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R2177 R E S O L U T I O N NO. 2177 WHEREAS, the Board of Trustees of The Metropolitan St. Louis Sewer District acts as fiduciary to the members and beneficiaries of the District's Pension Plan, and WHEREAS, as fiduciary, said Board has the responsibility for the evaluation and management of Pension Plan transaction costs for the exclusive benefit of members and beneficiaries, and WHEREAS, it is the intent of said Board that all Pension Plan transactions of publicly traded securities be effected through brokerage firms, regardless of location, in order to obtain the best execution and lowest cost of the transaction, and WHEREAS, it is the intent of said Board to establish guidelines for the selection of broker/dealer firms to be used by the District Pension Plan Investment Managers, NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF TRUSTEES OF THE METROPOLITAN ST. LOUIS SEWER DISTRICT, that the Trading and Brokerage Policy as attached hereto and made a part hereof is and hereafter shall be the policy of the District for the selection of broker/dealer firms to be used by the District Pension Plan Investment Managers for all Pension Plan transactions of publicly traded securities. THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEE PENSION PLAN INVESTMENT POLICY STATEMENT TRADING AND BROKERAGE POLICY A. Security Transaction Policy 1. Introduction The Board of Trustees of The Metropolitan St. Louis Sewer District (District) intends to fulfill its responsibility for the evaluation and management of transaction costs for the exclusive benefit of participants and beneficiaries. To assist in accomplishing these duties, this Security Transactions Policy and these Guidelines for the Selection of Brokerage Firms have been approved by the Board. 2. Basic Principles The Board of Trustees requires that these principles guide all transactions for the Plan: ! Best execution and lowest cost (including commission costs and market impact) and providing benefits exclusively for participants and beneficiaries of the District must apply to each trade. ! Efforts to reduce trading costs, in terms of both commissions and market impact, provided the investment returns of the Pension Plan are not jeopardized, will be ongoing. ! Only brokerage firms who meet the District's Guidelines for Selection with appropriate trading capabilities and market expertise should be utilized. ! The Board will retain the ability to enter into brokerage commission recapture agreement(s). ! The Board may evaluate transaction activity annually through a Trading Cost Analysis. Provided that the total return of a manager's portfolio is not adversely affected or that the investment process is not affected so as to place the Plan in a disadvantageous position relative to the investment manager's other accounts, and provided that best execution and lowest cost are obtained, each manager is to direct a percentage of its trading to specified firms for the purpose of brokerage commission recapture programs. The Board will select the brokerage firms and establish the expected level of trading to be directed. B. Guidelines for Selection of Brokerage Firm 1. Introduction and Basic Principles The primary responsibility of the Board of Trustees is to act as a fiduciary to the members and beneficiaries of the District's Pension Plan. It is the intent of the Board of Trustees that all transactions of publicly traded securities be effected through brokerage firms, regardless of location, in order to obtain the best execution and lowest cost of the transaction. Brokerage firms are an integral part of the investment process. Their services can significantly affect the investment performance of the fund. Hence, the Board of Trustees, in fulfilling their fiduciary responsibilities, is establishing guidelines for the selection of broker/dealer firms to be used by the Plan's investment managers. Each investment manager will be responsible for the selection of brokerage firms, or automated trading systems, through which trading will be completed for the Pension Plan. Their selection must in all cases be for the exclusive benefit of the Plan's participants and beneficiaries and should strive for best execution with lowest cost for each trade. 2. Guidelines for Selection The broker/dealer firm must: ! Be in compliance with applicable Federal and State of Missouri laws relevant to the conduct of business as a broker/dealer. ! Be a member in good standing of the major financial exchanges worldwide. ! Have on-site, in-house trading capability and direct access to major markets. ! Have in-house access to trading support equipment. ! Be able to trade for competitive rates. ! Have the financial capability to accommodate a capital commitment trade over a five day settlement period. ! Have the ability to clear and settle trades without unnecessary delays or fails, and a record of doing so. ! Have been in business as a broker/dealer for a reasonable period of time to ensure financial and operational stability. 3. Review/Evaluation At least annually, the Board of Trustees may review the brokerage firms utilized by the Plan's investment managers and all transactions for compliance with these policies and procedures through an annual trading Cost Analysis. With the assistance of the District's custodian, the Board may monitor manager commission costs on a routine basis. The foregoing Resolution was adopted April 20, 1995.