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HomeMy WebLinkAbout1996-10-17 - Agendas - Final FAYETTEVI LLE *THE THE CITY OF FAYETTEVILLE, ARKANSAS - TRACI PAUL, CITY CLERK TO : Policemen ' s Pension Board Members FROM : Traci Paul , City Clerk/Treasurer TP DATE : October 11 , 1996 SUBJECT : POLICE PENSION BOARD MEETING The next Police Pension Board meeting is Thursday , October 17 , 1996 , at 2 : 30 p . m . , in room 326 of City Hall . Attached , please find a copy of the agenda for the upcoming meeting , the minutes from the July 25 regular meeting , the pension lists for September , October , and November and various reports and correspondence . Attachments 113 WEST MOUNTAIN 72701 601 575-5323 AGENDA POLICEMEN ' S PENSION AND RELIEF BOARD October 17 , 1996 2 : 30 p . m . City Hall Room 326 1 . Approval of the minutes of the July 25 , regular meeting . 2 . Old Business A . Discussion of Dean Witter/Morgan Keegan issue 3 . New Business A . Report from Longer Investment B . Report from Jim Wood , Dean Witter C . Investment of Insurance Turnback money D . Other 4 . Adjournment MINUTES OF A POLICE PENSION BOARD MEETING A meeting of the Police Pension Board was held on July 25 , 1996 at 1 : 30 p . m . in room 326 of the City Administration Building , 113 West Mountain , Fayetteville , Arkansas . PRESENT : Mayor Fred Hanna , Eldon Roberts , Jerry Friend , Dr . James Mashburn , Randy Bradley , and City Clerk/Treasurer Traci Paul ABSENT : Hollis Spencer CALL TO ORDER The meeting was called to order by Mayor Hanna . MINUTES Mashburn moved to accept the minutes of the April 18 regular meeting and the minutes of the June 12 special meeting . Roberts seconded . The motion passed unanimously . OLD BUSINESS Report on the Proposed Benefit Increase • The Board reviewed a letter from Cathyrn Hinshaw which was distributed with the agenda . The letter explained the reasons for the denial of the benefit increase requested by the Board in February 1996 . Roberts stated the request for an increase to 530 of salary was not that far off . The Board discussed briefly the Police Pension Plan as compared to the Fire Pension Plan . It was determined that the Fire Pension Plan has always had more money than the Police Pension Plan . NEW BUSINESS Internal Revenue Service Tax Deposit Reauirements In answer to a question from Bradley regarding a memo that was sent to the Board , Administrative Services Director Ben Mayes stated the Board made payments quarterly in the past . Now the Board is required to make a monthly wire transfer . The transfer must be made through a financial institution . In response to concerns about the Fire and Police Pensions operating under a single Federal identification number , Mayes • explained the records kept by the City are clear . 1 • July 25 , 1996 INVESTMENT REPORTS Longer Investments Elaine Longer , Longer Investments , distributed the portfolio appraisal and other reports . Elaine Longer reviewed action taken in the portfolio during the first six months of the year . She stated she started ducking around the end of May . In the first quarter , the interest rate environment turned more hostile . Individual stocks started deterierating in the first part of June . The earnings release season is not as strong as prior quarters have been . She explained she is being conservative and is happy to be earning 6 . 25 % for now . Longer stated things are looking good this month because the market caught up to where we are . The market is down 6 . 50s month - to - date and as of yesterday ' s close the Russell 2000 and the NASDAQ were down about 12 % month to date . Longer discussed the status of the market . Longer stated in the combined portfolio , stocks as a total percent are about 33 % . The portfolio value is right at $ 4 million . The • yield on the total portfolio is 5 °s on market value and 5 . 49c; on book value . We have been able to take advantage of what we have in the interest rate environment to increase the income yield on the portfolio . Longer stated in the stock portfolio , 5096 of the portfolio is invested in stocks and the rest is in treasuries . We have flexibility to increase allocation to the equity market . The bond portfolio has a high income yeild at about 6 . 8 % on market value . Longer stated the blue chip names are still included in the largest holdings . Friend asked if Philip Morris would be affected by the lawsuits against ciggarett companies . Longer stated it did affect Philip Morris in the first quarter . They sold the stock off . Longer explained that the stock went down during some class action litigation in Florida . Then an appeals court disallowed class action status and the stock came back up . The class action status was a big scare factor . • 2 • July 25 , 1996 - Longer 996Longer stated nothing much has changed in the portfolio parameters except the percent of equity exposure . Last time small cap . stocks represented 27 % of equities . They are down to 81 . The blue chip stocks are now 69 % of equities . They were 40 % before . Realized gains through June 30 are $ 124 , 603 . Longer stated this is one of those years you just struggle to keep everything from going negative . Equities are up about 2 % . Fixed income , which is a bond portfolio , is at - 0 . 9 . The treasury index is down 1 . 8 % year - to - date through June 30 . The average annual returns are 10 . 61 in equities and 8 . 11; compounded annually overall . Longer stated fixed income securities have a 6 . 8 % yield on book value . Total portfolio is about 5 . 4 % . Weighted average maurity is right at 4 years . Fixed income secureities maturing in three years or less make up 34 . 2 % of the portfolio . The weighted average duration is 3 . 2 . Mashburn pointed out that the report is through June 30 . Mashburn expressed concern about the status of the portfolio after the first three weeks of July . Longer explained she looked at the portfolio yesterday . She stated we are holding constant . The market averages are coming back to • where we are year - to - date . The stock portfolio which is 50 % stocks and 50 % bonds is down about 226 . The whole account is off less that 1 % . The Board briefly discussed the status of several stocks managed by Longer . Presentation by Jim Wood , Dean Witter Jim Wood , Dean Witter , thanked the Board for using Dean Witter . Wood reminded the Board that Dean Witter is one of the most consistantly profitable and conservative firms . Wood gave an economic overview from TCW . Wood stated inflation is one of the most important things that affects investment performance . Inflation is running about 3 % . The long bond is about 71 so you have a real rate of return with 30 year governments minus inflation . Wood stated TCW sees good oportunities in U . S . based companies in the export business . Our economy is growing at around 2 . 596 but the export business is growing at around 10 % . The technology area is another area of great opportunity . • 3 • July 25 , 1996 Wood stated everything the Board has with Dean Witter is conservatively managed . In the past when there has been some uncertainty and the market was down , the account has gone up after the uncertain period was over . Wood reminded the Board that 600 of their portfolio with Dean Witter is in TCW . Wood reviewed the Industrties Matrix as of May 31 , 1996 and a list of the largest holdings as of June 30 , 1996 . Wood stated the other 40 % of the portfolio is the fixed income account . At the end of June , this account was worth $ 1 , 891 , 774 . For the quarter , it was up 2 . 4 % , year - to - date it is up 4 . 9 % . This time it was 63 . 81 stocks , 30 . 5 % bonds , and 5 . 7 % cash . Mayor Hanna asked what the Board ' s total _holdings in Dean Witter were . Bradley stated as of June 30 , TCW is worth $ 1 , 891 , 000 . Bradley asked about an ajustment for the last few weeks . Wood stated it is probably about 2 . 