City of Miami General Employees’ and Sanitation Employees ... Partners Presentation 1Q12.pdf · City of Miami General Employees’ and Sanitation Employees’ Retirement Trust ...

Proprietary and Confidential – Not for Distribution to the Public

City of Miami General Employees’ and Sanitation Employees’ Retirement Trust April 18, 2012

Our History

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Peter Thompson founded Coho Partners, Ltd. in 1999. An avid fly fisherman, Peter named the company after his favorite sport fish, the Coho salmon. The life of this species, particularly during its migration, demonstrates resoluteness in spite of adversity and peril. Because of this characteristic, these salmon are highly prized by anglers for their strength, tenacity, and fight. Our coat of arms, flanked by a pair of these trophy fish, represents the rigor of our selection process and the vigorous attributes inherent in the companies that are carefully chosen for our portfolios. The acorn and wheat sheaf on our shield symbolize both historical and contemporary characteristics that we desire to emulate. Since the times of heraldry, the acorn has been the symbol of growth and strength. The wheat sheaf once meant a secure harvest. Today, it signifies trust. Placed within a shield denoting resolution and production, the red border signifies defense and the blue of the saltire, truth and loyalty. Since its inception in 1999, Coho Partners has produced consistent, competitive returns and has been able to protect those gains during difficult periods. Stable companies that grow their revenues, earnings, and dividends in various economic climates are the trophies that we seek for our portfolios. We are more interested in tenacity, endurance, and navigation skills, than pure speed. Today, Coho Partners is owned by four employees – Peter Thompson, Rick Wayne, Brian Kramp and Glenn Dever.

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• Be explicit and up front as to who we are and what we expect to accomplish with

potential clients – we do not purport to be a fit for everybody

• Consistently execute our investment strategy at a high level of competence and integrity

• Provide an exceptional client experience through superior returns, thoroughness and honesty in our reporting, and uncompromised availability and service

• Client focused with a relentless attitude of continuous improvement in all of our endeavors

• Treat our clients as we would want to be treated

Our Pledge

• 100 percent employee ownership provides for stability of key employees and preservation of firm culture

• Remain a boutique firm focused on our Relative Value Equity strategy

• Outsource non-core competencies – additional hires will be in investment and client service areas to accommodate growth

• Asset growth will be measured and will allow for appropriate growth in support and continuity of culture

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Our Strategic Vision

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Coho Partners, Ltd. Organizational Chart

We firmly believe that the best method to create and sustain long-term wealth is to:

• Protect principal in down markets

• Generate competitive returns in all but the most speculative of up markets

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Preservation in Down Markets Participation in Up Markets

* Average Quarterly Returns in Down Markets and Up Markets as defined by the Russell 1000 Value Index since inception 10/1/2000 through 3/31/2012.

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Coho R1000 Value S&P 500

Our Investment Philosophy

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Coho R1000 Value S&P 500

We believe that the optimal way to achieve this desired pattern of returns is to:

• Narrow our focus to a highly selective, advantaged, and manageable universe of companies that have shown long-term predictable growth, regardless of the economic environment

• Utilize a conservative and vigorous valuation analysis which allows for significant long-term returns

• Execute a thorough, concentrated research process on these companies

• Construct portfolios to maximize the impact of our stock selection and to achieve the desired risk and return characteristics

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Our Investment Process

We screen 2000 companies with market caps over $1 billion, quantitatively and intuitively for:

• Stability – low variability in earnings, revenues, and financial strength

• Growth – absolute and relative growth in earnings, revenues and dividends

• Profitability – capital intensiveness and excess free cash flow generation capacity of the business model

• Quality – balance sheet strength, management depth, integrity and execution

• Shareholder focus – transparency of financials and operational strategy, capital allocation preferences – dividends, buybacks, acquisitions

The result is a highly selective, advantaged universe of approximately 250 companies – our “Coho 250”.

