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-
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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-
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