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2014-04-17 - Agendas - Final
Fayetteville Policeman's Pension and Relief Fund Meeting Date �,y ,-/ % -/ Adjourn Time `t • vZ j RM Me " .. Subject: It •r Motion To: sdxk 0, Motion By: Motion By: Seconded: Seconded: Jerry Friend Jerry Friend John Brown John Brown Frank Johnson ✓ Mayor Jordan Mayor Jordan Eldon Roberts ✓ Sondra Smith ✓ Melvin Stanley Melvin Stanley`✓ Subject: It •r Motion To: sdxk 0, Motion By: Motion By: Seconded: Seconded: �{obtnt Jerry Friend +/ John Brown ✓ Frank Johnson ✓ Mayor Jordan Eldon Roberts Eldon Roberts ✓ Sondra Smith Melvin Stanley`® Melvin Stanley`✓ 2" Subject: At&, -h P� 8 Motion To: sdxk 0, Motion By: Jo{ r) SOn �P Seconded: lZOb Jerry Friend ✓ John Brown ✓ Frank Johnson ✓ Mayor Jordan v Eldon Roberts ✓ Sondra Smith ✓ Melvin Stanley`® ✓ Subject: Leann Motion To: sdxk 0, Motion By: Jo{ r) SOn �P Seconded: lZOb Jerry Friend John Brown ✓ Frank Johnson ✓ Mayor Jordan �✓ Eldon Roberts ✓ Sondra Smith ✓ Melvin Stanle ✓ row Meeting Date Adjourn Time Attendees: Fayetteville Policeman's Pension and Relief Fund q -i1 -i,1 J%Wjl� Subject: r��a�¢�- Roi/w 0 Motion To: Motion By: Seconded: Jerry Friend ✓ John Brown ✓ Frank Johnson w' Mayor Jordan Eldon Roberts I t. '- Sondra Smith ✓ Melvin Stanley Subject: Motion To: Motion By: Seconded: Jerry Friend John Brown Frank Johnson Mayor Jordan Eldon Roberts Sondra Smith Melvin Stanley M Subject: Motion To: Motion By: Seconded: Jerry Friend John Brown Frank Johnson Mayor Jordan Eldon Roberts Sondra Smith Melvin Stanley Subject: Motion To: Motion By: Seconded: Jerry Friend John Brown Frank Johnson Mayor Jordan Eldon Roberts Sondra Smith Melvin Stanley Lioneld Jordan Chairman Sondra E. Smith Treasurer Eldon Roberts Secretary/Retired Position I Policemen's Pension and Relief Fund Board of Trustees Meeting Agenda April 17, 2014 Jerry Friend Retired Position 2 John Brown Retired Position 3 Melvin Stanley Retired Position 4 Frank Johnson Retired Position 5 A meeting of the Fayetteville Policemen's Pension and Relief Fund Board of Trustees will be held on April 17, 2014 at 3:00 PM in Room 326 of the City Administration Building located at 113 West Mountain Street, Fayetteville, Arkansas. Roll Call Minutes: 1. January 16, 2014 meeting minutes Pension List Changes: 1. None Approval of the Pension List: 1. Approval of the May, June and July 2014 pension lists Unfinished Business: 1. City Attorney memo regarding parking fines New Business: 1. Revenue & expense report: 1st Quarter— March 31, 2014 report 2. Actuarial Valuation State Code 24-11-205 3. Rick Hoyt additional benefit 4. Arkansas Local Police & Fire Retirement System (LOPFI) Consolidation with LOPFI letter dated January, 2014 5. "At Risk" letter from PRB — Action plan needed Longer Investments: 1. Longer Investment Advisor Agreement 2013 2. Longer Investments 111 Quarter report March 31, 2014 3. Longer Investments monthly report RFQ 14-06 Police Pension, Financial Advisor Trustee Services 1. Andrea Foren email 02/27/14 Informational: • 2014 Meeting schedule July 17, 2014 October 16, 2014 Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes January 16, 2014 Page 1 of 19 Lioneld Jordan Chairman Jerry Friend Retired Position 2 Sondra E. Smith Treasurer John Brown Retired Position 3 Eldon Roberts Secretary/Retired Position 1 Melvin Stanley Retired Position 4 Frank Johnson Retired Position 5 Fayve le ARKANSAS Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes January 16, 2014 A meeting of the Fayetteville Policemen's Pension and Relief Fund Board of Trustees was held on January 16, 2014 at 3:00 PM in Room 326 of the City Administration Building located at 113 West Mountain Street, Fayetteville, Arkansas. Mayor Jordan called the meeting to order. PRESENT: Frank Johnson, Eldon Roberts, Jerry Friend, John Brown, Kit Williams, City Attorney, Sondra Smith, City Clerk, Dee McCoy, City Clerk's office, Blake Pennington, City Attorney's office, Trish Leach, City Accounting Office, Elaine Longer and Kim Cooper, Longer Investments. ABSENT: Melvin Stanley Sondra Smith: Melvin told us that he had already planned a trip out of town so he would not be able to be here today. Kit Williams, City Attorney: If I could, I want to introduce everyone to the Assistant City Attorney, Blake Pennington. He might eventually have to occasionally sit in here for me. Approval of the Minutes: Approval of the October 17, 2013 meeting minutes Jerry Friend moved to approve the October 17, 2013 meeting minutes. John Brown seconded the motion. The minutes were approved in a unanimous vote. Pension List Changes: None Approval of the Pension List: Approval of the February, March and April 2014 pension lists Eldon Roberts moved to approve the February, March and April 2014 pension lists. Jerry Friend seconded the motion. The motion passed with a unanimous vote. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes January 16, 2014 Page 2 of 19 Unfinished Business: Fayetteville District Court fines disbursement calculation Sondra Smith: It was brought up at our last meeting about the 10% that we are supposed to collect on fines. Trish was good enough to get that calculation for us. A copy of that calculation is in your packet as to how those fines are received through the District Court and how much comes to us. It's kind of a total calculation of all fines collected and the 10% that comes to the pension fund. Mayor Jordan: What comments do we have on that? Jerry Friend: Thank you. It's good information. I'm going to read through it. Kit Williams: So this $9,299.21, is that what goes to the pension monthly? Sondra Smith: 10%, yes it is. Eldon Roberts: It's the next line, isn't it? It's got a circle around it, number nine. $124,458.34? Sondra Smith: Yes. Eldon Roberts: On our expense list that Trish keeps for us every month the 10% city fines and forfeitures has been putting in about $112,000, last year $125,000 and 2012 $126.000. Kit Williams: This was just for a single month wasn't it? Paul Becker, Finance Director: You are looking a month's disbursement of the courts. Trish Leach: To be honest, this is not a form that I see very often. Actually someone else does this. Dena prepares this from the court. We take this from her. We it sent it to Frank. That form comes to our office and the journal is prepared from that. Sondra Smith: We probably need Dena over here to explain if there are any questions on the form or the distribution or anything like that. Frank Johnson: My only question is was this whether or not this represented all of the fines or penalties that are collected by the city, specifically those related to the parking fines? That was my only question and I didn't think it did. So, that may be just another conversation, but if this reflects all the fines collected by the city then it is what it is. Unless there's some other department over there where fines are collected in the absence of some adjudication that you would have otherwise through the court. Is that a fine or is that a penalty? That's the question I have for you Kit. Paul Becker: They are the fines collected by the court system. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes January 16, 2014 Page 3 of 19 Kit Williams: We probably ought to invite Dena, the court clerk, to come over here and she could probably explain whether everything is included here. I would think it would be. Without her to confirm it I can't really tell you. Paul Becker: The parking fines are a separate issue from the parking system. So they are not a court fine. Frank Johnson: The statute says the fine is collected by the court or the city? Paul Becker: Kit would have to research that. Frank Johnson: I think it would be good to have that. Kit Williams: You want to know what fines are subject to the 10%. Frank Johnson: Yes. Eldon Roberts: Or is specifically the parking fines subject to the 10%. Frank Johnson: If the legislative intent for that statue involved something different than what we're doing right now in terms of collecting parking fines, how do you delineate those because in the end the city is still collecting the fines. If the statue says the court, then there's an answer. If it says the city, I think that's another discussion. Paul Becker: I think logically, for me, when the statue is passed, they were looking at fines associated with police participation. Parking fines are not, they are assessed by the parking division. Frank Johnson: That's a cogitate explanation from someone who manages city finances. It's the attorney who we really want to hear that from. Mayor Jordan: The reason I think Paul may be right on that is because the parking folks write those tickets, not you all. But that's a really good question and I really don't have an answer. Kit Williams: We'll check that out and I'll have an answer. In fact, I'll go ahead and send it out to you, we won't wait until the next meeting. I'll just send it out to you through Sondra. Mayor Jordan: If we need to bring Dena over here, we'll do that. Kit Williams: I'll get enough information from her and Sharon and make sure I understand everything. Jerry Friend: Eldon, when did we quit? We used to write parking tickets. Eldon Roberts: Yeah, we did. Years ago we did. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes January 16, 2014 Page 4 of 19 Kit Williams: We actually got the State Law changed to make sure our people could do that. It was questionable for a while whether a non -police officer could actually write that. We got the state law clarified so that we could do that because we felt like it was not a very good use of our police officers' time to write parking tickets. Mayor Jordan: Now they can't write tickets in private lots. Kit Williams: There are few tickets they probably still can write, but not the meters. You're not meter personnel. New Business: Revenue and Expense Report: 4th Quarter -December 31, 2013 report Sondra Smith: This is the report that we get from accounting each quarter. It shows your net income, your book value, your market value of your plan. It shows an overall picture of your plan from several years to current. It shows, as of December 31St, your book value is $6,682,459.70 and your market value is $7,443,057.63. Kit Williams: That is a decline in market value of $240,000.00 from the previous year. You are still on the decline even though you had a good market year last year. The stocks went way up and with that the pension funds still went down. 2013 Local Pension Fund Report to the City Council Mayor Jordan: There's a letter in your packet that I read to the City Council. Sondra Smith: According to the state statute during the first meeting of the City Council, which is the first meeting in January of each year, the Mayor is required to give a report on the old pension plans to the council. This is the report that he gave in open session to the City Council at the first meeting in January. If you all ever choose to come to one of those meetings, you are welcome to come to them. Jerry Friend: What was your feedback? Mayor Jordan: I don't think they said anything Kit Williams: It's kind of like more of the same as the last many years, the Mayor has been concerned and letting the council know that, in fact, there are problems. Sondra Smith: You can also watch that City Council meeting if you so choose on accessfayetteville.org. Go to city meetings online videos and that City Council meeting is there. You can listen to and read the report and if there were any comments you could listen to the comments, if you choose to do that. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes January 16, 2014 Page 5 of 19 Mayor Jordan: I don't believe there was any comments. Kit Williams: There was a little bit of a discussion, I remember. Sondra Smith: Kit made some comments. Mayor Jordan: I was just talking about the council. Frank Johnson: No discussion, like any inherent risk to the City's credit rating or anything we've talked about in the past? Kit Williams: I did say that, at this point in time, the way the law is right now, my belief and my opinion is that the City is not liable for this. That state law could change in the future and the City could become liable. Frank Johnson: Is there a time you think, your honor, that discussion would take place as an agenda item? This was the State of the City. Kit Williams: No, it's a separate report by the Mayor. Mayor Jordan: We had one in 2010, if you remember, where we had a special meeting with the council and the pension boards. They had the charts and they showed you all sort of skimming along and the Fire Department Pension fund just sort of tanking since that time they have gone below the $5 million mark. Kit Williams: The Fire Pension Plan is continuing to lose ground fairly rapidly. Frank Johnson: What does this say here, ruin? Kit Williams: Risk of ruin. Yes, that means that they've run out of money. Mayor Jordan: It's just a matter of time. Both funds are insolvent. Paul Becker: Most of this is statics coming out of the actuarial reports. Mayor Jordan: There's just simply more going out than coming in. Paul Becker: They're not actuarially sound. Frank Johnson: Is there a pension fund in the country that is sound? There probably isn't. Paul Becker: Sure there are. There are a few. There really are not a lot that are actually funded 100%. The ones who are sound are probably more unsound than sound. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes January 16, 2014 Page 6 of 19 Pension Review Board 2014 estimated Premium tax allocation letter Sondra Smith: That's your turn back. That's estimated allocation for your turn back for 2014. Eldon Roberts: The cover page of this in the second paragraph says "The letter will inform your local police pension board of trustees of the estimated amount of the additional allocations." Are they talking about in addition to our premium tax we always get or are they talking about the premium tax? Sondra Smith: How many years ago Paul, two or three years ago they did an additional tax for funds that weren't doing as well as other funds. Paul Becker: The additional premium tax was talked about two years ago down at the Pension Review Board. Eldon Roberts: Are there some stipulations tied to that before you can even apply for it? Sondra Smith: You don't even apply for it. Eldon Roberts: I don't think we can because you have never had to ever raise benefits and you had to be earning a full mill or half mill of property tax. Paul Becker: At one time it was like that but that was changed again to they would have an additional premium tax based on the condition of the fund. Sondra Smith: That's the 10% they're talking about and they are estimating. It's an estimate that for our fund in 2014 you should get an additional $40,137 in that extra money that they are giving to funds that are not sound. Add it on to the amount you normally get. Fire Pension would get more than you guys. Eldon Roberts: What we've been earning from the state insurance tax, last year was $142,000, the year before $138,000 and in 2011 was $205.000. We would be at about $160,000 if this is the way it comes out this time. It'll be a little better than 2013 maybe. We'll take it. Sondra Smith: Last year the additional allocation for Police was $24,000. They are expecting just a little bit more than last year. At the last meeting, we talked a little about the budget that I do for you guys. There was a question about whether we pay for the actuary report that we get every year. Trish sent an e-mail about that yesterday to find out if we are paying for that or if the Pension Review Board (PRB) is paying for that out of state funds. Eldon Roberts: I thought they were supposed to do that. Kit Williams: You only pay for special ones. Policemen's Pension and Relief Fund Board of Trustees Mectiig Minutes January 16, 2014 Page 7 of 19 Eldon Roberts: That's what they pay those actuaries for and keep them under state contract. I know in times past that was paid through the PRB. Sondra Smith: I'm budgeting like $3,500 for an audit. Trish explained to me that is for the City of Fayetteville audit, because they are having to audit our pension funds too. Last year, it was about $3,400 so the $3,500 I'm budgeting out of your fund is for the actual audit of the city books because they include the pension funds in that audit. It's a prorated share of the audit costs that the funds are charged. Kit Williams: I want to call your attention to the bolded language at the very bottom of the first page where it said the additional allocation last year was reduced by 37% through a shortfall. What they are predicting might actually be reduced if they don't get enough taxes in on their insurance policies. Eldon Roberts: They are getting plenty of money. Paul knows from the meetings we go to in Little Rock, they received several million more dollars last time around that they found other places for it. Paul Becker: The original allocation was reduced because of the second. Eldon Roberts: I want to say $4 million more came in in the last insurance premium turn back money that came back in to the state. They found a lot of things to do with it without passing it out. Some pension funds got it in a roundabout way, we didn't get any help. Paul Becker: They had to have a redistribution of the premium tax. Part of that was to be distributed based on the need. Frankly, a large share of that went to Little Rock. Eldon Roberts: There's a guy that sits on the pension board that is from the Governor's office that is in charge of finance and administration. I remember hearing them talk about when this additional $4 million came in the state immediately told the actuaries we need this much and you can take what's left of this additional money that has come in and do as you see fit just right off the top. That's just the way it is. Kit Williams: It might have been to the State Police or something. Frank Johnson: What do you mean that's just the way it is? Eldon Roberts: It's Little Rock. Frank Johnson: Is there some legislative guidelines? Eldon Roberts: They get that stuff finalized and passed through law, they sure do. They know they have too. Frank Johnson: Shame on us, maybe we ought to get our legislators here on the carpet and say look let's talk about this. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes January 16, 2014 Page 8 of 19 Eldon Roberts: I can't believe that's not happening already across the State of Arkansas. I can't believe cities are sitting by and just letting this go on because eventually somebody somewhere is going to have to do something. I don't know who. The Municipal League, I can't see them sitting idly by and just letting this go. They represent the cities and the cities make up the state. That'll all come out later down the road later I guess. Frank Johnson: As far as this board is concerned, we have to have some time to do something that's a little more progressive in getting out in front on some things. We aren't going to be able to do that an hour and a half four times a year. Perhaps that's another discussion we need to have, just how we are not more strategic necessary because we can only do so much but just to address some of the issues that you are talking about. Eldon Roberts: It would appear to me that a group of cities getting together could apply enough pressure to get something done. There are so many cities involved, it's not just Fayetteville, Arkansas. There's so many out there that's involved that's in this same predicament that we are in right here in the City of Fayetteville. I just can't believe they don't all get together and unify and try to get some kind of a movement through Little Rock to get money out the state treasury, it's there. The Governor has their own ideas where they want it to go. Paul Becker: They had this crazy premium tax distribution which was based on a distribution that had taken place back in 1998. Many cities and many pension funds were being completely paid for. A lot of this problem was buried. We saw the problem, Little Rock had a problem and there were five or six cities that saw the problem, they were paying attention. They changed the premium tax distribution based on need in a different proportion, now all of a sudden more of these cities are seeing a problem. If you sit there you can hear the discussion where more and more of the old pension funds are concerned and watch this now. If you really want to see how it works in action, anyone who gets a chance, could go down to the PRB meetings quarterly and watches them. There are becoming a lot more people watching it. I think at one point in time, frankly, there were very few cities that attended that PRB meeting. Anybody who would have the opportunity to go down and attend one of those meetings or watch the minutes from it, I would say that it would be time well spent. Eldon Roberts: It's like everybody else, it's not a problem until it's a problem. I've mentioned it before to this board where these meetings are at down there. I'm beginning to see more concern among mayors and city managers through this State of Arkansas about what Paul just said and I think that's a good thing that more and more people at the mayoral level and city manager level are beginning to look at this and say, hey Houston we have a problem. I believe if it was a unified effort put forth by all the cities that somebody would look at it down there. As long as we're fragmented it doesn't carry a lot of water. That's just my take on it. Sondra Smith: The Arkansas Municipal League has a Public Safety Board and they discuss those issue at that Public Safety Board. I've served on that board before. Mayor Jordan: I am about to start serving on that board. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes January 16, 2014 Page 9 of 19 Sondra Smith: The Municipal League does listen to anything about the old plans. Jody Carreiro came and tried to explain how they do the calculations. He couldn't even hardly explain how they did the calculations they're so complicated. There's several people across the whole state that sat on that Public Safety Board. Municipal League does listen to issues that are going on. I think the big focus now is the Arkansas Local Police & Fire Retirement System (LOPFI) because there's not that many old plans. The old plans are going away and a lot of people went to LOPFI so they are more concerned with LOFI then they are anything else and the cost of the LOPFI. Eldon Roberts: Basically you can say the old police and fire pension plans within all the cities in Arkansas it is not costing them anything right now and it may never depending on what the outcome is in court. They are having to pay LOPFI contracts and pay LOFPI pension funds for their fire and police. The old plans, to my knowledge, we're not costing the city a dime right now. Kit Williams: You have the millage and that's the only thing. Eldon Roberts: We don't have any employees working that the city has to match their contributions to the fund because everybody is retired on the old plans. I'd say it's like that all across the whole State of Arkansas fire and police both, because you'd have to be getting pretty old if you are still working on the old plan in any of these. It's not really a problem. It's just come to the front, a slam dunk all of a sudden because the LOPFI plan is costing cities money every month so I'm sure that's what they're paying attention to like you said. We're not costing them anything in any manner other than what Kit said about the property millage. Sondra Smith: LOPFI is going to continue unless they change pension plans for years to come and they know eventually the old plans are going to go away. Mayor Jordan: Why don't we let Elaine Longer give her report and we can come back and discuss this later if you like. Longer Investments: Longer Investments monthly report Elaine Longer, Longer Investments: Happy New Year. The first page is the portfolio appraisal, which you've seen before. Stocks closed the year at about 48% of total equity. The stock component has a 3.8% dividend yield. We've been emphasizing the conservative high dividend blue chip stock and so you still have almost a 4% yield. That compares to a ten year treasury at about 2.8%. The growth component of the portfolio exceeds the ten year yield. If you go to the next category, in 2011 we changed our investment policies to allow us to include on the income side of the portfolio some income growth investments like utility fund, high dividend paying stocks, preferred, master limited partnerships and real estate investment trusts. But still, you have to be conservative in terms of the total allocations of that category because in the event that a 2008 type credit crisis happens, these preform more like stocks than bonds. We Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes January 16, 2014 Page 10 of 19 have about 16% of the portfolio invested in this. The total income yield on this category is 6%, much higher than we can get on bonds. The Guggenheim Fund is largely high dividend paying stocks so with the 8% plus the 47% that's in the stock market, we are over the 50% where we should get approval because technically that Guggenheim Fund does hold stock. Mayor Jordan: So you need some sort of approval on the equity overage? Frank Johnson: What is the equity overage? Elaine Longer: We can be at 50% plus 10 % but I think we ask for approval. Kit Williams: That's right. You need to approve them remaining above 50%. Jerry Friend moved to approve the equity overage. Eldon Roberts seconded the motion. The motion passed with a unanimous vote. Elaine Longer: If you go down to the next category, your fixed income funds are listed below. This is an investment grade bond fund. We wrote about the price sensitivity of bonds with rising interest rates in our October newsletter. The reason that we adjusted investment policies in 2011 is because we were concerned about what bonds would do in the event of rising interest rates. This year, we had a negative return in bonds because the income interest earned was actually offset more than the interest income by the price decline in bonds. This follows years of declining interest rates where bond returns have been income plus capital appreciation. For an example, if you look at this investment grade bond fund your cost is $108. It's currently trading at $114.19. You still have about a 6% unrealized gain in that investment as well as having earned 4% income on it. The year before on 12-31-2012 this fund was trading at $121. You can see that during the year you had a price decline which is really giving back some of that unrealized gain that we had prior to that. That 7% drop in value was offset by 4% income yield, so that's a negative return. I think that helps to explain. We haven't had a negative return in the bond market since 1994. In 1994, we had five Federal Reserve interest rate increases. This year we didn't have any Federal rate increases, but just a hint of tapering. The quantitative easing program has caused a lot of turmoil in the bond market and caused the ten year yields to go from about a 1.6% in April to closing the year at 3%. Kit Williams: Didn't the Federal Reserve say they still want to try to keep interest rates basically at 0%? Elaine Longer: Yes. They can control the short term rates and they are going to keep that at 0%. At least until unemployment falls below 6.5%. Then they will appraise, their data dependent is what they're saying. They don't want to tie it to a calendar but they want to tie it to the data, which is unemployment and whether or not inflation stays subdued. On the next page, you'll see the treasury bonds. Here's another example, you have a treasury bond that's 5 1/8 that matures in 2016. Its price today is $110.8. We paid $100 for it. You still have a 10.8% appreciation in it and all the while that you bond it it's been earning 5.1%. It closed the year at $115.62, so you can see it's had a decline of a little bit under 5%. But, it has a Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes January 16, 2014 Page 11 of 19 5% coupon so that bond return is probably close to par, or zero this year. The next one is the 4% treasury that we paid $103.76 for that matures in 2018. At the time we purchased them, they were a ten year treasury, now they are a five year treasury. They've declined in price this year from $117.50 to current price of $110.90. Again, this is a 4% treasury, we can't approach anything close to that in the market, and it is not as if you can trade in and out of these. But that explains what the negative return is in the bond market. Price declines this year, in response to rising rates, have taken back some of that unrealized gain that was due to declining rates. The next bond that you have is the 6 1/8 Federal Farm Credit. This one has declined in price but because of the 6 1/8 coupon the total return on that bond year to date is about 3%. Then we have gold at just 1.9% of total portfolio, cash is 1.7%, and another income asset that we've incorporated into the portfolio on a conservative level of 2.6% of total is a Master Limited Partnership Exchange Traded Fund that holds energy partnerships. The income yield on this part of the portfolio is 6.2%. You can see it's so different from seven years ago where you could buy government agencies and treasuries and get good income yield you kind of have to go all over the place to get income into the portfolio and incorporate a number of different types of asset classes, but at the same time not betting the ranch on any one. The total portfolio is worth $7.4 million and has a growth component that's close to 60% when you include all of the parts that have growth plus income. The income yield is 4.2% on total portfolio. The next report shows your realized gain and total income; under $29,000 in realized gains and $193,000 in income. The next page shows the bond portfolio by itself. What you have in the bond portfolio is a weighted average maturity of about 3.9 years and weighted average yield to maturity of 4.4%. In the current five year, the five year yield is 1.75%. You have slightly less maturity than the current five year, but you're still earning 4.4%. The table below shows that all of your bond holdings mature within five years. Even though the fixed income part of your portfolio demonstrated a negative total return year to date, you're still in a great position to be able to capitalize on rising interest rates because of the face that you have short term. Anything that's under five years of maturity is cash to a trader. You don't have to hold the bond to maturity to reinvest it. It's a good structure for your fixed income side of your portfolio even though those high coupons treasuries and agencies still had a negative total return because of rising rates. If you look at the next page it shows your returns inception to date and it shows this year equity return was about 15%. The fixed income component was down 3.2%. That compares to the ten year treasury being down 7.7%. You're conservative price structure or maturity structure in your bonds limited the down side to 3.2%. The other income assets that we hold, those funds that have utility stocks, Preferred Build America Bond, the Guggenheim Fund, that delivered a 16.5% return so that the total return was 6.2% year to date. This is a year unlike 1999, or 2000, 2001, and 2002; in those years, stocks were negative but the bond supported the value of the portfolio so that the total hit to the portfolio wasn't that substantial. But in a year like this, bonds actually take away from the equity performance in the portfolio. The compound annual return inception to date is 6.1% after all expenses. On the column to the right, you'll see what the actuary return assumptions were for the portfolio inception to date. You can see that for a long time the actuary return hurdle rate was 6%, in 2008 it went up to 7%, and then it went back down to 5% so the Policemen's Pension aid Relief Fund Bound of Trustees Meeting Minutes January 16, 2014 Page 12 of 19 weighted average hurdle rate for the actuary return assumption for inception to date has been 5.91 % and the portfolio has a return of 6.1 % compounded. Kit Williams: These actuarial assumptions are the ones that were given to us by PRB? Elaine Longer: Yes. Kit Williams: They really had a great call in 2008 didn't they? Elaine Longer: There's a term, the sentiment indicators, always run contrary to where the markets are. For instance, in 2009 at the bottom of the market, the percent of institutional money managers who were bullish or optimistic was down to 9%. It was hard to find anybody who was optimistic, and of course that's where the market bottomed. Contrary to that, prior to the 2008 decline, the bullish sentiment was up around 55% to 60%. Currently, we are at 56%, that's a bit of a red flag in terms of the market after such a big year because you have the parry hats out and you have the bullish sentiment indicative of where it was in 2007, 1999 and 1987. Those are the three time periods that the bullish sentiment had strongly been to the side of optimism. It is an interesting phenomenon, the market is composed of humans who have emotions. It's not always just about math. The next page shows your contributions to the portfolio for the year and the distributions. The distributions have totaled $699,000. The important thing about that number is that as a percent of beginning value on 12-31-2012 it was about 9.4% of total portfolio value. Even though the portfolio has accomplished the return objective in the policy, the distributions are exceeding portfolio return. If you go to the next page, you'll see the inception to date numbers, this is called a reconciliation. The beginning value in 1990 was $1.3 million. You can see the additions that came in during the time frame while we've been managing money totaled about another $7.8 million. The total distributions over that entire time period from 1990 have been $10.23 million. The total investment return has been $8.47 million. It's interesting that even though the actuary return assumption that is behind this plan has been met and then some over that entire time period, the distributions still exceed the net investment return. The next page is my hardest report to deliver. We are asking to resign