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The Investable Universe

Earnings

Dividend

Price

Relative Price

Source: Securities Research Company 9

Demand Defensive: What We Own / Won’t Own

Source: Securities Research Company 10

Economically Sensitive: What We Own / Won’t Own

A stock is chosen for the portfolio when:

• It meets our earnings, dividend, and cash flow growth and stability criteria

• We have established comfort with the long term qualitative aspects of the investment

• We have met/talked with relevant management, competitors, customers and suppliers

• Our dividend discount model shows at least 600 basis points of annualized expected excess return over the risk-free alternative (5-10 year Treasury)

• We have completed our “Position Paper”

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Buy Discipline

The Position Paper is completed to objectively identify and monitor major operating and financial metrics that we expect the company to maintain or achieve at specific points in time:

Operating Metrics • New Product Introduction • Organic Revenue Growth • Market Share Gains • End Market Expansion • Elimination of Non-Core Businesses

Financial Metrics • Earnings Growth and Quality • Balance Sheet Integrity • Share Reduction • Cash Flow Generation • Margin Targets and Trends • Dividend Payout Ratio and Policy • Capital Intensiveness

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The Position Paper

A stock is eliminated when:

• It reaches its performance target and the expected excess return falls to 200 basis points versus the risk free alternative

• Position paper metrics are violated

• A new idea displaces the current holding

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Sell Discipline

Favored • Consumer Staples • Health Care • Integrated Oil Companies- Cash Generators • Consumer Discretionary • Moderately Cyclical Industrials • Service Oriented Technology • Niche Financials

Not Favored • Utilities • Basic Materials/Commodities • Technology Producers • Deep Cyclical Industrials • Refiners, E&P Energy Companies

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Sector Preferences

Source: Advent Systems, Standard & Poors, and Russell Investment Group. Data as of 3/31/12 15

Sector Weights

Sector Coho Partners Range Russell 1000 Value S & P 500 Consumer Staples 27.9% 10-40% 7.7% 10.8%

Health Care 18.5% 5-25% 12.3% 11.4%

Information Technology 10.7% 5-25% 9.1% 20.5%

Energy 10.8% 5-20% 11.6% 11.2%

Consumer Discretionary 10.5% 5-20% 9.3% 10.9%

Industrials 7.8% 5-20% 9.3% 10.6%

Financial Services 5.4% 0-25% 26.8% 14.9%

Materials 4.1% 0-10% 2.6% 3.5%

Telecommunications 0.0% 0-5% 4.4% 2.8%

Utilities 0.0% 0-10% 6.9% 3.4%

Cash 4.3% 0-5% 0.0% 0.0%

Total 100.0% 100.0% 100.0%

Demand Defensive Companies •Largely impervious to the level of economic activity •Consumer Staples, Health Care, Integrated Energy •Most predictable growth in earnings, dividends, and

cash flow •Significantly outperform in down markets •Compete in all but the strongest up markets

Economically Sensitive Companies •Stable business models with modest cyclicality •Consumer Discretionary, Industrials, Technology,

Financials •Provide competitive upside performance in rising

market

Portfolio Guidelines •25 – 30 stocks in the portfolio •40% - 80% in Demand Defensive companies •20% - 60% in Economically Sensitive companies •Security weighting range of 2% - 6% of portfolio •Cash tends to be less than 5%

Time period: October 1, 2000 – March 31, 2012

Portfolio Construction

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0%

50%

100%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Perc

ent o

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Cash Economically Sensitive Demand Defensive

Our primary concern as an investment advisor is protecting principal, therefore we are highly focused on risk control and approach this task in a number of ways:

• Each stock in our entire investable universe of “advantaged companies” is explicitly chosen for their defensive characteristics

• Our valuation discipline ensures that within this investable universe, the portfolio is focused only on those particular stocks with reasonable expectations and valuations

• Our portfolio construction is always focused on the most economically insensitive and risk adverse sectors and business models

• Our non-systematic risk is diversified over 25-30 holdings, where factor and business model correlations are carefully monitored

• The resulting portfolio confirms the sum of the parts with overall characteristics that themselves lend downside protection relative to the market – portfolio “shock absorbers”

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Risk Control

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Portfolio Holdings as of March 31, 2012

