HomeMy WebLinkAbout2014-10-16 - Agendas - FinalFayetteville Policeman's Pension and Relief Fund
Meeting Date
Adjourn Time
Attendees:
'!:.:,vh -� -�'. RJ:>: t 6'.x,.1.. �• sYt,`rj
�'.--•'{,�,,w : i.:- t. �4+ ire: /CQ.v�C L1/(<�K,r� `�1'f�`I.1 r'�
Genn Afkin r ., e:, %L..�'lli Dr aid.
Subject:
e
Motion To:
,L ,
Motion By:
Seconded:
-'
John Brown
✓
Ruston Cole
Frank Johnson
✓
Mayor Jordan
Ruston Cole
Eldon Roberts
QbAtwi�
Sondra Smith
"
Melvin Stanley
Mayor Jordan
Subject:
i
Motion To:
,L ,
Motion By:
Seconded:
^ q l n M1
John Brown
Seconded:
Ruston Cole
Frank Johnson
✓
Mayor Jordan
Ruston Cole
Eldon Roberts
Sondra Smith
"
Melvin Stanley
Mayor Jordan
Subject:
4404 N
Motion To:
Motion To:
y o ✓C
Motion By:
46dor1
S�
Seconded:
Ruston Cole
John Brown
✓
Mayor Jordan
Ruston Cole
✓
Frank Johnson
✓
Melvin Stanley
Mayor Jordan
✓
Eldon Roberts
Sondra Smith
Melvin Stanle
✓
Subject:
Motion To:
Motion By:
Seconded:
John Brown
Ruston Cole
Frank Johnson
Mayor Jordan
Eldon Roberts
Sondra Smith
Melvin Stanley
Lioneld Jordan Chairman
Sondra E. Smith Treasurer
Eldon Roberts Secretary
Retired Position 1
Ruston Cole
John Brown
Melvin Stanley
Frank Johnson
Policemen's Pension and Relief Fund
Board of Trustees Meeting Agenda
October 16, 2014
Page 1 of 2
Retired Position 2
Retired Position 3
Retired Position 4
Retired Position 5
A meeting of the Fayetteville Policemen's Pension and Relief Fund Board of Trustees will be
held on October 16, 2014 at 3:00 p.m. 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 April 17, 2014 meeting minutes
• Approval of the May 29, 2014 Special meeting minutes
Pension List Changes: None
Approval of the Pension List:
• Approval of the November and December 2014 pension lists
• Approval of the January 2015 pension list
Unfinished Business:
• None
New Business:
• Revenue & Expense Report: 3rd Quarter — September 30, 2014 report
• 2013 actuarial valuation
• 2014 turn back
• Pension Review Board "Evaluating Investments" memo
• Discuss rescheduling the January 15, 2015 Policemen's Pension meeting
Garrison Financial:
• Kerry Watkins email regarding transfer complete
• Kerry Watkins "Cost Basis" letter
• 4t1 Quarter reports
Page 2 of 2
Policemen's Pension and Relief Fund
Board of Trustees Meeting Agenda
October 16, 2014
Longer Investment Correspondence and Reports:
• Northern Trust transfer funds letter
• Longer final portfolio reports
• The Longer View
Informational:
• Policemen's Pension Board contact list
Lioneld Jordan Chairman
Sondra E. Smith Treasurer
Eldon Roberts Secretary
Retired Position 1
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
April 17, 2014
Pagel of23
Jerry Friend
Retired Position 2
John Brown
Retired Position 3
Melvin Stanley
Retired Position 4
Frank Johnson
Retired Position 5
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
April 17, 2014
A meeting of the Fayetteville Policemen's Pension and Relief Fund Board of Trustees was held
on April 17, 2014 at 3:00 p.m. 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, Melvin Stanley, Kit
Williams, City Attorney, Sondra Smith, City Clerk, Dee McCoy, City Clerk's office,
Andrea Foren, Purchasing, Paul Becker, Finance Director, Elaine Longer and Kim
Cooper, Longer Investments.
January 16, 2014 Meeting Minutes
Sondra Smith: The minutes have not been e-mailed out. They are in your packet for your
review and can be approved at the next meeting.
Pension List Changes:
None
Approval of the Pension List:
Approval of the May, June and July 2014 pension lists
Sondra Smith: There is one slight change. There will be an extra benefit for Rick Hoyt due to
years of service and age. The additional amount is for July and is prorated. The July pension list
has Mr. Hoyt listed twice with the extra benefit listed in a separate line item. After July it will be
the full extra benefit.
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
April 17, 2014
Page 2 of 23
Jerry Friend moved to approve the May, June and July 2014 pension lists. Eldon Roberts
seconded the motion. The motion passed with a unanimous vote.
Unfinished Business:
City Attorney Memo Regarding Parking Fines
Kit Williams: The fines that are collected by the Police Department, part of them are deposited
in the police pension fund. The vast majority of our fines are not collected by the Police
Department but are collected by the Parking Division. We don't use police officers to write very
many parking tickets. They can, for example, if someone parked in a disabled spot illegally,
write a ticket for that. State law says 10% of all fines and forfeitures collected by the Police
Department of the City for violation of ordinance or state law would be added to your fund.
Parking revenue, almost all of that, would not be applicable.
Mayor Jordan: Frank, wasn't that the question that you asked at the last meeting?
Frank Johnson: Yes, that answered it.
Sondra Smith: In your packet is a copy of City Attorney Kit Williams' memo and a copy of the
information from Sharon Waters, Parking & Telecommunications Manager.
New Business:
Revenue & Expense Reuort: 1st Quarter —March 31, 2014 Report
Sondra Smith: 000 the end of the 3rd quarter your book value was $6,546,751.74 and your
market value was $7,253,749.76. That's down slightly from the year end.
Kit Williams: What you should be looking at is the market value. Book value is just what you
paid for it. Market value is what it's allegedly worth March 31St. That can obviously fluctuate up
and down with the market.
Actuarial Valuation State Code 24-11-205
Sondra Smith: In your packet is a copy of the state code regarding your actuary report and how
it's paid for. The money that comes in from the state, part of it is used to pay for the actuary
reports.
Jerry Friend: Do they bid those out our anything?
Kit Williams: I've doubt it because Jody Carreiro has done it for as long as I can remember.
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
April 17, 2014
Page 3 of 23
Paul Becker: The actuarial study has not been bid out since I've been going down there
Jerry Friend: How do we know if we are paying him too much?
Paul Becker: That's in the jurisdiction of the Pension Review Board. They make that selection
and renew those contracts. Whether or not it can be done cheaper by somebody else, I can't
answer.
Kit Williams: It's very possible that it's professional services, so they might not actually bid it
out. They might have gone out for request for qualifications. When it is done that way, they look
at their qualifications and not the amount of money it costs.
Rick Hoyt Additional Benefit
Sondra Smith: There is a copy of the state statute in your packet that explains the additional
benefit, how that works and when they qualify for it.
Kit Williams: How many years did he work over 25?
Eldon Roberts: He actually worked a little over three, but they have to be completed. He had
three completed. Richard Watson and Rick Hoyt and I are the only three that draw that. There
will never be anybody else.
Kit Williams: That was under the old plan?
Eldon Roberts: Right. I might add too that it is a non -spousal benefit.
Arkansas Local Police & Fire Retirement System (LOPFI) Consolidation with LOPFI
Letter Dated January, 2014
Sondra Smith: In your packet is a letter that we received letting you know the consolidation
dates if you decide to consolidate with LOPFI. The window is April 1, 2014 to October 1, 2014
for this year. If you decide to do that we would have to do an actuarial evaluation.
Frank Johnson: We are interested.
Eldon Roberts: We knew this letter was coming. When this first came up there was some talk
amongst the board to do a special evaluation and spend $4,000 to $5,000. We had a meeting and
found out the rank and file is not ready to go that route yet.
"At Risk" Letter from Pension Review Board (PRE) — Action Plan Needed
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
April 17, 2014
Page 4 of 23
Eldon Roberts: PRB is telling what their take is on it if no changes are made. I don't know
where the information is coming from.
Sondra Smith: PRB is wants us to respond. The letter says "Respond with a plan of action."
They would really like a response by April 30a'.
Kit Williams: Where the letter says the assumption is that the City would be responsible for
benefit payments, I think that is incorrect in most cases. There have been cities, that in order to
allow their pension plans to increase benefits when they were not approved by Jody Carreiro and
the state people, agreed to stand behind the plan and finance the plan. If a city council did that,
that city is on the hook. They have to stand behind it. They can't back out of it once they've
done something like that. Apart from that, under current state law, I do not believe the City is
liable. Of course, that law can be changed by any legislature and the legislature could make the
City responsible at some point in time.
Eldon Roberts: Is that the law that you disagree with, that the Attorney General rendered an
opinion?
Kit Williams: No. There have been two laws brought forward in legislative sessions that would
have in fact done that. The City opposed those laws and pointed out to the legislator that was
bringing them forward the substantial effect on city finances if that law was passed. In one case,
a legislator who was a local legislator withdrew it. It was something that the Pension Review
Board actually sponsored. He was just carrying it for them and didn't know what the
consequences would be so he withdrew it. The second time it was tried by a different person.
The Arkansas Municipal League and Fayetteville opposed that law and it was not passed. The
basic position that we had was that it should be a City Council decision and it shouldn't be
forced upon them by the State Legislature. A decision to spend local taxpayer money should be
made here not in Little Rock.
Eldon Roberts: There's no for sure direction, there's no court precedent in the State of
Arkansas. That's what we're waiting for and it probably will come sometime down the path. I
don't think we will be involved. We'll just have to follow the precedent once it's set.
Kit Williams: That's about whether or not you can reduce benefits. The Attorney General and I
disagree on that. He looks at a code section and thinks it says one thing and I look at the code
section and think it says something else. We just agree to disagree on that. So you're right,
there's no final decision by a court on whether or not you have the power to reduce benefits at
this point in time to save your plan.
Eldon Roberts: That's what you and the Attorney General argue about. There's no precedent set
yet whether a city is liable for our pension plan when the money is exhausted. That is what's
going to come out in court one of these days.
Kit Williams: It's possible it would. I see no provision in the law that would remotely make the
city liable.
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
April 17, 2014
Page 5 of 23
Eldon Roberts: It's not been to court.
Kit Williams: That's right. The law can be changed by the legislature.
Sondra Smith: You have a huge unfunded liability that someone's going to have to pay for at
some point in time, unless things drastically change in the plan. I think the unfunded liability is
about $12 million.
Jerry Friend: Can Jody Carreiro officially require us to send a plan of action?
Kit Williams: No, I don't think he can.
Sondra Smith: I don't know that Jody is requesting it, I think it's being requested by the
Pension Review Board.
Paul Becker: I think it's from David Clark as directed by the Pension Review Board.
Jerry Friend: The Pension Review Board can officially require us to?
Paul Becker: They can ask you, yes.
Kit Williams: I don't think they have any power over you. You're a creature of the statute. The
only power they have is the power to review increases in benefits. You're not going to be able to
increase benefits anymore anyway.
Eldon Roberts: I think they have the power to withhold our insurance turn back money for not
reporting and filling out forms that have to be sent in every year. Paul and I see them do that.
They do have the power to withhold your insurance turn back money. I don't know that they
have that power or would do that for us not responding to this letter they've written.
Kit Williams: You can certainly respond. I think we did that for the Fire Pension Board when
they got a request like that. I think we did a short response.
Sondra Smith: We did.
Kit Williams: We looked at it and there doesn't appear to be a way to resolve the issue at this
point in time. The Fire Pension Board isn't ready to reduce benefits and the City Council isn't
ready to have the consolidation go forward. So what's your plan? There's an impasse.
Jerry Friend: If they say that we can't lower benefits, how can you have a plan?
Kit Williams: The only other thing would be if you could convince the voters to raise your
millage.
Jerry Friend: I'd even vote against that. I don't want to pay more taxes.
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
April 17, 2014
Page 6 of 23
Paul Becker: You'd have to go to the council.
Sondra Smith: Kit, you said you didn't think they would lose their current millage by trying to
raise the millage?
Kit Williams: I don't think the current millage would go away.
Sondra Smith: You'd have to word it a certain way so you wouldn't have to worry about losing
your current millage. Is it in the state statute that if the benefits keep dropping and you only have
a certain number of pensioners left you have to pro -rate benefits?
Kit Williams: That's what would happen if you actually had nothing in your fund. You would
still get the millage coming in and the turn back. You would distribute that in a prorated basis
for that year and then when it's distributed that would be it for that year. Then the next year you
would be able to have further payments. That is not a good plan though.
Sondra Smith: We don't want you to get to that point.
Jerry Friend: What concerns me is being told we can't do anything until we get to that place.
Kit Williams: If the Fire Pension Board decided to lower benefits they would have to reduce
benefits 22% to make their plan basically sound. There's no guarantee but the risk of ruin is very
little. They chose not to do it. If they had chosen to do it then they could possibly get a test case
to the courts and they would tell you one way or the other if you can reduce benefits. To do that
some pensioner would have to challenge the reduction. Now, if the board was right there would
be no problem and no loss. If the board was wrong, all you do is pay all the pensioners,
including yourselves, the money as if you had not made the reduction. The board members don't
have any liability because the pension plan is still whole. You can wait until the pension plan
craters and there's no money in there, then a pensioner could sue you, for not fulfilling your
fiduciary duties to preserve the plan, and if they win then you all would be individually liable
because there would be no money in the plan to pay that. Doing nothing has a risk.
Melvin Stanley: Even when the Attorney General says we don't have the ability to reduce
benefits?
Kit Williams: Right because he's an attorney like me, and he could be wrong, without a court
decision, you're not absolutely protected. In defending you, I would argue what the Attorney
General is saying.
Eldon Roberts: You'd take his side then of course.
Kit Williams: I would be defending you so I would certainly be taking that side and make every
argument I could that you didn't have the right to do it. I would point out that's what the
Attorney General said and that's what the Arkansas Pension Review Board says. I would do
everything I could to defend you. The only difference is there's some possibility of individual
liability on each one of you as board members in that case. In the other case, where you would
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
April 17, 2014
Page 7 of 23
lower it, if I was wrong, there wouldn't be any blow back on you all because you would go back
to paying what you'd been paying and you'd pay the other part back. That could all be paid out
of the trust fund so you all would not be individually liable. That's why I recommended that to
the Firemen's Pension Board, but they didn't want to do that.
Jerry Friend: How do we need to go about drafting the letter?
Sondra Smith: We need to do it here today.
Kit Williams: Or instruct the secretary what to put it in and the Mayor can sign it.
Jerry Friend: Just that we feel our hands are tied.
Kit Williams: You can do that. You can site the Attorney General that it is his opinion we can't
lower benefits. The only thing we can do is raise revenues and we don't think we can.
Jerry Friend: Right.
Eldon Roberts: To me, out of the options they've given us here to respond back to it is the no
change option.
Kit Williams: But you might want to say why because anything like this might be evidence in
the future.
Jerry Friend: I think we should say why.
Sondra Smith: Maybe after Elaine gives the report we can draft something. I can get it typed
and emailed out to everybody.
Frank Johnson: I think there should be some reference to how this has been in discussion for
the last year or two.
Kit Williams: Oh yeah, I think that makes sense.
Sondra Smith: We can put that in the letter.
Frank Johnson: It's been a matter record and it's not something that we just started talking
about. I think it's important for that to be in there.
Kit Williams: Let's go to Elaine so she doesn't have to listen to us.
Elaine Longer: It's a very important topic. Even if the performance had been above the actuary
assumption it's still in a situation where the weight of the benefits is too great for the capital. So
it is a real timely discussion. I'm happy to help you in any way that I can.
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
April 17, 2014
Page 8 of 23
Longer Investments:
Longer Investment Advisor Agreement 2013
Longer Investments 1St Ouarter report March 31, 2014
Longer Investments monthly report
Elaine Longer: If you look at your reports, this is through the end of the first quarter. We've
taken a couple of moves to sort of position the funds with transfers. We have some things in
there that may or may not be what another money manager would hold. For instance, we had
gold in there, we sold the gold at a good gain. That's not something that you want to keep and
maybe in two months it's back down and then someone has to sell it at a less opportune time. So
we've done some tweaking like that just to position the fund to be ready to transition.
If you look at your portfolio, the first page is the portfolio appraisal as of March 31St. Equities are
about 45% of total. The income yield, which is just the dividends paid on the stocks is 3.76%.
That's considerably higher than the S&P 500 which is about 2.1%. So we adhere to the
conservative, the blue chip stocks that pay good dividend yield and are more defensive in the
market than other types of companies. Then we have the other income securities which represent
about 13% of total portfolio and produce an income yield of 6%. This has been a great addition
to the portfolio. We added this in in 2013 because we were concerned about the downside risk in
bond prices if interest rates should rise. Last year the ten year treasury net return was about
minus 8%. This other income category delivered about 15% positive return last year. The
Guggenheim Multi -Asset Fund is technically a portfolio that holds high income stock and about
a 10% real estate investment trust holding, so it's growth plus income. But you can see that
during the time that we've held it you've had about a 12% appreciation while it's earning a 6%
return on income.
The next category is investment grade bond fund which is 16% of total portfolio and yields
approximately 4%. We still have some of these treasuries that now you can't even come close to
them, a 5 1/8 coupon which will roll off in 2016 and a 4% treasury that won't expire until 2018.
The treasury component of the portfolio is about 15% and still yields about 4% on cost. What I
mean about you can't see that anymore, the current five year yield is about a 1.5% and the
current ten year is about 2.6%.
Then the next category, we still have some of the government agency securities which carry the
6 1/8% coupon. They won't roll off until 2015. We also have a limited partnership which
represents only about 1% of the portfolio, but this is a master limited partnership that holds
energy investment and yields about 6.33%. The total value is about $7.2 million, and the income
yield which is just dividends and interest income is close to 4% on the total. So you have a
growth component that is approximately 50% but you still have a 4% yield on total portfolio
compared to the current ten year yield of a 2.60. That's been our emphasis, is to really try to
secure the income yield which provides the downside protection but also it's really difficult to
get yield in this type of environment because the safety trade, which is treasuries, you can't get
any yield over there. You have to stretch out the risk curve or out the maturity spectrum to try to
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
April 17, 2014
Page 9 of 23
get income yield into the portfolio. That's why you see we've incorporated so many different
asset classes and types of securities within those asset classes to try to secure that yield in a
conservative manner but still be able to give you a good total return. I remember the good old
days where we used to be able to buy 6% government agencies with a five year maturity and a
two year call. We could do that all day long. Now you can't get anything close to that. What the
Fed is doing with their zero interest rate policy is they are basically holding interest rates at zero.
That's forcing pension funds and endowments, retired people, people who need income to go out
the risk curve to get income. So where are they going? They are going into junk bonds, less than
investment grade bonds, or they extend into bond funds that may have a weighted average
maturity of twenty years but they don't know the price risk should interest rates rise. They think
they own a Treasury bond fund, but it has significant price risk on the down side if interest rates
go into a rising cycle. It's a bit of a trip right now to be able to incorporate the income side of the
portfolio without extending the risk.
Kit Williams: Does the low cost of the ten year treasuries indicate that the general feeling in the
world is that inflation and interest rates are going to remain low?
Elaine Longer: Well, it's a real high wire act right now. If you've seen any of Janet Yellen, the
new Fed chair her testimonies, they are juggling a lot. The first target, when they entered into
taper, and taper is just reducing the amount of purchases that the Fed is doing in the treasury
market monthly, they were at $85 billion a month and they've been tapering that off. They are
trying to get to a point, sometime in the 4s' quarter this year, where the Fed is not buying
treasuries. In terms of when they intend to increase interest rates from zero, the goal that they sat
is that they would be data dependent instead of calendar dependent. They are looking for
unemployment to drop below 6.5% with inflation not going above 2%. So here we are close to
6.5% and now they are starting to move the target and now we are starting to hear 6%
unemployment because inflation it still not above 2%. There are a lot of moving parts and pieces
and that's why you see so much volatility in the bond market because every time Janet Yellen
speaks, the whole world stops to listen. I'm hopeful that we'll get back to a point where the
market is not so dependent upon central bankers.
Kit Williams: Once the tapering is over, won't that stop a lot of the dependency?
Elaine Longer: We're hopeful, yes. Once the taper is over you're still looking at the zero
interest rate policy. By holding rates at zero, when the Fed is committed to trying to secure a 2%
inflation rate, tells you that their goal is a negative real rate of return on risk free asset. They
can't take rates below zero, what they can do is hold them there as inflation goes up so that you
end up actually earning a negative rate of return. That's what their goal is at this point.
Kit Williams: Because they are against savings?
Elaine Longer: They aren't against savings so much, but if you're retired and you can't take the
risk of junk or the stock market, there's not a lot out there that the individual can achieve without
going out the risk curve. It's kind of a balancing act where if you look at the percent of exposure
that we have to each one of those assets within the other income category or the master limited
partnership category, even though they are high quality assets, we know that in a 2008 type
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
April 17, 2014
Page 10 of 23
event, they're not going to act like bonds. They're going to act like stocks. You have to be very
careful and monitor them as carefully as we do stock investments.
