REQUEST FOR PROPOSAL

By the

STATE OF OHIO

OHIO BUREAU OF WORKERS' COMPENSATION

For

INVESTMENT ACCOUNTING AND REPORTING OUTSOURCING SERVICES

December 18 2006

Bid # B07014

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Table of Contents

Section Page 1.0 BACKGROUND AND NATURE OF PROJECT 3 1.1 PURPOSE OF THE REQUEST FOR PROPOSALS 3 1.2 BWC BACKGROUND 3 2.0 CALENDAR OF EVENTS 4 3.0 PROPOSAL INQUIRIES AND SUBMISSIONS 4 3.1 MANDATORY PRE-SUBMISSION LETTER OF INTENT 4 3.2 QUESTIONS 4 3.3 COMMUNICATION RESTRICTIONS 4 3.4 PROPOSAL SUBMISSION 5 3.5 CHANGES TO THIS REQUEST FOR PROPOSALS 5 4.0 GENERAL TERMS AND CONDITIONS 5 4.1 GENERAL 5 4.2 RESULTING CONTRACT 6 4.3 GOVERNING LAW – SEVERABILITY 6 4.4 COMPLIANCE WITH APPLICABLE LAWS 6 4.5 PUBLICITY 6 4.6 CONDITIONS PRECEDENT 6 4.7 EQUAL OPPORTUNITY 7 4.8 METHOD OF REMUNERATION AND BILLING PROCEDURES 7 4.9 WORKERS’ COMPENSATION 8 4.10 PUBLIC AND PROFESSIONAL LIABILITY INSURANCE 8 4.11 VENDOR’S LIABILITY 8 4.12 CONTRACT COMPLIANCE AND TERMINATION 8 4.13 DEFAULT BY VENDOR 8 4.14 DAMAGES 8 4.15 INSPECTION OF TIME RECORDS AND WORKPAPERS 9 4.16 SUBCONTRACTING 9 4.17 DRUG-FREE WORKPLACE 9 4.18 INTELLECTUAL PROPERTY & CONFIEDNTIALITY 9 4.19 OHIO ELECTIONS LAW 9 4.20 OTHER EXPENSES 9 4.21 UNRESOLVED FINDING FOR RECOVERY 9 4.22 CONTRACTOR DISCLOSURE; LOCATION OF SERVICES, DATA 10 4.23 DECLARATION REGARDING MATERIAL ASSISTANCE / NONASSISTANCE

TO A TERRORIST ORGANIZATION 10

4.24 NO SECONDARY INTERESTS 10 5.0 SCOPE OF SERVICES 10 6.0 PROPOSAL 10 6.1 COVER LETTER 11 6.2 COMPANY INFORMATION 11 6.3 COST/FEE 12 6.4 PROOF OF INSURANCE AND WORKERS’ COMPENSATION COVERAGE 14 6.5 SUBCONTRACTORS 14 6.6 CONFLICTS OF INTEREST 14 7.0 PROPOSAL EVALUATION 15 7.1 BWC SELECTION COMMITTEE 15 7.2 EVALUATIONS APPROACH 15 7.3 PHASE I MINIMUM REQUIREMENTS 15 7.4 GENERAL QUESTIONS 16 7.5 PHASE II OUTSOURCER REQUIREMENTS 17 7.6 PHASE II POINT SCALE RATING 46 8.0 AWARD OF CONTRACT 47 8.1 AWARD PROCEDURE 47 8.2 CONTRACT EXECUTION 47

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REQUEST FOR PROPOSAL by the

STATE OF OHIO OHIO BUREAU OF WORKERS' COMPENSATION

for INVESTMENT ACCOUNTING AND REPORTING SYSTEM

DECEMBER 18 2006

PLEASE READ ALL CONDITIONS AS SET FORTH IN THIS REQUEST FOR PROPOSALS (RFP) FOR A FULL UNDERSTANDING OF THE REQUIREMENTS. 1.0 BACKGROUND AND NATURE OF PROJECT

1.1 PURPOSE OF THE REQUEST FOR PROPOSALS

The purpose of this Request for Proposal (RFP) is to select and contract with a top tier investment accounting and reporting outsourcing firm that will serve the Ohio Bureau of Workers’ Compensation’s (BWC) current and future requirements in the areas of investment accounting, performance measurement, reporting, compliance, and reconciliation.

1.2 BWC BACKGROUND

Under the mandates of the Ohio Revised Code (ORC), the Ohio Workers' Compensation System is the largest exclusive state insurance fund system in the United States, with assets of $18.8 billion and annual insurance premiums and assessments of $2.2 billion. The Ohio Workers' Compensation System consists of BWC, responsible for administrative and insurance functions, and the Industrial Commission of Ohio (IC), responsible for claims adjudicative functions. BWC exercises fiduciary authority with respect to the State Insurance Fund (SIF) and related ancillary accounts. These funds are held for the benefit of the injured workers and employers of Ohio. It is from these funds that all claims for both medical and compensation for disability benefits are paid with the exception of self-insured claims. Self-insuring employers have been granted the status of self-insurance by having proven ability to meet certain obligations set forth in the ORC 4123.35. Self-insuring employers administer their own workers' compensation claims and are monitored by BWC. Presently, BWC processes claims, pays compensation and medical benefits to injured workers and underwrites workers' compensation coverage for employers doing business in Ohio. BWC also offers safety training and accident prevention programs to employers and helps injured employees return to work through rehabilitation programs. The Workers’ Compensation Oversight Committee oversees BWC’s activities, and functions as a fiduciary. In 2005, BWC provided coverage to 288,873 employers and received 197,083 claim applications for workers’ compensation benefits. Benefits paid out in 2005 totaled almost $2 billion.

BWC’s $17 billion investment portfolios are currently invested in a passively managed index fund (95%), private equity (3%), and cash and cash equivalents (2%). BWC’s total investment portfolio consists of the State Insurance Fund (SIF) portfolio ($15.6 billion) and four (4) separate ancillary portfolios (combined $1.4 billion). BWC will soon begin transitioning these portfolios to a target asset allocation approximating 60% passive index management, 39% active management, and 1% cash equivalents. The SIF and two ancillary fund portfolios (combined $17 billion) will be allocated to the following asset classes:

Fixed Income • Fixed Income – Long Duration 54% • U.S. Treasury Inflation-Protected Securities 20% • High Yield Bonds 5%

Equity • U.S. Large Cap Equity 12% • Non-U.S. Equity 5% • U.S. Small and Mid Cap Equity 3%

Cash Equivalents 1%

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The remaining two ancillary portfolios (combined $0.1 billion) will be allocated 99% to Fixed Income-Medium Duration and 1% cash equivalents. Outside investment managers will be hired to manage the investment portfolio according to the asset allocations mandated by the Investment Policy Statement. Currently, BWC does not internally manage or trade any of these portfolios. It is anticipated that cash management will be internally managed by the BWC. 2.0 CALENDAR OF EVENTS

The following time frames have been established: Event Dates RFP issued Monday December 18, 2006 Question submission begins Monday, December 18 2006 Mandatory Letter of Intent Thursday, December 27, 2006 Question submission ends Friday, December 29, 2006 Responses to all questions published on website, on or before close of business

Wednesday, January 10 , 2007

Proposals due Tuesday, January 16, 2007 2:00 PM EST Evaluation Committee Review Period Wednesday, January 17, 2007 – Wednesday,

January 31, 2007 Recommendation to Executive Staff Monday, February 5, 2007 3.0 PROPOSAL INQUIRIES AND SUBMISSIONS

3.1 MANDATORY PRE-SUBMISSION LETTER OF INTENT

In order to be eligible to submit a proposal in response to this RFP, an authorized legal representative from each vendor desiring to respond to this RFP shall submit a letter indicating the intent to submit a proposal. The letter will ensure all vendors have the same information and have been provided an equitable knowledge base in the event it becomes necessary for BWC to revise this RFP. Vendors may submit the Letter of Intent to the following e-mail address:

InvestAcctgRFP@bwc.state.oh.us Vendors who do not submit a timely Letter of Intent are deemed ineligible to submit a proposal. Letters of Intent must be received by 2:00 PM EST on December 27, 2006. 3.2 QUESTIONS

To be eligible to submit questions regarding this RFP, interested vendors must register by submitting the mandatory letter of intent. Questions must be emailed to InvestAcctgRFP@bwc.state.oh.us Question(s) must provide reference(s) to the RFP (e.g. Section number and or item number). Questions must be received by BWC by 4:45 PM EST on December 29, 2006. BWC’s responses to any or all questions will be in writing and will be made available to all respondents to this RFP via the web site described below:

http://www.ohiobwc.com/bwccommon/services/RFP/RFPDefault.asp Responses will be published on the website on or before close of business January 10, 2007. No response by BWC officially modifies the RFP in any way except in a written addendum issued by BWC. 3.3 COMMUNICATION RESTRICTIONS

In order to ensure fairness and parity among prospective vendors, from the time of the release of this RFP until a vendor is selected and a contract is awarded, vendors shall not communicate with any

