Music Thank you. Thank you. Thank you. The End Good morning, everybody. We'd like to call the order of the police and fire pension for February 14, 2018 to order. First on the agenda is Jennison. They're going to be doing a due diligence presentation. Do you want to introduce him? or good morning this morning we are going to hear from Rick Mastain he is with Jennison your large cap growth managers so these are large cap growth equities and he's going to give you some insights on the performance of the portfolio as well as their their current outlook on the markets thank you Thank you, John, and thanks, everybody. Certainly appreciate the chance to be here with you this morning. I'm going to take about 15 minutes or so and just go over highlights of what hopefully is helpful to you, cover our firm, just a brief background, talk about stability of the firm, a little bit about performance and what's driven performance over the last year or so, and then give some thoughts on our outlook. and you know please ask any questions that come to mind anything that i don't go in as much detail as you would like or anything that i don't cover so with that i'd like you to turn to page one and i really like to start my remarks by just saying thank you to you we've had the opportunity to work with you for a little over five years now and um you know it's been a you know there's always There's always ups and downs in the markets aren't there. But it's been a great run for the large cap growth style and we've been able to be in the top quartile in the Morningstar Universe over that five year time period. We'll talk a little bit more about that later, but mainly thank you for the opportunity to work with you and hopefully it goes on for many, many years. In terms of the firm, Jenison Associates is based in New York City and we're owned by Prudential Financial and have been actually since 1985. been in business since 1969 and one of the hallmarks of jenison i think is stability we the team that i'll show you that works on your behalf managing the large cap growth portfolio has been very stable we've never had a portfolio manager leave our organization to go to a competitor and our team of analysts which is very very strong has been very stable so like any any of you in the job that you do you know teamwork is important and having a solid group of people there for long periods of time is helpful, and we're very proud of that. No, sir. Tom, we're owned by Prudential Financial, so by 100%. We run it, the firm. It's very hands-off from Prudential. Run it as if it were a standalone investment boutique, but at the end of the day, we pay a dividend to them, almost like we'd pay a tax to the government for part of our income. Okay. On page three is the team working, as I mentioned, on your behalf. And again, one of the things we take a lot of pride in, and as I mentioned briefly, is the analyst and the portfolio manager. So a very deep team of 18 people dedicated solely to the large-cap growth portfolio. And again, tremendous stability among this team. One thing that clients like to hear is that our analysts, as well as our portfolio managers, but it's a little bit unusual, our analysts are rewarded on how they do for you. It's not how long the report was on let's buy Apple. It's not whether it's a 50-page report or a two-page report. It's did that stock in the portfolio help our clients make money. And we measured that over a rolling three-year time period because, as you know, these stocks can be volatile. So sometimes it pays to be patient with some of these. And so that's the structure of how we think we've added some value over time. obviously in addition to the very hard work of finding good companies that we think over time will grow their earnings their revenues free cash flow substantially faster than the overall market I'll go to performance and talk a little bit about how how we think about investing as I have you look on page seven on performance so you'll see on page seven as you know and very strong year for large cap growth last year a little bit under performance in the fourth quarter but 37.4 for gross of fee the fee is around 50 basis points to be clear then the three three five years and then you know always pleased to show since inception that we've added some nice value above the benchmark for you and again in our peer universe that would be about the its top quartile I think it's about the eighth or ninth percentile of managers in our universe. So I'm going to describe for a moment what we're looking for in terms of stocks, and then we can take a look, if you're interested, again, at some of the stocks that drove performance last year. But our mantra is really very simple. We're looking for, and it makes sense, but we're looking for companies that we believe are going to grow, and we measured by earnings, revenues, and free cash flow. they're going to grow those metrics faster than the overall investable universe of the overall market by at least 50% over the next three to five years. Very hard to find these companies. It doesn't, you know, they're not that many. We've probably followed 300 kind of, you know, rotating names in and out. We tend to have very low turnover. We tend to own stocks on average for about four years. We also pay attention to management teams. We think it's really important. to have a great team, and we spend a lot of time meeting with them before we own the stock and after. We think valuations are important. We pay a lot of attention to, you know, what are we paying for the, you know, what we're buying for the earning stream, if you will. We believe a company's got to have what we call a pristine, a very sound balance sheet. So those are kind of the four things we look for, and we've been very fortunate to have a great group of companies that have done that for us over the years. We do show, again, I'm skipping a few pages in the interest of time, but happy to go into any pages. But on page 10, we do show for the full year, again, a lot of information on page 10, but we do show the stocks and the areas, the industries, the sectors that did well, did best last year. And I'll take just a moment, and you can take a look at, on the left-hand side, it shows, taking a look at industrials, for example, it shows 5%. That's the average weight for the year in the portfolio. 