HomeMy WebLinkAbout2005-12-29 - Agendas - Final Firemen's Pension and Relief Fund
Meeting Agenda
December 29, 2005
A meeting of the Fayetteville Firemen's Pension and Relief Fund will be held at 11;00 AM
on December 29, 2005 in Room 326 of the City Administration Building
1. Approval of the Minutes:
• November 17, 2005 Meeting Minutes
2. Approval of the Pension List:
• January, 2006 Pension List
3. Old Business:
• Retirement of Marion Doss
4. New Business:
• Approval of the November 30, 2005 Equity Overage (51.4%)
5. Longer Investments:
• Longer View
• Report
Firemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
November 17,2005
Page 1 of 4
Firemen's Pension and Relief Fund Board of Trustees
Meeting Minutes
November 17, 2005
A meeting of the Fayetteville Firemen's Pension and Relief Fund Board of Trustees was held at
11 :00 AM on November 17, 2005 in Room 326 of the City Administration Building.
There was a discussion on changing the positions of Danny Farrar and Marion Doss. Due to the
retirement of Marion Doss, they discussed placing Danny Farrar in the highest serving officer
position and moving Marion Doss to a retired position.
Marion Doss called the meeting to order.
Present: Marion Doss, Dennis Ledbetter, Pete Reagan, Ronnie Wood, Sondra Smith, Marsha
Farthing, Accounting Department, and Kit Williams, City Attorney.
Absent: Mayor Coody, Danny Farrar
Approval of the October 27, 2005 Meeting Minutes
Dennis Ledbetter moved to approve the October 27, 2005 meeting minutes. Pete Reagan
seconded the motion. Upon roll call the motion passed 5-0. Mayor Coody and Danny
Farrar were absent.
Approval of the December, 2005 Pension List
Pete Reagan moved to approve the December, 2005 pension list. Ronnie Wood seconded to
motion. Upon roll call the motion passed 5-0. Mayor Coody and Danny Farrar were
absent.
New Business:
Retirement of Marion Doss
There was a discussion of Marion Doss' retirement at the end of December and his term on the
pension board will end also in December. Danny Farrar, being the highest ranking officer of the
department, will automatically take Marion Doss' place.
Firemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
November 17,2005
Page 2 of 4
Kit Williams: Well, actually when I look at this it says that all member trustees shall serve two
year terms and the normal rule is that you serve until you've been replaced by proper procedure.
I don't know if we can just do a switch because that would have to be a vote. It seems like to
me, when you were properly elected this two year term
Sondra Smith: Now, he wasn't elected.
Marion Doss: No, I wasn't elected, I was appointed in 1991 because the state law changed.
Previously it was always the Mayor, City Clerk, and Fire Chief. It got to where a lot of Fire
Chief s in Arkansas was under LOPFI and not on the Pension Board, so the State Law was
changed to the highest ranking. That's when I came on when the law came into effect.
Sondra Smith: Just like me and the Mayor were not elected by the pensioners, we serve because
State law assigns us a position
Dennis Ledbetter: Would it be legal to make a motion and we vote to change his status, so he
can finish his term?
Marion Doss: My term is up December 31, 2005.
Dennis Ledbetter: But I know, to change your status.
Pete Reagan: Your term is up December 31, because that's when you're retiring?
Marion Doss: Right, Right.
Sondra Smith: We've got to move Danny out of that position and into Marion's.
Pete Reagan: It would be much easier and I don't think anybody that is a member of this
pension fund would have a problem with us switching the two positions.
Kit Williams: Let me read this. It says that the Fire Chief or if the Fire Chief is not a member
of the fund the highest ranking member of the Fire Department who is a member and who is
willing to serve. Danny is already serving as a retiree; which he also happens to be active.
Pete Reagan: The only reason he is retired status because we have ars Attorney General's
opinion that says when you sign up on the Drop Plan that you are considered retired. So he is
active retired.
There was a discussion between Kit Williams, Pete Reagan, and Sondra Smith about Drop Plan
members.
Pete Reagan: The only time this will make any difference is if somebody challenge's it. I don't
foresee any challenges.
Firemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
November 17,2005
Page 3 of 4
Kit Williams: You are not planning to ask for any changes in benefits or anything like that
where it could be challenged.
Pete Reagan: No.
Dennis Ledbetter: If I just up and said that I don't want to be on it any more, I just quit or
somebody passes away how do you finish up their term?
Kit Williams: Well, actually what you should probably do is have an election.
Dennis Ledbetter: But the board can't appoint somebody to finish their term out?
Kit Williams: Probably not. I think that you would have to have an election. It doesn't say that
you have a right to appoint anyone.
What I would do at this time is just keep it as is at this point in time, and then in May we have to
go back and do it the right way to make sure that you and Danny are in the right slots. You
certainly would be entitled at that point to be a retired member and he would be the automatic
highest ranking member, so he would automatically move to that spot, as long as we don't have a
big issue coming up.
Sondra Smith: The only vote that would be questionable would be Marion's, because Danny
has to stay on the board. So you're only talking about one vote. You're not talking about two.
Pete Reagan: I don't foresee any challenges from anybody. They are both serving on the Board
right now, they are just switching positions.
Kit Williams: It might be that at next meeting you all can acknowledge that Danny is now the
highest ranking and appoint him as the highest ranking member and go ahead and appoint
Marion as retired member until May when everybody has to run for reelection.
Pete Reagan: This is just a question, not a motion. How about I make a motion in this meeting
that as of December 31, when Marion retires that we make Danny Farrar a board member to fill
Marion Doss' position on the board as the highest ranking Fire Department official and that
Marion Doss then serve Danny's position as a retiree until the next election, which will be in
May.
Kit Williams: The only other thing you might add on this motion to kind of protect the board is
say unless there is an objection from a retiree that requests an election that he be appointed to fill
the rest of Danny's term.
