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Home My WebLink About2010-02-25 - Agendas - FinalFayetteville Fireman's Pension and Relief Fund Meeting Date Adjourn Time Attendees: 0R{ y �e ai rlp+nt3rti, F 3'tas p,M, ss beat t,06intouS iRonnrtn, I:0nod /li ifijk ltjinita& AM 0.®113p DA. �el Subject: /�Y, I i A 1.01PM Motion To: / / s'r p flO i i p , Motion By: , Seconded: p' lu(A bciu'P Mayor Jordan ✓ Marion Doss V Pete Reagan 0-6 <th Gene Warford IV Ronnie Wood ✓/ Sondra Smith V Subject: /�Y, I i A 1.01PM Motion To: / / s'r p flO i i p , Motion By: S S Seconded: p' lu(A bciu'P Mayor Jordan ,/ Marion Doss 1 -/- Pete Reagan CbottY Gene Warford V Ronnie Wood ✓/ Sondra Smith diSa - d a J J04 ,1a4 Subject: f %dOlidin6ii Motion To: Motion To:___ ae,s.P O,`}pnd Motion By: C(l��YYY"` oncl Mayor Jordan Seconded: DOS C 1 -/- Mayor Jordan ✓ Warford Marion Doss I/ ✓/ Pete Reagan diSa - Gene Warford 1.Z -- Ronnie Ronnie Wood Sondra Smith J/ Subject: AeAta w t 5i' Motion To: A%p('Qt--C Motion By: O,`}pnd Seconded: Mayor Jordan t/ - Marion Marion Doss 1 -/- Pete Reagan Pete Warford t7-- ✓RonnGene Ronnie ie Wood ✓/ Sondra Smith v Lloneld Jordan Chairman Sondra E. Smith Secretary Marion Doss Position 1/Retired ¶ttleyille Firemen's Pension and Relief Fund Board of Trustees Meeting Agenda February 25, 2010 Pete Reagan Gene Warlord Ron Wood Position 2/Retired Position 3/Retired Position 4/Retired A meeting of the Fayetteville Firemen's Pension and Relief Fund Board of Trustees will be held at 3:00 PM on February 25, 2010 in Room 326 of the City Administration Building. Approval of the Minutes: • December 31, 2009 Meeting Minutes • There was no meeting in January due to the weather Pension List Changes: • Arthur Caselman Deceased Approval of the Pension Lists: • February and March 2010 Pension Lists Old Business: • Osborn, Carreiro & Associates, Inc. Actuarial Study Invoice New Business: • NCPRES 2010 Annual Conference • Local Pension Fund Report to the Council • Revenue Expense Report — December 31, 2009 Longer Investments: • Longer Investment — Investment Report • The Longer View • Longer 2009 4th Quarter Report Informational: • NCPERS Membership • 2010 Meeting Schedule Board Members Mayor Jordan Sondra E. Smith Marion Doss Pete Reagan Gene Warford Ron Wood Chairman Secretary Position 1/Retired Position 2/Retired Position 3/Retired Position 4/Retired aye evl e ARKANSAS Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes December 31, 2009 Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes December 31, 2009 Page 1 of 8 A meeting of the Fayetteville Firemen's Pension and Relief Fund Board of Trustees was held at 3:00 PM on December 31, 2009 in Room 326 of the City Administration Building. Mayor Jordan called the meeting to order. Present: Mayor Jordan, Marion Doss, Gene Warford, Pete Reagan, Sondra Smith,City Attorney Kit Williams, Paul Becker Finance Director, Trish Leach, Audience and Press. Absent: Ronnie Wood. Approval of the Minutes: November 19, 2009 Meeting Minutes Sondra Smith: I made a change to the minutes per Marion's request. Marion Doss moved to approve the November 19, 2009 Firemen's Pension and Relief Fund Board of Trustees meeting minutes. Pete Reagan seconded the motion. Upon roll call the motion passed 5-0. Ronnie Wood was absent. Approval of the Pension List: January, 2010 Pension List Pete Reagan moved to approve the January, 2010 Pension List. Marion Doss seconded the motion. Upon roll call the motion passed 5-0. Ronnie Wood was absent. Old Business: Osborn, Carreiro & Associates, Inc. actuarial study invoice Kit Williams: They want $2,900.00. 113 West Mountain 72701 (479) 575-8323 TDD (Telecommunications Device for the Deaf) (479) 521-1316 Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes December 31, 2009 Page 2 of 8 Pete Reagan: Is that what we approved? Sondra Smith: You authorized $2,200 on March 12th . Pete Reagan: I think we would need to write him a letter to say that we approved $2,200 and now we are getting billed for $2,900 and ask the reason why. Mayor Jordan: Do you want me to send him a letter? Pete Reagan: I think so. Mayor Jordan: I will do it. Gene Warford: We asked for three scenarios and he gave us one at that meeting. Kit Williams: When he came up here, he really didn't give you the scenarios you asked for but later he went back revised it. Gene Warford: Right. He mailed it to us. Marion Doss: It took quite a while, but I think after you called him, he finally did come back with scenarios we asked for. Mayor Jordan: Yes, they finally did. Pete Reagan: I don't think I ever got a copy of that. Sondra Smith: It was in the agenda Kit Williams: It was in an earlier agenda. Mayor Jordan: We can get you a copy. Pete Reagan: Thank you. Sondra Smith: At the February 11th meeting it was talked about at that meeting, the person that quoted that fee was David Clark. Kit Williams: So, that wasn't Carreiro saying the fee? Pete Reagan: I thought we had Jody up here? Sondra Smith: Jody was there during that time. Pete Reagan: I know Jody was there, but we had Jody back up here. 113 West Mountain 72701 (479) 575-8323 TDD (Telecommunications Device for the Deal) (479) 521-1316 Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes December 31, 2009 Page 3 of 8 Kit Williams: That was the one where he didn't really answer our questions. Mayor Jordan: Yes. Pete Reagan: Exactly. Paul Becker: He was going to send you the other scenarios which he subsequently did after Sondra reminded him. Kit Williams: Right. Sondra Smith: The original estimate was on February 11 David Clark gave the total for the study. David Clark says "for the three additional scenarios it would be $2,200" and then Pete says "on top of the $1,400" and David Clark says "no, that is the total". Just send us a letter clearly stating what your three scenarios would be.' Pate Reagan: And then we talked him into four scenarios, when he came up. Mayor Jordan: I don't remember all the details. Sondra Smith: It may be because he did an extra scenario that he is charging another $700. Marion Doss: He may have forgot. It kinds fiumy David Clark telling us what Carreiro is going to charge. Kit Williams: We can't hold him to what Clark says. Paul Becker: I don't remember but that would be odd that David Clark would be giving us a number. Kit Williams: How did Clark know? Sondra Smith: Because the actuarial studies go through PRB. Pete Reagan: You have to submit a check to PRB and I guess they forward it or deposit, Sondra Smith: Yes. But this time, the bill came directly from Osborn, Carreiro & Associates. In the past it has always come from PRB. Paul Becker: Right. Pete Reagan: Right. That's because we hired him to answer four questions for us. Paul Becker: You had a separate engagement. 