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HomeMy WebLinkAbout2014-05-29 - Agendas - FinalFayetteville Policeman's Pension and Relief Fund Meeting Date S `,A 9 `14 Adjourn Time 3 ; .S 9 AA Attendees: Subject: iv8 33 Motion To: �— Motion By: �-- Seconded: `�- Jerry Friend v® John Brown xa° Frank Johnson Mayor Jordan ✓ Eldon Roberts Vr Sondra Smith vl�- Melvin Stanley %Vkcwit b-0 Subject: iv8 33 Motion To: ; 2 rcai=, Motion By: r Seconded: i Jerry Friend v® John Brown ar_ Frank Johnson Mayor Jordan ✓ a Eldon Roberts W` Sondra Smith t.>" Melvin Stanley�,t3Q Subject: rc,2ytF f' Motion To:7C g Motion By: r Seconded: ; Jerry Friend v® John Brown ✓ Frank Johnson Mayor Jordan " Eldon Roberts y Sondra Smith t.>" Melvin Stanley -0 Subject: Motion To: E Motion By: } .n Seconded: Jerry Friend ✓! 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Smith Treasurer John Brown Retired Position 3 Eldon Roberts Secretary/Retired Position 1 Melvin Stanley Retired Position 4 Frank Johnson Retired Position 5 Tayve ei le ARKANSAS Policemen's Pension and Relief Fund Special Board of Trustees Meeting Agenda May 29, 2014 A meeting of the Fayetteville Policemen's Pension and Relief Fund Board of Trustees will be held on May 29, 2014 at 3:00 PM in Room 326 of the City Administration Building located at 113 West Mountain Street, Fayetteville, Arkansas. Roll Call Approval of the Minutes: • Approval of the January 16, 2014 Meeting Minutes Pension List Changes: • None Approval of the Pension List: • Approval of the August, September and October 2014 Pension Lists Unfinished Business: • "At Risk" Plan of Action Letter • Financial Advisor Discussion New Business: • Garrison Financial Investment Management Agreement Sample • Revenue & Expense Report: April 30, 2014 Report • Benefit Discussion • Election Results Informational: 0 2014 Meeting schedule Lioneld Jordan Chairman Sondra E. Smith Treasurer Eldon Roberts Secretary/Retired Position 1 Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes January 16, 2014 Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes January 16, 2014 Page I of 19 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 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: Sothis $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 uremium 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 Meeting 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 and Relief Fund Board 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 party 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 300'. 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 send 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 internet, 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 Quarter 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 8 8 8 August 2814 Mon10 8 Regular Mo 8 EMPN NAME BerreM YTD Rag Benefit Suppl. YTD Suppi. 154 ALLEN, CHARLES $ 2,584.64 $ 20,677.12 It 50.00 It 400.00 206 BAYLES, BOBS] J $ 1,587Ai $ 12,699.28 $ 50.00 $ 400.00 216 BLACK, MILDRED $ 1,125.64 $ 9,005.12 $ 50.00 $ 400.00 147 BRADLEY, GERALD $ 4,820.09 $ 38.560.72 $ 50.00 $ 400.00 139 BRADLEY, RANDALL $ 2,880.17 $ 22,881.36 It 60.00 $ 400.00 167 BROWN, JOHN $ 4,362.01 $ 34,896.08 $ 5D.0D $ 400.00 157 CARROLL,RONALD L $ 2,106.04 $ 16,848.32 $ 50.00 $ 400.00 151 COLE, RUSTON $ 3,065.74 $ 24,525.92 $ 50.00 $ 400.00 160 DUGGER,GARY $ 3,163.74 It 25,309.92 $ 50.OD It 400.00 140 FOSTER, BILLY D. $ 3,207.35 $ 25,658.80 $ 50.00 $ 400.00 148 FRIEND, JERRY $ 1,970.42 $ 15,763.36 $ 50.00 $ 400.00 161 HANNA, JANICE $ 1,968.55 It 10,948.72 $ - $ - 145 HANNA, MARK $ 1,388.59 $ 10,948.72 It 50.00 $ 400.00 169 HE.LDER, TIM $ 5,638.12 $ 46,704.96 $ 50.00 $ 400.00 180 HOYT, RICK $ 7,460.01 $ 59,680.08 $ 50.00 $ 400.00 180 HOYT, RICKPIus25add pay $ 272,01 $ 361.41 148 HUTCHENS, BERNICE It 1,825.54 $ 14,604.32 $ 50.00 $ 400.00 194 JOHNSON, FRANK $ 7,974.81 $ 63,798.48 $ 60.00 $ 400.00 215 JOHNSON, JOYCE $ 2,455.50 $ 19,644.00 $ 50.00 $ 400.00 103 JOHNSON, WENDELL $ 783.15 $ 6,265.20 $ 50.00 It 400.00 118 JONES, BOB $ 3,300.45 $ 26,403.60 $ 50.(10 $ 400.00 211 JONES, MICHELE $ 1,182.26 $ 9,456.08 144 KILGORE, DONALD $ 2,046.48 $ 16,371.84 $ 50.00 $ 400.00 218 MARTIN, CONNIE $ 3,692.85 $ 29,542.80 It 50.010 It 60.00 128 MCCAWLEY, LARRY $ 1,694.79 $ 13.568.32 $ 50.00 $ 400.00 136 MITCHELL, MICHAEL It 2,305.29 $ 18.442.32 $ 50.00 $ 40D.00 141 MUELLER, ROSEMARY $ 2,063.93 $ 16,511.44 $ 50.00 $ 400.00 158 MUNSON,ANGELA $ 4,198.15 $ 33,585.20 $ 50.00 $ 400.00 112 MURPHY, JAKE $ 405.75 $ 3,246.00 $ 50,00 $ 40D.00 137 PERDUE, LARRY $ 2,322.67 $ 18,561.36 $ 50.00 $ 400.00 164 PERSHALL, ROBIN $ 1,525.07 $ 12,200.56 $ - $ - 132 PHILLIPS, HOMER GENE $ 1,754.44 $ 14,035.52 $ 60.00 $ 400.00 199 PRESTON, NORMA J $ 1,601.37 $ 12,810.96 $ 50.00 $ 400.00 135 RICKMAN, LOREN $ 2,231.07 $ 17,848.56 $ 50.00 $ 400.00 214 RIGGINS, BONNIE $ 1,689.37 $ 13,354.96 $ 50.00 $ 400.00 183 ROBERTS, ELDON $ 4,263.24 $ 34,105.92 $ 50.00 $ 400.00 183 ROBERTS, ELDON PIUS 25 add pay $ 587.09 $ 4,698.72 $ - $ - 212 ROBERTS, CAROLYN K $ 3,216.13 $ 25,729.04 $ - 212 ROBERTS. CAROLYN K Pals 25 add pay $ 442.89 $ 3,543.12 $ - 155 SCHUSTER,JOHN H. $ 3,117.36 $ 24,938.88 $ 50.00 It 400.00 168 STANLEY, MEDAN $ 4,880.07 $ 39,040.56 $ 50.00 $ 40000 155 STOUT, BETTY $ 86651 $ 6,932.08 $ 50.00 $ 400.00 133 SURLES, JERRY $ 2,721.40 $ 21,771.20 $ 50.00 $ 400.00 142 TAYLOR, DENNIS $ 2,053.93 $ 16,511.44 $ 50.00 $ 400.00 163 WATSON. RICHARD $ 6,947.05 $ 55,576.40 $ 50.00 $ 400.00 163 Watson, Ridlard Pals 25 Add -1 Pay $ 846.76 $ 7,550.08 $ - $ - 149 WILLIAMS, JOYCE $ 2,639.66 $ 20,317.28 $ 50.01) $ 400.OD 195 WITT, BETTY) $ 1,766.83 $ 14,134.64 $ 60.00 $ 400.00 213 WOOD, RUTHIE It 1,580.93 $ 12,647.44 $ 50.00 $ 400.00 $ 128,135.36 $ 1,023.268.21 $2.050.W $ 16.050.00 POLICE PENSION FUND Sept 2014 Maas 9 EMP# NAME BeneS[ YTD Reg Benefit SUPPL YTD Supp) 154 ALLEN, CHARLES $ 2,584.64 $ 23,261.76 $ 50.00 $ 450.00 206 BAYLES, BOBBI J $ 1,687.41 $ 14,286.69 $ 50.00 $ 450.00 216 BLACK, MILDRED $ 1,125.64 $ 10,130.76 S 50.00 $ 450.00 147 BRADLEY, GERALD $ 4,820.09 S 43,380.81 S 50.00 5 450.00 139 BRADLEY, RANDALL S 2,860.17 $ 25,741.53 $ 50-00 S 450.00 167 BROWN, JOHN S 4,362.01 $ 39,258.09 $ 50.00 S 460.00 157 CARROLL,RONALD L $ 2,106.04 S 18,954.36 $ 50.00 $ 460.00 151 COLE, RUSTON $ 3,085.74 It 27,591.66 $ 60.00 $ 450.00 160 OUGGER,GARY $ 3,163.74 $ 28,473.66 $ 50.00 $ 450.0 140 FOSTER, BILLY D. S 3,207.35 $ 26,856.15 $ 50.00 S 450.00 148 FRIEND, JERRY $ 1,970.42 $ 17,733.78 $ 50.0 $ 450.00 161 HANNA, JANICE It 1,368.59 It 12,317.31 It - $ - 145 HANNA, MARK $ 1,368.59 $ 12,317.31 $ 50.00 $ 450.00 169 HELDER, TIM $ 5,838.12 $ 52,543.08 $ 50.00 $ 450.00 180 HOYT, RICK $ 7,480.01 $ 67,140.09 $ 50.00 S 450.0 180 HOYT. RICK PWB 25 add pay It 272.01 $ 633.42 148 HUTCHENS, BERNICE $ 1,825.54 $ 16,429.88 $ 50.00 $ 450.00 194 JOHNSON, FRANK $ 7,974.81 $ 71,773.29 $ 50.00 It 450.00 215 JOHNSON, JOYCE $ 2,455.50 $ 22,099.50 $ 50.00 $ 450.00 103 JOHNSON, WENDELL S 783.15 $ 7,048.35 $ 6D.00 $ 450.00 118 JONES, 808 S 3,300.45 It 29,704.05 $ 50.00 $ 450.00 211 JONES, MICHELE $ 1,182.28 $ 10,640.34 144 KILGORE, DONALD $ 2,046.48 $ 18,416.32 $ 50.00 S 450.00 218 MARTIN, CONNIE $ 3,692.85 $ 33,235.65 $ 50.00 S 60.00 128 MCCAWLEY, LARRY $ 1,694.79 $ 15,253.11 $ 60.00 $ 450.00 136 MITCHELL, MICHAEL $ 2,305.29 $ 20,747.61 S 50.00 $ 450.00 141 MUELLER, ROSEMARY S 2,063.93 $ 18,575.37 It 50.00 $ 450.00 158 MUNSON,ANGELA $ 4,198.15 $ 37,783.35 $ 50.00 $ 450.00 112 MURPHY, JAKE $ 405.75 $ 3,651.75 $ 50.00 S 450.00 137 PERDUE, LARRY $ 2,322.67 S 20,904.03 $ 50.00 It 460.00 164 PERSHALL, ROBIN $ 1,625.07 $ 13,725.63 $ - $ - 132 PHILLIPS, HOMER GENE $ 1,754.44 $ 15,789.96 S 50.00 9 450 -OD 199 PRESTON, NORMA J It 1,601.37 $ 14,412.33 $ 50.00 It 460.00 135 RICKMAN, LOREN $ 2,231.07 S 20,079.63 $ 50.00 $ 450.00 214 RIGGINS, BONNIE $ 1,869.37 S 15,024.33 S 50.00 S 450.00 183 ROBERTS, ELDON $ 4,283.24 $ 38,350.16 $ 50.00 $ 45000 183 ROBERTS, ELDON Plus 25 add pay $ 587.09 $ 5,283.81 It - $ - 212 ROBERTS, CAROLYN K $ 3,216.13 $ 28,945.17 $ - 212 ROBERTS, CAROLYN K Plus 25 add pay It 442.89 It 3,986.01 $ - 159 SCHUSTER,JOHN H. S 3,117.36 $ 28.056.24 S 50.00 $ 450.00 168 STANLEY, MELVIN $ 4,880.07 $ 43,920.63 It 50.00 $ 450.00 155 STOUT, BETTY $ 866.61 $ 7,796.59 $ 50.00 It 450.00 133 SURLES, JERRY S 2,721.40 $ 74,492.60 $ 50.00 $ 450.00 142 TAYLOR, DENNIS $ 2,083.93 $ 18,575.37 $ 50.00 $ 450.00 163 WATSON, RICHARD $ 6,947.05 $ 62,523.45 S 50.00 $ 4511.00 163 Watm, Rkhald PWa 25 AdrPI Pay S 948.76 It 8,538.84 $ - $ - 149WILLIAMS, JOYCE $ 2,539.66 It 22,856.94 $ 50.00 $ 450.01) 195 WITT, BETTY S 1,766.83 $ 15,901.47 $ 50.00 $ 450.00 213 WOOD, RUTMIE S 1,550.93 $ 14,228.37 $ 50.00 S 450.00 $ 128,135.36 $ 1.151.403.57 $2050.01) $ 1$050.00 POLICE PENSION FUND 10 10 10 10 Oct 2014 Month 10 10 EMP# NAME Benefit YTD Reg BerreBf Suppl. YTD Suppi. 