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R-2• • CITY OF CLERMONT POLICE OFFICERS PENSION BOARD OF TRUSTEES RESOLUTION NO. 2 A RESOLUTION OF THE CITY OF CLERMONT POLICE OFFICERS PENSION BOARD OF TRUSTEES REQUESTING THE CITY COUNCIL OF THE CITY OF CLERMONT, FLORIDA TO ADOPT AN ORDINANCE ESTABLISHING AN INVESTMENT POLICY OF THE CITY OF CLERMONT POLICE OFFICERS PENSION PLAN; PROVIDING FOR CONFLICTING RESOLUTIONS; AND PROVIDING FOR AN EFFECTIVE DATE. WHEREAS, the City Council of the City of Clermont, Florida established a Retirement Plan and Trust for the Police Officers of the City of Clermont pursuant to Ordinance No. 195; and WHEREAS, the Retirement Plan and Trust agreement was executed on December 20, 1960; and WHEREAS, Section 112.661, Florida Statutes, states that investments of the assets of any local retirement system or plan must be consistent with a written investment policy adopted by the Board; and WHEREAS, the City of Clermont Police Officers Pension Plan is a participant in the Florida Municipal Pension Trust Fund(FMPTF) and participation in the Florida Municipal Trust Fund requires adoption of the FMPTF's Investment Policy; and WHEREAS, Section 112.661(4), Florida Statutes, requires continuing education for Board members in matters relating to investments and the Board's responsibilities. NOW, THEREFORE BE IT RESOLVED BY THE CITY OF CLERMONT POLICE OFFICERS PENSION BOARD OF TRUSTEES, THAT: SECTION 1: The City of Clermont Police Officers Pension Board of Trustees, hereby requests the City Council of the City of Clermont to adopt a duly enacted ordinance approving the Investment Policy of the Florida Municipal Pension Trust Fund as the investment policy of the City of Clermont Police Officers Pension Plan. SECTION 2: The City of Clermont Police Officers Pension Board of Trustees hereby acknowledges the importance of continuing education for Board members. All Board members are encouraged and expected to receive continuing education concerning matters related to investments and responsibilities of Board members. • SECTION 3: All resolutions or parts of Resolutions in conflict with this Resolution are hereby repealed. SECTION 4: That this resolution shall be effective retroactive to October 1, 2000. DONE AND RESOLVED BY THE CITY OF CLERMONT POLICE OFFICERS PENSION BOARD OF TRU7STEES HIS 11TH DAY OF JANUARY, 2001. /~ d~` ~ `,,G , ~ zv ~( H MULLINS CHAIRMAN E SCHELLER SECRETARY • FLORIDA MUNICIPAL PENSION TRUST FUND INVESTMENT POLICY Amended and Restated Investment Policy Adopted December 14, 2000 Effective October 1, 2000 AUTHORITY The Master Trust Agreement made as of the 16`h day of December, 1983, and as amended and restated as of the ls` day of October, 2000, by and between all parties who are now or may hereafter become members of the Florida Municipal Pension Trust Fund (FMPTF) and the individuals named as Master Trustees pursuant to Article X of the Master Trust Agreement and their successors (such trustees collectively referred to as the "Master Trustees"). Article IV, Section A of the Master Trust Agreement provides that the Master Trustees have the exclusive authority and discretion to manage and control the assets of the Master Trust held by it according to the provisions herein. II. PURPOSE AND SCOPE The Florida Municipal Pension Trust Fund Master Trustees has established the herein investment policy and portfolio guidelines to assist the Administrator in the administration of the assets of the Master Trust Fund; to guide the investment managers in structuring portfolios consistent with the Master Trust Fund's desired performance results and an acceptable level of risk; and to assure the Master Trust Fund assets are managed in a prudent fashion. The Scope of this policy is: 1) Applicable to all funds, assets and properties under the control of the Master Trustees. 2) Applicable to all consultants, agents, and staff responsible to the Master Trustees. III. INVESTMENT OBJECTIVE AND EXPECTED ANNUAL RATE OF RETURN The primary objective is to seek long-term growth of capital and income consistent with conservation of capital. Necessary liquidity will be maintained to meet payout requirements. Emphasis is placed on achieving consistent returns and avoiding extreme volatility in market value. As of October 1 of each year, the Master Trustees shall determine for the defined benefit plans in the FMPTF the total expected annual rate of return for the current year, for each of the next several years and for the long-term thereafter. The expected annual rate of return for the current year and long-term thereafter is 7.5%, until amended by the Master Trustees. This determination must be filed promptly with the Department of Management Services, the Administrator, Master Trustees, and the Actuary. Specific member plan provisions may supercede this expected rate of return by approval of the Administrator and Plan Actuary. • • IV. DUTIES AND RESPONSIBILITIES Under the direction of the Master Trustees, it shall be the responsibility of the Administrator to supervise and administer the Master Trust Fund's investment program pursuant to a written agreement between the Master Trust Fund and the Administrator including, but not limited to, the following: Supervise and coordinate the activities of qualified investment management firms, dealers, brokers, issuers, custodians, consultants and other investment advisors in keeping with this investment policy. 