HomeMy WebLinkAbout1993-03-25 - Agendas - Final•
1
MINUTES OF A MEETING OF THE FIRE PENSION BOARD
A meeting of the Fayetteville Firemen's Pension and Relief Board
was held on Thursday, February 25, 1993, at 11:00 a.m. in Room 326
of the City Administration Building, 113 W. Mountain, Fayetteville,
Arkansas.
PRESENT:
Marion Doss, Pete Reagan, Retirees Richard Baird
and Darrell Judy, Mayor Fred Hanna, City Clerk
Sherry Thomas, Administrative Services Director Ben
Mayes, and City Treasurer Glyndon Bunton.
ABSENT: Danny Farrar
CALL TO ORDER
Mayor Hanna called the meeting to order.
OLD BUSINESS
PROXY AND MERRILL LYNCH CONTRACT
Baird asked what the proxy was that was discussed at the last
meeting. Doss stated it was a document sent to the Pension Board
to vote for one of the people on the board of the money manager
company. These proxies have customarily been given to Merrill
Lynch to handle, and this one was sent to Richard Yada.
Baird asked about the contract with Merrill Lynch. Doss stated
Yada has not yet supplied a copy to the Pension Board.
Baird, seconded by Judy, made a motion to write Merrill Lynch
requesting a copy of the contract. In addition, the letter should
request the representative from Merrill Lynch attend the next
regularly scheduled Fire Pension Board meeting and explain the
investment position as well as the fiduciary responsibility of the
board. The motion passed by a unanimous vote.
ROY SKELTON
Marion Doss explained to the Mayor that the Pension Board had asked
Mr. Skelton to take another doctors examination because he has
retired from the Fire Department on a line of duty disability basis
receiving 65% of his base salary. Mr. Skelton chose to sue rather
than take the examination because he did not feel he should have to
take one since he worked over 20 years. The attorneys in the case
have filed their briefs, and we are now in the waiting stage.
City Clerk Thomas stated Arvle King had called and would be mailing
the results of his medical examination.
February 25, 1993
MINUTES
Doss, seconded by Baird, made a motion to approve the minutes of
the January 28, 1993 Pension Board meeting. The motion passed
unanimously
PENSION LIST
Thomas reported there were two changes to the Pension List because
of the deaths of Letha Brown and Gladys Cole.
Baird asked if the pensioners withdrew from the fund at least the
amount they paid in.
Mayor Hanna asked if there was a system to check this for each of
the pensioners.
Baird stated if the Mayor's statement was a motion, he would second
the motion for some type of procedure. He expressed his concern
that the Pension Board could get into some real predicaments if the
retiring firemen left an ex-wife and a current wife, a combination
of natural children, step -children, and or/adoptive children, etc.
Mayor Hanna stated the Board could ask City Attorney Jerry Rose
about these questions for the next meeting. Mayor Hanna asked that
there be a standard type agenda prepared for these meetings.
City Treasurer Glyndon Bunton asked if these types of questions had
been addressed by any other board.
Mayor Hanna stated the state statutes probably cover these types of
situations.
Thomas stated she would draft a memo to the City Attorney asking
him to research these beneficiary questions.
Bunton asked how long a fire fighter had to work before he was
fully vested. Doss stated 20 years.
Thomas stated the family of Gladys Cole had returned her check.
However, since it is only for $45, Thomas asked if the Pension
Board wanted to return the entire check to her estate.
Doss, seconded by Judy, made a motion to approve the pension list
with the above changes and return Mrs. Cole's check to her estate.
The motion passed by a unanimous vote.
•
•
OTHER BUSINESS
February 25, 1993
RELIEF PORTION OF THE PENSION FUND
Richard Baird asked what the "relief" portion of the Firemen's
Pension and Relief Fund covers. He stated he had nothing in his
records defining this. He stated 5 of the full time retirees are
receiving under $500 per month pension, and there are 8 part-time
retirees or their beneficiaries receiving less than $50 per month.
He asked under the "relief" portion of the fund, could the minimums
for these two categories be raised.
Mayor Hanna stated those are small amounts for volunteers. He
feels the City Attorney should be asked about the Board's liability
to these people.
