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September 15, 2011
California Savings Plus Program
Investment Operations Manual
Operations Manual as of September 15, 2011 California Savings Plus Program
Contents
1. Introduction ................................................................................................................ 2
2. Plan description ......................................................................................................... 3
3. Service Commitments ................................................................................................ 5
4. Plan Processing ....................................................................................................... 11
5. Transactional Errors ................................................................................................ 19
6. Fund Accounting ...................................................................................................... 20
7. Unit Value and NAV Methodology............................................................................ 21
8. Proxy services ......................................................................................................... 23
9. Securities Lending ................................................................................................... 24
10. Reporting ................................................................................................................. 26
11. Investment Compliance and Performance Monitoring .............................................. 31
Appendix A: Glossary of Terms
Appendix B: Contacts
Appendix C: Investment Options
Appendix D: Accrual Schematics
Appendix E: Cash, Trade and Operating Account Schematic
Appendix F: Rebalancing Memo
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Operations Manual as of September 15, 2011 California Savings Plus Program
1
Introduction
The State of California Savings Plus Program (“SPP”) consists of the SPP Thrift Plan
(the “401(k)”), the SPP Deferred Compensation Plan (the “457”) which has separate
provisions applicable to part-time, seasonal, and temporary employees (the “PST Plan”),
and the Alternate Retirement Program (the “ARP”) (collectively the “Plans”),
The State of California Department of Personnel Administration (the “State”) has
contracted directly with Nationwide Retirement Solutions (“NRS”) to provide
administrative and record keeping services for the Plans.
JPMorgan Worldwide Securities Services (“JP Morgan”) provides trust, custody, daily
reconciliation and valuation for the Plans’ investment options, monthly reconciliation and
reporting, investment manager interfaces, and valuations used to place and settle trades
for rebalancing the Plans investment options through its agreements with NRS and SPP.
Purpose
The purpose of this document is to set forth the operating procedures employed in the
delivery of products and services from SPP’s third-party partners in support of the Plans’
investments.
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2
Plan description
Plan Management
California Department of Personnel Administration (“DPA”) administers a “deferred
compensation plan” under Section 457 of the Internal Revenue Code (IRC), a taxdeferred savings plan established in 1985 and implemented in 1989 under Section
401(k) of the IRC, an Alternate Retirement Program (ARP) established in 2004 under
Section 401(a) of the IRC, and a Part-time Seasonal, and Temporary Employees
Retirement Program (PST Program) established in 1991 under Section 457 of the IRC.
DPA’s authority to establish these plans is found in the California Government Code
sections 19993, 19999.5, 19999.3, and 19999.2, respectively.
The purpose of the 457 and 401(k) plans- collectively referred to as the “Main Plan” – is
to provide savings opportunities for State employees as a supplement to their retirement
income. Persons eligible to participate in the plans include State employees, appointed
and elected officers of the State, California State judges, and employees of California
State Universities.
ARP was designed to be a retirement savings plan in lieu of retirement benefits under
CalPERS during the first 24 months of State employment. The PST Program was
implemented as a result of the 1990 Federal Omnibus Budget Reconciliation Act, and its
purpose is to provide a retirement savings program for employees, who are not covered
by CalPERS or Social Security.
Staff Support
SPP staff provides primary support to the Director of DPA in the administration of SPP.
SPP staff makes recommendations to the Director on plan design issues, monitors
contract compliance, serves as liaison to the Third Party Administrator (TPA), investment
providers, investment consultants, and external tax counsel; and facilitates employee
participation in SPP.
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Operations Manual as of September 15, 2011 California Savings Plus Program
Administration
SPP operates an “unbundled” program structure which means that it has an open
architecture that employs investment vehicles and advisory services from a variety of
providers, enabling SPP to seek best-in-class providers. Currently, Nationwide
Retirement Solutions (NRS serves as SPP’s TPA, providing consolidated recordkeeping
services; a brokerage account; the Personal Choice Retirement Account (PCRA) through
Charles Schwab & Co., Inc.; participant education and outreach services; and
processing and call center functions.) In addition, JPMorgan Chase Bank, N.A. provides
SPP with trustee and custodial services. Investments are obtained under separate
contracts.
Additional information about SPP can be found on the SPP Web site.
www.sppforu.com
Asset holdings
The majority of assets are held in separate accounts; however, SPP also has other
investment vehicles including commingled funds, mutual funds, and a variable annuity
product.
The Plans’ Investment Options
The Plans’ investment structure includes a variety of investment options available for
participant selection. The investment options include lifestyle asset allocations, index
funds and actively managed funds, and a brokerage account.
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3
Service Commitments
Item
Responsibility
Frequency
1. Compile exchange,
contribution and
withdrawal directions from
CA SPP participants
NRS
Daily
8:00 am ET
2. Update participant record
keeping system with JPM
Unit Values
NRS
Daily
9:00 am ET
3. Place trades for index
funds; liquidity sleeves for
equity funds, asset
allocation funds; STIFCash; and Socially
Responsible Fund
NRS
Daily
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Distribution
External
Managers
Method
Email and/or
Fax
Deadline
8:30 am ET
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Operations Manual as of September 15, 2011 California Savings Plus Program
Item
Frequency
Distribution
4. Brokerage Account Nightly NRS
Transfer File
Nightly
Charles Schwab File
uploaded to
Schwab
secure
website
All transfer requests on the
transfer file to and from the
Brokerage Account received by
4:00 pm ET on any day the
NYSE is open will be initiated
the same day.
Transfers from the core funds to
the sweep account must not be
out of the market for longer than
1 business day.
5. Send Trade File to JPM
NRS
Daily
JP Morgan
Secure
electronic
transmission
8:00 am ET
6. Send Cash Summary to
JPM
NRS
Daily
JP Morgan
e-mail with
attachment
9:30 am ET
7. Management Reports
NRS
Monthly
CA SPP
NRS selfcertification
DPA/SPP
staff
confirmation
Monthly reports are due within
15 calendar days.
8. Demographic Reports
Responsibility
Monthly
9. Valuation Reports
Monthly
10. Year End Valuation
Reports
Fiscal + Year
end
Fiscal + Year
end
Monthly
11. Reconciliation Reports
12. Errors and Omissions
Report
Monthly
Method
Deadline
Quarterly reports are due within
30 calendar days.
Semi-annual and annual reports
due within 45 calendar days of
the close of the reporting period.
Ad-hoc reports will be due within
a mutually agreed-upon
timeframe.
13. Accounts Receivable
report
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Operations Manual as of September 15, 2011 California Savings Plus Program
Item
Responsibility
Frequency
Distribution
Method
Deadline
14. Share Balances Recon
JP Morgan Client
Service
Monthly
CA SPP
Email
On the 15th Calendar day of
each month
15. Market Value Report
JP Morgan Client
Service
Quarterly
Dwight
Email
This report will be due within a
mutually agreed-upon timeframe
16. Daily Trade and Money
Market Report
JP Morgan Client
Service
Daily
NRS
Email
This report will be due within a
mutually agreed-upon timeframe
17. Plan DDA Report
Daily
NRS
Email
This report will be due within a
mutually agreed-upon timeframe
18. Top Ten Holdings Report
for Active Funds
Quarterly
NRS
Email
19. Loan Participation balance NRS
adjustment
Monthly
JPM
20. Release wires to settle
trades
Daily
External
Email
Managers
Charles Schwab
4:00 pm ET
Trust
Accounting
System
3:00 pm ET
This report will be due within a
mutually agreed-upon timeframe
JP Morgan
21. Process cash and security JP Morgan
transactions based on
Trade File and Cash
Summary
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Daily
Emailed by
Fund
Balancing
Team
System
generated
12:00 pm ET (Charles Schwab
only)
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Operations Manual as of September 15, 2011 California Savings Plus Program
Item
Frequency
Distribution
Method
Deadline
22. The JPM accounting
JP Morgan
system keeps track of the
NRS record keeping units
for each investment
option. On a daily basis
the JPM’s accounting
team reconciles the record
keeping units held on their
accounting system to the
record keeping units on
NRS’ record keeping
system. JPM’s accounting
team does this for each
investment option. Once
reconciled these units
become the denominator
for the Unit Value for each
investment option
Daily
NRS if break is
identified (ref.
Section 5,
Transactional
Errors)
Manual
3:00 pm ET
23. Reconcile third party fund
shares (e.g., NT
commingled funds) to
shares held on trust
accounting system
JP Morgan
Daily
Manual
4:00 pm ET
24. Strike Unit Values for all
Investment Options
JP Morgan
Daily
NRS
Email
7:00 pm ET
25. Send Unit Values to NRS
JP Morgan
Daily
NRS
Email
7:00 pm ET
26. Reconcile Plan account
DDA. JPM reconciles
transaction activity for
DDA 627215700 (JPM
titled) and e-mails
information to Nationwide
on a daily basis.
JP Morgan
Daily
CA SPP & NRS
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Responsibility
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Operations Manual as of September 15, 2011 California Savings Plus Program
Item
Responsibility
Frequency
Distribution
Method
Deadline
27. Report differences in Unit
Values. JPM reconciles
share balances
(Nationwide, Northern
Trust, and external
manager values vs. JPM
values)
JP Morgan
Daily
NRS
Email and
phone
Daily as soon as possible upon
determination
28. Separate Accounts/ Fundof-Funds – Fund
Rebalancing
JP Morgan/NRS
Monthly
SPP
Email
Rebalance amounts determined
on 4th business day based on
prior day market values. Places
rebalance trades as needed.
29. Separate Accounts/ Fundof-Funds – Performance
Calculation
NRS/JP Morgan
Monthly
CSPP
participants
Online and
hardcopy
Calculate monthly performance
of SPP separate accounts/fundof-funds and verify against same
information provided monthly by
JP Morgan. Report the monthly
performance on the web site, the
VRU and applicable participant
communications within 15
business days of month end.
30. Calculation of estimated
investment fees for
participant disclosures
NRS
Quarterly
CSPP
participants
Online and
hardcopy
15th business day after end of
quarter
31. Fund fact sheet
NRS
Quarterly
CSPP
participants
Online and
hardcopy
10 days from receipt of
information from managers
32. Fee Accrual Analysis
JP Morgan
Yearly
SPP
Email
Once yearly an analysis of the
past years actual custody and
transaction fees is done. A
recommendation will be made to
the State of California whether to
change the sitting accruals. This
will be done within 60 days of
receipt of the December invoices
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Operations Manual as of September 15, 2011 California Savings Plus Program
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Operations Manual as of September 15, 2011 California Savings Plus Program
4
Plan Processing
This section addresses processes performed by JP Morgan and NRS in support of the
Plans’ daily operating environment.
Fees, Expenses and Accruals
NRS shall remit SPP administrative fees ($1.50 per participant account per month)
whenever requested by SPP and process reimbursements within 15 calendar days of
month end. JP Morgan is responsible for processing investment advisor and custodian
invoices. SPP shall instruct the investment advisors and custodian to remit such fees in
accordance with agreed upon procedures.
SPP Reimbursement
The State has directed JPM to accrue 10 basis points against the market value of each
investment option. If revenue sharing is provided by an investment advisor, then the
expense reimbursement accrual is adjusted accordingly to ensure that 10 total basis
points are accrued. JP Morgan DCD Fund Accounting accrues these amounts daily.
Each month by the 15th calendar day, the DCD Operations team must wire transfer the
total reimbursement amount to Nationwide Investment Service Corporation, JP Chase
Columbus DDA # 614005064.
Wire transfer procedures:
DCD Fund Accounting uses a spreadsheet to report the reimbursement accrual amount
which is sent to DCD Operations. DCD Operations authenticates the wire transfer
amount on the SPP Reimbursement Accrual Spreadsheet with NRS and sends the
spreadsheet to NRS for their information. The DCD Operations team places sales orders
with SPP’s external fund managers to raise cash for the reimbursement. The Northern
Trust ACWI EX-US Index fund has a T-2 trade notification requirement for which the
notice must be received by 10:30 am ET.
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On settlement date the DCD Operations team will wire transfer cash to the NRS DDA,
process expense transactions and unitize security sales in the Plans’ investment option
accounts.
NRS remits all fund reimbursements collected during a month to SPP by the 15th of the
following month.
Investment Manager Fees
SPP will send a written direction to JP Morgan Client Service regarding separate account
investment manager fee amounts to accrue daily against the accounts.
JP Morgan Client Service will send SPP’s directions to DCD Fund Accounting who will
accrue these amounts daily. SPP will send JP Morgan Client Service written direction to
review and pay the investment manager fees upon SPP’s receipt of investment manager
invoices. After receiving the direction from SPP, JP Morgan Client Service will first
authenticate with the State (if necessary) after which the direction will be sent to the DCD
Operations team for trading and processing.
The DCD Operations team places sales orders with Northern Trust to raise cash for their
fees. The Northern Trust ACWI EX-US Index fund has a T-2 trade notification
requirement. Notice must be received by Northern Trust by 10:30 am ET.
On settlement date the DCD Operations team will wire transfer cash to the
investment manager, process expense transactions and STIF sales in the
actively managed separate accounts.
JP Morgan Fees
The State will send a written directive to JP Morgan Client Service to accrue JP
Morgan’s fees against the Plans investment option accounts.
JP Morgan Client Service will send these directions to DCD Fund Accounting who will
accrue these amounts daily. The State will send JP Morgan Client Service a direction to
pay the JP Morgan fees upon the State’s receipt and approval of JP Morgan monthly
invoices. JP Morgan Client Service will send the authenticated State direction to the
DCD Operations team which will process the sales orders with Northern Trust, Hartford
and Nationwide Bank to raise cash for the fees.
In addition the DCD Operations team, on settlement date, will wire transfer cash to the
address below and process expense transactions and unitized security sales in the
investment option accounts.
Chase Manhattan Bank
ABA# 021000021
Acct: 9009002701
Reference Billing 5042E
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Once yearly an analysis of the custody, transaction and other fees will be done by
JPMorgan. Based on this analysis recommendations for adjustments to the accruals will
be made to the State of California. The State of California will decide whether to change
the standing accruals.
NRS Fees
NRS fees are billed directly on a monthly basis to SPP. SPP wires fees directly to NRS.
Cash/Trade File processing
Trade File
On each business day by 8:00 am ET NRS will send a Trade File by file transfer protocol
(FTP) to JP Morgan with the following information:
a)
b)
c)
d)
e)
f)
JPM P#
Net participant cash flow
Net participant record keeping units
JPM calculated Unit Value
A buy or sell trade type
An indication of either a manual or NSCC trade method
If NRS is unable to deliver the Trade File by FTP by 8:00 am ET, then they will contact
the DC Operations team and advise when it will be sent.
If by 9:00 am ET WSS has not received the Trade File or been contacted by NRS, then
the DCD Operations team will contact NRS Production Assurance at (614) 249-5301.
If NRS is unable to send the Trade File by 12:00 pm ET, then they will email the Trade
File to the DCD Operations team (“Contingency Mode”). In Contingency Mode the DCD
Operations team will process all cash and security transaction for the Plans manually.
The DCD Operations team will make a best effort to finish processing so that all
transaction activity is in the accounting system by 3:00 pm ET. It should be noted that
manually processed transactions may impact the timeliness and accuracy of the daily
Unit Values sent to NRS on the day(s) WSS employs Contingency Mode.
NRS sends a manually emailed version of the BUYS Trustee Report to JP Morgan each morning.
Cash Summary
On each business day by 9:30 am ET, NRS will send a Cash Summary by e-mail to the
DCD Operations team. If NRS is unable to deliver the Cash Summary by 9:30 am ET,
the team will contact the DCD Operations team to advise them on when they should
receive the file. A cash summary is communicated daily by NRS via email or fax.
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If by 9:00 am ET the DCD Operations team has not received the Cash Summary or been
contacted by NRS, then the DCD Operations team will contact NRS. If NRS is unable to
send the Cash Summary by 9:30 am ET, the Cash Summary will be faxed to the DCD
Operations Team.
If the DCD Operations team receives the Cash Summary by fax by 10:00 am ET, the
team will process all cash transactions in Contingency Mode. Following processing in
contingency mode, DCD Operations will make a best effort to send Schwab their wire by
12:00 ET.
Reconciliation of Cash and Trade Files
Once the DCD Operations team has the Cash Summary and Trade Files from NRS they
will reconcile cash amounts for security purchases and sales on the Trade File to the
cash amounts on the Cash Summary. Each day this reconciliation should net out to
zero.
The DCD Operations team will reconcile participant cash flow for all of the Plans’
investment options to the trade amounts for SPP’s mutual funds, liquidity vehicles, and
separate accounts such as Dwight Asset Management. These should all balance vis-àvis investment option cash flow to the liquidity vehicle trade. If these do not reconcile,
the DCD Operations team will contact NRS.
If the Cash Summary to Trade File reconciliation does not net to zero, or the unitized
trades don’t reconcile to the liquidity sleeve investments, then the DCD Operations team
will contact NRS.
Approval of Cash and Trade Files
The NRS Trade File creates cash and security transactions in the WSS custody system
for the Plans’ investment options.
Cash transactions will be created as an inter-fund transfer with record keeping units for
each of the Plans’ WSS investment option accounts. Security transactions are created
as a buy or sell for each underlying manager in SPP’s investment option accounts.
Security transactions, a participant driven activity, will result in a buy or sell for the
underlying securities held in the WSS NAV accounts.
Note that NRS Trade File does not have activity for Schwab and the Loan fund hence
these transactions are created manually by the DCD Operations team. The NRS Trade
File does not contain information for JPM to systemically process Schwab/Brokerage
Fund and Participant Loan transaction activity. This information comes from NRS
