LANTANA FIREFIGHTERS PENSION FUND MINUTES OF MEETING HELD August 10, 2018

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1 LANTANA FIREFIGHTERS PENSION FUND MINUTES OF MEETING HELD August 10, 2018 A regular meeting of the Board of Trustees was called to order by Mike Bergeron at 9:01 A.M., which meeting was held at th Place North, West Palm Beach, Florida. Those persons present were: TRUSTEES Mike Bergeron John Sluth Michael McCurdy Fred Angelo (9:03 A.M.) OTHERS Margie Adcock, Administrative Manager Mark Floyd, Fund Counsel John Thinnes, Investment Monitor PUBLIC COMMENTS There were no public comments. MINUTES The minutes for the meeting of May 11, 2018 were reviewed. A motion was made, seconded, and carried 3-0 to accept the minutes for the meeting of May 11, INVESTMENT MONITOR REPORT John Thinnes appeared before the Board. He reviewed the investment performance for the quarter ending June 30, He reviewed the market environment. He stated that emerging markets was down 8% for the quarter. He stated that the issue with trade has caused concern. The Fed increased rates in the quarter. He thinks there will probably be another one or two increases this year and three next year. Fred Angelo entered the meeting. The total market value of the Fund as of June 30, 2018 was $42,742,390. The asset allocation as of June 30, 2018 was 48.5% in domestic equities; 9.8% in international equities; 21.6% in domestic fixed income; 4.3% in global fixed income; 6.0% in real estate; 9.5% in real return; and.4% in cash. Mr. Thinnes reported on the investment performance for the Fund for the quarter ending June 30, The total Fund was up 1.48% net of investment fees while the benchmark was up 1.72% gross of fees. Total equities were up 3.01% while the benchmark was up 3.22%. Domestic equities were up 4.28% while the benchmark was up 4.40%. International was down 2.82% while the benchmark was down 2.61%. Total domestic fixed income was up.25% while the benchmark was down.16%. Total global fixed income was down 2.54% while the benchmark was down 3.35%. Total real estate was up 1.77% while the benchmark was up 2.10%. Total real return was down 2.37% while the benchmark was up.61%.

2 2 Mr. Thinnes reviewed the returns for each manager. He noted that MD Sass was terminated during the quarter. He stated that this was the right decision as there had been a lot of turmoil there. He noted that MD Sass fired their main analyst, which was the reason for their main underperformance. Mr. Thinnes advised that Dodge & Cox and Vanguard Equity Income were added during the quarter. Wells Fargo Premier LCG was up 6.45% for the quarter and the Russell 1000 Growth was up 5.76%. Eaton Vance was up 3.72% for the quarter, and the Russell 2500 was up 5.71%. Euro Pacific was down 2.82% and the benchmark was down 2.61%. Integrity was down.07% while the benchmark was down.16%. Garcia Hamilton was up.55% while the benchmark was down.16%. The Templeton Global Bond Fund was down 2.54% while the benchmark was down 3.35%. Mr. Thinnes stated that they were watching Templeton closely. They do not have any recommendations at this time, but have their eye on them. UBS was up 1.77% and the NCREIF was up 2.10%. PIMCO All Asset was down 2.37% while the benchmark was up.61%. Mr. Thinnes stated that this was a tough quarter for PIMCO All Asset. They had no US exposure but were overweight in emerging markets. With emerging markets being down 8%, that really affected their performance. Their longer term numbers are good and they are a good diversifier from US fixed income. There was discussion on domestic fixed income. It was noted that the current allocation was at 21.6%. The Board was concerned as they know that fixed income is going to continue to not perform well, especially with the Fed raising rates. There was discussion on possibly moving some money to small cap. Mr. Thinnes stated that the target for domestic fixed income is 25% so the allocation is on the low side already. He stated that the real estate target is 5%, but most plans are at 10%. Increasing the allocation to real estate would be a way to reduce fixed income. Mr. Thinnes stated that he would be comfortable with adding 5% to domestic equities. Mr. Thinnes presented a real estate manager analysis as of December 31, The candidates included: American Realty Advisors; Intercontinental Real Estate Corporation; PGIM Real Estate; and Principal Real Estate Investors. There was discussion on the queue to get into each manager. It was noted that American Realty s queue was 3-8 quarters. Mr. Thinnes stated that he has since talked to them and they have some purchases and it probably will not take that long. The Board stated that the queue was too long to wait, even if it is a bit shorter than they originally projected. The queue for Intercontinental is about one quarter. There is no queue for PGIM and a queue of about 3-4 quarters for Principal. There was further discussion about adding more money to small cap. Mr. Thinnes stated that adding more to small cap would be okay but he still wanted to get real estate to 10%. There was a lengthy discussion. A motion was made, seconded and carried 4-0 to follow the recommendation of the Investment Monitor and reduce the target to fixed income by 10% by adding 5% to real estate and 5% to domestic equity. Mr. Thinnes stated that he would bring a revised Investment Policy Statement to the next meeting setting out the changes. Mr. Thinnes stated that he would bring a small cap manager search to the next meeting. Mr. Thinnes stated that he would contact American and Intercontinental regarding their queues and provide an update at the end of the meeting.

3 3 ATTORNEY REPORT Mr. Floyd reported that there were two Trustees who ran into issues with their Form 1 filings. The first was Tim Daley who was only at one meeting. It was determined that he could not sit on the Board due to a dual office holding issue. He was approved by the Town so they reported his position to the Supervisor of Elections. Notices for failure to file a Form 1 were sent to the Town but were not forwarded on to Mr. Daley or to the Administrator. The first notice that was received from the Town was six months past the time frame. Mr. Floyd stated that Mr. Daley attempted to file an appeal but it was considered untimely as he was already in default. Yesterday a Default Final Order was received. Mr. Floyd stated that the options now are to appeal to circuit court or pay the fine. He stated that it will cost more than the $1,500 fine that is imposed to file an appeal with the circuit court, so paying the fine would be the more economical way to go. Mr. Floyd stated that it is proper to expend Fund assets to cover liabilities. He stated that is not the case in the private sector, but there are no restrictions in the public sector. He noted that if the fine is paid, there are no lasting consequences. It is a civil matter, not a criminal mater. There would be no lasting impact on his employment or pension. Mr. Floyd noted that this would normally be covered under the flat fee retainer, but these are individual issues. There was a lengthy discussion. The Board felt the Town was at fault here in not forwarding the first two notices. Further, Mr. Daley could not even serve as a Trustee due to the dual office holding issue. Apparently the notice did not identify the pension plan Mr. Daley was with, but there was clearly no effort made by the Town to even try to determine how the notice related to the Town. The Interlocal Agreement provides that the Town will not cause any costs to the Fund. Mr. Floyd stated that it is hard for him to recommend appealing the matter because of the cost. A motion was made and seconded to pay the $1,500 fine and send a letter to the Town based on the Interlocal Agreement to recoup the money. There was discussion on the motion and on the need to verify whether the Plan could pay for the fine. The motion was amended to add that that if the Plan cannot pay the fine, to proceed in circuit court. Mr. Floyd stated that the second Trustee that ran into an issue with their Form 1 filing was Dan Beesley. Mr. Beesley stated that he hand delivered the Form to the Supervisor of Elections. He has responded to the notice with an Affidavit stating that he hand delivered the Form. He has not heard back yet from the Ethics Commission. Mr. Floyd provided an update on the status of the proposed Ordinance. He stated that the County pulled the Ordinance because they said it has to be negotiated. He reported that they have negotiations next week on August 15 and 22. He stated that they will see at that time if the parties will tentatively agree to the Ordinance so things can move forward. ADMINISTRATIVE REPORT Ms. Adcock presented the disbursements to be made. A motion was made, seconded, and carried 4-0 to approve the disbursements as listed. There was discussion on the per diem rate. It was noted that the current per diem is $50 a day. The Board felt that was not a reasonable amount any more. Mr. Floyd stated that a municipality and a municipal pension fund could establish their own procedures. For a special district or county, they must follow county policy. In this situation, the Plan is a