5% of the portfolio was made up of industrial companies. And they were on average up 61%. So the point is that you hear so much these days about Apple and Facebook and Amazon and Netflix, all of which we own. But we were really pleased last year, aside from having great performance, that about a third of our outperformance came from stocks that you wouldn't normally kind of think of as having a position in a large cap growth portfolio. So Boeing is a stock we've owned for about five years. They're going through, we think, a fantastic period of explosive growth, and it was up 90% last year. Hasn't been a great stock every year, but we saw this growth coming, And what are they doing? They've invested huge amounts of money in their capital structure to be able to put out more airplanes per month with fewer people. Kind of a simple metric, but it's worked quite well. So their free cash flow is huge, and we see it as a stock we can own for long periods of time. Parker Hannafin, a Cleveland-based company, did really well for us. And FedEx was another holding, and then we recently purchased Caterpillar. So these are companies that are, again, they're not reinventing the wheel, but they're going through periods of great growth. You can see also our technology weight is quite high here at an average of 49% for the year. So I want to mention two things. One, that's a pretty high weight in an individual sector. Stocks in there would include names like a lot that I talked about, you know, Apple, Microsoft, you know, Facebook. We have two Chinese-based companies, which we think are worth owning because they're so powerful in their particular space. that's Alibaba and Tencent. They're both like, Alibaba is almost like Amazon, same type of business. But 17 of our tech holdings were up over 30% last year. And in tech, in the information technology space, just to be clear, it's really well diversified. There are many different industries in technology. For example, we own about 10% of our total portfolio, and so that would be about 20% of the technology weight is in card processors so that's v-cent mastercard that's not our choosing of how they're labeled it just happens to be how the industry standard is so they happen to be in technology so we think while it's about a 50 weight it's very very well diversified any questions on that and then the last point maybe on this page you can see i can talk about any of the stocks you see on the right-hand side the top performers the bottom performers obviously not everything always works out the way you want it to but for the most part we had very very strong performance last year I would point out that you know an area that hurt us in 2016 when we had a very tough year was consumer staples that was when everybody was kind of rewarding or buying companies paying high dividends those aren't the stocks we tend to own so we did very poorly in consumer staples in 16 came back very nicely in 17 as our stocks got rewarded so we don't change what we do we're just always trying to look for that long-term long-term growth that companies have and trying to trying to own them for long-term time periods and be patient when things aren't working out as well as as well as we think they will over the long haul and then maybe just one last comment comment on terms of the outlook again nobody knows what you know what's what what's the crystal ball what's the what but we do know that if we can find these companies that I described that are growing faster than the overall universe if they're well managed they have good balance sheets we do know those companies and it begins just come it's kind of common sense If you can find great companies that are growing faster over time, you'll do well. We can't predict when, what quarter, but we know we've been doing this nearly 50 years, and it works. You have to have a deep team of people to find those companies. So one kind of a proof statement is shown here on page 14 is to say, kind of answer a fair question. That is, you know, are you finding these companies, these fast-growing companies, and how does it look into 2018 and beyond? So if you look at in the top left, our estimate for as we finish out 17, there's still some companies to report. Earnings will come in around 20%. That's 20% earnings per share growth above last of 2016. And we compare it with the Russell 1000 growth at 14 and the S&P 510. Those numbers, 14 and 10, are what are called street numbers. They're not our numbers. It's just a consensus of what all analysts on Wall Street come up with. And so we are finding growth. And looking into this year, you see we're showing an estimate for 25% earnings per share growth. So our companies are continuing to grow quite nicely. Now, so with the tax reform, so will other companies, like we show the S&P growing 20%. We'll, as we'd say, kind of scrub our numbers a little bit as we learn more about this tax reform. our numbers will probably end up being a little bit higher than 25, which seems like a high number, but it's a good period for a lot of businesses. And then we show on the middle, what are we paying for this fast growth? And the 23 times earnings for 25% growth is considered a very fair valuation, if you will. A lot of people you'll hear talk about how stocks have gotten too expensive, even while it's true with some, we think we're able to find some that are, what we'd say, reasonably valued. So let me pause. It's been about 10 or 12 minutes, and I have a couple of other comments, but just see if you have any questions on anything I've said or anything that might be helpful to go into more detail on. Okay. The only thing I would say is, again, not to beat a dead horse, because everybody will talk about the last couple of weeks and how it's probably not a good thing to say in Kentucky, sorry. But anyway, not to spend too much time on this volatility that we've had over the last couple of weeks. Our view is that it's actually probably healthy. The market, as you know, has been just on a run, a big run