Loading...
HomeMy WebLinkAbout2006 04 25 Document Corresponding to Regular 300 (2)Date: Apri125, 2006 DOCUMENT CORRESPONDING TO REGULAR AGENDA ITEM 300 FOR THE APRIL 25, 2006 REGULAR BOARD OF TRUSTEES MEETING. ~~ a ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ Institutional Investment Advisor s ~ . ~ ~ ... ~ ....... ~ . CITY OF WINTER SPRINGS DEFINED BENEFIT PENSION PLAN REQUEST FOR PROPOSAL Pension Fund Investment Evaluation Services Burgess Chambers President burgess@burgesschambers.com BURGESS (~H~,~~1L'I I:S ~: ~ssc~c:ia~r~s ~~.~ Sidney H. Taylor, II Consultant Sidney@burgesschambers.com Institutional .investment Advisor 60I North New York Avenue, Suite 200 Winter Park, FL 32789 (407) 644-0111 (407} 644-0694 fax, (800) 229-0694 City of Winter Springs Defined Benefit Pension Plan April 12, 2006 Note on Consulting Business Practices: BCA has operated continuously as an independent consulting firm for over 16 years. As a fiduciary, BCA is paid only by its clients. O BCA has no affiliates or associations with any line of business that generates revenue from money management firms. O BCA does not conduct `pay to play business practices. " Accordingly, BCA does not receive fees of any kind from money managers. O BCA believes that pension funds should not pay a consultant in the form of "soft dollars, "since this method may cause conflicts of interest. O BCA does not subscribe to revenue sharing with money managers, such as the case of "wrap fee "programs. ~t ~ ~ City of Winter Springs Defined Benefit Pension Plan April 12, 2006 TABLE OF CONTENTS Descriution RFP Response to Questionnaire Appendix A Sample Manager Search Appendix B Sample Quarterly Report Form ADV Part II Tab I Tab II TabIIi TabIV City of Winter Springs Defined benefit Pension Plan April 12, 2000 IV. General Information Company Profile Burgess Chambers and Associates, Inc. 601 North New York Avenue Suite 200 Winter Park, Florida 32789 Phone: (407) 644-0111 Fax: (407) 644-0694 www.burgesschambers.com General description of the firm. BCA is a Florida corporation founded in 1988. It is a nationally recognized firm specializing in institutional performance monitoring and consulting. The firm consists of six employees with extensive industry experience, and has operated continuously for the past sixteen (16) years with headquarters in Winter Park, Florida. The firm has turned over one employee within the past year. With 43 governmental clients, BCA has grown carefully, emphasizing client service. All of the firm's revenue is derived from performance monitoring and consulting/advisory services. BCA is paid only by its clients and receives no referral fees or soft-dollars. The firm focuses upon directing cost effective investment programs that range from operating to pension assets. Please refer to our Form ADV II under Tab III. Statement indicating the firm's commitment to providing pension fund evaluation services. BCA has been an investment advisor/consultant since 1988 and is committed to providing pension fund evaluation services. BCA has grown carefully emphasizing client service and a commitment to Florida Public Pension Plans. BCA stays current with Florida public pension law and is a member and frequent speaker of the FPPTA. 1~C:11 4 City of Winter Springs Defined Benefit Pension Plan April 12, 2006 Firm Profile • Florida based -founded in 1988 Institutional experience -over 16 years • Focused -providing simplified solutions for public funds • Key personnel have over 18 years of institutional management experience • Manager selection -conducted in-house by key personnel • Credentialed - AIMR charter and associate members Fo~~ • BCA has grown carefully -assuring client focus • Coverage - 14 clients per professional • Client reports are prepared in-house • Centralized operating model • Independent - No affiliations or brokerage license • Registered with securities and Exchange Commission since 1988 43 Clients Representing $618 Million as of March 31, 2005 Taft-Hartley ERISA Plans 2"~ ~~ ru~uc runs 88°k 2 5 ~ ~ ~ ~ ~1 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ City of Winter Springs Defined Benefit Pension Plan April l2, 2000 BCA has had no NASD or SEC investigations into the firm. We stay ahead of the curve by in depth research of the markets and asset strategies, we utilize the latest technologies to provide our clients with the information they demand, and stay very maneuverable so that we can provide our clients the services they need. BCA has discharged eleven managers within the past 5 years, due to sub par performance. Recommendations of termination are made when a manager has changed disciplines and/or has underperformed the client's benchmarks and universes. BCA's philosophy and objectives are stated below: Philosophy • Independence is the highest fiduciary standard. • Team member relationships must be transparent. • Asset allocation is the most important determinant of the success or failure of an investment program. • Educated trustees make better fiduciaries. Objectives • Allocate risk in a manner that balances the inherent investment conflicts of short-term funding obligations and long-term growth. . Identify effective cost controls to increase returns and value. • Design an investment program that achieves an expected return with less uncertainty. • Create fiduciary teams to act in the best interest of the client. • Provide careful manager selection that complements the asset allocation process. • Educate trustees through workshops ~I 6 City of Winter Springs Defined Benefit Pension Plan April 12, 2006 V. Manager Searches Manager Database: BCA subscribes to the Checkfree M-Search (Mobius) database and Informs Investment Solutions PSN Enterprise database, both include over 1,100 investment management firms and over 5,000 investment products, composites as of March 31, 2006. BCA utilizes these services for performance benchmarks and manager peer universes to segment managers by the following investment styles: Equity Fixed-Income Other Large Cap Limited Duration Balanced Small Cap Intermediate Duration Tactical Allocation Growth Broad Market International Equity Growth Large Cap Long Duration Global Equity Growth Mid Cap High Yield Bonds European Equity Growth Small Cap Convertible Bonds Pacific Basin Equity Value Mortgage Backed Pacific Basin (excl. Japan) Value Large Cap Emerging Markets Value Mid Cap International Fixed Income Value Small Cap Global Fixed-Income Core Large Cap Real Estate Manager assignment objective: O Find Managers with Consistent Above Average Returns O Identify Managers with Low Correlations of Return O Maximize Program Effectiveness Q Maximise Cost Controls IiC.r1 7 ~ i ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ City of Winter Springs Defined Benefit Pension Plan April 12, 2006 Optimize Portfolio with Appropriate Manager Blends: Return Optimal ®Blend Blend ®Blend Blend Combinatio BCA conducts a simulation process to select managers that compliments the asset allocation process. Successful manager blending provides additional risk reduction to the portfolio. Manager search process: Investment manager selection is the most critical step in ensuring consistent investment returns that meet or exceed a Fund's actuarial required rate of return. BCA believes that superior investment manager selection has a tremendous impact on long-term total Fund returns and is an integral way in which a consultant can add value to a pension fund. As a result, our firm utilizes a rigorous due diligence process to analyze investment management firms prior to recommending them to our clients. 