HomeMy WebLinkAboutAgenda Police Pension 021309Agenda
City of Palm Beach Gardens Police Officers'
Pension Fund
Special Meeting
MEETING OF FEBRUARY 13, 2009
LOCATION: City Council Chambers'
10500 North Military Trail
Palm Beach Gardens, FL 33410
TIME: 1:OOPM
1. Call Meeting To Order
2. Roll Call:
Lt. lay Spencer, Chairman
David Pierson, Secretary
Jules Barone, Trustee
Brad Seidensticker, Trustee
Wayne Sidey, Trustee
3. 2008 Actuarial Valuation Report
Palmquist)
Gabriel, Roeder, Smith & Company (Steve
4. Investment Manager Report - RhumbLine Advisors (Denise D'Entremont)
5. Investment Manager Report - ICC Capital (Steve Stack)
6. Investment Consultant Report - Thistle Assets Consulting (John McCann)
12/31/08 Performance Report
12 Month Trailing Report
Investment Manager Search (Alternatives)
7. Administrator Report - TPA (Audrey Ross)
Approval of minutes that were tabled at the last meeting:
10/30/08 Regular Meeting
12/16/08 Special Meeting
1/14/09 Special Meeting
8. Attorney Report - Hanson, Perry & Jensen, P.A. (Bonni Jensen)
Approval of the DROP Distribution Policy
NW Meetina Date;
*Thursday April 30, 2009 @I 9AM
I I1 DROP DISTRIBUTIONS I I PALM BEACH GARDENS POLICE PENSION FUND
STATEMENT OF POLICY REGARDING
WHEREAS, the Palm Beach Gardens Police Pension Plan (“Plan”) provides for
Deferred Retirement Option Plan (“DROP) benefits;
WHEREAS, the Board of Trustees of the Plan (“Trustees”) desire to adopt a
Statement of Policy regarding the distributions of these benefits;
NOW, THEREFORE, it is hereby resolved that the following Statement of Policy
Regarding DROP and Share Account Distributions is hereby adopted.
I. DISTRIBUTION METHODS
A. Lump sum - If the lump sum method of distribution is selected then the
entire account balance will be paid. The full amount, or a portion thereof, will
be paid to the Retiree or can be rolled over to another qualified plan, at the
discretion of the Retiree. The payouthollover can be made in any amount of
the Retiree’s choosing but the full amount must be taken from the plan. Any
amounts paid directly to a Retiree will have a 20% withholding deduction and
may be subject to other taxes and/or penalties.
Annuity - If a Retiree chooses monthly installments, then the account
balance will be paid out on a monthly basis. The following rules will apply to
this method of distribution:
B.
1. For retirees who are aae under 50 won separation from service -The
Retiree may choose any amount provided the amount of the payment
Page 1 of 5
is within the minimum and maximum as determined in accordance
with the attached annuity tables. The amount chosen cannot be
modified beforethe Retiree attains age 59% orwithin 5 yearsfrom the
date of the first payment, whichever occur?. last. If the amount of the
payment is above the maximum, the Retiree can be subject to
additional taxes and/or penalties. At age 70%, the monthly
installment shall be paid at a rate which meets the minimum
distribution rules of Internal Revenue Code §401(a)(9).
For Retirees who are ase 50 and older won seDaration from sewice
when the monthly installments beain - The monthly amounts may be
determined by the Retiree according to his or her need. The amount
of the monthly benefit or the method of payment (for example, from
monthly to lump sum) can be changed on an annual basis during the
open enrollment period. The amount of the monthly payment can be
reduced to zero unless the payee has reached age 70%. The open
enrollment period will be during the months of August and February
each year. Additionally, during the open enrollment period only, a
member may request a partial lump sum withdrawal and still continue
to receive the monthly payments.
A 20% withholding tax applies to all payments paid directly to a
Retiree.
If there are less than 15 times the monthly installment at the start of
the fiscal year, then the remaining balance will be paid in a lump sum.
2.
3.
4.
Page 2 of 5
5. Between open enrollment periods, there will be no changes in the
method or amount of the payment unless a Retiree has a hardship.
Hardship withdrawals are permitted if both a and b below are met.
a. The Retiree has an immediate and heavy financial need -A
need may be immediate and heavy even though it was
foreseeable or voluntarily incurred. A need is deemed to be
immediate and heavy if it is:
1) medical expenses previously incurred by the Retiree,
the Retiree’s spouse or dependents, or amounts
necessary for these persons to obtain medical care;
costs related to the Retiree’s purchase of a principal
residence (not including mortgage payments);
payment of tuition and related educational fees and
room and board expenses for the next 12 months of
post-secondary education for the Retiree, the Retiree’s
spouse, children or dependents; or
payments necessary to prevent the eviction of the
employee from the principal residence or to avoid
foreclosure on the mortgage on that residence.
the distribution is necessary to satisfy the Retiree’s financial
need - A distribution generally may be treated as necessary to
satisfy a financial need if the need cannot be relieved:
2)
3)
4)
b.
Page 3 of 5
through reimbursement or compensation by insurance
or otherwise;
by reasonable liquidation of the participants’sassets (to
the extent that such liquidation would not itself cause an
immediate and heavy financial need);
by other distributions or nontaxable (at the time of the
loan) loans from the plans of the employer or by
borrowing from commercial sources at reasonable
terms; or
by cessation of elective contributions to other plans.
II. GENERAL CONSIDERATIONS
A. A Retiree may defer election of payment until age 70%. Any account
balances participate in earnings according to the Retiree’s election of
earnings method.
Final distributionsfrom the DROP account will be subject to a 10% hold back
to account for the crediting of earningdlosses and administrative fees. Final
disbursements of DROP accounts will be made once the DROP statements
for the prior quarter have been distributed.
Participants and Retirees may designate beneficiaries to receive any
balances in the DROP accounts upon their death. In the absence of such
designation, the benefit will be paid to the Retiree’s estate.
B.
C.
Page 4 of 5
D. Lump sum payments in excess of $50,000.00 will be paid as soon as
administratively possible but no later than 60 days after the date of approval
by the Board of Trustees.
No amount or number of payrnentsfrom the DROP accounts are guaranteed
. No member is entitled to paymentsgreater than the balance in the account,
as maybe reduced by losses and/or expenses.
E.
IN WITNESS WHEREOF the Board of Trustees of the Palm Beach Gardens Police
Pension Fund has adopted this STATEMENT OF POLICY REGARDING DROP AND
SHARE ACCOUNT DISTRIBUTIONS this __ day of ,2009
TRUSTEES
Witnessed by:
H:\PBG 0003\POLICY\DROP 8 Share PMTMETH.wpd
ESJ/ka - December 15.2008
January 22, 2009
February 4, 2009
February 12,2009
February 13.2009
Page 5 of 5
I
I- -. . .-
PALM BEACH GARDENS
POLICE PENSION FUND
EXECUTIVE SUMMARY
DECEMBER 31,2008
+ I
Palm Beach Gardens Police Pension Fund
Executive Summary Report
Table of Contents
SECTION
Market Snapshot
Index Comparisons
Compliance Report
Total Portfolio Pie Chart
Manager Pie Chart
Asset Allocation Table
Total Ranks Table
Manager Ranks
Scatterplot Graphs:
Total Fund Graph
Rhumbline Equities Graph
ICC Fixed income Graph
Beta Graph
Alpha Graph
Beta/Alpha Table
Batting Average Graph
Batting Average/ R-Squared Table
Other Managers' Page
PAGE
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
* Index Comparison
December 31,2008
..-43,38%ENE 5.56%LBGC 6.42% BCGC l_______l_._.__l__..___. 5.7WhLBGC 20.00
I I I I 10.00 I
aw
-10.00
-20.00
-30.00
4.00
-50.00 ’ I
3 Months Last 12 Months Last3 Years (Annualized)
Bmdays &,Cmdit BDnd .Bardays Gm,Cmdit-lntennediate .S&P 5w
mRusseU IWO Gmtk .Russell IWO Value mRussell2WO Gmth
mRusseff 2WO Value .Russell 3W0 .MSCI EAFE
Page 2
t Pnlm Beach Weas Police Pemion Fund
Compliance Reporr
December 31,2008
TOTAL FUND
-
1. Did the total return over the trailing %year period, exceed the policy, which is mmprised of 25% D r
SbP500,10% Wm, 10% sbP600.10% RIOWG, 10% EAFE and 35% LBGC? [-297 vs. 3.501
r 2 Did the total return overthe trdq3year period, rankin the top50% ofthe Universecomprised of25%
Mobius hd Large Cae, 10% Mid Cap, 10% smnll Cap, 10% Broad Large Cap Growth 10%
International and 35% Bmd Fixed? [2Oth]
rate of return)? [-2.97 vu. 7.501
p
3. Did the total return of the fund over the tniling %year period equal or exceed 7.5% (aauarial assumption r D
TOTAL EOUITY -
1. Did the equity return overthe trailing %year period, exceed the38.4% WSW, 15.4% W4w, 15.4% r 67
S&F' 600,15.4% RlOWG index and 15.4% EAFE? P.69 v8. -8.561
2 Didthenluityreturnoverthetrailing5yenrperiod,exceedthe38.4%WSW,15.4%W400,15.4%
S&F' 60315.4% RlODOG index and 15.4% EAFE? [-1.63 VB. -1.331
Did the equity return over the trailing %year period rank in the top 50% of the Mobius 38.4% &oad
Large Cap, 15.4% Mid Cap, 15.4% Small Cap, 15.4% Broad Large Cap Gmwth and 15.4% International
Did the equity return, over the trailing 5yem period, rank in the top 50% of the Mobius 38.4% Broad
Large Cap, 15.4% Mid Cap, 15.4% Small Cap, 15.4% Bd Large Cap Gmwth and 15.4% International
3.
UNvm? [s2nd]
4.
Universe? [Gth]
la the amount invfsted in my singe security less than or eqd to 5% of the market value ofthe total
equity portfolio?
equity portrolio?
5.
6. la the lllllDunt invested in my single industry less than or equal to 20% of the market value of the tots1 P
D
U
r
r
FIXED INCOME - ICC CAPITAL
1 Lhd the &xed mom return over the trabn~ >year period, aced the BCGC? 14 65 VR 5 511 r D
2 Did the fired income return over the tr&g%year period nnk in the tops% of the Mobius Broad
Fixed Inmme Universe? [13th]
Did the fired income return over the trailing 5-ym period, exceed the BCGC? I3.W VL 4.651
Did the fired home return over the trailing %year period nnk in the top50% ofthe Mobius hd
Fixed home Universe? [12th]
Is the mmt invested in any single dty (with eveption of US. Government and its agencies) lese
than orequalto5% of the market value ofthe total fixed income prtfolio?
la the minimwn quality rating of the bond investments EBB Imm Standard b Poor's 01 BAA from
Mmtyl~?(L&nnnBIothenBond)
3.
4.
5.
6.
P
r
r
I?
PaLm Beach Gardens Police Pension Fund
Total Assets
December 31,2008
Cash
12%
Equities 8 Fixed Income Cash
Page 4
Palm Beach Gardens Police Pension Fund
Total Assets
December 31,2008
Rhumbline SbP500
1 18%
ICC Lg. Growth
10%
Rhumbline St3P400
6%
I LRhumbZine SbP600
7% lntl. Equity
8%
WU~umbline S&P500 .Rhumbline SbP400 .Rhumbline SbP600 Mlntl. Equity .ICC Lg. Growth MICC Fixed
Page 5
Palm Beach Gardens Police Pension Fund
Pedomance Evaluation Summq
- December 31,2008 -~
Manager
Rhumbline S(Bp500
Rhumbline S(BP400
Rhumbline S(Bp600
IntL Equity
ICC Lg. Growth
ICC Fiwed
Total
Equities Fixed Income
$4,622,000 $0
$1,596,000 $0
$1,736,000 $0
$1,880,000 $0
$2,604,000 $0
$0 $9,87 1,000
$12,438,000 $9,871,000
Cash
$0
$0
$0
$0
$0
$2,952,000
$2,952,000
Total
$4,622,000
$1,596,000
$1,736,000
$1,880,000
$2,604,000
$12,823,000
$25,261,000
% of Total
18.3%
6.3%
6.9%
7.4%
10.3%
50.8%
100.0%
% of Total 49.2% 39.1% 11.7% 100.0%
Target % 60.0% 40.0% 0.0% 100.0%
Page 6
Ph Beach Gardens Police Pension Fund
Performace Evaluation Summq
December 31,2008
Current Fiscal Year
ouatter - m One Year Thre Years Five Years 2008
TOTAL FUND (Net of Fees)
-10.20% -10.20% -21.23% -2.97% 0.73% -13.73% 11.90% 6.n% 9.78% 8.97%
-13.66% -13.66% -24.03% -3.50% 0.76% -12.83% 12.98% 7.22% 10.33% 10.94%
5 5 25 20 17 56 21 52 24 59
TOTAL EQUITIES
Return -21.77% -21.77% -37.22% -8.69% -1.63% -23.23% 17.99% 9.59% 15.33% 15.36%
Policy Return (38.4%S&P500,
15.4%S&P400,15.4%S&P600, 15.4% RIOOOG, 15.4% EAFE) -22.78% -22.78% -37.09% -8.56% -1.33% -21.04% 17.05% 9.27% 16.00% 16.21%
99 99 100 82 45 99 3 3 7 15 Runking r"9
TOTAL FIXED INCOME
Return
Rnnking @mad Fired)
3.04% 4.65% 3.90% 1.22% 4.98% 3.56% 3.36% 1.83% 4.94% 4.94%
6 6 17 13 12 25 27 59 28 75
Policy Return @CAB) 4.57% 4.57% 5.24% 5.51 % 4.65% 3.66% 5.13% 3.67% 2.80% 3.68%
'25% Broad Large Cap Core, 10% Mid Cnp, 10% Small Cap, 10% Bmad Large Growth, 10% Internatiaal, 35% Broad Fixed
~25% S&P500,10% S&P400,10% S&P600,10% R1000G, 10% EAFE, 35% BCAB
**38.4% Broad Large Cap Core, 15.4% Mid Cap, 15.4% Small Cnp, 15.4% Broad Large Cap Growth, 15.4% International
Gold indicuks equal to or beat the inh, or in upper 40% ofuniwrse
Red indicates bottom 40% of universe
Page 7
Pnlm Beach Gprdens Pofice Pension Fund
Perfbnoance Evalmdon Summafy
December 31,2008
RHUMBUNE S&P 500 EQUITY PORTFOLIO
-21.61% -36.57% -8.05% -1.99%
21 18 18 36
-21.72% 16.63% 10.88% 12.22% 13.84%
36 39 27 57 35
-21.94% -37.00% -8.36% -2.19% -21.98% 16.44% 10.79% 12.25% 13.87%
RHUMBLINE SbP 400 EQUITY PORTFOLIO
Return
(50%Br.Lg.Cap&50% Br.Sm.Cap)
Rznldng
-2!5.29% -35.97% -8.63% 0.07%
79 48 48 16
-1654% 18.74% 6.60% 22.37% 17.62%
14 26 81 5 30
Pol@ (S&P 400) -25.55% -36.23% -8.76% -0.08% -16.68% 18.76% 6.56% 22.16% 17.55%
RHUMBLINE S&P 600 EQUITY PORTFOUO
-25.01% -30.77% -7.17% 1.11%
39 20 30 25
-13.64% 15.17% 7.61% 21.16% n/a
22 51 52 32 n/a
-25.17% 41.07% -7.51% 0.88% -13.83% 14.93% 7.16% 21.22% n/a Policy (S&P 600)
ICC LARGE CAP GROW EQUITY PORTFOLIO
&Q& er
Relurn -16.94% -31.54% -29.14% -37.80% -30.79% n/n
Ranking (Bd hg?? Cap Gmth) 1 43 13 31 100 n/a
Policy ('QIOOOG) -20.88% n/a
INTERNATIONAL EQUITY
I-yem 2-ycar
Return -22.54% -38.45% -43.97% -19.79% -29.10% 27.48% n/a
65 49 49 40 36 36 n/a
Policy (MSCI EAFE) -19.90% -37.55% -43.06% -20.27% -30.12% 25.38% n/n
Cold indicnks eqrral lo mhl the index, or in upper 40% ofuniverse
Red indicnb bottom 40% ofuniverse
4
0
December 31,2008
EXPLANATION OF RlSK/REWARD SCATTERPLOT GRAPHS
The crossing lines represent the 5-year return (horizontal line) and 5-year standard deviation or
volatility or risk (vertical line) of the index against which the Fund is being measured.
