July 9th and so that markets are back up and we're officially year-to date back in positive territory. But again, just any news that has come out about lowering tariffs or new deals with uh countries. So the UK deal, the temporary
deal with China, sorry. Um uh so the UK deal, the temporary deal with China to lower the 145 down to 35%. Um and then April inflation data came in at
2.3%. All this good news is building up and that's why we've seen markets rally. So uh hopefully as more deals roll in um and we get lower tariffs across the board, it sounds like the bottom is going to be 10% for most countries. um as we get those deals
finalized, I think that could be potential tailwinds for markets. Anytime we hear the threat of amplified or uh increased tariffs, that's when we've seen the market sell off. Um and then lastly, uh to your question, you know, how do we design the portfolio to kind
of hedge against uh the uncertainty we're seeing? Uh we do have investments internationally. We do have some alternatives like global infrastructure, private real estate that have done well. Uh and here is a good reason why we keep that diversification. So on page eight, you'll see, you know, it's been a nearly
17-year period that US has outperformed international. This is the first year that international has actually significantly started to outperform the US. And so through Friday, uh the MSCIE, so that's developed markets international, is up
16.3% year-to date. And so that excludes China. Emerging markets, which uh China falls under, up 10.1%. The S&P 500 through Friday was actually down slightly 8%. Now again, the markets are up one and a half to 2% today uh on the
back of the news over the weekend that we're um extending that 50% uh tariff uh deadline for the EU till July 9th. The markets are back up. So we're we're likely slightly positive years in the US markets. But again, this is why we have
that diversification. Uh the big reason you know outside of uh the new administration's policies uh why the US markets have underperformed is the magnificent seven. So Tesla, Apple uh and Alphabet are all
down significantly over 10% year-to- date. Uh and as a whole, those seven companies that have led markets in 23 and 24, they're down on average, you know, roughly 3 to 4% uh year to date. So they're a significant portion of the index. The S&P 500 is cap weighted. So
the largest companies have a larger portion of the index. So anytime those any one of those seven companies underperform, it's going to drag down the markets overall. And on the right, you can actually see Nvidia, one of the largest components of that, which has been the best performer in 2030 24. you
actually just took that company out uh going back to October of 22 and compared the US market minus that one uh company versus Japan and Europe, we would have actually underperform those two regions. So that's the significance and impact that just one of the magnificent seven
has had on our overall market. Uh with that we can hop into the report and I'll give you those numbers. Uh and then I'll go back to the handout just for an update on one of your managers, American Fund Europacific. But in the report, if you go to page
five for the quarter, we were down slightly. So overall, the total plan was down 183,000 or 1.4%. Uh in line with your strategic model, which was down 1.3%. And your best performers were again international
developed market index fund was up 6.8%. Conan Steer's global infrastructure fund was up 5.2. And that portfolio is roughly 50% US, 50% international. And then Sawrass, your fixed income manager, was up 3.1%. Fiscal year to date, so we're
halfway through the fiscal year as of March 31st, down 27,000 or 1.5%. Uh, again, in line with your strategic model, which was down 1.6%. For the one year, so 12 past 12 months, you still earned 738,000 or 5.9%. And
again, right in line with your strategic model and ranked in the top 43rd percentile. So outperforming about 60% of your public pension peers across the country. Best performers for the past year, global infrastructure up 14.8%. Uh
your S&P 500 index fund up 8.3% convertible 7.4 and high yield up 7.4. So if you look there just on the one-year period again some of those areas that we've diversified away from US global infrastructure convertibles and high yield three of your uh best
four performers for the past year and then if we go down a little bit further for the past five years despite all the volatility whether it's the pandemic inflation spiking and the market selling off in 22 or the current uh volatility of the market you've still earned 5.7
million or 10.2 on an annual base 10.2% 2% on an annual basis uh over that time period. So very happy with how the portfolio has performed. If we flip over to page uh page nine, just a quick highlight of your current
allocation verse your targets. So again, the gold bars there are your targets. Blue is where we're actually 31st. So again, slightly underweight US equities, which helped for the quarter while US markets sold off. Slightly
point out here. Um the first one, Fidelity Small Cap Index, somewhat surprised in the uh how poorly small caps did for the first quarter. So historically when there's volatility from a global standpoint like we're seeing with trade policy, there's less
of an impact on small uh companies because they're more domestically focused. So very surprised to see that it sold off more than midcap and small uh large cap. I would expect we should see a strong rebound from small cap um in the coming quarters especially from a valuation standpoint.