164 ALLEN, CHARLES $ 2,584.64 $ 25,846.40 S 50.00 $ 50000 206 BAYLES, BOBBI J S 1,587.41 $ 15,874.10 $ 50.00 $ 500.00 216 BLACK. MILDRED $ 1,125.64 $ 11,256.40 $ 50.00 S 500.00 147 BRADLEY, GERALD $ 4,820.09 S 46,200.90 $ 50.00 $ 500.00 139 BRADLEY, RANDALL S 2,860.17 S 26,601.70 S 50.00 It 500.00 167 BROWN, JOHN $ 4,362.01 S 43,620.10 $ 50.00 $ 500.00 157 CARROLL,RONALD L S 2,106.04 S 21.060.40 $ 50.00 $ 500.00 151 COLE, RUSTON It 3,065.74 $ 30,657.40 $ 50.00 $ 500.00 160 DUGGER,GARY $ 3,163.74 $ 31,637.40 $ 50.00 $ 600.00 140 FOSTER, BILLY D. $ 3,207.35 $ 32,073.50 $ 50.00 $ 500.00 148 FRIEND, JERRY S 1,970.42 $ 19,704.20 $ 50.00 $ 500.00 161 HANNA, JANICE $ 1,368.59 S 13,605.90 $ - $ - 145 HANNA, MARK It 1,368.59 $ 13,685.90 It 50.00 $ 500.00 169 HELDER TIM $ 5,838.12 $ 58,381.20 It 50.00 $ 5W.00 100 HOYT. RICK $ 7,460.01 $ 74,600.10 It 50.00 $ 500.00 180 HOYT, RICK Plus 25 add pay $ 272.01 $ W6A3 146 HUTCHENS, BERNICE $ 1,826.54 $ 18,255.40 S 50.00 S 500.00 194 JOHNSON, FRANK S 7,974.81 S 79,748.10 It 50.W S 000.00 215 JOHNSON, JOYCE $ 2,456.50 S 24,655.W $ 50.00 $ 6W.00 103 JOHNSON, WENDELL $ 783.15 S 7,831.50 S 50.00 $ 500.00 118 JONES, BOB $ 3,300.45 S 33,001.50 It 50.00 $ 500-00 211 JONES, MICHELE $ 1,18226 $ 11,822.60 144 KILGORE, DONALD S 2,046.48 $ 20,464.60 $ 00.00 $ 5W.00 218 MARTIN, CONNIE It 3,09285 S 36,928.50 It 50.00 It 60.00 128 MCCAWLEY, LARRY $ 1,694.79 S 16,947.90 $ 50.00 $ 500.00 136 MITCHELL, MICHAEL S 2,305.29 S 23,052.W $ 50.00 $ 500.00 141 MUELLER, ROSEMARY $ 2,063.93 S 201639.30 $ 50.00 $ 500-00 158 MUNSON,ANGELA $ 4,196.15 $ 41,981.50 $ 50.00 It 500.00 112 MURPHY, JAKE $ 405.75 $ 4,057.50 $ 60.00 $ 500.00 137 PERDUE, LARRY $ 2,322.67 $ 23,226.70 S 50.00 S 600.00 164 PERSHALL, ROBIN $ 1,625.07 $ 15,250.70 $ - $ - 132 PHILLIPS, HOMER GENE S 1,754,44 $ 17,544.40 $ 50.00 $ 000.00 199 PRESTON, NORMA J $ 1,601.37 It 16,013.70 S 50.00 $ 5W.00 135 RICKMAN, LOREN It 2,231.07 $ 22,310.70 It 00.00 S 500.00 214 RIGGINS, BONNIE $ 1,660.37 S 16,693.70 $ 50.00 $ 500.00 183 ROBERTS, ELDON $ 4,283.24 $ 42,632.40 $ 50.00 $ 500.00 183 ROBERTS, ELDON Pau 25 add pay It 587.09 $ 5,870.90 $ - $ - 212 ROBERTS, CAROLYN K $ 3216.13 It $2,161.30 $ - 212 ROBERTS, CAROLYN K Plus 25 add pay $ 442.89 $ 4,428.90 $ - 169 SCHUSTER,JOHN H. $ 3,117.36 S 31,173.60 $ 50.00 $ 500.00 168 STANLEY, MELVIN $ 060.07 $ 48.800.70 $ 50.00 S 5W.00 155 STOUT, BETTY $ 866.51 $ 8.685.10 $ 50.00 $ 600.00 133 SURLES, JERRY S 2,721.40 $ 27,214.00 $ 50.00 $ 500.00 142 TAYLOR, DENNIS $ 2,069.93 $ 20,639.30 $ 50.00 $ 5W.00 163 WATSON, RICHARD $ 6,947.05 $ 69,470.50 $ 50.00 $ 5W.00 163 Watson, RWWd PWS 25 Adtn Pay S 948.76 $ 9,487.60 It It - 149 WILLIAMS, JOYCE $ 2,590.66 $ M396.60 It 50.00 $ 50D.00 195 WITT, BETTY J $ 1.766.83 $ 17.660.30 $ 50.00 $ 500.00 213 WOOD, RUTHIE $ 1,560.93 E 15.809.30 S 50.00 $ 500.00 S 128.135.36 S 1,279,538.93 $2050.00 11, .00 10 OFFICE OF THE MAYOR LIONELD JORDAN May 1, 2014 David Clark, Executive Director Arkansas Fire & Police Pension Review Board 620 W 3rd Street Suite 200 Little Rock, AR 72201 RE: Policemen's Pension and Relief Fund Board of Trustees "At Risk" Plan of Action Dear Mr. Clark The Policemen's Pension and Relief Fund Board of Trustees met on April 17, 2014 and discussed a response to Osborn, Carreiro & Associates, Inc. letter, regarding the Arkansas Fire and Police Pension Review Board's action declaring the Fayetteville Policemen's Pension and Relief Fund "At Risk". The following is the Board's response: • We have been aware of this for a number of years and have been working to come to an agreeable solution before the "At Risk" letter was received. • We are in a position where we feel like we cannot, at this point, lower benefits which were approved by the Arkansas Fire and Police Pension Review Board, because of an Attorney General's opinion. • In previous discussions the City Council indicated they were not interested in assisting the Policemen's Pension unless benefits are reduced. • The City Council is not ready to assume any financial responsibility to consolidate. • A report regarding the condition of the Policemen's Pension Fund was presented by the Mayor to the City Council in open session at the January 7, 2014, City Council meeting. A copy of the report is attached. • No additional funding has been approved. • There is no satisfactory plan that we can come up with at this time. We are striving to come up with a solution. CITY OF FAYETTEVILLE 1 113 W MOUNTAIN $TREEI I FAYEPTEVILLE, AR 72701 1479.575.8330 1 WWW.FAYETTEVILLE-AR.GOV David Clark, Executive Director Arkansas Fire & Police Pension Review Board May 1, 2014 Page 2 In closing, we would like to thank the Arkansas Fire and Police Pension Review Board for their time. The Policemen's Pension and Relief Fund Board of Trustees is receptive to more viable options regarding their "At Risk" status. We certainly hope that we can work together to sustain the plan to ensure pensioners will continue to receive benefits. Si erely, Mayor Lioneld Jordan City of Fayetteville Policemen's Pension and Relief Fund Chairman CITY OF FAYETTEVILLE. 1 113 W. MOUNTAIN STREET I FAYETTEVILLE, AR 72701 1479.5758330 1 WWW.FAYETTEVILLE-AR.GOV Page 1 of 2 LOCAL PENSION FUND REPORT 2013 In keeping with statutory requirements, I am presenting this report for 2013 on the local Police and Fire Retirement and Relief Funds for the City of Fayetteville. Both of these plans were closed, by law, in 1983 and there are no longer any active working members remaining. There are currently 45 police and 54 fire retirees and beneficiaries in the system. At December 2013 projected expenses from the fire pension fund were approximately $1.4 million as compared to fund revenues of $950,000. Projected police pension fund expenses were approximately $1.6 million as compared to fund revenues in excess of $1.1 million. This is before adjusting investments to market value. However, on a cash flow basis, contributions are not covering expenses. Actuarial evaluations are the responsibility of the State of Arkansas Fire and Police Pension Review Board. The last evaluations completed were as of July, 2013 for the year ending December 31, 2012. Based on those evaluations the unfunded pension obligations of the Police and Fire Funds were $8.1 million and $10.5 million respectively and have grown considerably from prior years. The unfunded actuarially accrued liabilities for these funds were approximately $12.9 million for police and $15 million for fire. In the annual reports issued by the Arkansas Pension Review Board neither the fire nor police pension fund were found to be actuarially sound pursuant to established financial tests. Again, this actuarial valuation is for the 2012 fiscal year not 2013. On October 18, 2010 representatives of the Pension Review Board came to Fayetteville to present a special report on the Fire Pension Fund. Both Fire Pension Board members and City Council members attended the meeting when this report was presented .During that presentation, the PRB Board Actuary indicated that the fund ran a 90% risk of ruin within the next 5 to 10 years and conditions have not improved since then. The Fire Pension Board has again received correspondence in 2013 advising the Board of the funds risky financial condition. In 2012 operating conditions of the Fire Pension Fund have been relatively the same so no improvement has been made. However the asset value of the fund has fallen to under $5,000,000 which makes it subject to further investment restrictions. These restrictions no longer allow investments in individual securities. Investments will be limited to cash, cash equivalents, government bonds and no load mutual funds. This means overall returns in the future are likely to be less than previously experienced which could bring about depletion of the fund even earlier unless the Pension Board does something. The Fire Pension Board has been aware of the unstable condition of the fund and has been discussing the situation and possible options since 2009 but has not decided on a plan of action supported by the majority of the Board. The primary option which has been discussed is the possible reduction of current benefits. The City Clerk and I have each introduced motions and had numerous votes to reduce benefits but all votes to do so up to this point in time have failed. The Pension Board has also been advised that there is no Page 2 of 2 specific enabling legislation to reduce benefits and legal issues might prevent that option. All other options presented would require substantial financial contributions by the City. However, the City Attorney has advised the Pension Board that the City has no direct obligation to find the pension plan; other than a .4 mill dedicated levy for each, plus state insurance turn back. The PRB has continued to classify the Fire Pension Fund as "projected insolvent'. The Police Pension Fund is also considered actuarially unsound but not in immediate danger of becoming