Each point represents the Fund's 5-year return (vertically) and standard deviation or volatility
(horizontally), relative to the index. If a point is in the southwest quadrant, for example, the 5-year
return of the Fund has been less than (below) the index line, and the 5-year standard deviation
(volatility) has also been less than (to the lefl on the index line.
There are fourpoints, one for each of the last four quarters. The earliest one is the smallest and the
quarter just ended being the largest. Each point shows the 5-year relative position of the Fund
versus the index for that quarter, The movement of the points shows the trend, or direction, over
time.
As noted in the graph, the best place to be is the northwest quadrant (less risk and a higher
return); the worst place to be is the southeast quadrant (more risk and a lower return).
b
Palm Beach Gardens PoLice Pension Fund
Total Fund Tdng 5- Years
(versus 25% S&P5M, 10% S&PW, 10% S&P6M,10% JUOMG, 10% EAFe 35% BCGC)
December 31,2008 -
I
2
Good Aggressive
-2 L Conserzative
-2
A
0
Risk (Dinereme in Standard Deviations)
2
Page 9
Palm Beach Gardens Police Pension Fund
Total Equity Trailing 5- Years
(wrsus384%S&P~, 15.4% S&P400, 15.4%S&P600, 15.4%RllWG&ts.4% Id..)
December 31,2008
-2 0
Risk (Difference in Standard Deviations)
2
Page 10
Palm Beach Gardens Police Pension Fund
ICC Fiwed Income Trailing Since Inception
(versus BCGC)
December 31,2008
2
Good Aggressive
0
-2
A
Conservative I Bad
-2 0
Risk @iflerence in Standard Deviations)
2
Page 11
1
Palm Beach Gardens Pofice Pension Fund
Beta: Trailing 5- Year Risk
I I I
I' 1 I I I I I I
'I I I I I I I
Jun-08
Mar48
0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1 .oo 1.10 0.00
.Total Fund .Largecap OMidcap OSmallCng mICCFixed BIntematid DLargeGmth
Page 12
Palm Beach Gardens Police Pension Fund
Alpha: Trailing 5- Year Reward
December 31,2008
TOTAL FUND b INDIVIDUAL MANAGERS
-10.0% y
Dec-08 Sep-08 Jun-08 Mar08
rn Total Fund 0 Large Cnp OMid Cap OSmall Cap HICC Fixed .International Large Gmwth
-
Page 13
Palm Beach Gardens Poke Pension Fund
Mpha & Beta: 5- Years TraXng (or Inception if Less)
December31.2008
BETA
Current
policu Dec-08 Sea-08
Total Fund
Managers, Fixed Income
ICC Fixed
*
BCAB
0.80
0.90
0.89
0.91
0.86
0.7l
0.84
0.57
Managers, Equities
Large Cap s&P5OO 0.99 0.99 0.99 0.99
Mid Cap s&P400 0.99 0.99 0.99 1.00
Small Cap S&P600 0.99 0.99 0.99 0.99
International EAFE 0.37 0.47 0.32 0.41
Large Growth RlOOOG 1.04 1.24
ALPHA
Totn2 Fund * 0.12% -0.40% 0.15% 0.10%
Managers, Fixed Income
ICC Fixed BCAB -0.27% -0.47% 0.92%
Managers, Equities
s&P500 0.18% 0.14% 0.11%
0.12% Large cap Mid Cap s&P400 0.15% 0.14%
Small Cap S&P600 0.24% 0.23% 0.37%
International EAFE -9.28% -1.89% 4.98%
Large Growth RlOOOG -1.94%
* 25% S&P500,10% S&P400,10% SbP600,10% R1000G, 10% EAFE, 35% BCAB
1.44%
0.12%
0.12%
0.24%
5.63%
Page 14
Palm Beach Gardens Police Pension Fund
Barnng Average: 5-Years Trailing
December 31,2008
75
50
25
TOTAL FUND &3 INDIVIDUAL MANAGERS
0
Dee-08 Sep-08 Jun-08 Mar48
mTota2 Fund Ohrge Cap OMid Cnp OSrnall Cnp 8ICC Fixed mIntemationa1 Large Growth
Page 15
Palm Beach Gardens Poke Pension Fund
Battihg Avenge: 5- Years TmXhg (or Inception ifless)
December 31,2008
BA7TING AVERAGE
Total Fund
Managers, Fixed Income
ICC Fixed
Cumt
poIirv DeC-08 &&? Mar-08 . 35.00 30.00 30.00 25.00
BCAB 55.00 55.00 60.00 50.00
Managers, Equities
Lmge cap s&P500 75.00 70.00 65.00 60.00
Mid cap s&P400 60.00 60.00 55.00 55.00
Small cap s&P600 65.00 61.03 64.30 62.28
Intetnatiml EAFE 44.44 50.00 42.86 33.33
Lmge Gmth RlOOOG 40.00 25.00
Total Fund
Managers, Fixed lncotne
ICC Fixed
Managers, Equities
Large cap
Mid cap
Small Cap
International
Large Gmth
*
BCAB
s&PWO
S&P400
S&P600
EAFE
RlOOOG
0.96
0.78
1.00
1.00
1.00
0.25
0.81
0.97
0.71
1.00
1.00
1.00
0.33
0.84
O.%
0.78
1.00
1.00
1.00
0.14
25% S&P500, 10% SbP400,10% S&P600,10% RIWOG, 10% EAFE, 35% BCAB
0.96
0.76
1.00
1.00
1.00
0.16
Page 16
perlormmnnce of0therMmsp-s
December 31,2008
CORE EQUrrY
Qtr YTD 1Yr 3Yr 5Yr lOYr
____
'. Atlnnta Capital Management Co., LLC - Higk Quality Growth Plus - Gross Size -24.18 -24.18 -36.40 -7.29 -2.31 -1.20
Eagle Asset Management - Conmafive lnrge Cap Equity - Gross Size -23.81 -23.81 -38.57 -9.74 -2.95 1.35
ICC Capif~l Management, Inc - Core Value - Gross Size -23.77 -23.77 -36.02 -6.78 -0.61 1.28
Inoolffis Counsel - Miami Beach Fire b Police - Gross Sue Equity Only) -22.48 -22.48 -35.77 -4.03 0.94 1.05
INVESCO - Structured Core Equity - Gross Size -20.22 -20.22 -33.08 -4.78 0.85
IronOak Aduisors - Large Cap Core - Gross Size -21.87 -21.87 -36.67 -8.74 -0.82 1.01
Madism Investment Advisms, Inc. - Large Cap Equity (InstlJ - Gross Size -22.94 -22.94 -31.85 -6.98 -2.31 0.78
Rkumbline Advisers Corporation - Russell 1000 Index Fund - Gross Size -22.11 -22.11 -37.22 -8.47 -1.95
Rkumbline Advisers Corporation - SbP 500 Index Fund - Gross Sue -21.93 -21.93 -36.82 -8.23 -2.11 -1.22
Robeco Inwsfment Management, Inc. - WPG Disc Equity Large Cap - Gross Size -21.68 -21.68 -35.61 -7.40 -1.05 -0.14
Voyageur Asset Management - Large Cap Core -20.27 -34.79 -34.79 -5.92 1.88 2.37
Russell 1wO -22.48 -22.48 -37.60 -8.66 -2.04 -1.09
-21.94 -21.94 -37.00 -8.36 -2.19 -1.38
-24.87 -24.87 42.19 -10.94 -3.47 2.85
-23.45 -23.45 -36.20 -8.48 -3.21 -1.81
.' :.Denver Investment Advisors, LLC - Grawtk - Gmss Size -22.57 -22.57 -44.32 -9.90 -2.49 1.76
- ' . Montag b Caldwell, Inc. - lnrge Cap Growth - Gross Size -20.23 -20.23 -32.08 -3.28 0.24 -0.76
:,x ,:. S?zP 500
GROWTH EQW7Y ~~
:. ~
2 ZCC Capital Management, Inc - Large Cap Growth Equity - Gross Size -16.22 -16.22 -35.43 -10.48 -4.49
. . OakBnwk Investments, LLC - OakBrwk Select Equity - Gross Sire -20.70 -20.70 -24.96 -3.27 -0.97 2..
-22.72 -38.35 -38.35 -8.98 -3.35
-21.68 -21.68 -36.79 -7.56 -1.76 -0.43
-21.60 -21.60 -37.65 -5.69 -0.29
-22.20 -22.20 -30.99 -3.14 1.02
-21.73 -35.91 -35.91 -8.03 -1.86 -3.89
-26.77 -26.77 -40.38 -12.04 -4.59 -1.02
-22.79 -22.79 -38.44 -9.11 -3.42 -4.27
-20.24 -20.24 -34.92 -7.62 -2.74 -3.11
-21.61 -21.61 -36.57 -8.05 -1.99 n/a
-25.29 -25.29 -35.97 -8.63 0.07 n/a
-25.01 -25.01 -30.77 -7.17 1.11 n/a
I i Inkmafionai EquihdFYEJ -22.54 -22.54 -43.97 n/a n/a n/a
-16.94 -16.94 -37.80 n/a n/a n/a
@91.aw.tutem@ Page 17
PurOrmnnce of Other Mmngus
Deder 31.2z
YTD 1Yr 3Yr 5Yr lOYr __
-
Alethein Research and Management,Inc - Alethein Value - Gross Size
BlackRmk - Active Quant Large Cap Value - Gross Sue -23.62 -36.45 -36.45 -7.26 0.31
BucW Capital Management - Value Equity - Lorv P/E - Gross Size -18.83 -18.83 -29.74 -7.10 -1.17 3.22
We Inmfment Counsel, LLC - Large Cnp Value - Gross Size -19.08 -19.08 -33.95 -1.84 6.99 7.30
Cohen 6 Steers Capital Mgml., lnc. - Cohen 6 Steers Large Cap Value - Gross Size -21.40 -21.40 -33.29 -3.90 3.M)
Crawford InDeStmmt Counsel, Inc. - Dividend Gmwtk - Gross Sue -18.84 -18.84 -26.27 -3.39 0.07 1.90
&Prince, Race, Zollo, Inc. - Large Cap Value Equity - Gross Size -28.36 -28.36 -39.09 -10.48 -2.96 3.59
Eagle Asset Management - Value - Institutional - Gmss Size -24.98 -24.98 -34.45 -6.53 0.86 1.23
ICC Capital Management, Inc - Core Value - Gmss Size -23.77 -23.77 -36.02 -6.78 -0.61 1.28
Loomis, Sayles &Company, L.P. - Large Cap Value - Gross Size -19.42 -19.42 -33.42 -3.54 3.45 2.47
Mismm' Valley Partners - Large Cap Value - Gmss Size -21.10 -21.10 -34.75 -7.60 -1.96
oppolheimn Capital - Large Cap Value - Gross Size -24.20 -24.20 -51.17 -17.92 -7.89 -3.22
Rhumbline Advisers Corporation - Russell 1000 Value Index Fund - Gross Size -21.94 -21.94 -36.51 -8.11 -0.67 1.52
Stale Street Global Adviwrs - Active US. Large Cap Value Strategy - Gross Size -20.85 -36.92 -36.92 -7.90 -0.27 2.14
The Boston Company Assel Mgmt., LLC - US Large Cap Value Equity Management -20.32 -20.32 -35.14 -6.20 -0.48 2.10
Ceredex Value Ad Inrge Cap Value -18.78 -18.78 -31.50 -3.94 1.52 2.35
Voyageur Asset Management, Inc. - Large Cap Value - Gross Size -20.81 -20.81 -35.71 -6.72 1.85 2.22
We& Management Corporation - LargeCap Equity - Gross Size -20.24 -20.24 -32.44 -2.80 3.95 4.25
Russell 1wO Value -22.18 -22.18 -36.85 -8.32 -0.79 1.36
SkP 5oo/cilipp Value -23.83 -23.83 -39.22 -9.19 -1.72 0.10
4ID-CAP EQUITY
::;. ,! Amalgamfed Bank - Longview 400 MidCap Index tund - Gross Size -25.57 -25.57 -36.27 -8.73 -0.08 4.47 t.4: :. Baftgmrarch Financinl Mgmt., Inc. - US Mid Cap S6P 400 - Gross Size
' '. Chiago Equity Parhers, LLC - Mid Cap Core Equity - Gross Size -27.01 -27.01 41.60 -13.40 -2.60 3.55
: Rhumbline Advism Corporation - S6P 400 Index Fund - Gross Size -25.28 -25.28 -38.43 -9.83 -0.72 4.17
Robeco Inoesfmmt Management, Inc. - BPAM Mid Cap Value Equity - Gross Size -21.90 -21.90 -31.84 -4.90 3.23 5.62
State Street Global Advisors - Mid Cap CoreSfmlegy - Gross Size -25.51 -43.74 43.74 -13.79 -2.14 3.34
Russell Midcap -27.27 -27.27 -41.46 -10.68 -0.71 3.18
S&P Midcap 400 -25.55 -25.55 -36.23 -8.76 -0.08 4.46
Rhumbline We Cnp(FYE) -21.61 -21.61 -36.57 -8.05 -1.99 n/a
Rhumbline Mid CapfFYE) -25.29 -25.29 -35.97 -8.63 0.07 n/a
Rhumbline Small CapfFYE) -25.01 -25.01 -30.77 -7.17 1.11 n/a
International EquityfFYE) -22.54 -22.54 -43.97 n/a n/a n/a
ICC Large Gmth(FYE) -16.94 -16.94 -37.80 n/a n/a n/a
@MhW@ Page 18
....e.-
"1. -':: . WBrmk lnwsfments, LLC - Enhanced MidCap Strategy - Gross Sue -26.01 -26.01 -37.15 -8.30 0.64
PerEOrmmnnce of Other Managers
December31.2008
Qtr YTD 1Yr 3Yr 5Yr lOYr
Advanced Inwstment Partners - AllCap - Gross Size -22.09 -22.09 -35.16 -9.54 -1.83 0.40
BuckhendCaotinl Manamwnt -All Cao - Gross Size -22.49 -22.49 -32.11 -5.70 1.07
ALL CAP EQUIIT~
&nd Hi1 Capital knagement, ln;. - Diamond Hill Select Equity - Gross Sue
Inhppid Capital Management, Inc. - lntrepur Multi-Cap Equity - Gmss Size
Oak Ridge lnuestments, LLC - All-Cap - Gmss Size
Oppenheiw cnpltal -All Cap Equity - Grow; Size
Rockwood Capital - Strntegic Equity
Rm.nell Ym
-21.90 -21.90 -33.25 -6.66 4.35
-15.30 -15.30 -19.89 -1.96 2.44 5.60
-21.95 -21.95 -36.88 -8.67 0.61
-24.41 -24.41 -42.09 -11.02 -1.60 2.81
-21.79 -21.79 -36.16 -6.39 1.54
-22.78 -22.78 -37.31 -8.63 -1.95 -0.80 _.-""_- ---- -22.92 -22.92 -37.34 -8.43 -1.67 _--0:63 DO~ Jones Wilshire 5ooo (Full Cap) __-
SMALl..PEQLnn - __
Atlantn mtal Manafement Co., LLC - Hifh Quality Small Cap - Gross Size -16.57 -16.57 -19.41 0.00 5.01 7.15
Cereder - Value Ad S&lI Cap Value - Gross Size
hgle Asset Manngement - Small Cap Core - Institutional - Gmss Size
GW Gmital. Inc. - Small Cav Value Eauitu - Grms Size
-27.31 -27.31 -31.93 -5.84 3.83 9.05
-22.64 -22.64 -31.96 -3.31 3.61 10.11
-30.59 -30.59 -38.34 -6.35 7.40 11.48 . Intrepid Capital Manag&t. lnc. -Intrepid Small Cap - Gross Size -4.69 -4.69 -6.04 4.96 6.66 9.09
Kqme Andm Rudnick Inust. - Small Cap - Gross Size -20.42 -20.42 -27.65 -5.38 2.41 6.08
P- lnwstment Management, LLC -Pim Small Cap Value Seruice - Gross Size
Rhumbline Adv*ers Corporation - Russell 2oW Index Fund - Gmss Size -24.99 -24.99 -30.75 -7.18 1.10