The next page shows realized gains year to date are about $78,000 and total income which is
dividends and interest income is approximately the same. The next page just shows the fixed
income side of the portfolio, so the weighted average yield to maturity is 4.4% and the weighted
average maturity is 3.6 years. This is a very conservative maturity and that's why you haven't
seen a lot of price risk with the volatility in the interest rates because we've adhered to a fairly
short moderate duration or maturity structure. Yet, we still have high coupons so we have an
income yield that's higher than what you would have if you were in thirty year bonds. The
beauty of it is, if you face a rising interest rate environment, you have a lot of liquidity in the
short term holdings to use to go out the yield curve to tap into higher interest rates. At this point,
it's kind of like a waiting pattern. You don't want to sell anything that you've got because you
can't replace those coupons, but it's too soon to roll into something else that has a longer
maturity.
The next page shows the return history inception to date and year to date in 2014, that's this final
line. The first quarter of the year, the DOW was down about 1%, the S&P was up about 1%. The
small cap stocks are performing worse because in the market like this people are more likely to
go into a conservative stock, so as of yesterday, the small cap indices was down about 4% year to
date. Fixed income is a positive 1.4% and the income other category is up 5.7% so that the total
return for the first quarter of the year was 1.1%. On the far column the 5.875% is just the
weighted average total of your actuary assumed return inception to date. It was 6% for quite
some time then it popped up to 7% in 2008-2009. Then of course, when interest rates crashed,
then the actuary assumption was returned back to 5% largely because on the fixed income side of
the portfolio you can't achieve the 6% that we used to be able to achieve. The actuary
assumption during the time that this portfolio has been managed is 5 7/8% and you achieved a
6.1% compounded return annually inception to date net of all expenses. That's what I mean
about the weight of the benefit that it's not a return question because your actuary assumptions
that lie behind the portfolio, to be able to maintain the goals of the retirement portfolio, have
been that. If you look at the next page, it's the contributions and withdrawals year to date. You
can see that the withdrawals year to date have been about $268,000, and the contribution was
$427 for a class action law suit. It's funny, we did a study that looked at all the class action
lawsuits that have been filled inception to date on this portfolio and it's just ridiculous. The
paperwork that has to go into every request for information and how much is returned. I'd like to
know what the attorneys make on that.
Kit Williams: I'm afraid to ask, because usually they're making millions.
Elaine Longer: The next page just shows your inception to date reconciliations. Beginning value
in 1990 was $1.35 million. Then there were additions that came into the portfolio of $3.5 million
from other money managers as it was consolidated and transferred securities in. Total
distributions have been $10.5 million and that nets against total investment return which has
been $8.55 million. The total portfolio is worth $7.253 million.
Paul Becker: Elaine, when you go to the net income, is that strictly interest income?
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
April 17, 2014
Page 11 of 23
Elaine Longer: No, this is total return. If you look at the categories right here, net income plus
accrued income is about $5.15 million. That would be all dividends and interest income. Then if
you look at realized and unrealized gains that total is about $3.4 million. That would be the
growth or appreciation of the security. It would break down as income which includes not just
bond interest income but also dividend income.
Paul Becker: So a majority of the gains have come from bond interest and interest income on
security?
Elaine Longer: And the capital appreciate part which is just unrealized and realized gains is
about the $2.4 million.
The investment policy follows and there's really nothing that I would recommend at this time
changing. The asset weighting gives us plenty of room to operate within. Especially with the
ability to exceed the equity category by up to 10%. You've seen us exceed on both ends in the
time period that we've managed the portfolio, so there's plenty of flexibility to be able to do
whatever we need to do within the asset category.
Kit Williams: So you would not recommend any changes in the current investment policy?
Elaine Longer: No.
Kit Williams: Because they are looking at other people.
Elaine Longer: Yes. Another thing is, once we changed it to be able to incorporate those other
income assets in the income category that opened up a lot of ability for us to be more defensive,
trying to achieve income, without subjecting the portfolio to the price risk that you find in a
straight bond. I would say that's still going to be important as you go forward because at this
point you are still at this multi -decade low of interest rates. You look at the duration, which is the
measure of price volatility on a ten year treasury at these interest rates, duration takes into
account the maturity length of a bond and also the coupon. The lower the coupon rate of return,
the longer the maturity structure, the more the volatility in response to a given change in interest
rate. Back in the early 1980's where we had such a dramatic rise in interest rates, you might have
had a ten year treasury with a 10% coupon. You still could have seen maybe a 4% decline in
price or given a I% change in interest rates, but netted against a 10% coupon you could still have
a positive return. The problem now is the duration is close to 9% and you've got a coupon on
2.6%, so 1% rate of increase in the interest rates can bring about a 9% decline in price, offset by
only a 2.5% or 2.6% income return. That's a thing at this point in time because of the volatility
factor, the duration, and the low coupon which is unable to offset much price sensitivity, it's very
dangerous to be out there in the bond market.
Sondra Smith: We don't have an equity variance to approve this month?
Elaine Longer: No. I wondered if you have an update on moving forward with another money
management firm.
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
April 17, 2014
Page 12 of 23
Kit Williams: I think they are doing a selection today.
Jerry Friend: No, we're not selecting one today. We are narrowing the field today.
Eldon Roberts: We are going over our proposals. We had six and we'll go through those today I
assume. It looks like you'll be on the hook until June though. Didn't you say you'd be willing to
do that? I don't think we're going to quite make it, so we'll probably have to ask you to stay
with us until June sometime.
Elaine Longer: We have really appreciated our involvement with the City, both with Fire and
the Police Pension. We're sorry to leave the stage.
Kit Williams: You've done a stellar job.
Mayor Jordan: Yes you have.
Elaine Longer: Thank you. We'll help in any way that we can in this transition.
Andrea Foren: About how long do you think the transition period will need to be?
Elaine Longer: Once the succeeding firm is engaged by the City, then it's just a matter of us
submitting paperwork to Northern Trust and they handle the transfer of securities to whoever the
next custodian will be. The beauty of it is it could stay at Northern Trust. It depends on the next
firm.
Eldon Roberts: That's where I was going, what if they don't use Northern Trust?
Elaine Longer: It's a very easy transfer because you don't hold anything that's illiquid or is not
traded on the exchanges.
Sondra Smith: Thank you, we'll keep you posted.
RFO 14-06 Police Pension, Financial Advisor Trustee Services
Andrea Foren email 02/27/14
Kit Williams: My only question before you start that, are you finished with the letter? If you are,
I'm going to go, I need to leave. I don't know if you need me for the letter either. Do you think
you're in a position to draft one up now?
Sondra Smith: I'm ready to draft one up.
Kit Williams: From what they've already told you?
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
April 17, 2014
Page 13 of 23
Sondra Smith: No. I don't think we had a total agreement on what we were going to use
Mayor Jordan: Do you want to go ahead and do the letter now?
Eldon Roberts: If Kit's got to go we might should so he can stay here and keep us on the right
path.
Kit Williams: I think you've already made some statements. I thought you were in agreement
that you all were in a position where you felt like you could not at this point lower rates because
of the Attorney General's position. That you're aware that the City Council's not ready to
assume the financial responsibility to consolidate and that you've been aware of this for a
number of years, and have been working on this and considering this for a number of years but
there is not satisfactory plan that you can come up with at this point in time.
Eldon Roberts: Sounds great.
Jerry Friend: Sounds great to me.
Kit Williams: Is that okay, Frank?
Frank Johnson: I'm still to Jerry's point, I'm not very clear of what the intent of the letter was.
It's like asking us to respond to something that they are already aware of Is the intent of the
letter about our acknowledging?
Kith Williams: It really is. It's a form letter type thing. We saw the same thing with the Fire
Department.
Eldon Roberts: There are about seventeen funds or more that got this letter, it's not just us.
Kit Williams: And it wasn't just this year. They want to make sure the funds understand there's
a serious issue here and that even though it's out there a number of years, they want you all to
look at it and see if there's any plan you can make at this point in time.
Frank Johnson: I think what you said is fine. I would say a preface to the letter should be that
we have considered the options without being coy about it long before we got your letter. It has
been part of the discussion that this board has had.
Eldon Roberts: And will continue to be.
Melvin Stanley: Every meeting.
Frank Johnson: And maybe short bullet points, some response to additional city contributions.
Well, that's highly unlikely. I'd say just a response on each one of these bullet points. It
shouldn't be any more than one or two paragraphs it seems like.
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
April 17, 2014
Page 14 of 23
Kit Williams: I think it's good to respond but I don't think that really that we got much of a
response from them when we responded from the Fire one. Do you remember anything from
them Mayor? Were any of you here when Jody Carreiro came and gave us a presentation about
the Fire one and how they would have to reduce benefits?
Mayor Jordan: We had a joint meeting.
Eldon Roberts: I think they had one just within that period of time. I remember the one you're
talking about Mayor. That's where you sat beside me and told me not to run for re-election.
Mayor Jordan: I think I said you need to get out while you can.
Eldon Roberts: This has been within the last year.
Kit Williams: No, it's been longer than that when they had Jody do a complete analysis. We had
many people there including active people on the other plans who were also not really supportive
of using too much of current City funds to pay because they knew that they were going to be
tapped themselves. There's only so much money to go around.
Paul Becker: We actually had two meetings. They were in room 219. Both Jody Carreiro and
David Clark gave a presentation talking about Fire. Then there was a meeting here in room 326
that was joint with the council members where they gave some estimate of what they felt it
would cost to consolidate. That was about four years ago, if I remember correctly.
Eldon Roberts: Has it been that long?
Kit Williams: It's been that long.
Mayor Jordan: It's been a while back.
Eldon Roberts: The meeting that you and I were in Mayor was downstairs in the old
courtroom. It was joint between the Fire and Police and Jody Carreiro and David Clark were
here. It was about 2009 or 2010. No, I was not present for the one where Jody came up, I was
going to try to attend that because I wanted to hear what he wanted to tell them.
Paul Becker: Frank in answer to your question Eldon and I are down there, about three years
ago they started sending these letters because there was a concern they were being ignored. At
times, they talked about going to talk to people. They didn't even have the full board of trustees
like yourself to talk too and that information wasn't communicated. This was a suggested
solution so that they could hear back to ensure that the board had received the information.
Kit Williams: And appreciated the seriousness of the situation.
Jerry Friend: I think what you said will tell all of that.
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
April l7, 2014
Page 15 of 23
Sondra Smith: As a reminder, every one of those benefit increases that caused you to get to this
point was approved by the PRB board and their actuary. Now you're in the shape that you're in.
Melvin Stanley: And members of this board, which can't be done by police only, has to be a
Mayor and a secretary. It has to be six out of seven. I wasn't even here.
Sondra Smith: The thing about it is that every benefit increase that was approved was approved
because we received approval from PRB and at the time you were not actuarially sound.
Melvin Stanley: But still, on the spousal benefits, to give my wife full benefits if I fall dead right
now, somebody should have thought and said wow could this not cause us problems?
Sondra Smith: I did say wow.
Kit Williams: It was obviously a very substantial increase of cost to the pension.
Melvin Stanley: And now we're told that even that benefit if we pull back on it, we'll be sued.
Which would make up a difference in our actuarial report.
Sondra Smith: It would make a huge difference.
Melvin Stanley: Somebody would sue us.
Kit Williams: And it would be up to the court to decide whether or not you can reduce the
benefit or not.
Frank Johnson: By eliminating that benefit.
Melvin Stanley: Just that one benefit.
Sondra Smith: You can't totally eliminate it because of the state law.
Kit Williams: But you can reduce it down to what the state law says which is 50%.
Melvin Stanley: The only reason for my wife to want me around is because maybe she likes me
just a little bit. Other than that she'll have all the money. Somebody should have said let's think
about this.
Kit Williams: I wouldn't have voted for that.
Eldon Roberts: Where were you at for that meeting?
Melvin Stanley: If I thought you were going to vote on that, I would have been here. I think I
was in the middle of a bad divorce right then probably.
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
April 17, 2014
Page 16 of 23
Frank Johnson: It would be nice if there's some way, and I'm not sure if this'll come across as
being curt, but if in closing in this letter if we can say we are very receptive to more viable
options. This is almost like a due diligence thing as opposed to giving us more viable options. I
can't help from thinking that if a reduction of benefits is part of the options that maybe they think
we should initiate some by contacting our socializing the problem with our local legislatures. We
should pursue some legislative changes to give us that right. That is so long and drawn out. Can
you imagine pursuing something like that with that bunch in Little Rock? These aren't viable
options. The only viable option, I think is on there, and at some point we are going to have think
about what we are going to do. More than just talking about.
Melvin Stanley: We've been chasing our tails for three years on this thing.
Frank Johnson: I guess it's up to us.
Kit Williams: Six years ago I wrote a memo to the Fire Pension board and since I hadn't been
able to get their attention on earlier memos, I titled it "Train Wreck Approaching" that was when
they first started being a little bit more serious about understanding. I wrote it before the market
crashed. So even with a great market going up, up, up, they still were not going to make it.
Sondra Smith: I can guarantee you when I was sitting on the board, if we would have known
that you cannot reduce the benefits that you were increasing, some of them would have never
been approved. I guarantee you.
Jerry Friend: In fact, some of us said, if this doesn't work we can always go back. That was
stated.
Sondra Smith: I remember that conversation. We thought if things went bad in the market that
those increases could be reduced back down to the 50%.
Melvin Stanley: Where were you then Kit?
Kit Williams: I don't remember those conversations, but I agree that they can be reduced right
now.
Frank Johnson: Well, maybe at another time since we have other things on the agenda. I don't
like having a discussion about reducing benefits.
Kit Williams: You said the rank and files aren't ready.
Eldon Roberts: Not at this time. They all understand.
Kit Williams: The longer you wait the more they have to be reduced.
Sondra Smith: Jerry and I were on the same page on that. We thought we could go back. No
one mentioned that you could never reduce those benefits once you increase them above the
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
April 17, 2014
Page 17 of 23
50%. So we thought if the market ever got real bad, the pension fund started failing, we could
change those benefits back.
Frank Johnson: So a law that would allow this board to throttle up and down depending on
where we're at, is that what you're saying?
Sondra Smith: When those benefit increases were voted on by the board, we thought if things
went sour in the market and the funds started depleting that we could reverse those benefit
decisions; like changing the spousal benefit and the things that we had increased that were not
part of state statute, that we could change those back or move them back down.
Frank Johnson: There are some who believe that if they go back then they'll never go back up.
Kit Williams: Well they wouldn't go back up because you're reducing them only so it's
sustainable.
Sondra Smith: At the time they probably never would've been passed if we would've known
they could never have been reversed.
Frank Johnson: So we're back to the discussion about the percentage to go back to stay solvent.
Eldon Roberts: That's only if we decide to go there at this point in time. I'm for waiting a
while, just like the rank and file members are. But it's whatever this board's pleasure is. We can
do whatever we want to do against what the rank and file says.
Frank Johnson: I'm not suggesting that. We got a taste of that from, who at the time I thought
were more your constituents, just when we were thinking about paying for a study. That's a sure
way to get people here for a meeting, the closer we get to a discussion about a reduction of
benefits. But there's always letting the clock run out and then we could talk to them about this
and where we're at.
Kit Williams: As I've told this board repeatedly, the Fire Pension Board is going to hit the dirt
long before you do. Things will happen then that will be enlightening.
Melvin Stanley: The precedent will be set whether it's good or bad.
Kit Williams: There very well could be litigation at that point in time that would reveal whether
or not the courts feel like the boards have the inherent power as trustees to ensure that the fund
does not go bad by reducing benefits in a timely manner.
Eldon Roberts: It's not just Fayetteville Fire, there's seven or eight more that are on the list they
call insolvent. We are on that list but there's seven or eight that are insolvent and any of those at
some given time could initiate lawsuits..
Jerry Friend: Remind me, where do we have to get before they take the ability to?
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
April 17, 2014
Page 18 of 23
Sondra Smith: $5 million.
Jerry Friend: Are we going to hit $5 million before this stuff happens and then it'll be too late
to do anything.
Sondra Smith: You don't know because if the market takes a big dip tomorrow you could go
down really quick. But Fire is under $5 million.
Jerry Friend: But by the time they get their lawsuit or whatever, we might be under $5 million
and can't do anything anyways.
Kit Williams: You wouldn't be able to do the same kind of investment that you can do right
now. The understanding is you can maintain and keep the investments you have, so you don't
have to liquidate all the stocks or anything like that, you can still buy mutual funds, which
usually follow the market. So it's like owning stock. It's not terrible handcuffs to put on.
Melvin Stanley: You just can't buy any penny stocks.
Kit Williams: I wouldn't do it.
Mayor Jordan: So as far as the letter goes, bringing us back to that.
Kit Williams: I think Sondra's got it.
Sondra Smith: There was a motion and a second to approve what's been said here today.
Jerry Friend moved to approve the At Risk Letter based on what was stated at the meeting.
Eldon Roberts seconded the motion. The motion passed with a unanimous vote.
Mayor Jordan: Okay now, Andrea, take it away
Andrea Foren: The City advertised on behalf of your board for request for qualification for a
new financial advisor for your fund. We advertised March 10' and received six statements of
qualification back on April 4s . If you look at this voting form that was provided in your packet,
state law says that you cannot consider price when selecting a firm. You have to select them
based on their qualification and then negotiate their fee after selecting a firm based on how
qualified they are.
Eldon Roberts: I saw that in there and I have to ask if we finally hire somebody and can't come
to terms on the fees that we pay them, where are we at then?
Andrea Foren: Then you go to the second ranked firm. You would have the ability to go back
out for another RFQ if you desired or you could go to the second ranked firm.
Mayor Jordan: Have you all had a chance to look them all over? Do you want to open it up to
some discussion here?
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
April 17, 2014
Page 19 of 23
Eldon Roberts: I'd certainly like to see it stay in the state of Arkansas and keep the money in
the state of Arkansas. That will narrow it down to two I believe. Garrison Financial and Regions
Bank, I believe it's in Little Rock.
Andrea Foren: The proximity to Fayetteville is 20% of the consideration based on the RFQ that
we put out.
Frank Johnson: I agree.
John Brown: We're quite used to having someone come into these meetings, provide us with
financial statements and explain this. Which is very helpful. If you have someone, I think, at a
greater distance, would they be willing to come?
Eldon Roberts: Well they're required but I think possibly we could require them to show up at
our quarterly meetings and give us a report.
Mayor Jordan: Absolutely.
Eldon Roberts: They would have to send somebody here. Should we want to see them on the
spur of the moment or in a hurriedly fashion, it would be a little tough.
Jerry Friend: I agree with you, mostly. However, Tulsa is closer than Little Rock. It's just not
in the state of Arkansas. There was one there I really liked, but I prefer to stay close to home,
which makes Garrison on Dickson Street.
Eldon Roberts: You and I have been on the other end of this thing.
Jerry Friend: Which makes Dickson Street look pretty good.
Eldon Roberts: You've been on the other end of that deal with me, nobody else on this board
has. Big is not necessarily better.
Frank Johnson: I didn't see any really significant variances in the services that any of them
offer. I don't want to limit discussion but my preference would be to go with Garrison.
Eldon Roberts: That's where I'm at too.
John Brown: As I've read over these, this is there flowery presentation of their firms, basically
that is what you're getting. I can't imagine anyone is going to say anything negative about
themselves. They're very similar qualifications.
Mayor Jordan: Sondra you can correct me if I'm wrong, when we did this with the firemen, I
think they brought in two and interviewed them.
Sondra Smith: Two or three.
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
April 17, 2014
Page 20 of 23
Mayor Jordan: They brought them in and just fired questions at them. Then they made a call
from there. You can pick your top two or three and bring them in for an interview. Or if you feel
comfortable with somebody today, I'm good with that.
Melvin Stanley: I have not had a chance to go over a lot of this but I've leaned pretty heavily on
this guy here on my right because I figure he's watching his money and is watching mine as
well. He says he has checked into this Garrison firm and said that he believes that they are doing
a good job with the Fire Department and I would most certainly yield to that.
Frank Johnson: They were also recommended by Elaine as well, I'm not sure how that factors
in.
Eldon Roberts: Well I notice how much work they already do for the City and I understood
both of you two gentlemen to tell us back some time ago that they had been doing some work
even other than what they are doing now for the City and you were pretty comfortable with it.
Paul Becker: I'm familiar with three of the firms. Bank of Oklahoma, they do trust work for us.
Regions at one time did trust work. Garrison had the agreement with the City, they did the
investment for the City prior to the time I got here which was 2006. They did it for eight years.
They did a very good job, market conditions have changed but during those years they did a very
good job. The City chose to change through a selection process. They have been doing the Fire
Department and from what I can tell, I can't speak for the Fire Trustees, they seem to have been
doing a good job. Sondra and the Mayor can comment on that. They've been doing the best they
can for the Fire Department, which is restricted and there's only so much. I am familiar with
them on an investment basis and I will say that do a good job.
