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HomeMy WebLinkAboutAgenda Fire Pension 020613THE RESOURCE CENTERS , LLC 4360 Northlake Boulevard, Suite 206 Palm Beach Gardens, FL 33410 Phone (561) 624-3277 Fax (561) 624-3278 WWW.RESOURCECENTERS.COM PALM BEACH GARDENS FIREFIGHTERS’ PENSION FUND Meeting of Wednesday, February 6, 2013 Location: City Hall, Council Chambers Palm Beach Gardens City Hall 10500 North Military Trail Palm Beach Gardens, FL 33410 Time: 1 PM AGENDA 1. Call Meeting to Order 2. Public Comments 3. Minutes: • Regular Meeting Held on January 14, 2013 4. Presentation of the September 30, 2012 Audited Financial Statements: Cherry, Bekaert & Holland (Jim Burdick) 5. Investment Monitor Report: The Bogdahn Group (Troy Brown) • Discussion Regarding Index Funds • Update on Plans R&D Account • ICC Capital Investment History • 2012 Calendar Year Reconciliation 6. Attorney Report: Sugarman & Susskind, P.A. (Pedro Herrera) • Update on Buyback Benefit • Revised Board Officers’ Election Policy • Review of Pending Ordinance / Issuance of Impact Statement • November & December 2012 SFMS Reports 7. Administrative Report: Resource Centers (Audrey Ross) • Disbursements 8. Old Business • Selection of Chair & Secretary • Update on SPD • Update of DROP Statement Transition • Update on Actuary Transition & 9/30/2012 Actuarial Valuation Report 9. New Business 10. Other Business 11. Schedule Next Meeting: Monday March 11, 2013 at 9:00 A.M. 12. Adjourn 2 PLEASE NOTE: Should any interested party seek to appeal any decision made by the Board with respect to any matter considered at such meeting or hearing, he will need a record of the proceedings, and for such purpose he may need to insure that a verbatim record of the proceedings is made, which record includes the testimony and evidence upon which the appeal is to be based. In accordance with the Americans With Disabilities Act of 1990, persons needing a special accommodation to participate in this meeting should contact The Resource Centers, LLC no later than four days prior to the meeting. City of Palm Beach Gardens Firefighters' Pension Trust Fund Investment Performance Review 4th Quarter 2012 Intercontinental performance based on preliminary estimates 4t h Q u a r t e r 2 0 1 2 M a r k e t E n v i r o n m e n t 1  As w i t h p r e v i o u s q u a r t e r s t h i s y e a r , t h e m a r k e t s w e r e w h i p s a w e d b y t h e c h a n g e i n in v e s t o r s e n t i m e n t b e t w e e n p o s i t i v e e c o n o m i c n e w s , t h e U S P r e s i d e n t i a l e l e c t i o n , th e “ f i s c a l c l i f f ” , a n d c o m m e n t s f r o m k e y g o v e r n m e n t o f f i c i a l s o n t h e s t a t e o f a f f a i r s in t h e i r r e s p e c t i v e d o m a i n . T h e r e w a s i m p r o v e m e n t i n s e v e r a l U S e c o n o m i c d a t a po i n t s . T h e f i n a l r e a d i n g f o r U S e c o n o m i c g r o w t h f o r t h e t h i r d q u a r t e r w a s 3 . 1 % . I n ad d i t i o n , t h e e m p l o y m e n t p i c t u r e , h o m e s s a l e s , a n d c o n s u m e r s e n t i m e n t a l s o im p r o v e d d u r i n g t h e f o u r t h q u a r t e r , w h i c h h e l p e d l i f t t h e e q u i t y m a r k e t s . O n c e t h e el e c t i o n w a s o v e r , i n v e s t o r s a p p e a r e d t o b e p r i m a r i l y f o c u s e d o n t h e f i s c a l c l i f f a n d th e r h e t o r i c f r o m t h e p o l i t i c i a n s g e n e r a l l y w e i g h t e d o n t h e e q u i t y m a r k e t s . T h e co n c e r n w a s o v e r t h e p o t e n t i a l i m p a c t t o U S e c o n o m i c g r o w t h f r o m h i g h e r t a x r a t e s an d f e d e r a l s p e n d i n g c u t s i f n o a g r e e m e n t w a s r e a c h e d . C o m m e n t s f r o m go v e r n m e n t o f f i c i a l s i n E u r o p e a l s o i m p a c t e d t h e m a r k e t s . O n t h e d a y f o l l o w i n g t h e Pr e s i d e n t i a l e l e c t i o n , E C B P r e s i d e n t M a r i o D r a g h i a d d e d f u e l t o t h e n e g a t i v e se n t i m e n t w h e n h e c o m m e n t e d t h a t e c o n o m i c g r o w t h i n E u r o p e i s e x p e c t e d t o re m a i n w e a k a n d s l o w d o w n i n e c o n o m i c a c t i v i t y m a y h a v e r e a c h e d G e r m a n y . I n De c e m b e r , t h e F e d e r a l R e s e r v e ( “ F e d ” ) a n n o u n c e d t h a t w h i l e t h e y b e l i e v e ec o n o m i c g r o w t h a n d e m p l o y m e n t h a v e e x p a n d e d a t a m o d e r a t e p a c e , t h e F e d w i l l ma i n t a i n i t s a c c o m m o d a t i v e m o n e t a r y p o l i c y ( 0 . 0 % t o 0 . 2 5 % f e d e r a l f u n d s t a r g e t ) . Fu r t h e r m o r e , t h e F e d w i l l c o n t i n u e i t s “ a s s e t p u r c h a s e s ” , w h i c h i n c l u d e s b u y i n g $4 0 b i l l i o n i n m o r t g a g e - b a c k e d s e c u r i t i e s p e r m o n t h . I n a d d i t i o n , s t a r t i n g i n J a n u a r y 20 1 3 , t h e F e d w i l l b e g i n b u y i n g $ 4 5 b i l l i o n l o n g - t e r m T r e a s u r y s e c u r i t i e s p e r m o n t h . Wh i l e t h e m a r k e t d i d n o t g o u p o n t h e d a y o f t h e a n n o u n c e m e n t , t h e c o n t i n u a t i o n o f Fe d ’ s Q u a n t i t a t i v e E a s i n g ( Q E ) p r o g r a m w a s i m p o r t a n t f o r m a r k e t s e n t i m e n t .  Fo r t h e q u a r t e r , d o m e s t i c e q u i t y i n d e x e s w e r e v o l a t i l e . T h e S & P 5 0 0 I n d e x w a s ah e a d o f t h e s m a l l c a p R u s s e l l 2 0 0 0 I n d e x b y 2 2 3 b a s i s p o i n t s ( b p s ) , u n t i l No v e m b e r 1 5 th wh e n t h e s m a l l c a p i n d e x b e g a n i t s r a l l y t o e n d t h e q u a r t e r 2 3 0 b p s hi g h e r t h a n t h e l a r g e c a p i n d e x . A s i n d i c a t e d i n t h e a d j a c e n t c h a r t s , m i d c a p w a s th e b e s t p e r f o r m i n g d o m e s t i c e q u i t y i n d e x f o r t h e q u a r t e r a n d o n e - y e a r p e r i o d s . F o r th e s e c o n d c o n s e c u t i v e q u a r t e r , t h e M S C I E A F E o u t p e r f o r m e d t h e S & P 5 0 0 I n d e x , wh i c h h e l p e d t h e d e v e l o p e d i n t e r n a t i o n a l i n d e x m o v e a h e a d o f t h e d o m e s t i c i n d e x fo r 2 0 1 2 . F o r t h e f o u r t h q u a r t e r , t h e U . S . b o n d m a r k e t , r e p r e s e n t e d b y t h e B a r c l a y s Ag g r e g a t e B o n d I n d e x , p o s t e d i t s 1 2 th st r a i g h t q u a r t e r o f p o s i t i v e r e t u r n w i t h a mo d e s t g a i n o f 2 1 b p s . H o w e v e r , f o r 2 0 1 2 , t h e m a r k e t r e t u r n o f + 4 . 2 1 % w a s 3 4 1 bp s b e l o w t h e i n d e x r e t u r n o f t h e p r e v i o u s y e a r . R e t u r n a t t r i b u t i o n t r e n d s f o r t h e fo u r t h q u a r t e r a n d 2 0 1 2 w e r e s i m i l a r a s C o r p o r a t e s e a s i l y o u t p a c e d t h e T r e a s u r y an d M B S s e c t o r s . T h e e x c e s s r e t u r n f o r I n v e s t m e n t G r a d e C r e d i t I n d e x w a s 1 2 1 bp s f o r t h e q u a r t e r a n d 7 3 4 b p s f o r t h e f u l l c a l e n d a r y e a r . So u r c e : M o r n i n g s t a r D i r e c t The Market Environment Major Market Index Performance As of December 31, 2012 0. 0 % 1. 1 % -0 . 2 % 0. 7 % -0 . 1 % 0. 2 % 1. 9 % 2.9% 0. 1 % 0. 2 % -0 . 4 % 5.6%6.6%5.9% -2 . 0 % 0 . 0 % 2 . 0 % 4 . 0 % 6 . 0 % 8 . 0 % 3- M o n t h T - B i l l Ba r c l a y s C o r p I G Ba r c l a y s M B S Ba r c l a y s U S T I P S Ba r c l a y s U S T s y Ba r c l a y s U S A g g Ru s s e l l 2 0 0 0 Ru s s e l l M i d C a p Ru s s e l l 1 0 0 0 Ru s s e l l 3 0 0 0 S& P 5 0 0 MS C I E m e r g M k t s MS C I E A F E MS C I A C W x U S Qu a r t e r P e r f o r m a n c e 0. 0 % 9.8% 2. 6 % 7. 0 % 2. 0 % 4. 2 % 16.3%17.3%16.4%16.4%16.0%18.6%17.9%17.4% 0. 0 % 5. 0 % 10.0%15.0%20.0% 3- M o n t h T - B i l l Ba r c l a y s C o r p I G Ba r c l a y s M B S Ba r c l a y s U S T I P S Ba r c l a y s U S T s y Ba r c l a y s U S A g g Ru s s e l l 2 0 0 0 Ru s s e l l M i d C a p Ru s s e l l 1 0 0 0 Ru s s e l l 3 0 0 0 S& P 5 0 0 MS C I E m e r g M k t s MS C I E A F E MS C I A C W x U S 1- Y e a r P e r f o r m a n c e 2 So u r c e : M o r n i n g s t a r D i r e c t a n d B l o o m b e r g The Market Environment Do m e s t i c E q u i t y S t y l e I n d e x P e r f o r m a n c e As of December 31, 2012  Un l i k e t h e t h i r d q u a r t e r , t h e r e w a s n o t a l o t o f v a r i a t i o n i n t h e p e r f o r m a n c e am o n g t h e d o m e s t i c e q u i t y i n d e x e s i n t h e f o u r t h q u a r t e r . F o r t h e s e c o n d co n s e c u t i v e q u a r t e r , “ v a l u e ” o u t p e r f o r m e d “ g r o w t h ” f o r t h e q u a r t e r a n d t h e ca l e n d a r y e a r , r e g a r d l e s s o f c a p i t a l i z a t i o n ( “ c a p ” ) . T h e s i g n i f i c a n t r e t u r n di s p e r s i o n r e a l i z e d b e t w e e n t h e l a r g e c a p a n d a l l c a p s t y l e i n d e x e s w a s l a r g e l y at t r i b u t a b l e t o t h e p e r f o r m a n c e o f A p p l e , a l a r g e c a p g r o w t h s t o c k , a n d a n un d e r w e i g h t t o F i n a n c i a l s . W i t h a n e a r l y + 7 6 % y e a r - t o - d a t e r e t u r n t h r o u g h Se p t e m b e r 3 0 th , A p p l e ’ s s t o c k p r i c e dr o p p e d ne a r l y 2 0 % i n t h e f o u r t h q u a r t e r . In t h e R u s s e l l 1 0 0 0 G r o w t h a n d R u s s e l l 3 0 0 0 G r o w t h i n d e x e s , t h e a v e r a g e al l o c a t i o n t o A p p l e d u r i n g t h e q u a r t e r w a s 8 . 1 % a n d 7 . 1 % , r e s p e c t i v e l y . Co m p a r e d t o t h e i r r e s p e c t i v e g r o w t h c o u n t e r p a r t s , t h e R u s s e l l 1 0 0 0 V a l u e a n d Ru s s e l l 3 0 0 0 V a l u e i n d e x e s g a i n e d 1 7 2 b p s a n d 1 5 9 b p s , r e s p e c t i v e l y , f r o m th e l a c k o f e x p o s u r e t o A p p l e . A s p r e v i o u s l y m e n t i o n e d , a n o t h e r c o n t r i b u t o r t o th e l a r g e d i s p e r s i o n i n r e t u r n s b e t w e e n v a l u e a n d g r o w t h w a s t h e a l l o c a t i o n t o Fi n a n c i a l s . T h e F i n a n c i a l s s e c t o r w a s t h e s e c o n d b e s t p e r f o r m i n g s e c t o r i n t h e la r g e c a p i t a l i z a t i o n i n d e x e s ; t h e v a l u e - s t y l e i n d e x e s a d d e d a n a d d i t i o n a l 8 0 bp s f r o m t h e l a r g e o v e r w e i g h t t o t h e s e c t o r .  Th e p e r f o r m a n c e d i s p e r s i o n b e t w e e n t h e R u s s e l l M i d C a p V a l u e a n d R u s s e l l Mi d C a p G r o w t h i n d e x e s w a s n o t a t t r i b u t a b l e t o G I C S s e c t o r a l l o c a t i o n s . Ho w e v e r , a l a r g e r p e r c e n t a g e o f t h e c o m p a n i e s i n t h e v a l u e i n d e x w e r e po s i t i v e d u r i n g t h e q u a r t e r a n d t h e a v e r a g e r e t u r n w a s g r e a t e r . S i x t y - n i n e pe r c e n t o f t h e c o m p a n i e s i n t h e R u s s e l l M i d C a p V a l u e I n d e x h a d a p o s i t i v e re t u r n c o m p a r e d t o s i x t y - f o u r p e r c e n t f o r t h e R u s s e l l M i d C a p G r o w t h . I n ad d i t i o n , t h e a v e r a g e q u a r t e r l y r e t u r n f o r t h e c o m p a n i e s i n t h e R u s s e l l M i d C a p Va l u e w a s + 4 . 6 9 % c o m p a r e d t o + 3 . 3 0 % f o r t h e g r o w t h i n d e x . T h e R u s s e l l 20 0 0 V a l u e i n d e x ’ s 2 8 0 b p s o f o u t p e r f o r m a n c e v e r s u s t h e R u s s e l l 2 0 0 0 Gr o w t h i n d e x d u r i n g t h e q u a r t e r w a s p r i m a r i l y a t t r i b u t a b l e t o t h e d i f f e r e n c e s i n GI C S s e c t o r d i s t r i b u t i o n . D u e t o a n o v e r w e i g h t t o F i n a n c i a l s a n d u n d e r w e i g h t to H e a l t h C a r e , t h e R u s s e l l 2 0 0 0 V a l u e I n d e x a d d e d a p p r o x i m a t e l y 2 5 0 b p s re l a t i v e t o t h e g r o w t h i n d e x .  Fr o m a m a r k e t c a p p e r s p e c t i v e a n d i n g e n e r a l t e r m s , t h e “ s w e e t s p o t ” f o r pe r f o r m a n c e w a s t o i n v e s t i n c o m p a n i e s w i t h a m a r k e t c a p b e t w e e n $ 2 b i l l i o n an d $ 1 0 b i l l i o n . I n a r e v e r s a l f r o m t h e t h ir d q u a r t e r , “ m e g a c a p ” c o m p a n i e s , wh i c h i s d e f i n e d a s t h o s e c o m p a n i e s w i t h a m a r k e t c a p g r e a t e r t h a n $ 1 0 0 bi l l i o n , u n d e r p e r f o r m e d t h e o t h e r m a r k e t c a p b r e a k p o i n t s i n t h e R u s s e l l 1 0 0 0 an d R u s s e l l 3 0 0 0 i n d e x e s . M i c r o c a p c o m p a n i e s , w h i c h a r e d e f i n e d a s t h o s e co m p a n i e s w i t h a m a r k e t c a p l e s s t h a n $ 5 0 0 m i l l i o n , w e r e p u n i s h e d m o r e se v e r e l y i n g r o w t h t h a n i n v a l u e r e g a r d l e s s o f t h e i n d e x . 0. 4 % 1.9%3.2%1.7%2.9%3.9% -1 . 3 % 0. 1 % 1.5% -1 . 2 % 0. 2 % 1.6% -2 . 0 % 0. 0 % 2.0%4.0% 20 0 0 G r o w t h 20 0 0 I n d e x 20 0 0 V a l u e Mi d C a p G r o w t h Mi d C a p I n d e x Mi d C a p V a l u e 10 0 0 G r o w t h 10 0 0 I n d e x 10 0 0 V a l u e 30 0 0 G r o w t h 30 0 0 I n d e x 30 0 0 V a l u e Qu a r t e r P e r f o r m a n c e - R u s s e l l S t y l e S e r i e s 14.6%16.3%18.1%15.8%17.3%18.5%15.3%16.4%17.5%15.2%16.4%17.5% 0. 0 % 5. 0 % 10 . 0 % 15.0%20.0% 20 0 0 G r o w t h 20 0 0 I n d e x 20 0 0 V a l u e Mi d C a p G r o w t h Mi d C a p I n d e x Mi d C a p V a l u e 10 0 0 G r o w t h 10 0 0 I n d e x 10 0 0 V a l u e 30 0 0 G r o w t h 30 0 0 I n d e x 30 0 0 V a l u e 1- Y e a r P e r f o r m a n c e - R u s s e l l S t y l e S e r i e s 3 The Market Environment GI C S S e c t o r P e r f o r m a n c e & ( Q u a r t e r - E n d S e c t o r W e i g h t ) As of December 31, 2012 So u r c e : M o r n i n g s t a r D i r e c t a n d B l o o m b e r g f o r s e c t o r p e r f o r m a n c e a n d s e c t o r w e i g h t s  Fo r t h e q u a r t e r , s m a l l c a p s o u t p e r f o r m e d l a r g e c a p s . T h e r e t u r n f o r t h e Ru s s e l l 2 0 0 0 ( 1 . 8 5 % ) o u t p a c e d t h a t o f t h e R u s s e l l 1 0 0 0 ( 0 . 1 2 % ) b y 1 7 3 ba s i s p o i n t s ( b p s ) . T h i s d i s p a r i t y b r o u g h t t h e t w o i n d e x e s i n l i n e f o r t h e ye a r , w i t h t h e R u s s e l l 1 0 0 0 r e t u r n i n g 1 6 . 4 2 % , c o m p a r e d t o t h e 1 6 . 3 5 % re t u r n f o r t h e R u s s e l l 2 0 0 0 . O v e r l o n g e r o n e - , t h r e e - , a n d f i v e - y e a r pe r i o d s , t h e s m a l l e r c a p i n d e x h a s s i g n i f i c a n t l y o u t p e r f o r m e d i t s l a r g e r ca p s i b l i n g .  De s p i t e a s o l i d t h i r d q u a r t e r G D P g r o w t h o f 3 . 1 % a n n o u n c e d i n De c e m b e r 2 0 1 2 , S & P e a r n i n g s g r o w t h f o r e c a s t s f e l l p r e c i p i t o u s l y i n t h e fo u r t h q u a r t e r w i t h y e a r o v e r y e a r g r o wt h f a l l i n g t o t h e l o w s i n g l e d i g i t s (~ 4 % ) f r o m l o w d o u b l e d i g i t s ( ~ 1 0 % ) . H o w e v e r , t h e p r i m a r y d r i v e r s be h i n d t h i s d e c l i n e a r e H u r r i c a n e S a n d y r e l a t e d d i s t o r t i o n s a n d t h e di s p r o p o r t i o n a t e e f f e c t o f o u t l i e r p o s i t i o n s w i t h i n i n d i v i d u a l s e c t o r s . Ov e r a l l , t h e d e c l i n e i s m o r e p r e c i p i t o u s t h a n t h e m e d i a n c o m p a n y de c l i n e w o u l d s u g g e s t .  Th e d e c l i n e i n e x p e c t a t i o n s h a d t h e l a r g e s t i m p a c t i n c a p i t a l s p e n d i n g le v e r a g e d i n d u s t r i e s , s u c h a s T e c h n o l o g y a n d T e l e c o m S e r v i c e s , wh e r e a s i n d u s t r i e s t i e d t o t h e d u r a b l e g o o d s a n d h o u s i n g t r a d e h a v e be e n t h e m o s t r e s i l i e n t ( M a t e r i a l s a n d I n d u s t r i a l s ) . L a r g e c a p i t a l i z a t i o n Te c h n o l o g y w a s a l s o h i t h a r d b y A p p l e ’ s E P S s l o w d o w n a s , a t 3 . 9 7 % , th e s t o c k r e p r e s e n t s t h e s i n g l e l a r g e s t p o s i t i o n i n t h e R u s s e l l 1 0 0 0 in d e x . O n a n a b s o l u t e b a s i s , A p p l e s t o c k f e l l - 1 9 . 8 5 % d u r i n g t h e p e r i o d .  Vo l a t i l i t y h a s c o n t i n u e d t o f a l l t h r o u g h o u t t h e y e a r . W h e n c o m p a r e d t o th e t h i r d q u a r t e r , w h i c h s a w t w e l v e t o t a l t r a d i n g d a y s o f + / - 2 % d a i l y re t u r n f o r t h e R u s s e l l 2 0 0 0 , t h e f o u r t h q u a r t e r w i t n e s s e d o n l y t w o s u c h da y s a n d o n e c c u r r e d o n t h e f i n a l t r a d i n g d a y o f 2 0 1 2 ( + 2 . 1 0 % o n De c e m b e r 3 1 ) . T h e s a m e c a n b e s a i d f o r t h e R u s s e l l 1 0 0 0 , w h i c h ex p e r i e n c e d j u s t o n e t r a d i n g d a y o f g r e a t e r t h a n + / - 2 % m o v e m e n t ( - 2. 3 2 % o n N o v e m b e r 7 th ) v e r s u s t h r e e s u c h d a y s i n t h e t h i r d q u a r t e r . Al s o , t h e r a n g e b e t w e e n h i g h e s t a n d l o w e s t s i n g l e d a y r e t u r n s w e r e bo t h s i g n i f i c a n t l y r e d u c e d w h e n c o m p a r e d t o p r i o r p e r i o d s . 4 . 0 1 % re p r e s e n t e d t h e l a r g e s t g a p b e t w e e n t h e b e s t a n d w o r s t s i n g l e d a y re t u r n s f o r t h e R u s s e l l 1 0 0 0 a n d t h e s a m e d i s p e r s i o n f o r t h e R u s s e l l 20 0 0 w a s 4 . 3 8 % . T h i s w a s d o w n f r o m 5 . 5 % a n d 6 . 5 % f o r t h e t w o in d e x e s i n t h e 3 rd qu a r t e r , r e s p e c t i v e l y . 1. 7 % 18.9%14.2%26.7%18.7%10.9%24.8%17.0%16.6% 4. 0 % -2 . 4 % -5 . 6 % -5 . 2 % 5. 1 % 0. 1 % -1 . 4 % 2. 9 % 4. 9 % 3. 3 % -2 . 6 % -1 0 . 0 % - 5 . 0 % 0 . 0 % 5 . 0 % 1 0 . 0 % 1 5 . 0 % 2 0 . 0 % 2 5 . 0 % 3 0 . 0 % Ut i l i t i e s ( 3 . 6 % ) Te l e c o m S e r v i c e s ( 3 . 1 % ) In f o T e c h n o l o g y ( 1 9 . 2 % ) Fi n a n c i a l s ( 1 5 . 5 % ) He a l t h C a r e ( 1 1 . 8 % ) Co n s u m e r S t a p l e s ( 1 2 . 1 % ) Co n s u m e r D i s c ( 1 0 . 0 % ) In d u s t r i a l s ( 1 0 . 4 % ) Ma t e r i a l s ( 3 . 8 % ) En e r g y ( 1 0 . 5 % ) Ru s s e l l 1 0 0 0 Quarter1-Year 5. 7 % 8.4%10.1%22.2%15.4%11.5%22.4%17.2%24.1% -4 . 0 % -2 . 1 % -5 . 2 % 2. 2 % 2. 6 % -7 . 4 % -1 . 0 % 2. 9 % 9.6% 5. 6 % -0 . 9 % -1 0 . 0 % - 5 . 0 % 0 . 0 % 5 . 0 % 1 0 . 0 % 1 5 . 0 % 2 0 . 0 % 2 5 . 0 % 3 0 . 0 % Ut i l i t i e s ( 3 . 7 % ) Te l e c o m S e r v i c e s ( 0 . 8 % ) In f o T e c h n o l o g y ( 1 7 . 0 % ) Fi n a n c i a l s ( 2 1 . 6 % ) He a l t h C a r e ( 1 3 . 3 % ) Co n s u m e r S t a p l e s ( 1 3 . 9 % ) Co n s u m e r D i s c ( 3 . 6 % ) In d u s t r i a l s ( 1 4 . 8 % ) Ma t e r i a l s ( 5 . 0 % ) En e r g y ( 6 . 