HomeMy WebLinkAboutAgenda Police Pension 012612Agenda
City of Palm Beach Gardens Po /ice Officers'
Pension Fund
MEETING OF JANUARY 26, 2012
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
• Brad Seidensticker, Trustee
• Wayne Sidey, Trustee
3. Discussion with City Regarding the Collective Bargaining Agreement Changes to
the Pension Plan & the Chapter 185 Money
4. Presentation of the September 30, 2011 Actuarial Valuation Report - GRS (Steve
Palmquist)
5. Investment Manager Report - ICC Capital (Steve Stack)
6. Investment Consultant Report - Thistle Asset Consulting (John McCann)
• Revised IPG to include the American Realty Advisors Real Estate Fund
7. Attorney Report - Law Offices of Perry & Jensen (Bonni Jensen)
• Memo - Palm Beach County Ethics Opinion
• Disability Presumption Task Force Report
• Email from American Realty Advisors Regarding their Appraisal Process
8. Administrator Report - Resource Centers (Audrey Ross)
• 2012 Fiduciary Insurance Renewal Quote
• Salem Trust Authorized Signors Form to be Updated
9. Approval of Minutes
• October 20, 2011 Regular Meeting
• December 8, 2011 Special Meeting
10. Disbursements
11. Benefit Approvals
12. Other Business
• City's Pension Proposal to PBA
• Division of Retirements Response Regarding City's Proposal
13. Public Comments
14. Adjourn
Next Meetina Date:
Thursday April 19, 2012 @ 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.
PALM BEACH GARDENS POLICE PENSION FUND
BOARD OF TRUSTEES
COMBINED INVESTMENT POLICY STATEMENT
FOR ICC CAPITAL MANAGEMENT, AMERICAN REALTY ADVISORS &
RHUMBLINE GLOBAL ADVISORS
Amended January 19, 2012
I. PURPOSE OF INVESTMENT POLICY STATEMENT
The Pension Board Trustees maintain that an important determinant of future investment returns is the
expression and periodic review of the Fund's investment objectives. To that end, the Trustees have
adopted this statement of Investment Policy.
In fulfilling their fiduciary responsibility, the Trustees recognize that the retirement system is an essential
vehicle for providing income benefits to retired participants or their beneficiaries. The Board also
recognizes that the obligations of the Fund are long -term and that investment policy should be made with
a view toward performance and return over a number of years. The general investment objective, then, is
to obtain a reasonable total rate of return — defined as interest and dividend income plus realized and
unrealized capital gains or losses — commensurate with the Prudent Investor Rule and any other
applicable statute or requirement.
A reasonably consistent and adequate return, protection of the assets against the inroads of inflation and
safety of the assets are paramount. However, the volatility of interest rates and securities markets make it
necessary to judge results within the context of several years rather than over short periods of one or two
years or less. Performance will be measured quarterly.
II. INVESTMENT PERFORMANCE OBJECTIVES —QUARTERLY EVALUATION MECHANISMS
The below listed performance measures will be used as objective criteria for evaluating effectiveness of
the Investment Managers:
A. Total Return of the Combined Managers:
1. The performance of the total fund will be measured each quarter for rolling three and five year
periods. These periods are considered sufficient to accommodate the different market cycles
commonly experienced with investments. The return of this portfolio is expected to exceed the
return of a portfolio comprising:
Since Inception (3/31/92) until 11/30/95 —
25% S &P500, 60% Barclays Capital Aggregate Bond (BCAB), and
15% Citigroup Treasury Bill — 3 month (TBill);
From 12/1/95 until 11/30/96 —
30% S &P500, 60% BCAB and 10% TBill;
January 19, 2012
From 12/1/96 until 11/30/97 —
40% S &P500, 50% BCAB, and 10% TBill;
From 12/1/97 until 12/31/98 —
60% S &P500 and 40% BCAB;
From 1/1/99 until 6/30/00 —
30% Russell 1000 Growth, 30% Russell 1000 Value, and 40% BCAB;
From 7/01/2000 until 12/31/2002 the combined performance is expected to exceed the
return of a portfolio comprising:
60% S &P500 and 40% BCAB.
From 01/01/2003 until 12/31/2003 the combined performance is expected to exceed the
return of a portfolio comprising:
50% S &P500, 10% S &P MidCap 400 and 40% BCAB.
From 01/01/2004 until 09/30/2006 onwards the combined performance is expected to
exceed the return of a portfolio comprising:
40% S &P500, 10% S &P MidCap 400, 10% S &P SmallCap 600 and 40% BCAB.
From 10/01/2006 until 09/30/2007 the combined performance is expected to exceed the
return of a portfolio comprising:
35% S &P500, 10% S &P MidCap 400, 10% S &P SmallCap 600, 5% MSCI EAFE and
40% BCAB.
From 10/01/2007 until 9/30/2008 the combined performance is expected to exceed the
return of a portfolio comprising:
25% S &P500, 10% S &P MidCap 400, 10% S &P SmallCap 600, 10% Russell 1000
Growth, 5% MSCI EAFE and 40% BCAB.
From 10/01/2008 onwards the combined performance is expected to exceed the return of a
portfolio comprising:
25% S &P500, 10% S &P MidCap 400, 10% S &P SmallCap 600, 10% Russell 1000
Growth, 10% MSCI EAFE and 35% BCAB.
From 10/01/2010 onwards the combined performance is expected to exceed the return of a
portfolio comprising:
25% S &P500, 10% S &P MidCap 400, 10% S &P SmallCap 600, 10% Russell 1000
Growth, 10% MSCI EAFE, 4% Citi Non -US $ Bond Index and 31% BCAB.
From 01/01/2011 onwards the combined performance is expected to exceed the return of a
portfolio comprising:
25% S &P500, 10% S &P MidCap 400, 10% S &P SmallCap 600, 10% Russell 1000
Growth, 10% MSCI EAFE, 8% Citi Non -US $ Bond Index and 27% BCAB.
January 19, 2012 2
From 4/1/2012 onwards the combined performance is expected to exceed the return
of a portfolio comprising:
25% S &P500, 10% S &P MidCap 400, 10% S &P SmallCap 600, 10% Russell 1000
Growth, 10% MSCI EAFE, 2% NCREIF, 8% Citi Non -US $ Bond Index and 25%
BCAB.
B. For ICC Capital Management:
The performance of the total fund will be measured each quarter for rolling three and five year periods.
These periods are considered sufficient to accommodate the market cycles commonly experienced with
investments. After July 1, 2000 the return of this portfolio is expected to exceed the return of the BCAB.
After October 1, 2008 the return of this portfolio is expected to exceed the return of 78% of the BCAB Index
and 22% of the Russell 1000 Growth Index.
C. For Rhumbline Global Advisors
The performance of the total fund will be measured each quarter for rolling three and five year periods.
These periods are considered sufficient to accommodate the market cycles commonly experienced with
investments. After July 1, 2000 until December 31, 2002 the return of this portfolio is expected to match
the return of the S &P500 Index. From January 1, 2003 until December 31, 2003 the return of this portfolio
is expected to match the return of an 80% S &P500 and 20% S &P MidCap 400 policy. After January 1,
2004 the return of this portfolio is expected to match the return of a 60% S &P500, 20% S &P MidCap 400
and 20% S &P SmallCap 600 policy. After October 1, 2007 the return of this portfolio is expected to match
the return of a 56% S &P500, 22% S &P MidCap 400 and 22% S &P SmallCap 600 policy.
D. For International Equity Mutual Funds
After October 1, 2006 the return of this portfolio, which is made up of three (3) Vanguard Mutual
Funds, is expected to exceed the return of the MSCI EAFE Index Fund.
E. For American Realty Advisors
After April 1, 2012 the return of this portfolio is expected to exceed the return of the NCREIF
Index.
F. For International Bond Mutual Funds
After October 1, 2010 the return of this portfolio is expected to exceed the return of the Citi Non -US
$ International Bond Fund Index.
