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HomeMy WebLinkAboutAgenda Fire Pension 061608THE PENSION RESOURCE CENTER, INC. 4360 Northlake Boulevard, Suite 206 ❖ Palm Beach Gardens, FL 33410 Phone (561) 624 -3277 ❖ Fax (561) 624 -3278 ❖ WWW.RESOURCECENTERS.COM PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND Meeting of Monday, June 16, 2008 Location: Council Chambers, Palm Beach Gardens City Hall 10500 North Military Trail Palm Beach Gardens, FL 33410 Time: 10:00 A.M. AGENDA 1. Call Meeting to Order 2. Minutes of Meeting Held April 21, 2008 3. Investment Manager Report: Dana Investment Advisors (10:15 A.M. — 10.35 A.M.) 4. Investment Monitor Report: Bogdahn Consulting (10:35 A.M. — 11:15 A.M.) • Quarterly Report • Revised Investment Policy Statement 5. Attorney Report: Bob Sugarman • Status of Disability Application of Toby Bivins • Resolution Regarding Use of Social Security Numbers 6. Administrative Report: Margie Adcock 7. Disbursements 8. Other Business • Tax Exempt Certificate 9. Schedule Next Meeting: Monday, August 18, 2008 at 10:00 A.M. 10. Adjourn PLEASE NOTE: Should any interested party seek to appeal any decision made by the Board with respect to any matter considered at such meeting or hearing, he will need a record of the proceedings, and for such purpose he may need to insure that a verbatim record of the proceedings is made, which record includes the testimony and evidence upon which the appeal is to be based. In accordance with the Americans With Disabilities Act of 1990, persons needing a special accommodation to participate in this meeting should contact The Pension Resource Center, Inc. no later than four days prior to the meeting. PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND MINUTES OF MEETING HELD April 21, 2008 A meeting of the Board of Trustees was called to order at 10:00 A.M. at Council Chambers, Palm Beach Gardens, Florida. Those persons present were: TRUSTEES Ed Morejon Rick Rhodes Richard Hitchins Steve Rogers Tom Murphy MINUTES OTHERS Margie Adcock, Administrator Bob Sugarman, Attorney Dave West, Investment Monitor Brad Armstrong, Actuary The Board reviewed the minutes of the meeting held March 5, 2008. It was noted that there was a typographical error on the spelling of the last name of Mr. 011iff. A motion was made, seconded and carried 5 -0 to accept the minutes of the meeting held March 5, 2008 as corrected. The Board reviewed the minutes of the meeting held April 11, 2008. A motion was made, seconded and carried 5 -0 to accept the minutes of the meeting held April 11, 2008. ACTUARY REPORT Brad Armstrong appeared before the Board. He presented the September 30, 2007 Actuarial Valuation which determines contributions for the fiscal year beginning October 1, 2008. He stated that the principal sources of experience gains and losses were: a gain of approximately $.2 million due to the rate of return on the value of assets of 9.4% versus the assumption of 8.25% gross; a gain of approximately $3 million due to a 3.9% average salary increase versus an expected salary increase of 5.3 %; a loss due of approximately $.5 million due to 4 terminations versus the expected 6.1; and a gain of approximately $3 million due to the death of a retired member. Mr. Armstrong stated that he thought assumptions and methods should be reviewed again prior to the September 30, 2011 Valuation. He stated that he thinks that the Board should review some of the assumptions in the next three years again. He discussed the withdrawal assumption. He stated that it might not be the most conservative assumption. However, it was his opinion to leave it as it is now and review it in the next three years. Mr. Armstrong discussed the contribution requirement. He stated that the City contribution requirement increased to 31.18% of payroll versus 30.40% last year. He stated that the dollar amount is $3,180,731. He noted that the City previously infused $700,000 into the Plan. That amount is amortized and only effects the contribution by one -half of a percent at a time, although it is cumulative. He stated that the extra money put in the 2006 and 2007 numbers have not really come into the Plan to effect the contribution as of yet. The Plan is still in the process of receiving that money. He noted that it does not change the experience but rather just increases the assets and reduces contributions in that way. 2 Mr. Armstrong reviewed the revenues and expenditures. He stated that at market revenues overwhelmingly exceed expenditures. The total assets at September 30, 2007 were $22,791,087 versus last year of $17,322,340. He stated that positive cash flow was an important part of the investment policy and was a nice position to be in. He discussed the 4 -year smoothing. There was discussion on a market -to- market on an asset basis and the effect of using a fresh start in 2008. Mr. Armstrong stated that to go to a fresh start when there is unrecognized gain would likely be a wash. He did not think it was that influential at this point in time. However, if GASB forces them to report on market value on a liability basis, that will, generally speaking, make liabilities look higher than they are now. Mr. Armstrong reported that the funded ratio was 53.9% versus 46.8% last year. He stated that it was going in the right direction. There was discussion on the projected rate of return of 8.25 %. Mr. Armstrong stated that they are projecting over decades. The majority of members will be retiring in the future and will be paid out over their lifetimes. They assume that over longer periods of time the markets will correct and provide historical returns. There was then discussion regarding a request from Robert J. Boniewski for a total lump sum payout of his retirement benefit. Mr. Sugarman stated that there was no provision in the Plan for allowing such a payout. Mr. Armstrong stated that if there was such a provision, the funded ratio would be a little bit adversely affected. It would be moving out a 100% benefit and paying it all at once. If it was fair to the System on an actuarial basis it could work. However, the law of averages is that the people in the poorest health would take the lump sum. If that was the case, that could potentially expose the Plan to risks it does not presently have right now. Mr. Sugarman stated again that there was no provision in the Plan that allows for a lump sum payout. The Summary Plan Description was written incorrectly but in the SPD it states that if the SPD is contrary to the Plan, the Plan governs. Mr. Sugarman stated that if Mr. Boniewski is requesting a lump sum payout, the Board could not grant the request. However, the Board could grant a partial lump sum. Alternatively, Mr. Boniewski could always forfeit his right to a pension benefit and take back his contributions, although he would never recommend doing that. The SPD was written as an attempt to describe a partial lump sum, but was miswritten. There was a discussion on the partial lump sum option. It was noted that a Participant could get a partial lump sum option as long as they were eligible for normal retirement. The Board directed Mr. Sugarman to write a letter to Mr. Boniewski regarding his request for a total lump sum payout of his retirement benefit. It was noted that there was a typographical error on page A -2. A motion was made, seconded and carried 5 -0 to approve the September 30, 2007 Valuation as corrected. ATTORNEY REPORT There was discussion on the situation regarding Terry Petruzzi. Mr. Sugarman reviewed the options available to Mr. Petruzzi. He noted that he could not receive his Share Account monies as of yet. Section 38 -78 (6) provides that it is to be paid 30 days after the next Valuation date. There was discussion on the timing of the Share Account calculation. It was noted that