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Home My WebLink AboutDocumentation_Pension Public Safety_Tab 03_02/01/10 Tequesta Public Safety Officers' Preliminary Report 4th Quarter 2009 1~'1C'W.ROc;[):11INGROIIP.CC~\f THE ~O-~DAHN .._/ C~RO~UP simplifying your iuvaMi~nr nnrl fi~iaciary rlecisrons • ••ti• � •' �'-:a Y-. • ={... • •ti. • _ �• .. L tip• ti' ti �: -r.�• -� �•. 1 r r.l tilti titi• • • '' Y 1 %I - .titi •.1} ••titi• •• •. • • Y ,� . 1 .. •'1 ti ti .. .�� 1 1 1 • 1 .Iti 1 �ti : •• 1• •• ..titi• :T. ti' 1 ti, •Y- •• � • •. • ti ti L6, 1 . ' %. . titi. 1 •• • 1 .'f ti 1 .. IL I Y :•rti• .1• '� •• •�• ••`'ie�, •�••1 •� • 1� :1 -.• -Iti •y.. ti 4 Y;. tilti' 1• • ••• •• ••.ti• • e J':.. '~' 1� r. 1 Iti• .. ti' •ti •. ti •titi 1 � •' r�•••ti- L o �• •-'. .. ' -. -. 1 1•. % ti ••I.r• • .• •. - •ti ter. .''..' .��•,�••' � 7. •. ' ' .Y .. ..tir '• , 1 . Y }. 7• J 1 ' .9c ,ti 7 •, •fir •r= ': r; r• � ._ • ; _ •' �: �'-. " . , �. tir 1 .. 1�.• f. •, '..�, 1 1.7 �L-•.� }1. ` � � .; . 1 •• .. •� ti :r '• .'.: : 1�• ti� 1 r: 1 ti r The Market Environment Major Market Index Performance Period Ended: December 31, 2009 Quarter Performance ^ Much like 2008, 2009 will not be a year that investors will soon forget. After opening the year with a continuation of 2008's risk aversion and negative performance, investors embraced equity and credit-based risk assets, which drove market returns higher at one of the most rapid paces in history. However, each of the chart's strong annual equity results are somewhat deceptive since many of the equity benchmarks were down in excess of -20% during the 4cn quarterof 2008. ^ Outside of the United States, emerging markets more than tripled the performance of developed markets during the quarter and was once again the strongest broad asset class in our summary. These results are even more pronounced on an annual basis with emerging markets posting an impressive +79.0% for the year. ^ Most of the core domestic equity indices posted similar results to the S8~P 500's return of +6.0% for the quarter. Small cap issues, represented by the Russell 2000 index, returned a slightly lower +3.9% for the quarter. Over the one-year period, the Russell MidCap index posted the group's outsized performance relative to the various capitalization ranges with a return of +40.5%. ^ The Barclays aggregate return of +0.2% for the quarter was dominated by the performance of credit issues (+1.3%) in the index as spreads continued to compress for most of the quarter. The government index's return of -1.0% was impacted by the yield curve's move during the quarter. For the trailing 1-year period, the Barclays Aggregate posted a solid +5.9% return, which stands in contrast to the -2.2% return of the Government Index and the +18.7% retum of the Investment Grade Credit index. Source: Barclays Capital, MSCI Capital Markets, Russell Investments MSCI ACWxUS MSCI EAFE MSCI Emerg. Mkts. S8P 500 Russell 3000 Russell 1000 Russell MidCap Russell 2000 Barclays US Agg. Barclays US Gov. Barclays MBS Fixed Barclays Corp IG 3mos. T-Bill -5.0% 0.0% One Year Performance MSCI ACWxUS MSCI EAFE MSCI Emerg. Mkts. S8P 500 Russell 3000 Russell 1000 Russell MidCap Russell 2000 Barclays US Agg. Barclays US Gov. Barclays MBS Fixed Barclays Corp IG 3mos. T-Bill 5.0% 10.0% 79.0 18.7 o.z i ao.s i -10.0% 10.0% 30.0% 50.0% 70.0% 90.0°/a ~~ BOGDAHN GROUP The Market Environment Long-Term Major Market Index Performance Period Ended: December 31, 2009 Five Year Annualized Performance j Ten Year Annualized Pertormance MSCIEAFE MSCI Emerg. Mkts. 58~P 500 Russel 13000 Russell 1000 Russell MidCap Russel 12000 Barclays USAgg. Barclays US Gov. Barclays MBS Fixed Barclays Corp IG MSCIEAFE MSCI Emerg. Mkts. S&P 500 Russell 3000 Russell 1000 Russell MidCap Russe112000 Barclays US Agg. Barclays US Gov. Barclays MBS Fixed Barclays Corp IG 3mos. T-Bill 10.1 0.0% 5.0% 10.0% 15.0% 20.0% -5.0% 0.0% 5.0% Twenty-Five Year Annualized Performance ~ Thirty Year Annualized Performance MSCI ACWIxUS MSCIEAFE MSCI Emerg. Mkts. S8P 500 Russel 13000 Russel 11000 Russell MidCap Russell 2000 Barclays USAgg. Barclays US Gov. Barclays MBS Fixed Barclays Corp IG MSCI ACWIxUS MSCIEAFE MSCI Emerg. Mkts. S&P 500 Russell 3000 Russell 1000 Russell MidCap Russell 2000 Barclays USAgg. Barclays US Gov. Barclays MBS Fixed Barclays Corp IG 3mos. T-Bill 10.0% 15.0% 5.2 1o.z NIA 11.2 11.1°/. 11.1 12.6 1o.a % s.a % 8.6 s.1 % 9.2 5.7 0.0% 5.0% 10.0% 15.0% 0.0% Source: MSCI Capital Markets. Russell Investments, Barclays Capital & Bogdahn Consulting, LLC. 2 3mos. T-Bill 3mos. T-Bill 5.0% 10.0% 15.0% The Market Environment Domestic Equity Style Index Performance Period Ended: December 31, 2009 ^ A rally in two of the largest sectors of the growth benchmarks (information technology and health care) drove growth index performance to outpace value index results at all capitalization levels. The financial sector's negative performance, which represented a weight of more than 20% in each of the Russell value indices at the end of the quarter, was also a contributing factor to the underperformance of value relative to growth investments. ^ The differential between value and growth index results for the 4th quarter were broader at the large cap levels primarily due to a larger exposure to the strong performing information technology sector in the smaller capitalization value indices. While the range of style-based returns is much broader at all capitalization levels over the one year period, the causes are similar to the 4th quarter's results. Annual differentials were driven by the strong positive results in the information technology sector and the negative performance of the financial sector. ^ Style-based results over the one-year period were heavily impacted by the end-point sensitivity of the calculation. This sensitivity is quantified by the elimination of the 4th quarter of 2008's performance in the calculation, which fell by more than 20% for each style-based index, and the inclusion of the 4th quarter of 2009's results, which were positive for all of the indices. 