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CITY OF CAPE CORAL MUNICIPAL POLICE OFFICERS’ PENSION TRUST FUND BOARD OF TRUSTEES MINUTES OF QUARTERLY MEETING AUGUST 2, 2012 The meeting was called to order at 8:33 A.M. in the Community Room located in the Cape Coral City Complex. Those Trustees present on behalf of the Cape Coral Municipal Police Officers’ Pension Trust Fund were Christopher Ellis, David Toumey, Lyndia Bradley, and Michael Urraro. Also Present: Linda Runkle & Robert Kovacs, Pension Resource Center Jeff Swanson, Southeastern Advisory Services Steve Stack, ICC Capital Management Lee Dehner, Christiansen & Dehner Doug Lozen & Ferrell Jenne, Foster & Foster Victoria Bateman, City Finance Director Kurt Phares, Delaware Investments Christine Formoso, Steven Civera & Paulo Silva, Penn Capital Management APPROVAL OF MINUTES The Board reviewed the minutes of the meeting held May 3, 2012. David Toumey made a motion to approve the minutes. Lyndia Bradley seconded the motion, approved by the Trustees 4-0. INVESTMENT MANAGER REPORT: DELAWARE INVESTMENTS Kurt Phares appeared before the Board on behalf of Delaware Investments to provide a report on the performance of the MBS Fund, U.S. Governmental Mortgage Backed Securities. Mr. Phares explained that Delaware Investments joined the Macquarie Group in 2010. The MBS fund seeks to provide a positive absolute return by investing in U.S. Government backed fixed income securities, with particular focus on Agency MBS. He advised that the investment objective seeks to return Libor plus 300 basis points annually, with no negative rolling quarters. Mr. Phares reported that the current value of the portfolio is $4.14M, and that the yield for the quarter was 2.76%. He advised that a realistic goal for investment earnings is 3.5%. INVESTMENT MANAGER REPORT: PENN CAPITAL MANAGEMENT Christine Formoso, Steven Civera, and Paulo Silva appeared before the Board on behalf of Penn Capital Management to review performance of the Small-Mid Cap Equity portfolio. Mr. Silva advised that the value of the portfolio on June 30, 1 CITY OF CAPE CORAL MUNICIPAL POLICE OFFICERS’ PENSION TRUST FUND BOARD OF TRUSTEES MINUTES OF QUARTERLY MEETING AUGUST 2, 2012 2012 was $7.79M, down from $8.65M on March 31, 2012. He reported that although the loss for the quarter was 10%, the current value is up 2%. Jeff Swanson explained that Penn Capital Management has been under review status since the third quarter of 2011. He advised that the first quarter of 2012 showed positive performance, but that the second quarter of 2012 was poor. Mr. Swanson recommended that the Board move forward with a manager search to replace Penn Capital Management. INVESTMENT MANAGER REPORT: ICC CAPITAL MANAGEMENT Steve Stack appeared before the Board on behalf of ICC Capital Management to review the performance of the portfolio for the quarter ending June 30, 2012. He advised that the value of the portfolio was $14.32M on June 30, 2012, down from $15.28M on March 31, 2012, a loss of -6.27%. He reported that many companies are doing well, are paying down debt, and have cash, and explained that “the companies are not broken, the stocks are”. Jeff Swanson explained that ICC Capital Management has been under review status since the fourth quarter of 2012. He advised that the first quarter of 2012 showed positive performance, but that the second quarter of 2012 was poor. He recommended that ICC Capital Management be given additional time to improve performance, stating that the margin of underperformance was not as dramatic as that of Penn Capital Management. INVESTMENT CONSULTANT REPORT Jeff Swanson appeared before the Board on behalf of Southeastern Advisory Services to provide a report on performance of the portfolio for the quarter ending June 30, 2012. He reported that the portfolio experienced a 2.8% loss for the quarter, and advised that the portfolio value has increased by 11.5 % fiscal yearto-date. The total value of the fund of June 30, 2012 was $87.2M. Mr. Swanson reviewed the investments in the portfolio and explained that real estate, fixed income, and Delaware MBS were the positive investments for the quarter. He advised that he will bring recommendations to replace Penn Capital Management at the next quarterly meeting. Mr. Swanson recommended that the Investment Policy Statement be modified to adjust the target return for Delaware Investments MBS Fund to Libor + 300 basis points. Lyndia Bradley made a motion to modify the Investment Policy Statement in accordance with Mr. Swanson’s recommendation. The motion was seconded by David Toumey, approved by the Trustees, 4-0. 