0 % ) Ru s s e l l 2 0 0 0 Quarter1-Year 4 So u r c e : M o r n i n g s t a r D i r e c t The Market Environment To p 1 0 I n d e x W e i g h t s & Q u a r t e r l y P e r f o r m a n c e f o r t h e R u s s e l l 1 0 0 0 & 2 0 0 0 As of December 31, 2012 To p 1 0 W e i g h t e d S t o c k s To p 1 0 W e i g h t e d S t o c k s Ru s s e l l 1 0 0 0 S y m b o l Qt r - E n d Wt g . Re t u r n S e c t o r R u s s e l l 2 0 0 0 S y m b o l Qt r - E n d Wt g . ReturnSector Ap p l e I n c A A P L 3 . 4 3 % - 1 9 . 8 % I n f o r m a t i o n T e c h n o l o g y O cw e n F i n a n c i a l C o r p o r a t i o n O C N 0 . 3 1 % 2 6 . 2 % F i n a n c i a l s Ex x o n M o b i l C o r p o r a t i o n X O M 2 . 7 8 % - 4 . 7 % E n e r g y G e n e s e e & W y o m i n g , I n c . C l a s s A G W R 0 . 2 8 % 1 3 . 8 % I n d u s t r i a l s Ge n e r a l E l e c t r i c C o G E 1 . 5 3 % - 6 . 7 % I n d u s t r i a l s T w o H a r b o r s I n v e s t m en t C o r p T W O 0 . 2 7 % - 1 . 0 % F i n a n c i a l s Ch e v r o n C o r p C V X 1 . 4 7 % - 6 . 5 % E n e r g y P h a r m a c y cl i c s , I n c . P C Y C 0 . 2 6 % - 1 0 . 4 % H e a l t h C a r e IB M C o r p I B M 1 . 4 4 % - 7 . 3 % I n f o r m a t i o n T e c h n o l o g y C o m m V a u l t Sy s t e m s , I n c . C V L T 0 . 2 6 % 1 8 . 8%Information Technology Mi c r o s o f t C o r p o r a t i o n M S F T 1 . 3 8 % - 9 . 5 % I n f o r m a t i o n T e c hn o l o g y S t a r w o o d P r o p e r t y T r u s t , I n c . S T W D 0 . 2 6 % 1 . 0 % F i n a n c i a l s AT & T I n c T 1 . 3 6 % - 9 . 4 % T e l e c o m m u n i c a t i o n S e r v i c e s Al a s k a A i r G r o u p , I n c . A L K 0 . 2 6 % 2 2 . 9 % I n d u s t r i a l s Jo h n s o n & J o h n s o n J N J 1 . 3 2 % 2 . 6% H e a l t h C a r e W a r n a c o G r o u p , I n c . W R C 0 . 2 4 % 3 7 . 9 % C o n s u m e r D i s c r e t i o n a r y Pf i z e r I n c P F E 1 . 2 9 % 1 . 8 % H e a l t h C a re D r i l - Q u i p , I n c . D R Q 0 . 2 4 % 1 . 6 % E n e r g y Pr o c t e r & G a m b l e C o P G 1 . 2 8 % - 1 . 3 % C o n s u m e r S t a p l es W E X I n c W X S 0 . 2 4 % 8 . 1 % I n f o r m a t i o n T e c h n o l o g y To p 1 0 P e r f o r m i n g S t o c k s To p 1 0 P e r f o r m i n g S t o c k s Ru s s e l l 1 0 0 0 S y m b o l Qt r - E n d Wt g . Re t u r n S e c t o r R u s s e l l 2 0 0 0 S y m b o l Qt r - E n d Wt g . ReturnSector Cl e a r w i r e C o r p C l a s s A C L W R 0 . 0 1 % 1 1 5 . 7 % T e l e c o m m u n i c a t i o n S e r v i c es H o v n a n i a n E n t e r p r i s e s I n c H O V 0 . 0 6 % 1 0 2 . 3 % C o n s u m e r D i s c r e t i o n a r y Gr e e n M o u n t a i n C o f f e e R o a s t e r s , I n c . G M C R 0. 0 4 % 7 4 . 1 % C o n s u m e r S t a p l e s An a d i g i c s , I n c . A N A D 0 . 0 1 % 8 1 . 3%Information Technology Ne t f l i x , I n c . N F L X 0 . 0 4 % 7 0 . 1 % C o n s u m e r D i s c r e t i o n a r y Cy m e r , I n c . C Y M I 0 . 2 3 % 7 7 . 1 % Information Technology Al p h a N a t u r a l R e s o u r c e s I n c A N R 0 . 0 1 % 4 8 . 2 % E n e r g y M G I C I n v e s t m e n t C o r p o r a t io n M T G 0 . 0 4 % 7 3 . 9 % F i n a n c i a l s St r a t a s y s L T D S S Y S 0 . 0 2 % 4 7 . 3 % I n f o r m a t i o n T e c h n o l o g y A e g e r io n P h a r m a c e u t i c a l s , I n c . AE G R 0 . 0 5 % 7 1 . 3 % H e a l t h C a r e Ge n w o r t h F i n a n c i a l I n c G N W 0 . 0 3 % 4 3 . 6 % Fi n a n c i a l s L I N T V C o r p o r a t i o n T V L 0. 0 2 % 7 1 . 1 % C o n s u m e r D i s c r e t i o n a r y Ab e r c r o m b i e & F i t c h C o . A A N F 0 . 0 3 % 4 1 . 9 % Co n s u m e r D i s c r e t i o n a r y R o m a F i n a n c i a l C o r p o r a t i o n R O M A 0 . 0 1 % 6 9 . 9 % F i n a n c i a l s Un i t e d R e n t a l s I n c U R I 0 . 0 3 % 3 9 . 2 % In d u s t r i a l s S p a r t e c h C o r p o r a t i o n S E H 0 . 0 2 % 6 9 . 5 % M a t e r i a l s Je f f e r i e s G r o u p , I n c . J E F 0 . 0 2 % 3 6 . 7 % F i n a n c i a l s A ud i e n c e I n c AD N C 0 . 0 1 % 6 7 . 6 % I n f o r m a t i o n T e c h n o l o g y Li b e r t y V e n t u r e s C l a s s A LV N T A 0 . 02 % 3 6 . 5 % C o n s u m e r D i s c r e t i o n a r y Ap p l i e d M i c r o C i r c u i ts C o r p o r a t i o n A M C C 0 . 0 5 % 66.4%Information Technology Bo t t o m 1 0 P e r f o r m i n g S t o c k s Bo t t o m 1 0 P e r f o r m i n g S t o c k s Ru s s e l l 1 0 0 0 Sy m b o l Qt r - E n d Wt g . Re t u r n S e c t o r Ru s s e l l 2 0 0 0 Sy m b o l Qt r - E n d Wt g . ReturnSector IT T E d u c a t i o n a l S e r v i c e s , I n c . ES I 0 . 0 0 % - 4 6 . 3 % C o n s u m e r D i s c r e t i o n a r y Bi o c r y s t P h a r m a c e u t i c a l s BC R X 0 . 01 % - 6 6 . 5 % H e a l t h C a r e Be s t B u y C o I n c BB Y 0 . 0 2 % - 3 0 . 1 % C on s u m e r D i s c r e t i o n a r y On c o t h y r e o n , In c . ON T Y 0 . 0 1 % - 6 2 . 6 % H e a l t h C a r e He r b a l i f e , L t d . HL F 0 . 0 2 % - 29 . 9 % C o n s u m e r S t a p l e s Ac t i v e N e t w o r k I n c AC T V 0 . 0 2 % - 6 0 . 8 % I n f o r m a t i o n T e c h n o l o g y Ad v a n c e d M i c r o D e v i c e s I n c AM D 0 . 0 1 % - 2 8 . 8 % In f o r m a t i o n T e c h n o l o g y Gl u M o b i l e , I n c . GL U U 0 . 0 1 % - 5 0 . 9 % I n f o r m a t i o n T e c h n o l o g y Ap o l l o G r o u p I n c C l a s s A AP O L 0 . 0 1 % - 2 8 . 0 % C o n s u m e r D i sc r e t i o n a r y Zo g e n i x , I n c . ZG N X 0 . 0 1 % - 4 9 . 6 % H e a l t h C a r e TI B C O S o f t w a r e , I n c . TI B X 0 . 0 2 % - 2 7 . 3 % I n f o rm a t i o n T e c h n o l o g y Or c h a r d S u p p l y H a r d w a r e OS H 0 . 0 0 % - 4 8 . 8 % C o n s u m e r D i s c r e t i o n a r y Ve r t e x P h a r m a c e u t i c a l s VR T X 0 . 0 6 % - 2 5 . 0 % H e a l t h C a r e Co r c e p t T h e r a p e u t ic s , I n c . CO R T 0 . 0 1 % - 4 8 . 7 % H e a l t h C a r e We s t e r n U n i o n C o m p a n y WU 0 . 0 6 % - 2 4 . 6 % I n fo r m a t i o n T e c h n o l o gy Am i c u s T h e r a p e u t i c s, I n c . FO L D 0 . 0 1 % - 4 8 . 5 % H e a l t h C a r e Fu s i o n - i o I n c FI O 0 . 0 1 % - 2 4 . 2 % I n f o r m a t i o n T e c h n o l o g y U. S . A u t o Pa r t s N e t w o r k , I n c . PR T S 0 . 0 0 % -47.1%Consumer Discretionary Al l s c r i p t s - M i s y s H e a l t h c a r e S o l u t i o n s M D R X 0 . 0 1 % - 2 4 . 2 % H e a l t h C a r e En d e a v o u r I n te r n a t i o n a l C o r p EN D 0 . 0 2 % - 4 6 . 4 % E n e r g y 5 So u r c e : M S C I ( w w w . m s c i . c o m ) f o r i n d e x p e r f o r m a n c e . R e t u r n s a r e g r o s s .  In t e r n a t i o n a l e q u i t y m a r k e t s c o n t i n u e d t h e i r r u n , a n d w e r e t h e b e s t pe r f o r m e r s f o r t h e f o u r t h q u a r t e r . N o v e m b e r a n d D e c e m b e r , i n p a r t i c u l a r , we r e s t r o n g m o n t h s d r i v e n b y e u p h o r i c e x p e c t a t i o n s t h a t t h e w o r l d ’ s ec o n o m i c t r o u b l e s w o u l d b e s o l v e d s o o n e r r a t h e r t h a n l a t e r . D e v e l o p e d ma r k e t s , r e p r e s e n t e d b y t h e M S C I - E A F E I n d e x , w e r e u p 6 . 6 % f o r t h e qu a r t e r , w i t h e m e r g i n g m a r k e t s l a g g i n g s l i g h t l y a t + 5 . 6 % . T h e U S D de p r e c i a t e d v e r s u s m o s t o f E u r o p e a n d E m e r g i n g A s i a , b u t a p p r e c i a t e d si g n i f i c a n t l y v e r s u s t h e J a p a n e s e Y e n . 2 0 1 2 p e r f o r m a n c e f o r n o n - U S eq u i t i e s w a s s o l i d , a l t h o u g h d w a r f e d b y U . S . e q u i t y r e t u r n s . F i n a n c i a l s an d E u r o p e w e r e t h e b i g g e s t c o n t r i b u t o r s f o r t h e a n n u a l p e r i o d .  Al l n o n - U S e q u i t y m a r k e t s w e r e u p s t r o n g l y d u r i n g t h e f o u r t h q u a r t e r . De v e l o p e d E u r o p e a n e q u i t y m a r k e t s h a d t h e s t r o n g e s t U S D r e t u r n , w h i l e La t i n A m e r i c a n e q u i t y m a r k e t s l a g g e d s l i g h t l y .  Th e J a p a n e s e Y e n d e p r e c i a t e d s i g n i f i c a n t l y d u r i n g t h e q u a r t e r p r i m a r i l y du e t o m o n e t a r y p o l i c y a c t i o n s b y t h e B a n k o f J a p a n . N o t a b l e r e c e n t ne w s i n t h e c o u n t r y i n c l u d e t h e r e c e n t o u s t i n g o f t h e r u l i n g p a r t y a n d el e c t i o n o f S h i n z o A b e , f o r m e r P r i m e M i n i s t e r a n d m e m b e r o f t h e L i b e r a l De m o c r a t i c P a r t y . J a p a n w a s t h e s t r o n g e s t p e r f o r m e r i n l o c a l c u r r e n c y te r m s , a t + 1 7 . 6 % . F o r 2 0 1 2 , a m a j o r i t y o f n o n - U S e q u i t y m a r k e t s w e r e we l l i n t o p o s i t i v e d o u b l e - d i g i t t e r r i t o r y o n a U S D b a s i s . T h e n o t a b l e ex c e p t i o n s w e r e J a p a n ( + 8 . 4 % ) a n d B r a z i l ( + 0 . 3 % ) .  In U S D t e r m s , C h i n a w a s t h e s t r o n g e s t - p e r f o r m i n g e q u i t y m a r k e t d u r i n g th e q u a r t e r , a t + 1 2 . 9 % . C h i n a a l s o e l e c t e d i t s P r e s i d e n t d u r i n g t h e qu a r t e r w h i c h p r o v i d e d m u c h - n e e d e d c l a r i t y t o i n v e s t o r s o n t h e c o u n t r y ’ s lo n g - t e r m g r o w t h p a t h .  In d i a n a n d R u s s i a n e q u i t y m a r k e t s s t r u g g l e d r e l a t i v e t o o t h e r n o n - U S eq u i t i e s d u r i n g t h e q u a r t e r , r e t u r n i n g o n l y + 0 . 5 % a n d + 2 . 5 % , re s p e c t i v e l y , i n U S D .  Fi n a n c i a l s w e r e v e r y s t r o n g p e r f o r m e r s a c r o s s b o t h D e v e l o p e d a n d Em e r g i n g e q u i t i e s d u r i n g t h e q u a r t e r , w h i l e C o n s u m e r D i s c r e t i o n a r y st o c k s i n D e v e l o p e d C o u n t r i e s l e d t h e p a c k . D e v e l o p e d T e l e c o m a n d En e r g y s t o c k s w e r e t h e w o r s t p e r f o r m e r s a n d e n d e d t h e q u a r t e r i n ne g a t i v e t e r r i t o r y . The Market Environment In t e r n a t i o n a l a n d R e g i o n a l M a r k e t In d e x P e r f o r m a n c e ( C o u n t r y C o u n t ) As of December 31, 2012 5. 1 % 5. 2 % 4. 5 % 5. 4 % 12.7% 5. 2 % 7.6%7.0%6.6% 4. 4 % 5. 9 % 6.4% 5. 6 % 5. 9 % 7.1%6.6% 6. 0 % 5. 9 % 0. 0 % 2 . 0 % 4 . 0 % 6 . 0 % 8 . 0 % 1 0 . 0 % 1 2 . 0 % 1 4 . 0 % EM L a t i n A m e r ( 5 ) EM A s i a ( 8 ) EM E u r o p e ( 5 ) Em e r g i n g M k t ( 2 1 ) Pa c i f i c ( 5 ) Eu r o p e ( 1 6 ) EA F E ( 2 2 ) WO R L D x U S ( 2 3 ) AC W o r l d x U S ( 4 4 ) Qu a r t e r P e r f o r m a n c e USDLocal Currency 12 . 5 % 18.2%18.6%17.4%21.9%16.4%17.9%16.7%16.9% 8. 9 % 21.2%25.1%18.6%14.6%19.9%17.9%17.0%17.4% 0. 0 % 5 . 0 % 1 0 . 0 % 1 5 . 0 % 2 0 . 0 % 2 5 . 0 % 3 0 . 0 % EM L a t i n A m e r ( 5 ) EM A s i a ( 8 ) EM E u r o p e ( 5 ) Em e r g i n g M k t ( 2 1 ) Pa c i f i c ( 5 ) Eu r o p e ( 1 6 ) EA F E ( 2 2 ) WO R L D x U S ( 2 3 ) AC W o r l d x U S ( 4 4 ) 1- Y e a r P e r f o r m a n c e USDLocal Currency 6 So u r c e : M S C I ( w w w . m s c i . c o m ) The Market Environment U. S . D o l l a r I n t e r n a t i o n a l I n d e x A t t r i b u t i o n & C o u n t r y D e t a i l As of December 31, 2012 MS C I - E A F E M S C I - A C W I x U S Q u a r t e r 1 - Y e a r Co u n t r y W e i g h t W e i g h t R e t u r n R e t u r n Un i t e d K i n g d o m 2 2 . 6 % 15.4%4.2%15.3% Ja p a n 2 0 . 0 % 1 3 . 6 % 5 . 8 % 8 . 4 % Fr a n c e 9 . 6 % 6 . 5 % 1 0 . 9 % 2 2 . 8 % Au s t r a l i a 8 . 9 % 6 . 1 % 8 . 5 % 3 2 . 1 % Sw i t z e r l a n d 8 . 8 % 6 . 0 % 8 . 0 % 2 1 . 5 % Ge r m a n y 8 . 7 % 5 . 9 % 6 . 9 % 2 2 . 3 % Sw e d e n 3 . 2 % 2 . 2 % 5 . 1 % 2 3 . 4 % Ho n g K o n g 3 . 1 % 2 . 1 % 9 . 9 % 4 . 7 % Sp a i n 3 . 0 % 2 . 1 % 5 . 7 % 2 8 . 3 % Ne t h e r l a n d s 2 . 5 % 1.7%9.5%21.2% It a l y 2 . 3 % 1 . 5 % 9 . 3 % 1 3 . 5 % Si n g a p o r e 1 . 9 % 1 . 3 % 3 . 2 % 3 1 . 0 % De n m a r k 1 . 2 % 0 . 8 % 3 . 3 % 3 1 . 9 % Be l g i u m 1 . 2 % 0 . 8 % 6 . 3 % 4 0 . 7 % No r w a y 0 . 9 % 0 . 6 % 1 . 1 % 1 9 . 7 % Fi n l a n d 0 . 8 % 0 . 5 % 1 3 . 2 % 1 6 . 5 % Is r a e l 0 . 5 % 0 . 4 % - 3 . 8 % - 3 . 9 % Ir e l a n d 0 . 3 % 0 . 2 % 3 . 0 % 6 . 3 % Au s t r i a 0 . 3 % 0 . 2 % 1 9 . 1 % 2 7 . 0 % Po r t u g a l 0 . 2 % 0 . 1 % 1 0 . 5 % 5 . 0 % Ne w Z e a l a n d 0 . 1 % 0 . 1 % 4 . 7 % 3 0 . 4 % Gr e e c e 0 . 1 % 0 . 0 % 2 8 . 1 % 5 . 7 % To t a l E A F E C o u n t r i e s 1 0 0 . 0 % 6 8 . 1 % 6 . 6 % 1 7 . 9 % Ca n a d a 7 . 8 % 0 . 9 % 9 . 9 % To t a l D e v e l o p e d C o u n t r i e s 7 5 . 9 % 6 . 0 % 1 7 . 0 % Ch i n a 4 . 4 % 1 2 . 9 % 2 3 . 1 % Ko r e a 3 . 7 % 4 . 8 % 2 1 . 5 % Br a z i l 3 . 0 % 3 . 6 % 0 . 3 % Ta i w a n 2 . 6 % 1 . 6 % 1 7 . 7 % So u t h A f r i c a 1 . 9 % 6 . 3 % 1 9 . 0 % In d i a 1 . 6 % 0 . 5 % 2 6 . 0 % Ru s s i a 1 . 5 % 2 . 5 % 1 4 . 4 % Me x i c o 1 . 3 % 5 . 8 % 2 9 . 1 % Ma l a y s i a 0 . 8 % 3 . 7 % 1 4 . 3 % In d o n e s i a 0 . 6 % 1 . 1 % 5 . 2 % Th a i l a n d 0 . 6 % 5 . 9 % 3 4 . 9 % Tu r k e y 0 . 5 % 1 8 . 4 % 6 4 . 9 % Ch i l e 0 . 4 % - 0 . 6 % 8 . 3 % Po l a n d 0 . 4 % 1 1 . 7 % 4 1 . 0 % Co l o m b i a 0 . 3 % 1 2 . 6 % 3 5 . 9 % Ph i l i p p i n e s 0 . 2 % 1 1 . 6 % 4 7 . 6 % Pe r u 0 . 1 % 7 . 5 % 2 0 . 2 % Cz e c h R e p u b l i c 0 . 1 % - 3 . 2 % 3 . 5 % Eg y p t 0 . 1 % - 1 0 . 8 % 4 7 . 1 % Hu n g a r y 0 . 1 % - 1 . 5 % 2 2 . 8 % Mo r o c c o 0 . 0 % 1 . 3 % - 1 1 . 5 % To t a l E m e r g i n g C o u n t r i e s 2 4 . 1 % 5 . 6 % 1 8 . 6 % To t a l A C W I x U S C o u n t r i e s 1 0 0 . 0 % 5 . 9 % 1 7 . 4 % MS C I - E A F E Se c t o r W e i g h t Q u ar t e r R e t u r n 1 - Y e a r R e t u r n En e r g y 7. 7 % -0 . 8 % 0. 4 % Ma t e r i a l s 9. 8 % 9. 4 % 13 . 8 % In d u s t r i a l s 12 . 6 % 8. 4 % 17 . 4 % Co n s u m e r D i s c r e t i o na r y 10 . 7 % 12 . 3 % 25 . 4 % Co n s u m e r S t a p l es 11 . 6 % 3. 1 % 17 . 6 % He a l t h C a r e 9. 8 % 2. 1 % 18 . 2 % Fi n a n c i a l s 24 . 7 % 11 . 4 % 33 . 7 % In f o r m a t i o n T e c h n o l o g y 4. 3 % 9. 9 % 8. 9 % Te l e c o m m u n i c a t i o n S e r v i c e s 4. 9 % -4 . 7 % -0 . 2 % Ut i l i t i e s 3. 9 % 1. 5 % 4. 4 % To t a l 10 0 . 0 % 6. 6 % 17 . 9 % MS C I - A C W I x U S Se c t o r W e i g h t Qu a r t e r R e t u r n 1 - Y e a r R e t u r n En e r g y 10 . 3 % -0 . 6 % 2. 3 % Ma t e r i a l s 11 . 0 % 5. 9 % 10 . 5 % In d u s t r i a l s 10 . 6 % 7. 9 % 17 . 3 % Co n s u m e r D i s c r e t i o na r y 9. 5 % 10 . 3 % 23 . 4 % Co n s u m e r S t a p l es 10 . 3 % 4. 1 % 19 . 3 % He a l t h C a r e 7. 1 % 2. 2 % 18 . 7 % Fi n a n c i a l s 25 . 9 % 10 . 4 % 30 . 2 % In f o r m a t i o n T e c h n o l o g y 6. 4 % 7. 5 % 18 . 4 % Te l e c o m m u n i c a t i o n S e r v i c e s 5. 4 % -2 . 4 % 5. 2 % Ut i l i t i e s 3. 5 % 1. 6 % 4. 9 % To t a l 10 0 . 0 % 5. 9 % 17 . 4 % MS C I - E m e r g i n g M k t Se c t o r W e i gh t Q u a r t e r R e t u r n 1 - Y e a r R e t u r n En e r g y 12 . 5 % 1. 0 % 6. 4 % Ma t e r i a l s 11 . 8 % 6. 0 % 10 . 4 % In d u s t r i a l s 6. 5 % 5. 3 % 17 . 2 % Co n s u m e r D i s c r e t i o na r y 7. 9 % 4. 0 % 16 . 5 % Co n s u m e r S t a p l es 8. 8 % 7. 6 % 25 . 6 % He a l t h C a r e 1. 3 % 5. 0 % 33 . 5 % Fi n a n c i a l s 26 . 5 % 10 . 1 % 25 . 9 % In f o r m a t i o n T e c h n o l o g y 13 . 8 % 5. 4 % 29 . 0 % Te l e c o m m u n i c a t i o n S e r v i c e s 7. 7 % 0. 7 % 14 . 5 % Ut i l i t i e s 3. 4 % 1. 6 % 6. 8 % To t a l 10 0 . 0 % 5. 6 % 18 . 6 % 7 So u r c e : B a r c l a y s C a p i t a l L i v e  Th e B a r c l a y s A g g r e g a t e B o n d I n d e x e n d e d 2 0 1 2 b y p o s t i n g a m o d e s t r e t u r n of + 0 . 2 1 % . T h e m o s t r e c e n t q u a r t e r ’ s p e r f o r m a n c e r e p r e s e n t e d t h e 12 t h st r a i g h t q u a r t e r wh e r e t h e i n d e x h a s p o s t e d a p o s i t i v e r e t u r n . T h i s i s t h e lo n g e s t , c o n s e c u t i v e p e r i o d o f p o s i t i v e q u a r t e r s s i n c e t h e i n c e p t i o n o f t h e Ba r c l a y s A g g r e g a t e B o n d I n d e x . J u s t a s i n p r e v i o u s q u a r t e r s , i n v e s t o r ’ s ap p e t i t e f o r i n c r e a s e d i n c o m e r e s u l t e d i n s t r o n g d e m a n d f o r t h e h i g h e r yi e l d i n g a r e a s o f t h e d o m e s t i c b o n d m a r k e t . A c r o s s t h e k e y s e c t o r s o f t h e ma r k e t , o n l y C o r p o r a t e s p o s t e d a p o s i t i v e r e t u r n . F o r t h e t h r e e m o n t h p e r i o d en d i n g D e c e m b e r 3 1 st , C o r p o r a t e s o n c e a g a i n o u t p e r f o r m e d t h e T r e a s u r y a n d MB S s e c t o r s b y 1 1 5 b p s a n d 1 2 6 b p s , r e s p e c t i v e l y .  Wi t h i n t h e U S C o r p o r a t e I n v e s t m e n t G r a d e I n d e x , p e r f o r m a n c e w a s i n v e r s e l y co r r e l a t e d t o q u a l i t y ; t h e l o w e s t r a t e d c r e d i t g r o u p , B a a , o u t p a c e d t h e A - , A A - , an d A a a - r a t e d b o n d s b y 8 0 , 1 3 5 , a n d 1 7 9 b p s , r e s p e c t i v e l y . F r o m a n i n d u s t r y gr o u p p e r s p e c t i v e , F i n a n c i a l s r e t u r n e d + 1 . 9 0 % f o r t h e f o u r t h q u a r t e r f o l l o w e d by a + 0 . 6 8 % r e t u r n o n I n d u s t r i a l s a n d + 0 . 5 7 % r e t u r n o n U t i l i t i e s .  Fo r 2 0 1 2 , i n v e s t o r s w e r e l a r g e l y r e w a r d e d f o r o w n i n g t h e r i s k i e r a s s e t s w i t h i n th e d o m e s t i c , i n v e s t m e n t g r a d e u n i v e r s e . F r o m a s e c t o r a n d q u a l i t y pe r s p e c t i v e , l o w e r q u a l i t y b o n d s o u t p e r f o r m e d t h e h i g h e r q u a l i t y s e c u r i t i e s . On a f u l l - y e a r b a s i s , t h e e x c e s s r e t u r n f o r C o r p o r a t e s , o n a T r e a s u r y d u r a t i o n - ma t c h e d b a s i s , w a s 7 3 4 b a s i s p o i n t s v e r s u s 9 1 b a s i s p o i n t s f o r M B S . W i t h re s p e c t t o q u a l i t y r a t i n g s , t h e e x c e s s r e t u r n f o r B a a - r a t e d b o n d s w a s 8 7 5 ba s i s p o i n t s v e r s u s o n l y 5 9 f o r t h o s e r a t e d A a a .  In v e s t o r s w e r e a l s o r e w a r d e d o v e r t h e p a s t y e a r f o r o w n i n g l o n g e r - d a t e d ma t u r i t i e s . S u p p o r t e d b y s t r o n g c e n t r a l b a n k a c t i o n , t h e l o n g - e n d o f t h e y i e l d cu r v e r a l l i e d s h a r p l y t o e a s i l y b e a t s ho r t a n d i n t e r m e d i a t e b o n d s . B o n d s w i t h ma t u r i t i e s g r e a t e r t h a n 1 0 y e a r s r e t u r n e d 8 . 7 8 % f o r t h e t r a i l i n g 1 2 m o n t h s ve r s u s o n l y 3 . 6 3 % f o r t h o s e i n t h e 3 - 7 y e a r r a n g e .  Fo r t h e t r a i l i n g o n e - y e a r p e r i o d , t h e r e t u rn s i n t h e d o m e s t i c a n d i n t e r n a t i o n a l bo n d m a r k e t s w e r e b a s i c a l l y t h e s a m e , w i t h r e t u r n s o f + 4 . 2 % a n d + 4 . 