the Actuary could calculate the Share Account balances about 60 -90 days after the close of the fiscal year, but then there was still the administrative time for the actual payout. Mr. Sugarman stated that the Board should approve this one before paying it out to make sure all issues are resolved. Ms. Adcock 3 advised that the Share Accounts for two recent retirees were paid out, similar to the Account for Mr. Thurman. Mr. Sugarman stated that if it turns out they were paid too much, they will have to pay the difference back; if it is too little, the Fund will owe them more. Mr. Sugarman stated that they reviewed the agreement with Davis Hamilton Jackson and do not see a problem. He stated that he has other pension plans that have agreements with Agincourt and does not foresee any problems there. Mr. Armstrong departed the meeting. Mr. Sugarman stated that he received a disability application regarding Toby Bivins. He stated that they are in the process of obtaining the medical records. He noted that the City has expressed an interest in this matter. Mr. Sugarman stated that he would have the Resolution regarding use of social security numbers for the next meeting. He noted that they were working on moving forward to update the Fund's IRS Determination Letter. INVESTMENT MONITOR REPORT Dave West appeared before the Board. He provided a revised Investment Policy Statement based on the last meeting. It was noted that Mr. West felt that the Russell 3000 was still the most appropriate benchmark. He stated that they still recommended that the portfolio be expected to perform in the top 40th percentile over a 3 -5 year time frame. If the Board moves to a higher standard, it must be recognized that no manager will be there all the time and there is a risk of churning managers inappropriately. There was discussion on the necessity of signature lines on the IPS and Schedule A. Mr. Sugarman stated that there could be a separate acknowledgment page for managers to sign. Mr. West stated that he would make the revisions to the IPS and forward to the Chairman for signature. Steve Rogers departed the meeting. There was discussion on Addendum B to the IPS for Dana. It was noted that the objective needed to be changed. The Board expressed concern that it has taken so long to try to change the IPS. There was discussion on having the Fund bar set at four consecutive quarters below the 50th percentile and the managers at a different percentile of being in the top 40th percentile. Mr. West stated that the intent is if the total Fund is below the 50th percentile then the Board needs to take a total look at all of the portfolios. The Board would look at all of the managers and if one was in the top percentile, they would be fine and the Board would look at the next manager. Mr. Sugarman stated that rather than Fund performance, it probably should be manager performance. Mr. West stated that the intent was to flag the total Fund and make the Board look at all of the individual component pieces. Mr. Sugarman stated that something needed to be added for the total Fund performance. The Board asked Mr. West to make the changes and e- mail them to the Board before the next meeting. Bob Sugarman departed the meeting. 4 r PRESENTATIONS BY FIXED INCOME MANAGERS DAVIS HAMILTON JACKSON & ASSOCATES Janna Woods and Gilbert Garcia appeared before the Board. Ms. Woods stated that she was the client service manager and Mr. Garcia was the head of the fixed income team and also a managing partner. The firm was founded in 1988 and is based in Houston. She noted that 59% of the firm's assets are in public pensions. The majority of their public fund business is in Florida. Mr. Garcia discussed their philosophy. They try to preserve principal; maintain liquidity; and provide high current income. He discussed the fixed income portfolio and noted that it was high quality; no big surprises; flexibility; and risk controls. They do not have any high yield securities, BBB rated securities, derivatives, leverage, or non - dollar denominated bonds. They are an old fashioned, long only, high quality manager. They have the flexibility to quickly adjust to changing market conditions and exploit smaller markets. They have proprietary modes and software as part of their risk controls. Mr. Garcia discussed the investment process and five factors: market sentiment, monetary policy, economic policy, valuation and inflation. He reviewed the fixed income aggregate portfolio characteristics. Ms. Woods reviewed performance. She stated that they were above the benchmark in the 1, 2, 3, 5, 6 10 and since inception of December 31, 1991. She discussed their fee noting that it was 25 basis points. She noted that Mr. Harrison had reviewed the contract and she provided signed contracts to the Board in the event the Board hired them. Janna Woods and Gilbert Garcia departed the meeting. AGINCOURT CAPITAL MANAGEMENT Brad Coats appeared before the Board. He stated that he was the managing director and portfolio manager. The firm is located in Richmond, Virginia. They are 100% employee owned. The firm was founded in 1999, but the partners have been together sine 1991. They have $3.6 billion in client assets. He reviewed their public client list. He reviewed the investment professionals in the firm. Mr. Coats discussed their investment philosophy and objectives. Consistency of returns is their primary goal. They have active, value - based strategies. They believe that yield wins over time and they provide below average risk. He discussed their investment process and investment strategies. He also discussed their macro factor analysis. Mr. Coats discussed their portfolio construction. He reviewed performance. He stated that for the first quarter they underperformed by about 90 basis points. It was their worst quarter ever. He believes they are set up now to do very well. He noted that their fee is 25 basis points. Brad Coats departed the meeting. There was a lengthy discussion on the presentations by the fixed income managers. The Board questioned whether they were going to move all of the fixed income money to Galliard or split with one of these other managers. Mr. West stated that he was comfortable with both. He stated that DHJ will make some changes if need be and is willing to move around the benchmark a lot more. He stated that Agincourt is fairly consistent. They look for income over time to be the driver, which was the reason for their underperformance in the first quarter. He stated that Galliard is steady over time and has no big shifts. Galliard and DHJ have contrasting approaches and areas of focus as far as market sectors. Mr. West stated that both DHJ and Agincourt would be suitable. It was noted that DHJ took care of the contract as was requested. It was noted that DHJ beat the benchmark all 6 years whereas Agincourt was up and down. Mr. West stated that he was absolutely comfortable with DHJ. A motion was made, seconded and carried 4 -0 to hire Davis Hamilton Jackson and Associates as a fixed income manager. A motion was made, seconded and carried 4 -0 to have the Attorney review the contract, have the Chairman execute the contract, and have the Monitor rebalance to split the total bond portfolio 50% to Galliard and 50% to DHJ and move to the same benchmark. Mr. West provided an update on the investment performance for the quarter ending March 31, 2008. The asset allocation at market was 50% in equities; 38% in fixed income; 5% in REIT; 7% in international; and 0% in cash. Mr. West stated that he was recommending the Board to rebalance the portfolio in the aggregate to get the average of the equity back up to the target policy. He stated that he would recommend them take about 8% out of fixed income. He stated that the Board does not necessarily have to rebalance