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Home My WebLink AboutMinutes - 01/08/2013 - Police Pension BoardBoard of Trustees of the McHenry Police Pension Board 3:30 PM, Tuesday, January 8, 2013 Aldermen's Conference Room 1. Call to Order A meeting of the City of McHenry Police Pension Board of Trustees was called to order at 3:40 PM by President Jeffrey Foerster. 2. Roll Call Other board members present: Jon Meyer, and Robert Roske. Absent: Ormel Prust and Daniel Kreassig. Others present: Gary Karshna, Capital Gains, Inc.; Jim Schmidt, LPL Financial; Carolyn Lynch, Finance & Accounting Manager; and recording secretary Marci Geraghty. �- 3. Public Input None. 4. Reading and Consideration of Minutes Prust made a motion, seconded by Roske to approve meeting minutes from October 9, 2012 as presented and to hold them for audit. Ayes: Meyer, Foerster, Roske Absent: Kreassig, Prust Abstain: None Motion carried 5. Treasurer Report Ms. Lynch presented the Treasurer Report for the period ending December 31, 2012. Full market value of cash and investments was $17,997,783.97, which is a decrease of $10,067.12 from the last quarter. Property tax receipts collected as of December 31" were $1,199,655. Motion by Officer Roske, seconded by Mr. Meyer to approve the Treasurer Report for the period ending December 31, 2012 as presented and to hold it for audit. Ayes: Meyer, Foerster, Roske Absent: Kreassig, Prust Abstain: None Motion carried 6. Fixed Assets Investment Report Capital Gains, Inc.: Gary Karshna presented the fixed assets report for the period ending November 30, 2012. Interest rates for bonds are extremely low by historic standards. The Fed is keeping percentage rates low to help the economy. He adding interest rates may increase after the General Election. The portfolio continues to outperform the benchmark Barclays Intermediate Government Bond Index by a significant margin. The Barclays Intermediate Government Bond Index produced a 1.38% rate of return fiscal year-to-date compared to the McHenry Police Pension Fund portfolio, which produced a 2.32% return. Thirty-nine percent of the fund is invested in shorter -term taxable municipal positions, 33% in corporate notes, 14% in GNMA's, with the balance invested in a combination of Treasury inflation protected securities and money market instruments. 7. Equities Investment Report LPL Financial: Jim Schmidt of LPL Financial presented the equities report for the period ending December 31, 2012. Value of the fund for the period was $8,396,851.40. Mr. Schmidt noted in the current economic market, stocks are supporting the pension fund portfolio. The Ivy Asset Strategy Fund had been lagging however it performed well this past quarter and the trend is expected to continue; international funds also performed well. Mr. Schmidt presented a Portfolio Performance Summary from 12/30/11 through 12/31/12. Total Market value in December 2011 was $6,794,389.71 compared to the total market value as of December 2012 at $8,396,851.40; a 16.75% increase. The fund's equity investments continue to outperform the S&P 500. 8. Semi-annual Review of Investment Policy/Proposed Update to Investment Policy Mr. Foerster thanked Mr. Karshna for providing the board with a draft update to the Investment Policy. The current policy was updated in 2001 and since that time, several changes have been made to state regulations. Notable amendments to the current policy include: • The Pension Fund may now invest in corporate securities; • With assets in excess of $2.5M, the fund may invest up to 45% of total assets in separate accounts managed by life insurance companies; mutual funds (with conditions); • With assets in excess of $5M, the fund may invest up to 45% in aggregate market value of the total portfolio through an appointed investment advisor in domestic common and preferred stocks (with conditions); • With net assets of at least $10M with an appointed investment advisor, the fund may invest an additional portion of its assets in common and preferred stocks and mutual funds (with conditions); and • The fund's total investment in items authorized shall not exceed 50% effective 7/2011 and 55% effective 7/2012, of the market value of the pension fund's net present assets stated in most recent DOI annual report. Mr. Meyer suggested and the board agreed to specifically include Standard & Poor's and Moody's Investors Service under INVESTMENT INSTRUMENTS, Sec. 9, Page 3, as follows: 1) Corporate bonds which meet the following requirements: a) Rated as investment grade by one of the two largest credit rating services — Standard & Poor's and Moody's Investors Service - at the time of purchase. b) if securities are downgraded by both Standard & Poor's and Moody's Investors Service, subsequent to purchase, below investment grade, they must be liquidated within 90 days of the downgrade. Mr. Karshna reported a new ruling has been proposed that will allow pension funds to invest 65% of total assets in equities. If passed, the policy will have to be amended. -2- Answering Mr. Meyer's questions, Mr. Foerster said internal controls and an independent audit of the fund are performed annually as required in the proposed investment policy; two signatures are required on all checks issued by the city and pension fund; and, CD's are collateralized. Meyer made a motion, seconded by Officer Roske to approve the updated City of McHenry Police Pension Fund Investment Policy and to bring the amended document back to the Pension Board of Trustees for execution at the April meeting. Mr. Foerster called for a voice vote: Meyer: aye Roske: aye Foerster: aye Kreassig: absent Prust: absent Motion passed 3-0 with 2 absent. 9. Annual Pension Increases Officer Roske made a motion, seconded by Mr. Meyer to approve the annual pension increases as presented. Mr. Foerster called for a voice vote: Meyer: aye Roske: aye Foerster: aye Kreassig: absent Prust: absent Motion passed 3-0 with 2 absent. 10. Request for Refund of Contributions Mr. Meyer made a motion, seconded by Officer Roske to approve the request made by former McHenry Police Officer Dale J. Hojnacki for return of all contributions made to the Police Pension Fund totaling $63,043.41. Mr. Foerster called for a voice vote: Meyer: aye Roske: aye Foerster: aye Kreassig: absent Prust: absent Motion passed 3-0 with 2 absent. 11. Annual Review of Disability Pensions for Daniel King and David Porter Officer Roske made a motion, seconded by Mr. Meyer to accept the annual independent medical examinations and authorize the continuation of duty disability pensions for Daniel King and David Porter. President Foerster called for a voice vote. Meyer: aye Roske: aye Foerster: aye Kreassig: absent Prust: absent Motion passed 3-0 with 2 absent. 12. Bills for Approval Officer Roske made a motion, seconded by Mr. Meyer to approve payment of the following bills: $5,049, Capital Gains, Inc. quarterly fees; NIU Outreach Public Pension Trustee Training registration for February 27"' 8-hour ethics training for Trustees Prust, Foerster, and Roske @$125 each; and $190 -3- reimbursement to Trustee Meyer for January 2013, 8-hour online ethics training through NIU Outreach. Mr. Foerster called for a voice vote: Meyer: aye Roske: aye Foerster: aye Kreassig: absent Prust: absent Motion passed 3-0 with 2 absent. 13. Adjournment Mr. Meyer made a motion, seconded by Officer Roske to adjourn the meeting. Ayes: Meyer, Foerster, Roske Absent: Kreassig, Prust Abstain: None Motion carried; the meeting was adjourned at 4:30 PM. The next meeting of the Police Pension Fund Board of Trustees is April 9, 2013. Respectfully submitted, Marci Geraghty, Recqrding ecretary -4-