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09/16/1996 TRUSTEES OF THE EMPLOYEES' PENSION FUND MEETING September 16, 1996 The City Commission, meeting as the Board of Trustees of the Employees' Pension Fund, met in regular session at City Hall, Monday, September 16, 1996 at 9:20 A.M., with the following members present: Rita Garvey Chairperson J. B. Johnson Trustee Robert Clark Trustee Ed Hooper Trustee Karen Seel Trustee Also Present were: Elizabeth M. Deptula City Manager Pamela K. Akin City Attorney Cynthia E. Goudeau City Clerk ITEM #2 - Minutes: Trustee Hooper moved to approve the minutes of the July 29, 1996, meeting. The motion was duly seconded and carried unanimously. ITEM #3 - Recommended budget for City of Clearwater Employees Pension Plan; authorize expenditure of funds within budget in accordance with rules for City purchases In the past all expenditures needed approval by the trustees, no matter what amount. This is the first year staff is recommending the trustees adopt a budget for the Employees Pension Plan. This would allow those expenditures under $25,000 to be paid with appropriate management review. Expenditures over $25,0000 would still need to be approved by the trustees. Travel Expenses and Training is for members of the Pension Investment Committee (PIC) to attend the Callan Institute, visit Callan, the Pension Plan’s Performance Measurement Firm, and visit one of the money managers (same trip). Printing and Binding is for the annual informational distribution to the members of the pension plan. Membership is in the “Association of Confederation Life Contract Holder” which represents the organization the City is a member of in relation to the problem “Guaranteed Investment Contracts” the City owns. The biggest change in the budget is the addition of a Pension Administrator, which is currently out to bid. Discussion ensued regarding expenditures under $25,000 not coming to the Trustees for approval. A question was raised whether this would relieve the Trustees of the “prudent man” rule. The City Attorney indicated there is no exemption of that rule. In response to questions, it was indicated the expenses under $25,000 not anticipated to come to the Trustees for approval are travel, training, medical fees and similar items. The contract for the third party administrator and legal fees, for example, would come to the Trustees for approval. A suggestion was made that the word “unbudgeted” be included in the motion. Deputy City Manager Rice recommended staff review the item and bring it forward for approval at a later meeting. Trustee Hooper moved to continue this item. The motion was duly seconded and carried unanimously. ITEM #4 - Contract with Ark Asset Management Co., Inc. as an equity value manager; provide for smooth transition for the addition through opening of a safekeeping account at Sun Trust With the Trustees approval, Callan conducted a search for a value equity manager. Callan presented the following firms to the Pension Investment Committee (PIC): 1) Ark Asset Management Co., Inc.; 2) Brinson Partners, Inc.; 3) Sanford C. Bernstein & Co., Inc.; 4) Morgan (J.P.) Investment Management, Inc.; 5) DePrince, Race & Zello, Inc.; and 6) Trinity Investment Management Corp. The PIC ranked these firms and received presentations from the four top ranked firms. As a result of the presentations, Ark was the top ranked firm. On August 15, 1996 staff visited Ark’s offices and reviewed their facilities, equipment, and personnel. Staff was favorably impressed by Ark’s abilities, resources, and past performance. Ark was formed in 1929 as Lehman Management Company, Inc. In 1989 the employees purchased the business from Shearson Lehman Brothers. Ark is 100% employee owned. Their senior investment professionals have been together since 1975. The large cap value team has been together for 10 years. Of the $22.1 billion that Ark manages, $11.5 billion is in the large cap value style. Ark’s management fee is .5% of the account per year which compares very favorably to the industry and the other equity managers the City has. This fee is also the lowest fee they charge. Staff recommends the current equity portfolios be rebalanced and $25 million be given to Ark. Staff will open a safekeeping account at Sun Trust, the City’s safekeeping service, and facilitate the transfer. In response to a question, Margaret Simmons, Finance Director, indicated the return on the investments more than makes up for the managers’ fees. John Willoughby, the Pension Fund investment advisor, indicated most of the investment managers’ fees are in the .5% range. The City Manager recommended a Worksession presentation regarding the Pension Fund’s investment philosophy. Trustee Johnson moved to approve the contract with Ark Asset Management Co., Inc. as an equity value manager and to provide for the smooth transition for the addition through the opening of a safekeeping account at Sun Trust. The motion was duly seconded and carried unanimously. ITEM #5 - Other Business: - None. ITEM #6 - Adjournment: The meeting adjourned at 9:35 a.m.