as it is still within tolerances. However, he would recommend it. He also suggested that DHJ assume the fixed income portfolio for Dana. A motion was made, seconded and carried 4 -0 to have the Monitor rebalance to the target allocations in Schedule A of the Investment Policy Statement. Dave West departed the meeting. ADMINISTRATIVE REPORT Ms. Adcock provided the Board with an updated Trustee Handbook. She noted that Mr. Rhodes had requested copies of the contracts with the service providers of the Fund at the last meeting. She stated that she prepared a Handbook for all of the Trustees that included the contracts, as well as the Ordinance, SPD and other documents. Ms. Adcock provided an update on the progress of the online benefit calculator. Ms. Adcock presented the list of disbursements to be made. There was a question on the attorney bill regarding an entry for travel on February 11 to a meeting. It appeared to the Board that the cost for travel was not split with any other plan. Additionally, there was a question on the entry regarding a report on the social security number memo and why there would be a charge for just reporting the law. A motion was made, seconded and carried 4 -0 to approve the disbursements listed. OTHER BUSINESS There was discussion on the Investment Monitor. The Board stated that they had advised before at a meeting that they wanted Joe Bogdahn to attend these meetings. Mr. Morejon stated that he would discuss the matter with Mr. Bogdahn and ask him to attend the next meeting to address the Board. There being no further business, the meeting adjourned. Respectfully submitted, Tom Murphy, Secretary ,k Robert A. Sugarman* Howard S. Susskind Kenneth R. Harrison, Sr. D. Marcus Braswell, Jr. Pedro A. Herrera Noah S. Warman Ivelisse Berio LeBeau ♦ Board Certified Labor & Employment Lawyer SUGARMAN & SUSSKIND PROFESSIONAL ASSOCIATION ATTORNEYS AT LAW June 5, 2008 City of Palm Beach Gardens Firefighters' Pension Fund c/o Margaret M. Adcock, Administrator The Pension Resource Center 4360 Northlake Boulevard, Suite 206 Palm Beach Gardens, FL 33410 Re: City of Palm Beach Gardens Firefighters' Pension Fund Dear Trustees: 100 Miracle Mile Suite 300 Coral Gables, Florida 33134 (305) 529 -2801 Broward 327 -2878 Toll Free 1 -800- 329 -2122 Facsimile (305) 447 -8115 We have reviewed the latest revised Investment Policy for your plan, provided to us by your consultant on May 7, 2008 by electronic mail, and find this document to be in compliance with Chapter 112 of the Florida Statutes and acceptable for approval by the Board of Trustees. Thank you for your assistance. Please feel free to contact the undersigned if you have any questions concerning this matter. PAH /j d Yours truly, PEbi0 A. HERRERA City of Palm Beach Gardens (Plan Sponsor) Firefighters' Pension Trust Fund Investment Policy Statement I. PURPOSE OF INVESTMENT POLICY STATEMENT The Pension Board of Trustees, as named fiduciaries maintains that an important determinant of future investment returns is the expression and periodic review of the Fund's investment objectives. To that end, the Trustees have adopted this statement of Investment Policy and direct that it apply to all assets under their control. In fulfilling their fiduciary responsibility, the Trustees recognize that the Pension Plan is an essential vehicle for providing income benefits to retired participants or their beneficiaries. The Board also recognizes that the obligations of the Fund are long -term and that investment policy should be made with a view toward performance and return over a number of years. The general investment objective, then, is to obtain a reasonable total rate of return - defined as interest and dividend income plus realized and unrealized capital gains or losses - commensurate with the Prudent Investor Rule and any other applicable statute. 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 Pension Board of Trustees will employ professional Investment Management firms to invest the assets of the fund. Within the parameters allowed in this IPS, the Investment Managers have full discretion, including security selection, sector weightings and investment style. The Trustees, in performing their investment duties, shall comply with the fiduciary standards set forth in Employee Retirement Income Security Act of 1974 (ERISA) at 29 U.S.C. s. 1104(a) (1) (A) - (C). In case of conflict with other provisions of law authorizing investments, the investment and fiduciary standards set forth in this section shall prevail. .4D9P4T�,,PDRAFT: ,�pr-i!2-i-,May 2008 II. TARGET ALLOCATIONS In order to provide for a diversified portfolio, the Board has engaged Investment Management firms with target investment allocations as provided for on Schedule A, attached hereto. The managers are solely responsible for the assets and allocation of their mandate only and shall abide by any subordinate investment policy assigned to the manager attached hereto. On a regular biasbasis (at least quarterly) the Investment Consultant will review the investment portfolio for the purpose of rebalancing assets within the target investment allocations prescribed on Schedule A, and shall coordinate the overall asset allocation and affect rebalancing of the portfolio when necessary. The consultant shall also periodically review the investment portfolio and report to the Board the style and capitalization of the individual and total portfolios. III. INVESTMENT PERFORMANCE OBJECTIVES The following performance measures will be used as objective criteria for evaluating effectiveness of the investment managers. A. Total Fund Performance 1. The performance of the total Fund will be measured for rolling three and five year periods. These periods are considered sufficient to accommodate the market cycles experienced with investments. The performance of this portfolio will be compared to the return of a portfolio comprised of 55% Russell 3000, 10% MSCI EAFE, 25% Lehman Brothers Intermediate Aggregate Bond Index, and 10% NCREIF Index. 2. On a relative basis, it is expected that the total fund performance will be in the top 40% of the Appropriate peer Universe over three to five -year periods. 3. On an absolute basis, it is expected that total return of the combined equity, fixed income, and cash portfolio, will equal or exceed the actuarial earnings assumption (8.25 %), and equal or exceed the Consumer Price Index plus 3% over three to five year periods. B. Equity Performance The combined equity portion of the portfolio, defined as common stocks and convertible bonds, is expected to perform at a rate at least equal to a weighted benchmark; 85% Russell 3000, 15% MSCI EAFE Index. Individual components of the equity portfolio will be compared as outlined in Schedule A. All portfolios are expected to perform in the top 40% of an appropriate peer universe. C. Fixed Income Performance The overall objective of the fixed income portion of the portfolio is to add stability, consistency and safety to the total fund. The fixed income portion of the portfolio, defined as fixed income and preferred stocks, is expected to perform at a rate at least equal to the Lehman Brothers Intermediate Aggregate Bond Index, and in the top 40% of the appropriate peer universe. ,4D QTEDDRAFT. ,�prd 2May 2008 2 D. Alternatives (Real Estate /Timber) The overall objective of the alternative portion of the portfolio is to provide an attractive level of income with minimal volatility to the fund. This portion of the fund is expected to provide an absolute rate of return as benchmarked in Schedule A attached hereto. IV. INVESTMENT GUIDELINES A. Authorized Investments Other than with commingled funds as may be approved by the board, all investments made or held in the fund shall be limited to: 1. Time or savings accounts of a national bank, a state bank insured by the Bank Insurance Fund, or a savings and loan association insured by the Savings Association Insurance Fund which is administered by the Federal Deposit Insurance Corporation or a state or federal chartered credit union whose share accounts are insured by the National Credit Union Share Insurance Fund. 2. Bonds issued by the State of Israel. 