1~~:,1 8 City of winter Springs Defined Benefit Pension Plan April 12, 2006 Our internal manager due diligence function is driven by a comprehensive process, which analyzes both quantitative and qualitative factors to determine the suitability of a manager for a particular Fund. Our initial screening process examines a manager's composite returns along with various quantitative risk measures and risk adjusted return ratios. When verifying returns, we require that each firm comply with AIMR standards of practice. If we are not familiar with a firm's past results, we may ask for audited returns or verify the returns reported by the manager against the composite returns submitted to large, industry approved manager databases. All managers that rank favorably following the initial screening process undergo an exhaustive qualitative review which encompasses a firm evaluation, product evaluation, and investment process review. Our final step is to conduct interviews with those managers that rank favorably in the overall evaluation process. We will recommend a manager as a search finalist in a Fund only after that firm has completed each step of the due diligence process and is determined to be a suitable candidate for that particular Fund. BCA has been conducting manager search evaluations for pension funds since 1988 and we feel that our expertise in this area provides a tremendous value to our clients. BCA is and independent firm and does not accept fees or other compensation from investment managers. fC. ~ 9 ~ ~- s ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ City of Winter Springs Defined Benefit Pension Plan April l2, 2000 Please see Appendix A for a sample Mid Cap Core manager search! VI./VII. Performance Measurement/Accounting and Resorting BCA has been providing performance evaluations to clients for over 16 years. All reports are prepared in-house. BCA differentiates itself from other firms because it has no financial arrangements with money managers or brokers. BCA integrates proprietary software with external data sources as previously described. The goal of our performance evaluation program is to provide a thorough understanding of return attribution by answering the following questions: O Is the plan meeting the actuarial return objective? O How has the Fund performed over various time periods? O Are the investment objectives being achieved? O Has there been a change in the level of inherent program risk? ~ How does the performance compare with outside markets, comparative indices, and other investment managers? How much risk is the investment manager experiencing in order to achieve its performance? O Do the investment managers have investment styles that reduce over-all risk? O Are the investment managers performing within the guidelines of the investment policy? All performance analysis and report preparation is conducted by our staff internally. Throughout our performance reporting process we rely on the data provided to us by the custodian banks rather than on the values provided by investment managers. 10 BCA, __ __ _ City of Winter Springs Defined Benefit Pension Plan April 12, 2006 This practice ensures the accuracy of the market values utilized in the calculation of returns and allows us to review all managers using a uniform measurement system. Our process begins with the input and reconciliation of month ending custodian statement values into our performance evaluation system. When all market values and cash flows are precisely reconciled with the custodian bank, monthly and quarterly rates of return are calculated on atime-weighted basis. Our internally generated returns are then reconciled with the performance data reported by the investment managers and any discrepancies are resolved or reported. BCA uses the traditional and proven methods in performing analysis of manager portfolios. These would include: Quarterly returns Sharpe ratio Alpha Treynor Ratio Standard deviation Up market results Beta Information Ratio Scatter chart Down market results R-squared In addition, individual holdings in all portfolios are analyzed utilizing fundamental characteristics and relative performance on a quarterly basis to determine the security selection ability of each individual manager. BCA produces quarterly reports designed to be clear and concise, and are available as soon as client statements are received and inputted into the system. All quarterly reports will include a comprehensive review of the total Fund and each investment manager and will highlight the following areas: Investment gain/loss Fundamental style analysis Contributions and withdrawals Return attribution analysis Performance relative to benchmark indices Sector analysis Policy and guideline compliance Peer group rankings Current vs. target allocations Recommendations In addition, we can create customized quarterly reports for our clients. We believe that our in-depth manager evaluation process and comprehensive quarterly reports present our clients with a clear understanding ofthe performance of their portfolios in relation to the long-term goals and objectives. 11 City of Winter Springs Defined Benefit Pension Plan April 12, 2006 BCA utilizes performance systems developed in-house and externally. Our in-house reporting system has evolved encompassing over 16 years of performance analysis and client servicing. As well as our in-house system, we are currently converting to a web- based system by Informa Investment Solutions named Performer. Performer will allow us to spend more time on research, as well as provide more in-depth analysis for our clients. Asset allocation studies are conducted using both in-house analytics and external provider software. The firm conducts simulation modeling, rolling correlation analysis, and various other approaches such asmean- variance-optimization modeling. External provider analytical platforms include Ibbotson, Mobius, Morningstar, PSN Enterprise, and Performer. As a research based firm, BCA carries out special projects for clients which includes developing custom benchmarks. Data on manager performance is purchased from outside sources (Mobius, PSN. and Morningstar). Performance analysis blends our internal process with data provider software. A sample client report and analysis is provided in Appendix B! I~C~,~'~ 12 City of Winter Springs Defined Benefit Pension Plan April 12, 2000 VIII. Advisory Relationships SIZE CLIENT (SMi1L) CONTACT CONTACT NUMBER Boca Raton Genera] Employees Pension Plan 123 Crystal Duxbury (861)-347-8297 Deerfield Beach Firefighters' Pension Plan 54.3 Doug Walter (984) 571-4585 Boynton Beach Police Pension Fund 34.6 Bazbaza Ladue (861) 742-6081 Palm Tran / A.T.U. Local 1577 Pension Fund 33.3 Joe Mastrangelo (308)-S9S-4040 Bradenton Police Officers' Pension Plan 31.8 Lucille O. Hymes (941) 794-6611 Bradenton Surplus Funds 31.1 Cazl Callahan (941) 708-6200 Pasco-Hernando Community College Foundation 30 Marsha Gilbert (727)-847-2727 Panama City Municipal Firefighters' Retirement Fund 21. % Battalion Chief Austin Andrews (850) 872-3059 Panama City Municipal Police Officers' Retirement Fund ]9.9 Honorable Mayor Clemens (850) 872-3122 Panama City Beach GE, Police, and Fire Retirement Funds 19.8 Richazd Jackson (850) 233-5100 Kissimmee Municipal Firefighters' Retirement Plan 15.6 Dan Gazaguso (407) S 18-2512 Jupiter Police Officers' Retirement Fund 13.6 Sgt. Nick Scopelitis (861) 746-6201 Cocoa Police Retirement Fund 13.5 Sergeant Bill Gregory (321) 639-7620 Palatka General Employees' Retirement Fund 12.2 Mayor Karl Flagg (386) 329-0100 Plant City Safety Employees' Retirement System 11.3 Chief Bill McDaniel (813) 757-9200 Ironworkers Local 897 Pension Fund 10.8 Mazk Wood (904) 383-8827 Plant City General Employees Pension System 10.6 Sanders Busch (813}659-4201 St. Lucie County Firefighters' Pension and Relief Fund 10.5 Chris Bushman (772) 462-2300 Retirement Plan for Employees of the Town of Surfside 9.2 Eduardo Rodriquez (305) 993-1052 Port Orange Fire and Rescue Pension Fund 8.6 Frank Sheridan (386) 756-5420 Cocoa Beach Employees' System 8.1 Kea Killgore (321) 868-3245 New Port Richey Firefighters' Pension Plaa 8.l Mary Rabelo (727) 841-4500 ezt. 270 Median Clients South Eastern Iron Workers Health and Welfaze Fund 8 Mark S. Wood (904).353.8827 New Smyrna Beach Police Officers' Retirement System 7.4 John Thomson (386) 426-6159 Leesburg Firefighters' Retirement Frmd 7.3 Lieutenant Jerry Ponds (352) 728-9780 Fort Pierce Police Officers' Retirement System 6.9 Sgt. Antonio Hurtado (772) 461-3820 Palatka Police Officers' Retirement Fund 6.4 James Griffith (386) 329-0115 Cooper City Firelighters' Retirement Plan 5.6 Ray Briant (954) 432-8905 Palatka Firefighters' Retirement Fund 5.6 Michael Lambert (386) 329-0120 Orlando Transit Authority Retirement System (LYNX) 5 Dezna Hunt (407) 841-2279 ext. 3117 Sanibel Municipal Police Officers' Retirement System 5 William S. (Steve) Walters (239) 472-4808 Coral Gables Police Officers' Retirement Trust Fund 3.6 Major Richard Naue (305) 442-1600 Hospice Foundation of Lake and Sumter, Inc. 3.6 Ted Williams (382) 742-6800 Edgewater Firefighters' Retirement System 3.5 John Williams (386}424-2406 Lynn Haven General Employees' Retirement Fund 3.4 Hazold Haynes (850) 265-2121 Lake Mary Firefighters' Retirement Plan 2.5 Ed Koch (407) 333-8238 Tavares Police Officers' Retirement System 2.5 Officer David Myers (352) 742-6200 Lynn Haven Police Officers' Retirement Fund 2.3 Harold Haynes (880) 265-2121 Holly Hill Firefighters' Retirement System 2.1 Lieutenant Charles Cobb (386) 248-9470 St. Lucie County Fire District Retirement Health Trust 1.9 Chris Bushman (861) 462-2300 Belleview Police Officers' Retirement Trust Fund /.2 Lieutenant Terry Holland (352) 245-7044 Edgewater Police Officers' Retirement System 1.2 John Williams (386)-424-2406 Tavares Firefighters' Retirement