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SANTA BARBARA COUNTY EMPLOYEES' RETIREMENT SYSTEM TABLE OF CONTENTS TABLE OF CONTENTS Summary of Investment Program... 1 Corporate Overview Background Summary... 4 Client Servicing Capabilities... 6 Systems and Data-Processing... 7 On-Line Services... 8 Recordkeeping Accounting and Reporting... 10 Asset Safekeeping... 11 Audit Controls and Procedures... 13 Transition Plan... 14 Related Services Cash Management... 16 Securities Lending... 17 Performance Measurement and Analytical Services... 18 Benefit Disbursement and Payments... 19 Asset Transitions/Management... 20 Class Action Filing Services... 21 Foreign Exchange Transactions... 22 References... 24 Estimated Fees... 26 i

SUMMARY OF INVESTMENT PROGRAM FOR THIS Your firm qualified for inclusion in the more in-depth portion of a search for a Master Trust/Custody provider for the Santa Barbara County Employees Retirement System ( SBCERS ). SBCERS is a public fund with a total market value of approximately $1.9 billion. Currently, the Fund utilizes the services of 23 investment organizations, as detailed below: Investment Style Large Cap Growth Equity, Active Large Cap Value Equity, Active Large Cap Core Equity, Enhanced Index Small Cap Value, Active Small Cap Growth, Active Large Cap Core, Passive Covered Call Strategy Emerging Markets Equity, Active EAFE, Active EAFE, Active Emerging Markets Equity, Active EAFE, Passive Core Plus Global Fixed Income, Active Core Plus Fixed Income, Active Core Fixed Income Short Term Investment Fund Intermediate Government Bonds, Passive Real Estate- Discretionary Private Line Item Account- 8 underlying investments Private Equity- Discretionary Private Line Item Account-22 underlying investments TIPS, Passive Transition Recordkeeping (2 Accounts) Cash REITs, Active Account Type Separate Account Separate Account Separate Account Commingled Separate Account Separate Account Separate Account Commingled Separate Account Separate Account Commingled Commingled Separate Account Separate Account Separate Account Commingled Commingled Line Item Account Line Item Account Separate Account Separate Separate Account Separate Account Please include information on passive management offerings in your response. In light of the Fund's investment roster, please provide complete answers to all questions and support your responses with supplemental information as necessary. 1

Please note, as of March 19, 2012, the SBCERS Board/Staff will enter a quiet period, during which time no Board/Staff member may knowingly have any communication with any actual or potential candidate for this mandate, unless authorized by the Board in connection with the due diligence process. The quiet period shall cease upon the Board s entering into a contract with the provider selected for this mandate. By participating in this RFP you acknowledge and agree to adhere to the Board s quiet period policy. The quiet period restricts representatives from your firm from having any communication with the SBCERS Board/Staff members. A violation of the quiet period rule may result in disqualification of the candidate or other appropriate Board action. We request the completion and return of this RFP to Meketa Investment Group be no later than 5:00 PM PST, Monday, April 16, 2012. Your response should be provided in both hard copy and electronic format (pdf preferred). Please send your completed RFP, and address any questions, to: Mr. Brad Regier (bregier@meketagroup.com) Meketa Investment Group 5796 Armada Drive, Suite 110 Carlsbad, CA 92008 (760) 795-3450 and provide a soft copy via email to: Mr. Eli Martinez (elimar@co.santa-barbara.ca.us) Investment Officer Santa Barbara Employees Retirement System (805)-739-8684 Finalist candidates may present to the Board of Retirement, which will select the provider to the plan. 2

