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05/13/2008
PENSION TRUSTEES AGENDA Location: Council Chambers - City Hall Date: 5/13/2008- 1:30 PM 1. Call to Order 2. Approval of Minutes 2.1 Approve the minutes of the April 14, 2008 Pension Trustees meeting as submitted in written summation by the City Clerk. Attachments 3. Pension Trustee Items 3.1 Accept the Actuary's Report for the Employees' Pension Plan for the plan year beginning January 1, 2008. Attachments 3.2 Approve a new agreement between the City of Clearwater and the law firm of Klausner & Kaufman, P.A., to serve as outside counsel to the Pension Advisory Committee and Pension Trustees and authorize the appropriate officials to execute same. Attachments 3.3 Authorize staff to proceed with a search for a consultant to perform an Asset Allocation Study. Attachments 3.4 Extend the contract for pension investment performance measurement and consulting with Callan Associates until June 1, 2009 and authorize the appropriate officials to execute same. Attachments 3.5 Approve the granting of a regular pension to Nancy Yankus effective March 1, 2008. Attachments 3.6 Employees listed below be accepted into membership in the City of Clearwater Employees' Pension Plan. Attachments 3.7 Review of the pension investion performance for the year ended December 31, 2007. Attachments 3.8 James McGee, Solid Waste/General Services Department; Kathy Faye Chetoka, Gas Department; and Mary Stuart, Police Department, be granted regular pensions under Section(s) 2.393 and 2.397 of the Employees’ Pension Plan as approved by the Pension Advisory Committee. Attachments 3.9 Arthur Sprague, Jr., Gas Department, be allowed to vest his pension under Section(s) 2.397 and 2.398 of the Employees’ Pension Plan as approved by the Pension Advisory Committee. Attachments 4. Other Business 5. Adjourn Pension Trustees Agenda Council Chambers - City Hall Meeting Date:5/13/2008 SUBJECT / RECOMMENDATION: Approve the minutes of the April 14, 2008 Pension Trustees meeting as submitted in written summation by the City Clerk. SUMMARY: Review Approval:1) Clerk Cover Memo Item # 1 Attachment number 1 Page 1 of 5 Item # 1 Attachment number 1 Page 2 of 5 Item # 1 Attachment number 1 Page 3 of 5 Item # 1 Attachment number 1 Page 4 of 5 Item # 1 Attachment number 1 Page 5 of 5 Item # 1 Pension Trustees Agenda Council Chambers - City Hall Meeting Date:5/13/2008 SUBJECT / RECOMMENDATION: Accept the Actuary's Report for the Employees' Pension Plan for the plan year beginning January 1, 2008. SUMMARY: The January 1, 2008 actuary report for the Employees' Pension Plan indicates that a minimum City employer contribution of $10,074,978, equivalent to 12.54% of covered payroll, is required for fiscal 2009. This is a decrease from the fiscal 2008 required contribution of $12.5 million, or 15.77% of pay. The current required minimum contribution, per State Statute, of $10.1 million exceeds the minimum required contribution per the plan ordinance of 7% of payroll, or approximately $5.6 million. The decrease in the required employer contribution was primarily due to an actuarial investment return (5-year weighted average) of 10.68% versus the prior year's 5-year weighted average return of 7.87% and the expected return of 7.5%. Also contributing to the decrease was a decrease in the number of active employees participating in the plan, from 1,692 for the prior year valuation to the current level of 1,641. The improvement in the actuarial investment return is the result of three years of investment performance that exceeded the 7.5% assumed rate - 20.08%, 9.73%, 11.80%, for calendar years 2003, 2004, and 2006, respectively; partially offset by two years of investment earnings below the assumed rate - 6.67% for calendar year 2005 and 7.29% for calendar 2007. The actuarial investment return five-year average of 10.68% was a significant improvement from the January 1, 2007 report’s average return of 7.87%, due to the “dropping off” of a negative return of (8.83)% for calendar 2002 from the five-year average, replaced by 7.29% for calendar 2007. The plan has a current "credit balance" of $14,031,276, which can be used to subsidize future City employer contributions. During fiscal 2008, the employer contribution was budgeted across City departments at 13% of covered payroll, with the balance of the 15.77% required contribution funded from the credit balance. This effectively reduced the credit balance from $15.0 million to the current $14.0 million level. Staff recommends funding the employer contribution for fiscal 2009 at the same budgeted level of 13% versus the legally required minimum requirement of 12.54%, which would increase the credit balance by an estimated $400,000. Due to a significant downturn in the investment markets during calendar 2008 to-date, in addition to the fact that a very significant 20.08% return for calendar 2003 will be dropping out of the five-year investment return average, to be replaced by the yet-to-be determined 2008 rate, a substantial decrease in the average investment return, and a resulting significant increase in the required contribution rate is a major concern for fiscal 2010. Consequently, staff recommends maintaining the 13% contribution rate for fiscal 2009. The actuary report states that ultimate long- term cost of the plan is expected to be around 20% of payroll. Review Approval:1) Clerk Cover Memo The City of Clearwater Employees’ Pension Plan Actuary’s Report As of January 1, 2008 to determine annual contribution for the Plan Year: 01/01/2008 – 12/31/2008 to be paid in the Fiscal Year: 10/01/2008 – 09/30/2009 Prepared by PricewaterhouseCoopers, LLP May 2008 May 1, 2008 City of Clearwater 100 S. Myrtle Avenue Clearwater, FL 33756-5520 This document was not intended or written to be used, and it cannot be used, for the purpose of avoiding U.S. federal, state or local tax penalties. Ladies and Gentlemen: This report presents the results of the January 1, 2008 actuarial valuation of the City of Clearwater Employees’ Pension Plan. It has been prepared primarily to present to management the contribution requirements for 2008 and also the current status of funding of accumulated plan benefits. Section IV of this report includes a presentation of the information required by Government Accounting Standards Board (GASB) Statement No. 25. Our calculations were based on financial data and employee data furnished by the City of Clearwater. The valuation was based upon generally accepted actuarial methods, and we performed such tests as we considered necessary to assure the accuracy of the results. To our knowledge, there are no benefits or expenses to be provided by the plan for which a liability or current cost was not established. We certify that the amounts presented in the accompanying report have been appropriately determined according to the actuarial assumptions stated herein. Statement by Enrolled Actuary This actuarial valuation and/or cost determination was prepared and completed by me or under my direct supervision, and I acknowledge responsibility for the results. To the best of my knowledge, the results are complete and accurate, and in my opinion, the techniques and assumptions used are reasonable and meet the requirements and intent of Part VII, Chapter 112, Florida Statutes. There is no benefit or expense to these provided by the plan or paid from the plan’s assets for which liabilities or current costs have not been established or otherwise taken into account in the valuation. All known events or trends which may require a material increase in plan costs or required contribution rates have been taken into account in the valuation. Respectfully submitted, Stephen M. Metz Associate of the Society of Actuaries Enrolled Actuary Number 08-04342 Donna K. White Associate of the Society of Actuaries Enrolled Actuary Number 08-05071 C O N T E N T S Pages SECTION I SUMMARY 1 – 6 SECTION II FUNDING 7 – 11 SECTION III ASSETS 12 – 15 SECTION IV ACCOUNTING 16 – 17 SECTION V CENSUS DATA 18 – 22 SECTION VI ASSUMPTIONS AND METHODS 23 – 25 SECTION VII SUMMARY OF PLAN PROVISIONS 26 – 28 1 CITY OF CLEARWATER EMPLOYEES’ PENSION PLAN SECTION I – SUMMARY A. Actuary’s Comments This report presents the highlights of the January 1, 2008 actuarial valuation prepared to determine the contribution requirements for the 2008–2009 fiscal year. Since the last actuarial valuation of the plan on January 1, 2007, there have been no changes to the actuarial assumptions, the actuarial cost method or the asset valuation method. For a detailed description of the assumptions and methods, please see Section VI. Since the last actuarial valuation of the plan, there have been no changes in the plan provisions. For a detailed description of the plan provisions, please see Section VII. The minimum required City contribution pursuant to Florida Statutes for the 2008 plan year is $10,074,978 or 12.54% of pay (excluding the credit balance of $14,031,276), compared to $12,520,399 (or 15.77% of pay) for 2007. Although State law allows the City to use the credit balance to entirely fund the actuarially required City contribution, the City ordinance establishing the Plan requires the City to contribute at least 7% of payroll. The minimum required contribution was affected by the following factors: • While the investment return on the market value of assets was only 7.29%, the return on the actuarial value of assets was 10.68% (due to prior years’ gains), compared to an assumed rate of 7.5%. • The number of active employees declined this year from 1,692 to 1,641. The plan enjoys a couple of advantages that will mitigate future cost increases somewhat: • The credit balance is currently equal to $14,031,276, which can be used to offset future City contributions. • The market value of assets now exceeds the actuarial value by approximately $14 million. This difference will flow through the plan's asset valuation method over the next four years, decreasing costs slightly. 2 CITY OF CLEARWATER EMPLOYEES’ PENSION PLAN SECTION I – SUMMARY (continued) While the plan remains well funded compared to the majority of public and private pension plans, there are several issues that should be kept in mind: • If the City contributes 13% of payroll for the 2008 fiscal year (as it did for 2007), it will increase the credit balance by roughly $400,000. • Due to the Plan’s large asset pool and the impact of the employee contributions, the City’s cost is highly leveraged, which means that changes in the assets and liabilities can change the City’s funding requirements dramatically. • The ultimate long-term cost of the plan is expected to be around 20% of payroll, however, due to the large asset base and retiree liabilities the cost is highly leveraged and could be substantially lower than this for a long time. The funded status of the accumulated benefits decreased slightly compared to the prior year. The ratio of assets at market value to the actuarial present value of accumulated plan benefits is 131% at January 1, 2008, compared to 132% at January 1, 2007. B. Contribution Requirements for the Plan Year Ending December 31, 2008 Minimum Required Employer Contribution Florida Statutes $10,074,978* 7% of Payroll $ 5,626,013 The employer contribution is assumed to be made uniformly during the first two quarters of the fiscal year beginning on October 1, 2008. Differences in the investment return due to contributions actually being made at any other time will be recognized as an actuarial gain or loss in the following valuation. The minimum required contribution represents a funding level which will satisfy the minimum funding requirements under Part VII, Chapter 112, Florida Statutes. Please refer to Section VI and VII of the report for a summary of the actuarial assumptions and plan provisions, respectively. * Excluding the credit balance (currently $14,031,276) 3 CITY OF CLEARWATER EMPLOYEES’ PENSION PLAN SECTION I – SUMMARY (continued) C. Comparative Summary of Principal Valuation Results Actuarial Valuation Prepared as of: Jan. 1, 2008 Jan. 1, 2007 Jan. 1, 2006 (a) Participant Data Number Included Active Members 1,641 1,692 1,671 Retirees and Beneficiaries 802 758 721 Terminated Vested Participants 76 61 58 Annual Payroll of Actives $80,371,617 $79,385,090 $76,010,269 Annualized Benefits Retirees and Beneficiaries $21,755,799 $19,847,421 $18,243,971 Terminated Vested Participants $1,352,582 $1,011,310 $1,016,166 (b) Actuarial Reserves Market Value $624,560,675 $590,066,492 $534,252,349 Actuarial Value $610,979,087 $559,830,590 $525,573,824 (c) Liabilities Present Value of Expected Benefits: Active Participants: Retirement Benefits $352,350,615 $341,955,028 $358,857,273 Termination Benefits* $45,117,190 $45,977,610 $32,973,840 Disability Benefits $21,738,241 $22,026,650 $18,309,704 Death Benefits $5,348,974 $5,326,021 $4,274,602 Total Active $424,555,020 $415,285,309 $414,415,419 Terminated Vested Participants $10,379,208 $9,801,171 $9,890,291 Retirees and Beneficiaries $272,750,105 $250,792,752 $235,058,990 Total Present Value of Expected Benefits $707,684,333 $675,879,232 $659,364,700 Liabilities Due and Unpaid $695,234 $667,685 $662,183 *Refund of Employee Contributions included in Termination Benefits as of January 1, 2008. 4 CITY OF CLEARWATER EMPLOYEES’ PENSION PLAN SECTION I – SUMMARY (continued) C. Comparative Summary of Principal Valuation Results (continued) Actuarial Valuation Prepared as of: Jan. 1, 2008 Jan. 1, 2007 Jan. 1, 2006 (c) Liabilities (continued) Unfunded Actuarial Accrued Liability Supplemental FIL - 1/1/1979 $182,903 $353,049 $511,323 Supplemental FIL - 1/1/1981 77,635 99,990 120,785 Supplemental FIL - 1/1/1982 (1,180,295) (1,425,761) (1,654,101) Supplemental FIL - 1/1/1987 805,764 867,052 924,064 Supplemental FIL - 1/1/1988 956,728 1,019,638 1,078,158 Supplemental FIL - 1/1/1989 1,328,650 1,404,906 1,475,841 Asset Valuation Method - 1/1/1994 2,858,368 2,949,812 3,034,876 Change Plan Amendment - 1/1/1996 12,304,297 12,625,111 12,923,544 Plan Amendment - 1/1/2000 47,485,455 48,332,987 49,121,389 Assumption Changes - 1/1/2002 (28,685,438) (29,113,721) (29,512,123) Assumption Changes - 1/1/2007 (14,553,402) (14,695,526) N/A Total $21,580,666 $22,417,537 $38,023,756 (d) Funding Account Credit Balance Prior Year Amount $15,046,922 $18,817,573 $24,083,096 Prior Year: Required Employer Contributions (12,520,399) (15,438,360) (14,471,960) Employer Contributions Made 10,376,234 10,256,391 7,400,205 Interest on Credit Balance 1,128,519 1,411,318 1,806,232 Total $14,031,276 $15,046,922 $18,817,573 (e) Actuarial Present Value of Accrued Benefits $477,391,012 $445,702,880 $440,674,422 Changes During Prior Year: Value from Prior Year $445,702,880 $440,674,422 $417,252,415 Benefits Paid $(21,862,629) $(20,187,167) $(18,314,544) Interest, Aging and Benefits Accrued 53,550,761 51,050,794 41,736,551 Change in Assumptions 0 (25,835,169) 0 Change in Plan Provisions 0 0 0 Net Change $31,688,132 $5,028,458 $23,422,007 Value at Current Year $477,391,012 $445,702,880 $440,674,422 5 CITY OF CLEARWATER EMPLOYEES’ PENSION PLAN SECTION I – SUMMARY (continued) C. Comparative Summary of Principal Valuation Results (continued) Actuarial Valuation Prepared as of: Jan. 1, 2008 Jan. 1, 2007 Jan. 1, 2006 (f) Pension Cost for Year Normal Cost $10,319,716 $12,415,828 $13,742,657 Amortization of Unfunded Frozen Initial Liability 2,342,499 2,342,499 3,499,977 Administrative Expenses 2,999,254 2,968,095 2,808,804 Shortfall for Expenses in Prior Year 31,159 159,291 278,379 Interest Adjustment 824,079 997,493 1,201,365 Total Required Contribution $16,516,707 $18,883,206 $21,531,182 As a Percentage of Payroll 20.55% 23.79% 28.33% Anticipated Employee Contributions $6,429,729 $6,350,807 $6,080,822 As a Percentage of Payroll 8.00% 8.00% 8.00% Anticipated State Contributions $12,000 $12,000 $12,000 As a Percentage of Payroll 0.01% 0.02% 0.02% City Required Contribution 10,074,978 12,520,399 15,438,360 As a Percentage of Payroll 12.54% 15.77% 20.31% (g) Prior Year Actual Contributions made by State $12,000 $12,000 $12,000 Employees 6,265,404 6,060,134 5,827,931 City 10,376,234 10,256,391 7,400,205 Total $16,653,638 $16,328,525 $13,240,136 (h) Gains and Losses N/A N/A N/A (i) Other Present Values Present Value of Future Salaries At attained age $694,577,683 $694,770,240 $633,768,660 Present Value of Future Employee Contributions At attained age $55,566,215 $55,581,619 $50,701,493 6 CITY OF CLEARWATER EMPLOYEES’ PENSION PLAN SECTION I – SUMMARY (continued) C. Comparative Summary of Principal Valuation Results (continued) Actuarial Valuation Prepared as of: Jan. 1, 2008 Jan. 1, 2007 Jan. 1, 2006 (i) Other Present Values (continued) Present Value of Future Normal Costs $89,155,856 $108,678,027 $114,584,693 (j) Comparison of Actual and Assumed Investment Return Salary Increases Actual Year Ended Actual Assumed Market Value Actuarial Value Assumed 12/31/1986 7.40% 5.00% 13.21% N/A 7.00% 12/31/1987 5.90% 5.00% 10.78% N/A 7.00% 12/31/1988 9.10% 5.00% 9.12% N/A 7.00% 12/31/1989 8.70% 5.00% 20.84% N/A 7.00% 12/31/1990 5.30% 5.00% 6.21% N/A 7.00% 12/31/1991 6.10% 5.00% 28.52% N/A 7.00% 12/31/1992 6.80% 5.00% 6.49% N/A 7.00% 12/31/1993 1.20% 5.00% 9.29% 7.42% 7.00% 12/31/1994 4.40% 5.00% 0.89% 6.28% 7.00% 12/31/1995 6.40% 5.00% 23.36% 9.14% 7.00% 12/31/1996 6.70% 5.00% 14.80% 11.54% 7.00% 12/31/1997 5.60% 5.00% 17.49% 13.74% 7.00% 12/31/1998 7.40% 5.00% 16.74% 15.28% 7.00% 12/31/1999 4.20% 5.00% 18.61% 17.96% 7.00% 12/31/2000 5.80% 5.00% (3.43%) 12.42% 7.00% 12/31/2001 5.90% 5.00% (5.16%) 7.40% 7.00% 12/31/2002 5.80% 6.00% (8.83%) (1.85%) 7.50% 12/31/2003 6.40% 6.00% 20.08% 7.45% 7.50% 12/31/2004 6.38% 6.00% 9.73% 2.18% 7.50% 12/31/2005 5.49% 6.00% 6.67% 4.58% 7.50% 12/31/2006 5.15% 6.00% 11.80% 7.87% 7.50% 12/31/2007 6.62% 6.00% 7.29% 10.68% 7.50% 7 CITY OF CLEARWATER EMPLOYEES’ PENSION PLAN SECTION II – FUNDING A. Development of the Unfunded Frozen Actuarial Accrued Liability 1. Unfunded Frozen Actuarial Accrued Liability as of January 1, 2007 $22,417,537 Interest to December 31, 2007 $1,681,315 $24,098,852 2. Employer Normal Cost* for Year with interest $10,002,213 to December 31, 2007 3. Required Employer Contributions for Period $12,520,399 4. Increase/(Decrease) Due to Assumption Changes $0 5. Unfunded Frozen Actuarial Accrued Liability at December 31, 2007 $21,580,666 * Includes Expenses and Adjustments 8 CITY OF CLEARWATER EMPLOYEES’ PENSION PLAN SECTION II – FUNDING (continued) B. Development of Normal Cost The Normal Cost is the portion of the cost of projected benefits which is allocated to the current year by the actuarial cost method. The Normal Cost for the plan years beginning January 1, 2008 and January 1, 2007 are determined as follows: Total Projected Actuarial Liability: Jan. 1, 2008 Jan. 1, 2007 Jan. 1, 2006 The present value as of the beginning of the plan year of all benefits expected to be paid in the future to current participants. • Active participants $424,555,020 $415,285,309 $414,415,419 • Terminated vested participants 10,379,208 9,801,171 9,890,291 • Retired and disabled participants 272,750,105 250,792,752 235,058,990 • Total Participants $707,684,333 $675,879,232 $659,364,700 Credit Balance: Employer contributions from prior years reserved for future use. $14,031,276 $15,046,922 $18,817,573 Fund: The actuarial value of fund assets as of the beginning of the plan year. $610,979,087 $559,830,590 $525,573,824 Excess of Total Projected Actuarial Liability Over the Fund Minus the Credit Balance: The portion of the projected total actuarial liability to be funded in the future. $110,736,522 $131,095,564 $152,608,449 This portion is divided into two components: a. Unfunded frozen actuarial accrued liability $21,580,666 $22,417,537 $38,023,756 b. Present value of future service liability (funded over the expected future service years of current participants) $89,155,856 $108,678,027 $114,584,693 Present Value of Future Covered Payroll $694,577,683 $694,770,240 $633,768,660 9 CITY OF CLEARWATER EMPLOYEES’ PENSION PLAN SECTION II – FUNDING (continued) B. Development of Normal Cost (continued) Jan. 1, 2008 Jan. 1, 2007 Jan. 1, 2006 Normal Cost Rate: The ratio of the present value of future service liability to the present value of future covered payroll. 12.84% 15.64% 18.08% Annual Covered Payroll: The reported payroll for plan participants who have not attained the assumed retirement age. $80,371,617 $79,385,090 $76,010,269 Normal Cost: The annual cost as of the beginning of the plan year to fund the future service liability over the expected future years of service of the current participants. $10,319,716 $12,415,828 $13,742,657 10 CITY OF CLEARWATER EMPLOYEES’ PENSION PLAN SECTION II – FUNDING (continued) C. Schedule of Amortization Payments Date Established Reason Initial Amount Initial Amortization Period (Years) Jan. 1, 2008 Unamortized Amount Annual Amortization Payment 1/1/1979 Supplemental FIL $2,707,962 30 $182,903 $182,906 1/1/1981 Supplemental FIL 390,421 30 77,635 27,771 1/1/1982 Supplemental FIL (4,521,985) 30 (1,180,295) (327,812) 1/1/1987 Supplemental FIL 1,519,142 30 805,764 117,504 1/1/1988 Supplemental FIL 1,673,738 30 956,728 129,658 1/1/1989 Supplemental FIL 2,177,772 30 1,328,650 168,952 1/1/1994 Asset Valuation Method Change 3,724,296 30 2,858,368 290,865 1/1/1996 Plan Amendment 15,063,842 30 12,304,297 1,179,254 1/1/2000 Plan Amendment 52,921,724 30 47,485,455 4,160,471 1/1/2002 Assumption Changes (30,846,502) 30 (28,685,438) (2,429,592) 1/1/2007 Assumption Changes (14,695,526) 30 (14,553,402) (1,157,478) Total Charges $65,999,800 $6,257,381 Total Credits (44,419,135) (3,914,882) Total $21,580,665 $2,342,499 11 CITY OF CLEARWATER EMPLOYEES’ PENSION PLAN SECTION II – FUNDING (continued) D. Anticipated Amortization Schedule Shown below is the anticipated amortization schedule for the Unfunded Frozen Actuarial Accrued Liability taking into account the plan’s funding policy. Anticipated Amortization Schedule Date Unfunded Frozen Actuarial Accrued Liability 2008 $21,580,665 2009 $20,681,030 2010 $19,910,545 2011 $19,082,273 2037 $0 On July 1, 1963, the Unfunded Frozen Actuarial Accrued Liability was established equal to the difference between the retirement plan’s accrued liability, determined under the Entry Age Normal Funding Method and the actuarial value of plan assets. According to the plan’s funding policy, the initial liability is to be amortized by a series of level payments over a forty-year period. Subsequent changes in the level of the Frozen Actuarial Accrued Liability due to plan amendments or changes in actuarial assumptions are to be amortized on a straight-line basis over a period of thirty years. By contributing more than the stated funding policy, the amortization of the Unfunded Frozen Actuarial Accrued Liability can be accelerated. 12 CITY OF CLEARWATER EMPLOYEES’ PENSION PLAN SECTION III – ASSETS Comparative Balance Sheet As of December 31, 2007 ASSETS Market Value Dec. 31, 2007 Market Value Dec. 31, 2006 Cash and Cash Equivalents $9,799,417 $2,139,316 International Equity Securities 109,243,339 67,122,769 Domestic Corporate Equity Securities 251,655,562 302,072,191 Preferred Stock 737,836 161,044 Domestic Bonds Commodities 248,410,419 494,760 214,354,361 0 Total Investments $620,341,333 $585,849,681 Receivables: Interest – Pooled Cash 41,200 27,588 Commission Recapture 25,809 56,913 Employer Contributions 4,847,567 4,794,995 State Contributions 0 5,000 Total Assets $625,255,909 $590,734,177 LIABILITIES AND ACTUARIAL RESERVES Liabilities: Accounts Payable $695,234 $667,685 Total Liabilities $695,234 $667,685 Actuarial Reserves: Accumulated Member Contributions $53,183,617 $49,816,350 Balance of Actuarial Reserves 571,377,058 540,250,142 Total Actuarial Reserves $624,560,675 $590,066,492 TOTAL LIABILITIES AND ACTUARIAL RESERVES $625,255,909 $590,734,177 13 CITY OF CLEARWATER EMPLOYEES’ PENSION PLAN SECTION III – ASSETS (continued) Schedule of Changes in Actuarial Reserves For the Plan Year Ended December 31, 2007 Market Value Revenues: Employee Contributions $6,265,404 Employer Contributions 10,376,234 State Contributions 12,000 $16,653,638 Earnings on Investments: Interest Dividends Realized Net Gains on Securities Transactions $10,937,272 2,516,652 76,651,288 $90,105,212 Unrealized Appreciation (Depreciation) on Investments ($47,402,784) Expenses: Benefits Paid Refunds of Contributions Professional Fees Other Expenses $(20,857,298) (1,005,331) (2,999,254) 0 $(24,861,883) Net Change in Actuarial Reserves Actuarial Reserves at Beginning of Plan Year Actuarial Reserves at End of Plan Year $34,494,183 $590,066,492 $624,560,675 14 CITY OF CLEARWATER EMPLOYEES’ PENSION PLAN SECTION III – ASSETS (continued) Development of Actuarial Value of Assets 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. Actuarial Reserves at Beginning of Plan Year Time Weighted Employee Contributions (0.5 x $6,265,404) Time Weighted Employer Contributions (0.5 x .125 x $10,376,234) Time Weighted State Contributions (0.5 x $12,000) Time Weighted Benefit Payments ( (11/24) x $21,862,629) Time Weighted Expenses (0.5 x $2,999,254) Time Weighted Value of Actuarial Reserves (Items 1 + 2 + 3 + 4 – 5 – 6) Expected Asset Return (Item 7 x 7.50%) Actual Asset Return Difference of Expected Return over Actual Return Actuarial Reserves at End of Plan Year Expected Actuarial Reserves at End of Plan Year (Items 10 + 11) Difference Between Actual and Expected Asset Return (Item 11 – 12) $590,066,492 3,132,702 648,515 6,000 10,020,372 1,499,627 $582,333,710 43,675,028 42,702,428 $972,600 624,560,675 $625,533,275 ($972,600) 15 CITY OF CLEARWATER EMPLOYEES’ PENSION PLAN SECTION III – ASSETS (continued) Development of Actuarial Value of Assets (continued) Date Established Initial Amount Annual Amount Recognized Amount Excluded Prior Valuation Amount Excluded Current Valuation 01/01/2004 $49,774,669 $9,954,934 $(9,954,934) $0 01/01/2005 $10,516,067 $2,103,213 $(4,206,427) $(2,103,214) 01/01/2006 $(4,010,976) $(802,195) $2,406,586 $1,604,391 01/01/2007 $23,101,409 $4,620,282 $(18,481,127) $(13,860,845) 01/01/2008 $(972,600) $194,520 N/A $778,080 Total $(13,581,588) Actuarial Reserves $624,560,675 Actuarial Value of Assets, Before Applying Limits $610,979,087 80% of Actuarial Reserves $499,648,540 120% of Actuarial Reserves $749,472,810 Actuarial Value of Assets, After Applying Limits $610,979,087 16 CITY OF CLEARWATER EMPLOYEES’ PENSION PLAN SECTION IV – ACCOUNTING A. Plan Description and Contribution Information Membership of the plan consisted of the following at January 1, 2007, the date of the latest actuarial valuation: Retirees and beneficiaries receiving benefits Terminated plan members entitled to but not yet receiving benefits Active plan members 758 61 1,692 Total Number of participating employers 2,511 1 17 CITY OF CLEARWATER EMPLOYEES’ PENSION PLAN SECTION IV – ACCOUNTING (continued) B. Required Supplementary Information Scheduling of Funding Progress Actuarial Valuation Date Actuarial Value of Assets (a) Actuarial Accrued Liability (AAL) Frozen Entry Age (b) Unfunded AAL (UAAL) (b-a) Funded Ratio (a/b) Covered Payroll (c) UAAL as a Percentag e of Covered Payroll ( (b-a) / c) 01/01/1991 $141,865,764 $152,118,075 $10,252,311 93% $34,532,753 30% 01/01/1992 $184,746,269 $194,550,126 $9,803,857 95% $36,626,332 27% 01/01/1993 $198,315,690 $207,639,701 $9,324,011 96% $38,731,039 24% 01/01/1994 $213,014,474 $225,549,346 $12,534,872 94% $38,710,974 32% 01/01/1995 $225,482,726 $237,428,796 $11,946,070 95% $41,371,332 29% 01/01/1996 $244,744,488 $271,124,381 $26,379,893 90% $44,208,964 60% 01/01/1997 $272,346,200 $297,892,502 $25,546,302 91% $44,955,348 57% 01/01/1998 $308,596,133 $333,250,492 $24,654,359 93% $47,281,198 52% 01/01/1999 $354,088,751 $377,788,731 $23,699,980 94% $49,666,523 48% 01/01/2000 $414,826,422 $490,426,940 $75,600,518 85% $50,937,403 148% 01/01/2001 $461,724,610 $535,672,208 $73,947,598 86% $54,864,584 135% 01/01/2002 $491,859,015 $533,191,487 $41,332,472 92% $58,929,582 70% 01/01/2003 $477,541,459 $517,933,495 $40,392,036 92% $65,150,820 62% 01/01/2004 $507,256,663 $546,915,627 $39,658,964 93% $69,907,473 57% 01/01/2005 $510,265,274 $549,136,184 $38,870,910 93% $73,836,304 53% 01/01/2006 $525,573,824 $563,597,580 $38,023,756 93% $76,010,269 50% 01/01/2007 $559,830,590 $582,248,127 $22,417,537 96% $79,385,090 28% 01/01/2008 $610,979,087 $632,559,753 $21,580,666 97% $80,371,617 27% The information presented in the required supplementary schedules was determined as part of the actuarial valuations at the dates indicated. Additional information as of the latest actuarial valuation follows: Valuation date 01/01/2008 Actuarial cost method Frozen Entry Age Amortization method Level Dollar Closed Remaining amortization periods Various Asset valuation method Five Year Average * Actuarial assumptions: Investment rate of return 7.5% Projected salary increases 6.0% Include merit increases 3.0% Cost-of-living adjustments 3.0% * Effective January 1, 1994, the asset valuation method was changed from market value to a five year average method. 18 CITY OF CLEARWATER EMPLOYEES’ PENSION PLAN SECTION V – CENSUS DATA A. Reconciliation of Employee Data A summary of changes in the employee data from January 1, 2007 through January 1, 2008 follows. Employees who do not participate in the plan are not included. Participants included in the January 1, 2007 valuation Active Employees 1,692 Terminated Vested Employees 61 Retired Participants And Beneficiaries 758 Total 2,511 Nonvested terminations (15) (15) Data revisions* 1 (1) 0 Vested terminations (22) 22 0 Deaths without eligible beneficiary (4) (4) Retirements (41) (8) 49 0 Cash settlements (102) (102) Rehires New participants 129 129 Participants included in the January 1, 2008 valuation 1,641 76 802 2,519 Active Participants: Fully vested 1,081 Non-vested 560 Total 1,641 19 CITY OF CLEARWATER EMPLOYEES’ PENSION PLAN SECTION V – CENSUS DATA (continued) B. Age – Service Distribution of Active Participants as of January 1, 2008 Years of Service Attained Age 0 – 4 No. 5 – 9 No. 10 – 14 No. 15 – 19 No. 20 – 24 No. 25 + No. Total No. Under 25 88 2 0 0 0 0 90 25 to 29 122 19 0 0 0 0 141 30 to 34 90 78 18 0 0 0 186 35 to 39 74 66 61 15 1 0 217 40 to 44 57 55 62 51 17 2 244 45 to 49 53 47 42 48 52 19 261 50 to 54 34 37 33 44 46 50 244 55 to 59 27 25 24 30 27 27 160 60 to 64 14 8 16 13 17 6 74 65 + 1 6 5 6 2 4 24 Total 560 343 261 207 162 108 1,641 Active Participant Statistics Average Age 43.38 years Average Service 10.49 years 20 CITY OF CLEARWATER EMPLOYEES’ PENSION PLAN SECTION V – CENSUS DATA (continued) C. Age – Service Distribution of Active Hazardous Duty Participants as of January 1, 2008 Years of Service Attained Age 0 – 4 No. 5 – 9 No. 10 – 14 No. 15 – 19 No. 20 – 24 No. 25 + No. Total No. Under 25 26 0 0000 26 25 to 29 455 0000 50 30 to 34 3539 11000 85 35 to 39 28 35 34 10 0 0 107 40 to 44 10 11 27 33 6 0 87 45 to 49 2 1 2 16 13 7 41 50 to 54 2 3 1 6 4 11 27 55 to 59 20 1317 14 60 to 64 10 0000 1 65 + 0 0 0 0 0 0 0 Total 151 94 76 68 24 25 438 Active Participant Statistics Average Age 37.98 years Average Service 9.95 years 21 CITY OF CLEARWATER EMPLOYEES’ PENSION PLAN SECTION V – CENSUS DATA (continued) D. Age – Service Distribution of Active Non-Hazardous Duty Participants as of January 1, 2008 Years of Service Attained Age 0 – 4 No. 5 – 9 No. 10 – 14 No. 15 – 19 No. 20 – 24 No. 25 + No. Total No. Under 25 62 2 0 0 0 0 64 25 to 29 77 14 0 0 0 0 91 30 to 34 55 39 7 0 0 0 101 35 to 39 46 31 27 5 1 0 110 40 to 44 47 44 35 18 11 2 157 45 to 49 51 46 40 32 39 12 220 50 to 54 32 34 32 38 42 39 217 55 to 59 25 25 23 27 26 20 146 60 to 64 13 8 16 13 17 6 73 65 + 1 6 5 6 2 4 24 Total 409 249 185 139 138 83 1,203 Active Participant Statistics Average Age 45.35 years Average Service 10.68 years 22 CITY OF CLEARWATER EMPLOYEES’ PENSION PLAN SECTION V – CENSUS DATA (continued) E. Inactive Participant Count and Benefits as of January 1, 2008 Number of Participants Annual Benefit Terminated Vested Participants Retired Participants and Beneficiaries 76 802 $1,352,382 $21,755,799 23 CITY OF CLEARWATER EMPLOYEES’ PENSION PLAN SECTION VI – ASSUMPTIONS AND METHODS A. Actuarial Assumptions Investment Yield The investment rate of earnings is assumed to be 7.5% per annum. Mortality Mortality is based on the RP 2000 Combined Healthy Mortality Table. Withdrawal Employees are assumed to terminate according to the following schedules, depending upon whether or not the employee is deemed "Hazardous Duty": Hazardous Duty Withdrawal Age All Years 20 30 40 50 55 7.5% 3% 3% 3% 0% Non-Hazardous Duty Withdrawal Age First Year of Service Second Year of Service Third Year of Service More than 3 Years of Service 20 30 40 50 60 25% 15% 15% 15% 0% 25% 12.5% 12.5% 5% 0% 25% 10% 10% 5% 0% 20% 8% 5% 4% 0% Disability Pre-retirement incidence of disability is assumed to occur in accordance with a standard scale of moderate disability rates (Class 1, 1952 Inter- Company). Rates for females are assumed to be double that for males. Sample rates for males are shown below: Age Incidence of Disability 20 30 40 50 60 70 .17% .17% .20% .29% .59% 1.74% 24 CITY OF CLEARWATER EMPLOYEES’ PENSION PLAN SECTION VI – ASSUMPTIONS AND METHODS (continued) A. Actuarial Assumptions (continued) Service vs. Non-service All pre-retirement deaths are assumed to be non-service related. All incidence of disability is assumed to be service related. Salary Scale Future salaries are assumed to increase at the rate of 6% per year – 3% due to cost-of-living, and 3% due to merit increases. Valuation Salary Compensation during the plan year is assumed to be the greater of (1) and (2): (1) Compensation earned during the prior plan year, increased by salary scale; (2) Pay rate for the current plan year. Retirement Rates Employees are assumed to retire according to the following schedules, depending upon whether or not the employee is deemed "Hazardous Duty": Hazardous Duty Retirement Age 10 to 19 Years of Service 20 or More Years of Service 45 50 55 60+ 15% 20% 20% 100% 15% 20% 35% 100% Non-Hazardous Duty Retirement Age 10 to 19 Years of Service 20 to 29 Years of Service 30 or More Years of Service 50 55 60 65 70+ 0% 0% 10% 35% 100% 0% 30% 30% 75% 100% 20% 25% 25% 75% 100% Timing of Contribution The employer contribution is assumed to be made uniformly during the first two quarters of the fiscal year beginning on October 1 following the valuation date. Employees Covered All participants as of the actuarial valuation date. 25 CITY OF CLEARWATER EMPLOYEES’ PENSION PLAN SECTION VI – ASSUMPTIONS AND METHODS (continued) A. Actuarial Assumptions (continued) Spouses Eighty-five percent (85%) of the active participants are assumed to be married (or have dependents eligible for Survivor’s Benefits). Female spouses are assumed to be five years younger than male spouses. State Contributions The state contributions are assumed to equal $12,000 per year. Expenses Expenses are assumed to equal last year’s actual expenses. Completeness of All benefits and expenses to be provided by the Plan are recognized in the Assumptions valuation. All known events are taken into account; no current trends are assumed to discontinue in the future. B. Asset Valuation Method The Actuarial Value of Assets is based on a five-year moving average of assets valued at statement value. The statement value reflects an amortized value for bonds and market value for equity investments. From the statement value, actual and expected return on investments is derived. Any difference between the actual return on investments for a given year and the expected return is spread over five years. After five years the entire amount is fully recognized. However, the Actuarial Value of Assets will never exceed 120% nor fall below 80% of the market value of assets. The use of a derived value of plan assets rather than current market value will produce a more stable funding pattern for the plan by partially eliminating the effect of unusual market fluctuations. C. Actuarial Cost Method The actuarial cost method is the Frozen Entry Age Actuarial Cost Method. Under this method the excess of the actuarial present value of projected benefits over the sum of the actuarial value of assets plus the Unfunded Frozen Actuarial Accrued Liability is funded on a level basis over the future compensation of active employees. The portion of this excess allocated to the current year is called the Normal Cost. The Frozen Actuarial Accrued Liability is determined using the Entry Age Actuarial Cost Method. This Frozen Actuarial Accrued Liability is adjusted from time to time to reflect changes in the Plan or in the actuarial assumptions. The Unfunded Frozen Actuarial Accrued Liability is separately amortized over a fixed number of years. 26 CITY OF CLEARWATER EMPLOYEES’ PENSION PLAN SECTION VII – SUMMARY OF PLAN PROVISIONS This summary is intended as an outline of plan provisions and does not alter the intent or meaning of the provisions contained in the contract and / or plan document. Plan Year January 1 to December 31. Eligibility Any permanent employee shall participate in the plan immediately. Current Employee 8.0% of wages and salaries actually paid to a participant. Contributions Average Monthly The total Compensation received during the highest five years of service of the last ten Compensation years divided by sixty. Accrued Benefit A monthly benefit equal to 2.75% of Average Monthly Compensation multiplied by the number of years of service to date. Retirement Benefit A. Eligibility (Normal Retirement Date) • Non-Hazardous Duty: Completion of 30 years of service, completion of at least 20 years of service and the attainment of age 55, or completion of at least ten years of service and the attainment of age 65. • Hazardous Duty: Completion of 20 years of service or completion of at least ten years of service and the attainment of age 55. B. Normal Retirement Benefit The participant’s Accrued Benefit payable as of his actual retirement date on or after his Normal Retirement Date. No adjustment applies for deferred retirement beyond his Normal Retirement Date. C. Normal Form of Benefit A monthly annuity for the life of the participant. After the participant’s death, 100% of the Normal Retirement Benefit shall be paid as a Survivor Annuity to the spouse for five years. After five years, such Survivor Annuity is reduced to 50% of the original amount. The Survivor Annuity ceases upon death or remarriage of the spouse. 120 monthly payments are guaranteed in any case for police and fire fighters. 27 CITY OF CLEARWATER EMPLOYEES’ PENSION PLAN SECTION VII – SUMMARY OF PLAN PROVISIONS (continued) D. Early Retirement Benefit For police and fire fighters, an early retirement benefit is payable to those participants who have completed ten years of service and the attainment of age 50. The benefit is equal to the retirement benefit calculated as of the date of early retirement, reduced by 3% per year for each year below age 55. E. Cost of Living Increase All participants commencing annuity benefit payments shall be entitled to a 1.5% increase in their benefit amount each year. Disability Benefit A. Eligibility Total and permanent disability. If the disability is non-service connected, there is an additional requirement of the completion of ten years of service. B. Disability Benefit The participant's Accrued Benefit, payable immediately. If the disability is service connected, the Disability Benefit must be at least 66.67% of Average Monthly Compensation. C. Normal Form of Benefit A monthly annuity for the life of the participant. After the participant's death, a Survivor Annuity is provided as described under the Normal Form of Benefit for retirement benefits. 120 monthly payments are guaranteed in any case for police and fire fighters. D. Cost of Living Increase All participants commencing annuity benefit payments shall be entitled to a 1.5% increase in their benefit amount each year. Death Benefit A. Eligibility Any actively employed participant. B. Death Benefit The participant’s Accrued Benefit, payable immediately. If death is service connected, the Death Benefit must be at least 66.67% of Average Monthly Compensation. 