-26.91 -26.91 -43.69 -13.63 -5.11 -2.11 Smogmss Asset Management. LLC - Small Cap Growth Equity - Gross Size
State Street Global Ad& - Small Cap Equity Strategy - Gross Sue -25.63 -37.01 -37.01 -14.78 -4.30 0.62
Silmnt Cnpital - Small Cnp Growth - Gross Size -27.77 -27.77 -40.23 -11.41 -1.93
-26.12 -26.12 -33.79 -8.29 -0.93 3.02
SkP Smallcap 600 -25.17 -25.17 -31.07 -7.51 0.88 5.18
REAL ESTATE (W/30/2zwS)
American Realty Advisors - Core Equity Real Estate-Sep. Accts. -Gross Size
ASB Capital Management, lnc. - EB Real Estate Fund - Gross Size -0.66 -0.66 4.54 13.89 14.62 11.73
JPMorgan Asset Management - Strategic Property Fund - Gross Size -1.19 -1.19 3.49 12.98 14.78 12.58
Principl Global Inwstors -Real Estate Core Property - Gross Size -1.13 -1.13 1.28 11.36 13.07 11.37
Dow Jones Wilshire RElT Index 4.78 4.78 -12.47 5.21 13.44 13.05
NCREIF property Index -0.17 -0.17 5.27 13.24 14.24 11.83
INTERNATIONAL EQLnn
DePrince, Race. Zollo, lnc. - Internatwnal Equity - Gm Size -17.06 -17.06 -41.05 -7.07 1.73 4.77
ICC Grpital Management, Inc - lnternutional ADR Equity - Gross Size -19.65 -19.65 -39.11 -5.94 0.23 1.12
INVESCO - Internatirmal Equity - Gross Size -19.02 -40.07 -40.07 -6.02 2.46 2.91
Oppenhziw Capitnl - International Equity - Gmss Size -24.20 -24.20 49.39 -9.40 -0.04 3.99
State Sheet Global Advisors - MSCl EAFE Index Strategy - Gross Equnl -19.90 -43.14 43.14 -7.10 1.89 0.99
The Boston Compny Asset Mgmt., LLC - lntemtwnal Core Equity Management -22.94 -22.94 47.65 -9.68 2.00 4.34
Wenhrth, Hauw and Vwlich - WHV International Equity - Gmss Size -36.12 -36.12 -49.27 -3.22 10.71 12.38
MSCl EAFE -19.90 -19.90 -43.06 -6.92 2.10 1'"
-21.61 -21.61 -36.57 -8.05 -1.99 I , Rhumbline Lwfe Cnp(FYE)
Rhumbline Mid CnpfFYE) -25.29 -25.29 -35.97 -8.63 0.07 3
Rhumbline Small CapfFYEJ -25.01 -25.01 -30.77 -7.17 1.11
lnternationnl Equih/(FYEJ -22.54 -22.54 -43.97 nfa nfa
ICC Lnrp Growth(FYE) -16.94 -16.94 -37.80 nfa nfa
Russell u)(10
December 31,2008
Qlr___YTD 1Yr 3Yr LYr lOYr
Atlnnta Cap'tal Management Co., LLC - High Quality Brwd Market - Gross 5ize 5.74 5.74 8.72 6.92 5.69 5.96
Eagle Asset Management - Core Fired Institutional - Gross Siz 3.19 3.19 4.69 5.58 4.57 5.42
Gnllinrd Cnpitni Management - Brwd Market Core Composite - Gross Size 0.13 0.13 -1.44 3.25 3.60 5.47
ICC Capital Management, Inc - Core Fixed Income - Gross Size 4.46 4.46 3.29 4.65 3.98 5.20
oppmhermet. Cnpitnl - Fixed Income Aggregnte - Gross Siz 7.95 7.95 8.02 6.35 5.11 5.88
Rodnumd Capital - Core Bond - Gms Size 2.21 2.21 2.71 4.61 3.81 5.03
Smgrass Asset Management. LLC - Core Fixed Income - Gross Size 6.89 6.89 7.03 6.10 5.04 5.92
Voyaseur Asset Management, Inc. - Brcmd Market Core - Gross Size -1.07 -1.07 -3.50 2.21 2.78 4.63
Barchys Aggregate Bond 4.57 4.57 5.24 5.51 4.65 5.63
CORE FIXED-~@COME ~-..
Barclays GovlCredit Bond 6.42 6.42 5.n 5.57 4.64 5.64
INTERMEDG~~FIXED INCOME ~~ ._
Allegiant Asset Management - lntermedinte Gm'tKredit - Gmss Size 4.08 4.08 4.87 5.54 4.36 5.39
Dmis Hamilton JaCkMlfi Asslcintes - lntermedinle Fixed Income - Gross Size 5.03 5.03 5.53 6.04 4.87 5.69
Engle Assel Management - Institutionnl Conmtive - Gms Size 4.89 4.89 7.11 6.36 4.69 5.54
Missouri Vnllq Partners - Intdinte GmmmentKredit Fixed Income - Gross Size 6.06 6.06 8.78 7.03 5.25
Smogrnss Asset Management, LLC - lntermedinte Fired Income - Gross Size 6.99 6.99 7.20 6.32 4.73 5.64
Sit Investment Associntes, Inc. - Intermedinte GmtKorp - Gross Size -2.18 -2.28 -2.28 2.92 3.11 4.86
Voyagpur Asset Management, Inc. - Intermedinte Core - Gross Siz -1.65 -1.65 -4.39 1.96 2.21 4.64
ICC Fired IncomefFYEJ 4.94 4.94 3.04 4.65 3.90 5.04
Barchys GovlCredit-Intermediate 4.84 4.84 5.08 5.51 4.22 5.43
Page 20
PALM BEACH GARDENS
POLICE PENSION FUND
REVIEW OF hTERNA'l7ONAL EQUITYFUNDS
DECEMBER 31,2008
Palm Beach Gardens Police
Review of International Eauitv Funds
December 31,2008
1. Vanguard Global Equity (VHGEX)
Morningstar Rating:
Comparative Index:
[0.64%] * (out of 420 funds over 5-years)
World Stock ie. MSCl World
3 Month
Fund: -24.00%
Policy: -21.77%
Diff: -2.23%
m
-46.66%
-40.71%
-5.95%
m
-9.71 % -0.24%
-8.10% -0.51 %
-1.61 % 0.27%
Received an average rating but good review from Morningstar. Down from 4-stars last quarter. Not impressed with the
multi-manager change made in 2004 but we like the long term prospects. No change recommended.
www.vanquard.com
2. Vanguard International Growth Admiral Shares (VWILX)
Morningstar Rating:
Comparative Index:
[0.35%] * (out of 570 funds over 3-years)
Foreign Large Blend ie. MSCl EAFE
3 Month
Fund: -23.16%
Policy: -19.95%
D iff: -3.21%
-44.83%
-4 3.38%
-1.45%
-.6.81%
-7.35%
0.54%
5 Year
2.13%
1.66%
0.47%
Received an average rating but good review from Morningstar. Down from 4-stars last quarter. Added a third sub-advisor
in February 2008.No change recommended.
www.vanquard.com
3. Vanguard international Value (VTRIX)
Morningstar Rating:
Comparative Index:
[0.43%] * (out of 246 funds over 3-years)
Foreign Large Value ie. MSCl EAFE Value
3 Month
Fund: -20.51%
Policy: -19.81%
Diff: -0.70%
1 Year
-41.74%
-44.09%
2.35%
-5.80%
-8.25%
2.45%
3.38%
1.79%
1.59%
Good rating and review from Morningstar. Down from 4-stars last quarter. Added a fourth sub-advisor in May 2008,
Edinburgh Partners. No change recommended.
www.vanquard.com
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REPORT BY
GABRIEL, ROEDER, SMITH AND COMPANY
FOR
PALM BEACH GARDENS POLICE OFFICERS PENSION FUND
Regarding Possible Coverage of City’s Police Ofticers
By the Florida Retirement System
February 12,2009
Board of Trustees
Palm Beach Gardens Police Officers Pension Fund
10500 N. Military Trail
Palm Beach Gardens, FL 33410
Re:
Dear Trustees:
Pursuant to your request, we have prepared this Report regarding the possible coverage by the
Florida Retirement System of the City’s police officers who will be hired in the future. The Report
includes:
FRS Coverage of Police Officers Pensions
An overview of FRS in terms of its operation as well as discussion of its advantages and
disadvantages
Information as to the possible ways the transfer of coverage would occur
Effect of closing the Pension Fund to new hires
Explanation of the recent increases in the City contribution requirements to the Police
Officers Pension Fund
A discussion of Chapter 185, Florida Statutes
A comparison of the City’s pension benefit provisions to those of FRS
A discussion of long range cost and a 15 year projection of required contributions.
We would be pleased to meet with you to review this Report and answer any questions
As indicated below, the undersigned are members of the American Academy of Actuaries (MAAA)
and meet the Qualification Standards of the Academy of Actuaries to render the actuarial opinion
herein.
Respectfully Submitted,
GABRIEL, ROEDER, SMITH AND COMPANY
Q
JAtepheh Palmquist, AS&$lAAA, FCA
Enrolled Actuary No. 08-1560
JSP/gz
ld.L.$k &/&
Melissa Algayer, hkAAA, 6dA
Enrolled Actuary No. 08-6467
1
OVERVIEW
The Board of Trustees has retained Gabriel, Roeder, Smith and Company to examine the
possibility of providing retirement benefits for the City’s future police officers by the Florida Retirement
System (FRS) rather than the Palm Beach Gardens Police Officers Pension Fund. This Report sets forth
our findings.
Florida Retirement Svstem - A Brief Summary
FRS is a relatively well funded retirement system covering all State, county and public school
employees as well as employees of many other entities including some cities. There are approximately
700,000 employees covered by the system and another 300,000 receiving benefits. Assets at December
31, 2008 were $97.36 billion.
FRS benefits for police officers are very good especially considering that officers do not have to
contribute to the plan and that there is a 3% annual COLA for retirees. A comparison of benefits with
those of the City is shown later in this Report.
The portability of FRS benefits and service to other FRS-covered employers is also very
For example, a Palm Beach Gardens police officer could leave the City and work for the attractive.
County Sheriff‘s Department with no interruption or effect on hisiber retirement benefits.
While few police officers would be interested in this option, it is worthy to note that each person
bas the option of being covered by the traditional defined benefit plan or a defined contribution plan.
There is also an opportunity to change this election at a later point in one’s career.
As far as we can tell, FRS administration is efficient and effective. The total of investment and
administrative expenses is only about 0.1 8% of assets, i.e., 18 basis points.
Recruiting and Retaining Police Officers
We believe that FRS’s portability and lack of employee contributions would be a plus in terms of
recruiting both new and experienced officers. While we have no way of verifying this claim, some have
argued that portability may result in higher turnover. In other words, if an officer’s pension is not
affected by going to another FRS - covered employer, the decision to leave the City may be easier.
2
Collective Bargaining
If the City’s police off~cers hired in the future are covered by FRS, there will be less to negotiate
for these officers in terms of pensions during collective bargaining. There still could be pension issues to
discuss but their scope would be limited. The officers who remain in the City Plan will have dwindling
influence in collective bargaining as time goes by.
City’s Financial Statements
GASB Statement Number 27 requires certain pension disclosures in the City’s financial
statements. One of the disclosures called the Schedule of Funding Progress shows the ratio of plan assets
to accrued liabilities. There are reports that this ratio is one of the measures used by investment banks to
determine the creditworthiness of governmental entities seeking funds from the bond market. A low
ratio could possibly affect a city’s bond rating.
Governmental entities covered by statewide retirement systems do not have to include the
schedule of funding progress in their financial statements. As a result, there would be one less issue for
the bond market to consider in determining the government’s bond rating
Local Control vs. No Control
As will be seen later in this Report, there is a material difference in City cost as between FRS and
the City’s Retirement System. Probably the most important consideration other than cost is a matter of
philosophy. Does the City wish to relinquish control over this valuable part of the police officers’ benefit
package? A decision to join FRS is irrevocable - once a city joins FRS, it may never withdraw.
To be sure, ceding this responsibility to FRS would clear away a number of local responsibilities
with respect to future hires:
>
>
P
The City would simply send money to FRS each payday.
All pension questions would be directed to FRS.
There would be no Board of Trustees and related meetings, minutes, etc.