3/31/2012 % OF 3/31/2012 % OF SECTOR / SECURITY PRICE ASSETS YIELD SECTOR / SECURITY PRICE ASSETS YIELD

CONSUMER STAPLES CONSUMER DISCRETIONARY ALTRIA GROUP INC. 30.87 3.2 5.3 FAMILY DOLLAR STORES 63.28 3.4 1.3 COLGATE PALMOLIVE CO. 97.78 3.6 2.5 LOWES COMPANIES INC. 31.38 2.5 1.8 CVS CAREMARK CORP. 44.8 3.9 1.5 OMNICOM GROUP INC. 50.65 4.6 2.4 JM SMUCKER CO. 81.36 3.1 2.4 10.5 PHILIP MORRIS INTL INC. 88.61 4.5 3.5 INDUSTRIALS PROCTER & GAMBLE CO. 67.21 4.3 3.1 3M COMPANY 89.21 3.9 2.6 SYSCO CORP. 29.86 3.1 3.6 ILLINOIS TOOL WORKS INC. 57.12 3.9 2.5 WALGREEN 33.49 2.1 2.7 7.8

27.9 FINANCIALS HEALTH CARE CULLEN/FROST BANKERS, INC. $58.19 2.1 3.2

ABBOTT LABORATORIES 61.29 3.6 3.3 MARSH & MCLENNAN CO. $32.79 3.3 2.7 AMGEN INC. 67.97 3.3 2.1 5.4 BECTON, DICKINSON & CO. 77.65 3.7 2.3 INFORMATION TECHNOLOGY JOHNSON & JOHNSON 65.96 3.6 3.5 AUTOMATIC DATA PROCESSING INC. $55.19 3.1 2.9 UNITEDHEALTH GROUP INC. 58.94 4.3 1.1 INTERNATIONAL BUSINESS MACHINES $208.65 3.9 1.4

18.5 MICROCHIP TECH INC. $37.20 3.7 3.8 ENERGY 10.7

CHEVRON CORPORATION 107.21 3.4 3 MATERIALS CONOCOPHILLIPS COMPANY 76.01 3.6 3.5 AIR PRODUCTS $91.80 2 2.8 ROYAL DUTCH SHELL PLC-A 70.13 3.8 4.1 INTERNATIONAL FLAV&FRA COM $58.60 2 1.8

10.8 4

CASH AND EQUIVALENTS 4.3

TOTAL PORTFOLIO 100 2.8

Source: Thomson Reuters Baseline; Standard & Poors; Russell Investment Group. Data as of 3/31/12. 19

Portfolio Holdings-Based Characteristics

Coho Relative Value Russell 1000 Value S&P 500

Current Holdings 28 654 500

Range of Holdings 25-30 - -

Dividend Yield 2.7% 2.3% 1.9%

Dividend Growth (Last 5 Years) 12% -9% -3%

EPS Growth (Last 5 Years) 5% -2% 3%

EPS Growth (Next 5 Years) 9% 9% 11%

P/E (4 Qtrs. trailing) 14.6x 12.2x 13.7x

P/E (4 Qtrs. forward) 13.4x 12.3x 13.4x

Price/Book 2.9x 1.6x 2.3x

LT Debt/Capital 34% 39% 33%

Return on Equity (Last 5 Years) 26.0% 23.9% 14.8%

3 Year Annualized Turnover 14.6% - -

Beta 0.74 1.08 1.00

Weighted Average Market Cap $71.0 B $79.0 B $111.6 B

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Excess Returns 8.22%

Standard Deviation 16.35%

Alpha (Jenson) 5.80%

Tracking Error 8.30%

Information Ratio 0.99

Sharpe Ratio 0.38

Beta 0.68

Market Proxy: Russell 1000 Value Index Risk Free Rate Proxy: 3 Month T-Bills Source: eVestment Alliance Data current through 3/31/12

5 Year Risk/Reward Comparison

Coho Relative Value

S&P 500

R1000 Value

Standard Deviation

Rat

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Returns-Based Characteristics

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* Coho Relative Value Equity composite, gross of fees

** Coho performance relative to the S&P 500 Index

Source: Advent Systems, Standard & Poor’s, Coho Partners

Market Cycle Time Period Duration Coho Relative Value Equity* S&P 500 Coho relative to

