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Home My WebLink AboutAgenda Fire Pension 070813THE RESOURCE CENTERS , LLC 4360 Northlake Boulevard, Suite 206 Palm Beach Gardens, FL 33410 Phone (561) 624-3277 Fax (561) 624-3278 WWW.RESOURCECENTERS.COM PALM BEACH GARDENS FIREFIGHTERS’ PENSION FUND Meeting of Monday, July 8, 2013 Location: City Hall, Council Chambers Palm Beach Gardens City Hall 10500 North Military Trail Palm Beach Gardens, FL 33410 Time: 9 AM AGENDA 1. Call Meeting to Order 2. Public Comments 3. Minutes: • Regular Meeting Held on May 1, 2013 4. Investment Manager Interviews: • Segall Bryant & Hamill - All Cap Core (Ralph Segall) • Fiduciary Management, Inc. of Milwaukee – All Cap Equity (Michael Stanley) • Broadview Advisors, LLC – All Cap Strategy (Jim Wenzler) 5. Investment Monitor Report: The Bogdahn Group (Troy Brown) 6. Attorney Report: Sugarman & Susskind, P.A. (Pedro Herrera) • Memo – Interim Legislative Update 7. Administrative Report: Resource Centers (Audrey Ross) • Disbursements • Benefit Approvals • Schedule Special Meeting • Review of Draft Summary Plan Description 8. Old Business • American Realty Letter in Response to the 2012 Dispositions 9. New Business 10. Other Business 11. Schedule Next Meeting: Wednesday August 7, 2013 at 1:00 P.M. *special meeting date to be determined* 12. Adjourn PLEASE NOTE: Should any interested party seek to appeal any decision made by the Board with respect to any matter considered at such meeting or hearing, he will need a record of the proceedings, and for such purpose he may need to insure that a verbatim record of the proceedings is made, which record includes the testimony and evidence upon which the appeal is to be based. In accordance with the Americans With Disabilities Act of 1990, persons needing a special accommodation to participate in this meeting should contact The Resource Centers, LLC no later than four days prior to the meeting. SUGARMAN & SUSSKIND PROFESSIONAL ASSOCIATION ATTORNEYS AT LAW Robert A. Sugarman♦ 100 Miracle Mile Howard S. Susskind Suite 300 Kenneth R. Harrison, Sr. Coral Gables, Florida 33134 D. Marcus Braswell, Jr. (305) 529-2801 Pedro A. Herrera Broward (954) 327-2878 Noah Scott Warman Toll Free 1-800-329-2122 Ivelisse Berio LeBeau Facsimile (305) 447-8115 ♦Board Certified Labor & Employment Lawyer M E M O R A N D U M TO: Government Pension and Benefit Fund Clients FROM: Sugarman & Susskind, P.A. DATE: June 11, 2013 RE: Interim Legislative Update (awaiting governor's action on SB 50) I. New § 112.664 Financial Reporting Requirements On May 31, 2013, the governor signed SB 534, which creates Florida Statutes Section 112.664 and imposes new financial reporting requirements for local government pension plans. This law takes effect July 1, 2013. The new financial reports require the following information: • Annual financial reports in compliance with requirements found in Government Accounting Standards Board (GASB) Statement No. 67 and Statement No. 68 (summaries attached). These reports must use the RP-2000 Combined Healthy Participant Mortality Tables, by gender, with generational projection by scale AA; • Annual financial reports similar to those prescribed above, but which use an assumed rate of return and assumed discount rate 2% less than a plan's assumed rate of return; • Disclosure of the number of months or years for which the current market value of assets is adequate to sustain the payment of expected retirement benefits as determined in the plan's latest valuation. Memorandum re: Interim Legislative Update June 11, 2013 Page 2 • The recommended contribution to the plan based on the latest plan valuation stated as an annual dollar value and a percentage of valuation payroll. The reports will be due, at the very earliest, sixty days after you receive the October 1, 2014 actuarial valuation. Florida Statutes 112.664 also requires local government plans to post certain financial disclosures on the plan's website if the plan already has a website. The deadline for website posting is 60 days after receiving the October 1, 2014 actuarial valuation. There is no requirement to create a new website. Such website must contain the new Section 112.664 reports, as well as the plan's most recent actuarial valuation, a side-by-side comparison of the plan's assumed rate of return compared to the actual rate of return for the previous five years, and the percentages of cash, equity, bond, and alternative investments in the plan portfolio. Plan sponsors must also post this information on their websites in the same manner in which they are required to post tentative budget data. Retirement plans should be prepared provide plan sponsors with the documents they need to comply. TO DO NOW: Evaluate the costs and benefits of the new disclosures and advise the city in case repeal is proposed during the 2014 legislative session. Advise the city of the costs associated with the new disclosure requirements. Add the requested disclosures to any fund website at the same time the new financial disclosures are due (60 days after receiving the October 1, 2014 actuarial valuation). II. New Fine Enforcement for Late Financial Disclosures. On May 1, 2013, the governor signed SB 002, amending Florida Statutes Chapter 112 to change various ethics rules regarding the activities of public officers. SB 002 took immediate effect when the governor signed the bill on May 1, 2013. This bill created Section 112.31455, which creates a method to collect fines for failure to timely file disclosures of financial interests. Such methods include wage garnishment, court judgments, or referral to collection agencies. In other words, the fines for failure to comply with the disclosure requirements now have more "teeth." The law also requires the creation of an electronic disclosure filing system by the year 2015. We will share information on this new filing system once it is available. Memorandum re: Interim Legislative Update June 11, 2013 Page 3 TO DO NOW: Make sure your financial disclosure is filed by July 1, 2013. File with the supervisor of elections in the county where you reside and send certified, return receipt requested, and send a copy of the return receipt to the pension office. III. Required Public Comment Period at Meetings. The governor has not yet signed SB 50. If SB 50 is presented to the governor and signed, the law will amend Florida Statutes Section 286.0114 which will require local government retirement plans to give members of the public a reasonable opportunity to be heard on propositions being discussed at plan meetings. TO DO NOW: designate a specific period of time for public comment on regular meeting agendas. Agendas for city commission meetings usually provide three to five minutes for public comment. A similar allotment of time will suffice for retirement board meetings. This law, if signed, will take effect October 1, 2013. ReseaRch / expeRience / Results Jim WenzleR,cFa DiRectoR oF maRketing / Q1 2013 City of Palm BeaCh Gardens firefiGhters’ Pension trust fund BRoaDVieW oVeRVieW BRoaDVieW oVeRVieW / coRe gRoWth > small cap > all cap / Bottom up, FunDamental analysis / RepeataBle inVestment pRocess: the FiVe pillaRs / 100% employee oWneD 1 BRoaDVieW oVeRVieW / gips compliant / seasoneD team: 16 yeaR tRack RecoRD / suB-aDVisoR to an Fmi FunD / inVest alongsiDe ouR clients 2 BRoaDVieW inVestment team 3 Rick Whiting >inDustRials >tRaDing Rick lane, cFa >inDustRials >Financials >eneRgy aaRon gaRcia, cFa >mateRials >healthcaRe >inDustRials FaRaz FaRzam, cFa >consumeR >technology BRoaDVieW philosophy We inVest in Quality enDuRing Businesses stRategically positioneD in attRactiVe inDustRies Run By stRong management teams 4 BRoaDVieW pRocess FiVe pillaR analysis 5 / stRong Business tRaits > high level of recurring revenue > solid free cash flow > controllable destiny – not overly regulated or commodity centric / DeFenDaBle maRket niche > strategic value > Barriers to entry > Difficult to duplicate / attRactiVe gRoWth potential > Focus on 2-3 year time horizon > owners not renters > across all industries / capaBle management >history of successful strategic decisions > effective use of free cash flow > interests and compensation aligned with shareholders / Discount to pRiVate maRket Value (pmV) > substantial discount at purchase (industry specific) >most important risk control > Discipline and patience BRoaDVieW pRocess / RepeataBle Discipline 6 iDea geneRation (conFeRences, iDea list, company Visits, tRaDe peRioDicals) poRtFolio management team FiVe pillaR analysis pass gooD Business stRong management attRactiVe Valuation poRtFolio not pass ReseRVations moRe ReseaRch iDea list portfolio construction max position 5% max sector 2 times sell Discipline Violation of any of the Five pillars BRoaDVieW all cap stRategy all cap composite / RetuRn Vs psn all cap gRoss uniVeRse 7 > inception Date 01/01/2002 source: zephyr styleaDVisoRs please refer to the performance disclosure information at end of presentation Zephyr StyleADVISOR Zephyr StyleADVISOR: Broadview Advisors Manager vs PSN All Cap Gross: Return January 2002 - March 2013 (not annualized if less than 1 year) Re t u r n 0 5 10 15 20 25 1 quarter 1 year 3 years 5 years 10 years Analysis Period Broadview Advisors: All Cap Strategy Russell 3000 5th to 25th Percentile 25th Percentile to Median Median to 75th Percentile 75th to 95th Percentile all cap composite / poRtFolio Data* 8 source: Russell investments, Factset Research systems, inc. *information above is presented as supplemental to the fully compliant presentation located on page 17. hol d i n g s b y C a p i t a l i z a t i o n 7 28 35 28 ©FactSet Research Systems under $500m $500m to $2B $2B to $5B over $5B sec t o r W e i g h t s ( % ) Ch a r a c t e r i s t i c s Broadview russell 3000 top ten equ i t y hol d i n g s ( % ) consumer Discretionary 11.39 14.50 consumer staples --8.53 energy 7.22 9.49 Financials 13.29 16.96 health care 11.79 12.24 industrials 29.39 11.90 information technology 29.39 11.90 materials 4.70 3.92 telecommunication services --2.70 utilities 1.74 3.94 [cash]5.47 -- Wtd avg market cap 17,340 87,384 median market cap 3,039 1,154 p/e (forward 12 mo)16.0 14.6 price/cash Flow 9.8 9.2 price/Book 2.5 3.0 price/sales 1.0 1.4 est 3-5 yr eps growth 12.8 11.2 # of securities 100 2942 hexcel corp.2.77 metlife inc.2.58 medassets inc.2.23 chicago Bridge & iron company nV 2.14 mobile mini inc.2.08 american international group inc.1.82 Baker hughes inc.1.82 zions Bancorporation 1.79 Winnebago industries inc.1.77 crane co.1.77 20.76 all cap composite / sectoR concentRation* 9 source: Russell investments, Factset Research systems, inc. *information above is presented as supplemental to the fully compliant presentation located on page 17. -16.00 -12.00 -8.00 -4.00 -- 4.00 8.00 12.00 16.00 energy -16.00 -12.00 -8.00 -4.00 -- 4.00 