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BWC staff concerning this RFP, except as provided in Section 3.2. If the vendor attempts or undertakes an unauthorized communication, BWC reserves the right to reject that vendor’s proposal, without evaluation. BWC shall not be responsible for any vendor's reliance on any information regarding this Request for Proposal or any work hereunder if the information was provided by any source other than through the inquiry process in Section 3.2. 3.4 PROPOSAL SUBMISSION

It is absolutely essential that vendors carefully review all elements in their final proposal. Once received by BWC, a proposal cannot be altered. One original and seven (7b) complete, signed, and sealed copies of each proposal shall be submitted for evaluation. Proposals shall be clearly marked “Ohio Bureau of Workers’ Compensation BID No. B07014 - Investment Accounting and Reporting System” on the outside of the envelope. FAX or electronic mail transmissions will not be accepted.. All copies must be received by BWC together in one package. Proposals must be received in the Purchasing Department by 2:00 PM EST on January 16, 2007. Proposals inappropriately addressed or delivered elsewhere risk untimely re-routing to the Purchasing Department. Any proposals received in the Purchasing Department after the deadline will be marked as untimely and will not be opened or evaluated regardless of the reason for late receipt. If mailing proposals, vendors should allow for sufficient mailing time to ensure timely receipt by the Purchasing Department. All mail and deliveries can be expected to undergo package security screening (amounting to approximately one hour) before receipt in the Purchasing Department. Vendors must anticipate this additional time when arranging for mail or delivery of proposals. If attending the opening, vendors must bring photo identification and should allow for additional time for personal security screening (amounting to approximately twenty minutes) and for package security screening (amounting to approximately one hour) if they are also delivering their proposals in person at that time. Submit complete, signed and sealed copies of the proposal to:

BY MAIL OR HAND-DELIVERY: Ohio Bureau of Workers’ Compensation

Purchasing 30 W. Spring Street, Level 24 Columbus, Ohio 43215-2256

All material submitted to and accepted by BWC in response to the RFP shall become the property of BWC and will be retained by BWC in accordance with the Ohio Public Records Act and the Ohio Records Retention Act. THE CONTENTS OF PROPOSAL ARE SUBJECT TO THE OHIO PUBLIC RECORDS ACT, SECTION 149.43, OF THE OHIO REVISED CODE, UNLESS OTHERWISE EXCEPTED BY LAW. If the proposal includes information that the proposer in good faith believes falls within one of the exceptions from the provisions of the Ohio public records laws, the proposer must put such information in separate sealed envelopes with each copy of the proposal with a note of which exception is claimed. Any material not separately sealed and annotated will be released upon a proper public records request. Any proposal that claims the entire contents of the proposal falls within the exceptions will result in the disqualification of that proposal. After a contract is awarded, if BWC determines that the information separately sealed by any proposer appears not to be exempt and may be released upon a proper request, the vendor will be advised of BWC’s intent to release the information. 3.5 CHANGES TO THIS REQUEST FOR PROPOSAL

All vendors submitting the Letter of Intent will be sent a written addendum to this RFP in the event that BWC finds it necessary to modify one or more portions of this RFP after it has been released. Should BWC issue an addendum to this RFP, additional time may be given to all prospective vendors, if appropriate, to extend the deadline to accommodate needed changes in the proposals. 4.0 GENERAL TERMS AND CONDITIONS

4.1 GENERAL

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BY SUBMITTING A PROPOSAL, THE VENDOR ACKNOWLEDGES THAT VENDOR HAS READ THIS RFP, UNDERSTANDS IT, AND AGREES TO BE BOUND BY ITS REQUIREMENTS, TERMS, AND CONDITIONS. BWC RESERVES THE RIGHT TO DISQUALIFY ANY PROPOSAL WHICH TAKES EXCEPTION TO OR LIMITS THE RIGHTS OF BWC UNDER THE RFP. BWC RESERVES THE RIGHT TO REFUSE ACCEPTANCE OF ANY PROPOSAL WHICH IS NOT PROPERLY SUBMITTED IN ACCORDANCE WITH THE REQUIREMENTS OF THIS RFP. FURTHERMORE, BWC RESERVES THE RIGHT TO REJECT ANY AND ALL PROPOSALS, INCLUDING THE SELECTED PROPOSAL, AT ANY TIME PRIOR TO EXECUTION OF A CONTRACT. BWC RESERVES THE RIGHT TO CANCEL THIS RFP AT ANY TIME PRIOR TO EXECUTION OF A CONTRACT. Headings used in this RFP are for convenience only and shall not affect the interpretation of any of the terms and conditions hereof. In BWC's sole discretion, BWC may waive minor defects that are not material when no prejudice will result to the rights of any other vendors, the public, or BWC. BWC is not liable for any cost incurred by any vendor in the preparation and submission of any proposal, or in anticipation of the award of a contract. Moreover, BWC is not liable for any cost incurred by any selected Vendor prior to the execution of a contract by all parties. All disbursements made for the contract shall be only for obligations incurred on or after the effective date of the contract. BWC reserves the right to use any materials or ideas submitted without compensation to the vendor. BWC reserves the right to refuse any Vendor’s proposal solely on the basis of cost.

4.2 RESULTING CONTRACT

Any contract resulting from this RFP shall consist of this RFP and any written addenda issued by BWC, the proposal and the executed contract. 4.3 GOVERNING LAW - SEVERABILITY

The validity, construction and performance of any contract resulting from this RFP and the legal relations among the parties to any contract shall be governed by and construed in accordance with the laws of the State of Ohio. If any provision of any contract resulting from this RFP or the application of any such provision shall be held by an Ohio court of competent jurisdiction to be contrary to law, the remaining provisions of the contract shall remain in full force and effect. The parties agree to submit irrevocably to the jurisdiction of Ohio courts. 4.4 COMPLIANCE WITH APPLICABLE LAWS

The Vendor agrees to comply with all applicable federal, state, and local laws in the conduct of the work hereunder. The Vendor accepts full responsibility for payment of all taxes and insurance including workers’ compensation insurance premiums, unemployment compensation insurance premiums, all income tax deductions, social security deductions, and any and all other taxes or payroll deductions required for all employees engaged by the Vendor in the performance of the work authorized by this contract. BWC does not agree to pay any taxes. Failure to have workers’ compensation or other required insurance in accordance with the RFP shall deem any resulting contract voidable at BWC’s sole discretion. 4.5 PUBLICITY

Any use or reference to any resulting contract by the selected Vendor to promote, solicit, or disseminate information regarding the scope of the contract is prohibited, unless otherwise agreed to in writing by BWC. BWC agrees to be used as a reference by the successful Vendor in other State of Ohio situations where the Vendor may wish to make a proposal. 4.6 CONDITIONS PRECEDENT

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It is expressly understood by the parties that the contract is not binding on BWC until such time as all necessary funds are made available and forthcoming from the appropriate State agencies, and such expenditure of funds is approved by the Administrator after execution of the contract by the Vendor but before execution by BWC. No contract shall be binding upon either party until receipt by the contracting Vendor of a copy of a fully executed contract, and compliance with any and all conditions precedent. 4.7 EQUAL OPPORTUNITY

In fulfilling the obligations and duties of any contract resulting from this RFP, the Vendor shall not discriminate against any employee or applicant for employment on the basis of race, religion, national origin, color, gender, sexual orientation, age, Vietnam-era Veteran status, or disability as defined in the Americans with Disabilities Act. The Vendor shall ensure that applicants are hired and that employees are treated during employment without regard to any of the listed factors. Such action shall include, but not be limited to the following: employment, upgrading, demotion or transfer, recruitment or recruitment advertising, layoff or termination, rates of pay or other forms of compensation and selection for training, including apprenticeship. The Vendor agrees to post in conspicuous places, available to employees and applicants for employment, notices stating that the Vendor complies with all applicable federal and state non-discrimination laws. The Vendor shall incorporate the foregoing requirements of this section in all of its contracts for any of the work prescribed herein (other than subcontractors for standard commercial supplies or chemical supplies), and shall require all of its subcontractors for any part of such work to incorporate such requirements in all subcontracts for such work. 4.8 METHOD OF REMUNERATION AND BILLING PROCEDURES

Upon delivery of goods or performance of the service, as described on any purchase order placed against the contract awarded, the Vendor shall submit hard copy invoices directly to BWC Accounts Payable, PO Box 15369, Columbus, OH 43215-0369. A proper invoice is defined as being free from defects, discrepancies, errors, or other improprieties and shall include, but may not be limited to:

• Vendor’s name and address as designated in the RFP; • Vendor’s federal employer identification (E.I.) number; • The Purchase Order number authorizing the purchase of services; • Description, including time period (date received and date reported), of services delivered

or rendered as specified in the Purchase Order. Defective invoices shall be returned to the Vendor noting areas for correction. When such notification of defect is sent, the required payment date shall be thirty (30) days after receipt of the corrected invoice. Section 126.30 of the Ohio Revised Code, and any applicable rules thereto, are applicable to any resulting contract and require payment of interest if, upon receipt of a proper invoice, payment is not made within thirty (30) calendar days, unless otherwise agreed in writing. The interest charge shall be at the rate per calendar month which equals one-twelfth of the rate per annum prescribed by Section 5703.47 of the Ohio Revised Code, unless this calculation yields an amount less than ten dollars ($10.00) in which case no interest shall be paid. In the event that BWC does fail to make prompt payment, the contracting Vendor is entitled to the interest allowed by law. In no event shall such failure to make prompt payment be deemed a default or breach of contract on the part of BWC. By signing the contract, the selected vendor agrees to receive payment by means of electronic fund transfers, "EFT". BWC agrees to send to the selected vendor an Authorization Agreement for Automatic Deposit of State Warrants for the selected vendor to complete and to file with the Auditor of State, providing the information needed to enable EFT payment. It is the Vendor's responsibility to complete and to submit the Authorization Agreement for Automatic Deposit of State Warrant immediately upon receipt of a purchase order and signed contract under this RFP.

