INVESTMENT ADVISORY AGREEMENT (3)
City of Clearwater
Employee's Pension Fund
Artisan Partners Limited Partnership
Investment Advisory Agreement
This agreement, entered into as of this 18th date of June, 2001 by and between the Board of
Trustees of the City of Clearwater Employee's Pension Fund created by article V., Division
3 of the Clearwater Code ("Client") retains Artisan Partners Limited Partnership ("Artisan
Partners") as investment adviser for the Account (described below), and Artisan Partners
agrees to serve in that capacity.
Now therefore in consideration of the promises and covenants contained herein, the parties
agree as follows:
1. Authority
Artisan Partners shall have full power to supervise and direct the investment of all assets
the Client places under Artisan Partners' supervision (the "Account"), including the power
to buy, sell, exchange, convert, tender and otherwise trade in any stocks, bonds, or other
securities, all without prior consultations with Client, in accordance with the Statement of
Investment Objectives and Guidelines attached as Exhibit A to this Agreement and
incorporated by reference herein or such other objectives and guidelines as Client may,
from time to time, furnish Artisan Partners in writing, and subject only to such written
limitations as Client may impose.
2. Custody
Client will appoint a custodian ("Custodian") acceptable to Artisan Partners to take and
have possession of the assets of the Account. Artisan Partners shall not have custody or
physical control of the assets of the Account. Client will give Artisan Partners notice,
reasonably in advance, of any deposits or withdrawals of cash or other property to or from
the Account, which Client may make or direct.
Artisan Partners shall not be liable for any act or omission of the Custodian. In addition,
Artisan Partners shall not be responsible for any costs, losses or expenses incurred by the
Client as a result of the Account's participation in any securities lending program or other
revenue enhancing program that the Custodian, or other party selected by Client,
administers. Client acknowledges that participation in such programs, including the early
trade notification requirements of such programs, may restrict Artisan Partners' ability to
obtain the best net price and execution for securities sold, may result in failed trades, and
may affect Artisan Partners' ability to manage the portfolio in accordance with the client's
objectives.
3. Brokerage
Artisan Partners may open brokerage accounts for the Account and place orders for the
execution of transactions with or through such brokers, dealers, or banks as Artisan
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City of Clearwater
Employee's Pension Fund
Partners may select. Artisan Partners may cause brokerage transactions to be executed
through brokers or dealers who also provide Artisan Partners with "research services" as
defined in section 28(e) of the Securities Exchange Act of 1934. The commission paid to
such a broker may be greater than the commission another broker would charge for the
same transaction.
Artisan Partners agrees that it will use reasonable efforts to purchase and sell securities for
the Account through a broker or brokers as the Client directs in writing from time to time,
but only to the extent that Artisan Partners, in its judgment and discretion, is satisfied that
the brokerage commission proposed to be charged for such trade is competitive and is
satisfied that the execution expected to be attained is of such quality that Artisan Partners
would have placed the trade with that broker in the absence of such direction. Artisan
Partners shall use reasonable efforts to direct 10% to 20% of the total commissions on
transactions in listed securities to the broker or brokers identified by the Client. The Client
acknowledges that, depending on market conditions and portfolio strategy, the target range
may not be achieved during all periods.
4. Reports to Client
Artisan Partners will furnish to Client a monthly account statement including a statement
of all assets in the Account at the end of the period and a report of all transactions in the
Account during the period. In addition, Artisan Partners will furnish to Client any
additional or supplemental reports a Client reasonably requests.
5. Standard of Care
Except for violations of the securities laws, bad faith, negligence or willful malfeasance in
the performance of its duties under this agreement, neither Artisan Partners nor any of its
partners or employees shall be liable for any action performed or omitted to be performed
or for any errors of judgment in the management of the Account. Recommendations that
Artisan Partners makes will be based upon information from sources that Artisan Partners
regards as reliable, but Artisan Partners does not guarantee the accuracy of such
information.
