Hello: Today I attended an Emergency Meeting of the Northern Mariana Islands Retirement Fund (NMIRF) Board of Trustees. Only two items were on the agenda, Post P.L. 17-51 (Derivative Lawsuit Act) and Post P.L. 17-55 (FY2012 Budget Act). Based on the many negative effects of P.L. 17-51 on the Fund, and the need of the Fund staff to get direction from the Board as to matters contained in the FY 2012 Budget Act, P.L. 17-55, the Trustees approved the need for this Emergency Meeting. One CRA Board of Directors, Mr. Manual A. Tenorio, did appear at the Fund office but had to leave before the meeting actual started (a little late). A great deal of what transpired is very confusing to me, and I hope I don’t make matters worse by trying to explain what little I caught to you all.
Fund Administrator Rich Villagomez was asked to present his requests and recommendations to the Board. He said these were spelled out in a lengthy memorandum in the Trustees’ package. He said there are several recommendations on the last page of the memorandum and they are “recommendations for what needs to happen on our way to cash” assets. He said “keep in mind all this will happen in a short period of time and will involve contracting”. This memorandum contains many steps which should be taken in the interim before a new Investment Consultant is on board. He said the Fund Investment Consultant, Wilshire Associates Inc., agreed to stay with the Fund an additional 5 days after their announced termination, and “that ended yesterday“.
Since the last Emergency meeting of October 4, Mr. Villagomez said he and other Fund staff had been working with Wilshire representatives to make plans for the future operation of the Fund while Wilshire was still on board and in light of their departure. The memorandum mentioned was the result. He said the Fund and Trustees had hoped Judge Ken Govendo would rule in their favor and prevent implementation of P.L. 17-51. Wilshire had agreed to extend another 30 days if that ruling was in favor of the Fund. When Judge Govendo ruled against the Fund, in their remaining days with the Fund, Wilshire guided the Fund to develop emergency strategies. Mr. Villagomez said the law requires that the Fund have an Investment Consultant on board in order to make any investments.
Mr. Villagomez said the Wilshire and Fund recommended steps would carry the Fund portfolio “to a much more conservative” stance. Mr. Villagomez said “that does not mean we are risk free”. The first step, he continued, would be to change the allocations previously recommended, leading from Glidepath 2012 (approved in the last meeting) to Glidepath 2013 with slight modifications. It was recommended that all the Fund’s assets be placed in Federal Deposit Insurance Corporation (FDIC) approved banks. Those deposits are limited to $250,000 (this might be $200,000?  Djc) per bank and would, thus, require the Fund’s assets be distributed among many banks. Mr. Villagomez said moving this kind of money around (about $265,564,293 as of October 11, 2011) “is not an overnight matter” and could take “up to 10 weeks“. The recommendation was to contract with a “CDARs” company and this CDARs group would take the Fund’s assets and distribute them to the many banks so that the total in each bank did not exceed the FDIC amount allowed. This would continue until a new investment consultant is on board and can make other recommendations as to how assets will be handled. Second Vice Chair Adelina Roberto asked about expected interest rates given by these banks. The Administrator said, “not surprisingly, the rates are pathetic”. He said most would be below 0.5%, with maybe a few below 0.75%.
Ms. Roberto asked about the status of the $100 million set aside ordered by Judge Govendo for those who have not yet gotten out of the Fund all they put in, if and when the Fund no longer exists. Board Attorney Viola Alepuyo explained that the $100 million must be protected and could not be used for anything other than what the Judge specified. However this amount “could be put with other Fund assets for investment”, she added. When Ms. Roberto asked how many Money Managers were left, the Administrator said only Richmond Capital and PIMCO remain. During the immediate transition period, prior to getting a CDAR on board, he said his recommendation would be to take assets and spread them between Vanguard and PIMCO and, further, to issue a formal termination letter to Richmond Capital. The assets managed by Richmond would be put into Vanguard. At the last meeting, the Board approved to put assets in mutual funds under Vanguard. He said “this is not an investment strategy“, but it is necessary until a CDAR could be contracted and, eventually a new investment consultant could be on board. Chairman Sixto Igisomar said the Fund needs to follow a plan which will ensure “the least amount of risk” and put assets “somewhere safe”. Ms. Roberto asked why the Fund total assets could not just remain with the Custodian (Bank of Hawaii). Mr. Villagomez explained that the funds need to be distributed among several banks in order to stay under the ceiling of $250,000 (this might be $200,000?  Djc) allowed for each account to be FDIC insured.
Mr. Villagomez said the Fund cash flow is “very unreliable because of the very few contributions coming over”. Ms. Roberto asked “are we not getting anything from the Government at all?“ Mr. Villagomez said the Administration “only paid into the fund $800,000 in the last 12 months and $400,000 of that was just a few days ago”. He said this $800,000 was entirely for local employees. That was in addition to payments routinely being made for Federally funded employees, which he said “are coming in regularly”. He estimated that the percentage of Federal employees was only about 10%. Chairman Igisomar said “many of the decisions from over there have cost us more money.” (I’m assuming he meant the Administration and the Legislature when he said “over there”. DJC)
Ms. Roberto said she was concerned about the liquidity of the assets and suggested that funds be put in banks for 3 months rather than the one year listed in the recommendation in the Administrator’s memorandum. Chairman Igisomar asked how the Board wanted to take action on these recommendations proposed by the Administrator (under the guidance of Wilshire). Board Attorney Alepuyo said each of the recommendations would need to be voted on separately. At that, the Chairman called for an Executive Session to get legal advice. On returning a little more than an hour later, the Board voted, “in line with heading toward Glidepate 2013“.
Recommendation #1. The Board voted to liquidate foreign mutual funds immediately.