Pete Reagan moved that upon Marion Doss' retirement which is December 31, 2005,
Danny Farrar, a current Board member, will fill that position as highest ranking member
and that Marion Doss be moved over to fill the retiree term of Danny Farrar until the 2006
election unless we have an objection from the retirees. Dennis Ledbetter seconded the
Firemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
November 17,2005
Page 4 of 4
motion. Upon roll call the motion passed 5-0. Mayor Coody and Danny Farrar were
absent.
Longer Investments:
Monthly Report
Pete Reagan: Elaine Longer with Longer Investments was here at the last meeting and gave a
report.
Meeting Adjourned at 11:30 AM.
FIREMEN'S RELIEF AND PENSION
January 2006
THE FOLLOWING ARE THE OBLIGATIONS OF THE FIREMEN'S RELIEF FUND FOR THE
MONTH OF AUGUST. YOU ARE HEREBY INSTRUCTED TO ISSUE CHECKS TO THE
PAYEES, IN THE AMOUNTS SHOWN, AND FOR THE PURPOSE SO STATED.
Act 1373
DATE OF Regular Mo Year To Date Future
EMP#RETIREMENT NAME Benefit Reg Benefit Supplement Fed Tax St Tax Net
79 11/99 ARMSTRONG (DILL), PAMELA 1,812.74 1,812.74 300.00 100.00 1,412.74
177 4/04 BACHMAN, EDDIE 2,618.55 2,618.55 479.27 119.82 2,019.46
74 3/86 BAIRD, JULIA 1,802.08 1,802.08 350.00 145.00 1,307.08
2 3115 BLACKARD, PAUL 109.27 109.27 109.27
63 5172 BOLAIN, ANN 109.27 109.27 109.27
68 7/99 BONADUCE, MICHAEL 2,988.76 2,988.76 475.38 2,513.38
44 9/86 BOUDREY, BETTY MRS. 2,477.42 2,477.42 300.00 50.00 2,127.42
45 9/86 BOUDREY, HOWARD 2,089.28 2,089.28 2,089.28
49 7/88 BOUDREY, JACK 1,647.63 1,647.63 287.68 50.00 1,309.95
5 5/72 CASELMAN, ARTHUR 131.13 131.13 131.13
57 5/90 CATE, ROY 1,788.90 1,788.90 1,788.90
6 4/68 CHRISTIE, ARNOLD 109.27 109.27 109.27
8 10/76 COUNTS, WAYNE 109.27 109.27 109.27
77 11/99 DILL,GARY JOHN 1,812.75 1,812.75 100.00 1,712.75
188 12/05 DOSS, MARION H 5,376.91 5,376.91
11 2/76 FARRAR,ALONZO 998.86 998.86 998.86
38 5/84 FRALEY, JOSEPH G. 1,768.12 1,768.12 200.00 15.00 1,553.12
170 5/03 FREEDLE, LARRY 3,816.75 3,816.75 500.00 100.00 3,216.75
92 03/02 GAGE,TOMMY 2,596.69 2,596.69 226.00 50.00 2,320.69
34 6/79 HARRIS, JAMES E. 109.27 109.27 109.27
70 11/99 HARRIS, MARY RUTH 109.27 109.27 109.27
182 10/04 JENKINS, EILEEN 1,788.75 1,788.75 350.00 100.00 1,338.75
93 06/02 JENKINS, JOHN 1,788.76 1,788.76 350.00 100.00 1,338.76
86 07/01 JOHNSON,ROBERT 3,073.47 3,073.47 500.00 100.00 2,473.47
64 4/95 JORDAN, CHARLIE 2,274.95 2,274.95 2,274.95
76 5/88 JUDY, JAN 1,647.63 1,647.63 200.00 50.00 1,397.63
37 3/84 KING, ARNOLD D. 1,522.37 1,522.37 300.00 47.00 1,175.37
54 5/89 KING, ARVIL 1,711.21 1,711.21 130.00 50.00 1,531.21
12 3/60 LANE, HOPE MRS 109.27 109.27 109.27
13 10/67 LAYER, MERLIN 456.22 456.22 456.22
173 12/03 LEDBETTER, DENNIS 3,775.80 3,775.80 650.00 200.00 2,925.80
181 10/04 LEE, VIOLA LOUISE 109.27 109.27 109.27
51 10/88 LEWIS, CHARLES 1,647.63 1,647.63 75.00 25.00 1,547.63
40 9/85 LOGUE, PAUL D. 2,868.28 2,868.28 325.00 75.00 2,468.28
50 9/88 MASON, LARRY 1,631.25 1,631.25 137.61 25.00 1,468.64
39 4/85 MC ARTHUR, RONALD A. 1,753.74 1,753.74 150.00 50.00 1,553.74
35 2/82 MC CHRISTIAN, DWAYNE 109.27 109.27 109.27
15 4/77 MC WHORTER, CHARLES 1,334.51 1,334.51 150.00 1,184.51
29 8/81 MILLER, DONALD 1,304.07 1,304.07 125.00 25.00 1,154.07
73 2/00 MILLER,KENNETH 3,180.02 3,180.02 325.00 75.00 2,780.02
42 2/86 MOORE, JAMES H. 109.27 109.27 109.27
176 4/04 MORRIS, DIXIE E. 125.66 125.66 125.66
62 10/68 MORRISON, ELIENE 136.59 136.59 136.59
48 7/88 MULLENS, DENNIS W. 2,191.30 2,191.30 2,191.30
184 3/05 NAPIER, LONNIE 3,518.28 3,518.28 110.00 88.00 3,320.28
46 5/88 OSBURN, TROY 1,899.66 1,899.66 200.00 38.00 1,661.66
81 02/01 PHILLIPS,LARRY 2,765.09 2,765.09 2,765.09
53 2/89 POAGE, LARRY 2,346.70 2,346.70 300.00 100.00 1,946.70
186 06/05 REAGAN, PETE 3,535.71 3,535.71 3,535.71
22 4/73 REED, JOE 109.27 109.27 109.27
172 12/03 SCHADER, MADGE 1,386.01 1,386.01 1,386.01
41 9/85 SCHADER, TROY 1,524.99 1,524.99 57.00 1,467.99
83 03/01 SKELTON, KIMBERLY 2,434.98 2,434.98 250.00 50.00 2,134.98
66 8/98 SKELTON, PAULINE 426.16 426.16 426.16
36 5176 SPRINGSTON, CARL 806.19 806.19 70.00 17.00 719.19
90 03/02 STOUT, IMOGENE W. 767.80 767.80 767.80
165 12/02 TATE, RALPH 3,668.10 3,668.10 300.00 100.00 3,268.10
65 3/66 TUNE, BILLIE SUE 136.59 136.59 136.59
27 3/71 TUNE, MILDRED MRS. 136.59 136.59 136.59
71 1/00 WARFORD,THOMAS 2,502.72 2,502.72 300.00 2,202.72
28 7/68 WATTS, DONALD 437.09 437.09 437.09
88 01/02 WOOD,RONNIE D 3,077.15 3,077.15 800.00 200.00 2,077.15