insolvent. The Police Pension Board is also aware of the Police Pension Fund status and has been considering options that would guarantee long term solvency. I will continue to monitor these pension funds in the future and keep you apprised of any new developments. Smith, Sondra From: Foren, Andrea Sent: Monday, May 12, 2014 3:31 PM To: Foren, Andrea Cc: Smith, Sondra Subject: RE: RFQ 14-06, Police Pension - Financial Advisor, Project Voting Results Reference: RFQ 14-06, Police Pension — Financial Advisor Trustee Services Project Update The City of Fayetteville, on behalf of the Fayetteville Policeman's Pension and Relief Fund Board of Trustees (Board), received six (6) statements of qualification in response to RFQ 14-06. The following firms responded: BOKF, N/A, Garrison Financial, Gavion, LLC, Gregory W Group, JKMilne Asset Management, & Regions Bank. The Board met, discussed the responses, and voted to enter into negotiations with Garrison Financial. Until a final contract is negotiated and approved by the Board, all information will remain confidential on the project. Thank you for your interest in our project and your patience during the selection process. This is a major contract for the Board as well as the members of the pension fund. Your time and dedication to submit a statement of qualification is greatly appreciated. If you have any questions please let me know. Thank you again for your time and best wishes for your future endeavors. Thank you, Andrea Andrea Foren, CPPD, CPPB Purchasing Agent Purchasing Division 113 W. Mountain City of Fayetteville, Arkansas 72701 afore n @fayettevi Ile -a r.eov T 479.575.8220 1 F 479.575.8257 Website I Facebook i Twitter I YouTube CITY OF S!le ARKANSAS www.fayettevi lie-ar.gov Smith, Sondra From: Dawn.Blaeuer@Regions.com Sent: Monday, May 12, 2014 3:57 PM To: Foren, Andrea Cc: Smith, Sondra Subject: RE: RFQ 14-06, Police Pension - Financial Advisor, Project Voting Results Thank you for the follow-up. If we can be of any service in the future, please do not hesitate to contact us. Dawn Blaeuer SVP & Institutional Services Manager P. O. Box 1471 Little Rock, AR 72201-1471 T 501.371.6710 F 501.371.8821 INSTITUTIONAL SERVICES From: "Foren, Andrea" <aforen@fayetteville-ar.gov> To: "Foren, Andrea' <aforen@fayetteville-acgov> Cc: "Smith, Sondra" <ssmith@fayetteville-ar.gov> Date: 05/12/2014 03:31 PM Subject: RE: RFQ 14-06, Police Pension - Financial Advisor, Project Voting Results Reference: RFQ 14-06, Police Pension — Financial Advisor Trustee Services Project Update The City of Fayetteville, on behalf of the Fayetteville Policeman's Pension and Relief Fund Board of Trustees (Board), received six (6) statements of qualification in response to RFQ 14-06. The following firms responded: BOKF, N/A, Garrison Financial, Gavion, LLC, Gregory W Group, JKMilne Asset Management, & Regions Bank. The Board met, discussed the responses, and voted to enter into negotiations with Garrison Financial. Until a final contract is negotiated and approved by the Board, all information will remain confidential on the project. Thank you for your interest in our project and your patience during the selection process. This is a major contract for the Board as well as the members of the pension fund. Your time and dedication to submit a statement of qualification is greatly appreciated. If you have any questions please let me know. Thank you again for your time and best wishes for your future endeavors. Thank you, Andrea Andrea Foren, CPPD, CPPB Purchasing Agent Purchasing Division 113 W. Mountain Branson, Lisa From: Leach, Trish Sent: Thursday, May 08, 2014 10:09 AM To: Kim Cooper Cc: Tina Lamb; Elaine Longer; Smith, Sondra; Hertweck, Marsha; Branson, Lisa Subject: RE: Errors and Omissions coverage Thank you Kim. There was some discussion of the needs for errors and omissions coverage during the meeting yesterday. I anticipate more questions. Trish From: Kim Cooper [mailto:kim@longerinv.com] Sent: Thursday, May 08, 2014 9:36 AM To: Leach, Trish Cc: Tina Lamb; Elaine Longer Subject: RE: Errors and Omissions coverage Dear Trish, Longer Investments Inc. maintains errors and omissions coverage for our firm. In addition, the Fayetteville Police Pension Fund is covered by an ERISA bond that we are required to have in place for all ERISA plans. If you or the pension board has any additional questions, please feel free to contact me. Kim % Kim M. Cooper Executive Administrator Longer Investments Inc. P.O. Box 1269 Fayetteville, Arkansas 72702 (479)443-5851 (800)827-7710 kim lon2erinv.com From: Leach, Trish [mailto:pleach(a)fayetteville-ar.gov] Sent: Wednesday, May 07, 2014 4:34 PM To: Tina Lamb Cc: Smith, Sondra; Branson, Lisa Subject: Errors and Omissions coverage The police pension fund is moving forward with choosing another investment manager but had a question concerning errors and omissions coverage. Does Longer have this type of coverage on their current portfolio? Thanks Tina, Trish Patricia Leach Accounting Manager Accounting Division City of Fayetteville, Arkansas 72701 T 479.575.8285 1 F 479.575.8273 Pleach(d.favetteville.araov Facebook I Twitter I YouTube SCITY OF ����ii//rr l y�4AR Atd s A s www.fayettevi tte-an gov Smith, Sondra From: Leach, Trish Sent: Thursday, May 08, 2014 3:57 PM To: Smith, Sondra Subject: FW: Police Pension Attachments: Contract Template April 2013.doc Categories: Follow-up From: Kerry Watkins -Bradley [mailto kerry.bradley@garrisonfinancial.com] Sent: Thursday, May 08, 2014 3:55 PM To: Leach, Trish Subject: FW: Police Pension Hey Trish, We've looked through the current investment advisory agreement the Police Pension has in place with Longer right now and there really aren't any major differences. Longer has a 30 day termination notice, ours standard agreement has no time requirement. If we decide to terminate a client, then we must give the client a 30 day notice, but if a client decides they no longer need our services we can disengage immediately. I've attached a sample copy of our standard IAA if anyone would like to look it over in advance of the next meeting. Regarding the E&O insurance: the definition at the bottom of this email came directly from the Investopia website. E&O insurance is designed to protect the investment management firm in that it covers the advisor's legal expenses in the event a client choses to sue and would possibly cover any settlement. As we mentioned yesterday, we have carried it in the past when required by a client but feel we are a very low risk shop and discontinued the coverage when we no longer had clients who required it. From a business perspective we feel the coverage an E&O policy provides does not justify the significant cost of the policy. We do not sell "financial products" nor do we invest in what we consider high risk or inappropriate investments. Garrison Financial has never been subject to a lawsuit nor has a complaint ever been filed against us for investment management services. Should the Police Pension Board select Garrison as their investment advisor and decide they require their investment advisor to carry E&O insurance or if there is a law requiring the coverage we will be happy to reinstate our policy. If you have any questions or would like any additional information just let us know. Thanks for your help. Kerry Definition of 'Errors And Omissions Insurance - E&O' A professional liability insurance that protects companies and individuals against claims made by clients for inadequate work or negligent actions. Errors and omissions insurance often covers both court costs and any settlements up to the amount specified on the insurance contract. IM Investopedia explains'Errors And Omissions Insurance - E&O' E&O insurance can be obtained by insurance brokers/dealers, registered investment advisors and financial planners, among others. It is often required by regulatory bodies such as FINRA or company investors. In the financial industry, lawsuits will happen, regardless on how baseless the claims may be. Clients sometimes sue an advisor or broker after an investment goes sour, even if the risks were well known and within the guidelines established by the client. In these cases, even if a court or arbitration panel finds in favor of a broker or investment advisor, the legal fees can be very high and E&O insurance is vital in these situations. A person or company that has had numerous litigation problems has a higher underwriting risk and will find E&O insurance to be more expensive or less favorable in its terms as a result. Kerry Watkins Bradley, CFA MBA President F 1 N A N C I A 41ana g trrg money For you & Your Famfl p 605 W. Dickson Street Suite 201 Fayetteville, AR 72701 Phone (479)587-1045 Facsimile (479)587-1257 www.aarrisonfinancial.com This email has been scanned for email related threats and delivered safely by Mimecast. For more information please visit