HomeMy WebLinkAbout1997-02-26 - Agendas - Final FAYETTEVI LLE
•TNE CITY OF FAYETTEVILLE, ARKANSAS TRACI PAUL, CITY CLERK
TO : Policemen ' s Pension Board Members
FROM : Traci Paul , City Clerk/Treasurer '11-:2
DATE : February 26 , 1997
SUBJECT : Special Policemen ' s Pension Board Meeting
The next Policemen ' s Pension Board meeting is Thursday , February
27 , 1997 , at 1 : 00 p . m . , in room 326 of City Hall . The purpose of
the special meeting is to discuss the proposed revisions to the
investment policy . Attached , please find a copy of the revised
investment policy and a copy of the letters that were mailed to
each money manager .
Attachments
. .a
113 WEST MOUNTAIN 72701 501 575-8323
a CITY OF FAYETTEVILLE , ARKANSAS
POLICEMEN ' S PENSION 6 RELIEF FUND
INVESTMENT POLICY
PURPOSE : The purpose of this policy is to define the guidelines of the
Policemen ' s Pension and Relief Fund Board in selecting assets for the
Policemen ' s Pension and Relief ' Fund .
I . Investment Objectives :
A . To protect the Fund' s assets while insuring systematic and
adequate funding of plan distributions and benefits to
participants and their beneficiaries .
B . To earn the highest possible total return ( capital
appreciation plus current return ) , consistent with prudent
levels of risk .
C . The long -term goal is to realize wman, caTre.xagej annual
abso± nbe rate of return
yse3d nf` &$ on the Fund ' s total portfolio to satisfy
actuarial projections . The Board expects the .total fund , as
well as each component , ( ie : equity fund , balanced fund ,
fixed income fund , etc . ) to :
1 . Perform in the top one -third of an
evaluation services universe using a
. Standard & Poor ' s Index ;
2 . Achieve a net return equal to the S & P 500
rate of return for equities ;
3 . Achieve a net return , inclusive of fees ,
equal to the Shearson/Lehman
Government /Corporate Bond Index for
fixed income ; and
4 . Achieve a net return , inclusive. of . fees , at
least equal to the combination of the S & P
500 and Shearson/Lehman Government /Corporate
Bond Index for balanced funds .
II . Investment Guidelines :
A . Adherence to all applicable Arkansas Statutes is
required , particularly A . C . A 24 - 10 - 401 through
§ 24 - 11 - 410 of 1987 as amended .
B . Investments and reinvestment shall be made in
accordance with the prudent investor rule as
interpreted and defined by the Federal Employees
Retirement Income Security Act ( ERISA) of 1974 .
This rule states that in making investments , the
fiduciary shall exercise the same judgement and
•
CITY OF FAYETTEVILLE , ARKANSAS
• POLICEMEN' S PENSION & RELIEF FUND
INVESTMENT POLICY
care which an institutional investor of ordinary
prudence , discretion and intelligence exercises in
the management of large investments entrusted to
it , considering probable safety of capital as well
as - probable income .
C . If professional investment counsel is employed to
execute transactions as a money manager , the following
is required :
1 . Investment counsel may be comprised of more than
one professional firm in order to segregate
various duties and powers .
2 . Investment counsel shall be registered with the
Arkansas Securities Department and/ or the
Securities and Exchange Commission ( SEC ) . Proof
of current registration shall be made annually to
the Board .
3 . Investment counsel shall be retained under
contract awarded on the basis of competitive bid .
Award of the contract will not be required to be
solely on the lowest bid . All contracts shall
include a 30 day cancellation provision .
4 . The investment counsel shall have full power to
hold , purchase , sell , assign , transfer or dispose
of any of the moneys or investments of the fund so
long as such activities are in accordance with the
following guidelines :
.... ...
a . No more than z$ 125t
of the ' fund' s total
assets valued at cost may be invested in the
equities of any one company or affiliated
group of companies . ( Each telephone company
issuer shall be considered a separate &
distinct issuer ) . Equities purchased for the
account will carry a minimum Standard &
Poor ' s rating of " B- " with a weighted average
of the equity portfolio being equal to a
Standard & Poor ' s rating of " B+ " or better .
b . No more than 11 % of the fund ' s total assets
may be invested in any one debt security of
any one issuer or intermediary . This does
not apply to U . S . Treasury or government
guaranteed or agency debt securities .
