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HomeMy WebLinkAboutDocumentation_Pension Public Safety_Tab 03_05/03/2010 Village of Tequesta Public Safety Officers' Pension Fund Preliminary Report 1 st Quarter 2010 o THE /00 BOGDAHN GROUP W W W. BO(; h A H N C R O U R C O M simplifying your investment and fiduciary decisions I No Text 1St Quarter 2010 Market Environment 1 - 11F. BOGDAHN Report is preliminary. New reports will be issued on or around May 1 st, when peergroups are updated and finalized. GROUP The Market Environment Major Market Index Performance Period Ended: March 31, 2010 Quarter Performance • Despite getting off to a rough start in January, the domestic equity markets posted strong results for the 1St quarter of MSCI ACWxUS MSCI EAFE ,.7% o.s% 2010. January's weakness was largely a result of the MSCI Emerg Mkts 2.5% domestic political rhetoric associated with discussions surrounding increased banking regulations as well as the S &P 500 5.4% potential geopolitical consequences of Greece's troubles on Russell 3000 5.9% the global economy. As the quarter wore on investors began Russell 1000 5.7% Russell MidCap s.7% to view the domestic economy's recovery in a more positive Russell 2000 e.s% light, which drove market returns higher. The domestic equity benchmark performance for both the quarter and the trailing BarclaysUSAgg 1.8% one -year period was led by the Russell 2000 ( +8.7 %) and Barclays US Govt Russell MidCap ( +8.9 %) indices. Barclays MBS Barclays Corp IG 2.3% • International markets were also positive for the 1St quarter of 3- Month T -Bill 0.0% 2010. However, due to the strength of the U.S. dollar (USD), 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% the USD returns of each of the foreign benchmarks trailed the respective local currency results for the quarter. In the trailing one -year period, the international markets showed substantial One Year Performance strength, particularly emerging markets, which returned 81.6% - - - -- MSCI ACWxUS 61.7% i for the year. MSCI EAFE 55.2% MSCI Emerg Mkts 81.6% • The Barclays Aggregate index posted a solid return of +1.8% for the quarter. Unlike the prior several quarters, which were S&P 500 49.8% dominated by the performance of credit issues, the quarter's Russell 3000 52.0% Russell 1000 61.6% relatively stable rate environment meant that each segment of Russell MidCap 1 67.7% the bond index was a positive contributor to broad Russel 12000 62.8% benchmark's total return. However, the outperformance of credit issues is very evident in the one -year results where the Barclays USAgg 7.7% o Barclays US Govt -o., Barclays Aggregate index performance of +7.7% was Barclays MBS 5.2% dominated by the Corporate Investment Grade index return of Barclays CorplG ; 23.8% +23.8% and held back by the -0.1% return of the Government index. 3 -Month T -Bill 0.1% -10.0% 10.0% 30.0% 50.0% 70.0% 90.0% I'tit. Source: Barclays Capital, MSCI Capital Markets, Russell Investments 2 BOGDAHN Report is preliminary. New reports will be issued on or around May 1st, when peergroups are updated and finalized. GROUP The Market Environment Domestic Equity Style Index Performance Period Ended: March 31, 2010 Quarter Performance • The 1St quarter's value outperformance represents a mirror image of the 4th quarter's results for growth. While last 3000 Value 7.0% quarter's growth outperformance was led by strength in 30001ndex s .9% information technology and weakness in financials, this 3000 Gro wth a.9% quarter's value outperformance was a result of strength in 1000 Value 6.8% financials and relative weakness in information technology. 10'0'0 Index 6 .7% This quarter's outperformance by value indices is evident 1000 Growth a .6% across the entire capitalization spectrum where the financial sector represents a weight of more than 20% of each of the MidCapValue 9.6% Russell value indices. Midcapindex 6 .7% MidCap Growth 7.7% • The absolute performance differential between value and 2000Value 10.0% growth index results for the 1St quarter were relatively narrow 20001ndex 8.9% with the 240 basis point return differential between small cap 2000 Growth 7.6% style indices represented the widest performance band. While 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% the return disparity between the various style -based benchmarks is broader over the one -year period, absolute results for all of the equity benchmarks were strong. Much like One Year Performance the 1St quarter of 2010, annual benchmark differentials 3000 Value 54.5% between growth and value indices were driven by a strong 30001ndex 52.4% recovery in financial issues over the period. 3 0,00 Gro 50.5% • Style -based results over the one -year period were once again 1000Value 53.6% heavily impacted by the end -point sensitivity of the four 10001ndex 51.6% quarter calculation. This sensitivity is quantified by the 10 row 00 Growth 49.8% elimination of the 1St quarter of 2009's performance from the the calculation (Russell 1000: - 10.5 %) and the inclusion of the MidCapValue 72.4% MidCap Index 1 67.7% 1St quarter of 2010's performance (Russell 1000: +5.7 %)• MidCap Growth 63.0% 2000 Value 65.1% 20001ndex 62.8% 2000 Growth so.3% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% � Source: Russell Investments � DiF. 3 � BOGDAHN Report is preliminary. New reports will be issued on or around May 1 st, when peergroups are updated and finalized. GROUP The Market Environment GICS Sector Performance & (Quarter -End Sector Weight) Period Ended: March 31, 2010 ■QTR Russe111000 O 1 -Year • Large cap stock performance was largely positive across the various Global Industry Classification Standard (GICS) sectors Energy (10.7%) ° 327% for the quarter with the exception of the low- weighted Materials (4.0%) 4.2% telecommunication services and utilities sectors, which were 62.,% mildly negative. Sector positioning will most likely play a large Industrials (10.8 °i °) 120% 73.6% role in a portfolio's performance for the quarter, with only four Consumer Disc (10.7%) 11.3% 73.0 of the index's ten sectors outpacing +5.7% return of the Consumer Staples (10.7%) 6.0% Russell 1000 index. The quarter's performance was led by 36.4% industrial, consumer discretionary and financial issues, each Health Care (12.3 °i °) 43% 36.5% of which posted returns in excess of +10.0 %. Financials (15.6 %) 11'4% 76.6% 2.oi • Reversing last quarter's pullback where it represented the Info Technology (18.7 %) Telecom Services (2.8 %) 3.s% 59.0% weakest sector in the index, the financial sector of the Russell 15.7% 1000 posted a strong +11.4% return for the quarter. Utilities (3.6%) -3.0% 23.6% Industrials, which factor significantly in both the value and growth benchmarks ( >10% weight) was the Russell 1000 -20.0% 0.0% 20.0% 40.0% 60.0% 60.0% 100.0% index's strongest sector for the quarter with a return of ■QTR Russe112000 +12.4%. O 1 -Year • For the trailing one -year period, each of the ten GICS sectors Energy (5.0%) 3.3/ 83.0% posted double -digit performance for the Russell 1000 index. Materials (4.6%) s.9% 104.0% In fact, five of the ten sectors returned more than 50.0% for Industrials (15.r/6) 6.0% the period. 58.0% Consumer Disc (15.0 %) 17.9% too., % • Small cap stock performance was positive across nine of the Consumer Staples (3.1%) 7 467% ten GICS sectors for the quarter. In fact, with the exception of Health Care (14.3%) 61 % industrials, which was the strongest sector of the large cap .4% Financials (20.9 %) 11 493% index, the small cap sector performance exceeded each 47.2% respective large cap sector result for the quarter. Info Technology (18.0%) 6.6% 72.7% • The one -year results for the Russell 2000 index GICS sectors Telecom Services (0.9 %) -2'9% 28.3 were also impressive with the materials and consumer Utilities(3.0 %) 2'S% /° 24.6% discretionary sectors posting returns in excess of 100 %. 