Baird stated this would increase the pension amount paid out
monthly by $631.
Ben Mayes stated the pension fund had to be actuarially sound
before an increase can be given.
Baird stated that may be true, but he would like the City Attorney
to look into this.
Mayor Hanna stated this could leave the door open for the people
who did not get a raise to complain.
Pete Reagan stated before increases could be given, the pension
fund would have to pay for a special actuary report. The Pension
Board had previously stated at the time of the last increase that
everyone would get an increase the next time increases were given.
He stated the Pension Board did not guarantee active firefighters
a raise. Some retirees are now drawing 100% of what they retired
at. He would like to go on record opposing any increase at this
time.
Baird stated every time a current fire fighter gets a raise in
salary, he automatically gets an increase in the amount of pension
he will be receiving.
Reagan stated those people were paying in 3% of their salaries, and
the current fire fighters pay 6% of their salaries to the pension
fund. The City is matching the fire fighters contributions. The
Pension Board is trying to "build the pot" to be able to give
another increase later on.
Doss stated he felt the "relief" portion of the fund was to be used
as a temporary measure for specific reasons. He agreed there
needed to be some research on this.
411 Baird stated he would just like to know what the rules are.
February 25, 1993
PENSION AFFIDAVITS
Thomas stated she had received all of the pension affidavits
returned except for Dwayne McChristian and Madge Murphy. She needs
the Fire Pension Board's permission to send a letter withholding
the pension checks from these people until they file their forms.
Reagan, seconded by Doss, made a motion such a motion. The motion
passed by a unanimous vote.
PENSION BOARD ELECTION
Reagan stated there was a retiree and an active fire fighter
position coming up for election in May on the Fire Pension Board.
Thomas stated she would pull last year's file and put together a
letter for the retirees.
ADJOURNMENT
The meeting adjourned at 11:56 a.m.
•
•
•
ROXBURY
CAPITAL MANAGEMLNI
First Quarter Letter To Clients
The Changing of the Guard Continues
The dominant theme of the first quarter of 1993 was the market's continued shift away from
the consumer and health care stocks which performed so well over the last decade.
Consumer giants, including companies such as RJR Nabisco, Philip Morris and Proctor &
Gamble no longer are able to raise prices to manufacture earnings. Generic cigarettes and food
products are gaining market share and putting downward pressure on branded consumer
product prices.
Healthcare stocks, which started to decline in early 1992, also have product pricing concerns.
Many highly profitable drugs are coming off patent, new blockbuster drugs are hard to find,
and the cost-conscious consumer is buying more generic drugs In addition, the unknowns of
Clinton's healthcare plan, including the possibility of price controls, mean these industries
cannot be analyzed with confidence. Unable to quantify healthcare growth rates or cash flows,
investors are opting to stay away until these questions are answered.
During 1992, we cut back on our holdings of consumer and drug companies. In the first
quarter of 1993, we continued to sell consumer nondurable, traditional growth stocks. Colgate,
Gillette, Proctor and Gamble, Philip Morris and RJR Nabisco* were among the names that
were excellent performers during the recession, but have become a risk in the current
environment and were sold. In the quarter we sold most of our holdings of U.S. healthcare
companies as well as ADR's of international healthcare leaders including Ciba Geigy, Roche
and Sandoz. Keep in mind, however, that these are very good companies and we will consider
buying them back if they fall to bargain prices.
Other companies and industries have emerged as leaders. The common denominator of the
new leaders is that they are healthy companies with rising profitability. Most are making
corporate -wide "re-engineering" efforts to become globally competitive by lowering costs and
producing more with fewer workers. The leaders have gained an advantage over competitors
who have been slow to respond.
Many banks and insurance companies have cost reduction and consolidation programs, as
evidenced by the many takeovers of smaller banks by large bank holding companies. Indeed,
selected banks and insurance companies are in the best financial condition that we have seen
in many years, a big change from three years ago.
Telecommunication companies, once providing a relatively secure work environment, have
changed. Pacific Telesis now has only half the employees of 20 years ago, yet its business has
grown significantly.
• Philip Morris and RJR Nabisco were sold before they nanbled in price on April 3rd.