5 % less than the $ 1 , 891 , 000 . • Wood discussed the status of the account with Madison . He stated the market value of this account as of June 30 was $ 1 , 661 , 939 . Madison ' s number one goal is capital preservation . On June 30 , $ 461 , 000 of the account was in corporate bonds . The amount in treasury notes was $ 914 , 000 . The Board has put $ 1 , 040 , 000 in Madision and it is worth $ 1 , 661 , 000 . For the first six months of the year , this account is down . 71 % . Wood stated the average annual rate of return should be around 7 . 5 % to 8 . 51 since they have been managing the account . Administrative Services Director Ben Mayes stated we diversify between stocks and bonds and treasury notes . Mayes asked if the fund needs diversification between money managers . Wood stated you do need diversification between money mangers . From a trust committee point of view , it is wise to diversify . Mayor Hanna stated Mike Kirkland has requested that we continue to let him manage the Board ' s money at his new firm . The Board will need to make the decision . In answer to a question from Bradley , Wood stated he has been with Dean Witter since April of 1990 . Wood left the meeting . • 4 • July 25 , 1996 Mayor Hanna stated Dean . Witter has about $ 3 , 835 , 000 and Elaine Longer has about $ 3 , 998 , 000 . We gave Elaine about $ 150 , 000 a few months ago . Mashburn stated the Board needs to have a manager that can attend the meetings and explain things . Mashburn pointed out that Wood ' s report style was similar to Mike ' s report style . Mayor Hanna stated Dean Witter uses Madison and TCW to do all the managing . Elaine Longer does all the managing herself . Dean Witter just reports on how Madision and TCW are doing . Mashburn expressed his appreciation for Elaine Longer ' s presentations . Mayor Hanna stated the Board could have the tendancy to give all the money to Elaine Longer . She can explain it but she is not infallible either . It might not be a good idea to put all of the Board ' s eggs in one basket . Presentation by Mike Kirkland , Morgan Keegan Mike Kirkland thanked the Board for allowing him to present his case . . Kirkland introduced Bob Glenn , President of Morgan Assett Management . He is the head of the money management division at Morgan Keegan . Kikland stated he and Mr . Glenn wanted to give the Board a chance to see what Morgan Keegan has to offer . Bob Glenn stated Morgan Keegan is a regional brokerage firm . It was started in Memphis , Tennessee and has been in business for 27 years . It is one of the most well capitalized regional brokerage firms in the south . Morgan Keegan has grown its business very carefully . There was a market for a firm specializing on firms in the south . The intent of Morgan Keegan is to be the preiminate firm in the Southern United States . There are 36 offices in 13 states in the south . The two offices in Arkansas are in Little Rock and Rogers . Morgan Keegan consultants are chosen with care . Mogan Keegan is about service . In discussing the Investment Management Consulting Services Group at Morgan Keegan , Glenn stated a consultant would review your current investment policy and put together a historical review of the total fund performance . The historical review would be used in quarterly presentations . Glenn stated there is lots of experience represented in the staff of Morgan Keegan . • 5 • July 25 , 1996 Kirkland stated there is an item in the investment policy that we would want to review . It is the paragraph that talks about U . S . firms being affiliated with companies in South Africa . If it is still enforced by Arkansas law than it should be left in the policy . If not , it would need to be reviewed . Glenn stated we will review your investment policy over the next few weeks . If Morgan Keegan is retained to continue to work with you , at the next meeting we would review the policy and make recommendations as to potential changes . Glenn reviewed a chart showing what various assett mixes have provided in the past . Glenn stated this type of analysis is done for Morgan Keegan clients . Glenn stated Morgan Keegan does not sell investment management . We do not sell managers . Consultants are not compensated by any of the managers . Our data base was created by going through and screening managers that were out there and available and who we felt represented the characterists Morgan Keegan desires . We have an analyst whos job it is to go out and visit managers in their shop . Glenn stated we have identified NWQ as a firm that the Board might • want to consider to manage some of your assetts . Kirkland explained he has been familiar with NWQ for over 10 years . Kirkland stated they have been around since 1982 . They are involved with a list of companies that the Board should be familiar with . This management company has large cap stocks and has a great track record . It is achieving goals that I think the Board would like to achieve . A large cap manager ' s balance is going to be in the 600 - 4096 range . Glenn stated NWQ is a value manager . A value manager looks for slow steady growers . They typically pay a dividend . They look at the economy and general economic conditions . Glenn stated data is available from Morgan Keegan on lots of different managers . Glenn reviewed charts showing that NWQ ' s performance has been better than TCW ' s over the past three years . A five year comparison was also discussed . Glenn explained that one of the services available to the Board would be a comprehensive performance review on the Police Pension Fund . Glenn stated in general , our mission is to work with your group on investement matters relating to your fund . Glenn reviewed • several charts and reports as an example of the tupes of reports 6 • July 25 , 1996 that would be available to the Board . Kirkland stated the three accounts are still at Dean Witter . If the Board choses to continue the relationship , the cash account would stay just the same . The Madision account would also stay the same . TCW is the account in question . If we are retained , we would provide the types of reports to you that you have seen today and we would look at the investment policy . In answer to a question from Roberts , Kirkland stated we could show a comparision of all the managers the Board is using on one graph . The Board could direct the other manager to provide us with a monthly statement it could be documented as a service to the Board . Roberts stated the fees remain the same . Kirkland stated yes . There is no chance of them going up . Mayes asked how would a transfer from TCW to NWQ be handled . Kirkland stated the first thing would be to tell TCW and Dean Witter to cease trading . We would set up accounts with Morgan Keegan . The Board would sign transfer forms . The accounts would come over to Morgan Keegan just as they are . TCW money would come • into the NWQ account and the transaction would begin . There are no taxes , commissions , or fees involved in transactions . In answer to a question from Roberts , Kirkland stated in the perferred manager program , MWQ ' s minimum investment is $ 100 , 000 . Mike Kirkland and Bob Glenn left the meeting . Mayor asked if the Board wanted some time to think about its options . Roberts stated yes . Mashburn stated he would like to get more information on MWQ . Friend expressed his feelings that enough information was given . Mayor Hanna suggested Mashburn contact Mike directly and tell him what he wants . Bradley expressed his desire to make more money . He asked if the Board should consider investing money differently than what is currently being done . Roberts stated it would be good to revisit the investment guidlines because they are old . 