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Firemen's Pension And Relief Fund
Special Meeting Agenda
July 31, 2003
A Special meeting of the Fayetteville Firemen's Pension and Relief Fund will be held at
11:00 a.m. on July 31, 2003 in Room 326 of the City Administration Building.
Report from Attorneys Chuck Stutte and Mark L. Martin
1. Approval of the Minutes:
• June 26, 2003
2. Approval of the Pension List:
• Pension Increase for Volunteers (Act 1370)
• August, 2003 Pension List Approval
3. Investment Report:
4. Old Business:
• LOPFI Plan
• Draw Down
• Larry Freedle's Employee Number Missing.
5. New Business:
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Fire Pension Minutes
June 26, 2003
Page 1 of 14
MINUTES OF A MEETING
OF THE
FIRE PENSION BOARD OF TRUSTEES
June 26, 2003
A meeting of the Fayetteville Fire Pension Board was held on June 26, 2003 at 11:00
a.m. in Room 326 of the City Administration Building located at 113 West Mountain
Street, Fayetteville, Arkansas.
PRESENT: Mayor Coody, Doss, Reagan, Farrar, Johnson, Wood, Treasurer
Sondra Smith, Kim Cooper with Longer Investments, Attorneys Chuck Stutte,
Mark L. Martin and Ken Kieklak, Staff and Members of the Audience.
Mayor Coody called the meeting to order.
Report from Attorneys Chuck Stutte and Mark L Martin:
Mark L. Martin: When we met last we brought you up to date on the results of our
investigation and we projected that we would be here today giving you a final accounting
of losses sustained by the Pension Board. We have continued down that road, we don't
have final figures on that but since that time we have discovered some information that
we feel would be good news to this board. Not only do we have in our opinion a cause of
action against the stock broker Merrill Lynch and of course we have brought you up to
date on our jnvestigation with regards to losses substained by the Pension Board with
regards to inappropriate investments, unauthorized investments, and out and out fraud.
Chuck is going to speak a little more about the continuing investigation in that regard.
Since we meet last we have been exploring other potential causes of action that this
Board needs to be aware of and we have found that in 1995 they passed a private security
reform act, which enables stock holders to bring class action lawsuits against
corporations for SEC violations. Since that time there have been a number of class action
lawsuits in this country brought by boards and funds to recover for fraud, inappropriate
investments, insider trading, that kind of thing. Our cause of action is against Merrill
Lynch for the inappropriate investment that we are talking about and the losses that this
board has substained as a result of that which are substantial, but you also need to be
aware that there is a different level and a higher level of liability which we believe that
this board has sustained losses. We have been in contact with a law firm that does simply
SEC litigation and from what we have discovered there are about five in the country and
we have asked them to go ahead and run a search on the securities that this board has had
to find out if there have been class action lawsuits for which there may be a potential
recovery. Since 1999 there have been approximately 40 class action lawsuits which have
involved securities that are a part of this Fayetteville Fire Fighters Pension Fund. As far
as we can tell at this point in time no one has taken action on behalf of this board to
recover the funds that have been set aside in these class action lawsuits, that is not to say
that all 40 have resulted in some type of recovery or settlement, but we do know that
Fire Pension Minutes
June 26, 2003
Page 2 of 14
there is a number of those class action lawsuits that have resulted in sums of money for
which this board should have been entitled to recovery. How do you get your money,
there are a number of ways to do it. Number one you take action as a lead Plaintiff
involving these SEC violations and there is a recovery at any number of stages or if you
are not the lead Plaintiff, but you are part of the effected class,. then once the fund is
established then there is a procedure that must be followed to get your portion of the
recovery. There are at least 40 of these class action lawsuits. This is something that
needs to be explored, we are certain that there are monies there that should have been
recovered. The question comes down to this, who has the responsibility of finding out if
these settlements have occurred or these judgments have occurred. It is generally the
responsibility of the custodial bank and there may be an additional cause of action against
the custodial bank for not having pursued these class action sums. Just to give you an
example of some of the most recent there was a settlement by Sprint which was
announced in April 7 of 2003 of 6 billion dollars, there was a settlement from Campbell
Soup announced February 6 of 2003 in the sum of 35 billion dollars. We know that there
are two other class action lawsuits which have been filed and those are very close to
settlement or judgment and those sums should also be substantial. That is not to say that
this Board is going to receive those sums of money but they are certainly entitled to
receive their portion of the losses as a result of these class action lawsuits. We are
exploring an optional cause of action against the custodial bank it may or may not be
Merrill Lynch we don't have that information but we are going to explore that. We
would also like to continue down this road and pursue the SEC potential cases which we
feel could result and probably will result in substantial sums recovered for this
organization. Our case, the one that we started with against Merrill Lynch and that is
under the cause of action that we prescribed we continue to pursue that and again Chuck
is going to talk a little bit about the accounting procedure we have, we hoped to have that
information here today for you, but frankly we got onto this other theory of liability and
we wanted to be sure that we were thorough and we do expect to have that as well as the
information on this SEC case by the next meeting. To pursue the SEC causes of action
will require one of two things, either filing claims against, first of all exploring these
class action lawsuits, determining if there have been recoveries, if so how much, then
what portion belongs to this organization, some of them may be a matter of filing claim
forms, some of them may be a matter of filing lawsuits, but again this is an area that we
want to pursue and we have discovered to best represent you in this regard, it would be in
this Board's interest to allow us to associate this SEC law firm of Cauley, from Little
Rock, Arkansas and that is all they do. They are plugged into a data base with other
stock broker companies where they monitor these class action lawsuits on a daily basis so
they know before anybody else when these lawsuits are filed, when these cases are
settled, when they come to judgment, where the lawsuits need to be filed and since we
met last we have been in contact with this law firm to discuss that on your behalf and
what we would like is your permission to associate this law firm to pursue the SEC cases
and with regards to attorneys fees what we would like is your permission to negotiate
some arrangement with that law firm where we could continue to represent you on all the
cases for no increase of attorneys fees. That is one of the things that we are asking you
today to allow us to pursue this to associate this firm to work with us so we can make a
maximum recovery for you and what we will do is we will work with that law firm to
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Fire Pension Minutes
June 26, 2003
Page 3 of 14
work outran arrangement where again the attorney fee that we have agreed with the
Board there will be no additional cost to you, but we do need your permission to do that.
We would like to be put on the agenda for the next meeting so that we can report back to
you about how much is involved in these class action lawsuits, how much money we are
looking at and the best course to pursue these either by filing claims for the judgments
that are there or potential litigation on behalf of this Board.
Mayor Coody: I have some questions. When you say custodial bank and it may or may
not be Merrill Lynch, define custodial bank.
Mark L. Martin: The stock broker is the broker and then the money is held in a bank
and that's simply the keeper of the funds. Sometimes there will develop a situation
where no one has taken responsibility for filing these claims. It is our opinion that it
should be the bank that is ultimately responsible for filing these claims. There was a
recent article in the Wall Street Journal that discussed the amounts of money that have
not been claimed which have been subject to class action lawsuit in terms of hundreds of
millions of dollars, have ended up in funds created by class action lawsuits and no claims
have been filed. Generally it's the responsibility of the custodial bank to be checking into
this and to be filing claims, but we find a lot of them simply don't do that, don't know
they are suppose to do it, or don't take responsibility.
Mayor Coody: So Merrill Lynch is a big enough organization, could they have been the
custodial bank.
Mark L. Martin: Possibility, we don't know that, but that is something we certainly
will pursue and if they are and there is a separate cause of action against Merrill Lynch in
that regard, that is something we certainly would want to pursue.
Mayor Coody: These pots of money, let's just say 100 million bucks in a left over class
action money that hasn't been claimed, we wouldn't be able to get any kind of punitive's
out of it, it would just be to cover the losses and legal fees, is that the best we could hope
for?
