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HomeMy WebLinkAboutAgenda Police Pension 042111 Agenda City of Palm Beach Gardens Police Officers’ Pension Fund M EETING OF A PRIL 21, 2011 LOCATION: City Council Chambers’ 10500 North Military Trail Palm Beach Gardens, FL 33410 TIME: 9 AM 1. Call Meeting To Order 2. Roll Call: • Lt. Jay Spencer, Chairman • David Pierson, Secretary • Jules Barone, Trustee • Brad Seidensticker, Trustee • Wayne Sidey, Trustee 3. Custodial RFP Interviews: • Comerica Bank – Felecia Reli ef, Assistant Vice President • Salem Trust Company – Karen Russo, Senior Vice President & Regional Mgr • Wells Fargo Institutional Retirement & Trust – Patrick Laratta, Vice President 4. GRS – Steve Palmquist • Discussion of Excess Chapter 185 Money 5. Investment Manager Report – ICC Capital (Steve Stack) 6. Investment Consultant Report – This tle Asset Consulting (John McCann) 7. Attorney Report – Law Offices of Perry & Jensen (Bonni Jensen) • Discussion Regarding Multiple Buybacks • Memo Regarding Proposed State Legi slative Changes to Pensions – PCB GVOPS 11-17 & SB 1128, as amended 8. Administrator Report – Resource Centers (Audrey Ross) 9. Approval of Minutes • January 27, 2011 Regular Meeting 10. Disbursements 11. Benefit Approvals 12. Financial Statements 13. Old Business • Update on George Smith’s Prior Contributions 14. Other Business • Chairman – Update on March 1, 2011 Meeting with the City Regarding the Pension Funds Funding and Unfunded Liability 15. Public Comments 16. Adjourn Next Meeting Date: Thursday July 21, 2011 @ 9AM PLEASE NOTE: Should any interested party seek to appeal any decision of this Board with respect to any matter considered at such meeting or hearing, s/he will need a record of the proceedings and for such purpose may need to ensure 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 The Pension Resource Center, LLC no later than four days prior to the meeting. Minutes 1-27-11.doc Page 1 of 7 City of Palm Beach Gardens Police Officers’ Pension Fund Minutes of the Meeting Held January 27, 2010 The regular meeting of the Board of Truste es of the City of Palm Beach Gardens Police Officers’ Pension Fund was called to order at 1:03 PM by Chairman Jay Spencer in the Council Chambers at the Palm Beach Gardens City Hall at 10500 North Military Trail, Palm Beach Gardens, Florida. TRUSTEES PRESENT OTHERS PRESENT Jay Spencer, Chair Audrey Ross (Resource Centers) Brad Seidensticker, Trustee Bonni Jensen (Law Offices of Perry & Jensen) Jules Barone, Trustee Steve Stack (ICC Capital Management) Donna Cannon (PBG Clerk’s Office) John McCann (Thistle Asset Consulting) Steve Palmquist (GRS) Jim Burdick (CBH) Alan Knopf, ARK Consulting Associates PRESENTATION OF THE SEPTEMBER 30, 2011 AUDITED FINANICAL STATEMENTS Cherry, Bekaert & Holland (CBH) – Presented by Jim Burdick Mr. Burdick reviewed the audit engagement letter and stated that they issued an unqualified opinion which is the highest level that can be issued. There were no significant efficiencies found within the inte rnal controls, or no material weaknesses found while performing the audit. Alth ough he did note that they found one miscalculated benefit that is in the process of being corrected. Mr. Burdick also reported that they did not consult with any other CPA’s during the audit. Mr. Burdick briefly discussed th e management discussion and analysis letter which is a narrative overview of the au dit process. The net assets increased to $41,403,852 in 2010 from $34,032,253 in 2009, and the employ er contributions also increased to $3,955,968 from $3,349,679. But the employ ee contributions decreased to $779,843, which was primarily due to more members entering the DROP during the fiscal year. In addition the benefit payments increased as well as the refund of contribution payments during the fiscal year. Mr. Burdick reported that after all the additions and all the deductions the plan had a net increase of $7,371,599m which is compared to the net increase of $5,688,180 last year. Lastly Mr . Burdick reviewed the financial footnotes and stated that he added in a DROP tabl e which separates out the plans designated benefits (for DROP benefits only) versus unde signated assets. He also briefly mentioned that the admin expenses decreased this year which is ve ry beneficial to the plan. Ms. Jensen recommended that they need to go back and look at the changes in plan provisions in 2006, as there were more amen dments then what is documented in this report. Mr. Burdick stated th at he will revise that sect ion to reflect all the correct amendments and will reissue a clean final copy of the report. MOTION: Mr. Seidensticker made a mo tion to approve the September 30, 2010 Audited Financials Statements as presented by the Auditor, with the one revision to the 2006 changes in plan provisions and actuarial methods. Minutes 1-27-11.doc Page 2 of 7 SECOND: Mr. Barone seconded the motion. CARRIED: The motion carried unanimously 3-0. Ms. Ross commented to the Trustees that this years audit went very smooth and we did not have any issues like we encoun tered last year. She commented that she thinks this is due to the personnel change the CBH recently had (in which she actually thought was not going to go over very well). Ms. Ross noted that the new person she works with relating to the fiel d work on the audit is very knowledgeable and professional. Overall th e audit process this year was very pleasant, and she stated that she looks forward to th e same smooth process next year. PRESENTATION OF THE SEPTEMBE R 30, 2011 ACTUARIAL VALUATION REPORT Gabriel, Roeder, Smith & Company (G RS) – Presented by Steve Palmquist Mr. Palmquist reviewed the participant data and commented that there were 11 new DROP members during the fiscal year, so th erefore the employee contributions were less. He also noted that the payroll dramatically decreased because of less active members, and also the higher paid employees are retiring. Therefore, the City’s contributions will decrease for the fiscal year beginning October 1, 2011. The City’s contribution for th e upcoming fiscal year is $3,785,539, versus the $3,885,572 they paid last fiscal year. He commented that with more members entering the DROP in 2011 it will probably ha ve the same effect on payroll as it did this year. Mr. Palmquist reported that the Plan ha d an net actuarial loss of $348,981, which was primarily due to the investments bein g under the assumed rate of return of 7.5% (it was noted that the market valu e return on the in vestments on 9/30/2010 were 9.8%, but according to the smoothing method the actuarial return was only 5.6%). He reported that the plans fund ed ratio increased from 56.2% to 58.8%, which is right on track. He comment ed that since the board changed their assumptions and mortality table 4 years ago it has only benefited them. If the board did not make those changes then the funded ratio would not be as high as it currently is. The total chapter revenue re ceived for the fiscal year was $435,832, which means the plan now has $482,519 in th eir reserve account that can only be used to buy benefits. Mr. Palmquist reported that the plans unfunded liability as of October 1, 2010 is $29,393,731, which increa sed from $26,562,613 last year. He explained that they predicted 5 new retire es during the fiscal year and there were actually 11, so that is considered a negative experience for the plan. So for the next fiscal year they only expect to have 2 ne w retires, although th ere are already more then that that have applied. Therefore the plan will prob ably have another negative experience next fiscal year as well. Lastly Mr. Palmquist noted that the investment income fees are only about 62 basis points which are low and also a positive factor for the plan. MOTION: Mr. Barone made a motion to approve the September 30, 2010 Actuarial Valuation Report as presented by the Actuary. SECOND: Mr. Seidensticker seconded the motion. CARRIED: The motion carried unanimously 3-0. BOARD DISCUSSION: Mr. Spencer asked Mr. Palmquist what the board and members can do today to keep things moving in a positive direction and to reduce the plan unfunded liability. Mr. Minutes 1-27-11.doc Page 3 of 7 Palmquist stated that you can lower the as sumed rate of return which would help keep things cost neutral. Also by decrea sing the expected numbe r of disabilities will help save some cost, and by not allowing members to use their mustering out money in their FAS calculation. The board discusse d different ideas that could help cut the plan unfunded liability cost and Mr. Spen cer recommended lowering the assumption rate down to 5.5%, but doing it gradually over a period of time. Mr. Seidensticker commented that he would like to table this discussion until they have the opportunity to speak to the City regarding the letter they sent out stating that they would like the Police and Fire pension board reps, City reps and Union reps to meet to discuss their unfunded liabilities. Lastly, Ms. Jensen commented that at this time the board shou ld state what their anticipated return will be over the long term and short term. MOTION: Mr. Seidensticker made a motion that the Plan’s Actuary and Consultant anticipate that the fund’s long term and short term return will be 7.5%. SECOND: Mr. Barone seconded the motion. CARRIED: The motion carried unanimously 3-0. Ms. Jensen stated that she will send a letter to the Division of Retirement stating the long term goals. INVESTMENT MANAGER REPORT ICC Capital – Presented by Steve Stack Mr. Stack commented that 5 out of the 10 years the fund has outperformed their assumed rate of return, but it is unfor tunate what happened in 2008 because that set back the fund. He ex plained that the last 10 years have been the most challenging for Cities and overall this fund has held up very well. Mr. Stack then reviewed the performance for the quarter and stated that the build America bond program is continuing so ICC will keep buying into them. The worst performer in the portfolio was US Treasuries, and the bond market is now more challenging then equities so they are keeping their durati on low on all bonds. Mr. Seidensticker questioned what ICC is doing to protect the portfolio against a “bond burst”. Mr. Stack commented that they are moving away from Treasuries and moving more into Corporates, and right now they are actually seeing a rally in mortgage pools so that is where they would go if both Corporates and Treasuries sell off. INVESTMENT CONSULTANT REPORT Thistle Asset Consulting – Presented by John McCann Mr. McCann reviewed Callen Peri odic table of investment returns and stated that this table proves that diversification is great. He then reviewed the funds compliance checklist for the quarter ending December 31, 2010 and stated that we are inline in all areas except that the total fund is trailing for the 3 year period. At the end of the quarter there was 62% in equities, 367% in fixed income and 1% in cash. Mr. McCann reported that that the total fund net of fees was behind the index for the quarter at 5.89% versus 6.97%. The total fixed income was also behind at -1.86% versus -1.28%, although the total equiti es were ahead of the index at 11.59% versus 11.56%. He then review ed each mangers performance: Rhumbline S&P 500 – Slightly behind the index for the quarter at 10.73% versus 10.76%. Rhumbline S&P 400 – Inline with the index for the quarter at 13.50%. Minutes 1-27-11.doc Page 4 of 7 Rhumbline S&P 600 – Fell short of the benchmark for the quarter at 16.14% versus 16.24%. ICC Large Cap Growth – Had a great quarter althou gh they were behind at 11.65% versus the index at 11.83%. ICC Fixed Income – It was a hard quarter for fixed income. The fund was negative and behind the benchm ark at -1.78% versus -1.29%. International Equity – Outperformed significantly for the quarter at 7.48% versus the index at 6.65%. International Fixed Income – Although it was a negative quarter, they still outperformed the benchmark at -1.37% versus -1.45%. Mr. McCann noted that the fund is below ta rget in the S&P500 fund, and above in the fixed income account. Therefore he re commends to the board to rebalance by transferring $1.7M from fixe d income to S&P500. MOTION: Mr. Seidensticker made a motion to rebalance according to the policy by transferring $1.7M from ICC Capital’s fixed income account to Rhumbline’s S&P500 account. SECOND: Mr. Barone seconded the motion. CARRIED: The motion carried unanimously 3-0. Lastly Mr. McCann presented the board with a fee increase. He proposed to add in an additional $750 per quarter to manage and review the 2 new International mangers the Fund recently hired. The board discussed the proposal and the dollar amount. MOTION: Mr. Seidensticker made a motion to increase the plans Investment Consultant’s (Thistle Assets) quarterly fee by an additional $500 per quarter for management of the 2 new International fixed income accounts. SECOND: Mr. Barone seconded the motion. CARRIED: The motion carried unanimously 3-0. ATTORNEY REPORT Law Offices of Perry & Jensen - Presented by Bonni Jensen Ms. Jensen provided the board with th e revised statement of policy regarding buyback of police/non-intervening military services. She reviewed the changes and briefly stated that she removed the vestin g clause and added in the 90 day window language. MOTION: Mr. Seidensticker made a motion to approve and accept the revised statement of policy re garding buyback of police/non- intervening military services that was prepared by the Plan’s Attorney. SECOND: Mr. Barone seconded the motion. CARRIED: The motion carried unanimously 3-0. Ms. Jensen noted that the IRS mileage reim bursement increased by a penny to $.51. Minutes 1-27-11.doc Page 5 of 7 Ms. Jensen reviewed the summary of the responses that were received from the Custodians regarding the RFP that was issued on behalf of this board. She noted that Comerica did not state whether or not they purchase mutual funds on behalf of the board, and the boards intent is to move to a Custodian that does offer that service. The board discussed the response s and narrowed down their selection to 3 Custodians that they would like to invite to their next meeting for an interview. Their selections are: Comerica (depending on wh ether or not they purchase mutual funds on behalf of the board), Salem Trust and Wells Fargo. Ms. Jensen confirmed with the Trustees that their intent is for her to confirm with Comerica on whether of not they offer that service, and if they do not then they will not be part of the board’s selection for an interview. If they do, then they will be invited to the next meeting as well. The Trustees concurred. Ms. Jensen updated the board on the prop osed house bill 303. She briefly reviewed what the proposals were and stated that th ere are 3 pieces to it; one pertaining to FRS, one pertaining to Chapter 175 & 185 plan s (which this fund is), and one related to all other Governmental plans. Also Ms. Jensen reported that there is a senate bill 290 out there that is applicable to the FR S only. It was noted by the end of the meeting that the house bill 303 was already withdrawn. ADMINISTRATOR REPORT Resource Centers – Presented by Audrey Ross Ms. Ross presented the board with the 2011 Fiduciary Liability insurance renewal. She explained that she receiv ed a quote for both the $1M policy (which is what the board has always purchased) and also the $3M as directed. The $1M policy can be renewed for $6,379.82, as the $3M prem ium is $18,013.64. The board discussed what coverage is necessary for this fund. MOTION: Mr. Barone made a motion to renew the Fund’s 2011 Fiduciary Liability Insurance for $6,379.82 ($1M Policy). SECOND: Mr. Seidensticker seconded the motion. CARRIED: The motion carried unanimously 3-0. Ms. Ross stated that they need to sched ule the remaining 2011 meeting dates. The board scheduled them for the 3 rd Thursday of the 1 st month preceding the end of the quarter at 9AM (Thursday April 21, 2011 @ 9AM, Thursday July 21, 2011 @ 9AM and Thursday October 20, 2011 @ 9AM). Ms. Ross announced that she re ceived a letter from FPPTA which states that the fund won a door prize and will receive 5 free Tr ustee registrations to the upcoming FPPTA summer conference at the SeaWorld Resort in Orlando. Ms. Jensen noted that any Trustee who attends will need to fill out a gift form. MINUTES MOTION: Mr. Barone made a motion to approve the minutes from the October 21, 2010 regular meeting. SECOND: Mr. Seidensticker seconded the motion. CARRIED: The motion carried unanimously 3-0. Minutes 1-27-11.doc Page 6 of 7 DISBURSEMENTS APPROVALS MOTION: Mr. Seidensticker made a motion to approve the disbursements. SECOND: Mr. Barone seconded the motion. CARRIED: The motion carried unanimously 3-0. BENEFIT APPROVALS MOTION: Mr. Barone made a motion to approve the applications to enter the DROP for Ernest Carr, George Betshca and Robert Thomas. SECOND: Mr. Seidensticker seconded the motion. CARRIED: The motion carried unanimously 3-0. MOTION: Mr. Seidensticker made a moti on to approve the application for a refund of contributions for Cokes Watson. SECOND: Mr. Barone seconded the motion. CARRIED: The motion carried unanimously 3-0. FINANCIAL STATEMENTS The board reviewed and discu ssed the financial statemen ts that were provided through December 2010. The board received and filed the financial statements through December 2010. OLD BUSINESS Ms. Jensen noted that Mr. Pierson and Mr. Seidensticker were reappointed to serve another 4 year Trustee term on this pension board. OTHER BUSINESS Mr. Spencer explained that a member by the name of George Smith was employed with the City back in 1992 and for some re ason did not start contributing to the pension plan until sometime in 1996. With that said the Actuary did a calculation reflecting what his contributions would have been for that time period, and Mr. Spencer wants the board to consider allowi ng Mr. George the option to repay back his contributions for that ti me frame. Ms. Jensen recommended to the board that they should research this situation more as Mr. Georg e may have been with the group of members who opted out of the plan and then reentered sometime in 1995. The board discussed Mr. George’s situatio n and the letter from the Actuary and decided to table this di scussion until more information is researched. Mr. Spencer explained that curre ntly there are some retirees who are still paying into the VEBA through pension deductions. Th e Pension Resource Centers is deducting the member’s premium from their monthly pe nsion check and then sending it over to the VEBA fund. Currently there is a di screpancy on the amou nts that are being deducted because of how the amount is calc ulated. Mr. Spencer explained that it is not the Pension Resource Centers or the pe nsion board’s responsibility to calculate the amounts to be deducted from the reti ree’s pension check for the VEBA, so he asked GRS to prepare a quote for the VEBA board so they can see how much it will Minutes 1-27-11.doc Page 7 of 7 cost them to have a calculation completed. Ms. Jensen noted that the board does not need to take any action on the letter an d that it just needed to be forwarded to the VEBA Attorney and Chair. Mr. Spencer reviewed a letter that he rece ived from the City Manager regarding the Police pension board’s participation in a meet ing with the City reps and Union reps. He stated that the City wants to get together with all parties to help find ways to cut City costs. Mr. Seidensticker briefly reviewed a letter that he put together in response to the City’s letter. The Trust ees discussed the letter and commented that at every meeting they always discuss ways to help reduce costs and save money. Also the board can not make or change benefits, they can only administer them as they are. The board understands the City ’s concerns and they look forward to meeting with all parties to help come up with plan saving ideas. PUBLIC COMMENTS Mr. Knopf introduced himself to the board an d stated that he is a Consultant for the class action law firm Weiss & Laurie out of New York. He commented that he has done class action work for over 20 years with this firm and he brings in over 50% of their cases. Mr. Knopf explai ned that his office is local and that he does business with the Fire pension board. He stated th at he would like to have the relationship with the board as he understands that most of this funds assets are in index funds so it would be very unlikely for them to be a lead plaintiff in a case. AJOURN There being no further business, and the fu ture meetings are scheduled for the 3rd Thursday of the first month proceeding th e quarter. The next regular meeting was scheduled for Thursday April 21, 2011 at 9AM; the Trustees offi cially adjourned the meeting at 5:31PM. Respectfully submitted, _____________________________ DAVID PIERSON, Secretary PALM BEACH GARDENS POLICE PENSION FUND STATEMENT OF POLICY REGARDING BUYBACK OF POLICEI NON-INTERVENING MILITARY SERVICE WHEREAS, the Palm Beach Gardens Police Pension Fund ("Plan"), and the City of Palm Beach Gardens Code of Ordinances, Section 50-127 provides that participants may purchase prior police officer or non-intervening military service as "credited service" in this Plan; and WHEREAS, the Trustees desire to adopt a Statement of Policy regarding the buyback of prior police officer and non-intervening military service; NOW, THEREFORE, it is hereby resolved that the following Statement of Policy Regarding Buyback of Police Officer/Non-Intervening Military Service is hereby adopted: I. TIME AVAILABLE FOR PURCHASE A. A Member may purchase years or fractional parts of years of service that a member: 1. Previously served as a police officer with the City of Palm Beach Gardens and for which accumulated contributions were withdrawn from the Fund; 2. Previously served as a Police Officer with any other municipal, county state or federal law enforcement department or agency; or 3. Previously served in the United States Military (before beginning employment with the City of Palm Beach Gardens Police Department). B. A Member shall not be eligible to purchase prior service if such service is or will form the basis for a pension from another retirement system or plan. This exclusion does not apply to military service. II. APPLICATION PROCESS A. A Member shall make application to buyback service time on a form provided by the Board of Trustees. A copy of the form is attached to this Policy. B. A police officer may request to purchase some or all available years of service. C. The Trustees shall review and approve all requests for buybacks in accordance with this Statement of Policy. D. Upon approval of application for buyback, the cost shall be calculated by the Fund's actuary as follows: 1. Previous Palm Beach Gardens Service calculation based upon repayment of refund with interest, from the date of withdrawal to the date of repayment. 2. Previous Police Officer or Military Service calculated based upon salary and contribution rate in effect at the time that purchase is requested; plus the amount required to make the cost neutral; plus the cost for professional services E. After the amount of the buyback is calculated and the Member has elected to purchase permissive service, the Member shall execute a "Buyback Contract" which shall set forth the specific buy back provisions for that individual Member. Page 2 of 5 F. The request for buyback may be made at any time during employment but such request can only be made once. G. The credit purchased under this policy will count for all purposes, excluding vesting. III. FUNDS AVAILABLE FOR PAYMENT A Member may pay for the cost of the purchase of time with any of the following sources, if available. A. A Member may pay for the buyback out of pocket, in one lump sum payment; or B. Using rollovers from other qualified plans; or C. The police officer can buy back this time over a period equal to the length of time being purchased or five years, whichever is greater, at an interest rate which is equal to the fund's actuarial assumption. IV. REPAYMENT PERIOD A. The time period for repayment is 5 years or a period equal to the amount of time being purchased. B. Members must determine whether they are purchasing the service within 90 days of receipt of the certified letter containing the statement from the Actuary showing the cost of the buyback. C. Repayment must begin within six months of the request for credit. D. While in repayment status, no credit will be given for any years of service until the full number of years of service to be purchased has been repurchased. Page 3 of 5 E. If a member becomes disabled and entitled to a benefit while in the process of completing a buyback, then the member will not have to complete the buyback, but any payments made before disability is determined shall remain with the Fund. F. If a Member terminates employment with the City of Palm Beach Gardens Police Department before attaining 5 years of service (with the City) or before completing entire service buyback repurchase, then any buyback contributions made shall be refunded to the Member without interest. V. COST OF CALCULATIONS A. Participants must pay the cost of the actuary's calculation for the buyback. However, each member will be entitled to one free calculation. INTENTIONALLY LEFT BLANK Page 4 of 5 THIS STATEMENT OF POLICY REGARDING BUYBACK OF POLICE OFFICER/NON-INTERVENING MILITARY SERVICE is adopted by the Board of Trustees of the PALM BEACH GARDENS POLICE PENSION ----=::J~Q"'-!....!.-\\\..::!.-\J:::....:::;\Q:..!....!.V--=--\li--' 2011. , .