(Although this may not be possible for some time; see the later discussion.)
There would be no actuary or actuarial reports. P
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P The City auditors would not have to review financial statements of the Police
Retirement System.
On the other hand, the City would have no control over the mandates of the State and would not
be able to use the local retirement plan to accomplish management goals and objectives. A case in point
is the so-called rate stabilization reserve that FRS established a few years ago. The use of this reserve
has been very successful in keeping the FRS cost stable over the past few years while nearly all other
plans have had dramatic cost increases. There is now pressure mounting from employee groups who feel
that employers have benefited from the reserve at the expense of employees. These groups are pushing
to raise benefits. The City would have virtually no say in this battle.
The issue of local control versus no control is one of philosophy and outlook. Only City officials
can determine which side they feel would best serve the City and its police officers.
Prowsal to Close the FRS Defined Benefit Plan
There is a proposed bill to be considered by the Florida Legislature this spring that would require
all employees entering FRS after 2009 to be covered by the FRS defined contribution plan. Senate Bill
534 would result in the FRS defmed benefit plan only covering those who began membership before
2010. We have no way of determining the likelihood that this bill will become law. A change to FRS
like this would certainly have a bearing on the decision to send new hires to FRS.
4
TRANSFERRING PENSION COVERAGE TO FRS
In order to cover the City’s police officers by FRS, a number of steps would have to be taken
The following discussion briefly describes the process. Much more detail would be necessary if the City
wishes to pursue this transfer.
Terminate the Retirement System
(We understand that the City is not considering this alternative but we include it in this Report for
the sake of completeness.)
Under a plan termination, the actuarial present value of each member’s accrued pension is
calculated. The total value for all members including retirees is then compared to the value of the
pension fund. If the value of benefits exceeds the value of assets, then the City will have to fund the
difference over some period of time. We are certain that Plan assets are less than the value of accrued
benefits.
If assets did exceed the value of benefits, the excess will be returned to the City and State in
proportion to the amount each entity contributed to the System since its inception.
Once plan assets have been allocated, there would be a lump sum payment made to each person
(or to hisiher IRA, 457 plan, etc.). Alternatively, a successor trust fund could be established to pay
monthly benefits as they become due. Of course, annuities could be purchased, but the cost would be
prohibitive.
Maintaining the Plan for Existing Members
Another option is to allow current members the option of staying in the Plan or choosing FRS and
placing future hires into FRS. The Plan would continue to operate and would be subject to funding
requirements based on the remaining population. For existing members who choose FRS, a decision
would have to be made whether to cover past service under FRS (described below) or provide the
accrued-todate benefits under the Plan and only have &hue service count under FRS.
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Paving for Past Service Under FRS
One of the most important issues in considering a move to FRS is how the past service of present
employees will be treated. FRS will only cover past service if full payment is made of all past
contributions that would have been paid to FRS, plus interest on those amounts. Once such payment is
completed, the employee only receives credit of a 2% multiplier for those past years. (We understand
that certain groups are lobbying the Legislature to raise the 2% multiplier to 3%.)
illustration of how the past service calculation is made.
Shown below is an
ILLUSTRATION OF PAST SERVICE BUY-BACK
CALCULATION UNDER FRS PENSION PLAN
Example: Police Officer hired 7/1/98; current year’s
pay= $60,000; 4% increase in pay each previous year
Year
711 107-6/30/08
1/1/05-6/30/06
I/ 1/04-6/30/05
711103-6/30/04
7/1/02-6/30103
7/1/01-6/30/02
7/1100-6/30/0 1
711199-6130100
7/1/98-6/30/99
711 106-6/30/07
Pay
$60,000
57,692
55,473
53,340
51,288
49,316
47,419
45,595
43,841
42,155
FRS
Contribution
Rate
20.92%
20.92
18.53
18.53
18.53
16.01
18.44
20.29
21.16
25.32
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Contribution For Interest at 6.5%
Year Through 6/30/08 I
$12,552
12,069
10,279
9,884
9.504
7,895
8,744
9,25 1
9,277 10.674
100,129
$402
1,196
1,753
2,437
3,114
3,268
4,423
5,585
6,568 8.741
37,487
Total payment needed to purchase 10 years ofpast service is $100,129 + $37,487 = $137,616
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EFFECT OF CLOSING THE PENSION FUND TO NEW HIRES
If newly hired police officers are covered by FRS, the funding of the Palm Beach Gardens Police
Officers Pension Fund would have to be changed in two ways.
First, we would revise the way the payment on the unfunded accrued liability is calculated. We
now calculate the payment as a level percent of covered payroll under the assumption that such payroll
will rise by 5% per year. If the Plan is closed to new members, we cannot assume that the covered
payroll will keep growing so the payroll growth assumption will change from 5% to 0% which will raise
the annual required contribution.
Second, it will be advisable sooner or later to change the actuarial cost method from the Entry
Age Method to the Aggregate Method. This change would ensure that the Plan’s obligations would be
funded over the future working years of the remaining members, and that there would be no outstanding
unfunded obligations when the last member retires.
Near the end of this Report is a projection of required contributions taking into account the
changes just described.
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REASONS FOR CITY’S COST INCREASE
Cost Comparison
II I Required City Contribution for EYE11
Slptember 30
2004 2010 Increase
Dollar Amount $1,239,522 $3,962,169 $2,722,647
As % of Payroll 2 1.49% 38.34% 16.85%
Investment Losses in 2001.2002 and 2008
For years ending September 30, 2001, 2002 and 2008, the City’s Plan as well as nearly every
pension plan in the country suffered investment losses. For the three years combined, the difference
between actual and expected returns was a loss of approximately $10 million. These losses are
recognized gradually pursuant to the asset smoothing mechanism. The required contribution has risen by
at least 5% of payroll due to these losses. It is likely that recent market losses after September 30, 2008
will further increase the required contribution by the City in the 201 1 fiscal year. The FRS contribution
rates will also be affected by the 2008 and 2009 investment losses.
Plan Amendment
An amendment in 2006 raising the multiplier and adding a supplemental benefit raised the
required City contribution by 7% of covered payroll.
Covered Pavroll
The covered payroll over the six years from October 1,2002 to October 1,2008 increased by
77%, from $5,572,514 million to $9,842,874 million. The required contribution to the Plan is directly
affected by the increase in payroll.
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CbaDter Revenue
Because the Plan mec
8
CHAPTER 185. FLORIDA STATUTES
the requiremer of ChaI r : Plan receives revenue from the
State. This revenue is equal to 0.85% of casualty insurance premiums written within the City limits. A
table following this discussion shows the amount of Chapter revenue over the past 11 years.
Generally, the Chapter revenue must be used to provide additional benefits for police officers.
This year the City may use $412,644 of the total revenue of $440,115 as a credit against its required
contribution to the Plan. Chapter revenue in excess of this amount is held in reserve to provide additional
benefits at a later date.
The Chapter has a list of minimum benefits that each plan must include. The Plan has met all the
minimums.
Particbation in FRS
Once a city decides to cover its police officers by FRS, Chapter 185 revenue ceases. Cessation of
Chapter revenue would also occur if new hires were to be covered by FRS with present members
remaining in the present plan. The City would have to pay $412,644 more each year if the Chapter
revenue ends.
We understand that there is a legislative proposal to allow Chapter revenue to continue if new
hires are covered by FRS. We will have to monitor the upcoming session of the Legislature to see if this
proposal is enacted.
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Chapter 185 Revenue
Year of Receipt
1998
1999
2000
200 1
2002
2003
2004
2005
2006
2007
2008
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Premium Tax Revenue
Received
$23531 8
236,636
215,773
225,892
262,919
292,446
364,985
41 1,047
428,055
460,438
440,115
Average Annual Increase
1998-2008
9
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BENEFIT COMPARISONS
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Areas Where City’s Plan is Materially Better Than FRS
> Multiplier
3.5% versus 3.0%
> Supplemental Pension
$12.50 per year of service versus $5.00
> Normal Retirement Date
Age 55 with six years of special risk service or 25 years of special risk service for FRS. The
City allows retirement at 20 years of service, regardless of age, or at age 52 with ten years
of service.
Areas Where FRS is Materially Better Than The City’s Plan
COLA
3.0% for FRS versus 0% for City, except that a COLA may be provided from actuarial
gains.
Employee Contributions
0% for FRS versus 8.6%
Vesting
FRS requires six years of service for 100% vesting. The City plan starts at 25% at 5 years,
40% at 6 years, etc. up to 100% at ten years.
Line of Duty Disability
FRS provides a benefit of 65% of average final compensation versus 60% from the City.
11
COMPARISON OF PENSIONABLE COMPENSATION
Pensionable Compensation
Base pay
Incentive pay
Longevity pay
Overtime pay
Bonuses
Annual sick and vacation buy-back
Lump sum payment of accumulated
vacation pay upon termination of
employment
Lump sum payment of accumulated
sick leave upon termination of
employment
City’s Plan ~
X
X
X
X
X
X
X
X
FRS
X
X
X
X
X
X
X*
* Limited to 500 hours.
DROP Particioants
Under the City’s Plan, DROP participants are considered to be retired so no further normal cost
contributions are made on their behalf. Under FRS, each employer must pay 10.91% of the pensionable
pay of each DROP participant.
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LONG RANGE COST
Florida Retirement System
The current contribution rate to FRS is 20.92% of payroll for those not in the DROP and
10.91% for those in the DROP. It is likely that these rates will continue for the year July 1, 2009 to
June 30, 2010. However, due to the steep investment losses since June 30, 2008, we estimate that the
FRS contribution rate starting July 1,2010 will he about 26% of payroll. The rate will rise to a peak of
about 28% of payroll. These very rough estimates are based on the assumption that the FRS market
value return will he (20)% this plan year, 15% next year and 8% thereafter.
Palm Beach Gardens Police Officers Pension Fund
Our October 1, 2008 actuarial valuation indicates that the required City contribution starting
October 1, 2009 will he 38.34% of payroll. When the State and member contributions are added, we
see the total needed to fund this Plan is 50.93% of payroll. In the absence of offsetting actuarial gains,
the City contribution rate will increase over the next several years to about 47% of payroll. See
Appendix A for an estimate of City contributions under different investment return scenarios.
FRS for New Hires
In the tables that follow, we are providing a projection over the next 15 years of required City
contributions for the present Plan without change and for requiring future new hires to be covered by
FRS. Under the second scenario, we are assuming that those already employed by the City will be given
the option to join FRS, and that all members with less than five years of service will elect to do so. The
present members who elect to join FRS will receive from the Plan a refund of their own contributions.
RECENT HISTORY OF FRS PENSION
CONTRIBUTION RATES FOR POLICE OFFICERS
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7/1/07 - 6130108
7/1/06 - 6/30/07
7/1/05 ~ 6/30/06
7/1/04 ~ 6/30/05
7/1/03 - 6/30/04
7/1/02 - 6/30/03
7/1/01 - 6/30/02
7/1/00 - 6/30/01
7/1/99 ~ 6/30/00
7/1/98 - 6130199
7/1/96 - 6/30/98
1/1/96 - 6130196
1/1/95 -12131195
1/1/94 -12131194
1 11 193 -1 213 1 193
1/1/92 -12131192
1/1/91 -12131191
1/1/90 -12/31/90
1/1/89 -12/31/89
10/1/87-12/3 1/88
1011186- 9/30/87
10/1/84- 9/30/86
10/1/81- 9/30/84
10/1/78- 9/30/81
13
20.92%
20.92
20.92
18.53
18.53
18.53
16.01
18.44
20.29
21.16
25.32
27.10
27.50
27.49
27.59
27.62
26.83
26.00
20.38
17.98
15.35
15.11
14.67
13.91
13.95
Notes:
b
unfunded actuarial liability (surplus) is about 23%.
expected long-term contribution rate.
temporary cost decrease due to a funding surplus.
3
b
insurance subsidy and administrative charges.
3
The FRS contribution rate excluding payments (credits) due to the
The 23% rate is the
The present rate of 20.92% reflects a
No employee contributions are required by FRS.
Rates shown above include the cost for the post-retirement health
The current contribution rate for members in the DROP is 10.91%
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A. UAAL Amoritzation Period and Payments
Years
7/1/1986 .
10/1/1991 '
10/1/1991 .
10/1/1992 .
10/1/1993
10/1/1995.
10/1/1996.
10/1/2000 '
10/1/2005 '
10/1/2OO5
10/1/2006
10/1/2007 '
1 O/ 1 /2008
Qmortization
Period Years
(Years) Amount Remaining
30
30
30
30
30
30
30
30
30
30.
30
15
15
4,147.
(1,504)
286,223
122,611
796,975
(1 89,977)
3,6 3 9,2 7 3
975,210
5,273,728
12,571.5 15
(251,668)
3.376.020
$ 26,408,109
(1 94,444)
8'
13 ',
13
14 '
15
17
18 '
22
27 '
27 '
28 '
14 .
15
Amount Payment
$ 2,027 '$ '
190,508 * 16,811 4
275
(1,004) e (89) '
85,287 7,067
(141,682) * (11,079) m
755,219 * 53,276 I
(192,578) 0 (12,971) *
4,215,642 242,613 *
1,069,833 52,909
5,785,424 286,122 *
13,348,674 * 643,312 -
(247,737) (20,527) *
3,376.020 ' 264,001
$ 28,245,693 *$ 1,521,720
I'
Special Report
Palm Beach Gardens Police
Pension Fund
fw
For the Period Ending
December 31,2008
e 69 69169
ss
t-Fj 1
38
tft e 69169 69
ETF Snapshot: State Street Global Advisors http:llstatestreetspdrs.comisnapshotsi books1print_view/29
Prsciss in a world that isn't:
1 US ETF Snapshot: December 2008
SNAPSHOT OMRVlEW
As of December 31,747 ETFs in the US -with assets totaling approximately $533.5BN -were
managed by 22 ETF managers.
ETF industry assets rose $56.6BN for the month - up 11.9%.
13 new ETFs were launched in December and one was liquidated.
FIGURE 1: US ETF ASSET GROWTH
800
c4n
320 ak
-Assets (BN) - Number of Funds I
Alter 3 months of dechne, ETF aseis grew In December Gains were drien predomtnanUy
by Size and lnternabonal asset classes
STATE STREET HIGHLIGHTS, DECEMBER 2008
State Street Global Advisors' (State Street's) US ETF market share was 30.0% as of month end. an
ETF Snapshot State Street Global Advisors http://statestreetspdrs .comisnapshotslbooks/print-vi ewi29
increase of 4.0% since the beginning of the year.
o Despite steep losses in the equity and credit markets, State Street saw $70BN in combined net
flows into the SPDR@ ETF familyfor 2008, raising assets by $2BN to $160.1 BN.
State Street introduced the newly redesignedspdrscom; visit www.spdrs.com today to:
o View performance data, holdings, and index information;
o Download fact sheets and other literature supporting our full family of SPDR" ETFs;
o Create and analyze ETF portfolios with our online tools; and
o Leverage premium content and educational resources through a simple registration process that
offers full access to SPDRs.com and SPDRU.com, our online educational resource exclusively
designed for Investment Professionals. I For more information and afull prospectus covering our SPDR'funds, please visit www.spdrs.com.
