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HomeMy WebLinkAbout2010 05 26 Board Of Trustees Regular Meeting Minutes - RESCHEDULED CITY OF WINTER SPRINGS, FLORIDA MINUTES BOARD OF TRUSTEES REGULAR MEETING MAY 26, 2010 (RESCHEDULED FROM MAY 11, 2010) CALL TO ORDER The Regular Meeting of Wednesday, May 26, 2010 (Rescheduled from Tuesday, May 11, 2010), of the Board of Trustees was called to Order by Chairperson Maria Fair at 5:33 p.m. in the Commission Chambers of the Municipal Building (City Hall, 1126 East State Road 434, Winter Springs, Florida 32708). Roll Call: Chairperson Maria Fair, present Vice Chainnan Ben McMahan, present Board Member Vernon Rozelle, Jr., arrived at 7:03 p.m. Board Member Max Swaim, present Board Member Barbara Watkins, present A moment of silence was followed by the Pledge of Allegiance led by Chairperson Fair. Next, Chairperson Fair asked if there were any Agenda changes and there were none noted. City Manger Kevin L. Smith introduced the new Finance and Administrative Services Department Director, Mr. Shawn Boyle. INFORMATIONAL AGENDA INFORMATIONAL 100. Office Of The City Manager And Finance And Administrative Services Department Providing A Summary Of Pension - Related Expenditures For The Second Quarter Expenditures For Fiscal Year 2010. Chairperson Fair stated, "I am assuming that we have some of the issues corrected that we had — in the past. The Fees are now on here and because of the delay of the time change in the Meeting; that should have now caught up to everything." Manager Smith replied, "If you all see anything that we may have missed, then please point it out, but that was our goal." CITY OF WINTER SPRINGS, FLORIDA MINUTES BOARD OF TRUSTEES REGULAR MEETING - MAY 26, 2010 (RESCHEDULED FROM MAY 1 1, 2010) PAGE 2 OF 16 INFORMATIONAL 101. Finance And Administrative Services Department Providing A Summary of The Pension Income Statements. Manager Smith introduced this item and commented, "You were looking basically for us to provide a quarterly financial statement showing the status of the Pension Fund. Shawn (Boyle) has attempted that with Informational (Agenda Item) `100'. This is just a starting point. We certainly intend to expand on it and make it better but, we would like to get your feedback as to whether or not this is what you are looking for." Chairperson Fair commented, "I think that looks really good." Board Member Max Swaim inquired, "Will this be on a quarterly basis or time of need ?" Manager Smith responded, "It will be on a quarterly basis for your Regular quarterly Meeting. So if you have a Special Meeting, unless you specifically ask for an update, we just plan on having at your Regular quarterly Meetings if that is okay with the Board." Chairperson Fair suggested, "That makes sense." No objections were voiced. CONSENT AGENDA CONSENT 200. Office Of The City Clerk Requesting Approval Of The January 26, 2010 Board Of Trustees Regular Meeting Minutes. "I MAKE A MOTION WE APPROVE THE JANUARY MINUTES." MOTION BY BOARD MEMBER SWAIM. SECONDED BY BOARD MEMBER WATKINS. DISCUSSION. VOTE: VICE CHAIRMAN McMAHAN: AYE CHAIRPERSON FAIR: AYE BOARD MEMBER WATKINS: AYE BOARD MEMBER SWAIM: AYE MOTION CARRIED. CONSENT 201. Office Of The City Clerk Requesting Approval Of The February 23, 2010 Board Of Trustees Special Meeting Minutes. Chairperson Fair noted, "The next Agenda Item is for the Minutes of February the 23 [2010] Special Meeting." CITY OF WINTER SPRINGS, FLORIDA MINUTES BOARD OF TRUSTEES REGULAR MEETING -- MAY 26, 2010 (RESCHEDULED FROM MAY 11, 2010) PAGE 3 OF 16 "MOTION TO APPROVE." MOTION BY BOARD MEMBER SWAIM. SECONDED BY VICE CHAIRMAN McMAHAN. DISCUSSION. VOTE: CHAIRPERSON FAIR: AYE VICE CHAIRMAN McMAHAN: AYE BOARD MEMBER SWAIM: AYE BOARD MEMBER WATKINS: AYE MOTION CARRIED. At this time, Manager Smith announced that the new Actuary firm would be presenting and he updated the Board on what Gabriel Roeder Smith & Company has done to date. Manager Smith then provided a status update related to invoices from the City's former Actuary firm, Retirement Plan Specialists, Inc. Referring to the Regular Meeting held on February 23, 2010, Vice Chairman Ben McMahan asked Manager Smith, "The thirty -one (31) employees who you talked about during that Meeting were taken care of, but I just want to make sure that we know for sure they have all been taken care