset class perf o rm a n c e .

• Supporting the Securities andExchange Commission’s continu-ing implementation of theSarbanes-Oxley Act of 2002 andmany other related reforms.

For the fiscal year, the net assetvalue of the Total Fund increased22% due to solid returns oninvestments despite cash outflowsfor pension payments and admin-istrative expenses. At the end ofthe fiscal year there was $874.7million in net assets in theTeachers’ Fund and $1.346 billionin net assets in the Police Officersand Firefighters’ Fund.

During the fiscal year, the D.C.Retirement Board approved anumber of changes to the invest-ment program. Some of thesechanges included:

• Adoption of a new asset allo-cation policy, effective April 1,2003, replacing the previous asset allocation plan that had

Fi s cal Year 2003 Annual Report Summary and Sch e d u l e sTotal Fund Performance

Strategic Asset Allocation after 4/1/03

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Spring 2004 • DCRB Report

The Total Fund Benchmark wasmodified as of April 1, 2003, toreflect the new allocation targetsfor the various asset classes.

As of September 30, 2003, allasset classes were within theirrespective target allocation ranges,with the exception of private equi-ty and real estate. Because of thetime element involved in reachingfull exposure to these two assetclasses, U.S. public equities andfixed income will be used as prox-

ies for exposure to private equityand real estate, respectively, untilthese strategies can be fully imple-mented.

Other HighlightsThe Board received a clean auditfrom its outside independent audi-tors for fiscal 2003. The followingschedules show the audited finan-cial statements compared with theprior fiscal year.

STATEMENTS OF NET ASSETS as of September 30, 2003 and 2002 (in $000s)Teachers’ Retirement Fund Police Officers & Fire Fighters’

Retirement Fund2003 2002 2003 2002

ASSETSInvestments & accrued interest $945,684 $790,725 $1,453,713 $1,166,558Benefit contributions receivable 1,548 1,475 1,312 1,166Due from District 46 72 0 0

Total Assets 947,278 792,272 1,455,025 1,167,724

LIABILITIESLiabilities under securities lending transactions 66,667 54,372 102,367 80,162Accounts payable - investment expenses 561 490 864 724Due to Federal government 5,100 3,800 5,800 2,900Due to District 292 247 449 358

Total liabilities 72,620 58,909 109,480 84,144Net Assets Held in Trust for Pension Benefits $874,658 $733,363 $1,345,545 $1,083,580

STATEMENTS OF CHANGES IN NET ASSETS Years Ended September 30, 2003 and 2002 (in $000s)

Teachers’ Retirement Fund Police Officers & Fire Fighters’ Retirement Fund

2003 2002 2003 2002Additions

Contributions:District $0 $0 $68,900 $74,600Employees 26,047 25,374 19,867 19,390

Total contributions 26,047 25,374 88,767 93,990Investment income:

Net appreciation (Depreciation) in fair value of investments 101,914 (86,692) 151,584 (129,669)

Interest and dividends, net of interest expense 21,375 22,638 32,209 32,917Subtotal 123,289 (64,054) 183,793 (96,752)

Less:Investment expenses 1,963 1,922 3,003 2,812

Net investment income 121,326 (65,976) 180,790 (99,564)Total Additions 147,373 (40,602) 269,557 (5,574)

DeductionsBenefit Payments 5,100 3,800 6,091 3,222Administrative expenses 978 989 1,501 1,445Total Deductions 6,078 4,789 7,592 4,667

Net Increase (Decrease) 141,295 (45,391) 261,965 (10,241)Net Assets Held in Trust for Pension Benefits:

October 1 733,363 778,754 1,083,580 1,093,821September 30 $874,658 $733,363 $1,345,545 $1,083,580

Total Fund Asset Value

DCRB Report • Spring 2004

S T A F F

Betty Ann KaneExecutive Director

William CarrInvestment Analyst

Bruce GambleGeneral Counsel

Florence JonesInvestment Assistant

Sheila Morgan-JohnsonChief Investment Officer

Wendy NewkirkExecutive Assistant

Rhonda O’NealSenior Accountant

T R U S T E E S

Lyle BlanchardCouncil Appointee

Barbara Davis BlumMayoral Appointee

Mary A. CollinsElected Active Teacher

Shireen L. DodsonTreasurerCouncil Appointee

Brian K. LeeParliamentarianElected Active Firefighter

Judith C. MarcusSecretaryElected Retired Teacher

Denice PattersonReceptionist

Michael SlavinDirector of Operations

Alicia TraynhamAccounting Technician

Valerie WilkinsOffice Manager

Michael J. McNallyElected Retired Firefighter

Joan Parrott-FonsecaMayoral Appointee

Darrick O. RossChairmanElected Active Police Officer

William H. SimonsMayoral Appointee

George R. SuterSergeant-At-ArmsElected Retired Police Officer

[Vacant]Council Appointee

N. Anthony CalhounEx Officio, Non-Voting

D.C. Retirement Board1400 L Street, NW, Suite 300Washington, DC 20005Voice (202) 535-1271Fax 202-535-1414www.dcrb.dc.gov

Longevity Service AmendmentEnacted for Police OfficersThe D.C. Council has enacted leg-islation amending the longevityprovisions for retirement benefitsfor police officers. DC Law 15-125, the Police and Firemen’sLongevity Service Amendment Actof 2004, provides that longevitypay attributable to all creditableservice, such as qualified military,federal government, and other DCgovernment service, is to beincluded as base pay when calcu-lating retirement benefits forpolice officers who have 25 yearsor more of total service. Under

previous law passed in 2000longevity pay was included inbase pay when calculating retire-ment benefits only if all 25 yearsof creditable service were servedin the Metropolitan PoliceDepartment.

Trustee Elections This fall the Board will conductelections for three Trustees repre-senting retired police officers,active firefighters, and activeteachers. Look for candidateinformation in the mail in earlySeptember from the AmericanArbitration Association.

Endnotes Useful NumbersD. C. Public Schools Personnel Office 202-442-4080

Metropolitan Police Department Personnel Office 202-727-4286

Department of Fire and Emergency Medical Services Personnel Office 202-673-3335

Office of Pay and Retirement Services 202-727-5851 or

1-800-638-6182

Office of D.C. Pensions,U.S. Treasury 202-622-0800