2
• CITY OF FAYETTEVILLE , ARKANSAS
POLICEMEN' S PENSION & RELIEF FUND
INVESTMENT POLICY
C , Any fixed income securities shall carry an
investment rating of "A" or better by Moody' s
or "A" by Standard & Poor ' s .
d . Short term investments shall consist of
direct U . S . Government obligations such as
U , S . Treasury Bills , repurchase agreements
fully collateralized by U , S . Treasury
issues , certificates of deposit not to exceed
$ 100 , 000 at any national bank or federal
savings and loan institution , and corporate
issues of one year maturity or less . Funds
may be held in good quality money market
funds during periods of purchasing
securities .
e . Investments in international securities that
are not exchange -traded American Depository
Receipts shall be made only after securing
. approval by the majority of the Board at ,a
regularly scheduled meeting .
E in aro_ da�-n__eFrith Arkansas 2
336 � _,
• i no funds l t L _ J
Repub± ± c of South ftfr ± ca which have not I
adopted the " Statement of ilrincip � es of �3 . S .
5 . Investments and reinvestment shall be made only in
accordance with the prudent investor rule , as
interpreted by the Federal ERISA of 1974 .
6 , Investment counsel shall provide the Board a written
investment policy and promptly provide the Board with
subsequent policy changes in writing . The policy shall
adhere to guidelines as set forth in this document .
7 . . Investment counsel shall file a written report with the
Board , for the period since the last report, setting
forth the following :
a . All investments purchased and sold , all receipts
and disbursements and any other transactions
concerning the Fund ' s account on a monthly basis .
3
• CITY OF FAYETTEVILLE , ARKANSAS
, POLICEMEN ' S PENSION 6 RELIEF FUND
INVESTMENT POLICY
b . Cost and market value of all investment categories
on a monthly basis .
C . Current yield at market on a monthly basis .
d . Total investment return of the total Fund as well
as investment . return by asset category for the
most recent quarter . This quarterly information
should include year to date and previous year
return figures .
e . Average maturities of applicable securities on an
annual basis .
f . Comparison of actual asset allocation to
established asset allocation guidelines on a
quarterly basis .
g . Short and long- term forecasts of economic
conditions which have an impact on investments at
• least quarterly .
h . Projected earnings for the Fund for the next
annual period at least quarterly .
i . A list of all transactions fees as cents per share
and percent of trade value and the total amount of
transaction fees on a monthly and year to date
basis .
8 . If the Board chooses to direct a specific investment
activity , the investment counsel shall be so notified
in writing . The Board must approve such action during
a regularly scheduled meeting .
9 . The investment counsel shall select brokers to handle
transactions on a competitive bid basis at least
quarterly . A report of these bids and awards shall be
submitted to the Board quarterly .
III . Volatility and Liquidity :
A . Consistent with the desire for adequate
diversification , this investment policy is based upon
4
• CITY OF FAYETTEVILLE , ARKANSAS
POLICEMEN' S PENSION S RELIEF FUND
INVESTMENT POLICY
the assumption that the volatility of the portfolio
will be similar to that of the overall market .
Consequently , it is expected that the volatility of the
total portfolio , in aggregate , will be reasonably close
to that of a weighted composite of market indexes ( e . g .
Standard & Poors 500 index for stocks and Salomon
Brothers Broad grade Index for bonds ) .
B . While there is no immediate requirement for the
investment managers to maintain liquid reserves for
payment of pension benefits , the Board of Trustees will
monitor the liquidity needs of the plan with the
managers on at least an annual basis .
IV . Asset Allocation/Diversification :
A . The maximum allocation of investment categories shall
be -4-�o a;0 for equities and the balance in fixed income
and cash and cash equivalents .
• B . A specific asset allocation shall be approved by the
Board and shall be segregated as a percentage for
equities , fixed income and cash equivalents . The
specific asset allocation shall be reviewed at least
semi - annually with the investment counsel . Any changes
shall be transmitted to the investment counsel in
writing . The allocation shall be within the following
guidelines :
1 . Cash and Cash Equivalents : 18 �61 --z15o 4.1 25
Short term investments shall consist of
obligations of the U . S . Government , U . S .