- TRUSTEES Witnessed by: 2l ·th FUND on this day of BSJllb October 25,2010 H:\PBG 0003\Buyback\201 0.1 0.25 .PBG -Buyback Policy -CLEAN.wpd Page 5 of 5 Sec. 50-127. Prior police office r ser vice. 1. Unless otherw ise prohibited by law, the y ear s or fra ctional par ts of y ear s that a police of fice r previously serve d in the United States Military Service , or the y ear s or fra ctional par ts of y ear s that a police of fice r pre viously serve d as a police office r with the city during a per iod of employ ment and for which ac cumulated c ontributions were w ithdrawn fr om the fund, or the y ear s and fr actional pa rts of y ear s that a police of fice r ser ved as a police off icer with any other municipal, county , state or f eder al law e nforc ement ag ency shall be adde d to the y ear s of cr edited se rv ic e pr ov ide d th a t: (a) The police office r contributes to the f und the sum that would have be en contr ibuted, based on the police of fice r's salary and the e mploy ee c ontribution rate in ef fec t at the time that the cr edited service is requeste d, had the police office r bee n a member of this sy stem for the y ear s or fra ctional par ts of y ear s for whic h the cr edit is requeste d plus amount actuar ially deter mined such tha t th e c re dit ing of se rv ic e do e s n ot r e su lt i n a ny c os t to the fu nd plu s p a y me nt o f c os ts f or a ll profe ssional service s rende red to the boa rd in conne ction with the purcha se of y ear s of cr edited service . (b) Pay ment by the police of fice r of the r equire d amount may be made within six months of the reque st for cr edit and in one lump sum pay ment, or the police office r ca n buy back this time over a per iod equal to the leng th of time being purcha sed or f ive y ear s, whicheve r is g rea ter, a t an int e re st r a te wh ic h is e qu a l to the fu nd 's a c tua ri a l a ssu mpt ion . A po lic e of fi c e r m a y re qu e st t o purcha se some or a ll y ear s of servic e. No c redit shall be g iven for a ny service until all y ear s of service which ar e to be r epurc hased, ha ve bee n repur chase d. (c) The c redit purc hased unde r this section shall count for a ll purposes, except vesting . (d) I n no event, howe ver, ma y cre dited service be purc hased pur suant to this section for prior se rv ic e wi th a ny oth e r m un ic ipa l, c ou nty , o r s ta te po lic e de pa rt me nt, if su c h p ri or se rv ic e fo rm s or will form a ba sis of a re tirement bene fit or pension fr om another r etireme nt sy stem or plan. This subsection does not apply to mili tary service . (Ord. N o. 2, 2010, § 9, 2-18-10) Editor's note: Ord. No. 2, 2010, § 9, a dopted Fe b. 18, 2010, repe aled f ormer § 50-127, and enac ted a ne w § 50-127 a s set out here in. Forme r § 50-127 pe rtained to similar subject matter . See the Code Compar ative Ta ble for c omplete der ivation. H:\PBG 00 03 \Buy ba ck\Sec 50 -1 27 municod e 2-7-11 .w pd F THE LAW OFFICES OF PERRY & JENSEN, LLC ANN H. PERRY aperry@perryjensenlaw. wm MEMORANDUM VIA ELECTRONIC MAIL DELIVERY BONNI SPATAW JENSEN bsjansen@perryjensenlaw.com TO: PALM BEACH GARDENS POLICE OFFICERS' PENSION FUND Board of Trustees FROM: Bonni S. Jensen Fund Legal Counsel DATE: April, 201 1 RE: ANNUAL FORM 1 FILING Attached is Commission on Ethics (CE) Form 1 "Statement of Financial Interests" which must be filed by Trustees with the Supervisor of Elections for the county in which they reside, prior to July 1 each year. The instructions for filing and completing the form are also attached. Please note that it is recommended that current or former law enforcement officers and firefighters do not use their home addresses on the form; if you do not have a post office box, you may use your work address. You may also complete the form online using your keyboard to fill in the information, tabbing from one section to the next. However, you must print the completed form, sign and date it, then send it to the Supervisor of Elections for the county in which you reside. There is no current system available to file online. It is important that you timely file this form because the penalty for failure to timely file is $25.00 per day, to a maximum of $1,500.00. I suggest that you file this form by certified mail, return receipt requested, and keep a photo copy of the form for your files. Several Trustees have had to show proof of filing in the past, so it is my practice to always get a receipt for such documents. If you have any questions or if I may be of any assistance to you at all, please do not hesitate to contact me or one of my assistants. BSJ/ks E-Copy: Administrator 400 EXECUTIVE CENTER DRIVE, SUITE 207t WEST PALM BEACH, FLORIDA 33401-2922 561'686'6550 *' '% %k&Rh%s&LL BOARDS\2011\2011 Form 1-ALL FUNDS wpd 11 FORM 1 NAME OF SOURCE OF INCOME STATEMENT OF Please address, print agency or type name, your and name, position maillng below: I FINANCIAL INTERESTS SOURCES DESCRIPTION OF THE SOURCES ADDRESS PRINCIPAL BUSINESS ACTIVITY I LAST NAME - FIRST NAME - MIDDLE NAME MAILING ADDRESS : NAME OF BUSINESS ENTITY CITY : ZIP : COUNTY : NAME OF AGENCY : NAME OF OFFICE OR POSITION HELD OR SOUGHT : NAME OF MAJOR SOURCES ADDRESS PRINCIPAL BUSINESS OF BUSINESS' INCOME OF SOURCE ACTIVITY OF SOURCE You are not limited to the space on the lines on this form. Mach additional sheets, if necessary. CHECK ONLY IF 0 CANDIDATE OR NEW EMPLOYEE OR APPOINTEE 2010 I FOR OFFICE USE ONLY: ID Code ID No. Conf. Code P. Req. Code I I I I I I 8 I I FILING INSTRUCTIONS for when and where to file this form are located at the bottom of page 2. INSTRUCTIONS on who must file this form and how to fill it out begin on page 3. PART C - REAL PROPERTY [Land, buildings owned by the reporting person] (If you have nothing to report, you must write "none" or Wan) OTHER FORMS you may need to file are described on page 6. ~~~ CE FORM I -Effective: January 1.201 1. Refer to Rule 34-8.202(1). F.A C. (Continued on reverse side) PAGE 1 PART D - INTANGIBLE PERSONAL PROPERTY [Stocks, bonds, certificates of deposit, etc.] (if you have nothing to report, you must write "none" or "nla") TYPE OF INTANGIBLE I BUSINESS ENTITY TO WHICH THE PROPERTY RELATES NAME OF BUSINESS ENTITY ADDRESS OF BUSINESS ENTITY PART E - LIABILITIES [Major debts] (if you have nothing to report, you must write "none" or "nla") NAME OF CREDITOR ADDRESS OF CREDITOR ~~ ~ PRINCIPAL BUSINESS ACTIVITY POSITION HELD WITH ENTITY I OWN MORE THAN A 5% INTEREST IN THE BUSINESS NATURE OF MY OWNERSHIP INTEREST IF ANY OF PARTS A THROUGH F ARE CONTINUED ON A SEPARATE SHEET, PLEASE CHECK HERE 0 SIGNATURE (required): DATE SIGNED (required): FILING INSTRUCTIONS: WHAT TO FILE: WHERE TO FILE: WHEN TO FILE: After completing all parts of this form, including signing and dating it, send back only the first sheet (pages 1 and 2) for filing. If you have nothing to report in a particular section, you must write "none" or "n/a" in that section(s). Facsimiles will not be accepted. If you were mailed the form by the Commission lnitia/ly, each local officer/empioyee, state on Ethics or a County Supervisor of Elections for officer, and specified state employee must your annual disclosure filing, return the form to file within 30 days of the date of his or her that location. appointment or of the beginning of employ- ment. Appointees who must be confirmed by of Elections of the county in which they perma- if that is less than 30 days from the date of their nently reside. (If you do not permanently reside in Florida, file with the Supervisor of the county appointment' where your agency has its headquarters.) Candidates for publiclyelected local office Loca'officer~~m~'oyeesfi'e with the Sumrvisor the Senate must file prior to confirmation, even NOTE: MULTIPLE FILING UNNECESSARY Generally, a person who has filed Form 1 for calendar or fiscal year is not required to file second Form 1 for the same vear. However. State officers or specified state employees file with the Commission on Ethics, P.O. Drawer 15709, Tallahassee, FL 32317-5709; physical address: 3600 Maclay Boulevard, South, Suite a a a 201, Tallahassee, FL 32312. candidate who PreViOUdY filed-FOrm 1 t~~ause of another public position must at least file a COPY of his or her original Form 1 when qualifying. Candidates file this form together with their qualifying papers. To determine what category your position falls under, see the "Who Must File" Instructions on page 3. must file at the same time they file their qualifying papers. Thereafter. local officerslemployees, State officers, and specified state employees are required to file by July 1st following each calendar year in which they hold their posi- tions. Finally, at the end of office or employment, each local officer/employee. state officer, and specified state employee is required to file a final disclosure form (Form IF) within 60 days of leaving office or employment. :E FORM 1 -Effective: January 1,2011. Refer to Rule 34-8.202 (1). F.A.C. PAGE 2 INSTRUCTIONS FOR COMPLETING FORM 1 STATEMENT OF FINANCIAL INTERESTS WHO MUST FILE FORM 1: 911 persons who fall within the categories of "state officers," "local officerslemployees." "specified state employees," as well as candidates for elective local offie, are required to file Form 1. Positions within these categories are listed below. Persons required to file full financial disclosure (Form 6) and officers of the judicial branch do not file Form 1 (see Form 6 for a list of persons who must file that form). STATF OFFl- include the following positions for state officials: 1) Elected public officials not serving in a political subdivision of the state and any person appointed to fill a vacancy in such office. unless required to file full disclosure on Form 6. 2) Appointed members of each board, commission, authority. or council having statewide jurisdiction, excluding members of sole advisory bodies: but including judicial nominating commission members; Directors of the Florida Black Business Investment Board, Enterprise Florida, Scripps Florida Funding Corporation, Workforce Florida, and Space Florida; Members of the Florida Commission on Tourism, Florida Substance Abuse and Mental Health Corporation, and the Council on the Social Status of Black Men and Boys; and Governors and senior managers of Citizens Property Insurance Corporation and Florida Workers' Compensation Joint Underwriting Association. 3) The Commissioner of Education, members of the State Board of Education, the Board of Governors, and the local Boards of Trustees and Presidents of state universities. LOCAL 0 FFlCERSlEMPLOYEES include the following positions for officers and employees of local government: 1) Persons elected to office in any political subdivision (such as munici- palities, counties, and special districts) and any person appointed to fill a vacancy in such office, unless required to file full disclosure on Form 6. 2) Appointed members of the following boards, councils, commissions, authorities, or other bodies of any county, municipality, school district, inde- pendent special district, or other political subdivision: the governing body of the subdivision; a community college or junior college district board of trustees; a board having the power to enforce local code provisions; a board of adjustment; a planning or zoning board having the power to recommend, create, or modify land planning or zoning within the political subdivision, except for citizen advisory committees, technical coordinating committees, and similar groups who only have the power to make recommendations to planning or zoning boards; a pension board or retirement board empowered to invest pension or retirement funds or to determine entitlement to or amount of a pension or other retirement benefit. 3) Any other appointed member of a local government board who is required to file a statement of financial interests by the appointing authority or the enabling legislation. ordinance, or resolution creating the board. 4) Persons holdina anv of these Dositions in local aovernment: Mavor: -, county or city manager; chief adminisirative employee of-a county, municipal- INTRODUCTORY INFORMATION (At Top of FO~): .. .. INSTRUCTIONS FOR COMPLETING FORM 1: address If YOU +ubuzv 't a written recruest for confi- Person$ listed in Section 119.071(4)(d), F.S.. are encouraged to provide an address other than their home address. DISCLOSURE PERIOD: The tax year for most individuals is the calendai year (January 1 through December 31). If that is the case for you, then your financial interests should be reported for the calendar year 2009; jus1 check the box and you do not need lo add any information in this part 01 the form. However, if you file your IRS tax return based on a tax year that is not the calendar year, you should specify the dates of your tax year in this portion of the form and check the appropriate box. This is the time frame or "disclosure period" for your report. MANNER OF CALCULATING REPORTABLE INTERESTS: As noted in this portion of the form, the Legislature has given filers the option of report- ing based on &r thresholds that are comparative (usually, based on percentage values) p~ thresholds that are based on absolute dollar values. The instructions on the following pages specifically describe the differeni thresholds. Simply check the box that reflects the choice you have made. You must use the type of threshold you have chosen for each part of the form. In other words, 8 YOU choose to report based on absolute dollar value thresholds, you cannot use a percentage threshold on any part 01 the form. If your name, mailing address, public agency, and position are alrea@ printed on the form, you do not need to provide this informa- tion unless it should be changed. To change any of this information, write the correct information on the form, then contact your agency's financial disclosure coordinator. Your coordinator is identified in the financial disclosure portal on the Commission on Ethics website: www.ethics.state.fl.us. NAME OF AGENCY This should be the name of the governmental unit which you serve or served, by which you are or were employed, or for which you are a candidate. For example, "City of Tallahassee," "Leon County," or "Department of Transportation." OFFICE OR POSITION HELD OR SOUGHT Use the title of the office or position you hold, are seeking, or held during the disclosure period (in some cases you may not hold that position now, but you still would be required to file to disclose your interests during the last year you held that position). For example, "City Council Member," "County Administrator," "Purchasing Agent," Or "Bureau Chief." If YOU are a candidate for Office Or are a new employee or appointee, check the appropriate box. MAILING ADDRESS: If your home address appears on the form but you prefer another address be shown, change the address as described above If you are an active or former officer or employee listed in Section 119.071(4)(d). F.S., whose home address is exempt from disclosure, the Commission is required to maintain the confidentiality of your home (CONTINUED on page 4) cp ity, or other political subdivision; county or municipal attorney; chief county or municipal building inspector: county or municipal water resources coordina- tor; county or municipal pollution control director; county or municipal envi- ronmental control director; county or municipal administrator with power to grant or deny a land development permit; chief of police; fire chief; municipal clerk; appointed district school superintendent; community college president; district medical examiner: purchasing agent (regardless of title) having the authority to make any purchase exceeding $20,000 for the local govemrnen- tal unit. 5) Officers and employees of entities serving as chief administrative officer of a political subdivision. STATF EMPLOYEES include the following positions for state employees: Employees in the office of the Governor or of a Cabinet member who are exempt from the Career Service System, excluding secretariat, clerical, and similar positions. 2) The following positions in each state department, commission, board, or council: Secretary, Assistant or Deputy Secretary, Executive Director, Assistant or Deputy Executive Director. and anyone having the power normally conferred upon such persons, regardless of title. 3) The following positions in each state department or division: Director, Assistant or Deputy Director, Bureau Chief, Assistant Bureau Chief, and any person having the power normally conferred upon such persons, regardless of title. 4) Assistant State Attorneys, Assistant Public Defenders, Public Counsel, full-time state employees serving as counsel or assistant counsel to a state agency, administrative law judges, and hearing officers. 5) The Superintendent or Director of a state mental health institute estab- lished for training and research in the mental health field, or any major state institution or facility established for corrections, training, treatment, or reha- bilitation. 6) State agency Business Managers, Finance and Accounting Directors, Personnel officers, Grant Coordinators, and purchasing agents (regardless of title) with power to make a purchase exceeding $15,000. 7) The following positions in legislative branch agencies: each employ- ee (other than those employed in maintenance, clerical, secretarial, or similar positions and legislative assistants exempted by the presiding officer of their house): and each emDlovee of the Commission on Ethics. 1) CE FORM 1 - Effective.January 1. 2011. Refer to Rule 34-8.202(1). F.A.C. PAGE 3 * PART A - PRIMARY SOURCES OF INCOME [Required by Sec. 112.3145(3)(a)l or (b)l. Fla. Stat.] Part A is intended to require the disclosure of your principal sources of income during the disclosure period. You do not have to disclose the amount of income received. The sources should be listed in descending order, with the largest source first. Please list in this part of the form the name, address, and principal business activity of each source of your income which (depending on whether you have chosen to report based on percentage thresholds or on dollar value thresholds) either: exceeded five percent (5%) of the gross income received by you in your own name or by any other person for your benefit or use during the disclosure period, or exceeded $2,500.00 (of gross income received during the disclosure period by you in your own name or by any other person for your use or benefit). You need not list your public salary received from sewing in the position(s) which requires you to file this form, but this amount should be included when calculating your gross income for the disclosure period. The income of your spouse need not be disclosed. However, if there is joint income to you and your spouse from property held by the entireties (such as interest or dividends from a bank account or stocks held by the entireties), you should include all of that income when calculating your gross income and disclose the source of that income if it exceeded the threshold. "Gross income" means the same as it does for income tax purposes, including all income from whatever source derived, such as compensation for services. gross income from business, gains from property dealings, interest, rents, dividends, pensions, social security, distributive share of partnership gross income, and alimony, but not child support. Examples: - If you were employed by a company that manufactures computers and received more than 5% of your gross income (salary, commissions, etc.) from the company (or, alternatively, $2,500). then you should list the name of the company, its address, and its principal business activity (computer manufacturing). - If you were a partner in a law firm and your distributive share of partnership gross income exceeded 5% of your gross income (or, alternatively. $2,500), then you should list the name of the firm. its address, and its principal business activity (practice of law). - If you were the sole proprietor of a retail gift business and your gross income from the business exceeded 5% of your total gross income (or, alternatively, $2,500), then you should list the name of the business, its address, and its principal business activity (retail gift sales). - If you received income from investments in stocks and bonds, you are required to list only each individual company from which you derived more than 5% of your gross income (or, alternatively, $2.500). rather than aggregating all of your investment income. - If more than 5% of your gross income (or, alternatively, $2,500) was gain from the sale of property (not just the selling price), then you should list as a source of income the name of the purchaser, the purchaser's address, and the purchaser's principal business activity. If the purchaser's identity is unknown, such as where securities listed on an exchange are sold through a brokerage firm, the source of income should be listed simply as "sale of (name of company) stock." for example. - If more than 5% of your gross income (or, alternatively, $2,500) was in the form of interest from one particular financial institution (aggregating interest from all CD's, accounts, etc., at that institution), list the name of the institution, its address, and its principal business activity. PART B - SECONDARY SOURCES OF INCOME [Required by Sec. 112.3145(3)(a)2 or (b)2, Fla. Stat.] This part is intended to require the disclosure of major customers, clients, and other sources of income to businesses in which you own an interest. You will not have anything to report unless : (a) If you are reporting based on percentage thresholds: (1) You owned (either directly or indirectly in the form of an equitable or beneficial interest) during the disclosure period more than five percent (5%) of the total assets or capital stock of a business entity (a corporation, partnership, limited partnership, proprietorship, joint venture, trust, firm, etc., doing business in Florida); and (2) You received more than ten percent (10%) of your gross income during the disclosure period from that business entity; and (3) You received more than $1.500 in gross income from that business entity during the period. (1) You owned (either directly or indirectly in the form of an equitable or beneficial interest) during the disclosure period more than five percent (5%) of the total assets or capital stock of a business entity (a corporation. partnership, limited partnership. proprietorship, joint venture, trust, firm, etc., doing business in Florida); and (2) You received more than $5,000 of your gross income during the disclosure period from that business entity. If your interests and gross income exceeded the appropriate thresholds listed above, then for that business entity you must list every source of income to the business entity which exceeded ten percent (10%) of the business entity's gross income (computed on the basis of the business entity's most recently completed fiscal year), the source's address, and the source's principal business activity. (b) If you are reporting based on dollar value thresholds: Examples: - You are the sole proprietor of a dry cleaning business, from which you received more than 10% of your gross income (an amount that was more than $1,500) (or, alternatively, more than $5,000. if you are using dollar value thresholds). If only one customer, a uniform rental company, provided more than 10% of your dry cleaning business, you must list the name of the uniform rental company, its address, and its principal business activity (uniform rentals). - You are a 20% partner in a partnership that owns a shopping mall and your partnership income exceeded the thresholds listed above. You should list each tenant of the mall that provided more than 10% of the partnership's gross income, the tenant's address and principal business activity. - You own an orange grove and sell all your oranges to one marketing cooperative, You should list the cooperative. its address, and its principal business activity if your income met the thresholds. PART C - REAL PROPERTY [Required by Sec. 112.3145(3)(a)3 or (b)3, Fla. Stat.] In this part, please list the location or description of all real property (land and buildings) in Florida in which you owned directly or indirectly at any time during the previous tax year in excess of five percent (5%) of the property's value. This threshold is the same, whether you are using percentage thresholds or dollar thresholds. You are not required to list your residences and vacation homes; nor are you required to state the value of the property on the form. Indirect ownership includes situations where you are a beneficiary of a trust that owns the property, as well as situations where you are more than a 5% partner in a partnership or stockholder in a corporation that owns the property. The value of the property may be determined by the most recently assessed value for tax purposes, in the absence of a more current appraisal. The location or description of the property should be sufficient to enable anyone who looks at the form to identi the property. Although a legal description of the property will do, such a lengthy description is not required. Using simpler descriptions, such as "duplex, 115 Terrace Avenue, Tallahassee" or 40 acres located at the intersection of Hwy. 60 and 1-95. Lake County" is sufficient. In some cases, the property tax identification number of the property will help in identifying it: "120 acre ranch on Hwy. 902, Hendry County, Tax ID # 13145863.'' (CONTINUED on page 5) p 3E FORM 1 - Effective:January 1, 2011. Refer to Rule 34-8.202(1). F.A.C. PAGE 4 , Examples: - You own 113 of a partnership or small corporation that owns both a vacant lot and a 12% interest in an office building. You should disclose the lot, but are not required to disclose the office building (because your 113 of the 12% interest-which equals 4%-dces not exceed the 5% threshold). - If you are a beneficiary of a trust that owns real property and your interest depends on the duration of an individual’s life, the value of your interest should be determined by applying the appropriate actuarial table to the value of the property itself, regardless of the actual yield of the property. PART D - INTANGIBLE PERSONAL PROPERTY [Required by Sec. 112.3145(3)(a)3 or (b)3, Fla. Stat.] Provide a general description of any intangible personal property that. at (1) ten percent (10%) of your total assets (if you are using percentage thresholds), pc (2) $10,000 (if you are using dollar value thresholds), any time during the disclosure period, was worth more than: and state the business entity to which the property related. Intangible per- sonal property includes such things as money, stocks, bonds, certificates of deposit, interests in partnerships. beneficial interests in a trust. promissory notes owed to you, accounts receivable by you, IRA’S, and bank accounts. Such things as automobiles, houses, jewelry, and paintings are not intan- gible property. Intangibles relating to the same business entity should be aggregated; for example, two certificates of deposit and a savings account with the same bank. Where property is owned by husband and wife as ten- ants by the entirety (which usually will be the case), the property should be valued at 100%. Calculations: In order to decide whether the intangible property exceeds 10% of your total assets, you will need to total the value of all of your assets (including real property, intangible property, and tangible personal property such as automobiles, jewelry, furniture, etc.). When making this calculation, do not subtract any liabilities (debts) that may relate to the property-add only the fair market value of the property. Multiply the total figure by 10% to arrive at the disclosure threshold. List only the intangibles that exceed this threshold amount. Jointly owned property should be valued according to the percentage of your joint ownership, with the exception of property owned by husband and wife as tenants by the entirety, which should be valued at 100%. None of your calculations or the value of the property have to be disclosed on the form. If you are using dollar value thresholds, you do not need to make any of these calculations. Examples for persons using Comparative (percentage) thresholds: - You own 50% of the stock of a small corporation that is worth $100,000, according to generally accepted methods of valuing small businesses. The estimated fair market value of your home and other property (bank accounts, automobile, furniture, etc.) is $200,000. As your total assets are worth $250,000, you must disclose intangibles worth over $25.000. Since the value of the stock exceeds this threshold, you should list ‘stock” and the name of the corporation. If your accounts with a particular bank exceed $25,000, you should list ”bank accounts” and bank‘s name. - When you retired, your professional firm bought out your partner- ship interest by giving you a promissory note, the present value of which is $100,000. You also have a certificate of deposit from a bank worth $75,000 and an investment portfolio worth $300,000, consisting of $100,000 of IBM bonds and a variety of other investments worth between $5,000 and $50,000 each. The fair market value of your remaining assets (condominium, automobile, and other personal prop- erty) is $225,000. Since your total assets are worth $700,000, you must list each intangible worth more than $70,000 Therefore, you would list ‘promissory mte” and the name of your former partnership, “certificate of deposit” and the name of the bank, “bonds” and ‘IBM,” but none of the rest of your investments. PART E - LIABILITIES [Required by Sec. 112.3145(3)(a)4 or (b)4. Fla. Stat.] In this part of the form, list the name and address of each private or governmental creditor to whom you were indebted for a liability in any amount that, at any time during the disclosure period, exceeded: (1) your net worth (if you are using percentage thresholds), (2) $10,000 (if you are using dollar value thresholds) You are not required to list the amount of any indebtedness or your net worth. You do not have to disclose any of the following: credit card and retail installment accounts, taxes owed (unless reduced to a judgment), indebted- ness on a life insurance policy owed to the company of issuance. contingent liabilities, and accrued income taxes on net unrealized appreciation (an accounting concept). A “contingent liability” is one that will become an actual liability only when one or more future events occur or fail to occur, such as where you are liable only as a guarantor, surety, or endorser on a promissory note. If you are a “co-maker^ and have signed as being jointly liable or jointly and severally liable, then this is not a contingent liability: if you are using the $10,000 threshold and the total amount of the debt (not just the percentage of your liability) exceeds $10,000, such debts should be reported. Calculations for persons using comparative (percentage) thresholds: In order to decide whether the debt exceeds your net worth, you will need to total all of your liabilities (including promissory notes, mortgages. credit card debts, lines of credit, judgments against you, etc.). Subtract this amount from the value of all your assets as calculated above for Part D. This is your “net worth.” You must list on the form each creditor to whom your debt exceeded this amount unless it is one of the types of indebtedness listed in the para- graph above (credit card and retail installment accounts. etc.). Joint liabilities with others for which you are “jointly and severally liable.” meaning that you may be liable for either your part or the whole of the obligation, should be included in your calculations based upon your percentage of liability, with the following exception: joint and several liability with your spouse for a debt which relates to property owned by both of you as “tenants by the entirety” (usually the case) should be included in your calculations by valuing the asset at 100% of its value and the liability at 100% of the amount owed. Examples for persons using comparative (percentage) thresholds: - You owe $15,000 to a bank for student loans, $5,000 for credit card debts, and $60,000 (with your spouse) to a savings and loan for a home mortgage. Your home (owned by you and your spouse) is worth $80,000 and your other property is worth $20,000. Since your net worth is $20,000 ($100,000 minus $80,000), you must report only the name and address of the savings and loan. - You and your 50% business partner have a $100,000 business loan from a bank, for which you both are jointly and severally liable. The value of the business, taking into account the loan as a liability of the business, is $50,000. Your other assets are worth $25,000, and you owe $5,000 on a credit card. Your total assets will be $50,000 (half of a business worth $50,000 plus $25.000 of other assets). Your liabilities. for purposes of calculating your net worth, will be only $5,000, because the full amount of the business loan already was included in valuing the business. Therefore, your net worth is $45,000. Since your 50% share of the $100,000 business loan exceeds this net worth figure, you must list the bank. PART F - INTERESTS IN SPECIFIED BUSINESSES [Required by Sec. 112.3145(5), Fla. Stat.] The types of businesses covered in this disclosure are only: state and federally chartered banks; state and federal savings and loan associations; cemetery companies; insurance companies (including insurance agencies); mortgage companies; credit unions; small loan companies; alcoholic bever- age licensees; pari-mutuel wagering companies, utility companies, entities controlled by the Public Service Commission; and entities granted a franchise to operate by either a city or a county government. (CONTINUED on page 6) .