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08-11-1999 Minutes kid THE CITY OF OCOEE POLICE OFFICERS' /FIREFIGHTERS' RETIREMENT BOARD MEETING - August 11, 1999 Chairman REED called the meeting of the City of Ocoee Police Officers'/Firefighters' Retirement Trust Fund to order at 1:02 p.m. in the Commission Chambers Conference Room of City Hall. The roll was called and a quorum declared present. PRESENT: Chairman Reed, Members Gledich, Williams, and Wilson. Also, present were Attorney Delmer, Actuary Foster (arrived late), Money Manager Senderowitz, and Sue Mela for Recording Secretary Judie Lewis. ABSENT: Member Strosnider and Performance Monitor Mike Callaway from Merrill Lynch. APPROVAL OF MINUTES Chairman REED presented the Police Officers'/Firefighters' Retirement Trust Fund Minutes of May 13, 1999, and also, June 18, 1999 for acceptance and approval. He said that as directed the Summery Plan Description, and Selected Provisions of Operating Rules and Procedures of the Board As Pertaining to Members of the Plan, as referred to under Attorney Comments, No. 1, of the June 18, 1999 minutes on page six (6), had kre been distributed on June 23, 1999 to the Police/Fire membership. Member GLEDICH, seconded by Member WILSON, moved to approve the Minutes of the May 13, 1999, and also, the June 18, 1999 Police Officers'/Firefighters' Retirement Trust Fund meetings as presented. Motion carried 4 -0. QUESTIONS /COMMENTS FROM AUDIENCE Lt. Wayne VAUGHN and Assistant Fire Chief Richard FIRSTNER were present for the meeting but had no comments at this time. OTHER BUSINESS AUTHORIZE/RATIFY PAYMENT OF BILLS A summary of payment vouchers had been distributed during the meeting. Chairman REED said that 99 - 06 - 02 - The Breakers check had been returned to SunTrust, Inc. (STI). There had been a problem with the reservation for that conference. Mr. REED asked for ratification of payment, and requested approval by the Board of the bills that had been presented to STI for payment. Member WILLIAMS, seconded by Member GLEDICH, moved to authorize and ratify payment of the bills. Motion carried 4 -0. PENSION PLAN IMPROVEMENTS Chairman REED presented a letter of June 25, 1999 from Actuary Ward Foster regarding Actuarial Analysis of Benefit Improvements. Actuary Foster wrote that in response to the direction of the Board, they had performed a special actuarial analysis to Police Officers' /Firefighters' Retirement Trust Fund August 11, 1999 determine the costs associated with the implementation of the following benefit improvements: Option 1 - Provide for retirement following the completion of 25 years of credited service, regardless of age. Option 2 - Provide for retirement following the completion of 20 years of credited service, regardless of age. For purposes of this analysis, service was not imputed in determining the date when deferred vested and early retirement benefits are payable. For example, under Option 1, if a member terminates employment at age 35 with 15 years of service, the unreduced vested benefit is payable at age 55, not at age 45 (when the member would have completed 25 years of service). The cost impact, determined as of October 1, 1998, is as follows: Current Option 1 Option 2 Total Required Contribution $ 897,494 $ 921,625 $ 1,063,246 % of Total Annual Payroll 25.9% 26.6% 30.7% Expected Member Contributions 262,919 262,919 262,919 Expected Date Contributions 111,604 111,604 111,604 Balance From City 522,971 547,1025 688,723 %of Total Annual Payroll 15.1% 15.8% 19.9% Cost Increase 24,131 165,752 % of Total Annual Payroll 0.7% 4.8% Discussion ensued about the Chapter 175/185 requirement if they reduced their early retirement penalty from its current 6 to 7% to where it now could not be more than 3 %. This would induce a cost to the City for the Plan. (Actuary FOSTER arrived at approximately 1:15 p.m. to the meeting.) Actuary FOSTER reported that a letter of July 28, 1999, regarding Police Officers' and Firefighters' Pension Plan Amendments to Chapters 175 and 185, Florida Statutes would have certain effects of the amendments to 175/185. In summary, there were two significant provisions. The amendments established some minimum benefits provisions to local ordinance plans. The Ocoee Police/Fire plan was a local ordinance plan and they must make sure that all the benefits were consistent with these amendments. If they were consistent and we had to make improvements, the State allowed us to fund the cost of the 2 Police Officers' /Firefighters' Retirement Trust Fund August 11, 1999 improvements through incremental increases in the State money. This meant that the amount in our regular June distribution for 1998 would be the base line, and the dollar amount would be frozen for purposes of determining the City's contribution amounts for the Plan until the State money increased to the point where we could implement any minimums to help them out. Only one was necessary. At some point, the Board needed to adopt an early retirement reduction factor which could not exceed 3% per year. Accordingly, the actuarial equivalent had a definition. If someone goes out under early retirement their benefit was reduced from the