3000 Value 30001ndex 3000 Growth 1000 Value 10001ndex 1000 Growth MidCap Value MidCaplndex MidCap Growth 2000 Value 20001ndex 2000 Growth 3000 Value 30001ndex 3000 Growth Quarter Performance One Year Performance I 19.8 2 a.3 37.0 19.7 % ' 2a.a % 372 34.2 40.5 46.3 20.6 27.2 34.5 1000 Value 10001ndex 1000 Growth MidCap Value MidCaplndex MidCap Growth 2000 Value 20001ndex 2000 Growth 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% ~~ THF. Source: Russell Investments BOGDAHlr 3 ~,_... GROUP 0.0% 5.0% 10.0% The Market Environment GICS Sector Performance & (Quarter-End Sector Weight) Period Ended: December 31, 2009 ^ Large cap stock performance was positive across the various Global Industry Classification Standard (GICS) sectors for the quarter with the exception of financial issues, which were mildly negative. While six of the index's ten sectors outpaced the +6.1 % return of the Russell 1000, performance was led by strong results in the information technology (+10.8%) and health care (+8.7%) sectors. ^ The financial sector of the Russell 1000, which was the strongest sector of the index during the 2nd and 3rd quarters of the year, posted the index's weakest performance during the 4th quarter with a return of -2.6%. However, the strong results of the previous quarters are evident in the solid +16.7% return of the financial sector for the year. ^ Within the Russell 1000 index, each of the ten GICS sectors posted positive results for the year. The strongest performance came from the information technology (+62.0%), materials (+52.5%) and consumer discretionary (+45.1 %) sectors of the index. ^ For the quarter, small cap stock performance was positive across all ten GICS sectors with the materials (+10.3%), consumer staples (+7.7%), and energy (+7.1 %) sectors providing the largest contribution. Six of the Russell 2000's economic sectors managed to outpace the 3.9% return of the core index for the 4th quarter. ^ For the year, seven of the ten GICS sectors in the Russell 2000 posted annual returns in excess of 20%. In fact, three sectors posted returns in excess of 50%. Only the financial sector, which returned -1.5%, posted a negative result for the year. Source: Thompson Financial ^ QTR o 1_Year i Energy (11.3%) Materials (4.0%) Industrials (10.4%) Consumer Disc (10.2%) Consumer Staples (10.7%) Health Care (12.5%) Financials (14.4%) Info Technology (19.4%) Telecom Services (3.1%) Utilities (4.0%) ^ QTR ~ t-Year Energy (5.2%) Materials (4.8%) Industrials (15.8%) Consumer Disc (13.8%) Consumer Staples (3.5%) Health Care (14.3%) Financials (20.3%) Info Technology (18.3%) Telecom Services (1.0%) Utilities (3.2%) 'i Russe111000 5.6 ,7a^r, 8.1 52.5 5.5% zz.e i, 6.3 45.7 as% 15S 8.7 % i 27.7 % -2.6 7 6.7 X0.8% sz.o % 8.3 t2.a% 6.8 ~ss~. -10.0% D.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% Russell 2000 7.7 % 41.0 % 7 0.3 se.s % 3.7 13.9% 4.1% 60.6 7.7% 23.8% 2.7 zzs % 1.8 % -7.5 3.4 59.9 5.8 % ~ 23.9 7.0 % 7.9 -10.0% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% ~~ BOGDAHN 4 GROUP The Market Environment Quality Rankings* Breakdown by Weight and Quarterly Performance Period Ended: December 31, 2009 Within the Russell 1000 index, the performance of each of the quality segments, with the exception of those classified as "not available", were spread over a relatively narrow spectrum during the 4th quarter. Of the companies that received a rating, "B" rated stocks turned in the strongest performance with a return of +7.2%, while "B=' rated stocks returned a weaker but still solid +4.7% for the quarter. With nearly 30% of the small cap Russell 2000 index being classified as "not rated", drawing sweeping quality conclusions from the data can be more problematic. However, for the issues with a weight in excess of 1 % in the breakdown, there appears to be a clear advantage to quality in smaller cap issues with the "A+" and "A" rated segments of the index leading performance for the quarter. - ~~~ . q+ 10.6% 5.5% A 10.7% 7.0% A- 14.1% 4.8% B+ 16.9% 6.5% B 5.9% 7.2% B- 28.1 % 4.7% C 2.1 % 6.5% D 0.0% 0.0% Not Rated 10.8% 8.8% N/A ... 0.8% ~~ ~~, 14.2% ~~~ A+ 3.1 % 6.2% A 5.0% 4.6% A- 0.7% -0.2% B+ 17.3% 4.6% B 20.4% 2.5% B- 12.2% 4.3% C 11.2% 1.1% D 0.2% 16.6% Not Rated 29.3% 4.8% N/A ~~~ - ^- 6°/ 10.0% Quality Rankings Table Highest I High I Above Average I Average I Below Average I Lower I Lowest I In Reorganization 'Standard and Poor's rankings are generated by a computerized system and are based on per-share earnings and dividend records of the most recent 10 years. -October 2005 report ~~ THe Source: Thompson Financial BOGDAHlr 5 GROUP The Market Environment International and Regional Market Index Performance (# Countries) Period Ended: December 31, 2009 ^QTR (USD) Quarter Performance oQTR (Local) ^ For the first time since the equity markets turned positive back in March, intemational developed markets (+2.2%) lagged the AC Worldx US (44) performance of domestic equity markets across the wORLDxUS(22) capitalization spectrum. Another phenomenon visible in the performance of international developed markets during the 4tn EAFE (z1) quarter is the strength of the U.S. dollar (USD). Both the Europe(16) Europe and Pacific regions of the MSCI-EAFE index show stronger results in local currency vs. USD. Pacific (s) ^ Emerging Markets continued its strong performance during the 4th quarter with a return of +8.6%. Unlike the developed markets, which were impacted by USD strength, the currency effect on the performance of the emerging markets index continued to be positive. This USD depreciation is visible in the 4th quarter performance of each of the emerging market country segments. ^ Over the trailing one-year period, the USD's broad deprecation against various foreign currencies is evident. This USD deprecation had a positive impact for U.S. investors on un-hedged international returns. ^ In contrast to the domestic indices which were driven by information technology and health care results, the GICS sector attribution of both the EAFE and ACWIxUS indices illustrates the largest strength coming from exposure to materials and consumer staples issues. While financial sector weakness was evident in both indices (-4.5% & -1.8%), the information technology and utilities sectors also posted negative results in the EAFE index. Source: MSCI Capital Markets Emerging Mkt (22) EM Europe (5) EM Asia (8) EM Latin Amer (7) 3.8 4.1 2.5 3.3 2.2 % 3.4 3.3 4.0 °., % 2.1 % 8.6 a.2 % 9.3 s.s s.a a.s 2.5 % 2.3 0.0% 5.0% 10.0% 15.0% ^1-Year (USD) One-YearPerformancel 01-Year (Local) i AC World x US (44) a2.i 32.4 WORLD x US (22) 34.4 i zs.o 32.5 % EAFE (21) 25.4 Europe(16) 36.8 2ss% Pacific (5) za.3% 19.8 79.0 Emerging Mkt (22) s2.a % 86.2 % EM Europe (5) 73.s% 74.2 EM Asia (8) ss i % i oa.z EM Latin Amer (7) s3.z % 0. 0% 20.0% 40.0% 60.0% 80.0% 100.0% 120.0% ~~ THE. 6 ~ BOGDAHN GROUP The Market Environment U.S. Dollar International Index Attribution & Country Detail Period Ended: December 31, 2009 • Energy 8.4% 7.0% 34.9% Materials 10.4% 13.2% 70.0% Industrials 11.2% 1.5% 31.8% Consumer Discretionary 9.7% 2.9% 38.0% Consumer Staples 10.1% 8.1% 32.2% Health Care 8.4% 5.4% 18.3% Financials 25.5% -4.5% 38.7% Information Technology 4.8% -2.6% 21.9% Telecommunication Services 5.8% 1.6% 16.6% Utilitit _ 5.9°'0 -0.3°/ ~.3% • Energy 11.2% 7.3% 51.2% Materials 12.0% 12.7% 76.5% Industrials 9.8% 2.4% 36.0% Consumer Discretionary 8.4% 4.4% 45.9% Consumer Staples 8.5% 9.2% 36.3% Health Care 6.4% 6.0% 19.8% Financials 25.8% -1.8% 48.6% Information Technology 6.7% 2.7% 51.7% Telecommunication Services 6.2% 1.9% 19.8% Utilities 5.0°/ 0.9°~ 11.2% Source: MSCI Capital Markets. & Franklin/Templeton United Kin dom 21.6 % ydt•.. •I 15.2 % %.0 ~, Ja an 20.7% 14.5% -2.8% 6.4 France 11.1 % 7.8 % 2.2% 33.3° Australia 8.4% 5.9% 5.0% 76.8% German 8.1% 5.7% 2.2% 26.6 Switzerland 7.7% 5.4% 3.8% 26.6% Spain 4.6% 3.2% 1.6% 45.1% Ital 3.5% 2.4% -2.6% 28.0% Netherlands 2.7 % 1.9% 3.8 % 43.0% Sweden 2.5% 1.8% 3.6% 65.9% Hon Kon 2.3% 1.6% 3.6% 60.2% Sin spore 1.5% 1.0 % 9.8% 74.0% Finland 1.1 % 0.8% -3.5% 12.7 Bel ium 1.0% 0.7°/ 1.6% 58.6% Denmark 0.9% 0.6% -2.8% 37.1% Norwa 0.8% 0.6% 14,9% 88.6% Greece 0.5% 0.4°/ -22.4% 25.3% Austria 0.3% 0.2% -9.8% 44.8% Portu al 0.3% 0.2% 0.5% 41.7% Ireland 0.3% 0.2% -2,7% 12.9% New Zealand 0.1% i~ i•. 