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05/16/2016Monday, May 16, 2016 1:00 PM City of Clearwater City Hall 112 S. Osceola Avenue Clearwater, FL 33756 Council Chambers Pension Trustees Meeting Agenda May 16, 2016Pension Trustees Meeting Agenda 1. Call To Order 2. Approval of Minutes 2.1 ID#16-2448 Approve the minutes of the April 18, 2016 Pension Trustees Meeting as submitted in written summation by the City Clerk. 3. Citizens to be Heard Regarding Items Not on the Agenda 4. New Business Items 4.1 ID#16-2310 Approve the new hires for acceptance into the Pension Plan as listed. 4.2 ID#16-2311 Approve the following request of employee Brent Peters, Information Technology Department to vest his pension as provided by Section 2.419 of the Employees’ Pension Plan. 4.3 ID#16-2312 Approve the following request of employees Dale Johnson, Public Utilities Department, Terry Avery, Solid Waste General Services Department and Russell Shawen, Engineering Department, for a regular pension as provided by Sections 2.416 and 2.424 of the Employees’ Pension Plan. 4.4 ID#16-2439 Approve Class A Interests fee structure for IFM Global Infrastructure money manager, to include foreign currency hedging. 5. Adjourn Page 2 City of Clearwater Printed on 5/12/2016 Cover Memo City of Clearwater City Hall 112 S. Osceola Avenue Clearwater, FL 33756 File Number: ID#16-2448 Agenda Date: 5/16/2016 Status: Agenda ReadyVersion: 1 File Type: MinutesIn Control: Pension Trustees Agenda Number: 2.1 SUBJECT/RECOMMENDATION: Approve the minutes of the April 18, 2016 Pension Trustees Meeting as submitted in written summation by the City Clerk. SUMMARY: APPROPRIATION CODE AND AMOUNT: USE OF RESERVE FUNDS: Page 1 City of Clearwater Printed on 5/12/2016 Pension Trustees Meeting Minutes April 18, 2016 City of Clearwater City Hall 112 S. Osceola Avenue Clearwater, FL 33756 Meeting Minutes Monday, April 18, 2016 1:00 PM Council Chambers Pension Trustees Page 1 City of Clearwater Draft Pension Trustees Meeting Minutes April 18, 2016 Roll Call Present 5 - Chair George N. Cretekos, Trustee Doreen Caudell, Trustee Bob Cundiff, Trustee Hoyt Hamilton, and Trustee Bill Jonson Also Present – William B. Horne – City Manager, Jill Silverboard – Assistant City Manager, Pamela K. Akin – City Attorney, Rosemarie Call – City Clerk, Nicole Sprague – Official Records and Legislative Services Coordinator To provide continui ty for research, items are listed in agenda order although not ne cessarily discussed in that order. Unapproved 1. Call To Order – Chair Cretekos The meeting was called to order at 2:34 p.m. at City Hall. 2. Approval of Minutes 2.1 Approve the minutes of the March 14, 2016 Pension Trustees meeting as submitted in written summation by the City Clerk. Trustee Hamilton moved to approve the minutes of the March 14, 2016 Pension Trustees meeting as submitted in written summation by the City Clerk. The motion was duly seconded and carried unanimously. 3. Citizens to be Heard Regarding Items Not on the Agenda – None. 4. New Business Items 4.1 Approve the new hires for acceptance into the Pension Plan as listed. Page 2 City of Clearwater Draft Pension Trustees Meeting Minutes April 18, 2016 Name/ Job Classification/Department Pension Eligibility Date Eryn Berg, Gas Dispatcher, Gas Department 2/06/2016 Anthony Medina *, Police Comm. Operator Trainee, Police Dept. 2/08/2016 Mark Jones, Service Dispatcher, Gas Department 2/08/2016 Anthony Violante, Solid Waste Accounts Coordinator, Solid Waste 2/08/2016 Jose Jaquez, Stormwater Technician I, Engineering 2/08/2016 Michele Stewart, Customer Service Accounting Rep., Customer Service 2/08/2016 Vincent Giallonardo, Traffic Signal Technician, Engineering 2/22/2016 Christopher Smith, Stormwater Technician I, Engineering 2/22/2016 Chauncey Swinton, Stormwater Technician I, Engineering 2/22/2016 Zane King, Tradesworker, General Services 2/22/2016 Molly Doran, Police Comm. Operator Trainee, Police Department 2/22/2016 Kellen Scott, Police Comm. Operator Trainee, Police Department 2/22/2016 Nancy Selvick, Police Comm. Operator Trainee, Police Department 2/22/2016 Nicolette Sepanski, Police Comm. Operator Trainee, Police Department 2/22/2016 James Hatten, Fire Inspector II, Fire Department 2/22/2016 SemieAkeen Hearns, Public Utilities Technician I, Public Utilities 2/22/2016 LaRon Brown, Water Distribution Operator Trainee, Public Utilities 2/22/2016 Craig Campbell, Recreation Supervisor I, Parks and Recreation 2/22/2016 Bryan Burke, Stormwater Technician I, Engineering 2/08/2016 Page 3 City of Clearwater Draft Pension Trustees Meeting Minutes April 18, 2016 * Anthony Medina was employed in temporary part-time positions from 06/02/2014 to 12/12/2014, 01/05/2015 to 12/11/2015, and 12/29/2015 to 02/05/2015. He was hired into a full time position on 02/08/2016 and will be eligible for pension as of 02/08/2016. Trustee Jonson moved to approve the new hires for acceptance into the Pension Plan as listed. The motion was duly seconded and carried unanimously. 4.2 Approve the following request of employee Christopher Lyons, Police Department to vest his pension as provided by Section 2.419 of the Employees’ Pension Plan. Christopher Lyons, Police Officer, Police Department, was employed by the City on March 12, 2001 and began participating in the Pension Plan on that date. Mr. Lyons terminated from city employment on March 11, 2016. 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 2.416 provides for normal retirement eligibility for non-hazardous duty employees hired prior to the effective date of this reinstatement (January 1, 2013), a member shall be eligible for retirement following the earlier of the date on which a participant has reached the age of fifty-five years and completed twenty years of credited service; the date on which a participant has reached age sixty-five years and completed ten years of credited service; or the date on which a member has completed thirty years of service regardless of age. For non-hazardous duty employees hired on or after the effective date of this restatement, a member shall be eligible for retirement following the earlier of the date on which a participant has reached the age of sixty (60) years and completed twenty-five years of credited service; or the date on which a participant has reached the age of sixty-five years and completed ten years of credited service. Section 2.416 provides for normal retirement eligibility for hazardous duty employees, a member shall be eligible for retirement following the earlier of the date on which the participant has completed twenty years of credited service regardless of age, or the date on which the participant has reached fifty-five years and completed ten years of credited service. Mr. Lyons will meet the Page 4 City of Clearwater Draft Pension Trustees Meeting Minutes April 18, 2016 hazardous duty criteria and begin collecting pension in April 2021. Trustee Caudell moved to approve the following request of employee Christopher Lyons, Police Department to vest his pension as provided by Section 2.419 of the Employees’ Pension Plan. The motion was duly seconded and carried unanimously. 