-
ETF Snapshot: State Weet Global Advisors http://statestreetspdrs .comisnapshots/books/print-vi ewi29
ASSET CLASSES - OVERALL
The S8P 500@gained 1 .I% in December, but fell 37% for the year. MSCl EAFE@ gained 6.0% for
the month in USD terms but closed down 43.0% for the year. The Barclays Capital U.S. Treasury
Index rose 3.4% in December, gaining 13.7% for the year, while the Lehman US Aggregate Index
increased 3.7% and rose 5.2% in 2008. Gold climbed to $869.75 an ounce, an increase of 6.8%
from last month's close.
Nine of the twelve categories gained assets with Size and International ETF assets gaining the most,
$25.7BN and $14.6BN, respectively.
Sector assets lost $1.4BN, or 2.8%.
~
~
FIGURE 2: CHANGE IN ETF ASSETS AND NUMBERS BY TYPE
CATEGORY
! BROAD
cormoom
CURRENCY
DNDENOlFLMDAMENTAL
FED INCOME
GLOBAL
INTERNATIONAL
IMlERSElLMRAGEO
SECTOR
SEE
SPECWLTY
STYLE
TOTALS
~
DECEMBER
CURRENT
Ems TF
10 514,322
22 532,854
19 $3.393
106 59.582
52 556,459
23 $3.843
131 51W,015
104 521,711
118 550,368
33 5175,400
83 57.208
46 554,376
747 $533.532
NOVEMBER A
. 51,507 11.8
- 54,269 14.9
-546 -1.3
1 5421 4.6
- S6,m 12.1
$246 6.9
- 514,638 16.4
10 -a 0.0
-1 41,436 -2.8
- $25,699 17.2
2 $943 15.1
- 54,240 8.5
12 $56.564 11.9
MD A
- -51,622 -10.2
2 $7,197 28.1
8 -5129 -3.7
5 -54,841 -33.6
4 $21,694 62.4
10 -$1,401 -26.7
42 -W,932 -36.9
42 512,100 125.9
-20 -57,335 -12.7
2 -521,520 -10.9
25 4236 -3.2
-2 -517,113 -23.9
118 -t74.141 -12.2
SlZElSTYLE
The majority of gains was concentrated in the Large Cap categoty with a gain of $21.4BN, or 17.5%.
FIGURE 3: CHANGE IN ETF ASSETS AND NUMBERS BY MARKET CAPlSME
DECEMBER NOVWER A MD A
=ET ASSET CURRENT
CATEGORY ETFs &SETS gs @$r CHANGE yMy CHANGE
(MM) (xl Vd
ALLCAP 10 514,322 - 51,507 11.8
SEE - LARGE 16 5143585 - 521,378 17.5
CAP
SEE - MICRO 3 $355 $67 23.2
CAP
SEE-MIOCAP 7 $15,525 - 51,753 12.7
SEE - SMALL 7 515,934 - $2,501 18.6
CAP
STYLE-ALLCAP 1 $440 $59 GROWTH
STYLE-ALLCAP 1 5414 VALUE
15.4
18.9
-51,622 -10.2
1 -515,958 -10.0
-5102 -22.3
-54,547 -2.27
1 -5914 -5.4
54 1.0
-5283 -40.6
STYLE-LARGE 8 519.367 - 51,317 7.3 -57,632 -28.3
GROWTH
TOTALS 89 s244,m - $31,446 14.8 - -540,266 -14.2
ETF Snapshot: State Street Global Advisors
DECEMBER
CURRENT
IMW
SME-LARGE 8 $15,181
VALUE
GROWTH
VALUE
GROWTH
CATEGORY ETFs ASSETS
STYLE - MID 7 $4,265
STYLE - MID 7 $4.380
STYLE-SMALL 7 $4.389
NOVEMBER A YIDA
ASSET
CHANGE #OF ASSETS #OF ASSETS
1% ETFs (MM) ETFS IMM)
- $1.702 12.6 42,650 -14.9
$83 2.0 -1 42,604 -37.9
$316 7.8 -$1.526 -25.8
$1 58 3.7 -$1.6@5 -27.7
$539 10.0 -1 4737 -11.0 STYLE-SMALL 7 $5.941 VALUE
TOTALS 89 $244,098 - $31,446 14.8 - -c10,256 -14.2
SECTOR
Assets were mixed with Materials and RElTs gaining the most in absolute terms
Energy fell $912MM, while Financials fell $626MM.
FIGURE 4 CHANGE IN ETF ASSETS BY US SECTOR
DECEMBER NOVEMBER A
CATEGORY
COMER
DISCRETIONARY
COWER
STAPLES I 1 ENRGY
FIWWLS
HEALTH CARE
INDVSTRWLS
MATERIAL
REK
TECHWLOGY
I
CURRENT ASSET
ASSETS Tr CHANGE
(MM) ('N ETFS
8 $1,637
10 $3,569
11 $7,618
15 $11,216
18 $5,001
9 $2,348
7 $4,331
11 $5.965
23 $5.807
$62
$378
-5912
-5626
$22
-5134
5594
$1 86
-1 -5171
3.9
-9.6
-10.7
-5.3
0.4
-5.4
15.9
3.2
-2.9
ASSET
1%
#OF ASSETS
ETFs (MM)
$30 1.9
$357 11.1
-54,837 -38.8
1 $4.072 57.0
.I5 -SI2 -9.3
-$1.054 -31.0
$127 3.0
-6 -$749 -11.2
43,888 -40.1
WILKIES 6 $2,875 479 -2.7 -$sal -23.5
-20 47,336 -12.7 TOTALS 118 $50,368 -1 -11,436 -2.8
MANAGER AND FUND DETAIL
The top three managers in the US ETF marketplace were: Barclays Global Investors (BGI); State
Street; and Vanguard. Collectively, they accounted for approximately 86.8% of the US-listed ETF
market
FIGURE 5 US ETF ASSETS BY MANAGER
DECEMBER 2008 YIDA
#OF ASSETS MARKET #OF ASSETS MARKET
ETFs (MMI SHARE(% ETFs IMW SHARE ('4 MANAGER
STATE STREET 80 516Q134 30.0 15 $2,029 4.0
ALPS 1 $5 1 $5
BGI 178 $257,671 48.3 24 -$71,409 -5.8
3
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American Core Realty Fund, LLC
PEFFnpMANrF HlfTORY (PRELIMINARY)
Cross of Fees I
Income Return 1 .03% 4.38% 5.01 'lo 5.1 4 % 4.93%
Appreciation Return -8.56% -9.37% 2.14% 5.1 8% 5.06%
Total Return -7.53% -5,30% 7.22% 1 0.5 1 % 10.16%
Income Return 0.80% 3.43% 4.05% 4.14% 3.93%
Appreciation Return -8.56% -9.37% 2.14% 5.18% 5.06%
Total Return -7.76% -6.1 9% 6.25% 9.47% 9.1 3%
lnceplion Date: November 21, 2003
'Annualized
PERFORMANCE DISCLAIMER
The American Core Realty Fund refurns above include leveraged returns before Igrorr) and alter lneO the deduction of invertmenf management leer and reflm the
reinvestment of -me income. The above returns are calculated at the Fund lwel and may not be refleaive of the actual performance re~mr experienced by any one
inmtor. The returns abwe are preliminary and rubjm to revision. The rum of annualized component returns may not equal the mal return due TO the chain-linking
of quaneerly returns. Past performance is not P guarante of future results and it is impanant fo understand that Imwrtments 01 the hjpe made by the Fund pay the
potential for loss of capital over any time period.
A
F\MARKETINC_DEPnPerformanceV008\4~8~merica" Core Realty Fund. Preliminan/ 4Q08 Perforrnance.doc
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I 3QOS Snapshot
~mdpmAkasdsepternber30,m investment performance as of September 30,2008 (Fund)'
Gm& valw [Wok $WlO.l35 .-
Net&valw~ooo): $2,045,103 Total (gross of fees) -9.54% 0.79% 8.31% 10.37%
Cum longterm levem 59% Total (net of management fees) -9.93% -0.48% 6.47% 8.03%
Year to date One year Since inceptionZ .~ Quarter
To ow clients:
Over the past six months we have all lived through virtually unprecedented volatility in equity. fixed income and com-
modities markets. as well as extraordinary steps taken by central banks and governments to stabilize financial markets
and banking systems, and cushion the blows to economies around the world. In the midst of this maclslrom, the
JPMorgan Infrastructure Investments Fund ("the Fund) reached a fundraising milestone in the third quarter of approxi-
mately $3 billion in total investor commitments. The Fund's portfolio of monopoly assets continue to perform in line
with, or better than, expectations, resulting in increased valuations and positive performance when mcasurcd in the cur-
rency ofthe countries where our assets are located. However. we did not escape the volatility of the past six months
completely unscathed. As a result of rapid appreciation of the US dollar against the pound sterling (which depreciated
approximately I I% versus the US dollar in the third quarter alone), the Fund delivered a total gross return of -9.54%
for the quarter ended September 30,2008. in US dollar terms. The Fund's since inception gross total return in US dollar
terms is 10.37%.
On July II, 2008. the Fund invested approximately $190 million to acquire a 45% equity interest (with co-equal gover-
nance rights) in Southwest Generation (.SWG). a portfolio of gas-fired contracted power gcncration plants that is
diversified across the western United States. SWG is comprised of scven facilities \r,ith a total existing generating
capacity of 914 megawatts of power, and has potential for expansion.
On July 23, 200R. thc Fund invested approximately $25 million in Southern Missouri Natural Gas ("SMNG"). a 450-
mile regulated natural gas distribution system with operations in the Midwcstern state of Missouri. This privately-nego-
tiated initial investment in equity and senior notes of SMNG resulted in the Fund acquiring a 98% controlling interest in
the business. The Fund invested an additional $15 million in early Octobcr, with a further $20 million in SMNG equity
and senior notes planned for the first half of 2009, to provide growth capital for management's expansion plans.
The Fund made a distribution ofapproxirnately SI3 million to investors in late September, representing cash received
from second quarter operations at Electricity North Wesi and Zephyr Investments Limited. Our fourth and final distnbu-
tion of 2008. of approximately $42 million, will bc made on December 30th.
Looking ahead at the fourth quarter, we are plcased to announce that the Fund has entcrcd into a definitive agreement to
make a $260 million equity investment in Coastal States Wind Holdings. a ponfolio ofwind farms with a total generat-
ing capacity of354 megawatts. The three wind farms havc long-term contracted cashflows. environmentally advanced
technologies, and an experienced wind generation operatorlpartncr. The portfolio is geographically diversified across
the US with facilities and connections to transmission gnds located in New York. Texas. and Oregon. This acquisition
marks the Fund's first investment in the US wind generation market.
The Fund has also entered into a purchase agreement to makc an investment in the approximate amount ofA$345 mil-
lion (US$237 million) that will result in an equal joint venture co-ownership interest of a 99-year concession to operate
the Cairns and Mackay Airports located in Queensland, Australia. in a transaction that marked the last major Australian
airport privatization opportunity. The Fund pamered with Australian-based Hastings Fund Management. which is also
our partner in Southwest Generation.
We wish to thank you for your commitment to the Fund and we look fonvard to sharing iurthcr details in subsequent
reports.
Mark A. Weisdorf
CIO and Portfolio Manager
Please coni~ci Lon) Kvhn 01 212-648-2227 (l~-:a.k"h~~~jpmo~~X.~~m) or Lori Pollon m 212~648-2IY2
/larrren.opollon~~~~orb.an.roml with ov quesliom obvir1 the Fzmd.
FOR QUALIFIED INVESTORS ONLY. This fact rhcct has bccn prcparcd for inrerlors who quahfy 10 L~YCS~ m fhlr 'ypc of Fund. Gcncmll) thcy
would include inveslors who an "Accdited I~Y~PIoR" for purposcs ofthc U.S SccuriU~s kf or1933 and arc "Qualcficd Purcharcri' for lhc
pyrpos ofthc U S. lnv~srmenl Company Act of 1940. This sheel may not bc rcproduccd or vscd as sdcs lhte~~l~rc wilh rncmben 01 the gencrai
public. A" invcstmcnf dccision with mpcd IO thc Fund should bc hoed solely on fhc mfomation confamcd ~n thc ConBdcntial Prirate Placemen1
Mcrnorandum for thc Fund. thc Chaner Docummls and thc Subscription Bcnklcl J.€?Morgaj
J.P. Morgan lnsim~i~nal lnvestmcnfs. inc. Owrnkr FiNRNSIPC) IS thc Fund's placcmant agcnl Asset Management
PALM BEACH GARDENS POLICE PENSION FUND
BOARD OF TRUSTEES
COMBINED INVESTMENT POLICY STATEMENT
FOR ICC CAPITAL MANAGEMENT &
RHUMBLINE GLOBAL ADVISORS
Amended Julv 2008
1. PURPOSE OF INVESTMENT POLICY STATEMENT
The Pension Board Trustees maintain that an important determinant of future investment returns is the
expression and periodic review of the Fund's investment objectives. To that end, the Trustees have
adopted this statement of Investment Policy.
In fulfilling their fiduciary responsibility, the Trustees recognize that the retirement system is an essential
vehicle for providing income benefits to retired participants or their beneficiaries. The Board also
recognizes that the obligations of the Fund are long-term and that investment policy should be made with
a view toward performance and return over a number of years. The general investment objective, then, is
to obtain a reasonable total rate of return - defined as interest and dividend income plus realized and
unrealized capital gains or losses - commensurate with the Prudent Investor Rule and any other
applicable statute or requirement.
A reasonably consistent and adequate return, protection of the assets against the inroads of inflation and
safety of the assets are paramount. However, the volatility of interest rates and securities markets make it
necessary to judge results within the context of several years rather than over short periods of one or two
years or less. Performance will be measured quarterly.
II. INVESTMENT PERFORMANCE OBJECTIVES - QUARTERLY EVALUATION MECHANISMS
The below listed performance measures will be used as objective criteria for evaluating effectiveness of
the Investment Managers:
A. Total Return of the Combined Managers:
1. The performance of the total fund will be measured each quarter for rolling three and five year
periods. These periods are considered sufficient to accommodate the different market cycles
commonly experienced with investments. The return of this portfolio is expected to exceed the
return of a portfolio comprising:
Since Inception (3/31/92) until 11/30/95 -
25% S&P500,60% Lehman Brothers Aggregate Bond (LBAB), and
15% Citigroup Treasury Bill - 3 month (TBill);
From 12/1/95 until 11/30/96 -
30% S&P500,6O% LBAB and 10% TBill;
1
From 12/1/96 until 11/30/97 -
40% S&P500,50% LBAB, and 10% TBill;
From 12/1/97 until 12/31/98 -
60% S8P500 and 40% LBAB;
rrom 1/1/99 until 6/30/00 -
30% Russell 1000 Growth, 30% Russell 1000 Value, and 40% LBAB;
From 7/01/2000 until 12/31/2002 the combined performance is expected to exceed the
return of a portfolio comprising:
60% S&P500 and 40% LBAB.