0.1% ~ 0.1% 51.7% Canada •: 7.3% 5.2% 57.4% China 4.0% 9.6% 62.6% Brazil 3.8% 13.1% 128.6% Korea 2.8% 2.3% 72.1 Taiwan 2.5% 8.1% 80.3% India 1.7% 7.7% 102.8 South Africa 1.5% 9.4°/ 57.8% Russia 1.4% 10.5% 104.9% Mexico 1.0% 13.7°/ 56.6% Israel 0.6% 14.1% 54.6% Mala is 0.6% 6.7% 52.1 Indonesia 0.4 % 5.2% 127.6% Turkey 0.3% 9.2% 98.5% Chile 0.3°/ 15.4°/ 86.7% Thailand 0.3% 1.1% 77.3% Poland 0.3 % 12.9% 42.5% Colombia 0.1% -1.1% 84.4% Peru 0.1% 0.8% 721% Hungary 0.1°/ 3.5% 77.6% Egypt 0.1% -6.2% 39.7% Philippines 0.1% 9.8% 68.0% Czech Republic 0.1 °/ -6.9% 27.8 Morocco - ., n, -- !~~% f -~~~~~ ~~ : BOGDAHN GROUP The Market Environment Domestic Credit Sector & Broad Market Maturity Performance Period Ended: December 31, 2009 Quarter Performance ^ Although the equity quality performance distribution showed a much more narrow range than in previous quarters, a move down the quality ladder in fixed income assets continued to reward investors willing to take on lower quality debt. In addition to the "quality-play" that is evident in the performance numbers of the various credit indices, the longer-dated broad index suffered relative to the shorter-term broad indices as a result of a steepening curve. This yield curve movement is particularly evident in the results of the chart's government benchmark, which recorded a -1.1 % return for the quarter. ^ For the quarter, high yield issues once again produced the strongest results with a return of +6.0%. Results in investment grade segment of the credit market (BBB to AAA) step down dramatically from high yield results. These investment grade results range from +2.2% for BBB issues down to -0.8% for AAA issues. Outside of government and credit issues, the chart's mortgage-backed benchmark posted a mild but positive return of +0.5%. ^ Each of the themes that are described in the paragraphs above for 4th quarter are also evident, and much more dramatic, over the one-year period. This disparity is best illustrated in the more than 60% performance differential between the year's high yield return of +57.5% and the government return of -2.6%. aaa a,a A eBa <BBB Govt Mort 1-3yrG/MIC 1-syr GIM/C 1-10yr G/M/C 10+yrGIM/C -0.a % -__ 0.6 o.~ z.z % 6.0 •1.1 o.s % G/M/C =Broad Market (Government + Mortgage + Corporate) o.s % O.s o.a % •2.6 -5.0% 0.0% ;One Year Performance 5.0% 10.0% a,aa, A BBs <BSs Govt Mort 1-3yr GIM/C 1-SyrG/MIC 1-10yr G/M/C 10+yrGIMIC -o.~ % 9.1 15.9 31.4 J.~.. ~ ~'' s~s% -2.6 s.a % ss % 7.8% -10.0% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% ~~ THE Source: Merrill Lynch Index System $ BOGDAHN GROUP The Market Environment Market Rate & Yield Curve Comparison Period Ended: December 31, 2009 ^ During the quarter, the Fed kept the target for the Fed funds rate unchanged at 0-25 basis points, despite calls by many market observers to systematically remove the stimulative effects of such a low interest rate policy. The Fed continued to state in its press release that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. ^ The various indicators reported in the 2009 Market Rates charts continue to show improving credit conditions and more stable inflation expectations than were evident earlier in the year. ^ Reversing its move during the 3rd quarter, the Treasury yield curare increased at maturities beyond two years during 4cn quarter to their highest level of 2009. This steepening is particularly visible at the long end of the curve where rates spiked by 60 basis points during the quarter. ^ The benchmark 10-year Treasury finished the quarter with a yield of 3.85%. This yield represented an increase of 54 basis points from the yield at the end of the 3rd quarter (3.31 %) and a 160 basis point increase from the yield at the end of 2008 (2.25%). Source: Mortgage-X.com , US Department of Treasury & St. Louis Fed ~.oo 6.00 5.00 a. 00 3.00 2.00 1.00 o.oo Dec-08 s.oa 5.00 a.oo 3.00 2.00 1.00 0.00 Mar-09 Jun-09 Sep-09 Dec-09 Treasury Yield Curve -~ 12/31 /2008 6130/2009 ~ 9/30/2009 ~ 12/31/2009 1 mo 3 mo 6 mo 1 yr 2 yr 3 yr 5 yr 7 yr 10 yr 20 yr 30 yr ~~ BOGDAHN s ~, GROUP 2009 Market Rates The Market Environment Decades in Review Period Ended: December 31, 2009 ^ Despite some exciting years along the way, the decade that ended December 31, 2009 represented the weakest calendar decade on record for stocks back to the 1930's. In contrast to the returns on stocks, both bond and cash results for the 2000's were consist with long-term averages. 25.0% • 20.0% 15.0% • 1o.o°i° • 5.0% o.o°i° -s.o°r° -10.0% Retums by Decade ~ N I n a a N o ^a I N N ~; ~ OI ~ vo - n I o M n _' °ai ~ ' ~c M io I e v? ~ i0 ~a+ a ~ II ~ ~ ~ e ao _ I ~ O+ d~ ~ + t ~ CD o M I vi ~ IF,< o o ~ '~ FI `~",~ C`~~ , ~ 4 4 ^Stocks ^Bonds ^Cash ^ The rolling decade chart presents a similar visual story as the "Returns by Decade" chart. However, by moving the inception period back to 1926 and rolling the 10-year periods forward by month, some mid 1930's 10-year returns were lower than those recorded during the 2000's decade. Source: Ibbotson & Zephyr Associates 2s.oo zo.oo 15.00 10.00 5.00 0.00 -5.00 -10 00 1930's 1940's 1950's 1960's 1970's 1980's 1990's 2000's Average Rolling 10-Year Returns -Equity -Bonds -Cash Dec-35 Mar-45 Jun-54 Sep-63 Dec-72 Mar-82 Jun-91 Sep-00 Dec-09 ~~~;- BOGDAHN 10 ~.. GROUP ~~ THE _ BOGDAHN GROUP Total Fund December 31, 2009 •~ iii ~ ~ ~ September 30, 2009: $4,683,940 December 31, 2009: $4,962,603 Segments Market Value Allocation Segments Market Value Allocation ~$) ~"/o) ~$) ~"/o) ^ Equity 2,754,735 58.8 ^ Equity 2,945,319 59.4 ^ Fixed Income 1,651,142 35.3 ~ Fixed Income 1,780,074 35.9 ^ Cash Equivalent 278,063 59 ^ Cash Equivalent 237,210 4.8 ~~ THE ~~ BOGDAHN GROUP Total Fund December 31, 2009 Asset Allocation B,y Manager -Current Quarter September 30, 2009: $4,683,940 December 31, 2009: $4,962,603 ^ Rockwood Capital Advisors Balanced Account ^ Receipt & Disbursement 13 Market Value Allocation ~$) ~%) 4,680,910 99.9 3,030 0.1 ^ Rockwood Capital Advisors Balanced Account Receipt & Disbursement Market Value Allocation ~$) ~%) 4,940,176 99.5 22,428 0.5 ~ TFte ~ l BOGDAHN GROUP Tequesta Public Safety Officers' Total Fund October 1, 2009 To December 31, 2009 ~~ Tt-it 14 (~ BOGDAHN GROUP Tequesta Public Safety Officers' Financial Reconciliation As of December 31, 2009 Financial Reconciliation Rockwood Capital Advisors Balanced .Account 4,630.910 -40,000 144,979 - - -97(, 25,307 129,955 4,940,176 Receipt & Disbursement 3,030 40,000 - - -6,101 -14,501 - - 22.428 Total Fund Portfolio 4,683,940 - 144,979 - -6,101 -15,477 25,307 129,955 4,962,603 Financial Reconciliation FYTD Rockwood Capital Advisor's Balanced Account 4,680,910 -40,000 144,979 - - -976 25,307 129,955 4.940,]76 Rcccipt~ Dishurscmcnt 3,030 40,000 _ _ _6,101 -14,501 - - 22,428 Total Fund 4,633,940 - 144,979 - -6.101 -15.477 25,307 129,955 4,962,603 `~ THE ,5 (~ BOGDAHN GROUP Tequesta Public Safety Officers' Comparative Performance Trailing Returns As of December 31, 2009 Total Fund (Net) 3.09 3.09 13.62 -5.00 -0.33 1.84 N/A 3.16 05/01/2005 ~fr~tE~! 