4.3 Approve the following request of employees Konrad McCree, Solid Waste General Services Department, Ronnie Melton, Marine and Aviation Department, Richard Nestor, Police Department and Raymond Niski, Police Department for a regular pension as provided by Sections 2.416 and 2.424 of the Employees’ Pension Plan. Konrad McCree, Solid Waste Equipment Operator, Solid Waste General Services Department, was employed by the City on August 19, 1985, and his pension service credit is effective on that date. His pension will be effective March 1, 2016. Based on an average salary of approximately $43,982.86 over the past five years, the formula for computing regular pensions and Mr. McCree’s selection of the 100% Joint and Survivor Annuity with a 10% Partial Lump Sum, this pension benefit will be approximately $30,034.20 annually. Ronnie Melton, Marine Operations Supervisor, Marine and Aviation Department, was employed by the City on July 17, 2006, and his pension service credit is effective on that date. His pension will be effective August 1, 2016. Based on an average salary of approximately $37,971.11 over the past five years, the formula for computing regular pensions and Mr. Melton’s selection of the 100% Joint and Survivor Annuity, this pension benefit will be approximately $8,841.84 annually. Richard Nestor, Police Sergeant, Police Department, was employed by the City on February 6, 1995, and his pension service credit is effective on that date. His pension will be effective March 1, 2016. Based on an average salary of approximately $99,598.09 over the past five years, the formula for computing regular pensions and Mr. Nestor’s selection of the 100% Joint and Survivor Annuity with a 30% Partial Lump Sum, this pension benefit will be approximately $39,254.16 annually. Raymond Niski, Police Communication Supervisor, Police Department, was employed by the City on April 28, 1986, and his pension service credit is effective on that date. His pension will be effective May 1, 2016. Based on an average salary of approximately $66,676.92 over the past five years, the formula for computing regular pensions and Mr. Niski’s selection of the 50% Joint and Survivor Annuity, this pension benefit will be approximately $53,156.52 annually. Page 5 City of Clearwater Draft Pension Trustees Meeting Minutes April 18, 2016 Section 2.416 provides for normal retirement eligibility for non-hazardous duty employees hired prior to the effective date of this reinstatement (January 1, 2013), a member shall be eligible for retirement following the earlier of the date on which a participant has reached the age of fifty-five years and completed twenty years of credited service; the date on which a participant has reached age sixty-five years and completed ten years of credited service; or the date on which a member has completed thirty years of service regardless of age. For non-hazardous duty employees hired on or after the effective date of this restatement, a member shall be eligible for retirement following the earlier of the date on which a participant has reached the age of sixty years and completed twenty-five years of credited service; or the date on which a participant has reached the age of sixty-five years and completed ten years of credited service. Mr. McCree, Mr. Melton, and Mr. Niski have met the non-hazardous duty criteria. Section 2.416 provides for normal retirement eligibility for hazardous duty employees, a member shall be eligible for retirement following the earlier of the date on which the participant has completed twenty years of credited service regardless of age, or the date on which the participant has reached fifty-five years and completed ten years of credited service. Mr. Nestor has met the hazardous duty criteria. Trustee Cundiff moved to approve the following request of employees Konrad McCree, Solid Waste General Services Department, Ronnie Melton, Marine and Aviation Department, Richard Nestor, Police Department and Raymond Niski, Police Department for a regular pension as provided by Sections 2.416 and 2.424 of the Employees’ Pension Plan. The motion was duly seconded and carried unanimously. 4.4 Annual review of the Employees’ Pension Plan investment performance for the calendar and plan year ended December 31, 2015. Annually a presentation of the Plan’s investment performance is made to the Trustees. For calendar 2015, the Plan realized an investment return of 1.42%, versus a customized benchmark of 0.22%, placing the plan in the 31st percentile of public pension plans per the Wilshire Public Plan Sponsor Universe. For the last three calendar years period, the plan had an annualized return of 8.98%, versus a benchmark of 8.08%, placing the plan in the 18th percentile of public plans. During calendar 2015, the Plan introduced a new investment category, core Page 6 City of Clearwater Draft Pension Trustees Meeting Minutes April 18, 2016 plus real estate, per the hiring of two new money managers. The Plan also terminated one international equity money manager and hired two new international equity money managers during calendar 2015. During calendar 2016 to-date, the Trustees approved a new infrastructure money manager, as well as the termination of an additional international equity money manager. Staff continues to seek diversification and decreased volatility in investment returns for the Plan via alternative investment categories. In recent years, new categories introduced have included timber investments, core plus real estate, and infrastructure. A number of money managers underperformed their indexes during calendar 2015. The investment committee, with the assistance of the Plan’s investment consultant, CapTrust, closely monitors underperforming money managers and will continue to recommend terminations and replacements when appropriate. Finance Director Jay Ravins presented a PowerPoint presentation. Trustee Caudell departed Chambers at 2:42 p.m. Trustee Hamilton moved to accept the annual review of the Employees’ Pension Plan investment performance for the calendar and plan year ended December 31, 2015. The motion was duly seconded and carried unanimously. 