HomeMy WebLinkAboutAgenda Fire Pension 031510THE 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, March 15, 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 Meetings Held January 13, 2010 and January 25, 2010
3. Actuarial Report: Brad Armstrong
• Actuarial Valuation
• Actuarial Study on Information Requested by the Union
• Board Review of Current Contract with GRS
4. Investment Manager Report: RBC Global (previously Voyageur) Mike Spencer
5. Investment Monitor Report: Bogdahn Consulting
• Revised Investment Policy Statement
6. Attorney Report: Bob Sugarman
• Status of Proposed Ordinance
• Revised Agreement for Bogdahn Consulting for Fee Increase
7. Administrative Report: Margie Adcock
• Disbursements
8. Other Business
• Review Status of Disability Recipients
9. Schedule Next Meeting: Monday, May 10, 2010 at 9:00 A.M.
10. 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
January 13, 2010
A special 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 (9:20 A.M.)
Rick Rhodes
Ed Morejon
Donna Wisneski
Roy 011iff (9:15 A.M.)
OTHERS
Margie Adcock, Administrator
Ken Harrison, Attorney (via teleconference)
Peter Bergel, Fire Chief
Allan Owens, Finance Director
DISCUSSION ON REOUEST BY THE UNION FOR AN ACTUARIAL STUDY
It was noted that the Union made a request for an actuarial study on the impact of the fire
services merging with Palm Beach County Fire Rescue. Mr. Morejon stated that he
asked Chief Bergel to appear before the Board to discuss the current proposal. Chief
Bergel appeared before the Board. He stated that the City was entertaining a proposal by
Palm Beach County Fire Rescue (PBCFR) to provide fire services. He stated that the
parties are proceeding in these discussions. He stated that he was advised that a study
needed to be done in order to get a true cost proposal. He advised that the City has no
problem with the study being done. However, the City is not willing to incur any cost for
the study due to the fact that they are just entertaining a proposal from PBCFR. He stated
that the City was approached to look at a merger and he thinks it is smart to look at the
possibility of a merger. He noted that the City is scheduled to meet again in February
with PBCFR with an outline of their proposal.
Chief Bergel departed the meeting.
Ken Harrison appeared via teleconference.
Mr. Morejon stated that he called a special meeting today because he received a request
from Mike Mayo, President of the Union, to have an impact study done on a potential
merger of fire services with the County. Mr. Harrison stated that there was no problem
with the request. He noted that the Florida Statutes have certain requirements if there is
going to be a merger, such as the costs associated with a merger. He stated that this is an
issue that has been discussed around the State in the past year and a half. He stated that if
the City terminates the Plan there is a liability that flows to them because everyone
becomes vested at the time of termination and the employer has to fund the present value
of that going forward. He stated that it is reasonable to request that such a study be done.
The only question he had was that the letter requested a poll be done by the Fund. He
stated that he was not sure why such a poll would not be done by the Union. It would
make more sense for the Union to do the poll. Mr. Harrison noted that in some instances
2
he has seen a fund authorize the actuary to do the study but with the union paying for the
study. He stated that if there were serious consideration of such a merger, the study
would need to be done anyway.
Roy 011iff entered the meeting.
There was discussion on Participant education related to the poll. Mr. Harrison stated
that the Statute requires a vote. There was concern expressed that the Participants
understand what they are voting on so that they can make an informed decision. It was
noted that if the City were seriously considering this, then the Board would have the
Actuary and Attorney discuss the issues with the Participants. The Board cannot mandate
that Participants attend educational sessions, but such sessions can be made available.
However, it was noted that there is no obligation to do anything prior to a vote.
Tom Murphy entered the meeting.
There was discussion that the study is dependent on the poll, so it should be as accurate
as possible. Mr. Harrison stated that the study is nothing more than an estimate. A survey
might help make it more accurate. The Board asked if it would be appropriate to provide
some broad education before the poll. Mr. Harrison stated that it would be appropriate.
Ken Harrison departed the meeting.
Allan Owens appeared before the Board. He stated that about a year and a half ago the
City engaged Bolton Partners to do an actuarial study. He stated that Bolton came back
with recommendations of projections and assumptions of future costs based on different
rates of return. He noted that the cost of the study was split with the City. There was a
lengthy discussion. Mr. Rhodes stated that he was fine with providing some broad basic
education. He thought the Union should do the polling as long as they are given the
information needed for the poll in order to find out what the actuarial cost would be of a
merger. He also felt that if the Union was requesting the study then the Union should pay
50% of the cost, especially since the Board required the City to pay 50% when the City
requested a study. Mr. Morejon noted that there was interest on all sides. The City is
interested, the Union is interested and the firefighters voted to move forward. Everyone
feels it is worthwhile to get the cost of a merger from PBCFR, and the cost will depend,
in part, on the pension part.
Roy 011iff departed the meeting.
There was further discussion on educating the Participants. A motion was made,
seconded and carried 4 -0 to allow the Union to conduct a straw poll but that such poll be
reviewed and authorized by Ed Morejon prior to the poll, with Participants being given
an informational packet at least one week prior to the poll and be advised that it is just an
informal straw poll. A motion was made, seconded and carried 4 -0 to authorize an
actuarial study following the scope of the Union's letter requesting the study, not to
3
exceed $10,000 to be split with the Union, as long as the Union agrees beforehand that
they will split the cost so the Fund cost would not exceed $5,000.
OTHER BUSINESS
Mr. Murphy discussed the DROP investments and stated that he thought that the Board
needed to look at a self - directed plan to set up for DROP investments. There was a
lengthy discussion. It was noted that the DROP Participants currently have a choice of
keeping the money commingled with the Plan or in a stable value investment. Mr.
Murphy stated that he thought the Participants should be given an option to take risk if
they wanted to earn more if there was no cost to the Plan.
Roy 011iff re- entered the meeting.
The Board decided to have further discussion on the possibility of self - directed DROP
investments at the next meeting when the Investment Monitor would be in attendance.
There being no further business, the meeting adjourned.
Respectfully submitted,
Tom Murphy, Secretary
PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND
MINUTES OF MEETING HELD
January 25, 2010
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
Rick Rhodes
Ed Morejon
Donna Wisneski
Roy 011iff
MINUTES
OTHERS
Margie Adcock, Administrator
Ken Harrison, Attorney (9:15 A.M.)
Joe Bogdahn, Investment Monitor
Steve Gordon, Auditor
The Board reviewed the minutes of the meeting held November 16, 2009. A motion was
made, seconded and carried 5 -0 to accept the minutes of the meeting held November 16,
2009.
ANNUAL AUDIT
Steve Gordon appeared before the Board to present the audit for the period ending
September 30, 2009. He stated that he was issuing a clean unqualified opinion. He
reviewed the Statement of Plan Net Assets. The total assets of the Fund as of September
30, 2009 were $27,958,195 almost all of which were in investments. Total liabilities were
$118,246. Total net assets of the Fund as of September 30, 2009 were $27,839,949. Mr.
Gordon reviewed the Statement of Changes in Plan Net Assets. He reported that there
was total net investment income of $323,079. The total contributions to the Fund were
$4,437,680. The total additions were $4,763,257 and total deductions were $527,110. The
net increase in Plan net assets was $4,236,157.
Ken Harrison entered the meeting.