Mark L. Martin: That's the best we could hope for, to recover the portions that have
been set aside. The problem there is some of these class action lawsuits are old, there are
some that are set up where if claims are not filed, then the money is simply disbursed
among the people that do claim, or in some instances the money is turned over to
charities, so as we speak today we don't know the status of that, but we are going to get
answers.
Mayor Coody: You mentioned people that have setteled these lawsuits or the potential
to settle some lawsuits, if you mention those outfits in particliar are those investments
that this Board made that was outside the policy of investments?
Chuck Stutte: Here is what I think happens on those claims, the securities, like class
• actions going against these various companies, stock manipulation, misrepresentation to
Fire Pension Minutes
June 26, 2003
Page 4 of 14
the shareholder, these class action suits have gone on, they will admit they manipulated
price or they failed to report certain things or losses occurred, class action gets settled in
some cases and then there is a fund that is subject to people sending out notices that there
is a class action settlement, if you want to opt in or opt out. If you want part of that
settlement they will give you a claim form if you do have shares of stock for whatever
period of time you are submitting in. This form that we have been visiting with, what
they mostly do is monitor these particular funds to see which investments that we had and
if there is an active class action they monitor so we know where we are at in that
particular class action lawsuit, if they are older class action settlements and there are
settlement funds available and no claims have been processed for your fund, then we
proceed to file a claim and recover that money on that behalf. This is what I think and we
are also investigating, Merrill Lynch would have funds and should have been advising the
Board whenever there was any notice of these class action suits. There should have been
some kind of notice coming to the Board or to the broker or somebody should have been
monitoringon behalf because they are initially looking after these funds. They had
fiducially duty to do this reporting, I suspect that some of these lawsuits particularly on
the larger ones where Merrill Lynch would have known whatever the claim was, they had
huge investments far beyond what this claim is, it would be to their advantage not to
process or file for individual investors, so the pot of available recovery funds for either
them or clientele would be larger, because that is how these funds work, they set aside
what they think is the total amount of damage and then they will see how many people
actually file their claims and invariably not everybody is getting full recovery and then
that left over there may be subsequental disbursements or it is more for those that pursue
it. As such, going down this avenue is beyond the scope of what we have been on our
initial contract authorized to do. We are pursuing a claim against Merrill Lynch, in
looking at the investments that you had, not only is Merrill Lynch probably not, we will
wait and see if they processed and ever accounted for recovery of funds, but probably has
not advised you that these class action suits existed and probably have not passed on
information, again that is something we are investigating. To the extent that the Board
has investments and would have a claim on various levels of class action suits against
individual companies we would like to pursue that avenue of action on behalf of the
Board to collect those funds from this other source having the same arrangement as the
contract that we have pursuing Merrill Lynch, so in essence expand the scope of what
defendants we can pursue to cover losses that you would be entitled to. The associations
that we have talked with at these other securities firms would be of no additional attorney
fees attached it is under the same contingent fee.
Mayor Coody: Explain to me how that works no additional attorney's fees when you go
with this other firm.
Mark L. Martin: I talked to them about the SEC litigation and what we have decided is
that all law firms can work together on this project and all adding substantial contribution
to the project, and in such cases lawyers associate other law firms and work together
basically as a team all agreeing to split the agreed upon attorney's fees.
Mayor Coody: So we work on a contingency?
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Fire Pension Minutes
lune 26, 2003
Page 5 of 14
Mark L. Martin: It will still be a contingency fee, it will still be a third and basically
the law firms will agree on relative divisions.
Mayor Coody: 30 — 35 billion dollars is probably enough to work pretty hard.
Chuck Stutte: We don't know that we are necessarily required that if we contact
another attorney that we want to help, as part of the team on recovery, we still have the
same contract, in this respect because we will be disclosing different, investments that the
funds have that some extent may or may not be confidential, before disclosing the funds
position to other firms we would like to at least let you know we are doing and what we
are trying to look at on your behalf. To the extent that we are looking at different causes
of action and possibly other defendants we would like to ask permission to broaden the
scope of our representation.
Mark L Martin: I do not want to mislead you. This group is not going to receive 35
billion dollars but a relative portion. The question that you had these cases that are
subject to class action lawsuit on a.SEC level is there also a potential recovery on the
stock broker level and we think very likely.
Pete Reagan: So you are estimating between 20 and 30 million, you said 35 is a little
too high.
Mark L. Martin: Give us an opportunity to get the specifics. As Chuck said where we
are today is basically identifying these additional causes of action I think with what we
have identified I think we have all causes of action identified, and we would like to
continue moving in that regard. You have given us permission to bring action against
Merrill Lynch, you have not given us permission to pursue a SEC case and we are asking
for your permission to do that as well as to associate this firm that will work with us on
an associate basis.
Mayor Coody: What questions do you guys have?
Robert Johnson: Would it not be feasible for this firm in Little Rock to save you guys
hours time wise.
Mark L. Martin: Basically every lawyer will be contributing a different portion of the
litigation and that is fairly common in our business for law firms to associate with each
other and determine who will handle what part of the project.
Mayor Coody: What I would suspect might happen instead of saving these guys hours
the more they discover of additional causes the more work load that generates, of course
that means a bigger potential pot at the other end, but I can see where having more
lawyers may get big fast on our end but so might the potential returns as far as recovery
goes.
Fire Pension Minutes
June 26, 2003
Page 6 of 14
Mark L Martin: That is accurate.
Pete Reagan moved that we expand the scope of their investigation to include
possible SEC violations on behalf of the Fire Pension Board. Robert Johnson
seconded.
Chuck Stutte: The only clarification, I think you all understand this but when we say
there may not be additional attorney's fees, there could be additional attomey's fees if we
were to get more money, but the percentage will remain the same. In other words we are
all going to find a way to agree to the same contingency fee that we agreed when you
originally hired us at.
Mayor Coody: So it is no more extra damage on our part.
Chuck Stutte: Exactly.
Mayor Coody: Any other questions or comments on this. We have a motion and second
to let these guys expand into the area of which they have requested.
The motion carried unanimously.
Mark L Martin: We would like the opportunity to appear before you 30 days from
now.
Pete Reagan: If you get you information earlier, we can meet earlier. If you will keep
us advised on that.
Mayor Coody: Thanks.
Approval of the minutes:
Pete Reagan: Does anyone have any additions, deletions or corrections?
Ronnie Wood moved to approve the minutes of the May 29, 2003 meeting, Danny
Farrar seconded. The Motion carried unanimously.
Approval of the pension list:
Pete Reagan: Larry Freddie has been taken from the drop account and put on the
retirees. I noticed that he doesn't have an employee number. Is there a reason for that?
Sondra Smith: I will check on that.
Pete Reagan: I think that is the only change to the Pension List isn't it Sondra.
Sondra Smith: That is the only change I noticed.
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Fire Pension Minutes
June 26, 2003
Page 7 of 14
Robert Johnson moved to approve the Pension List. Pete Reagan seconded. The
motion carried unanimously.