8.00 12.00 16.00 financials -16.00 -12.00 -8.00 -4.00 -- 4.00 8.00 12.00 16.00 health Care -16.00 -12.00 -8.00 -4.00 -- 4.00 8.00 12.00 16.00 industrials -16.00 -12.00 -8.00 -4.00 -- 4.00 8.00 12.00 16.00 information technology -16.00 -12.00 -8.00 -4.00 -- 4.00 8.00 12.00 16.00 materials -16.00 -12.00 -8.00 -4.00 -- 4.00 8.00 12.00 16.00 Consumer discretionary percentage over/under Russell 3000 sector weight - 12/31/2007 through 3/28/2013 all cap composite / Fee scheDule 10 First $25,000,000 $25,000,000 - $50,000,000 over $50,000,000 0.90% 0.80% negotiable city of palm Beach gardens Firefighters’ pension trust Fund 0.75% aDDitional inFoRmation BRoaDVieW inVestment team / Bios 11 richard e. lane, Cfa managing member, portfolio management, Research education: university of Wisconsin, ms, Ba - applied security analysis program investment experience since 1982 with Broadview advisors since inception - 2001 prior experience: Fiduciary management, inc., cleary gull Reiland & mcDevitt, inc., stein Roe & Farnham, inc. faraz farzam, Cfa portfolio management, Research education: university of Wisconsin, Bs investment experience since 1999 with Broadview advisors since 2001 prior experience: strong capital management, inc. aaron J. Garcia, Cfa portfolio management, Research education: Rice university, Ba investment experience since 2002 with Broadview advisors since 2003 prior experience: stifel nicolaus & co. richard J. Whiting trading, portfolio management, Research education: lawrence university, Ba investment experience since 1982 with Broadview advisors since inception - 2001 prior experience: Fiduciary management, inc., Vector securities int’l., inc., cleary gull Reiland & mcdevitt, inc. BRoaDVieW inVestment team / Bios 12 owen l. hill, Jr. administration, operations, compliance education: texas a&m, BBa; marquette university graduate school of Business investment experience since 1961 with Broadview advisors since inception - 2001 prior experience: tucker anthony cleary gull, Blunt ellis & loewi, inc. Paul C. Baures marketing, administration, it education: university of Wisconsin- milwaukee, Ba investment experience since 1992 with Broadview advisors since 2001 prior experience: tucker anthony cleary gull, uniplan inc., m&i imc, Banc one investment advisors ethan a. hill trading, administration, hR education: arizona state university, Ba investment experience since 1996 with Broadview advisors since inception - 2001 prior experience: summit investment management, ltd., strong capital management, inc. James m. Wenzler, Cfa marketing, client service education: university of Wisconsin - milwaukee, BBa investment experience since 1985 with Broadview advisors since 2006 prior experience: alpha investment consulting group, a.o. smith corp., associated trust company all cap composite / annual RetuRns 13 year total return Gross of fees (%) total return net of fees (%) Benchmark* return (% ) 3 yr. stan dev Portfolio 3 yr. stan dev Benchmark dispersion number of Portfolios total Composite assets end of Period total firm assets end of Period Percentage of firm assets 2002 (23.01)(23.80)(21.54)1 14,648,680 652,174,219 2.25% 2003 62.19 60.63 31.06 1 21,877,440 1,263,238,559 1.73% 2004 11.03 9.93 11.95 1 25,640,765 1,205,585,105 2.13% 2005 11.16 10.07 6.12 1 23,295,919 1,062,966,663 2.19% 2006 17.03 15.88 15.71 1 27,273,183 970,900,312 2.81% 2007 0.11 (0.89)5.14 1 30,462,203 892,929,619 3.41% 2008 (23.52)(24.22)(37.31)1 21,532,976 383,895,216 5.61% 2009 45.03 43.76 28.34 1 31,453,457 416,401,924 7.55% 2010 29.89 28.30 16.93 1 39,923,994 575,155,300 6.94% 2011 (3.65)(5.20)1.03 24.11%19.35%2 42,266,064 577,979,488 7.31% 2012 11.57 10.33 16.42 20.44%15.73%na 3 50,827,560 689,584,084 7.37% 2013 Q1 14.91 14.70 11.07 na 3 57,305,730 808,499,812 7.09% * Benchmark: Russell 3000 all cap composite / DisclosuRes 14 Broadview Advisors, LLC claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS® standards. Broadview Advisors, LLC has been independently verified for the periods 05/31/01-3/31/13. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS® standards on a firm-wide basis and (2) the firm’s policies and procedures are deigned to calculate and present performance in compliance with GIPS® standards. The Broadview All Capitalization Composite has been examined for the periods 12/31/01-3/31/13. The verification and performance examination reports are available upon request. Broadview Advisors, LLC is an investment advisor registered with the Securities and Exchange Commission under the Investment Advisors Act of 1940. Broadview Advisors, LLC manages equity assets in endowment, defined contribution, sub-advised mutual fund and high net-worth individuals. The firm’s separate account fee schedule is as follows: 0.90% for first twenty five million, 0.80% for next twenty five million. Fees may be subject to negotiation where special circumstances warrant. The All Capitalization Composite was created beginning March 2008. The composite consists of fully discretionary taxable and tax-exempt All Capitalization US equity accounts. No non-fee paying accounts are included in the composite. The All Capitalization Equity Composite reflects the time-weighted returns of the individual accounts and asset weighted returns of the composite. All returns are calculated using United States Dollars and are based upon monthly valuations using trade date accounting. All accounts in this composite are fee paying. Gross of fee returns are calculated gross of management fees and custodial fees and net of transaction costs. Net of fee returns for the period between 2002-2009 are calculated net of maximum management fees and transaction costs and gross of custodial fees. Beginning in 2010 net of fee returns are calculated net of actual management fees and transaction costs and gross of custodial fees Individual account returns are time weighted and the All Cap composite return is asset weighted. Dispersion of annual returns is measured by the asset-weighted standard deviation of all accounts included in the composite for the entire year. For years with five or fewer accounts in the composite for the entire year, we do not present dispersion as it is not required. A complete list and description of all composites is available upon request. Additional information regarding policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request. The firm generally requires a minimum of $5 million in assets to establish a discretionary account. High Net Worth individuals may establish an account for less than the $5 million but the firm reserves the right to charge a minimum dollar fee for High Net Worth individuals depending upon the client servicing involved. The minimum account sizes do not apply to new accounts for which there is a corporate, family, or other substantial relationship to existing accounts. In addition, the firm reserves the right to waive the minimum account size and minimum annual fee under certain conditions. The Russell 3000 Index® is an unmanaged index generally representative of the broad U.S. equity universe representing approximately 98% of the U.S. market. The investment strategy of this composite may lead to investments that differ markedly from the benchmark. Returns may be more volatile than, and/or may not be correlated to, this index (for comparative purposes only). Although we have rarely done so in the past, the strategy does allow for the use of short selling in the accounts in this composite. Also, although rarely done so in the past, the portfolios in the composite may also be leveraged from time-to-time to increase equity market exposure. ReseaRch / expeRience / Results broadviewadvisors.com Q1 2013 Michael S. Stanley Partner Presented to: U.S. All Cap Equity Management FIREFIGHTERS’ PENSION TRUST FUND 1 Table of Contents I. Introduction (Fiduciary Management) –Pages 2-7 II.Investment Philosophy and Research Process –Pages 8-12 III.All Cap Equity Portfolio –Pages 13-14 IV.All Cap Equity Performance –Pages 15-16 V.Supplemental Performance for FMI Small Cap / Large Cap –Pages 17-18 VI.Summary and Footnotes –Pages 19-22 2 •Founded in 1980 •Based in Milwaukee, Wisconsin •100% Employee-Owned (12 Partners) •$17.7 Billion in Assets Under Management as of 3/31/13 Large Cap Equity = $13.8 Billion (Inception 12/31/00) -Closed Small Cap Equity = $2.8 Billion (Inception 01/01/80) -Closed All Cap Equity = $180 Million (Inception 12/31/07) International Equity = $101 Million (Inception 12/31/10) •―We Eat Our Own Cooking‖... we invest alongside our investors About FMI 33 Investment Professionals Name Portfolio Management Committee Years of Investment Experience Ted D. Kellner, CFA 44 Patrick J. English, CFA Yes 28 John S. Brandser Yes 28 Bladen J. Burns, CFA 21 Andy P. Ramer, CFA Yes 16 Robert M. Helf, CFA Yes 23 Matthew J. Goetzinger, CFA Yes 12 Karl T. Poehls, CFA Yes 9 Daniel G. Sievers, CFA Yes 5 Jonathan T. Bloom Yes 3 Michael S. Stanley 13 Leslie A. Hultgren 4 Collin M. Hirsch 11 Nora A. Smith 4 Ryan P. Rusch 3 Jessica P. Taske 10 4 TED D. KELLNER, CFA, 66, Executive Chairman Investment Experience: 44 Years –Joined FMI: 1980 University of Wisconsin, BBA Prior Experience: Nicholas Company, Inc., 1973-1980; Brittingham, Inc., 1969-1973 PATRICK J. ENGLISH, CFA, 52, CEO and Chief Investment Officer Investment Experience: 28 Years –Joined FMI: 1986 Stanford University, BA Prior Experience: Dodge and Cox, Inc., 1985-1986 JOHN S. BRANDSER, 51, President, COO, CCO Investment Experience: 28 Years –Joined FMI: 1995 University of Minnesota, Duluth, BA Accounting Prior Experience: Marshall & Ilsley Corp., 1985-1995 BLADEN J. BURNS, CFA, 43, Senior Vice President—Marketing/Client Service Investment Experience: 21 Years –Joined FMI: 2002 Boston University, BS Business Administration Prior Experience: Strong Capital Mgmt.,1996-2002; Wellesley Group, 1994-1996; Brown Brothers Harriman, 1992-1994 ANDY P. RAMER, CFA, 38, Director of Research, Research Analyst Investment Experience: 16 Years –Joined FMI: 2002 University of Illinois, BS Prior Experience: Bufka & Rodgers, LLC, 1997-2002 ROBERT M. HELF, CFA, 44, Research Analyst Investment Experience: 23 Years –Joined FMI: 1998 University of Wisconsin, MS; University of Southern California, BS Prior Experience: Everen Securities, 1994-1997; R.W. Baird & Co., 1990-1992 5 MATTHEW J. GOETZINGER, CFA, 35, Research Analyst Investment Experience: 12 Years –Joined FMI: 2004 University of Wisconsin -Madison, MS, BBA Prior Experience: Applied Security Analysis Program, University of Wisconsin, 2003-2004; R. W. Baird & Co., 2003; Strong Investments, Inc., 2001-2002 KARL T. POEHLS, CFA, 32, Research Analyst Investment Experience: 9 Years –Joined FMI: 2008 University of Wisconsin -Madison, MBA, University of Wisconsin-LaCrosse, BS Prior Experience: Applied Security Analysis Program, University of Wisconsin, 2006-2008; UBS Investment Bank, 2007; Smith Barney, Citigroup Global Markets, 2004-2006 DANIEL G. SIEVERS,CFA,27, Research Analyst Investment Experience: 5 Years –Joined FMI: 2009 Boston College, BS Prior Experience: Evergreen Investment Management Company, LLC, 2008-2009 JONATHAN T. BLOOM, 32, Research Analyst Investment Experience: 3 Years –Joined FMI: 2010 Columbia Business School, MBA; Brown University, BA Prior Experience: Applied Value Investing Program, Columbia Business School, 2008-2009; National Investment Services, 2009; Jonathan has passed all three levels of the CFA exam. His charter is pending his completion of the work experience requirement. MICHAEL S. STANLEY, 35, Vice President—Marketing/Client Service Investment Experience: 13 Years –Joined FMI: 2003 Marquette University, MBA; University of Wisconsin –Whitewater, BBA Prior Experience: Strong Capital Management, 2000-2003 LESLIE A. HULTGREN, 26, Vice President—Marketing/Client Service Investment Experience: 4 Years –Joined FMI: 2012 Marquette University, BBA Prior Experience: Wells Capital Management, 2008-2012. 