of; they have gotten the funds if they are due funds and that we have closed that chapter." Mr. Boyle remarked, "What we've basically done is we've got the actuarial calculations from Larry (Wilson, Gabriel, Roeder & Smith Company). We have contacted all those folks. Some have received their funds. Some we are waiting on response from, but that process is well underway." Vice Chairman McMahan then inquired, "We didn't uncover any others outside that thirty -one (3 1) that we didn't know about ?" Mr. Boyle replied, "No." Next, Vice Chairman McMahan asked about a checklist procedure. Manager Smith described, "Through email correspondence, Dave (West) and I have been working to put Policies in place per this Board's direction to insure, for example, rebalancing activities do take place." Then, Manager Smith confirmed with Mr. Dave West, The Bogdahn Group that there were no outstanding items to their knowledge that needed to be addressed. AWARDS AND PRESENTATIONS AWARDS AND PRESENTATIONS 300. Not Used. CITY OF WINTER SPRINGS, FLORIDA MINUTES BOARD OF TRUSTEES REGULAR MEETING - MAY 26, 2010 (RESCHEDULED FROM MAY 11, 2010) PAGE 4 OF 16 400. REPORTS Assistant to the City Clerk Gayle Coutant referred to the Appreciation Dinner and asked that if Members had not yet responded to please do so by June 11, 2010. Next, Assistant to the City Clerk Coutant mentioned to the Board that Staff would like to start sending Agenda packets (Agendas, Minutes, and Agenda Items) to the Board via email to save money and time, and asked if the Board would be in agreement with this. Manager Smith commented on this request also. Vice Chairman McMahan said, "I am happy to participate." Chairperson Fair said, "I am happy to participate as well." Board Member Barbara Watkins replied, "Yes." Board Member Swaim nodded in agreement. PUBLIC INPUT Lieutenant Corey Green, Seminole County Fire And Rescue: asked that he be sent via email, the Agenda for upcoming Meetings. Discussion. Manager Smith commented to Lieutenant Green, "If you would like, just send me an email, I'll get it to the Clerk's Office and she can add you to the email list." PUBLIC HEARINGS AGENDA PUBLIC HEARINGS 500. Not Used. REGULAR AGENDA REGULAR 600. Office Of The City Manager Presentation From A Representative Of Lateef Investment Management. Ms. Jennifer L. Lavin, LIMA, Lateef Investment Management, 300 Drakes Landing Road, Suite100, Greenbrae, California: mentioned of the two (2) packets she provided the Board, she would be referring to the "City of Winter Springs Portfolio Review -Q1 2010" Report, dated May 26, 2010. CITY OF WINTER SPRINGS, FLORIDA MINUTES BOARD OF TRUSTEES REGULAR MEETING - MAY 26, 2010 (RESCHEDULED FROM MAY 11, 2010) PAGE 5 OF 16 Ms. Lavin directed the Board's attention to page 3 and remarked, "We are a domestic Equity Manager, more concentrated than most Managers with nineteen (19) positions. On average each position has about a five percent (5 %) weight." Continuing Ms. Lavin described Lateef Investment Management by stating, "We — consider ourselves very much conviction Managers, high quality growth companies." Then, an overview of the company was presented. Next, the page entitled "Net of Fees" was discussed and Ms. Lavin commented on the negative number and said, "That number, as far as from an absolute standpoint, I don't want to say we consider ourselves a failure when our job is not to lose a dollar. So we still struggle when we see a number that is in the negative like that. Even though relative to the benchmarks, we are doing okay." Continuing, Ms. Lavin presented an update on Berkshire Hathaway and ITT Educational. Ms. Lavin commented, "We think it's really important to do the Due Diligence and then you have to be able to do two (2) things very well. Know what price you are willing to pay and when to move out of the company." Then, Qualcolmm and Suncor were reviewed. Ms. Lavin then went on to say, "We do have a low turnover — each year it's about two (2) to three (3) companies that we `turn over'. We sell two (2) to three (3) companies and buy hopefully two (2) to three (3) new ones." Discussion. Next, Ms. Lavin discussed Visa and MasterCard and stated, "We continue to buy Visa and MasterCard at the levels they are now to round out those positions." Page 12 entitled, "Quality Next Move Up ?" was reviewed and Ms. Lavin stated, "If we look