separate from their Trade File and, as such, JPM must process transactions manually to
reflect this activity. NRS will assess fees to participants accounts effective the 3rd
Saturday of the month. The following business day the fees will be sold through the
buys/sells file.
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In summary:
The DCD Operations team reconciles the following:
a) Reconciles the Cash Summary and Trade files to zero
b) Reconciles the investment option cash flow to the liquidity sleeve trades
c) Ensures that cash and security transactions in the custody system reflect the
Cash Summary and Trade Files
DCD Ops transaction reconciliation is followed by transaction approval on the custody
system. DCD Accounting checks the accounting system throughout the day. There is a
hard cutoff of 3:00 pm EST for DCD Ops transactions to enter Accounting’s system. If,
at 3:00 pm there are no DCD Ops transactions in the Accounting system the Accounting
team calls DCD Ops. After the reconciliation is complete, the DCD Fund Accounting
team approves the release of the cash and security transactions into the custody system.
These transactions are swept into the accounting system and reviewed by the DCD
Fund Accounting Team.
Systemic transaction processing is targeted to be done by noon ET. Contingency Mode
transaction processing is done on a best efforts basis.
Trade Tickets
On each business day, NRS faxes or emails Trade Tickets for each of the Plans’
investment options to the DCD Fund Accounting team.
Trade Tickets are currently created for the liquidity sleeves, the STIF-Cash, and the
variable annuity, and the STIF.
The Northern Trust order forms are faxed each morning by 8:30 a.m. ET. The NW Bank
and Dwight order forms are automatically emailed by BUYS early in the morning, at 7:30
a.m. ET and 8:00 a.m. ET, respectively. The Hartford order forms are faxed between
8:30 and 9:30 a.m. ET each morning.
Record Keeping Unit Totals
The NRS Fund Balancing Team emails the Unit Position Report, showing closing
recordkeeping system unit totals, to DCD Fund Accounting on a daily basis. If the Unit
Position Report totals for each investment option do not reconcile to the unit total on the
WSS accounting system, then DCD Fund Accounting will contact the NRS Fund
Balancing Team. All discrepancies are to be resolved prior to calculating a daily Unit
Value. Failure to do so will result in a Unit Value error.
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Wire Transfer Processing
Based on the Cash Summary, the DCD Operations team will send Fed Funds wire
transfers to Schwab and the various checking accounts at JP Morgan listed on the Cash
Summary. These wires will generally fund benefit payments, fees and expenses and self
directed investment amounts.
The DCD Operations team will also send wires to Northern Trust, Nationwide Bank, and
Hartford for Neuberger Berman to fund purchases reported on the Trade File.
The wire to Schwab will be sent by noon ET. All other wires will be sent each day prior
to the closing of the Federal Reserve wire transfer system.
If the Cash Summary shows a contribution (i.e., salary deferrals, rollover ins, exchange
transactions) to the Plans, then the DCD Operations Team will transfer the funds from
the Contribution DDA to the Custody Clearing Account. Contribution dollars remain in
the Contribution DDA. The DCD Ops team uses this cash to settle trades placed by
NRS.
All incoming and outgoing wires flow through the WSS SPP Clearing Account P64282.
Rebalancing
On the 4th business day of the month, DC Fund Accounting will input the 3rd business
day closing market values into a spreadsheet and send it to NRS for review.
NRS will review the market values for reasonableness and approve the amounts in the
spreadsheet and direct the DC Team to go forward with the re-balance process.
The DC Team will place purchase and sale orders for all affected funds. The Northern
Trust ACWI EX-US Index fund has a T-2 settlement process and those orders must be
received by 10:30 am ET.
On settlement date, the DC Team will process purchase and sale transactions in the
investment option accounts, the unitized investment accounts, and the actively managed
accounts as well as inter-fund transfers needed to rebalance the investment options.
Settlement date can be as late as the 9th business day of the month.
Demand Deposit Accounts
NRS Plan Contribution DDA
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Daily the DDA titled Plan Contribution #627215700 is reconciled by JPMorgan and the
report is sent via email to Nationwide. Additionally the monthly reconciliation of this
account is sent to SPP by the 15th calendar day of the next month.
401K and 457 SPP Fee JPM Demand Deposit Account (“DDA”) Assessment
The State will send written direction to Client Service to wire the fee assessment from
the 457 #627215684 and 401K #627215676 JP Chase DDA accounts for the stated
month. NRS will assess fees to participants accounts effective the 3rd Saturday of the
month. The following business day the fees will be sold through the Buys/Sells file. The
DCD Operations Team will then send a Fed Fund wire to the State of California, Bank of
America DDA #01482-80005.
Other Accounts
Loan Balance
The NRS Fund Balancing Team sends the Participant Loan month end share balances
to JP Morgan Client Service. JP Morgan Client Service prepares the SPP Loan
Participant Monthly Adjustment form to balance the JP Morgan Loan account P64266 to
the NRS balance. The SPP Loan Participant Monthly Adjustment form is faxed to the
DCD Operations team. The DCD Operations team processes cash and security
transactions to adjust the JP Morgan balance to be in line with the NRS balance on
JPM’s accounting system.
Short Term Investment Fund-Cash
Short Term Investment Fund-Cash (STIF-Cash) (formerly known as the Savings
Pool) - STIF-Cash assets are invested in omnibus accounts with a number of
financial institutions independently contracted by and with SPP. Current financial
institutions are Nationwide Bank, Bank of Oklahoma, and Union Bank. The return is
adjusted quarterly. NRS will maintain daily participant account balances, with
interest posted on a daily effective method, compounded quarterly, based on the
published quarterly rates of return as agreed upon by and between the financial
institutions and SPP.
JP Morgan will calculate the effective rate to be applied to participant accounts.
Such calculation may involve calculating a blended rate or determining a rate based
upon a given index. If the STIF-Cash providers offer varying rates, JP Morgan will
calculate a blended rate by determining the weighted average yield based on the
respective balances of the depositories at the beginning of each quarter. The
weighted average yield will be used to construct daily unit values projected through
the end of the quarter.
Participants invested in STIF-Cash financial institutions are provided the same
protections by the financial institutions offered to regular bank/credit union
customers utilizing savings accounts (i.e., FDIC and/or NCUA insurance up to
$250,000 per institution). Pursuant to SPP agreements, the institutions pledge
acceptable collateral at 110% of any participant amount in excess of $250,000 held
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Operations Manual as of September 15, 2011 California Savings Plus Program
by that institution. In the event there is a change to the FDIC/NCUA insured
amount, the collateral requirements will change accordingly.
To facilitate and document the required level of pledge amounts, NRS will issue a
monthly report to SPP and STIF-Cash financial institutions listing, by participant,
account values requiring collateralization.
Regardless of the number of participating STIF-Cash institutions, there will only be
one “active” institution into and out of which daily transactions occur. Currently, the
active institution is Nationwide Bank. Once a month, concurrent with the
rebalancing of the separate accounts, funds will be transferred amongst the
participating STIF-Cash financial institutions to equalize the asset balance with each
financial institution.
ARP Wire
On the second Wednesday of each month, NRS FTP's a file to CalPERS (via SPP)
containing data on the ARP participants who have elected Option 1 (transfer to
CalPERS) in the group of participants whose election period ended in the prior
month. NRS systematically processes a payout for those participants and creates a
manual wire to CalPERS for the proceeds.
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5
Transactional Errors
When transactional errors (e.g. trading instructions, pricing errors, etc.) are discovered,
all participants affected will be identified in a timely manner. NRS will perform a
gain/loss analysis on these accounts to determine the financial impact to all affected
participants. NRS will issue a corrected confirmation notice or letter to affected
participants communicating the adjustment processed on their accounts for exchanges,
end-result exchanges, transfers in, and PCRA transfers in and out.
NRS Errors: NRS will be responsible for funding participant losses, regardless of
materiality, resulting from errors caused by NRS.
Plan Sponsor Errors: NRS will provide short-term cash needs for corrective actions.
NRS will obtain reimbursement from SPP via the monthly invoice process. NRS will
provide a monthly report detailing the funding activity for the prior month. The net
amount of the funding activity will be added to the monthly invoice, as further described
in Exhibit B – Budget Detail and Payment Provisions.
Errors by Third Parties: In the case of an error by a third party, such as an investment
provider’s pricing error, NRS will fund the shortfall and obtain reimbursement from the
provider.
NRS corrects all impacted transactions and provides SPP with a report of the impacted
transactions, as well as a report detailing the cause of the error.
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6
Fund Accounting
JP Morgan Responsibilities
On each business day JP Morgan DCD Fund Accounting:
 Reconcile cash and security positions between custody and accounting systems.
 Reconcile NRS Unit Position Report totals to the WSS accounting system.
 Reconcile the mutual fund investments held in the Plan to the transfer agent
positions.
 Reconcile the commingled/fund positions held in the Plans’ unitized investment
accounts.
 Reconcile shares of the unitized investment accounts to the shares owned by the
Lifestyle and Active Equity investment options.
 Check SPP reimbursement accruals in the Plans’ investment options.
 Check JPM fee accrual in the Plans’ investment options.
 Check investment manager fees accruals in the unitized investment accounts and
the actively managed separate accounts.
 Check the income accrual in the cash accounts unitized.
 Calculate net asset values (“NAVs”) for the unitized investment accounts and the
actively managed separate accounts using a mutual fund based formula.
 Calculate Unit Values for investment options
 Transmit Unit Values to NRS by 7:00 pm ET.
NRS Responsibilities
NRS posts the Unit Values supplied by JP Morgan to the recordkeeping system on a
daily basis.
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7
Unit Value and NAV Methodology
Unit Value
DCD Fund Accounting calculates a daily price for each of the Plans’ investment options
(Unit Value). Each investment option has its own WSS trust account (shown as “Pink
Box” in Appendix C charts).
On a daily basis, cash and security transactions are processed in each Pink Box based
on Plan participant directions given to NRS. NRS’ Trade File and Cash Summary create
cash and security transactions on a daily basis based on participant direction.
Transactions flow from NRS into the JP Morgan custody and fund accounting systems.
Security transactions in the Investment Options reflect an increase or decrease of the
shares of the placeholder CUSIP in each account. DCD Fund Accounting calculates a
price each day for these placeholder shares which become the numerator of the Unit
Value fraction as shown below.
Cash transactions are processed with record keeping units. Record keeping units are
stored on the fund accounting system and reconciled each day. These units become the
denominator of the Unit Value fraction.
The Unit Value calculation also includes accrued expenses as shown below:
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Table 7.1 Factor formulae
Result
Formula
Investment Option Value =
Placeholder CUSIP shares x NAV
Total Net Assets for the Investment
Option Account =
Unit Value =
Investment Option Market Value
less
Accrued expenses for SPP & JPM
fees
Total Net Assets for the Investment
Option Account
divided by
NRS’ Unit Position Report
NAV for Unitized Investment Accounts
JP Morgan calculates net asset values (NAVs) for the unitized investment accounts and
the actively managed separate accounts using a mutual fund based formula as follows:
Table 7.2 NAV formula
Result
Unit NAV =
Formula
[(Current day market value of securities held)
less
(Inv. manager fee accrual)]
divided by
Prior day closing shares outstanding
The current day market value includes dividends, capital gains, interest, stock splits and
any other corporate actions.
The NAV is used to price the placeholder CUSIP in the Investment Option account.
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8
Proxy services
NRS will act as the agent for the SPP for proxy voting for variable annuities, mutual
funds and commingled funds. Upon receipt of proxy materials from investment providers
or JP Morgan, NRS will review the investment provider Board of Director’s recommended
action. NRS will vote in accordance with this recommended action providing such action
is in the best interest of SPP participants. Such guidance shall be provided by SPP to
NRS upon NRS’ request. Each proxy vote will be reviewed and approved by an NRS
representative prior to voting. Additionally, NRS will maintain a record of all proxy
materials received and the final disposition of each matter. This proxy activity record will
be provided to SPP in January and July, or immediately upon request.
Proxies for all funds that are not variable annuities, mutual funds or commingled funds
will be routed by JPM to the appropriate investment manager for voting. Separate
account managers for SPP vote proxies for their accounts according to the firm’s proxy
voting policies and procedures and provide quarterly reports to SPP.
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9
Securities Lending
Below is the list of accounts that are currently involved in the Securities Lending
program:
Table 9.1 Securities Lending Account List
Account
Account Name
P 01887
STCA-CRM
P 04200
STCA – COLUMBUS CIRCLE INVESTORS LARGE CAP GROWTH
P 04199
STCA – WELLINGTON MANAGEMENT LARGE CAP GROWTH
P 06232
STCA-ROBECO LARGE CAP VALUE
P 06233
STCA-WILLIAM BLAIR SMALL CAP GROWTH
P 06234
STCA – FRONTIER SMALL CAP GROWTH
P 06293
STCA – MFS LARGE CAP VALUE
P 31576
STCA STIF WELLS CAPITAL MANAGEMENT
P 31577
STCA STIF JANUS CAPITAL MANAGEMENT
P 61392
STCA THOMPSON, SIEGEL & WALMSLEY SMALL CAP VALUE
P 61393
STCA PEREGINE ASSET MGMT SMALL CAP VALUE
P 62774
STCA-MID CAP VALUE (T. Rowe)
P 62775
STCA-MID CAP GROWTH (T. Rowe)
P 89698
STCA MCKINLEY CAPITAL NON -US
P 89699
STCA ALLIANCE BERNSTEIN STRATEGY
Assets loaned from one or more of the investment manager accounts listed above
generate securities lending revenues on a daily basis. JP Morgan shall credit
accumulated securities lending revenue for the month on the 20th calendar day after
month end to the appropriate investment manager account. The credited revenues are
net of agreed-upon allocation to JP Morgan.
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As directed by written SPP instructions, JP Morgan shall transfer the net credited
revenues from the investment manager accounts to the State of California Savings Plus
Program Securities Lending Program account (P04746) via internal account-to-account
transfer. Should the 20th calendar day fall on a weekend, the transfer shall be completed
on the next business day.
SPP has a standing instruction to move the funds from the State of California Savings
Plus Program Securities Lending Program account (P04746) to the 457 Plan Fee
Account #62752618 (a DDA) on the same day the funds are credited from the Securities
lending Program. This movement will be less monthly JPM fees for account P04746.
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10
Reporting
NRS will prepare or make available the following reports for the 457 Plan, 401(k) Plan,
the PST Program, and the ARP. All references below to SPP investments include the
brokerage account. SPP may amend these report requirements. Monthly reports are
due within 15 calendar days, quarterly reports are due within 30 calendar days, semiannual and annual reports due within 45 calendar days of the close of the reporting
period. The ad-hoc reports will be due within a mutually agreed-upon timeframe. The
following plan sponsor reports will be made available online:
The Web Activity Report and the Automated Telephone Transactions Report will be
presented in real-time using prior day’s close of business data.
The Fund Summaries Report and the Fund Balance and Participant by Age Report
utilize information which is updated weekly.
Monthly Management Reports –
Summary of participant activity identified by transaction type and medium used to
perform transactions (Internet, VRU, or customer service representative [CSR]).
Distribution Report by Plan –
Summary of distributions issued during the period by distribution method (e.g. direct
payments, periodic payments, rollover, purchase of service credit, etc.). The report is to
include the dollar value of distribution as well as the number of distributions issued. For
periodic payments the report will also include a breakdown of the number of checks
issued versus Automatic Clearing House (ACHs) processed. (Separate reports for the
Main Plan, PST Program and ARP.)
Loan Report by Plan Type –
Report to include number of loans and total dollar value of loans issued by loan type
(residential vs. general purpose). (Not applicable to the PST Program or the ARP.)
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Administrative Fee Report –
Report will include a breakdown of administrative fees assessed by plan, by tiered
amount reporting the total number of accounts at a given tier and the total fee collected
at each tier. (Not applicable to PST Program or ARP.)
Statement of Assets by Plan by Investment Option –
This section of the report will provide a summary of the market value of each investment
option by Plan for the period, including the total plan assets as of the last business day of
the month. Additionally the report will depict a percentage breakdown of the plan assets
by assets class and asset category. (Separate reports for the Main Plan, PST Program
and the ARP.)
Statement of Assets by Participant Count –
This section of the report will provide the number of participants invested in each
investment option by plan, by money type and an unduplicated count (unique SSNs).
(Separate reports for the Main Plan, PST Program and ARP.)
Monthly Demographic Reports –
Not applicable to PST or ARP, this report will summarize the demographic data of the
participant base by unique SSN.
Monthly Valuation Reports – This report will summarize the financial activity for the
period, by transaction type, for each investment option, including the brokerage account,
as reported by the recordkeeping system. For the 457 Plan, the 401(k) Plan, the PST
Program and ARP, these reports will include the beginning balance (market value) and
ending balance (market value and units) of each investment option. These reports will
present the market value of each transaction type by investment option. NRS will notify
SPP in a timely manner as mutually agreed upon by the parties of any previously
produced monthly valuation report which has been amended due to corrective actions,
transaction adjustments, etc.
Monthly Trust Accounting Reports – This report is for all trust accounts holding SPP
funds. The format and data provided, recommended by the trustee, will be subject to
SPP approval and amendment.
Monthly Reports for all Demand Deposit Accounts (DDA) for all State of California
accounts held outside the Trust. Report all activity for the period including a detailed
description of total deposits and total withdrawals.
Quarterly Brokerage Account Summary Reports by Plan Type
The report must include at a minimum the following:
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Operations Manual as of September 15, 2011 California Savings Plus Program