7 r� July 25 , 1996 Mayes stated they were discussed in 1990 or 1991 . The percentages wer not changed at that time . The Board discussed the need to increase the amount of money in the Police Pension fund and briefly discussed some changes that could be made to achieve an increase : Mayes reminded the Board that the investment policy states that cash can be from 10a to 250 of the fund , fixed income can be from 15 % to 751 , and equities can be between 20 % and 400 . Mayes stated we capped the equity at 40 because we were trying to make sure we got at least a 6o increase . Equities are currently at 290 . Fixed Income is at 560 . The Board might consider bumping equity up to 50 % . In response to a concern of the Board , Mayes stated he would check with the City Attorney on the South Africa question . Mayor Hanna asked if the Board wanted to wait until the next meeting to take action . In answer to a question from Friend , Paul stated the next meeting will be the third Thursday in October . • Friend suggested the Board have a special meeting after the insurance turnback check comes in . Mashburn suggested that each member review the investment policy before the next meeting . Paul asked if the reports submitted by Mike through Morgan Keegan were easier for the Board to understand . Paul stated she understood them better . The Board agreed that they were better than reports given to the Board in the past . The meeting adjourned at 4 : 05 p . m . • 8 POLICE PENSION FUND SEPTEMBER 1996 • EMP# NAME GROSS FED, TAX ST. TAX NET 131 ARNOLD, RD 838.00 838.00 130 BAYLES, DON 760.73 760.73 107 BLACK, JOE P 539.44 539.44 120 BOWEN , J R 350.00 10.00 340.00 147 BRADLEY, GERALD 2,345.47 300.00 45.47 2,000.00 139 BRADLEY, RANDALL 11368.45 1 ,388.45 101 BROOKS, BILL 728.22 728.22 109 COOPER, ADRIAN 350.00 350.00 111 DAY, LUCILLE 350.00 350.00 108 DENNIS, WARREN 666.51 666.51 125 FLOWERS, HAROLD 413.39 413.39 140 FOSTER, BILLIE D. 1 ,563.71 150.00 50.00 1 ,363.71 148 FRIEND, JERRY 1 ,510.85 1 ,510.85 145 HANNA, MARK 11311 .73 120.00 35.00 11156.73 124 HASKINS, RONALD 374.85 374.85 146 HUTCHENS, BERNICE 874.85 130.00 744.85 143 JOHNSON , CHARLES 11176.74 36.70 1 , 140.04 103 JOHNSON , WENDELL 375.30 375.30 118 JONES, BOB 11581 .67 1 ,581 .67 144 KILGORE, DONALD 980.73 19.72 961 .01 129 LAWSON , FORREST 751 .38 50.00 701 .38 114 LITTLE, LOYD F 350.00 350.00 119 LORCH , EARL 350.00 350.00 128 MCCAWLEY, LARRY 812. 19 70.00 742. 19 • 116 MCCHRISTIAN, MARIE 350.00 350.00 126 MCWHORTER, KAREN 485.02 485.02 136 MITCHELL, MICHAEL 1 ,104.75 150.00 954.75 141 MUELLER, ROSEMARY 989. 10 989. 10 112 MURPHY, JAKE 350.00 350.00 137 PERDUE, LARRY 1 ,113.09 100.00 1 ,013.09 132 PHILLIPS, HOMER GENE 843.00 300.00 543.00 105 PRESTON , GEORGE DAVID 767.43 67.43 700.00 135 RICKMAN, LOREN 1 ,069. 19 169.00 20.00 880. 19 104 RIGGINS, RAYMOND C 806.67 100.00 706.67 115 RITCHIE, LIZZIE 350.00 350.00 122 SKELTON, FRANK 398.70 398.70 123 SPENCER, HOLLIS 659.25 50.00 609.25 121 STOUT, WAYNE 415.25 415.25 133 SURLES , JERRY 1 ,304. 17 138.00 1 , 166. 17 142 TAYLOR, DENNIS 989. 10 60.00 15.00 914. 10 106 UPTON , FRANKLIN 506.58 10.00 496.58 110 WATTS, BEULAH 350.00 350.00 138 WILLIAMS, BOBBY 11217.07 217.07 1 ,000.00 134 WITT, DON 846.72 64.00 782.72 127 WOOD, PAUL J 757.62 757.62 ------------------------- -------------- $36,416.92 $2,255.50 $221 .89 $33,939.53 POLICE PENSION FUND OCTOBER 1996 EMP# NAME GROSS FED. TAX ST. TAX NET 131 ARNOLD, RD 838.00 838.00 130 BAYLES, DON 760.73 760.73 107 BLACK, JOE P 539.44 539.44 120 BOWEN , J R 350.00 10.00 340.00 147 BRADLEY, GERALD 2,345.47 300.00 45.47 21000.00 139 BRADLEY, RANDALL 11388.45 11388.45 101 BROOKS, BILL 728.22 728.22 109 COOPER, ADRIAN 350.00 350.00 111 DAY, LUCILLE 350.00 350.00 108 DENNIS, WARREN 666.51 666.51 125 FLOWERS, HAROLD 413.39 413.39 140 FOSTER, BILLIE D. 1 ,563.71 150.00 50.00 1 ,363.71 148 FRIEND, JERRY 1 ,510.85 1 ,510.85 145 HANNA, MARK 1 ,311 .73 120.00 35.00 1 , 156.73 124 HASKINS , RONALD 374.65 374.85 146 HUTCHENS, BERNICE 874.85 130.00 744.85 143 JOHNSON, CHARLES 11176.74 36.70 1 , 140.04 103 JOHNSON, WENDELL 375.30 375.30 118 JONES, BOB 1 ,581 .67 1 ,581 .67 144 KILGORE, DONALD 980.73 19.72 961 .01 129 LAWSON , FORREST 751 .38 50.00 701 .38 114 LITTLE, LOYD F 350.00 350.00 119 LORCH, EARL 350.00 350.00 128 MCCAWLEY, LARRY 812. 19 70.00 742. 19 116 MCCHRISTIAN, MARIE 350.00 350.00 126 MCWHORTER, KAREN 485.02 485.02 136 MITCHELL, MICHAEL 1 , 104.75 150.00 954.75 141 MUELLER, ROSEMARY 989. 10 989. 10 112 MURPHY, JAKE 350.00 350.00 137 PERDUE, LARRY 1 , 113.09 100.00 1 ,013.09 132 PHILLIPS, HOMER GENE 843.00 300.00 543.00 ' 105 PRESTON , GEORGE DAVID 767.43 67.43 700.00 135 RICKMAN , LOREN 1 ,069. 19 169.00 20.00 680. 19 104 RIGGINS, RAYMOND C 806.67 100.00 706.67 115 RITCHIE, LIZZIE 350.00 350.00 122 SKELTON, FRANK 398.70 398.70 123 SPENCER, HOLLIS 659.25 50.00 609.25 121 STOUT, WAYNE 415.25 415.25 133 SURLES, JERRY 1 ,304. 17 138.00 1 , 166. 17 142 TAYLOR, DENNIS 989. 10 60.00 15.00 914. 10 106 UPTON , FRANKLIN 506.58 10.00 496.58 110 WATTS, BEULAH 350.00 350.00 138 WILLIAMS , BOBBY 11217.07 217.07 1 ,000.00 134 WITT, DON 846.72 64.00 782.72 127 WOOD, PAUL J 757.62 757.62 ---------------- ----------------------- $36,416.92 $2,255.50 $221 .89 $33,939.53 POLICE PENSION FUND NOVEMBER 1996 EMP# NAME GROSS FED. TAX ST. TAX NET 131 ARNOLD, R D 838.00 838.00 130 BAYLES, DON 760.73 760.73 107 BLACK, JOE P 539.44 539.44 120 BOWEN, J R 350.00 10.00 340.00 147 BRADLEY, GERALD 21345.47 300.00 45.47 2,000.00 139 BRADLEY, RANDALL 1 ,388.45 1 ,388.45 101 BROOKS, BILL 728.22 728.22 109 COOPER, ADRIAN 350.00 350.00 111 DAY, LUCILLE 350.00 350.00 108 DENNIS, WARREN 666.51 666.51 125 FLOWERS, HAROLD 413.39 413.39 140 FOSTER, BILLIE D. 1 ,563.71 150.00 50.00 1 ,363.71 148 FRIEND, JERRY 1 ,510.85 1 ,510.85 145 HANNA, MARK 1 ,311 .73 120.00 35.00 11156.73 124 HASKINS, RONALD 374.85 374.85 146 HUTCHENS, BERNICE 874.85 130.00 744.85 143 JOHNSON, CHARLES 1 , 176.74 36.70 11140.04 103 JOHNSON, WENDELL 375.30 375.30 118 JONES, BOB 1 ,581 .67 1 ,581 .67 144 KILGORE, DONALD 980.73 19.72 961 .01 129 LAWSON , FORREST 751 .38 50.00 701 .38 114 LITTLE, LOYD F 350.00 350.00 119 LORCH , EARL 350.00 350.00 128 MCCAWLEY, LARRY 812. 19 70.00 742. 19 116 MCCHRISTIAN, MARIE 350.00 350.00 126 MCWHORTER, KAREN 485.02 485.02 136 MITCHELL, MICHAEL 1 , 104.75 150.00 954.75 141 MUELLER, ROSEMARY 989. 10 989. 10 112 MURPHY, JAKE 350.00 350.00 137 PERDUE, LARRY 1 , 113.09 100.00 11013.09 132 PHILLIPS, HOMER GENE 843.00 300.00 543.00 105 PRESTON , GEORGE DAVID 767.43 67.43 700.00 135 RICKMAN, LOREN 1 ,069. 19 169.00 20.00 880. 19 104 RIGGINS, RAYMOND C 806.67 100.00 706.67 115 RITCHIE, LIZZIE 350.00 350.00 122 SKELTON , FRANK 398.70 398.70 123 SPENCER, HOLLIS 659.25 50.00 609.25 121 STOUT, WAYNE 415.25 415.25 133 SURLES, JERRY 19304. 17 138.00 1 , 166. 17 142 TAYLOR, DENNIS 989. 10 60.00 15.00 914. 10 106 UPTON , FRANKLIN 506.58 10.00 496.58 110 WATTS, BEULAH 350.00 350.00 138 WILLIAMS, BOBBY 1 ,217.07 217.07 1 ,000.00 134 WITT, DON 846.72 64.00 782.72 127 WOOD, PAUL J 757.62 757.62 $36,416.92 $2,255.50 $221 .89 $33,939.53 FAYETTEVI LLE THE CITY OF FAYETTEVILLE. ARKANSAS DEPARTMENTAL CORRESPONDENCE To : Mayor Fred Hanna and Police Pension Board members From : Ben Mayes , Administrative Services Director Subject : State Insurance Turnback Date : August 22 , 1996 The City received $ 309 , 999 . 13 in State Insurance Turnback funds on August 19 , 1996 . The funds were divided between the Policemen ' s Pension and Relief Fund and LOPFI as follows : Plan participants : Active Retired Total Policemen ' s Pension and Relief Fund 15 44 59 LOPFI 53 53 Total participants 112 Funds received $ 309 , 999 . 13 divided by 112 = $ 2 , 767 . 