113 West Mountain 72701 (479) 575-8323 TDD (Telecommunications Device for the Deaf) (479) 521-1316 Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes December 31, 2009 Page 4 of 8 Pete Reagan: The one where we actually hired him on a separate point of business was in this room in late summer. Paul Becker: The trip that you're recalling Pete, I think that was his advice where he gave the one scenario if they followed the current plan. Mayor Jordan: I do not know what occurred or why he's charging the extra $700. He obviously feels like he's had to do some extra work. Kit Williams: I think he did more work, than he was planning on. New Business: Mayor Jordan's letter to David Clark at PRB regarding ability to decrease benefits David Clark's response to Mayor's letter regarding ability to reduce benefits Mayor Jordan: We sent a letter to David Clark on a recommendation of the Fire Pension Board to see if the PRB would let us reduce benefits. I think there is a copy of that letter in the agenda. Sondra Smith: Yes there is. Mayor Jordan: We have his response, which he said he agreed with the Attorney General's opinion. He did not feel that you could. Sondra Smith: It says the current law does not permit a reduction in benefits. Kit Williams: His was a lot stronger than the Attorney General. Mayor Jordan: That is what we got back. Marion Doss: The last paragraph in that letter kind of left me with some questions. Kit Williams: What did you need to know about that last paragraph? Marion Doss: He talks about the City sending information as of December 31, 2009, the financial report for the fund, and he says "the completed financial report will assist the actuaries in conducting the referenced evaluation which will be reviewed by PRB at there June 2010 meeting. PRB will then provide a follow up letter informing the fund of actions needed to safe guard the benefits". Kit Williams: That goes with that paragraph above it where it said that it's likely going to be projected to deplete its assets within ten years. That's a thing that kicks in a different statue that says they will then notify the fund and tell them of what there options are. The guarantee fund, which is a fund that would normally help funds that are in financial distress, has two 113 West Mountain 72701 (479) 575-8323 TDD (Telecommunications Device for the Deaf) (479) 521-1316 Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes December 31, 2009 Page 5 of 8 requirements that we can not meet, one of which requires a full mill to be assessed and the second that the benefits are at their minimal amount of 50%. So that fund won't help us. Trish Leach: If you're curious about the report they reference, we do this report every year. The deadline in March 31 and we usually mail it the first week of March. We have already started working on it. When I read that I was surprised, because reading it, if you didn't know we did this report every year, you'd think this was something additional we were doing and it's not. Pete Reagan: David has always complemented Fayetteville on being one of the first ones to get their information in. But we had a situation in West Helena, a couple years ago, where the Pension Review Board held $290,000 from that fund, and their fund is in almost as bad of shape as ours, because they did not have the required reports filled out. So they really push those reports. That's one requirement of funding. Mayor Jordan: Have we sent the reports or is there an issue here? Kit Williams: We can't send them yet. Marion Doss: I guess I misunderstood that because when it said December 31, I thought he was expecting it to be in the mail on that date and I guess he just used that as the final date and then the normal time for getting them in. That's what I was wondering about. Trish Leach: One of the things we do, on the affidavits all the members send in to Sondra, we actually go through those, as per the report, to make sure if a spouse is deceased that we take them off, to get the actuarial report as accurate as possible. So until all the affidavits are in, that holds it up and all the financial information is in. Marion Doss: I see. Sondra Smith: So if you don't turn your affidavits in on time it holds Trish up on getting that report out. Mayor Jordan: Is there any more discussion on the letters. Marion Doss: I was just kind of curious as to what they meant by it. Paul Becker: That's normally the standard information that he's referring to that you are under funded. You're not actuarially sound. Kit Williams: And you're liable to be depleted in ten years. City Attorney memo regarding State statutes 24-11-213 thru 215, 24-11-301 and 24-11-809 Kit Williams: These statues are how state turn back funds get divvied up and if you read these statues and some of the rest of the chapter it's extremely convoluted. It pretty convoluted but 113 West Mountain 72701 (479) 575-8323 TDD (Telecommunications Device for the Deaf) (479) 521-1316 Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes December 31, 2009 Page 6 of 8 they give the responsibility statutorily at the end to the state board and its actuary to determine the proper division between the funds and the State of Arkansas also receives money out of that into its general funds. The City of Harrison was and maybe still is contemplating even legal action to try to see if maybe the funds where not being distributed properly and more should go to the pension funds. Because of that a local attorney had talked to the Mayor of Harrison and talked to me about it and asked me what our position was and obviously if there was likelihood that we could force more money from the turn back funds to be used for our pension plans that would be good for us. We would need that. So that's why I looked at all these particular statues and I've tried to explain in this memo about them. I've shared this information with Dale Evans, who was the attorney that talked to the Mayor of Harrison, and talked to me. When he originally talked to me he hadn't done a whole bunch of research, but I indicated that this board might very well be interested, if in fact it looked like we