2. Provide advice and assistance in the administration and operation of the Master Trust Fund's investment program. _ 3. Establish accounting systems and procedures for the safekeeping, disposal of and recording of all investment assets held or controlled by the Master Trust Fund including the establishment of appropriate internal controls as required. 4. Assist in the design, development, operation, review and evaluation of the Master Trust Fund's investment program for compliance with this policy. Advise the Master Trustees as to recommendations relative to amendments to this policy. Inform the Master Trustees of unaddressed concerns with the Master Trust Fund's investment program. 5. Immediately notify the Master Trustees of any event or of any information that may have a severe and adverse effect on the Master Trust Fund's investment program under the provisions of this policy. V. INVESTMENT AND FIDUCIARY STANDARDS The standard of prudence to be used by investment advisors, money managers or other qualified pazties or individuals with contracted investment responsibilities with the Master Trust Fund (the "Managers") shall be by "prudent person" which provides that the investments of the Master Trust Fund shall be made with the judgment and caze under the circumstances then prevailing which persons of prudence, discretion and intelligence exercise in the management of their own affairs, not in regazd to speculation but in regard to the permanent disposition of the invested Master Trust Funds considering the probable income, total return and probable safety of these Master Trust Funds. Managers shall adhere to the fiduciary standazds set forth in the Employee Retirement Income Security Act of 1974 at 29 U.S.C. s. 1104(a)(1)(A) through (C). Individuals, acting in accordance with established procedures and exercising due diligence, shall be relieved of personal responsibility for an individual security's credit risk or market price changes, provided deviations from expectations are reported in a timely fashion and appropriate action is taken to minimize any investment losses. Any individual who is involved in the investment process shall refrain from personal business activity that could_ conflict with proper execution of the investment program,--or which could impair their ability to make impartial investment decisions. Managers shall have a written policy Paec 2of I~ • • which addresses the disclosure of potential conflict-of-interests which shall be submitted to the Administrator upon request. Managers shall also disclose to the Administrator any material financiaVinvestment position or finding which may be contrary to this policy or otherwise related 'to the performance of the Master Trust Fund's portfolio. Any adverse findings of the U.S. Department of Labor or the Securities and Exchange Commission regarding a Manager or its financial activities shall be brought to the immediate attention of the Master Trustees by the Administrator once the Administrator is notified. Before engaging in any investment transactions with the Master Trust Fund, a Manager shall have submitted to the Administrator a signed certification from a duly authorized representative attesting that the individuals responsible for the Master Trust Fund's account have reviewed and shall comply with this investment policy and that they agree to undertake reasonable efforts to preclude imprudent transactions involving the funds of the Master Trust Fund. VI. INTERNAL CONTROLS The Master Trustees require that the Administrator and any other designees establish a system of internal controls which shall be in writing. These controls shall be reviewed by independent certified public accountants as part of any required periodic financial audit periodically required. The internal controls should be designed to prevent losses of Master Trust Funds which might arise from fraud, error, misrepresentation by third parties, or imprudent actions by the Master Trustees, Administrator or other designees VII. BROKERAGE AND BID REQUIREMENT Investment managers shall use their best efforts to ensure that portfolio transactions aze placed on a best execution basis. The Master Trustees intend to utilize recapture commissions when it does not interfere with best execution, solely at the discretion of the investment managers. Managers aze required to, on a quarterly basis, report all brokerage transactions and reasons for using brokers to the Master Trustees. The Investment Managers shall competitively bid securities in question when feasible and appropriate. Except as otherwise required by law, the most economically advantageous bid must be selected. VIII. PROXY VOTING Responsibility for the voting of proxies shall be with the Master Trustees. The Master Trustees may exercise the right to assign this responsibility to the investment managers. Since proxy votes may be considered an asset of the Master Trust Fund, the assignment of voting proxies shall be exercised solely in the interest of the participants and beneficiaries of the Master Trust Fund, and for the exclusive purpose of providing benefits to participants and beneficiaries. Documentation related to the handling and voting of proxies will be reported to the Master Trustees on a quarterly basis. IX. CONTINUING EDUCATION The FMPTF acknowledges the importance of continuing education for Master Trustees. To that end, the Master Trustees shall attend appropriate educational conferences in connection with their duties and responsibilities as Master Trustees. • C~ X. REPORTING AND PERFORMANCE MEASUREMENT The Administrator shall submit to the Master Trustees a quarterly investment report with information sufficient to provide for a comprehensive review of investment activity and performance for the