66 COLLIN M. HIRSCH, 32, Senior Trader Investment Experience: 11 Years –Joined FMI: 2007 University of Wisconsin –Milwaukee , BA, MS Prior Experience: Artisan Partners, 2002-2007 NORA A. SMITH, 26, Vice President –Portfolio Administration / Trading Investment Experience: 4 Years –Joined FMI: 2009 University of Wisconsin –Milwaukee, BA RYAN P. RUSCH, 25, Portfolio Administration / Trading -Associate Investment Experience: 3 Years –Joined FMI: 2011 Marquette University, BA Prior Experience: Cortina Asset Management, 2010-2011 JESSICA P. TASKE, 32, Vice President –Administration Investment Experience: 10 Years –Joined FMI: 2004 University of Wisconsin –LaCrosse, BS Prior Experience: Wells Fargo, 2003-2004; Strong Capital Management, 2002-2003 7 Corporate ACT, Inc. Reserve Fund (2009) A.O. Smith Corporation (2003) Baker Hughes Incorporated (2010) Baxter International (2009) Briggs & Stratton Retirement Plan (1986) FM Global Pension Plan (1995) Generac Corporation (1994) Green Bay Packers (2009) Link-Belt Construction Equipment (2002) Minnesota Lawyers Insurance Mutual (2005) Michigan Commercial Insurance Mutual (2005) MGIC Investment Corp. (2002) Quad Graphics (2009) Endowments and Foundations Cardinal Stritch University (2005) Catholic Charities of the Archdiocese of Chicago (2010) Catholic Community Foundation of San Antonio (2007) Chipstone Foundation (1995) Gateway Foundation (2003) Greater Milwaukee Foundation (2008) Indian Land Tenure Foundation (2002) Milwaukee School of Engineering MSOE (2001) Milwaukee Art Museum (2007) Mount Saint Mary College (2011) RC Lilly Foundation (1986) School Sisters of St. Francis (1994) Sisters of Providence (1995) SSM Mission & Ministry (1996) St. Mary’s University Endowment Fund (2010) St. Procopius Abbey (2010) Tower Foundation of San Jose State University (2010) United Church of Christ -The Pension Boards (2011) University of St. Joseph College (2011) Women’s Christian Association (1984) Public Plans Alberta Teachers Retirement Fund Board (2011) Champaign, IL Police Pension Plan (2006) City of Newport News, VA (2010) Florida College Savings Program (2005) Franklin Park, IL Firefighters Pension Plan (2003) Overland Park, KS Police Pension Fund (1994) Port of Houston Authority (2005) Rockford, IL Firefighters Pension Plan (2008) Schaumburg, IL Firefighters Pension Plan (2006) Southfield, MI Fire & Police Retirement (2005) Tamarac, FL Employees Retirement Plan (2006) Health Care American Board of Psychiatry and Neurology (2009) Ancilla Systems, Inc. (2003) Aurora Health Care, Inc. (2007) Bellin Hospital (2010) Blue Cross Blue Shield of Kansas City, MO (2010) Children’s Hospital of Wisconsin (2005) Essentia Health (2009) Froedtert and Community Health, Inc. (2007) Grandview Hospital (2009) Independence Blue Cross 401(H) Plan (2007) Mercy Hospital of Iowa City (2007) North Mississippi Health Services (2011) Proctor Hospital Pension Plan (2010) Sisters of St. Francis Health System (2007) St. Luke’s Roosevelt Hospital Center Pension Fund (2010) Wheaton Franciscan Services (2009) WPS Health Insurance (2009) (Year) relationship began with Fiduciary Management. Sub-Advised ICMA Retirement Corporation (2009) MD Physician Services (2011) Northwestern Mutual Series Fund (2012) 8 Investment Philosophy •Make our research count… 43 Companies •Invest in businesses with attractive or a potentially attractive ROIC •Purchase when there is a cloud (or some controversy) over the business •Invest with management teams that think and act like shareholders •Avoid value traps… are the issues facing this company surmountable •Be patient… let time work for us 9 Good Business Analysis of the Company’s Business •Durable… Tough to Replicate •Recurring Revenue and/or modestly priced products/services •Attractive Return on Invested Capital (ROIC) Prospects •Understandable Business •Reasonable ability to control destiny (cost, regulations, etc.) •Solid Balance Sheet Research Process 10 Attractive Valuation Fundamental Valuation Analysis •Price Relative to Balance Sheet Metrics •Valuation relative to ROIC •Relative Valuation to Historical Metrics (Price/Earnings, Price/Cash Flow, Price/Sales) •Stock Price < Intrinsic Value Research Process 11 Assessment of Company Management •Capable Management Team –smart strategic decisions –acquisition activity •Ownership Structure –compensation policy –shareholder-oriented Strong Management Research Process 12 Portfolio Construction •Concentrated Portfolio •Initial Position Size (1-3%) •Purchased across all portfolios •Security Positions Limits ( 6%) •Liquidity Constraints (10-20 trading days) Sell Discipline •Stock price reaches our Valuation Target •We missed something in our initial work •Management actions that dilute ROIC --(e.g., Expensive Acquisition) •Position Size Limit YES = Portfolio Good Business + Attractive Valuation + Good Portfolio Fit Portfolio Management Committee 1 Idea Generation (Screens, Conferences, Trade Periodicals, Monitor List) Valuation, or Other Reservations NO = Monitor List 13 All Cap Portfolio Characteristics –March 31, 2013 Fiduciary Portfolio iShares Russell 3000 Manufacturing 16%8% Finance 15%17% Distribution/Logistics 15%3% Consumer 12%21% Technology 9%17% Business Services 7%2% Energy/Commodities 7%10% Process Industries 5%3% Healthcare 5%12% Communications 0%3% Utilities 0%4% Cash/Other 9%0% Total 100%100% Number of Holdings 43 2951 P/E (1 Year Trailing Wgtd. Avg.)15.8x 24.4x FY1 P/E (1 Year Forward Wgtd. Avg.)14.3x 18.9x P/B (Weighted Average)3.1x 4.0x P/S (Weighted Average)1.5x 2.8x EV/EBITDA (Weighted Average)7.9x 11.9x Debt/Capital (Weighted Average)32%36% Dividend Yield (Weighted Average)1.7%2.0% Active Share 92%N/A *The risk statistics and sector weightings presented above are shown as supplemental information to the All Cap Equity compli ant presentation. 14 Representative All Cap Portfolio vs. iShares Russell 3000 Index Fund As of March 31, 2013 Portfolio Benchmark Portfolio Benchmark Economic Sector Weight WeightDifference Weight WeightDifference Consumer 12.20 21.33 -2 Distribution / Logistics 15.20 2.93 6.3481 Wal-Mart Stores 2.39 5 Arrow Electronics Inc.2.77 2.78526 Time Warner 2.28 3 Sysco 2.70 3.29226 Nestle 2.03 2 Patterson Cos. Inc. 2.50 2.49645 Family Dollar Stores, Inc.1.89 2 AmerisourceBergen 2.00 4.15434 Danone 1.88 2 Anixter International 1.95 2.03154 Kimberly-Clark 1.73 2 Expeditors International of Washington 1.67 1.89784 Finance 15.20 16.76 -1 World Fuel Services Corp.1.61 1.27256 Bank of NY Mellon 3.72 1 Manufacturing 15.68 7.57 1.97878 W.R. Berkley Corp.2.36 2 3M 3.71 -6.132 Comerica, Inc.2.29 ##Berkshire Hathaway B 3.70 2.58648 American Express 2.27 2 Illinois Tool Works Inc.2.53 3.18801 Protective Life Corp.1.63 3 Avery Dennison 2.18 1.62235 Arthur J. Gallagher & Co.1.56 3 Ingersoll-Rand, Inc.2.02 3.08597 Willis Group 1.37 Paccar Inc.1.54 Technology 9.30 17.11 Business Services 7.41 1.87 1.1737 TE Connectivity 2.96 2 Omincom Group 2.70 Accenture 2.88 3 Cintas Corp.1.92 Automatic Data Processing 1.87 1 Dun & Bradstreet 1.54 8.2257 Microsoft Corp.1.59 1 Robert Half International 1.25 3.40105 Communications 0.00 2.69 2 Process Industries 4.76 3.29 2.02208 1 H.B. Fuller Co.2.00 2.97833 Utilities 0.00 3.63 2 Monsanto 1.59 2.55684 Sigma-Aldrich Corp.1.17 Health Care 4.57 11.77 2 Energy/Commodities 7.27 10.58 1.39062 Covidien 2.61 Devon Energy 2.35 GlaxoSmithKline 1.96 Schlumberger 2.00 0.8682 McDermott International, Inc.1.49 2.14722 Bristow Group Inc.1.43 7.15 0.00 = Overweight = Underweight *The information presented above is shown as supplemental information to the All Cap Equity compliant presentation. 15 1 Year 3 Years 5 Years Inception: Dec. 2007 Fiduciary All Cap Equity +15.21% +13.44% +9.36% +8.12% Russell 3000 Index +14.56% +12.97% +6.32% +4.01% Gross of Fees Performance: As of March 31, 2013 Fiduciary All Capitalization Equity Composite 1 Year 3 Years 5 Years Inception: Dec. 2007 Fiduciary All Cap Equity 8.9% 14.8% 19.1% 18.7% Russell 3000 Index 10.2% 15.4% 19.5% 19.3% 87% 96% 98% 97% Risk (Standard Deviation): As of March 31, 2013 Performance as of March 31st is preliminary and subject to final reconciliation. Above Standard Deviation Calculation is based on monthly performance. Please refer to the performance disclosure footnote for a detailed explanation of the Fiduciary All Capitalization Equity Composite. 16 Year FIDUCIARY ALL CAP Russell 3000 2008 -26.7%-37.3% 2009 +30.2%+28.3% 2010 +18.2%+16.9% 2011 +3.9%+1.0% 2012 +16.1%+16.4% YTD 2013 +10.8%+11.1% Since Inception - Cumulative Return +50.6%+22.9% As of March 31, 2013 Fiduciary All Capitalization Equity Composite Gross of Fees Calendar Year Performance Performance as of March 31st is preliminary and subject to final reconciliation. Please refer to the performance disclosure footnote for a detailed explanation of the Fiduciary All Capitalization Equity Composite. 17 1 Year 3 Years 5 Years 10 Years Inception: Jan. 1980 Fiduciary Small Cap Equity +11.35% +13.66% +11.95% +13.78% +14.72% Russell 2000 Index +16.30% +13.45% +8.24% +11.52% +10.84% Gross of Fees Performance: As of March 31,2013 Fiduciary Small Capitalization Equity Composite 1 Year 3 Years 5 Years 10 Years Inception: Jan. 1980 Fiduciary Small Cap Equity - - 18.2% 22.3% 17.8% 17.4% Russell 2000 Index - - 22.0% 25.5% 21.4% 22.1% 83% 87% 83% 79% Risk (Standard Deviation): As of March 31, 2013 Performance as of March 31st is preliminary and subject to final reconciliation. Above Standard Deviation Calculation is based on quarterly performance returns. Please refer to the performance disclosure footnote for a detailed explanation of the Fiduciary Small Capitalization Equity Composit e. 18 1 Year 3 Years 5 Years 10 Years Inception: Dec. 2000 FMI Large Cap Equity +16.41% +12.09% +8.73% +12.36% +10.20% S&P 500 Index +13.96% +12.67% +5.81% +8.53% +3.41% Gross of Fees Performance: As of March 31, 2013 Fiduciary Large Capitalization Equity Composite Risk (Standard Deviation): As of March 31, 2013 1 Year 3 Years 5 Years 10 Years Inception: Dec. 2000 FMI Large Cap Equity -- 16.0% 18.6% 15.0% 16.1% S&P 500 Index -- 17.5% 21.1% 16.8% 18.2% Percentage 91% 88% 89% 88% Performance as of March31st are preliminary and subject to final reconciliation. Above Standard Deviation Calculation is based on quarterly performance. Please refer to the performance disclosure footnote for a detailed explanation of the Fiduciary Large Capitalization Equity Composite. 