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Payment shall be made to the Vendor, in the Firm’s Federal E.I. number, as provided for in the response to the RFP. The date the EFT payment is issued shall be considered the date payment is made. Payment shall not be initiated before a proper invoice is received by BWC. 4.9 WORKERS’ COMPENSATION

The Vendor shall submit a copy of the certificate proving that the Vendor and agents are covered by workers’ compensation. The Vendor is responsible for ensuring contractually that any subcontractors maintain workers’ compensation insurance at all times during the term of the resulting contract. Failure to maintain coverage at any time during the term of any contract shall be deemed a material breach of the contract. Such breach shall render the contract voidable in its entirety at BWC’s sole discretion. 4.10 PUBLIC AND PROFESSIONAL LIABILITY INSURANCE Each vendor shall carry public and professional liability insurance with limits of not less than quoted cost of the proposal for any one occurrence. Failure to maintain coverage at any time during the term of any contract shall be deemed a material breach of the contract. Such breach shall render the contract voidable in its entirety at BWC’s sole discretion. The Vendor will furnish a certificate of insurance for the required coverage from an insurance carrier authorized to do business in Ohio. The certificate must be in a form that is reasonably satisfactory to BWC as to the contents of the policies and the quality of the insurance carriers. The certificate also must provide 30 days’ notice to BWC before cancellation and must list BWC as an additional insured. Failure to maintain the required coverage will not disqualify a vendor during evaluation. Failure to provide the certificate of coverage within the stated time period will result in the Vendor being deemed non-responsive, and the proposal will be immediately disqualified. 4.11 VENDOR’S LIABILITY

The Vendor’s entire liability and BWC’s remedies for claims it may have related to or arising out of the contract for any cause and regardless of the form of action shall include all legal and equitable remedies. 4.12 CONTRACT COMPLIANCE AND TERMINATION

During the term of this contract, BWC’s Financial Reporting Manager shall be responsible for monitoring the Vendor’s performance and compliance with the terms and conditions of the contract. It is specifically understood that the nature of the services to be rendered pursuant to any contract resulting from this RFP are of such a nature that BWC is the sole judge of the adequacy of such services. BWC reserves the right to cancel the contract at any time without cause upon 30 days notice. Upon cancellation, other than for the default of the Vendor, BWC shall pay the Vendor for services rendered prior to the effective date of the cancellation. If BWC’s representative observes any infraction(s), such shall be documented and notice conveyed to the Vendor for immediate correction. Continued failures on the Vendor’s part to comply with the terms and conditions of the ensuing contract may constitute an event of default. Unremedied infraction(s) persisting beyond 30 days after notice to the vendor may constitute an event of default. 4.13 DEFAULT BY THE VENDOR

BWC declares and the Vendor acknowledges that BWC may suffer damages due to the failure of the Vendor to act in accordance with the requirements, terms, and conditions of the contract. BWC declares and the Vendor agrees that such failure shall constitute an event of default on the part of the Vendor. The Vendor agrees that if BWC does not give prompt notice of such a failure, that BWC has not waived any of its rights or remedies. 4.14 DAMAGES

In the event that the Vendor fails to cure a default or breaches any term or condition of the contract, the Vendor agrees to reimburse BWC for any actual and direct losses incurred by BWC including but not limited to the cost of the contract under this RFP and the cost to BWC to seek a new Investment Accounting and Reporting System. In addition, the Vendor agrees that BWC shall have the right to

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terminate the contract either in whole or in part, without liability to BWC whatsoever. The Vendor agrees that the liquidated damages are not a penalty.

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4.15 INSPECTION OF TIME RECORDS AND WORKPAPERS

BWC reserves the right to inspect the records and work-papers of the Vendor’s organization to determine the validity of billings for work performed. Adequate records to support these charges must be maintained. Documentation must be retained for review for at least three (3) years subsequent to final payment. 4.16 SUBCONTRACTING

No subcontracting will be permitted without prior written approval by the Administrator of BWC or his designee. However, the BWC’s approval will not serve to modify or abrogate the responsibility of the Vendor for the acts, omissions, nonfeasance, malfeasance, or misfeasance of any and all subcontractors. 4.17 DRUG-FREE WORKPLACE

The Vendor agrees to comply with all applicable state and federal laws regarding a drug-free workplace. The Vendor shall make a good faith effort to ensure that all of its employees, if working on state property, will not purchase, use or possess illegal drugs or alcohol or abuse prescription drugs in any way. 4.18 INTELLECTUAL PROPERTY & CONFIDENTIALITY

The Vendor acknowledges that some of the information contained in BWC records is confidential under state and federal law. The Vendor shall not use any information received from BWC after a contract is awarded, for any purpose other than performing under the contract resulting from this RFP. Further, the Vendor agrees to protect the confidentiality of BWC records with the same degree of care it exercises to protect its own confidential records. The vendor will implement all necessary safeguards to ensure that BWC data is not used, accessed, or disseminated in any manner other than that explicitly described herein. BWC expects the vendor to ensure that their employees, contractors, and partners all adhere to the confidentially requirements.

All materials, surveys, analysis and reports developed or used by the vendor shall become the property of BWC. BWC shall have an unrestricted right to reproduce, distribute, modify, maintain and use the materials, surveys, analysis and reports, and the vendor shall not obtain copyright, patent or other proprietary protection for these items. The vendor relinquishes any and all copyrights, privileges and proprietary rights to these items. The vendor shall not include in the materials, surveys, analysis and reports any copyrighted matter, unless the copyright owner gives prior written approval to such copyrighted matter provided herein.

4.19 OHIO ELECTIONS LAW

By signing the contract, the vendor affirms that, as applicable, no party listed in Division (I), (J), (Y), or (Z) of Section 3517.13 of the Ohio Revised Code or spouse of such party has made, as an individual, within the two previous calendar years, one or more contributions totaling in excess of $1,000.00 to the Governor of Ohio or lieutenant governor or to the campaign committee of any candidate for the office of governor or lieutenant governor. 4.20 OTHER EXPENSES

Any travel or per diem required by the selected Vendor to carry out its obligations under the contract shall be at the Vendor’s expense. Any additional travel, requested by BWC after award of the contract, shall be paid by BWC only with prior written approval. All additional travel and per diem shall be paid in accordance with the BWC Travel Policy and Reimbursement Guide, as may be periodically amended during the term of the contract and in accordance with Ohio Administrative Code Rule 126-01-02 http://www.obm.ohio.gov/mppr/adm126-1-02.pdf

4.21 UNRESOLVED FINDING FOR RECOVERY

By signing the contract, the selected vendor affirmatively represents and warrants that it is not subject to any unresolved finding for recovery issued by the Auditor of State within the meaning of Ohio Revised Code Section 9.24, or that it has taken the appropriate remedial steps required under Section

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9.24 or otherwise qualifies under that section. The Vendor agrees that if this representation and warranty is deemed to be false, the contract shall be declared "void ab initio" as between the parties to this contract and BWC will not pay for any services rendered or goods delivered under the contract. Immediately upon such declaration, any funds paid under this contract shall be immediately repaid by the vendor to BWC or an action for recovery of such payments from the vendor may result. 4.22 CONTRACTOR DISCLOSURE; LOCATION OF SERVICES, DATA

As part of this Agreement, the vendor shall disclose the following information: (1) the location(s) where all services will be performed; (2) the location(s) where any state data applicable to the contract will be maintained or made

available; and (3) the principal location of business for the vendor and all subcontractors.