1^nui I'~>i,ic~~~ ;.-~ ; ~~ l,`~.(I --}.(17 -0.711 x.10 'v-4 .lil Difference -0.66 -0.66 -4.49 -0.93 0.37 -0.26 N/A 0.06 Total Fund (Gross) 3.22 3.22 13.90 -4.63 0.10 2.34 N/A 3.63 05/01/2005 l ~.~1;~! I ,,in~l ('nlic~ ~_-~ ~~ 11.1 I --1.11- -~~ -(~ ~.I11 N ~a ~ ;I) Ditfcrcncc -0.53 -0.53 -4.21 -0.56 0.80 0.24 N/A 0.53 gal Equity Portfolio 5.40 5.40 19.60 -12.94 -5.22 -0.82 N/A ~~ ;iii r,.fi:_1 (,.U? ~n_-}t, -1 (1, ~.~ _;,6; -(1_(,"7 I).-'l, fcrcncc -0.64 -0.64 -6.86 -2.20 0.41. -0.15 N/A mestic Fixed 0.27 0.27 5.91 4.74 5.82 5.44 N/A ~n~rrmr~li<u~ l ~.~. (u~~ crnmrnt (rc~lil fi_~ I. (1. ; 1 ~.'a ~. l h ~.'lli ~.-1-+ ~.r,~ Terence -0.04 -0.04 0.67 -0.42 -0.08 0.00 N/A 1.71 I_ 0.3 R 5.04 -t.~)1 0.10 Returns for periods greater than one year are annualized ~ THF, Returns are expressed as percentages. ,s ` BOGDAHN GROUP Tequesta Public Safety Officers' Comparative Performance Fiscal Year Returns As of December 31, 2009 Fund (Net) -1.39 -11.80 14.24 4.07 N/A N/A I~~.m~f I'~,I,c~ a l~ -1- ~~, t, "_ ,.e?; ~ -~ ~ .A ence -1.87 0.66 2.22 -3.81 N/A N/A Fund (Gross) -1.12 -11.34 14.82 4.67 N/A N/A ~; ~~,~~. I'~~Lic, (i -1X -1 ,_.Ir, I _ n_ 7.'~~ ti ;1 \ A •ence -1.60 1.12 2.80 -3.21 N/A N/A Equity -11.08 -21.39 21.99 5.38 N/A N/A ti,~l' ~ii~i -n ~~I -~1 '1~ I~,.-l~a I(i.~9 l~.'~ I ti.~7 Difference -4.17 0.59 5.55 -5.41 N/A N/A Fixed Income 9.03 3.55 5.93 3.88 N/A N/A 13,u~~1:!~<i,;~,ital t',~ (ir~crnnx~nt <~r.~li~ I I -k, ,.~I ~.U1 ;-~~ ~(~ ~.?` Difference -2.43 1.14 0.85 0.55 N/A N/A Returns for periods greater than one year are annualized. Returns are expressed as percentages. 17 THE BOGDAHN GROUP Tequesta Public Safety Officers' Total Fund As of December 31, 2009 Effective Date: Apr-2005 S&P 500 Index 60.00 Barclays Capital Intermediate L1.S. Government!C'rcdit 4fl.flO ~~ THE ~$ ` _, BOGDAHN GROUP ChICal J; U W In l l c 1 d R e a d S 11 I l c ? l) l) \\arrcn%illy, Illinui 01) Tm-', BOGDAHN �F GROUP sinrJr/itj-irr� }uur irrrr�stnrr»t cnrrl Jir/uci,rr �- rlec-isious OrIanClo -19U 1 VItic land Road. OI Ia11do- Florida N1ilWaukCC SUItC A\ i,cOnsin \\ c Suitc I �( Village of Tequesta Public Safety Officers' Pension Plan Quarterly Review \\'\\'\C'.Rt~c;i~,\IINt;Rtlt!I'.c:t~~l 4th Quarter 2009 THE BQGDAHN CROUP simp[rfying yoar iuve~unreiu n~id fir(ariary d~~risions The Market Environment Major Market Index Performance Period Ended: December 31, 2009 Quarter Performance ^ Much like 2008, 2009 will not be a year that investors will soon forget. After opening the year with a continuation of 2008's risk aversion and negative performance, investors embraced equity and credit-based risk assets, which drove market returns higher at one of the most rapid paces in history. However, each of the chart's strong annual equity results are somewhat deceptive since many of the equity benchmarks were down in excess of -20% during the 4tn quarter of 2008. ^ Outside of the United States, emerging markets more than tripled the performance of developed markets during the quarter and was once again the strongest broad asset class in our summary. These results are even more pronounced on an annual basis with emerging markets posting an impressive +79.0% for the year. ^ Most of the core domestic equity indices posted similar results to the S&P 500's return of +6.0% for the quarter. Small cap issues, represented by the Russell 2000 index, returned a slightly lower +3.9% for the quarter. Over the one-year period, the Russell MidCap index posted the group's outsized performance relative to the various capitalization ranges with a return of +40.5%. ^ The Barclays aggregate return of +0.2% for the quarter was dominated by the performance of credit issues (+1.3%) in the index as spreads continued to compress for most of the quarter. The government index's return of -1.0% was impacted by the yield curve's move during the quarter. For the trailing 1-year period, the Barclays Aggregate posted a solid +5.9% return, which stands in contrast to the -2.2% return of the Government Index and the +18.7% return of the Investment Grade Credit index. MSCI ACWxUS MSCI EAFE MSCI Emerg. Mkts. S&P 500 Russell 3000 Russell 1000 Russell MidCap Russell 2000 Barclays US Agg. Barclays US Gov. Barclays MBS Fixed Barclays Corp IG 3mos. T-Bill 3.8 2.2 8.6 I 6.0 5.9 s.~ % s.s % 3.9 0.2 % -l.o % 0.6 1.3 % o.o -5.0% 0.0% One Year Performance MSCI ACWxUS MSCI EAFE MSCI Emerg. Mkts. S8P 500 Russell 3000 Russell 1000 Russell MidCap Russell 2000 Barclays US Agg. Barclays US Gov. Barclays MBS Fixed Barclays Corp IG 3mos. T-Bill 5.0% 10.0% Source: Barclays Capital. MSCI Capital Markets, Russell Investments -10.0% 10.0% 30.0% 50.0% 70.0% 90.0% The Market Environment Long-Term Major Market Index Performance Period Ended: December 31, 2009 Five Year Annualized Performance I Ten Year Annualized Performance ~ MSCI EAFE MSCI Emerg. Mkts. S8~P 500 Russell 3000 Russel 11000 Russell MidCap Russel 12000 Barclays USAgg. Barclays US Gov. Barclays MBS Fixed Barclays Corp IG 3mos. T-Bill 15.9 0.0% 5.0% 10.0% 15.0% Twenty-Five Year Annualized Performance I MSCI ACWIxUS MSCI EAFE MSCI Emerg. Mkts. S8P 500 Russel 13000 Russel 11000 Russell MidCap Russell 2000 Barclays USAgg. Barclays US Gov. Barclays MBS Fixed Barclays Corp IG 20.0% MSCI EAFE MSCI Emerg. Mkts. SB~P 500 Russell 3000 Russell 1000 Russell MidCap Russell 2000 Barclays USAgg. Barclays US Gov. Barclays MBS Fixed Barclays Corp IG 3mos. T-Bill 10.1% -5.0% 0.0% 5.0% 10.0% Thirty Year Annualized Performance MSCI ACWIxUS MSCI EAFE MSCI Emerg. Mkts. SB~P 500 Russell 3000 Russell 1000 Russell MidCap Russell 2000 Barclays USAgg. Barclays US Gov. Barclays MBS Fixed Barclays Corp IG 3mos. T-Bill 3mos. T-Bill 15.0% 5.2 10.2 NIA 11.2 11.1 11.1 tzs% 1 o.a % s.s % 8.6 s.1 s.z % 5.7 0.0% 5.0% 10.0% 15.0% 0.0% Source: MSCI Capital Markets. Russell Investments, Barclays Capital & Bogdahn Consulting, LLC. 2 5.0% 10.0% 15.0% The Market Environment Domestic Equity Style Index Performance Period Ended: December 31, 2009 ^ A rally in two of the largest sectors of the growth benchmarks (information technology and health care) drove growth index performance to outpace value index results at all capitalization levels. The financial sector's negative performance, which represented a weight of more than 20% in each of the Russell value indices at the end of the quarter, was also a contributing factor to the underperformance of value relative to growth investments. ^ The differential between value and growth index results for the 4th quarter were broader at the large cap levels primarily due to a larger exposure to the strong performing information technology sector in the smaller capitalization value indices. While the range of style-based returns is much broader at all capitalization levels over the one year period, the causes are similar to the 4th quarter's results. Annual differentials were driven by the strong positive results in the information technology sector and the negative performance of the financial sector. ^ Style-based results over the one-year period were heavily