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PUBLIC SAFETY PERSONNEL RETIREMENT SYSTEM CORRECTIONS OFFICER RETIREMENT PLAN ELECTED OFFICIALS' RETIREMENT PLAN Phoenix, Arizona
85016-4416 TELEPHONE: (602) 255-5575 FAX: (602) 255-5572 |
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James M. HackingAdministrator |
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Tracey D. PetersonAssistant Administrator-COO |
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In accordance with statute § 38-848.02, we are submitting the required report of the “global security risk” to the Senate Finance Committee and the House of Representatives Government and Retirement Committee on January 10, 2008. This report is on the economic impact of global security risks of investments of the fund monies managed by the Fund Manager. This report includes: 1) a list, compiled by the Administrative staff of PSPRS, of companies reasonably known by the Fund Manager to have had business activities in the countries listed on the US State Department’s list of state sponsors of terrorism: Iran, North Korea, Sudan and Syria; 2) a summary description of the business activities of such companies; 3) total amount invested by PSPRS in each company and 4) an assessment by the Fund Manager based on the prudent investor rule of the level of the global security risk attributable to such investments. These investments are being reported for the PSPRS portfolio holdings as of October 12, 2007 as prescribed by statute.
The list of companies was obtained by cross referencing the fund’s holdings against a list provided by Institutional Shareholders Service (ISS), a reputable corporate governance consultant who provides compliance solutions for screening companies with ties to sanctioned states. Previous editions of this report were prepared using proprietary software that we accessed through another government agency, to which we no longer have access.
Global Security Risk Report
The ISS system identified twelve companies that were held in our portfolio on October 12, 2007 that had exposure to at least one of the four countries on the State Department’s list.
3M COMPANY $23,951,198
3M Company (3M) is a diversified technology company with a global presence in various businesses, including industrial and transportation, healthcare, display and graphics, consumer and office, safety, security and protection services, and electro and communications.
ALLIANZ SE $8,360,314
Allianz SE provides insurance, banking, and asset management products and services worldwide. It primarily offers property-casual and life/health insurance products.
BAYER AG $9,332,800
Bayer AG offers a range of products, including ethical pharmaceuticals and other healthcare products, agricultural products and polymers. The business operations of the company are organized into three groups: Bayer HealthCare, Bayer CropScience and Bayer MaterialScience.
CREDIT SUISSE GROUP $4,682,238
Credit Suisse Group operates as a financial services company. The company operates in three segments: Investment Banking, Private Banking, and Asset Management.
DELL INC $12,359,196
Dell Inc. (Dell) designs, develops, manufactures, markets, sells and supports a range of computer systems and services that are customized to customer requirements.
GENERAL ELECTRIC CO $133,554,770
General Electric Company (GE) is a diversified industrial corporation. It is engaged in developing, manufacturing and marketing a variety of products for the generation, transmission, distribution, control and utilization of electricity, aircraft engines, consumer products, and financial services.
LOCKHEED MARTIN CORP $39,590,365
Lockheed Martin Corporation principally researches, designs, develops, manufactures, integrates, operates and sustains advanced technology systems, products and services. The Company serves customers in domestic and international defense and civil markets, with its principal customers being agencies of the United States Government.
NATIXIS SA $9,994,333
Natixis SA is a financial services company that operates in the following sectors: Commercial Banking, International Business Financing, Specialized Financing, Financial Management and Intermediation, Investment Capital, and advisory services for Mergers and Acquisitions.
PROCTER & GAMBLE COMPANY $97,718,138
The Procter & Gamble Company (P&G) is focused on providing branded consumer goods products. The Company is organized into three global business units: Beauty and Health; Household Care, and Gillette GBU.
SCHLUMBERGER LIMITED $79,257,798
Schlumberger Limited operates as
an oilfield services company in the
TOTAL SA $30,916,650
Total SA, together with its subsidiaries, operates as an integrated oil and gas company worldwide. The company operates in three segments: Upstream, Downstream, and Chemicals.
Toyota Motor Corporation operates in the automotive industry worldwide. It engages in the design, manufacture, assembly, and sale of passenger cars, recreational and sport-utility vehicles, minivans and trucks, and related parts and accessories.
Risk Assessment
The Prudent Investor rule requires a fiduciary to manage a plan’s assets in consideration of the risk to the overall portfolio utilizing Modern Portfolio Theory and risk diversification to balance risk and return rather than considering the risks of the individual investments in isolation.
As of October 12th 2007, PSPRS held securities issued by twelve companies that have been identified as having some level of exposure to the listed terrorist sponsoring states. The market value of these seven holdings was $ 454,598,931, or 6.36% of the total value of the PSPRS portfolio. Given the fact that all of these companies have very diversified global operations and that their resultant direct exposure to these markets is limited, we conclude that none of these companies would be significantly impacted by their exposure to these countries.
Therefore, under the Prudent Investor rule the global security risk attributable to holding these securities in the Fund’s portfolio is considered to be de minimus.
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Carter Olson, Fund Manager Chairman Date