htto://www.mimecast.com GARRISON CITY OF ft Policemen's Pension &-Relief Fund Garrison Financial 605 W. Dickson Street, Suite 201 • Fayetteville, Arkansas a 72701 (479) 587-1045 Telephone • (479) 557-1257; Facsimile a (888) 442-7637 Toll Free www.CarrisonFinancial.com. Introduction to Garrison Financial A SEC -Registered Investment Advisor 4 Family & Employee Owned 0 Investing Our Own Capital Along With Our Clients • Portfolios Tailored To Specific Client Needs a- Concentrated Positions (WMT, JBHT, TSN, CAT) ♦ Minimum Cash Levels A, Portfolio Restrictions ® Fee -Only Investment Advice • Personalized & Confidential Service 4 Equity, Balanced & Fixed Income Investment Management w Separately Managed Accounts — Utilizing Individual Stocks and Bonds Investment Services Q Individually Managed Account -4 Individual Investors 0 IRAs, Trusts, Individual Accounts, Custodial Accounts - Institutional Investors 0 High Net Worth Individuals, Retirement Plans, Foundations, Endowments • Portfolio Accounting & Reconciliation • Performance Monitoring & Reporting ® Portfolios Custom Built For Individual Client Needs Investment Philoso- h 0 We seek to provide income, capital appreciation & capital preservation through a disciplined approach of asset allocation, security selection, and portfolio construction which is consistent with long-term wealth building, inflation protection and the realization of your goals O Research Driven Investment Style We focus on our team's strength of independent research & employ investment strategies we believe add value & reward investors over the long term We do not try to time the markets or follow the crowds O Risk Control We believe managing risk is a key component in building and preserving wealth. We do not make concentrated bets or chase the highest yield We take a disciplined approach to risk management & strive to provide risk adjusted returns in excess of the general market through prudent investment selection O Independent Investment Advice Based On Our Market Conviction & Historical Experience Investment & Portfolio Management Process 0 Economic Outlook O Interest Rate Expectations 0 Inflation Outlook 0 Regulatory Environment 0 Sector Allocation 0 Security Screening & Selection 0 Proper Diversification 0 Investment Monitoring 0 Portfolio Rebalancing To IPS Guidelines & Market Changes All Cap Core Equity Strate • "All Cap Equity" Approach • Cross Section of Large -to -Small Capitalization Companies • Proper Industry & Sector Diversification • Balanced Mix of Growth & Value Stocks • Focused on Rigorous Independent Fundamental Research • Attractive Industry Dynamics • Efficient Operations That Generate Attractive Returns On Investment • Strong Management Focused On Building Shareholder Value OverThe Long Term • Long-term Approach • Focused on buying durable businesses that create shareholder value over the long-term • Valuation • Focus on both absolute and relative valuation • PE, PEG, Price/Cash Flow, DividendYield, EV/Sales, EV/EBITDA • Buy Discipline • We consider buying a position when we believe the shares exhibit a compelling value for the expected level of risk • Sell Discipline • We consider selling a position when we believe the shares are trading at an excessive valuation, a negative change in industry or company fundamentals has occurred, or an alternative investment exhibits a better value • Diversification • 5% In A Security, 25% In An Industry, Daily Monitoring Of Positions • Traditional Financial Statement Analysis • Ratio Analysis, Earnings Estimates, Cash Flow Estimates, Growth Potential, Strong Balance Sheets • Qualitative Assessment of Company Management Core Bond Strate • Fundamental Research Driven • Corporate Bond Focus • Conservative, Income Focused Style • In -House Bond Ratings • Focused On Absolute & Relative Value • Long -Term Focus • Shifts between corporate, governments, etc., occur deliberately • When changes are made, we are attempting to capture value changes among these sectors • Buy Discipline • Relative Value Analysis Credit Quality/Security Analysis, Maturity/Duration, Industry/Sector Diversification • Sell Discipline • Deterioration In Credit Quality, Sector No Longer Exhibits Relative Value, Maturity/Duration Do Not Match Current Interest Rate Outlook, Portfolio Structure Does Not Match Our Interest Rate Outlook • Diversification Risk • Issuer: 5% of market value • Issue: 5% of par value • Industry: 25% of market value • Excludes treasuries & agencies Growth & Income Balanced Strate • Our balanced strategy is a combination of our All Cap Core Equity and Core Bond Strategy • We create portfolios that strive to produce income and capital appreciation to meet current income needs while also providing opportunities for growth to protect against inflation • Periodic rebalancing to IPS guidelines takes advantage of the opportunity provided by market fluctuations Account Custodv & Brokeraize 0 Assets are held in custody on your behalf by an independent third party custodian. 0 Client Account Are Never Commingled 0 Accounts Are Administered Separately and Are Held Under Your Name & Tax ID Number Client Reporting O Accurate & Timely Reports O Efficient Record -Keeping & Transaction Reporting O State -of -the -Art Accounting Systems O Accounts Reconciled Daily O Quarterly Reports From Garrison Asset Management Portfolio Holdings w Account Transactions ♦ Capital Gain Information -k Comprehensive Investment Performance Reporting O Monthly Reports From Your Custodian Biographies Kerry Watkins Bradley, CFA, MBA - Equity Portfolio Manager Ms. Bradley received a BSBA in Financial Management (cum laude) from the University of Arkansas at Fayetteville and is a Chartered Financial Analyst charter holder. Ms. Bradley is the equity portfolio manager for Garrison Asset Management. She also holds an MBA from the Sam M. Walton College of Business at the University of Arkansas. Her investment experience began in 1992 on the Floor of the New York Stock Exchange and includes equity and fixed income portfolio management, investment analysis and economic research. Prior to joining Garrison Financial in 1998 she was a portfolio manager/research analyst for a registered investment advisory firm in Fayetteville, AR, providing portfolio management services for individual investors. Her responsibilities included articulating and implementing portfolio and asset allocation strategy and employing fundamental and technical analysis for security selection. Other experience included being part of a five -person equity research team with responsibility for eight industries for an investment management firm with $3.5 billion in assets under management. In 2001 Ms. Bradley was named to the "40 Under 40" list of up-and-coming business leaders by the Northwest Arkansas Business Journal. She is a member of the Junior League of Northwest Arkansas and serves of the Board of Directors of the Donald W. Reynolds Boys & Girls Club and Life Styles Inc. Glenn E. Atkins, CFA, MBA - Fixed Income Portfolio Manager Mr. Atkins received a BSBA in Financial Management from the University of Arkansas at Fayetteville and is a Chartered Financial Analyst charter holder. He is the fixed income portfolio manager for Garrison Financial. Mr. Atkins also holds an MBA from the Sam M. Walton College of Business at the University of Arkansas. He has managed personal and family equity portfolios since 1981 and has an extensive background in residential real estate leasing and development. In 1987 he began specializing in fixed-income research and management for Monarch Capital Corporation, a Fortune 500 insurance holding company with assets totaling approximately $1 billion and joined Llama Asset Management Company, LP (the predecessor to Garrison Financial) in 1994. Mr. Atkins has authored articles for leading financial publications including The American Association of Individual Investors Journal and was a contributing author for a book on bankruptcy investing, which was recognized by Forbes magazine as "one of ...the best from the class of '92." He has also appeared as a guest lecturer at the Harvard Business School and is member of the Springdale, AR Club of Rotary International. In 1998 Mr. Atkins was named to the "40 Under 40" list of up-and-coming business leaders by the Northwest Arkansas Business Journal. Biographies James B. Bell, CFA - Portfolio Manager He received a BSM in Finance from Tulare University in New Orleans, Louisiana, and is a Chartered Financial Analyst charter holder. Mr. Bell is a portfolio manager for Garrison Financial. His investment experience began in 1996 and includes company analysis, portfolio management, economic research, and investment reporting. Before joining Garrison Financial, Mr. Bell worked as an analyst in the acquisitions and divestitures department of an oil and gas exploration and production company in Tulsa, Oklahoma. Prior to that, he had four