Mayor Jordan: They have, we've dealt with them before.
Eldon Roberts: It's here for everyone to see, I'm just pointing it out, the Fire Department
obviously, the Fayetteville Public Library, Fayetteville Public Education Foundation, Single
Parent Scholarship of Northwest Arkansas, United Way of Northwest Arkansas, Elizabeth
Richardson Center. I've talked to the Fire Department and they are as tickled with these folks as
they can be. They don't feel like they've missed a step by leaving Elaine and going there. Elaine
opted to let them go because of the $5 million deal. She just couldn't generate the revenue and
the income with the restrictions once they fell below $5 million. But they are very comfortable
with this group.
Frank Johnson: Just a question for Andrea, I have a financial interest in two of the
organizations they have on there, just as a matter of disclosure, is there any issues there?
Andrea Foren: I don't believe so, unless you are part owner in the company or something.
Frank Johnson: No. What's the next step?
Mayor Jordan: If you want to make a motion and second to pick Garrison and then we just take
a vote, then I'm good with that.
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
April 17, 2014
Page 21 of 23
Frank Johnson: For an interview or to hire?
Eldon Roberts: Hire.
Sondra Smith: Don't we need to fill out the form?
Andrea Foren: Yes, I would prefer to short list and vote that way if negotiations weren't
successful with Garrison, you could come back to whoever your second one is that you selected.
That's something that we do with city practice, I don't know that it's required of the board or
anything.
Mayor Jordan: I can tell you the Firemen picked three, brought them in and interviewed them
and made a call after they interviewed them that day.
Jerry Friend: I would feel more comfortable interviewing two or three but if everybody's set on
Garrison I would hate to bring somebody in knowing that we're not going to get them. So if
everybody's for Garrison then I don't have a problem with it.
Mayor Jordan: If we can't come to terms with Garrison, who do you want to fall back on?
Eldon Roberts: Back to what I was saying about staying in the state, Regions.
Andrea Foren: You wouldn't have to vote on a second today. If negotiations fail with Garrison,
you could start over or have another meeting and select a second firm.
Frank Johnson: We still have that timeline with Longer. We have until June.
Mayor Jordan: Who would you like to be your negotiator? The Firemen had Pete Reagan
negotiate with Garrison.
Eldon Roberts: I think it should be this board. I wouldn't want that responsibility.
Mayor Jordan: He made a report to the board.
Andrea Foren: It was kind of just a primary contact person.
Mayor Jordan: He wasn't the one that said this is what we're going to do.
Mayor Jordan: First we need to vote for Garrison.
Eldon Roberts: I'm interested in the fees obviously, and I don't want to pay any more than
we've been paying and I don't want to pay as much starting out.
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
April 17, 2014
Page 22 of 23
Frank Johnson moved to hire Garrison Financial to be the financial advisor for the Police
Pension Board. Eldon Roberts seconded the motion. The motion passed with a 6-1 vote,
Jerry Friend voting no.
Sondra Smith: The only reason I voted yes is because we went through that and I've heard
Garrison and all the other ones and really you don't hear any more than what you read in the
packet. I asked accounting and they are very happy with Garrison. We haven't had any issues.
We've used them now for two years. That's the reason that I'm comfortable with them.
Jerry Friend moved to have Eldon Roberts and John Brown talk to Garrison Financial.
Melvin Stanley seconded the motion. Upon roll call the motion passed with a unanimous
vote.
Eldon Roberts: How are we going to get this appointment set up with Garrison? Do I need to
call them myself and set up an appointment with a time frame John and I can both meet?
Sondra Smith: Yes. And then we will need to have a special meeting after you get the contract
negotiated before June 300i. The sooner you can get that done then we can have a meeting.
Maybe at that meeting they can come in and introduce themselves to the board.
Andrea Foren: Typically, you can get a draft contract from them.
Sondra Smith: In your packets there's a copy of the Longer Investment contract and the fees.
It's called the Advisor Agreement.
Eldon Roberts: Do we have elections coming up for the Pension Board?
Sondra Smith: Yes. I was getting ready to mention that. We are sending those out around the
first of May. Make sure that people get that turned back in. We'll probably give people until the
middle of May. If we give them too long they forget to turn everything back in.
Melvin Stanley: Who's up for reelection?
Eldon Roberts: Jerry and Frank.
Informational:
2014 Meeting schedule
July 17, 2014
October 16, 2014
Mayor Jordan: So we have another meeting in June and we may not have to have one in July if
we have one in June.
Sondra Smith: I would advise you that we have the meeting before the end of May because
your current board is through the end of May. Should someone else be appointed or elected to
Policemen's Pension and Relief Fund
Board of Trustees Meetatg Minutes
April 17, 2014
Page 23 of 23
the board you don't want them to come to the meeting and have to select an investment advisor
or hear all this for the first time. I am not saying that anyone is going to get voted off the board
but I would just suggest we have a meeting sometime late in May before the actual deadline of
the board terns.
Eldon Roberts: I guess before we go any further, Jerry and Frank are you both willing to serve
again?
Jerry Friend: Yes.
Frank Johnson: Yes.
Meeting adjourned at 4:00 p.m.
Lioneld Jordan Chairman
Sondra E. Smith Treasurer
Eldon Roberts Secretary
Retired Position l
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
May 29, 2014
Page 1 of 14
Jerry Friend
Retired Position 2
John Brown
Retired Position 3
Melvin Stanley
Retired Position 4
Frank Johnson
Retired Position 5
Policemen's Pension and Relief Fund
Board of Trustees Special Meeting Minutes
May 29, 2014
A special meeting of the Fayetteville Policemen's Pension and Relief Fund Board of Trustees
was held on May 29, 2014 at 3:00 p.m. 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 office, Paul Becker, Finance
Director, Press
ABSENT: Melvin Stanley
Roll Call
Sondra Smith: Melvin Stanley said that he is in Nebraska with his ill father.
Approval of the Minutes:
Approval of the January 16, 2014 Meeting Minutes
Jerry Friend moved to approve the January 16, 2014 meeting minutes. Eldon Roberts
seconded the motion. The motion passed with a 4-0 vote. John Brown and Frank Johnson
were absent during the vote. Melvin Stanley was absent.
Pension List Changes: None
Approval of the Pension List:
Approval of the August, September and October 2014 pension lists
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
May 29, 2014
Page 2 of 14
Sondra Smith: Eldon talked to me about maybe having this meeting and not doing the July
meeting. I only heard back from one or two about whether or not they wanted to do that. I went
ahead and put the pension list on here in case we decided to cancel the July meeting.
Eldon Roberts: We mentioned that at our last meeting, I think the Mayor actually brought it up.
I thought it sounded like a pretty good deal because it's next month that our regularly scheduled
meeting is held.
Sondra Smith: The only thing you won't have, and probably wouldn't in July either, is the
Elaine Longer report because she only gives that quarterly. You wouldn't have had it today, but
you probably wouldn't have it in July because by then you will probably have the new
investment advisor.
Jerry Friend moved to cancel the July meeting. Eldon Roberts seconded the motion. The
motion passed with a 6-0 vote. Melvin Stanley was absent.
Eldon Roberts: There's no changes?
Sondra Smith: No changes.
Eldon Roberts: We got Rick Hoyt's taken care of at the last meeting. It goes into effect in July.
Eldon Roberts moved to approve the August, September and October 2014 pension lists.
Jerry Friend seconded the motion. The motion passed with a 6-0 vote. Melvin Stanley was
absent.
Unfinished Business:
"At Risk" Plan of Action Letter
Sondra Smith: That is the letter that I e-mailed you that was sent to PRB at the request of the
board. It's just a copy of the letter for your review.
Frank Johnson: There was an exchange of e-mails that kind of went back and forth on this on
the wording. I don't know if y'all want to talk about it, it's all semantics to me.
Eldon Roberts: I think it just depends on how you read it. It's correct. I talked to Sondra about it
on the phone also. It was bullet number two that we talked about, that we aren't in a position
where we feel like we can, at this point, lower benefits which were approved by the Arkansas
Fire and Police Pension Review Board because of the Attorney General's opinion. That's a true
statement. I think the letter is fine. That doesn't require a motion to vote does it?
Kit Williams: I don't think so, the letter's already been sent. It's just a discussion item.
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
May 29, 2014
Page 3 of 14
Mayor Jordan: We got a few e-mails after we sent the letter.
Sondra Smith: It was about a week later and we had a deadline to get that letter to PRB.
Kit Williams: It could be clearer, like I said in my e-mail, but I think they should understand it.
Eldon Roberts: It's a true statement. All the benefit increases were approved by the Arkansas
Fire and Police Pension Review Board in Little Rock, but that's what you're basically saying in
bullet two. This should suffice for what they were wanting. They were just wanting us to respond
back to their letter.
Kit Williams: I think it covers it.
John Brown: All I wanted to say was my purpose for sending the e-mail that I sent was that I
wanted on record that it could have been clearer. It can be misconstrued if you take it at word
value. Like you said, you could read it either way depending on which side you were looking
from. I just wanted to state my opinion.
Kit Williams: The Pension Relief Board will know though. They've got some expertise in this
area, so they know what you're talking about.
John Brown: I just wanted to make my opinion known.
Sondra Smith: If you remember, at the meeting I tried to get everybody to do the letter word for
word so we would get exactly what the board wanted but nobody wanted to do that so we did the
best job that we could.
John Brown: I understand.
Kit Williams: I appreciate Sondra and her hard work on this.
Jerry Friend: Amen.
Frank Johnson: She had the most cryptic response in her e-mail that I caught on, which I think
in fairness to you we should probably be a little more attentive and spend more time on those
things that we want to manage in the details before we get out of here instead of just throwing it
on her.
John Brown: I agree, it's our responsibility.
Frank Johnson: Just based on the way the letter is now, their response is going to be interesting.
Kit Williams: I would also say that, they sent you a form letter. It's not like, as Sondra said in
her letter, that we didn't know about this already and have been looking at it for a long time,
discussing it for a long time and we really have limited options especially after you adopt the
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
May 29, 2014
Page 4 of 14
Attorney General's opinion that you cannot lower benefits. They are well aware of that opinion
too, I'm sure.
Financial Advisor Discussion
Eldon Roberts: This is information that the Garrison Financial group passed out at the meeting
we had with them. John Brown and I met with them three or four weeks ago.
Kit Williams: Were they your first choice?
Eldon Roberts: Right. We decided that at our last meeting. The board asked John Brown and I
to be there and to visit with some of the representatives from Garrison Financial. We set up a
meeting, it was open to the press. We had a few questions that we asked and I'll just touch on
those right quick. I had wanted to know what kind of fees that we could expect to be charged and
I leaned on them pretty hard. I said we would like to see a reduction in the fees starting out from
what we've been paying to somebody that's been working for us for twenty years. On the front
page, there's an estimated savings of about $29,000 a year from what we're paying right now.
Secondly, they do not do business with Northern Trust like Elaine does. They use Charles
Schwab for all of their transactions. Charles Schwab doesn't charge for every little thing that
they do that Northern Trust charges for. It looked like another $3,700 annual savings there by
going to Schwab and not doing business with Northern Trust. There's one other little issue that
came up and I'm not sure where we're at on that. It's a deal about errors and omissions
insurance. If we ask or require that Garrison have insurance for errors and omissions, our savings
annually would only be $17,000. We checked into that, I think Trish did, and I don't believe that
Elaine Longer carries that. According to the Garrison folks, all this does is help hire a lawyer and
defend them if they do something that we instructed them not too, like maybe invest money in
something that we don't want them to do. They weren't concerned about having it. I don't know
where we are on that, I haven't heard back from Trish. We were going to get some inside
information and have you look at it and see what you thought.
Kit Williams: Normally an errors and omissions policy does more than just hire a lawyer for
them. It doesn't mean that it does not hire a lawyer, because that probably would do that. But, it
also says that if they make a $5 million mistake and they only have $3 million then we are still
going to get $5 million back because the company will stand behind them. That's what they are
paying the premiums for. On the other hand, I think Garrison has done a fine job for the Fire
Pension Board to date. I think it would be very unlikely that they would do something that would
be contrary to policy. It doesn't mean that the stock market won't go down or something.
Eldon Roberts: That would not be there fault. This is going to have to be something they would
inadvertently do.
Kit Williams: It would almost be like one of their people was stealing and funneled so much
money out that they can't even make it back, those chances are extremely low, not impossible,
but extremely low. You're paying for their insurance policy. You have to decide if it's worth it
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
May 29, 2014
Page 5 of 14
for the very low risk but a potential high loss. Even then, the high loss is somewhat questionable
because I'm sure they have internal policies that should prevent that kind of conduct on behalf of
one of their employees. There is some chance that something could happen.
Sondra Smith: There's a couple of e-mails in your packet. There's one from Trish dated
Thursday May 8a' that contains discussion back and forth with Longer Investments. The next e-
mail is the e-mail from Kerry Watkins -Bradley from Garrison Financial that explains what an
errors and omission policy is and gives some information about why they do not carry it.
Eldon Roberts: As you can see it makes quite a bit of difference on the annual savings from
$29,000 without errors and omission insurance and that savings would be reduced to $17,847
with the insurance policy.
Kit Williams: It's almost $12,000 that this policy is going to cost.
Jerry Friend: The e-mail from Elaine says that Longer maintains the coverage. Plus the pension
fund is covered by ERISA Bond that we're required to have in place.
Frank Johnson: Is this an action item or just a discussion?
Eldon Roberts: Depending on how we vote here, it's something that we can require that they
carry. It's going to make a difference in our savings.
Frank Johnson: It sounds like low risk to me
Eldon Roberts: I for one am not in favor of it but it depends on the pleasure of the board. The
second question I asked them was if they manage other public retirement funds. I believe they
mentioned the Fire Department was the only one. Out of the three representatives that was there,
they have all had some experience in their careers doing so, some of them out of state, I don't
know about anymore in state. They are doing the Fire Departments and have been now for two
years. I don't think that is an issue.
I also asked them if they had an opportunity to review investment policy objectives and
guidelines that we currently operate with Elaine Longer and I gave them a copy of that. I told
them if there were going to be any huge changes in their investment policy guidelines, or if they
wanted any changes made and they were huge that we needed to know what they were. I gave
them a copy of the contract we have with Elaine Longer and told them to review that and if there
were going to be any drastic changes in their contract proposals that we wanted to know about
that.
The other thing I asked was if there would be someone from their firm available at every one of
our quarterly scheduled meetings. They said yes they certainly would be. They are local, they are
right here in Fayetteville. I think there's some information on them here on what all they already
do. They do the United Way Charitable Trust and the Public Library. I think I understand the
Mayor and Paul say they've done other things for the City in times past and they were pleased
with their performances. I was pleased with the three people that we talked too, they are really
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
May 29, 2014
Page 6 of 14
down to earth. I think they told me they have $226 million under management. I was impressed
with the people. I am in favor of hiring Garrison Financial to take over our investment portfolio.
Elaine wanted to have it changed by the end of June, and if we adopt measures today to hire
Garrison Financial. It will give them over 30 days to move the assets and to get everything
transferred.
John Brown: I believe they told us they would need ten days to transfer.
Eldon Roberts: They said they have a real good working relationship with Longer Investments
and after the transfer of all the assets and all this, if anything else pops up they would be able to
go right back to Elaine and get it ironed out. I don't think we'd miss a beat hiring this firm and
going with them from what Elaine's done for us. Which, she has done a fantastic job for the last
20 years. I think we are way better off today financially because of her.
Kit Williams: I think you're right.
Eldon Roberts: I hate to lose her but we've got to move on. I think this group will serve us well.
John Brown: They mentioned that in the event that something came up later that we didn't care
for them, there's no termination fees or anything like that. We could fire them at any time we
chose to do so.
Eldon Roberts: I think they said their contract allowed either side the right to stop doing
business with the other person. There's no fees for breaking the contract if we decided we didn't
want to use them.
Frank Johnson: Did you guys talk to them about some of our challenges with the fund?
Eldon Roberts: Yes, we went over all of that with them, where we're at, that we're somewhat
behind the eight ball on our unfunded liabilities down the road. I enlightened them on some
things that I don't think they knew even from talking to the Fire Department.
Jerry Friend: If there's some big changes, let us know but any change in the policy we all have
to sign anyway.
Kit Williams: They will probably present you a new policy but it should be very similar to the
one you already have.
Eldon Roberts: When that happens, if we elect to hire them today then I'm sure there's going to
be a contract forthcoming and as you said, an investment policy. Can someone in yours or Paul's
category look that over?
Kit Williams: Well, what I would also ask that you do at this meeting, if you want to hire them,
is to authorize the Mayor to sign the contract and the policy statement as long as it's been
approved by Paul and me, and if the policy statement is virtually identical to what we have right
now with Elaine. That way you don't have to have a separate meeting to approve it.
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
May 29, 2014
Page 7 of 14
Paul Becker: I don't see why they'd have to change the investment policy from what you have
now.
Kit Williams: They took over the fire right when it was going below $5 million so they had
restricted things that they could do. You're still right above that so.
John Brown: Like Eldon said with them looking over our current policy they made the
statement that, "we have no issue with the current policy, it looks great to us." They're not going
to have any problems with it.
Kit Williams: The contract probably won't be temporary. We can terminate it or amend it too if
we look at it and we think that it's not what we want we can suggest to them that we want to
change it and if they're agreeable then we can, if they're not agreeable then no, it takes two sides
of the contract. Neither one you'll be doing is temporary, we think they'll be permanent but I
think we do need the contract and the policy. You all won't sign the contract but the policy
needs to come back and everybody needs to sign the policy.
Paul Becker: If I understand correctly, you have no issues with the current investment policies,
right?
Eldon Roberts: I don't know. I don't think so. It suited Elaine.
Paul Becker: So we just tell them that we want it in keeping with the current investment
policies. Kit, I don't think they'll have an issue with that. If they do then we'll bring it for
revision.
Frank Johnson moved to hire Garrison Financial and authorize the Mayor to sign the
contract and policy. Eldon Roberts seconded the motion. The motion passed with a 6-0
vote. Melvin Stanley was absent.
Frank Johnson: Eldon and John, thank you for leading us on this.
Eldon Roberts: Sondra, will you notify those folks or do you want me too and tell them that we
officially hired them and ask if they would get us a contract and investment policy to you and
you could distribute it to Kit and Paul. As soon as they did that then the Mayor would have the
authority to sign the interim contracts or whatever you want to call them.
Sondra Smith: I can do that
Eldon Roberts: Okay, good for you. You'll find no argument from me here
New Business:
Garrison Financial Investment Management Agreement Sample
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
May 29, 2014
Page 8 of 14
Sondra Smith: There's a sample that Kerry sent of their investment management agreement so
that you can see how it usually looks. You might want to look at that and see if you have any
questions or concerns about the sample because that's similar to what they will be for our plan.
Eldon Roberts: Just to back up a little bit, I believe in case they ask about the omissions and
errors insurance, we didn't opt to have it.
Sondra Smith: We're not concerned with them having that.
Eldon Roberts: Right.
Jerry Friend: If I can ask Eldon are they going to have to sell all of our securities and buy new
ones or can they just move them?
Kit Williams: No. It goes from Northern Trust to Charles Schwab.
Eldon Roberts made a motion to decline requiring Garrison Financial to carry an errors
and omission insurance policy. John Brown seconded the motion. The motion passed with a
6-0 vote. Melvin Stanley was absent.
Revenue & Expense Report: April 30, 2014 Report
Sondra Smith: There's no requirement to approve that. That's just a report that accounting does
for you every quarter normally.
Jerry Friend: We appreciate it. Wish it looked better, but we appreciate it.
Mayor Jordan: Could be worse.
Paul Becker: Remember that doesn't mark to market. It shows you before any adjustment for
increase in value.
Kit Williams: That's why the historical one is the one to look at, that's what its worth if you try
to sell it today.
Benefit Discussion
Jerry Friend: That's my request. There's an excel sheet. Don't hold me to the numbers because
some of them may be a little off. We've talked before about when we voted to include widows
at 100%, what it did to our pension. The first page is police officers that's drawing pension and
currently have a wife eligible to draw when they die. That $224,000 at the bottom right is the
extra that actuaries look at when they look at our liabilities just for those officers.
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
May 29, 2014
Page 9 of 14
On page 2, our raising the widows didn't affect the ex -spouses or the pensioners with no spouses
Page 3 shows, in the first box, spouses currently drawing 100%, of what their deceased husband
or wife drew, the liability is $124,269. That $248,000 is what it is yearly and they would draw
half of that if we hadn't had voted the increase. Both of those added together, page 1 and this
page, puts a big hurt on our pension. It's been brought out in actuaries. Do you understand my
figures? And where they may be off, there's a few pensioners that drew less than a certain
amount and state law raised them to $500 or $1,000. There's a minimum they can't be under.
Eldon Roberts: I think its $500
Jerry Friend: On the last page over on the right hand side, it shows the reduction in each
person's pension each year. So, every year they would lose $158.
Mayor Jordan: This is the widows, correct?