DATE OF Regular Mo Year To Date Future
EMP#RETIREMENT NAME Benefit Reg Benefit Supplement Fed Tax St Tax Net
52 9/88 WRIGHT, RANDALL 1,691.34 1,691.34 20_0.00 25.00 1,466.34
102,201.90 102,201.90 0.00 9,572.94 2,169.82 90,459.14
DROP DATE DROP EMPLOYEES NEW BENEFITS
03/01/03 MAHAN, MARSHALL 4,077.28
03/01/03 PIERCE, JOEY 3,647.18
03/01/03 SHACKLEFORD, GLEN 3,647.18
04/01/03 O'NEAL, TEDDY 4,120.99
05/01/04 FARRAR, DANNY 4,155.36
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
SECRETARY CHAIRMAN AND PRESIDENT
ACKNOWLEDGEMENT
STATE OF ARKANSAS )
COUNTY OF WASHINGTON)
SWORN TO AND SUBSCRIBED BEFORE ME THIS DAY OF 2005.
NOTARY PUBLIC
MY COMMISSION EXPIRES :
YTD
6810-98105335-00 1,097,427.05
6810-98105335-06 21,690.00
Drop Payouttintrest Checks to Drop Retirees 460,781.89
YTD Column 1,579,898.94
Difference 0.00
FIREMEN'S PENSION & RELIEF FUND AFFIDAVIT
State of Arkansas )
)ss:
County of Washington )
l� ��� , do solemnly swear that:
1. I am a former firefighter for the City of Fayetteville, Arkansas, Fire Department.
I am the spouse/former spouse/widow of a former firefighter for the City of Fayetteville, Arkansas,
Fire Department, and that I have not remarried since becoming eligible for benefits.
I am an eligible dependent of a former firefighter for the City of Fayetteville, Arkansas, Fire
Department and submitted the attached school affidavit for verification of school attendance.
2. I presently receive benefits from the Fayetteville Firemen's Pension and Relief Fund and I am eligible to
continue receiving the pension fund benefits as governed under state law.
3. My personal information is as follows:
Address:
Telephone:
Social Security No.:
Birth date:
PLEASE LIST ALL BENEFICIARIES BELOW: (complete if you are the retiree)
NAME SOCIAL SECURITY No. BIRTH DATE RELATIoNsHII'
/V JAM5
5Z�Vl- Pe 4F,� 4-2,-,T�7
DATED this day of --
AFFIANT (signature
Parent/Guardian Signature
SUBSCRIBED AND SWORN TO before me, a Notary Public, this a? day of
bOS .
No Public Official Seal
�9'0� '' oZ���- SONDRA ELAINE SMITH
My Commission Expires Notary Plhh«;_Arkansas
WAS►iiN(;TO N COUNTY
(This affidavit is required annually by the Firemen's Pension and Relief Fund oA&0 4A'lM8&i3frd bglU9p6 j y2Mut and
returned to the Fayetteville City Clerk, 113 West Mountain, Fayetteville, Ark ,
City of Fayetteville
Fire Pension and Relief Fund U/A Dated 6/18/86
November 30, 2005 Equity Allocation: 51.4%
Equity Range Per Policy: 25% to 50% (+1-5% with monthly approval)
Longer Investments Inc. requests authorization for the variance of less than 5%, as
required in the investment policy dated February 24, 2005.
LONGER INVESTMENTS INCORPORATED
A Registered Investment Advisor
s
Th
A Ar eL 0
iew
COMMENTS AND OUTLOOKS FROM LONGER INVESTMENTS INCORPORATED
December 21, 2005
At the close of the year, we appreciate the the end of the last tightening cycle in 1994-1995. (See
resiliency of the U.S. economy and the stock and Chart B.)
bond markets in the face of rising interest rates and
energy prices, and natural disasters. It has been a Chart B
challenging year in which to navigate financial
markets. In 2005, as in 2004, it looks as though U.S. 10-Year Treasury Yield Minus
almost all of the year's returns were squeezed into Fed Funds Target Rate
the fourth quarter.
Table 1 300
s
250-
2005
50 2005 Stock Market Returns
Through 12/20/05 1cD <=s
9/30-12/20 YTD
S&P 500 (cash basis) 2.51% 3.94% 5° . Now 17 BP
S&P 500(with div.reinv.) 2.91% 5.78% <r
-5°
DJIA (cash basis) 2.24% 0.21%
DJIA(with div. reinv.) 2.76% 2.72% ' "
92 :93 94 95. 9a 97 98 99 00 Oi 02 03' 04 05
NASDAQ 3.29% 2.16°/D
Source: International Strategy&Investment(ISI),Dec.14,2005
In the third and fourth quarters, the Federal As we face 2006 with a new Federal Reserve
Reserve (the Fed) continued to raise short-term chairman, Ben Bemanke, the yield curve is telling us
interest rates. The 13th quarter-point increase, made that the Fed's job is almost done. Historically, as we
in December, brought the Fed funds rate to 4.25%. approach the end of tightening cycles, short-term and
The yield curve has flattened further; that is, the long-term yields converge. We expect at least one
difference between short-term rates and long-term more rate hike to 4.5% in January. There is also a
rates has narrowed. (See Chart A.) In fact, at this remote possibility of a hike at the Mar. 28, 2006,
writing, the difference between 10-year yields and meeting-the first Fed meeting Bernanke will chair.