years of experience with a registered investment advisory firm in Fayetteville, Arkansas. Mr. Bell serves on the Financial Management Committee of Habitat For Humanity of Washington County, the Alumni Advisory Board of Pi Kappa Alpha Fraternity, and is active in the Junior Achievement program of economic education for youth. He was named to the "40 under 40" list of up-and-coming business leaders by the Northwest Arkansas Business Journal in 2008. Carla M. Muruaaa - Director of Portfolio Accounting Ms. Muruaga received an associate degree in sales and accounting from the Fayetteville Business College and attended the University of Arkansas where she studied administrative management. She has an extensive portfolio accounting background with responsibilities including custodial reconciliation, trade settlement, performance reporting, and portfolio manager support. Additionally, her experience includes cost accounting, accounts receivable, and asset -account reconciliation for a division of one of the world's largest agriculture firms, and payroll, accounting, and inventory control for a small retail firm. Ms. Muruaga is responsible for all portfolio and internal accounting at Garrison Asset Management. I FINANCIAL 00�GARRISON Contact Information Kerry Watkins -Bradley, CFA, MBA Portfolio Manager kbradley@gardsonfinancial.com Glenn E. Atkins, CFA, MBA Portfolio Manager gatkins@garrisonfinancial. com James B. Bell, CFA Portfolio Manager jbell@garrisonfinancial.com Carla Muruaga Portfolio Accountant cmuruaga@gardsonfinancial.com 605,W.,Dickson S�reet,F Suite 201 Fay�tte�ille; /�Ft; 72701 ("479) 587 12 �, sir acsimile ";•�: (888) 442 7637Toll Free . www.aarrisonfinancial.com 011i'j, GARRISON I=INANCIAL CITY OF Tay e q1jqS Policemen's Pension & Relief Fund` Cost Comparison Analysis Garrison Financial 605 W. Dickson Street, Suite 201 • Fayetteville, Arkansas • 72701 (479) 587-1045 Telephone • (479) 587-1257 Facsimile «(888) 442-7637 Toll Free www.GarrisonFinancial.com Fee Proposal & Comparison Without E&O Insurance Total Account Value As Of 12-31-2013 7,443,645 Garrison Financial Fee - Excl. E&O Ins. 0.50% Previous Manager (2) 0.84%! ESTIMATED ANNUAL SAVI NGS 7Q,M 7 (1) Assumes a static portfolio for the year. Fees fluctuate based on market value. (2) Previous manager fee is 1.00% on the first $3mm, .75% on -the -next $3mm, and .65% on amounts > $6mm. Fee Proposal & C Including E&O Insurance OMDarlson Total Account Value As Of 12-31-2013 7,443,645 Garrison Financial Fee - Incl. E&O Ins. 0.65% Previous Manager (2) 0.84% ESTIMATED ANNUAL SAVINGS (1) Assumes a static portfolio for the year. Fees fluctuate based on market value. (2) Previous manager fee is 1.00'% on the first $3mm, .75% on the next $3mm, and .65% on amounts > $6mm. Recommendations O Change custodians from Northern Trust to Charles Schwab O Custody services are free at Schwab, saves $3,700 annually O Stock commissions are $8.95 per trade at Schwab © We estimate your current commission structure at $35.00 per trade minimum, or $.06 per share O 10 trades per month under your current commission structure would be at least $350.00 and at most $89.50 at Schwab O Monthly savings of $260.50, annual savings of $3,126 Biographies Kerry Watkins Bradley, CFA, MBA - Equity Portfolio Manager Ms. Bradley received a BSBA in Financial Management (cum laude) from the University of Arkansas at Fayetteville and is a Chartered Financial Analyst charter holder. Ms. Bradley is the equity portfolio manager for Garrison Asset Management. She also holds an MBA from the Sam M. Walton College of Business at the University of Arkansas. Her investment experience began in 1992 on the floor of the New York Stock Exchange and includes equity and fixed income portfolio management, investment analysis and economic research. Prior to joining Garrison Financial in 1998 she was a portfolio manager/research analyst for a registered investment advisory firm in Fayetteville, AR, providing portfolio management services for individual investors. Her responsibilities included articulating and implementing portfolio and asset allocation strategy and employing fundamental and technical analysis for security selection. Other experience included being part of a five -person equity research team with responsibility for eight industries for an investment management firm with $3.5 billion in assets under management. In 2001 Ms. Bradley was named to the "40 Under 40" list of up-and-coming business leaders by the Northwest Arkansas Business Journal. She is a member of the Junior League of Northwest Arkansas and serves of the Board of Directors of the Donald W. Reynolds Boys & Girls Club and Life Styles Inc. Glenn E. Atkins, CFA, MBA - Fixed Income Portfolio Manager Mr. Atkins received a BSBA in Financial Management from the University of Arkansas at Fayetteville and is a Chartered Financial Analyst charter holder. He is the fixed income portfolio manager for Garrison Financial. Mr. Atkins also holds an MBA from the Sam M. Walton College of Business at the University of Arkansas. He has managed personal and family equity portfolios since 1981 and has an extensive background in residential real estate leasing and development. In 1987 he began specializing in fixed-income research and management for Monarch Capital Corporation, a Fortune 500 insurance holding company with assets totaling approximately $1 billion and joined Llama Asset Management Company, LP (the predecessor to Garrison Financial) in 1994. Mr. Atkins has authored articles for leading financial publications including The American Association of Individual Investors Journal and was a contributing author for a book on bankruptcy investing, which was recognized by Forbes magazine as `one of ...the best from the class of '92." He has also appeared as a guest lecturer at the Harvard Business School and is member of the Springdale, AR Club of Rotary International. In 1998 Mr. Atkins was named to the "40 Under 40" list of up-and-coming business leaders by the Northwest Arkansas Business Journal. Bio . raphies James B. Bell. CFA - Portfolio Manager He received a BSM in Finance from Tulane University in New Orleans, Louisiana, and is a Chartered Financial Analyst charter holder. Mr. Bell is a portfolio manager for Garrison Financial. His investment experience began in 1996 and includes company analysis, portfolio management, economic research, and investment reporting. Before joining Garrison Financial, Mr. Bell worked as an analyst in the acquisitions and divestitures department of an oil and gas exploration and production company in Tulsa, Oklahoma. Prior to that, he had four years of experience with a registered investment advisory firm in Fayetteville, Arkansas. Mr. Bell serves on the Financial Management Committee of Habitat For Humanity of Washington County, the Alumni Advisory Board of Pi Kappa Alpha Fraternity, and is active in the Junior Achievement program of economic education for youth. He was named to the "40 under 40" list of up-and-coming business leaders by the Northwest Arkansas Business Journal in 2008. Carla M. Muruaga - Director of Portfolio Accounting Ms. Muruaga received an associate degree in sales and accounting from the Fayetteville Business College and attended the University of Arkansas where she studied administrative management. She has an extensive portfolio accounting background with responsibilities including custodial reconciliation, trade settlement, performance reporting, and portfolio manager support. Additionally, her experience includes cost accounting, accounts receivable, and asset -account reconciliation for a division of one of the world's largest agriculture firms, and payroll, accounting, and inventory control for a small retail firm. Ms. Muruaga is responsible for all portfolio and internal accounting at Garrison Asset Management. +"tGARRISON FINANCIA.L Contact Information Kerry Watkins -Bradley, CFA, MBA Portfolio Manager kbradley@garrisonfinancial.com Glenn E. Atkins, CFA, MBA Portfolio Manager gatkins@gardsonfinancial.com James B. Bell, CFA Portfolio Manager jbell@garrisonfinancial.com Carla Mumma Portfolio Accountant cmuruaga@garrisonfinancial.com 69, W.,DicksoriS�teet,iSuite 20l, „ . Favetteville.,AR272701- Why Select a CFA" Charterholder? uccessful investors recognize the importance of edu- catiun and knowledge "hen it comes to maneging- linancial assets. But %vhile. they maispend countless hours learning ahout markem securdics,and associated risks, investors often overlook the qualifications of the pro- lessionals lvhona the), hire to manage their money. If you work with invesunent. adMirs, they will have access to the personal details of your finanees, so their cre- dentials should matter to yow There are a mmnher of rep- utahle and applicable credentials that financial professionals in different disciplines may hold, lint none is as rigorously Mused un investment knowledge as the Chartered Finan- cial Analyst' (CFA') designation. Understanding the signi- 6cnnce of the CFA charter— and what A required of investment professionals in order to hold it — can he useful infnnnatiun when choosing an invesunent advisor. Global Relevance \Pith CF:\ charwhuldtn:s in nwre than 120 cuuntrics and the increasin' demand worldwide for the (YA Pnymilt, the CFA charter has hecume the global prufcssional investment credential.'File CTIA charter is Men referred to as a professional global "passport:' pru%W- ing the knowledge and expertise that allows CF.