G. For Each Investment Manager:
1. Relative to other similar investment managers, it is expected the manager's performance with
regard to the total return of the fund will be in the top forty percent (40 %) of the appropriate
Performa Universe over three to five year periods. When performance is below the standard,
January 19, 2012 3
the manager will report to the Trustees the reasons for the occurrence and the steps taken to
avoid reoccurrence.
a. On an absolute basis, it is expected that the total return of the fund will equal or exceed the
actuarial earnings assumption, and equal or exceed the Consumer Price Index, plus 3% over
three to five year periods. When performance is below these standards, the manager will
report to the Trustees the reasons for occurrence and the steps taken to avoid reoccurrence.
b. From time to time the performance monitor may adjust or change the evaluation indices and /or
universes so as to more adequately measure and evaluate the investment manager's particular
equity and fixed income investment style. Any such adjustment or change would be
communicated to both the Investment Manager and the Pension Board Trustees at the time of
said adjustment or change.
III. INVESTMENT GUIDELINES
A. Authorized Investments
1. To include Certificates of Deposit up to a $100,000 maximum value and money market deposit
accounts of a national bank, a state bank or a savings and loan association insured by the
Federal Deposit Insurance Corporation.
2. Obligations issued by the United States Government or obligations guaranteed as to principal
and interest by the United States Government.
3. Stocks, bonds or other evidences of indebtedness issued or guaranteed by a corporation
organized under the laws of the United States, any state or organized territory of the United
States, or the District of Columbia, provided:
a. Equities will be traded on one or more of the following recognized national exchanges:
1. New York Stock Exchange
2. American Stock Exchange
3. The NASDAQ Stock Market
b. The individual issue meets the following rating criteria:
1. Fixed income: Standard & Poor's, AAA, AA, A or Moody's Aaa, Aa, A.
(not applicable to the International Bond mutual funds)
2. Equities: Value Line Investment Survey Rank for Safety, 1, 2, and 3 or Standard &
Poor's A +, A or A-
3. Money Market: Standard & Poor's Al or Moody's P1
C. Not more than five percent of the Fund's assets shall be invested in the common
stock or capital stock of any one issuing company, nor shall the aggregate
investment in any one issuing company exceed five percent (5 %) of the outstanding
capital stock of the company.
January 19, 2012 4
Fixed income investments shall mean publicly traded debt securities issued by the
United States Government or agencies of the United States Government, sovereign
and supranational debt, domestic corporations and domestic banks and other
United States financial institutions or mortgage /asset backed securities. "Yankee
bonds" (debt securities issued by foreign entities denominated in U.S. dollars which
are traded domestically) are also available for investment.
Use of To Be Announced (TBA) Securities.
All investments in TBA securities shall be issued by a Federal Agency or be of
investment grade. Cash equivalent balances to satisfy the transaction must be
available at the time of purchase and held until final settlement.
Prohibited Securities.
The following types of asset backed securities and collaterized mortgage obligations
are not permissible for investment using the Fund's assets without the Trustees'
prior written approval:
1. Securities paying Interest Only (ID's).
2. Securities representing Principal Only (PO's).
3. Accrual Bonds (z- tranches).
4. Inverse or Reverse Floaters with a multiplier greater than 1.00 or less than
-1.00.
5. Asset pools not domiciled in the United States.
6. Collateralized Bond Obligations (CBO's)
7. Collateralized Debt Obligations (CDO's)
8. Collateralized Loan Obligations (CLO's)
9. Companion bonds.
4. Mutual Funds, commingled stock, bond or money market funds whose individual investments
are restricted to securities meeting the criteria expressed in III.
5. Bonds issued by the State of Israel.
6. The use of unhedged and /or leveraged derivatives will not be allowed in any form.
7. International Equity Stocks or Bonds or Mutual Funds may be purchased.
8. Real Estate investments and securities may be purchased. The Board understands that
trust documents of the Real Estate fund will guide this investment, and not the Plans'
Investment Policy.
January 19, 2012 5
B. Limitations
Investments in corporate common stock, international equities, convertible bonds and convertible
preferred issues should be targeted at sixty percent (60 %) of the fund at market value and shall not
exceed sixty -five percent (65 %) of the fund assets at cost. No restriction is placed on the Fund's
percentage holdings of bonds or cash.
In accordance with the Protecting Florida's Investment Act (Fla. Stat. 215.473), the Board is prohibited
from directly investing in any companies, identified by the State Board of Administration (SBA) on its
website each quarter, as a scrutinized company. The investment Consultant and each investment
manager shall review its investments each quarter to determine whether it is required to sell, redeem,
divest or withdraw any publicly traded security of a company identified by the SBA as a scrutinized
company and shall notify the Board each quarter, in writing, of the results of its review. Beginning no later
than January 1, 2010, the Board shall sell, redeem, divest or withdraw all publicly traded securities it holds
in any scrutinized company by no later than September 10, 2010 for Chapter 185 plans. Mutual and
Commingled Funds may be excluded from this restriction as long as that company does not offer a similar
fund that is in compliance with the above restriction, is NOT available.
IV. PERFORMANCE MEASUREMENT
The Board has specified performance measures as are appropriate for the nature and size of the assets
within the Board's custody. Those performance measures are set forth in the Internal Controls section of
this Investment Policy.
V. INVESTMENT AND FUDICIARY STANDARDS
In performing its investment duties, the Board shall comply with the fiduciary standards set forth in the
Employees Retirement Income Security Act of 1974, 29 U.S.C. §1104(a)(1)(A) — (C), meaning that Board
members must discharge their duties with respect to the Plan solely in the interest of participants and
beneficiaries and for the exclusive purpose of: (a) providing benefits to participants and their beneficiaries
and (b) defraying reasonable expenses of administering the Plan; with the care, skill, prudence and
diligence under circumstances then prevailing that a prudent person acting in a like capacity and familiar
with such matters would use in the conduct of an enterprise of a like character and with like aims; by
diversifying investments of the plan so as to minimize risk of large losses, unless under the circumstances
it is clearly prudent not to do so. In the event of conflict with other provisions of law authorizing
investments, the investment and fiduciary standards set forth in this section shall prevail.
VI. PORTFOLIO COMPOSITION
The Investment Guidelines establish parameters for investments and limits on security issues, issuers and
maturities. Said Guidelines are commensurate with the nature and size of the funds within control of the
Board. The Board believes that the Plan's risk and liquidity posture are, in large part, a function of asset
class mix. The Board has reviewed long -term performance characteristics of various asset classes,
focusing on balancing the risks and rewards of market behavior.
January 19, 2012 6
VII. RISK AND DIVERSIFICATION
The Investment Guidelines provide for appropriate diversification of the portfolio. Investments have been
diversified to the extent practicable to control risk of loss resulting from over concentration in a specific
maturity, issuer, instrument, dealer or bank through which financial instruments are bought and sold. The
Board recognizes the difficulty of achieving the Plan's investment objectives in light of uncertainties and
complexities of contemporary investment markets. The Board also recognizes that some risk must be
assumed to achieve the Plan's long -term investment objectives. In establishing the risk tolerances, the
Plan's ability to withstand short and intermediate term variability has been considered. However, the
Plan's strong financial condition enables the Board to adopt a long -term investment perspective.
VIII. MATURITY AND LIQUIDITY REQUIREMENTS
The Fund's Investment Manager(s) shall be kept informed of the liquidity requirements of the Fund.
The Fund's investment portfolio shall be structured so as to provide sufficient liquidity to pay
obligations as they come due. To the extent possible, cash needs and anticipated cash -flow
requirements shall be matched with the maturity schedule of the portfolio.
IX. EXPECTED ANNUAL RATE OF RETURN
The Board shall determine, in consultation with its consultant and investment professionals, the
total expected annual rate of return for the current year, for the next several years, and for the long
term thereafter.
X. THIRD -PARTY CUSTODIAL AGREEMENTS
The Board shall retain a third -party to custody the fund's assets. All securities shall be designated
as an asset of the Board, and no withdrawal of securities, in whole or in part, shall be made from
safekeeping except by an authorized member of the Board or the Board's designee. Securities
transactions between a broker - dealer and the custodian involving purchase or sale of securities by
transfer of money or securities must be made on a "delivery vs. payment" basis, if applicable, to
ensure that the custodian will have the security or money, as appropriate in hand at the conclusion
of the transaction.