3. Obligations issued by the United States Government or obligations guaranteed as to principal and interest by the United States Government or by an agency of the United States Government. 4. Stocks, commingled funds administered by national or state banks, mutual funds and bonds or other evidences of in debtedness, 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, 5. Commingled fixed income vehicles which may include Asset - backed securities, caps, floors, options, collective funds, corporate notes, bonds, debentures, and bank credit or loan participation agreements, federal agency securities /or other debts or loans backed by U.S. Govt. Agencies, federal funds, forward agreements /dollar rolls, financial futures, swaps, money market instruments, mortgage- backed securities, mortgage pass - throughs, mutual funds (which incorporate investments listed above), municipal securities, private placements /144A, repurchase agreements, treasury notes, bonds and bills /or other debts or loans guaranteed by the U.S. Treasury, fixed & variable preferreds /hybrids, other illiquid securities with exposure not to exceed 2% of the Fund assets; provided that: a. The securities when purchased meet the following ranking criteria: i. Fixed Income: a. Investment Grade as measured by Standard & Poor's or Moody's. b. Portfolio duration of the overall Fund shall not exceed + or - 25% of the Lehman Brothers Intermediate Aggregate Bond Index ii. Equities: Traded on a national exchange. iii. Money Market: Standard & Poor's Al or Moody's P1. AD0,P BDRAFT.- Appil 24-,May 2008 3 1 iv. Real Estate: Commingled private placements and direct investments must be independently appraised annually. b. Not more than 3% of the Fund's assets shall be invested in the common stock or capital stock of any one issuing company, nor shall the aggregate investment in any one issuing company exceed 3% of the outstanding capital stock of the company. c. The value of bonds issued by any single corporation shall not exceed 3% of the total fund. 6. Real Estate 7. Foreign Securities, to include fixed income and equity securities. B. Limitations 1. Investments in corporate common stock and convertible bonds shall not exceed 65% of the Fund assets at cost or 75% of the fund assets at market value. 2. Foreign securities shall not exceed 10% of the value at cost of the fund. 3. Real estate investments shall not exceed 10% of the value at cost of the fiend. 4. No investment may be made unless provided for as part of this policy D. Trading Parameters When feasible and appropriate, all securities shall be competitively bid. Except as otherwise required by law, the most economically advantageous bid shall be selected. Commissions paid for purchase of securities must meet the prevailing best - execution rates. The responsibility of monitoring best price and execution of trades placed by each manager on behalf of the Plan will be governed by the Portfolio Management Agreement between the Plan and the Investment Managers. V. COMMUNICATIONS A. On a monthly basis, the custodian shall supply an accounting statement that will include a summary of all receipts and disbursements and the cost and the market value of all assets. On a quarterly basis, the managers shall provide a written report affirming compliance with the security restrictions of Section IV above and a summary of common stock diversification and attendant schedules. In addition, the manager shall deliver each quarter a report detailing the Fund's performance, adherence to the investment policy, forecast of the market and economy, portfolio analysis and current assets of the Trust. Written reports shall be delivered to the Trustees within 60 days of the end of the quarter. A copy of the written report shall be submitted to the person designated by the City, and shall be available for public inspection. The Investment Managers will provide immediate written and telephone notice to the Trustees of any significant market related or non - market related event, specifically including, but not limited to, any deviation from the standards set forth in Section IV above. B. The Investment Managers will disclose any securities that do not comply with Section IV in each quarterly report. "" " X�EDDRAFT. �pril A, May 2008 4 C. If the Fund owns investments, that complied with section IV at the time of purchase, which subsequently exceed the applicable limit or do not satisfy the applicable investment standard, such excess shall result in rebalancing within 30 days; noncompliant investments shall be disposed of at the earliest economically feasible opportunity in accordance with the prudent man standard of care, but shall not exceed two (2) fiscal quarters and no additional investment may be made. Assets for which a fair market value is not provided shall be excluded from the assets used in the determination of annual funding cost. For each actuarial valuation, the board must verify the determination of the fair market value for those investments and ascertain that the determination complies with all applicable state and federal requirements. The board shall disclose to the Department of Management Services and the Plan's sponsor each such investment for which the fair market value is not provided. D. The Trustees shall retain a monitoring service to evaluate and report on a quarterly basis the rate of return and relative performance of the Fund. The Trustees will meet quarterly to review the monitoring service's Performance Report. The Trustees will meet with the investment manager and appropriate outside consultants to discuss performance results, economic outlook, investment strategy and tactics and other pertinent matters affecting the Fund on a periodic basis. E. At least annually, the Trustees shall provide the Investment Managers with projected disbursement needs of the plan, so that the investment portfolio can be structured in such manner as to provide sufficient liquidity to pay obligations as they come due. To this end, the Investment Managers should, to the extent possible, attempt to match investment maturities with known cash needs and anticipated cash -flow requirements. VI. COMPLIANCE A. It is the direction of the Trustees that the plan assets are held by a third party custodian, and that all securities purchased by, and all collateral obtained by the plan shall be properly designated as plan assets. No withdrawal of assets, in whole or in part, shall be made from safekeeping except by an authorized member of the board of Trustees or their designee. Securities transactions between a broker - dealer and the custodian involving purchase or sale of securities by transfer of money or securities must be made on a "delivery vs. payment" basis to insure that the custodian will have the security or money in hand at conclusion of the transaction. Provided that all approved vendors transacting repurchase agreements perform as stated in any Master Repurchase Agreement B. At the direction of the Trustees, operations of the fund shalt be reviewed by independent certified public accountants, as part of any financial audit periodically required. Compliance with the Trustees' internal controls shall be verified. These controls have been designed to prevent losses of funds that might arise from fraud, error, or misrepresentation by third parties or imprudent actions by the Board or employees of the plan sponsor, to the extent possible. C. Each member of the Board of Trustees shall participate in a continuing education program relating to investments and the Trustee's responsibilities to the fund. It is highly suggested that this education process begin during the Trustees' first term. �D0P-T-EBDRAFT. 