the Fed funds rate is only 17 basis points, a level not
seen since May 2000. This is 'lower than it was at Economic Outlook
Chart A This year was marked by rising interest rate
pressures, rising energy and raw material prices,
U.S. Treasury Historical Yield Curve natural disasters, and a dramatic decline in the
5.5% popularity of President George W. Bush. In spite of all
5.0% ------_------------__..._ _..._.......____._._...__.__....._.__....._._..... <_:'__ this, the economy performed well. The third-quarter
4.5% -_._..__..._..__.._......_..._.._._._._._...__........_._.._._ .. --' --- GDP (gross domestic product) was revised higher to
4.0% 4.1%, making this the 10th consecutive quarter of 3%+
3.5% _.._..........__— - `' _---.__.._.....__.._..._.....__............._...... growth. The third-quarter GDP revisions were
3.0% - = K='==--- - — - -- especially notable for showing strength almost across
- the board. Durable goods orders increased at an
annual rate of 10.5%, gross private investment rose at
2yr Syr Syr 1oyr 3oyr 5.8%, and real spending on equipment and software
rose by about 12% (The Wall Street Jour (� I� /E
sisot2ooa �1tiis/2ooa page A2, Dec. 1, 2005). Business investm !/
6/30/-.._.._.._...__...--- �s`�3
DEC 2 7 2805
CITY OF FAYE1TEyi-,
LONGER INVESTMENTS INCORPORATED
a major growth driver; housing is beginning to cool in the second half of 2004, growth in unit labor costs
(see Chart C) and consumer spending is slowing. settled down in 2005, with costs actually contracting in
Much of the third-quarter strength occurred in both the second and third quarters. (See Chart E.) So,
with energy prices stabilizing at somewhat higher
Chart C levels, with core consumer inflation trending lower,
ISI House Price Survey Chart E
(4-Week Avg. Y/Y Percent)
Nonfarm Business Sector: Unit Labor Cost
(% Change)
5.0 20 20
5.5
s.o 10 10
�.5
tggt qaq
4.0-- I latest 0llck:4,7 0 A _ a 0
3.0 -10 -10
25- _ 1999 00 01 02 03 04 2005
2002 2003 2004 2005
Source: ISI,Dec.9,2005 Source: Northern Trust Company,Dec.9,2005
in July. The economy entered the fourth quarter at with labor costs behaving benignly, and with aggregate
a slower pace—probably around 3%. Tn 2004, year- demand moderating, inflation in 2006 should not push
over-year growth in real GDP was 3.8%. We should the Fed fund rate beyond the 4.50% to 4.75% range.
close 2005 with a yearly gain of 3.6%. Projections
call for 3% growth in 2006, with growth stronger in We expect corporate spending, capital investment,
the first half and weaker in the second half. dividend increases, and merger and acquisition activity
to be the major forces in the markets in 2006. Consum-
We think inflation is more likely to fall than rise ers have been tapping into home equity to support their
in 2006. The yield curve is indicating that inflation spending in an environment that has seen little in real
is not a significant concern. Ten-year yields are wage gains since 1980. (See Chart F.) Mortgage equity
lower now than they were when this tightening Chart F
cycle began. The Personal consumption expendi-
ture(PCE) core price index peaked in November
2004 at 2.3%; it has been trending lower since. (See U.S. Compensation Trends
Chart D.) The Fed has emphasized labor costs as a
source of inflationary Pressures. After increasing I A._.ft._er_19 80, consumer _....:..........................................................
debtmas added to
76% , supplement sluggish wages.
Compensation trend if
Chart D 1 74% i consumerdebris added
3
< PCE Less Food and Energy - YN % Change (bars)
PCE Chain Price Index - Y!Y % Change (line) > 7D°�
168°h
4.0 4.0 VVV
64%
62°k Actual compensation
3.0 3.0 tMndpost 4980:
60% ti
56°/u .,_..,-?rr...�.:.,....,. ;,i.try,.,.r.;...r•,•r-:-r'ri _,.,., ,...,.,.,y.y..�...«,..�,,.,..,;,::,r...,
2.0 2.0Q 0 m 0) M m m
O1 05 01 Oi Or 0) N W a_b W tll b! m N
U,S.compensation%of GDP {
�1.0 , 1.0 U.S.compensation+ change in annual consumer )1 91€ �� i..._.... .debt for the post-1980 period,%of GDP
2003 2004 2005 __... _ ::_..: . -x.:::m:.::.-.:, . .-.--:...— ::.-.. ::-:-.-..:::,-......................
Source: NorthemTrustcom an Dec.9 2005 1 Source: Northern Trust Company
LONGER INVESTMENTS INCORPORATED
withdrawals (MEW) surged to almost$800 billion in Chart H
the third quarter of 2005. (See Chart G.) This huge
extraction of equity helps to explain how consumer Free Cash Flow
450,000-
Chart G
350,000-
U.S. Mortgage Equity Withdrawal 250,000-
150,000-
50,000-
LVA - -50,000-
600
1953 57 61 65 69 73 77 81 BS 89 93 97 01 2005
500Source: ISI,Dec.9,2005
400
300 Stock Market Outlook
?OD
Standard&Poor's 500 operating profits appear
foo poised to increase by 13% in 2005 after posting a
0 20D/o-i-gain in 2004. Estimates call for a slower
-1061 growthrate in earnings of 6%in 2006, to $81.25. The
f960 1965 1970 1975 1960 1965 1990 1995. 2000 2005 S&P 500 and Dow Jones Industrial Average (cash
Source: ISI,Dec.s,2005 basis) were up 9.0% and 3.2% in 2004, and they
showed gains of 3.9% and 0.2%in 2005. So, while
spending has remained so resilient in the face of earnings advanced 35% from year-end 2003 to year-
rising energy prices and interest rates. Roughly half end 2005,the S&P 500 and DJIA(cash basis)
of MEW money is spent on consumer goods; it advanced by 13:3% and 3.4%, respectively. Because
represents 4% of consumer spending. Consumer prices did not keep pace with earnings growth, the
spending accounts for 73% of GDP growth. With the price/earnings (P/E) multiple contracted further
interest rates on home equity loans now more than and the valuation of the stock market improved.