XI. MASTER REPURCHASE AGREEMENT
All approved institutions that transact repurchase agreements on behalf of the Fund, including
short -term investments by the Fund's custodian, shall execute and adhere to the requirements of
the Master Repurchase Agreement.
XI 1. BID REQUIREMENT
The Board requires that the Investment Manager(s) competitively bid securities as appropriate and
select he most advantageous bid.
January 19, 2012 7
XIII. INTERNAL CONTROLS
The Fund shall be governed by a set of written internal controls and operational procedures which
shall be periodically reviewed by the Fund's Certified Public Accountant and are contained herein.
The Board shall retain an independent Certified Public Accountant on an annual basis as well as
require reports from the Fund's Investment Consultant quarterly. This policy is designed to
safeguard the Fund from losses that might arise from fraud, error or misrepresentations by third
parties, or imprudent actions by the Board or employees of the plan sponsor.
XIV. CONTINUING EDUCATION
The Fund acknowledges the importance of continuing education for trustees. To that end, the
trustees are encouraged to attend educational conferences in connection with their duties and
responsibilities as trustees.
XV. REPORTING
The Fund's Investment Consultant shall provide quarterly reports of the Fund's investment
activities. These reports shall be public records and shall be submitted to the plan sponsor as
required by law.
XVI. FILING OF INVESTMENT POLICY
Upon adoption by the Board, this Investment Policy shall be promptly filed with the Florida
Department of Management Services, the City of Palm Beach Gardens and the Actuary. The
effective date of this Investment Policy, and any amendment hereto, shall be 31St calendar day
following the filing date with the City.
XVII. VALUATION OF ILLIQUID INVESTMENTS
No illiquid investments shall be utilized by this Fund.
XIX. COMMUNICATIONS AFFECTING MANAGERS
A. It shall be incumbent upon the Investment Managers and the custodian to apprise the
Board of all transactions. On a monthly basis each Manager shall supply an accounting
statement, which will include a summary of all receipts and disbursements, the cost and the
market value of all assets and their percentage of the Fund invested in equities, fixed
income and money market at cost. On a quarterly basis each Manager shall provide an
analysis of the quality of the assets, a summary of common stock diversification and
attendant schedules. In addition, each manager shall deliver each quarter a report detailing
the fund's performance, adherence to the investment policy, forecast of the market and
economy, portfolio analysis and current assets of the trust. Written reports shall be
provided to the Board at the quarterly meetings. Each Manager will provide immediate
written and telephone notice to the Board and the performance monitor of any significant
January 19, 2012 8
market related or non - market related event. The Board have retained a monitoring service
to evaluate and report on a quarterly basis the rate of return and relative performance of the
fund.
B. Meetings; the Board will meet annually with the monitoring service's representative to
review the performance report. At least once a year, the Board will meet with each
Investment Manager and appropriate outside consultants to discuss performance results,
economic outlook, investment strategy and tactics and other pertinent matters affecting the
fund.
C. When the Fund owns securities that met investment restrictions at time of purchase, that no
longer meet investment restrictions, the Manager will sell such securities within a
reasonable period of time. Manager shall be required to report such situations and
recommendations monthly or as directed by the Board.
D. Any foreign securities, which are acquired through spin -offs, which do not meet the
investment restrictions, will be sold forthwith. Manager shall be required to report such
situations and recommendations immediately or as directed by the Board.
E. Any securities, which are acquired through spin -offs, which do not meet the investment
restrictions, will be sold within a reasonable amount of time. Manager shall be required to
report such situations and recommendations immediately or as directed by the Board.
F. The Investment Manager's quarterly report will list separately any security whose value has
diminished twenty -five percent (25 %) or more from the purchase price.
G. In accordance with their proxy guidelines, the Investment Manager shall vote proxies on
behalf of the Board and shall report to the Board on an annual basis how each proxy was
voted, the issue as to each, and the date the proxy was voted. If a proxy was not voted, the
Manager shall provide a written statement indicating the reason that particular proxy was
not voted.
H. The Board may wish to recapture as many of their commission dollars as possible
consistent with obtaining the "best execution" as defined in ERISA Technical Release 85 -1
which is made part of this agreement by reference.
The Investment Manager shall notify the Board of any and all material events regarding the
firm and shall furnish the Board with the Securities Exchange Commission (SEC) Form
ADV, Part II annually.
J. The Managers are authorized to take direction from the Board regarding rebalancing the
equity portfolios.
K. The Investment Consultant, on behalf of the Board, shall send a letter to any pooled fund
referring the Investment Manager to the listing of `Scrutinized Companies' by the State
Board of Administration (`SBA list'), on their website www.sbafla.com /fsb /. This letter shall
request that they consider removing such companies from the fund or create a similar
actively managed fund having indirect holdings devoid of such companies. If the Investment
Manager creates a similar fund, the Manager shall replace all applicable investments with
investments in the similar fund in an expedited timeframe consistent with prudent investing
January 19, 2012 9
standards. For the purposes of this section, a private equity fund is deemed to be an
actively managed investment fund. However, after sending the required correspondence,
the Fund is not required to sell the pooled fund.
XX. CRITERIA FOR INVESTMENT MANAGER REVIEW
The Board wishes to adopt standards by which judgments on the ongoing performance of an
Investment Manager may be made. In this regard, the following will be closely monitored.
1. Four consecutive quarters of Total Fund performance below the fortieth (40 %) percentile in
the Manager performance rankings.
2. Loss by the Manager of any senior investment personnel.
3. Any change in basic investment philosophy by the Manager.
4. Failure to attain a 60% vote of confidence by the Board members.
This shall in no way limit or diminish the Board's right to terminate an investment manager at any
time for any reason.
XXI. FLORIDA STATUTES AND APPLICABLE CITY ORDINANCES
If at any time this document is found to be in conflict with Florida Statutes, or the applicable City
Ordinances, the Statute and Ordinances shall prevail.
January 19, 2012 10
XXII. REVIEW AND AMENDMENTS
It is intended that the Investment Manager and Board review this document periodically. In this
regard, the Investment Manager's interest in consistency in these matters is recognized and will be
taken into account when changes are being considered. If at any time the Investment Manager
feels that the specific objectives herein cannot be met, or the guidelines constrict performance, the
Board should be so notified in writing. By the initial and continuing acceptance of this Investment
Policy Statement, the Investment Manager accepts the provisions of this document.
For ICC Capital Management
For American Realty Advisors
For Rhumbline Global Advisors
For the Pension Board of Palm Beach Gardens Police
January 19, 2012 11
Date
Date
Date
Date
PALM BEACH GARDENS POLICE PENSION FUND
BOARD OF TRUSTEES
COMBINED INVESTMENT POLICY STATEMENT
FOR ICC CAPITAL MANAGEMENT, AMERICAN REALTY ADVISORS &
RHUMBLINE GLOBAL ADVISORS
Amended January 26, 2012
PURPOSE OF INVESTMENT POLICY STATEMENT
The Pension Board Trustees maintain that an important determinant of future investment returns is the
expression and periodic review of the Fund's investment objectives. To that end, the Trustees have
adopted this statement of Investment Policy.
In fulfilling their fiduciary responsibility, the Trustees recognize that the retirement system is an essential
vehicle for providing income benefits to retired participants or their beneficiaries. The Board also
recognizes that the obligations of the Fund are long -term and that investment policy should be made with
a view toward performance and return over a number of years. The general investment objective, then, is
to obtain a reasonable total rate of return — defined as interest and dividend income plus realized and
unrealized capital gains or losses — commensurate with the Prudent Investor Rule and any other
applicable statute or requirement.
A reasonably consistent and adequate return, protection of the assets against the inroads of inflation and
safety of the assets are paramount. However, the volatility of interest rates and securities markets make it
necessary to judge results within the context of several years rather than over short periods of one or two
years or less. Performance will be measured quarterly.