for a long time. And so who knows exactly what caused them? Some people, you know, there's all kinds of, you know, could be the interest rates are rising or wages are rising or too much speculation in some of these ETFs. But at the end of the day, probably healthy, may continue for a little while. But at the end of the day, we see companies doing well. And as I was saying in a meeting yesterday, if you'd said to me on January 1st, you know, you'll be at this meeting in Lexington on the 14th of January, and you can tell your client that you're up 4% for the year, 200 basis points ahead of the benchmark. Fourth quarter earnings have come in very nicely for our companies. We feel very good about it. And so we do feel good about where we are today. And, of course, it's never comfortable when you're going through these very volatile times. but it's been a long time since we had any kind of a correction. I think it's probably healthy, but I think as we go throughout the year, things will settle down. So with that, I'll answer any questions or thank you for your time and for the chance to work with you. Any questions? We have more maybe comments more than questions. Our relationship was about five and a quarter years, I think, correct? Something like that. Yes, sir. Looking at your performance, you all have done an outstanding job, other than 16 was a little bit of a hiccup. Yes, sir. Everybody has to have a hiccup, correct? Yes, it was. Basically, your company so far, since we've had you in our portfolio, has stayed in the top 25 percentile basically for the last five years. I think that's outstanding. And, you know, I want to thank you for what you all do because you all have made us a lot of money. And that's the name of the game. We need to make money. At the end of the day, it's the people who get those checks at the end of the month or beginning of the month. So, yeah, thank you. Yeah. Okay. Okay. Thanks very much for your time. I appreciate it. Yes, sir. I'm sorry, Bill. I can't let you go yet. Okay, good. I need to ask about your crystal ball. Uh-huh. And where do you see the money from the tax reform going in private America? Do you see it as hiring? Do you see it as buyback? Do you see it as earnings? Where do you see that money going? Three places. One is going to be some stock buybacks. One will be higher dividends. But the vast majority, we think, will go to the broad area of hiring, or I would say productivity. So when a company hires a worker, it's to become more productive. It's to do something, a job more efficiently. But we think today, in today's world, that decision will include how can I be more productive with this extra cash that I have. And so that can include a lot of different decisions. It can include hiring individuals, which we think we'll see. But we'll also see, we think, the part that people haven't really focused on a lot is, how can I make my workforce more productive? What can I do to do that? And, you know, it could be to, like, we own a company called Workday. day it's a software company that produces a product for human resources and for the financial side of a business and so we think their business could do continue to do quite well as people as companies buy their product to help make their business more productive like a university a lot of universities are their clients and they'll buy the the hr package to kind of tie all their different parts of their organization together so we think it's it's um it's going to be broad-based but we'd be focused on productivity and it could include a you know maybe i'll maybe i'll buy a couple of more tractors from caterpillar i can expense them right away and they will help make my workforce more productive maybe i'll retire some of the older tractors you know as as an example So if I heard you right, you're seeing a real analysis and expectation of technology and soft cost investment. Yes, sir. Technology, when we say technology, we're talking about more than just technology stocks. So my example of Boeing, you know, they have invested huge amounts of money in how to build an airplane more efficiently. That does include investments in technology to make the process go more quickly. So, yes, technology is driving – the use of technology, I should say, is driving an awful lot of the advancements in the business place today, and it's also – and adding a lot to our confidence, and companies can have – continue to have very good earnings. Thank you. Does that help? Okay. Okay. Thank you again. Appreciate the time. Thank you. Thanks for helping with the books. John, you want to do the quarterly report for Callen? Thank you. Good morning, all. So we're going to discuss some of the information contained in the green book from Callen. And I'm going to echo some of the comments on Rick that Rick had made. In terms of the market performance, we closed 2017 with another stellar year. The equity markets were very robust. The fundamentals GDP for the fourth quarter came in at 2.6%. So, again, not monstrous growth, but certainly significant growth. And what we have is the longest-running bull market. And so GDP numbers came in second quarter above 3%, third quarter above 3%, fourth quarter at healthy 2.6. That's up from 1.5% for 2016. So, again, for the entire year, 2017, it was about 2.3%. So we've seen a strong momentum, a lot of the fundamentals strengthening. The Fed, as you recall, did raise rates in December. That was the third rate, 25 basis point increase. They are expected to increase three times in 2018. Again, that's data dependent. So as they look at the numbers coming in, when they are trying to reduce or increase the short-term interest rates, reduce the size of the Fed book, what they're doing is they're tapping on the brakes, trying to get into a normalized range. Certainly when they entered into the post-recession, they embarked on an unprecedented level of quantitative easing, meaning dropping the rates down considerably and holding them down for quite a while. So as they move towards normalization, the hope or the expectation is not to stall the economy. Slow growth is a good thing. Unemployment, we saw labor remains tight. Unemployment was at