28 CITY OF CLEARWATER EMPLOYEES’ PENSION PLAN SECTION VII – SUMMARY OF PLAN PROVISIONS (continued) C. Form of Benefit A monthly Survivor Annuity as described under the Normal Form of Benefit. D. Cost of Living Increase All participants commencing annuity benefit payments shall be entitled to a 1.5% increase in their benefit amount each year. Vested Termination Benefit A. Eligibility Completion of ten years of service. B. Termination Benefits The participant’s Accrued Benefit payable as of his Normal Retirement Date, provided Employee Contributions are not refunded. C. Form of Payment A monthly annuity for the life of the participant. After the participant’s death, a Survivor Annuity is provided as described under the Normal Form of Benefit, beginning at the latter of the participant’s Normal Retirement Date or date of death. D. Cost of Living Increase All participants commencing annuity benefit payments shall be entitled to a 1.5% increase in their benefit amount each year. Non-Vested Termination Benefit A. Eligibility Any actively employed participant. B. Benefit Refund of Employee Contributions with 5% simple interest. C. Form of Benefit Lump sum. Pension Trustees Agenda Council Chambers - City Hall Meeting Date:5/13/2008 SUBJECT / RECOMMENDATION: Approve a new agreement between the City of Clearwater and the law firm of Klausner & Kaufman, P.A., to serve as outside counsel to the Pension Advisory Committee and Pension Trustees and authorize the appropriate officials to execute same. SUMMARY: The law firm of Klausner & Kaufman, PA, has acted as outside counsel to the Pension Advisory Committee and Pension Trustees since 2003 at a rate of $250.00 per hour. At this time Klausner & Kaufman is asking for a rate increase to $300.00 per hour. The service provided by the firm since 2003 has been exceptional. The total paid to the firm for the last two years was approximately $153,000. The majority of these expenses are related to the processing of disability applications for plan participants. City staff recommends the approval of a new agreement with Klausner & Kaufman at the rate of $300.00 per hour. Review Approval:1) Office of Management and Budget 2) Legal 3) Clerk 4) Assistant City Manager 5) Clerk 6) City Manager 7) Clerk Cover Memo Item # 3 PROFESSIONAL SERVICES AGREEMENT THIS AGREEMENT is made this day of , 2008, by and between THE BOARD OF TRUSTEES OF THE CITY OF CLEARWATER EMPLOYEES’ PENSION PLAN (hereinafter referred to as the “Board”) and KLAUSNER & KAUFMAN, P.A., a professional legal corporation (hereinafter referred to as the “Counsel”). WITNESSETH: WHEREAS, the Board wishes to retain Counsel to serve as Legal Counsel; NOW, THEREFORE, in consideration of the promises and mutual covenants contained in this Agreement, the parties hereby agree as follows: SECTION 1. AUTHORIZATION TO PROCEED AS COUNSEL. Counsel is hereby authorized to provide services as described in this Agreement and for the professional fees described in this agreement. SECTION 2. SCOPE OF SERVICES. Counsel hereby agrees to provide its services to the Board as follows: a. review all contracts and other documents relating to the affairs of the Board for legal sufficiency, legal form and correctness, and approve same on signature page of document; b. provide verbal and legal written opinions as requested by the Board and by individual Trustees for matters relating to their duties on the Board; c. provide reasonable availability for telephone consultation on matters relating to the affairs of the Board; d. draft legislation, rules and regulations, contracts, and other legal documents as requested by the Board; e. review and supervise the services of any other Attorneys who may be retained by the Board; f. provide continuing educational updates to the Trustees on changes in the law relating to the duties of the Trustees and the management of the Pension Fund; Attachment number 1 Page 1 of 3 Item # 3 g. attend meetings of the Board, Pension Advisory Committee (PAC), and other meetings as requested by the Board; h. provide advice to the PAC in determining eligibility of applicants for disability and other pension benefits; i. provide advice on Sunshine Law and Public Records Act issues; j. advise the Board and PAC regarding provisions of state and federal pension and tax law and, as directed by the Board, recommend changes to the pension ordinance and procedures necessary to comply with the law; k. represent the Board, PAC, or other body as directed by the Board in litigation arising out of administration of the pension plan; l. provide such other legal services as the Board shall deem appropriate. SECTION 2. PROFESSIONAL FEES AND COSTS. The Board and Counsel agree to a rate of $300 per hour. There shall be no charge for faxes, long distance telephone calls, or regular postage. Copying charges will be billed at $0.25 per page. Overnight mail shall be billed at cost. Travel for meeting attendance shall be a flat fee of $300 for travel time plus airfare and car rental. SECTION 3. INDEMNIFICATION AND INSURANCE. Counsel represents that it has expertise in the area of public employee retirement systems and is competent to perform the duties required by this Agreement. Counsel agrees to protect, defend, indemnify, and hold the City and its officers, employees, and agents free and harmless from and against any and all losses, penalties, damages, settlements, costs, charges, professional fees, or other expenses or liabilities of every kind and character arising out of or due to any negligent act or omission of Counsel, its employees, agents, and subcontractors in connection with or arising directly or indirectly out of this Agreement and/or the performance hereof. Without limiting its liability under this Agreement, Counsel shall procure and maintain during the life of this Agreement professional liability insurance in an amount of $1,000.000. This provision shall survive the termination of this Agreement. SECTION 4. CONFLICT OF INTEREST. It is understood by the Board and Counsel that Counsel is not aware of any clients of the firm that currently present any conflict between the Attachment number 1 Page 2 of 3 Item # 3 interests of the Board and other clients of Counsel. If any potential conflict of interest arises during the time Counsel is representing the Board, Counsel will promptly inform the Board. The Board is under no obligation to agree to permit such conflict representation. The parties recognize that the role of Counsel in representing the Board is that of a fiduciary and Counsel shall act in accordance with generally accepted principles of fiduciary responsibility. SECTION 5. CONSTRUCTION AND AMENDMENTS. This Agreement shall be governed by the laws of the State of Florida and any dispute involving the enforcement or interpretation of this Agreement shall have its venue in Pinellas County, Florida. This Agreement may be amended only by a writing duly entered into by the Board and Counsel. SECTION 6. CANCELATION OF AGREEMENT. This Agreement may be terminated with or without cause upon thirty (30) days written notice. The terms of the Agreement shall remain in effect as is unless modified in writing. This Agreement shall supersede any other professional services agreements between the parties. IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first written above. BOARD OF TRUSTEES OF THE EMPLOYEES’ PENSION PLAN OF THE CITY OF CLEARWATER, FLORIDA By: Frank V. Hibbard Chairperson Approved as to form: Attest: Pamela K. Akin Cynthia E. Goudeau City Attorney City Clerk Klausner & Kaufman, P.A. Attest: By: Its Attachment number 1 Page 3 of 3 Item # 3 Pension Trustees Agenda Council Chambers - City Hall Meeting Date:5/13/2008 SUBJECT / RECOMMENDATION: Authorize staff to proceed with a search for a consultant to perform an Asset Allocation Study. SUMMARY: At the Trustee’s meeting of August 13, 2007, the Trustees expressed an interest in having a new asset allocation study performed once the recommendations in the current asset allocation were complete. The pension plan is currently in the final stage of implementing the current asset allocation study with the averaging in of the funding for the emerging market and REIT managers. Staff will issue a RFQ to as wide an audience as possible using trade publications, trade reference information and to consultants who have expressed interest in the search. In addition to the asset classes that the plan currently uses, the following asset classes will be included in the asset allocation study to see if they will provide a benefit to the Plan. Master Limited Partnerships Long Duration Bonds Timber Non US Fixed Income Bank Loans Real Estate Private Equity 130-30 Absolute Return Hedge Funds Cash Equivalents Inflation Bonds Micro Cap Options Alpha Overlays Active Duration Fixed Infrastructure Core Equities Active Alpha Puts/Calls Review Approval:1) Clerk Cover Memo Item # 4 Pension Trustees Agenda Council Chambers - City Hall Meeting Date:5/13/2008 SUBJECT / RECOMMENDATION: Extend the contract for pension investment performance measurement and consulting with Callan Associates until June 1, 2009 and authorize the appropriate officials to execute same. SUMMARY: Callan Associates was hired as a result of an RFQ process and was awarded a three-year contract with the Pension Plan to provide performance-reporting services to the Plan. The contract can be renewed for additional periods of time with the consent of both parties. Staff is requesting and Callan has agreed to renew the contract at the same price and terms until June 1, 2009. Staff has been very satisfied with the services provided by Callan. Due to the fact that the investment specifics of the Plan have expanded (more investment classes, additional managers, etc.), the Pension Investment Committee is in the process of reviewing the Callan contract for any appropriate changes and in the near future will bring back a recommendation to approve a longer contract with Callan or to go out for a RFQ. Type:Operating Expenditure Current Year Budget?:None Budget Adjustment:None Budget Adjustment Comments: Pension plan is not a budgeted fund. All expenditures must be approved by the Trustees. This fee is for the 6 quarters ending 12/31/07, 3/31/08, 6/30/08, 9/30/08, 12/31/08, 3/31/09 at $18,000 each. No additional services requested. Current Year Cost:$72,000 Annual Operating Cost:$72,000 Not to Exceed:Total Cost:$108,000 For Fiscal Year:10/1/07 to 9/30/08 Appropration Code Amount Appropriation Comment 0646-07410-530100-585- 000-0000 $108,000 Review Approval: 1) Financial Services 2) Office of Management and Budget 3) Legal 4) Clerk 5) Assistant City Manager 6) Clerk 7) City Manager 8) Clerk Cover Memo Item # 5 CONTRACT FOR INVESTMENT CONSULTING SERVICES CALLAN ASSOCIATES INC AND CITY OF CLEARWATER This agreement the Agreement is made and entered into by and between CALLAN ASSOCIATES INC a California corporation hereinafter referred to as Callan and the CITypF CLEARWATER hereinafter referred to as Clearwater this 7 of cJA 200 to provide investment consulting services in accordance with this Agreement with respect to NAMES OF PLANS collectively the Plan and the assets of the Plan the Fund 1 SCOPE OF WORK Callan will provide the services under this Agreement with respect to the Plan and its Fund as described in Attachment A During the performance of such services by Callan Clearwater will retain and exercise all decision making authority with respect to the management and administration of the retirement planes Callan certifies that it is professionally qualified as an independent consultant to evaluate the performance of professional money managers investing the assets of the Fund 2 ADDITIONAL WORK Consulting projects beyond the scope of services included in Attachment A may be conducted by Callan at the direction and request of Clearwater The fee for each project shall be mutually agreed upon in writing between Clearwater and Callan 3 TERMS OF AGREEMENT This Agreement shall be in effect for three 3 years upon execution of this signed document This Agreement may however be extended for additional periods subject to approval of Callan and Clearwater This Agreement constitutes the entire Agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements undertakings negotiations and discussions both written and oral 4 CANCELLATION Clearwater may cancel this Agreement upon thirty 30 calendar days written notice Callan may cancel this Agreement upon ninety 90 calendar days written notice 5 FEES Callan s fee for performance of the work as referenced in Scope of Work in Attachment A is set forth in Attachment B Attachment number 1 Page 1 of 8 Item # 5 6 TRAVEL AND EXPENSES Callan shall get authorization from Clearwater prior to incurring any travel or other expenses other than Paul Troup s expenses related to attendance at meetings 7 PAYMENTS All fees are quoted on a cash basis Clearwater will be invoiced quarterly in arrears Clearwater shall make cash payments within thirty 30 days of receipt of billing from Callan Interest of 1 per month will be charged on all overdue balances Clearwater has the option to form a directed broker arrangement with AlphaBNY ESI Callan s preferred agent for directed commission payments as a means of paying all or part of Callan s fees 8 APPliCABLE LAWS This Agreement shall be governed by the laws of the State of Florida Venue for resolution of any dispute under the terms of this Agreement shall be in Pinellas County Florida In the event of any legal action arising out of the enforcement or interpretation of this Agreement the prevailing party shall be entitled to recover its costs and attorneys fees 9 LIABILITIES AND THE INDEMNIFICAnON OF CALLAN The parties to this Agreement recognize that the Fund is not governed by ERISA Nevertheless in all of its activities on behalf of the Fund Callan will utilize the skill care prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an activity of a like character and with like aims Callan recognizes that its primary obligation under this Agreement is to the Fund and that it will place the interest of the Fund and the members of the Plan above all others and will not enter into any agreement or take any action contrary to that obligation Callan shall be governed in all of its activities by Chapter 112 Part VII Florida Statutes including but not limited to the standards applicable to providers of services to retirement plans in Section 112 656 Florida Statutes as they relate to consultant services While no guarantee of investment results is made Callan shall make the Fund whole for any loss caused solely by its gross negligence or material breach of this Agreement provided that in any case where any part of an investment loss is caused by or is alleged to have been caused by a breach of duty of any nature by an investment manager or advisor the Fund will not make any claim or take any action in any court against Callan unless it shall also make a claim against the investment manager or advisor in that same court Notwithstanding the above Clearwater acknowledges and agrees that Callan s obligation under this Agreement is to act as a consultant to assist the fiduciaries of the Fund in obtaining the level of expertise they need to prudently fulfill their fiduciary duties Clearwater retains the absolute and unrestricted fiduciary responsibility for making all investment decisions with respect to the Fund but in making those decisions may draw upon the resources and expertise of Callan to the extent it deems necessary to perform its responsibilities consistent with the standard of care applicable to its employees as fiduciaries under the relevant state statutes Callan shall also be responsible for reasonably measuring the performance by managers relative to the performance measurement standards as outlined in the Investment Objectives 2 Attachment number 1 Page 2 of 8 Item # 5 Guidelines and Procedures as referenced in Attachment A hereto on a quarterly basis and shall report to Clearwater on a quarterly basis such performance measurement However Callan is not responsible for buy sell or hold decisions of the investment managers and advisors for the Fund and shall have no duty to affirmatively inquire into the adequacy of any investment manager s or advisor s due diligence or prudence in making its buy sell or hold decisions such duty belonging solely to the investment managers Nor shall Callan be responsible for reviewing the risks of individual securities or the compliance non compliance of individual security holdings with the Fund s Investment Objectives Guidelines and Procedures Clearwater acknowledges and agrees that Callan s expertise is in reviewing and commenting on the investment results achieved by investment managers and advisors and not in actual management of the assets of the Fund Callan shall utilize its expertise in making its recommendations to the Fund but shall have no authority or duty to direct hire or fire investment managers and advisors of the Fund Callan shall not be liable for good faith reliance on any written or oral representation of such investment managers and advisors in making its reports and recommendations to Clearwater Callan does not waive any rights it may have for indemnity or contribution from investment managers and advisors in the event of any claim against or liability of Callan Clearwater will not release or attempt to release any investment manager investment advisor or mutual fund from any claim or liability arising from investment activities subject to performance measurement by Callan without also releasing Callan and a release of an investment manager investment advisor or mutual fund from liability arising from losses attributable to investment decisions of such person or entity shall constitute by that fact alone a release of Callan Callan agrees to disclose in writing to the Clearwater within seven 7 business days if Callan becomes the subject of an investigation by the Securities and Exchange Commission for alleged breach of federal securities laws an investigation by the U S Department of Justice for allegations relating to violation of federal securities laws or related allegations of fraud or if the Callan is named as the defendant in any civil action alleging fraud negligence or breach of fiduciary responsibility in connection with its consulting duties Callan and its employees will not render any legal accounting or actuarial advice and will not prepare any legal accounting or actuarial documents Callan encourages Clearwater to obtain such services from competent professionals Callan will treat confidentially by not disclosing to unaffiliated persons information furnished by the Fund to Callan hereunder without Clearwater s consent except i incident to a subcontract or service contract entered into by Callan to assist in performing services hereunder ii in connection with an audit or regulatory examination or iii as may otherwise be legally required 10 REGISTERED INVESTMENT ADVISER Callan is a registered investment adviser under the Investment Advisers Act of 1940 3 Attachment number 1 Page 3 of 8 Item # 5 11 CHANGES IN THE AGREEMENT Any change to this Agreement shall be in writing in the form of an amendment mutually agreed upon and duly executed by both parties Callan s named representative shall be the point of contact with regard to contractual matters 12 ASSIGNMENT No assignment in whole or in part of this Agreement and no delegation except as contemplated herein of any part or all of the performance of its duties hereunder may be made by Callan without the prior written consent of Clearwater and any attempted assignment or delegation without such consent will be void 13 FORM ADV Clearwater acknowledges receipt of Callan s disclosure statement Form ADV Part II more than 48 hours prior to the date of the execution of this Agreement 14 PROFESSIONAL LIABILITY INSURANCE Professional liability insurance shall be maintained by the Advisor during the life of this Agreement with the following limit of liability Professional Liability 1 000 000 00 The Advisor shall provide the Trustees with proof of insurance within seven 7 business days of execution of this Agreement and annually thereafter during the first week of January of each year 4 Attachment number 1 Page 4 of 8 Item # 5 BY THE SIGNATURES affixed below the above Agreement is hereby accepted as to all the terms and conditions CALLAN ASSOCIATES INC llY V Date Countersigned CITY OF CLEARWATER FLORIDA 4 e t Frank V Hibbard Mayor Approved as to form By dJ 73 Y William B Ho II City Manager Attest 5 Attachment number 1 Page 5 of 8 Item # 5 Attachment A SCOPE OF WORK 1 INVESTMENT POUCIES AND GUlDEUNES Upon the written request of Clearwater Callan shall conduct an annual review of the Fund s Investment Objectives Guidelines and Procedures and if necessary make recommendations for amendments thereto 2 PERFORMANCE EVALUATION Callan shall review and evaluate the performance of the investment managers and advisors for the Fund and shall provide written quarterly reports to Clearwater Callan shall attend quarterly meetings and make oral presentations regarding the investment managers performance for up to five 5 meetings in each year of the term of this Agreement Clearwater agrees that the timing of these meetings shall be established ninety 90 days in advance of the event If additional investment managers accounts are added or deleted the charge for the Investment Measurement Service Reports referenced in Attachment B shall then be mutually agreed upon in writing between Callan and Clearwater in the form of an amendment to this Agreement duly executed by both parties 3 ASSET ALLOCATIONILIABILITY ANALYSIS Upon the written request of Clearwater Callan will conduct a study comparing the Fund s current asset allocation actuarial assumptions and investment structure to alternate asset mixes and structures Callan will examine the impact of these alternatives on the Fund s projected return and liabilities over time At the conclusion of the study Callan will provide a written report defining alternative asset allocation strategies and comparing the advantages and disadvantages to that of other available strategies 4 MANAGER STRUCTURE REVIEW On a per asset class basis if requested by Clearwater Callan will analyze the Fund s existing investment manager structure to determine a range of optimal mixes by style and capitalization as applicable At the conclusion of the review Callan will provide a written report defining alternative manager structures and compare the advantages and disadvantages to that of other available structures 5 INVESTMENT MANAGER SEARCH The investment manager search process assumes Callan s normal process which is tailored to individual client guidelines and results in a group of candidates named for possible selection by Clearwater At the conclusion of the review Callan will provide a written report defining alternative manager candidates and compare the advantages and disadvantages of each The Callan consultant shall also be available to attend finalist interviews to provide additional 6 Attachment number 1 Page 6 of 8 Item # 5 discussion as necessary to aid in Clearwater s manager selection decision which decision is the sole responsibility of Clearwater 6 CALLAN INVESTMENTS INSTITUTE During the term of this Agreement Clearwater will be a member of the Callan Investments Institute CII CII is a continuing education and research facility in the pensions and investments industry A division of Callan the Institute was established in 1980 and its membership has steadily grown to over 400 leading corporate public endowmentfoundation and multi employer fund sponsor and investment management The Institute provides research and educational assistance through periodic surveys monthly and quarterly market index summaries and research papers In addition trustees and staff designated by trustees may attend regional and national Institute conferences without payment of a registration fee 7 ADDITIONAL CONSULTING SERVICES To be mutually agreed upon in writing by Callan and Clearwater 7 Attachment number 1 Page 7 of 8 Item # 5 Attachment B FEES 1 Revision andor establishment of written investment policy objectives and guidelines 10 000 2 Quarterly performance evaluation Five meetings per year in Clearwater are included in this fee 3 Asset AllocationlLiability Analysis 4 Manager Structure Review per asset class 5 Re evaluation and selection of money managers mutual funds Domestic Manager Search International Manager Search L O A v A 8 72 000 45 000 25 000 30 000 35 000 Attachment number 1 Page 8 of 8 Item # 5 Attachment number 2 Page 1 of 2 Item # 5 Attachment number 2 Page 2 of 2 Item # 5 Pension Trustees Agenda Council Chambers - City Hall Meeting Date:5/13/2008 SUBJECT / RECOMMENDATION: Approve the granting of a regular pension to Nancy Yankus effective March 1, 2008. SUMMARY: Nancy Yankus was hired on June 30, 1987, as a part-time employee and did not become full-time and pension eligible until November 26, 1990. Her original part-time hire date of June 30, 1987, was entered into the payroll system as her pension effective date. Ms. Yankus terminated employment on July 10, 1999. At that time the incorrect date of June 30, 1987, was erroneously used on her Application for Vested Pension Rights. Since Ms. Yankus was not eligible to participate in the Pension Plan while a part-time employee, the pension date should have been November 26, 1990. Consequently, she did not have ten years of creditable pension service upon her termination. After consulting with Klausner & Kaufman, the City's pension attorneys, they recommended that Ms. Yankus be allowed to make the required pension contribution on the salary she received as a part-time employee from June 30, 1987, through November 25, 1990. During that time she earned $35,256.71. The 8% employee contribution required at that time would have amounted to $2,850.54. Upon payment of the pension contributions, Ms. Yankus would be eligible to receive a pension based on 12 years and 10 days of service. Her base benefit would amount to $673.59. Additionally, Ms Yankus would be required to sign a waiver stating she will seek no further action against the City of Clearwater's Employees' Pension Plan. Ms. Yankus has agreed to these terms and has provided payment and the signed waiver. Upon approval of the Trustees, her benefit will be paid retroactively to March 1, 2008. Review Approval:1) Legal 2) Clerk 3) Assistant City Manager 4) Clerk 5) City Manager 6) Clerk Cover Memo Item # 6 Pension Trustees Agenda Council Chambers - City Hall Meeting Date:5/13/2008 SUBJECT / RECOMMENDATION: Employees listed below be accepted into membership in the City of Clearwater Employees' Pension Plan. SUMMARY: Pension Elig. Name, Job Class, Department/Division Date Date Salvatore Accomando, Police Officer/Police 3/3/08 3/3/08 Patrick Pongon, Field Service Rep./Customer Service 2/19/08 2/19/08 Joseph Doiron, Electronics Technician /Engineering 3/3/08 3/3/08 Penny Johnston, Senior Payroll Technician/Finance 3/17/08 3/17/08 Michael Billian, Fleet Mechanic/Solid Waste-General Services 3/17/08 3/17/08 Review Approval:1) Clerk Cover Memo Item # 7 Pension Trustees Agenda Council Chambers - City Hall Meeting Date:5/13/2008 SUBJECT / RECOMMENDATION: Review of the pension investion performance for the year ended December 31, 2007. SUMMARY: The following is the performance for the Pension Plan for the period ending December 31, 2007: Last Year Last 3 Years Total Fund 7.22% 8.54% Benchmark 6.30% 7.64% Public Funds 8.30% 9.90% These numbers show that we have beaten our benchmark (which is based upon the allowable investments for which we had permission to invest in during these time periods), but have not beaten the mid point of other public pension plans. This under performance compared with other public pension plans was caused by our investment restrictions. We are in the final phases of adjusting the restrictions that we believe were a major cause of these performance issues. Fundamental changes have occurred to the plan with the implementation of the Asset Allocation Study. The following are some of the highlights. During the last calendar year the following investment styles were added: Small Cap Growth Manager - Independence Capital Mid Cap Value Manager - Wedge Capital During the last calendar year the following new managers were added: Aletheia Research & Management - Large Cap Value HTGI Russell 1000 Value Index - Large Cap Value Since the first of this year the following investment styles were added: Emerging Markets Eaton Vance Partial Funding Emerging Markets Wellington Trust Company Partial Funding REITs Security Capital Partial Funding Active EAFE Earnest Partners Fully Funded Active EAFE Wentworth Hauser Fully Funded The averaging in funding (for the above partial funded managers) will be completed in the near future. Once this is completed the Asset Allocation Study will have been implemented except of the High Yield portion. Given the problems with sub prime mortgages and structured investment vehicles this implementation has been put on hold. Review Approval:1) Clerk Cover Memo Item # 8 Callan Associates Inc. Investment Measurement Service Quarterly Review City of Clearwater Employees Pension Fund December 31, 2007 The following report was prepared by Callan Associates Inc. ("CAI") using information from sources that include the following: fund trustee(s); fund custodian(s); investment manager(s); CAI computer software; CAI investment manager and fund sponsor database; third party data vendors; and other outside sources as directed by the client. CAI assumes no responsibility for the accuracy or completeness of the information provided, or methodologies employed, by any information providers external to CAI. Reasonable care has been taken to assure the accuracy of the CAI database and computer software. In preparing the following report, CAI has not reviewed the risks of individual security holdings or the compliance/non-compliance of individual security holdings with investment policies and guidelines of a fund sponsor, nor has it assumed any responsibility to do so. Copyright 2008 by Callan Associates Inc. Attachment number 1 Page 1 of 91 Item # 8 Active Management OverviewActive Management Overview Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Domestic Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Domestic Fixed-Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 International Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 International Fixed-Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Asset Allocation and PerformanceAsset Allocation and Performance Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Cost vs Target Asset Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Actual vs Target Asset Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Investment Manager Asset Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Investment Manager Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Investment Manager Returns - Net of Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Quarterly Total Fund Attribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Cumulative Total Fund Attribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Cumulative Performance Relative to Target . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Actual vs Target Historical Asset Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Total Fund Ranking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Asset Class Rankings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Domestic EquityDomestic Equity Domestic Equity Composite . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Large Cap Composite . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Aletheia Research and Management, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 ING Investment Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 NTGI - Russell 1000 Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Mid Cap Composite . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Artisan Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Denver Investment Advisors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 WEDGE Capital Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Small Cap Composite . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Atlanta Capital Management Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Independence Investments LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Systematic Financial Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 International EquityInternational Equity International Equity Composite . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 NTGI-QM Enhanced EAFE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 Domestic Fixed-IncomeDomestic Fixed-Income Domestic Fixed-Income Composite . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 Dodge & Cox, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 NTGI-QM Collective Aggregate Bd Idx Fd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 Western Asset Management Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 DisclosuresDisclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 Callan Research/EducationCallan Research/Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 Attachment number 1 Page 2 of 91 Item # 8 Active Management ‘Overview ‘ Attachment number 1 Page 3 of 91 Item # 8 MARKET OVERVIEW ACTIVE MANAGEMENT VS INDEX RETURNS Market Overview The charts below illustrate the range of returns across managers in Callan’s Separate Account database over the most recent one quarter and one year time periods. The database is broken down by asset class to illustrate the difference in returns across those asset classes. An appropriate index is also shown for each asset class for comparison purposes. As an example, the first bar in the upper chart illustrates the range of returns for domestic equity managers over the last quarter. The triangle represents the S&P 500 return. The number next to the triangle represents the ranking of the S&P 500 in the domestic equity manager database. Range of Separate Account Manager Returns by Asset Class One Quarter Ended December 31, 2007 Returns(10%) (8%) (6%) (4%) (2%) 0% 2% 4% 6% Domestic Non-US Domestic Non-US Real Cash Equity Equity Fixed-Income Fixed-Income Estate Equivalents vs vs vs vs vs vs S&P 500 MSCI EAFE LB Aggr Bd Citi Non-US Gov NCREIF Index 3 Mon T-Bills (51) (71) (27) (29)(44) (87) 10th Percentile 0.99 1.77 3.33 4.25 4.45 1.55 25th Percentile (1.28)0.25 3.02 3.95 3.74 1.43 Median (3.31) (0.77)2.52 3.80 3.03 1.30 75th Percentile (5.36) (2.28)1.65 3.43 2.21 1.24 90th Percentile (7.35) (3.67) (0.07)2.77 1.20 0.86 Index (3.33) (1.75)3.00 3.91 3.21 1.05 Range of Separate Account Manager Returns by Asset Class One Year Ended December 31, 2007 Returns(10%) (5%) 0% 5% 10% 15% 20% 25% Domestic Non-US Domestic Non-US Real Cash Equity Equity Fixed-Income Fixed-Income Estate Equivalents vs vs vs vs vs vs S&P 500 MSCI EAFE LB Aggr Bd Citi Non-US Gov NCREIF Index 3 Mon T-Bills (54) (61) (37) (35) (28) (83) 10th Percentile 18.66 21.18 7.85 12.04 19.06 5.72 25th Percentile 11.88 17.56 7.26 11.57 16.31 5.55 Median 5.87 13.05 6.58 11.06 12.98 5.42 75th Percentile 1.29 9.33 5.28 9.95 9.96 5.23 90th Percentile (4.02)6.30 3.53 8.95 4.72 4.25 Index 5.49 11.17 6.97 11.46 15.85 5.00 2City Of Clearwater Employees Pension Fund Attachment number 1 Page 4 of 91 Item # 8 DOMESTIC EQUITY Active Management Overview Active vs the Index Driven by two Fed rate cuts, a stronger than expected retail sales report in November and multiple cash infusions from Sovereign Wealth Funds, the U.S. domestic stock market saw two rallies in the fourth quarter. The first rally occurred at the end of November and the second midway through December. Unfortunately, these rallies turned out to be unsustainable as the spillover of the subprime market into the broader credit market and numerous charge-offs from many of the world’s largest banks, drove all domestic equity indexes lower for the quarter. The median fund across all capitalizations and style groups outperformed their respective benchmarks in the fourth quarter except for Small Cap Value which underperformed its benchmark. For the year ended December 31, 2007, all groups except Small Cap Value and Large Cap Value outperformed their benchmarks. Large Cap vs Small Cap With recession fears lingering, investors continued to favor larger, more stable firms in the fourth quarter, resulting in the continued outperformance of large capitalization stocks compared to their small cap peers. The median Large Cap Core manager lost 2.74%, 59 basis points less than the S&P 500’s loss of 3.33%. The median Small Cap Broad manager lost 5.54%, 91 basis points ahead of the S&P 600’s loss of 6.45%. The median Mid Cap Broad manager fared better than the median Small Cap manager posting a 3.13% loss, 40 basis points lower than the S&P Mid Cap Index’s loss of 2.73%. However, Mid Cap Broad fell 39 basis points behind the median Large Cap Core fund. For the year ended December 31, 2007, Large Cap bested Small Cap across all styles, with Mid Cap managers beating both Large and Small Cap funds. Growth vs Value The recent investor preference for growth stocks continued last quarter’s trend. The median Large Cap Growth manager gained 0.20% in the fourth quarter, 533 basis points ahead of the median Large Cap Value fund’s loss of 5.13%. For the year, the median Large Cap Growth manager returned 16.02%, a staggering 14.89% ahead of the 1.13% return from the median Large Cap Value manager. Similar results can be found in the Mid Cap and Small Cap arenas, with the largest discrepancy between growth and value performance belonging to the Mid Cap stocks. Despite a 1.38% loss in the fourth quarter, the median Mid Cap Growth manager returned 19.36% for the twelve months ended December 31, 2007, resulting in the best performance of the year. The median Mid Cap Value manager returned a meager 1.96%. Separate Account Style Group Median Returns for Quarter Ended December 31, 2007 (10%) (8%) (6%) (4%) (2%) 0% 2% (2.88%) Small Cap Growth (8.32%) Small Cap Value (5.54%) Small Cap Broad (1.38%) Mid Cap Growth (4.20%) Mid Cap Value (3.13%) Mid Cap Broad 0.20% Large Cap Growth (5.13%) Large Cap Value (2.74%) Large Cap CoreReturnsS&P 500:(3.33%) S&P 500 Growth:(1.28%) S&P 500 Value:(5.37%) S&P Mid Cap:(2.73%) S&P 600:(6.45%) S&P 600 Growth:(5.96%) S&P 600 Value:(6.93%) Separate Account Style Group Median Returns for One Year Ended December 31, 2007 (15%) (10%) (5%) 0% 5% 10% 15% 20% 25% 13.70% Small Cap Growth (8.60%) Small Cap Value 1.36% Small Cap Broad 19.36% Mid Cap Growth 1.96% Mid Cap Value 9.04% Mid Cap Broad 16.02% Large Cap Growth 1.13% Large Cap Value 6.35% Large Cap CoreReturnsS&P 500: 5.49% S&P 500 Growth: 9.13% S&P 500 Value: 1.99% S&P Mid Cap: 7.98% S&P 600:(0.30%) S&P 600 Growth: 5.60% S&P 600 Value:(5.54%) 3City Of Clearwater Employees Pension Fund Attachment number 1 Page 5 of 91 Item # 8 DOMESTIC FIXED-INCOME Active Management Overview Active vs the Index The Federal Open Market Committee lowered the Federal Funds rate by 25 basis points to 4.50% in the fourth quarter. Although strong economic growth continued in the third quarter, the Federal Reserve board expects the pace of economic expansion to slow in the near term due to the housing correction. The Lehman Aggregate returned 3.00%, up 16 basis points from last quarter, finishing 33 basis points ahead of the median Core Bond Fund’s return of 2.67%. For the year ended December 31, 2007, the Lehman Aggregate returned 6.97%, 36 basis points higher than the median Core Bond Fund’s return of 6.61%. Short vs Long Duration The yield curve remained relatively steep as the Federal Reserve continued its commitment to cutting the Federal Funds rate in the wake of the housing crisis. The median Extended Maturity manager’s return of 4.05% was 266 basis points higher than the median Active Cash Manager’s return of 1.39% for the fourth quarter of 2007. The results for the twelve months ended December 31, 2007 closely resemble those for the fourth quarter, with the median Extended Maturity Manager returning 6.66%, 133 basis points higher than the median Active Cash Manager’s return of 5.33%. Mortgages and High Yield The Federal Open Market Committee’s decision to continue to lower the Federal Funds rate is related to the subprime housing market downturn and the tightening of credit. The Lehman Mortgage index was up 42 basis points over third quarter 2007’s return of 2.64%. For calendar year 2007, the median Mortgage Backed fund returned 6.81%, underperforming the Lehman Mortgage index which returned 6.90%. In the fourth quarter, High Yield funds were the worst performers losing 0.67%, 63 basis points ahead of the Lehman High Yield index. For the year ended December 31, 2007, the median High Yield fund outperformed the Lehman High Yield index, 3.34% versus 1.87%. Separate Account Style Group Median Returns for Quarter Ended December 31, 2007 (2%) (1%) 0% 1% 2% 3% 4% 5% 1.39% Active Cash 2.07% Defensive 2.92% Intermed 2.67% Core Bond 2.02% Core Plus 4.05% Extended Maturity 3.12% Active Duration 2.97% Mortgage Backed (0.67%) High YieldReturnsLehman Universal: 2.67% Lehman Aggregate: 3.00% Lehman Govt/Credit: 3.10% Lehman Mortgage: 3.06% Lehman High Yield:(1.30%) Separate Account Style Group Median Returns for One Year Ended December 31, 2007 0% 2% 4% 6% 8% 10% 5.33% Active Cash 6.43% Defensive 7.31% Intermed 6.61% Core Bond 5.74% Core Plus 6.66% Extended Maturity 7.24% Active Duration 6.81% Mortgage Backed 3.34% High YieldReturnsLehman Universal: 6.50% Lehman Aggregate: 6.97% Lehman Govt/Credit: 7.23% Lehman Mortgage: 6.90% Lehman High Yield: 1.87% 4City Of Clearwater Employees Pension Fund Attachment number 1 Page 6 of 91 Item # 8 INTERNATIONAL EQUITY Active Management Overview Active vs. the Index Volatility and uncertainty with regards to U.S. markets continued to spill over into the international arena as median funds across all style groups (with the exception of Emerging Markets) posted negative returns for the quarter ended December 31, 2007. Chinese attempts to cool its economy did not prevent the median Emerging Markets fund from posting a 4.14% gain for the quarter, besting its benchmark by 48 basis points. Strong performances by Brazil and India buoyed Emerging Markets in the 4th quarter contributing to a 40.44% return for the year ended December 31, 2007, while the MSCI Emerging Markets Index gained 39.78%. Europe Struggles to curb economic slowdown while avoiding inflationary threats resulted in the median Europe fund posting a loss of 1.08% for the quarter ended December 31, 2007. The UK experienced its slowest economic growth since 2005. This, coupled with the euro’s continued appreciation and subsequent widening of currency imbalances (with respect to the yuan, yen, and dollar), will continue to put a strain on economic growth in Europe. The median Europe fund posted 12.95% for the year, while the MSCI Europe Index returned 13.86%. Pacific Australia has appeared to escape the effects of problems abroad. With high job growth and retail sales, Australia’s economy remains strong. In addition, the Australian and New Zealand dollar continue to rise, on speculation of Fed rate cuts. However, Japan continues to be a significant drag on the region’s performance (losing 5.65% for the quarter) which resulted in the median Pacific Basin fund down 2.28% for the quarter ended December 2007, 235 basis points ahead of its benchmark. For the year, the median Pacific Basin fund gained 11.50%, besting its benchmark by 6.20%. Separate Account Style Group Median Returns for Quarter Ended December 31, 2007 (8%) (6%) (4%) (2%) 0% 2% 4% 6% (1.08%) Europe (1.39%) Core Int’l 0.06% Core Plus (2.28%) Pacific Basin (5.65%) Japan Only 4.14% Emerging Markets (1.95%) Global EquityReturnsMSCI AC World Index (1.70%) MSCI ACW ex US Free:(0.62%) MSCI EAFE:(1.75%) MSCI Europe:(0.46%) MSCI Pacific:(4.63%) MSCI Emerging Markets: 3.66% Separate Account Style Group Median Returns for One Year Ended December 31, 2007 (20%) (10%) 0% 10% 20% 30% 40% 50% 12.95% Europe 11.02% Core Int’l 15.48% Core Plus 11.50% Pacific Basin (3.44%) Japan Only 40.44% Emerging Markets 9.72% Global EquityReturnsMSCI AC World Index 12.18% MSCI ACW ex US Free: 17.12% MSCI EAFE: 11.17% MSCI Europe: 13.86% MSCI Pacific: 5.30% MSCI Emerging Markets: 39.78% 5City Of Clearwater Employees Pension Fund Attachment number 1 Page 7 of 91 Item # 8 INTERNATIONAL FIXED-INCOME Active Management Overview Active vs. the Index Currency infusions and rate cuts by the world’s central banks have failed to provide a permanent solution to the credit crisis. Developed nations now face the difficult task of maintaining growth in the face of devaluing currencies and increased commodity prices. Japan continues to delay plans for further rate increases, while the European Central Bank has turned its attention to inflation. Modest gains characterized the International Fixed-Income market in the fourth quarter of 2007 and median fund manager returns trailed benchmark returns across all style groups. The median Global Fixed-Income fund returned 3.50%, 42 basis points less than the Citi World Government Index return of 3.92%. The median Non-U.S. Fixed-Income fund returned 3.80%, falling short of the 3.91% return of its benchmark. For the year, median manager returns again fell behind their benchmarks, with Global Fixed-Income funds returning 10.21% vs. 10.95% for its benchmark. Non-U.S. Fixed-Income’s return of 11.06% was 39 basis points behind its index. Emerging Markets Emerging Market debt continues to be a beacon of stability. The median Emerging Debt fund returned 2.26%, compared to 2.00% for the third quarter. However, manager returns fell short of the JP Morgan Emerging Market index return of 4.41%. The one-year median Emerging Debt manager’s return of 7.22% is less than half of its benchmark return. Investor apprehension and the evaporation of liquidity have widened credit spreads. Developing nations have rushed to issue new debt as borrowing conditions are predicted to worsen. China, a net creditor to the developed world, has tightened its policies, raising reserve requirements 9 times in the past 18 months by a cumulative 500 basis points. Separate Account Style Group Median Returns for Quarter Ended December 31, 2007 0% 1% 2% 3% 4% 5% 3.80% Non-US Fixed-Income 3.50% Global Fixed-Income 2.26% Emerging Debt 2.67% Domestic Core BondReturnsCiti World Govt: 3.92% Citi Non-US Govt: 3.91% Citi Non-US Hedged: 1.94% JP Morgan Emerging Mkt: 4.41% Separate Account Style Group Median Returns for One Year Ended December 31, 2007 0% 2% 4% 6% 8% 10% 12% 14% 11.06% Non-US Fixed-Income 10.21% Global Fixed-Income 7.22% Emerging Debt 6.61% Domestic Core BondReturnsCiti World Govt: 10.95% Citi Non-US Govt: 11.46% Citi Non-US Hedged: 4.88% JP Morgan Emerging Mkt: 15.92% 6City Of Clearwater Employees Pension Fund Attachment number 1 Page 8 of 91 Item # 8 Asset Allocation ‘and Performance ‘ Attachment number 1 Page 9 of 91 Item # 8 ASSET ALLOCATION AND PERFORMANCE Asset Allocation and Performance This section begins with an overview of the fund’s asset allocation at the broad asset class level. This is followed by a top down performance attribution analysis which analyzes the fund’s performance relative to the performance of the fund’s policy target asset allocation. The fund’s historical performance is then examined relative to funds with similar objectives. Performance of each asset class is then shown relative to the asset class performance of other funds. Finally a summary is presented of the holdings of the fund’s investment managers, and the returns of those managers over various recent periods. 