* CE FORM 1 - Effective:January 1, 2011. Refer to Rule 34-8.202(1). F.A.C. PAGE 5 I . You are required to disclose in this part of the form the fact that you owned during the disclosure period an interest in, or held any of certain posi- disclosure period, an officer, director, partner, proprietor, or agent (other than a resident agent solely for service of process). If you have or held such a position or ownership interest in one of these ness, its address and principal business activity, and the position held with the business (if any), Also, if you own(ed) than a 5% interest in the business, as described above, you must indicate that fact and describe the nature of your interest, tions with, particular types of businesses listed above. You are required to form of an equitable or beneficial interest) at any time during the disclosure perid more than five percent (5%) of the total assets or capital stock of one of the types of business entities granted a privilege to operate in Florida that are listed above. You also must complete this part of the form for each of these tvms of businesses for which vou are. or were at any time durina the make this disclosure if You own or owned (either directly Or indirectly in the types of businesses, list (vertically for each business): the name of the busi- .. - (End of Instructions.) PENALTIES A failure to make any required disclosure constitutes grounds for and may be punished by one or more of the following: dis- qualification from being on the ballot, impeachment, removal or suspension from ofice or employment, demotion, reduction in salav, reprimand, or a civil penalty not exceeding $1 0,000. [Sec. 11 2.31 7, Florida Statutes] Also, if the annual form is not filed by September lst, a fine of $25 for each day late will be imposed, up to a maximum Denaltv of $lSOo.lSection 112.3145. ES. 1. OTHER FORMS YOU MAY NEED TO FILE IN ORDER TO COMPLY WITH THE ETHICS LAWS In addition to filing Form 1, you may be required to file one or more of the special purpose forms listed below, depending on your particular position, business activities, or interests. As it is your duty to obtain and file any of the special purpose forms which may be applicable to you, you should carefully read the brief description of each form to determine whether it applies Form IF - Final Statement of Financial Interests: Required of local officers, state officers, and speci- fied state employees within 60 days after leaving office or employment. This form is used to report financial interests between January 1 st of the last year of office or employment and the last day of office or employ- ment. [Sec. 112.3145(2)(b), Fla. Stat.] Form 1X - Amended Statement of Financial Interests: TO be used by local officen, state officers, and speci- fied state employees to correct mistakes on previously filed Form 1’s. [Sec. 112.3145(9), Fla. Stat.] Form 2 - Quarterly Client Disclosure: Required of local officers, state officers, and specified state employees to disclose the names of clients represented for Compensation by them- selves or a partner or associate before agencies at the same level of government as they serve. The form should be filed by the end of the calendar quarter (March 31, June 30, Sept. 30, Dec. 31) following the calendar quarter in which a reportable representation was made. [Sec. 112.3145(4), Fla. Stat.] Bid for Public Business: Required of public officers and public employees prior to or at the time of submission of a bid for public business which otherwise would violate Sec. 112.313(3) or 112.313(7), Fla. Stat. [Sec. 112.313(12)(b), Fla. Stat.] Form 4A.- Disclosure of Business Transaction, Relationship, Or Interest: Required of public officers and employees to disclose certain business transactions, relationships, or interests which otherwise would violate Sec. 112.313(3) or 112.313(7), Fla. Stat. [Sec. 112.313(12) and (12)(e), Fla. Stat.] State Ofhers: Required to be filed by a state officer within 15 days after having voted on a measure which inured to his or her special Form, 3A - Statement .of Interest in Competitive Form 8A - Memorandum of Voting Conflict for private gain (or loss) or to the special gain (or loss) of a relative. busi- ness associate, or one by whom he or she is retained or employed. Each appointed state officer who seeks to influence the decision on such a measure prior to the meeting must file the form before undertaking that action. [Sec. 112.3143, Fla. Stat.] Form 88 - Memorandum of Votin Conflict for County, Municipal, and Other i! oca1 Public officers: Required to be filed (within 15 days of abstention) by each local officer who must abstain from voting on a measure which would inure to his or her special private gain (or loss) or the special gain (or loss) of a relative, business associate, or one by whom he or she is retained or employed. Each appointed local official who seeks to influ- ence the decision on such a measure prior to the meeting must file the form before undertaking that action. [Sec. 112.3143. Fla. Stat.] local officers, state officers, specified state employees, and state procurement employees to report gifts over $100 in value. The form should be filed by the end of the calendar quarter (March 31, June 30, September 30, or December 31) following the calendar quarter in which the gift was received. [Sec. 112.3148, Fla. Stat.] Form 9 - Quarterly Gift Disclosure: Required of Form 10 - Annual D@losure of Gifts from Governmen tal Entities and Direct Support Organizations and Honorarium Event Rela fed Expenses: Required of local officers, state officers, specified state employees, and state procurement employees to report gifts over $100 in value received from certain agencies and direct support organizations; also to be utilized by these persons to report honorarium event-related expenses paid by certain persons and entities.The form should be filed by July 1 following the calendar year in which the gift or honorarium event-related expense was received. [Sec. 112.3148 and 112.3149. Fla. Stat.] AVAILABILITY OF FORMS; FOR MORE INFORMATION -are available from the Supervisor of Elections n your county; from the Commission on Ethics, Post Office Drawer 15709, Tallahassee, Florida 3231 7-5709; telephone (850) 488-7864; and at the Commission’s web site: www.ethics.state.fl.us. Questions . about any of these forms or the ethics laws may be addressed to the Commission on Ethics, Post Office Drawer 15709, Tallahassee, Florida 3231 7-5709; telephone (850) 488-7864. CE FORM 1 - Effeclive.Januafy 1. 2011. Refer to Rule 348.202(1). F.A C PAGE 6 I Page 1 of 1 . . . - - -. Audrey Ross From: Karl Seifel, Jr. [karl@perryjensenlaw.com] Sent: Tuesday, April 19, 201 1 2:06 PM To: Lt. Jay Spencer; Jules Barone; Brad Seidensticker; David Pierson; Wayne Sidey cc: Audrey Ross; ThePensionTeam Subject: Palm Beach Gardens Police Pension Fund - Form 1 Attachments: PBG Memo-2010 Form1 .pdf; 2010 Form 1 .pdf Sender ALLOWED [ Remove ] [ I&?& ] detalls Vanquish Anti-Spam Control Panel - "" "_ Trustees: It's time to file Form 1 again. Be sure to send it by a means that will provide you with proof of delivery (for example: Certified MailReturn Receipt Requested) You must also keep a copy of the completed form for your files. The attached form may be simply completed by clicking on the page and typing. You may print it out once you have entered all the required information. Or, you may print out the blank form and complete it by hand. If you would like us to mail it in for you, please complete the Form 1, Sim & Date it on the back and send it to our office (see address below). We will send you a copy for your records by regular mail. If you have any questions, please do not hesitate to contact us. &e w, ,$k. <karl@perryjensenlaw.com> Y Y Legal Assistant - Pension Team of Bonni Jensen THE LAW OFFICES OF PERRY & JENSEN, LLC 400 Executive Center Drive, Suite 207 West Palm Beach, FL 33401-2922 561 -686-6550 (Phone) 56 1-686-2802 (Fax) The Law Offices of Perry Bi densen, L1.C is proud tu be an ABA-EPA Law Office Climate Challenge Partner. Think before you print!! PALM BEACH GARDENS POLICE PENSION FUND Benefit Approvals Meeting of April 21, 2011 APPLICATION TO ENTER THE DROP JOSEPH SHEEHAN DATE OF BIRTH 03/28/1961 DATE OF HIRE 06/22/1988 DATE OF TERMINATION 02/01/2011 AGE AT RETIREMENT 49 YEARS YEARS AT SERVICE 22.6 YEARS FORM OF BENEFIT 100% J&S MONTHLY BENEFIT AMOUNT $7,088.84 SUPPLEMENTAL BE NEFIT $ 275.00 APPLICATION FOR DISTRIBUTION OF DROP ACCO UNT (MAY 15, 2011) RONALD COUNCIL DATE OF RETIREMENT 09/17/2009 DATE OF BIRTH 03/09/1956 TYPE OF DISTRIBUTION PARTIAL LUMP SUM AMOUNT REQUESTED $97,000.00 TAX WITHHOLDING (20%) $19,400.00 TOTAL NET DISTRIBUTION $77,600.00 APPLICATION FOR REFUND OF CONTRIBUTIONS JOSE PICO DATE OF BIRTH 12/08/1961 DATE OF HIRE 09/10/2007 DATE OF TERMINATION 03/25/2010 YEARS OF SERVICE 2 YEARS & 6 MTHS TOTAL REFUND $11,914.39 TAX WITHHOLDING (20%) $ 2,382.87 TOTAL NET REFUND $ 9,531.51 APPROVED: ______________________________________, CHAIRMAN APPROVED ______________________________________, SECRETARY ____________________________________, DATE r Page 1 of2 Audrey Ross From: Bonni S. Jensen [bsjensen@perryjensenlaw.com] Sent: To: Jay Spencer Cc: Audrey Ross; ThePensionTearn@perryjensenlaw.com Subject: Re: Palm Beach Gardens Police Pension Fund - Buyback Policy Sender ALLOWED [ Remove 3 [ Block 3 details Vanquish Anti-Spam Control Panel I I-""__ ~" -~ Tuesday, February 08,201 1 4:35 PM So far here is what I have found: George Smith did not participate in the pension plan from his date of hire. During his employment he made two requests to purchase time in the pension plan. The first request was from his date of hire 4/12/89 to 10/1/95. The buyback application was filled out by Mr. Smith. The second request was for the period from May 13, 1992 to April 30, 1996. This request was completed by ASI. Both times calculations were made for the buyback. Not sure whether he took advantage of either. I am still looking to determine when he became a member of the pension plan. It was either October 1, 1995 or May 1, 1996. Since he chose not to participate in the pension plan, he will need to be treated the same as someone who is buying time from another entity for any time before his participation in the plan. Please contact me if you have any questions. We will continue to look for the exact date that he participated in the pension plan. TO SEND MAIL TO MY ENTIRE TEAM, PLEASE RESPOND TO THEPENSIONTEAMOPERRY JEN SENLA W.COM Bonni S. Jensen <bsiensen@perryiensenlaw.com> Law Offices of Perry & Jensen, LLC 400 Executive Center Drive, Suite 207 West Palm Beach, Florida 33401 Telephone: (561)686-6550 Facsimile: (561)686-2802 CONFIDENTIALITY NOTICE: This communication is confidential, may be privileged and is meant only for the intended recipient. If you are not the intended recipient, please notify the sender ASAP and delete this message from your system. IRS CIRCULAR 230 NOTICE: To the extent that this message or any attachment concerns tax matters, it is not intended to be used and cannot be used by a taxpayer for the purpose of avoiding penalties Comerica Bank Client Solutions Preseniation to: PALM BEACH GARDENS - Palm Beach Gardens Police Officers' Pension Fund April 21, 2011 Representin nk Felecia Relief, Client Service Team, Relationship Manager Page 2 Agen I. Overview of Comerica II. I I I. Relationship Conversion IV. Competitive Pricing V. Why Comerica? Come rica’s So I uti o n s Paae 3 section ?age 4 Cornerica Incorporate Comerica is a diversified financial services company headquadered in Dallas, Texas: i Established in I849 ,- Among the 25 largest banking companies in the U.S. with $53.7 billion in assets (as of December 31. 2010) 7 Among the IO largest commercial business lender 7 Located in Michigan, Florida, California and Texas with select businesses operating in several other states, Canada and Mexico Page 5 .. ... Lmge enorrgh to offer the tec?mology yorr need. . . Small enough to offer high-torrch, personal service you deserve. Institutio Over 1,000 clients and $83 billion in trust assets Trust powers in all 50 states Over 400 professionals in Comerica’s trust division In-house compliance attorneys Relationship Managers average over 18 years in the industry Relationship Management and operations report to the same executive and are located in the same office Page 5 Cornericsb9 B Gardens 7 Comerica Bank - Florida -3 - Over 30 years . p+ 4.- -:+ - Headquartered in Boca Raton 3k’* $ -? c - Over 170 colleagues work in Florida ‘-+ - Currently 11 Banking Centers - Full Service Banking, Palm Beach Gardens, Florida __~__--_____ . - - - . . - - - Florida Headquarters. Boca Raton Pagt 7 Palm Beach Gardens 2401 PGA Blvd. Suite 198 Palm Beach Gardens. FL 33410 561-691-5900 800-81 3-81 99 The Services We Provide To South Florida Clients Trust Services Full Service Retail Banking Wealth Management & Planning Small Business Banking Business Leasing Merchant Services Treasury Management Middle Market Banking Commercial Real Estate National Dealer Services US Corporate Banking Nonprofit and Healthcare Banking Page 8 .v. - ., Charitable Contributions Board and Community Involvement ncl udes : Since 2000, over $1.5 million and over 7.000 volunteer hours have been contributed in Florida 7 Civic and Community Programs 7 Health & Human Services 7 Arts & Culture 7 Education Programs 7 Housing & Economic Development Programs 7 United Way . Alzheimer's Association American Heart Association American Lung Association Business Development Board of Palm Beach Chamber of Commerce of Palm BeachlNorth Palm Beach Community Financing Consortium Consumer Credit Counseling on Palm Beach Executive Women Outreach Friends of McArthur State Park Hospice of Palm Beach County Hospice By the Sea Jewish Federation of Palm Beach County Leukemia and Lymphoma Society of Palm Beach County Local Initiatives Support Corporation Neighborhood Renaissance Northwood University Place of Hope Urban League of Palm Beach Villages of Hope YMCA of the Palm Beaches Page C Section IL 7 Custody and Reporting - Safekeeping and trade settlement for domestic and global securities - Timely and accurate investment accounting - GASB 40 Reporting 7 Services delivered by a seasoned - No turnover of key contacts - Attentive and responsive service - Operating from a single location Client Service Team 7 “Right Size” Provider - Focus on Municipalities - Focus on Florida 7 Technology 7 Competitive Fee Structure Page 11 ~ Broadest range of services available.. . As you need them ... Fully integrated. Securities Settlement & Safekeeping Income & Dividend Collection Corporate Action & Class Action 0 Processing Asset Pricing 0 0 Accounting Attentive, veteran service team - Daily - Monthly Securities Lending e Cashsweep Training and Education Plan Accounting Services Full Accrual, Trade Date Reporting GASB 40 reporting Performance Measurement & Analytics - Attribution Analysis - Customized Benchmarks I nvest men t Compliance Mon itori ng Pag2 12 7 Vast experience working with Municipalities > Participates in various client board meetings, providing support and assistance in fiduciary oversight responsibilities 7 Pro-active in providing assistance, expertise and best practices P Experienced and knowledgeable in Comerica's systems and reports i Engages in regular dialogue with you and your portfolio managers > Coordinates with other professionals inside and outside the Bank to ensure that your account runs efficiently Felecia Relief, Assistant Vice Presl Ms. Relief is a Relationship Manager in the Institutional Trust C ient Administration Department and works specifically with municipality clients. She has 24 years experience in the financial service and customer service industries, which includes I I years as a Relationship Manager. Prior to joining Comerica Bank in 2000, she was the Benefits Coordinator/Team Leader at Salomon Smith Barney, Inc. Ms. Relief is a graduate of Grambling State University, where she earned a Bachelor of Science degree in Management. Cvnthia Corbv, Senior Trust Aaa[\~s-i: Ms. Corby is a Senior Trust Analyst in the Institutional Trust Client Administration Department. She started her financial career at Comerica in 1986. She has a vast knowledge of the trust department, having worked in various capacities of increasing responsibility . Relationship Manager Felecia Relief, Asst Vice Presideni f re1 ief @co mer ica . co m (313) 222-9814 Back-up Relationship Manager Dan Berd, Vice President daniel-a - berd@comerica.com (3 13) 222-5472 Responsibilities Oversees account relationship Coordinates w o r kf I ow Resolves and researches problems Completes special projects as requested Trust Account An a I yst :3 I 11 i.\y u 3 i';?y (31 3) 222-4747 Cynthia a corby@comerica.com >. 1 - * -- Back-up Account Analyst Sarah Grant Sara hj grant@comerica. com (31 3) 222-41 50 - Responsi bilities 0 Researches trade settlement and income issues 3 Verifies accuracy of reports 3 Handles capital actions 1 Resolves statement issues . Coordinates preparation of Plan ' Open new accounts Reviews overdrafts and excess cash daily Accountings Page 15 7 Custody Online - Navigation - Reports - Customization - Downloading - Electronic Statements I Benefit Payments Online - Inquiry and processing capabilities 7 Custom Reports - Representativ Alpena ERS Auburn Hills ERS Auburn Hills Health Battle Creek Police & Fire Brighton Fire (LOSAP) Berrien County ERS Birmingham ERS Birmingham Retiree Health Care Chowan County ERS City of Alexandria Fire & Police (effective 4/29/2011) City of Alexandria Supplemental RP (effective 4/29/2011) City of Alexandria OPEB (effective 4/29/201 I) City of Clayton ERS City of Fort Myers General City of Plano Police & Fire Clawson Fire Clinton Township Police & Fire Dearborn General Dearborn Police & Fire Dearborn Police & Fire Revised Dearborn Post Employment Health Dearborn Heights General Fund Dearborn Heights Police & Fire Detroit Police Benefit/Protection Detroit Transportation Ferndale ERS Ferndale Police & Fire Franklin Regional Retirement Genesee County ERS G re at e r 0 r I a n d o Av i at i c I! Grosse Pointe ERS Grosse Pointe 401 (h) Grosse Pointe Woods Grosse Pointe Shores Harper Woods ERS Highland Park ERS Independence Township lnkster Police & Fire lshpeming P&F Retirement Jackson County Jackson Police Fire Act 345 Kent District Library Livonia ERS Livonia VEBA Lake Worth Police Relief Fund - Division iI System Authority Southfield ERS Macomb County ERS Macomb County Retiree Medical Southfield Health Care Plan Spring Hill (LOSAP) State of Michigan Legislative RS Sterling Heights General Sterling Heights Police & Fire Taylor General Village of Beverly Hills Village of Palm Springs Village of Pairn Spriacis Midland County ERS n'iiramar Firefighters ZS City of Monroe ERS Monroe County ERS Mt. Clemens ERS Northern Virginia Regional Park Oak Park ERS Oakland County Road Authority General i-iazardoiis Commission RS Ohio State Highway Patrol Pompano Beach Poiice and Firefighters' Retirenient System Pontiac Police & Fire VEBA Reading Fireman Reading Officers Royal Oak Retirement System Roseville ERS St. Clair Shores General St. Clair Shores Police & Fire Saulte Ste. Marie Police/Fire Shelby Township Fire & Police Volunteer Firefighters of New York State Warren General Warren General Health Warren Police & Fire Warren Police & Fire Health Waterford Township ERS Waterford Township Police & West Bloomfield ERS West Bloomfield Health Care Westland Police & Fire Wyoming ERS Fire Secti II Page 13 . .. . . . ....~ . Relationship team responsible for smooth conversion, no “hand off’ 7 Customized conversion plan ,- Coordination of all internal resources - Trust Operations Department (to ensure smooth movement of assets) - Legal (to ensure timely and efficient execution of trustkustody documents) 7 Dedicated training - before, during and after conversion 7 Minimal impact on the Palm Beach Gardens Police Officers’ Pension Fund Page ;3 . .. I To Be Completed By: I Action 1 2 months prior to transition Provide Comerica with a copy of the existing trust. plan document and amendments. IRS Determination letter and trust statements. 2 months prior Provide Comerica with names and phone numbers of contacts at prior ma nag ers , 2 months prior ~ Instruct prior custodian to transfer assets and Paying Agency responsibilities to Comerica Bank on July 1. 201 1. Provide a copy of the notification letter to Felecia Relief at Comerica Bank. Comerica can provide sample letter. I 1 month prior Inform investment managers of Comerica Bank's appointment as successor trusteekustodian. Provide copies of the notification letters to Felecia Relief at Comerica. I 1 month prior I Inform Comerica of decisions on what reporting services are required. I 2 weeks prior ~ Provide Comerica with an executed trust agreement and other required documentation. 7 Page 25 Action To Be Completed By: Imonth prior 1 month prior 1 month prior Contact prior custodian to review transition activities and to obtain a preliminary list of assets. Review asset listings from prior custodian to identify items requiring special re-registration procedures. Review trust and plan documents. Forward standard trust agreement to the client and or their attorney for review. 2 weeks prior 2 weeks prior 1 month prior I Send security and cash delivery instructions to prior custodian. Coordinate with investment managers to prepare for any trades. which would settle on or after July 1. 201 1 at Comerica Bank (assuming cash and securities are being transferred from prior custodian) . Execute trust agreement(s). forward an executed copy to client for their file(s). 1 Transition day Transition day 1 month prior Receive cash transfers and inform investment managers of availability. Receive securities delivered physically with appropriate powers and tax waivers from pr-or custodian and immediately begin preparing them to be sent out to the transfer agents for re- registration. Comerica will keep investment managers informed of status. ~ Send investment managers procedural letter covering the requirements for entering security orders and for cash management. 1 week prior Review final asset listing from prior custodian. Monitor receipt of all daily transactions from prior custodian between the time they prepared the final asset lists until all accounts are zeroed out. Post conversion I Review prior custodian's statements to confirm Comerica received all assets. I ~~~ Post conversion ~ ~~ ~ Commence regular reporting procedures with July 31. 201 1 cash transaction and asset r statement. I ' PES2 21 To Be Completed By: Three weeks post conversion Action ~~~~~~~~ File a certified final asset statement for each portfolio and the total trust with the client and Comerica Bank. Review transition activities and provide Comerica Bank with a preliminary list of assets by tax lot held for each porffolio showing original trade date. number of shares or par value of each lot, location code. CUSIP. book value and market value if available. 1 month prior ~~ Arrange for Comerica Bank to receive monthly statements commencing June 30. 201 0 and until accounts are zeroed out. Provide final lists of assets with same information as outlined above. 48 hours before the actual transfer. Fax asset lists to Comerica Bank in the morning. Update Comerica Bank on all daily transactions between the times the final asset lists are prepared until all accounts are zeroed out. All trades with settlements on or after July 1. 201 1 should settle at Comerica Bank. assuming cash and securities are transferred on July 1. 201 1. Transmit cash balances to Comerica Bank via Federal Funds wire. Comerica Bank should be telephoned in advance of wire by 1O:OO a.m. EST. Deliver all securities to Comerica Bank as per instructions via DTCC. Fed Book Entry. and/or physical with proper paperwork attached. 2 weeks prior 1 week prior When accounts are zeroed out Transition day Transition day Transition day Provide Comerica Bank with a list of securities as of June 30. 201 0 Transition day (Fax in morning) When accounts are zeroed out Transfer any cash credited on or after July 1. 201 1 to Comerica Bank on a daily basis with a description and breakdown by account. Page 22 To Be Completed By: Action 2 weeks prior Finish review of trading and settlement instructions provided by Comerica Bank. clarify any questions and resolve any procedural issues with Comerica Bank. Cease trading through prior custodian and begin processing of trades with settlements on or after July 1. 201 1 at Comerica Bank. (This assumes cash will be transferred to Comerica Bank to cover purchase(s) and securities are received in good form to cover sale(s).) Transition day Transition day Plan to invest cash balances sent by prior custodian: Comerica Bank will verify amounts upon receipt of funds. ko Mixed Sources Pq. 24 CO.\IERIC.I B.4YK CLSTODI.4L SERIICES FEE SCHEDULE P.IL.\I BE.ICH G.IRDESS POLICE OFFICERS' PE3SIOX Fl'SD Fiduciary Fee I I1 c 1 ti d eci S!llKl annuall! per x~otiiit 5.0 basis poiriis on iilvt 550 niillion -.