S&P 500 **

Bear 4Q00 – 3Q02 8 qtrs -8.4% -41.7% 20.2%

Early Bull 4Q02 – 4Q03 5 qtrs 33.7% 39.4% 85.5%

Mature Bull 1Q04 – 3Q07 15 qtrs 49.2% 47.0% 104.6%

Bear 4Q07 – 1Q09 6 qtrs -28.6% -45.8% 62.4%

Early Bull 2Q09 – 3Q09 2 qtrs 23.9% 34.0% 70.5%

Mature Bull 4Q09 – 1Q11 6 qtrs 30.8% 29.2% 105.3%

Bear 2Q11 – 3Q11 2 qtrs -7.3% -13.8% 53.2%

Bull 4Q11 – 1Q12 2 qtrs 21.9% 25.9% 84.6%

Our Pattern of Returns / Performance Expectations

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Russell 1000 Value

S&P 500

Russell 1000 Growth

Time

$159

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100

Source: Advent Systems, Russell Investment Group, Coho Partners

$239

Performance Since 10/1/2000 Inception to 3/31/2012

* Gross-of-fee performance does not reflect the payment of advisory fees and other expenses.

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Performance – As of 3/31/2012

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1Q2012 1 Year 3 Year 5 Year 10 Year Inception 10/1/2000

Coho Partners R1000 Value S&P 500

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Name Position Joined Coho Relevant Experience

Peter Thompson Partner / Chief Investment Officer 1999 28 years

Glenn Dever Partner / President 2009 27 years

Sheila Heenan Client Service Manager 2003 14 years

Brian Kramp, CFA Partner / Portfolio Manager / Research 2006 28 years

Lisa Moneymaker Client Service Manager 1999 11 years

Rick Wayne, CFA Partner / Portfolio Manager / Strategy 2004 28 years

Our Team

Peter A. Thompson Partner / Chief Investment Officer In 1999, Peter formed Coho Partners, Ltd. He is the chief investment officer of the firm and is responsible for maintaining the firm’s investment philosophy and process. His responsibilities include portfolio management and company research. He is a partner of the firm and a member of the Board of Directors. Prior to forming Coho Partners, Peter spent 10 years with the investment-counseling firm of Cooke & Bieler. There he oversaw a wide range of research and portfolio responsibilities. In addition to managing stand-alone portfolios, he played an integral role in the development of three of the firm's mutual funds for which he was also the portfolio manager. Peter began his investment career with Kidder, Peabody & Company. During his time there, Peter was involved in research and ultimately promoted to a position of oversight on the firm’s Stock Selection and Investment Policy Committees. Peter graduated from Princeton University, with a Bachelor of Arts Degree in Economics. He received an MBA from the University of Virginia's Colgate Darden School of Business Administration. Glenn A. Dever Partner / President

Glenn joined Coho Partners, Ltd. in 2009. As president, he is responsible for managing the non-investment activities of the firm including, day-to-day operations, legal, compliance, information technology, marketing and sales. He is a partner of the firm and a member of the Board of Directors. Before joining Coho, Glenn spent 12 years with Turner Investment Partners. His responsibilities included head of institutional client service and sales, and eventually as chief marketing officer, he was responsible for global sales, marketing and client service. Glenn was also employed by Delaware Investment Advisers, where he worked with institutional clients to keep them abreast of investment results and portfolio changes. He was a senior consultant with New England Pension Consultants, Inc., working with institutional plan sponsors to establish written investment policies, asset allocation, manager selection, transition plans, and performance measurement. He began his investment career with Ameritech Corporation, one of the largest corporate pension and savings plans in the U.S. at the time.

