MINUTES OF THE REGULAR MEETING OF THE POLICE OFFICERS' PENSION BOARD, MAY 27, 2011 Present: Chair Ron Baty, Secretary/Ireasurer Pamela Nadalini, Trustees Kevin Stiff and Tim Van Schultz Absent: Vice-Chair Jody Hudgins Others Present: Attorney Lee Dehner, Mr. Larry Cole of Burgess Chambers & Associates, Mr. Rey Reza and Kenneth Burke of Fayez Sarofim, Pension Plans Administrator Benita Saldutti, Pension Analyst Gail Loeffler, and Staff Member Diane Torres CALL' TO ORDER Chair Baty called the meeting to order at 8:17 a.m. APPROVAL OF THE REGULAR MEETING MINUTES OF APRIL 22,2011 On a motion of Seeretary/Irensurer Nadalini and a second of Trustee Van Schultz, it was moved to approve the minutes of the regular meeting of April 22, 2011. Motion carried unanimously. APPROVAL RE: DROP RETIREMENT REQUEST FOR MICHAEL MCHALE, VESTED TERMINATION BENEFITS FOR THOMAS LAUGHLIN, BILLY PHILLIPS AND DAVID ZAVOS Ms. Saldutti stated that Michael McHale has applied for DROP retirement beginning June 1, 2011, that he is 52 years of age with 22 years of service, and has selected the 100% Survivor Benefit option for spouse. On a motion ofTrustee Van Schultz and a second of T'rustee Stiff, it was moved to approve the DROP retirement request of Michael McHale. Motion carried unanimously. Ms. Saldutti stated that Thomas Laughlin terminated employment February 12, 2011, at 42 years of age with 14 years of service. She continued that he waived his right to begin receiving benefits at the age of50 and requested a refund ofhis contributions. On a motion of Seeretary/Irensurer Nadalini and a second of'Trustee Van Schultz, it was moved to approve the vested termination benefit for Thomas Laughlin. Motion carried unanimously. Ms. Saldutti stated that Billy Phillips terminated employment August 15, 2002, that he will be 50 years of age August 2011 and has elected to begin receiving a reduced monthly benefit with the Normal Retirement option. On a motion of Secretary/Irensurer Nadalini and a second of Trustee Van Schultz, it was moved to approve the vested termination benefits for Billy Phillips. Motion carried unanimously. May 27, 2011 1 Ms. Saldutti stated that David Zavos terminated employment in 1994, that he will be 50 years of age in September and has elected to begin receiving a reduced monthly benefit with the Normal Retirement option. On a motion ofTrustee Stiff and a second of Seeretary/Irensurer Nadalini, it was moved to approve the vested termination benefits for David Zavos. Motion carried unanimously. FAYEZSAROFIM INVESTMENT REVIEW Mr. Reza presented the portfolio performance through March 31, 2011. He stated that the portfolio is up 8.7% in the first five months of 2011 VS. the Russell 1000 Growth Index at 8% and the S&P 500 at 7.6%. He continued that the portfolio was up 14.7% VS. the Russell 1000 Growth Index at 16.7% and the S&P 500 at 15.1% in 2010. Mr. Burke presented the portfolio profile through March 31, 2011. He stated that consumer staple companies will be key beneficiaries of the rise of the emerging market consumer as the companies have dominant positions in the emerging markets. QUARTERLY INVESTMENT REVIEW Mr. Cole presented the quarterly investment review for the quarter ending March 31, 2011, stating the investment gain was $5,020,672. He stated that the investment return net of fees was 3.4%. He recommended that $2 million be moved from large cap equities to the convertible managers. On a motion of ecretary/Ireasurer Nadalini and a second of Trustee Van Schultz, it was moved to approve $2 million be moved from the large cap equities to invest $1 million into Adyent Convertibles and $1 million into SSI Conyertibles. Motion carried unanimously. Secretary/Ireasurer Nadalini questioned whether the current assumed investment return of 8% is too high. Mr. Cole stated that 8% is a reasonable assumption rate as the Fund has exceeded that over the long term. Mr. Cole reported the status of the contract with Frontier Capital stating that the one issue pertaining to the lost opportunity costs is believed to be resolved. He stated that the contract should be executed by the end of the current day or no later than the week ofMay 30, 2011. Attorney Dehner stated that Frontier Capital is requesting the lost opportunity costs be measured against the appropriate index with a cap equal to 2 years of their fees. Secretary/Ireasurer Nadalini stated that she is concerned that Frontier Capital does not want to honor an agreement they made during the interview. She continued that she does not feel very comfortable starting a business relationship ifthe company is already going back on their word. On a motion of' Trustee Van Schultz and a second ofTrustee Stiff, it was moved to proceed with the contract providing Frontier Capital fully complies with the stipulations agreed at the interview. Motion carried by a 3-1 vote with Seretary/Irensurer Nadalini dissenting, May 27, 2011 2 STATUS RE: CONTRACT WITH FRONTIER CAPITAL AND APPROVAL OF INVESTMENT ADDENDUM Attorney Dehner stated that the Addendum to the Investment Policy, prepared by Mr. Cole, is acceptable. On a motion ofTrustee Van Schultz and a second ofTrustee Stiff, it was moved to approve the Addendum pending approval of the contract with Frontier Capital. Motion carried by a 3-1 vote with ecretary/Ireasurer Nadalini dissenting. STATUS RE: DISABILITY REQUEST OF RICHARD CONWAY AND JANINE CROUGH Attorney Dehner stated that Janine Crough' 's medical, workers' compensation and personnel records have been requested. He continued that interrogatories have been sent to Richard Conway, however, the answers have not yet been reçeived. OTHER MATTERS: Legislative Update Attorney Dehner stated that SB 1128 was passed by the Senate and HB 7142 was passed by the House of Representatives. He stated that he will be participating in a conference call with the Division of Retirement, other pension attorneys and actuaries to receive clarification on some of the issues. Financial Statements Attorney Dehner stated that Trustees must return the financial statements by July 1, 2011. Public Records Training Ms. Saldutti stated that ManaSota League of Cities is working with the Office of the City Auditor and Clerk to provide educational training on parliamentary procedure, public records, and Government-in-the-Sunshine laws. Next Meeting The next regular meeting will be at 8:15 a.m. on Friday, June 17, 2011, in the City Commission Chambers. ADJOURN The meeting was adjourned at 10:05 a.m. Chair Baty Secretary/lreasurer Nadalini May 27, 2011 3