8City Of Clearwater Employees Pension Fund Attachment number 1 Page 10 of 91 Item # 8 Actual vs Target Cost Allocation The top left chart shows the Fund’s asset allocation as of December 31, 2007. The top right chart shows the Fund’s target asset allocation as outlined in the investment policy statement. The bottom chart ranks the fund’s asset allocation and the target allocation versus the CAI Public Fund Sponsor Database. Actual Cost Allocation Domestic Equity 49% International Equity 15% Domestic Fixed-Income 36% Target Cost Allocation Domestic Equity 51% International Equity 9% Domestic Fixed-Income 40% $000s Percent Percent Percent $000s Asset Class Actual Actual Target Difference Difference Domestic Equity 287,107 48.8% 51.0%(2.2%) (12,812) International Equity 88,463 15.0% 9.0% 6.0% 35,536 Domestic Fixed-Income 212,507 36.1% 40.0%(3.9%) (22,724) Total 588,077 100.0% 100.0% Asset Class Weights vs CAI Public Fund Sponsor Database Weights0% 10% 20% 30% 40% 50% 60% 70% Domestic Domestic Short Real International Intl Alternative Equity Fixed-Income Term-Cash Estate Equity Fixed-Inc (27)(19) (14) (8) (77) (96) 10th Percentile 54.11 38.20 6.45 11.16 24.60 8.71 19.24 25th Percentile 49.26 33.78 1.70 9.70 22.00 5.25 10.85 Median 43.00 27.05 0.74 6.68 18.91 3.45 7.28 75th Percentile 37.61 21.17 0.17 4.67 15.62 1.90 4.17 90th Percentile 32.08 18.12 0.08 3.93 11.83 0.95 1.77 Fund 48.82 36.14 - - 15.04 - - Target 51.00 40.00 - - 9.00 - - % Group Invested 97.70% 100.00% 47.67% 52.33% 96.51% 25.58% 41.86% * Current Quarter Target = 51.0% S&P 500, 40.0% L/B Agg and 9.0% MSCI EAFE Index. 9City Of Clearwater Employees Pension Fund Attachment number 1 Page 11 of 91 Item # 8 Actual vs Target Asset Allocation The top left chart shows the Fund’s asset allocation as of December 31, 2007. The top right chart shows the Fund’s target asset allocation as outlined in the investment policy statement. The bottom chart ranks the fund’s asset allocation and the target allocation versus the CAI Public Fund Sponsor Database. Actual Asset Allocation Domestic Equity 48% International Equity 18% Domestic Fixed-Income 34% Target Asset Allocation Domestic Equity 50% International Equity 18% Domestic Fixed-Income 32% $000s Percent Percent Percent $000s Asset Class Actual Actual Target Difference Difference Domestic Equity 298,701 48.0% 50.0%(2.0%) (12,574) International Equity 109,243 17.5% 18.0%(0.5%) (2,816) Domestic Fixed-Income 214,606 34.5% 32.0% 2.5% 15,390 Total 622,551 100.0% 100.0% Asset Class Weights vs CAI Public Fund Sponsor Database Weights0% 10% 20% 30% 40% 50% 60% 70% Domestic Domestic Short Real International Intl Alternative Equity Fixed-Income Term-Cash Estate Equity Fixed-Inc (33)(23) (20)(28) (62)(58) 10th Percentile 54.11 38.20 6.45 11.16 24.60 8.71 19.24 25th Percentile 49.26 33.78 1.70 9.70 22.00 5.25 10.85 Median 43.00 27.05 0.74 6.68 18.91 3.45 7.28 75th Percentile 37.61 21.17 0.17 4.67 15.62 1.90 4.17 90th Percentile 32.08 18.12 0.08 3.93 11.83 0.95 1.77 Fund 47.98 34.47 - - 17.55 - - Target 50.00 32.00 - - 18.00 - - % Group Invested 97.70% 100.00% 47.67% 52.33% 96.51% 25.58% 41.86% * Current Quarter Target = 50.0% S&P 500, 32.0% L/B Agg and 18.0% MSCI EAFE Index. 10City Of Clearwater Employees Pension Fund Attachment number 1 Page 12 of 91 Item # 8 Investment Manager Asset Allocation The table below contrasts the distribution of assets across the Fund’s investment managers as of December 31, 2007, with the distribution as of September 30, 2007. The change in asset distribution is broken down into the dollar change due to Net New Investment and the dollar change due to Investment Return. Asset Distribution Across Investment Managers December 31, 2007 September 30, 2007 Market Value Percent Net New Inv. Inv. Return Market Value Percent Domestic Equity $298,701,280 47.98%$(0) $(9,275,236)$307,976,516 49.01% Aletheia Research 18,443,125 2.96% 0 (875,342)19,318,468 3.07% Artisan Partners 26,364,294 4.23%(0) (44,410)26,408,703 4.20% Atlanta Capital Management 18,249,870 2.93%(0) (496,075)18,745,945 2.98% Denver Investment Advisors 35,465,131 5.70%(0) (1,216,740)36,681,871 5.84% ING Investment Management 63,467,135 10.19% 0 1,866,863 61,600,272 9.80% Independence Investments LLC 41,002,012 6.59% 0 (2,306,739)43,308,751 6.89% NTGI Russell 1000 Value 48,696,463 7.82%(0) (2,974,214)51,670,677 8.22% Systematic Financial Mgmt. 17,474,238 2.81%(0) (1,489,765)18,964,004 3.02% WEDGE Capital Management 29,539,013 4.74%(0) (1,738,813)31,277,826 4.98% International Equity $109,243,339 17.55%$(16) $(2,526,640)$111,769,996 17.79% NTGI-QM Enhanced EAFE 109,243,339 17.55%(16) (2,526,640)111,769,996 17.79% Domestic Fixed-Income $214,606,472 34.47% $1,138,057 $4,846,577 $208,621,838 33.20% Dodge & Cox, Inc. 101,707,299 16.34% 0 1,809,437 99,897,861 15.90% NTGI-QM Collective Agg Bd Idx 8,815,363 1.42% 0 261,309 8,554,054 1.36% Western Asset Management Co. 100,798,329 16.19% 0 2,772,841 98,025,488 15.60% Secs. Lending Income Account 332,441 0.05% 167,363 2,989 162,090 0.03% In-House Account 2,953,040 0.47% 970,694 0 1,982,346 0.32% Total Fund $622,551,091 100.0% $1,138,041 $(6,955,300)$628,368,350 100.0% 11City Of Clearwater Employees Pension Fund Attachment number 1 Page 13 of 91 Item # 8 Investment Manager Returns and Peer Group Rankings The table below details the rates of return and peer group rankings for the Sponsor’s investment managers over various time periods ended December 31, 2007. Negative returns are shown in red, positive returns in black. Returns for one year or greater are annualized. The first set of returns for each asset class represents the composite returns for all the fund’s accounts for that asset class. Returns and Rankings for Periods Ended December 31, 2007 Market Last Last Last Value Ending Last Last 3 5 20 $(mm) Weight Quarter Year Years Years Years Domestic Equity $299 47.98%(3.01%)7.17% 9.41% 14.67% 12.51%43 19 30 28 21 S&P 500 - -(3.33%)5.49% 8.62% 12.83% 11.82%69 52 76 86 56 Public Fund - Dom Equity - -(3.15%)5.61% 8.99% 13.70% 12.02%50 50 50 50 50 Aletheia Research & Mgmt. 18 2.96%(4.53%)- - - -34 NTGI Russell 1000 Value 49 7.82%(5.76%)- - - -67 Russell 1000 Value - -(5.80%) (0.17%)9.32% 14.63% 12.77%68 63 57 51 59 CAI Large Cap Value Style - -(5.13%)1.13% 9.70% 14.67% 13.03%50 50 50 50 50 ING Investment Management 63 10.19% 3.03% 17.11% 12.02% 15.04% 13.00%13 42 24 27 30 Russell 1000 Growth - -(0.77%)11.81% 8.68% 12.11% 10.66%67 72 63 60 92 CAI Lrg Cap Growth Style - - 0.20% 16.02% 9.98% 12.70% 12.30%50 50 50 50 50 Artisan Partners 26 4.23%(0.17%)22.32% 14.36% 18.37% -36 32 42 48 Denver Investment Advisors 35 5.70%(3.32%)12.31% 10.67% 16.93% 14.25%84 83 76 71 70 Russell Mid Cap Growth - -(1.70%)11.43% 11.39% 17.90% 12.10%60 86 69 56 94 CAI Mid Cap Growth Style - -(1.38%)19.36% 13.60% 18.31% 14.97%50 50 50 50 50 WEDGE Capital Management 30 4.74%(5.56%)- - - -69 Russell Midcap Value - -(5.97%) (1.42%)10.11% 17.92% 14.11%76 80 56 40 67 CAI Mid Cap Value Style - -(4.20%)1.96% 10.49% 17.39% 14.70%50 50 50 50 50 Independence Investments 41 6.59%(5.33%)- - - -79 Russell 2000 Growth - -(2.10%)7.05% 8.11% 16.50% 8.81%37 74 71 62 99 CAI Sm Cap Growth Style - -(2.88%)13.70% 10.47% 17.42% 14.58%50 50 50 50 50 Atlanta Capital Management 18 2.93%(2.65%)6.90% 9.68% - -1 4 11 Systematic Financial Management 17 2.81%(7.86%)0.47% 8.85% - -46 16 17 Russell 2000 Value Index - -(7.28%) (9.78%)5.27% 15.80% 13.30%38 59 45 54 79 CAI Small Cap Value Style - -(8.32%) (8.60%)4.79% 16.14% 14.80%50 50 50 50 50 International Equity $109 17.55%(2.26%)11.01% 17.03% 19.84% -95 89 80 90 Public Fund - Intl Equity - -(0.53%)15.27% 19.04% 22.56% 9.17%50 50 50 50 50 NTGI-QM Enhanced EAFE 109 17.55%(2.26%)11.01% 17.18% - -74 63 67 MSCI EAFE Index - -(1.75%)11.17% 16.83% 21.59% 7.45%71 61 72 67 100 CAI Non-U.S. Equity Style - -(0.77%)13.05% 18.48% 22.66% 10.55%50 50 50 50 50 Domestic Fixed-Income $215 34.47% 2.32% 5.94% 4.53% 4.26% 6.95%68 77 71 87 88 Public Fund - Dom Fixed - - 2.55% 6.67% 4.64% 4.64% 7.42%50 50 50 50 50 Dodge & Cox, Inc. 102 16.34% 1.81% 5.47% 4.48% - -87 79 72 NTGI-QM Coll Agg Bd Idx Fd 9 1.42% 3.05% 7.15% 4.64% - -20 20 56 Western Asset Management Co. 101 16.19% 2.83% 6.51% 4.64% - -40 58 58 Lehman Brothers Aggregate - - 3.00% 6.97% 4.56% 4.42% 7.56%24 25 70 75 85 CAI Core Bond F-I Style - - 2.67% 6.61% 4.67% 4.66% 7.70%50 50 50 50 50 Total Fund $623 100.00%(1.11%)7.22% 8.54% 10.95% 10.25%89 75 81 82 47 Composite Benchmark - -(1.02%)6.30% 7.64% 10.23% 10.06%85 92 91 87 59 Public Fund Sponsor DB - -(0.58%)8.30% 9.90% 12.83% 10.18%50 50 50 50 50 * Current Quarter Target = 50.0% S&P 500, 32.0% L/B Agg and 18.0% MSCI EAFE Index. 12City Of Clearwater Employees Pension Fund Attachment number 1 Page 14 of 91 Item # 8 Investment Manager Returns and Peer Group Rankings The table below details the rates of return and peer group rankings for the Sponsor’s investment managers over various time periods. Negative returns are shown in red, positive returns in black. Returns for one year or greater are annualized. The first set of returns for each asset class represents the composite returns for all the fund’s accounts for that asset class. 2007 2006 2005 2004 2003 Domestic Equity 7.17% 13.03% 8.12% 13.17% 33.75%19 91 21 34 16 S&P 500 5.49% 15.79% 4.91% 10.88% 28.68%52 22 95 84 87 Public Fund - Dom Equity 5.61% 14.61% 6.50% 12.61% 31.24%50 50 50 50 50 ING Investment Management 17.11% 7.14% 12.02% 10.28% 29.99%42 46 13 28 24 Russell 1000 Growth 11.81% 9.07% 5.26% 6.30% 29.75%72 25 67 65 26 CAI Lrg Cap Growth Style 16.02% 6.70% 7.02% 7.18% 27.19%50 50 50 50 50 Artisan Partners 22.32% 10.95% 10.20% 16.08% 33.85%32 34 76 25 57 Denver Investment Advisors 12.31% 13.81% 6.05% 13.52% 42.06%83 17 95 42 26 Russell Mid Cap Growth 11.43% 10.66% 12.10% 15.48% 42.71%86 39 57 29 24 CAI Mid Cap Growth Style 19.36% 8.33% 12.92% 12.15% 35.96%50 50 50 50 50 Atlanta Capital Management 6.90% 16.21% 6.21% 20.24% -4 59 65 72 Systematic Financial Mgmt. 0.47% 18.60% 8.25% 11.40% -16 50 57 97 Russell 2000 Value Index (9.78%)23.48% 4.71% 22.25% 46.03%59 12 83 56 28 CAI Small Cap Value Style (8.60%)18.75% 9.23% 22.78% 42.49%50 50 50 50 50 International Equity 11.01% 27.63% 13.14% 17.66% 31.06%89 21 82 81 91 Public Fund - Intl Equity 15.27% 26.47% 15.85% 19.59% 37.09%50 50 50 50 50 NTGI-QM Enhanced EAFE 11.01% 28.49% 12.81% - -63 33 80 MSCI EAFE Index 11.17% 26.34% 13.54% 20.25% 38.59%61 48 78 37 36 CAI Non-U.S. Equity Style 13.05% 26.10% 15.86% 18.88% 35.91%50 50 50 50 50 Domestic Fixed-Income 5.94% 5.07% 2.61% 3.92% 3.78%77 35 62 91 89 Public Fund - Dom Fixed 6.67% 4.68% 2.82% 4.83% 4.91%50 50 50 50 50 Dodge & Cox, Inc. 5.47% 5.62% 2.39% - -79 5 89 NTGI-QM Coll Agg Bd Idx Fd 7.15% 4.39% 2.45% 4.37% -20 78 83 64 Western Asset Management Co. 6.51% 4.65% 2.78% - -58 42 48 Lehman Brothers Aggregate 6.97% 4.33% 2.43% 4.34% 4.10%25 80 86 66 71 CAI Core Bond F-I Style 6.61% 4.54% 2.77% 4.48% 4.48%50 50 50 50 50 Total Fund 7.22% 11.76% 6.72% 9.89% 19.63%75 80 67 80 75 Composite Benchmark 6.30% 12.05% 4.72% 9.18% 19.53%92 78 87 82 77 Public Fund Sponsor DB 8.30% 13.97% 7.54% 11.47% 21.14%50 50 50 50 50 * Current Quarter Target = 50.0% S&P 500, 32.0% L/B Agg and 18.0% MSCI EAFE Index. 13City Of Clearwater Employees Pension Fund Attachment number 1 Page 15 of 91 Item # 8 Investment Manager Returns The table below details the rates of return for the Sponsor’s investment managers over various time periods ended December 31, 2007. Negative returns are shown in red, positive returns in black. Returns for one year or greater are annualized. The first set of returns for each asset class represents the composite returns for all the fund’s accounts for that asset class. Returns for Periods Ended December 31, 2007 Last Last Last Last Last 2 3 4-1/4 Quarter Year Years Years Years Domestic Equity Aletheia Research - Gross (4.53%)- - - - Aletheia Research - Net (4.67%)- - - - Russell 1000 Value (5.80%) (0.17%)10.47% 9.32% 13.89% Artisan Partners - Gross (0.17%)22.32% 16.50% 14.36% 16.97% Artisan Partners - Net (0.37%)21.52% 15.70% 13.56% 16.17% Russell Mid Cap Growth (1.70%)11.43% 11.04% 11.39% 14.69% Atlanta Capital - Gross (2.65%)6.90% 11.46% 9.68% 13.90% Atlanta Capital - Net (2.85%)6.10% 10.66% 8.88% 13.10% Russell 2000 Value (7.28%) (9.78%)5.55% 5.27% 12.66% Denver Investment Adv. - Gross (3.32%)12.31% 13.06% 10.67% 13.30% Denver Investment Adv. - Net (3.43%)11.85% 12.61% 10.22% 12.85% Russell Mid Cap Growth (1.70%)11.43% 11.04% 11.39% 14.69% Independence Invmts. - Gross (5.33%)- - - - Independence Invmts. - Net (5.53%)- - - - Russell 2000 Growth (2.10%)7.05% 10.15% 8.11% 12.15% ING Investment Mgmt. - Gross 3.03% 17.11% 12.01% 12.02% 13.63% ING Investment Mgmt. - Net 2.92% 16.68% 11.58% 11.58% 13.19% Russell 1000 Growth (0.77%)11.81% 10.43% 8.68% 10.13% NTGI Russell 1000 Value - Gross (5.76%)- - - - NTGI Russell 1000 Value - Net (5.78%)- - - - Russell 1000 Value (5.80%) (0.17%)10.47% 9.32% 13.89% Systematic Financial - Gross (7.86%)0.47% 9.16% 8.85% 12.85% Systematic Financial - Net (8.11%) (0.53%)8.18% 7.87% 11.86% Russell 2000 Value (7.28%) (9.78%)5.55% 5.27% 12.66% WEDGE Capital Mgmt. - Gross (5.56%)- - - - WEDGE Capital Mgmt. - Net (5.73%)- - - - Russell Midcap Value (5.97%) (1.42%)8.86% 10.11% 16.34% International Equity NTGI-QM Enh. EAFE - Gross (2.26%)11.01% 19.43% 17.18% - NTGI-QM Enh. EAFE - Net (2.35%)10.66% 19.08% 16.83% - Domestic Fixed-Income Dodge & Cox - Gross 1.81% 5.47% 5.55% 4.48% - Dodge & Cox - Net 1.65% 4.83% 4.90% 3.83% - NTGI-QM Bd Fd - Gross 3.05% 7.15% 5.76% 4.64% 4.37% NTGI-QM Bd Fd - Net 3.05% 7.14% 5.75% 4.64% 4.36% Western Asset Mgmt. - Gross 2.83% 6.51% 5.58% 4.64% - Western Asset Mgmt. - Net 2.75% 6.21% 5.28% 4.34% - Lehman Brothers Aggregate 3.00% 6.97% 5.64% 4.56% 4.31% 14City Of Clearwater Employees Pension Fund Attachment number 1 Page 16 of 91 Item # 8 Quarterly Total Fund Attribution In general, the actual return for the Total Fund will differ from the return for the Total Fund Target. This deviation is caused by two factors: The managers outperforming or underperforming their targets (Manager Selection Effect); or the actual asset allocation being different from the target asset allocation (Asset Allocation Effect). The table and charts below dissect the Total Fund return into smaller components to quantify each of these effects over the most recent quarter. Asset Class Under or Overweighting (1.5%)(1.0%)(0.5%)0.0%0.5%1.0%1.5% Domestic Equity (0.9%) Domestic Fixed-Income 1.1% International Equity (0.2%) Domestic Equity Domestic Fixed-Income International Equity Total Actual vs Target Returns (5%)0%5% (3.0%) (3.3%) 2.3% 3.0% (2.3%) (1.8%) (1.1%) (1.0%) Actual Target Attribution by Asset Class (0.3%)(0.2%)(0.1%)0.0%0.1%0.2%0.3% 0.16% 0.02% (0.22%) 0.05% (0.09%) 0.00% (0.16%) 0.07% Manager Effect Asset Allocation Attribution for Quarter ended December 31, 2007 Effective Target Actual Target Manager Asset Asset Class Weight Weight Return Return Effect Allocation Domestic Equity 49% 50%(3.01%) (3.33%)0.16% 0.02% Domestic Fixed-Income 33% 32% 2.32% 3.00%(0.22%)0.05% International Equity 18% 18%(2.26%) (1.75%) (0.09%)0.00% Total = + +(1.11%) (1.02%) (0.16%)0.07% * Current Quarter Target = 50.0% S&P 500, 32.0% L/B Agg and 18.0% MSCI EAFE Index. 15City Of Clearwater Employees Pension Fund Attachment number 1 Page 17 of 91 Item # 8 Cumulative Total Fund Attribution The charts below accumulate the Quarterly Total Fund Attribution Analysis (shown earlier) over multiple periods. By examining these cumulative results, the Fund Sponsor can quantify and understand the long-term impact of asset allocation differences from the target, as well as the contribution of the Fund’s managers to total return. In general, assuming the Fund Sponsor is pursuing a disciplined rebalancing program, the asset allocation effects should be close to zero. The manager effects should be larger, assuming the Sponsor is not using index funds. All analysis is for the period ended December 31, 2007. One Year Cumulative Attribution Effects (1.0%)(0.5%)0.0%0.5%1.0%1.5% Domestic Equity 0.87% 0.06% Domestic Fixed-Income (0.34%) 0.24% International Equity (0.07%) 0.16% Total 0.46% 0.46% Manager Effect Asset Allocation Cumulative Attribution Effects 0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4% 2007 Manager Effect Asset Allocation Total One Year Cumulative Attribution Effects Effective Avg Trgt Actual Target Manager Asset Asset Class Weight Weight Return Return Effect Allocation Domestic Equity 52% 51% 7.17% 5.49% 0.87% 0.06% Domestic Fixed-Income 34% 38% 5.94% 6.97%(0.34%)0.24% International Equity 14% 11% 11.01% 11.17%(0.07%)0.16% Total = + +7.22% 6.30% 0.46% 0.46% * Current Quarter Target = 50.0% S&P 500, 32.0% L/B Agg and 18.0% MSCI EAFE Index. 16City Of Clearwater Employees Pension Fund Attachment number 1 Page 18 of 91 Item # 8 Cumulative Total Fund Attribution The charts below accumulate the Quarterly Total Fund Attribution Analysis (shown earlier) over multiple periods. By examining these cumulative results, the Fund Sponsor can quantify and understand the long-term impact of asset allocation differences from the target, as well as the contribution of the Fund’s managers to total return. In general, assuming the Fund Sponsor is pursuing a disciplined rebalancing program, the asset allocation effects should be close to zero. The manager effects should be larger, assuming the Sponsor is not using index funds. All analysis is for the period ended December 31, 2007. Twenty Year Annualized Cumulative Attribution Effects (0.4%)(0.2%)0.0%0.2%0.4%0.6% Domestic Equity 0.39% 0.04% Domestic Fixed-Income (0.26%) 0.01% International Equity (0.01%) 0.02% Total 0.12% 0.06% Manager Effect Asset Allocation Cumulative Attribution Effects (30%) (20%) (10%) 0% 10% 20% 30% 40% 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 Manager Effect Asset Allocation Total Twenty Year Annualized Cumulative Attribution Effects Effective Avg Trgt Actual Target Manager Asset Asset Class Weight Weight Return Return Effect Allocation Domestic Equity 55% 52% 12.51% 11.82% 0.39% 0.04% Domestic Fixed-Income 42% 45% 6.95% 7.56%(0.26%)0.01% International Equity 3% 3% - -(0.01%)0.02% Total = + +10.25% 10.06% 0.12% 0.06% * Current Quarter Target = 50.0% S&P 500, 32.0% L/B Agg and 18.0% MSCI EAFE Index. 17City Of Clearwater Employees Pension Fund Attachment number 1 Page 19 of 91 Item # 8 Cumulative Performance Relative to Target The first chart below illustrates the cumulative performance of the Total Fund relative to the cumulative performance of the Fund’s Target Asset Mix. The Target Mix is assumed to be rebalanced each quarter with no transaction costs. The difference between the Total Fund return and the Target Mix return is explained by the performance attribution on the next page. The second chart below shows the return and the risk of the Total Fund and the Target Mix, contrasted with the returns and risks of the funds in the CAI Public Fund Sponsor Database. Cumulative Returns Actual vs Target Cumulative Returns0% 100% 200% 300% 400% 500% 600% 700% 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 Total Fund Total Fund Target Twenty Year Annualized Risk vs Return 5.5%6.0%6.5%7.0%7.5%8.0%8.5%9.0%9.5%10.0%10.5%11.0%11.5% 8.5% 9.0% 9.5% 10.0% 10.5% 11.0% 11.5% 12.0% Total Fund Total Fund Target Standard DeviationReturns Triangles represent membership of the CAI Public Fund Sponsor Database * Current Quarter Target = 50.0% S&P 500, 32.0% L/B Agg and 18.0% MSCI EAFE Index. 18City Of Clearwater Employees Pension Fund Attachment number 1 Page 20 of 91 Item # 8 Actual vs Target Historical Asset Allocation The Historical asset allocation for a fund is by far the largest factor explaining its performance. The charts below show the fund’s historical actual asset allocation, the fund’s historical target asset allocation, and the historical asset allocation of the average fund in the CAI Public Fund Sponsor Database. Actual Historical Asset Allocation 0%0% 10%10% 20%20% 30%30% 40%40% 50%50% 60%60% 70%70% 80%80% 90%90% 100%100% 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 International Equity Domestic Fixed-Income Domestic Equity Target Historical Asset Allocation 0%0% 10%10% 20%20% 30%30% 40%40% 50%50% 60%60% 70%70% 80%80% 90%90% 100%100% 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 International Equity Domestic Fixed-Income Domestic Equity Average CAI Public Fund Sponsor Database Historical Asset Allocation 0%0% 10%10% 20%20% 30%30% 40%40% 50%50% 60%60% 70%70% 80%80% 90%90% 100%100% 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 Hedge Funds Global Balanced Other Alternatives Intl Fixed-Inc Intl Equity Real Estate Short Term-Cash Domestic Broad Eq Domestic Fixed * Current Quarter Target = 50.0% S&P 500, 32.0% L/B Agg and 18.0% MSCI EAFE Index. 19City Of Clearwater Employees Pension Fund Attachment number 1 Page 21 of 91 Item # 8 Total Fund Ranking The first two charts show the ranking of the Total Fund’s performance relative to that of the CAI Public Fund Sponsor Database for periods ended December 31, 2007. The first chart is a standard unadjusted ranking. In the second chart each fund in the database is adjusted to have the same historical asset allocation as that of the Total Fund. CAI Public Fund Sponsor Database Returns4% 6% 8% 10% 12% 14% 16% Last Year Last 2 Years Last 3 Years Last 5 Years Last 20 Years (75) (92) (83)(88) (81) (91) (82) (87)(47)(59) 10th Percentile 10.58 12.80 11.88 14.63 11.03 25th Percentile 9.52 12.49 11.17 13.92 10.73 Median 8.30 11.13 9.90 12.83 10.18 75th Percentile 7.22 10.06 8.82 11.56 9.81 90th Percentile 6.46 8.80 7.72 9.83 9.58 Total Fund 7.22 9.47 8.54 10.95 10.25 Policy Target 6.30 9.14 7.64 10.23 10.06 Asset Allocation Adjusted Ranking Returns5% 6% 7% 8% 9% 10% 11% 12% 13% Last Year Last 2 Years Last 3 Years Last 5 Years Last 20 Years (38) (79) (66) (85) (50) (98) (55) (95)(67)(70) 10th Percentile 8.32 10.31 9.44 12.08 10.78 25th Percentile 7.60 10.00 8.82 11.63 10.52 Median 7.02 9.71 8.53 11.07 10.37 75th Percentile 6.42 9.35 8.20 10.68 9.81 90th Percentile 6.02 8.96 7.96 10.33 9.74 Total Fund 7.22 9.47 8.54 10.95 10.25 Policy Target 6.30 9.14 7.64 10.23 10.06 * Current Quarter Target = 50.0% S&P 500, 32.0% L/B Agg and 18.0% MSCI EAFE Index. 20City Of Clearwater Employees Pension Fund Attachment number 1 Page 22 of 91 Item # 8 Asset Class Rankings The charts below show the rankings of each asset class component of the Total Fund relative to appropriate comparative databases. In the upper left corner of each graph is the weighted average of the rankings across the different asset classes. The weights of the fund’s actual asset allocation are used to make this calculation. The weighted average ranking can be viewed as a measure of the fund’s overall success in picking managers and structuring asset classes. Total Asset Class Performance One Year Ended December 31, 2007 Returns2% 4% 6% 8% 10% 12% 14% 16% 18% 20% Public Fund Public Fund Public Fund - Dom Equity - Intl Equity - Dom Fixed (19) (52) (89)(86) (77) (29) 10th Percentile 7.78 18.24 7.74 25th Percentile 6.50 16.32 7.07 Median 5.61 15.27 6.67 75th Percentile 4.92 11.96 5.99 90th Percentile 4.42 11.00 4.74 Asset Class Composite 7.17 11.01 5.94 Composite Benchmark 5.49 11.17 6.97 Weighted Ranking 49 Total Asset Class Performance Twenty Years Ended December 31, 2007 Returns6% 7% 8% 9% 10% 11% 12% 13% 14% Public Fund Public Fund - Dom Equity - Dom Fixed (21) (56) (88) (35) 10th Percentile 13.02 8.09 25th Percentile 12.40 7.91 Median 12.02 7.42 75th Percentile 10.97 7.37 90th Percentile 9.61 6.86 Asset Class Composite 12.51 6.95 Composite Benchmark 11.82 7.56 Weighted Ranking 50 * Current Quarter Target = 50.0% S&P 500, 32.0% L/B Agg and 18.0% MSCI EAFE Index. 21City Of Clearwater Employees Pension Fund Attachment number 1 Page 23 of 91 Item # 8 Domestic Equity ‘ Attachment number 1 Page 24 of 91 Item # 8 DOMESTIC EQUITY PERIOD ENDED DECEMBER 31, 2007 Quarterly Summary and Highlights Domestic Equity’s portfolio posted a (3.01)% return for the quarter placing it in the 43 percentile of the Public Fund - Domestic Equity group for the quarter and in the 19 percentile for the last year. Domestic Equity’s portfolio outperformed the S&P 500 by 0.32% for the quarter and outperformed the S&P 500 for the year by 1.68%. Quarterly Asset Growth Beginning Market Value $307,976,516 Net New Investment $0 Investment Gains/(Losses) $-9,275,236 Ending Market Value $298,701,280 Percent Cash: 2.3% Performance vs Public Fund - Domestic Equity (10%) (5%) 0% 5% 10% 15% 20% Last Last Last 3 Last 5 Last 7 Last 10 Last 15 Last 20 Quarter Year Years Years Years Years Years Years (43)(69) (19) (52) (30)(76) (28) (86) (35) (97) (35) (84) (51)(48) (21)(56) 10th Percentile (2.37)7.78 9.96 15.32 6.55 8.29 11.82 13.02 25th Percentile (2.90)6.50 9.54 14.82 5.26 7.34 11.07 12.40 Median (3.15)5.61 8.99 13.70 4.46 6.66 10.45 12.02 75th Percentile (3.47)4.92 8.65 13.15 4.03 6.07 9.75 10.97 90th Percentile (3.77)4.42 8.16 12.53 3.39 5.42 9.59 9.61 Domestic Equity (3.01)7.17 9.41 14.67 4.81 7.01 10.45 12.51 S&P 500 (3.33)5.49 8.62 12.83 3.30 5.91 10.49 11.82 Relative Return vs S&P 500 Relative Returns(8%) (6%) (4%) (2%) 0% 2% 4% 6% 8% 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 Domestic Equity Public Fund - Domestic Equity Annualized Five Year Risk vs Return 9.0 9.5 10.0 10.5 11.0 11.5 12.0 12.5 13.0 11% 12% 13% 14% 15% 16% 17% Domestic Equity S&P 500 Standard DeviationReturns 23City Of Clearwater Employees Pension Fund Attachment number 1 Page 25 of 91 Item # 8 DOMESTIC EQUITY RETURN ANALYSIS SUMMARY Return Analysis The graphs below analyze the manager’s return on both a risk-adjusted and unadjusted basis. The first chart illustrates the manager’s ranking over different periods versus the appropriate style group. The second chart shows the historical quarterly and cumulative manager returns versus the appropriate market benchmark. The last two charts illustrate the manager’s ranking relative to their style using various risk-adjusted return measures. Performance vs Public Fund - Domestic Equity (40%) (30%) (20%) (10%) 0% 10% 20% 30% 40% 50% 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1952 9122 2195 3484 1687 5573 7382 9896 8 42 34 7 10th Percentile 7.78 16.49 9.31 14.74 36.10 (18.75) (5.66)1.05 27.75 28.01 25th Percentile 6.50 15.63 7.98 13.47 32.95 (20.34) (7.12) (1.60)22.67 23.34 Median 5.61 14.61 6.50 12.61 31.24 (21.17) (9.67) (4.62)20.74 19.11 75th Percentile 4.92 13.77 5.88 11.65 29.70 (22.26) (11.10) (6.87)17.32 15.44 90th Percentile 4.42 13.14 5.06 10.73 28.32 (23.53) (12.66) (8.86)13.87 10.68 Domestic Equity 7.17 13.03 8.12 13.17 33.75 (21.29) (10.98) (10.07)29.18 22.05 S&P 500 5.49 15.79 4.91 10.88 28.68 (22.10) (11.89) (9.11)21.04 28.58 Cumulative and Quarterly Relative Return vs S&P 500 Relative Returns(25%) (20%) (15%) (10%) (5%) 0% 5% 10% 15% 20% 25% 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Domestic Equity Public Fund - Dom Equity Risk Adjusted Return Measures vs S&P 500 Rankings Against Public Fund - Domestic Equity Five Years Ended December 31, 2007 (4) (2) 0 2 4 6 8 10 12 14 Alpha Treynor Ratio (22) (20) 10th Percentile 1.67 11.66 25th Percentile 1.17 10.84 Median 0.51 10.26 75th Percentile 0.04 9.79 90th Percentile (0.59)9.12 Domestic Equity 1.26 11.04 (0.6) (0.4) (0.2) 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 Information Sharpe Excess Return Ratio Ratio Ratio (43) (23) (45) 10th Percentile 0.84 1.14 0.84 25th Percentile 0.53 1.07 0.66 Median 0.38 1.03 0.54 75th Percentile 0.02 0.97 0.23 90th Percentile (0.31)0.90 (0.15) Domestic Equity 0.41 1.07 0.55 24City Of Clearwater Employees Pension Fund Attachment number 1 Page 26 of 91 Item # 8 LARGE CAP COMPOSITE PERIOD ENDED DECEMBER 31, 2007 Investment Philosophy Large Capitalization managers concentrate their holdings in large market capitalization domestic equity securities regardless of style (growth, value or core) orientation. Quarterly Summary and Highlights Large Cap Composite’s portfolio posted a (1.50)% return for the quarter placing it in the 31 percentile of the CAI Large Capitalization Style group for the quarter and in the 39 percentile for the last year. Large Cap Composite’s portfolio outperformed the Russell 1000 by 1.73% for the quarter and outperformed the Russell 1000 for the year by 1.99%. Quarterly Asset Growth Beginning Market Value $132,589,417 Net New Investment $0 Investment Gains/(Losses) $-1,982,694 Ending Market Value $130,606,723 Percent Cash: 1.2% Performance vs CAI Large Capitalization Style (10%) (5%) 0% 5% 10% 15% 20% 25% Last Last Last 3 Last 5 Last 7 Last 10 Last 15 Last 19-3/4 Quarter Year Years Years Years Years Years Years A(31) B(54)(52) A(39) B(52)(49) A(59) B(67)(61) A(55) B(70)(62) A(61) B(69)(62) A(78) B(79)(74) B(74) A(85)(72) A(76) B(79)(78) 10th Percentile 1.19 19.13 12.74 16.54 8.65 9.80 13.37 13.99 25th Percentile (1.00)11.93 11.04 15.21 7.16 8.59 12.59 13.32 Median (2.93)5.64 9.73 14.08 4.77 7.46 11.54 12.55 75th Percentile (5.07)1.89 8.12 12.43 2.48 6.13 10.41 11.98 90th Percentile (6.71) (1.96)6.33 11.10 (0.03)4.98 9.44 11.09 Large Cap Composite A (1.50)7.76 9.29 13.79 3.81 5.97 9.84 11.85 S&P 500 B (3.33)5.49 8.62 12.83 3.30 5.91 10.49 11.66 Russell 1000 (3.23)5.77 9.08 13.43 3.68 6.20 10.58 11.76 Relative Return vs Russell 1000 Relative Returns(6%) (4%) (2%) 0% 2% 4% 6% 8% 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 Large Cap Composite CAI Large Capitalization Style Annualized Five Year Risk vs Return 6 8 10 12 14 16 18 20 6% 8% 10% 12% 14% 16% 18% 20% 22% Large Cap Composite Russell 1000S&P 500 Standard DeviationReturns 25City Of Clearwater Employees Pension Fund Attachment number 1 Page 27 of 91 Item # 8 LARGE CAP COMPOSITE RETURN ANALYSIS SUMMARY Return Analysis The graphs below analyze the manager’s return on both a risk-adjusted and unadjusted basis. The first chart illustrates the manager’s ranking over different periods versus the appropriate style group. The second chart shows the historical quarterly and cumulative manager returns versus the appropriate market benchmark. The last two charts illustrate the manager’s ranking relative to their style using various risk-adjusted return measures. Performance vs CAI Large Capitalization Style (40%) (30%) (20%) (10%) 0% 10% 20% 30% 40% 50% 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 3949 6245 3864 5349 1835 4036 5555 5656 5141 5045 10th Percentile 19.13 21.00 12.52 16.37 32.79 (15.33) (0.05)14.49 36.60 39.13 25th Percentile 11.93 17.83 10.05 14.60 30.54 (19.43) (5.53)5.81 25.70 32.44 Median 5.64 14.96 7.51 11.37 28.28 (23.45) (11.23) (3.57)18.88 25.39 75th Percentile 1.89 8.18 5.33 7.82 25.96 (26.07) (17.66) (10.82)8.54 14.62 90th Percentile (1.96)4.83 4.01 5.30 23.41 (29.78) (25.87) (17.06)1.98 8.57 Large Cap Composite 7.76 11.52 8.63 11.24 31.37 (22.03) (12.64) (7.49)18.68 25.12 Russell 1000 5.77 15.46 6.27 11.40 29.89 (21.65) (12.45) (7.79)20.91 27.02 Cumulative and Quarterly Relative Return vs Russell 1000 Relative Returns(15%) (10%) (5%) 0% 5% 10% 15% 20% 25% 88 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Large Cap Composite CAI Large Cap Style Risk Adjusted Return Measures vs Russell 1000 Rankings Against CAI Large Capitalization Style Five Years Ended December 31, 2007 (5) 0 5 10 15 20 Alpha Treynor Ratio (50) (49) 10th Percentile 3.30 14.76 25th Percentile 1.96 12.47 Median 0.71 11.11 75th Percentile (0.56)9.58 90th Percentile (2.07)8.18 Large Cap Composite 0.72 11.18 (1.0) (0.5) 0.0 0.5 1.0 1.5 2.0 Information Sharpe Excess Return Ratio Ratio Ratio (36) (36) (46) 10th Percentile 0.89 1.29 0.70 25th Percentile 0.55 1.16 0.43 Median 0.20 1.03 0.15 75th Percentile (0.18)0.90 (0.22) 90th Percentile (0.48)0.75 (0.54) Large Cap Composite 0.41 1.10 0.18 26City Of Clearwater Employees Pension Fund Attachment number 1 Page 28 of 91 Item # 8 ALETHEIA RESEARCH & MANAGEMENT PERIOD ENDED DECEMBER 31, 2007 Investment Philosophy Large Cap Value Equity Style managers invest predominantly in large cap companies believed to be currently undervalued in the general market. The companies are expected to have a near-term earnings rebound and eventual realization of expected value. Quarterly Summary and Highlights Aletheia Research & Management’s portfolio posted a (4.53)% return for the quarter placing it in the 34 percentile of the CAI Large Cap Value Style group for the quarter and in the 59 percentile for the last one-half year. Aletheia Research & Management’s portfolio outperformed the Russell 1000 Value by 1.27% for the quarter and outperformed the Russell 1000 Value for the one-half year by 0.20%. Quarterly Asset Growth Beginning Market Value $19,318,468 Net New Investment $0 Investment Gains/(Losses) $-875,342 Ending Market Value $18,443,125 Percent Cash: 1.4% Performance vs CAI Large Cap Value Style (14%) (12%) (10%) (8%) (6%) (4%) (2%) 0% Last Quarter Last 1/2 Year (34) (68)(59)(59) 10th Percentile (2.94)(1.37) 25th Percentile (3.97)(3.77) Median (5.13)(5.52) 75th Percentile (6.35)(7.90) 90th Percentile (8.28)(11.14) Aletheia Research & Management (4.53)(5.83) Russell 1000 Value (5.80)(6.03) Relative Return vs Russell 1000 Value Relative Returns(1.5%) (1.0%) (0.5%) 0.0% 0.5% 1.0% 1.5% 2.0% 2007 Aletheia Research & Management Cumulative Returns vs Russell 1000 Value Cumulative Relative Returns(1.4%) (1.2%) (1.0%) (0.8%) (0.6%) (0.4%) (0.2%) 0.0% 0.2% 0.4% 2007 Aletheia Research & Management CAI Large Cap Value Style 27City Of Clearwater Employees Pension Fund Attachment number 1 Page 29 of 91 Item # 8 ALETHEIA RESEARCH & MANAGEMENT EQUITY CHARACTERISTICS ANALYSIS SUMMARY Portfolio Characteristics This graph compares the manager’s portfolio characteristics with the range of characteristics for the portfolios which make up the manager’s style group. This analysis illustrates whether the manager’s current holdings are consistent with other managers employing the same style. Portfolio Characteristics Percentile Rankings Rankings Against CAI Large Cap Value Style as of December 31, 2007 Percentile Ranking100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Weighted Median Price/Fore- Price/Book Forecasted Dividend MSCI Market Cap casted Earnings Earnings Growth Yield Combined Z-Score (97) (54) (3) (49)(54) (79) (36) (85)(87) (18) (7) (86) 10th Percentile 73.96 13.66 2.45 12.45 2.85 (0.32) 25th Percentile 60.35 13.27 2.32 11.43 2.64 (0.47) Median 52.50 12.68 2.16 10.69 2.43 (0.67) 75th Percentile 39.13 12.15 2.01 10.19 2.21 (0.81) 90th Percentile 34.92 11.80 1.86 9.61 1.99 (0.95) Aletheia Research & Management 25.16 14.66 2.14 10.94 2.03 (0.24) Russell 1000 Value 52.05 12.68 1.96 9.94 2.72 (0.85) Sector Weights The graph below contrasts the manager’s sector weights with those of the benchmark and median sector weights across the members of the peer group. The magnitude of sector weight differences from the index and the manager’s sector diversification are also shown. Diversification by number and concentration of holdings are also compared to the benchmark and peer group. Issue Diversification represents by count, and Diversification Ratio by percent, the number of largest holdings that comprise half of the portfolio’s market value. Sector Allocation December 31, 2007 0%5%10%15%20%25%30%35% Energy 23.4% 16.6% 15.5% Consumer Discretionary 15.7% 7.3% 8.1% Materials 14.0%50%Mgr MV50%Mgr MV4.1% 4.5% Financials 13.3% 29.2% 25.7% Consumer Staples 10.4% 8.8% 8.5% Industrials 8.2% 10.6% 10.3% Utilities 5.7% 6.7% 4.8% Health Care 3.7% 7.0% 9.5% Information Technology 2.9% 3.1% 7.2% Pooled Vehicles 2.7% Telecommunications 6.5% 5.9% Aletheia Research & Management Russell 1000 Value CAI Large Cap Value Style Sector Diversification Manager 2.78 sectors Index 2.39 sectors Relative Sector Variance Manager 59% Style Median 16% Diversification December 31, 2007 0 20 40 60 80 100 120 140 160 180 Number of Issue Securities Diversification (49) (13) 10th Percentile 150 26 25th Percentile 106 21 Median 69 19 75th Percentile 52 16 90th Percentile 42 14 Aletheia Research & Management 69 25 Russell 1000 Value 615 32 Diversification Ratio Manager 36% Index 5% Style Median 28% 28City Of Clearwater Employees Pension Fund Attachment number 1 Page 30 of 91 Item # 8 ING INVESTMENT MANAGEMENT PERIOD ENDED DECEMBER 31, 2007 Investment Philosophy Using a systematic approach to identify those companies whose success will likely continue and accelerate, ING believes that long term superior price appreciation is tied to a foundation of positive business momentum. Quarterly Summary and Highlights ING Investment Management’s portfolio posted a 3.03% return for the quarter placing it in the 13 percentile of the CAI Large Cap Growth Style group for the quarter and in the 42 percentile for the last year. ING Investment Management’s portfolio outperformed the Russell 1000 Growth by 3.80% for the quarter and outperformed the Russell 1000 Growth for the year by 5.29%. Quarterly Asset Growth Beginning Market Value $61,600,272 Net New Investment $0 Investment Gains/(Losses) $1,866,863 Ending Market Value $63,467,135 Percent Cash: 2.0% Performance vs CAI Large Cap Growth Style (10%) (5%) 0% 5% 10% 15% 20% 25% 30% Last Last Last 3 Last 5 Last 7 Last 10 Last 15 Last 20 Quarter Year Years Years Years Years Years Years (13) (67) (42) (72)(24) (63) (27) (60) (20) (65) (30) (86) (26) (89) (30) (92) 10th Percentile 3.32 23.13 14.50 17.08 4.33 9.95 13.21 14.98 25th Percentile 1.91 19.68 12.00 15.21 2.66 8.30 11.54 13.19 Median 0.20 16.02 9.98 12.70 0.72 6.27 10.25 12.30 75th Percentile (1.20)11.24 7.98 11.67 (0.25)4.94 9.37 11.41 90th Percentile (2.14)7.99 6.49 10.57 (0.98)3.45 8.32 11.10 ING Investment Management 3.03 17.11 12.02 15.04 3.04 7.98 11.51 13.00 Russell 1000 Growth (0.77)11.81 8.68 12.11 0.23 3.83 8.47 10.66 Relative Return vs Russell 1000 Growth Relative Returns(15%) (10%) (5%) 0% 5% 10% 15% 20% 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 ING Investment Management CAI Large Cap Growth Style Annualized Five Year Risk vs Return 7 