20.0°i° o.o °r° 20.0°i° ao.o °i° 60.0°r° ao.o °r° 100.0°r° 120.0°i° 14 1 L Source: Thompson Financial 4 BOGDAHN Report is preliminary. New reports will be issued on or around May 1st, when peergroups are updated and finalized. GROUP The Market Environment Quality Rankings* Breakdown by Weight and Quarterly Performance Period Ended: March 31, 2010 • Within the Russell 1000 index, the performance of each of the Russell 1000 Quality Breakdown Average Weight QTR Return quality segments was spread over a 300 basis point range A+ 9.7% 5.3% during the 1St quarter. "B" quality rated companies, which A 11.7% 7.4% make up 6.5% of the index, posted the strongest quality A- 14.0% 4.5% performance for the quarter with a return of +7.5 %. "A-" B+ 17.7% 5.7% quality rated companies, which make up a larger 14.0% of the B 6.5% 7.5% index, posted the quarter's weakest quality performance with B- 27.7% 5.2% a return of +4.5 %. c 2.2% 7.1% D 0.0% 0.0% N/A 0.0% 0.0% Not Rated 10.5% 5.6% Russell 1000 Index 100.0% • With nearly 30% of the small cap Russell 2000 index being iii Quality Breakdown Average Weight QTR Return classified as "not rated ", drawing sweeping conclusions from A+ 3.0% 9.4% the quality data associated with the small cap index can often A 4.9% 7.7% be misleading. However, since the +8.2% return by these A- 0.5% 3.0% "non- rated" companies is similar to the +8.8% posted by the B+ 17.2% 9.2% index, it is reasonable to draw conclusions for the index based B 20.3% 9.3% on the 1St quarter's quality data. With the exception of the B- 11.8% 8.1% outlying performance posted by the low- weighted "A-" and C 11.9% 9.8% "N /A" companies, the spectrum of performance for the various D 0.2% 9.5% quality ratings of the Russell 2000 index was a narrow 210 N/A 1 0.8% 19.8% basis points. Not Rated 29.4% 1 8.2% Russell 000 Index 100.0% Quality Rankings Table Highest High Above Average Average Below Average Lower Lowest 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 5 BOGDAHN Report is preliminary. New reports will be issued on or around May 1 st, when peergroups are updated and finalized. GROUP The Market Environment International and Regional Market Index Performance (# Countries) Period Ended: March 31, 2010 Q (Local) USD) Quarter Performance ■ International developed market performance for the quarter o QTR ( was led by the performance in the Pacific region, which AC World x US (44) 1.7% 3.6% posted a return of +6.3% in U.S. Dollars (USD). Within the WORLD x US (22) 1 Pacific region, Japan was the standout country with a return of 4 ' 2 % o.s +8.3% for quarter in USD. Japan's strong performance was EAFE(21) 4.4% enough to propel it past the United Kingdom as the largest Europe (16) -1.7% representative country in international benchmarks. Another 3.6% Pacific (5) 6.3% phenomenon visible in the performance of international 6.0% developed markets during the quarter is the continued Emerging Mkt (22) 2.5% strength of the USD. However, unlike the 4th quarter where 6.2% EM Europe (5) s.t both the Europe and Pacific regions of the index showed 9. weakness against the USD, during the 1St quarter, Europe EM Asia (8) 1 was the sole source of weakness with a return of +3.6% in 61 ' o 1.7 EM Latin Amer (7) local currency vs. -1.7 /o in USD. 5.3% -5.0% 0.0% 5.0% 10.0% 15.0% • Emerging markets continued their solid performance during the 1St quarter with a return of +2.5% in USD. Much like ■1 -Year (USD) developed markets, USD returns were muted as the result of o 1 -Year (Local) One -Year Performance a strengthening dollar. However, in contrast to the developed 1.7% markets where Europe represented a drag on the broader ACWorldxUS(44) 475% benchmarks, Europe's emerging market countries, which WORLD xUS(22) 56'6' posted a USD return of +6.1%, were the primary source of 44 EAFE (21) 55.2 performance in the boarder emerging market benchmark. 45.4% Europe (16) 57'2% • Despite the strength of the USD over the last two quarters, the 50.5% one -year results of both the broad and regional benchmarks Pacific (5) 36.6% 51.5% show the substantial weakness of the USD over the last year. Emerging Mkt (22) 61.6% 58.4% ■ EM Europe (5) 111.5% In contrast to the domestic indices which were driven by 85.9% performance in the industrial, financial and consumer EM Asia (8) 73.6% discretionary sectors, the GICS sector attribution of both the 56.5% 1st q EM Latin Amer (7) 97.e% EAFE and ACWIxUS benchmarks for the 1 quarter illustrate 60.2% the largest strength coming from exposure to the information 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 120.0% technology sector. CHI: Source: MSCI Capital Markets 6 BOGDAHN Report is preliminary. New reports will be issued on or around May 1st, when peergroups are updated and finalized. r'ROUP The Market Environment U.S. Dollar International Index Attribution & Country Detail Period Ended: March 31, 2010 Country Ending Weight Ending Weight Return Return MSCI-EAFE Ending Weight 1 st Qtr Return 1 -Year Return Ja an 22.2% 15.5% 1 8.3% 38.0% United Kingdom 21.0% 14.7% -0.6% 59.6% Energy 8.0% -3.5% 38.7% France 10.6% 7.4% -3.9% 52.4% Materials 10.5% 2.4% 84.0% Australia 8.7% 6.0% 4.2% 87.1% Industrials 11.8% 5.8% 63.6% Switzerland 7.9% 5.5% 4.4% 55.5% Germany 7.9% 5.5% -2.6% 53.1% Consumer Discretionary 9.9% 3.1% 54.6% Spain 3.9% 2.7% -15.2% 50.6% Consumer Staples 10.0% 2.2% 55.2% Italy 3.2% 2.3% -7.3% 49.4% Sweden 2.8% 1.9% 7.7% 90.6% Health Care 8.1% -1.2% 37.1% Netherlands 2.6% 1.8% -1.0% 69.3% Financials 25.3% -0.7% 71.7% Hong Kong 2.4% 1.7% 2.4% 64.8% ° Singapore 1.5% 1.0% -1.3% 88.9% Information Technology 5.3% 11.9% 52.1 Finland 1.2% 0.9% 12.4% 62.2% Telecommunication Services 5.5% -4.3% 32.0% Belgium 1.0% 0.7% -1.0% 64.1% UtIIIt12S 5.6% - 4.0% 27.4% Denmark 0.9% 0.7% 10.0% 69.5% Norway 0.7% 0.5% -6.4% 71.0% Total 1 00.0% 0.9% 55.2% Greece 0.4% 0.3% - 13.2% 24.5% Austria 0.3% 0.2% -1.2% 55.7% Portugal 0.3% 0.2% - 10.3% 37.9% Ireland 0.3% 0.2% -0.2% 23.6% New Zealand 0.1% 0.1 % -3.7% 50.2% Total EAFE Countries 1 Canada 1 1 7.6% 1 6.2% 1 72.9% Total Developed Countries 77.3% 1.4% 66.8% Otr Return I-Y ear Return China 4.0% -1.6% 58.0% Energy 10.8% -2.1% 50.7% Brazil 3.7% -0.1% 103.0% Materials 12.2% 3.2% 84,7% Korea 2.9% 4.0% 79.1% Taiwan 2.4% -3.8% 60.1% Industrials 10.2% 5.8% 65.5% India 1.7% 4.9% 115.9% Consumer Discretionary 8.6% 3.0% 61.6% South Africa 1.6% 4.6% 71.8% Consumer Staples 8.5% 2.4% 58.6% Russia 1.5% 6.8% 106.5% Mexico 1.0% 7.8% 96.3% Health Care 6.2% 0.0% 38.7% Israel 0.7% 10.0% 60.9% Financials 25.9% 1.2% 79.8% Malaysia 0.6% 9.1% 71.1% Information Technology 7.0% 6.5% 64.0% Indonesia 0.5% 10.0% 147.6% Turkey 0.3% 4.0% 136.4% Telecommunication Services 6.0% -1.9% 35.5% Thailand 0.3% 13.3% 111.3% Utilities 4.8% -2.9% 32.5% Chile 0.3% 0.3% 64.8/° Total Poland 0.3% 4.2% 116.7% 1 00.0 % Colombia 0.2% 10.4% 126.4% Hungary 0.1% 12.6% 181.0% Peru 0.1% 0.6% 62.5% Egypt 0.1% 11.9% 76.5% Philippines 0.1% 5.2% 65.6% Czech Republic 0.1% -0.2% 51.2% Morocco 0.0% 6.7% 11.1% Total Emerging Countries 22.7% 2.5% 81.6% Total ACWlxlJS Countries 1 00 . 0 % � � 'rl►F. Source: MSC/ Capital Markets, & Franklin/Templeton 7 • t BOGDAHN Report is preliminary. New reports will be issued on or around May 1 st, when peergroups are updated and finalized. GROUP The Market Environment Domestic Credit Sector & Broad Market Maturity Performance Period Ended: March 31, 2010 Quarter Performance • While several quarters during 2009 were marked by substantial credit compression that benefited lower quality AAA 2.0% investments, the 1 st quarter of 2010 represented a more stable AA 2.1 environment. This stability is particularly evident in the A 2.4% narrower 280 basis point performance differential between BBB 3,5% AAA and <BBB rated debt. This is a substantial change from <BBB 48% the last quarter where the return differential between AAA and Govt <BBB rated debt was a much wider 680 basis points. Given the quarter's steady rate environment, the higher coupons Mort ,.