Loading...
HomeMy WebLinkAboutAgenda Fire Pension 012510THE RESOURCE CENTERS, LLC 4360 Northlake Boulevard, Suite 206 Palm Beach Gardens, FL 33410 Phone (561) 624 -3277 ❖ Fax (561) 624 -3278 ❖ www.RESOURCECENTERS.COM PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND Meeting of Monday, January 25, 2010 Location: Council Chambers, Palm Beach Gardens City Hall 10500 North Military Trail Palm Beach Gardens, FL 33410 Time: 9:00 A.M. AGENDA 1. Call Meeting to Order 2. Minutes of Meeting Held November 16, 2009 3. Annual Audit: Steve Gordon 4. Investment Monitor Report: Bogdahn Consulting • Revised Investment Policy Statement • Consulting Services Fee Increase /Review of Current Agreement 5. Attorney Report: Bob Sugarman • Revised Proposed Ordinance • Special Report: IRS Updates Safe Harbor Rollover Notice Forms 6. Administrative Report: Margie Adcock • Disbursements 7. Other Business • Update on Information Requested Regarding Request by the Union for an Actuarial Study • Discussion on DROP Plan Investment Options 8. Schedule Next Meeting: Monday, March 15, 2010 at 9:00 A.M. 9. Adjourn PLEASE NOTE: Should any interested party seek to appeal any decision made by the Board with respect to any matter considered at such meeting or hearing, he will need a record of the proceedings, and for such purpose he may need to insure that a verbatim record of the proceedings is made, which record includes the testimony and evidence upon which the appeal is to be based. In accordance with the Americans With Disabilities Act of 1990, persons needing a special accommodation to participate in this meeting should contact The Resource Centers, LLC no later than four days prior to the meeting. PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND MINUTES OF MEETING HELD November 16, 2009 A meeting of the Board of Trustees was called to order at 9:00 A.M. at Council Chambers, Palm Beach Gardens, Florida. Those persons present were: TRUSTEES Tom Murphy (9:23 A.M.) Rick Rhodes Ed Morejon Donna Wisneski OTHERS Margie Adcock, Administrator Ken Harrison, Attorney (9:07 A.M.) Joe Bogdahn, Investment Monitor Mike Dana, Investment Manager It was noted that the City appointed Donna Wisneski to the Board to replace Richard Hitchins. Mr. Morejon welcomed new Trustee Donna Wisneski to the Board. MINUTES The Board reviewed the minutes of the meeting held September 21, 2009. A motion was made, seconded and carried 3 -0 to accept the minutes of the meeting held September 21, 2009. INVESTMENT MANAGER REPORT: DANA INVESTMENT ADVISORS Mike Dana appeared before the Board. He discussed the market environment. He stated that things are better but there is a long way to go. He is not seeing any inflation at this time, but there is a continuing concern of inflation. He noted that Fed Chairman declared the end of the recession a moth or two ago. Mr. Dana reviewed the performance of the portfolio as of September 30, 2009. He stated that the stocks in the portfolio have gone up from a low on March 9, 2009 to October 31, 2009 by 47.75 %. Ken Harrison entered the meeting. The total portfolio was up 13.52% for the quarter ending September 30, 2009 while the Russell 3000 was up 16.31 %. For the fiscal year to date, the portfolio was down 10.68% while the Russell 3000 was down 6.41 %. The total market value of the portfolio as of September 30, 2009 was $12,928,124.96. There was a lengthy discussion on the long- term performance and the risk/reward analysis of Dana. Tom Murphy entered the meeting. 2 INVESTMENT MONITOR REPORT Joe Bogdahn appeared before the Board. He reviewed the market environment for the period ending September 30, 2009. Mr. Bogdahn then reviewed the investment performance for the quarter ending September 30, 2009. The total market value of the Fund as of September 30, 2009 was $27,009,334. The asset allocation was 47.4% in domestic equities; 9.3% in international; 29.9% in fixed income; 2.8% in real estate; and 10.6% in cash. The Fund was up 10.01% net of fees for the quarter while the benchmark was up 11.40 %. Mr. Bogdahn noted that the Fund underperformed the benchmark because the Fund has a higher quality bias. The total equity portfolio was up 14.67% while the benchmark was up 16.79 %. The total domestic equity portfolio was up 13.52% while the Russell 3000 was up 16.31 %. The Dana core equity portfolio was up 15.13% for the quarter while the S &P 500 was up 15.61%. The Dana growth equity portfolio was up 12.04% for the quarter while the Russell 1000 Growth was up 13.97 %. The total international portfolio was up 19.61% while the benchmark was up 19.52 %. The international portfolio managed by Voyageur was up 15.90% and the international portfolio managed by Manning & Napier was up 25.72% for the quarter while the EAFE was up 19.52 %. The real estate portfolio managed by American Realty was down 9.62% for the quarter while the NCREIF was down 3.32 %. The total fixed income portfolio was up 5.06% for the quarter while the benchmark was up 3.21 %. Agincourt was up 4.01% for the quarter while the benchmark was up 3.71 %. DHJ fixed income was up 6.07% for the quarter while the benchmark was up 3.21 %. Mr. Bogdahn reviewed the compliance checklist as of September 30, 2009. There was discussion on the long -term performance period of 3 to 5 years even if a manger has not been with the Fund for that long of a time frame. Mr. Bogdahn stated that he was comfortable with the direction the managers are taking at this time. There was discussion on the assumption rate. Mr. Bogdahn stated that he thinks 8.25% is still achievable. He stated that there was a period of five years from October 2002 to September 2007 where the Fund met this rate. Mr. Harrison stated that 8.25% is at the high end. The trend is to reduce it, even to go as low as 7.5 %. Mr. Harrison stated that he is aware that some funds have been reducing the rate incrementally .25% each year until they get to the lower rate. He stated that the Board needed to discuss this with the Actuary. Mr. Bogdahn stated that the trend Mr. Harrison is referring to takes into account the municipalities' ability to fund the increase that goes along with lowering the interest rate, which is not the situation here. There was a lengthy discussion. Mike Dana departed the meeting. Mr. Bogdahn stated that he revised the Investment Policy Statement. Mr. Harrison stated that he reviewed the changes made as a result of the recent legislative changes. He noted that since the proposed Ordinance has not yet passed, the IPS does not include the increased limit for international investments. He stated that all the mandatory requirements of the statutes are in the revised IPS. Mr. Rhodes asked that the changes in the IPS be made in legislative style. He stated that he received the revised IPS with highlights, but the version is different and parts have been moved. There was a lengthy 3 discussion. Mr. Rhodes stated that he wanted to know exactly what was removed, added or changed and that it was hard to follow if the changes are not shown in legislative style. The Board requested Mr. Bogdahn to provide the revised IPS in legislative form for the next meeting. Mr. Bogdahn presented a fee increase. He stated that they were still in the process of working out the numbers. He stated that they have some older contracts like this one that charge for additional items. They want to have an all- inclusive fee. They will present a proposal at the next meeting. There was discussion on the contracts of the other service providers. The Board stated that they would like to review all of the service