formula benefit to reflect that the benefits were going to be paid over a longer period of time, and the deduction was about six (6) to seven (7) percent per year. If someone goes out five (5) years early, their benefit could be reduced to approximately one - third. Under this provision, if someone goes out five (5) years early, their formula benefit was only reduced three (3) percent a year. That meant they would get a three (3) percent reduction or 85% of the formula benefit. That was a significant improvement. It was cutting the penalty more than one -half and made early retirement more attractive. In response to an inquiry about the division's position on whether we could change from 50 to 45 (making an actuarial reduction) as the statutory early retirement age which was 50, and the Plan's which was 45 and 5 by Attorney DEHNER, Actuary FOSTER advised the Plan to lower it. He said that it was only the reduction cycle which could not exceed three (3) percent between the Plan's normal retirement date and the statutory early retirement date (50). The Plan could do whatever they wanted between 50 and 45. For purpose of their analysis, Actuary FOSTER said that they had done what most plans were doing, and that was to continue the three (3) percent early retirement reduction from 50 down to 45. Members going out early would be subject to a three (3) percent pre - exemption. The other thing was that the Statutes were now clear in that the State contribution amounts were to be used to provide extra benefits to Police Officers and Firefighters over and above the benefits provided to the City's General Employees. They had not had that clarification. The way that they determined that was whether or not the State money was in fact being used to provide extra benefits as compared by the City's funding rate to this Plan against its funding rate for the General Employees Plan. There were a number of ways of doing it but the rigorous test would almost always bear out the same conclusion. The City was funding this Plan to the tune of 15.1 percent of payroll. They were only funding 9.8 percent to the General Employees Plan. They were not using the State to lower their costs of the funding for this plan. It was their opinion that the State money was in fact being used to provide extra benefits. That really was not an issue. He said that we had only one small improvement standing between where we were now and complete compliance with Chapter 175 and 185, as far as the substance provision of the current one. The question now was that we knew what the 1999 State contribution was and we also knew for a fact that it represented a $2,239.50 increase, compared with the amounts received in 1998. He said that the question was whether or k ive not this amount could buy us the three percent early retirement reduction. 3 Police Officers' /Firefighters' Retirement Trust Fund August 11, 1999 kid Actuary FOSTER referred to his August 10, 1999 letter to Chairman Reed regarding the Analysis of Costs to Comply With Minimum Benefits in Chapter 99 -01, and said that it showed the total required contribution for the current plan versus the total required contribution for the proposed improvement, 3 percent for the early retirement reduction, and saw that it would require an additional $9,660 per year to provide this subsidized early retirement benefit. The Fund only had $2200 to work with. This meant we were not required to implement the early retirement reduction. We were only required to do it if increases in State money were sufficient to fund it. He said that what it meant was our early retirement absent the generosity of the City to just go ahead and implement the improvement. You could keep the early reduction retirement where it was and wait to see if next year the difference between the 2000 State money and the 1998 money was $9600. We would still use the 1998 State money as our benchmark. In addition, the City would continue to fund this Plan based upon the frozen base line 1998 amount. They could not use the $2200 to reduce their costs until all the minimums were in place. In response to Chairman REED's question of whether or not this was a bookkeeping system as far as the dollar amount, Actuary FOSTER said that now that we had done this, they will report to the City on what the minimum requirement from City sources were to the year ending September 30, 1999, the current year. They were projecting the cost developed at the October 1, 1997 to the current year, September 30, 1999. A letter will be written to the City telling them exactly what they must contribute for the current year. There had been some questions about that in the past. If the Fund gets another $7400 increase in State money between '99 and 2000 so that the total increase from 1998 was $9660, than the City could use that $9600 increase of State money to fund the improved benefit. They would not know until June, 2000. At that time, it would require an ordinance. The Plan was still in compliance with State requirements. Technical items that Attorney Dehner would discuss later with the Board must be implemented before December 31, 1999. Once those were in place, the Plan would have