2 CITY OF CAPE CORAL MUNICIPAL POLICE OFFICERS’ PENSION TRUST FUND BOARD OF TRUSTEES MINUTES OF QUARTERLY MEETING AUGUST 2, 2012 ACTUARIAL ASSUMPTION CHANGES: EXPERIENCE STUDY Doug Lozen appeared before the Board on behalf of Foster & Foster to answer questions about the Experience Study that was presented to the Board on May 3, 2012. Mr. Lozen advised that assumption changes must be implemented by the Board based upon reasonable expectations that rely upon actual experience. Lyndia Bradley made a motion to reduce the investment earnings assumption from 8% to 7.75%. The motion was seconded by Michael Urraro, approved by the Trustees 4-0. Lyndia Bradley made a motion to implement the 7.75% investment earnings assumption for the 2012 Actuarial Valuation. The motion was seconded by Michael Urraro, approved by the Trustees, 4-0. David Toumey made a motion to accept all proposed actuarial assumption changes presented by Foster & Foster, as outlined in the Board Minutes of May 3, 2012. The motion was seconded by Lyndia Bradley, approved by the Trustees 4-0. Lyndia Bradley made a motion to implement all assumption changes for the 2012 Actuarial Valuation. The motion was seconded by Michael Urraro, approved by the Trustees 4-0. Mr. Lozen discussed the Foster & Foster Memorandum Regarding Funding Requirements. He advised that the State of Florida permits the annual required contributions to be calculated as a percentage of payroll, or in actual dollars. It was a consensus of the Trustees and Finance Director Vickie Bateman that dollars are easier to understand. Lyndia Bradley made a motion that the 2012 Actuarial Valuation will reflect required pension contributions in dollars. The motion was seconded by David Toumey, approved by the Trustees 4-0. ATTORNEY REPORT Lee Dehner presented the proposed ordinance prepared by the City Attorney’s Office. He explained that the new definition of “salary” for the calculation of benefit entitlement will be limited to 300 hours of overtime, and the effective date for determination of compensable vacation balances will be February 7, 2012. 3 CITY OF CAPE CORAL MUNICIPAL POLICE OFFICERS’ PENSION TRUST FUND BOARD OF TRUSTEES MINUTES OF QUARTERLY MEETING AUGUST 2, 2012 Lyndia Bradley made a motion to accept the ordinance. seconded by Michael Urraro, approved by the Trustees, 4-0. The motion was Mr. Dehner reviewed the memorandum from Christiansen & Dehner regarding benefit overpayments. Linda Runkle advised that Foster & Foster provides an annual review of pension benefits, and she explained that the Pension Resource Center and Salem Trust Company coordinate and confirm pension benefit payments on a routine basis. Mr. Dehner advised that new legislation effective July 1, 2012, requires that the birth dates of police officers be redacted from public records. He also reported that beneficiary designations must be updated after a divorce in order for an exspouse to be legally recognized as a beneficiary. Mr. Dehner requested that a special meeting be scheduled for the purpose of determining whether the Board has probable cause to schedule a pension forfeiture hearing in the matter of prior police officer Albert Arroyo. Mr. Dehner reported that he has completed a review of records and interviews that will be presented to the Board for consideration prior to the special meeting. ADMINISTRATIVE REPORT The Trustees reviewed the disbursements and benefit approvals provided by the Administrator for review. David Toumey made a motion to approve the disbursements and benefit approvals as presented. Lyndia Bradley seconded the motion, approved by the Trustees 4-0. Linda Runkle discussed the Notice of Election for Michael Urraro’s Trustee term, which expires on October 31, 2012. The new term will run from November 1, 2012 through October 31, 2016. Mr. Urraro has expressed interest in serving another term. Nominations will be accepted from August 13-29, 2012, and the election will be held September 24-26, 2012. Ms. Runkle explained the fee adjustment proposal on behalf of the Pension Resource Center. Lyndia Bradley made a motion to increase the monthly fee for services to $1,700.00, effective September 1, 2012. There will not be an automatic COLA, rather, an increase will be proposed by the Pension Resource Center in the future. The motion was seconded by Michael Urraro. David Toumey did not participate in the vote due to a conflict of interest. Form 8B, Memorandum of Voting Conflict, is attached to the minutes. The motion was approved by the Trustees, 3-0. 4 CITY OF CAPE CORAL MUNICIPAL POLICE OFFICERS’ PENSION TRUST FUND BOARD OF TRUSTEES MINUTES OF QUARTERLY MEETING AUGUST 2, 2012 SCHEDULE NEXT MEETING With there being no further business and the next quarterly meeting scheduled for November 1, 2012, the meeting adjourned at 10:20 A.M. Respectfully submitted, Lyndia Bradley, Secretary 5