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Home My WebLink AboutAgenda GEPB 021108City of Palm Beach Gardens 10500 N. Military Trail Palm Beach Gardens, FL 33410 GENERAL EMPLOYEES PENSION FUND NOTICE OF MEETING AND AGENDA Please take notice that the Board of Trustees of the City of Palm Beach Gardens will conduct a meeting of the board at the above location on February 11, 2008 at 2:OOPM in Council Chambers. Old Business: Approval of 11/19/07 minutes New Business: Adjournment Report from Foster & Foster Foster & Foster Proposed Rate Increase Report from Bogdahn Consulting Report from Scott Christiansen Discussion Regarding Pending Ordinance Report from Rockwood Consulting Approval of Bills DISABILITY INFORMATION In accordance with the Disabilities Act and F.S.S.286.26, persons with disabilities needing special accommodation to participate in this proceeding should contact the Human Resource Department no later then seven days subsequent to the proceeding at (561) 799 — 4223 for assistance, if hearing impaired, telephone the Florida Relay Service Number at 800 — 955 — 8770 (VOICE) for assistance. APPEAL NOTICE If a person decides to appeal any decision made by the Board, with respect to any matter considered at such meeting or hearing, he will need to ensure that a verbatim record of the proceedings is made, which record includes the testimony and evidence upon which the appeal is to be based. { 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 GENERAL EMPLOYEE PENSION BOARD NOVEMBER 19, 2007 MINUTES The General Employee Pension Fund convened on November 19, 2007 in the Council Chambers of the Municipal Complex, located at 10500 North Military Trail, Palm Beach Gardens, Florida. The meeting was called to order by Allan Owens at 2:12 P.M. A quorum was declared. I. ROLL CALL Members Present: Allan Owens, Finance Administrator Kenneth Steele Dindial Laljie Members Absent: Steve Parella, Chair Jamie Smith Additional Attendees: Joseph Bogdan — Bogdahn Consulting Scott Christiansen — Attorney Sarah Varga — Accountant II. OLD BUSINESS • Approval of Minutes — Motion made to accept minutes from the August 13, 2007 meeting; seconded and approved unanimously 3-0. • Discussion ensued regarding the status of Steve Parella, Chair. Allan Owens, Finance Administrator, explained that Steve Parella has moved to the Tampa area, but retains ownership of his house in Palm Beach Gardens. Allan Owens consulted with Christine Tatum, City Attorney, who advised against Steve Parella holding a seat on the Board because he is no longer a full -time resident. Steve Parella has missed three meetings in a row. Allan Owens will discuss the situation further with the City Attorney. • Kenneth Steele discussed the issue of absence by Steve Parella and Jamie Smith. The Board having a quorum is dependent upon Allan Owens, Dindial Laljie and Kenneth Steele always being present. • Scott Christiansen, Attorney, stated that Steve Parella's absences makes it difficult for the Board to conduct business because of the issue of having a quorum and because he is unavailable to sign documents in his capacity as the Board Chair. • Allan Owens stated that he will consult with the City Attorney and then pursue a new member for the Board. — Scott Christiansen, Attorney, has not yet received the signed addendum for his contract. General Employee Pension Board 11.19.07 Page 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 III. NEW BUSINESS • Scott Christiansen reported on the following items: — Fiscal Year End Report is due to the City Council. — Meeting dates for 2008 are: February 11, May 12, August 11 and November 10. — Prior discussion of an Ordinance to change the composition of the Board was mentioned. The City Attorney is looking into it. — Prior discussion of the City's interest in turning over administrative control of the General Employee Defined Benefit Plan to the Florida League of Cities was cited. Scott Christiansen stated that a Board of Trustees was still required and would function much the same as the Board does now. • Bogdahn Consulting third quarter report was presented by Joseph Bogdahn. — Kenneth Steele requested definition of the term "funkier." Joseph Bogdahn provided an in -depth response. — Discussion ensued on Russell small, medium and large cap investments. — Calendar year returns were discussed. — Allen Owen requested information on the State Board of Administration (SBA) and the Florida Retirement System (FRS). • Approval of bills: — Bogdahn Consulting third quarter statement, $2000.00. Motion made, seconded and passed unanimously 3-0. — Christiansen and Dehner statement, $1068.68. Motion made, seconded and passed unanimously 3-0. — Sawgrass Asset Management third quarter statement, $816.00. Motion made, seconded and passed unanimously 3-0. — Rockwood Capital Advisors third quarter statement, $3510.66. Motion made, seconded and passed unanimously 3 -0. — Salem Trust third quarter statement, $750.00. Motion made, seconded and passed unanimously 3 -0. • Kenneth Steele made a motion for the adjustment of the basic asset allocation to 70 percent equity and 75 percent at market. He believes we should be more heavily invested in equity. — Discussion ensued regarding the motion. • Kenneth Steele amended the motion to: Amend the Investment Policy Statement Section III BI to increase the maximum limitation at market from 70 to 75 percent. Motion seconded and passed unanimously 3 -0. (The remainder of this page intentionally left blank) General Employee Pension Board 11.19.07 Page 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 IV. ADJOURNMENT With no further business to discuss the meeting adjourned at 3:07 P.M. APPROVED: —111ndial Lal" Allan Owens (w4e�A Kenneth Steele r— Jamie Smith Steve Parella, Chair Attest: Donna M. Cannon Municipal Services Coordinator NOTE: These action minutes are prepared in compliance with 286.011 F.S. and are not verbatim transcripts of the meeting. A verbatim audio recording is available from the Office of the City Clerk. All referenced attachments on file in the City Clerk's office. General Employee Pension Board 11.19.07 Page 3 6;i ex)q L, L- N!%,L O Y C S' L-: A.I S / 0 ,4) &0,4/LD NAME r� i�fr5 n/D� oLTlo��f V� CITY OF PALM BEACH GARDENS MEETING DATE SIGN -IN SHEET PLEASE PRINT MUNICIPALITY /COMPANY PHONE �C� ooj � in!-L. �v✓�SocS 3/ �— ��02^-�3,�v I` Foster &Fostenc. Actuarial Consultants for Public Pension Plans February 8, 2008 Ms. Sarah Varga City of Palm Beach Gardens General Employees' Pension Fund 10500 North Military Trail Palm Beach Gardens, FL 33410 Re: City of Palm Beach Gardens General Employees' Pension Fund Dear Ms. Varga: I am writing to propose changes to the Actuarial Services Agreement between the City of Palm Beach Gardens General Employees' Pension Fund and Foster & Foster, Inc. The prior agreement was signed December 9, 2002, and was to be in effect for 3 years, with subsequent renewals at the mutual agreement of each party. We have continued with the same fee structure for each of the last 6 years. As you know, the cost of doing business has increased during this time. In order for us to maintain a high standard of service for our clients, as well as to attract and retain the best actuaries and staff possible, we are asking that you consider the proposed changes to the agreement listed below. These changes will be guaranteed for three (3) years from date of this letter. The fee for the annual valuation will increase from $3,300 to $4,000 for the 2007 valuation. Subsequent valuations will incur a 5% increase. 2. Hourly rates will be as follows: Senior Actuarial Consultant $250 Actuarial Consultant $200 Actuarial Analyst $150 Administrative /Clerical $ 65 DROP Account updates, if any, will be $60 per account, per quarter 6290 Corporate Court C -201 Fort Myers, FL 33919 • (239) 433 -5500 • Fax (239) 481 -0634 • www.foster- foster.com Ms. Sarah Varga February 8, 2008 Page 2 4. Our fee for benefit calculations and the certification of the normal form of payment and all optional forms is $150, provided that the information is submitted using our standardized form. Information provided by any other means will incur a $200 charge. These calculations will be performed and the results provided to the Board within 10 working days of receipt of all necessary employee and financial information. Calculations of monthly benefits due to disability, death, or those benefits to terminated vested members who left under prior plan provisions will be provided within the same timeframe, although hourly rates will apply due to the complexity of the calculations. 5. Refund of employee contributions calculations will incur a $75 fee. 6. Travel to and from special meetings will be billed at 1/2 of the hourly rate, with a maximum of 8 hours per day. As with the prior agreement, all travel expenses will be split amongst the Boards visited during the trip. We have considered it a great pleasure to serve as the Board's actuary for many years. Our new fee schedule continues to place us as the lowest cost provider in the marketplace, but will also allow us to attract and retain the best and brightest actuaries and staff in the industry. We hope that the Board strongly consider our proposal and ask the attorney to revise the contract effective immediately. Sincerely, 0,111 Bradley R. Heinrichs, FSA, EA, MAAA BRH /dlb Foster&Fosten, Oster&FOster,.NC. IActuarial And Employee Benefits Consulting 1 1 1 1 i �J // 1 !!(/ / / _. _� - i �J // 1 !!(/ / / CITY OF PALM BEACH GARDENS RETIREMENT PLAN FOR EMPLOYEES ACTUARIAL VALUATION REPORT AS OF OCTOBER 1, 2007 CONTRIBUTIONS APPLICABLE TO THE PLAN /FISCAL YEAR ENDED SEPTEMBER 30, 2009 I Foster&Fosten.. Actuarial Consultants for Public Pension Plans February 9, 2008 Board of Trustees City of Palm Beach Gardens Retirement Plan for Employees 10500 North Military Trail Palm Beach Gardens, Florida 33410 Re: City of Palm Beach Gardens Retirement Plan for Employees Dear Board: We are pleased to present to the Board this report of the annual actuarial valuation of the City of Palm Beach Gardens Retirement Plan for Employees. The valuation was performed to determine whether the assets and contributions are sufficient to provide the prescribed benefits and to develop the appropriate funding requirements for the applicable plan year(s). The valuation has been conducted in accordance with generally accepted actuarial principles and practices, including the applicable Actuarial Standards of Practice as issued by the Actuarial Standards Board, and reflects laws and regulations issued to date pursuant to the provisions of Chapter 112, Florida Statutes, as well as applicable federal laws and regulations. In our opinion, the assumptions used in this valuation, as adopted by the Board of Trustees, represent reasonable expectations of anticipated plan experience. In conducting the valuation, we have relied on personnel, plan design, and asset information supplied by the Board of Trustees and the City, financial reports prepared by the custodian bank, Salem Trust, and the actuarial assumptions and methods ' described in the Actuarial Assumptions section of this report. While we cannot verify the accuracy of all this information, the supplied information was reviewed for consistency and reasonableness. As a result of this review, we have no reason to doubt the substantial accuracy of the information and believe that it has produced appropriate results. This information, along with any adjustments or modifications, is summarized in various sections of this report. ' The undersigned is familiar with the immediate and long -term aspects of P ension valuations, and meets the Qualification Standards of the American Academy of Actuaries necessary to render the actuarial opinions contained herein. All of the sections of this report are considered an integral part of the actuarial opinions. 1 Board of Trustees February 9, 2008 Page Two To our knowledge, no associate of Foster & Foster, Inc. working on valuations of the program has any direct financial interest or indirect material interest in the City of Palm Beach Gardens, nor does anyone at Foster & Foster, Inc. act as a member of the Board of Trustees of the City of Palm Beach Gardens Retirement Plan for Employees. Thus, there is no relationship existing that might affect our capacity to prepare and certify this actuarial report. If there are any questions, concerns, or comments about any of the items contained in this report, please contact me at 239 - 433 -5500. Respectfully submitted, Foster & Foster, Inc. � By: Bradle ei richs, F.S.A. Enrolle Actua #05 -6901 BRH \kst Enclosures TABLE OF CONTENTS Section Title Page I Introduction a. Summary of Report 1 b. Changes Since Prior Report 3 c. Requirements of Chapter 112, Part VII, Florida Statutes 4 II Valuation Information a. Derivation of Unfunded Actuarial Accrued Liability 9 b. Actuarial Assumptions and Funding Methods 10 c. Valuation Notes 11 III Trust Fund 12 IV Member Statistics a. Eligibility for Retirement 16 b. Statistical Data 17 c. Age and Service Distribution 18 d. Member Reconciliation 19 V Summary of Plan Provisions 20 VI Governmental Accounting Standards 22 Board Statements No. 25 and No. 27 Disclosure Information SECTION I INTRODUCTION SUMMARY OF REPORT The regular annual actuarial valuation of the City of Palm Beach Gardens ' Retirement Plan For Employees, performed as of October 1, 2007, has been completed, and the results are presented in this Report. The results of this valuation are applicable to ' the plan /fiscal year ended September 30, 2009. ' The funding requirements, compared with the amounts developed in the October 1, 2006, actuarial valuation, are as follows: Valuation Date 10/1/2006 10/1/2007 ' Applicable Plan /Fiscal Year End 9/30/2008 9/30/2009 Total Required Contribution $109,554 $69,128 ' % of Total Annual Payroll 36.4% 48.1% ' Member Contributions (Est.) 18,066 8,625 ' Balance from City 91,488 60,503 % of Total Annual Payroll 30.4% 42.1% 1 As can be seen, the Total Required Contribution has decreased in dollar amount, but has increased when expressed as a percentage of Total Annual Payroll. The reduction in the dollar amount is the result of net favorable actuarial experience during the last 12 months. The principal components of favorable experience included a 9.7% investment return Actuarial Asset basis that exceeded the 8.0% assumption, the death of 2 retirees ( ) p ' and average salary increases that were less than the assumed rate. Because the primary ' component of the funding requirement is now the amortization of the unfunded actuarial accrued liability, which is not affected by payroll, the percentages of payroll are not a good ' indicator of the health of the plan. I 1 The balance of this Report presents additional details of the actuarial valuation and the general operation of the Fund. The undersigned would be pleased to meet with the Board of Trustees in order to discuss the Report and any pending questions concerning its contents. Respectfully submitted, FOSTER & FOSTER, INC. . - 3Q .. . By: ' 0A.'