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HomeMy WebLinkAbout11-19-2002 Minutes Minutes of the Quarterly Meeting of the CITY OF OCOEE GENERAL EMPLOYEES PENSION BOARD Held on November 19, 2002 At 150 N. Lakeshore Drive Ocoee, FL 34761 Chairperson Tom Ison called the meeting to order at 10:15 a.m. He advised those in attendance that Trustee Ed Bishop had run unopposed for reelection to his position on this Board and was therefore reelected for a two-year term. On motion made by Trustee Vogt and seconded by Chairperson Ison,the Board unanimously Resolved to approve the election of Ed Bishop to serve as Trustee for the two-year term beginning October 1,2002 and ending September 30,2004. Chairperson Ison then called the roll. Those present were Chairperson Tom Ison,Trustee John Vogt and Trustee Ed Bishop. Trustees Patricia Cornell and Mike Miller were both absent due to illness, however, it was determined that a quorum was present. Attending the meeting by invitation were Attorney H. Lee Dehner, Diane Garcia and Tim Nash, representing TRUSCO Capital Management, Larry Cole, representing Merrill Lynch, and Jo Ann Lacey, Recording Secretary of the Meeting. Four General Employee Members were also present. Chairperson Ison advised that the minutes of the meeting of the General Employees Pension Board held on August 8, 2002, had been circulated to all Trustees for review. The Trustees were asked if there were any corrections or additions to the minutes. There being none, it was, on motion made by Trustee Bishop and seconded by Trustee Vogt, unanimously RESOLVED,that the minutes of the Board of Trustees of the General Employees Pension Board of August 8,2002, be and they are hereby approved as presented. Chairperson Ison then called upon Tim Nash for the Money Manager's Report. Mr.Nash called the Board's attention to the printed report from TRUSCO,pointing out that this is the report for the Fiscal Year Ended September 30, 2002. He advised that this has been a totally different market environment and that there has just been"no place to hide"as every sector of the market has been negative. He stated that the Fed had again lowered interest rates by 50 basis points just one week ago and that decrease should help. He said that interest rates are very low now and that one of the things needed to boost the economy would be for corporate spending to increase. Mr.Nash advised that government spending was on the rise,that a defense budget of$293 Billion had just been approved,thus TRUSCO had been and would continue going overweight in industrials, i.e., General Dynamics, Lockheed Martin, railroads, etc. He also said they were General Employee Pension Board Meeting November 19,2002 Page 2 of 5 gradually shifting out of the Treasury Bonds, which were yielding only 4%, into corporate and mortgage-backed bonds, which yield about 6%. Mr. Nash reported the Cash Flow for the Quarter was down and that the Portfolio Value at Fiscal Year End was $7,401,424.00. He went on to say that things were improving already in this new quarter and that through mid-November,that value was steadily climbing back up. He said all of that would be reported in the next quarterly meeting. He pointed out that the Performance Comparison for the 60 months ended September 30, 2002, showed earnings of only 3.97%, which was well below historic norms. He said that the all time market high was in 1999 and the all time market low was at the end of September 2002. He pointed out the Asset Allocation as 53% in Equities and 47% in Bond Funds. Referring to the various Fund Fact Sheets, Mr.Nash pointed out that because of the additional defense spending which was anticipated,the portfolio was overweight in industrial type stocks as well as information technology. He said that the managers are extremely selective in the tech stocks, investing in companies such as Microsoft and Intel, companies which have solid earnings and are product based. He said they are also investing in companies such as Masco,which is involved with home improvement products. He advised that the international funds are being looked at daily and weekly. He said the managers are currently evaluating international,that they have been looking for the U.S. economy to become somewhat stronger before increasing exposure,but may soon be adding more international. Attorney Dehner asked Mr. Nash if he had the proxy guidelines, which had been requested at the last meeting. Mr.Nash advised that TRUSCO's attorneys are still in the process of amending those guidelines and he would make them available to the Board as soon as they were ready. Attorney Dehner then asked Mr.Nash if he knew of any corporate malfeasance for any of the items held in this portfolio. Mr. Nash advised that they knew of one, in the High Grade Growth Fund: Tenant Healthcare. He said this is an HMO organization that has had two doctors accused of defrauding Medicare and that a SEC investigation was to be getting underway. He advised that this had just happened in October and that TRUSCO had an exit strategy in the works at the present time. Attorney Dehner asked Mr. Cole to look into the handling of this and advise the Board of his findings. Mr. Cole stated that there was nothing to report at present as this was an investigation that was just getting started, that nothing had yet been decided or charged. Attorney Dehner told him that the Board would like his opinion as to whether the retention or disposition of the holdings was handled in a prudent manner by TRUSCO. Mr. Cole agreed to report on that. Attorney Dehner asked both Mr.Nash and Mr. Cole to add a page into their reports regarding any of these kinds of problems, for the Board's information and discussion. He then mentioned Adelphia and asked what the results of that review had been as that was one of the items mentioned at the last Board C, General Employee Pension Board Meeting November 19,2002 Page 3 of 5 meeting. Mr. Cole advised that he had already reviewed that situation and had reported in writing that it had been handled in a prudent manner. Mr. Nash said that TRUSCO was now working on a report to be included each quarter which will report on stocks with a greater than 20%change. Trustee Bishop asked what time periods the report would be comparing. Mr.Nash responded that they would be comparing each quarterly reporting period. Following a brief discussion, Chairperson Ison thanked Mr.Nash for his