1 % , re s p e c t i v e l y . AA A , A A , A , B a a , a r e c o m p o n e n t s o f t h e U . S . C o r p o r a t e I n v e s t m e n t G r a d e I n d e x . C o r p o r a t e I G r e p r e s e n t s t h e U . S . C o r p o r a t e I n v e s t m en t G r a d e a n d i s a c o m p o n e n t o f U . S. C r e d i t I n d e x . “ T r e a s u r y ” r e p r esents U.S. Treasury and is a co m p o n e n t o f t h e U . S . G o v e rn m e n t I n d e x . “ M o r t g a g e ” ( U . S . M B S ) i s a c o m p o n e n t o f t h e B a r c l a y s U. S . A g g r e g a t e I n d e x . U . S . G o v e r n m en t a n d U . S . C r e d i t a r e c o m p o n e n t s o f t h e B a r c l a y s U . S . G o v./Credit Index, which is a co m p o n e n t o f t h e B a r c l a y s A g g r e g a t e I n d e x . M u l t i v e r s e r e p r e s e n t s t he B a r c l a y s M u l t i v e r s e I n d e x , w h ic h c o n s i s t s o f t h e G l o b a l A g gr e g a t e a n d G l o b a l H i g h Y i e l d i n d e x e s . The Market Environment Do m e s t i c B o n d S e c t o r & B r o a d / Gl o b a l B o n d M a r k e t P e r f o r m a n c e As of December 31, 2012 -0 . 3 % -1 . 0 % 0. 2 % 0. 2 % 0.7%1.1% -0 . 2 % -0 . 1 % 3.6%1.7%0.7% 0. 2 % -0 . 7 % -3 . 0 % -1 . 0 % 1.0%3.0%5.0% Mu l t i v e r s e Gl o b a l A g g x U S In t e r m e d i a t e A g g Ag g r e g a t e TI P S Co r p o r a t e I G Mo r t g a g e Tr e a s u r y Hi g h Y i e l d Ba a AAA AA A Qu a r t e r P e r f o r m a n c e 4. 8 % 4. 1 % 3. 6 % 4. 2 % 7. 0 % 9.8% 2. 6 % 2. 0 % 15.5%11.1%9.6% 6. 2 % 3. 8 % 0. 0 % 5. 0 % 10.0%15.0%20.0% Mu l t i v e r s e Gl o b a l A g g x U S In t e r m e d i a t e A g g Ag g r e g a t e TI P S Co r p o r a t e I G Mo r t g a g e Tr e a s u r y Hi g h Y i e l d Ba a AAA AA A 1- Y e a r P e r f o r m a n c e 8 So u r c e : U S D e p a r t m e n t o f T r e a s u r y , F R E D - F e d e r a l R e s e r v e o f S t. L o u i s , a n d M o r t g a g e - X . c o m ( f o r L I B O R d a t a p r i o r t o 1 2 - 3 0 - 2 0 1 1 ) .  Af t e r a s t r o n g 3 rd qu a r t e r r a l l y t h a t c a m e o n t h e h e e l s o f d e c i s i v e c e n t r a l ba n k a c t i o n s , d o m e s t i c b o n d m a r k e t s w e r e c a l m e r i n t h e l a s t q u a r t e r o f 20 1 2 . E a r l y i n t h e q u a r t e r , m a r k e t s q u i e t l y d i g e s t e d t h e U . S . e l e c t i o n re s u l t s t h a t s e n t P r e s i d e n t O b a m a b a c k t o t h e W h i t e H o u s e w h i l e k e e p i n g th e l o w e r c h a m b e r o f t h e H o u s e o f R e p r e s e n t a t i v e s u n d e r R e p u b l i c a n co n t r o l . A s t h e q u a r t e r p r o g r e s s e d , a t t e n t i o n t u r n e d t o t h e l o o m i n g f i s c a l cl i f f . T h o u g h W a s h i n g t o n t e c h n i c a l l y w e n t “ o v e r t h e c l i f f ” , b o t h s i d e s re a c h e d a n a g r e e m e n t i n e a r l y J a n u a r y . T h r o u g h o u t t h e q u a r t e r , b o n d yi e l d r o s e a n d f e l l w i t h i n a n a r r o w r a n g e a s m a r k e t s c o n t i n u e d t o r e c e i v e ne w s i n d i c a t i n g a m o d e r a t e t o w e a k U . S . e c o n o m y . A s a r e s u l t , y i e l d le v e l s o n t h e s h o r t - e n d a n d 3 0 - y e a r m a t u r i t i e s o n t h e c u r v e w e r e es s e n t i a l l y u n c h a n g e d , w h i l e t h e 5 - t h r o u g h 1 0 - y e a r m a t u r i t i e s m o v e d wi d e r b y 1 0 a n d 1 4 b p s .  Th o u g h y i e l d l e v e l s c h a n g e d l i t t l e f r o m t h e e n d o f t h e t h i r d q u a r t e r t o t h e en d o f t h e f o u r t h q u a r t e r , t h e r e w a s a d e g r e e o f v o l a t i l i t y l a t e i n t h e qu a r t e r a s t h e 1 0 - y e a r T r e a s u r y y i e l d r o s e 1 9 b a s i s p o i n t s i n D e c e m b e r t o th e e n d t h e y e a r w i t h a y i e l d o f 1 . 7 8 % .  Fo r t h e f u l l y e a r o f 2 0 1 2 , t h e d i r e c t i o n o f t h e y i e l d c u r v e e x h i b i t e d a s i m i l a r st o r y t o t h a t o f t h e 4 th qu a r t e r . W h i l e s h o r t a n d l o n g - t e r m T r e a s u r y r a t e s we r e e s s e n t i a l l y u n c h a n g e d f r o m t h e e n d o f 2 0 1 1 , t h e 5 - t o 1 0 - y e a r ma t u r i t y p o i n t s d i d m o v e l o w e r b y a m o d e s t 1 1 b a s i s p o i n t s . T h o u g h t h e yi e l d c h a n g e o n t h e 1 0 y e a r T r e a s u r y w a s s m a l l , v o l a t i l i t y w a s m u c h hi g h e r a s t h e y i e l d t r a d e d i n a 9 6 b a s i s p o i n t y i e l d r a n g e ( f r o m 1 . 4 3 % t o 2. 3 9 % ) .  At c u r r e n t i n t e r e s t r a t e l e v e l s , i n v e s t o r s m u s t e x t e n d t o 1 0 - y e a r m a t u r i t i e s , or b e y o n d , t o f i n d a T r e a s u r y y i e l d i n e x c e s s o f t h e r a t e o f i n f l a t i o n . S i n c e 20 1 0 , i n v e s t o r s i n l o n g - d a t e d , l o w q u a l i t y b o n d s h a v e b e e n r i c h l y re w a r d e d a s y i e l d s m o v e d l o w e r a n d s p r e a d s c o m p r e s s e d . H o w e v e r , go i n g f o r w a r d , t h e f l a t t e r y i e l d c u r v e a n d l o w n o m i n a l y i e l d s p r o v i d e in v e s t o r s w i t h l i t t l e r e t u r n t o c o m p e n s a t e f o r t h e h i g h l e v e l o f i n t e r e s t r a t e ri s k i n h e r e n t i n l o n g - d a t e d , f i x e d i n c o m e s e c u r i t i e s . F u r t h e r m o r e , t h e dr a m a t i c r a l l y i n C o r p o r a t e s t h a t b e g a n a f t e r t h e c r i s i s i n 2 0 0 8 h a s m o v e d sp r e a d l e v e l s b e l o w t h e i r l o n g - t e r m a v e r a g e s i n b o t h i n v e s t m e n t g r a d e an d h i g h y i e l d . G i v e n t h e t i g h t e r s p r e a d s a n d l o w n o m i n a l y i e l d s o n Tr e a s u r i e s a n d M B S , i n v e s t o r s s h o u l d e x p e c t a n a c t i v e i n v e s t m e n t ma n a g e r ’ s e x c e s s r e t u r n t o b e l o w e r t h a n m a n y e x p e r i e n c e d o v e r t h e l a s t th r e e o r f o u r y e a r s . The Market Environment Ma r k e t R a t e & Y i e l d C u r v e C o m p a r i s o n As of December 31, 2012 0. 0 0 0. 5 0 1. 0 0 1. 5 0 2. 0 0 2. 5 0 3. 0 0 3. 5 0 4. 0 0 4. 5 0 5. 0 0 5. 5 0 1 m o 3 m o 6 m o 1 y r 2 y r 3 y r 5 y r 7 y r 1 0 y r 2 0 y r 3 0 y r Tr e a s u r y Y i e l d C u r v e 12 / 3 1 / 2 0 1 0 12 / 3 0 / 2 0 1 1 9/ 3 0 / 2 0 1 2 12 / 3 1 / 2 0 1 2 -1 . 0 0 -0 . 5 0 0. 0 0 0. 5 0 1. 0 0 1. 5 0 2. 0 0 2. 5 0 3. 0 0 3. 5 0 4. 0 0 4. 5 0 Ja n - 1 2 F e b - 1 2 M a r - 1 2 A p r - 1 2 M a y - 1 2 J u n - 1 2 J u l - 1 2 A u g - 1 2 S e p - 1 2 O c t - 1 2 N o v - 1 2 D e c - 1 2 1- Y e a r T r a i l i n g M a r k e t R a t e s Fe d F u n d s R a t e TE D S p r e a d 3-Month Libor BA A / 1 0 y r S p r e a d 10 y r T r e a s u r y 10yr TIPS 9 December 31, 2012 : $49,377,381 US Cash $49,210 0% US Private Real Estate $3,823,269 8% International Fixed Income $1,619,301 3% US Fixed Income $11,854,040 24% International Equity $4,880,132 10% US Equity $27,151,429 55% September 30, 2012 : $48,821,733 US Cash $1,138,258 2% US Private Real Estate $3,667,547 8% International Fixed Income $1,559,551 3% US Fixed Income $11,773,448 24% International Equity $4,388,632 9% US Equity $26,294,297 54% Asset Allocation By Asset Class Total Fund As of December 31, 2012 Intercontinental market value as of 12/31/2012 calculated using estimated quarter-end fund level performance and is subject to change. 10 December 31, 2012 : $49,377,381 Dana (LC) $15,051,896 30% ICC $9,414,679 19% R & D $49,210 0% Intercontinental $1,930,546 4% American $1,892,723 4% Templeton GB $1,619,301 3% GHA $6,166,614 12% Agincourt $5,687,426 12% Manning & Napier $2,401,463 5% RBC $2,478,669 5% Dana (SC) $2,684,854 5% September 30, 2012 : $48,821,733 Dana (LC) $14,410,423 30% ICC $9,210,498 19% R & D $1,138,258 2% Intercontinental $1,815,959 4% American $1,851,588 4% Templeton GB $1,559,551 3% GHA $6,105,381 13% Agincourt $5,668,067 12% Manning & Napier $2,070,280 4% RBC $2,318,352 5% Dana (SC) $2,673,376 5% Asset Allocation By Manager Total Fund As of December 31, 2012 Intercontinental market value as of 12/31/2012 calculated using estimated quarter-end fund level performance and is subject to change. 11 Asset Allocation vs. Target Allocation Allocation Differences 0.00%2.00%4.00%6.00%8.00%10.00%-2.00 %-4.00 %-6.00 %-8.00 %-10.00 % Cash Equivalent Real Estate Global Fixed Income Fixed Income International Equity Domestic Equity 0.10% -2.26 % -1.72 % 4.01% -0.12 % -0.01 % Market Value Allocation (%)Target (%) Domestic Equity 27,151,429 55.0 55.0 International Equity 4,880,132 9.9 10.0 Fixed Income 11,854,040 24.0 20.0 Global Fixed Income 1,619,301 3.3 5.0 Real Estate 3,823,269 7.7 10.0 Cash Equivalent 49,210 0.1 0.0 Total Fund 49,377,381 100.0 100.0 Asset Allocation vs. Target Allocation Total Fund As of December 31, 2012 Intercontinental market value as of 12/31/2012 calculated using estimated quarter-end fund level performance and is subject to change. 12 Asset Allocation Attributes Domestic EquityInternational Equity Domestic Fixed Income Global Fixed IncomeReal EstateCash Equivalent Total Fund ($)%($)%($)%($)%($)%($)%($)% Total Domestic Equity 26,338,53097.01 --------812,8992.9927,151,42954.99 Dana (Large Cap)14,868,21298.78 --------183,6831.2215,051,89630.48 ICC 8,814,47593.62 --------600,2046.389,414,67919.07 Dana (Small Cap)2,655,84398.92 --------29,0111.082,684,8545.44 Total International Equity --4,880,132100.00 --------4,880,1329.88 RBC International Portfolio --2,478,669100.00 --------2,478,6695.02 Manning & Napier Overseas (EXOSX)--2,401,463100.00 --------2,401,4634.86 Total Fixed Income ----11,626,00586.291,619,30112.02 --228,0351.6913,473,34127.29 Agincourt Capital Management ----5,513,48396.94 ----173,9423.065,687,42611.52 Garcia, Hamilton & Associates ----6,112,52299.12 ----54,0920.886,166,61412.49 Templeton Global Bond Adv (TGBAX)------1,619,301100.00 ----1,619,3013.28 Total Real Estate --------3,823,269100.00 --3,823,2697.74 American Core Realty Fund --------1,892,723100.00 --1,892,7233.83 Intercontinental Real Estate --------1,930,546100.00 --1,930,5463.91 Receipt & Disbursement ----------49,210100.0049,2100.10 Total Fund Portfolio 26,338,53053.344,880,1329.8811,626,00523.551,619,3013.283,823,2697.741,090,1432.2149,377,381100.00 Asset Allocation Total Fund As of December 31, 2012 Intercontinental market value as of 12/31/2012 calculated using estimated quarter-end fund level performance and is subject to change. 13 Financial Reconciliation Quarter to Date Market Value 10/01/2012 ContributionsDistributions Management Fees Other Expenses Return On Investment Market Value 12/31/2012 Total Domestic Equity 26,294,297 788,255 --38,255 -107,132 27,151,429 Dana (Large Cap)14,410,423 772,565 --22,565 --108,527 15,051,896 ICC 9,210,498 11,504 --11,504 -204,182 9,414,679 Dana (Small Cap)2,673,376 4,186 --4,186 -11,478 2,684,854 Total International Equity 4,388,632 204,863 --4,863 -291,500 4,880,132 RBC International Portfolio 2,318,352 4,863 --4,863 -160,317 2,478,669 Manning & Napier Overseas (EXOSX)2,070,280 200,000 ---131,183 2,401,463 Total Fixed Income 13,332,999 3,816 --3,816 -140,342 13,473,341 Agincourt Capital Management 5,668,067 ----19,359 5,687,426 Garcia, Hamilton & Associates 6,105,381 3,816 --3,816 -61,233 6,166,614 Templeton Global Bond Adv (TGBAX)1,559,551 ----59,751 1,619,301 Total Real Estate 3,667,547 ---5,188 -160,910 3,823,269 American Core Realty Fund 1,851,588 ---5,188 -46,323 1,892,723 Intercontinental Real Estate 1,815,959 ----114,587 1,930,546 Receipt & Disbursement 1,138,258 242,725 -1,315,614 --16,215 56 49,210 Total Fund Portfolio 48,821,733 1,239,659 -1,315,614 -52,122 -16,215 699,940 49,377,381 Financial Reconciliation Total Fund 1 Quarter Ending December 31, 2012 Intercontinental market value as of 12/31/2012 calculated using estimated quarter-end fund level performance and is subject to change. 14 Financial Reconciliation Fiscal Year to Date Market Value 10/01/2012 ContributionsDistributions Management Fees Other Expenses Return On Investment Market Value 12/31/2012 Total Domestic Equity 26,294,297 788,255 --38,255 -107,132 27,151,429 Dana (Large Cap)14,410,423 772,565 --22,565 --108,527 15,051,896 ICC 9,210,498 11,504 --11,504 -204,182 9,414,679 Dana (Small Cap)2,673,376 4,186 --4,186 -11,478 2,684,854 Total International Equity 4,388,632 204,863 --4,863 -291,500 4,880,132 RBC International Portfolio 2,318,352 4,863 --4,863 -160,317 2,478,669 Manning & Napier Overseas (EXOSX)2,070,280 200,000 ---131,183 2,401,463 Total Fixed Income 13,332,999 3,816 --3,816 -140,342 13,473,341 Agincourt Capital Management 5,668,067 ----19,359 5,687,426 Garcia, Hamilton & Associates 6,105,381 3,816 --3,816 -61,233 6,166,614 Templeton Global Bond Adv (TGBAX)1,559,551 ----59,751 1,619,301 Total Real Estate 3,667,547 ---5,188 -160,910 3,823,269 American Core Realty Fund 1,851,588 ---5,188 -46,323 1,892,723 Intercontinental Real Estate 1,815,959 ----114,587 1,930,546 Receipt & Disbursement 1,138,258 242,725 -1,315,614 --16,215 56 49,210 Total Fund Portfolio 48,821,733 1,239,659 -1,315,614 -52,122 -16,215 699,940 49,377,381 Financial Reconciliation Total Fund October 1, 2012 To December 31, 2012 Intercontinental market value as of 12/31/2012 calculated using estimated quarter-end fund level performance and is subject to change. 15 Comparative Performance Trailing Returns QTR FYTD 1 YR 3 YR 5 YR Inception Inception Date Total Fund Portfolio (Gross)1.44 (59)1.44 (59)13.69 (30)8.50 (57)3.13 (49)4.82 (82)05/01/1998 Total Fund Policy 1.00 (76)1.00 (76)12.76 (53)9.53 (17)2.99 (59)4.60 (91) All Public Plans-Total Fund Median 1.70 1.70 12.98 8.63 3.12 5.40 Total Fund Portfolio (Net)1.33 1.33 13.11 7.99 2.66 4.25 05/01/1998 Total Fund Policy 1.00 1.00 12.76 9.53 2.99 4.60 Total Equity 1.25 1.25 16.31 8.81 N/A 4.35 07/31/2008 Total Equity Policy 1.19 1.19 16.69 10.16 N/A 4.09 Total Domestic Equity 0.39 (39)0.39 (39)14.85 (65)9.25 (74)2.70 (35)6.69 (44)07/01/2002 Russell 3000 0.25 (42)0.25 (42)16.42 (41)11.20 (37)2.04 (55)5.84 (80) IM U.S. Large Cap Core Equity (SA+CF) Median 0.00 0.00 15.83 10.55 2.20 6.54 Total International Equity 6.36 (49)6.36 (49)25.29 (8)7.50 (20)0.44 (16)4.90 (36)01/01/2006 MSCI EAFE Index 6.60 (43)6.60 (43)17.90 (59)4.04 (61)-3.21 (59)2.67 (64) IM International Equity (SA+CF+MF) Median 6.28 6.28 18.70 4.77 -2.56 3.59 Total Fixed Income 1.05 (7)1.05 (7)8.47 (7)7.14 (13)6.93 (15)5.71 (28)07/01/2002 Barclays Intermediate Aggregate Index 0.18 (87)0.18 (87)3.56 (88)5.22 (80)5.39 (84)5.09 (85) IM U.S. Intermediate Duration (SA+CF) Median 0.41 0.41 4.99 5.76 6.00 5.50 Total Real Estate 4.39 (N/A)4.39 (N/A)13.36 (N/A)13.32 (N/A)-0.93 (N/A)2.94 (N/A)07/01/2006 NCREIF Property Index 2.54 (N/A)2.54 (N/A)10.54 (N/A)12.63 (N/A)2.13 (N/A)5.23 (N/A) IM U.S. Open End Private Real Estate (SA+CF) MedianN/A N/A N/A N/A N/A N/A Comparative Performance Total Fund As of December 31, 2012 Returns for periods greater than 1 yr. are annualized. Returns are expressed as percentages . 16 Comparative Performance Total Fund As of December 31, 2012 QTR FYTD 1 YR 3 YR 5 YR Inception Inception Date Total Domestic Equity Dana (Large Cap)-0.74 (75)-0.74 (75)15.83 (51)10.91 (45)0.99 (78)6.38 (59)07/01/2002 S&P 500 Index -0.38 (60)-0.38 (60)16.00 (48)10.87 (47)1.66 (64)5.65 (87) IM U.S. Large Cap Core Equity (SA+CF) Median 0.00 0.00 15.83 10.55 2.20 6.54 ICC 2.22 (22)2.22 (22)12.64 (83)N/A N/A -5.03 (100)05/01/2011 Russell 3000 Index 0.25 (68)0.25 (68)16.42 (45)11.20 (49)2.04 (60)4.35 (34) IM U.S. All Cap Core Equity (SA+CF) Median 0.72 0.72 16.22 11.19 2.10 2.18 Dana (Small Cap)0.43 (94)0.43 (94)19.75 (22)17.71 (8)5.14 (41)5.75 (81)05/01/2005 Russell 2000 Index 1.85 (67)1.85 (67)16.35 (55)12.25 (82)3.56 (75)6.54 (71) IM U.S. Small Cap Core Equity (SA+CF) Median 2.36 2.36 16.91 14.07 4.63 7.51 Total International Equity RBC International Portfolio 6.92 (38)6.92 (38)31.46 (5)11.12 (3)1.93 (11)6.01 (18)01/01/2006 MSCI EAFE Index 6.60 (48)6.60 (48)17.90 (52)4.04 (63)-3.21 (76)2.67 (72) IM International Large Cap Value Equity (SA+CF) Median6.53 6.53 17.97 4.98 -1.85 3.58 Manning & Napier Overseas (EXOSX)5.89 (67)5.89 (67)19.28 (27)3.30 (65)N/A 9.28 (36)06/01/2009 MSCI EAFE Index 6.60 (44)6.60 (44)17.90 (43)4.04 (50)-3.21 (33)9.15 (37) IM International Multi-Cap Core Equity (MF) Median 6.47 6.47 17.23 3.99 -4.02 8.50 Returns for periods greater than 1 yr. are annualized. Returns are expressed as percentages . 17 Comparative Performance Total Fund As of December 31, 2012 QTR FYTD 1 YR 3 YR 5 YR Inception Inception Date Total Fixed Income Agincourt Capital Management 0.34 (65)0.34 (65)5.87 (50)7.04 (50)N/A 8.52 (33)10/01/2008 Barclays Aggregate Index 0.21 (85)0.21 (85)4.21 (92)6.19 (87)5.95 (82)6.87 (93) IM U.S. Broad Market Core Fixed Income (SA+CF) Median0.46 0.46 5.85 7.00 6.66 8.03 Garcia, Hamilton & Associates 1.00 (9)1.00 (9)9.04 (4)6.75 (16)N/A 7.54 (13)07/01/2008 Barclays Intermediate Aggregate Index 0.18 (87)0.18 (87)3.56 (88)5.22 (80)5.39 (84)5.69 (84) IM U.S. Intermediate Duration (SA+CF) Median 0.41 0.41 4.99 5.76 6.00 6.29 Templeton Global Bond Adv (TGBAX)3.83 (3)3.83 (3)16.15 (1)N/A N/A 13.84 (1)10/01/2011 Citigroup World Government Bond -1.70 (82)-1.70 (82)1.65 (96)4.37 (67)5.27 (51)1.21 (83) IM International Fixed Income (MF) Median 0.15 0.15 6.69 5.29 5.39 5.44 Total Real Estate American Core Realty Fund 2.50 (N/A)2.50 (N/A)11.27 (N/A)12.51 (N/A)-1.36 (N/A)1.96 (N/A)07/01/2006 NCREIF Property Index 2.54 (N/A)2.54 (N/A)10.54 (N/A)12.63 (N/A)2.13 (N/A)5.23 (N/A) IM U.S. Open End Private Real Estate (SA+CF) MedianN/A N/A N/A N/A N/A N/A Intercontinental Real Estate 6.31 (N/A)6.31 (N/A)15.49 (N/A)N/A N/A 15.95 (N/A)10/01/2010 NCREIF Property Index 2.54 (N/A)2.54 (N/A)10.54 (N/A)12.63 (N/A)2.13 (N/A)13.19 (N/A) IM U.S. Open End Private Real Estate (SA+CF) MedianN/A N/A N/A N/A N/A N/A Returns for periods greater than 1 yr. are annualized. Returns are expressed as percentages . 18 Comparative Performance Fiscal Year Returns FY2012FY2011FY2010FY2009FY2008FY2007FY2006 FY2005 Total Fund Portfolio (Gross)18.93 (30)0.08 (56)8.61 (83)0.00 (66)-11.96 (27)11.67 (90)8.65 (51)14.35 (26) Total Fund Policy 19.99 (14)2.54 (13)9.32 (69)-1.86 (82)-14.02 (54)13.39 (68)9.16 (42)9.23 (85) All Public Plans-Total Fund Median 17.95 0.23 9.98 1.25 -13.78 14.43 8.65 12.46 Total Fund Portfolio (Net)18.28 -0.37 8.14 -0.46 -12.30 10.96 7.92 13.82 Total Fund Policy 19.99 2.54 9.32 -1.86 -14.02 13.39 9.16 9.23 Total Equity 25.54 -4.38 10.56 -1.59 N/A N/A N/A N/A Total Equity Policy 27.76 -0.89 9.91 -4.90 N/A N/A N/A N/A Total Domestic Equity 26.53 (71)-2.59 (85)11.15 (29)-3.60 (32)-16.51 (21)14.18 (82)10.21 (57)21.50 (13) Russell 3000 30.20 (44)0.55 (56)10.96 (32)-6.42 (57)-21.52 (61)16.52 (58)10.22 (57)12.69 (73) IM U.S. Large Cap Core Equity (SA+CF) Median 29.69 0.98 9.50 -5.81 -20.49 16.98 10.76 15.21 Total International Equity 20.29 (18)-10.51 (43)8.14 (52)11.28 (28)-30.51 (46)24.22 (71)N/A N/A MSCI EAFE Index 14.33 (69)-8.94 (31)3.71 (75)3.80 (54)-30.13 (43)25.38 (63)19.65 (45)26.32 (56) IM International Equity (SA+CF+MF) Median 16.57 -11.27 8.54 4.69 -31.02 27.91 19.08 27.04 Total Fixed Income 8.82 (7)3.39 (61)9.20 (24)15.33 (8)0.03 (85)5.24 (79)3.64 (83)1.77 (76) Barclays Intermediate Aggregate Index 4.31 (84)4.22 (21)7.52 (78)9.69 (81)4.16 (35)5.33 (71)3.84 (59)2.23 (41) IM U.S. Intermediate Duration (SA+CF) Median 5.57 3.60 8.25 11.48 3.26 5.50 3.91 2.09 Total Real Estate 12.45 (56)15.92 (78)2.44 (79)-32.96 (41)4.98 (36)21.07 (13)N/A N/A NCREIF Property Index 11.00 (80)16.10 (78)5.84 (53)-22.09 (5)5.27 (29)17.31 (71)17.62 (56)19.19 (68) IM U.S. Open End Private Real Estate (SA+CF) Median12.90 16.62 6.39 -34.36 3.60 18.73 18.17 19.98 Comparative Performance Total Fund As of December 31, 2012 Returns for periods greater than 1 yr. are annualized. Returns are expressed as percentages . 