quarter. Performance shall be measured against appropriate indices identified by the Master Trustees for each investment category. This report shall summarize recent market conditions, economic developments and anticipated investment conditions. The report should also summarize the investment strategies employed in the most recent quarter, and describe the portfolio in terms of investment securities, maturities, risk characteristics, adherence to guidelines and other relevant features. Managers shall provide timely transaction and performance data to record and document investment activity including asset valuation, yield and total return data and such other relative performance data of the Master Trust Fund's portfolio on a periodic basis as may be reasonably requested by the Administrator. The Administrator, Managers, and other contracted parties shall provide to the Master Trust Fund's Auditor such verifications or reports as are required for the purpose of developing and supporting the annual financial statements of the Master Trust Fund, and the footnotes thereto. Managers shall provide immediate written and telephone notice to the Administrator to the Master Trust Fund of any significant event, specifically but not limited to the resignation, termination or incapacity of any senior personnel. XI RISK AND DIVERSIFICATION The Boazd will monitor the return per unit of risk (as measured by the standard deviation of quarterly returns) of the Master Trust Fund's assets on an ongoing basis, with each Manager's contribution being reviewed independently and as to its impact on the overall Master Trust Fund's investment return and volatility of results over time. Each manager's contribution will be measured against similaz data for appropriate benchmazks. Investment guidelines and monitoring will provide controls for identifying and limiting risk of loss from over concentration of assets invested in a specific maturity, with a single issuer, in like instruments, or dealers or through utilization of intermediaries for purchase and sale of investments. Risk and diversification strategies shall be reviewed and revised, if necessary, on a regular basis in light of the current and projected market condition and the Master Trust Fund's needs. Assets in the Master Trust Fund shall be diversified among equities, fixed income, and real estate to minimize overall portfolio risk consistent with the level of expected return and thereby improve the long-term return potential of the Master Trust Fund's assets. The Master Trustees reserve the right to add additional diversification by retaining multiple managers or portfolios, upon Master Trustee approval and amendment to this Policy, to further minimize portfolio risk or to maintain the level of expected return. i~:,~.• nor in • • Investment managers shall be selected to fulfill a particular diversifying role within the Master Trust Fund's overall investment structure. It is the express intent of the Master Trustees to grant each investment manager substantial discretion over the assets under its control. XII. ASSET ALLOCATION AND PORTFOLIO COMPOSITION Assets of the Master Trust Fund shall be invested in a diversified portfolio consisting of equity and debt. Although cash is not included in-the asset allocation of the Master Trust Fund, surplus cash flows, additional contributions and investment manager cash will be utilized to pay obligations of the Master Trust Fund and periodic re-balancing of the assets. The Master Trust Fund may consider investments in other asset classes which offer potential enhancement to total return at risks no greater than the exposure under the initially selected asset classes. From time to time the Master Trustees will adopt asset allocation strategies within the ranges specified below: Equities Maximum Limitation 70% at market The Master Trustees may employ an independent consultant to perform an annual, or more frequent, Asset Allocation Report that will include, but not be limited to, a strategic analysis and report on asset allocation investments between different types of investments and appropriate changes to the percentages therein. This study will be used to assist the Master Trustees in the determination of the appropriate investment allocation to maximize the return and minimize the risk to the pooled assets of the Master Trust Fund. This study may include a recommendation to add or delete asset classes as is warranted by the risk/reward analysis and by Master Trustee approval. The Master Trustees are not bound by acceptance or denial of recommendations presented in conjunction with the Asset Allocation Report. . It is not the intention of the Master Trust Fund to become involved in the day-to-day investment decisions. Therefore, the investment managers are authorized by this document to make asset allocation decisions to reallocate or redirect either contributions or the investments held by the Master Trust Fund in order to take advantage of changing market conditions. Any tactical allocation that will cause the allocation of the investment classes to vary from the approved strategic allocation percentages of any asset class by more than 5% requires approval by the Master Trust Fund Chairman. The investment managers will report to the Master Trustees at their quarterly meetings on the tactical and re-balancing allocation decisions made during the prior quarter. • • XIII. MATURITY AND LIQUIDITY The Master Trust Fund shall provide sufficient liquidity to meet any required payment. XIV. AUTHORIZED INVESTMENTS In an effort to accomplish the objectives of the Master Trust