100 Wilshire Blvd., Suite 600 Santa Monica, California 90401 310 / 917-5600 FAX 310 / 917-2850
r
First Quarter Letter To Clients
May 4, 1993
Page 2
Certain railroads, after years of struggle, have won major concessions from labor and are
emerging as more profitable, lower cost carriers poised for significant earnings gains as the
economy recovers.
We feel company -wide restructurmg is a revolution that has just begun and have invested in
companies which should benefit from efforts to lower production costs and increase market
share in a slow growth environment.
New portfolio holdings include some high quality insurance stocks, such as American
International Group and General Relnsurance, as well as leading regional and money center
banks like Bank of America and Citicorp. Improved loan portfolios, market share gains,
earnings improvement through acquisitions, and the elimination of redundant operations offer
continuing potential for earnings increases and share pnces. Eastman Kodak and Allied Signal
are undervalued companies that have committed to reduce costs, restructure operations and
make key management changes. In addition we have purchased two excellent, undervalued
railroad stocks; Norfolk Southern and Burlington Northern.
Although some of the names in our portfolios have changed, our adherence to our disciplines
has not. We remain invested in quality companies with predictable, above average growth in
earnings and cash flow, with share prices that we believe are undervalued.
First Quarter Performance Review
Our response to the market and the resulting portfolio changes were reflected in our
performance numbers. Roxbury's first quarter performance fell between the results of
"Growth" and "Value" style investors. This might be expected from an approach that
incorporates elements of both "Growth" and "Value" investing without, we believe, assuming
the risks of either extreme.
Leading growth managers were down about 6% in the first quarter and suffered even more
dunng April. Leading value managers like John Neff were up about 8% in the quarter. The
S&P 500 was up 4.8%. Roxbury was up in the first quarter but lagged the S&P 500. These
relative performances are a reversal of 1991 when growth managers were up 40-60%, and
value managers were up only 20-30%. During 1991, Roxbury was also in-between, up 46%.
We report these comparisons not as an apology for recent results but rather because
"investment style" is a determinant of performance and because some markets favor one style
over another. Roxbury's results have pretty consistently fallen between the extremes, steadier
than "pure" growth or "pure" value managers due to our eclectic philosophy.
r
First Quarter Letter To Clients
May 4, 1993
Page 3
Our long term objective is an absolute return of 15% per year and a relative return that is
above the market We take a long tern 3-5 year view of each investment but have learned that
these changing times may require us to be more active, either taking profits or selling stocks
that trigger our sell disciplines with weak fundamentals.
Market Forecast
Our fearless forecast is for more of the same for a while; no real upward market surge and
always the possibility of a decline until the painfully slow economic recovery, and the
improved productivity of America's re -engineered companies manifests itself in earmngs per
share growth, as we believe it will over time.
A primary near term concem is the Clinton administration which seems to be confused,
scattered, and blocked by the Republican filibuster strategy of Bob Dole. It is beginning to
look like another four years of gridlock in Washington. Considering the cost of some of
Clinton's new programs, that might not be all bad. Like previous Presidents, he may be
• tempted to build his domestic stature by a military fling overseas.
Longer term, stocks should continue to provide better returns than most other investment
alternatives. American industry is more productive than ever and is better able to compete
internationally. The dollar is relatively low compared to other currencies. Many industries,
particularly the ones we are investing in, don't need a strong economy to grow profits. Re-
engineered companies are building their financial strength which will improve the outlook for
the economy and the equity markets over the long run. The missing ingredient is jobs. Where
will all of those ex -IBM, GM, defense industry, and bank employees go to find work? When
job creation begins, the economy and the market will really soar.
•
F A Y E T T E V S L L E
CITY ATTORNEY DEPARTMENT
Jerry 1. AWE
Lamle D. M tirty
Clarice Deffslote.J-Pe..z n
37S-8st,
DEPARTMENTAL CORRESPONDENCE
•
TO:
THRU:
FROM:
DATE:
Fireman's Pension & Relief Fund Board of Trustees
Sherry Thomas
Jerry E. Rose, City Attorney
March 18, 1993
rk
RE: Questions from Fire Pension Board
Thank you for your memo of March 15, 1993 in which you ask the
following questions:
1) Would you please look into the issue of
beneficiaries of a fire fighter and/or retiree? In
other words, if a fire fighter dies and leaves an
ex-wife, a current wife, and/or children, step-
children, adoptive children, etc., to whom does the
Fire Pension Fund pay the pension? Do the state
statutes cover these situations?