4.5 Accept the January 1, 2016 Annual Actuarial Valuation for the Employees’ Pension Plan. Per the actuary report dated January 1, 2016, a minimum City employer contribution of $8.93 million, or 11.13% of covered payroll, is required for fiscal year 2017. This is an increase of $176 thousand over the fiscal 2016 required contribution of $8.76 million, or 11.66% of covered payroll. The calendar year 2015 investment return was a loss of (0.28%) net of investment fees, versus the assumed rate of 7.0%. The five-year smoothed investment return based on the actuarial value of the assets was 7.64% versus the assumed rate of 7.0%. Calendar 2011 through 2015 investment returns were (0.32%), 13.92%, 16.90%, 7.99%, and (0.28%), respectively. Page 7 City of Clearwater Draft Pension Trustees Meeting Minutes April 18, 2016 The plan experienced a net actuarial experience loss of $475,313 for the year. The actuarial gain from an actuarial return of 7.64% versus assumption of 7.0% was more than offset by actuarial losses, primarily due to actual salary increases of 8.65% versus expected 4.09%. This increase was partially due to the inclusion of 27 pay periods in the calendar 2015 payroll totals, versus the normal 26 pay periods. Adjusting for the extra pay period, the estimated increase was 4.62% versus the assumption of 4.09%. The Plan's funded ratio is 102.92% (including the credit balance) versus 101.89% for the prior year. The Actuarial Value of Assets exceeds the Market Value of Assets by $8.7 million as of January 1, 2016. The plan's credit balance, which reflects actual contributions in excess of actuarially required contributions for prior years, increased from $10,381,518 to $15,570,503 during calendar 2015. This $5.2 million increase was due to the City’s intentional overfunding of the fiscal 2015 required contribution. The City contributed approximately 17% of salaries, versus the actuarially required 11.66%, in order to increase the plan’s credit balance reserves for future volatility in required contributions. The Employees’ Pension Plan is highly leveraged on investment returns in comparison to most pension plans, which means changes in investment earnings cause significant increases or decreases in required employer contributions. This year-to-year volatility necessitates building reserves, such as the plan’s credit balance, during periods of positive investment earnings experience. This provides the City the ability to subsidize increased employer contributions during periods of negative investment earnings experience with contributions from accumulated reserves. Gabriel Roeder Smith representative Pete Strong reviewed the valuation report. Trustee Caudell entered Chambers at 2:46 p.m. Trustee Hamilton moved to accept the January 1, 2016 Annual Actuarial Valuation for the Employees’ Pension Plan. The motion was duly seconded and carried unanimously. 4.6 Determine Trustees’ expected rate of return for pension plan investments for current year, each of the next several years, and for the long term thereafter, in accordance with FL Statutes 112.661(9). Page 8 City of Clearwater Draft Pension Trustees Meeting Minutes April 18, 2016 Florida Statutes 112.661(9) requires an annual determination of expected rates of return be filed with the Florida Department of Management Services, with the plan’s sponsor, and with the consulting actuary. Staff is recommending the current plan investment rate of return assumption of 7.0%, net of investment-related fees, as the expected annual rate of return for the current year, for each of the next several years, and for the long term thereafter. In response to a question, Finance Director Jay Ravins said GASB 68 does not effect this actuarial report or valuation. GASB 68 marked up the Plan's net assets at the beginning of the fiscal year; this year's investment performance eliminated the asset and took it in as a $7 million liability by the end of the fiscal year. GASB 68 did not have a significant impact on the balance sheet this year. A net pension liability means that at September 30, 2015 valuation, the pension liability exceeded the market value of the investments by $7 million. The information presented to the Trustees today is based on the December 31, 2015 valuation. Trustee Jonson moved to determine Trustees’ expected rate of return assumption of 7.0% for pension plan investments for the current year, each of the next several years, and for the long term thereafter, in accordance with FL Statutes 112.661(9). The motion was duly seconded and carried unanimously. 5. Adjourn The meeting adjourned at 3:07 p.m. Chair Employees’ Pension Plan Trustees Attest City Clerk Page 9 City of Clearwater Draft Cover Memo City of Clearwater City Hall 112 S. Osceola Avenue Clearwater, FL 33756 File Number: ID#16-2310 Agenda Date: 5/16/2016 Status: Agenda ReadyVersion: 2 File Type: Action ItemIn Control: Pension Trustees Agenda Number: 4.1 SUBJECT/RECOMMENDATION: Approve the new hires for acceptance into the Pension Plan as listed. SUMMARY: Name Job Classification Department Pension Eligibility Date Robert Waite *Solid Waste Worker Solid Waste 03/05/2016 Candace Tuetken Police Communications Operator Trainee Police Department 03/07/2016 Christopher Damm Water Distribution Operator Trainee Public Utilities 03/07/2016 Tyler Jones Water Distribution Operator Trainee Public Utilities 03/07/2016 Nicholas Gossard Customer Service Representative Customer Service 03/07/2016 Jamie Thomas Solid Waste Worker Solid Waste 03/07/2016 Courtney Schultz **Recreation Leader Parks and Recreation 03/19/2016 Tonya Sandy Customer Service Representative Gas Department 03/21/2016 Valerie McHargue Paralegal Legal Department 03/21/2016 Daniel Castellano Parks Service Technician I Parks and Recreation 03/21/2016 Gregory Graff Police Service Technician Police Department 03/21/2016 Jada Grabis ***Parking, Facility, and Security Aide Marine and Aviation 03/19/2016 APPROPRIATION CODE AND AMOUNT: N/A USE OF RESERVE FUNDS: N/A Page 1 City of Clearwater Printed on 5/12/2016 Cover Memo City of Clearwater City Hall 112 S. Osceola Avenue Clearwater, FL 33756 File Number: ID#16-2311 Agenda Date: 5/16/2016 Status: Agenda ReadyVersion: 2 File Type: Action ItemIn Control: Pension Trustees Agenda Number: 4.2 SUBJECT/RECOMMENDATION: Approve the following request of employee Brent Peters, Information Technology Department to vest his pension as provided by Section 2.419 of the Employees’ Pension Plan. SUMMARY: Brent Peters, Senior Systems Programmer, Information Technology Department, was employed by the City on May 20, 2002, and began participating in the Pension Plan on that date. Mr. Peters terminated from City employment on January 8, 2016. 