> basis poinis on the iiext S50 million Responsibility Fees Account Fee Xlarket \'slue Fee Separately held securities are under SlOO IIII Jlininiurn annual responsibility fee of S6.000 Account and market \Aue fees apply to minimum 7- ' Special Asset Fees Commingled. Jlutual funds. other bank collecti\ e fUI1ds. iorei~il stdirities. pi\ 3te Fl3CtliltntS c?r unique 3Sst'IS I\ ith estensi\-e reponing requirements. Activity Fees Buy Sell Jlaturit> Included Checks ( LuIlip Sui11 I" S'lj per ~he~k 1 plus postage) Internet Access Included Pension Pa! 111ti1ts" Quoted in a separate j<hedtik \\.ire Transfer Out Other Services r On-line services are wailable at no additional charge r Foreign securities with non-C.S. settlement \\ill be chrtrged under a global iustod\ schedule F Performance Jleasurement \\ill be charged under Comerica's Pcrforniance I Ieasurenieiit Senices Fee Ssliedule r Other estraordinap senkes. including tax reporting. may be quoted jtpsraiely based on die scope and costs ofihe asti\ it! r Compliance Jlonitoring is a\.ailal?le and quoted under a separate sdicdule Cash Sweep Coinerica makes a\ ailable a \.ariety of highI\ rated cash in\ estinenr hiirids for autoniatcd. saint-da) in\ tj1nieilf of cajli balances resulting from income or trade senlenient. .A cash s\veep charpe ofnvenp basis poinis ij netted 10 the ~~niilgj oftlie fund. Please note that Conierica ma! recei\.e a senicing fee for non-proprietary money market funds. * Conicria uses 3 genersl disbursement chcLbing xcc'at io 77 rccmr. 11oat Float is emed at the Fed Funh izii'. 35 TU'P 3re tr~nzlPrreJ from !tour trust ziiount to the geneizl dihnsrncnt month For lunip sum distributions. the tr.msfer ;!pidI> ~'iiuis on :!x presentr.1 for p! n:ciit or the fund5 zie diiyosc.! of piiuzni io 2n improxed funds 3\ ~il~bilit?. for rtxipent~ Ciencizii! Co:i:ericJ i procedures ma! zppI> Conierica's fees are billed yuanerly in arrears and will be direct debited io ill? appropriaie trust aiiount( s I. Proposal valid for 120 days S 1 .Oil0 each annuall! S 1 7 per \\ ire tiii' L~XLI. :> I Pace 25 COMERICA BANK PENSION PAYMENT SERVICES FEE SCHEDULE FOR PALM BEACH GARDENS POLICE OFFICERS’ PENSION FUND Periodic Payments (Checks & EFT) S2.00 per payment (plus postage) Luiiip Suiii Payiients S20 per payiient (plus postage) Third Party Deductions S 100 per third party (per year) CD-ROM Pens io 11 Registers s 100 per Illonth Manual Ne\v Retiree Setup (L4~itomated set-ups will be processed at no charge.) S3 per new Retiree Other Senices Provided At Xo Additional Charge: 7 All tax ~\-itlilioldin~ipa~-ments and reporting to taxing entities. 7 1099R, W3 and other related tax forms produced and distributed to benefit recipients. r Call Center Services with unlimited call volumes. 7 Mes sag i 11 g o 11 c he c ks/E F T c o 11 fi 1-111 a t i o 11 s . 7 Conversions from client operations or other service proL-iders. 7 Initial set-up and ongoing On-line access. Pace 26 - . - . -. . . . . . Pege 2T -. * The Palm Beach Gardens Police Officers' Pension Fund is a **'::x. with Comerica's core competencies and market focus 1 .i . -- - !- ensures that our veteran ..^ -. Our continual i,-,v~s .rc: a . :, , Client Service Team has the technology and tools to meet the Palm Beach Gardens Police Officers service delivery needs now and in the future 1' .... -- L - -,- , I We listen. We understand. We make it work. Page 28 . General Disc 10s u re: Comerica's Wealth & Institutional Management team consists of various divisions and affiliates of Comerica Bank and also subsidiaries of Comerica Bank including World Asset Management, Inc.; Wilson, Kemp & Associates, Inc.; Comerica Insurance Services, Inc. and its affiliated insurance agencies; and Comerica Securities, Inc. Investment products are not insured by the FDIC. are not deposits or other obligations of or guaranteed by Comerica Bank or any of its affiliates. and are subject to investment risks, including possible loss of the principal invested. ?age 29 rPITAL MANAGEMENT SECTOR MARKETS SFIIIIRlflFC PALM BEACH GARDENS POLICE PENSION FUND Investment Review Quarter Ending March 31,2011 e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e 0 e e e e 0 e e e e 0 e - PALM BEACH GARDENS POLICE PENSION FUND Table of Contents Quarter Ending March 31,2011 11 Scctiolr 11 Fixed Income Review I Scctioii Ill I Palm Beach Gardens Police Pension Fund Growth ZCC Capital Management, Znc. First Quarter 207 7 ICC Fixed Income Commentary “The End of Quantitative Easing” With June fast approaching an important question we must ask ourselves is, “What will the end of Quantitative Easing mean for both the equity and fixed income markets?” Our economy has been flushed with a tremendous amount of public money over the past couple of years. Whether or not the economy is ready for the transition back to a credit system reliant mainly on private capital rather than government support will largely determine how financial markets behave over the next few quarters. In the spotlight during the coming weeks and months will be the battle in Congress over raising the debt ceiling and more importantly the debate over the 2012 and beyond fiscal budget. How aggressively Congress tackles the budget deficit issue and in what manner will have serious implications on the amount of new Treasury bond supply and thus the general direction of interest rates over the longer term. In a world where market expectations are not firmly anchored and where the economic outlook is unusually uncertain we expect to see a more broad volatile trading range for the ten year treasury somewhere between 3.25% and 4.25% throughout 201 1. If Federal Reserve officials deem it necessary to reduce their Treasury holdings by selling them back into the market, we can expect a rather sharp rise in rates in the near term. We assign a very low probability to the Fed taking this particular course of action any time soon but will continue to monitor Federal Open Market Committee language closely for clues as to their intentions going forward. A more probable scenario would be for Fed purchases to gradually come to a halt sometime in June and for rates to drift moderately higher as the decrease in demand from the Fed is picked up domestically and from other central banks around the world. However, if the U.S. economy turns out not to be ready for the handoff from government to private credit creation then we expect yields to once again move downward. The almighty dollar may hold the key as to whether or not financial markets continue on an upward trajectory. The weakening dollar, surely a stealthily intended byproduct of quantitative easing, has helped boost U.S. equity markets by allowing foreign investors the ability to pick up shares of quality U.S. companies “on the cheap”. It is possible that an end to Quantitative Easing could usher in a stronger dollar as the Fed, for lack of a better term, stops “printing” money. If the dollar rises too quickly or significantly we would expect to see lower inflation expectations, along with weaker equity and commodity prices. A revisit to the flight to quality trade would ensue resulting in lower government bond yields in the near term. There is no doubt that currently the global economy sits at a critical juncture in the recovery process after coming out of the greatest financial crisis the world has seen since the Great Depression. We must not lose sight of this fact even though equity markets have regained a large percentage of lost market value over the past two years. As we have said before, so far markets have taken kindly to Quantitative Easing but whether or not the recent move higher reflects a monetary illusion or a sustainable recovery has yet to be determined. Credit creation is paramount for any economy to grow at a steady robust rate. The level of debt overhang remaining at the nations banks, two years after the great debt binge crash, will largely determine the ultimate success or failure of the upcoming Federal Reserve handoff. If the end of Quantitative Easing wasn’t enough we have a wonderful drama brewing in our nation’s capital. True, the political theater coming out of Washington D.C. to this point has been largely ignored by investors. In the coming months, however, the critical debate over how to tackle the U.S. fiscal deficit will take center stage. This debate and eventual policy outcome will have serious implications not only on quality of life issues here in the U.S. but also as to how the world will view U.S. credit worthiness over the longer term. For certain, trillion dollar deficits cannot be sustained over time. The all powerful bond market will be watching! So how does all this translate into portfolio management? Even if the transition of easy monetary policy goes off without a hitch, there are many other compelling reasons to maintain positions in longer duration assets. Natural disasters, nuclear crises, ongoing wars, European debt woes and high unemployment levels are a few that come to mind. Balancing these events is the fact that large budget deficits combined with expectations of stronger growth are not consistent with current U.S. Treasury yields. Therefore, we 1 e e e 0 e e e e e e e e e e e e e e e 0 e e 0 e e 0 0 0 0 e 0 0 0 0 e e 0 e 0 0 e e are currently biased towards the higher range of our rate outlook with portfolios positioned in a defensive manner approximately 15% below benchmark duration. During the first quarter, we further increased our overweighting to intermediate high grade U.S. corporate bonds. We also decreased our Build America Bond and longer term U.S. Treasury holdings. We continue to be concentrated in the 4-8 year duration bucket and have slightly increased our exposure to high coupon government mortgage-backed securities. This positioning helped us outperform our benchmarks as the corporate sector led all others during the first quarter. Volatility, as we have previously discussed, will continue presenting a myriad of tactical opportunities both in credit and duration based trades. The first chart represents yield curve changes during the first quarter 201 1, as well as the rise off of the lowest yields printed back in December of 2008 when QE1 was first announced. Yield curve changes going back to December of 2008 are an important case study because they reflect a period in which the economy was aided by enormous monetary expansion. At first thought, one would think nearly $600 billion worth of asset purchases would drive yields on Treasury bonds down as increased demand would drive prices higher. The charts below tell a different story however. Investors essentially got out of the Fed's way and instead bought risky assets as evidenced by flat treasury index returns and large spread sector returns. The total return for the 20+ year Treasury Index over this time was a staggering -17.3%. Factor in S&P 500 gains greater than 60% off their lows back in March 2009 and you get a vivid picture as to the voracious appetite for risk assets since the inception of Quantitative Easing. The second chart, illustrating the volatile nature of interest rates, is one that we have shown before but is critical to our way of thinking about rate movements and our approach to tactical duration decisions. Yield Curve Changes 5.000. 4.OO0h 3.00°h Ten Year Treasury Year over Year Change in Yield ' 3.00% 1.00% - 2 e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e a e e e e e e e e PALM BEACH GARDENS POLICE PENSION FUND FIXED INCOME Investment Review Quarter Ending March 31,2011 PALM BEACH GARDENS POLICE PENSION FUND FIXED INCOME Investment Performance Report Quarter Ending March 31,2011 Total Return Summary Portfolio Allocation Investment Performance by Asset Category Fixed-Income Analysis Purchases & Sales - Page ...... 1 Page ...... 2 Page ...... 3 Page ...... Page ...... Page ...... 4 8 13 Realized Gains/ Losses Portfolio Summary Page ...... 17 Portfolio Appraisal Page ...... 18 ZCC Capital Management, Inc. n a a a a e a a a a e a a a a a a a e a a 0 a e e a e e a a a a a a a 0 e e a a a a PALM BEACH GARDENS POLICE PENSION FUND FIXED INCOME Total Return Summa y Quarter Ending March 31,2011 Fisca 1 Year to Since Inception Current Qtr Date (04/?O/94 - O.WW41) I Starting Value $15,265,736 $17,047,858 $1,625,387 1 Ending Value I $14,300,168 I $14,300,168 1 $14,300,168 Difference ($965,568) ($2,747,690) $1 2,674,781 Net Contributions/ (Withdrawals) ($1,056,011) ($2,568,550) $6,653,678 Gaid(Loss) from Investments $90,443 ($179,140) $6,021,104 I TOTALRETURNI 0.59% I -1.16% I 178,!M0/0 I 1 ANNUALIZED TOTAL RETURN 7.42% I ICC Capital Management, Inc. a 1 a PALM BEACH GARDENS POLICE PENSION FUND FIXED INCOME Portfolio Allocation at Market Quarter Ending March 31,2011 Asset Allocatiort: O!OO (Mkt) Market Value as of ly3#0 CASH/ EQUIVS 3.1 % FIXED INCOME 96.9% Market Value as of 03/32/22 CASH/EQUIVS 2.4% I FIXED INCOME Mkt Value Mkt Value O/O Mkt Value Mkt Value O/O as of ly3l/lO as of ly3l/lO as of 03/31/11 as of 03/31/11 3ash/Equivs $472,856 3.1 % $340,555 2.4% ?xed $14,792,880 96.9% $1 3,959,613 97.6% rota1 $15,265,736 100.0% $14,300,168 100.0% ICC Capital Maizngenient, lnc. 2 e e a e e a e a e e e a e a e a a e e a e a e e e e e e e a e e e e a e 0 e - I PALM BEACH GARDENS POLICE PENSION FUND FIXED INCOME Investment Performance by Asset Category Quarter Ending March 31,2011 Quarter 6.00 4.00 2.00 0.00 Oh3 0.42 0.59 0.42 W ACCOUNT ~ W BCAG 0.47 0.42 BONDS TOTAL GROSS OF FEES TOTAL NET OF FEES - ~ ~ - W BCAG Fiscal Year to Date , WACCOUNT ~ ~ ~~ 0.00 -2.00 -4.00 -6.00 - I r- 7 1- --r -0.88 -0.88 -1.39 -1.16 -0.88 -1.17 ~ ~ ~ - - -~ ~~ -~ ~~ ~~- ,, ~ BONDS TOTAL GROSS OF FEES TOTAL NET OF FEES Since Inception Annualized (04/30/94 - 03/32/21) 12.00 7 7.42 6.22 6-42 6.42 6.42 -J, I- BONDS TOTAL GROSS OF FEES TOTAL NET OF FEES The red total bar rcprc7sents the Burclays Capital Aggregate Index. ICC Capital Management, Inc. 3 n PALM BEACH GARDENS POLICE PENSION FUND FIXED INCOME Fixed Income Analysis (Page 1 of 4) Quarter Ending March 31,2011 Average Quality - AA- Average Duration - 4.00 Current Yield - 4.35 ICC Core Fixed Income Portfolio Mortgage Pools 24 2% Municipal Bonds 2 0% Government Sponsored 8.7% US Treasuries 4.8% Corporate Bonds 60.3% Average Quality - AA Average Duration - 5.47 Current Yield - 3.64 Barclaws Capital GovernmenVCredit Index Corporate Bonds Government Sponsored 30.1 % 18.7% A PA L US Treasuries 3.2% Averape Oualitu - AA Average Duration - 5.12 Current Yield - 4.02 Barclaws Capital Aggregate - Index US MBS 33.0% US Treasuries 32.9% Government Sponsored 12.0% CMBS Corporate Bonds 2.4% ABS 0.3% 19.4% ICC Cnpitnl Mnrzngenzenf, Inc-. 4 PALM BEACH GARDENS POLICE PENSION FUND FIXED INCOME Fixed Income Analysis (Page 2 of 4) Quarter Ending March 31,2011 Sectors and Market Indices Performance VS. Core Fixed Income Portfolio 1Q11 4.00 2.05 2.00 0.00 -2.00 -0.16 A A V Municipal Bonds Coupon Maturity S&P Rating Moody's Rating Commonwealth Fing Auth Pa Rev 5.653% 6/1/2024 AA- AA3 Utah St 4.554% 71 1 / 2024 AAA AAA GovernmenVAgency Bonds Coupon Maturity S&P Rating Moody's Rating Fannie Mae 2.000% 10/25/ 2016 AAA AAA Freddie Mac 5.900% 6/ 15/ 2022 AAA AAA Fannie Mae 5.625% 11/ 15/2021 AAA AAA Fannie Mae 6.000% 4/ 28/ 2021 AAA AAA Us Treasury 3.625% 2/15/2021 AAA AAA Us Treasury 1.250% 2/15/2014 AAA AAA Us Treasury 2.750% 2/28/2018 AAA AAA ZCC Capital Management, Inc. 5 PALM BEACH GARDENS POLICE PENSION FUND FIXED INCOME Fixed Income Analysis (Page 3 of 4) Quarter Ending March 31,2011 ICC Capital Management, Inc. 6 PALM BEACH GARDENS POLICE PENSION FUND FIXED INCOME Fixed Income Analysis (Page 4 of 4) Quarter Ending March 31,2011 Portfolio Duration vs. Index Duration (Ratio) +INDEX -W- ACCT ~~ 1.8% - 1.4% ~- L-, AGG RESS IVF- 1 NEUTRAL I A A A A I v I m 1 I m I I)FFFNSIVEI ! 0.2% +-- ~ '_-- 1-- 1 3/31/2009 6/30/2009 9/30/2009 12/31/2009 3/31/2010 6/30/2010 9/30/2010 12/31/2010 3/31/2011 ZCC %tal Management, lnc. I 7 ICC Capital Management PURCHASE AND SALE PALM BEACH GARDENS POLICE PENSION FUND FIXED INCOME From 12-31-10 To 03-31-11 Trade Settle Date Date Quantity PURCHASES 01-1 1-1 1 01-14-1 1 02-02- 1 1 02- 10- 1 1 01-20-1 1 01-25-1 1 01-20-1 1 01-25-1 1 03-02-1 1 03-07-1 1 01-12-11 01-18-11 01-18-11 01-20-11 01-26-1 1 01-28-1 1 02-04-1 1 02-08-1 1 03-03-1 1 03-07-1 1 03-03-1 1 03-07-1 1 03-15-11 03-17-11 02-10-11 02-15-11 SALES 03-08-1 1 03-1 1-1 1 02-15-1 1 02-16-1 1 02-15-1 1 02-16-1 1 02-04- 1 1 02-09- 1 1 02-04-1 1 02-09-1 1 01-18-11 01-21-11 200,000.000 756,741.760 220,000.000 245,000.000 180,000.000 175,000.000 400,000.000 245,000.000 350,000.000 180,000.000 180,000.000 300,000.000 160,000.000 170,000.000 400,000.000 200,000.000 190,000.000 100,000.000 125,000.000 Unit Security Price -Amount BERKSHIRE HATHAWAY FIN 4.250% Due 01-15-21 FG POOL #GO5900 6.000% Due 03-01-40 MORGAN STANLEY 1.903% Due 01-24-14 OCCIDENTAL PETROLEUM CORP 4.100% Due 02-0 1-2 1 STATE STREET COW 2.875% Due 03-07-16 US TREASURY NB 1.000% Due 01-15-14 US TREASURY NB 2.625% Due 11-15-20 US TREASURY NB 3.875% Due 08-15-40 US TREASURY NB 3.875% Due 08-15-40 US TREASURY NB 1.250% Due 02-15-14 US TREASURY NB 2.750% Due 02-28-18 US TREASURY NB 3.625% Due 02-15-21 WELLS FARGO & COMPANY 3.676% Due 06-15-16 99.49 108.64 100.00 100.59 99.58 99.78 93.78 89.02 86.47 99.95 98.77 103.23 100.67 198,984.00 822,12 8.9 8 220,000.00 246,457.75 179,253.00 174,6 17.19 375,125 .OO 2 18,088.28 302,640.63 179,90 1.56 177,778.12 309,703.12 161,078.56 3,565,756.19 CITIGROUP INC 109.60 186,326.80 6.010% Due 01-15-15 FANNIEMAE 96.32 3 85,300.00 1.750% Due 10-21-15 GOLDEN WEST FINL 105.33 2 10,668.00 4.750% Due 10-01-12 GOLDMAN SACHS GROUP INC 101.72 193,271.80 5.375% Due 03-15-20 GOLDMAN SACHS GROUP INC 101.72 101,722.00 5.375% Due 03-15-20 JOHNS HOPKTNS UNIVERSITY 109.83 137,285.00 5.250% Due 07-0 1 - 19 8 ICC Capital Management PURCHASE AND SALE PALM BEACH GARDENS POLICE PENSION FUND FIXED INCOME From 12-31-10 To 03-31-11 Trade Settle Unit Date Date Quantity Security Price Amount 02-09-1 1 02-14-1 1 03-31-1 1 04-05-11 01-04-1 1 01-06-1 1 01-04-11 01-06-11 01-14-11 01-18-11 01-14-11 01-18-11 02-02-1 1 02-04-1 1 02-02-1 1 02-04-1 1 02-14-1 1 02-16-1 1 02-22-1 1 02-23-1 1 02-22-1 1 02-23-1 1 03-04-1 1 03-07-1 1 03-04-1 1 03-07-1 1 03-04- 1 1 03-07- 1 1 155,000.680 NOVANT HEALTH INC 5.850% Due 11-01-19 160,000 UNIVERSITY VA UNIV REVS 5.000% Due 09-01-40 120,000.000 US TREASURY N/B 3.375% Due 11-15-19 345,000.000 US TREASURY N/B 3.375% Due 11-15-19 500,000.000 US TREASURY N/B 1.875% Due 08-31-17 315,000.000 US TREASURY N/B 1.875% Due 10-31-17 400,000.000 US TREASURY N/B 2.625% Due 11-15-20 200,000.000 US TREASURY N/B 3.875% Due 08-15-40 240,000.000 US TREASURY NB 3.875% Due 08-15-40 110,000.000 US TREASURY N/B 3.875% Due 08-15-40 45,000.000 US TREASURY NIB 3.875% Due 08-15-40 175,000.000 US TREASURY N/B 1.000% Due 01-15-14 160,000.000 US TREASURY NB 1.250% Due 09-30-15 175,000.000 US TREASURY NB 1.250% Due 10-31-15 103.37 94.23 101.97 101.97 96.09 95.67 92.91 87.77 87.02 87.94 87.94 99.55 96.6 1 96.36 160,229.70 150,769.60 122,362.50 3 5 1,792.19 48 0,429.69 30 1,366.4 1 371,625.00 175,531.25 208,837.50 96,73 1.25 39,571.88 174,207.03 154,575.00 168,628.91 PRINCIPAL PAYDOWNS 03-01-11 03-14-11 19,971.040 FG POOL #GO5900 01-01-11 01-15-1 1 2,710.200 FGCI #G12205 02-01-11 02-15-11 2,304.620 FGCI #G12205 03-01-1 1 03-15-1 1 2,232.090 FGCI #G12205 01-01-1 1 01-15-1 1 209.120 FGCI N #E313455 02-01-11 02-15-11 85.180 FGCI N #313455 6.000% Due 03-01-40 4.500% Due 06-01-21 4.500% Due 06-01-21 4.500% Due 06-0 1-2 1 4.500% Due 04-01-19 4.500% Due 04-01-19 9 4,171,23 1.5 1 100.00 19,971.04 100.00 2,7 10.20 100.00 2,3 04.62 100.00 2,232.09 100.00 209.12 100.00 85.18 ICC Capital Management PURCHASE AND SALE PALM BEACH GARDENS POLICE PENSION FUND FIXED INCOME From 12-31-10 To 03-31-11 Trade Settle Unit Date Date Quantity Security Price Amount 03-01-1 1 03-15-1 1 01-01-1 1 01-15-11 02-01-1 1 02-15-1 1 03-01-1 1 03-15-1 1 01-01-11 01-15-11 01-01-11 01-15-11 02-01-11 02-15-11 02-01-1 1 02-15-1 1 03-01-11 03-15-11 03-01-11 03-15-11 01-01-11 01-15-11 02-01-11 02-15-11 03-01-1 1 03-25-1 1 01-01-11 01-15-11 02-01-11 02-15-11 03-0 1 - 1 1 03-25- 1 1 01-01-11 01-15-11 01-01-11 01-15-11 02-01-11 02-15-11 02-01-11 02-15-11 03-01-11 03-25-11 03-01-1 1 03-25-11 5 1.400 FGCI N #B 13455 4.500% Due 04-0 1 - 19 145.300 FGCI N #G12323 4.500% Due 08-01-21 148.020 FGCI N #G12323 4.500% Due 08-01-21 121.630 FGCI N #G12323 4.500% Due 08-0 1-2 1 2,300.750 FGLMC #GO2268 6.500% Due 08-01-36 7,850.890 FGLMC #GO2268 6.500% Due 08-0 1-36 2,220.300 FGLMC #GO2268 6.500% Due 08-01-36 7,576.400 FGLMC #GO2268 6.500% Due 08-01-36 2,038.980 FGLMC #GO2268 6.500% Due 08-01-36 6,957.670 FGLMC #GO2268 6.500% Due 08-01-36 2,601.380 FNCI M #254371 5.500% Due 07-0 1 - 17 1,108.120 FNCI M #254371 5.500% Due 07-01-17 85 1.030 FNCI M #254371 5.500% Due 07-01-17 4.000% Due 08-01-20 4.000% Due 08-01-20 4.000% Due 08-01-20 4.500% Due 05-01-19 4.500% Due 05-01-19 4.500% Due 05-01-19 4.500% Due 05-01-19 4.500% Due 05-01-19 4.500% Due 05-01-19 1,627.380 FNCI N #255888 667.190 FNCI N #255888 245.890 FNCI N #255888 53.435 FNCI N #725445 1,72 1.4 15 FNCI N #725445 45.800 FNCI N #725445 1,475.430 FNCI N #725445 40.677 FNCI N #725445 1,3 10.393 FNCI N #725445 10 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.0 1 100.00 ~00.00 100.00 100.01 100.00 51.40 145.30 148.02 121.63 2,3 00.75 7,850.89 2,220.30 7,576.40 2,038.98 6,957.67 2,601.38 1,108.12 85 1.03 1,627.38 667.19 245.89 53.44 1,721.41 45.80 1,475.43 40.68 1,3 10.39 Trade Date 01-01-1 1 02-01-1 1 03-01-11 01-01-1 1 02-01-1 1 03-01-1 1 0 1-01- 1 1 02-01- 1 1 03-01-11 01-01-11 02-01-1 1 03-01-1 1 01-01-11 02-0 1-1 1 03-01-1 1 01-01-11 02-01-11 03-01-1 1 01-01-1 1 02-01 -1 1 03-01-1 1 01-01-11 ICC Capital Management PURCHASE AND SALE PALM BEACH GARDENS POLICE PENSION FUND FIXED INCOME From 12-31-10 To 03-31-11 Settle Unit Date Quantity Security Price Amount 01-15-11 02-15-1 1 03-25-1 1 01-15-11 02-15-11 03-25-1 1 01-15-11 02-1 5-1 1 03-25-1 1 0 1-0 1-1 1 02-0 1-1 1 03-20-1 1 0 1-20-1 1 02-20-1 1 03-20-1 1 01-20-1 1 02-20-1 1 03-20-1 1 01-15-1 1 02-15-1 1 03-15-1 1 01-14-11 2,650.060 FNCI N #825335 301.200 FNCI N #825335 301.010 FNCI N #825335 490.620 FNCI N #829053 632.210 FNCI N #829053 605.100 FNCI N #829053 4.000% Due 05-01-20 4.000% Due 05-01-20 4.000% Due 05-01-20 4.000% Due 08-01-20 4.000% Due 08-01-20 4.000% Due 08-01-20 6.500% Due 09-01-36 6.500% Due 09-01-36 6.500% Due 09-01-36 5.500% Due 07-20-38 5.500% Due 07-20-38 5.500% Due 07-20-38 6.000% Due 07-20-38 6.000% Due 07-20-38 6.000% Due 07-20-38 5.000% Due 05-20-39 5.000% Due 05-20-39 5.000% Due 05-20-39 6.000% Due 08-15-36 6.000% Due 08-15-36 6.000% Due 08-15-36 6.000% Due 07-15-16 5,901.300 FNCL # 256394 8,503.970 FNCL # 256394 5,029.860 FNCL # 256394 7,815.070 G2 POOL # 4194 6,135.080 G2 POOL # 4194 5,282.540 G2 POOL # 4194 2,703.970 G2 POOL # 4195 2,653.590 G2 POOL # 4195 2,076.890 G2 POOL # 4195 8,412.890 G2 POOL # 4447 5,095.180 G2 POOL # 4447 4,66 1.340 G2 POOL # 4447 4,65 1 SO0 GN POOL # 782 1 19 4,082.190 GN POOL # 7821 19 5,627.760 GN POOL # 7821 19 433.120 GNJO M #781313 11 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 2,650.06 301.20 301.01 490.62 632.21 605.10 5,901.30 8,503.97 5,029.86 7,815.07 6,135.08 5,2 82.54 2,7 03.97 2,653.59 2,076.89 8,412.89 5,095.18 4,661.34 4,65 1 SO 4,082.19 5,627.76 433.12 e e ICC Capital Management PURCHASE AND SALE PALMBEACH GARDENS POLICE PENSION FUND FIXED INCOME From 12-31-10 To 03-31-11 e e Trade Settle Unit Date Date Quantity Security Price Amount e 02-01-1 1 02-14-1 1 03-01-11 03-14-11 01-01-1 1 01-15-1 1 02-01-11 02-15-11 03-01-11 03-15-11 01-01-1 1 01-15-1 1 02-01-11 02-15-11 03-01-11 03-15-1 1 01-01-11 01-15-11 02-01-1 1 02-15-1 1 03-01-1 1 03-15-1 1 539.960 GNJO M #781313 493.180 GNJOM#781313 428.390 GNSF 5.5% POOL #714005 6,898.550 GNSF 5.5% POOL #714005 6,955.010 GNSF 5.5% POOL #714005 4,903.900 GNSF M #552509 248.620 GNSF M #552509 4,998.050 GNSF M #552509 53.450 GNSF M #582153 52.380 GNSF M #582153 1,593.490 GNSF M #582153 6.000% Due 07-15-16 6.000% Due 07-15-16 5.500% Due 10-15-39 5.500% Due 10-15-39 5.500% Due 10-15-39 6.000% Due 04- 15-32 6.000% Due 04-15-32 6.000% Due 04-15-32 6.000% Due 06-15-32 6.000% Due 06-15-32 6.000% Due 06-15-32 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 539.96 493.18 428.39 6,898.55 6,955.01 4,903.90 248.62 4,998.05 53.45 52.38 1,593.49 179,883.16 12 e a 0 0 a a 0 ICC Capital Management REALIZED GAINS AND LOSSES PALM BEACH GARDENS POLICE PENSION FUND FIXED INCOME From 12-31-10 Through 03-31-11 Gain Or Loss Open Close cost Date Date Quantity Security Basis Proceeds Short Term Long Term ~____ 12-15-06 01-01-11 01-08-07 01-01-11 02-21-07 01-01-11 08-24-06 01-01-11 09-08-04 01-01-1 1 05-23-02 01-01-11 09-08-05 0 1-01-1 1 01-08-07 0 1-01-1 1 09-1 5-04 0 1-0 1-1 1 01-29-07 01-01-11 09-08-05 01-01-1 1 08-23-05 01-01-1 1 06-13-02 01-01-11 03-10-10 01-01-11 12- 18-09 0 1-0 1-1 1 07-22-08 01-01-11 04- 15-02 0 1-0 1-1 1 12-03-09 01-01-1 1 07-02-02 01-01-11 02-22-10 01-0 1-1 1 02-23-10 01-04-11 02-05-10 0 1-04- 1 1 08-30-10 01-14-11 11-23-10 01-14-11 03-25-09 01-1 8-1 1 12-15-06 02-01-1 1 0 1-08-07 02-0 1-1 1 2,300.750 FGLMC #GO2268 7,850.890 FGLMC #GO2268 2,710.200 FGCI #G12205 6.500% Due 08-01-36 6.500% Due 08-01-36 4.500% Due 06-01-21 4.500% Due 08-01-21 4.500%Due 04-01-19 5.500% Due 07-01-17 4.000% Due 08-01-20 6.500% Due 09-01-36 4.500% Due 05-01-19 4.500%Due 05-01-19 4.000% Due 05-01-20 4.000% Due 08-01-20 6.000% Due 06-15-32 5.000% Due 05-20-39 5.500% Due 07-20-38 6.000% Due 07-20-38 6.000% Due 04-15-32 428.390 GNSF 5.5% POOL #714005 5.500% Due 10-15-39 433.120 GNJO M #781313 6.000% Due 07-15-16 4,651.500 GNPOOL# 782119 6.000% Due 08-15-36 120,000.000 US TREASURY NIB 3.375%Due 11-15-19 345,000.000 US TREASURY NIB 3.375%Due 11-15-19 500,000.000 US TREASURY NE3 1.875%Due 08-31-17 3 15,000.000 US TREASURY NIB 1.875% Due 10-31-17 125,000.000 JOHNS HOPIUNS UNIVERSITY 5.250% Due 07-01-19 6.500% Due 08-01-36 6.500% Due 08-01-36 145.300 FGCIN #G12323 209.120 FGCIN #B13455 2,601.380 FNCIM #254371 1,627.380 FNCIN #255888 5,901.300 FNCL # 256394 53.435 FNCIN #725445 1,721.415 FNCIN#725445 2,650.060 FNCIN #825335 490.620 FNCIN #829053 53.450 GNSF M #582153 8,412.890 G2 POOL # 4447 7,815.070 G2 POOL # 4194 2,703.970 G2 POOL # 4195 4,903.900 GNSF M #552509 2,220.300 FGLMC #GO2268 7,576.400 FGLMC #GO2268 2,348.57 8,014.05 2,6 14.92 139.3 1 208.50 2,590.00 1,583.64 6,019.33 53.48 1,652.02 2,578.84 475.90 53.36 8,817.76 8,293.74 2,70 1.01 4,843.37 454.76 446.65 ' 4,980.74 116,737.50 338,854.69 495,937.50 3 11,751.56 123,741.25 2,266.44 7,733.85 13 2,300.7 5 7,850.89 2,710.20 145.30 209.12 2,60 1.38 1,627.38 5,901.30 53.44 1,721.41 2,650.06 490.62 53.45 8,412.89 7,8 15.07 2,703.97 4,903.90 428.39 433.12 4,651.50 122,362.50 3 5 1,792.19 480,429.69 301,366.4 1 137,285.00 2,220.30 7,576.40 -47.82 -163.16 95.25 5.99 0.62 11.38 43.74 -1 18.03 -0.04 69.39 71.22 14.72 0.09 404.87 478.67 2.96 60.53 -26.37 -13.53 -329.24 5,625.00 12,937.50 -15,507.81 -10,385.15 13,543.75 -46.14 -157.45 e e e e IC€ Capital Management REALIZED GAINS AND LOSSES PALM BEACH GARDENS POLICE PENSION FUND FIXED INCOME From 12-31-10 Through 03-31-11 Gain Or Loss Open Close cost Date Date Quantity Security Basis Proceeds Short Term Long Term ___~ c 0 a a e 0 02-21-07 02-01-1 1 08-24-06 02-01-1 1 09-08-04 02-01-1 1 05-23-02 02-01-1 1 09-08-05 02-01-1 1 01-08-07 02-01-11 09- 15-04 02-0 1 - 1 1 0 1-29-07 02-0 1- 1 1 09-08-05 02-01-1 1 08-23-05 02-01-11 06-13-02 02-01-11 03-10-10 02-01-11 12-18-09 02-01-11 07-22-08 02-01-1 1 04-15-02 02-01-11 07-02-02 02-01-1 1 02-22-10 02-01-1 1 12-03-09 02-01-1 1 01-18-11 02-02-11 01-26-11 02-02-11 04-1 6-1 0 02-04- 1 1 04-16-10 02-04-1 1 09-10-09 02-09-11 02-04-1 1 02-14-1 1 09-30-10 02-15-11 12-12-07 02-15-11 e a a - 2,304.620 FGCI #G12205 4.500% Due 06-01-21 4.500% Due 08-01-21 4.500% Due 04-01-19 5.500% Due 07-01-17 4.000% Due 08-01-20 6.500% Due 09-01-36 4.500% Due 05-01-19 4.500% Due 05-01-19 4.000% Due 05-01-20 4.000% Due 08-01-20 6.000% Due 06-15-32 5.000% Due 05-20-39 5.500% Due 07-20-38 6.000% Due 07-20-38 6.000% Due 04-15-32 6.000% Due 07-15-16 6.000% Due 08-15-36 5.500% Due 10-15-39 400,000.000 US TREASURY NB 2.625% Due 11-15-20 200,000.000 US TREASURY NB 3.875% Due 08-15-40 190,000.000 GOLDMAN SACHS GROUP INC 5.375% Due 03-15-20 GROUP INC 5.375% Due 03-15-20 155,000.000 NOVANT HEALTH INC 5.850% Due 11-01-19 240,000.000 US TREASURY NB 3.875% Due 08-15-40 400,000.000 FANNIE MAE 1.750% Due 10-21-15 200,000.000 GOLDEN WEST FWL 4.750% Due 10-01-12 148.020 FGCI N #GI2323 85.180 FGCIN#B13455 1,108.120 FNCIM #254371 667.190 FNCIN#255888 8,503.970 FNCL # 256394 45.800 FNCI N #725445 1,475.430 FNCI N #725445 301.200 FNCIN #825335 632.210 FNCIN #829053 52.380 GNSF M #582153 5,095.180 G2 POOL # 4447 6,135.080 G2 POOL # 4194 2,653.590 G2 POOL # 4195 248.620 GNSF M #552509 539.960 GNJO M #781313 4,082.190 GNPOOL # 782119 6,898.550 GNSF 5.5% POOL #714005 100,000.000 GOLDMAN SACHS 2,223.60 141.91 84.93 1,103.27 649.26 8,674.05 45.83 1,415.95 293.11 613.24 52.29 5,340.39 6,s 10.85 2,650.68 245.55 556.83 4,371.13 7,323.24 375,125.00 178,031.25 189,768.20 100,045 .OO 154,975.20 207,525.00 400,000.00 195.640.00 2,304.62 148.02 85.18 1,108.12 667.19 8,503.97 45.80 1,475.43 301.20 632.21 52.38 5,095.1 8 6,135.08 2,653.59 248.62 539.96 4,082.19 6,898.55 371,625.00 175,53 1.25 193,271.80 10 1,722.00 160,229.70 208,837.50 385,300.00 2 10.668.00 81.02 6.11 0.25 4.85 17.93 -170.08 -0.03 59 48 8.09 18.97 0.09 -245.2 1 -375 77 2.91 3.07 -16.87 -288.94 424.69 -3,500.00 -2,500.00 3,503.60 1,677.00 5,254.50 1,312.50 -14.700.00 15,028.00 14 ICC Capital Management REALIZED GAINS AND LOSSES PALM BEACH GARDENS POLICE PENSION FUND FIXED INCOiME From 12-31-10 Through 03-31-11 Gain Or Loss Open Close Cost Date Date Quantity Security Basis Proceeds Short Term Long Term ~~ 02-04-1 1 02-22-1 1 01-26-11 02-22-11 12-15-06 03-01-1 1 0 1-08-07 03-0 1 - 1 1 02-21-07 03-01-1 1 08-24-06 03-01-1 1 02-02-1 1 03-01-1 1 09-08-04 03-01-1 1 05-23-02 03-01-11 09-08-05 03-01-11 01-08-07 03-01-11 09-1 5-04 03-01 - 1 1 01-29-07 03-01-11 09-08-05 03-01-1 1 08-23-05 03-01-1 1 06-13-02 03-01-11 03-10-10 03-01-11 12-1 8-09 03-01-1 1 07-22-08 03-01-11 04- 15-02 03-0 1- 1 1 07-02-02 03-01-11 02-22-1 0 03-0 1-1 1 12-03-09 03-01-11 01-12-11 03-04-11 10-05-10 03-04-11 11-03-10 03-04-11 12-03-09 03-08-1 1 110,000.000 US TREASURY NIB 3.875% Due 08-15-40 45,000.000 US TREASURY N/B 3.875% Due 08-15-40 6.500% Due 08-01-36 6.500% Due 08-01-36 4.500% Due 06-01-21 4.500% Due 08-01-21 6.000% Due 03-0 1-40 4.500% Due 04-01-19 5.500% Due 07-01-17 4.000% Due 08-01-20 6.500% Due 09-01-36 4.500% Due 05-01-19 4.500% Due 05-01-19 4.000% Due 05-01-20 4.000% Due 08-01-20 6.000% Due 06-15-32 5.000% Due 05-20-39 5.500% Due 07-20-38 6.000% Due 07-20-38 6.000% Due 04-15-32 6.000% Due 07-15-16 6.000% Due 08-15-36 5.500% Due 10-15-39 175,000.000 US TREASURY NE3 1.000% Due 01-15-14 160,000.000 US TREASURY N/B 1.250% Due 09-30-15 175,000.000 US TREASURY N/B 1.250% Due 10-3 1-1 5 170,000.000 CITIGROUP INC 6.010Y0Due 01-15-15 2,038.980 FGLMC #GO2268 6,957.670 FGLMC #GO2268 2,232.090 FGCI #G12205 121.630 FGCI N #G12323 19,971.040 FG POOL #GO5900 51.400 FGCIN#B13455 851.030 FNCIM #I254371 245.890 FNCIN#255888 5,029.860 FNCL # 256394 40.677 FNCI N #725445 1,3 10.393 FNCI N #725445 301.010 FNCIN#825335 605.100 FNCI N #829053 1,593.490 GNSF M #582153 4,661.340 G2 POOL # 4447 5,282.540 G2 POOL # 4194 2,076.890 G2 POOL # 4195 4,998.050 GNSF M #I552509 493.180 GNJO M #781313 5,627.760 GN POOL # 7821 19 6,955.010 GNSF 5.5% POOL #714005 15 95,115.63 40,05 7.03 2,081.36 7,102.26 2,153.62 116.61 21,696.66 51.25 847.3 1 239.28 5,130.46 40.71 1,257.57 292.92 586.95 1,590.75 4,885.67 5,606.10 2,074.62 4,936.36 508.59 6,026.10 7,383.18 174,6 17.19 160,325 .OO 1 75,929.69 173.031.10 96,73 1.25 1,6 15.62 39,571.88 -485.15 2,038.98 6,957.67 2,232.09 121.63 19,971.04 -1,725.62 51.40 851.03 245.89 5,029.86 40.68 1,3 10.39 301.01 605.10 1,593.49 4,661.34 -224.33 5,282.54 2,076.89 4,998.05 493.18 5,627.76 6,955.01 174,207.03 -410.16 1543 75.00 -5,750.00 168,628.91 -7,300.78 186.326.80 -42.38 -144.59 78.47 5 02 0.15 3.72 6.61 -100.60 -0.03 52.82 8.09 18.15 2.74 -323.56 2.27 61.69 -15.41 -398.34 -428.17 13,295.70 e a e a a a a e e a e * e a e .. 