Agencies and corporate issues of one to three year
maturity or less , repurchase agreements ,
certificates of deposit and the highest two grades
of commercial paper . Additionally , any good
quality money market funds may be utilized .
2 . Fixed Income : i5 �01 :F 5 ¢
The quality of fixed income securities shall not
be rated less than "A" by Moody ' s or Standard &
5
. CITY OF FAYETTEVILLE , ARKANSAS
POLICEMEN ' S PENSION 6 RELIEF FUND
INVESTMENT POLICY
Poor ' s . Any one issue shall not exceed 15 % of the
fixed income portfolio at cost without Board
approval . Only after the Board has approved any
recommendation may the investment advisor take
such action . Whenever possible , call protection
shall be integrated into the portfolio to
stabilize the current income and marketability of
the portfolio .
3 . Equities : 26 % 8035 "a0
Managers shall have no restrictions as to the
percentage of their diversification except as
follows : Equity investments in any single issue
shall not exceed 5 % of the cost value of the total
equity portfolio . Private placements are
permissible .
C . The Board of Trustees recognizes the need for
diversification of the plan assets in order to minimize
• the risk of large losses . Consequently , the total
portfolio will be structured to maintain high levels of
diversification , consistent with prudent investment
practices and with the Board ' s desire to stress the
principle of preservation of capital .
V . Monitoring the Performance of the Investment Process :
A . At least semi - annually , the Board shall review its
investment methodology , including the investment
policy .
B . A five ( 5 ) year time frame shall be used to evaluate
real investment return .
C . If an investment counsel is employed, the manager ' s
performance shall be measured over a five ( 5 ) year time
frame . Consideration shall be given for investment
market conditions during the period and adherence to
the Board ' s investment policy guidelines . If the Board
so chooses , a review of the money manager ' s performance
over the cycle shall be made by an independent third
party .
6
• - CITY OF FAYETTEVILLE , ARKANSAS "
POLICEMEN' S PENSION & RELIEF FUND
INVESTMENT POLICY -
D . Annually, the City Accounting Division
shall prepare a schedule wh± ch computes the simpie
weighted averaye investirtent rate of return which
as
required by the Arkansas Pension Review board for
actuary information .
E . The Board of Trustees may opt to employ a professional
service " to perform regular investment performance
analysis on the portfolio . Payment for this service
can by made through directed commission business , which
is an option that may be chosen .
F . The Board of Trustees will meet a minimum of semi -
annually with its investment counsel . At that time
they will review :
1 . The counsels ' adherence to the policy
guidelines ;
2 . Comparison of the counsels ' results against
funds using similar policies ( in terms of the
stock /bond ratio , diversification , .
volatility, and style ) ;
3 . The opportunities available in both . the
equity and bond markets ; and
4 . Material changes in the counsels '
organization ; such as philosophical and
personnel changes . "
VI . Communication and Review :
Ongoing communication by phone , letter , or meeting will be
accomplished as deemed necessary by either the investment
counsel and/ or the Board of Trustees . A .review of the
fund' s overall performance will be scheduled to occur
quarterly ; and that review will be done in person . A copy
of all trades will be sent by the money manager to the City
Clerk ' s office to be distributed to the Board for
information purposes only. The Board will look forward to
specific investment ideas and how they should affect the
7
• CITY OF FAYETTEVILLE , ARKANSAS
POLICEMEN ' S PENSION & RELIEF FUND
INVESTMENT POLICY
, portfolio ' s performance . Additionally , any communications
concerning the outlook of the economy , business environment
and other related matters would be information well received
by the Board .
•
8
FAYETTEVI LLE
WE crry OF FAVErrEvOlE. ARKANSAS Ben R. Mayes, Administradte Services Dire=
February 19, 1997
Mr. Jim Wood
Dean Witter
112 W. Center, Suite 100
Fayetteville, Arkansas 72701
Dear Mr. Wood:
Enclosed you will find a draft copy of the Investment Policy for the Policemen' s Pension & Relief
Fund. Please review it and note any questions and/or comments. This draft will be considered at
the next meeting of the police pension board.
