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PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND
MINUTES OF MEETING HELD
February 11, 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 OTHERS
Tom Murphy
Rick Rhodes
Richard Hitchins
Steve Rogers
MINUTES
Margie Adcock, Administrator
Ken Harrison, Attorney
Dave West, Investment Monitor (10:20 A.M.)
Steve Gordon, Auditor
The Board reviewed the minutes of the meeting held November 26, 2007. A motion was
made, seconded and carried 4 -0 to accept the minutes of the meeting held November 26,
2008.
ANNUAL AUDIT
Steve Gordon appeared before the Board to present the audit for the period ending
September 30, 2007. He advised that he was issuing a clean unqualified opinion. He
reviewed the Statement of Plan Net Assets. The total assets of the Fund as of September
30, 2007 were $22,791,087 almost all of which were in investments. There were no
liabilities. Total net assets of the Fund as of September 30, 2007 were $22,791,087 versus
$17,322,340 as of September 30, 2006. Mr. Gordon reviewed the Statement of Changes
in Plan Net Assets. He reported that there was a total net investment income of
$1,983,318. The total contributions to the Fund were $3,725,765. The increase in plan net
assets was $5,468,747. Mr. Gordon then discussed the schedule of funding progress that
he is required to include in the Audit but that is provided for in the Actuarial Valuation.
He reviewed the notes to the financial statements. Mr. Gordon stated that there was no
unusual matter to discuss or disclose regarding the audit of the Fund for the period ending
September 30, 2007. A motion was made, seconded and carried 4 -0 to accept the Audit
for the period ending September 30, 2007.
Steve Gordon departed the meeting.
ATTORNEY REPORT
Mr. Harrison provided a letter agreement for the increase of the fee for legal services that
was approved at the last meeting for an hourly rate of $285 for three years. Mr. Harrison
noted that the Board had asked him to explore the possibility of a retainer of $2,500 a
month with Mr. Sugarman. Mr. Harrison reported that Mr. Sugarman did not accept that
proposal. The Board executed the letter agreement for the increase of the fee for legal
services that was approved at the last meeting.
Mr. Harrison discussed a new law that was passed regarding the use of social security
numbers. He stated that the Fund does have a reason and requirement to collect social
security numbers. He stated that the Fund needed to establish a policy statement
regarding the use of social security numbers. Mr. Harrison provided a draft policy
statement for the Board to consider and sample letters that need to be filed with the State.
Mr. Harrison reviewed the draft policy statement. He advised that if the Board adopted
the policy statement, he would prepare a Resolution for the next meeting. He
recommended the Board adopt the policy statement. A motion was made, seconded and
carried 4 -0 to accept the recommendation of the Attorney and adopt the policy statement.
Dave West entered the meeting.
Mr. Harrison discussed the Sudan Accountability Act, which is a federal law that was
recently passed. He stated that Florida had passed a similar act that required the State, not
municipalities, to divest security holdings in Iran and Sudan. He stated that the Federal
Government passed the Sudan Accountability Act, which gives the ability to the State to
require divestiture of security holdings in Sudan, and provides protection against a claim
of breach of any fiduciary duty if a board has to divest. He stated that he had a sample
letter if the Board decided it wanted to divest of any holdings in Sudan. He stated that
the Board is not required to divest, but can if it wants to. If the Board decides to divest,
there is this additional protection but there are requirements that need to be followed.
Mr. Harrison discussed the process regarding an IRS Determination Letter. He stated that
as the Board makes changes to the Plan, it is sometimes recommended that the Board get
an updated IRS Determination Letter. The IRS has looked at the various DROP plans
and has come out with a cycle for boards that want to apply for a Determination Letter.
There is a grace period from February 1, 2008 to January 31, 2009. Mr. Harrison
recommended that the Board apply for a Determination Letter. He stated that it has
probably been a long time since the Board has received a Determination Letter and one
was most likely not asked for after the Board instituted the DROP. He stated that their fee
to get an updated IRS Determination Letter for the Fund was $9,500, which includes the
$1,000 registration fee. He recommended the Board go forward and update the
Determination Letter. He stated that it puts the Plan in a strong status as a qualified plan.
A motion was made, seconded and carried 4 -0 to accept the recommendation of the
Attorney and go forward and update the Fund's IRS Determination Letter.
Mr. Rogers inquired if the 175 premium tax monies would go away with the tax
rollbacks. Mr. Harrison stated that there is always a possibility that the 175 premium tax
monies could go away as the Legislature can make changes. However, he did not think
that it would be affected by his latest reading of the recent tax legislation. He stated that
he did not think the tax rollback would have a big effect on the 175 monies, although it is
always possible.