Jerry Friend: My feeling is when we raised the widows, we did it with the idea that we could
always decrease it if we needed too. I remember back in the 1990's the county asked the
Attorney General about a tax they were collecting and they said it was legal. Then the county got
sued and the court said no it's not legal so in about 1999 the county was paying back thousands
of dollars.
Kit Williams: Are you talking about the property tax?
Jerry Friend: Yes. And they paid an attorney $3 to $4 million. The Attorney General is not
always right.
Kit Williams: No, the Attorney General is not always right.
Jerry Friend: Kit feels that we can reduce, it makes sense that we can reduce and that's what I'd
like to do.
Mayor Jordan: This would only be on the widows?
Jerry Friend: Yes.
Jerry Friend made a motion that as of today spousal benefits are lowered to 50% if the
spouse is not receiving the benefits and to lower the amounts received by the widowed
spouses who are currently drawing by 10% of their pension this year starting in
September, and continue to reduce them by 10% for the following four years each
September. This would exclude any spouse that has drawn an amount set by the State Law.
Sondra Smith seconded the motion.
Eldon Roberts: To me, the spouses that are drawing now from their deceased police officer are
just as much a part of this as the police officers are because they are allowed to vote in our
pension board elections. To me, if we reduce their benefits, we are going right against what the
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
May 29, 2014
Page 10 of 14
Attorney General says, I know Kit has a different opinion. For right now I would like to think the
Attorney General trumps your opinion. If we were to do this, we are going to be in violation of
the Attorney General telling us we cannot lower benefits.
Mayor Jordan: Let me ask just a point of understanding here. In this pension plan, the retirees
and their spouses have the same voting rights.
Jerry Friend: I didn't think they did, do they?
Sondra Smith: On Police, they do. On Fire, they do not.
Mayor Jordan: But they do on Police, so that's kind of like they are all hooked together so you
are taking out a category of those that are receiving benefits and some of them won't be.
Jerry Friend: If they can vote now than they would still be eligible to vote. .
Eldon Roberts: I'm not going at it from that angle that it would remove their eligibility to vote
on these elections and who represents them. I'm going at it on the fact that they are a member of
this Police Pension system and if we lower their benefits then we are in violation of what the
Attorney General says that there's no mechanism in the law for us to lower benefits.
Mayor Jordan: To me, it becomes an equality issue too. If you've got both of them with the
same voting rights, you are excluding a group in the retirement plan, if they are a voting member.
Sondra Smith: They are only a voting member if their husband has deceased.
Mayor Jordan: But they are a part of the program. I have an issue with that.
Kit Williams: None of them are drawing except for the ones whose husbands have died.
Sondra Smith: Right. The ones that have a husband, they both don't get to vote. The husband
gets to vote.
Eldon Roberts: There's no way to look at it other than we're going to be lowering benefits
should we do what Jerry's suggested.
Mayor Jordan: To me, you would be. It would only be a segment of them.
Eldon Roberts: The Attorney General says we cannot do that and until it's decided in a court of
law, I'm going to stick to the Attorney General.
Frank Johnson: Jerry, was this part of an effort to help us gain some solvency in the program?
Jerry Friend: Yes. I think rather than to do nothing, I would at least like to do something. I
agree that it's against what the Attorney General says.
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
May 29, 2014
Page 11 of 14
Kit Williams: You can only do it in order to salvage the pension plan. If the pension plan was
fine, I don't think you would have the right to lower the benefits. Now that the pension plan has
been officially notified that it's not fine and that there is a risk of ruin, then that's a lot of what I
had said that it's an inherit power of a board of trustees to maintain the liability of the trust that
they are administering. The Attorney General did not agree with me on that. He interpreted one
statute differently than me, lawyers do that. What I did tell the fire people, and I don't think I
told you all because you were in far better shape, is that if they decided to see what would
happen by attempting some lowering of the benefits then a pensioner could file suit. The
pensioner would sue the board of trustees saying you can't lower it. Then the court would decide.
If the pensioner was right, then you know who would pay the pensioner. It wouldn't be you, it
would be the trust because he should have gotten the money he didn't get, so everybody would
get refunded the additional money. If you wait and drive the pension plan into the dirt where
there's no money left except for the annual millage, so there's enough to pay two or three months
and then nothing for the rest of the year, and then a pensioner says you violated your fiduciary
duty to me, you should have prevented that and reduced rates so we still have money, so they sue
the pension board. If they win, then I would say what the Attorney General said was right
because I would be defending you. Let's assume the Attorney General was wrong and my
argument is going to work and the pensioner wins, where is he going to get the money? The fund
is gone. That's the only place where you all would have some individual potential liability
because you had not done anything. However, you have good arguments that you rely on the
Attorney General. The personal risk would be to do nothing because if you go the other way,
you've got the fund to support you. If you wait until the fund is gone, then you don't have a back
stop.
Frank Johnson: We've had this conversation a lot and I understand all that. I do appreciate
what Jerry is proposing to his point of doing nothing. At least we have the dialogue. It's not like
you randomly chose widowers as a target for a decrease in benefits. You are going back on the
extension of benefits to the widows was the most recent action by the board.
Kit Williams: Regardless, this is a possibility. There are some slight other dangers with your
suggestion in that you are treating beneficiaries slightly differently.
Jerry Friend: Right, I recognize that.
Kit Williams: If you look at, even though I know it's not intentional, all of the beneficiaries that
you are affecting are women. If I'm the lawyer on the other side, I'm saying that you're
discriminating against them on the basis of sex. That might not be a winning argument but I
know I will hear it. If you reduce benefits for all beneficiaries to a slight extent, they couldn't
make that argument.
Jerry Friend: On the other side, when we raised the benefit it was only that group of women
too.
Kit Williams: That's right, but I didn't hear anybody suing us.
Eldon Roberts: It's okay when it was that way.
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
May 29, 2014
Page 12 of 14
Frank Johnson: This could go all over the place, maybe it needs to be on the agenda for the
next meeting. Someone could easily say, okay now that you're having a cogent discussion about
reducing benefits, why don't we take these calculations and see what it looks like across the
board. That's not a discussion I really want to have, I don't think anyone wants to have until we
have to have it.
Jerry Friend: My idea is that we have to have it now. I don't embarrass easy, if this dies or fails
a second I'm good with that.
Kit Williams: I would suggest if we really want a test case to see what kind of powers you
would have, well that's not going work. I was going to suggest you make a very low benefit
decrease but you have to make a decrease large enough to actually try to prevent your risk of
ruin. If you are just reducing it and it's not really going to do anything effective, then you don't
have power to do it. You only have power to do it, in my opinion, to avoid the failure of the fund
that is reasonably foreseeable and reasonably likely to occur.
Eldon Roberts: Somewhere this is going to get played out for us. There's eight or nine plans in
the State of Arkansas that may not be financially solvent for five more years. They kind of talked
about us being solvent for fifteen. Then we'll have to follow what that court prescient is. Once it
is has been tested and stand then we're going to have to fall in line with what that is. You'd be
silly to argue that cutting benefits wouldn't help the pension plan. Obviously that would help the
pension plan to cut benefits today and quit paying out as much as we are.
Sondra Smith: My concern would be for the current spouses drawing it. I could probably
support the spouses that aren't drawing because they aren't getting that benefit.
Kit Williams: Then you're making another distinction that I would have to justify why we are
not going to pay them and you have similar people we are paying.
Sondra Smith: I agree with that statement. I could probably support the ones that aren't drawing
because they are not drawing it, they've never received it. You've to remember that when we
increased the benefits there was spouses that drew for several years that did not get the same
benefit that the spouses are currently getting. They were at 50% and then the benefits went to
100% and some people drew at 100% all the years and some people drew at 50% part of the
years. I agree with you, I think an across the board decrease is more justifiable and would stand
up in court easier.
Kit Williams: I do agree with Eldon. I've told you this before that I don't think that you all are
not going to be first. I only know truly about the Fire Pension. They are much closer to the
ground then you all are. So, one way or another we are going to find out what happens to them
before you're in terrible shape.
Eldon Roberts: There may be some plans in the state worse than Fayetteville Fire.
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
May 29, 2014
Page 13 of 14
Kit Williams: There are. Some cities have actually agreed, in order to get the benefits raised, to
stand behind them. Those cities are on the hook.
Eldon Roberts: They agreed to do it without a lawsuit.
Kit Williams: In order to get the benefit increased for their police or fire, they agreed to put their
full faith and credit of their town behind it. They're on the hook.
Sondra Smith: I also agree with Jerry, I was at that meeting when benefits were increased and
we were told we could reduce those benefits if we increased them.
Frank Johnson: That can't be a separate provision or excluded from the overall law and what
we can do with benefit increases or decreases. You can't carve out widows can you?
Kit Williams: I don't think you can. I guess I need to see the minutes to that meeting because I
don't remember that.
Sondra Smith: I don't think that anybody looked at the law and at the time I don't think that
anybody knew that benefits, once increased, could be reduced.
Jerry Friend: The Attorney General hadn't made that decision.
Sondra Smith: As a whole the board did not know that for pensioners or widows.
Jerry Friend: I think that conversation was the board saying, well if this doesn't work we can
go back.
Sondra Smith: No matter what benefit increase it was, whether it was for a pensioner when we
went from 50% to 90% or a spouse. We've always thought, until we got the Attorney General's
opinion, that those benefits could be reduced.
The motion to reduce the widow's benefits failed with a 1-5 vote. Jerry Friend voting yes.
Frank Johnson, John Brown, Eldon Roberts, Mayor Jordan and Sondra Smith voting no.
Melvin Stanley was absent.
Election Results
Sondra Smith: The ladies that are drawing because of QDRO are not eligible to vote, there's
four of them. We sent out 41 ballots and we received 38 back. The two people that have been
elected are Frank Johnson and Ruston Cole with a term beginning date of June 1, 2014.
Jerry Friend: I've enjoyed the years that I've been privileged to sit on this board. I'm probably
going to enjoy retirement too.
Mayor Jordan: Thank you for your service.
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
May 29, 2014
Page 14 of 14
Paul Becker: I have one question for Eldon because I wasn't at the presentation with Garrison.
Their proposal was a 0.5% of assets, was that their fee? Am I understanding that correctly?
Eldon Roberts: Elaine's is a sliding scale usually. Theirs is opposite from hers and it was a set
fee.
Kit Williams: It says on your thing 25%.
Paul Becker: Let me just make sure because we are going to be reviewing it.
Eldon Roberts: Elaine's would so much for the first amount of money and then so much for the
rest.
Paul Becker: 0.5%.
Eldon Roberts: Across all the assets, right?
Kit Williams: Was Elaine's starting at 0.84%?
Paul Becker: No, Elaine's started at 1% for the first $3 million.
Kit Williams: So there's effective 0.84% for the whole range?
Eldon Roberts: Probably. Then theirs is 0.50% all the way across the board for the whole range
of assets that they are going to be managing.
Informational:
2014 Meeting schedule
Adjournment: 3:59 p.m.
POLICE PENSION FUND
Nov 2014
Month 11
11
EMP# NAME
154 ALLEN, CHARLES
206 BAYLES, BOBBI J
216 BLACK, MILDRED
147 BRADLEY, GERALD
139 BRADLEY, RANDALL
167 BROWN, JOHN
157 CARROLL,RONALD L
151 COLE, RUSTON
160 DUGGER,GARY
140 FOSTER, BILLY D.
148 FRIEND, JERRY
161 HANNA, JANICE
145 HANNA, MARK
169 HELDER, TIM
180 HOYT, RICK
180 HOYT, RICK Plus 25 add pay
146 HUTCHENS, BERNICE
194 JOHNSON, FRANK
215 JOHNSON, JOYCE
103 JOHNSON, WENDELL
118 JONES, BOB
211 JONES, MICHELE
144 KILGORE, DONALD
218 MARTIN, CONNIE
128 MCCAWLEY, LARRY
136 MITCHELL, MICHAEL
141 MUELLER, ROSEMARY
158 MUNSON,ANGELA
112 MURPHY, JAKE
137 PERDUE, LARRY
164 PERSHALL, ROBIN
132 PHILLIPS, HOMER GENE
199 PRESTON, NORMA J
135 RICKMAN, LOREN
214 RIGGINS, BONNIE
183 ROBERTS, ELDON
183 ROBERTS, ELDON Plus 25 add pay
212 ROBERTS, CAROLYN K
212 ROBERTS, CAROLYN K Plus 25 add pay
159 SCHUSTER,JOHN H.
168 STANLEY, MELVIN
155 STOUT, BETTY
133 SURLES, JERRY
142 TAYLOR, DENNIS
163 WATSON, RICHARD
163 Watson, Richard Plus 25 Add'I Pay
149 WILLIAMS, JOYCE
195 WITT, BETTY J
213 WOOD, RUTHIE
11 11 11 11
6800-9800 6800-9800
Regular Mo 5335-00 5335-05
Benefit YTD Reg Benefit Suppl. YTD Suppl.
$
2,584.64
$
28,431.04
$
50.00
$
550.00
$
1,587.41
$
17,461.51
$
50.00
$
550.00
$
1,125.64
$
12,382.04
$
50.00
$
550.00
$
4,820.09
$
53,020.99
$
50.00
$
550.00
$
2,860.17
$
31,461.87
$
50.00
$
550.00
$
4,362.01
$
47,982.11
$
50.00
$
550.00
$
2,106.04
$
23,166.44
$
50.00
$
550.00
$
3,065.74
$
33,723.14
$
50.00
$
550.00
$
3,163.74
$
34,801.14
$
50.00
$
550.00
$
3,207.35
$
35,280.85
$
50.00
$
550.00
$
1,970.42
$
21,674.62
$
50.00
$
550.00
$
1,368.59
$
15,054.49
$
-
$
-
$
1,368.59
$
15,054.49
$
50.00
$
550.00
$
5,838.12
$
64,219.32
$
50.00
$
550.00
$
7,460.01
$
82,060.11
$
50.00
$
550.00
$
272.01
$
1,177.44
$
1,825.54
$
20,080.94
$
50.00
$
550.00
$
7,974.81
$
87,722.91
$
50.00
$
550.00
$
2,455.50
$
27,010.50
$
50.00
$
550.00
$
783.15
$
8,614.65
$
50.00
$
550.00
$
3,300.45
$
36,304.95
$
50.00
$
550.00
$
1,182.26
$
13,004.86
$
2,046.48
$
22,511.28
$
50.00
$
550.00
$
3,692.85
$
40,621.35
$
50.00
$
50.00
$
1,694.79
$
18,642.69
$
50.00
$
550.00
$
2,305.29
$
25,358.19
$
50.00
$
550.00
$
2,063.93
$
22,703.23
$
50.00
$
550.00
$
4,198.15
$
46,179.65
$
50.00
$
550.00
$
405.75
$
4,463.25
$
50.00
$
550.00
$
2,322.67
$
25,549.37
$
50.00
$
550.00
$
1,525.07
$
16,775.77
$
-
$
-
$
1,754.44
$
19,298.84
$
50.00
$
550.00
$
1,601.37
$
17,615.07
$
50.00
$
550.00
$
2,231.07
$
24,541.77
$
50.00
$
550.00
$
1,669.37
$
18,363.07
$
50.00
$
550.00
$
4,263.24
$
46,895.64
$
50.00
$
550.00
$
587.09
$
6,457.99
$
-
$
-
$
3,216.13
$
35,377.43
$
-
$
442.89
$
4,871.79
$
-
$
3,117.36
$
34,290.96
$
50.00
$
550.00
$
4,880.07
$
53,680.77
$
50.00
$
550.00
$
866.51
$
9,531.61
$
50.00
$
550.00
$
2,721.40
$
29,935.40
$
50.00
$
550.00
$
2,063.93
$
22,703.23
$
50.00
$
550.00
$
6,947.05
$
76,417.55
$
50.00
$
550.00
$
948.76
$
10,436.36
$
-
$
-
$
2,539.66
$
27,936.26
$
50.00
$
550.00
$
1,766.83
$
19,435.13
$
50.00
$
550.00
$
1,580.93
$
17,390.23
$
50.00
$
550.00
$
128,135.36
$
1,407,674.29
$2,050.00
$
22,050.00
POLICE PENSION FUND
Dec 2014
Month 12
12
EMP# NAME
154 ALLEN, CHARLES
206 BAYLES, BOBBI J
216 BLACK, MILDRED
147 BRADLEY, GERALD
139 BRADLEY, RANDALL
167 BROWN, JOHN
157 CARROLL,RONALD L
151 COLE, RUSTON
160 DUGGER,GARY
140 FOSTER, BILLY D.
148 FRIEND, JERRY
161 HANNA, JANICE
145 HANNA, MARK
169 HELDER, TIM
180 HOYT, RICK
180 HOYT, RICK Plus 25 add pay
146 HUTCHENS, BERNICE
194 JOHNSON, FRANK
215 JOHNSON, JOYCE
103 JOHNSON, WENDELL
118 JONES, BOB
211 JONES, MICHELE
144 KILGORE, DONALD
218 MARTIN, CONNIE
128 MCCAWLEY, LARRY
136 MITCHELL, MICHAEL
141 MUELLER, ROSEMARY
158 MUNSON,ANGELA
112 MURPHY, JAKE
137 PERDUE, LARRY
164 PERSHALL, ROBIN
132 PHILLIPS, HOMER GENE
199 PRESTON, NORMA J
135 RICKMAN, LOREN
214 RIGGINS, BONNIE
183 ROBERTS, ELDON
183 ROBERTS, ELDON Plus 25 add pay
212 ROBERTS, CAROLYN K
212 ROBERTS, CAROLYN K Plus 25 add pay
159 SCHUSTER,JOHN H.
168 STANLEY, MELVIN
155 STOUT, BETTY
133 SURLES, JERRY
142 TAYLOR, DENNIS
163 WATSON, RICHARD
163 Watson, Richard Plus 25 Add'I Pay
149 WILLIAMS, JOYCE
195 WITT, BETTY J
213 WOOD, RUTHIE
12 12 12 12
6800-9800 6800-9900
Regular Mo 5335-00 5335-05
Benefit YTD Reg Benefit Suppl. YTD Suppl.
$
2,584.64
$
31,015.68
$
50.00
$
600.00
$
1,587.41
$
19,048.92
$
50.00
$
600.00
$
1,125.64
$
13,507.68
$
50.00
$
600.00
$
4,820.09
$
57,841.08
$
50.00
$
600.00
$
2,860.17
$
34,322.04
$
50.00
$
600.00
$
4,362.01
$
52,344.12
$
50.00
$
600.00
$
2,106.04
$
25,272.48
$
50.00
$
600.00
$
3,065.74
$
36,788.88
$
50.00
$
600.00
$
3,163.74
$
37,964.88
$
50.00
$
600.00
$
3,207.35
$
38,488.20
$
50.00
$
600.00
$
1,970.42
$
23,645.04
$
50.00
$
600.00
$
1,368.59
$
16,423.08
$
-
$
-
$
1,368.59
$
16,423.08
$
50.00
$
600.00
$
5,838.12
$
70,057.44
$
50.00
$
600.00
$
7,460.01
$
89,520.12
$
50.00
$
600.00
$
272.01
$
1,449.45
$
1,825.54
$
21,906.48
$
50.00
$
600.00
$
7,974.81
$
95,697.72
$
50.00
$
600.00
$
2,455.50
$
29,466.00
$
50.00
$
600.00
$
783.15
$
9,397.80
$
50.00
$
600.00
$
3,300.45
$
39,605.40
$
50.00
$
600.00
$
1,182.26
$
14,187.12
$
2,046.48
$
24,557.76
$
50.00
$
600.00
$
3,692.85
$
44,314.20
$
50.00
$
50.00
$
1,694.79
$
20,337.48
$
50.00
$
600.00
$
2,305.29
$
27,663.48
$
50.00
$
600.00
$
2,063.93
$
24,767.16
$
50.00
$
600.00
$
4,198.15
$
50,377.80
$
50.00
$
600.00
$
405.75
$
4,869.00
$
50.00
$
600.00
$
2,322.67
$
27,872.04
$
50.00
$
600.00
$
1,525.07
$
18,300.84
$
-
$
-
$
1,754.44
$
21,053.28
$
50.00
$
600.00
$
1,601.37
$
19,216.44
$
50.00
$
600.00
$
2,231.07
$
26,772.84
$
50.00
$
600.00
$
1,669.37
$
20,032.44
$
50.00
$
600.00
$
4,263.24
$
51,158.88
$
50.00
$
600.00
$
587.09
$
7,045.08
$
-
$
-
$
3,216.13
$
38,593.56
$
-
$
442.89
$
5,314.68
$
-
$
3,117.36
$
37,408.32
$
50.00
$
600.00
$
4,880.07
$
58,560.84
$
50.00
$
600.00
$
866.51
$
10,398.12
$
50.00
$
600.00
$
2,721.40
$
32,656.80
$
50.00
$
600.00
$
2,063.93
$
24,767.16
$
50.00
$
600.00
$
6,947.05
$
83,364.60
$
50.00
$
600.00
$
948.76
$
11,385.12
$
-
$
-
$
2,539.66
$
30,475.92
$
50.00
$
600.00
$
1,766.83
$
21,201.96
$
50.00
$
600.00
$
1,580.93
$
18,971.16
$
50.00
$
600.00
$
128,135.36
$
1,535,809.65
$2,050.00
$
24,050.00
POLICE PENSION FUND
Jan 2015
Month 7
1
EMP# NAME
154 ALLEN, CHARLES
206 BAYLES, BOBBI J
216 BLACK, MILDRED
147 BRADLEY, GERALD
139 BRADLEY, RANDALL
167 BROWN, JOHN
157 CARROLL,RONALD L
151 COLE, RUSTON
160 DUGGER,GARY
140 FOSTER, BILLY D.
148 FRIEND, JERRY
161 HANNA, JANICE
145 HANNA, MARK
169 HELDER, TIM
180 HOYT, RICK
180 HOYT, RICK Plus 25 add pay
146 HUTCHENS, BERNICE
194 JOHNSON, FRANK
215 JOHNSON, JOYCE
103 JOHNSON, WENDELL
118 JONES, BOB
211 JONES, MICHELE
144 KILGORE, DONALD
218 MARTIN, CONNIE
128 MCCAWLEY, LARRY
136 MITCHELL, MICHAEL
141 MUELLER, ROSEMARY
158 MUNSON,ANGELA
112 MURPHY, JAKE
137 PERDUE, LARRY
164 PERSHALL, ROBIN
132 PHILLIPS, HOMER GENE
199 PRESTON, NORMA J
135 RICKMAN, LOREN
214 RIGGINS, BONNIE
183 ROBERTS, ELDON
183 ROBERTS, ELDON Plus 25 add pay
212 ROBERTS, CAROLYN K
212 ROBERTS, CAROLYN K Plus 25 add pay
159 SCHUSTER,JOHN H.
168 STANLEY, MELVIN
155 STOUT, BETTY
133 SURLES, JERRY
142 TAYLOR, DENNIS
163 WATSON, RICHARD
163 Watson, Richard Plus 25 Add'I Pay
149 WILLIAMS, JOYCE
195 WITT, BETTY J
213 WOOD, RUTHIE
6800-9800 6800-9800
Regular Mo 5335-00 5335-05
Benefit YTD Reg Benefit Suppl. YTD Suppl.
