Monday, August 23, 2010, 7:00 P.M.



Members Present:                   Drew Bastian

                                                Frank Sheridan

                                                Jim Reardon   

                                                Dominick Leone         

Members Absent:                    Bob Pohlmann

Plan Attorney:                        Scott Christiansen

Plan Administrator:                Sheila Hutcheson

Consultants:                            Burgess Chambers, Performance Monitor (BCA)

                                                Janet Newcomb, PNC Institutional Investments

                                                Michael Santelli, PNC Portfolio Manager, Mid Cap Value Fund





Chairman Bastian called the meeting to order at 7:00 p.m. and stated that there was a quorum with four members present.


APPROVAL OF MINUTES - Quarterly Meeting - May 24, 2010


Chairman Bastian made a motion to approve the minutes of the May 24, 2010 meeting; Member Leone seconded the motion, which passed unanimously.




Janet Newcomb, PNC Institutional Investments & Michael Santelli, PNC Portfolio Manager, Mid Cap Value Fund


Ms. Newcomb distributed reports and opened with a review of the total asset allocation summary and the total fund’s market value of $13,885,708 as of June 30, 2010.  Next, she reported the PNC performance:



She then discussed each investment type and the holdings.  Mr. Santelli opened his report on the mid-cap value segment of the portfolio with an overview of his staff and investment philosophy of focusing on the concept of intrinsic value (buying in the “green” zone).  He discussed the quantitative ranking model, and their process.  Burgess Chambers said the product has had very good performance until a dowturn in the last year and asked Mr. Santali to address why the change occurred. He stated that a headwind started in the second half of 2007 and continued into 2008 when the whole market did badly.  In 2009, the fund return was 34.21%, but this followed a return for 2008 of negative 39.07%.    He then discussed the three types of risk:  balance sheet risk, business risk, and valuation risk.  Mr. Chambers said almost all managers emphasize quality, but the underperformance of the benchmark is everywhere and he asked why the benchmark is doing so well.  Mr. Santelli said it is the fund’s



objective to beat the index over the course of time.  The index did really well for the last portion of 2009 with lower quality stocks, which are not held in the portfolio, performing the best in 2009.  The last three months’ performance has been better.  Mr. Chambers also asked him how to compare the bail-out of the banks this time versus the past situations.  Mr. Santelli stated that he thinks it will be less costly this time, even though the magnitude is greater.  The government decided, with the TARP plan, to guarantee all the bonds, as opposed to the risk-taking investments.  He then reviewed the various banks’ downturns.  Member Reardon asked for Mr. Santelli’s forecast for the future; he said that he thinks in the next ten years equities will have a 3-5% return annually, with high quality dividend-paying stocks being the best investments.  Stocks are cheaply priced and bonds are richly priced.  Mr. Chambers recommended that the Board stay with this product and let it improve.


Ms. Newcomb then discussed the conversion from Allegiant to PNC, noting that the transition is being worked through.  It was discovered that the lower fee structure implemented in 2007 wasn’t being billed, resulting in a credit of about $32,349.07 to the fund; PNC will credit this amount going forward.  Attorney Christiansen asked the Administrator to follow up with Ms. Newcomb to confirm that retirement options, especially any stop dates, have been noted in the PNC conversion and to ascertain PNC’s internal processes to determine if a retiree dies.


Burgess Chambers, Performance Monitor


Mr. Chambers distributed the report for the quarter ending June 30, 2010 and opened with a discussion of the need to rebalance the portfolio to go back to the target allocation, noting that he would start the process now so that it will be in line by the end of this fiscal year.  Accordingly, he asked the Board to direct PNC to proceed to bring the assets back into line with the target allocations.  He recommended a letter to C.S. McKee in this regard, taking into account the State monies.


Member Bastian made a motion to take action to bring equities at cost back to 60%, requiring rebalancing of the equity and fixed income portions of the portfolio, and to take into consideration the State monies, Member Sheridan seconded the motion, which passed unanimously.


Mr. Chambers then discussed that the loss for the quarter was reversed by the returns during the July rally, but he stated that August has been negative (about -3%) so far.  He hopes for a strong September.  The fund’s performance was negative 6.4%% for the quarter and 1.1% for the fiscal year-to-date, both net of fees. The fiscal year-to-date return, based on the equity rally in July, is about 5.5%.  The return for one year was 12.2%% and the portfolio had $13,924,252 as of June 30, 2010.  PNC’s fixed income investment has been a great performer over the years.  BCA is very concerned about the bond market and is looking at other alternatives.  At the next meeting, he will discuss convertibles as an alternative.


Scott Christiansen, Attorney


The Attorney opened with a discussion of the status of the IRC ordinance, which he had thought was ready for submittal to the City Council, until he was recently notified that the City is still reviewing it.  The Administrator will send the letter of no impact to the City to accompany the ordinance when it is forwarded to the City Council.  Mr. Christiansen then discussed that the IRS has said that the agency will be more involved in public pension plans, which is a change from the past.   He said that this may result in the need to have the plan obtain a determination of qualified status from the IRS.  Such determination ensures that the benefits of the plan are not taxable to the members, until such time as a member begins to receive a retirement benefit.  The reason to consider filing at this time is that the IRS has stated that if the determination is sought voluntarily, the agency would look more favorably on compliance issues.  The plan has been updated periodically to reflect IRC changes, but some


changes may not have been timely due to the Board’s meeting schedule and the subsequent time frame for ordinance preparation/consideration by the City.   Due to potential issues if the IRS were to mandate a determination of qualified status, Mr. Christiansen is checking with tax law firms regarding

their cost to handle the filings and he will send a report to the Board as to recommendations and the cost to proceed with a voluntary filing for a determination of qualified status.


Sheila Hutcheson, Plan Administrator             


The Administrator reported that the State monies have been received, in the amount of $264,108.66.  Last year, the amount was $257,000+ and a supplement of approximately $53,000. The Attorney noted that the supplement will most likely be less than last year.  Ms. Hutcheson advised that all the Trustees had timely filed their Financial Disclosure Forms.  Next, she informed the Board of the annual Police/Fire Conference in Orlando October 10 - 13.  Ms. Hutcheson reported that she had had a request from Member Pohlmann for information on retirees/DROP participants, and this information would be sent to the Board.




Approval of Summary Plan Description (SPD)


Attorney Christiansen said he had sent two SPD’s, with one including the information in the proposed IRC ordinance discussed under his report, and the other without this information.  The reason for this was to have the SPD, which is already over two years old, provided to members as required by Statute (once every two years) by the end of September.  He then reviewed the changes, noting the emphasis on the DROP entry deadline, IRC language on survivor benefits, broader buy-back provisions (for out-of-state service as a firefighter), change in the benefits limits based on IRC provisions, and an updated Board Member list.


Member Leone made a motion to approve both SPD’s, so that the appropriate document can be issued to plan members by September 30, 2010; Chairman Bastian seconded the motion, which passed unanimously.






1.         Sheila Hutcheson, Professional Services - $3,300.00  (administration fees)

2.         Christiansen & Dehner, Professional Services - $1,427.71, $58.00

                       3.     PNC, quarterly fees - $13,247.21

                          4.     Foster & Foster, actuarial services - $2,057.00

5.     C.S. McKee, quarterly fees, $8,135.31

                          6.     Burgess Chambers, Performance Monitor, quarterly fees - $6,942.85                      

                          7.     Mike Michaud, refund of contribution (terminated, vested member - $14,272.71




Chairman Bastian made a motion to approve the Disbursements, Return of Contributions and Deposits; Member Leone seconded the motion, which passed unanimously.









ADJOURNMENT - The Chairman adjourned the meeting adjourned at 8:37 p.m.


Respectfully Submitted:                                                           Approved:




________________________________                                ___________________________

Sheila Hutcheson, Plan Administrator                          Drew Bastian, Chairman