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POLICE PENSION BOARD The Police Pension Board meeting was held on August 14, 2014 at 10:03 a.m. with Mr. Lynn presiding in the absence of Chairman Mullaney. Members present were Mr. Stallings, Mr. Unterkofler, Chief Bernat, and Mr. Koenig. Mr. Anderson was absent. AGENDA ADDITIONS/DELETIONS Mr. Stallings moved for approval of the agenda as presented, seconded by Mr. Unterkofler. Adoption of Minutes - Police Pension Board Meeting of May 1, 2014 Mr. Stallings moved for adoption of the minutes of the Police Pension Board meeting of May 1, 2014, seconded by Mr. Unterkofler and unanimously carried. Organizational Issues - Election of Chair Mr. Koenig moved to nominate Mr. Mullaney to serve as Chair of the Police Pension Board, seconded by Mr. Stallings and unanimously carried. Quarterly Performance Review (Quarter Ending June 30, 2014)/Investment Manager Recommendations (Milliman, Inc.) Mr. Jeff Marzinsky, Principal and Employee Benefits Consultant, Milliman, Inc., reviewed the Board Meeting Notes dated August 14, 2014. He advised members that the plan assets as of June 30, 2014 were approximately $12.26M, which was an increase from approximately $11.59M on March 31, 2014 and included contributions and pension payments made during the quarter. Performance of the plan portfolio for the quarter was approximately 4%, which was generally in line with the performance of the plan’s benchmark index of 4.2%. Over the last year, the plan had a return of approximately 14.6%, which he stated was a good return in relation to the actuarial assumption of approximately 7% - 7.5% and would improve the funded status of the plan. Referring to Page 2 of the Board Meeting Notes, Mr. Marzinsky indicated that the Vanguard Prime Cap Fund had been closed to new investments; therefore, it was recommended to rebalance to different investments within the plan. In addition, the Vanguard Morgan Growth Fund had shown underperformance and changes were recommended. Mr. Marzinsky explained that this would be discussed later in the meeting. Mr. Marzinsky reviewed the Quarterly Investment Monitor - Summary Report for the Quarter Ending June 30, 2014. Referring to Page 3 - Market Indices - 2nd Quarter 2014, Mr. Marzinsky explained that the market had a very good quarter ending June 30, 2014, with equity markets performing very well and long-term bonds with very good returns as a result of declining interest rates. He stated that the Federal Reserve had indicated that interest rates would be kept low. Unemployment was down and in the 6% range, which was the lowest it had been in the last five (5) or six (6) years. The U.S. market was looking much better and returns for emerging markets, which were negative last year, were also starting to turn around. Caution was recommended going forward since the Dow Jones Industrial Average and Standard & Poor 500 were at high levels; however, returns for the year to date were “pretty good.” Referring to Page 9 - Asset Allocation, Mr. Marzinsky indicated that the plan had approximately $12.2M invested. He stated that approximately $560,000 was held in a Wells Fargo money market