7%, and with housing markets cooling, this impetus (See Chart 1.) The market enters 2006 with a P/E of
to consumer spending has probably run its course. 15.5 times estimated earnings of$81.25 a share.
We anticipate that consumer spending will weaken With a 10-year Treasury yield of 4.45%, the stock
as we enter the new year and that the economy will market remains undervalued in comparison to the
slow accordingly. fixed-income markets.
Corporate America is in great shape financially. Chart
Corporate free cash flow is at an all-time high(see
Chart H) and corporate aftertax profits as a percent S&P 500 12-Month Forward P/E Ratio
of GDP are near 9°/%, another record. This cash 30
brought about higher dividends, a reduction of debt P/E
on corporate balance sheets, increased share 20
repurchases, and new merger and acquisition
activity. This trend should continue in 2006. Due to
repatriation of profits, cash flow exceeded capital 10
expenditures in the third quarter by$133 billion— a
record by a wide margin. The gap is expected to be 0
even greater in the fourth quarter. The corporate 1979 1992 2005
sector enters 2006 with a better cash flow position Source: Northern Trust Company,Oct.2005
and a much stronger balance sheet than does the
consumer sector. We wrote in our July newsletter that stocks
were more attractive than bonds and that we
expected stocks to outperform bonds in the second
half of 2005. They did. We continue to believe
stocks at these levels are more attractive than bonds
at 4.45% (as measured by the 10-year Treasury
LONGER INVESTMENTS INCORPORATED
yield). If bond yields remain at these low levels as in 2005). This would help growth stocks, as a sector,
the Fed completes this tightening cycle, we could to outperform the energy- and utility-laden value
see P/E multiple expansion(to 17 times earnings) in indices.
2006. That would offset the slowing in earnings
growth (to 6%), and it would still lead to a high The international exposure built into our equity
single-digit or low double-digit return in stocks next portfolios enhanced the returns we achieved in
year. domestic equities this year. Foreign equity returns,
translated into U.S. dollars, trailed the returns
This would be similar to the conditions in 1994- achieved in foreign currency. However, even with
1995. In 1994 and early 1995, the Fed raised rates the strong dollar muting the foreign markets' returns,
seven times, from 3% to 6%. The stock market and dollar-denominated foreign performance still
bond market posted negative returns in 1994, even trumped returns.on U.S. stocks. In 2006, weakness
while earnings growth was strong. As the economy in the dollar may produce positive foreign invest-
slowed in 1995, the stock market outperformed ment returns even as foreign markets consolidate
earnings growth, because interest rates declined as recent gains. We remain committed to foreign
growth tapered off. Consequently, both stock and exposure in our equity portfolios, favoring Asia over
bond markets returned double-digit results in 1995. Europe now.
This has been a year in which returns were The risks for next year are hidden in those
muted. Returns were fairly similar across asset macroeconomic problems we have written about
classes (bonds vs. stocks vs. cash), style throughout the year. They include the
characteristics (value vs. growth) and size (small-cap overleveraged household sector, the unwieldy fiscal
VS. large-cap vs. mid-cap). Small-cap and mid-cap and trade deficits, the legacy costs of Social
stocks are completing a six-year cycle of outperform- Security and Medicare (which seem to be
ing large-cap stocks. Value stocks (heavily unaddressable from a political standpoint), and the
weighted with energy and utility stocks) are no threat of terrorism. Mid-term elections may
longer cheap relative to growth stocks. We believe pressure the markets in the second half of the year.
that large-cap will outperform small- and mid-cap If inflation comes in higher than we expect, causing
stocks because they are cheaper, on a secular basis, the Fed to stay in its tightening mode for longer
than their smaller counterparts. Also, large than we anticipate, our outlook would change.
companies pay higher dividends, display greater
dividend growth, and are better able to take advan- It is always a challenge.to write a newsletter
tage of the global economy. They can more easily about the coming year. We deal in a rapidly
capitalize on mergers and acquisitions that augment changing environment. New variables appear daily,
core growth. and the markets respond in "Internet time." This is
what our tea leaves look like as we close the year.
As the economy slows, we expect growth But we remain vigilant and open to changes in the
stocks to outperform value stocks. Utilities and key factors we monitor daily that could cause us to
energy stocks, strong performers in 2005, are adopt a new outlook. Right now, at least, the
expected to cede leadership in 2006 to financials, outlook for next year appears quite favorable.
technology, and consumer staples (all laggards
The information provided herein is illustrative only. It should not be construed as a formal recommendation by
Longer Investments Inc.
L4 k
LONGER INVESTMENTS INCORPORATED
Services Provided by Longer Investments Inc.:Personal Investment Planning-Risk Tolerance Assessment •Development of
an Investment Policy-Retirement Planning•IRA,Pension and Profit Sharing Management •Survivorship and Estate Transfer Planning
Charitable Trust Management •Nonprofit Foundation and Endowment Management •Tax and Accounting Facilitation • Reputable
Fee-Based Asset Management
i;
P0.Box 1269 • Fayetteville,Arkansas 72702
Telephone:479-443-5851 •Toll free: 800-827-7710 • Fax:479-443-7129 •E-mail: info@longerinv.com
Web site: www.longerinvcom
S
F
Longer Investments Inc.
PORTFOLIO APPRAISAL
Fayetteville Fire Pension and Relief Fund U/A DTD 6-18-86
November 30, 2005
Unit Total Market Pct. Unit Annual Cur.
Quantity Security Cost Cost Price Value Assets Income Income Yield
COMMON STOCK
1,850 Amgen Inc. 76.35 141,239.55 80.93 149,720.50 1.6 0.000 0.00 0.0
1,000 Anadarko Petroleum 59.05 59,054.15 90.61 90,610.00 0.9 0.720 720.00 1.2
Corp.