Investment Report:
Kim Cooper, Longer Investment: This is normally not our regularly scheduled month
but I wanted to come and bring the report that we usually distribute. Elaine would have
liked to have been here, but she had a dental appointment that she could not reschedule. I
will deliver this report then if you have any questions related to the meeting on Tuesday
that you would like me to have Elaine address, I can take those back to her. The reports
that I gave to you are the portfolio appraisal to show you where you stood at the end of
May. Your account total value is listed on page 7 it is $9.839 million, nght now your
stock asset allocation is 33.6%, that is your stock and your stock mutual funds, that is Inst
about mid-range of your investment policy which is 25-50% stocks. The balance of the
account bonds in fixed income investment, your corporate bonds are about 12% of your
portfolio, your government bonds, agencies, CD's. are 36.5% and the,current yield on
your portfolio is 3.7%, working that up to 4% as we do some more fixed income
investments, you still have about 8.6% in cash, that is just being held for other investment
opportunities. The next page is just your contribution and withdraw report. Your May
distribution was $66,000 and withdrawals since we started managing the account have
been $515,000. The last page is just a performance summary through the end of May,
year to date through May 3151 your account was up 4.6% total, your stocks were up 8.6%,
your accumulative return since we started managing the account last year has been 2.3%
on equity, 8.2% on your bonds and 3.4% total. There was a question at the meeting the
other day as to what your account had done year-to-date and through the close of last
week your account is up $560,000, that is a total of 6% year to date, 12% on stocks year-
to-date, but as we can see that all can change very quickly, both up side and down side.
Pete Reagan* In reference to what our attorneys said is our custodial bank, which is in
Chicago, do they do that type of thing.
Kim Cooper: Yes, Northern Trust files any time there is a class action lawsuit, Northem
Trust files those on your behalf. We take it upon ourselves to get confirmation from
them that they have done that for you.
Pete Reagan: So Mark mentioned Sprint or whatever the other one was
Kim Cooper: The only problem would be it would only be related to securities since
your account was transferred there. So if there was a lawsuit regarding a stock that you
had held while you were at Merrill Lynch then we would not know about it, even if it
were filed currently, Northern Trust wouldn't be aware of it.
Mayor Coody: Thank you for coming today.
Fire Pension Minutes
June 26, 2003
Page 8 of 14
Kim Cooper: Were there any questions, do you want me to stay related to the meeting.
Pete Reagan: How mad are you going to be at us?
Kim Cooper: We are not mad at all or in any way, we want whatever is best for firemen
and your retirees, that is our best interest too, we understand that you have to do what's
best for the people that you represent.
Danny Farrar: Whatever happens I think that you and Elaine should know that this
Board appreciates very much what you have done for us.
Kim Cooper: I appreciate that. The thing that we wouldn't want since this goes to a
public forum like the City Council we wouldn't like to have any negative repercussions
on the fact that it is being moved with Longer Investments name associated with it and I
don't know if that is something that the Board can do. a resolution on or how that works.
Pete Reagan: I think that if it does happen that your names should be mentioned as, if it
is alright with you all, as doing an excellent job for us
Marion Doss: I think the figures speak for themselves they came up, plus the fact that
you discovered some things for us
Kim Cooper: I appreciate that and once you have an opportunity to have a discussion, if
you have any questions for us, just call me, we will be glad to do whatever you need.
Pete Reagan: You are welcome to stay, but we are going to discuss what our options
are, as shown in our minutes we have probably 60-70 beneficiaries of our fund that are
retired that we would like to seek input from. I personally would like to call a meeting of
all of them and if we could get you or Elaine to attend that just to answer questions, we
would love to have you there.
Kim Cooper: Just let me know when you want to do it.
Pete Reagan: Okay.
Kim Cooper: Thank you very much.
Mayor Coody: Steve do you know roughly what investment of return the State has on
investments like this. I wonder if we are out performing them where we are. I know that
doesn't offset the potential liability over the long haul, I'm hoping they are having as
good luck as we are.
Steve Davis: I don't have that information from the State.
• Pete Reagan: Steve can you contact Kathryn and ask her what the last 10 year
performance, I am sure they can ship us a chart real easy.. They have some real, good
Fire Pension Minutes
June 26, 2003
Page 9 of 14
money managers and they stay on top of it, I think they have seven different money
managers.
Old Business:
NCPERS membership:
Sondra Smith: I just wanted to let you guys know that we have filled out the application
for that so we should be members of that organization rather quickly.
Pete Reagan: Thank You.
New Business:
Insurance premium check:
Sondra Smith: You received a copy of the insurance premium check.
Pete Reagan: This is a rollover from the Act 833 funds that are not portioned out. Act
833 is a portion of your fire insurance premium is taxed and that goes into a fund at the
Department of Emergency Management that allows fire departments to apply for grants
from that fund and at the end of the year the way I understand it, there is money left in
that fund because departments didn't meet certain criteria to apply for it and that money
that is left over if your pension fund is not actuarially sound that money is divided up per
capital. Is that the way you understand it Steve?
Steve Davis: This is the first time I have ever seen a check like this so I didn't know
how that worked.
Mayor Coody: So if you don't apply for grants that money goes into the pension fund?
Pete Reagan: No, we applied for and received grants from our Act 833 funds, it is the
rest of the departments in the State, a lot of small rural departments that don't apply for
grants and there is money left in this pot.
Mayor Coody: So if they don't apply for grants the money goes into the pension fund.
Pete Reagan: If the fund is not actuarially sound as part of a supplement.
Marion Doss: That Act 833 money there are only certain things that can be used for, it's
real tight.
A discussion followed on the Act 833 money.
Fire Pension Minutes
June 26, 2003
Page 10 of 14
Marsha Farthing Pension Plan Memo:
Sondra Smith: There is a copy attached to your agenda, and I mailedeveryone on the
Board a copy. Also attached are the questions that were asked at the LOPFI meeting. I
have requested a copy of the video tape from that meeting so that if you do choose to
have future meetings about this and involve all the pensioners you can show that tape if
you so choose. Does anyone have any questions on the letter that accounting has sent out
or the LOPFI Plan.
Pete Reagan: I have some concerns, I know Steve is looking out for our best interest
and so is Marsha, I just hope that we are going to be able to include the $412,000 in the
actuary that is going to be performed.
Steve Davis: It is, the folks that are doing the actuarial study, they had a similar number
for this year's insurance turn back to go to the old plan, so they are aware of that and they
are factoring that into their future calculations. We should have that cash flow report
back within the next 2-3 weeks and as soon as we get it back we will distribute it to both
Pension Boards.
Pete Reagan: The reason we are asking for that cash flow actuary study is to see what it
is going to cost per. percentage of payroll.
Steve Davis: This one was to confirm or to provide information for both pension plans
to see where they are likely to be through the life beneficiaries. Because we have .
between the two plans we have $9 million plus in unfunded liability, we want to make
sure we know what the cash flow number is because the cash flow number is the one that
was used to increase the benefits for both pension plans up to the 90% level, so we want
to make sure that same analysis was run to look at future payouts to see if the pension
plans are going to run out of money or when they are going to run out of money, so that.
everybody would be able to make a better informed decision.
Pete Reagan: If we are able to recoup, say 3 ''A to 4 million from Merrill Lynch on the
fire pension side and we are 4 million under funded, that is going to put us back in good
graces or close to it.
Steve Davis: Yes, it will have a positive impact We would have to factor that
information back into the acturarys and have them run another analysis.
Pete Reagan: We all know how the legal system works so it may be four years down the
road before we wind up with any money in our hands Just for the purpose of looking at
the scope of that, say we recover $4 million and we are $4 million under funded, that puts
us back to 100% and we are being managed by LOPFI and there is no one else paying
into the fund, it is a totally closed fund, Danny is retired and everyone is off of DROP,
there is no more money going into the old plan and the beneficiaries of this plan are
going to start dying off, what are the two possibilities of one increasing benefits again
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Fire Pension Minutes
June 26, 2003
Page 11 of 14
with LOPFI, I think that that would have to be approved by City Council before it went to
LOPFI. The other thing is what happens to the final monies.
Steve Davis: My understanding about the way the system works is when the plans go
down to Little Rock, LOPFI will set a contribution rate for the City based on the active
employees that will actually make the old plan actuarially plan as well as the current
younger plan. So if there is a settlement that generates money for the fire pension fund it
will go to LOPFI for the credit of this pension fund and it will reduce the percentage of
contribution the City would have to pay on the active payroll probably. What Kathryn
said Tuesday, is any money left over in the closed fire pension plan that LOPFI was
administering would flow over to the new fire LOPFI Plan that LOPFI is managing.