0 e * 0 e e a ICC Capital Management REALIZED GAINS AND LOSSES PALM BEACH GARLIENS POLICE PENSION FUND FIXED INCOME From 12-31-10 Through 03-31-11 Gain Or Loss Open Close Date Date Quantity ~~ 07-22-10 03-31-1 1 160,000 TOTAL GAINS TOTAL LOSSES TOTAL REALIZED GAINLOSS cost Security Basis Proceeds Short Term Long Term UNIVERSITY VA UNIV 162,496.00 150,769.60 -1 1,726.40 REVS 5.000% Due 09-01-40 26,671.22 47,940.38 -75,483 66 -3,491 74 4,355,478. 8,812.44 44,448.64 4,363 80 16 e a a e e e e e e e a e e e e a a a e e 0 c a 0 0 e e e 0 a a e e e e .. e e a a ICC Capital Management PORTFOLIO SUMMARY PALM BEACH GARDENS POLICE PENSION FUND FImD INCOME March 31, 2011 Pct. Cur. Est.Annua1 Security Type Total Cost Market Value Assets Yield Income ~~ Cash & Equivalents CASH AND 340,555.34 340,555.34 2.4 0.1 224.77 EQUIVALENTS 340,555.34 340,555.34 2.4 0.1 224.77 -- Fixed Income CORPORATE BONDS 8,05 1,100.96 8,336,502.64 58.3 4.1 3 3 8,885.29 MUNICIPAL BONDS 265,000.00 276,073.00 1.9 4.9 13,606.70 GOVERNMENT 667,3 82.80 663,014.14 4.6 2.7 18,075.00 BONDS MORTGAGE POOLS 3,214,861.23 3,353,895.72 23.5 5.3 177,756.1 1 GOVERNMENT 1,182,482.00 1,197,2 14.99 8.4 4.4 53,106.25 SPONSORED BOND Accrued Interest 132,912.34 0.9 ~- 13,380,826.99 13,959,612.84 97.6 4.3 60 1,429.35 PORTFOLIO 82.3 300,168. 00.0 601,654.11 17 ICC Capital Management PORTFOLIO APPMSAL PALM BEACH GARDENS POLICE PENSION FUND FIXED INCOME Murch 31, 2011 Unit Quantity Security cost cAsn AND EQUIVALENTS CASH & CASH EQWALENTS CORPORATE BONDS 165,000.000 CITIGROUP INC 200,000.000 AT&T INC 200,000.000 FRANKLIN 5.300% Due 10-17-12 4.950% Due 01-15-13 RESOURCES INC 2.000% Due 05-20-13 135,000.000 NATIONAL RURAL UT% COOP 5.500% Due 07-01-13 CAP cow 1.875% Due 09-16-13 5.250% Due 10-15-13 135,000.000 IBM CORP 6.500% Due 10-15-13 125,000.000 BAKER HUGHES LNC 6.500% Due 11-15-13 220,000.000 MORGAN STANLEY 1.903% Due 01-24-14 125,000.000 GENERAL DYNAMICS CORP 5.250% Due 02-01-14 INTERNATIONAL 3.875% Due 02-15-14 3.625% Due 03-15-14 GROUP INC 6.000% Due 05-01-14 120,000.000 MORGAN STANLEY 6.000% Due 05-13-14 360,000.000 P MORGAN 5.700% Due 11-15-14 5.125% Due 01-15-15 130,000.000 PEPSICO INC 3.100% Due 01-15-15 400,000.000 BANK OF NEY YORK MELLON 2.950% Due 06-18-15 185,000.000 GENERAL ELEC CAP cow 3.500% Due 06-29-15 155,000.000 MORGAN STANLEY 4.000% Due 07-24-15 co 2.125% Due 09-13-15 135,000.000 GENERAL ELECTRIC 85,000.000 GOLDMAN SACHS 125,000.000 HONEYWELL 255,000.000 COCA-COLA CO 130,000.000 GOLDMAN SACHS 65,000.000 GOLDMAN SACHS 205,000.000 HEWLETT-PACKARE 104.77 100.30 101.56 99.84 101.22 98.44 99.24 99.76 100.00 99.53 99.56 104.24 103.81 99.65 110.29 99.74 99.90 99.87 99.86 99.65 101.34 Total cost 340,555.34 340,555.34 172,875.45 200,592.00 203,128.00 134,789.40 136,652.40 83,674.00 133,97 1.30 124,702.50 220,000.00 124,410.00 124,452.50 265,819.65 134,958.20 119,581.20 397,032.75 64,829.10 129,868.70 399,484.00 184,739.15 154,465.25 207,738.80 18 Price 105.52 106.51 101.09 109.11 99.97 107.38 112.59 112.61 101.98 110.55 106.71 105.92 109.81 108.78 109.91 106.86 103.75 101.84 102.21 101.63 98.06 Market Value 340,555.34 340.555.34 174,112.29 213,021.40 202,188.80 147.296.07 134.953.69 9 1,276.65 151,997.85 140,756.87 224,359.96 138,192.25 133,390.50 270,106.7 1 142.75 1.83 130,542.00 395,688.24 69,457.70 134,871.62 407,368.40 189,096.08 157,523.40 201,025.46 Pet. Assets ~ 2.4 2.4 ~ 1.2 1.5 1.4 1.0 0.9 0.6 1.1 1.0 1.6 1.0 0.9 1.9 1.0 0.9 2.8 0.5 0.9 2.8 1.3 1.1 1.4 Cur. Yieid __ 01 41 ~ 50 46 20 50 19 49 58 58 19 47 36 34 55 55 52 48 30 29 34 39 22 ICC Capital Management PORTFOLIO APPRAISAL PALM BEACH GARDENS POLICE PENSION FUND FIXED INCOME Murch 31, 2011 Quantity 165,000.000 200,000.000 190,000.000 300,000.000 215,000.000 180,000.000 225,000.000 160,000.000 150,000.000 115,000.000 100.000.000 195,000.000 225,000.000 115.000.000 120,000.000 125,000.000 115,000.000 180,000.000 120,000.000 115,000.000 140,000.000 155,000.000 Security MICROSOFT CORP 1.625% Due 09-25-15 WAL-MART STORES INC 1.500% Due 10-25-15 PROCTER & GAMBLE corn 1.800% Due 11-15-15 SAN DEGO GAS & ELECTRIC 5 300% Due 11-15-15 E1 DU PONT DE NEMOUR & CO 1.950% Due 01-15-16 STATE STREET COW 2.875% Due 03-07-16 AT&T INC 5.625% Due 06-15-16 WELLS FARGO & COMPANY 3.676% Due 06-15-16 MCDONALD'S CORP 5.300% Due 03-15-17 VERIZON COMMUNICATIONS 5.500% Due 04-01-17 NATIONAL RURAL UTE. COOP 5.450% Due 04-10-17 MERCK & CO INC 6.000% Due 09-15-17 MCDONALD'S COW 5.800% Due 10-15-17 CONS EDISON CO OF NY 5.850% Due 04-01-18 AMGEN INC 5.700% Due 02-01-19 CISCO SYSTEMS INC 4.950% Due 02-15-19 CHEVRON COW 4.950% Due 03-03-19 BLACKROCK INC 5 000% Due 12-10-19 CONOCOPHILLIPS 6.000% Due 01-15-20 BgEING CO 4.875% Due 02-15-20 BAXTER INERNATIONAL INC 4.250% Due 03-15-20 GEORGE WASHINGTON UNIVERSlTY 4.896% Due 09-15-20 Unit cost 99.56 99.09 99.20 111.89 99.86 99.58 101.36 100.67 98.90 102.45 99.68 115.26 102.47 99.96 99.78 98.81 99.97 99.61 101.29 98.96 99.61 100.00 Total Cost 164,275.65 198,190.00 188,480.00 335.658.00 214.690.40 179,253.00 228,071.25 161,078.56 148,348.50 117,812.90 99,680.00 224,757.00 230,555.25 114,949.40 119,732.40 123,518.75 114,964.35 179,298.00 121,544.40 113,801.70 139,456.80 155,000.00 19 Price 96.81 95.67 97.67 111.42 96.27 99.34 111.87 100.59 111.49 110.26 110.60 115.36 114.48 113.11 111.77 107.35 110.34 104.91 114.83 106.85 101.49 100.34 Market Value 159,744.09 191,339.60 185,567.49 334,271.10 206,970.39 178,812.00 251,698.05 160,945.60 167,241.75 126,800.38 110,600.70 224,956.87 257,59 1.02 130,073.62 134,127.12 134,190.75 126,888.01 188,829.18 137,801.88 122,882.79 142,080.54 155,530.10 Pct. Assets 1.1 1.3 ___ 1.3 2.3 1.4 1.3 1.8 1.1 1.2 0.9 0.8 1.6 1.8 0.9 0.9 0.9 0.9 1.3 1.0 0.9 1.0 1.1 Cur. Yieid 1.7 1.6 __ 1.8 4.8 2.0 2.9 5.0 3.7 4.8 5.0 4.9 5.2 5.1 5.2 5.1 4.6 4.5 4.8 5.2 4.6 4.2 4.9 ICC Capital Management PORTFOLIO APPRAISAL PALM BEACH GARDENS POLICE PENSION FUND FIXED INCOME Murch 31, 2011 Cur. Yield 4.3 - 4.1 5.4 Unit Total cost cost 99.49 198,984.00 Market Pct. Price Value Assets 99.96 199,926.40 1.4 Quantity Security 200,000.000 BERKSHIRE HATHAWAY FIN 4.230% Due 01-15-21 PETROLEUM CORP 4.100% Due 02-01-21 CHICAGO 5.420% Due 10-01-30 Accrued Interest 245,000.000 OCCIDENTAL 215,000.000 UNIVERSITY OF 100.59 246,457.75 99.04 242,657.55 1.7 99.90 2 14,778.5 5 100.00 214,997.85 1.5 91,732.93 0.6 8,428,235.58 58.9 8,051,100.96 4.1 5.3 4.5 5.3 MUNICJPAL BONDS 140,000 COMMONWEPLLTH FING AUTH PA REV 5.653% Due 06-01-24 4.554% Due 07-01-24 UNIV REVS 5.000% Due 09-01-40 Accrued Interest 125,000 UTAHST 0 UNIVERSITYVA 100.00 140,000.00 106.24 148,743.00 1.0 100.00 125,000.00 0.00 0.00 101.86 127,330.00 0.9 94.3 1 0.00 0.0 4,727.86 ' 0.0 280,800.86 2.0 265,000.00 4.9 1.2 2.8 3.6 GOVERNMENT BONDS 180,000.000 US TREASURY N/B 1.250% Due 02-15-14 180,000.000 US TREASURY NE3 2.750% Due 02-28-18 300,000.000 US TREASURY N/B 3.625% Due 02-15-21 Accrued Interest 99.95 179,90 1.56 98.77 177,778.12 103.23 309,703.12 100.06 180,112.50 1.3 99.24 178.635.94 1.2 101.42 304.265.70 2.1 2,012.29 0.0 665,026.43 4.7 667,382.80 17,498.20 41,392.97 2,837.63 51,954.89 28,022.01 30,904.20 23,420.39 57,910.85 3,096.69 84,831.56 2.7 5.5 5.1 4.3 4.3 3.8 3.8 3.8 4.3 4.3 5.4 MORTGAGE POOLS 16,967 950 GNJO M #781313 6 000% Due 07- 15-1 6 41,574 860 FNCI M #254371 5 500% Due 07-01-17 2,846 020 FGCI N #B13455 4 500% Due 04-01-19 54,067 630 FNCI N #725445 4 500% Due 05-01-19 28,795 900 FNCI N #825335 4 000% Due 05-01-20 3 1,757 690 FNCI N #255888 4 000% Due 08-01-20 24,144 730 FNCI N #829053 4 000% Due 08-01-20 60,020 960 FGCI #G12205 4 500% Due 06-01-21 4 500% Due 08-0 1-2 1 6 000% Due 04-15-32 3,229 922 FGCI N #G12323 85,891 790 GNSF M #552509 103.12 99.56 99.71 96.09 97.3 1 97.3 1 97.00 96.48 95.88 98.77 108.41 108.53 105.65 105.70 104.37 104.37 104.37 105.53 105.53 18,395.70 45,119.37 3,006.92 57,149.65 30,055.72 33,147.09 25,201.06 63,339.16 3.408.49 0.1 0.3 0.0 0.4 0.2 0.2 0.2 0.4 0.0 110.65 95.035.66 0.7 20 20,713.080 GNSF M #582153 6.000% Due 06-15-32 327,325.362 FGLMC #GO2268 6.500% Due 08-01-36 303,976.332 GN POOL # 782119 6.000% Due 08-15-36 324,697.700 FNCL # 256394 6.500% Due 09-01-36 245,701.650 G2 POOL # 4194 5.500% Due 07-20-38 96,343.692 G2 POOL # 4195 6.000% Due 07-20-38 G2 POOL # 4447 5.000% DueO5-20-39 #7 14005 5.500% Due 10-15-39 6.000% Due 03-01-40 Accrued Interest 3 11,234.624 355,954.951 GNSF 5.5% POOL 736,770.720 FG POOL #GO5900 ICC Capital Management PORTFOLIO APPRAISAL PALMBEACH GARDENS POLICE PENSION FUND FIXED INCOME Quantity Security GOVERNMENT SPONSORED BOND 425,000.000 FANNIE MAE 2.000% Due 10-25-16 200,000.000 FANME MAE 6.000% Due 04-28-21 265,000.000 FANNIE MAE 5.625% Due 11-15-21 300,000.000 FREDDIE MAC 5.900% Due 06-15-22 Accrued Interest March 31, 2011 Unit Total Cast Cost 99 83 20,677 48 102.08 334,127.83 107 08 325,492.16 102.00 33 1,19 1.77 106.12 260,750.88 99 89 96,238.20 104.81 326,212.79 106.16 377,868.43 108.64 800,432.32 3,2 14,86 1.23 100.00 425,000.00 99.20 198,394.00 99.32 263,198.00 98.63 295,890.00 1,182,482.00 Price 110.65 112.33 110.09 112.44 108.21 109.28 106.27 108.45 Market Value Pet. Assets 22,918.15 367,672.47 334,653.62 365,076.13 265,869.58 105,285.64 330,735.34 386,025.67 0.2 2.6 2.3 2.6 1.9 0.7 2.3 2.7 108.83 801,800.31 5.6 14,813.01 0.1 3,368,708.73 23.6 95.67 406,589.42 2.8 100.40 200,799.00 1.4 102.99 272,917.67 1.9 105.64 316,908.90 2.2 19,626.25 0.1 1,216,84 1.24 8.5 Cur. Yield 5.4 5.8 5.4 5.8 5.1 5.5 4.7 5.1 __ 5.5 5.3 2.1 6.0 5.5 5.6 4.4 RTF 82.3 21 0 a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a e e PALM BEACH GARDENS POLICE PENSION FUND GROWTH Investment Review Quarter Ending March 31,2011 ICC Capital Management, lnc. a e e e PALM BEACH GARDENS POLICE PENSION FUND GROWTH e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e Investment Performance Report Quarter Ending March 31,2011 Total Return Summary Page ...... 1 Investment Performance by Asset Category Page ...... 3 Portfolio Sector Diversification Page ...... 4 Investment Performance by Sectors Page ...... 5 Brokers Commission Page ...... 7 Portfolio Allocation Page ...... 2 Portfolio Attributes Page ...... 6 Purchases & Sales Page ...... 8 Portfolio Summary Page ...... 10 Portfolio Appraisal Page ...... 11 Realized Gains/ Losses Page ...... 9 ZCC Capital Management, Inc. e m I e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e PALM BEACH GARDENS POLICE PENSION FUND GROWTH Total Return Summa y Quarter Ending March 31,2011 ;#artsng Value Fnding Value Difference Net Contributions/ (Withdrawals) Sai&Loss) porn Investments Fiscal Year to Since Inceptioi tr Date (02/28/07 - 03/31/"11) I I I I $5,7933563 $6,199343 $405,680 ($678) $406358 $l,Zuu,uUu $6,199,543 $4,999,543 $3,516,392 $1,483.150 TOTAL RETURN I 7.M% I 19.38% I 21.12% 1 1 ANNUALIZED RETURN 1 4.80% ZCC *tal Management, Inc. 1 a a a a a a a a e e e e e a a a a a a a a a a a a a a e a a a a a 'a e e 100.0% PALM BEACH GARDENS POLICE PENSION FUND GROWTH Portfolio Allocation at Market Quarter Ending March 31,2011 Asset AI Zoea tioii: ZOO/O (Mkt) Market Value as of 1y3lbO CASH/EQUIVS -1.7% Market Value as of 03/3lb1 CASH/EQUIVS 0.4% -- EQUITY 7 99.6% I Mkt Value Mkt Value O/O Mkt Value Mkt Value O/O as of 1y3l/lO as of ly3l/lO as of 03/31/11 as of 03/31/11 Cas Wquivs -$96,956 -1.7% $26,434 0.4% I I I I ICC Capital Maringerirent, Inc. 'a 2 rn PALM BEACH GARDENS POLICE PENSION FUND GROWTH Investment Pevormance by Asset Catego y Quarter Ending March 31,2011 I BACCOUNT BINDEX 1 Quarter 15.00 10.00 5.00 0.00 6’89 6.03 7.11 7.01 6.03 v4--’ I 4 TOTAL NET OF FEES /- - L_r EQUITY TOTAL GROSS OF FEES I I A Fiscal Year to Date ACCOUNT INDEX 40.00 30.00 20.00 10.00 0.00 I EQUITY TOTAL GROSS OF FEES TOTAL NET OF FEES Since Inception Annualized (02/28/07 - 03/32/c11) ACCOUNT INDEX 10.00 8.00 6.00 4.00 2.00 0.00 3-89 3.73 4.80 - 3.73 I 4.34 ’J W’J I I EQUITY TOTAL GROSS OF FEES TOTAL NET OF FEES The red total bar represents the Russell 1000 Growth Index. ZCC Cuaitul Munuaement, Inc. 3 a a a a a a a 0 a e a a a a e e e a e a PALM BEACH GARDENS POLICE PENSION FUND GROWTH Portfolio Sector Diversification Quarter Ending March 31,2011 Top Ten Holdings Security % of equities Return for Quarter THOMAS & BETS CORP. 3.95% 23.13% APPLE COMPUTER INC. 3.67% 8.04% TARGET CORPORATION PARKER-HANNIFIN CORP. MICROSOFT CORP. ALBEMARLE CORP. DARDEN RESTAURANTS INC. MICRON TECHNOLOGY INC. 3.40% 3.22% 3.04% 2.90% 2.86% 2.80% -16.45% 12.63% -8.48 % 7.40 % 7.06% 43.02% CONCH0 RESOURCES INC. 2.78% 22.39% CIGNA CORP. 2.65% 20.90% sector Sector Contribution % of Portfolio Return for Quarter Materials Industrials Telecommunications consumer Discretionary Consumer Staples Financials Health Care Information Technology ~UtilitieS Energy 6.96% 21.70% 2.01 % 12.03% 7.45 % 12.40% 4.47% 13.69% 17.33% 1.96% 7.18% 4.20% 4.27% 0.35% -2.37% 19.32% 7.18% 10.44% 9.11 % 6.86% ICC Capital Management, lnc. e 4 m e e e a e e a a e e e e e e a e 0 e e e e e e e a e e a e e @~ e mi e a e e e PALM BEACH GARDENS POLICE PENSION FUND GROWTH Investment Performance by Sectors Quarter Ending March 31,2011 Index Sector Returns for 1 Q11 30.0 20.0 10.0 0.0 -1 0.0 14.1 16.6 8.3 Sector Diversification Relative to the Russell 1000 Growth Index 24.0 OVERWEIGHT 8.1 1.9 12.0- 3.8 0.5 0.0 -0.3 -2.3 -1.9 -12.0 I' UNDERWEIGH -12.9 -24.0 PALM BEACH GARDENS POLICE PENSION FUND GROWTH e e e ICC - e e 0 CAPITALIZATION 0 R1mG - BETA ICC - RlOOOG - e e e 0 @ET- e 0 MELD @ RlOOOG - e om . ICC - 0 R1-- 0 0 a ICC - 3 YEAR EPS GROWTH RlOOOG - e 0 0 0 ICC - 0 R1oOOG - 0 e a 5YEAREPSGROWTH Growth Portfolio Attributes Quarter Ending March 31,2011 MARKET CAPlTALlZATlON 12/31/2010 3/31/2011 9/30/2010 6/30/2010 42.4 40.2 45.6 43.4 91.1 85.2 76.0 69.5 100.0 75.0 , 4d , 50.0 25.0 0.0 4~ 7 , 4~ I 3/31/2011 12/31/2010 9/30/2010 6/30/2010 I BETA 3/31/2011 12/31/2010 9/30/2010 6/30/2010 1.00 1.00 1.01 1.01 1.50 1.00 1.00 1.00 1.00 1.01 1.00 1.01 1.00 0.50 0.00 1.00 1.00 1.00 I 3/31/2011 12/31/2010 9/30/2010 6/30/2010 3/31/2011 12/31/2010 9J30/2010 6/30/2010 1.00 0.90 1.00 1.50 I 3.0 T 2.0 I 0.0 1.40 , I 7 I 1.a 1.40 1.40 1.50 1.70 1.0 1 o.90 I 3/31/2011 12/31/2010 9/30/2010 6/30/2010 I 12/31/2010 3/31/2011 9/30/2010 6/30/2010 17.4 16.5 15.3 12.4 14.9 15.1 14.4 13.3 30'0 T ~ PRICyEARNlNGS 20.0 ~~~ 10.9 15.1 15.3 14,4 0.0 3/31/2011 12/31/2010 9/30/2010 6/30/2010 3/31/2011 12/31/2010 9/30/2010 6/30/2010 15.0 9.0 3.0 3.0 5.0 7.0 4.0 4.0 5.0 3 YR EPS GROWTH 0.0 5.0 ll 5.0 5.0 4.0 4.0 I 3/31/2011 12/31/2010 9/30/2010 6/Yu/zu10 I 12/31/2010 3/31/2011 9/30/2010 6/30/2010 14.0 19.0 20.0 14.0 11.0 12.0 13.0 13.0 5 YR EPS GROWTH 30.0 T I 14,0 , I 19.0 , I 20.0 , I , - , 20.0 12.0 13.0 I4.O 13.0 - 1, 0 10.0 0.0 3/31/2011 12/31/2010 9/30/2010 6/30/2010 ICC Capital mnagement, Inc. 0 6 e 0 PALM BEACH GARDENS POLICE PENSION FUND GROWTH 0 0 0 Date Trans Ticker Security $Amount Shares Price Comm PerSh The Griswold Company 1/19/2011 Sell MRVL Marvell Technology Group $10,593.95 500 $21.23 $20.00 $0.04 1/19/2011 Sell MRVL Marvell Technology Group $8,475.16 400 $21.23 $16.00 $0.04 1/19/2011 Sell MRVL Marvell Technology Group $10,593.95 500 $21.23 $20.00 $0.04 1/19/2011 Sell MRVL Marvell Technology Group $16,950.31 800 $21.23 $32.00 $0.04 1/19/2011 Sell MRVL Marvell Technology Group $57,207.30 2700 $21.23 $108.00 $0.04 1/19/2011 Sell MRVL Marvell Technology Group $42,375.78 2000 $21.23 $80.00 $0.04 'Total: The Griswold Company $146,196.45 6,900 $276.00 $0.04 Edgetrade2 1/3/2011 Sell BGC 1/12/2011 Buy DRI Broker Commission Summary Report Quarter Ending March 31,2011 1/18/2011 2/ 7/2011 2/16/2011 2/ 2/ 201 1 2/22/2011 2/ 22/ 201 1 2/22/2011 12/22/2011 0 2/22/2011 2/22/2011 2/22/2011 12/23/2011 3/11/2011 3 /24/2011 3/25/2011 3/ 25/ 2011 3/25/2011 e 13/24/2011 0 0 3/25/2011 Sell UPS 3/25/2011 Sell UPS 3/25/2011 Buy IEX IdexCorp $124,735.09 2900 $43.00 $29.00 $0.01 Total: Edgetrade 2 $1,071,815.10 20,600 $206.00 $0.01 13/25/2011 sell BUY BUY BUY BUY sell sell sell sell Sell sell sell sell sell Sell sell sell sell BUY ENR MJN ALB WLL PEP SPN SPN SPN SPN SPN SPN CF PH FII FII UPS UPS UPS UPS General Cable Corp Del New Darden Restaurants Inc Energizer Holdings Inc Mead Johnson Nutrition Co Albemarle Corp Whting Petroleum Corp Pepsico Inc. Superior Energy Services Inc Superior Energy Services Inc Superior Energy Services Inc Superior Energy Services Inc Superior Energy Services Inc Superior Energy Services Inc Cf IndUSTries Holdings Inc. Parker-Hannifin Corp. Federated Investors Inc-C1 B Federated Investors Inc-C1 B United Parcel Svc Inc United Parcel Svc Inc United Parcel Svc Inc United Parcel Svc Inc United Parcel Svc Inc United Parcel Svc Inc $143,985.47 $59,601.49 $57,751.85 $40,255.25 $40,276.39 $121,619.80 $126,587.40 $15,143.27 $3,785.82 $3,785.82 $22,714.90 $68,144.71 $11,357.45 $65,299.69 $42,595.40 $28,950.12 $1 5,790.98 $7,221.29 $36,106.45 $7,221.29 $7,221.29 $7,221.29 $14,442.59 4100 $35.13 1300 $45.84 800 $72.20 700 $57.50 700 $57.53 1000 $121.61 2000 $63.28 400 $37.87 100 $37.87 100 $37.87 600 $37.87 1800 $37.87 300 $37.87 500 $130.61 500 $85.18 1100 $26.33 600 $26.33 100 $72.22 500 $72.22 100 $72.22 100 $72.22 100 $72.22 200 $72.22 $41.00 $0.01 $13.00 $0.01 $8.00 $0.01 $7.00 $0.01 $7.00 $0.01 $10.00 $0.01 $20.00 $0.01 $4.00 $0.01 $1.00 $0.01 $1.00 $0.01 $6.00 $0.01 $18.00 $0.01 $3.00 $0.01 $5.00 $0.01 $5.00 $0.01 $11.00 $0.01 $6.00 $0.01 $1.00 $0.01 $5.00 $0.01 $1.00 $0.01 $1.00 $0.01 $1.00 $0.01 $2.00 $0.01 " '0 7 a e e e 0 0 e e e e e e e e e e e e e 0 e a e e e 0 e 0 0 e a e e c 0 0 e * 0 e 0 e ICC Capital Management PURCHASE AND SALE PALMBEACH GARDENS POLICE PENSION FUND GROWTH From 12-31-10 To 03-31-11 Trade Settle Unit Date Date Quantity Security Price Amount PURCHASES 02-07-1 1 02-10-1 1 01-12-1 1 01-18-1 1 03-25-1 1 03-30-1 1 02-02-1 1 02-07-1 1 03-11-1 1 03-16-1 1 02-22-1 1 02-25-1 1 02-16-1 1 02-22-1 1 700.00 ALBEMARLE CORP 1,300.00 DARDEN RESTAURANTS INC 2,900.00 IDEX CORP 700.00 MEAD JOHNSON NUTRITION CO 500.00 PARKER-HANNIFIN CORP. 2,000.00 PEPSICO INC. 1,000.00 WHTING PETROLEUM CORP 57.54 40,276.39 45.85 59,60 1.49 43 .O 1 124,735.09 57.51 40,255.25 85.19 42,595.40 63.29 126,587.40 12 1.62 12 1.6 19.80 SALES 02-23-1 1 02-28-1 1 01-18-11 01-21-11 03-24-1 1 03-29-1 1 03-24-1 1 03-29-1 1 01-03-11 01-06-11 01-19-1 1 01-24-1 1 01-19-1 1 01-24-1 1 01-19-11 01-24-1 1 01-19-11 01-24-11 01-19-1 1 01-24-1 1 01-19-11 01-24-11 02-22-1 1 02-25-1 1 02-22-1 1 02-25-1 1 02-22-1 1 02-25-1 1 02-22-1 1 02-25-1 1 02-22-1 1 02-25-1 1 02-22-1 1 02-25-1 1 03-25-1 1 03-30-1 1 03-25-1 1 03-30-1 1 03-25-1 1 03-30-1 1 03-25-1 1 03-30-1 1 03-25-1 1 03-30-1 1 03-25-1 1 03-30-1 1 500.00 CF INDUSTRIES HOLDINGS INC. 800.00 ENERGIZER HOLDINGS INC 600.00 FEDERATED INVESTORS INC-CL B 1,100.00 FEDERATED INVESTORS INC-CL B 4,100.00 GENERAL CABLE CORP DEL NEW 400.00 MARVELL TECHNOLOGY GROUP 500.00 MARVELL TECHNOLOGY GROUP 800.00 MARVELL TECHNOLOGY GROUP 2,700.00 MARVELL TECHNOLOGY GROUP 2,000.00 MARVELL TECHNOLOGY GROUP 500.00 MARVELL TECHNOLOGY GROUP 1,800.00 SUPERIOR ENERGY SERVICES INC 300.00 SUPERIOR ENERGY SERVICES INC 400.00 SUPERIOR ENERGY SERVICES INC 100.00 SUPERIOR ENERGY SERVICES INC 100.00 SUPERIOR ENERGY SERVICES INC 600.00 SUPERIOR ENERGY SERVICES INC 100.00 UNITED PARCEL SVC INC 500.00 UNITED PARCEL SVC INC 100.00 UNITED PARCEL SVC INC 100.00 UNITED PARCEL SVC INC 100.00 UNITED PARCEL SVC INC 200.00 UNITED PARCEL SVC INC 130.60 72.19 26.32 26.32 35.12 21.19 21.19 21.19 21.19 21.19 21.19 37.86 37.86 37.86 37.86 37.86 37.86 72.21 72.21 72.2 1 72.2 1 72.2 1 72.2 1 5 5 5,670.82 65,299.69 57,751.85 15,790.98 28,950.12 143,985.47 8,475.16 10,593.95 16,950.31 57,2 07.3 0 423 75.7 8 10,593.95 68,144.7 1 11,357.45 15,143.27 3,785.82 3,785.82 22,7 14.90 7,22 1.29 36,106.45 7,22 1.29 7,22 1.29 7,22 1.29 14,442.59 662,340.73 0 a a a a a a a a a a a a a 0 a a a a a a a a a a a a a e a a a 0 a e a a e 0 a a 0 ICC Capital Management REALIZED GAINS AND LOSSES PALMBEACH GARDENS POLICE PENSION FUND GROWTH From 12-31-10 Through 03-31-1 I Gain Or toss Open Close Date Date Quantity SecuriQ ~~ 09-09-10 01-03-1 1 4,100 00 GENERAL CABLE CORP DEL NEW INC GROUP GROUP GROUP GROUP GROUP GROUP SERVICES INC 10-30-07 02-22-1 1 300 00 SUPERIOR ENERGY SERVICES INC 01-28-08 02-22-11 400 00 SUPERIOR ENERGY SERVICES INC 04-22-08 02-22-1 1 100 00 SUPERIOR ENERGY SERVICES INC 08-13-08 02-22-1 1 100 00 SUPERIOR ENERGY SERVICES INC 04-07-09 02-22-1 1 600 00 SUPERIOR ENERGY SERVICES INC 12-22-10 02-23-1 1 500 00 CF INDUSTRIES HOLDINGS INC 03-12-09 03-24-1 1 600 00 FEDERATED INVESTORS 10-15-09 01-18-11 800 00 ENERGIZER HOLDINGS 10-12-07 01-19-11 400 00 MARVELL TECHNOLOGY 10-30-07 01-19-1 1 500 00 MARVELL TECHNOLOGY 01-28-08 01-19-11 800 00 MARVELL TECHNOLOGY 02-27-08 01-19-1 1 2,700 00 MARVELL TECHNOLOGY 03-07-08 01-19-1 1 2,000 00 MARVELL TECHNOLOGY 04-22-08 01-19-1 1 500 00 MARVELL TECHNOLOGY 10-12-07 02-22-1 1 1,800 00 SUPERIOR ENERGY INC-CL B 04-07-09 03-24-11 1,100 00 FEDERATED INVESTORS INC-CL B 06-06-07 03-25-1 1 100 00 UNITED PARCEL SVC INC 07-26-07 03-25-1 1 500 00 UNITED PARCEL SVC INC 10-30-07 03-25-1 1 100 00 UNITED PARCEL SVC INC 01-28-08 03-25-11 100 00 UNITED PARCEL SVC INC 08-13-08 03-25-1 1 100 00 UNITED PARCEL SVC INC 04-07-09 03-25-1 1 200 00 UMTED PARCEL SVC INC TOTAL GAINS TOTAL LOSSES TOTAL REALIZED GAINLOSS 144,684 47 9 Cost Basis 99,682 07 52,891 92 6,808 00 8,834 00 9,488 00 32,054 67 21,596 40 5,785 00 59,942 70 10,362 00 16,467 00 4,575 00 4,636 00 8,454 00 63,737 15 11,948 94 24,077 02 7,120 39 37,875 00 7,509 00 7,077 00 6,379 00 10,356 00 517,656.26 Proceeds 143,985.47 57,751 85 8,475.16 10,593.95 16,950.31 57,207.30 42,375.78 10393.95 68,144.71 11,357.45 15,143.27 3,785.82 3,785.82 22,7 14.90 65,299.69 15,790.98 28,950.12 7,22 1.29 7,22 1.29 7,22 1.29 7.221.29 36,106.45 Short Term Long Term 44,303.40 4,859.93 1,667.1 6 1,759.95 7,462.3 1 25,152.63 20,779 38 4,808.95 8,202.01 995.45 - 1,323.73 -789.18 -850.18 14,260.90 1,562.54 3,842.04 4,873.10 100.90 -1,768.55 -287.71 144.29 842.29 14,442.59 4,086.59 45,865 94 103,837 85 662,340.73 45,865.94 98,818.53 0 00 -5,019 35 ICC Capital Management PORTFOLIO SUMMARY PALM BEACH GARBENS POLICE PENSION FUND GROWTH Mcirch 31. 2011 Pct. Cur. Est.Annua1 Security Type Total Cost Market Value Assets Yield Income -~ Cash & Equivalents CASH AND 26,433.71 26,433.71 0.4 0.1 14.64 EQUIVALENTS 26,433.71 26,433.71 0.4 0.1 14.64 - -___ Equities COMMON STOCK MATERIALS INDUSTRIALS TELECOMMUNICATIONS CONSUMER DISCRETIONARY CONSUMER STAPLES ENERGY FINANCIALS HEALTH CARE INFORMATION TECHNOLOGY UTILITIES COMMON STOCK 3 3 6,6 93.73 1,050,007.48 120,675.54 750,691.63 473,668.74 547,706.09 27 5,227.86 624,239.06 664,034.5 1 82,769.25 4,925,7 13.89 429,344.00 1,339,496.00 124,23 3 .OO 742,855 .OO 460,080.00 765,88 1 .OO 275,753.00 844,818.00 1,070,039.82 120,609.00 6,173,108.82 6.9 0.9 21.6 0.8 2.0 0.0 12.0 0.8 7.4 2.4 12.4 0.8 4.4 0.3 13.6 0.6 17.3 0.5 1.9 3.2 99.6 0.8 - -- 3,980.00 10,317.00 0.00 5,852.00 11,036.00 5,808.00 940.00 5,246.00 5,036.00 3,888.00 52,103.00 __- 4,925,7 13.89 6,173,108.82 99.6 0.8 52,103.00 4,952,147.60 6,199,542.53 100.0 0.8 52,117.64 10 e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e a e e e e a e e e e 1- ICC Capital Management PORTFOLIO APPRAISAL PALMBEACH GARDENS POLICE PENSION FUiW GROWTH March 31, 2011 Unit Total Quantity Security cost cost CASH AND EQUIVALENTS CASH & CASH EQUIVALENTS 22,176.71 DIV CASH ACCRUAL ACCT 43 7.00 26,433.71 COMMON STOCK MATERIALS 3,000.00 ALBEMARLE COW 1,600.00 CLIFFS NATURAL 1,700.00 NEWMONT MINING RESOURCES INC cow INDUSTRIALS 22,500.00 AMR cow 2,200.00 EXPEDITORS INTL WASH INC 1,300.00 GENERAL DYNAMJCS CORP 4,900.00 GENERAL ELECTRIC co. 2,900.00 IDEX COW 2,100.00 PARKER-HANNIFIN cow. 12,500.00 SOUTHWEST AIRLINES co. cow 4,100.00 THOMAS &BETS 2,400.00 TOR0 CO TELECOMMUNICATIONS 1,200.00 AMERICAN TOWER CORPORATION 11,100.00 CLEARWIRE CORP-CLASS A CONSUMER DISCRETIONARY 3,600.00 DARDEN RESTAURANTS INC 12,900.00 INTERPUBLIC GROUP COMPANIES INC. 2,900.00 NORDSTROM INC. 8,600.00 PULE COW 4,200.00 TARGET CORPORATION 48.87 146,623.98 71.79 114,868.00 44.24 75,201.75 336,693.73 7.43 167,184.14 36.61 80,550.58 67.90 85,273.64 22.40 109,778.48 43.01 124,73 5.09 79.59 167.148.36 7.84 98,061.25 25.86 1 06,028.98 45.10 108,246.96 1,050,007.48 37.42 44,907.00 6.83 75,768.54 120.675.54 48.28 173,795.80 9.78 126,145. 