\ cherter- hulders to practice across international houndriries. Mic" hake referred to it as the gold standard of the industr. Each lame and Dccclidwr, tens of thousands of candi- dates sit fur the CFA examination at store than NO sites around the world_ In 2006, CPA Institute will see mune th.tn I1(1.11!1(1 candidates from almost IT countries enroll to take one of the three-level CPA cxams. Since I')o8, sonic A the must signilwant growth in un didatm nuribers has Occurred in Furupe and ,Asia, Jimticdarly China and India. Knowledge and Experience In the hic I')40s, Benjamin (Wham, often called the "father of seen] M amrlv5is;' first proposcd a `Ouah ied Securities .Analyadesignmum for members of the growing investment profession. After much 4cOrk from Crah,un and other dedicated professionals, the first CAR exam was administered in 1963 to 284 candidates. -Ili become a CFA chane holder, a candidate must pass a series of three xis -hour examinations, taken in sequence. \ve-age ctnnptetion time is fern years. Core elements of the CFA curriculum include investment tools (economics, Fnan- c5l statement analysis, quantitative analysis, and corpurare finance), asset valuation (analysis of deht investments, equity investments, derivatives, and alternative investments), and portfolio management (hath institutional and individual, ncludin;g Performance meastu-cmeut). Importantly, each examination includes a section than thorou<ghly tests knowledge and application of ethical aml pntfessiunal standards. to ensure that the CFA Pr 1rarn star's current with the ever changing dynamics of professional Why Select a CEN Charterholder cc,Nll:uuto it%estnteut practice throughout the world, CFA Institute Inemher MILloteers and professional NNIf 0nnualhdevelop sand update the curriculum :anti construct the exantimations. Achieving passing Scores on all three exams IS no small fest. Each Of the six -hour ex:uninatious takes, on ivertge, a minimum of approximately 2i(1 hours of intensive self -study and prepara- tion. The combined pass tate (aggregated over all three exam levels) for the lune and Decem- her exams since 1963 is 52 percent. As ritr0rous as the curriculum and exami- nations ure, the CEA Program requires more than academ- ic preparation. Before they earn the rinfu to use the CFA designation, candidates must have three to foto' years of prol`essimaal experience in the investment decision-nral:ing process. Additionally, they must fulfill dae CFA lnstitute membership requirements and commit to uphold the Strin- gent CFA Institute Cade of Ctbtrr and Standards of Prnfrr- sioual ( ondrrrt. Ethics The integrity of investment advisors is of dae utmost importvtce. Their skills and advice directly impact the financial well-being of their clients. That is shy every (1A ch.uterholder. CFA lnstitute member, and CFA candidate is required to sign an annual statement tleclarill' his/her adherence to the CGA Institute Cadc of Ethos and Standind< ul Yrnl"csimal Gondar/. -The Calc and .5710/11ardc require menaherS and randi- d:ucs to act with integrity, practice in a professional aril ethical mailmen. eScrcise independent professional judgment. maintain :and improve their pruliSsionel competence, :and put client interests belole their own. The 160-1)i9t (.F:\ 111stitate Stawhirdr of Plattin' llandboo4' — an "insu-uction CFA I n stitate 1 s the global, mol-'r-iit prolesslonal RNSTITUTE ���� a sac iron that administers the Chartered F.ra"Cial Analyst' tuicalum andexom upon program of cl ido andel, votantory eth cs-bosed proton slanal and per lormonce-reporlmg sluoclards I -r the �nves'mcnt Industry. CFA nslitule was kroear as AMR {Assodotion for nveslmenl Management and ReseorchJ from 1990 to early 2004, and before that wos Iwo sep. orate organizations whose roofs go buck to 1947 More in61111. ion may be. lound 01 wv; w.ck:"" o. ora. . f: "ecas un b:re: •., :•5ol,r if ......Yic• nn d,, i ci manual... lot ethical guidil nee within the investment cuno- numity — interprets :and expands upon the requirements of the Curk :and SlandanE. Cf .A Institute investigates all allegations of violations Of the Code, and S'rardards, whether self -disclosed 3 by the CFA cliarterhoker or raised by' an investor, fellow investment professional, or the uaedia. Those ah0 are found ut have v101zted the Codr and Standards, or who fail to divulge formal n'nnplaints AS required in the annual Cl :A Institute PI'LIfeSSlOn:tl COMI1.1Ct Statement. AIC Subject to disciplinary sanctions from CFA hastitute. Sanctions can range fr(iro priv;rte censure up to revoking membership in CGA Institute and the right to use the CE -A dcsigmation. Recognition A relevant end cvohVing Cal"ICnIUtn, rigor- ous examinations, and it stringemt'applica60 11 ole the CF -A Institute C;odc ofTabus and Sfamlaldv of I'rnji-wourll C;wulnrt have been hallmarks of the CEA Program throughout its histol -V. Recognition of the CFA Program's globally rele- vant Candidate Body of Knowledge " anti the professional standards ejilt) odtell in the program makes the CIA desia- nation the mark of distintYiora lin- investment prnfessionnls avnrldwide. It is a global distinction recognized and reward- ed by employers, respected ht: reguhtors mid investment ll and demanded by private investors_ ■ CulmrlI I,hid InAir nlr for oro r minr l?niw 01 I) hrugrrulic-1111/ su,uirry: 560 R:n C. I lint 1), ive 110, liuc i668 Ch:n'Inuescille. \'� "9113-066h ,Y)0 -]-1.7-A1 i-' r et)^re 434-951-; P)Q ric IF .k 951-5 6' .nx intim%t�cfa inctiurte.ufu� =....I CHARt O11tSVlllt NtW r0R11 - vaNG %ONG - IONnOH GARRISON F I N A N C I A L INVESTMENT MANAGEMENT AGREEMENT Sample GARRISON FINANCIAL 605 West Dickson Street, Suite 201 Fayetteville, Arkansas 72701 (479) 587-1045 Telephone (888) 442-7637 Toll Free (479) 587-1257 Facsimile www earrisonfinancial.com INVESTMENT MANAGEMENT AGREEMENT BETWEEN Client Name m GARRISON FINANCIAL This Investment Management Agreement between Client Name (the "Client') and Garrison Financial, LLC (the "Investment Advisor") is effective as of the date day of Month, 2013. WHEREAS, the Client is desirous of appointing the Investment Advisor as investment manager with respect to the investment of certain assets of the Client; and WHEREAS, the Investment Advisor is willing to accept the duties and the responsibilities of an investment manager set forth herein with respect to such assets; NOW, THEREFORE, in consideration of the premises and mutual considerations provided in this Agreement, and intending to be legally bound, the Client and the Investment Advisor agree as follows: 1. Appointment. The Investment Advisor is hereby appointed to act as an investment manager with respect to the assets of the Client specified in Schedule A attached hereto and the proceeds of the investments thereof and accretions and addition thereto (collectively, the "Assets"), and the Investment Advisor will famish continuously an investment program with respect to the Assets. The cash, securities, and other investments making up the Assets are sometimes referred to collectively herein as the "Account." The Client may add additional Assets to the Account. The Client may remove any of the Assets from the Account at any time. Upon removal of Assets, the Investment Advisor shall have no further obligation to provide the investment management services contemplated by this Agreement with respect to such Assets. The Client hereby instructs the Investment Advisor to have all of the Assets held by Charles Schwab & Company, Inc. (Custodian), for the investment accounts of Client Name. Notwithstanding any provision of this Agreement, the Investment Advisor shall not be liable for any error, mistake, or unlawful act committed by the Custodian or for any loss suffered by the Client as a result of the custodianship of any of the Assets by a Bank or any other person, except if and only to the extent that any such error, mistake, act, or loss is a direct result and proximate result of misfeasance, bad faith, or gross negligence on the part of the Investment Advisor in the performance of its obligations and duties under this Agreement, and the Client shall otherwise look only to such Custodian for legal or equitable relief in connection therewith. 