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2011-11-03 Police Fund Meeting� • • OKEECHOBEE POLICE PENSION BOARD MEETING November 3, 2011 Called to Order: 5:10 PM by Jamie Mullis Present: Bettye Taylor Russ Cale Bill Bartlett Ray Worley Absent: Chief Dennis Davis Bowen & Haynes: David Kelly Spoke: This is a synopsis Good news is that the new fiscal year to date we are up 8.8%. The bad news is that we were up almost 16% and then in August and September we lost all of our returns for fiscal year. We have had tremendous volatility. What this means is that three things are affecting this. Europe, China and US are all having good news right now. We had gotten such bad news out of Europe that the market was way down. We were hoping last year that we would have a trading range that was down around 12000 but we had such bad news out of Europe that it got down to 10000 and 11000. We are maxed out in stocks capitalizing at 60% at cost. If we thought this would not turn around we would pull back on stocks and put the money in cash. We have cash just earmarked for bonds. Volatility is here with us. We have a � little bit of room at 60% to 65% market value. We think there is a drum beat for more growth. We are working in a welfare state borrowing a lot of money but think people are starting to realize that businesses are what employ people not government. Greece and Italy are an example of what happens when countries out borrow themselves. In the last 100 years there have been over 200 defaults of countries. There is a pattern of history of governments over spending and the debtors paying for it. We are hoping the Central Bank will get out in front of these issues. Portfolios had 8% or 9% cash. We are tapped out on the stock portfolios. We are on a buy and hold with stocks. What are coming down the pike are more domestic energy policies. The last couple of years have been very difficult to make any head winds to develop any natural resources. We are buying high quality stocks. We are up 8% in one month. Hoping these numbers will be improved on. Tim Nash of Bogdahn asked David Kelly to explain the Treasury bond portfolio. Bond Portfolio — We only own one inflation indexed Treasury bond. We don't like Treasury Bonds because the interest rates are artificial low and manufactured to be low. An anything that is artificial we stay away from it. That is the wrong path in the short term. Our Treasuries have been very attractive and the index has about half Treasuries. We are out of one total asset class which has affected us. We are outside on the Treasury Market. We are not buying Treasuries because they are extremely sensitive to the market. The Federal Reserve's artificial lowers when needed. It is easy to move money around the market looking for a safe haven. It is easy to push a button buy Treasuries and then wait on a class to lift. We are not going to buy Treasuries in the foreseeable future because they are artificially lowered by the Federal Reserve. They think when the market comes back the Treasury will be the last bet. They are positioned portfolio to do better and better in the economy. The third world bonds are inflation indexed. The last year we were not totally out of the asset class. � Tim Nash of Bogdahn Group: This is a synopsis "Tim Nash introduced a fellow consultant Jack Evatt. Tim stated, due to scheduling conflicts, Jack Evatt � would be meeting with the three boards on an ongoing basis. Tim noted he could always be reached anytime the Plan needs him. Tim and Jack discussed the investment environment and Plan returns. For the quarter ending September 30, 2011, the total market value of the Police Fund decreased from $5,404,898 to $5,385,694. The quarterly dollar decline of the Fund was ($792,718). The quarterly tota) fund investment return of (-12.61) % underperformed the benchmark return of (-7.98) % and ranked in the 90th percentile of the Public Fund Plan Sponsor Universe. The fiscal year dollar decrease of the Fund was ($188,859}. The fiscal year total fund investment return of (-1.91) % underperformed the benchmark return of 2.00% and ranked in the 85`h percentile of the Public Fund Plan Sponsor Universe. The range of returns for public pension funds in the sample for fiscal 2011 was as high as 4.00% and as low as (-3.85) %. The asset allocation of the Fund as of September 30, 2011 is as follows: 60.9 % Domestic Equity, 29.9% Fixed Income and 9.2% Cash. The total domestic equity portfolio returned (-18.32} % vs. the Standard & Poor's 500 Index at (-13.87) %. Fiscal year to date the domestic equity portfolio returned (-3.03) % underperforming the Standard & Poor's S00 Index at 1.14%. The domestic equity quarterly and FYTD returns ranked in the 925Y and 87'h percentile, respectively. The third quarter was extremely difficult for global equities as virtually all market segments, styles and countries experienced "double- digit" losses. During the quarter, the equity market reacted negatively to "resolved" issues including the debt ceiling debate, the U.S. sovereign downgrade and the Fed's $400 billion "twist". While markets almost always react negatively to uncertainty, the events listed above make it clear that unwanted resolutions often are not viewed very favorably either. The fixed income portfolio under-performed the benchmark for the quarter largely due to the lack of � Treasury bond holdings. Over 40% of the Barclays Aggregate Index is invested in Treasury Bonds which were the best performing sector for the quarter. The fixed income portfolio returned (-0.34) % vs. Barclay's Aggregate Index at 3.82% for the quarter. Fiscal year to date the fixed income portfolio returned 1.22% underperforming the Barclays Aggregate Index which returned 5.26%. The fixed income quarterly and FYTD returns ranked in the 100`h and 100th percentile, respectively. We strive to be in the top 40t'' percentile compared to other pension funds over the long term. Historically the total fund has performed well, ranking in the top 34th percentile for fiscal 2010, top 55`h percentile for fiscal 2009 and top 17`h percentile for fiscal 2008. Ritter from OUA: do you know if this will continue because of it being election year? Also Corp earnings are up so why no jobs? Tim Nash: The election year is significant and both parties are polarized to issues. Each of the players has a reason to want election year to look better. The corporations are holding up on hiring because they are waiting to see the outcome of the insurance issue and the regulations being put into place. The companies are making what product they can with the current amount of employees and not increasing until they know what the government is going to do. Attorney Scott Christiansen: This is a synopsis Make sure Form 1 is filled out for new members and leaving members. Fiscal yearend report letter needs to be done and go to the council. It can be addressed to the City Administrator for the Council. This is letter #2 in package. � Meeting dates have been submitted if there is an issue let me know. � Legislature: Bill 365 as been pre-filed with the House. Pension members should read it. It will affect the diseases that are currently covered. Letter from McBee with $100.00 fee increase for year ending September 2011 report. Christiansen has not seen it and wants to review it before board signs it. It can be approved pending his approval. Regular Meeting adjourned at 6:00 PM Police Board Meeting called to order at 6:00 PM by Russ Cale acting Chairman. There were three sets of minutes to be approved. Bill Bartlett made motion to approve all three minutes. Ray Worley seconded motion. Passed all in favor. Bill Bartlett made motion to approve Expenditure report seconded by Russ Cale. Passed all in favor. Bill Bartlett made motion to approve McBee letter pending approval by Attorney Scott Christiansen. Cale seconded motion. Motion passed all in favor. Scott Christiansen reviewed the requested Ordinance and advised that it defined salary. Bill Bartlett made motion to approve Ordinance and send to City Council. Ray Worley seconded motion. Passed all in favor. � Ray Worley made motion to adjourn meeting at 6:10 PM. Motion seconded by Bill Bartlett. Passed all in favor. Bettye Taylor--Secretary