had a legal claim that we could make. My review on this is it looks like we have a dry hole to me, I can't guarantee you. It's extremely complicated and confusing. If you look at my conclusion on page three, I actually don't think we will probably be successful but I can't be for sure because in order to really know the answer to that we would have to do an actuarial analysis with a complete understanding of the law and the historical distributions. That would be an expensive proposition. I'm not an actuary. We'd have to hire an actuary and we wouldn't be paying $2,200 for this It would be a lot more than that to go through those statues. So my feeling was that, that was probably not a good bet to try to go forward. I have not heard back from Mr. Evans. I have faxed him a copy of this letter a day or two ago so he could see what I had looked at and he has not gotten back to me at this point in time. I'm and trying to keep an open mind so maybe he'll find something I didn't find, but at this point in time I surely could not recommend that we join a suit with the potential financial cost of an actuary and a lot of legal analysis on this. If they are going forward themselves and want us to go forward on this, then I would invite him to come here and speak to you all and explain what his theory was and then you all could decide whether or not you want to join in or not. But right now it doesn't look very promising to me. Pete Reagan: It's very complex. Kit Williams: The only thing that's more complex is the alcohol laws, those are really complex. This comes in second, I think. Pete Reagan: The thing we went to the governor with last year was the 28% of the total of fire insurance premium tax that was collected that was left over after all distributions were made to all Fire and Police plans both old and LOPFI went to the Governors Discretionary Fund. So we went to the Govemor asking for some of that money for the old pension funds that were in distress and the Reader's Digest version of his answer is no. Mayor Jordan: That's what I remember. Kit Williams: I think that was proper for you to ask, because it would be within his discretion. I don't think that we can take him court and force him to do it. I think it's within his discretion, it 113 West Mountain 72701 (479) 575-8323 TDD (Telecommunications Device for the Deaf) (479) 521-1316 Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes December 31, 2009 Page 7 of 8 is state revenue. This would be a legitimate use of state revenue, if he wanted to do it, but I don't know if he's going to do. Pete Reagan: If he did it for one he'd have to do it for all. Paul Becker: I think it's quite clear in the statue Kit that the left over money goes to the general revenue fund. Kit Williams: There are a certain portions of money, in the State turn back, that is supposed to go to the general revenue fund. Pete Reagan: And some how the State Police got in there. Kit Williams: Yes, they got there hands out. Of course State Police is the responsibility of the state so that's why maybe they got the extra money and we didn't because you're not the responsibility of the state at this point. Pete Reagan: Except that we protect state lands. I agree whole heartedly. Moving right along. Kit Williams: I spent a lot of time on this and I kind of regret it. Marion Doss: We appreciate your time though. Kit Williams: I don't think I know much more that I did when I started reading all this Mayor Jordan: That got pretty complicated. NCPERS membership fee invoice Pete Reagan moved to approve the 2010 NCPERS Dues in the amount of $150. Marion Doss seconded the motion. Upon roll call the motion passed 5-0. Ronnie Wood was absent. Longer Investments: A copy of the monthly investment report was handed out to the board. Informational: 2010 Parking Permits The permits were handed out to the board. 113 West Mountain 72701 (479) 575-8323 TDD (Telecommunications Device for the Deaf) (479) 521-1316 Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes December 31, 2009 Page 8 of 8 2010 Meeting Schedule A copy of the 2010 meeting schedule was handed out to the board. Meeting Adjourned at 3:45 PM 113 West Mountain 72701 (479) 575-8323 TDD (Telecommunications Device for the Deaf) (479) 521-1316 Art `Beco' Caselman RMINGTON — Arthur Clar- ce Caselman passed from -this life, Thursday, February th, at his ome in Farm tgton. Arkan sas... Arthur -vas 94. ::`He was born October 15th, 1915, the son of Caselman Andrew Jack Caselman, and Ethel Corbet Caselman. He;; `was born on Swaders Creek,:` in North Crawford County. Arthur married Gladys` Caselman December 23rd, 4937 in Fayetteville. t He lived a good portion of his life in Hazel Valley, -moving to Fayetteville in` =1947, where he worked for the Fayetteville Water Depart- ment. He retired as Mainte- nance Superintendent in 197 after thirty years of service to the City. Arthur and Gladys] moved to the farm in Fare' ington in 1975. He was als' retired as a Volunteer Fi men from the City of Faye ville. Arthur was a member the Center Street Church Christ, where he served as Elder for thirty-seven ye He enjoyed hunting, dri in the country, and wo with livestock. • Arthur is survived thi morning by; r Gladys Caselman, his of 72 years, Of Farmington. • One son Randall Casel man and wife Georgia pf Bella Vista. • Three grandchildren: Karen McGee and husba Greg of Farmingtom� ' Kathy Chappell a husband Ed of Farmingtoi And Keith Caselilati wife Ana of Farmington. Arthur is survived by e great-grandchildren and`> great -great grandchildren. Visitation will be Sunk` afternoon from 4 until t FIREMEN'S PENSION & RELIEF FUND AFFIDAVIT STATE OF ARKANSAS )ss: COUNTY OF WASHINGTON RECEIVED DEC 2s 2008 CITY OF FAYETTEVIL ir MOE • I, ,4r4ltvr sCl44a4 dosolemnly swear that: (Please check the appropriate statement below) 1. V. I am a former firefighter for the Fayetteville Fire Department. 2. I am the spouse/former spouse/widow of a former firefighter for the Fayetteville FireDepartment, and that I have not remarried since becoming eligible for benefits. 3. I am an eligible dependent Of a former firefighter for the Fayetteville Fire Department and submitted the attached school affidavit for verification of school attendance. 