3,250 Applebee's International 22.84 74,221.23 22.92 74,490.00 0.8 0.200 650.00 0.9
Inc.
2,000 B.P. Amoco PLC A.D.S. 39.64 79,285.00 65.84 131,680.00 1.4 2.140 4,280.00 5.4
2,750 Barclays PLC 39.80 109,462.93 40.77 112,117.50 1.2 1.830 5,032.50 4.6
3,000 Best Buy 44.25 132,741.90 48.24 144,720.00 1.5 0.320 960.00 0.7
2,385 Caterpillar Inc. 44.77 106,773.88 57.78 137,805.30 1.4 1.000 2,385.00 2.2
2,250 Chevron Corp. 38.26 86,084.01 57.31 128,947.50 1.4 1.800 4,050.00 4.7
3,500 Citigroup 41.09 143,827.09 48.55 169,925.00 1.8 1.760 6,160.00 4.3
2,750 Coach Inc. 30.95 85,112.50 34.43 94,682.50 1.0 0.000 0.00 0.0
3,330 Coca-Cola 43.20 143,860.33 42.69 142,157.70 1.5 1.120 3,729.60 2.6
2,500 Computer Sciences 48.84 122,096.46 50.23 125,575.00 1.3 0.000 0.00 0.0
Corp.
3,000 Ecolab Inc. 28.57 85,702.26 33.27 99,810.00 1.0 0.350 1,050.00 1.2
2,000 Emerson Electric 48.02 96,050.00 75.61 151,220.00 1.6 1.780 3,560.00 3.7
2,350 ExxonMobil 39.55 92,946.26 58.03 136,370.50 1.4 1.160 2,726.00 2.9
5,750 General Electric 24.34 139,982.00 35.72 205,390.00 2.2 1.000 5,750.00 4.1
3,250 Hain Celestial Group, 19.49 63,335.03 22.33 72,572.50 0.8 0.000 0.00 0.0
Inc.
1,650 Illinois Tool Works 82.62 136,317.58 88.27 145,645.50 1.5 1.320 2,178.00 1.6
3,675 Ingersoll-Rand 38.19 140,338.84 39.63 145,640.25 1.5 0.570 2,094.75 1.5
1,675 Int'1 Business Machines 82.27 137,798.94 88.90 148,907.50 1.6 0.800 1,340.00 1.0
5,425 Intel Corp. 18.85 102,243.27 26.68 144,739.00 1.5 0.320 1,736.00 1.7
3,000 Johnson &Johnson 52.08 156,250.18 61.75 185,250.00 1.9 1.320 3,960.00 2.5
3,750 Louisiana-Pacific Corp. 25.54 95,790.48 26.97 101,137.50 1.1 0.500 1,875.00 2.0
2,500 MeadWestvaco 26.74 66,858.25 27.99 69,975.00 0.7 0.920 2,300.00 3.4
5,000 Microsoft Corp. 26.45 132,241.53 27.68 138,400.00 1.4 0.320 1,600.00 1.2
2,750 Morgan Stanley 53.68 147,615.71 56.03 154,082.50 1.6 1.080 2,970.00 2.0
2,250 Nike, hic. 81.48 183,329.68 85.30 191,925.00 2.0 1.240 2,790.00 1.5
1,500 Parker Hannifin Corp. 65.14 97,715.30 68.41 102,615.00 1.1 0.920 1,380.00 1.4
3,500 Pharmaceutical Holders 69.51 243,279.75 66.16 231,560.00 2.4 1.707 5,974.32 2.5
Trust
2,425 Procter&Gamble 56.13 136,111.50 57.19 138,685.75 1.5 1.120 2,716.00 2.0
2,400 Sigma-Aldrich 58.26 139,827.18 66.04 158,496.00 1.7 0.760 1,824.00 1.3
3,375 Sony Corp. 37.27 125,786.25 37.01 124,908.75 1.3 0.000 0.00 0.0
1,000 Standard &Poors 120.52 120,520.00 125.41 125,410.00 1.3 2.087 2,086.76 1.7
Depository Receipts
3,650 US Bancorp 30.42 111,020.08 30.28 110,522.00 1.2 1.200 4,380.00 3.9
1,500 Walmart Stores 52.26 78,390.00 48.56 72,840.00 0.8 0.600 900.00 1.1
4,113,209.09 4,658,533.75 48.8 83,157.93 2.1
PREFERRED DEBT SECURITIES
2,000 G.E. Preferred 6.10% 25.00 50,000.00 24.91 49,820.00 0.5 1.525 3,050.00 6.1
AAA/AAA (C 11-15-07)
5,000 G.E. Preferred 6.625% 26.01 130,030.00 25.61 128,050.50 1.3 1.656 8,281.25 6.4
AAA/AAA(C 6-28-07)
3,000 Roch G&E 6.65% 26.30 78,893.10 25.26 75,780.00 0.8 1.662 4,987.50 6.3
AAA/AAA (C 6-20-07)
AMBAC
258,923.10 253,650.50 2.7 16,318.75 6.3
1
LONGER INVESTMENTS INCORPORATED
A Registered Investment Advisor
Longer Investments Inc.
PORTFOLIO APPRAISAL
Fayetteville Fire Pension and Relief Fund U/A DTD 6-18-86
November 30, 2005
Unit Total Market Pct. Unit Annual Cur.