4pi-d 2-P May 2008 5 D. With each actuarial valuation, the Board of Trustees shall determine the total expected annual rate of return for the current year, for each of the next several years and for the long term thereafter. This determination shall be filed promptly with the Department of Management Services, the plan's sponsor and the consulting actuary. E The proxy votes must be exercised for the exclusive benefit of the participants of the Fund. Each manager shall provide the Board with a copy of their proxy voting policy for approval. On a regular basis, at least annually, each manager shall report a record of their proxy vote. VII. CRITERIA FOR INVESTMENT MANAGER REVIEW The Board wishes to adopt standards by which judgments of the ongoing performance of a portfolio manager may be made. If, at any time, any one of the following is breached, the portfolio manager will be warned of the Board's serious concern: A. Four consecutive quarters of total Fundmanager performance below the 50th 40th percentile in manager performance rankings. B. Standard deviation for a €-manager component in excess of 150% of the assigned benchmark. C. Loss by the manager of any senior investment personnel. D. Any change in basic investment philosophy by the manager. E. Failure to attain a 60% vote of confidence by the Board of Trustees. F. Failure to observe the security quality restrictions of Section IV. Nothing in this section shall limit or diminish the Trustees' right to terminate the manager at any time for any reason. VIII. CRITERIA FOR INVESTMENT TOTAL FUND REVIEW A. Four consecutive quarters of Total Fund performance below the 50th percentile in Fund performance rankings. B. Four consecutive quarters of Total Fund performance below the established benchmark C. Standard deviation for the Total Fund in excess of 150% of the assigned benchmark. SIX. — FLORIDA STATUTES 112,175 AND APPLICABLE CITY ORDINANCES If, at any time, this document is found to be in conflict with Chapter 112 or 175 Florida Statutes, or the applicable City Ordinances, the Statutes and Ordinances shall prevail. IX X. — REVIEW AND AMENDMENTS It is the Trustees intention to review this document at least annually subsequent to the actuarial report and to amend this statement to reflect any changes in philosophy, objectives, or guidelines. Any investment not specifically allowed as part of this policy is prohibited. If, at any time, the Investment Manager feels that the specific objectives defined herein cannot be met, or the guidelines constrict performance, the Trustees should be notified in writing. By initial and continuing acceptance of this Investment Policy Statement, the Investment Managers concur with the provisions of this document. CITY OF PALM BEACH GARDENS FIREFIGHTERS' PENSION PLAN By: Date: 74D9P-TE-BDRAFT.• �pril 24, May 2008 6 Chairman, Board of Trustees ADOP DDRAFT: Appil 24-,May 2008 7 .-1 m 0 O N U a� b �I O Q q U � b w z ¢ o x cd > o c� C x o o 000 °' o z rj) cn 04 0 .1 z o� H 0 0 0 0 0 w 0 0 p' M .O 0 0 0 00 -6``" O oov;C) N 0 h+y = � W .� z ANN) �i hn r— r- c; ° N W `�1 o ai a" Gzr U 'dA 9w N a U a o o r a cl 4-1 0 0 N O .-1 m 0 O N U O b �I O Q q U 00 0 0 �rIl 'I �I C �a i� RESOLUTION NO. , 2008 A RESOLUTION OF THE CITY OF PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND; ADOPTING A POLICY STATEMENT CONCERNING THE COLLECTION OF SOCIAL SECURITY NUMBERS; PROVIDING FOR REPEAL; PROVIDING FOR SEVERABILITY AND PROVIDING FOR AN EFFECTIVE DATE. WHEREAS, the trustees of the City of Palm Beach Gardens Firefighters' Pension Fund have been made aware of the recent changes in Chapter 119 of the Florida Statutes concerning the limitation on collection of social security numbers; and WHEREAS, the adoption of a policy concerning such collection of social security numbers is required; now therefore, NOW THEREFORE, BE IT RESOLVED BY THE BOARD OF TRUSTEES OF THE CITY PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND, that: SECTION 1. The foregoing WHEREAS clauses are hereby ratified and confirmed as being true and correct and are hereby made a specific part of this Resolution upon adoption hereof. SECTION 2. The following Policy Statement is hereby ratified and confirmed as an official resolution of the Board of Trustees for the City of Palm Beach Gardens Firefighters' Pension Fund. POLICY STATEMENT COLLECTION OF SOCIAL SECURITY NUMBER STATEMENT OF DISCLOSURE Pursuant to Section 119.071(5)(a)2, Florida Statutes, social security numbers are requested for the purpose of determining eligibility for retirement benefits as a plan member, retiree or beneficiary; the processing of retirement benefits; verification of retirement benefits; income reporting; or other notice or disclosures related to retirement benefits. Social security numbers will be used solely for one or more of these purposes and for no other reason. ,♦ SECTION 3. All Resolutions or parts of Resolutions in conflict herewith be and the same are hereby repealed. SECTION 4. If any section, subsection, sentence, clause, phrase of this resolution, or the particular application thereof shall be held invalid by any court, administrative agency, or other body with appropriate jurisdiction, the remaining section, subsection, sentences, clauses, or phrases under application shall not be affected thereby. SECTION 5. This Ordinance shall take effect on Adoption. PASSED this day of 52008 ATTEST: BY: Secretary, CITY OF PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND W Chairperson H PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND DISBURSEMENTS June 16, 2008 • PENSION RESOURCE CENTER, LLC. $ 800.00 (Bill for services for May 2008) • REGIONS MORGAN KEEGAN TRUST $ 647.89 (Custodial Fees for April 2008) • SUGARMAN & SUSSKIND $ 3,535.16 (Fees for legal services for April and May 2008) • GALLIARD CAPITAL MANAGEMENT $ 2,444.72 0 st Quarter 2008 Management Fee) VOYAGEUR ASSET MANAGEMENT INC. $ 3,498.89 (1St Quarter 2008 Management Fee) • STEVEN I. GORDON $ 740.00 (Final bill for audit for year ended September 30, 2007) • DANA INVESTMENT ADVISORS INC. 0 st Quarter 2008 Management Fee) $ 20,244.10 • GABRIEL ROEDER SMITH & COMPANY $ 8,900.00 (Bill for Valuation; Employee Benefit Statements; Share Account Statements; 2 Benefit calculations) • BOGDAHN CONSULTING, LLC. $ 6,275.00 (1St Quarter 2008 Monitoring Fee; Manager Search; Additional Meeting Attendance Fee) • UMHC $ 80.00 (Facility Fee for IME for T. Bivins) • UMDC $ 900.00 (IME for T. Bivins) • FPPTA $ 1,500.00 (Registration for E. Morejon, T. Murphy and S. Rogers for Conference in Orlando in June 2008) • OMNI ORLANDO RESORT AT CHAMPIONSGATE $ 2,160.00 (Hotel Registration for E. Morejon, S. Rogers and T. Murphy for the FPPTA Conference in June 2008) • ED MOREJON $ 250.00 (Per diem expenses for FPPTA Conference) • STEVE ROGERS $ 250.00 (Per diem expenses for FPPTA Conference) • TOM MURPHY $ 250.00 (Per diem expenses for FPPTA Conference) • FLORIDA STATE UNIVERSITY $ 160.00 (Registration for T. Murphy for Division of Retirement School in May 2008) • TOM MURPHY $ 777.48 (Reimbursement of rental car, gas, and per diem expenses for Division of Retirement School) Total Disbursements for Approval $ 53,413.24 (Trustee) (Trustee) 2 Page 1 of 3 Margie Adcock From: Margie Adcock Sent: Wednesday, April 30, 2008 1:51 PM To: 'reorchid @bellsouth.net'; 'murphlt @aol.com'; 'srogers @pbgfl.com'; 'sugarman @sugarmansusskind.com'; 'Jessica Dela Torre'; 'rkr64 @aol.com'; 'richard. hitchins @lpl.com' Subject: FW: PBG Fire - tax exempt certificate Hi gang. Please see the string of a -mails