back at 2008 where — the stock prices of your Portfolio and actually, the performance of your Portfolio was not good at all and down significantly. However, the companies themselves were up thirteen percent (13 %). So, if you looked at the business at what they were doing, you have businesses that were up thriving and then stock price that just didn't follow. And this is all this chart is saying is that we have a lot of low quality rallies and we truly do believe in high quality." Lastly, Ms. Lavin reviewed the Portfolio characteristics. CITY OF WINTER SPRINGS, FLORIDA M INUTES BOARD OF TRUSTEES REGULAR MEETING -- MAY 26, 2010 (RESCHEDULED FROM MAY 11, 2010) PAGE 6 OF 16 Mr. West asked Ms. Lavin to clarify the term "Growth Manager" to which Ms. Lavin responded, "We are a Growth Manager, however, what makes us at a reasonable price is because of that pricing discipline. We are not momentum driven. We believe that there are great companies that will grow over time — one of the multiples that we think is truly important is return on invested Capital. Meaning, how is a company re- deploying its own cash or how much did it make on its own cash, if you will." Tape 1 /Side B Ms. Lavin then described Lateef Investment Management's strategy on purchasing company shares and remarked, "We are not growth at any price or growth for any reason." Further discussion ensued regarding Lateef Investment Management's model. Chairperson Fair inquired, "How are you determining how many positions to, at any given time to hold ?" Ms. Lavin responded, "For us the number at Lateef (Investment Management) does matter. We will not own more than twenty (20) — companies. We believe in a concentrated Portfolio," and continued by saying, "The firm was started in 1974, never held more than 20 (twenty) positions and would not hold more. I would say seventeen (17) to nineteen (19) is our average over the long term." Discussion ensued on sector weighting; how the company manages risks, the City's Investment Policy, and standard deviation of the Portfolio. Chairperson Fair inquired, "What are your total assets under management in the firm ?" Ms. Lavin replied, "About 3.7 billion ($3,700,000,000.00)." Continuing, Chairperson Fair asked Ms. Lavin, "How many clients do you have ?" Ms. Lavin responded, "We have 1,200 accounts — if that would help. I don't know the actual number of clients because a lot of clients have two (2) accounts." Next, Chairperson Fair raised the question, "Do you have any numbers on the standard deviation ?" Mr. West responded, "We could provide that." Discussion followed on Dividend Managers. Ms. Lavin then asked the Board for clarification, "On the standard deviation numbers; is there a period — I just don't want to quote the Russell 1000 (Index) growth without knowing the numbers against it, but a five (5) or ten (10) year number..." Chairperson Fair remarked, "...If you could get us a five (5) year number that would be great." No objections were voiced. CITY OF WINTER SPRINGS, FLORIDA MINUTES BOARD OF TRUSTEES REGULAR MEETING - MAY 26, 2010 (RESCHEDULED FROM MAY II, 2010) PAGE 7 OF 16 REGULAR 601. Finance And Administrative Services Department Presentation Of The Actuarial Report From Gabriel, Roeder, Smith & Company (GRS). Mr. Larry Wilson, Gabriel, Roeder, Smith & Company (GRS) One East Broward Boulevard, Suite 505, Fort Lauderdale, Florida: addressed the Board. Mr. Wilson noted, "The most recent Valuation Report that was done by the prior group was as of 10/1/07. And so, we have done numbers as of 10/1/08. With a little tweaking of these numbers, we can use them. The City if it chooses; or the Board recommends the City could use these numbers for Fiscal year ending 9/30/10. We're allowed to project that one (1) year. Then, we would recommend doing a 10/1/09 which would be used then for Fiscal 9/30/11. So, that will give plenty of time for budgeting for that Fiscal Year and we will catch up at that point." Mr. Wilson referred to the "Winter Springs Defined Benefit Plan" Preliminary Results of the October 1, 2009 Actuarial Valuation" Report and reviewed the page entitled, "Comparison of Cost Data of October 1, 2007 and October 1, 2009 Valuations ". Furthermore, Mr. Wilson reviewed the "Prior Assumptions" column and noted, "The middle column is of 10/1/08 with no changes in methods, no changes in the Plan benefits. There