• In addition, the board requests that you refer to Section IV concerning asset allocation
and diversification. In order for the plan to achieve the asset allocation outlined in the policy, the
board requests that your firm invest 100% of the funds held by Madison in Fixed Income
securities.
If you have any questions or comments, or if I can be of assistance to you, please call me at
575-8330.
Sincerely,
Ben R. Mayo
Administrative Services Director
Enclosures
BRM/rlw
•
113 WEST MOUNTAIN 72701 501675-8330
FAX 501575-8257
FAYETTEVILLE
WE CFTV OF FAYETTEVILLE. ARKANSAS Ben R. Mayes, Adminiseadve SerAoea Direm
February 19, 1997
Mr. Mike Kirkland
Morgan Keenan
41 Halsted Circle, Suite 5
Rogers, Arkansas 72756
Dear Mr. Kirkland:
Enclosed you will find a draft copy of the Investment Policy for the Policemen' s Pension & Relief
Fund. Please review it and note any questions and/or comments. This draft will be considered at
the next meeting of the police pension board.
• In addition, the board requests that you refer to Section IV concerning asset allocation and
diversification. In order for the plan to achieve the asset allocation outlined in the policy, the
board requests that your firm invest 25 to 50% of the funds under your management in Fixed
Income securities and the remaining 50 to 75% in Equities.
If you have any questions or comments, or if I can be of assistance to you, please call me at
575-8330.
Sincerely,
Ben R. Mayes
Administrative Services Director
Enclosures
BRM/rlw
113 WEST MOUNTAIN 72701 501575-8330
FAX 501 5754257
FAYE 1 TEVILL
•TME OITV OF FAYETTEVILLE. ARKANSAS Ben R. Mayes, Administadve Servkee Dire=
February 19, 1997
Ms. Elaine Longer
Longer Investments
18 E. Center
Fayetteville, Arkansas 72701
Dear Ms. Longer:
Enclosed you will find a draft copy of the Investment Policy for the Policemen's Pension & Relief
Fund. Please review it and note any questions and/or comments. This draft will be considered at
the next meeting of the police pension board.
In addition, the board requests that you refer to Section IV concerning asset allocation and
diversification. In order for the plan to achieve the asset allocation outlined in the policy, the
board requests that your firm invest 35 to 65% of the funds under your management in Equity
securities and the remainder in Fixed Income securities.
If you have any questions or comments, or if I can be of assistance to you, please call me at
575-8330.
Sincerely,
-b ! V \X
Ben R. Mayes v
Administrative Services Director
Enclosures
BRM/rlw
113 WEST MOUNTAIN 72701 501575-9330
FAX 501 575-8257
FAYETTEVI LLE /'0
� � 1
THE CITY OF FAYETTEVILLE, ARKANSAS �Q� ^ID
O�
February 14 , 1997
Mike Kirkland
Morgan Keegan Company , Inc .
# 1 Halsted Circle Suite 5
Rogers , AR 72756
Dear Mike :
Members of the Police Pension Board have requested the following
information . Please forward this information to the Board by
February 26th if possible . Questions regarding this request
should be directed to Eldon Roberts or Randy Bradley .
• Missing statement for Acct . #47001946 - value $ 492 , 147
• Performance accounting for TCW from 12 - 31 - 95 to account
transfer .
• • Performance by manager / by account from November 1996 to
December 31 , 1996 .
• Reports for all transactions taken place from time of
transfer for three accounts . Report regarding liquidation ,-
repurchase of assets .
• Summary of all fees and expenses paid to Dean Witter , TCW ,
Morgan Keegan and any other managers for 1996 .
• List of fees and expenses to be paid going forward . Wrap
fee ? Managers fee ? Rate of managers fee ?
• Explanation of how you are paid .
a Transaction summary for December 31 , 1995 through December
31 , 1996 .
Thank you for your assistance .
Sincerely ,
V/L
Traci
City er reasurer
113 WEST MOUNTAIN 72701 501-521 .7700
FAX 501 -575.8257
ECEIVEb
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FAYETTEVI LLE
THE CITY OF FAYETTEVILLE, ARKANSAS
February 14 , 1997
Jim Wood
Dean Witter
112 W . Center Street , Suite 100
Fayetteville , AR 72701
Dear Jim :
Members of the Police Pension Board have requested the following
information . Please forward this information to the Board by
February 26th if possible . Questions regarding this request
should be directed to Eldon Roberts or Randy Bradley .