Ms. Wisneski inquired about several matters including the employer contributions, the
Chapter 175 premium tax contribution, and the notes to the financial statements. Mr.
Gordon responded to Ms. Wisneski's questions and reiterated that these are the Board's
financial statements and the Board has to be satisfied with how the financials are
presented. He noted that the majority of Ms. Wisneski's comments had to do with a
matter of style and /or wording, but that such requested changes would not change the
actual numbers presented. Ms. Wisneski stated that she would like to discuss her
comments and possible additions to the notes of the financial statements and the
representation letter with Mr. Gordon before the audit was finalized. There was concern
that the City received a copy of the draft audit prior to approval by the Board. It was
noted that the City was advised that they were receiving a draft that had not yet been
2
approved by the Board. It was further noted that it has been normal practice in the past to
cooperate with the City and provide them with a draft audit as soon as it is available. A
motion was made, seconded and carried 5 -0 that prior to providing any outside parry with
a draft of the audit, such approval be first obtained by the Chair.
INVESTMENT MONITOR REPORT
Joe Bogdahn appeared before the Board. He reviewed the market environment for the
period ending December 31, 2009. He reviewed the quality rankings breakdown by
weight and quarterly performance. He reviewed international and regional market index
performance. He reviewed fixed income market performance. He stated that he thinks the
Fed will begin raising rates soon.
Mr. Bogdahn then reviewed the preliminary investment performance for the quarter
ending December 31, 2009. The total market value of the Fund as of December 31,
2009 was $28,596,870. The Fund was up 2.54% net of fees for the quarter while the
benchmark was up 3.26 %. The total equity portfolio was up 4.32% while the benchmark
was up 5.35 %. The total domestic equity portfolio was up 5.47% while the Russell 3000
was up 5.90 %. The Dana core equity portfolio was up 4.31 % for the quarter while the
S &P 500 was up 6.04 %. The Dana growth equity portfolio was up 6.97% for the quarter
while the Russell 1000 Growth was up 7.94 %. The total international portfolio was down
.35% while the benchmark was up 2.22 %. The international portfolio managed by
Voyageur was down .58% and the international portfolio managed by Manning & Napier
was down .01% for the quarter while the EAFE was up 2.22 %. It was noted that
Voyageur changed its name to RBC Global. There was discussion on the name change.
Mr. Bogdahn stated that from a management standpoint, there has been no change. The
real estate portfolio managed by American Realty was down 4.22% for the quarter while
the NCREIF was down 3.40 %. The total fixed income portfolio was up .95% for the
quarter while the benchmark was up .53 %. Agincourt was up .60% for the quarter while
the benchmark was up .20 %. DHJ fixed income was up 1.28% for the quarter while the
benchmark was up .53 %.
Mr. Bogdahn discussed managers and performance. He stated that he would have further
discussion at the March meeting when he had a final report. Mr. Morejon stated that he
would like to see information on similar size plans in the area.
Mr. Bogdahn discussed the Revised Investment Policy Statement (IPS). He provided the
current IPS and the revised IPS that highlighted the changes. It was noted that they were
using a new format for all of the pension plans they have as clients and he worked off that
format in making specific changes for this Fund. Mr. Bogdahn reviewed the revised IPS.
There was a lengthy discussion. Mr. Harrison stated that he reviewed the revised IPS and
it meets the requirements of Chapter 112. Mr. Bogdahn further reviewed the revised IPS.
There was a lengthy discussion on the various changes. Mr. Bogdahn stated that he
would revise the IPS as discussed and bring it back to the next meeting for approval.
3
Mr. Morejon stated that the IPS might have further changes if the City passes the
proposed Ordinance. There was discussion on the status of the proposed Ordinance. Mr.
Harrison stated that he has not heard anything from the City. He stated that he would
follow up on this matter.
The Board discussed the request for a fee increase that had been presented by Mr.
Bogdahn at the last meeting. Mr. Bogdahn stated that the current annual fee is $20,500.
He stated that they were proposing an all- inclusive fee of $22,500. There would be no
additional fees for manager searches, additional portfolio evaluations or special meetings.
There was a lengthy discussion. A motion was made, seconded and carried 5 -0 to
authorize the Attorney to draft a contract with an all- inclusive annual fee of $22,500
effective April 1, 2010. Mr. Harrison stated that he would have the contact prepared for
the Board to review and execute at the next meeting.
ATTORNEY REPORT
Mr. Harrison provided a revised Ordinance. He stated that at the November meeting he
discussed USERRA and noted that the Ordinance needed to be changed to include the
required language. He stated that he amended the proposed Ordinance to include
USERRA retroactive to January 2007. A motion was made, seconded and carried 5 -0 to
approve the revised proposed Ordinance, which includes the USEERA language, and
direct the Attorney to provide the revised proposed Ordinance to the City.
Mr. Harrison provided the Board with a Memorandum on the new Special Tax Notice
from the IRS. He discussed the updated Safe Harbor Rollover Notice and recommended
the Notice be adopted. A motion was made, seconded and carried 5 -0 to adopt the IRS
updated Special Tax Notice.
Mr. Harrison stated that he discussed with Mr. Sugarman the issues raised at the Board's
special meeting two weeks ago. He stated that he wanted to reiterate that if a merger is
the course of action, it is important that the Board participate at some level. He
encouraged the Board to request to be involved in the process. Mr. Morejon stated that
the Union did request that the cost be looked at, as did the City and Fire Department. So
this is not a unilateral thing. Mr. Harrison stated that he strongly urged the Board make
sure they become part of the process to participate. A plan needs to participate in the
actual negotiations so they can understand the ramifications of the Interlocal Agreement.
Mr. Morejon noted that the Board was provided with a letter from the Actuary dated
January 19, 2010 regarding the cost of the actuarial study, as well as a letter from the
Union dated January 20, 2010 agreeing to pay half of the cost of the study. He stated that
the Actuary is moving forward with the study. Mr. Morejon also noted that the Actuary
does not need a poll to be conducted in order to do the study. As such, he advised that he
was not moving forward with the poll of the Participants at this time.
4
ADMINISTRATIVE REPORT
Ms. Adcock presented the list of disbursements to be made. A motion was made,
seconded and carried 5 -0 to approve the disbursements listed.
Ms. Adcock advised that an election was done for the Trustee position that was held by
Ed Morejon. It was noted that no one ran against Mr. Morejon so he was reappointed to
the Board for another term. A motion was made, seconded and carried 4 -0 to ratify the
reappointment of Ed Morejon. Ed Morejon did not vote on the motion.
OTHER BUSINESS
There was discussion on additional investment options for the DROP Participants. There
was a discussion on self - directed DROP accounts. Ms. Wisneski stated that she would
look at possible options for the March meeting. Mr. Bogdahn stated that he was aware of
options with ICMA and Hartford. Those happen to be the options available for the City's
457 Plan. Mr. Harrison stated that the Ordinance would need to be amended to allow for
self - directed DROP accounts. There was a lengthy discussion. A motion was made,
seconded and carried 5 -0 to have presentations from ICMA, Hartford and Nationwide at
the May meeting.
There being no further business, the meeting adjourned.