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 2.416 provides for normal retirement eligibility for non -hazardous duty employees hired prior to the effective date of this reinstatement (January 1, 2013), a member shall be eligible for retirement following the earlier of the date on which a participant has reached the age of fifty-five years and completed twenty years of credited service; the date on which a participant has reached age sixty -five years and completed ten years of credited service; or the date on which a member has completed thirty years of service regardless of age. For non-hazardous duty employees hired on or after the effective date of this restatement, a member shall be eligible for retirement following the earlier of the date on which a participant has reached the age of sixty years and completed twenty -five years of credited service; or the date on which a participant has reached the age of sixty -five years and completed ten years of credited service. Mr. Peters will meet the non -hazardous duty criteria and begin collecting a pension in June 2022. Section 2.416 provides for normal retirement eligibility for hazardous duty employees, a member shall be eligible for retirement following the earlier of the date on which the participant has completed twenty years of credited service regardless of age, or the date on which the participant has reached fifty-five years and completed ten years of credited service. APPROPRIATION CODE AND AMOUNT: N/A USE OF RESERVE FUNDS: Page 1 City of Clearwater Printed on 5/12/2016 File Number: ID#16-2311 N/A Page 2 City of Clearwater Printed on 5/12/2016 Cover Memo City of Clearwater City Hall 112 S. Osceola Avenue Clearwater, FL 33756 File Number: ID#16-2312 Agenda Date: 5/16/2016 Status: Agenda ReadyVersion: 2 File Type: Action ItemIn Control: Pension Trustees Agenda Number: 4.3 SUBJECT/RECOMMENDATION: Approve the following request of employees Dale Johnson, Public Utilities Department, Terry Avery, Solid Waste General Services Department and Russell Shawen, Engineering Department, for a regular pension as provided by Sections 2.416 and 2.424 of the Employees’ Pension Plan. SUMMARY: Dale Johnson, Wastewater Treatment Plant Oper A, Public Utilities Department, was employed by the City on January 19, 1987, and his pension service credit is effective on that date. His pension will be effective May 1, 2016. Based on an average salary of approximately $71,663.09 over the past five years, the formula for computing regular pensions and Mr . Johnson’s selection of the Life Annuity, this pension benefit will be approximately $57,704.16 annually. Terry Avery, Fleet Mechanic Supervisor, Solid Waste General Services Department, was employed by the City on February 17, 1987, and his pension service credit is effective on that date. His pension will be effective May 1, 2016. Based on an average salary of approximately $68,037.87 over the past five years, the formula for computing regular pensions and Mr . Avery’s selection of the Life Annuity with a 20% Partial Lump Sum payment, this pension benefit will be approximately $43,711.68 annually. Russell Shawen, Parking Operations Supervisor, Engineering Department, was employed by the City on October 27, 1997, and his pension service credit is effective on that date. His pension will be effective April 1, 2016. Based on an average salary of approximately $40,635.22 over the past five years, the formula for computing regular pensions and Mr . Shawen’s selection of the 100% Joint and Survivor Annuity, this pension benefit will be approximately $17,403.24 annually. Section 2.416 provides for normal retirement eligibility for non -hazardous duty employees hired prior to the effective date of this reinstatement (January 1, 2013), a member shall be eligible for retirement following the earlier of the date on which a participant has reached the age of fifty-five years and completed twenty years of credited service; the date on which a participant has reached age sixty -five years and completed ten years of credited service; or the date on which a member has completed thirty years of service regardless of age. For non-hazardous duty employees hired on or after the effective date of this restatement, a member shall be eligible for retirement following the earlier of the date on which a participant has reached the age of sixty years and completed twenty -five years of credited service; or the date on which a participant has reached the age of sixty -five years and completed ten years of Page 1 City of Clearwater Printed on 5/12/2016 File Number: ID#16-2312 credited service. Mr. Johnson, Mr. Avery and Mr. Shawen have met the non -hazardous duty criteria. Section 2.416 provides for normal retirement eligibility for hazardous duty employees, a member shall be eligible for retirement following the earlier of the date on which the participant has completed twenty years of credited service regardless of age, or the date on which the participant has reached fifty-five years and completed ten years of credited service. APPROPRIATION CODE AND AMOUNT: N/A USE OF RESERVE FUNDS: N/A Page 2 City of Clearwater Printed on 5/12/2016 Cover Memo City of Clearwater City Hall 112 S. Osceola Avenue Clearwater, FL 33756 File Number: ID#16-2439 Agenda Date: 5/16/2016 Status: Agenda ReadyVersion: 1 File Type: Action ItemIn Control: Pension Trustees Agenda Number: 4.4 SUBJECT/RECOMMENDATION: Approve Class A Interests fee structure for IFM Global Infrastructure money manager, to include foreign currency hedging. SUMMARY: The Trustees recently approved the hiring of IFM Global as the pension plan ’s infrastructure money manager under the existing fee structure for the money manager at the time. IFM Global has recently notified us that they are adopting a new fee structure for new investors. They are also offering the new fee structure as an option to existing investors such as Clearwater’s pension plan. The new fee structure lowers the base management fee, from 0.97% to 0.77%, but accelerates the money managers timing of sharing of earnings over