System /.2 Wayne J. Luckock (352) 742-6475 IiC~t1 13 City of Winter Springs Defined Benefit Pension Plan April l2, 2006 Names and resumes of personnel who will be responsible for this engagement: BURGESS B. CHAMBERS PRESIDENT Institutional Consulting Experience: 21 Years He oversees all aspects of the firm with emphasis in designing new investment programs and client consultations. Mr. Chambers is on the faculty of the Investment Management Institute in Greenwich, Connecticut and the Florida Public Pension Trustees Association. He has served is an arbitrator for the National Association of Securities Dealers (NASD) in Tampa. Mr. Chambers is an associate member of the Association of Investment Management and Research (AIMR). He has published numerous articles, and has been quoted in U.S. News and World Report and Investment Management WeeklX. Mr. Chambers was formerly an executive vice president of an investment counseling firm (1983-1987) and a senior auditor of a major Texas based oil company (1981-1983). Mr. Chambers received his M.B.A. and B.S. degrees from Tulane University in 1980 and 1978. He was a research fellow of the department of physics from 1978 to 1979. He is the registered principal of the firm. SIDNEY H. TAYLOR, II CONSULTANT Combined Institutional and Consulting Experience: 7 years Mr. Taylor leads the firm's web based technology area and manages client reporting data bases and the client reporting system. He develops and tests asset allocation models and carries out due diligence analysis of prospective and current investment managers. Mr. Taylor assists in capital market research in order to determine the relative valuations and risks associated with various classes at any time, an essential part of the asset allocation and rebalancing process. Previously, he was employed by an internationally recognized $70 billion investment management firm, serving in a number of capacities, including; portfolio specialist, asset allocation design, portfolio team member, consultant relations, client reporting support, and information technology. Previously, he served as a mutual fund specialist at the Bank of New York and was assigned as an equity trader and portfolio manager at KCM Asset Management, Inc.. He has owned and operated two private companies. He received his M.B.A., and B.A. degrees from Stetson University in 2001 and 1999. 14 ~~ City of Winter Springs Defined Benefit Pension Plan April 12, 2000 BRYAN BAKARDJIEV ANALYST/CONSULTANT Combined Institutional and Consulting Experience: S years Previously employed by a leading institutional money management firm, Mr. Bakardjiev is the team leader for the firm's client reporting process. He conducts asset allocation studies and manager searches. Mr. Bakardjiev also shares investment research responsibilities. While employed in institutional money management, he worked in several capacities including a research analyst for an institutional asset allocation strategy group, portfolio analysis and performance measurement for the separate account portfolio management and client service group. Mr. Bakardjiev also has extensive analytical systems knowledge having served as a business analyst and project manager for the operations department. Mr. Bakardjiev received his bachelor's degree in finance from the University of Central Florida. He is a Level II candidate in the Chartered Financial Analyst Program. He is a registered representative of the firm. MELISSA M. HOLDCRAFT ANALYST/CLIENT REPORTING OPERATIONS Ms. Holdcraft is responsible for supervising the preparation of all client performance measurement reports for final review and approval. She is the team leader for all administrative related matters and money manager conversions. Ms. Holdcraft has extensive experience in areas that include, bank trust, regulatory compliance, securities transactions and support services with non-profit and retirement plans. Ms. Holdcraft is currently completing a bachelor's degree in finance from the University of Central Florida. She is a level II candidate for the Certified Trust Financial Advisor, has pension administration certifications from the American Society of Pension Actuaries, and has customer service and legal banking certifications from the American Institute of Banking. MELANIE M. WINSLOW CLIENT REPORTING OPERATIONS Ms. Winslow has been a key member of the firm's client performance measurement team since 1999. Her responsibilities include reconciling account data that is provided in electronic form from both banks and managers and she coordinates the production of client reports. Ms. Window's professional experience includes 401(k) administration and education. l~C:r1 15 City of Winter Springs De1"ined Benefit Pension Plan April 12, 2000 IX. Pncing The proposed annual hard dollar fee for services is $16,000. The fee for a manager search, including a search event involving multiple mandates at one time, is $5,000. There is no incremental charge for additional manager monitoring evaluations. BCA does not accept soft dollar payments or referral fees. We assist trustees in identifying and controlling the true costs of a program. The services included are as follows: Consultant Level • Initial program-level status and recommendations • Determination of program objectives • Determination of unique program attributes • Actuarial assumptions review and recommendations • Asset allocation review and optimization analysis • Probability analysis of expected returns • Custom benchmark creation • Investment Policy Statement creation/maintenance • Risk management • Manager assessments and site visits • Manager blending and optimization • Tactical strategy (allocation shifting) • Rebalancing approach • Ongoing progress assessment and review • Capital markets assessment • Additional special projects and presentations • Cost assessment and containment • Trading and commission analysis • Introduction of new products Monitor Level • Quarterly reporting and review of program progress • Program compliance with statutes and local law • Program compliance with Investment Policy Statement • Program progress to actuarial objectives • Program peer review • Manager compliance • Manager regulatory status • Manager peer review • Manager performance to benchmarks • Manager attribution analysis • Manager adherence to mandate (style analysis) • Manager searches • Trustee education programs LC~t~ 16 City of Winter Springs Defined Benefit Pension Plan April 12, 2000 Appendix A: SAMPLE MID CAP CORE MANAGER SEARCH 17 MidCap Manager Search Criteria Product Overall S le Asset Class Domestic E uity 1033 3016 Russell Midcap, S&P Product Overall St le Product Benchmark Midca 400 104 118 Performance Index Relative Trackin Error <= 15.000 79 90 Performance Index Relative Beta >= 0.75 AND <=1.1 66 74 Quality of Performance Com osite E ui Return T pe Total Return 65 73 Total Firm Assets Under Management Firm Assets/Accounts $ Millions) >= 1000.000 55 61 AIMR-PPS -Firm In Compliance with Firm General Com liance Status AIMR-PPS and verified 38 41 Institutional or HNW Portfolio Available Account Separately Managed, Product Characteristics T es Commin led Fund 36 38 e ormance n ex a ative p a >_ 18 Pertormance: Style Analysis 6ctor Weightings6tyle Drift Model: Mobius Equity ' 5 Years Trailing ending 12/31/2005 Data calculated using Quarterly returns Style fYtlel: trios Fjity Analysts Period: Y 2 --- - --- -------- - - Ril' R~ 1i - - - ~ ~ C ~~ '~ L . i fi ` T _. ~ r: ` ~-, '~i. ff i~ `~ -1 Rti' R~ -2 -1 p 1 2 ^ Ark Asset Management Company, Inc. - Midcap Value ~ Martingale Asset Management, L.P. - MidCap Core ^ Lazard Asset Management - U.S. Mid Cap Equity ^ Victory Capital Management Inc. -Mid Cap Equity ^ Lotsoff Capital Management -Mid Cap Equity Weiss, Peck & Greer -Mid Cap Disciplined Equity t 1 19 ' Pertormance: Growth of $100 t Benchmark: S&P Midcap 400 5 Years Trailing ending 12/31/2005 Data calculated using Quarterly returns , Growth of 5100 $220 _. _ __ _ _. $200 _ _ _ _ _ _ 1 1 $180 _ _ __ _ _ _. _ _..._ _ _ $160 ~_._ _ _ _ __ _ _ _ 1 ~o __ _ _ 140 _ , t $120. _ _ $100 _ _ _ _ __ ' $80 ' __ _ _ -''' M01 S01 M02 S02 M03 S03 M04 S04 M05 S05 D00 J01 D01 J02 D02 J03 D03 J04 D04 J05 D05 , Quarter Ending __ _ 5Yr _ ^ Ark Asset Management Company, Inc. -Midcap Value -Gross Size ____ _ - 15.12 ~ Lazard Asset Mana ement U.S. Mid Ca E ui Gross Size 9 p q tY- ----_ - - i 12.41 Lotsoff Ca ital Mana ement Mid Ca E ui Gross Size 12 52 ~ - - - Gross Size _ -- I Martingale Asset Management, L.P Mi Cap Core - -~ _ _-- - - , 13 10 ' _ ^ Victory Capital Management Inc. -Mid Cap Equity -Gross Size 13.03 Weiss, Peck & Greer -Mid Cap Disciplined Equity -Gross Size _ -. --- - ~ S&P Midcap 400 12.91 ~ -8.60 1 _- -- _ _ __ ___ -- Returns 1 1 1 I 20 ' Pertormance: Market Cycle ' Benchmark: S&P Midcap 400 5 Years Trailing ending 12/31/2005 Data calculated using Quarterly returns Returns Up-Market Ratio Down-Market Ratio ' ~s _ X20 . __ _ __ so ~a 12 10 8' 6-, 4 2 0 5Yr Returns Above Index s' s a, ~ ~wy, 3 " 2 '~ ,; 7 0 _ ~. `~ SYr goo 60 60 40 20 0 5Yr ao - 70 60 50 .;, 40 ~' 20 10 p 1 f > X 5Yr Tracking Error Information Ratio s ~.2 ~ ' s i.o 4 0.8 '' 3 I ~ 0.6 ~ 2 ~ 0.4 ' r ~~. 