$
2,584.64
$
2,584.64
$
50.00
$
50.00
$
1,587.41
$
1,587.41
$
50.00
$
50.00
$
1,125.64
$
1,125.64
$
50.00
$
50.00
$
4,820.09
$
4,820.09
$
50.00
$
50.00
$
2,860.17
$
2,860.17
$
50.00
$
50.00
$
4,362.01
$
4,362.01
$
50.00
$
50.00
$
2,106.04
$
2,106.04
$
50.00
$
50.00
$
3,065.74
$
3,065.74
$
50.00
$
50.00
$
3,163.74
$
3,163.74
$
50.00
$
50.00
$
3,207.35
$
3,207.35
$
50.00
$
50.00
$
1,970.42
$
1,970.42
$
50.00
$
50.00
$
1,368.59
$
1,368.59
$
-
$
-
$
1,368.59
$
1,368.59
$
50.00
$
50.00
$
5,838.12
$
5,838.12
$
50.00
$
50.00
$
7,460.01
$
7,460.01
$
50.00
$
50.00
$
272.01
$
1,449.45
$
1,825.54
$
1,825.54
$
50.00
$
50.00
$
7,974.81.
$
7,974.81
$
50.00
$
50.00
$
2,455.50
$
2,455.50
$
50.00
$
50.00
$
783.15
$
783.15
$
50.00
$
50.00
$
3,300.45
$
3,300.45
$
50.00
$
50.00
$
1,182.26
$
1,182.26
$
2,046.48
$
2,046.48
$
50.00
$
50.00
$
3,692.85
$
3,692.85
$
50.00
$
50.00
$
1,694.79
$
1,694.79
$
50.00
$
50.00
$
2,305.29
$
2,305.29
$
50.00
$
50.00
$
2,063.93
$
2,063.93
$
50.00
$
50.00
$
4,198.15
$
4,198.15
$
50.00
$
50.00
$
405.75
$
405.75
$
50.00
$
50.00
$
2,322.67
$
2,322.67
$
50.00
$
50.00
$
1,525.07
$
1,525.07
$
-
$
-
$
1,754.44
$
1,754.44
$
50.00
$
50.00
$
1,601.37
$
1,601.37
$
50.00
$
50.00
$
2,231.07
$
2,231.07
$
50.00
$
50.00
$
1,669.37
$
1,669.37
$
50.00
$
50.00
$
4,263.24
$
4,263.24
$
50.00
$
50.00
$
587.09
$
587.09
$
-
$
-
$
3,216.13
$
3,216.13
$
-
$
442.89
$
442.89
$
-
$
3,117.36
$
3,117.36
$
50.00
$
50.00
$
4,880.07
$
4,880.07
$
50.00
$
50.00
$
866.51
$
866.51
$
50.00
$
50.00
$
2,721.40
$
2,721.40
$
50.00
$
50.00
$
2,063.93
$
2,063.93
$
50.00
$
50.00
$
6,947.05
$
6,947.05
$
50.00
$
50.00
$
948.76
$
948.76
$
-
$
-
$
2,539.66
$
2,539.66
$
50.00
$
50.00
$
1,766.83
$
1,766.83
$
50.00
$
50.00
$
1,580.93
$
1,580.93
$
50.00
$
50.00
$
128,135.36
$
129,312.80
$2,050.00
$
2,050.00
Book Value Total Reserve Assets' $ 6,707,642.48 $ 6,682,459.70 $ 7,081,891.04 $ 7,468,021.86 $ 7,785,041.00 $ 7,950,215.00 $ 8,398,199.00 $ 9,880,601.00 $ 10,104,083.00 $ 10,119,990.00
Market Value Total Reserve Assets $ 7,101,888.17 $ 7,443,057.63 $ 7,689,491.43 $ 8,158,105.82 $ 8,565,897.00 $ 8,360,804.00 $ 8,046,366.00 $ 10,819,789.00 $ 10,891,530.00 $ 10,552,465.00
'Assets less any liabilities
" Market Value calculated at year end
10/15/2014 C:\Users\ssmith\AppData\Local\Microsoft\Windows\Temporary Internet Files\Content.Outlook\CP4W827V\Police Pension Summary
Police Pension Fund
Revenue Expense Summary
9/30/2014
12/31/2013
2012
2011
2010
2009
2008
2007
2006
2005
Revenues:
Employee Contributions
$ -
$ -
$
$ _
$
$
-
$ 4,139.00
$ 5,193.00
Employer Contributions
It -
$ -
$
-
$
-
$
-
$ 8,278.00
$ 10,385.00
State Insurance Tax
$
152,519.00
$
142,151.31
It 138,410.77
$ 205,694.53
$
213,357.83
$ 214,429.30
$ 186,429.42
$ 190,192.00
$ 226,826.00
$ 353,271.00
Local Millage (A mills)
$
263,015.15
$
494,749.58
$ 511,961.22
$ 498,380.57
It
508,192.07
$ 485,345.06
$ 441,696.50
$ 388,877.00
$ 370,649.OD
$ 339,416.D0
10% City Fines and Forfeitures
$
77,271.63
$
112,992.59
$ 125,274.87
$ 126,045.40
$
130,723.07
$ 123,653.64
$ 131,583.83
$ 106,385.00
$ 119,147.00
$ 126,833.00
Sale of Confiscated Goods
$
5,182.00
$
1,898.28
$ 3,491.81
$ 5,026.40
$
5,487.59
$ 9,732.16
$ 7,715.61
$ 10,806.00
$ 6,343.00
$ 120.00
Interest and Dividends
$
188,526.69
$
263,480.49
$ 285,514.18
$ 263,520.02
$
267,714.80
$ 256,907.42
$ 359,998.26
$ 356,699.00
$ 373,776.0D
$ 347,752.00
Gain (Loss) on Sales
$
518,609.33
$
160,066.59
$ 168,288.38
$ 209,001.15
$
362,318.64
$ 153,193.23
$ (885,460.76)
$ 395,378.00
$ 420,298.00
$ 231,691.D0
Police Supplement
$
37,200.00
$
37,800.00
$ 39,900.00
$ 40,500.00
$
42,OOD.OD
$ 31,200.00
$ 30,000.00
$ 30,000.00
$ 30,300.00
$ 31,275.00
Future Supplement
$
44,280.00
$
46,620.00
$ 55,575.00
$ 36,450.00
$
26,061.50
$ 38,350.00
$ 41,370.00
$ 86,040.00
$ 60,060.00
$ 51,199.00
Misc Revenue
$
195.77
$ 53.39
$ 104.60
$
1,561.27
$ 5,757.99
$ 161.46
$ 907.00
$ 1,126.00
$ 2,401.00
Total Revenue
$
1,286,603.80
$
1,259,954.61
$ 1,328,469.62
$ 1,364,722.67
$
1,557,416.77
$ 1,318,568.80
$ 313,494.32
$ 1,565,284.00
$ 1,620,942.00
$ 1,499,536.00
Expenditures
Regular Monthly Benefits
$
1,151,403.57
$
1,535,372.30
$ 1,551,087.50
$ 1,564,986.62
$
1,582,900.00
$ 1,628,521.36
$ 1,638,067.76
$ 1,581,319.00
$ 1,456,466.00
$ 1,362,068.00
Police Supplement
$
18,450.00
$
24,650.00
$ 25,500.00
$ 26,400.00
$
27,250.00
$ 29,300.00
$ 30,000.00
$ 30,000.00
$ 29,600.00
$ 29,800.00
Future Supplement
$
44,280.00
$
45,510.00
$ 51,870.OD
$ 35,640.00
$
24,952.50
$ 36,816.00
$ 41,370.00
It 86,040.00
$ 60,060.00
$ 48,245.00
Investment Manager Fees
$
47,434.86
$
66,240.45
$ 69,500.53
$ 71,050.23
$
70,369.02
$ 68,150.57
$ 82,754.75
$ 67,712.00
$ 86,243.00
$ 86,672.00
Other Expenses:
Office Supplies/printing
$
51.52
$
56.81
$ 46.20
$ -
$ 84.00
Audit Fees
$
3,500.00
$
3,400.00
$ 3,600.00
$ 3,500.00
$
3,500.00
$ 3,500.00
$ 3,500.00
$ 3,500.00
$ 3,300.00
$ 3,210.00
Professional Services
$
103.75
$ -
$ 2,000.00
Legal Fees
$ -
$ 1,025.00
Bank Fees
$
38.18
$
99.10
$ 89.83
$ 164.48
$
119.34
$ 181.69
$ 203.21
$ 195.00
$ 156.00
$ 156.OD
Total Expenses
$
1,265,261.88
$
1,675,328.66
$ 1,701,694.06
It 1,701,741.33
$
1,709,090.86
$- 1,766,553.62
$ 1,795,895.72
$ 1,788,766.00
$ 1,636,850.DO
$ 1,532,151.00
Net Income (Loss) Before Market Adj"'
$
21,341.92
$
(415,374.05)
$ (373,224.44)
$ (317,018.66)
$
(151,674.09)
$ (447,984.62)
$ (1,482,401.40)
$ (223,482.00)
$ (15,908.00)
$ (32,615.00)
Market Adjustment
$
852,113.26
$ 756,67D.42
$ 770,169.29
$
770,856.91
$ 410,382.51
$ (1,291,031.77)
$ 151,74D.00
$ 344,973.00
$ (361,860.00)
Net Income (Loss)
It
21,341.92
$
436,739.21
$ 383,445.96
$ 453,150.63
$
619,182.82
$ (37,602.31)
$ (2,773,433.17)
$ (71,742.00)
$ 329,065.00
$ (394,475.00)
Book Value Total Reserve Assets' $ 6,707,642.48 $ 6,682,459.70 $ 7,081,891.04 $ 7,468,021.86 $ 7,785,041.00 $ 7,950,215.00 $ 8,398,199.00 $ 9,880,601.00 $ 10,104,083.00 $ 10,119,990.00
Market Value Total Reserve Assets $ 7,101,888.17 $ 7,443,057.63 $ 7,689,491.43 $ 8,158,105.82 $ 8,565,897.00 $ 8,360,804.00 $ 8,046,366.00 $ 10,819,789.00 $ 10,891,530.00 $ 10,552,465.00
'Assets less any liabilities
" Market Value calculated at year end
10/15/2014 C:\Users\ssmith\AppData\Local\Microsoft\Windows\Temporary Internet Files\Content.Outlook\CP4W827V\Police Pension Summary
7:7'
ARKANSAS FIRE & POLICE PENSION REVIEW BOARD 620 W. 3rd, Suite 200
Little Rock, Arkansas 72201-2223
Telephone: 501.682.1745
Toll -Free: 866.859.1745
Fax: 501.682.1751
email: info@lopti-prb.00m
website: www.lopii-prb.com
To: Board of Trustees
FAYETTEVILLE Police Pension Fund
From: PRB Staff
Re: 2013 Annual Actuarial Valuation
Date: August 4, 2014
Under state law the actuary for the PRB tests each local fire and police pension fund for actuarial
soundness. The PRB uses an annual valuation cycle to assist each Local Plan in monitoring the funding
progress of their plan. The enclosed valuation for December 31, 2012, answers the following questions
about your plan:
YES NO
1. Does income meet or exceed the Necessary XX
Employer Contribution (see page 4)?
2. Is the funded percentage at least 97% (see page 10),
OR are there enough assets to cover: all active
member contributions; all payments to current
beneficiaries; and 100% of all future payments
earned by active members (see page 11)? XX
Is the Local Plan actuarially sound?
(YES response to items 1 and 2) XX
FAYETTEVILLE POLICE PENSION FUND
ACTUARIAL VALUATION
AS OF DECEMBER 31, 2013
Osborn, Carreiro & Associates, Inc.
Actuaries Consultants Analysts
Little Rock, Arkansas
Osborn, Carreiro & Associates, Inc.
ACTUARIES CONSULTANTS ANALYSTS
August 4, 2014
Board of Trustees
Fayetteville Police Pension Fund
Gentlemen:
124 West Capitol Avenue, Suite 1690
Little Rock, Arkansas 72201
(501) 376-8043
This report presents the results of our actuarial valuation of the assets and liabilities of the Fayetteville
Police Pension Fund as of December 31, 2013.
This valuation is required by Arkansas Code Annotated 24-11-205. The purpose of this report is to (1)
evaluate the actuarial status of the Fund, (2) determine the level contribution requirement needed, (3)
review the development of the Fund over the past several years, and (4) present certain actuarial items
on page 9 for disclosure under Governmental Accounting Standards. This report is not intended for
any other purpose.
The Arkansas Fire & Police Pension Review Board reviewed the experience study we performed and a
change in the assumed interest discount rate was made to 5%. If your plan assumed something other
than 5% in previous valuations, the effect of this change in assumption is disclosed on page 5 of this
report.
The Summary of Financial Information found in Exhibit 3 has been expanded in this report. The
Exhibit now contains the basic financial information for the recently completed year and the previous
nine years. This expanded history and indicies provide trustees with additional tools for understanding
the financial condition of the plan. Please review this information.
The member and financial information used in this report was supplied by the Arkansas Fire & Police
Pension Review Board. We did not audit this information, although we did review it for
reasonableness and consistency.
I certify that this report has been prepared in accordance with generally accepted actuarial principles
and practices. In my opinion, the actuarial methods used are appropriate and the actuarial assumptions
produce results which, in the aggregate, are reasonable.
Sincerely,
Jody Carreiro, A.S.A., M.A.A.A.
Actuary
TABLE OF CONTENTS
EXHIBIT I CONTRIBUTIONS
EXHIBIT 2 COST AND LIABILITIES
EXHIBIT 3 SUMMARY OF FINANCIAL INFORMATION
EXHIBIT 4 COMPARISON WITH PRIOR YEARS
EXHIBIT 5 SHORT CONDITION TEST
EXHIBIT 6 EMPLOYEE AND RETIREE PROFILES
EXHIBIT 7 PRINCIPLE PROVISIONS OF THE PLAN
EXHIBIT 8 ACTUARIAL METHODS AND ASSUMPTIONS
lWWRINK
CONTRIBUTIONS
The following contribution level reflects the payment of the current year Normal Cost for benefits
attributable to said year (see Exhibit 2) plus an amount sufficient to pay off the Unfunded Actuarial
Liability over a 5 -year period. These costs DO NOT include the contributions due to the Local
Police and Firefighters Retirement System ("LOPFP') for persons hired after 1982.
2014 Necessary Annual Contribution to pay:
I Normal Cost, plus $ 0
2 Pay off the Unfunded Actuarial
Accrued Liability 3,017,108
3 Total necessary $ 3,017,108
Less
4 Expected Employee Contribution 0
(6.00% of salary)
Necessary Employer Contribution $ 3,017,108
(This is the amount needed in
addition to investment income)
Covered Payroll $ 0
Necessary Employer Rate
0.00%
The contributions are assumed to be made continuously throughout the year.
The actual 2013 contribution was $796,675 from the employer.
4
EXHIBIT 2
COSTS AND LIABILITIES
5
December 31,
2013
A Normal Cost
Dollar
Percent
(Cost to fund current active members)
Amount
ofnay
I Regular Retirement Benefits
$
0
0.00%
2 Voluntary Termination Benefits
0
0.00%
3 Survivors' Benefits
0
0.00%
4 Disability Benefits
0
0.00%
TOTAL
$
0
0.00%
B Actuarial Accrued Liability
I Active Lives
Regular Retirement Benefits
$
0
Voluntary Termination Benefits
0
Survivors' Benefits
0
Disability Benefits
0
TOTAL ACTIVE LIVES
$
0
2 Inactive Lives
Retirees
$
14,708,326
Disability Retirees
2,936,973
Widows & Children
2,633,315
TOTAL INACTIVE LIVES
$
20,278,614
3 Total Liability
$
20,278,614
C Assets
$
6,897,517
D Unfunded Actuarial Accrued Liability
$
13,381,097
E Effect of Change in Assumptions (if applicable)
1 Change in Unfunded Accrued Liability
$
0
2 Change in Necessary Employer Contribution
$
0
5
EXHIBIT 3
SUMMARY OF FINANCIAL INFORMATION
(Items C, F -H, and 1 detemsined by Osborn, Carreiro and Associates, Inc.)
A. INCOME
Year Ended
12/31/2013
Year Ended
12/3111012
Year Ended
12/31/2011
Year Ended
12/31/2010
Year Ended
12/312009
Year Ended
12/312008
Year Ended
12/31/2007
Year Ended
12/3/2006
Year Ended
12/312005
Year Ended
12/312004
1 FEnlovee Contributions $
0 S
0 $
0 $
0 $
0 $
0 $
0 $
4,139 S
5,193 $
11,829
2F 1 C trb
Employer/Court Fines/01her
Local Millage
127,094
527,430
128,767
511,961
131,071
498,381
136,210
508,192
133,386
485,345
139,299
441,697
117,191
388,877
133,768
370,649
137,338
339,416
151,651
295,409
3 Star,
Premium T. Allocation
Additional Allocation
Guarantee Fund
117,370
24,781
0
103,808
34,603
0
205,695
0
0
213,358
0
0
214,429
0
0
186,429
0
0
190,192
0
0
226,826
0
0
353,271
0
0
232,007
0
0
40h rIn ome
LOPFI Subsidy
Police Supplement (Act 1452 of 199
Future Supplearent(Act 1373 of200
Other herwas/Donations
0
25,200
46,620
196
0
27,300
55,575
53
0
27,600
36,450
0
0
28,500
26,062
1,561
0
31,200
38,350
5,758
0
30,000
41,370
161
0
30,000
86,040
907
0
30,000
60,060
1,427
0
31,275
51,199
2,401
30,600
33,140
536
AdjusOneni to prior year value
0
0
0
0
0
0
0
0
0
0
5 Ne, I
3575307
3845301
401,576
559,665
341,867
(608,217)
664,365
707,831
492,771
537,422
TOTAL INCOME $
1,225,998 $
1,246,368 $
1,300,773 $
1,473,548 $
1,250,335 $
230,739 $
1,477,572 $
1,534,700 $
1,412,864 $
1,292,594
B. EXPENSES
1 Adur cislrstive S
3,556 $
3,736 $
3,671 $
3,619 $
3,682 $
3,703 $
3,695 $
4,481 $
5,366 $
3,920
2 Benefits Paid068
Monthly Benefits
Police Supplements
Furore Supplements
DROP Payouts
Paid Current Year for Previous Year
1,535,372
24,650
45,510
0
0
1,551,087
25,500
51,870
0
0
1,564,987
26,400
35,640
0
0
1,582,900
27,250
24,953
0
0
1,628,521
29,300
36,816
0
0
1,638,068
30,000
41,370
0
0
1,581,319
30,000
86,040
0
0
1,456,466
29,600
60,060
0
0
1,362,
29,800
48,245
0
1,226,282
30,600
33,1400
0
3 Refunds
0
0
0
0
0
0
0
0
0
0
4 Othere enses
0
0
0
0
0
0
0
0
0
0
TOTAL EXPENSES $
1,609,088 5
1,632,193 $
1,630,698 $
1,638,722 $
1,698,319 $
1,713,141 $
1,701,054 $
1,550,607 S
1,445,479 S
1,293,942
C. Non -Investment Cash Flow $
(740,397) S
(770,126) S
(731,501) S
(724,839) S
(789,851) S
(874,185) S
(887,847) S
(723,738) S
(525,386) $
(538,770)
6
EXHIBIT 3 (Continued)
D. ASSETS (at book value) 12/31/2013
12/31/2012
12/312011
12/31/2010
12/312009
12/312008
12/31/2007
12/31/2006
12/312005
12/31/2004
1 Cash & Checking Accounts $ 4,403 $
10,906 $
19,643 $
3,018 $
0 $
0 $
0 $
0 $
0 $
0
2 Bank Deposits 0
0
0
0
2,932
1,81g
5,952
1,260
18,524.