impacted by the end-point sensitivity of the calculation. This sensitivity is quantified by the elimination of the 4th quarter of 2008's performance in the calculation, which fell by more than 20% for each style-based index, and the inclusion of the 4tn quarter of 2009's results, which were positive for all of the indices. Quarter Performance 3000 Value 30001ndex 3000 Growth 1000 Value 10001ndex 1000 G rowth MidCapValue MidCaplndex MidCap Growth 2000 Value 20001ndex 2000 Growth o.o°i° . a.2 % 5.9 7.6 . a.z % 6.1 zs% 5.2 5.9 6.7 3.6 3.9 a.1 5.o°i° 1 o.o°i° One Year Performance 3000 Value 30001ndex 3000 Growth 1000 Value 10001ndex 1000 Growth MidCap Value MidCaplndex MidCap Growth 2000 Value 20001ndex 2000 Growth 19.8 28.3 3zo% is.7% 2s.a % 37.2 34.2 40.5 46.3 zo.s % 27.2 34.5 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% Source: Russell Investments 3 The Market Environment GIGS Sector Performance & (Quarter-End Sector Weight) Period Ended: December 31, 2009 ^ Large cap stock performance was positive across the various Global Industry Classification Standard (GIGS) sectors for the quarter with the exception of financial issues, which were mildly negative. While six of the index's ten sectors outpaced the +6.1 % return of the Russell 1000, performance was led by strong results in the information technology (+10.8%) and health care (+8.7%) sectors. ^ The financial sector of the Russell 1000, which was the strongest sector of the index during the 2nd and 3~d quarters of the year, posted the index's weakest performance during the 4t" quarter with a return of -2.6%. However, the strong results of the previous quarters are evident in the solid +16.7% return of the financial sector for the year. ^ Within the Russell 1000 index, each of the ten GIGS sectors posted positive results for the year. The strongest performance came from the information technology (+62.0%), materials (+52.5%) and consumer discretionary (+45.1 %) sectors of the index. ^ For the quarter, small cap stock performance was positive across all ten GIGS sectors with the materials (+10.3%), consumer staples (+7.7%), and energy (+7.1 %) sectors providing the largest contribution. Six of the Russell 2000's economic sectors managed to outpace the 3.9% return of the core index for the 4t"quarter. ^ For the year, seven of the ten GIGS sectors in the Russell 2000 posted annual returns in excess of 20%. In fact, three sectors posted returns in excess of 50%. Only the financial sector, which returned -1.5%, posted a negative result for the year. ^QTR Russell 1000 D1-Year Energy (11.3%) Materials (4.0%) Industrials (10.4%) Consumer Disc (10.2%) Consumer Staples (10.7%) Health Care (12.5%) Financials (14.4%) Info Technology (19.4%) Telecom Services (3.1%) Utilities (4.0%) s.s % 17.z % 8.1 52.5 5.5 zz.s % 8.3 45.1 4.9 15.5 8.7 % 21.7 % -2.6 16.7 1o.a % sz.o % 8.3 % z.a % 6.8 12.9 -10.0% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% ^QTR Russe112000 01-Year Energy (5.2°/ ) Materials (4.8%) Industrials (15.8%) Consumer Disc (13.8%) Consumer Staples (3.5%) Health Care (14.3%) Financials (20.3%) Info Technology (18.3%) Telecom Services (1.0%) Utilities (3.2%) 3.7 13.9% 4.1 % 7.7 2.7 % ,.a % -1.5 3.4 s.a % 7,0 % zs% -10.0% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% ato% ~ 6o.s% -~ 6°.8 59.9 Source: Thompson Financial 4 The Market Environment Quality Rankings* Breakdown by Weight and Quarterly Performance Period Ended: December 31, 2009 Within the Russell 1000 index, the performance of each of the quality segments, with the exception of those classified as "not available", were spread over a relatively narrow spectrum during the 4th quarter. Of the companies that received a rating, "B" rated stocks turned in the strongest performance with a return of +7.2%, while "B-" rated stocks returned a weaker but still solid +4.7% for the quarter. With nearly 30% of the small cap Russell 2000 index being classified as "not rated", drawing sweeping quality conclusions from the data can be more problematic. However, for the issues with a weight in excess of 1 % in the breakdown, there appears to be a clear advantage to quality in smaller cap issues with the "A+" and "A" rated segments of the index leading performance for the quarter. ,~, A+ 10.6% 5.5% A 10.7% 7.0% p,_ 14.1 % 4.8% g+ 16.9% 6.5% g 5.9% 7.2% g_ 28.1 % 4.7% (; 2.1 % 6.5% p 0.0% 0.0% Not Rated 10.8% 8.8% N/A ~~~ 0.8% ~~ ~~, 14.2% ~~~ q+ -_ _ 3.1 % 6.2% A 5.0 % 4.6 A- 0.7% -0.2% g+ 17.3% 4.6% g 20.4% 2.5% g_ 12.2% 4.3% C 11.2% 1.1% p 0.2% 16.6% Not Rated 29.3% 4.8% N/A ~~~ 0.6% ~~ ~~ 10.0% Quality Rankings Table Highest High Above Average Average Below Average Lower Lowest In Reorganization 'Standard and Poors rankings are generated by a computerized system and are based on per-share earnings and dividend records of the most recent 10 years. -October 2005 report Source: Thompson Financial The Market Environment International and Regional Market Index Performance (# Countries) Period Ended: December 31, 2009 ^ For the first time since the equity markets turned positive back in March, international developed markets (+2.2%) lagged the performance of domestic equity markets across the capitalization spectrum. Another phenomenon visible in the performance of international developed markets during the 4th quarter is the strength of the U.S. dollar (USD). Both the Europe and Pacific regions of the MSCI-EAFE index show stronger results in local currency vs. USD. ^ Emerging Markets continued its strong performance during the 4th quarter with a return of +8.6%. Unlike the developed markets, which were impacted by USD strength, the currency effect on the performance of the emerging markets index continued to be positive. This USD depreciation is visible in the 4th quarter performance of each of the emerging market country segments. ^ Over the trailing one-year period, the USD's broad deprecation against various foreign currencies is evident. This USD deprecation had a positive impact for U.S. investors on un-hedged international returns. ^ In contrast to the domestic indices which were driven by information technology and health care results, the GICS sector attribution of both the EAFE and ACWIxUS indices illustrates the largest strength coming from exposure to materials and consumer staples issues. While financial sector weakness was evident in both indices (-4.5% & -1.8%), the information technology and utilities sectors also posted negative results in the EAFE index. ^oTR (usD) [ ~ Quarter Performance o QTR (Local) AC World x US (44) 3.8 a i % WORLDxUS(22) z.si 3.3 °% EAFE (21) 2.2 3.4 Europe (16) 3.3 a °% Pacific (5) °., % z ~ % Emerging Mkt (22) 6.6 a z % EM Europe (5) 9.3 ss% EM Asia (8) 6.6 4 5 % ,2.s% EM Latin Amer (7) z 3 % 0.0% 5.0% 10.0% 15.0% ~- ^ 1-Year (USD) ^1-Year(Locap AC World x US (44) WORLD x US (22) EAFE (21) Europe(i6) Pacific (5) Emerging Mkt (22) EM Europe (5) EM Asia (8) EM Latin Amer (7) One-Year Performance I az., % 32.4 34.4 26.0% 32.5 25.4 T 36.8 28.6 ' 24.3 19.8 - 79.0 sz.s% ss.2 % 73.6 74.2 68.1 104.2 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 120.0% Source: MSCI Capital Markets g The Market Environment U.S. Dollar International Index Attribution & Country Detail Period Ended: December 31, 2009 Energy 8.4% 7.0% 34.9% Materials 10.4% 13.2% 70.0% Industrials 11.2% 1.5% 31.8% Consumer Discretionary 9.7% 2.9% 38.0% Consumer Staples 10.1% 8.1% 32.2% Health Care 8.4% 5.4% 18.3% Financials 25.5% -4.5% 38.7% Information Technology 4.8% -2.6% 21.9% Telecommunication Services 5.8% 1.6% 16.6% Utilities 5.9°/ ~' -0.3% 5.3% Energy 11.2% 7.3% 51.2% Materials 12.0% 12.7% 76.5% Industrials 9.8% 2.4% 36.0% Consumer Discretionary 8.4% 4.4% 45.9% Consumer Staples 8.5% 9.2% 36.3% Health Care 6.4% 6.0% 19.8% Financials 25.8% -1.8% 48.6% Information Technology 6.7% 2.7% 51.7% Telecommunication Services 6.2% 1.9% 19.8% Utilities 5.0% rr r'. 