8493 Policemen ' s Pension and Relief Fund $ 2 , 767 . 8493 x 59 = $ 163 , 303 . 11 LOPFI $ 2 , 767 . 8493 x 53 = $ 146 , 696 . 02 Total $ 309 , 999 . 13 The Policemen ' s Pension and Relief Fund portion of the funds are currently invested with the regular City investments . A cash flow projection indicates a balance of approximately $ 155 , 000 . 00 will be available for transfer to a money manager in October at the Pension Board ' s direction . we " will discuss this at the October 18 , 1996 , Pension Board meeting . y t TCW ASSET MANAGEMENT COMPANY SEP — 6 19% 865 SOUTH FIGUEROA STREET LOS ANGELES, CALIFORNIA 90017 (213) 244-0000 August 29, 1996 Mr. Ben Mayes City of Fayetteville Poli 113 W Mountain Fayetteville, AR 72701 Dear Mr. Mayes, TCW Asset Management Company (TAMCO) will be making some modifications to the equity portion of our Access Balanced strategy. For over twenty years TCW has managed large-cap equity and balanced portfolios for pension plans, endowments and individuals. Prior to entering the Access program in 1992 the TCW Equity Policy Committee made the decision to offer a balanced portfolio through the Dean Witter Access program. Our management style for the equity portion of these portfolios has been that of a sector rotator, specifically we focus our investments on sectors or industry groups of the stock market that we feel will benefit from current or future economic conditions. This will not change. • Our investment strategy has also maintained several guidelines or constraints around sector and security weightings. Specifically these guidelines included: 1 ) all industries with a 1 % weighting or higher position in the S&P 500 will be represented in the portfolio; 2) no security will initially represent more than 3% or grow to represent more than 5% of the portfolio at any time; 3) industry weightings will not fall below 50% or exceed 200% of the S&P 500 Index weightings. We have elected to lift these constraints in order to enhance our ability as a sector rotator by giving our portfolio managers more flexibility to underweight, overweight or exclude a sector from the investment portfolio. We have been managing equity portfolios without constraints for some of our institutional clients such as: Chrysler, General-Signal, NYNEX, Lockheed-Martin, Nike, and Boeing*. This strategy has a higher degree of concentration and has experienced more volatility over a market cycle but has also outperformed the S&P 500 Index over 5, 10 and 15 year time periods. We feel that these adjustments to our guidelines are in the best interest of our clients. Please consider that these changes are being made for an investor with the following investment objectives: - Seeks to achieve a rate of return that performs favorably to the standard market indices over a market cycle - Seeks a balanced portfolio diversified for potential appreciation and moderate income - Acknowledges that the economy and the financial markets are volatile and go through cycles, which can affect performance of their portfolio positively or negatively during any given period. *Inclusion on this partial list should not be considered an endorsement ofTCW's investment advisory services t Jim Tilton and Tom McKissick, Managing Directors, will continue to manage the TCW Access Balanced portfolios with the same objective of constructing a diversified equity portfolio. Since we operate in the market's most efficient sector (our portfolios hold only highly capitalized and large companies), success requires that we be early to identify and assess the financial implications of change. We are always searching for sectors of the stock market that will benefit from future or current economic trends. We feel that revising our investment guidelines will enhance our results in the search for investment value and the management of risk, which continue to be central themes of the securities research and portfolio management effort at TCW. However, you should review your investment objectives as set forth in your policy statement and contact your Dean Witter account executive if they have changed. Continuing with TCW as your Balanced Access manager utilizing the modified equity strategy requires no response. These modifications will take effect in your account October 1 , 1996. If you have any questions, please contact your Dean Witter account executive. We appreciate your continued confidence and look forward to working with you. Sincerely, Robert Sant Managing Director • • The #ollovtnng tsa d�scrrptlon flf thenYesfrerst �urr3Qi>nes f+3r ttaefTW Ian ced Portfo3ro 5ftategy. Tht3gurdelt �es thy# wrll # a remaxec arm tx �ttl' m ' #alts c Rr a revtsrt�rt rs wfift do �e ��rrr�r#t ad delrn� INVESTMENT GUIDELINES AND OBJECTIVES TCW ACCESS BALANCED ACCOUNTS I. INVESTMENT STYLE - Balanced Portfolio management II. INVESTMENT OBJECTIVE - The investment objective of the portfolio is to exceed rates of return available from risk free investments. Portfolios will be invested balancing moderate capital growth and reasonable current income. TCW adhere to the following investment guidelines under normal market conditions: III. INVESTMENT GUIDELINES - A. Security selection for equity portfolios can include: . Common stocks; Convertible Securities - Fixed Income Securities Cash Equivalents. B. Portfolios should be diversified to avoid undue exposure to any single economic or industry sector, or individual security. C. All assets should have a readily ascertainable market value and be readily marketable. D. Realization of capital gains and losses should be viewed solely in terms of investment merits. E. Equity investments should be listed on the New York, American or principal regional exchanges or traded on the over-the-counter market with the requirement that such have adequate market liquidity. F. Fixed Income investments may include: U.S. Government securities Treasury obligations Corporate bonds with an "A" rating or better High quality, liquid convertibles 40 G. Cash equivalents or short-term investments shall consist of investment grade, a ; liquid securities such as certificates of deposit, commercial paper, U.S. Treasury bills, and other Treasury obligations, government agency paper, and high quality, short-term corporate securities that do not exceed a two-year maturity. H . Neither TCW nor Dean Witter will take any tax related issues into consideration in the management of the assets within the Access program. L (eliminated) y industry with a 1% position in the S&P 500 must be represented in the portfolio. J. (eliminated) TCW has the discretion to underweight the industry by 50% K. (eliminated) TCW has the discretion to overweight the industry by 200% L. (eliminated) No position will represent more than 3% of the total portfolio, at initial purchase. however we will allow a stock to increase to 5% if we feel it has not achieved full value. M.