8 9 10 11 12 13 14 15 8% 10% 12% 14% 16% 18% 20% 22% ING Investment Management Russell 1000 Growth Standard DeviationReturns 29City Of Clearwater Employees Pension Fund Attachment number 1 Page 31 of 91 Item # 8 ING INVESTMENT MANAGEMENT RETURN ANALYSIS SUMMARY Return Analysis The graphs below analyze the manager’s return on both a risk-adjusted and unadjusted basis. The first chart illustrates the manager’s ranking over different periods versus the appropriate style group. The second chart shows the historical quarterly and cumulative manager returns versus the appropriate market benchmark. The last two charts illustrate the manager’s ranking relative to their style using various risk-adjusted return measures. Performance vs CAI Large Cap Growth Style (60%) (40%) (20%) 0% 20% 40% 60% 80% 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 4272 4625 1367 2865 2426 953 5850 22 90 4743 3130 10th Percentile 23.13 10.45 13.37 13.76 33.21 (22.50) (10.57)2.70 51.33 45.91 25th Percentile 19.68 9.05 9.86 11.21 29.92 (24.52) (14.64) (3.18)36.51 40.51 Median 16.02 6.70 7.02 7.18 27.19 (27.46) (20.47) (11.78)30.04 35.38 75th Percentile 11.24 4.71 4.79 5.28 24.68 (29.78) (26.01) (17.06)23.56 30.39 90th Percentile 7.99 2.00 3.77 3.31 21.95 (32.16) (31.10) (22.42)16.11 25.30 ING Investment Management 17.11 7.14 12.02 10.28 29.99 (22.23) (21.30) (3.13)30.78 37.98 Russell 1000 Growth 11.81 9.07 5.26 6.30 29.75 (27.88) (20.42) (22.42)33.16 38.71 Cumulative and Quarterly Relative Return vs Russell 1000 Growth Relative Returns(20%) (10%) 0% 10% 20% 30% 40% 50% 60% 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 ING Investment Management CAI Lrg Cap Growth Style Risk Adjusted Return Measures vs Russell 1000 Growth Rankings Against CAI Large Cap Growth Style Five Years Ended December 31, 2007 (5) 0 5 10 15 20 Alpha Treynor Ratio (15) (11) 10th Percentile 4.96 14.38 25th Percentile 3.09 12.87 Median 1.43 10.71 75th Percentile 0.13 9.19 90th Percentile (1.13)7.74 ING Investment Management 4.05 14.21 (1.0) (0.5) 0.0 0.5 1.0 1.5 2.0 Information Sharpe Excess Return Ratio Ratio Ratio (12)(12) (22) 10th Percentile 1.46 1.38 1.25 25th Percentile 0.79 1.18 0.69 Median 0.35 0.98 0.16 75th Percentile 0.05 0.88 (0.12) 90th Percentile (0.50)0.73 (0.49) ING Investment Management 1.32 1.37 0.79 30City Of Clearwater Employees Pension Fund Attachment number 1 Page 32 of 91 Item # 8 ING INVESTMENT MANAGEMENT RETURN ANALYSIS SUMMARY Return Analysis The graphs below analyze the manager’s return on both a risk-adjusted and unadjusted basis. The first chart illustrates the manager’s ranking over different periods versus the appropriate style group. The second chart shows the historical quarterly and cumulative manager returns versus the appropriate market benchmark. The last two charts illustrate the manager’s ranking relative to their style using various risk-adjusted return measures. Performance vs CAI Large Cap Growth Style 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 22% 3 Years 3 Years 3 Years 3 Years 3 Years 3 Years 3 Years 3 Years 3 Years 3 Years Ended 12/07 Ended 9/07 Ended 6/07 Ended 3/07 Ended 12/06 Ended 9/06 Ended 6/06 Ended 3/06 Ended 12/05 Ended 9/05 24 63 31 65 18 63 23 65 18 65 17 62 23 62 26 59 17 51 28 47 10th Percentile 14.50 18.16 13.15 10.98 11.49 12.85 12.97 19.68 18.20 18.29 25th Percentile 12.00 15.28 10.51 8.90 9.10 10.95 11.63 18.61 16.07 16.74 Median 9.98 13.47 9.23 7.72 7.62 8.93 9.48 15.55 13.41 14.38 75th Percentile 7.98 11.62 7.74 6.35 6.23 7.70 7.27 13.64 12.03 12.51 90th Percentile 6.49 10.44 6.83 5.30 4.97 5.90 5.84 12.20 10.55 10.18 ING Investment Management 12.02 14.53 11.39 9.10 9.80 12.09 11.92 18.32 17.10 16.36 Russell 1000 Growth 8.68 12.20 8.70 7.01 6.87 8.35 8.35 14.80 13.23 14.74 Cumulative and Quarterly Relative Return vs Russell 1000 Growth Relative Returns(20%) (10%) 0% 10% 20% 30% 40% 50% 60% 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 ING Investment Management CAI Lrg Cap Growth Style Risk Adjusted Return Measures vs Russell 1000 Growth Rankings Against CAI Large Cap Growth Style Five Years Ended December 31, 2007 (5) 0 5 10 15 20 Alpha Treynor Ratio (15) (11) 10th Percentile 4.96 14.38 25th Percentile 3.09 12.87 Median 1.43 10.71 75th Percentile 0.13 9.19 90th Percentile (1.13)7.74 ING Investment Management 4.05 14.21 (1.0) (0.5) 0.0 0.5 1.0 1.5 2.0 Information Sharpe Excess Return Ratio Ratio Ratio (12)(12) (22) 10th Percentile 1.46 1.38 1.25 25th Percentile 0.79 1.18 0.69 Median 0.35 0.98 0.16 75th Percentile 0.05 0.88 (0.12) 90th Percentile (0.50)0.73 (0.49) ING Investment Management 1.32 1.37 0.79 31City Of Clearwater Employees Pension Fund Attachment number 1 Page 33 of 91 Item # 8 ING INVESTMENT MANAGEMENT EQUITY CHARACTERISTICS ANALYSIS SUMMARY Portfolio Characteristics This graph compares the manager’s portfolio characteristics with the range of characteristics for the portfolios which make up the manager’s style group. This analysis illustrates whether the manager’s current holdings are consistent with other managers employing the same style. Portfolio Characteristics Percentile Rankings Rankings Against CAI Large Cap Growth Style as of December 31, 2007 Percentile Ranking100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Weighted Median Price/Fore- Price/Book Forecasted Dividend MSCI Market Cap casted Earnings Earnings Growth Yield Combined Z-Score (24) (60) (68)(68) (79) (62) (80)(81) (6) (16) (87) (79) 10th Percentile 58.32 20.99 5.32 21.91 1.14 1.58 25th Percentile 46.60 19.57 4.77 19.16 0.96 1.32 Median 41.71 18.14 4.43 17.58 0.82 1.15 75th Percentile 32.73 16.73 3.99 16.08 0.69 0.88 90th Percentile 27.29 16.07 3.55 14.86 0.48 0.62 ING Investment Management 48.28 17.03 3.87 15.67 1.15 0.66 Russell 1000 Growth 39.11 17.02 4.19 15.66 1.11 0.74 Sector Weights The graph below contrasts the manager’s sector weights with those of the benchmark and median sector weights across the members of the peer group. The magnitude of sector weight differences from the index and the manager’s sector diversification are also shown. Diversification by number and concentration of holdings are also compared to the benchmark and peer group. Issue Diversification represents by count, and Diversification Ratio by percent, the number of largest holdings that comprise half of the portfolio’s market value. Sector Allocation December 31, 2007 0%5%10%15%20%25%30%35%40% Information Technology 22.7% 28.4% 31.9% Health Care 16.3% 15.9% 16.7% Financials 16.0%50%Mgr MV50%Mgr MV7.0% 8.2% Industrials 10.7% 13.0% 12.3% Consumer Discretionary 9.2% 11.2% 9.7% Energy 8.7% 8.7% 8.4% Consumer Staples 8.7% 10.3% 7.4% Materials 4.5% 3.4% 4.3% Utilities 1.7% 1.4% Telecommunications 1.5% 0.7% 1.1% ING Investment Management Russell 1000 Growth CAI Lrg Cap Growth Style Sector Diversification Manager 2.68 sectors Index 2.44 sectors Relative Sector Variance Manager 23% Style Median 14% Diversification December 31, 2007 0 20 40 60 80 100 120 140 Number of Issue Securities Diversification (52) (37) 10th Percentile 122 27 25th Percentile 80 21 Median 56 18 75th Percentile 46 14 90th Percentile 32 11 ING Investment Management 53 19 Russell 1000 Growth 690 54 Diversification Ratio Manager 35% Index 8% Style Median 30% 32City Of Clearwater Employees Pension Fund Attachment number 1 Page 34 of 91 Item # 8 NORTHERN TRUST GLOBAL INVESTMENTS PERIOD ENDED DECEMBER 31, 2007 Investment Philosophy State Street’s philosophy is to manage every index portfolio in a manner that ensures the following three objectives: to gain broad-based equity exposure; to attain predictable variance around a given benchmark; and to gain this exposure at the lowest possible cost. Quarterly Summary and Highlights NTGI Russell 1000 Value’s portfolio posted a (5.76)% return for the quarter placing it in the 67 percentile of the CAI Large Cap Value Style group for the quarter and in the 59 percentile for the last one-half year. NTGI Russell 1000 Value’s portfolio outperformed the Russell 1000 Value by 0.04% for the quarter and outperformed the Russell 1000 Value for the one-half year by 0.08%. Quarterly Asset Growth Beginning Market Value $51,670,677 Net New Investment $0 Investment Gains/(Losses) $-2,974,214 Ending Market Value $48,696,463 Performance vs CAI Large Cap Value Style (14%) (12%) (10%) (8%) (6%) (4%) (2%) 0% Last Quarter Last 1/2 Year (67)(68)(59)(59) 10th Percentile (2.94)(1.37) 25th Percentile (3.97)(3.77) Median (5.13)(5.52) 75th Percentile (6.35)(7.90) 90th Percentile (8.28)(11.14) NTGI Russell 1000 Value (5.76)(5.95) Russell 1000 Value (5.80)(6.03) Relative Return vs Russell 1000 Value Relative Returns0.00% 0.01% 0.02% 0.03% 0.04% 0.05% 2007 NTGI Russell 1000 Value Cumulative Returns vs Russell 1000 Value Cumulative Relative Returns(0.6%) (0.5%) (0.4%) (0.3%) (0.2%) (0.1%) 0.0% 0.1% 0.2% 2007 NTGI Russell 1000 Value CAI Large Cap Value Style 33City Of Clearwater Employees Pension Fund Attachment number 1 Page 35 of 91 Item # 8 NORTHERN TRUST GLOBAL INVESTMENTS EQUITY CHARACTERISTICS ANALYSIS SUMMARY Portfolio Characteristics This graph compares the manager’s portfolio characteristics with the range of characteristics for the portfolios which make up the manager’s style group. This analysis illustrates whether the manager’s current holdings are consistent with other managers employing the same style. Portfolio Characteristics Percentile Rankings Rankings Against CAI Large Cap Value Style as of December 31, 2007 Percentile Ranking100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Weighted Median Price/Fore- Price/Book Forecasted Dividend MSCI Market Cap casted Earnings Earnings Growth Yield Combined Z-Score (54)(54)(49)(49) (79)(79) (85)(85) (18)(18) (86)(86) 10th Percentile 73.96 13.66 2.45 12.45 2.85 (0.32) 25th Percentile 60.35 13.27 2.32 11.43 2.64 (0.47) Median 52.50 12.68 2.16 10.69 2.43 (0.67) 75th Percentile 39.13 12.15 2.01 10.19 2.21 (0.81) 90th Percentile 34.92 11.80 1.86 9.61 1.99 (0.95) NTGI Russell 1000 Value 52.05 12.68 1.96 9.94 2.72 (0.85) Russell 1000 Value 52.05 12.68 1.96 9.94 2.72 (0.85) Sector Weights The graph below contrasts the manager’s sector weights with those of the benchmark and median sector weights across the members of the peer group. The magnitude of sector weight differences from the index and the manager’s sector diversification are also shown. Diversification by number and concentration of holdings are also compared to the benchmark and peer group. Issue Diversification represents by count, and Diversification Ratio by percent, the number of largest holdings that comprise half of the portfolio’s market value. Sector Allocation December 31, 2007 0%5%10%15%20%25%30%35% Financials 29.2% 29.2% 25.7% Energy 16.6% 16.6% 15.5% Industrials 10.6%50%Mgr MV50%Mgr MV10.6% 10.3% Consumer Staples 8.8% 8.8% 8.5% Consumer Discretionary 7.3% 7.3% 8.1% Health Care 7.0% 7.0% 9.5% Utilities 6.7% 6.7% 4.8% Telecommunications 6.5% 6.5% 5.9% Materials 4.1% 4.1% 4.5% Information Technology 3.1% 3.1% 7.2% NTGI Russell 1000 Value Russell 1000 Value CAI Large Cap Value Style Sector Diversification Manager 2.39 sectors Index 2.39 sectors Relative Sector Variance Manager 0% Style Median 16% Diversification December 31, 2007 0 100 200 300 400 500 600 700 Number of Issue Securities Diversification (1) (1) 10th Percentile 150 26 25th Percentile 106 21 Median 69 19 75th Percentile 52 16 90th Percentile 42 14 NTGI Russell 1000 Value 615 32 Russell 1000 Value 615 32 Diversification Ratio Manager 5% Index 5% Style Median 28% 34City Of Clearwater Employees Pension Fund Attachment number 1 Page 36 of 91 Item # 8 MID CAP COMPOSITE PERIOD ENDED DECEMBER 31, 2007 Investment Philosophy Mid Cap Equity managers invest primarily in mid-range companies with market capitalizations between core equity companies and small capitalization companies. The average market capitalization is approximately $3 Billion. Quarterly Summary and Highlights Mid Cap Composite’s portfolio posted a (3.18)% return for the quarter placing it in the 51 percentile of the CAI Mid Capitalization Style group for the quarter and in the 45 percentile for the last year. Mid Cap Composite’s portfolio underperformed the S&P Mid Cap 400 by 0.45% for the quarter and outperformed the S&P Mid Cap 400 for the year by 2.27%. Quarterly Asset Growth Beginning Market Value $94,368,400 Net New Investment $0 Investment Gains/(Losses) $-2,999,963 Ending Market Value $91,368,437 Percent Cash: 3.5% Performance vs CAI Mid Capitalization Style (10%) (5%) 0% 5% 10% 15% 20% 25% 30% Last Last Last 3 Last 5 Last 7 Last 10 Last 15 Last 19-3/4 Quarter Year Years Years Years Years Years Years A(51) B(60)(45) A(45) B(64) (57) B(56) A(68)(67) B(42) A(74)(74) B(50) A(70) (52) B(71) A(81) (50) B(73) A(83) (57)A(76) B(83) (47) 10th Percentile 1.04 23.73 16.32 21.53 12.68 13.72 16.82 17.09 25th Percentile (1.38)17.48 14.07 19.64 11.50 12.26 14.89 15.38 Median (3.13)9.04 11.44 17.75 8.98 11.22 13.68 14.70 75th Percentile (4.20)3.54 9.39 16.02 5.99 9.62 12.45 13.87 90th Percentile (5.88) (0.77)7.71 14.75 3.05 7.86 11.28 12.85 Mid Cap Composite A (3.18)10.25 10.20 16.31 6.76 9.31 11.63 13.83 Russell Mid-Cap B (3.55)5.60 11.09 18.21 8.98 9.91 12.62 13.25 S&P Mid Cap 400 (2.73)7.98 10.27 16.19 8.76 11.19 13.35 14.75 Relative Return vs S&P Mid Cap 400 Relative Returns(30%) (20%) (10%) 0% 10% 20% 30% 40% 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 Mid Cap Composite CAI Mid Capitalization Style Annualized Five Year Risk vs Return 6 8 10 12 14 16 18 20 22 10% 12% 14% 16% 18% 20% 22% 24% 26% S&P Mid Cap 400 Russell Mid-Cap Mid Cap Composite Standard DeviationReturns 35City Of Clearwater Employees Pension Fund Attachment number 1 Page 37 of 91 Item # 8 MID CAP COMPOSITE RETURN ANALYSIS SUMMARY Return Analysis The graphs below analyze the manager’s return on both a risk-adjusted and unadjusted basis. The first chart illustrates the manager’s ranking over different periods versus the appropriate style group. The second chart shows the historical quarterly and cumulative manager returns versus the appropriate market benchmark. The last two charts illustrate the manager’s ranking relative to their style using various risk-adjusted return measures. Performance vs CAI Mid Capitalization Style (60%) (40%) (20%) 0% 20% 40% 60% 80% 100% 120% 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 4557 5468 8338 7055 3046 5540 6041 90 35 21 60 3818 10th Percentile 23.73 18.29 16.93 24.19 45.11 (7.76)14.15 28.77 100.33 24.77 25th Percentile 17.48 16.00 13.79 20.44 39.91 (11.82)6.08 20.47 56.86 17.19 Median 9.04 13.40 11.39 17.28 35.26 (17.85) (3.36)12.41 20.46 9.06 75th Percentile 3.54 8.35 8.73 13.04 31.13 (26.84) (19.66) (0.21)6.92 0.18 90th Percentile (0.77)5.63 6.54 10.06 29.11 (32.71) (32.73) (16.02) (2.96) (6.10) Mid Cap Composite 10.25 12.54 7.84 14.48 38.94 (19.87) (7.30) (15.90)61.28 13.53 S&P Mid Cap 400 7.98 10.31 12.56 16.48 35.62 (14.51) (0.60)17.50 14.73 19.11 Cumulative and Quarterly Relative Return vs S&P Mid Cap 400 Relative Returns(30%) (20%) (10%) 0% 10% 20% 30% 40% 50% 88 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Mid Cap Composite CAI Mid Cap Style Risk Adjusted Return Measures vs S&P Mid Cap 400 Rankings Against CAI Mid Capitalization Style Five Years Ended December 31, 2007 (5) 0 5 10 15 20 25 Alpha Treynor Ratio (77) (77) 10th Percentile 5.33 19.60 25th Percentile 3.97 18.02 Median 2.35 15.71 75th Percentile 0.37 13.37 90th Percentile (1.08)11.76 Mid Cap Composite 0.11 13.13 (0.5) 0.0 0.5 1.0 1.5 2.0 Information Sharpe Excess Return Ratio Ratio Ratio (77) (76) (74) 10th Percentile 1.13 1.51 0.92 25th Percentile 0.87 1.38 0.62 Median 0.54 1.23 0.25 75th Percentile 0.06 1.04 (0.04) 90th Percentile (0.27)0.93 (0.27) Mid Cap Composite 0.02 1.03 0.02 36City Of Clearwater Employees Pension Fund Attachment number 1 Page 38 of 91 Item # 8 ARTISAN PARTNERS PERIOD ENDED DECEMBER 31, 2007 Investment Philosophy Artisan Mid-Cap invests in mid-cap companies that possess franchise characteristics and whose stock is selling at attractive valuations. Quarterly Summary and Highlights Artisan Partners’s portfolio posted a (0.17)% return for the quarter placing it in the 36 percentile of the CAI Mid Cap Growth Style group for the quarter and in the 32 percentile for the last year. Artisan Partners’s portfolio outperformed the Russell Mid Cap Growth by 1.53% for the quarter and outperformed the Russell Mid Cap Growth for the year by 10.89%. Quarterly Asset Growth Beginning Market Value $26,408,703 Net New Investment $0 Investment Gains/(Losses) $-44,410 Ending Market Value $26,364,294 Percent Cash: 4.6% Performance vs CAI Mid Cap Growth Style (10%) (5%) 0% 5% 10% 15% 20% 25% 30% Last Quarter Last Year Last 3 Years Last 5 Years Last 6-1/4 Years (36)(60) (32) (86) (42) (69) (48)(56) (23)(58) 10th Percentile 3.72 26.23 17.42 22.34 14.88 25th Percentile 0.98 23.52 15.44 20.74 13.80 Median (1.38)19.36 13.60 18.31 12.87 75th Percentile (2.63)14.35 10.69 16.78 10.77 90th Percentile (3.69)9.93 9.79 14.61 9.63 Artisan Partners (0.17)22.32 14.36 18.37 13.90 Russell Mid Cap Growth (1.70)11.43 11.39 17.90 12.61 Relative Return vs Russell Mid Cap Growth Relative Returns(5%) 0% 5% 10% 01 2002 2003 2004 2005 2006 2007 Artisan Partners CAI Mid Cap Growth Style Annualized Five Year Risk vs Return 6 8 10 12 14 16 18 20 22 10% 15% 20% 25% Artisan Partners Russell Mid Cap Growth Standard DeviationReturns 37City Of Clearwater Employees Pension Fund Attachment number 1 Page 39 of 91 Item # 8 ARTISAN PARTNERS RETURN ANALYSIS SUMMARY Return Analysis The graphs below analyze the manager’s return on both a risk-adjusted and unadjusted basis. The first chart illustrates the manager’s ranking over different periods versus the appropriate style group. The second chart shows the historical quarterly and cumulative manager returns versus the appropriate market benchmark. The last two charts illustrate the manager’s ranking relative to their style using various risk-adjusted return measures. Performance vs CAI Mid Cap Growth Style (60%) (40%) (20%) 0% 20% 40% 60% 2007 2006 2005 2004 2003 2002 (32) (86)(34)(39)(76)(57)(25)(29) (57)(24) (23)(48) 10th Percentile 26.23 14.64 17.29 21.52 48.46 (19.11) 25th Percentile 23.52 12.95 14.76 16.13 42.33 (24.26) Median 19.36 8.33 12.92 12.15 35.96 (27.71) 75th Percentile 14.35 6.25 10.31 9.82 30.57 (31.83) 90th Percentile 9.93 3.88 8.12 8.23 28.71 (33.42) Artisan Partners 22.32 10.95 10.20 16.08 33.85 (23.38) Russell Mid Cap Growth 11.43 10.66 12.10 15.48 42.71 (27.41) Cumulative and Quarterly Relative Return vs Russell Mid Cap Growth Relative Returns(20%) (15%) (10%) (5%) 0% 5% 10% 2001 2002 2003 2004 2005 2006 2007 Artisan Partners CAI Mid Cap Growth Style Risk Adjusted Return Measures vs Russell Mid Cap Growth Rankings Against CAI Mid Cap Growth Style Five Years Ended December 31, 2007 (10) (5) 0 5 10 15 20 25 Alpha Treynor Ratio (49) (49) 10th Percentile 4.45 20.33 25th Percentile 2.77 18.01 Median 1.30 16.08 75th Percentile (1.00)13.49 90th Percentile (2.68)11.63 Artisan Partners 1.36 16.36 (1.0) (0.5) 0.0 0.5 1.0 1.5 2.0 Information Sharpe Excess Return Ratio Ratio Ratio (45) (41) (46) 10th Percentile 0.88 1.54 0.72 25th Percentile 0.49 1.35 0.48 Median 0.30 1.25 0.09 75th Percentile (0.22)1.03 (0.27) 90th Percentile (0.64)0.91 (0.69) Artisan Partners 0.35 1.29 0.11 38City Of Clearwater Employees Pension Fund Attachment number 1 Page 40 of 91 Item # 8 ARTISAN PARTNERS RETURN ANALYSIS SUMMARY Return Analysis The graphs below analyze the manager’s return on both a risk-adjusted and unadjusted basis. The first chart illustrates the manager’s ranking over different periods versus the appropriate style group. The second chart shows the historical quarterly and cumulative manager returns versus the appropriate market benchmark. The last two charts illustrate the manager’s ranking relative to their style using various risk-adjusted return measures. Performance vs CAI Mid Cap Growth Style 5% 10% 15% 20% 25% 30% 35% 3 Years 3 Years 3 Years 3 Years 3 Years 3 Years 3 Years 3 Years 3 Years 3 Years Ended 12/07 Ended 9/07 Ended 6/07 Ended 3/07 Ended 12/06 Ended 9/06 Ended 6/06 Ended 3/06 Ended 12/05 Ended 9/05 42 69 42 68 4755 5446 3935 3734 5542 6850 64 29 48 16 10th Percentile 17.42 23.01 19.05 16.04 15.68 16.88 19.74 28.50 24.82 26.48 25th Percentile 15.44 20.98 16.81 14.45 13.48 16.24 18.23 26.96 23.60 22.26 Median 13.60 18.65 14.88 11.90 11.77 13.45 16.54 25.75 20.81 20.40 75th Percentile 10.69 16.63 12.82 10.68 9.88 11.60 14.02 22.49 18.01 18.92 90th Percentile 9.79 14.38 10.61 8.70 7.95 8.73 11.07 19.58 15.12 15.80 Artisan Partners 14.36 19.39 15.10 11.66 12.38 14.17 16.24 23.93 19.63 20.87 Russell Mid Cap Growth 11.39 17.01 14.48 12.41 12.73 14.53 16.86 25.75 22.70 24.92 Cumulative and Quarterly Relative Return vs Russell Mid Cap Growth Relative Returns(20%) (15%) (10%) (5%) 0% 5% 10% 2001 2002 2003 2004 2005 2006 2007 Artisan Partners CAI Mid Cap Growth Style Risk Adjusted Return Measures vs Russell Mid Cap Growth Rankings Against CAI Mid Cap Growth Style Five Years Ended December 31, 2007 (10) (5) 0 5 10 15 20 25 Alpha Treynor Ratio (49) (49) 10th Percentile 4.45 20.33 25th Percentile 2.77 18.01 Median 1.30 16.08 75th Percentile (1.00)13.49 90th Percentile (2.68)11.63 Artisan Partners 1.36 16.36 (1.0) (0.5) 0.0 0.5 1.0 1.5 2.0 Information Sharpe Excess Return Ratio Ratio Ratio (45) (41) (46) 10th Percentile 0.88 1.54 0.72 25th Percentile 0.49 1.35 0.48 Median 0.30 1.25 0.09 75th Percentile (0.22)1.03 (0.27) 90th Percentile (0.64)0.91 (0.69) Artisan Partners 0.35 1.29 0.11 39City Of Clearwater Employees Pension Fund Attachment number 1 Page 41 of 91 Item # 8 ARTISAN PARTNERS EQUITY CHARACTERISTICS ANALYSIS SUMMARY Portfolio Characteristics This graph compares the manager’s portfolio characteristics with the range of characteristics for the portfolios which make up the manager’s style group. This analysis illustrates whether the manager’s current holdings are consistent with other managers employing the same style. Portfolio Characteristics Percentile Rankings Rankings Against CAI Mid Cap Growth Style as of December 31, 2007 Percentile Ranking100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Weighted Median Price/Fore- Price/Book Forecasted Dividend MSCI Market Cap casted Earnings Earnings Growth Yield Combined Z-Score (7) (22) (37) (87) (58)(61)(65) (98) (67) (1) (27) (91) 10th Percentile 9.56 25.53 5.42 23.16 0.70 1.44 25th Percentile 7.78 22.53 4.63 21.44 0.53 1.18 Median 6.91 20.41 4.03 19.94 0.37 0.99 75th Percentile 5.51 18.79 3.70 18.68 0.27 0.84 90th Percentile 4.51 17.40 3.49 18.00 0.15 0.74 Artisan Partners 9.83 21.13 3.90 19.02 0.31 1.17 Russell Mid Cap Growth 8.44 17.75 3.89 16.96 0.81 0.69 Sector Weights The graph below contrasts the manager’s sector weights with those of the benchmark and median sector weights across the members of the peer group. The magnitude of sector weight differences from the index and the manager’s sector diversification are also shown. Diversification by number and concentration of holdings are also compared to the benchmark and peer group. Issue Diversification represents by count, and Diversification Ratio by percent, the number of largest holdings that comprise half of the portfolio’s market value. Sector Allocation December 31, 2007 0%5%10%15%20%25%30%35%40% Information Technology 32.2% 19.6% 23.2% Health Care 23.3%50%Mgr MV50%Mgr MV12.5% 17.4% Industrials 16.6% 16.5% 17.5% Consumer Discretionary 9.5% 16.2% 15.0% Financials 6.6% 8.3% 7.7% Consumer Staples 5.5% 4.3% 2.2% Energy 3.5% 12.0% 10.9% Materials 2.3% 4.8% 3.7% Telecommunications 0.4% 2.2% 2.4% Utilities 3.5% Artisan Partners Russell Mid Cap Growth CAI Mid Cap Growth Style Sector Diversification Manager 1.76 sectors Index 2.86 sectors Relative Sector Variance Manager 49% Style Median 19% Diversification December 31, 2007 0 20 40 60 80 100 120 Number of Issue Securities Diversification (22) (60) 10th Percentile 108 34 25th Percentile 87 27 Median 68 22 75th Percentile 52 17 90th Percentile 44 13 Artisan Partners 89 19 Russell Mid Cap Growth 546 105 Diversification Ratio Manager 22% Index 19% Style Median 33% 40City Of Clearwater Employees Pension Fund Attachment number 1 Page 42 of 91 Item # 8 DENVER INVESTMENT ADVISORS PERIOD ENDED DECEMBER 31, 2007 Investment Philosophy Denver’s Mid-Cap Growth Investing is a growth-oriented , bottom-up stock selection process that is research intensive and emphasizes stock picking. Quarterly Summary and Highlights Denver Investment Advisors’s portfolio posted a (3.32)% return for the quarter placing it in the 84 percentile of the CAI Mid Cap Growth Style group for the quarter and in the 83 percentile for the last year. Denver Investment Advisors’s portfolio underperformed the Russell Mid Cap Growth by 1.62% for the quarter and outperformed the Russell Mid Cap Growth for the year by 0.88%. Quarterly Asset Growth Beginning Market Value $36,681,871 Net New Investment $0 Investment Gains/(Losses) $-1,216,740 Ending Market Value $35,465,131 Percent Cash: 3.1% Performance vs CAI Mid Cap Growth Style (10%) (5%) 0% 5% 10% 15% 20% 25% 30% Last Last Last 3 Last 5 Last 7 Last 10 Last 15 Last 20 Quarter Year Years Years Years Years Years Years (84)(60) (83)(86)(76)(69) (71)(56) (28) (69) (65) (83) (64)(90) (70) (94) 10th Percentile 3.72 26.23 17.42 22.34 9.15 14.13 16.72 17.58 25th Percentile 0.98 23.52 15.44 20.74 7.87 12.57 14.84 16.13 Median (1.38)19.36 13.60 18.31 5.95 11.10 12.97 14.97 75th Percentile (2.63)14.35 10.69 16.78 3.19 8.94 11.43 13.82 90th Percentile (3.69)9.93 9.79 14.61 1.81 7.00 10.36 12.50 Denver Investment Advisors (3.32)12.31 10.67 16.93 7.54 9.86 12.01 14.25 Russell Mid Cap Growth (1.70)11.43 11.39 17.90 4.05 7.59 10.31 12.10 Relative Return vs Russell Mid Cap Growth Relative Returns(10%) (5%) 0% 5% 10% 15% 20% 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 Denver Investment Advisors CAI Mid Cap Growth Style Annualized Five Year Risk vs Return 6 8 10 12 14 16 18 20 22 10% 15% 20% 25% Russell Mid Cap Growth Denver Investment Advisors Standard DeviationReturns 41City Of Clearwater Employees Pension Fund Attachment number 1 Page 43 of 91 Item # 8 DENVER INVESTMENT ADVISORS RETURN ANALYSIS SUMMARY Return Analysis The graphs below analyze the manager’s return on both a risk-adjusted and unadjusted basis. The first chart illustrates the manager’s ranking over different periods versus the appropriate style group. The second chart shows the historical quarterly and cumulative manager returns versus the appropriate market benchmark. The last two charts illustrate the manager’s ranking relative to their style using various risk-adjusted return measures. Performance vs CAI Mid Cap Growth Style (100%) (50%) 0% 50% 100% 150% 200% 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 8386 1739 9557 4229 2624 748 637 7466 5069 6641 10th Percentile 26.23 14.64 17.29 21.52 48.46 (19.11) (10.32)13.61 147.59 34.98 25th Percentile 23.52 12.95 14.76 16.13 42.33 (24.26) (12.72)5.86 101.09 24.16 Median 19.36 8.33 12.92 12.15 35.96 (27.71) (24.63) (4.35)61.12 16.52 75th Percentile 14.35 6.25 10.31 9.82 30.57 (31.83) (33.00) (16.10)42.51 9.90 90th Percentile 9.93 3.88 8.12 8.23 28.71 (33.42) (41.63) (28.35)22.86 4.20 Denver Investment Advisors 12.31 13.81 6.05 13.52 42.06 (17.49) (7.77) (15.90)61.28 13.53 Russell Mid Cap Growth 11.43 10.66 12.10 15.48 42.71 (27.41) (20.15) (11.75)51.29 17.86 Cumulative and Quarterly Relative Return vs Russell Mid Cap Growth Relative Returns(20%) (10%) 0% 10% 20% 30% 40% 50% 60% 70% 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Denver Investment Advisors CAI Mid Cap Growth Style Risk Adjusted Return Measures vs Russell Mid Cap Growth Rankings Against CAI Mid Cap Growth Style Five Years Ended December 31, 2007 (10) (5) 0 5 10 15 20 25 Alpha Treynor Ratio (82) (81) 10th Percentile 4.45 20.33 25th Percentile 2.77 18.01 Median 1.30 16.08 75th Percentile (1.00)13.49 90th Percentile (2.68)11.63 Denver Investment Advisors (2.17)12.51 (1.0) (0.5) 0.0 0.5 1.0 1.5 2.0 Information Sharpe Excess Return Ratio Ratio Ratio (84) (81) (70) 10th Percentile 0.88 1.54 0.72 25th Percentile 0.49 1.35 0.48 Median 0.30 1.25 0.09 75th Percentile (0.22)1.03 (0.27) 90th Percentile (0.64)0.91 (0.69) Denver Investment Advisors (0.56)1.00 (0.21) 42City Of Clearwater Employees Pension Fund Attachment number 1 Page 44 of 91 Item # 8 DENVER INVESTMENT ADVISORS RETURN ANALYSIS SUMMARY Return Analysis The graphs below analyze the manager’s return on both a risk-adjusted and unadjusted basis. The first chart illustrates the manager’s ranking over different periods versus the appropriate style group. The second chart shows the historical quarterly and cumulative manager returns versus the appropriate market benchmark. The last two charts illustrate the manager’s ranking relative to their style using various risk-adjusted return measures. Performance vs CAI Mid Cap Growth Style 5% 10% 15% 20% 25% 30% 35% 3 Years 3 Years 3 Years 3 Years 3 Years 3 Years 3 Years 3 Years 3 Years 3 Years Ended 12/07 Ended 9/07 Ended 6/07 Ended 3/07 Ended 12/06 Ended 9/06 Ended 6/06 Ended 3/06 Ended 12/05 Ended 9/05 7669 6268 6955 7746 5735 73 34 79 42 75 50 64 29 65 16 10th Percentile 17.42 23.01 19.05 16.04 15.68 16.88 19.74 28.50 24.82 26.48 25th Percentile 15.44 20.98 16.81 14.45 13.48 16.24 18.23 26.96 23.60 22.26 Median 13.60 18.65 14.88 11.90 11.77 13.45 16.54 25.75 20.81 20.40 75th Percentile 10.69 16.63 12.82 10.68 9.88 11.60 14.02 22.49 18.01 18.92 90th Percentile 9.79 14.38 10.61 8.70 7.95 8.73 11.07 19.58 15.12 15.80 Denver Investment Advisors 10.67 17.46 13.33 10.03 11.07 11.85 12.79 22.51 19.59 19.71 Russell Mid Cap Growth 11.39 17.01 14.48 12.41 12.73 14.53 16.86 25.75 22.70 24.92 Cumulative and Quarterly Relative Return vs Russell Mid Cap Growth Relative Returns(20%) (10%) 0% 10% 20% 30% 40% 50% 60% 70% 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Denver Investment Advisors CAI Mid Cap Growth Style Risk Adjusted Return Measures vs Russell Mid Cap Growth Rankings Against CAI Mid Cap Growth Style Five Years Ended December 31, 2007 (10) (5) 0 5 10 15 20 25 Alpha Treynor Ratio (82) (81) 10th Percentile 4.45 20.33 25th Percentile 2.77 18.01 Median 1.30 16.08 75th Percentile (1.00)13.49 90th Percentile (2.68)11.63 Denver Investment Advisors (2.17)12.51 (1.0) (0.5) 0.0 0.5 1.0 1.5 2.0 Information Sharpe Excess Return Ratio Ratio Ratio (84) (81) (70) 10th Percentile 0.88 1.54 0.72 25th Percentile 0.49 1.35 0.48 Median 0.30 1.25 0.09 75th Percentile (0.22)1.03 (0.27) 90th Percentile (0.64)0.91 (0.69) Denver Investment Advisors (0.56)1.00 (0.21) 43City Of Clearwater Employees Pension Fund Attachment number 1 Page 45 of 91 Item # 8 DENVER INVESTMENT ADVISORS EQUITY CHARACTERISTICS ANALYSIS SUMMARY Portfolio Characteristics This graph compares the manager’s portfolio characteristics with the range of characteristics for the portfolios which make up the manager’s style group. This analysis illustrates whether the manager’s current holdings are consistent with other managers employing the same style. Portfolio Characteristics Percentile Rankings Rankings Against CAI Mid Cap Growth Style as of December 31, 2007 Percentile Ranking100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Weighted Median Price/Fore- Price/Book Forecasted Dividend MSCI Market Cap casted Earnings Earnings Growth Yield Combined Z-Score (87) (22) (83)(87) (65)(61)(60) (98) (51) (1) (71) (91) 10th Percentile 9.56 25.53 5.42 23.16 0.70 1.44 25th Percentile 7.78 22.53 4.63 21.44 0.53 1.18 Median 6.91 20.41 4.03 19.94 0.37 0.99 75th Percentile 5.51 18.79 3.70 18.68 0.27 0.84 90th Percentile 4.51 17.40 3.49 18.00 0.15 0.74 Denver Investment Advisors 4.83 18.31 3.82 19.38 0.37 0.85 Russell Mid Cap Growth 8.44 17.75 3.89 16.96 0.81 0.69 Sector Weights The graph below contrasts the manager’s sector weights with those of the benchmark and median sector weights across the members of the peer group. The magnitude of sector weight differences from the index and the manager’s sector diversification are also shown. Diversification by number and concentration of holdings are also compared to the benchmark and peer group. Issue Diversification represents by count, and Diversification Ratio by percent, the number of largest holdings that comprise half of the portfolio’s market value. Sector Allocation December 31, 2007 0%5%10%15%20%25%30% Consumer Discretionary 22.3% 16.2% 15.0% Information Technology 19.5% 19.6% 23.2% Health Care 18.1%50%Mgr MV50%Mgr MV12.5% 17.4% Industrials 14.6% 16.5% 17.5% Energy 10.7% 12.0% 10.9% Financials 8.0% 8.3% 7.7% Telecommunications 2.4% 2.2% 2.4% Materials 2.2% 4.8% 3.7% Consumer Staples 2.1% 4.3% 2.2% Utilities 3.5% Denver Investment Advisors Russell Mid Cap Growth CAI Mid Cap Growth Style Sector Diversification Manager 2.45 sectors Index 2.86 sectors Relative Sector Variance Manager 24% Style Median 19% Diversification December 31, 2007 0 20 40 60 80 100 120 Number of Issue Securities Diversification (44) (33) 10th Percentile 108 34 25th Percentile 87 27 Median 68 22 75th Percentile 52 17 90th Percentile 44 13 Denver Investment Advisors 70 25 Russell Mid Cap Growth 546 105 Diversification Ratio Manager 36% Index 19% Style Median 33% 44City Of Clearwater Employees Pension Fund Attachment number 1 Page 46 of 91 Item # 8 WEDGE CAPITAL MANAGEMENT PERIOD ENDED DECEMBER 31, 2007 Investment Philosophy WEDGE Capital seeks to achieve consistently superior returns through a value oriented stock selection process and strict buy-sell disciplines. Quarterly Summary and Highlights WEDGE Capital Management’s portfolio posted a (5.56)% return for the quarter placing it in the 69 percentile of the CAI Mid Cap Value Style group for the quarter and in the 61 percentile for the last three-quarter year. WEDGE Capital Management’s portfolio outperformed the Russell Midcap Value by 0.41% for the quarter and outperformed the Russell Midcap Value for the three-quarter year by 2.01%. Quarterly Asset Growth Beginning Market Value $31,277,826 Net New Investment $0 Investment Gains/(Losses) $-1,738,813 Ending Market Value $29,539,013 Percent Cash: 3.1% Performance vs CAI Mid Cap Value Style (16%) (14%) (12%) (10%) (8%) (6%) (4%) (2%) 0% 2% 4% Last Quarter Last 1/2 Year Last 3/4 Year (69)(76) (59) (68) (61) (84) 10th Percentile (2.77) (3.50)2.15 25th Percentile (3.27) (5.25) (0.04) Median (4.20) (7.74) (3.25) 75th Percentile (5.88) (10.34) (4.63) 90th Percentile (8.11) (12.93) (8.67) WEDGE Capital Management (5.56) (8.34) (3.98) Russell Midcap Value (5.97) (9.30) (5.99) Relative Return vs Russell Midcap Value Relative Returns0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4% 2007 WEDGE Capital Management Cumulative Returns vs Russell Midcap Value Cumulative Relative Returns0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 2007 WEDGE Capital Management CAI Mid Cap Value Style 45City Of Clearwater Employees Pension Fund Attachment number 1 Page 47 of 91 Item # 8 WEDGE CAPITAL MANAGEMENT EQUITY CHARACTERISTICS ANALYSIS SUMMARY Portfolio Characteristics This graph compares the manager’s portfolio characteristics with the range of characteristics for the portfolios which make up the manager’s style group. This analysis illustrates whether the manager’s current holdings are consistent with other managers employing the same style. Portfolio Characteristics Percentile Rankings Rankings Against CAI Mid Cap Value Style as of December 31, 2007 Percentile Ranking100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Weighted Median Price/Fore- Price/Book Forecasted Dividend MSCI Market Cap casted Earnings Earnings Growth Yield Combined Z-Score (78) (23) (73) (29) (58) (76) (94)(94) (9)(10) (92)(90) 10th Percentile 8.74 16.07 2.34 14.40 2.24 (0.30) 25th Percentile 7.20 14.92 2.18 12.62 1.94 (0.40) Median 6.49 13.90 1.97 11.85 1.77 (0.56) 75th Percentile 4.93 13.11 1.75 11.05 1.53 (0.68) 90th Percentile 4.19 12.66 1.46 10.69 1.36 (0.85) WEDGE Capital Management 4.80 13.22 1.96 10.41 2.26 (0.95) Russell Midcap Value 7.37 14.76 1.74 10.33 2.26 (0.83) Sector Weights The graph below contrasts the manager’s sector weights with those of the benchmark and median sector weights across the members of the peer group. The magnitude of sector weight differences from the index and the manager’s sector diversification are also shown. Diversification by number and concentration of holdings are also compared to the benchmark and peer group. Issue Diversification represents by count, and Diversification Ratio by percent, the number of largest holdings that comprise half of the portfolio’s market value. Sector Allocation December 31, 2007 0%5%10%15%20%25%30%35% Financials 19.4% 28.8% 22.5% Utilities 14.4% 14.5% 11.8% Industrials 13.8% 10.3% 12.8% Information Technology 13.2%50%Mgr MV50%Mgr MV6.8% 10.0% Materials 11.4% 6.7% 7.4% Consumer Discretionary 10.7% 12.8% 13.0% Health Care 6.9% 2.3% 5.8% Consumer Staples 6.4% 7.6% 7.0% Energy 3.6% 8.3% 8.6% Telecommunications 2.0% 1.0% WEDGE Capital Management Russell Midcap Value CAI Mid Cap Value Style Sector Diversification Manager 3.18 sectors Index 2.53 sectors Relative Sector Variance Manager 39% Style Median 21% Diversification December 31, 2007 0 20 40 60 80 100 120 140 160 Number of Issue Securities Diversification (91) (83) 10th Percentile 138 44 25th Percentile 95 31 Median 69 24 75th Percentile 54 18 90th Percentile 40 13 WEDGE Capital Management 39 14 Russell Midcap Value 484 91 Diversification Ratio Manager 36% Index 19% Style Median 33% 46City Of Clearwater Employees Pension Fund Attachment number 1 Page 48 of 91 Item # 8 SMALL CAP COMPOSITE PERIOD ENDED DECEMBER 31, 2007 Investment Philosophy Small Cap Equity Style managers invest in companies with relatively small capitalizations of approximately $400 million. The companies typically have dividend yields below the broader market and exhibit greater volatility than the broader market. Quarterly Summary and Highlights Small Cap Composite’s portfolio posted a (5.30)% return for the quarter placing it in the 45 percentile of the CAI Small Capitalization Style group for the quarter and in the 43 percentile for the last year. Small Cap Composite’s portfolio underperformed the Russell 2000 by 0.72% for the quarter and outperformed the Russell 2000 for the year by 4.83%. Quarterly Asset Growth Beginning Market Value $81,018,699 Net New Investment $0 Investment Gains/(Losses) $-4,292,579 Ending Market Value $76,726,120 Percent Cash: 2.8% Performance vs CAI Small Capitalization Style (20%) (15%) (10%) (5%) 0% 5% 10% 15% 20% 25% Last Quarter Last Year Last 3 Years Last 4-1/4 Years (45)(36) (43) (60) (35) (64) (52)(61) 10th Percentile (0.39)19.33 15.16 17.32 25th Percentile (2.90)9.14 10.88 15.08 Median (5.54)1.36 7.85 13.40 75th Percentile (7.33) (5.33)5.23 11.65 90th Percentile (9.11) (11.32)3.28 9.54 Small Cap Composite (5.30)3.26 9.13 13.28 Russell 2000 (4.58) (1.57)6.80 12.52 Relative Return vs Russell 2000 Relative Returns(3%) (2%) (1%) 0% 1% 2% 3% 4% 5% 03 2004 2005 2006 2007 Small Cap Composite CAI Small Capitalization Style Annualized Four And One-Quarter Year Risk vs Return 5 10 15 20 25 0% 5% 10% 15% 20% 25% 30% Small Cap Composite Russell 2000 Standard DeviationReturns 47City Of Clearwater Employees Pension Fund Attachment number 1 Page 49 of 91 Item # 8 SMALL CAP COMPOSITE RETURN ANALYSIS SUMMARY Return Analysis The graphs below analyze the manager’s return on both a risk-adjusted and unadjusted basis. The first chart illustrates the manager’s ranking over different periods versus the appropriate style group. The second chart shows the historical quarterly and cumulative manager returns versus the appropriate market benchmark. The last two charts illustrate the manager’s ranking relative to their style using various risk-adjusted return measures. Performance vs CAI Small Capitalization Style (20%) (15%) (10%) (5%) 0% 5% 10% 15% 20% 25% 30% 2007 2006 2005 2004 (43) (60) (32)(26) (55)(82) (65)(51) 10th Percentile 19.33 21.82 14.77 25.42 25th Percentile 9.14 18.62 10.97 22.73 Median 1.36 14.59 7.55 18.46 75th Percentile (5.33)11.57 5.55 13.77 90th Percentile (11.32)7.13 2.78 8.81 Small Cap Composite 3.26 17.40 7.21 15.71 Russell 2000 (1.57)18.37 4.55 18.33 Cumulative and Quarterly Relative Return vs Russell 2000 Relative Returns(6%) (4%) (2%) 0% 2% 4% 6% 2003 2004 2005 2006 2007 Small Cap Composite CAI Small Cap Style Risk Adjusted Return Measures vs Russell 2000 Rankings Against CAI Small Capitalization Style Four And One-Quarter Years Ended December 31, 2007 (5) 0 5 10 15 20 Alpha Treynor Ratio (34) (30) 10th Percentile 5.48 16.52 25th Percentile 3.46 12.89 Median 1.10 10.45 75th Percentile (0.70)8.19 90th Percentile (2.06)6.53 Small Cap Composite 2.27 12.22 (1.0) (0.5) 0.0 0.5 1.0 1.5 Information Sharpe Excess Return Ratio Ratio Ratio (15)(22) (45) 10th Percentile 1.18 1.14 0.89 25th Percentile 0.62 0.87 0.45 Median 0.21 0.71 0.15 75th Percentile (0.11)0.58 (0.14) 90th Percentile (0.39)0.44 (0.43) Small Cap Composite 0.89 0.90 0.19 48City Of Clearwater Employees Pension Fund Attachment number 1 Page 50 of 91 Item # 8 ATLANTA CAPITAL MANAGEMENT PERIOD ENDED DECEMBER 31, 2007 Investment Philosophy Atlanta believes investing in a diversified portfolio of high quality, small capitalization companies as measured by a company’s historical ability to consistently grow earnings and dividends. Quarterly Summary and Highlights Atlanta Capital Management’s portfolio posted a (2.65)% return for the quarter placing it in the 1 percentile of the CAI Small Cap Value Style group for the quarter and in the 4 percentile for the last year. Atlanta Capital Management’s portfolio outperformed the Russell 2000 Value by 4.63% for the quarter and outperformed the Russell 2000 Value for the year by 16.68%. Quarterly Asset Growth Beginning Market Value $18,745,945 Net New Investment $0 Investment Gains/(Losses) $-496,075 Ending Market Value $18,249,870 Percent Cash: 2.2% Performance vs CAI Small Cap Value Style (25%) (20%) (15%) (10%) (5%) 0% 5% 10% 15% 20% 25% Last Quarter Last Year Last 3 Years Last 4-1/4 Years (1) (38) (4) (59) (11) (45) (36)(54) 10th