19 •Continuity of the Team and Process •Strong valuation discipline... highly sensitive to downside risk •Historical outperformance of our benchmarks with less risk •Heavily invested alongside of our clients…―We Eat Our Own Cooking‖ Why Fiduciary Management? Fiduciary Management,Inc. --All Cap Equity Composite (12/31/2007 –12/31/12) 20 Fiduciary Management, Incorporated (FMI) claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. FMI has been independently verified for the periods 12/31/1993 -12/31/2012. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm's policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. The All Cap Equity composite has been examined for the periods 12/31/2007 -12/31/2012. The verification and performance examination reports are available upon request. FMI was founded in 1980 and is an independent investment counseling firm registered with the SEC and the State of Wisconsin. The firm manages over $15.2 billion in assets of pension and profit sharing trusts, mutual funds, Taft-Hartley funds, insurance company portfolios, endowments and personal trusts. The firm includes both institutional and mutual fund business. Although the firm has participated in wrap programs, it is a separate and distinct business, and is excluded from firm-wide assets. The FMI All Cap Equity Composite was created in December 2007. These accounts primarily invest in small, medium and large capitalization US equities. The FMI All Cap Equity Composite reflects time-weighted and asset-weighted returns for all discretionary accounts. From December 31, 2007 all accounts were managed for at least one month. All returns are calculated using United States Dollars and are based on monthly valuations using trade date accounting. All accounts in this composite are fee paying. Gross of fees returns are calculated gross of management fees and custodial fees and net of transaction costs. Net of fees returns are calculated net of actual management fees and transaction costs and gross of custodial fees. Dispersion is calculated using the equal weighted standard deviation of all accounts in the composite for the entire period. As of 12/31/2011, the trailing three year annualized ex-post standard deviation for the Composite and Benchmark are required to be stated per GIPS®. Currently, the advisory fee structure for the FMI All Cap Equity Composite portfolios is as follows: Up to $25,000,000 0.75% $25,000,001-$50,000,000 0.65% $50,000,001-$100,000,000 0.60% $100,000,001 and above 0.55% The firm generally requires a minimum of $3 million in assets to establish a discretionary account. High Net Worth individuals may establish an account with a minimum of $1,000,000, however, the firm reserves the right to charge a minimum dollar fee for High Net Worth individuals depending on the client servicing involved. The minimum account sizes do not apply to new accounts for which there is a corporate, family, or other substantial relationship to existing accounts. In addition, the firm reserves the right to waive the minimum account size and minimum annual fee under certain circumstances. A complete list and description of all firm composites is available upon request. Policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request. The Russell 3000 Index® measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market. The All Cap Equity composite uses the Russell 3000 Index® as its primary index comparison. Three Year Ex-Post Standard Deviation Year Total Return Gross of Fees % Total Return Net of Fees % *Benchmark Return % Number of Portfolios Dispersion %Composite *Benchmark Total Assets Composite End of Period ($ millions) Total Firm Assets End of Period ($ millions) Percentage of Firm Assets % 2008 -26.65 -27.18 -37.31 12 0.60 n/a n/a $ 56.9 $ 4,062.5 1.40% 2009 30.19 29.35 28.34 18 0.23 n/a n/a $ 86.9 $ 7,008.9 1.24% 2010 18.20 17.41 16.93 18 0.26 n/a n/a $ 103.3 $ 9,816.0 1.05% 2011 3.85 3.14 1.03 23 0.41 19.57%19.35%$ 127.4 $ 12,273.6 1.04% 2012 16.06 15.34 16.42 30 0.27 14.87%15.73%$ 168.5 $ 15,253.5 1.10% *Benchmark: Russell 3000 Index® Returns reflect the reinvestment of dividends and other earnings. The above table reflects past performance. Past performance does not guarantee future results. A client's investment return may be lower or higher than the performance shown above. Clients may suffer an investment loss. . Fiduciary Management, Inc. --Small Cap Equity Composite (12/31/2002 –12/31/12) 21 Fiduciary Management, Inc. (FMI) claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. FMI has been independently verified for the periods 12/31/1993 -09/30/2012. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm's policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. The Small Cap Equity comp osite has been examined for the periods 12/31/1993 -09/30/2012. The verification and performance examination reports are available upon request. FMI was founded in 1980 and is an independent investment counseling firm registered with the SEC and the State of Wisconsin. The firm manages over $15.1 billion in assets of pension and profit sharing trusts, mutual funds, Taft - Hartley funds, insurance company portfolios, endowments and personal trusts. The firm includes both institutional and mutual fund business. Although the firm has participated in wrap programs, it is a separate and distinct business, and is excluded from firm-wide assets. The FMI Small Cap Equity Composite was created in January 1980. These accounts primarily invest in small to medium capitaliz ation US equities. The FMI Small Cap Equity Composite reflects time-weighted and asset-weighted returns for all discretionary accounts, with a market value greater than $500,000 as of month end. A small percentage of composite assets (typically ranging from 0-5%) historically has been invested in unmanaged fixed income securities at the direction of account holders. Fr om December 31, 1993 thru September 30, 2002 all accounts included were managed for at least one quarter, from October 1, 2002 to present all accounts were managed for at least one month. All returns are calculated using U nited States Dollars and are based on monthly valuations using trade date accounting. All accounts in this composite are fee paying. Gross of fees returns are calculated gross of management fees, gross of custodial fees, gross of wi thholding taxes and net of transaction costs. Net of fees returns are calculated net of actual management fees and transaction costs and gross of custodial fees and withholding taxes. Dispersion is calculated using the equal weigh ted standard deviation of all accounts in the composite for the entire period. As of 12/31/2011, the trailing three year annualized ex-post standard deviation for the Composite and Benchmark are required to be stated per GIPS®. Currently, the advisory fee structure for the FMI Small Cap Equity Composite portfolios is as follows: Up to $25,000,000 0.90% $25,000,001-$50,000,000 0.85% $50,000,001-$100,000,000 0.75% $100,000,001 and above 0.65% The firm generally requires a minimum of $3 million in assets to establish a discretionary account. High Net Worth individual s may establish an account with a minimum of $1,000,000, however, the firm reserves the right to charge a minimum dollar fee for High Net Worth individuals depending on the client servicing involved. The minimum account sizes do no t apply to new accounts for which there is a corporate, family, or other substantial relationship to existing accounts. In addition, the firm reserves the right to waive the minimum account size and minimum annual fee under certain ci rcumstances. A complete list and description of all firm composites is available upon request. Policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request. The Russell 2000 Index® measures the performance of the small -cap segment of the U.S. equity universe. The Russell 2000 Index is a subset of the Russell 3000® Index representing approximately 8% of the total market capitalization of that index. It includes approximately 2,000 of the smallest securities based on a combination of their mark et cap and current index membership. The Small Cap Equity composite uses the Russell 2000 Index® as its primary index comparison. Three Year Ex-Post Standard Deviation Year Total Return Gross of Fees % Total Return Net of Fees % *Benchmark Return % Number of Portfolios Dispersion %Composite *Benchmark Total Composite Assets End of Period ($ millions) Total Firm Assets End of Period ($ millions) Percentage of Firm Assets % 2003 27.18 26.22 47.25 167 1.93 n/a n/a $ 1,206.9 $ 2,927.0 41.23% 2004 20.92 20.02 18.33 181 1.00 n/a n/a $ 1,486.6 $ 3,085.8 48.18% 2005 11.12 10.26 4.55 186 0.69 n/a n/a $ 1,605.8 $ 3,174.4 50.59% 2006 18.46 17.56 18.37 147 0.73 n/a n/a $ 1,606.8 $ 3,589.4 44.77% 2007 -0.92 -1.72 -1.57 161 0.85 n/a n/a $ 1,520.2 $ 3,960.4 38.39% 2008 -21.06 -21.69 -33.79 145 1.16 n/a n/a $ 1,212.4 $ 4,062.5 29.84% 2009 35.72 34.56 27.17 165 0.97 n/a n/a $ 2,004.6 $ 7,008.9 28.60% 2010 23.45 22.43 26.85 170 0.48 n/a n/a $ 2,477.7 $ 9,816.0 25.24% 2011 5.64 4.79 -4.18 179 0.34 21.17%24.99%$ 2,523.2 $ 12,273.6 20.56% 2012 11.34 10.43 16.35 182 0.40 15.46%20.20%$ 2,609.5 $ 15,253.5 17.11% *Benchmark: Russell 2000 Index® Returns reflect the reinvestment of dividends and other earnings. The above table reflects past performance. Past performance does not guarantee future results. A client's investment return may be lower or higher than the performance shown above. Clients may suffer an investment loss. 22 Fiduciary Management Inc. –Large Cap Equity Composite (12/31/2002 –12/31/12) Fiduciary Management, Inc. (FMI) claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. FMI has been independently verified for the periods 12/31/1993 -12/31/2012. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm's policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. The Large Cap Equity comp osite has been examined for the periods 12/31/2000 -12/31/2012. The verification and performance examination reports are available upon request. FMI was founded in 1980 and is an independent investment counseling firm registered with the SEC and the State of Wisconsin. The firm manages over $15.2 billion in assets of pension and profit sharing trusts, mutual funds, Taft - Hartley funds, insurance company portfolios, endowments and personal trusts. The firm includes both institutional and mutual fund business. Although the firm has participated in wrap programs, it is a separate and distinct business, and is excluded from firm-wide assets. The FMI Large Cap Equity Composite was created in December 2000. These accounts primarily invest in medium to large capitaliz ation US equities. The FMI Large Cap Equity Composite reflects time-weighted and asset-weighted returns for all discretionary accounts with a market value greater than $500,000 as of month end beginning January 1, 2012. From December 31, 2000 thru September 30, 2002 all accounts included were managed for at least one quarter, from October 1, 2002 to present all acco unts were managed for at least one month. All returns are calculated using United States Dollars and are based on monthly valuations using trade date accounting. All accounts in this composite are fee paying. Gross of fees returns are calculated gross of management fees, gross of custodial fees, gross of withholding taxes and net of transaction costs. Net of fees returns are calculated net of actual management fees and transaction costs and gross of custo dial fees and withholding taxes. Dispersion is calculated using the equal weighted standard deviation of all accounts in the composite for the entire period. As of 12/31/2011, the trailing three year annualized ex-post standard deviation for the Composite and Benchmark are required to be stated per GIPS®. Currently, the advisory fee structure for the FMI Large Cap Equity Composite portfolios is as follows: Up to $25,000,000 0.65% $25,000,001-$50,000,000 0.55% $50,000,001-$100,000,000 0.45% $100,000,001 and above 0.40% The firm generally requires a minimum of $3 million in assets to establish a discretionary account. High Net Worth individual s may establish an account with a minimum of $1,000,000, however, the firm reserves the right to charge a minimum dollar fee for High Net Worth individuals depending on the client servicing involved. The minimum account sizes do no t apply to new accounts for which there is a corporate, family, or other substantial relationship to existing accounts. In addition, the firm reserves the right to waive the minimum account size and minimum annual fee under certain cir cumstances. A complete list and description of all firm composites is available upon request. Policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request. The S&P 500 Index® is widely regarded as the best single gauge of the U.S. equities market. This index includes 500 leading companies in leading ind ustries of the U.S. economy. Although the S&P 500® focuses on the large cap segment of the market, with approximately 75% coverage of U.S. equities, it is also an ideal proxy for the total market. The Large Cap Equity composite uses the S&P 500 Index® as its primary index comparison. Three Year Ex-Post Standard Deviation Year Total Return Gross of Fees % Total Return Net of Fees % *Benchmark Return % Number of Portfolios Dispersion %Composite *Benchmark Total Composite Assets End of Period ($ millions) Total Firm Assets End of Period ($ millions) Percentage of Firm Assets % 2003 34.29 33.15 28.68 4 0.86 n/a n/a $ 20.8 $ 2,927.0 0.71% 2004 19.32 18.46 10.88 10 0.46 n/a n/a $ 48.9 $ 3,085.8 1.58% 2005 10.22 9.57 4.91 28 0.29 n/a n/a $ 192.2 $ 3,174.4 6.05% 2006 17.91 17.15 15.79 49 0.30 n/a n/a $ 491.0 $ 3,589.4 13.68% 2007 5.05 4.34 5.49 86 0.48 n/a n/a $ 1,000.2 $ 3,960.4 25.26% 2008 -26.38 -26.91 -37.00 130 0.63 n/a n/a $ 1,969.3 $ 4,062.5 48.48% 2009 30.92 30.09 26.46 252 1.22 n/a n/a $ 3,820.3 $ 7,008.9 54.51% 2010 12.52 11.81 15.06 394 0.31 n/a n/a $ 5,923.2 $ 9,816.0 60.34% 2011 2.35 1.74 2.11 509 0.37 18.34%18.70%$ 8,434.8 $ 12,273.6 68.72% 2012 16.02 15.32 16.00 575 0.32 13.94%15.09%$ 11,270.3 $ 15,253.5 73.89% *Benchmark: S&P 500 Index® Returns reflect the reinvestment of dividends and other earnings. The above table reflects past performance. Past performance does not guarantee future results. A client's investment return may be lower or higher than the performance shown above. Clients may suffer an investment loss. PALM BEACH GARDENS FIREFIGHTERS’ PENSION FUND MINUTES OF MEETING HELD May 1, 2013 A meeting of the Board of Trustees was called to order at 1:03 PM. 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 Ed Morejon Doug Lozen, Actuary Mark Joyce Brad Coats, Investment Manager Martin Cohen Troy Brown, Investment Consultant Alan Owens – Finance Director Mary Anderson – Alan Owens PUBLIC COMMENTS The Trustees welcomed Mr. Cohen to the board. Mr. Cohen briefly reviewed his background and stated that he also served on the City’s budget committee board as well. MINUTES The Board reviewed the minutes of the regular meeting held on March 11, 2013. A motion was made by Ed Morejon to approve the minutes of the March 11, 2013 regular meeting. The motion was seconded by Tom Murphy and carried 5-0. The Board reviewed the minutes of the special meeting held on March 18, 2013. A motion was made by Mark Joyce to approve the minutes of the March 18, 2013 special meeting. The motion was seconded by Tom Murphy and carried 5-0. INVESTMENT MONITOR REPORT: THE BOGDAHN GROUP (TROY BROWN) Mr. Brown reviewed the process of the ICC and Vanguard transition that took place in between meetings and he commented that it went very well. He explained that the board chose to use CAPIS for the transition manager per his recommendation and the process went very smooth. The transition was completed on April 1, 2013 and the total cost of the transition was $4K. Mr. Brown noted that the plan did save a lot of money by using the transition manager instead of just having ICC liquidate their portfolio because ICC did lose money in April due to gold selling off. He reported to the board that the Bogdahn Group did visit with ICC Capital in their office in early April, and the outcome of the meeting left Bogdahn with the recommendation to all their ICC clients to seek another alternative. Lastly Mr. Brown stated that they will use ConvergEx for all future transitions and that CAPIS was a one time deal, although now the board does have a current contract with both transition managers. Mr. Brown reviewed the funds performance for the quarter ending March 31, 2013. He noted that it was a strong quarter with the mid cap sector leading. Interest rates are still very low, which are making investors move into lower debt and higher risk stocks. International equity had a positive quarter, but fixed income posted negative returns. Mr. Brown reviewed the plans current asset allocation and commented that he does have a 2 recommendation for rebalancing in which he will address later on in his presentation. The total fund slightly underperformed for the quarter ending March 31, 2013 net of fees at 6.71% versus the benchmark at 6.76%. Although for the fiscal year to date they are ahead of the benchmark and also the plans assumed rate of return at 8.08% versus 7.83% net of fees. Mr. Brown reviewed each mangers performance during the quarter and stated that ICC, Manning, and American Realty outperformed, but Agincourt was negative (although still ahead of the benchmark). He noted that he is comfortable with the current portfolio and the funds that are being held, and therefore he does not have any recommendations for changes at this time other than looking for a replacement manager for ICC and rebalancing back to target. Lastly he noted that since the quarter ended the Plan is up another 0.6% for April, which puts the fiscal year to date return at 9%. Mr. Brown continued to explain that since the quarter ended ICC has been removed from the portfolio and now the board needs to look at other all cap managers to replace them. The Trustees discussed why they would want to replace ICC with another active manager instead of purchasing another index fund. Mr. Brown provided the board with an active manager search and reviewed the top 3 managers; Segall Bryant, Fiduciary Management, and Broadview. He compared those 3 managers to ICC and noted that all of them did have a strong long term performance record. He explained the difference between the managers investment style and commented that all their fees where inline with each other. Mr. Brown recommended interviewing all 3 managers so that the board can get a feel for all the different investment styles and processes that are involved in the all cap funds and to also ask any questions that they may have. The Trustees concurred and noted that they will invite Segall Bryant, Fiduciary Management, and Broadview to their next meeting for interviews. Mr. Brown stated that he does have a recommendation in regards to the plans current asset allocation because there is a lot of money currently sitting in cash. Therefore he is recommending that the board transfer $725K from the cash account and allocate $200K to the Manning and Napier account and $525K to the Templeton account. Mr. Brown explained that both managers are outperforming and with the market going up, you want to have as much invested in it as you can. The Trustees discussed the recommendation and noted that they do not need that much in cash and concurred with Mr. Brown’s recommendation. A motion was made by Ed Morejon to move $725K from the cash account and allocate $525K to the Templeton fund and $200K to the Manning and Napier fund per the recommendation of the Consultant. The motion was seconded by Martin Cohen and carried 5-0. Lastly Mr. Brown noted that after the ICC transition took place there was still a small amount of cash left in the portfolio due to earnings. He stated that he needs the board’s permission at this time to completely close out the ICC account and transfer the remaining cash over to the Plan’s receipt and disbursement account. A motion was made by Tom Murphy to closeout the ICC Capital account and transfer any remaining funds from that account over to the plans receipt and disbursement account per the recommendation of the Consultant. The motion was seconded by Mark Joyce and carried 5-0. 