Eldon Roberts: That is what I heard her say too, one of the police officers asked when
the last beneficiaries on the pension plan passes away and there is money left where does
that go and her answer was, just as Steve said, it goes over to LOPFI for that City's
portion of contribution to the police or fire plan.
Steve Davis: It will still go to cover the Fayetteville local firefighter's retirement old
plan or new plan or Fayetteville police officer retirement old plan or new plan.
Eldon Roberts: I think I see the question you are asking Pete, later on down the road
let's say both plans opt to go to Little Rock to LOPFI Pension system, and then later on
your plan becomes financially sound or a lot more financially sound that it is now, or
actuarially sound, are there any provisions for you all then to get benefit increases and the
way I read that you would have to come back to the City and bargain with those folks on
that. I don't think it is a given that you would be given an increase on your benefit, but I
think you would have to come back and bargain with the City.
Steve Davis: One of the things about moving the plans to LOPFI is the benefit increase,
I guess is to address any loss that may occur due to inflation, if you all ask and the City
Council agrees there is a provision to do a COLA so that loss of purchasing power would
be addressed somewhat through that provision.
Pete Reagan: That is currently what's in the LOPFI's new firefighters and police
officers, is the 3% compounded COLA.
Steve Davis: That is correct. It was a 3% simple, but now it is a 3% compounded.
Marion Doss: That $4 million you mentioned is that just a theoretical amount, I have
not heard any dollars about.
Mayor Coody: They are talking about a $4 million loss that occurred. Now was that $4
million, I think that was questionable Merrill Lynch misbehavior resulted in what could
be a $4 million dollar loss, that is not total loss of the entire program, I don't think.
• Pete Reagan: That is the way I understood it.
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Fire Pension Minutes
June 26, 2003
Page 12 of 14
Marion Doss: The only thing that I could think of, a couple of years ago our fund was
worth $12.5 million and now about $9.5, so the question is, is that mismanagement or the
stock market in general. I think we are guessing at what we might be able to recoup.
Steve Davis: As this Board puts together their thoughts on the request to City Council if
you want to move the plan to Little Rock for management, you could provision in there if
you get a favorable settlement you would like to have this revisited and that makes it a
conditional statement that if it happens that it is kind of an automatic and you don't have
to come back to City Council after the fact, to say that we would like to amend it now.
That would be pre -approved that if we get a settlement we want to have our benefits
looked at. That way whenever the legal system works it magic then it is automatic.
Pete Reagan: I think the police were very forward in wanting to seek a COLA in theirs.
My guys that I have talked to are very interested in doing that also. If there is an extra
$4-5 million dollars out there that our fund is worth and the economy turns around after
the election, and then if there are $4-5 million dollars in the fund that we can use for
benefits for retirees, then I think we should have that availability to do that.
Steve Davis:. That is something I think you should out in the initial document, it makes it
a lot easier to come back and revisit, because there is no guarantee on the composition of
City Council some year in the future. From a scheduling standpoint I would hope to take
whatever Resolution there is to City Council sometime in August, so that we can get all
this paperwork settled before we run into the fourth quarter of 2003 and the auditors are
back here and we are faced with having to make a decision on the actuarial liability.
There is a possibility on the fire fund that we might have to do that this year, if we could
avoid that this year we would like to.
Mayor Coody: You want to get this question about Council approval on revisiting the
retirement on potential light of any settlement, get that taken care of before August.
Steve Davis: My request is to have any decision to move the pension plan to Little Rock
to City Council, any retiree benefit as a result of a lawsuit recovery, plus any COLA
adjustment that you may pass, have it all wrapped up in package so that we can present
this to the City Council sometime in August.
Pete Reagan. Eldon are you all meeting on the 17th.
Eldon Roberts: Yes
Pete Reagan: Are you going to invite your retirees.
Eldon Roberts: I contacted Sondra after the meeting Tuesday, some of the Board
members asked me to have her send a letter to all our retired people stating that we are
going to meet the 17th and that they are welcome to attend and what the topic of the
•
Fire Pension Minutes
June 26, 2003
Page 13 of 14
conversation is going to be. We didn't want to mail it in the checks because it could not
leave them enough lead time so it should go out this week.
Sondra Smith: I Plan on having it out Friday.
Pete Reagan: Where are you going to meet on the 17'h Eldon?
Eldon Roberts: Here, but.1 don't know how many people are going to show up.
Steve Davis: The issues that the Police Pension Board and Fire Pension Board have if it
is this LOPFI issue we might do a joint meeting and have Kathryn show up, and maybe
do it at the Town Center. You are looking at about 100 retirees on the police and the fire
Pete Reagan: I can see where we could possibility having 30-40. Eldon would you have
a problem with us doing a joint one?
Eldon Roberts: I am not on the Pension Board any longer, so I do not feel comfortable
speaking for them. We have no representation from the active side.
Sondra Smith: I can check with the Police Pension and see if that would be a problem.
Pete Reagan: Eldon, Rick and I talked after the last meeting and I drew this up as a
basic form letter to send out to our retirees and see if they would be interested in knowing
what is going on with this and I think our members need to be informed in an open form
and be able to ask questions. I would encourage us as a Board to see if we can have a
joint information meeting with the Fayetteville Police Pension Fund.
Sondra Smith: These meetings are open to the public and they can attend.
Pete Reagan: Is everyone okay with the letter.
A discussion followed on a possible date and time for an informational meeting with
LOPFI.
Sondra Smith: What we might could do is check with Kathryn to see if she can come on.
that date, have the Police Pension meeting before and have her scheduled to come in after
the Police Pension meeting or right before it and involve both departments and the
pensioners for the meeting with her and then break away for the Police Pension meeting.
Marion Doss: That is what I was thinking, d think it would be great if we could get
Kathryn to come and also if Steve could be there because I think people are going to have
questions.
Sondra Smith: I will call Kathryn to see if she will be available on July 17 and I will
• check to see if Steve Davis will be available on that day. The Police Pension will meet at
1:30.
4
•
Fire Pension Minutes
June 26, 2003
Page 14 of 14
A discussion followed on a date and time.
Sondra Smith: I will set it up for July 17 in Room 219 at 10:00 for the Fire Pension and
1:30 for the Police Pension.
Eldon Robert: The City has the right to do I believe with our pension plans without a
vote of the Board of Trustees, but I would hope that we could iron out something that we
could all live with and enter into this mutually agreeable. I really have concerns about
where we are going if we try to keep these plans and manage them ourselves. This
guarantee of not having our benefit cut, I don't care if I never get another raise, 1 would
love to but if I don't that's okay.
A discussion on transferring the fund to LOPFI and how the Resolution should read
Sondra Smith I might suggest that you make a list of questions for Kathryn when she
comes, I will compile the questions if you get them to me before she comes.
Skelton Letter on Enrollment:
Sondra Smith: I sent a letter to Kimberly Skelton that just graduated from high school
about proof of enrollment for the college semester or her benefits would be cut. I also
send a letter to Kelley Skelton that we need to have proof of enrollment from her before
the fall semester.
Senate Bill 43
House Bill 1061, 1122, 1218, 1223, 1226, 1228, 1239, 1254:
Pete Reagan: If you have any questions on the bills attached to you agenda, please bring
them to the next meeting. The one on the 10 year DROP you will get some questions on
that from the active guys, that DROP cannot be extended by this board until the fund is
declared actuarially sound.
Larry Freedle's Drop Payment:
Pete Reagan: His DROP distribution check is $209,474. Can someone explain what the
total draw down for the June Pension is.