�� associated with lower- quality debt as well as the higher yields G /M /C =Broad Market (Government +Mortgage +Corporate) offered on longer -term bonds were the primary drivers of total 1-3yrG /M /C 1.2% return performance. 1- 5yrG /M/C 1.5% 1 -10yr G /M /C 1.7% 10 +yr G /M /C 1.9% 0.0% 2.0% 4.0% 6.0% 8.0% • The results of the bond market summarized in the one -year one Year Performance performance chart show what can only be characterized as an "extreme" performance band between the various bond index AAA 7.9% segments. The Government bond index, which did not benefit AA 15.7' from 2009's credit compression, was at the low end of the A 22.3% performance band with a one -year return of -0.4 %. In BBB 32.9% contrast, high yield securities, which benefited from both <BBB 57.2% strengthening credit market conditions and higher coupon Govt -0,4% rates, posted a return of +57.2% for the year. Mort 5.2% 1 -3yr G /M /C 4.7% 1 -5yr G /M /C 5.41% 1 -10yr G /M /C 5.5% 10 +yr G /M /C 10.0% -10.0% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 'I'm:. Source: Merrill Lynch Index System 8 BOGDAHN Report is preliminary. New reports will be issued on or around May 1st, when peergroups are updated and finalized. GROUP The Market Environment Market Rate & Yield Curve Comparison Period Ended: March 31, 2010 2009 -2010 Market Rates • During the quarter, the Fed reiterated that rates will remain 7.00 low for an extended period of time. While there is no shortage — Fed Funds Rate —TED Spread —3 -Month Libor of opinion, many market observers feel that the Fed will not 6.00 — BAN1OyrSpread — 10yrTreasury — 10yrTIPs raise rates before the end of the year due to muted growth, low inflationary pressures and high unemployment. While 5.00 several readings indicate that the domestic economy has largely stabilized, there are fewer indicators of the strong 4.00 demand or organic growth necessary to drive the economy forward without substantial government stimulus. The current 3.00 economic weakness is most evident in many small and mid sized companies, which still face tight credit conditions and 2.00 slow growth. 1.00 • Although there were a number of economic and geopolitical events during the quarter that could have derailed the 0.00 recovery in the credit markets, the various indicators reported Mar -09 Jun -09 Sep -09 Dec -09 Mar -10 in the "Market Rates" chart show a relatively stable rate environment during the quarter. I Treasury Yield Curve 6.00 • In contrast to prior quarters, the Treasury yield curve +3/31/2009 — 9/30/2009 X12/31/2009 0 3/31/2010 remained largely unchanged during the 1St quarter. For 5.00 example, the quarter -end yield on the benchmark 10 -year Treasury (3.84 %) only changed by 1 basis point versus the year -end yield (3.85 %). As a result of this rate stability, the 4.00 0 yield curve remains extremely steep with a 2- year /10 -year spread of 282 basis points. 3.00 2.00 1.00 0.00 1mo 3mo 6mo 1 y 2yr 3yr 5yr 7yr 10yr 20yr 30yr Source: Mortgage -X. com , US Department of Treasury & St. Louis Fed 9 1 BOGDAHN Report is preliminary. New reports will be issued on or around May 1 st, when peergroups are updated and finalized. GROUP The Market Environment What a Difference a Year Makes Period Ended: March 31, 2010 1 -Year Return as of 3131/09 1 -Year Return as of 3131/10 -46.2 %, MSCI ACWxUS 61.7% •46.2% MSCI EAFE 55.21 -46.9 MSCI Emerg Mkts 81.6% -38.1% S&P 500 49.8/> -38.2% Russell 3000 52.4% -38.3% Russell 1000 51.6% .40.8% Russell MidCap j'62.8% 67.7% -37.5 % Russell 2000 3.1% Barclays US Agg 7.7% 7.0% Barclays US Govt -0.1% 8.1% Barclays MBS 7 5. = 2 o/. -5.2% Barclays Corp IG 20.8% 1.1% 3 -Month T -Bill 0.1% - 60.0% - 40.0% -20.0% 0.0% 20.0% -20.0% 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% • It would be difficult to identify another consecutive two- While it is easy to look in a rearview mirror to see the year period with more diametrically opposed performance logic of diversifying a portfolio across several strategies that the one -year periods ending 3/31/09 and 3/31/10. and asset classes, it is important to remember that the Over this period the average performance differential for greatest investment opportunity often exists when the risk the international and domestic equity benchmarks was appears to be the greatest. The best lesson for long -term 112.6% and 95.4% respectively. investors to take from the performance disparity of last two -years is do their best not to anticipate or react to • Fixed income, which typically offers a high degree of short -term market performance but rather to maintain stability year- over -year, had an average performance focus on their long -term strategic plans. spread over the two -year period of 10.2% for the benchmarks shown. This differential was largely due to the 26.0% return differential realized in investment grade debt over these two years. Tlllw Source: Barclays Capital, MSCI Capital Markets, Russell Investments 10 BOGDAHN Report is preliminary. New reports will be issued on or around May 1 st, when peergroups are updated and finalized. GROUP 'I 11 { BOGDAHN Report is preliminary. New reports will be issued on or around May 1 st, when peergroups are updated and finalized. GROUP Tequesta Public Safety Officers' Pension Fund March 31, 2010 Asset Allocation By Style as of i iii December 31, 2009: $4,962,603 March 31, 2010: $5,359,607 Segments Mark // et Value Allocation Segments Market Value Allocation ■ Equity 2,945,319 59.4 ■ Equity 3,228,822 60.2 0 Fixed Income 1,780,074 35.9 Fixed Income 1,762,953 32.9 ■ Cash Equivalent 237,210 4.8 ■ Cash Equivalent 367,832 6.9 12 THE ` BOGDAHN Report is preliminary. New reports will be issued on or around May 1st, when peergroups are updated and finalized. ! 'DOT TP Tequesta Public Safety Officers' Pension Fund March 31, 2010 Asset Allocation By Manager as of Dee - Ili Asset Allocation By Manager - Current Quarter December 3l, 2009 : $4,962,603 March 31, 2010 : $5,359,607 Market Value Allocation Market Value Allocation ■ Rockwood Capital Advisors Balanced Account 4,940,176 99.5 ■ Rockwood Capital Advisors Balanced Account 5,340,721 99.6 ❑ Receipt & Disbursement 22,428 0.5 ❑ Receipt & Disbursement 18,886 0.4 �:n%� 1>tE 13 BOGDAHN Report is preliminary. New reports will be issued on or around May 1st, when peergroups are updated and finalized. GROUP Tequesta Public Safety Officers' Pension Fund Asset Allocation vs. Target Allocation As of March 31, 2010 March 31, 2010 Cash Equivalent 6.1% Equity 0.2% Fixed Income -7.1% - 10.0 -8.0% -4.0 0.0 4.0% 8.0% 10.0 Allocation Differences March 31, 2010 Market Value Allocation Target % Cash Equivalent 325,672 6.1 - Equity 3,228,822 60.2 60.0 Fixed Income 1,762,953 32.9 40.0 Total Fund 5,359,607 99.2 100.0 THE 14 BOGDAHN Report is preliminary. New reports will be issued on or around May 1 st, when peergroups are updated and finalized. GROUP Tequesta Public Safety Officers' Pension Fund Asset Allocation History As of March 31, 2010 Asset Allocation History by Portfolio I I 1 II' II' II' Rockwood Capital Advisors Balanced Account 5,340,721 99.65 4,940,176 99.55 4,680,910 99.94 4,108,133 99.56 3,84 Receipt & Disbursement 18,886 0.35 22,428 0.45 3,030 0.06 18,012 0.44 Total Fund 5,359,607 100.00 4,962,603 100.00 4,683,940 100.00 4,126,146 100.00 3,84 Asset Allocation History by Segment 100.0 80.0 0 60.0 c 0 u 40.0 0 Q 20.0 0.0 7/07 10/07 1/08 4/08 7/08 10/08 1/09 4/09 7/09 10/09 1 /10 3/10 0 Equity ❑ Fixed Income . Cash Equivalent 15 :. BOGDAHN Report is preliminary. New reports will be issued on or around May 1st, when peergroups are updated and finalized. GROUP 16 Report is preliminary. New reports will be issued on or around May 1 st, when peergroups are updated and finalized. Tequesta Public Safety Officers' Pension Fund Financial Reconciliation As of March 31, 2010 Financial Reconciliation Quarter to Date Market Capital Market 1 1 Value Net Contribution Distributions Fees Expenses Income