Participation: provide the number of accounts at the
beginning of the period, accounts at the end of the
period, and new accounts.
Average Participant Profile: provide the average
account balance, number of positions held by asset
category, and average number of trades by asset
class.
Summary of Assets:
o Sweep Account: provide the total value of
assets residing in the account and the
corresponding percentage that the sweep
account represents of total brokerage account
assets;
o Net Asset Flow: provide net asset flow by asset
category; and,
o Investments: provide the allocation of
investment activity by asset category including
the top ten Equity Holdings, top ten Mutual
Fund holdings, and their corresponding market
value and percentage of total brokerage
account assets.
Fiscal and Calendar Year-End Reports – This report will summarize the data contained
in the Monthly Valuation Reports. Data is provided in the same format as the monthly
reports but provides data for the fiscal year ended June 30 and the calendar year ended
December 31.
Fiscal and Calendar Year-End Reconciliation Reports – “Trust to Recordkeeper”:
These reports reconcile asset holdings, by plan and by program, as reported by the
recordkeeping system, to the asset holdings as reported by the trustee system (reported
in shares/units and market value). Any deviations are to be fully identified and explained
by NRS.
Fiscal and Calendar Year-End Reconciliation Reports – “Trust to Carrier”: These
reports reconcile asset holdings, by plan and by program, as reported by the trustee’s
system, to asset holdings as reported by the investment providers (reported in
shares/units and market value). Any deviations are to be fully identified and explained
by NRS.
Fiscal and Calendar Year-End Reconciliation Reports – “Recordkeeper to Carriers”:
These reports reconcile asset holdings, by plan and by program, as reported by the
recordkeeping system, to asset holdings as reported by the investment providers
(reported in shares/units and market value). Any deviations are to be fully identified and
explained by NRS.
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Documentation of Disabled Veteran Business Enterprise (DVBE) Program
Requirements (Std. 840) – NRS will report on its DVBE activities for the 12 months
ended June 30. The report is due August 15th. This standard form can be located at
http://www.pd.dgs.ca.gov/smbus/default.htm.
Errors and Omissions Reports – These monthly reports provide details relating to
each situation requiring NRS to provide short-term cash to fund corrective actions and/or
failed negative contributions. (Separate reports for the Main Plan, PST and ARP.)
Accounts Receivable Report – This report updates the status of participants for who
SPP provided funding and from who NRS was directed to pursue reimbursement.
(Separate reports for the Main Plan, PST and ARP.)
Investment Provider Reimbursement and Other Administrative Revenue Report –
This report provides the underlying details to substantiate the total amount received by
NRS in revenue reimbursements by fund provider and plan type for the reporting period
(e.g. the fund balance utilized by the fund company to calculate the provider
reimbursement, the provider reimbursement factor and the resulting value of the
reimbursement). A separate report shall be prepared to report the monthly
accumulation of the daily fee accrual assessed against the NAV for selected funds.
Deferral Change Report “650 Report” – This report contains all payroll deduction
changes for the upcoming payroll cycle. A separate report is prepared for each payroll
office in a format requested by the payroll office. This report is due by the fifth business
day of the month. (Not applicable to the PST or ARP.)
Call Center Reports – NRS shall prepare a weekly report indicating the number of calls
to the VRU and the number of calls which request a CSR.
NRS shall submit a monthly report, the cut off for which shall be the last calendar or last
business day of the month. The monthly report shall also present information on a
calendar year-to-date basis.
Ad-Hoc Reports – As SPP may request, it is expected that such reports will pertain to
activities and responsibilities undertaken by and agreed to by NRS. As such, no
additional administrative costs are expected. However, if SPP deems the nature of a
requested report to be extraordinary, a negotiated cost may be considered.
Education and Outreach Reports – NRS will provide quarterly reports designed to
measure the overall effectiveness of these efforts. The reports should include but are
not limited to the following areas of analysis: new enrollees; changes in overall deferral
amounts; changes in participant asset allocations; the number of group presentations,
with attendance figures, and the number of individual counseling sessions made during
the review period; and, a summary of feedback obtained from attendees. This quarterly
education and outreach data will be included in the monthly management report
referenced above.
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Top Ten Holdings Report – JP Morgan will prepare a report of the top ten holdings of
the actively managed funds and will provide that report to NRS as soon as the
information is available after the end of each calendar quarter. The report will list the top
ten holdings and the percentage each holding is of the entire fund.
Plan Year Foreign Holdings Report – JPMorgan will prepare a report of all foreign
currency holdings as of June 30th which is the fiscal year end for the “Plan”. This is
accomplished by receiving all foreign currency holdings from Northern Trust which
manages the State of California ACWI EX-US fund as well as all foreign holdings within
all Investment Management accounts within the custody system at JPMorgan.
The ACWI EX-US holdings are proportioned among all investment options that hold the
Northern Trust ACWI EX-US fund in amounts equal to the percentage of the fund held in
each option.
This is combined into one spreadsheet and supplied to the California DPA as soon as
available after the end of the “Plan” year.
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11
Investment Compliance and Performance
Monitoring
Mercer
Mercer Sentinel provides Transaction Cost Analysis and FX Cost Analysis for SPP on an
ad hoc basis. In addition, Mercer Sentinel provides Securities lending monitoring on a
quarterly basis.
Mercer shall provide quarterly investment performance reporting which will cover the
following:
 Performance and market value of the underlying managers of the funds along
with a rollup of each fund-of-funds performance compared to benchmarks and
institutional peers. Median ranking for peer managers and an actual ranking of
each fund. The rankings are to be based on institutional universes.