about 4%, although there was some labor shortages increase that gave the specter most recently that sparked concern about inflation. So one of the contributing causes to the volatility was that we have this inflationary impact looming out there. And again, to Rich's point, when you've had a run to the extent that we have without a correction, most are expecting a kind of a respite of some type and certainly year to date as we look we hit highs in january 26th we're still large cap equities are about flat for the year coming off a very healthy 2017 so even with that correction even and small caps down a little bit consumer sentiment so university of michigan does a consumer sentiment index that they do this poll and it's at 98, which is a high. So, again, the sentiment in the markets is upbeat. Certainly the prospect of the tax reform that was passed in late December, in anticipation of that, the markets were responding very favorably and then favorably post. So, again, fundamentals solid throughout. That's not to say that there aren't any concerns geopolitically. Geopolitically, there's some concerns out there in North Korea, et cetera. So that's certainly the wild card. The one thing that we know is that there is no status quo. This change is the one thing that we can anticipate. So how do the markets respond? If you turn to page three of the book, there's a table to the right side. And I'm not going to go through each of the numbers. But suffice to say that the S&P 500 was up 6.6% for the fourth quarter. And year to date that puts it at 21.8 or 22%. To put that in context, if you go back to 1926, the S&P has earned and annualized 10%. So again, if you look at the distribution of returns throughout, certainly this is on the better half of that for a very strong 2017. There were 62 record highs in the equity markets this past year. And the themes that took place is, you know, equities handily outperformed fixed income. So the Barclays Ag, which is the composite investment grade fixed income index, was up about 0.4% for the quarter, about 3.5% for the year. So certainly equities delivered a significant premium, again, but we would say that fixed income remains the stalwart in the portfolio from the standpoint of anchor to windward. It has about two-thirds of the securities within the ag are government-related securities. So, again, that's the area of the portfolio that when you have that volatility, you're looking for them to kind of hold in and stabilize. Non-U.S. markets were very strong. They did underperform the U.S. markets. So when you look at non-U.S. equity, that MSCI, ACQUI-X-U.S., that means all country world index excluding the United States. So that includes emerging markets as well. Emerging markets represents about 23% of that index. So that was up 5% for the quarter, but for the year, up 27%. So again, non-U.S. markets were outperformed U.S. markets for 2017, and they were aided by a weakening dollar. So in other words, those monies that were invested abroad in a weakening dollar, when you bring that back, you've increased your return. So the themes for the markets for the quarter, equities beat fixed income. Large cap securities, so those are bigger cap names. like those in the Jenison portfolio outperforms certainly information technology that he talked about. The Facebooks, the Amazons, the Microsofts, the Googles, etc. Contributed significantly to that. So growth beat value stocks. And what are value stocks? We have a large cap value manager in the portfolio and Jim's going to talk about that, which is Dodge and Cox. And just to handicap, what's the difference between a growth stock and a value stock? Value stocks are typically on sale. They're trading at a discount. They're cheaper. Your growth stocks tend to be pricier stocks that have experienced a greater level of growth that you anticipate that they're going to continue to grow. Your value stocks, something has happened. There's been a disappointment in the market. They're cheap, and you're buying them at a discount. So the two offer a good complement to the portfolio that we try to be roughly style neutral in terms of our growth and value style. So for the past year, growth meaning value. And that's not surprising given that the growth indices have a greater level of information technology. So the Russell 1000 growth has about 38% information technology stocks. And again, those big cap names that we talked about certainly had a bumper year. So the Russell 1000 growth index was up 30% for the year. The value index was up 14%. So again, pretty big dispersion, but again, this was a growth environment. So with that, let's turn to, I'll take a pause there and answer any questions that you might have about the market review. Hearing none, we'll press on. All right, let's turn to page six. I'm sorry, I'm going to, let's go to 26. This is the portfolio allocation. So we have a few pie charts to talk about your actual asset allocation and your target asset allocation, and then we show what the asset classes are on the table, the value. And again, the first thing I would say is this is as of December 31st. You look at the market value was 741 million as of that date. And we see that the allocation versus the target, the biggest overweight is domestic equity, and that's in large part due to the run up in their valuation. We try to stay close to the target allocations and certainly within 2% it certainly meets that. And the way we go through the rebalancing process is that when you are pulling out money for benefit distributions, we use this as kind of a rebalancing. We take from the portions of the portfolio that are more heavily weighted versus their target. So it's our rebalancing mechanism. So the market value on page 26, again, $741 million and within target. If we turn to the next page on page 27, this gives you a cash flow summary showing your beginning value was $719 million. So that was your value as of $930. Investment returns, about $29 million. And the net new investments, that's where you see the money that we're pulling out for distributions was about $7 million. Coming to your net December 31 value at $741.6 million. Any questions there? Okay, let's