2. Fees. The Client will pay the Investment Advisor, as compensation for its services under this Agreement, fees determined in accordance with Schedule B, which is attached to this Agreement. The Client may elect to have the fees directly deducted from the account. The Client can indicate billing preference on the custodial application. Please be advised that it is the responsibility of the client to verify the accuracy of each billing. The custodian will not determine whether the fee is properly calculated. In the event fees are deducted directly from the �A INVESTMENT MANAGEMENT AGREEMENT 1 Page 2 of 8 GARRISON FINANCIAL Initial client account, the custodian will be furnished with the dollar amount of the fee and the specific account where the deduction will be made. 3. Authority of the Investment Advisor. Subject to the provisions of Section 5 of this Agreement, the Investment Advisor shall have the discretionary authority to manage and control the Assets, including the power to acquire and dispose of investments of the assets. Except as the Client may otherwise from time to time specify in writing to the Investment Advisor, the Investment Advisor shall not be required, when exercising its authority under this Section 3, to consult with or obtain the consent of the Client. 4. Limitation of Liability of the Investment Advisor. The Investment Advisor shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Client in connection with the matters to which this Agreement relates except a loss resulting from willful misfeasance, bad faith, or gross negligence on the part of the Investment Advisor in the performance of its obligations and duties under this Agreement. The Investment Advisor does not guarantee the future performance of the Client's account or any specific level of performance, the success or accuracy of any investment decision/determination or strategy that the Investment Advisor may use, or the success of Investment Advisor's overall management of Client's account. The Client understands that investment decisions made for the Client's account are subject to various market, currency, economic, political and business risks. The Client understands that at any given point in time the value of an investment may be worth more or less than the original purchase price. Except as may otherwise be provided by law, the Investment Advisor will not be liable to the Client for (a) any loss that Client may suffer by reason of any investment decision made or other action taken or omitted in good faith by the Investment Advisor with that degree of care, skill, prudence, and diligence under the circumstances that a prudent person acting in a fiduciary capacity would use, (b) any loss arising from the Investment Advisor's adherence to the Client's instructions, or (c) any act or failure to act by a custodian, any broker or dealer to which the Investment Advisor directs transactions for the Client's account, or by any other third party. Notwithstanding the limitations listed in Section 4, the client is not waiving any rights under the federal securities laws. 5. Investment Limitations and Guidelines. The Investment Advisor shall manage the Assets in accordance with the investment objectives, policies, and restrictions set out from time to time in Schedule C, which is attached to this Agreement. The Client may, from time to time, revise, supplement, or otherwise modify the guidelines set out in Schedule C by specifying such revision, supplement, or amendment in writing to the Investment Advisor; provided, however, that no such revision, supplement, or modification shall be effective until written notice thereof is received by the Investment Advisor. 6. Brokerage. (a) The Investment Advisor may place orders both as to sales and purchases of investments of the Assets through any broker or dealer it chooses. In selecting a broker or dealer for any transaction or series of transactions, the Investment Advisor may consider a number of factors including, for example, net price, reputation, financial strength and stability, efficiency of the Investment Advisor's execution, block trading and block positioning capabilities, willingness to execute related or unrelated difficult transactions, and other matters ordinarily involved in the receipt of brokerage services generally. The Investment Advisor shall not be deemed to have acted unlawfully or to have breached any duty created by this Agreement solely by reason of its having caused the Client to pay a broker or dealer that provides brokerage or research services to the Investment Advisor an amount of commission for effecting a portfolio transaction in excess of the amount of commission another broker or dealer would have charged for effecting a portfolio transaction, if the Investment Advisor determines reasonably in good faith that the amount of such commission is reasonable in relation to the value of the brokerage or research services provided by such executing broker or dealer viewed in terms of a particular transaction or the Investment Advisor's overall responsibilities to the Client or its other discretionary client accounts. (b) The Client agrees that the Investment Advisor may aggregate sale and purchase orders of securities held in the Account with similar orders being made simultaneously for other accounts managed by the Investment Advisor or for accounts of the affiliates of the Investment Advisor if, in the Investment Advisor's judgement, such aggregation shall result in an overall economic benefit to the Account based on an evaluation that the Account is INVESTMENT MANAGEMENT AGREEMENT Page 3 of 8 Initial benefited by relatively better purchase or sale prices, lower commission expenses, and beneficial timing of transactions, or a combination of such factors. (c) The Investment Advisor will allocate aggregated transactions (block trades) in a manner that is fair and equitable to each client of the Investment Advisor. An internal allocation report will detail the list of participating accounts and will show the allocation between each account. Orders that are partially filled will be allocated to each client account in a computer generated, random fashion that is fair and equitable as determined by the Investment Advisor's Block Trade Allocation Policy. (d) The Investment Advisor will not at any time have custody of, or access to, Client Assets. The Investment Advisor may direct that distributions be made to the Client or to other accounts maintained by the Client. 7. Other Activities of the Investment Advisor. In addition to the investment management services to be performed by it under this Agreement, the Investment Advisor or any of its affiliates may engage in any other business and may render investment and advisory services to any other person, even if such other person may have investment policies similar to those required to be followed by the Investment Advisor with respect to the Assets. The Investment Advisor may, at any time, buy or sell securities of the same kind or class that are purchased or sold with respect to the Account. 8. Reports. The Investment Advisor agrees to furnish the Client with quarterly statements of the Account, in a format reasonably acceptable to the Client and the Investment Advisor (including e-mail and other electronic means), and such other reports and information as the Investment Advisor customarily makes available to other clients. Clients will also receive periodic reports directly from their custodian. Reports sent electronically by the Advisor are deemed delivered upon successful transmission by the Advisor. Client is required to notify Advisor immediately if they do not receive a quarterly report. 9. Proxy Voting. Unless otherwise requested in writing by the Client, the Investment Advisor shall not take any action with respect to the voting of proxies solicited by any person with respect to any investment of the Assets. The Investment Advisor will advise the Client on the issues presented in such proxies if so requested by the Client. 10. Block Trading. Block trades are allocated in a fair and impartial manner. Partially executed block trades are allocated based on a randomly generated computer list. Company and personal accounts included in block trades are excluded for the purpose of allocation in the event of a partial fill. In the event the block trade is executed at varying prices, an average price will be calculated and each account will receive the average price. 11. Termination. The Investment Advisor may terminate this Agreement on thirty (30) days notice to the Client. The Client may terminate the Investment Advisor's appointment as an investment manager with respect to all or part of the assets immediately upon delivery of notice of termination to the Investment Advisor as provided in Section 1 above. 12. No Assignment. Neither the Investment Advisor nor the Client may assign this Agreement or delegate its responsibilities hereunder without the written consent of the other party. 