Board Committee Meeting Notes
Audit and Finance Committee
Chancellor’s Conference Room
Meeting Date April 4, 2006
Present: Chair Bill Withrow, Trustee William B. Riley, Trustee Alona Clifton, Chancellor Elihu Harris, Vice Chancellor
Tom Smith, PFT President Michael Mills, Eric Johnson, Dean G. DuMonthier, Gordon Froeb, Lehman Brothers,
and Recording Secretary Kashi Yamashita
Absent:
None
Chair Withrow convened the meeting at 5:12 p.m.
Action: Trustee Riley moved approval of the Agenda for today’s meeting (April 4, 2006) seconded by Trustee Clifton with
full committee consensus.
The following chart shows action/assignments for District administration following review of various items by the
Committee:
Respondent Item
Requester/
Due Date
Harris
Withrow
Lehman Brothers Presentation
Smith
Tom Smith, Vice Chancellor for Budget & Finance, introduced three representatives from Riley
Lehman Brothers Asset Management: Dean DuMonthier, Sr. Vice President; Gordon Froeb, Vice Clifton
President of Marketing & Client Servicing; and Eric Johnson, Managing Director of Global
Institutional Sales and Client Services to give a detailed presentation of the Peralta’s investment
portfolio of $153.7 million for the Other Post Employment Benefit (OPEB) bonds and
performance stats for the period between February 1, 2006 through March 29, 2006.
An overview of the investment profile was given with an asset management advisory plan given
to each committee member. Interested parties may view, upon request, a copy of the plan in the
office of the Vice Chancellor for Budget & Finance.
DuMonthier stated that Lehman Brothers asset allocation implementation schedule could be
tailored to Peralta as follows:
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
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A monthly reporting package would be sent to include position summary, transactions, gains
and losses sent from the custodians of the accounts
A quarterly detailed reporting package could be sent that includes performance summary,
market commentary as well as a face-to-face meeting with a marketing representative and
portfolio manager from one of the products periodically
Semi-annually, Lehman Brothers would rebalance the portfolio back to target weights
Annually, Lehman Brothers would review the asset allocation with the investment
committee to ensure goals are met and achieved.
DuMonthier indicated that the opening balance as of January 20, 2006 was $150,307,485 with no
additions or withdrawals. The investment gains/losses totaled $3,476,134 leaving the market
value of the investments ending March 29, 2006 at $153,783,619.
Top Holdings Categories
Asset Allocation as of 3/29/06
 Consumer Discretionary
 Large Cap Value - $23,553,642
 Consumer Staples
 Large Cap Discipline Growth - $22,845,186
 Energy
 Small Cap Core - $15,642,833
 Financials
 REIT - $8,371,286
 Health Care
 International Fund - $31,358,757
 Industrials
 Core Fixed Income - $52,011,914
 Information Technology
 Materials
 Telecomm Service
 Utilities
Audit & Finance Committee
April 4, 2006
Lehman representatives stated that the OPEB bond investments approach were similar to PERS
approach. As an example, focused strategies of their investment staff is to invest in wellmanaged companies with an identifiable “catalyst” for change as those holdings have the
potential for outperforming through earnings growth. Additionally, focus is placed on protection
to the investment through extensive research and market intuition.
2
The investments in real estate securities are combined top-down analysis and bottom-up research
selecting companies with a track record of superior growth and low cash flow multiples,
diversification and property sectors and regions.
In selecting international markets, the equity strategy looks for returns through well researched
security selection showing growth and quality which includes emerging markets selling at
appealing rates. DuMonthier stated that many factors are considered such as economic, social,
and political climates in the analysis and selection of investments, emphasizing a “focused
approach.” Also, Lehman Brothers approach is to diversify the portfolio and that they seek to
add value to the portfolio’s positioning by watching interest rates and using credit research and
observing risk considerations, and by investing in a wide range of investment grade taxable
bonds.
After a lengthy presentation, the meeting adjourned at 6:20 p.m. The next meeting is scheduled for May 11, 2006, 5:00 p.m.