A compliance section/summary which outlines compliance to the IPS, both
quantitative (for example, 3 and 5-year performance vs. peers and benchmarks)
in addition to qualitative criteria including changes in process, investment
professionals, style drift, positioning within each fund of funds, and any relevant
information/insights gathered.

Executive summary which outlines specific recommendations regarding any
aspect of the Program.

Individual write-up on each of the managers, including a brief description of
process, performance drivers for the quarter, statistical measures,
quantitative/qualitative data on the investment managers, performance issues
and recommendations.
Mercer shall provide reports within 30 days after quarter end. Mercer will present the
information at quarterly SPP Investment Committee meetings.
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Mercer shall perform compliance monitoring at the custodial level and based on the daily
transactions from all the individual managers. The report entails reviewing/analyzing the
daily transaction information from the custodian’s system to determine separate account
investment manager’s compliance with the investment guidelines as specified in their
contract with the Department and making recommendations/judgments accordingly.
Mercer shall provide reports within 10 business days after receipt of data from the
custodian.
Mercer will solicit investment managers’ review and sign-off on compliance with the
investment guidelines as specified in their contract with the Department. Solicitation will
occur at least annually (more frequently if determined necessary). Mercer will provide a
report including comments on any manager requested change(s) to their investment
guidelines. Mercer will provide reports within 7 days after receipt of all manager
information.
Mercer will conduct annual Transaction Cost Analysis (TCA) for separate accounts:
1. Equity TCA – Evaluation and review of equity transaction costs (custodian driven
data) across all active equity managers. Review shall cover both explicit
(commission) and implicit (market impact) costs and use multiple transparent
benchmarks (i.e., market database of stock trade information) to validate
findings.
2. Foreign exchange (FX) TCA – Evaluation and review of FX costs (custodian
driven data) for international separate accounts.
Analysis will cover a 12-month period of transaction costs. Mercer shall provide reports
within 50 days after receipt of data from the custodian.
Mercer will conduct ongoing monitoring of all aspects of the investment process,
including annual due diligence visits with managers (alternating between managers’ and
Contractor’s locations), ongoing analysis of the comparable universe of strategies and
products. Mercer will provide reports within 30 days after on-site due diligence visit is
conducted.
Mercer will conduct ongoing monitoring of all aspects of the securities lending agent(s),
custodian, and transition managers, including annual due diligence visits with the
services providers. Mercer will provide a report within 30 days after due diligence visit is
conducted.
JP Morgan
Compliance reporting for the State of California is provided through the Boston offices of
JP Morgan.
Compliance Reporting Services has built a set of rules for each investment account
according to the mandates of the Agreements between the State of California and its
Investment Managers. Holdings and exception-based rules are constructed on the
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JPMorgan TRAC system to support the intentions of the different portfolios and to
identify any possible variances from those intents.
Current services include daily testing and review of potential violations via the
JPMAccess Breach Register application, research and resolution of questionable
violations, and provision of a quarterly summary of remaining violations for discussion
with the client’s consultant, Mercer Company. The summary will be provided by
Compliance Reporting to Mercer no later than the second business day of the month
following the end of each quarter. Additional detail itemizing specific securities, their
market value, country of origin, investment type etc. are also provided to Mercer as
requested.
Enhancements to compliance rule-sets may be requested by the State of California to
include/exclude specific securities. Compliance Reporting Services will perform these
updates and also make suggestions to assist with streamlining rule-sets. Any rules
changes are documented and sent via email to the client for final approval.
Compliance Reporting Services will establish a new set of rules for any new account as
requested by the State of California, following the guidelines provided. New accounts
will be established on the Compliance Reporting system no later than 20 Business Days
after guidelines have been provided. In addition to opening new accounts for reporting,
Compliance also removes closed accounts from the reporting systems as instructed by
the client.
On a quarterly basis, Compliance Reporting will provide SPP a report of service statistics
and a listing of all current compliance-eligible accounts.
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12
JPMorgan Class Action Processing
JPMorgan maintains a dedicated class action unit in our Dallas, Texas operations center.
This group of seven experienced professionals handle all class action claims processing
for U.S. domestic accounts. The receipt of notice and process of filing claims includes
research to determine valid holders, completion and submission of proof of claims,
handling of any rejects and, ultimately, crediting of settlement funds received.
Our class action service includes the following steps:
1). Proof of Claim Filing Procedures
JPMorgan receives the majority of its notices via direct mail from the claims
administrators and also subscribes to ISS’s Securities Class Action Service (SCAS).
This service includes a monthly on-line securities class action newsletter with links to a
comprehensive, fully searchable SCAS database. This database features
comprehensive coverage of all securities class action cases and provides JPMorgan with
e-mail alerts for changes in case status.
Upon receiving notice of a pending class action settlement, JPMorgan will research trade
and holdings information and identify the holders of the affected security during the class
period. If we identify holdings for clients who are not part of the Securities Class Action
Filing Service, we will send a copy of the notice of settlement and proof of claim form to
those clients, with instruction for them to complete the proof of claim form if they desire
to participate in the settlement.
Please note that JPMorgan does not forward notice or proof of claim to those clients for
whom we are actively filing.
In order to obtain a share of settlement proceeds, three basic requirements must be met:
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Operations Manual as of September 15, 2011 California Savings Plus Program

the proof of claim form must be completed

supporting documentation verifying trade info must be supplied

the claim form must be signed.
JPMorgan prioritizes all pending actions by filing deadline date, compiles the required
documentation and submits a proof of claim per beneficial owner to the court-appointed
claims administrator by the deadline date. The proof of claim is verified and then
reviewed by the court-appointed claims administrator against the settlement criteria to
determine whether the holdings or transactions are eligible to participate in the
settlement.
The class action file at JPMorgan remains open until settlement proceeds are received
and distributed to clients or the claims are rejected because they do not meet the
settlement criteria set by the court.
2). Rejections
Claims may be refused by the courts or court-appointed claims administrator because
they do not meet the settlement specifications set by the court or because the proof of
claim is insufficient. JPMorgan processes these rejections as follows:

Rejections for cause: When a court determines that a beneficial owner is
ineligible to participate in the settlement, it typically sends JPMorgan a
notice advising of the rejection and of the deadline and instructions for
filing of appeals. JPMorgan advises clients that the claim has been
rejected by the court.

Rejections for proof: When JPMorgan receives notices of rejection for
insufficient proof, the staff prioritizes the items by deadline date, compiles
the additional proof or documents required by the court and re-submits the
claim. JPMorgan does not refer these rejects to clients as the court will
reconsider the proof of claim with the additional information.
Because reject notices are sent by regular mail, and the deadlines given to file additional
proof or appeal the court’s finding are short, JPMorgan often receives reject notices very
close to the deadline dates. In addition, rejections for cause often do not state the
reason for the court’s finding, and they rarely disclose the settlement criteria the court
used to determine entitlements. This information is sometimes available from the claims
administrator or the issuer.
Rejections for cause are most often attributed to lack of a “recognized loss” according to
the Plan of Allocation as described in the Notice of Settlement.
3). Distribution of Settlement
Upon receipt of the settlement proceeds from the claims administrator, JPMorgan will
effect a payment to the client’s account. Once payment is received the class action
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Operations Manual as of September 15, 2011 California Savings Plus Program
database is updated to reflect the receipt of payment (or securities) and the closure of
the claim.
4). Monitoring and Reporting
JPMorgan monitors all class action activity on an ongoing basis and provides quarterly
reporting that includes the following information:

Claim Status

Case Number

Class Period

Opt-Out Deadline

Claim Deadline

Settlement Proceeds (cash or stock)
Currently, class action reporting is available in hard copy or via e-mail, although
JPMorgan is in the process of enhancing its reporting flexibility to include additional
electronic means of delivery.
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13
JPMorgan WSS AutoFX and Agent FX Process
JPMorgan offers clients the flexibility to determine how FX deals are executed. Deals
can be executed directly with the desk (3rd party basis), as part of the WSS custody
standing instruction platform (AutoFX), through J.P.Morgan’s proprietary e-dealing
platform (Morgan Direct) or any one of the leading third-party multi-bank FX portals,
including but not limited to FXAll and FXConnect. Regardless of the method of
execution chosen by Clients, JPMorgan is committed to providing full transparency and
best execution.
AutoFX
AutoFX is the complete outsourced FX solution that automates everything from trade
initiation to settlement and confirmation. Clients can chose to automate all FX
transactions with AutoFX, or alternatively maintain direct execution of nominated
currencies and accounts and automate all remaining currencies through AutoFX where
Clients or their managers may have less focus, knowledge and/or expertise. Deals are
automatically processed on the back of securities trades, income, dividends, corporate
actions and tax reclaim activity and settled through J.P.Morgan’s FX infrastructure. As
the process is automated, JPMorgan offers Clients the ability to establish a benchmark
for the pricing and execution of all foreign exchange trades that meets their Best
Execution requirements.
AutoFX will enable Clients to remove certain FX risks, as JPMorgan assumes
operational, settlement, replacement and reputational risks on behalf of its clients.
Clients can also maximize cost efficiencies as FX dealing and settlement is outsourced
to JPMorgan, thereby saving associated and duplicated infrastructure costs.
Additionally, AutoFX automatically captures FX requirements, leading to 100% STP,
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Operations Manual as of September 15, 2011 California Savings Plus Program
thereby dramatically reducing costs associated with human error. AutoFX includes
Agent only currencies with restrictions that permit onshore trading only.
Income FX
JPM's Income group oversees the operational process associated with the payments of
foreign dividends and tax reclaims. This process includes reconciling dividend and
interest payments from the local sub custodian across each individual holder of the
security and allocating the proceeds to the underlying client account. As an added
operational benefit, JPM Income offers Autocredit across 43 markets. Autocredit is the
conditional advance of income and interest on unconfirmed funds based upon market
announcements and information made available prior to pay date. For clients with
Income FX SSI's, the FX is triggered and executed via a fully automated process once
the Autocredit process runs. The FX is executed on pay date for same day value,
irrespective of confirmed or unconfirmed fund status. If there’s a reversal or adjustment
of the original payment, JPM will apply the pay date exchange rate regardless of the
reconciliation date and assume full responsibility for any rate exposure. Due to specific
market issues some currencies are not included in the Autocredit process. The main
difference with Non Autocredit is the client account is paid based on confirmed funds
only (i.e., once funds are received and reconciliation is completed with the sub
custodian). The FX is also executed only upon receipt of confirmed funds. This typically
occurs on or after pay date.
Corporate Action FX
JPM’s Corporate Action group oversees a process similar to Income as it pertains to
foreign payments tied to various corporate action events. The corporate action process
also includes reconciling payments received from the local subcustodian and allocating
the cash positions across the underlying client account however this process is done on
confirmed funds only. Once the reconciliation process is complete, they system
recognizes clients who have FX SSI’s in place and automatically generates the
instruction to the FX desk. This generally takes place on either pay date or pay date +1
depending on the market.
Agent FX
Agent FX represents JP Morgan’s process of executing FX transactions in highly
regulated and restricted markets. “Restricted Markets” or “Agent Markets” require their
currencies to be traded within the country (onshore). JPMorgan has established
AgentFX as a best practice in consideration of the risks associated with each market.
For Agent currencies, the rate will be obtained from our onshore subcustodian when the
deal is booked locally and proactively monitored by JPMorgan Foreign Exchange desk in
London, who are in from 12am to 10pm London time, to ensure best execution from our
subcustodians/agents. Rates achieved will be dependent upon the currencies
concerned, size of the deal, and market volatility at the time of booking the deal.
In order to meet local requirements related to foreign exchange activity and other local
regulations related to trade settlement and cash management, the FX execution timing is
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Operations Manual as of September 15, 2011 California Savings Plus Program
tied to the underlying securities trade settlement status ie., matched or settled for FX’s
relating to purchases, sales and income. Given the vast currency, cash management
and reporting restrictions in many restricted markets, the FX is only executed after the
securities trade has matched in the market. Due to the different market settlement
cycles FX execution timings can vary as security trades match anywhere from T1 or
greater (relating to purchase trades). FX execution relating to the repatriation of local
funds associated with a sale of a security trade will occur only upon confirmation of
cleared funds. Depending on the local cash clearing process repatriations are executed
earliest on SD or SD+1 and greater depending on local requirements i.e. tax impacts etc.
The foreign exchange repatriations relating to specific tax, corporate actions, and/or
dividend proceeds also require varying levels of direct linkage between the original
income & the FX which is monitored by the sub custodian. Cash flow is restricted and
overdrafts are illegal for foreign investors as such these markets are not part of the WSS
Autocredit Product as the FX execution is only done upon confirmation & reconciliation of
each client’s local payment proceeds- FX execution is typically on paydate +1 or greater.
Summary of AutoFX Benefits:
Risk Reduction - removes fail risk and linked reputation risk (and any associated costs)
particularly in emerging markets with short settlement cycles and high overdraft rates.
Also removes operational and replacement risk
Error Reduction - eliminates/minimizes the need for manual FX instructions and
therefore the associated opportunity for human error
Efficiency & Cost Reduction - AutoFX provides the ideal vehicle for straight through
processing, required to conduct investment activities, saving time and resource. It
effectively outsources the FX infrastructure, eliminates unnecessary overdrafts and
therefore reduces the number of currencies to be managed
Confirmations - generates and delivers FX confirmations immediately upon execution of
individual trades, or with daily reporting on FX trading activity for single or multiple
account relationships, using a variety of methods (SWIFT, automated fax)
To utilize AutoFX, Clients authorize and direct JPMorgan Worldwide Securities Services
via standing settlement instructions (SSI’s), individually on a trade by trade basis, or
through a stand-alone instruction (MT380 or fax).
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Appendix A
Glossary of Terms
Term
Definition
DCD Client Service Support
JP Morgan unit that provides Client service and
operational support for SPP and NRS
DCD Fund Accounting
JP Morgan unit that calculates daily Unit Values and
NAVs
DCD Operations
JP Morgan unit that provides Daily interface with
NRS, DCD Fund Accounting, SPP Client Service
and investment managers. Responsible for all
transaction processing
DPA
California Department of Personnel Administration
JP Morgan Client Coverage
Main point of contact for SPP and NRS
JP Morgan Client Service
Client service for SPP and NRS
JPM WSS
Worldwide Securities Services is the trust and
custody business of JP Morgan
NRS
Nationwide Retirement Solutions
NSCC
National Securities Clearing Corporation,
Mercer
40
Operations Manual as of September 15, 2011
California Savings Plus Program
Appendix B
Contacts
Table B.1. JP Morgan Contacts
Name
Role
Phone
Fax
Email
Marion Scida
Vice President
(469) 477-1634
(469) 477-1904
[email protected]
Jamshid Irshad
Asst. Vice President
(469) 477-2306
(469) 477-1904
[email protected]
DCD Operations
DCD Fund Accounting
General E-Mail
[email protected]
Matt Reiben
(469) 477-2214
(214) 451-6096
[email protected]
Client Service/Coverage
Jeffrey Autero
Client Service Account Manager
(212) 623-8756
(212) 623-3154
[email protected]
Vito Milillo
Client Service Account Manager
(212) 623-8705
(212) 623-3154
[email protected]
Kevin Isawa
Coverage Officer
(415) 315-7989
(415) 315-8235
[email protected]
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Operations Manual as of September 15, 2011
California Savings Plus Program
Table B.2. NRS Contacts
Name
Role
Phone
Fax
Email
Cynthia G. Dragics
Relationship Manager
(614) 854-8529
(614) 854-5115
[email protected]
Stephanie Smith
Program Director
(916) 324-0513
(916) 939-2751
[email protected]
Jeff Godorhazy
Director of Accounting
(614) 249-4356
(614) 677-2223
[email protected]
Table B.3. Mercer Investment Consulting (Monitoring Services) Contacts
Name
Role
Phone
Fax
Email
David Williams
Mercer Investment Consulting
(206) 214- 3707
(206) 382 0627
[email protected]
Paul Sachs
Mercer Sentinel
(215) 246-1297
(215) 246 1399
[email protected]
Taaha Haq
Mercer Sentinel
(312) 902-7684
(312) 902 7626
[email protected]
Table B.4. RV Kuhns & Associates Inc. (Plan Design and Search Services) Contacts
Name
Role
Phone
Fax
Email
Michael Ford
Co-Lead
(503) 221-4200
(503) 802-6908
[email protected]
Marcia Beard
Co-Lead
(503) 221-4200
(503) 802-6901
[email protected]
Table B.5. CA SPP contact information
Name
Role
Phone
Fax
Email
Michelle Berklacich
Administrator
(916) 324-0536
(916) 327-1885
[email protected]
Alan Staton
Deputy Administrator
(916) 327-8984
(916) 327-1885
[email protected]
Carrie Pierce
Program Advisor – Investment
Officer
(916) 324-9355
(916) 327-1885
[email protected]
Anastacio Santiago
Program Advisor – Compliance
Officer
(916) 322-9500
(916) 327-1885
[email protected]
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Operations Manual as of September 15, 2011
California Savings Plus Program
Manager Contacts
Table B.6. Alliance Bernstein L.P.
Investment category/service
Name
Phone/ Fax
Email
International Value
Bob Harleman
T (310) 286-6089
F (415) 217-8133
[email protected]
Investment category/service
Name
Phone/ Fax
Email
Short Term Investment-Cash
Kristopher Neuhold
T (405) 936-3926
F (405) 936-3965
[email protected]
Table B.7. Bank of Oklahoma
Table B.8. Columbus Circle Investors
Investment category/service
Name
Phone/ Fax
Email
Large Cap Growth
Stephen Weeks
T (203) 353-6000
[email protected]
Table B.9. Cramer Rosenthal McGlynn, LLC
Investment category/service
Name
Phone/ Fax
Email
Mid Cap Blend
Addison West
T (212) 326-5318
[email protected]
Table B.10. Wells Capital Management, LLC
Investment category/service
Name
Phone/ Fax
Email
Short Term Investment
Michael P. Rodgers
T (415) 396-6911
F (415) 975-6214
[email protected]
Table B.11. Frontier Capital Management
43
Operations Manual as of September 15, 2011
California Savings Plus Program
Investment category/service
Name
Phone/ Fax
Email
Small Cap Growth
Leigh Anne Yoo
T (617) 443-1621
F (617) 267-0864
[email protected]
Table B.12. Hartford Life
Investment category/service
Name
Phone/ Fax
Email
Socially Responsible (Neuberger Berman)
Kathleen Donahue
T (860) 843-9402
F (866) 521-9643
[email protected]
Table B.13. McKinley Capital Management, LLC
Investment category/service
Name
Phone/ Fax
Email
International Growth Equity
John Reynolds
T (203) 202-2103
F (203) 202-1607
[email protected]
Table B.14. MFS Institutional Advisors Inc.
Investment category/service
Name
Phone/ Fax
Email
Large Cap Value
Carolyn Lucey
T (617) 954-5980
F (617) 210-8814
[email protected]
Name
Phone/ Fax
Email
Table B.15. Nationwide Bank
Investment category/service
44
Operations Manual as of September 15, 2011
California Savings Plus Program
Investment category/service
Name
Phone/ Fax
Email
Short Term Investment-Cash
Mark Donati
T (614) 249-9619
F (614) 249-7435
[email protected]
Table B.16. Northern Trust Investments, N. A.
Investment category/service
Name
Phone/ Fax
Email
Bond Index, Mid Cap Index, Large Cap Index,
International Index, Small Cap Index, TIPS Index
Daniel Hynes
T (312) 444-7160
F (312) 444-4517
[email protected]
Table B.17. Peregrine Capital Management, Inc.
Investment category/service
Name
Phone/ Fax
Email
Small Cap Value
Stefanie M. Adams
T (612) 343-7660
F (612) 343-7631
[email protected]
Table B.18. Robeco Investment Management
Investment category/service
Name
Phone/ Fax
Email
Large Cap Value
Sandy Sinor
T (213) 687-1656
F (213) 687-1522
[email protected]
Table B.19. Schwab via Nationwide Retirement Solutions
Investment category/service
Name
Phone/ Fax
Email
Brokerage Account
Ken Nichols
T (602) 355-3359
F (602) 355-4859
[email protected]
Phone/ Fax
Email
Table B.20. Thompson, Siegel & Walmsley LLC
Investment category/service
Name
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Operations Manual as of September 15, 2011
California Savings Plus Program