as investment manager for the City of Fayetteville Police Pension. There are a number of reasons mostly it's just that the direction of our business growth is more in the area of serving the high net worth individual investor and define contribution plans which are profit sharing, 401K and foundations. This is our only public pension plan and I feel that with the increase regulations that we are all dealing with and with the way our business growth is going it's best to offer our resignation. It's a very tough call because you came in in 1990. I think our firm was only 4 t/2 years old and I don't know how many millions we had under management but I'm sure it took a leap of faith to trust a small firm to even be a participant in a pension plan. We really do appreciate all the time that we've spent and been able to work in partnership with this committee and with the public pension funds and the city. It's very hard to offer our resignation but I do believe that going Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes January 16, 2014 Page 13 of 19 forward that this pension plan will be better served by a firm that has more resources to bring to the table to help you deal with what you'll be looking at in the next five years. Eldon Roberts: Do we get to vote on this? How does that contract read, can either side break the contract? Kit Williams: I think we've got them for 20 years and then they can get out. Elaine Longer: Well we did 24. I was hoping we could make it to 25. We are happy to offer a 90 day period to look for another money manager. If 90 days doesn't work we will extend it to June 30'x'. We don't want to put anybody into any kind of uncomfortable situation. Kit Williams: They'll have to go through a regular search committee. Mayor Jordan: Just like we did with the Fire Pension. Elaine Longer: We'll just continue to manage the way that we manage and nothing much will change unless the market conditions change and then again we would respond with as if we were still completely on deck. Eldon Roberts: Fair enough. Once someone else is selected, and I know you had to do this with the Fire Department, how big of a problem is it to move everything? This happens fairly easily? Elaine Longer: Very easily. Kit Williams: What we'll probably need to do is have a special meeting once we've been able to send out a request for qualifications or proposals and then when we get them in we'll probably have the entire board be the selection committee for that and provide you copies of their proposals. It'll probably be a two-step process depending on how many applicants we get. If we get a number of applicants it'll be a two-step process where you'll rate the top two or three and then you very well might want to interview the top two or three before you make your final selection. Eldon Roberts: I've been through this time and time again, and Jerry has. I think the other people on the board missed all that, so get ready. What are we required to do, being a public entity? We've got to take quotes, see who's got the best deal. I might not want to go with the guy that's got the best deal. Sondra Smith: It's request for qualifications. Kit Williams: You're looking for someone that's going to be very qualified and it'll be up to you all, the board itself, to rate them and their experience and previous work. A lot of the discretion is totally within this board about who they would be hiring as their new financial advisor. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes January 16,2014 Page 14 of 19 Mayor Jordan: I can tell you how it went with the Fire Department because I was involved in that. They sent us a great big stack of all these folks and we went through them. We sat down as a group and picked out three that we interviewed. It took us two to three meetings. Sondra Smith: We work with purchasing. Purchasing really helped us. Andrea in purchasing was a life saver on that. She sent out an invitation for a request for proposals and then once that goes out people will seA in their information and then we start having the meetings. I will get with purchasing tomorrow and start working with Andrea on getting something put together and then we will have to schedule some special meetings. Eldon Roberts: Who is the Fire Department using now? Paul Becker: Garrison. Eldon Roberts: And they are here? Kit Williams: Yes, they are on Dickson Street. Frank Johnson: I have a general idea of what the process is, but who vets these candidates. Sondra Smith: We do, the board. Frank Johnson: They can say they are registered and all this other good stuff, but as a measure of success if we are looking to sustain what we've accomplished with Elaine. Eldon Roberts: I know where you are going and you're right, who are we to understand how well they manage money. Paul Becker: What we did for the Fire Department is what Lioneld said. You're not necessarily required to go through the same selection process that the City does because you are an independent board. However, we'd be happy to offer purchasing. Purchasing will go out and do an advertisement and submit the documents to you and you can review them and make a selection from that. That should all be presented in the answer to the request for proposal. Yes, you would be the ones who would evaluate them and you have to make the final selection. Eldon Roberts: Is it a fair question to ask you if the Fire Department and the guy they are using, are they doing as good of a job in your opinion as they could do. Paul Becker: Yes. Sondra Smith: Yes. Kit Williams: But you can't hold them to the standard of Elaine. Eldon Roberts: I understand that. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes January 16, 2014 Page 15 of 19 Frank Johnson: Ask Elaine that same question. Eldon Roberts: Yes Elaine. Do you know this firm? Elaine Longer: They are a good firm. Eldon Roberts: They've got restrictions there that they wouldn't have with us because the Fire Department is under $5 million. Mayor Jordan: You might want somebody entirely different. I'm good with that. I'm just telling you what we did. Frank Johnson: That's great. It would be nice to have, instead of the process, some professional input almost like a consultant. I know it would be totally inappropriate to ask Elaine right now who she would recommend. Elaine Longer: I don't know the legalities involved but I'm happy to sit down with you and take a look at it. Eldon Roberts: I was glad to hear what Paul said and what you said. Jerry has been on this board nearly as long as I have and you other two guys are kind of new but we've been out to those big people time and time again and the way I phrase it is we've never had a good taste in our mouth anytime we left some of those name branders, Meryl Lynch, AG Edwards. My play on words to that is we are too small of a fish in their big pond. They just kind of overlook us and throw us in and lump us in. We don't get the personal touch and we might with someone locally here. I'm not a big advocate of those big firms. We've tried them time and time again. They will promise you the moon, if we pick out three people and they come in here they'll all promise you everything there is to promise you about how good they are. Elaine Longer: I know that Springdale Police went with Arvest. You probably have contacts with them to see if they are satisfied. Paul Becker: The City, prior to me being here, used Garrison for an investment firm. We were required to have governmental bonds under five years. Garrison did it for us and at that time did a good job. We went out for proposal and received a request from several of the banks, one was Arvest. We also received proposals from First Security Bank and Garrison. When we went and advertised and did an RFQ for the City's management we did get these local banks and they did give a good presentation. Eldon Roberts: Who is the City with? Paul Becker: Right now we are with First Security. Kit Williams: That's not stocks at all. It's a different situation. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes January 16, 2014 Page 16 of 19 Paul Becker: They all handle investments in general. The proposers we looked at were Stevens, who has a good reputation in Arkansas. You can look at First Security who had a good presentation and very good track record Garrison and Arvest Bank. What I would recommend to you that you start the process. There's nothing saying that if you're not comfortable with one of them you can't step back and do it again. Certainly you would get some proposals from some local firms if that is what you would like to do. That choice is yours. Sondra Smith: That's what I would recommend, that we go through the process just like the City goes through it. I think it's a fair process and I think it has more accountability. Kit Williams: You'll see what's going on and be able to do a good job. Mayor Jordan: You really will. You'll be surprised. Of course it was their retirement but I was there and I have a vote but I wanted to be sure that they were okay with it. Eldon Roberts: Do we need to tell purchasing we want these local people or do they put one out and it goes to everybody in the world? Sondra Smith: It goes to everybody and you narrow your selection down. Paul Becker: We'll do an advertisement. Kit Williams: Sometimes it's a two -prong too where they know there are certain entities that do this and they'll send them out. They are already on the list and then they'll advertisement it so anybody else can apply. Paul Becker: We'll send it to people you know and see what they propose. For your own benefit you'll want to advertise. You want to open it up for advertisement. We're skilled at doing that. Eldon Roberts: Elaine, what's your fee right now? What's the percentage of portfolio? Elaine Longer: We have an investment policy in here. Eldon Roberts: You all deal with these people all the time, more so than we do. We deal with Elaine and you all deal with these people with the City's money so we appreciate your input on all this because you've got a working knowledge of these folks. What percentage? Elaine Longer: It's not in the investment policy it's in the contract which we don't have here. But it's staggered, so it's less than 1%. I don't know exactly what the percentage is. Sondra Smith: I have a copy of the contract. Jerry Friend: Sondra, when purchasing puts out that notice, there is a cut off time? Sondra Smith: There is a deadline. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes January 16, 2014 Page 17 of 19 Jerry Friend: That way as soon as that cut off time comes we can start. Paul Becker: What will happen is we'll put something together and send it to you. There will be a day for them to respond. First you'll look at the proposal and see if you want anything else in it. Then we will give them a period of time that they must respond in. You will want to set up the interviews. Then you can look at what you've received. It's up to you, you can interview. Kit Williams: We hope to be able to do it maybe within 90 but it may be longer. Eldon Roberts: It'll probably be the furthest date you've got there. It'll probably be the end of June. Kit Williams: We will start the ball going though. Frank Johnson: Sondra, do you have, from when this was done with the Fire Department, the list of criteria? Kit Williams: We'll provide all that to you. Sondra Smith: I'll get with Andrea tomorrow and then you'll be getting e-mails from me. I think I've got everyone's e-mail except for Eldon. I don't know how you want me to get the information to you Eldon. Eldon Roberts: Can you mail it? Sondra Smith: I can mail it to you. Some of it, if you're working here, I may just call you and ask you to come pick it up. Some of it may be thick. Eldon Roberts: I have e-mail with the Police Department but I only work two days a week and I don't get it checked that often. I don't mind to come by and pick it up, just call me on my cell like you do about other business that comes up. Sondra Smith: I'm sorry, I have another appointment I have to be at. Do you have any other questions for me? Frank Johnson: Will all the beneficiaries be notified? Sondra Smith: We can discuss that, if you want us to notify them we can notify them. You just tell us what you want us to do. Frank Johnson: It's been such a long term relationship. Sondra Smith: I suggest that we have another special meeting as soon as we can get things pulled together. If you want us to send a letter before then we can. Jerry Friend: I don't think we need too. She's still going to be handling it for a while. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes January 16, 2014 Page 18 of 19 Sondra Smith: Like I said, we'll have to schedule some special meetings and I'll try to get with everybody's schedule. Usually when it happens it's quick. Mayor Jordan: Yeah, it moves right along. Once we start, it moves along. I'll call some special meetings. If you don't like it, we'll back it up and do it again. Sondra Smith: It'll take Andrea a little bit of time to pull it all together. Elaine Longer: There are lots of money managers out there and we will help you any way that we can. We really appreciate everything. Sondra Smith: We really appreciate you too, you've done an excellent job. Eldon Roberts: I guess I don't realize we're the only public fund you handle. Everything else is private. Jerry Friend: We have different rules. Eldon Roberts: You have to play different ball for us only, so I can understand. You've done very well for us. Jerry Friend: But you'll come back and give a report next meeting? Elaine Longer: Yes. Once you're on our newsletter list you never get off completely unless you tell us to take you off. Eldon Roberts: I didn't find any humor, and little funny one-liners in this one this time Elaine Longer: No it wasn't very humorous. Every day when I sit in my chair I'm just so thankful that people trust us to do what we do. We went through 2008 with total chaos. I tell people it was like a patient came into the emergency room with triage, they went off to ICU and you look around and there's blood and guts all over the walls. It was just so sloppy but people stayed with us and trusted us. That's such a tremendous honor in this business to be trusted and to be able to operate in such a very important position with people. Thank you for that. We're just truly honored to be a part of what we've been able to be a part of for 24 years. Jerry Friend: It doesn't seem like it's been that long Elaine Longer: No it doesn't. Eldon Roberts: 1990? Elaine Longer: I don't know, all I know is I was in my 30's. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes January 16, 2014 Page 19 of 19 Eldon Roberts: I believe Kim was your only employee. Am I right? When we came over there and visited with you upstairs on Center Street, I think it was you and Kim, that's it. Elaine Longer: A long time it was Kim and me and a student intern. Without the intemet, which was really fun. Well thank you. We'll help any way we can. Eldon Roberts: Thank you Kim, Elaine. Thank you guys. We might be wanting to talk to you about the potential candidates. We are going to value your opinion very much as we do the Mayor and Paul's. Elaine Longer: I'm happy to help. There's different layers of money management expertise. There's the brokerage layer, there's the money manager layer, there's money managers who have more public funds. When you start getting a list down there's different layers of experience and expertise in that list that I would be happy to help you decipher. Eldon Roberts: Thank you, that's great. Longer Investments 4th Ouarter report December 31,2013: A copy was given to the Board Longer View January 9, 2014: A copy was given to the Board Jerry Friend moved to adjourn the meeting. Adjournment: 4:06. p.m. POLICE PENSION FUND May 2014 Month 5 5 EMP# NAME 154 ALLEN, CHARLES 206 BAYLES, BOBBI J 216 BLACK, MILDRED 147 BRADLEY, GERALD 139 BRADLEY, RANDALL 167 BROWN, JOHN 157 CARROLL,RONALD L 151 COLE, RUSTON 160 DUGGER,GARY 140 FOSTER, BILLY D. 148 FRIEND, JERRY 161 HANNA, JANICE 145 HANNA, MARK 169 HELDER, TIM 180 HOYT, RICK 146 HUTCHENS, BERNICE 194 JOHNSON, FRANK 215 JOHNSON, JOYCE 103 JOHNSON, WENDELL 118 JONES, BOB 211 JONES, MICHELE 144 KILGORE, DONALD 218 MARTIN, CONNIE 128 MCCAWLEY, LARRY 136 MITCHELL, MICHAEL 141 MUELLER, ROSEMARY 158 MUNSON,ANGELA 112 MURPHY, JAKE 137 PERDUE, LARRY 164 PERSHALL, ROBIN 132 PHILLIPS, HOMER GENE 199 PRESTON, NORMA J 135 RICKMAN, LOREN 214 RIGGINS, BONNIE 183 ROBERTS, ELDON 183 ROBERTS, ELDON Plus 25 add pay 212 ROBERTS, CAROLYN K 212 ROBERTS, CAROLYN K Plus 25 add pay 159 SCHUSTER,JOHN H. 168 STANLEY, MELVIN 155 STOUT, BETTY 133 SURLES, JERRY 142 TAYLOR, DENNIS 163 WATSON, RICHARD 163 Watson, Richard Plus 25 Add'I Pay 149 WILLIAMS, JOYCE 195 WITT, BETTY J 213 WOOD, RUTHIE 5 5 5 5 6800-9800 6800-9800 Regular Mo 5335-00 5335-05 Benefit YTD Reg Benefit Suppl. YTD Suppl. $ 2,584.64 $ 12,923.20 $ 50.00 $ 250.00 $ 1,587.41 $ 7,937.05 $ 50.00 $ 250.00 $ 1,125.64 $ 5,628.20 $ 50.00 $ 250.00 $ 4,820.09 $ 24,100.45 $ 50.00 $ 250.00 $ 2,860.17 $ 14,300.85 $ 50.00 $ 250.00 $ 4,362.01 $ 21,810.05 $ 50.00 $ 250.00 $ 2,106.04 $ 10,530.20 $ 50.00 $ 250.00 $ 3,065.74 $ 15,328.70 $ 50.00 $ 250.00 $ 3,163.74 $ 15,818.70 $ 50.00 $ 250.00 $ 3,207.35 $ 16,036.75 $ 50.00 $ 250.00 $ 1,970.42 $ 9,852.10 $ 50.00 $ 250.00 $ 1,368.59 $ 6,842.95 $ - $ - $ 1,368.59 $ 6,842.95 $ 50.00 $ 250.00 $ 5,838.12 $ 29,190.60 $ 50.00 $ 250.00 $ 7,460.01 $ 37,300.05 $ 50.00 $ 250.00 $ 1,825.54 $ 9,127.70 $ 50.00 $ 250.00 $ 7,974.81 $ 39,874.05 $ 50.00 $ 250.00 $ 2,455.50 $ 12,277.50 $ 50.00 $ 250.00 $ 783.15 $ 3,915.75 $ 50.00 $ 250.00 $ 3,300.45 $ 16,502.25 $ 50.00 $ 250.00 $ 1,182.26 $ 5,911.30 $ 2,046.48 $ 10,232.40 $ 50.00 $ 250.00 $ 3,692.85 $ 18,464.25 $ 50.00 $ 50.00 $ 1,694.79 $ 8,473.95 $ 50.00 $ 250.00 $ 2,305.29 $ 11,526.45 $ 50.00 $ 250.00 $ 2,063.93 $ 10,319.65 $ 50.00 $ 250.00 $ 4,198.15 $ 20,990.75 $ 50.00 $ 250.00 $ 405.75 $ 2,028.75 $ 50.00 $ 250.00 $ 2,322.67 $ 11,613.35 $ 50.00 $ 250.00 $ 1,525.07 $ 7,625.35 $ - $ - $ 1,754.44 $ 8,772.20 $ 50.00 $ 250.00 $ 1,601.37 $ 8,006.85 $ 50.00 $ 250.00 $ 2,231.07 $ 11,155.35 $ 50.00 $ 250.00 $ 1,669.37 $ 8,346.85 $ 50.00 $ 250.00 $ 4,263.24 $ 21,316.20 $ 50.00 $ 250.00 $ 587.09 $ 2,935.45 $ - $ - $ 3,216.13 $ 16,080.65 $ - $ 442.89 $ 2,214.45 $ - $ 3,117.36 $ 15,586.80 $ 50.00 $ 250.00 $ 4,880.07 $ 24,400.35 $ 50.00 $ 250.00 $ 866.51 $ 4,332.55 $ 50.00 $ 250.00 $ 2,721.40 $ 13,607.00 $ 50.00 $ 250.00 $ 2,063.93 $ 10,319.65 $ 50.00 $ 250.00 $ 6,947.05 $ 34,735.25 $ 50.00 $ 250.00 $ 948.76 $ 4,743.80 $ - $ - $ 2,539.66 $ 12,698.30 $ 50.00 $ 250.00 $ 1,766.83 $ 8,834.15 $ 50.00 $ 250.00 $ 1,580.93 $ 7,904.65 $ 50.00 $ 250.00 $ 127,863.35 $ 639,316.75 $2,050.00 $ 10,050.00 POLICE PENSION FUND 6 6 6 6 June 2014 6800-9800 6800-9800 Month 6 Regular Mo 5335-00 5335-05 6 EMP# NAME Benefit YTD Reg Benefit Suppl. YTD Suppl. 