3 INVESTMENT MANAGER REPORT: AGINCOURT CAPITAL (BRAD COATS) Mr. Coats introduced himself and gave a brief overview of his firm. He stated that Agincourt is 100% employee owned and they currently have over $4B in assets. Mr. Coats reviewed the investment team and noted that their professionals are broken up into 4 different teams. Agincourt’s number one goal regarding investing is to have consistent returns with low volatile. They have a top down sector management approach with security selection and yield curve duration management as well. Mr. Coats reviewed the plans portfolio and commented that corporates did better than treasury’s and that the lower rated securities did better in regards to the stocks during the quarter. As of March 31, 2013 the portfolio was negative but ahead of the benchmark at -0.07% versus -0.12%, but for the one year they are ahead at 4.56% versus the benchmark at 3.77%. Mr. Coats gave his brief outlook on the market environment. He stated that the Federal Reserve has increased the number of Governmental securities which has stimulated the market for the time being, but inflation still remains low and that they will need to be concerned when inflation does happen. Lastly he commented that for disclosure purposes Agincourt was audited by the SEC in 2001 and 2008 for minor deficiencies that were considered low risk, but they have since been cleared on everything. PRESENTATION OF THE 9/30/2012 ACTUARIAL VALUATION REPROT: FOSTER & FOSTER, INC. (DOUG LOZEN) Mr. Lozen reviewed the summary sheet he created that compares this years valuation results to last years valuation that was completed by the prior actuary GRS. He noted that 2008 rolled off which was very beneficial to the plan because 2008 was a double digit negative. Mr. Lozen stated that the plan had an actuarial loss of ($296,437) during the fiscal year, but the plans total assets did increase to over $50M which is a new all time high for this plan. The funded ratio also increased this year to 71.9% from 61.6% last year and this was mainly due to the benefit changes that took place. Therefore the estimated City contribution for the fiscal year beginning 10/1/2013 is 36.17% of covered payroll. He noted that the City’s contribution amount would have been a lot higher before the benefit changes where put into place. Mr. Lozen stated that overall this plan had a good year and broke even due to no salary increases, but they had a great investment year. Mr. Owens stated that the Board made a motion back in September 2012 to have the Actuary reflect both methods of the City’s contribution funding; fixed dollar amount and percentage of payroll. Mr. Lozen commented that he can calculated the City’s contribution rate either way, but the percentage of payroll is more accurate because payroll changes throughout the year. Also he noted that if the City wants a fixed dollar amount to fund for the fiscal year beginning 10/1/2013, then they would need to revise this report. The Trustees had a lengthy discussion and commented that they will leave this years report as is and will have a special meeting with the Actuary in the near future to discuss changing the funding method going forward. A motion was made by Ed Morejon to approve the September 30, 2012 Actuarial Valuation as presented setting forth the contributions for the fiscal year beginning October 1, 2013. The motion was seconded by Mark Joyce and carried 4-1 (Mr. Cohen objected to the vote). Lastly Mr. Lozen explained that currently the DROP account assets are commingled with the plans assets and because of that it brought down the Plans return for the fiscal year ending 9/30/2012, which had a small negative impact on the plan. The Trustees 4 discussed this and stated that they recently had this conversation with their Auditor and concluded at that time that the Division would accept the report either way and that it was just the preference of the board. Although if commingling the DROP assets with the plans assets caused a negative impact to the Plan, the Trustees noted that they do not want it reported that way going forward. A motion was made by Ed Morejon to authorize that the DROP assets are not commingled with the Plans assets going forward. The motion was seconded by Tom Murphy and carried 5-0. Mr. Ross noted that she will notify the Auditor of the change in recording the DROP and plan assets. ATTORNEY REPORT: SUGERMAN & SUSSKIND (PEDRO HERRERA) Mr. Herrera noted that he did attend the City Commission meeting earlier this month for the 1st reading of the pension Ordinance as requested by the board. The Commission did pass the 1st reading of the Ordinance and the 2nd reading is schedule very soon. Mr. Herrera commented that he did review the CAPIS agreement prior to the transition with ICC and Vanguard. He noted that there were no issues with the agreement. Mr. Herrera stated that all Senate Bills that were proposed during this past Legislative session have been tabled indefinitely. ADMINISTRATIVE REPORT: RESOURCE CENTERS (AUDREY ROSS) DISBURSEMENTS The Board reviewed the disbursements presented for approval by the Administrator. A motion was made by Mark Joyce to approve the disbursements that were presented by the Administrator. The motion was seconded by Martin Cohen and carried 5-0. Ms. Ross stated that the Division of Retirement sent out a notice of confidentiality request for all Cities to execute on behalf of the public safety officers that they employ. She noted that the City’s Finance Director did sign off on the confidently notice and it was submitted back to the Division of Retirement. OLD BUSINESS Ms. Herrera explained that since amended Ordinance is going to be in effect soon, now the board needs to work on setting up a self directed DROP account option. The Trustees discussed all the options and what providers offer this type of service. Per the recommendation of the Attorney, the Trustees asked Mr. Brown to bring back some quotes from a couple of different service providers that offer self directed DROP accounts to the next meeting. NEW BUSINESS The Trustees asked Ms. Ross to coordinate a special meeting in June to meet with the Actuary and the investment consultant to review the plans current assumptions methods and the self directed DROP accounts. 5 There being no further business, the meeting adjourned at 5:16 PM. Respectfully submitted, Tom Murphy, Secretary SEGALL BRYANT & HAMILL 10 S. WACKER DR., SUITE 3500 • CHICAGO, ILLINOIS 60606.7507 TEL: 800.836.4265 • FAX: 312.474.0521 • www.sbhic.com 1 Quarter 2013 All Cap st Palm Beach Gardens Firefighters’ Pension Trust Fund July 8, 2013 Ralph M. Segall, CFA, CIC Chief Investment Officer Table of Contents 2 Section Page 1. Firm Overview 3-5 2. Investment Philosophy and Process 6-10 3. Portfolio Characteristics 11-13 4. Performance 14-18 Appendix 19-22 Firm Profile Founded in 1994 Locations in Chicago, IL and St. Louis, MO Employee-Owned Manage $9.3 Billion in Equity, Fixed Income and Alternative Assets Consistent: −Investment Philosophy −Investment Results −Asset Growth (As of 03/31/13) Total Assets Under Management $ B i l l i o n s Fixed Income Investments Equity Investments 0 1 2 3 4 5 6 7 8 9 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 0 10 20 30 40 50 60 1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 Number of Employees Nu m b e r o f E m p l o y e e s Total Employees 3 Investment Professionals Fixed Income Alternative Investments Senior investment professionals average more than 18 years of industry experience JEFF D. HANK, CFA Director, Alternative Investments JOHN M. LAFFERTY JR. Portfolio Manager JAMES D. DADURA, CFA Managing Director, Fixed Income Portfolio Manager NICKOLAS KLADOURIS Senior Analyst, Alternative Investments All Cap/Mid Cap Equity RALPH M. SEGALL, CFA, CIC Chief Investment Officer PHILIP L. HILDEBRANDT, CFA Chief Executive Officer PAUL A. LYTHBERG, CPA Chief Compliance Officer / Chief Operating Officer Small Cap Equity LINN J. ARBOGAST, CFA, CPA Director, Small Cap Portfolio Manager JEFFREY C. PAULIS, CFA Senior Equity Analyst MARK T. DICKHERBER, CFA, CPA Senior Equity Analyst ELISA BRIZUELA Small Cap Trader SHAUN P. NICHOLSON Senior Equity Analyst ZACHARY T. ROSENSTOCK, CFA Senior Equity Analyst SCOTT N. BARNUM, CFA Senior Equity Analyst CHRIS P. SCHWEITZER, CFA Senior Equity Analyst CHERYL A. WOODCOCK Manager, Equity Trading STEPHEN M. LAPOINTE Manager, Separately Managed Accounts SURESH RAJAGOPAL, CFA Director, Senior Equity Analyst JEFF R. RODE, CFA Managing Director SEAN T. BASHFORD Equity Analyst YOUNG B. IM, CFA, CPA Senior Equity Analyst JAMES D. DADURA, CFA Managing Director, Fixed Income Portfolio Manager CAROLYN M. MORIARTY, CFA Senior Credit Analyst MICHAEL R. DIEHL, CFA Fixed Income Analyst GREGORY C. HOSBEIN, CFA Managing Director, Fixed Income Portfolio Manager MAERGRETHE F. HAINES, CFA Fixed Income Analyst NICK N. DETCHEV Fixed Income Analyst 4 CHAD M. FULLER, CPA Chief Financial Officer ERIC D. HINES Equity Analyst Representative Client List * * This list contains representative sample of Segall Bryant & Hamill’s clients that have investment agreements in force as of March 31, 2013. Account performance was not a factor in compiling this list. It is not known whether the listed clients approve or disapprove of Segall Bryant & Hamill or the advisory services provided. Public 21% Taft-Hartley 42% Corporate 26% E & F / Health Care 11% Boilermakers National Health & Welfare Fund Central Laborers Pension Fund Central Pennsylvania Teamsters Chicago Carpenters Welfare Fund Greater Pennsylvania Carpenters’ Fund Indiana Electrical Workers Pension Trust IUOE Local 825 Pension Fund Iron Workers St. Louis District Council Pension Plan Louisiana Carpenter Pension Fund Massachusetts Laborers’ Annuity Fund Michigan Laborers’ Annuity Fund Michigan UFCW National Electric Benefit Fund NECA IBEW Welfare Trust Fund New Jersey Carpenters Pension Fund Northern California Cement Masons Ohio Bricklayers Pension Fund Ohio State Plumbers & Pipefitters Oregon & Southwest Washington Painters Pension Trust Fd Pipefitters Local 636 (Detroit) San Francisco Bricklayers Local No. 7 Pension Fund Southern California UFCW Pension Trust Fund St. Paul Electrical Construction Pension Structural Iron Workers Local 1 Pension Fund Teamsters Joint Council 83 of Virginia Pension Fund Teamsters Local 639 Employers Pension Fund Teamsters Local 734 Pension Fund Twin City Ironworkers Pension Fund UFCW & FELRA Pension Fund UFCW Local 1546 Pension Fund Waterfront Employers-ILA Pension and Welfare Fund Wisconsin Laborers Pension Fund Illinois State Board of Investment New Hampshire Retirement System Municipal Employees’ Annuity & Benefit (Chicago) Metropolitan Pier & Exposition Authority Fredrick County, Maryland Berrien County, Michigan Commonwealth of Pennsylvania-SWIF Michigan Municipal Risk Management Authority City of New Orleans Employees Retirement System Transit Management of Southeast Louisiana City of Evanston Fire Pension Fund Lexington-Fayette Urban County Govt. City of Ocala, FL Firemen’s Pension Fund of Peoria, Illinois Village of Arlington Heights Fire Pension Fund Village of Schaumburg Firefighters Pension Fund Intel Corporation Exelon Corporation A.O. Smith The ACT Reserve Fund Amerco Inc. Kentucky Insurance Guarantee Authority Service Wire Company Bemis Manufacturing Company Bradveco Inc. Choctaw Nation of Oklahoma First Financial Insurance Company EWT Properties, LLC Illinois CPA Society Madison Mutual Insurance Company The University of Georgia Baptist Health Washington Regional Medical Center Franciscan Alliance