2) In what situations and when is the "relief" portion
of the Firemen's Pension and Relief Fund supposed
to be used. The Pension Board asked for your
definition of this portion of the fund.
The beneficiaries of a deceased active or retired member are
set forth in A.C.A.§24-11-820. Generally, the benefits go to a
surviving spouse or children under age 19. No benefits are
authorized to divorced spouses or step -children. Adopted children
under 19 years of age appear to be valid beneficiaries. If any
spouse or child shall marry the benefits cease.
In answer to the second question, I can find no definition of
the term "relief" in the Firemen's Relief & Pension Fund Act. I
believe it is safe to assume that the word "relief" confers no
powers or duties beyond those specifically set forth in the Act.
In reviewing the minutes of the board's February 25th meeting. The
board was apparently concerned about using the "relief" power to
J
• Page 2
March 18, 1993
•
•
increase pensions. I would urge you to grant only such increases
as are specifically allowed under the Act and that all increases be
actuarially sound.
If I may provide you with any further information you have
only to ask. I will attempt to attend your March 25th board
meeting to answer any questions.
JER/cbp
FAYETTEVI LLE
• CITY OF FAYETTEVILLE. ARKANSAS SHERRY L. THOMAS. CITY CLERK
February 25, 1993
Mr. Richard Yada
Merrill Lynch
425 W. Capitol
Suite 200
Little Rock, AR 72201
Dear Mr. Yada:
The Fire Pension Board met today and requested you attend the next
regularly scheduled Fire Pension Board meeting which is scheduled
for the last Thursday of the month, which will be March 25, 1993,
at 11:00 a.m. in Room 326 of the City Administration Building.
Please provide the Board with a copy of the contract between the
Pension Board and Merrill Lynch. In addition to explaining the
investment position, the Board is requesting you explain the
fiduciary responsibility as per the contract.
Sincerely,
/if dOr
Sherry L. Thomas
City Clerk
cc: Fire Pension Board members
113 WEST MOUNTAIN 72701 501 57541323
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k
A History of Long -Term
saiea IS0.104U
L
Merrill Lynch
March 24, 1993
Bought $50,000.00 CD 3/30/90 with
CD maturity 4/5/93.
Sold $50,000.00 CD 3/18/91, 1 year
for $53,463.80.
Cash Received
(if CD was held to
Premium Received
(profit after sale of CD)
The difference is the
to maturity.
Caluculation:
*This
"real"
Private Client Group
425 West Capitol, Suite 200
Little Rock, Arkansas 72201
501 370 2000
8.55 % coupon.
after pruchase
$8,763.75
3,463.00
maturity -2.05 years)
return $5,299.95
5,299.95 Net Income
50,000.00 Maturity
is 10.59% divided by 2.05 years=5.16% yearly.
The proceeds of this sale were
at 9.00% for 5 years.
The CD would have matured this
9.00% yield today!?
•
used by purchase City Corp. Pfd,
month, where can we get a 5 year
FAYETTEVILLE FIRE DEPT PENSION AND RELIEF FUND
PORTFOLIO PERFORMANCE 12/31/92 TO 02/26/93
NM CAPITAL MANAGEMENT
ROXBURY
INCOME ACCT
CHECKING ACCOUNT
TREASURY PILL
3 - MONTHS TREASURY RILLS
DJIA W/DIV REINVESTED
S & P 500 W/DIV REINVEST
LONG TERM TREASURY BONDS
H IGH GRADE CORP PONDS
CPI (JAN)
NM CAPITAL
ROXBURY
INCOME ACCT (TIME WTD
12/31/92
$2,761,819
799, 002
2,986,567
12/31/91
+ 6.38
+24.31
+30. 48
+ 18.43
+19.65
+ 3.21
+ 19.73
+40. 73
+ 12.70
INVESTMENT: INCOME PORTFOLIO (NM)
12/06/85
04/23/87
EQUITY PORTFOLIO (ROXBURY)
06/20/86
10/01/86
02/26/93
$2,865,041
786,756
3,089,004
7,231
157,961
12/31/92 02/26/93
+ 3.93
+ 7.42
+ 7. 66
+ 7. 92
+ 9. 87
+ 3. 10
+ 9. 43
+ 0. 28
+ 5.51
$ 1,000,000.00
647, 585. 00
1,647,585.00
$ 312, 657.00
195,000.00
507, 657. 00
+ 0. 53
+ 2. 61
+ 2. 19
+ 6. 48
+ 4.73
+ 0. 49
+ 3. 74
- 1.533
+ 3.43
1014
•
•
•
•
FINANCIAL CONSULTANT ADVISORY AGREEMENT
This agreement is entered into between the
Fayetteville Firemen's Pension and Relief Fund ("The
Fund") and Merrill Lynch, Pierce, Fenner and Smith, Inc.