4. )/ 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 govemed under state law. My personal information is as follows: Address: /7 46 `7 3 L ft/e gz/w .eor6 fa.nmirt91znv/ %-L 72 730 Telephone: ( 447%) z(o7-3 5‘0 Social Security No.: 4‘30 - 20 -3%93 Birthdate: /0 /5 -/975 PLEASE LIST ALL BENEFICIARIES BELOW (complete only for spouse, minor children and/or children under 23 years of age enrolled in a institute of higher education): NAME SOCIAL SECURITY NO. BIRTHDATE RELATIONSHIP G-ictais Ga.setrngki 43t -56 -10 ,-4, o4 -a7 -d/7 spew se DATED this ) `2 day of be -Cern 6 cr , z.00. . AF (signature) SUBSCRIBED AND SWORN to before me, a Notary Public, this % 9 day of Pc c..er&r My Commission dlldeo Sfi GREG MCGEE Notary Public -Arkansas WAS y9N1,5 _!. 2oa tit (This affidavit is required annually by the Firemen's Pension and Relief Fund Board of Trustees and must be properly completed and returned to the Fayetteville City Cleric, 113 West Mountain, Fayetteville, Arkansas, 72701 by January 31" each year.) (Revised 12/2006) FIREMEN'S RELIEF AND PENSION February 2 2 2010 2 2 THE FOLLOWING ARE THE OBLIGATIONS OF THE FIREMEN'S RELIEF FUND FOR THE MONTH LISTED ABOVE YOU ARE HEREBY INSTRUCTED TO ISSUE CHECKS TO THE PAYEES, IN THE AMOUNTS SHOWN , AND FOR THE PURPOSE SO STATED. DATE OF EMP# RETIREMENT NAME O 79 11/99 R 177 4/04 S 74 3/86 ✓ 63 5/72 R 68 7/99 S 44 9/86 R 45 9/86 R 49 7/88 ✓ 5 5/72 R 57 5/90 ✓ 6 4/68 ✓ 8 10/76 R 77 11/99 R 188 12/05 R 188 12/05 R 11 2/76 R 192 4/06 R 38 5/84 R 170 5/03 R 170 5/03. R 92 03/02 ✓ 34 6/79 ✓ 70 11/99 O 182 10/04 R 93 06/02 R 86 07/01 R 64 4/95 S 76 5/88 R 37 3/84 R 54 5/89 R 13 10/67 R 173 12/03 ✓ 181 10/04 R 51 10/88 R 40 9/85 R 202 02/08 R 50 9/88 R 39 4/85 ✓ 35 2/82 R 15 4/77 S 209 8/81 R 73 2/00 R 73 2/00 ✓ 42 2/86 ✓ 176 4/04 R 48 7/88 R 184 3/05 R 196 01/02 SMITH (ARMSTRONG) (DILL), PAMELA BACHMAN, EDDIE BAIRD, JULIA BOLAIN, ANN BONADUCE, MICHAEL BOUDREY, BETTY MRS. BOUDREY, HOWARD BOUDREY, JACK CASELMAN, ARTHUR CATE, ROY CHRISTIE, ARNOLD COUNTS, WAYNE DILL,GARY JOHN DOSS, MARION H DOSS, MARION H plus 25 additional pay FARRAR,ALONZO FARRAR, DANNY FRALEY, JOSEPH G. FREEDLE, LARRY FREEDLE, LARRY plus 25 additional pay GAGE,TOMMY HARRIS, JAMES E. HARRIS, MARY RUTH JENKINS, EILEEN JENKINS, JOHN JOHNSON,ROBERT JORDAN, CHARLIE JUDY, JAN KING, ARNOLD D. KING, ARVIL LAYER, MERLIN LEDBETTER, DENNIS LEE, VIOLA LOUISE LEWIS, CHARLES LOGUE, PAUL D. MAHAN, MARSHALL MASON, LARRY MC ARTHUR, RONALD A. MC CHRISTIAN, DWAYNE MC WHORTER, CHARLES MILLER, ALICE GAYLE MILLER,KENNETH MILLER,KENNETH plus 25 additional pay MOORE, JAMES H. MORRIS, DIXIE E. MULLENS, DENNIS W. NAPIER, LONNIE ONEAL, TEDDY Regular Mo Year To Date Benefit Reg Benefit 1,812.74 2,618.55 1,802.08 109.27 2,988.76 2,477.42 2,089.28 1,647.63 131.13. 1,788.90 109.27 109.27 1,812.75 5,376.91 731.61 998.86 4,155.36 1,768.12 3,816.75 141.37 2,596.69 109.27 109.27 1,788.75 1,788.76 3,073.47 2,274.95 1,647.63 1,522.37 1,711.21 456.22 3,775.80 109.27 1,647.63 2,868.28 4,077.28 1,631.25 1,753.74 109.27 1,334.51 1,304.07 3,180.02 170.60 109.27 125.66 2,191.30 3,518.28 4,120.99 3,625.48 5,237.10 3,604.16 218.54 5,977.52 4,954.84 4,178.56 3,295.26 262.26 3,577.80 218.54 218.54 3,625.50 10,753.82 1,463.22 1,997.72 8,310.72 3,536.24 7,633.50 282.74 5,193.38 218.54 218.54 3,577.50 3,577.52 6,146.94 4,549.90 3,295.26 3,044.74 3,422.42 912.44 7,551.60 218.54 3,295.26 5,736.56 8,154.56 3,262.50 3,507.48 218.54 2,669.02 2,608.14 6,360.04 341.20 218.54 251.32 4,382.60 7,036.56 8,241.98 DATE OF EMP# RETIREMENT NAME Regular Mo Year To Date Benefit Reg Benefit R 46 5/88 OSBURN, TROY 1,899.66 3,799.32 R 81 02/01 , PHILLIPS,LARRY 2,765.09 5,530.18 R 203 02/08 PIERCE, JOEY 3,647.18 7,294.36 R 53 2/89 POAGE, LARRY 2,346:70 4,693.40 R 186 06/05 REAGAN, PETE 3,535.71 7,071.42 ✓ 201 ^02/08 REED, JUNE 109.27 218.54 S 172 12/03 SCHADER, MADGE 1,386.01 2,772.02 R 41 9/85 SCHADER, TROY 1,524.99 3,049.98 R 190 04/06 SHACKELFORD, GLEN 3,647.18 7,294.36 R 36 5/76 SPRINGSTON, CARL 806.19 1,612.38 S 90 03/02 STOUT, IMOGENE W. 767.80 1,535.60 R 165 12/02 TATE, RALPH 3,668.10 7,336.20 ✓ 65 3/66 TUNE, BILLIE SUE 136.59 273.18 R 71 1/00 WARFORD,THOMAS 2,502.72 5,005.44 S 207 7/68 WATTS, MAGGIE 437.09 874.18 R 88 01/02 WOOD,RONNIE D 3,077.15 6,154.30 S 208 9/88 WRIGHT, Barbara 1,691.34 3,382.68 119, 540.61 239, 081.22 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 NOTARY PUBLIC MY COMMISSION EXPIRES : FIREMEN'S RELIEF AND PENSION March 3 3 2010 3 3 1 THE FOLLOWING ARE THE OBLIGATIONS OF THE FIREMEN'S RELIEF FUND FOR THE MONTH LISTED ABOVE YOU ARE HEREBY INSTRUCTED TO ISSUE CHECKS TO THE PAYEES, IN THE AMOUNTS SHOWN , AND FOR THE PURPOSE SO STATED. DATE OF EMP# RETIREMENT NAME Regular Mo Year To Date Benefit Reg Benefit Q 79 11/99 SMITH (ARMSTRONG) (DILL), PAMELA 1,812.74 5,438.22 R 177 4/04 BACHMAN, EDDIE 2,618.55 7,855.65 S 74 3/86 BAIRD, JULIA 1,802.08 5,406.24 ✓ 63 5/72 BOLAIN, ANN 109.27 327.81 R 68 7/99 BONADUCE, MICHAEL 2,988.76 8,966.28 S 44 9/86 BOUDREY, BETTY MRS. 2,477.42 7,432.26 R 45 9/86 BOUDREY, HOWARD 2,089.28 6,267.84 R 49 7/88 BOUDREY, JACK 1,647.63 4,942.89 ✓ 5 5/72 CASELMAN, ARTHUR deceased 2/11/10 0.00 262.26 ✓ 210 5/72 CASELMAN, GLADY'S 131.13 131.13 R 57 5/90 CATE, ROY 1,788.90 5,366.70 ✓ 6 4/68 CHRISTIE, ARNOLD 109.27 327.81 ✓ 8 10/76 COUNTS, WAYNE 109.27 327.81 R 77 11/99 DILL,GARYJOHN 1,812.75 5,438.25 R 188 12/05 DOSS, MARION H 5,376.91 16,130.73 R 188 12/05 DOSS, MARION H plus 25 additional pay 731.61 2,194.83 R 11 2/76 FARRAR,ALONZO 998.86 2,996.58 R 192 4/06 FARRAR, DANNY 4,155.36 12,466.08 R 38 5/84 FRALEY, JOSEPH G. 1,768.12 5,304.36 R 170 5/03 FREEDLE, LARRY 3,816.75 11,450.25 R 170 5/03 FREEDLE, LARRY plus 25 additional pay 141.37 424.11 R 92 03/02 GAGE,TOMMY 2,596.69 7,790.07 ✓ 34 6/79 HARRIS, JAMES E. 109.27 327.81 ✓ 70 11/99 HARRIS, MARY RUTH 109.27 327.81 Q 182 10/04 JENKINS, EILEEN 1,788.75 5,366.25 R 93 06/02 JENKINS, JOHN 1,788.76 5,366.28 R 86 07/01 JOHNSON,ROBERT 3,073.47 9,220.41 R 64 4/95 JORDAN, CHARLIE 2,274.95 6,824.85 S 76 5/88 JUDY, JAN 1,647.63 4,942.89 R 37 3/84 KING, ARNOLD D. 1,522.37 4,567.11 R 54 5/89 KING, ARVIL 1,711.21 5,133.63 R 13 10/67 LAYER, MERLIN 456.22 1,368.66 R 173 12/03 LEDBETTER, DENNIS 3,775.80 11,327.40 ✓ 181 10/04 LEE, VIOLA LOUISE 109.27 327.81 R 51 10/88 LEWIS, CHARLES 1,647.63 4,942.89 R 40 9/85 LOGUE, PAUL D. 2,868.28 8,604.84 R 202 02/08 MAHAN, MARSHALL 4,077.28 12,231.84 R 50 9/88 MASON, LARRY 1,631.25 4,893.75 R 39 4/85 MC ARTHUR, RONALD A. 1,753.74 5,261.22 ✓ 35 2/82 MC CHRISTIAN, DWAYNE 109.27 327.81 R 15 4/77 MC WHORTER, CHARLES 1,334.51 4,003.53 S 209 8/81 MILLER, ALICE GAYLE 1,304.07 3,912.21 R 73 2/00 MILLER,KENNETH 3,180.02 9,540.06 R 73 