provider contracts, with one being reviewed at each meeting. They advised that they would start with the Investment Monitor at the next meeting. ATTORNEY REPORT Mr. Harrison discussed the status of the proposed Ordinance. He stated that he received an email this morning and the Ordinance is still with the City Attorney. Mr. Harrison stated that there is a new Special Tax Notice from the IRS. He stated that he would provide the information for the next meeting for further discussion. He stated that the Board would need to take action to adopt the new notices. He stated that the safest thing would be to adopt the IRS Notice. Mr. Harrison discussed with the Board several issues that came up during a conference he went to on corporate liability, such as stockholder meetings and the green factor. ADMINISTRATIVE REPORT Ms. Adcock presented the engagement letter for the audit for the fiscal year ending September 30, 2009. It was noted that the fee was the same as last year. Ms. Wisneski noted that there were a few items she would be asking of the auditor when he comes to present such as the requirements for the SAS 70 from the custodian and a peer review letter. A motion was made, seconded and carried 4 -0 to approve the engagement letter for the audit for the fiscal year ending September 30, 2009. Ms. Adcock presented the list of disbursements to be made. A motion was made, seconded and carried 4 -0 to approve the disbursements listed. It was noted that the FPPTA annual dues for 2010 would be due soon. A motion was made, seconded and carried 4 -0 to renew the membership dues for 2010. There was discussion on the FPTA re- certification fee that is being charged every three years. Ms. Adcock provided the Board with meeting dates for 2010. 4 OTHER BUSINESS Ms. Wisneski stated that she reviewed the prior minutes and noted that there was an issue with the investment options for the DROP Participants. There was a discussion on self - directed DROP accounts. Mr. Rhodes stated that he attended the Division of Retirement Conference in Orlando. He stated that it was a good conference and was very similar to the FPPTA schools. There being no further business, the meeting adjourned. Respectfully submitted, Tom Murphy, Secretary CITY OF PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND FINANCIAL STATEMENTS SEPTEMBER 30, 2009 AND 2008 CITY OF PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND FINANCIAL STATEMENTS SEPTEMBER 30, 2009 AND 2008 TABLE OF CONTENTS Page No. INDEPENDENT AUDITOR'S REPORT 1 -2 FINANCIAL STATEMENTS • Statements of plan net assets 3 • Statements of changes in plan net assets 4 NOTES TO FINANCIAL STATEMENTS 5 -10 SUPPLEMENTAL INFORMATION • Schedules of administrative expenses 11 • Schedule of contributions from employer and other contributors 12 • Schedule of funding progress 13 COMPLIANCE REPORT • Report of Independent Certified Public Accountant on Internal Control over financial reporting and compliance and other matters based on an audit of financial statements performed in accordance with government auditing standards 14 -15 Steven I. Gordon Certified Public Accountant American Institute of Certified Public Accountants Florida Institute of Certified Public Accountants INDEPENDENT AUDITOR'S REPORT Board of Trustees City of Palm Beach Gardens Firefighters' Pension Fund Palm Beach Gardens, Florida I have audited the accompanying statements of plan net assets of City of Palm Beach Gardens Firefighters' Pension Fund ( "Fund ") as of September 30, 2009 and 2008, and the related statements of changes in plan net assets for the years then ended. These financial statements are the responsibility of the Trustees. My responsibility is to express an opinion on these financial statements based on my audits. I conducted my audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States of America. Those standards require that I plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Trustees, as well as evaluating the overall financial statement presentation. I believe that my audits provide a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the Plan's net assets as of September 30, 2009 and 2008, and the changes in the Plan's net assets for the years then ended in conformity with accounting principles generally accepted in the United States of America. My audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary schedules of administrative expenses are presented for the purpose of additional analysis and are not a required part of the basic financial statements. The schedules have been subjected to the auditing procedures applied in the audits of the financial statements, and, in my opinion, are fairly stated in all material respect in relation to the basic financial statements as a whole. 4600 W. Commercial Blvd. Suite 5 Tamarac, FL 33319 Voice (954) 485 -5788 Fax (954) 485 -8988 sgordon@stevengordoncpa.com In accordance with Government Auditing Standards, I have also issued my report dated December 23, 2009 on my consideration of City of Palm Beach Gardens Firefighters' Pension Fund internal control over financial reporting and on my tests of its compliance with certain provisions of laws, regulations, contracts and grants. The purpose of that report is to describe the scope of my testing and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of my audit. The supplemental schedules of funding progress and the schedule of contributions from the employer and other contributors, which show historical pension information, are not a required part of the basic financial statements, but are supplementary information required by the Government Accounting Standards Board. I have applied certain limited procedures, which consisted principally of inquires of management regarding the methods of measurement and presentation of the supplementary information. However, I did not audit the information and express no opinion on it. Steven I. Gordon, CPA December 23, 2009 2 CITY OF PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND STATEMENTS OF PLAN NET ASSETS SEPTEMBER 30, 2009 AND 2008 ASSETS LIABILITIES Accounts payable Due to DROP account Total liabilities 2009 2008 Investments, at fair value (Note 3) $ 26,993,473 $ 22,519,822 Receivables: Employees contributions 27,565 27,759 Employer contributions 795,183 763,998 Chapter 175 tax contributions 45,602 262,511 Accrued investment income 96,372 75,218 964,722 1,129,486 Total receivables Total assets $ 27,958,195 $ 23,649,308 LIABILITIES Accounts payable Due to DROP account Total liabilities $ 37,740 80,506 $ 45,516 - $ 118,246 $ 45,516 PLAN NET ASSETS HELD IN TRUST FOR PENSION BENEFITS Plan net assets held in trust for pension benefits 1 $ 27,839,949 1 $ 23,603 792 READ THE NOTES TO THE FINANCIAL STATEMENTS 3 CITY OF PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND STATEMENTS OF CHANGES IN PLAN NET ASSETS FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008 Additions: Investment income - Net depreciation in fair value of investments Interest and dividend income Total investment income (loss) Less: Investment expenses Net investment income (loss) Contributions - Employer Florida Chapter 175 taxes Employees Total contributions Miscellaneous income Total additions Deductions: Benefits paid Administrative expenses (See Schedule) Total deductions Increase in plan net assets Plan net assets held in trust for pension benefits: Beginning of year End of year 2009 2008 $ (194,895) $ (3,407,533; 652,069 496,177 457,174 (2,911,356; 134,095 174,493 323,079 (3,085,849; 3,180,731 453,089 803,860 4,437,680 2,498 4,763,257 