the 8% hurdle rate. Additionally, the new fee structure will include foreign currency hedging. The foreign currency hedging is intended to reduce the volatility of returns from year to year caused by currency exchange rates. An irrevocable election is required by May 20, 2016, for any existing investors that would like to opt for the new Class A Interests fee structure with foreign currency hedging. Any existing investors not responding by the deadline will remain in the existing Class B Interests fee structure. The plan’s investment consultant, CapTrust, recommends adoption of the new fee structure as being in the best interests of the plan, as it decreases net management fees up to an earning threshold of 9.5% and increases manager incentives for performance in excess of the 8% hurdle rate. Additionally the foreign currency hedging is expected to produce the desired result of decreasing the volatility of investment returns from year to year. APPROPRIATION CODE AND AMOUNT: N/A Page 1 City of Clearwater Printed on 5/12/2016   1      April 18, 2016    City of Clearwater Employees' Pension Plan  100 S. Myrtle Ave.  Clearwater, FL 33756  USA    Dear Limited Partner,  Re: IFM Global Infrastructure Fund (“IFM GIF”) Future Fee Structure & Currency Hedging Over the past several months, IFM Investors has been analysing two important areas concerning IFM GIF  – whether to commence a foreign currency hedging strategy for the fund, and a comprehensive review  of the fee structure of the fund.  At the Investor Advisory Committee (“IAC”) discussion during our  Annual General Meeting of investors last year, the IAC asked the investment team to consider potential  options for addressing foreign currency volatility. Following an extensive review, we have decided to  implement a comprehensive currency hedging strategy for IFM GIF, which will apply to new investors  (and, at your option, to existing investors).  Following a review by IFM Investors’ Finance and Operations team regarding the current cost structure,  revenues and expected costs associated with planned investments and expansions of the investment  platform, the Board of IFM Investors approved the fee and terms changes for IFM GIF detailed in this  letter.   Revised Fee Structure  Over the past few years, IFM Investors has made significant investments in its infrastructure business  ahead of revenue, including increasing the number of investment professionals and enhancing the  capability of the global team; opening offices in Berlin and Tokyo to assist with asset management, deal  sourcing and increasing scale; and augmenting our asset management capabilities and administrative  support, including in relation to recent acquisitions in Mexico City and Vienna.   We believe that all of these investments have directly benefited all of our investors and will continue to  do so.  Since 2012, we have also reduced management fees by more than 20% – from 1.25% to 0.97%.  In light of those enhancements to the platform, an outright fee reduction was not considered to be  prudent at this time. However, a recommendation was made and accepted by the Board of IFM  Investors to reduce the base management fee charged to new investors and increase the weighting  towards variable performance fees. For all existing investors, the current fees will remain as they are.  We will of course, offer the option for existing investors to switch to the new fee structure1 and we  believe that there is merit in considering this switch.  We believe that the future fee structure, which results in reduced fixed fees and an increased weighting  toward variable revenue for the manager, will in turn help strengthen alignment with investors over the  life of the fund – creating stability around maintaining a world class investment team in a highly                                                               1 Note: The new fee structure will only apply to the hedged unit class    2  competitive market for talent. Moreover, the significant reduction of the base management fee  demonstrates IFM Investors’ confidence in our product and team to deliver attractive returns to  investors.  The new and existing fee structures are outlined below:  Item Existing Fee  Structure  New Fee  Structure  Comments  Management Fee (<US$300m) 0.97%0.77%Fixed fee reduced by 20bps  Management Fee (>US$300m) 0.85%0.65%Fixed fee reduced by 20bps  Carried Interest Rate 20%10%Carried interest rate reduced by 50% Hurdle Rate 8%8%No change to the hurdle rate  Catch‐Up Rate n/a 33.3%  Catch‐up included in the revised fee  structure, in excess of the 8% hurdle.  The  catch‐up rate is 33.3%, unlike typical 100%  rates  Holdback 50% 50% 50% holdback mechanism retained to  provide additional protection to investors  Currency Hedging  As you are aware, the returns for IFM GIF have been subject to considerable variability from movements  in exchange rates. In calendar year 2015, this variability resulted in lower returns for the feeders that  are denominated in US dollars (circa 5%) relative to the fully hedged Australian feeder (over 12%). At the  other extreme, the Canadian feeder returned over 20% due to the depreciation of the Canadian dollar.  The inconsistent outcomes for parties who invest in the same pool of assets and the potential for  greater volatility, is not in line with our investment objective of generating stable returns. Going  forward, we believe that it is sensible to address the variability associated with currency.  IFM Investors is very well placed to manage foreign currency risk for investors. We have hedged  currency exposures for over ten years for Australian investors, including through periods of significant  foreign currency volatility.   The currency hedging program for IFM GIF will be implemented, primarily, through forward contracts.  We have well established liquidity processes and policies. We have trading lines and ISDAs in place with  virtually all of the major global banks who are able to trade currency in volume. We also recently  completed an external review of our liquidity analysis, stress testing and reporting.  IFM Investors will not charge any additional management fee for providing foreign currency hedging to  IFM GIF.  Implementation  In order to accommodate these changes we are establishing two classes of Interests in the US LP – Class  A Interests and Class B Interests. Class A Interests will be hedged against currency movements with  respect to the portfolio investments that are held in currencies other than US dollars, and the new fee  structure will apply. All new investors coming into IFM GIF will invest through Class A. Class B Interests  will not be hedged against foreign currency movements and the existing fee structure will apply.    