1 -- 0.2 ~ ~~z a SYr ' Returns svr Up-Market Down-Market ('Returns AboveiTracking Error Informatlon __ Ratio Ratio ~ Index _Ratlo j ^ Ark Asset Mgmt Co -Midcap Value -Gross Size 15.12' 103.02 63.36', 6.52' 6.61' 0.831 - -- ---~- ^ Lazard Asset Mgmt - U.S. Mid Cap Equity -Gross Size 12.41 98.84 ~ Lotsoff Capital Mgmt -Mid Cap Equity -Gross Size 12.52. 111.08 - Martingale Asset Mgt -Midcap Core -Gross Size - 13.10 107.17 - - -- _ ^ Victory Cap Mgmt -Mid Cap Equity -Gross Size _ - 13.03 98.03 Weiss, Peck & Greer -Mid Cap Disciplined Equity -Gross 12.91 109.75. Size • S&P Midcap 400 8.60 100.00 Timeframe: 5 Years Trailing Index: S&P Midcap 400 75.26! 3.81', 5.42 0.5 _ _ _ 89.661 3.92 5.24' 0.74 ~ 81.45. 4.5~ 3.18 1 31j ~ 70 231 - 4.43' 5.75 0.61' 85.74, 4.31. 3.22 - 1 1 ' 100.00',, 0.00'. OAO 21 Performance: Risk Analysis Benchmark: S&P Midcap 400 t 5 Years Trailing ending 12/31/2005 Data calculated using Quarterly returns 1 Retums 16 14 12 10 8 6 4 2 0 5Yr Negative Quarters 7 6 _ 5 .~1 4i 3, 2 ' '- 1 i I '_"; ' 0 ', I 5Yr Standard Deviation 25 20 ;y ,.1: 15 10 ' 5 ., ~ (. 0 '~ ' - - 5Yr 0 -2 -'{ -6 _g ', -10 -12 -14 -16 _18 -20 Worst Quarter 5Yr Sharpe Ratio 0.7 _ - 0.6 0.5 ~.4 [ '~.' 0.3 ~ 0.2 0.1 •, 0.0 '~__..... ~- -_ SYr Worst 4 Quarters o __ M.. -5 I _1p .75 -20 ': : _~ -25 I _g0 5Yr -_ ', Returns Standard Sharpe 'Negative ', Worst !, _ Worst 4 I~ _ _ Deviation Ratio Quarters _ i Quarter ~,' Quarters ^ Ark Asset M mt Co -Midca Value -Gross Size 9 P 15.12 ! 18.34 0.69~I 5 19.28, -19.86 ~ Lazard Asset M mt - U.S. Mid Ca E ui Gross Size 9 P - 12.41 17.88, 0.56 71 . -15.66~~ -20.65, ~ Lotsoff Capital Mgmt -Mid Cap Equi Gross Size _ 12.52 22.33 0.45; T 18.00; -25.0& J Martin ale Asset M t -Midca Core Gross Size g 13.10 20.26 0.53i 6 -16 61' 20 04 ^ Victo Ca M mt Mid Ca E w Gross Size ry P 9 P q tY 13.03 17.84 0.59 1 5'' -16 36 18 91 ~ Weiss, Peck & Greer - Mid Cap Disciplined Egwty -Gross S¢e 12.91 19.89 0.53; 6 -15.44, -21.4& . • S8P Midcap 400 8.60; 20.38 0.311 T -16 57~ -23.45 Timeframe: 5 Years Trailing 22 Performance: Return vs Risk Benchmark: S8P Midcap 400 3 Years Trailing and 5 Years Trailing ending 12/31/2005 Data calculated using Quarterly returns 28 26 24 w 22 E ~', 20 18 16 14 8 9 10 11 12 13 14 15 16 17 18 Standard Deviation 16 14 12 u, 10 E ~ 8_ 6 4 2 17 5 Years Trailing ending 12/3112005 __ 3Yr 5Yr Returns Standard ' Returns Standard ' j Deviation '. Deviation ^ Ark Asset Mgmt Co -Midcap Value -Gross Size j 24.44 '~, 12.80 ' 15.12 18.34 ^ Lazard Asset Mgmt U S. Mid Cap Equity -Gross Size 21.76 , 11.25 12.41 17.88 !'~ --- 9 - P q- Y _ Lotsoff Capital M mt -Mid Ca E uit Gross Size _ . -- - '~ 23 80 - _- i 17 22 -' - - _ _ 12.52 I 22.33 ~ ~,! Martingale Asset Mgt -Midcap Core -Gross Size ! 26.86 I 13.72 13.10 20 26 ^ Victory Cap Mgmt -Mid Cap Egwty -Gross Size -- 23 38 ~ 12.62 13.03 17.84 j .~ Weiss, Peck & Greer -Mid Ca Disci lined E ui Gross Size __ __ - - 27.35 _ 12.98 12.91 19.89 __ • S&P Midcap 400 T ----- ', 21.15 _- -_. 13.05 ~ ____ 8.60 _ _---- 20.38 23 3 Years Trailing ending 12/3112005 18 19 20 21 22 23 Standard Deviation Performance: Returns vs Universe ' Universe: Mobius Mid Cap Benchmark: S&P Midcap 400 ' 10 Years Trailing ending 12/31/2005 Data calculated using Quarterly returns Universe Percentile Retums for 1 Years Trailing Retums for 3 Years Tralling Returns for S Years Trailing i -- ------ Retums for 10 Years Trelling ', 5th 19.68 27.20; ' 25th 14.61 _ _ _ 23.63 11.05 _ __ _ _ - 14.88! Median 12.71. 21.62, 8.54, 12.94 75th 9.59 19.82 6.01 11.4 95th . 3.93 16.17 1.56 ' 9.83 Universe: Mobius Mid Cap __, Returnset ^ Ark Asset Mgmt Co -Midcap Value -Gross Size -- - _ _ _ ^ Lazard Asset Mgmt - U.S Mid Cap Equity Gross Size Lotsoff Capital Mgmt -Mid Cap Equity -Gross Size - _ _ -- Martingale Asset Mgt -Midcap Core -Gross Size -- -- ^ Victory Cap Mgmt Mid Cap Equity -Gross Size - -- __ __ -- -_ ~3 Weiss, Peck & Greer -Mid Cap Disciplined Equity -Gross Size Universe: Mobius Mid Cap Percentile: Percentile: Percentile: Percentile: Returns for 1 'Returns for 3 Returns for 5 Retums for Years Years Years 10 Years Tralling Trailing Trailing ', Trail(ng 60 0 20.0 4 0 N/A _ 73.0 __ 49.0 - _ 13.0 -- 27.0 62.0 25.0 13.0 N/A 22.0 6.0 9.0 31 0 5.0 30.0 10.0 49.0 ' 6.0 5.0 11.0 N/A 24 Sample Allocation Study ~ ~ ~ ~ ~ ~ ~ 25 Portfolio Allocations Russe111000 TR 45% 35% 30% 20% 60% 0% 0% Russell 2000 Value TR 5% 5% 10% 10% 0% 13% 9% MSCI EAFE TR 5% 10% 10% 10% 0% 9% 10% DJ Wilshire Real Estate Securities TR 0% 0% 5% 10% 0% 0% 8% LB Aggregate Bond TR 40% 35% 35% 35% 40% 28% 33% S&P MidCap 400 TR (C) 2005 5% 15% 10% 15% 0% 3% 10% Russell 1000 Growth TR 0% 0% 0% 0% 0% 31 % 15% Russell 1000 Value TR 0% 0% 0% 0% 0% 13% 15% Russell 2000 Growth TR 0% 0% 0% 0% 0% 3% 0% Tra i I i ng Performance A 1. 6% 5.5% 11.8% 4.5% 8.7% B 1. 9% 6.7% 13.4% 5.2% 9.2% C 1. 8% 6.7% 14.1 % 6.4% 9.5% D 1. 9% 7.4% 15.0% 7.7% 10.0% E 1. 5% 4.8% 10.7% 3.3% 8.4% K 1. 9% 5.8% 13.9% 4.1 % 8.6% S 1. 9% 7.1 % 14.7% 6.7% 9.6% 26 . . . . ~ . . ~ ~ w . . . . . . . ~- ~ Expected Retum 27 0.0 2.0 4.0 6.0 B.0 10.0 12.0 14.0 16.0 1 B.0 20.0 22.0 24.0 26.0 28.0 30.0 Standard Deviation (Risk) Risk vs. Return February 1981- December 2005 Return (AM) 28 10.2% 10.4% 10.6% 10.8% 11.0% 11.2% 11.4% 11.6% 11.8% 12.0% 12.2% 12.4% 12.6% 12.9% Risk (STD) City of Winter Springs Defined Benefit Pension Plan April 12, 2006 Appendix B SAMPLE PENSION FUND INVESTMENT PERFORMANCE EVALUATION For the Quarter Ended September 30, 2005 29 City of Winter Springs Defined Benefit Pension Plan April 12, 2006 SAMPLE PENSION FUND Third Quarter 2005 The out-performance of value stocks comes as no surprise to those dedicated to the study of asset class behavior and asset allocation. With the knowledge that cyclical performance patterns exist, it is important to understand the economic drivers of the out-performance of this asset class. It is important to understand why value has done so well at this stage of the market cycle, and what the determining drivers of the out-performance have been. We must ask: Have the influences changed? How long might they continue? Financials were the dominant drivers of value stock performance during the fast several years of the decade. However, during the past two years, the clear performance drivers have been the energy and utility sectors. We postulate, as the energy cycle turns, so turns the cycle from value to growth. Each stage of the economic cycle brings different influences that impact company balance sheets and profitability. This impact is reflected in stock prices and resulting company capaalizations. Following the chain of events, as one group of companies grows in capitalization they become an increasing representation of the index group in which they are classified. This inadvertently creates an outsized or disproportionate representation (investor exposure) to a particular sector or industry. In the late 90's, at its peek, technology became almost half the total domestic mazket capitalization and represented over 70% of the return generated by the S&P 500. Even index investors easily recall the pain suffered as the cycle matured and technology lead the growth stock and subsequent mazket decline. We purport, today that group to be energy stocks and uti~ities. Rate of Return (%13Q-05 0.15 2.57 14.25 30.34 3.20 5.08 29.39 28.11 0.49 2.30 62.61 22.38 While energy and utilities garner our current attention, fmancials are the lazgest representation of the value stock community. For this group, the positive driving inputs for profitability occurred early in the cycle (low relative and declining interest rates, a steep term struchue) and have already turned negative as the Federal Reserve continues to raise rates in a "measured pace" in its effort to tighten money supply and slow the growth of business activity in this leverage driven sector. Weight in the Index (°~I: 36.20 12.00 9.80 3.60 61.60 While the price of oil might exceed $100/barrel, we believe current pricing levels are not sustainable, but more importantly energy stock valuations are viewed as excessive by many, and are disproportionately represented in value indices. The energy disruption caused by the hurricanes will pass, conservation efforts will rise, and the price of energy will stabilize as supplies are restored Positive earnings surprises from value stocks will be replaced with more subdued outlooks and investors will look to other, more reasonably valued sectors. To understand the impact energy and utility companies have had on the returns of value stocks we look at the composition and returns of the popular Russell stock indices. The outlook for the economy remains positive with consensus GDP growth of3%. Fed policy remains restrictive suggesting confidence in the underlying sustainability of that strength. We postulate: as the energy cycle turns, so turns the cycle of opportunity from value to growth. 