was a change in benefits between those two (2) years and no changes in Actuarial assumptions." Mr. Wilson clarified, "Had we done nothing, we would calculate the cost would have gone from the million seven (dollars) [$1,700,000.00] to the two million (dollars) [$2,000,000.00]." Continuing, Mr. Wilson stated, "The Plan was changed. We don't have any control over that. We are recommending changes in `Methods and Assumptions'. The changes in methods we believe will stabilize costs in the long run. The changes in assumptions are to make the assumptions more reasonable in our estimates and they would be more in line with what other plans in the State of Florida assume for different contingencies." Summarizing the "Current Assumptions" column, Mr. Wilson noted, "That brought the — current year's contribution amount from two million (dollars) [$2,000,000.00] eighteen point eight percent (18.8 %); to 2.4 million (dollars) ($2,400,000.00) twenty -two point two percent (22.2 %). So that — net effect change of method benefit improvements and change in assumptions was a three point four percent (3.4 %) of pay increase or about a three hundred seventy thousand dollar ($370,000.00) contribution requirement." Next, Item C. "Actuarial Accrued Liability" was reviewed and Mr. Wilson mentioned, "We see that would have grown from twenty (20) to almost thirty million (dollars) [$30,000,000.00]. That was a substantial increase. Going then from the changing plan provisions assumptions — brings it up to thirty -three million (dollars) [$33,000,000.00]." CITY OF WINTER SPRINGS, FLORIDA MINUTES BOARD OF TRUSTEES REGULAR MEETING - MAY 26, 2010 (RESCHEDULED FROM MAY 11, 2010) PAGE 8 OF 16 Information related to Item E. "Actuarial Value of Assets" was then presented and Mr. Wilson commented, "As of 10/1/07, we had substantial deferred — investment gains that hadn't been recognized and so — even though the Plan on a market value basis for the year ended 9/30/08, lost a little bit less than seventeen percent (17 %) on a market value rate of return, the Actuarial value recognized like a ten percent (10 %) increase." Mr. Wilson then pointed out "Total Normal Costs" and said, "Once that prior service cost is paid off, the Plan is going to cost thirteen percent (13%) of pay. Manager Smith noted, "When will it be paid off? That is thirty (30) years." Continuing, Mr. Wilson reviewed "Statement of Assets as of October 1, 2008" and the "Reconciliation of Plan Assets ". After speaking about the "Development of Actuarial Value of Assets as of September 30 ", Mr. Wilson stated, "We recognize the eight percent (8 %) expected return and then a smooth return, but the State requires that we can't go above 120% of market value. We can't have book assets that diverge from market value by more than twenty percent (20 %). So, on the converse side, we couldn't go below eighty percent (80 %). But that's not in jeopardy for any plans currently. So, we were limited by the — 120% cap. What that ends up, Item H. ( "Difference Between Total Market Value and Total Actuarial Value ") is that we have a 3.1 million (dollars) of deferred investment losses as of 10/1/08 that we are going to recognize." Continuing, Mr. Wilson defined the "Changes Since Previous Valuation" and talked about the "Actuarial Assumptions and Actuarial Cost Methods Used in the Valuation" as presented on pages 23 and 24 in the "Defined Benefit Plan" Preliminary Report. Mr. Wilson then referenced to the tables in the Report and stated, "We have separate tables for the General Employees and the Police and Fire." Board Member Vernon Rozelle, Jr., arrived at 7:03 p.m. Mr. Wilson briefly reviewed the "Actuarial Assumptions and Actuarial Cost Methods Used in the Valuation" tables located in the Preliminary Report. Related to the Long Term Disability Benefit, Mr. Wilson indicated, "We used what was provided by the prior people, the 1.5% load of cost to estimate the cost of that benefit. Going forward we will try to use an actuarially determined rate. We will calculate that number for each person. We talked about the Asset Valuation method going with the five (5) year smoothing. That's not a change. That's what was being used and that would be our recommended method. That is a good method." Mr. Wilson then addressed the Board and stated, "We are looking for direction, if this is in agreement