CAPITAL DISTRICT KIWANIS FOUNDATION, INC.
Meeting of the Board of Directors
May 10, 2014
The 196th meeting of the Board of Directors of the Capital District Kiwanis Foundation was held on Saturday, May 10, 2014 at the Fredericksburg Hospitality House.
President - Elect Gary Boswell opened the meeting at 10:00AM and led the Pledge of Allegiance and Nancy Simonelli gave the invocation.
Introduction of Guests: Gary Boswell introduced past governor John Tyner and Past District Foundation President Dale Collins.
The following members were in attendance:
Approval of Agenda- Motion to approve was made by Ken Hogan. Second by Jon Rife. Motion passed.
Minutes of the February 8, 2014 Meeting: Motion to approve the minutes as corrected circulated was made by Tim Wesling and seconded by Brain Bell. Motion passed.
Treasurer Report: Marion Allen presented the Treasurer’s report which was circulated to the Board and is posted on the CDKF Web Page under Reports- Resources- Capital District Kiwanis Foundation Financials- March 2014. A motion to accept the Treasurer’s report was made by Carolyn Richar and seconded by Joe Maranto.The motion passed.
Life Membership: Secretary Charles Adams reported that we have 7 new life members since the last meeting.
Caring Corner: Chair Floyd Brown reported theme baskets will be donated to raffle at the DCON. Also asking each division to bring new, quality items to be sold in the Caring Corner. First Lady Missy Zimmerman has been promoting the Caring Corner at the Mid-winter conferences.
Ducky Derby: Bob Cassada reported that adoption certificates should be out to the clubs now. Each director was asked to make a $50 donation or obtain a donation of the same value as additional prizes for the Ducky Derby. Gift cards can be donated as prizes. Cash prizes can also be donated by the Directors. Email Bob as to what you are going to give. If the treasurer cannot read the Ducky Derby certificate at the DCON, it will be withdrawn and another one drawn in its place.
Founder’s Society- Bernice Oden No report.
Finance Committee – Gary Boswell reported that the committee recommended that 3 CD’s be rolled over for a one year term- $75,000 on May 15th, $50,000 on May 28th. Kopeland Fund-$13,000 in June. Moved by Ken Hogan, second by Joe Maranto to roll over the CD’s. Motion passed. This will be voted on by the Board following the Financial Advisor’s report.
Financial Advisor’s Report – May 8, 2014 Bob Cressy
Disclaimer Note: Comments on the markets are my viewpoints as of this date and not those of Lombard Securities. I have continuing teleconferences with and significant input from major financial institutions such as PIMCO, JP Morgan, Lord Abbott, American Funds, S&P Advisor’s and numerous MF companies, etc., on past & current market conditions and trends. Of course, past performance does not guarantee future performance.
FINANCIAL ADVISOR’S COMMENTS
My General Comments
Last December the Fed began to cut back the federal bond buying ‘program’ known as QE from $85 BILLION dollars per month. It has cut purchases several times this 1Q14 and just did so again by another $10 billion to $40 Billion per month. There was a not so successful 30 year bond sale this week hoping to net $16 B in purchases from the Fed. It fell short. The 30 year UST is currently at 3.37% per year. The 2 year is 0.42%, hence our low short term CD rates. The 10 years is 2.6%. FMOC chair Janet Yellen says interest rate will remain low in 2014.
Meanwhile, capitalism is seems to be still working. The DJ set a new record of 16,583 on 5/9/14. The S&P 500 is 1879 with the NASDAQ is 4072. Past performance does not guarantee future performance. Unemployment rate has fallen to 6.3% but those millions of people who have stopped looking for work are not counted. Because they don’t want them to be.
CDKF mutual performance remains strong, al Beit slightly less than 2013 (a great year). See the detail on this and the CD – bond performance in this report
Federal deficit and debt remain very high as does most all S&L governments. As some of that QE money does not reach S&L to help balance their budgets (by law – as Fed doesn’t have to), it will get very interesting. Spending continues unabated. As an aside, I attend the IBM Corporation annual meeting in Jacksonville, FL, 29 April. A note: IBM’s annual revenue is just under $100 Billion dollars. The Fed spent $100 Billion dollars … last and every week. Most Americans seem to think that’s OK, I guess.