30 BC:A SAMPLE PENSION FUND Investment Summary ^ The total Fund underperformed the benchmark for the quarter and fiscal year. However, relative to peers in a balanced universe the total Fund performed very well ranking 29th for the quarter and 21st for the fiscal year. ^ Underperformance for the quarter and fiscal year relative to the benchmark was due to the Private Capital management portfolio and the Mercator portfolio. ^ All other mandates have performed inline or exceeded their benchmarks for the fiscal year. ^ Over the trailing three year period the total Fund has significantly outperformed the benchmark (+17.4% vs. +15.7%) and ranked 7th in a balanced universe. Recommendations: BCA has no recommendations at this time. BCA, 31 SAMPLE PENSION FUND For the Quarter ended September 30, ZOOS Fund Asset Allocation Table Based nn Market Value as of September 30.2005 ,;~ ,. . _ Per ormance ~ - v ._ment,A rg ch ;.,s rt" tactual % Total~Egu~ty ~ `'a R~aitt e _ ~ - =`' _-- ~, u ~Annualied R ;~ ~ TD Cumulative ~'~ ur t"~`-~ Large Ca Value Equity 16.6 7 25 5.2 21.9 ~.?$.Zr. '`= Large Ca Growth Equit 20.0 7 25 4.5 16.9 '..57.8.:_ Mid Ca Core E uity 10.1 5 20 0.2 20.0 '70:x° International Equity 15.6 10 20 9.5 23.2 ' ' - '' -83 ~7 Total E ui (with a ui cash 62.3 30 70 3.8 3.7 ''w'~:~`28.2~'` REIT 8.1 7.5 12.5 4.4 30.5 ` `11.7:5 Broad Market Fixed Income 22.4 N/A N/A -0.1 3.8 ,1~I S TIPS Fixed Income 7.2 5 10 0.6 1.7 1.7 Total Fund 100.0 3.5 6.1 49 2; Total Fund Bencbmark 3.7 5,5 ?43.9 "`° Limitations set forth in the Investment Policy Statement. Total equities may not exceed 70% of total assets at market value. Investment Performance October 1, 2004 -September 30, 2005 uarter One Year Beginning Market Value 140,057,837 128,999,638 Ending Market Value 144,879,837 144,879,837 Net Contributions (+/-) -100,322 -1,307,548 Investment Gain (+/-) 4,922,322 17,187,747 Investment Return (%) +3.5% +1.3.4% Benchmark Objective (%) +3.7% +14.8% Difference -0.2% -1.4% Fiscal Year: October 1st to September 30th. 32 City of Winter Springs Defined Benefit Pension Plan Apri112, 2006 Compliance Checklist Yes No 1. The total Fund's annualized three-year performance beat the Benchmark Objective's three-year annualized performance (+17.4% vs. +15.7%). ® ^ 2. The total Fund's annualized three-year performance ranked in the top 40th percentile (7th percentile) in a balanced universe of managers investing in both ® ^ equity and fixed income securities. 3. The total Fund's annualized three-year performance achieved the 8% actuarial assumption rate. ® ^ 4. The total domestic equity portfolio's annualized three-year performance beat the three-year annualized return for the domestic equity benchmark (+21.5% vs. ® ^ +19.3%). 5. Investments in equity securities, excluding the real estate allocation, were 62.3% and did not exceed 70% of Fund's assets at market value. ® ^ 6. No more than 5% of the total Fund's assets at market value were invested in the common stock or capital stock of one issuing company. ® ^ 7. The annualized three-year bond performance did not equal the return for the bond benchmark index (+3.4% vs. +4.0%). ^ 8. The annualized three-year bond performance ranked in the top 40th percentile in an intermediate investment grade fixed income universe; performance ranked ^ SI st. 9. No more than 3% of each domestic equity manager's account at market value was invested in American Deposit Receipts (ADR). ® ^ 10. Non-government bonds: Investments in any one issuing company were limited to 1.5% of the total bond portfolio. ® ^ l 1. Permitted fixed income securities rated below A3/A- are limited to 15% of the total fixed portfolio. ® ^ 12. All of the fixed income securities (bonds or other evidence of indebtedness) were issued or guaranteed by a corporation organized under the laws ofthe United ® ^ States or District of Columbia, traded over-the-counter (OTC) and had a credit rating of "Baa2/Mid BBB" or above by Moody's Investor Service or Standard & Poor's. 13. International equities emphasized companies of developed countries ® ^ 33 SAMPLE PENSION FUND For the Quarter ended September 30, 2005 I. Total Fund Performance (Annualized Percent Returns) 3 Yr. Std. 5 Yr. Std. Qtr. 1 Yr. 3 Yr. 5 Yr. Dev. Dev. 60/40 Balanced Manager Universe Rankin 29th 21st 7th 35th N/A N/A TOTAL FUND 3.5 13.4 17.4 5.0 8.6 11.4 Benchmark Objective O 3.7 14.8 15.7 4.6 8.5 11.2 Difference -0.2 -1.4 +1.7 +0.4 +0.1 +0.2 Generic 60/40 Benchmark 1.9 8.5 11.7 2.1 7.3 10.4 vnrrer-rrve ~ivru~ me nencnmarx vo~ecnve maex we~gnungs are LtS.u% tcusseu 1 vUU, l ~.U% Jd"it' 4uu, I~.U% MJI:t t:,At~~, lu.U"/o W USture Keal estate JecunUes, 24.5% custom bond benchmark, and 7.5% LB int. Tips. The Generic 60/40 Benchmark is 60% S&P 500 and 40% Lehman Aggregate Index. As of 1/01/04 the Benchmark Objective index weightings are 28.0% Russell 1000, 15.0% S&P 400, 15.0% MSCI EAFE, 10.0% Wilshire Real Estate Securities, and 35%custom bond benchmark. 25.0% Russell 1000, 15.0% S&P 400, 15.0% MSCI EAFE, 10.0% Wilshire Real Estate Securities, 7.5% LB int. Tips, and 24.5% custom bond benchmark. From 6/22/03 until 1/01/04, the Benclmiark Objective index weightings were 25.0% Russell 1000, 15.0% S&P 400, 15.0% MSCI EAFE, 10.0% Wilshire Real Estate Securities, and 35% Lehman Intermediate Aggregate. From 10/5/02, the Benchmark Objective index weightings were 25.0% Russell 1000, 15.0% S&P 400, 15.0% MSCI EAFE, 10.0% W ilshire Real Estate Securities, and 35% LBAB. Prior to 10/05/02, the Benchmark Objective weightings approximated the long-term average of the Fund's asset allocation: 55% S&P 500, 40% LBGC, and 5% MSCI EAFE. Total Fund Performance (For the One-Year Periods ended Sentember 30th) .2005 2004 2003. .2002 2001 ~ 2000 TOTAL FUND 13.4 1.5.9 23.0 -8.7 -13.6 18.6 Benchmark Objective 14.8 13.4 19.0 -8.5 -11.8 11.5 Difference -1.4 +2.5 +4.0 -0.2 -1.8 +7.1 34 City of Winter Springs Defined Benefit Pension Plan April 12, 2006 II. Domestic Equity Performance (Annualized Percent Returns) Qtr. 1 Yr. 3 Yrs. 3 Yr. 5 Yrs. Std. Dev. 5 Yr. std. Dev. Total Domestic Equity OO 3.8 14.9 21.5 0.6 10.0 18.5 III. Domestic Equity Benchmark • 4.2 16.8 19.3 -0.2 10.9 19.0 IV. Difference -0.4 -1.9 +2.2 +0.8 -0.9 -0.5 ® On 8/14/03, the Board resolved to classify the REIT portfolio as a separate asset class and not equity. NOTE: During October 2002, C.S. McKee (lg. cap value), INTECH (lg. cap growth), Private Capital Management (mid-cap), and Adelante (REIT) became the Fund's domestic equity managers. ® MSbius Broad Large Cap Moderate (Core) equity universe • Effective August 14, 2003, the domestic equity benchmark was changed to a floating index based on the weights of the underlying domestic equity assets. The benchmark is comprised of the Russell 1000 and the S&P Ivtidcap index. Previously the domestic equity benchmark was 50% Russell 1000, 30%S&P Midcap 400 and 20% Wilshire Real Estate Securities Index; previously, the benchmark was the S&P 500 index. Total Domestic Equity Performance (For the One-Year Periods ended Sevtember 30th) 2005 2004 2003.- 2002 `2001 "2000 Total Domestic Equity 14.9 20.0 29.9 -19.7 -28.3 27.0 Domestic Equity Benchmark • 16.8 15.3 26.2 -20.5 -26.6 13.3 Difference -1.9 +4.7 +3.7 +0.8 -1.7 +13.7 35 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ i SAMPLE PENSION FUND For the Quarter ended September 30, 2005 V. Domestic Equity Performance Equity Manager Qtr. 1 Yr, 2 Yr. VI. Mobius Pure Large Cap Growth Universe 54th 79th 22nd VII. INTECH 4.5 11.8 15.9 VIII. Russell 1000 Growth 4.0 11.6 9.5 IX. Difference +0.5 +0.2 +6.4 X. Mobius Pure Large Cap Value Universe 34th 24th 20th X1. C.S. McKee 5.2 19.1 20.3 XII. Russell 1000 Value 3.9 16.7 18.6 XIII. D~erence +1.3 +2.4 +1.7 XIV. Mobius MidCap Core Universe 100th 79th 68th XV. Private Capital Management 0.2 12.4 15.3 XVI. S&P 400 Index 4.9 22.2 19.8 XVII. Difference -4.7 -9.8 -4.5 36 BCA ::~ --~- ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ i City of Winter Springs Defined Benefit Pension Plan Apri112, 2006 REIT Performance .Qtr. 1 Yr. 2 Yr. VIII. A Mobius REIT Universe 24th 30th 47th XIX. Adelante Capital Management 4.4 30.4 28.5 XX. Wilshire Real Estate Securities Index 4.1 29.0 27.2 XXI. D~erence +0.3 +L4 +1.3 XXII. AISCORE REIT Index ~ 4.2 28.9 26.9 ~ A modified REI'f index that excludes the following non-core sectors: lodging, manufactured homes, factory outlets, and public storage. 