turn to page 28. So when sitting in your chair, but we're going to get into the individual manager performance that Jim's going to cover. But taking the top down view, this is giving you a view of what is the market value, what is the weight in the portfolio, and what is the performance by these broad six categories. We've got domestic equity, international equity, domestic fixed, real estate, real assets, and then cash. Again, cash is not an intended strategic allocation, but This is raising funds available for benefit distributions. And we see that when we look at the last quarter's return, the total fund returned 4.14% versus the total fund benchmark. And what is the total fund benchmark? What we do is we take your allocation, large cap, international, fixed income, real estate. And we have indices that represent those segments of the market. And we blend them according to that weight to come up with a customized total fund benchmark. So our goal is to, when we see the manager performance versus the benchmark, what we're really looking about, there's two factors. It's going to be how overweight or underweighted will impact the return to your target allocation. And secondly, how did your managers perform? While we're managing the portfolio collectively, very close to the target allocation. So the primary driver of outperformance is going to be manager performance. So we see that in the last quarter, 414 was the performance return on a gross of fees basis. Net of fees was 4.04, so about 10 basis points differential. That puts it in the 23rd percentile. So that's the outperforming 77% of public funds of approximately year size. The stellar numbers, I think, over the last year, 18.2%. So even amongst the programs that we deal with that include private equity and some of the more exotic strategies, 18% puts you in the 7th percentile. So that's top decile performing 93% of the peers. And that's versus a benchmark return of about 15.36. On a net of fees basis, that would be about a 17.71. And we've included the net of fees calculation on page 32 if you want to go back there. But the gross of fees gives us a comparison when we look at the universe, which is gross of fees. Last three years, gross return 9.56%. Net of fees 9.1. And that's versus a benchmark of 7.89. So that puts you in the third percentile. outperforming 97 of the funds so again this is the point in time where a condition expectations what you've experienced has been extraordinary from a performance standpoint will not always be the case certainly we think anything above median is strong anything above that is and at this level top quartile is terrific these are kind of extraordinary numbers so but what you've done is Within your portfolio structure, what you have that's performed well, you've had active managers that have done well. You've had an allocation to large cap equity. Your small cap has performed strongly. But even within your fixed income portfolio, you have a conservative but high yield component in Makai Shields. And again, high yield is below investment rate. So a portion of your fixed income portfolio is targeted toward growth, and they have performed really well and have added to the return. So everything has worked over this five-year or so period. 10.3% over the last five years, that's an annualized return versus 940. Over a, on a net of fees basis, that's 9.93%, so almost 10% net of fees. And that puts you in the 12th percentile, so top quartile easily. That gives you the top-down perspective. I'd be happy to answer any questions you have at this time or after Jim goes through some of the individual manager performances. Okay, thank you. Hi, good morning all. Good morning all. I just want to do a quick time check. We know we're at about 936 or so. Do we have any time constraints? I can keep my comments pretty brief, but if there's any hard stops, please let me know. You can probably keep them kind of brief because we're doing so good. Sure, yeah, absolutely. Great point, and I will. So I'm going to just quickly flip back to page 29. Here we have the managers as well as the asset class composites and they're waiting within the portfolio and then performance over the trailing one quarter, one, two, three, and five year periods. And I'll also give just a quick update on a couple organizational updates that happened here to date. So with that, I guess my first comment is the Fidelity 500 index fund. This will be the last quarter that it will be managed by Fidelity. So just next quarter when we come in, you'll see a name change there. It'll be the Northern Trust S&P 500 index. It will be managed exactly the same. It will be passively managed, except it will be managed by Northern Trust and at a lower fee. So I just want to give you an update there and believe that transition happened in February of this year. Moving on to the other managers within the domestic equity area. Dodge and Cox, which is the active value manager, had a strong quarter. We've talked about how some of the sectors such as information technology and financials have had a nice run here lately. Dodge & Cox is a very disciplined value investor, and they are going to rebalance some of their portfolios, capture some of those gains, and reinvest those in securities within the energy and utility sectors. Newburger Berman, which is the small cap equity manager, had a very nice quarter. Stock selection within technology and financials were very strong, and you could see their performance over the long term is above the benchmark. I won't comment on Jenison. I think we've heard enough about them, but they've done a very nice job since inception with the fund. Moving on to international equity, you can see it modestly underperformed its target. Bailey Gifford for the quarter had a couple stock specific softness within their portfolio, but nothing too concerning considering their long term performance over the one and two year period is strong. And then the emerging markets portfolio, which is managed by Capital Group, you could see over the last year had the strongest absolute return within the portfolio at over 40%. So that has been a nice tailwind for the fund and the international