Respectfully submitted,
Tom Murphy, Secretary
Gabriel Roeder Smith & Company One Towne Square 248.799.9000 phone
GRS Consultants & Actuaries Suite 900 248.799.9020 fax
Southfield, MI 49076 -3723 www.gabrielroedercom
February 19, 2010
Ms. Margaret Adcock
Plan Administrator
The Resource Center LLC
4360 Northlake Boulevard
Suite 206
Palm Beach Garden, Florida 33410
Re: City of Palm Beach Gardens Firefighters' Pension Fund
Dear Margie:
As requested, we are providing an analysis of the City of Palm Beach Gardens Firefighters' Pension
Fund to estimate the financial impact of closing the Plan to new hires and allowing existing
members to transfer from the plan to the Florida Retirement System (FRS). The attachments
illustrate a 15 year projection of funding requirements under two scenarios regarding transfers of
existing members. The results are based on census data as of September 30, 2008 and financial data
as of September 30, 2009. Except where otherwise noted, all results were developed using the same
actuarial assumptions as outlined in the September 30, 2008 actuarial valuation.
Maintaining Current Plan
Under this scenario the Plan is maintained with the current provisions. As you can see from the
attachment, the annual costs are projected to increase both in dollar amounts and as a percentage of
payroll in the first few years. This is directly caused by the recent period of poor asset performance.
If future Plan experience is in line with the actuarial assumptions, we would expect the annual cost
as a percentage of payroll to begin to decrease in about 15 years. This is because the current
amortization bases start to become fully amortized at that time.
Effect of Closing Plan to New Entrants
As a result of any change which closes the Plan to future hires, the expected future working lifetime
of members will decrease as the population matures. Under the current actuarial funding method,
Proposed Unit Credit, the required contributions will not be high enough in the early years, before
most active employees are retired, to significantly reduce the shortfall between assets and liabilities.
For this reason we recommend changing to the Aggregate Cost Method. We also recommend that
the asset return assumption be lowered in the future as the time frame for the Plan becomes shorter.
We have reflected the Aggregate Method in our projections.
Ms. Margaret Adcock
February 19, 2010
Page 2
Migrating Members to Florida Retirement System
FRS is a relatively well funded retirement system covering all State, county and public school
employees as well as employees of many other entities including some cities. There are
approximately 600,000 employees covered by the system and another 300,000 receiving benefits.
Assets are in the area of $100 billion.
Probably the most important consideration other than cost is a matter of philosophy. Does the City
wish to relinquish control over this valuable part of the employees' benefit package? A decision to
join FRS is irrevocable — once a city joins FRS, it may never withdraw.
To be sure, ceding this responsibility to FRS would clear away a number of local responsibilities:
➢ The City would simply send money to FRS each payday.
➢ All pension questions would be directed to FRS.
➢ There would be no Board of Trustees and related meetings, minutes, etc.
(Although this may not be possible for some time).
➢ There would be no actuary or actuarial reports.
➢ The City auditors would not have to review financial statements of the
Firefighters' Pension Fund.
➢ If there is a collective bargaining unit, pension issues would be a minimal
part of the collective bargaining process.
On the other hand, the City would have no control over the mandates of the State and would not be
able to use the local retirement plan to accomplish management goals and objectives. A case in
point is the so- called rate stabilization reserve that FRS established a few years ago. The use of
this reserve has been very successful in keeping the FRS cost stable over the past few years while
nearly all other plans have had dramatic cost increases. There has been pressure at times from
employee groups who feel that employers have benefited from the reserve at the expense of
employees. These groups have pushed to raise benefits. The City of Palm Beach Gardens would
have virtually no say in this battle.
Options for Transitioning to FRS
Employees entering FRS are treated as new entrants under that system. Past service with the City is
not counted for FRS purposes unless this past service is purchased. Once members enter FRS, the
City must pay a percentage of their pensionable payroll (29.67% for the year beginning July 1,
2010).
Gabriel Roeder Smith & Company
Ms. Margaret Adcock
February 19, 2010
Page 3
Under one option, it was assumed all existing members with less than 10 years of service would
transfer into FRS. Under the other option, only new hires enter FRS and current members continue
to accrue benefits under the existing Plan.
This report is intended to describe the financial effect of the proposed plan changes. No statement
in this report is intended to be interpreted as a recommendation in favor of the changes, or in
opposition to them. Since some of the changes involve a reduction in benefit accrual, we
recommend that you consult with your legal counsel before making any decisions.
The calculations are based upon assumptions regarding future events, which may or may not
materialize. They are also based upon present and proposed plan provisions that are outlined in the
report. If you have reason to believe that the assumptions that were used are unreasonable, that the
plan provisions are incorrectly described, that important plan provisions relevant to this proposal are
not described, or that conditions have changed since the calculations were made, you should contact
the authors of this report prior to relying on information in the report.
If you have reason to believe that the information provided in this report is inaccurate, or is in any
way incomplete, or if you need further information in order to make an informed decision on the
subject matter of this report, please contact the author of the report prior to making such decision.
As indicated below, the undersigned are Members of the American Academy of Actuaries (MAAA)
and meet the Qualification Standards of the American Academy of Actuaries to render the actuarial
opinion herein.
We welcome your questions and comments.
Sincerely yours,
0AW �ee -
Brad L. Armstrong, ASA, EA, MAAA
Senior Consultant & Actuary
RJD:mrb
Enclosures
I
Randall J. Dziubek, ASA, EA, MAAA
Consultant & Actuary
Gabriel Roeder Smith & Company
Fiscal Year
Total Covered
Ending
Payroll
2010
10,525,462
2011
10,999,107
2012
11,494,067
2013
12,011,300
2014
12,551,809
2015
13,116,640
2016
13,706,889
2017
14,323,699
2018
14,968,266
2019
15,641,837
2020
16,345,720
2021
17,081,278
2022
17,849,935
2023
18,653,182
2024
19,492,575
2025#
20,369,741
Assumptions
City of Palm Beach Gardens Firefighters' Pension Fund
15 Year Projection of Required City Contributions
Current Plan New Members Enter FRS
ARC#
ARC for Current Plan Actives*
ARC for FRS Plan Members
Total ARC
$ Amount
% of Payroll
$ Payroll
$ Amount
% of Payroll
$ Payroll
$ Amount
% of Payroll&
$ Amount
% of Payroll
3,550,238
33.73%
10,525,462
3,550,238
33.73%
0
0
19.47%
3,550,238
33.73%
3,906,883
35.52%
10,393,441
5,120,713
49.27%
635,949
188,686
29.67%
5,309,399
48.14%
4,170,048
36.28%
10,894,891
5,608,787
51.48%
629,135
186,664
29.67%
5,795,451
50.29%
4,450,187
37.05%
10,985,677
5,944,591
54.11%
1,076,904
319,517
29.67%
6,264,108
51.93%
4,676,804
37.26%
11,103,029
6,106,727
55.00%
1,521,219
451,346
29.67%
6,558,073
51.95%
4,887,260
37.26%
10,957,233
6,043,905
55.16%
2,267,377
672,731
29.67%
6,716,636
50.79%
5,107,187
37.26%
10,676,218
5,910,954
55.37%
3,182,204
944,160
29.67%
6,855,114
49.47%
5,337,010
37.26%
10,023,209
5,584,045
55.71%
4,515,514
1,339,753
29.67%
6,923,798
47.62%
5,577,176
37.26%
9,701,579
5,431,141
55.98%
5,530,021
1,640,757
29.67%
7,071,898
46.43%
5,828,148
37.26%
9,425,165
5,302,580
56.26%
6,527,506
1,936,711
29.67%
7,239,291
45.38%
6,090,415
37.26%
9,525,623
5,371,881
56.39%
7,161,102
2,124,699
29.67%
7,496,580
44.93%
6,364,484
37.26%
8,610,782
4,910,835
57.03%
8,894,021
2,638,856
29.67%
7,549,691
43.13%
6,650,886
37.26%
7,901,267
4,557,981
57.69%
10,446,101
3,099,358
29.67%
7,657,339
41.74%
6,950,176
37.26%
7,426,484
4,328,740
58.29%
11,788,033
3,497,509
29.67%
7,826,249
40.73%
7,262,933
37.26%
7,210,850
4,235,919
58.74%
12,895,811
3,826,187
29.67%
8,062,106
40.10%
4,905,034
24.08%
6,800,976
4,042,390
59.44%
14,247,203
3,211,320
22.54%
7,253,710
34.46%
Return for FYE September 30, 2009 2.50%
Return for FYE September 30, 2010 and After 8.250/c
Asset Return Assumption - Palm Beach Gardens Fire 8.25%
Asset Return Assumption - FRS 7.75%
Covered Payroll Growth Assumption - Palm Beach Gardens Fire 4.500/c
No future non- investment gains or losses
FRS payroll figures include 5% load to account for differences in the definition of Pensionable Pay
*Aggregate Method is used to develop the ARC for the Closed Group
#The decrease in dollar amount is attributable to the current plan having fully amortized the unfunded
actuarial liability including all known unrecognized invenstment loss as of September 30, 2009. This
coincides with the date the current plan is projected to reach a 100% funded ratio.