CORPORATE OVERVIEW

BACKGROUND SUMMARY 1. Provide a brief history of your Master Trust/Custody organization. 2. Please summarize your Master Trust/Custody Department's long-term strategy for business development. 3. Please describe any organizational changes (mergers, acquisitions, alliances) of the past two years that have affected your Master Trust/Custody operations. Specifically, what adjustments have or are occurring as a result of these organizational changes? 4. Please list your current credit rating by Moody s or S&P. In addition please list the percentage of Tier 1 capital. 5. Briefly summarize your firm's competitive advantages within the Master Trust/Custody industry. 6. What percentage of total corporate earnings did your Master Trust/Custody Department contribute to your organization each year over the last five years? 7. Please indicate your organization s quantity of relationships (total number of clients) and assets (market value) in each of the Master Trust/Custody areas. Of these combined assets, what proportion and asset base are represented by Public Fund clients? 8. Please indicate how your firm maintains its independence. 9. Does any foreign entity have any control or financial interest in your bank? If so, please identify and describe the relationship. 10. Will you be subcontracting any of the work described in these specifications? If so, explain. 11. What was the custodial client turnover (gains and losses) of your firm over the last three years? 12. How many clients do you serve that have asset sizes similar to those of the Fund described? 13. Please provide a brief description of any past or pending regulatory action, litigation or other legal proceedings involving your Master Trust/Custody Department or any registered employees and/or principals. 14. Does your firm consider itself to be a fiduciary with respect to the services provided? Is this stated in writing within your contract, and if so, how is it stated specifically? 15. Do you provide reporting for FAS 157 disclosure requirements? 4

16. Describe what limitation of liability, if any, your company imposes through its contract. 17. Please attach a sample client contract, with all addenda and attachments. 18. Please provide copies of all insurance policies (E&O, Fidelity Insurance, and other insurance policies). 5

CLIENT SERVICING CAPABILITIES 1. Describe your approach to client service. Include a discussion of the procedures relative to client interaction. Does each client have a primary contact to whom all inquiries are directed? What coverage is provided if those responsible for an account are unavailable? 2. Briefly describe the organizational structure of your Master Trust/Custody Department, including an organizational chart and the total number of employees in each area. 3. Discuss the minimum level of education or experience required of employees in your Master Trust/Custody Department. Describe on-going and new-employee training program(s). 4. Describe the roles and number of people who would be assigned to this account, their total years in the industry, their total years with your organization and their total number of years in custody if different from organization. Where would they be located? To how many client accounts would this team be assigned? 5. Do you have programs in place designed to retain key personnel? If so, describe. 6. Describe quality control programs you have within your Master Trust/Custody Department. 7. In what ways do you distinguish yourself from other Master Trust/Custody providers in the area of client relations? 8. Do you have a dedicated Master Trust/Custody legal staff? 9. Do you provide any training or other educational media to your clients? 10. How often will the client service officer meet with the client at the client s office? 11. Will specific members of your staff be assigned to this account? If so, please provide their names, educational and experience backgrounds. 12. Do you have a disaster recovery program in place? If so, describe in detail. 13. Describe the time requirement and termination charges (if any) required by your firm if your services are terminated. 6

SYSTEMS AND DATA-PROCESSING 1. Discuss the hardware and software systems that support your Master Trust/Custody Department. 2. How long has the current software been in place? When was the most recent major change/enhancement to the systems that support your Master Trust/Custody capabilities? 3. Was the software developed in-house? Do you have a data-processing staff in-house? How many persons actually support your system? 4. What major enhancements are planned at this time? 5. What are your annual budgets for the last three years for systems enhancements/upgrades in the Master Trust/Custody areas? 6. Is your data-processing equipment shared with other departments? If so, what is the priority level for Master Trust/Custody? 7. Describe the data-processing cycle for creating monthly and annual reports. 8. What system security measures do you have in place? 9. Do you have a physically separate back-up facility? If yes, what is the location? How does the location provide a strategic advantage? 10. How do you handle software programming needs specific to one client? Include a discussion of any cost implications. What is the approximate time frame within which client-specific programming needs are met? 7

ON-LINE SERVICES 1. Do you offer an on-line reporting service for clients and investment managers? If yes, how current is the information. What are system support availability hours? 2. In what formats is data available? With which commercial software programs is your data compatible? 3. Can users access your system through Microsoft Windows? 4. What are your e-mail/internet capabilities with respect to client data retrieval? 5. What E-mail/internet security measures do you have in place? 6. Can non-standard reports be created by users with your on-line software? Does your system have a user-friendly report writer? 7. What client training do you provide for utilizing your on-line system? 8. Does your system provide on-line help? 9. Please provide sample copies of user manuals and documentation. 8