II. INVESTMENT PERFORMANCE OBJECTIVES — QUARTERLY EVALUATION MECHANISMS
The below listed performance measures will be used as objective criteria for evaluating effectiveness of
the Investment Managers:
A. Total Return of the Combined Managers:
1. The performance of the total fund will be measured each quarter for rolling three and five year
periods. These periods are considered sufficient to accommodate the different market cycles
commonly experienced with investments. The return of this portfolio is expected to exceed the
return of a portfolio comprising:
Since Inception (3/31/92) until 11/30/95 —
25% S &P500, 60% Barclays Capital Aggregate Bond (BCAB), and
15% Citigroup Treasury Bill — 3 month (TBill);
From 12/1/95 until 11/30/96 —
30% S &P500, 60% BCAB and 10% TBill;
January 26, 2012
From 12/1/96 until 11/30/97 —
40% S &P500, 50% BCAB, and 10% TBill;
From 12/1/97 until 12/31/98 —
60% S &P500 and 40% BCAB;
From 1/1/99 until 6/30/00 —
30% Russell 1000 Growth, 30% Russell 1000 Value, and 40% BCAB;
From 7/01/2000 until 12/31/2002 the combined performance is expected to exceed the
return of a portfolio comprising:
60% S &P500 and 40% BCAB.
From 01/01/2003 until 12/31/2003 the combined performance is expected to exceed the
return of a portfolio comprising:
50% S &P500, 10% S &P MidCap 400 and 40% BCAB.
From 01/01/2004 until 09/30/2006 onwards the combined performance is expected to
exceed the return of a portfolio comprising:
40% S &P500, 10% S &P MidCap 400, 10% S &P SmallCap 600 and 40% BCAB.
From 10/01/2006 until 09/30/2007 the combined performance is expected to exceed the
return of a portfolio comprising:
35% S &P500, 10% S &P MidCap 400, 10% S &P SmallCap 600, 5% MSCI EAFE and
40% BCAB.
From 10/01/2007 until 9/30/2008 the combined performance is expected to exceed the
return of a portfolio comprising:
25% S &P500, 10% S &P MidCap 400, 10% S &P SmallCap 600, 10% Russell 1000
Growth, 5% MSCI EAFE and 40% BCAB.
From 10/01/2008 onwards the combined performance is expected to exceed the return of a
portfolio comprising:
25% S &P500, 10% S &P MidCap 400, 10% S &P SmallCap 600, 10% Russell 1000
Growth, 10% MSCI EAFE and 35% BCAB.
From 10/01/2010 onwards the combined performance is expected to exceed the return of a
portfolio comprising:
25% S &P500, 10% S &P MidCap 400, 10% S &P SmallCap 600, 10% Russell 1000
Growth, 10% MSCI EAFE, 4% Citi Non -US $ Bond Index and 31 % BCAB.
From 01/01/2011 onwards the combined performance is expected to exceed the return of a
portfolio comprising:
25% S &P500, 10% S &P MidCap 400, 10% S &P SmallCap 600, 10% Russell 1000
Growth, 10% MSCI EAFE, 8% Citi Non -US $ Bond Index and 27% BCAB.
January 26, 2012 2
From 4/1/2012 onwards the combined performance is expected to exceed the return
of a portfolio comprising:
25% S &P500, 10% S &P MidCap 400, 10% S &P SmallCap 600, 10% Russell 1000
Growth, 10% MSCI EAFE, 2% NCREIF, 4% Citi Non -US $ Bond Index and 29%
BCAB.
B. For ICC Capital Management:
The performance of the total fund will be measured each quarter for rolling three and five year periods.
These periods are considered sufficient to accommodate the market cycles commonly experienced with
investments. After July 1, 2000 the return of this portfolio is expected to exceed the return of the BCAB.
After October 1, 2008 the return of this portfolio is expected to exceed the return of 78% of the BCAB Index
and 22% of the Russell 1000 Growth Index.
C. For Rhumbline Global Advisors
The performance of the total fund will be measured each quarter for rolling three and five year periods.
These periods are considered sufficient to accommodate the market cycles commonly experienced with
investments. After July 1, 2000 until December 31, 2002 the return of this portfolio is expected to match
the return of the S &P500 Index. From January 1, 2003 until December 31, 2003 the return of this portfolio
is expected to match the return of an 80% S &P500 and 20% S &P MidCap 400 policy. After January 1,
2004 the return of this portfolio is expected to match the return of a 60% S &P500, 20% S &P MidCap 400
and 20% S &P SmallCap 600 policy. After October 1, 2007 the return of this portfolio is expected to match
the return of a 56% S &P500, 22% S &P MidCap 400 and 22% S &P SmallCap 600 policy.
D. For International Equity Mutual Funds
After October 1, 2006 the return of this portfolio, which is made up of three (3) Vanguard Mutual
Funds, is expected to exceed the return of the MSCI EAFE Index Fund.
E. For American Realty Advisors
After April 1, 2012 the return of this portfolio is expected to exceed the return of the NCREIF
Index.
F. For International Bond Mutual Funds
After October 1, 2010 the return of this portfolio is expected to exceed the return of the Citi Non -US
$ International Bond Fund Index.
G. For Each Investment Manager:
1. Relative to other similar investment managers, it is expected the manager's performance with
regard to the total return of the fund will be in the top forty percent (40 %) of the appropriate
Performa Universe over three to five year periods. When performance is below the standard,
January 26, 2012 3
the manager will report to the Trustees the reasons for the occurrence and the steps taken to
avoid reoccurrence.
a. On an absolute basis, it is expected that the total return of the fund will equal or exceed the
actuarial earnings assumption, and equal or exceed the Consumer Price Index, plus 3% over
three to five year periods. When performance is below these standards, the manager will
report to the Trustees the reasons for occurrence and the steps taken to avoid reoccurrence.
b. From time to time the performance monitor may adjust or change the evaluation indices and /or
universes so as to more adequately measure and evaluate the investment manager's particular
equity and fixed income investment style. Any such adjustment or change would be
communicated to both the Investment Manager and the Pension Board Trustees at the time of
said adjustment or change.
III. INVESTMENT GUIDELINES
A. Authorized Investments
To include Certificates of Deposit up to a $100,000 maximum value and money market deposit
accounts of a national bank, a state bank or a savings and loan association insured by the
Federal Deposit Insurance Corporation.
2. Obligations issued by the United States Government or obligations guaranteed as to principal
and interest by the United States Government.
3. Stocks, bonds or other evidences of indebtedness issued or guaranteed by a corporation
organized under the laws of the United States, any state or organized territory of the United
States, or the District of Columbia, provided:
a. Equities will be traded on one or more of the following recognized national exchanges:
1. New York Stock Exchange
2. American Stock Exchange
3. The NASDAQ Stock Market
b. The individual issue meets the following rating criteria:
1. Fixed income: Standard & Poor's, AAA, AA, A or Moody's Aaa, Aa, A.
(not applicable to the International Bond mutual funds)
2. Equities: Value Line Investment Survey Rank for Safety, 1, 2, and 3 or Standard &
Poor's A +, A or A-
3. Money Market: Standard & Poor's Al or Moody's P1
C. Not more than five percent of the Fund's assets shall be invested in the common
stock or capital stock of any one issuing company, nor shall the aggregate
investment in any one issuing company exceed five percent (5 %) of the outstanding
capital stock of the company.
January 26, 2012 4
Fixed income investments shall mean publicly traded debt securities issued by the
United States Government or agencies of the United States Government, sovereign
and supranational debt, domestic corporations and domestic banks and other
United States financial institutions or mortgage /asset backed securities. "Yankee
bonds" (debt securities issued by foreign entities denominated in U.S. dollars which
are traded domestically) are also available for investment.
Use of To Be Announced (TBA) Securities.
All investments in TBA securities shall be issued by a Federal Agency or be of
investment grade. Cash equivalent balances to satisfy the transaction must be
available at the time of purchase and held until final settlement.
Prohibited Securities.
The following types of asset backed securities and collaterized mortgage obligations
are not permissible for investment using the Fund's assets without the Trustees'
prior written approval:
1. Securities paying Interest Only (ID's).
2. Securities representing Principal Only (PO's).
3. Accrual Bonds (z- tranches).
4. Inverse or Reverse Floaters with a multiplier greater than 1.00 or less than
-1.00.
5. Asset pools not domiciled in the United States.
6. Collateralized Bond Obligations (CBO's)
7. Collateralized Debt Obligations (CDO's)
8. Collateralized Loan Obligations (CLO's)
9. Companion bonds.
4. Mutual Funds, commingled stock, bond or money market funds whose individual investments
are restricted to securities meeting the criteria expressed in III.
