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General Employees Trust Fund Investment PolicyVillage of North Palm Beach GENERAL EMPLOYEES' TRUST FUND Investment Policy Statement I. PURPOSE OF INVESTMENT POLICY STATEMENT The Pension Board of Trustees, as named fiduciaries maintains that an important determinant of future investment returns is the expression and periodic review of the Fund's investment objectives. To that end, the Trustees have adopted this statement of Investment Policy and direct that it apply to all assets under their control. In fulfilling their fiduciary responsibility, the Trustees recognize that the retirement system is an essential vehicle for providing income benefits to retired participants or their beneficiaries. The Board also recognizes that the obligations of the Fund are long -term and that investment policy should be made with a view toward performance and return over a number of years. The general investment objective, then, is to obtain a reasonable total rate of return - defined as interest and dividend income plus realized and unrealized capital gains or losses - commensurate with the Prudent Investor Rule and any other applicable statute. Reasonable consistency of return and protection of assets against the inroads of inflation are paramount. However, the volatility of interest rates and securities markets make it necessary to judge results within the context of several years rather than over short periods of two years or less. The Pension Board of Trustees will employ professional Investment Management firms to invest the assets of the fund. Within the parameters allowed in schedule A of this IPS, the Investment Managers have full discretion, including security selection, sector weightings and investment style. The Trustees, in performing their investment duties shall comply with the fiduciary standards set forth in Employee Retirement Income Security Act of 1974 (ERISA) at 29 U.S.C. s. 1104(a) (1) (A) — (C). In case of conflict with other provisions of law authorizing investments, the investment and fiduciary standards set forth in this section shall prevail. II. TARGET ALLOCATIONS In order to provide for a diversified portfolio, the Board has engaged Investment Management firm(s), with target investment allocations as provided for on Schedule A, attached hereto. The manager(s) is solely responsible for the assets and allocation of their mandate only and shall abide by any subordinate investment policy assigned to the manager attached hereto. Village of North Palm Beach General Employees' Retirement Trust Fund - I - III. INVESTMENT PERFORMANCE OBJECTIVES The following performance measures will be used as objective criteria for evaluating effectiveness of the investment managers. A. Total Fund Performance 1. The performance of the Total Fund will be measured for rolling three and five year periods. These periods are considered sufficient to accommodate the market cycles experienced with investments. The performance of this portfolio will be compared to the return of a hybrid index comprised of 45% S &P 500, 15% MSCI ACWI ex US, 40% Barclays Aggregate Bond Index. 2. On an absolute basis, it is expected that total return of the combined equity, fixed income, and cash portfolio, will equal or exceed the actuarial earnings assumption (7.5 %). B. Equity Performance The combined equity portion of the portfolio, defined as common stocks and convertible bonds, is expected to perform at a rate at least equal to a blended benchmark consisiting of 75% S &P 500 Index and 25% MSCI ACWI ex US. Individual components of the equity portfolio will be compared as outlined in Schedule A. C. Fixed Income Performance The overall objective of the fixed income portion of the portfolio is to add stability, consistency and safety to the total fund. The fixed income portion of the portfolio, defined as fixed income is expected to perform at a rate at least equal to the Barclays Aggregate Bond Index. IV. INVESTMENT STANDARDS AND GUIDELINES Liquidity: The Fund's Manager(s) shall be kept informed on the liquidity requirements of the fund. The investment portfolio shall be structured in such a manner as to provide sufficient liquidity to pay obligations as they come due. To the extent possible, an attempt will be made to match investments maturities with known cash needs and anticipated cash -flow requiriements. Custodian: The trustees have a retained and will continue to retain a third party to be custodian of the Fund's assets. All securities shall be designated as an asset of the Fund, and no withdrawal of securities -in whole or part- shall be made