met all the requirements. The City would still be required to fund this Plan based on the 1998 base line. It could not do it with the $2200 yet it was one of the cleaner situations. Many plans had a lot that have a laundry list of minimums that they did not need. Our Plan would get there within a couple of years. Chairman REED expressed concern about the Fire Department on the 175 Plan that showed a difference between the 185 money. One had an increase while the other had a decrease. The increase could be due to the growth in the area but he asked if there was someone that they could contact about the amount received from Chapter 175 and 185. Attorney DEHNER explained that there was frustration in many places. The division had held a meeting (as a sounding board) several months ago where Trustees were invited at State expense. The division has had success with one project whereby the Plan could obtain verification among residents of Ocoee that our insurance premiums were being used to inspect their insurance premiums. The document could be mailed with water bills to City residents, asking them to send it to their insurance company to place what code 4 Police Officers' /Firefighters Retirement Trust Fund August 11, 1999 their company was reporting, and ask the citizen to return it to us. Chairman REED said that in order to make sure the City was getting its dollars, they had undertaken a similar project with the zipcode in changing the entire city to 34761. Attorney DEHNER said that they now had gone to a three digit code as some problem had been created by overlapping zipcodes in municipal boundaries. Now, supposedly there was a three digit code number that was assigned to us which should be the number utilized by everyone specifically within our boundaries. Actuary FOSTER said that during the last three years we have had 23, 50, and 30 percent increases. This was very modest. Discussion ensued about benefit improvements, and Actuary FOSTER said that they did not usually advise the Board to consider benefit reductions since improvements were hard enough to come by. Also, discussion ensued about pros and cons of cost impacts of certain improvements to the Fund. The City's funding rate to this Plan two (2) years ago had been 17.5 percent of payroll. It was now down to 15.1 percent. State monies had increased and investments had done well. During the year ending September 30, 1998, the City had put $654,000 in this Plan. Member WILLIAMS, seconded by Member GLEDICH, moved to direct Foster & Foster, Inc. to prepare an update of the study of our Actuarial Alalysis of Benefit Improvements. Motion carried 4 -0. Attorney DEHNER said that the minutes should reflect that Actuary Foster has reported to us that we do the appropriate gap in benefits between this Plan and the General Employees. (Lt. Wayne Vaughn left the meeting at 1:30 p.m.) In response to Member WILSON, Actuary FOSTER said that there was no cap on the funding rate because right now the City's cost went from 17 down to 15, and his personal feeling were when there was a favorable experience that significantly reduced the costs, the City should not be the only beneficiary of that good experience. It should be shared with the members. The Plan could implement a funding for the City to fund the actuarial soundness but not less than 16 percent of payroll. If the costs went down from 15 to 14 percent, without regards to that than you could more easily implement improvements because you know that they would be putting in the 15 percent. It was a mechanism to help re- invest the good experience in the Florida Benefit Improvements without having to battle it out and make your case for dropping City costs. In reply to Member GLEDICH, Actuary FOSTER said that there were ordinances that covered this issue. He recommended they wait until after the October 1, 1999 valuation. Attorney DEHNER said that they might want to incorporate any proposals of benefit improvements into the ordinance where they make technical amendments, even with the non -cost items, including the DROP Plan, and do that in one ordinance. He said that he would later report to the Board about a meeting with City Administration on the DROP Plan. 1 5 Police Officers'/Firefighters' Retirement Trust Fund August 11, 1999 t hol For the record, the June 25, July 28, and July 28, 1999 letters from Actuary Foster to Chairman Reed will be placed with the official minutes in the office of the City Clerk. Actuary FOSTER said that the Plan was in compliance with everything except for the one item which we were not allowed to admit now. Member GLEDICH said that we must make sure to discuss this ordinance change and any improvements at our next meeting. Discussion ensued about the Board directing Attorney Dehner to draft a memo explaining to taxpayers (City residents only) about the tax, its path in coming back to work locally in the Pension Plan. It was to the benefit of the citizens for the Plan to receive all its entitled dollars. Their taxes may increase to pay what the insurance money otherwise would not pay. Hopefully this would give them the incentive to make the next step in sending the form to their insurance company