below. As you will see, the City is not allowing the Board to use the City's tax exempt certificate anymore. That means that the Fund will need to pay taxes on hotel stays for conferences in the State. Perhaps someone can talk to Allan Owens about this to see if he will change his mind. Margie Effective immediately, please note my new email add ress_margie.adcock @_resource- team.com . Margaret M. Adcock Pension Resource Center, LLC 4360 Northlake Blvd., Suite 206 Palm Beach Gardens, FL 33410 Phone: 561 - 624 -3277 ext. 2962 Fax: 561 - 624 -3278 - - - -- Original Message---- - From: Sarah Varga [mailto:svarga @pbgfl.comj Sent: Wednesday, April 30, 2008 1:39 PM To: Margie Adcock Subject: RE: PBG Fire Sender ALLOWED [ Remove ] [ Block ] details Vanquish Anti -Spam Control Panel I talked with Allan, and he was not aware that the fire pension was using the City's tax exempt certificate. After speaking with him, we request that you do not use our tax exempt certificate. Please let me know if you have any questions. Thanks. Sarah Varga Accountant City of Palm Beach Gardens P: 561.799.4166 F: 561.799.4134 From: Margie Adcock [mailto:margie.adcock @resource- team.com] Sent: Wednesday, April 30, 2008 1:20 PM To: Sarah Varga Subject: RE: PBG Fire 4/30/2008 Page 2 of 3 We have always used the City tax exempt form so they do not have to pay tax for the hotel. Effective immediately, please note my new email address margie.adcock @resource- team.com . Margaret M. Adcock Pension Resource Center, LLC 4360 Northlake Blvd., Suite 206 Palm Beach Gardens, FL 33410 Phone: 561 - 624 -3277 ext. 2962 Fax: 561 - 624 -3278 - - - -- Original Message---- - From: Sarah Varga [mailto:svarga @pbgfl.com] Sent: Wednesday, April 30, 2008 1:19 PM To: Margie Adcock Subject: RE: PBG Fire Sender ALLOWED [ Remove) [ Block } detains vanquish Anti -Spam Control Panel Why would you need a city tax exempt certificate to register board members to attend a conference? The Board pays for these expenses and the City is not involved in the process. Are you sure you don't mean a tax exempt certificate for the fire pension? Thanks. From: Margie Adcock [mailto:margie.adcock @resource- team.com] Sent: Wednesday, April 30, 2008 1:11 PM To: Sarah Varga Subject: RE: PBG Fire Hi Sarah. I am looking for the current city tax exempt certificate. The one I have expired in September 2007. 1 need it for the Trustees to attend a conference. Thanks. Margie Effective immediately, please note my new email add ress_margi.e.adcock resource - team.com . Margaret M. Adcock Pension Resource Center, LLC 4360 Northlake Blvd., Suite 206 Palm Beach Gardens, FL 33410 Phone: 561 - 624 -3277 ext. 2962 Fax: 561 - 624 -3278 4/30/2008 .. ,N O J �. ^� M Q � H V z �,, w � f > c�.,, p � � i U z 0 Q H w >w z �. z a � � V � � �/ T/� V1 4� � � C� � �"i � � •� . �..� .. ,N O J �. ^� M Q � H V z �,, w � f > c�.,, p � � i U z 0 Q H w >w z �. z a ■ w U �y ..r .O FBI V1 .poll wo Ina T� V V a� . 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O Lw O ■ 4,, V Soot UEf n 170OZ 130 170OZ Inf O ■ 170OZ AV � 1700Z UEf ■ U z � £oozl3o £OOZ Inf Q £OOZ AV E- w £OOZ UEf r z O zoozl3o Q ■ ■ S m �C N I-I O Q D o 0 0 800Z unf 8002 -SEW LOOZ DOG LOOZ &S LOOZ unf LOOZ JEW 9002 33G 90OZ daS 90OZ unf 9002 JUW SOOZ OKI SOOZ doS SOOZ unf SOOZ -TAW b00Z 3aQ tOOZ daS t7OOZ unf tb00Z ipw ON Z)aQ £OOZ diS £OOZ unf £OOZ irN ZOOZ Z)aQ ZOOZ d3S ZOOZ unf ZOOZ -SEW i ON 3;)Q 10OZ daS i OOZ unf i ON luw OOOZ 3aQ OOOZ &S OOOZ unf OOOZ -SEW 6661 3aQ 6661 daS 6661 unf 6661 -JEW 8661 XIG 8661 doS z a 0 5 W W Q N Total Return through 3 -31.08 YTD 1 Yr 3 Yrs 5 Yrs Dana Large Cap -8.15% -5.61% 7.65% 13.84% Dana Large Growth - 10.56% -1.39% 9.49% 15.25% Dana large Value -6.78% -5.14% 8.31% 15.36% Dana All Cap -8.15% -7.40% 6.65% 14.09% Dana Small Cap -6.70% - 17.45% 2.60% 13.29% Dana Socially Responsible -5.82% - 2.08% 9.08% 17.22% Dana Ind ADR -6.90% -1.01% n/a n/a S&p3w 9.45% -5.08% 5.85% 11.32% The S&P 500 fell 9.5% in the first quarter of 2008, which ranks as the index's steepest quarterly decline since its 17% plunge in the third quarter of 2002. Selling showed little discrimination by market capi- talization, as the Russell Midcap and Russell 2000 also posted losses around 10 %. Investors in foreign stocks didn't fare much better, as the widely diversified EAFE International index returned a negative 8.4 %, while the Emerging Market index dropped 10.6 %. What happened? Equity markets worldwide succumbed to the worst financial crisis since the failure of Long Term Capital Management in 1998. The present crisis was driven by a boom and subsequent bust in real estate, as low interest rates, coupled with looser lending prac- tices, encouraged excessive leverage and speculation in many U.S. residential real estate markets. Significant housing price declines have now wiped out the equity of many sub -prime and other marginal buyers that purchased properties near the peak of the boom. This has encouraged many borrowers to simply walk away from their financial obligations, with the net result being a huge spike in mortgage defaults. In the past, these types of financial crises were typically centered on commercial banks. This time, however, the risks have been spread across a wide swath of the financial world. The demise of Bear Stearns and announcements of multi - billion dol- lar asset write -offs from many financial institutions, including a num- ber of major foreign banks, prompted near -panic conditions within the equity markets. Market sentiment was also heavily influenced by inflation fears, driven by rising energy and commodity prices, and growing concern over slowing economic growth, partially fueled by steadily rising weekly jobless claims and unemployment levels. The Fed has taken a number of unprecedented actions to help restore confidence within the financial markets. The Fed has also aggressively lowered short term interest rates, and it is reasonable to expect that these efforts will eventually begin to bear fruit. Stocks tend to follow earnings over the long term, so let's examine the recent trends. Operating earnings for the S &P 500 declined 5.9% in 2007, and Wall Street analysts currently forecast S &P 500 earnings to rebound 17% in 2008. The bar chart on this page illustrates the quar- terly projections used to derive that 17% figure. Note that earnings are expected to fall around 6% in Q108, with the expectation of a significant rebound in the second half of the year. It is a tough call to make with certainty, but based on the company news we follow, the projections for the second half of 2008 are probably too optimistic. Thus, a key consideration for equity investors should be: Do cur- rent equity prices already discount the possibility that current earn- ings expectations may be too high? Q108 earnings season should provide a clearer answer to that question, especially with regard to how stocks react as companies provide forward "guidance" in their upcoming Q108 earnings calls. 