and if it makes sense from the City's prospective to use this for funding for 9/30/10, we can tweak it and issue a final Report within the next couple of weeks." CITY OF WINTER SPRINGS, FLORIDA MINUTES BOARD OF TRUSTEES REGULAR MEETING — MAY 26, 2010 (RESCHEDULED FROM MAY 11,2010) PAGE9OF 16 Tape 2 /Side A Chairperson Fair asked Mr. Wilson, "Have you gotten everything you needed from the prior Actuary ?" Mr. Wilson responded, "We believe so." Next, Mr. Wilson stated, "We would issue a final Report as of 10/1/08. It would be again, our recommendation that that be used for funding by the City for 9/30/10. We have to tweak it with a little interest to recognize that deferral of receipt and if that's the case, then we would be within a couple of weeks of issuing a full final Report that would meet the requirements of the State and have all the numbers, have the information for the CAFR (Comprehensive Annual Financial Report) for the City and all that. And then we would immediately go into the 10/1/09 Valuation, so you would have some numbers for 9/30/11, shortly." Discussion. Vice Chairman McMahan asked, "With what you are seeing in here, does it track with where you think we should be as far as the assumptions that have changed and the ones that have stayed the same ?" Mr. Boyle replied, "Just for the Record — one of the assumptions I am looking at right here — is the allowances for expense and contingencies. That actually comes out of the Pension Fund; it's not funded by the City." Further discussion ensued on Actuary services performed by Gabriel, Roeder, Smith & Company (GRS) and utilizing their assumptions. Mr. Wilson then suggested, "What would work for us, maybe would solve procedural issues is, if the Board would authorize us to work with the City; Kevin (Smith) and Shawn (Boyle) and then, like they pointed out that one (1) of the assumptions in the prior report — is no longer used. Once we come up with an agreement as to what should be, then we can issue a final Report." Manager Smith said to Mr. Wilson, "I would ask about your eight percent (8 %) assumption. Do you feel comfortable with that ?" Mr. Wilson said, "I do." Board Member Rozelle referred to the table on page 24, Section D. and inquired, " Their salary and increase factors for service levels five (5) through fifteen (15) years is that the — the State figures or is that a figure that we have imported from something we have gotten through the City's — planning ?" Mr. Wilson replied, "It's a number based on limited data that we have for the City, for your Pension, for your Fund. We've got like a five (5) year history and then we get feeds quarterly. And so recognizing all the data we have today, this would be in line with what's actually been occurring." CITY OF WINTER SPRINGS, FLORIDA MINUTES BOARD OF TRUSTEES REGULAR MEETING - MAY 26, 2010 (RESCHEDULED FROM MAY 11,2010) PAGE 10 OF 16 Next, Board Member Rozelle commented, "The old assumption on Section 2 (page 31), the three percent (3 %) per year; is unrealistic and then page 24, does that meet with our City Manager — does that seem realistic overall? It is not overly optimistic ?" Manager Smith stated, "It is most likely — a high end." Discussion. Board Member Rozelle then noted, "Page 24, Section D. — is that assumed to be an increase of - it says `Increase at a rate of' that means annual rate; the word `Annual' is not in there." Mr. Wilson clarified, "Yes." Further discussion. "I MAKE A MOTION THAT WE GO WITH THE NEW ASSUMPTIONS THAT WAS PRESENTED BY THE NEW ACTUARY." MOTION BY BOARD MEMBER WATKINS. MANAGER SMITH SUGGESTED, "AND DIRECT LARRY (WILSON) TO MOVE FORWARD WITH THE PREPARATION OF THE..." CHAIRPERSON FAIR ADDED, "...FINAL REPORT." SECONDED BY BOARD MEMBER SWAIM. DISCUSSION. VOTE: BOARD MEMBER WATKINS: AYE BOARD MEMBER SWAIM: AYE BOARD MEMBER ROZELLE: AYE CHAIRPERSON FAIR: AYE VICE CHAIRMAN McMAHAN: AYE MOTION CARRIED. REGULAR 602. Finance And Administrative Services Department Presentation From Bogdahn Consulting, LLC Of The Investment Review Report For The Quarter Ending April 2010. Mr. West presented this Agenda Item and provided the Board of Trustees with the "Winter Springs General Employees General Plan and Trust 1 Quarter 2010" Report and "Asset Allocation And Performance Flash Report As of April 30, 2010" document. CITY OF WINTER SPRINGS, FLORIDA M INUTES BOARD OF TRUSTEES