CAUTION: Don’t be over confident that present conditions will continue. Uncontrolled spending & debt does have consequences. Market values, dividend, capital gain can be affected.
Issues will result …tapering of QE availability may increase interest rates and affect equity prices.
CDFK MUTUAL FUND Background, April 30, 2014, Lombard Account Statement Report
All MF performance is benchmarked to the appropriate public index. For example, a U.S. equity stock fund is benchmarked to the S&P 500 largest stocks, as well as to its peers. Foreign stocks are measured against the MSCI EAFE (Europe/Asia/Far East) index. The PIMCO Total Return bond fund is benchmarked against the BarCap US Aggregate Intermediate Bond Trust index. Remember the overall value of the CDKF funds cannot be measured against any one ‘benchmark’, but must be and is measured against that security’s appropriate benchmark.
The CDKF MFs are chosen in part for their conservative investments often including dividend income. They may not be the top fund against all funds in their category but are chosen for total investment objectives, performance, moderate risk and volatility vs. other factors.
Recent Market Index Bench Marks (dates are of CDKF Financial Reports)
Report Dow Jones 30 S&P 500 Index NASDAQ
5/7/13 15056 1626 3392 May 2013 meeting
8/8/13 15489 1698 3669 August 2013
10/30/13 15619 1763 3931 November Meeting
12/31/13 16577 1848 4177 YE 2013
1/28/14 15739 1774 4051 January 29, 2014
5/8//14 16551 1875 4051 May 2014 meeting
UPDATED CDKF INVESTMENT PERFORMANCE as of April 30, 2014
This demonstrates the value of the CDKF Investment Policy of asset allocation. The percentages of allocations are based on costs, not market value. There is $213,000 in CD’s which is FDIC insured and $11,458 in Money Market Funds in both the Kopeland & main investment accounts.
IMPORTANT Calculation on Fixed/Bond/Cash % values vs. Equities Values:
Market Value - Kopeland Fund $ 21,257 CD + Money Market
Main Account #185290399 $203,200 CDs face value + Money Market
Main Account (Bond Funds) $ 61,621 Nuveen & PIMCO Tot Ret .Bond FD.
Total Fixed Income & Bonds $286,078 Cash, Fixed & Bond Value (37%)
PIMCO Total Return Intermediate Bond Fund (PTTAX) is a bond fund with a Sector Allocation
consisting of UST & UST Inflation Protected, U.S. Agency bonds, plus Corporate bonds, Securitized bonds (Agency – MBS Pass Through, ARMs, CMOs), Muni bonds and cash. Both the PIMCO Total Return Bond Fund and Nuveen Muni Bond Fund have lost some value in 2013.
Fixed Income securities do not participate in the stock markets changes, so as equity markets grow, asset allocations can change. Conversely, if stock markets drop as they can, the fixed securities principal is more stable although potential interest rate increases can affect principal, especially if sold before maturity.
As of the April 30, 2014, Account Statement, Lombard Securities, Inc. (Monthly Statements received separately by each of you):
1. CDKF Account #2, Account #185303767 Kopeland Trust – Market value of $21,257. The CD matures 06/12/14. Current market value of $13,000 ($13,000 redeemed face value) plus $8,257 in FDIC money market/cash funds. Estimated annual income is remains at $52 for now but will change when this CD matures and a replacement is obtained. ACTION in MAY.
2. CDKF Account # 185290399 has a current total market value (main account) of $780 584 up from $766,055 for a gain of $11,858 in value in three months.
Current Market Values: Estimated Annual Income
(Oct. 2013 to Sept. 2014)
Certificates of Deposit $200,000 CD/Cash $ 887 **
Cash/Money Market 3,200
(1) Fixed Income $203,200
MF BOND Funds (only)
Nuveen Bond Fd. (NZF) $ 28,968 NZF $1,547
PIMCO T. Return Bd. Fd. 32,653 PIMCO 641
(2) Total Bond Funds $ 61,621 Tot. Bd. Fds. $2,188
(3) Equity MFs $515,763 MF $9,344***
TOTAL Assets $780,584 Total Income $12,419
** Fixed Income remains low due to low Fed interest rate base.
*** MF Cap Gains & Dividends are reinvested into the MFs.
IMPORTANT Fixed Income Information From 4/30/2014 Statement
Note: CDKF is a 501C (3) tax exempt endowment foundation and doesn’t receive a YE 1099.