Apprec./ Value As of Transfers s II' 1 3/31/2010 Rockwood Capital Advisors Balanced Account 4,940,176 - 20,000 150,502 - - -1,103 23,445 247,701 5,340,721 Receipt & Disbursement 22,428 20,000 - - -6,425 - 17,116 - - 18,886 Total Fund Portfolio 4,962,603 - 150,502 - -6,425 - 18,219 23,445 247,701 5,359,607 Financial Reconciliation Fiscal Year to Date Market Market Capital Value Net Contribution Value As of Transfers s Distributions 9/30/2009 1 3/31/2010 Rockwood Capital Advisors Balanced Account 4,680,910 - 60,000 295,481 - - -2,079 48,752 377,656 5,340,721 Receipt & Disbursement 3,030 60,000 - - - 12,526 - 31,617 - - 18,886 Total Fund 4,683,940 - 295,481 - - 12,526 - 33,696 48,752 377,656 5,359,607 TFIF. 17 BOGDAHN Report is preliminary. New reports will be issued on or around May 1 st, when peergroups are updated and finalized. ('' ROUP Tequesta Public Safety Officers' Pension Fund Comparative Performance Trailing Returns As of March 31, 2010 11' Quarter To Year Years Years Inception Date 11 Total Fund (Net) 5.17 (4) 8.42 (21) 23.82 (96) 0.33 (57) 0.02 (59) 4.06 N/A 05/01 /2005 Total Fund Policy 3.92 (54) 7.82 (40) 31.28 (53) 0.10 (62) 0.24 (56) 3.75 N/A Difference 1.25 0.60 -7.46 0.23 -0.22 0.31 All Public Plans -Total Fund Median 3.95 7.49 31.54 0.46 0.36 N/A Total Fund (Gross) 5.31 8.71 24.30 0.72 0.46 4.54 05/01/2005 Dotal Fund Policy 3.92 7.9-' 31.28 1 � ' 0.24 3.75 Difference 1.39 0.89 - 6.98 0.62 0.22 0.79 Equity 8.05 (4) 13.89 (7) 38.90 (91) -3.92 (73) -4.65 (77) 3.24 (51) 05/01/2005 S &P 500 5.39 (52) 11 5 (53) - 7 (41) - -1.17 (68) 2.35 (81 Difference 2.66 2.14 -10.87 -0.21 -0.48 0.89 US Core/Large Cap Equity (SA +CF) Median 5.40 11.79 48.64 -2.91 -3.67 3.29 Fixed Income 1.74 (63) 2.01 (75) 7.86 (67) 4.25 (91) 5.85 (82) 5.14 (82) 05/01/2005 Barcap Intermediate U.S. Government /Credit 1.54 (78) 1.85 (82) 6.92 (79) 4.41 (88) 5.88 (81) 5.01 (88) Difference 0.20 0.16 0.94 -0.16 -0.03 0.13 US Intermediate Fixed Income SA +CF Median 1.86 2.53 8.95 5.87 6.72 5.65 Returns for periods greater than one year are annualized. "N� THE Returns are expressed as percentages. 18 BOGDAHN Report is preliminary. New reports will be issued on or around May 1 st, when peergroups are updated and finalized. ` GROUP Tequesta Public Safety Officers' Pension Fund Comparative Performance Fiscal Year Returns As of March 31, 2010 1 II II 1 To To To To To To 11: 1 116 II II Total Fund (Net) -1.39 (80) -11.80 (28) 14.24 (53) 4.07 (99) N/A N/A Total Fund Policy 0.48 (62) -12.46 (40) 12.02 (89) 7.88 (67) N/A Difference -1.87 0.66 2.22 -3.81 N/A N/A All Public Plans -Total Fund Median 1.30 -13.40 14.38 8.70 12.35 11.14 Total Fund (Gross) -1.12 -11.34 14.82 4.67 N/A N/A Total Fund Policy 0.48 -12.46 12.02 7.88 N/A Difference -1.60 1.12 2.80 -3.21 N/A N A Equity -11.08 (94) -21.39 (53) 21.99 (9) 5.38 (97) N/A N/A S &P 500 -6.91 (60) -21.98 (65) 16.44 (58) 10.79 (51) 12.25 (80) 13.87 (5° Difference -4.17 0.59 5.55 -5.41 N/A N/A US Core/Large Cap Equity (SA +CF) Median -6.50 -21.22 16.61 10.80 14.34 14.22 Fixed Income 9.03 (84) 3.55 (44) 5.93 (9) 3.88 (52) N/A N/A Barcap Intermediate U.S. Government/Credit 10.01 (77) 3.13 (52) 5.43 (56) 3.54 (93) 1.48 (95) 2.66 (G= Difference -0.98 0.42 0.50 0.34 N/A N/A US Intermediate Fixed Income SA +CF Median 11.45 3.22 5.47 3.90 2.07 2.87 Returns for periods greater than one year are annualized. THE Returns are expressed as percentages. 19 7� BOGDAHN Report is preliminary. New reports will be issued on or around May 1st, when peergroups are updated and finalized. ` (`RO7 TP Tequesta Public Safety Officers' Pension Fund Total Fund (Net) March 31, 2010 Financial lleconcifiation I Quarter Market Value Market Value As of Transfers Contributions Distributions Fees Expenses Income ApprecptDeprec. As of 12/31/2009 3/31/2010 Total Fund (Net) 4,963 - 151 -6 -I8 23 248 5,360 Financial Reconciliation October 1, 2009 To March 31, 20 11) Market Value Net Capital Market Value Contributions Distributions Fees Expenses Income ppprec./ Deprec. As of As of Transfers 9/30/2009 3/31/2010 Total Fund (Net) 4,684 295 -13 -34 49 178 5,360 11cer Group Analysis - All Public I'lans-Total Fund Cuntinulative Perforniance $130.0 60.00 45.00 $120.0 $119.0 117.2 30.00 � $ e 15.00 $110.0 E 0.00 $100.0 -15.00 -30.00 1 Oct -2009 1 2 3 4 5 $90.0 Quarter To Year Years Years Years Years Mar -2010 ■ Total Fund (Net) 5.17 (4) 8.42 (21) 23.82 (96) 0.33 (57) 0.02 (60) 2.49 (63) 3.22 (86) • Total Fund Policy 3.92 (54) 7.82 (40) 31.28 (53) 0.10 (62) 0.24 (58) 2.49 (63) 3.54 (77) $80.0 3/05 3/06 3/07 3/08 3/09 3/10 Median 3.95 7.49 31.54 0.46 0.45 2.83 4.22 -Total Fund (Net) - Total Fund Policy 1 1 1 1 1 1 Quarter Quarter Quarter Quarter Quarter Quarter Ending Ending Ending Ending Ending Ending Dec -2009 Sep -2009 Jun -2009 Mar -2009 Dec -2008 Sep -2008 Total Fund (Net) 3.09 (80) 8.12 (95) 5.63 (94) -3.49 (13) -10.52 (22) -7.64 (52) Total Fund Policy 3.75 (31) 10.56 (67) 10.13 (56) -6.51 (70) -11.73 (38) -5.50 (13) All Public Plans -Total Fund Median 3.39 11.48 10.59 -5.70 -12.49 -7.59 20 BOGDAHN Report is preliminary. New reports will be issued on or around May 1 st, when peergroups are updated and finalized. GRouP Tequesta Public Safety Officers' Pension Fund Total Fund (Net) March 31, 2010 Rollin , 20.0 Over 0.00 Perbrmance 12.0 25.00 ■ ■ a ■ .. a.o = 50.00 • • ■ z -4.0 • : • E 75.00 • ■ i -12.0 d Under a �� , ■ • o Perfornnnce 100.00 F -20.0 6/05 6/06 6/07 6/08 6/09 3/10 -20.0 -12.0 -4.0 4.0 12.0 20.0 Total Period 5-25 25- Median Median -75 7595 Total Fund Policy( %) Count Count Count Count ■ Total Fund (Net) 9 1 (I1 %) 3 (33 %) 3 (33 %) 2 (22 %) f Under Performance f Over Performance -A- Mar -2008 Mar -2010 • Total Fund Policy 9 0 (0 %) l (1I %) 6 (67 %) 2 (22 6 /6) Peer Gr 3.00 7.50 1.50 6.00 0.00 4.50 e e y L -3.00 � � 1.50 4.50 T __.____------ 0.00 10.00 1200 14.00 16.00 18.00 7.50 9.00 10.50 12.00 13.50 15.00 Risk (Standard Detiation 'Z.) Risk (Standard Deviation %) Return Standard Deviation Return Standard Deviation ■ Total Fund (Net) 0.02 11.15 ■ Total Fund (Net) 3.22 9.52 • Total Fund Policy 0.24 12.42 • Total Fund Policy 3.54 9.97 - Median 0.45 1140 - Median 4.22 10.00 Hist Tracking Up Down Sharpe Downside Error Market Market Alpha IR Ratio Beta Risk Capture Capture Total Fund (Net) 5.01 89.72 91.31 -0.18 -0.07 -0.11 0.82 8.68 Total Fund Policy 000 100.00 100.00 0.00 N/A -0.07 1.00 961 Hist Tracking Up Down Sharpe Do" nside Error Market Market Alpha IR Ratio Beta Risk Capture Capture Total Fund (Net) 4.56 98.76 101.63 0.24 -0.08 0.09 0.85 7.17 Total Fund Policy 0.00 100.00 100.00 000 N/A 0.12 1.00 7.51 l I I1. 21 BOGDAHN Report is preliminary. New reports will be issued on or around May 1st, when peergroups are updated and finalized. GROUP Tequesta Public Safety Officers' Pension Fund Total Equity Portfolio March 31, 2010 Financial Reconciliation I Quarter Market Value Net Capital Market Value As of Transfers Contributions Distributions Fees Expenses Income Apprecd Deprec. As of 12/31/2009 3/31/2010 Total Equity Portfolio 4,963 151 -6 -18 23 248 5,360 Financial Reconciliation October 1, 2009 To March 31,2010 Market Value Market Value As of Net Contributions Distributions Fees Expenses Income Capital Transfers of 9/30/2009 Transfers Apprec./ Deprec. 3/31/2010 Total Equity Portfolio 4,684 295 -13 -34 49 378 5,360 Peer Group i t Eq uity $160.0 80.00 $145.0 60.00 $130.0 40.00 e u 20.00 $140,9 rY $100.0 0.00 ®® $85.0 -20.00 1 Oct -2009 1 2 3 4 5 Quarter To Year Years Years Years Years $70.0 Mar -2010 ■ Total Equity Portfolio 8.05 (4) 13.89 (7) 38.90 (91) -3.92 (73) -4.65 (77) -0.05 (54) 1.84 (82) • S &P 500 5.39 (52) 11.75 (53) 49.77 (41) -3.71 (70) -4.17 (68) -0.39 (73) 1.92 (79) $55.0 3/05 3/06 3/07 3/08 3/09 3/10 Median 5.40 11.79 48.64 -2.91 -3.67 0.06 174 -Total Equity Portfolio ---- S &P 500 1 1 1 1 1 1 Quarter Quarter Quarter Quarter Quarter Quarter Ending Ending Ending Ending Ending Ending Dec -2009 Sep -2009 Jun -2009 Mar -2009 Dec -2008 Sep -2008 Total Equity Portfolio 5.40 (74) 11.73 (91) 9.15 (96) -6.96 (13) -21.63 (50) -13.08 (90) S&P 500 6.04 (48) 15.61 (38) 15.93 (41) -11.01 (69) -21.94 (60) -8.37 (41) US Core/Large Cap Equity (SA+CF) Median 5.99 15.27 15.56 -10.44 -21.66 -8.