RECORDKEEPING

ACCOUNTING AND REPORTING 1. Provide a complete description of your accounting system. 2. Do you provide actual trade-date reporting? 3. Do asset valuations include accrued income and dividends, as well as all pending transactions? 4. How do you report interest and dividend income? 5. Can you capture and report brokerage commissions generated by a money manager? 6. What ERISA-required reports do you provide? When are these reports made available? Are your reports formatted to facilitate the completion of government reports? 7. How long is your on-line data retention period? 8. What steps are taken to ensure the accuracy of your reports? What data reconciliations are performed? Are final monthly reports audited before they are mailed to clients? If so, by whom? 9. Please provide a sample set of standard monthly reports. Include a list of all available report formats. 10. Describe the daily, weekly, monthly, quarterly, and annual reporting timetables to which your organization would commit. 11. Do you provide book and market value reconciliations? How often? 12. What procedures are used to verify the accuracy and completeness of dividend and income receipts? 13. Where is your accounting group located? 14. Please list any costs associated with customized reporting requests, and examples of customized reports. 10

ASSET SAFEKEEPING 1. Describe your system for registration and custody of assets, including depositories used. 2. How and where are physical settlements transacted? 3. How do you track the accuracy in your custody and clearing area? 4. Please provide the following information concerning pricing: a. What is the source of your pricing data for equity and fixed income securities? Include pricing sources for foreign assets and currencies. b. What procedures do you have in effect, if any, to identify and investigate unusual or significant pricing changes? 5. How do you handle information on corporate activities (i.e., tender offers, exchange offers, splits, etc.)? 6. Describe how you monitor and distribute proxy information. Also, please note whether proxy voting services are included in your cost proposal. 7. Briefly describe your global custody capabilities, highlighting those items which set you apart from your competition. 8. For each country where you provide custody services, list your custodial agent bank and the year the current relationship began. 9. What selection criteria do you use to select your global sub-custodians? Please describe how you ensure that sub custodians provide the highest level of reporting and service to your clients. Also, discuss whether clients have transparency into the sub custodian relationships and underlying reporting. 10. Please discuss whether your firm is willing to take on the burden/liability of filing on behalf of clients for either sub-custodial documentation or foreign taxes. If not, please describe the process for ensuring this documentation takes place. 11. Outside of the United States, do you use any central depository facilities? Are they used for international clearing? 12. How are trade settlements communicated? 13. Describe your ability to handle foreign exchange transactions. Please discuss transparency with respect to FX and trade data, especially in light of recent issues surrounding this topic. 14. Do you execute foreign exchange transactions pursuant to best execution standards for the client s benefit or do you derive profit from foreign exchange transactions you execute above your stated fixed fee for consummating the transactions and, if so, in what amount or percentage per transactions? 11

15. Do you provide real time reporting on FX trades, with spreads and costs clearly articulated? Do you provide time-stamped data? 16. Do you have an accrual accounting system for global custody? 17. How do you handle tax reclaim processing? 18. Are accounting and reporting capabilities available in both local currency and in U.S. dollars? Please describe. 19. Do your standard reports include a report of trades pending settlement? Is there a standard report of all pending transactions? Is there a standard report of pending tax reclaims? 20. How long have you used your current global accounting software? What major enhancements have you made in the last three years? 21. Describe your global cash management services. 12

AUDIT CONTROLS AND PROCEDURES 1. Is there a general audit system in place? Is it certified by an outside public accounting firm? 2. Discuss the scope of your most recent audit. 3. What levels of management review result from audit reports, and who is required to implement changes to correct audit deficiencies noted? 4. How much fiduciary insurance do you carry? Describe any and all insurance that would cover a client's assets. 5. Do you have errors and omissions and/or other insurance coverage for the protection of your clients? If so, please describe (including any limitations on liability). Please attach a copy of the certificate of insurance. 13

TRANSITION PLAN 1. Describe a proposed custodian transition process and timetable. 2. Describe the factors that could change the proposed transition process and timetable. 3. What specific technical and human resources would you provide during the conversion? 4. Please discuss the transition notification period required for terminating a current securities lending program, and implementing a new program. 14