(eliminated) Any security that declines by 25% from cost will be bought in additional amounts or sold entirely. M. (revised) Any security that declines 15% from cost is automatically reviewed. Based on a complete update and review from our research staff, a decision is made whether the stock should be added to, held or liquidated. • N. All securities must have a minimum market capitalization of $1 .5 billion. TCW Balanced portfolios are well diversified, with 40 to 55 securities held at any one time. In addition, due to the capitalization requirements imposed by this discipline, these portfolios are liquid. IV. INVESTMENT GOALS AND PERFORMANCE MEASUREMENT A. TCW shall make reasonable efforts to preserve the principal of the Portfolio's assets under our management given TCW's investment approach and the Client's objectives. B. The client acknowledges that the economy and financial markets are volatile and go through cycles, which can affect performance of their portfolio either positively or negatively during any given period. C. The Client's account returns is expected to demonstrate better performance than a balanced index consisting of 60% S&P 500 Equity Index , 30% Lehman Bros Govt/Corp index, and 10% cash, over an average market cycle (3 to 5 years) D. It is expected that total account return returns will demonstrate better performance than the Balanced Index (described in C)over an average market cycle (3 to 5 years) 4 • TCW Balanced Portfolio Strategy as of June 30, 1996 WA set Management Company (TAMCO) Investment Results: Assets Under Management: $53.3 Billion % Annual Rates of Return Year Founded: 1971 TCWTCW 60%5& .W* TCR TCW Professional Staff: 222 Balanced Ian 30%LB Int Balanced lilanced Firm Ownership: Independent Modified Exi nn Gov't/corn Modified Existin (Gross 1 (Gm 10% T-BiILc 'et QW) Portfolio Characteristics 1986 18.5% 13.5 15.7% 18.1% 13.0% Number stock holdings: 40 to 55 1987 7.0 5.4 6.4 6.6 4.9 Average dividend yield: Below the S&P 500 1988 10.6 13.3 12.5 10.2 12.8 Median P/E ratio: Similar to the S&P 500 1989 30.2 28.2 23.3 29.8 27.7 1990 3.4 3.8 1 .9 3.0 3.3 Cash level over market cycle: 0% to 10% 1991 30.8 25.3 23.2 30.3 24.8 Risk-Standard deviation: Generally similar to or above the Balanced Index 1992 11 .4 9.0 7.2 11 .0 8.5 Average maturity: 5 to 15 years 1993 18.8 13.0 8.9 4.2 12.5 Average bond ratings: - AA to AAA 1994 21 .7 22.5 0.7 21 .1 ' (4.8) Number bond holdings Less than 10 1995 21 .7 22.5 27.2 21 .1 21 .9 Use ADRs: 0% to 10% 1996 YTD 7.6 5.8 5.8 7.3 5.6 Capitalization: Medium and large company Portfolio Statistics TCW Asset Management Company's (TAMCO) balanced account � 6N6 6196 6196 management stresses identification of trends and themes. The stock TAMCO S&P 500 component uses a "top-down" sector rotational approach to determine Balanced Index LBIGCaa Modified which sectors and industries have potential above-average performance Number of stock 44 500 - characteristics. TAMCO stresses large capitalization stocks including, on holdings occasion, the purchase of international companies in the form of Average dividend yield 1 .0% 2.2% - American Depository Receipts (ADRs). Portfolios will generally be MedianP/Eratio 15.6x 17.7x - ersified across five sectors. However, they may, at times, look TAverage portfolio beta 1 .2 I .0 r/undereighted in a particular sector/industry versus the S&P 500 ndew x. The bond strategy is based on interest rate forecasts, yield curve Large cap.: % Port. 77.0% 87.4% - analysis, and relative performance analysis of various sectors and issues. Medium cap. % Port. 23.0% 12.5% Based on fundamental and technical analysis, TAMCO may actively Small cap.: % Port. - 0. 1% - make small incremental shifts in the allocation across stocks, bonds and Average maturity 7.2 yrs. - 4.2 yrs. cash over time. Average bond rating AA+ - - Investment Process Number bond holdings 10 3,344 Select Stocks Demonstrating Sell Stocks When ■ Above-average growth rates ' ■ Fundamentals deteriorate ■ Industry leaders ■ Automatic review if price falls lEuuity Sector Weightings 6/96 6/96 ■ Minimum capitalization is $I billion 15% from recent market high TAMCO S&P 500 • Both "value" and "growth" ■ Stock is fully valued Modified Index characteristics ■ An industry represents more % of Total Eq. % of Total Eq. than 35% of portfolio Sectr Market Value Market Value Fixed Income Approach Basic Materials 13.3% 7.3% ■ Shift duration based on interest Capital Goods 11 . 1 7.7 rate forecasts Consumer Goods 10.3 8.4 ■ Quality securities Consumer Cyclicals 19.3 29.9 ■ Stress intermediate-to-long-term bonds Credit Sensitive Investment Process -Excl. Utilities 9.9 13.8 -Utilities - 12.5 ■ Investment Policy Committee ■ Project economic activity Energy 2.9 9.3 sets asset allocation ■ Focus on secular trends Technology 33.2 11 .0 ■ Use quantitative model as tool EMonitor 250 stocks Miscellaneous - 0.1 ■ Stress fundamental research ■ Buy List - 100 Fixed Income Sector Distribution Investment Stratenv With Returns Attributable To 3095 4095 1096 2096 Top-down/structures portfolio 2Q % Market Timing - Asset Allocation Governments 56% 55% 79% 79% a •based on economic forecasts 4% Stock Selection Corporates 4Q % Bond Selection - Industrials - - - - - Utilities 15 IS 7 7 - Financials 29 30 14 14 **Lehman Bros. Inlermediate Gov'fXorp. PERFORMANCE ANALYSIS All performance results in this profile are composites returns showing total returns that are calculated assuming Net of Investment Advisory Fees reinvestment of dividends and income plus capital 18.0% appreciation. All returns for more than one year 16.0% annualized and based on quarterly data. is 14.0% TAMCO's balanced composites consist of all full 12'0% discretionary balanced accounts over $ 1 million under 10.0% management for at least one quarter. The TAMCO Modified 8.0% composite is equal-weighted and consists of all accounts 6.0% present for the entire quarter, excluding in any quarter o accounts subject to material client restrictions andior 4.0 % significant cash distributions or withdrawis. The TAMCO 2.0% current blaanced composite is calculated in the same manner 0.0% except that for 1993 and after, the composite includes the Y-T-D Five Years Ten Years actual results of ACCESS accounts. 7/91 -6/96 7/86-6/96 Balanced Account: TAMCO's results prior to 1/94 on the ■ TAMCO (Modified) ■ TAMCO (Current) ❑ Balanced Index performance analysis graph include a deduction of the investment advisor fees charged by the manager and are net of commissions charged on securities transactions. Subsequent RISK/RETURN ANALYSIS to 12/93, results are reduced by the total ACCESS fee. Rate of Return (%) 5 Years Ending6/30!96 16%= ' The ACCESS fee paid to Dean Witter, a portion of which is S&P500 paid to TAMCO for their advisory services to the client may 14%— . differ from the execution charges and advisory fees reflected TAMCO-Modified in the performance results prior to 1/94 on this profile. The Balanced ACCESS fee is described in the Investment Consulting 1 p°/,— TAMCO-Current Services disclosure document. 8%—' While TAMCO believes this data most accurately reflects the results achieved by TAMCO's balanced strategies, it show 6%—] be noted that past performance is not necessarily predictive future results. Actual individual account results may diff -Bills 4%—' from the performance shown herein. 0.2% 1 .8% 2.7% 3.6% 4.5% 5.4% 6.3% 7.2% 8.7% Standard Deviation (%) The economy and financial markets go through cycles, and the investment return and principal value of a portfolio and/or Performance Standard Rate of individual security will fluctuate, and can result in a gain or through 00196 Deviation Rearm_ loss during any given period. TAMCO Balanced Modified (Net) 9. 1% 13.90/0 TAMCO Balanced Current (Net) 7.3% 10.3% The Balanced Index is an unmanaged group of securities, Balanced Index 6.0% 12.5% S&P 500 Index 7.3% 15.7% consisting of 60% S&P 500, 30% Lehman Brothers T-Biils (30 day) O.fi% 4.2% Intermediate Gov't/Corp. Bond Index, and 10% T-Bills, and assumes no reduction for fees or expenses in measuring source: IbhotsonAssocim°.s, Chicago returns. RISK VOLATILITY Rate of Retum (%) 5 Year Quarterly Returns through 6/30/96 10% TCW - Motlified TCW - Cunenl 6% ( Balanced Intlex I � 3% � , 1 a 0 i u 4% I O 1991 1992 1993 I 1994 1 -" 995 1996 No. of llo Otm. No. of Down Qtrs. TAMCO Modified 16 4 TAMCO Cuffent 16 4 Balanced Index 18 2 Source: Ibbotson Associates, Chicago SEP MADISON INVESTMENT ADVISORS, INC. I,-, PORTFOLIO APPRAISAL "! FAYETTEVILLE, CITY OF POLICEMEN'S PENSION & RELIEF FUND August 31 , 1996 Unit Total - Market Pct. Quantity Security Cost Cost Price Value Assets Yield CORPORATE BONDS 6000-Alcan Aluminum 106.76 649053.55 100.68 60,405.59 3.6 7.0 7.250 % Due 12-15-99 709000 IBM 96.09 679266.05 97.95 68,565.70 4.1 7.0 6.375 % Due 06-15-00 60,000 International Lease 117.08 70,246.20 106.49 63,895.20 3.8 7.2 Finance 8.875 % Due 04-15-01 70,000 Morgan Stanley 100.24 70,169.64 97.12 67,983.30 4.1 7.3 6.750 % Due 03-04-03 60,000 Marshall & Ilsley 100.29 60,173.35 94.32 56,592.00 3.4 7.4 _ Corporation . . a. .