05-14-09 vCITY OF ATLANTIC BEACH
BOARD OF TRUSTEES OF THE ATLANTIC BEACH PENSION FUND
GENERAL EMPLOYEES PENSION BOARD MEETING
May 14, 2009
1. The City of Atlantic Beach General Employee Pension Board meeting was called to order at
5:30 P.M. Those members in attendance were trustees, Tim Townsend, Alan Gleit, Harry McNally,
Bob Sternfeld and Malcolm Clemons. Also in attendance were Nelson Van Liere, Plan Administrator
2. Interview with the law firm Gray Robinson Attorneys at Law was conducted. Kelly A. Bosecker
was the firm representative and was accompanied by Rick Burke.
3. Approval of the minutes from the February 19, 2009, General Employees Pension Board
Meeting: The motion was made by Tim Townsend and seconded by Malcolm Clemons. The
minutes were unanimously approved.
4. Meeting Calendar Established
The boadd established Thursday August 13`x, 2009 as the date for the next regular boadd meeting with
the time of the meeting being 6:OOp.m.
5. Quarterly Investment Report was provided by Dino Ragazzo, the Executive Director of North
Florida Market Area Manager of UBS. He was accompanied by Thomas Burdette. The
resignation of Michael O' Shields was announced. Dino Ragazzo gave a brief update of his
background and of those in the Atlanta office and indicated that the Atlanta office would be primarily
responsible for the investment reporting going forward. Ragazzo also informed us that the Atlanta
office could send a representative two times a year and the other two quarterly reports would be via
conference call. The UBS report was by conference call to the Atlanta PRIME Consulting Group.
The report was given by Van Price and Jon LeDoyen and a hazd copy report was provided at the
meeting. The results were a negative 3.46% for the quarter and year to date ended March 31, 2009.
The boadd indicated a desire to have the change in balance shown on the report by fund. UBS agreed.
that that will be in the report in the future.
Mr. Ragazzo next gave testimony to the error and the proposed resolution of the trade that was
reversed in error. E explained that the error was a gain that should go back to UBS. Mr. Ragazzo
read a prepared letter attached to these minutes as an explanation of the transaction. The Board
requested that Mr. Ragazzo fmd out from UBS if the profits related to the increase in value after the
trade date in question could be given to Atlantic Beach. He indicated he would get that question
answered before they proceeded with any transfers of balances to correct the error.
6. Financial Expenditures: The board was provided a detailed listing of expenditures through March
31, 2009. Harry McNally made a motion to approve the expenditures and Tim Townsend seconded;
the vote was unanimous to approve.
7. City of Atlantic Beach General Employee Retirement System Annual Actuarial Valuation
Report from Gabriel Roeder Smith & Company was distributed by the Plan Administrator.
The Plan Administrator reported that this report was presented to the City Commission. Highlights
of the report were discussed including the funding ratio and the annual contribution from the City to
the plan. The funded ratio was 72.9 percent and the contribution from the City to the plan will be
$599,292 for fiscal budget yeaz 2010. This represents an increase of $70,864.
Page 1 of 2
CITY OF ATLANTIC BEACH
BOARD OF TRUSTEES OF THE ATLANTIC BEACH PENSION FUND
GENERAL EMPLOYEES PENSION BOARD MEETING
May 14, 2009
A motion to accept the report was made by Tim Townsend and seconded by Alan Gleit. The vote
was unanimous to approve the report for September 2008.
8. The board was provided a letter indicating that the State's Department of Management Services had
received the 2008 Actuarial Valuation Report.
9. Adjourn -Motion by Tim Townsend at 8:26pm
Tim Townsend
Board Chairperson
~2 ~
Bob Sternfeld
Board Secretary
Minutes taken. and prepared by Nelson Van Liere, Pension Board Plan Administrator and represent a
summary of the actions taken. Audio tapes of the meetings are retai~ea for a complete punt, record, 247-sso~
Page 2 of 2
May 13, 2009
City of Atlantic Beach
800 Seminole Road
Atlantic Beach, FL 32233-5444
RE: NU02234 General Employees Retirement System
NU02235 Police Officers Retirement System
Dear Mr. Van Liere:
I am writing in regards to recent trading activity which was processed in the accounts
referenced above. After careful review, it has come to my attention that in carrying out
the instructions from the Boards of the Retirement Systems to convert certain mutual
fund shares from one class to another, we incorrectly canceled and repurchased a portion
of those shares. The purpose of this letter is to lay out clearly what actions were taken
and the steps we are now taking to correct the transactions to accurately reflect the
instructions given to us by the Boards.