Existing investors have two election options in relation to your undrawn commitment:   1. Have your Interests classified as Class A Interests under the revised fee structure – NOTE: THIS  ELECTION IS IRREVOCABLE ONCE MADE  Under this election, upon drawdown your commitment will be drawn into the new hedged unit  class.     3  In order to make this irrevocable election, please complete and return the forms attached to this  letter by May 20, 2016. If you do not meet the May 20, 2016 deadline, you may transfer your  Interests, in consultation with the General Partner, at a later date.    2. Have your Interests classified as Class B Interests on your existing fee terms   You are not required to do anything if you elect this option, simply disregard this letter. Upon  drawdown you will receive units in the unhedged unit class on the existing terms. We will continue  to honor our agreed terms and conditions on your existing capital and any additional commitments  you may make to IFM GIF in the future.   Action Required  In order to make an irrevocable election to receive units in the hedged unit class under the revised fee  structure, please return the following forms to investorrelations@ifminvestors.com:  1. Completed Interest Election Form  2. Completed and Signed Classification Agreement  If we do not receive a response from you, we will consider that your election to have your commitment  drawn into the unhedged unit class on your existing terms. Should you have any questions, please do  not hesitate to contact your IFM Global Investor Relations representative.    Yours sincerely,          Kyle Mangini  Global Head of Infrastructure       4  INTEREST ELECTION FORM    _____________________________________  Print Name of Limited Partner (Investor)    Class A Interests   It is intended that the non‐US dollar exposure caused by the non‐US portfolio company holdings of  the Master Fund held by the Class A Interests will be hedged.    Management Fee:   There are no fees on undrawn capital.   For any Limited Partner with a commitment below $300 million, and with a share of net  asset value (“NAV”) below $300 million, such Limited Partner’s Management Fee on drawn  capital is 0.77% per annum of the Limited Partner’s share of NAV.   For any Limited Partner with a commitment equal to or exceeding $300 million, or with a  share of NAV equal to or exceeding $300 million, such Limited Partner’s Management Fee  on drawn capital is 0.65% per annum of the Limited Partner’s share of NAV.    If a Limited Partner’s share of NAV reaches $300 million, but subsequently drops below  $300 million (other than as a result of a redemption of its Interests in the Partnership), the  0.65% Management Fee will continue to apply. If a Limited Partner partially redeems its  Interests in the Partnership, causing such Limited Partner’s share of NAV to drop below $300  million, the 0.77% Management Fee will apply thereafter until the share of NAV reaches  $300 million again.   If a Limited Partner with a commitment equal to or exceeding $300 million subsequently  reduces its commitment below $300 million, the 0.77% Management Fee will apply  thereafter until such Limited Partner’s commitment is equal to or exceeds $300 million  again.   Performance Fee:   10% of the net realized and unrealized appreciation in the NAV of the Interests in the  Partnership, in excess of a threshold return; of 8% per annum (net of Management Fees).    33.3% catch‐up.   Calculated annually on December 31 each year.   50% held back each year to offset underperformance in the subsequent year.   If you elect Class A Interests, please refer to the documents in Appendix I   Classification Agreement   PPM (Exhibit A to the Classification Agreement )‐ – Please refer to supplementary document  attached to cover email   Side Letter Amendment (Exhibit B to the Classification Agreement)  The above summary of the terms of the Class A Interests does not purport to be complete and is  qualified in its entirety by the Confidential Private Placement Memorandum of the Partnership  relating to the Class A Interests, as well as each Limited Partner’s side letter.    5  Re: Classification of Class A Interests of IFM Global Infrastructure (US), L.P.  Ladies and Gentlemen:  This classification agreement (the “Agreement”) pertains to the classification of Class A Interests of IFM  Global Infrastructure (US), L.P., a Delaware limited partnership (the “Partnership”) held by the investor  identified on the signature page hereto (the “Investor”).  The Investor is a limited partner of the Partnership.  The Investor subscribed for its limited partnership  interest in the Partnership on the terms and conditions set forth in the Subscription Agreement  executed by the Investor, IFM Global Infrastructure (US) GP, LLC (the “General Partner”) and IFM  Investors (US) Advisor, LLC (the “Investment Advisor”) (the “Subscription Agreement”), including Exhibits  A, B and C thereto (together, the “Subscription Booklet”), and in the Fourth Amended and Restated  Limited Partnership Agreement of the Partnership dated as of December 15, 2014 (as it may be  amended or restated from time to time, the “Partnership Agreement”).  Capitalized terms used and not  defined herein have the meanings specified in the Partnership Agreement.    Pursuant to Section 2.6 of the Partnership Agreement, the General Partner may establish multiple  classes of ownership interests in the Partnership from time to time.  The Investor acknowledges that the  General Partner has established Class A Interests in the Partnership, the terms and conditions of which  are described in the Subscription Booklet, the Partnership Agreement and the Private Placement  Memorandum of the Partnership relating to the Class A Interests (attached hereto as Exhibit A) (the  “Memorandum”).  The Investor acknowledges that it is hereby being offered to have its Interests in the  Partnership and its Remaining Commitment, if any, classified as Class A Interests upon such terms and  conditions, and effective as of the Effective Date, as defined below.    