457,329 69,771 527,100 4,236,157 23,603,792 $ 27,839,949 1 $ READ THE NOTES TO THE FINANCIAL STATEMENTS 4 3,055,991 654,444 801,846 4,512,281 4,635 1,431,067 558,637 59,724 618,361 812,706 22,791,087 23,603,792 CITY OF PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND NOTES TO FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008 (1) DESCRIPTION OF THE PLAN: The following description of the City of Palm Beach Gardens Firefighters' Pension Fund ( "Plan ") provides only general information. Participants should refer to the City's ordinance for more complete information. . General — The Plan is a single- employer combined defined benefit and money purchase plan covering all eligible firefighters. The Plan was established by the City in accordance with a City ordinance and state statutes. . Eligibility - All firefighters as of the effective date, and all future new firefighters, become members of the Plan as a condition of employment. Benefits - Defined Benefit portion: The Plan provides retirement, death and disability benefits. The benefit provisions are established and may be amencied under the authority of City Ordinance. Normal retirement age is age 52 with 10 years of credited service or upon completion of 25 years of credited Service, regardless of age. The Fund provides a normal retirement benefit equal to 2.75% of the participants average final compensation, for each year of credited service, provided however, that the benefit shall not exceed 75% of average final compensation but shall, in any event, average, at least 2% for each year of credited service. The monthly retirement benefit for members retiring on or after January 1, 2005 will be equal to 3% of average final compensation for each year of credited service, provided, however, that the benefit does not exceed 99% of average final compensation. Early retirement age is age 50 with 10 years of credited service. Early retirement benefit shall be determined by reducing the normal retirement benefit by 3% for each year by which the commencement of benefits precedes age 52. The death benefit for a member who was partially or fully vested, but had not attained at least age 50, is a payment to the member's beneficiary for 10 years, beginning on the date that the member would have attained age 52 for a normal retirement benefit or age 50 for an early retirement benefit, at the option of the beneficiary. The disability benefit for a service - incurred disability is 60 -0/o of the average final compensation. The disability benefit for a non - service incurred disability, for participants with 10 or more years of service only, is 2.5% of average final compensation multiplied by the credited service. 5 CITY OF PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND NOTES TO FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008 (1) DESCRIPTION OF THE PLAN (CONTINUED): . Benefits (Continued) — Money purchase portion: Upon death, disability or termination as described above, the participant is also entitled to the value of their individual account in the money purchase portion of the plan. Funding - All participants are required to contribute 6.00'% of pretax earnings. Pursuant to Florida law, the City of Palm Beach Gardens is ultimately responsible for the actuarially soundness of the Plan. Therefore, each year, the City of Palm Beach Gardens must contribute an amount determined by the Trustees in conjunction with the Plan's actuary to be sufficient, along with the employee's contribution, to fund the defined benefits under the Plan. Pursuant to Chapter 175, Florida Statutes, the City imposes a 1.85% tax on fire insurance premiums paid to insure real or personal property within its corporate limits. The proceeds of this tax are contributed to the Plan and allocated to the individual participants' accounts to fund the money purchase portion of the benefits. Commencing in 2004, 2.00% of the total salaries for all members during the Plan year will be deducted from the Chapter 175 monies and credited as additional member contributions. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES . Valuation of investments - Investments are valued at fair values as of September 20, 2009 and 2008. Investment in common stocks, international furkis, mutual funds, government securities and corporate bonds are valued at fair market value, as evidenced by quoted market prices, which are Level 1 inputs within the Fair Value Hierarchy as defined in FASB No 157. The value of the real estate is determined by the trustees based on the quoted fair value of the underlying asset, which is a Level 2 input within the Fair Value Hierarchy. Investments in money market funnds are valued at fair value, which is the equivalent of cost, which is also Level 1 input within the Fair Value Hierarchy. (See Note 3) . Income taxes - The Plan is exempt from federal income taxes under the Internal Revenue Code and, accordingly, no provision for federal income taxes has been made. 6 CITY OF PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND NOTES TO FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008 (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): . Use of estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. . Purchases and sales of securities - Purchases and sales of securities are recorded on a trade -date basis. . Accounting principles - The Plan applies all GASB pronouncements as well as FASB pronouncements issued on or before November 30, 1989, unless they conflict with or contradict GASB pronouncements. (3) INVESTMENTS: The Plan's investments are being held by Regions Bank. Investments at September 30, 2009 and 2008 consisted of the following: Investments at fair value as determined by quoted market price (Level 1 inputs) Investments at fair value (Level 2 inputs) Real estate 756,753 1,131,913 Total Investments $22,519,822 7 2009 2008 Common Stocks $12,813,663 $10,356,465 Government Securities 4,138,548 5,101,054 Corporate Bonds 3,942,317 1,435,794 Mutual Funds 1,264,803 - International Funds 1,234,890 1,184,091 Cash & cash equivalents 2,842,499 3,310,505 26,236,720 21,387,909 Investments at fair value (Level 2 inputs) Real estate 756,753 1,131,913 Total Investments $22,519,822 7 CITY OF PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND NOTES TO FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008 (3) INVESTMENTS (CONTINUED): During the year ended September 30, 2009 the Plan's investments (including gains and losses on investments bought and sold, as well as held during the year) depreciated in value by $194,895 (reported as Net deprecation in fair value of investments in the Statements of Changes in Plan Net Assets) as follows: Common Stock $(890,580) Government Securities 214,840 International Funds 130,920 Real estate (404,756) Mutual Funs 264,803 Corporate Bonds 489,878 $ 19( 4•g95� The term "interest rate risk" refers to the portfolio's exposure to fair value losses arising from increasing interest rates. Interest rate risk disclosures are required for all debt investments, as well as investments in mutual funds, external investment pools and other pooled investments that do not meet the definition of a 20-like pool. The Board of Trustees determines the Plan's investment policy. The policy has been designed by the Board to maximize the Plan's asset value, while assuming a risk that is consistent with the Board's risk tolerance. As is prudent, the Board has adopted a policy to diversify investment risk among several institutionally acceptable asset classes including bonds, debentures and other corporate