From 01/01/2003 until 12/31/2003 the combined performance is expected to exceed the
return of a portfolio comprising:
50% S&P500,10% S&P MidCap 400 and 40% LBAB.
From 01/01/2004 until 09/30/2006 onwards the combined performance is expected to
exceed the return of a portfolio comprising:
40% S&P500,10% S&P MidCap 400,10% S&P SmallCap 600 and 40% LBAB.
From 10/01/2006 until 09/30/2007 the combined performance is expected to exceed the
return of a portfolio comprising:
35% S&P500,10% S&P MidCap 400,10% S&P SmallCap 600,5% MSCl EAFE and
40% LBAB.
From 10/01/2007 until 9/30/2008 the combined performance is expected to exceed the
return of a portfolio comprising:
25% S&P500, 10% S&P MidCap 400,10% S&P SmallCap 600, 10% Russell 1000
Growth, 5% MSCl EAFE and 40% LBAB.
From 10/01/2008 onwards the combined performance is expected to exceed the
return of a portfolio comprising:
25% SBP500, 10% S8P MidCap 400,10% S8P SmallCap 600,10% Russell 1000
Growth, 10% MSCl EAFE and 35% LBAB.
B. For ICC Capital Management.
The performance of the total fund will be measured each quarter for rolling three and five year periods.
These periods are considered sufficient to accommodate the market cycles commonly experienced with
investments. After July 1, 2000 the return of this portfolio is expected to exceed the return of the LBAB.
After October 1, 2008 the return of this portfolio is expected to exceed the return of 78% of the LBAB Index
and 22% of the Russell 1000 Growth Index.
C. For Rhumbline Global Advisors
The performance of the total fund will be measured each quarter for rolling three and five year periods.
These periods are considered sufficient to accommodate the market cycles commonly experienced with
investments. After July 1, 2000 until December 31, 2002 the return of this portfolio is expected to match
the return of the SBPSOO Index. From January 1, 2003 until December 31, 2003 the return of this portfolio
is expected to match the return of an 80% S&P500 and 20% S&P MidCap 400 policy. After January 1,
2004 the return of this portfolio is expected to match the return of a 60% S&P500, 20% S&P MidCap 400
and 20% S&P SmallCap 600 policy. After October 1, 2007 the return of this portfolio is expected to match
the return of a 56% S&P500, 22% S&P MidCap 400 and 22% S&P SmallCap 600 policy.
D. For International Equity Mutual Funds
After October 1, 2006 the return of this portfolio, which is made up of three (3) Vanguard Mutual
Funds, is expected to exceed the return of the MSCl EAFE Index Fund.
F For Each Investment Manager:
1. Relative to other similar investment managers, it is expected the manager's performance with
regard to the total return of the fund will be in the top forty percent (40%) of the appropriate
Performa Universe over three to five year periods. When performance is below the standard,
the manager will report to the Trustees the reasons for the occurrence and the steps taken to
avoid reoccurrence.
a. On an absolute basis, it is expected that the total return of the fund will equal or exceed the
actuarial earnings assumption, and equal or exceed the Consumer Price Index, plus 3% over
three to five year periods. When performance is below these standards, the manager will
report to the Trustees the reasons for occurrence and the steps taken to avoid reoccurrence.
b. From time to time the performance monitor may adjust or change the evaluation indices andlor
universes so as to more adequately measure and evaluate the investment manager's particular
equity and fixed income investment style. Any such adjustment or change would be
communicated to both the Investment Manager and the Pension Board Trustees at the time of
said adjustment or change.
111. INVESTMENT GUIDELINES
A. Authorized Investments
1. To include Certificates of Deposit up to a $100,000 maximum value and money market deposit
accounts of a national bank, a state bank or a savings and loan association insured by the
Federal Deposit Insurance Corporation.
2. Obligations issued by the United States Government or obligations guaranteed as to principal
and interest by the United States Government.
3. Stocks, bonds or other evidences of indebtedness issued or guaranteed by a corporation
organized under the laws of the United States, any state or organized territory of the United
States, or the District of Columbia, provided:
i. Equities will be traded on one or more of the following recognized national exchanges:
1. New York Stock Exchange
2. American Stock Exchange
3. The NASDAQ Stock Market
b. The individual issue meets the following rating criteria:
1. Fixed income: Standard & Poor's, AAA, AA, A or Moody's Aaa, Aa, A
2. Equities: Value Line Investment Survey Rank for Safety, 1, 2, and 3 or Standard &
Poor's A+, A or A-
3. Money Market: Standard & Poor's A1 or Moody's P1
Not more than five percent of the Fund's assets shall be invested in the common
stock or capital stock of any one issuing company, nor shall the aggregate
investment in any one issuing company exceed five percent (5%) of the outstanding
capital stock of the company.
Fixed income investments shall mean publicly traded debt securities issued by the
United States Government or agencies of the United States Government, sovereign
and supranational debt, domestic corporations and domestic banks and other
United States financial institutions or mortgage/asset backed securities. "Yankee
bonds" (debt securities issued by foreign entities denominated in U.S. dollars which
are traded domestically) are also available for investment.
Use of To Be Announced (TBA) Securities.
All investments in TBA securities shall be issued by a Federal Agency or be of
investment grade. Cash equivalent balances to satisfy the transaction must be
available at the time of purchase and held until final settlement.
Prohibited Securities.
The following types of asset backed securities and collaterized mortgage obligations
are not permissible for investment using the Fund's assets without the Trustees'
prior written approval:
1. Securities paying Interest Only (IDS).
2. Securities representing Principal Only (Po's).
3. Accrual Bonds (z-tranches).
4. Inverse or Reverse Floaters with a multiplier greater than 1 .OO or less than
5. Asset pools not domiciled in the United States.
6. Collateralized Bond Obligations (CBO's)
7. Collateralized Debt Obligations (CDO's)
8. Collateralized Loan Obligations (CLO's)
-1 .oo.
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9. Companion bonds.
4. Mutual Funds, commingled stock, bond or money market funds whose individual investments
are restricted to securities meeting the criteria expressed in 111.
5. Bonds issued by the State of Israel
6. The use of unhedged andlor leveraged derivatives will not be allowed in any form.
7. International Equity Stocks or Mutual Funds may be purchased
B. Limitations
Investments in corporate common stock, international equities, convertible bonds and convertible
preferred issues should be targeted at sixty percent (60%) of the fund at market value and shall not
exceed seventy percent (70%) of the fund assets at cost. No restriction is placed on the Fund's
percentage holdings of bonds or cash.
IV. COMMUNICATIONS AFFECTING BOTH MANAGERS
A.
0.
C.
D.
F.
The custodian shall apprise the Trustees of all transactions and shall forward all proxies to the
Managers within five calendar days. On a monthly basis, the custodian shall supply an accounting
statement which will include a summary of all receipts and disbursements and the cost and the
market value of all assets. On a quarterly basis, the Managers shall provide a written report
affirming compliance with the security restrictions of Section 111 above and a summary of common
stock diversification and attendant schedules. In addition, the Managers shall provide each quarter a
report detailing the fund's performance, adherence to the investment policy, forecast of the market
and economy, porlfolio analysis and current assets of the Trust. Written reports shall be mailed to
the Trustees within 60 days of the end of the quarter. The Managers will provide immediate written
and telephone notice to the Chairman of the Board of Trustees and the Performance Monitor of any
significant market related or non-market related event, specifically including, but not limited to the
resignation, termination or incapacity of any senior personnel.
The Managers will disclose any securities which are not in compliance with Section 111 in each
quarterly report.
If the fund owns securities, which complied with Section 111 at the time of purchase, that are
subsequently down graded below permissible levels, the Managers will dispose of such securities in
the normal course of business.
The Managers' quarterly reports will list separately any security whose value has diminished twenty-
five percent (25%) or more from purchase price.
The Trustees intend to meet periodically with the monitoring service's representative to review the
Performance Report. The Trustees will meet with the Investment Managers and appropriate outside
consultants to discuss performance results, economic outlook, investment strategy and tactics and
other pertinent matters affecting the Fund as needed.
5
G. The Managers shall report to the Trustees on an annual basis how each proxy was voted, the issue
as to each, and the date the proxy was voted. If a proxy was not voted, the Managers shall provide
a written statement indicating the reason that particular proxy was not voted.
The Trustees may wish to recapture as many of their commission dollars as possible consistent with
obtaining the "best execution" as defined in ERISA Technical Release 86-1 which is made part of
this agreement by reference.
When there is any change in ownership of the investment management firm, the new firm will
provide the Trustees with an audited balance sheet and will keep the Trustees fully informed of all
material events. This is to include, but not be limited to, the loss of any clients, deterioration of the
financial health of the firm and all employment contracts.
H.
I.
V. CRITERIA FOR INVESTMENT MANAGER REVIEW
The Board wishes to adopt standards by which judgments of the ongoing performance of an Investment
Manager may be made. With this in mind, the following are adopted:
If, at any time, any one of the following is breached, the Managers will be warned of the Board's serious
concern for the Fund's continued safety and performance.
1. Four consecutive quarters of total fund performance below the fiftieth percentile (50*) in the
Performa Mutual Fund Manager performance rankings.
2. Standard deviation for the Fund in excess of one hundred-twenty percent (120%) of the investment
policy.
3. Loss by the Manager of any senior investment personnel.
4. Any change in basic investment philosophy by the Manager
5. Failure to attain a sixty percent (60%) vote of confidence by the Board members
6. Failure to observe the security quality restrictions of Section 111
7. Failure to maintain a positive three-year alpha.
This shall in no way limit or diminish the Trustee's right to terminate the Manager at any time for any
reason.
VI. FLORIDA STATUTES AND APPLICABLE CITY ORDINANCES
If at any time this document is found to be in conflict with Florida Statutes, or applicable City Ordinances,
the Statute and Ordinances shall prevail.
VII. REVIEW AND AMENDMENTS
It is intended the Investment Managers and Trustees review this document periodically. If at any time the
Manager feels that the specific objectives defined herein cannot be met, or the guidelines constrict
6
performance, the Trustees should be so notified in writing. By the initial and continuing acceptance of this
investment policy statement, the Investment Manager concurs with the provisions of this document.
For ICC Capital Management Date
For Rhumbline Global Advisors Date
For the Pension Board of Palm Beach Gardens Police Date
...
Palm Beach Gardens Police Officers Pension Fund
Summary of October 1,2008 Actuarial Valuation Report
(Final Report will be completed by February 27th.)
Reauired Contributions
For FYE
Total Required Contribution
9/30/20 1 0
$ 5,263,625
% of Payroll 50.93 %
Estimated Member Contribution $ 888,812
% of Payroll 8.60 %
Allowable Credit for State Contribution $ 412,644
% of Payroll 3.99 %
City Contribution
% of Payroll
$ 3,962,169
38.34 %
Covered Payroll $ 10,335,018
For FYE
9/30/2009
$ 4,567,398
48.79 %
805,075
8.60 %
412,644
4.41 %
3,349,679
35.78 %
9,361,341
Difference
2.14 Yo
83,737
0.00 %
0
(0.42) %
612,490
2.56 %
973,677
Exoerience Gain (Loss1 for 2008
$ (1 ,I 79,690) due to investments
(2,196,330)
(3,376,020) total
due to other sources, primarily salary increases
Investment Return: (13.6) % on market value of assets
3.6 % on actuarial value of assets
Average Salary Increase: 13.8 % vs. 7.5% expected
Funded Ratio
10/1/2008 53.3 %
10/1/2007 53.2
10/1/2006 48.9
Unfunded Actuarial Accrued Liability
10/1/2008 $ 28.2 million
1 O/ 1 /2007 24.4 million
1 O/ 1 /2006 23.8 million
Note: The 2008 results listed above are not final. We will prepare final figures once we receive the
audit report for 2008.