("Merrill Lynch").
1. Custodializatiori
Merrill Lynch shall provide custodial services and
shall act as custodian for all accounts entered into by
the Fund for management of the Fund's assets.
Each account shall be separately maintained by use of
a Merrill Lynch Retirement Cash Management Account (RCMA).
Monthly statements shall be provided by Merrill Lynch for
each account.
Security for each account is provided by Securities
Investor Protection Corporation (SIPC). In addition to
existing SIPC protection, Merrill Lynch has obtained
coverage from Aetna Casualty & Surety Company in the
amount of $25 million per customer. Merrill Lynch agrees
to keep such security and coverage during the term of this
contract.
2•
Performance Monitoring
Merrill Lynch shall provide the Fund on a quarterly
basis a performance review of each account using statistal
data provided by the Asset Information & Measurement Dept.
Review of these quarterly data will be made in person by a
member of Merrill Lynch.
3. Investment Manager Selection
Merrill Lynch shall screen and present investment
managers for the management of the Fund's assets in
accordance with the Fund's adopted investment policy
attached hereto. Merrill Lynch will present only those
investment managers whose styles, risk-adjusted
performances, and investment policies coincide with the
Fund's policies and objectives.
The selection of the investment manager or managers
shall be set forth in a separate Appointment Schedule, a
form of•which is attached hereto as Schedule A. The
designation of the Fund's assets for each investment
manager shall be set forth in a separate Asset Schedule, a
form of which is attached as Schedule B. The assets set
forth in the Asset Schedules, together with all additions,
substitutions, withdrawals and alterations, as agreed to
by the Fund, are hereinafter called the "Portfolio". The
investment manager is^ managers are selected to manage the
•
•
•
•
Portfolio on the basis of an analysis of the Fund's
adopted investment policy, a copy of which is attached
hereto as attachment 1, and the compatibility of the
investrnent philosophy of the investrnent manager or
managers with the Fund's investment objectives.
The investrnent manager or managers retained by the
Fund in one or more Appointment Schedules are being
retained to conduct their activities for the Fund pursuant
to the terms and conditions of the Master Investment
Management Agreement between the investment manager and
Merrill Lynch, a form of which is attached hereto.
Merrill Lynch will make the investment manager -Cs)
reasonably available to the Fund and a Merrill Lynch
Financial Consultant for joint consultation regarding the
management c.f the Fund's Portfolio and the Fund's
financial situation and investments objectives.
It will be Merrill Lynch's responsibility to monitor
the investment managers to insure that each continues to
comply with all policies and guidelines of the Board.
Reports on compliance will be made to the Board as
required.
4. Advisory and Consultative Services
Merrill Lynch shall provide the Fund with information
and recommendations necessary for management of the Fund's
assets.
From time to time Merrill Lynch may request time be
allocated by the Fund to review research material. This
information may concern but not be limited to the
direction of various markets, economic forecasts,
formulation of fixed income strategies and cash flow
management and other pertinent research data relevant to
the Board's decision-making process on asset allocation or
policy formulation.
5. Confidential Relationship
All information and advice provided by either the
Fund or Merrill Lynch to the other party shall be treated
as confidential and shall not be disclosed to third
parties except as required by law.
6. Termination
• The Fund may terminate this agreement at any time
upon written notice to Merrill Lynch.