REGULAR MEETING MAY 26, 2010 (RESCHEDULED FROM MAY 11, 2010) PAGE I I OF 16 Mr. West then explained that the Flash Report was an update to the Quarterly Report and stated, "If you follow across the top line, the total Portfolio, this calculation has to be on a gross basis and it is an estimated calculation because our real estate fund is valued on a quarterly basis, so the number I am giving you, excludes that, we have to take that portion out to get us an estimate up through April." Chairperson Fair asked Mr. West, "Is there any way to do that net in the future ?" Mr. West responded, "No." Furthermore, Mr. West remarked, "This print is as of May 24 [2010] and again, this includes contributions, distributions and changes in investment value, market values. The total Portfolio assets as of May 24 — were eighteen million, eight (hundred) twenty -two (thousand) [$18,822,000.00]. We're very close and very much in line with the targets. The new Policy and Procedures and rebalancing procedures were put in place and the Custodian has been investing in those targets on a monthly basis. This reflects this activity." Following, Mr. West reviewed the quarterly Report and discussed the "Major Market Index Performance" along with the "Domestic Credit Sector & Broad Market Maturity Performance ". Mr. West explained, "The lower quality securities again got the highest returns and really the same applied in equities." Page 11 was reviewed next and Mr. West commented "What a difference a year makes" and referenced Bond performance. Mr. West then directed the Board's attention to pages 18 and then page 20 of the quarterly Report, in which Manager specific details were discussed. In referencing the Galliard Core Fixed Income, Mr. West stated, "That active management had really paid off. It helped boost the overall plan." Related to page 35 Mr. West remarked, "We have a provision in our `Investment Policy Statement' that basically requires some action if we have four (4) quarters in a row of sub peer group ranking; an index level performance and unfortunately with American (Stable Value Fund) we have to pull the flag. A required action can be as simple as — issuing a letter of concern, noting that they have missed certain policy parameters on a performance basis and we are advising them of concerns of their performance. That's our recommended course of action. We continue to review the Manager and we continue to be comfortable with the Manager." Board Member Swaim asked if a letter could be generated from the Board of Trustees, Mr. West responded, "It can happen either way. We can send a notice on behalf of the Board as directed by the Board; or we can draft something and it can go out on City letterhead. Whatever the Board's preference." Discussion. Mr. West then noted, "Given the nuances of the environment and the stability of the properties that American is invested in, we are still comfortable — recommended continue use of them for a basic core, very bread and butter core real estate strategy." CITY OF WINTER SPRINGS, FLORIDA MINUTES BOARD OF TRUSTEES REGULAR MEETING — MAY 26, 2010 (RESCHEDULED FROM MAY 11,2010) PAGE 12 OF 16 Chairperson Fair added, "But another thing to consider is that a huge majority of real estate trust and funds of this nature are frozen and if we wanted to, could we even change Managers at this point ?" Mr. West responded, "That's correct." Further discussion ensued regarding American Stable Value Fund. Chairperson Fair suggested, "If you want to be considered for whatever time frame in the future there will be a withdrawal allowed, you better be on the list in advance because they are only going to allow so many people to come out of that, am I correct? In other words, if you wanted to get your money out — of the fund and you wanted to liquidate where they have frozen it, they can only let out so much at a time to not be problematic to their other shareholders." Mr. West replied, "Yes, exactly." Chairperson Fair then remarked, "We don't know how many people are on the list, ahead of us. Should that be something we consider - changing Managers ?" Mr. West said, "That's correct." Further discussion. Mr. West explained, "What they're suggesting, is by July 1 (2010), we are going to have the normal quarterly redemption. If we wanted to make a full redemption..." Chairperson Fair said, "...So we