The vendor shall not, during the performance of this Agreement, change the location(s) of the country where the services are performed or change the locations(s) of the country where the data is maintained or made available without prior written approval of the state. 4.23 DECLARATION REGARDING MATERIAL ASSISTANCE/NONASSISTANCE TO A

TERRORIST ORGANIZATION

Ohio law now requires the completion and submission of a form,” Declaration Regarding Material Assistance/Nonassistance to a Terrorist Organization,” that can be obtained by going to http://www.homelandsecurity.ohio.gov/DMA_forms.asp. Choose “DMA for funding and business contracts.” Please print, sign, and return the DMA form with the contract. The Terrorist Exclusion List can be found through Homeland Security at: http://www.homelandsecurity.ohio.gov/dma_terrorist/terrorist_exclusion_list.pdf 4.24 NO SECONDARY INTERESTS By signing the contract, the selected vendor represents and warrants that in the event of any referral of any third party to sell, license, or furnish products, services, or other items to BWC, such referral shall not result in any such third party’s payment to the selected vendor (or to any partner, director, principal or affiliate thereof) of any monetary consideration, referral fee, finder’s fee or anything else of value. For breach of the above warranty, the selected vendor shall promptly pay to BWC the full amount (or cash equivalent) of the consideration received from the third party for the referral.

By signing the contract, the selected vendor represents and warrants that the work to be performed under this RFP will be a complete work product, not requiring any subsequent, additional purchase from the selected vendor. 5.0 SCOPE OF SERVICES

This Request for Proposal is to contract with an investment accounting and reporting outsourcing service firm that will serve BWC’s current and future needs in the following areas:

• Portfolio Investment Accounting • Reconciliations • Performance Measurement and Analytics

• Performance Measurement • Performance Attribution • Investment Analytics • Peer Group Comparisons • Reporting

• Compliance Monitoring

6.0 PROPOSAL To be considered, Vendors must submit a complete, signed and sealed response to this Request for Proposal in accordance with Section 3.4 of this RFP. The original and seven (7) copies of the proposal must be marked “Bid No. B07014 Investment Accounting and Reporting System” on the outside of the envelope, and must be received on or before 2:00 PM EST on January 16, 2007. Proposals must be signed by an official authorized to bind the Vendor. No faxed or electronically mailed copies will be accepted.

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Any proposal received after the specified time, or improperly marked, prepared or submitted will not be eligible for consideration and will be rejected. Proposals that do not comply with all of the requirements of this RFP shall be rejected as non-responsive. The proposal must remain valid for the term of the proposed contract, and this validity statement must also appear in the response. All proposals submitted in response to this RFP will become the property of BWC and are subject to the Ohio Public Records Law. As a public record, all proposals will be available to the public for inspection unless subject to a statutory exception from the Ohio Public Records Law. Any material for which a claim of trade secret or other confidentiality is made must be sealed in a separate envelope and marked as confidential. The envelope shall be included in the Proposal at the place where the materials would otherwise appear. Any confidentiality is waived unless this requirement is met. The BWC reserves the right to request written explanation of the vendor’s claim of an exception to the Public Records Act, and may either accept or reject that vendor’s claim. All material submitted becomes the property of the BWC and may be returned only at BWC’s option. BWC reserves the right to use any or all ideas presented in response to this Request for Proposal. Selection or rejection of any given proposal does not affect this right. BWC is not liable for any cost incurred by a Vendor in the preparation and submission of any proposal, or in anticipation of the award of a contract. Moreover, BWC is not liable for any cost incurred by any Vendor prior to the execution of a contract. A respondent of this Request for Proposal must include in its proposal sufficient information to permit BWC to effectively evaluate its qualifications. At a minimum, the following information must be submitted: 6.1 COVER LETTER

A cover letter in the form of a standard business letter that shall be signed by an individual authorized to legally bind the Vendor must be provided. The letter shall also provide a statement that the proposal remains valid for the term of the proposed contract. 6.2 COMPANY INFORMATION

1. Provide the following information:

• Name of Firm • Contact Name • Title • Address • Telephone Number • Fax Number • E-mail Address

2. Specify the legal status of the Company (sole proprietorship, partnership, corporation, etc.) and the year the entity was organized to do business as the entity now substantially exists.

3. Give a brief history of your Company including the year of organization, current ownership and affiliations. Is there any ownership change planned or anticipated at this time?

4. Provide a completed IRS Form W-9 and a disclosure statement concerning the Company’s organization structure, including subsidiary or parent corporations.

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6.3 COST/FEE

The Vendor shall provide copies of the current fee schedules for Investment Accounting and Reporting Outsourcing Services. Please provide a pro-forma fee estimate based on the services requested in this RFP and the following account parameters. Each fund should be assumed to be a separate account for the purpose of estimating fees.

Ohio BWC Anticipated Account Overview State Insurance Fund

Market Value Anticipated # as of 11/30/06 Number of % of Asset Class of Managers ($ millions) Holdings* Transactions Fund

Total Fund 20 $14,850

Fixed Income (79%)

Long Duration Fixed Income (Passive) 2 $4,010 1,000 1,200 27% Long Duration Fixed Income (Active) 4 $4,010 4,000 4,800 27% US TIPS (Passive) 1 $2,970 25 60 20% High Yield (Active) 1 $743 150 360 5%

Equity (20%)

Large Cap S&P 500 Index (Passive) 1 $1,782 500 600 12% Non-US Equity (Active) 5 $594 500 1,200 4% Small/Mid Cap US Equity (Active) 5 $446 500 1,200 3% Non-US Equity (Passive) 1 $149 200 480 1%

Cash (1%) Internal $149 30 360 1%

Totals: 6,905 10,260 100%

* These holdings do not represent individual cusips. It should be assumed that different managers on the same mandate may own the same cusips.

Ohio BWC Anticipated Account Overview

Coal Workers' Pneumoconiosis Fund Market Value Anticipated # as of 11/30/06 Number of % of Asset Class of Managers ($ millions) Holding* Transactions Fund

Total Fund 2 $233

Fixed Income (79%)

Long Duration Fixed Income (Passive) $63 500 600 27% Long Duration Fixed Income (Active) $63 1,000 1,200 27% US TIPS (Passive) $47 25 60 20% High Yield (Active)

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$12 150 360 5%

Equity (20%)

Large Cap S&P 500 Index (Passive) $28 500 600 12% Non-US Equity (Active) $9 100 240 4% Small/Mid Cap US Equity (Active) $7 100 240 3% Non-US Equity (Passive)

1

$2 200 480 1%

Cash (1%) Internal $2 5 60 1%

Totals: 2,580 3,840 100%

* These holdings do not represent individual cusips. It should be assumed that different managers on the same mandate may own the same cusips.

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Ohio BWC Anticipated Account Overview

Disabled Workers' Relief Fund Market Value Anticipated # as of 11/30/06 Number of % of Asset Class of Managers ($ millions) Holding* Transactions Fund

Total Fund 2 $1,110

Fixed Income (79%)

Long Duration Fixed Income (Passive) $300 500 600 27% Long Duration Fixed Income (Active) $300 1,000 1,200 27% US TIPS (Passive) $222 25 60 20% High Yield (Active)

1

$56 150 360 5%

Equity (20%)

Large Cap S&P 500 Index (Passive) $133 500 600 12% Non-US Equity (Active) $44 100 240 4% Small/Mid Cap US Equity (Active) $33 100 240 3% Non-US Equity (Passive)

1

$11 200 480 1%

Cash (1%) Internal $11 10 120 1%

Totals: 2,585 3,900 100%

* These holdings do not represent individual cusips. It should be assumed that different managers on the same mandate may own the same cusips.

Ohio BWC Anticipated Account Overview

Other Ancillary Funds

Anticipated # as of 11/30/06 Number of % of Asset Class of Managers ($ millions) Holdings Transactions Fund Marine Industry Fund Total Fund 0 $15

Cash (100%) Internal $15 10 120 100%

Public Work-Relief Fund Employees' Fund Total Fund 1 $21

Fixed Income (99%)

Intermediate Duration (Passive) 1 $21 1 12 99%

Cash (1%) Internal $0 2 24 1%

Self-Insured Employers Guarantee Fund Total Fund 0 na

Cash (100%) Internal na 1 100%

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Ohio BWC Anticipated Account Overview

Totals of SIF and Five Ancillary Funds Market Value Anticipated # as of 11/30/06 Number of Number of Separately Managed Funds of Managers ($ millions) Holdings* Transactions 6 24 $16,229 12,083 18,156 * These holdings do not represent individual cusips. It should be assumed that different managers on the same mandate may own the same cusips.

6.4 PROOF OF INSURANCE AND WORKERS’ COMPENSATION COVERAGE

The Vendor shall provide a copy of a current Ohio certificate of workers’ compensation coverage, if appropriate, or insurance policy for workers’ compensation coverage. The Vendor shall also provide proof of public and professional liability coverage. 6.5 SUBCONTRACTORS

The identity of any subcontractors and the scope of services to be provided by subcontractors must be presented as part of the proposal. BWC reserves the right to review the credentials of the subcontractor and to approve the selection of the subcontractor retrospectively or prospectively. The Vendor shall be wholly responsible for the work performed by the subcontractor.

6.6 CONFLICTS OF INTEREST

“Conflict of Interest” shall be defined as an incompatibility between competing duties to the Bureau.