asking it to record the number (Plan would pay mailing costs for citizen) that they are reporting to Tallahassee. The citizen would be asked to return those directly to the Board. A review of the numbers would determine whether or not there was a need for change. Member GLEDICH, seconded by Member WILSON, moved to direct Christiansen & Dehner to draft a memo to the City of Ocoee concerning the insurance code for Chapter 175 and 185 money. Motion carried 4 -0. Attorney DEHNER said that the memo would be sent to Chairman Reed who would provide it to the City. Attorney DEHNER advised the Board about the nine clause technical items which the Plan needed to incorporate into the ordinance, as follows: Add 1. Optional Forms of Benefits for Disability Retirees (similar to normal retirement); 2. New Fraud Provision - is that if any Plan member attempts to attempts to obtain a benefit, not just a disability but any benefit, through fraud or misrepresentation or information to the Board, they are subject to prosecution of a misdemeanor by the State Attorney, and if convicted, and for this purpose, conviction is defined very broadly to include a "Nolo" plea, and includes adjudication, and if the member is convicted within that definition, then they forfeit their pension. The Board's duty in this regard of an attempt to defraud the system, that they then would report to the State Attorney. This must be added to the Plan. Remove 1. Existing exclusions that separates from service and goes into military service and returns, whereas now under the Federal and State law, we were still under Federal law where we were required to give that person the opportunity to get accredited service in our Plan for the military service time up to 5 years. We were able to charge the contribution they would have made had they been back here working on the military. Currently, we must give them their time which was interesting because the purpose of 6 Police Officers' /Firefighters' Retirement Trust Fund August 11, 1999 the Federal law was do not discriminate against someone for military service but not to discriminate in their favor either. Obviously, this discriminates under State law now in their favor which the State can do it because it liberalizes the Federal law. The Plan needs to make that change. He said that he thinks Actuary Foster will tell us even though there may be some cost to the system but from a funding standpoint it would not be any additional funding cost. It was one change that we must do by December 31. On that point, the Statute provided that these changes need to be made by the 31' but if we run into early next year before the ordinance is actually through it will be O.K. since we are dealing with possible benefit improvements. The ordinance must be passed in February or March as State checks are out on July 1. 2. Workers Compensation, Social Security, Disability Setoff. Our current provision, as in many plans, has a combination of those three benefits which will not exceed a hundred percent of average compensation, and to the extent that they do, we reduce the payment out of our Plan for disability so that the combined benefits would be a hundred percent. We must change that to do one of two things: either delete the setoff entirely or amend the setoff. We would still be permitted to have a setoff but would have to provide that we would not reduce the payment out of our Plan below what an accrued benefit at 2 %. That was a decision that the Board must make and a decision they could make with all the other decisions at the next meeting. Chairman REED inquired about whether or not the Board needed to direct the Attorney to do the ordinance, and expressed concern that there might be confusion on the cost, non -cost of improvements. Attorney DEHNER said that it would be best to do every thing in one ordinance. Chairman REED and Member GLEDICH expressed concern about frustrating members with a whole lot of details. Supported by Chairman REED, Actuary FOSTER said that when they have their November meeting and distributing their valuations, they could address the floor, the 25 and out, and include the DROP, doing it all at once. Attorney DEHNER provided a quick comment on the DROP, and said that he had sent the DROP Plan to the City Manager, and there had been a meeting with the City Manager, City Attorney, Human Resource Director Psaledakis, Finance Director Horton, and Finance Supervisor Carter to review the DROP. The City Manager had requested one change, and Mr. DEHNER recommended that the Board take under consideration the method for a member terminating employment at the end of the DROP period: 1. Stop all transfers of retirement payment as well as interest accrued on your account at the end of the DROP period. Financially, we said a person really could not afford to stay because that money would be forfeited. 