would be able to by July ?" Mr. West stated, "That could be done." Vice Chairman McMahan commented, "Could a suggestion be that we go another quarter and see where we are at the end of the next quarter and then make a real decision ?" Mr. West mentioned, "That's what we would be trying to achieve. We've identified an issue, we want to make note of the issue and — advise the Manager - we are putting them on notice." Chairperson Fair asked, "Are they required to be on notice ?" Mr. West answered, "Is there a requirement to be on notice, no. By Policy, we are suggesting we set out objective criteria so we don't have Managers that sit in here and languishes forever and it's never identified and no action at all had ever been taken. The step of any course would be to send the advisement of concern and then — we're suggesting continue let it go..." Chairperson Fair then inquired, "...What would the difficulty be, just so we have something to think about; what is the difficulty finding a replacement Manager that is accepting money ?" Mr. West noted, "The other thing I wanted to talk about today was a shift in position on behalf of the Bogdahn Group. As I suggested at the last Meeting, I would advise you, when our fine changed the position to not allocate new capital to this area, or this space. We shifted that position and are now recommending this is an opportunistic time to start increasing the allocation to your point..." Tape 2 /Side B Board Member Swaim inquired, "...Are you bringing in your next Agenda Item ?" Mr. West noted, "That's the next Agenda Item." CITY OF WINTER SPRINGS, FLORIDA MINUTES BOARD OF TRUSTEES REGULAR MEETING - MAY 26, 2010 (RESCHEDULED FROM MAY 1 I, 2010) PAGE 13 OF 16 Chairperson Fair then queried, "So, is it going to be to recommend to put it with — American Stable Value Fund, or do you have a new Manager ?" Discussion. Mr. West then stated, "There are a couple of Managers that we would be able to take a look at and meet the one million (dollar) [$1,000,000.00] minimum funding," Furthermore, Mr. West remarked, "The recommendation would be to move forward and fund this base back up to the eight to ten percent (8 -10 %) target and we're at half weight and do so by either - allocating additional funds to American Realty; but our preference, if we have the ability to meet minimums, would be diversified Managers." Continuing, Mr. West noted, "We think diversification across Managers would be a good thing, though. We're comfortable with American Realty (Advisors) as a Manager." Chairperson Fair suggested, "If you are that comfortable, then you should be recommending that we put more money with them, if you are that comfortable." Mr. West then commented, "It would not be more than half of the allocation. The first order of recommendation is to move to the maximum ten percent (10 %) — target allocation. How we get there, first order of recommendation would be to look at the other Managers that will accept funding of this size and do it that way." Discussion relating to the possibility of changing Managers and time constraints in relation to the Policy ensued. Mr. West remarked, "We think it would be beneficial to be diversified with different real estate Managers if we afford to do that and we can. Number one (1) and number two (2), we're not recommending an action or termination of American Realty (Advisors). We're recommending that we continue to monitor that Manager's results, but by — Policy, Policies and Procedures, the Policy and the Investment Policy Statement, we have to flag the issue and take an action and the action can be simply identifying, `We have performance concern here' and sending that communication." Discussion.. "I MAKE A MOTION THAT WE PUT IN PLACE THE PROCESS TO BEGIN TO INTERVIEW MANAGERS FOR THE REAL ESTATE PORTION — WITH THE OUTCOME BEING THAT WE HAVE THE ABILITY THEN TO MAKE A DECISION ABOUT HOW WE ALLOCATE CURRENT AND FUTURE FUNDS INTO THAT PORTION." MOTION BY BOARD MEMBER McMAHAN. SECONDED BY BOARD MEMBER WATKINS. DISCUSSION. CITY OF WINTER SPRINGS, FLORIDA MINUTES BOARD OF TRUSTEES REGULAR MEETING - MAY 26, 2010 (RESCHEDULED FROM MAY 11, 2010) PAGE 14 OF 16 BOARD MEMBER ROZELLE STATED, "JUST TO CLARIFY, THIS MIGHT NOT BE PERTINENT TO YOUR MOTION, NECESSARILY, BUT THEY ARE GOING TO FINISH JUST OUR CURRENT — AMERICAN REALTY (ADVISORS) IS GOING TO FINISH UP IN