Percentile (4.26)3.55 9.87 16.61 25th Percentile (5.43) (2.46)7.85 14.99 Median (8.32) (8.60)4.79 12.95 75th Percentile (9.51) (12.63)3.02 11.12 90th Percentile (11.01) (16.42)1.01 8.91 Atlanta Capital Management (2.65)6.90 9.68 13.90 Russell 2000 Value (7.28) (9.78)5.27 12.66 Relative Return vs Russell 2000 Value Relative Returns(10%) (5%) 0% 5% 10% 15% 03 2004 2005 2006 2007 Atlanta Capital Management CAI Small Cap Value Style Annualized Four And One-Quarter Year Risk vs Return 5 10 15 20 25 0% 5% 10% 15% 20% 25% Russell 2000 Value Atlanta Capital Management Standard DeviationReturns 49City Of Clearwater Employees Pension Fund Attachment number 1 Page 51 of 91 Item # 8 ATLANTA CAPITAL MANAGEMENT RETURN ANALYSIS SUMMARY Return Analysis The graphs below analyze the manager’s return on both a risk-adjusted and unadjusted basis. The first chart illustrates the manager’s ranking over different periods versus the appropriate style group. The second chart shows the historical quarterly and cumulative manager returns versus the appropriate market benchmark. The last two charts illustrate the manager’s ranking relative to their style using various risk-adjusted return measures. Performance vs CAI Small Cap Value Style (30%) (20%) (10%) 0% 10% 20% 30% 40% 2007 2006 2005 2004 (4) (59) (59) (12) (65)(83) (72)(56) 10th Percentile 3.55 24.47 14.39 28.47 25th Percentile (2.46)21.48 11.04 25.39 Median (8.60)18.75 9.23 22.78 75th Percentile (12.63)14.65 5.40 19.12 90th Percentile (16.42)12.88 3.01 16.09 Atlanta Capital Management 6.90 16.21 6.21 20.24 Russell 2000 Value (9.78)23.48 4.71 22.25 Cumulative and Quarterly Relative Return vs Russell 2000 Value Relative Returns(15%) (10%) (5%) 0% 5% 10% 15% 2003 2004 2005 2006 2007 Atlanta Capital Management CAI Small Cap Value Style Risk Adjusted Return Measures vs Russell 2000 Value Rankings Against CAI Small Cap Value Style Four And One-Quarter Years Ended December 31, 2007 (10) (5) 0 5 10 15 20 25 Alpha Treynor Ratio (12) (6) 10th Percentile 5.25 16.21 25th Percentile 2.25 12.12 Median 0.52 9.68 75th Percentile (1.27)7.77 90th Percentile (3.51)5.40 Atlanta Capital Management 4.91 18.62 (1.0) (0.5) 0.0 0.5 1.0 1.5 Information Sharpe Excess Return Ratio Ratio Ratio (14)(8) (45) 10th Percentile 1.21 1.11 0.84 25th Percentile 0.60 0.82 0.53 Median 0.13 0.69 0.07 75th Percentile (0.24)0.55 (0.30) 90th Percentile (0.59)0.37 (0.59) Atlanta Capital Management 1.11 1.20 0.15 50City Of Clearwater Employees Pension Fund Attachment number 1 Page 52 of 91 Item # 8 ATLANTA CAPITAL MANAGEMENT RETURN ANALYSIS SUMMARY Return Analysis The graphs below analyze the manager’s return on both a risk-adjusted and unadjusted basis. The first chart illustrates the manager’s ranking over different periods versus the appropriate style group. The second chart shows the historical quarterly and cumulative manager returns versus the appropriate market benchmark. The last two charts illustrate the manager’s ranking relative to their style using various risk-adjusted return measures. Performance vs CAI Small Cap Value Style 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 3 Years 3 Years 3 Years 3 Years 3 Years 3 Years 3 Years 3 Years 3 Years 3 Years Ended 12/07 Ended 9/07 Ended 6/07 Ended 3/07 Ended 12/06 Ended 9/06 Ended 6/06 Ended 3/06 Ended 12/05 Ended 9/05 11 45 3261 7967 7055 8149 86 43 92 57 93 47 94 64 92 62 10th Percentile 9.87 16.63 18.67 17.82 20.07 22.71 26.14 35.96 28.27 31.87 25th Percentile 7.85 15.10 17.32 15.89 17.90 20.58 23.11 33.39 26.89 28.48 Median 4.79 13.07 15.67 14.70 16.41 18.87 21.34 30.43 24.38 26.11 75th Percentile 3.02 10.57 14.13 12.41 14.38 16.70 19.53 28.41 21.83 23.30 90th Percentile 1.01 9.01 12.74 10.97 11.83 14.90 17.31 25.74 19.69 20.92 Atlanta Capital Management 9.68 14.71 13.73 13.32 14.06 15.22 16.60 24.19 17.75 20.58 Russell 2000 Value 5.27 12.51 15.02 14.47 16.48 19.04 21.01 30.75 23.18 24.89 Cumulative and Quarterly Relative Return vs Russell 2000 Value Relative Returns(25%) (20%) (15%) (10%) (5%) 0% 5% 10% 15% 2003 2004 2005 2006 2007 Atlanta Capital Management CAI Small Cap Value Style Risk Adjusted Return Measures vs Russell 2000 Value Rankings Against CAI Small Cap Value Style Five Years Ended December 31, 2007 (10) (5) 0 5 10 15 20 25 Alpha Treynor Ratio (16) (11) 10th Percentile 4.59 19.07 25th Percentile 1.98 14.83 Median 0.31 13.03 75th Percentile (1.06)11.39 90th Percentile (2.58)9.61 Atlanta Capital Management 3.55 18.75 (1.0) (0.5) 0.0 0.5 1.0 1.5 Information Sharpe Excess Return Ratio Ratio Ratio (17) (13) (66) 10th Percentile 1.13 1.14 0.49 25th Percentile 0.60 0.92 0.39 Median 0.09 0.80 0.06 75th Percentile (0.21)0.69 (0.24) 90th Percentile (0.54)0.56 (0.56) Atlanta Capital Management 0.77 1.08 (0.07) 51City Of Clearwater Employees Pension Fund Attachment number 1 Page 53 of 91 Item # 8 ATLANTA CAPITAL MANAGEMENT EQUITY CHARACTERISTICS ANALYSIS SUMMARY Portfolio Characteristics This graph compares the manager’s portfolio characteristics with the range of characteristics for the portfolios which make up the manager’s style group. This analysis illustrates whether the manager’s current holdings are consistent with other managers employing the same style. Portfolio Characteristics Percentile Rankings Rankings Against CAI Small Cap Value Style as of December 31, 2007 Percentile Ranking100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Weighted Median Price/Fore- Price/Book Forecasted Dividend MSCI Market Cap casted Earnings Earnings Growth Yield Combined Z-Score (37) (73) (4) (13) (1) (74) (26) (83) (93) (24) (1) (61) 10th Percentile 1.84 16.12 1.99 16.62 2.84 (0.31) 25th Percentile 1.53 14.64 1.87 15.39 2.08 (0.47) Median 1.26 13.56 1.59 13.65 1.62 (0.64) 75th Percentile 1.01 12.67 1.43 12.62 1.29 (0.78) 90th Percentile 0.93 11.74 1.26 11.54 1.15 (1.06) Atlanta Capital Management 1.40 17.60 2.94 15.26 1.05 0.16 Russell 2000 Value 1.03 15.73 1.44 12.24 2.10 (0.72) Sector Weights The graph below contrasts the manager’s sector weights with those of the benchmark and median sector weights across the members of the peer group. The magnitude of sector weight differences from the index and the manager’s sector diversification are also shown. Diversification by number and concentration of holdings are also compared to the benchmark and peer group. Issue Diversification represents by count, and Diversification Ratio by percent, the number of largest holdings that comprise half of the portfolio’s market value. Sector Allocation December 31, 2007 0%5%10%15%20%25%30%35%40% Industrials 21.8% 12.7% 17.4% Consumer Discretionary 20.9% 11.3% 13.7% Information Technology 16.1%50%Mgr MV50%Mgr MV12.9% 13.9% Financials 14.3% 32.2% 25.6% Health Care 13.7% 6.1% 6.6% Consumer Staples 5.7% 3.8% 4.1% Materials 2.8% 7.3% 6.9% Energy 2.7% 6.2% 6.5% Utilities 2.2% 5.9% 4.9% Telecommunications 1.6% 0.3% Atlanta Capital Management Russell 2000 Value CAI Small Cap Value Style Sector Diversification Manager 2.46 sectors Index 2.38 sectors Relative Sector Variance Manager 63% Style Median 19% Diversification December 31, 2007 0 50 100 150 200 250 300 Number of Issue Securities Diversification (72) (68) 10th Percentile 236 55 25th Percentile 154 41 Median 100 32 75th Percentile 55 19 90th Percentile 37 12 Atlanta Capital Management 59 20 Russell 2000 Value 1301 230 Diversification Ratio Manager 35% Index 18% Style Median 31% 52City Of Clearwater Employees Pension Fund Attachment number 1 Page 54 of 91 Item # 8 INDEPENDENCE INVESTMENTS PERIOD ENDED DECEMBER 31, 2007 Investment Philosophy The investment philosophy, "Stocks that show improving fundamentals and are statistically undervalued with an identifiable catalyst for change are attractive," adds value through investing in a group of small cap growth companies without taking undue risk. Catalysts for growth include new products, new management, or a new distribution technique that will enhance shareholder value, but is not yet reflected in the current stock price. Quarterly Summary and Highlights Independence Investments’s portfolio posted a (5.33)% return for the quarter placing it in the 79 percentile of the CAI Small Cap Growth Style group for the quarter and in the 87 percentile for the last three-quarter year. Independence Investments’s portfolio underperformed the Russell 2000 Growth by 3.22% for the quarter and underperformed the Russell 2000 Growth for the three-quarter year by 4.01%. Quarterly Asset Growth Beginning Market Value $43,308,751 Net New Investment $0 Investment Gains/(Losses) $-2,306,739 Ending Market Value $41,002,012 Percent Cash: 3.3% Performance vs CAI Small Cap Growth Style (10%) (5%) 0% 5% 10% 15% 20% 25% 30% Last Quarter Last 1/2 Year Last 3/4 Year (79) (37) (85) (66) (87) (68) 10th Percentile 1.75 10.30 22.04 25th Percentile (0.10)4.92 15.05 Median (2.88) (0.03)9.31 75th Percentile (5.18) (3.56)2.95 90th Percentile (6.39) (6.15) (0.07) Independence Investments (5.33) (4.59)0.45 Russell 2000 Growth (2.10) (2.09)4.46 Relative Return vs Russell 2000 Growth Relative Returns(4%) (3%) (2%) (1%) 0% 1% 2% 2007 Independence Investments Cumulative Returns vs Russell 2000 Growth Cumulative Relative Returns(6%) (4%) (2%) 0% 2% 4% 6% 8% 2007 Independence Investments CAI Sm Cap Growth Style 53City Of Clearwater Employees Pension Fund Attachment number 1 Page 55 of 91 Item # 8 INDEPENDENCE INVESTMENTS EQUITY CHARACTERISTICS ANALYSIS SUMMARY Portfolio Characteristics This graph compares the manager’s portfolio characteristics with the range of characteristics for the portfolios which make up the manager’s style group. This analysis illustrates whether the manager’s current holdings are consistent with other managers employing the same style. Portfolio Characteristics Percentile Rankings Rankings Against CAI Small Cap Growth Style as of December 31, 2007 Percentile Ranking100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Weighted Median Price/Fore- Price/Book Forecasted Dividend MSCI Market Cap casted Earnings Earnings Growth Yield Combined Z-Score (100) (60)(61) (29) (90) (56) (23) (75) (42) (4) (39) (67) 10th Percentile 1.92 30.11 4.58 29.38 0.46 1.33 25th Percentile 1.80 26.66 4.21 25.66 0.33 1.10 Median 1.38 22.52 3.58 22.23 0.22 0.89 75th Percentile 1.19 20.17 3.10 20.74 0.14 0.63 90th Percentile 0.99 17.13 2.78 19.08 0.07 0.50 Independence Investments 0.69 21.55 2.79 25.91 0.25 0.97 Russell 2000 Growth 1.32 24.30 3.43 20.73 0.62 0.73 Sector Weights The graph below contrasts the manager’s sector weights with those of the benchmark and median sector weights across the members of the peer group. The magnitude of sector weight differences from the index and the manager’s sector diversification are also shown. Diversification by number and concentration of holdings are also compared to the benchmark and peer group. Issue Diversification represents by count, and Diversification Ratio by percent, the number of largest holdings that comprise half of the portfolio’s market value. Sector Allocation December 31, 2007 0%5%10%15%20%25%30%35%40% Information Technology 31.6% 23.0% 27.8% Health Care 21.7%50%Mgr MV50%Mgr MV21.8% 22.1% Financials 15.9% 7.7% 4.9% Industrials 10.2% 16.7% 17.6% Energy 7.3% 7.2% 6.7% Consumer Discretionary 6.0% 15.4% 14.5% Materials 3.5% 4.0% 2.5% Pooled Vehicles 2.1% Consumer Staples 1.5% 2.4% 2.3% Utilities 0.6% Telecommunications 1.3% 1.7% Independence Investments Russell 2000 Growth CAI Sm Cap Growth Style Sector Diversification Manager 1.85 sectors Index 2.31 sectors Relative Sector Variance Manager 38% Style Median 13% Diversification December 31, 2007 0 20 40 60 80 100 120 140 Number of Issue Securities Diversification (93) (85) 10th Percentile 120 38 25th Percentile 98 29 Median 81 26 75th Percentile 63 20 90th Percentile 53 15 Independence Investments 50 16 Russell 2000 Growth 1269 202 Diversification Ratio Manager 32% Index 16% Style Median 31% 54City Of Clearwater Employees Pension Fund Attachment number 1 Page 56 of 91 Item # 8 SYSTEMATIC FINANCIAL MANAGEMENT PERIOD ENDED DECEMBER 31, 2007 Investment Philosophy Systematic believes that a disciplined, traditional, value investment approach, combined with an emphasis on positive earnings surprise as a catalyst for price appreciation, will yield a diverse group of companies that will provide higher returns over the long term. Systematic’s goal is to invest in ’value’ companies that have a confirmed catalyst for stock price appreciation. Quarterly Summary and Highlights Systematic Financial Management’s portfolio posted a (7.86)% return for the quarter placing it in the 46 percentile of the CAI Small Cap Value Style group for the quarter and in the 16 percentile for the last year. Systematic Financial Management’s portfolio underperformed the Russell 2000 Value by 0.58% for the quarter and outperformed the Russell 2000 Value for the year by 10.25%. Quarterly Asset Growth Beginning Market Value $18,964,004 Net New Investment $0 Investment Gains/(Losses) $-1,489,765 Ending Market Value $17,474,238 Percent Cash: 2.2% Performance vs CAI Small Cap Value Style (25%) (20%) (15%) (10%) (5%) 0% 5% 10% 15% 20% 25% Last Quarter Last Year Last 3 Years Last 4-1/4 Years (46)(38) (16) (59) (17) (45) (51)(54) 10th Percentile (4.26)3.55 9.87 16.61 25th Percentile (5.43) (2.46)7.85 14.99 Median (8.32) (8.60)4.79 12.95 75th Percentile (9.51) (12.63)3.02 11.12 90th Percentile (11.01) (16.42)1.01 8.91 Systematic Financial Management (7.86)0.47 8.85 12.85 Russell 2000 Value (7.28) (9.78)5.27 12.66 Relative Return vs Russell 2000 Value Relative Returns(8%) (6%) (4%) (2%) 0% 2% 4% 6% 03 2004 2005 2006 2007 Systematic Financial Management CAI Small Cap Value Style Annualized Four And One-Quarter Year Risk vs Return 8 10 12 14 16 18 20 22 24 0% 5% 10% 15% 20% 25% Systematic Financial Management Russell 2000 Value Standard DeviationReturns 55City Of Clearwater Employees Pension Fund Attachment number 1 Page 57 of 91 Item # 8 SYSTEMATIC FINANCIAL MANAGEMENT RETURN ANALYSIS SUMMARY Return Analysis The graphs below analyze the manager’s return on both a risk-adjusted and unadjusted basis. The first chart illustrates the manager’s ranking over different periods versus the appropriate style group. The second chart shows the historical quarterly and cumulative manager returns versus the appropriate market benchmark. The last two charts illustrate the manager’s ranking relative to their style using various risk-adjusted return measures. Performance vs CAI Small Cap Value Style (30%) (20%) (10%) 0% 10% 20% 30% 40% 2007 2006 2005 2004 (16) (59) (50)(12) (57)(83) (97) (56) 10th Percentile 3.55 24.47 14.39 28.47 25th Percentile (2.46)21.48 11.04 25.39 Median (8.60)18.75 9.23 22.78 75th Percentile (12.63)14.65 5.40 19.12 90th Percentile (16.42)12.88 3.01 16.09 Systematic Financial Management 0.47 18.60 8.25 11.40 Russell 2000 Value (9.78)23.48 4.71 22.25 Cumulative and Quarterly Relative Return vs Russell 2000 Value Relative Returns(15%) (10%) (5%) 0% 5% 10% 2003 2004 2005 2006 2007 Systematic Financial Management CAI Small Cap Value Style Risk Adjusted Return Measures vs Russell 2000 Value Rankings Against CAI Small Cap Value Style Four And One-Quarter Years Ended December 31, 2007 (10) (5) 0 5 10 15 20 Alpha Treynor Ratio (42) (43) 10th Percentile 5.25 16.21 25th Percentile 2.25 12.12 Median 0.52 9.68 75th Percentile (1.27)7.77 90th Percentile (3.51)5.40 Systematic Financial Management 0.80 10.03 (1.0) (0.5) 0.0 0.5 1.0 1.5 Information Sharpe Excess Return Ratio Ratio Ratio (49) (57) (52) 10th Percentile 1.21 1.11 0.84 25th Percentile 0.60 0.82 0.53 Median 0.13 0.69 0.07 75th Percentile (0.24)0.55 (0.30) 90th Percentile (0.59)0.37 (0.59) Systematic Financial Management 0.14 0.67 0.03 56City Of Clearwater Employees Pension Fund Attachment number 1 Page 58 of 91 Item # 8 SYSTEMATIC FINANCIAL MANAGEMENT RETURN ANALYSIS SUMMARY Return Analysis The graphs below analyze the manager’s return on both a risk-adjusted and unadjusted basis. The first chart illustrates the manager’s ranking over different periods versus the appropriate style group. The second chart shows the historical quarterly and cumulative manager returns versus the appropriate market benchmark. The last two charts illustrate the manager’s ranking relative to their style using various risk-adjusted return measures. Performance vs CAI Small Cap Value Style 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 3 Years 3 Years 3 Years 3 Years 3 Years 3 Years 3 Years 3 Years 3 Years 3 Years Ended 12/07 Ended 9/07 Ended 6/07 Ended 3/07 Ended 12/06 Ended 9/06 Ended 6/06 Ended 3/06 Ended 12/05 Ended 9/05 17 45 9 61 4267 7355 87 49 8043 91 57 93 47 93 64 95 62 10th Percentile 9.87 16.63 18.67 17.82 20.07 22.71 26.14 35.96 28.27 31.87 25th Percentile 7.85 15.10 17.32 15.89 17.90 20.58 23.11 33.39 26.89 28.48 Median 4.79 13.07 15.67 14.70 16.41 18.87 21.34 30.43 24.38 26.11 75th Percentile 3.02 10.57 14.13 12.41 14.38 16.70 19.53 28.41 21.83 23.30 90th Percentile 1.01 9.01 12.74 10.97 11.83 14.90 17.31 25.74 19.69 20.92 Systematic Financial Management 8.85 16.88 16.10 12.71 12.66 15.98 17.13 24.72 18.46 18.13 Russell 2000 Value 5.27 12.51 15.02 14.47 16.48 19.04 21.01 30.75 23.18 24.89 Cumulative and Quarterly Relative Return vs Russell 2000 Value Relative Returns(20%) (15%) (10%) (5%) 0% 5% 10% 2003 2004 2005 2006 2007 Systematic Financial Management CAI Small Cap Value Style Risk Adjusted Return Measures vs Russell 2000 Value Rankings Against CAI Small Cap Value Style Five Years Ended December 31, 2007 (10) (5) 0 5 10 15 20 25 Alpha Treynor Ratio (48) (46) 10th Percentile 4.59 19.07 25th Percentile 1.98 14.83 Median 0.31 13.03 75th Percentile (1.06)11.39 90th Percentile (2.58)9.61 Systematic Financial Management 0.78 13.65 (1.0) (0.5) 0.0 0.5 1.0 1.5 Information Sharpe Excess Return Ratio Ratio Ratio (49) (53) (73) 10th Percentile 1.13 1.14 0.49 25th Percentile 0.60 0.92 0.39 Median 0.09 0.80 0.06 75th Percentile (0.21)0.69 (0.24) 90th Percentile (0.54)0.56 (0.56) Systematic Financial Management 0.14 0.79 (0.17) 57City Of Clearwater Employees Pension Fund Attachment number 1 Page 59 of 91 Item # 8 SYSTEMATIC FINANCIAL MANAGEMENT EQUITY CHARACTERISTICS ANALYSIS SUMMARY Portfolio Characteristics This graph compares the manager’s portfolio characteristics with the range of characteristics for the portfolios which make up the manager’s style group. This analysis illustrates whether the manager’s current holdings are consistent with other managers employing the same style. Portfolio Characteristics Percentile Rankings Rankings Against CAI Small Cap Value Style as of December 31, 2007 Percentile Ranking100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Weighted Median Price/Fore- Price/Book Forecasted Dividend MSCI Market Cap casted Earnings Earnings Growth Yield Combined Z-Score (23) (73) (24) (13) (5) (74) (1) (83) (70) (24) (2) (61) 10th Percentile 1.84 16.12 1.99 16.62 2.84 (0.31) 25th Percentile 1.53 14.64 1.87 15.39 2.08 (0.47) Median 1.26 13.56 1.59 13.65 1.62 (0.64) 75th Percentile 1.01 12.67 1.43 12.62 1.29 (0.78) 90th Percentile 0.93 11.74 1.26 11.54 1.15 (1.06) Systematic Financial Management 1.54 14.75 2.07 18.75 1.33 (0.14) Russell 2000 Value 1.03 15.73 1.44 12.24 2.10 (0.72) Sector Weights The graph below contrasts the manager’s sector weights with those of the benchmark and median sector weights across the members of the peer group. The magnitude of sector weight differences from the index and the manager’s sector diversification are also shown. Diversification by number and concentration of holdings are also compared to the benchmark and peer group. Issue Diversification represents by count, and Diversification Ratio by percent, the number of largest holdings that comprise half of the portfolio’s market value. Sector Allocation December 31, 2007 0%5%10%15%20%25%30%35%40% Financials 28.1% 32.2% 25.6% Information Technology 18.4% 12.9% 13.9% Consumer Discretionary 12.2%50%Mgr MV50%Mgr MV11.3% 13.7% Industrials 8.5% 12.7% 17.4% Materials 8.3% 7.3% 6.9% Consumer Staples 6.4% 3.8% 4.1% Health Care 5.6% 6.1% 6.6% Utilities 4.8% 5.9% 4.9% Energy 4.4% 6.2% 6.5% Telecommunications 3.3% 1.6% 0.3% Systematic Financial Management Russell 2000 Value CAI Small Cap Value Style Sector Diversification Manager 2.29 sectors Index 2.38 sectors Relative Sector Variance Manager 23% Style Median 19% Diversification December 31, 2007 0 50 100 150 200 250 300 Number of Issue Securities Diversification (35) (36) 10th Percentile 236 55 25th Percentile 154 41 Median 100 32 75th Percentile 55 19 90th Percentile 37 12 Systematic Financial Management 113 37 Russell 2000 Value 1301 230 Diversification Ratio Manager 32% Index 18% Style Median 31% 58City Of Clearwater Employees Pension Fund Attachment number 1 Page 60 of 91 Item # 8 International Equity ‘ Attachment number 1 Page 61 of 91 Item # 8 INTERNATIONAL EQUITY COMPOSITE PERIOD ENDED DECEMBER 31, 2007 Quarterly Summary and Highlights International Equity Composite’s portfolio posted a (2.26)% return for the quarter placing it in the 95 percentile of the Public Fund - International Equity group for the quarter and in the 89 percentile for the last year. International Equity Composite’s portfolio underperformed the MSCI EAFE Index by 0.51% for the quarter and underperformed the MSCI EAFE Index for the year by 0.16%. Quarterly Asset Growth Beginning Market Value $111,769,996 Net New Investment $-16 Investment Gains/(Losses) $-2,526,640 Ending Market Value $109,243,339 Performance vs Public Fund - International Equity (10%) (5%) 0% 5% 10% 15% 20% 25% 30% Last Quarter Last Year Last 3 Years Last 5 Years Last 6-1/2 Years (95)(84) (89)(86) (80)(85) (90) (69) (85)(77) 10th Percentile 0.31 18.24 20.68 24.63 16.10 25th Percentile (0.14)16.32 19.75 23.49 14.27 Median (0.53)15.27 19.04 22.56 12.90 75th Percentile (1.13)11.96 17.13 21.09 11.94 90th Percentile (2.02)11.00 16.14 19.81 11.02 International Equity Composite (2.26)11.01 17.03 19.84 11.28 MSCI EAFE Index (1.75)11.17 16.83 21.59 11.72 Relative Return vs MSCI EAFE Index Relative Returns(3%) (2%) (1%) 0% 1% 2% 3% 4% 01 2002 2003 2004 2005 2006 2007 International Equity Composite Public Fund - International Equity Annualized Five Year Risk vs Return 11 12 13 14 15 16 18% 20% 22% 24% 26% 28% 30% MSCI EAFE Index International Equity Composite Standard DeviationReturns 60City Of Clearwater Employees Pension Fund Attachment number 1 Page 62 of 91 Item # 8 INTERNATIONAL EQUITY COMPOSITE RETURN ANALYSIS SUMMARY Return Analysis The graphs below analyze the manager’s return on both a risk-adjusted and unadjusted basis. The first chart illustrates the manager’s ranking over different periods versus the appropriate style group. The second chart shows the historical quarterly and cumulative manager returns versus the appropriate market benchmark. The last two charts illustrate the manager’s ranking relative to their style using various risk-adjusted return measures. Performance vs Public Fund - International Equity (30%) (20%) (10%) 0% 10% 20% 30% 40% 50% 2007 2006 2005 2004 2003 2002 (89)(86) (21)(53) (82)(80)(81)(38) (91) (36) (35)(74) 10th Percentile 18.24 28.50 19.45 22.79 41.38 (8.76) 25th Percentile 16.32 27.29 16.81 20.59 39.66 (12.02) Median 15.27 26.47 15.85 19.59 37.09 (14.20) 75th Percentile 11.96 25.10 13.76 18.04 33.07 (16.04) 90th Percentile 11.00 22.53 12.19 16.65 31.23 (17.64) International Equity Composite 11.01 27.63 13.14 17.66 31.06 (13.03) MSCI EAFE Index 11.17 26.34 13.54 20.25 38.59 (15.94) Cumulative and Quarterly Relative Return vs MSCI EAFE Index Relative Returns(6%) (4%) (2%) 0% 2% 4% 6% 8% 10% 2001 2002 2003 2004 2005 2006 2007 International Equity Composite Public Fund - Intl Equity Risk Adjusted Return Measures vs MSCI EAFE Index Rankings Against Public Fund - International Equity Five Years Ended December 31, 2007 (5) 0 5 10 15 20 25 Alpha Treynor Ratio (88) (90) 10th Percentile 2.83 22.00 25th Percentile 2.22 21.13 Median 1.45 20.21 75th Percentile (0.24)18.22 90th Percentile (0.48)17.96 International Equity Composite (0.41)17.97 (1.5) (1.0) (0.5) 0.0 0.5 1.0 1.5 2.0 Information Sharpe Excess Return Ratio Ratio Ratio (86) (88) (88) 10th Percentile 1.58 1.55 1.39 25th Percentile 1.07 1.50 0.89 Median 0.73 1.44 0.45 75th Percentile (0.15)1.30 (0.18) 90th Percentile (0.28)1.28 (0.77) International Equity Composite (0.21)1.28 (0.74) 61City Of Clearwater Employees Pension Fund Attachment number 1 Page 63 of 91 Item # 8 NORTHERN TRUST GLOBAL INVESTMENTS PERIOD ENDED DECEMBER 31, 2007 Investment Philosophy NTGI believes that the most consistent way to enhance returns is through a diversified, risk-controlled approach that capitalizes on identified market anomalies. They aim to add 75-100 bps over the benchmark return (EAFE Index) on a consistent basis. It is a stock selection driven strategy with no style, risk, country, or sector bets. Quarterly Summary and Highlights NGTI - QM Enhanced EAFE’s portfolio posted a (2.26)% return for the quarter placing it in the 74 percentile of the CAI Non-U.S. Equity Style group for the quarter and in the 63 percentile for the last year. NGTI - QM Enhanced EAFE’s portfolio underperformed the MSCI EAFE Index by 0.51% for the quarter and underperformed the MSCI EAFE Index for the year by 0.16%. Quarterly Asset Growth Beginning Market Value $111,769,996 Net New Investment $-16 Investment Gains/(Losses) $-2,526,640 Ending Market Value $109,243,339 Performance vs CAI Non-U.S. Equity Style (10%) (5%) 0% 5% 10% 15% 20% 25% 30% 35% Last Quarter Last Year Last 3 Years Last 3-1/4 Years (74)(71) (63)(61) (67)(72) (64)(68) 10th Percentile 1.77 21.18 22.90 26.64 25th Percentile 0.25 17.56 20.66 24.00 Median (0.77)13.05 18.48 21.88 75th Percentile (2.28)9.33 16.58 20.14 90th Percentile (3.67)6.30 14.65 18.40 NGTI - QM Enhanced EAFE (2.26)11.01 17.18 20.93 MSCI EAFE Index (1.75)11.17 16.83 20.62 Relative Return vs MSCI EAFE Index Relative Returns(1.0%) (0.5%) 0.0% 0.5% 1.0% 1.5% 04 2005 2006 2007 NGTI - QM Enhanced EAFE CAI Non-U.S. Equity Style Annualized Three And One-Quarter Year Risk vs Return 6 8 10 12 14 16 10% 15% 20% 25% 30% 35% 40% NGTI - QM Enhanced EAFE MSCI EAFE Index Standard DeviationReturns 62City Of Clearwater Employees Pension Fund Attachment number 1 Page 64 of 91 Item # 8 NORTHERN TRUST GLOBAL INVESTMENTS RETURN ANALYSIS SUMMARY Return Analysis The graphs below analyze the manager’s return on both a risk-adjusted and unadjusted basis. The first chart illustrates the manager’s ranking over different periods versus the appropriate style group. The second chart shows the historical quarterly and cumulative manager returns versus the appropriate market benchmark. The last two charts illustrate the manager’s ranking relative to their style using various risk-adjusted return measures. Performance vs CAI Non-U.S. Equity Style 0% 5% 10% 15% 20% 25% 30% 35% 2007 2006 2005 (63)(61) (33)(48) (80)(78) 10th Percentile 21.18 31.58 23.03 25th Percentile 17.56 29.08 18.64 Median 13.05 26.10 15.86 75th Percentile 9.33 23.98 13.77 90th Percentile 6.30 20.41 11.55 NTGI - QM Enhanced EAFE 11.01 28.49 12.81 MSCI EAFE Index 11.17 26.34 13.54 Cumulative and Quarterly Relative Return vs MSCI EAFE Index Relative Returns(2%) (1%) 0% 1% 2% 3% 4% 5% 2004 2005 2006 2007 NTGI - QM Enhanced EAFE CAI Non-U.S. Equity Style Risk Adjusted Return Measures vs MSCI EAFE Index Rankings Against CAI Non-U.S. Equity Style Three And One-Quarter Years Ended December 31, 2007 (5) 0 5 10 15 20 25 30 Alpha Treynor Ratio (69) (68) 10th Percentile 5.10 22.64 25th Percentile 3.73 20.83 Median 1.44 18.12 75th Percentile (0.08)16.37 90th Percentile (1.37)14.98 NTGI - QM Enhanced EAFE 0.30 16.84 (1.5) (1.0) (0.5) 0.0 0.5 1.0 1.5 2.0 2.5 Information Sharpe Excess Return Ratio Ratio Ratio (63) (62) (58) 10th Percentile 1.47 2.06 1.22 25th Percentile 1.12 1.88 0.88 Median 0.55 1.70 0.41 75th Percentile (0.03)1.51 (0.18) 90th Percentile (0.56)1.39 (0.72) NTGI - QM Enhanced EAFE 0.27 1.61 0.25 63City Of Clearwater Employees Pension Fund Attachment number 1 Page 65 of 91 Item # 8 NORTHERN TRUST GLOBAL INVESTMENTS RETURN ANALYSIS SUMMARY Return Analysis The graphs below analyze the manager’s return on both a risk-adjusted and unadjusted basis. The first chart illustrates the manager’s ranking over different periods versus the appropriate style group. The second chart shows the historical quarterly and cumulative manager returns versus the appropriate market benchmark. The last two charts illustrate the manager’s ranking relative to their style using various risk-adjusted return measures. Performance vs CAI Non-U.S. Equity Style 10% 15% 20% 25% 30% 35% 40% 3 Years 3 Years 3 Years 3 Years 3 Years 3 Years 3 Years 3 Years 3 Years 3 Years Ended 12/07 Ended 9/07 Ended 6/07 Ended 3/07 Ended 12/06 Ended 9/06 Ended 6/06 Ended 3/06 Ended 12/05 Ended 9/05 6772 5663 5165 4756 4960 4251 4651 4952 5252 4851 10th Percentile 22.90 28.79 27.85 24.07 24.80 27.20 28.67 37.17 29.36 29.96 25th Percentile 20.66 26.40 24.99 21.96 22.37 24.43 26.31 34.11 26.00 27.32 Median 18.48 24.11 23.10 20.28 20.39 22.54 23.99 31.22 23.83 24.75 75th Percentile 16.58 22.37 21.25 18.19 18.55 20.57 22.12 28.88 21.69 22.01 90th Percentile 14.65 20.90 19.66 17.13 16.99 19.49 20.00 27.05 19.80 20.49 NTGI - QM Enhanced EAFE 17.18 23.80 23.04 20.51 20.43 22.94 24.28 31.38 23.68 24.82 MSCI EAFE Index 16.83 23.24 22.24 19.83 19.93 22.32 23.94 31.13 23.68 24.62 Cumulative and Quarterly Relative Return vs MSCI EAFE Index Relative Returns(3%) (2%) (1%) 0% 1% 2% 3% 4% 2003 2004 2005 2006 2007 NTGI - QM Enhanced EAFE CAI Non-U.S. Equity Style Risk Adjusted Return Measures vs MSCI EAFE Index Rankings Against CAI Non-U.S. Equity Style Five Years Ended December 31, 2007 (5) 0 5 10 15 20 25 30 Alpha Treynor Ratio (67) (67) 10th Percentile 4.98 24.85 25th Percentile 2.87 21.87 Median 1.60 20.37 75th Percentile (0.13)18.31 90th Percentile (1.59)16.64 NTGI - QM Enhanced EAFE 0.39 18.97 (1.0) (0.5) 0.0 0.5 1.0 1.5 2.0 Information Sharpe Excess Return Ratio Ratio Ratio (58) (62) (44) 10th Percentile 1.34 1.68 1.01 25th Percentile 0.87 1.53 0.70 Median 0.49 1.42 0.28 75th Percentile (0.06)1.29 (0.20) 90th Percentile (0.46)1.18 (0.56) NTGI - QM Enhanced EAFE 0.40 1.37 0.35 64City Of Clearwater Employees Pension Fund Attachment number 1 Page 66 of 91 Item # 8 Domestic Fixed-Income ‘ Attachment number 1 Page 67 of 91 Item # 8 DOMESTIC FIXED-INCOME PERIOD ENDED DECEMBER 31, 2007 Quarterly Summary and Highlights Domestic Fixed-Income’s portfolio posted a 2.32% return for the quarter placing it in the 68 percentile of the Public Fund - Domestic Fixed group for the quarter and in the 77 percentile for the last year. Domestic Fixed-Income’s portfolio underperformed the L/B Agg by 0.68% for the quarter and underperformed the L/B Agg for the year by 1.02%. Quarterly Asset Growth Beginning Market Value $208,621,838 Net New Investment $1,138,057 Investment Gains/(Losses) $4,846,577 Ending Market Value $214,606,472 Performance vs Public Fund - Domestic Fixed 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% Last Last Last 3 Last 5 Last 7 Last 10 Last 15 Last 20 Quarter Year Years Years Years Years Years Years (68) (19) (77) (29) (71)(63) (87)(78) (96) (69) (93) (74)(97) (67) (88) (35) 10th Percentile 3.10 7.74 5.09 5.70 6.68 6.64 6.92 8.09 25th Percentile 2.91 7.07 4.79 5.29 6.27 6.26 6.68 7.91 Median 2.55 6.67 4.64 4.64 5.94 6.08 6.55 7.42 75th Percentile 2.16 5.99 4.49 4.44 5.79 5.94 6.33 7.37 90th Percentile 1.50 4.74 3.97 4.19 5.44 5.68 6.21 6.86 Domestic Fixed-Income 2.32 5.94 4.53 4.26 4.98 5.47 6.03 6.95 L/B Agg 3.00 6.97 4.56 4.42 5.81 5.97 6.47 7.56 Relative Return vs L/B Agg Relative Returns(3%) (2%) (1%) 0% 1% 2% 3% 4% 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 Domestic Fixed-Income Public Fund - Domestic Fixed Annualized Five Year Risk vs Return 1 2 3 4 5 6 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5% 7.0% 7.5% L/B Agg Domestic Fixed-Income Standard DeviationReturns 66City Of Clearwater Employees Pension Fund Attachment number 1 Page 68 of 91 Item # 8 DOMESTIC FIXED-INCOME RETURN ANALYSIS SUMMARY Return Analysis The graphs below analyze the manager’s return on both a risk-adjusted and unadjusted basis. The first chart illustrates the manager’s ranking over different periods versus the appropriate style group. The second chart shows the historical quarterly and cumulative manager returns versus the appropriate market benchmark. The last two charts illustrate the manager’s ranking relative to their style using various risk-adjusted return measures. Performance vs Public Fund - Domestic Fixed (5%) 0% 5% 10% 15% 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 7729 3586 6283 9174 8979 71 21 95 44 6348 2657 6154 10th Percentile 7.74 6.66 4.26 6.89 10.14 10.79 9.11 12.63 2.45 10.33 25th Percentile 7.07 5.36 3.18 5.50 6.87 10.12 8.69 12.09 0.65 9.49 Median 6.67 4.68 2.82 4.83 4.91 9.48 8.32 11.51 (0.46)8.80 75th Percentile 5.99 4.42 2.48 4.32 4.48 7.87 7.53 10.60 (1.80)7.99 90th Percentile 4.74 4.16 2.28 4.03 3.70 5.57 6.56 9.09 (2.61)7.32 Domestic Fixed-Income 5.94 5.07 2.61 3.92 3.78 8.07 5.57 11.13 0.56 8.45 L/B Agg 6.97 4.33 2.43 4.34 4.10 10.26 8.43 11.63 (0.82)8.70 Cumulative and Quarterly Relative Return vs L/B Agg Relative Returns(8%) (6%) (4%) (2%) 0% 2% 4% 6% 8% 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Domestic Fixed-Income Public Fund - Dom Fixed Risk Adjusted Return Measures vs L/B Agg Rankings Against Public Fund - Domestic Fixed Five Years Ended December 31, 2007 (0.5) 0.0 0.5 1.0 1.5 2.0 2.5 3.0 Alpha Treynor Ratio (83) (83) 10th Percentile 1.20 2.62 25th Percentile 0.92 2.27 Median 0.28 1.68 75th Percentile 0.07 1.43 90th Percentile (0.13)1.22 Domestic Fixed-Income (0.01)1.35 (0.5) 0.0 0.5 1.0 1.5 Information Sharpe Excess Return Ratio Ratio Ratio (83) (83) (89) 10th Percentile 1.27 0.76 1.17 25th Percentile 0.97 0.67 0.84 Median 0.66 0.49 0.38 75th Percentile 0.20 0.42 0.06 90th Percentile (0.21)0.36 (0.31) Domestic Fixed-Income (0.03)0.39 (0.29) 67City Of Clearwater Employees Pension Fund Attachment number 1 Page 69 of 91 Item # 8 DODGE & COX, INC. PERIOD ENDED DECEMBER 31, 2007 Investment Philosophy Dodge & Cox employs a bottom-up security selection process focusing on undervalued issues. The process aims to produce a high-quality, diversified portfolio with above-market returns over three-to-five year periods. Quarterly Summary and Highlights Dodge & Cox, Inc.’s portfolio posted a 1.81% return for the quarter placing it in the 87 percentile of the CAI Core Bond Fixed-Inc Style group for the quarter and in the 79 percentile for the last year. Dodge & Cox, Inc.’s portfolio underperformed the L/B Agg by 1.19% for the quarter and underperformed the L/B Agg for the year by 1.50%. Quarterly Asset Growth Beginning Market Value $99,897,861 Net New Investment $0 Investment Gains/(Losses) $1,809,437 Ending Market Value $101,707,299 Percent Cash: 2.4% Performance vs CAI Core Bond Fixed-Inc Style 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% Last Quarter Last Year Last 3 Years Last 3-3/4 Years (87) (24) (79) (25) (72)(70) (70)(69) 10th Percentile 3.37 7.47 4.95 4.47 25th Percentile 2.99 6.97 4.82 4.36 Median 2.67 6.61 4.67 4.22 75th Percentile 2.23 5.83 4.41 4.06 90th Percentile 1.61 5.12 4.16 3.82 Dodge & Cox, Inc.1.81 5.47 4.48 4.07 L/B Agg 3.00 6.97 4.56 4.08 Relative Return vs L/B Agg Relative Returns(1.5%) (1.0%) (0.5%) 0.0% 0.5% 1.0% 2004 2005 2006 2007 Dodge & Cox, Inc. CAI Core Bond Fixed-Inc Style Annualized Three And Three-Quarter Year Risk vs Return 2.4 2.6 2.8 3.0 3.2 3.4 3.6 3.8 4.0 3.2% 3.4% 3.6% 3.8% 4.0% 4.2% 4.4% 4.6% 4.8% 5.0% L/B Agg Dodge & Cox, Inc. Standard DeviationReturns 68City Of Clearwater Employees Pension Fund Attachment number 1 Page 70 of 91 Item # 8 DODGE & COX, INC. RETURN ANALYSIS SUMMARY Return Analysis The graphs below analyze the manager’s return on both a risk-adjusted and unadjusted basis. The first chart illustrates the manager’s ranking over different periods versus the appropriate style group. The second chart shows the historical quarterly and cumulative manager returns versus the appropriate market benchmark. The last two charts illustrate the manager’s ranking relative to their style using various risk-adjusted return measures. Performance vs CAI Core Bond Fixed-Inc Style 1% 2% 3% 4% 5% 6% 7% 8% 9% 2007 2006 2005 (79) (25) (5) (80) (89)(86) 10th Percentile 7.47 5.38 3.14 25th Percentile 6.97 4.89 3.01 Median 6.61 4.54 2.77 75th Percentile 5.83 4.42 2.64 90th Percentile 5.12 4.22 2.37 Dodge & Cox, Inc.5.47 5.62 2.39 L/B Agg 6.97 4.33 2.43 Cumulative and Quarterly Relative Return vs L/B Agg Relative Returns(2.0%) (1.5%) (1.0%) (0.5%) 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 2004 2005 2006 2007 Dodge & Cox, Inc.CAI Core Bond F-I Style Risk Adjusted Return Measures vs L/B Agg Rankings Against CAI Core Bond Fixed-Inc Style Three And Three-Quarter Years Ended December 31, 2007 (0.4) (0.2) 0.0 0.2 0.4 0.6 0.8 1.0 Alpha Treynor Ratio (65) (63) 10th Percentile 0.38 0.79 25th Percentile 0.29 0.69 Median 0.14 0.50 75th Percentile (0.01)0.35 90th Percentile (0.23)0.10 Dodge & Cox, Inc.0.07 0.46 (0.6) (0.4) (0.2) 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 Information Sharpe Excess Return Ratio Ratio Ratio (69)(65)(69) 10th Percentile 1.21 0.20 0.98 25th Percentile 0.77 0.19 0.63 Median 0.34 0.14 0.27 75th Percentile (0.01)0.10 (0.05) 90th Percentile (0.31)0.03 (0.33) Dodge & Cox, Inc.0.09 0.12 (0.01) 69City Of Clearwater Employees Pension Fund Attachment number 1 Page 71 of 91 Item # 8 DODGE & COX, INC. RETURN ANALYSIS SUMMARY Return Analysis The graphs below analyze the manager’s return on both a risk-adjusted and unadjusted basis. The first chart illustrates the manager’s ranking over different periods versus the appropriate style group. The second chart shows the historical quarterly and cumulative manager returns versus the appropriate market benchmark. The last two charts illustrate the manager’s ranking relative to their style using various risk-adjusted return measures. Performance vs CAI Core Bond Fixed-Inc Style 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 3 Years 3 Years 3 Years 3 Years 3 Years 3 Years 3 Years 3 Years 3 Years 3 Years Ended 12/07 Ended 9/07 Ended 6/07 Ended 3/07 Ended 12/06 Ended 9/06 Ended 6/06 Ended 3/06 Ended 12/05 Ended 9/05 7270 8 90 8 87 32 90 4584 34 84 16 84 19 81 27 77 17 73 10th Percentile 4.95 4.32 4.56 3.95 4.38 4.21 2.92 3.93 4.73 5.27 25th Percentile 4.82 4.23 4.51 3.84 4.27 4.03 2.69 3.67 4.44 4.71 Median 4.67 4.03 4.26 3.65 3.97 3.65 2.39 3.20 3.98 4.25 75th Percentile 4.41 3.97 4.08 3.48 3.81 3.50 2.22 3.03 3.66 3.93 90th Percentile 4.16 3.86 3.91 3.30 3.62 3.31 1.88 2.76 3.30 3.55 Dodge & Cox, Inc.4.48 4.35 4.59 3.80 3.99 3.83 2.83 3.84 4.40 4.96 L/B Agg 4.56 3.86 3.98 3.31 3.70 3.38 2.05 2.92 3.62 3.96 Cumulative and Quarterly Relative Return vs L/B Agg Relative Returns(2%) (1%) 0% 1% 2% 3% 4% 5% 2003 2004 2005 2006 2007 Dodge & Cox, Inc.CAI Core Bond F-I Style Risk Adjusted Return Measures vs L/B Agg Rankings Against CAI Core Bond Fixed-Inc Style Five Years Ended December 31, 2007 (0.5) 0.0 0.5 1.0 1.5 2.0 2.5 3.0 Alpha Treynor Ratio (9) (5) 10th Percentile 0.67 2.04 25th Percentile 0.46 1.84 Median 0.28 1.75 75th Percentile 0.06 1.42 90th Percentile (0.20)1.12 Dodge & Cox, Inc.0.68 2.24 (1.0) (0.5) 0.0 0.5 1.0 1.5 2.0 Information Sharpe Excess Return Ratio Ratio Ratio (43)(6) (57) 10th Percentile 1.47 0.61 1.28 25th Percentile 0.95 0.55 0.96 Median 0.61 0.50 0.50 75th Percentile 0.15 0.42 0.02 90th Percentile (0.31)0.33 (0.45) Dodge & Cox, Inc.0.70 0.64 0.36 70City Of Clearwater Employees Pension Fund Attachment number 1 Page 72 of 91 Item # 8 DODGE & COX, INC. PORTFOLIO CHARACTERISTICS SUMMARY AS OF DECEMBER 31, 2007 Portfolio Structure Comparison The charts below compare the structure of the portfolio to that of the index from the three perspectives that have the greatest influence on return. The first chart compares the two portfolios across sector weights. The second chart compares the portfolios based on duration, duration distribution, duration "dispersion" (degree of "barbellness"), and sector weights within duration ranges. The last chart compares the distributions across quality ratings and sector weights within quality cells. Sector Allocation Dodge & Cox, Inc. Mortgages 45% Eurobonds 1% Credit 33%Cash 2% Treasuries 10% Asset Backed 2% CMOs 6% Lehman Aggregate Mortgages 39% Convertible Preferred 0% Credit 23% Eurobonds 0%Treasuries 22% Asset Backed 1% Agencies 10% CMBSs 6% Duration Distribution by Sector 0% 5% 10% 15% 20% 25% 30% <0 0-1 1-2 2-3 3-4 4-5 5-6 6-7 7-8 8-9 9-10 10-11 11-12 12+ Agencies Asset Backed CMBSs CMOs Cash Credit Eurobonds Mortgages Treasuries Years DurationPercent of PortfolioWeighted Average: DispersionDuration Bar #1:Dodge & Cox, Inc.: Bar #2:Lehman Aggregate: 3.71 3.05 4.41 2.97 Quality Distribution by Sector 0% 10% 20% 30% 40% 50% 60% 70% Trsy Agcy AAA AA A BBB BB B CCC CC C D N/A Agencies Asset Backed CMBSs CMOs Cash Credit Eurobonds Mortgages Treasuries Quality RatingPercent of PortfolioWeighted Average: Quality Bar #1:Dodge & Cox, Inc.: Bar #2:Lehman Aggregate: AA AA+ * All Statistics shown on the page are dependent on the securities in the portfolio being recognized (by their Cusip) and priced. In this case 100% of the securities in the portfolio (by market value) were recognized and priced. 