The Vendor agrees that it will have in place at all times the proper protocols and fortifications within and between each of its lines of business, which provide service to the Bureau, in order to avoid conflicts of interest. The Vendor agrees to maintain these protocols and fortifications such that no improper or illegal information is shared between the lines of business causing or which could cause any harm to the Bureau. The protocols and fortifications shall include, but are not limited to, the employment of compliance officers within each line of business at the Vendor and the presence of discernable electronic and physical barriers between individuals, departments and/or lines of business handling matters which are or could create conflicts of interest. The Vendor has compliance officers who are aligned with each of the major lines of business. The compliance officers work directly with attorneys in the Legal Department to identify laws and regulations that govern the business functions. They are responsible for assisting the business to minimize compliance risk and to ensure adherence with statutory and regulatory obligations, as well as ongoing compliance education and training of the Vendor’s staff. In this connection, compliance officers address issues including, but not limited to, management of conflicts, money laundering and the firm’s code of conduct.

A complete list of current services performed for the Bureau by the Vendor is attached to this agreement as Exhibit A, and the Vendor hereby declares that all protocols and fortifications above described are currently in place and will continue throughout the term of this contract to repel any current or future conflicts of interest.

If the Vendor detects the existence or possible existence of a conflict of interest with respect to any matter relating to the duties performed by the Vendor for the Bureau that might affect, or have the appearance of affecting, the performance of its responsibilities under this Agreement, the Vendor will immediately notify the Bureau in writing and immediately prohibit any affected Vendor employees from performing any actions in furtherance of this Agreement. If the Bureau detects the existence or possible existence of a conflict of interest of the same nature as described above, the Bureau shall notify the Vendor immediately in writing. Within 10 days of detection from either the Vendor or the Bureau and upon written approval from the Bureau, the Vendor shall select a third party to exercise the Vendor’s fiduciary responsibilities with respect to the functions it has agreed to provide in this contract to the Bureau which the Vendor and/or the Bureau has identified are or may be compromised by the detected conflict of interest or possible conflict of interest. Provided that the third party is reasonably acceptable to the Bureau, the Bureau shall engage such third party as a special fiduciary

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for the limited purpose described in the previous sentence. This section shall have no effect on the termination clause of this contract.

The Vendor also warrants that it will adhere to all ethics laws contained in Chapters 102 and 2921 of the Ohio Revised Code governing ethical behavior, understands that such provisions apply to persons doing or seeking to do business with the Bureau, and agrees to act in accordance with the requirements of such provisions. The Vendor warrants that it has not paid and will not pay, has not given and will not give, any remuneration or thing of value directly or indirectly to the Bureau or any of its Oversight Commission members, officers, employees, or agents, or any third party in any of the engagements of this Agreement or otherwise, including, but not limited to a finder’s fee, cash solicitation fee, or a fee for consulting, lobbying or otherwise.

The Vendor warrants that it is not owned, or controlled by, a person who within the preceding three years was employed by the Bureau, a board member of, or an officer of the oversight commission, or a person who within the preceding three years was employed by or was an officer holding a fiduciary, administrative, supervisory, or trust position, or any other position in which such person would be involved, on behalf of the person's employer, in decisions or recommendations affecting the investment policy of the Bureau, and in which such person would benefit by any monetary gain. 7.0 PROPOSAL EVALUATION

BWC evaluation will consist of two (2) phases as described in Section 7.3 through 7.5. Each proposal that satisfies the administrative and mandatory requirements (phase 1) will be evaluated using the evaluation criteria described in Section 7.6. 7.1 BWC SELECTION COMMITTEE

A selection committee composed of BWC personnel will evaluate the proposals. The composition of the committee will remain consistent for all responses. The selection committee will be responsible for documenting and tabulating the scores for all responses. 7.2 EVALUATIONS APPROACH

BWC’s approach to evaluation of responses to this proposal will consist of the following two (2) phases: Phase I Verifies compliance by a respondent to the administrative requirements of the

RFP.

Phase II Verifies compliance by a respondent to the mandatory and technical requirements of the RFP and evaluates the answers to the general questions.

7.3 PHASE I MINIMUM REQUIREMENTS The first phase of the evaluation process consists of a review of all proposals received to ensure that each proposal meets the minimum administrative and professional requirements identified below: Administrative Requirements 1. The Vendor must submit one original and seven (7) copies of the proposal by the deadline. 2. The Vendor must sign and seal the one original and seven (7) copies of the proposal. 3. The Vendor Proposal must include:

• Cover Letter • Company Information • Company Qualifications • Cost/Fee Schedule • Proof of Insurance and Proof of Workers’ Compensation • Subcontractor Information (if any is being proposed) • Conflict of Interest Statement • Disclosure Statement

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Proposal Rejection Criteria The following list details some of the most common submission errors that shall be grounds for rejection of proposal. • failure to sign the one original and seven (7) copies of the Proposal; • failure to identify RFP Bid Number and name or description on the outside envelope; • failure to submit one original and seven (7) copies for evaluation purposes; • failure to meet the deadline for submission; • claiming that the entire contents of a proposal qualifies for an exception to Ohio public records

law; • mailing proposal with insufficient postage; and, • taking exception to mandatory technical terms, conditions, and requirements of the contract. Proposals that have been determined not to have met one or more of the administrative requirements will be excluded from any further consideration or scoring. 7.4 GENERAL QUESTIONS

1. Please describe your firm’s background in the global securities services business. 2. Please provide contact information for at least four (4) current and past clients with

investment portfolios of similar size and asset classes that can be contacted as a reference.

3. What is the number of current customers using the same investment accounting and reporting outsourcing services being proposed, the average and median size of the customer portfolio, and how long on average has the customer used these services?

4. What has been your firm’s past experience with clients similar to the BWC in implementing your system? How often, in percentage terms, is your firm on-time and on-budget?

5. Comment on your firm’s commitment to research and development of your investment accounting product. Please include thoughts with regard to dollars invested, time and personnel invested, and the need for R&D given the competitive climate of the industry.

6. How do you monitor legislative and/or regulatory changes affecting Investment Accounting and Reporting Outsourcing Services administration? How are these changes communicated to clients?

7. What features in your opinion make your service offering superior to that which may be offered by other service providers in this industry?

8. What is your capacity for servicing the relationship described in this proposal? 9. Please detail the division of your organization proposed to support and service this

potential client relationship. Please include an organization chart and define key leadership positions. Would BWC have one dedicated contact and a dedicated service team?

10. What is the experience and tenure of your proposed service and relationship management team?

11. What is the minimum level of education, experience, and training programs required for client service personnel? What is the minimum level of education, experience, and training programs required for all other personnel required to service this relationship?

12. Back-up support must be provided for this relationship. Describe how you will ensure adequate back-up support is available to support this relationship.

13. How do you measure the performance of your professional staff and support teams? 14. Comment on the personnel turnover your organization has experienced in the past 3

years. Please differentiate between individuals leaving the firm and those moving to other departments within the firm.

15. How do you track, measure, and monitor customer satisfaction? 16. Describe how your firm interacts with investment managers and fund custodians. 17. How soon after the accounting period is over are complete and fully audited reports

available? Are preliminary reports available? 18. Please describe your disaster recovery/business continuity plans and procedures. 19. Do you offer a multi-year guarantee of current fee schedules.

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7.5 PHASE II OUTSOURCER REQUIREMENTS

This section includes a detailed check list of the investment outsourcer requirements applicable to BWC. Each requirement is classified into one of the following need levels:

• Mandatory (M) This requirement is essential to serving BWC’s needs. It is critical that the software address this requirement.

• Desired (D) This requirement fills an existing or future planned need at BWC. This need level is lower in importance and priority than the mandatory requirements.

Please indicate your response to the requirements by selecting from one of the following:

• Y =Yes Product supplies complete support of the requirement listed.

• N = No Product does not support the requirement listed.

• P = Partial Product supplies limited functionality to address the requirement.

• F = Future There is a planned capability for this requirement. Include information on the release number and date this requirement will be met.