Lake Health Cornell College The Archdiocese of San Francisco Procter Hospital/Procter Health Care The Archdiocese of Louisville Bethesda Lutheran Home Foundation, Inc. Church of Brethren Benefit Trust Dominican Sisters of Springfield, IL Delta Upsilon California Hospital Medical Center Provision for the Future East Africa Foundation Nazareth Convent Greater Boston Association Jewish Community Foundation Associated Radiologists of Joliet The Archdiocese of Bismarck McGraw Foundation Academy of Nutrition and Dietetics The Viscardi Center Osprey Foundation Mercy Memorial Hospital System Sage Foundation Lakeland Hospital Scholarships for Illinois Residents Second Presbyterian Church of Chicago Special People in Need Temple Sholom of Chicago Cascia Hall Foundation 5 Why We Are Different 6 25+ year track record continuously managed by Ralph Segall, supported by analytical team with over 70 years of experience All weather approach with consistent record of down side protection Broad perspective that is agnostic with regards to market cap and style 6 7 Core Equity Principles Philosophy Bottom- Up Focus Seek attractively priced companies with strong or improving Return on Investment (ROI). Long-Term Perspective Invest in companies with a 2-3 year horizon. Growth Orientation Invest in companies with superior growth potential. Intrinsic Value Identify companies trading at a discount to our Discipline proprietary intrinsic valuation. Risk-Adjusted Return Provide competitive risk-adjusted returns and investment style consistency. Investment Discipline Return Profile “We believe that excess returns are generated in this manner.” Investment Process Overview 8 Sourcing Ideas Idea generation comes from several different sources: screens run by the analyst; internal discussed ideas (“themes”); and external sources. Fundamental Research with ROI Focus Analyze growth measures such as revenue and earnings and strength of cash flow. Screens allow analysts to focus on catalysts which maximize future results. Fundamental Due Diligence Determine intrinsic value using proprietary cash flow model and then compare to current market price to determine premium or discount. 1 2 3 Buy Decision 45-60 securities comprising best ideas List of 1100 Potential Securities List of 500 Qualified Securities Focus List of 100 Securities 4 8 Portfolio Construction and Controls Holdings  Typically hold 45-60 securities  Average less than 10% in cash; typically 5%  Average portfolio turnover is 40% per annum Diversification  Diversified across industries and sectors  Sector weights 0% to 200% vs. benchmark  Maximum 5% in any one security at market 9 9 Sell Discipline Change in Underlying Fundamentals Investment thesis no longer intact Company fails to deliver expected Return on Investment Management has failed to find cash flow reinvestment opportunities at or above historical rates of return Change in management that is viewed negatively Valuation Company reaches valuation target Opportunistic More compelling investment opportunity appears 10 10 All Cap Equity Representative Account Statistics * 11 Profitability Measures Valuation Measures Portfolio Characteristics (As of 03/31/13) * Performance is gross of fees. This information is supplemental to the fully compliant presentation Historical performance cannot guarantee future results. See specific performance disclosure pages at the end of the presentation. Source: FactSet All Cap Russell 3000 S&P 500 Return on Investment 17.0% 14.8% 15.7% Earnings Growth (Last 5 Yrs) 12.2% 7.2% 7.4% Projected Earnings Growth (5 Yrs) 14.9% 11.1% 10.4% Price / Earnings (Projected) 15.4x 14.2x 13.8x Weighted Avg. Mk. Cap ($mil) $48,261 $85,796 $107,398 Median Market Cap ($mil) $15,223 $1,155 $14,152 Portfolio Beta 1.07 1.00 1.00 Current Dividend Yield 0.8% 2.0% 2.1% Growth in Dividend (Last 5 Yrs) 4.9% 4.2% 5.0% Number of Holdings 55 2942 500 11 ‘09 ‘04 ‘03 ‘99 ‘00 ‘01 ‘02 ‘05 ‘06 ‘07 ‘08 Historical Style Analysis 12 Small Cap Large Cap Less than $1 billion $1 billion - $15 billion Greater than $15 billion # Holdings % Portfolio Market Cap All Cap Universe (Russell 3000) Value Growth Universe of available equities (As of 03/31/13) ‘10 0 27 28 0% 53% 47% ‘11 12 ‘12 All Cap Equity Representative Account Construction * Company Percent of Total Top Ten Holdings ¹ Russell 3000 SBH Utilities Telecommunication Materials Information Tech Industrials Health Care Financials Energy Consumer Staples Consumer Discretion Sector Allocation Source: FactSet Analyst Coverage: (As of 03/31/13) * This information is supplemental to the fully compliant presentation. ¹ Top ten holdings are reported based on the market value of individual positions in the portfolio. Holdings are subject to change, vary over time and should not be considered a recommendation to buy or sell. It should not be assumed that future holdings will be profitable or equal the performance of these holdings. Suresh Rajagopal, CFA – Consumer Staples, Health Care Christopher Schweitzer, CFA – Energy, Industrials, Materials Scott Barnum, CFA – Information Technology, Media, Telecommunication Young Im, CFA, CPA - Financials Sean Bashford – Consumer Discretionary Jeff Rode, CFA – Utilities Roper Industries Inc. 3.1% Stericycle Inc. 2.9% Energizer Holdings Inc. 2.8% LKQ Corp 2.8% Perrigo Co. 2.7% Treehouse Foods Inc. 2.7% Amazon.Com Inc. 2.6% Qualcomm Inc. 2.6% Google Inc. Cl A 2.5% Hologic Inc. 2.4% 0%5%10%15%20% 13 All Cap Equity Composite - Investment Experience Over Market Cycles * (As of 03/31/13) * Performance is gross of fees. Historical performance cannot guarantee future results. See specific performance disclosure pages at the end of the presentation. Avoided irrational exuberance in tech-internet bubble Minimized exposure to Financials as housing bubble ended ? Cycle still unfolding All Cap Russell 3000 Avg Annual ROR 10.1% 8.9% Upside Capture 83% Downside Capture 79% Beta 0.80 Sharpe Ratio 0.37 0.24 February 1995 to September 2002 September 2002 to February 2009 All Cap Russell 3000 Avg Annual ROR 1.6% -0.9% Upside Capture 86% Downside Capture 80% Beta 0.84 Sharpe Ratio -0.07 -0.23 February 2009 to Current All Cap Russell 3000 Avg Annual ROR 20.5% 20.3% Upside Capture 87% Downside Capture 79% Beta 0.79 Sharpe Ratio 1.49 1.19 14 All Cap Equity Composite - Managing Through Market Volatility * Upside Capture Ratio Downside Capture Ratio Upside Capture Ratio Downside Capture Ratio SBH All Cap 92.9 79.8 89.0 80.6 Russell 3000 100.0 100.0 100.0 100.0 Russell 3000 Growth 99.1 97.0 98.1 92.7 Russell 3000 Value 100.6 102.9 101.8 107.7 S&P 500 95.1 94.4 95.0 97.7 -7.23 17.86 -0.72 14.89 -13.55 17.13 -4.59 15.09 -11.70 17.64 -4.44 15.35 -15.60 18.19 -4.97 16.15 -13.06 16.95 -4.76 14.65 STD DEV 3 Years 5 Years Market Capture Source: eEASE Analytics System RO R RO R ROR STDEV ROR STDEV SBH All Cap 14.2 16.5 8.0 19.9 Russell 3000 13.0 19.1 6.3 22.4 Russell 3000 Growth 13.2 19.2 7.4 22.1 Russell 3000 Value 12.7 19.3 5.0 23.5 Standard & Poor’s 500 12.7 18.3 5.8 21.6 (As of 03/31/13) * Performance is gross of fees. Historical performance cannot guarantee future results. See specific performance disclosure pages at the end of the presentation. Risk vs. Return 15 13 13.5 14 17 18 19 5 6 7 8 20 21 22 23 Source: eEASE Analytics System All Cap Equity Composite - Controlling Risk – Information Ratio The Information Ratio is a measure of expected return to risk as a standard deviation. The information ratio is used in active management to gauge a manager’s performance against some benchmark. Source: FinancialDictionary 16 All Cap Equity Composite Performance Returns * (As of 3/31/13) SBH Russell 3000 S&P 500 % Re t u r n *Periods greater than one year are annualized Performance is gross of fees Historical performance cannot guarantee future results. See specific performance disclosure pages at the end of the presentation. 0% 5% 10% 15% Quarter 1 Year 3 Years 5 Years 10 Years 20 Years Since Inception (4/1/87) SBH 10.84% 13.84% 14.15% 8.00% 10.63% 9.78% 10.25% Russell 3000 11.07% 14.56% 12.97% 6.31% 9.15% 8.65% 9.18% S&P 500 10.61% 13.96% 12.68% 5.81% 8.53% 8.53% 9.13% 17 All Cap Equity Composite Performance * *Periods greater than one year are annualized. Performance is gross of fees. Historical performance cannot guarantee future results. See specific performance disclosure pages at the end of the presentation. Source: eEASE Analytics System 18 Mr. Segall is Co-Founder and Chief Investment Officer of Segall Bryant & Hamill as well as Senior Portfolio Manager. Prior to co-founding SBH, Mr. Segall was a senior vice-president of Stein Roe & Farnham, managing a variety of accounts including a mutual fund. Mr. Segall has a Bachelor of Science degree in Economics from Wharton School, University of Pennsylvania, and an M.B.A. from the University of Chicago. He provides SBH with valuable market insight and is responsible for setting the tone of all investment and portfolio management related activities. He organized the Global Discovery Fund, LLC, an alternative investment fund, in 1998 and has earned the Chartered Financial Analyst and Chartered Investment Counselor designations. Mr. Segall is the chair of the Investment Committee of the Evanston Community Foundation, a member of the Pooled Endowment Portfolio Committee of the Jewish United Fund of Metropolitan Chicago, and a Trustee of Goucher College (Baltimore, MD) and a member of the Investment Committee of its Endowment Fund. Ralph M. Segall, CFA Chief Investment Officer Suresh Rajagopal is a Senior Equity Research Analyst and Assistant Portfolio Manager. Mr. Rajagopal joined the firm in October 2007 and has been in the financial industry since 1991. He specializes in healthcare and consumer staples related stocks. Prior to joining SBH, he was a co-manager on the Munder Healthcare Fund and a Senior Equity Research Analyst covering healthcare at Munder Capital Management. Mr. Rajagopal has a Chartered Financial Analyst designation. He holds a B.A. from Alma College and an M.B.A. from the University of Notre Dame. Suresh Rajagopal, CFA Director, Senior Equity Analyst Mr. Rode is the lead manager for the Segall Bryant & Hamill Mid Cap. Mr. Rode is responsible for management and equity research within the strategies. In December 2006, he was named lead manager for the Mid Cap strategy. Mr. Rode was named a Managing Director/Principal of the firm in 2003. Prior to joining Segall Bryant & Hamill in 1999, he served as an Analyst in the investment banking department at JP Morgan. Mr. Rode is a graduate of Northwestern University and has earned a Chartered Financial Analyst designation. Mr. Rode has been in the investment industry since 1998. Jeff Rode, CFA Managing Director Portfolio Management Team 19 Chris Schweitzer joined the firm in 2001 as an Equity Research Analyst. He specializes in industrials, materials and energy stocks. Mr. Schweitzer has been