19 Comparative Performance Total Fund As of December 31, 2012 FY2012FY2011FY2010FY2009FY2008FY2007FY2006 FY2005 Total Domestic Equity Dana (Large Cap)31.58 (20)-0.89 (70)10.10 (42)-13.66 (97)-12.23 (6)15.43 (72)10.93 (45)18.87 (23) S&P 500 Index 30.20 (44)1.14 (49)10.16 (41)-6.91 (63)-21.98 (67)16.44 (60)10.79 (49)12.25 (78) IM U.S. Large Cap Core Equity (SA+CF) Median 29.69 0.98 9.50 -5.81 -20.49 16.98 10.76 15.21 ICC 17.73 (99)N/A N/A N/A N/A N/A N/A N/A Russell 3000 Index 30.20 (27)0.55 (62)10.96 (51)-6.42 (60)-21.52 (65)16.52 (62)10.22 (39)14.57 (74) IM U.S. All Cap Core Equity (SA+CF) Median 26.95 0.94 10.97 -6.06 -21.09 17.43 9.29 17.88 Dana (Small Cap)39.20 (7)3.82 (14)15.86 (35)-13.06 (84)-21.93 (80)8.02 (88)5.23 (80)N/A Russell 2000 Index 31.91 (53)-3.53 (76)13.35 (72)-9.55 (65)-14.48 (25)12.34 (70)9.92 (32)17.95 (82) IM U.S. Small Cap Core Equity (SA+CF) Median 32.35 -0.25 14.62 -7.80 -17.68 14.74 8.18 21.91 Total International Equity RBC International Portfolio 24.65 (3)-8.87 (57)12.31 (10)7.72 (38)-29.87 (71)24.22 (49)N/A N/A MSCI EAFE Index 14.33 (54)-8.94 (57)3.71 (64)3.80 (63)-30.13 (73)25.38 (40)19.65 (68)26.32 (59) IM International Large Cap Value Equity (SA+CF) Median15.10 -8.43 4.95 5.67 -27.35 23.99 20.79 26.80 Manning & Napier Overseas (EXOSX)16.04 (31)-12.51 (71)2.52 (85)N/A N/A N/A N/A N/A MSCI EAFE Index 14.33 (58)-8.94 (26)3.71 (72)3.80 (40)-30.13 (35)25.38 (42)19.65 (25)26.32 (31) IM International Multi-Cap Core Equity (MF) Median 14.77 -11.05 5.23 1.80 -31.58 24.81 17.80 24.93 Returns for periods greater than 1 yr. are annualized. Returns are expressed as percentages . 20 Comparative Performance Total Fund As of December 31, 2012 FY2012FY2011FY2010FY2009FY2008FY2007FY2006 FY2005 Total Fixed Income Agincourt Capital Management 6.96 (42)4.92 (68)9.55 (38)14.76 (18)N/A N/A N/A N/A Barclays Aggregate Index 5.16 (91)5.26 (49)8.16 (87)10.56 (80)3.65 (33)5.14 (53)3.67 (76)2.80 (82) IM U.S. Broad Market Core Fixed Income (SA+CF) Median6.60 5.25 9.20 12.32 2.56 5.15 3.85 3.14 Garcia, Hamilton & Associates 9.51 (5)2.32 (90)8.87 (28)15.91 (7)N/A N/A N/A N/A Barclays Intermediate Aggregate Index 4.31 (84)4.22 (21)7.52 (78)9.69 (81)4.16 (35)5.33 (71)3.84 (59)2.23 (41) IM U.S. Intermediate Duration (SA+CF) Median 5.57 3.60 8.25 11.48 3.26 5.50 3.91 2.09 Templeton Global Bond Adv (TGBAX)13.25 (1)N/A N/A N/A N/A N/A N/A N/A Citigroup World Government Bond 3.28 (90)4.61 (7)4.98 (63)13.79 (68)5.88 (1)8.69 (40)2.22 (38)3.03 (59) IM International Fixed Income (MF) Median 6.40 1.75 6.49 16.02 -0.08 8.27 1.74 3.39 Total Real Estate American Core Realty Fund 11.57 (69)16.11 (74)2.72 (75)-32.96 (41)4.98 (36)16.31 (81)N/A N/A NCREIF Property Index 11.00 (80)16.10 (78)5.84 (53)-22.09 (5)5.27 (29)17.31 (71)17.62 (56)19.19 (68) IM U.S. Open End Private Real Estate (SA+CF) Median12.90 16.62 6.39 -34.36 3.60 18.73 18.17 19.98 Intercontinental Real Estate 13.33 (42)15.80 (79)N/A N/A N/A N/A N/A N/A NCREIF Property Index 11.00 (80)16.10 (78)5.84 (53)-22.09 (5)5.27 (29)17.31 (71)17.62 (56)19.19 (68) IM U.S. Open End Private Real Estate (SA+CF) Median12.90 16.62 6.39 -34.36 3.60 18.73 18.17 19.98 Returns for periods greater than 1 yr. are annualized. Returns are expressed as percentages . 21 Plan Sponsor Peer Group Analysis - All Public Plans-Total Fund Comparative Performance -22.00 -19.00 -16.00 -13.00 -10.00 -7.00 -4.00 -1.00 2.00 5.00 8.00 11.00 14.00 17.00 20.00 23.00 26.00 R etu r n Oct-2011 To Sep-2012 Oct-2010 To Sep-2011 Oct-2009 To Sep-2010 Oct-2008 To Sep-2009 Oct-2007 To Sep-2008 ŁTotal Fund18.93 (30)0.08 (56)8.61 (83)0.00 (66)-11.96 (27) ŁTotal Policy19.99 (14)2.54 (13)9.32 (69)-1.86 (82)-14.02 (54) Median17.950.239.981.25-13.78 -2.00 -1.00 0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00 10.00 11.00 12.00 13.00 14.00 15.00 16.00 17.00 17.67 R etu r n QTRFYTD1 YR2 YR3 YR4 YR5 YR ŁTotal Fund1.44 (59)1.44 (59)13.69 (30)6.51 (51)8.50 (57)10.04 (82)3.13 (49) ŁTotal Policy1.00 (76)1.00 (76)12.76 (53)7.61 (11)9.53 (17)11.73 (31)2.99 (59) Median1.70 1.7012.98 6.53 8.6311.18 3.12 1 Qtr Ending Sep-2012 1 Qtr Ending Jun-2012 1 Qtr Ending Mar-2012 1 Qtr Ending Dec-2011 1 Qtr Ending Sep-2011 1 Qtr Ending Jun-2011 Total Fund 5.02 (34)-2.58 (72)9.55 (11)6.11 (50)-11.22 (74)0.32 (85) Total Policy 4.78 (50)-1.84 (46)8.54 (38)7.48 (10)-9.39 (37)1.10 (49) All Public Plans-Total Fund Median 4.77 -1.95 8.17 6.11 -10.23 1.09 As of December 31, 2012 Performance Review Total Fund NONE 22 Peer Group Scattergram - 3 Years 3 Yr Rolling Under/Over Performance - 5 Years Peer Group Scattergram - 5 Years 3 Yr Rolling Percentile Ranking - 5 Years Historical Statistics - 3 Years Historical Statistics - 5 Years 0.0 25.0 50.0 75.0 100.0R etu r n Per cen ti l e R an k 3/08 9/08 3/09 9/09 3/10 9/10 3/11 9/11 3/12 12/12 Total Period 5-25 Count 25-Median Count Median-75 Count 75-95 Count ŁTotal Fund20 0 (0%)3 (15%)14 (70%)3 (15%) ŁTotal Policy20 4 (20%)1 (5%)8 (40%)7 (35%) Over Performance Under Performance Earliest Date Latest Date -6.0 0.0 6.0 12.0 18.0 21.9 To tal F u n d (% ) -9.0 -6.0 -3.0 0.0 3.0 6.0 9.0 12.0 15.0 18.0 21.0 Total Policy (%) Over Performance Under Performance 8.40 8.80 9.20 9.60 R etu r n (% ) 11.10 11.15 11.20 11.25 11.30 11.35 11.40 11.45 11.47 Risk (Standard Deviation %) Return Standard Deviation ŁTotal Fund 8.50 11.43 ŁTotal Policy 9.53 11.28 ¾Median 8.63 11.13 3.00 3.05 3.10 3.15 R etu r n (% ) 12.0 12.3 12.6 12.9 13.2 13.5 13.8 14.1 14.4 14.7 14.9 Risk (Standard Deviation %) Return Standard Deviation ŁTotal Fund 3.13 12.32 ŁTotal Policy 2.99 14.58 ¾Median 3.12 13.73 Tracking Error Up Market Capture Down Market Capture Alpha Information Ratio Sharpe Ratio Beta Downside Risk Total Fund 2.22 95.98 105.14 -0.87 -0.42 0.77 0.99 7.22 Total Policy 0.00 100.00 100.00 0.00 N/A 0.86 1.00 6.69 90 Day U.S. Treasury Bill 11.28 0.48 -0.38 0.10 -0.86 N/A 0.00 0.00 Tracking Error Up Market Capture Down Market Capture Alpha Information Ratio Sharpe Ratio Beta Downside Risk Total Fund 4.15 86.63 83.20 0.57 -0.04 0.27 0.82 8.25 Total Policy 0.00 100.00 100.00 0.00 N/A 0.24 1.00 9.83 90 Day U.S. Treasury Bill 14.77 0.49 -4.07 0.56 -0.24 N/A -0.01 0.00 As of December 31, 2012 Performance Review Total Fund NONE 23 Peer Group Analysis - IM U.S. Large Cap Core Equity (SA+CF) Comparative Performance -40.00 -35.00 -30.00 -25.00 -20.00 -15.00 -10.00 -5.00 0.00 5.00 10.00 15.00 20.00 25.00 30.00 35.00 40.00 45.00 R etu r n Oct-2011 To Sep-2012 Oct-2010 To Sep-2011 Oct-2009 To Sep-2010 Oct-2008 To Sep-2009 Oct-2007 To Sep-2008 ŁDana LC31.58 (20)-0.89 (70)10.10 (42)-13.66 (97)-12.23 (6) ŁS&P 500 Index30.20 (44)1.14 (49)10.16 (41)-6.91 (63)-21.98 (67) Median29.690.989.50-5.81-20.49 -6.00 -4.00 -2.00 0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 18.00 20.00 22.00 24.00 25.26 R etu r n QTRFYTD1 YR2 YR3 YR4 YR5 YR ŁDana LC-0.74 (75)-0.74 (75)15.83 (51)8.95 (46)10.91 (45)12.75 (86)0.99 (78) ŁS&P 500 Index-0.38 (60)-0.38 (60)16.00 (48)8.84 (48)10.87 (47)14.58 (50)1.66 (64) Median 0.00 0.0015.83 8.6410.5514.55 2.20 1 Qtr Ending Sep-2012 1 Qtr Ending Jun-2012 1 Qtr Ending Mar-2012 1 Qtr Ending Dec-2011 1 Qtr Ending Sep-2011 1 Qtr Ending Jun-2011 Dana LC 5.18 (84)-2.14 (21)13.37 (44)12.76 (22)-16.65 (78)0.99 (38) S&P 500 Index 6.35 (54)-2.75 (28)12.59 (61)11.82 (50)-13.87 (30)0.10 (62) IM U.S. Large Cap Core Equity (SA+CF) Median 6.43 -3.63 13.07 11.80 -14.84 0.47 Performance Review (Fiscal Years) As of December 31, 2012 Dana LC NONE 24 Peer Group Scattergram - 3 Years 3 Yr Rolling Under/Over Performance - 5 Years Peer Group Scattergram - 5 Years 3 Yr Rolling Percentile Ranking - 5 Years Historical Statistics - 3 Years Historical Statistics - 5 Years 0.0 25.0 50.0 75.0 100.0R etu r n Per cen ti l e R an k 3/08 9/08 3/09 9/09 3/10 9/10 3/11 9/11 3/12 12/12 Total Period 5-25 Count 25-Median Count Median-75 Count 75-95 Count ŁDana LC 20 3 (15%)6 (30%)6 (30%)5 (25%) ŁS&P 500 Index20 0 (0%)5 (25%)14 (70%)1 (5%) Over Performance Under Performance Earliest Date Latest Date -10.0 0.0 10.0 20.0 29.7 D an a L C (%) -15.0 -10.0 -5.0 0.0 5.0 10.0 15.0 20.0 25.0 29.7 S&P 500 Index (%) Over Performance Under Performance 10.60 10.80 10.96 R etu r n (% ) 17.00 17.10 17.20 17.30 17.40 17.50 17.60 17.70 17.80 17.87 Risk (Standard Deviation %) Return Standard Deviation ŁDana LC 10.91 17.63 ŁS&P 500 Index 10.87 17.03 ¾Median 10.55 17.76 1.20 1.60 2.00 2.38 R etu r n (% ) 21.24 21.26 21.28 21.30 21.32 21.34 21.36 21.38 21.40 21.42 21.43 Risk (Standard Deviation %) Return Standard Deviation ŁDana LC 0.99 21.41 ŁS&P 500 Index 1.66 21.26 ¾Median 2.20 21.31 Tracking Error Up Market Capture Down Market Capture Alpha Information Ratio Sharpe Ratio Beta Downside Risk Dana LC 2.22 98.08 96.71 0.29 0.00 0.77 0.97 9.02 S&P 500 Index 0.00 100.00 100.00 0.00 N/A 0.76 1.00 9.16 90 Day U.S. Treasury Bill 15.09 0.26 -0.18 0.10 -0.76 N/A 0.00 0.01 Tracking Error Up Market Capture Down Market Capture Alpha Information Ratio Sharpe Ratio Beta Downside Risk Dana LC 3.24 94.84 96.83 -0.59 -0.20 0.12 0.98 14.19 S&P 500 Index 0.00 100.00 100.00 0.00 N/A 0.16 1.00 13.93 90 Day U.S. Treasury Bill 18.99 0.45 -1.60 0.53 -0.16 N/A -0.01 0.01 Performance Review (Fiscal Years) As of December 31, 2012 Dana LC NONE 25 Peer Group Analysis - IM U.S. All Cap Core Equity (SA+CF) Comparative Performance -35.00 -30.00 -25.00 -20.00 -15.00 -10.00 -5.00 0.00 5.00 10.00 15.00 20.00 25.00 30.00 35.00 40.00 45.00 R etu r n Oct-2011 To Sep-2012 Oct-2010 To Sep-2011 Oct-2009 To Sep-2010 Oct-2008 To Sep-2009 Oct-2007 To Sep-2008 ŁICC17.73 (99)N/A N/A N/A N/A ŁR300030.20 (27)0.55 (62)10.96 (51)-6.42 (60)-21.52 (65) Median26.95 0.9410.97-6.06-21.09 -6.00 -4.00 -2.00 0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 18.00 20.00 22.00 24.00 26.00 27.15 R etu r n QTR FYTD 1 YR 2 YR 3 YR 4 YR 5 YR ŁICC2.22 (22)2.22 (22)12.64 (83)N/A N/A N/A N/A ŁR30000.25 (68)0.25 (68)16.42 (45)8.45 (36)11.20 (49)15.26 (46)2.04 (60) Median0.72 0.7216.22 7.6711.1915.10 2.10 1 Qtr Ending Sep-2012 1 Qtr Ending Jun-2012 1 Qtr Ending Mar-2012 1 Qtr Ending Dec-2011 1 Qtr Ending Sep-2011 1 Qtr Ending Jun-2011 ICC 6.51 (33)-8.57 (98)13.17 (39)6.83 (93)-18.60 (80)N/A R3000 6.23 (38)-3.15 (32)12.87 (51)12.12 (20)-15.28 (43)-0.03 (62) IM U.S. All Cap Core Equity (SA+CF) Median 5.97 -4.14 12.87 11.41 -15.66 0.11 Performance Review (Fiscal Years) As of December 31, 2012 ICC NONE 26 Peer Group Scattergram - 3 Years 3 Yr Rolling Under/Over Performance - 5 Years Peer Group Scattergram - 5 Years 3 Yr Rolling Percentile Ranking - 5 Years Historical Statistics - 3 Years Historical Statistics - 5 Years 0.0 25.0 50.0 75.0 100.0R etu r n Per cen ti l e R an k 3/08 9/08 3/09 9/09 3/10 9/10 3/11 9/11 3/12 12/12 Total Period 5-25 Count 25-Median Count Median-75 Count 75-95 Count ŁICC 0 0 0 0 0 ŁR300020 0 (0%)5 (25%)15 (75%)0 (0%) No data found. 11.190 11.196 11.202 11.207 R etu r n (% ) 17.79 17.82 17.85 17.88 17.91 17.94 17.97 18.00 Risk (Standard Deviation %) Return Standard Deviation ŁICC N/A N/A ŁR3000 11.20 17.81 ¾Median 11.19 17.98 2.04 2.06 2.08 2.10 R etu r n (% ) 22.04 22.05 22.06 22.07 22.08 22.09 22.10 22.11 22.12 Risk (Standard Deviation %) Return Standard Deviation ŁICC N/A N/A ŁR3000 2.04 22.04 ¾Median 2.10 22.11 Tracking Error Up Market Capture Down Market Capture Alpha Information Ratio Sharpe Ratio Beta Downside Risk ICC N/A N/A N/A N/A N/A N/A N/A N/A R3000 0.00 100.00 100.00 0.00 N/A 0.75 1.00 9.63 90 Day U.S. Treasury Bill 15.73 0.24 -0.17 0.10 -0.75 N/A 0.00 0.01 Tracking Error Up Market Capture Down Market Capture Alpha Information Ratio Sharpe Ratio Beta Downside Risk ICC N/A N/A N/A N/A N/A N/A N/A N/A R3000 0.00 100.00 100.00 0.00 N/A 0.18 1.00 14.46 90 Day U.S. Treasury Bill 19.71 0.43 -1.53 0.53 -0.18 N/A -0.01 0.01 Performance Review (Fiscal Years) As of December 31, 2012 ICC NONE 27 Peer Group Analysis - IM U.S. Small Cap Core Equity (SA+CF) Comparative Performance -40.00 -35.00 -30.00 -25.00 -20.00 -15.00 -10.00 -5.00 0.00 5.00 10.00 15.00 20.00 25.00 30.00 35.00 40.00 45.00 50.00 52.86 R etu r n Oct-2011 To Sep-2012 Oct-2010 To Sep-2011 Oct-2009 To Sep-2010 Oct-2008 To Sep-2009 Oct-2007 To Sep-2008 ŁDana SC39.20 (7)3.82 (14)15.86 (35)-13.06 (84)-21.93 (80) ŁR200031.91 (53)-3.53 (76)13.35 (72)-9.55 (65)-14.48 (25) Median32.35-0.2514.62-7.80-17.68 -4.00 -2.00 0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 18.00 20.00 22.00 24.00 26.00 28.00 30.00 R etu r n QTR FYTD1 YR 2 YR 3 YR 4 YR 5 YR ŁDana SC0.43 (94)0.43 (94)19.75 (22)10.65 (13)17.71 (8)18.71 (43)5.14 (41) ŁR20001.85 (67)1.85 (67)16.35 (55)5.59 (81)12.25 (82)15.81 (82)3.56 (75) Median2.36 2.3616.91 7.5014.0718.36 4.63 1 Qtr Ending Sep-2012 1 Qtr Ending Jun-2012 1 Qtr Ending Mar-2012 1 Qtr Ending Dec-2011 1 Qtr Ending Sep-2011 1 Qtr Ending Jun-2011 Dana SC 6.89 (17)-3.46 (27)15.55 (15)16.75 (33)-19.70 (23)0.48 (27) R2000 5.25 (54)-3.47 (27)12.44 (68)15.47 (55)-21.87 (57)-1.61 (78) IM U.S. Small Cap Core Equity (SA+CF) Median 5.40 -4.39 13.24 15.71 -21.47 -0.17 Performance Review (Fiscal Years) As of December 31, 2012 Dana SC NONE 28 Peer Group Scattergram - 3 Years 3 Yr Rolling Under/Over Performance - 5 Years Peer Group Scattergram - 5 Years 3 Yr Rolling Percentile Ranking - 5 Years Historical Statistics - 3 Years Historical Statistics - 5 Years 0.0 25.0 50.0 75.0 100.0R etu r n Per cen ti l e R an k 3/08 9/08 3/09 9/09 3/10 9/10 3/11 9/11 3/12 12/12 Total Period 5-25 Count 25-Median Count Median-75 Count 75-95 Count ŁDana SC19 3 (16%)1 (5%)4 (21%)11 (58%) ŁR200020 0 (0%)5 (25%)9 (45%)6 (30%) Over Performance Under Performance Earliest Date Latest Date -22.0 -11.0 0.0 11.0 22.0 33.0 D an a SC (%) -20.0 -10.0 0.0 10.0 20.0 30.0 37.5 R2000 (%) Over Performance Under Performance 12.00 14.00 16.00 18.00 R etu r n (% ) 21.54 21.57 21.60 21.63 21.66 21.69 21.72 21.75 21.78 21.81 Risk (Standard Deviation %) Return Standard Deviation ŁDana SC 17.71 21.77 ŁR2000 12.25 21.59 ¾Median 14.07 21.55 3.60 4.20 4.80 5.40 R etu r n (% ) 24.60 24.80 25.00 25.20 25.40 25.60 25.80 26.00 26.13 Risk (Standard Deviation %) Return Standard Deviation ŁDana SC 5.14 24.64 ŁR2000 3.56 25.72 ¾Median 4.63 25.94 Tracking Error Up Market Capture Down Market Capture Alpha Information Ratio Sharpe Ratio Beta Downside Risk Dana SC 4.56 98.52 76.88 5.74 1.01 0.94 0.93 10.94 R2000 0.00 100.00 100.00 0.00 N/A 0.67 1.00 12.41 90 Day U.S. Treasury Bill 20.20 0.19 -0.14 0.10 -0.67 N/A 0.00 0.01 Tracking Error Up Market Capture Down Market Capture Alpha Information Ratio Sharpe Ratio Beta Downside Risk Dana SC 5.71 89.50 83.72 1.75 0.19 0.31 0.90 16.36 R2000 0.00 100.00 100.00 0.00 N/A 0.25 1.00 17.52 90 Day U.S. Treasury Bill 24.43 0.55 -0.96 0.53 -0.25 N/A 0.00 0.01 Performance Review (Fiscal Years) As of December 31, 2012 Dana SC NONE 29 Peer Group Analysis - IM International Large Cap Value Equity (SA+CF) Comparative Performance -45.00 -40.00 -35.00 -30.00 -25.00 -20.00 -15.00 -10.00 -5.00 0.00 5.00 10.00 15.00 20.00 25.00 30.00 35.00 R etu r n Oct-2011 To Sep-2012 Oct-2010 To Sep-2011 Oct-2009 To Sep-2010 Oct-2008 To Sep-2009 Oct-2007 To Sep-2008 ŁRBC24.65 (3)-8.87 (57)12.31 (10)7.72 (38)-29.87 (71) ŁMSCI EAFE14.33 (54)-8.94 (57)3.71 (64)3.80 (63)-30.13 (73) Median15.10-8.434.955.67-27.35 -13.00 -10.00 -7.00 -4.00 -1.00 2.00 5.00 8.00 11.00 14.00 17.00 20.00 23.00 26.00 29.00 32.00 35.00 38.00 R etu r n QTRFYTD1 YR2 YR3 YR4 YR5 YR ŁRBC 6.92 (38)6.92 (38)31.46 (5)5.16 (18)11.12 (3)14.99 (16)1.93 (11) ŁMSCI EAFE6.60 (48)6.60 (48)17.90 (52)2.01 (58)4.04 (63)10.51 (65)-3.21 (76) Median6.53 6.5317.97 2.43 4.9811.28-1.85 1 Qtr Ending Sep-2012 1 Qtr Ending Jun-2012 1 Qtr Ending Mar-2012 1 Qtr Ending Dec-2011 1 Qtr Ending Sep-2011 1 Qtr Ending Jun-2011 RBC 11.26 (2)-6.04 (35)17.62 (2)1.38 (91)-21.21 (79)0.62 (73) MSCI EAFE 6.98 (57)-6.85 (50)10.98 (50)3.38 (57)-18.95 (55)1.83 (42) IM International Large Cap Value Equity (SA+CF) Median 7.28 -6.86 10.89 3.59 -18.76 1.46 Performance Review (Fiscal Years) As of December 31, 2012 RBC NONE 30 Peer Group Scattergram - 3 Years 3 Yr Rolling Under/Over Performance - 5 Years Peer Group Scattergram - 5 Years 3 Yr Rolling Percentile Ranking - 5 Years Historical Statistics - 3 Years Historical Statistics - 5 Years 0.0 25.0 50.0 75.0 100.0R etu r n Per cen ti l e R an k 3/08 9/08 3/09 9/09 3/10 9/10 3/11 9/11 3/12 12/12 Total Period 5-25 Count 25-Median Count Median-75 Count 75-95 Count ŁRBC 17 5 (29%)8 (47%)2 (12%)2 (12%) ŁMSCI EAFE20 0 (0%)1 (5%)18 (90%)1 (5%) Over Performance Under Performance Earliest Date Latest Date -10.0 0.0 10.0 20.0 R B C (% ) -16.0 -12.0 -8.0 -4.0 0.0 4.0 8.0 12.0 16.0 20.0 23.5 MSCI EAFE (%) Over Performance Under Performance 3.00 6.00 9.00 12.00 R etu r n (% ) 19.20 19.50 19.80 20.10 20.40 20.70 21.00 21.30 21.60 Risk (Standard Deviation %) Return Standard Deviation ŁRBC 11.12 21.22 ŁMSCI EAFE 4.04 19.38 ¾Median 4.98 19.25 -4.00 -2.00 0.00 2.00 R etu r n (% ) 22.80 23.20 23.60 24.00 24.40 24.80 25.20 25.60 26.00 Risk (Standard Deviation %) Return Standard Deviation ŁRBC 1.93 22.96 ŁMSCI EAFE -3.21 25.68 ¾Median -1.85 24.71 Tracking Error Up Market Capture Down Market Capture Alpha Information Ratio Sharpe Ratio Beta Downside Risk RBC 6.92 108.91 83.48 7.15 0.97 0.63 0.96 12.13 MSCI EAFE 0.00 100.00 100.00 0.00 N/A 0.30 1.00 13.29 90 Day U.S. Treasury Bill 19.32 0.19 -0.17 0.10 -0.30 N/A 0.00 0.01 Tracking Error Up Market Capture Down Market Capture Alpha Information Ratio Sharpe Ratio Beta Downside Risk RBC 8.78 91.30 77.24 4.55 0.52 0.17 0.82 14.69 MSCI EAFE 0.00 100.00 100.00 0.00 N/A -0.04 1.00 17.64 90 Day U.S. Treasury Bill 23.40 0.39 -1.20 0.51 0.04 N/A 0.00 0.01 Performance Review (Fiscal Years) As of December 31, 2012 RBC NONE 31 Peer Group Analysis - IM International Multi-Cap Core Equity (MF) Comparative Performance -45.00 -40.00 -35.00 -30.00 -25.00 -20.00 -15.00 -10.00 -5.00 0.00 5.00 10.00 15.00 20.00 25.00 30.00 34.93 R etu r n Oct-2011 To Sep-2012 Oct-2010 To Sep-2011 Oct-2009 To Sep-2010 Oct-2008 To Sep-2009 Oct-2007 To Sep-2008 ŁM & N16.04 (31)-12.51 (71)2.52 (85)N/A N/A ŁMSCI EAFE14.33 (58)-8.94 (26)3.71 (72)3.80 (40)-30.13 (35) Median14.77-11.055.231.80-31.58 -13.00 -10.00 -7.00 -4.00 -1.00 2.00 5.00 8.00 11.00 14.00 17.00 20.00 23.00 26.00 29.00 32.00 33.76 R etu r n QTRFYTD1 YR2 YR3 YR4 YR5 YR ŁM & N5.89 (67)5.89 (67)19.28 (27)0.34 (59)3.30 (65)N/A N/A ŁMSCI EAFE6.60 (44)6.60 (44)17.90 (43)2.01 (34)4.04 (50)10.51 (46)-3.21 (33) Median6.47 6.4717.23 0.81 3.9910.19-4.02 1 Qtr Ending Sep-2012 1 Qtr Ending Jun-2012 1 Qtr Ending Mar-2012 1 Qtr Ending Dec-2011 1 Qtr Ending Sep-2011 1 Qtr Ending Jun-2011 M & N 6.93 (32)-9.28 (90)16.11 (2)3.02 (80)-23.70 (91)1.88 (39) MSCI EAFE 6.98 (29)-6.85 (52)10.98 (58)3.38 (77)-18.95 (28)1.83 (39) IM International Multi-Cap Core Equity (MF) Median 6.39 -6.82 11.29 4.13 -20.86 1.31 Performance Review (Fiscal Years) As of December 31, 2012 M & N NONE 32 Peer Group Scattergram - 3 Years 3 Yr Rolling Under/Over Performance - 5 Years Peer Group Scattergram - 5 Years 3 Yr Rolling Percentile Ranking - 5 Years Historical Statistics - 3 Years Historical Statistics - 5 Years 0.0 25.0 50.0 