Ronnie Wood moved to adjourn. Robert Johnson seconded.
Meeting Adjourned at 12:20 P.M.
FIREMEN'S RELIEF AND PENSION
August 2003
IfOLLOWING ARE THE OBLIGATIONS OF THE FIREMEN'S RELIEF FUND FOR THE
H OF AUGUST 2003. YOU ARE HEREBY INSTRUCTED TO ISSUE CHECKS TO THE
ES, IN THE AMOUNTS SHOWN, AND FOR THE PURPOSE SO STATED.
DATE OF
EMP# RETIREMENT NAME
•
•
79 11/99
74 3/86
2 3/75
63 5/72
68 7/99
44 9/86
45 9/86
49 7/88
4 6/67
5 5/72
57 5/90
6 4/68
84 03/01
85 03/01
8 10/76
61 6/66
78 11/99
11 2/76
38 5/84
170 5/03
92 03/02
34 6/79
70 11/99
93 06/02
86 07/01
64 4/95
76 5/88
37 3/84
54 5/89
12 3/60
13 10/67
14 7/74
51 10/88
55 12/89
40 9/85
50 9/88
39 4/85
35 2/82
15 4/77
29 8/81
73 2100
42 2186
17 2/66
16 4/64
62 10/68
48 7/88
58 9/90
46 • 5/88
81 02/01
53 2/89
22 4/73
30 3/81
41 9/85
82 03/01
83 03/01
23 4/71
66 8/98
36 5/76
90 03/02
25 2/75
165 12(02
26 3/66
ARMSTRONG (DILL), PAMELA
BAIRD, JULIA
BLACKARD, PAUL
BOLAIN, ANN
BONADUCE, MICHAEL
BOUDREY, BETTY MRS.
BOUDREY, HOWARD
BOUDREY, JACK
CARL; FLOYD JR
CASELMAN, ARTHUR
CATE, ROY
C RISTIE, ARNOLD
CIRCT CLRK WA CO
CIRCT CLRK WA CO
'COUNTS; WAYNE
DAVIS BEULAH F.
DILL GARY JOHN
FARRAR,ALONZO
FRALEY, JOSEPH G.
FREEDLE, LARRY
GAGE TOMMY
HARRIS, JAMES E.
HARRIS, MARY RUTH
JENKINS, JOHN
JOHNSON,ROBERT
JORDAN, CHARLIE
JUDY, JAN
KING, ARNOLD D.
KING, ARVIL
[LANE,, HOPE MRS
LAYER, MERLIN
LEE, HAROLD
LEWIS, CHARLES
LEWIS, ROGER (DECEASED)
LOGUE, PAUL D
MASON, LARRY
MC ARTHUR, RONALD A.
LMC CHRISTIAN; DWAYNE 1
MC WHORTER, CHARLES
MILLER, DONALD
MILLER,KENNETH
MOORE, JAMES H.
MORRIS, WILKIE MRS. (DECEASED)
REGULAR Year To Date
MO BENEFIT REG BENEFIT
1,658.91
1,649.16
55.00 100.00
55.00 100.00
2,735 14
2,267.18
1,911.99
1,507.82
55.00 100.00
75.00 120.00
1,637.10
55.00 100.00
55.00 100.00 ]
377.50
1,658.92
914.10
1,618.08
3,492.86
2,376:34
55.00 100.00]
55.00 100.00
3,273.93
2,812.66
2,061.90
1,507.82
1,393.18
1,566.00
100.00
417.50
55.00 100.00
1,507.82
55.00
2,624.88
1,492.83
1,604.92,
55007c" 100:00
1,221.26
1,193.41
2,910.17
55.00 100.00]
MORRIS; WILLIAM H.
MORRISON, ELIENE
MULLENS, DENNIS W.
OSBURN, EDWARD
OSBURN, TROY
PHILLIPS,LARRY
POAGE, LARRY
REED, JOE
SCHADER EARVEL
SCHADER TROY
SKELTON,KELLY •
SKELTON, KIMBERLY
SKELTON, LAWRENCE BURL (DECEASED)
SKELTON, PAULINE
SPRINGSTON, CARL
STOUT, IMOGENE W.
STOUT, ORVILLE (DECEASED)
TATE, RALPH
TUNE, BILLIE SUE
70.00 115.001
80.00 125.001
2,005.35
2,248.33
1,738.46
2,530.45
2,147.56
55.00 100.00
1,268.40
1,395.58
1,114.17
1,114.17
390.00
737.78
702.65
11,612.37
11,544.12
385.00
385.00
19,145.98
15,870.26
13,383.93
10,554.74
385.00
525.00
11,459.70
385.00
0.00
0.00
385.00
2,642.50
11,612.44
6,398.70
11,326.56
10,478.58
16,634.38
385.00
385.00
22,917.51
19,688.62
14,573.30
10,554.74
9,752.26
10,962.00
385.00
2,922.50
385.00
10,554.74
0.00
18,374.16
10,449.81
11,234.44
385.00
8,548.82
8,353.87
20,371.19
385.00
55:00
490.00
560.00
14,037.45
15,738.31
12,169.22
17,713.15
15,032.92
385.00
8,878.80
9,769.06
7,799.19
7,799.19
3,482.00
2,730.00
5,164.46
4,918.55
3,356.83 23,497.81
80.00
125.00 ] 560.00
FED TAX ST. TAX
NET
300.00 100.00 1,258.91
350.00 145.00 1,154.16
100.00
100.00
475.38 2,259.76
300.00 50.00 1,917.18
1,911.99 "
287.68 50.00 1,170.14
100.00
120.00
1,637.10
100.00
o.do
0.00
100.00
377 50
100.00 1,558.92
75.00 839.10
200.00 15.00 1,403.08
500.00 100.00 2,892.86
226.00 50.00 2,100.34
100.00
100.00
700.00 200.00 2,373.93
.500.00 100.00 2,212.66
2,081.90
200.00 50.00 1,257.82
240.00 100.00 1,053.18
130.00 1,436.00
100.00
417.50
100.00
75.00 25.00 1 407 82
0.00
325.00 75.00 2,224.88
78.16 1,414.67
150.00 50.00 1,404.92
100.00
150.00 1,071.26
125.00 25.00 1,043.41
325.00 75.00 2,510.17
100.00
0.00
115.00
125.00
2,005.35
160.00 2,088.33
200.00 38.00 1,500.46 .
2,530.45
300.00 100.00 1,747.56
100.00
1,268.40
57.00 1338.58
125.00 25.00 964.17
125.00 25.00 964.17
0.00
390.00
70.00 17.00 650 78
702.65
0.00
300.00 100.00 2,956.83
125.00
•
DATE OF
EMP# RETIREMENT NAME
REGULAR Year To Date
MO BENEFIT REG BENEFIT FED. TAX ST. TAX
27 3171 ITUNE; MILDRED MRS.
