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HomeMy WebLinkAbout1994-01-20 MinutesMINUTES OF A POLICE PENSION BOARD MEETING A meeting of the Police Pension Board was held on January 20, 1994, at 2:30 p.m. in Room 326 of the City Administration Building, 113 W. Mountain, Fayetteville, Arkansas. PRESENT: Jerry Friend, Hollis Spencer, Clint Hutchens, Mayor Fred Hanna, City Clerk Sherry Thomas, and City Treasurer Glyndon Bunton ABSENT: Eldon Roberts and Dr. James Mashburn CALL TO ORDER The meeting was called to order by Mayor Hanna. MINUTES Friend, seconded by Spencer, made a motion to approve the October 21, 1993 minutes. The motion passed unanimously. OLD BUSINESS MEDICAL RETIREES Bunton stated he has asked about the medical retirees to make sure everyone was aware of these people and if someone knows how and what most of these people are doing. Friend stated he was concerned about having rules and not enforcing them. Mayor Hanna asked after a retiree's 20 years of service time has expired, what does the Pension Board do at that point in time. Spencer stated the retiree's pension amount stays the same, and the retirement converts to a regular retirement without any further obligations to provide medical information to the Pension Board. Friend stated he felt the Pension Board needs to be fair and require medical updates from all the people on medical retirements. Friend, seconded by Hutchens, made a motion that if there has been no medical report or letter from a doctor within the last twelve months, one should be requested from the retiree and supplied to the Pension Board. The motion passed unanimously. NEW BUSINESS MARK HANNA MEDICAL RETIREMENT REQUEST Mayor Hanna stated a medical retirement request by Mark Hanna has been copied and distributed to the Board members. Since Mark is • • January 20, 1994 his son, he stated he will not attend the Pension Board meeting(s) where this retirement request is to be discussed. Since Dr. Mashburn could not attend this meeting, he suggested calling a special meeting when Dr. Mashburn can be in attendance. The Board agreed this should be done. WENDEL BAILEY WITH THE LLAMA COMPANY Wendel Bailey with the Llama Company addressed the Board and stated his company manages pension funds, and he would be glad to offer his services to this Board. Llama Company only invests in bonds, so Bailey stated he would not be competing with Elaine Longer or with Mike Kirkland. He stated they have a $5 million dollar minimum, but his company is working on being able to combine funds from several investors to meet this minimum. He stated he would keep the Board informed about this possibility. LONGER INVESTMENTS REPORT Elaine Longer stated the combined portfolio is 53% in stocks, 12% in corporate bonds, 23% in government bonds, 7% in CD's, and 5% in cash and equivalents. The value of the portfolio as of December 31, 1993 was $3.224 million. The bond market had a yield of 6.1% on market value and 6.4% on book value. She stated they were using a staggered maturity approach with the bonds to help keep the portfolio returns fairly constant. Longer stated the stock account has shifted from consumer non- durable goods to industrial goods. The stock value of the portfolio is $2.044 million. Friend stated there is always news on environmental concerns. He asked why the portfolio is no longer in this market. Longer stated these stocks have been having a downturn for the past two years. Their earnings are sensitive to the economy, and when it slowed, so did the stock's earnings. Longer stated the return on equity average for all companies was 17.2%. The debt to capital was 12.5%. The portfolio gained $44,872.42. Equities returned 12.1% and bonds returned 8.46%. The average return was 9.30% net of all expenses for 1993. Since inception, the portfolio net investment return was $721,161.28. The net annualized return was 10.31%. The custody fees were .18%. They use the Northern Trust Company for their investments. The commissions were 1/2 of 1%. The management fee was $27,729.08 or 1.01%. The management fee will drop to .75% when the portfolio gets over $3 million in value. • Longer stated the outlook for 1994 shows the European economies beginning to recover. The inflation outlook is 3-3 1/2% for 1994. • January 20, 1994 This could increase some by the end of the year. Unemployment is expected to be about 5.3%. The dollar will probably be fairly strong on the foreign markets. Ben Mayes asked if any of the portfolio is invested in the European market. Roberts stated they do own some Nestles stock. Friend asked if the ban is going to be lifted on investing in European markets. He stated he would get Eldon Roberts and ask him to talk with Katherine Henshaw about this. Longer stated she monitors what the companies are doing in the European markets. Several of them are positioning for the emerging markets in the world. Friend asked if the NAFTA agreement was opening up markets in Mexico. Longer stated it was. She stated the United States should benefit with those exports. DEAN WITTER INVESTMENT REPORT Mike Kirkland reported there is $83,709.82 in cash. There are two $90,000 CD's that will mature in 2 1/2 years, and they are earning 8.00% and 8.05%. He stated the Pension Fund switched from Acorn in August to TCW. The value of that account at the end of July 31, 1993 was $1,492,714. The value as of January 19, 1994 is $1,603,177, which is up 7.4% in five months. They have purchased a little more aggressive type stocks. Some of the stocks are more growth oriented such as Tandy and Home Depot. The TCW portfolio is split 67% in equities, 29% in bonds, and 4% in cash. Kirkland stated the Madison account was up only about 1/2%. They are invested 17% in cash and 83% in bonds with a total value of $1,465,790. 1993 was not a very good year for the bond market. The 30 year bonds are returning about 6.28 to 6.30%. They do not look for the bond rates to go up a whole lot. The combined accounts are valued at about $3.3 million. Kirkland stated both Madison and TCW will be coming out with the year end statements this month. He expects TCW to outperform Acorn. Kirkland reminded the Board that Madison Investments is not one of the money managers that Dean Witter monitors, but they are doing okay. He stated if the Board decides to change managers to one that is monitored by Dean Witter, he has one to recommend that he feels would do a good job for the Pension Board. The Board could have more current information about their investments if they hired • • January 20, 1994 a fixed income manager under the Dean Witter roof. He stated this is not an urgent situation, but he had told the Board last year that he would continue to monitor this situation. There have been no changes with the manager, and he does not expect any. ACTUARY REPORT Mayes stated this is the year the Pension Fund receives an actuary report, but it will probably not be ready until June or July. The pension fund is about $1 million ahead of the projections for this time period. There have been a few medical retirements, but he feels the fund should be pretty close to being actuarially sound. ADJOURNMENT The meeting adjourned at 3:56 p.m. • •