obligations, equity securities and domestic real estate. The Fund's investment policy does not use limits on investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. The Fund's investments in government securities and corporate bonds had maturities as follows: Investment Maturities Investment tune Fair value Less than 1 1 -5 6 -10 More than 10 Corporate bonds $3,942,317 $ - $1,146,603 $2,284,440 $ 511,274 US Treasuries 203,567 30,788 - - 172,780 US Agencies 3,934,980 240,089 964,335 398,746 2,331,809 Totals $$,080,864 $270,877 $2,110,938 $2,683,186 $3,015,863 8 CITY OF PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND NOTES TO FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008 (3) INVESTMENTS (CONTINUED): State law limits investments in corporate bonds and commercial paper to the top three ratings listed by nationally recognized statistical rating organizations. The Fund's corporate bonds and money market funds were rated by Moody's Investors Services as follows: Rating Fair Value Aaa $1,648,049 Aal 5,937 Aa2 496,642 Aa3 109,847 Al 545,867 A2 1,054,856 A3 632,256 Baal 383,270 Baa2 262,071 Baa3 77,631 Government securities 2,864,438 Total $8.080,804 "Concentration of credit risk" is the risk inherent with investing a significant amount of Plan assets in particular issuers. The Fund limits investments that may be invested in any one issuer to no more than 5% of Plan Net Assets, other than those issued by the US Government or its Agencies. More than 5% of the Fund's plan net assets are invested in debt securities issued by the United States Agencies. This investment represented 14.08% of Plan Net Assets. "Custodial credit risk" is the risk that in the event of the failure of the counterparty, the Plan will not be able to recover the value of its investments or collateral securities that are in the possession of an outside parry. Consistent with the Plan's investment policy, the investments are held by the Plan's custodial bank and registered in the Plan's name. (4) ACTUARIAL VALUATION: The most recent actuarial valuation was done as of October 1, 2008. At that date the actuaries determined that the unfunded accrued actuarial liability for benefits was $16,994,822 while the actuarial value of the assets available to pay benefits was $22,307,415 They further determined that the required City contribution for the year ended September 30, 2009 was $3,180,731, which was contributed in full. Additional information regarding major assumptions used by the actuaries and funding progress is included in the attached supplemental information. 9 CITY OF PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND NOTES TO FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008 (5) RISKS AND UNCERTAINTIES: Fund contributions are made and the actuarial present value of accumulated plan benefits are reported based on certain assumptions pertaining to interest rates, inflation rates and employee demographics, all of which are subject to change. Due to uncertainties inherent in the estimations and assumptions process, it is at least reasonably possible that changes in these estimates and assumptions in the near term would be material to the financial statements. The Fund invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the statement of net assets available for benefits. 10 CITY OF PALM BEACH GARDENS' FIREFIGHTERS PENSION FUND SCHEDULES OF ADMINISTRATIVE EXPENSES FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008 READ THE NOTES TO THE FINANCIAL STATEMENTS 11 2009 2008 Accounting $ 5,075 $ 5,125 Actuarial fees 11,750 8,900 Administrative fees 16,690 11,919 Conferences 9,135 6,738 Insurance 6,864 7,070 Legal fees 17,077 17,344 Miscellaneous 3,180 2,628 $ 69,771 $ 59,724 Total expenses READ THE NOTES TO THE FINANCIAL STATEMENTS 11 CITY OF PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND SCHEDULE OF CONTRIBUTIONS FROM EMPLOYER AND OTHER CONTRIBUTORS AS OF SEPTEMBER 30, 2009 (UNAUDITED) Year Ended September 30 Annual Required Contribution Actual Contribution Percentage Contributed 2008 $3,055,991 $3,055,991 100.00% 2007 2,247,828 2,247,828 100.00 2006 1,542,934 1,542,934 100.00 2005 1,188,002 1,188,002 100.00 2004 739,310 739,310 100.00 2003 731,241 731,241 100.00 2002 594,562 594,562 100.00 2001 423,628 423,628 100.00 2000 227,154 227,154 100.00 1999 200,759 200,759 100.00 The information presented in the required supplemental information was determined as part of the actuarial valuations at the dates indicated. Additional information as of the latest actuarial valuation is as follows: Valuation date October 1, 2008 Mortality rates RP 2000 Mortality Table Actuarial cost method — Funding Projected Unit Credit Actuarial Cost Method Remaining amortization period 27 years Actuarial assumptions: Investment rate of return 8.25% Projected salary increases 4.50% Postretirement benefit increases None Inflation 4.50% 12 CITY OF PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND SCHEDULE OF FUNDING PROGRESS AS OF SEPTEMBER 30, 2008 (UNAUDITED) Actuarial Valuation Date Actuarial Value of Assets (a) Actuarial Accrued Liability (AAL) - Entry Age (b) Unfunded AAL (UAAL) (b -a) Funded Ratio (a/b) Covered Payroll (c) UAAL As % of Covered Payroll (b -a) /c 10/1/08 $22,309 $39,302 $16,995 56.8% $9,853 172.5% 10 /1/07 18,248 33,826 15,578 53.9 9,549 163.1% 10/1/06 a 13,974 29,846 15,872 46.8 9,205 172.4 10 /1 /06 13,974 32,003 18,029 43.7 9,205 195.9 1011105 10,791 28,083 17,292 38.4 8,774 197.1 10 /01 /04 8,146 21,254 13,108 38.33 7,568 173.21 10/01/03 7,183 17,411 10,258 41.19 6,542 156.81 10/01/02 5,754 12,577 6,823 45.75 4,840 140.99 10 /01 /01 5,415 6,675 1,260 81.13 4,255 29.61 10 /01 /00 4,810 6,066 1,255 79.30 3,841 32.69 10/01/99 3,943 5,313 1,371 74.20 3,194 42.91 (a) After changes in benefit provisions, actuarial assumptions or cost methods (b) Before changes in benefit provisions, actuarial assumptions or cost methods 13 Steven I. Gordon Certified Public Accountant American Institute of Certified Public Accountan ts Florida Institute of Certified Public Accountan ts REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS The Board of Trustees Clay of Palm Beach Gardens Firefighters' Pension Fund Palm Beach Gardens, Florida I have audited the financial statements of City of Palm Beach Gardens Firefighters' Pension Fund, as of and for the year ended September 30, 2009, and have issued my report thereon dated December 23, 2009. I conducted my audit in accordance with generally accepted auditing standards and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. CQmgliance As part of obtaining reasonable assurance about whether City of Palm Beach Gardens Firefighters' Pension Fund financial statements are free of material misstatement, I performed tests of its compliance with certain provisions of laws and regulations, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of my audit and, accordingly, I do not express such an opinion. The results of my tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards. Internal Control Over Financial Reg In planning and performing my audit, I considered City of Palm Beach Gardens Firefighters' Pension Fund internal control over financial reporting in order to determine my auditing procedures for the purpose of expressing my opinion on the financial statements and not to provide assurance on the internal control over financial reporting. My consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control over financial reporting that might be material weaknesses. 