CD Interest is posted to the Money Market. Dividends & Capital Gain earnings from MFs are reinvested back into the MF that generated them. Compounded reinvestments significantly increase Total MF performance.
Fixed Income Detail : Five CD’s face value of $200,000, with $3,200 in FDIC cash. TWO CDs (5/14 and 5/28 below mature. ACTION required to replace them in MAY. See list.
1. $75,000 matures 05/14/2014 @ .4% Fifth Third Bank (Ohio)
2. $50,000 matures 05/28/2014 @ .5% SAFRA Bank of NY
3. $25,000 matures 11/28/2014 @ .6% SAFRA Bank of NY
4. $25,000 matures 11/6/2014 @ .45% Fifth Third Bank (OH)
5. $25,000 matures 3/27/2015 @ .3% Everbank (FL)
NOTE: Market rates remain low. Fed rate is 0.25%. Two year UST is 0.37%; a 10 year UST is now 2.68%. Still below the current inflation rate. CD’s are lower % than UST’s and rate will be determined when renewed. FED FOMC again stays pat. We’re keeping maturities short.
Notes on Costs of Doing Business: CDKF uses the “traditional method” of managing equities. CDKF pays to buy each MF. Most initial MF investments were made from 2004 to 2009 and held. There is no cost to sell if sold. There have been very, very few transactions over the years.
With American Funds because of the total amount in that ‘family’, CDKF receives a Rights of Accumulation (ROA) buy discount. Most original purchases were made at a discount rate between 3.5% to 2.5% vs. 5.75%. (The current rate for A.Fds. is at $250K ROA is 2.5%). Initial ‘buys’were ‘amortized’ long ago over five years, (then 0.7% to 0.5% cost average per year). There are no asset management brokerage fees based on assets held. There are normal MF management services expenses to manage the MF charged by each MF company (for all management styles). The average expense is O.85% per year. Any trades are recommended by the Finance Committee, and then authorized by the Board. Confirmations of trades are sent to CDKF Treasurer.
FUND HOLDINGS – Mutual Funds Market Values April 30, 2014 Lombard Securities Report
Symbol MF Name Category Market Est. Yld Est. Yr
Value of Funds Income
AMECX Amer. – Income Fund Moderate Allocation $45,713 3.1% $1411
ANWPX Amer. New Perspective World Stock $69,941 .76% $559
CAIBX Amer. – Cap Inc Bldr World Allocation $95,439 3.0% $3140
PNEAX Allianz NFJ Div Adv. Large Value $86,227 2.0% $1636
CWGIX Amer. Cap Wld G & I World Stock $72,632 2.2% $1377
IGAAX Amer. Intern’l G & I Foreign Lg. Stock $35,689 3.2% $1192
SMCWX Amer. Small Cap Wld. Gr. World Stock $87,697 .0% zero
JCMAX JPM Mid Cap Growth Mid Cap Growth $22,428 0.12% $29
PTTAX PIMCO Tot. Return Interm. BOND Fd. $32,653 1.8% $641
________ _____ Sub-Total MF Values $548,416 $9985
Nuveen Divid, Adv. Muni MD S&L Bonds $ 28,968 5.6% $1547
(NZF) Nuveen current Yield 5.6%) ________ ______
Total MF Values $577,384 $11222
+ CD’s $200,000 Face Value; Mkt Value $200,000 $887
+ Money Market Funds - Cash 3,200 _______
Total Fixed (large Account) $203,200
TOTAL Assets Value (with CDs) $780,584 $12419
Note: Total mutual fund value gained $11,858 (not including Nuveen) Jan. 31 to Apr.30.. No new dollars were added to investments by any “Kiwanis fund raising contributions” (Founder’s Society, Life Member, Memorials, or $2.00 per member club donations, etc.).