5. Bonds issued by the State of Israel.
6. The use of unhedged and /or leveraged derivatives will not be allowed in any form.
7. International Equity Stocks or Bonds or Mutual Funds may be purchased.
8. Real Estate investments and securities may be purchased. The Board understands that
trust documents of the Real Estate fund will guide this investment, and not the Plans'
Investment Policy.
January 26, 2012 5
B. Limitations
Investments in corporate common stock, international equities, convertible bonds and convertible
preferred issues should be targeted at sixty percent (60 %) of the fund at market value and shall not
exceed sixty -five percent (65 %) of the fund assets at cost. No restriction is placed on the Fund's
percentage holdings of bonds or cash.
In accordance with the Protecting Florida's Investment Act (Fla. Stat. 215.473), the Board is prohibited
from directly investing in any companies, identified by the State Board of Administration (SBA) on its
website each quarter, as a scrutinized company. The investment Consultant and each investment
manager shall review its investments each quarter to determine whether it is required to sell, redeem,
divest or withdraw any publicly traded security of a company identified by the SBA as a scrutinized
company and shall notify the Board each quarter, in writing, of the results of its review. Beginning no later
than January 1, 2010, the Board shall sell, redeem, divest or withdraw all publicly traded securities it holds
in any scrutinized company by no later than September 10, 2010 for Chapter 185 plans. Mutual and
Commingled Funds may be excluded from this restriction as long as that company does not offer a similar
fund that is in compliance with the above restriction, is NOT available.
IV. PERFORMANCE MEASUREMENT
The Board has specified performance measures as are appropriate for the nature and size of the assets
within the Board's custody. Those performance measures are set forth in the Internal Controls section of
this Investment Policy.
V. INVESTMENT AND FUDICIARY STANDARDS
In performing its investment duties, the Board shall comply with the fiduciary standards set forth in the
Employees Retirement Income Security Act of 1974, 29 U.S.C. §1104(a)(1)(A) — (C), meaning that Board
members must discharge their duties with respect to the Plan solely in the interest of participants and
beneficiaries and for the exclusive purpose of: (a) providing benefits to participants and their beneficiaries
and (b) defraying reasonable expenses of administering the Plan; with the care, skill, prudence and
diligence under circumstances then prevailing that a prudent person acting in a like capacity and familiar
with such matters would use in the conduct of an enterprise of a like character and with like aims; by
diversifying investments of the plan so as to minimize risk of large losses, unless under the circumstances
it is clearly prudent not to do so. In the event of conflict with other provisions of law authorizing
investments, the investment and fiduciary standards set forth in this section shall prevail.
VI. PORTFOLIO COMPOSITION
The Investment Guidelines establish parameters for investments and limits on security issues, issuers and
maturities. Said Guidelines are commensurate with the nature and size of the funds within control of the
Board. The Board believes that the Plan's risk and liquidity posture are, in large part, a function of asset
class mix. The Board has reviewed long -term performance characteristics of various asset classes,
focusing on balancing the risks and rewards of market behavior.
January 26, 2012 6
VII. RISK AND DIVERSIFICATION
The Investment Guidelines provide for appropriate diversification of the portfolio. Investments have been
diversified to the extent practicable to control risk of loss resulting from over concentration in a specific
maturity, issuer, instrument, dealer or bank through which financial instruments are bought and sold. The
Board recognizes the difficulty of achieving the Plan's investment objectives in light of uncertainties and
complexities of contemporary investment markets. The Board also recognizes that some risk must be
assumed to achieve the Plan's long -term investment objectives. In establishing the risk tolerances, the
Plan's ability to withstand short and intermediate term variability has been considered. However, the
Plan's strong financial condition enables the Board to adopt a long -term investment perspective.
VIII. MATURITY AND LIQUIDITY REQUIREMENTS
The Fund's Investment Manager(s) shall be kept informed of the liquidity requirements of the Fund.
The Fund's investment portfolio shall be structured so as to provide sufficient liquidity to pay
obligations as they come due. To the extent possible, cash needs and anticipated cash -flow
requirements shall be matched with the maturity schedule of the portfolio.
IX. EXPECTED ANNUAL RATE OF RETURN
The Board shall determine, in consultation with its consultant and investment professionals, the
total expected annual rate of return for the current year, for the next several years, and for the long
term thereafter.
X. THIRD -PARTY CUSTODIAL AGREEMENTS
The Board shall retain a third -party to custody the fund's assets. All securities shall be designated
as an asset of the Board, and no withdrawal of securities, in whole or in part, shall be made from
safekeeping except by an authorized member of the Board or the Board's designee. Securities
transactions between a broker - dealer and the custodian involving purchase or sale of securities by
transfer of money or securities must be made on a "delivery vs. payment" basis, if applicable, to
ensure that the custodian will have the security or money, as appropriate in hand at the conclusion
of the transaction.
XI. MASTER REPURCHASE AGREEMENT
All approved institutions that transact repurchase agreements on behalf of the Fund, including
short-term investments by the Fund's custodian, shall execute and adhere to the requirements of
the Master Repurchase Agreement.
XII. BID REQUIREMENT
The Board requires that the Investment Manager(s) competitively bid securities as appropriate and
select he most advantageous bid.
January 26, 2012 7
XIII. INTERNAL CONTROLS
The Fund shall be governed by a set of written internal controls and operational procedures which
shall be periodically reviewed by the Fund's Certified Public Accountant and are contained herein.
The Board shall retain an independent Certified Public Accountant on an annual basis as well as
require reports from the Fund's Investment Consultant quarterly. This policy is designed to
safeguard the Fund from losses that might arise from fraud, error or misrepresentations by third
parties, or imprudent actions by the Board or employees of the plan sponsor.
XIV. CONTINUING EDUCATION
The Fund acknowledges the importance of continuing education for trustees. To that end, the
trustees are encouraged to attend educational conferences in connection with their duties and
responsibilities as trustees.
XV. REPORTING
The Fund's Investment Consultant shall provide quarterly reports of the Fund's investment
activities. These reports shall be public records and shall be submitted to the plan sponsor as
required by law.
XVI. FILING OF INVESTMENT POLICY
Upon adoption by the Board, this Investment Policy shall be promptly filed with the Florida
Department of Management Services, the City of Palm Beach Gardens and the Actuary. The
effective date of this Investment Policy, and any amendment hereto, shall be 31St calendar day
following the filing date with the City.
XVII. VALUATION OF ILLIQUID INVESTMENTS
No illiquid investments shall be utilized by this Fund.
XIX. COMMUNICATIONS AFFECTING MANAGERS
A. It shall be incumbent upon the Investment Managers and the custodian to apprise the
Board of all transactions. On a monthly basis each Manager shall supply an accounting
statement, which will include a summary of all receipts and disbursements, the cost and the
market value of all assets and their percentage of the Fund invested in equities, fixed
income and money market at cost. On a quarterly basis each Manager shall provide an
analysis of the quality of the assets, a summary of common stock diversification and
attendant schedules. In addition, each manager shall deliver each quarter a report detailing
the fund's performance, adherence to the investment policy, forecast of the market and
economy, portfolio analysis and current assets of the trust. Written reports shall be
provided to the Board at the quarterly meetings. Each Manager will provide immediate
written and telephone notice to the Board and the performance monitor of any significant
January 26, 2012 8
market related or non - market related event. The Board have retained a monitoring service
to evaluate and report on a quarterly basis the rate of return and relative performance of the
fund.
B. Meetings; the Board will meet annually with the monitoring service's representative to
review the performance report. At least once a year, the Board will meet with each
Investment Manager and appropriate outside consultants to discuss performance results,
economic outlook, investment strategy and tactics and other pertinent matters affecting the
fund.
C. When the Fund owns securities that met investment restrictions at time of purchase, that no
longer meet investment restrictions, the Manager will sell such securities within a
reasonable period of time. Manager shall be required to report such situations and
recommendations monthly or as directed by the Board.
D. Any foreign securities, which are acquired through spin -offs, which do not meet the
investment restrictions, will be sold forthwith. Manager shall be required to report such
situations and recommendations immediately or as directed by the Board.