Um large cap is still somewhat overvalued uh from a historical standpoint. Small cap is significantly undervalued to its historical averages. So uh eventually those valuations will matter and so I would expect at some point we'll see small cap start to outperform. The other fund I'll
highlight is the American Fund Europe Pacific. Uh again for the quarter it underperformed. So you can see versus the index it was up 2.7. The index was up seven. Uh that's why we've diversified uh almost twothirds of it away to that index fund the Vanguard
Footsie developed markets. Uh and so with that, if you go back to the handout, just want to give a quick highlight of American Funds, why it underperformed for the quarter and why our recommendation currently is just to remain patient. Uh we'll consider
changes next quarter if we see continued deterioration in their performance. But on page 10 of the handout, this is just a snapshot for the quarter of what went well and what didn't work for for their portfolio. And so what I'll touch on here is two of their largest holdings that underperformed and caused most of
their underperformance for the quarter. Novo Nordis probably a name you're not familiar with but it's one of the largest pharmaceutical companies internationally. Uh you probably know more so their drugs ompicgo and rebelsis. They are the new weight loss
drugs or diabetes drugs that are being used off-brand for weight loss. Um so they are one of the first to market with the weight loss supplements uh excuse me drugs. uh had huge runs in 23 and 24 based on that. Unfortunately, competition has caught up. Uh,
additionally, the Trump administration signaled that they were going to impose tariffs on pharmaceutical imports. We've seen some some language come out from the administration that it may not be tariffs. that may be negotiating, you know, most favored nations so that where
pharmaceuticals are charging less abroad, they will now have to charge those same prices here or raise their prices abroad. So, we don't know what that's going to look like, but again, that that impacts their revenue stream as well as their bottom line. Uh on top of that, they're in late stage clinical
trials for a new weight loss drug um trying to get ahead of the competition. Unfortunately, they had underwhelming um results in that latest stage trial. And so again, kind of the three-headed monster, all three of those things. in the AR AI arms race, we want to be
ahead of those uh countries we're competing with. Um and so anytime there's tariffs talked about or export controls, again, that leads to a write down in revenues, projected revenues as well as earnings. And so with that, they sold off for the quarter. So, two of
their largest positions underperformed for the quarter. On page 11, the reason why we're recommending patience. Uh, it's no surprise really since the start of the pandemic in 2020, markets have been a little wonky across the board. It's been very hard for active managers,
international, US, you name it, to outperform their benchmark. Um, so you can see here this chart on page 11. If you look down the first column, this is looking at the end of 2020 through March of 2025. American Funds has been one of the worst uh international managers
underperformed its benchmark by about 4% over that time period on an annual basis. However, if we kind of write off the pandemic period and we look at the past two decades, so from 2020 2020 back to 2010 and then 2010 to 2000, they've
been consistently one of the best performers in terms of international managers. So that decade from 2010 to 2020 outperformance benchmark by nearly 2 and a half% on an annual basis ranked in the top first percentile. Same thing for the decade 2000 to 2010
outperformance benchmark by nearly 1% on annual basis and ranked in top seven percentile. So again, I think buying a little patience um will consider next quarter if they continue to deteriorate from a performance standpoint, making some changes, but we've already carved
out twothirds of the portfolio and put in the index, which has done well. Um I would put money on them returning to their longerterm averages of outperforming in the next year. Um, and again, if they don't, if we continue to see them significantly underperform, we
would likely consolidate to the index and then bring a search in to uh potentially add a different active manager there. But as of right now, just recommending a little more patience. Um, I think they're So um no recommendations again uh Capital City is going to rebalance as
they see opportunities in this volatile market. Uh so that cash underweight is a little bit overweight excuse me is probably come down already. Um and would expect if we see any volatile more volatile markets where markets sell off by five 10% they'll put a little bit
more to work. So um with that I will conclude my report and just open it up to to any questions you have about the portfolio or markets overall. Anna, can you hear us? We can't hear you. Can you hear me? Yes, now we can. Go
ahead with your report, please. Thank you. Um, okay. So, you should have in front of you the drafted ordinance that applies to all three plans um to add in the partial lumpsum option that we spoke about at our last meeting. Um, the
language is um pretty self-explanatory. It just gives the options 5, 10, 15, and 20% uh that will be paid under the normal form uh or optional form as per the section uh the relevant section in the plan. This was recently sent to Patrick to get an impact statement for.
Um because our meetings were delayed and rescheduled, he hasn't had this request for long. Um so I'm sure it will not be an issue for him to have it before the next meeting. Once we get that impact statement, I can provide the necessary materials um to city council and
hopefully get this passed um you know, as quickly as we can. Were you able to catch all that? Most of it. Okay. Um, basically just to summarize, um, this is the ordinance that was requested, um, for all three
plans. I submitted it to Patrick. He had previously, um, okayed the language. I submitted it to him, um, now that it's completed and requested an impact statement, um, which I think should be no problem for him to have ready for the next meeting. And once that gets
approved, we can provide the materials to city council and hopefully get this passed as quickly as possible. Thank you. Now, they also have the letter for reminding them to do their form one. Yes. Just a um you know, another reminder, your form one is due
July 1st. Um the form has to be done electronically. And from what I understand, once you fill out the form this year, um the next time you fill out the form, everything that you entered should autopop populate. So, moving forward, um it should be relatively easy to um get all your information in and
submit on time. But if you have any questions, please feel free to email me and I will get you the help that you need. Anything else? That's it. Thank you. Thank you. as there there's not been a actual
impact letter with this yet. Once we receive it, we assume that there will be no impact to the plan. So we're sure that I can't. Yes, we will need a special meeting to to get these things approved, especially
if you want to negotiate partial as part of the soy meeting as soon as possible. Yes.
Yes, that's already been done. But Anna, as far as I know, there's no ordinance been written for a fixed rate. Has there? No, there hasn't. So, we'll need to have a meeting to authorize you to um draft an advance
with fixed range so we can get after. Exactly. She's the chair. Yes. Question. Thank you. Will you be available on Wednesday, June
4th to join remotely if there's a special meeting scheduled? Kyle, are you talking to me? Okay. Sorry, it's very difficult to hear. Um, you said must be breaking over June 4th at 12.
Yes. Okay. We will schedule a special meeting for 1:00 on Wednesday, July 4th. Okay. It's ajourned. Anna, thank you.