-6.375-% Due-07-15-03- 70,000 WMX Technologies 98.56 68,992.95 94.78 ' 66,343.20 4.0 7.3 6.375 % Due 12-01 -03 65,000 Ford Motor Credit 107.54 69,901 .00 100.96 65,627.25 3.9 7.6 7.750 % Due 03-15-05 Accrued Interest 10,122.43 0.6 470,802.74 459,534.67 27.6 7.3 GOVERNMENT BONDS 123 00-U:Slreasury Notes 99.72 124,650.79 99.34 124,179.69 7.5 6.1 5.625 % Due 01 -31 -98 235,OOO U.S. Treasury Notes 100.70 236,654.69 98.69 231 ,915.62 13.9 6.6 6.250 % Due 05-31 -00 • 285,000 U.S. Treasury Notes 98.32 • 2809214.08 94.81 270,215.62 16.2 6.6 5.250 % Due 01 -31 -01 300,000 U.S. Treasury Notes 90.86 272,592.20 94.22 282,656.25 17.0 6.9 5.875 % Due 02-15-04 135,000 U.S. Treasury Notes 97.69 131 ,880.48 97.06 131 ,034.37 7.9 6.9 6.500 % Due 08-15-05 Accrued Interest 61692.50 0.4 1 ,045,992.24 1 ,D46,694.06 62.8 6.7 CASH AND EQUIVALENTS Cash-Equiv Money Market Fund 159,706.20 1599706.20 9.6 5.4 159,706.20 159,706.20 9.6 5.4 Tp OTAL_PORTFOLIO 1;676;501:181;665934:94100-0'67] ♦h • S. at , v . LONGER OCT 0 3 1996 INVESTMENTS -tine M. Longer,C.F.A. INCORPORATED RNANCE DEPT. A REGISTERED INVESTMENT ADVISOR October 7, 1996 City of Fayetteville Police Pension Fund Attn: Ben Mayes 113 W. Mountain Fayetteville, AR 72701 Dear Ben: Please find enclosed the 1996 third quarter portfolio reports for the City of Fayetteville Police Pension Fund. These reports include a portfolio appraisal, a report of realized gains/losses, and an income and expense report. As instructed, the Northern Trust account will be billed for the management fee. Also enclosed is a copy of Market News our quarterly newsletter. It discusses market activity • year-to-date and our outlook for the fixed income and equity markets. The spin-off of Lucent Technologies to A T & T shareholders took place as of September 30, 1996. - On the first of October, A T & T began trading at a lower price because it reflects the value of A T & T without Lucent. For each share of A T & T owned, 0.324084 shares of Lucent were distributed to shareholders. A T & T reports that the distribution has been ruled a tax-free transaction by the Internal Revenue Service, however any cash received for fractional shares may be taxable. These changes will be reflected on the year-end statements you will receive in January. We appreciate the opportunity to help manage the City of Fayetteville Police Pension Fund's investments. Please feel free to call if you have any questions or comments. Sincerely, Elaine M. Longer, F.A. President EML/kmc • Enclosure P.O. Box 1269 / 18 East Center Street, Suite 201 / Fayetteville, AR 72701 / Telephone 501 .443-5851 1 FAX 501 443-7129 RECEIVEi,# OCT 0 3 1996 i°� s A►RI�T NEW M Fl DEPT, INCORPORAZED September 30, 1996 The Year So Far... Anticipatingacorrection, weenteredthequarterwah ample cash reserves. As a result, we were able to do some In the June 30, 1996, newsletter we discussed the opportunistic buying during the July turmoil. Many of the rising risk to equity market valuation posed by higher interest stocks purchased during July, especially among the twhnol- rates. Market interest rates have been in a rising trend all year ogy and small-capitalization growth stocks, have achieved as illustrated in the comparative yield curves fisted below: significant gains and are approaching full valuations once again- 9/30196 gain9/30/96 6/30/96 12/31/95 Two-Year 6.05% 6.10% 5.15% Looking Forward... Five-Year 6.46% 6.45% 5.25% Ten-Year 6.70% 6.71% 5.50% In September, the Federal Reserve Open Market Thirty-Year 6.95% 6.95% 5.95% Committee (FOMC) decided to leave rates unchanged; al- Although interest rates endedthe thirdquarter at June though most market participants expected a 25 basis point levels, rates spiked higher (to 7.25% on the thirty-year increase in rates. Without compelling evidence of consumer Treasury Bond) in July due to stronger-than-expected em- or producer price acceleration, the Fed opted to stand pat. ployment growth, rising commodity prices, and labor wage inflation. The pressure from the bond market precipitated a We believe that the primary key to the performance correction in stocks in July that was worse than the markets of the stock market in the fourth quarter will be the direction had experienced since 1990:• From the highs achieved in June of interest rates. Stock market activity in July demonstrated to the lows reached in July, large-capitalization (blue-chip) the sensitivity of equity market valuation torising interest rate stocks, as measured by the Standard and Poor's 500 (S & P pressure. To hold on to the gains achieved in August and 500) and Dow Jones Industrial Average (DAA), declined by September, interest rates must remain relatively low. Any approximately 10% with the smaller-capitalization index significant increase in rates can be expected to produce a (Russell 2000) and the technology-laden NASDAQ each retracement of the gains accomplished since July, with a losing almost 20%. possible retesting of the lower level of the trading range that has been established. The equitymarkets recovered in August and Septem- ber to close the quarter only slightly changed from June 30 At current levels, the stock market is fairly valued levels (see chart that follows) while interest rates have re- relative to interest rates (6% two-year Treasury Note), al- treated followingJuly's spike. though not extremely overvalued (see chart). With eamings y P growth of 10- 12%expected for 1996 and an estimated 7-10% Third growth rate next year, stocks are trading at approximately Quarte r Year-to-Date 16.0 times this years earnings and 14.4 times next year's S & P 500 2.49% 11.59% earnings. Russell 2000 -0.07% 9.63% Price/Earnings Multiple NASDAQ 3.54% 16.60% 7e DJIA 4.03% 14.95% DJ Transports 4.72% 4.95% zs DJ World Index 0.83% 6.71 % zo Money flow from individuals into mutual funds, Average PIE A A . slowed in July and resumed in August with a monthly cash 16 g Mow of $18 billion into equity mutual funds. September 10 data has not been released yet; however, preliminary indica- tions are that mutual funds took in another $20 billion or so 6 no nz es °o rz rs ro er ea ar so 00 oe from individuals in September. FIE r Market:News .Page Two Although the D11A achieved new highs in Septem- There is awhiff of change in the air pertaining to the ber, as yet the new highs are unconfirmed by market breadth trend of rising labor productivity exhibited by U. S. corpora- (see chart) or by new highs in other market indices (see table). tions since the 1980s. Unemployment has reached a level of 5. 1% of the workforce, with pockets of lower unemployment reported in growth regions of the U. S. The economy is still growing at a rate exceeding the "equilibrium growth raw" of :.o0 2-2.5%. (The equilibrium growth tate of the economy is the rate of growth sufficient to move new entrants to the labor force into the workplace.) If the economy continues to grow �^^^ atagneater-than-equilibriumrate, furtherdownwardpressure 1 on.unemplovment will result, and companies will beforced to ',u , n .i :,r :r - pay ahigher Wage to antic[ qualified workers. What we have observed in 1996 is a reduction in the momentum of profit margin expansion. In other words, earnings growth has begun to approach the revenue growth _ ,,,,, rate as marginal improvements in profitability are more q-�.