Fees and Commissions
Total fees charged to the Fund for all services, fees
1
•
•
and/or commissions provided under the provisions of this
agreement, whether by Merrill Lynch, investrnent managers,
or others, shall not exceed 1% of the Fund's assets valued
at the beginning of each calendar year.
Merrill Lynch shall negotiate fees and commissions on
behalf of the Fund with each of the Fund's investrnent
managers and at the erid of each quarter Merrill Lynch
shall submit itemized billing to the Furid for payment of
services, fees and/or commissions provided or incurred
under the provisions of this agreement during the previous
quarter.
The Fund will pay such reasonable charges incurred,
but under no circumstances will such payments exceed the
aforementioned 1% of the Fund's assets.
From time to time Merrill Lynch may receive fees,
commissions, or selling concessions from sources other
than the Fund for securities purchased by the Fund. The
Merrill Lynch representatives shall, at the Board's
request, disclose the amount of such fees and how Merrill
Lynch was compensated.
8. Assignment
No assignment of this agreement shall be made by
Merrill Lynch without prior consent of the Fund.
•
FAYETTEVILLE
imE CITY OF FAYETTEVILLE, ARKANSAS SHERRY 1. THOMAS, CITY CLERK
•
•
February 25, 1993
Mr. Richard Yada
Merrill Lynch
425 W. Capitol
Suite 200
Little Rock, AR 72201
Dear Mr. Yada:
The Fire Pension Board met today and requested you attend the next
regularly scheduled Fire Pension Board meeting which is scheduled
for the last Thursday of the month, which will be March 25, 1993,
at 11:00 a.m. in Room 326 of the City Administration Building.
Please provide the Board with a copy of the contract between the
Pension Board and Merrill Lynch. In addition to explaining the
investment position, the Board is requesting you explain the
fiduciary responsibility as per the contract.
Sincerely,
i
dor
Sherry L. Thomas
City Clerk
cc: Fire Pension Board members
113 WEST MOUNTAIN 72701 501 575-11525
•
• TO: Mr. Richard Baird
FROM: John Lewis and Bob E. Hall
RE: Pension Plan - City of Fayetteville Firemen
DATE: 3/25/93
Dear Richard:
We have reviewed the various investment reports and actuary's
reports, and would like to submit the following items for your
Board to at least consider:
(1) Trustees: Currently you have individual trustees
responsible, as fiduciaries, for several million dollars of
retirement funds for retirees and active employees.
I is our_�ee g that you consider having a bank as
corporate trusted in place of individuals.
You could still use a retirement committee to review the
trustees reports, actuary's reports, contributions, etc.,
and, thus, keep the individual member participants informed
as to the management and progress of the plan.
The trustee would assume the fiduciary responsibility}:
(a) Provide 1/4 reports;
(b) Provides reports as to contribution made and
contribution receivables.
(c) Provide information as to rates of return and
recommendations; and
(d) Account for all assets, and all incoming and outgoing
funds.
The City has a corporate trustee for the plan for their
salaried and hourly employees and we urge your Board to at
least consider this suggestion.
(2). Diversification: On plans of this size, it is sometimes
helpful to divide the investment management function up and
have 2 or 3 or even 4 investment managers.
Then, at the end of two years the two lowest performers drop
out; and two years later the best performer is given all
responsibility.
Please Note: There should be only one corporate trustee,
but the investment portion is the part the trustee can
divide up - if this seems like a good idea.
•
•
Mr. Richard Baird
Page 2
(3) Reports: You should receive 1/4 reports that not only show
investment results and list of assets, but contributions and
outflows summarized.
A corporate trustee can provide this and even the auditor
can audit the funds every year or two.
(4) Contract: You mentioned that no one can find a contract
with Merrill Lynch.
The corporate trustee can help get the roles defined as to
who is to do what and when, which is for the benefit of the
retirees, active participants, your Board and the City.
Please let us know anytime that we may •e of assistance.
Lewis
12.ikd
Bob E. Hall
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3-30-93
I,HOWARD BOHDREY,NOMINATE ARVIL RING,FOR THE POSITION
OF RETIREE MEMBER ON THE FAYETTEVILLE FIREHANS
PENSION AND RELIEF BOARD.