Fund, this policy identifies various authorized investment instruments, issuer diversification, maturity constraints, investment ratings and liquidity parameters. The following are authorized investments: A. Repurchase Agreements which are purchased only from dealers authorized by the Master Trustees and may only involve the sale and repurchase of securities authorized for purchase by this investment policy. Maximum maturity at purchase shall not exceed 180 days with a total average maturity, at any point in time, for all repurchase agreements held of not greater than 60 days. B. Direct obligations of the United States Treasury including Bills, Notes, Bonds and various forms of Treasury zero-coupon securities. C. Any authorized investments purchased by or through the State Board of Administration or the Office of the State Treasurer and held on behalf of the Trust in a commingled pool or separate account. D. Commercial paper issued in the United States by any corporation, provided that such instrument carries a rating of "AUDI" (or comparable rating) as provided by two of the top nationally recognized statistical rating organization; and that the corporation's long term debt, if any, is rated at least "AUA+" by a nationally recognized statistical rating organization or, if backed by a letter of credit (LOC), the long term debt of the LOC provider must be rated at least "AA" (or a comparable rating) by at least two of the nationally recognized statistical rating agencies publishing ratings for financial institutions. The maximum maturity shall not exceed 270 days from the time of purchase. E. Banker's Acceptances issued within the U.S. by institutions with a long term debt rating of at least "AA" or short term debt rating of Pl (or comparable ratings), as provided by one nationally recognized statistical rating organization. Exceptions to the above may be approved by the Administrator from time to time and reported to the Board of Trustees. The invested account of a Manager may own no more than five percent of the portfolio in banker's acceptances issued by any one depository institution at one time. Maximum maturity shall not exceed 270 days from the time of purchase. F. Nonnegotiable Certificates of Deposit issued by Fiorida Qualified Public Depositories as identified by the State Treasurer's offtce /or negotiable Certificates of Deposit issued in U.S. dollars by institutions, provided such institution carries a short term rating of at least "A1/PI" (or comparable rating) and a long term rating of a least "A" (or comparable rating) as provided by two of the top nationally recognized rating agencies. The invested account of a Manager may own no more than $5,000,000 in certificates.of any one depository institution at one time. Maximum maturity on any certificate shall be 2 years. r~a~~ car ~ n • • G. Obligations of the agencies or instrumentalities of the Federal Government including but not limited to the Federal Home Loan Mortgage Corporation, Federal National Mortgage Association, Federal Home Loan Banks, Federal Farm Credit Banks, Student Loan Marketing Association, and the Resolution Master Trust Funding Corporation. H. Money Market Mutual Master Trust Funds as defined and regulated by the Securities Exchange Commission. Money Market Master Trust Funds will be limited to monies held by trustees, paying agents, safekeeping agents, etc., as a temporary investment to facilitate relationships as delineated above. I. Mortgage obligations guaranteed by the United States Government and sponsored agencies or instrumentalities including but not limited to the Government National Mortgage Association, the Federal National Mortgage Association, and the Federal Home Loan Mortgage Corporation. Mortgage-backed securities, including mortgage-pass through securities and Collateralized Mortgage Obligations (CMO) issued, guaranteed or backed by an agency or instrumentality of the Federal Government or other mortgage securities including CMOs rated AAA or equivalent by a nationally recognized statistical rating organization. Derivative mortgage securities, such as interest only, principal only, residuals and inverse floaters are prohibited. J. Corporate Fixed Income Securities issued by any corporation in the United States with any A rating. A Manager may hold no more than 5 percent of the invested account in any one corporation at the time of purchase. K. Asset-Backed Securities issued in the United States. L Securities of State, Municipal and County Governments or their public agencies, which are rated in the three highest rating categories by a national recognized statistical rating organization. M. Commingled governmental investment trusts, no-load investment Master Trust Funds, or no-load mutual Master Trust Funds in which all securities held by the trusts or Master Trust Funds are authorized investments as provided herein or as may be approved by the Master Trustees. N. Guaranteed Investment Contracts (GIC's) with insurance companies rated in the highest category by AM Best Rating System or a comparable nationally recognized statistical rating organization. O. Investment Agreements with other financial institutions. If collateralized, the collateral securing the investment agreement shall be limited to those securities authorized for purchase by this investment policy. The invested account of a Manager may own, at one time, no more than $10,000,000 in investment agreements from any one financial institution. P. Equity Assets including common stock, preferred stock and interest bearing obligations having an option to convert into common