7 Police Officers' /Firefighters• Retirement Trust Fund August 11, 1999 skew 2. Add an Agreement at the time of election into the DROP, that the person will resign. There would be a contractual agreement as well for the person to resign. Attorney DEHNER said that they were doing more of those, and added that an employee agrees when they start the DROP that at the end of the DROP period, they would terminate from the City. Earlier that day, he had advised the General Employees Board that the City Manager wanted both Boards (General, and the Police/Fire) to come forward at the same time. It was obvious that it would take several months for passing of this ordinance. Member WILLIAMS, seconded by Member WILSON, moved that the aforementioned changes be made to the DROP PLAN by the Board Attorney. Motion carried 4 -0. The City had expressed concern about the financial part. There were three potential negatives: 1. The Board's prospective was that we might have to deal some day with someone who had elected to get into the DROP Plan but felt that they had made the wrong financial decision, and tried to back out (which they could not do); % 2. The City's prospective was that it could encourage someone to stay more years past normal retirement age than they would otherwise do so; (The City could address this by changing from a 5 year DROP to a 3 year DROP.) 3. Membership had raised a potential negative in upward mobility. Some employees /members were concerned with members at the top who stay longer because of the DROP which closes the opportunity to promote. Chairman REED said that the only other concern had been the disability clause. Once you retire, you were not eligible for disability or workers compensation. Attorney DEHNER said that in most cases, it was not going to be a disadvantage because since a member could not go into it until they reached normal retirement age they had already, in most case, accrued a good benefit and if they had become disabled during the DROP, they would stop working and begin drawing normal retirement benefits. The only potential negative versus disability could be if one goes out in an in -line of duty disability, they would have the potential to draw that benefit at a tax free basis. Attorney DEHNER said that he would make that one change, would move forward together, and discuss it again at the next Board meeting. In response to Member WILSON, Attorney DEHNER said that the General Employees Board had gone for the 5 year DROP Plan. He also said that the Police/Fire Board was 4441ie not going with an option or choice (percentage). A majority of the Plans under 8 Police Officers' /Firefighters' Retirement Trust Fund August 11, 1999 Si' Christiansen & Dehner were going with the option which gave a member a choice and allowed them one change during the DROP period. Actuary FOSTER expressed his support for the 6.5 percent for 5 years. Once approved, only an ordinance could change the percentage. Member GLEDICH, seconded by Member WILLIAMS, moved to change the DROP Plan to reflect the option for the member in the fixed or tie it to the Plan of investments with the option of one change over the period they are in during the DROP Plan. Motion carried 4 -0. ELECTION Chairman REED presented a copy of the Notice that the Firefighter seat would be open for letter of nomination. A copy would also be placed in Firefighter payroll checks that week, and posted on department and the official City Hall bulletin boards. Mr. REED announced that Mr. Strosnider, the current fifth appointed Board member, was not planning to submit his name for re- appointment. A meeting was scheduled for Friday, September 24, 1999, 1:00 p.m. to certify the election, select the fifth Board member, and nominate officers. Mr. REED also announced that Assistant Fire Chief Richard Firstner had expressed an interest in the Fire seat, and that James Coschingano was willing to serve as the fifth Board member. Chairman REED said that the General Employees' Board had held a discussed about hiring a part-time administrator, the size of the fund, and whether or not there was a `,,, certain criteria to justify hiring an administrator. Attorney DEHNER said that funds this size rarely have hired administrators to provide full services. Typically, most Boards hire a recording secretary for minutes, meeting notices, and scheduling. Bills were generally done by the Board. Attorney DEHNER said that Mr. Reed had done a great job while serving on the Board, and announced that he had enjoyed working with him. REPORTS ACTUARY There was no Actuarial Report. MONEY MANAGER Money Manager SENDEROWITZ distributed copies of the STI Capital Management Summary Performance for the period ending June 30, 1999. He wanted to re- emphasize that the past few quarters he had come before the Board, that large cap growth stocks had out performed. We were not in large cap growth stocks. We were not making any money. He had gone back a few quarters to look closer and to show every quarter from January, 1998, that the large cap growth was the highest performing asset class, and the S &P 500 was a little bit worse, than value, than mid -cap, then small. The only sector messing the graph was the mid -caps in the fourth quarter of 1998 which was when all the ,, Internet stocks were going crazy. A lot of them were classified as mid -cap stocks during oir 9 Police Officers' /Firefighters' Retirement Trust Fund August 11, 1999 that time. That was kind of an anomaly. Last quarter (and he may