Vendor must meet all of the mandatory specifications to be considered for further evaluation. Descriptions and examples must be provided as necessary to fully support your compliance to each of the mandatory specifications. A. Security Types Supported Need Supports Comments/Examples a. Money Market 1. Treasury Bills M 2. Treasury Inflation Protection Securities (TIPS) M 3. Commercial Paper M

• Discount based M • Interest bearing M • Floating rate M

4. Banker’s acceptances M 5. Negotiable CDs M 6. Certificates of Deposit M 7. Time Deposits – Domestic M

• Advance vs. Arrears Interest Calculations M 8. Variable Rate CDs M 9. Repurchase Agreements M

• Term M • Overnight Repurchase Agreements M

10. Federal Agency Securities M • Discount based M

11. Short-term Investments Fund M 12. Fed Funds M 13. Money Market Deposit Accounts M 14. Money Market Mutual Funds M 15. Sweep Accounts M

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b. Collateral-Backed Securities 1. Repurchase Agreements features for:

• Collateral tracking (including type) M • Many to one collateral assignments M • Collateral substitutions M

2. Ability to assign fixed-income securities as collateral

M

3. Ability to track MBS as collateral M

c. Notes and Bonds M 1. U.S. government notes and bonds M 2. Corporate notes and bonds M 3. Yankee bonds M 4. Convertible bonds M 5. Municipal notes and bonds M

• Taxable M • Tax exempt M • Flexibility to specify beginning and end

(redemption) dates M

6. Variable rate notes and bonds M • Stepped rate bonds M

7. Zero coupon M 8. Stripped coupon M 9. Callable bonds M

• Support of multiple call dates M • Continually callable bonds M

10. Putable bonds M • Support of multiple put dates M

11. Support of multiple call and put dates on a single issue

M

12. Letters of Credit (Surety Bonds) M 13. Foreign government bonds M 14. Foreign currency denominated bonds M 15. Medium term notes M 16. LIBOR reset bonds M 17. Private placements M 18. Federal agency securities M

• Debentures M • Step-ups M • Floaters M

d. Mortgage and Asset-Backed Securities 1. SBA'S M 2. GNMA M 3. FHLMC M 4. FNMA M 5. Midgets, Dwarfs & Gnomes (15 year MBS) M 6. Adjustable rate (ARMs) M 7. Balloon Payment MBS M 8. FHA'S M 9. MBS tracking of original face values (i.e. not a

calculated value) M

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10. Asset-backed securities M

• CARS M • CARDS (credit card backed securities) M • Equipment Certificates M • Other ABS (boat, mobile home) M • Collateral type tracking M

11. Tennessee Valley Authority (TVA) M 12. Commercial mortgage backed securities M 13. Stripped MBS: M

• Interest only (I/O) M • Principal only (P/O) M

14. TBA's / commitments M 15. Graduated Payment Mortgages (GPMs) M

e. Equities 1. Common stocks M 2. ADRs / ADS M 3. Global Depository Receipts / GDS M 4. GDR / GDS Reg. S (Euroclear settle) M 5. Preferred M 6. Convertible preferreds M 7. International equity M 8. REITs M 9. Rights M

10. Warrants M 11. Index Traded Funds M

f. Other Security Types 1. Limited partnerships M 2. Foreign currency securities M 3. GICS M

g. Derivatives 1. Interest rate swaps D

• Tracking of caps D • Tracking of collars D • Tracking of floors D

2. Options D 3. Futures M 4. Forwards D

h. Provide list of other security types supported D

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B. Transactions Supported Need Supports Comments/Examples

a. Transaction Entry - Please comment on ability to process through interfaces or manual entry

1. Original purchase M 2. Additional purchase M 3. Full sale M 4. Partial sale M 5. Amortization M 6. Accretion M 7. Transaction cancellations M

• Cancelled transactions retained in system M • Cancelled transactions available for

reporting M

• Block trade cancellation M • Cancellation with retroactive adjustments M

8. Transaction corrections / revisions M • Including any non-dollar values M 9. Block trade support - all security types D

10. MBS principal & interest M 11. Interest payments M 12. Principal payments M 13. Dividends on Money-Market Accounts M

• Ability to designate auto reinvestment M 14. Quality rating changes M

• Ability to track historic changes M 15. Enter or modify safekeeping location M

• At lot level M 16. Full calls M 17. Full puts M 18. Partial call M 19. Partial put M 20. Manual pricing M 21. TBA commitments M 22. TBA settlement M

• Partial pool/delivery/receive M 23. TBA cancel M 24. TBA close-out M

• Partial TBA close-outs M 25. TBA rolls M 26. CUSIP or name changes M 27. Pair-offs for Treasuries and Treasury rolls M 28. Ability to trade/account with dummy CUSIP M

• Ability to revise once CUSIP issued M 29. Memorandum:

• Security level M • Lot specific M • Transaction specific M

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30. Key field maintenance:

• CUSIP / SEDOL / ISIN M • Ticker / symbol M • Issuer M • Portfolio / account number M • Any supporting table entry (safekeeping,

broker, etc.) M

• Security master file field changes with audit log

M

31. Intra-portfolio sales/transfers at cost M 32. Intra-portfolio sales/transfers at market M 33. Intra-portfolio sales/transfers at amortized book-

value M

34. Ability to specify basis as cost at point of transaction entry

M

35. Ability to specify basis as market at point of transaction entry

M

36. Ability to specify basis as amortized cost of transaction entry

M

37. Return of capital M 38. Adjustment transactions:

• Cost M • Par M • Interest accruals M

39. Failed Transactions M 40. Cash adjustments at portfolio level M 41. Private Equity Qtly Non-Cash Updates M 42. Private Equity Call for Investment M 43. Private Equity Call for Management Fees M 44. Private Equity Call for Other Expenses M 45. Private Equity Return of Capital M 46. Private Equity Gains/Losses M 47. Private Equity Interest and Dividends M 48. Miscellaneous income or expense item at

portfolio level M

49. Ability to globally apply corporate action at the security level

M

b. Automatically Generated Transactions 1. Maturities M 2. Coupons/Interest payments M 3. Calls (full and partial) M 4. Global corporate actions M 5. Stock splits M 6. Stock dividends M 7. SWIFT/DTC M 8. Ability to automatically apply quality rating

changes

• Moody M • S&P M • Fitch M

9. Ability store / update multiple ratings based on source

M

10. MBS principal & interest M

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11. TBA settlement via electronic feed of pool

information M

• Automated security master set-up M • Pool level transaction set-up M • Partial pool delivery/receive M

12. Pricing feeds M 13. CPI, LIBOR, or other updates/feeds M 14. Ability to earmark securities as restricted –

based on feed of securities lending information M

15. Factor Updates M 16. Interest Rate Updates M 17. Capacity Requirements:

• Online transaction history – 7 years minimum

M

• Unlimited history – specify limits if any M C. Securities Accounting and Reporting Need Supports Comments/Examples

a. Accounting Reporting 1. Profit/Loss (realized and unrealized) reporting

based on:

• Trade date M • Settlement date M • Any user-defined period M • Month-to-date period M • Year-to-date period – need fiscal year (June

30 year end) and calendar year reporting M

2. Transaction Journal reporting based on: • Trade date M • Settlement date M • Cash Date M • Effective date (or effective accounting

period) M

• Entry Date M • Dated date M • Issue Date M

3. Transaction reporting includes: • Detail level reporting M • Summary level reporting M • Ability to extract/download transactions M • Generalized user-defined reporting sorts

(e.g., transaction type) M

• Varied selection criteria (by fund, account, security, etc)

M

4. Support of cash basis accounting M • Discount impact on income accounted for at

maturity

• Premium impact on income accounted for at maturity

M

• Failed trade report (including counterparty) M 5. Ability to effect an accounting period close (hard

close) M

6. Ability to effect an accounting period close (soft close)

M

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7. GASB 3 reporting capability M

• Auto-default of GASB 3 code during trade entry

M

8. Maturity Listings • Totaled by fund M • Totaled by day(s) user defined range M • Includes individual securities in listing M

9. Trade settlement reporting • By trade date M • By settlement date M

10. Income Earned Report – cash and accrual M • Including income for period M • Include realized gains and loses for period M • Include other income items M

11. Receivables Tracking including • Interest payments M • Maturities M • Sales M • Calls M • MBS Principal and Interest M

12. Position Reporting including: • By portfolio/fund M • Any historical as-of-date M • By issue M • By CUSIP M • Generalized sort and filter options M • Varied selection criteria M • Ability to download to excel M • Ability to download to other tools – provide

list M

• Ability to receive feeds from outside managers

M

• Report writer access to transaction and position information

M

13. Ability to create files for general ledger posting M 14. Detail daily subsidiary ledger activity M

• Income / maturities M • Realized gains / losses M • Cancel / corrections M • Adjustments M • Holdings for reconciliation M • Electronic export of file (s) M • Retroactive adjustments M

15. Market valuation reporting M • Applies pricing file for selected as-of report

date M

b. Additional Accounting Requirements 1. Purchased accrued interest accounting

including: M

• Auto-calculation of accrued interest purchased

M

• Auto-calculation of accrued interest sold upon sale

M

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• Purchased interest reflected as asset in system

M

• Purchased interest cleared once coupon received

M

• Ability to account for and report purchased interest separate from interest income upon sale

M

• Ability to include purchased interest in cost for reporting

M

• Ability to include purchased interest in cost for yield calculation

M

2. Ability to apply earning accrual rate to "cash" balances

D

3. Ability to track late interest payment amounts D 4. FICC MBSCC "good delivery" check on MBS D

• Ability to apply PSA “good delivery” check D 5. Auto draw-down & link of TBA to MBS pools

upon pool delivery D

6. Ability to substitute pools before and after delivery/settlement date

M

7. Ability to manually enter factor M 8. Ability to edit factor without re-entering trade M 9. Position should reflect "scheduled" par value

based on current factor D

c. Derivative Accounting & Reporting 1. Interest rate swaps accounting D

• Varying payment frequencies supported D • Ability to link asset and liability sides for

reporting D

• Ability to report on one or both sides of the position

D

• Single consolidated description / security master

D

• Ability to calculate and report gross and net payments

D

• Ability to feed the G/L with interests accruals on swaps

D

D. Cash Processing Requirements Need Supports Comments/Examples

a. Cash Journal Reporting M 1. Historically based cash reporting by:

• Trade date M • Settlement date M • Entry date M • Expected cash date M • Actual cash date M

2. Cash Projection Reporting M • Based on trade date M • Based on settlement date M • Up to 360 days in future M • Up to 50 years in futures M

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• Summarize by day M • Summarize by month M

3. Schedule of Cash Transactions M

• Listing all cash based activity posted to

portfolio accounting system M

4. Period-to Period Statement of Cash Changes reported by custodian D

5. Cash Projections including: • Projected settlements M

• MBS principal and interest (based on PSA projection) D

• MBS TBA Settlements D • Derivative cash activity, including: D • Interest rate swaps D • Margin calls D • Interest payments M • Include projected calls M • Daily by portfolio M • Based on user-defined data range M • Cash projection by settlement date M • Cash projection includes: • Security level projection M • Summary level projection M

6. Ability to export or download cash activity to various formats M

E. Reconciliation Requirements Need Supports Comments/Examples a. Cash Reconciliation Requirements 1. Ability to Export Unmatched Items into Excel M

2. User-defined Tolerances Applied to Reconciliation By: M

• Dollar Amount (multi-currency) M • Percentage Amount M • Account M • Group of Accounts M • Date (i.e., x number of days) M

• Transaction Type M 3. Ability to reconcile cash activity M

• All cash activity M • Sales M • Maturities M • Purchases M • Transfers (end of day net) M • Interest M • Principal payments M

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4. Multi-match capability D

5. Partial-match capability D

6. Multi-pass run capability (2nd run applies 2nd set of user-defined matching criteria) D

7. Ability to easily communicate supporting data for unreconciled items to custodian. M

8. Auto write-off of transactions that feed G/L system (based on tolerance levels) D

9. Ability to store and support alternate security ID for mapping M

10. Ability to directly link tables and data in recon system to portfolio system M

b. General Reconciliation Requirements 1. Cash / Transactions M 2. Settlement Date Cash M 3. Effective date M 4. Holdings M 5. Security Master Fields M 6. Market Value M 7. Cost (Without accrued interest) M 8. Original Face Value M 9. Ability to reconcile to original face for MBS M

c. Reconciliation Types 1. Holdings based reconciliation M

• Portfolio summary level • Position level M • Lot level M

2. Transaction based reconciliation M • Trade date based reconciliation D

• Settlement date based reconciliation M • Effective date based reconciliation D

• Ability to handle all security transactions

types, (MBS/Options/Derivatives) M

3. Ability to automatically charge custodian interest for past due cash amounts. D

• Ability to create receivable in system for

such amounts D

4. General variable record and fields based reconciliation capability M

5.

Multi-pass matching engine that supports definition of multiple levels and keys and indicates highest matching level in the reconciliation views and reports D

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6. Cancel/Correction Processing M

d. Reconciliation Features 1. Reconciliation Configuration

• Creation of an unlimited number of

reconciliation configurations by user D

• All configurations are stored and accessed

from a single central data model D

• Ability to create user defined, logical account groups for reconciliation management D

• Ability to apply the reconciliation rule set at

the custodial level D

• Ability to apply the reconciliation rule set at

the portfolio level D

• Ability to apply the reconciliation rule set at

the account group level D

• Ability to map many custodian data files

against a single internal data file M

• Ability to filter/select data for a specific

reconciliation D

• Ability is exclude records based on user

defined filters on any data fields D

• Ability to see on-line which records have

been excluded from the reconciliation D

• Ability to automatically summarize (roll-up)

data for reconciliation D

• Automated feature to group cash transaction by account code or transaction type D

• Automated feature to roll lot level holdings

records up from the lot to the Security level D • Access controls for setting tolerance limits D

2. Support for industry standard keys • CUSIP M

3. Flexibility to define match thresholds by: • Actual thresholds (0.01) D • Date thresholds (Match if within X days) D • Support for rounding or truncation D

• Support for sub-string based matching

(Match on first 8 characters of CUSIP) M 4. Ability to support multiple key levels:

• Primary and secondary key matching M • Support for more than five matching keys M

• Support for defining multiple matching key

levels M • Matching using user-defined Fields D

5. Systems management of duplicate keys (many-to-many links) D

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6. Ability to include any set of security, portfolio, holding or transaction fields in matching D

7. Associate accounts to specific custodian and reconcile at custodian or manager level D

8. User performed manual matching of unresolved events D

9. Unresolved reconciliation records held in a pending queue (until resolved) D

10. Ability to manually match many-to-1 record sets D 11. Ability to reconcile with custodial bill M

12. Ability to review unresolved items on-line sorted in aged order D

13. Ability to review unresolved items on-line sorted in size order D

14. Support for user notes with date and time stamp during resolution on any records M

15. Historical and Audit Views

• Ability to load and review any historical

reporting periods M

• Ability to close and prevent changes to a

historic period M • Ability to close and process again D

• Audit trail tracks open/closed status of

periods and exceptions records M

• View and report detailed user activity log,

showing operator, date, time and activity M

• If settlement date is a weekend or holiday -

default to next business day for matching D 16. Audit trail requirement w/ explanation D 17. Ability to match items marked by system D 18. Ability to view reconciliation tables on-line M

• Apply and save user defined sort capability D

• Apply and save user filters by Custodian,

Portfolio, Security D

• Apply and save user filers on by any

available field M 19. Data conversion capabilities:

• Ability to translate data via user defined

conversion tables M • Support for string based conversion rules M • Ability to translate data using Boolean logic M

• Ability for a business analyst to configure all

recon and mapping rules D

• Ability for a business analyst to configure

logic D

• Secured access to all recon and mapping

rules M • Ability to exclude portfolios from processing D

20. Validation Rules

• Ability to analyze the header portion on the

data file to validate the file M • Rules to ensure the correct period data is M

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being loaded

• Rules to ensure the data file formats are

correct to avoid loading bad data D

• Ability to automatically unload and reload

an entire data set D

• Support for user defined file level validation

rules D

e. Data Handling Capability and Interfaces 1. Bulk data import facility M 2. Ability to handle the following data formats: • Quote/comma delimited (CSV) M • ODBC D • SWIFT M • SWIFT support for transactions M • SWIFT support for cash M • SWIFT support for holdings M • Excel M

• Ability to create custom import

specifications D • SQL formatted D • ISO 15022 Data Dictionary Support D • BAI format for cash transactions D • XML D

3. Capability to extract data and export to Microsoft Excel M

4. Capability to extract data and export to comma delimited files M

5. Direct interface with Oracle Financials version 11.5.10.2 D

6. Additional import/export/interface capabilities D

f. Reporting

1. Standard Systems Reports (On-line and hard copy):

• Matched records M • Unmatched records M • Multi-matched records M

2. Ability to highlight and display reconciliation differences on any key fields M

3. Ability to highlight and display reconciliation differences on non-key fields D

4. Summary reconciliation statistics showing: • Total records process from both sources M • Total matched and unmatched M • Processing date and time M

5. Ability to produce a balancing report for any reconciliation period M

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6. Account cross reference - showing all activity for a single account D

7. Security cross reference - showing single security activity across all accounts D

8. Aged Recon Report - by day for cash and transactions D

9. Aged Recon Report - 30, 60, 90 days for securities and holdings D

10. Audit report showing all changes to a given account or transaction M

11. User Defined Reports • Ability for user to build and save reports M

• Selection of all fields from any database

tables M • Multiple user-defined sorts and sub-totals M

12. View all reports online M 13. Recall historical reconciliation snapshots D

14. Print all reports for a single account or for a group of accounts D

15. Extract report output to Excel/Word M 16. Ability to configure reports at run time D

g. Automation Capabilities

1.