report. He asked Diane Garcia about the Agenda Item for a discussion of Proxy Policy Guidelines. She advised that those Guidelines were still being revised and would be made available as soon as possible, perhaps by the next meeting. Chairperson Ison stated this particular item would be carried forward to the Agenda for the next meeting and then called upon Mr. Larry Cole for the Money Monitor's report. Mr. Cole began with an apology to the Board because they did not have the Merrill Lynch report in hand. He said he believed that through a clerical error, all of the reports had been sent to Trustee Miller. He assured the Board that he would make arrangements to see that sort of thing did not happen again and agreed to get copies to the Board as soon as possible. Mr. Cole went on to say that on a relative basis, TRUSCO had done a good job considering that there was"nowhere to hide" as Mr.Nash had previously mentioned. He said that this was the third consecutive calendar year with a negative S&P 500. He reminded the Board, however, that the market bounces back. He suggested that this is the best time to buy stocks since 1930. He stated that arrests of CFOs and CEOs which were being reported in the news on an almost daily basis was good for the market,that holding someone accountable was reassuring to the investor. He added that because of the excesses that had been in the market, a correction over the last two years had not been expected. He stated that"no earnings" stocks were the best in the last couple of years, that they had dominated the market. Referencing his report, Mr. Cole reported that though there was a 6.9% loss in this portfolio for the quarter, it had been a good quarter, relative to the peers of the Fund. This loss ranked in the top 18 percentile. He reported that for the Fiscal Year End,the Fund was down 4.9%, which ranked in the top 21 percentile. He added that, looking out for six years, there had been an average increase of 6.8%per year, a lot of that because the last two years the returns had been 11.7%per year. He pointed out that the S&P 500 had an average of only 4.4% annualized for six years,that Treasury Bills had an annualized average for six years of 4.8%. He said that had been a good run,but the bond market was done and that investors must look at stocks for return of some of the losses. Mr. Cole went on to say that the objectives of the fund are being met in all cases with the exception of the actuarial assumption rate, which was not possible in this market. Referring to the Florida Ranking,the Plan ranked 20 out of 88 for the past period. He General Employee Pension Board Meeting November 19,2002 Page 4 of 5 reminded that the asset allocation made a huge difference and that this again confirms that diversification is the key to weathering these market conditions. Mr. Cole advised that USA Today had just had an article about Tenant Healthcare and its review. Chairperson Ison asked if they were being investigated for fraud. Mr. Cole stated that fraud is hard to prove, but they were looking for people to blame. Chairperson Ison thanked Mr. Cole for his report and asked if there were any questions. Trustee Vogt asked about the list of money managers for the top 30 funds on the Florida Ranking list. Mr. Cole advised that he had followed up on that request following the last meeting and it was available. Trustee Vogt said he would be interested in seeing that list and Mr. Cole agreed to have it made available either by mail to the Trustees' home addresses or to bring it to the next meeting. Chairperson Ison referred to the Meeting Agenda and noted that the next item was for the Valuation Report from Foster& Foster. No representative of Foster&Foster was in attendance at the meeting, so this item was also to be brought forward to the next meeting. City Clerk Jean Grafton advised the Board that the General Employee Members had expected their valuation reports to be available at this meeting. General discussion ensued and it was suggested that those valuation reports could be sent to Trustee Vogt for distribution. Trustee Vogt asked if it would then be necessary to have a workshop session. Chairperson Ison advised that it would be necessary to have a workshop and discussion and that he would not be opposed to calling a Special Session for that purpose when the reports were available. Chairperson Ison asked Trustee Vogt for a report on the status of Ordinance currently before the Commission. Trustee Vogt stated that it was expected to be approved at the City Commission meeting which, would be held this same night. The next Agenda item was for payment of bills, copies of which were included in the Trustees' packets. Chairperson Ison asked if there were any questions or comments. There being none, it was, on motion made by Trustee Bishop and seconded by Trustee Vogt,unanimously RESOLVED that the list of bills be approved and paid as presented. Chairperson Ison then called upon Attorney Dehner for comments. Attorney Dehner advised that most of his comments had already been made,however,he advised that one thing that had been coming up around the State in other funds, was retirees who were interested in become re-employed, coming back to work with the City. He said that if that case were to come up here, it would be important to call him first and that he would need to get correspondence out to Fran Deidrich to apprize her of the situation. He added that there would be guidelines set forth for this regarding suspension of benefits. He stated that doing any of this would require amendments to this Plan and it might require a Special Session to get it done. (ikryChairperson Ison thanked Attorney Dehner for making the Board aware of the possibility of this situation arising and letting them know how it should be handled. General Employee Pension Board Meeting November 19,2002 Page 5 of 5 Chairperson Ison then began a discussion regarding setting the Agenda for the next meeting, which is scheduled for Wednesday, February 12, 2003. He commented that several items would need to be carried forward to that meeting, including the Foster & Foster Valuation Report, unless it was determined that a Special Session would need to be held prior to that date. He asked for any comments. There being none,the meeting was adjourned at 11:38 a.m. Respectfully submitted Jo Ann Lacey, Recording Secretary of the Meeting Approved By: Tom Ison, Chairperson L L