75.0 100.0R etu r n Per cen ti l e R an k 3/08 9/08 3/09 9/09 3/10 9/10 3/11 9/11 3/12 12/12 Total Period 5-25 Count 25-Median Count Median-75 Count 75-95 Count ŁM & N 3 0 (0%)1 (33%)2 (67%)0 (0%) ŁMSCI EAFE20 0 (0%)20 (100%)0 (0%)0 (0%) Under Performance Earliest Date Latest Date 2.0 4.0 6.0 7.9 M & N (%) 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 7.9 MSCI EAFE (%) Over Performance Under Performance 3.30 3.60 3.90 4.20 R etu r n (% ) 19.20 19.50 19.80 20.10 20.40 20.70 21.00 21.26 Risk (Standard Deviation %) Return Standard Deviation ŁM & N 3.30 20.99 ŁMSCI EAFE 4.04 19.32 ¾Median 3.99 19.41 -3.90 -3.60 -3.30 -3.09 R etu r n (% ) 23.25 23.30 23.35 23.40 23.45 23.50 23.55 23.60 Risk (Standard Deviation %) Return Standard Deviation ŁM & N N/A N/A ŁMSCI EAFE -3.21 23.29 ¾Median -4.02 23.57 Tracking Error Up Market Capture Down Market Capture Alpha Information Ratio Sharpe Ratio Beta Downside Risk M & N 4.52 103.89 106.30 -0.72 -0.08 0.26 1.06 14.81 MSCI EAFE 0.00 100.00 100.00 0.00 N/A 0.30 1.00 13.29 90 Day U.S. Treasury Bill 19.32 0.19 -0.17 0.10 -0.30 N/A 0.00 0.01 Tracking Error Up Market Capture Down Market Capture Alpha Information Ratio Sharpe Ratio Beta Downside Risk M & N N/A N/A N/A N/A N/A N/A N/A N/A MSCI EAFE 0.00 100.00 100.00 0.00 N/A -0.04 1.00 17.64 90 Day U.S. Treasury Bill 23.40 0.39 -1.20 0.51 0.04 N/A 0.00 0.01 Performance Review (Fiscal Years) As of December 31, 2012 M & N NONE 33 Peer Group Analysis - IM U.S. Broad Market Core Fixed Income (SA+CF) Comparative Performance -10.00 -8.00 -6.00 -4.00 -2.00 0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 18.00 20.00 22.00 R etu r n Oct-2011 To Sep-2012 Oct-2010 To Sep-2011 Oct-2009 To Sep-2010 Oct-2008 To Sep-2009 Oct-2007 To Sep-2008 ŁAgincourt6.96 (42)4.92 (68)9.55 (38)14.76 (18)N/A ŁBC Agg5.16 (91)5.26 (49)8.16 (87)10.56 (80)3.65 (33) Median6.60 5.25 9.2012.32 2.56 -2.00 -1.00 0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00 10.00 11.00 12.00 13.00 R etu r n QTRFYTD1 YR 2 YR 3 YR 4 YR 5 YR ŁAgincourt0.34 (65)0.34 (65)5.87 (50)6.73 (50)7.04 (50)7.16 (68)N/A ŁBC Agg0.21 (85)0.21 (85)4.21 (92)6.01 (87)6.19 (87)6.12 (90)5.95 (82) Median0.46 0.46 5.85 6.72 7.00 7.82 6.66 1 Qtr Ending Sep-2012 1 Qtr Ending Jun-2012 1 Qtr Ending Mar-2012 1 Qtr Ending Dec-2011 1 Qtr Ending Sep-2011 1 Qtr Ending Jun-2011 Agincourt 2.21 (44)2.03 (70)1.18 (39)1.38 (36)3.04 (61)2.35 (25) BC Agg 1.58 (90)2.06 (68)0.30 (90)1.12 (71)3.82 (27)2.29 (38) IM U.S. Broad Market Core Fixed Income (SA+CF) Median 2.14 2.15 1.03 1.26 3.30 2.24 Performance Review (Fiscal Years) As of December 31, 2012 Agincourt NONE 34 Peer Group Scattergram - 3 Years 3 Yr Rolling Under/Over Performance - 5 Years Peer Group Scattergram - 5 Years 3 Yr Rolling Percentile Ranking - 5 Years Historical Statistics - 3 Years Historical Statistics - 5 Years 0.0 25.0 50.0 75.0 100.0R etu r n Per cen ti l e R an k 3/08 9/08 3/09 9/09 3/10 9/10 3/11 9/11 3/12 12/12 Total Period 5-25 Count 25-Median Count Median-75 Count 75-95 Count ŁAgincourt6 0 (0%)2 (33%)4 (67%)0 (0%) ŁBC Agg20 0 (0%)5 (25%)6 (30%)9 (45%) Over Performance Earliest Date Latest Date 6.0 7.0 8.0 9.0 10.0 Ag i n co u r t (%) 6.0 6.5 7.0 7.5 8.0 8.5 9.0 9.5 10.0 BC Agg (%) Over Performance Under Performance 6.30 6.60 6.90 7.17 R etu r n (% ) 2.50 2.55 2.60 2.65 2.70 2.75 2.80 2.85 Risk (Standard Deviation %) Return Standard Deviation ŁAgincourt 7.04 2.55 ŁBC Agg 6.19 2.80 ¾Median 7.00 2.54 6.00 6.30 6.60 6.76 R etu r n (% ) 3.20 3.25 3.30 3.35 3.40 3.45 3.50 3.55 3.60 3.65 3.70 3.75 Risk (Standard Deviation %) Return Standard Deviation ŁAgincourt N/A N/A ŁBC Agg 5.95 3.24 ¾Median 6.66 3.69 Tracking Error Up Market Capture Down Market Capture Alpha Information Ratio Sharpe Ratio Beta Downside Risk Agincourt 0.70 110.67 94.51 0.92 1.14 2.76 0.98 0.83 BC Agg 0.00 100.00 100.00 0.00 N/A 2.49 1.00 0.80 90 Day U.S. Treasury Bill 2.39 1.11 -2.16 0.11 -2.49 N/A 0.00 0.01 Tracking Error Up Market Capture Down Market Capture Alpha Information Ratio Sharpe Ratio Beta Downside Risk Agincourt N/A N/A N/A N/A N/A N/A N/A N/A BC Agg 0.00 100.00 100.00 0.00 N/A 1.51 1.00 1.63 90 Day U.S. Treasury Bill 3.54 3.86 -9.54 0.55 -1.51 N/A -0.01 0.01 Performance Review (Fiscal Years) As of December 31, 2012 Agincourt NONE 35 Peer Group Analysis - IM U.S. Intermediate Duration (SA+CF) Comparative Performance -6.00 -4.00 -2.00 0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 18.00 20.00 R etu r n Oct-2011 To Sep-2012 Oct-2010 To Sep-2011 Oct-2009 To Sep-2010 Oct-2008 To Sep-2009 Oct-2007 To Sep-2008 ŁGHA9.51 (5)2.32 (90)8.87 (28)15.91 (7)N/A ŁBC Int Agg4.31 (84)4.22 (21)7.52 (78)9.69 (81)4.16 (35) Median5.573.608.2511.483.26 -1.00 0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00 10.00 11.00 11.68 R etu r n QTRFYTD1 YR 2 YR 3 YR 4 YR 5 YR ŁGHA1.00 (9)1.00 (9)9.04 (4)6.53 (14)6.75 (16)8.08 (21)N/A ŁBC Int Agg0.18 (87)0.18 (87)3.56 (88)4.75 (83)5.22 (80)5.53 (74)5.39 (84) Median0.41 0.41 4.99 5.45 5.76 6.54 6.00 1 Qtr Ending Sep-2012 1 Qtr Ending Jun-2012 1 Qtr Ending Mar-2012 1 Qtr Ending Dec-2011 1 Qtr Ending Sep-2011 1 Qtr Ending Jun-2011 GHA 3.10 (4)1.35 (67)3.31 (3)1.43 (9)-0.27 (96)1.91 (66) Barclays Int Agg 1.36 (85)1.32 (68)0.66 (80)0.91 (76)2.30 (33)2.17 (18) IM U.S. Intermediate Duration (SA+CF) Median 1.74 1.46 1.17 1.07 2.01 2.00 Performance Review (Fiscal Years) As of December 31, 2012 GHA NONE 36 Peer Group Scattergram - 3 Years 3 Yr Rolling Under/Over Performance - 5 Years Peer Group Scattergram - 5 Years 3 Yr Rolling Percentile Ranking - 5 Years Historical Statistics - 3 Years Historical Statistics - 5 Years 0.0 25.0 50.0 75.0 100.0R etu r n Per cen ti l e R an k 3/08 9/08 3/09 9/09 3/10 9/10 3/11 9/11 3/12 12/12 Total Period 5-25 Count 25-Median Count Median-75 Count 75-95 Count ŁGHA 7 6 (86%)1 (14%)0 (0%)0 (0%) ŁBC Int Agg20 0 (0%)4 (20%)14 (70%)2 (10%) Over Performance Earliest Date Latest Date 5.0 6.0 7.0 8.0 9.0 GH A (%) 5.0 5.5 6.0 6.5 7.0 7.5 8.0 8.5 9.0 9.2 Barclays Int Agg (%) Over Performance Under Performance 5.40 6.00 6.60 7.04 R etu r n (% ) 1.95 2.00 2.05 2.10 2.15 2.20 2.25 2.30 2.35 Risk (Standard Deviation %) Return Standard Deviation ŁGHA 6.75 2.30 ŁBC Int Agg 5.22 2.00 ¾Median 5.76 2.22 5.40 5.60 5.80 6.00 R etu r n (% ) 2.40 2.50 2.60 2.70 2.80 2.90 3.00 3.10 3.20 3.30 3.40 3.46 Risk (Standard Deviation %) Return Standard Deviation ŁGHA N/A N/A ŁBC Int Agg 5.39 2.45 ¾Median 6.00 3.33 Tracking Error Up Market Capture Down Market Capture Alpha Information Ratio Sharpe Ratio Beta Downside Risk GHA 2.79 137.96 209.51 1.25 0.54 1.90 1.05 2.03 Barclays Int Agg 0.00 100.00 100.00 0.00 N/A 2.67 1.00 0.63 90 Day U.S. Treasury Bill 1.88 1.34 -3.43 0.10 -2.67 N/A 0.00 0.01 Tracking Error Up Market Capture Down Market Capture Alpha Information Ratio Sharpe Ratio Beta Downside Risk GHA N/A N/A N/A N/A N/A N/A N/A N/A Barclays Int Agg 0.00 100.00 100.00 0.00 N/A 1.71 1.00 1.24 90 Day U.S. Treasury Bill 2.81 5.11 -10.93 0.52 -1.71 N/A 0.00 0.01 Performance Review (Fiscal Years) As of December 31, 2012 GHA NONE 37 Peer Group Analysis - IM International Fixed Income (MF) Comparative Performance -8.00 -6.00 -4.00 -2.00 0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 18.00 20.00 22.00 24.00 26.00 28.00 29.64 R etu r n Oct-2011 To Sep-2012 Oct-2010 To Sep-2011 Oct-2009 To Sep-2010 Oct-2008 To Sep-2009 Oct-2007 To Sep-2008 ŁTempleton GB13.25 (1)N/AN/AN/AN/A ŁCiti WGB3.28 (90)4.61 (7)4.98 (63)13.79 (68)5.88 (1) Median6.401.756.4916.02-0.08 -6.00 -4.00 -2.00 0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 18.00 19.89 R etu r n QTRFYTD1 YR2 YR3 YR4 YR5 YR ŁTempleton GB3.83 (3)3.83 (3)16.15 (1)N/A N/A N/A N/A ŁCiti WGB-1.70 (82)-1.70 (82)1.65 (96)3.97 (70)4.37 (67)3.91 (88)5.27 (51) Median0.15 0.15 6.69 4.91 5.29 5.86 5.39 1 Qtr Ending Sep-2012 1 Qtr Ending Jun-2012 1 Qtr Ending Mar-2012 1 Qtr Ending Dec-2011 1 Qtr Ending Sep-2011 1 Qtr Ending Jun-2011 Templeton GB 5.40 (10)-0.99 (88)7.20 (1)1.23 (19)N/A N/A Citi WGB 2.99 (91)0.92 (19)-0.51 (100)-0.13 (53)2.38 (10)3.33 (56) IM International Fixed Income (MF) Median 4.56 0.28 1.97 -0.06 -0.99 3.54 Performance Review (Fiscal Years) As of December 31, 2012 Templeton GB NONE 38 Peer Group Scattergram - 3 Years 3 Yr Rolling Under/Over Performance - 5 Years Peer Group Scattergram - 5 Years 3 Yr Rolling Percentile Ranking - 5 Years Historical Statistics - 3 Years Historical Statistics - 5 Years 0.0 25.0 50.0 75.0 100.0R etu r n Per cen ti l e R an k 3/08 9/08 3/09 9/09 3/10 9/10 3/11 9/11 3/12 12/12 Total Period 5-25 Count 25-Median Count Median-75 Count 75-95 Count ŁTempleton GB0 0 0 0 0 ŁCiti WGB 20 6 (30%)6 (30%)7 (35%)1 (5%) No data found. 4.50 4.80 5.10 5.40 R etu r n (% ) 5.40 5.70 6.00 6.30 6.60 6.90 7.20 7.50 7.80 8.10 Risk (Standard Deviation %) Return Standard Deviation ŁTempleton GB N/A N/A ŁCiti WGB 4.37 5.52 ¾Median 5.29 7.85 5.28 5.32 5.36 5.40 R etu r n (% ) 7.40 7.60 7.80 8.00 8.20 8.40 8.60 8.80 9.00 9.20 9.40 9.60 9.80 9.94 Risk (Standard Deviation %) Return Standard Deviation ŁTempleton GB N/A N/A ŁCiti WGB 5.27 7.66 ¾Median 5.39 9.65 Tracking Error Up Market Capture Down Market Capture Alpha Information Ratio Sharpe Ratio Beta Downside Risk Templeton GB N/A N/A N/A N/A N/A N/A N/A N/A Citi WGB 0.00 100.00 100.00 0.00 N/A 0.79 1.00 3.50 90 Day U.S. Treasury Bill 5.51 0.68 -0.62 0.09 -0.79 N/A 0.00 0.01 Tracking Error Up Market Capture Down Market Capture Alpha Information Ratio Sharpe Ratio Beta Downside Risk Templeton GB N/A N/A N/A N/A N/A N/A N/A N/A Citi WGB 0.00 100.00 100.00 0.00 N/A 0.65 1.00 4.73 90 Day U.S. Treasury Bill 7.63 2.63 -2.17 0.48 -0.65 N/A 0.00 0.01 Performance Review (Fiscal Years) As of December 31, 2012 Templeton GB NONE 39 Peer Group Analysis - IM U.S. Open End Private Real Estate (SA+CF) Comparative Performance -70.00 -60.00 -50.00 -40.00 -30.00 -20.00 -10.00 0.00 10.00 20.00 30.00 40.00 R etu r n Oct-2011 To Sep-2012 Oct-2010 To Sep-2011 Oct-2009 To Sep-2010 Oct-2008 To Sep-2009 Oct-2007 To Sep-2008 ŁAmerican11.57 (69)16.11 (74)2.72 (75)-32.96 (41)4.98 (36) ŁNCREIF11.00 (80)16.10 (78)5.84 (53)-22.09 (5)5.27 (29) Median12.9016.62 6.39-34.36 3.60 -4.00 -3.00 -2.00 -1.00 0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00 10.00 11.00 12.00 13.00 14.00 15.00 16.00 R etu r n QTRFYTD1 YR 2 YR 3 YR 4 YR 5 YR ŁAmerican2.50 (N/A)2.50 (N/A)11.27 (N/A)13.15 (N/A)12.51 (N/A)-0.21 (N/A)-1.36 (N/A) ŁNCREIF2.54 (N/A)2.54 (N/A)10.54 (N/A)12.39 (N/A)12.63 (N/A)4.40 (N/A)2.13 (N/A) MedianN/A N/A N/A N/A N/A N/A N/A 1 Qtr Ending Sep-2012 1 Qtr Ending Jun-2012 1 Qtr Ending Mar-2012 1 Qtr Ending Dec-2011 1 Qtr Ending Sep-2011 1 Qtr Ending Jun-2011 American 2.58 (63)2.72 (61)3.03 (63)2.77 (65)3.20 (44)3.83 (62) NCREIF 2.34 (83)2.68 (62)2.59 (86)2.96 (55)3.30 (41)3.94 (61) IM U.S. Open End Private Real Estate (SA+CF) Median 2.76 2.88 3.54 3.05 3.15 4.29 Performance Review (Fiscal Years) As of December 31, 2012 American NONE 40 Peer Group Scattergram - 3 Years 3 Yr Rolling Under/Over Performance - 5 Years Peer Group Scattergram - 5 Years 3 Yr Rolling Percentile Ranking - 5 Years Historical Statistics - 3 Years Historical Statistics - 5 Years 0.0 25.0 50.0 75.0 100.0R etu r n Per cen ti l e R an k 3/08 9/08 3/09 9/09 3/10 9/10 3/11 9/11 3/12 12/12 Total Period 5-25 Count 25-Median Count Median-75 Count 75-95 Count ŁAmerican13 0 (0%)7 (54%)3 (23%)3 (23%) ŁNCREIF19 14 (74%)2 (11%)3 (16%)0 (0%) Under Performance Earliest Date Latest Date -10.0 -5.0 0.0 5.0 10.0 15.0 Amer i can (% ) -12.0 -9.0 -6.0 -3.0 0.0 3.0 6.0 9.0 12.0 15.0 16.6 NCREIF (%) Over Performance Under Performance 12.50 12.55 12.60 12.65 R etu r n (% ) 1.80 1.90 2.00 2.10 2.20 2.30 2.40 2.50 2.60 2.69 Risk (Standard Deviation %) Return Standard Deviation ŁAmerican 12.51 2.58 ŁNCREIF 12.63 1.87 ¾Median N/A N/A -1.20 0.00 1.20 2.40 R etu r n (% ) 7.20 7.60 8.00 8.40 8.80 9.20 9.60 10.00 10.40 10.74 Risk (Standard Deviation %) Return Standard Deviation ŁAmerican -1.36 10.29 ŁNCREIF 2.13 7.49 ¾Median N/A N/A Tracking Error Up Market Capture Down Market Capture Alpha Information Ratio Sharpe Ratio Beta Downside Risk American 1.28 99.21 N/A -2.68 -0.07 4.64 1.22 0.38 NCREIF 0.00 100.00 N/A 0.00 N/A 6.48 1.00 0.00 90 Day U.S. Treasury Bill 1.85 0.81 N/A -0.03 -6.48 N/A 0.01 0.00 Tracking Error Up Market Capture Down Market Capture Alpha Information Ratio Sharpe Ratio Beta Downside Risk American 3.90 100.67 161.83 -3.89 -0.82 -0.13 1.31 8.93 NCREIF 0.00 100.00 100.00 0.00 N/A 0.25 1.00 5.74 90 Day U.S. Treasury Bill 7.55 3.96 -3.87 0.52 -0.25 N/A -0.01 0.00 Performance Review (Fiscal Years) As of December 31, 2012 American NONE 41 Peer Group Analysis - IM U.S. Open End Private Real Estate (SA+CF) Comparative Performance -70.00 -60.00 -50.00 -40.00 -30.00 -20.00 -10.00 0.00 10.00 20.00 30.00 40.00 R etu r n Oct-2011 To Sep-2012 Oct-2010 To Sep-2011 Oct-2009 To Sep-2010 Oct-2008 To Sep-2009 Oct-2007 To Sep-2008 ŁIntercontinental13.33 (42)15.80 (79)N/AN/AN/A ŁNCREIF11.00 (80)16.10 (78)5.84 (53)-22.09 (5)5.27 (29) Median12.9016.626.39-34.363.60 0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00 10.00 11.00 12.00 13.00 14.00 15.00 16.00 17.00 18.00 18.53 R etu r n QTRFYTD1 YR2 YR3 YR4 YR5 YR ŁIntercontinental6.31 (N/A)6.31 (N/A)15.49 (N/A)15.80 (N/A)N/A N/A N/A ŁNCREIF2.54 (N/A)2.54 (N/A)10.54 (N/A)12.39 (N/A)12.63 (N/A)4.40 (N/A)2.13 (N/A) Median N/A N/A N/A N/A N/A N/A N/A 1 Qtr Ending Sep-2012 1 Qtr Ending Jun-2012 1 Qtr Ending Mar-2012 1 Qtr Ending Dec-2011 1 Qtr Ending Sep-2011 1 Qtr Ending Jun-2011 Intercontinental 2.80 (45)2.64 (63)2.96 (73)4.33 (27)3.15 (50)3.34 (80) NCREIF 2.34 (83)2.68 (62)2.59 (86)2.96 (55)3.30 (41)3.94 (61) IM U.S. Open End Private Real Estate (SA+CF) Median 2.76 2.88 3.54 3.05 3.15 4.29 Performance Review (Fiscal Years) As of December 31, 2012 Intercontinental NONE 42 Peer Group Scattergram - 3 Years 3 Yr Rolling Under/Over Performance - 5 Years Peer Group Scattergram - 5 Years 3 Yr Rolling Percentile Ranking - 5 Years Historical Statistics - 3 Years Historical Statistics - 5 Years 0.0 25.0 50.0 75.0 100.0R etu r n Per cen ti l e R an k 3/08 9/08 3/09 9/09 3/10 9/10 3/11 9/11 3/12 12/12 Total Period 5-25 Count 25-Median Count Median-75 Count 75-95 Count ŁIntercontinental0 0 0 0 0 ŁNCREIF 19 14 (74%)2 (11%)3 (16%)0 (0%) No data found. 11.90 12.60 13.30 13.93 R etu r n (% ) 1.76 1.78 1.80 1.82 1.84 1.86 1.88 1.90 1.92 1.94 1.96 1.98 2.00 Risk (Standard Deviation %) Return Standard Deviation ŁIntercontinental N/A N/A ŁNCREIF 12.63 1.87 ¾Median N/A N/A 2.03 2.10 2.17 2.24 R etu r n (% ) 7.38 7.40 7.42 7.44 7.46 7.48 7.50 7.52 7.54 7.56 7.58 7.60 7.62 Risk (Standard Deviation %) Return Standard Deviation ŁIntercontinental N/A N/A ŁNCREIF 2.13 7.49 ¾Median N/A N/A Tracking Error Up Market Capture Down Market Capture Alpha Information Ratio Sharpe Ratio Beta Downside Risk Intercontinental N/A N/A N/A N/A N/A N/A N/A N/A NCREIF 0.00 100.00 N/A 0.00 N/A 6.48 1.00 0.00 90 Day U.S. Treasury Bill 1.85 0.81 N/A -0.03 -6.48 N/A 0.01 0.00 Tracking Error Up Market Capture Down Market Capture Alpha Information Ratio Sharpe Ratio Beta Downside Risk Intercontinental N/A N/A N/A N/A N/A N/A N/A N/A NCREIF 0.00 100.00 100.00 0.00 N/A 0.25 1.00 5.74 90 Day U.S. Treasury Bill 7.55 3.96 -3.87 0.52 -0.25 N/A -0.01 0.00 Performance Review (Fiscal Years) As of December 31, 2012 Intercontinental NONE 43 Total Fund Compliance:Yes No N/A Equity Compliance:Yes No N/A Fixed Income Compliance:Yes No N/A 44 Yes No N/A Manager Compliance: Yes No N/A Yes No N/A Yes No N/A Yes No N/A 45 Total Equity Policy Allocation Mandate Weight (%) Jul-2008 MSCI EAFE Index 15.00 Russell 3000 Index 85.00 Oct-2011 MSCI EAFE Index 15.00 Russell 3000 Index 85.00 Total Fund Policy Allocation Mandate Weight (%) May-1998 S&P 500 Index 60.00 Barclays U.S. Government/Credit 35.00 Citigroup 3 Month T-Bill Index 5.00 Jan-2001 S&P 500 Index 65.00 Barclays U.S. Government/Credit 30.00 Citigroup 3 Month T-Bill Index 5.00 Apr-2003 S&P 500 Index 65.00 Barclays Intermediate U.S. Gov/Credit Index 30.00 Citigroup 3 Month T-Bill Index 5.00 Jul-2005 S&P 500 Index 55.00 Barclays Intermediate U.S. Gov/Credit Index 30.00 MSCI EAFE Index 10.00 Citigroup 3 Month T-Bill Index 5.00 Oct-2007 Russell 3000 Index 55.00 Barclays Intermediate Aggregate Index 30.00 MSCI EAFE Index 10.00 Citigroup 3 Month T-Bill Index 5.00 Jul-2008 Russell 3000 Index 55.00 Barclays Intermediate Aggregate Index 25.00 MSCI EAFE Index 10.00 NCREIF Property Index 10.00 Oct-2011 Russell 3000 Index 55.00 MSCI EAFE Index 10.00 Barclays Intermediate Aggregate Index 20.00 Citigroup World Government Bond 5.00 NCREIF Property Index 10.00 Benchmark History Investment Policy Benchmarks As of December 31, 2012 Prior to 6/1/2011, the data and inception dates for Dana LC and Dana SC were provided by the manager. 