have touched on it a little bit when he was here for the June 18 meeting) he had said that they were starting to see the value stocks do better, and you could see the most recent quarter that the Fund was in saw a complete reversal of the performance but the small caps stocks did the best and the large cap growth doing the worst. Mr. SENDEROWITZ said that he had wanted to put that in an easier form to understand. You could really see that when you looked at the performance for the Fund. He said that he believed that the best news was the nine month performance for the total fund being up 19 %. That was a phenomenal returns for the fiscal year to date of which 5.6% was this most recent quarter, still at the 60 -40 split stocks to bonds. They were still below 50 -50 on a costs basis. They could see a high grade equity income which is the value portion was up almost 15% just in the last quarter, more than doubled that was the S &P 500. It was nice to see because for a long time it had been a consistent lager, and the high grade growth which had been the super star performer had lagged the S &P 500, only by 2% which was not too badly, and a 5 %. A smaller cap stocks (the Fund didn't have a lot but a smaller exposure) was up over 19 %. They wished that they had everything was in the small cap stocks at a 49% return for nine months. Again, those were a lot more aggressive, a lot more volatile. It was nice to have that exposure to get the benefit of it yet they kept it at such a point that it won't hurt you when it hits and when it does go down they swing and even out. The Bond side continues a negative k rie since the end of the quarter with interest rates rising. He thinks that we would continue to see a rough environment on the Bond side. For the three month period, they could see that the Stock returns were a little over 10 %2 %. Fixed income had come down a little over one. It had added about $362,000 cash to the Plan just in the last three (3) months. The more exciting number for the fiscal year, nine (9) months was that the investment gain was over a million dollars. The Stock side was up almost 35 %. Money Manager SENDEROWITZ said that he can't really run performance since the end of the quarter to a year at $6,978,000 but that did include the $130,000 or so that had been contributed from the State monies. Also, they had some distributions and were down since the end of the quarter. It had been a rough environment. He could comfortably say that they would hit the actuarial assumption over the next quarter. It was a difficult market and if we see the kind of events that happened last summer we could be in some trouble. He reminded them that even last summer at the end of August, we had a significant drop but it had bounced back relatively quickly. If the economy was in as good a shape that they were expecting than there would again see great rates. Most people say 25 basis points which was the kind of camp that we were in but it could be 50 basis points. Something that a lot of people had forgotten was that even if they raise it to 50 basis points at the next meeting, it will put the Fund right back where it was last summer at this time because we had the interest rate drops in retaliation to the difficulties in Russia. The U.S. consumer is still very strong. We are seeing retailers such as Wal- Mart and Home Depot still posting great gains so he thinks that things were still looking 10 Police Officers' /Firefighters' Retirement Trust Fund August 11, 1999 4+ '"' good. It was going to be a little bit rocky between now and the end of the year but still very bullish on the market. We were looking for the calendar year 1999 to gain in the 10 - 12 percent range. We were going up and down, and back up. Where the S &P 500 had closed on August 10 had been where it was on January 29. In response to Chairman REED, Money Manager SENDEROWITZ said that the Police /Fire Plan had not gone to International investment at this time. The Board could do it but had not done it because it was too volatile. Attorney DEHNER said that the Policy was still no foreign but they did have the legal authority to add it up to 10% of the value of the Fund any time they wanted to do it. He suggested, and Chairman Reed agreed, that the Board might like Mr. Senderowitz to bring some data to take a look at the next meeting so they would have a basis for the decision one way or another. Discussion ensued about the Board meeting at 1:00 p.m. on November 18, and again at 6 p.m. with membership. No action was taken. PERFORMANCE MONITOR Merrill Lynch Performance Monitor was absent. Discussion ensued about whether or not a representative from Merrill Lynch would be available for the November 18, 1999 meeting. Chairman REED said that he had been informed that someone would be present for the 1:00 p.m. meeting but the rep must be at another meeting at 5:00 p.m. Attorney DEHNER reported that during its morning meeting the General Employees Board at his recommendation had directed action to notify Merrill Lynch (they were by contract suppose to be here in person) that the Board was asking for a de- concession because they had not performed. Attorney DEHNER