13. Communications. Any notice, instruction, request, consent, demand, or other communication required or contemplated by this Agreement to be in writing shall be given or made or communicated in person to, or by United States first class mail, postage prepaid, addressed as follows: If to the Client: Client name and address INVESTMENT MANAGEMENT AGREEMENT Page 4 of 8 Initial If to the Investment Advisor: Garrison Financial 605 West Dickson Street, Suite 201 Fayetteville, Arkansas 72701 provided that each party shall, by written notice, promptly inform the other party of any change of address. Communication may also be conducted by e-mail or other electronic means. All written, but non -electronic, notices to either party shall be effective upon receipt. All electronic notices to the Advisor shall be effective upon receipt and all electronic notices to the Client shall be effective upon successful transmission by the Advisor. The Client shall notify the Investment Advisor, in writing, of the people who are authorized to act on behalf of the Client under this Agreement. 14. Modification of Agreement. This Agreement may be amended only by a written instrument signed by the Client and the Investment Advisor;rop vided, however, that Schedule C may be amended, supplemented, or otherwise modified at any time or from time to time by this Client by written notice to the Investment Advisor. 15. Governing Laws. This Agreement shall be construed in accordance with the laws of The State of Arkansas (other than conflicts of law rules), except to the extent superseded by federal law. IN WITNESS WHEREOF, the Client and the Investment Advisor have executed this Agreement as of the day and year written above. Client Client ACKNOWLEDGE OF RECEIPT OF FORM ADV PART II & CLIENT CUSTODY NOTIFICATION REQUIREMENTS. Client hereby acknowledges receipt of ADV Part II as of the day and year written above. The Investment Advisory Act of 1940 requires that information in this contract be delivered to the Client at least 48 hours prior to contract initiation or that the Client be permitted to terminate the contract within five business days without penalty. Rule 206(4)-2 (the "Rule") of the Investment Advisors Act of 1940, as amended , requires us to notify you that by engaging us to manage your assets under this contract that you have also opened a custodial account with the custodian of your choosing for the safekeeping of your assets. We are required under the Rule to have a reasonable belief, after "due inquiry", that your chosen custodian will send client statements directly to you. After due inquiry, we have determined that the custodian does, in fact, send client statements directly to you because they also send a copy of those statements to us. YOU ARE URGED TO COMPARE THE CLIENT STATEMENTS YOU RECEIVE FROM YOUR CHOSEN CUSTODIAN TO THE CLIENT STATEMENTS YOU RECEIVE FROM US AND NOTIFY US IMMEDIATELY OF ANY DISCREPANCIES. Client Client GARRISON FINANCIAL Name and Address of Safekeeping Institution: Charles Schwab & Company, Inc. 101 Montgomery Street By: San Francisco, CA 94104 �A INVESTMENT MANAGEMENT AGREEMENT 7 Pae 5 of 8 GARRISON g FINA NCIAL Initial SCHEDULE A TO THE INVESTMENT MANAGEMENT AGREEMENT BETWEEN Client Name AND GARRISON FINANCIAL Assets of the Account: To be determined following transfer of accounts. INVESTMENT MANAGEMENT AGREEMENT Page 6 of 8 Initial INANCIAL SCHEDULEB TO THE INVESTMENT MANAGEMENT AGREEMENT BETWEEN Client Name AND GARRISON FINANCIAL In consideration of the services performed by the Investment Advisor under this agreement, the Client agrees to pay the Investment Advisor a management fee determined as follows: 1% of all assets under management Certain account fees are negotiated based on the nature, size and extent of the investment advisory services provided. Asset management fees are calculated based on the average market value over the billing cycle. Fees are calculated quarterly on an annual basis according to the schedule above and are paid quarterly in arrears. Fees for partial billing periods are prorated based on the actual number of days assets are under management. Client understands that Assets of the Account invested in shares of mutual funds or other investment companies ("Funds") will be included in calculating the value of the Assets for purposes of computing Investment Advisor's fees and the same Assets will also be subject to additional advisory and other fees and expenses, as set forth in the prospectuses of those funds, paid by the funds but ultimately borne by the Client. INVESTMENT MANAGEMENT AGREEMENT Page 7 of 8 Initial GARRISON Y I NA N C I A L SCHEDULE C TO THE INVESTMENT MANAGEMENT AGREEMENT BETWEEN Client Name AND GARRISON FINANCIAL Investment Policies and Guidelines: See Investment Policy Statement. INVESTMENT MANAGEMENT AGREEMENT Page 8 of 8 Initial rq GAMSON f INA NCI AL Revenues: Employee Contributions Employer Comributlons State Insurance Tax Local MIIIage (A mills) 10% City Fkree and Forfeitures Sale of Confiscated Goods Interest and Dividends Gain (Loss) on Sales Police Supplement Future Supplement Mlso Revenue Total Revenue Expenditures Regular Monthly Bene to Police Supplement Future Supplement imeslment Manager Fees Other Expenses: Office 8uppiles/prinOng Audit Fees Professional Sambas Legal Fees Bank Fess Total Expenses Not Income (Loss) Before Market Adj Market Adjustment Net Income (Love) Police Pension Fund Revenue Expense Summary 413012014 12!3112013 2012 2011 2010 2008 2008 2007 2006 2005 $ 551,563.63 $ 1,675,328.66 $ 1,701,894.06 S 1,701,741.33 $ 1,709,090.86 $ 1,766,553.62 It 1,795,895.72 $ 1,788,766.00 $ 1,836,850.00 $ 1,532,151.00 $ (206,979.30) $ (415,374.05) It $ - $ - $ - $ - $ $ $ 4,139.00 $ 5,193.00 852,113.28 $ 756,870.42 $ $ $ - $ - 151,740.00 $ $ $ - $ 8,278.00 $ 10,385.00 383,445.98 $ $ 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 $ 40,974.14 It 494,749.68 S 511,981.22 $ 498,380.57 $ 508,192.07 $ 485,345.06 $ 441,696.50 $ 388,877.00 $ 370,649.00 $ 339,416.00 4 38,274.12 $ 112,992.59 $ 125,274.87 $ 128,045.40 $ 130,723.07 $ 123,853.64 It 131,683.83 $ 106,385.00 $ 119,147.00 $ 128,833.00 S 427.05 $ 1,898.28 $ 3,491.61 $ 5,028A0 $ 6,487.69 $ 9,732.16 $ 7,715.61 $ 10,808.00 $ 6,343.00 $ 120.00 $ 88,393.85 $ 263,480.49 It 285,514.18 $ 253,520.02 $ 287,714.80 S 268,907.42 $ 359,998.26 $ 358,699.00 $ 373,776.00 $ 347,752.00 $ 163,915.07 $ 160,088.59 $ 168,288.36 $ 209,001.15 $ 362,318.64 $ 163,193.23 $ (885,400.76) S 396,378.00 It 420,298.00 It 231,891.00 $ 12,800.00 $ 37,800.00 $ 39,9W.00 $ 40,600.00 $ 42,000.00 $ 31,200.00 $ 30,OW.00 S 30,000.00 $ 30,500.00 $ 31,275.00 $ 46,620.00 $ 55,575.00 $ 35,460.00 S 26,061.60 111 38,350.00 $ 41,370.00 $ 86,040.00 $ 60,060.00 S 51,199.00 $ 195.77 $ 53.39 $ 104.60 $ 1,561.27 $ 5,757.99 $ 161.46 $ 007.00 $ 1,128.00 $ 2,401.00 $ 344,584.23 $ 1,269,954.61 $ 1,328,469.62 $ 1,384,722.87 $ 1,557,418.77 $ 1,318,568.80 $ 313,494.32 $ 1,585,284.00 $ 1,620,942.00 $ 1,499,538.00 $ 511,463.40 $ 1,53.5,372.30 $ 1,551,087.50 $ 1,564,986.62 It 1,582,SW.00 $ 1,628,521.36 $ 1,838,087.78 $ 1,581,319.00 $ 1,458,488.00 $ 1,362,088.00 $ 8,200.00 $ 24,850.00 $ 25000.00 $ 20,400.00 It 27,250.00 $ 28,300.00 S 30,000.00 $ 30,000.00 $ 29,600.00 $ 29,800.00 $ 45,510.00 $ 51,870.00 $ 35,840.00 It 24,952.60 $ 36,816.00 $ 41,370.00 $ 66,040.00 $ 60,060.00 $ 48,245.W $ 31,776.68 $ 66,240.45 $ 69,600.63 $ 71,060.23 $ 70,389.02 $ 68,150.57 $ 82,754.75 $ 87,712.W $ 86,243.00 $ 86,672.00 $ 66.81 It 46.20 $ - $ 84.00 $ 3,400.00 $ 3,600.00 $ 3,500.00 $ 3,500.00 $ 3,500.00 $ 3,600.00 $ 3,500.00 $ 3,300.00 $ 3,210.00 S 103.76 $ - $ 2,000.00 $ - $ 1,025.00 11 29.70 $ 99.10 $ $9.83 $ 164.48 $ 119.34 It 161.69 $ 203.21 $ 195.00 $ 156.00 $ 156.00 $ 551,563.63 $ 1,675,328.66 $ 1,701,894.06 S 1,701,741.33 $ 1,709,090.86 $ 1,766,553.62 It 1,795,895.72 $ 1,788,766.00 $ 1,836,850.00 $ 1,532,151.00 $ (206,979.30) $ (415,374.05) It (373,224.44) $ (317,018.65) $ (151,674.09) $ (447,984.82) $ (1,452,401.40) $ (223,482.00) $ (15,908.00) $ (32,615.00) $ 852,113.28 $ 756,870.42 $ 770,180.29 $ 770,856.91 S 410,382.51 $ (1,291,031.77) $ 151,740.00 $ 344,973.00 $ (361,860.00) $ (206,979.30) $ 436,738.21 $ 383,445.98 $ 453,150.63 $ 619,182.82 $ (37,802.31) $ (2,773,433.17) $ (71,742.00) $ 329,055.00 $ (394A75.00) Book Value Total Reserve Assets • $ 6,479,221.26 S 8,682A68.70 $ 7,081,891.04 $ 7A88,021.86 $ 7,788,041.00 $ 7,950,218.00 $ 8,398,199.00 $ 9,880,801.0 $ 10,104,093.00 S 10,119,990.00 Market Value Total Reserve Assets * $ 7,224,931.66 $ 7,443,057.68 S 7,889,491,43 $ 8,168,105.82 $ 8,588,897.00 $ 8,860,804.00 $ 8,008,366.00 $ 10,819,789.00 $ 10,891,530.00 $ 10,582,468.00 -Assets less arty liabilities "Market Value calculated at year and 5/26/2014 K:1Pollee PenslonlRemus & Expanse Summary2014 PP Reveune Expense SumnaryRavenue and Expense Report 043014 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