% 22 7"41, Till l- BOGDAHN Report is preliminary. New reports will be issued on or around May 1st, when peergroups are updated and finalized. GROUP Tequesta Public Safety Officers' Pension Fund Total Equity Portfolio March 31, 2010 20.° 0.00 Over Peribmunce 10.0- 25.00 ■ ■ 0.0 s 50.00 ■ -10.0- c 75.00 • • • • • • • • • • • • • • • • -20.0 V Under C 11" Pedotmance 100.00 ! - -�- c -30.0 6/05 6 /06 6/07 6/08 6/09 3/10 F -30.0 -20.0 -10.0 0.0 10.0 20.0 Total Period 5-25 25- Median Mediae -75 75 -95 S &P500( %) Count Count Count Count ■ Total Equity Portfolio 9 2 (22 %) 2 (22 %) 4 (44 %) 1 (11 %) i- Under Perfannance f ovcrPeiIbnwnce -A- Mar -2008 ♦Mar-2010 • S &P 500 20 0 (0 8 /0) 0 (0 %) 14 (70 %) 6 (30 %) Peer Grotil) Scallel-grani - 3 Vears Peer Group Scattert - 5 ears 10.00 15.00 5.00 10.00 0.00 e � 5.00 C -5.00 e > > 0.00 a -10.00 a -15.00 -5.00 0.00 10.00 20.00 30.00 40.00 50.00 0.00 10.00 2000 30.00 40.00 Risk (Standard Deviation %) Risk (Standard Deviation %) Return Standard Deviation Return Standard Deviation ■ Total Equity Portfolio -4.65 19.97 ■ Total Equity Portfolio 1.84 16.38 • S &P 500 -4.17 21.48 • S &P 500 1.92 17.25 - Median -3.67 21.25 - Median 2.74 17.16 Hist Tracking Up Down Sharpe Downside Error Market Market Alpha ut Ratio Beta Risk Capture Capture Total Equity Portfolio 7.94 95.64 97.99 -0.79 -0.07 - 0.24 0.90 15.87 S &P 500 0.00 100.00 100.00 0.00 N/A -0.20 1.00 15.94 Tracking Up Down Sharpe Downside Error Market Market Alpha IR Ratio Beta Risk Capture Capture Total Equity Portfolio 7.39 106.15 107.04 0.24 0.00 0.03 0.94 13.04 S &P 500 0.00 100.00 100.00 000 N/A 0.03 1.00 12.51 23 BOGDAHN Report is preliminary. New reports will be issued on or around May 1 st, when peergroups are updated and finalized. GROUP Tequesta Public Safety Officers' Pension Fund Total Fixed Portfolio March 31, 2010 Financial Reconciliation Market Value Net Capmetal Market Value (contributions Distributions Fees Expenses Income Apprec Deprec. As of As of Transfers 12/31/2009 3/31/2010 Total Fixed Portfolio 4,963 151 -6 -18 23 248 5,360 Financial Reconciliation October 1, 2009 To March 31,2010 Market Value Net Capital Market Value As of Transfers Contributions Distributions Fees Expenses Income Apprec./ Deprec As of 9/30/2009 3/31/2010 Total Fixed Portfolio 4,684 295 -13 -34 49 378 5,360 Peer Group Inco $130.0 22.50 126.5 125.5 18.00 $120.0 13.50 9.00 • �� � � ® $110.0 4.50 � ! 0.00 $1 00.0 -4.50 � - 1 Oct -2009 1 2 3 4 5 Quarter To Year Years Years Years Years Mar -2010 ■ Total Fixed Portfolio 1.74 (63) 2.01 (75) 7.86 (67) 4.25 (91) 5.85 (82) 5.93 (86) 4.99 (90) $90.0 • Barcap Intermediate U.S. Goverment/Credit 1.54 (78) 1.85 (82) 6.92 (79) 4.41 (88) 5.88 (81) 5.95 (84) 5.16 (87) 6/05 6/06 6/07 6/08 6/09 3 /10 Total Fixed Portfolio Median 1.86 2.53 8.95 5.87 6.72 6.63 5.78 Barcap Intermediate U.S. Government /Credit P erformance Comparative I I 1 1 1 1 Quarter Quarter Quarter Quarter Quarter Quarter Ending Ending Ending Ending Ending Ending Dec -2009 Sep -2009 Jun -2009 Mar -2009 Dec-2008 Sep -2008 Total Fixed Portfolio 0.27 (83) 3.55 (53) 2.11 (66) -0.10 (84) 3.23 (63) -0.82 (44) Barcap Intermediate U.S. Government/Credit 0.31 (81) 3.25 (68) 1.67 (75) -0.05 (81) 4.84 (34) -1.19 (52) US Intermediate Fixed Income (SA +CF) Median 0.59 3.69 2.65 0.73 4.22 -1.17 �-!-N THE 24 � BOGDAHN Report is preliminary. New reports will be issued on or around May 1 st, when peergroups are updated and finalized. GROUP Tequesta Public Safety Officers' Pension Fund Total Fixed Portfolio March 31, 2010 Ro lling Over 0.00 Pemibrmance 7.0 a 25.00 . w . a 6.0 ° e 50.00-o • , 5.0- 96 • A 75.00 4.0 v • 4 Under o: Performance 100.00 e 3 . 0 � 1 6/05 6/06 6/07 6/08 6/09 3/10 i 3.0 4.0 5.0 6.0 7.0 8.0 Total Period 5 -25 25- Median Median -75 75-95 BarcapIntermediateU .S.G overrun ent/Credit( %) Count Count Count Count ■ Total Fixed Portfolio 8 0 (0 %) 2 (25 %) 4 (50 %) 2 (25 %) -W Over Performance f Under Performance -A-Jun-2008 Mar -2010 0 Barcap Intermediate U.S. Goverment/Credit 20 0 (0 %) 2 (10 %) 10 (50 %) 8 (40 %) Peer Group Scatter-ram - 3 Years Peer Group Sca tte ru raIn - Cars 10.50 8.00 9.00 7.00 7.50 6.00 e 6.00 ■ L 4.50 5.00 7 p a 3.00 4.00 1.50 3.00 2.00 4.00 6.00 8.00 10.00 12.00 1.50 3.00 4.50 6.00 7.50 9.00 Risk (Standard Deviation %) Risk (Standard Deviation %) Return Standard Deviation Return Standard Deviation ■ Total Fixed Portfolio 5.85 3.48 ■ Total Fixed Portfolio 4.99 3.02 0 Barcap Intermediate U.S. Govemment /Credit 5.88 3.80 • Barcap Intermediate U.S. Government /Credit 5.16 3.37 - Median 6.72 3.84 - Median 5.78 3.44 Hist Tracking Up Down Sharpe Downside Error Market Market Alpha IR Ratio Bets Risk Capture Capture Total Fixed Portfolio 2.28 104.39 113.74 -0.02 0.00 0.86 1.00 2.73 Barcap Intermediate U.S. Government/Credit 0.00 100.00 100.00 0.00 N/A 1.01 1.00 1.87 Hist Tracking Up Down Sharpe Downside Error Market Market Alpha IR Ratio Beta Risk Capture Capture Total Fixed Portfolio 1.91 98.77 102.64 0.04 -0.08 0.57 096 2.17 Barcap Intermediate U.S. Government/Credit 0.00 100.00 100.00 0.00 N/A 0.68 1 00 1.59 25 7 ,11 THE Report is preliminary. New reports will be issued on or around May 1st, when peergroups are updated and finalized. BOGDAHN GROUP Tequesta Public Safety Officers' Pension Fund Total Fund Policy As of March 31, 2010 Allocation Mandate Wei0t Effective Date: Apr -2005 S &P 500 Index 60 Barclays Capital Intermediate U.S. Government /Credit 40 26 BOGDAHN Report is preliminary. New reports will be issued on or around May 1 st, when peergroups are updated and finalized. 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 portfolio 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 Sharpe 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 return 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 Information 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 performance. 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 performance 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 on monthly periodicity. 2, BOGDAHN Report is preliminary. New reports will be issued on or around May 1 st, when peergroups are updated and finalized. GROUP Village of Tequesta Public Safety Officers' Pension Fund Compliance Checklist as of March 31, 2010 ,Total Fund Compliance: Yes No N/A 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. ✓ ,Equity Compliance: Yes No N/A 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. ✓ Fixed Income Compliance: Yes No N/A 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. All fixed income securities are rated investment grade or higher. ✓ 1. Manager outperformed the index over the trailing three and five year periods. ✓ ✓ 2. Less than four consecutive quarters of performance below the 50th percentile ✓ ✓ 28 � TIiF, BOGDAHN Report is preliminary. New reports will be issued on or around May 1 st, when peergroups are updated and finalized GROUP THE BOGDAHN �...,�' GROUP simplifying your investment and fiduciary decisions Chicago Orlando Milwaukee 4320 Winfield Road Suite 200 4901 Vineland Road, Suite 600 250 E. Wisconsin Ave Suite 1800 Warrenville, Illinois 60555 Orlando, Florida 32811 Milwaukee, Wisconsin 53202 866.240.7932 VILLAGE OF TEQUESTA (PLAN SPONSOR) PUBLIC SAFETY OFFICERS' PENSION FUND Investment Policy Statement I. PURPOSE OF INVESTMENT POLICY STATEMENT The Pension Board of Trustees (Board) maintains that an important determinant of future investment returns is the expression and periodic review of the Village of Tequesta Public Safety Officers' Pension Fund (the Plan) investment objectives. To that end, the Board has adopted this statement of Investment Policy and directs that it apply to all assets under their