in the investment industry since 1996. Prior to joining SBH, he served as an Equity Analyst at Robert W. Baird and Strong Capital Management. Mr. Schweitzer has earned a Chartered Financial Analyst designation. He holds a B.B.A. from the University of Wisconsin. Chris P. Schweitzer, CFA Senior Equity Analyst Scott Barnum joined the firm, as an Equity Research Analyst, in April 2006. He specializes in technology, media and telecom related stocks. Mr. Barnum has been in the investment industry since 1997. Prior to joining SBH, his experiences include work as an Equity Analyst at Credit Suisse, Equity Analyst at ABN AMRO, and an Engineer at Unilever. Mr. Barnum has earned a Chartered Financial Analyst designation. He holds a B.S. from Bradley University and an M.B.A. from Northwestern University. Scott N. Barnum, CFA Senior Equity Analyst Young Im joined the firm as a Senior Equity Research Analyst in January 2011. He specializes in financial services related stocks and has been in the financial services industry since 1995. Prior to joining SBH, he was a Senior Equity Analyst at Talon Asset Management covering financial services and technology. Mr. Im also held the positions of Vice President – Senior Research Analyst, Financial Services, at Robert W. Baird and Vice President – Corporate Development, at ABN AMRO N.A. Mr. Im holds the designations of Chartered Financial Analyst and Certified Public Accountant. He earned Bachelor of Science degrees in Finance and Accountancy from the University of Illinois and an M.B.A. from Northwestern University. Young B. Im, CFA Senior Equity Analyst Portfolio Management Team Sean Bashford is an Equity Research Analyst for Segall Bryant & Hamill’s Mid Cap and All Cap portfolios. Mr. Bashford joined the firm in 2010 after serving as an intern in 2009. Prior to joining SBH, he was an industrial engineer and Six Sigma Black Belt at Motorola. Mr. Bashford holds an MBA with honors from the University of Chicago Booth School of Business and an M.S. and B.S. in Industrial Engineering from the University of Wisconsin-Madison. Sean T. Bashford Equity Analyst 20 All Cap Equity Composite Performance Annualized Cumulative Returns Portfolio Characteristics (As of 03/31/13) SBH SBH Russell Annualized Gross Net 3000 S&P 500 1 Year 13.84% 13.29% 14.56% 13.96% 3 Years 14.15% 13.63% 12.97% 12.68% 5 Years 8.00% 7.49% 6.31% 5.81% 10 Years 10.63% 10.11% 9.15% 8.53% 15 Years 6.96% 6.51% 4.68% 4.27% 20 Years 9.78% 9.28% 8.65% 8.53% Since Inception (4/1/87) 10.25% 9.68% 9.18% 9.13% Russell SBH 3000 S&P 500 Worst 4 Quarter Period -35.04% -38.20% -38.09% 5 Year Sharpe Ratio 0.40 0.27 0.26 Standard Deviation (since inception) 14.82% 17.03% 16.46% (1) Presented as supplemental information to the fully compliant presentation. Segall Bryant & Hamill is a Registered Investment Adviser, established in 1994. SBH provides fee-based management of fixed income and equity portfolios for institutional clients and high net worth individuals. The All Cap Core composite was created in October, 1994. The All Cap Core composite is an equity strategy consisting of companies with a market capitalization in excess of $1 billion. Accordingly, the composite is benchmarked against the Russell 3000 Index and/or the S&P 500 Index. The Russell 3000 index measures the performance of the largest 3000 US companies. These companies generally have a weighted average market value of $85.8 billion. The S&P 500 Index measures the performance of 500 leading large US companies. These companies generally have a weighted average market value of $107.4 billion. The 3-year ex-post standard deviation as of December 31, 2012 is 13.58% for the composite, 15.73% for the Russell 3000, and 15.09% for the S&P 500. The All Cap Core composite is comprised of all fee paying, discretionary, tax-exempt, institutional accounts managed to this investment approach which have assets greater than $1 million and one full quarter of returns. Accounts falling below the $1 million threshold are not eligible for inclusion in the composite. In addition, accounts that have a significant cash flow, defined as 25% of the market value, will be removed from the composite until the next reconciliation and calculation period. Balanced portfolio segments are included in this composite prior to 2010. Due to new GIPS guidelines effective 1/1/2010, Balanced portfolio segments are no longer included which resulted in several accounts leaving the composite. Gross results are shown net of trading costs and include the reinvestment of all dividends and interest. Net results are shown net of management fees as well as trading costs and include the reinvestment of all dividends and interest. Net results reflect actual fees paid. The current fee schedule applicable to the All Cap Core accounts is 0.60% on the first $25 million of assets, 0.50% on the next $25 million of assets and 0.30% over $50 million of assets. Actual fees will vary. Prior to October 1994, performance results reflect returns generated by the investment manager using this investment strategy at another firm. All information is based on US dollar values. Returns are calculated on a capitalization and time weighted basis and linked quarterly. Dispersion of returns is measured by an equal weighted standard deviation of all the accounts in the composite for a full year period. Neither the composite nor the benchmark returns reflect the withholding of any taxes for ordinary income or capital gains. Segall Bryant & Hamill claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. Segall Bryant & Hamill has been independently verified for the periods January 1, 2000 through December 31, 2012. In connection with the GIPS verification, SBH is republishing this presentation to include several disclosures that were not previously included. The verification did not result in changes to any historical performance previously published. The verification report is available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation. It should be noted that principal risk is taken and that historical performance can not guarantee future results. A complete list and description of the firm's composites, as well as additional information regarding policies for valuing portfolios, calculating returns and preparing compliant presentations, is available upon request from SBH. Revised April 2013. Period 1Q 2Q 3Q 4Q YTD # of Accounts Std Dev. Composite Market Value ($ mil) Product Market Value(1) ($ mil) % Carve- out % of Total Assets % of Product (1) 2001 Gross of Fee -10.50% 4.43% -14.23% 10.65% -11.30% 12 0.71% $117.0 $930.7 4.1% 12.6% Net of Fee -10.58% 4.35% -14.31% 10.55% -11.61% Russell 3000 -12.15% 6.88% -15.62% 11.76% -11.45% S&P 500 -11.86% 5.85% -14.68% 10.69% -11.89% 2002 Gross of Fee 0.58% -9.16% -13.44% 3.22% -18.37% 16 1.57% $131.2 $785.4 4.6% 16.7% Net of Fee 0.49% -9.22% -13.53% 3.11% -18.66% Russell 3000 0.97% -13.09% -17.23% 8.02% -21.54% S&P 500 0.28% -13.40% -17.28% 8.44% -22.10% 2003 Gross of Fee -3.05% 13.41% 4.18% 11.29% 27.48% 20 1.81% $181.4 $1,065.2 5.1% 17.0% Net of Fee -3.15% 13.31% 4.07% 11.18% 26.98% Russell 3000 -3.04% 16.24% 3.43% 12.43% 31.06% S&P 500 -3.15% 15.39% 2.65% 12.18% 28.69% 2004 Gross of Fee 1.66% 2.16% -2.29% 9.46% 11.08% 23 0.35% $214.1 $1,224.5 4.9% 17.5% Net of Fee 1.55% 2.04% -2.42% 9.34% 10.56% Russell 3000 2.23% 1.33% -1.90% 10.16% 11.95% S&P 500 1.69% 1.72% -1.87% 9.23% 10.87% 2005 Gross of Fee -1.50% 1.77% 3.18% 0.83% 4.29% 23 0.35% $196.6 $1,231.6 4.3% 16.0% Net of Fee -1.61% 1.65% 3.05% 0.71% 3.80% Russell 3000 -2.20% 2.24% 4.01% 2.04% 6.12% S&P 500 -2.15% 1.37% 3.61% 2.09% 4.91% 2006 Gross of Fee 6.01% -2.81% 4.44% 3.45% 11.32% 18 0.46% $160.7 $1,304.9 18% 3.6% 12.3% Net of Fee 5.88% -2.93% 4.32% 3.34% 10.80% Russell 3000 5.31% -1.98% 4.64% 7.12% 15.72% S&P 500 4.21% -1.44% 5.67% 6.70% 15.80% 2007 Gross of Fee 2.66% 6.28% 7.44% 3.79% 21.67% 18 0.56% $175.5 $1,520.8 16% 3.6% 11.5% Net of Fee 2.55% 6.17% 7.31% 3.67% 21.12% Russell 3000 1.28% 5.77% 1.55% -3.34% 5.14% S&P 500 0.64% 6.28% 2.03% -3.33% 5.50% 2008 Gross of Fee -9.43% 1.73% -6.78% -24.37% -35.04% 17 0.67% $132.1 $1,063.2 15% 3.2% 12.4% Net of Fee -9.54% 1.61% -6.89% -24.48% -35.37% Russell 3000 -9.52% -1.69% -8.73% -22.78% -37.31% S&P 500 -9.45% -2.73% -8.37% -21.94% -37.00% 2009 Gross of Fee -3.87% 14.60% 12.48% 5.26% 30.43% 17 0.90% $176.3 $1,427.3 14% 2.9% 12.4% Net of Fee -4.00% 14.47% 12.36% 5.14% 29.82% Russell 3000 -10.80% 16.82% 16.31% 5.90% 28.34% S&P 500 -11.01% 15.93% 15.61% 6.04% 26.46% 2010 Gross of Fee 5.58% -6.40% 11.31% 10.17% 21.18% 19 0.32% $270.8 $1,685.0 3.7% 16.1% Net of Fee 5.45% -6.51% 11.18% 10.05% 20.62% Russell 3000 5.94% -11.32% 11.53% 11.59% 16.92% S&P 500 5.39% -11.43% 11.29% 10.76% 15.06% 2011 Gross of Fee 7.15% 0.36% -13.27% 8.15% 0.87% 26 0.24% $286.3 $1,700.8 3.6% 16.8% Net of Fee 7.03% 0.28% -13.39% 8.03% 0.42% Russell 3000 6.38% -0.03% -15.28% 12.12% 1.02% S&P 500 5.92% 0.10% -13.87% 11.82% 2.11% 2012 Gross of Fee 12.87% -3.93% 6.52% 0.36% 15.92% 43 0.37% $501.0 $2,131.4 5.6% 23.5% Net of Fee 12.73% -4.05% 6.39% 0.24% 15.35% Russell 3000 12.87% -3.15% 6.23% 0.25% 16.42% S&P 500 12.59% -2.75% 6.35% -0.38% 16.00% 2013 Gross of Fee 10.84% 10.84% 45 0.64% $550.4 $2,156.1 5.9% 25.5% Net of Fee 10.71% 10.71% Russell 3000 11.07% 11.07% S&P 500 10.61% 10.61% 21 All Cap Equity Composite Historical Performance Period 1Q 2Q 3Q 4Q YTD # of Accounts Std Dev. Composite Market Value ($ mil) Product Market Value(1) ($ mil) % Carve- out % of Total Assets % of Product (1) 1995 Gross of Fee 6.00% 6.23% 6.94% 5.95% 27.58% <5 0.00% n/a n/a n/a n/a Net of Fee 5.83% 6.07% 6.78% 5.79% 26.80% Russell 3000 9.01% 9.41% 9.01% 5.22% 36.80% S&P 500 9.74% 9.55% 7.95% 6.02% 37.59% 1996 Gross of Fee 4.64% 2.71% 3.60% 6.52% 18.60% 26 2.39% $270.6 $726.1 16.1% 37.3% Net of Fee 4.49% 2.56% 3.51% 6.43% 18.06% Russell 3000 5.47% 4.17% 2.95% 7.70% 21.82% S&P 500 5.37% 4.49% 3.09% 8.34% 22.97% 1997 Gross of Fee 1.34% 15.69% 7.27% -0.10% 25.64% 30 3.73% $285.2 $868.8 14.1% 32.8% Net of Fee 1.26% 15.60% 7.19% -0.18% 25.25% Russell 3000 0.87% 16.75% 9.33% 2.35% 31.78% S&P 500 2.68% 17.46% 7.49% 2.87% 33.36% 1998 Gross of Fee 11.60% 2.07% -8.35% 16.17% 21.28% 23 5.66% $226.2 $999.0 9.6% 22.6% Net of Fee 11.50% 1.98% -8.41% 16.07% 20.88% Russell 3000 13.05% 1.82% -11.19% 21.43% 24.13% S&P 500 13.95% 3.30% -9.95% 21.30% 28.58% 1999 Gross of Fee -1.19% 6.63% -6.79% 15.44% 13.37% 17 5.60% $226.5 $1,200.8 8.9% 18.9% Net of Fee -1.28% 6.53% -6.88% 15.34% 12.95% Russell 3000 3.39% 7.71% -6.58% 16.22% 20.91% S&P 500 4.98% 7.05% -6.25% 14.88% 21.03% 2000 Gross of Fee 12.62% -2.77% 3.24% 2.22% 15.56% 11 2.26% $126.9 $1,004.4 4.8% 12.6% Net of Fee 12.53% -2.85% 3.18% 2.13% 15.20% Russell 3000 4.57% -3.46% 0.74% -9.01% -7.46% S&P 500 2.29% -2.66% -0.97% -7.83% -9.12% (1) Presented as supplemental information to the fully compliant presentation. 22