46 Report Statistics Definitions and Descriptions R e t u r n - Co m p o u n d e d r a t e o f r e t u r n f o r t h e p e r i o d . S t a n d a r d D e v i a t i o n - A s t a t i s t i c a l m e a s u r e o f t h e r a n g e o f a p o r t f o l i o ' s p e r f o r m a n c e. I t r e p r e s e n t s t h e v a r i a b i l i t y o f r e t u r n s a r o u n d t h e a v e r a g e r e tu r n o v e r a s p e c i f i e d t i m e p e r i o d . S h a r p e R a t i o - Re p r e s e n t s t h e e x c e s s r a t e o f r e t u r n o v e r t h e r i s k f r e e r e t u r n d i v i d e d b y t h e s t a n d a r d d e v i a t i o n o f t h e e x c e s s r e t u r n . T h e r e s u lt i s a n a b s o l u t e r a t e o f r e t u r n p e r u n i t o f r i s k . A hi g h e r v a l u e d e m o n s t r a t e s b e t t e r h i s t or i c a l r i s k - a d j us t e d p e r f o r m a n c e . A l p h a - A m e a s u r e o f t h e d i f f e r e n c e b e t w e e n a p o r t f o li o ' s a c t u a l p e r f o r m a n c e a n d i t s e x p e c t e d r e tu r n b a s e d o n i t s l e v e l o f r i s k a s d e t e rmined by beta. It determines the portfolio's no n - s y s t e m i c r e t u r n , o r i t s h i s t o r i c a l p e r f o r m a n ce n o t e x p l a i n e d b y m o v e m e n t s o f t h e m a r k e t . B e t a - A m e a s u r e o f t h e s e n s i t i v i t y o f a p o r t f o l i o t o t h e m o v e m e n t s i n th e m a r k e t . I t i s a m e a s u r e o f th e p o r t f o l i o ' s s y s t e m a t i c r i s k . R - S q u a r e d - Th e p e r c e n t a g e o f a p o r t f o l i o ' s p e r f o r m a n c e t h a t c a n b e e x p l a i ne d b y t h e b e h a v i o r o f t h e a p p r o p r i a t e b e n c h m a r k . A h i g h R - S q u a r e d means the portfolio's performance has hi s t o r i c a l l y m o v e d i n t h e s a m e d i r e ct i o n a s t h e a p p r o p r i a t e b e n c h m a r k . T r e y n o r R a t i o - Si m i l a r t o S h a r p e r a t i o b u t u t i l i z e s b e t a r a t h e r t h a n e x c e s s r i sk a s d e t e r m i n e d b y s t a n d a r d d e v i a t i o n . I t i s c a l c u l a t e d b y t a k i ng t h e e x c e s s r a t e o f r e t u r n a b o v e t h e r i s k f r e e ra t e d i v i d e d b y b e t a t o d e r i v e t h e a b s o l u t e r a t e o f r e t u r n p e r u n i t o f r i s k . A h i g h e r v a l u e i n d i c a t e s a p r o d u c t h a s a c h i e v e d b e tt e r h i s t o r i c a l r i s k - adjusted performance. D o w n s i d e R i s k - A m e a s u r e s i m i l a r t o s t a n d a r d d e v i a t i o n t h a t u t i l i z e s o n l y t h e n e g a t iv e m o v e m e n t s o f t h e r e t u r n s e r i e s . I t i s c a l c u l a t e d b y t a k in g t h e s t a n d a r d d e v i a t i o n o f t h e n e g a t i v e qu a r t e r l y s e t o f r e t u r n s . A h i g h e r f a c t o r i s i n d i c a t i v e o f a r i s k i e r p r o d u c t . T r a c k i n g E r r o r - Th i s i s a m e a s u r e o f t h e s t a n d a r d d e v i a t i o n o f a p o r t f o l i o ' s r e t u r n s i n r e l a t i o n t o t h e p e r f o r m a n c e o f i t s d e s i g n a t e d m a r k e t b e n c h m a r k . I n f o r m a t i o n R a t i o - Th i s c a l c u l a t e s t h e v a l u e - a d d e d c o n t r i b u t i o n o f th e m a n a g e r a n d i s d e r i v e d b y d i v i d i n g t h e a c t i ve r a t e o f r e t u r n o f t h e p o r t f o l i o b y the tracking error. The higher the In f o r m a t i o n R a t i o , t h e m o r e t h e m a n a g e r h a s a d d e d v a l u e t o t h e p o r t f o l i o . C o n s i s t e n c y - Th e p e r c e n t a g e o f q u a r t e r s t h a t a p r o d u c t a c h i e v e d a r a t e o f r e t u rn h i g h e r t h a n t h a t o f i t s b e n c h m ar k . H i g h e r c o n s i s t e n c y i n d i c ates the manager has contributed more to the pr o d u c t ’ s p e r f o r m a n c e . E x c e s s R e t u r n - Ar i t h m e t i c d i f f e r e n c e b e t w e e n t h e m a n a g e r ’ s p e r f o r m a n c e a n d t h e r i s k - f r e e r e t u r n o v e r a s p e c i f i e d t i m e p e r i o d . A c t i v e R e t u r n - Ar i t h m e t i c d i f f e r e n c e b e t w e e n t h e m a n a g e r ’ s p e r f o r m a n c e a n d t h e d e s i g n a t e d b e n c h m a r k r e t u r n o v er a s p e c i f i e d t i m e p e r i o d . E x c e s s R i s k - A m e a s u r e o f t h e s t a n d a r d d e v i a t i o n o f a p o r t f o l i o ' s p e r f o r m a n c e r e l a t i v e t o t h e r i s k f r e e r e t u r n . Up M a r k e t C a p t u r e - Th e r a t i o o f a v e r a g e p o r t f o l i o p e r f o r m a n c e o v e r t h e d e s i g n a t e d b e n ch m a r k d u r i n g p e r i o d s o f p o s i t i v e r e t u r n s . A h i g h e r v a l u e i n d icates better product performance. Do w n M a r k e t C a p t u r e - Th e r a t i o o f a v e r a g e p o r t f o l i o p e r f o r m a n c e o v e r t h e d e s i g n a t e d b e n ch m a r k d u r i n g p e r i o d s o f n e g a t i v e r e t u r n s . A l o w e r v a l u e i n d i cates better product performance Ca l c u l a t i o n s b a s e d o n m o n t h l y p e r i o d i c i t y . 47 ______________________________________________________________________ 4901 Vineland Road Suite 600 Orlando, Florida 32811 Telephone (866) 240-7932 Facsimile (863) 292-8717 www.bogdahngroup.com FROM: Troy E. Brown, CFA TO: Palm Beach Gardens Firefighters’ DATE: January 20, 2013 RE: R&D Account Funding Policy Based on a request from the Trustees of the Palm Beach Gardens Firefighters’ Pension Fund (the Fund), we compiled the transactions that occurred within the R&D account for 2012. The Fund’s 2012 cash funding policy was to target a $225,000 R&D account balance at each meeting and to transfer any excess cash balance into the most appropriate managed account. Period Expenses & Benefit Payments Contributions 1/1/12 – 3/31/12 $517,911 $1,124,210 4/1/12 – 6/30/12 $339,846 $1,128,825 7/1/12 – 9/30/12 $284,201 $2,747,410 10/1/12 – 12/31/12 $363,909 $261,861 The large distribution that occurred during the 1st quarter included a $122,109 IRA distribution on 3/29/12. This IRA distribution resulted in the need to transfer assets from the managed accounts into the R&D account to fund an account overdraft. This was the only overdraft transfer in 2012. Excluding the 1st quarter’s IRA distribution, this 2012 activity implies an average quarterly cash flow of approximately $345,000 in regular expenses and benefit payments. Based on this average, we are recommending that the Fund increase its target R&D account balance by $100,000 to $325,000. However, it should be understood that even if the Fund decides to increase its target R&D account level, there can be no guarantee that a large transaction will not result in a future overdraft of the R&D account. Please contact me if you have any questions or require additional information. W 0 m v) (D W *v tDm 3 1 G) 0 Y h) 0 3 v) 3 n S 3 c) PI a tD 3 Y 0 u" 0 * v PI m tD PI I 1 1 A -. 3 3 2 M L i3 F 0 v) CD v) E;; 3 : u Q1 (DQ QCD 71 c CT -- -9) v, 3 3 C 2 2 t/) I I I 7 1 1 I I I 1 1 I I I I I 1 I I I 1 I 1 I 1 3 : Y 0 5 P) 3 '6 CD -. 3 8 3 ps "C 2 2 h I 1 f Y 3 a 9) 9) m (P ! 2 c E P m (P 3 5 9) P a Z 0 O 5 9) 3 tn g C 'I I I 3 1s C 2 b -i 2 6 5 h 'I I 7 Y 1 I8 QD 1 Y aJ m x -Lu R = 9, 3 9, tn (P 3 tD s 3 rc A tn (P a % 5 a rc tn 0 f x 3 0 Q (P (D s c R 3 8 3 0 v) C 0 3 0 rc 5 4 e 3 B 0 0 a B 9) 3 Y i C 2 4 g 0 0 E m 3 0 tn a 0 a f P f' B 3 3 f' tn s (P P E P zc' 0 0 3 3 E 3 10 frr, 8 3 ps @C c) b U I I I I I I I I I I I I I I I I I n I !I A 3 CD 1 u C 5 rr, D 3 1s C 2 b -i 2 5 5 h I 1 1 I I 1 1 1 1 I I I I I I I I I I 'I II U z CD rc i Y 9) v) v) 8 3 1 e3 P (D -l 00 01 00 -l -l e3 i;, 00 P in i 0) 0 00 "i G) -l h) 0 A h) h) 0 n 8 m I !I 0 0 3 z 0 I- % X X X 25 25 P 0 s 9 3 (4 cp h e3 w -l 0 Q, 0 00 P b -5 w Q, Q, i 2 -5 -5 5' z cp cy Y h) 0 w b z h 3 c) 5 !2 1 Y e9 e9 e9 e9 h) 0 h) a 2 h) 0 a a tiJ -I - 1-1 2' (P s" (0 3 Q (P Q -I 11-1 -I <- m rp h -b 3 Q il 11 I I I 1 I m CI, X il 0 cn h) h) A 03 A 0 -J A -a h) Q, -a .. .A cn h) 0 0 -0 .. 0 s -i P 03 -0 0 0 0 0 0 -0 -0 0 0 -0 0 0 " 0 0 0 cnPPWWh) !OcnO!P 000000 000000 -J .!! "A 'D -0 -0~000303 00 -03 "-J .!! -9 .!a -000000 C n 9, Y Y n 2 -0 -0 -0 -0 -0 -0 000000 000000 -0 -0 -* 0 0 0, .!! P -0 0 n VIo(003cnh) -J-J!cnPO 000000 000000 000000 3 (D Y 7 1 1 I 1 b I i Y PALM BEACH GARDENS FIREFIGHTERS’ PENSION FUND MINUTES OF MEETING HELD January 14, 2013 A meeting of the Board of Trustees was called to order at 10:02 AM. at Council Chambers, Palm Beach Gardens, Florida. Those persons present were: TRUSTEES OTHERS Rick Rhodes, Chair Audrey Ross, Administrator Tom Murphy, Secretary Pedro Herrera, Attorney (arrived 10:13AM) Donna Wisneski Troy Brown, Investment Consultant Mark Joyce PUBLIC COMMENTS N/A MINUTES The Board reviewed the minutes of the regular meeting held on November 5, 2012. A motion was made by Donna Wisneski to approve the minutes of the November 5, 2012 regular meeting as amended. The motion was seconded by Tom Murphy and carried 4-0. INVESTMENT MONITOR REPORT: THE BOGDAHN GROUP (TROY BROWN) Mr. Brown reviewed the funds performance and allocation as of December 31, 2012. The preliminary return for quarter is 1.20% versus .82%. He reviewed each manager performance during the quarter and noted that all performed well with the exception of ICC Capital. ICC is a very volatile manager and 20% of the total portfolio is allocated to them. Mr. Brown reported that the Plan just received an overdraft notice from Regions Bank so they took the cash that ICC had available to cover it. Going forward Mr. Brown stated that if the board decided to open an index fund account to manage the cash flow, then this type of situation would probably not occur again. He reviewed the reasons as to why an index fund would be beneficial to add into the portfolio. It is getting harder to add value in the equity space, so by indexing a part of the portfolio it would also lower some of the plans volatility and risk. Also with active management you have your periods of ups and downs, but with the index fund it will always be inline with the market. The Trustees discussed the index fund and the purposes it serves. They stated that they would like to wait until the next meeting when all the Trustees are present to make a decision. The Trustees had a lengthy discussion on the recent overdraft that took place. Mr. Brown stated that the overdraft was due to the timing of the City’s contributions being deposited and all the payments going out. Also with the holiday on January 1, 2013 and the banks being closed, it delayed the posting of the City’s deposit as well. Mr. Brown commented that he will get with Ms. Ross to see if we need to increase the amount of money that is being held in the plans receipt and disbursement account (which is used for all benefit payments and plan expenses). He commented that he will follow up with a recommendation regarding this at the next meeting. 2 Mr. Brown updated the board on ICC’s transition with Munder, which is no longer going to happen for unknown reasons as this time. Mr. Brown also stated that he does not have any recommendation regarding ICC at this meeting, although he may in the future. It is too early in the month to know their January performance numbers, but their long term track record does reflect that they have added value to the return of the Plan over the long term, but it has not been a straight upward move. Lastly Mr. Brown noted that Dana Advisors underperformed for the quarter ending December 31, 2012 as well, but he has not spoken to anyone over at Dana yet because it is too early in the month. ATTORNEY REPORT: SUGERMAN & SUSSKIND (PEDRO HERRERA) Mr. Herrera explained that the 1st reading of the pension Ordinance was scheduled for the second week in January 2013 and the City had asked him to be present for the reading, in which the Chair did approved. A couple of days after the invite, Mr. Herrera stated that he was told the Ordinance was going to be taken off the City Council agenda because it was still being reviewed by their legal department. He commented that he has not received an update from the City since he was notified the Ordinance reading was canceled, but with the board’s permission he stated that he would like to attend the 1st reading for whenever it is rescheduled. The Board of Trustees authorized Mr. Herrera to attend the City Council meeting for reading of the 1st pension Ordinance, when scheduled. Mr. Herrera updated the board on the IRS determination letter status. He explained that they did recently receive communication back from the IRS stating that they are requiring additional information in order to proceed. Mr. Herrera’s office is in the process of gathering all the information and submitting it back to the IRS. He noted that the IRS has already indicated that there will be no fines implemented on the Plan because they did receive the Plan’s original information by the deadline. Mr. Herrera commented that he will update the board as more information becomes available. Mr. Herrera explained that Foster & Foster has received their first calculation as new Actuary and first calculation under the new Plan provision as well. Foster & Foster had some questions on how the additional lump sum payment (of accrued sick and vacation time as of September 13, 2012) should be calculated into the member’s final average salary. Foster gave two different scenarios of how a benefit could be calculated under the new plan provisions; either look at the base compensation alone and pick the five highest years of earnings and then add in the lump sum sick/vacation after OR first add the lump sum (sick/vacation) in at the Member’s termination date, and then choose the five highest years of earnings. The Trustees had a lengthy discussion on the different ways to calculate in the lump sum payment. They stated that it is not more beneficial to a member to calculate it one way or another, but the board just needs to be consistent on how they will be calculating benefits going forward. The Trustees agreed that they will continue with the same practice as the have in the past and will add in the lump sum at the end, after the members 5 years of FAS is already found. A motion was made by Donna Wisneski to approve the method of calculating in the lump sum of sick and vacation time at the end of a benefit calculation, after the 5 year FAS has already been calculated. The motion was seconded by Tom Murphy and carried 4-0. 3 ADMINISTRATIVE REPORT: RESOURCE CENTERS (AUDREY ROSS) DISBURSEMENTS The Board reviewed the disbursements presented for approval by the Administrator. Ms. Wisneski had a question relating to the Attorneys invoice. She noted that the Plan was charged twice for review of September 30, 2012 audit engagement letter. Mr. Herrera explained that he did review the audit engagement letter twice. The Auditor had sent him the original engagement letter, in which Mr. Herrera reviewed and made some revisions. After the Auditor revised the letter he sent it back to Mr. Herrera to review again for final approval. A motion was made by Mark Joyce to approve the disbursements that were presented by the Administrator. The motion was seconded by Tom Murphy and carried 4-0. OLD BUSINESS Ms. Ross presented that board with the revised 2013 meeting dates. Ms. Ross followed up on the Trustee term expirations for Ms. Winseski and Mr. Murphy. She noted that she did confirm with the City that they do have on file the correct Trustee term dates for both (9/30/2015). Ms. Ross stated that as a follow up from last meeting she received a quote from her office regarding the DROP accounting as well as the quote from the Foster & Foster contract. She stated that PRC will update the DROP accounts on a quarterly basis, along with online access to members on a daily basis for a flat monthly fee of $500. Foster & Foster has stated in their contract that they will charge $75 per statement per quarter. The Trustees discussed and stated that it would make sense for the Actuary to do the DROP accounting since they are doing the Share accounting as well. A motion was made by Donna Wisneski to authorize Foster & Foster to perform the DROP accounting on a quarterly basis per their contact agreement effective January 1, 2013. The motion was seconded by Tom Murphy and carried 4-0. Mr. Murphy discussed the pending Ordinance that will be going up for 1st reading soon. He explained that part of this Ordinance (if passed) will allow the Plan to implement a self directed DROP account option in addition to the current options. This will be a great option that will be available to the members and is also cost neutral to the Plan. With that said he stated that the board should consider allowing the members to continue to keep their money in the DROP plan after they separate service. Mr. Murphy explained that now would be a great time to amend the pending Ordinance to add this language in. The Trustees discussed this idea and shared their thoughts. Mr. Herrera commented that the board would need to set the rules and regulations around this which would take more time to gather information. The Trustees asked Mr. Murphy to bring back more information regarding this and they tabled this item. A motion was made by Tom Murphy to authorize Mr. Herrera to amended the current Ordinance to allow participants to keep their monies in the DROP account after separation of service until required to take distributions under the IRS rule . 4 The motion was seconded by Mark Joyce and was tabled until more information is available. Mr. Murphy had a question regarding the buybacks and the recent pension changes. He explained that members can not buyback time to increase their retirement eligibility date, but they can buyback time to increase the dollar amount of their pension benefit. With that said the new changes now cap a member’s final average salary at 75%, so if a member previously bought back time under the old contract they might not get use of their buyback benefit now (depending on when the member bought back time and when their normal retirement eligibility date is). The Trustees had a lengthy discussion regarding this situation and if there are any members currently in this position and if they would be effected. Mr. Herrera commented that he would have to do some research regarding this and will bring back more information to the board at their next meeting. Ms. Ross presented the board with the draft copy of the September 30, 2012 audited Financial Statements. She noted that the Auditor will be attending the February 6, 2013 meeting to present them to the board. Ms. Wisneski commented that she read through the entire report and she was please to announce that she was very satisfied with the end result and that she had no other comments or revisions. Mr. Rhodes commented that we will have to table the selection of the Chair and Secretary till the next meeting when all the Trustees are present. He also noted that according to the Plans Board Officer election policy, we have to post the selection of the Chair and Secretary 30 days prior too the meeting. The Trustees discussed this clause and decided that it was not necessary to do this since no outside members can vote on the Chair or Secretary anyways; they are voted in by the Trustees. Mr. Herrera agreed and stated that he can just remove that section of the policy altogether. A motion was made by Tom Murphy to authorize Mr. Herrera to amend the Board of Trustees Election Policy to remove the language that states that the selection of the Chair and Secretary has to be posted 30 days prior. The motion was seconded by Mark Joyce and carried 4-0. A motion was made by Mark Joyce to approve and adopt the revised Board of Trustees Election Policy as stated above. The motion was seconded by Tom Murphy and carried 4-0. Ms. Ross reported to the Board the Summary Plan Description that was drafted in 2010 was never approved due to the pending Ordinance changes at that time. Now that most of the big Ordinance changes have past the Trustees can now decide if they want to update the SPD, or wait a little longer until the current pending Ordinance is passed. The Trustees discussed and noted that most of the changes in the upcoming Ordinance will not be included in the SPD anyways, so to go ahead and have Foster & Foster proceed with updating the SPD. Ms. Wisneski asked Ms. Ross if she could send out the minutes a week after the meeting so that the Trustees can stay up to date. Ms. Ross noted that two weeks after the meeting would be more practical on her end due to meeting date cycles. The Trustees concurred. 