Glenn graduated from Miami University (Ohio) with a Bachelor of Science degree in Finance. He received an MBA in Finance from Loyola University Chicago. 25

Our Team

Sheila M. Heenan Client Service Manager Sheila joined Coho Partners Ltd. in 2003. She is responsible for client service and administrative support. Her career in finance spans twenty years. She worked at PSFS/Meritor with departmental responsibilities for the administration of escrow accounts. At The Resolution Trust Sheila was responsible for designing and maintaining procedures to comply with governmental mandates before rising to the position of Oversight Manager. Sheila was also responsible for all administrative support at the investment firm of Wilmerding & Associates. Sheila graduated from the Moore College of Art with a Bachelor of Fine Art in Painting. She attended Saint Joseph University and Cabrini College. Brian L. Kramp, CFA Partner / Portfolio Manager / Research Brian joined Coho Partners, Ltd. in June, 2006. His primary responsibilities include company research and portfolio management. He chairs the weekly investment committee meeting and manages the quantitative screening process which helps define our “Coho 250”. He is a partner of the firm and a member of the Board of Directors. Before joining Coho, Brian was employed by Morgan Stanley / Miller, Anderson, and Sherrerd as a research analyst/portfolio manager. He rose to the position of executive director and held significant responsibility for portfolio management, equity research and client service on the large cap core and value equity teams. Prior to this, Brian was an analyst / portfolio manager for Meridian Investment Company, where he managed or co-managed several equity funds. Brian’s initial position with Meridian was in their asset management unit as a personal trust investment officer focusing on managing individual and institutional accounts. He began his investment career as a financial advisor for a regional brokerage firm in Allentown, PA. Brian graduated from Muhlenberg College with a Bachelor of Arts Degree in Business Administration and Accounting. He earned the right to use the Charter Financial Analyst designation.

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Our Team

Lisa B. Moneymaker Client Service Manager Lisa joined Coho Partners in 1999. She designed the company's administrative systems, manages client service, oversees client record keeping, updates regulatory and industry databases, administers proxies and oversees company finances. Lisa previously worked at Aramark, as manager of Cash Operations with the responsibility for centralizing all cash administration for 25 subsidiaries. She also worked at Girard/Mellon Bank where she rose to senior corporate cash management officer. Lisa is a cum laude graduate of the University of Richmond with a Bachelor of Science Degree in Finance. Rick S. Wayne, CFA Partner / Portfolio Manager / Strategist Rick joined Coho Partners in 2004, to lead the High Net Worth Group. In addition to his portfolio management responsibilities, Rick is a member of the Investment Committee and is the firm's chief strategist. He is a partner of the firm and a member of the Board of Directors. Prior to joining Coho, Rick was a senior vice president at PNC Advisors where he specialized in discretionary investment advisory relationships. In addition, he played an integral role in the design of the bank’s portfolio management system and analytic software. Rick was also a member of the PNC Stock Selection Committee and various strategic committees. Additional responsibilities included portfolio manager training. Rick began his investment career at Morgan Stanley Dean Witter, where for 11 years he managed individual client portfolios with primary responsibilities in sales and portfolio management. Rick graduated from the Wharton School of the University of Pennsylvania with a Bachelor of Science Degree in Economics. At Wharton, Rick majored in Marketing with a minor in Finance. He earned the right to use the Charter Financial Analyst designation.

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Our Team

• Affiliated Distributors • Beaumont Retirement Community • Benchmark School • Connecticut Yankee Atomic Power Company • DiGiorgio Retirement Plan • Eastern University • Ewing Cole Pension Plan • FMC Corporation • Friends School Haverford • Georgia Baptist Foundation • Jessie Smith Noyes Foundation

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This list is comprised of tax-exempt and taxable institutional clients, including employee benefit funds, corporations, non-profits, endowments and foundations greater than $1 million. Coho Partners does not use performance related criteria for the selection of clients on this list. Inclusion on this list does not represent an endorsement of Coho Partners, nor does it indicate whether any of these clients approve or disapprove of Coho’s services.

• Kelly’s Sports, Ltd. • The Louis Cassett Foundation • Maine Yankee Atomic Power Company • Muirfield Foundation • Nephrology Associates, P.A. • The Oak Hill Fund • The Pennsylvania Horticultural Society • Tabor Children’s Services Inc. • The Visiting Nurse Society of Philadelphia • Woodlynde School • Yankee Atomic Electric Company

Representative Client List

First $25 Million 0.50%

Remaining balance 0.40%

Fees are billed quarterly in arrears. The fee is calculated based on assets under management on the last business day of the calendar quarter and pro-rated accordingly.