composite. Moving on to fixed income, for the quarter you'll see it outperformed its target. return 54 basis points versus target which is at 39 basis points. And much of that can be attributed to Mackay Shields. So they are the high yield manager and they outperform their benchmark for the quarter. And they are complemented with two core fixed income managers, Siegel, Brian, and Hamill and Hillswick Acid Management. So those two managers only invest in high-quality investment-grade fixed income. And then to wrap up real quickly, real estate and real assets both had a positive absolute return for the quarter. Real estate returned 1.8%. So we're seeing the appreciation in the real estate market coming down slightly. So of that 1.8%, 1% of that comes from the income that's generated within their properties, and 0.8% comes from appreciation. But you could see over the annualized periods, they have returns well above 7%, and over the five years have returns about 11.5%. And then real assets. So this is managed by PIMCO. This is a diversified real asset fund. You can see it outperformed its custom benchmark this quarter, 2.58 versus 2.30, and has outperformed CPI, which is the Consumer Price Index, over the near term. And then I'll just wrap up. Over the last year, so we had year end December 31st. There are 11 active managers within the portfolio, nine of which outperform their peers. So they ranked above the median return. And in some cases, some of those managers, as John mentioned, or in the top decile and top quartile of their respective peers. And then I'll conclude with just a quick update on one of your fixed income managers. So quick org update with Siegel, Bryant, and Hamel. They acquired Denver Investments January 10th. So Denver Investments, believe it or not, based in Denver. They manage fixed income portfolios as well as equity portfolios. So that deal is expected to close any time now, actually, sometime in the second quarter of 2018. Our general outlook is we think this is beneficial to both firms. So I should add that the Denver Investments name is going away, and it's just going to be Siegel, Bryant, and Hamill. So there's 10 fixed income professionals coming over from Denver Investments. So there's going to be some synergies with some of the portfolios that Denver Investments managed and Siegel Bryant managed in the core fixed income space. but they're also going to be adding some high yield capabilities as well, so that will bolster their research. And the combined entity will be managing roughly about $12 billion in assets, so 12 of which is Siegel, Brian, and Hamill. So overall, we find this as a positive, and our research team has scheduled calls and talked with the representatives from both firms, and we feel pretty strongly about this merger. So with that, that's all my prepared remarks. If there aren't any questions, I just want to say thank you. Any questions? Go ahead. Well, things are doing well, and you said we, and so I thought I would include Callan in the we. We appreciate your partnership and advice in managing this portfolio. So I just wanted to say thanks. And we say thank you as well for the continued support. And, you know, we will continue to be great stewards of the fund. John? Yes, sir. I hate to keep bringing up how long I've been on this board. It seems like forever. But, and it has been. I'm a big believer in diversification and all that, obviously. When I got on this board in October of 1992, we had two equity managers and a bond manager, and over 50% of our money was in the bonds sector. We have 12 managers now, and I noticed that we're getting our weight, like in New Burger, is getting pretty high and everything, and I'm kind of big about diversifying. Is there any sectors or anything that we're missing right now that we could get into? Or, you know, like I say, we're a little heavy, I think, in a couple of sectors, or a couple of managers, basically. What's your idea? I mean, you know. Yeah. Certainly the two types of diversification. One is market diversification and then manager diversification. of diversification, certainly every manager that differs from the index is introducing some bias in the way that they run portfolios. When we structure a portfolio, we look to allocate a significant enough amount that it makes a difference, that it moves the needle. So from that standpoint, in terms of investing in new strategies, we would be looking at if we're not willing to put 5% into that particular strategy. In our mind, what it does is increase the fees, does broaden diversification, but you don't necessarily get the impact of the portfolio. It's not really moving the needle. So let's talk about where you're not. You're not in private equity, so that's an area that could be explored. But what private equity introduces is it's not unlike public equities where you go in and you make a selection and you make an investment. Private equity, it's a program. So that you, we have which we call vintage year diversification. That you are putting money into that particular vintage, whether it be every year or launching. So what it requires is a greater level of staffing support. How is it done? The long-term private equity, you're getting paid a premium over public markets because it's less liquid. But the downside is you invest, and you really don't know until seven years down the road whether or not how well that particular investment has performed. So that's one area of the portfolio. that you don't have it has not hurt you public equities of outperform private equities over over the period of time that we've been working with your funds so again when we we don't we don't come to a client relationship with a model portfolio you need to have this much in large cap this much in small cap this much in in international this much in private equity we what we try to do is what is the best fit for the client both from a support standpoint So private equity is one thing that we don't have. In terms of weighting in the portfolio that's benefited you is that relative to other fixed income allocations, you've got a higher weighting of high yield with Mackay. Now, Mackay is a very conservative high