RELATED SERVICES

CASH MANAGEMENT 1. What short-term investment vehicles do you offer for tax-exempt use? What are the respective fees? 2. Describe, in detail, your buy/sell fail procedures. Are dollar amounts netted together? 3. If your client is in a net buy fail position, how are the related cash monies handled? 4. How are overdrafts handled? What are the charges if any for an overdrawn position? 5. Do you have the ability to forecast available cash? If yes, how far out into the future? 6. Did any of your organization s short-term investment vehicles break the buck in the past five years? If so, what was your firm s response to clients who may have suffered losses (realized or unrealized) and were any capital support programs offered by your organizations? 16

SECURITIES LENDING 1. In what year did you first offer securities lending? 2. How many clients currently participate in securities lending? What is the dollar size of your securities lending pool? 3. How do you protect against excess risk and loss? Describe with specific details your loss indemnification program. 4. Describe your policy for screening borrowers. 5. Please provide a current list of the brokers approved for lending. 6. How many brokers on your approved list are actually used (i.e., does 75% of your lending actually go to a small number of brokers)? 7. What is the maximum loan made to a single broker? 8. What percentage of collateral do you require? Do you require collateral to cover both market value and accrued income? 9. What forms of collateral do you accept? 10. What is the credit quality of your collateralized pool? 11. Describe the procedures and the frequency of marking collateral to market. 12. How is the collateral invested? 13. For direct lending services do clients have a choice of collateral pools? If yes, please provide a factsheet or prospectus for each pool. 14. Have you ever experienced any impairments to your collateral pools? If so, how was this handled? 15. Describe the allocation system used in determining which clients securities are loaned. 16. What lending reports are made available to clients? 17. Do you offer international lending? If yes, please describe. 18. What percentage of the income generated from securities lending is shared with your clients? 19. Given the summary of the investment program enclosed with this Request for Proposal, what would be the approximate annual income generated by your securities lending program? 17

PERFORMANCE MEASUREMENT AND ANALYTICAL SERVICES 1. Describe the performance evaluation services you presently offer, including attribution analysis reports. 2. Describe the internal infrastructure used to provide these services (i.e., organizational hierarchy, resources, etc.). 3. Describe the methodology used to calculate performance measurement. 4. Can you compare managers' rates of return to a substantial universe of similar portfolios? 5. Do you adjust market values used in performance calculations for accruals? 6. Describe any reports you have which analyze equity or fixed income portfolio holdings. Are these reports available for aggregates of portfolios? 7. What are the sources of your performance measurement and manager analytic information? 8. List all market indices available. 9. How often and how soon are performance measurement reports available? 10. Do you provide broker trade analysis? Can you provide information identifying commission and implicit execution costs by broker, and by portfolio? Please describe your capability in this area in detail. 11. Provide a sample of the performance measurement information that you normally send to your clients. 12. Can you backload prior years' monthly performance data? If yes, please describe and give the number of years of data that can be backloaded. 13. Describe your procedures for auditing rates of return calculated. 14. What is your procedure for calculating performance for periods that contain large cash flows? (>10% of market value) 15. How do you process private market investments (i.e. private equity, private real estate & infrastructure) that are reported on a lagged basis? 16. Do you have any other significant performance measurement or analytic services not addressed in the above questions? 18

BENEFIT DISBURSEMENTS AND PAYMENTS 1. Do you provide benefit payment services? How long have you provided such services? 2. What system and software is used for benefit payments? 3. Do you provide lump-sum payments as well as monthly payments? What are the frequencies of check disbursements? When is the Fund charged for payments? 4. How quickly can you respond to time-sensitive disbursement requests (e.g., hardship withdrawals)? 5. Describe your procedures for controlling outstanding checks. 6. Do you provide federal and state income tax withholding? 7. Do you offer a direct deposit option? 8. Can your system provide a monthly benefit check register which lists the amounts paid to each participant and the various withholding taxes (state, federal, etc.)? Please describe your ability to provide check registers via electronic media (e.g., CD ROM, diskette). 9. Please describe in detail the tax reporting you provide to sponsors and to benefit payment recipients. 10. Do you have an on-line system for direct input of benefit data by the client? Is the system capable of interfacing directly with client pension administration and recordkeeping systems? 19