4600 W. Commercial Blvd. Suite 5 Tamarac, FL 33319 Voice (954) 485 -5788 Fax (954) 485 -8988 sgordon@stevengordoncpa.com A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. I noted no matter involving the internal control oveWinanc�al reporting and its operation that I consider to be material weaknesses. ' December 23, 2009 untant 14 City of Palm Beach Gardens Firefighters' Pension Trust Fund Investment Policy Statement I. PURPOSE OF INVESTMENT POLICY STATEMENT The Pension Board of Trustees, as named fiduciaries, maintains 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 and direct that it apply to all assets under their control. In fulfilling their fiduciary responsibility, the Trustees recognize that the Pension Plan 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. Reasonable consistency of return and protection of assets against the inroads of inflation 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 two years or less. The Pension Board of Trustees will employ professional Investment Management firms to invest the assets of the fund. Within the parameters allowed in this IPS, the Investment Managers have full discretion, including security selection, sector weightings and investment style. The Trustees, in performing their investment duties, shall comply with the fiduciary standards set forth in Employee Retirement Income Security Act of 1974 (ERISA) at 29 U.S.C. s. 1104(a) (1) (A) — (C). In case of conflict with other provisions of law authorizing investments, the investment and fiduciary standards set forth in this section shall prevail. II. TARGET ALLOCATIONS In order to provide for a diversified portfolio, the Board has engaged Investment Management firms with target investment allocations as provided for on Schedule `A', attached hereto. The managers are solely responsible for the assets and allocation of their mandate only and shall abide by any subordinate investment policy assigned to the manager attached hereto. On a regular basis (at least quarterly) the Investment Consultant will review the investment portfolio for the purpose of rebalancing assets within the target investment allocations prescribed on Schedule `A' and shall coordinate the overall asset allocation and affect rebalancing of the portfolio when necessary. The consultant shall also periodically review the investment portfolio and report to the Board the style and capitalization of the individual and total portfolios. z III. INVESTMENT PERFORMANCE OBJECTIVES The following performance measures will be used as objective criteria for evaluating effectiveness of the investment managers. A. Total Fund Performance 1. The performance of the total Fund will be measured for rolling three and five year periods. These periods are considered sufficient to accommodate the market cycles experienced with investments. The performance of this portfolio will be compared to the return of a portfolio comprised of 55% Russell 3000, 10% MSCI EAFE, 25% Barclays Intermediate Aggregate Bond Index, and 10% NCREIF Index. 2. On a relative basis, it is expected that the total fund performance will be in the top 40% of the appropriate peer universe over trailing three to five year periods. 3. On an absolute basis, it is expected that total return of the combined equity, fixed income, and cash portfolio, should equal or exceed the higher of the actuarial earnings assumption (8.25 %) or the Consumer Price Index plus 3% over three to five year periods. B. Equity Performance The combined equity portion of the portfolio, defined as common stocks and convertible bonds, is expected to perform at a rate at least equal to a weighted benchmark of 85% Russell 3000 and 15% MSCI EAFE Index. Individual components of the equity portfolio will be compared as outlined in Schedule W. All portfolios are expected to perform in the top 40% of an appropriate peer universe over trailing three to five year periods. C. Fixed Income Performance The overall objective of the fixed income portion of the portfolio is to add stability, consistency and safety to the total fund. The fixed income portion of the portfolio, defined as fixed income and preferred stocks, is expected to perform at a rate at least equal to the Barclays Intermediate Aggregate Bond Index, and rank in the top 40% of the appropriate peer universe over trailing three to five year periods. D. Alternatives (Real Estate /Timber) The overall objective of the alternative portion of the portfolio is to provide an attractive level of income with minimal volatility to the fund. This portion of the fund is expected to provide an absolute rate of return as benchmarked in Schedule 'A' attached hereto. -2- IV. INVESTMENT GUIDELINES A. Authorized Investments i. Fixed ineome .�. be investment GFade as measured by Standard & Poor*s b. Not or m oec AA. ney Market! Standard 0 the must 1P. Poof's_ Fund's fice A! or- AA..ody' Di. be invested in the stoelE or- eapital st ffier-e than of assets shall eemman eyiee 1 20/ of tl, o eutstandi.,... pital steek of the e i. Fixed ineome Seetififies be investment GFade as measured by Standard & Poor*s b. Not or m oec AA. ney Market! Standard 0 the must 1P. Poof's_ Fund's fice A! or- AA..ody' Di. be invested in the stoelE or- eapital st ffier-e than of assets shall eemman eyiee 1 20/ of tl, o eutstandi.,... pital steek of the e 6. Foreign Securities. B. Limitations 1. Investments in corporate common stock and convertible bonds shall not exceed 65% of the Fund assets at cost or 75% of the fund assets at market value. 2. Foreign securities shall not exceed 10% of the value at eest of the Fund and may only be 3. Real estate investments shall not exceed 10% of the value at cost of the fund. 4. No investment may be made unless provided for as part of this policy C. Trading Parameters When feasible and appropriate, all securities shall be competitively bid. Except as otherwise required by law, the most economically advantageous bid shall be selected. Commissions paid for purchase of securities must meet the prevailing best - execution rates. € to 'best v „t:., pr-aetiees. - 3 - V. COMMUNICATIONS A. On a monthly basis, the custodian shall supply an accounting statement that 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 IV In addition, the manager shall deliver each quarter a report detailing the Fund's performance, adhemnee to the inyestment pelie , forecast of the market and economy, portfolio analysis and current assets of the Trust. Written reports shall be delivered to the Trustees within 69 days of the end of the quarter. A copy of the written report shall be submitted to the person designated by the City, who shall make them available for public inspection. The Investment Managers will provide immediate written and telephone notice to the Trustees of any significant market related or non - market related event, specifically including, but not limited to, any deviation from the standards set forth in Section IV above. B. The Investment Managers will disclose any securities that do not comply with Section IV in each quarterly report. C. If the Fund owns investments, that complied with section IV at the time of purchase, which subsequently exceed the applicable limit or do not satisfy the applicable investment standard, such excess shall msult in mbalaneing within 30 days; noncompliant investments shall be disposed of at the earliest economically feasible opportunity in accordance with the prudent man standard of care, and no additional investment may be made. Assets for- whieh a fair- m"ket value is net pr-evided shall be exeluded fi;efn th asms used in the deteFminafien of anneal funding eest. Fer- eaeh