stock. Q. Securities lending with approved dealers and custodians. R. Florida Municipal Investment Trust (FMIvT) Portfolios. • • XV. VALUATION OF ILLIQUID INVESTMENTS If illiquid investments for which a generally recognized market is not available or for which there is no consistent or generally accepted pricing mechanism, the criteria set forth in Section 215.47(6), Florida Statutes, shall apply, except that submission to an Investment Advisory Council is not required. For each plan year (defined benefit plans only) the Master Trustees must verify the determination of the fair market value for those investments and ascertain that the determination complies with all applicable state and federal requirements. The Master Trustees shall disclose to the Department of Management Services and the Administrator each such investment for which the fair market value is not provided. XVI. MASTER REPURCHASE AGREEMENTS All approved institutions and dealers transacting repurchase agreements shall execute and perform as stated in a Master Repurchase Agreement. All repurchase agreement transactions shall adhere to the requirements of the Master Repurchase Agreement. This provision does not restrict or limit the terms of any such Master Repurchase Agreement. XVII. PLAN CUSTODIAN A third party custodian shall hold all actively managed or non-indexed assets of the Master Trust Fund. The plan custodian will operate in accordance with a separate agreement with the Master Trustees. All securities shall be held with a third party, and all securities purchased by, and all collateral obtained by the Master Trustee shall be properly designated as an asset of the Master Trustee. No withdrawal of securities, in whole or in part, shall be made from safekeeping except by an authorized member of the Master Trustee or Master Trustee's designee. Securities transactions between abroker-dealer and the custodian involving purchase or sale of securities by transfer of money or securities must be made on a "delivery vs. payment" basis, if applicable, to ensure that the custodian will have the security or money, as appropriate, in hand at the conclusion of the transaction. XVIII. CRITERIA FOR INVESTMENT MANAGER REVIEW The Master Trustees wishes to adopt standards by which ongoing retention of an investment manager should be determined. With this in mind, the following guidelines are adopted: If, at any time, any one of the following is breached, the Manager will be notified of the Master Trustees' serious concern for the Fund's continued safety and performance and that manager termination could occur. t. Consistent performance below the fiftieth (50`'') percentile in the specified universe over rolling three-year periods. 2. Consistent under-performance of the stated target index over rolling three-year periods. E~:,~~ sor to • • 3. Loss by the manager of any senior personnel deemed detrimental to the manager's ability to perform required duties. 4. Substantial change in basic investment philosophy by the manager. 5. Substantial change of ownership of the firm deemed detrimental to the manager's ability to perform required duties. 6. Failure to attain at least afifty-one (51%) percent vote of the confidence of the Master Trustees. 7. Failure to observe any guidelines as stated in this document. This shall in no way limit or diminish the Master Trustees' right to terminate the manager at any time for any reason. Investment Management Agreements will be entered into between the Master Trustees and each Investment Management Firm. The agreements will include such items as Fiduciary Standards, notice requirements, duties and responsibilities and specific investment guidelines f6r the management of the Master Trust Fund and will be subject to the prior review and approval of an attorney for the Master Trustees. All investment managers must be duly registered with the appropriate government agencies to act in the capacity of investment manager on behalf of the Master Trustees. Any investment manager appointed shall promptly notify the Master Trustees in the event any circumstance arises that may result in its failing to continue to meet the requirements stipulated by the respective government agencies. Investment manager's performance will be evaluated with the assistance of performance measurement consultants on an on-going basis and will be a primary criteria for their retention. XIX. REVIEW AND AMENDMENTS It is intended that the investment managers, consultants, administrator, and Master Trustees review this document periodically. If at any time a manager or consultant believes that the specific objectives defined herein cannot be met or that the guidelines unreasonably constrict performance, the Master Trustees shall be notified in writing. By the initial and continuing acceptance of these investment guidelines, the investment manager concurs with the provisions of this document. XX. FILING OF INVESTMENT POLICY Upon adoption by the Master Trustees, the Investment Policy herein shall be promptly filed with the Department of Management Services, the participants in the FMPTF and the plan actuary. The effective date of this Investment Policy, and any amendment hereto, shall be the 31St calendar day following the filing date with the plan sponsor. • • XXI. EFFECTIVE DATE The Master Trust Fund's Investment Policy shall become effective October 1, 2000. As adopted by the Master Trustees on j `1 day of ~ C~ev,b~, 2000 Gj a~ e . ~aaT. y.._~ Chairman Florida Municipal Pension Trust Fund Master Trustees >~ecutive Director, Florida League of Cities, For the Administrator r~.3~~ io~r io