control. In fulfilling their fiduciary responsibility, the Board recognizes that the retirement system is an essential vehicle for providing income benefits to retired participants or their beneficiaries. The Board also recognizes that the obligations of the Plan are long -term and that investment policy should be made with a view toward performance and return over a number of years. The general investment objective is to obtain a reasonable total rate of return - defined as interest and dividend income plus realized and unrealized capital gains or losses - commensurate with the Prudent Investor Rule and any other applicable ordinances and statutes. Reasonable consistency of return and protection of assets against the inroads of inflation are paramount. However, interest rate fluctuations and volatility of securities markets make it necessary to judge results within the context of several years rather than over short periods of five years or less. The Board will employ investment professionals to oversee and invest the assets of the Plan. Within the parameters allowed in this document and their agreements with the Board, the investment management professionals shall have investment discretion over their mandates, including security selection, sector weightings and investment style. The Board, in performing their investment duties, shall comply with the fiduciary standards set forth in Employee Retirement Income Security Act of 1974 (ERISA) at 29 U.S.C. s. 1104(a) (1) (A) — (C). In case of conflict with other provisions of law authorizing investments, the investment and fiduciary standards set forth in this section shall prevail. April 2010 Page 1 II. TARGET ALLOCATIONS In order to provide for a diversified portfolio, the Board has engaged investment professional(s) to manage and administer the fund. The investment manager(s) are responsible for the assets and allocation of their mandate only and may be provided an addendum to this policy with their specific performance objectives and investment criteria. The Board has established the following asset allocation targets for the total fund: Asset Class Target Range Benchmark Index Domestic Equity 50% 35%-65% S &P 500 International Equity 10% 0%-15% MSCI EAFE Broad Market Fixed Income 40% 30%-50% Barclays Intermediate Aggregate TIPS* 0% 0%- 10% Barclays TIPS *Benchmark will default to "broad market fixed income" if these portfolios are not funded. Targets and ranges above are based on market value of total Plan assets. The Board will monitor the aggregate asset allocation of the portfolio, and will rebalance to the target asset allocation based on market conditions. If at the end of any calendar quarter, the allocation of an asset class falls outside of its allowable range, barring extenuating circumstances such as pending cash flows or allocation levels viewed as temporary, the asset allocation will be rebalanced into the allowable range. To the extent possible, contributions and withdrawals from the portfolio will be executed proportionally based on the most current market values available. The Board does not intend to exercise short-term changes to the target allocation. III. INVESTMENT PERFORMANCE OBJECTIVES The following performance measures will be used as objective criteria for evaluating the effectiveness of the Investment Managers. A. Total Portfolio Performance 1. The performance of the total portfolio will be measured for rolling three and five year periods. The performance of the portfolio will be compared to the return of the policy indexes comprised of 50% S &P 500, 10% MSCI EAFE, 40% Barclays Intermediate Aggregate Bond Index. 2. On a relative basis, it is expected that the total portfolio performance will rank in the top 40' percentile of the appropriate peer universe over three and five -year time periods. 3. On an absolute basis, the objective is that the return of the total portfolio will equal or exceed the actuarial earnings assumption (8 %), and provide inflation protection by meeting Consumer Price Index plus 3 %. April 2010 Page 2 B. Equity Performance The combined equity portion of the portfolio, defined as common stocks and convertible bonds, is expected to perform at a rate at least equal to the 83% S &P 500 and 17% MSCI EAFE. Individual components of the equity portfolio will be compared to the specific benchmarks defined in each Investment Manager addendum. All portfolios are expected to rank in the top 40 percentile of the appropriate peer universe over three and five -year time periods. C. Fixed Income Performance The overall objective of the fixed income portion of the portfolio is to add stability and liquidity to the total portfolio. The fixed income portion of the portfolio is expected to perform at a rate at least equal to the Barclays Capital U.S. Intermediate Aggregate Index. All portfolios are expected to rank in the top 40 percentile of the appropriate peer universe over three and five -year time periods. D. Treasury Inflation Protection Security (TIPS) Performance The overall objective of the TIPS portfolio, if utilized, is to provide inflation protection while adding stability to the total portfolio. If TIPS are utilized the strategy is expected to approximate the structure and performance of the Barclays Capital U.S Treasury TIPS Index. IV. INVESTMENT GUIDELINES A. Authorized Investments Pursuant to the investment powers of the Board of Trustees as set forth in the Florida Statutes and local ordinances, the Board of Trustees sets forth the following investment guidelines and limitations: 1. Equities: a. Must be traded on a national exchange or electronic network; and b. Not more than 5% of the Plan's assets, at the time of purchase, shall be invested in the common stock, capital stock or convertible stock of any one issuing company, nor shall the aggregate investment in any one issuing company exceed 5% of the outstanding capital stock of the company; and c. Convertible bonds of domestic corporations and traded in domestic dollars, and are easily negotiable; and d. Additional criteria may be outlined in the manager's addendum. 2. Fixed Income: a. All fixed income investments shall have a minimum rating in one of the four highest classifications by a major rating service; and April 2010 Page 3 b. The value of bonds issued by any single corporation shall not exceed 5% of the total fund; and c. Preferred Stocks of domestic corporations, and are easily negotiable; and d. Mortgage backed securities issued by non - government entities must be limited to 15% of the fixed income portfolio. e. Collateralized Mortgage Obligations (CMOs) shall be limited to issues that are currently paying interest, receiving principal pay -downs and do not contain leverage. f. Additional criteria may be outlined in the manager's addendum. 3. Money Market: a. The money market fund or STIF options provided by the Plan's custodian; and b. Have a minimum rating of Standard & Poor's Al or Moody's P1. 4. Pooled Funds: Investments made by the Board may include pooled funds. For purposes of this policy pooled funds may include, but are not limited to, mutual funds, commingled funds, exchange - traded funds, limited partnerships and private equity. Pooled funds may be governed by separate documents which may include investments not expressly permitted in this Investment Policy Statement. In the event of investment by the Plan into a pooled fund, the Board will adopt the prospectus or governing policy of that fund as the stated addendum to this Investment Policy Statement, including section 5. B. Trading Parameters When feasible and appropriate, all securities shall be competitively bid. Except as otherwise required by law, the most economically advantageous bid shall be selected. Commissions paid for purchase of securities must meet the prevailing best - execution rates. The responsibility of monitoring best price and execution of trades placed by each manager on behalf of the Plan will be governed by the Portfolio Management Agreement between the Plan and the Investment Managers. C. Limitations 1. Investments in corporate common stock and convertible bonds shall not exceed seventy (70 %) of the Plan assets at market. 