154 ALLEN, CHARLES $ 2,584.64 $ 15,507.84 $ 50.00 $ 300.00 206 BAYLES, BOBBI J $ 1,587.41 $ 9,524.46 $ 50.00 $ 300.00 216 BLACK, MILDRED $ 1,125.64 $ 6,753.84 $ 50.00 $ 300.00 147 BRADLEY, GERALD $ 4,820.09 $ 28,920.54 $ 50.00 $ 300.00 139 BRADLEY, RANDALL $ 2,860.17 $ 17,161.02 $ 50.00 $ 300.00 167 BROWN, JOHN $ 4,362.01 $ 26,172.06 $ 50.00 $ 300.00 157 CARROLL,RONALD L $ 2,106.04 $ 12,636.24 $ 50.00 $ 300.00 151 COLE, RUSTON $ 3,065.74 $ 18,394.44 $ 50.00 $ 300.00 160 DUGGER,GARY $ 3,163.74 $ 18,982.44 $ 50.00 $ 300.00 140 FOSTER, BILLY D. $ 3,207.35 $ 19,244.10 $ 50.00 $ 300.00 148 FRIEND, JERRY $ 1,970.42 $ 11,822.52 $ 50.00 $ 300.00 161 HANNA, JANICE $ 1,368.59 $ 8,211.54 $ - $ - 145 HANNA, MARK $ 1,368.59 $ 8,211.54 $ 50.00 $ 300.00 169 HELDER, TIM $ 5,838.12 $ 35,028.72 $ 50.00 $ 300.00 180 HOYT, RICK $ 7,460.01 $ 44,760.06 $ 50.00 $ 300.00 146 HUTCHENS, BERNICE $ 1,825.54 $ 10,953.24 $ 50.00 $ 300.00 194 JOHNSON, FRANK $ 7,974.81 $ 47,848.86 $ 50.00 $ 300.00 215 JOHNSON, JOYCE $ 2,455.50 $ 14,733.00 $ 50.00 $ 300.00 103 JOHNSON, WENDELL $ 783.15 $ 4,698.90 $ 50.00 $ 300.00 118 JONES, BOB $ 3,300.45 $ 19,802.70 $ 50.00 $ 300.00 211 JONES, MICHELE $ 1,182.26 $ 7,093.56 144 KILGORE, DONALD $ 2,046.48 $ 12,278.88 $ 50.00 $ 300.00 218 MARTIN, CONNIE $ 3,692.85 $ 22,157.10 $ 50.00 $ 50.00 128 MCCAWLEY, LARRY $ 1,694.79 $ 10,168.74 $ 50.00 $ 300.00 136 MITCHELL, MICHAEL $ 2,305.29 $ 13,831.74 $ 50.00 $ 300.00 141 MUELLER, ROSEMARY $ 2,063.93 $ 12,383.58 $ 50.00 $ 300.00 158 MUNSON,ANGELA $ 4,198.15 $ 25,188.90 $ 50.00 $ 300.00 112 MURPHY, JAKE $ 405.75 $ 2,434.50 $ 50.00 $ 300.00 137 PERDUE, LARRY $ 2,322.67 $ 13,936.02 $ 50.00 $ 300.00 164 PERSHALL, ROBIN $ 1,525.07 $ 9,150.42 $ - $ - 132 PHILLIPS, HOMER GENE $ 1,754.44 $ 10,526.64 $ 50.00 $ 300.00 199 PRESTON, NORMAJ $ 1,601.37 $ 9,608.22 $ 50.00 $ 300.00 135 RICKMAN, LOREN $ 2,231.07 $ 13,386.42 $ 50.00 $ 300.00 214 RIGGINS, BONNIE $ 1,669.37 $ 10,016.22 $ 50.00 $ 300.00 183 ROBERTS, ELDON $ 4,263.24 $ 25,579.44 $ 50.00 $ 300.00 183 ROBERTS, ELDON Plus 25 add pay $ 587.09 $ 3,522.54 $ - $ - 212 ROBERTS, CAROLYN K $ 3,216.13 $ 19,296.78 $ - 212 ROBERTS, CAROLYN K Plus 25 add pay $ 442.89 $ 2,657.34 $ - 159 SCHUSTER,JOHN H. $ 3,117.36 $ 18,704.16 $ 50.00 $ 300.00 168 STANLEY, MELVIN $ 4,880.07 $ 29,280.42 $ 50.00 $ 300.00 155 STOUT, BETTY $ 866.51 $ 5,199.06 $ 50.00 $ 300.00 133 SURLES, JERRY $ 2,721.40 $ 16,328.40 $ 50.00 $ 300.00 142 TAYLOR, DENNIS $ 2,063.93 $ 12,383.58 $ 50.00 $ 300.00 163 WATSON, RICHARD $ 6,947.05 $ 41,682.30 $ 50.00 $ 300.00 163 Watson, Richard Plus 25 Add'I Pay $ 948.76 $ 5,692.56 $ - $ - 149 WILLIAMS, JOYCE $ 2,539.66 $ 15,237.96 $ 50.00 $ 300.00 195 WITT, BETTY J $ 1,766.83 $ 10,600.98 $ 50.00 $ 300.00 213 WOOD, RUTHIE $ 1,580.93 $ 9,485.58 $ 50.00 $ 300.00 $ 127,863.35 $ 767,180.10 $2,050.00 $ 12,050.00 POLICE PENSION FUND July 2014 Month 7 7 EMP# NAME 154 ALLEN, CHARLES 206 BAYLES, BOBBI J 216 BLACK, MILDRED 147 BRADLEY, GERALD 139 BRADLEY, RANDALL 167 BROWN, JOHN 157 CARROLL,RONALD L 151 COLE, RUSTON 160 DUGGER,GARY 140 FOSTER, BILLY D. 148 FRIEND, JERRY 161 HANNA, JANICE 145 HANNA, MARK 169 HELDER, TIM 180 HOYT, RICK 180 HOYT, RICK Plus 25 add pay 146 HUTCHENS, BERNICE 194 JOHNSON, FRANK 215 JOHNSON, JOYCE 103 JOHNSON, WENDELL 118 JONES, BOB 211 JONES, MICHELE 144 KILGORE, DONALD 218 MARTIN, CONNIE 128 MCCAWLEY, LARRY 136 MITCHELL, MICHAEL 141 MUELLER, ROSEMARY 158 MUNSON,ANGELA 112 MURPHY, JAKE 137 PERDUE, LARRY 164 PERSHALL, ROBIN 132 PHILLIPS, HOMER GENE 199 PRESTON, NORMA J 135 RICKMAN, LOREN 214 RIGGINS, BONNIE 183 ROBERTS, ELDON 183 ROBERTS, ELDON Plus 25 add pay 212 ROBERTS, CAROLYN K 212 ROBERTS, CAROLYN K Plus 25 add pay 159 SCHUSTER,JOHN H. 168 STANLEY, MELVIN 155 STOUT, BETTY 133 SURLES, JERRY 142 TAYLOR, DENNIS 163 WATSON, RICHARD 163 Watson, Richard Plus 25 Add'I Pay 149 WILLIAMS, JOYCE 195 WITT, BETTY J 213 WOOD, RUTHIE 7 7 7 7 1 6800-9800 6800-9800 Regular Mo 5335-00 5335-05 Benefit YTD Reg Benefit Suppl. YTD Suppl. $ 2,584.64 $ 18,092.48 $ 50.00 $ 350.00 $ 1,587.41 $ 11,111.87 $ 50.00 $ 350.00 $ 1,125.64 $ 7,879.48 $ 50.00 $ 350.00 $ 4,820.09 $ 33,740.63 $ 50.00 $ 350.00 $ 2,860.17 $ 20,021.19 $ 50.00 $ 350.00 $ 4,362.01 $ 30,534.07 $ 50.00 $ 350.00 $ 2,106.04 $ 14,742.28 $ 50.00 $ 350.00 $ 3,065.74 $ 21,460.18 $ 50.00 $ 350.00 $ 3,163.74 $ 22,146.18 $ 50.00 $ 350.00 $ 3,207.35 $ 22,451.45 $ 50.00 $ 350.00 $ 1,970.42 $ 13,792.94 $ 50.00 $ 350.00 $ 1,368.59 $ 9,580.13 $ - $ - $ 1,368.59 $ 9,580.13 $ 50.00 $ 350.00 $ 5,838.12 $ 40,866.84 $ 50.00 $ 350.00 $ 7,460.01 $ 52,220.07 $ 50.00 $ 350.00 $ 89.40 $ 89.40 $ 1,825.54 $ 12,778.78 $ 50.00 $ 350.00 $ 7,974.81 $ 55,823.67 $ 50.00 $ 350.00 $ 2,455.50 $ 17,188.50 $ 50.00 $ 350.00 $ 783.15 $ 5,482.05 $ 50.00 $ 350.00 $ 3,300.45 $ 23,103.15 $ 50.00 $ 350.00 $ 1,182.26 $ 8,275.82 $ 2,046.48 $ 14,325.36 $ 50.00 $ 350.00 $ 3,692.85 $ 25,849.95 $ 50.00 $ 50.00 $ 1,694.79 $ 11,863.53 $ 50.00 $ 350.00 $ 2,305.29 $ 16,137.03 $ 50.00 $ 350.00 $ 2,063.93 $ 14,447.51 $ 50.00 $ 350.00 $ 4,198.15 $ 29,387.05 $ 50.00 $ 350.00 $ 405.75 $ 2,840.25 $ 50.00 $ 350.00 $ 2,322.67 $ 16,258.69 $ 50.00 $ 350.00 $ 1,525.07 $ 10,675.49 $ - $ - $ 1,754.44 $ 12,281.08 $ 50.00 $ 350.00 $ 1,601.37 $ 11,209.59 $ 50.00 $ 350.00 $ 2,231.07 $ 15,617.49 $ 50.00 $ 350.00 $ 1,669.37 $ 11,685.59 $ 50.00 $ 350.00 $ 4,263.24 $ 29,842.68 $ 50.00 $ 350.00 $ 587.09 $ 4,109.63 $ - $ - $ 3,216.13 $ 22,512.91 $ - $ 442.89 $ 3,100.23 $ - $ 3,117.36 $ 21,821.52 $ 50.00 $ 350.00 $ 4,880.07 $ 34,160.49 $ 50.00 $ 350.00 $ 866.51 $ 6,065.57 $ 50.00 $ 350.00 $ 2,721.40 $ 19,049.80 $ 50.00 $ 350.00 $ 2,063.93 $ 14,447.51 $ 50.00 $ 350.00 $ 6,947.05 $ 48,629.35 $ 50.00 $ 350.00 $ 948.76 $ 6,641.32 $ - $ - $ 2,539.66 $ 17,777.62 $ 50.00 $ 350.00 $ 1,766.83 $ 12,367.81 $ 50.00 $ 350.00 $ 1,580.93 $ 11,066.51 $ 50.00 $ 350.00 $ 127,952.75 $ 895,132.85 $2,050.00 $ 14,050.00 Smith, Sondra From: Sent: To: Cc: Subject: Categories: Sondra, Frank Johnson <Frank.Johnson@wal-mart.com> Saturday, January 18, 2014 11:02 AM Smith, Sondra Branson, Lisa; Brown, John; Broyles, Lana; Cooper, Kim; Eads, Gail; Friend, Jerry; Frank Johnson; Johnson, Kimberly; Jordan, Lioneld; Marr, Don; McCoy, Dee; Pennington, Blake; Roberts, Gina; Smith, Sondra; Stanley, Melvin; Williams, Kit RE: City Attorney Kit Williams regarding parking fines Follow-up Thank you for the quick response. Please include a follow-up discussion on the agenda for our next meeting. I have a general understanding of Kit's response relative to the law but I still need clarity on the difference in parking fines collected by the police department and those collected by the city; e.g. a prohibited parking ticket written by uniformed police officers adjudicated by the court versus the same ticket written by a parking enforcement officer without going through the court. Thanks From: Smith, Sondra [mailto:ssmith@fayetteville-ar.gov] Sent: Friday, January 17, 2014 11:41 PM To: Branson, Lisa; Brown, John; Broyles, Lana; Cooper, Kim; Eads, Gail; Friend, Jerry; Frank Johnson; Johnson, Kimberly; Jordan, Lioneld; Marr, Don; McCoy, Dee; Pennington, Blake; Roberts, Gina; Smith, Sondra; Stanley, Melvin; Williams, Kit Subject: City Attorney Kit Williams regarding parking fines Hello All Attached is a memo from City Attorney Kit Williams regarding parking fines. Have a great day! Office of the City Clerk Treasurer Sondra E. Smith CAMC, CMC City of Fayetteville 113 West Mountain Fayetteville, AR 72701 (479) 575-8323 ssmith@fayetteville-or.gov TDD (Telecommunications Device for the Deaf): (479) 521-1316 This email and any files transmitted with it are confidential and intended solely for the individual or entity to whom they are addressed. If you have received this email in error destroy it immediately. * * * Walmart Confidential *** Departmental Correspondence RKANSA TO: Mayor Jordan City Clerk Sondra Smith Fayetteville Police Pension Board CC: Paul Becker, Finance Director FROM: Kit Williams, City DATE: January 17, 2014 RE: Use of Parking Fine Revenue Kit Williams City Attorney Jason B. Kelley Assistant City Attorney A.C.A. § 24-11-413 Moneys added to fund - Contributions. provides several revenue sources for the Police Pension and Relief Fund including 6% of the monthly salary for non -retired officers. The issue brought up at the Pension Board meeting is whether the parking fine revenue should be included within section (5) "Ten percent (10%) of all fines and forfeitures collected by the police department of the city for violation of ordinances or state law...." The Arkansas Supreme Court has determined the rules on how to interpret state statutes. "The first rule in considering the meaning and effect of a statute is to construe it just as it reads, giving the words their ordinary meaning in common language. We construe the statute so that no word is left void, superfluous, or insignificant; and meaning and effect are given to every word in the statute if possible." Potter v. City of Tontitown, 371 Ark. 200, 209, 264 S.W.3d 473, 480 (2007) (citations omitted, emphasis added), Accord, CitiFinancial Mortgage Co., Inc. v. Matthews 372 Ark. 167, 271 S.W.3d 501, 506 (2008). This statute clearly requires that only those fines or forfeitures "collected by the police department" shall be subject to the 10% contribution for the Police Pension and Relief Fund. Thus, fines collected by the Parking Division are not subject to the 10% contribution allowed by A.C.A. § 24-11-413(5). Parking fines are not commingled with other fine revenues collected by the Police Department. Instead, this parking revenue is segregated into its own account which the City has pledged the net parking revenue to repay the parking revenue bonds. These bonds are paying for the construction of the parking deck. The City cannot legally impair this pledged revenue source for these bonds by contributing them to another purpose. 5 Smith, Sondra From: Waters, Sharon Sent: Sunday, January 19, 2014 8:26 PM To: Williams, Kit, Frank Johnson Cc: Brown, John; Friend, Jerry; Jordan, Lioneld; Marr, Don; Pennington, Blake; Smith, Sondra; Stanley, Melvin; Becker, Paul; Hertweck, Marsha; Tabor, Greg Subject: RE: City Attorney Kit Williams regarding parking fines Frank, Our parking fines are driven by City ordinance and issued by parking management staff to cover the cost of providing parking services in the districts. Our staff only provides parking enforcement services in the Entertainment Parking District and the Downtown Business Parking District as defined in the ordinance. Sharon Waters Parking & Telecommunications Manager City of Fayetteville 113 W. Mountain St. Fayetteville, AR 72701 Ph: 479-575-8280 Fax: 479-575-8250 Email: swaters@favetteville-ar.gov Website: www.accessfavetteville.ore TDD: 479-521-1316 (Telecommunications Device for the Deaf) From: Williams, Kit Sent: Sunday, January 19, 2014 12:03 PM To: Frank Johnson Cc: Brown, John; Friend, Jerry; Jordan, Lioneld; Marr, Don; Pennington, Blake; Smith, Sondra; Stanley, Melvin; Becker, Paul; Hertweck, Marsha; Waters, Sharon Subject: RE: City Attorney Kit Williams regarding parking fines Frank, Thanks for your question. I have forwarded your question and request for clarification to finance, accounting and parking. My answer was predicated upon the vast majority parking tickets issued and collected by the Parking Division, not whatever rare parking ticket that might be occasionally issued by a police officer. I assume we can get that situation clarified promptly. Kit From: Frank Johnson[ma ilto: Fran k.Johnson@wal-mart.com] Sent: Saturday, January 18, 2014 11:02 AM To: Smith, Sondra Cc: Branson, Lisa; Brown, John; Broyles, Lana; Cooper, Kim; Eads, Gail; Friend, Jerry; Frank Johnson; Johnson, Kimberly; Jordan, Lioneld; Marr, Don; McCoy, Dee; Pennington, Blake; Roberts, Gina; Smith, Sondra; Stanley, Melvin; Williams, Kit Subject: RE: City Attorney Kit Williams regarding parking fines Sondra, Thank you for the quick response. Please include a follow-up discussion on the agenda for our next meeting. I have a general understanding of Kit's response relative to the law but I still need clarity on the difference in parking fines collected by the police department and those collected by the city; e.g. a prohibited parking ticket written by uniformed police officers adjudicated by the court versus the same ticket written by a parking enforcement officer without going through the court. Thanks From: Smith, Sondra [mailto:ssmithCabfayetteville-ar.gov] Sent: Friday, January 17, 2014 11:41 PM To: Branson, Lisa; Brown, John; Broyles, Lana; Cooper, Kim; Eads, Gail; Friend, Jerry; Frank Johnson; Johnson, Kimberly; Jordan, Lioneld; Marr, Don; McCoy, Dee; Pennington, Blake; Roberts, Gina; Smith, Sondra; Stanley, Melvin; Williams, Kit Subject: City Attorney Kit Williams regarding parking fines Hello All Attached is a memo from City Attorney Kit Williams regarding parking fines. Have a great day! Office of the City Clerk Treasurer Sondra E. Smith CAMC, CMC City of Fayetteville 113 West Mountain Fayetteville, AR 72701 (479) 575-8323 ssmith @fayetteville-ar. aov TDD (Telecommunications Device for the Deaf): (479) 521-1316 This email and any files transmitted with it are confidential and intended solely for the individual or entity to whom they are addressed. If you have received this email in error destroy it immediately. *** Walmart Confidential *** Police Pension Fund Revenue Expense Summary Book Value Total Reserve Assets ` $ 6,546,751.74 $ 6,682,459.70 $ 7,081,891.04 $ 7,468,021.86 $ 7,785,041.00 $ 7,950,215.00 $ 8,398,199.00 $ 9,880,601.00 $ 10,104,083.00 $ 10,119,990.00 Market Value Total Reserve Assets ` $ 7,253,749.76 $ 7,443,057.63 $ 7,689,491.43 $ 8,168,105.82 $ 8,555,897.00 $ 8,360,804.00 $ 8,046,366.00 $ 10,819,789.00 $ 10,891,53D.OD $ 10,662,465.00 'Assets less any liabilities " Market Value calculated at year end 4/17/2014 C:\Users\ssmithWppData\Local\Microsoft\Windows\Temporary Internet Files\Content.OuBook\CP4W827V\Police Pension Summary 3/31/2014 12/31/2013 2012 2011 2010 2009 2008 2007 2006 2005 Revenues: Employee Contributions $ - $ - $ - $ - $ - $ _ $ 4,139.00 $ 5,193.00 Employer Contributions $ - $ - $ - $ - $ - $ 8,278.00 $ 10,385.00 State Insurance Tax $ 142,151.31 $ 138,410.77 $ 205,694.53 $ 213,357.83 $ 214,429.30 $ 186,429.42 $ 190,192.00 $ 226,826.00 $ 353,271.00 Local Millage (A mills) $ 22,890.45 $ 494,749.58 $ 511,961.22 $ 498,380.57 $ 508,192.07 $ 485,345.06 $ 441,696.50 $ 388,877.00 $ 370,649.00 $ 339,416.00 10% City Fines and Forfeitures $ 29,406.94 $ 112,992.59 $ 125,274.87 $ 126,045.40 $ 130,723.07 $ 123,653.64 $ 131,583.83 $ 106,365.00 $ 119,147.00 $ 126,833.00 Sale of Confiscated Goods $ 427.05 $ 1,698.28 $ 3,491.81 $ 5,026.40 $ 5,487.59 $ 9,732.16 $ 7,715.61 $ 10,806.00 $ 6,343.00 $ 120.00 Interest and Dividends $ 70,190.07 $ 263,480.49 $ 285,514.18 $ 263,520.02 $ 267,714.80 $ 256,907.42 $ 359,998.26 $ 356,699.00 $ 373,776.00 $ 347,752.00 Gain (Loss) on Sales $ 131,138.47 $ 160,066.59 $ 168,286.38 $ 209,001.15 $ 362,318.64 $ 153,193.23 $ (885,460.76) $ 395,378.00 $ 420,298.00 $ 231,691.00 Police Supplement $ 12,600.00 $ 37,800.00 $ 39,900.00 $ 40,500.00 $ 42,000.00 $ 31,200.00 $ 30,000.00 $ 30,000.00 $ 30,300.00 $ 31,275.00 Future Supplement $ 46,620.00 $ 55,575.00 $ 36,450.00 $ 26,061.50 $ 38,350.00 $ 41,370.00 $ 86,040.00 $ 60,060.00 $ 51,199.00 Misc Revenue $ 195.77 $ 53.39 $ 104.60 $ 1,561.27 $ 5,757.99 $ 161.46 $ 907.00 $ 1,126.00 $ 2,401.00 Total Revenue $ 266,654.98 $ 1,259,954.61 $ 1,328,469.62 $ 1,384,722.67 $ 1,557,416.77 $ 1,318,568.80 $ 313,494.32 $ 1,565,284.00 $ 1,620,942.00 $ 1,499,536.00 Expenditures Regular Monthly Benefits $ 383,590.05 $ 1,535,372.30 $ 1,551,087.50 $ 1,564,986.62 $ 1,582,900.00 $ 1,628,521.36 $ 1,638,067.76 $ 1,561,319.00 $ 1,456,466.00 $ 1,362,068.00 Police Supplement $ 6,150.00 $ 24,650.00 $ 25,500.00 $ 26,400.00 $ 27,250.00 $ 29,300.00 $ 30,000.00 $ 30,000.00 $ 29,600.00 $ 29,800.00 Future Supplement $ 45,510.00 $ 51,870.00 $ 35,640.00 $ 24,952.50 $ 36,816.00 $ 41,370.00 $ 86,040.00 $ 60,060.00 $ 48,245.00 Investment Manager Fees $ 16,349.95 $ 66,240.45 $ 69,500.53 $ 71,050.23 $ 70,369.02 $ 68,150.57 $ 62,754.75 $ 87,712.00 $ 86,243.00 $ 86,672.00 Other Expenses: Office Supplies/printing $ 56.81 $ 46.20 $ - $ 84.00 Audit Fees $ 3,400.00 $ 3,600.00 $ 3,500.00 $ 3,500.00 $ 3,500.00 $ 3,500.00 $ 3,500.00 $ 3,300.00 $ 3,210.00 Professional Services $ _ $ 2,000.00 Legal Fees $ - $ 1,025.00 Bank Fees $ 13.80 $ 99.10 $ 89.83 $ 164.48 $ 119.34 $ 181.69 $ 203.21 $ 195.00 $ 156.00 $ 156.00 Total Expenses $ 406,103.80 $ 1,675,328.66 $ 1,701,694.06 $ 1,701,741.33 $ 1,709,090.86 $ 1,766,553.62 $ 1,795,895.72 $ 1,788,766.00 $ 1,636,850.00 $ 1,532,151.00 Net Income (Loss) Before Market Adj "' $ (139,448.82) $ (415,374.05) $ (373,224.44) $ (317,018.66) $ (151,674.09) $ (447,984.82) $ (1,482,401.40) $ (223,482.00) $ (15,908.00) $ (32,615.00) Market Adjustment $ 852,113.26 $ 756,670.42 $ 770,169.29 $ 770,856.91 $ 410,382.51 $ (1,291,031.77) $ 151,740.00 $ 344,973.00 $ (361,860.00) Net Income (Loss) $ (139,448.82) $ 436,739.21 $ 383,445.98 $ 453,150.63 $ 619,182.82 $ (37,602.31) $ (2,773,433.17) $ (71,742.00) $ 329,065.00 $ (394,475.00) Book Value Total Reserve Assets ` $ 6,546,751.74 $ 6,682,459.70 $ 7,081,891.04 $ 7,468,021.86 $ 7,785,041.00 $ 7,950,215.00 $ 8,398,199.00 $ 9,880,601.00 $ 10,104,083.00 $ 10,119,990.00 Market Value Total Reserve Assets ` $ 7,253,749.76 $ 7,443,057.63 $ 7,689,491.43 $ 8,168,105.82 $ 8,555,897.00 $ 8,360,804.00 $ 8,046,366.00 $ 10,819,789.00 $ 10,891,53D.OD $ 10,662,465.00 'Assets less any liabilities " Market Value calculated at year end 4/17/2014 C:\Users\ssmithWppData\Local\Microsoft\Windows\Temporary Internet Files\Content.OuBook\CP4W827V\Police Pension Summary Smith, Sondra From: Sent: To: Cc: Subject: Thank you s000 much. Trish Leach, Trish Tuesday, January 21, 2014 2:32 PM Denise Reed Smith, Sondra; Hertweck, Marsha RE: actuarial reports From: Denise Reed [mailto:sdreed@lopfi-prb.com] Sent: Tuesday, January 21, 20141:14 PM To: Leach, Trish Subject: RE: actuarial reports Trish - You will find the answer to the Board Members questions in A.C.A. §24-11-205. 24-11-205. Actuarial valuation. (a) (1) The Executive Director of the Arkansas Fire and Police Pension Review Board shall cause an actuarial valuation of each plan to be made annually to determine how well the plan is meeting the objectives set forth in § 24-11-204. (2) The actuarial valuation shall be prepared by an actuary under the supervision of the executive director, who shall establish and implement procedures for securing actuarial services: Why. (4) The executive director shall submit one (1) copy of the actuarial study to the local pension board and a summary of the findings to the Joint Committee on Public Retirement and Social Security Programs. Who Pays. (6) The method and amount of the payment shall be made under § 24-11-203. (b) The report of each actuarial valuation shall include at least the following: (1) A summary of the plan benefits evaluated; (2) The level normal cost of plan benefits, expressed as a percent of active employee payroll or, in the case of volunteer fire department pension plans, expressed in dollar amounts, computed in accordance with generally accepted actuarial funding methods which produce a normal cost rate at least as high as the entry age normal cost funding method; (3) The accrued liabilities of the plan, which shall be equal to the present value of all future benefits for present plan participants minus the present value of all future normal cost contributions for present plan participants; (4) The contribution required to amortize unfunded accrued liabilities over a period not to exceed thirty (30) years. Unfunded accrued liabilities shall be equal to the accrued liabilities minus the plan's accrued assets, which are the plan's cash and investments; (5) The employer contribution required to provide for the normal cost of the plan plus the amount required to amortize the unfunded accrued liability of the plan; (6) Assumptions of future experiences which are appropriate for the fund in pursuing the general financial objective established by this subchapter. Assumptions shall be made with respect to at least the following: (A) Investment return; (B) Pay increase assumptions; (C) Mortality; (D) Withdrawal (turnover); (E) Disability; (F) Retirement ages; and (G) Change in active employee group size. If the pay increase assumption is a constant percentage for all active employee ages, the investment return rate percentage shall not exceed the pay increase percentage by more than two percent (20/6) annually, compounded annually, and preferably not by more than one and one-half percent (1.5%). If the pay increase assumptions are the total of a constant percent plus a changing percentage which decreases as age increases, the investment return rate percentage shall not exceed the constant percent of the pay increase assumptions by more than three percent (3%) annually, compounded annually, and preferably not by more than two percent (2%). If the entire employee group size is assumed to increase, the increase shall be assumed to occur within the five-year period after the valuation date, and to an eventual active employee group size no more than one hundred fifteen percent (115%) of present size; (7) Changes in each assumption since the last actuarial valuation shall be noted; and (8) The actuary shall certify that, in his or her opinion, the assumptions used for the valuation produce results which, in the aggregate, are reasonable. HISTORY: Acts 1979, No. 700, § 3; 1981, No. 286, § 3; 1983, No. 512, § 2; 1985, No. 992, § l; A.S.A. 1947, § 19-5703; Acts 1989, No. 374, § l; 2013, No. 41, § 4.. If you need additional information please let me know. Have a good afternoon! Denise wed ,qccountant II Arkansas Loca(ToRrx & Fire 1Pgtirement System 501-682-1745 Tax: 501-682-1751 Search - 1 Result - 24-11-432. Additional benefits for certain officers hired prior to Januar... Page 1 of 2 FOCUSTm Terms Search Within I Original Results (1 - 1) V Go View Full v <'- 1 of 1 L' ,' Return to Results I Book Browse A.C.A. § 24-11-432 (Copy w/ Cite) ....................................................................................................................................................................................................................... A.C.A. § 24-11-432 Arkansas Code of 1987 Annotated Official Edition © 1987-2014 by the State of Arkansas All rights reserved. *** Legislation is current through the 2013 Regular Session and updates *** *** received from the Arkansas Code Revision Commission through *** *** November15, 2013. *** Title 24 Retirement And Pensions Chapter it Local Police And Fire Pension And Relief Funds Subchapter 4 -- Police Pension and Relief Funds -- Cities of the First Class A.C.A. § 24-11-432 (2014) View Tutorial TM 24-11-432. Additional benefits for certain officers hired prior to January 1, 1983. (a) Beginning July 1, 1987, in addition to the monthly pension benefits as set forth in §§ 14- 52-106, 24-11-401 -- 24-11-403,24-11-405 -- 24-11-413, 24-11-416, 24-11-417,24-11-422, 24-11-423, 24-11-425, 24-11-428 -- 24-11-430, 24-11-801 -- 24-11-807, 24-11-809, 24-11- 810, 24-11-813 -- 24-11-815, and 24-11-818 -- 24-11-821, for those police officers hired prior to January 1, 1983, and who continue to work beyond their twenty-fifth year, the member shall receive at age sixty (60) and thereafter a benefit on the amount equal to one and one-fourth percent (1.25%) of final salary attached to the rank which the member may have held in the department preceding the date of retirement multiplied by the number of years of service in excess of twenty-five (25) years up to a maximum total benefit of seventy-five percent (75%) of final salary, provided that the maximum seventy-five percent (75%) of final salary shall no longer apply to benefits payable on April 30, 1993, and thereafter to persons retiring henceforth and to those persons who retired on or after July 1, 1987. (b) This benefit shall be payable to the member only and not to surviving spouses or dependent children. (c) (1) For the purposes of this section, "salary" means recurring pays which are received for a regularly scheduled work week and shall not include, except as otherwise provided in this subsection, payments for unused accrued sick leave or annual leave or the cash value of any nonrecurring or unusual remunerations. (2) The term "salary" may include the payments to those police officers under this section for unused accrued sick leave not to exceed ninety (90) work days recorded on the records of the city or town as of the officer's date of retirement, provided the municipality agrees by ordinance to make adequate contributions to the fund to cover the additional costs for the benefits from the increased salary and the fund is judged by an actuarial determination to be actuarially sound. The board of trustees shall determine the actuarial costs of the payments for the unused accrued sick leave to the fund. HISTORY: Acts 1987, No. 878, § 1; 1993, No. 546, § 2; 1993, No. 872, § 1; 2001, No. 1140, § 1. http://web.lexisnexis.comlresearchlretrieve?_m=19173Od2l4l92bded2a5e l94786530e0&c... 3/20/2014 Search - 1 Result - 24-11-432. Additional benefits for certain officers hired prior to Januar... Page 2 of 2 View Full v z 1 of 1 Return to Results ( Book Browse A.C.A. § 24-11-432 (Copy w/ Cite) Pages: 2 `*` _ About LexisNexis I Privacy Policy I Terms & Conditions I Contact Us �. sNex ' Copyright © 2014 LexisNexis, a division of Reed Elsevier Inc. All rights reserved. http://web.lexisnexis.com/research/retrieve?_m=19173Od2l4l92bded2a5 e l 94786530cO&c... 3/20/2014 Smith, Sondra From: Sent: To: Subject: Attachments: Categories: Leach, Trish Tuesday, April 08, 2014 3:04 PM Smith, Sondra FW: PRB Consolidation 2014 Consolidation Memo .PDF FYI From: Tracy Warfe [mailto:twarfe@lopfi-prb.com] Sent: Tuesday, April 08, 2014 3:01 PM Cc: Denise Collins Subject: PRB Consolidation Good afternoon - Attached is a memo regarding the consolidation of the Local Pension Plan with LOPE. If the Board of Trustees of your Local Pension Plan is interested in consolidation, you will need to begin the process by submitting a request for the actuarial valuation and appropriate fee. The check will need to be made payable to "Gabriel, Roeder, Smith & Co." and mailed to LOPFI. The 2013 Annual Financial Statement has been received by the Pension Review Board (PRB) staff; therefore, you may request an actuarial valuation to determine the initial employer contribution rate to fund benefits for the Local Plan. The valuation will provide an employer rate to implement a 3% compound Cost of Living Adjustment (COLA) for the pension plan members as well as a rate without a COLA. The valuation will take approximately 6 weeks to complete; therefore, it's important to begin the process promptly. The window for a Pension Plan to consolidate with LOPFI is from April 1, 2014 to October 1, 2014. If you have any questions or need any further information, please contact Denise Collins toll free at 866- 859-1745. Have a good afternoon. LOPFI ARKANSAS LOCAL POLICE & FIRE RETIREMENT SYSTEM 620 W. 3rd, Suite 200 Little Rock, Arkansas 72201-2223 Telephone: 501.682.1745 Toll -Free: 866.859.1745 To: Local Fire and Police Pension Funds Fax: 501.682.1751 email: info@lopfi-prb.com From: Arkansas Local Police and Fire Retirement System (LOPFI) website: www.lopfi-prb.com Re: Consolidation of Local Plan Date: January 2014 State law permits a Local Fire or Police Pension Fund (Local Plan) to assign its administration to the Arkansas Local Police and Fire Retirement System (LOPFI). This is only a change in administration. Benefits remain unchanged except for locations that approve the addition of a three percent (3%) compound cost of living adjustment (COLA) for the Local Plan and fire pension funds that have not enacted Act 397 benefits (co -equal spouse benefit.) To Consider Consolidation with LOPFI A Local Plan must request an actuarial valuation to determine the initial employer contribution rate to fund benefits for the Local Plan and LOPFI for the affected department. The valuation will provide an employer contribution rate to implement a 3% compound COLA for the Local Plan and a rate without a COLA. The valuation fee has a base amount of $600 for a Local Plan with fewer than 20 total participants (active and retired) with an additional $20 for each participant up to 100 and $10 for each participant over 120. Make the check payable to "Gabriel, Roeder, Smith, & Co." and mail to LOPFI. The valuation process takes about six (6) weeks to complete and will begin once the request and payment are received. LOPFI will mail the completed valuation to the Local Plan. If the Local Plan chooses to proceed with consolidation, it will pass a resolution asking the governing body (City Council or Board of Directors/Commissioners) to adopt an ordinance authorizing the governing body's presiding officer to sign an irrevocable agreement to consolidate the Local Plan with LOPFI. Upon receipt of the properly executed resolution, ordinance, and agreements the LOPFI Board of Trustees will decide whether to accept administration of the Local Plan. Upon the LOPFI Board's approval, consolidation shall proceed. LOPFI must receive all records and assets prior to the start of LOPFI administration. Should you have questions, please contact either David Clark or Denise Reed. 1690 Osborn Carreiro & Associates Inc. One Union Nationale Capitol Avenue 124 West Capitol Avenue Little Rock, Arkansas 72201 ACTUARIES • CONSULTANTS • ANALYSTS (501)376-8043 fax (501)376-7847 February 14, 2014 RE: Fayetteville Police Pension Fund Ladies and Gentlemen: As you know, the Arkansas Fire and Police Pension Review Board (PRB) took the action December of 2012 of declaring your pension fund "At Risk." This designation is not defined in law—many plans have recently been declared "projected insolvent" as required by state law, and the "at Risk" designation is a proactive attempt to reduce the risk of future funds being declared projected insolvent and to provide the trustees with additional information for planning purposes. Under ACA §24-11-208, the PRB is obligated to provide options to improve plan funding for those plans declared projected insolvent --the goal for this report, completed pursuant to the request of the PRB, is to provide some similar options for your fund. In declaring your fund "At Risk," we created a simplified projection of your fund's benefit payments and income streams derived from the assumptions listed in your December 31, 2011 Actuarial Valuation and the data submitted in your fund's annual financial report. This projection suggested that your fund could run out of money in less than 15 years unless action is taken. Our intent is not to recommend a particular action, but rather to provide a list of available options which decision makers (both at the board and city level) might use to address funding issues. Many of the funds declared projected insolvent have taken steps to address underfunding by utilizing some of the options discussed and no longer cavy the insolvent designation. The PRB would like your board to discuss these options. The discussion should include the fund's members and city leadership. The PRB would then request that you respond with a plan of action. Even if immediate actions appear difficult, the PRB would like you to acknowledge that your local board has taken a serious look at its options and that the membership understands the risks associated with doing nothing. The goal is not to induce panic, but to facilitate proactive planning and discussion of the future benefits of the fund. Please respond with your plan of action by April 30, 2014. If your board would like a more detailed analysis of the issues your plan is facing, the PRB could consider requests for a special report such as those received by projected insolvent funds. Sincerely, Jody Carreiro, ASA, MAAA, EA, FCA Actuary SUMMARY OF RISK INDICATORS In addition to the cover letter, this report contains a Summary of Risk Indicators, a Summary of Possible Actions and Historical Financial Information for the past 10 years. This report should be reviewed together with your most recent actuarial valuation report. The primary Risk Indicators that your plan should review are shown below. Funded Percentage. The actuarial valuation report has a summary on page 10 of the Funded Percentage for the past several years. This is a ratio of the assets of the plan to the total actuarial liabilities. This ratio should be increasing toward 100%. A 100% funded ratio suggests that