On January 15, 2009, UBS consultant Michael O'Shields met with the Boards to discuss
several matters, including a proposed rebalancing of assets to the target allocations of
each plan. Each Board authorized mutual fund purchases to effect the rebalancing, and as
a result on January 16, 2009, the rebalance took place, including the following three fund
purchases: American Funds Growth fund of America Class A, American Funds
Washington Mutual fund Class A and American Funds Euro Pacific Growth fund Class
A. Those purchases are set forth on confirmations and on the January account statement
for each account.
On February 19, 2009, Michael again met with the Boards to discuss converting the
American Funds -both those that the Retirement Systems had transferred into UBS in
December 2008, and those purchased in January 2009 -from Class A shares to Class F
shares. Each Board approved the conversion of all of the Class A shares to Class F
shares.
Consistent with these instructions, UBS proceeded to convert to Class F those Class A
shares that were transferred into UBS in December 2008; that conversion process (which
takes some time to complete operationally) was completed on March 2, 2009. For the
shares that were purchased in January 2009, however, we have discovered that instead of
correcting the share class as described those shares were incorrectly treated as a cancel of
the January 16 purchase and a subsequent repurchase of Class F shares on February 23,
2009. Rather, we should have cancelled the January 16 purchase of A shares and
replaced this purchase with Class F shares, in essence correcting the original January 16
buy to be in line with the internal selling agreement with American Funds.
It is important for both the Boards' records and the records of UBS that we correct our
back-office processing error, and process these transactions as the Boards instructed and
our agreement with American Funds requires. This will result in a new set of
confirmations and correcting entries on the Retirement Systems' account statements
which will reflect the Class F Share purchases with a January 16 NAV versus February
23 NAV. While the same dollar amount will be invested we will reduce the number of
shares since the NAV in January was higher than February. In order to assist the Boards
in understanding the corrections being undertaken, I have outlined these corrections on an
attached exhibit. I can be available to you or any member of the Board to discuss these
corrections at your convenience.
In delivering the UBS Client Experience, we are committed to understanding your needs
and goals and seek to proactively provide appropriate solutions. On behalf of UBS, we
sincerely apologize for these processing errors and will work quickly to resolve these and
reflect all transactions for which the Boards provided instructions.
We look forward to a continued prosperous relationship.
Sincerely,
Dino Ragazzo
Executive Director
Market Area Manager
Enclosure
cc: Tom Burdette
Exhibit -Trade Corrections
Process F Share Purchases as of 1/16/09 and cancel shares overbought with 2/23/09 pricing
NU02234 General Employees Retirement System
NAV of F NAV of F # shares if # shares
Change Dictated by Shares close of Shares close purchased on purchased on Shares to be
Manager 1/16/09 Rebalance 1/16/09 of 2/23/09 1/16/09 2/23/09 cancelled
Growth Fund of
America +$137,953.84 $19.59 $18.06 7,042.054 7,638.640 596.586
Washington Mutua( +$38,663.45 $20.00 $17.44 1,933.172 2,216.941 283.769
EuroPacific Growth +$265,481.50 $26.17 $23.88 10,144.497 11,117.316 972.819
NU02235 Police Officers Retirement System
NAV of F NAV of F # shares if # shares
Change Dictated by Shares close of Shares close purchased on purchased on Shares to be
Manager 1/16/09 Rebalance 1/16/09 of 2/23/09 1/16/09 2/23/09 cancelled
Growth Fund of
America +$93,822.35 $19.59 $18.06 4,789.298 5,195.036 405.738
Washington Mutua( +$106,493.37 $20.00 $17.44 5,324.668 6,106.271 781.603
EuroPacific Growth +$110,498.95 $26.17 $23.88 4,222.351 4,627.259 404.908
Account will show as follows once corrections have been placed:
NU02234 General Employees Retirement System
NAV of F # shares
Change Dictated by Shares close of purchased on
Manager 1/16/09 Rebalance 1/16/09 1/16/09
Growth Fund of
America +$137,953.84 $19.59 7,042.054
Washington Mutual +$38,663.45 $20.00 1,933.172
EuroPacific Growth +$265,481.50 $26.17 10,144.497
NU02235 Police Officers Retirement System
NAV of F # shares
Change Dictated by Shares close of purchased on
Manager 1/16/09 Rebalance 1/16/09 1/16/09
Growth Fund of
America +$93,822.35
Washington Mutua( +$106,493.37
EuroPacific Growth +$110,498.95
$19.59 4,789.298
$20.00 5,324.668
$26.17 4,222.351