6. Voting Proxies
Artisan Partners shall vote proxies solicited by or with respect to the issuers of securities in
which assets of the Account may be invested, unless otherwise instructed by Client.
7. Confidential Relationship
All information and advice furnished by either party to the other shall be treated as
confidential and shall not be disclosed to third parties except as required by law.
8. Non-Exclusive Contract
Artisan Partners acts as adviser to other clients and may give advice, and take action, with
respect to any other client which may differ from the advice given, or the timing or nature
of action taken, with respect to the Account. Artisan Partners shall have no obligation to
purchase or sell for the Account any security which Artisan Partners, its partners or
employees may purchase or sell for themselves or for any other clients.
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City of Clearwater
Employee's Pension Fund
9. Agreement not Assignable
No assignment (as that term is defined in the Investment Advisers Act of 1940) of this
agreement may be made by Artisan Partners without written consent of Client.
10. Termination
This agreement may be terminated at any time upon ninety (90) days written notice by
either party. Fees will be prorated to the date of termination and any unearned portion of
prepaid fees, if any, less any expenses incurred by Artisan Partners in connection with
termination, will be refunded to Client.
11. Representations
Artisan Partners represents that it is registered as an investment adviser under the
Investment Advisers Act of 1940 and that such registration is currently effective. Artisan
Partners represents that it will notify Client of any change in the membership of Artisan
Partners within a reasonable time after any such change. Delivery of Artisan Partners'
Disclosure Statement consisting of Part II of Artisan Partners' Form ADV shall be deemed
to satisfy the notification provisions set forth herein.
Client represents that employment of Artisan Partners is authorized by, has been
accomplished in accordance with, and does not violate, the documents governing the
Account. Client will furnish Artisan Partners with true copies of all governing documents
and will promptly furnish true copies of any amendment thereto.
12. Communications
Notices required to be given under this agreement shall be sent by certified mail and shall
be deemed given when received at the addresses specified below, or at such other address
as a party to receive notice may specify in a notice given in accordance with this provision.
Artisan Partners may rely on any notice from any person reasonably believed to be genuine
and authorized.
13. Fees
Artisan Partners' compensation for services shall be calculated and paid in accordance with
the attached Schedule of Fees. Artisan Partners will deliver an invoice to: City of
Clearwater Employees Pension Fund, Attention: Mr. Steve Moskun, Cash and Investment
Manager, 101 S. Myrtle Avenue, Clearwater, Florida 33756, or such other address as
Client shall from time to time provide to Artisan Partners. Fees are payable within 30 days
after the date of the invoice.
The remainder of this page intentionally left blank.
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City of Clearwater
Employee's Pension Fund
14. Entire Agreement: Governing Law
This agreement constitutes the entire agreement of the parties with respect to management
of the Account and can be amended only by written document signed by the parties. It
shall be governed by the law of the State of Florida.
Approved as to form:
Board of trustees of the City of Clearwater
Employee's Pension Fund
By
Taxpayer Identification Number: 59-6000289
Attest:
ARTISAN PARTNERS LIMITED PARTNERSHIP
By: Artisan Investment Corporation,
its general partner
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City of Clearwater
Employee's Pension Fund
Exhibit A
STATEMENT OF INVESTMENT
OBJECTIVES AND GUIDELINES
CITY OF CLEARWATER EMPLOYEES'
PENSION FUND
Adopted September 5, 2000
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City of Clearwater
Employee's Pension Fund
PURPOSE
The purpose of this Statement of Investment Objectives and Guidelines 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 29D.S.C. s. 1104 (a) (1) (A) - (C).
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City of Clearwater
Employee's Pension Fund
Fundin2 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;
· the Fund assets should earn sufficient total rate of return over time to reduce the
Fund's dependency on 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
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 oflegal reserve life
insurance companies licensed to do business in the State of Florida, 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
. 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 insured by the Federal Deposit Insurance Corporation or
collateralized by United States Government Agency securities.
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
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City of Clearwater
Employee's Pension Fund
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.
c. Fully collateralized United States Agency obligations which cany 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 cany 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
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. County bonds containing a pledge of the full faith and credit of the county involved,
bonds of the Florida Development Commission, or of any other state agency, which have
been approved as to legal and fiscal sufficiency by the state board of administration.
g. Obligations of any municipal authority issued pursuant to the laws of this state;
provided, however, that for each of the five years next preceding the date of investment,
the income of such authority available for fixed charges shall have been not less than one
and one-halftimes its average annual fixed charge requirements over the life of its
obligations.
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 anyone 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;
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City of Clearwater
Employee's Pension Fund
2. 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
3. Not more than five percent of the assets of the pension fund shall be invested in
the common stock or capital stock of anyone issuing company nor shall the
aggregate investment anyone issuing company exceed five percent of the
outstanding capital stock of that company; nor shall the non-US. investments
exceed ten percent of the pension fund's assets at cost; nor shall the aggregate of
the investments under this subparagraph at cost exceed sixty-five percent of the
pension fund's assets at cost.
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.
Investment Mana2:ement 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
International/Non US Equities
Domestic Fixed Income
Cash
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.
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 US. Market Equity
commitment will be achieved through the employment of managers of complementary investment
styles, Growth and Value. In the US. Fixed Income market a core bond managers will be utilized
to stabilize the fund. In the International Equity market a diversified non-US. managers will be
hired and 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. The Fund will keep
sufficient funds in the City's pooled cash account to meet the current obligations ofthe Fund.
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City of Clearwater
Employee's Pension 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 40.0% 60.0% Cost
Growth 10.0% 40.0% Cost
Value 10.0% 40.0% Cost
Fixed Income 30.0% 50.0% Cost
International Equity 5.0% 10.0% 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
manor.
When in market equilibrium, cash flows will be deployed in a manner that returns the portfolio to
its normal commitments.
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, misrepresentation by third parties or
imprudent actions by the trustees or city employees.
Makeup of The Investment Committee
The Pension Investment Committee initially shall be made up of the following: Finance Services
Administrator (City Treasurer), Assistant Finance Director, Finance Controller, Risk Manager,
Senior Accountant, General Services Controller, Fire Administrative Support Manager and Cash &
Investments Manager. The Financial Services Administrator 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.
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City of Clearwater
Employee's Pension Fund
Continuin2: 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.
· 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%. The expected rate of return for the foreseeable future is
also 7%.
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.
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City of Clearwater
Employee's Pension Fund
. 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 or maximum of 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.
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 the 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 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 one
(1) percentage point 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
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City of Clearwater
Employee's Pension Fund
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 (CIEAFE) by at least two (2) percentage points per
year over a minimum of three (3) or maximum of (5) years.
3. Fixed Income Segment Return Objectives
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 one-half (.5) percentage point per year measured over a
minimum period ofthree (3) or maximum of(5) years.
4. Responsibilities of the Third Party Custodian
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
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City of Clearwater
Employee's Pension Fund
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;
· 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.
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
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City of Clearwater
Employee's Pension Fund
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 ofthe investment management organizations.
4. Initiating written communication with the Fund whenever the investment
manager believes that this Statement of Investment Objectives and Guidelines
should be altered. 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
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.
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:
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City of Clearwater
Employee's Pension Fund
· 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
similar retirement plans and will be responsible for suggesting appropriate changes in the Fund's
investment program over time.
Filinl!: of Investment Policv
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.
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City of Clearwater
Employee's Pension Fund
APPENDIX A:
FUND SEGMENT AND INDIVIDUAL MANAGER GUIDELINES
CITY OF CLEARWATER EMPLOYEES PENSION FUND
INVESTMENT STRUCTURE
September. 2000
Investment Manager
Target
Allocation
Domestic Equity Specialist Manager
Value Orientation
10% - 40%
Domestic Equity Specialist Manager
Growth Orientation
10% - 40%
International Equity Specialist Manager
5% - 10%
Domestic Fixed Income Specialist Manager
Core Fixed Income Orientation
30% - 50%
1. Manaeer 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.
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City of Clearwater
Employee's Pension Fund
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
ofthe normal protection of the Fund's assets is provided for.