the plan is projected to have enough money to pay its future benefits with only current assets and investment income. If the ratio is flat or decreasing, this indicates a need for additional revenue. Non -Investment Cash Flow. This is found on line C of the Historical Financial Information. This is the amount of income (other than investment income) less the expenses (mostly benefits). At this stage in the life -cycle of your plan, this number should be negative. If this amount is several times larger than the Net Investment Income (line A.4.), then the plan may need additional non -investment income to support the benefits. Ratio of Assets to Expenses. This is found on line F of the Historical Financial Information. A healthy plan at this point in its life -cycle should have a number of 8 or more. If this amount is decreasing and is less than 8, it indicates that the plan may not be as strong as it should be. Ratio of Assets to Non -Investment Cash Outflow. This is found on line G of the Historical Financial Information. This is a ratio of total assets to the Non -Investment Cash Flow (see above for explanation). The larger this number the better the health of the plan. Typically, one would like for this number to be more than 12. One way to understand this indicator is to look at the reciprocal of this number. For example, if this number is 10, the reciprocal is 1/10 or 10%. This would mean that the plan would have to earn 10% every year or generate additional revenue to maintain its current level of assets if no one dies. Summary of Returns. This is shown on section H of the Historical Financial Information. Section H includes an average return over the 9 years ending December 31, 2012. This long term average return can be compared to the discount assumption used in the actuarial valuation, which is found on page 16 of the actuarial valuation report. If your plan has a discount assumption of 5% and the 9 year average return is 4%, your plan likely saw a reduction in funded percentage over this period of time due to not meeting the assumption. This may require a conversation with the plan's investment advisors to ensure that the plan is meeting their goals and has a plan to maintain a certain amount of growth. SUMMARY OF POSSIBLE ACTIONS AND FUNDING SOURCES Below you will find a summary of possible actions the fund could take to promote future solvency and reduce benefit risk. This should provide the Fayetteville Police Pension Fund with the tools it needs to make important decisions for the future of the Fund. Additional City Contributions. The City could find additional contributions to be made to the Pension Fund to reduce the risk of insolvency. This could be done through general millage/fee allocation, or by going to voters and increasing the dedicated millage funding stream to the statutory maximum of I mill (if your plan has not done so already). Your plan reported a dedicated millage collection of 0.4 mills during the last reporting cycle. Positive. The City significantly reduces the risk of having to pay benefits from general assets. The City also would improve its financial statements by reducing the unfunded liabilities and possibly improve its standing with bond underwriters. Negative. The current economic conditions make it difficult for cities to find any additional money for pension plans. It is also a difficult political challenge in many cities to pass a millage increase to pay for retired service pensions. LOPFI Consolidation. A consolidation would allow the City to use its current income streams of millage and premium tax along with other City funds to pay the unfunded liabilities over a 15 or 25 year period based on the LOPFI assumptions. Positive. After consolidation, the benefits are guaranteed by the LOPFI system. This removes the risk of ruin from the City and the Fund. Also, the City improves its financial statement by removing the unfunded liabilities from the City's financial statement and improves their standing with bond underwriters. Negative. The City must agree to pay whatever the actuarially calculated costs are under LOPFI. The dollar cost of consolidation increases 4% a year before recognition of other gains or losses. This is faster than premium tax and millage are projected to grow. Also, the local board of the Pension Fund is dissolved. There can be benefit improvements (for example, COLAs) in the future, but they would have to come from the City agreeing to pay the actuarially calculated costs under LOPFI. No Chances. The Pension Fund could continue on the same path that it is currently pursuing. Simplified projections have suggested that your fund could run out of money in the next 15 years. The assumption is that the city would then be responsible for the benefit payments in excess of millage and premium tax beginning at that time. Positive. The Fund nor the City have to take any additional action at this time. Negative. If the Fund did deplete its assets, the City is assumed to be responsible for picking up the benefit payments. This would be difficult for the City and would create a public relations problem. Additionally, bond rating services review the pension liabilities contained in the City's financial reports. If the unfunded liabilities continue to grow or the Fund is depleted, it could affect the City's ability to issue bonds. HISTORICAL FINANCIAL INFORMATION Fayetteville Police Pension Fund 12/31/2012 12/3112011 12/31/2010 12/31/2009 12/31/2008 12/31/2007 12/31/2006 12/31/2005 12/31/2004 12/31/2003 A. INCOME 1 Emnlovee Contributions 0 0 0 0 0 0 4,139 5,193 11,829 14,287 2 Employer Contributions Employer/ Court Fines/ Other 128,767 131,071 136,210 133,386 139,299 117,191 133,768 137,338 151,651 157,643 Insurance Tax 103,808 205,695 213,358 214,429 186,429 190,192 226,826 353,271 232,007 385,039 Additional Allocation 34,603 0 0 0 0 0 0 0 0 0 Local Millage 511,961 498,381 508,192 485,345 441,697 388,877 370,649 339,416 295,409 274,856 3 Other Income Guarantee Fund 0 0 0 0 0 0 0 0 0 0 LOPFI Subsidy 0 0 0 0 0 0 0 0 0 0 Police/Act 1452 Supplement 27,300 27,600 28,500 31,200 30,000 30,000 30,000 31,275 30,600 30,500 Future Supplement 55,575 36,450 26,062 38,350 41,370 86,040 60,060 51,199 33,140 17,236 Other Income/ Donations 53 0 1,561 5,758 161 907 1,427 2,401 536 3,478 Adjustment to prior year 0 0 0 0 0 0 0 0 0 0 4 Net Investment Income 384,301 401,576 559,665 341,867 -608,217 664,365 707,831 492,771 537,422 368,889 TOTAL INCOME 1,246,368 1,300,773 1,473,548 1,250,335 230,739 1,477,572 1,534,700 1,412,864 1,292,594 1,251,928 B. EXPENSES 1 Administrative 3,736 3,671 3,619 3,682 3,703 3,695 4,481 5,366 3,920 3,121 2 Benefits Paid Monthly Benefits 1,551,087 1,564,987 1,582,900 1,628,521 1,638,068 1,581,319 1,456,466 1,362,068 1,226,282 1,141,685 Police/1452 Supplements 25,500 26,400 27,250 29,300 30,000 30,000 29,600 29,800 30,600 30,500 Future Supplements 51,870 35,640 24,953 36,816 41,370 86,040 60,060 48,245 33,140 17.236 DROP Payouts 0 0 0 0 0 0 0 0 0 0 3 Refunds 0 0 0 0 0 0 0 0 0 0 4 Other Exuenses/Previous Years 0 0 0 0 0 0 0 0 0 0 TOTAL EXPENSES 1,632,193 1,630,698 1,638,722 1,698,319 1,713,141 1,701,054 1,550,607 1,445,479 1,293,942 1,192,542 C. NON -INVESTMENT CASH FLOW -770,126 -731,501 -724,839 -789,851 -874,185 -887,847 -723,738 -525,386 -538,770 -309,503 Historical Financial Information (Continued) 12131/2012 12/31/2011 12/31/2010 12/31/2009 12/31/2008 12/31/2007 12/31/2006 12131/2005 12/31/2004 12/31/2003 D. ASSETS (at book value) 1 Cash & Checking Accounts 10,906 19,643 3,018 0 0 0 0 0 0 0 2 Bank Deposits 0 0 0 2,932 1,818 5,952 1,260 18,524 14,144 27,996 3 Savings and Loan Deposits 0 0 0 0 0 0 0 0 0 0 4 Other Cash Equivalents 116,827 109,154 212,637 91,470 882,635 503,276 272,024 13,795 63,347 364,098 5 US Govt. Securities 1,352,185 1,279,004 1,586,099 1,963,872 2,455,193 4,049,437 4,395,290 4,559,937 4,226,452 4,370,229 6 Non -US Govt Securities 0 0 0 0 0 0 0 0 0 0 7 Mortgages 0 0 0 0 0 0 0 0 0 0 8 Corporate Bonds 1,443,125 1,324,587 922,200 1,024,106 401,276 258,140 381,729 482,122 631,330 630,893 9 Common Stocks 4,135,803 4,711,054 5,044,965 4,842,939 4,601,263 5,003,139 4,984,362 4,985,062 5,157,550 4,689,678 10 Other 23,044 24,574 29,622 38,696 71,029 75,657 84,418 75,850 75,157 86,434 11 Payables -12,600 -12,900 -13,500 -13,800 -15,015 -15,000 -15,000 -15,300 -15,375 -15,375 TOTAL ASSETS (Book Value) 7,069,291 7,455,116 7,785,041 7,950,215 8,398,199 9,880,601 10,104,083 10,119,990 10,152,605 10,153,953 E. TOTAL MARKET VALUE 7,825,962 8,225,285 8,555,897 8,360,804 8,046,356 10,819,789 10,891,530 10,562,465 10,956,940 10,937,721 F. RATIO OF ASSETS TO EXPENSES Book Basis 4.33 4.57 4.75 4.68 4.90 5.81 6.52 7.00 7.85 8.51 Market Basis 4.79 5.04 5.22 4.92 4.70 6.36 7.02 7.31 8.47 9.17 G. RATIO OF ASSETS TO NON -INVESTMENT CASH OUTFLOW Book Basis 9.18 10.19 10.74 10.07 9.61 11.13 13.96 19.26 18.84 32.81 Market Basis 10.16 11.24 11.80 10.59 9.20 12.19 15.05 20.10 20.34 35.34 H. SUMMARY OF RETURNS Book Value Beginning of Year 7,455,116 7,785,041 7,950,215 8,398,199 9,880,601 10,104,083 10,119,990 10,152,605 10,153,953 Book Value End of Year 7,069,291 7,455,116 7,785,041 7,950,215 8,398,199 9,880,601 10,104,083 10,119,990 10,152,605 10,153,953 Book Value Rate of Return 5.44% 5.41% 7.38% 4.27% -6.44% 6.88% 7.25% 4.98% 5.44% 9 Year Average Return 4.43% Net Market Investment Income 370,803 400,889 919,932 1,104,299 -1,899,248 816,106 1,052,803 130,911 557,989 11,247,224 Market Value Beginning of Year 8,225,285 8,555,897 8,360,804 8,046,356 10,819,789 10,891,530 10,562,465 10,956,940 10,937,721 Market Value End of Year 7,825,962 8,225,285 8,555,897 8,360,804 8,046,356 10,819,789 10,891,530 10,562,465 10,956,940 10,937,721 Market Value Rate of Return 4.73% 4.89% 11.50% 14.43% -18.29% 7.81% 10.32% 1.22% 5.23% 9 Year Average Return 4.22% r''0 I ; t:f 11u" _Rf44-St DV1 INVESTMENT ADVISOR AGREEMENT This agreement is made and entered into this 18th day of July, 2013, by and between LONGER INVESTMENTS INC., a corporation organized and existing under the laws of the State of Arkansas, having its principal place of business at 9 N. West Avenue, City of Fayetteville, County of Washington, State of Arkansas, hereinafter referred to as ADVISOR; and City of Fayetteville Police Pension and Relief Fund, hereinafter referred to as CLIENT. The parties stipulate and recite that: 1. The CLIENT is a pension fund organized under the laws of the State of Arkansas and has certain funds to invest. 2. The ADVISOR is registered as an investment advisor under the Investment Advisers Act of 1940, and is in the business of acting as investment advisor to corporations, individuals, banks and other clients, and rendering research and advisory services to such companies and individuals. 3. The CLIENT desires to retain the ADVISOR to render such advisory services in investing said funds pursuant to trading authorizations over a specified Client Brokerage account ("Accounf � in the manner and on the terms and conditions hereafter set forth. For the reasons recited above, and in consideration of the mutual promises contained herein, the CLIENT and ADVISOR agree as follows: SECTION I SERVICES 1. The ADVISOR represents that it is registered as an investment advisor under the Investment Advisors Act of 1940, as amended, and that such registration is currently effective. If the Account is subject to the Employees Retirement Security Act of 1974 ("ERISA"), ADVISOR acknowledges that it is a "fiduciary' (as that term is defined by ERISA) with respect to the Account. Upon execution of this agreement and the placement of said monies, funds, and assets of CLIENT with ADVISOR, ADVISOR agrees to manage, invest, and administer said monies, funds, and assets on behalf of CLIENT in accordance with the terms and provisions of this agreement, however, in no respect shall ADVISOR ever take possession of any monies, funds, or assets of CLIENT. CLIENT does hereby authorize and appoint ADVISOR, and its representatives, as CLIENT's investment advisor with trading authority over Client's Account solely for the purpose of managing, investing, trading and administrating the monies, funds, and assets of CLIENT which are placed with ADVISOR in accordance with the terms and provisions of this agreement, and to execute any and all documents for accomplishing this purpose. 2. The ADVISOR agrees to use its best efforts in the furnishings of such advice and recommendations and in the preparation of such reports and information, and for this purpose the ADVISOR shall maintain at all times a staff of officers and other trained personnel for the performance of its obligations under this agreement. The ADVISOR may at its expense, employ other persons and firms to furnish to ADVISOR statistical and other factual information, advice regarding economic factors and trends, information with respect to technical and scientific developments, and such other information, advice and assistance as ADVISOR may desire. The CLIENT will release information to the ADVISOR including statements of the investments and transactions relating to said funds and the CLIENT will make available to ADVISOR such financial reports, legal, and other information relating to said funds as may be in possession of the CLIENT or available to it to insure proper administration of the Account. 3. The ADVISOR will not vote proxies for securities held in the CLIENT's account. The CLIENT may elect to receive the proxies and vote them at his or her discretion or to have the proxies sent to Longer Investments. The CLIENT hereby directs the custodian to: ❑ Send all proxy materials to ADVISOR ❑ Send all proxy materials to CLIENT SECTION lI INVESTMENT POLICY 1. CLIENT hereby expressly acknowledges that the representatives of ADVISOR have reviewed completely and in full detail the investment philosophy of LONGER INVESTMENTS, INC., and that ADVISOR will analyze and research CLIENT'S account at which time a written investment policy specifically structured for CLIENT shall be prepared and provided to CLIENT, and upon said investment policy being reviewed, executed, and returned by CLIENT to ADVISOR, said investment policy shall by this reference be incorporated herein. CLIENT hereby further expressly agrees and acknowledges that the investment policy subsequently provided to CLIENT after the execution of this agreement does accurately portray CLIENT'S investment objectives, risk tolerance, tax consequences, liquidity needs, appropriate asset allocation, and administration as set forth The policy may by mutual agreement be amended and revised in writing. Modifications to or approved deviations from thepolicy are reviewed with the CLIENT and approved periodically. 2. CLIENT hereby agrees and acknowledges that any and all investment, or administration of the assets of CLIENT placed with ADVISOR, including but not limited to any and all purchasing, trading, selling, exchanging, pursuant to any and all investment policies, strategies, plans, or other actions taken on behalf of CLIENT by ADVISOR shall be performed by ADVISOR at its sole, complete, total, and full discretion pursuant to the terms and provisions of this agreement. 3. ADVISOR and CLIENT hereby expressly understand and agree that ADVISOR is not qualified to render any legal or accounting advice and/or to prepare any accounting or legal documents for implementation on behalf of CLIENT. CLIENT hereby expressly agrees that CLIENT'S personal attorney and/or accountant is solely responsible for rendering and/or preparation of any and all legal advice, legal opinions, determinations, legal documents, tax returns, and accounting statements and documents. 4. CLIENT hereby certifies that CLIENT has exclusive ownership of any and all monies, funds, and assets placed with ADVISOR and held in CLIENT'S Account, and that no restrictions have been placed upon said monies, funds, or assets of CLIENT which would prevent the investment or disposition of said monies, funds, and assets. CLIENT further certifies that there is no lien or encumbrance existing or recorded of record on said monies, funds, or assets placed by CLIENT with ADVISOR. 5. The parties executing this agreement on behalf of the CLIENT and ADVISOR certify that they have the HI power and authority to enter into the agreement. 6. The terms of the agreement do not violate any obligation by which either CLIENT or ADVISOR is bound, whether arising by agreement, operation of law, or otherwise. 