0.9% 11.2% United Kin dom 21.6 % ,; 15.2'!< 7.0`'~;- 4_x.4% Ja an 20.7% 14.5 % -2.8% 6.4% France 11.1% 7.8°/ 2.2% 33.3% Australia 8.4% 5.9% 5.0% 76.8% German 8.1 % 5.7% 2.2% 26.6% Switzerland 7.7% 5.4% 3.8% 26.6% Spain 4.6 % 3.2% 1.6% 45.1% Ital 3.5% 2.4% -2.6% 28.0% Netherlands 2.7°/ 1.9% 3.8% 43,0% Sweden 2.5% 1.8% 3.6% 65.9 Hong Kon 2.3% 1.6% 3.6°/ 60.2% Sin apore 1.5% 1.0% 9.8% 74.0% Finland 1.1% 0.8% -3.5% 12.7% Bel ium 1.0% 0.7% 1.6% 58.6% Denmark 0.9% 0.6% -2.8% 37.1% Norwa 0.8% 0.6% 14.9% 88.6% Greece 0.5% 0.4% -22.4 % 25.3 Austria 0.3% 0.2% -9.8% 44.8% Portu al 0.3% 0.2% 0.5% 41,7% Ireland 0.3% 0.2% -2.7% 12.9% New Zealand 0.1% it r•, 0.1% i 0.1% 51.7% Canada 7.3% 5.2% 57.4% ~: China 4.0% 9.6% 62.6% Brazil 3.8% 13.1% 128.6% Korea 2.8% 2.3% 72.1% Taiwan 2.5% 8.1 % 80.3% India 1.7% 7.7% 102.8% South Africa 1.5% 9.4% 57.8% Russia 1.4% 10.5% 104.9% Mexico 1.0% 13.7% 56.6% Israel 0.6% 14,1% 54.6% Mala sia 0.6% 6.7% 52.1 Indonesia 0.4 % 5.2% 127.6° Turkey 0.3% 9.2°/ 98.5% Chile 0.3% 15.4% 86.7% Thailand 0.3% 1.1% 77.3% Poland 0.3% 12.9°/ 42.5% Colombia 0.1% -1.1% 84.4° Peru 0.1% 0.8% 72.1% Hungary 0.1% 3.5% 77.6% E9YPt 0.1% -6.2% 39.7% Philippines 0.1% 9.8% 68.0% Czech Republic 0.1% -6.9% 27.8% Morocco ~"~ ~`/, ~~ -7.1 %~ -5.0°/, Source: MSCI Capital Markets, & Franklin/Templeton The Market Environment Domestic Credit Sector & Broad Market Maturity Performance Period Ended: December 31, 2009 Quarter Performance ^ Although the equity quality performance distribution showed a much more narrow range than in previous quarters, a move down the quality ladder in fixed income assets continued to reward investors willing to take on lower quality debt. In addition to the "quality-play" that is evident in the performance numbers of the various credit indices, the longer-dated broad index suffered relative to the shorter-term broad indices as a result of a steepening curve. This yield curve movement is particularly evident in the results of the chart's government benchmark, which recorded a -1.1 % return for the quarter. ^ For the quarter, high yield issues once again produced the strongest results with a return of +6.0%. Results in investment grade segment of the credit market (BBB to AAA) step down dramatically from high yield results. These investment grade results range from +2.2% for BBB issues down to -0.8% for AAA issues. Outside of government and credit issues, the chart's mortgage-backed benchmark posted a mild but positive return of +0.5%. ^ Each of the themes that are described in the paragraphs above for 4t" quarter are also evident, and much more dramatic, over the one-year period. This disparity is best illustrated in the more than 60% performance differential between the year's high yield return of +57.5% and the government return of -2.6%. AAA AA A BBB <BBB Govt Mort 1-3yr G/M/C 1-5yr G/M/C 1-10yr G/M/C 10+yrGIM/C A.8 0.6 % 0.7 % 2.2 % 6.0 -,., % o.s % G/M/C =Broad Market (Government + Mortgage + Corporate) °.6 o.s % o.a % -2.6 5.0% 0.0% One Year Performance s.o% 1 o.o°i° AAA AA A BBB <Bee Govt Mort 1-3yr GIM/C 1-5yr G/MIC 1-10yrG/M/C 10+yrG/MIC -0.7 % 9.1 15.9 31.4 ',. 1`r7. ',Pr i?,',.,.,. 67.5% -2.6 s.a % 5.1 5.4% 6.a % 1.8 -10.0% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% Source: Merrill Lynch Index System $ The Market Environment Market Rate & Yield Curve Comparison Period Ended: December 31, 2009 ^ During the quarter, the Fed kept the target for the Fed funds rate unchanged at 0-25 basis points, despite calls by many market observers to systematically remove the stimulative effects of such a low interest rate policy. The Fed continued to state in its press release that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. ^ The various indicators reported in the 2009 Market Rates charts continue to show improving credit conditions and more stable inflation expectations than were evident earlier in the year. ^ Reversing its move during the 3rd quarter, the Treasury yield curve increased at maturities beyond two years during 4tn quarter to their highest level of 2009. This steepening is particularly visible at the long end of the curve where rates spiked by 60 basis points during the quarter. ^ The benchmark 10-year Treasury finished the quarter with a yield of 3.85%. This yield represented an increase of 54 basis points from the yield at the end of the 3rd quarter (3.31 %) and a 160 basis point increase from the yield at the end of 2008 (2.25%). ~. 00 s.oo 5.00 4.00 3.00 2.00 1.00 o.oo Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Treasury Yield Curve s.oo 5.00 4.00 3.00 2.00 1.00 0.00 -X12/31/2008 6/30/2009 ~-9/30/2009 -0-12/31/2009 Imo 3mo 6mo 1yr 2yr Syr Syr Tyr 10yr 20yr 30yr Source: Mortgage-X.com . US Department of Treasury & St. Louis Fed 9 2009 Market Rates The Market Environment Decades in Review Period Ended: December 31, 2009 ^ Despite some exciting years along the way, the decade that ended December 31, 2009 represented the weakest calendar decade on record for stocks back to the 1930's. In contrast to the returns on stocks, both bond and cash results for the 2000's were consist with long-term averages. ^ The rolling decade chart presents a similar visual story as the "Returns by Decade" chart. However, by moving the inception period back to 1926 and rolling the 10-year periods forward by month, some mid 1930's 10-year returns were lower than those recorded during the 2000's decade. 