yield manager, and again, that has benefited you extremely well. If we were going to diversify away, that might be one area where we take something and putting it into a little more possibly core. Again, that's going to impact the growth of the portfolio, that growth profile. It's going to take away from that. But certainly, they've had a great run and they are good stewards of capital in terms of the way they've managed the portfolio. So the management team that we have, we feel good about. We recognize that Jenison is a manager that differs significantly from the benchmark. They're a solid manager, but they will go through periods where they may underperform. And again, that's where we're going to call on patients and say, this is a long term, it's a marathon and not a sprint. So from that standpoint, we've had the benefit that in their first five and a quarter years, they've had a pretty good tailwind. That's not always going to be the case. Other things in the portfolio, I mean, we think it's balanced. The one area of the portfolio, real assets, that really hasn't paid off is that there has been very little to no inflation. So that's a portion of the portfolio that represents about 4% of the portfolio that shredded water hasn't really been a big contributor because its role in the portfolio hasn't really been called on. So we think that in an inflationary environment, that's a portion of the market. So we kind of like that, and again, so there is nothing here that we would say points to, gosh, we need a change. Acadian, as an all-cap manager, as you know, when they were first brought on, struggled, And again, it's an exercise in patience that we have confidence in the manager over the long term. They delivered very strong returns. So at this point, Tommy, I wouldn't say that there's anything we would point to that's leaking in the portfolio. There's always an opportunity to diversify away. But from the standpoint of the managers you have, we feel pretty comfortable in terms of how they're managing their mandates is in line with our expectations. Any other questions? Thank you very much for your presentation. Well, I would just like to echo Jim's comments. We appreciate the confidence that you all have placed in us, and we certainly appreciate the relationship. Next item on the agenda is the Treasurer's Report. Mr. O'Mara. Thank you. included in the packet is the usual information we have the statement of changes of assets as well as portfolio balances activity within lfucg and bank statements as well as transfer authorization letter for february and one thing that i did find interesting is with the volatility that we've talked about our fund actually grew by 117 000 this time last year our current balance today was 750 million 413 152 and that compares to 750 million 295 937 this time last month motion to accept the report and approve the transfer letter Is there any discussion? All those in favor of the motion? Any opposed? Motion passes to approve the authorization letter for the payroll. Next item on the agenda is the minutes for January of 2018. I need a motion to approve. So moved. Second. Is there any discussion? All those in favor? Aye. Any opposed? I'm staying because I wasn't here. Motion passes to approve the minutes from last month's meeting. New business. Item number one is ghost time purchases. Let the board know that Brandon Reese has opted not to purchase at this time, so please cross that one out. So the only ghost time purchase will be for John Purdy. I need a motion to approve. Is there any discussion? All those in favor? Aye. Any opposed? The motion passes to purchase ghost time for John Purdy. Item number two, military payback for Robert Larkin. I need a motion to approve. Any discussion? All those in favor? Aye. Any opposed? Motion passes to military payback. Time for Rob Larkin. Item number three, request for rescheduling the rehearing for Christopher Branham. His attorney had an issue with the March date, so we're asking to move that to April 11th. I need a motion to approve. So moved. Any discussion? All those in favor? aye any opposed motion passes to have the rehearing scheduled for april 11th for chris branham i'm going to combine the next four their widow's annuities for mrs donald chumley mrs isaac hart mrs barbara kitchen and mrs linda johnson i need a motion to approve is there any discussion yes it is on the um if you read at the bottom it says the minimum is will be granted yes sir ready for a vote all those in favor any opposed motion passes to approve payment for the four widows next item on the agenda we are going through currently going through an upgrade for people soft through the pension system and while setting up and reprogramming that system we have found that there was two widows that accidentally got a cola increase and should not have per the statute the widows should have gotten based on five years age 50 of their deceased husband well they got an actual cola so I wanted the board to let them know that if it's the choice of the board is to leave their annuity as is and then just let them know that they will not get an a a COLA until the appropriate date, which one would be 2020, the other one would be 2021. Is that your recommendation? Yes, it is. So moved. Second. Any further discussion? All in favor of the motion? Aye. Any opposed? Motion passes. One comment. The problem we've always had with the few widows, you know, I call you every year about, has that been corrected? Yes, it has. Okay. The new COLA query has picked them up. Okay, it did. All right. Thank you. Next item on the agenda is the disbursements for February. They're on the agenda. I need a motion to approve. So moved. Second. Any discussion? All those in favor of the motion? Aye. Any opposed? Motion passes for the disbursements for February. Service retirements for police. We have Officer Ryan Mays, retirement effective January 29, 2018. Officer Lorenzo Bueno, retirement effective February 6, 2018. And Officer Richard Rice, retirement effective February 26, 2018. I need a motion, please. Move approved. Second. Any discussion? All those in favor of the motion? Aye. Any opposed? Motion passes. Disabilities, Bobby