6o 60 40 20 -20 -40 S&P 500 Operating Earnings Comparison of Year -Over -Year Growth by Quarter Source: Standard 8 Poors Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 03 Q4 2006 2006 2006 2006 2007 2007 2007 2007 2008 2008 2008 2008 e Dana Equity Strategies According to Lipper Inc. data, the average actively managed large cap stock fund lagged its benchmark in Q108. For example, Lipper reports that the average large cap core fund fell 10.2% in Q1 vs. a 9.5% decline for the S &P 500. We were somewhat surprised by this data, as savvy active managers can frequently beat market aver. ages during bear markets by paying close attention to valuation and other risk metrics for their portfolios. Dana equity strategies typically remain fully invested, as we believe accurately timing market movements is almost impossible. Our investment process places a high priority on controlling volatility and protecting downside in unfavorable market conditions, so we are pleased to report that most of Dana's equity portfolios delivered on that goal in Q108, some by a significant margin. Large Cap Core, the largest strategy in terms of assets under man- agement, delivered average returns in excess of 100 basis points above the S &P 500 in Ql. From an attribution perspective, Large Core gained its largest relative performance from stock picks within some of the worst performing sectors in the period, including Fi- nancials and Technology. Two energy companies, XTO Energy and Apache, delivered double -digit positive returns and finished as the F L— 'I top contributors to Large Core's overall performance. VF Corp., IBM, General Mills and Nike also delivered positive returns in a pe- riod where the overall markets fell considerably. Dana's Large Value, Socially Responsible and Small Cap strategies also generated strong relative returns versus their respective bench- marks. The Social strategy delivered the strongest absolute and relative per- formance of any Dana equity strategy, besting the S &P 500 by over 300 basis points during the quarter. Key contributors to perform- ance included most of the stocks listed above for the Large Core strategy, along with energy holding Helmerich & Payne. Holdings within the Technology, Energy and Healthcare sectors delivered al- most 400 basis points of out performance versus the S &P 500, while Industrial holdings such as Textron generally lagged the S &P 500. Valero Energy was a weak performer among a strong energy group, primarily due to the fact refining margins have been under pressure as oil crossed the $100 mark. Large Value's average returns beat the Russell 1000 Value index by roughly 280 basis points. Top contributors to performance were similar to those stocks mentioned earlier. Stock picks within the Energy, Consumer and Financial sectors contributed the most to relative performance. Similar to other strategies, industrial holdings such as Eaton generally lagged the S &P 500 during the period. The Small Cap strategy's returns generally came in well above the Russell 2000 in Q1. Industrial picks, including Wabtec, were among the top contributors to overall performance. Healthcare and Tech- nology holdings were also strong contributors to relative perform- ance. Dana's Allcap strategy beat the S &P 1500 by a slight margin in Q1. Healthcare, Technology and Financial holdings generally contrib- uted the most to relative performance in the period, while Industrial holdings created a lag versus the benchmark. Top individual stock performers included most of those owned in other strategies, and also included Raytheon, St. Jude Medical and Healthcare REIT Inc. Large Growth came in roughly in line with the Russell 1000 Growth in Q108. Several Healthcare holdings, including Genentech and St. Jude Medical, ranked among the top contributors to overall perform- ance. Other top contributors included Apache, Nike, Halliburton and CVS Caremark. Several technology holdings, including Apple, Google & Infosys detracted from overall performance in Q1. Investment Outlook At first glance, the investment picture appears grim. Aggressive ac- tions by the Fed have been unable to significantly relieve credit mar- ket strains, and it is becoming increasingly likely that the U.S. econ- omy is entering a recession. In addition, the dollar is slumping, a major Wall Street firm re- quired a rescue, and equity mar- kets continue to churn near cyclical lows. Economic conditions are weak, but the picture is not universally gloomy. The weak dollar has made U.S. goods and services more competitive versus foreign Stocks Are Good Value US. 10.YEAe TREASUSt' YWW MINUS S&P S0G – DIVpE41) YIELD > scA Faosc.- 206, 1085 im 189! LOOT 2000 2010 competitors, creating a strong "tailwind" for U.S. multi - national corporations. Many sectors are expected to post solid earnings growth in the coming year, and real consumer incomes are still above year -ago levels. Crisis environments typically create opportunities for savvy investors that maintain long- term views, and the resulting "flight to safety" is starting to create good value within certain sectors of both the equity and credit mar- %r­ CASH MOUNTAIN" AS % OF MLSHIRE SM —% kets. 60 60 55 55 An important considera- 50 56 tion is that the markets are 45 45 not suffering from a short- 40 40 age of liquidity, as mone- 35 35 tary growth has recently 30 30 accelerated. Global cash 25 SCA Research 2008 25 reserves continue to build 1998 2000 2002 2004 2006 2006 (see chart at left). The real 'YONFY MARKF7 ru4DS Mn GAVaa6 DFPOUTa problem is investor reluc- tance to commit their capital to any asset class that requires more than a minimal amount of risk. Just as greed pushes asset prices to unexpected levels during a bubble period, fear works in just the opposite direction during the bust. War- ren Buffett was once quoted in one of Berkshire Hathaway's annual reports: "Be fearful when others are greedy, and greedy when others are fearful." That advice sounds pretty timely today. Iona Lary. Cap Podia lu Ch a"dooslns Pr¢a to E - .Oa RMM Pr 1, Cash Flats earn PIE I a G ran 1h lP EGf RM,a PI PO 2 _ 16) 1B - - -171 ,5 112 tai 1= 12 I F]C 5 0 0 0 Dane CC SAPS00 Gana CC SAPI Dana lC S8P500 CPS G-1h R-FOra 1 a lane Y.. M.-I Cap l hr eeeaelMea ®nl PO% 3% 15% 1=6% 115% 2.16% 110 10% 60 5X 07 SO 2]D 111 % 0% 0 Dana 1C SIP Son Dena 11 SGP 500 Us., L SIP— Actual Composite Charactermlics as PI Mamh 31, 7008 ■ Dana Investment Advisors, Inc. is an independent federally registered investment adviser providing equity and fixed income investment management services to a broad range of clients. The returns pre- senled have been prepared and presented in accordance with the AIMR PPS Standards. AIMR has neither endorsed the presented performance, nor is AIMR affiliated with Dana Investment Advisors, Inc. in any way. All fee- paying accounts utilizing similar investment strategies to those discussed herein were included in the composite performance returns presented. Total firm assets for the period ending 12-31 - 07 were $2,794,270,000. The number of portfolios contained in the Dana Large Cap Equity and Small Cap Equity Strategies were 410 and 66 respectively. The percentage of firm assets in 2007 represented in the Dana Large Cap Equity Strategy was 22.9%; with an annual 2007 return dispersion of 1.13%. The percentage of firm assets in 2007 represented in the Dana Small Cap Equity Strategy was 13%; with an annual 2007 return dispersion of 0.65%. To receive a complete list and description of Dana Investment Advisor, Inc.'s composites and /or a presentation that adheres to the AIMR -PPS standards, contact Nick ■ Berich at Tel. (262) 782 -3631. All data is presented in U.S. Dollars. Portfolio characteristics reflect Dana equity strategy holdings as of market close on the dale indicated. Returns presented are exclusive of investment management and custodial lees, and net of transaction costs. Investment management fees would reduce the returns presented, for example: on a one - million dollar portfolio with an advisory fee ■ of .75% earning a 10% return, the total compounded advisory fee over a live year period would be $50,368. The resulting average annual return for the period would therefore he 9.17%. All returns were calculated on a time weighted total return basis. Performance does include the accrual of income and the reinvestment of dividends and interest received. Indexes shown were selected because they demon- strated similar characteristics to the Dana strategy to which they were compared. During various market cycles, the strategies discussed herein have demonstrated portfolio characteristics and returns that ■ have been both more and less volatile than that of the comparable index. While data contained herein was gathered from sources deemed reliable, the accuracy of the data presented cannot be guaranteed. Past performance is not indicative of future returns. Dana Composite Yields at 03/31/2008 Yield Return Duration Limited Volatility 3.79% 1.51% 0.98 Intermediate 4.69% 2.44% 3.57 Municipal 4.36% 0.07% 3.39 (rax EgWv. @ 35 %) US Treasury Yields At 03/31/2008 6 month 1.48% 2 year 1.58% 5 Year 2.44% 10 Year 3.41% 30 Year 4.29% U.S. Fixed Income Performance 1st Qtr. 1 Year Lehman Aggregate 2.17% 7.67% Treasury 4.43% 12.21% Investment Grade Corp 0.43% 3.99 % Mortgages 2.43% 7.82% High -Yield Corporate - 3.02% - 3.74% Too Much Leverage Despite significant intervention by the Federal Reserve, the credit crisis that began last summer intensified during the first quarter. Without a doubt, deleveraging was the main attraction as financial markets sought to reduce their balance sheets by selling bonds and calling in margin loans. A vicious cycle emerged as declining val- ues of fixed income securities prompted many institutions, which are forced to mark the value of their bond holdings to current market prices, to sell even more to shore up their already weak capital positions. Even more surprising has been the impact of the labor. Job growth, as shown above, has been slowing over the past couple of years, but three consecutive readings of losses have created a weak consumer confidence level. Given this negative backdrop and the now - consensus view that the U.S. economy is heading for reces- sion , it is not surprising that protection of capital is foremost on investors minds. The Fed's actions throughout the quarter were squarely focused on stopping this negative feedback . loop and restoring at least some confidence in the markets. Sector Returns Treasuries - Treasury yields fell as economic conditions worsened and credit crisis expanded. The curve steepened as most of the action was in short maturities, driven by 200 basis points of ease by the Fed. The two -year Treasury fell from 3.05% to 1.58% and the 10 -year Treasury fell from 4.02% to 3.41 %. Agencies - By earning a positive return for the quarter, agencies and agency- backed mortgages fared relatively well ■ compared to other investment grade sectors. Still, the sectors lagged Treasuries as swap spreads widened and volatility remained high. Corporates - Battered by cyclical fears, yields for A and BBB rated corporates ended the quarter up 25 -50 basis ■points, leading to poor performance relative to Treasuries. Dominated by finance, the AA sector was under pressure in March when tensions built on a possibly bankruptcy of Bear Stearns. Following the firm's sale to J.P. Morgan and ■ action by the Fed, pressure eased and spreads recovered, though not fully. Bond Outlook Properly functioning financial markets are critical to the U.S. economy and the Fed, with its creative and timely intervention, has done a commendable job in preventing a financial calamity. While a certain amount of confidence has been restored, there is still much work to be done to stimulate economic growth. Al- though yields on Treasury securities have decreased dramatically, consumers and businesses alike would benefit from narrower credit spreads. Unfortunately, credit spreads remain at restrictive levels and prevent economic stimulus. —0 290 240 220 200 180 190 140 120 100 Jan-03 Moodys BAA Corporate Bonds Jon -04 Jan -05 J3148 Jan - ?7 J51 43 While we are hesitant to speculate at the length of this credit crisis 3 -Month LIBOR Spread or regarding the duration of the tough credit market environment, 250 - it should be noted that some of the best opportunities are created 201 - Preadcups; during heightened periods of stress in the securities markets. 150 t Therefore, we prefer fixed income securities that trade significantly wider than fundamentals dictate owing to market technicals or be- on cause of investor per - Conventional Mortgage Spread p t 835 - -- — - - - -- - -- — ception about lever - �n Sts - ;�,ex:�ca�weetlr aging risk. With 255 J3n -0 Jan-04 Ja °.O5 Jan -06 Jan -0T Jan-08 275 short maturity securi- 235 ties and money mar - 255 .r`r 215 ket yields falling quickly, adjustable rate mortgage (ARMs) securi- �.�� cos kAveA.4 ties should not be ignored. ARMs offer liquidity and enhanced ,ss yields over comparable short duration securities without the price 135 volatility of longer duration securities. Jan -03 Jan-N Jan -05 Jan -09 Jar -C? pan -08 . Dana Composite Characteristics Dana Composite Average Quality Average Coupon Current Yield Average YTM Effective Duration ■ (at market) Dana Intermediate AA+ 5.17 5.03 3.86 3.37 . Dana Limited Volatility AGY 5.40 5.62 3.79 0.98 Dana Municipal AA+ 4.88 4.87 4.36 3.39 Data reflects composites as of market close March 31, 2008 ■ Dana Investment Advisors, Inc. is an independent federally registered investment adviser providing equity and fixed income investment management services ■ to a broad range of clients. The returns presented have been prepared and presented in accordance with the AIMR PPS Standards. AIMR has neither endorsed the presented performance, nor is AIMR affiliated with Dana Investment Advisors, Inc. in any way. All fee- paying accounts utilizing similar investment strate- gies to those discussed herein were included in the composite performance returns presented. Toral firm assets for the period ending 12 -31 -07 were $2,794,270,000. The number of portfolios contained in the Dana Limited Volatility I and Limited Volatility II Strategies were 33 and 51 respectively. The num- ber of portfolios contained in the Dana Intermediate and Municipal Bond Strategies were 31 and 66 respectively. The percentage of firm assets in 2007 repre- sented in the Dana Limited Volatility I Strategy was 6.1 %; with an annual 2007 return dispersion of 0.60° /u. The percentage of firm assets in 2007 represented in the Dana Limited Volatility II Strategy was 21.0 %; with an annual 2007 return dispersion of 0.47 %. The percentage of firm assets in 2007 represented in the ■ Dana Intermediate Bond Strategy was 3.3 %; with an annual 2007 return dispersion of 1.2 1/6. The percentage of firm assets in 2007 represented in the Dana Municipal Bond Strategy was 4.4 %; with an annual 2007 return dispersion of 0.39 %. To receive a complete Est and description of Dana Investment Advisor, ■ Inc.'s composites and /or a presentation that adheres to the AIMR -PPS standards, contact Nick Bedch at Tel. (262) 782 -3631. All data is presented in U.S. Dollars. Portfolio Characteristics reflect the respective Dana Fixed Income Strategy holdings as of market close on the date indicated. Returns presented are exclusive of investment management and custodial fees, and net of transaction costs. Investment management fees would reduce the returns presented, for ■ example: on a one - million dollar portfolio with an advisory fee of .75% earning a 10% return, the total compounded advisory fee over a five year period would be $50,368. The resulting average annual return for the period would therefore be 9.17 %. All returns were calculated on a time weighted total return basis. ■ Performance does include the accrual of income and the reinvestment of dividends and interest received. Indexes shown were selected because they demon- strated similar characteristics to the Dana strategy to which they were compared. During vatious market cycles, the strategies discussed herein have demon- strated portfolio characteristics and returns that have been both more and less volatile than that of the comparable index. \L,'hile data contained herein was ■ gathered from sources deemed reliable, the accuracy of the data presented cannot be guaranteed. 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