&Rates reported on page I -4 of the Florida Retirement System Actuarial Valution report as of July 1,
2009 issued in December 2009.
Note
If the reader is aware of any material differences that affect the results shown on this page, please
contact the authors promptly before using these results as the basis for making any final decisions.
If you have reason to believe that the information provided in this report is inaccurate, or is in any way
incomplete, or if you need further information in order to make an informed decision on the subject
matter of this report, please contact the author of the report prior to making such decision.
Prepared by Gabriel Roeder Smith and Company
February 19, 2010
Fiscal Year
Total Covered
Ending
Payroll
2010
10,525,462
2011
10,999,107
2012
11,494,067
2013
12,011,300
2014
12,551,809
2015
13,116,640
2016
13,706,889
2017
14,323,699
2018
14,968,266
2019
15,641,837
2020
16,345,720
2021
17,081,278
2022
17,849,935
2023
18,653,182
2024
19,492,575
2025#
20,369,741
Assumptions
City of Palm Beach Gardens Firefighters' Pension Fund
15 Year Projection of Required City Contributions
Current Plan Members Not 100% Vested Enter FRS
ARC#
ARC for Current Plan Actives*
ARC for FRS Plan Members
Total ARC
$ Amount
% of Payroll
$ Payroll
$ Amount
% of Payroll
$ Payroll
$ Amount
% of Payroll&
$ Amount
% of Payroll
3,550,238
33.73%
10,525,462
3,550,238
33.73%
0
0
19.47%
3,550,238
33.73%
3,906,883
35.52%
6,291,258
4,417,155
70.21%
4,943,241
1,466,660
29.67%
5,883,815
52.37%
4,170,048
36.28%
6,610,772
4,949,358
74.87%
5,127,460
1,521,317
29.67%
6,470,675
55.12%
4,450,187
37.05%
6,587,496
5,318,716
80.74%
5,694,995
1,689,705
29.67%
7,008,421
57.06%
4,676,804
37.26%
6,492,309
5,383,510
82.92%
6,362,475
1,887,746
29.67%
7,271,256
56.56%
4,887,260
37.26%
6,130,738
5,113,770
83.41%
7,335,197
2,176,353
29.67%
7,290,123
54.14%
5,107,187
37.26%
5,622,341
4,729,641
84.12%
8,488,775
2,518,620
29.67%
7,248,261
51.37%
5,337,010
37.26%
4,822,748
4,118,080
85.39%
9,975,998
2,959,879
29.67%
7,077,959
47.83%
5,577,176
37.26%
4,330,421
3,747,830
86.55%
11,169,737
3,314,061
29.67%
7,061,891
45.56%
5,828,148
37.26%
3,831,165
3,372,844
88.04%
12,401,205
3,679,438
29.67%
7,052,282
43.45%
6,090,415
37.26%
3,673,180
3,265,862
88.91%
13,306,167
3,947,940
29.67%
7,213,802
42.49%
6,364,484
37.26%
2,644,570
2,477,762
93.69%
15,158,543
4,497,540
29.67%
6,975,302
39.18%
6,650,886
37.26%
1,824,325
1,853,640
101.61%
16,826,890
4,992,538
29.67%
6,846,178
36.71%
6,950,176
37.26%
1,208,235
1,390,236
115.06%
18,317,194
5,434,711
29.67%
6,824,947
34.95%
7,262,933
37.26%
803,417
1,093,160
136.06%
19,623,616
5,822,327
29.67%
6,915,487
33.85%
4,905,034
24.08%
568,561
930,097
163.59%
20,791,239
4,686,345
22.54%
5,616,442
26.29%
Return for FYE September 30, 2009 2.50%
Return for FYE September 30, 2010 and After 8.250/c
Asset Return Assumption - Palm Beach Gardens Fire 8.25%
Asset Return Assumption - FRS 7.75%
Covered Payroll Growth Assumption - Palm Beach Gardens Fire 4.500/c
No future non- investment gains or losses
FRS payroll figures include 5% load to account for differences in the definition of Pensionable Pay
*Aggregate Method is used to develop the ARC for the Closed Group
#The decrease in dollar amount is attributable to the current plan having fully amortized the unfunded
actuarial liability including all known unrecognized invenstment loss as of September 30, 2009. This
coincides with the date the current plan is projected to reach a 100% funded ratio.
&Rates reported on page I -4 of the Florida Retirement System Actuarial Valution report as of July 1,
2009 issued in December 2009.
Note
If the reader is aware of any material differences that affect the results shown on this page, please
contact the authors promptly before using these results as the basis for making any final decisions.
If you have reason to believe that the information provided in this report is inaccurate, or is in any way
incomplete, or if you need further information in order to make an informed decision on the subject
matter of this report, please contact the author of the report prior to making such decision.
Prepared by Gabriel Roeder Smith and Company
February 19, 2010
ACTUARIAL SERVICES AGREEMENT
THIS CONTRACT is entered into the 1St day of October, 2005, between the
BOARD OF TRUSTEES OF THE CITY OF PALM BEACH GARDENS
FIREFIGHTERS' PENSION FUND, (herein referred to as the "Board ") and GABRIEL,
ROEDER, SMITH AND COMPANY (herein referred to as the "Actuary").
WITNESSETH
WHEREAS, the Actuary has demonstrated the expertise and experience to
perform the actuarial services outlined in this Agreement.
NOW, THEREFORE, in consideration of services to be performed and payments
to be made together with mutual covenants and conditions hereinafter set forth, the
parties agree as follows:
1. The Actuary shall perform the following Regular Annual Services:
A. Prepare an annual Actuarial Valuation Report for fiscal years ending
September 30, 2005 and thereafter.
B. Attend at least one meeting per year to present the annual
valuation.
C. Annual aggregate share account update
D. Compute and verify retirement, death and disability benefits.
E. Consulting services regarding benefit and /or assumption changes.
F. Correspondence with City's auditors regarding disclosures included
in City's financial statements.
G. Correspondence with State of Florida Department of Management
Services, Division of Retirement which agency reviews the required
Annual and Actuarial Reports.
H. Prepare actuarial impact statement as necessary.
I. Coordinate with other service providers regarding other plan reports
and necessary governmental filings.
I Provide telephone consultations on plan matters.
2. During the contract period, the Actuary shall also perform such additional
actuarial services as may be requested by the Board. The charges for this work shall be
based upon the amount of time required to complete each task and then current hourly
rates. A firm fee quotation prior to commencing any work shall be provided
3. For Regular Annual Services as provided in paragraph 1 of this
Agreement, the Board agrees to pay an annual fee of Seven Thousand dollars ($7,000)
for 2005, Seven Thousand Three Hundred Dollars ($7,300) for 2006 and Seven
Thousand Six Hundred Dollars ($7,600) for 2007. Further, the Actuary shall receive
additional fees as follows:
• One hundred fifty dollars ($150.00) for each calculation of service
retirement, disability retirement, survivor and vested benefits for members
of the Retirement System as such benefits become payable.
2005 2006 2007
Supplemental Valuations and non -de
minimis Impact Statements — First $1,000 $1,050 $1,100
Change
Additional Changes at same time — 2nd $ 575 $525 $550
and 3rd
4 'h and above $350 $375 $400
De minimis (no cost) impact statements $500 $500 $500
All fees are guaranteed for three (3) years.
4. This contract embodies the entire Agreement of the parties hereto and no
modification thereof shall be made except by written amendment agreed to and
executed by both parties.
I
5. The Board shall deliver to the Actuary all employee and financial data and
any such further information as the Actuary shall deem necessary from time to time in
order to complete the job.
6. Termination. Either party may terminate this Agreement at any time
upon thirty (30) days written notice to the other party. The Actuary shall be entitled to
payment for any actuarial services performed through the effective date of termination.
7. The Actuary shall maintain malpractice insurance in the sum of at least
one million dollars ($1,000,000) and shall provide the Board with a certificate of
insurance evidencing such coverage.
8. Change in Personnel. This Agreement is entered into by the Board with
the expectation and request that Brad Armstrong will remain as the principal senior
actuarial consultant assigned to the Board by the Actuary. Should the Actuary decide to
assign another Senior Actuarial Consultant to the Board, the Actuary will give the Board
at least sixty (60) days advance notice.
9. The term of this Agreement shall be for three (3) years beginning the 1St
day of October, 2005, and may be renewed for subsequent periods upon the mutual
agreement of the parties hereto. There shall be no change in any terms unless
mutually agreed to by the parties hereto.
10. Neither party hereto may assign, convey, or otherwise transfer any of its
rights, obligations, or interest herein without the prior express consent of the other
party.
11. The validity of this Agreement and of any of its terms or provisions, as
well as the rights and duties of the parties hereunder, shall be governed by the laws of
the State of Florida, with venue being Palm Beach County Florida. All prior agreements
between the parties are hereby terminated and superseded by this Agreement.
12. This Agreement may be executed in several counterparts, each of which
shall be deemed an original.
IN WITNESS WHEREOF, the Board has signed duplicates hereof, and
GABRIEL, ROEDER, SMITH AND COMPANY has caused its corporate name to be
3
signed to said duplicates by its proper officers thereunto duly authorized on the date
and in the year first above written.
BOARD OF TRUSTEES OF THE
GABRIEL, ROEDER, SMITH CITY OF PALM BEACH GARDENS'
FIREFIGHTERS' PENSION FUND
ORMAN L. ]ONES, Chairman I
Chairman Print Name: � (c l K zl ;'- - v
ATTEST:
By:
G:\\PBGF\ACrU\2005-GRS-ActuarialServiceAgreement
4
ATTEST;,
By:
Firm Overview
RBC Global Asset Management (U.S.) Inc.
As of 12.31.09
Founded in 1983, RBC GAM (US) is an SEC - Registered ►
Investment Adviser Headquartered
in Minneapolis, MN
►
-�> Comprised of independent, experienced investment teams
►
* 102 employees (26 portfolio managers)
* $44.7 billion in assets under management ►
►
_ RBC Global
Asset Management
"The International Equity strategy is sub - advised by
Polaris Capital Management, LLC
RBC Global Asset Management
As of 12.31.09
RBC Global Asset Management (RBC GAM) is the umbrella for
three investment management businesses owned by RBC
• RBC Global Asset Management (U.S.) Inc. (RBC GAM (US))
- formerly Voyageur Asset Management Inc. (U.S. -based Institutional)
• Phillips, Hager & North Investment Management Ltd. (PH &N)
(Canadian -based Institutional)
• RBC Asset Management Inc.* (Individual Investors)
* Comprehensive range of investment solutions and services
* Offices located in the United States, Canada, Europe and Asia
* 595 individuals (205 investment professionals)
$194.7 billion (USD) in assets under management on behalf of our
global client base
• RBC Global Asset Management
(U.S.) Inc.
• RBC Asset Management
• Phillips, Hagar & North Investme
Management Ltd.
"Please note: within the U.S., RBC Asset Management Inc. is not registered with the SEC or any state as an investment advisor
_ RBC Global
�= Asset Management
Royal Bank of Canada
As of 12.31.09
6th Largest Bank in North America and 13th Largest in the World Based on Market
Capitalization
Credit Rating among Highest of Financial Institutions Globally
• AA- by S&P
• Aaa by Moody's
Diversified Mix of Businesses and Geographies
Approximately 80,000 Employees and 18 Million Clients Worldwide
_ RBC Global
Asset Management
5
International Equity
RBC GAM (US) International Equity
Overview
Objective: To Identify the Best Values in the World
• Disciplined, bottom -up value approach
• Proprietary investment technology
• In -depth fundamental research
• Team focuses on absolute risk
• Seek high risk - adjusted returns that exceed the global cost of equity
Underlying Belief
• Companies exist to generate cash flow for owners
• Superior returns can be generated by purchasing the most undervalued streams of "free" cash flow
_ RBC Global
94 Asset Management"
7
RBC GAM (US) International Equity
Annualized Returns ( %) as of 2.28.10
City of Palm Beach Gardens
-2.93
Firefighters Pension Trust Fund
MSCI EAFE Index -5.05
1.53 27.00 31.74 -9.64 53.48 73.57 -9.88
2.23 19.52 25.84 -13.85 32.45 55.32 -7.65
'Inception Date: 1. 1.2006
Source: RBC GAM (US), MSCI
Performance is presented gross of fees.
All returns for periods greater than one year are shown on an annualized basis. Past performance is not indicative of future results.
:RB JC
RBC Global
Asset Management"
0.34
0.34
�j
RBC GAM (US) International Equity
Composite Performance as of 2.28.10
80%
70%
60%
50%
40%
30%
20%
10%
0%
-10%
-20%
YTD10 2009 1 Year 3 Years 5 Years 7 Years 10 Years Since Inception
(7.1.98)
■ International Equity (Gross) N MSCI EAFE Index
Returns are presented gross of management fees and include the reinvestment of all income. All returns for periods greater than one year are shown on an annualized basis.
Inception of the International Equity Composite is 7.1.98. The Voyageur International Equity composite is presented as supplemental to the "Performance Presentation &
Disclosures" appendix to these materials. The appendix contains additional GIPSO- required disclosures and important information regarding calculation of performance data
and includes net of fees performance returns. Past performance is not indicative of future results.
_ RBC Global
Asset Management"
RBC GAM (US) International Equity
Sector Weightings as of 2.28.10
25%
20%
15%
10%
5%
0%
Consumer Consumer Energy Financials Health Care Industrials Information Materials Telecomm. Utilities
Discretionary Staples Technology Services
■ International Equity ■ MSCI World Index
Source: MSCI Blue Book
Sector weightings are based on a representative account.
_ RBC Global
Asset Management"
in
RBC GAM (US) International Equity
Top Country Allocations as of 2.28.10 (% of Equities)
Country RBC GAM (US)
International
Japan 15.1%
Germany 10.8
United Kingdom 10.7
Sweden 8.8
Ireland 8.6
Source: MSCI Blue Book
Top country allocations are based on a representative account.
_ RBC Global
Asset Management"
MSCI EAFE Index
11.8%
8.7
6.7
1.3
0.6
11
RBC GAM (US) International Equity
Buys and Sells 2009
Fourth Quarter
New Investments
N/A Bank of Ireland
Third Quarter
Investments Sold
New Investments Investments Sold
State Bank of India Andritz
Svenska Handelsbanken Austevoll Seafood
Symnse AG Bellway PLC
Camillo Eitzen & Co.
Methanex Corporation
Smurfit Kappa Group PLC
Taylor Wimpey PLC
This should not be construed as a recommendation to buy or sell any financial instruments.
_ RBC Global
Asset Management
Second Quarter
New Investments
Novartis AG
Infosys Technologies
First Quarter
Investments Sold
Banco Bilbao Vizcaya Argentaria
Maruichi Steel Tube
New Investments Investments Sold
N/A Continental
12
RBC GAM (US) International Equity
2009 Strategy Review
Strengths
• The year's positive performance was the result of both security and sector selection. The strongest sector in the market was
Materials, up 70 %. The Fund was heavily overweight the sector and gained 85 %. Smurfit Kappa, the Irish box company
gained 340% during the year. Also notable were Methanex Corp., up 131 %, and BASF Corp., which rose 81 %.
• Other sectors in the market also benefited from excellent stock selection. The portfolio positions in the Energy sector gained
87% versus 35% for the EAFE Index sector. Technip, the French oil services company, was up 148 %. Thai Oil gained
100 %.
• Consumer Discretionary gained 38% in 2009, while the Fund positions were up 84 %. The four British homebuilder
companies gained from 57% to 199 %. Christian Dior gained 94 %, Autoliv was up 106% and Duni AB, the German maker of
paper products for restaurants, was up 174 %. While the aforementioned Smurfit Kappa was the largest contributor to
portfolio performance, YIT OYJ, the Finnish construction company, was a close second, up 260 %, and aided Industrial
sector performance.
Weaknesses
a Hurting performance during a strong year for the market were the Japanese domestically- oriented companies, which had
helped performance in 2008 and were sold down to lower levels at the beginning of the year. Kansai Electric Power and
Tokyo Electric Power lost 14% and 18 %, respectively. Culture Convenience Club, a consumer video product company, also
hurt results, down 48 %.
_ RBC Global
Asset Management"
13
RBC GAM (US) International Equity
Fourth Quarter 2009 Strategy Review
Strengths
• The best performing market sector was Materials, which gained 13.2 %. The portfolio, while significantly outperforming in
this sector for the year, underperformed in the fourth quarter, gaining 10.2 %.
• Stock performance relative to sector performance was best in Healthcare where the single holding, Novartis, gained 9.4%
versus 5.4% for the EAFE sector and in Technology, where, led by the Indian company Infosys, results were 2.2% versus
-2.6% for the Index. The portfolio, however, was underweighted in both sectors.
= Portfolio performance was aided by both an overweight and stock selection in the Industrials sector. Portfolio returns were
4.3% for the sector versus 1.5% for the Index. Performance here was led by three Finish companies: Cargotec Corp, a
cargo handling company, which gained 17.9 %; Kone, an elevator company, which rose 17.1 %; and YIT, a construction
company, which was up 9 %.
Weaknesses
a The portfolio was held back by performance in the Consumer Discretionary sector, where the portfolio was overweight and
where profit- taking in the British homebuilding companies led to a loss of 2% in the sector, versus a gain of 2.9% for the
Index, and in the Consumer Staples sector where Greencore Holdings, the Irish food packaging company, lost 10.9 %, and
Meiji Holdings, the Japanese dairy company which lost 11.9 %.
_ RBC Global
Asset Management"
a
14
RBC GAM (US) International Equity
Outlook
• At this point, while generally constructive on the worldwide economy, many of our holdings have come close to reaching
their selling price or no longer look as inexpensively priced as they once were. At present, we are reviewing all of these
holdings and would not be surprised to see more transactions than usual during the first quarter of 2010 as these stocks
are sold.
_ RBC Global
Asset Management
a
15
Professionals
RBC Global Asset Management (U.S.) Inc.
Michael M. Spencer, CFA
Vice President, Senior Portfolio Manager
Mike Spencer is responsible for Large Cap Value, Concentrated Large Cap Value, and Diversified Large Cap Core Equity
research, portfolio management, and client service. Mike is also the client service portfolio manager for our International
Equity clients. Before joining RBC GAM (US) in 2007, he was the chief investment officer and chief compliance officer of
Freedom Capital Management, where he oversaw investment processes and served on the equity style committee. Mike's
previous experience also includes fixed income portfolio management at Shawmut National Corporation. He began his
career in the investment industry in 1983. Mike earned an AB from the University of Notre Dame. He is a CFA charterholder
and member of the CFA Institute. Mike is also a member of the Boston Economic Club and the Boston Security Analysts
Society.
_ RBC Global
Asset Management
A
16
Professionals
Polaris Capital Management, LLC
Bernard R. Horn, Jr.
President, Portfolio Manager
Bernard Horn Jr. is president and portfolio manager of Polaris Capital Management, LLC, a Boston -based global and
international value equity management firm that serves as the sub - advisor for our International Equity strategy. Prior to
founding Polaris Capital in 1995, Bernard served as an investment officer for MDT Advisers, Inc. He also worked as a
portfolio manager for Freedom Capital Management Corporation. From 1980 to 1990, Bernard was the principal and
founder of Horn & Company, an investment counseling firm that specialized in global portfolio management for individuals,
trusts and tax - qualified accounts. Bernard began his career in the investment industry in 1980. He received a BS from
Northeastern University and a MS in Management from the Massachusetts Institute of Technology. In January 2007,
Bernard was named Fund Manager of the year by MarketWatch. He was profiled in the January 2004 issue of SmartMoney
Magazine and has been highlighted in Business Week, The New York Times, The Wall Street Journal and other national
publications. Bernard has appeared on CNBC, CNNfn and Bloomberg TV to discuss global market trends.
Sumanta Biswas, CFA
Vice President, Assistant Portfolio Manager
Sumanta Biswas is an assistant portfolio manager for Polaris Capital Management, LLC, the sub - advisor of our
International Equity strategy. Sumanta is responsible for quantitative and fundamental analysis of potential investment
opportunities as well as day -to -day management of Polaris' Global Valuation Model. He began his career in the investment
industry in 1996. Sumanta received a BE from North Bengal University and an MS in Finance from Boston College. He also
earned an MBA from Calcutta University in India. Sumanta is a CFA charterholder.
RBC Global
jg, Asset Management"
17
Professionals
Polaris Capital Management, LLC
Richard V. Howe, CFA — Analyst
Rich Howe is responsible for equity research, client service and assisting with the International Equity portfolio
management process. Rich joined Polaris Capital as an account manager in June 2005. Prior to joining Polaris, Rich
worked for Freedom Capital and Tucker Anthony where he helped build each firm's institutional business. Rich began his
career in the investment industry in 1973. He received a BA in Economics from the University of Virginia and an MBA from
the Wharton School at the University of Pennsylvania. Rich is a CFA charterholder.
Eleanor Marsh — Analyst
Eleanor Marsh is a research analyst focusing on international and global equities. In her role, Eleanor capitalizes on her
experience and tenure in Asian markets. Before Joining Polaris Capital in 2010, she was an equity analyst in the global
fundamental equity strategies group at State Street Global Advisors (SSgA), where she covered a variety of industries
including transportation, real estate, office and consumer electronics, and Japanese financial services. Eleanor also
managed the Japan Opportunities Fund at SSgA. Prior to working at SSgA, she was a portfolio manager responsible for
international equity fundamental analysis and portfolio construction at State Street Research & Management Company.
Eleanor's previous experience also includes serving as a co- portfolio manager for one global and two international funds at
Evergreen Investments and a senior analyst at S.G. Warburg Securities in Tokyo. She earned a BA from Yale University
and an MA from Stanford University.
_ RBC Global
Asset Management"
im
Professionals
Polaris Capital Management, LLC
Andry Sutanto — Analvst
Andry Sutanto is an analyst for Polaris Capital Management, LLC, the sub - advisor of our International Equity strategy.
Andry's focus is on quantitative research and the proprietary investment technology that is an integral part of Polaris'
investment process. Prior to working at Polaris, Andry worked in the finance and MIS departments at Northeastern
University and was a computer engineer with the Cambridge Research Group. Andry began his career in the investment
industry in 2005. He received a BS from Boston University and an MBA in Finance from Northeastern University.
Bin Xiao — Analvst
Bin Xiao is responsible for quantitative and fundamental analysis of potential International Equity opportunities. Bin joined
Polaris Capital in 2006 after completing his internship for the firm in 2004/2005 working as an analyst. Prior to his
experience at Polaris, Bin's experience includes working as a systems engineer for PNC Financial Service Group (PFPC)
and a software engineer at RIT Research Corporation. Bin began his career in the investment industry in 2006. He received
a BE from the Beijing Institute of Technology in China. Bin also received a MS from the Rochester Institute of Technology
and an MBA from MIT Sloan School of Management.
_ RBC Global
Asset Management
19
Appendix
Performance Presentation & Disclosure
RBC GAM (US) International Equity as of December 31, 2009
ANNUALIZED RETURNS
One Th ree
QTD YTD Year Years
Five Seven Ten
Years Years Years
International Equity (Gross)
1.6%
53.4%
53.4%
.8.0%
4.1%
13.7%
9.6%
International Equity (Net)
1.4%
52.0%
52.0%
-8.9%
3.1%
12.6%
8.6%
MSCI SAFE Index
2.2%
32.5%
32.5%
-5.6%
4.0%
10.8%
1.6%
ANNUAL RETURNS
Period
YTD
Gross
YTD
Net
MSCI EAFE
Index
Composite
Dispersion
Number of
Accounts
Market
Value ($MM)
Percent of
Firm Assets
Total
Firm Assets
2000
-4.7%
-5.6%
-14.0%
N /A'
1
$12
$14,103.0
2001
0.8%
-0.2%
-21.2%
N /A'
1
$19
$15,061.3
2002
5.9%
4.9%
-15.7%
N /A'
1
$21
$20,245.8
2003
54.9%
53.5%
39.2%
N /A'
1
$34
$22,518.8
2004
29.8%
28.6%
20.7%
N /A'
1
$90
$26,858.3
2005
16.7%
15.6%
14.0%
N /A'
2
$153
$27,018.8
2006
34.6%
33.3%
26.9%
N /A'
3
$283
$28,358.1
2007
1.7%
0.8%
11.6%
0.2%
3
$378
1.2%
$32,045.1
2008
-50.1%
-50.6%
- 43.1%
0.2%
2
$217
0%
$32,140.1
2009
53.4%
52.0%
32.5%
0.4%
1
$267
<1%
$44,674.0
'N /A - Information is not statistically meaningful
due to on insufficient number
of portfolios
in the composite forthe entire year.
(Performance Presentation and Disclosures
continued on next page)
_
RBC Global
Asset Management"
21
Performance Presentation & Disclosure
RBC GAM (US) International Equity as of December 31, 2009
RBC Global Asset Management (U.S.) inc.Tm is o federally registered investment adviser(ounded in 1983. RBC GAM (US) was formerly known as Voyageur Asset Management Inc. (VAM).
VAM was purchosed in December 2000 by RBC Capital Markets Holdings (USA) Inc. formerly known as RBC Doin Rouscher Corp. On 1.5.07, RBC GAM (US) purchased substantially all
of the assets of Freedom Capital Management, LLC ( "Freedom'). Prior to 1.5.07 the performance represents that of a composite from Freedom. The firm maintains a complete list and
description of composites, which is available upon request.
Effective 12.31.09, Total Firm Assets includes all discretionary and non - discretionary assets managed by RBC GAM (US). From 1. 1.06 to 12.31.09 RBC GAM (US) was separated into
two divisions for the purpose ofcomplying with the CFA institute's Global investment Performance Standards (GIPS°). The wrap fee /SMA basin ess of RBC GAM (US) was defined as a
separate division under the name Voyageur Advisory Services and was excluded from the GiPSkdefined firm. Prior to 1.1.06, the G1PSm- defined firm included all discretionary and non -
discretionary assets managed by RBC GAM (US).
International Equity Composite contains fully discretionary accounts invested in a diversified portfolio of foreign equity securities deemed to be undervalued by the strategy's investment
team. Polaris Capital Management, LLC is the sub - advisor for this strategy. For comparison purposes, the composite is measured against the MSCI- EAFE (gross) index (gross of
wmthholding taxes on dividends). Effective 1.31.06, the firm changed die benchmark for comparison purposes from the MSCI -EAFE Net Index to the MSCI -EAFE Gross Index in order
to align the comparison against the industries more widely reported by the Gross index. The MSCI -EAFE Index uses withholding tax rates applicable to a Luxembourg based holding
company. Additional information regarding the percentage ofthe composite which may be invested in countries or regions not included in the Index is available upon request. The
minimum account see for this composite is $1 million.
Results are based on fully discretionary accounts under management, including those accounts no longer with the firm. Composites with more than three accounts, composite policy
requires the temporary removal of any portfolio incurring a client initiated significant cash inflowor outffowof at least 10% of portfol io assets. The temporary removal of such an account
occurs otthe beginning of the month in which the significant cash flow occurs and the account re- enters the composite the first full month of being fully invested. Additional information
regarding the treatment of significant cash flows is available upon request. Post performance is not indicative of future results.
Composite performance is presented net of foreign withholding taxes. The index grosses -up dividends, where this is appropriate, to reflect the position of an international investor with
the benefit of double taxation agreements, irony. Withholding taxes may vary according to the investor's domicile. Composite returns represent investors domiciled in the United Stores.
Trade date accounting is used and returns are presented in U.S. dollars. Returns include the effect of foreign currency exchange rates. Dispersion of annual returns is measured by the
equal weighted standard deviation of all accounts in the composite for a full year. Prior to 1.1.07, asset weighted standard deviation was used .if there were more than five portfolios
in the composite for a full calendar period. Returns are presented gross and net of management fees and include the reinvestment of oll income. Actual returns will be reduced by
investment advisory fees and other expenses that moy be incurred in the management of the account. The collection of fees produces a compounding effect on the total rate of return net
of management fees. For example, a $10 million portfolio earn ing a 10% ann utilized retum over 5 years would be valued of $16.4 million. The some portfolio with an annual fee of a95%
would be valued at $15.6 million net of investment management fees. Advisory fees are described in Form ADV Port 11. Additional information regarding policies for calculating and
reporting returns is available upon request.
Institutional Fee Schedule: 0.95% on all assets. RBC GAM ( U S ) reserves the right t o n egotiate all advisory fees.
The internationol Equity Composite was created on 1.1.07 and has on inception date of 7.1.98. RBC GAM (US) has prepared and presented this report in compliance with the Global
Investment Performance Standards (61PS*). Compliance with GIPSO has been verified firm -wide by an independent third party from January 1, 1993 through June 2009. In addition,
performance examination was conducted on the international Equity Composite beginning 7.1.98. Their report is available upon request.
RBC Global Asset Manogement (RBC GAM) comprises RBC Global Asset Management (U.S.) Inc. (RBC GAM (US)), RBC Asset Management Inc. (RBC AM) and Phillips, Hager& North
Investment Management Ltd. (PH&N), which are separate but afftioted corporate entities. O Registered trademark of Royal Bank of Canada. RBC Global Asset Management is a
trademark of Royal Bank of Canada. Used under license.
(D 2010 RBC Global Asset Management (U.S.) inc.
_ RBC Global
Asset Management"
22
City of Palm Beach Gardens
(plan sponsor)
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.
- 1 -
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 `A'. 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
• — Formatted: Font: 8 pt
A. Authorized Investments
• — Formatted: Font: 8 pt
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: — Formatted: Font: 4 pt
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:
— Formatted: Font: 4 pt
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 Pl.
4. Pooled Funds:
— Formatted: Font: 4 pt
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.
Trading Parameters
t — Formatted: Bullets and Numbering
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.
Limitations
• — Formatted: Bullets and Numbering
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. For the purposes -
of this Investment Policy Statement, foreign securities are defined as bonds, stocks, or other
evidences of indebtedness issued or guaranteed by a company that is not organized under the laws of
the United States, any state or organized territory of the United States, or the District of Columbi�Added
to clarify definition of foreigry _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
-3-
Formatted: Indent: Left: 0.3 ",
Hanging: 0.3 ", Numbered + Level: I
+ Numbering Style: 1, 2, 3, ... +
Start at: 1 + Alignment: Left +
Aligned at: 03" + Tab after: 0.55"
+ Indent at: 0.55 ", Tabs: Not at
Comment [ibl]: Added to
Formatted: Font: Not Bold
All equity and fixed income securities must be readily marketable. Commingled funds must
be independently appraised at least annually.
4. Real Estate investments cannot exceed ten percet (10 %) of Plan assets at cos6dded back. _
Absolute Restrictions
C�
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
Formatted: Indent: Left: 0.3 ",
Hanging: 0.33"
Formatted: Bullets and Numbering
Comment &2]:
Formatted: Bullets and Numbering
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 fas well as any provisions outlined in the Investment — Formatted: Highlight
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 , Formatted: Highlight
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. Formatted: Highlight
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 , Formatted: Highlight
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 pet of — Formatted: Highlight
investment fees and relative performance of the Plan.
E. The Board will meet periodically to review the Investment Consultant performance report. The — Formatted: Highlight
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
-4-
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.
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. 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 guidelines shall result in a probation recommendation. Violation of five individual
guidelines shall results in a termination recommendation: (reinserted old language)
0 4 consecutive quarters of relative under - performance verses benchmark index. - — Formatted: Bullets and Numbering
0 3 and 5 year trailing returns below the 40th percentile and underperforming the index.
0 Downside volatility greater than index, measured by up /down market capture ratio.
0 Style Consistency or purity drift from the mandate.
o Management turnover in portfolio team or senior management.
0 Investment process change, including varying the index or benchmark.
0 Failure to adhere to the IPS or other compliance issues.
0 Investigation of the firm by the SEC.
o Significant asset flows into or out of the company.
0 Merger or sale of firm.
0 Fee increases.
0 Servicing issues — Key personal stop servicing the account without proper notification.
(reinserted old language)
Nothing in this section shall limit or diminish the Board's right to terminate the manager at any time
for any reason.
VIII. CRITERIA FOR INVESTMENT TOTAL FUND REVIEW
A. Four consecutive quarters of Total Fund performance below the 50th percentile in Fund
performance rankings.
B. Four consecutive quarters of Total Fund performance below the established benchmark
C. Standard deviation for the Total Fund in excess of 150% of the assigned benchmark.
(reinserted old language)
XI. c APPLICABLE CITY ORDINANCES _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Deleted: VIII
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.
X. REVIEW AND AMENDMENTS Deleted: I
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` hi this Formatted: Highlight
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 Formatted: Highlight
document, the Chairman attests that this policy has been recommended by the Investment Consultant,
1
reviewed by the plan's legal counsel for compliance with applicable law, and approved by the Board of
Trustees.
,XL FILING OF THE INVESTMENT POLICY Formatted: Highlight
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
By:
Chairman, Board of Trustees
Date:
-7-
Schedule `A'
City of Palm Beach Gardens
Firefighters' Pension Trust Fund Investment Policy Statement
ASSET CLASS
TARGET
(% MARKET)
RANGE
(% MARKET)
BENCHMARK INDEX
Broad Core / Value Equity
27.5%
0.0%-60.0%
S &P 500
Broad Growth Equity
27.5%
0.0%-60.0%
Russell 1000 Growth
International Equity
10.0%
5.0%-15.0%
MSCI EAFE
Investment Grade Bonds
12.5%
10.0% - 18.0%
Barclays Intermediate Agg. (DHJ)
Investment Grade Bonds
12.5%
10.0% - 18.0%
Barclays Aggregate (Agincourt)
Income Opportunity
10.0%
5.0%-15.0%
NCREIF
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. Investments in foreign equity shall be limited to 10% of the fund assets at cost.
CITY OF PALM BEACH GARDENS FIREFIGHTERS' PENSION PLAN
Chairman, Board of Trustees