PERFORMANCE Report by Morningstar vs. Benchmarks as of April 30, 2014 (+ means better; -less than benchmark). Note: Five year data includes has shown marked increases.
Symbol & Description (Above) 1yr 3yr 5yr 10yr
AMECX +11.6% +107 % +15% +7.9%
+/- MornStar Mod. Target +2.7% +2.95% +3.7% +.4%
ANWPX +12.9 +9.9% +15.2% +9.3%
+/- MSCI EAFE +.7% +3.1% +3.1% +2.3%
CAIBX +9.2% +9.3% +12.4% +7.9%
+/- M.S. Moderate Tgt Risk -.3% 1.4% -.9% -.3%
PNEAX +17.9% +13.5% +16.2% +7.7%
+/- S&P 500 Trust Index +.8% -.9% -1.3% +.02%
CWGIX +14.8% +9.9% 14% +9.5%
+/- MSCI EAFE +2.6% +3.0% +2.0% +2.4%
IGAAX +13% +8.1% +13.2% (Fund 5 years old)
+/- MSCI EAFE +4.4% +4% +.1.8%
JCMAX +19.3% +13.8% +19.4% +9.9%
+/- S&P 500 Index +2.0% -0.6% +1.8% +2.2%
SMCWX +10.8% +8.5% +16.9% +9.5%
+/- MSCI EAFE -1.4% +1.2% +5% +2.4%
PTTAX -1.3% +3.6% +6.2% +5.9%
+/- BarCap US Agr Bond Trust -1.7% +.03% +1.3% +0.9%
SUMMARY of M F Performance: CDKF holdings compare well against their Benchmark Indices. Performance since 2009 for the markets has been strong, yet not a straight-line increase, The CDKF has benefitted from good assets, management and compounded growth of principal and dividend & capital gains reinvestments.
END of April30, 2014 Financial statistics with Market Comments for the May 2014 meeting. Please PRINT OUT this report for easy readability and bring it to the meeting. Thanks.
Robert N. Cressy, Financial Advisor
Lombard Securities, Inc.
1700 Rockville Pike, Suite 400
Rockville, MD 20852-1631
Office 301-998-6104 or Cell 301-919-66692
From CDKF Treasurer Marion Allen’s, December 31, 2013 (Presented 2/9/14 Meeting)
Net Assets Raised Balances Dec. 31, 2013 Contributions/Revenue 9/30/13 YTD
Life Memberships $280,900 $4,300 (43 @ $100 each)
Tablet of Honor $ 70,641 ZERO
Life Memorials $ 64,502 $100.00
Founder’s Society $110,962 ZERO
$2 per Member Year End Dec. 30 $10,653
We can do better and help our operating cash funds for giving.
Robert N. Cressy, PG & Past CDKF VP
The earlier recommendation by the Finance Committee Chair Gary Boswell to roll over the three CD’s was passed.
Nominating Committee- A motion was made by Tom Varner for the CDKF President to appoint a 5 member Nominating Committee according to the policy statement and for it to make a report of the nominees 30 days prior to the DCON and to evaluate the Executive Secretary and Treasurer. Second by Ken Hogan. Motion passed.
Grant Committee- Floyd Brown reported that a grant request was submitted by the Grundy Club to request $1,500 for Buchannan General Hospital to buy equipment for youth at risk of Type 1 Diabetes. The committee recommended $750. A motion was made by Charles Adams to make it the $1,500 requested. Seconded by Carolyn Richar. Motion Passed.
Niswonger Children’s Hospital- Jon Rife made a motion that the CDKF aids the
Niswonger Children’s Hospital in Johnson City, Tennessee as a new pediatric hospital that we support. It covers a large number of children in Southwest Virginia. Second by Carolyn Richar.
An amendment was made by Brian Bell to add $3,000 for NCH for the 2013-2014 administrative year. Second by Tim Wesling. The amendment to the motion passed. The motion as amended passed.
There being no further business to come before the Board, a motion to adjourn was made by Charlie Adams. Seconded by Floyd Brown. Motion passed. President- Elect Gary Boswell adjourned the meeting. The next Board meeting will be on August 22, 2014 at the Hyatt Regency Reston.
Charles Adams, Executive Secretary
Capital District Kiwanis Foundation