SOMEWHERE IN JULY, THE SIXTY -SIX MILLION (DOLLARS) [$66,000,000.00] IN REDEMPTIONS THAT THEY HAVE ALREADY ACCEPTED ?" MR. WEST RESPONDED, "THAT'S WHAT THEIR COMMUNICATION STATES." BOARD MEMBER ROZELLE THEN ADDED, "AND THEN THEY WILL BE ACCEPTING NEW INVESTMENTS. DO YOU ANTICIPATE — WHAT DO YOU ANTICIPATE AS FAR AS LET'S SAY THEORETICALLY, THAT THEY RECEIVE ANOTHER FIFTY MILLION (DOLLARS) [$50,000,000.00] OF REDEMPTION REQUEST OR YOU KNOW, OURS IS A SMALL, SMALL PART OF THAT PORTION. IF WE WERE TO GET IN THE DOOR THAT WAY, WHAT EFFECT WOULD THAT HAVE ON THE TOTAL IF THEY WERE TO GET ANOTHER FIVE PERCENT (5 %) REQUEST ?" Chairperson Fair stated, "Point of Order" and thought the discussion was off - track. VOTE: CHAIRPERSON FAIR: AYE BOARD MEMBER WATKINS: AYE BOARD MEMBER SWAIM: AYE BOARD MEMBER ROZELLE: AYE VICE CHAIRMAN McMAHAN: AYE MOTION CARRIED. Board Member Rozelle then asked Mr. West, "If we did make a redemption request, and they say `No, it's going to wait six (6) months', they are not going to get moving any redemption request until they get new money; so how does that affect, in this kind of fund, how does that affect our future performance ?" Mr. West explained, "Based on Jay Butterfield's [Managing Director of Fund/Separate Account Operations of American Realty Advisors] communication, they've received indications that clients will resend an additional forty million (dollars) [$40,000,000.00] in redemption requests prior to June 30 [2010] — and it further states they expect to pay the balance of the redemption request on 6/30 [/2010]. As of July they will no longer be a queue. It also indicates that they are seeing soft indications of additional pledges of assets going in as clients look to rebalance back into the real estate space. They expect to be the recipients of additional funding as other clients they have are doing similar rebalancing and increasing their real estate allocations." CITY OF WINTER SPRINGS, FLORIDA MINUTES BOARD OF TRUSTEES REGULAR MEETING - MAY 26, 2010 (RESCHEDULED FROM MAY 11, 2010) PAGE 15 OF 16 Further discussion. Board Member Swaim inquired, "Dave (West), assuming you would suggest we rebalance, which of our funds would you tap to rebalance from ?" Mr. West stated, "Source of funds would be Bonds." ❖ ❖ AGENDA NOTE: THE FOLLOWING TWO (2) REGULAR AGENDA ITEMS WERE DISCUSSED SIMULTANEOUSLY, AS DOCUMENTED. • REGULAR AGENDA 603. REGULAR Finance And Administrative Services Department Presentation From Bogdahn Consulting, LLC Reviewing The Portfolio Rebalancing. 604. REGULAR Finance And Administrative Services Department Presentation From Bogdahn Consulting, LLC Of The Real Estate Market Conditions. The Report entitled, "Real Estate Current Market Conditions" was referred to and discussed. Chairperson Fair mentioned for the Record that Regular Agenda Items "603" and "604 ' were discussed simultaneously. Mr. West addressed the Board, "So I am crystal clear on marching orders, we will be setting up interviews; is there a desire for a Special Meeting ?" Chairperson Fair suggested, "I prefer to do it as a Special Meeting because of the time." There were no objections voiced. Mr. West then stated, "We will coordinate with Kevin's (Smith) Office on a Special Meeting date and coordinate the Real Estate Managers who will be attending." Chairperson Fair commented, "Even though we have — reached a Consensus up here that we don't want to send a formal letter because it really doesn't accomplish a lot. We could send them a letter all day long and they are not doing liquidations anyway. The fund is frozen. It would be a — moot point. So, we just want the Record to show that we are aware of it and we basically want to flag the fact that they have under - performed, and the Board recognizes that; and therefore we are taking action, really more than anything to interview Managers for the rebalancing. But, it certainly may lead to something else; depending on that action, depending what happens there." No objections were noted. CITY OF WINTER SPRINGS, FLORIDA MINUTES BOARD OF TRUSTEES REGULAR MEETING — MAY 26, 2010 (RESCHEDULED FROM MAY 11, 2010) PAGE 16 OF 16 ADJOURNMENT Chairperson Fair adjourned the Regular Meeting at 8:17 p.m. RESPECTFULLY SUBMITTED: (-, GAYLE COUTANT •ASS.STANT TO THE CITY CLERK • NOTE: These Minutes were approved at the August 10, 2010 Board of Trustees Regular Meeting.