-- Patrick T. Donlan, MAAA N Plan Changes Since Prior Valuation There have been no plan changes since the prior valuation. IActuarial Assumption /Method Changes Since Prior Valuation ' There have been no changes in actuarial assumptions or methods since the prior valuation. 2 Comparative Summary of Principal Valuation Results 10/1/2007 10/1/2006 A. Participant Data Number Included Actives 2 5 Service Retirees 10 9 Beneficiaries 2 2 Terminated Vested 3 3 Disability Retirees 1 1 Total 18 20 Total Annual Payroll $130,793 $273,962 Payroll Under Assumed Ret. Age 130,793 273,962 Annual Rate of Payments to: 77,778 68,594 Service Retirees 269,581 198,286 Beneficiaries 20,033 20,033 Terminated Vested 31,392 29,817 Disability Retirees 6,873 6,873 B. Assets Actuarial Value 2,761,142 2,665,022 Market Value 3,089,245 2,827,567 C. Liabilities Present Value of Benefits Active Members Retirement Benefits 375,286 1,089,081 Disability Benefits 15,214 17,123 Death Benefits 10,361 15,779 Vested Benefits 115,168 161,028 Refund of Contributions 0 0 Service Retirees 2,484,829 1,759,817 Beneficiaries 199,933 203,325 Terminated Vested 77,778 68,594 Disability Retirees 70,015 71,116 Total 3,348,584 3,385,863 C. Liabilities - (Continued) Present Value of Future Salaries Present Value of Future Member Contributions EAN Normal Cost (Retirement) EAN Normal Cost (Disability) EAN Normal Cost (Death) EAN Normal Cost (Vesting) EAN Normal Cost (Refunds) Total Normal Cost (Entry Age Method) Present Value of Future Normal Costs (Entry Age) Accrued Liability (Retirement) Accrued Liability (Disability) Accrued Liability (Death) Accrued Liability (Vesting) Accrued Liability (Refunds) Accrued Liability (Inactives) Total Actuarial Accrued Liability Unfunded Actuarial Accrued Liability (UAAL) D. Actuarial Present Value of Accrued Benefits Vested Accrued Benefits Inactives Actives Member Contributions Total 10/1/2007 10/1/2006 1,390,428 1,510,451 83,426 90,627 7,818 N/A 435 N/A 333 N/A 1,904 N/A 0 N/A 10,490 35,382 106,517 103,675 298,044 N/A 10,728 N/A 7,078 N/A 93,662 N/A 0 N/A 2,832,555 N/A 3,242,068 3,282,189 480,926 617,167 2,832,555 57,028 69,369 2,958,952 Non - vested Accrued Benefits 0 Total Present Value Accrued 2,958,952 Benefits Increase (Decrease) in Present Value of Accrued Benefits Attributable to: Plan Amendments 0 Assumption Changes 0 New Accrued Benefits 119,856 Benefits Paid (248,474) Interest 219,506 Other 0 Total: 90,888 2,102,852 555,320 209,892 2,868,064 0 2,868,064 9 C Valuation Date Applicable to Fiscal Year Ending E. Pension Cost Normal Cost (with interest) % of Projected Annual Payroll* Administrative Expenses (with int.) % of Projected Annual Payroll* Payment Required to Amortize Unfunded Actuarial Accrued Liability over 30 years (as of 10/1/07) % of Projected Annual Payroll* Total Required Contribution % of Projected Annual Payroll* Expected Member Contributions % of Projected Annual Payroll* Expected City Contrib. % of Projected Annual Payroll* F. Past Contributions Plan Years Ending: Total Required Contribution City Requirement Actual Contributions Made: Members City Total G. Net Actuarial Gain (Loss) 10/1/2007 10/1/2006 9/30/2009 9/30/2008 $11,619 $39,189 8.1 13.0 12,110 13,128 8.4 4.4 45,398 57,237 31.6 19.0 69,128 109,554 48.1 36.4 8,625 18,066 6.0 6.0 60,503 91,488 42.1 30.4 9/30/2007 107,247 90,703 14,257 90,703 104,960 124,544 * Contributions developed as of 10/1/07 are expressed as a percentage of projected annual payroll at 04/1/09 of $143,750. H. Schedule Illustrating the Amortization of the Total Unfunded Actuarial Accrued Liability as of: (ii) 3 Year Comparison of Investment Return on Actuarial Value Actual Projected Unfunded Year Ended 9/30/2007 9.7% Year Accrued Liability 8.0% 2007 480,926 2008 475,133 2009 468,876 2019 370,976 2029 159,617 2034 - 25,187 2037 0 I. (i) 3 Year Comparison of Actual and Assumed Salary Increases Actual Assumed Year Ended 9/30/2007 2.5% 6.5% Year Ended 9/30/2006 5.8% 6.5% Year Ended 9/30/2005 7.3% 6.5% (ii) 3 Year Comparison of Investment Return on Actuarial Value Actual Assumed Year Ended 9/30/2007 9.7% 8.0% Year Ended 9/30/2006 8.6% 8.0% Year Ended 9/30/2005 4.8% 8.0% (iii) Average Annual Payroll Growth (a) Payroll as of: 10/1/2007 $130,793 10/1/1997 693,567 (b) Total Increase -81.1% (c) Number of Years 10.00 (d) Average Annual Rate -15.4% E:3 Statement by Enrolled Actuary This actuarial valuation was prepared and completed by me or under my direct supervision, and I acknowledge responsibility for the results. To the best of my knowledge, the results are complete and accurate, and in my opinion, the techniques and assumptions used are reasonable and meet the requirements and intent of Part VII, Chapter 112, Florida Statutes. There is no benefit or expense to be provided by the plan and /or paid from the plan's assets for which liabilities or current costs have not been established or otherwise taken into account in the valuation. All known events or trends which may require a material increase in plan costs or required contribution rates have been taken into account in the valuation. 1 Pa ick T. Donlan, EA, MAAA Enrolled Actuary #05 -6595 A copy of this Report is to be furnished to the Division of Retirement within 60 days of receipt from the actuary at the following address: Mr. Charles Slavin, Actuary Bureau of Local Retirement Systems P. O. Box 9000 Tallahassee, FL 32315 -9000 SECTION II VALUATION INFORMATION 9 Reconciliation and Derivation of Unfunded Actuarial Accrued Liability As of October 1, 2007 (1) UAAL as of October 1, 2006 (2) Sponsor (City) Normal Cost (3) Interest on (1) and (2) (4) Sponsor (City) Contributions (5) Interest on (4) (6) Expected UAAL as of October 1, 2006 (1) +(2) +(3)- (4) -(5) (7) Actual UAAL as of October 1, 2006 (8) Actuarial Gain (Loss): (6) -(7) 617,167 30,797 51,837 90,703 3,628 605,470 480,926 124,544 10/1/2007 Amount Date Years 47,497 Established Remaining "A" 10/1/2004 27 "B" 10/1/2005 28 "C" 10/1/2006 29 "D" 10/1/2007 30 617,167 30,797 51,837 90,703 3,628 605,470 480,926 124,544 10/1/2007 Amount Amortization Amount 560,940 47,497 48,657 4,077 (4,126) (342) 12( 4,544) 1( 0,243) 480,926 40,988 * Includes $10,600 for non - investment related expenses. ACTUARIAL ASSUMPTIONS AND COST METHODS Assumptions Mortality Rates 1983 Group Annuity Mortality Table. Termination Rates See Tables below. Disability Rates See Tables below. Retirement Age Age 62. Also, any member who has 40 reached Normal Retirement is assumed to 50 continue employment for one additional 60 year. Early Retirement Commencing upon eligibility for Early Retirement (age 55 with 10 years of service), members are assumed to retire with an immediate benefit at the rate of 2% per year. Interest Rate 8% per year, compounded annually, net of investment related expenses. Salary Increases 6.5% per year until the assumed retirement age; see Table below. In addition, projected salary in the year of retirement is increased 20% to account for non - regular compensation. Payroll Increase Administrative Expenses None. $10,934 added to Normal Cost. % Becoming Disabled During the Year 0.03% 0.04 0.07 0.18 0.90 Funding Method Entry Age Normal Actuarial Cost Method. Current Salary as % of Salary at aae 65 5.9% 11.0 20.7 38.9 73.0 10 % Terminating Acme Durinq the Year 20 17.2% 30 15.0 40 8.2 50 1.7 60 0.5 None. $10,934 added to Normal Cost. % Becoming Disabled During the Year 0.03% 0.04 0.07 0.18 0.90 Funding Method Entry Age Normal Actuarial Cost Method. Current Salary as % of Salary at aae 65 5.9% 11.0 20.7 38.9 73.0 10 IVALUATION NOTES Total Annual Payroll is the projected annual rate of pay for the year following the valuation date of all covered members. Present Value of Benefits is the single sum value on the valuation date of all future ' benefits to be paid to current Members, Retirees, Beneficiaries, Disability Retirees and Vested Terminations. INormal (Current Year's) Cost is the current year's cost for benefits yet to be funded. Unfunded Actuarial Accrued Liability (UAAL) is a liability which arises when a pension plan is initially established or improved and such establishment or improvement is ' applicable to all ears of past service. Under the Ent Age Normal Actuarial Cost pp Y p Entry 9 Method, there is also a new UAAL created each year equal to the actuarial gain or ' loss for that year. ' Total Required Contribution is equal to the Normal Cost plus an amount sufficient to amortize the Unfunded Accrued Liability over no more than 30 years. The required amount is adjusted for interest according to the timing of contributions during the 1 9 9 9 year. ' Ent Age Normal Actuarial Cost Method is the method determine ry use t g d o dete m ne required contributions under the Plan. The use of this method involves the systematic funding of Ithe Normal Cost (described above) and the Unfunded Accrued (Past Service) Liability. 11 SECTION III TRUST FUND City of Palm Beach Gardens 12 General Employees' Pension Plan BALANCE SHEET September 30, 2007 ASSETS COST VALUE MARKET VALUE Cash and Cash Equivalents: Money Market 68,610.54 68,610.54 Total Cash and Equivalents 68,610.54 68,610.54 Receivable: Accrued Income 11,048.10 11,048.10 Total Receivable 11,048.10 11,048.10 Investments: U.S. Gov't. & Agencies 486,396.97 489,748.57 Corporate Bonds 424,731.60 421,807.53 Common Stock 1,369,960.39 1,717,801.92 Common Stock - ADR 191,726.90 256,785.26 Mutual Funds: International Equity 103,838.58 132,387.85 Total Investments 2,576,654.44 3,018,531.13 TOTAL ASSETS 2,656,313.08 3,098,189.77 LIABILITIES AND NET ASSETS Liabilities: Payable: Unpaid Investment Expenses 7,876.66 7,876.66 Unpaid Administrative Expenses 1,068.58 1,068.58 Total Liabilities 8,945.24 8,945.24 Net Assets: Active and Retired Members' Equity 2,647,367.84 3,089,244.53 Total Net Assets 2,647,367.84 3,089,244.53 TOTAL LIABILITIES AND NET ASSETS 2,656,313.08 3,098,189.77 City of Palm Beach Gardens General Employees' Pension Plan CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS September 30, 2007 Market Value Basis INCOME Contributions: Member City Total Contributions Earnings from Investments Interest & Dividends Net Realized Gain (Loss) Unrealized Gain (Loss) Total Earnings and Investment Gains EXPENSES Administrative Expenses: Investment Related* Other Total Expenses Distributions to Members: Benefit Payments Total Distributions Change in Net Assets for the Year Net Assets Beginning of the Year Net Assets End of the Year *Investment Related expenses include investment advisory, custodial and performance monitoring fees. 14,256.92 90,703.04 82,378.79 169,170.20 193,437.71 28,862.32 10,933.72 248,473.54 13 104,959.96 444, 986.70 39,796.04 248,473.54 261,677.08 2,827,567.45 3,089,244.53 1 City of Palm Beach Gardens General Employees' Pension Plan ACTUARIAL ASSET VALUATION September 30, 2007 ' Actuarial Assets for funding purposes are developed by increasing the Actuarial Assets used in the most recent actuarial valuation of the Fund by the average annual market value rate of return (net of investment related expenses) for the past four years, but are limited to 120% of Market Value, if less. IDetails of the derivation are set forth as follows: Plan Year End 9/30/04 ' 9/30/05 ' 9/30/06 9/30/07 ' Annualized Rate of Return for prior four (4) years: ' (A) 10/01/06 Actuarial Assets: Rate of Return* 9.03% 7.81% 6.95% 15.13% ' (1) Net Investment Income: 1. Interest and Dividends 2. Realized Gains (Losses) 3. Change in Actuarial Value 4. Investment Related Expenses Total ' (B) 10/01/07 Actuarial Assets: 9.68% Actuarial Asset Rate of Return = 21 /(A +B -1): ' 10/01/07 Limited Actuarial Assets: (Lesser of Actuarial Assets or 120% of Market Value) *Market Value Basis net of investment related expenses 14 $2,665,022.08 82,378.79 169,170.20 27,880.42 (28,862.32) 250,567.09 $2,761,141.87 9.68% $2,761,141.87 City of Palm Beach Gardens General Employees' Pension Plan CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS September 30, 2007 Actuarial Asset Basis INCOME Contributions: Member City Total Contributions Earnings from Investments Interest & Dividends Net Realized Gain (Loss) Change in Actuarial Value Total Earnings and Investment Gains EXPENSES Administrative Expenses: Investment Related* Other Total Administrative Expenses Distributions to Members: Benefit Payments Total Distributions Change in Net Assets for the Year Net Assets Beginning of the Year Net Assets End of the Year ** *Investment Related expenses include investment advisory, custodial and performance monitoring fees. * *Net Assets may be limited for actuarial consideration 14,256.92 90,703.04 82, 378.79 169,170.20 27, 880.42 28,862.32 10,933.72 248,473.54 15 104,959.96 279,429.41 39,796.04 248,473.54 96,119.79 2,665,022.08 2,761,141.87 SECTION IV MEMBER STATISTICS ELIGIBILTY FOR RETIREMENT Members are eligible for Normal Retirement based upon the following criteria: 1) Attained Age 62 Members