71City Of Clearwater Employees Pension Fund Attachment number 1 Page 73 of 91 Item # 8 DODGE & COX, INC. BOND CHARACTERISTICS ANALYSIS SUMMARY Portfolio Characteristics This graph compares the manager’s portfolio characteristics with the range of characteristics for the portfolios which make up the manager’s style group. This analysis illustrates whether the manager’s current holdings are consistent with other managers employing the same style. Fixed-Income Portfolio Characteristics Rankings Against CAI Core Bond Fixed-Inc Style as of December 31, 2007 (4) (2) 0 2 4 6 8 10 12 OA Duration Effective Effective Coupon OA Duration Dispersion Maturity Yield Rate Convexity (75)(44) (64)(72) (45)(41) (36)(68)(18)(40) (56)(44) 10th Percentile 5.18 4.02 10.31 5.91 6.01 0.47 25th Percentile 4.81 3.45 8.38 5.62 5.61 0.15 Median 4.31 3.10 6.64 5.05 5.39 (0.37) 75th Percentile 3.71 2.85 5.69 4.77 5.10 (0.59) 90th Percentile 2.98 1.49 4.52 4.43 4.91 (0.78) Dodge & Cox, Inc.3.71 3.05 6.81 5.32 5.69 (0.40) L/B Agg 4.41 2.97 7.05 4.90 5.45 (0.34) Sector Allocation and Quality Ratings The first graph compares the manager’s sector allocation with the average allocation across all the members of the manager’s style. The second graph compares the manager’s weighted average quality rating with the range of quality ratings for the style. Sector Allocation December 31, 2007 0%10%20%30%40%50%60% Mortgages 45.2% 26.7% 38.8% Credit 32.9%50%Mgr MV50%Mgr MV27.7% 22.6% Treasuries 10.2% 21.1% 22.3% CMOs 6.1% 9.6% Asset Backed 2.5% 2.0% 0.9% Cash 2.4% Eurobonds 0.7% 0.0% CMBSs 6.6% 5.6% Agencies 5.1% 9.7% Other 1.3% Dodge & Cox, Inc.CAI Core Bond Fixed-Inc Style L/B Agg Sector Diversification Manager 1.11 sectors Style 1.37 sectors Index 1.49 sectors Quality Ratings vs CAI Core Bond Fixed-Inc Style A+ AA- AA AA+ AAA Trsy Weighted Average Quality Rating (81) (32) 10th Percentile AAA 25th Percentile AA+ Median AA+ 75th Percentile AA 90th Percentile A+ Dodge & Cox, Inc.AA L/B Agg AA+ 72City Of Clearwater Employees Pension Fund Attachment number 1 Page 74 of 91 Item # 8 NORTHERN TRUST GLOBAL INVESTMENTS PERIOD ENDED DECEMBER 31, 2007 Investment Philosophy Northern Trust seeks to minimize tracking error versus the benchmark. Quarterly Summary and Highlights Collective Aggregate Bd Idx’s portfolio posted a 3.05% return for the quarter placing it in the 20 percentile of the CAI Core Bond Fixed-Inc Style group for the quarter and in the 20 percentile for the last year. Collective Aggregate Bd Idx’s portfolio outperformed the L/B Agg by 0.05% for the quarter and outperformed the L/B Agg for the year by 0.18%. Quarterly Asset Growth Beginning Market Value $8,554,054 Net New Investment $0 Investment Gains/(Losses) $261,309 Ending Market Value $8,815,363 Performance vs CAI Core Bond Fixed-Inc Style 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% Last Quarter Last Year Last 3 Years Last 4-1/2 Years (20)(24) (20)(25) (56)(70) (67)(71) 10th Percentile 3.37 7.47 4.95 4.49 25th Percentile 2.99 6.97 4.82 4.38 Median 2.67 6.61 4.67 4.18 75th Percentile 2.23 5.83 4.41 4.02 90th Percentile 1.61 5.12 4.16 3.70 Collective Aggregate Bd Idx 3.05 7.15 4.64 4.08 L/B Agg 3.00 6.97 4.56 4.03 Relative Return vs L/B Agg Relative Returns(0.08%) (0.06%) (0.04%) (0.02%) 0.00% 0.02% 0.04% 0.06% 0.08% 0.10% 2003 2004 2005 2006 2007 Collective Aggregate Bd Idx CAI Core Bond Fixed-Inc Style Annualized Four And One-Half Year Risk vs Return 2.4 2.6 2.8 3.0 3.2 3.4 3.6 3.8 3.2% 3.4% 3.6% 3.8% 4.0% 4.2% 4.4% 4.6% 4.8% 5.0% Collective Aggregate Bd Idx L/B Agg Standard DeviationReturns 73City Of Clearwater Employees Pension Fund Attachment number 1 Page 75 of 91 Item # 8 COLLECTIVE AGGREGATE BD IDX RETURN ANALYSIS SUMMARY Return Analysis The graphs below analyze the manager’s return on both a risk-adjusted and unadjusted basis. The first chart illustrates the manager’s ranking over different periods versus the appropriate style group. The second chart shows the historical quarterly and cumulative manager returns versus the appropriate market benchmark. The last two charts illustrate the manager’s ranking relative to their style using various risk-adjusted return measures. Performance vs CAI Core Bond Fixed-Inc Style 1% 2% 3% 4% 5% 6% 7% 8% 9% 2007 2006 2005 2004 (20)(25) (78)(80) (83)(86) (64)(66) 10th Percentile 7.47 5.38 3.14 5.29 25th Percentile 6.97 4.89 3.01 4.84 Median 6.61 4.54 2.77 4.48 75th Percentile 5.83 4.42 2.64 4.23 90th Percentile 5.12 4.22 2.37 3.90 Collective Aggregate Bd Idx 7.15 4.39 2.45 4.37 L/B Agg 6.97 4.33 2.43 4.34 Cumulative and Quarterly Relative Return vs L/B Agg Relative Returns(0.4%) (0.2%) 0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4% 2003 2004 2005 2006 2007 Collective Aggregate Bd Idx CAI Core Bond F-I Style Risk Adjusted Return Measures vs L/B Agg Rankings Against CAI Core Bond Fixed-Inc Style Four And One-Half Years Ended December 31, 2007 (0.4) (0.2) 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 Alpha Treynor Ratio (72) (72) 10th Percentile 0.47 1.28 25th Percentile 0.37 1.18 Median 0.19 0.98 75th Percentile 0.00 0.77 90th Percentile (0.22)0.51 Collective Aggregate Bd Idx 0.04 0.81 (1.0) (0.5) 0.0 0.5 1.0 1.5 2.0 Information Sharpe Excess Return Ratio Ratio Ratio (35) (72) (25) 10th Percentile 1.42 0.36 1.16 25th Percentile 0.85 0.33 0.73 Median 0.52 0.28 0.37 75th Percentile 0.01 0.22 (0.03) 90th Percentile (0.35)0.14 (0.41) Collective Aggregate Bd Idx 0.69 0.23 0.74 74City Of Clearwater Employees Pension Fund Attachment number 1 Page 76 of 91 Item # 8 NORTHERN TRUST GLOBAL INVESTMENTS RETURN ANALYSIS SUMMARY Return Analysis The graphs below analyze the manager’s return on both a risk-adjusted and unadjusted basis. The first chart illustrates the manager’s ranking over different periods versus the appropriate style group. The second chart shows the historical quarterly and cumulative manager returns versus the appropriate market benchmark. The last two charts illustrate the manager’s ranking relative to their style using various risk-adjusted return measures. Performance vs CAI Core Bond Fixed-Inc Style 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 3 Years 3 Years 3 Years 3 Years 3 Years 3 Years 3 Years 3 Years 3 Years 3 Years Ended 12/07 Ended 9/07 Ended 6/07 Ended 3/07 Ended 12/06 Ended 9/06 Ended 6/06 Ended 3/06 Ended 12/05 Ended 9/05 5670 8090 8387 8890 8384 8384 8384 8081 7677 7173 10th Percentile 4.95 4.32 4.56 3.95 4.38 4.21 2.92 3.93 4.73 5.27 25th Percentile 4.82 4.23 4.51 3.84 4.27 4.03 2.69 3.67 4.44 4.71 Median 4.67 4.03 4.26 3.65 3.97 3.65 2.39 3.20 3.98 4.25 75th Percentile 4.41 3.97 4.08 3.48 3.81 3.50 2.22 3.03 3.66 3.93 90th Percentile 4.16 3.86 3.91 3.30 3.62 3.31 1.88 2.76 3.30 3.55 Collective Aggregate Bd Idx 4.64 3.93 4.04 3.36 3.73 3.40 2.07 2.93 3.64 3.99 L/B Agg 4.56 3.86 3.98 3.31 3.70 3.38 2.05 2.92 3.62 3.96 Cumulative and Quarterly Relative Return vs L/B Agg Relative Returns(0.5%) 0.0% 0.5% 1.0% 1.5% 2.0% 2003 2004 2005 2006 2007 Collective Aggregate Bd Idx CAI Core Bond F-I Style Risk Adjusted Return Measures vs L/B Agg Rankings Against CAI Core Bond Fixed-Inc Style Five Years Ended December 31, 2007 (0.5) 0.0 0.5 1.0 1.5 2.0 2.5 Alpha Treynor Ratio (78) (78) 10th Percentile 0.67 2.04 25th Percentile 0.46 1.84 Median 0.28 1.75 75th Percentile 0.06 1.42 90th Percentile (0.20)1.12 Collective Aggregate Bd Idx 0.05 1.41 (1.0) (0.5) 0.0 0.5 1.0 1.5 2.0 Information Sharpe Excess Return Ratio Ratio Ratio (41) (79) (27) 10th Percentile 1.47 0.61 1.28 25th Percentile 0.95 0.55 0.96 Median 0.61 0.50 0.50 75th Percentile 0.15 0.42 0.02 90th Percentile (0.31)0.33 (0.45) Collective Aggregate Bd Idx 0.77 0.42 0.85 75City Of Clearwater Employees Pension Fund Attachment number 1 Page 77 of 91 Item # 8 WESTERN ASSET MANAGEMENT CO. PERIOD ENDED DECEMBER 31, 2007 Investment Philosophy The firm’s investment philosophy emphasizes the use of multiple strategies and active sector rotation and issue selection, while constraining overall interest rate risk relative to the benchmark. Quarterly Summary and Highlights Western Asset Management Co.’s portfolio posted a 2.83% return for the quarter placing it in the 40 percentile of the CAI Core Bond Fixed-Inc Style group for the quarter and in the 58 percentile for the last year. Western Asset Management Co.’s portfolio underperformed the L/B Agg by 0.17% for the quarter and underperformed the L/B Agg for the year by 0.45%. Quarterly Asset Growth Beginning Market Value $98,025,488 Net New Investment $0 Investment Gains/(Losses) $2,772,841 Ending Market Value $100,798,329 Percent Cash: (1.4)% Performance vs CAI Core Bond Fixed-Inc Style 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% Last Quarter Last Year Last 3 Years Last 3-1/4 Years (40)(24) (58) (25) (58)(70)(58)(71) 10th Percentile 3.37 7.47 4.95 4.87 25th Percentile 2.99 6.97 4.82 4.74 Median 2.67 6.61 4.67 4.63 75th Percentile 2.23 5.83 4.41 4.43 90th Percentile 1.61 5.12 4.16 4.21 Western Asset Management Co.2.83 6.51 4.64 4.62 L/B Agg 3.00 6.97 4.56 4.51 Relative Return vs L/B Agg Relative Returns(0.6%) (0.4%) (0.2%) 0.0% 0.2% 0.4% 0.6% 04 2005 2006 2007 Western Asset Management Co. CAI Core Bond Fixed-Inc Style Annualized Three And One-Quarter Year Risk vs Return 2.0 2.5 3.0 3.5 3.6% 3.8% 4.0% 4.2% 4.4% 4.6% 4.8% 5.0% 5.2% 5.4% Western Asset Management Co. L/B Agg Standard DeviationReturns 76City Of Clearwater Employees Pension Fund Attachment number 1 Page 78 of 91 Item # 8 WESTERN ASSET MANAGEMENT CO. RETURN ANALYSIS SUMMARY Return Analysis The graphs below analyze the manager’s return on both a risk-adjusted and unadjusted basis. The first chart illustrates the manager’s ranking over different periods versus the appropriate style group. The second chart shows the historical quarterly and cumulative manager returns versus the appropriate market benchmark. The last two charts illustrate the manager’s ranking relative to their style using various risk-adjusted return measures. Performance vs CAI Core Bond Fixed-Inc Style 1% 2% 3% 4% 5% 6% 7% 8% 9% 2007 2006 2005 (58)(25) (42)(80) (48)(86) 10th Percentile 7.47 5.38 3.14 25th Percentile 6.97 4.89 3.01 Median 6.61 4.54 2.77 75th Percentile 5.83 4.42 2.64 90th Percentile 5.12 4.22 2.37 Western Asset Management Co.6.51 4.65 2.78 L/B Agg 6.97 4.33 2.43 Cumulative and Quarterly Relative Return vs L/B Agg Relative Returns(0.6%) (0.4%) (0.2%) 0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 2004 2005 2006 2007 Western Asset Management Co.CAI Core Bond F-I Style Risk Adjusted Return Measures vs L/B Agg Rankings Against CAI Core Bond Fixed-Inc Style Three And One-Quarter Years Ended December 31, 2007 (0.4) (0.2) 0.0 0.2 0.4 0.6 0.8 1.0 Alpha Treynor Ratio (60) (61) 10th Percentile 0.37 0.84 25th Percentile 0.26 0.69 Median 0.14 0.55 75th Percentile (0.05)0.34 90th Percentile (0.25)0.10 Western Asset Management Co.0.11 0.50 (1.0) (0.5) 0.0 0.5 1.0 1.5 Information Sharpe Excess Return Ratio Ratio Ratio (62)(61)(48) 10th Percentile 1.24 0.25 0.93 25th Percentile 0.86 0.22 0.68 Median 0.36 0.17 0.23 75th Percentile (0.09)0.10 (0.14) 90th Percentile (0.37)0.03 (0.39) Western Asset Management Co.0.25 0.16 0.25 77City Of Clearwater Employees Pension Fund Attachment number 1 Page 79 of 91 Item # 8 WESTERN ASSET MANAGEMENT CO. RETURN ANALYSIS SUMMARY Return Analysis The graphs below analyze the manager’s return on both a risk-adjusted and unadjusted basis. The first chart illustrates the manager’s ranking over different periods versus the appropriate style group. The second chart shows the historical quarterly and cumulative manager returns versus the appropriate market benchmark. The last two charts illustrate the manager’s ranking relative to their style using various risk-adjusted return measures. Performance vs CAI Core Bond Fixed-Inc Style 1% 2% 3% 4% 5% 6% 7% 8% 9% 3 Years 3 Years 3 Years 3 Years 3 Years 3 Years 3 Years 3 Years 3 Years 3 Years Ended 12/07 Ended 9/07 Ended 6/07 Ended 3/07 Ended 12/06 Ended 9/06 Ended 6/06 Ended 3/06 Ended 12/05 Ended 9/05 5870 4890 3287 9 90 3 84 1 84 1 84 1 81 1 77 1 73 10th Percentile 4.95 4.32 4.56 3.95 4.38 4.21 2.92 3.93 4.73 5.27 25th Percentile 4.82 4.23 4.51 3.84 4.27 4.03 2.69 3.67 4.44 4.71 Median 4.67 4.03 4.26 3.65 3.97 3.65 2.39 3.20 3.98 4.25 75th Percentile 4.41 3.97 4.08 3.48 3.81 3.50 2.22 3.03 3.66 3.93 90th Percentile 4.16 3.86 3.91 3.30 3.62 3.31 1.88 2.76 3.30 3.55 Western Asset Management Co.4.64 4.04 4.43 4.04 4.54 4.68 3.40 5.00 6.22 7.38 L/B Agg 4.56 3.86 3.98 3.31 3.70 3.38 2.05 2.92 3.62 3.96 Cumulative and Quarterly Relative Return vs L/B Agg Relative Returns(2%) 0% 2% 4% 6% 8% 10% 2003 2004 2005 2006 2007 Western Asset Management Co.CAI Core Bond F-I Style Risk Adjusted Return Measures vs L/B Agg Rankings Against CAI Core Bond Fixed-Inc Style Five Years Ended December 31, 2007 (1.0) (0.5) 0.0 0.5 1.0 1.5 2.0 2.5 3.0 Alpha Treynor Ratio (1) (3) 10th Percentile 0.67 2.04 25th Percentile 0.46 1.84 Median 0.28 1.75 75th Percentile 0.06 1.42 90th Percentile (0.20)1.12 Western Asset Management Co.1.35 2.62 (1.0) (0.5) 0.0 0.5 1.0 1.5 2.0 Information Sharpe Excess Return Ratio Ratio Ratio (22) (2) (13) 10th Percentile 1.47 0.61 1.28 25th Percentile 0.95 0.55 0.96 Median 0.61 0.50 0.50 75th Percentile 0.15 0.42 0.02 90th Percentile (0.31)0.33 (0.45) Western Asset Management Co.1.08 0.77 1.18 78City Of Clearwater Employees Pension Fund Attachment number 1 Page 80 of 91 Item # 8 WESTERN ASSET MANAGEMENT CO. PORTFOLIO CHARACTERISTICS SUMMARY AS OF DECEMBER 31, 2007 Portfolio Structure Comparison The charts below compare the structure of the portfolio to that of the index from the three perspectives that have the greatest influence on return. The first chart compares the two portfolios across sector weights. The second chart compares the portfolios based on duration, duration distribution, duration "dispersion" (degree of "barbellness"), and sector weights within duration ranges. The last chart compares the distributions across quality ratings and sector weights within quality cells. Sector Distribution (20%) 0% 20% 40% 60% 80% Mortgages Credit Treasuries Agencies AssetBacked InternationalConvertiblePreferredNon-ConvertiblePreferredEurobonds CMBSs CashPercent of PortfolioWestern Asset Management Co. Lehman Aggregate Duration Distribution by Sector 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% <1 1-2 2-3 3-4 4-5 5-6 6-7 7-8 8-9 9-10 10-11 11-12 12+ Agencies Asset Backed CMBSs Cash Convertible Preferred Credit International Mortgages Non-Convertible Preferred Treasuries Years DurationPercent of PortfolioWeighted Average: DispersionDuration Bar #1:Western Asset Management Co.: Bar #2:Lehman Aggregate: 4.66 3.14 4.41 2.97 Quality Distribution by Sector 0% 10% 20% 30% 40% 50% 60% 70% Trsy Agcy AAA AA+ AA AA- A+ A A- BBB+ BBB <BBB Agencies Asset Backed CMBSs Cash Convertible Preferred Credit International Mortgages Non-Convertible Preferred Treasuries Quality RatingPercent of PortfolioWeighted Average: Quality Bar #1:Western Asset Management Co.: Bar #2:Lehman Aggregate: AA+ AA+ * All Statistics shown on the page are dependent on the securities in the portfolio being recognized (by their Cusip) and priced. In this case 99% of the securities in the portfolio (by market value) were recognized and priced. 79City Of Clearwater Employees Pension Fund Attachment number 1 Page 81 of 91 Item # 8 WESTERN ASSET MANAGEMENT CO. BOND CHARACTERISTICS ANALYSIS SUMMARY Portfolio Characteristics This graph compares the manager’s portfolio characteristics with the range of characteristics for the portfolios which make up the manager’s style group. This analysis illustrates whether the manager’s current holdings are consistent with other managers employing the same style. Fixed-Income Portfolio Characteristics Rankings Against CAI Core Bond Fixed-Inc Style as of December 31, 2007 (4) (2) 0 2 4 6 8 10 12 OA Duration Effective Effective Coupon OA Duration Dispersion Maturity Yield Rate Convexity (36)(44) (45)(72) (40)(41) (34)(68)(39)(40) (94)(44) 10th Percentile 5.18 4.02 10.31 5.91 6.01 0.47 25th Percentile 4.81 3.45 8.38 5.62 5.61 0.15 Median 4.31 3.10 6.64 5.05 5.39 (0.37) 75th Percentile 3.71 2.85 5.69 4.77 5.10 (0.59) 90th Percentile 2.98 1.49 4.52 4.43 4.91 (0.78) Western Asset Management Co.4.66 3.14 7.09 5.38 5.46 (1.02) L/B Agg 4.41 2.97 7.05 4.90 5.45 (0.34) Sector Allocation and Quality Ratings The first graph compares the manager’s sector allocation with the average allocation across all the members of the manager’s style. The second graph compares the manager’s weighted average quality rating with the range of quality ratings for the style. Sector Allocation December 31, 2007 (20%)0%20%40%60%80% Mortgages 54.2%50%Mgr MV50%Mgr MV26.7% 38.8% Credit 21.4% 27.7% 22.6% Treasuries 19.0% 21.1% 22.3% Agencies 5.7% 5.1% 9.7% Asset Backed 0.7% 2.0% 0.9% International 0.4% 0.0% Other 0.2% 1.3% CMBSs 6.6% 5.6% CMOs 9.6% Cash (1.6%) Western Asset Management Co.CAI Core Bond Fixed-Inc Style L/B Agg Sector Diversification Manager 0.94 sectors Style 1.37 sectors Index 1.49 sectors Quality Ratings vs CAI Core Bond Fixed-Inc Style A+ AA- AA AA+ AAA Trsy Weighted Average Quality Rating (41) (32) 10th Percentile AAA 25th Percentile AA+ Median AA+ 75th Percentile AA 90th Percentile A+ Western Asset Management Co.AA+ L/B Agg AA+ 80City Of Clearwater Employees Pension Fund Attachment number 1 Page 82 of 91 Item # 8 Disclosures ‘ Attachment number 1 Page 83 of 91 Item # 8 List of Managers That Do Business with Callan Associates Inc. Confidential – For Callan Client Use Only Callan Associates takes its fiduciary and disclosure responsibilities to clients very seriously. The list below is compiled and updated quarterly because we believe our fund sponsor clients should have a clear understanding of the investment management organizations that do business with our firm. As of 12/31/2007, Callan provided educational, consulting, software, database, or reporting services to this list of managers through one or more of the following business units: Institutional Consulting Group, Independent Adviser Group, Fund Sponsor Consulting, the Callan Investments Institute and the “Callan College.” Per strict policy these manager relationships do not affect the outcome or process by which any of Callan’s services are conducted. Fund sponsor clients may request a copy of this list at any time. Fund sponsor clients may also request specific information regarding the fees paid to Callan by the managers employed by their fund. Per company policy, information requests regarding fees are handled exclusively by Callan’s Compliance Department. Clients should also be aware that Callan maintains an asset management division, the Trust Advisory Group (TAG). TAG specializes in the design, implementation and on-going management of multi-manager portfolios for institutional investors. Currently TAG serves as the sponsor and advisor to a multi- manager small cap equity fund and as the non-discretionary adviser to a series of Target Maturity Funds known as the Callan GlidePath® Funds. We are happy to provide clients with more specific information regarding TAG, including detail on the portfolios that it oversees. Per company policy these requests are handled by TAG’s Chief Investment Officer. Page 1 of 4 Manager Name Educational Services Consulting Services Aberdeen Asset Management Y ABS Investment Management Y Acadian Asset Management, Inc. Y Affiliated Managers Group, Inc. Y Y AIG Global Investment Group Y Allegiant Asset Management Group Y Y AllianceBernstein Y Y Allianz Investor Services, LLC (fka USAllianz Investor Services, LLC)Y Allstate Investments LLC Y Altanes Investments, LLC Y American Century Investment Management Y AmSouth/Investment Management Group Y Analytic Investors Y Argus Research Group Y Ariel Capital Management, Inc. Y Ark Asset Management Co., Inc. Y Y Atalanta Sosnoff Capital, LLC Y Atlanta Capital Management Co., L.L.C. Y Y Atlantic Asset Management, LLC Y AXA Rosenberg Investment Management Y Baillie Gifford International LLC (fka Baillie Gifford Overseas Ltd.)Y Baird Advisors Y Bank of America Y Bank of Hawaii Y Barclays Global Investors Y Baring Asset Management Y Barrow, Hanley, Mewhinney & Strauss, Inc. Y Y Batterymarch Financial Management, Inc. Y Bear Stearns Asset Management Y Y Bel Air Investment Advisors Y BlackRock Y BNY Asset Management Y Boston Company Asset Management, LLC (The) Y Y Brandes Investment Partners, L.P. Y Y Brandywine Global Investment Management, LLC Y Y Brown Brothers Harriman & Company Y Cadence Capital Management Y Capital Guardian Trust Company Y Y CastleArk Management, LLC Y Causeway Capital Management Y Charles Schwab & Co. Y Chartwell Investment Partners Y Chicago Equity Partners, LLC Y Clear Bridge Advisors Y Y Columbia Management Advisors, LLC Y Y Columbus Circle Investors Y Y Cramer Rosenthal McGlynn, LLC Y Crawford Investment Counsel Y Credit Suisse Asset Management Y Davis Advisors Y Davis Hamilton Jackson & Associates Y DE Shaw Investment Management, L.L.C. Y Delaware Investment Advisers Y Y Delta Asset Management Y Attachment number 1 Page 84 of 91 Item # 8 List of Managers That Do Business with Callan Associates Inc. Confidential – For Callan Client Use Only Callan Associates takes its fiduciary and disclosure responsibilities to clients very seriously. The list below is compiled and updated quarterly because we believe our fund sponsor clients should have a clear understanding of the investment management organizations that do business with our firm. As of 12/31/2007, Callan provided educational, consulting, software, database, or reporting services to this list of managers through one or more of the following business units: Institutional Consulting Group, Independent Adviser Group, Fund Sponsor Consulting, the Callan Investments Institute and the “Callan College.” Per strict policy these manager relationships do not affect the outcome or process by which any of Callan’s services are conducted. Fund sponsor clients may request a copy of this list at any time. Fund sponsor clients may also request specific information regarding the fees paid to Callan by the managers employed by their fund. Per company policy, information requests regarding fees are handled exclusively by Callan’s Compliance Department. Clients should also be aware that Callan maintains an asset management division, the Trust Advisory Group (TAG). TAG specializes in the design, implementation and on-going management of multi-manager portfolios for institutional investors. Currently TAG serves as the sponsor and advisor to a multi- manager small cap equity fund and as the non-discretionary adviser to a series of Target Maturity Funds known as the Callan GlidePath® Funds. We are happy to provide clients with more specific information regarding TAG, including detail on the portfolios that it oversees. Per company policy these requests are handled by TAG’s Chief Investment Officer. Page 2 of 4 Manager Name Educational Services Consulting Services Denali Advisors LLC Y DePrince, Race & Zollo, Inc. Y Deutsche Asset Management/Deutsche Bank Y Y DSM Capital Partners Y DuPont Capital Management Y Dwight Asset Management Y Eagle Asset Management, Inc. Y Y EARNEST Partners, LLC Y Eaton Vance Management Y Y Edgar Lomax Company (The) Y Enhanced Inv. Technologies, LLC (INTECH) Y Entrust Capital Inc. Y Equinox Capital Management, LLC Y Evergreen Investments Y Y Falcon Point Capital Y Fayez Sarofim & Company Y Y Federated Investors Y Fiduciary Asset Management Y Fifth Third Asset Management, Inc. Y First Quadrant L.P. Y Fisher Investments Y Forstmann Leff Associates Y Fort Washington Investment Advisors Y Fortis Investments Y Franklin Portfolio Associates Y Franklin Templeton Y Fred Alger Management Co., Inc. Y Y FX Concepts Y GAM USA Inc. Y Y GE Asset Management Y Y Geneva Advisors Y GlobeFlex Capital, L.P. Y GoldenTree Asset Management, LP Y Goldman Sachs Asset Management Y Y Grande-Jean Capital Management Y Grantham, Mayo, Van Otterloo & Co., LLC Y Great Lakes Advisors, Inc. Y Harris Investment Management, Inc. Y Hartford Investment Management Co./The Hartford Y Y Hartford (The) Y Heartland Advisors, Inc. Y Y Henderson Global Investors Y Hotchkis and Wiley Capital Management Y HSBC Investments (USA) Inc. Y Y Independence Investments LLC Y Y ING Clarion Y ING Investment Management Y Y INVESCO Y Y Investec Asset Management Y Janus Capital Management, LLC Y Jensen Investment Management Y JPMorgan Y Y Julius Baer Investment Management Y Y Kelly Capital Management, LLC Y Attachment number 1 Page 85 of 91 Item # 8 List of Managers That Do Business with Callan Associates Inc. Confidential – For Callan Client Use Only Callan Associates takes its fiduciary and disclosure responsibilities to clients very seriously. The list below is compiled and updated quarterly because we believe our fund sponsor clients should have a clear understanding of the investment management organizations that do business with our firm. As of 12/31/2007, Callan provided educational, consulting, software, database, or reporting services to this list of managers through one or more of the following business units: Institutional Consulting Group, Independent Adviser Group, Fund Sponsor Consulting, the Callan Investments Institute and the “Callan College.” Per strict policy these manager relationships do not affect the outcome or process by which any of Callan’s services are conducted. Fund sponsor clients may request a copy of this list at any time. Fund sponsor clients may also request specific information regarding the fees paid to Callan by the managers employed by their fund. Per company policy, information requests regarding fees are handled exclusively by Callan’s Compliance Department. Clients should also be aware that Callan maintains an asset management division, the Trust Advisory Group (TAG). TAG specializes in the design, implementation and on-going management of multi-manager portfolios for institutional investors. Currently TAG serves as the sponsor and advisor to a multi- manager small cap equity fund and as the non-discretionary adviser to a series of Target Maturity Funds known as the Callan GlidePath® Funds. We are happy to provide clients with more specific information regarding TAG, including detail on the portfolios that it oversees. Per company policy these requests are handled by TAG’s Chief Investment Officer. Page 3 of 4 Manager Name Educational Services Consulting Services Kensington Investment Group Y Knightsbridge Asset Management, LLC Y Y Lazard Asset Management Y Y Lehman Brothers Inc. Y Y Logan Circle Partners Y Loomis, Sayles & Company, L.P. Y Y Lord Abbett & Company Y Y LSV Asset Management Y Y MacKay-Shields LLC Y Y Marquette Asset Management Y Mellon Asset Management, fka Mellon Institutional Asset Management Y Mellon Private Wealth Management Y Metropolitan Life Insurance Company Y Metropolitan West Capital Management, LLC Y MFS Investment Management Y Y Mondrian Investment Partners Limited Y Y Montag & Caldwell, Inc. Y Y Montgomery Street Income Securities Y Morgan Stanley Investment Management Y Y Natixis Global Asset Management Y Newton Capital Management Y New York Life Investment Management LLC (NYLIM) Y Y Nicholas-Applegate Capital Management Y Y Nomura Asset Management U.S.A., Inc. Y Northern Trust Global Investment Services Y Y Northern Trust Value Investors Y NorthRoad Capital Management LLC Y Nuveen Investments Institutional Services Group Y Y NWQ Investment Management Company Y OFI Institutional Asset Management Y Old Mutual Asset Management Y Y Oppenheimer Capital Y Pacific Income Advisers Y Pacific Investment Management Company Y Palisades Investment Partners Y PanAgora Asset Management Y Paradigm Asset Management Co., LLC Y Y Pax World Funds Y Payden & Rygel Y Peregrine Capital Management, Inc. Y Perimeter Capital Management Y Pinnacle West Capital Corporation Y Pioneer Investment Management, Inc. Y Y Principal Global Investors Y Y Provident Investment Counsel Y Prudential Investment Management Y Y Putnam Investments Y Y Pyramis Global Advisors Y RCM Y Y Rice Hall James & Associates, LLC Y River Road Asset Management Y RiverSource Investments, LLC Y Y Robeco Investment Management Y Y Rosewood Management Corp. Y Attachment number 1 Page 86 of 91 Item # 8 List of Managers That Do Business with Callan Associates Inc. Confidential – For Callan Client Use Only Callan Associates takes its fiduciary and disclosure responsibilities to clients very seriously. The list below is compiled and updated quarterly because we believe our fund sponsor clients should have a clear understanding of the investment management organizations that do business with our firm. As of 12/31/2007, Callan provided educational, consulting, software, database, or reporting services to this list of managers through one or more of the following business units: Institutional Consulting Group, Independent Adviser Group, Fund Sponsor Consulting, the Callan Investments Institute and the “Callan College.” Per strict policy these manager relationships do not affect the outcome or process by which any of Callan’s services are conducted. Fund sponsor clients may request a copy of this list at any time. Fund sponsor clients may also request specific information regarding the fees paid to Callan by the managers employed by their fund. Per company policy, information requests regarding fees are handled exclusively by Callan’s Compliance Department. Clients should also be aware that Callan maintains an asset management division, the Trust Advisory Group (TAG). TAG specializes in the design, implementation and on-going management of multi-manager portfolios for institutional investors. Currently TAG serves as the sponsor and advisor to a multi- manager small cap equity fund and as the non-discretionary adviser to a series of Target Maturity Funds known as the Callan GlidePath® Funds. We are happy to provide clients with more specific information regarding TAG, including detail on the portfolios that it oversees. Per company policy these requests are handled by TAG’s Chief Investment Officer. Page 4 of 4 Manager Name Educational Services Consulting Services Rothschild Asset Management, Inc. Y Y RREEF Funds (The) Y Russell Investment Group Y Schroder Investment Management North America Inc. Y Y Scottish Widows Investment Partnership Y Security Global Investors Y Segal Bryant & Hamill Y SEI Investments Y Y Seligman (J. & W.) & Company, Inc. Y Y Shell Asset Management Y Shenandoah Asset Management Y Shenkman Capital Management, Inc. Y Sit Investment Associates, Inc. Y Smith Group Asset Management Y Southeastern Asset Management, Inc. Y Standish Mellon Asset Management Company Y State Street Global Advisors Y Y Sterne Agee Asset Management Y Stone Harbor Investment Partners, L.P. Y Stratton Management Y Systematic Financial Management Y Y T. Rowe Price Associates, Inc. Y Y Taplin, Canida & Habacht Y The Torrey Funds Y Threadneedle Investsments Y Thrivent Financial for Lutherans Y TIAA-CREF Y Y TimesSquare Capital Management, LLC Y Trusco Capital Management, Inc. Y TCW Asset Management Company Y UBS Y Y Union Bank of California Y U.S. Trust Y Y Van Eck Absolute Return Advisers Corp. Y Vanguard Group, Inc. (The) Y Victory Capital Management Inc. Y Y Vontobel Asset Management Y Waddell & Reed Asset Management Group Y WEDGE Capital Management Y Wellington Management Company, LLP Y Y Wells Capital Management Y Western Asset Management Company Y William Blair & Co., Inc. Y Ziegler Capital Management LLC Y Attachment number 1 Page 87 of 91 Item # 8 Callan Research/Education ‘ Attachment number 1 Page 88 of 91 Item # 8 WHITE PAPERS Getting a Handle on Defined Contribution Fee Disclosures John Carr; Lori Lucas, CFA; Margo Rocklin (November 2007) Qualified Default Investment Alternatives: Summary and Commentary of the DOL's Final Regulation Lori Lucas, CFA (November 2007) The Callan DC Index: Performance Summary & Analysis Lori Lucas, CFA; Ivan “Butch” Cliff, CFA (October 2007) Global Real Estate Securities: An Introduction for the Institutional Investor Gregory C. Allen; Sarah Snyder (October 2007) NEWSLETTERS & DATA PACKAGE DC Observer:2008 Is Around the Corner: Do You Know Where Your QDIA Is? (Winter 2007-2008) Capital Market Review:4th Quarter 2007 Hedge Fund Monitor:3rd Quarter 2007 Private Markets Trends:Fall 2007 Quarterly Performance Data: 4th Quarter 2007 Below is a list of recent Callan Institute research and upcoming programs. The Institute’s research and educational programs keep clients abreast of the latest trends in the investment industry and help clients learn through carefully structured workshops and lectures. For more information, please contact your Callan Consultant or Gina Falsetto at 415.974.5060 or institute@callan.com. Callan Investments Institute Callan Investments Institute – Fourth Quarter 2007 • White Papers • Newsletters • Research Presentations • Event Summaries • Upcoming Educational Programs Research and Upcoming Programs Attachment number 1 Page 89 of 91 Item # 8 RESEARCH PRESENTATIONS (WITH TALKING POINTS) This research series offers a page-by-page summary of the key talking points given by Callan experts during their PowerPoint presentations at Institute programs. The module brings a “voice” to the presentation and offers a description of each slide’s charts, tables, graphs, and the like. “Global Positioning” – October 2007 Regional Breakfast Workshop EVENT SUMMARIES October 2007 Regional Breakfast Workshop Summary – “Global Positioning” June 2007 Regional Breakfast Workshop Summary –“Plan Regulations & Costs: What’s New, and How Does it Affect Your Plan?” UPCOMING EDUCATIONAL PROGRAMS The Twenty-Eighth Annual National Conference San Francisco, January 28-30, 2008 June 2008 Regional Breakfast Workshops Chicago and San Francisco, dates TBA October 2008 Regional Breakfast Workshops New York City, October 28 Atlanta, October 29 If you have any questions regarding these programs, please contact Ray Combs at 415.974.5060 or institute@callan.com. 101 CALIFORNIA ST., SUITE 3500, SAN FRANCISCO, CALIFORNIA 94111 415.974.5060 FAX 415.274.3049 www.callan.com © 2007 Callan Associates Inc. The Callan Investments Institute, the educational division of Callan Associates Inc., has been a leading educational forum for the pensions and investments industry since 1980. The Institute offers continuing education on key issues confronting fund sponsors and investment managers. Please contact the Callan Investments Institute for more information, or visit our website at www.callan.com. Callan Investments Institute Callan Investments Institute – Fourth Quarter 2007 Attachment number 1 Page 90 of 91 Item # 8 ANNOUNCING 2008 “CALLAN COLLEGE” DATES “CALLAN COLLEGE” – AN INTRODUCTION TO INVESTMENTS May 6–7 in San Francisco October 21–22 in San Francisco “CALLAN COLLEGE” – ADVANCED INVESTMENT TOPICS March 4–6 in San Francisco July 15–17 in San Francisco “CALLAN COLLEGE” – ALTERNATIVE INVESTMENTS June 3–4 in San Francisco Tuition for the “Callan College” Introduction to Investments is $2,350 per person; tuition for the other sessions is $2,500 per person. Tuition includes instruction, all materials, breakfast and lunch on each day and dinner on the first evening with the instructors. CUSTOMIZED SESSIONS A unique feature of the “Callan College” is its ability to educate on a specialized level through its customized sessions. These sessions are tailored to meet the training and educational needs of the participants, whether they are plan sponsors or those who provide services to institutional tax-exempt plans. Past customized “Callan College” sessions have covered topics such as: custody, industry trends, sales and marketing, client service, international, fixed income and managing the RFP process. Instruction is tailored to basic or advanced audiences. For more information on the “Callan College,” please contact Kathleen Cunnie at 415.974.5060 or college@callan.com. “Callan College” – Fourth Quarter 2007 “Callan College” Educational Sessions The Center for Investment Training (“Callan College”) provides relevant and practical educational opportunities to all professionals engaged in the investment decision making process. This educational forum offers basic-to-intermediate level instruction on all components of the investment management process. 101 CALIFORNIA ST., SUITE 3500, SAN FRANCISCO, CALIFORNIA 94111 415.974.5060 FAX 415.274.3049 www.callan.com © 2007 Callan Associates Inc. Attachment number 1 Page 91 of 91 Item # 8 City of Clearwater Employees’ Pension Plan May 13, 2008 Attachment number 2 Page 1 of 72 Item # 8 2 Table of Contents Duties of Trustees…………………………………………………………….3 Current Advisors to the plan…………………………………………………6 Plans Current Asset Managers……………………………………………….7 Market performance by sector………………………………………………..8 Asset allocation study.………………………………………………………..10 Implementation of the asset allocation study…………………………………11 Current status of the asset allocation study recommendations……………….12 Current asset allocation goals ………………………………………………14 Pension Plan Position After Rebalancing. …………………..……………….15 How we hire a manager………………………………………………………16 How a manager is terminated………………………………………………...16 Current manager performance benchmarks ………………………………….18 Pension plan performance ……………………………………………………19 Manager with no history to report ……………………………………………38 What other public pension plans invest in…………………………………….39 Allowable investment and restrictions ………………………………………43 Other investment vehicles……………………………………………………..44 Training ……………………………………………………………………...44 Pension investment policy……………………………………………………..45 Attachment number 2 Page 2 of 72 Item # 8 3 Clearwater Code of Ordinances Duties of Trustees DIVISION 3. EMPLOYEES PENSION PLAN Sec. 2.394. Plan administration. (a) Administration of the plan. The trustees, in conjunction with the committee, shall control and manage, the operation and administration of the plan as provided in this division. (b) Trustees. (1) The members of the city commission of the employer, whether elected or appointed, shall serve as the trustees. The term of office of each trustee shall be consistent with his term of office as a member of the city commission. (2) The finance director of the employer shall be the treasurer for the trustees and shall provide such bond as may be prescribed by the trustees. (3) Each trustee shall be entitled to one vote. Three affirmative votes shall be necessary for any decision by the trustees at a meeting of the trustees. A trustee shall have the right to recuse himself from voting as the result of a conflict of interest provided that the trustee states in writing the nature of the conflict. (4) The trustees shall not receive any compensation for service as a trustee, but may be reimbursed expenses as provided by law; provided, however, that the trustees may receive compensation for services as a member of the city commission. (c) Powers and duties of trustees. The trustees shall have final authority and control over the administration of the plan herein embodied, with all powers necessary to enable them to carry out their duties in that respect. Not in limitation, but in amplification of the foregoing, the trustees shall have the power and discretion to interpret or construe this plan and to determine all questions that may arise as to the status and rights of the participants and others hereunder Attachment number 2 Page 3 of 72 Item # 8 4 (d) Pension advisory committee. (1) a. There shall be a pension advisory committee comprised of seven persons. Three members of the committee shall be employees who are active employees and participants in the plan; three members shall be city commissioners or appointees of the city commission; and the seventh member, who shall be a resident of the City of Clearwater, shall be appointed by the other six members. b. Except as provided in subparagraph (3) below, terms of members shall be for two years. (2) Committee members representing the employees shall be elected by a majority of the active employees who are participants in the plan. Committee members representing the city commission shall be appointed by a majority vote of the city commission. The seventh member shall be appointed by a majority vote of the other six members of the committee. (3) Terms of office of employee elected committee members shall overlap, with two of the members to be initially elected for two years and the third member to be initially elected for one year. Terms of office of city commission appointed members shall overlap, with two of the members to be initially appointed for two years and the third member to be initially appointed for one year. (4) a. Members of the committee last elected by employees on the date of adoption of this amended and restated plan shall continue to serve as the employee elected committee members for the remainder of their respective terms. b. Not less than 60 days before each election to be scheduled for an employee elected committee member, the existing employee elected committee members, shall select and appoint a nominee group composed of five persons from employees participating in the plan to conduct the election process. The department of the city clerk shall provide necessary assistance to the employees for the administration of elections. (5) Any vacancy on the committee, whether employee elected, city commission term and in the same manner as the original committee member who vacated the position. Attachment number 2 Page 4 of 72 Item # 8 5 (6) Members of the committee shall serve without compensation additional to that earned in their respective capacities as regular employees or elected city commissioners. (7) Each committee member shall be entitled to one vote. Four affirmative votes shall be necessary for any decision by the committee at any meeting. A committee member shall have the right to recuse himself from voting as a result of a conflict of interest provided that the committee member states in writing the nature of the conflict. (e) Powers and duties of committee. (1) The committee shall have authority to: a. Arrange for the necessary physicians to pass upon all medical examinations required under this plan. Such physicians shall report in writing to the committee their conclusions and recommendations. The committee shall review such physicians' reports and prepare its recommendations as to the acceptance or denial of employees as participants and forward same to the trustees. b. In conjunction with the employer and medical consultants, establish the scope of the medical examinations to be used for benefit eligibility and medical standards to be used for benefit eligibility and to guide the examining physicians in reaching their conclusions and recommendations. Such medical standards shall give due consideration to the nature of the job classification in which participants are to be placed. c. Investigate and recommend to the trustees, in conjunction with the actuaries, such mortality/service and other tables as shall be deemed necessary for the operation of the plan. d. Make recommendations to the trustees for improvements or changes in the plan. e. Receive all applications for benefits under this plan and determine all facts that are necessary to establish the right of an applicant to benefits under the plan. f. Prepare and distribute to the participants information relating to the plan. g. Investigate and determine the eligibility of participants for disability pension as provided in section 2.397, paragraph (c). (2) The committee shall, from time to time as it deems appropriate, submit recommendations to the trustees as to rules, procedures, forms Attachment number 2 Page 5 of 72 Item # 8 6 and general administrative procedures relating to the responsibilities of the committee. (3) No benefits or relief shall be provided to any participant under the plan unless the same has been reviewed by the committee and a recommendation provided to the trustees. f) Conflict in terms. In the event of any conflict between the terms of this plan and any explanatory booklet, this plan shall control. (g) Nondiscrimination. The trustees and the committee shall not take any action whatsoever that would result in unfairly benefiting one participant or group of participants at the expense of another or in discriminating between participants similarly situated or in the application of different rules to substantially similar sets of facts. (h) Procedures and records. (1) The trustees and, subject to the approval of the trustees, the committee, may establish rules and procedures as are necessary to administer the plan, which rules and procedures shall be applied in a uniform and nondiscriminatory manner. (2) The trustees and the committee shall keep a complete record of all their proceedings and all data necessary for the administration of the plan. All of the foregoing records and data shall be located at the principal office of the employer. (i) Final authority. Except to the extent otherwise required by law or by this plan, the decision of the trustees in matters within their jurisdiction shall be final, binding and conclusive upon the employer, the committee, each employee and beneficiary, and every other interested or concerned person or party. (j) Appointment of advisors. The trustees may appoint such actuaries, accountants, professional investment counsel, legal counsel, specialists, third party pension administrators, and other persons that they deem necessary and desirable in connection with the administration of this plan or to assist them in the performance of their duties as trustees. The trustees are authorized to pay for such services from the pension fund. Attachment number 2 Page 6 of 72 Item # 8 7 Current Advisors to the Plan Financial Advisor John Willoughby Charles D. Hyman, Inc. Performance Measure Paul Troup Callan Associates Asset Allocation Study Grant Kalson Kalson & Associates Manager Searches Greg McNeillie Dahab Associates Actuary Steve Metz Price Waterhouse Coopers Pension Attorney Stuart Kaufman Klausner & Kaufman Pension Attorney Robert Klausner Klausner & Kaufman Custodian Mike Peska Northern Trust Asset Transition Mac Nickey Northern Trust Attachment number 2 Page 7 of 72 Item # 8 8 Plan’s Current Asset Managers Category Manager Name Asset Class Domestic Equity Aletheia Research & Management Large Cap Value Northern Trust Russell 1000 Index Large Cap Value ING Large Cap Growth Artisan Partners Mid Cap Growth Denver Investment Advisors Mid Cap Growth Wedge Capital Management Mid Cap Value Atlanta Capital Management Small Cap Value Systematic Financial Small Cap Value Independence Investments LLC Small Cap Growth International Equity Northern Trust Enhanced EAFE EAFE (Europe, Asia, Far East) Wentworth, Hauser and Violich EAFE – Intl Growth Earnest Partners EAFE – Intl Value Wellington Management Emerging Markets Eaton Vance Management Emerging Markets Fixed Income Dodge & Cox Lehman Brothers Aggregate Western Asset Management Lehman Brothers Aggregate REITS Security Capital Research & Management Real Estate Securities Attachment number 2 Page 8 of 72 Item # 8 9 Market Performance by Sector The following chart is the overall market performance by sector for the last twenty years. Attachment number 2 Page 9 of 72 Item # 8 Attachment number 2 Page 10 of 72 Item # 8 11 Asset Allocation Study On October 18, 2004 the trustees authorized Kalson & Associates to do an asset allocation study for the Employees Pension Plan. The goal of the study was to find the asset mix that would generate the highest possible rate of return with an acceptable amount of risk. On March 14, 2005 the Asset Allocation Study was presented to the trustees. The trustees accepted the recommendations of the Asset Allocation Study and authorized staff to take the necessary actions to implement the recommendations. The following is a summary of the recommendations of the Asset Allocation Study Changes requiring voter approval via referendum: 1. Add Real Estate Investment Trusts (REITs) as an allowable investment for up to 15% of the portfolio. REITS are companies that primarily own buildings and land. 2. Increase the allowable amount of international investments from 10% to 20% of the portfolio to provide for the addition of emerging market equity investments (State law limits the amount of international investments to 25%.). 