25.0% 20. o°i° 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% Returns by Decade r' ~ ry N a° N e N ~ O1 'N c ~ A e in Qf ' ~,°~ I ID ~ 'n N < N M e N °w ~ ~ ~ M ~ M T O M M eo ~ v ~ ~' 0 o 0 4 ^Stocks ^Bonds ^Cash 1930's 1940's 1950's 1960's 1970's 1980's 1990's 2000's Average ~olling 10-Year Returns Equity -Bonds -Cash1 Dec-35 Mar-45 Jun-54 Sep-63 Dec-72 Mar-82 Jun-91 Sep-00 Dec-09 25.00 20. o0 15.00 10.00 5.00 0.00 -5.00 10 00 Source: Ibbotson & Zephyr Associates 10 The Market Environment A Closer Look at the Measurement of CPI-U & Core CPI Period Ended: December 31, 2009 ^ The Consumer Price Index for All Urban Consumers (CPI-U) is a measure of the average change in prices over time of goods and services purchased by consumers (inflation). The CPI-U data is calculated on both an unadjusted (chart) and a seasonally adjust basis. While the seasonally adjusted data is often used for analyzing economic trends, the unadjusted data is used extensively for escalation purposes. The December 2009 year-over-year change in CPI-U was 2.7%. ^ The Core Consumer Price Index is a more narrow measure of inflation in that it excludes the food and energy segments of the CPI-U index. These segments are often excluded by analysts due to their volatility and susceptibility to price shocks that cannot be dampened through monetary policy. Although both the CPI-U and the Core CPI have averaged 4.0% over the analysis period, the chart clearly shows that the two measures have diverged significantly at various times in history. The December 2009 year-over-year change in Core CPI was 1.8%. ^ The table illustrates the various components of CPI-U as well as the items that are excluded in the measurement of Core CPI. This data is from the December 2009 report from the Bureau of Labor Statistics (BLS). Each major component of the index is made up of several sub- segments. Housing as an example, which also carries the heaviest weight in the index, is made up of lodging, fuels & utilities, and household furnishings & operations. Change vs. Prior Year 15.00 12.00 9.00 6.00 3.00 o.oo -3 00 -CPI-U -CoreCPl ----Average (both series) 1 a.o i 2.7 1.8 Jan-58 Jan-68 Jan-78 Jan-88 Jan-98 Jan-08 .. Food & Bev 15.8% -0.4% Housing 43.4% -0.3% Apparel 3.7% 1.9% Transportation 15.3% 14.4% Medical Care 6.4% 3.4% Recreation 5.7% -0.4% Education & Communication 6.3% 2.4% Other .. Less Food 3.4% ~~ ~~ 7.6% 8.0% 18.2% Less Energy 14.6% -0.5% 'BLS 2008 Relative Importance Source: St. Louis Fed & BLS 11 Total Fund December 31, 2009 iii ~ ~ ~ September 30, 2009: $4,683,940 December 31, 2009: $4,962,603 Segments Market Value ~$~ Allocation (~/o) Segments Market Value ($) Allocation (%) ^ Equity ^ Fixed Income ^ Cash Equivalent 2,754,735 1,651,142 278,0(3 58.8 35.3 5.9 ^ Equity D Fixed Income ^ Cash Equivalent 2,945,319 1,780,074 237,210 59.4 35.9 4.8 ,2 ~~ THE. ~ BOGDAHN GROUP Total Fund December 31, 2009 Asset Allocation B,y Manager -Current Quarter September 30, 2009: $4,683,940 December 31, 2009: $4,962,603 ^ Rockwood Capital Advisors Balanced Account ^ Receipt & Disbursement Market Value Allocation ~$) (%) 4,680,910 99.9 3,030 0.1 Market Value Allocation ~$) ~%) ^ Rockwood Capital Advisors Balanced Account 4,940,176 99.5 D Receipt & Disbursement 22,428 0.5 13 ~~ TtiF. BOGDAHN GROUP Tequesta Public Safety Officers' Total Fund October 1, 2009 To December 31, 2009 ~~ BOGDAHN 15 l ~e GROUP Financial Reconciliation Quarter Financial Reconciliation Quarter to Date l Quarter Ending December 3l, 2009 od Capital Advi,ors Balanced Account & Disburscmcnt 4,C>x0,910 -40,000 3,030 40,000 a fisz 4an _ 144,979 - - -976 25,307 - -6,10] -14,501 - - -6,101 -15.477 25.307 129,955 4,940,176 - z2,42x 16 TI1ki BOGDAHN GROUP Financial Reconciliation FYTD Financial Reconciliation Fiscal Year to Date October 1, 2009 To December 31, 2009 Kocksvood Capital Advisors Balanced Account x.680910 -40,000 144.979 - - -976 25.307 129,955 4,940,17( Receipt & Disbursement 3,030 40,000 - - -6,101 -14,501 - - 22,428 Total Fund 4,683.940 - 144,979 - -6,101 -15,477 25,307 129.955 4,962,603 ~~ THE ,~ ` BOGDAHN GROUP Tequesta Public Safety Officers' Total Fund (Net) December 31, 2009 MarkM Value Market •'alae As of let Contributions Distributions Fees Expenses Income Capital As of 9/i0/20119 Transfers Apprec./ Deprec' 12/41/2009 "1'ntal Fund (Nett 4.684 - 145 - -G -IS 25 13(1 4,963 Market Value Market Value As of \et Contributions Distributions Fees Expenses Income Capital ;4s of 9/30/21109 Transfers Apprec./ Deprec. 12/41/20119 Toad Pund (Ncq -3.(iR4 - I~15 - -( -15 2$ 13(1 4.963 45.00 ~ ;u ii0-I 15.(10 ~ ~_ a ~ ~ ` 0.00 z - 15.00 - -3 (L(10 ! ~ 1 Oct-2U119 Quarter To Dec-2009 ^ Total Fund (Nett 3.09 (8111 3.09 (SU) • Total Fund Policy 3.75 (29) 3.75 (29) 1 Year 2 3 4 Years Years Years Median 3.39 3.39 13.63 (97) -5.00 (69) -0.33 (55) L84 ((i6) 18.11 (SR) -4.07 (49) -0.70 i67) 2.10 (62) 18.64 -4.20 -0.13 _'.44 5 1"ears N/A N/A 3.23 $130.0- $ 120.0 $110.0- $ 100.0 $9Q 0- $80.0 ~-~~-~ -i 3/05 3/06 3/07 3/08 -Total Fund (Net) • --_ Total Fund Policy S 114.5 $111.4 f 3/09 1209 1 1 l 1 1 I Quarter Quarter Quarter Quarter Quarter Quarter Ending Ending Ending Ending Ending Ending Sep-20(19 .tun-2009 Mar-2009 Dec-2008 Sep-2008 .tun-2008 Total Fund (Net) 8.12 (99) 5.63 (94) -3.49 (13) -10.52 (22) -7.64 (53) 1.93 (S) Total Fund Policy IQ56 (51) 10.13 (56) -6.51 (71) -11.73 (38) -5.50 (13) -2.12 196) All Public Plaus-Total Fund Median I (1.59 10.57 -S.fi9 -12.41 -7.54 -11.77 20 ~~ BOGDAHN ~~ GROUP Tequesta Public Safety Officers' Total Fund (Net) December 3l, 2009 t ~ '• ' zo.u o.on -- - --- Izll a.o -4.0 - e ~° -12.11 0 F -20.0 -20.11 Total Fund Policv(% ) ~ l;nder Perka~nnnce f Over Per$:mance -~ Mar-2008 ~ Dec-2009 6.11(1 .___ 4.(1(1 3.00 ~~ 4on . -29u z -4.0(1 --r -- ~ ---- ~ -~ - -.. _. _1 8.00 10.(10 1200 14.I)U I t+AO 18.00 2(1.(10 Risk(StandardDev~ation % 1 Rcturn Standard Dcviatiat ^ "Polo( Fund (Ncl) -(1.33 10.56 • Total Fetid Policy -470 12.19 - Median -(1.13 1 L99 2s.oo- ~ c'e ^ ^ ~~ so.oo ~ ~ • • ~ ^ ~ • a , a 75,11(1-~ .. • Y ~ 10(1.00 r- - - - r _ l- - I i ?i05 3106 ?'U7 3'(18 i U9 1209 Total Period 5-25 25-Median Median-75 75-95 Count Count Count Count ^ Tutal Fund (Net) K I (13 ro) 2 (25%) 3 f38"/0) 2 (25"ro) • Total Fund Policv R 0 (0%) 1 (13%) S (63"/0) ? (25'%) I 1 9 (1(I _ - ___ - - _- 7.50 G.00 4.50 3 c)n z L50 0.00 ~- - -~ _ ~ --~ i -- 7.50 9.00 10.50 12.0(1 I?.50 15.0(1 Ri.k (Standard Deviation % ) Rcturn Standard Deviation ^ 'T'om( Fund (Net) N/A NlA • Total Fund Policv NiA N/A Median 3.23 9.79 Tracking lip Market Down b7arkel Alpha IR Sharpe Beta Dow aside Error Ratio Risk Capture Capture Total Fund fNcll 4.89 88.28 87.12 0.19 0.04 -0.20 0.79 8.47 Ibml Fund Policv 0.00 10(1.00 100.00 (L (10 N/A -0.19 1.00 9.57 Tracking Up Uowo h IR Sharpe Beta Downside Error Market Market Alp a Ratio Risk Capture Capture folal Fund (Nell N/A N/A N/A N!A N/A N/A N/A N/A TWaI Fund Policy N/A NiA N/A NiA N/A NLA N/A NIA ~~ THi; z~ ~ BOGDAHN GROUP -12.0 -4.0 4.0 12.0_nn Tequesta Public Safety Officers' Total Equity Portfolio December 31, 2009 Market Value Net Ca ital D1arke[ Value .4s oi' Transfer Contributions Distributions Fccs Expenses Income ;1pprec.p/ Deprec. As of 9/30/2009 12/31 /2009 Total Equity F'ottf'olio 4.654 - 145 - -6 -15 25 130 4.963 Market Value Market Faluc As of :Set Contributions Distributions Fees Expenses Income Capital As of 9/30/2009 Transfers Apprec./ Deprec 12/12009 Total Equity I'ortColio 4.(154 - 145 - -G -I S 25 130 4.963 45.00 30.00 ~ I S.OU~ e ° OAO~ z` -1 S.nn -;0.00 _-_- i __ 1 Oct-20119 Quarter To Dec-2009 ^ Total Equity Portfolio 5.40 (74) 5.40 (74) • $~P 500 6.04 (52) 6.04 (52) Median (i.(1(i 6.06 I 2 3 4 5 Year Vears Years Years Years 19.(i(1 (911 -12.94 (92) -5.22 (56) -0.#2 176) `J/A 26.46 (4R) -10.74 ((,5) -S.G3 (71) -0.67 (72) 0.42 (ff2) 26.20 -10.30 -5.03 -0.16 1.41 $ 160.0 $145.0 $130.0 $115.0 $100.0 $R5.0 $70.0 $55.0 3/05 3/06 3/07 3/OA Total F.yuity PurtA~lio S&P 500 i u4.a iui.a 3/09 12/U9 1 1 1 l 1 1 Quarter Quarter Quarter Quarter Quarter Quarter Ending Ending Ending Ending Ending Ending Sep-2009 .lun-2009 Mar-2009 Dec-200N Sep-2008 .