82 41.45 120,197.17 11.68 100,436.82 54.79 230,116.02 CONSUMER STAPLES 2,600.00 CVS CAREMARK cow 750,691.63 34.61 89,974.00 11 Market Pct. Cur. Assets Yield ~~ Price Value 22,176.7 1 0.4 0.1 4,257.00 0.1 0.0 26,433.11 0.4 0.1 ~- 59.77 179,310.00 2.9 0.9 95.28 157,248.00 2.5 0.8 54.58 92,786.00 1.5 1.1 -__ 429,344.00 6.9 0.9 6.46 145,350.00 2.3 0.0 50.15 110,330.00 1.8 0.8 99,528.00 1.6 2.5 76.56 20.05 98,245.00 1.6 2.4 43.65 126,585.00 2.0 7 94.68 198,828.00 3.2 1.4 12.63 157,875.00 2.5 0.1 59.47 243,827.00 3.9 0.0 158,928.00 2.6 1.1 1,339,496.00 21.6 0.8 -___ 66.22 51.82 62,184.00 1.0 0.0 5.59 62,049.00 1.0 ? 124,233.00 2.0 0.0 ~~ 49.13 176,868.00 2.9 ? 12.57 162,153.00 2.6 0.0 44.88 130,152.00 2.1 1.0 7.40 63,640.00 1.0 2.7 50.01 210,042.00 3.4 1.4 742,855.00 12.0 0.8 -- 34.32 89,232.00 1.4 1.5 0 0 a a 0 e 0 e a 0 a a a 0 a 0 0 a a a a 0 ICC Capital Management PORTFOLIO APPRAISAL PALMBEACH GARDENS POLICE PENSION FUND GROWTH Mcirch 31, 201 I Quantity Security 2,600.00 MEAD JOHNSON 2,000.00 PEPSICO INC. 3,300.00 SYSCO COW NUTRITION CO ENERGY 2,300.00 ATWOOD OCEANICS INC 1,600.00 CONCH0 RESOURCES INC 1,800.00 CONOCOPHILLIPS 600.00 EXXON MOBILE cow. CORP PETROLEUM CORP 1,400.00 OCCIDENTAL PETE 2,000.00 WHTING FINANCIALS 1,300.00 AFFILIATED MANAGERS GROUP INC 500.00 FRANKLIN RES INC 2,600.00 MORGAN STANLEY HEALTH CARE 1,500.00 ABBOT LAB COM 1,100.00 BECTON DICKINSON & co 1,200.00 CERNER COW 3,700.00 CIGNA COW 1,600.00 GENZYME CORP 5,700.00 MYLAN LABORATORIES 1,500.00 STRYKER COW 14,250.00 SUPERGEN INC INFORMATION TECHNOLOGY 650.00 APPLE COMPUTER 3,300.00 BROADCOM COW 3,800.00 EMC COW 6,400.00 JDS UNIPHASE COW 2,800.00 MARVELL INC TECHNOLOGY GROW TECHNOLOGY INC 7,400.00 MICROSOFT CORP. 1,550.00 NETAPP INC 15,100.00 MICRON Unit Total cost cost 60.83 158,16 1.46 63.29 126,587.40 29.98 98,945.88 473,668.74 26.43 60,779.57 65.40 104,641.96 60.36 108,646.56 65.99 39,592.32 80.30 112.425.88 60.81 121.619.80 547,706.09 86.3 1 112,206.38 102.36 5 1,180.60 43.02 111,840.88 275,227.86 52.35 78,521.00 64.29 70,720.77 49.24 59,088.16 21.95 81,228.98 69.84 111,738.88 19.65 11 1,999.49 53.08 79,623 60 2.20 3 1,3 18.18 624,239.06 126.32 82,107.55 26.68 88,029.30 15.32 58,202.97 10.44 663 15.23 9.74 27,284.00 5.76 87,008.20 29.49 218,234.26 23.45 3 6,3 53 .OO 664,034.5 1 Price 57.93 64.41 27.70 46.43 107.30 79.86 84.13 104.49 73.45 109.37 125.08 27.32 49.05 79.62 111.20 44.28 76.15 22.66 60.80 3.10 345.51 39.38 26.56 20.84 15.55 11.47 25.39 48.15 Market Pct. Cur. Assets Yield Value 150,618.00 2.4 1.8 ~~ 128,820.00 2.1 2.8 91,410.00 1.5 3.5 460.080.00 7.4 2.4 ___~ 106,789.00 1.7 ? 171,680.00 2.8 ? 143,748.00 2.3 2.1 50,478.00 0.8 2.0 146,286.00 2.4 1.3 146,900.00 2.4 ? -__ 765,881.00 12.4 0.8 142,181.00 2.3 ? 62,540.00 1.0 0.7 71,032.00 1.1 0.7 275,753.00 4.4 0.3 ~__ 73,575.00 1.2 3.3 87,582.00 1.4 2.1 133,440.00 2.2 0.0 163,836.00 2.6 0.1 121,848.00 2.0 0.0 129,162.00 2.1 0.5 91,200.00 1.5 0.2 44,175.00 0.7 0.0 844.818.00 13.6 0.6 ~___ 226,530.20 3.7 0.0 129,954.00 2.1 0.9 100,928.00 1.6 0.0 133,376.00 2.2 0.0 43,540.00 0.7 0.0 173,197.00 2.5 0.0 187,856.00 3 0 2.0 12 00 1,070,039.82 173 05 ____ 74,628 62 12 a e e e e e e e e e e e e e e e ICC Capital Management PORTFOLIO APPRAISAL PALM BEACH GARDENS PQLICE PENSION FUND GROWTH hlarch 31. 201 1 Unit Total Market Pct. Cur. Assets Yield ___~ Quantity Security cost cost Price Value UTILITIES 19 32 82,169 25 120,609 00 19 32 COMMON STOCK Total 4,925,713 89 6,173,105 52 99 6 0 8 -__ 8,100 00 NV ENERGY INC 10 22 82,769 25 14 89 120,609 00 ~~ TOTAL PORTFOLIO 4,952,147.60 6,199,542.53 100.0 0.8 e 0 0 a e e e a 13 1 cc 390 North Orange Avenue . 27th Floor Orlando, Florida . 32801 . 800-480-6445 . www.icccapitaI.com SALEM TRUST c OMPANY State of Florida Government Series Publication date: March 30, 201 1 S&P 500: 1,328.24 1 0-Year Treasury Note: 3.45% Research provided by. . . m PENNANT MANAGEMENT Pennant Management, Inc. is an aftiliate of Salem Trust Company. CHICAGO NEW YORK MILWAUKEE TAMPA www.pennantmanagement. com 11270 WEST PARK PLACE, SUITE 1025 . MILWAUKEE, WI 53224 . TEL (414) 359-1044 FAX (414) 359-1008 PENNANT MANAGEMENT, INC.. IS A SUBSIDIARY OF U.S. FIDUCIARY SERVICES, INC., AN EMPLOYEE-OWNED COMPANY. The Overall Economic Outlook. . . Florida’s recovery continues as the State’s unemployment rate for February dropped to 11.5% from 11.9% during January. The State’s unemployment rate is still a huge 2.6% higher than the national unemployment rate of 8.9%. The Agency for Workforce Innovation reported that 67 of Florida’s 67 counties reported a decrease in unemployment for February. The State’s economic growth is expected to lag the national recovery. On the national level, economic momentum is coming from exports and the manufacturing sector. According to S&P/Case-Shiller 20 City Index, home prices decreased 0.2% during January after decreasing 0.4% during December. The Index has decrease 3.1% over the past year. Prices fell in 19 cities from December 2010 to January 2011. This drop in prices was the sixth consecutive monthly decline. Eighteen of the 20 cities in the Index showed a year-over-year decline. Tampa and ten other major cities of the Index are at their lowest level since the housing bust of 2006/2007. January home prices for Miami and Tampa decreased 1.3% and 1 .O%, respectively. For the past 12 month period, Miami and Tampa home values decreased 4.7% and 7.0%, respectively. Vacant homes continue to put downward pressure on home prices. According to CNN Money, 17.5% of Florida’s housing stock is vacant. The rate of vacancy drops to 10% if vacation properties are excluded. Although the number of foreclosures decreased during February, the decreased should be considered temporary because of the delays from the controversy surrounding the process. RealtyTrac believes foreclosures will surge in a catch-up with an overall increase of 20% by year-end. The rental market continues to do well as more people now prefer to rent rather than own in a down market. Many households are forced to rent, given they abandoned their homes. At some point in the near future, the higher cost of renting will push some households back into the housing market. The NAHBMlells Fargo Housing Market Index of builder confidence increased slightly during March to 17. The regional index for the South increased from 18 in February to 20 for March. Two of its three components in the national index held steady, as only single family sales in the next six months increased to 27 from 25. According to the report, builders continue to face problems with inaccurate appraisals and with obtaining production financing. The recent predictions of a massive wave of municipal defaults are misplaced, at least for the near term. Local governments, as well as the State, have to make fiscal adjustments, maybe painful adjustments, to reduce downgrade risk and possible default. Austerity is the new buzz word. Pension liabilities come up with every discussion about the municipal debt market. Some investors, academics and policymakers agree that state and local governments should discount their employee pension liabilities at their cost of capital, which is exactly what‘s being done with corporate plans and the federal government. Nonetheless, investors are clamoring for more disclosure and comparability. While muni rates have followed Treasuries of late, the spreads have narrowed after the knee jerk reaction at the end of 2010. Taxable municipals have outperformed their tax-exempt alternatives. The scarcity of recent supply has been the driver for the credit tightening. Any new increase in the BABs program will be not have much U.S. Congressional support due to the debate on the federal deficit . Florida’s tourism has bounced back according to several tracking trade agencies. The increase in consumer confidence over the past year has increased bookings. The oils spill problems are now memories. The recent run up in energy costs can curtail some vacation plans. While the addition energy costs for travel may be an addition charge to a vacation, it is the effect on consumer confidence that alter future vacation plans. 1 he Uverall hconornic Uutlook . . I 3 - I1 IO 9 8 7 6 5 4 3 2 I 52 I 37 I72 I IO 98 88 n 71 63 n 51 46 41 IO 9 8 7 6 5 4 3 2 1 0 I 2 3 4 - - - ... -100 - -?.so - -3w - -350 - a- 450 - -m - -550 - a- 450 ? -4 1 I- How 'l'he States Are Doing . . (E45E) Copyright 201 1 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Reserved. See NDR Disclaimer at www.ndr.wm/wpyright.html . For data vendor disclaimers refer to www.ndr.wmhendorinfo/ . 4 Florida's economic rebound is lagging the national average. ? t How 'l'he States Are Doing; . . . Monrhly Data 11/30/1979 - 2/28/2011 Recession Probabilitv Model Based on State Conditions 100 95 90 85 80 75 70 65 60 55 50 45 40 35 30 25 20 15 10 5 0 Shaded areas represent National Bureau of Economic Research recessions Numbers indicate length of Leads (-)and Lags (+) in months from reference turning dates (shown below) 5 IO0 95 90 85 80 75 70 65 60 55 50 45 40 35 30 25 20 15 10 5 0 :-) 2222222:,:, " copyright 201 1 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rahts Reserved. See NDR Disclaimer at www.ndr.com/mpyright.html . For data vendor disclaimers refer to www.ndr.com/vendorinfo/ . T L How The States Are Doing . . FY 1979 - FY 201 1 Fiscal Condition of the States I I 68 64 60 56 52 48 44 40 36 32 28 24 20 16 12 8 4 Total Year-End Balances = General Fund + Budget Stabilization Fund 68 64 60 56 52 48 44 40 36 32 28 24 20 16 12 8 4 1 'Figures for prior fiscal year are preliminary. 'Figures for current fiscal year are based on appropriations. i I FY 201 1 = $36.2 billion rl n n t 7 s N 8 n 11 10 9 8 7 6 5 4 3 2 11 10 9 8 7 6 5 4 3 2 E360) Source: National Association of State Budget Ofticers, www.nasbo.org n I. ... .: . . . . . . . ._. . .... , ,. \ I V FY 2011 = 5.6% 1 , ,. .. .. , , . , , , . ., Year-End Balances as Percentage of Expenditures.. :*.I ,- ;' . .. '..: ,' ,' . '" .' ' .. '" ' - .. '-.' - - - "- - ' - -' ,. .. .. @3wyright 2011 Ned Davis Research, Inc. Further distribution Drohibited without Drior oarmission. All Rohts Reserved. See NDR Disclaimer at www.ndr.com/copyright.html . For data vendor disciaimers refer to www.idr.cMnhrendorinfo/ . How The States Are Doing . . guarierly Data ~/~I/IYJL - 1~/31/2010 State and Local Government Debt as % of GDP I I 20.8 20.4 20.0 19.6 19.2 18.8 18.4 18.0 17.6 17.2 16.8 16.4 16.0 15.6 15.2 14.8 14.4 14.0 13.6 13.2 12.8 12.4 12.0 11.6 11.2 10.8 10.4 10.0 9.6 9.2 8.8 8.4 8.0 - 20.8 - 20.4 - 20.0 Gross Domestic Product = $14861.0 Billion - 19.6 - 19.2 - 18.8 - 18.4 - 18.0 - 17.6 - 17.2 - 16.8 16.4 - 16.0 - 15.6 - 15.2 - 14.8 - 14.4 - 14.0 - 13.6 - 13.2 . .. .. * - 12.8 ... - 12.4 - 12.0 - 11.6 - 11.2 - 10.8 - 10.4 - 10.0 - 9.6 - 9.2 - 8.8 - 8.4 Data Subject To Revisions By The Federal Reserve Board - 8.0 =21.1% State i3 Local Government Debt = $3135.2 Billion 55-Year Mean = 16.4% A 15.1 13.5 . * . . .: .. . I I""I""I'.''I""I""I."'I""I""I'"'I"'',""~ ' Eosoa) 1955 1960 1965 1970 1975 1980 1985 1990 1995 ZOO0 2005 2010 &Copyright 201 1 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Resewed. See NDR Disclaimer at www.ndr.com/copyright.htmi . For data vendor disclaimers refer to www.ndr.comhrendorinfo/ . How The States Are DninP Performance of State 8, Local Government Payrolls vs I Monthly Data 6/30/2007 - 2/29/2012 mrage of Last Six Expansions i 103.8 103.6 . . Recession 103.4 ' I ended in June 2009, '< . ... 103.2 ' 103.0 ,. .. .... Current Expansion (-1 102.8 102.6 102.4 102.2 - 102.0 - 101.8 - 101.6 - 101.4 - 101.2 - 101.0 - 100.8 - 100.6 - 100.4 100.2 100.0 99.8 99.6 99.4 99.2 99.0 98.8 98.6 98.4 98.2 98.0 97.8 97.6 97.4 97.2 97.0 96.8 %.6 96.4 96.2 96.0 95.8 - - - - - - - - - - - Average of Last Six Post World War II Expansions" (-1 S DI M J S D1 M Florida, like other states, have cut payrolls. 'Dates used for determining economic expansions are those designated by the National Bureau of Economic Research. The data has been adjusted for ease of comparison with the current cycle. Expansion starting dates used: November 1970, March 1975, July 1980. November 1982, March 1991, and November 2001. - 103.8 - 103.6 - 103.4 - 103.2 - 103.0 - 102.8 - 102.6 - 102.4 102.2 - 102.0 - 101.8 - 101.6 - 101.4 101.2 101.0 - 100.8 - 100.6 - 100.4 - 100.2 - 100.0 - 99.8 - 99.6 - 99.4 - 99.2 - 99.0 - 98.8 - 98.6 - 98.4 - 98.2 - 98.0 - 97.8 - 97.6 - 97.4 - 97.2 - 97.0 - 96.8 - 96.6 - 96.4 - 96.2 - 96.0 - 95.8 - - - S D1 M J S DI M J S DI 2008 2009 2010 201 1 2012 dopyright 2011 Ned Davis Research, Inc. Further distribution pmhibited without prior permission. All Rights Resewed. See NDR Disclaimer at www.ndr.com/copyight.htrni . For data vendor disclaimers refer to www.ndr.com/vendorinfo/ State and local governments look to layoffs to help balance their budgets. Hnw The States Are DninP, . . 9 Quarterly Data W3Wl982 - lU31/2010 Compensation Costs for State & Local Government and Its Components (Quarterly % Changes) i Compensation 12/31/2010 = 0.6% 2.4 2.2 2.0 1.8 1.6 1.4 1.2 1 .o 0.8 0.6 0.4 0.2 - 2.4 - 2.2 - 2.0 - 1.8 - 1.6 - 1.4 2.2 2.0 1.8 1.6 1.4 1.2 1 .o 0.8 0.6 0.4 0.2 0.0 1 Wages and Salaries 12/31/2010 = 0.5% - 2.2 - 2.0 - 1.8 - 1.6 - 1.4 - 1.2 1.0 - 0.8 - 0.6 - 0.4 0.2 - 0.0 - - Benefits 12/31/2010 = 0.8% 1; -I -0.2 2.4 - 2.2 2.0 - 1.8 - 1.6 - 1.4 - 1.2 1.0 - 0.8 - 0.6 - 0.4 - 0.2 - 0.0 - -0.2 - - - - 1.4 1.2 1.0 - 0.8 - 0.6 - 0.4 - 0.2 - 0.0 - - b I U I I I I I 1 1 Tun41 1985 1990 1995 2000 2005 2010 .. copyright 201 1 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Resewed. See NDR Disdaimer at www.ndr.com/copyright.html . For data vendor disclaimers refer to www.ndr.comhrendorinfo/ 10 Can Local Government Sell Bonds; What Does It Cost. Monthly Data 1/31/1984 - 2/28/2011 Barclays Capital Municipal Bond Price Index 109 108 107 106 105 104 103 102 101 100 99 98 97 96 95 94 93 92 91 90 89 88 87 I09 108 107 106 105 104 103 102 101 100 99 98 97 96 95 94 93 92 91 90 89 88 87 loo00 9OOo 8000 7000 6OOo 5000 4Ooo 3000 2000 lo00 -1000 -2000 -3000 -4Ooo -5000 -6Ooo -7000 -8000 -9Ooo loo00 1 1000 0 W 222222222 * .. . .... . Net Flow for 2/28/2011 = $-3346 Million Includes State Municipal Bond Funds t source: investment mmnv Institute. mnv.ici.om w +ll000 :~309) Municipal Bond Mutual Funds Customer Purchases Minus Redemptions mpyright 2011 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Reserved. See NDR Disclaimer at www.ndr.codcopyright.html . For data vendor disclaimers refer to www.ndr.codvendorinfo/ . .. Can Local Government Sell Bonds; What Does It Cost. Daity Data 1/02/2002 - 3/29/2011 Municipal Yield Curve (20-2, 10-2, 5-2) 420 390 360 330 300 270 240 210 180 150 120 90 60 3/29/2011 = 386 - Daily Close of AAA-rated Securities 20-Year minus 2-Year - In basis points - 420 - 390 - 360 - 330 300 - 270 - 240 - 210 - 180 - 150 - 120 - 90 - 60 - I I 300 1 IO-Year minus 2-Year 3/29/201 I = 264 4 300 270 270 240- 240 210 - - 210 180 180 150 150 120 120 90 90 - 60 60 - 30 30 - 5-Year minus 2-Year 3/29/2011 = 114 7 140 - - - - - - - - - - - - 140 130 120 110 100 90 80 70 60 50 40 30 20 10 10 I 'M J S DIM J S DIM J S DIM J S 85999 2002 2003 2004 2005 2006 2007 2008 2009 2010 201 1 aopyright 2011 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Reserved. See NDR Disclaimer at www.ndr.mmlcopyright.html . For data vendor disclaimers refer to www.ndr.w~endorinfd . Fear of potential state and local government defaults began to subside during March. Y 'ost . . 4 FALt MARKET VIEID- CURVES i@i-sT- The above chart illustrates generic taxable and tax-free municipal security yield levels (as of 3/30/11). .. .. . The Housing Market Is Important To Florida . . Quarterly Datn 3/31/1952 - 12/31/2010 Household Real Estate Ratios 30 29 28 27 26 25 24 23 22 21 Household Real Estate / Household Tangible Assets 76 - 74 72 - 70 - 68 - 66 - - Mean = 68.0% 12/31/2010 = 70.9% Owners' Equity in Household Real Estate / Household Net Worth 22 - Mean = 18.7% 18 - 17 - 16 - 15 - 30 29 28 27 26 25 24 23 22 21 76 14 72 70 68 66 64 62 22 21 20 19 18 17 16 15 14 13 12 aopyright 2011 Ned Davis Research, Inc. Futther distributim prohibited without prior permission. All Rights Reserved. See NDR Disdaimer at www.ndr.wmlwpyright.hbnl . For data vendor disdaimen refer to www.ndr.conVvendorinfd The loss of household net wealth from decreased home values weighs heavily on consumer confidence and spending. , .. The Housing Market Is Important IO Florida . . . 6.4 6.2 6.0 5.8 5.6 5.4 5.2 5.0 4.8 4.6 4.4 4.2 4.0 3.8 3.6 3.4 3.2 3.0 2.8 2.6 2.4 1.9 1.8 1.7 1.6 1.5 1.4 1.3 1.2 1.1 1 .o 0.9 0.8 0.7 1955 1960 1965 1970 1915 1980 1985 1990 1995 2005 EM~A) Residential Spending as a % of Household Net Worth Gopyright 201 1 Ned Davis Research. Inc. Further distribution prohibited without prior permission. All Rights Reserved. See NDR Disclaimer at www.ndr.wm/copyright.html . For data vendor disclaimers refer to www.ndr.com/vendorinfo/ . 1 he Housing Market Is lrnportant lo Florida . . 2009 1807 1626 1463 1316 1184 1065 959 863 776 698 628 565 60 50 40 30 20 10 0 -10 -20 -30 -40 -50 -60 -70 70 60 50 40 30 20 10 0 -10 VI Quarter!v Data 9/30/1990 - 12/31/2010 (Log Scale) Housing Starts vs Demand and Standards For Residential Mortgages Q4 2010 = 538 In thousands Builders are very reluctant to put holes in the ground as long as there is a glut of homes to be sold. Increasing Demand 04 2010 = -8% Decreasing Demand :' . .':,:, ' ,: Net % of Commercial Banks Reporting Increasing Demand for Residential Mortgages NDR Estimates since Q2 2007 Net % of Commercial Banks Tightening Standards for Residential Mortgages At least banks are no longer tightening their mortgage lending standards. Tighter Standards h d Q4 2010 = 8.2% Easier Standards I I I 1 1995 2000 2005 2010 2009 1807 1626 1463 1316 1184 1065 959 863 776 698 628 565 60 50 40 30 20 10 0 -10 -20 -30 -40 -50 -60 -70 70 60 50 40 30 20 10 0 -10 mpyright 201 1 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Reserved. See NDR Disclaimer at www.ndr.comlcopyright.htm1 . For data vendor disclaimers refer to w.ndr.comlvendorinfo/ 1 he Housing Market Is lmportant lo filorida 1 Quarterly Data 3/31/1988 - 12/31/2010 Types of Financing for New Home Purchases (as a % of Total) 'Includes houses reporting other types of financing Conventional Financing' 12/31/2010 = 60.0% 92 - 88 - 84 - 80 - 76 - 72 - 68 - 64- 60 - FHA-Insured Financing 12/31/2010 = 21.5% 27 - 24 - 21 - 18 - 15 - 12 - 9- 6- .... 12/31/2010 = 12.3% ............... ....... VA-Guaranteed Financing. 13 12 11 10 - 9- 8- 7- 6- 5- 4- 3- - ,.. - - . ..... . Cash Financing 12/31/2010 = 6.2% ...... ...... .. .. , ... .. ... . ,. , .. ,. , ................ ..* -. 11 10 - - 9- 8- 7- 6- 5- 4- I I I I I 1990 1995 2000 2005 2010 (FM33E> 92 88 84 80 76 72 68 64 60 27 24 21 18 15 12 9 6 13 12 11 10 9 8 7 6 5 4 3 11 10 9 8 7 6 5 4 \------I &?Copyright 201 1 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rghts Resewed. See NDR Disclaimer at www.ndr.com/copyright.html . For data vendor disclaimers refer to www.ndr.com/vendorinfo/ 16 The Housing Market Is Important To Florida . . . 80 70 60 50 40 30 20 90 80 70 60 50 40 30 20 10 80 70 60 50 40 30 20 60 ' 8 Monthly Data 1/31/1985 - 3/31/2011 NAHBMlells Fargo Housing Market Index and Its Components 3/31/2011 = 17 80 - - 70 - 60 50 40 30 20 - National Association of Home Buildersl Sales Conditions Good Wells Fargo Housing Market Index (HMI) A.& - - - Sales Conditions Poor - 90 80 70 60 IV 50 40 30 20 10 - 80 - 70 - 60 - Current Single Family Home Sales 3/31/2011 = 17 - - - - - - - Expected Sales of Single Family Homes in the Next Six Months 3/31/2011 = 27 - 40 Traffic of Prospective Home Buyers 3/31/2011 = 12 17 See NDR Disdaimer at www.ndr.comlcopyright.hbnl . . For data vendo; disdaimers refer to - www.ndr.mdvendotinfo/ . Home builders remain very cautious about starting new projects. According to a National Association of Realtors@ (NAR) 3/21/2011 press release, sales of existing homes and condominiums in Florida rose in February. In information released by Florida Realtd existing homes sales increased 13% during February with a total of 13,701 homes sold statewide compared to 12,164 homes sold during February 2010. Existing condo sales in Florida increased 29% or 1,560 units during February 201 1 over the same month last year. During February, 17 of Florida's metropolitan statistical areas (MSAs) reported higher existing home sales and 18 MSAS rebrted'higher existing condos sales: February marked the third month in a row that Florida Realtors reported increased year-over-year sales. , ,. . ,. . . . ., ,. .. ,., , . , , , ,.. . . . . . . , . . . . . . .. -. , , . .. ,. ., ,. ,.... . .. , , .. . ,. ,.... . FbtWdta&rb Jrbaovllk Florida's existing home median sales price for February 201 1 was $121,900, a 2% decrease from the same moth last year. The Florida existing condo median sales price for February 201 1 was $77,300. a 14% decrease from February 2010. Foreclosure and other distressed properties sales continue to downwardly distort the median price. 201 159 31 $171,100 S19opoO -10 122 109 12 $152,500 5146,900 4 1.017 843 21 SlM.300 $142.400 -11 Florida Sales Report - February 2U11 Single-Family, Existing Homes I RealtorsolCs MdhlStlkdRiec I I I I I Autaoad. --Bndrr*oll TW 268 239 12 m,Ym S96.m 1 8% 747 19 8137.700 $IW.Mo -11 145 122 19 5151Mo 5167.100 -10 L.tclrd-uima€Ilvm I 284 I 252 I 13 I %3@ I $101,500 1 -18 ~ m~lwuvik-*B.v I 562 I 357 I 57 I $87.700 I 5106.400 I -18 bti&UiI 540 I 445 I 21 I $147,- I $191,100 I -W 0Cll.I 294 I 264 Ill I S7SM)o I S9o.W I -17 I -I3 I 2375 I 2P50 I 16 I $111,100 I $128.100 I =-EZzI Florida Sales Report - February 2011 EXisthgCondominiums I I I Rwbrsrla Mcdh.s.krRk!t 1 ..... , ,. ,. , ,. ... -. - .- ..... ,. -. ... , ,. .. ..... ,.. , , I ., . .. ..... .- . -. , .. - I1n-g iviarket Is Important lo Plorida . . I Monthly Data 12/31/2004 - 3/31/2011 NAHBMlells Fargo Regional Housing Market Indexes I I 90 88 86 84 82 80 78 76 74 72 70 68 66 64 62 - 60 - 58 - 14 50 - 48 - 46 - 44- 42 - 40 - 38 - 36 - 34 - 32 - 30 - 28 - 26 - 24 - 22 - 20 18 16 14 12 10 - - - - - - 8- 6- 4 t Region 3/31/2011 West (-1 17 South (-1 20 Northeast (-1 20 Midwest (-1 12 Builders see little interest among potential buyers. Most builders do not have access to credit, and worry if they will be able to meet a rebound in demand when it occurs. - 90 88 - 86 - 84 - 82 - 80 - 78 - 76 74 - 72 - 70 - 68 - 66 -64 - 62 - 60 - 58 - 56 54 - 52 - 50 - 48 - 46 -44 - 42 - 40 - 38 - - - 36 34 32 30 28 26 24 22 20 18 16 14 12 10 8 6 4 I.."..." .............................................. ..I IMJ S DMJ S D'MJ S DIMJ S D'MJ S DIMJ S DIM ,. m8C) 2005 2006 2001 2008 2009 2010 201 1 Sopyright 201 1 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Reserved. ,. , See NDR Disdaimer at www.ndr.com/copyright.ht,ml . For data vendor disclaimers referto www,ndr.Fmlvendorinfol .. ,. .,.. .. , ,. ,.-.. ..... ..... .. .. ........ , , . , , , , , , , - -, ... . ,.. , The Housing Market Is Important To Florida 320 02/28/11 Building Permits By Florida Metro Areas All data in thousands FLORIDA Cepe CwaCFort Myers FL Deltona-DaytoM Beach-Onnond Beach FL Fort Walton BeachCreshriw-Destin FL Gainesville FL JadaonvilleFL LakeWFL MiamIi-Fo~i LauddaleMiami Beach FL ' Naples-WcolslandFL ' OcalaFL ' OfiandoFL Palm Bay-MelboumaTihrsville FL Panama CiLynn Haven FL ' Pensacda-Feny Pass-Brent FL ' Port St. Lude-Fort Pierce FL Punta Gorda FL SatasoQBradenlon-Venice FL Tallahassee FL Tampa-St. Petemburg-Clearwater FL ' VemBeachFL m YTD YTD YEAR Feb-11 Feb-IO XCHG 2010 Qu -I* 147 4.27 5.59 -24% 30.86 0.15 0.22 -29% 1.18 0.06 0.12 -51% 0.64 0.07 0.04 92% 0.37 0.05 0.07 -37% 0.32 0.40 0.66 -39% 3.38 0.18 0.18 -2% 1.15 0.41 0.52 -21% 3.18 0.13 0.13 1% 0.77 0.04 0.W -32% 0.48 0.61 0.87 -31% 4.18 0.13 0.21 -37% 0.93 0.04 0.03 13% 0.20 0.17 0.30 43% 1.34 0.06 0.07 -13% 0.43 0.05 0.03 32% 0.29 0.22 0.29 -23% 1.70 0.07 0.09 -24% 0.55 0.67 0.67 -1% 4.40 0.04 0.05 -18% 0.31 Source: Bureau of Census. Percent changes are computed from unrounded data. prepared by Ewmnics Department, NAHB. NULWmY I TQlAL YTD rn YTD YTD m YTD YEAR For the two months of 201 1, most of Florida MSAs posted fewer new building permits than last year for the same period. he Tourism Market Is Important To Florida . . . I Calendar Year Visitor Numbers for 2010* Percent of VkltoI.8 Tots1 Most Recent Value Change Total visitors 100.0% January-December 82.6 million 2.1% Air Visitors 51.8% January-December 42.8 million 3.1% NorrAQvi 48.2% January-December 39.8 million 1.1% *preliminary Quarter Four Visitor Numbers for 2010* Vlsltors Total Most Recent Value e Percent of Chang Total Visitors 100.0% October-December 20.8 million 5.1% Air Visitors 52.7% October-December 10.9 million 7.0% Non-Air Visitors 47.3% October-December 9.8 million 3.0% ‘preliminary itTisitor Volume (in mi~ions)’ Q4 20101 20.81 +5.1% PI Car Surcharge (in millions) Dec- 1 q 9.2 +9.5% TD Rental Car Surcharge (in millions) Jan-Dec- 1 4 119.9 +5.9% ed Tax Collections ($ millions) Oct- 1 q 31.2 +9.4% Florida’s tourism industry is expected a great spring break. Increased gasoline prices have the potential to blunt travel to the State. Smith Travel Research 21 . 22 NSA Unemployment Rate by County for January 201 1 12 Month Change in Unemployment as of 1/31/11 a Ir 1 I t. . . f P’ While most Florida counties have high unemployment rates, many of the counties have lower unemployment rates than a year ago. mi 11.4 87 mo 11.4 121 (07 lal 124 118 101 Hl L7 1U 11 U 114 121 Ll 1M l&I 10 11 1 M 1U 82 U M 114 11 7 78 114 io1 m7 102 1M u 124 1U 112 11I 11 1 104 11o 11.4 l(1 85 112 Id 124 153 (01 14 1 lS2 11 9 121 u 14R mo 112 1Zd 127 01 lad iai tin mi I2 11 b Re B.2 12.5 132 10 8 11 5 10 I 12 0 11 7 11 1 168 I1 11 I4 11 e 12 0 MA la0 UI 11 1 11 1 16 12 90 u 12s 12 1 00 12 0 io a ma $3 i .. 113 14l I11 I11 7* 122 *O 127 117 11'1 110 138 It 1 114 130 la0 142 104 124 100 94 IU 124 127 e7 117 oa *a 4 2 Florida Unemployment Rate Through February 2011 .. Florida’s unemployment rate decreased to 11 5% during February. Florida’s unemployment rate still exceeds the 8.9% national rate. The Florida Labor Market. . . r 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0 Number of Unemployed in Florida The number of unemployed workers in Florida decreased 3.06% during February. 4 -8:. ,$ oe *.... . ... .. .. .. 3.C .. . 09 8 4 Through February 2011 ,. , ,. .. , ,. .. ,. .. .. , ,. , .... . ,. .. .. . ,. .... , ,. , ,. Florida Labor Force 9,400,000 . .. .. .. .. .. 9,200,000 . .. .. 9,000,000 8,800,000 8,600,000 .. 8,400,000 '. . . I. 8,200,000 8,000,000 11,111111011,1111 ,,,,,,,,,,,,,,,/,,/,,,((,((,,,, I -Labor Force -Enployed I ased 0.25%. The Florida Labor Market. Florida Metro Unemployment Rates North Port-B randento n-Sarasota 't Lauderdale-Pompano Beach-Deerfield Beach Nest Palm B each-Boca Rat0 n-Bo ynto n Beach Tam pa-St . P etersburg-Clearwater Tallahassee Sebastian-Vero Beach - I -- -I--- Punta Gorda Port St. Lucie-Fort Pierce Pensacola-Ferry Pass-B rent Panama City-Lynn Haven Palm BayM elbourne-Titusville Orlando -Kiss im mee Ocala Naples-M arc0 Island -- I M iami-Fort Lauderdale-M iami Beach I Lakeland-Winter Haven Jacksonville Gainesville Fort Walton Beach-CrestviewDestin 1 I Deltona-Dayto na B each-Ormond Beach - I Dec 2009 I Dec 202) I Jan 2011 I Feb 2011 I I I I Capecoral-Fort Myers 7% 8% 9% 10% 11% 12% 13% 14% 15% During February, most of Florida's metro areas showed decreases in their unemployment rates. Inflation.. 