5 Lastly Mr. Joyce noted that he will post a copy of the meeting agenda at all the Fire Stations going forward. There being no further business, the meeting adjourned at 12:09PM. Respectfully submitted, Tom Murphy, Secretary State and Local Pension Plans Number 29, February 2013 LOCALLY-ADMINISTERED PENSION PLANS: 2007-2011 By Alicia H. Munnell, Jean-Pierre Aubry, and Joshua Hurwitz* * Alicia H. Munnell is director of the Center for Retirement Research at Boston College (CRR) and the Peter F. Drucker Professor of Management Sciences at Boston College’s Carroll School of Management. Jean-Pierre Aubry is the assistant director of state and local research at the CRR. Josh Hurwitz is a research associate at the CRR. The authors wish to thank Madeline Medenica, Christine Manuelo, and Joseph Prestine for invaluable data collection and David Blitzstein and Nathan Scovronick for helpful comments. Introduction Most of the attention in the wake of the financial crisis and ensuing recession has focused on state-ad- ministered pension plans. But cities often administer their own plans, and stories circulate about the perils facing Chicago, Philadelphia, Providence, and others.1 To assess the status of locally-administered plans, this Issue in Brief reports on a survey of 128 locally-admin- istered plans in 43 states. The sample is limited to local entities with plans of their own, because the goal is to compare the effect of local versus state administration. Such a focus, however, leaves out an important component of the local story. For example, the sample includes no city or town in Mississippi, Montana, or Nevada, because cities and towns in those states do not sponsor their own plans but rather participate in state plans. In fact, for the nation as a whole, only 42 percent of lo- cal pension contributions go to locally-administered plans, while 58 percent go to state-administered plans. Thus, an equally, or perhaps more, important question is the burden of local pension contributions – to both local and state plans – on local budgets. Because of the many dimensions of the local story, this brief, which reports just on localities with pension plans, is the first of three that will assess pensions from a local perspective. The second brief will analyze the burden of pensions on localities by doubling the sample to include localities without plans and calcu- lating the impact of pension contributions on local budgets. The third brief will explore the bankruptcies that have occurred at the local level and see whether it is possible to identify the role of pensions among other common contributing factors. LEARN MORE Search for other publications on this topic at: crr.bc.edu RESEARCH RETIREMENT Center for Retirement Research2 Sources: Authors’ calculations from U.S. Census Bureau, Employee-Retirement Systems of State and Local Governments (2010); and Public Plans Database (2010). This brief proceeds as follows. The first section de- scribes the sample. The second section compares the funded status of local plans to that of state plans and reveals a puzzle – sponsors of locally-administered plans pay a higher percentage of the annual required contribution (ARC), but these plans are less well funded than state-administered plans. The third sec- tion uses regression analysis to untangle this seeming conundrum. An equation explaining percent of ARC paid confirms that, even after controlling for a num- ber of factors that could affect contribution behavior, state-administered plans pay less. A second equation explaining the relationship between funded levels, percent of ARC paid, and other factors suggests an answer: investment returns. Indeed, for mature plans with substantial assets that receive most of their income from investments, the higher returns histori- cally earned by state-administered plans explain their higher funded levels. A closer look at returns also suggests why the funded level of local plans declined by less than that for state plans since the economic crisis – they held less in equities and other risky as- sets and therefore suffered less from the collapse of the stock market. The final section concludes that the locally-administered plans in our sample, which in- cludes plans from the problem cities cited above, are slightly less funded than state-administered plans, but have been closing the funding gap in recent years. The Sample The survey data are for 2007 and the most recent year available – generally a mix of 2010 and 2011.2 The intent was to include the largest locally-administered plans from each state, but, as noted in the introduc- tion, some states have no localities that administer plans. As a result, the final sample consists of 128 local plans from 43 states (see Appendix A). The data for 19 of these plans come from the Center’s Public Plans Database; the data for the other 109 are newly collected. Figure 1 shows the comprehensiveness of the state-administered and locally-administered databas- es. The state sample covers about 97 percent of assets and workers relative to the totals reported by the U.S. Census Bureau. The sample of local plans represents 67 percent of local plan assets and 63 percent of local workers. This outcome is to be expected given that state-administered plans are few and large, while locally-administered plans are many and often small.3 Figure 1. Sample Plans as a Percent of Total Assets and Active Members, by Level of Administration Locally-administered plans range enormously in size. Three plans – the New York City Employee Re- tirement System, the New York City Teachers Retire- ment System, and the Los Angeles County Employee Retirement System – each have assets in excess of $30 billion. In contrast, six plans in our sample each have less than $10 million. The employee groups covered by state- and locally- administered plans differ. State-administered sys- tems tend to have more teacher plans, while locally- administered systems have more plans for police and firefighters (see Table 1). Under both arrangements, plans for general employees account for about 60 percent of the total in our sample. 97% 67% 97% 63% 0% 20% 40% 60% 80% 100% State Local Assets Active members Source: Public Plans Database (2011). Table 1. State- and Locally-Administered Plans by Type of Employee, Percent Group covered Administration level State Local General employees 60.7 56.3 Teachers 29.9 9.4 Police/firefighters 9.3 34.4 %% Issue in Brief 3 The Funded Status Two measures capture the financial health of public plans: 1) the funded ratio, which shows the portion of the plan’s liabilities covered by assets; and 2) the percent of ARC paid, which shows the extent to which the sponsor is keeping up with benefits as they accrue and paying down unfunded obligations.4 Funded ratio Figure 2 presents the aggregate funded ratios for state- and locally-administered plans for 2007 and 2011. In both cases, funded levels dropped over the period as a result of the financial crisis, from 87 per- cent to 76 percent for state plans and from 81 percent to 72 percent for local plans.5 Of course, the magni- tude of the liabilities – and the funded ratios – de- pends on the rate used to discount promised benefits. Discounting by a riskless rate, which reflects the fixed nature of the benefit commitments, increases the liabilities significantly and reduces the 2011 funded ratios to the 50-percent range. Nevertheless, the ma- jor takeaway from this exercise is that while locally-ad- ministered plans have been slightly less funded than state-administered plans, they have fared somewhat better through the financial crisis, closing the funding gap to just 4 percentage points.6 Figure 3 shows the funded ratios for the three main types of locally-administered plans: general employee, teacher, and police/fire. Of the three, general employees are the best funded but suffered the greatest decline between 2007 and 2011, while teachers’ plans had the lowest funded ratio through- out the period. Sources: Authors’ calculations from Public Plans Database (2007 and 2011); and various financial and actuarial reports. Figure 2. Aggregate Funded Ratios for State- and Locally-Administered Plans, 2007 and 2011 87% 81% 76% 72% 0% 20% 40% 60% 80% 100% State Local 2007 2011 Sources: Authors’ calculations from Public Plans Database (2007 and 2011); and various financial and actuarial reports. Figure 3. Funded Ratios for Locally-Administered Plans by Type of Plan, 2007 and 2011 81% 86% 74% 75% 72% 74% 65% 69% 0% 20% 40% 60% 80% 100% Total General Teachers Police/fire 2007 2011 Finally, Figure 4 shows the distribution of funded ratios for state- and locally-administered plans in 2011. Compared to state plans, local plans have nearly the same percentage of plans that are fully Sources: Authors’ calculations from Public Plans Database (2007 and 2011); and various financial and actuarial reports. Figure 4. Distribution of State and Locally- Administered Plans by Funded Ratio, 2010 2% 14% 47% 32% 6% 6% 17% 43% 29% 5% 0% 10% 20% 30% 40% 50% 0-39 40-59 60-79 80-99 100+ State Local Center for Retirement Research4 funded and a greater percentage of plans with very low levels of funding. Three of the ten worst funded are Chicago pension plans. The ARC While the funded ratio provides a snapshot, ARC payments show the extent to which the plan sponsor has a funding strategy and is sticking to it. The Gov- ernmental Accounting Standards Board defines the ARC as the normal cost plus a payment to amortize the unfunded liability, generally over a 30-year period. Because of the deterioration in the funded status of plans, the ARC increased between 2007 and 2011 at both the state and local level (see Figure 5). The ARC at the local level, however, is substantially larger than at the state level, because police and fire plans – which provide relatively high benefits at younger ages – are expensive. Explaining Behavior of State- and Locally-Administered Plans To resolve the puzzle, the following section looks at factors that affect the payment of the ARC, fac- tors that affect funded levels given ARC payments, and factors that explain the declining gap between the funded status of state-administered and locally- administered plans. Making the ARC Payment A regression was used to estimate the relationship be- tween the average percent of ARC paid from 2007 to 2010 and four types of factors: the plan’s governance structure; the discipline of the sponsor; the presence of other plans; and the characteristics of the plan. Governance. Three aspects of the governance struc- ture could affect the likelihood of paying the ARC. • State plan. The aggregate data show that, on average, sponsors of state-administered plans pay a lower percentage of their ARC than those of locally-administered plans. The question is whether the relationship holds after controlling for other factors. • Statutory contribution rate. Plans with statutory contribution limits are likely to pay a smaller percentage of their ARC.7 Figure 6 shows the percent of the ARC paid by sponsors of both state- and locally-administered plans. While sponsors at the state level significantly reduced the percent of ARC paid, locally-administered plans did a better job in covering the ARC. Therefore, while local plans in general have a higher ARC per dollar of payroll, they also contribute a higher percent- age of total ARC each year. Yet, despite the higher ARC payments, locally-administered plans are less well funded than those administered at the state level. How can that be? Sources: Authors’ calculations from Public Plans Database (2007 and 2011); and various financial and actuarial reports. Figure 5. ARC as a Percent of Payroll for State- and Locally-Administered Plans, 2007 and 2011 11% 20% 14% 25% 0% 10% 20% 30% State Local 20072011 Sources: Authors’ calculations from Public Plans Database (2007 and 2011); and various financial and actuarial reports. Figure 6. Percent of ARC Paid by State- and Locally-Administered Plans, 2007 and 2011 86%91% 79% 88% 0% 20% 40% 60% 80% 100% State Local 2007 2011 Issue in Brief 5 • Employees/retirees on the board. Boards with a lot of workers and retirees could be more interested in benefit expansion or greater cost-of-living adjustments than in funding benefit promises. Alternatively, workers and retirees have a major stake in the plan’s success, so their presence on a board would tend to encourage funding. Earlier studies have shown mixed results.8 Lack of Fiscal Discipline. Two characteristics would signal that a plan sponsor is not disciplined in its fiscal effort. • Actuarial cost method. The projected unit credit (PUC) cost method allows sponsors to postpone contributions and therefore is a less stringent funding method. Sponsors that opted for this method may be less committed to funding their plans and therefore pay less of their ARC. • Debt-to-revenue. If a locality is having fiscal prob- lems, it may meet current non-pension obliga- tions by cutting back on the annual contribution to the pension plan. Other Retirement Plan. Sponsors that provide other sources of retirement income to participants may be less likely to pay the ARC. • Social Security coverage. Sponsors might feel less responsibility to fund the plan if participants are also covered by Social Security. Plan Characteristics. The likelihood of paying the ARC might depend on the cost of the plan and the type of employees covered. • ARC as a percent of payroll. The higher the ARC as a percent of payroll, the more costly it is to make the full payment. • Teacher plan. Teachers have longer tenures than general government employees and higher earn- ings (due to higher education levels), and these factors translate into larger pension liabilities and a higher ARC.9 The results of the regression are shown in Figure 7. (The full results are reported in Appendix B.) Most variables entered with their expected signs, have sta- tistically significant coefficients, and have an econom- ically meaningful impact on the percent of ARC paid. The story that emerges is as follows. First, paying the ARC reflects a commitment to fiscal discipline. Plan sponsors that borrow freely and have high levels of debt relative to revenue are less likely to pay the ARC. And the choice of the PUC actuarial method – in the context of state and local plans – also appears to be a signal that politicians are less committed to funding their plans. Other factors, such as governance and plan characteristics, have an effect, but being fis- cally responsible is the key. Surprisingly, even after controlling for these factors that influence the percent of ARC paid, state-administered plans are inherently less likely to pay the ARC. Notes: Closed plans are excluded from the regression. Marginal effects reflect a one-unit change for dichotomous variables and a one-standard-deviation change for continuous variables. Standard errors are adjusted for state-level clustering. Solid bars indicate that the coefficient is significant at the 10-percent level or better. An additional control not depicted is Social Security coverage. Sources: Authors’ calculations from Public Plans Database (2007-2010); and U.S. Census Bureau, State and Local Government Finances (2007-2010). Figure 7. Factors Associated with Average Percent of ARC Paid, 2007-2010 3.6 -1.3 -2.6 -6.5 -9.8 -15.7 -18.8 -11.4 -20 -10 0 10 State plan PUC cost method Statutory contribution rate Debt/revenue Teacher plan Average ARC/payroll SS coverage (% of employees) Employees/retirees on board Center for Retirement Research6 Funding the Plan Given that state-administered plans pay a smaller share of the ARC even after controlling for other fac- tors, why do they end up with higher funded ratios? Clearly other factors are at play. These factors fall into three categories: governance, history, and assump- tions. Governance and Size. • State plan. State plans are slightly better funded than local plans in aggregate, but fared worse over the period from 2007 to 2010. The state variable is included to determine whether being a state- versus locally-administered plan significant- ly influences the funded ratio, even after control- ling for other relevant factors. • Plan size. Our previous studies have shown that larger plans tend to be better funded.10 Possible reasons may be that not funding could have a significant impact on future taxpayers, or that larger plans are more in the political spotlight than smaller plans. • Investment council. If a plan has a dedicated investment board or hires financial advisors in making its investment decisions, the plan should have greater returns, which leads to more assets and a higher funded ratio.11 History. Today’s funded status depends very much on what has happened in the past. Here two factors appear important. • Average percent of ARC paid. Consistently pay- ing more of the ARC should be associated with a higher funded ratio. The average percent of ARC paid from 2007 to 2010 is used as a proxy for the plan’s long-term commitment to funding. • Age of plan. Older plans are likely to have prom- ised benefits over a longer period of time without putting aside funds to cover the promises, there- by creating a large unfunded liability. Therefore, the older the plan, the lower the expected funded ratio. Assumptions. The meaningfulness of the ARC as a mechanism for pre-funding benefits depends crucial- ly on the realism of the underlying assumptions.12 • Actuarial cost method. Use of the PUC cost method in this case is associated with lenient assumptions, given that the PUC method permits the least stringent funding requirement. Use of the PUC method is likely to be associated with a smaller funded ratio.13 As shown in Figure 8, all of the variables have the expected relationship with the funded status of the pension plan, and almost all coefficients were statisti- cally significant. (The full equation is reported in Ap- pendix B.) The exception is state-administered plan, which says that, after accounting for governance, history, and assumptions, the funded ratio is not directly influenced by whether a plan is administered at the state or local level. One clue to untangling the conundrum of the higher percent of ARC paid and Notes: Closed plans are excluded from the regression. Values for percent of ARC paid are averaged over the 2007-2010 peri- od. The results shown are for a one-unit change for dichotomous variables and one-standard-deviation change for continu- ous variables. Standard errors are adjusted for state-level clustering. Solid bars indicate that the coefficient is significant at the 10-percent level or better. Source: Authors’ calculations from Public Plans Database (2007-2010). Figure 8. Factors Associated with State/Local Pension Funded Ratios, 2010 5.2 2.7 1.8 -4.1 -12.6 -1.9 -20 -10 0 10 State plan PUC cost method Age of plan Plan size Average percent of ARC paid Plan has investment council 40% 50% 60% 70% 80% 1993 1996 1999 2002 2005 2008 2011 State Local Issue in Brief 7 lower funded ratios of locally-administered plans is the significance of an investment council and its implications for returns. The Role of Investment Returns An explanation for locally-administered plans’ slight but persistent funding gap despite paying more of the ARC is that state-administered plans have experi- enced higher investment returns over the long haul than locally-administered plans (see Table 2). These higher returns reflect a higher share of portfolios in- vested in risky assets (see Figure 9). While the excess returns appear slight, for mature plans that receive most of their revenue from investment returns, a difference of about 30 basis points is enough to offset the impact of paying even 10 percent less of the ARC. That is, over the long run the higher investment returns have more than compensated for the lower percent of ARC paid. In the last few years, however, the pattern of investment returns has reversed; locally-administered plans outperformed state-administered plans from 2007 to 2010. Slightly better investment returns, combined with larger ARC payments, have shrunk the funding gap between state-administered and locally-administered plans from 6 percentage points to 4 percentage points. Source: U.S. Census Bureau, Employee-Retirement Systems of State and Local Governments (2010). Table 2. Aggregate Geometric Returns for State- and Locally-Administered Pension Plans Period State Local Difference (S-L) 1990-2011 9.23 8.74 0.49 1995-2011 7.75 7.40 0.35 2000-2011 5.60 5.18 0.42 2005-2011 5.67 4.84 0.83 2007-2010 -3.60 -3.11 -0.49 Note: “Risky” assets are defined as any assets except cash, bonds, and mortgages. Source: Authors’ calculations from U.S. Census Bureau (2011). Figure 9. Percentage of Total Assets Invested in “Risky” Assets for State- and Locally-Administered Pension Plans, 1993-2011 Conclusion Although press accounts often suggest that locally- administered plans are significantly less funded than those administered by states, our sample of 128 local plans from 43 states suggests that they are nearly as well funded and have been closing the gap in recent years. Averages, as always, hide a lot of variation and a number of plans, including large cities such as Chicago, Philadelphia and Providence, have seriously underfunded plans. More importantly, locally-administered plans are only one aspect of the local pension story. As noted, only 42 percent of local pension contributions go to locally-administered plans, while 58 percent go to state plans. Thus, an equally, or perhaps more, important issue is the burden of local pension con- tributions – to both local and state plans – on local budgets. The budget story is the topic of the next brief in this series. 