E. Any securities, which are acquired through spin -offs, which do not meet the investment
restrictions, will be sold within a reasonable amount of time. Manager shall be required to
report such situations and recommendations immediately or as directed by the Board.
F. The Investment Manager's quarterly report will list separately any security whose value has
diminished twenty -five percent (25 %) or more from the purchase price.
G. In accordance with their proxy guidelines, the Investment Manager shall vote proxies on
behalf of the Board and shall report to the Board on an annual basis how each proxy was
voted, the issue as to each, and the date the proxy was voted. If a proxy was not voted, the
Manager shall provide a written statement indicating the reason that particular proxy was
not voted.
H. The Board may wish to recapture as many of their commission dollars as possible
consistent with obtaining the "best execution" as defined in ERISA Technical Release 85 -1
which is made part of this agreement by reference.
The Investment Manager shall notify the Board of any and all material events regarding the
firm and shall furnish the Board with the Securities Exchange Commission (SEC) Form
ADV, Part II annually.
J. The Managers are authorized to take direction from the Board regarding rebalancing the
equity portfolios.
K. The Investment Consultant, on behalf of the Board, shall send a letter to any pooled fund
referring the Investment Manager to the listing of `Scrutinized Companies' by the State
Board of Administration ('SBA list'), on their website www.sbafla.com /fsb /. This letter shall
request that they consider removing such companies from the fund or create a similar
actively managed fund having indirect holdings devoid of such companies. If the Investment
Manager creates a similar fund, the Manager shall replace all applicable investments with
investments in the similar fund in an expedited timeframe consistent with prudent investing
January 26, 2012 9
standards. For the purposes of this section, a private equity fund is deemed to be an
actively managed investment fund. However, after sending the required correspondence,
the Fund is not required to sell the pooled fund.
XX. CRITERIA FOR INVESTMENT MANAGER REVIEW
The Board wishes to adopt standards by which judgments on the ongoing performance of an
Investment Manager may be made. In this regard, the following will be closely monitored.
1. Four consecutive quarters of Total Fund performance below the fortieth (40 %) percentile in
the Manager performance rankings.
2. Loss by the Manager of any senior investment personnel.
3. Any change in basic investment philosophy by the Manager.
4. Failure to attain a 60% vote of confidence by the Board members.
This shall in no way limit or diminish the Board's right to terminate an investment manager at any
time for any reason.
XXI. FLORIDA STATUTES AND APPLICABLE CITY ORDINANCES
If at any time this document is found to be in conflict with Florida Statutes, or the applicable City
Ordinances, the Statute and Ordinances shall prevail.
January 26, 2012 10
XXII. REVIEW AND AMENDMENTS
It is intended that the Investment Manager and Board review this document periodically. In this
regard, the Investment Manager's interest in consistency in these matters is recognized and will be
taken into account when changes are being considered. If at any time the Investment Manager
feels that the specific objectives herein cannot be met, or the guidelines constrict performance, the
Board should be so notified in writing. By the initial and continuing acceptance of this Investment
Policy Statement, the Investment Manager accepts the provisions of this document.
For ICC Capital Management
For American Realty Advisors
Date
Date
For Rhumbline Global Advisors Date
For the Pension Board of Palm Beach Gardens Police Date
January 26, 2012 11
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E
PALM BEACH GARDENS POLICE PENSION FUND
REVIEW OF INTERNATIONAL EQUITY FUNDS
& INTERNATIONAL BONDS
DECEMBER 31, 2011
Palm Beach Gardens Police
Review of International Equity & Bond Funds
December 31, 2011
1. Dreyfus International Bond I (DIBRX) [0.82 %]
December 31, 2011
MorningStar Rating: -i�? (out of 178 funds over 5- years)
Comparative Index: Citi Non US & World Government
September 30, 2011
MorningStar Rating: (out of 240 funds over 3- years)
Comparative Index: Citi Non US & World Government
r_ ....,._
10.03%
7.23%
2.80%
Quarter
1 Year
3 Year
Fund
-1.37%
3.43%
9.48%
Policy
-0.48%
5.17%
4.92%
Differences
-0.89%
-1.74%
4.56%
Universe
n/a
55
30=
September 30, 2011
MorningStar Rating: (out of 240 funds over 3- years)
Comparative Index: Citi Non US & World Government
r_ ....,._
10.03%
7.23%
2.80%
Excellent rating and review from Morningstar. The fund is managed by David C. Leduc, he has
been the portfolio manager since 1995. Brendan Murphy serves as an additional portfolio
manager, a position he has held since February 2010.The fund seeks to maximize total return
through capital appreciation and income. The fund normally invests at least 80% of assets in
fixed- income securities; 65% of assets in non -U.S. dollar denominated fixed- income securities of
foreign governments. The fund, at times, may invest up to 25% of assets in emerging markets
and up to 5% of assets in any single emerging market country.No change recommended.
www.Dreyfus.com
Quarter
1 Year
3 Year
5 Year
Fund
0.47%
3.67%
13.43%
10.81%
Policy
0.95%
4.14%
8.09%
7.77%
Differences
-0.48%
-0.47%
5.34%
3.04%
Universe
n/a
1 'f
4
Excellent rating and review from Morningstar. The fund is managed by David C. Leduc, he has
been the portfolio manager since 1995. Brendan Murphy serves as an additional portfolio
manager, a position he has held since February 2010.The fund seeks to maximize total return
through capital appreciation and income. The fund normally invests at least 80% of assets in
fixed- income securities; 65% of assets in non -U.S. dollar denominated fixed- income securities of
foreign governments. The fund, at times, may invest up to 25% of assets in emerging markets
and up to 5% of assets in any single emerging market country.No change recommended.
www.Dreyfus.com
2. Oppenheimer International Bond Y (OIBYX) [0.67 %]
December 31, 2011
MorningStar Rating: (out of 178 funds over 5- years)
Comparative Index: Citi Non US & World Government
MorningStar Rating: (out of 175 funds over 5- years)
Comparative Index: Citi Non US & World Government
Fund
Quarter
1 Year
3 Year
5 Year
Fund
0.99%
-0.20%
7.01%
6.85%
Policy
-0.48%
5.17%
4.92%
7.23%
Differences
1.47%
-5.37%
2.09%
-0.38%
Universe
n/a
87
44
2?;
September 30 2011
MorningStar Rating: (out of 175 funds over 5- years)
Comparative Index: Citi Non US & World Government
Fund
Quarter
1 Year
3 Year
5 Year
Policy
-5.72%
-2.63%
7.69%
7.71%
0.95%
4.14%
8.09%
7.77%
Differences
-6.67%
-6.77%
-0.40%
-0.06%
Universe
n/a
93
12
Good rating and review from Morningstar. Oppenheimer International Bond's adventurous approach requires
Patience. Comanagers Art Steinmetz and Sara Zervos employ a distinctive style. They have long argued that
many emerging markets' macroeconomic fundamentals are stronger than developed markets', and thus
stake half the fund's assets in emerging- markets sovereign and corporate bonds. They also hold a hefty 27%
stake in local- currency- denominated emerging- markets debt, whereas its more - traditional world -bond peers
mainly stick to bonds denominated in dollars, yen, and euros. While the fund can face short -term setbacks,
its bold style holds appeal for more - patient types. Steinmetz has years of experience investing overseas;
since returning to the fund's helm in April 2004, he has delivered an 8.0% annualized gains that tops all but
one competitor. He has also made timely shifts in the past to protect the fund, such as reducing its emerging -
markets currency exposure prior to 2008's credit crisis, as well as a modest reduction this year. Oppenheimer
recently added several new hires to the global debt team, including Hemant Baijal, who now manages the
fund's developed- markets sleeve. After the revious manager left in 2010, the team had run an indexlike
developed- sovereign portfolio. Baijal has no public track record, and he's playing it close to the vest for now,
so it will take time to assess his skills. Still, Steinmetz and Zervos' oversight provides some confidence.