28 3.4 3.3 3.2 3.1 3 .O 2.9 2.8 2.7 2.6 2.5 2.4 2.3 2.2 2.1 2.0 1.9 I .8 1.7 1.6 1.5 1.4 1.3 I .2 1.1 1 .o 0.9 0.8 0.7 0.6 0.5 0.4 0.3 t - - 5-Year Ahead Inflation Expectations 2/28/2011 = 2.9% (-) J IO-Year CPI Inflation Expectations 2/28/2011 = 2.2% (-1 Implied Inflation (IO-Year Treasury Yield (3.6%) minus IO-Year TIPS Yield (1.2%)) 2MW2011 = 2.4% (-1 &urns: ReuiersUnjversiiy of Michigan Surveys of Consumers and Research Department, Federal Reserve Bank of PhiladalphiaC3urvey of Professional Forecastem 3.4 3.3 3.2 3.1 3.0 2.9 2.8 2.7 2.6 2.5 2.4 2.3 2.2 2.1 2.0 1.9 1.8 1.7 - 1.6 1.5 1.4 1.3 1.2 1.1 1.0 - 0.9 - 0.8 - 0.7 - 0.6 0.5 0.4 0.3 - - - - - - - - - 1""'"'""''''~'""1'""1'""1''''' ,,, , I"""""'"'"'""'., ' 2003 2004 2005 2006 2007 2008 2009 2010 201 1 3725A) 1998 1999 ZOO0 2001 2002 @.Copyright 201 1 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Reserved. See NDR Disclaimer at www.ndr.comlcopyright.html . For data vendor disclaimers refer to www.ndr.comlvendorinfo/ . m29 Debt Lomposition.. . . . *. Composition of Domestic Nonfinancial Debt 12/31 /2010 Municipals OVHr (Wnk Loans. ConarmrCndH CP Ob.) Y ConarmrCndH 12/31 /2000 Municipals Numbers may not add to 100% due to mundii wght 2011 Nmi Drr& Re6earch. Inc. Furhr dkthbutkm pr&iMW without prior prmlular. All Rlphtl Rsumed. Sge NDR Dlsdalmw at wm.ndr.mm/mpyrQht.bl . For deh wndu di.dalnmrs mbr lo wm.ndr.cadw&ainfol rest Rate Forecast RETURN BOX SCORES - - 200: 4.88% 10.92% 6.95% 12.16% 7.68% 22.65% 10.8% 18.27% Percent Change 2011 From 2010 Wear-OvePYear) Total UNts 2L, 2011 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Real GDP Indust. Dis.Pers. Personal Non-Res. Cop Treas. Hming Atdoh Net (Cluind) GDPPrice NomGDP Cmmner Pmd. Income ComExp Fkh. Pmfits Treas. Notes10- Unempl Stads LightTmdc Expnts (zwS$) Index (Cur.$) PdceIndcx (TotaD (ZOOS$) (2005s) (2005S) (Cur.$) Bills3-ma Year Rate (Civ.) (MIL) Saks(MIL) (ZOOS$) Top 10 Avg. 3.4% 2.0% 5.2% 2.8% 5.4% 3.0% 3.5% 10.2% 11.3% I 0.4% 3.9% 93% I 0.73 13.5 I -379.1 February Avg. 3.2% 1.4% 4.6% 1.9% 4.4% 2.7% 3.2% 8.8% 7.9% 0.3% 3.6% 9.3% 0.67 13.1 -4332 2008 0.0% 2.2% 22% 3.8% -3.3% 1.7% -03% 0.3% -16.4% I 1.4% 3.7% 5.8% I 0.90 13.2 I -504.1 2010 2.8% 1.0% 3.8% 1.6% 5.8% 1.4% 1.8% 5.6% na I 0.1% 3.2% 9.6% I 0.59 11.6 I -421.8 rercenr uange 2011 From 2010 (YearOverYear) Average rur LO12 1 Om1 UNRi LUlL LUIL 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Real GDP Indust. Dis.Pem Personal NorrRes. Corp. Treas. Housing Auto& Net (Chained) GDPPdce NomGDP Cmmr Prod. Income Com.Exp FkInv. Profits Treas. Notes10- UnempL Stads LightTmdc Exports ... ... I I (ZOOS$) Index (Cur.$) PdceIndex (Total) (2005S) (2005S) (2005S) (Cm.$) B ToplOAvg. 3.8% 2.3% 5.8% 2.7% 5.3% 3.4% 3.5% 10.6% 9.6% I February Avg. 3.3% 1.7% 4.9% 2.0% 4.1% 2.4% 2.9% 8.1% 6.2% I 32 .. .. Pennant Management, Inc. ("PMI") publications are designed for sophisticated investors who are aware of the risk in securities' investments and market forecasting. This analysis is - - based both on technical and fundamental research. Recommendatiins represent the opinion of PMI, supplemented by research and opinions of third party providers whose-work may be paraphrased within. Past performance does not imply nor guarantee profitable results in the future. The information contained herein is derived from multiple sources, which are believed to be reliable, however, they are not necessarily complete and cannot be guaranteed. PMI, its officers, hectors and employees may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. The investment choices and services in this publication are provided as general information only and are not intended to provide investment or other advice. 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Mullins, BA Officer cmullins@pennantmanagement .com 414-359-1045 SALEM TRUST c QYPANY The Safety & Soundness of Investor Assets Qualified Custodians Largely as a response to the Ponzi schemes orchestrated by Bernard Madoff and others that came to light in 2008 and 2009, the Securities and Exchange Commission amended the Custody Rule contained in the Investment Advisers Act of 1940 (the “Act”). Among other features, these amendments, which become effective in 2010, are intended to provide additional safeguards for client funds or securities that are deemed to be in the custody of a Registered Investment Adviser (an “Adviser”). The Act requires all Advisers to protect client funds and securities that are in their custody. The term “in their custody’’ includes being in possession of client funds or securities, having the authority to withdraw funds or securities from a client’s account, and having the ability to act in any capacity that gives the Adviser legal ownership of, or access to, the client funds or securities. The Act goes on to require Advisers who have custody of client funds and securities to maintain such client assets with Qualified Custodians who must hold the client funds or securities in an account either under the client’s name or under the Adviser’s name as agent or trustee for its clients. Qualified Custodians include the types of financial institutions that clients and Advisers customarily turn to for custodial services, including trust companies, banks, savings associations, registered broker-dealers and registered futures commission merchants. Prior to these amendments to the Custody Rule, Advisers generally were required to maintain client funds or securities with a Qualified Custodian whom the Adviser reasonablv believed sent account statement to the clients of the Adviser at least quarterly. The Adviser had the option of sending statements directly to clients if the Adviser agreed to undergo a surprise examination by an independent public accountant on at least an annual basis. Now, under the amended Custody Rule, Advisers with custody of client funds or securities must undergo an annual surprise examination of client assets by an independent public accountant. Further, clients must now receive, no less frequently than quarterly, account statements directly from the Qualified Custodian rather than from the Adviser. It is believed that requiring delivery of account statements directly to the client by Qualified Custodians will provide greater assurance of the integrity of the account statements. In addition, Advisers now have an obligation to perform some level of investigation into the statement processes of the Qualified Custodian when the Adviser relies on the Qualified Custodian to deliver account statements. Receipt of duplicate statements by the Adviser is one example of how this obligation may be satisfied. There are specific exceptions to the statement delivery requirement under the Custody Rule related to pooled investment vehicles. Trustees of a municipal retirement plan must ensure the safety of the plan’s assets. The FPPTA educational curriculum teaches that a system of checks and balances based on a separation of duties and responsibilities coupled with independent reporting is the best structure to ensure the safety and soundness of a plan’s assets. Trustees should understand how the assets of their plan are maintained and controlled. Asking questions such as those that follow would be helpful in the effort to achieve that understanding: Are the plan’s assets controlled in one location? Are there strict separations of duties and accurate reporting on at least a quarterly basis? Who is responsible for reviewing and comparing statements? To whom and how often are the results of the review and comparison of statements reported? Trustees who understand the answers to these questions will be prepared to ensure the safety of their plan’s assets. .._ . . ..,.. ..... ...... .. ............ .. *. .. .. ,-, ,. .. ................ ,. , .- ,. -, .. ,. ........ .. ., .. .. .. ,. .... ............. ,. .-.. .. .. I. .......... .... _.. *. .. ,. -- . . ,. .-- ,. ... .. ... ....... .. -., .. ,.. ........ ,. .. 1 I I- 1 T L r I-A dOj NVld 01 IWII L I-- L A ....... ......... - .. .. .. I I by Bradley K. Rinsem President & CEO, Salem Trust Company 1 r The guardian of your plans'assets is your custodian. .__ Despite the high ethical standards of the majority of reputable investment firms', this last year exposed many grievous investment frauds to an increasingly uneasy public. Bernie Madoff was the year's most prominent sad story, having been accused of commit- ting one of the largest financial frauds of all time. 2008 also saw the conviction of Norman Hsu, who promoted an $80 million hoax. Still under inves- tigation are cases against Tom Petters, who allegedly absconded with over $3.5 billion of investor assets, Arthur Nadel, the Sarasota, Florida based money imanager charged with the pearance of $350 million invested with him, Schrenkler, the Indiana based hedge fund was arrested in northern Florida regarding the whereabouts of over $50 million of investor money, hd Robert Stanford, who is charged with, defrauding investors of over $8 billion by utilizing high yield certificates of deposit held in the Caribbean island nations of Antigua and Barbuda. cases was an independ- ent custodian. 9 .,: ' .= > A similar modus operandi tied together these recent activities. Some money managers paid out money from new investors to old investors, some falsified the returns or recorded nonexistent securities during these schemes. It is nothing new to promise stellar returns to investors. Investment schemes affect investors of all kinds, in all walks of life. The ruses have ranged in degrees of elaborateness, but the large scale losses recently suffered by Madoff's investors included some normally very astute people, many of whom reside here in Florida. Because of recent media exposure of these frauds, many are now learning the role a custodian can play in protecting their invested assets from phantom recordkeeping. In my mind there is no doubt that a custodian can dramatically reduce the risk of loss resulting from deceptive practices. Let us start by reviewing the basics. For our purposes a custodian is an organization defined as separate and independent from a money manager, and segregates the assets of one client from another on its records. Florida statutes recognize the importance of this basic principle and require fire, police and general employee pension funds to use an independent custodian. Not every state has the same mandate. After reading about the conviction and allegations above, I am sure the danger that could occur is perfectly clear to you. A trust company serving in the capacity of custodian also serves as a corporate fiduciary. In this role, the trust company adds another layer of checks and balances which contributes to the highest level of protection for the client. This results in a system where multiple parties discharge specific independent duties that are interdependent in ensur- ing the safety and soundness of the client. Independence and separateness are not the only qualities of a custodian that should be sought out. Accuracy, timeliness, its commitment to investing in technology, safety and soundness are additional qualities you should look for in your custodian. These are qualities a custodian arrives at intentionally, not accidentally. Proactive safeguards, back up systems and the financial well-being of the custodial company all factor as parts of an overall line of defense against fraud, errors or omissions. Not everybody understands the daily tasks charged to a custodian, or the challenges presented by changing technologies and the ever evolving complexities of the investment marketplace. You need objective data on which to base your opinion of a .. .. ,. .. B t G ua rd ia n Continued from page 49 custodian's suitability.While it's never possible to know everything about your financial service providers, I recommend asking your custodian some very comprehensive questions. These questions are not easy to answer,and I think they provide a picture of the requirements for what needs to be in place between the time your investment manager makes a trade and the time when you receive your statement. I will be speaking on the topic of a custodian's safety and soundness at the upcoming FPPTA School in Bonita Springs on October 4-7,2009, but if you would like a copy of my custodial services questionnaire before then I will be happy to share it with you. You can reach me toll-free at 877-382-5268 or e-mail me at brad. rinsem@salem trust.com. 1.- 1 We Learned? By Fred Nesbitt Former Executive Director, NCPERS When our pension plans came under attack, we had to scurry around and play catch-up for we were behind the curve. The opponents came after us in 36 states - starting with California, Alaska, and Colorado. Hard work and a little luck allowed us to win two out of the first three battles, but we realized we needed to be prepared. What did we learn from these attacks? First, we could not sit back and wait for our opponents to attack our plans. We needed to play good offense as well as defense. We needed to be ahead of the curve by ad- vocating for our defined benefit plans with DC add-ons. Second, we had to educate, educate and educate more. Those needing education included trustees, the media, public officials, plan participants and the general public. FPPTA does an excellent job of educating trustees. FPPTA has held town hall meetings across Florida to educate more leaders on the merits of defined benefit plans. There is still much to be done -trustees have to be advocates on behalf of their plans and share their knowledge and information. That doesn't mean issuing an annual report that "no one reads or understands" or passing the buck off to the plan administrator or actuary. Trustees need to be out front taking and advocating the benefits of having a defined benefit pension. Lastly, we have a great story to tell. For over 150 years, public defined benefit plans have operated In conclusion, even though there is no absolute guarantee of protection from a financial fraud, the retention of a well-qualified custodian, investment manager, consultant, actuary and legal counsel and the checks and balances these firms provide will go a long way in deterring wrongdoing. Based on my decades of service to the institutional investor community, I am confident the care in choosing and maintaining a well- qualified team will become one of the most important uses of your time. I Institutional money managers are governed by the U.i Securities and Exchange Commission, and most of them also practice rigorous self-regulation based on codes of ethics that, for instance, can be found in Certified Financial Analyst Institute guidelines. .. .. successfully, providing retirees and survivors guaran- teed benefits. The best part is over 75% of the funding comes from sources other than the taxpayers. The intangible benefit is the recruitment and retention of qualified employees and outstanding government services. We need to talk about our investment and the returns. My Pennsylvania state plan just announced that last year, "SERS' investments earned $5.2 billion dollars!" That's money taxpayers didn't have to contribute. I hope we have learned. The pressure on our plans was reduced when the markets were doing well and funding levels increased. However, the recent downturn in the markets has made our plans bulls' eyes again for attacks. A recent article in the Washington Post talked about the problems public plans are facing as a result of the financial collapse. It was entitled, "Downturn Clobbers Public Pension Funds." The article wasn't too negative; however, the posted comments from readers should scare us all. These comments included. "The time for govern- ment perks such as taxpayer financed pension funds and taxpayer financed health plans are long past." Another reader asked,"Why do public sector employ- ees get pensions to begin with?" And finally, one respondent said, "The concept of a'defined pension'is dead. It is now dog eat dog." Have we learned our lessons from the past attacks? I hope so - otherwise citizen comments like those above will ensure the end of our defined benefit pension plans. THE PENNANT EXPRESS I A QUARTERLY INVESTMENT STRATEGY OUTLOOK December 31,2010 Stocks made an important cyclical low on July 2. Subsequently, the S8P 500 has rallied approximately 24% as of December 31, 2010. As we enter 201 1, bullish forecasts calling for further gains in 201 1 abound. Universal bullishness usually means that at least a near term correction is likely. Lonaer term, after a brief market pullback early in the year, we 1.6 14 2.2 20 1.8 1.6 1.4 11 0.8 0.6 0.4 2 - -. - 5m -480 -440 ShP m 1a.Yrr robl R.bJm sm ~ 4110 12n1Ro10-14m 400- -400 - 360 3m - 310 - -3m Bo- -ua uo- -7.m 200 - -ml - im im - - im im - 80 - -10 40- r- BLl0V.r robl -40 0- 11131m10.24 0% 0 4- -4 - 440- uo- 400- 360 - 310 - 280 uo- ua- - im ~ 110- 40- 0- 40- P~ZBS~EEPPPP~~: e A cyclical rise in marketdriven interest rates appears to be underway. Federal Resetve monetary policy remains very accommodative, but likely to begin to be reigned in by year end. ---- - &WbtdZOllW~.~F~-pd*uW*apapbn Mew w hm-. -*aw-mu-d mu--n*.tm -*- Economic growth and employment will be positive during 2011. However, the persistent headwinds will limit gains. While the manufacturing and industrial sectors are leading the economic turnaround, weak housing values will remain a major drag on - believe the current cyclical rally will likely carry stocks higher over the next quarter. However, we believe the U.S. stock market remains in a secular bear market that will reassert itself in the second half of 201 1. financial institutions and consumers for another year. TEL (414) 359-1044 PENNANT MANAGEMENT, INC , IS A SUBSIDIARY OF US. FIDUCIARY SERVICES, INC., AN EMPLOYEE-OWNED COMPANY www.pennantmanagemen1. com PENNANT MANAGEMENT The Outlook THE STOCK MARKET Many of the themes we wrote about in last quarter’s Pennant Express continue to be relevant and resonate with investors. Stocks made an important cyclical low on July 2, 2010. Subsequently, the S&P 500 has rallied approximately 24% as of December 31 , 201 0. We believe much of the market‘s second half bounce can be attributed directly to an improvement in investor psychology. One could argue that many of the fundamental underpinnings of the economy have not changed dramatically since June, but despair has been replaced by hope. Fears that the economy would experience a double dip recession have now faded to black. What event changed investors’ attitudes and helped spark a move higher in so many different assets? We believe the primary catalyst for the market‘s advance was the Fed’s decision to purchase $600 billion in Treasury securities by June, 2011. By attempting to lower the interest rate investors earn when holding stable, safe investments like Treasuries, the Fed is hoping investors will decide to purchase riskier assets in an attempt to increase the return on their investments. Many economists are skeptical that another round of quantitative easing will have a beneficial impact, but investors voted with their money and bid up riskier assets I such as stocks nevertheless. According to Barron’s, only 21% of mutual funds outpetformed the S&P 500 in 2010. The fourth quarter was a particularly tough one to navigate for most money managers. The stock market was able to shrug off some disappointing employment data and methodically move higher. The relentless nature of the advance did not give investors the luxury of using brief pullbacks as buying opportunities. Thankfully, the decision to maintain a fully invested position in most accounts allowed our clients to capture nearly all the returns posted by the stock market. It is always rewarding when the market moves significantly higher and we are able to capture that move for our clients. D.iryLkata 12/01/1995 - 1/w/2011 S574A) NDR Crowd Sentiment Poll - Transitional Mode Basis ocOpyighl2011 Ned Davis Rsseanh. Im. FuUar dMbution pmMM(al rri(h0Ut prior PeImiESkm. All Whb See NDR Dktaimer fhw.ndr.mmlmpyight.hhr+or data vendor disctzhm refw*.ndr.cankdrh As the new year begins, the stock market is near its highs, and bullish forecasts calling for further gains in 201 1 abound. Bloomberg conducted a poll of the chief market strategists for 13 of the largest banks in the world. All 13 strategists called for the market to advance and finish 2011 higher. The December 17, 2010 USA TODAY front page headline read, “5 Wall Street heavyweights say it’s time to GET BACK INTO STOCKS.” These are merely two examples of the positive stories that are prevalent in the media today. . THE STOCK MARKET, ctd. - ._ .. * . ,:: g ' 1 . .,k When the majority of investors are pessimistic and nervous, it often leads to a buying opportunity. That was certainly the case in the third quarter of 2010, as low expectations set the stage for the powerful global stock market rally that ensued. Unfortunately, we are now dealing with almost the opposite situation-- an environment where nearly everyone is bullish. As the chart on the previous page shows, universal bullishness of this magnitude usually means that at least a near term market correction is likely. We believe that stocks will in fact take a breather and retreat a bit in .. January-J . '. ' . Even though there are compelling reasons to believe the market can make its way higher in 201 1, caution is now warranted over the very near term. In addition to our concern that investors are too optimistic and have become complacent, a new earnings season is just around the corner, and expectations are extremely high. We have written several times before about our belief that companies are eventually going to have to show sales and revenue growth in order to push stocks higher. Thus far, better earnings reports achieved via cost cutting have been enough to appease investors. Nothing says that it cannot happen again, but we think investors are likely to be disappointed this time around if the earnings improvements . are . . .. gained primarily through cost cutting. .*. . +.. ' Our best forecast is that a January pullback in stocks would most likely give way to the resumption of the global cyclical bull market that we have enjoyed since March of 2009. We would not be surprised to see stocks move another 10% higher from their 2010 closing levels. However, we expect the cyclical rally to meet its demise sometime during the second half of 201 1. We believe that a major market correction looms, and we assign a very high probability that it will occur later in 2011. We currently see two potential catalysts that could cause a significant decline: the sovereign debt crisis in Europe and rising interest rates. .'. .. Regarding the European debt crisis, we think the consensus has shifted and now adopts the view that this problem is contained and is solely a European problem. It seems to us that few investors think the crisis will spread and impact countries outside of Europe. Unfortunately, we believe the problem is far from resolved and is likely to spread beyond Europe. We fully expect to see the issue reemerge in 2011 and rattle investor confidence. ... , .. , . ., . , ,.. , - -- .. .. .. ....,' ,I .E:,-..:' ." '... .. . E, _. *. : .. .I* I V S8P 500 Cycle Composite for 201 1 I h 4 64 sx ~ 56 '4 52 50 - 48 - 46 - 44 - 42 40 - 38 36 - 14 - 32 - 30 - - - - - - 2n - 26 - 24 - j6 Significant decline in 2nd 1 ;; \ half2011? - 46 - 41 - 42 ~ 40 - 1x - 16 - 14 - 12 - 10 - 28 - 26 - 24 I0 08 04 I) 2 - 22 - 20 - in ~ 16 - I4 - 12 - IO - I18 - I) 6 - u4 (! 2 - The Outlook THE STOCK MARKET, ctd. The negative effect that rising interest rates could have on the stock market are best summarized by Tim Hayes, Chief Investment Strategist at Ned David Research. “If investors begin to worry about too much growth (inflation) rather than too little growth (deflation), then rising interest rates might threaten to halt the global bull market. Investors will be likely to see rising bond yields less as a positive reflection of economic growth and more as a negative sign of increasing inflation. For the U.S. market, stocks could start to respond negatively if the 10 year Treasury yield climbs above 4%, the rate reached before the market peak in April of 201 0.” As we look ahead to 1Q 2011, our opinion remains that stocks are stuck in a secular bear market that began in 2000. We believe the next few years will continue to see the U.S. economy wrestle with structural unemployment. We also think most consumers will continue to retrench and pay down debt. Although trying to predict what the market will do in the year ahead is a fun exercise, all forecasts must be used with caution. Rather than taking our 2011 forecast as gospel and stubbornly clinging to our thesis, we will stay open minded and flexible, focusing on our trend based models and trading indicators. As investors learned once again in 2010, stocks can, and often will, jump significantly higher even while in the midst of a secular bear market. We try hard not to have too many preconceived notions that would cloud our investment decision making process and cause us to fall out of harmonv with the prevailing market action. 4 321 - 299- n6 251 233 - 218 - 2001 - 186 - 172 - 159 - 146 - 133 - 125 - 115 - - - I Irn c 108 106 lo( 102 100 98 96 94 n 90 88 72 70 68 m m 61 36 E[ M 48 \‘ -84 82 -10 - 78 - 16 - 74 72 -68 -64 - 62 -54 -% - 32 -sa -4a -46 -44 - 42 -40 - 38 - 36 - - -m -m -M -n I ine uutiooK THE ECONOMY The evidence is clear, the economy is growing and that growth should continue throughout 201 1. However, growth will not be as strong as previous recoveries. Recent economic news is promising, indicating that the expansion has moved to a balanced and maybe sustainable stage. For instance, unemployment claims have been in a steady decline since October, job growth has turned positive, consumer spending has perked up, GDP growth remains positive, and manufacturing and industrial activity is leading the recovery’s momentum. The risk for 2011 is the sustainability of this growing improvement in the economy. Our economy remains on government-assisted life support. So far, the Fed has pumped so much liquidity into the economy that some analysts say the Fed has created an illusion of prosperity. Much of this excess liquidity has flowed into the equity markets and into corporate balance sheets. The rise in the market value of equity markets has increased both individual and company confidence, a major objective of the Fed. The Federal Reserve hopes that the economy can continue to grow itself out of its problems. While we are optimistic that the recovery should continue to broaden into 201 1, we are realistic that the economy still battles the same headwinds faced during 2010. These headwinds include a high unemployment rate, a weak housing market, weak state and local governments, and relatively tight bank credit. A new headwind is beginning to blow. We cannot forget the recent rise in oil prices above $90 a barrel and the negative affect on consumer spending. These headwinds work together to limit growth. For instance, the considerable wealth destruction from the housing meltdown has worked through the economy in a number of ways. The most obvious has been through the standard wealth effect. Consumers reduce spending in response to a negative wealth shock. Lower home values feeds through the credit channel as impaired home collateral exacerbates the tightness in the credit market and makes it more difficult to bomw. This, in turn, feeds back into the economy through lower spending and lower investment, both in capital and labor. The charts to the right highlight some of the current characteristics of the prolonged weak employment market. The average worker has been out of work an average of 22.4 weeks. One in six workers are under-employed, that is unemployed or working part-time and wanting to work full-time. The chart on top of the next page tells an important story. The Beveridge Curve tracks the relationship between jobs listings against the unemployment rate. Normally, jobs -- yment rate increases with a slowing economy. ,. .. - -., ;*!, ....- ,.. , I *. .. .. .. .. .. li ,.;-.,.‘: ,...,<. ,.-... , - ..: r ..! L.. / /! of- CMh Lbx F- R* d M.rpMI- Wm I2r3lrMlO=lE? 1 in 6 underemployed or unemployed 4.0 Jobs listings increase and the unemployment rate decreases when the economy expands. As we pointed out in the previous Pennant Express, that relationship broke down several quarters ago. The top right chart shows the current Beveridge fi Curve Jobs listings have been increasing for several quarters but the # unemployment rate has been stubbornly stable. Some believe that the increase in # 2,5 new job postings is a sign that the job environment is improving. However, the lag 2 time is too long which leads others to believe that those unemployed do not have 2.0 the skills needed to fulfill the requirements needed for the available jobs. 3.5 3.0 ..... ,. .. Increasing want ads but no meaningful drop in the Recenldae 1.5 ! 