Prepared by Gabriel, Roeder, Smith and Company
February 13,2009
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Investment Review
to the
Trustees
of the
Palm Beach Gardens
Police Pension Fund
February 13,2009
Denise D'Entremont
Marketing Director
dad@indexmngr.com
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TABLE OF CONTENTS
I. S&P 500 Pooled Index Fund
11. S&P 400 Pooled Index Fund
111. S&P 600 Pooled Index Fund
IV. Benchmark Returns
V. RhumbLine Update
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PALM BEACH GARDENS POLICE PENSION FUND
MARKET VALUE SLLMMARY
S&P 500 POOLED INDEX FUND - Large-Cap Core
Original Contribution (6/27/00) $5,461,008.87
Additional Contributions (11) x lPv $2,481,187.37
Withdrawal (2) $2,561,000.00
Net Investment $5,381,196.24
Market Value as of 1/31/09 $4.333.112.04
S&P 400 POOLED INDEX FUND - Mid-Cap Core
Original Contribution (11/20/02) $1,000,000.00
Additional Contributions (3) + 160" $419,759.19
Net Investment $1,419,759.19
Market Value as of 1/31/09 $1.578.704.55
S&P 600 POOLED INDEXFUND - Small-Cap Core
Original Contribution (10/14/03) $1,000,000.00
Additional Contributions (5) \(DW $792,744.30
Net Investment $1,792,744.30
Market Value as of 1/31/09
* * * * * *
TOTAL NET INVESTMENT: $8,593,699.73
S&P 500 Pooled Index Fund $4,333,112.04
S&P 400 Pooled Index Fund $1,578,704.55
S&P 600 Pooled Index Fund $1,615,852.67
TOTAL ASSETS MANAGED as of 1/31/09 $7.527.669.26
1
PALM BEACH GARDENS POLICE PENSION FUND
PORTFOLIO RETURNS
S&P 500 POOLED INDEX FUND - Large-Cap Core
Date ofInception: June 27,2000
PORTFOLIO m /. 32-
2009 (YTD) -8.38%
January -8.38
2008
Q4
Q3
42
Q1
2007'
2006
2005
2004
2003
2002
2003
2000
Q4
Q3
-36.57% k$+ ra(f
-21.61
-8.21
-8.40
-9.40
5.56%
15.86%
4.89%
10.86%
28.59%
-21.91%
-11.67%
-8.25%
-7.55
-0.75
S&P 500 INDEX
-8.43%
-8.43
-37.00%
-21.94
-8.37
-8.43
-9.44
5.49%
15.79%
4.88%
10.88%
28.68%
-22.10%
-11.89°/o
-8.73%
-7.84
-0.97
-4.72%
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CHARACTERISTICS
(as ofJanuary 31,2009)
Number of Holdings
Weighted Market Cap ($MM)
P/E! Ratio
P/E Ratio
Dividend Yield (%)
5 Year Earnings Growth (“A)
Return on Equity (“A)
Beta
PORTFOLIO
500
72,709
1.5
11.2
3.11
15.80
21.48
1.00
S&P 500 INDEX
500
72,080
1.5
11.2
3.11
15.77
21.43
1 .oo
S&P 500 POOLED INDEXFUND
(as ofJanuary 31,2009)
Assets:
Number of Participants:
% of Fund:
$980.5 mion
33
0.43%
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S&P 500 INDEX
SECTOR PEAFORMANCE
(as ofDecember 32,2008)
SECTORS t of STOCKS WEIGHT
Consumer Discretionary
Consumer Staples
Energy
Financials
Health Care
Industrials
Information Technology
Materials
Telecommunication Services
Utilities
Totals:
80
41
39
85
54
58
74
27
9
33
500
8.35%
12.79
13.25
13.90
14.72
10.99
15.17
2.91
3.82
4.11
100.00%
2008
RETURNS
-33.43%
-15.45
-34.81
-54.72
-22.89
-39.87
-42.97
-45.08
-30.47
-29.07
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Exxon Mobil Corp
Proder & Gamble
General Electric
AT&T Inc
Johnson &Johnson
Chevron Corp
Microsoft Corp
Wal Mart Stores
Pfizer Inc
J P Morgan Chase
Totals:
TOP 10 HOLDINGS
(as of December 32,2008)
X OF SHARES
680,995
399,817
1,406,087
788,929
373,310
274,465
1,024,153
299,578
900,465
499,704
6,647203
WEIGHT
5.14%
2.34
2.15
2.12
2.11
1.92
1.88
1.59
1.51
1.49
22.24%
2008
RETURN
-13.14%
-13.77
-53.98
-28.01
-7.77
-18.31
-44.39
20.00
-16.85
-25.13
~
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TOP 5 PERFORMERS FOR S&P 500 RVDEX
(us of December 31,2008)
2008
COMPANY INDUSTRY RETURN WEIGHT
Family Dollar Stores Inc Retail 38.62% 0.05%
UST Inc Tobacco 31.96 0.13
H&R Block Inc Business Services 25.77 0.09
Amgen Drugs & Medicine 24.35 0.77
Wal Mart Stores Inc Retail 20.00 1.59
BOTTOM 5 PERFORMERS FOR S&P 500 INDEX
(as of December 31,2008)
COMPANY INDUSTRY
American Int'l Group Insurance
XL Cap Ltd Insurance
American Cap Ltd Miscellaneous Finance
National City Corp Banks
Genworth Finl Inc InSUranCe
2008
RETURN WEIGHT
-97.25% 0.05%
-92.15 0.01
-89.05 0.01
-88.75 0.05
-88.48 0.02
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POATFOLIO COMMISSIONS
(January 1 -December 32,2008)
Brokers Utilized
Total Commissions:
Fund's Pro-rata Estimate:
Total Shares Traded:
Average Commissions per Share:
ITG & Instinet
$73,302
$315
4,101,122
1.84 /share
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PORTFOLIO RETURNS
S&P 400 POOLED INDEXFUND - Mid-Cap Core
Date of Inception: November 20,2002
& 231
2009 (YTD)
January
2008
Q4
Q3
Q2
Q1
2007
2006
2005
2004
2003
2002
December
November*
Since Inception (Annualized)
‘Partial Return (11/20/02 - 11/30/02)
PORTFOLIO S&P 400 INDEX
-7.23%
-7.23
-35.96%
-25.28
-10.82
5.42
-8.83
8.02%
10.20%
12.02%
16.52%
35.44Oh
-1.17%
-4.09
3.04
3.61%
-7.25%
4% -7.25
-36.23%
-25.55
-10.87
5.43
-8.85
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7.98%
10.32%
11.78%
16.49%
35.62%
-0.96%
-4.11
3.29
3.55% xd
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CHARACTENSTICS
(as of January 31,2009)
PORTFOLIO
Number of Holdings 400
Weighted Market Cap ($W 2,229
P/B Ratio 1.2
P/E Ratio 12.9
Dividend Yield (%) 2.31
5 Year Earnings Growth (%)
Retum on Equity (%)
Beta
12.52
15.26
1.41
S&P 400 INDEX
400
2,193
1.2
12.9
2.31
12.49
15.24
1.41
S&P 400 POOLED INDEX FUND
(as ofJanuary 31,2009)
Assets: $361.1MM
Number of Participants:
% of Fund
23
0.41%
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SECTORS
S&P 400 INDEX
SECTOR PERFORMANCE
(as of December 31,2008)
Consumer Discretionary
Consumer Staples
Energy
Financials
Health Care
Industrials
Information Technology
Materials
Telecommunication Services
Utilities
Totals:
# of STOCKS WEIGHT
73
16
25
72
40
62
59
30
2
21
400
13.83%
4.51
6.28
22.07
11.28
14.31
12.28
6.68
0.58
8.18
100.00%
2008
RETURNS
-38.95%
-24.88
-57.46
-27.20
-33.33
-36.67
-40.98
-44.49
-50.20
-20.33
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TOP IO HOLDINGS
(as ofDecember 31,2008)
NAME
Everest Re Group
Vertex Pharmaceuticals
Health Care Reit Inc
Berkley W R Corp
OReilly Automotive
New York Bancorp
Martin Marietta Materials Inc
MDU Res Group Inc
SAIC Inc
Church & Dwight Inc
Totals:
t OF SHARES
35,461
87,800
60,400
80,912
78,500
200,826
24,195
107,125
118,300
40,927
834,446
WEIGHT
0.70%
0.69
0.66
0.65
0.63
0.62
0.61
0.60
0.60
0.60
6.36%
2008
RETURN
-22.33%
30.78
0.30
4.91
-5.21
-27.73
-25.74
-20.04
-3.18
4.42
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TOP 5 PERFORMERS FOR SbP 400 INDEX
(as of December 31,2008)
2008
COMPANY SECTOR RETURN WEIGHT
Valeant Pharmaceuticals Drugs & Medicine 91.31% 0.28%
Dollar Tree Inc Retail 61.27 0.57
First Niagara Finl Group Banks 39.76 0.29
99 Cents Only Stores Retail 37.31 0.07
Thoratec Corp Drugs & Medicine 36.06 0.27
BOTTOM 5 PERFORMERS FOR SbP 400 INDEX
(as of December 31,2008)
2008
COMPANY INDUSTRY RETURN WEIGHT
Pacific Sunwear Retail -88.73% 0.02%
Louisiana Pac Corp Paper Products -88.30 0.02
Patriot Coal Corp Miscellaneous -88.21 0.06
Belo A H Corp Media -88.05 0.02
iMymetrix Inc Business Services -87.08 0.03
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PORTFOLIO COMMISSIONS
(January 1 -December 31,2008)
Brokers Utilized:
Total Commissions:
Fund's Pro-rata Estimate:
Total Shares Traded:
Average Commissions per Share:
ITG, Instinet & Jefferies
$151,318
$620
8,048,883
18q hare P
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PALM BEACH GARDENS POLICE PENSION FUND
PORTFOLIO RETURNS
SbP 600 POOLED INDEXFUND - Small-Cap Core
Date of Inception: October 14,2003
2009 WD)
January
2008
Q4
Q3
Q2
Q1
2007
2006
2005
2004
PORTFOLIO S&P 600 INDEX
-12.48% -12.70%
-12.48 1% -12.70
-30.76% ,+31
-25.00
-1.36
0.84
-7.20
-0.18%
15.7l%
8.81%
22.61%
-31.07%
-25.17
-0.85
0.40
-7.46
-0.30%
15.12%
8.68%
22.65%
2003 5.67% 5.90%
December 1.59 1.77
November 3.61 3.78
October* 0.39 0.26
Since Inception (Annualized) 4.44% -0.65% x 2’
‘Partial Return f10114103 - 10/31/03)
CHAM CTERISTICS
(as oflanuay 31,2009)
Number of Stocks:
Weighted Market Cap ($MM):
P/B Ratio:
.. :. . 1 P/E Ratio: .. . ../ .; :‘.q
, ’ j-::: ::.,$ ’ I’
..i : t . ~ .. . .I I ., Dividend Yield (“3):
5 Year Earnings Growth Rate (“3):
Return on Equity (%)
Beta:
DebtBquity Ratio
PORTFOLIO
600
835
1.1
13.3
1.91
11.98
13.01
1.49
33.60
S&P 600 INDEX
600
805
S&P 600 POOLED INDEXFUND
(as of January 31,2009)
Assets:
Number of Participants:
% of Fund
$28.2MM
13
5.4%
1.1
13.2
1.91
11.97
12.91
1.50
33.76
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SECTORS
S&P 600 INDEX
SECTOR PERFOZXMANCE
(as ofDecember 32,2008)
Consumer Discretionary
Consumer Staples
Energy
FinanCialS
Health Care
Industrials
Information Technology
Materials
Telecommunication Services
Utilities
Totals:
t of STOCKS WEIGHT
118
21
24
107
73
90
119
30
2
16
600
12.86%
3.57
4.26
21.19
13.70
19.04
15.77
3.84
0.19
5.58
100.00%
2008
RETURNS
-42.57%
-14.39
-46.90
-25.29
-27.21
-26.88
-39.72
-48.51
-49.33
-3.99
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TOP IO HOLDINGS
(as ofDecember 31,2008)
NAME # OF SHARES
Piedmont Natural Gas Inc
Itron Inc
Atmos Energy Corp
Landstar Sys Inc
Senior Housing Properties Trust
Watson Wyatt & Co
Immucor Inc
Proassurance Corp
New Jersey Resources COT
Clarcor Inc
Totals:
6,795
3,183
8,360
4,945
10,600
3.936
6,513
3,130
4,028
4,721
56,211
WEIGHT
0.71%
0.67
0.65
0.62
0.62
0.62
0.57
0.54
0.52
0.51
6.03%
2008
RETURN
25.49%
-33.58
-11.20
-8.51
-15.26
3.64
-21.80
-3.90
22.08
-11.78
4
TOP 5 PERFORMERS FOR S&P 600 INDEX
(as of December 32,2008)
2008
COMPANY SECTOR RETURN WEIGHT
Viopharma Inc Drugs & Medicine 63.98% 0.03%
Hot Topic Inc Retail 59.28 0.12
National Presto Industries Consumer Durables 58.74 0.12
First Bancorp Banks 57.43 0.25
Gentiva Health Services Business Services 53.68 0.26
BOTTOM 5 PERFORMERS FOR S&P 600 INDEX
(as of December 32,2008)
COMPANY
Crocs Inc
Champion EI pris
Arthrocare Corp
INDUSTRY
Apparel
Consumer D cable
Drugs & Medicine
2008
RETURN WEIGHT
-96.63% 0.03%
-94.06 0.01
-90.07 0.04
Flagstar Bancorp Inc Miscellaneous Finance -89.81 0.01
Corus Bankshares Inc Banks -89.36 0.01
5
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PORTFOLIO coMMI;ssIoNs
(January 1 -December 31,2008)
Brokers Utilized
Total Commissions:
Fund's Pro-rata Estimate:
Total Shares Traded
Average Commissions per Share:
lTG, Instinet & Jefferies
$20,446
$1,104
1,070,594
1.96 /share
6
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&POORS November 12,2008
Standard & Poor's Indices Versus Active
Funds Scorecard, Mid Year 2008
0 The S&P Indices Versus Active Funds (SPIVA) Scorecard report
performance comparisons corrected for survivorship bias, shows
equal- and asset-weighted peer averages, and provides measures of
style consistency covering actively managed US. equity, international
equity and fixed income mutual funds.
0 Starting with this report, we reintroduce an enhanced SPIVA with
broader asset class coverage. Data for enhanced SPIVA is from the
CRSP Survivor-Bias-Free U.S. Mutual Fund Database. To
accommodate CRSP release schedules, the new SPrVA will be
published semi-annually with a fourteen week lag.
0 Over five years ending June 2008, S&P 500 outperformed 68.6%
of actively managed large cap funds, S&P MidCap 400 outperformed
75.9% of mid cap funds and S&P SmallCap 600 outperformed 77.8%
of small cap hnds.
0 Among global equity funds, five-year results show S&P Global
1200 outperforming 70.1% of giobal equity funds, S&P 700
outperforming 86.5% of international equity funds, and S&P IFCI
Composite outperforming 73.9% of emerging market funds.
L Media Contacts
Dave Guarina
(212) 438-1471
.~ :,.: ;.,*~''; ,., :;:.?,::':!
0 Among fixed income funds, indices outperformed twelve of
thirteen categories over a five-year horizon. Only emerging market
bond funds outperformed their benchmark index.
D Funds disappear at a meaninghl rate. Over five years, 26.8% of
U.S. equity funds, 22.5% of global equity hnds and 24.7% of fixed
income funds have been merged or liquidated. This highlights the
importance of addressing survivorship bias in mutual fund analysis.
Standard 8 Poor's Indices Versus Active Funds Scorecard
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A Uniaue Scorecard for the Active Versus Passive Debtate
The Standard & Poor's Indices Versus Active Funds (SPIVA) Scorecard presents the
performances of actively managed mutual funds as compared to benchmark indices. It
reports c0verU.S. equity, international equity and fixed income categories. The
popularity of SPIVA stems from a few unique attributes:
Survivorship bias correction: Many funds might be liquidated or merged
during a period of study, However, for someone making an investment decision
at the beginning of the period, these funds are part of the opportunity set. Unlike
commonly available comparison reports, SPIVA removes this survivorship bias.
Apples-to-apples comparison: Fund returns are often compared to popular
benchmarks such as the S&P 500, regardless of size or style classification. An
appropriate comparison would be to measure a fund's returns against the returns
of a benchmark for that particular style and size category. SPIVA reports do
this.
Asset-weighted refurns: Average returns for a fund group are often calculatea
using only equal weighting, which results in the returns of a $10 billion fund
affecting the average in the same manner as the returns of a $10 million fund.
An accurate representation of how investors fared in a particular period can be
ascertained by calculating weighted-average returns, where each fund's return is
weighted by net assets. SPIVA reports show both equal- and asset-weighted
averages.
Style consisfency: SPIVA reports measure style consistency for each style
category across different time horizons. Style consistency is an important metric
because style drift (the tendency of funds to move away from their initial
investment categorization) can have an impact on asset allocation decisions.
Dafa Cleaning: SPIVA avoids double counting of multiple share classes in all
count based calculations, where only the share class with bigger assets is used.
Since this is meant to be a scorecard for active managers, index funds,
leveraged and inverse funds and other index-linked products are excluded.
SPIVA reports are the only comprehensive, periodic and publicly available sources of
such data. SPIVA reports can be found online at
Enhancements to SPIVA
SPIVA has been a popular keeper of statistics on the active versus passive debate fore more
than five years. Till first quarter of 2007, it was based upon the S&P Mutual Fund database, a
continuous, consistent, survivorship-bias free database. In 2007, that database lost much Of its
continuity and consistency following its sale and reshuctwing. Therefore, we had to seek
alternative data sources to which we could apply the SPIVA methodology.