The Investor hereby irrevocably agrees to the classification of its Interests in the Partnership and its  Remaining Commitment, if any, as Class A Interests upon such terms and conditions, as of the date  selected below (please check the box below):   1. May 31, 2016.2  The Investor hereby acknowledges and agrees that, while the General Partner shall use its reasonable  efforts to classify the Investor’s Interests in the Partnership, and its Remaining Commitment, if  applicable, as Class A Interests as soon as reasonably practicable following the date specified in the  Investor’s election above, the General Partner shall manage the hedging of Class A Interests as it deems  prudent in its sole discretion (taking into consideration, among other things, minimizing execution  costs), and that as a result, the classification of the Investor’s Interests in the Partnership, and its  Remaining Commitment, if applicable, as Class A Interests may occur over the twelve months following  the election date, or longer thereafter.  The parties hereto hereby acknowledge and agree that the  “Effective Date” as used herein shall mean the date that the Investor’s Interests in the Partnership, and  its Remaining Commitment, if applicable, are actually classified as Class A Interests, which date shall be  determined by the General Partner in its reasonable discretion.  The General Partner shall notify the  Investor of the date of the Effective Date promptly following the determination thereof.  The parties hereto hereby agree that the side letter agreement by and between the Partnership and the  Investor issued in connection with the Investor’s subscription for an interest in the Partnership (the  “Side Letter Agreement”), as amended by the amendment to the Side Letter Agreement dated as of the  Effective Date attached hereto as Exhibit B (the “Side Letter Amendment”), shall apply to the Investor’s  investment in the Partnership with respect to its Class A Interests.  By executing this Agreement, the                                                               2 An Investor who would like to classify its Interests in the Partnership and its Remaining Commitment, if any, as  Class A Interests but has not returned this Agreement on or prior to May 31, 2016 may elect this option and the  General Partner will seek to classify the Investor’s Interests and Remaining Commitment as Class A Interests as  soon as reasonably practicable.    6  Investor hereby irrevocably agrees to the terms provided in the Side Letter Amendment with respect to  its Class A Interests.  For the avoidance of doubt, if an Investor makes the Effective Date election  provided in number 3 above, and as a result of such election the Investor holds Class A Interests and  Class B Interests in the Partnership, the Side Letter Amendment will apply only to such Investor’s Class A  Interests in the Partnership until such time as the remainder of the Investor’s Interests in the  Partnership are classified as Class A Interests.   The Investor hereby agrees and acknowledges that the classification made by the Investor pursuant to  this Agreement shall be irrevocable and the Investor may not elect to have its Interests re‐classified as  Class B Interests at a later date, including, without limitation, with respect to the Investor’s pre‐election  fee structure and related provisions.    The Investor acknowledges that it has been furnished with, and has carefully read the Memorandum,  including, without limitation, the risk factors contained therein.  To the fullest satisfaction of the  Investor, the Investor has been given the opportunity to (i) ask questions of, and receive answers from,  the General Partner, the Investment Advisor and the Master Fund Advisor concerning the Class A  Interests and (ii) obtain any additional information that the General Partner or the Investment Advisor  can acquire without unreasonable effort or expense that is necessary to evaluate the merits and risks of  an investment in the Class A Interests.   The Investor hereby acknowledges and agrees that all information previously completed or provided by  the Investor in the Subscription Booklet in connection with its subscription for an interest in the  Partnership, including but not limited to, all representations and warranties in the Subscription  Agreement and the Prospective Investor Questionnaire, remains true, correct and complete in all  material respects.  This Agreement shall be governed by and construed in accordance with the laws of the State of  Delaware, without regard to the principles of conflicts of laws thereof.  Any term or provision of this Agreement that is invalid or unenforceable in any jurisdiction shall, as to  such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering  invalid or unenforceable the remaining terms or provisions of this Agreement or affecting the validity or  enforceability of any of the terms or provisions of this Agreement in any other jurisdiction.  To the fullest extent permitted by law, in any judicial proceeding involving any dispute, controversy or  claim arising out of or relating to this Agreement, the Investor (except as otherwise agreed to in writing  by the General Partner (on its own behalf or on behalf of the Partnership) or unless the Investor is a  sovereign entity that is a State of the United States or a political subdivision thereof) hereby consents to  the non‐exclusive jurisdiction and venue in any state or federal court located in the City and State of  New York.  In any such judicial proceeding, the Investor agrees that in addition to any method for the  service of process permitted or required by such courts, to the fullest extent permitted by law, service of  process may be made by prepaid certified mail with a proof of mailing receipt validated by the U.S.  Postal Service constituting evidence of valid service.  EXCEPT AS OTHERWISE AGREED TO IN WRITING BY  THE GENERAL PARTNER (ON ITS OWN BEHALF OR ON BEHALF OF THE PARTNERSHIP), THE INVESTOR  HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING ANY DISPUTE, CONTROVERSY  OR CLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.  Nothing contained herein shall affect  the right of the Partnership to commence any action, suit or proceeding or otherwise to proceed against  the Investor in any other jurisdiction or to serve process upon the Investor in any manner permitted by  any applicable law in any relevant jurisdiction.    This Agreement may be executed in counterparts with the same effect as if the parties executing the  counterparts had all executed one counterpart.  