- n4;Aq difficult to deliver. Because .of the fact that :earnings improvements going forward will be more dependent upon revenue growth Index Percent From Previous High asopposed toproductivity improvements, weare focusing our Dow.Jones Transportion Index -9.45% research to identify companies capable of delivering strong Dow Jones Utility Index 4.32% revenue growth wdthinasluggish economic environment. We NASDAQ -1:84% are looking for growth companies showing improvement in Russell 2000 -5.00% operating margins, with strong balance sheets and cash flow, Value Eine -2.40% and selling at a discount valuation to their growth rates. For American Stock .Exchange -7.07% the most part the opportunities in the market at these levels are The market has developed a positive momentum and further most pronounced among the small-and intermediaw-capitah- gains are possible if. 1) third quarter earnings come through zation stocks that have lagged behind blue chips in perfor- mance in 1996. There are still plenty of opportunities in the in line with expectations of a year-over-year growth of 10% market but selectivity is becoming more important. .or 2) interest rates decline further due to indications that growth did slow in thethird quarter vis avis the second quarter E rate of 4.8%. lection Note: We have had questions on the upcoming elections Investment Strategy and the potential impact the election might have on the markets. Speaking in a non-partisan manner, the markets love gridlock and disdain change. If the President is re- During 1994 and 1995, inanenvironmentofsluggish elected and the Republicans retain control ofthe House and economic performance, U. S. corporations delivered sales Senate, the markets are likely to be totally unaffected by the growth rates in line with nominal economic growth of 5-8%' election outcome. If. however, the Democrats regain control However, profits exploded due to reduced cost structures of the House andSenate with a re-elected Clinton in the resulting from restructuring and improving productivity . In White House. the markets would probably respond nega- 1994 and 1995, reported earnings on the S.& P 500 increased nvely for a day or two and then the election outcome would by 24%per year, far surpassing gains in sales growth. During be forgotten until months later when the legislative agenda 1996, profit growth has again .outstripped sales growth, emerges . With Republicans in the House and Senate and although not as dramatically as in the prior three years. The Democrat in the White House, 'bipartisan legislation passed producfivity improvements that resulted in sharply higher byCongressandsignedinto law bythePresident isless likely earnings and dividendsfor shareholders were accomplished in to have a major impact on the economic landscape than alarge;part 'by controlling labor costs. legislation a single-party government might produce. Longer 'Investmenis, Ind. P. (0. Box 1269, Fayetteville, AR 72702 Phone: (501) 443-5851 Fax: (501) 443-7124 NEC hive id OCT Or' 1996 •, Longer Investments, Incorporated PORTFOLIO APPRAISAL FINANCE DEPT, City of Fayetteville Police Pension Fund Combined Account September 30, 1996 -Unit Total Market Market Pct. Unit Annual Cur. Quantity Security Cost Cost Price Value Assets Income Income Yield COMMON STOCK 1,650 AT & T 58.03 952749.25 52.25 86212.50 2. 1 1 .320 2,178.00 2.5 1 ,500 ADT Limited 13.57 20,355.00 19.00 285500.00 0.7 0.000 0.00 0.0 1 ,400 Barrick Gold Corp. 19.26 26,968.28 25. 12 35,175.00 0.9 0.120 168.00 0.5 900 Bed Bath & Beyond 21.75 195575.00 27.37 24,637.50 0.6 0.000 0.00 0.0 1,100 Bristol Myers Squibb 86.13 94,747.32 %.37 1065012.50 2.6 3.000 3300.00 3.1 1 ,100 Clayton Homes 17.31 19,038.25 22.00 24,200.00 0.6 0.080 88.00 0.4 500 Cleveland Cliffs 39.37 19,687.50 40.00 20,000.00 0.5 1 .300 650.00 3.2 600 Coherent, Inc. 39.62 23,775.00 35.25 217150.00 0.5 0.000 0.00 0.0 1 ,087 Diebold, Inc. 20.34 222112.58 58.37 632453.62 1 .5 0.680 739.16 1 .2 900 Dillards Dept. Stores 34. 12 302712.50 32.25 29,025.00 0.7 0. 120 108.00 0.4 1 ,400 Dover Corp. 43.64 61 ,090.00 47.75 665850.00 1 .6 0.600 840.00 1 .3 1 ,400 Emerson Electric 66.25 92,751 .87 90. 12 126,175.00 3. 1 1 .960 2,744.00 2.2 1 ,225 General Electric 52.85 64,736.02 91 .00 1112475.00 2.7 1.840 2254.00 2.0 700 Hanna, M. A. 22.37 15,662.50 22.75 152925.00 0.4 0.400 280.00 1 .8 2,000 Inco, Ltd. 33.08 662165.00 30.75 61 ,500.00 1 .5 0.400 800.00 1 .3 800 Intel Corp 61 .87 49,500.00 95.44 76350.00 1.9 0.160 128.00 0.2 1,500 Intimatc Brands, Inc. 18.87 28312.50 18.25 27,375.00 0.7 0.480 720.00 2.6 1 ,600 JLG Industries 17.52 28,032.08 18.75 307000.00 0.7 0.040 64.00 0.2 1,200 Jacobs Engineering 28.12 33,750.00 22.50 27,000.00 0.7 0.000 0.00 0.0 • 1 ,500 Lam Research 24.08 36,127.05 26.62 39,937.50 1.0 0.000 0.00 0.0 1 ,500 Lojack Corporation 10.69 16,031 .25 10.87 16,312.50 0.4 0.000 0.00 0.0 500 Micron Technology 19.84 9,921 .87 30.50 15,250.00 0.4 0.200 100.00 0.7 1 ,300 Mobil Corp. 101 .76 132,293.00 115.75 150,475.00 3.7 4.000 5200.00 3.5 800 Motorola, Inc. 58.50 46,800.00 51 .50 41 ,200.00 1 .0 0.400 320.00 0.8 1 ,200 Northern Trust Corp. 47.38 56,853.08 65.75 785900.00 1 .9 1 .240 1 ,488.00 1 .9 850 Philip Morris 63.73 54,168.16 89.75 76,287.50 1 .9 4.800 4,080.00 5.3 1 ,500 Placer Dome, Inc. 26.44 39,667.50 23.62 359437.50 0.9 0.300 450.00 1 .3 2,250 Staples, Inc. 16.59 37,335.90 22.19 49,921 .87 1 .2 0.000 0.00 0.0 2,800 Walmart Stores 25.91 72,555.00 26.37 73,850.00 1 .8 0.210 588.00 0.8 1 ,314,473.46 11558,588.00 38.0 27287.16 1 .8 CORPORATE BONDS 100,000 Philip Morris 100.54 100,543.50 103.28 103281 .25 2.5 9.250 9,250.00 9.0 (Non-callable) Rated A2/A 9.250 % Due 12-01-97 55,000 Pepsico (Non-callable) 99.31 542618.30 99.77 54,873.49 1 .3 6.125 3,368.75 6.1 Rated AI/A 6.125 % Due 01-15-98 1402000 Wal-Mart Stores 101 .83 142,565.75 97.50 136,500.00 3.3 6.500 9,100.00 6.7 (Non-callable) Rated AAI/AA - 6.500 % Due 06-01-03 75,000 J.P. Morgan 99.90 74,925.75 87.28 65,460.94 1 .6 5.750 4312.50 6.6 (Non-callable) Rated AA3/AA 5.750 % Due 10-15-08 • I 1 1 hP HE * rm wrta • Longer Investments, Incorporated OCT 0 Gu 1990 PORTFOLIO APPRAISAL FINANCE DEPT. City of Fayetteville Police Pension Fund Combined Account September 30, 1996 Unit Total Market Market Pct. Unit Annual Cur. Quantity Security Cost Cost Price Value Assets Income Income Yield Accrued Interest 8,744.08 0.2 372,653.30 368,859.76 9.0 26,031 .25 72 GOVERNMENT BONDS 100,000 U. S. Treasury Note 99.96 99,958.00 100.31 100,312.50 2.4 7.250 7,250.00 7.2 7.250 % Due 11-30-96 225,000 U. S. Treasury Note 99.89 224,751 .75 100.53 226,195.31 5.5 7.500 16,875.00 7.5 7.500 % Due 12-31-96 150,000 U. S. Treasury Note 99.94 149,910.50 101 .59 152,390.62 3.7 7.375 11,062.50 7.3 7.375 % Due 11-15-97 100,000 U. S. Treasury Note 99.36 995359.37 100. 12 100,125.00 2A 6.000 6,000.00 6.0 6.000 % Due I1-30.97 75,000 U. S. Treasury Note 99.99 749995.25 99.25 74,437.50 1 .8 5.250 3,937.50 5.3 5.250 % Due 12-31-97 50,000 U. S. Treasury Note 99.99 49,996.00 99.94 492968.75 1 .2 6.000 3,000.00 6.0 6.000 % Due 05-31-98 250,000 U. S. Treasury Note 99.93 249,820.00 100.31 250,781 .25 6. 1 6.250 15,625.00 62 6.250 % Due 06-30-98 240,000 U. S. Treasury Note 99.95 239,882.00 100.28 240,675.00 5.9 6.250 15,000.00 6.2 6.250 % Due 07-31-98 • 50,000 U.S. Treasury Note 100.06 503030.00 100.31 50,15625 1 .2 6.375 35187.50 6.4 6.375 % Due 05-15-99 50,000 U. S. Treasury Note 99.56 49,781 .50 99.44 493718.75 1 .2 6.250 3,125.00 6.3 6.250 % Due 0831-00 100,000 U. S. Treasury Note 99.00 99,000.00 106.09 106,093.75 2.6 8.000 8,000.00 7.5 8.000 % Due 05-15-01 1005000 U. S. Treasury Note 101 .50 101 ;500.00 99.28 99,281 .25 2.4 6.375 6,375.00 6.4 6.375 % Due 08-15-02 1555000 U. S. Treasury Note 98.34 1525425.98 103.56 160,521 .87 3.9 7.250 11,237.50 7.0 7.250 % Due 05-15-04 50,000 U. S. Treasury Note 99.97 49,984.38 107.44 53,718.75 1 .3 7.875 3,937.50 7.3 7.875 % Due 11-15-04 50,000 U. S. Treasury Note 99.87 49,937.50 98.69 49,343.75 1 .2 6.500 3,250.00 6.6 6.500 % Due 08-15-05 100,000 U. S. Treasury Note 100.09 100,093.75 94.44 94,437.50 2.3 5.875 5,875.00 6.2 5.875 % Due 11-15-05 50,000 U. S. Treasury Note 99.83 49,914.06 90.34 45,171 .87 1 . 