4 4 municipal pension fund so it could be argued that the Board can establish its own policy. A motion was made, seconded and carried 4-0 to raise the per diem rate to $100 a day effective November 1, The Board was presented with a letter from Robert Cole, CPA, regarding accounting services. Mr. Bergeron stated that Mr. Cole contacted him regarding the matter. In looking back through the minutes, it was noted that in 2009 the Board authorized Steve Gordon to engage an accountant to do the financials. Since that time, everyone thought that Mr. Gordon had included the cost of the accountant in his audit engagement since the Fund never received a separate invoice. However, this year it was realized that Mr. Cole was sending an annual invoice to the Resource Centers, which invoices have been paid by the Resource Centers. It was believed that these invoices were part of a separate arrangement that the Resource Centers had with Robert Cole in doing accounting work for their company. Mr. Bergeron stated that according to Mr. Cole, he is not a big firm and did not know the invoices were not being passed along to the Fund. He is asking to be reimbursed for the work he performed for the Fund. There was a lengthy discussion. Mr. Sluth stated that he felt that matter was totally ridiculous and was not in favor of paying the invoice that included work back to He felt it was not the error of the Board and he was not going to authorize payment. Mr. Bergeron stated that the minutes from 2009 did reflect that the Board approved Mr. Gordon engaging an accountant for the Fund s audit and noted that the work was performed. A motion was made and seconded to not pay the requested amount from Robert Cole. The motion failed 2-2 with Mr. Bergeron and Mr. McCurdy opposing the motion. There was further discussion. Mr. Floyd noted that Mr. Gordon had stated in 2009 that he could get someone to do the accounting work for $800 or less. Mr. Gordon was able to get Robert Cole to do the accounting at $700 a year. The matter never came back before the Board. He stated that when the fee exceeded $700 the matter should have come back before the Board. The Board did approve the engagement and expected to incur that cost. The Board received the services. If Mr. Cole was to sue the Board, it would not be covered under the flat fee arrangement. He stated that it would cost more to litigate the matter. There was discussion on the need to do a request for proposal for accounting services for the next audit. It was noted that Robert Cole has always done a good job with the accounting and he is familiar with the Fund. The Board would like him to continue to do the accounting. It was noted that his most recent fee was $1,000. A motion was made, seconded and carried 3-1 to pay Robert Cole the annual accounting fee not to exceed $700 a year for a total of $6,300 and enter into an engagement for accounting services for the next three years at a cost not to exceed $1,000 per year. Mr. Sluth opposed the motion. The Board was presented with the engagement letter for the audit for the fiscal year ending September 30, Mr. Bergeron expressed his concern on the timeliness of the Audit, noting he has had an issue in some other funds.. He did note that he has not had a big issue with this Fund as Maribel does most all of the work for this Plan. A motion was made, seconded and carried 4-0 to approve the engagement letter for the audit for the fiscal year ending September 30, 2018 and authorize the Chair to execute the letter.

5 5 Ms. Adcock presented a draft administrative expense budget for fiscal year 2019 that is required by Section (8)(a)2, Florida Statutes. The Board reviewed the draft budget. There was a lengthy discussion. A motion was made, seconded and carried 4-0 to adopt the administrative expense budget as amended and provide the budget to the City in compliance with Section (8)(a)2, Florida Statutes. Ms. Adcock stated that the quarterly Share Account Statements for the quarters ending December 31, 2017; March 31, 2018; and June 30, 2018 have been processed and provided to the Participants. She provided the Board with a spreadsheet of the Share Account balances. Ms. Adcock stated that the Authorized Signer List with the Custodian needed to be updated. The Board executed an updated Authorized Signer List. It was noted that the term for the 5 th Trustee had expired. A motion was made, seconded and passed 3-0 to reappoint Mike Bergeron for the position of the 5 th Trustee for another term which will expire on August 1, OTHER BUSINESS There was discussion on Trustee attendance. It was noted that Mr. Schainuck was not in attendance again. The Board felt that meeting attendance was extremely important. Meeting dates are known at least three months in advance and attendance is necessary to conduct business. Additionally, since he is the Secretary, he is needed for signatures on Board documents. There was discussion on appointing a new Secretary. A motion was made, seconded and carried 3-0 to appoint Fred Angelo as the Secretary for the Board. Mr. Thinnes discussed the possible real estate managers. He stated that it would take one year to get fully invested with American Realty. The Fund could be fully invested with Intercontinental by the end of the year. There was a lengthy discussion. A motion was made, seconded and carried 4-0 to engage Intercontinental as the real estate manager. Mr. Thinnes stated that he would contact Intercontinental and provide the information to Mr. Floyd to negotiate an agreement. There being no further business. A motion was made, seconded and passed 4-0 to adjourn the meeting. Respectfully submitted, Fred Angelo, Secretary