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Police/Fire Pension Board Meeting May 18, 2010 Page 2 the international portfolio to equal 15% of plan assets. The target allocation going forward is 50% domestic, 15% international and 35% fixed income. The quarter ended March 31, 2010 was a good quarter for domestic equities. The Russell 3000 index was up 5.9% which is the standard for Fund Policy. The growth was concentrated in small and mid cap stocks. The smaller the companies bring higher risk. Investors are gaining confidence in moving money into more risky investments. Bonds did well also. Barclays Capital Intermediate Aggregate (Plan Policy) grew 1.8% for the quarter (annualized would be 7.2%). Bogdahn Group does not foresee that this high growth in bonds can be sustained. Going forward it is expected that bonds will be flat or grow slightly in the short term. Stocks will continue to grow gradually. As stated earlier the plan invests in small and mid range stocks but it also has a strong position in large cap as well. Fortune 500 companies have been lagging the smaller stocks in appreciation, however, they are lean and many are in the best financial position they've been in for some time. Indices indicate that these companies are holding $1.2 billion in cash. As a safe haven for nervous international investors domestic large cap stocks would be attractive. This bodes well for the pension plan. The plan overall grew for the quarter ended March 31, 2010 after fees and expenses $426,883 primarily from capital appreciation. This equated to a 3.66% change for second quarter of fiscal year 2010. It is a little below plan policy of 3.93% and ranks at the 53rd percentile compared to other public pension plans. The plan target is to achieve 8% annual growth each year. Over the last twelve months the plan has appreciated 34.64%. Plan policy based on various indices was 34.64%. The pension plan is at the 35'1' percentile compared to other public pensions. Since plan inception average annual growth is 4.35% and is above plan policy of 3.93%. The domestic portfolio managed by Manning and Napier grew at a rate of 4.60% for the quarter. It underperformed plan policy (5.94%) by 1.34°/x. The international investments exceeded policy by 0.80%. The fixed income portfolio managed by Galliard grew 2.97% for the quarter compared to policy of 1.81%. It should be noted that Galliard grew 14.23% year to date compared to policy of 7.4%, a very good year. Underperformance of the domestic portfolio reflects its repositioning from a more aggressive posture to a more defensive posture. 6. Approval of Expenditure Report In a letter dated May 18, 2010 from Randy Newlon, Finance Director, the following invoices were submitted for Board Approval: • Bogdahn Consulting, LLC. — March 25, 2010 - $2,625.00 • Christiansen & Dehner, P.A — February 28, 2010 - $1,022.55 • Christiansen & Dehner, P.A. — March 31, 2010 - $29.00 • Florida Municipal Insurance Trust — March 26, 2010 - $3,835.98 • Florida Municipal Insurance Trust — March 26, 2010 - $147.46 • Manning & Napier — March 9, 2010 - $6,794.20 Discussion ensued regarding an invoice from Florida Municipal Insurance Trust (FMIT) for liability insurance on a Waiver of Recourse rider. This policy is necessary in case a board member breached their fiduciary responsibility while governing the pension find. This type of insurance cannot be paid out of the pension fund directly, but can be paid by the City.