Quantity Security Cost Cost Price Value Assets Income Income Yield
MUTUAL FUNDS-EQUITY
20,000.0000 iShares MSCI Japan 10.14 202,750.00 12.46 249,200.00 2.6 0.043 860.00 0.4
Index Fund
202,750.00 249,200.00 2.6 860.00 0.4
CORPORATE BONDS
50,000 NationsBank Corp. 99.79 49,894.00 103.05 51,523.50 0.5 6.375 3,187.50 6.4
Subordinated Notes
AA3/A+ (NC)
6.375% Due 02-15-08
65,000 J.P. Morgan Chase 102.60 66,687.00 104.18 67,713.81 0.7 6.700 4,355.00 6.5
Bank AA3/A+ (NC)
6.700% Due 08-15-08
50,000 Bankers Trust NY Corp 99.26 49,630.00 102.92 51,461.55 0.5 6.000 3,000.00 6.0
Subordinated Notes
A2/A (NC)
6.000% Due 10-15-08
25,000 First Union Corp. 93.78 23,446.00 103.04 25,760.50 0.3 6.000 1,500.00 6.4
Subordinated
Debentures Al/A(NC)
6.000% Due 10-30-08
25,000 Pepsico Incorporated 97.49 24,373.00 102.63 25,657.15 0.3 5.700 1,425.00 5.8
Medium Term Note
AI/A+ (NC)
5.700% Due 11-01-08
50,000 Hershey Foods Corp. 97.63 48,816.00 111.00 55,498.20 0.6 6.950 3,475.00 7.1
Notes Al/A+ (NC)
6.950% Due 08-15-12
50,000 Paribas New York 96.03 48,014.00 110.88 55,440.70 0.6 6.950 3,475.00 7.2
Branch Subordinated
Notes AA3/AA- (NC)
6.950% Due 07-22-13
60,000 Aetna Inc. Debentures 87.48 52,487.00 109.75 65,850.90 0.7 6.750 4,050.00 7.7
AA3/AA- (NC)
6.750% Due 09-15-13
75,000 Merrill Lynch &Co. 99.26 74,442.00 109.71 82,280.99 0.9 6.500 4,875.00 6.5
Inc. Global Bonds
AA3/A+ (NC)
6.500% Due 07-15-18
50,000 National City Corp. 96.65 48,326.00 112.42 56,207.60 0.6 6.875 3,437.50 7.1
Sub. Notes A2/A- (NC)
6.875% Due 05-15-19
50,000 IBM Corp. Debentures 100.01 50,004.00 116.40 58,199.65 0.6 7.000 3,500.00 7.0
Al/A+ (Subject to make
whole call)
7.000% Due 10-30-25
50,000 Dell Computer Corp. 95.46 47,731.00 117.14 58,569.65 0.6 7.100 3,550.00 7.4
Debentures A2/A
(Subject to make whole
call)
7.100% Due 04-15-28
Accrued Interest 8,614.31 0.1
583,850.00 662,778.51 6.9 39,830.00 6.9
2
LONGER INVESTMENTS INCORPORATED
A Registered Investment Advisor
Longer Investments Inc.
PORTFOLIO APPRAISAL
Fayetteville Fire Pension and Relief Fund U/A DTD 6-18-86
November 30, 2005
Unit Total Market Pct. Unit Annual Cur.
Quantity Security Cost Cost Price Value Assets Income Income Yield
GOVERNMENT BONDS
250,000 U. S. Treasury Note 100.06 250,139.09 98.62 246,562.50 2.6 4.000 10,000.00 4.0
4.000% Due 06-15-09
50,000 U. S. Treasury Bond 100.01 50,004.00 109.66 54,828.12 0.6 5.500 2,750.00 5.5
5.500% Due 08-15-28
50,000 U. S. Treasury Bond 98.95 49,474.00 106.31 53,156.25 0.6 5.250 2,625.00 5.3
5.250% Due 11-15-28
525,000 U. S. Treasury Bond 101.02 530,347.66 106.34 558,304.69 5.8 5.250 27,562.50 5.2
5.250% Due 02-15-29
Accrued Interest 13,512.62 0.1
879,964.75 926,364.19 9.7 42,937.50 4.9
GOVERNMENT AGENCY
100,000 Federal Home Loan 100.00 100,000.00 99.78 99,781.25 1.0 4.550 4,550.00 4.5
Bank (C 05-22-06 @
100, IX)
4.550% Due 11-22-06
100,000 Federal Farm Credit 100.00 100,000.00 98.34 98,343.75 1.0 3.580 3,580.00 3.6
Bank (C 6-15-05, 1X)
3.580% Due 06-15-07
250,000 Fed Nat'l Mortgage 100.00 250,000.00 99.12 247,812.50 2.6 4.150 10,375.00 4.1
Assoc (C 7-13-06 @
100, IX)
4.150% Due 07-13-07
75,000 Federal Home Loan 100.00 75,000.00 98.81 74,109.37 0.8 4.010 3,007.50 4.0
Bank(C 5-24-06, 1X)
4.010% Due 08-24-07
100,000 Federal Home Loan 100.00 100,000.00 97.12 97,125.00 1.0 3.000 3,000.00 3.0
Bank(C 09-07-05, 1X)
3.000% Due 09-07-07
185,000 Federal Home Loan 100.00 185,000.00 98.75 182,687.50 1.9 4.000 7,400.00 4.0
Bank(C 6-28-06 @
100, 1X)
4.000% Due 09-28-07
100,000 Federal Home Loan 100.00 100,000.00 99.34 99,343.75 1.0 4.400 4,400.00 4.4
Bank(C 9-28-06 @
100, IX)
4.400% Due 09-28-07
75,000 Federal Home Loan 100.00 75,000.00 97.16 72,867.19 0.8 3.300 2,475.00 3.3
Bank(C 1-17-06, 1X)
3.300% Due 01-17-08
225,000 Federal Farm Credit 100.00 225,000.00 97.69 219,796.87 2.3 4.000 9,000.00 4.0
Bank (C 1-30-06,
continuously thereafter)
4.000% Due 12-29-08
100,000 Federal Farm Credit 100.00 100,000.00 99.84 99,843.75 1.0 5.020 5,020.00 5.0
Bank (C 11-22-06 @
100, IX)
5.020% Due 05-22-09
125,000 Federal Farm Credit 100.00 125,000.00 98.72 123,398.44 1.3 4.350 5,437.50 4.3
Bank (NC)
4.350% Due 06-01-09
3
LONGER INVESTMENTS INCORPORATED
A Registered Investment Advisor
Longer Investments Inc.
