AGENDA

MEETING OF THE
STATE BOARD OF ADMINISTRATION
(Contact Person: Dorothy Westwood - 488-4406)
THE CAPITOL
October 12, 1999

1. Approval of minutes of meeting held September 14, 1999. (Att. #1)

2. Approval of amendments to Section VI and VII of the Florida Retirement System Total Fund Investment Plan, and approval of an effective date.

1. Amendments to Section VI include adoption of new target allocations for certain asset classes, creation of a new Alternative Investments asset class and adoption of floating target allocations for certain illiquid asset classes:

a) Adoption of new target allocations for some of the asset classes at the SBA. This change will require the redistribution of approximately $3.5-4.0 billion from Domestic Equities and Fixed Income to Foreign Equities. The following chart highlights these changes:

ASSET CLASS PROPOSED NEW TARGET RANGE CHANGE FROM CURRENT TARGET

Domestic Equities 55.5% 47-61% -3
Foreign Equities 12.0% 9-15% +4
Fixed Income 25.0% 15-35% -1
Real Estate Floating, Centered at 4.0% 2-6% 0
Alternative Investments* Floating, Centered at 2.5% 1-4% 0
Cash Equivalents Floating, Centered at 1.0% 0-10% 0
* Alternative Investments is currently subsumed in Domestic Equities.

b) Creation of a new asset class titled Alternative Investments. Initially, this class will be comprised of the current private equity relationships, but other investment strategies may be incorporated with Trustee approval.

AGENDA
October 12, 1999
Page Two

c) Adoption of floating weights for the illiquid asset classes. The illiquid classes are Real Estate and Alternative Investments. Cash will float as an offset to the two illiquid classes.

2. Amendments to Section VII include adoption of new target indices (i.e. performance benchmarks) and performance measurement methodologies for certain asset classes:

a) Adoption of new performance benchmark for the International Equities asset class: the "MSCI All Country World Free Index, excluding the U.S." The principal difference between the current index and this proposal is the inclusion of Canada in the new index and the elimination of a fixed weight of 15% on emerging markets. The proposed new index approximates market neutral weightings.

b) Adoption of a two-part performance index for Real Estate comprised of: 1) the Wilshire Real Estate Securities Index, unlevered, and 2) CPI plus 450 basis points, per annum. The new index provides broader coverage of the commercial real estate market and more closely aligns with the long-run role of Real Estate in the SBA portfolio.

c) Adoption of a performance benchmark for Alternative Investments: "a fixed premium return of 600 basis points per annum in excess of the Domestic Equity Target Index return adjusted for the average maturity of the asset class portfolio." This index recognizes that private equity investments are designed to add incremental value to publicly traded equities investments. However, due to the elevated risk associated with private equity partnerships, a premium of 600 basis points is proposed. This premium is derived from staff research based on the typical levels of leverage in the portfolios.

d) Adoption of the use of an internal rate of return methodology to assess the long-run effectiveness of the Alternative Investments and Real Estate investment programs.

3. Amendment creating Section X, providing an effective date. It is recommended that all of these changes be effective November 1st. However, due to logistical and other investment factors, the reallocation of assets subsequent to approval of a new target allocation (item 1.a) would begin no sooner than November 1st but may take several weeks or more to complete. (Att. #2)