7. It is understood that the ADVISOR renders investment advisory services to clients and customers other than the CLIENT'S Account. Nothing in this agreement shall be deemed to impose upon the ADVISOR any obligation to purchase or sell or to recommend for purchase or sale, by or for the Account, any security or other property which the officers or employees of the ADVISOR may purchase or sell for their own account, or for the account of any other client or customer. CLIENT recognizes that transactions in a specific security may not be accomplished for all client accounts at the same time or at the same price. Neither the ADVISOR's acceptance of the CLIENT's investment objectives, nor any other provision of this agreement shall be considered a guaranty that any specific result will be achieved. SECTION III COMPENSATION TO THE INVESTMENT ADVISOR L The CLIENT agrees to pay to the ADVISOR, and the ADVISOR agrees to accept as compensation for all services rendered and as reimbursement for all expenses assumed by ADVISOR hereunder, an annual fee calculated as detailed in the fee schedule attached hereto and incorporated herein. The fee shall be assessed quarterly on the net asset value of the invested funds, computed at the close of the New York Stock Exchange on the last trading date of the calendar quarter. The amounts thus accrued during each calendar quarter shall be billed to the CLIENT and paid to the ADVISOR by the fifteenth (15th) day of the succeeding month. SECTION IV DURATION, TERMINATION 1. This agreement shall remain in force unless terminated by the CLIENT or ADVISOR on thirty (30) days notice in writing to the ADVISOR or CLIENT at the discretion of the CLIENT or ADVISOR without the payment of any penalty. If this agreement is terminated by either party, the ADVISOR shall be entitled to the unpaid portion of its annual fee computed on a pro rata basis which it has earned up to the effective date of termination. By way of example: If the effective date of termination is May 15, 20X, the ADVISOR will be entitled to the first quarter of the 20X fee as herein described, and an amount computed on a pro rata basis for the period of April 1, 20X to May 15, 20X and assessed on the net asset value computed at the close of the New York Stock Exchange on May 15, 20X. The ADVISOR shall not be entitled to any additional fee beyond the above-described amount. 2. This agreement shall not be binding upon the ADVISOR unless accepted in writing by the President of the ADVISOR. After such acceptance, this agreement shall be binding upon the CLIENT, the ADVISOR, and the heirs, successors, permitted assigns, legal representatives, executors, and administrators. No provision of the agreement may be varied, altered, or amended except by written agreement by both parties, executed by the CLIENT, or a duly authorized Client Representative and accepted by the President of the ADVISOR. 3. CLIENT'S death, disability, or incompetency will not automatically terminate or change the terms of this agreement. However, CLIENT'S personal representative, guardian, attomey-in-fact, or other authorized representative may cancel this agreement by giving written notice to ADVISOR. 4. CLIENT acknowledges having received a copy of ADVISOR'S Form ADV Part H not less than 48 hours prior to entering into this agreement. CLIENT has read and understood Form ADV Part II in its entirety and any questions related thereto have been satisfactorily answered by ADVISOR. 5. CLIENT acknowledges having received a copy of ADVISOR'S Privacy Policy. 6. This agreement may be terminated by CLIENT without penalty (including the refund of any Initial Account Administration fee), within five business days after entering into the agreement; provided however, that any investment action taken by the ADVISOR with respect to the account during such five day period in reliance upon this agreement and any prior receipt of actual notice of the CLIENT's exercise of this right of termination, shall be at the sole risk of the CLIENT. 7. The provisions regarding arbitration will survive any expiration or termination of this agreement. 8. Upon termination, the CLIENT is responsible for monitoring the securities and other assets in the Account. ADVISOR will have no further obligation to act or advise with respect to those assets and no continuing responsibility for performance of those assets. 9. The agreements and undertakings set forth herein constitute the entire agreement between the parties hereto with respect to the investment and management of the Account. SECTION V ARBITRATION OF DISPUTES 1. Arbitration - The CLIENT agrees that all controversies which may arise between the CLIENT and the ADVISOR concerning the agreement or the construction, performance, services of ADVISOR or breach interpretation or remedies of this or any other agreement between the CLIENT and ADVISOR, whether entered into prior, on or subsequent to the date hereof, shall be determined by arbitration. Any arbitration under this agreement shall be conducted pursuant to the federal arbitration act and the laws of the State of Arkansas in accordance with the securities arbitration rules of the American Arbitration Association ("AAA") under the rules then prevailing at the AAA. The award of the arbitrator, or of the majority of them if more than one, shall be final, and judgment upon the award rendered may be entered in any court, state or federal, having jurisdiction. SECTION VI This agreement is duly authorized and will be binding upon the CLIENT and ADVISOR in accordance with its terms. It represents the entire understanding of the parties with regard to the matters specified herein and any changes must be made in writing and signed by the parties. This agreement may not be amended, transferred, or assigned, without the written consent of the CLIENT; and this agreement shall automatically and immediately terminate in the event of an attempted assignment by the ADVISOR without the consent of the Client. If any part of the agreement is found to be invalid or unenforceable, it will not affect the validity or enforceability of the remainder of the agreement. CLIENT understands that securities markets are subject to volatility, and all investments involve risk ADVISOR makes no promise or guarantee of future returns. WITNESS WHEREOF, the parties hereto have caused this agreement to be signed by their individual names affixed hereto, the day and year first written above. BY:7 Date: / Lo er nvestments I Elaine M. Longer, President Date: 1' O Longer Investments Kim M. Cooper, SP BY: / ti Date:_ May in eld Jorda BY: �P/ �m ' Date: 71Z9,113 Sondra Smith, City Clerk BY: Date: John Bro BY: Jem BY: Prank John on BY: & Eldonoberts BY: c _ Melt'' S ey Date: Date: Date: Date: r FEE SCHEDULE Portfolio Management $0 to $3,000,000 1.00% of the market value of assets under management, calculated on an annual basis, and assessed quarterly. $3,000,000 to $6,000,000 0.75% of assets under management. $6,000,000 to $10,000,000 0.65% of assets under management. Over $10,000,000 0.50% of assets under management. 1 LONGER INVESTMENTS INCORPORATED A Rrgislrred lnvrsbnrnl A&450r April 7, 2014 Ms. Sondra Smith City of Fayetteville Police Pension Fund 113 W. Mountain St. Fayetteville, Arkansas 72701 Dear Sondra: Enclosed please find the 2014 first-quarter reports for the City of Fayetteville Police Pension Fund. These reports include a portfolio appraisal, a summary of realized gains/losses and income/expenses, and a performance report. In accord with the board's instructions, the account at Northern Trust will be billed for the management fee. On February 21, 2014, Vodafone sold its stake in Verizon Wireless to Verizon. Vodafone paid a special cash dividend and issued a stock dividend for shares of Verizon to shareholders. The Vodafone investment has been a very profitable investment for the portfolio, even though the enclosed reports reflect realized losses on our subsequent sales of Vodafone. This realized loss is a result of the way Vodafone accounted for the spin- off. Instead of considering the distribution of Verizon shares a return of capital, it will be reported as a dividend. The cash distribution will also be reported as a dividend, not a capital distribution. Following the distribution, we sold Vodafone because we do not agree with management's treatment of this transaction and believe that, from this point, there are better growth options for the portfolio. We wanted to provide an accounting of the returns received on this inveshnent because the way it was handled by Vodafone was difficult to decipher. The table on page two reflects the total return in Vodafone since we purchased it for the account in late 2012 and early 2013. P0. Buy 1269 6iprnndllq Arkansas 72702 Telephone: 479-143-5851 R41free: 800-627-7710 Cas:479-443-7129 Web rile mmidongnimaom Ms. Sondra Smith April 7, 2014 Page Two Original Cost 4350 Vodafone $110,177.71 Dividends Earned 5,793.29 Cash Dividend From Spin -Off 9,856.01 Stock Dividend (Verizon) 24,572.18 Realized Gams Before Spin -Off 18,729.50 Realized Gain/Loss (Verizon) After Spin -Off 130.50 Realized Gain/Loss (Vodafone) After Spin -Off (9,168.07) Total Gain $49,913.41 % Return 45.3% Elaine is attending an investment seminar in New York this week, and the second quarter newsletter will be forthcoming later in the quarter. The stock market has been digesting the gains of last year, as investors have dealt with the increase in geopolitical risks in Ukraine, the slowing of growth in China and emerging markets, the uncertainty of the U.S. economic growth outlook, and a new Federal Reserve chairman. Basically, there has been a lot of churning, with the Dow Jones Industrial Average slightly down for the year and the S&P 500 slightly positive for the year. Bonds have improved, and gold has bounced back from year-end tax selling. Foreign markets closed the first quarter flat to down. There were no material changes to the Longer Investments Inc. Form ADV Part 2 that was submitted to the Securities and Exchange Commission on March 28, 2014. If you would like a copy of the full brochure, please contact Kim Cooper at (800) 827-7710 or via e-mail at kim@longerinv.com. We appreciate the opportunity to assist with the management of the City of Fayetteville Police Pension Fund's assets. Please do not hesitate to call if you have any questions or comments, or if we can be of further service. Sincerely, kw� . " K. 000VA) Kim M. Cooper Executive Administrator /knit Enclosure Quantity Security Common Stock 105,210.00 3,000 AT&T 1,965 Abbott Laboratories 220 Apple Inc. 2,350 BCE, Inc. 1,750 Centurytel Inc. 800 Chevron Corp. 4,100 Cisco Systems, Inc. 2,000 Coca-Cola 6,700 Coeur d'Alene Mines 2,684 00 Corp. 1,650 ConocoPhillips 4,250 EMC Corporation 5,700 Ericsson 11,150 Financial Select Sector 30.92 SPDR Fund 3,580 Ford Motor Co. 6,350 General Electric 3,000 Intel Corp. 300 International Business 118.91 Machines Corp. 1,250 Johnson & Johnson 2,100 Merck & Co. Inc. 2,675 Microsoft Corp. 1,000 Northern Trust 1.3 Corporation 775 Occidental Petroleum 30.98 Corporation 3,600 Pfizer Inc. 1,600 Procter & Gamble Co. 1,300 Qualcomm Incorporated 1,500 Wal-Mart Stores Inc. 8,000 iShares Dow Jones 0.9 Select Dividend Index Other Income Securities 10,000 BlackRock Build 91,709.04 America Bond Tr 10,000 Guggenheim 2.76 Multi -Asset Income 4.97 Index 8,250 Utilities Select Sector 116,492.50 SPDR Fund 4,000 iShares U.S. Preferred 1.56 Stock Index Fund Mutual Funds -Fixed 10,000.0000 iSharesiBoxx Investment Grade Corp Bond Government Bonds 150,000 U. S. Treasury Note 5.125% Due 05-15-16 800,000 U. S. Treasury Note 4.000% Due 08-15-18 Longer Investments Inc. PORTFOLIO APPRAISAL City of Fayetteville Police Pension Fund March 31, 2014 Unit Total Market Pct. Unit Annual Cur. Cost Cost Price Value Assets Income Income Yield 28.24 84,713 82 35.07 105,210.00 1.5 1.84 5,520.00 6.52 40.06 78,727.14 38.51 75,672.15 1.0 0.88 1,72920 2.20 500.11 110,023.97 536.74 118,082.80 1.6 12.20 2,684 00 2.44 24.40 57,329.90 43.14 101,379.00 14 2.23 5,241.81 9.14 30.92 54,103.35 32.84 57,470.00 0.8 2.16 3,780.00 6.99 85.21 68,169.23 118.91 95,128.00 1.3 4.00 3,200.00 469 19.70 80,782.73 22.42 91,901.50 1.3 0.76 3,116.00 3.86 30.98 61,963.71 38.66 77,320.00 1.1 1.22 2,440.00 3.94 11.17 74,811.02 9.29 62 243.00 0.9 0.00 0.00 0.00 55.58 91,709.04 70.35 116,077.50 1.6 2.76 4,554.00 4.97 25.64 108,974.70 27.41 116,492.50 1.6 0,40 1,700.00 1.56 12.06 68,743.42 13.33 75,981.00 1.0 0.30 1,710.00 249 21.82 243,288.73 22.34 249,09100 3.4 0.34 3,809.96 1.57 15.56 55,704.08 15.60 55,848.00 0.8 0.50 1,790.00 3.21 19.53 124,027.24 25.89 164,401.50 2.3 0.88 5,588.00 4.51 20.53 61,603.62 25.81 77,442.00 1.1 0.90 2,700.00 4.38 172.39 51,716.55 192.49 57,747.00 0.8 3.80 1,140.00 2.20 64.70 80,869.69 98.23 122,787.50 1.7 2.64 3,300.00 4.08 51.39 107,912.85 56.77 119,217.00 1.6 1.76 3,696.00 3,42 37.59 100,543.80 40.99 109,648.25 1.5 1.12 2,996.00 2.98 43.31 43,314.51 65.56 65,560.00 0.9 1.24 1,240.00 2.86 93.65 72,580.77 95.29 73,849.75 1.0 2.88 2,232.00 3,08 20.12 72,441.75 32.12 115,632.00 1.6 1.04 3,744.00 5.17 59.42 95,068.17 80.60 128,960.00 1.8 2.41 3,849.60 4.05 63.62 82,701.31 78.86 102,518.00 1.4 1.40 1,820.00 2.20 62.11 93,160.98 76.43 114,645.00 1.6 1.92 2,880.00 3.09 52.23 417,855.93 73.32 586,560.00 &1 2.23 17,819.08 4.26 2,642,842.01 3,236,864.45 44.6 94,279.65 3.75 18.97 189,745.61 20.24 202,400.00 2.8 1.58 15,840.00 8.35 21.92 219,222.04 25.13 251,300.00 3.5 1.29 12,93000 5.90 34.14 281,679.38 41.46 342,045.00 4.7 1.47 12,139.13 4.31 38.34 153,340.30 39.03 156,120.00 2.2 2.58 10,318.35 6.73 843,987.32 951,865.00 13.1 51,227.48 5.98 109.72 1,097,167.76 116.94 1,169,400.00 16.1 4.30 42,964.19 3.92 100.00 150,000.00 109.78 164,671.80 2.3 5.13 7,687.50 5.13 103.76 830,072.13 110.67 885,375.20 12.2 4.00 32,000.00 3.86 Longer Investments Inc. PORTFOLIO APPRAISAL City of Fayetteville Police Pension Fund March 31, 2014 NOTE: Please compare this statement with account statements received from the account custodian. Unit Total Market Pct. Unit Annual Cur. Quantity Security Cost Cost Price Value Assets Income Income Yield Accrued interest 6,777.62 0.1 980,072.13 1,056,824.62 14.6 39,687.50 4.05 Government Agency 200,000 Federal Farm Credit 99.97 199,938.00 109.99 219,981.80 3.0 6.13 12,250.00 6.13 Bank INC) 6.127% YTM 6.125% Due 12-29-15 Accrued Interest 3,130.56 0.0 199,938.00 223,112.36 3.1 12,250.00 6.13 Cash and Equivalents Dividends Accrued 5,813.20 5,813.20 0.1 0.00 0.00 0.00 Money Market 556,380.40 556,380.40 7.7 0.01 55.64 0.01 562,193.60 562,193.60 7.8 55.64 0.01 Limited Partnerships 3,000.00 ALPS Alerian MLP ETF 17.15 51,451.61 17.66 52,980.00 0.7 1.09 3,255.00 6.33 TOTAL PORTFOLIO 6,377,652.45 7,253,240.03 100.0 243,719.46 3.92 NOTE: Please compare this statement with account statements received from the account custodian. Longer Investments Inc. REALIZED GAINS AND LOSSES WITH INCOME AND EXPENSES SUMMARY City of Fayetteville Police Pension Fund From 01-01-14 Through 03-31-14 Realized Gains and Losses TOTAL REALIZED GAINS AND LOSSES 78,487.96 Income and Expenses Income: Common Stock 60,779.27 Other Income Securities 9,159.02 Mutual Funds -Fixed 6,935.54 Government Bonds 16,455.81 Cash and Equivalents 8.46 Limited Partnerships 834.00 Expenses: ADR Fee 30.00 Foreign Tax on Dividends 187.65 Miscellaneous Expense 8.54 Northern Trust Fee 891.68 Management Fee 15,449.73 NET INCOME 77,604.50 Longer Investments Inc. CONTRIBUTIONSMTHDRAWALS City of Fayetteville Police Pension Fund From 01-01-14 To 03-31-14 Tran Trade Settle Broker Code Date Date Security Amount Quantity Code Commission CONTRIBUTIONS dp 01-17-14 01-17-14 Money Market 427.05 Wyeth Distribution for Class Action Litigation 427.05 WITHDRAWALS wd 01-01-14 01-01-14 Money Market 65,000.00 wd 02-01-14 02-01-14 Money Market 100,000.00 wd 03-01-14 03-01-14 Money Market 103,000.00 268,000.00 EXPENSE ACCOUNTS dp 02-05-14 02-05-14 ADR Fee 30.00 dp 01-15-14 01-15-14 Foreign Tax on Dividends 187.65 dp 01-17-14 01-17-14 Miscellaneous Expense 8.54 Service Charge for Wyeth Distribution on 1/17/14 dp 01-31-14 01-31-14 Northern Trust Fee 305.74 dp 02-28-14 02-28-14 Northern Trust Fee 281.70 dp 03-31-14 03-31-14 Northern Trust Fee 304.24 1,117.87 AFTER FEE PERFORMANCE EXPENSE ACCOUNTS dp 01-13-14 01-13-14 Management Fee 15,449.73 15,449.73 PORTFOLIO NET TOTAL -284,140.55 EXPENSE ACCOUNTS PAID BY CLIENT AFTER FEE PERFORMANCE EXPENSE ACCOUNTS PAID BY CLIENT 0.00 0.00 GRAND TOTAL -284,140.55 Longer Investments Inc. PERFORMANCE HISTORY NET OF FEES City of Fayetteville Police Pension Fund Time Period 12-31-13 to 03-31-14 Date to Date 12-31-13 to 03-31-14 Combined Account Percent Return Per Period Total Equities Fixed Other Alternative Account Income Income Investments (Gold) 1.11 -0.80 1.39 5.66 10.04 1.11 -0.80 1.39 5.66 10.04 March 31. 