from safekeeping except by an authorized member of the Trustees or the Trustees' designee. Securitiey transactions between a broker dealer and a custodian involving the purchase or sale of securities by tranfers of money or securities must be made on a "delivery vs. payment" basis, if applicable, to ensure that the custodian will have the money or security, as appropriate, in hand at the conclusion of the transaction. V i l l a g e o f North Palm Beach General Employees' Retirement Trust Fund - 2 - Bid requirement: The Trustees shall determine the approximate maturity date based on cash flow needs and market conditions, analyze and select one or more optimal types of investment, and competitively bid the security when feasible and appropriate. Except as otherwise required by law, the most economically advantageous bid must be selected. Risk and Diversification: The investments held by the fund shall be diversified to the extent practical to control the risk of loss resulting from over - concentration of assets in a specific maturity, issuer, instrument, dealer or bank which financial instruments are bought and sold. A. Authorized Investments All investments made or held in the fund shall be limited to: 1. Money market instruments and cash equivalents rated Al and or P1 by Standard and Poor's and Moody's. 2. Obligations issued by the United States Government or obligations guaranteed as to principal and interest by the United States Government or by an agency of the United States Government. Foreign Securities, including: convertible bonds, convertible preferred issues and preferred stock. 4. Equities — including publically traded REITS, commodities, convertible bonds, convertible preferred issues and preferred stock. Convertible bonds, convertible preferred issues and preferred stock will be deemed as equity and shall not be held to the rating standards of fixed income. Foreign security convertibles are limited to those that settle in U.S. dollars and are traded on one or more of the recognized national exchanges, NASDAQ or the OTC. 5. Bonds or other evidences of indebtedness, issued or guaranteed by a corporation organized under the laws of the United States, any state or organized territory of the United States or the District of Columbia, The issues are traded on one or more of the recognized national exchanges or over - the - counter (OTC) and shall hold a rating of Baa/BBB or above by Moody's and Standard and Poor's respectively, except that up to 20% of the fixed income portfolio may be held in securities that do not meet this criteria. The weighted average quality of the portfolio will be "A" or better and the effective duration of the portfolio shall be kept within +/ -20% of Barclays Aggregate Index. 6. Commingled Stock, bond or money market funds whose investments are restricted to securities meeting the criteria outlined in Section IV, if possible. B. Limitations 1. Investment in equities shall not exceed 70% of the fund's assets at market value. V i l l a g e o f N o r t h Palm Beach General Employees' Retirement Trust Fund - 3 - 2. Not more than 5% of the Fund's assets shall be invested in the common stock, capital stock or convertible stock of any one issuing company, nor shall the aggregate investment in any one issuing company exceed 5% of the outstanding capital stock of the company. 3. Foreign Securities including both equities and fixed income is limited to 20% of the total Fund's assets. 4. Investments in Real Estate are limited to real estate investment trusts (REITS) 5. The following investments are prohibited: a. Bonds issued by any state of municipality b. Futures c. Hedge Funds \Insurance annuities d. Internally managed assets e. Limited partnerships not listed on a national exchange f. Margin accounts g. Options h. Private equity i. Private mortgages j. Securities lending k. Any investment with no generally recognized market 6. Under Protecting Florida's Investment Act (PFIA), scrutinized companies published by the State Board of Administration, unless and indirect investment is unable to divest, as provided for in Florida Statutes. IV. COMMUNICATIONS A. On a monthly basis, the custodian shall supply an accounting statement that will include a summary of all receipts and disbursements and the cost and the market value of all assets. On an annual basis, the investment managers shall provide a written report affirming compliance with the security restrictions of Section IV above and a summary of common stock diversification and attendant schedules. B. In addition, the investment managers shall deliver each quarter a report detailing the Fund's