are eligible for Early Retirement based upon the following criteria: 1) Attained Age 55 with 10 Years of Credited Service As of the date of this valuation, the following list of Members are eligible for: Normal Retirement None Early Retirement None 16 STATISTICAL DATA (Averages are salary weighted) 17 10/1/2007 2 43.8 28.7 15.0 $65,397 10/1/2004 10/1/2005 10/1/2006 Number 5 5 5 Average Current Age 52.3 53.4 54.0 Average Age at Employment 35.6 35.7 35.4 Average Past Service 16.7 17.7 18.6 Average Annual Salary $48,280 $51,780 $54,792 17 10/1/2007 2 43.8 28.7 15.0 $65,397 m AGE AND SERVICE DISTRIBUTION PAST SERVICE AGE 0 1 2 3 4 5 -9 10 -14 15 -19 20 -24 25 -29 30+ Total 15 -19 0 0 0 0 0 0 0 0 0 0 0 0 20 -24 0 0 0 0 0 0 0 0 0 0 0 0 25-29 0 0 0 0 0 0 0 0 0 0 0 0 30 -34 0 0 0 0 0 0 0 0 0 0 0 0 35 -39 0 0 0 0 0 0 1 0 0 0 0 1 40 -44 0 0 0 0 0 0 0 0 0 0 0 0 45-49 0 0 0 0 0 0 0 0 0 0 0 0 50 -54 0 0 0 0 0 0 0 1 0 0 0 1 55-59 0 0 0 0 0 0 0 0 0 0 0 0 60 -64 0 0 0 0 0 0 0 0 0 0 0 0 65+ 0 0 0 0 0 0 0 0 0 0 0 0 Total 0 0 0 0 0 0 1 1 0 0 0 2 VALUATION PARTICIPANT RECONCILIATION 1. Active lives a. Number in prior valuation 10/1/06 b. Terminations i. Vested (partial or full) with deferred benefits ii. Non - vested or full lump sum distribution received c. Deaths i. Beneficiary receiving benefits ii. No future benefits payable d. Disabled e. Retired f. DROP Retired g. Voluntary withdrawal h. Continuing participants i. New entrants j. Total active life participants in valuation 2. Non - Active lives (including beneficiaries receiving benefits) Service 0 0 Retirees, 3 2 Vested Receiving Receiving Receiving Death Disability Benefits Benefits Benefits a. Number prior 9 2 1 valuation b. In c. Out d. Number current valuation 19 5 $ 0 0 3 0 0 2 0 2 Vested Deferred DROP Total 3 0 15 3 0 0 0 0 3 2 0 0 0 0 2 10 2 1 3 0 16 SECTION V SUMMARY OF PLAN PROVISIONS 20 SUMMARY OF PLAN PROVISIONS (Through Ordinance 11, 2004) Effective Date Original Plan Latest Amendment Eligibility Salary Average Final Compensation December 20, 1982 April 15, 2004 Full -time Employees who were members of the Plan on 2/6/97 who are not classified as full -time Police Officers or Firefighters. W -2 compensation, plus all tax deferred, tax sheltered, and tax exempt items of income. 1/12th of average Salary for the 3 best consecutive years of the 5 years immediately preceding retirement or termination. Credited Service Total years and completed months of service with the City as a General Employee. Members receive credit only for years during which Member Contributions were made. Normal Retirement Date Age 62. Benefit 2.5% of Average Final Compensation times Credited Service. Form of Benefit 10 Year Certain and Life Annuity (options available). Early Retirement Date Age 55 and completion of 10 years of Credited Service. Benefit Accrued benefit, reduced 1/15th for each of the first 5 and 1 /30th for each of the next 5 years that early retirement precedes normal retirement. 21 Death Benefit Pre - Retirement Vested Accrued benefit payable to designated beneficiary for 10 years at the Member's Normal Retirement Date (unreduced) or on a reduced basis at the otherwise Early Retirement Date. Not Vested Refund of accumulated Member Contributions. Post - Retirement According to optional form of benefit Selected at retirement. Vesting Schedule Years of Service Vested % Less than 5 0% 5 25 6 40 7 55 8 70 9 85 10 or more 100 Benefit Member will receive the vested portion of his (her) accrued benefit at the otherwise Early or Normal Retirement Date. Member Contributions Amount 6.0% of Salary. Interest 6.0% per year. Disabili Eligibility Total and permanent (as determined by the Board). Benefit Benefit accrued to date of disability, payable for life (with a 10 year guarantee) or until recovery (as determined by the Board). SECTION VI ' GOVERNMENTAL ACCOUNTING STANDARDS BOARD STATEMENT NO. 25 AND No. 27 INFORMATION U �- J 0 -0— o a) o > (C6 c�Va.� ca 0 _ O 6- = a) CU O � cif Q 0 0 0 0 0 0 CD rl- vOOo rl_ NIRTO00 r 6C)G)00 CDNd T co N N N MNNO�tO 0)0000)U) r-a)0 't M0 OM 00,4 Mr- OV (0 CD T- N N N M CO 0 0 0 0 0 0 ti O M 0 0 0 �N(D O)00 O O N O O 00 00 00 00 0 0 T- T- (D r-0) 00 NOO�- 0) — OO Or- NO 00 " M It (D O oornLnr - LOM (D 00r -OM- O�NO0)O N N MO r- •- �00��O1n NNN — CD(D McMCMMNN N N O O O Cr) ,1•CV000(M— O r- O 0) (D �LoC)Or`r- cD0(3)0000 Il- OOOCDCD N N N N N N r-_ OO19TMN 0 0 0 0 0 0 0 C) C:) C:) C) C:) 000000 T- � T- � v (n -0 C (a O O E a) cn cr L CO c 3C: 00 C U "a Q O M U C m a) C E a) > m O CL (D O a) fl- L C4-- O w� L N W m o L Z o c -o E a) m > U) � O O 0-co O co 75 L 00- Q) m L `- U 0) �M a) m O- O co W Z W Z H m R H Z O W f-' 0 0 Z cr- W 0 J d. W W 2 F- 2 orf LL U) Z 0 F- Z) _m H Z 0 U U- 0 W J W 2 U CO (D-0 0) (1) m C L 0-U C O � O L UL c O WA C p O +� (D • Z3 O C: L Q0� O U O M M W �- a) U) 0 0 0 0-.0- o 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 000000 ��r MNMr- lq co 00) (DNO'� r-M O,O ooior00r` 0) r- C) (D MNMr- It CD 0 0) co Iq r,- M cc� O�- O 0 0) cl r` 00 r- a)r- �CO T- r- O O MN 000000 000000 N N N N N N 22 (n � C M O O Em o a) (n > 2 f0 a_ U ( D � � c CU) U- 0 � L `O a0 N m C U O F-- ZQ c� aQ W -0 -0 (7 :3� rL ZO ui < f6 a) 0� c: E Q C/) (jZ N Z — Z cis O Q p CL a) U_ 0 Z 0 OU U- C: cv O 0 c :D� .� QQ QN J Z) 0� LZ U Z o c 0 = W 0 U — 2 E Cl) a) Z) W Cl) -a— > �a3JQ (fl _—a LQ �' 00 4- 0 0 U•cc C: UO Qr- QQJ W O M ' -0 CL a) m L L- 0 U O L O (n ~ O m a) a) N :3 Z) Qj< ca 0 _ O 6- = a) CU O � cif Q 0 0 0 0 0 0 CD rl- vOOo rl_ NIRTO00 r 6C)G)00 CDNd T co N N N MNNO�tO 0)0000)U) r-a)0 't M0 OM 00,4 Mr- OV (0 CD T- N N N M CO 0 0 0 0 0 0 ti O M 0 0 0 �N(D O)00 O O N O O 00 00 00 00 0 0 T- T- (D r-0) 00 NOO�- 0) — OO Or- NO 00 " M It (D O oornLnr - LOM (D 00r -OM- O�NO0)O N N MO r- •- �00��O1n NNN — CD(D McMCMMNN N N O O O Cr) ,1•CV000(M— O r- O 0) (D �LoC)Or`r- cD0(3)0000 Il- OOOCDCD N N N N N N r-_ OO19TMN 0 0 0 0 0 0 0 C) C:) C:) C) C:) 000000 T- � T- � v (n -0 C (a O O E a) cn cr L CO c 3C: 00 C U "a Q O M U C m a) C E a) > m O CL (D O a) fl- L C4-- O w� L N W m o L Z o c -o E a) m > U) � O O 0-co O co 75 L 00- Q) m L `- U 0) �M a) m O- O co W Z W Z H m R H Z O W f-' 0 0 Z cr- W 0 J d. W W 2 F- 2 orf LL U) Z 0 F- Z) _m H Z 0 U U- 0 W J W 2 U CO (D-0 0) (1) m C L 0-U C O � O L UL c O WA C p O +� (D • Z3 O C: L Q0� O U O M M W �- a) U) 0 0 0 0-.0- o 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 000000 ��r MNMr- lq co 00) (DNO'� r-M O,O ooior00r` 0) r- C) (D MNMr- It CD 0 0) co Iq r,- M cc� O�- O 0 0) cl r` 00 r- a)r- �CO T- r- O O MN 000000 000000 N N N N N N 22 23 DISCLOSURE INFORMATION PER STATEMENT NO. 27 OF THE GOVERNMENTAL ACCOUNTING STANDARDS BOARD ANNUAL PENSION COSTS AND RELATED INFORMATION Contribution rates as of 9/30/07 City 32.9% Plan Members 6.0% Annual pension cost 90,703 Contributions made 90,703 Actuarial valuation date 10/1/2005 Actuarial cost method Entry Age Normal Amortization method Level Dollar Remaining amortization period 30 Years Asset valuation method 4 Year Smooth Actuarial assumptions Investment rate of return 8.0% Projected salary increase* 6.5% * Includes inflation at 3.0% Post Retirement COLA 0.0% THREE YEAR TREND INFORMATION Actuarially Percentage of Net Year Determined Actuarially Determined Pension Ending Contribution Contribution Obligation 9/30/07 90,703 100% 0 9/30/06 79,392 100% 0 9/30/05 102,863 100% 0 City of Palm Beach Gardens GENERAL EMPLOYEES RETIREMENT SYSTEM Quarterly Review December 2007 �0 THE `J BOGDAHN GROUP simplifying your investment & fiduciary decisions Performance Evaluation for Palm Beach Gardens General Employees Pension Plan Rockwood & Sawgrass For the Period Ending December 31, 2007 Presented by: Bogdahn Consulting, LLC ' Palm Beach Gardens General Employees' ' General Employees Pension Plan Executive Summary Report Explanation 1 The Executive Summary provides an overview of the fund's performance. It shows the performance in dollars, percent, ' and relative to the investment policy. These are provided over different time periods including up and down markets. All rates of return are annualized if the period for which they are calculated exceeds one year. Account Reconciliation: This section shows the performance of the account in dollars, during the most recent quarter, the calendar year, and since the inception date. The Beginning Value is the value at the start of each period. The Ending Value shows the value as of the date of the report. Net contributions are the total contributions less the total withdrawals during the period. The Investment G/L is the gain or loss resulting from the investments. It is the difference between the beginning and ending values that cannot be explained by the net contributions. Positive investment G/L figures represent a profit, and negative values represent a loss. Investment Policy: This section defines the benchmark against which the fund is being compared. Generally, this is the most important objective for a fund to achieve. The performance of the fund relative to this measure over longer periods of time, such as market cycles, is the strongest indicator of the success or failure of the investment strategy. This objective should be reasonable, and the performance of the fund should be measured against the investment policy after adjusting for risk. Trailing Returns: This section shows the cumulative time weighted returns over the last 1 year, 2 years, and so on up through 10 years if available, as well as since the inception date. A positive difference indicates the fund has exceeded the policy's returns. The investor would prefer that this difference be positive for all time periods; however, it is more important for it to be positive for the longer periods rather than the shorter periods. Calendar Year Returns: This section gauges the consistency of performance over one year time periods. Each calendar year of performance represents the return from January 1 st through December 31 st. Watch out for a trend of declining relative performance in recent periods. Returns In Up /Down Markets: This section shows how the fund performed in both up and down markets. The methodology is to segregate the performance for each time period into the quarters in which the market, as defined by the policy, was positive and negative. Quarters with negative policy returns are treated as down markets, and quarters with positive policy returns are treated as up markets. Thus, in a 3 year or 12 quarter period, there might be 4 down quarters and 8 up quarters. Up market returns are calculated for the fund and the policy based on the up quarters. Down market returns are calculated for the fund and the policy based on the down quarters. The ratio of the fund's return in up markets to the policy's is the up market capture ratio. The ratio of the fund's return in down markets to the policy's is the down market capture ratio. Ideally, the fund would have a greater up market capture ratio than down market capture ratio. 1 1 Palm Beach Gardens General Employees' General Employees Pension Plan Executive Summary Account Reconciliation .......... 9.9:x: 6 45 3.46 ...:.1.03..::..0.68:: . ............................... .. ............................... 9.79 8.76 7.82 7.14 -- 7.94 7.42 0.52 9.29 :: 9.59 :: -0.30::::: ...................... 5.83 6.15 : - 0.:32. 5.11 4.68 O.43 12/31/2007 2007 09/30/1994 8.88 9.69: -0.81 Qtr YTD Incept $eghning V2Iue- 31098 2,906 1 079: Net Flows: -76 -201 -609 .Invest.ment 'GEL >. >:-::: -35 282 2,517 ....... .r;g Wale . ;:. 2,987 2,987 2,987 Trailing Returns through December 31, 2007 Investment Policy Index Weight 09/30/1994 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10 Yr Incept ............................ :Fund .. ..Policy : :b .......... 9.9:x: 6 45 3.46 ...:.1.03..::..0.68:: . ............................... .. ............................... 9.79 8.76 7.82 7.14 -- 7.94 7.42 0.52 9.29 :: 9.59 :: -0.30::::: ...................... 5.83 6.15 : - 0.:32. 5.11 4.68 O.43 5.18 3.97 1.21. .................... 5.47 4.77 0:70..::. 6.04 6.32 -0.28 8.88 9.69: -0.81 Qtr YTD 2006 2005 2004 2003 2002 2001 2000 1999 1998 ..... ..................... 1:18 .:. Calendar Year Returns Returns in Up Markets 09/30/1994 3 Yr 5 Yr 10 Yr Incept .................................... .................................... Fund 12/31/2007 2007 15.$ .:::::::::15:6: .. Policy 113 :.:::.:::.. 17.2.: ..a;x.. Ratio 108.2 Qtr YTD 2006 2005 2004 2003 2002 2001 2000 1999 1998 ..... ..................... 1:18 .:. 9.91 9.66 3:0& :...:.$.33 14.87 -9.90 0.84 5.74 7,81 11: .:27: -1.03 _6.45 11.12 3.97 825 18.76 .. -9.53 -3.67 -0.92 11.40 21:3.x: fli F :...: .............:. :.. -0.15. 3.46..:::::.,-1.46 0.01 0.08 -3.89 .: -0.37 4.51 6.66 -3.59 - 10.0$:' Returns in Up Markets 09/30/1994 3 Yr 5 Yr 10 Yr Incept .................................... .................................... Fund 12.3 .: ............................... ............................... .... .;1. 15.$ .:::::::::15:6: .. Policy 113 :.:::.:::.. 17.2.: ..a;x.. Ratio 108.2 9T:5::: 9'fi.8.... 90;1: Inception date is September 30, 1994 All dollar values are shown in thousands. Returns for periods exceeding one year are annualized. Returns are net of fees. Returns in Down Markets 09/30/1994 3 Yr 5 Yr 10 Yr Incept ..................................... Fund -3.4 ............................... -11.7 :: .. Pol%cy......:..... -3.4 . 