71 1/00 WARFORD,THOMAS
28 7/68 WATTS, DONALD
59 5/91 WATTS, WAYNE (DECEASED)
B8 01/02 WOOD,RONNIE D
52 9/88 WRIGHT, RANDALL
DROP DATE DROP EMPLOYEES
02/01/99
05/01/99
04/01/00
07/01/00
01/01/01
03/01/03
03/01/03
03/01/03
04/01/03
LEDBETTER, DENNIS
BACHMAN, EDDIE
NAPIER,LONNIE
REAGAN,PETE
DOSS,MARION
MAHAN, MARSHALL
PIERCE, JOEY
SHACKLEFORD, GLEN
O'NEAL TEDDY
80.00 125.001 560.00
2,290.35 16,032.45 300.00
400.00 2,800.00
2,816.02
1,547.62
79,027.30
19,712.14
10 834 74
537,401.66
800.00
200.00
8,449.22
200.00
25.00
1,740.00
NET
125.00
1,990.35
400.00
0.00
1,816.02
1,322.82
68,838.08
NEW BENEFITS
3,455.40
2,396.34
3,219.73
3,235.68
4,920.63
3,731.29
3,337.69
3,337.69
3,771.29
WE, THE UNDERSIGNED, DO SOLEMNLY SWEAR THAT THE ABOVE OBLIGATIONS ARE
JUST AND CORRECT; THAT NO PART THEREOF HAS BEEN PREVIOUSLY PAID; THAT
THE PENSION PAYMENTS SO CHARGED ARE IN ACCORDANCE WITH THE ACTIONS OF
THE BOARD OF TRUSTEES OF THE FIREMEN'S RELIEF AND PENSION FUND; THAT
THE SERVICES OR SUPPLIES FURNISHED, AS THE CASE MAY BE, WERE ACTUALLY
RENDERED OR FURNISHED; AND THAT THE CHARGES MADE THEREFORE DO NOT
EXCEED THE AMOUNT ALLOWED BY LAW OR THE CUSTOMARY CHARGE FOR SIMILAR
SERVICES OR SUPPLIES
RETARY CHAIRMAN AND PRESIDENT
ACKNOWLEDGEMENT
STATE OF ARKANSAS )
COUNTY OF WASHINGTON)
SWORN TO AND SUBSCRIBED BEFORE ME THIS
DAY OF 2003.
NOTARY PUBLIC
MY COMMISSION EXPIRES :
YTD
6810-981u st16.00 537,401.66
•
•
LONGER INVESTMENTS INCORPORATED
A Registered Investment Advisor
July 9, 2003
City of Fayetteville
Fire Pension and Relief Fund
Attn: Sondra Smith
113 W. Mountain
Fayetteville, Arkansas 72701
Dear Sondra:
Enclosed you will find the 2003 second quarter reports for the Fayetteville Fire Pension and
Relief Fund U/A dtd 6-18-86 account. These reports include a portfolio appraisal, a report of
realized gains/losses, and an income and expense report. As instructed, Northern Trust will
be billed for the management fee.
Effective March 10, 2003, the U.S. Securities and Exchange Commission adopted a new rule
and rule amendments under the Investment Advisers Act of 1940 that address an investment
advisor's fiduciary obligation to its clients when the advisor has authority to vote their
proxies. The new rule requires an investment advisor that exercises voting authority over
client proxies to adopt policies and procedures reasonably designed to:
• Ensure that the advisor votes proxies in the best interests of clients.
• Disclose to clients information about those policies and procedures.
• ,Disclose to clients how they may obtain information on how the advisor has voted their
proxies.
The rule amendments also require advisors to maintain certain records relating to proxy
voting. The rule and rule amendments are designed to ensure that advisors vote proxies in
the best interest of their clients and provide clients with information about how their proxies
are voted. As such, enclosed you will find the Longer Investments Inc. Proxy Voting Policy;=
If you have any questions regarding this policy or the manner in which your proxies were
voted, please feel free to contact our office
P0. Box 1269
Finalnd114 Arkansas 72702
relrphonr 501-443-5851
Toll free: 800-827-7710
Fax: 501-443-7129
Web site: wrv,v ongninvmm
City of Fayetteville
July 9, 2003
Page Two
Due to end of quarter constraints, in lieu of a regular quarterly newsletter we are enclosing a
reprint of an article that appeared in the April 28, 2003, issue of the Northwest Arkansas
Business Journal. The article discusses the value of harvesting losses to enhance portfolio
returns. We thought you would be interested in reading about one of the strategies we utilize
to help our clients save on taxes.
A copy of the Longer Investments Inc Privacy Policy is enclosed. As required by SEC
Regulation S -P, Longer Investments provides a copy of the policy to its clients on an annual
basis.
As part of our contingency planning, we had previously provided the cell phone numbers to
use if you are unable to reach our office during regular business hours. Please note that my
cell phone number has changed to 479-283-9470. You may still reach Kim at 479-841-7901.
We appreciate the opportunity to be involved in the management of the City of Fayetteville
Fire Pension Fund's assets.
Sincerely,
Elaine M. Longer, CFA
President
EML•tac
Enclosures
Longer Investments, Inc.
Proxy Voting Policy
Longer Investments Inc. will vote proxies for clients under the authority explicitly granted by the
client in the custodian's new account documentation and/or their Investment Advisory Agreement.
Proxies will be voted according to the proxy voting policy that follows. Longer Investments Inc. will
not be responsible or liable for failing to vote any proxies if it has not received such proxies or related
shareholder communications on a timely basis from the custodian of the account.
1. Vote with management on routine matters such as the election of directors and the
appointment of auditors.
2. Vote with management on proposals regarding social issues.
3. Vote against anti-takeover measures and limitations on shareholder rights.
Vote against a poison pill unless:
a. management indicates that it is linked to a specific corporate strategy,
b. it has a sunset provision, or
c. it is subject to shareholder vote.
5. Mergers, acquisitions, and changes in capital structure are voted with management unless
equity research available regarding the proposal indicate that it is not in the best interest of
shareholders.
Vote with management regarding option plans and compensation for executives and directors
as well as items related to procedures and terms for election of board of directors.
Proposals not specifically identified above will be reviewed on an individual basis and
generally voted with management, unless it is not deemed to be in the best interest of
shareholders.
Reasons for not voting with management on any proposal must be documented.
9. In the event that voting a certain proxy could result in a conflict of interest between Longer
Investments Inc. and its clients, Longer Investments will take steps necessary to notify clients
of the potential conflict and will obtain clients' consent before voting the proxy.
10. Copies of each proxy statement and a proxy voting record must be maintained.
11. . Clients may obtain information about the manner in which their proxies were voted by
contacting Longer Investments Inc. by phone at (479) 443-585] or (800) 827-7710 or in
writing at P. 0. Box 1269, Fayetteville, AR 72702.
Revised: June 25, 2003
•
•
LONGER INVESTMENTS INC.
PRIVACY POLICY
At Longer Investments Inc., we respect your right to privacy. Protecting client data has always been a
paramount concem at Longer. We are committed to maintaining the confidentiality, integrity and security
.of personal information entnisted to us by current and prospective customers. We further believe that our
customers have a right to know how we protect and use private information.
In November 1999, Congress passed the Gramm -Leach -Bliley Act, which requires financial institutions
to implement specific policies and procedures to safeguard nonpublic consumer information. In response
to the Act, the Securities and Exchange Commission adopted Regulation S -P, effective on Nov. 13, 2000,
which applies to federally registered investment advisers and broker/dealers.
In general terms, Regulation S -P requires that we protect the information we receive from individuals in
the course of doing business. We have always had procedures in place to safeguard your confidential
information. For example, all of our employees sign and abide by a strict confidentiality agreement. We
never give client names as references. We protect all information on our Web site, and maintain a secure
office environment.
In response to Regulation S -P, we are making this Privacy Policy explicit. We will disclose this Privacy
Policy to our existing clients annually, as mandated by Regulation S -P, and to new clients when they join
us. We also continually monitor our results to ensure that our Privacy Policy keeps pace with business
practices.
To conduct business and provide customers with a broad range of products and investment advice, we
must collect and use the financial information that belongs to our clients. We hold this nonpublic
personal information in the strictest confidence.
Information Collection
In the normal course of business, wecollect and use various types of information from various sources.
These sources include personal interviews, applications and other forms, correspondence and
conversations about your transactions, and information exchanges with approved nonaffiliated third
parties (i.e. brokers and custodians that we use to administer the accounts).
The information that we gather is used for internal purposes only. Your nonpublic personal information is
available only to those employees and entities that have a specific business reason for knowing it, as
permitted by law.