ASSET TRANSITIONS/MANAGEMENT 1. Describe your capabilities with respect to assisting clients in implementing significant asset transitions/restructurings. 2. Do you offer internal trade crossing/swapping opportunities to help clients achieve low-cost transitions between managers? If so, what was the volume of internal crosses/swaps executed during 2011, 2010, 2009, 2008, and 2007? 3. Please provide an overview of investment products offered by your organization to qualified plans. What advantages, if any, are associated with client utilization of these products relative to other vehicles? 20

CLASS ACTION FILING SERVICES 1. Describe your capabilities with respect to assisting clients in filing claims on behalf of the class actions. 2. Please explain how fees are charges with regards to filing claims on the client s behalf as well as an estimated fee range. 3. Please outline the 3rd party audit services on class action filings. Are these costs borne by the custodian bank, or the client? If there is a choice, please detail how many clients utilize each option currently. BANKRUPTCY FILINGS 1. How do you handle bankruptcy filings and the subsequent monitoring of the filings? 21

FOREIGN EXCHANGE TRANSACTIONS 1. Within international separate account portfolios, what is your pricing policy and procedures for competitive and auto-repatriated foreign-exchange trades (i.e. dividends, interest, etc.)? 2. How does your firm monitor and evaluate the execution of the local "sub-custodian" foreign-exchange executions. Please elaborate on how these sub-custodians are held to the same standards as your firm with respect to execution. Do you assume the liability, and indemnify the client, for sub-custodians? 3. What area handles foreign exchange contracts within your organization? Have there been any recent personnel changes with regards to senior management? 4. Are managers given a choice to as to whether or not they want use the custodian for foreign contracts? 5. Are any penalties in place for executing trades outside of the custodian bank? 6. When a foreign contract request is initiated by the manager do you execute the contract right away or will the request become part of a batch process to be executed at a later time? 7. How are the rates which foreign contracts are executed, arrived at? 8. Do you track your execution relative to the daily average for each currency? Is this information available to clients and consultants? 9. What is the cost associated with a foreign exchange contract? Is there a flat fee or is the cost embedded in the spread? 10. Are their any countries with which you will not process a foreign currency exchange contract with? 11. Can you confirm compliance with the foreign laws, including the Foreign Corrupt Practices Act? 22

REFERENCES

REFERENCES 1. Please provide a list of clients that have converted to your organization in the past twelve months, including the dates of conversion. 2. Indicate the numbers of Public Funds (and 1937 Act County Funds specifically) of similar nature that you currently serve. Please furnish client references. 3. Please list the five money managers who have the largest market values under your custody. 4. Please list clients that have departed your organization in the past twelve months. 5. Please list five references for clients with similar structures and sizes to this Fund, and that utilize any services you provide that support this structure (i.e., multiple sponsors/plans with a commingled investment pool) with at least three of these references utilizing the same client service team you are proposing for this mandate. For how long has each been a client of your organization? 6. Please list estimated fees for compliance monitoring. 24

ESTIMATED FEES

ESTIMATED FEES 1. Every Master Trust/Master Custody provider has a different fee structure. To help us evaluate your response please quote unbundled fees for the services referenced, and fees for any service packages that may be appropriate. Please fill out the attached fee spreadsheet and be as specific as possible with regards to all services covered by this Request for Proposal, including your fees for: a. Separate account portfolios (domestic equity, foreign equity, fixed income); b. Commingled accounts; c. Line item accounts; d. Limited Partnership accounts; e. Third Party Mutual Fund Transactions; f. Minimum Annual Fee (if applicable); g. Check Distributions, including lump sums; h. Wire outs, ACH; i. Options/Futures; j. Assets under custody; k. Transactions/settlements for domestic, foreign (DTC, FED, Physicals, Mortgage Paydowns, etc); l. On-line data access; m. Analytic and performance reports and services; n. Expense ratio for short-term investment vehicle; o. Securities lending: collateral pool fee; revenue split p. All other services and fees (please provide specific details of each) 2. Are you willing to offer a flat fee structure? If so, what fee would you propose? 3. Are you willing to guarantee your fees for a fixed number of years? 26