2/00 MILLER,KENNETH plus 25 additional pay 170.60 511.80 ✓ 42 2/86 MOORE, JAMES H. 109.27 327.81 ✓ 176 4/04 MORRIS, DIXIE E. 125.66 376.98 R 48 7/88 MULLENS, DENNIS W. 2,191.30 6,573.90 DATE OF EMP# RETIREMENT NAME Regular Mo Year To Date Benefit Reg Benefit R 184 3/05 NAPIER, LONNIE 3,518.28 10,554.84 R 196 01/02 ONEAL, TEDDY 4,120.99 12,362.97 R 46 5/88 OSBURN, TROY 1,899.66 5,698.98 R 81 02/01 PHILLIPS,LARRY 2,765.09 8,295.27 R 203 02/08 PIERCE, JOEY 3,647.18 10,941.54 R 53 2/89 POAGE, LARRY 2,346.70 7,040.10 R 186 06/05 REAGAN, PETE 3,535.71 10,607.13 ✓ 201 A02/08 REED, JUNE 109.27 327.81 S 172 12/03 SCHADER, MADGE 1,386.01 4,158.03 R 41 9/85 SCHADER, TROY 1,524.99 4,574.97 R 190 04/06 SHACKELFORD, GLEN 3,647.18 10,941.54 R 36 5/76 SPRINGSTON, CARL 806.19 2,418.57 S 90 03/02 STOUT, IMOGENE W. 767.80 2,303.40 R 165 12/02 TATE, RALPH 3,668.10 11,004.30 ✓ 65 3/66 TUNE, BILLIE SUE 136.59 409.77 R 71 1/00 WARFORD,THOMAS 2,502.72 7,508.16 S 207 7/68 WATTS, MAGGIE 437.09 1,311.27 R 88 01/02 WOOD,RONNIE D 3,077.15 9,231.45 S 208 9/88 WRIGHT, Barbara 1,691.34 5,074.02 119, 540.61 358, 621.83 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 NOTARY PUBLIC MY COMMISSION EXPIRES : Osborn, Carreiro & Associates, Inc. ACTUARIES CONSULTANTS • ANALYSTS STATEMENT December 28, 2009 Fayetteville Fire Pension and Relief Fund c/o Ms. Sondra Smith, City Clerk 113 West Mountain Fayetteville, AR 72701 RE: Fayetteville Firefighters Pension Fund Invoice for actuarial work recently completed for the above referenced pension fund. Work completed includes the following: A cash flow study with investment result simulations as of January 1, 2009. Estimation of LOPFI consolidation costs. Current and future city out-of-pocket costs under different scenarios. Review of four specific scenarios. Presentation of report to pension board on August 27, 2009 TOTAL DUE $ 2,900.00 Return payment to: Osborn, Carreiro & Associates, Inc. (Tax ID# 71-0631123) 124 West. Capitol, Suite 1690 Little Rock, AR 72201 Invoice #0903110. Return this copy with your payment. Thank you! LOCAL PENSION FUND REPORT 2009 In keeping with statutory requirements, I am presenting this report for 2009 on the local Police and Fire retirement funds for the City of Fayetteville. Both of these plans were closed, by law, in 1983 and there are no longer any active members remaining. There are currently 47 police and 60 fire retirees and beneficiaries in the system. At December 2009 projected expenses from the fire pension fund were in approximately $1.5 million as compared to fund revenues of $786,000. Projected police pension fund expenses were approximately $1.7million as compared to fund revenues in excess of $1.1million. This is before adjusting investments to market value. However, on a cash flow basis, contributions are not close to covering expenses. Actuarial evaluations are the responsibility of the State of Arkansas Fire and Police Review Board. The last evaluations completed were as of December 31, 2008. Based on these evaluations the unfunded pension obligations of police and fire were $3.6 million and $5.5 million respectively and have grown considerably from prior years. The unfunded actuarially accrued liabilities for these funds were approximately $9.6 million for police and $10 million for fire. In the annual reports issued by the Arkansas Pension Review Board neither the fire nor police pension fund were adjudged actuarially sound pursuant to established financial tests. Again, this actuarial valuation was performed before the current year (2009). The appropriate local oversight pension boards have been notified of these facts and have been currently examining the situation and reviewing possible options. The primary option considered was that of reducing current benefits. However, the pension boards have been advised that there is no specific enabling legislation to reduce benefits and that legal issues might prevent that option .Although the City has no direct obligation to fund these pension plans; other than a .4 mill dedicated levy for each, plus state insurance turn back and certain dedicated fees, the status of these plans need to be carefully monitored. Revenues: Employee Contributions Employer Contributions State Insurance Tax Local Millage (.4 mills) Interest and Dividends Gain (Loss) on Sales Future Supplement Misc Revenue Total Revenue Expenditures Regular Monthly Benefits Future Supplement Drop Expense Investment Manager Fees Other Expenses: Audit Fees Professional Services Legal Fees Bank Fees Publications and Dues Travel and Training Total Expenses $ Net Income (Loss) Before Market Adj $ Market Adjustment Net Income (Loss) $ 12/31/2009 125,710.67 485,345.06 179,204.26 84,355.52 24,192.00 389.74 2008 $ 1,356.43 $ 2,712.85 $ 146,031.32 $ 441,696.50 $ 265,704.47 $ (728,656.78) $ 31,333.44 $ 0.96 899,197.25 $ 160,179.19 Fire Pension Fund Revenue Expense Summary 2007 6,987.00 13,973.00 150,067.00 388,877.00 292,444.00 421,630.00 38,917.00 1,044.00 1,313,939.00 1,434,487.32 $ 1,436,083.26 $ 1,430,646.00 24,192.00 $ 31,333.44 $ 38,766.00 2,973.17 $ 43,816.86 $ 125,419.00 53,323.12 $ 67,758.33 $ 76,454.00 42.00 3,500.00 $ 3,500.00 $ 3,500.00 207.54 $ 228.60 $ 150.00 $ 2,548.88 1,518,725.15 $ 1,585,419.37 (619,527.90) $ (619,527.90) $ $ 205.00 $ 150.00 $ 1,675,140.00 (1,425,240.18) $ (967,119.37) $ (2,392,359.55) $ 2006 $ 11,863.00 $ 25,852.00 $ 151,560.00 $ 370,649.00 $ 311,217.00 $ 383,393.00 $ 27,060.00 $ 541.00 $ 1,282,135.00 2005 $ 23,439.00 $ 46,878.00 $ 225,492.00 $ 339,416.00 $ 308,578.00 $ 297,771.00 $ 24,480.00 $ 176.00 $ 1,266,230.00 1,281,954.00 $ 26,749.00 $ 238,801.00 $ 78,764.00 $ 3,300.00 2,200.00 1,025.00 202.00 150.00 3,462.00 2004 $ 25,393.00 $ 53,730.00 $ 185,445.00 $ 295,409.00 $ 328,158.00 $ 466,221.00 $ 16,661.00 $ 121.00 $ 1,371,138.00 1,097,427.00 $ 24,390.00 $ 398,082.00 $ 84,005.00 $ $ 3,210.00 $ 188.00 $ 100.00 $ 2,389.00 $ 1,636,607.00 $ (354,472.00) $ 280,562.00 $ (73,910.00) $ (361,201.00) $ 3,621.71 $ (357,579.29) $ 1,609,791.00 1,005,154.00 16,349.00 431,817.00 86,515.00 $ 3,700.00 $ 129.00 $ 100.00 $ 1,543,764.00 (172,626.00) (79,916.00) (252,542.00) (343,561.00) $ (378,645.00) $ (722,206.00) $ Book Value Total Reserve Assets * $ Market Value Total Reserve Assets * *Assets less any liabilities ** Market Value calculated at year end 5,441,627.54 $ 6,061,155.44 $ 5,759,825.37 $ 5,823,183.74 $ 7,486,396.00 $ 8,215,544.00 $ 1/27/2010 K:\Fire Pension\Revenue & Expense Summary\Fire