POLICE PENSION BOARD MEETING OF AUGUST 14, 2014 PAGE 2 account to make monthly benefit payments to members. Mr. Marzinsky stated that the portfolio had a good balance of funds and that the investments are rebalanced to the target asset allocations as needed or when a contribution is received. Referring to Page 10 - Investment Policy Review - Active Management, Mr. Marzinsky stated that the Return Rank compared the plan’s investment managers to similar investment managers. For example, he explained that the Ivy High Income I rank of 4 indicated that this fund ranked in the top 4% of funds in its category. He indicated that funds in the top 50% were doing well and those below 50% were highlighted. Mr. Marzinsky advised members that the Excess Return reflected the performance of the fund compared to the Standard & Poor and Dow Jones Industrial Average market indexes, noting that each asset category had a different index benchmark. Mr. Marzinsky pointed out that the Vanguard Morgan Growth Admiral Fund was highlighted and had negative excess returns, which reflected that this fund underperformed its index by 2.84% over three (3) years and also underperformed over five (5) years. He explained that the Relative Standard Deviation indicates the volatility or risk of the fund compared to the risk of its index, and that a number above 1.0 indicates that a fund is more risky and moves up and down more than its index. Mr. Marzinsky stated that the Vanguard Morgan Growth Admiral Fund was taking on more risk than its market index but its performance was not exceeding the index. Mr. Marzinsky explained that lower numbers in Alpha and Sharpe rank are best, with the 99th percentile being the worst; therefore, the Vanguard Morgan Growth Fund ranked in the bottom third over three (3) years and at 65% or below over three (3) years for Sharpe, which indicated that the manager was not performing well compared to other funds in this category. He stated that other funds were generally performing well compared to the indexes and ranks within their category. There was slight underperformance in the Target Small Capitalization Value T Fund; however, it was taking on a little less risk and still ranked well compared to other funds in its category. Mr. Marzinsky recommended that the Vanguard Morgan Growth Admiral Fund be removed from the plan portfolio and replaced with two (2) other funds, the Vanguard Growth Index and the Vanguard Mid Cap Index, since the Vanguard Morgan Growth Admiral Fund had been investing in both large and small-to-mid-size company stocks. He indicated that if the fund was not exceeding the market index, it would be better to invest in index funds. Responding to Chief Bernat regarding the percentage of the plan portfolio that the Vanguard Morgan Growth Admiral Fund investments represented, Mr. Marzinsky stated that this was approximately 5% of the plan, which was approximately $600,000, 75% of which would be invested in the Vanguard Growth Index Fund and 25% in the Vanguard Mid Cap Index Fund, which would effectively replicate the current investment allocation. Mrs. Mitchell stated her concurrence with this recommendation. Chief Bernat moved in favor of Milliman, Inc.’s recommendation to remove the Vanguard Morgan Growth Admiral Fund from the plan portfolio and invest 75% of the funds in the Vanguard Growth Index Fund and 25% in the Vanguard Mid Cap Index Fund, seconded by Mr. Stallings and unanimously carried.

POLICE PENSION BOARD MEETING OF AUGUST 14, 2014 PAGE 3 Annual Review of Investment Policy Mr. Jeff Marzinsky, Milliman, Inc., advised members that he had redrafted the investment policy prepared by the prior investment advisor and had attempted to simplify the policy. He advised members that an investment policy statement serves as an instruction manual for the board to address their duties. It defines how investment managers are selected and monitored and how it is determined that money will be invested among those managers. Mrs. Mitchell reminded members that Mr. Marzinsky had provided a draft Investment Policy Statement during their meeting held on May 14, 2014. She stated that she compared the plan’s existing policy, the draft policy provided in May 2014, and the revised draft dated August 2014, and felt that the revised draft was a much better and clearer policy. Mr. Marzinsky reviewed the Investment Policy Statement for the City of Dover Police Pension Plan, August 2014. He noted that it assigned responsibilities of the Board, Milliman, Inc. as the advisor, and Wells Fargo as the trustee and set forth a structure for managing the assets. In reviewing Page 3 - II. Statement of Objectives, he advised members that, during their meeting held earlier in the day, the Civilian Pension Board had approved a change in the wording of Objective #9 to read, “Attain a funded status such that the employer has the option to discontinue contributions to the plan if deemed appropriate and fully funded.” Mr. Lynn explained that this change was made by the Civilian Pension Board to clarify the language since members felt uncomfortable with the phrase “terminate the plan if deemed appropriate.” He inquired if members wished to make a similar change. Mr. Koenig moved to amend the language as suggested, seconded by Mr. Lynn. Mr. Lynn explained that, when looking at Objective #9 as written, he was not necessarily sure that it reflected the intent to protect the pension fund. He felt that members would not wish to vest the employer with the ability to terminate the plan; therefore, it would be more prudent to state that funding the plan could be discontinued if it were fully funded. Mr. Unterkofler inquired who would determine if funding would be discontinued. Responding, Mr. Lynn and Mrs. Mitchell stated their opinions that the Police Pension Board would make this decision. The motion to amend the language of Objective # 9 to read “Attain a funded status such that the employer has the option to discontinue contributions to the plan if deemed appropriate and fully funded” was unanimously carried. Mr. Marzinsky explained that the body of the Investment Policy Statement contained the operational goals and objectives for the Board and the actual plan asset allocation was included as Appendix A to the body of the Investment Policy Statement. In this way, the Board could approve the body of the investment policy and make changes to Appendix A - Strategic Asset Allocation Policy as needed.