announced that Merrill Lynch, numbers wise, probably have the most number of municipal clients that they monitor. He had never recalled them every missing meetings. However, a Summary report had been faxed to Chairman Reed via Donald Carter. The Total Fund Summary for the Police/Fire Pension Fund, as follows: QUARTER • As of June 30, 1999, your fund had a total market value of $6,950,239. For the quarter the total fund earned $374,535 and received $214,512 in net contributions for a net increase of $589,047 since the previous quarter end. • On June 30` your fund had 59.0% of the total invested in equities, 39.9% in bonds and 1.1% in cash and equivalents. Your equity allocation is slightly more aggressive than the median fund in our sample which had 57.4% of its total assets invested in equities. • For the quarter ended June 30 your total fund earned 5.9% ranking in the Top 19% of the balanced fund sample. The target index, comprised of 50% S &P 500 and 50% N..r Merrill Lynch Government /Corporate bond index, returned 3.0% for the quarter. 11 Police Officers' /Firefighters' Retirement Trust Fund August 11, 1999 • The June 1999 quarter was notable for the return to investor favor of long - languishing value stocks, mid - capitalization and small cap stocks. Although the largest companies participated in the advance, lower cap stocks enjoyed a much stronger comeback. The S &P 500, which is very heavily weighted to the largest capitalization stocks returned 7.0 %, while the equal - weighted S &P 500 index earned 14.2. The Russell 2000 index of small caps returned 15.5 %. In the growth / value styles, value type stocks displayed convincingly higher returns than growth stocks, marking a change of direction in the growth/value equation. • Bond investors became increasingly persuaded during the quarter than the strong economy would cause the Fed to raise interest rates, and yields rose. The Merrill Lynch Domestic Master index produced a -0.9% return despite an average coupon return of 1.7 %. The longer maturities suffered the worst. • In the foreign equity markets, the MSCI EAFE index returned 2.6% for the June 1999 quarter, in US dollars. The European markets remained stagnant, while the East Asian economies extended their sharp recovery. • Your fund beat the target index of 3.0% thanks to a greater than 50% equity allocation in a strong equity market, coupled with equity performance in excess of the S &P 500. The High Grade Equity Fund returned 5.1%, as compared to the S&P/BARRA Growth Index of 3.8 %. This fund continues to heavily weight consumer staples, healthcare, and consumer cyclicals all of which underperformed for the quarter. STI's technology stocks (also overweighted) provided some strong gains, particularly IBM and Hewlett Packard. • The High Grade Equity Income Fund was very successful this quarter, marking up for some of the shortfall in performance from the last several quarters. The fund return of 14.8% was more than double that of the S &P 500 and also exceeded the S&P/BARRA Value index of 10.8 %. Previously neglected value -type stocks snapped back into favor during the June quarter, including basic materials, capital goods and energy. • Your diversification into smaller cap stocks paid off this quarter, as the US Limited Cap fund returned 19.1% vs. 15.5% for the Russell 2000 small cap index. • The bond portfolio returned -1.0 %, down slightly less than the benchmark bond index of -1.1%. ONE YEAR • For the year ended June 30 your total return of 14.2% ranked in the Top 23 %. The equity portfolio failed to keep pace with the S &P 500 of 22.8 %, returning 20.5 %. Your bond portfolio beat the benchmark of 2.7% with a 4.0% return. Your total fund trailed the return of the target index by a 0.9% margin for the year. LONG TERM • For the three -year period, your annualized return of 17.7% per year ranked in the Top 29 %. The target index earned 18.2% by comparison. In this period, your above 12 Police Officers' /Firefighters' Retirement Trust Fund August 11, 1999 average rank was the result of your above average performance in the equity and bond portfolios. • The four -year period annualized return of 17.1% ranked in the Top 33 %. SET NEXT MEETING AGENDA Discussion ensued about a special meeting to verify the election (if more than one employee chooses to run for the seat), to appoint the fifth Board member, and elect officers. Consensus was reached to meet on September 24, 1999, 1:00 p.m. Attorney DEHNER advised the Board Chairman that it was not necessary for him to be presented, and cautioned them to only verify election result, appoint the fifth Board member, and elect officers. Chairman REED announced that the next regular meeting would be held on Thursday, November 18, 1999, 1:00 p.m., and again at 6:00 p.m. for the distribution of certificates to membership. Mr. REED said that this was his last meeting but it had been a pleasure working with everyone. Actuary FOSTER expressed his pleasure at working with Mr. Reed, and others present extended the same sentiment to him. ADJOURNMENT Member GLEDICH, seconded by Member WILLIAMS, moved to adjourn the meeting at 2:44 p.m. Motion carried 4 -0. a: \Word\PF0899M.doc 13