3 9::::: = 1:3;x =� 3 2 < Ratio . >.::::::997:< <. >10 ::::: $8:8 :: >.: ":6: Index change effective 1/1/06 from LB Gov /Credit to LB Aggregate 1/1/2007 International added to Policy X Palm Beach Gardens General Employees Pension Plan Asset Allocation as of December 31, 2007 Domestic Equity 60% Domestic Equity 64% At Cost Intl At Market Int'I 4% ;ash & Equiv 2% 3 ;ash & Equiv 2% ixed Income 34% =ixed Income 30% Equity Limitations 65 @ Cost 70 @ Market Palm Beach Gardens General Employees General Employees Pension Plan Universe Comparison Report Explanation The universe compares the fund's returns to a group of other investment portfolios, called a universe. Ideally the universe is comprised of many other investment funds with similar investment profiles. Comparisons are provided over many different time periods. Trailing Returns: This section focuses on longer term returns. It shows the cumulative time weighted returns and percentile rankings for the last 1 year, 2 years, 3 years, and so on up through 10 years if available. The returns for the fund, the policy and the universe percentiles are displayed. A percentile ranking of 1 is the best, and 100 is the worst. ' For example, a ranking of 50 means that the fund outperformed half of the universe. A ranking of 25 means the fund was in the top 25% of the universe, outperforming 75 %. Above 50 is acceptable. Above 25 is excellent. High rankings over all time periods are ideal; however, it is more important to rank highly over the longer periods rather than the shorter periods. Calendar Year Returns: This section focuses on shorter periods and gauges the consistency of performance over time. ' It shows the calendar year returns for the fund, the investment policy and the universe percentiles. Each full year of performance represents the return from January 1 st through December 31 st. Ideally the fund has performed well in the earlier years and in the most recent years. Watch out for a trend toward underperformance in recent periods. Note the ' performance in different market environments. A high policy return indicates a bull market, and a low policy return indicates a bear market. All rates of return are annualized if the period for which theyare calculated exceeds one year. 4 Palm Beach Gardens General Employees' General Employees Pension Plan Universe Comparisons 60% PLCC, 35% HQB & 5% International Trailing Returns through December 31, 2007 Calendar Year Returns 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10 Yr .... fund .......... Return 9.91 9.79 7.82 7.94 9.29 5.83 5.11 5.18 5.47 6.04 % -tile 7 14 15 21 58 43 21 23 24 34 .... ................ �'oliey: ::::: .. ........ . Return 6.45 8.76 7.14 7.42 9.59 6.15 4.68 3.97 4.77 6.32 % -tile 30 40 42 43 43 28 35 39 42 26 ............................... ...........I......... ................. ............................... _ ................... ........ ............ ............................... .. l�e.se .... ........................................................................................................... ............................... 5th % -tile 10.45 10.59 8.84 8.90 10.99 7.34 6.59 7.27 6.84 7.51 25th % -tile 6.68 9.09 7.52 7.81 9.96 6.22 4.99 4.84 5.41 6.33 50th % -tile 5.82 8.57 7.02 7.30 9.45 5.73 4.30 3.70 4.56 5.84 75th % -tile 4.77 8.04 6.60 6.87 9.05 5.30 3.88 3.29 4.18 5.49 95th % -tile 1.78 6.15 5.21 5.72 8.25 4.47 2.68 1.97 3.56 4.90 Calendar Year Returns Returns are in percent. " %- tile" is the percentile ranking within the universe. Returns for periods exceeding one year are annualized. Incept is September 30, 1994 to December 31, 2007 Index change effective 1/1/06 from LB Gov /Credit to LB Aggregate 1/1/2007 International added to Policy 5 Qtr YTD 1 2006 2005 2004 2003 2002 1 2001 1 2000 1999 ....... .. Futiti::::::.... ,,.....:: ...... ........... Return -1.18 9.91 9.66 3.98 8.33 14.87 -9.90 0.84 5.74 7.81 % -tile 40 7 86 52 41 100 62 18 25 73 ............ ........... ............................... ........ ..... ........................... ... li P c o .. ...:::::::::::::::::::::::::::: ....................... ::::::::::::::::::::: Y ............................. .... ........................................................................................................... ............................... Return -1.03 6.45 11.12 3.97 8.25 18.76 -9.53 -3.67 -0.92 11.40 % -tile 31 30 54 52 45 49 51 52 59 60 ........... . .. ....... . Urllverse. . >. 5th % -tile -0.10 10.45 14.53 6.43 10.97 22.23 -4.68 4.35 15.12 24.96 25th % -tile -0.90 6.68 12.09 4.76 8.91 19.88 -8.29 -0.81 5.56 13.55 50th % -tile -1.32 5.82 11.17 4.01 8.09 18.70 -9.50 -3.63 -0.41 12.01 75th % -tile -1.79 4.77 10.54 3.50 7.38 17.84 -10.62 -4.32 -1.70 7.09 95th % -tile -2.89 1.78 7.49 2.60 5.13 16.23 -12.53 -8.37 -5.08 1.01 Returns are in percent. " %- tile" is the percentile ranking within the universe. Returns for periods exceeding one year are annualized. Incept is September 30, 1994 to December 31, 2007 Index change effective 1/1/06 from LB Gov /Credit to LB Aggregate 1/1/2007 International added to Policy 5 1 Palm Beach Gardens General Employees' Total Fixed Income 1 Account Reconciliation 1 1 d 1 Executive Summary 12/31/2007 2007 09/30/1994 Qtr YTD Incept .. BEgi6hing:Value... ' ":< 934 949 ... 453: ........ Net Flows -21 -71 5.30 Investment .......... 24 ...::: . ..........:. . 58- 682 .Ending Value 936 936 936 Trailing Returns through December 31, 2007 Investment Policy Index Weight 09/30/1994 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10 Yr Incept Calendar Year Returns 6.41 5.12 4.29 '4:01 3.77 4.66 5.30 5.45 4:67 5.09 6.01 Rd 6.96 5.64 4.53 4.45 4.49 5.55 5.97 6.69 5.67 6.04 6.93 :cliff -0.55 -0,52 -0.24_ .. - 0.44.... -0.72 - 0.89:. -0.67 _ -1.24 ... -1.00 -0.95 ...:...:: -0.92: Calendar Year Returns IReturns in U P Markets f 09/30/1994 3 Yr 5 Yr 10 Yr Incept . uriii ...............$::6 ......:...8:8::::::::::::8 12/31/2007 2007 8:6 ?olley ::::::::::. . : .. . .::::::::::. ... :::::::: i0:. ::::::::::1:1;0: Ratio :88:4:::83:4: ::::::8?k::6::::86 .5 88 ::::::... 8;: Qtr YTD 2006 2005 2004 2003 2002 2001 2000 1999 1998 .................... .................. ::FCind . ;:. ............................... ............................... :'`2.60:.. :6.41 _ :: 384 ........_ _ ..... 2.65 _ _ _ .. ...........I................... ............................ 3 16..:::::::2;88:::: 9,23 9.24 6.50 -1.37 8.99 Policy 3.bb 6:96 4.33 2.34 4.21 4:68 11.02 8.51 1134 -2.15 9.47 Diff -0.40 -0.55 =0 49::::::::::::0 31 -1.05 -1.85 -1.79 0.73 -5.34 0.78 -0.48: IReturns in U P Markets f 09/30/1994 3 Yr 5 Yr 10 Yr Incept . uriii ...............$::6 ......:...8:8::::::::::::8 2:7 ::::::::::.::.: 8:6 ?olley ::::::::::. . : .. . .::::::::::. ... :::::::: i0:. ::::::::::1:1;0: Ratio :88:4:::83:4: ::::::8?k::6::::86 .5 88 ::::::... 8;: Inception date is September 30, 1994 All dollar values are shown in thousands. Returns for periods exceeding one year are annualized. Returns are net of fees. Returns in Down Markets 09/30/1994 3 Yr 5 Yr 10 Yr Incept runt# -14 2:7 ?2.9 :: X3:3: Pali . . ....... -2.3 -3.3 := Ratio ::: 6 .1:..7 ::: 83: 8 .5 88 ::::::... x Sawgrass assumed fixed- 10 -26 -05 $1,043,932.60 - Index change effective 1/1/06 from LB Gov /Credit to LB Aggregate X Palm Beach Gardens General Employees Fixed Income & Cash - Sawgrass Executive Summary Investment Policy Account Reconciliation 41 1 , .. , .:. .. . .. . ... ::...539 .Policy..::::::: 96 5.64 . ..... ..................... 12/31/2007 2007 10/26/2005 ..:... : :::::::::::.:...... .:..... ........ :.::. 1: Qtr YTD Incept $Egir�rrirag Value::;:< .> 934 99 1;044 'Net Flows -21 -71 -220 Investment G/L 24 58 112 :Ending Value .:::::::: : >:::::: 936 936 936 Trailing Returns through December 31, 2007 10/26/2005 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10 Yr Incept Fund 41 1 , .. , .:. .. . .. . ... ::...539 .Policy..::::::: 96 5.64 . ..... ..................... 2 fF............0.55 Returns in Up Markets - . ... ......... 0 52 ..:... : :::::::::::.:...... .:..... ........ :.::. 1: Calendar Year Returns 12/31/2007 2007 Qtr YTD 1 J 2006 2005 2004 2003 2002 2001 2000 1999 1998 6.41 Fund 2.60 6.96,.:..:. Polic y 0 3. 0 -0.55 Riff -0.40 Fi�rid" ' :::..::5:..: ... fi....... $ :::::::::: ... 7 7 8. . Returns in Up Markets 1 J 2006 2005 2004 2003 2002 2001 2000 1999 1998 6.41 3.84 6.96,.:..:. 4.33 -0.55 :::::-0.49 Inception date is October 26, 2005 All dollar values are shown in thousands. Returns for periods exceeding one year are annualized. Returns are net of fees. Index change effective 1/1/2006 from LB Gov /Credit to LB Aggregate 7 Returns in Down Markets 10/26/2005 1 Yr 2 Yr Incept .............. :.. -0 1 10/26/2005 1 Yr 2 Yr Incept Fi�rid" ' :::..::5:..: ... fi....... $ :::::::::: ... 7 7 8. . ?ol' �Cy ...... .....................::::.....1 . 3:::..::: :::::::::::::::.:::::::::.... i . Ratio ..:: 870::::::.. 4: ::::: 8 ..6 .......................8,4. :: . Inception date is October 26, 2005 All dollar values are shown in thousands. Returns for periods exceeding one year are annualized. Returns are net of fees. Index change effective 1/1/2006 from LB Gov /Credit to LB Aggregate 7 Returns in Down Markets 10/26/2005 1 Yr 2 Yr Incept .............. :.. -0 1 -0.4 -0.4 �' :' :.:.::.:....:: I'4.>�y.....,...... -0.5 -1. 2 ... - > 1.2:: .. ... ... . .... ...... ..,. 23.1 . ...............:.......... 35.5 .............::..... >:35.5:. Palm Beach Gardens General Employees' Total Equity t Executive Summary 1 Account Reconciliation Weight S &P 500 ,: ;:... 95.00 ' ..... 5.04. 12/31/2007 2007 09/30/1994 5.29..::14.26 09/30/1994 1 Yr Qtr YTD Incept 5 Yr :beginning Value x,141 . 1,.932 622 10 Yr 1 Vet Flows ;: -32 . -106 -411 5:90 >:: investment G/L .::.....:...:......:: -59 224 1;839: 6:30.:.::.... ........ ' Ending ualue 2 050 2,050 2,050 Trailing Returns through December 31, 2007 Investment Policy Index Weight S &P 500 ,: ;:... 95.00 MSCI EAFE ::::::;:. ..... 5.04. Total 100.00. 1 Calendar Year Returns 12/31/2007 2007 Qtr YTD 2006 2005 2004 2003 2002 2001 2000 1999 1998 Fund -2.81 11:70 #2..95 4.:52:::::1:1:44:::::.22.83.: Policy -6.7 -21;Q3 -4.42 5.29..::14.26 09/30/1994 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10 Yr Incept ........................................................................................................... ........................................................................................................... :uti i :11.70 ............... ............... .......................... 12.33 9.66 10.10:::::::::'1:2:54:::::::: ............... 5:90 >:: 6.09 '4:52 4.61 ............................... ............................... 5.64 6:30.:.::.... ........ ............................ ............................ . .... . .... ?olisy :::::::::5:80....,..10.69 -6.78 8.73 9.26 12.90:::: _.. 6.13 3.34 1.70 3.69 5:94 11.07 .................. J0:. 1,64 .:0.93 0.84 - 0,36 .: -0.04 1.18 2.91 :: : 1.95 _0.36 - 0.74 1 Calendar Year Returns 12/31/2007 2007 Qtr YTD 2006 2005 2004 2003 2002 2001 2000 1999 1998 Fund -2.81 11:70 #2..95 4.:52:::::1:1:44:::::.22.83.: Policy -6.7 -21;Q3 -4.42 5.29..::14.26 Ratio 12.39 Policy -3.25 5.80 ;5:8D »: >::.:4 $1::;.:..:1{):8$' 28:6$ -22 :to : -11.88 -9.11 21.04 28.58: fliff : 0.44 5:90 >:: ;:= 2:85;: .:-0 S. U:56 -5.85: ....1::07... 4:40 -6.78 -.16.19:: : Returns in U P Markets Returns in Down Markets 09/30/1994 3 Yr 5 Yr 10 Yr Incept 09/30/1994 3 Yr 5 Yr 10 Yr Incept .............................. Fund -612 .. ...................... -9.5 -21.3 -20.8 Policy -6.7 -9.2 -25.4 -23.9 Ratio 92.5 104.0 83.8 86.8 IRockwood assumed account 10 -26 -05 $ 1,565,898.88 International bought 11/9/2006, will be added to Policy 1/1/2007 1 a Palm Beach Gardens General Employees' Total Equity Universe Comparisons 95% Pure Large Cap Core & 5% International Trailing Returns through December 31, 2007 Calendar Year Returns 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10 Yr :.:.:..... ...::: :::::.. ... ... . . .. . ... Fufld . Return 11.70 12.33 9.66 10.10 12.54 6.09 4.52 4.61 5.64 6.30 % -tile 7 14 20 20 67 43 24 25 20 31 €' li ::::::::::::::::: ::::::::::::::::::::::::::::::::::::::::::::::::::: :.....::::::::::::::::::::::::: ::::::::::::::::::::::::::::: Return 5.80 10.69 8.73 9.26 12.90 6.13 3.34 1.70 3.69 5.94 % -tile 37 38 43 43 43 41 46 56 46 40 ........................................................................................................... ............................... ........................................................................................................... ............................... f J r1 fivers :::::::::::: :: . 5th % -tile 13.28 14.06 11.62 11.71 14.99 8.39 7.16 7.83 7.33 8.27 25th % -tile 6.16 11.05 9.26 9.91 13.44 7.06 4.42 4.58 4.83 6.70 50th % -tile 5.52 10.51 8.63 9.15 12.79 5.94 3.26 1.86 3.60 5.78 75th % -tile 4.21 10.00 8.20 8.66 12.35 5.57 2.85 1.41 3.28 5.47 95th % -tile -0.70 6.53 6.06 7.12 11.09 4.42 0.97 0.52 2.73 4.48 Calendar Year Returns Returns are in percent. " %- tile" is the percentile ranking within the universe. Returns for periods exceeding one year are annualized. Incept is September 30, 1994 to December 31, 2007 Rockwood assumed account 10 -26 -05 $ 1,565,898.88 International bought 11/9/2006, will be added to Policy 1/1/2007 J Qtr YTD 1 2006 2005 2004 2003 2002 1 2001 1 2000 1999 ........... ............................... ........,.,.... ..... .. . .......... ........ Return -2.81 11.70 12.95 4.52 11.44 22.83 -21.03 -4.42 5.29 14.26 % -tile 20 7 89 68 31 100 35 17 24 74 Pglicy ... > . Return -3.25 5.80 15.80 4.91 10.88 28.68 -22.10 -11.88 -9.11 21.04 % -tile 47 37 32 48 38 34 47 47 57 23 :i::::: Un ..er Se :.:.:.:: > > >:..::::::: » » >..... : 5th % -tile -1.69 13.28 21.01 9.06 14.89 31.71 -14.19 1.29 18.77 36.89 25th % -tile -3.00 6.16 16.39 6.21 12.14 29.67 -20.21 -6.82 4.23 20.82 50th % -tile -3.28 5.52 15.56 4.87 10.68 28.26 -22.19 -11.93 -8.21 20.13 75th % -tile -3.57 4.21 14.77 4.31 10.04 26.79 -22.80 -12.37 -9.39 12.73 95th % -tile -5.73 -0.70 9.60 3.27 5.52 24.94 -26.72 -19.45 -11.00 -0.72 Returns are in percent. " %- tile" is the percentile ranking within the universe. Returns for periods exceeding one year are annualized. Incept is September 30, 1994 to December 31, 2007 Rockwood assumed account 10 -26 -05 $ 1,565,898.88 International bought 11/9/2006, will be added to Policy 1/1/2007 J Palm Beach Gardens General Employees' Domestic Equity & Cash - Rockwood Executive Summary I Account Reconciliation 12/31/2007 2007 10/26/2005 Qtr YTD Incept ..................................... ..................................... f3i?git iaa :ualue .... ..................................... ............................... ............................... .... ............................... ............................... ............................... .: >: ............................. ..................................... Net . . . . . . .s . ............. ..... . . . . . . . . . . . . . ... . .................. ..........i .............F....l.o..w.. ............................... ............................... . . . . . ......... . . . . .. : 2..:..: 3... . . . . . . . ...... . . . . . . . . . . . . . . . . .:.. ............... ........ i.es t Gv....:L : :::...: . . .... : .:.:.:...........:.:.X... . .......f...:.. . .......... ......... . . . . . . . . ..:.::.: ._ ....: . . . . . . . :..:.:.:::.: . :21...Q¢.6 3. .:.::.::.::.:.:.:..:.:..:.:..:.:..:.:..:.:..:X ... . . . . . . . . . ..... . . . . . . . . . . . . . . . .:..5.1....72...........31..........: . :.. . . . .... . . . . ..... ..... ....... ............. . ................ Endirtg:Val ue: . ..... . . . . ........ 1;918 . . . . . . . I . . . . . . . . .. 1;918 .... 1:;9:18: Trailing Returns through December 31, 2007 Investment Policy Index Weight ICalendar Year Returns 1 Returns in U P Markets Returns in Down Markets 10/26/2005 1 Yr 2 Yr Incept ..................................... Fu: id 14 5 ............................... .: >: Policy... $.1 ...'.:.' 18:0 1$.4 .. ........... Ratio ........ 158 6 ..::.1.11;2: . . Inception date is October 26, 2005 All dollar values are shown in thousands. Returns for periods exceeding one year are annualized. Returns are net of fees. 10 10/26/2005 1 Yr 2 Yr Incept Fund w w2.$ - -4.6 - -4.6:. Policy . .3: - -4.7 X X4:7: Ratio.. 8 .. r Palm Beach Gardens General Employees' ' Domestic Equity & Cash - Rockwood Universe Comparisons Pure Large Cap Core i railing Returns through December s1, zuui Calendar Year Returns 2 Qtrs 1 3 Qtrs 1 1 Yr 1 2 Yr 1 3 Yr 1 4 Yr I 5 Yr 1 6 Yr 1 7 Yr 1 8 Yr Fusin ::::::::::::::::::::::::::: ::::::::::::::::::::::::::::::::::: ::::::::::::::::::::::::::::::: :::::: ........................................................................................................... ............................... ........................................................................................................... ............................... ........................................................................................................... ............................... Return 1.89 4.71 11.25 12.03 % -tile 8 35 8 16 . .. .. ... .... .. Policy ......... . Return -1.37 4.82 5.49 10.53 % -tile 26 25 31 34 .............. I ............ ............ .............. .........I..................... .......... ............................... .................................................... ............................... .......... ............................... u . Ive s� ..::::::::::::::::::::::::::::: : ........................................................................................................... ............................... ........................................................................................................... ............................... 5th % -tile 3.77 10.56 12.81 13.80 11.68 11.71 14.85 8.41 7.08 7.71 25th % -tile -1.37 4.82 5.64 10.83 9.15 9.83 13.24 6.97 4.30 4.33 50th % -tile -1.60 4.52 5.22 10.32 8.52 9.05 12.65 5.90 3.18 1.69 75th % -tile -3.42 2.62 3.76 9.76 8.02 8.52 12.16 5.54 2.80 1.38 95th % -tile -8.45 -3.38 -2.63 5.53 5.05 6.23 10.03 4.27 0.26 0.91 Calendar Year Returns Returns are in percent. " %- tile" is the percentile ranking within the universe. Returns for periods exceeding one year are annualized. Incept is October 26, 2005 to December 31, 2007 11 Qtr YTD 1 2006 2005 2004 2003 2002 1 2001 2000 1999 ... .. .:.:.:.:..:... . ...................... .... .. Purtd .:::::::::::::..... .... ... ..... ... ..... Return -2.83 11.25 12.81 % -tile 19 8 75 ........................................................................................................... ............................... ........................................................................................................... ............................... POW :::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::: ::::::::::::::::::::::::::::::. ....:...... ::::::::::::::: ....................................................................................................... ............................... ...... .................................................................................................... ............................... ........................................................................................................... ............................... Return -3.33 5.49 15.80 % -tile 44 31 30 ........................................................................................................... ............................... ........................................................................................................... ............................... iv.... ........................................................................................................... ............................... .................................................................................. ............................... ......................... 5th % -tile -1.66 12.81 20.97 11.33 15.14 33.34 -15.55 -1.49 13.61 35.03 25th % -tile -3.09 5.64 16.19 7.20 11.51 28.99 -20.13 -9.35 -0.20 22.80 50th % -tile -3.36 5.22 15.48 5.09 10.39 27.83 -22.23 -12.08 -7.39 20.27 75th % -tile -3.72 3.76 12.74 4.22 8.38 24.97 -23.39 -13.51 -9.63 16.39 95th % -tile -6.49 -2.63 4.79 1.07 5.14 20.58 -26.60 -19.10 -14.67 6.13 Returns are in percent. " %- tile" is the percentile ranking within the universe. Returns for periods exceeding one year are annualized. Incept is October 26, 2005 to December 31, 2007 11 Palm Beach Gardens General E mployees ' International Equity Executive Summary 1 Account Reconciliation Investment Policy Trailing Returns through December 31, 2007 Calendar Year Returns Returns in U P Markets Returns in Down Markets 12/31/2007 2007 11/07/2006 .................................... ............................... Fund 221 Qtr YTD Incept .................................... ..................................... $i�ir}n:iratj :Value .. .................................... ............................... ............................... :::1:35 ............. ............................... ............................... ............................... ::1 04: . ..................................... .................................... ..................................... t let Flows :::::::::::::::::::: ..... .................. ....... ..................... ............................... ............................... 0::::::::::::4 ............................... ............................... ::::::::::::::0: ....................... ........................... ..................................... tnvestinent Q/L ........................... ............................... *»>:*: >:* >::: ....... ;3 >:::::: 21 8 : : 28:: r d.. Value :::::::: 1.3 ::::::::: 32 Trailing Returns through December 31, 2007 Calendar Year Returns Returns in U P Markets Returns in Down Markets Inception date is November 7, 2006 All dollar values are shown in thousands. Returns for periods exceeding one year are annualized. Returns are net of fees. 11/07/2006 1 Yr Incept .................................... ............................... Fund 221 ?oli > : :: 1: 3: 6 : :::::::::::::.:.:.:.:.:.....: 4y ............ ........ .............................�. ;::::::::::1g; Ratio 1:fi3 0 .. .. . 1:52.4:: 11 Inception date is November 7, 2006 All dollar values are shown in thousands. Returns for periods exceeding one year are annualized. Returns are net of fees. 12 11/07/2006 1 Yr Incept .... . ........ Fund -2 6 ........ X2;0:. ..QW . .::::::::::: -1.7 ::: >.1.7, . ... Ratio::: ... ....11 3..... .. ... ... ..:. . .... 4...... 12 Palm Beach Gardens General Employees' International Equity Universe Comparisons International Equity Trailing Returns through December 31, 2007 Calendar Year Returns 2 Qtrs 3 Qtrs 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr . .. . Fu�td ,... . Return 5.18 14.21 18.98 % -tile 20 19 17 ::::::::::::::::::::::::::::: ::::::::::::::::::::::::::..... ....... ::::::::: :::::::::::::::::::: Pq. cy .............................................................................................:................: ......:.:.............:.:...... . Return 0.48 7.19 11.63 % -tile 51 54 51 ... tier qtr:;;:; ; ;: > ::::::: ::::....:... ::::::.. . ....: ' <::::::::: ::::::::::::::::< ::::: % :::: >::::::: >:: >:.:.. ........::::.::...: 5th % -tile 11.62 21.83 25.16 28.17 29.25 29.10 32.20 27.09 20.79 14.37 25th % -tile 3.76 11.96 16.56 21.03 19.68 19.90 24.01 17.08 11.67 8.94 50th % -tile 0.53 7.74 11.69 18.42 17.38 17.89 21.68 14.47 9.05 5.86 75th % -tile -2.54 4.10 8.26 16.34 15.50 16.38 19.74 12.98 7.08 3.47 95th % -tile -7.61 -0.88 3.34 12.68 12.63 14.22 17.46 10.85 3.53 -0.43 Calendar Year Returns Returns are in percent. " %- tile" is the percentile ranking within the universe. Returns for periods exceeding one year are annualized. Incept is November 7, 2006 to December 31, 2007 13 Qtr YTD 1 2006 2005 2004 2003 2002 2001 2000 1999 .. ...........:....:::::.:....:::::::::....:...:....:....:.:.:.:...:.:....:.:....:::::: Return -2.57 18.98 % -tile 61 17 ::::::::::::::::::::::::::::: ::::::::::::::::::::::::::..... ....... ::::::::: :::::::::::::::::::: Pq. cy .............................................................................................:................: ......:.:.............:.:...... . Return -1.71 11.63 % -tile 47 51 :Universe 5th % -tile 2.30 25.16 35.29 38.92 32.32 65.72 1.26 2.71 2.11 117.71 25th % -tile -0.21 16.56 28.37 23.76 23.60 48.59 -8.48 -10.53 -8.63 67.62 50th % -tile -1.89 11.69 25.65 16.31 19.34 38.92 -14.41 -18.53 -15.84 47.72 75th % -tile -3.67 8.26 22.79 13.13 16.57 33.20 -18.10 -23.29 -24.08 29.01 95th % -tile -6.79 3.34 18.65 9.40 12.66 27.55 -23.32 -29.32 -34.43 17.12 Returns are in percent. " %- tile" is the percentile ranking within the universe. Returns for periods exceeding one year are annualized. Incept is November 7, 2006 to December 31, 2007 13 � Palm Beach Gardens General Employees' General Employees Pension Plan '25.00% Up Market Returns 20.00% - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 1 15.00% - -- - -- 10.00% - -- -- 5.00% - - 0.00% 3 Yr 5 Yr 10 Yr Fund ( %) 12.27 14.15 15.82 Policy ( %) 11.34 14.50 17.24 Difference ( %) 0.93 -0.35 -1.42 Ratio 108.20 97.59 91.76 # Up Qtrs 9.00 15.00 27.00 Down Market Returns o.00 °% o 0 :A I - 5.00% - - - - - - - - - - - - - - - - - - - - 10.00% - 15.00% 3 Yr 5 Yr 10 Yr Fund ( %) -3.41 -4.06 -11.71 Policy ( %) -3.42 -3.90 -13.22 Difference ( %) 0.01 -0.16 1.51 Ratio 99.71 104.10 88.58 # Down Qtrs 3.00 5.00 13.00 i❑ Fund ( %) Policy ( %) Index change effective 1/1/06 from LB Gov /Credit to LB Aggregate 1/1/2007 International added to Policy ' 14 Incept 16.55 18.37 -1.82 90.09 40.00 Incept -11.71 -13.22 1.51 88.58 13.00 - a I U e Palm Beach Gardens General Employees' General Employees Pension Plan Objective Comparison I..IVL IVIVJ JVJ JVJ ✓VJ IVIVY Jul JVY ✓VY IVIVJ JVJ JVJ ✓VJ IV- JVV JVV VVV Mul Jul JVl VV/ Quarter Ending [' Fund —X Policy Q Nominal 8% E] CPI + 4% Inception date is September 30, 1994 All dollar values are shown in thousands. Index change effective 1/1/06 from LB Gov /Credit to LB Aggregate 1/1/2007 International added to Policy ' 15 Palm Beach Gardens General Employees' ' General Employees Pension Plan Attributions of Returns Report Explanation I. Performance attribution concentrates on evaluating the effect of the manager's decisions on asset allocation and security selection. This allows the investor to see whether the manager is adding value by adjusting the actual asset allocation or by picking individual securities. This information is valuable in helping determine the amount of freedom that might be given to the manager in regard to asset allocation ranges. The result of these skills are shown for multiple time periods. The top section shows the returns for both the account and the investment policy and the results of the manager's contribution. The fund's return is thus attributed to the policy and the manager. The bottom section divides the manager's contribution into two components: asset allocation and security selection. The asset allocation effect measures the value that was added by varying the actual asset allocation from the target allocation. This is done by assuming investments, in amounts equal to the actual asset allocation weights, were made in the policy's indices so that security selection has no effect. The difference between this return and the policy's return is the asset allocation effect. The security selection is the remainder of the manager's contribution that is not explained by asset allocation. 16 Palm Beach Gardens General Employees' General Employees Pension Plan Attribution of Returns Attribution of Performance to show Manager Contribution Policy + Manager Contribution = Fund Attribution of Manager Contribution between Asset Allocation and Security Selection Policy .... ... .... ... ............................... ............................... ............................... ............................... Manager Contribution Fund Current Quarter -1.03 -0:15 ... ............................... ... ... ............................... ... -1.18 Year to Date 6.45 :::....` ... .... ... .... ... ......:::. :: »>::;::::3.46 ............................... ............................... ............................... ............................... ............................... ... ....................... .......................... ... ... ... 9.91 3 Years 7.14 ::::::::::::::::::::::::::::: ............................ ............................ ..............I............. ............................. ............................ ............................ 0.68 7.82 5 Years 5 Years 9.59 :.....::::.:.. » >: ::< :::; -0.30 9.29 10 Years ............................... ............................... ............................... ............................... ............................... 6.32 :: ............................. ............................. ............................. ............................ ........................... :.... : :::.::::: :: <% ::::X0.28 6.04 Incept ... ... ... ... ... ... :: 9.69 Incept . - 0.81::: -4.33 8.88 Policy + Manager Contribution = Fund Attribution of Manager Contribution between Asset Allocation and Security Selection Asset Allocation + Security Selection = Manager Contribution Index change effective 1/1/06 from LB Gov /Credit to LB Aggregate 1/1/2007 International added to Policy 17 Asset Allocation Security Selection Manager Contribution: Current Quarter 0.09 -0.24 ... ............................... ... ... ............................... ... .... :: ' :::::::::::::::::= 0::5:: ............................... ............................... ......................... Year to Date -3.39 6.85 ... ....................... .......................... ... ... ... . ....... ....... ............................... ............................... ............................... 3:46: 3 Years -3.25 3.93 Q:68: 5 Years -4.20 3.90 ... ... ... ... ... .. ............................... ............................... ............................... ............................... ............................... ............................... 10 Years -2.92 2.64 ... ... ... ... ... ... :: ............................... ............................... ............................... ............................... ............................... ............................... =0.28: Incept -4.33 3.52 :::::::::::::::::: ::::::::: Asset Allocation + Security Selection = Manager Contribution Index change effective 1/1/06 from LB Gov /Credit to LB Aggregate 1/1/2007 International added to Policy 17 I. Palm Beach Gardens General Employees , 1 General Employees Pension Plan 1 Asset Allocation Effect 0 ° M03 J03 S03 D03 M04 J04 SO4 D04 M05 J05 S05 D05 M06 J06 S06 D06 M07 J07 S07 D07 1 Quarter Ending Security Selection Effect 1 10.00 0 10.00 /o IP P e 5.00% r Ir C 1 e n t 0.00% ' E f ' f e -5.00% 1 C 1 It 1 -10 00°/ ° M03 J03 S03 D03 M04 J04 SO4 D04 M05 J05 S05 D05 M06 J06 S06 D06 M07 J07 S07 D07 1 Quarter Ending Security Selection Effect 1 10.00 0 1 ° M03 J03 S03 D03 M04 J04 SO4 D04 M05 J05 S05 D05 M06 J06 S06 D06 M07 J07 S07 D07 Quarter Ending Quarterly Effect Cumulative Effect 1 Index change effective 1/1/06 from LB Gov /Credit to LB Aggregate 1/1/2007 International added to Policy 1 18 /o IP e 5.00% Ir C e n t 0.00% E f ' f e - 5.00% C 1 t in 00°/ 1 ° M03 J03 S03 D03 M04 J04 SO4 D04 M05 J05 S05 D05 M06 J06 S06 D06 M07 J07 S07 D07 Quarter Ending Quarterly Effect Cumulative Effect 1 Index change effective 1/1/06 from LB Gov /Credit to LB Aggregate 1/1/2007 International added to Policy 1 18 1 Palm Beach Gardens General Employees ' General Employees Pension Plan Asset Allocation vs Targets " 80.000/co 70.00% ------------------- - - - - -- ----------------- ' 60.00% - -- --------------- - -- 50.00% -- - -- ----------------------------------------------------------------------------------- 40.00% ------------------- - - - - -- ------------------ - - - - -- ------------------------------------------------------------------------------- 30.00°/ -- ------------------------------- - - - - -- ---------------- - - - - -- ----------- - - - - -- ----- - - - - -- 20.00% - - -- 10.00% - -------------------------------------------------------------------------------------- - - - - -- ------------ - - ------------------------------------------------- 0.00% 3 J3 S3 D3 4 J4 S4 D4 5 J5 S5 D5 6 J6 S6 D6 7 J S7 D7 ' Quarter Ending � Cash & Equiv —>K-- Target 80.00% 70.00°/ --- - - - - -- ------------------- - - - - -- - - - -- ------------------------------------------------------ 60.00%-- A w 50.00% -- ----- - - - - -- -- -- - -- -- -- -- - ' 40.00 ° / -- -- -- - -- - -- -- -- -- - 30.00 °/ -- -- -- - -- - -- -- -- -- - 20.00 % 10.00% 0.00% M03 J03 S03 D03 M04 J04 SO4 D04 M05 J05 S05 D05 M06 J06 S06 D06 M07 J07 S07 D07 Quarter Ending Equity � Target ' 80.00 ° / " 70.00% 60.00% - - - -- - - - - - -- ------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------- ----------------------------------------- 50.00% -- - - - -- - - - - - -- ------------------------------------------------------------------------------------------------------ 40.00% ---- - - - - -- 20.00 % 10.00% 0.00% M03 J03 S03 D03 M04 J04 SO4 D04 M05 J05 S05 D05 M06 J06 S06 D06 M07 J07 S07 D07 Quarter Ending Fixed Income Target Index change effective 1/1/06 from LB Gov /Credit to LB Aggregate 1/1/2007 International added to Policy " 19 Palm Beach Gardens General Employees' t- General Employees Pension Plan Asset Allocation vs Targets 80.00% 70.00% --------- - - - - -- ------------------------------------------------------------------------------------------------------------------------- ' 60.00% - - - -- ------------------------------ 50.00% - - - -- --------------------------------- 40.00% --------------------------------------------------------------------------------- 30.00% ---------------------------------------------- -------------------------------------------------------------------------------------------------------------------------- 20.00% -- - - - - -- - - - - - -- - - - - -- --------------- - - - -- 10.00% ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- ' 0.00% 3 J3 S3 D3 4 J4 S4 D4 5 J5 S5 D5 6 J6 S6 D6 M07 J07 S07 D07 Quarter Ending Foreign Fnds -7X— Target 1 1 Index change effective 1/1/06 from LB Gov /Credit to LB Aggregate 1/1/2007 International added to Policy 20 Palm Beach Gardens General Employees' General Employees Pension Plan Manager Contribution 5.uu ro 4.00% ---------- - - - - -- ------------------- - - - - -- 3.00% - - - - -- --------------------------------------------------------------------------------------------------------- 2.00% --- - - - - -- ------ - - - - -- --------------------------------------- R e1.00% --------------------------------- - - - - -- --- - - - - -- t u 0.00% r n - 1.00% - - - -- -- ------------------- - - - - -- - - - - - -- ------------------------ ------------------------- --------- ------- - - - - -- ---- - - - - -- - 2.00% -- - - - - -- ------------------ - - - - -- - - 3.00% --- - - - - -- -------------- - - - - -- ----------------------------------------------------------------------------------------------- - 4.00% M03 J03 S03 D03 M04 J04 SO4 D04 M05 J05 S05 D05 M06 J06 S06 D06 M07 J07 S07 1301 Quarter Ending IN Quarterly Cumulative Growth of $100 Fund VS Policy V a $ 1 u e $ UUL IVIU3 JU3 JU3 UU3 IVIU4 JU4 0U4 UU4 IVIU7 JU7 JU0 UU.7 MUD JUO JUO UUO IVIU/ Jul JU/ UU/ Quarter Ending Fund -0 Policy Index change effective 1/1/06 from LB Gov /Credit to LB Aggregate 1/1/2007 International added to Policy 21 � Palm Beach Gardens General Employees' General Employees Pension Plan Quarterly Comparison Analysis ($) Period Fund Policy Diff Nominal 8% Diff CPI + 4% Diff Ending Sep 1994 1,079 1,079 0 1,079 0 1,079 0 Dec 1994 1,059 1,078 -20 1,098 -39 1,090 -31 Mar 1995 1,211 1,240 -29 1,194 17 1,188 23 Jun 1995 1,369 1,421 -51 1,294 75 1,286 84 Sep 1995 1,432 1,495 -63 1,316 116 1,301 131 Dec 1995 1,533 1,600 -67 1,365 168 1,338 195 Mar 1996 1,634 1,697 -62 1,452 182 1,431 203 Jun 1996 1,688 1,752 -64 1,486 202 1,461 227 Sep 1996 1,728 1,800 -72 1,518 210 1,488 240 Dec 1996 1,820 1,916 -96 1,551 270 1,514 306 Mar 1997 1,927 2,045 -118 1,685 242 1,647 280 Jun 1997 2,141 2,284 -144 1,717 424 1,664 477 Sep 1997 2,328 2,423 -94 1,752 576 1,691 637 Dec 1997 2,375 2,530 -155 1,820 556 1,741 635 Mar 1998 2,568 2,756 -188 1,856 712 1,769 799 Jun 1998 2,550 2,842 -291 1,893 657 1,797 753 Sep 1998 2,385 2,730 -345 1,928 456 1,818 566 Dec 1998 2,679 3,106 -427 2,001 678 1,874 805 Mar 1999 2,642 3,168 -526 2,025 617 1,888 753 Jun 1999 2,790 3,256 -466 2,033 757 1,890 900 Sep 1999 2,647 3,131 -484 2,063 584 1,917 730 Dec 1999 2,821 3,391 -570 2,095 726 1,934 887 Mar 2000 2,907 3,490 -583 2,149 758 1,999 907 Jun 2000 2,843 3,432 -589 2,167 675 2,010 833 Sep 2000 2,926 3,436 -510 2,192 734 2,027 899 Dec 2000 2,945 3,324 -380 2,225 719 2,042 903 Mar 2001 2,846 3,104 -258 2,243 603 2,061 785 Jun 2001 2,927 3,183 -256 2,251 676 2,068 859 Sep 2001 2,675 2,893 -218 2,229 446 2,028 648 Dec 2001 2,827 3,062 -234 2,256 571 2,013 814 Mar 2002 2,824 3,046 -222 2,283 541 2,040 783 Jun 2002 2,621 2,805 -184 2,290 331 2,038 583 Sep 2002 2,397 2,540 -144 2,305 92 2,041 356 Dec 2002 2,434 2,655 -221 2,313 121 2,024 410 Mar 2003 2,385 2,609 -224 2,345 41 2,068 318 Jun 2003 2,534 2,852 -317 2,358 176 2,050 484 Sep 2003 2,533 2,861 -329 2,373 160 2,056 477 All dollar values are shown in thousands. Index change effective 1/1/06 from LB Gov /Credit to LB Aggregate 1/1/2007 International added to Policy I " 22 1 Palm Beach Gardens General Employees' ' General Employees Pension Plan Quarterly Comparison Analysis ($) Period Fund Policy Diff Nominal 8% Diff CPI + 4% Diff Ending Dec 2003 2,680 3,036 -356 2,388 292 2,035 645 Mar 2004 2,741 3,094 -352 2,424 317 2,077 664 Jun 2004 2,717 3,068 -351 2,453 263 2,105 611 Sep 2004 2,674 3,045 -371 2,469 205 2,096 578 Dec 2004 2,805 3,188 -383 2,483 321 2,088 717 Mar 2005 2,745 3,112 -367 2,504 240 2,115 630 Jun 2005 2,717 3,117 -400 2,490 228 2,087 630 Sep 2005 2,740 3,148 -408 2,513 227 2,129 611 Dec 2005 2,779 3,177 -398 2,541 238 2,109 671 Mar 2006 2,812 3,206 -394 2,549 264 2,121 691 Jun 2006 2,765 3,162 -396 2,581 184 2,159 606 Sep 2006 2,834 3,276 -442 2,591 242 2,141 692 Dec 2006 2,906 3,386 -481 2,605 300 2,116 790 Mar 2007 2,979 3,369 -390 2,599 380 2,116 863 Jun 2007 3,022 3,482 -459 2,631 391 2,148 875 Sep 2007 3,098 3,511 -413 2,630 468 2,124 974 Dec 2007 2,987 3,400 -413 2,605 382 2,083 904 All dollar values are shown in thousands. Index change effective 1/1/06 from LB Gov /Credit to LB Aggregate 1/1/2007 International added to Policy 1 23 � Palm Beach Gardens General Employees' General Employees Pension Plan Quarterly Comparison Analysis ( %) Period Fund Policy Diff Nominal 8% Diff CPI + 4% Diff Ending Dec 1994 -1.67 0.16 -1.83 1.94 -3.61 1.22 -2.89 Mar 1995 7.15 7.82 -0.67 1.94 5.21 2.12 5.03 Jun 1995 6.68 8.32 -1.64 1.94 4.74 1.71 4.97 Sep 1995 4.85 5.52 -0.67 1.94 2.91 1.45 3.40 Dec 1995 5.46 5.49 -0.03 1.94 3.52 1.08 4.38 Mar 1996 2.64 2.24 0.40 1.94 0.70 2.39 0.25 Jun 1996 2.91 2.88 0.03 1.94 0.97 1.69 1.22 Sep 1996 2.22 2.61 -0.39 1.94 0.28 1.69 0.53 Dec 1996 5.12 6.23 -1.11 1.94 3.18 1.49 3.63 Mar 1997 0.17 1.30 -1.13 1.94 -1.77 1.89 -1.72 Jun 1997 11.16 11.79 -0.63 1.94 9.22 1.09 10.07 Sep 1997 8.66 5.95 2.71 1.94 6.72 1.49 7.17 Dec 1997 0.59 3.06 -2.47 1.94 -1.35 0.99 -0.40 Mar 1998 8.07 8.90 -0.83 1.94 6.13 1.59 6.48 Jun 1998 -0.75 3.05 -3.80 1.94 -2.69 1.49 -2.24 Sep 1998 -6.44 -3.89 -2.55 1.94 -8.38 1.29 -7.73 Dec 1998 10.89 12.51 -1.62 1.94 8.95 1.09 9.80 Mar 1999 -0.83 2.50 -3.33 1.94 -2.77 1.59 -2.42 Jun 1999 6.80 3.77 3.03 1.94 4.86 1.69 5.11 Sep 1999 -4.78 -3.56 -1.22 1.94 -6.72 1.99 -6.77 Dec 1999 6.89 8.60 -1.71 1.94 4.95 1.29 5.60 Mar 2000 2.62 2.57 0.05 1.94 0.68 2.69 -0.07 Jun 2000 -1.42 -1.02 -0.40 1.94 -3.36 1.69 -3.11 Sep 2000 3.54 0.63 2.91 1.94 1.60 1.69 1.85 Dec 2000 0.95 -3.01 3.96 1.94 -0.99 1.19 -0.24 Mar 2001 -2.54 -5.93 3.39 1.94 -4.48 2.19 -4.73 Jun 2001 4.11 3.69 0.42 1.94 2.17 2.09 2.02 Sep 2001 -6.53 -7.20 0.67 1.94 -8.47 1.18 -7.71 Dec 2001 6.32 6.41 -0.09 1.94 4.38 0.09 6.23 Mar 2002 0.47 0.03 0.44 1.94 -1.47 2.19 -1.72 Jun 2002 -5.93 -6.75 0.82 1.94 -7.87 1.69 -7.62 Sep 2002 -7.51 -8.45 0.94 1.94 -9.45 1.59 -9.10 Dec 2002 3.08 5.95 -2.87 1.94 1.14 0.98 2.10 Mar 2003 -1.47 -1.24 -0.23 1.94 -3.41 2.80 -4.27 Jun 2003 7.62 10.56 -2.94 1.94 5.68 0.69 6.93 Sep 2003 1.16 1.44 -0.28 1.94 -0.78 1.79 -0.63 Dec 2003 7.08 7.21 -0.13 1.94 5.14 0.49 6.59 Returns for periods exceeding one year are annualized. IIndex change effective 1/1/06 from LB Gov /Credit to LB Aggregate 1/1/2007 International added to Policy 24 f 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Palm Beach Gardens General Employees' General Employees Pension Plan Quarterly Comparison Analysis ( %) Period Fund Policy Diff Nominal 8% Diff CPI + 4% Diff Ending Mar 2004 2.67 2.25 0.42 1.94 0.73 2.59 0.08 Jun 2004 -0.24 -0.25 0.01 1.94 -2.18 2.19 -2.43 Sep 2004 -0.38 0.30 -0.68 1.94 -2.32 1.08 -1.46 Dec 2004 6.17 5.82 0.35 1.94 4.23 1.18 4.99 Mai-2005 -1.19 -1.54 0.35 1.94 -3.13 2.59 -3.78 Jun 2005 1.32 2.21 -0.89 1.94 -0.62 1.69 -0.37 Sep 2005 1.75 1.79 -0.04 1.94 -0.19 3.20 -1.45 Dec 2005 2.07 1.50 0.57 1.94 0.13 -0.01 2.08 Mar 2006 2.71 2.25 0.46 1.94 0.77 2.59 0.12 Jun 2006 -1.09 -0.89 -0.20 1.94 -3.03 2.59 -3.68 Sep 2006 3.95 4.92 -0.97 1.94 2.01 0.98 2.97 Dec 2006 3.84 4.49 -0.65 1.94 1.90 0.49 3.35 Mal-2007 4.49 1.13 3.36 1.94 2.55 2.69 1.80 Jun 2007 2.07 3.91 -1.84 1.94 0.13 2.39 -0.32 Sep 2007 4.29 2.36 1.93 1.94 2.35 1.28 3.01 Dec 2007 -1.18 -1.03 -0.15 1.94 -3.12 1.69 -2.87 Incept. 