2. Foreign securities shall not exceed twenty -five percent (15 %) of Plan's market value. 3. All equity and fixed income securities must be readily marketable. Commingled funds must be independently appraised at least annually. Apri12010 Page 4 D. Absolute Restrictions No investments shall be permitted in; 1. Any investment not specifically allowed as part of this policy. 2. Illiquid investments, as described in Chapter 215.47, Florida Statutes. 3. Direct investment in `Scrutinized Companies' identified in the periodic publication by the State Board of Administration ( "SBA list ", updated on their website www.sbafla.com/fsb/ ), is prohibited. Any security identified as non - compliant on or before January 1, 2010 must be divested by September 1, 2010. Securities identified after January 1, 2010, are subject to the provisions of section V. (c) below. However, if divestiture of business activities is accomplished and the company is subsequently removed from the SBA list, the manager can continue to hold that security. Indirect investment in `Scrutinized Companies' (through pooled funds) are governed by the provisions of Section V(G) below. V. COMMUNICATIONS A. On a monthly basis, the custodian shall supply an accounting statement that will include a summary of all receipts and disbursements and the cost and the market value of all assets. B. On a quarterly basis, the Investment Managers shall provide a written report affirming compliance with the security restrictions of Section IV (as well as any provisions outlined in the Investment Manager's addendum). In addition, the Investment Managers shall deliver a report each quarter detailing the Plan's performance, forecast of the market and economy, portfolio analysis and current assets of the Plan. Written reports shall be delivered to the Board within 30 days of the end of the quarter. A copy of the written report shall be submitted to the person designated by the Village, and shall be available for public inspection. The Investment Managers will provide immediate written and telephone notice to the Board of any significant market related or non - market related event, specifically including, but not limited to, any deviation from the standards set forth in Section IV or their Investment Manager addendum. C. If the Fund owns investments, that complied with section IV at the time of purchase, which subsequently exceed the applicable limit or do not satisfy the applicable investment standard, such excess or noncompliant investments may be continued until it is economically feasible to dispose of such investment in accordance with the prudent man standard of care, but no additional investment may be made unless authorized by law or ordinance. An action plan outlining the investment `hold or sell' strategy shall be provided to the Board immediately. D. The Investment Consultant shall evaluate and report on a quarterly basis the rate of return net of investment fees and relative performance of the Plan. April 2010 Page 5 E. The Board will meet periodically to review the Investment Consultant performance report. The Board will meet with the investment manager and appropriate outside consultants to discuss performance results, economic outlook, investment strategy and tactics and other pertinent matters affecting the Plan on a periodic basis. F. At least annually, the Board shall provide the Investment Managers with projected disbursement needs of the Plan so that the investment portfolio can be structured in such a manner as to provide sufficient liquidity to pay obligations as they come due. To this end the Investment Managers should, to the extent possible, attempt to match investment maturities with known cash needs and anticipated cash -flow requirements. G. The Investment Consultant, on behalf of the Plan, shall send a letter to any pooled fund referring the investment manager to the listing of `Scrutinized Companies' by the State Board of Administration (`SBA list'), on their website www.sbafla.com /fsb / . This letter shall request that they consider removing such companies from the fund or create a similar actively managed fund having indirect holdings devoid of such companies. If the manager creates a similar fund, the Plan shall replace all applicable investments with investments in the similar fund in an expedited timeframe consistent with prudent investing standards. For the purposes of this section, a private equity fund is deemed to be an actively managed investment fund. However, after sending the required correspondence, the Plan is not required to sell the pooled fund. VI. COMPLIANCE A. It is the direction of the Board that the plan assets are held by a third party custodian, and that all securities purchased by, and all collateral obtained by the plan shall be properly designated as Plan assets. No withdrawal of assets, in whole or in part, shall be made from safekeeping except by an authorized member of the Board or their designee. Securities transactions between a broker -dealer and the custodian involving purchase or sale of securities by transfer of money or securities must be made on a "delivery vs. payment" basis to insure that the custodian will have the security or money in hand at conclusion of the transaction. B. The investment policy shall require all approved institutions and dealers transacting repurchase agreements to execute and perform as stated in the Master Repurchase Agreement. All repurchase agreement transactions shall adhere to the requirements of the Master Repurchase Agreement. C. At the direction of the Board operations of the Plan shall be reviewed by independent certified public accountants as part of any financial audit periodically required. Compliance with the Board's internal controls shall be verified. These controls have been designed to prevent losses of assets that might arise from fraud, error, or misrepresentation by third parties or imprudent actions by the Board or employees of the plan sponsor, to the extent possible. D. Each member of the Board shall participate in a continuing education program relating to investments and the Board's responsibilities to the Plan. It is suggested that this education process begin during each Trustee's first term. April 2010 Page 6 E. With each actuarial valuation, the Board shall determine the total expected annual rate of return for the current year, for each of the next several years and for the long term thereafter. This determination shall be filed promptly with the Department of Management Services, the plan's sponsor and the consulting actuary. F. The proxy votes must be exercised for the exclusive benefit of the participants of the Plan. Each Investment Manager shall provide the Board with a copy of their proxy voting policy for approval. On a regular basis, at least annually, each manager shall report a record of their proxy vote. VII. CRITERIA FOR INVESTMENT MANAGER REVIEW The Board wishes to adopt standards by which judgments of the ongoing performance of a portfolio manager may be made. If, at any time, any three of the following is breached, the portfolio manager may be warned of the Board's serious concern for the Plan's continued safety and performance. If any five of these are violated the consultant may recommend a manager search for that mandate. • Four (4) consecutive quarters of relative under- performance verses the benchmark. • Three (3) year trailing return below the top 40` percentile within the appropriate peer group and under performance verses the benchmark. • Five (5) year trailing return below the top 40 percentile and under performance verses the benchmark. • Three (3) year downside volatility