Recommendation #2. The Board voted to liquidate the Richmond Capital account and issue a formal termination letter to Richmond immediately.
Recommendation #3. The Board voted to rescind its October 4, 2011 instructions to the Administrator to implement Glidepath 2012.

Recommendation#4. The Board voted to, as an interim step, move to cash or equivalent allocations and implement Glidepath 2013 for a transitional portfolio to go to CDARs until a new investment consultant is on board.
Recommendation #5. The Board voted to authorize the use of a CDARs program based on a maturity not to exceed 3 months. An RFP will be issued for this contract on an emergency basis. Mr. Villagomez said there remains the “possibility they might not even want to contract with the Fund because of P.L. 17-51”.
Recommendation #6. The Board voted to go with Wilshire’s recommended use of First Financial as a CDARs. Their second choice was Reliance Trust (a company out of Georgia) and their third choice was EverBank (a company out of Jacksonville, FL).
Recommendation #6A. The Board voted to adopt a cash or equivalent allocation to go to a CDAR company.

Recommendation #7. The Board voted to authorize the Administrator, once he finds a CDAR company, to immediately follow the modified Glidepath 2013.
Recommendation #8. The Board voted to stop all transition actions and transferring of funds to the CDAR company as soon as a new investment consultant is on board.

Fund Attorney Carolyn Kern explained that the second item on the agenda for this meeting had to do with sections in the FY 2012 Budget Act (P.L. 17-55) which speak to payment and non payment of salaries for government holidays. She said one such holiday occurred last week and a decision needed to be made as to whether or not the Board, as expenditure authority, would allow Fund staff to be paid for that holiday. She said the Board could grant annual leave with pay for 7-8 holidays if sufficient funds are certified available. She said there are 3 holidays coming up which take place during the weekend and the Board does not have that authority to grant leave with pay, Christmas 12/25/11, New Year’s Day 1/1/12, and Covenant Day 3/24/12. The Chairman expressed concern that more thought needed to be given to this matter. The Board agreed that this would be deferred until the next regular meeting. The Chairman asked staff to have ready legal opinions and advice prepared during the last government shutdown, and said this matter might need to be discussed in Executive Session at the next meeting.
The next regular meeting was scheduled for Friday, October 28, 2011, at 1:30 p.m.

I remind you that these notes are not a formal or official record of this meeting and what is written here is strictly my “understanding” of what transpired. I must apologize for the brevity in these notes, as I surely didn’t understand much of what took place in today’s meeting. Although I try to do my best, I could be wrong on some points. Often, it is extremely difficult to hear and understand everything being said. There are sometimes items I simple don’t feel capable of providing reasonably good interpretations. To get full and accurate information for yourself, you should personally attend Fund Board meetings.
I remind you also to periodically check out the NMIRF websitewww.nmiretirement.com and Glen Hunter’s website for retirees http://kixproductions.com/cnmiretiree/ . Note that he administers and updates his website free of charge to help keep retirees informed. There is a lot of valuable information on both these sites.
Warm regards, Donna