Minutes of a meeting of the Board of Trustees for by liuhongmei


									                                                     Minutes of a meeting of the Board of Trustees for
                                                         The Policemen’s & Firemen’s Pension Fund
                                                                                   February 15, 2011

The Board of Trustees met at City Hall on the above date at 9:00 a.m.

The following were present:
                                           Glenn Ladd, Police Chief
                                           Dave Williams, Fire Department
                                           Kevin Roumas, Fire Department
                                           Robert Masterson, Police Department
                                           Ron Ball
                                           Bob West
                                           Traci Christian
                                           Shirley Land
                                           Anthony Bologna
                                           Mike Blumlein
                                           Pam Windsor
                                           Jan Gall

Fire Chief, Dave Williams, called the meeting to order at 9:00 a.m.

Agenda Item – Approval of minutes: Correction of November 9 requested, for change of second
motion by Bob West for approval of August 10 minutes to seconded motion for approval of August
10 minutes by Kevin Roumas. Glenn Ladd made a motion to approve the minutes of the November 9
meeting with noted correction, seconded by Ron Ball. All voted “Yes”.

Mike Blumlein, with Russell Investments, addressed the attendees with the quarterly and annual report,
discussing highlights of 2010 and an outlook for 2011.

2010 was an up and down year until September when improvement was visible. Quantitative easing,
where the goal was to get money into the system, was implemented toward the end of the year, actually
triggering some form of inflationary scare so consumers will go out and spend.

Bush tax cuts were extended, which brought some certainty to the business environment as far as taxes
and consumers are concerned and what they will be paying. They also gave a two percent holiday on
social security tax for employees, helping put more money into consumer’s pockets, which hopefully, in
turn, will result in economic spending.

Unemployment remains high, at around 9%, and is speculated to be in the mid to high 8% range by the
end of 2011. Inflation is still a concern. Food prices are sky rocketing around the world, causing unrest
in emerging markets. Mortgage rates have increased slightly – not a positive for the housing market,
which continues to stumble along.

Outlook for 2011 –Unemployment remains high, but is expected to creep down. Modest growth rates in
investments are expected, with GDP at 3.5 %. Inflation should remain under control and the Fed keeping
interest rates low through 2011 is Russell Investments expectation. Economic Indicators are creeping in
the right direction.
Account Performance 2010:

The Fund currently has 45% in US Equity with 5% in Small Cap and 40% Large Cap, 15% exposure to
International and 40% exposure to the Bond Market, with 5% of that being in Long Credit.

Market Value is over $37 million, a good year as far as earning $4.5 million vs. paying out $1.3 million.
Return for the entire portfolio for 2010 is at 13.9%, well ahead the benchmark of 12.3%

US Equity ended the year at 76 basis points below benchmark, but as of this meeting date in 2011, it is
ahead of its benchmark slightly, by about 20 basis points.

Small Cap beat its benchmark by 168 basis points, and is equal to its benchmark so far in 2011.

International Fund had a strong year vs. benchmark, especially in comparison to US Markets, at 9.5%
return with benchmark at 7.75%.

Fixed Income showed a 10% return, but this positive return is not expected in the Bond Fund going
forward in 2011, although it beat its benchmark by 360 basis points, Russell expects a tighter correlation
with the benchmark.

Long Credit finished at 12.93%, showing that the allocation paid off as far as getting a higher return in
the Fixed Income Fund, but is currently reversing itself in today’s environment and the expected
environment forecasted down the road. As a result, Russell is recommending that the Fund’s 5% tactical
play in Long Credit be moved back to the Fund’s strategic allocation.

Blumlein provided a twenty-year forecast on investment returns. The current fund allocations twenty-
year forecast shows a 7.77% gross of fee return, including both Beta and Alpha, with 12.08% standard

Also provided, for educational purposes, was a twenty-year forecasted performance for four other
portfolio allocation scenarios to show a variation of beta return and volatility percentages with more
diversified portfolios. Blumlein stated that the Fund’s portfolio has a solid level of expected return at a
fair or reasonable level of volatility, but also expressed to the Board that the only way to get better
returns is either more equity exposure or by diversification to other asset classes. Blumlein would like to
revisit the subject and Board’s consideration for changes to the Fund’s allocation at a future meeting.