greater than the index (greater than 100), as measured by down market capture ratio. • Five (5) year downside volatility greater than the index (greater than 100), as measured by down market capture ratio. • Style consistency or purity drift from the mandate. • Management turnover in portfolio team or senior management. • Investment process change, including varying the index or benchmark. • Failure to adhere to the IPS or other compliance issues. • Investigation of the firm by the Securities and Exchange Commission (SEC). • Significant asset flows into or out of the company. • Merger or sale of firm. • Fee increases outside of the competitive range. • Servicing issues — key personnel stop servicing the account without proper notification. • Failure to attain a 60% vote of confidence by the Board. Nothing in this section shall limit or diminish the Board's right to terminate the manager at any time for any reason. April 2010 Page 7 VIII. APPLICABLE VILLAGE ORDINANCES If at any time this document is found to be in conflict with the Village Ordinances or applicable Florida Statutes, the Ordinances and Statutes shall prevail. IX. REVIEW AND AMENDMENTS It is the Board's intention to review this document at least annually subsequent to the actuarial report and to amend this statement to reflect any changes in philosophy, objectives, or guidelines. In this regard, the Investment Manager's interest in consistency in these matters is recognized and will be taken into account when changes are being considered. If, at any time, the Investment Manager feels that the specific objectives defined herein cannot be met, or the guidelines constrict performance, the Board should be notified in writing. By initialing and continuing acceptance of this Investment Policy Statement, the Investment Managers concur with the provisions of this document. By signing this document, the Chairman attests that this policy has been recommended by the Investment Consultant, reviewed by the plan's legal counsel for compliance with applicable law, and approved by the Board of Trustees. X. FILING OF THE INVESTMENT POLICY Upon adoption by the Board, the investment policy shall be promptly filed with the Florida Department of Management Services, the Village, and the plan's actuary. The effective date of the Investment Policy shall be the 31 days following the filing date with the Village. VILLAGE OF TEQUESTA PUBLIC SAFETY OFFICERS' PENSION PLAN Chairman, Board of Trustees Date April 2010 Page 8 VILLAGE OF TEQUESTA PUBLIC SAFETY OFFICERS' PENSION FUND ADDENDUM TO STATEMENT OF INVESTMENT POLICY Rockwood Capital Advisors (Core Fixed Income) Rockwood Capital has been retained by the Village of Tequesta Public Safety Officers' Pension Board to manage a well - diversified portfolio of fixed income, and money market securities. Rockwood Capital was retained for this assignment based on their qualifications and experience in managing Core Fixed Income portfolios. I. GUIDELINES Within the guidelines contained in the Statement of Investment Policy established for the Village of Tequesta Public Safety Officers' Pension Board, Rockwood Capital's Core Fixed Income portfolio must comply with the following: A. The Fixed Income portfolio characteristics shall exhibit similar features as the Target Bond Index. B. All of the fined income securities shall be rated Investment Grade or better by nationally recognized rating services (Moody's, S &P, Fitch) at the time of purchase. C. Yankee bonds and non - dollar denominated bonds are prohibited. D. Mortgage backed securities issued by non - government entities must be limited to 15% of the portfolio. E. Collateralized Mortgage Obligations (CMOs) shall be limited to issues that are currently paying interest, receiving principal pay -downs and do not contain leverage. H. INVESTMENT OBJECTIVES Total Portfolio: A. The primary objective of the Rockwood Capital Fixed Income portfolio shall be to achieve a return over the longer term, 3 to 5 years, in excess of the Barclays Capital U.S. Intermediate Aggregate Bond Index. B. The secondary objective of the portfolio shall be to achieve a rate of return over the longer term, 3 to 5 years that ranks in the top 4& percentile of a representative universe of similarly managed portfolios. C. The volatility of the Fund's total returns is expected to be similar to that of this Target Index and will be evaluated accordingly. April 2010 Page 1 III. POLICY REVIEW This Addendum is a part of the Village of Tequesta Public Safety Officers' Pension Board's Investment Policy and is intended only to complement the objectives and guidelines outlined therein. It is the intention of the Board of Trustees of the Village of Tequesta Public Safety Officers' Pension Plan to review the Statement of Investment Policy and this Addendum from time to time and to amend them if necessary to reflect any changes in philosophy or objectives. However, if at any time the investment manager believes that the specific objectives defined herein cannot be met, or that the guidelines unnecessarily constrict performance, the Trustees shall be so notified in writing. By signing this addendum the investment manager understands and agrees to adhere to the guidelines, investment manager responsibilities, and other conditions therein. Chairman, Board of Trustees Date Rockwood Capital Advisors, LLC Date April 2010 Page 2 VILLAGE OF TEQUESTA PUBLIC SAFETY OFFICERS' PENSION PLAN ADDENDUM TO STATEMENT OF INVESTMENT POLICY Rockwood Capital Advisors (Domestic Core Equity) Rockwood Capital has been retained by the of Village of Tequesta Public Safety Officers' Pension Board to manage a well- diversified portfolio of equity and money market securities. Rockwood Capital was retained for this assignment based on their qualifications and experience in managing Core Equity portfolios. I. GUIDELINES Within the guidelines contained in the Statement of Investment Policy established for the Village of Tequesta Public Safety Officers' Pension Board, Rockwood Capital's portfolio must comply with the following: A. The portfolio is to be invested in equity securities, regardless of capitalization and is expected to exhibit "Core" type characteristics. B. Foreign securities including American Depository Receipts (ADRs) are limited to 5% of the portfolio at "market" value. C. Investment in cash and equivalents shall not exceed 20 %. II. INVESTMENT OBJECTIVES Total Portfolio: A. The primary objective of the Rockwood Capital Equity portfolio shall be to achieve a return over the longer term, 3 to 5 years, in excess of the S &P 500 Stock Index. B. The secondary objective of the portfolio shall be to achieve a rate of return over the longer term, 3 to 5 years, that ranks in the top 40` percentile of a representative universe of similarly managed portfolios. C. The volatility of the Fund's total returns is expected to be similar to that of this Target Index and will be evaluated accordingly. April 2010 Page 1 III. POLICY REVIEW This Addendum is a part of the Village of Tequesta Public Safety Officers' Pension Board's Investment Policy and is intended only to complement the objectives and guidelines outlined therein. It is the intention of the Board of Trustees of the City Village of Tequesta Public Safety Officers' Pension Plan to review the Statement of Investment Policy and this Addendum from time to time and to amend them if necessary to reflect any changes in philosophy or objectives. However, if at any time the investment manager believes that the specific objectives defined herein cannot be met, or that the guidelines unnecessarily constrict performance, the Trustees shall be so notified in writing. By signing this addendum the investment manager understands and agrees to adhere to the guidelines, investment manager responsibilities, and other conditions therein. Chairman, Board of Trustees Date Rockwood Capital Advisors, LLC Date April 2010 Page 2