Investment category/service
Name
Phone/ Fax
Email
Small Cap Value
Shelton Horsley
T (804) 353-4500
F (804) 213-4958
[email protected]
Table B.21. T. Rowe Price Associates, Inc.
Investment category/service
Name
Phone/ Fax
Email
Mid Cap Growth
Mid Cap Value
David B. Orlando
T (415) 772-1103
F (415) 772-1111
[email protected]
Investment category/service
Name
Phone/ Fax
Email
Short Term Investment-Cash
Cindy Dekruyf
T (323) 278-6449
F (800) 738-2329
[email protected]
Table B.22. Union Bank of California
Table B.23. Wellington Management Company LLP
Investment category/service
Name
Phone/ Fax
Email
Large Cap Growth
Sue Bonfeld
T (415)-627-1820
F (415)-627-1801
[email protected]
Name
Phone/ Fax
Email
Table B.24. William Blair
Investment category/service
46
Operations Manual as of September 15, 2011
California Savings Plus Program
Investment category/service
Name
Phone/ Fax
Email
Small Cap Growth
Gabe Ayoroa
T (312) 364-8217
[email protected]
F (312) 577-0908
Table B.25. Janus Capital management
Investment category/service
Name
Phone/ Fax
Email
Short Term
Ken Paieski
T (303)619-5568
[email protected]
F (303) 394-7697
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Operations Manual as of September 15, 2011
California Savings Plus Program
Appendix C
Investment Options
Chart C.1. Investment Options – As of September 15, 2011
e following tables show details of SPP’s Investment Option Accounts:
Table C.2. Active Equity Options
Large Cap Equity – P65872
Underlying Manager(s)
NTGI S&P 500 Index
MFS Large Cap Value
Columbus Circle Large Cap Growth
Robeco Large Cap Value
Wellington Large Cap Growth
Allocation %
40%
15%
15%
15%
15%
100%
Vehicle type
Account
CUSIP/Placeholder
Collective fund (liquidity vehicle)
Separate account
Separate account
Separate account
Separate account
P64268
P06293
P04200
P06232
P04199
629998550
59399J608
124996323
770995850
949994776
Mid Cap Equity – P65873
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Operations Manual as of September 15, 2011
Underlying Manager(s)
NTGI S&P 400 Index
T. Rowe Mid Cap Value
T. Rowe Mid Cap Growth
CRM
California Savings Plus Program
Allocation %
10%
29%
32%
29%
100%
Vehicle type
Account
CUSIP/Placeholder
Collective fund (liquidity vehicle)
Separate account
Separate account
Separate account
P65081
P62774
P62775
P01887
629998790
779990027
872992482
126990332
Vehicle type
Account
CUSIP/Placeholder
Collective fund (liquidity vehicle)
Separate account
Separate account
Separate account
Separate account
P65080
P61392
P61393
P06233
P06234
629992488
872990221
713990042
416528800
359994878
Vehicle type
Account
CUSIP/Placeholder
Collective fund (liquidity vehicle)
Separate account
Separate account
P89697
P89699
P89698
629992850
018996546
857998520
Vehicle type
Account
CUSIP/Placeholder
Collective fund (liquidity vehicle)
Mutual fund
Mutual fund
P64269
P06235
P06887
629998758
04399J604
779996511
Small Cap Equity – P65874
Underlying Manager(s)
NTGI Russell 2000 Index
TSW Small Cap Value
Peregrine Small Cap Value
William Blair Small Cap Growth
Frontier Small Cap Growth
Allocation %
10%
22.5%
22.5%
22.5%
22.5%
100%
International Equity – P62773
Underlying Manager(s)
NTGI MSCI ACWI EX-US Index
AllianceBernstein International Value
McKinley International Growth
Allocation %
10%
45.0%
45.0%
100%
Table C.3. Bond Fund and STIF Options
Bond Fund – P65871
Underlying Manager(s)
NTGI Aggregate Bond Fund
Artio Bond Fund
T. Rowe Price Bond Fund
Allocation %
20.00%
40.00%
40.00%
100%
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Operations Manual as of September 15, 2011
California Savings Plus Program
STIF Fund – P66547
Underlying Manager(s)
STIF Cash FDIC Providers
STIF Cash Govt MM Funds
Allocation %
50%
50%
100%
Vehicle type
Account
CUSIP/Placeholder
Cash
Cash
P05488
P05489
905993697
092996370
Account
CUSIP/Placeholder
Collective fund
P64269
629998758
Vehicle type
Account
CUSIP/Placeholder
Collective fund
P64268
629998550
Vehicle type
Account
CUSIP/Placeholder
Collective fund
P65081
629998790
Vehicle type
Account
CUSIP/Placeholder
Table C.4. Index Fund and Stand-Alone Options
Bond Index – P65866
Underlying Manager(s)
NTGI Market Duration Bond Index
Allocation
%
100%
Vehicle type
Large Cap Equity Index – P65867
Underlying Manager(s)
NTGI S&P 500 Index
Allocation %
100%
Mid Cap Equity Index – P65868
Underlying Manager(s)
NTGI S&P 400 Index
Allocation %
100%
Small Cap Equity Index – P65869
Underlying Manager(s)
NTGI Russell 2000 Index
Allocation %
100%
Collective fund
P65080
629992488
International Index – P65870
Underlying Manager(s)
NTGI MSCI ACWI EX-US Index
Allocation %
100%
Vehicle type
Account
CUSIP/Placeholder
Separate account
P89697
629992850
Short Term Investment (Stable Value) – P65875
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Operations Manual as of September 15, 2011
Underlying Manager(s)
Wells Capital Management
Janus Capital Management
California Savings Plus Program
Allocation %
50%
50%
Vehicle type
Account
CUSIP/Placeholder
Separate account
Separate account
P31576
P31577
949996524
470995846
Vehicle type
Account
CUSIP/Placeholder
Variable Annuity
P64280
416998243
Socially Responsible Investment- P64280
Underlying Manager(s)
Hartford
Allocation %
100%
Table C.5. Plan Features Accounts
Brokerage Window – P64265
Underlying Manager(s)
Various -- aggregate balances only
Allocation %
n/a
Vehicle type
Account
CUSIP/Placeholder
n/a
P64265
806995114
Vehicle type
Account
CUSIP/Placeholder
n/a
P64266
89299V500
Vehicle type
Account
CUSIP/Placeholder
P31576
P31577
949996524
470995846
Loan Account – P64266
Underlying Manager(s)
Various -- aggregate balances only
Allocation %
n/a
PST Account – P64281
Underlying Manager(s)
Wells Capital Management
Janus Capital Management
Allocation %
50% Separate account
50% Separate account
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Operations Manual as of September 15, 2011
California Savings Plus Program
Table C.6. – Lifestyle Asset Allocation Options
Conservative – P65861
Underlying Managers/Accounts
NTGI Market Duration Bond Index
NTGI S&P 500 Index
NTGI S&P 400 Index
NTGI Russell 2000 Index
NTGI MSCI ACWI EX-US Index
Diversified Real Return Fund
STIF Low Duration – Wells
STIF Low Duration - Janus
STIF Cash – FDIC Providers
STIF Cash – Gov’t MM Providers
Allocation %
Account
CUSIP/Placeholder
33 .00%
5.20%
1.60%
1.20%
8.00%
10.00%
15.50%
15.50%
5.00%
5.00%
100%
P64269
P64268
P65081
P65080
P89697
P14201
P31576
P31577
P05488
P05489
629998758
629998550
629998790
629992488
629992850
629996356
949996524
470995846
905993697
092996370
Allocation %
Account
CUSIP/Placeholder
35 .00%
11.05%
P64269
P64268
629998758
629998550
3.40%
2.55%
17.00%
10.00%
8.00%
8.00%
2.50%
2.50%
100%
P65081
P65080
P89697
P14201
P31576
P31577
P05488
P05489
629998790
629992488
629992850
629996356
949996524
470995846
905993697
092996370
Moderately Conservative – P65862
Underlying Managers/Accounts
NTGI Market Duration Bond Index
NTGI S&P 500 Index
NTGI S&P 400 Index
NTGI Russell 2000 Index
NTGI MSCI ACWI EX-US Index
Diversified Real Return Fund
STIF Low Duration – Wells
STIF Low Duration - Janus
STIF Cash – FDIC Providers
STIF Cash – Gov’t MM Providers
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Operations Manual as of September 15, 2011
California Savings Plus Program
Moderate – P65863
Underlying Managers/Accounts
NTGI Market Duration Bond Index
NTGI S&P 500 Index
NTGI S&P 400 Index
NTGI Russell 2000 Index
NTGI MSCI ACWI EX-US Index
Diversified Real Return Fund
STIF Low Duration – Wells
STIF Low Duration - Janus
Allocation %
Account
CUSIP/Placeholder
29.00%
15.60%
4.80%
3.60%
24.00%
15.00%
4.00%
4.00%
100%
P64269
P64268
P65081
P65080
P89697
P14201
P31576
P31577
629998758
629998550
629998790
629992488
629992850
629996356
949996524
470995846
Moderately Aggressive – P65864
Underlying Managers/Accounts
NTGI Market Duration Bond Index
NTGI S&P 500 Index
NTGI S&P 400 Index
NTGI Russell 2000 Index
NTGI MSCI ACWI EX-US Index
Diversified Real Return Fund
Allocation %
Account
CUSIP/Placeholder
16.00%
20.80%
6.40%
4.80%
32.00%
20.00%
100%
P64269
P64268
P65081
P65080
P89697
P14201
629998758
629998550
629998790
629992488
629992850
629996356
Allocation %
Account
CUSIP/Placeholder
29.25%
9.00%
6.75%
45.00%
10.00%
100%
P64268
P65081
P65080
P89697
P14201
629998550
629998790
629992488
629992850
629996356
Aggressive – P65865
Underlying Managers/Accounts
NTGI S&P 500 Index
NTGI S&P 400 Index
NTGI Russell 2000 Index
NTGI MSCI ACWI EX-US Index
Diversified Real Return Fund
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Operations Manual as of September 15, 2011
California Savings Plus Program
Appendix D
Accrual Schematics
Chart D.1. Accrual Schematic – As of September 15, 2011
STCA SPP Expense Accrual Schematic – September 2011
P65861
Target Risk – Conservative
Accrual Type
Amount
STCA Reim.
10 bp
JPM
see sched.
P 65866
Market Duration Bond
Accrual Type
Amount
STCA Reim.
10 bp
JPM
see sched.
P 64281
PST Account
Accrual Type
STCA Reim.
JPM
P66547
STIF Cash
Accrual Type
STCA Reim.
JPM
Amount
10 bp
see sched.
P65862
Target Risk – Mod. Cons.
Accrual Type
Amount
STCA Reim.
10 bp
JPM
see sched.
P65867
Large Cap Equity
Accrual Type Amount
STCA Reim.
10 bp
JPM
see sched.
P65871
Market Duration Bond
Accrual Type
Amount
STCA Reim.
10 bp
JPM
see sched.
Amount
7.5 bp
see sched.
P65863
Target Risk – Moderate
Accrual Type
Amount
STCA Reim.
10 bp
JPM
see sched.
P65868
Mid Cap Equity Index
Accrual Type Amount
STCA Reim. 10 bp
JPM
see sched.
P64280
SRI
Accrual Type Amount
STCA Reim. 10 bp
JPM
see sched.
P65864
Target Risk – Mod. Agg.
Accrual Type
Amount
STCA Reim.
10 bp
JPM
see sched.
P65865
Target Risk – Aggressive
Accrual Type
Amount
STCA Reim.
10 bp
JPM
see sched.
P 65869
Small Cap Equity Index
Accrual Type Amount
STCA Reim. 10 bp
JPM
see sched.
P 65870
Non-US Equity Index
Accrual Type Amount
STCA Reim. 10 bp
JPM
see sched.
P65875
P14200
Short Term Investment
Accrual Type Amount
STCA Reim. 10 bp
JPM
see sched.
Diversified Real Return
Accrual Type Amount
STCA Reim. 10 bp
JPM
see sched.
P65872
Active Core – Large Cap
Accrual Type Amount
STCA Reim. 10 bp
JPM
see sched.
P65873
Active Core – Mid Cap
Accrual Type Amount
STCA Reim. 10 bp
JPM
see sched.
P 65874
Active Core – Small Cap
Accrual Type Amount
STCA Reim. 10 bp
JPM
see sched.
P 62773
Active Core – Int’l. Eq.
Accrual Type Amount
STCA Reim. 10 bp
JPM
see sched.
P64265
Brokerage Window
See Page 3 for Asset Allocation % Detail
P64266 Loan Account: Holds JPM Dummy CUSIP – 89299V500 Participant Loan
P 64269 – Market Duration Bond
Accrual Type
Amount
JPM
see sched.
P64268 – S&P 500 Index Fund
Accrual Type
Amount
JPM
see sched.
P65081 – S&P 400 Index F und
Accrual Type
Amount
JPM
see sched.
P65080 – Russell 2000 Index
Accrual Type
Amount
JPM
see sched.
P89697 – Intl Index Fund
Accrual Type
Amount
JPM
see sched.
P 31576 – Wells
Accrual Type
JPM
IM
P05488 – STIF Cash-FDIC
Accrual Type
Amount
JPM
see sched.
P05489 – STIF Cash-Govt MM
Accrual Type
Amount
JPM
see sched.
P06235 – Artio Bond Fund
Accrual Type
Amount
JPM
see sched.
P06887 – T. Rowe Bond Fund
Accrual Type
Amount
JPM
see sched.
Low Duration
Amount
see sched.
see sched
P 31577 – Janus Low Duration
Accrual Type
Amount
JPM
see sched.
IM
see sched
P14201 – Div ersified Real Return
Accrual Type
Amount
JPM
see sched.
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Operations Manual as of September 15, 2011
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Appendix E
Cash, Trade and Operating Account Schematic
Chart E.1. Cash, Trade and Operating Account Schematic – As of September 15, 2011
STCA Cash, Trade and Operating Account Schematic – September 2011
P65861
Target Risk – Conservative
Holds NAV a/c CUSIPS
Bond – 629998758
100.00
Large – 629998550
Mid – 629998790
Small– 629992488
Intl- 629992850
LD Wells – 949996524
LD Janus – 470995846
DRR-629996356
STIF-FDIC-905993697
STIF-Govt -092996370
%
P65862
Target Risk – Mod Conservative
Holds NAV a/c CUSIPS
%
Bond – 629998758 100.00
Large – 629998550
Mid – 629998790
Small– 629992488
Intl- 629992850
LD Wells – 949996524
LD Janus – 470995846
DRR-629996356
STIF-FDIC-905993697
STIF-Govt -092996370
P65863
Target Risk – Moderate
Holds NAV a/c CUSIPS
Bond – 629998758
Large– 629998550
Mid – 629998790
Small– 629992488
Intl– 629992850
DRR – 629996356
LD Wells – 949996524
LD Janus - 470995846
%
100.00
P65864
Target Risk – Mod. Aggressive
Holds NAV a/c CUSIPS
%
Bond – 629998758
Large– 629998550
100
Mid– 629998790
Small– 629992488
Intl– 629992850
DRR – 629996356
P65865
Target Risk – Aggressive
Holds NAV a/c CUSIPS
Large– 629998550
Mid– 629998790
Small– 629992488
Intl– 629992850
DRR – 629996356
%
100.00
P65875
P 65866
Market Duration Bond Index
Holds NAV a/c CUSIP
Bond – 629998758 100%
P 14200
Diversified Real Return
Holds NAV a/c CUSIP
DRR – 629996356 100%
P65871-Market Duration
Bond
Holds NAV a/c CUSIPS
Bond – 629998758 100%
Artio – 04399J604
T. Rowe – 779996511
P65867
Large Cap Equity Index
Holds NAV A/c CUSIP
Large – 629998550 100%
P 64281
PST Account
Holds NAV a/c CUSIP
LD Wells – 949996524
LD Janus – 470995846
P65872
Active Core – Large Cap
Holds NAV a/c CUSIPS
Large – 629998550 100%
MFS – 59399J608
Robeco – 770995850
Wellington – 9499994776
Col. Circle – 124996323
P65868
Mid Cap Equity Index
Holds NAV a/c CUSIP
Mid – 629998790
100%
100%
P 65869
Small Cap Equity Index
Holds NAV a/c CUSIP
Small – 629992488 100%
P66547
STIF Cash
Holds NAV a/c CUSIPS
FDIC Providers - 905993697
Govt MM Funds– 092996370 100%
P65873
Active Core – Mid Cap
Holds NAV a/c CUSIPS
Mid – 629998790 100%
T. Rowe – 779990027
T. Rowe – 872992482
CRM – 126990332
P 65870
Non-US Equity Index
Holds NAV a/c CUSIP
Intl – 629992850
100%
P64265
Brokerage Window
Holds JPM Dummy CUSIP
Schwab – 806995114
P 65874
Active Core – Small Cap
Holds NAV a/c CUSIPS
Small – 629992488 100%
TSW – 872990221
Peregrine – 713990042
William Blair – 969997865
Frontier - 359994878
Short Term Investment
Holds NAV a/c CUSIP
LD Wells –949996524 100%
LD Janus – 470995846
P64280
SRI
Holds Street CUSIP
Neuberger Berman
416998243
100%
P 62773
Active Core – Int’l. Eq.
Holds NAV a/c CUSIPS