2014 City of Fayetteville Pollee Pension Fund 113 W. Mountain Fayetteville, Arkansas 72701 Longer Investments Inc. STATEMENT OF MANAGEMENT FEES For The Period Ending March 31, 2014 Portfolio Valuation as of 03-31-14 $ 7,243,331.85 3,000,000 @ 1.000% per annum 7,500.00 3,000,000 @0.750% per annum 5,625.00 1,243,332 @0.650% per annum 2,020.41 Quarterly Management Fee $ 15,145.41 TOTAL DUE AND PAYABLE $ 15,145.41 Pursuant to Section 204-3 of the Investment Advisors Act of 1940, Part II of Form ADV is available to all clients of Longer Investments Inc. This statement may be obtained by submitting a written request to the company. As instructed, the management fee has been billed to the account. It is the responsibility of the client to verify the accuracy of the fee calculation. The custodian will not determine if the fee is properly calculated. ,Sondra From: Foren, Andrea Sent: Thursday, February 27, 2014 11:48 AM To: haymakercop@hotmail.com;jerryprice0369@att.net; Frank.Johnson@wal-mart.com; Jordan, Lioneld; Smith, Sondra; paperpig83@wildblue.net Cc: Foren, Andrea; Branson, Lisa; Williams, Kit; Pennington, Blake; Broyles, Lana Subject: Draft review: RFQ 14-06, Police Pension, Financial Advisor Trustee Attachments: RFQ 14-06, Attachment A - Agenda from Police Pension Meeting held 01.16.14.pdf; RFQ 14-06, Attachment B - Police Pension Investment Policy Revised, 07.19.13.pdf; RFQ 14-06, Police Pension, Financial Advisor Trustee Services -- DRAFT 2.0.doc Reference: RFQ 14-06, Police Pension, Financial Advisor Trustee Services Target Deadline for Review: Wednesday, March 05, 2014 at 2:00 PM Attached is a draft for RFQ 14-06, Police Pension, Financial Advisor Trustee Services. This solicitation is aimed at assisting the Policemen's Pension and Relief Fund Board of Trustees in obtaining a new financial advisor/trustee for the Police Pension Fund. Please take some time to review the draft and e-mail me back with any changes by Wednesday, March 05 at 2:00 PM. will coordinate all feedback and distribute a final version of the RFQ. If anyone on the Board feels more time is needed for review please let me know and I can adjust the project time line accordingly. Because this solicitation is for a financial advisor, state law restricts from considering price until a financial advisor has been selected based on their qualifications and selection criteria outlined in the RFQ. After the Board selects a financial advisor, not considering price, then price can be finalized during contract negotiations. The selection criteria is set by state law; however, the Board can adjust the weight for each criteria (selection criteria is highlighted in yellow in the attached draft). Below is an anticipated timeline in preparation to put the project on schedule to transfer and place investments with a new advisor/trustee: - Advertise RFQ: Friday, March 07, 2014 - Deadline for vendors to respond: Friday, April 04, 2014 - Contract negotiations final: no later than Friday, May 02, 2014 - Final day for Longer Investments: Monday, June 30, 2014 - First day for new selected vendor: Tuesday, July 01, 2014 If you have any questions please let me know. This draft has been presented to Sondra Smith and the City Attorney's Office with their incorporated changes. I will be out of the office tomorrow through Monday, March 3rd but can respond to any questions Tuesday when I return. Have a great weekend! Thank you, Andrea Andrea Foren, CPPD, CPPB Purchasing Agent T 479.575.8220 1 F 479.575.8257 aforen@fayettevil le-ar ccov City of Fayetteville, AR 113 W. Mountain, Fayetteville, AR 72701 htto //bids accessfayetteville org TDD 479-521-1316 (Telecommunication Device for the deaf) Please consider the environment before printing this email. This email and any files transmitted with it are confidential and intended solely forth use of the individual or entity to which they are addressed and maybe subject to public disclosure under the Arkansas Freedom of Information Act (FOIA). 2014 Meeting Schedule City of Fayetteville Policemen's Pension and Relief Board of Trustees Third Thursday of the First Month of each Quarter 3:00 p.m. - City Administration Room 326 January 16, 2014 April 17, 2014 July 17, 2014 October 16, 2014 �d 1 �'CPii'V1A2tio ��ra.� LONGER INVESTMENTS I NCORPORATED City of Fayetteville Police Pension Board Meeting April 17, 2014 Longer Investments Inc. PORTFOLIO APPRAISAL City of Fayetteville Police Pension Fund March 31, 2014 Unit Total Market Quantity Security Cost Cost Price Value Common Stock BlackRock Build 18.97 3,000 AT&T 28.24 1,965 Abbott Laboratories 40.06 220 Apple Inc. 500.11 2,350 BCE, Inc. 24.40 1,750 Centurytel Inc. 30.92 800 Chevron Corp. 85.21 4,100 Cisco Systems, Inc. 19.70 2,000 Coca-Cola 30.98 6,700 Coeur d'Alene Mines 11.17 1.1 Corp. 9.29 1,650 ConocoPhillips 55.58 4,250 EMC Corporation 25.64 5,700 Ericsson 12.06 11,150 Financial Select Sector 21.82 75,981.00 SPDR Fund 0.30 3,580 Ford Motor Co. 15.56 6,350 General Electric 19.53 3,000 Intel Corp. 20.53 300 International Business 172.39 25.81 Machines Corp. 1.1 1,250 Johnson & Johnson 64.70 2,100 Merck&Co. Inc. 51.39 2,675 Microsoft Corp. 37.59 1,000 Northern Trust 43.31 1.76 Corporation 109,648.25 775 Occidental Petroleum 93.65 65,560.00 Corporation 1.24 3,600 Pfizer Inc. 20.12 1,600 Procter & Gamble Co. 59.42 1,300 Qualcomm Incorporated 63.62 1,500 Wal-Mart Stares Inc. 62.11 8,000 iShares Dow Jones 52.23 1.40 Select Dividend Index 114,645.00 Other Income Securities 10,000 BlackRock Build 18.97 1.84 America Bond Tr 75,672.15 10,000 Guggenheim 21.92 118,082.80 Multi -Asset Income 12.20 43.14 Index 1.4 8,250 Utilities Select Sector 34.14 0.8 SPDR Fund 118.91 4,000 iShares U.S. Preferred 38.34 22.41 Stock Index Fund 1.3 Mutual Funds -Fixed 10,000.0000 iShares iBoxx 109.72 Investment Grade Corp Bond Government Bonds 150,000 U. S. Treasury Note 100.00 5.125% Due 05-15-16 800,000 U. S. TreasuryNote 103.76 4.000% Due 08-15-18 84,713.82 78,727.14 110,023.97 57,329.89 54,103.35 68,169.23 80,782.73 61,963.71 74,811.02 91,709.04 108,974.70 68,743.42 243,288.73 55,704.08 124,027.24 61,603.62 51,716.55 80,869.69 107,912.85 100,543.80 43,314.51 72,580.77 72,441.75 95,068.17 82,701.31 93,160.98 417,855.93 189,745.61 219,222.04 281,679.38 153,340.30 843,987.32 Pct. Unit Assets Income 35.07 105,210.00 1.5 1.84 38.51 75,672.15 1.0 0.88 536.74 118,082.80 1.6 12.20 43.14 101,379.00 1.4 2.23 32.84 57,470.00 0.8 2.16 118.91 95,128.00 1.3 4.00 22.41 91,901.50 1.3 0.76 38.66 77,320.00 1.1 1.22 9.29 62,243.00 0.9 0.00 70.35 116,077.50 1.6 2.76 27.41 116,492.50 1.6 0.40 1333 75,981.00 1.0 0.30 22.34 249,091.00 3.4 0.34 15.60 55,848.00 0.8 0.50 25.89 164,401.50 2.3 0.88 25.81 77,442.00 1.1 0.90 192.49 57,747.00 0.8 3.80 98.23 122,787.50 1.7 2.64 56.77 119,217.00 1.6 1.76 40.99 109,648.25 1.5 1.12 65.56 65,560.00 0.9 1.24 95.29 73,849.75 1.0 2.88 32.12 115,632.00 1.6 1.04 80.60 128,960.00 1.8 2.57 78.86 102, 518.00 1.4 1.40 76.43 114,645.00 1.6 1.92 73.32 586,560.00 8.1 2.23 3,236,864.45 44.6 20.24 202,400.00 2.8 1.58 25.13 251,300.00 3.5 1.29 41.46 342,045.00 4.7 1.47 39.03 156,120.00 2.2 2.58 951,865.00 13.1 1,097,167.76 116.94 150,000.00 109.78 830,072.13 110.67 1,169,400.00 16.1 4.30 164,671.80 2.3 5.12 885,375.20 12.2 4.00 Annual Cur. Income Yield 5,520.00 6.52 1,729.20 2.20 2,684.00 2.44 5,241.81 9.14 3,780.00 6.99 3,200.00 4.69 3,116.00 3.86 2,440.00 3.94 0.00 0.00 4,554.00 4.97 1,700.00 1.56 1,710.00 2.49 3,809.95 1.57 1,790.00 3.21 5,588.00 4.51 2,700.00 4.38 1,140.00 2.20 3,300.00 4.08 3,696.00 3.42 2,996.00 2.98 1,240.00 2.86 2,232.00 3.08 3,744.00 5.17 4,112.00 4.33 1,820.00 2.20 2,880.00 3.09 17,819.08 4.26 94,542.05 3.76 15,840.00 8.35 12,930.00 5.90 12,139.13 4.31 10,318.35 6.73 51,227.48 5.98 42,964.19 3.92 7,687.50 5.12 32,000.00 3.86 LONGER INVESTMENTS INCORPORATED A Registered Investment Advisor LONGER INVESTMENTS INCORPORATED A Registered 6roeshnent Advisor Longer Investments Inc. PORTFOLIO APPRAISAL City of Fayetteville Police Pension Fund March 31, 2014 Unit Total Market Pet. Unit Annual Cur. Quantity Security Cost Cost Price Value Assets Income Income Yield Accrued Interest 6,777.62 0.1 980,072.13 1,056,824.62 14.6 39,687.50 4.05 Government Agency 200,000 Federal Fame Credit 99.97 199,938.00 109.99 219,981.80 3.0 6.12 12,250.00 6.13 Bank (NC) 6.127% YTM 6.125% Due 12-29-15 Accrued Interest 3,130.56 0.0 199,938.00 223,112.36 3.1 12,250.00 6.13 Cash and Equivalents Dividends Accrued 5,813.20 5,813.20 0.1 0.00 0.00 0.00 Money Market 556,380.40 556,380.40 7.7 0.01 55.64 0.01 562,193.60 562,193.60 7.8 55.64 0.01 Limited Partnerships 3,000.00 ALPS Alerian MLP ErF 17.15 51,451.61 17.66 52,980.00 0.7 1.08 3,255.00 6.33 TOTAL PORTFOLIO 6,377,652.45 7,253,240.03 100.6 243,981.86 3.92 LONGER INVESTMENTS INCORPORATED A Registered 6roeshnent Advisor Longer Investments Inc. SUMMARY OF REALIZED GAINS & LOSSES AND INCOME & EXPENSES City of Fayetteville Police Pension Fund From 01-01-14 Through 03-31-14 TOTAL REALIZED GAINS AND LOSSES 78,487.96 Income and Expenses Income: Common Stock 60,779.27 Other Income Securities 9,159.02 Mutual Funds -Fixed 6,935.54 Government Bonds 16,455.81 Cash and Equivalents 8.46 Limited Partnerships 834.00 Expenses: ADR Fee 30.00 Foreign Tax on Dividends 187.65 Miscellaneous Expense 8.54 Northern Trust Fee 891.68 Management Fee 15,449.73 NET INCOME 77,604.50 L8 LONGER INVESTMENTS INCORPORATED A Regis(errd fiwcstmrnt Advism Distribution by Maturity 03/31/14 VS. 12/31/13 Longer Investments Inc. 4.4 FIXED INCOME DISTRIBUTION 3.9 City of Fayetteville Police Pension Fund 4.5 3.4 March 31, 2014 Summary Information Totals 5.70% Weighted Averages Par Value $1,150,000 Average YTM Market Value $1,279,937 Average Maturity (yrs) Total Cost $1,180,010 Average Coupon (%) Net Gain/Loss $99,927 Average Duration Annual Income $51,938 Accrued Interest $9,908 Number of Issues 3 Distribution by Maturity 03/31/14 VS. 12/31/13 4.4 4.4 3.6 3.9 4.5 4.5 3.4 4.4 % Bond Average Average Average Maturity Number Mkt Value Holdings Y T M Coupon Duration 1 Yr - 3 Yrs 2 $390,672 30.5% 5.7 5.70% 1.8 3 Yrs - 5 Yrs 1 $889,265 69.5% 3.9 4.00% 4.0 LONGER INVESTMENTS INCORPORATED A Registered Invrshnenf Advisor *Returns are reported net ofall fees and expenses. L LONGER INVESTMENTS INCORPORATED A Registered Investment Advisor Longer Investments Inc. PERFORMANCE SUMMARY City of Fayetteville Police Pension Fund March 31, 2014 Other Fixed- Income Actuarial Equities Income Assets Total Assumptions 1991 39.5% 17.2% 28.1% 1991 6% 1992 -1.0% 7.4% - 0.6% 1992 6% 1993 12.1% 8.5% - 9.3% 1993 6% 1994 -7.9% -5.7% -5.7% 1994 6% 1995 27.7% 14.7% 19.6% 1995 6% 1996 14.1% 2.5% -- 6.9% 1996 6% 1997 35.7% 6.7% -- 19.2% 1997 6% 1998 21.5% 7.4% 11.2% 13.0% 1998 6% 1999 5.7% 0.3% -3.5% 3.3% 1999 6% 2000 -10.0% 9.0% 22.0% -0.2% 2000 6% 2001 -16.7% 7.9% 25.1% -1.9% 2001 6% 2002 -32.9% 9.6% 8.0% -2.0% 2002 6% 2003 27.9% 2.2% 19.8% 11.1% 2003 6% 2004 7.4% 2.7% 8.1% 5.5% 2004 6% 2005 -1.1% 2.1% -1.6% 1.3% 2005 6% 2006 17.4% 3.5% 3.0% 10.5% 2006 6% 2007 10.8% 6.5% 1.8% 8.2% 2007 6% 2008 -40.2% 6.5% 4.5% -19.1% 2008 7% 2009 28.2% 1.9% 13.3% 15.7% 2009 7% 2010 12.7% 8.5% 6.9% 11.7% 2010 5% 2011 5.4% 9.4% 8.8% 5.2% 2011 5% 2012 4.0% 4.8% 3.2% 4.6% 2012 5% 2013 14.7% -3.2% 16.5% 6.2% 2013 5% 2014 (through 3131) -0.8% 1.4% 5.7% 1.1% 2014 5% Cumulative Return: 246.5% 251.4% 313.7% 297.5% 5.875% Annualized Return: 5.5% 5.6% 9.1% 6.1% *Returns are reported net ofall fees and expenses. L LONGER INVESTMENTS INCORPORATED A Registered Investment Advisor Longer Investments Inc. CONTRIBUTIONS/WITHDRAWALS City of Fayetteville Police Pension Fund From 01-01-14 To 03-31-14 CONTRIBUTIONS 01-17-14 Money Market (Wyeth Distribution for Class Action Litigation) WITHDRAWALS $427.05 $427.05 01-01-14 Money Market $65,000.00 02-01-14 Money Market $100,000.00 03-01-14 Money Market $103,000.00 $268,000.00 LONGER INVESTMENTS INCORPORATED A Registered Investment Advisor Longer Investments Inc. ACCOUNT RECONCILIATION City of Fayetteville Police Pension Fund March 31. 2014 Beginning Value (July 26, 1990) $ 1,350,354.18 Contributions $ 3,537,658.17 Transfer of Securities $ 4,320,415.91 Distributions $ (10,507,500.00) Net Income $ 5,171,972.03 Accrued Income $ (22,220.66) Realized Gains $ 2,652,051.53 Unrealized Gains $ 750,508.87 Ending Value (March 31, 2014) $ 7,253,240.03 NET INVESTMENT RETURN $ 8,552,311.77 LONGER INVESTMENTS INCORPORATED A Registered Investment Advisor CITY OF FAYETTEVILLE POLICE PENSION AND RELIEF FUND INVESTMENT POLICY OBJECTIVE & GUIDELINES INTRODUCTION This statement of investment policies and objectives of the City of Fayetteville Police Pension and Relief Fund (the "Fund") has been provided by Longer Investments, Inc. (the "Investment Advisor") to the Fund and is hereby adopted by the Board of Trustees to the Fund (the "Trustees") as follows: The Trustees shall clearly define investment polices and objectives as generally set forth below. 2. The Investment Advisor shall be given guidance as set forth below and understand what is expected of them by the Trustees. The investment polices and objectives may be changed at any time by the Trustees and shall be reviewed at least annually. FIDUCIARY RESPONSIBILITY The Trustees are charged with the responsibility of investing the assets of the Fund in accordance with the minimum asset management standards set forth in A.C.A. §24-11- 216 and the prudent investor rule set forth in A.C.A. §§24-2-610 -- 24-2-619 (the "Prudent Investor Rule"). PRUDENT INVESTOR RULE Pursuant to the Prudent Investor Rule, the Trustees are required to invest and manage Fund assets as a prudent investor would, by considering the purposes, terms, distribution requirements, and other circumstances of the Fund. In satisfying this standard, the Trustees must exercise reasonable care, skill, and caution. The Trustee's decisions with respect to individual assets must be evaluated not in isolation but in the context of the Fund portfolio as a whole and as a part of an overall investment strategy having risk and return objectives reasonably suited to the Fund. The following circumstances maybe considered in investing and managing Fund assets to the extent such circumstances are relevant to the Fund or its beneficiaries: • General economic conditions; • The possible effect of inflation or deflation; • Needs for liquidity, regularity of income, and preservation or appreciation of capital. DELEGATION OF AUTHORITY Pursuant to A.C.A. §24-2-618, the Trustees are authorized to delegate the investment and management of the Fund to an Investment Advisor. Any Investment Advisor retained by the Trustees will be held responsible for making all investment decisions regarding the assets under their direction. The Investment Advisor will observe the guidelines and philosophies stated herein and will be required to operate within these guidelines. The Investment Advisor will ensure proper reporting is provided to the Trustees and includes, but is not limited to, the results of the Investment Advisor's performance versus their respective benchmarks. Such reporting will clearly disclose all of the Fund's investment -related fees and will occur at least twice amlually. However, from time to time the Trustees may direct a specific investment activity and shall be fully responsible for the direction pursuant to A.C.A. §24-10- 402(a)(2)(E). INVESTMENT OBJECTIVES The investment guidelines set forth below consider the risk/reward characteristics of various and diversified asset classes in an effort to develop an investment plan designed to accomplish the investment objectives below. The investment objectives of the fiord represent long term expectations and will be evaluated over three (3) and five (5) year time periods. To provide for growth and income within a balanced portfolio structure, consistent with prudent levels of risk. 2. To achieve the actuary return objective of 5% compound annual return over a long-temi time period. INVESTMENT GUIDELINES The Fund's assets will be invested pursuant to the guidelines set forth below. The Investment Advisor, within these investment guidelines, shall have full discretion with regal to the investment process. Maximum Equity 50% Maximum Fixed Income 65% Maximum Other 10% Maximum Cash & Equivalents 25% Minimum Equity 35% Minimum Fixed Income 25% Minimum Other 0% Minimum Cash & Equivalents 0% Investment in international securities will be limited to 50% of the equity portfolio at cost. Options and exchange -traded finds may be used for hedging purposes. Policy guidelines may be amended from time to time by the Trustees after considering the advice and recorrnnendations of the Fund's Investment Advisor. The Trustees believe that maintaining a balanced and diversified allocation is critical to the long-term success of the Fund. To maintain balance and diversification the Investment Advisor will be allowed to deviate plus or minus 10% of the Fund's target allocation set forth above if it sees fit. The Trustees will be notified of such deviations at the quarterly meeting. The Investrnent Advisor shall utilize security brokers that provide competitive cost, execution, and research on all transactions. All assets selected by the Investment Advisor must have a readily ascertainable market value and must be readily marketable. The following assets mid/or transactions are prohibited: Naked Options—Puts or Calls Leveraging without specific prior approval Securities lending without approval It is recognized that mutual finds and/or collective trusts may inchade securities that deviate from the Fund's investment policy statement It is understood that these nrvestmentpositions are permitted if held and managed inside the find and fully disclosed in the prospectus. REVIEW PROCEDURES The Trustees will meet periodically with the Investment Advisor. The meetings will serve as review of the Investment Advisor's progress and adherence to the Fund's guidelines. The Trustees and the Investment Advisor will also discuss the outlook for the markets at these meetings. The Investrnent Advisor will meet with the Trustees at least twice annually to review the perfonnance of the Investment Advisor. TED BY THE CITY OF FAYETTEVILLE POLICE PENSION AND FUND BOARD OF TRUSTEES: _ 6 & Amy, Sondra Smith, City Clerk - pl��(6 ---- 117 ATE `71/91/3 DATE -7�/3/13 DATE d TE DATE DATE ATE