Information Disclosure
We do not disclose any nonpublic personal information about you either to affiliated or nonaffiliated third
parties without your express consent, except as permitted by law for purposes of serving your fmancial
needs. To that end,we may disclose the nonpublic personal information we collect, as described above, to
nonaffiliated third parties that perform services on our behalf and to other financial institutions that must
have it to process your financial transactions. However, no information will be provided to unaffiliated
third parties without the explicit knowledge and approval of management. We may also disclose or report
information when such disclosure is required or permitted under law, to satisfy legal or regulatory
obligations. For example, we must give information in response to a valid court order, search warrant, or
other legally valid inquiry or demand. We insist that any third party with whom we share your
information agree to maintain the confidentiality of this information in accordance with applicable law.
•
•
Security Procedures
We will of course continue to protect your information with appropriate safeguards and security
measures. We restrict access to your personal information to personnel who need it to serve you. Our
employees are familiar with our strict Privacy Policy and with the procedures necessary to safeguard your
personal information. Adherence to our Privacy Policy is required of every employee. We maintain
physical, electronic, and procedural safeguards to protect your nonpublic personal information. Our
offices are monitored by a 24-hour electrical security system. We maintain secure office and computer
environments to ensure that your information is not placed at risk, and we back up our systems as
appropriate. All client files are kept in locked cabinets in a secure storage area, with access restricted to
authorized personnel. All documents containing account information and/or client names are shredded
before they are discarded. We audit our procedures and security measures regularly to ensure that they
are being properly administered and that they remain effective and appropriate.
Online Privacy
Longer Investments Inc., considers Web site security to be Just as critical as office security. Our Web site
collects no individually identifiable information about visitors unless they knowingly and voluntarily
provide it. You can visit our Web site without telling us who you are or revealing any information about
yourself. Clients who choose to access their account.information via our Web site are given passwords to
protect their identities. If Web visitors give us individually identifiable information, we do not disclose it
to anyone outside of Longer Investments Inc., without specific authorization except as permitted by law.
Our site uses 128 -bit encryption, the highest level generally available today. We do not employ any
tracking device to collect personal data on visitors, nor do we make use of "cookies"(reminders left on
your computer by Web sites you visit). We do, however, use certain tracking devices that enable us to
collect generic information, about visitors, in order to measure our site's effectiveness.
To provide clients with easy access to additional information and resources, our Web site contains links to
other Web sites that are not affiliated with Longer. We do not monitor the privacy practices of these
third -party sites, and we do not exercise any authority over them. We therefore do not assume any
responsibility for the content or data collection policies and procedures of these sites, and we cannot
guarantee that your privacy will be protected there as it is at Longer Investments. Such links in no way
compromise the integrity of our Web site.
Contact Us
Your questions are important to us. If you have any questions related to our Privacy Policy and
procedures, please feel free to contact us at (479) 443-5851, (800) 827-7710 or via e-mail at
info®longerinv.com.
an ,„test
Longer Investments, Inc.
Proxy Voting Policy
Longer Investments Inc. will vote proxies for clients under the authority explicitly granted by the
client in the custodian's new account documentation and/or their Investment Advisory Agreement.
Proxies will be voted according to the proxy voting policy that follows. Longer Investments Inc. will
not be responsible or liable for failing to vote any proxies if it has not received such proxies or related
shareholder communications on a timely basis from the custodian of the account.
1. Vote with management on routine matters such as the election of directors and the
.appointment of auditors.
2. Vote with management on proposals regarding social issues.
3. Vote against anti-takeover measures and limitations on shareholder rights.
4. Vote against a poison pill unless:
a. management indicates that it is linked to a specific corporate strategy,
b. it has a sunset provision, or
c. it is subject to shareholder vote.
• 5. Mergers, acquisitions, and changes in capital structure are voted with management unless
equity research available regarding the proposal indicate that it is not in the best interest of
shareholders.
Vote with management regarding option plans and compensation for executives and directors
as well as items related to procedures and terms for election of board of directors.
7. Proposals not specifically identified above will be reviewed on an individual basis and
generally voted with management, unless it is not deemed to be in the best interest of
shareholders.
•
8. Reasons for not voting with management on any proposal must be documented.
9. In the event that voting a certain proxy could result in a conflict of interest between Longer
Investments Inc. and its clients, Longer Investments will take steps necessary to notify clients
of the potential conflict and will obtain clients' consent before voting the proxy.
10. Copies of each proxy statement and a proxy voting record must be maintained.
11. Clients may obtain information about the manner in which their proxies were voted by
contacting Longer Investments Inc. by phone at (479) 443-5851 or (800) 827-7710 or in
writing at P. 0. Box 1269, Fayetteville, AR 72702.
Revised: June 25, 2003
i
•
•
LONGER INVESTMENTS INC.
PRIVACY POLICY
At Longer Investments Inc., we respect youf right to privacy. Protecting client data has always been a
paramount concern at Longer. We are committed to maintaining the confidentiality, integrity and security
of personal information entrusted to us by current and prospective customers. We further believe that our
customers have a right to know how we protect and use private information.
In November 1999, Congress passed the Gramm -Leach -Bliley Act, which requires financial institutions
to implement specific policies and procedures to safeguard nonpublic consumer information. In response
to the Act, the Securities and Exchange Commission adopted Regulation S -P, effective on Nov. 13, 2000,
which applies to federally registered investment advisers and broker/dealers.
In general terms, Regulation S -P requires that we protect the information we receive from individuals in
the course of doing business. We have always had procedures in place to safeguard your confidential
information. For example, all of our employees sign and abide by a strict confidentiality agreement. We
never give client names as references. We protect all information on our Web site, and maintain a secure
office environment.
In response to Regulation S -P, we are making this Privacy Policy explicit. We will disclose this Privacy
Policy to our existing clients annually, as mandated by Regulation S -P, and to new clients when they loin
us. We also continually monitor our results to ensure that our Privacy Policy keeps pace with business
practices.
To conduct business and provide customers with a broad range of products and investment advice, we
must collect and use the financial information that belongs to our clients. We hold this nonpublic
personal information in the strictest confidence.
Information Collection
In the normal course of business, we collect and use various types of information from various sources.
These sources include personal interviews, applications and other forms, correspondence and
conversations about your transactions, and information exchanges with approved nonaffiliated third
parties (i.e. brokers and custodians that we use to administer the accounts).
The information that we gather is used for intemal purposes only. Your nonpublic personal information is
available only to those employees and entities that have a specific business reason for knowing it, as
permitted by law.
Information Disclosure
We do not disclose any nonpublic personal information about you either to affiliated or nonaffiliated third
parties without your express consent, except as permitted by law for purposes of serving your financial
needs. To that end, we may disclose the nonpublic personal information we collect, as described above, to
nonaffiliated third parties that perform services on our behalf and to other financial institutions that must
have it to process your financial transactions. However, no information will be provided to unaffiliated
third parties without the explicit knowledge and approval of management. We may also disclose or report
information when such disclosure is required or permitted under law, to satisfy legal or regulatory
obligations. For example, we must give information in response to a valid court order, search warrant, or
other legally valid inquiry or demand. We insist that any third party with whom we share your
information agree to maintain the confidentiality of this information in accordance with applicable law.
•
•
•
Security Procedures
We will of course continue to protect your information with appropriate safeguards and security
measures. We restrict access to your personal information to personnel who need it to serve you. Our
employees are familiar with our strict Privacy Policy and with the procedures necessary to safeguard your
personal information. Adherence to our Privacy Policy is required of every employee. We maintain
physical, electronic, and procedural safeguards to protect your nonpublic personal information. Our
offices are monitored by a 24-hour electrical security system. We maintain secure office and computer
environments to ensure that your information is not placed at risk, and we back up our systems as
appropriate. All client files are kept in locked cabinets in a secure storage area, with access restricted to
authorized personnel. All documents containing account information and/or client names are shredded
before they are discarded. We audit our procedures and security measures regularly to ensure that they
are being properly administered and that they remain effective and appropriate.