aetuarial valuation, the be D. The Trustees shall retain a monitoring service to evaluate and report on a gtedy be the rate of return and relative performance of the Fund. The Trustees will meet quarterly to review the monitoring service's 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 on a periodic basis. E. At least annually, the Trustees shall provide the Investment Managers with projected disbursement needs of the plan, so that the investment portfolio can be structured in such manner as to provide sufficient liquidity to pay obligations as they come due. To this end, the Investment Managers should, to the extent possible, attempt to match investment maturities and with known cash needs and anticipated cash -flow requirements. VI. COMPLIANCE A. It is the direction of the Trustees that the plan assets are held by a third party custodian, and that all securities purchased by, and all collateral obtained by the plan shall be properly designated as plan assets. No withdrawal of assets, in whole or in part, shall be made from safekeeping except by an authorized member of the board of Trustees or their designee. Securities transactions between a broker - dealer and the custodian involving purchase or sale of securities by transfer of money or securities must be made on a "delivery vs. payment" basis to insure that the custodian will have the security or money in hand at conclusion of the transaction. All -4- r ,; approved vendors transacting repurchase agreements must perform as stated in any Master Repurchase Agreement B. At the direction of the Trustees, operations of the fund shall be reviewed by independent certified public accountants, as part of any financial audit periodically required. Compliance with the Trustees' internal controls shall be verified. These controls have been designed to prevent losses of funds that might arise from fraud, error, or misrepresentation by third parties or imprudent actions by the Board or employees of the plan sponsor, to the extent possible. C. Each member of the Board of Trustees shall participate in a continuing education program relating to investments and the Trustee's responsibilities to the fund. It is highly suggested that this education process begin during the Trustees' first term. D. With each actuarial valuation, the Board of Trustees shall determine the total expected annual rate of return for the current year, for each of the next several years and for the long term thereafter. This determination shall be filed promptly with the Department of Management Services, the plan's sponsor and the consulting actuary. E Proxy votes must be exercised for the exclusive benefit of the participants of the Fund. Each manager shall provide the Board with a copy of their proxy voting policy for approval. On a regular basis, at least annually, each manager shall report a record of their proxy vote. VII. CRITERIA FOR INVESTMENT MANAGER REVIEW The Board wishes to adopt standards by which judgments of the ongoing performance of a portfolio manager may be made. Upon violation of any of the following, the portfolio manager will be warned of the Board's serious concern for the Fund's continued safety and performance. Violation of three individual guidetines shatl result in a probation r-eeemmendation. Violation of five indmdefil ♦ 4 consecutive quarters of relative under - performance verses benchmark index. ♦ 3 and 5 year trailing returns below the 40th percentile and underperforming the index. ♦ Downside volatility greater than index, measured by up /down market capture ratio. ♦ Style Consistency or purity drift from the mandate. ♦ Management turnover in portfolio team or senior management. ♦ Investment process change, including varying the index or benchmark. ♦ Failure to adhere to the IPS or other compliance issues. ♦ Investigation of the firm by the SEC. ♦ Significant asset flows into or out of the company. ♦ Merger or sale of firm. ♦ Fee increases. ♦ Servicing issues — Key personal stop servicing the account without proper notification. Nothing in this section shall limit or diminish the Trustees' right to terminate the manager at any time for any reason. MW -5- IX. FLORIDA STATUTES 112,175 AND APPLICABLE CITY ORDINANCES If, at any time, this document is found to be in conflict with Chapters 112 or 175 of the Florida Statutes, or the applicable City Ordinances, the Statutes and Ordinances shall prevail. X. REVIEW AND AMENDMENTS It is the Trustees intention to review this document at least annually subsequent to the actuarial report and to amend this statement to reflect any changes in philosophy, objectives, or guidelines. A*y investment net speeifieally allowed as paft of this peliey is pr-ehibited. Eaeh investment ManageF will r-eeeive and agree to this ifivestment pehey, and will exeeute an addendum to this pehey eutfining theif speeifie -mate. If, at any time, the Investment Manager feels that the specific objectives defined herein cannot be met, or the guidelines constrict performance, the Trustees should be notified in writing. By initial and continuing acceptance of this Investment Policy Statement, the Investment Managers concur with the provisions of this document. CITY OF PALM BEACH GARDENS FIREFIGHTERS' PENSION PLAN Chairman, Board of Trustees Date: -6- 4� 4� r� V 1 *moo O o� L Cw �••+ a o � •.r O v � 110 4mo b� L ..r w z a r F- c �. h x� N Qo U b db bA . G bA p O O to � � O � Qy �r��aaaaz b w � a� o a� 0 0 o 0 0 000000 �p-p O O N o6 oo to Z 000000 0 o z o o W; a o O d z �o w > tn tn o [�t�ONNO U> NN E W U w CA W 0 0 Q (z W a• 'd "o �' W 0 o°q C7 C7 C7��°'°'O U E � O -b -v c� c� E O C, I. City of Palm Beach Gardens (plan sponsor) Firefighters' Pension Trust Fund Investment Policy Statement PURPOSE OF INVESTMENT POLICY STATEMENT The Pension Board of Trustees, as named fiduciaries, maintains 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 and direct that it apply to all assets under their control. In fulfilling their fiduciary responsibility, the Trustees recognize that the Pension Plan 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. Reasonable consistency of return and protection of assets against the inroads of inflation 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 two years or less. The Pension Board of Trustees will employ professional Investment Management firms to invest the assets of the fund. Within the parameters allowed in this IPS, the Investment Managers have full discretion, including security selection, sector weightings and investment style. The Trustees, in performing their investment duties, shall comply with the fiduciary standards set forth in Employee Retirement Income Security Act of 1974 (ERISA) at 29 U.S.C. s. 1104(a) (1) (A) — (C). In case of conflict with other provisions of law authorizing investments, the investment and fiduciary standards set forth in this section shall prevail. II. TARGET ALLOCATIONS In order to provide for a diversified portfolio, the Board has engaged Investment Management firms with target investment allocations as provided for on Schedule `A', attached hereto. The managers are solely responsible for the assets and allocation of their mandate only and shall abide by any subordinate investment policy assigned to the manager attached hereto. On a regular basis (at least quarterly) the Investment Consultant will review the investment portfolio for the purpose of rebalancing assets within the target investment allocations prescribed on Schedule `A' and shall coordinate the overall asset allocation and affect rebalancing of the portfolio when necessary. The consultant shall also periodically review the investment portfolio and report to the Board the style and capitalization of the individual and total portfolios. III. INVESTMENT PERFORMANCE OBJECTIVES The following performance measures will be used as objective criteria for evaluating effectiveness of the investment managers. A. Total Fund Performance The performance of the total Fund will be measured for rolling three and five year periods. These periods are considered sufficient to accommodate the market cycles experienced with investments. The performance of this portfolio will be compared to the return of a portfolio comprised of 55% Russell 3000, 10% MSCI EAFE, 25% Barclays Intermediate Aggregate Bond Index, and 10% NCREIF Index. 