Compatibility with Windows scheduler if running in a Windows 2003 environment and with Cron if running under Solaris. D

2. Ability to auto-schedule by individual reconciliation scenario (Custodian or Manager) D

3. Time-based scheduling to include: • Same day M • Next business day M • Month end (last business day) M • Multiple times per day D

• Event based schedule - on the arrival of a

file D 4. Automatic exception reports creation by: • Custodian / Broker D • Portfolio D

5. Automatic error notification by: • Email message regarding exceptions D

• Creation of exception reports by

reconciliation scenario D

6. Ability to create groups of reconciliation's for automatic processing D

7. Ability to view job queue and pending schedules D

8. Ability to automatically add new securities during file loading D

9. Capability to launch processes through an external API such as Oracle Financials D

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F. Portfolio Management Requirements Need Supports Comments/Examples a. Portfolio Management and Distribution

Reporting:

1. Issuer M 2. Issue M 3. Quality Rating:

• Moody's M • Standard & Poor's M • Fitch / Phelps M • Summary reporting by quality rating M • Detail reporting by quality rating M • Track and report historical ratings changes M

4. Coupon ranges M 5. Yield to maturity (YTM) ranges M 6. Duration ranges (modified duration) M 7. By agency summarized within portfolio M 8. Broker / counterparty M 9. Maturity Distribution Reporting:

• By day M • By portfolio/ fund M • By user-defined maturity range M • By month (summary) M • By year (summary) M

10. Detail Reporting M • Ability to drill-down to access detail M

11. Ability to load duration M 12. System calculated duration M 13. Holdings by sector (i.e., treasuries, agencies,

MBS, etc.) M

14. Security types M 15. User-defined classifications M 16. Report of purchases for month M 17. Report of payables M 18. Summary & detail transaction reports M

• By transaction types selected M 19. Analyst or portfolio manager M 20. Ability to generate portfolio reports for selected

portfolios, including:

• Market value M • Percentage of portfolio by security M • Valuations include accrued interest M

21. Unrealized gain / loss reporting M 22. Realized gain / loss reporting M 23. Portfolio reports include multiple security

identifiers:

• CUSIP M • Second identifier M

24. Callable vs. non-callable bonds M 25. GASB 40 Risk Monitoring reporting M 26. Report of compliance rules M 27. Report of beginning holdings for period M 28. Purchases reported by asset type for period M 29. Sales by asset type for period M 30. Ending holdings for period M

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31. As-of historical position reporting M 32. Ability to email reports M

• Automatically following report production M 33. Historical transaction reporting including: M

• Current month M • Month-to-date M • Year-to-date M • Any user-defined date range M • Reporting includes "closed periods" M

34. Turnover ratio reporting by portfolio M 35. Reporting of available securities for lending M 36. Reporting based on user-defined fields M 37. User defined security identifiers M 38. Reporting of holdings by custodian M 39. Reporting of collateral by location M

b. Analytics and Yield Reporting Requirements 1. Current yield M 2. YTM at market M 3. YTM at cost M 4. Yield-to-call (YTC) M 5. YTC with multiple call dates M 6. Yield-to-worst at market M 7. Effective yield M

• Ability to enter effective yield at point of purchase

M

8. MBS and ABS cash flow yields: • Based on PSA rate M • Based on CPR rate M • Based on user prepayment estimate M • MBS payment days delay incorporated in

yield calculation M

9. Ability to import MBS yields from Bloomberg M 10. Modified adjusted duration M 11. Modified duration M 12. MacCauley's duration M 13. Effective duration M 14. Ability to import duration statistic M 15. Duration contribution of position to portfolio M 16. Weighted days to maturity for portfolio M 17. Weighted days to maturity (market weighted) M 18. Spreads calculated and stored with trade M G. Composite Performance Returns &

Statistics Need Supports Comments/Examples

a. Composite Performance Returns 1. Asset weighted composite returns M 2. Ability to assign multiple composites M 3. Ability to build and store returns monthly M 4. Ability to build and report returns daily M 5. Ability to store daily returns M 6. Composite Level Statistical Measures:

• Tracking Error (Active Risk) M • Alpha M • Beta M

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• Sharpe M • Treynor M • Correlation Coefficient M • R-Squared M

7. Portfolio can be in more than one composite M • Internal Standard Deviation M

b. Composite Maintenance 1. Ability to add (or delete) portfolio to composite M

• Multiple adds and deletes of portfolio to composite

M

2. Ability to support growth to 30 composites M 3. Portfolios remain in composite history

permanently M

4. Ability to store market values for composite M 5. Ability to combine composites M 6. Ability to calculate and report average daily

AUM M

H. Performance Measurement &

Attribution Need Supports Comments/Examples

a. Performance Attribution Requirements 1. Attribution Methodology

Entity level decomposition of returns, including: M • Security selection M • Attribution analysis assesses allocation

decisions, including: M

o Issuer Type M o Allocation attribution is available by

portfolio M

o Allocation attribution organization-wide (across all accounts)

M

System calculates and reports Excess Return M System calculates and reports Tracking Error M System calculates and reports Information

Ratio (simple method) M

2. Field-level security/ audit reporting M 3. Transaction-level security/audit reporting M

• Model provides decomposition of Tracking Error

M

o Versus benchmark or selected index

M

• Identifies and delineates fixed-income sources of Excess Returns including:

o Duration contribution M o Yield curve shifts M o Spread changes M o Sector allocations versus the

benchmark M

o Subsector allocations versus the benchmark

M

o Security selection / issue concentrations

M

• Excess return contributions are expressed in basis points

M

• Ability to download report output to Excel M • Sum of excess returns at detail levels M

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total to explain portfolio total excess return

4. Attribution indicates exposure to risk factors, including:

• Term structure of interest rates, including:

M

o Parallel yield curve shifts M o Curve twists M o Changes in curvature M o Roll-down effect (timing) M

5. Attribution of duration deviations at sector level from benchmark and return impact versus benchmark

M

6. Supports Arithmetic Returns M Supports Additive Method of Attribution (over

multiple periods) M

7. Supports Geometric Returns M 8. Supports Multiplicative Method of Attribution

(over multiple periods) M

9. Ability to define multiple performance attribution classification schemes

M

10. • Performance builds occur at each classification level

M

11. Ability to retroactively apply classifications and perform attribution analysis

M

12. Ability to retroactively apply classification assignments to securities

M

• To Benchmark subsector M 13. Benchmark Capabilities Include:

• Ability to construct user-defined benchmarks

M

• Ability to adjust index weights in creating benchmark

M

• Ability to create blended benchmarks based on multiple indices and assigned weights

M

• Ability to modify weights over time and date stamp

M

• Import and maintain o Benchmark constituents M o Securities M • Use actual cash date M • Ability to track all benchmark changes

historically M

14. Percent Contribution to Return: • By security selection M • Best/worst absolute contributor (security

level): M

o Top 10 M o Top 25 M o Top X (user defined) M • Best/worst active contributor (I.e.,

versus benchmark): M

o Top 10 M o Top 25 M o Top X (user defined) M

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• All sectors best/worst contributors (down to security level)

M

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I. Compliance & Restriction Monitoring Need Supports Comments/Examples

a. General Compliance Requirements 1. Ability to support post-trade compliance

reporting M

2. Ability to support pre-trade compliance monitoring

D

3. Ability to modify restriction rules intra-day in real-time and immediately apply compliance testing

M

4. Ability to drill down (navigation) into security master, transaction and position to information to determine details causing violation

M

5. Ability to establish portfolio lists applying to specific restrictions

M

6. Ability to "look through" commingled funds down to individual securities

M

7. Ability to apply multiple restrictions to: • Selected portfolio(s) M • Portfolio groups / lists M

8. Detailed textual explanations should clearly identify:

• Rule that triggered the compliance violation

M

o Threshold violated M o Par / quantity / market value of

trade M

o Par / quantity / market value exceeding limitation

M

o Par / quantity /market value that can be traded and remain in compliance

M

• Components of rule violation o Full identification of securities

involved in violation M

o CUSIP or ticker symbol of security(s)

M

o Trade / securities involved M 9. Display current portfolio positions versus

guidelines M

10. Display missing data fields causing violations M

b. Notification & Reporting of Compliance Violations

1. Compliance reporting requirements: • Standard non-compliance report M • Tolerance Report of all positions within a

user-defined % factor of a violation M

• Ability to report currently outstanding and unresolved rule violations

M

• Data exception report indicating missing data items causing violation

M

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• Ability to report compliance rule details

for review by:

o Specific rule M o All rules M o All rules applicable to a specific

portfolio M

o All rules applicable to all portfolios M

c. Required Parameter Maintenance 1. Ability to change/modify rules intraday M 2. Ability to restrict securities via rules assigned

based on:

• Security Classifications: M o 144A/Reg S M o Segregated securities (I.e., that

client does not wish to sell) M

• Market capitalization M • Security Ratings M o S&P M o Moody's M o Fitch M o Rating at time of purchase M • By maturity date (absolute. e.g., 180 day) M • Maturity date rule set by security type M • Guarantor / obligor relationship M • Sell short transactions M

d. Application Parameters 1. Illiquid securities M 2. Ability to assign restrictions at the trade,

portfolio, or portfolio group levels by selecting from the following lists:

• Approved Issuers M • Security Types M • Security Classes M • Sector M • Industry M • Sub-sectors M • Sub-industry M • Issues M • Foreign totals M • Classification M • Total parent exposure M • Underlying securities M • User-defined fields in the security master

file M

3. Ability to support compliance rules expressed as:

• Absolute dollar or percentage restrictions M • Specific rules by portfolio (i.e., credit

rating) M

• Specific rules by account or portfolio group

M

• Organization-wide restrictions (i.e., credit M

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quality restrictions) • Max % of total market value M • Max % of total asset class M

4. Ability to support: • Monitoring for obligors M • "Look-throughs" to credit obligors /

guarantors M

• Ability to check for split rating M • Ability to incorporate collateral securities

in compliance checks M

• Ability to import asset masters M • Max amount of total market value M • Max % of total M

5. Compliance rule logic includes support for: • Inclusive/exclusive logic M • And statements M • Or statements M • Any combination of Boolean logic applied

to selected restrictions (, =, and, or)

M

• Concentration buckets specified at: M • Organization-wide level M • Portfolio level M • Multip