37 SAMPLE PENSION FUND For the Quarter ended September 30, 2005 XXIII. International Equity Performance (Annualized Percent Returns) 3 Yr 5 Yr. Equity Manager Qtr. 1 Yr. 2 Yr. 3 Yrs. 5 Yrs. Std. Dev. Std. Dev. Rank ® 72nd 90th 79th 71st 41st N/A N/A Total International Equity OO 9.5 22.3 22.3 23.4 6.1 17.6 20.3 IV. MSCI EAFE 10.4 26.3 24.4 25.1 3.5 16.8 20.6 XXV. D~erence -0.9 -4.0 -2.1 -1.7 +2.6 +0.8 -0.3 VI. Mercator Asset Marra ement 9.5 22.3 22.3 N/A N/A N/A N/A U Mobius World Equity: International Developed Universe s0 As of November 1, 2002, Mercator Asset Management became the international equity manager; previously, INVESCO was the international manager. International Equity Performance (For the One-Year Periods ended Sentemher 30th1 Manager 2005 2004 2003 2002 `2001 2000 Total International Equity 22.3 22.3 25.7 -9.7 -20.9 7.8 MSCI EAFE 26.3 22.5 26.4 -15.3 -28.3 3.4 Difference -4.0 -0.2 -0.7 .h .~ ~- -~~,~ _ j ~#- ~~ 38 City of Winter Springs DeTined Benefit Pension Plan Apri112, 2006 XXVII. Performance of Various Equity Strategies (Calendar-Year Performance) Composite 3QU 2004 2003 2002 2001 2000 - 1999 1998 .1997 1996 1995 10 Yr. Avg. Sample Pension Fund: Total Dom. E ui 3.8 1.6.9 36.0 -20.2 -13.5 -43 1.9.1 N/A N/A N/A N/A N/A S&P 500 3.6 10.9 28,7 -22.1 -11.9 -9.1 21.1 28.6 33.4 23.0 37.6 14.0 Russell 1000 Growth 4.0 63 29.7 -27.9 -20.4 -2L~ 33.2 38.7 30.5 23.1 37.2 12.8 Russel11000 Value 3.9 16.5 30.0 -15.5 -5.6 7.0 7.3 15.6 35.2 ~ 21.6 38.4 15.1 S&P Midcap 400 4.9 16.5 35.6 -14.5 -0.6 17.5 14.7 19.1 32.3 19.2 30.9 17.1 Russell 2000 (S-n Cap) 4.7 18.3 473 -20.5 2.5 -3.0 21.3 -2.5 22.4 16.5 28.4 13.1 Russell 2000 Growth 63 14.3 48.5 -303 -9.2 -22.4 43.1 1.2 12.9 113 31.0 10.0 Russell 2000 Value 3 a :, ~ 22.2 46.0 - 11.4 14.0 22.8 - L ~ -6.5 31.8 21.4 25.8 16.5 Wilshire Real Estate . ~ Securities Index 4.1 33.1 37.1 2.G I ILS 30.7 3 1 ~, ',, 17A ~~., 19.8 36 9 ~ ~~ 13.6 16.4 MSCI EAFE 10.4 20.7 39.2 -15.7 -21.2 -14.0 273 20.3 ~ 1; ;, ~' ~e~ ~ ~ 6 ~ ,~ :~ 7 t; ; , ~ . _ Best Performing Strategy Worst Performing Strategy 39 ~~{.~ SAMPLE PENSION FUND For the Quarter ended September 30, 2005 Fixed-Income Performance (Annualized Percent Returns) Fixed-Income Manager Qtr. 1 Yr. 2 Yr. 3 Yrs. 5 Yrs. 3 Yr. Std. Dev. 5 Yr. Std. Dev. Rank © 21st 23rd 30th 51st 14th N/A N/A Total Core Fixed Income O -0.1 2.5 2.8 3.4 6.7 2.7 4.3 Bond Benchmark -0.3 2.5 3.2 4.0 6.8 2.9 4.0 Difference +0.2 0.0 -0.4 -0.6 -0.1 -0.2 +0.3 Richmond Capital Core Fixed -0.1 2.5 2.8 N/A N/A N/A N/A Richmond Capital TIPS 0.6 N/A N/A N/A N/A N/A N/A v n~.,ti rixea income: intenn investment cJraae Universe O The Richmond Capital fixed income account was established on October 21, 2002. NOTE: Effective 1/01/04 the bond benchmark is a custom benchmark. From 10/5/02 to 12/31/03, the bond benchmazk was the L.BAB. Prior to 10/5/02, it was the LBGC. Total Fixed Income Performance /Fnr thn ()nn-Year Pvrindc ondvd .Contoss.bor 7/Nb 1 2005 '2004 '' 2003 2002 200)1 ` 2000 Total Fixed Income 2.5 3.1 4.8 10.1 13.4 6.1 Bond Benchmark 2.5 3.8 5.7 9.2 13.2 6.7 Difference 0.0 -0.7 -0.9 +0.9 +0.2 -0.6 40 City of Winter Springs Defined Benefit Pension Plan April 12, 2006 Fundamental Portfolio Characteristics Fixed-Income Characteristics Relative to the Custom Bond Benchmark Index For the Quarter Ended 9/30/05. Richmond Capital BCA Custom ~ Benchmark Return (%) -0.1 -0.3 Average Credit Quality AA AAA Average Duration (Yrs) 3.1 3.5 41 SAMPLE PENSION FUND For the Quarter ended September 30, 2005 Total Domestic Equity Risk Statistics Performance Relative to the Domestic Equity Benchmark Index For the Three-Year Trailing Period Ended 09/30/05. Domestic Equity Domestic. Equity Benchmark Difference Return (%) 21.5 19.3 +2.2 Standard Deviation (%, +/-) 10.6 11.7 -1.1 Sharpe Ratio 1.9 1.5 +0.4 Worst Quarter (%) -1.1 -2.6 +1.5 Worst 4 Consecutive Quarters (%) 10.5 9.3 +1.2 Number Negative Quarters 2 3 -1 Up Mkt. Capture Ratio (%) 100.2 100.0 +0.2 Down Mkt. Capture Ratio (%) 27.8 100.0 -72.2 Annualized Alpha (%) 3.2 0.0 +3.2 Beta 0.9 1.0 -0.1 R-Squared (%) 97.6 100.0 -2.4 NOTE: Effective 10/01/03, the domestic equity benchmark is approximately 60% Russell 1000 and 40% S&P 400. From 10/05/02 until 9/30/03, the total domestic equity benchmark was a hybrid index consisting of the following: 50% Russell 1000, 30% S&P 400 and 20% Wilshire Real Estate Securities Index; previously, the benchmark was the S&P 500. 42 City of Winter Springs Defined Benefit Pension Plan April 12, 2006 International Equity Risk Statistics Performance Relative to the MSCI EAFE Indez For the Three-Year Trailing Period Ended 09/30/05. International Equity MSCI EAFE Difference Return (%) 23.4 25.1 -1.7 Standard Deviation (%, +/-) 17.6 16.8 +0.8 Sharpe Ratio 1.2 1.4 -0.2 Worst Quarter (%) -10.2 -8.1 -2.1 Worst 4 Consecutive Quarters (%) 12.5 14.1 -1.6 Number Negative Quarters 3 4 -1 Up Mkt. Capture Ratio (%) 98.0 100.0 -2.0 Down Mkt. Capture Ratio (%) 127.8 100.0 27.8 Annualized Alpha (%) -2.0 0.0 -2.0 Beta 1.0 1.0 0.0 R-Squared (%) 96.3 100.0 -3.7 43 _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ SAMPLE PENSION FUND For the Quarter ended September 30, 2005 Fined-Income Risk Statistics Performance Relative to the Bond Benchmark For the Three -Year Trailing Period Ended 09/30/05 Total Fined Income Bond Benchmark Difference Return (%) 3.4 4.0 -0.6 Standard Deviation (%, +/-) 2.7 2.9 -0.2 Sharpe Ratio 0.7 0.8 -0.1 Worst Quarter (%) -2.0 -1.8 -0.2 Worst 4 Consecutive Quarters (%) 0.8 1.1 -0.3 Number Negative Quarters 3 3 0.0 Up Mkt. Capture Ratio (%) 87.0 100.0 -13.0 Down Mkt. Capture Ratio (%) 94.9 100.0 -S.1 Annualized Alpha (%) -0.4 0.0 -0.4 Beta 0.9 1.0 -0.1 R-Squared (%) 97.1 100.0 -2.9 Note: Effective 1/1/04, the benchmark is the BCA Custom Bond Benchmark. From July 1, 2003 until December 31, 2003, the benchmark was LIAB. From October 5, 2002 until June 30, 2003, the fixed income benchmark is the LBAB; prior to October 2002, the benchmark was the LBGC ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ i City of Winter Springs Defined Benefit Pension Plan April 12, 2006 GLOSSARY OF TERMS: ACCRUED IN'T'EREST Bond interest earned since the last interest payment, but not yet received. ALPHA A linear regressive constant that measures the manager's expected return independent of Beta. ASSET ALLOCATION The optimal division of portfolio asset classes in order to achieve an expected investment objective. BETA A measure of portfolio sensitivity (volatility) in relation to the market, based upon past experience. BOND DURATION A measure of portfolio sensitivity to interest rate risk. COMMINGLED FUND An investment fiord, offered by a bank or insurance company, which is similar to a mutual fund in that investors are permitted to purchase and redeem units that n:present ownership in a pool of securities. CORE A type of investment strategy that has approximately an equal weighting in both growth and value stocks in order to achieve a return that is comparable to the broad market performance (i.e., the S&P 500). CORRELATION COEFFICIENT A statistical measure ofhow two assets move together. The measure is bounded by+1 and -1; +1 means that the two assets move together positively, while ameasure of-1 means that the assets are perfectly negatively correlated. INDEXES Indexes are used as "independent representations of markets" (e.g., S&P 500 and LBGC). INFORMATION RATIO Annualized excess return above the benchmazk relative to the annualized tracking error. GROWTH MANAGER A growth manager generally invests in companies that have either experienced above- averagegrowth rates and/or are expected toexperienceabove-average growth rates in the future. Growth portfolios tend to have high price/earnings ratios and generally pay little to no dividends. LARGE CAP Generally, the term refers to a tympany that has a market capitalization that exceeds $5 billion. MANAGER UNIVERSE A collection of quarterly investment returns from various investment management firms that may be subdivided by style (e.g. growth, value, core). MID CAP Generally, the term refers to a company that has a market capitalization between $1 and $5 billion. RATE OF RETURN The percentage change in the value of an investment in a portfolio over a specified time period. RISK MEASURES Measures of the investment risk level, including beta, credit, duration, standard deviation, and others that are based on current and historical data. R-SQUARED Measures how closely portfolio returns and those of the market are wrrelated, or how much variation in the portfolio returns maybe explained by the market. An R2 of 40 means that 40% of the variation in a fund's price changes could be attn'buted to changes in the market index over the time period. SHARPE RATIO The ratio of the rate of return earned abovetherisk-free late to the standazd deviation of the portfolio. It measures the number of units of return per unit of risk. STANDARD DEVIATION Measure of the variability (dispersion) of historical returns around the mean. It measures how much exposure to volatility was experienced by the implementation of an investment strategy. SYSTEMATIC RISK Measured by beta, it is the risk that cannot be diversified away (mazket risk). TRACKING ERROR A measure of closely a manager's performance tracks an index; it is the annualized standard deviation of the differences between the quarterly returns for the manager and the benchmark. UP-MARKET CAPTURE RATIO Ratio that illustrates how a manager perfottned relative to the market during rising market periods; the higher the ratio, the better the manager performed (i.e., a ratio of 110 implies the manager performed 10% better than the market). VALUE MANAGER A value manager generally invests in companies that have low price-to~amings and price-to-book ratios and/or above-average dividend yields. 45 OMB APPROVAL OMB Number: 3235-0049 FORM ADV Expires: July 31, 200& Uniform Application for Investment Adviser Registration Estimated average burden Part II -Page 1 Hours per response... ..9.402 Name of Investment Adviser: Burgess Chambers 8< Associates, Inc. Address: (Number and Street) (City) (State) (Zip Code) Area Code: Telephone Number: 601 N. New York Avenue, Suite 200 Winter Park FL 32789 (407) 644-0111 This part of Form ADV gives information about the investment adviser and its business for the use of clients. The information has not been approved or verified by any governmental authority. Table of Contents Item Number Item Pace 1 Advisory Services and Fees ......................................... 2 2 Types of Clients .................................................. 2 3 Types of Investments .............................................. 3 4 Methods of Analysis, Sources of Information and Investment Strategies ...... 3 5 Education and Business Standards .................................... 4 6 Education and Business Background .................................. 4 7 Other Business Activities ........................................... 4 8 Other Financial Industry Activities or Affiliations ........................ 4 9 Participation or Interest in Client Transactions .......................... 5 10 Conditions for Managing Accounts ................................... 5 11 Review of Accounts ............................................... 5 12 Investment or Brokerage Discretion ................................... 6 13 Additional Compensation ........................................... 6 14 Balance Sheet .................................................... 6 Continuation Sheet ................................................ Schedule F Balance Sheet, if required ............................................ Schedule G (Schedules A, B, C, D, and E are included with Part I of this Form, for the use o[ regulatory bodies, and are not distributed to clients.) Potential persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number. 46 m2004 National Compliance SeMces 8oa8ooa204 FORM ADV Applicant: Part II - Pa e 2 Burgess Chambers 8~ 1 Inc. SEC File Number: Date: sot-32111 April 9, 2004 I. A. Advisory Services and Fees. (check the applicable boxes) For each type of service provided, state the approximate % of total advisory billings from that service. Applicant: (See instruction below.) ^ (1) Provides investment supervisory services .................... ° ^ (2) Manages investment advisory accounts not involving investment supervisory services ................... ® (3) Furnishes investment advice through consultations not included in either service described above .......... 100% ^ (4) Issues periodicals about securities by subscription ....................... ..................... ~o ^ (5) Issues special reports about securities not included in any service described above ..................... ^ (6) Issues, not as part of any service described above, any charts, graphs, formulas, or other devices which clients ° may use to evaluate securities ................................................................ /n ^ (7) On more than an occasional basis, furnishes advice to clients on matters not involving securities ........... ^ (g) Providesatimingservice ............................................................... ~o ^ (9) Furnishes advice about securities in any manner not described above ................................. _~o (Percentages should be based on applicant's last fiscal yeaz. If applicant has not completed its first fiscal yeaz, provide estimates of advisory billings for that year and state that the percentages are estimates.) Yes No B. Dces applicant call any of the services it checked above financial planning or some similar term? .................. ^ C. Applicant offers investment advisory services for: (check all that apply) ® (1) A percentage of assets under management ^ (4) Subscription fees ® (2) Hourly chazges ^ (5) Commissions ® (3) Fixed fees (not including subscription fees) ^ (6) Other D. For each checked box in A above, describe on Schedule F: • the services provided, including the name of any publication or report issued by the adviser on a subscription basis or for a fee • applicant's basic fee schedule, how fees are chazged and whether its fees aze negotiable • when compensation is payable, and if compensation is payable before service is provided, how a client may get a refund or may terminate an investment advisory contract before its expiration date 2. Types of clients -Applicant generally provides investment advice to: (check those that apply) ^ A. Individuals ® E. Trusts, estates, or chazitable organizations ^ B. Banks or thrift institutions ® F. Corporations or business entities other than those listed above ^ C. Investment companies ^ G. Other (describe on Schedule F) ® D. Pension and profit sharing plans ' Answer all items. Complete amended pages in full, circle amended items and file with ezecution page (page 1). 47 ©2004 National Compliance SeMCes 800-9003204 _ _ _ _ _ FORM ADV Applicant: SEC File Number: Date: Part II - Pa e 3 Burgess Chambers & Associates, Inc. 801- 32111 April 9, 2004 I 3. Types of Investments. Applicant offers advice on the following: (check those that apply) A. Equity securities ® H. United States government securities I ® (1) exchange-listed securities ® (2) securities traded over-the-counter I. Options contracts on: ® (3) foreign issues ^ (I) securities I ^ (2) commodities ^ B. Warrants J. Futures contracts on: I ® C. Corporate debt securities ^ (1) tangibles (other than commercial paper) ^ (2) intangibles ® D. Commercial paper K. Interests in partnerships investing in: I ® (1) real estate ^ E. Certificates of deposit ® (2) oil and gas interests ^ (3) other (explain on Schedule F) I ^ F. Municipal securities ^ L. Other (explain on Schedule F) G. Investment company securities: ^ (1) vaziable life insurance I ® (2) vaziable annuities ® (3) mutual fund shares I 4. Methods of Analysis, Sources of Information, and Investment Strategies. A. Applicant's security analysis methods include: (check those that apply) (1) ^ Charting (4) ®Cyclical (2) ®Fundamental (5) ®Other (explain on Schedule F) (3) ^ Technical ' B. The main sources of information applicant uses include: (check those that apply) (1) ®Financial newspapers and magazines (5) ®Timing services I (2) ®Inspections of corporate activities (6) ®Annual reports, prospectuses, filings with the Securities and Exchange Commission (3) ®Reseazch materials prepared by others (7) ®Company press releases I (4) ®Corporate rating services (8) ^ Other (explain on Schedule F) ' C. The investment strategies used to implement any investment advice given to clients include: (check those that apply) (1) ®Long term purchases (5) ^ Mazgin transactions (securities held at least a year) I (2) ®Short term purchases (6) ^ Option writing, including covered options, uncovered (securities sold within a yeaz) options or spreading strategies (3) ^ Trading (securities sold within 30 days) (7) ^ Other (explain on Schedule F) I (4) ^ Short sales ' Answer all Items. Complete amended pages in t5~11, circleOamended items and t51e with ezecution page (page 1). 48 m 2004 National Compliance SaMCea 800.8003204 1 FORM ADV Applicant: SECFileNumber Date: Part II - Pa e 4 Burgess Chambers 8~ Associates, Inc. ao1-32111 April 9, 2004 I I I I I t I I I I 5. Education and Business Standards. Are there any general standazds of education or business experience that applicant requires of those involved in Yes No determining or giving investment advice to clients? .................................................... ® ^ (Ifyes, describe these standards on Schedule F.) 6. Education and Business Background. For: each member of the investment committee or group that determines general investment advice to be given to clients, or if the applicant has no investment committee or group, each individual who determines general investment advice given to clients (if more than five, respond only for their supervisors) each principal executive officer of applicant or each person with similar status or performing similaz functions. On Schedule F, give the: • name ' formal education after high school year of birth ' business background for the preceding five years 7. Other Business Activities. (check those that apply) ^ A. Applicant is actively engaged in a business other than giving investment advice. ^ B. Applicant sells products or services other than investment advice to clients. ^ C. The principal business of applicant or its principal executive officers involves something other than providing investment advice. (For each checked box describe the other activities, including the time spent on them, on Schedule F.) 8. Other Financial Industry Activities or AlI'diations. (check those that apply) ^ A. Applicant is registered (or has an application pending) as a securities broker-dealer. ^ B. Applicant is registered (or has an application pending) as a futures commission merchant, commodity pool operator or commodity trading adviser. C. Applicant has arrangements that are material to its advisory business or its clients with a related person who is a: ^ (1) broker-dealer ^ (7) accounting firm ^ (2) investment company ^ (8) law firm ^ (3) other investment adviser ^ (9) insurance company or agency ^ (4) fmancial planning firm ^ (10) pension consultant ^ (5) commodity pool operator, cotnmodity trading ^ (11) real estate broker or dealer adviser or futures commission merchant ^ (12) entity that creates or packages limited partnerships ^ (6) banking or thrift institution (For each checked box in C, on Schedule F identify the related person and describe the relationship and the arrangements.) Yes No D. Is applicant or a related person a general partner in any partnership in which clients are solicited to ^ invest?........ (If yes, describe on Schedule F the partnerships and what they invest in J I I Answer all items. Complete amended pages In full, circle amended items and file with a:ecution page (page 1). 49 ©2004 National Compliance Services a00-900.3204 I LJ t FORMADV Applicant: SECFileNumber Date: Part II - Pa e 5 Burgess Chambers r~ Associates, Inc. sol- 32111 February 1, 2006 I 9. Participation or Interest in Client Transactions. Applicant or a related person: (check those that apply) I ^ A. As principal, buys securities for itself from or sells securities it owns to any client. ^ B. As broker or agent effects securities transactions for compensation for any client. ^ C. As broker or agent for any person other than a client effects transactions in which client securities are sold to or bought from a I brokerage customer. ^ D. Recommends to clients that they buy or sell securities or investment products in which the applicant or a related person has some financial interest. I ^ E. Buys or sells for itself securities that it also recommends to clients. (For each box checked, describe on Schedule F when the applicant or a related person engages in these transactions and what restrictions, internal procedures, or disclosures are used for conflicts of interest in those transactions.) I Describe, on Schedule F, your code of ethics, and state that you will provide a copy of your code of ethics to any client or prospective client upon request. 10. Conditions for Managing Accounts. Does the applicant provide investment supervisory services, manage investment advisory ' accounts or hold itself out as providing financial planning or some similazly termed services and impose a minimum dollar value of Yes No assets or other conditions for starting or maintaining an account? . , , , ,, , ,,, , , , , , , , , , , , , ^ (If yes, describe on Schedule F.) ' 11. Review of Accounts. If applicant provides investment supervisory services, manages investment advisory accounts, or holds itself out as providing financial planning or some similarly termed services: A. Describe below the reviews and reviewers of the accounts. For reviews, include their frequency, different levels, and triggering factors. For I reviewers, include the number of reviewers, their titles and functions, instructions they receive from applicant on performing reviews, and number of accounts assigned each. Burgess Chambers and Associates, Inc. (BCA) conducts client reviews utilizing a team approach no less than ' quarterly. We follow a peer review approach to bring our reporting accuracy to as high a level as possible. This keeps key personnel involved in ail aspects of preparing client reports. Account Information is entered Into our pertormance measurement system each month. Quarterly reports are approved by a principal before presentation to a client. I B. Describe below the nature and frequency ofregulaz reports to clients on their accounts. Our pertormance evaluation process answers the following questions: I 1. How has the Fund performed over various time periods? 2. Are the investment objectives being achieved? 3. How does the pertormance compare with comparative indices and peer groups? 4. How much risk is the investment manager experiencing in order to achieve its pertormance? I 5. Do the investment managers have investment styles that reduce over-all risk? See Schedule F for additional information. I I Answer all items. Complete amended pages in full, circle amended items and file with ezecution page (page 1). 50 m20oa National Compliance SeMces a00-800J204 FORMADV Applicant: SECFileNumber: Date: Part 11 -Page 6 Burgess Chambers S Associates, Inc. sot-32111 April 9, 2004 12. Investment or Brokerage Discretion. A. Dces applicant or any related person have authority to determine, without obtaining specific client consent, the: Yes No (1) securities to be bought or sold? .......................................................... ^ Yes No (2) amount of the securities to be bought or sold ? ............................................... ^ Yes No (3) broker or dealer to be used ? .......................... ................................ ^ Yes No (4) commission rates paid? ............................................................... ^ Yes No B. Does applicant or a related person suggest brokers to clients? ...................................... ® ^ For each yes answer to A describe on Schedule F any limitations on the authority. For each yes to A(3), A(4) or B, describe on Schedule F the factors considered in selecting brokers and determining the reasonableness of their commissions. If the value of products, research and services given to the applicant or a related person is a factor, describe: • the products, reseazch and services • whether clients may pay commissions higher than those obtainable from other brokers in return for those products and services • whether research is used to service all of applicant's accounts or just those accounts paying for it; and • any procedures the applicant used during the last fiscal yeaz to direct client transactions to a particulaz broker in return for products and reseazch services received. 13. Additional Compensation. Dces the applicant or a related person have any arrangements, oral or in writing, where it: A, is paid cash by or receives some economic benefit (including commissions, equipment or non-research services) from Yes No a non-client in connection with giving advice to clients? ........................................ ^ Yes No B. directly or indirectly compensates any person for client referrals? ...... .............................. ^ (For each yes, describe the arrangement"s on Schedule F.) 14. Balance Sheet. Applicant must provide a balance sheet for the most recent fiscal year on Schedule G if applicant: • has custody of client funds or securities unless applicant is registered or registering only with the Securities and Exchange Commission; or • requires prepayment of more than $500 in fees per client and 6 or more months in advance Yes No Has applicant provided a Schedule G balance sheet? ......................................... ^ ' Answer aU items. Complete amended pages in foil, circle amended items and file with execution page (page 1). 5 1 m 2004 National Compliance SeMces 800-8003204 l._J