Blumlein’s recommendation for today’s meeting was to move the 5% in Long Credit back to Fixed
Income, removing the tactical play that was previously put into play, producing a better return at that
time. Kevin Roumas made a motion to make the change in allocation, as recommended. Glenn Ladd
seconded the motion. All voted “yes”.

Bob West questioned Blumlein as to whether the Affiliated Brokerage Services authorization for the
Russell Collective Trust agreement that was discussed at the November meeting, and was approved for
signature by the Board in January, had been implemented by Russell Investments. Blumlein reported
that the agreement was still being voted on.

Linda Minson, of Cretcher Heartland, presented the Board with a quote for fiduciary liability insurance
through Travelers Insurance. The quote was for coverage of one million dollars of annual aggregate limit
of liability and $1,000 deductible per claim, for a total annual premium of $4,604.00.

Dave Williams questioned whether he and Glenn Ladd, as acting Chiefs and employees of the City of
North Kansas City would be covered under the City’s current policy for such coverage. Minson
explained that their actions as a public official would be covered under the City’s policy, however
because this is a separate Board that has everything to do with the actual funds and investments of the
Plan, there would not be coverage under the City’s public liability for actions taken concerning the Police
and Fire Pension Plan.

After discussion of the explanation of benefits, the Board requested that Minson provide additional
quotes for higher limit of liability coverage of both five and ten million dollars, in addition to higher
deductible options.

Agenda Item: Kevin Roumas – Definition of Compensation Clarification

Kevin Roumas addressed the Board with regards to previous discussion concerning definition of
compensation of benefits where the assumption was made that workman’s compensation income
would not be included in calculating average salary calculations for retirement benefits, should an
employee receive workman’s compensation benefits during their last thirty-six months of service.
Roumas stated that the definition was never updated in the Plan documented code and suggested that
these updates be made.

Bob West explained that the definition of compensation benefits had been changed in the last three
years from the last thirty-six months of service to the high last thirty-six months of service, which at
the time was thought to remedy any such occurrence where workman’s compensation income came
into play during the last thirty-six months of service, prior to retirement. However, there has been
recent question as to whether that change does remedy it, or is the possibility for a discrepancy still
possible. West explained that theoretically the possibly still existed if the high last thirty-six
included workman’s compensation income.

Jan Gall added that this currently affects only the Fire Department, because as part of their contract
they chose not to reimburse the City their workman’s compensation payments. The City pays Police
personnel their regular salary and the employees then turn over their workman’s compensation pay to
the City, which does remedy any possibility of workman’s compensation ever being a factor in
calculating the high last thirty-six. Dave Williams stated he felt that no changes were needed at this

Agenda Item: Bob West – Amendment to the Russell Collective Trust Agreement – Agenda item was
discussed with Mike Blumlein as noted above.

Agenda Item: Bob West – Periodic Review of Investments

Bob west addressed the Board about having an independent outside source periodically monitor the
Plans investment structure and performance. Preparation of an RFP and potential candidates was

Agenda Item: New Business

Traci Christian brought attention to an email she recently sent all of her public plan client boards.
Christian suggested that Board members read the article and discuss it at a future meeting, which
would likely qualify as one of the two Board education requirements for 2011.

Bob West reported on an announcement from JCPER requiring that all Defined Benefit Plans submit
quarterly reports regarding the Plans investment performance. Shelley Harrell reported that quarterly
reports were already being submitted to JCPER via the internet.

Agenda Item: Old Business - Jan Gall questioned Traci Christian on the progress of a web page that
would enable future retirees to calculate retirement benefits using a variety of retirement scenarios.
Traci reported that, as of this date, there has been no progress on the page, as there was uncertainty
as to what the Boards expectations for a site would be. She further explained that in order to provide
an online service that would allow future retirees to receive retirement benefit calculations based on
multiple scenarios, there would be an estimated expense to the Plan of between $5,000 and $10,000.

The Board further discussed the possibility of developing a simplistic form or spread sheet where
members could plug in numbers in and receive a close approximation of what their retirement
benefits would be, based on relevant variables. The Board agreed, however, that if the member was
close to actual retirement, accurate figures should be obtained through McCloud and Nichols.

With no further business, Glenn Ladd made a motion for adjournment. Kevin Roumas seconded the
motion. All voted “yes”.

Meeting adjourned at 11:05 a.m.


Attest: _______________________________

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