PORTFOLIO APPRAISAL
Fayetteville Fire Pension and Relief Fund U/A DTD 6-18-86
November 30, 2005
Unit Total Market Pct. Unit Annual Cur.
Quantity Security Cost Cost Price Value Assets Income Income Yield
225,000 Federal Home Loan 100.00 225,000.00 96.56 217,265.62 2.3 4.000 9,000.00 4.0
Bank(C 1-30-06,
continuously thereafter)
4.000% Due 04-01-10
200,000 Federal Home Loan 100.00 200,000.00 97.06 194,125.00 2.0 4.200 8,400.00 4.2
Bank (C 1-30-06,
continuously thereafter)
4.200% Due 05-20-10
50,000 Tennessee Valley 98.95 49,474.00 103.63 51,813.05 0.5 5.625 2,812.50 5.7
Authority (NC)
5.625% Due 01-18-11
150,000 Federal Farm Credit 100.00 150,000.00 96.16 144,234.37 1.5 4.150 6,225.00 4.1
Bank (Call 04-07-06,
continuously thereafter)
4.150% Due 04-07-11
55,556 Federal Home Loan 100.00 55,555.56 98.28 54,600.70 0.6 5.080 2,822.22 5.1
Bank(C 1-30-06,
continuously thereafter)
5.080% Due 10-03-12
250,000 Federal Home Loan 100.00 250,000.00 97.69 244,218.75 2.6 5.000 12,500.00 5.0
Bank (C 10-5-07 @
100, continuously
thereafter)
5.000% Due 10-05-12
100,000 Federal Home Loan 100.00 100,000.00 100.00 100,000.00 1.0 5.250 5,250.00 5.2
Bank (C 11-14-08 @
100, IX)
5.250% Due 11-14-12
75,000 Federal Home Loan 100.00 75,000.00 98.66 73,992.19 0.8 5.375 4,031.25 5.4
Bank (C 1-30-06,
continuously thereafter)
5.375% Due 11-07-13
125,000 Federal Farm Credit 100.00 125,000.00 98.06 122,578.12 1.3 5.300 6,625.00 5.3
Bank(C 6-22-07 @
100, continuously
thereafter)
5.300% Due 06-22-15
Accrued Interest 27,229.94 0.3
2,665,029.56 2,645,167.12 27.7 115,910.97 4.4
CASH AND EQUIVALENTS
Dividends Accrued 10,230.02 10,230.02 0.1 0.000 0.00 0.0
Money Market 47,262.41 47,262.41 0.5 3.180 1,502.94 3.2
57,492.43 57,492.43 0.6 1,502.94 2.6
CERTIFICATE OF DEPOSIT
50,000 MBNA America Bank 100.00 50,000.00 100.06 50,032.25 0.5 6.550 3,275.00 6.5
Newark, DE A3/NR
(NC)FDIC-Insured
6.550% Due 12-20-05
4
LONGER INVESTMENTS INCORPORATED
A Registered biveshnent Advisor
Longer Investments Inc.
PORTFOLIO APPRAISAL
Fayetteville Fire Pension and Relief Fund U/A DTD 6-18-86
November 30, 2005
Unit Total Market Pct. Unit Annual Cur.
Quantity Security Cost Cost Price Value Assets Income Income Yield
40,000 Capital One Bank FSB 100.00 40,000.00 100.11 40,045.96 0.4 4.900 1,960.00 4.9
Falls Church,VA
BAAI/NR(NC)
FDIC-Insured
4.900% Due 02-20-07
Accrued Interest 2,000.00 0.0
90,000.00 92,078.21 1.0 5,235.00 5.8
WARRANTS
144 Lucent Warrants (Expire 1.59 228.96 0.62 89.28 0.0 0.000 0.00 0.0
12/10/2007)
228.96 89.28 0.0 0.00 0.0
TOTAL PORTFOLIO 8,851,447.89 9,545,353.99 100.0 305,753.10 3.4
5
LONGER INVESTMENTS INCORPORATED
Lih
mom A Registered Investment Advisor
Longer Investments Inc.
CONTRIBUTIONS/WITHDRAWALS
City of Fayetteville Fire Pension and Relief Fund
08-15-02 To 11-30-05
CONTRIBUTIONS
09-10-03 Money Market $350,000.00
08-04-04 Money Market $127,000.00
09-01-05 Money Market $145,000.00
$622,000.00
WITHDRAWALS
10-09-02 Money Market $403000.00
12-12-02 Money Market $900.00
12-18-02 Money Market $150,000.00
01-08-03 Money Market $73,000.00
02-15-03 Money Market $51,000.00
03-04-03 Money Market $66,000.00
04-01-03 Money Market $60,000.00
05-01-03 Money Market $66,000.00
06-03-03 Money Market $245,000.00
07-01-03 Money Market $30,000.00
08-01-03 Money Market $65,000.00
10-01-03 Money Market $75,000.00
11-03-03 Money Market $20,000.00
01-06-04 Money Market $24,000.00
01-22-04 Money Market $216,000.00
02-09-04 Money Market $76,000.00
03-01-04 Money Market $66,000.00
04-01-04 Money Market $75,000.00
05-03-04 Money Market $60,000.00
05-19-04 Money Market $88,000.00
06-02-04 Money Market $80,000.00
07-01-04 Money Market $70,000.00
07-29-04 Money Market $15,000.00
08-11-04 Money Market $15,000.00
09-08-04 Money Market $80,000.00
10-04-04 Money Market $601000.00
12-08-04 Money Market $10,000.00
01-03-05 Money Market $65,000.00
02-01-05 Money Market $74,000.00
03-01-05 Money Market $80,000.00
04-01-05 Money Market $90,000.00
04-14-05 Money Market $217,000.00
05-01-05 Money Market $55,000.00
06-09-05 Money Market $351000.00
07-06-05 Money Market $280,000.00
08-01-05 Money Market $95,000.00
10-01-05 Money Market $75,000.00
11-01-05 Money Market $40,000.00
$2,991,000.00
6
LONGER INVESTMENTS INCORPORATED
A Registered Investment Advisor