POLICE PENSION BOARD MEETING OF AUGUST 14, 2014 PAGE 4 Chief Bernat moved to approve the Investment Policy Statement, as amended (Attachment #1), seconded by Mr. Stallings and unanimously carried. Mr. Unterkofler moved to authorize Mr. Mullaney to sign the Investment Policy on the Board’s behalf, seconded by Mr. Stallings and unanimously carried. Mr. Marzinsky reviewed the City of Dover, Delaware Police Pension Plan Asset Allocation Study dated July 2014 that was included with the Quarterly Performance Monitor - Summary Report for the Quarter Ending June 30, 2014. Referring to Page 2 - Optimization Input Review, Mr. Marzinsky explained that Milliman, Inc. had developed projections for market returns over the next ten years, as well as the level of risk. In developing a portfolio, return expectations were weighed against the risk. For example, the U.S. Large Value Fund had an expected return of approximately 8% and an Annual Standard Deviation of approximately 17; therefore, the returns for this fund could increase by 17 percentage points to 25% or decline to -9%. In reference to Page 3 - Input Correlation, Mr. Marzinsky explained that this table reflected how well assets move together. If a portfolio were all equities, they would all go up and down at the same time; therefore, it was desired to mix asset categories to balance movements. Referring to the Page 4 - Individual and Group Constraints, he indicated that Milliman, Inc. set constraints to allow for a minimum and maximum in each asset category in order to prevent over- investment in the same types of assets. Mr. Marzinsky stated that page 5 - Portfolio Options, reflected the Current Portfolio Allocation of approximately 60% stocks and 40% fixed income investments in the fifth column, with an expected return of approximately 6.6% per year on average. He stated that during the previous year, the plan had a return of approximately 14% and the sample portfolios provided options for the Board to consider. If members desired to target a slightly higher return, as in Sample Portfolio #1, equity investments could be increased to approximately 67% and fixed income investments decreased to approximately 33%, although this would slightly increase volatility. Sample Portfolios #2 and #3 reflected the potential for greater returns but also greater risk. He stated that the current portfolio was a “more conservative, middle-of-the-road” portfolio. He advised members that actuarial expectations were for an approximate return of 7.5% per year and meeting this expectation would be a good thing for the funded status of the plan and would also affect the future contributions. Mrs. Mitchell explained that during their meeting of August 14, 2014, the Civilian Pension Board had opted to select Sample Portfolio #1 in an effort to move closer to the actuarial assumption and to help the City with contributions. She did not feel that this would be taking an aggressive approach, such as that in Sample Portfolio #3. She also advised members that this portfolio allocation would be considered at the next annual investment policy review but could also be reviewed on a quarterly basis. Mr. Lynn informed members that during the Civilian Pension Board meeting of August 14, 2014, Mr. Marzinsky had advised members that there would be no fees involved if a more aggressive approach were adopted and it was later decided to return to the original investment.

POLICE PENSION BOARD MEETING OF AUGUST 14, 2014 PAGE 5 Mr. Marzinsky confirmed that the portfolio would be rebalanced each quarter to the selected targets; therefore, no additional trading would be required. Mr. Unterkofler expressed his desire to defer changes to the asset allocation until Chairman Mullaney could be present. Mr. Unterkofler moved to defer consideration of changes to the asset allocation until the next meeting, seconded by Mr. Stallings and unanimously carried. (City Clerk’s Office Note: The City of Dover Police Pension Plan Strategic Asset Allocation Policy is Appendix A to the Investment Policy Statement.) Future Meeting Dates Mr. Unterkofler moved for approval of the proposed meeting dates of November 13, 2014; February 12, 2015; May 14, 2015, and August 13, 2015, seconded by Mr. Stallings and unanimously carried. By unanimous consent, the meeting adjourned at 10:53 a.m. Sean M. Lynn Acting Chairman SML/JS/dd S:\AGENDAS-MINUTES-PACKETS-PRESENTATIONS-ATT&EXH\Misc-Minutes\PENSION\2014\08-14-2014 Police Pension.wpd Attachment Attachment #1 - Investment Policy Statement - City of Dover Police Plan - August 2014

ATTACHMENT #1 Police Pension Board Meeting of 08/14/2014