3.5 4.5 5.5 6.5 7.5 85 95 10.5' Un*npioyrn*nt Rat. Lackluster job formation is a formable headwind as businesses have been slow to hire workers. Whether large and small businesses are worried about the future or ~Havr~.wypn.LmGuReudl are not willing to take on added risk, the economy suffers from low new job E 1 Cmd.M'F"UM 137 92 70 formation. The inability or unwillingness of small businesses to hire during the past two years has been commonly cited as the main reason for the jobless recovery. This notion is not unreasonable as about 45% of the iobs are in establishments with 1; 1 ; : :: : Increasing oil prices act as an indirect c on consumers resulting in decreased consumer spending fewer than 50 employees. New research suggests that the employment problem is not small business hiring that matters most to a labor recovery, but rather, it is new business formation. According to a Bank of America report, start-ups account for about 20% of new jobs. In the early recovery stage, new start-ups account for as much as 40% of new job growth. During the current recovery, new business formation has been painfully slow. The slow pace of new business formation can be partly explained by the headwind of tight credit standards. While large business can tap the capital markets for financing, small and new businesses are highly dependent on financing from banks, which have tightened their credit standards over the past few years. Reports suggest that tightening has ceased and that some banks have started to loosen their credit standards. Nonetheless, lenders are most willing to extend credit to the best borrowers, those with a history of revenue growth ... and a high likelihood of continued profitability. ... Now tie this back to the weak housing market headwind. Small business owners often use their home as collateral against loans. A recent study from the Cleveland Fed looked at the link between home prices and small business finance. Based on a variety of surveys from the National Federal Independent Business, Small Business Association, and others, the Fed found that more than one fifth of small business Owners borrow against the value of their home to obtain financing. With home prices down more than 30% from the peak and mortgage standards tight, particularly for home equity loans or second liens, this method of financing is virtually shut down. So without sufficient collateral for a loan to start up a new business, new business formations suffer and impair the job recovery. In addition, . 36 36 - 31 - 27 - 21 - 18 1s - 13 - 12 - 24- -24 - 24 10 - 16 - I1 - I- 4. 0- 4- 8- -11 -I6 - -3 - -u - -la - -32 . -* - - - .... -- - , ,.. ........... .... ........... ,. . ,. ,. .. ...... ...... ,. - . . , , , , , " .. , ,. .. . . , . , , . , -, ,. .. ... ,. -- , .. ,. - ,. ... . c. . : *.:. \. . ' The Oiitlnnl start-ups are more prone to borrow from small banks, which have been slower to recover than the larger commercial banks. Fortunately, credit conditions have started to loosen modestly over the past few months. However, the demand for loans continues to be weak. The New York Fed received only some or none of the credit requested. In addition, there was a difference depending on the type of credit desired. The denial rate for a business found that 59% of small business owners in their survey had applied for credit during the first half of 2010. The survey found that more than three quarters loan was 69%. The denial rate for a new business line of credit was 63%. But, the denial rate was only 30% for the financing of a vehicle or equipment since there is did not make it more likely to receive new credit. Many of the respondents stated that they did not apply for credit because they did not expect they would qualify in hard collateral behind the loan. The survey also found that previous relationships I Banking data prior to 3/31/2010 adjusted by NDR to reflect FAS166 and FAS167 changes. +NmbVIIDr-OOmO r4m*~rol-wm~~ 8g8888888800 sf: mmmmmmmmm r4r4r4mmr4mrir4r4mr4 this environment. Gerall, the survey showed that the decline in credit is mostly al(Bo,,o) function of weakened applicant quality and perceptions of limited credit availability, rather than a lack of loan demand. This contrasts with the Senior Loan Officer Survey, which shows demand for credit remained weak. Without free-flowing credit, new businesses and jobs cannot be created. Credit availability will improve during 201 1 as home price declines moderate. The vicious cycle between housing, the credit market and the labor market, may be slowly turning upward. We can continue to expect improving but lackluster job recovery this year. The pace of new job growth will increase later in the year as home values stabilize and banks lend more. However, more time is needed to recover the jobs lost during the recession. The Fed and Treasury have managed the recovery by pumping liquidity into the economy. As mentioned earlier, the positive effects are a firming stock market and increased consumer and business confidence. Now is the time to plan for the consequences of a falling dollar and increased inflation. While the inflation backdrop is currently weak, the cumulative effects of a weak dollar policy and excess liquidity will eventually produce unwanted inflation. The headline inflation news may seem under control, but the inflation rate for the things we actually buy is running more than 5% annually. 3Y 36 36 Manufacturing activity is solid. *cOrn(yCo"Eadr. Nobel Prize Winner Paul Krugman shared some of his economic wisdom in a ~ -M 58 - 56 -54 52 -M -48 -46 -44 - 42 38 1SVR.pa.m- 38 12/31rm0(0-57 I INW - January 2, 2011 NEW YORKTIMES article. He wrote, "Even though we may : 1 finally have stopped digging, we're still near the bottom of a very deep hole". His i: : article went on to suggest that the markets may be overreacting to the recent good 1 economic news. We feel the worst is over, but the economy has hurdles to 1 overcome before economic growth becomes more self-sustaining. Growth will be - sovo. ,-~-- positive but uneven over the next year. 4a *dtY - -40 - - WII) im im zcca mi aun mi zm am m am mol ma) mo The Outlook a BONDE THE BOND MARKET The fixed-income markets ended 2010 on a down note as prices, which move inversely to yields, fell to multi-month lows as market participants became more optimistic about U.S. economic growth in the new year. Many economists have raised their economic forecasts for 201 1, believing that the Federal Reserve's easy monetary policy and the tax cut extensions approved by the government last month are likely to deliver a double boost to the economic recovery. U.S. Treasury and agency securities were the worst performing sectors within the bond market in the last few months of the year as investors parted with low-risk investments, opting instead for riskier assets. Higher interest rates weighed heavily upon total returns across all bond market sectors, but higher-risk spread products generally outperformed Treasuries. Credit market yields moved materially lower throughout most of the first three quarters of 2010, with low-risk Treasuries leading the way, in response to uncertainty about the sustainability of the economic recovery, the sovereign debt crisis in Europe, and a very expansionary Fed monetary policy. However, yields reversed that course, and proceeded to jump sharply in the fourth quarter as the aforementioned concerns diminished and expectations have mounted that the Fed will not need to provide further monetary accommodation after the current round of Quantitative Easing and its balance sheet expansion ends in June, 2011 (see Federal Reserve Policy section). The Fed is currently engaged in a $600 billion open-market bond purchase program, a form of quantitative easing, which has been nicknamed QE2. One of its objectives was to artificially and further suppress interest rates in an effort to increase spending and investment. It is interesting to note that bond yields declined in anticipation of the initiation of this program, bottomed within days of its announcement, and have since risen sharply. It was a classic example of buying on the rumor and selling on the news. Yields had overshot to the downside when the ten-year note fell to 2.33% in October. The difference between the fair value yield on the ten-year note (below right) and its actual yield had reached an unsustainably high level. The recent rise in yields have brought actual yields more back in line with their fair value levels. So, in one sense, the rise in yields has simply normalized them. This is one reason why we do not believe that significantly higher yields are imminent within the very near term. Also, bond market sentiment (top right, lower clip) is currently suggestive of an oversold market. We, therefore, believe that yields are likely to remain within recent ranges in the very near term, but that they will trend higher throughout the year. 135 L 124 ~ 114 - 1M - 97- 89 ~ 82 - 58 - . . . . . . , .. I - a,! 1.1 1.1 0.; 9.l 1.' 7.) 7. 6.. 1.1 1.: 4.' 4: 3.1 3.8 3 2.1 2: - .. -- The Outlook 1 .. THE BOND MARKET, CTD. Interestingly, the yields on both the two and ten-year Treasury notes fell by 54 basis points in 2010, resulting in no change in the slope of the benchmark yield curve. This apparent stability, however, masks the considerable yield volatility that occurred throughout the year. For example, the yield on the benchmark ten-year note began the year at 3.84%, fell to 2.33% in October, and then ros8 to 3.56% in mid December. The rise in yields on bonds from the lows in October to the highs in mid December caused their negative total return for that period of time to rank among the worst five such periods within the past 30 years. Risk premiums, or yield spreads, within the bond market (top right) remain low. Nonetheless, investors' appetites for risk and hunger for yield are likely to cause them to narrow further within the near term. However, a renewed flight to quality could occur at any time, which would favor Treasuries. We, therefore, favor a well diversified posture within the fixed-income space. .. <. . .. .. .. ,. ..' i. , .. -. .. I. We expect yield volatility to continue throughout 201 1, but for yields to trend higher throughout the year after a period of stability within the very near term. Both investors and policy-makers are becoming increasingly persuaded that the economic revival is gathering pace and that the day of diminished Fed monetary accommodation is drawing nearer. We are further of the opinion that the Fed will begin to raise its short-term interest rate targets in the fourth quarter of this year, or early in 2012. Nonetheless, stresses within the European debt markets, diminished fiscal stimulus in the U.S. later this year, low levels of inflation, a downward correction in the stock market, and the potential for slower than expected economic growth both domestically and globally are dynamics that could serve to mitigate increases in interest rates, and at times, push them lower. The slope of the yield curve (below right) remains historically very steep. We expect a bear flattening of the yield curve, in which short-term interest rates rise by more than longer-term rates, to be the next major move in the debt markets as a Fed tightening cycle becomes more certain. In view of all of the above, we continue to advise that bond investors continue to shorten the overall duration of their bond holdings, and to hold greater amounts of cash and cash equivalents in anticipation of rising interest rate levels in the years ahead. Investors who poured into bond funds last year are likely to be disappointed with the total returns that they realize in the nextfew years,, 4.50 - 4.40 - 4.30 - 4.10 - 4.00 - 3.90 - 3.80 - 3.70 - 3.60 - 1.50 - 3.40 - 3.M . 3.10 - 3.00 - 1.90 - 1.80 - 170 - 160 - l.m - 2.40 - 2.30 - 2.20 - 2.10 - 200 - 1.90 - 1.80 - 1.70 - 1.60 - 1.54 - 1.40 - I30 - I10 - 1.m - 0.90 - 080 . 0.70 - 0.60 - 0.50 - 0.40 - 0.30 - om - 0.10 - 4m - 3.20 - i.m - ve - current. / IWO m 600 IWO 600 800 Yn-ns A S 0 N D I P HA U I I A S 0 ND 'I 1 A U I I A S 0 N 0 'I PM AH I I A ION D 'I 2010 mil 2.m Xl lonths & 1 Ye "r) a%m 1NBa~Rr4hhm--~-- Ym- -'I.M - 420 . 4.40 ~ 43 - 4.10 - 400 - 3.90 . 3.80 . 3.70 . 1.m . 3.50 . 3.40 ~ 33 - 3M 3 10 - 300 . 2.90 . 2.80 ~ 2.70 . 2.50 ~ 2.40 - 2.M - 2.20 - 2.10 . 1.90 . 1.80 - 1.10 . l.m . 1.40 . 1.M - 1.10 - 1.00 - 0.90 - . 2.m . 2.00 - 160 ~ 1.m - 0.80 . 0.m - 0.60 - 0.w . 0.40 - 0.30 . 0.10 . 0.m - - .. . FEDERAL RESERVE POLICY .. . As was widely expected, the Federal Reserve’s policy-setting Open Market Committee announced on November 3 that it was engaging in a new program of quantitative easing, nicknamed QE2. By purchasing securities in the open market, the Fed is attempting to maintain interest rates at artificially low levels and to push investors and other entities into taking more risk. The Fed hopes that by further injecting massive amounts of liquidity into the financial system that banks will use their reserves to make more loans, large companies will deploy their record cash balances to purchase equipment and hire more employees, asset prices will rise promoting a kind of wealth effect, and investors will move out on the risk spectrum. In utilizing unconventional tools in order to energize the economy, the Fed is in effect in an experimentation mode, not certain that they will achieve the intended objectives, and cognizant that any benefits may come with costs, risks, and unintended consequences. In fact, an already unintended consequence is that market driven interest rates have risen, not fallen, since the Fed embarked upon their new securities purchase program. The more the Fed pumps liquidity into the US. system, the greater the negative spillover to other countries in terms of large capital flows, asset bubbles, and inflationary pressures. Logically, unless this massive expansion of the Fed’s balance sheet (top, right) is unwound in a timely fashion, the U.S dollar will materially devalue and rampant inflation will ensue. History teaches us that countries cannot monetarily print their way to prosperity. With the already huge federal debt, no appetite in Washington for more fiscal stimulus, and short-term interest rates already near 0%, short of outright debt monetization, the Fed has virtually exhausted all policy options other than asset purchases. With unemployment high, inflation low, and a large output gap in terms of actual versus potential gms domestic product, the Fed, therefore, is of the belief that it can, and has no choice, but to accept the aforementioned risks. US. gross domestic product is expected to grow at an annualized rate of 3-3 %% in 201 1, which should be sufficient to prevent outright price deflation, but not sufficient to materially reduce the rate of unemployment. Expectations of Fed interest rate hikes have begun to creep into the federal funds and Eurodollar futures markets. The Eurodollar futures market one-year out (below, right) is currently forecasting a hike in the federal funds rate to 0.50% from the current level of 0-0.25%. Forecasters are similarly and generally not expecting any increase in the federal funds rate until the first quarter of 2012, and for the rate to be at about 1.50% at the end of 2012. The slope of the yield curve (see bond section) remains historically very steep, If these fed funds rate expectations are realized, the yield curve can be expected to flatten very dramatically at that time The Fed has made it very, very clear that they do not intend to raise interest rates until we experience material and sustained job growth. Secondly, the Fed is not currently very popular with either political party in Washington. So, any Fed rate hikes are likely to be delinquent by historical standards. Federal Reserve Bank Credit mI..loll-.o.D. ~”rr) Sscufitk Held By The Federal Ressrve Fad Funds Rata FwrUuarter Advanced F” * I .--.. ,... ,.... ..... - , ,.. , ,.. . , ,. . , , , .. . . . . . . . . . . . . 11 - Rates, Returns and Forecasts Courtesy o/Bhre Chip FbtoneiaIForecasls (OUOUII) Interest Rate Forecast I Comm. Paper, 1-month C Bill, 3-mOr 0.3% 0.5% 0.7% 1.1% I I T-Bill, 6-month C 0.3% 0.5% 0.8% 1.1% I I T-Note, 2 year C 1.2% 1.5% 1.8% I I T-Note, 10 year ? 3.7% 3.9% 4.1% I rporate AAA Bond E orate Baa Bond The unwisaom OT wowas: uomg IO Exrremes ~y Lass K. punsrein There's little wisdom in crowds - and not many knowledgeable individuals, either. In many cases, people suffer from a crippled epistemology, in the sense that they know very few things, and what they know is wrong. This wrong headedness just gets worse when people put their heads together. Like minded folk tend to aggregate into groups, causing their views to grow more extreme. This is where rabid diffo heads take hold and with it very bad things can happen. This group polarization helps explain fundamentalist terrorism, Enron and the Bay of Pigs. When this sets in even direct appeals to mason can be a waste of time. In what is an especially disturbing finding, people's false beliefs can actually be strengthened when they are shown the emr of their ways. Extreme view of groups is not all bad as long as there is an opposing force; puffing people with humility, curiosity and openness in power limifs the damage of extremist groups while promoting change that would probably not occur without the group. Extremism will enrich society's argument pool and thus promote sensible solutions; when groups are left to their own devices unchecked is where the problems sfart. Comment: Now that the stock market is up two years in a row, the average investor is getting Bullish. 72 69 66- 63 60- 57 54 51 48 45 42 39 36 Daily Data 12/01/1995 - 12/28/2010 - - 72 - - 69 -66 - - 63 -60 - - 57 - - 54 - - 51 - - 48 - - 45 - - 42 - - 39 - - 36 u 12 wat~ on w~W momin s) 1 1560 1 1560 1500 1440 1380 1320 1260 I200 1140 1080 1020 I P' 1. 4 1020 75 1996 1997 1998 1999 ZOO0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 75 7 immm = 71.8 75 Extreme Opbmlsm (Beansh) 33 33.5 33.9 33 1 30.9 Extreme Pessimism (Bullish) SSIIA) NDR Crowd Sentiment Poll -- Transitional Mode Basis etopylght2010 Ned Davis Research, Inc. Furtherdbtriburion prohibited withwt prbr permiasion. All Rights Reserved. Greed is good when fear is high. Fear is good when greed is high. Similar to many BulVBear cycles in the past, individual investors sold all of their stock at what turned out to be the absolute low in share prices in March of 2009. Now that the market has rallied significantly, money is now flowing back into stock funds. This equity flow of funds will probably last as long as it takes for most to become significantly more invested in stocks than they are now currently. In fact this retail flow of funds is exactly what moves stock markets to their next cyclical peak. At that point the fuel that drives the stock market automobile runs out. 14 Pennant Management, Inc. ("PMI") publications are designed for sophsticated investors who are aware of the risk in securities' investments and market forecasting. This analysis is based both on technical and fundamental research. Recommendations represent the opinion of PMI, supplemented by research and opinions of third party providers whose work may be paraphrased within. Past performance does not imply nor guarantee profitable results in the future. The information contained herein is derived from multiple sources, which are believed to be reliable, however, they are not necessarily complete and cannot be guaranteed. PMI, its officers, directors and employees may at times have positions in the securities referred to and may make purchases or sales of these securities whde publications are in circulation. The investment choices and services in this publication are provided as general information only and are not intended to provide investment or other advice. Under no circumstances is the information contained herein to be used or considered as an offer to sell or a solicitation of an offer to buy a particular investment. Certain names, words, titles, phrases, logos, icons, graphics or designs in this publication may constitute trade names, registered or unregistered trademarks or service marks of PMI and its affiliates, or of third parties used under license or with permission. 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IN NO EVENT WILL PMI OR ITS AFFILIATES BE LIABLE FOR ANY DAMAGES, INCLUDING WITHOUT LIMITATION DIRECT OR INDIRECT, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES, LOSSES OR EXPENSES ARISING IN CONNECTION WITH THIS PUBLICATION OR USE THEREOF BY ANY PARTY OR IN CONNECTION WITH ANY ERROR OR OMISSION. Michael Welgat, BA, JD Chief Executive Oflcer, President US. Fiduciary Services, Inc. Mark A. Elste, BBA, MBA, CFA President, Chief Executive Oflcer Pennant Management, Inc. Ja;v B. Kaun, BS, MA. MBA. CPA Executive Vice President, Pennant Management. Inc . Gregov R. Beard BA. JD Senior Vice President John P. Culhane, BS, MS, MBA, CFA Senior Vice President Christopher J. Weber, BA Senior Vice President David W. Trotter, BA Assistant Vice President James Habanek, BBA, MBA, CFA Senior Vice President Pamela C. 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Institutional Retirement and Trust Presented by: Patrick Laratta Karl Hutchinson Sales Director 813.240.62 14 561.795.9934 patrick. la ra tta @ we1 lsfa rqo .corn Re I at i o n s h i p M a nag e r ka rl . hu tchi nson@ we1 lsfa rcjo.com 2 ‘argo & ( ierica’s gre :,I reputation for 1 J a S ornpany t corn pa nies trength and stabi T kgulatory oversight - OCC, FED, DOL, SEC 1 One of the largest US. bank holding compa 1 Fully diversified financial services company commercial and retail clients E!. I . 11,000 locatiork and the Internet (wellsfargo.com) in all 50 states and internationally I I . Assets of $1.4 trillion lity 1 L lnies - Our earnings diversity* Coiiiniunity Banking.. ......................... 320. Investments & Insurance. ...................... 15”. Wholesale Bar~~ng/Conir.riercial Real Estate. .... g”., a Consumer Finance. ............................. Ei-., e Home Mortgaye/Honie Equity. ................ 19’’. e Specialized Lending** ......................... lg*>. Ir 3 ." .Wells I Fargo & Company mT host extensive banking network in the U.S. -1 e * Wells Fargo retail banking stores - 3,339 Wachovia retail banking stores - 3,314 Total combined retail banking stores - 6,653 Source: SNL Financial, 09/30/08 4 i' Investing in growth 2000 BPS&M ActuariaI/benefits consulting firm 2004 Strong Milwaukee, Com plia nce, actua ria I, consulting, and ERISA Indianapolis, legal staff Chicago New York, Asset ma nag em en t I LA 2008 Wachovia Bank 2004 PFPC - Alliance 2005 SouthTrust 2006 Ameriprise 2004 PFPC - ASP I 12004 2002 JPMorgan Chase's institutional trust business: Texas, New York Custody, asset management Harris Bank's retirement plan services portfolio 2009 Comerica Bank's DC recordkeeping business Custody, asset 2006 LaSalle Bank's management employee benefit trust business Custody, asset management Your team A L II II c3 1 Establishes '.' procedures tailored to meet your specific needs I I Pdlrn Beach Garden's Police Officer's 7 Pension Fund [I I donsu I ta n t Hanc#ts day-to-day activities, imludlng all cash movements, disbursements, inquiries, and report setup. Coordinates all information flow with Investment ~~, and Consultant. First bine contact for any questions, issues, or special requests. Karl Hutchinson Re I at ions h i p M a nag e r 1 High level point of contact for account servicing and meetings 1 Provides consultative ideas for streamlining account administration based on experience with pension plans Accountant Investment Manager Rep resen ta tive Handles reporting related Works directly with your activities including report investment managers to issuance, daily data audits, ensure proper processing asset manager of trades, income reconciliation, custom $. k;,-, collection, and corporate reporting. Works directlt with plan auditors and A,: i proactive pricing on alternative assets. , "- Online Products Team Provides training for all on line tools and a 1-800 number for all day-to-day questions. Wells Fargo internal resources Sewice Team - Relationship Managers . More than 300 relationship managers in over 60 tions around the country 15 years experience Wells Fargo Daily Service Team . *mice coordinator and dedicated accountant for [prospect name] are located in Minneapolis . Sit side by side with operational partners for immediate issue resolution with top level service Wndards #ark with client to develop efficient ways to operate, quch as repetitive wire codes, pre-designed letters 1 trade and cash movements, blanket authorization tters for funding of capital calls; proactive solutions f r dealing with day to day issues tlrnely and accurate real-time reporting . 5 se online product, EO, to deliver to [client name] Legal Staff Internal staff of four attorneys supporting Institutional Retirement and Trust clients . Compliance and risk staff to review all procedures aind adhere to strict compliance standards. I Wells Fargo Strategic Relationship Management SM Monitor progress and report Conduct risk/ n eed s assessment Each step is supported by consultative tools Establish goals and measures 8 Consultative tools I Commercial Electronic Office@ (CEO @) I . Trust Portfolio . Trust Information . Retirement Plan Reporting De I i ve ry Pay men ts How do we differentiate ourselves? 8 8 8 8 8 8 Dedicated service team Fully understand our customers’ needs Tailor our products and services to meet those needs Service team specializes in relationships like [prospect name] Use best in class technology Offer consultative ideas to help customers be successful Use customer feedback to reinvest in our business 10 Trust and custody solutions A broad scope of services to help meet your needs A A 9 Mu I ti -currency reporting Global custody services Foreign exchange A A S pecia I izec Performance measurement reporting borting Analytics and attribution tools A r 1 A 1 Custodysewices = Trustee/Fiduciary Financial statements Benefit payments A r A pre trust and 1 A Tax reporting = Cashsweep e Wells Fargo banking services Commercial Electronic Office (CEO) L- L, custody sen A L Audited statement process All transactions are reviewed for reasonableness All security pricing is reviewed for completeness as well as reasonability to the prior month Ending market value and total return for the period are reconciled to each asset manager's portfolio reporting Adjustments for corrections and reconciling issues are input into the system This process is repeated for every customer account and roll-up Reports are generated and made available in hard copy and electronic formats Trust Portfolio Reporting (TPR) CI ien t experience 8 8 8 m 8 8 View, print, or download over 50 pre-formatted graphical and tabular reports Create and Save Ad Hoc Reports My Reports generates frequently used reports in just two clicks Available in PDF, HTML, Excel, CSV Create and Save Account Groups Investment Performance, Ana lytics, Mu Iti-Cu rrency Re port i n g , Fi n a n c i a I An a I y s i s Reports rn EQUITIES H CASH EQUIVALENTS BONDS a NOTES Asset Allocation by Major Asset Group Trust Information Delivery (TID) Client experience w Customer receives emai notification of each new w w y deliver *. View, print, or archive information Convenient search and filter options Accumulates up to 7 years history Several report options II ',' I 14 mm~mummmmmmmmmmm petitive advantages Working together to drive success ’ Financial strength and stability of Wells Fargo ensures resources and commitment necessary to be a long-term player trategic Relationship Management delivers “high touch” service designed to r needs - we are a relationship bank a difference Senior management commitment to the continued growth of Institutional Retirement and Strength that comes from dedicated people and experienced service team #l commitment: anticipating and meeting your needs will benefit you ommitment and consultative expertise has proven history of benefiting our h that delivers quality service 15 Questions? 16 Exhibits 17 U 9" P cb E' P z; F E % 9 P 3 Q b P 5' L 5 2 2 5' a 2 3 a Y