14,144
3 Savings and Loan Deposits 0
0
0
0
0
0
0
0
0
0
4 Other Cash Equivalents 167,633
116,827
109,154
212,637
91,470
882,635
503,276
272,024
13,795
63,347
.5 US Govt Securities 1,258,389
1,352,185
1,279,004
1,586,099
1,963,872
2,455,193
4,049,437
4,395,290
4,559,937
4,226,452
6 Non -US Govt Securities 0
0
0
0
0
0
0
0
0
0
7 Mortgages 0
0
0
0
0
0
0
0
0
0
8 Corporate Bonds 883,239
1,443,125
1,324,587
922,200
1,024,106
401,276
258,140
381,729
482,122
631,330
9 Common Stocks 4,329,152
4,135,803
4,711,054
5,044,965
4,842,939
4,601,263
5,003,139
4,994,362
4,985,062
5,157,550
10 Other 55,985
23,044
24,574
29,622
38,696
71,029
75,657
84,418
75,850
75,157
11 Payables (12,600)
(12,600)
(12,900)
(13,500)
(13,800)
(15,015)
(15,000)
(15,000)
(15,300)
(15,375)
TOTAL ASSETS $ 6,686,201 $
7,069,291 S
7,455,116 S
7,785,041 S
7,950,215 S
8,398,199 S
9,880,601 S
10,104,083 S
10,119,990 S
10,152,605
E. TOTAL MARKET VALUE S 7,538,314 S
7,825,962 S
8,225,285 $
8,555,897 $
8,360,804 S
8,046,356 $
10,819,789 S
10,891,530 S
10,562,465 S
10,956,940
F. RATIO OF ASSETS TO ANNUAL EXPENSES
Book Value Basis 4.2
4.3
4.6
4.8
4.7
4.9
5.8
6.5
7.0
7.8
Market Value Basis 4.7
4.8
5.0
5.2
4.9
4.7
6.4
7.0
7.3
6.5
G. RATIO OF ASSETS TO NON -INVESTMENT CASH OUTFLOW
Book Value Basis 9.0
9.2
10.2
10.7
10.1
9.6
11.1
14.0
193
18.8
Market Value Basis 10.2
10.2
112
11.8
10.6
9.2
12.2
15.0
20.1
20.3
H. SUMMARY OF NET INVESTMENT RETURNS
Book Value Rate of Return 5.33%
5.44%
5.41%
7.38%
4.27%
-6.44%
6.88%
7.25%
4.98%
5.44%
10 Year Average Return 4.52%
Market Value Rate ofRetum 6.07%
4.73%
4.89%
11.50%
14.43%
-18.29%
7.81%
1032%
1.22%
5.23%
10 Year Average Return 4.41%
Note: The assumed liability discount rate is 5%. Ifthe plan does not realize an investment return of 5 %or mare over the long tern, the ultimate cost ofthe plan will be greater then the liabilities shown
in this report.
That is, the plan would need more money to meet its obligations.
7
EXHIBIT 3 (Continued)
12/31/2013 12/312012 12/31/2011 12/31/2010 12/312009
1. TOTAL MARKET VAL
1.
Market Value, end of yew
7,538,314
7,825,962
8,225,285
8,555,897
8,360,804
(Used for GASB calculations, page 9)
2.
Market Value, beginning of year
7,825,962
8,225,285
8,555,897
8,360,804
8,046,356
J.
DEVELOPMENT OF ACTUARIAL VALUE
OF ASSETS
1.
Actuarial Value of Assets, beginning of year
7,088,826
7,815,210
8,429,143
8,923,776
9,465,599
2.
Non investment Net Cash Flow
(740,397)
(770,126)
(731,501)
(724,839)
(789,851)
3.
Development of Investment Income
(a)
Total Market Investment Income (I1 -I242)
452,749
370,803
400,889
919,932
1,104,299
(b)
Assumed Rate for Immediate Recognition
5%
5%
5%
5%
7%
(c)
Amount for Immediate Recognition (Jl x b)
354,441
390,761
421,457
446,189
662,592
(d)
Amount for Phased In Recognition (a -c)
98,308
(19,958)
(20,568)
473,743
441,707
(e)
Phased In Recognition
Current year: 20% of 3(d)
19,662
(3,992)
(4,114)
94,749
88,341
First Prior Year
(3,992)
(4,114)
94,749
88,341
(522,003)
Second Prior Year
(4,114)
94,749
88,341
(522,003)
39,138
Third Prior Year
94,749
88,341
(522,003)
39,138
83,792
Fourth Prior Year
88,341
(522,003)
39,138
83,792
(103,832)
Total Phased In Recognition
194,646
(347,018)
(303,889)
(215,983)
(414,564)
(f)
Actuarial Value Investment Income
549,088
43,742
117,568
230,205
248,028
( 3(c)+3(e) )
4.
Actuarial Value of Assets, End of year
(1+2+3(t))
6,897,517
7,088,826
7,815,210
8,429,143
8,923,776
5,
Net Investment Return on the
8.2%
0.6%
1.5%
2.7%
2.7%
Actuarial Value of Assets
,
Note: The Pension Review Board's Board Rule #11 first applies this methodology to determine the Actuarial Value
of Assets for the 12/31/99 actuarial valuation report. Different methods were used to determine the Actuarial
Value of Assets for the 12/31/98 and earlier reports.
8
EXHIBIT 3 (Continued)
ACCOUNTING INFORMATION
This page is included to provide the information required by the Governmental Accounting Standards Board Statement
No. 25 and 27. The values below are based on the assumptions contained in Exhibit 8.
The Annual Pension Cost disclosed in this exhibit will almost always differ from the actual cash contribution to the fund.
We must emphasize that these disclosures are shown in the city's financial statements; Sound actuarial projections
should be used to determine the actual cash contribution requirements.
RECONCILIATION OF NET PENSION OBLIGATION (NPO)
E
2012
2013
2014
1.
Actuarially Required Contribution
2,944,130
2,919,366
2,872,624
2.
Interest on NPO
361,595
406,393
441,216
3.
Adjustment to (1)
1,630,615
1,832,634
1,989,666
4.
Annual Pension Cost (1)+(2).(3)
1,675,110
1,493,125
1,324,173
5.
Actual Contribution Made
779,139
796,675
6.
Increase in NPO (4)-(5)
895,971
696,450
7.
NPO Beginning of Year
7,231,898
8,127,868
8,824,318
8.
NPO End of Year
8,127,868
8,824,318
REQUIRED SUPPLEMENTARY INFORMATION
(a)
(b) (c)
(d)
(e)
(f)
(9)
Unfunded
Entry Age
Accrued
UAL as a %
Actuarial
Market Actuarial
Liability
Funded
Annual
of Covered
Valuation
Value of Accrued
(UAL)
Ratio
Covered
Payroll
Date
Plan Assets Liability
(c) -(b)
(b)/(c)
Payroll
(d)/(f)
12/31/2003
10,937,721 18,596,975
7,659,254
58.8%
219,008
3497.2%
12/31/2005
10,562,465 20,132,980
9,570,515
52.5%
70,279
13617.9%
12/31/2007
a 10,819,789 18,707,210
7,887,421
57.8%
0
N/A
12/31/2008
8,046,356 19,015,138
10,968,782
42.3%
0
N/A
12/31/2009
b 8,360,804 22,485,442
14,124,638
37.2%
0
N/A
12/31/2010
8,555,897 21,801,583
13,245,686
39.2%
0
N/A
12/31/2011
8,225,285 21,282,718
13,057,433
38.6%
0
N/A
12/31/2012
7,825,962 20,773,565
12,947,603
37.7%
0
N/A
12/31/2013
7,538,314 20,278,614
12,740,300
37.2%
0
N/A
12/31/2013
c 7,538,314 20,278,614
12,740,300
37.2%
0
N/A
a Includes change in assumptions to 7% discount rate
and 83GAM mortality.
b Includes change in assumptions to 5% discount rate
and 83GAM mortality.
c Includes change in assumptions to 5% discount rate
and 83GAM mortality.
E
EXHIBIT 4
COMPARISON WITH PRIOR YEARS
II!
Full Paid
Actuarial Computed
Active Members
Employer Contribution
Total Plan
Unfunded
Normal
Valuation
Annual
Percent
Dollar
Actuarial
Cost
Funded
Date
No.
Payroll
of Pay
Amount
Assets
Liability
Percent
Percent
12/31/1984
38
691,245
32.9%
227,671
2,637,566
1,685,881
23.7%
61.0%
12/31/1986
29
604,566
35.5%
214,342
3,251,235
1,712,937
23.9%
65.5%
12/31/1987
* 28
666,941
37.8%
252,114
3,374,250
2,065,775
24.6%
62.0%
12/31/1989
25
634,711
38.8%
246,132
4,009,866
2,175,493
27.2%
64.8%
12/31/1991
24
675,900
35.9%
242,541
5,144,950
1,632,194
28.2%
75.9%
12/31/1993
17
536,070
37.2%
199,314
6,293,999
1,232,923
27.8%
83.6%
12/31/1995
* 15
518,643
37.5%
194,517
7,187,710
989,655
27.7%
87.9%
12/31/1997
12
491,422
15.1%
74,142
9,126,449
(255,946)
26.9%
102.9%
12/31/1999
* 11
482,457
175.7%
847,558
10,572,573
4,788,608
45.2%
68.8%
12/31/2001
7
384,312
252.4%
969,851
11,353,564
4,549,239
41.6%
71.4%
12/31/2003
* 3
219,008
0.0%
1,678,182
11,125,006
7,471,969
36.4%
59.8%
12/31/2005
* 1
70,279
0.0%
2,071,290
10,564,072
9,568,908
40.6%
52.5%
12/31/2007
* 0
0
0.0%
1,872,657
10,153,822
8,553,388
0.0%
54.3%
12/31/2008
0
0
0.0%
2,108,536
9,384,367
9,630,771
0.0%
49.4%
12/31/2009
0
0
0.0%
3,057,822
8,923,775
13,561,667
0.0%
39.7%
12/31/2010
* 0
0
0.0%
3,015,156
8,429,143
13,372,440
0.0%
38.7%
12/31/2011
0
0
0.0%
3,036,591
7,815,210
13,467,508
0.0%
36.7%
12/31/2012
0
0
0.0%
3,085,572
7,088,826
13,684,739
0.0%
34.1%
12/31/2013
0
0
0.0%
3,017,108
6,897,517
13,381,097
0.0%
34.0%
* Benefits or assumptions changed
II!
EXHIBIT 5
SHORT CONDITION TEST
The Arkansas General Assembly has stated that the funding objective for these plans is to pay for
benefits with contributions that remain level as a percentage of employee payroll. Thus, the long-
term condition test is met when the actual contributions are fairly level and are paid when due.
A short condition test can be used to measure a plan's progress. Under the short condition test, the
fund's assets are compared with:
1) Active member contributions;
2) The liabilities for future benefits to the present retirees and inactive members;
3) The liabilities for service already rendered by active members.
If the plan has been following level cost funding, liability (1) and liability (2) above will almost
always be fully covered by the rest of the present assets. In addition, liability (3) above will at least
partially funded. The larger the funded portion of liability (3), the stronger the condition of the fund.
For a closed fund i.e., one like yours, where no new members are admitted), the funded portion of
liability (3) should be steadily increasing.
The following table illustrates the history of the short condition test for this plan:
11
Computed Actuarial Liabilities
Portion of Liabilities
(1)
(2)
(3)
covered by Assets
Active
Retirees
Actives -
Valuation
Members
and
Employer
Valuation
Date
Contributions
Inactives
Financed
Assets
(1)
(2)
(3)
12/31/1984
186,492
2,220,660
1,916,295
2,637,566
100%
100%
12%
12/31/1986
200,487
2,982,120
1,781,565
3,251,235
1000/.
100%
4%
12/31/1987
229,457
3,095,232
2,115,336
3,374,250
100%
100%
2%
12/31/1989
266,726
3,719,388
2,199,245
4,009,866
100%
100%
1%
12/31/1991
336,940
3,674,180
2,766,024
5,144,950
100%
100%
41%
12/31/1993
299,612
4,834,716
2,392,594
6,293,999
100%
100%
48%
12/31/1995
319,728
5,358,162
2,499,475
7,187,710
100%
100%
60%
12/31/1997
317,594
5,944,842
2,608,067
9,126,449
100%
100%
110%
12/31/1999
347,267
10,047,770
4,966,144
10,572,573
100%
100%
4%
12/31/2001
291,291
11,488,981
4,122,531
11,353,564
100%
96%
0%
12/31/2003
155,251
16,072,819
2,368,905
11,125,006
100%
68%
0%
12/31/2005
50,523
19,314,460
767,997
10,564,072
100%
54%
0%
12/31/2007
0
18,707,210
0
10,153,822
100%
54%
0%
12/31/2008
0
19,015,138
0
9,384,367
100%
49%
0%
12/31/2009
0
22,485,442
0
81923,775
100%
40%
0%
12/31/2010
0
21,801,583
0
8,429,143
100%
39%
0%
12/31/2011
0
21,282,718
0
7,815,210
100%
37%
0%
12/31/2012
0
20,773,565
0
7,088,826
100%
34%
0%
12/31/2013
0
20,278,614
0
6,897,517
100%
34%
0%
11
EXHIBIT 6
Employee Profile
Employee data needed for the valuation was obtained from the records furnished by the
Arkansas Fire and Police Pension Review Board. The following table shows a detailed
breakdown of the present participants by the number of participants and total salary.
Actives
Years of Service
30 and
Axe 0-5 5-10 10-15 15-20 20-25 25-30 Over Total
Under
25
25-29
30-34
35-39
40-44
Count
Salary
Count
Salary
Count
Salary
Count
Salary
Count
Salary
0
0
0�'..
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
U
0
0
0
0
0
0
0
0
0
v
0
0
0
0
0
0
0
0
v-� &
0` a
0 a n u
0
0
0.:
0
0
0 vN
45-49
50-54
55-59
60-64
65 &
Over
Unknown
Age
Total
Count
Salary
Count0
Salary
Count
Salary
Count
Salary
Count
Salary
Count
Salary
Count
Salary
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 p0 0
'v 4D L eb ��
0,
0=_ 0
0 ,
0
0 z0
0 «i x
011, 1 W" AMR Q
0
0
0' °
12
EXHIBIT 6
Inactive Profile
Employee data needed for the valuation was obtained from the records furnished by the Arkansas
Fire and Police Pension Review Board. The following table shows a detailed breakdown of the
present payees by the number of payees and total annual benefit.
Retirees and Survivors
Years Since Retirement
10 and
Age 0-1 1-2 2-3 3-4 4-5 5-10 Over Total
Under
Count
0
0
0
0
0
0
0
0
40
Benefit
0
0
0
0
0
0
0
0;
40-44
Count
0
0
0
0
0
0
0
Benefit
0
0
0
0
0
0
0
0'
45-49
Count
0
0
0
0
0
0
1
1
Benefit
0
0
0
0
0
0
18,301
„18,301
50-54
Count
0
0
0
0
0
1
2
3
Benefit
0
0
0
0
0
95,698
66,531
162,229
55-59
Count
0
0
0
0
0
0
7
7
Benefit
0
0
0
0
0
0
226,930
226,930
60-64
Count
0
0
0
0
0
1
5
6
Benefit
0
0
0
0
0
92,784
196,516
'' 289,300
65-69
Count
0
0
0
0
0
3
8
11
Benefit
0
0
0
0
0
102,113
246,541
'.: 34816544
70-74
Count.
0
0
0
0
0
0
10
10
Benefit
0
0
0
0
0
0
243,189
243,189.
75-79
Count
0
0
0
0
0
0
4
-4
Benefit
0
0
0
0
0
0
176,293
176,293,:
80-84
Count
0
0
0
0
0
0
2
2;
Benefit
0
0
0
0
0
0
43,357
43,357
85 &
Count
0
0
0
0
0
0
2
1 2
Over
Benefit
0
0
0
0
0
0
29,369
29,369'
Unknown
Count
0
0
0
0
0
0
0
0`
Age
Benefit
0
0
0
0
0
0
0
0 -
Total
Count
0
0
0
0'
0
5
41
46
Benefit
0
0
0
0
0
290,595
1,247,027
3,537,622
This includes 25 retirees with annual benefit of $1,029,935 .
This includes 10 disableds with annual benefit of $259,149 .
This includes 11 survivors with annual benefit of $248,538 .
13
EXHIBIT 7
PRINCIPLE PROVISIONS OF THE PLAN
EMPLOYEE Member of Police Department
EMPLOYER Fayetteville Police Department
MEMBERSHIP Condition of Employment. Police officers hired after 1982 must join the
statewide Local Police and Firefighters Retirement System
CREDITABLE SERVICE Determined on basis of service since employment
Employee 6% of salary. Refundable if member terminates before retirement eligibility.
Employer 1. Matching contribution equal to employee contribution
2. State Insurance Premium Tax turnback
3. Local Millage
4. 10% of all fines & forfeitures collected by the Police Department.
FINAL SALARY Highest salary for any continuous twelve-month period of time worked prior
to retirement.
RETIREMENT BENEFITS
Elip:ibility 20 Years of Service regardless of age.
Benefit 95% of Final Salary, but not less than $4,200. If service exceeds 20 years, the
annual benefit is increased by $240 for each year over 20, up to $1,200/year
extra.
If service is more than 25 years, member receives an extra 1.25% (for each
year over 25) of Final Salary, payable once the retiree reaches age 60. The
benefit cannot exceed 100% of Final Salary.
DEATH BENEFITS
Elieibility Death of an active member or member receiving benefits.
Benefit I. Widow receives same amount as member is receiving or eligible to
receive, excluding the 1.25% additional formula for service over 25
years.
2. Each child under age I8 (23 if still in school) receives $1,500/year.
If no surviving spouse, children receive spouse's benefit to age 18.
3. If no widow or children, widowed mother receives $1,500/year.
14
EXHIBIT 7 (Continued)
DISABILITY BENEFITS
Eligibility Permanent physical or mental disability. Five year service requirement unless
disability is incurred in the line of duty.
Benefit Non -duty disability
Retirement benefit but not less than $4,200/year.
Duty related disability
Retirement benefit but not less than 65% of Final Salary and not less
than $4,200/year.
15
EXHIBIT 8
ACTUARIAL METHODS AND ASSUMPTIONS
The assumptions for this valuation have been selected in accordance with Actuarial Standards of Practice No. 27.
The asset valuation method is prescribed in Arkansas Code Annotated 24-11-207. This prescribed asset
valuation method directly impacts the investment return assumption. The assumed salary growth is restricted by
A.C.A. 24-11-205 in relation to the investment return assumption.
ACTUARIAL COST METHOD The "entry age normal' cost method has been used.
PRE -RETIREMENT MORTALITY Deaths have been projected on the basis of the 1983 Group
Annuity Table for Males, set back five years for females.
Mortality rates at a few sample ages are:
Age Mortality rate per 1.000
25 0.464
35 0.860
45 2.183
55 6.131
POST RETIREMENT MORTALITY The 1983 Group Annuity Mortality Table was used. For females,
the male table was used with a five-year setback. The life
expectancy according to this table is as follows:
Age Males Females
55 24.87 29.23
65 16.74 20.68
MORTALITY BASIS AND PROJECTION The mortality assumptions do not include a projection for
mortality improvement. These rates were chosen after an
experience study for 2007-2012. No projection was deemed
necessary at this time since the recent experience study did not
show significant improvement over an experience study for 2000-
2006 deaths.
The 1971 Group Annuity Table for Males, set back five years for
females was used before the 12/31/2007 Valuation.
VOLUNTARY TERMINATIONS Annual termination rates at a few sample ages are:
Age
Termination rate per 1.000
20
50
25
45
30
39
35
23
40
9
45
5
50
5
55
5
16
EXHIBIT 8 (Continued)
ASSUMED DISCOUNT RATE
DISABILITIES
ASSET VALUATION
When a person had less than 4 years of service, we assumed that
his chances of voluntary termination were a multiple of thereafter
rates, with the following multiples being used:
1 st year
2.85
2nd year
2.00
3rd year
1.50
4th year
1.15
5.0%
The reports for the valuations as of 12/31/2009 through 12/31/
2012 were completed using an assumed discount rate of 5%. The
effect of any assumption change is shown on page 5 of this report.