3. Increase the maximum equity allocation from 65% to 70% (State law limits the maximum domestic equity allocation to 80%.). 4. Allow up to 10% of the portfolio to be invested in High Yield Bonds. Changes not requiring voter approval via a referendum: 5. Add a Mid Capitalization Value Equity Manager. 6. Add a Small Capitalization Growth Equity Manager. 7. Add an active International Europe, Asia, and Far East (EAFE) Manager to replace the current passive EAFE Manager. Attachment number 2 Page 11 of 72 Item # 8 12 Implementation of the Asset Allocation Study At the June 13, 2005, trustee meeting the trustees decided that the recommended changed to the Employees Pension Plan’s allowable investments bore a striking resemblance to that of State Statute. The trustees agreed with the pension plan’s attorney’s recommendation that the Trustees adopt the state’s investment restrictions as the plan’s investments restrictions. There is only one minor modification to the state investment restriction. That modification is the plan cannot own any assets in the corporate limits of the City of Clearwater. The trustees approved changing allowable pension investments to be set by State Statute and forwarded to City Council and voters for approval in a referendum. The referendum was originally scheduled for March 14, 2006. The referendum was first moved to November 7, 2006, and then to March 13, 2007, where it passed. The Investment Policy was updated on May 15, 2007, to reflect the approved investment restrictions. Current status of the Asset Allocation Study recommendations 1. Add Real Estate Investment Trusts (REITs) as an allowable investment for up to 15% of the portfolio. Security capital has been hired and has been partially funded. The averaging in funding will be completed this summer. 2. Increase the allowable amount of International Investments from 10% to 20% of the portfolio to provide for the addition of emerging market equity investments. State Statute limits Florida public pension plans to 25% international exposure. Done 3. Increase the maximum equity allocation from 65% to 70%. Done Attachment number 2 Page 12 of 72 Item # 8 13 4. Allow up to 10% of the portfolio to be invested in High Yield Bonds. On hold due to the sub prime mortgage and structured investment vehicle problems. 5 Add a Mid Capitalization Value Equity Manager. Wedge Capital Management LLC Done 6 Add a Small Capitalization Growth Equity Manager. Independence Investments LLC Done 7 Add an active International EAFE Manager to replace the current passive EAFE Manager. Wentworth, Hauser & Violich - Int’l Growth Earnest Partners – Int’l Value Done Attachment number 2 Page 13 of 72 Item # 8 14 Current Asset Allocation Goals Asset Allocation Goal 22% 20% Growth Value Small Cap 7% 5% 12% Domestic Mid Cap 5% 5% Equity 42% 10% 60% Large Cap 10% 10% 20% EAFE 10% International 10% 18% Emerging Market 8% 8% REITS 10% 10% Fixed 30% 30% 100% Growth/Value 22% 20% Attachment number 2 Page 14 of 72 Item # 8 15 Current Asset Allocation Current: Growth Value Growth Managers Value Atlanta Capital 2.93% Small Cap 5.76% 5.65% Independence 5.76% Systematic 2.72% 11.41% NT Index Index Artisan 4.08% Domestic Med Cap 9.61% 4.79% Denver 5.53% Wedge 4.79% Equity 46.76% 14.40% NT Index NT Index 63.60% Large Cap 10.06% 10.89% ING 10.06% Aletheia 3.13% 20.95% NT Index NT Russel Index 7.76% Earnest Partners 4.88% EAFE 14.10% Wentworth 4.88% International NT Enhance Index 4.34% 16.84% Wellington 1.35% Emerging Market 2.74% Eaton Vance 1.39% NT Index 0.00% REITS 3.28% Security Capital 3.28% 3.28% NT Index 0.00% Dodge and Cox 16.56% Fixed 33.10% Western Asset 16.46% 33.10% NT Index 0.08% Cash 0.02% Cash 0.02% 100.00% 100.00% Growth/Value 25.43% 21.33% Attachment number 2 Page 15 of 72 Item # 8 16 How We Hire A Manager Determine which asset class needs to add a manager: Asset Allocation Study Replacing Existing Manager Get approval from trustees for a placement in that asset class and hire a consultant to assist in the search for a manager. The search consultant reviews its database of money managers and produces a list of prospects. The consultant may also issue an RFQ to assist in the search process if appropriate. The search consultant presents to the Pension Investment Committee a summary of all appropriate money manager information received. The search consultant and the Pension Investment Committee determine who will make final presentations. The search consultant and staff conduct due diligence on the finalists. Final presentations are made to the search consultant and the Pension Investment Committee. The committee ranks the firms and makes a recommendation to the trustees. The trustees approve the hiring of the recommended money manager. Staff works with Northern Trust to transition assets to the new manager. Attachment number 2 Page 16 of 72 Item # 8 17 How A Manager Is Terminated The performance of all managers is reviewed on a quarterly basis. A performance report is created every quarter by Callan Associates and reviewed in depth by the Pension Investment Committee. When a manager has performance that has fallen below what is acceptable as defined in the Investment Policy, at least three things happen: 1 Callan is asked to opine if this is a temporary situation or a bigger problem. 2. Staff contacts the manager to get an explanation as to their lack of performance. 3.The manager is asked to attend the next Pension Investment Committee meeting. If warranted, the Pension Investment Committee will call a special meeting before the next regular meeting to discuss the money manager in question. An example warranting a special meeting could be a significant change in a money manager’s key personnel. At the next Pension Investment Committee meeting the manager’s performance will be reviewed and the manager will be present to discuss their current situation. If the Investment Committee and consultants are satisfied that the manager’s situation is only temporary the manager will be under close scrutiny but termination will not be recommended. If the committee feels otherwise they will recommend termination to the trustees. The Trustees must approve the actual termination. Staff works with Northern Trust to transfer assets from the underperforming money manager to the designated manager. Attachment number 2 Page 17 of 72 Item # 8 18 Current Manager Performance Benchmarks Currently our money managers are compared against their peer groups and an appropriate index. Following are the applicable indices: Asset Class Peer Group Index Large Cap Value Callan Large Cap Value Style Russell 1000 Value Index Large Cap Growth Callan Large Cap Growth Style Russell 1000 Growth Index Mid Cap Value Callan Mid Cap Value Style Russell Mid Cap Value Index Mid Cap Growth Callan Mid Cap Growth Style Russell Mid Cap Growth Inx Small Cap Value Callan Small Cap Value Style Russell 2000 Value Index Small Cap Growth Callan Small Cap Growth Style Russell 2000 Growth Index EAFE Callan Non-U.S. Equity Style MSCI EAFE Index Emerging Markets Callan Emerging Market Index MSCI Emerging Markets Domestic Fixed Income Callan Core Bond Style Lehman Brothers Aggregate REITS Callan US REIT Index NCREIF Index Total Fund Callan Public Fund Data Base Proposed New 42% S&P 500, 31% L/B, 9%MSCI EAFE, 8% MSCI Emg Mkt, &10 % NCREIF Attachment number 2 Page 18 of 72 Item # 8 19 Pension Plan Performance Attachment number 2 Page 19 of 72 Item # 8 20 City of Clearwater Employees' Pension Plan Overall All Performance VS Benchmark 3-Year and 5-Year Rolling Performance Rolling Period Ended Three-Year Average % Return Three-Year Benchmark % Return Five-Year Average % Return Five-Year Benchmark % Return Jun-04 12.29% 12.52% 2.21% 2.10% Sep-04 5.93% 5.83% 2.97% 2.89% Dec-04 6.25% 5.95% 1.85% 2.43% Mar-05 5.52% 5.41% 0.60% 1.70% Jun-05 8.19% 8.08% 1.67% 2.25% Sep-05 12.74% 12.35% 2.04% 2.63% Dec-05 11.95% 10.97% 3.92% 3.60% Mar-06 13.93% 12.65% 6.43% 5.44% Jun-06 9.86% 8.68% 5.17% 4.65% Sep-06 10.35% 9.64% 7.88% 7.15% Dec-06 9.44% 8.61% 7.43% 6.89% Mar-07 8.97% 8.24% 7.75% 7.12% Jun-07 10.73% 9.55% 9.80% 9.11% Sep-07 11.82% 10.29% 12.24% 11.65% Dec-07 8.54% 7.64% 10.95% 10.23% * The lower the percentile ranking, the better the performance, with 1 being the best percentile rating possible and 50 the median. Benchmark is the Callan Public Fund Sponsor Data Base = Beat benchmark = Underperformed Attachment number 2 Page 20 of 72 Item # 8 21 City of Clearwater Employees' Pension Plan Domestic Equity 3-Year and 5-Year Rolling Performance VS Benchmark Rolling Period Ended Three-Year Average % Return Three-Year Percentile Ranking * Five-Year Average % Return Five-Year Percentile Ranking * Mar-05 4.72% 29 -2.55% 78 Jun-05 10.01% 20 -1.08% 75 Sep-05 19.51% 22 -0.43% 84 Dec-05 17.85% 21 2.78% 34 Mar-06 21.00% 27 6.93% 27 Jun-06 13.66% 37 4.64% 32 Sep-06 13.39% 45 9.34% 26 Dec-06 11.42% 48 7.80% 29 Mar-07 10.57% 71 7.94% 43 Jun-07 12.86% 30 12.14% 34 Sep-07 14.77% 23 17.19% 29 Dec-07 9.41% 30 14.67% 28 * The lower the percentile ranking, the better the performance, with 1 being the best percentile rating possible and 50 the median. Benchmark is the Callan Public Fund Domestic Equity Data Base = Beat benchmark = Underperformed Attachment number 2 Page 21 of 72 Item # 8 22 City of Clearwater Employees' Pension Plan International Equity 3-Year and 5-Year Rolling Performance VS Benchmark Rolling Period Ended Three-Year Average % Return Three-Year Percentile Ranking * Five-Year Average % Return Five-Year Percentile Ranking * Mar-05 8.89% 90 N/A N/A Jun-05 9.45% 87 N/A N/A Sep-05 21.94% 82 N/A N/A Dec-05 20.39% 91 N/A N/A Mar-06 28.02% 92 N/A N/A Jun-06 21.82% 84 9.47% 78 Sep-06 21.22% 77 13.74% 77 Dec-06 19.32% 82 14.13% 85 Mar-07 20.02% 55 14.42% 85 Jun-07 23.30% 53 16.35% 90 Sep-07 23.53% 80 22.13% 89 Dec-07 17.03% 80 19.84% 90 * The lower the percentile ranking, the better the performance, with 1 being the best percentile rating possible and 50 the median. Benchmark is the Callan Public Fund Sponsor Intl Equity Data Base = Beat benchmark = Underperformed Attachment number 2 Page 22 of 72 Item # 8 23 City of Clearwater Employees' Pension Plan Domestic Fixed Income 3-Year and 5-Year Rolling Performance VS Benchmark Rolling Period Ended Three-Year Average % Return Three-Year Percentile Ranking * Five-Year Average % Return Five-Year Percentile Ranking * Mar-05 5.41% 91 5.86% 94 Jun-05 5.45% 84 6.10% 92 Sep-05 3.73% 84 5.61% 93 Dec-05 3.43% 89 4.77% 96 Mar-06 2.89% 87 4.17% 97 Jun-06 2.11% 82 4.25% 96 Sep-06 3.48% 72 4.22% 96 Dec-06 3.86% 41 4.67% 87 Mar-07 3.61% 55 5.17% 90 Jun-07 4.27% 61 4.54% 82 Sep-07 4.14% 47 4.06% 89 Dec-07 4.53% 71 4.26% 87 * The lower the percentile ranking, the better the performance, with 1 being the best percentile rating possible and 50 the median. Benchmark is the Callan Public Fund Sponsor Dom Fixed Data Base = Beat benchmark = Underperformed Attachment number 2 Page 23 of 72 Item # 8 24 Review of Existing Managers Attachment number 2 Page 24 of 72 Item # 8 25 City of Clearwater Employees' Pension Plan Money Manager: ING Investments Management 3-Year and 5-Year Rolling Performance VS Benchmark Domestic Equity Large Cap Growth Manager Hired 1st Qtr 1995 Rolling Period Ended Three-Year Average % Return Three-Year Percentile Ranking * Five-Year Average % Return Five-Year Percentile Ranking * Mar-05 3.09% 7 -4.90% 17 Jun-05 7.91% 34 -4.38% 19 Sep-05 16.36% 28 -3.52% 16 Dec-05 17.10% 17 -0.34% 10 Mar-06 18.32% 24 4.08% 15 Jun-06 11.92% 23 1.65% 16 Sep-06 12.09% 18 6.40% 19 Dec-06 9.80% 19 6.00% 13 Mar-07 9.10% 23 5.99% 20 Jun-07 11.39% 18 9.91% 32 Sep-07 14.53% 27 15.10% 34 Dec-07 12.02% 24 15.04% 27 * The lower the percentile ranking, the better the performance, with 1 being the best percentile rating possible and 50 the median. Benchmark is the Callan Large Cap Growth Data Base = Beat benchmark = Underperformed Attachment number 2 Page 25 of 72 Item # 8 26 City of Clearwater Employees' Pension Plan Money Manager: Aletheia Research & Management Quarterly and One Year Performance VS Benchmark Domestic Equity Large Cap Value Manager Hired 2nd Qtr 2007 Rolling Period Ended Three-Year Average % Return Three-Year Percentile Ranking * Five-Year Average % Return Five-Year Percentile Ranking * Mar-05 N/A N/A N/A N/A Jun-05 N/A N/A N/A N/A Sep-05 N/A N/A N/A N/A Dec-05 N/A N/A N/A N/A Mar-06 N/A N/A N/A N/A Jun-06 N/A N/A N/A N/A Sep-06 N/A N/A N/A N/A Dec-06 N/A N/A N/A N/A Mar-07 N/A N/A N/A N/A Jun-07 N/A N/A N/A N/A Sep-07 -1.36% 75 N/A N/A Dec-07 -4.53% 34 N/A N/A * The lower the percentile ranking, the better the performance, with 1 being the best percentile rating possible and 50 the median. Benchmark is the Callan Large Cap Growth Data Base = Beat benchmark = Underperformed Attachment number 2 Page 26 of 72 Item # 8 27 City of Clearwater Employees' Pension Plan Money Manager: Northern Trust Russell 1000 Index Quarterly and One Year Performance VS Benchmark Domestic Equity Large Cap Value Manager Hired 2nd Qtr 2007 Rolling Period Ended Three-Year Average % Return Three-Year Percentile Ranking * Five-Year Average % Return Five-Year Percentile Ranking * Mar-05 N/A N/A N/A N/A Jun-05 N/A N/A N/A N/A Sep-05 N/A N/A N/A N/A Dec-05 N/A N/A N/A N/A Mar-06 N/A N/A N/A N/A Jun-06 N/A N/A N/A N/A Sep-06 N/A N/A N/A N/A Dec-06 N/A N/A N/A N/A Mar-07 N/A N/A N/A N/A Jun-07 N/A N/A N/A N/A Sep-07 -0.20% 45 N/A N/A Dec-07 -5.76% 67 N/A N/A * The lower the percentile ranking, the better the performance, with 1 being the best percentile rating possible and 50 the median. Benchmark is the Callan Large Cap Growth Data Base = Beat benchmark = Underperformed Attachment number 2 Page 27 of 72 Item # 8 28 City of Clearwater Employees' Pension Plan Money Manager: Artisan Partners 3-Year and 5-Year Rolling Performance VS Benchmark Domestic Equity Mid Cap Growth Manager Hired 2nd Quarter 2001 Rolling Period Ended Three-Year Average % Return Three-Year Percentile Ranking * Five-Year Average % Return Five-Year Percentile Ranking * Mar-05 5.59% 23 N/A N/A Jun-05 11.38% 54 N/A N/A Sep-05 20.87% 48 N/A N/A Dec-05 19.63% 64 N/A N/A Mar-06 23.93% 69 N/A N/A Jun-06 16.24% 58 N/A N/A Sep-06 14.17% 39 11.52% 28 Dec-06 12.38% 40 7.80% 44 Mar-07 11.66% 57 8.89% 56 Jun-07 15.10% 45 14.30% 51 Sep-07 19.39% 42 20.28% 40 Dec-07 11.39% 42 18.37% 48 * The lower the percentile ranking, the better the performance, with 1 being the best percentile rating possible and 50 the median. Benchmark is the Callan Mid Cap Growth Data Base = Beat benchmark = Underperformed Attachment number 2 Page 28 of 72 Item # 8 29 City of Clearwater Employees' Pension Plan Money Manager: Denver Investment 3-Year and 5-Year Rolling Performance VS Benchmark Domestic Equity Mid Cap Growth Manager Hired 1st Quarter 1995 Rolling Period Ended Three-Year Average % Return Three-Year Percentile Ranking * Five-Year Average % Return Five-Year Percentile Ranking * Mar-05 6.53% 14 -3.39% 29 Jun-05 11.66% 42 -0.12% 18 Sep-05 19.71% 65 0.10% 18 Dec-05 19.59% 64 5.41% 7 Mar-06 22.51% 75 10.87% 19 Jun-06 12.79% 79 6.93% 23 Sep-06 11.85% 77 12.63% 12 Dec-06 11.07% 59 9.94% 13 Mar-07 10.03% 79 9.77% 38 Jun-07 13.33% 69 14.09% 55 Sep-07 17.46% 62 18.91% 63 Dec-07 10.67% 76 16.93% 71 * The lower the percentile ranking, the better the performance, with 1 being the best percentile rating possible and 50 the median. Benchmark is the Callan Mid Cap Growth Data Base = Beat benchmark = Underperformed Attachment number 2 Page 29 of 72 Item # 8 30 City of Clearwater Employees' Pension Plan Money Manager: Wedge Capital Management Quarterly and One Year Performance VS Benchmark Domestic Equity Mid Cap Value Manager Hired 1st Qtr 2007 Rolling Period Ended Three-Year Average % Return Three-Year Percentile Ranking * Five-Year Average % Return Five-Year Percentile Ranking * Mar-05 N/A N/A N/A N/A Jun-05 N/A N/A N/A N/A Sep-05 N/A N/A N/A N/A Dec-05 N/A N/A N/A N/A Mar-06 N/A N/A N/A N/A Jun-06 N/A N/A N/A N/A Sep-06 N/A N/A N/A N/A Dec-06 N/A N/A N/A N/A Mar-07 N/A N/A N/A N/A Jun-07 4.77% 60 N/A N/A Sep-07 -2.95% 36 N/A N/A Dec-07 -5.56% 69 N/A N/A * The lower the percentile ranking, the better the performance, with 1 being the best percentile rating possible and 50 the median. Benchmark is the Callan Large Cap Growth Data Base = Beat benchmark = Underperformed Attachment number 2 Page 30 of 72 Item # 8 31 City of Clearwater Employees' Pension Plan Money Manager: Atlanta Capital Management 3-Year and 5-Year Rolling Performance VS Benchmark Domestic Equity Small Cap Value Manager Hired 3rd Quarter 2003 Rolling Period Ended Three-Year Average % Return Three-Year Percentile Ranking * Five-Year Average % Return Five-Year Percentile Ranking * Mar-05 N/A N/A N/A N/A Jun-05 N/A N/A N/A N/A Sep-05 N/A N/A N/A N/A Dec-05 N/A N/A N/A N/A Mar-06 N/A N/A N/A N/A Jun-06 N/A N/A N/A N/A Sep-06 15.22% 88 N/A N/A Dec-06 14.06% 81 N/A N/A Mar-07 13.32% 72 N/A N/A Jun-07 13.73% 77 N/A N/A Sep-07 14.71% 34 N/A N/A Dec-07 9.68% 11 N/A N/A * The lower the percentile ranking, the better the performance, with 1 being the best percentile rating possible and 50 the median. Benchmark is the Callan Public Plan Small Cap Value Data Base = Beat benchmark = Underperformed Attachment number 2 Page 31 of 72 Item # 8 32 City of Clearwater Employees' Pension Plan Money Manager: Atlanta Capital Management Quarterly and One Year Performance VS Benchmark Domestic Equity Small Cap Value Manager Hired 3rd Quarter 2003 Rolling Period Ended Last Quarter % Return Last Quarter Percentile Ranking * Last-Year Average % Return Last-Year Percentile Ranking * Mar-05 -2.26% 69 12.67% 53 Jun-05 2.27% 83 12.17% 79 Sep-05 6.82% 21 18.94% 71 Dec-05 -0.54% 83 6.21% 64 Mar-06 10.35% 63 19.91% 66 Jun-06 -2.64% 28 14.15% 53 Sep-06 1.71% 23 8.69% 52 Dec-06 6.35% 98 16.21% 62 Mar-07 2.26% 60 7.70% 65 Jun-07 3.85% 70 14.88% 70 Sep-07 3.39% 1 16.78% 15 Dec-07 -2.65% 1 6.90% 4 * The lower the percentile ranking, the better the performance, with 1 being the best percentile rating possible and 50 the median. Benchmark is the Callan Small Cap Value Data Base = Beat benchmark = Underperformed Attachment number 2 Page 32 of 72 Item # 8 33 City of Clearwater Employees' Pension Plan Money Manager: Systematic Financial Management 3-Year and 5-Year Rolling Performance VS Benchmark Domestic Equity Small Cap Value Manager Hired 3rd Quarter 2003 Rolling Period Ended Three-Year Average % Return Three-Year Percentile Ranking * Five-Year Average % Return Five-Year Percentile Ranking * Mar-05 N/A N/A N/A N/A Jun-05 N/A N/A N/A N/A Sep-05 N/A N/A N/A N/A Dec-05 N/A N/A N/A N/A Mar-06 N/A N/A N/A N/A Jun-06 N/A N/A N/A N/A Sep-06 15.98% 84 N/A N/A Dec-06 12.66% 87 N/A N/A Mar-07 12.71% 77 N/A N/A Jun-07 16.10% 39 N/A N/A Sep-07 16.88% 8 N/A N/A Dec-07 8.85% 17 N/A N/A * The lower the percentile ranking, the better the performance, with 1 being the best percentile rating possible and 50 the median. Benchmark is the Callan Small Cap Value Data Base = Beat benchmark = Underperformed Attachment number 2 Page 33 of 72 Item # 8 34 City of Clearwater Employees' Pension Plan Money Manager: Systematic Financial Management Quarterly and One Year Performance VS Benchmark Domestic Equity Small Cap Value Manager Hired 3rd Quarter 2003 Rolling Period Ended Last Quarter % Return Last Quarter Percentile Ranking * Last-Year Average % Return Last-Year Percentile Ranking * Mar-05 -3.67% 91 1.89% 100 Jun-05 1.97% 91 6.20% 94 Sep-05 5.62% 39 18.34% 81 Dec-05 4.34% 1 8.25% 56 Mar-06 13.52% 12 27.57% 11 Jun-06 -2.92% 33 21.46% 6 Sep-06 0.92% 36 16.05% 6 Dec-06 6.63%% 97 18.60% 50 Mar-07 5.43% 9 10.14% 44 Jun-07 6.94% 4 21.32% 24 Sep-07 -3.29% 15 16.26% 18 Dec-07 -7.86% 46 0.47% 16 * The lower the percentile ranking, the better the performance, with 1 being the best percentile rating possible and 50 the median. Benchmark is the Callan Small Cap Value Data Base = Beat benchmark = Underperformed Attachment number 2 Page 34 of 72 Item # 8 35 City of Clearwater Employees' Pension Plan Money Manager: Independence Investments LLC Quarterly and One Year Performance VS Benchmark Domestic Equity Small Cap Growth Manager Hired 1st Qtr 2007 Rolling Period Ended Three-Year Average % Return Three-Year Percentile Ranking * Five-Year Average % Return Five-Year Percentile Ranking * Mar-05 N/A N/A N/A N/A Jun-05 N/A N/A N/A N/A Sep-05 N/A N/A N/A N/A Dec-05 N/A N/A N/A N/A Mar-06 N/A N/A N/A N/A Jun-06 N/A N/A N/A N/A Sep-06 N/A N/A N/A N/A Dec-06 N/A N/A N/A N/A Mar-07 N/A N/A N/A N/A Jun-07 5.28% 87 N/A N/A Sep-07 0.78% 75 N/A N/A Dec-07 -5.33% 79 N/A N/A * The lower the percentile ranking, the better the performance, with 1 being the best percentile rating possible and 50 the median. Benchmark is the Callan Large Cap Growth Data Base = Beat benchmark = Underperformed Attachment number 2 Page 35 of 72 Item # 8 36 City of Clearwater Employees' Pension Plan Money Manager: Northern Trust Enhanced EAFE Quarterly and One Year Performance VS Benchmark International Equity Index Hired 3rd Quarter 2004 Rolling Period Ended Last Quarter % Return Last Quarter Percentile Ranking * Last-Year Average % Return Last-Year Percentile Ranking * Mar-05 -0.19% 45 N/A N/A Jun-05 -0.67% 63 N/A N/A Sep-05 9.65% 76 25.27% 64 Dec-05 3.78% 77 12.81% 82 Mar-06 10.58% 20 24.98% 71 Jun-06 1.29% 15 27.44% 55 Sep-06 4.21% 41 21.13% 31 Dec-06 10.09% 65 28.49% 31 Mar-07 4.66% 14 21.62% 24 Jun-07 6.77% 53 28.20% 35 Sep-07 1.64% 65 25.04% 54 Dec-07 -2.62% 74 11.01% 63 * The lower the percentile ranking, the better the performance, with 1 being the best percentile rating possible and 50 the median. Benchmark is the Callan Intl Equity Data Base = Beat benchmark = Underperformed Attachment number 2 Page 36 of 72 Item # 8 37 City of Clearwater Employees' Pension Plan Money Manager: Dodge & Cox 3-Year and 5-Year Rolling Performance VS Benchmark Domestic Fixed Income Manager Hired 1st Quarter 2004 Rolling Period Ended Three-Year Average % Return Three-Year Percentile Ranking * Five-Year Average % Return Five-Year Percentile Ranking * Mar-05 N/A N/A N/A N/A Jun-05 N/A N/A N/A N/A Sep-05 N/A N/A N/A N/A Dec-05 N/A N/A N/A N/A Mar-06 N/A N/A N/A N/A Jun-06 N/A N/A N/A N/A Sep-06 N/A N/A N/A N/A Dec-06 N/A N/A N/A N/A Mar-07 3.80% 31 N/A N/A Jun-07 4.59% 8 N/A N/A Sep-07 4.35% 8 N/A N/A Dec-07 4.48% 72 N/A N/A * The lower the percentile ranking, the better the performance, with 1 being the best percentile rating possible and 50 the median. Benchmark is the Callan Public Core Bond Data Base = Beat benchmark = Underperformed Attachment number 2 Page 37 of 72 Item # 8 38 City of Clearwater Employees' Pension Plan Money Manager: Dodge & Cox Quarterly and One Year Performance VS Benchmark Domestic Fixed Income Manager Hired 1st Quarter 2004 Rolling Period Ended Last Quarter % Return Last Quarter Percentile Ranking * Last-Year Average % Return Last-Year Percentile Ranking * Mar-05 -0.28% 36 1.54% 38 Jun-05 2.22% 99 6.27% 90 Sep-05 -0.12% 1 3.24% 47 Dec-05 0.58% 78 2.39% 83 Mar-06 0.04% 1 2.72% 27 Jun-06 0.28% 10 0.77% 5 Sep-06 3.56% 88 4.49% 8 Dec-06 1.67% 3 5.62% 2 Mar-07 1.55% 66 7.23% 7 Jun-07 -0.08% 2 6.84% 8 Sep-07 2.09% 85 5.33% 16 Dec-07 1.81% 87 5.47% 79 * The lower the percentile ranking, the better the performance, with 1 being the best percentile rating possible and 50 the median. Benchmark is the Callan Public Fund Core Bond Data Base = Beat benchmark = Underperformed Attachment number 2 Page 38 of 72 Item # 8 39 City of Clearwater Employees' Pension Plan Money Manager: Western Asset Management Quarterly and One Year Performance VS Benchmark Domestic Fixed Income Manager Hired 3rd Quarter 2004 Quarter Ended Quarter % Return Quarter Percentile Ranking * One-Year % Return One -Year Percentile Ranking * Mar-05 -0.37% 81 N/A N/A Jun-05 2.91% 65 N/A N/A Sep-05 -0.20% 1 3.41% 24 Dec-05 0.45% 92 2.78% 49 Mar-06 -0.56% 73 2.59% 43 Jun-06 -0.14% 85 -0.45% 55 Sep-06 4.00% 5 3.75% 78 Dec-06 1.33% 36 4.65% 39 Mar-07 1.62% 35 6.94% 34 Jun-07 -0.91% 98 6.12% 63 Sep-07 2.87% 22 4.96% 63 Dec-07 2.83% 40 6.51% 58 * The lower the percentile ranking, the better the performance, with 1 being the best percentile rating possible and 50 the median. Benchmark is the Callan Public Fund Core Bond Data Base = Beat benchmark = Underperformed Attachment number 2 Page 39 of 72 Item # 8 40 City of Clearwater Employees' Pension Plan Money Manager: Northern Trust Bond Index 3-Year and 5-Year Rolling Performance VS Benchmark Domestic Fixed Income Bond Index Hired 2nd Quarter 2003 Rolling Period Ended Three-Year Average % Return Three-Year Percentile Ranking * Five-Year Average % Return Five-Year Percentile Ranking * Mar-05 N/A N/A N/A N/A Jun-05 N/A N/A N/A N/A Sep-05 N/A N/A N/A N/A Dec-05 N/A N/A N/A N/A Mar-06 N/A N/A N/A N/A Jun-06 2.07% 82 N/A N/A Sep-06 3.40% 83 N/A N/A Dec-06 3.73% 80 N/A N/A Mar-07 3.36% 88 N/A N/A Jun-07 4.04% 81 N/A N/A Sep-07 3.93% 80 N/A N/A Dec-07 4.64% 56 N/A N/A * The lower the percentile ranking, the better the performance, with 1 being the best percentile rating possible and 50 the median. Benchmark is the Callan Public Fund Core Bond Data Base of active managers. = Beat benchmark = Underperformed Attachment number 2 Page 40 of 72 Item # 8 41 City of Clearwater Employees' Pension Plan Money Manager: Northern Trust Bond Index Quarterly and One Year Performance VS Benchmark Domestic Fixed Income Bond Index Hired 2nd Quarter 2003 Rolling Period Ended Last Quarter % Return Last Quarter Percentile Ranking * Last-Year Average % Return Last-Year Percentile Ranking * Mar-05 -0.46% 94 1.19% 79 Jun-05 3.05% 20 6.88% 65 Sep-05 -0.70% 89 2.83% 81 Dec-05 0.59% 75 2.45% 77 Mar-06 -0.60% 79 2.31% 80 Jun-06 -0.06% 74 -0.78% 92 Sep-06 3.81% 49 3.73% 80 Dec-06 1.23% 73 4.39% 75 Mar-07 1.58% 56 6.68% 56 Jun-07 -0.52% 56 6.20% 60 Sep-07 2.88% 21 5.25% 20 Dec-07 3.05% 20 7.15% 20 * The lower the percentile ranking, the better the performance, with 1 being the best percentile rating possible and 50 the median. Benchmark is the Callan Public Fund Core Bond Data Base of active managers. = Beat benchmark = Underperformed Attachment number 2 Page 41 of 72 Item # 8 42 Managers with no history to report: Manager Style Quarter Added Wentworth, Hauser and Violich EAFE – Int’l Growth 2nd Quarter 2008 Earnest Partners EAFE – Int’l Value 2nd Quarter 2008 Wellington Management Emerging Markets 1st Quarter 2008 Eaton Vance Management Emerging Markets 1st Quarter 2008 Security Capital Research & MGMT REITS 1st Quarter 2008 Attachment number 2 Page 42 of 72 Item # 8 43 What Other Public Pension Plans Invest In Fixed Income Allocation. A concern has been raised about the percentage allocation to fixed income in the Employees’ Pension Plan. Before the referendum the fixed income allocation had a target level of 35%. The asset allocation study recommends a target allocation of 30%. Florida statutes have no minimum or maximum level of fixed income. The following chart is the Employees’ Pension Plan versus the Callan public pension plan database. There are over one thousand (1,000) plans in this database and the database includes universities, states, counties, etc. The chart shows our migration to the implementation of the asset allocation study. 0 5 10 15 20 25 30 35 40 45 50 Domestic EquityDomestic FixedInt' EquityReal EstateAlternativesInt' FixedPublic Plans CLW Today CLW Tomorrow Attachment number 2 Page 43 of 72 Item # 8 44 The second chart shows the percentage of fixed income in public pension plans in Florida. There are seventy (70) public pension plans that have over a 30% allocation to fixed income. Thirteen (13) public pension plans have a 30% allocation to fixed income. Only five (5) pension plans have an allocation of less than 30%. Of those five plans, four of them have a 25% allocation to fixed income. Florida Public Pensions Plans Fixed Income Percentage Total 88 Plans 0 10 20 30 40 50 60 70 80 Under 30% 30% Over 30% Attachment number 2 Page 44 of 72 Item # 8 45 The next chart shows the Employees’ Pension Plan’s target asset allocation after the full implementation of the asset allocation study as compared to that of the California Public Employees Retirement System (CalPERS). CalPERS is the largest pension plan in the world. Florida public pension plans have a maximum limit of 25% international exposure. CalPERS does not have this limit. Both pension plans have approximately a 20% exposure to international equity. In addition, CalPERS has a fixed income allocation of approximately 27%, also with an international element via global fixed. The Clearwater plan is totally domestic fixed income. Clearwater vs. VS. CalPERS Asset Allocation 0 5 10 15 20 25 30 35 40 45 Private Equity Real Est Int Equity Global Fix Dom Fix Dom Equity CalPERS Clearwater + Asset All Attachment number 2 Page 45 of 72 Item # 8 46 Allowable Investments and Restrictions Attached is our current investment policy, which our pension attorney, Stuart Kaufman, has reviewed and approved. Since our current policy is stricter than state law the following are the restrictions of state law and some of the investment vehicles allowable by state law that we are not currently using. A. Up to 80% of the portfolio may be invested in publicly traded domestic companies. B. Up to 25% of the portfolio may be invested in foreign companies. This includes American Depository Receipts. C. Up to 5% in “alternative” investments. D. Buy and sell futures and options provided that they are traded on a regulated security exchange. E. Up to 25% in bonds of municipalities or other political subdivisions of the State of Florida, notes secured by first mortgages, group annuity contracts, certain interests in real property, fixed income obligations issued by foreign governments, Israel bonds, obligations of agencies of the government of the United States, as long as they are authorized by the Florida Retirement System Defined Benefit Plan Investment Policy, United States dollar denominated obligations issued by foreign governments, and asset backed securities. With regard to real estate investments, the pension plan is specially prohibited from investing in business or property within the City. Attachment number 2 Page 46 of 72 Item # 8 47 Other Investment Vehicles Many other investment vehicles are available. Staff recommends that the plan do a new asset allocation study to examine these other investment vehicles, some of which are listed below. Direct Real Estate Ownership Timber Private Equity Hedge Funds 130/30 or Long Short Funds Commodities Futures and Options First Mortgages Group Annuity Contracts Foreign Government Debt Portable Alpha Training All of the various parties involved with the Employees’ Pension Plan, including the pension attorney, the pension consultants, the money managers and numerous others would like to offer a half day of training to the trustees. Attachment number 2 Page 47 of 72 Item # 8 48 Exhibit A “Statement of Objectives and Guidelines” Attachment number 2 Page 48 of 72 Item # 8 49 STATEMENT OF INVESTMENT OBJECTIVES AND GUIDELINES CITY OF CLEARWATER EMPLOYEES’ PENSION FUND Approved 5/15/2007 Attachment number 2 Page 49 of 72 Item # 8 50 PURPOSE The purpose of this Statement of Investment Objectives and Guidelines hereinafter referred to as the “Policy Statement” or “Policy” is to assist the City of Clearwater Employees’ Pension Fund (hereafter referred to as the Fund) in more effectively supervising and monitoring the investment of the Fund's assets. In the various sections of this policy document, the Fund defines its investment program by: stating in a written document the Fund's attitudes, expectations and objectives in the investment of Fund assets. setting forth an investment "structure" for managing assets. This structure includes various asset classes and investment management styles that, in aggregate, are expected to produce a prudent level of diversification and investment return over time. providing guidelines for each investment portfolio that control the level of risk assumed in the portfolio and ensure that assets are managed in accordance with stated objectives. encouraging criteria to monitor and evaluate the performance results achieved by the investment managers. This Statement represents the Fund's current philosophy regarding the investment of Fund assets. In addition, although the Fund shall utilize this Policy Statement in making decisions concerning the Fund, it shall not necessarily be bound solely by its contents. PRUDENCE AND ETHICAL STANDARDS The standard of prudence to be applied by the trustees shall be the "Prudent Person" rule, which states: "Investments shall be made with judgment and care, under circumstances then prevailing, which persons of prudence, discretion and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income derived." The "Prudent Person" rule shall be applied in the context of managing the overall portfolio. The trustees shall also be governed by the fiduciary standard set forth in the Employee Retirement Income Security Act of 1974 at 29U.S.C. s. 1104 (a) (1) (A) – (C). In the event of a conflict between the Policy and Florida Statutes or City ordinances, the statutes and ordinances shall prevail. Attachment number 2 Page 50 of 72 Item # 8 51 Funding Philosophy The Fund's funding objectives for the Fund is to be as fully funded as possible so that: the ability to pay all benefits and expense obligations from the Fund when due is ensured; there will be no principal erosion of contributed funds or the purchasing power thereof. a "funding cushion" is maintained within the Fund for unexpected developments and for possible future increases in benefit structure and expense levels; Attachment number 2 Page 51 of 72 Item # 8 52 the Fund assets should earn sufficient total rate of return over time to reduce the Fund's dependency on employer contributions to meet all benefit and expense obligations. Investment results within the Fund are considered to be the major critical element in achieving these funding objectives stated above while reliance on contributions is a secondary element. Liquidity Posture The Investment Portfolio shall be structured in such a manner as to provide sufficient liquidity to pay obligations as they come due. Liquidity considerations are low in the short-term and intermediate-term resulting in an immaterial impact upon investment policy, objectives and guidelines. Authorized Investments The following is a list of authorized investments: • Invest and reinvest the assets of the pension fund in annuity (including group annuity contracts of the pension investment type) and life insurance contracts of legal reserve life insurance companies, in amounts sufficient to provide, in whole or in part, benefits to which all of the participants shall be or become entitled under the provisions of the Fund, and pay the initial and subsequent premiums thereon. Provided that the amount invested with a life insurance company shall not exceed 3% of the insurance companies assets. • Invest and reinvest the assets of the pension fund in: a. Time deposits, savings accounts, money market accounts, funds, certificates of deposits, or money market certificates of a national bank, a state bank, or a savings, building and loan association. b. Negotiable direct obligations of, or obligations the principal and interest of which are unconditionally guaranteed by, and which carry the full faith and credit of the United States Government and its agencies. Investments in this category would include but not be limited to the following: United States Treasury Bills, Notes and Bonds, and securities issued by the Small Business Administration, Government National Mortgage Association (Ginnie Mae), Veterans Administration, and Federal Housing Administration. Attachment number 2 Page 52 of 72 Item # 8 53 c. Fully collateralized United States Agency obligations, which carry an implied guarantee and the implied full faith and credit of the United States government. Investments in this category would include but not be limited to the following: obligations of the Federal Home Loan Banks System (FHLB) or its distinct banks and Financing Corporation (FICO). d. Other United States Agency obligations, which carry an implied guarantee (Government Sponsored Entities) and the implied full faith and credit of the United States Government. Investments in this category would include but not be limited to the following: obligations of the Federal Farm Credit Bank, Federal National Mortgage Association (Fannie Mae), Federal Home Loan Mortgage Corporation (Freddie Mac), Student Loan Marketing Association (Sallie Mae), Financial Assistance Corporation and Federal Agriculture Mortgage Corporation (Farmer Mac). e. Collateralized Mortgage Obligations (CMO) and/or Real Estate Mortgage Investment Conduits (REMIC), rated investment grade or equivalent by Standard and Poor's, Moody's Fitch, or other recognized national rating agencies which are backed by securities otherwise authorized in this ordinance and which are guaranteed as to the timely payment of principal and interest by the U.S. Government or its agencies. f. Securities of countries, states, municipalities and county governments or their public agencies, which are, rated investment grade or equivalent by Standard and Poor's, Moody's Fitch, or other recognized national rating agencies. g. Asset-backed securities, which are, rated investment grade or equivalent by Standard and Poor's, Moody's Fitch, or other recognized national rating agencies. h. Common stocks, preferred stocks and bonds and other evidence of indebtedness issued or guaranteed by a corporation organized under the laws of the United States, any state, or organized territory of the United States or the District of Columbia or any non-U.S. corporation, provided: 1. The corporation is listed on any one or more of the recognized national or international stock exchanges and/or in the case of bonds and mortgage backed securities, traded among dealers and investors in a recognized and agreed upon conventional format; 2. Unless an asset allocation for less than investment grade corporate bonds is established, all corporate bonds shall carry an investment grade rating as established either by Standard & Poor's, Moody's, Fitch or other recognized rating agencies; and Attachment number 2 Page 53 of 72 Item # 8 54 3. Not more than three (3) percent of the equity assets of the pension fund shall be invested in the common stock or capital stock of any one issuing corporation except to the extent a higher percentage of the same issue is included in a nationally recognized market index, based on market values, at least as broad as the Standard and Poor's Composite Index of 500 Companies, or except upon a specific finding by the investment committee that such higher percentage is in the best interest of the fund; nor shall the non-U.S. investments exceed twenty percent of the pension fund's assets at cost; nor shall the aggregate of the investments under this subparagraph at cost exceed seventy percent of the pension fund's assets at cost. Investments not listed above in this section are prohibited. Bid Requirements All securities shall be competitively bid where feasible and appropriate. Except as otherwise required by law, the most economically advantageous bid must be selected. Executions must be made on a best-execution basis. Illiquid Investments The Fund will not invest in illiquid investments. Illiquid investments being defined as an investment for which there is no generally recognized market or generally accepted pricing mechanism. Once an investment becomes illiquid the money manager will notify the plan of the illiquid investment. Included in that notification will be how the money manager will handle the illiquid investment. Investment Management Structure The Fund has reviewed the investment program for the City of Clearwater Employees’ Pension Fund. The result of the review is an updated, long-term strategic asset allocation Fund. Initially, four distinct asset classes were considered for inclusion in the portfolio: Domestic Equities Domestic Fixed Income International/Non US Equities REITS / Real Estate After a thorough review, a permanent commitment to these four asset classes will be made to ensure diversification at the Fund level. The Fund may consider investments in other asset classes, which offer potential enhancement to total return at risks no greater than the exposures under the initially selected asset classes. Attachment number 2 Page 54 of 72 Item # 8 55 It is not the intention of the Fund to become involved in day-to-day investment decisions. Therefore, the assets will be allocated to professional investment managers in a manner consistent with the Policy's objectives. Each asset class will have its own investment managers. Diversification of the U.S. Market Equity commitment will be achieved through the employment of managers of complementary investment styles, Growth and Value. In the U.S. Fixed Income market a core bond managers will be utilized to stabilize the fund. In the International Equity market a diversified non-U.S. managers will be hired to achieve diversification. Cash and cash equivalents will be managed either by the Investment Managers or the custodian. In addition the City uses the pooling concept to meet the immediate cash needs of the city and to maximize the interest earnings. All cash placed in the City’s pooled cash account shall be separately accounted for and listed as an asset of the Fund. The Fund will keep sufficient funds in the City’s pooled cash account to meet the current obligations of the Fund. The guidelines for the allocation of assets, at cost, to investment managers are as follows: Lower Limit Upper Limit Cost or Market U.S. Market Equities Growth Value 40% 15% 15% 70% 40% 40% Cost Cost Cost Domestic Fixed Income 30% 40% Cost Real Estate / REITS International Equity 0% 10% 10% 20 % Cost Cost Because the asset classes do not move in concert, deviations from the normal commitments will occur through normal market activity. The Upper and Lower Limits define the ranges within which market activity will be allowed to shift the allocations. The ranges are designed to allow for a reasonable period of time to elapse before rebalancing the portfolio. When the investments are out of policy the assets will be moved from the over-allocated to the under-allocated in a prudent manner. When in market equilibrium, cash flows will be deployed in a manner that returns the portfolio to its normal commitments. Attachment number 2 Page 55 of 72 Item # 8 56 Internal Controls As part of the city’s annual financial audit the external CPA firm will review the internal controls of the Fund. The hiring or termination of all money managers, consultants or safekeeping custodians must be made by the trustees. No individual associated with the Fund may authorize any movement of monies or securities with out the approval of the trustees, if required, or by the approval of the Pension Investment Committee if trustee approval is not required. An instance not requiring trustee approval is rebalancing the portfolio. Internal controls will be designed to prevent losses of funds which might arise from fraud, error, and misrepresentation by third parties or imprudent actions by the trustees or city employees. Makeup of The Investment Committee The Pension Investment Committee shall be made up (at a minimum) of the following: Finance Director (Treasurer for the Trustees), Assistant Finance Director, the Cash & Investments Manager and one member from the general public appointed by the Trustees. The Treasurer for the Trustees shall appoint/remove other Finance professionals as needs warrant. One representative for each of the unions will also serve on the Investment Committee. The Financial Director or their designee will chair the committee. The City Treasurer will make a recommendation to the Trustees as to any changes in the makeup of the committee. Continuing Education The annual budget for the pension Fund will include sufficient funding for the trustees and members of the Pension Investment Committee to participate in pension education opportunities. These educational opportunities will include education on the individual’s duties and responsibilities as well as investments in general. The chief investment officer will complete no less than 8 hours of continuing educational opportunities on pension investments each fiscal year. Investment Return Objectives In formulating investment return objectives for the Fund objectives for the Fund assets, the Fund placed primary emphasis on the following goals: Achieve investment performance that exceeds the rate of inflation over time thereby providing a real rate of return. Achieve investment results of at least the actuarial rate of return. Attachment number 2 Page 56 of 72 Item # 8 57 Achieve investment performance that is materially above average when compared to: - Other investment managers - Other investment manager peers of related investment style - Other public retirement plans - Several capital market indices For each actual valuation the Trustees will determine the expected rate of return of the current year, next several years and the long term. Based upon the above and the following the expected annual rate of return for the current year is 7.5%. The expected rate of return for the foreseeable future is also 7.5%. 1. Total Fund Return Objectives The following minimum comparative objectives have been established for the total Fund: • The total fund should rank in the upper fiftieth (50th) percentile compared to a recognized performance measure company’s total public plan sponsor database measured over a minimum period of three (3) or maximum five (5) years. • The Fund's overall annualized total return should perform at least at the upper fiftieth (50th) percentile compared to investment style peers of similar type as found in recognized performance measure company’s style database for each asset class segment. • The Fund's overall annualized total return (which is defined as all price changes plus all income and/or dividends) should exceed the actuarial assumption over a rolling three (3) or maximum of five (5) year period. • The Fund's overall annualized total return should exceed the returns that would have collectively been achieved if the Fund had been fully invested in the appropriate percentage of : - Standard & Poor's 500 Stock Index - Lehman Brothers Aggregate Bond Index - Morgan Stanley Capital International EAFE Index This is a custom benchmark that will be calculated relative to the actual collective asset class mix of the Fund measured over a minimum of three (3) or maximum of five (5) years. Attachment number 2 Page 57 of 72 Item # 8 58 2. Equity Segment Return Objectives A. The following minimum performance goals have been established for the Fund's domestic equity segment: The domestic equity segment total return should perform at least at the upper fiftieth (50th) percentile compared to a recognized performance measurement company’s total U.S. equity database measured over a minimum period of three (3) or maximum of (5) years. The individual domestic equity managers total return should perform at least at the upper fifth (50th) percentile compared to investment style peers of similar type as found in a recognized performance measure company’s total U.S. equity database measured over a minimum period of three (3) or maximum of (5) years. The total domestic equity segment total return should exceed the total return of the Standard & Poor's 500 Stock Index by at least 100 basis points per year measured over a minimum period of three (3) or maximum of (5) years. B. The following minimum performance goals have been established for the Fund's international equity segment: The international equity segment total return should perform at least at the upper fiftieth (50th) percentile compared to recognized performance measure company’s total non U.S. equity database measured over a minimum period of three (3) or maximum of (5) years. The individual international equity managers total return should perform at least at the upper fiftieth (50th) percentile compared to the investment style peers of similar type as found in a recognized performance measure company’s total non U.S. equity database measured over a minimum period of three (3) or maximum of (5) years. The international equity segment total return should exceed the total return of the Morgan Stanley Capital International Europe, Australia, Far East Index (EAFE) by at least 200 basis points per year over a minimum of three (3) or maximum of (5) years. 3. Fixed Income Segment Return Objectives Attachment number 2 Page 58 of 72 Item # 8 59 A. The following minimum performance goals have been established for the Fund's domestic fixed-income segment: The domestic fixed-income segment total return should perform at least at the upper fiftieth (50th) percentile compared to the recognized performance measure company’s total domestic fixed income database measured over a minimum period of three (3) or maximum of (5) years. The individual domestic fixed income managers total return should perform at least at the upper fiftieth (50th) percentile compared to investment style peers of similar type as found in a recognized performance measure company’s total domestic fixed income database measured over a minimum period of three (3) or maximum of (5) years. The domestic fixed income segment total returns should exceed the total return of the Lehman Brothers Aggregate Bond Index by at least 50 basis points per year measured over a minimum period of three (3) or maximum of (5) years. Criteria for Investment Manager Review 1 Consistent performance below the 50th percentile in the specified universe over rolling 3-year periods. 2 Consistent under-performance of the stated target index over rolling 3-year periods. 3 Loss by the Manager of any senior personnel deemed detrimental to the Manager’s ability to perform required duties or any potentially detrimental organizational issues that may arise and have an effect on the management of the Plan’s assets. 4 Substantial change in basic investment philosophy by the Manager. 5 Substantial change of ownership of the firm deemed detrimental to the Manager’s ability to perform the required duties. 6 Failure to observe any guidelines as stated in this policy. Responsibilities of the Third Party Custodian Attachment number 2 Page 59 of 72 Item # 8 60 A third party custodian will hold all Fund assets other than commingled accounts. In order to maximize the Fund's return, no money should be allowed to remain idle. Dividends, interest, proceeds from sales, new contributions and all other monies are to be invested or reinvested promptly. If funds are not reinvested, then they will be placed in money market instruments or a money market fund immediately by the designated cash manager working in concert with the custodian. The custodian will be responsible for performing the following functions: Accept daily instructions from the investment managers; Advise investment managers daily of changes in cash equivalent balances; Immediately advise investment managers of additions or withdrawals from account; Notify investment managers of tenders, rights, fractional shares or other dispositions of holdings; Resolve any problems that investment managers may have relating to custodial account; Safekeeping of securities; Interest and dividend collection; Daily cash sweep of idle principal and income cash balance; Process all investment manager transactions on a delivery vs. payment basis; Collect proceeds from maturing securities; Provide monthly statements by investment manager account; All securities purchased by the Fund shall be properly designated as an asset of the Fund; No withdrawal of securities, in whole or in part shall be made except by an authorized member of the committee or the committee’s designee. Attachment number 2 Page 60 of 72 Item # 8 61 RESPONSIBILITIES OF INVESTMENT MANAGERS The duties and responsibilities of each of the registered investment advisors retained by the Fund include: 1. Managing the assets under its management in accordance with the policy guidelines and objectives expressed herein, or expressed in a separate written agreement when deviation is deemed prudent and desirable. 2. Exercising full investment discretion within the guidelines and objectives stated herein. Such discretion includes decisions to buy, hold or sell securities in amounts and proportions reflective of the manager's current investment strategy and compatible with investment objectives. 3. Promptly informing the Fund regarding all significant matters pertaining to the investment of the fund assets, for example: changes in investment strategy, portfolio structure and market value of managed assets; the manager's progress in meeting the investment objectives set forth in this document; and significant changes in the ownership, affiliations, organizational structure, financial condition, professional personnel staffing and clientele of the investment management organizations. 4. No deviation from guidelines and objectives established in the Statement should occur until after such communication has occurred and the Fund has approved such deviation in writing. 5. The Fund formally delegates full authority to each investment manager for exercising all proxy and related actions of the Fund’s investment assets assigned to it. Each manager shall promptly vote all proxies and related actions in a manner consistent with the long-term interests of the Fund and its Participants and Beneficiaries. Each investment manager shall keep detailed records of all said voting of proxies and related actions and will comply with all regulatory obligations related thereto. The Fund shall periodically audit and review each investment manager's policies and actions in this area. 6. Each Investment Manager shall utilize the same due care, skill, prudence and diligence under the circumstances then prevailing that experienced, investment professionals acting in a like capacity, as a fiduciary, and fully familiar with such Attachment number 2 Page 61 of 72 Item # 8 62 matters would use in like activities for like Funds with like aims, while maintaining appropriate diversification to avoid the risks of large losses, in accordance and compliance with all applicable laws, rules and regulations from local, state, federal and international political entities as it pertains to fiduciary duties and responsibilities. 7. Notifying the Fund of the filing of a lawsuit by a client against the manager alleging breach of fiduciary duty or other willful conduct. EVALUATION AND REVIEW On a timely basis, but not less than four times a year, the Fund will review actual investment results achieved by each manager (with a perspective toward a five-year time horizon) to determine whether: the investment managers performed in adherence to the investment philosophy and policy guidelines set forth herein; and the investment managers performed satisfactorily when compared with: - the objectives set forth in Appendix "A", as a primary consideration, - their own previously stated investment style, - other investment managers, both in asset class and in style group, - other retirement Funds, - several different market indices. In addition to reviewing each investment manager's results, the Fund will re-evaluate, from time to time, its progress in achieving the total fund, equity, fixed-income, international, and cash and equivalents segment objectives previously outlined. The periodic re-evaluation also will involve an evaluation of the continued appropriateness of: (1) the manager structure set forth in Appendix "A"; (2) the allocation of assets among the managers; and (3) the investment objectives for the Fund's assets. The Fund may appoint investment consultants to assist in the on-going evaluation process. The consultants selected by the Fund are expected to be familiar with the investment practices of other Attachment number 2 Page 62 of 72 Item # 8 63 similar retirement plans and will be responsible for suggesting appropriate changes in the Fund's investment program over time. Filing of Investment Policy Upon adoption by the trustees, the investment policy shall be promptly filed with the Department of Management Services, the City Clerk, and the consulting actuary. The effective date of changes to the Investment policy will be 31 days after the filing date with the city. Attachment number 2 Page 63 of 72 Item # 8 64 APPENDIX A: FUND SEGMENT AND INDIVIDUAL MANAGER GUIDELINES Attachment number 2 Page 64 of 72 Item # 8 65 CITY OF CLEARWATER EMPLOYEES PENSION FUND INVESTMENT STRUCTURE May, 2007 Target Investment Manager Allocation Domestic Equity Value Orientation 20%- 25% Domestic Equity Growth Orientation 20% - 25 International Equity 10% - 20% Domestic Fixed Income 30% - 40% REITS /Real Estate Future Addition Attachment number 2 Page 65 of 72 Item # 8 66 APPENDIX A: FUND SEGMENT AND INDIVIDUAL MANAGER GUIDELINES 1. Manager Structure The Fund will retain investment managers that specialize in the use of particular asset classes. The targeted distribution of Fund assets among specialist managers will be as illustrated on the previous page. The Fund believes that the established structure: is consistent with the practices of other similar-sized retirement funds; and offers an appropriate "blend" of investment styles that will produce a sufficient level of diversification and investment return over time. 2. Cash Flow Allocation The allocation of assets is consistent with the Fund’s desire to diversify its investment management program. The Fund intends to review on a periodic basis the allocation of assets among its investment managers. To the extent that it is practically possible, it is expected that any cash flow will be allocated to or taken from the managers in the same proportions that each manager's assets represent to total fund assets in the target asset allocation outlined previously. 3. Trustee Utilization Restrictions All domestic Fund assets, in any form, shall be solely and exclusively: (a) settled at, (b) held in custody at, and (c) safe-kept only at custodians designated by the Fund at its sole discretion. International Fund assets may be held in commingled accounts provided that all of the normal protection of the Fund’s assets is provided for. 4. Transaction Agent Assignment Restrictions Assignment of specific brokerage firms, dealers, financial institutions, and other transaction execution agents to all investment managers shall be the sole responsibility of the Fund. From time to time, the Fund at its sole discretion may specify certain transaction agents that investment transactions shall be executed through. 5. Short Selling and Related Restrictions There shall be no: short selling, non-collateralized and/or non-delivered repurchase agreements, use of financial futures or options, non-marketable direct investments in equity or debt private placements or lease-backs or any other specialized investment activity without the prior written consent of the Fund. Attachment number 2 Page 66 of 72 Item # 8 67 6. Liquidity and Marketability Restrictions Liquidity and marketability frequently are perceived to be a function of the quality and the market capitalization of each security holding. From the Fund's perspective, liquidity and marketability also may be a function of a manager's aggregate holdings in a particular security. The Plan believes that an investment manager should not buy or hold a security for the Funds portfolio if the aggregate holdings among all of that manager's other accounts in that same security would restrict the manager's ability to expeditiously liquidate the position at any time. From a total Fund perspective, the Fund believes the collective holdings among all Fund managers’ accounts in that same security would restrict all managers’ collective ability to expeditiously liquidate their respective positions in that same security. Therefore, the Fund retains the sole right to limit any manager's holding of any security in the Fund at any time in order to prevent the potential for said Fund's collective liquidation and market risk. 7. Usage of Custodian STIF on all Idle Cash Restrictions Any idle cash not invested by the investment managers shall be invested daily via an automatic sweep STIF managed by the Custodian or by others in behalf of each investment manager. It is the Fund's objective to have no idle cash at any time in any manager's portfolios. 8. Usage of Cross Asset Segment Investment Guideline Restrictions When a manager's holdings include Fund assets outside of their primary assigned asset segment assignment (e.g. a primary domestic equity manager also holds some cash equivalents or fixed income securities as well as equities) the guidelines stated therein for the non primary asset segment shall fully apply to the manager, in addition to the primary asset assigned segment guidelines. 9. Diversification Restrictions Except for criteria noted elsewhere in this Policy and in specific written contracts with each manager, the appropriate and reasonable diversification of securities by such factors as geography, region, sovereign risk, native currency, quality, coupon, country risk, maturity, industry, duration, and sector is within the full discretion and responsibility of the investment managers. 10. Other Objectives, Guidelines and Restrictions Forthcoming The Fund may l develop additional objectives, guidelines and restrictions and may amend the Policy from time to time. 11. Fund Segment Guidelines Attachment number 2 Page 67 of 72 Item # 8 68 Following are guidelines and objectives established for the fund segments and for each investment manager retained by the Fund. Individual manager guidelines are designed to be consistent, in aggregate, with the total fund asset allocation guidelines and investment objectives set forth in the Statement of Investment Objectives and Guidelines. 11A. Domestic Equity Segment Each equity manager is expected to adhere to the following guidelines: Equity holdings in any one company (including common and preferred stock, convertible securities and debt) should not exceed 10% of the market value of the manager's portion of the Fund without the consent of the Fund. Equity holdings in any one industry (as defined by Standard & Poor's) should not exceed 50% of the market value of the manager's portion of the Fund. Cash equivalents and fixed income positions should not exceed twenty five percent (25%) of the manager's portfolio. A manager may invest in fixed income securities if projected returns on such securities are perceived to be competitive with potential equity returns. However, fixed income securities will not represent more than twenty-five percent (25%) of a manager's portfolio without the prior written consent of the Fund. No purchase shall be made by an investment manager that would cause a holding to exceed 5% of the issue outstanding. 11B. International Equity Segment Each international equity manager is expected to adhere to the following minimum guidelines: Equity holdings in any one company and all of its subsidiaries and affiliates (including equities, convertible securities and debt) should not exceed five percent (5%) of the market value of the manager's portion of the Fund portfolio without the prior written consent of the Fund. Equity holdings in any one industry should not exceed fifty percent (50%) of the market value of the manager's portion of the Fund portfolio. Equity holdings in any one sector (e.g., consumer cyclical, energy, technology, etc.) should not exceed fifty (50%) of the market value of the manager's portfolio without the prior written consent of the Fund. Attachment number 2 Page 68 of 72 Item # 8 69 Cash equivalents and fixed income positions should not exceed fifty percent (50%) of the manager's portion of the Fund assets. A manager may invest in fixed income securities (i.e. securities with more than two years to maturity) if projected returns on such securities are perceived to be competitive with potential equity returns. The manager may enter into foreign exchange contracts on currency provided that: (a) such contracts have a maturity of one year or less, and (b) use of such contracts is limited solely and exclusively to hedging currency exposure existing within the manager's portfolio. The intent is to dampen portfolio volatility and prevent currency loss. There shall be no direct foreign currency speculation or any related investment activity. The manager may purchase or sell currency on a spot basis to accommodate specific securities settlements. 11C. Fixed Income Segment Each fixed income manager is expected to adhere to the following guidelines: All Fixed Income Securities held in each portfolio should have a Moody's, or Standard & Poor's quality rating of no less than Investment Grade from any of these rating services. (For an issue, which is split-rated, the lower quality designation will govern. Once a security falls below investment grade the money manager will notify the plan of the downgrade as soon as practical. Included in that notification will be how the money manager will handle the below investment grade security. The diversification of securities by maturity, quality, sector, coupon and geography is the responsibility of the manager. The exposure of each manager's portfolio to any single security other than a security backed by the full faith and credit of the U.S. Government or any of its instrumentalities should be limited to five (5)% of the manager's portion of the Fund measured at market value. No purchase shall be made by a Fixed Income Manager, which would cause a holding to exceed ten (10) of the issue outstanding. There shall be no use of options, financial futures, derivatives or other specialized investment activity without the prior written approval of the Fund. Not more than 10% of an investment manager's portfolio, valued at market, shall be invested in certificates of deposit, time deposits, bankers acceptances, commercial paper, or related investments of a Attachment number 2 Page 69 of 72 Item # 8 70 single issuer financial institution or financial institution holding company family. 11D. Cash and Equivalents Segment Although investment managers will be retained for their expertise in a certain investment segment, it is expected that from time-to-time each will have some cash and equivalents in their portfolios as a result of discretionary asset allocation decisions. Any idle cash not invested by the investment managers shall be invested daily via an automatic sweep STIF managed by the custodian. It is the Fund's objective to have no idle cash at any time in any manager's portfolio. 11E. Pooled Vehicles To the extent that the Fund invests a portion of the Fund's assets in commingled vehicles or institutional mutual funds, then the investment guidelines of the Fund's prospectus will be adopted as this fund's guidelines. 11F. Master Repurchase Agreement The money managers and safekeeping custodian will use a master repurchase agreement whenever appropriate. All repurchase agreements transactions shall adhere to the requirements of the master repurchase agreement. 12. Individual Manager Descriptions and Five-Year Expectations All expectations are minimums. All investment managers shall exceed the stated expectations. Investment Manager Percentile Expectation Relative To Other Managers Percentile Expectation Relative To Style Peers Domestic Equity Specialist Manager Value Orientation 50th 50th Domestic Equity Specialist Manager Growth Orientation 50th 50th International Equity Specialist Manager 50th 50th Domestic Fixed Income Specialist Manager Core Fixed Income Orientation 50th 50th Cash and Equivalents and STIF Portfolios 50th 50th In addition, each domestic equity and fixed income manager is expected to achieve positive risk-adjusted (alpha) performance over a three (3) or maximum of (5) year periods. Attachment number 2 Page 70 of 72 Item # 8 71 13. Reporting Requirements: Consultant Reporting The Pension Fund's Consultant will provide quarterly reports to the Pension Fund, which, at a minimum, will review the following information about each Investment Manager and the Total Fund: Overview of the most recent quarter and year-to-date investment indicators Total Fund asset allocation Comparison of total Fund return versus the customized benchmark Performance results by individual Manager and Total Fund compared to appropriate benchmarks. Investment Reporting: • On not less that an annual basis the Trustees will receive a report showing a list of all of the securities held by investment manager. This report will be provided by the safekeeping custodians and shall include the portfolio by class or type, book value, income earned, and market value as of the date of the report. This report will be filed with the city. 14. Proxy Voting: • On not less that a quarterly basis, money manager will report to the Plan their proxy voting during the last period. Attachment number 2 Page 71 of 72 Item # 8 72 Review of Policy This Statement of Investment Policy must be reviewed annually by the Pension Investment Committee with a recommendation to revise or confirm to the Trustees. Meeting Agenda At each meeting, the written and oral presentations shall cover the following points: A report of performance for past periods. Standard time periods for each report will be last quarter, last year, year to date, latest twelve (12) months, two years, three years, etc., and since inception and by calendar year. Returns should be annualized and calculated on a time-weighted basis for the total portfolio. All returns should include price change plus income and/or dividends. Discussion of the rationale for performance results by relating them specifically to investment strategy and tactical decisions implemented during the current review period. Discussion of the investment manager's specific strategy for the portfolio over the next six to twelve months with specific reference to asset allocation and sector weighting, as appropriate. Supporting discussion of the next period's strategy with reference to investment manager's capital market and economic assumptions, if applicable. Twelve (12) copies of the written summary should be received by the Fund at least five (5) business days prior to the meeting. The Fund is interested in fostering an effective working relationship with its investment managers through a discipline of good communication. The establishment of Objectives, Performance Standards, Policies and Guidelines, and Reporting Requirements is intended to provide the Fund with a good foundation from which to understand specific management styles and strategies, evaluate results and oversee progress toward overall investment objectives. The Fund shall be using a third party consultant selected, hired and directed by the Fund to: (1) assist in appraising performance, (2) to provide performance comparison data with other retirement plans, several capital market indices, and to other investment managers, (3) assist in evaluating manager style discipline and peer comparisons, (4) assist in strategic funding and management of the Fund, and (5) other factors the Fund deems appropriate. Investment managers are required to support and assist the consultant with their fullest cooperation. Attachment number 2 Page 72 of 72 Item # 8 City of ClearwaterCity of Clearwater Employees Pension Plan Employees Pension PlanMay 13, 2008May 13, 2008 Item # 8 Last Calendar Year s Performance Last Calendar Year s Performance Total Fund 7.22% 75th Benchmark 6.30% 92nd Public Fund 8.30% 50th Total Fund 7.22% 75th Benchmark 6.30% 92nd Public Fund 8.30% 50th Item # 8 Last Calendar Year s Performance Last Calendar Year s Performance Domestic Equity 7.17% 19th Inter. Equity 11.01% 89th Dom. Fix Inc. 5.94% 77th Domestic Equity 7.17% 19th Inter. Equity 11.01% 89th Dom. Fix Inc. 5.94% 77th Item # 8 Last Three CY Years Last Three CY Years Total Fund 8.54% 81st Benchmark 7.64% 91st Public Fund 9.90% 50th Total Fund 8.54% 81st Benchmark 7.64% 91st Public Fund 9.90% 50th Item # 8 Changes to Plan Last Year Changes to Plan Last Year Added Small Cap Growth Manager –Independence Capital Added Mid Cap Value Manager –Wedge Capital Added Small Cap Growth Manager –Independence Capital Added Mid Cap Value Manager –Wedge Capital Item # 8 Changes to Plan Last Year Changes to Plan Last Year Added Two Large Cap Value Managers –Aletheia Research & Management –NTGI Russell 1000 Value Index Added Two Large Cap Value Managers –Aletheia Research & Management –NTGI Russell 1000 Value Index Item # 8 New Money ManagersNew Money Managers Emerging Market Managers –Eaton Vance –Wellington Trust Company Emerging Market Managers –Eaton Vance –Wellington Trust Company Item # 8 New Money Managers New Money Managers REITs (Real Estate) –Security Capital & Management REITs (Real Estate) –Security Capital & Management Item # 8 New Money Managers New Money Managers Active EAFE –Earnest Partners –Wentworth Hauser and Violich Active EAFE –Earnest Partners –Wentworth Hauser and Violich Item # 8 Asset Allocation Change Asset Allocation Change Domestic Equity Dec 06 52% Dec 07 48% After Funding 42% Domestic Equity Dec 06 52% Dec 07 48% After Funding 42% Item # 8 Asset Allocation Changes Asset Allocation Changes Domestic Fixed Income Dec 06 36% Dec 07 34% After Funding 30% Domestic Fixed Income Dec 06 36% Dec 07 34% After Funding 30% Item # 8 Asset Allocation Changes Asset Allocation Changes International Equity Dec 06 11% Dec 07 18% After Funding 18% International Equity Dec 06 11% Dec 07 18% After Funding 18% Item # 8 Asset Allocation Changes Asset Allocation Changes REITs (Real Estate) Dec 06 0% Dec 07 0% After Funding 10% REITs (Real Estate) Dec 06 0% Dec 07 0% After Funding 10% Item # 8 Custodial BankCustodial Bank Securities Lending $502,443 No SIV or Impaired Securities Transitions Securities Lending $502,443 No SIV or Impaired Securities Transitions Item # 8 FutureFuture Final Implementation Current Asset Allocation Study New Asset Allocation Study Final Implementation Current Asset Allocation Study New Asset Allocation Study Item # 8 City of Clearwater Employees Pension Plan City of Clearwater Employees Pension Plan Questions?Questions? Item # 8 Pension Trustees Agenda Council Chambers - City Hall Meeting Date:5/13/2008 SUBJECT / RECOMMENDATION: James McGee, Solid Waste/General Services Department; Kathy Faye Chetoka, Gas Department; and Mary Stuart, Police Department, be granted regular pensions under Section(s) 2.393 and 2.397 of the Employees’ Pension Plan as approved by the Pension Advisory Committee. SUMMARY: James McGee, Solid Waste Supervisor II, Solid Waste/General Services Department, was employed by the City on November 23, 1971, and his pension service credit is effective on May 23, 1972. His pension will be effective June 1, 2008. Based on an average salary of approximately $53,291 per year over the past five years, the formula for computing regular pensions, and Mr. McGee’s selection of the 100% Joint & Survivor Annuity, this pension will approximate $51,737 annually. Kathy Faye Chetoka, Gas Program Coordinator, Gas Department, was employed by the City on July 6, 1984, and her pension service credit is effective on March 11, 1985. Her pension will be effective June 1, 2008. Based on an average salary of approximately $58,521 per year over the past five years, the formula for computing regular pensions, and Ms. Chetoka’s selection of the 100% Joint & Survivor Annuity, this pension will approximate $36,046 annually. Mary Stuart, Police Officer, Police Department, was employed by the City on April 9, 1975, and her pension service credit is effective on that date. Her pension will be effective April 1, 2008. Based on an average salary of approximately $62,559 per year over the past five years, the formula for computing regular pensions, and Ms. Stuart’s selection of the 100% Joint & Survivor Annuity, this pension will approximate $56,099 annually. These pensions were approved by the Pension Advisory Committee on April 10, 2008. Section 2.393 provides for normal retirement eligibility when a participant has reached age 55 and completed twenty years of credited service, has completed thirty years of credited service, or has reached age 65 and completed ten years of credited service. Section 2.393 also provides for normal retirement eligibility when a participant has completed twenty years of credited service or has reached age 55 and completed ten years of credited service in a type of employment described as “hazardous duty” and further defines service as a Police Officer as meeting the hazardous duty criteria. Mr. McGee qualifies under the 30 years of service criteria. Ms. Chetoka qualifies under the age 55 and 20 years of service criteria. Ms. Stuart qualifies under the hazardous duty criteria. Review Approval:1) Clerk Cover Memo Item # 9 Pension Trustees Agenda Council Chambers - City Hall Meeting Date:5/13/2008 SUBJECT / RECOMMENDATION: Arthur Sprague, Jr., Gas Department, be allowed to vest his pension under Section(s) 2.397 and 2.398 of the Employees’ Pension Plan as approved by the Pension Advisory Committee. SUMMARY: Arthur Sprague, Jr., Sales Representative, Gas Department, was employed by the City on November 18, 1996, and began participating in the Pension Plan on that date. Mr. Sprague terminated from City employment on March 18, 2008. The Employees’ Pension Plan provides that should an employee cease to be an employee of the City of Clearwater or change status from full-time to part-time after completing ten or more years of creditable service (pension participation), such employee shall acquire a vested interest in the retirement benefits. Vested pension payments commence on the first of the month following the month in which the employee normally would have been eligible for retirement. Section 2.393 (p) provides for normal retirement eligibility when a participant has reached age 55 and completed twenty years of credited service, has completed 30 years of credited service, or has reached age 65 and completed ten years of credited service. Mr. Sprague would have completed at least 30 years of service on November 18, 2026. His pension will be effective December 1, 2026. This pension was approved by the Pension Advisory Committee on April 10, 2008. Review Approval:1) Clerk Cover Memo Item # 10