2. On a relative basis, it is expected that the total fund performance will be in the top 40% of the appropriate peer universe over trailing three to five year periods. 3. On an absolute basis, it is expected that total return of the combined equity, fixed income, and cash portfolio, should equal or exceed the higher of the actuarial earnings assumption (8.25 %) or the Consumer Price Index plus 3% over three to five year periods. B. Equity Performance The combined equity portion of the portfolio, defined as common stocks and convertible bonds, is expected to perform at a rate at least equal to a weighted benchmark of 85% Russell 3000 and 15% MSCI EAFE Index. Individual components of the equity portfolio will be compared as outlined in Schedule W. All portfolios are expected to perform in the top 40% of an appropriate peer universe over trailing three to five year periods. C. Fixed Income Performance The overall objective of the fixed income portion of the portfolio is to add stability, consistency and safety to the total fund. The fixed income portion of the portfolio, defined as fixed income and preferred stocks, is expected to perform at a rate at least equal to the Barclays Intermediate Aggregate Bond Index, and rank in the top 40% of the appropriate peer universe over trailing three to five year periods. D. Alternatives (Real Estate /Timber) The overall objective of the alternative portion of the portfolio is to provide an attractive level of income with minimal volatility to the fund. This portion of the fund is expected to provide an absolute rate of return as benchmarked in Schedule 'A' attached hereto. -2- IV. INVESTMENT GUIDELINES A. Authorized Investments Pursuant to the investment powers of the Board of Trustees as set forth in the Florida Statutes and local ordinances, the Board of Trustees sets forth the following investment guidelines and limitations: 1. Equities: a. Must be traded on a national exchange or electronic network; and b. Not more than 3% of the Plan's assets, at the time of purchase, shall be invested in the common stock, capital stock or convertible stock of any one issuing company, nor shall the aggregate investment in any one issuing company exceed 3% of the outstanding capital stock of the company, and c. Additional criteria may be outlined in the manager's addendum. 2. Fixed Income: a. All fixed income investments shall have a minimum rating of investment grade or higher as reported by a major credit rating service; and b. The value of bonds issued by any single corporation shall not exceed 3% of the total fund; and c. Additional criteria may be outlined in the manager's addendum. 3. Money Market: a. The money market fund or STIF options provided by the Plan's custodian; and b. Have a minimum rating of Standard & Poor's Al or Moody's P1. 4. Pooled Funds: Investments made by the Board may include pooled funds. For purposes of this policy pooled funds may include, but are not limited to, mutual funds, commingled funds, exchange - traded funds, limited partnerships and private equity. Pooled funds may be governed by separate documents which may include investments not expressly permitted in this Investment Policy Statement. In the event of investment by the Plan into a pooled fund, the Board will adopt the prospectus or governing policy of that fund as the stated addendum to this Investment Policy Statement. B. Trading Parameters When feasible and appropriate, all securities shall be competitively bid. Except as otherwise required by law, the most economically advantageous bid shall be selected. Commissions paid for purchase of securities must meet the prevailing best - execution rates. The responsibility of monitoring best price and execution of trades placed by each manager on behalf of the Plan will be governed by the Portfolio Management Agreement between the Plan and the Investment Managers. C. Limitations 1. Investments in corporate common stock and convertible bonds shall not exceed sixty five (65 %) of Plan assets at cost or seventy -five (75 %) of the Plan assets at market. 2. Foreign securities shall not exceed ten percent (10 %) of Plan's market value. 3. All equity and fixed income securities must be readily marketable. Commingled funds must be independently appraised at least annually. - 3 - D. Absolute Restrictions No investments shall be permitted in; 1. Any investment not specifically allowed as part of this policy. 2. Illiquid investments, as described in Chapter 215.47, Florida Statutes. 3. Direct investment in `Scrutinized Companies' identified in the periodic publication by the State Board of Administration ( "SBA list ", updated on their website www.sbafla.com/fsb/ ), is prohibited. Any security identified as non - compliant on or before January 1, 2010 must be divested by September 1, 2010. Securities identified after January 1, 2010, are subject to the provisions of section V. (c) below. However, if divestiture of business activities is accomplished and the company is subsequently removed from the SBA list, the manager can continue to hold that security. Indirect investment in `Scrutinized Companies' (through pooled funds) are governed by the provisions of Section V(G) below. V. COMMUNICATIONS A. On a monthly basis, the custodian shall supply an accounting statement that will include a summary of all receipts and disbursements and the cost and the market value of all assets. B. On a quarterly basis, the Investment Managers shall provide a written report affirming compliance with the security restrictions of Section IV (as well as any provisions outlined in the Investment Manager's addendum). In addition, the Investment Managers shall deliver a report each quarter detailing the Plan's performance, forecast of the market and economy, portfolio analysis and current assets of the Plan. Written reports shall be delivered to the Board within 30 days of the end of the quarter. A copy of the written report shall be submitted to the person designated by the City, and shall be available for public inspection. The Investment Managers will provide immediate written and telephone notice to the Board of any significant market related or non - market related event, specifically including, but not limited to, any deviation from the standards set forth in Section IV or their Investment Manager addendum. C. If the Fund owns investments, that complied with section IV at the time of purchase, which subsequently exceed the applicable limit or do not satisfy the applicable investment standard, such excess or noncompliant investments may be continued until it is economically feasible to dispose of such investment in accordance with the prudent man standard of care, but no additional investment may be made unless authorized by law or ordinance. An action plan outlining the investment `hold or sell' strategy shall