INVESTMENT MONITOR REPORT
Dave West appeared before the Board. He discussed the investment performance for the
quarter ending December 31, 2007. The Fund was down 1.15% for the quarter while the
benchmark was down 1.08 %. The total market value of the Fund as of December 31,
2007 was $22,624,000. The asset allocation at market was 50% in equities; 38% in fixed
income; 5% in REIT; 7% in international; and 0% in cash.
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The total market value of the fixed income portfolio managed by Dana was $5,399,000.
The portfolio managed by Dana was up 2.4% for the quarter while the benchmark was up
2.89 %. The total market value of the fixed income portfolio managed by Galliard was
$3,251,000. The portfolio managed by Galliard was up 2.52% for the quarter while the
benchmark was up 3.0 %. Mr. West noted that the Board has had a lot of discussion about
this portfolio. He stated that Dana wants to avoid risk and want to be conservative. That
strategy is just not panning out. His recommendation was to move the bond portfolio
away from Dana and move to Galliard. He noted that Dana has been problematic for a
while now. He stated that Galliard had a tough quarter but has had much more consistent
performance. Galliard is potentially less risky because they will not take any more than a
2.5% exposure in any security. The Board stated that they would like to see the factors
and background of Galliard compared to Dana before making a decision as well as see
other possible managers. There was a lengthy discussion. Mr. West stated that he would
bring options to the next quarterly meeting for the Board to analyze. The Board decided
that there was not enough information to make a change today. However, since Mr. West
came to make a recommendation today they did not want to wait until the next quarterly
meeting. The Board scheduled a special meeting to consider an updated list of bond
managers for Wednesday, March 5 at 10:00 a.m.
The total market value of the equity portfolio was $12,782,000. Equities for the quarter
were down 3.61% while the benchmark was down 3.08 %. The equity portfolio managed
by Dana was down 3.21% for the quarter while the benchmark was down 3.34 %. The
total market value of the equity portfolio managed by Dana was $11,141,000. Mr. West
stated that Dana was in a headwind right now. The market environment has made it
difficult for managers with an equal weight process. He stated that he is fine with Dana
and they ended up even for the quarter.
There was discussion regarding the Investment Policy Statement (IPS). It was noted that
the Monitor Report as of December 31, 2007 does not match the IPS executed at the last
meeting. It was noted that the Report has the total Fund performance measured using
85% of the Russell 3000 while the IPS uses the S &P 500. Mr. West stated that the IPS
needs to be changed and it should be the Russell 3000 across the board. He
recommended for consistency that Section III (B) on page 2 should be 85% Russell 3000
and 15% EAFE. Mr. West stated that he would provide new information for the
December 2007 Report for the total equity. A motion was made, seconded and carried 4-
0 to change the Investment Policy Statement Section III (B) to 85% Russell 3000 and
15% EAFE.
The international equities managed by Voyageur Asset Management were down 6.36%
for the quarter while the benchmark was down 1.71%. The total market value of the
international equity portfolio was $1,641,000. Mr. West stated that he went to Boston and
met with the lead portfolio manager on this product. He stated that he was perfectly
comfortable with this manager and there has been no change in their process.
The REIT portfolio was up 2.78% for the quarter while the benchmark was up 3.21%.
The total market value of the REIT portfolio was $1,114,000. Mr. West stated that he met
with their key people at the FPPTA School in January. His concerns are how they current
credit environment effects their ability to borrow money to continue to operate. He stated
that they are unaffected by this because of the very low leverage rate. He stated that they
should not be reflected on total performance of the IPS because they are likely to change
to core, which is a difference benchmark. If they use the NCREIF, that will only limit the
fund. He stated that they should be tracked on a manager level and left out of the total
performance and executive summary.
There was discussion on Addendum B to the Statement of Investment Policy for Dana.
Mr. Harrison stated that he reviewed the Addendum and it was fine for the Board to
execute it. Mr. West noted that if there is a new bond manager, that will change. Mr.
Harrison discussed the requirement of reporting changes in the IPS to the State and noted
that such changes take effect 31 days after such filing. There was discussion on Schedule
A to the IPS. It was noted that perhaps they could list the asset classes rather than the
investment managers. Mr. West recalled that Mr. Sugarman wanted the investment
managers to be listed. Mr. Harrison stated that he would talk to Mr. Sugarman regarding
that and report back to the Board at the special meeting.
ADMINISTRATIVE REPORT
Ms. Adcock presented the list of disbursements to be made. A motion was made,
seconded and carried 4 -0 to approve the disbursements listed.
Ms. Adcock provided an update on the progress of the online benefit calculator.
OTHER BUSINESS
There being no further business, the meeting adjourned.
Respectfully submitted,
Tom Murphy, Secretary