A study of the returns of all fire and police plans was made of the
2006-2012 experience. The components and variations of
appropriate portfolios were also reviewed. The Pension Review
Board determined that for comparison with previous years and
with other similar plans that a single discount assumption of 5%
We continued the disability rates used in prior reports. Disability
rates at a few sample ages are:
Age
Disability rate per 1.000
20
0.8
25
0.8
30
0.8
35
0.8
40
2.0
45
2.6
50
4.9
55
8.9
60
14.1
One third of the disabilities were assumed to be service related.
For mortality after disability, we assumed rates based on the
Eleventh Actuarial Valuation of the Railroad Retirement System,
for occupational disabilities
See Exhibit 3, Part J
17
EXHIBIT 8 (Continued)
SALARY GROWTH
EXPECTED RETIREMENT PATTERN
We have used the salary scale used in prior reports. Annual
assumed growth at a few sample ages is:
ANNUAL SALARY INCREASE
Age
Base
Merit
Total
20
4.0%
4.0%
8.0%
25
4.0%
3.2%
7.2%
30
4.0%
2.8%
6.8%
35
4.0%
2.5%
6.5%
40
4.0%
2.2%
6.2%
45
4.0%
1.7%
5.7%
50
4.0%
1.2%
5.2%
55
4.0%
0.7%
4.7%
60
4.0%
0.2%
4.2%
Since the plan allows full benefits at ages younger than the
traditional "65", an assumption that will have an important impact
is what percentage of people who are eligible for this early
retirement will actually take advantage of it.
This will depend on intangible things such as the economy, health,
financial ability to retire, Social Security eligibility, and work
patterns. Based on recent experience, we are using the following
assumed rates:
Retirement rate per 1,000
Age
40-44
200
45-50
250
51
250
52-58
250
59
250
60+
1,000
Note:
A member was assumed to be eligible for retirement
after attaining age 40 with 20 years of service. It is
also assumed that twice the normal number will
retire in the fust year of eligibility.
18
We received the following insurance turnback funds for the old police pension funds:
2014 2013 2012 2011 2010 2009 2008
Police
$
152,519.00
$
142,151.31
$
138,410.77
$
205,694.53
$
213,357.83
$
214,429.30
$
186,429.42
Police Future Supplement
$
44,280.00
$
46,620.00
$
55,575.00
$
36,450.00
$
26,061.50
$
38,350.00
$
41,370.00
Police Supplement
$
24,600.00
$
25,200.00
$
27,000.00
$
27,000.00
$
28,200.00
$
30,000.00
$
30,000.00
For 2014 Police Pension received two checks. The "first round" allocation for Police was $120,410.00 with an additional allocation of $ 32,109.00
Police Future Supplement
Regular Retirees
Disabled Retirees
Spouse Regular
QDRO
Police Supplement
Regular
Spouse Regular
QDRO
Amount per
Distribution
Number of
Amount
Pensioner
Pensioners
$1,080.00
Lump Sum
19
$20,520.00
$1,080.00
Lump Sum
11
$11,880.00
$1,080.00
Lump Sum
11
$11,880.00
0
4
$0.00
46
$44,280.00
$50.00
Monthly
30
$18,000.00
$50.00
Monthly
11
$6,600.00
0
4
$0.00
$24,600.00
K:\Police Pension\Turnback & Suplemental Benefits\2014 Police Pension Supplement\Copy of Lopfi Turnback Funds from State 2014
10/15/2014 tl
Dear Sirs:
STATE OF ARKANSAS
Department of Finance
and Administration
OFFICE OF ADMINISTRATIVE SERVICES
Fiscal Accounting
1515 West Seventh Street, Suite 700
Post Office Box 2485
Little Rock, AR 72203-2485
Phone: (501)324-9060
Fax: (501)324-9070
httpl/www.arkansas.gov/dfa
Enclosed are payments for your Fire or Police pension program. The payments include
the following checked items:
✓ Old Plan Fire Pension Program
Id Plan Police Pension Program
Additional Supplement Fire Pension Program
ditional Supplement Police Pension Program
_ lice Supplement Program
ire Future Supplement Program
Police Future Supplement Program
The payments to the LOPFI plans have been directly remitted to them. LOPFI will apply
the funds to your account.
Funds for this payment were collected by the Arkansas Insurance Department, certified
by the Arkansas Fire & Police Pension Review Board, and disbursed by the Department
of Finance and Administration.
Thank you for your assistance. Questions concerning the payments should be directed
to Arkansas Fire & Police Pension Review Board at (501) 682-1745 or myself at the
number below.
Sincerely,
Accounting Manager
(501)324-9062
e-mail: richard.drilling@dfa.arkansas.gov
Enc.
ARKANSAS FIRE & POLICE PENSION REVIEW BOARD
To: Local Police Pension Fund Board of Trustees
From: Arkansas Fire and Police Pension Review Board (PRB)
Re: 2014 Police Supplement Fund Distribution
Date: June 2014
620 W. 3rd, Suite 200
Little Rock, Arkansas 72201-2223
Telephone: (501) 682-1745
Toll -Free: (866) 859-1745
Fax: (501) 682-1751
email: info@lopfi-prb.com
website: www.lopfi-prb.com
Enclosed from the Department of Finance and Administration is the Police Supplement
Fund distribution provided by Act 1452 of 1999 (as amended by Act 1543 of 2001). The
Police Supplement is to be distributed monthly to each retiree, survivor, and DROP
participant as reflected on the Annual. Financial Report for the Local Plan at December 31,
2013.
Although, the Local Plan received the annual amount of the Police Supplement, the
distribution should occur as a monthly payment to each eligible participant. This
distribution is not available to an alternate payee under a Qualified Domestic Relations
Order (QDRO). An alternate payee is an ex-spouse who receives a portion of a retiree's
benefit pursuant to a divorce. Again, only the participants identified in paragraph one of
this memo are eligible for this distribution.
Should you have any questions, please contact Denise Collins at one of the above
numbers. Thank you.
ARKANSAS FIRE & POLICE PENSION REVIEW BOARD
To: Local POLICE Pension Fund Board of Trustees
From: Arkansas Fire and Police Pension Review Board (PRB)
Re: 2014 Future Supplement Fund Distribution
Date: June 2014
620 W. 3rd, Suite 200
Little Rock, Arkansas 72201-2223
Telephone: (501) 682-1745
Toll -Free: (866) 859-1745
Fax: (501) 682-1751
email: info@lopfi-prb.com
website: www.lopti-prb.com
Enclosed is the Future Supplement Fund distribution for your POLICE pension fund
mailed from the Department of Finance and Administration. The distribution complies
with Act 1373 of 2003. The amount listed below is to be distributed equally to each
retiree, beneficiary, and DROP participant as reflected on the Annual Financial Report
for the Local Plan at December 31, 2013. The effective date for the distribution is July 1,
2014.
Please remember that the amount available for distribution will vary from year-to-year. It
may increase or decrease; therefore, to avoid errors we recommend a single one-time
payment be made to each eligible participant.
The total one-time amount to distribute to each participant is: $ 1,080.00
For eligible participant(s) who have deceased, those monies are to be placed into the
Local Plan. This will ensure each eligible person receives the correct allocation.
Should you have questions, please contact Denise Collins at one of the above phone
numbers. Thank you.
it L -J L -J --
Agency Name: DFA -DISBURSING OFFICER _
Address : 1515 W 7TH ST STE 700 _
City,StZip: LITTLE ROCK AR 72201
Vendor Number: 0800000336 _
Invoice # Document Text
2014 Old Plan Po 2014 Old Plan Police
476301
I
--J -J --J
Warrant Numb: 14W-1094609
Warrant Date: 6/30/2014
Payment Date: 6/30/2014
Net Amount
120,410.00
ArENCY1 dAU. UAY ''YEAR
0 4O D'6 30 2014
f L_J L_J I _J L_J
Agency Name: DFA -DISBURSING OFFICER _ Warrant Numb: 14W-1094607
AddreSS : 1515 W 7TH ST STE 700 _ Warrant Date: 6/30/2014
City,St Zip: LITTLE ROCK AR 72201 _ Payment Date: 6/30/2014
Vendor Number: 0800000336 _
Invoice #
2014 Add Allocat 2014 Add Allocation Police
ass 1
Document Text
7HlS W rR8 k
<,
Aug#�
TOTALS THIS WARRANT
Net Amount
32,109.00
Au ... CY -':M0,1-'DAY
YEAR
0620 A613012014
__ 32,109.00
777
41
iSdR■ t;08 20Q77$t X43 i091,60�tri■
Agency Name: DFA -DISBURSING OFFICER _
Address : 1515 W 7TH ST STE 700 _
City,StZip: LITTLE ROCK AR 72201 _
Vendor Number: 0000000336 _
Invoice # Document Text
2014 Future Poli 2014 Future Police
J�
4]6301
ii
C-� r
Warrant Numb: 14W-1094611
Warrant Date: 6/30/2014
Payment Date: 6/30/2014
TOTALS THIS WARRANT
1 K�S THA U1kARN�Nfi
o k; '� 1(� Il1t ii,[IL t'r� tsurEr T'11i1� #�a�k� tlrls
> N ,1P1SP`''
-MU DAY'. YEAR
10620_11g,6 30 2014 1 CITY OF'FAYETTEVILLE
ff9lxEGfFi
Net Ampunt
44,280.00
44,280.00
Agency Name: DFA -DISBURSING OFFICER _ Warrant Numb: 14W-1094606
Address : ISIS W 7TH ST STE 700 _ Warrant Date: 6/30/2014
City,St Zip: LITTLE ROCK AR 72201 _ Payment Date: 6/30/2014
Vendor Number: 0800000336 _
■ Invoice #
2014 Police Supp 2014 Police Supplement
i
a]63D1
i
Document Text
THIS WARRANT
Net Amount
24,600.00
24,600.00
'..A aENCY " M0. `DAY YEAR
062D06 30 2014
Smith, Sondra
From:
Leach, Trish
Sent:
Monday, June 02, 2014 1:39 PM
To:
Smith, Sondra
Cc:
Hertweck, Marsha; Becker, Paul
Subject:
FW: 2014 Evaluating Investments Memo
Attachments:
Evaluating Investments 2014.docx
From: Tracy Warfe [mailto:twarfe@lopfi-prb.comj
Sent: Monday, June 02, 201412:19 PM
Cc: Denise Collins
Subject: 2014 Evaluating Investments Memo
Good afternoon -
Attached you will find the 2014 Evaluating Local Plan Investments Memo.
Please provide the information to the Local Fire and Police Pension Plan's Board of Trustees.
Ifyou should have any questions please call our office toll free at 866-859-1745.
Sincerely,
PRB Staff
ARKANSAS FIRE & POLICE PENSION REVIEW BOARD 620 W. 3rd, Suite 200
Little Rock, Arkansas 72201-2223
Telephone: (501) 682-1745
Toll -Free: (866) 859-1745
To: Local Fire and Police Pension Fund Boards' of Trustees Fax: (501) 682-1751
From: Arkansas Fire and Police Pension Review Board (PRB) email: info@lopfi-prb.com
website: www.lopfi-prb.com
Re: Evaluating Local Plan Investments
Date: June 2, 2014
The following information is intended to assist Local Plan trustees with a regular review
of the Local Plan's investment portfolio, which is an essential role as a trustee. Trustees
must ensure all holdings and fees comply with the local board's investment policy and
state law. The local board should seek advice from their investment professional(s) and
legal counsel to verify compliance with ACA 24-11-805 (fire funds) and 24-11-410
(police funds). Local Plans that utilize an investment advisor should also review ACA
24-10-402 for additional restrictions on allowable investments. The PRB understands
these code sections to say that permissible asset classes for Local Plans with assets over
$100,000 and under $5,000,000 are Cash (including savings accounts and CDs), state and
federal government bonds, and no load mutual funds (this also means no sales or
redemption charges for mutual funds). Annuity products are not an allowable investment.
At a minimum, items for review should include:
• Liquidity -Is an asset able to be sold with relative ease? Will the Local Plan incur
surrender charges or other costs to exit a holding? If so, were such charges fully
disclosed to the trustees when the asset(s) were purchased?
• Performance -Does each investment produce the expected return and is
performance consistent with the asset's benchmark (index)?
• Index -What information was provided to the local board to demonstrate that a
specific index is the correct one to use?
• Allocation -Is each style (equities, bonds, domestic, international, etc.) operating
within the board's investment policy or is rebalancing the portfolio necessary?
• Fees -Clear disclosure of all investment related fees must be on all monthly,
quarterly, and annual statements prepared for the board. Trustees should be able
to easily determine the total amount the Local Plan spends on all fees.
• Prohibited investments -Do all assets conform to the board's investment policy?
Were assets purchased in violation of the policy or, in the case of a bond holding,
was the bond downgraded? Are there any assets not allowed under ACA 24-11-
805, 24-11-410 or 24-10-402?
This memo is neither a complete checklist nor a legal opinion. It should be used as a
guide to assist local boards with a regular review of their investment program. Please
contact Denise Collins with any questions.
Smith, Sondra
From: Kerry Watkins -Bradley <kerry.bradley@garrisonfinancial.com>
Sent: Monday, June 30, 2014 5:30 PM
To: Smith, Sondra
Subject: Police pension
I just wanted to let you know the police pension account transferred in Friday so we're all set to go.
Carla will reconcile it and make sure everything came over. There will probably be some trailing dividends and
interest hit over the next few weeks.
Have a nice evening.
Sent from my iPhone
This email has been scanned for email related threats and delivered safely by Mimecast.
For more information please visit http://www.mimecast.com
oOwGARRISON
T1 N AN C I A L
August 26, 2014
Ms. Sondra Smith
City of Fayetteville
113 West Mountain Street
Fayetteville, Arkansas 72701
Dear Ms. Smith,
RECEIVED
AUG 2 8 2014
CITY CLERK'S OFFICE
We're writing to let you know that new IRS legislation requires that brokers and
custodians (like Schwab) begin reporting cost basis information on select fixed income
positions for the 2014 tax year. Garrison Financial recommends the default cost basis
selection which requires No Action on your part.
Beginning in August 2014, Schwab will make changes to the amortization settings in its
cost basis system to conform to the new IRS reporting rules. The changes will be
implemented over a two-week period in August and will be retroactive to January 1,
2014.
Below is a summary of the changes Schwab will implement for taxable accounts
beginning in August 2014:
• Enable amortization settings.
• The methods used to calculate amortization and accretion will be based on whether a
bond is purchased at a premium, original issue discount, or market discount, and/or if
there is a call or put feature.
. Market discount on a bond purchased on the secondary market will be calculated
using the straight line accounting method (this is parallel to the IRS default for
taxpayers).
The amount of the market discount will not be incorporated in current income or
adjusted cost basis until the position has been sold, has matured, or has been called.
Prior to this change, Schwab assumed that you included market discount in your
current income and adjusted cost basis daily.
These changes are effective January 1, 2014, and will affect all open bond holdings in
your accounts. As a result, you may see changes to the cost basis information reported
on your year-end 1099 report. It's important to note that the changes don't affect bonds
that were purchased and sold prior to the beginning of this year. In addition, bonds that
closed in 2014 before the August implementation date will be updated this fall.
Garrison Financial
605 W. Dickson Street, Suite 201 • Fayetteville, Arkansas 72701
479-587-1045 9 888-442-7637. 479-587-1257 Facsimile • www.GarrisonFinancial.com
The IRS will allow taxpayers to instruct their brokers to use settings for taxable bonds
that differ from the defaults. A change from the default can be designated with a letter
of authorization from you. We have included some information detailing the options
other than the default along with some frequently asked questions Schwab sent to us as
your advisor about these changes. Due to the complex nature of this matter we wanted
to pass along this information to you.
Garrison Financial will also begin accounting for the required changes in the same
manner as Charles Schwab in an effort for our reports to closely match your tax reports
from Charles Schwab. We do not offer tax advice and encourage you to consult with
your tax preparer about this issue. We are happy to work with you and your tax
preparer on this matter in an effort to do what is best for your personal situation.
If you have any questions or would like to schedule time to discuss the changes, please
don't hesitate to call to set up a time to talk.
Sincerely,
e.Amf
Kerry L. Bradley, CFA, MBA
President & Equity Portfolio Manager
Garrison Financial
605 W. Dickson Street, Suite 201 • Fayetteville, Arkansas 72701
479-587-1045 • 888-442-7637. 479-587-1257 Facsimile • www.GarrisonFinancial.com
Letter of Authorization (LOA) to Change Fixed Income
Amortization & Accretion Settings form
Client instructions
The new IRS -designated defaults may not coincide with what your
clients have used for tax filing purposes in the past. But the IRS
will allow taxpayers to instruct their brokers to use settings for
taxable bonds that differ from the defaults. They can choose to:
• Accrue market discount using constant yield.
• Include market discount in current income.
• Disable bond premium amortization.
• Treat all interest as GID.
Please note: Schwab is able to support all the instructions above
for the 2014 tax year except the instruction to "Treat all interest
as GID' We'll provide an update about this instruction in 2015.
The Letter of Authorization (LOA) to Change Fixed
Income Amortization & Accretion Settings form will
be available September 1, 2014-
If your client is considering changes to their default settings,
instructions for the 2014 tax year must be submitted in writing to
Schwab by December 31, 2014, and will be retroactive to January
1, 2014. Schwab will ensure that all forms received by December
31 will be processed in time for 1099 reporting for that tax year.
• The Letter of Authorization (LOA) to Change Fixed Income
Amortization & Accretion Settings form must be signed and
completed by the account holder for each affected account.
Advisors cannot execute the LOA on their client's behalf.
- Some instructions are not revocable and others require IRS
commissioner approval for revocation.
Your clients are also responsible for filing the appropriate
instructions with the IRS on their tax returns.
- To obtain the Letter of Authorization (LOA) to Change Fixed
Income Amortization & Accretion Settings form, contact the
Client Reporting Services Team at 1-877-762-6446.
Letter of Authorization (LOA) to
Change Fixed Income Amortization
& Accretion Settings
Use this form to make changes to the IRs broker defaults for fixes
0 (Inside the corn
SS00-436AODD the U.S.)
income amortization and accretion settings that are currently applied to your Charles Schwab account.
outside
+1-317-5961501 (outside the U.S.)
Complete, sign, and return this form to
14888.686.6916 (multilingual services)
Charles Schwab & Co., Inc.
Clients of mdependent investment
2423 E. Lincoln Drive, Phoenix, AZ 55016
advisors, contact your advisor directly
You may also fax this completed form to 1-866-713-8388.
or Schwab Alliance at 1-600-515-2157.
Page 1 of 2
L Current Schwab Account AmorRTatlon and Accretion settings as Required by the IRS Brokaf Defaults
• Bond premium will be amortized for any taxable bonds in your account.
• Market discount will be Calculated using the stmight4im method.
• Market discount will be included on the 1099-B when the security is sold or matures.
2. Changes to IRS Broker DefauBs for Fixed Income AmorBration
PLEASE NOTE THAT SUSUMMO AN INSTRUCTION ON THIS FORM TO CHARLES SCHWAB DOES HOT SATISFY THE IRS REQUIREMENTS FOR
MAKING ELECTIONS ON YOUR TAX RETURN. IT IS YOUR RESPONSIBILITY TO FILE THE APPROPRIATE ELECTION WRH THE His. SOME ELECTIONS
ARE NOT REVOCA13LE AND OTHERS REQUIRE IRS COMMISSIONER APPROVAL FOR REVOCATION. WE STRONGLY RECOMMEND THAT YOU CONSULT
WITH A TAX ADVISOR BEFORE SUBMITTING THIS FORM.
Your Instructions must be received by December 31 of the current tax year to be applied for that same tax year. Changes for round; received after
December 31 will be applied to the following tax year.
Review your options below and check the boxes for the broker defaults that you would like to change. This change will be applied to all taxable fixed
Income positions in the account unless otherwise stipulated. Instructions must be given for each Individual account.
18
FAQs
Why is Schwab making adjustments to cost basis and reporting
calculations this year?
The IRS has issued guidelines for brokers and custodians for the
next set of securities they are required to include in their tax
reporting. For tax year 2014, brokers and custodians are required
to report cost basis on select fixed income securities and options.
The guidelines require Schwab to begin amortizing/accreting
bonds purchased at a premium/discount and adjust the cost and
basis accordingly. White Schwab is not required to make changes
that affect gain/loss calculations on options contracts, there are
tax withholding and reporting requirements on options that we
will be making as a result of this phase of the legislation.
What securities and positions will be considered covered and
reported to the IRS?