No change recommended.
www.oppenheimerfunds.com
3. Vanguard Global Equity (VHGEX) [0.44 %]
December 31, 2011
MorningStar Rating: (out of 697 funds over 3- years)
Comparative Index: World Stock ie. MSCI World
Fund
Policy
Differences
Universe
September 30, 2011
MorningStar Rating
Quarter
1 Year
3 Year
5 Year
6.76%
-8.90%
12.02%
-3.49%
7.59%
-5.54%
11.13%
-2.37%
-0.83%
-3.36%
0.89%
-1.12%
n/a
56
47
70
(out of 692 funds over 3- years)
Comparative Index: World Stock ie. MSCI World
Received an average rating but a very good review from Morningstar. This fund has been a subpar
performer as a multimanager offering. After handily outgaining its average peer over the roughly nine
years the Marathon team ran the entire portfolio, this fund has lagged its typical rival since it added a
second subadvisor, since it added a third subadvisor, and since it added a fourth subadvisor. That's
pretty disappointing, but there still are reasons to hope that this fund will develop into a solid
multimanager offering. Most of its underperformance as a multimanager offering took place as
stocks plunged around the world in the first 11 months after Baillie Gifford was hired, and this fund
has comfortably outpaced its average peer since then. The overall quality of its subadvisors is pretty
good. And true to its family, it has a low expense ratio, which gives it a significant and ongoing edge
over most of its rivals. No change recommended.
www.vanguard.com
Quarter
1 Year
3 Year
5 Year
Fund
-19.71%
-7.32%
0.02%
-2.95%
Policy
-16.61%
-4.35%
-0.07%
-2.23%
Differences
-3.10%
-2.97%
0.09%
-0.72%
Universe
n/a
61
59
68
Received an average rating but a very good review from Morningstar. This fund has been a subpar
performer as a multimanager offering. After handily outgaining its average peer over the roughly nine
years the Marathon team ran the entire portfolio, this fund has lagged its typical rival since it added a
second subadvisor, since it added a third subadvisor, and since it added a fourth subadvisor. That's
pretty disappointing, but there still are reasons to hope that this fund will develop into a solid
multimanager offering. Most of its underperformance as a multimanager offering took place as
stocks plunged around the world in the first 11 months after Baillie Gifford was hired, and this fund
has comfortably outpaced its average peer since then. The overall quality of its subadvisors is pretty
good. And true to its family, it has a low expense ratio, which gives it a significant and ongoing edge
over most of its rivals. No change recommended.
www.vanguard.com
4. Vanguard International Growth Admiral Shares (VWILX) [0.34 %]
December 31, 2011
MorningStar Rating: (out of 737 funds over 3- years)
Comparative Index: Foreign Large Blend ie. MSCI EAFE
September 30, 2011
MorningStar Rating: (out of 735 funds over 3- years)
Comparative Index: Foreign Large Blend ie. MSCI EAFE
Quarter
1 Year
3 Year
5 Year
Fund
6.00%
- 13.58%
12.40%
-1.85%
Policy
3.33%
- 12.14%
7.65%
-4.72%
Differences
2.67%
-1.44%
4.75%
2.87%
Universe
n/a
44
September 30, 2011
MorningStar Rating: (out of 735 funds over 3- years)
Comparative Index: Foreign Large Blend ie. MSCI EAFE
Received a good rating and review from Morningstar.A trio of reputable subadvisors manages
this foreign large -blend fund. Schroder Investment Management (on board here since 1981)
and Baillie Gifford Overseas (in place since in 2003) manage 90% of the
fund's assets in sleeves of roughly equal size. The remainder is managed by M &G Investment
Management, a third subadvisor Vanguard enlisted in February 2008. The teams' processes
aren't wildly different from one another. Each is long- term - oriented and focused on higher -
quality growth stocks. In aggregate, the fund's lineup of 200 -plus stocks currently trades with
price /earnings and price /book premiums relative to category norms, but the managers' focus on
quality is also evident. The portfolio boasts superior net margins and returns on equity, for
example, and its lower debt/capital ratio reflects the managers' preference for financially sound
firms. Investors are in good hands given the teams' experience. The thoughtful management
transitions that have occurred here over time also inspire confidence. And its 0.34% expense
ratio makes it a bargain among actively managed foreign funds. No change recommended.
www.vanguard.com
Quarter
1 Year
3 Year
5 Year
Fund
-22.31%
- 12.55%
0.97%
-1.02%
Policy
-19.01%
-9.36%
-1.13%
-3.46%
Differences
-3.30%
-3.19%
2.10%
2.44%
Universe
n/a
65
Received a good rating and review from Morningstar.A trio of reputable subadvisors manages
this foreign large -blend fund. Schroder Investment Management (on board here since 1981)
and Baillie Gifford Overseas (in place since in 2003) manage 90% of the
fund's assets in sleeves of roughly equal size. The remainder is managed by M &G Investment
Management, a third subadvisor Vanguard enlisted in February 2008. The teams' processes
aren't wildly different from one another. Each is long- term - oriented and focused on higher -
quality growth stocks. In aggregate, the fund's lineup of 200 -plus stocks currently trades with
price /earnings and price /book premiums relative to category norms, but the managers' focus on
quality is also evident. The portfolio boasts superior net margins and returns on equity, for
example, and its lower debt/capital ratio reflects the managers' preference for financially sound
firms. Investors are in good hands given the teams' experience. The thoughtful management
transitions that have occurred here over time also inspire confidence. And its 0.34% expense
ratio makes it a bargain among actively managed foreign funds. No change recommended.
www.vanguard.com
5. Vanguard International Value (VTRIX) [0.39 %]
December 31, 2011
MorningStar Rating: (out of 327 funds over 3- years)
Comparative Index: Foreign Large Value ie. MSCI EAFE Value
September 30, 2011
MorningStar Rating: (out of 307 funds over 3- years)
Comparative Index: Foreign Large Value ie. MSCI EAFE Value
Quarter
1 Year
3 Year
5 Year
Fund
5.05%
- 14.58%
7.03%
-4.25%
Policy
2.74%
- 12.17%
6.77%
-6.33%
Differences
2.31%
-2.41%
0.26%
2.08%
Universe
n/a
72
3�i
September 30, 2011
MorningStar Rating: (out of 307 funds over 3- years)
Comparative Index: Foreign Large Value ie. MSCI EAFE Value
Average rating but good review from Morningstar. The teams use sound, complementary value
strategies. Hansberger takes an opportunistic approach, making full use of the style spectrum.
AllianceBernstein employs a classic value strategy. Lazard relies on a relative -value strategy.
Edinburgh uses a concentrated bargain discipline. This leads to a portfolio with considerable
diversification, though it retains some distinguishing characteristics. All four teams are
comfortable buying stocks in bunches, and this fund usually sports a few notable sector or
country overweights. Three squads consider good bargains in the developing world, and the
fourth pays even more attention to such issues, so this fund normally has more emerging -
markets exposure than the category average. It has a strong record to go along with its
reasonably attractive portfolio, but there's reason to be cautious. Thanks to the teams' stock
selection - -plus the perennial and sizable benefits it reaps from its low expense ratio - -the fund
has outpaced its average peer since the Edinburgh squad arrived, since the Lazard team joined,
since the AllianceBernstein squad arrived, and since the Hansberger team joined. It has merit as
a broad - based, value- oriented foreign holding. Shareholders need to be vigilant about manager
changes.
No change recommended.
www.vanguard.com
Quarter
1 Year
3 Year
5 Year
Fund
- 20.73%
-13.31%
-2.47%
-3.37%
Policy
- 19.03%
-9.99%
-1.69%
-4.82%
Differences
-1.70%
-3.32%
-0.78%
1.45%
Universe
n/a
77
48
Average rating but good review from Morningstar. The teams use sound, complementary value
strategies. Hansberger takes an opportunistic approach, making full use of the style spectrum.
AllianceBernstein employs a classic value strategy. Lazard relies on a relative -value strategy.
Edinburgh uses a concentrated bargain discipline. This leads to a portfolio with considerable
diversification, though it retains some distinguishing characteristics. All four teams are
comfortable buying stocks in bunches, and this fund usually sports a few notable sector or
country overweights. Three squads consider good bargains in the developing world, and the
fourth pays even more attention to such issues, so this fund normally has more emerging -
markets exposure than the category average. It has a strong record to go along with its
reasonably attractive portfolio, but there's reason to be cautious. Thanks to the teams' stock
selection - -plus the perennial and sizable benefits it reaps from its low expense ratio - -the fund
has outpaced its average peer since the Edinburgh squad arrived, since the Lazard team joined,
since the AllianceBernstein squad arrived, and since the Hansberger team joined. It has merit as
a broad - based, value- oriented foreign holding. Shareholders need to be vigilant about manager
changes.