4. Transaction A!!ent Assi!!nment 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 Sellin!! 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.
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. Usa!!e 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.
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City of Clearwater
Employee's Pension Fund
8. US32:e of Cross Asset Se2:ment 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 Obiectives. Guidelines and Restrictions Forthcomin2:
The Fund will develop additional objectives, guidelines and restrictions in the future on
other areas as it deems appropriate.
11. Fund Se2:ment Guidelines
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.
llA. Equity Se2:ment
Each equity manager is expected to adhere to the following guidelines:
· Equity holdings in anyone 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 anyone 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
percent (20%) 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. However, fixed income securities
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City of Clearwater
Employee's Pension Fund
should 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 which would cause a
holding to exceed 5% of the issue outstanding.
lIB. International Equity Sel!ment
Each international equity manager IS expected to adhere to the following minimum
guidelines:
· Equity holdings in anyone company and all of its subsidiaries and affiliates
(including equities, convertible securities and debt) should not exceed ten
percent (10%) of the market value of the manager's portion of the Fund
portfolio without the prior written consent ofthe Fund.
· Equity holdings in anyone industry should not exceed fifty percent (50%) of
the market value of the manager's portion of the Fund portfolio. Equity
holdings in anyone 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.
· Cash equivalents and fixed income positions should not exceed fifty percent
(50%) ofthe 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.
11 C. Fixed Income Sel!ment
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
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City of Clearwater
Employee's Pension Fund
quality designation will govern.) No more than twenty percent (20%) ofthe
market value of the manager's portion of the Fund portfolio shall be rated
less than "investment grade" quality.
· The diversification of securities by maturity, quality, sector, coupon and
geography is the responsibility ofthe 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 10% 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 15% ofthe 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 single issuer
financial institution or financial institution holding company family.
ltD. Cash and Equivalents Sel!ment
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.
UE. 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.
UF. 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.
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City of Clearwater
Employee's Pension Fund
12. Individual Manal!er Descriptions and Five-Year Expectations
All expectations are minimums. All investment managers shall exceed the stated
expectations.
Investment Manager Percentile Percentile
Expectation Expectation
Relative To Relative To
Other Managers Style Peers
Domestic Equity Specialist Manager 50th 50th
Value Orientation
Domestic Equity Specialist Manager 50th 50th
Growth Orientation
International Equity 50th 50th
Specialist Manager
Domestic Fixed Income Specialist Manager 50th 50th
Core Fixed Income Orientation
Cash and Equivalents and 50th 50th
STIF Portfolios
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.
13. Reportinl! Requirements
Consultant Reportinl!
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 Reportinl!
. 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
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City of Clearwater
Employee 'sPension Fund
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.
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.
Meetinl! Al!enda
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.
Ten (10) 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
23
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City of Clearwater
Employee's Pension Fund
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.
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City of Clearwater
Employee's Pension Fund
Schedule of Fees
Investment Advisory Agreement between
Artisan Partners Limited Partnership
and
City of Clearwater Employee's Retirement Fund
The investment management fee for Artisan Partners' services shall be an annual rate of
0.80% on assets up to $50 million
0.60% on assets from $50 million up to $100 million
0.50% on assets in excess of $100 million
calculated on the market value of the Account and payable quarterly in arrears, beginning on the
first day on which Artisan Partners provides services pursuant to this Agreement.
Effective as of June 18,2001
CITY OF CLEARWATER EMPLOYEE'S
PENSION FUND
By lIt Af~n
ARTISAN PARTNERS LIMITED PARTNERSHIP
By: Artisan Investment Corporation
its general partner
~~~07~
Name & Title
4~~ N~c/,*- ~htf~
25
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