1 Allegheny Institute (2012); Kerkstra (2012); Ma- her, White, and Bauerlein (2012); Newcombe (2011); Olsen (2012); and Russ (2012). 2 The most recently reported data for eight of the plans are for fiscal year 2009. 3 In total, the Census identifies 222 state-adminis- tered and 3,196 locally-administered systems, com- pared to 107 and 128 in our samples, respectively (see U.S. Census Bureau, 2011). 4 In June 2012, the Governmental Accounting Stan- dards Board approved Statements 67 and 68, which will ultimately eliminate the concept of an ARC. However, the employer’s payment of the ARC is cur- rently the most standardized metric for measuring commitment to funding. 5 The results for local plans differ somewhat from a recent study by The Pew Charitable Trusts (2013), pri- marily because our latest data cover 2011 while Pew’s latest data cover 2010. 6 Our earlier update on local plans reported the same funded ratio for both state- and locally-administered plans in 2010. This finding would suggest that the situation for locally-administered plans deteriorated between 2010 and 2011. However, after updating the 2010 results to incorporate more recent estimates, the funded ratios in 2010 were not identical for the two types of plans – instead, state-administered plans were better funded than locally-administered plans, which is consistent with the analysis in this brief. 7 The degree of constraint varies significantly (Mun- nell 2012). For example, the statutory rates in Texas roughly equaled the actuarially determined ARC, so the contribution level fell only slightly short of the required amount. In contrast, the rate in Kansas was well below the required amount, so the sponsors con- tributed only about 65 percent of the ARC. 8 See Carmichael and Palacios (2003); Mitchell and Hsin (1997); Schneider and Damanpour (2002); and Yang and Mitchell (2005). 9 Weller, Price, and Margolis (2006). 10 See, for example, Munnell, Haverstick, and Aubry (2008) and Munnell, Aubry, and Quinby (2011). 11 Previous studies have directly included a measure of the rate of return on investments (see Yang and Mitchell, 2005). For our analysis, return data were not available for many local plans. 12 The most important assumption – the discount rate – has generated a lot of controversy. The issue is that actuaries discount using expected long-term returns, while financial theory suggests a rate that matches the riskiness of the promised benefit stream (see, for example, Novy-Marx and Rauh (2011)). However, since all plans use a rate of about 8 percent, the lack of variation would provide no insight for this analysis. 13 Another possible explanation is that, for mature plans, the PUC requires a larger ARC payment than other cost methods, so not paying the ARC results in a larger funding shortfall. Endnotes Center for Retirement Research8 Issue in Brief 9 References Allegheny Institute. 2012. “Pittsburgh in Denial about Pension Assets.” Allegheny Institute for Public Policy (August 27). Carmichael, Jeffrey and Robert Palacios. 2003. “A Framework for Public Pension Fund Manage- ment.” Washington, DC: World Bank. Governmental Accounting Standards Board. 2012. “Summary of Statement No. 67: Financial Report- ing for Pension Plans – an amendment of GASB Statement No. 25.” Governmental Accounting Standards Board. 2012. “Summary of Statement No. 68: Accounting and Financial Reporting for Pensions – an amendment of GASB Statement No. 27.” Kerkstra, Patrick. 2012. “Moral Hazards: Philadel- phia’s Ongoing Pension Crisis.” Philadelphia Magazine (May). Maher, Kris, Bobby White, and Valerie Bauerlein. 2012. “Hard Times Spread for Cities.” The Wall Street Journal (August 10). Mitchell, Olivia S. and Ping-Lung Hsin. 1997. “Public Sector Pension Governance and Performance.” In The Economics of Pensions: Principles, Policies and International Experience, ed. Salvador Valdes Prieto, 92-126. Cambridge: Cambridge University Press. Munnell, Alicia H. 2012. “State and Local Pensions: What Now?” Washington, DC: Brookings Institu- tion Press. Munnell, Alicia H., Jean-Pierre Aubry, and Laura Quinby. 2011. “Public Pension Funding in Prac- tice.” Journal of Pension Economics and Finance 10(2): 247-68. Munnell, Alicia H., Kelly Haverstick, and Jean-Pierre Aubry. 2008. “Why Does Funding Status Vary Among State and Local Plans?” State and Local Plans Issue in Brief 6. Chestnut Hill, MA: Center for Retirement Research at Boston College. Newcombe, Tod. 2011. “Pensions Threaten to Sink Cities.” Governing States and Localities (November). Novy-Marx, Robert and Joshua D. Rauh. 2011. “Public Pension Promises: How Big Are They and What Are They Worth?” Journal of Finance 66 (4): 1211-49. Olsen, Kevin. 2012. “Chicago’s Pension Funding Woes Get Moody’s Critical Eye.” Pensions and Investments (April 26). The Pew Charitable Trusts. 2013. “A Widening Gap in Cities: Shortfalls in Funding for Pensions and Retiree Health Care.” Washington, DC. Public Plans Database. 2007-2011. Center for Retire- ment Research at Boston College and Center for State and Local Government Excellence. Russ, Hillary. 2012. “Pensions Burden Rhode Island Towns Despite State Reform.” Reuters (August 12). Schneider, Marguerite and Fraiborz Damanpour. 2002. “Public Choice Economics and Public Pen- sion Plan Funding: An Empirical Test.” Adminis- tration & Society (34):57-86. Thousand Oaks, CA: SAGE Publications. U.S. Census Bureau. 2010-2011. Employee-Retirement Systems of State and Local Governments. Washing- ton, DC. Available at http://www.census.gov/govs/ retire/. U.S. Census Bureau. 2007-2010. State and Local Gov- ernment Finances. Washington, DC. Available at: http://www.census.gov/govs/estimate/. Weller, Christian E., Mark A. Price, and David M. Margolis. 2006. “Rewarding Hard Work: Give Pennsylvania Families a Shot at Middle Class Retirement Benefits.” Washington, DC: Center for American Progress. Yang, Tongxuan (Stella) and Olivia S. Mitchell. 2005. “Public Pension Governance, Funding, and Perfor- mance: A Longitudinal Appraisal.” Working Paper PRC WP 2005-2. Philadelphia, PA: The Pension Research Council. APPENDIX Appendix A: Locally-Administered Plans – Assets, Funded Ratio, and ARC Paid, 2011 State Plan name Actuarial value of assets (millions)Funded ratio Average percent of ARC paid (2007-10) AK Anchorage Police and Fire Retirement System $301 76.6 100 AL Birmingham Retirement and Relief System* 913 82.0 76 AR Little Rock City Firemen’s Pension and Relief Fund* 73 49.9 41 Little Rock City Policemen's Pension and Relief Fund* 49 40.1 33 AZ Phoenix ERS 1,835 66.7 100 Tucson Supplemental Retirement System 643 69.2 100 CA Contra Costa County ERA 5,427 78.5 100 Los Angeles County ERS 39,194 80.6 100 Los Angeles City ERS 9,691 72.4 101 Los Angeles City Fire and Police Pension System 14,338 86.3 100 Los Angeles Water and Power Employees' Retirement Plan 7,465 80.3 101 Marin County Employees' Pension Plan 1,065 74.2 100 Orange County ERS 9,064 67.0 100 San Diego County ERA 8,542 81.5 103 San Francisco City & County ERS 16,313 87.7 100 San Jose Police and Fire Department Retirement Plan* 2,577 79.8 100 CO Denver Employees Retirement Plan* 1,943 85.0 91 Denver Public Schools Retirement System 2,805 81.5 251 CT Bridgeport Police Retirement Plan B* 113 82.8 105 Bridgeport Public Safety Plan A* 193 56.8 53 Town of Greenwich Retirement System* 326 80.6 100 Hartford Municipal ERF 1,018 83.5 114 New Haven City ERF 177 46.5 100 New Haven Policemen and Firemen Retirement Fund 290 52.1 100 DC DC Police Officers' & Firefighters' Retirement Plan 3,594 108.6 100 DC Teachers' Retirement Fund 1,574 101.9 100 DE Dover General Employee Pension Plan* 20 38.1 112 New Castle County Pension Program* 411 87.0 90 Wilmington Police Pension Fund* 72 53.8 100 FL City of Jacksonville General Employees Retirement Plan 1,582 71.3 102 City of Miami Fire Fighters' and Police Officers' Retirement Trust* 1,181 76.4 100 Pensacola General Pension and Retirement Fund* 119 68.5 100 Tallahassee Retirement System** 1,128 103.7 100 Tampa City Firefighters and Police Officers Pension 720 91.5 100 %% Fund* Issue in Brief 11 State Plan name Actuarial value of assets (millions)Funded ratio Average percent of ARC paid (2007-10) GA Atlanta Board of Education Fund* $115 17.1 113 Atlanta Fire Fund** 423 60.5 103 Atlanta General Employees Pension Fund* 867 53.7 105 Atlanta Police Fund** 592 59.8 115 Cobb County ERS Pension Plan* 381 53.8 102 IA Des Moines Water Works Pension Plan 38 74.1 117 ID Pocatello Police Retirement Pension Plan 9 93.1 100 IL Chicago Firemen's Annuity and Benefit Fund 1,102 28.6 41 Chicago Laborers' and Retirement Board Employees' Annuity and Benefit Fund 1,422 66.1 56 Chicago Municipal Employees' Annuity and Benefit 5,552 45.2 37 Chicago Policemen's Annuity and Benefit Fund 3,445 36.2 52 Chicago Teachers' Pension and Retirement Fund 10,109 59.7 60 Cook County Employees' Annuity and Benefit Fund 7,897 62.5 52 IN Marion County Law Enforcement Personnel Retirement and Disability Plans 153 74.2 98 KS Wichita ERS 513 92.5 100 Wichita Police and Fire Retirement System 511 90.8 100 KY Lexington-Fayette Policemen's and Firefighters' Retirement Fund 501 66.0 154 Louisville-Jefferson County Firefighters' Pension Fund* 7 29.5 100 Owensboro City Employees' Pension Fund 4 127.4 100 Owensboro Police and Firefighters' Retirement Fund 5 68.0 27 LA City of Baton Rouge and Parish of East Baton Rouge ERS 1,028 72.2 109 New Orleans ERS 380 74.8 60 MA Boston Retirement Board* 4,593 62.2 110 MD Anne Arundel County Employees' Retirement Plan 516 79.0 100 Baltimore City Fire and Police ERS 2,546 82.0 106 Baltimore County ERS* 2,197 80.0 100 Baltimore City ERS 1,410 72.7 100 Montgomery County ERS 2,869 76.6 100 MI Detroit Police and Fire Retirement System 3,805 99.9 72 Detroit General Retirement System* 3,238 87.1 100 Wayne County Employees' Pension Plan 795 49.8 100 MN Duluth Teachers Retirement Fund 235 73.2 63 Minneapolis ERF 911 73.5 77 Minneapolis Police Relief Association* 255 62.8 63 St. Paul Teachers' Retirement Fund Association 973 70.0 71 %% Fund Center for Retirement Research12 Issue in Brief 13 State Plan name Actuarial value of assets (millions)Funded ratio Average percent of ARC paid (2007-10) MO Kansas City ERS* $750 75.3 101 St Louis City ERS 662 78.6 140 St Louis Police Retirement System 695 81.3 147 St. Louis City Public School Retirement System* 944 88.6 133 NC Charlotte Firefighters' Retirement System 366 89.5 101 ND Bismarck City Employees' Pension Plan 59 81.9 166 Fargo Employees' Pension Plan 28 59.3 56 Fargo Police Pension Plan 32 59.2 68 NE Omaha ERS 237 56.3 49 Omaha Police and Fire Retirement System 467 43.4 51 Omaha School Employees' Retirement System* 1,078 73.5 106 NH Manchester Employees' Contributory Retirement System 153 61.6 100 NJ Jersey City ERS** 69 42.8 77 NY New York City Board of Education Retirement System** 1,964 66.7 100 New York City ERS* 42,556 77.2 100 New York City Fire Pension Fund** 7,305 54.2 100 New York City TRS* 31,135 62.9 100 New York City Police Pension Fund** 22,676 71.3 100 OH City of Cincinnati ERS 1,466 66.8 61 OK Oklahoma City ERS* 525 92.6 100 Tulsa City Municipal Employees' Pension Fund* 372 76.8 93 OR Portland Fire and Police Disability and Retirement 26 1.0 51 PA Philadelphia Municipal Retirement System* 4,381 47.0 75 Pittsburgh Firemen's Relief and Pension Plan 210 61.9 131 Pittsburgh Municipal Pension Plan 187 66.2 131 Pittsburgh Policemen's Relief and Pension Plan 235 60.2 131 RI Providence ERS 423 31.9 99 SC City of Spartanburg Retirement Plan* 9 58.8 68 Greenville City Fire Department’s Pension Plan* 31 79.3 153 SD Sioux Falls ERS 264 87.4 100 TN Knox County DB Plan* 60 80.0 78 Knox County Teachers' DB Plan* 70 90.0 106 Nashville-Davidson Metropolitan Employees' Benefit Trust Fund* 2,144 90.8 106 City of Memphis Retirement System 1,838 75.1 56 %% Plan State Plan name Actuarial value of assets (millions)Funded ratio Average percent of ARC paid (2007-10) TX City of Austin ERS $1,791 65.7 66 City of Austin Fire Fighters Relief and Retirement Fund** 589 88.7 111 City of Austin Police Retirement System* 547 70.5 102 Dallas ERF* 3,027 92.2 148 Dallas Police and Fire Pension Plan 3,379 73.9 97 El Paso City Employees' Pension Fund * 570 80.2 99 Fort Worth ERF* 1,895 76.6 89 Houston Firefighters' Relief and Retirement Fund 3,222 90.6 100 Houston Municipal Employees Pension System 2,329 61.4 75 Houston Police Officers' Pension System* 3,527 83.3 45 San Antonio Fire and Police Pension Fund 2,331 90.6 100 VA Arlington County ERS* 1,504 95.2 100 Richmond Retirement System 493 58.6 100 Fairfax County ERS* 2,636 69.9 70 Fairfax County Police Officers Retirement System* 900 79.3 78 Fairfax County Educational Employees' Supplementary Retirement System* 1,823 76.5 100 Newport News ERF 641 56.0 48 Norfolk ERS 832 78.2 100 VT Burlington ERS 135 71.0 103 WA Seattle City ERS 1,954 68.3 87 WI Milwaukee County ERS 1,837 89.2 445 Milwaukee ERS 4,405 96.0 75 WV Charleston Firemen’s Pension and Relief Fund* 7 5.0 37 Morgantown Employees' Retirement and Benefit Fund 36 81.3 98 Wheeling City Employee's Retirement and Benefit Fund* 31 110.8 100 %% Note: “ERS” = Employees’ Retirement System; “ERA” = Employees’ Retirement Association; “ERF” = Employees’ Retirement Fund. * = Actuarial asset and funded ratio data are from fiscal year 2010. ** = Actuarial asset and funded ratio data are from fiscal year 2009. Source: Authors’ calculations from various financial and actuarial reports. Center for Retirement Research14 Issue in Brief 15 Table B1. Regression Results for Factors Associated with Average Percent of ARC Paid, 2007-2010 Variable Coefficient State plan -11.399 (5.604) Statutory contribution rate -15.722 (3.979) Employees/retirees on board (% of board)0.165 (0.075) PUC cost method -18.759 (4.532) Debt/revenue -0.102 (0.041) SS coverage (% of employees)-0.043 (0.055) Average ARC/payroll -0.154 (0.160) Teacher plan -6.532 (3.398) R-squared 0.231 Number of observations 205 ** *** *** ** * ** Note: Robust standard errors are in parentheses. Coefficients are significant at the 10-percent (*), 5-percent (**) or 1-percent (***) levels. Source: Authors’ calculations. Table B2. Summary Statistics for Factors Associated with Average Percent of ARC Paid, 2007-2010 Variable Mean Standard deviation Minimum Maximum Average percent ARC paid 95.38 35.85 25.44 444.83 State plan 0.49 0.50 0 1 Statutory contribution rate 0.26 0.44 0 1 Employees/retirees on board (% of board)52.70 21.46 0 100 PUC cost method 0.14 0.35 0 1 Debt/revenue 118.30 95.57 4.83 613.50 SS coverage (% of employees)69.79 30.41 0 100 Average ARC/payroll 18.00 16.62 0.93 152.19 Teacher plan 0.20 0.40 0 1 Source: Authors’ calculations. Appendix B: Regression Results Table B3. Regression Results for Factors Associated with State/Local Pension Funded Ratios Variable Coefficient State plan -1.925 (3.073) Plan size 0.015 (0.004) Plan has investment council 5.210 (2.150) Average percent of ARC paid (2007-2010)0.079 (0.043) Age of plan -0.225 (0.058) PUC cost method -12.643 (2.886) R-squared 0.295 Number of observations 194 *** * *** *** ** Note: Robust standard errors are in parentheses. Coefficients are significant at the 10-percent (*), 5-percent (**) or 1-percent (***) levels. Source: Authors’ calculations. Table B4. Summary Statistics for Factors Associated with State/Local Pension Funded Ratios Variable Mean Standard deviation Minimum Maximum Funded ratio 75.57 18.38 0.65 153.52 State plan 0.52 0.50 0 1 Plan size 73.70 120.48 0.23 834.06 Plan has investment council 0.22 0.42 0 1 Average percent of ARC paid (2007-2010)94.21 34.51 25.44 444.83 Age of plan 65.27 18.38 12 123 PUC cost method 0.14 0.35 0 1 Source: Authors’ calculations. Center for Retirement Research16 Issue in Brief 17 About the Center The Center for Retirement Research at Boston Col- lege was established in 1998 through a grant from the Social Security Administration. The Center’s mission is to produce first-class research and educational tools and forge a strong link between the academic com- munity and decision-makers in the public and private sectors around an issue of critical importance to the nation’s future. To achieve this mission, the Center sponsors a wide variety of research projects, transmits new findings to a broad audience, trains new schol- ars, and broadens access to valuable data sources. Since its inception, the Center has established a repu- tation as an authoritative source of information on all major aspects of the retirement income debate. Affiliated Institutions The Brookings Institution Massachusetts Institute of Technology Syracuse University Urban Institute Contact Information Center for Retirement Research Boston College Hovey House 140 Commonwealth Avenue Chestnut Hill, MA 02467-3808 Phone: (617) 552-1762 Fax: (617) 552-0191 E-mail: crr@bc.edu Website: http://crr.bc.edu © 2013, by Trustees of Boston College, Center for Retirement Research. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that the authors are identified and full credit, including copyright notice, is given to Trustees of Boston College, Center for Retirement Research. The CRR gratefully acknowledges the Center for State and Local Government Excellence for its support of this research. The Center for State and Local Government Excel- lence (http://www.slge.org) is a proud partner in seeking retirement security for public sector employees, part of its mission to attract and retain talented individuals to public service. The opinions and conclusions expressed in this brief are solely those of the authors and do not represent the opinions or policy of the CRR or the Center for State and Lo- cal Government Excellence. pubplans.bc.edu Visit our: