Loading...
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