1 6.250 39125.00 6.9 6.250 % Due 08.15-23 Accrued Interest 357074.31 0.9 1 ,891 ,340.05 1 ,938,403.99 47.3 126,862.50 6.7 GOVERNMENT AGENCY 100,000 Federal Home Loan Bank 100.31 100,312.50 100.66 100,656.25 2.5 6.690 6,690.00 6.6 (Noncallable) 6.690 % Due 05-16-01 60,000 Federal Home Loan Bank 100.06 603035.00 98.31 58,987.50 1 .4 7.350 42410.00 7.5 (Call6-14-96Q 100) 7.350 % Due 06-14-05 • R VlGLl • Longer Investments, Incorporated OCT 0 3 1996 PORTFOLIO APPRAISAL FINANCE DEPT. City of Fayetteville Police Pension Fund Combined Account September 30, 1996 Unit Total Market Market Pet. Unit Annual Cur. Quantity Security . Cost Cost Price Value Assets Income Income Yield Accrued Interest 37788.67 0.1 _ 160,347.50 163,432.42 4.0 117100.00 7.0 CASH AND EQUIVALENTS Dividends Accrued 2,811 .00 2,811 .00 0.1 0.000 0.00 0.0 Money Market 682391 .08 68r391 .08 1 .7 4.690 37207.54 4.7 71 ,202.08 71 ,202.08 1 .7 3,207.54 4.5 TOTAL PORTFOLIO 318109016.39 4,1001486.25 100.0 194,488.45 4.8 • • 3 R Lo OCT 0 0 1996 • Longer Investments, Incorporated FINANCE DEPT. PORTFOLIO APPRAISAL City of Fayetteville Police Pension Fund Stock Account September 30, 1996 Unit . Total Market Market PM. Unit Annual Cur. Quantity Security Cost Cost Price Value Assets Income Income Yield COMMON STOCK 1 ,650 AT & T 58.03 959749.25 52.25 86,212.50 3.3 1 .320 2,178.00 2.5 1 ,500 ADT Limited 13.57 205355.00 19.00 28,500.00 1 . 1 0.000 0.00 0.0 1 ,400 Barrick Gold Corp. 19.26 26,968.28 25. 12 35,175.00 1 .3 0. 120 168.00 0.5 900 Bed Bath & Beyond 21.75 195575.00 27.37 24,637.50 0.9 0.000 0.00 0.0 1 ,100 Bristol Myers Squibb 86.13 94,747.32 96.37 106,012.50 4.0 3.000 3,300.00 3. 1 1,100 Clayton Homes 17.31 199038.25 22.00 24,200.00 0.9 0.080 88.00 0.4 500 Cleveland Cliffs 39.37 19,687.50 40.00 205000.00 0.8 1 .300 650.00 3.2 600 Coherent Inc. 39.62 23,775.00 35.25 212150.00 0.8 0.000 0.00 0.0 1 ,087 Diebold, Inc. 20.34 22,112.58 58.37 63,453.62 2.4 0.680 739.16 1.2 900 Dillards Dept. Stores 34. 12 300712.50 32.25 29,025.00 1 .1 0. 120 108.00 0.4 1,400 . Dover Corp. 43.64 617090.00 47.75 66,850.00 2.5 0.600 840.00 1 .3 1 ,400 Emerson Electric 66.25 92,751 .87 90.12 126,175.00 4.8 1 .960 2,744.00 2.2 1,225 General Electric 52.85 645736.02 91 .00 111 ,475.00 4.2 1 .840 27254.00 2.0 700 Hanna, M. A. 22.37 157662.50 22.75 15,925.00 0.6 0.400 280.00 1.8 2,000 Inco, Ltd. . 33.08 66,165.00 30.75 61 ,500.00 2.3 0.400 800.00 1 .3 800 Intel Corp 61 .87 49,500.00 95.44 76,350.00 . 2.9 0. 160 128.00 0.2 1,500 Intimate Brands, Inc. 18.87 28,312.50 18.25 27,375.00 1 .0 0.480 720.00 2.6 1,600 JLG Industries 17.52 28,032.08 18.75 30,000.00 1 .1 0.040 64.00 0.2 is 1,200 Jacobs Engineering 28.12 332750.00 22.50 27,000.00 1 .0 0.000 0.00 0.0 1 ,500 Lam Research 24.08 36,127.05 26.62 39,937.50 1 .5 0.000 0.00 0.0 1 ,500 Lojack Corporation 10.69 16,031 .25 10.87 16,312.50 0.6 0.000 0.00 0.0 500 Micron Technology 19.84 9,921 .87 30.50 15,250.00 0.6 0.200 100.00 0.7 1,300 Mobil Corp. 101 .76 132,293.00 115.75 150,475.00 5.7 4.000 59200.00 3.5 800 Motorola, Inc. 58.50 465800.00 51 .50 41 ,200.00 1 .6 0.400 320.00 0.8 1,200 Northern Trust Corp. 47.38 56,853.08 65.75 780900.00 3.0 1 .240 10488.00 1.9 850 Philip Morris 63.73 54,168. 16 89.75 76,287.50 2.9 4.800 42080.00 5.3 1,500 Placer Dome, Inc. 26.44 393667.50 23.62 35,437.50 1 .3 0.300 450.00 1 .3 2,250 Staples, Inc. 16.59 - 37335.90 22. 19 49921 .87 1 .9 0.000 0.00 0.0 2,800 WalmartStores 25.91 72.555.00 26.37 735850.00 2.8 0.210 588.00 0.8 1 ,314,473.46 1 ,558,588.00 59.3 27,287.16 1 .8 GOVERNMENT BONDS 1252000 U. S. Treasury Note 99.88 124,853.75 100.53 125,664.06 4.8 7.500 9,375.00 7.5 7.500 % Due 12-31-96 50,000 U. S. Treasury Note 99.96 497978.50 101 .59 50,796.87 1 .9 7.375 39687.50 7.3 7.375 % Due 11-15-97 100,000 U. S. Treasury Note 99.36 992359.37 100. 12 100,125.00 3,8 6.000 61000.00 6.0 6.000 % Due I1-30-97 50,000 U. S. Treasury Note 99.99 49,996.00 99.94 49,968.75 1 .9 6.000 3,000.00 6.0 6.000 % Due 05-31-98 250,000 U. S. Treasury Note 99.93 2497820.00 100.31 2502781 .25 9.5 6.250 15;625.00 6.2 6.250 % Due 06-30-98 50,000 U.S. Treasury Note 100.06 50,030.00 100.31 50,156.25 L9 6.375 3,187.50 6.4 6.375 % Due 05-15-99 100,000 U. S. Treasury Note 101 .50 101 ,500.00 99.28 99,281 .25 3.8 6.375 67375.00 6.4 6.375 % Due 08-15-02 110,000 U. S. Treasury Note 97.95 1077747.48 103.56 1132918.75 4.3 7.250 71975.00 7.0 7.250 % Due 05-15-04 • 1 RECir IViry OCT 0 S 1996 • Longer Investments, Incorporated PORTFOLIO APPRAISAL FINANCE DEPT, City of Fayetteville Police Pension Fund Stock Account September 30, 1996 Unit Total Market Market Pct. Unit Annual Cur. Quantity Security Cost Cost Price Value Assets Income Income Yield 50,000 U. S. TreasuryNote 99.97 49,984.38 107.44 535718.75 2.0 7.875 3,937.50 7.3 7.875 % Due 11-15.04 Accrued Interest 17,048.78 0.6 _ 883,269.48 911 ,459.72 34.7 59,162.50 6.6 GOVERNMENT AGENCY . - ]00;000 Federal Home Loan Bank 100.31 1007312.50 100.66 1007656.25 3.8 6.690 6,690.00 6.6 (Non-callable) 6.690 % Due 05-16-01 Accrued Interest 2,490. 17 0. 1 _ 100,312.50 103,146.42 3.9 60690.00 6.6 CASH AND EQUIVALENTS Dividends Accrued 21811 .00 2,811 .00 0. 1 0.000 0.00 0.0 Money Market 513005.43 51 ,005.43 1 .9 4.690 2,392.15 4.7 53,816.43 53,816.43 2.0 2,392.15 4.4 �TAL PORTFOLIO 29351,871.88 29627,010.57 100.0 95,531.81 3.7 • 2 ' t2 � Ctlilr, d.r OCT 0 8 1996 • Longer Investments, Incorporated PORTFOLIO APPRAISAL FINANCE DEPT, City of Fayetteville Police Pension Fund Bond Account September 30, 1996 Unit Total Market Market Pct. Unit Annual Cur. Quantity Security Cost Cost Price Value Assets Income Income Yield CORPORATEBONDS 100,000 Philip Morris 100.54 1009543.50 103.28 103,281 .25 7.0 9.250 9,250.00 9.0 (Non-callable) Rated A2/A 9.250 % Due 12-01-97 55,000 Pepsico (Non-callable) 99.31 54,618.30 99.77 542873.49 3.7 6.125 3r368.75 6. 1 Rated Al/A 6.125 % Due 01-15-98 140,000 Wal-Mart Stores 101 .83 142,565.75 97.50 136,500.00 9.3 6.500 99100.00 6.7 (Non-callable) Rated AAI/AA 6.500 % Due 06-01 -03 75,000 J.P. Morgan 99.90 74,925.75 87.28 65,460.94 4.4 5.750 43312.50 6.6 (Non-callable) Rated AA3/AA 5.750 % Due 10-15-08 Accrued Interest 8,744.08 0.6 372,653.30 368,859.76 25.0 26,031 .25 7.2 �V ERNMENT BONDS 1002000 U. S. Treasury Note 99.96 99,958.00 100.31 100,312.50 6.8 7.250 7,250.00 7.2 7.250 % Due 11-30-96 100,000 U. S. Treasury Note 99.90 99,898.00 100.53 100,531 .25 6.8 7.500 7,500.00 7.5 7.500 % Due 12-31.96 100,000 U. S. Treasury Note 99.93 99,932.00 101 .59 1012593.75 6.9 7.375 7,375.00 7.3 7.375 % Due I1-15.97 759000 U. S. Treasury Note 99.99 74,995.25 99.25 742437.50 5.1 5.250 3,937.50 5.3 5.250 % Due 12-31 -97 240,000 U. S. Treasury Note 99.95 239,882.00 100.28 2402675.00 16.3 6.250 15,000.00 6.2 _ 6.250 % Due 07-31-98 505000 U. S. Treasury Note 99.56 49,781 .50 99.44 49,718.75 3.4 6.250 3,125.00 6.3 6.250 % Due 08-31-00 1002000 U. S. Treasury Note 99.00 99,000.00 106.09 106,093.75 7.2 S000 8,000.00 7.5 8.000 % Due 05-15-01 45,000 U. S. Treasury Note 99.29 44,678.50 103.56 46,603.12 3.2 7.250 3,262.50 7.0 7.250 % Due 05-15-04 5%000 U. S. Treasury Note 99.87 49,937.50 98.69 49343.75 3.3 6.500 3,250.00 6.6 6.500 % Due 08-15-05 100,000 U. S. Treasury Note 100.09 100,093.75 94.44 94,437.50 6.4 5.875 5,875.00 6.2 5.875 % Due 11-15-05 50,000 U. S. Treasury Note 99.83 49,914.06 90.34 45,171 .87 3.1 6.250 3,125.00 6.9 6.250 % Due 08.15.23 Accrued Interest 18,025.52 1 .2 11008,070.56 1 .026,944.27 69.7 679700.00 6.7 GOVERNMENT AGENCY 60,000 Federal Home Loan Bank 100.06 602035.00 98.31 58,987.50 4.0 7.350 4,410.00 7.5 (Call 6-14-96 Q 100) • 7.350 % Due 06-14-05 1