Pension Summary 123109.xls tl 7,847,597.00 $ 8,202,070.00 $ 8,573,123.00 $ 8,647,034.00 $ 8,545,630.00 9,369,238.00 TheLongerView COMMENTSAND OUTLOOKS FROM LONGER INVESTMENTS INCORPORATED January 8, 2010 What a year that was! Thankfully, it ended as a good year, althoughit felt as if we were peering into the abyss in Marcwhen the market bit bottom at 6470 (DowJones Industrial Average) and 667 (S&P 500). rom those lows, the market rallied (up 63% on the DMA and up 68% on the S&P 500) so that for the year the DJIA performance was 22.6% and the S&P 500 retumed 26.4% (both including dividends). Bond interest rates rose in the last quarter of the year, even while the Federal Reserve held short-term Fed fund rates at 0.0% to 0.25%. As a result, perfor- mance in bonds was negative year -over -year. The 10 -year Treasury bond return was a negative 8.4%. Price declines on the bond itself (bond prices decline when interest rates rise) offset the interest income earned, so the total return was negative. Federal Reserve Policy The Fed continued its accommodative stance throughout 2009, holding short-term interest rates near zero. However, rates along the yield curve rose in the longer maturities as prospects for economic growth improved and the market began to anticipate rising inflation (see Table A). This produced a steepening of the yield curve (see Chart 1). The difference between the 10 -year and two-year security interest rates increased to a historically significant high: 2.7%. TableA U.S. Treasury Yield Curve Maturity 12131/08 06/30/09 12/31/09 Fed Funds 0-0.25% 0-0.25% 0-0.25% Two -Year 0.76% 1.11% 1.14% Five -Year 1.54% 2.55% 2.68% 10 -Year 2.24% 3.53% 3.84% 30 -Year 2.69% 4.33% 4.64% Chart1 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% U.S. Treasury Historical Yield Curve 2yr Syr Syr 10yr 30yr �-12131/08 —.-06/30.09—e-12/31A9 The Fed will probably remain cautious and refrain from raising short-term interest rates until the eco- nomic recovery gets traction and employment numbers improve. Because of the depth and severity of the current recession, the Fed may maintain its current stance longer than it usually does in an economic contraction. However, lithe dollar's decline in value relative to the euro and yen accelerates, or if inflation expectations pick up, the Fed may be forced to raise rates sooner to stabilize the currency and bond markets. For several months, the Fed was actively buying the 10 -year Treasury. This quantitative easing was intended to keep interest rates low to support the nascent housing recovery. Thirty-year mortgage rates track 10 -year Treasury rates. So if 10 -year Treasury rates rise due to market forces, it will have a negative effect on both the housing recovery and the economic recovery. In fact, since the Fed tapered back its purchases of the 10 -year Treasury m November, 30 -year mortgage rates rose from 4.71% to 5.14%at year-end (a 9% increase in the cost of financing a house). Although the Fed has exited the market for Treasuries, it is still buying mortgage-backed securi- ties. It has targeted the end of March as the date when it will cease its active purchasing of mortgage debt. This may well be a major factor m the markets in 2010, as the Fed discontinues some of the interven- tions it made during the economic crisis and allows the markets to take over the setting of rates on the long end of the interest rate curve. The markets will be sensitive to the Fed's exit plan and the implementa- tion of that plan. Our strategy for fixed-income portfolios remains what we articulated in the July 1, 2009, newsletter. Specifically: • emphasizing high-quality debt (investment-grade corporate and municipal debt, government agency debt, and Treasury debt) and • maintaining a moderately conservative maturity stmcture to minlmi7e price risk if longer -tens Treasury yields rise. This strategy has allowed us to maintain an attractive income yield on the fixed-income portfolios we manage while controlling duration (maturity) risk and credit -quality risk. Equity Market From the high in October 2007 to the low in March 2009, the stock market declined 58%, as measured by the S&P 500. From that low we have seen an impressive 68% rally. The year closed with a gain of 26%. Even so, the stock market closed 2009 with the worst decade of performance in more than a century (see Chart 2 on page 2). Chart2 8.8% z." Annual Return By Decade 13.3% -02% flooded the banking system with liquidity and moved the cost of -money (the Fed funds rate) to zero. The combined monetary and 19.3% V.9% fiscal stimulus halted the stock market's decline. The improvement in the market over the ensuing months helped to restore confidence and provide a foundat on for 8.0% economic growth to resume, 8.3 albeit haltingly. By the third I 8.6% quarter of the year, GDP owth turned positive 2.2%). Expectations are for ourth-quarter GDP growth of 3.5% to 4.0%, and for 2010 growth between 2.0% and 3.5°/9. Even so, the growth has not been strong enough or persistent enough to encourage corporate America to rehire its laid -off workers. The unemployment rate, a lagging economic indicator, remains near 10%. The true unemployment figure — which would include the unemployed, the underem- ployed (those who have taken pan-timeobs or returned to school), and the discouraged unemployed (those unemployed who have quit looking for jobs) v— is closer to 1p8%. It is possible that we may see a positive number — 25,000 to 50,000 new jobs cre- ated— sometime in the first quarter of the year. However, it will take months of new -job growth consistently above 250,000 to move unemployment down to 8% or 9% — still a high rate. Unemployment is expected to remain high throughout 2010. If it stays high, it will keep a lid on consumer spending and economic growth. What has been negative for Main Street America (job layoffs) has been positive for corporate America's profitability. Productivity improvements have sur- prised to the upside (companies are making more goods with fewer employees), pushing profits higher even while sales growth remained sluggish. As a result, the valuation on the market did not reach a level out of line with historical references, since earnings improvement kept up with market improvement. Earnings per share on the S&P 500 are projected to be $74 in 2010 (an increase of 20% over 2009 earnings), placing the price/earnings multiple on the market at 15, m line with the long-tenn average. With an overhang of troubled real estate (both commercial and residen- tial), and sub -4% yields on taxable Treasury bonds, attractive alternatives to equity ownership are few. We expect more modest gains m 2010 than those achieved in 2009, but equities still appear to be the financial asset of choice as we enter the new year. 16.6% Ii 93.9% 1630. 