-un-200R Total Equity Portfolio ll.73 (9l) 9.15 (96) -6.96 (13) -2Lfi3 (SO) -13.ON (R9) 4.SR (4) S&P 500 15.61 (3C,) 15.93 (41) -11.01 (69) -2L94 (60) -R.37 (-101 -2.73 (R2) US Core/Large Cap Equity (SA+CF) Median 15.24 15.54 -10.46 -21.68 _5.95 -I.1) 22 ~ BOGDAHN GROUP Tequesta Public Safety Officers' Total Equity Portfolio December 31, 2009 1 1 ~ ~ 1 ., ~ . •. 2n.o over P crtorn~ncc ^ IOD c 25.00 _ z ~ 0.0 - • ~ 50.00 - • -10.0- • • • i I c 75.(10 ~ . ~ ~ ~ ~ ~. ~ ~ ~ ~ • ' '~ `~ -20.0- i ~ Undei eG ~ _ 100.00 Pcifiii nom cc .i - i-- ------- -r - - - --- - -~--- i ---r -30.0 ----- - ~ - r - ---- -r r - ?/OS 3/06 3/07 3/OH 3/09 12/09 F•= -30.0 -_(1.0 -10.0 0.0 10.0 '_0D Total Periud 5-25 25-Median Median-75 75-95 S&P 51111 ('%) Count Count Count Count ^ Toml Equity Portfolio 8 2 (25'%) 2 25"i) 4(5(1%) 0 ((1'%) ~ Under Perlorn>:mcc f Over Pcrti>rmm~ce -a- star-2008 ~Q- Dec-2009 • SRcP 500 20 0 (0%) 0 (0%) 13 ((i5""/o) 7 (35"0) 5,00 n.on - -5.00 c -10.00 z -I 5.00 5.0(1 i ~ _ _ _ r - - ~--~-- IO.UO 15AO 2(LUO 25.00 30.00 Risk (Standard Deviation % ) Return Standard Deviation ^ Total Equity Portfolio -5.22 19.72 • SFcP 5(111 -S.G3 21.21 - Mcdion -S.U3 21.05 35.0(1 15,0(1 1 (1.11(1 0 5.00 e ~ 0.00 5 -5.00 , t-~ ~-~ 5,00 10.00 15,00 20.00 25.00 Risk(Standard Deviation % ) Return Standard Deviation ^ Total Equity Portfolio N/A N/A • SRcP 500 0.42 17.17 Median 1.41 IZ09 30.UU l'rackink IiP Down Sharpe. Downside Error Markel Markel Alpha tR Ratio Reta Risk Capture Capture Total Ryuity Porttiilio 7.6h 93.97 93.91 -0.24 0.03 -0.32 0.87 15.44 S&P 5(10 0.00 IOU_00 10400 (LOU N/A -0.31 1.(10 15.85 '1'ruckinR l p Down Sharpe Downside Error Market Market :~Ipha IR Ratio Beta Risk Capture Capture Total F.quiry Portfolio N/A N A N!A ~i:~ N/A N-A N'.1 N7A $&P 511(1 11.(10 Illll.(10 1011.(111 0,1111 NiA -(1.07 1.110 12.47 ~ BOGDAHN 23 '~~ GROUP Tequesta Public Safety Officers' Total Fund As of December 31, 2009 Effective Date: Apr-2005 S&P 500 Index 60.00 Barclays Capital Intermediate U.S. Go~-ernment/Credit 40.00 26 ~~ BOGDAHN GROUP Statistics Definitions Statistics Description Return -- Compounded rate of return for the period. Standard Deviation -- A statistical measure of the range of a portfolio's performance, the variability of a return around its average return over a specified time period. Sharpe Ratio -- Represents the excess rate of return over the risk free return divided by the standard deviation of the excess return. The result is the absolute rate of return per unit of risk. The higher the value, the better the product's historical risk-adjusted performance. Alpha -- A measure of the difference between a portfolio's actual returns and its expected performance, given its level of risk as measured by beta. It is a measure of the portfolio's historical performance not explained by movements of the market, or a portfolio's non-systematic return. Beta -- A measure of the sensitivity of a pvrtfolio to the movements in the market. It is a measure of a portfolio's non-diversifiable or systematic risk. R-Squared -- The percentage of a portfolio's performance explained by the behavior of the appropriate benchmark. High R-Square means a higher correlation of the portfolio's performance to the appropriate benchmark. Treynor Ratio -- Similar to Shape ratio, but focuses on beta rather than excess risk (standard deviation). Represents the excess rate of return over the risk free rate divided by the beta. The result is the absolute rate of return per unit of risk. The higher the value, the better the product's historical risk-adjusted performance. Downside Risk -- A measure similar to standard deviation, but focuses only on the negative movements of the rch~rn series. It is calculated by taking the standard deviation of the negative quarterly set of returns. The higher the factor, the riskier the product. Tracking Error -- A measure of the standard deviation of a portfolio's performance relative to the performance of an appropriate market benchmark. Information Ratio -- Measured by dividing the active rate of return by the tracking error. The higher the hiformation Ratio, the more value-added contribution by the manager. Consistency -- The percentage of quarters that a product achieved a rate of return higher than that of its benchmark. The higher the consistency figure, the more value a manager has contributed to the product's perforn~ance. Excess Return -- Arithmetic difference between the managers return and the risk-free return over a specified time period. Active Return -- Arithmetic difference between the managers return and the benchmark return over a specified time period. Excess Risk -- A measure of the standard deviation of a portfolio's perforn~ance relative to the risk free return. Up Market Capture -- The ratio of average portfolio return over the benchmark during periods of positive benchmark return. Higher values indicate better product performance. Down Market Capture -- The ratio of average portfolio return over the benchmark during periods of negative benchmark return. Lower values indicate better product performance. Calculation based ou monthly periodicity. ~"~ ~T•htF. 27 t e, BOGDAHN ~' GROUP Village of Tequesta Public Safety Officers' Pension Fund Compliance Checklist as of December 31, 2009 1. The Total Plan return equaled or exceeded the 8% actuarial earnings assumption over the trailing three and five year periods. / 2. The Total Plan return equaled or exceeded the total plan benchmark over the trailing three and five year periods. / 3. The Total Plan return ranked within the top 40th percentile of its peer group over the trailing three and five year periods. / 4. The Total Plan standard deviation was equal to or less than 120% of the total plan benchmark over the trailing three and five year periods. / 1. Total equity returns meet or exceed the benchmark over the trailing three and five year periods. / 2. Total equity returns ranked within the top 40th percentile of its peer group over the trailing three and five year periods. / 3. The total equity allocation was less than 70% of the total plan assets at market. / 4. The total equity allocation was less than 60% of the total plan assets at cost. 5. Total foreign equity was less than 10% of the total plan assets at cost. -. 1. Total fixed income returns meet or exceed the benchmark over the trailing three and five year periods. / 2. Total fixed income returns ranked within the top 40th percentile of its peer group over the trailing three and five year periods. / 3. The average quality of the fixed portfolio was investment grade or better. / 1. Manager outperformed the index over the trailing three and five year periods. 2. Manager ranked within the top 50th percentile over trailing three and five year periods. 3. Less than four consecutive quarters of under performance relative to the benchmark. 4. Three-year down-market capture ratio less than the index. 5. Standard deviation <= 150% of the index over the trailing three and five year periods. 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