Intl – 629992850 100%
Bernstein – 018996546
McKinley – 857998520
See Page 3 for Asset Allocation % Detail
P64266 Loan Account: Holds JPM Dummy CUSIP – 89299V500 Participant Loan
55
Operations Manual as of September 15, 2011
California Savings Plus Program
STCA SPP Investment Option Asset Allocation Schematic – September 2011
P 64269 – Market Duration Bond Index
Holds JPM Dummy CUSIP NTRS
Bond Index – 629990623
NAV a/c CUSIP 629998758
P64268 – S&P 500 Index Fund
Holds JPM Dummy CUSIP
NTRS S&P 500 Index – 629999012
NAV a/c CUSIP 629998550
P65081 – S&P 400 Index F und
Holds JPM Dummy CUSIP
NTRS Mid Cap Index – 629990607
NAV a/c CUSIP 629998790
P65080 – Russell 2000 Index F und
Holds JPM Dummy CUSIP NTRS
Small Cap Index – 629990599
NAV a/c CUSIP 629992488
P06235 – Bond Index Fund
Holds Street Cusip
Artio Total Return Bond – 481378Z91
NAV a/c CUSIP 04399J604
P06887 – Bond Index Fund
Holds Street Cusip
T. Rowe Inst. Core Plus Bond –
77958B303
NAV a/c CUSIP 779996511
P 31576 – Wells Capital Low Duration
Fund
Holds GICS, BONDS and STIF
CUSIPS
NAV a/c CUSIP 949996524
P89697 – ACWI-EX US Fd
Holds JPM Dummy CUSIP
NTRS International Index – 629994260
NAV a/c CUSIP 629992850
P14201 – Diversified Real Return
Holds Street/JPM Dummy CUSIP
Alliance Bernstein– 018907501
Wellington – 94966R709
NTRS TIPS Index – 629991431
NAV a/c CUSIP 629996356
P05488 – STIF Cash FDIC
Holds JPM Dummy CUSIP
Union Bank – 857994750
Bank of OK – 857993695
Nationwide Bank – 857992168
NAV a/c CUSIP 905993697
P 31577 – Janus Low Duration Fund
Holds GICS, BONDS and STIF
CUSIPS
NAV a/c CUSIP 470995846
P05489 – STIF Cash Govt Money
Market Funds
Holds Street CUSIPS
Blackrock Fed – 09248U700 RBC
Govt Fund – 74926P696
NAV a/c CUSIP-092996370
P64282 Clearing Account
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Operations Manual as of September 15, 2011
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Appendix F
Rebalancing Memo
To:
Carrie Pierce, California Savings Plus Program
Date:
December 13, 2007
From:
Kelly Tracey, Paul G. Sachs
Subject:
Michelle Berklacich, Troy Saharic, David Williams
The California Savings Plus Program (“the Program”) asked the Mercer Sentinel® Group (“Mercer Sentinel”) to review the needs
of the Program with regard to liquidity management and rebalancing, and to formulate policies for each of these activities. In this
memo, Mercer Sentinel presents its recommendations, including general and specific liquidity and rebalancing policies. The
general liquidity and rebalancing policies establish a consistent and objective processing framework for the overall Program. The
specific liquidity and rebalancing policies present detailed recommendations for each investment option, including which specific
liquidity vehicles will be used and how rebalancing is to be implemented.
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Operations Manual as of September 15, 2011
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Background & Recommendations
Within an investment option comprised of multiple separate accounts and/or fund vehicles, identifying one component to serve as
the primary vehicle through which funds are contributed and disbursed reduces transaction costs and mitigates operational risk.
We refer to this component as the ‘liquidity vehicle.’ The liquidity vehicle is typically either a daily valued index fund vehicle that is
aligned with the intended asset class exposure for an investment option, or the largest liquid active component within the
investment option. The goal of an effective liquidity management structure is to minimize transaction costs associated with
market trading and to maximize the intended asset class exposure. Appendix A (attached) depicts Mercer Sentinel’s
recommended liquidity vehicles for each investment option.
Rebalancing asset and manager allocations is necessary to control risk. Without rebalancing, allocations drift off-target and
upset the balance between risk and reward. Rigorous adherence to a formal rebalancing policy eliminates the need to make
discretionary asset allocation decisions, which is particularly important in volatile markets when emotions may obscure objectivity.
Implementing a formal rebalancing policy will also provide the Program with fiduciary protection when potentially “unpopular”
reallocations are required during adverse market conditions.
Mercer Sentinel recommends testing monthly to ensure that the Program’s fund options are not diverging from their intended
benchmarks. Since the Total Risk Funds are constructed solely using index funds, dispersion from the composite benchmark is
likely to be more apparent to plan participants than if the Total Risk Funds were constructed using active funds. Investing in
index funds implies less tolerance for dispersion away from the benchmark, so we believe monthly rebalancing will be the best
approach to minimize dispersion.
As envisioned, if rebalancing is necessary, the Recordkeeper/Custodian1 would handle the rebalancing and alert the investment
managers of cash movements three days prior to actual activity. The recommended policy dictates that the
Recordkeeper/Custodian would rebalance halfway back to the target allocation from the tolerance limit. Appendix A depicts the
1
To implement a rebalancing policy, it is assumed that Funds will require one of their agents to perform the actual rebalancing calculations. This agent may
be the Fund’s recordkeeper, custodian, or an additional party. For the purposes of this memo, we will use the term ‘Recordkeeper/Custodian’ to represent the
Program’s agent.
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Operations Manual as of September 15, 2011
California Savings Plus Program
tolerance ranges and rebalancing rules for Investment Options 1 – 5 and 14 – 17. As we are all well aware, implementation by
the Recordkeeper/Custodian will require standing instructions issued by the Program and accepted by the
Recordkeeper/Custodian.
Policy Overview
Liquidity Policy
As envisioned in the Program’s structure, each investment option will include a liquidity vehicle in the form of a highly liquid, daily
valued index fund. Rather than maintain a large cash position (which creates performance drag) or force individual separate
account managers to trade on a daily basis in the open market (which increases transaction costs and operational risk), daily
participant cash flows will be effected within the liquidity vehicle. The goal is to avoid situations where an active manager may
have to buy securities one day to accommodate participant contributions, and then sell those same positions three days later to
accommodate participant redemptions.
When selecting the liquidity vehicle for each investment option, Mercer Sentinel considered each investment option’s structure
and mandate. Mercer Sentinel used the following guidelines as a general approach for the Program when determining the
liquidity vehicle:
For single asset class funds (e.g., Active Core Options):
The index fund is the liquidity vehicle for participants’ cash flows.
For multiple asset class funds (e.g., Target Risk Funds):
The liquidity vehicle is the most liquid fund (that is, the component with the most liquid underlying securities).
If the liquidity characteristics are similar, the fund with the largest allocation is the most appropriate liquidity vehicle.
When selecting a liquidity vehicle, the most important factor to consider is liquidity of the underlying securities, followed by
allocation size. For example, in the first two Target Risk Funds, the Duration Bond Index is a better choice as a liquidity vehicle
than the Stable Value Fund, even though the target allocation for the Stable Value Fund is much larger than that of the Duration
Bond Index. The Stable Value Fund is not constructed to accommodate daily cash flows, whereas the underlying assets of the
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Operations Manual as of September 15, 2011
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Duration Bond Index have more favorable liquidity characteristics. In the Moderate and Moderately Aggressive Target Risk
Funds, the S&P 500 Index is the best choice as a liquidity vehicle since the options are more weighted towards equity than fixed
income.
As part of this analysis, we also considered adding a money market fund (MMF) to the allocation in the Target Risk Funds for the
sole purpose of providing a liquidity vehicle. MMFs can provide excellent short-term liquidity. However, the opportunity costs of
adding a MMF are far greater than using an already existing index fund. Adding a MMF would distort the asset allocation of the
MMF, introducing a significant cash drag to the portfolio. By using already existing index funds as the liquidity vehicles, the
Target Risk Fund portfolios will maintain better exposure to their intended benchmarks.
Rebalancing Policy
Over time, as some asset classes outperform and others under-perform relative to their benchmarks, portfolio investment
allocations naturally drift from their target allocations. Rebalancing, by moving funds from the asset classes that are performing
well to those that are not, will realign the portfolio to better reflect the target allocation. Rebalancing reduces tracking error, a
measure of how closely portfolio returns follow the returns of the portfolio benchmark, by tightening the distribution of returns
around the target return. While this approach dampens strongly positive returns, there are also fewer strongly negative returns.
Hence, rebalancing reduces risk.
Mercer Sentinel devised a tolerance band around each manager account within each investment option. Typically, we would
recommend tolerance ranges of 0.5 – 5% for equities and fixed income. To determine the exact range, we considered the asset
class type, volatility, and transaction costs associated with the asset class. Less volatile asset classes and fewer funds contribute
to a wider tolerance range, because those factors generally lead to less drift from the strategic allocation. In addition, high
transaction costs factor in to a wider tolerance range because if rebalancing occurs too frequently, it will lower the cost
effectiveness of rebalancing. A high investor risk tolerance also contributes to a wider tolerance range because a higher risk
tolerance suggests less frequent rebalancing, which indicates further dispersion away from the strategic allocation and more
exposure to market fluctuations.
Rebalancing Implementation Process
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Operations Manual as of September 15, 2011
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Implementation of the rebalancing policy will require a clear process agreed between the Program and the
Recordkeeper/Custodian. The Recordkeeper/Custodian will test each investment option on the fourth trading day of each new
month, using the prior trading day’s closing values. This intended schedule is designed to permit the cash flows from monthly
participant payroll funding to clear before the rebalancing testing occurs, thereby streamlining the process.
If the portfolio allocation is found to be outside the permitted tolerance range, the Recordkeeper/Custodian will alert the affected
investment managers to expect a cash contribution (redemption) in their account three days following, when rebalancing occurs.
The Recordkeeper/Custodian should send prompt notification to the investment manager as soon as the funds are in the
account. Note: While the rebalancing computation is targeted for the fourth business day, implementation instructions may be
issued on the fourth or fifth business day, thereby allowing for time for potential schedule impediments.
Ideally, the Recordkeeper/Custodian should rebalance to a level where the Program incurs the lowest total transaction costs
while staying within an acceptable risk tolerance. Studies by Seth J. Masters of AllianceBernstein Institutional Investment
Management and Dr. Louis Finney of Mercer Investment Consulting, Inc., indicate this is achieved by rebalancing halfway back to
the target allocation from the tolerance limit. By rebalancing only halfway, this reduces transaction costs incurred while still
reducing tracking error risk by a material amount. By only rebalancing halfway to the target allocation, we lessen the risk that the
benefits of rebalancing will be eroded by transaction costs.
The high level summary of the rebalancing process is this: funds are moved from those components that have exceeded their
upper tolerance limits to components that are most under funded. (Conversely, where a component has exceeded its lower
tolerance limit, funds are moved from components that are most over funded.) A detailed description of the process is provided
in the Appendix.
Rebalancing Examples
The examples below depict possible rebalancing situations, with the selected liquidity vehicles highlighted in blue. The Test
Column represents the allocation after the Recordkeeper/Custodian performs the monthly rebalancing tests.
In the examples below, at least one of the investment funds is out of the tolerance range so that a rebalancing is necessary. It is
important to note that although some of the allocations have changed, it is only necessary to rebalance the investment funds that
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Operations Manual as of September 15, 2011
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are out of their tolerance range. The Rebalance Result column depicts the ending allocation after rebalancing has occurred,
where all of the resulting allocations are within the tolerance range.
Example A
Target
Allocation %
Need To
Rebalance
Move
Result %
Limit
Test
10.0
1.5
14.25
-3.50
10.75
McKinley (Growth)
45.0
5.0
41.00
+3.50
44.50
AllianceBernstein (Value)
45.0
5.0
44.75
0.0
44.75
International Equity Fund
Northern Trust MSCI ACWI EXUS Index
Total:
100.0
100.00
Example B
In this example, the MSCI ACWI EX-US Index needs to lose 1.25% and the R2000 Index needs to gain 1%. Note that the