be provided to the Board immediately. D. The Investment Consultant shall evaluate and report on a quarterly basis the rate of return net of investment fees and relative performance of the Plan. E. The Board will meet periodically to review the Investment Consultant performance report. The Board will meet with the investment manager and appropriate outside consultants to discuss performance results, economic outlook, investment strategy and tactics and other pertinent matters affecting the Plan on a periodic basis. F. At least annually, the Board shall provide the Investment Managers with projected disbursement needs of the Plan so that the investment portfolio can be structured in such a manner as to provide sufficient liquidity to pay obligations as they come due. To this end the Investment Managers should, to the extent possible, attempt to match investment maturities with known cash needs and anticipated cash -flow requirements. -4- G. The Investment Consultant, on behalf of the Plan, shall send a letter to any pooled fund referring the investment manager to the listing of `Scrutinized Companies' by the State Board of Administration (`SBA list'), on their website www.sbafla.com/fsb /. This letter shall request that they consider removing such companies from the fund or create a similar actively managed fund having indirect holdings devoid of such companies. If the manager creates a similar fund, the Plan shall replace all applicable investments with investments in the similar fund in an expedited timeframe consistent with prudent investing standards. For the purposes of this section, a private equity fund is deemed to be an actively managed investment fund. However, after sending the required correspondence, the Plan is not required to sell the pooled fund. VI. COMPLIANCE A. It is the direction of the Board that the plan assets are held by a third party custodian, and that all securities purchased by, and all collateral obtained by the plan shall be properly designated as Plan assets. No withdrawal of assets, in whole or in part, shall be made from safekeeping except by an authorized member of the Board or their designee. Securities transactions between a broker- dealer and the custodian involving purchase or sale of securities by transfer of money or securities must be made on a "delivery vs. payment" basis to insure that the custodian will have the security or money in hand at conclusion of the transaction. B. The investment policy shall require all approved institutions and dealers transacting repurchase agreements to execute and perform as stated in the Master Repurchase Agreement. All repurchase agreement transactions shall adhere to the requirements of the Master Repurchase Agreement. C. At the direction of the Board operations of the Plan shall be reviewed by independent certified public accountants as part of any financial audit periodically required. Compliance with the Board's internal controls shall be verified. These controls have been designed to prevent losses of assets that might arise from fraud, error, or misrepresentation by third parties or imprudent actions by the Board or employees of the plan sponsor, to the extent possible. D. Each member of the Board shall participate in a continuing education program relating to investments and the Board's responsibilities to the Plan. It is suggested that this education process begin during each Trustee's first term. E. With each actuarial valuation, the Board shall determine the total expected annual rate of return for the current year, for each of the next several years and for the long term thereafter. This determination shall be filed promptly with the Department of Management Services, the plan's sponsor and the consulting actuary. F. The proxy votes must be exercised for the exclusive benefit of the participants of the Plan. Each Investment Manager shall provide the Board with a copy of their proxy voting policy for approval. On a regular basis, at least annually, each manager shall report a record of their proxy vote. -5- VII. CRITERIA FOR INVESTMENT MANAGER REVIEW The Board wishes to adopt standards by which judgments of the ongoing performance of a portfolio manager may be made. If, at any time, any three of the following is breached, the portfolio manager may be warned of the Board's serious concern for the Plan's continued safety and performance. If any five of these are violated the consultant may recommend a manager search for that mandate. ♦ Four (4) consecutive quarters of relative under - performance verses the benchmark. ♦ Three (3) year trailing return below the top 40'' percentile of the peer group and under performance verses the benchmark. ♦ Five (5) year trailing return below the top 40`x' percentile of the peer group and under performance verses the benchmark. • Three (3) year downside volatility greater than the index, as measured by down market capture ratio. ♦ Five (5) year downside volatility greater than the index, as measured by down market capture ratio. • Style consistency or purity drift from the mandate. • Management turnover in portfolio team or senior management. ♦ Investment process change, including varying the index or benchmark. ♦ Failure to adhere to the IPS or other compliance issues. ♦ Investigation of the firm by the Securities and Exchange Commission (SEC). • Significant asset flows into or out of the company. ♦ Merger or sale of firm. Fee increases outside of the competitive range. ♦ Servicing issues — key personnel stop servicing the account without proper notification. ♦ Failure to attain a 60% vote of confidence by the Board. Nothing in this section shall limit or diminish the Board's right to terminate the manager at any time for any reason. VIII. APPLICABLE CITY ORDINANCES If at any time this document is found to be in conflict with the City Ordinances or applicable Florida Statutes, the Ordinances and Statutes shall prevail. IX. REVIEW AND AMENDMENTS It is the Board's intention to review this document at least annually subsequent to the actuarial report and to amend this statement to reflect any changes in philosophy, objectives, or guidelines. In this regard, the Investment Manager's interest in consistency in these matters is recognized and will be taken into account when changes are being considered. If, at any time, the Investment Manager feels that the specific objectives defined herein cannot be met, or the guidelines constrict performance, the Board should be notified in writing. By initialing and continuing acceptance of this Investment Policy Statement, the Investment Managers concur with the provisions of this document. By signing this document, the Chairman attests that this policy has been recommended by the Investment Consultant, reviewed by the plan's legal counsel for compliance with applicable law, and approved by the Board of Trustees. -6- X. FILING OF THE INVESTMENT POLICY Upon adoption by the Board, the investment policy shall be promptly filed with the Florida Department of Management Services, the City, and the plan's actuary. The effective date of the Investment Policy shall be the 31 days following the filing date with the City. CITY OF PALM BEACH GARDENS FIREFIGHTERS' PENSION PLAN IN Chairman, Board of Trustees Date: -7- V V e� OEM .pm O U r•1 z Q "r :z] CL cz OEM- r.� a O U .. cu j G G fY� v a cn Q cz O b Q Jz Q (4- 03 G C a 0 v� a� o W t o a W >, >,� �n y m M W cn wo cz 000000 �b 00V�0600W b 0 0 0 0 0 0 o 0 o v> o O to c o cl c o .fl N O N N O orA N b U c a O W sc 11 � o b E cc ca v a� a� o rA cz �, OEM- r.� a O U .. cu j G G fY� v a