Online Privacy
Longer Investments Inc., considers Web site security to be just as critical as office security. Our Web site
collects no individually identifiable information about visitors unless they knowingly and voluntarily
provide it. You can visit our Web site without telling us who you are or revealing any information about
yourself. Clients who choose to access their account information via our Web site are given passwords to
protect their identities. If Web visitors give us individually identifiable information, we do not disclose it
to anyone outside of Longer Investments Inc., without specific authorization except as permitted by law.
Our site uses 128 -bit encryption, the highest level generally available today. We do not employ any
tracking device to collect personal data on visitors, nor do we make use of "cookies"(reminders left on
your computer by Web sites you visit). We do, however, use certain tracking devices that enable us to
collect generic information, about visitors, in order to measure our site's effectiveness.
•
To provide clients with easy access to additional information and resources, aur Web site contains links to
other Web sites that are not affiliated with Longer. We do not monitor the privacy practices of these
third -party sites, and we do not exercise any authority over them. We therefore do not assume any
responsibility for the content or data collection policies and procedures of these sites, and we cannot
guarantee that your privacy will be protected there as it is at Longer Investments. Such links in no way
compromise the integrity of our Web site.
Contact Us
Your questions are important to us. If you have any questions related to our Privacy Policy and
procedures, please feel free to contact us at (479) 443-5851, (800) 827-7710 or via e-mail at
info@longerinv.com.
LONGER INVESTMENTS INCORPORATED
reprinted from
IN1*Oa$ T' t A RsK' A9t'11 s r Si
BUSINESS PURNAL
April 28, 2003
Harvesting losses can save on taxes
Loss harvesting is a vital part
of tax -efficient investing. Loss
harvesting simply means selling
stocks, bonds, or other
investments that have lost
value and using the
realized losses to offset
taxable gains and
income from other
assets in the portfolio.
Naturally, loss
harvesting is most
attractive in a bear
market. However,
investors should be
alert to the opportunity
to capture losses in any
market environment.
When the stock
market booms,
investors typically
fixate on picking
winners and protecting gains.
This leads to asset turnover and
higher taxes. Investors tend to
overlook the value of managing
taxes in the portfolio.
But tax containment is a
Elaine M Longer,
CFA, President,
Longer Investments
Incorporated
simple and practical way to
improve investment
performance in good and bad
markets. By reducing the capital
gains and income taxes
triggered when investments are
sold, investors can improve -
aftertax returns without
incurring additional risk. Every
dollar saved on taxes is a dollar
that can be invested to create
more wealth over time. The
longer an investor's time
horizon is, the more value
astute tax management can add.
Several factors should be
considered in the harvesting
of losses:
• Tax rate treatment.
Short-term and long-term losses
are treated differently for tax
purposes. Investments held for less
than a year are deemed short-
term Short-term gains are taxed at
the investors marginal income tax
rate (up to 38.6 percent); long-
term gains are taxed at a 20
percent rate. So a short-term loss
is usually worth more when it can
offset a short-term gain
• Loss and gain proportions.
First, the investor should
match similar losses and gains.
The normal procedure is to
apply long-term losses to .
reduce long-term gains, and
short-term losses to reduce
short-term gains. Remaining
losses are then matched to
offset remaining capital gains. If
there are still losses left after all
gains are matched, those losses
can be applied to reduce the
investor's earned income and
interest income up to $3,000 in
a single tax year. Beyond that,
excess losses can be carried
forward to future tax years,
when they can be used to offset
realized gains, without limit, or
to offset income up to $3,000
annually. Matching losses
requires analysis, planning, and
coordination, especially if a
portfolio has multiple assets
that show gains and losses.
LONGER INVESTMENTS INCORPORATED
• Tbuing and tax year.
Generally, any loss realized in a
given tax year reduces gains for that
same year. But it is important to note
that the IRS has a "wash sale' rule
that disallows a loss for any
investment that is sold and
repurchased within 30 days. When a
losing investment is expected to
rebound soon, the investor may be
reluctant to wait 30 days to get back
into it, fearing that the benefit of a tax
reduction will not compensate for the
missed advance. One way to capture
the loss while maintaining the position
is to buy another investment in the
same industry group with similar risk
and return traits. Another strategy is to
double up on the investments
intended for sale, then after the 30 -day
wait sell the higher -cost tax lot.
• Cost basis calculation.
Losses or gains reported depend on
the acquisition price (cost basis) of the
shares sold. Three methods are
available to calculate cost basis.
Different methods can be used within
a portfolio, but the same method must
be applied to all shares sold of a
particular investment.
Fist -in, first -out (FIFO) is the IRS
default method. This method assumes
that the first share purchased is the first
share sold. In an upward -trending
market FIFO usually renders the largest
gain (and therefore the smallest loss) for
the investor because the older shares
were usually bought at a lower cost.
Another method is cost averaging. To
use this method, an investor should
calculate the average acquisition price
for all shares of a particular investment.
The preferred method is to sell high-
cost shares first. This method requires
identification of each tax lot of shares
and diligent recordkeeping, but it is
worth the effort. When realizing gains,
investors can minimize taxes and keep
low-cost investments in the portfolio.
When harvesting losses, investors
realize a greater loss through the sale
of fewer shares. Tax lot identification
requires tracking the original cost of
each share sold, without regard to
time sequence. Although this involves
detailed recordkeeping, specific
identification helps investors reap
larger tax savings sooner.
Investors should keep in mind,
however, that all of these decisions
will affect the aggregate cost basis of
the portfolio. For instance, selling
higher -cost shares will reduce gains
and taxes. But the assets that remain
will have a lower cost basis, which
may create future tax liability. If the
portfolio grows, the investor will face
a higher tax bill when the remaining
shares are liquidated. The good news
is that money saved today can be
invested today, with a reasonable hope
of future profit
• Asset allocation/investment policy.
Loss harvesting can affect the
character of the whole portfolio: the
asset allocation, expected risk and return
dimensions, and rebalancing strategy.
Investors should remember not to let
the tail wag the dog when it comes to
minimizing taxes. Low taxes aren't the
ultimate goal of good portfolio
management; wealth creation is. Tax -
efficient techniques should always be
evaluated in the larger context of the
potential impact on the investor's
personal tax position, investment policy,
and investment goals.
•
Elaine Longer, CFA, is President of Longer
Investments Inc., an investment advisory
company in Fayetteville registered with the
SEC. For more information, visit
www.Iongerinv.com.
•
•
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From: Sharon Ostrowski
To: Smith, Sondra
Date: 6/4/03 1:47PM
Subject: DROP Distribution check
Sondra,
FYI:
Larry Freedle's DROP Distribution check amount is $209,474.85.
The Iota! draw down for June pension is : $384,529.57 which includes:: TQ 1-1d
Larry Freedle's DROP Distribution check $20�n9,474.85.— a�.e. �l tit
--Fire Pension $78,262.30 �_ut_ S
Police Pension $96,792.42
Thanks!
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Sondra Smith Returning your phone call Page 1
•
•
From: Sharon Ostrowski
To: Smith, Sondra
Date: 7129/03 4:21 PM
Subject: Returning your phone call
Hi Sondra,
It's been a very busy phone day for me. So incase you try to call me back again, I thought I would just
answer your question via e-mail. Larry Freedle's employee number is 170 and was accidentally left off of
the July schedule. Thanks for pointing that out and I will make sure that it is included on the new August
schedule I will be sending you tomorrow..
Thanks!
Sharon
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