8.88 9.69 -0.81 8.00 0.88 6.60 2.28 Returns for periods exceeding one year are annualized. Index change effective 1/1/06 from LB Gov /Credit to LB Aggregate 1/1/2007 International added to Policy 25 I Palm rdens General Employees' Beach Gardens General Employees Pension Plan Risk Measures Report Explanation 1 The evaluation of a fund's performance should extend beyond return to encompass measures of risk. The next two 1 pages are used to determine the level of risk to which the fund has been exposed, and whether the return has been commensurate with the risk taken. All measures are calculated for both the fund and the policy as well as the difference between the two. Up to four time periods are evaluated depending on the age of the fund. # Of Negative Qtrs /# Of Positive Qtrs: Number of negative quarters shows the number of quarters in which the return was less than zero, and the number of positive quarters is the number of quarterly returns which were greater or equal to ' zero. Batting Average: The batting average is a measure of consistency. It shows the percent of the quarters the fund has beaten the policy and the percent of the quarters the policy has beat the fund. A high average for the fund (e.g. over 50) is desirable, indicating the fund has beaten the policy frequently. J t Worst Quarter /Best Quarter /Range: The worst quarter is the lowest quarterly return experienced during the period, a measure of downside risk. The best quarter is the highest quarterly return, and the range is the difference of the high and low, and indicates dispersion. Standard Deviation: Standard deviation measures the total volatility of the fund, by measuring dispersion. Higher standard deviation indicates higher risk. If the quarterly or monthly returns are all the same the standard deviation will be zero. The more they vary from one another, the higher the standard deviation. Thus, it measures uncertainty, which is a measure of risk. Alpha /Beta /R- Squared: If the policy is appropriate, then the alpha should be positive, the beta close to one, and the r- squared should be high. Beta measures risk relative to the policy. A beta of 1 suggests risk equivalent to the policy. Higher betas indicate higher relative risk. A beta of 1.2 indicates 20% more risk than the policy. The alpha measures the return adjusting for beta. The higher the alpha, the better. R- squared measures the relationship between the policy and the fund. A high r- squared means the returns of the fund can largely be explained by movements of the policy. The higher the r- squared, the more reliable the alpha and the beta. R- squared may range from 0 to 100. Beta, alpha and r- squared are derived from regression analysis using the fund and policy returns as the dependent and independent variables respectively. Roughly, one would expect the fund's performance to equal the return of the policy multiplied by the beta plus the alpha. Sharpe Ratio/Treynor Ratio: The Sharpe and Treynor ratios are similar. The Sharpe ratio is the excess return per unit of total risk as measured by standard deviation. The Treynor ratio is the excess return per unit of market risk as measured by beta. Both of these should be compared against the corresponding value for the policy. Higher numbers are better, indicating more return for the level of risk that was experienced. 26 Palm Beach Gardens General Employees' General Employees Pension Plan Risk Measures 3r . Fund Poiic Diff # of Negative Qtrs 3.00 3.00 0.00 # of Positive Qtrs 9.00 9.00 0.00 Batting Average 41.67 58.33 -16.66 Worst Qtr -1.19 -1.54 0.35 Best Qtr 4.49 4.92 -0.43 Range 5.68 6.46 -0.78 Worst 4 Qtrs 3.98 3.97 0.01 Standard Deviation 5.64 4.79 0.85 Beta 1.04 1.00 0.04 Annualized Alpha 0.56 0.00 0.56 R- Squared 0.78 1.00 -0.22 Sharpe Ratio 0.65 0.62 0.03 Treynor Ratio 3.52 2.98 0.54 Tracking Error 2.63 0.00 2.63 Information Ratio 0.26 ........................... tO :Yr ...... ............................... Fird Poiicy Diff:: # of Negative Qtrs 15.00 13.00 2.00 # of Positive Qtrs 25.00 27.00 -2.00 Batting Average 45.00 55.00 -10.00 Worst Qtr -7.51 -8.45 0.94 Best Qtr 10.89 12.51 -1.62 Range 18.40 20.96 -2.56 Worst 4 Qtrs -11.63 -12.21 0.58 Standard Deviation 7.90 8.65 -0.75 Beta 0.84 1.00 -0.16 Annualized Alpha 0.15 0.00 0.15 R- Squared 0.85 1.00 -0.15 Sharpe Ratio 0.31 0.31 0.00 Treynor Ratio 2.88 2.70 0.18 Tracking Error 3.37 0.00 3.37 Information Ratio -0.08 .............................. 5 Yr ............................... Fund Policy: Diffi # of Negative Qtrs 6.00 5.00 1.00 # of Positive Qtrs 14.00 15.00 -1.00 Batting Average 40.00 60.00 -20.00 Worst Qtr -1.47 -1.54 0.07 Best Qtr 7.62 10.56 -2.94 Range 9.09 12.10 -3.01 Worst 4 Qtrs 3.98 3.97 0.01 Standard Deviation 5.67 5.42 0.25 Beta 0.95 1.00 -0.05 Annualized Alpha 0.07 0.00 0.07 R- Squared 0.83 1.00 -0.17 Sharpe Ratio 1.12 1.23 -0.11 Treynor Ratio 6.67 6.64 0.03 Tracking Error 2.36 0.00 2.36 Information Ratio -0.13 ............................ ncept . ........................ f=:und . Policy ............ Di€f # of Negative Qtrs 16.00 13.00 3.00 # of Positive Qtrs 37.00 40.00 -3.00 Batting Average 39.62 60.38 -20.76 Worst Qtr -7.51 -8.45 0.94 Best Qtr 11.16 12.51 -1.35 Range 18.67 20.96 -2.29 Worst 4 Qtrs -11.63 -12.21 0.58 Standard Deviation 7.71 8.59 -0.88 Beta 0.81 1.00 -0.19 Annualized Alpha 0.26 0.00 0.26 R- Squared 0.82 1.00 -0.18 Sharpe Ratio 0.63 0.66 -0.03 Treynor Ratio 5.95 5.63 0.32 Tracking Error 3.66 0.00 3.66 Information Ratio -0.22 Index change effective 1/1/06 from LB Gov /Credit to LB Aggregate 1/1/2007 International added to Policy 27 r r 1 13.00% r ' 12.00% 1 11.00% r A 10.00% n n ' u a 9.00% i ree d 8.00% ' R e t ' u r 7.00% n 1 6.00% r ' 5.00% 1- 4.00°/8 0 Palm Beach Gardens General Employees' General Employees Pension Plan Return vs Risk through December 31, 2007 XS &P 500 Fund LB Gov /Corp not 3 Mo 1 L3111 rZ nnoi i n nnoi 4 r, nnoi On v V V vv V Risk (Annualized Std Dev) -- Policy Index change effective 1/1/06 from LB Gov /Credit to LB Aggregate 1/1/2007 International added to Policy - 28 �U.nO% Palm Beach Gardens General Employees General Employees Pension Plan Return vs Risk through December 31, 2007 10% 20.00% 15.00% R e t 10.00% u r n s 5.00% 0 00 5 Years S &P Fund Gov /Corp X3 Mo TBill ALB I I I I - ° 1.00% 3.00% 5.00% 7.00% 9.00% 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% Risk (Annualized Std Dev) 13.00% Inception 12.00% 11.00% XS &P 500 10.00% R e 9.00% Fund t U 8.00% r n 7.00% s LB Gov /Corp 6.00% 5.00% 4.00% 3 Mo E P 15.00% 0.00% 10.00% 20.00% Risk (Annualized Std Dev) Risk (Annualized Std Dev) ' Policy Index change effective 1/1/06 from LB Gov /Credit to LB Aggregate 1/1/2007 International added to Policy 29 7.00 /o 3 Years 6.50% 9.50% 6.00% R 1 9.00% t u 8.50% 5.00% XS &P 500 ' 8.00% 4.00% 3.50°600 7.50% Fund R - - - - e 7.00% u 6.50% n 6.00% s 5.50% 5.00% 4.50% X LB Gov /Corp 4.00% /0 00% 5.00% 7.00% 9.00% 0.00% 2.00% 4.00% 6.00% 8.00% 1 Risk (Annualized Std Dev) ' 0 10 Years 10% 20.00% 15.00% R e t 10.00% u r n s 5.00% 0 00 5 Years S &P Fund Gov /Corp X3 Mo TBill ALB I I I I - ° 1.00% 3.00% 5.00% 7.00% 9.00% 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% Risk (Annualized Std Dev) 13.00% Inception 12.00% 11.00% XS &P 500 10.00% R e 9.00% Fund t U 8.00% r n 7.00% s LB Gov /Corp 6.00% 5.00% 4.00% 3 Mo E P 15.00% 0.00% 10.00% 20.00% Risk (Annualized Std Dev) Risk (Annualized Std Dev) ' Policy Index change effective 1/1/06 from LB Gov /Credit to LB Aggregate 1/1/2007 International added to Policy 29 7.00 /o 6.50% 6.00% R e 5.50% t u r 5.00% n ' s 4.50% 4.00% 3.50°600 10% 20.00% 15.00% R e t 10.00% u r n s 5.00% 0 00 5 Years S &P Fund Gov /Corp X3 Mo TBill ALB I I I I - ° 1.00% 3.00% 5.00% 7.00% 9.00% 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% Risk (Annualized Std Dev) 13.00% Inception 12.00% 11.00% XS &P 500 10.00% R e 9.00% Fund t U 8.00% r n 7.00% s LB Gov /Corp 6.00% 5.00% 4.00% 3 Mo E P 15.00% 0.00% 10.00% 20.00% Risk (Annualized Std Dev) Risk (Annualized Std Dev) ' Policy Index change effective 1/1/06 from LB Gov /Credit to LB Aggregate 1/1/2007 International added to Policy 29 Palm Beach Gardens General Employees' General Employees Pension Plan Policy: 09/30/1994 - 12/31/2005 60.00 S &P 500 40.00 Lehman Gov /Credit Bond 01/01/2006- 12/31/2006 60.00 S &P 500 40.00 Lehman Aggregate Bond 01 /01/2007-12/31/2007 60.00 S &P 500 35.00 Lehman Aggregate Bond 5.00 MSCI EAFE First Objective: 09/30/1994 - 12/31/2007 Annual Return of 8.00% Second Objective: 09/30/1994- 12/31/2007 100.00 US Consumer Price Index + 4.00 annual adder Universe Data: 60% PLCC, 35% HQB & 5% International 09/30/1994- 12/31/2006 40.00 High Quality Bond 60.00 Pure Large Cap Core 01/01/2007 - 12/31/2007 35.00 High Quality Bond 60.00 Pure Large Cap Core 5.00 International Equity 30 MSCI EAFE MSCI Emerg. Mkts. S &P 500 Russell 3000 Russell 1000 Russell 2000 Lehman US Agg. Lehman US Gov. Lehman MBS Fixed Lehman US Credit 3mos. T-Bill -6.0% The Market Environment Asset Class Performance Period Ended: December 31, 2007 Quarter Performance I -4.6% -3.0% 3.4% 3.0% 3.7% 3.2% 2.2% 1.0% 0.0% 3.0% 6.0% Source: MSCI Capital Markets, Russell Co., HFR, Lehman, & Bogdahn Consulting, LLC. Year-to-Date Market Performance MSCI EAFE MSCI Emerg. Mkts. S &P 500 Russell 3000 Russell 1000 Russell 2000 Lehman US Agg. Lehman US Gov. Lehman MBS Fixed Lehman US Credit 3mos. T-Bill -4.8% � 1 -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% IIII BOGDAHN GROUP The Market Environment Asset Class Performance Period Ended: December 31, 2007 Five Year Annualized Performance MSCI EAFE MSCI Emerg. Mkts. S &P 500 Russell 3000 Russell 1000 Russell 2000 Lehman US Agg. Lehman US Gov. Lehman MBS Fixed Lehman US Credit 3mos. T -Bill 3.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% Rniirra• M.Igrl ranital Markatc Ra"pll rn HFR I ahman ritirnrn R Rnnrtahn rnn.ciiltinn I I t, Ten Year Annualized Performance MSCI EAFE MSCI Emerg. Mkts. S &P 500 Russell 3000 Russell 1000 Russell 2000 Lehman US Agg. Lehman US Gov. Lehman MBS Fixed Lehman US Credit 3mos. T-Bill 8.7% 11.7% JMIL5.9% 7.1% 6.0% 5.9% 5.9% 6.1% 3.6% 0.0% 3.0% 6.0% 9.0% 12.0% 15.0% �\ BOGDAHN GROUP ENERGY MATERIALS ' INDUSTRIALS ' CONSUM ER DISCR CONSUM ER STAPLES " HEALTH ARE C ' FINANCIALS INFORMATION TECH TELECOM SVC i UTILITIES i 1 1 1 The Market Environment Equity Sector Performance Period Ended: December 31, 2007 Sector Performance as of 12/31/2007 5.0% 34.4% 1.4% 26.5% -3.8% 13.4% - 10.4% -11.4% 3.4% 13.9% -0.1% 8.0% -13.0% - 17.3% -0.5% 15.1% -6.0% 10.5% 6.5% 17.5% M QTD ■ YTD]_ Source: MSC/Barra & Bogdahn Consulting, LLC. I3OGDAHN l:Rnr m Source: Frank Russell Co. 25 '15 16 10 ' 6 0 5 •10 •16 The Market Environment Equity Style Performance Period Ended: December 31, 2007 Russell All Cap Style Performance 11.4 11.4 12.4 13.6 14.7 8.6 8.9 9.0 i i 6.2 7.7 3.8 [Ii-, I A91 •0.9 .3.3 -1.0 -1.0 - ' Qtr 1 25 20 15 10 5 0 -5 •10 -16 Qtr ' 25 20 15 10 b 0 -b ' -10 ' -lb YTD lyr Syr 5yr 10yr ❑ 3000 Growth ■ 3000 Index ■ 3000 Value Russell Large Cap Style Performance 11.8 11.8 12.1 13.4 14.6 8.7 9.1 9.3 5.8 6.2 7.7 b.8 -0 3.8 =0.2 -0.2 - -5.8 YTD lyr 3yr 5yr 10yr ❑ 1000 Growth ■ 1000 Index ■ 1000 Value Russell Small Cap Style Performance 16.5 16.3 15.8 7.1 7.1 8.1 6.8 5.3 4.3 7.1 9.1 -2.1 .4 6 1.6 1.6 -7.3 -9.8 -9.8 Qtr YTD lyr 3yr 5yr ❑ 2000 Growth ■ 2000 Index ■ 2000 Value 10yr BOGDAHN GROUP The Market Environment Trends for Stocks and Bonds Period Ended= December 31, 2007 1 ' Growth vs. Value Russell 1000 Excess Return Rolling 12 Month Periods 30.0% ' 20.0% Style is In -Favor 0.0% ° r -w a �Q�d �►.�� P P Style is Out -of -Favor ' - 20.0% 30.0% I- °o °o m W ro m °o °o m CO M Qf M 0 M rn m W T 0 0 0 0 0 0 0 0 0 rn rn rn rn rn rn rn rn m rn rn w rn rn rn rn rn rn rn rn rn o 0 0 0 0 0 0 0 N N N N N N N N N N N N N N N N N N N N N N N N r N N N N N r r r r I— Growth Source: Frank Russell Co. & Bogdahn Consulting, LLC. ' Treasury Yield Curve ' 1 mo 3 mo 6 mo 1 yr 2 yr 3 yr 5 yr 7 yr 10 yr 20 yr 30 yr Source: US Dept. of Treasury 12/31/2007 --*-- 12/29/2006 BOGDAHN C;ROI JP 7 ' 6 5 4 ' 3 2 1 1 0 ' 1 mo 3 mo 6 mo 1 yr 2 yr 3 yr 5 yr 7 yr 10 yr 20 yr 30 yr Source: US Dept. of Treasury 12/31/2007 --*-- 12/29/2006 BOGDAHN C;ROI JP Palm Beach Gardens General Employees' Pension Plan Fourth Quarter 2007 Review February 11, 2008 Strategy Review Presented by: Andy Holtgrieve Managing Partner andy@rockwoodcapital.com ROCKW OOD CAPITAL ADVISORS 721 Emerson Road, Suite 565 St. Louis, Missouri 63141 • (888) 962 -8336 (toll -free) (314) 962 -1254 (fax) I Palm Beach Gardens General Employees' Investment Policy The Board recognizes that the obligations of the Fund are long -term and that the ' investment policy should be made with a view toward performance and return over a number of years. The general investment objective, then, is to obtain a reasonable total rate of return — defined as interest and dividend income plus realized and unrealized ' capital gains or losses — commensurate with the Prudent Investor Rule and any other applicable statute. Reasonable consistency of return and protection of assets against the inroads of inflation are paramount. However, the volatility of interest rates and securities markets make it necessary to judge results within the context of several years rather than over short periods of two years or less. The performance of the total Fund will be measured for rolling three and five year periods and compared to the return of a portfolio comprised of 60% S &P 500 Stock Index, 5% MSCI EAFE, and 35% Lehman Brothers Aggregate Bond Index. On a relative basis, performance for the combined portfolio over three to five year periods is expected to be in the 40% of the Mobius Universe. Additionally, on an absolute basis, performance for the combined portfolio over three to five year periods is expected to meet or exceed the actuarial earnings assumption of 8 %, and equal or exceed CPI plus 4% over three to five year periods. All investments made or held in the fund shall be limited to, obligations issued by the United States Government or guaranteed as to principal and interest by the US Govt. or by an agency of the US Govt. Additionally, stocks, commingled funds administered by national or state banks, mutual funds and bonds or other evidence of indebtedness, issued or guaranteed by a corporation organized under the laws of the United States, any state or organized territory of the United States or the District of Columbia. Fixed income securities are to be ranked Investment Grade by S & P or Moody's and 90% of the equities shall be rated by a major rating service in the top three quality grades. Not more than 5% of the Fund's assets shall be invested in the common stock, capital stock or debt of any one issuing company, nor shall the aggregate investment in any one issuing company exceed 5% of the outstanding capital