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Fee Proposal

Mr. Scott Renninger Independence Asset Advisors, LLC President & CIO 610-234-2209 [email protected] Mr. Randy Woods FMC Corporation Pension Investments Consultant 312-861-6160 [email protected] Ms. Ellen Harvey The Oak Hill Fund Board of Directors 610-526-9920 [email protected] 30

References

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Coho Partners, Ltd. is an independent investment management company not affiliated with any other entity and is a registered investment adviser under the Investment Advisers Act of 1940. Coho Partners, Ltd. manages assets for institutional employee benefit plans, endowments, foundations, corporations, eleemosynary organizations, individuals, trusts and estates. This composite was created in October 2000. The name of the composite was changed from the Coho Tax Exempt Equity composite to the Coho Relative Value Equity composite on July 1, 2011. A complete list and description of the firm’s Composites is available upon request. Coho Partners, Ltd. has been verified on a firm-wide basis according to GIPS standards for the period 10/1/2000 through 12/31/2010. The Coho Relative Value Equity composite has received a Performance Examination for the period 10/1/2000 through 12/31/2010. The verification report is available upon request. Additional information regarding the firm’s policies and procedures for calculating and reporting performance results is also available upon request. The Coho Relative Value Equity composite includes all discretionary, fee-paying, non-wrap separately managed institutional and high net worth equity portfolios of at least $1 million managed for at least one full month. Portfolios may be excluded from the composite due to investment restrictions, frequent cash requirements, legacy positions, or other situations that may prevent the portfolio from being managed in accordance with the composite strategy. The strategy for all portfolios included in the Coho Relative Value Equity composite is to invest only in selective equity securities while maintaining a diligent focus on preserving capital and maximizing client returns. The composite returns reflect the reinvestment of dividends, capital gains, and other earnings when appropriate. “Gross of fees” performance returns are presented net of actual trading expenses. No other fees are deducted. “Net of fees” performance returns are calculated net of actual trading expenses and management fees. No other fees are deducted. The maximum management fee charged to portfolios in this composite is 1.00% annually, pro-rated on a quarterly basis. All returns are expressed in U.S. dollars.

Coho Relative Value Equity Composite Important Disclosures

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(1) Effective January 1, 2009 the Russell 1000 Value Index became the primary performance benchmark and the S&P 500 Index became the secondary benchmark. A previously utilized benchmark, the Russell 1000 Index, was removed due to the company’s belief that the Russell 1000 Value Index and the S&P 500 Index more accurately reflect the characteristics of the actual composites and investment philosophy of each composite. Composite dispersion, which represents the consistency of performance of individual portfolio returns within the composite, is measured using standard deviation across asset-weighted portfolios for the preceding twelve months. Past performance is no guarantee of future results.

Year

Gross of Fees

Return % Net of Fees Return %

Russell 1000 Value (1) Return %

S&P 500 Return %

Number of Portfolios

Composite Dispersion

% Composite

Assets ($M) Total Firm Assets ($M)

1Q2012 7.93 7.83 11.12 12.59 33 0.32 301.7 791.1

2011 10.83 10.39 0.39 2.11 38 0.32 290.1 688.1

2010 16.03 15.47 15.51 15.06 14 0.58 75.7 445.2

2009 18.36 17.82 19.69 26.46 12 1.09 50.2 337.8

2008 -16.97 -17.34 -36.85 -37.03 11 0.93 28.1 248.2

2007 5.29 4.80 -0.17 5.48 11 1.06 36.3 282.3

2006 17.16 16.58 22.25 15.80 12 0.89 47.7 257.2

2005 0.50 0.10 7.05 4.88 11 1.25 33.2 179.4

2004 15.37 14.91 16.49 10.92 11 1.12 36.2 119.4

2003 23.94 23.61 30.03 28.68 12 1.99 44.3 89.6

2002 -13.19 -13.39 -15.52 -22.15 9 0.64 30.4 72.2

2001 1.89 1.44 -5.59 -11.90 7 1.66 33.3 75.0

4Q 2000 11.66 11.52 3.60 -7.83 <5 0.72 10.4 22.0

Coho Relative Value Equity Composite Important Disclosures