Standard & Poor's Indices Versus Active Funds Scorecard
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The Center for Research in Security Prices (CRSP), a research center at the University
of Chicago, Graduate School of Business, is well-known for its survivorship bias fiee
databases used in academic research. The CRSP Survivor-Bias-Free US. Mutual Fund
Database is currently the only complete database ofboth active and liquidatdmaged
mutual funds. (That database used the S&P Mutual Fund database as itn source data and
had to be rebuilt with Lipper data since the sale of the S&P database.)
The data we use in enhanced SPIVA is drawn from the CRSP Survivor-Bias-Free US.
Mutual Fund Database. The fund categories we use in SPlVA are drawn from Lipper's
style classifications. Appendix A explains how the SPIVA categories map into Lipper
Classifications. CRSP updates its database with a three-month lag. Therefore, SPIVA
reports Will be published every six months, with a three month lag, and focus on longer-
term metrics.
The new SPIVA offers a few enhancements over its prior incarnation.
The use of a respected survivorship-bias free database provides a solid foundation
for the reports. The CRSP database sets the standard for academic research
databases and is widely used by researchers.
Fund category coverage has been expanded and streamlined to cover almost all
mainstream mutua! fund categories across U.S. equity, international equity and
fixed income.
The breadth of SPIVA has been expanded to cover more than 3500 unique fund
portfolios. (Reports 2,7 and 12 give precise counts used for each category in each
time period.)
-
U.S. Equity Funds
Over longer time horizons, indices continue to outperform active managers. For the
three years ending June 30,2008, the S&P 500 outperformed 57.5% of active large-cap
funds, the S&P MidCap 400 led 63.5% of mid-cap funds, the S&P SmallCap 600
outperformed 59.6% of small-cap funds and the S&P Composite 1500 led 53.7% of
multi-cap funds. Over the past five years, indices also outperfarmed active funds. The
S&P 500 outperformed 68.6% of active large-cap funds, the S&P MidCap 400 led
75.9% ofmid-cap funds, the S&P SmallCap 600 outperformed 77.8% of small-cap
funds and the S&P Composite 1500 outperformed 58.2% of multi-cap funds.
For the one-year period ending June 30,2008,59.2% ofactive large-cap funds
outperformed the S&P 500 Index and 56.3% of multi-cap funds outperformed the S&P
Composite 1500 Index. As the credit crisis unfolded last year, active managers who
were overweight in energy and materials and/or underweight fmancials and holding
higher than average cash positions outperfanned benchmark indices. The S&P Midcap
400 Index outperformed 63.5% of active mid-cap funds and the S&P SmallCap 600
outperformed 59.5% of active small-cap funds. At a more granular style box level,
results were a tie.
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Standard &Poor‘s Indices Versus Active Funds Scorecard
Looking at the real estate fund category, the S&P BMI U.S. REIT Index outperformed a
majority of active manager; over one, three and five year horizons.
International Eauitv Funds
As in the U.S. equity category, indices led a majority of active funds over longer time
horizons. Over three and five year horizons, the S&P Global 1200 outperformed
actively managed global funds by 61.5% and 70.1% respectively. Comparable figures
for S&P 700 versus international funds were 85.1% and 86.5%. (Wlobal” funds invest
in global equity markets including the U.S., while “International” funds invest in ex-
U.S. markets.)
The results for indices leading a majority of active funds persisted in less eficient
markets such as international small caps and emerging markets. The S&P Developed
Ex-U.S. SmallCap Index outperformed 54.3% and 55.3% of international small cap
funds for three- and five-year periods respectively. The S&P IFCI Composite index
outperformed 73.0% and 73.9% of active emerging market funds over three and five
years respectively.
Over the one-year horizon, the S&P 700 Index outperformed 69.7% of active
international funds. With the outperformance of the energyhaterials sectors, emerging
market funds benefited from overweights in Brazil and Russia. 54.0% of emerging
market funds outperformed the S&P/IFCI Composite Index. 52.1% of international
small-cap funds outperformed the S&P Developed Ex-US. SmallCap Index. At the
global funds level, results were a tie.
Fixed Income Funds
Over five years, indices outperfomed more than three quarters of actively managed
funds in all of the domestic bond fund categories. Only active emerging madcet band
funds outperformed their index. Over three years, indices outperformed a inajorjty of
active managers in 1 1 of 13 fixed income categories. Over a one-year horizon, indices
outperformed a majority in all categories.
The degree of outperfomance of indices versus active funds over longer time horizons
is much higher for fixed income funds compared to equity funds. We theorize that there
could be two reasons for this. First, the comparatively lower liquidity and higher
transaction costs of fixed income securities increases relative costs for real world
portfolio management. Note that index returns do not have any frictional costs. Second,
there is lower cross-sectional dispersion which presents fewer active selection
opportunities.
Survivorship
Over five years, 26.8% of US. equity funds, 22.5% of global equity funds and 24.7% of
ked income funds have been merged or liquidated. Over three years, the comparable
numbers were 15.3%, 9.3% and 16.0% respectively. This highlights the importance of
addressing survivorship bias in mutual hd analysis.
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Standard Poor's Indices Versus Active Funds Scorecard
Report 1: Percentage of U.S. Equity Funds Outperformed by Benchmarks
Real Estate Funds
Source: Standard & Poo115, CRSP For peilods endlny June 30. 2008. Outperformance is based "pol equalweig?ted fuld Counts.
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RhumbLine’s ofice located at 30 Rowes Wharf-Boston
q- RHUMBLINE UPDATE
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CURRENT PROFILE
(as of December 3 I, 2008)
Assets Under Management: $14.7 Billion
Diversified Client Base
65 Public Funds
23 Corporate/ERISA
24 Endowments/Foundations
22 Taft-Hartley’s
2 Private Trusts
2 Sub-Advisory Relationships
Committed Team of Experienced
Professionals
1
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,. ..
mb Last I Year Year Comwnv
Asset Managers
Atlanta, GA Paul E. Viera 1999 50 $22.391 I
2 Ariel Investments LLC: SI Chicago, I1 John W. Rogers Jr. 1983 102 13.155
I 5 I 4 Advent Capital Management LLL New Yo* NY Tracy V. Maitbnd 19% 46 +l% I "
I 7 I 6 UtendahlCapitalManagementLP New York, NY Penny Zuckrwise 1992 n 2.036
*< +.-
4-4 2059 ..< ". 9 1 9 HollandCapitalManagementLLC. Chicago, u. Monica L Walker 1991 23
ll I 5 BrownfapitalManagement Inc. Baltimore, MD Eddie C. Brown 1983 25 1.980
Sp~ingfield, VA Randall R. Eley 1986 10
Ronald D. Brown
1% I JUNE 2008 :BLACK ENTERPRISE ; WWW.ELACKENTERPRISE.COM
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The RhumbLine Team
I
To the Trustees of the
Palm Beach Gardens
Police Pension Fund
THANK YOU
Your Business
and Your Continued Support
of
RhumbLine
2 Yr
3 Yr
4 Yr
5 Yr
6 Yr
7 Yr
8 Yr
-46.3
-13.53
-16.52
-18.15
-19.53
-22.95
-6.59
-8.48
-9.85
-1 1.28
-13.3
-3.18
-4.95
-5.97
-7.02
-8.77
-0.41
-2.14
-3.14
-4.21
-6.07
3.8
2.47
1.6
0.24
-1.58
-0.15
-2.78
-3.96
-5.33
-1.61
-1.92
-3.17
4.51
-5.93
-7.82
Fiscal Year Returns Ending September
Fund
Return
%-tile
Policy
Return
%-tile
Universe
5th %-tile
Diff
Incept
#of Negative Qtrs
#of Positive Qtrs
Batting Average
Worst Qtr
Best Qtr
Range
Worst 4 Qtrs
Standard Deviation
Beta
Annualized Alpha
R-Squared
Sharpe Ratio
Treynor Ratio
Tracking Error
Information Ratio
Fund
Policy
0
0
0
0
5.21
2.25
-2.96
0.64
3.46
0.05
2.57
-0.17
0.26
2.53
10.81
4
1
40
-17.58
3.5
21.08
-37.8
24.44
1.04
-1.94
0.81
-1.56
-36.56
10.69
-0.3
4
1
60
25th %-tile
50th %-tile
75th %-tile
95th %-tile
Qtr
-16.94
1
-22.79
50
-20.31
-21.89
-22.82
-24.41
-26.99
-16.94
1
-22.79
50
-20.31
-21.89
-22.82
-24.41
-26.99
2008
-30.79
100
-20.88
32
-15.25
-20.07
-22.53
-25.72
-29.44
2007
27.74
21 53
18.79
15.69
10.15
2006
11.56
8.5
5.96
3.16
-3.37
2005
26.56
18.97
14.4
11.48
7.67
-0.1694
-0.2279
-0.1694
-0.2279
-22.79
1.25
24.04
-38.44
21.18
1
0
1
-1.64
-34.82
0
Diff
0
0
-20
5.21
2.25
-2.96
0.64
3.26
0.04
-1.94
-0.19
0.08
-1.74
10.69
Palm Beach Gardens Police Pension Fund
2004
17.89
11.72
8.74
6.26
2.04
2003
34.24
24.4
21.58
18.63
13.1
2002
-12.54
-18.67
-21.5
-24.59
-30.7
2001
-27.62
-33.35
-38.5
-46.64
-56.07
3 Qtrs
Z Yr
-31.54
43
-32.31
50
-27.34
-30.16
-32.36
-34.74
-40.42
ICC LARGE CAP UNIVERSE HERE
Palm Beach Gardens Police Pension Fund
ICC Large Cap Growth
Universe Comparisons Risk Measures
ICC LARGE CAP RISK MEAS. HERE
Palm Beach Gardens Police Pension Fund
ICC Large Cap Growth
Broad Large Cap Growth 51
39 1 Yr
Returns are in percent. "%-tile" is the percentile ranking within the ur # of Negative Qtrs
Returns for periods exceeding one year are annualized.
Incept is September 30,2007 to December 31,2008
Trailing Returns through December 31, 2008
Fund Best Qtr
Return Range
%-tile Worst 4 Qtrs
Policy Standard Deviation
Return Beta
%-tile Annualized Alpha
Universe R-Squared
5th %-tile Sharpe Ratio
25th %-tile Treynor Ratio
50th %-tile Tracking Error
75th %-tile Information Ratio
95th %-tile Fund
2 Qtrs
#of Positive Qtrs
Batting Average
Worst Qtr
-0.3154
-29.14
13
-31.46
50
-27.94
-30.21
-31.47
-34.49
-38.7
-37.8
31
-38.44
43
-37.61
-39.5
-32.98
-42.38
-0.3231
-0.2914
-0.3146
Policy
-0.378
-0.3844
3 I
1
50
3.5
21.08
-37.8
25.95
1.05
2.57
-1.53
-17.58
0.83
10.81
-37.71
0.06
3
1
50
-22.79
1.25
24.04
22.49
1
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1
-1.79
40.24
-38.44
-32.58
3.2
Fiscal Year Returns Ending September
Fund
Policy
Diff
Qtr
1213 1 /ZOO8
YTD
-16.94
-22.79
2009
-16.94
-22.79
2008
-30.79
5.85
5.85
-20.88
-9.91
2007 2006 2005 2004 2003 2002 2001 2000
Returns in UD Markets
Fund
Policy
Ratio
1 Yr
Incept
Returns in Down Markets
Fund
Policy
Ratio
1 Yr
-0.1 308
Incept
3.5
1.2
9/30/2007
3.5
1.2
280
280
-39.9
-39.2
101.8
9/30/2007
-44.5
-39.7
112.1
LOCK
-und
ICC LARGE CAP EXECUTIVE HERE
Palm Beach Gardens Police Pension Fund
ICC Large Cap Growth
Executive Summary
Inception date is September 30, 2007
All dollar values are shown in thousands.
Returns for periods exceeding one year are annualized.
Returns are gross of fees.
Account Reconciliation
Beginning Value
Net Flows
Investment G/L
Ending Value
31
Qtr
MD
Incept
12/31/2008
2,863
238
-498
2,604
2009
2,863
238
498
9/30/2007
2,320
1,919
-1,635
2,604 2604000
2,604 2604000
Investment Poky
Index
Russell 1000 Growth
Total
Weight
100
100
Trailing Retums through December 31, 2008
Fund
Policy
Diff
1 Yr
-37.8
-38.44
0.64
2Yr 3Yr4Yr 5Yr6Yr 7 Yr 8Yr9Yr 10Yr
9/30/2007
Incept
-35.70
2 Yr
3 Yr
4 Yr
-54.64
-19.79 -0.1979
40
-20.27 -0.2027
45
-14.94
-18.71
-20.71
-23.43
-29.21
-2.87
-5.77
-7.49
-10.13
-14.88
2.54
-0.79
-2.32
4.1
-7.94 5 Yr
6.64
3.31
1.77
n nr
Diff
2 Yr
#of Negative Qtrs
#of Positive Qtrs
Batting Average
Worst Qtr
Best Qtr
Range
Worst 4 Qtrs
Standard Deviation
Beta
Annualized Alpha
n e-..---*
0
0
0
0
-2.04
0.61
2.65
-0.91
-12.88
-0.89
-39.1 3
-0.95
-1.77
-371.23
26.33
Return
%-tile
Universe
5th %-tile
25th %-tile
50th %-tile
75th %-tile
95th %-tile
Qtr
MD
#VALUE!
#VALUE!
#VALUE!
#VALUE!
-22.54 -0.2254
-19.9 -0.199
65
37
-14.76
-19.25
-20.88
-24.27
-28.77
-22.54
65
-19.9
37
-14.76
-19.25
-20.88
-24.27
-28.77
2008
-29.1 -0.291
36
-30.12 -0.3012
45
-23.37
-27.72
-30.7
-33.93
40.21
2007
27.48
43
25.38
57
45.57
31.15
26.18
23.56
18.63
2006
26.04
20.73
18.6
Diff
Incept
#of Negative Qtrs
#of Positive Qtrs
Batting Average
Worst Qtr
Best Qtr
Range
Worst 4 Qtrs
Standard Deviation
Beta
Annualized Alpha
R-Squared
Sharpe Ratio
Treynor Ratio
Tracking Error
Information Ratio
Fund
-20.5
6.67
27.17
43.06
21.49
1
0
1
-1.09
-23.53
0
0
0
0
-2.04
2.1
4.14
-0.91
-6.66
-0.67
-13.08
-0.77
-0.46
46.32
19.4
5
4
44.44
-22.54
8.82
31.36
43.97
15.55
0.37
16.77
13.32
2005
48.69
34
26.71
24.1
20.79
2004
33.21
25.4
21.35
17.89
13.13
2003
51.17
34.61
26.12
21.8
17.28
2002
11.68
-0.47
-12.57
-16.62
-21.09
2001
-14.24
-25.9
-31.34
-37.03
-45.47
Policy
-9.28
0.25
-1.16
-48.95
18.91
0
Diff
5
4
55.56
-20.5
10.4
30.9
-43.06
20.99
1
0
1
-0.86
-18.03
0
0
0
-11.12
-2.04
-1.58
0.46
-0.91
-5.44
-0.63
-9.28
-0.75
-0.3
-30.92
18.91