By executing the signature page to this Agreement, the parties hereto agree to be bound by the  foregoing, including, without limitation, the Side Letter Amendment attached hereto as Exhibit B.    7    _____________________________________  Print Name of Limited Partner (Investor)     By: __________________________________  By:    Signature of Authorized Signatory  Signature of Authorized Signatory      Print Name of Authorized Signatory  Print Name of Authorized Signatory      Print Title of Authorized Signatory  Print Title of Authorized Signatory        IFM Global Infrastructure (US) GP, LLC,     in its capacity as General Partner, and on behalf of  IFM Global Infrastructure (US), L.P.    By:    Name:   Title:    By:    Name:   Title:     Accepted and Agreed  as of _____________ __, 2016         8  EXHIBIT A  [MEMORANDUM – attached to cover email]       9  Exhibit B to the Classification Agreement  IFM Global Infrastructure (US), L.P.  Fees.  Notwithstanding any provisions in the private placement memorandum of Class A Interests of the  Partnership (the “PPM”), the Partnership Agreement, the Subscription Agreement, the Investment  Management Agreement, the Advisory Deed, or the Trust Deed to the contrary, the Investment Advisor,  the General Partner and the Manager represent that the Investor, as a Class A Limited Partner in the  Partnership is subject only to the following management and performance fees, which are subject to  modification in writing by mutual consent of the Investment Advisor, the General Partner and/or the  Manager (on one hand) and the Investor (on the other hand):  (a) Management Fee paid to the Manager, accrued monthly on the Investor’s  drawn capital, and payable quarterly in arrears equal to a rate (plus value added tax, if applicable) of (i)  0.77% per annum of the Limited Partner’s share of the Partnership’s net assets (“NAV”) if such Limited  Partner’s Capital Commitment and such Limited Partner’s share of  NAV are both below $300 million  and (ii) 0.65% per annum of the total amount of the Limited Partner’s share of NAV if such Limited  Partner’s Capital Commitment or such Limited Partner’s share of NAV is equal to or exceeds $300  million.  If the Limited Partner’s share of NAV reaches $300 million, but subsequently drops below $300  million (other than as a result of a redemption of its Interests in the Partnership), the 0.65%  Management Fee will continue to apply. If the Limited Partner partially redeems its Interests in the  Partnership, causing such Limited Partner’s share of NAV to drop below $300 million, the 0.77%  Management Fee will apply thereafter until the share of NAV reaches $300 million again.  If the Limited  Partner with a commitment equal to or exceeding $300 million subsequently reduces its commitment  below $300 million, the 0.77% Management Fee will apply thereafter until such Limited Partner’s  commitment is equal to or exceeds $300 million again.  There are no fees on undrawn capital.     (b) Performance Fee paid to the Manager, accrued, calculated and payable as set  forth in Appendix 1 to this Exhibit B.    For the avoidance of doubt, there shall be no drawdown premium paid to the Partnership in relation to  any Drawdown.  The General Partner, Investment Advisor, and the Manager represent and agree that  they and the Investor are not violating any applicable state, federal, or international law or regulation  regarding payment of any of the Management Fee or the Performance Fee described in this Side Letter.      10  Appendix 1 to Exhibit B  PERFORMANCE FEE CALCULATION   1. Definitions  The following definitions apply in this clause:  Aggregate Cash Flow for an Investor as of a given date is calculated by adding all of the Investor’s capital  contributions and subtracting all redemption payments and distributions made to the Investor as of  such date.  Annual Performance Fee for any year equals the Performance Fee Amount, less the sum of:  (a) all performance fees previously paid to the Manager; and  (b) any Holdback Amount for the prior Payment Date;  provided that, for the avoidance of doubt, in no event shall the Annual Performance Fee have a value of  less than zero.  Catch Up Rate means one divided by three.  Catch Up Return means:  Preferred Return * ( Performance Fee Rate  /  Catch Up Rate )  1‐ ( Performance Fee Rate  /  Catch Up Rate )  Catch Up Return NAV for an Investor as of a given date means the Preferred Return NAV as of such date  plus the Catch Up Return as of such date.  Hurdle Rate is 8% per annum.  Holdback Amount is the Annual Performance Fee multiplied by (100% – Payout Ratio)  Holdback Payout is the Holdback Amount accrued to the Manager from the prior Payment Date,  provided that the Investor NAV is above the Preferred Return NAV on the Payment Date, otherwise it is  zero.  Investor NAV for an Investor as of such date means such Investor’s capital balance as of such date  (excluding any performance fee accrual as of such date and adding back any performance fees  previously paid as of such date).  Payment Date for an Investor means 31 December each year or the date of the termination of the  Manager or the date of redemption of such Investor (with respect to the redemption amount).  Payout Ratio is 50%.       11  Performance Fee Amount for an Investor means:  (a) If the Investor NAV is below the Preferred Return NAV, the Performance Fee Amount is  zero;  (b) If the Investor NAV is above the Preferred Return NAV, but below the Catch Up Return  NAV, then the Performance Fee Amount is equal to:  ( Investor NAV ‐ Preferred Return NAV ) * Catch Up Rate;  (c) If the Investor NAV is above the Catch Up Return NAV, the Performance Fee Amount is  equal to the Performance Fee Rate multiplied by Profit.   Performance Fee Rate means 10%.  Preferred Return for an Investor as of a given date is calculated by taking the Preferred Return NAV as  of such date, and subtracting the Aggregate Cash Flow as of such date.  Preferred Return NAV for an Investor as of a given date is calculated by compounding each of such  Investor’s contributions at the Hurdle Rate from the date of each applicable contribution and  subtracting any redemption and distribution payments compounded at the Hurdle Rate from the date of  each applicable redemption and distribution payment.  Profit for an Investor as of a given date is calculated by taking the Investor NAV as of such date, and  subtracting the Aggregate Cash Flow as of such date.  2. Payment of Performance Fee  On each Payment Date, the Investor will pay the Manager an amount equal to:  (a) the Annual Performance Fee multiplied by the Payout Ratio; plus  (b) the Holdback Payout.