18406 1850* 1860, 1870, 18801 18900 19000 1910* 19205 1930s 1840, 19506 10809 19700 19806 1990s 80000 Source: Yale International Center for Finance database of the New York Stock Exchange and Ibbotson The market's rally off the lows of March is depicted in Chart 3 below. This shows the decline from the October 2007 high to the March 2009 low as well as the ensuing rally, which has now recouped 50% of the decline. Chart 3 A 50% Retracement in 50% of the Time (DJIA Daily) 11'69 11809 Source: The Elliott Wave Theorist 11/23/09 13) 6000 or doegbatiala Ile yet., AO frtt » Teal AO 'r oa The advance in March was sparked by a massive fiscal stimulus plan. Initiatives such as TARP (the Troubled Asset Relief Program), the stimulus program, and the multiple bailouts (General Motors, GMAC, Chrysler, the banks, AIG, Bear Stearns, etc.) were augmented by an easy Fed monetary policy. Those actions Where Do We Go From Here? The financial system has been rescued from the collapse that seemed imminent in March. In 2008, the financial system was like a patient in the emergency room. The treatment interventions — TARP; the AIG, Fannie Mae, Freddie Mac bailouts; the financial takeovers of Bear Stearns and Merrill Lynch — were meant to stabilize the patient and avert collapse. In 2009, we moved the patient to the intensive care unit — still on life support and monitors, but out of imminent danger. In 2010, we will need to move the patient to a hospital bed and let him breathe on his own, free of government subsidies and liquidity support. The transition may be bumpy, but it is necessary. Continued government support at the levels seen in the past 12 months will not be taken positively by the foreign currency and international bond markets. There are signs in just this past week's newspa- per headlines, that this transition may face problems. California is seeking federal government hel as it faces a $21 billion shortfall through June 2011.pState and local government tax revenues continue their decline. General Motors Acceptance Corp. (GMAC) was given another $3.8 billion on top of the $12.5 billion already transferred from taxpayers to GMAC earlier in 2009. The caps on Fannie Mae and Freddie Mac support of $200 billion (each) were lifted, which suggests that more support will be needed. TARP was extended to September 2010. We still see weekly bank closures. We enter 2010 facing a headwind certainly. We all know that 2010 is a big year on the political calendar, with highly charged congressional elections looming in November. We expect the government and the Federal Reserve to remain as accommodative as the markets will allow them to be. But the recent strength in gold, the uptick in 10 -year bond rates, and the weakness of the dollar will keep policy makers on a short leash (as far as international markets are con- cerned) for additional stimulus. The international markets do matter because the United States will probably need to issue $2.5 trillion in debt in 2010 (see Chart 4). We are beholden to foreign investors and to foreign central banks (China's= in particular) that continue to buy our debt. This is the high-stakes drama for 2010: How much additional support (in fiscal and monetary stimulus) can the intemational markets tolerate without causing the value of the dollar to decline, bond interest rates to spike, or gold to soar? Will our actions so far be enough to keep the eco- nomic growth going? Will growth be strong enough to bring unemployment down? Before November? Will there be policy missteps along the way? Chart 4 Tidal Wave Total amount of gross issuance for Treasury notes and bonds, in trillions 2004 2005 2008 2007 2008 Source: Wall Street Journal, 1/2110 2009 $2.5 $2.0 51.5 '$1.0 50.5 2010 50.0 There are many unanswered questions remaining as we close this profitable year. Growth resumed, profitablity was impressive, and earnings improved. We expect 2010 to deliver a continuation of these trends although risks to our optimistic outlook are still of concern. We would be remiss if we did not mention the "worry list." • Government policy missteps could occur. Given that 2010 is a highly charged election year and that high unemployment persists, we can't rule out government intervention that might overstep the lime and create turmoil in the international bond, currency, and commodity markets. • Sovereign debt problems could worsen. With Dubai's default on debt and the downgrade of Greece's credit rating, 2010 could be the year of rising sovereign debt problems. Five countries in Europe, called the PIIGS, for short—Portugal, Ireland, Italy, Greece and Spain— are already well in excess of the 3% euro currency debt -to -GDP lint. Greece is now approaching 13% (as is the United States, by the way). We can expect more negative news about the other PUGS and the United Kingdom as 2010 progresses. Policy responses by these countries and the stronger euro countries (Germany, in particular) will be important to markets in the new year. • Protectionism is still a danger. We have already seen isolated instances of protectionist policies. As yet, there is not an overall trade -threatening trend, but it bears watching. • Regulation, taxation, and government interven- tion and involvement in the economy and private sector are on the rise. Whether the real economy can resume a strong rate of growth (sufficient to reduce unemployment) under the weight of government is still an open question (see Chart 5). Private sector employment has suffered while government employ- ment has boomed. Chart 5 Source: businessweek.com, 7/1/09 • Geopolitical risk and the war on terrorism present a clear and present danger. We were reminded of this threat again on Christmas Day, by an attempted airline bombing. Terror dangers move on and off the radar screens of investors. LONGER INVESTMENTS INCORPORATED • State and local governments' budgets are still suffering. Public demands increase while unemploy- ment remains high and tax revenues remain low. Downgrades of state and municipal debt may become a more prominent focus in 2010. • Health care legislation, cap -and -trade legisla- tion, and card check legislation are still on the table. Any one of these of these bills can create a drag on economic growth and job creation if passed in its current form. We watch legislative progress daily because it has become a key risk factor for the markets. Strategy In fixed-income portfolios, we are conservatively postured, both in maturity structure and in credit quality. At this point, we are without exposure to real estate investment trusts (REITs). We traded on a good bounce off the bottom last year. Currently, REIT prices do not present a good retum/risk profile, so we remain on the sidelines. In international equities, we have reduced our exposure to emerging markets. We are more defen- sively postured in Japan, the other Asian economies, and Europe. For equity portfolios, we have also moved to a more defensive posture. We harvested gains where stocks moved to or exceeded our valuation parameters. We are emphasizing dividend income, believing that in 2010 dividend returns will be a greater percentage of total return in stock portfolios than they were in 2009. For instance, in 2009 when price appreciation was so dramatic dividend income accounted for only about 10% of the total return in stocks. We anticipate a more modest equity return in 2010, though we still expect stocks to outperform other financial assets. A divi- dend yield of 3.0% to 3.5% may represent half of the total return for stocks as an asset class in 2010. We have increased the dividend yield in our stock portfo- lios by emphasizing large -cap multinational firms that pay a steady dividend. We are diversified among asset classes, geo- graphic economies, economic sectors and industries, and individual stocks. We are not making any big bets, preferring to win the game by hitting singles. There are too many risks still in the system to step up to the plate and swing for the fences. The world is still in flux, and the variables can change rapidly. We seek to balance risk and return over a long- term investment horizon, as we execute decisions in markets that trade and respond to news at Internet speed. The worst thing investors can do in this environment is to lose sight of the Tong -term goal. Just as importantly, it is critical that investors do not become entrenched or locked into a position, unwilling to adapt tothe changed environment in which we invest. This is not your father's (or grandfather's) market. We monitor all the markets — international, equity, and fixed-income — and adhere to valuation processes and procedures that have served us well over time. To check ourselves, we overlay technical analysis (the study of charts and trading patterns) to alert us to downside risk in the securities we hold. And, we monitor any changes that could affect our decision models and valuation criteria as they occur. Little is certam as we enter 2010. We are pleased by the recovery achieved in 2009, and we look forward —guardedly — to continued progress in 2010. Personal Note We at Longer Investments will celebrate our 25th anniversary in 2010. I have many people to thank for the success we have achieved — my family, for their support and their understanding of my love for this business; our clients who have trusted us with so much throughout the years; my staff, whose knowledge and commitment support us in delivering the services we offer; and many mentors, elders and friends in the business who continue to share ideas, to educate, and to inspire along the way. This has not been a one -woman show. I feel blessed to have been able to start a business with $5,000 and to have enjoyed long employment in a profession I love. It continues to fascinate me. We appreciate all of you and strive to honor your faith m us daily as we manage the assets you have entrusted to our stewardship. We wish all of you a joyous, healthy, and prosperous new year. The Information provided herein Is illustrative only. It should not be construed as a formal recommen- dation by Longer Investments Inc. 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 P.O. Box 1269 • Fayetteville, Arkansas 72702 Tlephone: 479-44.3-5851 •Toil free: 800-827-7710 • Fax: 479-443-7129 • E-mail: itzfo@longerinv.com Web site: wnwlongerinecan LONGER INVESTMENTS INCORPORATED A Registered Investment Advisor January 9, 2010 Ms. Sondra Smith City of Fayetteville Fire Pension & Relief Fund 113 W. Mountain Fayetteville, Arkansas 72701 Dear Sondra: RECEIVED JAN 12 2010 CITY OF FAYETTEVILLE CITY CLERKS OFFICE Enclosed you will find the 2009 fourth-quarter reports for the Fayetteville Fire Pension and Relief Fund account. These reports include a portfolio appraisal and a summary of realized gains/losses and income/expenses. Detailed reports of realized gains/losses and income/expenses are included at the back of the report package. As instructed, the account at Northern Trust will be billed for the management fee. Last year was a tumultuous year, but it was, in the end, very profitable as you will see from the performance listed below. In fact, the portfolio has fully recovered from the decline that began on September 30, 2008. We enter 2010 cautiously optimistic. The accompanying newsletter, The Longer View, looks at 2009 activity in the stock and bond markets and reviews our strategy for the new year in greater detail. Performance for 2009 is detailed below. Performance is quoted net of all fees and expenses. City of Fayetteville Fire Pension & Relief Fund Domestic Foreign Fixed Total Equities Funds Income REITs Account 29.1% 23.7% 3.5% 17.1% In comparison, 2009 performance of the market indices is listed below: S&P 500 (cash basis) 23.5% S&P (with reinvested dividends) 26.4% Dow Jones Industrial Average (cash basis) 18.8% Dow Jones Industrial Average (with reinvested dividends) 22.6% P.O. Box 1269 Fayetteville, Arkansas 72702 Telephone: 479-443-5851 Toll free: 800-827-7710 Fax: 479-443-7129 Web site: wwwlongennvcom 16.3% Ms. Sondra Smith January 9, 2010 Page Two We appreciate the opportunity to assist with the management of the Fayetteville Fire Pension and Relief Fund's assets. Please do not hesitate to call if you have any questions or comments, or if we can be of further service. Best wishes for a happy, healthy new year. Sincerely, EML/kmc Enclosures City of Fayetteville Fire Pension and Relief Fund U/A Dated 06-18-86 FOURTH QUARTER REPORTS December 31, 2009 LONGER INVESTMENTS INCORPORATED A Registered Investment Advisor