No change recommended.
www.vanguard.com
1oN
U wt.
4J
ON
Commissioners
Edward Rodgers, Chair
PalmBeach County Manuel Farach, Vice Chair
Robin N. Fiore
Ronald E. Harbison
Commission ®n Ethics Bruce E. Reinhart
December 1, 2011
Bonni S. Jensen, Esquire
Perry & Jensen, LLC
400 Executive Center Drive, Suite 207
West Palm Beach, FL 33401 -2922
Re: RQO 11-089
Gift Law /Retirement Boards
Dear Ms. Jensen,
Executive Director
Alan S. Johnson
The Palm Beach County Commission on Ethics (COE) considered your request for an advisory opinion on October 6,
2011, and on November 3, 2011, and again on November 30, 2011, and rendered its opinion at a public meeting
on November 30, 2011.
YOU ASKED in your letter dated September 22, 2011, whether Trustees of the Firefighter Board of Trustees, Town
of Palm Beach Retirement System (FBT), who are subject to the Palm Beach County Commission on Ethics, must
report "salary, benefits, services, fees, commissions, gifts or expenses associated primarily with the [Trustees]
employment, business or service as an officer or director of a corporation or organization ?" You also asked if a
Trustee nominated or selected by the other four (4) Trustees to this retirement board, but ultimately appointed by
the governing body of the Town, is subject to the jurisdiction of the Palm Beach County Commission on Ethics.
IN SUM, local officials and advisory board members who are state reporting individuals are required to report gifts
quarterly, in accordance with state law, and are therefore not subject to the annual gift reporting requirements
under §2- 444(f)(2)b. of the Palm Beach County Code of Ethics. A state reporting individual is responsible to comply
with those reporting requirements as contained within state law.
Although the FBT itself is a state created board and therefore not an advisory board as defined in the Palm Beach
County Code of Ethics,' trustees who are appointed by the governing body of the Town of Palm Beach (the Town),
are considered "officials" and subject to the code. The fact that one appointment is based on a selection by the
existing Trustees does not negate the fact that the ultimate appointment is made by the governing body and the
appointee is therefore subject to the Code of Ethics.Z
THE FACTS as we understand them are as follows:
You are legal counsel for the Firefighters Board of Trustees (FBT), within the Town of Palm Beach Retirement
System (RS). The RS was created by a Palm Beach Ordinance in accordance with Chapter 112, Florida Statutes.
The FBT's authority was created pursuant to Chapter 175, Florida Statutes, and is contained within Section 82 -86
of the Town Code. The FBT is comprised of five (5) members. Two (2) are chosen and appointed by the Town
1 §2 -442, RQO 11 -060 (Boca Raton Police and Firefighters' Retirement System established pursuant to chapters 175 and 185 of
the Florida Statutes, is not an advisory board as defined in the PBC Code of Ethics, however, appointees of the Boca Raton
governing body are considered "officials. ")
z RQO 11 -035, RQO 11 -060, id.
2633 Vista Parkway, West Palm Beach, FL 33411 561.233.0724 FAX: 561.233.0735
Hotline: 877.766.5920 E -mail: ethics @palmbeachcountyethics.com
Website: palmbeachcountyethics.com
Council. Two (2) are employees of the Town and are elected by the members in the retirement fund. The fifth
member is chosen by the other four Trustees, but is actually appointed by the Town Council, in what you refer to
in your letter as, "a ministerial duty by the Town." The Town of Palm Beach (the Town) is ultimately responsible
for funding the System. You also advise that it is the Town that actually appoints this fifth trustee to the Board.
THE LEGAL BASIS for this opinion is found in the following relevant sections of the revised Palm Beach County Code
of Ethics:
Section 2 -442 defines Advisory board to mean "any advisory or quasi-judicial board created... by local municipal
governing bodies, or by the mayors who serve as chief executive officers... of local municipal governing bodies."
While the FBT is governed by local ordinance, the board is authorized by state statute. It is not "created by" the
local municipal governing body and is, therefore, not an advisory board.
However, §2 -442, defines "Official" as a member appointed by the local municipal governing body to serve on any
advisory, quasi-judicial or any other board of the county, state, or any other regional, local, municipal, or corporate
entity. The Code does not make a distinction as to whether the governing body is making such an appointment in
any particular manner. The fact that one Trustee on the FBT is initially chosen as a candidate by the other four
Trustees is immaterial to the manner in which that person formally becomes a Trustee on the Board when
appointed by a vote of the governing body. The governing body, in particular one that is, "responsible to fund the
benefits of the Plan," under state law3, can choose not to appoint a particular individual and require that another
candidate be selected. Again, the relevant fact is that while the initial choice of a potential candidate is made by
the other Trustees, the appointment itself is made by the governing body.
A member of the FBT, appointed by the Boca Raton Council, is under the jurisdiction of the COE as to all sections of
the Code of Ethics applicable to officials.
Section 2- 444(f)(1) states, "Those persons required to report gifts pursuant to state law shall report those gifts in
the manner provided by Florida Statutes, §112.3148, as may be amended. Under this section of the Code of Ethics,
members of the FBT are "state reporting individuals" and must comply with all state requirements. The COE
cannot opine as to any specific reporting requirements under state law.
IN SUMMARY, regardless of who refers a candidate for FBT appointment, FBT Trustees who are appointed by the
Boca Raton Council are subject to the PBC Code of Ethics and the jurisdiction of the COE as "officials." Those
Trustees who are Boca Raton employees are subject to the code as "employees" as well.
FBT Trustees are subject to state gift reporting requirements as listed under Chapter 112, Florida Statutes and
must report as required by state law.
This opinion construes the Palm Beach County Code of Ethics Ordinance, but is not applicable to any conflict under
state law. Inquiries regarding possible conflicts under state law should be directed to the State of Florida
Commission on Ethics.
Please feel free to contact me at (561) 233 -0724 should you have any further questions in this matter
incer
Alan S. Johnson
Executive Director
ASJ /meb /gal
3 Pursuant to Sections 112.66 and 175.091, Florida Statutes (2011)
2633 Vista Parkway, West Palm Beach, FL 33411 561.233.0724 FAX: 561.233.0735
Hotline: 877.766.5920 E -mail: ethics @palmbeachcountyethics.com
Website: palmbeachcountyethics.com
THE LAW OFFICES OF
FERRY &JENSEN, LLC
ANN H. PERRY
aperry @perryjensenlaw.com
MEMORANDUM
To: Board of Trustees
From: Bonni S. Jensen A( "/V
4
Subject: Palm Beach County Ethics Opinion - RQO 11 -089
Date: December 12, 2011
BONNI SPATARA JENSEN
bsjensen @perryjensenlaw.com
Attached is the final Palm Beach County Commission ( "PBC Commission ") on
Ethics Opinion regarding gift reporting and the 5th trustee.
The PBC Commission on Ethics determined that the Trustees who are state
reporters need to follow the State laws regarding filing under Florida Statutes §112.3148
and are not therefore subject to the requirements of §2- 244(f)(2)(b) underthe Palm Beach
County Ordinance. Additionally, the Commission confirmed that the 5th Trustee, who is
appointed by the other 4 trustees, is considered an official for purposes of the Palm Beach
County Ethics law because the 5th Trustees is ministerially appointed by the municipal
legislative body.
Attached is the Form 9 Gift reporting form for the State of Florida. It requires
quarterly reporting if the Trustee receives a reportable gift during the quarter. This form
will need to be filed with both the State and the County.
Please add this item for discussion to your next meeting agenda. If you have any
questions in the meantime, please contact me.
HAM Miscellaneous\ALL BOARDS\201 1 \RQO 11 -089 memompd
400 EXECUTIVE CENTER DRIVE, SUITE 207•:• WEST PALM BEACH, FLORIDA 33401 -2922
PH: 561.686.6550: Fx: 561.686.2802