performance, adherence to the investment policy, forecast of the market and economy, portfolio analysis and current assets of the Trust. Written reports shall be delivered to the Trustees within 60 days of the end of the quarter. A copy of the written report shall be submitted to the person designated by the City, and shall be available for public inspection. The investment managers will provide immediate written and telephone notice to the Trustees of any significant market related or non- market related event, specifically including, but not limited to, any deviation from the standards set forth in Section IV above. V i l l a g e o f N o r t h Palm Beach General Employees' Retirement Trust Fund - 4 - V. COMPLIANCE With each actuarial valuation, the Board of Trustees shall consult with the investment manager to determine the total expected annual rate of return for the current year, for each of the next several years and for the long term thereafter. This determination shall be filed promptly with the Department of Management Services, the plan's sponsor and the consulting actuary. VI. CRITERIA FOR INVESTMENT MANAGER REVIEW The Board wishes to adopt standards by which judgments of the ongoing performance of a portfolio manager may be made. If, at any time, any one of the following is breached, the portfolio manager will be warned of the Board's serious concern for the Fund's continued safety and performance. A. Cumulative rolling performance significantly below the target benchmark (rolling 3 and 5 years net of fees). B. Loss by the manager of any senior investment personnel. C. Any change in basic investment philosophy by the manager D. Failure to attain a majority vote of confidence by the Board of Trustees. E. Failure to observe the security quality restrictions of section IV. Nothing in this section shall limit or diminish the Trustees' right to terminate the manager at any time for any reason. VII. INTERNAL CONTROLS The funds shall be governed by the Village's written internal controls and operational procedures, which shall be periodically reviewed by the fund's certified public accountant (CPA). VII. CONTINUING EDUCATION In fulfilling its fiduciary responsibility the Trustees acknowledge that continuing education is important. Therefore, all Trustees support the receipt of continuing education relating to investments and the Trustee's responsibilities. VII. FLORIDA STATUTES 112 AND APPLICABLE CITY ORDINANCES If, at any time, this document is found to be in conflict with Chapters 112, Florida Statutes, or the applicable Village Ordinances, the Statutes and Ordinances shall prevail. VIII. REVIEW AND AMENDMENTS It is the Trustees intention to review this document at least annually subsequent to the actuarial report and to amend this statement to reflect any changes in philosophy, objectives, or guidelines. In this regard, the money manager's interest in consistency in these matters is recognized and will. be taken into account when changes are being considered. If, at any time, the Investment Manager feels that the specific objectives defined herein cannot be met, or the guidelines constrict performance, the Trustees should be notified in writing. By initial and continuing acceptance of this Investment Policy Statement, the Investment Managers concur with the provisions of this document. V i l l a g e o f North Palm Beach General Employees' Retirement Trust Fund - 5 - Village of North Palm Beach GENERAL EMPLO 'RETIREMENT TRUST FUND By: Li�n 1 ai an, Board of Trustees Date: SunTWt Institutional llnv&ents Date. UZZ V i l l a g e o f North Palm Beach General Employees' Retirement Trust Fund - 6 - Schedule A Asset Allocation Guidelines Asset Class Target% Range% Benchmark Total Equities 60% 40-70% 75% S &P 500125% MSCI ACWI ex US Domestic Equities 45% 40 -70% S &P 500 Index Large Cap Equities 35% 25 -70% S &P 500 Index Mid Cap Equities 5% 0 -10% Russell Mid Cap Index Small Cap Equities 5% 0 -10% Russell 2000 Index Real Estate 0% 0 -10% Wilshire REIT Index International 15% 0 -20% MSCI ACWI ex US International Developed 10% 0 -15% MSCI EAFE Index International Emerging 5% 0 -10% MSCI Emerging Markets Index Alternatives 0% 0 -10% Appropriate Category Index Commodities 0% 0 -10% Dow Jones UBS Commodity Index Fixed Income 40% 25 -60% Barclays Aggregate Cash Equivalents 0% 0 -15% 91 -day T -bills Policy Benchmark • 45% S &P 500,15% MSCI ACWI ex US and 40% Barclays Aggregate Village of North Pal eak By: C Ch ' an, Board of Trustees By: G Sun st Institutional estj Retirement Trust Fund 49-( (l Date: e - a, Dat Village of North Paln Beach General Employees' Pension Fund -7-