stock of the company. Foreign securities shall not exceed 10% of the value at cost of the fund. R0CRW00D CAPITAL ADVISORS Wicked Ending? Sh SAW IT *Y SISTeAl COMING. THAT'S ALAN .. IS colft c� 7 Ak ROCKWOOD CAPITAL ADVISORS i7 1 1 1 1 1 1 Palm Beach Gardens General Employees' Pension Plan Fourth 4 uarter 2007 Total Fund Portfolio Summary Beginning of Market Value Market Portfolio Annual Current Yield Value Income ' Equities $1,974,587 $1,896,618 99.0% $20,229 1.1% Short -Term Funds $29,533 $19,733 1.0% $594 3.0% Accrued Income $1,970 $1,779 -- -- -- Change this • •. Change in Market Value Beginning i0 i•0 Equities 99% Net Dividends /Interest Contributions Disbursements Net Realized & Unrealized (G /L) Portfolio Summary Short -Term Funds 1% I R 0 C K W 0 0 D CAPITAL ADVISORS $4,976 $0 ($35,626) ($57,310) Total Fund Performance Palm Beach Gardens GE -2.6% 12.2% Policy (S &P 500) -3.3% 5.5% Diff +/- +0.7% +6.7% Palm Beach Gardens General Em Equity - Fourth Quarter 2007 Another Year Pension Plan And what a year at that. Between the spreading credit crisis (sub -prime mess), oil near $100 a barrel, a housing "recession" and an accommodative Federal Reserve (Fed), it's hard to believe that another positive year for stocks was possible — but that is precisely what happened. For the year, Rockwood Strategic Equity returned a respectable 11.7% vs. 5.5% for the S &P 500 and 5.1 % for the Russell 3000, despite the best efforts of the fourth quarter to spoil the year. The fourth quarter began positively, with most major stock indices reaching all time highs in October. Faced with the prospect of slower growth, the Fed cut interest rates an additional 25 basis points. Market volatility increased in November as the credit crisis worsened, with news of large write -offs being taken by many of our largest financial institutions. The continued decline in housing and the growing uncertainty over consumer spending sent stocks lower for the balance of '07. Not even another Fed rate cut in mid - December (the third since the onset of the subprime crisis) could turn the tide. The stock market was disappointed, having hoped for more aggressive Fed action. By year end, the Fed was more openly concerned about future economic growth than inflation. Sectors that contributed positively to the overall performance of the portfolio during the quarter were Materials (US Steel added in October + 16 %), Finance (stock selection has been a benefit here; TROW & LTR +7.0 %), Healthcare and ADR's (Bayer +14.8 %). Areas that struggled were in the Consumer Discretionary (GM -31 %), Durables (Boeing faded -16 %) and Technology sector as a whole -7.4 %. The consensus call for 2008 is that the economy will slip into a mild recession, and that the Capital Markets will continue to be very volatile. This environment favors stock pickers. We continue to see many buying opportunities. Early trends are developing in several sectors: Defensive Staples; Beverage groups; Energy sector (particularly amongst the Energy Service Group and Integrated Oil & Gas); Health Care; Industrials (the most impressive sector during the past seven years); and Technology (showing very attractive opportunities; a sector that we will overweight). This unsettling stock market environment favors our flexible approach to achieving long -term superior returns. We will continue to monitor your portfolio and make adjustments as opportunities reveal themselves. Contravisory Research & Management Corp. is a registered investment adviser and equity sub - adviser to Rockwood Capital Advisors, LLC. 20% 15% 10% 5% 0% -5% -10% Performance 12.2% 12.5% 10.5% 14.3% 11.8% 015in 2.6% - . o 4th Qtr. One 2007 Year 0 Palm Beach Gardens GE Two Since Inception Years (10/25/05) 0 S &P 500 R 0 C K W 0 0 D CAPITAL ADVISORS 4 ' Equi ty Portfolio Fourth Quarter 2007 Characteristics Style Box Numhpr of Rtnd -kc Top Ten Holdings 1. T. Rowe Price Group 3.3% 2. VCA Antech Inc. 3.3% 3. Verisign Inc. 3.2% 4. Waters Corp. 3.2% 5. Praxair Inc. 3.1% 6. Schein Henry Inc. 3.1% 7. Stericycle Inc. 3.1% 8. Bayer AG 3.1% 9. Hewlett Packard Co. 3.1% 10. United States Steel 3.1 % Five Best Impact 1. Waters Corp. +18.2% 2. United States Steel Co. +16.1% 3. Bayer AG +14.8% 4. PPL Corp. +12.9% 5. Verisign Inc. +11.5% Val Cr Grw Large Cap - 52.8% Mid Cap - 47.2% Small Cap - 0% Average Market Cap $39.8 billion Median Market Cap $19.0 billion Material 6% Health Ca 26% Sector Allocation Producer Technology Durables 21% Utilities 5% A DR's 8% Cons. Disc. 4% Finance Cons. Staples 6% 13% Five Worst Impact 1. General Motors Corp. -31.6% 2. Infineon Technologies -22.1% 3. Echostar Communication -19.4% 4. Cisco Systems Inc. -18.2% 5. Boeing Co. -16.4% -4& R 0 C K W 0 0 D CAPITAL ADVISORS 5 Equity Transactions Fourth Quarter 2007 ' Sold , Oct Tyco International LTD Oct Alliant Corp. Oct Fisery Inc. Oct Safeway Inc. Nov Infineon Technologies Nov Sprint Nextel Corp. Nov Wendy's International Inc. Dec Ball Corp. Dec Centurytel Inc. Dec Dow Chemical Co. Bought Oct Mettler Toledo International - Mid Cap Growth, Info Tech Oct Rockwell Collins Inc. - Lg Cap Growth, Industrials Oct United States Steel Co. - Lg Cap Value, Materials Nov Unilever - Lg Cap Blend, Consumer Staples Nov Baxter International Inc. - Lg Cap Growth, Health Care Nov Dell Inc. - Lg Cap Growth, Info Tech Dec Cigna Corp. - Lg Cap Growth, Health Care Dec Edison International - Lg Cap Blend, Utilities Dec Energizer Holdings Inc. - Mid Cap Growth, Consumer Staples ROCKW00D CAPITAL ADVISORS ti 1 ■ Equity Analysis and Attribution ' Fourth Quarter 2007 Sector Allocation ' 24% 20% 16% ' 12% 8% ■ 4% ' 0% -4% i-8% 3.4 Rockwood ■ S &P 500 17.8 18.2 17.6 h 12.9 11.5 8.5 �I 7.2 5.6 0.0 Info Energy Industrial Tel/Util Finance Tech Relative °` Performance 1 Style Distribution ' 45% 40% 35% 30% 25% ' 20% 15% 10% ' 5% 0% '-5% -10% -15% 1 38.5 38.9 Rockwood S &P 500 21.0 21.4 18.2 18.1 .3 12.7 5.2 Op . _ 0.4 0.0 0.0 0.0 0.0 0.0 0.0 Value Core Grow th Value Core Grow th Value Core Grow th Large Cap Mid Cap Small Cap I�& R 0 C K W 0 0 D CAPITAL ADVISORS 7 Equity Holdings - December 31, 2007 Exchange Total Ticker Company Cost Cost Value Mkt Val (%) Yield (%) Income CGQ -- Cash 19,732 1.00 19,732 1.00 19,732 1.0 3.0 592 NA BUD ANHEUSER BUSCH COS 900 46.99 42,295 52.34 47,106 2.5 2.5 1,188 0.55 T AT &T INC 1,400 33.80 47,323 41.56 58,184 3.0 3.9 2,240 0.81 BAX BAXTER INTL INC 860 58.90 50,654 58.05 50,110 2.6 1.5 748 0.46 BAYRY BAYER A G 650 52.86 34,356 91.19 59,272 3.1 1.2 697 NA BA BOEING CO 520 64.47 33,525 87.46 45,479 2.4 1.8 832 0.87 Cl CIGNA CORP 840 54.84 46,067 53.73 45,142 2.4 0.1 34 0.86 CSCO CISCO SYS INC 1,478 28.51 42,133 27.07 40,009 2.1 0.0 0.55 DELL DELL INC 1,690 29.31 49,532 24.51 41,422 2.2 0.0 0.70 EBAY EBAY INC 1,413 34.28 48,443 33.19 46,897 2.4 0.0 0.64 DISH ECHOSTAR COMMUNICA 1,134 36.37 41,246 37.72 42,774 2.2 0.0 0.03 EIX EDISON INTL 830 56.72 47,078 53.37 44,550 2.3 2.3 1,013 0.79 ENR ENERGIZER HLDGS IN 400 115.64 46,257 112.13 44,852 2.3 0.0 - 0.47 GM GENERAL MTRS CORP 1,206 33.60 40,518 24.89 30,017 1.6 4.0 1,206 0.98 HNZ HEINZ H J CO 1,015 42.21 42,842 46.68 47,766 2.5 3.3 1,543 0.90 HPQ HEWLETT PACKARD CO 1,170 32.33 37,820 50.48 59,155 3.1 0.6 374 0.30 IFF INTERNATIONAL FLAV 944 52.24 49,313 48.13 45,652 2.4 1.9 868 0.34 IBM INTL BUSINESS MCHN 412 109.00 44,909 108.10 44,537 2.3 1.5 659 0.32 AHO KONINKLIJKEAHOLD 3,600 16.13 58,079 13.93 50,159 2.6 0.0 NA LMT LOCKHEED MARTIN CO 510 60.12 30,663 105.26 53,683 2.8 1.6 857 0.20 LTR LOEWS CORP 1,155 29.94 34,580 50.34 58,143 3.0 0.5 289 0.12 MTD METTLER TOLEDO INT 491 102.87 50,508 113.80 55,876 2.9 0.0 - 0.84 PPL PPL CORP 1,000 33.44 33,438 52.09 52,395 2.7 2.3 1,220 0.35 PX PRAXAIR INC 675 62.52 42,201 88.71 59,879 3.1 1.4 810 0.73 PCP PRECISION CASTPART 377 46.02 17,351 138.70 52,290 2.7 0.1 45 0.33 COL ROCKWELL COLLINS 1 675 7516 50,734 71.97 48,580 2.5 0.9 432 0.45 HSIC SCHEIN HENRY INC 970 45.52 44,158 61.40 59,558 3.1 0.0 - 0.79 SGP SCHERING PLOUGH CO 1,665 29.79 49,603 26.64 44,356 2.3 1.0 433 0.60 SNN SMITH & NEPHEW PLC 804 59.42 47,776 57.42 46,166 2.4 1.0 453 NA SRCL STERICYCLE INC 1,000 31.72 31,721 59.40 59,400 3.1 0.0 - 0.44 TROW T.ROWE PRICE GROUP 1,050 33.76 35,443 60.88 64,176 3.3 1.6 1,008 0.40 TMO THERMO FISHER SCIE 974 48.42 47,164 57.68 56,180 2.9 0.0 - 0.24 UN UNILEVER N V 1,470 34.22 50,306 36.46 53,596 2.8 2.3 1,247 NA X UNITED STATES STL 484 104.30 50,479 120.91 58,520 3.1 0.7 387 0.82 WOOF VCA ANTECH INC 1,445 28.86 41,707 44.23 63,912 3.3 0.0 - 0.07 VRSN VERISIGN INC 1,651 28.88 47,677 37.61 62,094 3.2 0.0 - 0.04 VOLVY VOLVO AKTIEBOLAGET 2,652 16.81 44,591 16.79 44,519 2.3 3.7 1,647 NA WAT WATERS CORP 783 61.58 48,217 79.07 61,912 3.2 0.0 - 0.90 Portfolio Total ii 0. 42 $1,918,052 100.0 1.1 $20,822 R 0 C K W 0 0 D CAPITAL ADVISORS 8 Proxy Voting Record Elect Directors Amend Omnibus Stock Plan Approve Executive Incentive Bonus Plan Ratify Auditors Amend Bylaws to Establish a Board Committee on Human Rights Pay for Superior Performance Advisory Vote to Ratify Named Executive Officers' Compensation Report on Internet Fragmentation For For 1,478 11/17/07 For For 1,478 1 11/17/07 For For 1,478 11/17/07 For For Against Against Against Against Against Against Against Against 1,478 111/17/07 1,478 11/17/07 1,478 11/17/07 1,478 11/17/07 1,478 11/17/07 Rockwood Capital Advisors, through our equity sub - adviser, Contravisory Research & Management Co., has retained Institutional Shareholder Services ( "ISS ") to coordinate and vote proxies with respect to client securities. Proxy voting is an important right of shareholders and reasonable care and diligence must be undertaken to ensure that such rights are properly and timely exercised. When the Adviser has discretion to vote the proxies of its clients, they will be voted by ISS in accordance with Company Management. Client quarterly reports contain information with respect to each voted proxy about which the client portfolio held during the period, including (a) the name of the issuer, (b) the proposal voted upon, and (c) how ISS voted the client's proxy. Additionally, the Compliance Officer will maintain files relating to the Adviser's proxy voting procedures in an easily accessible place. Records will be maintained and preserved for five years from the end of the fiscal year during which the last entry was made on a record, with records for the first two years kept in the offices of the Adviser. Records of the following will be included in the files: • Copies of this proxy voting policy and procedures, and any amendments thereto. • A copy of each written client request for information on how ISS voted such client's proxies, and a copy of any written response to any (written or oral) client request for information on how ISS voted its proxies. The Adviser has arranged with ISS to have ISS maintain and make available promptly upon request (i) copies of each proxy statement that is received for one of Adviser's clients, provided however that ISS and the Adviser may rely on obtaining a copy of proxy statements from the SEC's EDGAR system for those proxy statements that are so available, (ii) a record of each vote that ISS casts for one of Adviser's clients and (iii) a copy of any document ISS created that was material to making a decision how to vote proxies, or that memorializes that decision. R 0 C I W 0 0 D -�& CAPITAL ADVISORS 9 Economic Environment & Outlook I Fourth Quarter 2007 ' A The onset of the Q3 subprime mortgage crisis has morphed into a full -blown credit crisis. Rather than offering our current economic outlook, we believe an overview of the origins and likely direction of the current crisis is more worthwhile at this juncture. ' A Since September, the Fed has lowered the federal funds target rate by 100 basis points. However, the current crisis has exposed the shortcomings of the funds rate ' as a tool for monetary policy. Several key market -based rates (e.g. LIBOR) have not tracked the funds rate as they have in the past. In other words, the Fed can lower the funds rate, but they cannot force LIBOR lower. 99% of all subprime , mortgages are tied to LIBOR. A Given the muted impact of the funds rate, the Federal Reserve has created a new , program, the Term Auction Facility (TAF), which allows banks to secure funds from the Fed anonymously via an auction format. The TAF may become the new major policy tool for the conduct of monetary policy. ' A What caused this credit crisis? In our view, overly stimulative monetary policy during the Greenspan era created a nation -wide housing bubble which is now ' deflating. Low interest rates combined with lax underwriting standards led to an unprecedented increase in home ownership and a jump in home prices. Rapidly rising home prices caused housing affordability to reach an all -time low in July 2006, , despite low interest rates. A The combination of declining home prices and resets of teaser mortgage rates led ' to a high rate of foreclosure in so- called "Alt A" and subprime mortgages. In turn, the poor performance of these mortgages led to the downgrade of billions of dollars worth of supposedly high quality mortgage- backed securities (MBS). , A The agency downgrades of these MBS was a watershed moment and led to a ' seizing up in credit markets. For the first time, a AAA rating was no longer a "guarantee" of safety. Money market funds, banks and brokers who held these securities were forced to take large write -downs as the values of these securities plummeted. A In our view, there is no quick fix. Government proposals to interfere with the natural ' market readjustment process are likely to only drag out the recovery period. A The vast majority of teaser rate resets will be completed by mid 2008. The rate of ' foreclosures should then subside. Home affordability rates will need to improve before the market stabilizes. In short, housing prices need to decline to the point that the average person can once again afford to purchase a home. ' R 0 C K W 0 0 D CAPITAL ADVISORS 10 1