• Performance report for 1996 - net of expenses .
• Fees and expenses going forward .
• Transaction summary for the year .
Thank you for your assistance .
Sincerely ,
Traci Pau
City Cl easurer
113 WEST MOUNTAIN 72701 501-521 -7700
FAX 501-575-8257
DEAN WITTER REYNOLDS INC. D
112 West Center, Suite 100, FayetteviIIe, AR 72701
�1 Telephone (501) 575-1400
(800) 487-4880
February 26, 1997
Traci Paul
City of Fayetteville
113 W Mountain
Fayetteville AR 72701
Dear Traci:
Per your request of February 14th:
1 . The performance for 1996 is in the enclosed annual report, tab 1 .
2. The fees and expenses going forward are based on account value - for the fourth
r' O(� quarter was $2, 166. 17. The commissions paid in 1996 were $2,020. These commissions
CYC 0 occur only wh n a security is bought or sold.
Lx4 = 0i ,k � � -r aaao :::-% 1.0,(68Y -6�tW
3 . The ansaction summary is in the annual report in a appendik section.
ego
Please advise if more is needed. Thank you for allowing Dean Witter to service your investment
needs.
Sincerely,
kJA/�
Jes T. Wood
ice President & Branch Manager
JTW/hn
Encl: Annual Report
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MADISON INVESTMENT ADVISORS, INC.
PORTFOLIO APPRAISAL
FAYETTEVILLE, CITY OF - POLICEMEN'S PENSION & RELIEF FUND
FIXED INCOME PORTFOLIO
February 28, 1997
Unit Total Market Pct.
_ Quantity Security Cost _ Cast Price Value Assets Yield
CORPORATE BONDS
50,006-CIcan Aluminum 106.76 64,053.55 101 .51 609907.20 3.5 6.6
7.250 % Due 12-15-99
70,000 IBM 96.09 67,266.05 99.75 699825.00 4.0 6.5
6.375 % Due 06-15-00
60,000 International Lease 117.08 70,246.20 107.50 649501 .80 3.7 6.8
Finance
8.675 % Due 04-15-01
60,000 Marshall & Ilsley 100.29 60,173.35 96.90 58,143.00 3.3 7.0
Corporation
6.375 % Due 07-15-03
80,000 American Home 108.73 86,980.74 106.08 84,868.00 4.9 6.9
- - - Products = .., -- _-, _- _ _ _
7.900 % Due 02-15-05
65,000 Ford Motor Credit 107.54 69,901 .00 104.03 67,620.15 3.9 7.1
7.750 % Due 034545
70,000 Disney 96.69 67,665.35 98.37 689859.00 4.0 7.0
6.750 % Due 03-30-06
75,000 Morgan Stanley 98.72 74,043.75 98.52 739887.00 4.2 7.1
6.875 % Due 03-01-07
Accrued Interest 8,691 .38 0.5
5609349.99 557,302.53 32.0 6.9
GOVERNMENT BONDS
210;U00_J:S:Treasury Notes 99.61 209,175.02 99.91 209,803.12 12.1 5.7
5.625 % Due 01 -31 -98
235,000 U.S. Treasury Notes 100.70 2369654.69 99.97 234,926.56 13.5 6.3
6.250 % Due 05-31 -00
285,000 U.S. Treasury Notes 98.32 280,214.08 96.44 274,846.87 15.8 6.3
5.250 % Due 01 -31 -01
200,000 U.S. Treasury Notes 90.86 181 ,728.13 96.62 1939250.00 11 .1 6.5
5.875 % Due 02-15-04
135,000 U.S. Treasury Notes 97.69 131 ,880.48 99.69 134,578.12 7.7 6.5
6.500 % Due 08-15-05
Accrued Interest 60439.60 0.4
19039,652.40 11053,844.29 60.6 6.2
CASH AND EQUIVALENTS
mash-Equiv Money Market Fund 128,140.98 128,140.98 7.4 4.7
128,140.98 128,140.98 7.4 4.7
TOTAL PORTFOLIO"'""`' � _ `Y1;728,143:37P 7391287:80l100:0�"6:3