R2000 Index is subsequently increased to absorb the .25% of the MSCI ACWI EX-US Index not absorbed by the first calculation
of rebalancing.
Initial
Target
Target Risk:
Moderately Conservative Fund
Allocation %
Limit
Test
Need To
Rebalance
Final
Move
Calculation
Rebalance Result
NT Market Duration Bond Index *
20.00
3.0
19.00
0.0
19.00
19.00
Northern Trust S&P 500 Index
19.50
3.0
21.00
0.0
21.00
21.00
Northern Trust S&P 400 Index
6.00
5.0
4.50
1.0
6.00
3.00
0.0
Northern Trust R2000 Index
+1.00
6.00
4.00
6.00
4.25
Northern Trust MSCI ACWI EX-US Index
10.00
1.5
12.00
-1.25
10.75
10.75
Stable Value Fund
40.00
5.0
39.00
0.0
39.00
99.75
39.00
Total:
100.0
-.25
62
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Operations Manual as of September 15, 2011
California Savings Plus Program
The important thing to note about Example B is that, after the initial reallocation calculation (which essentially took from the one
with too much and added to the one with too little), there is still an amount to be re-allocated. This remaining portion (a surplus)
is spread proportionately over the components that are at their lower rebalance target. (A deficit would be spread proportionately
over the components at their upper rebalance target.)
Appendix to the Liquidity and Rebalancing Policy (Revision of December 2007)
Overview of Rebalancing Process
The goal of a rebalancing process is to move assets from over-weighted mandates to underweighted mandates in a systematic
fashion. As noted in the memo, rebalancing to levels that are halfway back to the strategic target allocation is deemed to be the
most effective approach given transaction costs.
One problem that is frequently encountered in actual rebalancing exercises is that, after the initial large scale shifts are identified
(the “primary mandate shifts”), there remains a smaller residual amount that needs to be distributed. The question to be
addressed is “What is the most appropriate systematic way to redistribute this residual?”
Theoretically, the residual would be distributed among the mandates based upon the investor’s risk preferences for each
mandate. In the real world, few (if any) investors have identified risk preferences by mandate, and identifying these preferences
would be an expensive process with no clear demonstrable benefit for plan participants or beneficiaries. Accordingly, we must
look to more practical approaches to addressing distribution of the residual.
There are many possible solutions for arriving at a redistribution plan, including:
a) finding the least transfers to accommodate the change,
b) allocating the money to the largest mandate not affected by the primary shifts,
c) distributing the residual in equal portions to the non-primary mandates
… and the list could go on.
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Operations Manual as of September 15, 2011
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Our recommended approach distributes the residual to the non-primary mandates on a weighted basis according to how far each
is from its strategic allocation. The effect is to move most mandates closer to their strategic target, rather than to introduce a
perturbation of a single mandate.
The accompanying spreadsheet demonstrates one possible approach for this redistribution. The spreadsheet is not intended
as a redistribution calculator. Mercer has not reviewed this model for accuracy, nor have we stress tested it for varying
scenarios. Mercer does not believe that a model constructed in Excel can appropriately consider all possible
combinations or permutations of account values. Accordingly, using this spreadsheet as a redistribution calculator
would be a risky endeavor. This spreadsheet is intended solely as an example of one approach for calculating a central
tendency solution and not as a model on which to base actions. Mercer cannot accept any responsibility for any
actions based on its output.
Sample Rebalancing Process Discussion
Rebalancing occurs at the Fund Option level, where a Fund Option is an investment choice that a Program participant can elect.
For clarity, the following diagram shows the terms graphically (assuming a strategic allocation of 40% with a tolerance limit of +/3%):
Chart F.1 Rebalancing process
64
Operations Manual as of September 15, 2011
Upper Band
43%
41.5%
Allocation
Upper Rebalance Target
40%
38.5%
Lower Band
California Savings Plus Program
Lower Rebalance Target
37%
Following are the logical steps in the actual rebalancing process. Please note that the following illustration assumes that a
component has exceeded the Upper Band. Opposite instructions would be implemented in cases where the component has
exceeded the Lower Band of tolerance.
Step 1
Test: Are any of the components allocations above their respective Upper Bands?
­
No. Stop: the Fund Option is within tolerance.
­
Yes. Continue process.
Step 2
Identify all components that are above their Upper Bands. These will be source accounts, providing funding to other
components within the Fund Option.
Step 3
Identify all components that are below their Lower Rebalance Targets. These will be target accounts, receiving
funding from the over-allocated components within the Fund Option.
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Operations Manual as of September 15, 2011
California Savings Plus Program
Step 4
Identify the component that is furthest below its Lower Rebalance Target. This will be the first recipient of funding.
Funds should be allocated to this account up to the point where it reaches its Lower Rebalance Target.
Test: Are there remaining assets to be redistributed?
­
No. Stop: the Fund Option is within tolerance.
­
Yes. Repeat Steps 3 and 4 until all components have at least reached their Lower Rebalance Targets.
Note: It is possible to redistribute sufficient funds from the source account to raise all other components to their Lower Rebalance
Targets, yet still have the source account over its Upper Rebalance Target.
Step 5
Test: Are there remaining assets to be redistributed while all other components are at or above their Lower
Rebalance Targets?
­
No. Stop: the Fund Option is within tolerance.
­
Yes. Proceed to Step 6.
Step 6
Calculate the amount needed to be redistributed. Distribute this to all components that are at their below their Target
Allocations in proportion to their difference from that Allocation value.
Test: Are there remaining assets to be redistributed?
­
No. Stop: the Fund Option is within tolerance.
Yes. There has been an error implementing Step 5. Go back and re-check work.
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Operations Manual as of September 15, 2011
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Neither this memo nor the accompanying spreadsheet is intended by Mercer to be tax, legal or investment advice. Mercer gives
no representations or warranties as to the accuracy of this information and accepts no responsibility or liability for your or your
vendors’ reliance thereon. This memo and spreadsheet are the intellectual property of Mercer and are intended for your and your
recordkeeper’s/custodian’s exclusive use.
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Operations Manual as of September 15, 2011
California Savings Plus Program
Table F.1. Rebalancing guidelines
Strategi c Target
Tol erance Range
Al l ocati on %
+ / -
Northern Trust Mark et Duration Bond Index *
33.00%
Northern Trust S&P 500 Index
5.20%
Northern Trust S&P 400 Index
Northern Trust RU 2000 Index
Investment Opti on/Managers
Rel ati ve
Lower Li mi t
Upper Li mi t
Lower Target
Upper Target
3.00%
30.00%
36.00%
31.50%
34.50%
9%
1.00%
4.20%
6.20%
4.70%
5.70%
19%
1.60%
0.50%
1.10%
2.10%
1.35%
1.85%
31%
1.20%
0.50%
0.70%
1.70%
0.95%
1.45%
42%
Northern Trust MSCI ACW ex-US Index
8.00%
0.50%
7.50%
8.50%
7.75%
8.25%
6%
Diversified Real Return Fund
10.00%
3.00%
7.00%
13.00%
8.50%
11.50%
30%
Short Term Investment Fund (Low Duration)
31.00%
2.00%
29.00%
33.00%
30.00%
32.00%
6%
Short Term Investment Fund - Cash FDIC
5.00%
1.00%
4.00%
6.00%
4.50%
5.50%
20%
Short Term Investment Fund - Cash Govt MM
5.00%
1.00%
4.00%
6.00%
4.50%
5.50%
20%
Northern Trust Mark et Duration Bond Index *
35.00%
3.00%
32.00%
38.00%
33.50%
36.50%
9%
Northern Trust S&P 500 Index
11.05%
3.00%
8.05%
14.05%
9.55%
12.55%
27%
Northern Trust S&P 400 Index
3.40%
1.00%
2.40%
4.40%
2.90%
3.90%
29%
Northern Trust RU 2000 Index
2.55%
1.00%
1.55%
3.55%
2.05%
3.05%
39%
Northern Trust MSCI ACW ex-US Index
17.00%
1.50%
15.50%
18.50%
16.25%
17.75%
9%
Diversified Real Return Fund
10.00%
3.00%
7.00%
13.00%
8.50%
11.50%
30%
Short Term Investment Fund (Low Duration)
16.00%
2.00%
14.00%
18.00%
15.00%
17.00%
13%
Short Term Investment Fund - Cash FDIC
2.50%
1.00%
1.50%
3.50%
2.00%
3.00%
40%
Short Term Investment Fund - Cash Govt MM
2.50%
1.00%
1.50%
3.50%
2.00%
3.00%
40%
Northern Trust Market Duration Bond Index
29.00%
2.50%
26.50%
31.50%
27.75%
30.25%
9%
Northern Trust S&P 500 Index *
15.60%
4.00%
11.60%
19.60%
13.60%
17.60%
26%
Northern Trust S&P 400 Index
4.80%
1.50%
3.30%
6.30%
4.05%
5.55%
31%
Northern Trust RU 2000 Index
3.60%
1.00%
2.60%
4.60%
3.10%
4.10%
28%
Northern Trust MSCI ACW ex-US Index
24.00%
3.00%
21.00%
27.00%
22.50%
25.50%
13%
Diversified Real Return Fund
15.00%
3.00%
12.00%
18.00%
13.50%
16.50%
20%
Short Term Investment Fund (Low Duration)
8.00%
2.00%
6.00%
10.00%
7.00%
9.00%
25%
Northern Trust Market Duration Bond Index
16.00%
2.50%
13.50%
18.50%
14.75%
17.25%
16%
Northern Trust S&P 500 Index *
20.80%
5.00%
15.80%
25.80%
18.30%
23.30%
24%
Northern Trust S&P 400 Index
6.40%
1.50%
4.90%
7.90%
5.65%
7.15%
23%
Northern Trust RU 2000 Index
4.80%
1.50%
3.30%
6.30%
4.05%
5.55%
31%
Northern Trust MSCI ACW ex-US Index
32.00%
3.50%
28.50%
35.50%
30.25%
33.75%
11%
Diversified Real Return Fund
20.00%
3.00%
17.00%
23.00%
18.50%
21.50%
15%
Northern Trust S&P 500 Index *
29.25%
5.00%
24.25%
34.25%
26.75%
31.75%
17%
Northern Trust S&P 400 Index
9.00%
2.00%
7.00%
11.00%
8.00%
10.00%
22%
Northern Trust RU 2000 Index
6.75%
1.50%
5.25%
8.25%
6.00%
7.50%
22%
Northern Trust MSCI ACW ex-US Index
45.00%
4.50%
40.50%
49.50%
42.75%
47.25%
10%
Diversified Real Return Fund
10.00%
3.00%
7.00%
13.00%
8.50%
11.50%
30%
Range
Target Risk Fund: Conservative
Target Risk Fund: M oderately Conservative
Target Risk Fund: M oderate
Target Risk Fund: M oderately Aggressive
Target Risk Fund: Aggressive
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Operations Manual as of September 15, 2011
California Savings Plus Program
STIF Cash Fund
Government M oney M arket Providers
50.00%
5.00%
45.00%
55.00%
47.50%
52.50%
10%
Black Rock (Gov MM) *
15.00% ^
2.00%
13.00%
17.00%
14.00%
16.00%
13%
RBC (Gov MM)
35.00% ^
4.00%
31.00%
39.00%
33.00%
37.00%
11%
10%
FDIC Providers
50.00%
5.00%
45.00%
55.00%
47.50%
52.50%
≤$305M
≤$305M
$50M
$305M
$50M
$305M
≥$50M & ≤$150M
≥$50M & ≤$150M
$50M
$150M
$50M
$150M
≥$50M
≥$50M
$50M
Remainder
$50M
Remainder
Northern Trust Mark et Duration Bond Index *
20.00%
1.50%
18.50%
21.50%
19.25%
20.75%
8%
T.Rowe (Core Plus1)
40.00%
4.00%
36.00%
44.00%
38.00%
42.00%
10%
Artio (Core Plus2)
40.00%
4.00%
36.00%
44.00%
38.00%
42.00%
10%
S&P 500 Index *
40.00%
3.00%
37.00%
43.00%
38.50%
41.50%
8%
MFS (LCV1)
15.00%
2.00%
13.00%
17.00%
14.00%
16.00%
13%
Robeco (LCV2)
15.00%
2.00%
13.00%
17.00%
14.00%
16.00%
13%
Wellington (LCG1)
15.00%
2.00%
13.00%
17.00%
14.00%
16.00%
13%
Columbus Circle (LCG2)
15.00%
2.00%
13.00%
17.00%
14.00%
16.00%
13%
S&P 400 Index *
10.00%
1.50%
8.50%
11.50%
9.25%
10.75%
15%
T.Rowe (MCV)
29.00%
4.00%
25.00%
33.00%
27.00%
31.00%
14%
CRM (MCC)
29.00%
4.00%
25.00%
33.00%
27.00%
31.00%
14%
TBD (MCG)
32.00%
5.00%
27.00%
37.00%
29.50%
34.50%
16%
R2000 Core Index *
10.00%
1.50%
8.50%
11.50%
9.25%
10.75%
15%
TSW (SCV1)
22.50%
3.50%
19.00%
26.00%
20.75%
24.25%
16%
Peregrine (SCV2)
22.50%
3.50%
19.00%
26.00%
20.75%
24.25%
16%
Frontier (SCG1)
22.50%
3.50%
19.00%
26.00%
20.75%
24.25%
16%
William Blair (SCG2)
22.50%
3.50%
19.00%
26.00%
20.75%
24.25%
16%
MSCI EAFE Index *
10.00%
1.50%
8.50%
11.50%
9.25%
10.75%
15%
Bernstein (Value)
45.00%
5.00%
40.00%
50.00%
42.50%
47.50%
11%
McKinley (Growth)
45.00%
5.00%
40.00%
50.00%
42.50%
47.50%
11%
Northern Trust Collective TIPS Index Fund *
35.00%
3.00%
32.00%
38.00%
33.50%
36.50%
9%
Wellington Diversified Inflation Hedges
50.00%
3.50%
46.50%
53.50%
48.25%
51.75%
7%
AllianceBernstein Global Real Estate Investment Fund
15.00%
3.50%
11.50%
18.50%
13.25%
16.75%
23%
UBOC (FDIC) -- $305m
Nationwide -- $150m
BOK (FDIC)
^ Percent (%) of total STIF-Cash Fund value
Active Core: Bond Fund
Active Core: Large Cap Equity Fund
Active Core: M id Cap Equity Fund
Active Core: Small Cap Equity Fund
Active Core: International Equity Fund
Real Return: Diversified Real Return Fund
69
Operations Manual as of September 15, 2011
Table F.2. Rebalancing timeframe
Schedule / Calendar
Business Day 4
California Savings Plus Program
replace MF ref with VA
Business Day 5
Business Day 6
Business Day 7
Business Day 8
TRADE DATE (T)
Business Day 9
SETTLEMENT DATE
Sep Acct Managers
Recordkeeper / Custodian
Actions
1. Calculation
Using Business Day 3
values
3. Order Entry Begins
4. Trade Processing
5. Settlement
6. Entry To Custody/
Recordkeeping System
2. Separate Account
Notification
All affected separate
account managers
International trades to
raise cash
3.1 Notification on T-2 3.2 Notification on T-1 3.3 Order Entry (before
(Before 10:30 am EST)
(Before 10:30 am EST) 3:30pm EST)
All Mutual and
All NT Intl Funds
All NT Domestic Funds
Commingled Funds
Domestic trades to
raise cash
Actions
1 Calculation of rebalance activities
2 Notification to separate account managers
3 Order entry
4 Trade processing
5 Settlement
6 Entry to recordkeeping & custodial systems
70
Operations Manual as of September 15, 2011
California Savings Plus Program
71
Operations Manual as of September 15, 2011
California Savings Plus Program
Mercer (US) Inc.
10 South Wacker Drive, Suite 1700
Chicago, IL 60606
312 902 7500
72