White, Division of Fire, medical report was completed and distributed. I need a motion. Motion to get clarification from the Dr. Bray. Chris, can you use your mic, please? Your mic. I'll get clarification because I think he based his disability and his current position not as the general role or duties of a firefighter. Yes. Second. Any further discussion? All those in favor of the motion? Aye. All those opposed? Motion passes to get further clarification on Bobby White. Next on the agenda is Christopher Martin, Division of Police. Medical report was completed and distributed. I need a motion. Moved to send to a third doctor. Second. Any discussion? All those in favor of the motion? Aye. Any opposed? The motion passes to send Christopher Martin for an evaluation by a third doctor. Tributes. We have Donald Chumley, Division of Police, passed away on January 7, 2018. Isaac Hart, Division of Police, passed away on January 16, 2018. Benny Zarenka, Division of Fire, passed away on January 17, 2018. Phillip Kitchen, Division of Police, passed away on January 26, 2018. David Johnson, Division of Fire, passed away on January 30, 2018. And Judith Smith, widow of Walter Smith, Division of Fire, passed away on January 14, 2018. On the police side, Sergeant Chumley, Don Chumley, Eichhardt, and Captain Kitchen, I had the privilege of working with all three of them, although I didn't work with Don all that much. But I would like to say that he was the, after he retired, he became the only representative of the retirees and was on this board for many, many years. At that time, he kind of got it started to where we started making a little bit of money because we were all in bonds for years. And I talked to Don on a fairly regular basis. He still was very interested in the pension and all that. Ike, we worked together in patrol for a number of years. He was a very dependable. you knew he was going to be your backup. There was never an issue as far as having to worry. He had your back. He was a fine officer. Captain Kitchen, he originally, I believe, started out on the county and then during the merger came over here. Phil was a great supervisor and I will miss all three of them, especially Don. He still stayed, like I say, very active in what was going on at the pension, watched all the meetings and all that. So they will be missed. Chief, I had the pleasure of knowing everybody except Sergeant Chumley, but I was aware that he was instrumental with this pension plan. When I was a civilian employee at the division of police I knew Ike Hart and I made Phil Kitchens life a little uncomfortable having to supervise me. Chief Zarenka at the division of fire was a member of the University of Kentucky football team, was probably one of the biggest fans of UK you'd ever seen. His motor home was historical in the amount of UK stuff that he had on it. And of course, everybody knew that Chief Zoranka was a big football fan. So they found a toy train and painted it up in the colors of Tennessee and wound it up and sent it through the bedroom at Station one in the middle of the night and Chief Zaranka was not happy. He threw the train down the hole where you slide down the pole and broke the train into lots of little pieces. He had a very deep baritone voice, was a very nice gentleman, loved working with him. Dave Johnson was another really nice guy. Played boogie-woogie piano like you'd never heard. His nickname was Dancing Dave. Loved to play golf. I enjoyed working with him. Judy Smith was the wife of legendary Red Smith. I did not have the pleasure of knowing her, but on behalf of this board and the Urban County Government, I'd like to express our condolences to all the families. As the chair of the board, I would just like to send our condolences out to all the members of these individuals, families. Please identify our both who have served this community. Subcommittee updates. Larry is not here, so there won't be an update on the organizational subcommittee. Tommy, do you have anything on the continuation of benefits or the legislative? Nothing on the continuation of benefits, which is a good thing. And right now there's nothing in the legislative, at the legislature that I'm aware of that's going on. So there's nothing to report. Okay. Any, oh. I have a question on the organizational subcommittee. We had, we came to an agreement on some of the experience studies, recommendations we want to change. We need to put that on the agenda to get it approved by the full board. I'd have to look to, I think we can make motions or we can put it on the agenda either way, whatever the will of the body is. Let's put it on the agenda. Okay, so maybe have Larry prepare something for next month. Yeah. Any informational matters? Just one thing. I just want to thank the three officers that are retiring on service. I can obviously relate to them, and the police department is losing over 60 years of experience, which I know that means a whole lot because I don't hardly know anybody down there anymore. and I haven't been gone that much longer and I hate to tell you but you're getting old too. We're all getting old. Yes. We want to thank them for their service. Chief, I'd like to make note that we've had a problem with retirees 1099s and W2s last month that had to be corrected And from what I'm being told, that seems to be an almost annual problem. I was notified yesterday that it appears that the retirees' paychecks due out tomorrow did not correctly note the changes in federal tax law, and I'm still waiting on further information on that. I think I can talk about the federal tax law. We're having that effective February 15th as required, so that paycheck, I believe, will reflect it in the next one. But I could double-check and get back with you. We put something on the intranet, intranet, whatever's inside, for the employees saying that it would be effective for the next pay period. And so I think that's the same message, but we can get back to you. In clarification, I don't think there was any issues with the 1099-Rs. I think it was just the W-2s in regards to HSA contributions. Any additional items? All those in favor? All those opposed? meeting is adjourned you