This year, the IRS requires custodians and brokers to report cost
basis on select fixed income positions and options purchased on
or after January 1, 2014. With respect to fixed income holdings,
the legislation is in effect only for what the IRS is categorizing as
"less complex" bonds_ These are bonds that generally have fixed
rates and fixed terms, including Treasury notes and bonds,
fixed-rate corporate bonds, and municipal bonds. In 2016, cost
basis on bonds considered "more complex" is expected to
become reportable to the IRS. Examples of more complex bonds
include variable-rate bonds, convertible bonds, contingent
payment bonds, or other bonds that make it difficult for brokers
to calculate a yield. The full list of bonds that will be reportable in
this initial phase is available on page 4 of the Advisor Toolkit.
What changes will Schwab be making to cost basis reporting on
fixed income holdings?
Schwab is required to comply with IRS guidelines for fixed
income cost basis accounting. The guidelines require the
following changes:
• Amortizing/accreting covered bonds
Updating the amortization yield method (these differ based on
bond feature; refer to the appropriate section of the Advisor
Toolkit for details)
Updating the market discount to accrue at disposition
• Updating the market discount accrual method to straight line
To ensure consistent accounting for all fixed income holdings, the
three amortization/accretion setting changes fisted at left will be
applied to all bond positions with these settings enabled,
including both covered and uncovered positions in taxable and
non-taxable accounts.
NOTE: For the 2014 tax year, Schwab will only be reporting to the
IRS adjusted cost basis on covered securities (less complex bonds
and options) purchased and sold on or after January 1, 2014.
Which of my clients will be affected?
Clients holding less complex bonds in both taxable and non-
taxable accounts may be affected. Clients who have amortization/
accretion currently enabled on their accounts may see a change
in cost basis for their less complex bonds. For clients who do not
currently have amortization/accretion enabled, there will be
adjustments to their cost basis in their taxable accounts (the new
settings wilt only be enabled for taxable accounts). Your clients'
level of awareness of these changes will depend on the reporting
preferences you have chosen for their accounts. If you have
enabled your clients to view gain/loss information on
schwabalfiance.com and/or on their monthly statements, your
clients may see the adjusted cost basis values.
Will you adjust the cost basis on both open and dosed
positions?
We will enable the new settings per the guidelines above on
affected bonds in August 2014. Later this year, we will
retroactively adjust the settings on bonds that were dosed after
January 1, 2014, and through the August implementation. We wilt
provide additional information on the changes that wilt affect
closed positions later this year-
What
ear
What will be reported and where?
AR realized gains/tosses for bonds and options in taxable
accounts will be included on your clients' 2014 Form 1099-6, but
only the cost basis for those covered bonds and options
purchased and sold on or after January 1, 2014, will be reported
to the IRS.
19
Do I and/or my clients need to take any action to ensure that
the required changes are implemented?
No. Neither advisors nor their clients need to do anything to
ensure that the proper changes are made. Schwab will be
implementing changes and updates to its cost basis systems to
ensure adherence to the new guidelines issued by the IRS.
Will my clients see the adjusted cost basis of fixed income
positions for amortization/accretion?
Depending on the settings you have chosen, your clients may
see the adjusted cost basis on statements and/or
schwabaUiance.com. You may view your settings in the Cost
Basis tab on schwabadvisorcentercom or call Schwab for this
information. Click on the Subscription/Status link for the
applicable master account to view these settings, or call Client
Reporting Services at 1-877-762-6446.
What information will Schwab report to the IRS on covered
bonds and options for 2014?
Schwab will report adjusted cost basis and total market discount
at disposition (sale or maturity) on IRS Form 1099-B. Schwab will
also report bond premium on an annual basis to the IRS on Form
1099 -INT and acquisition premium on Form 1099-01D.
From what date will Schwab adjust my clients' cost basis?
Once adjusted cost is implemented on your clients' accounts,
Schwab will "catch or calculations on all applicable positions
from the acquisition of the position to the current day.
Will Schwab provide both original and adjusted cost basis
figures to me?
Advisors will see both original and adjusted cost on
schwabadvisorcenter.com and in cost basis data files. If you have
selected to include cost basis on your clients' statements, the
electronic copies of these statements that you have access to
through schwabadvisorcentercom will also reflect the changed
values.
Will Schwab provide me with my clients' market discount and
bond premium on an annual basis?
Yes, this information on less complex fixed income holdings will
appear in the amortization section of the 1099 Composite and
Year -End Summary.
What if a client reports their bonds differently on their income
tax return than the IRS -prescribed defaults?
The IRS will allow taxpayers to instruct Schwab to use settings
for taxable bonds that differ from the defaults. To do so, clients
must sign and complete the Letter of Authorization (LOA) to
Change Fixed Income Amortization & Accretion Settings form.
For the different settings to be in effect, the form must be
submitted prior to the end of this year. The IRS has approved
these instructions:
• Accrue market discount using constant yield.
• Include market discount in current income.
• Disable bond premium amortization'
• Treat all interest as DID.
Please rote: Schwab is able to support all the instructions above
for the 2014 tax year except the instruction to "treat all interest
as DID." We will provide an update regarding support for this
instruction in 2015.
What if a client doesn't accrue their market discount using the
straight fine method? Are you able to calculate it using the
constant yield method?
Yes, but to do so, your client must complete and return the Letter
ofAuthorization (LOA) to Change Fored Income Amortization &
Accretion Settings form and instruct Schwab to make the change.
What if a client holds alt their bonds until maturity? Does it
matter whether you accrue the discount using the straight line
or constant yield method?
No, if a bond is held until maturity, the result will be the same
regardless of whether we calculate straight line or constant yield.
Generally, if a bond is sold prior to maturity, the straight line
method may accrue the discount at a faster rate than constant
yield.
`Schwab will stop amortizing and adjusting cost basis for bond premium for taxable bonds only. We are still required to accrete for market discount and original issue discount
for both taxable and iron -taxable bonds.
Pbl
What if a client includes their market discount and pays tax on
it in their income tax return every year? Are you able to change
their account settings to include market discount in income
currently?
Yes, but to do so your client must complete and return the Letter
of Authorization (LOA) to Change Fixed Income Amortization &
Accretion Settings form. This gives us the authority to update the
setting on their account to include their market discount in their
annual 1099 -INT or 1099-OID reporting. We will also adjust their
cost basis daily when they select current inclusion.
What if a client doesn't want you to calculate their market
discount at all? Wilt you disable market discount reporting?
No, if a bond is covered under the cost basis reporting rules, we
are required by the IRS to report market discount when a bond is
sold or matures.
Are you able to stop amortizing bond premium on my clients'
accounts?
Yes, but only for taxable bonds. We are required to make the
adjustments and report the premium for non-taxable bonds in
alignment with the taxpayer requirements.
How can I obtain the Letter of Authorization (LOA) to Change
Fixed Income Amortization & Accretion Settings form?
You can obtain the form by contacting the Advisor Services Client
Reporting Services Team at 1-877-762-6446.
When wilt the Letter of Authorization (LOA) to Change Fixed
Income Amortization & Accretion Settings form be available?
The Letter of Authorization (LOA) to Change Fixed Income
Amortization &Accretion Settings form will be available on
September 1, 2014.
Can I sign and submit the Letter of Authorization (LOA) to
Change Fixed Income Amortization & Accretion Settings form
on behalf of my client?
No, the IRS requires that the account holder execute the form.
Why are you making these changes now rather than in January
2014, when the changes became effective?
The IRS released the final cost basis regulations in April 2013.
The guidelines provided require Schwab to upgrade its cost basis
systems. To ensure proper 2013 tax reporting, we needed to wait
until tax year 2013 ended before making the required changes.
The IRS only requires brokers to make changes on less complex
bonds purchased after January 1, 2014, in taxable accounts.
Why did Schwab decide to apply the changes to the bonds my
clients purchased prior to 2014 and also apply these changes to
amortized bond positions in non-taxable accounts?
We made this decision because we believe that it wilt result in a
simpler and easier message to communicate to your clients, and
that it will deliver a more consistent experience to your clients.
How will my clients find out about these changes? Is Schwab
communicating information to them directly?
You should inform your clients about these changes. We've
provided resources within the Advisor Toolkit to help advisors
communicate this information directly to their clients. Schwab
will communicate the changes to clients who access cost basis
through schwaballiance.com in the Unrealized Gain/Loss tab. In
addition, all clients with cost basis on their statements will
receive an insert in their August 2014 statements, which will be
mailed early in September.
Whom should I and/or my clients call with questions?
Advisors should contact the Advisor Services Client Reporting
Services Team at 1-877-762-6446. If your clients want to speak
to someone at Schwab, direct them to Schwab Alliance at
1-800-515-2157.
21
(GARRisoN
F I N A N C I A L
October 7, 2014
Ms. Sondra Smith
City of Fayetteville
113 West Mountain Street
Fayetteville, Arkansas 72701
Dear Ms. Smith,
Enclosed are the quarterly reports for both Firemen's Pension & Relief Fund and Police Pension and Relief
Fund for the quarter ended September 30, 2014.
For the third quarter, the S&P 500 Index was up +1.13% including dividends. The variance between the best
and worst sectors was vast. Sector performance was split down the middle with five of the ten sectors posting
gains while five posted losses. Health care gained +5.03% in the quarter due to large gains in the most risky
slice of that industry, biotechnology. Energy was decimated losing -9.15% due to concerns over the
strengthening dollar and lower demand. Year to date, the S&P 500 is up +8.34% while the Dow Jones
Industrial Average is up +4.61%.
Volatility ticked up after a prolonged period of slumber. Geopolitical events such as threats of war in the
Middle East and Russia, terrorism, and disease have influenced the volatility, and concerns about economic
growth both here and abroad continue to echo. Barring external geopolitical shocks, we believe the domestic
economy will continue to grow at a subdued rate.
The equity market has now passed the three year mark without a 10% correction. Decades of market history
suggest corrections are a more typical occurrence in the investment experience, even in long-term bull
markets. While we would not predict that the stock market is `overdue' for a correction, we do want to remind
investors that they are more common than recent experience suggests. Rather than a reason to panic, a
correction would be an opportunity for discipline and commitment to your asset allocation strategy.
Regarding equity portfolio performance, while there are bright spots, we acknowledge that we have not kept
pace with our benchmark this year. In particular, our investments in companies in the energy and agriculture -
related sectors have performed poorly, while we have had little exposure to strong areas like biotechnology,
high multiple technology stocks, and utilities. We continually test both our thesis and valuation measures of
our investments in energy and agriculture, and we would not hesitate to shift those investments should either
measure turn negative. At this juncture, we maintain our conviction that in a world that is becoming more
global, with a rising middle class in huge emerging markets, our energy and agriculture investments have
attractive potential for growth and trade at very reasonable valuations, especially compared to other sectors of
the market. Sectors that we have avoided, such as biotechnology and some segments of technology, have
fascinating implications for our health and culture and have performed well this year. But many of these
companies carry significant risks, such as a single drug or product, and trade at valuations that require
Garrison Financial
605 W. Dickson Street, Suite 201 . Fayetteville, Arkansas 72701
479-587-1045. 888-442-7637. 479-587-1257 Facsimile 9 www.GarrisonFinancial.com
tremendous earnings growth and perpetual operating excellence to justify their price from our fundamental
perspective. Given our fundamental approach, we are likely to lag our benchmark any time it is led by stocks
with stretched valuations. But we are confident that over a full market cycle we will see valuations revert on
both the low and high end, and we will participate while moderating the risk taken in the portfolio.
Speaking of our benchmark, we have used the S&P 500 Index including dividends since our inception to
compare equity returns. While we share some common criticisms of the S&P 500 (it is market cap weighted
and has a momentum bias), it is also well known and widely reported. The S&P 500 represents essentially the
500 largest public U.S.-based companies. Our portfolios, on the other hand, will be overweight or underweight
certain economic sectors versus the S&P 500 based on our fundamental research. Additionally, because we
are a core equity manager, our portfolios will include large allocations to mid -cap and small -cap stocks, as well
as international developed and emerging markets. Our portfolios are very intentionally constructed to look
different than the index and performance differences, both positive and negative, should be viewed from that
perspective. Our goal has always been and will continue to be to generate attractive long-term risk-adjusted
returns.
In the bond market, rates fell slightly for the quarter as volatility continued. Our market barometer, the 10 Year
Treasury, began the quarter yielding 2.53% and ended the quarter at 2.49%. That doesn't sound like much
until you realize the high in rates for the quarter was 2.64% and the low was 2.33%, having almost reached
2.64% in both July and September. For the quarter, the Barclays Intermediate Government/Credit Index was
essentially flat at negative -0.03%, bringing YTD returns to +2.21%.
For the year, rates have fallen considerably from 3.03% to 2.49%, again with major volatility along the way. At
the latest Federal Reserve meeting the governors cut quantitative easing by the scheduled $10 billion per
month. The remaining $15 billion is scheduled to be eliminated in October. The consensus seems to be, and
we agree, that the first rate hikes are likely to occur in mid -2015.
We continue to be grateful for your business, support, and confidence in us. Thank you. We will strive every
day to invest your portfolios, as well as our own, in a careful and thoughtful manner consistent with our proven
investment philosophies. Please call the office if you should have any questions.
Cordially,
e4VT
Kerry Bradley, CFA, MBA
Equity Portfolio Manager
Garrison Financial
605 W. Dickson Street, Suite 201 • Fayetteville, Arkansas 72701
479-587-1045 • 888-442-7637. 479-587-1257 Facsimile 9 www.GarrisonFinancial.com
,,*)I
GARRISON
F I N A N C I A L
City of Fayetteville Police Pension and Relief Fund
Charles Schwab #2448-5630
Quarter Ending September 30, 2014
PORTFOLIO SUMMARY
City of Fayetteville Police Pension and Relief Fund
Charles Schwab #2448-5630
September 30, 2014
■ Cash & Equivalents 592,691.92
■ Account Fixed Income 2,278,565.56
® Account Equities 4,242,032.57
CONVERTIBLE PREFERRED
300
Runge 4.875%Conv.
Garrison Financial
32,588.95
108.75
32,625.00
0.5
4.875
1,462.50
PORTFOLIO APPRAISAL
Pfd.
City of Fayetteville Police Pension and Relief Fund
Charles Schwab #2448-5630
32,588.95
32,625.00
September 30, 2014
1,462.50
4.5
COMMON STOCK
Adj Unit
Total Adjusted
Market
Pct.
Unit
Annual
Quantity Security
Cost
Cost Price
Value
Assets
Income
Income
Yield
1.840
3,680.00
5.2
1,965
Abbott Laboratories
CASH AND EQUIVALENTS
78,727.14
41.59
81,724.35
1.1
0.880
1,729.20
Schwab Advisor Cash
Res -
592,691.92
592,691.92
8.3
0.010
59.27
0.0
Premier
2.440
1,525.00
1.7
500
Ansys, Inc.
75.67
37,836.95
75.67
592,691.92
592,691.92
8.3
0.00
59.27
0.0
TREASURY NOTE
72.69
122,121.54
100.75
169,260.00
2.4
1.880
150,000 US Treasury Note
100.00
150,000.00 107.59
161,384.70
2.3
5.125
7,687.50
0.4
5.125% Due 05-15-16
0.9
0.000
0.00
0.0
1,350
BCE, Inc. Cl F
24.40
700,000 US Treasury Note
101.76
712,306.76 109.56
766,937.50
10.8
4.000
28,000.00
1.5
4.000% Due 08-15-18
Becton, Dickinson &
113.97
39,889.45
113.81
39,833.50
0.6
Accrued Interest
763.00
1.9
6,382.81
0.1
862,306.76
934,705.01
13.1
35,687.50
1.3
AGENCY BONDS
62,000.35
41.63
62,445.00
0.9
1.080
1,620.00
200,000 Federal Farts Credit
100.00
199,992.03 107.07
214,137.60
3.0
6.125
12,250.00
0.4
Bank
3,000
CSX Corporation
28.88
6.125% Due 12-29-15
32.06
96,180.00
1.4
0.640
1,920.00
2.0
400
Accrued Interest
85.21
3,096.53
0.0
47,728.00
0.7
_
1,712.00
3.6
199,992.03
217,234.13
3.1
12,250.00
0.4
CORPORATEBONDS
1.5
0.760
3,268.00
3.0
1,400
Coca-Cola Company
30.98
125,000 Verizon
99.92
124,904.36 99.49
124,364.87
1.7
1.350
1,687.50
1.5
Communications
ConocoPhillips
55.58
63,918.42
76.52
87,998.00
1.2
1.350% Due 06-09-17
3,358.00
3.8
2,000
EMC Corp.
25.64
51,282.21
125,000 Lab Corp. of America
101.23
126,534.26 100.47
125,588.62
1.8
2.500
3,125.00
2.4
2.500% Due 11-01-18
61,526.35
80.89
56,623.00
0.8
1.400
980.00
125,000 Kroger Company
100.24
125,296.22 100.07
125,089.62
Is
2.300
2,875.00
2.3
2.300% Due 01-15-19
1.720
2,253.20
2.7
Accrued Interest
2,403.30
0.0
376,734.83
377,446.42
5.3
7,687.50
2.1
CONVERTIBLE PREFERRED
300
Runge 4.875%Conv.
108.63
32,588.95
108.75
32,625.00
0.5
4.875
1,462.50
4.5
Pfd.
32,588.95
32,625.00
0.5
1,462.50
4.5
COMMON STOCK
2,000
AT&T, Inc.
28.24
56,475.88
35.24
70,480.00
1.0
1.840
3,680.00
5.2
1,965
Abbott Laboratories
40.06
78,727.14
41.59
81,724.35
1.1
0.880
1,729.20
2.1
625
Amgen, Inc.
114.33
71,456.06
140.46
87,787.50
1.2
2.440
1,525.00
1.7
500
Ansys, Inc.
75.67
37,836.95
75.67
37,835.00
0.5
0.000
0.00
0.0
1,680
Apple Computer
72.69
122,121.54
100.75
169,260.00
2.4
1.880
3,158.40
L9
125
AutoZone, Inc.
516.09
64,511.70
509.66
63,707.50
0.9
0.000
0.00
0.0
1,350
BCE, Inc. Cl F
24.40
32,934.20
42.76
57,726.00
0.8
2.200
2,970.00
5.1
350
Becton, Dickinson &
113.97
39,889.45
113.81
39,833.50
0.6
2.180
763.00
1.9
Company
1,500
Broadridge Financial
41.33
62,000.35
41.63
62,445.00
0.9
1.080
1,620.00
2.6
Solutions
3,000
CSX Corporation
28.88
86,627.40
32.06
96,180.00
1.4
0.640
1,920.00
2.0
400
Chevron Corporation
85.21
34,084.61
119.32
47,728.00
0.7
4.280
1,712.00
3.6
4,300
Cisco Systems, Inc.
19.87
85,424.73
25.17
108,231.00
1.5
0.760
3,268.00
3.0
1,400
Coca-Cola Company
30.98
43,374.60
42.66
59,724.00
0.8
1.220
1,708.00
2.9
1,150
ConocoPhillips
55.58
63,918.42
76.52
87,998.00
1.2
1920
3,358.00
3.8
2,000
EMC Corp.
25.64
51,282.21
29.26
58,520.00
0.8
0.460
920.00
1.6
700
Eastman Chemical
87.89
61,526.35
80.89
56,623.00
0.8
1.400
980.00
1.7
1,310
Emerson Electric
68.00
89,080.00
62.58
81,979.80
1.2
1.720
2,253.20
2.7
Garrison Financial
PORTFOLIO APPRAISAL
City of Fayetteville Police Pension and Relief Fund
Charles Schwab #2448-5630
September 30, 2014
You should carefully compare this statement to the statement you receive from your custodian and notify us immediately of any discrepancies.
2
Adj Unit
Total Adjusted
Market
Pct.
Unit
Annual
Quantity
Security
Cost
Cost
Price
Value
Assets
Income
Income
Yield
1,750
Ensco Plc.
50.34
88,100.71
41.31
72,292.50
1.0
3.000
5,250.00
7.3
2,000
Freeport-McMoRan
34.88
69,754.00
32.65
65,300.00
0.9
1.250
2,500.00
3.8
Copper & Gold, Inc.
3,825
General Electric Co.
19.53
74,709.32
25.62
97,996.50
1.4
0.880
3,366.00
3.4
1,200
GlaxoSmithKline Plc.
50.10
60,124.15
45.97
55,164.00
0.8
2.650
3,180.00
5.8
200
IBM Corporation
172.39
34,477.70
189.83
37,966.00
0.5
4.400
880.00
2.3
3,250
Intel Corp.
21.12
68,641.12
34.82
113,165.00
1.6
0.900
2,925.00
2.6
1,250
Johnson & Johnson
64.70
80,869.69
106.59
133,237.50
1.9
2.800
3,500.00
2.6
5,650
Keycorp
13.42
75,839.95
13.33
75,314.50
1.1
0.260
1,469.00
2.0
1,000
Lincoln Electric
67.21
67,209.18
69.13
69,135.00
1.0
0.920
920.00
1.3
1,100
Merck & Co., Inc.
51.39
56,525.78
59.28
65,208.00
0.9
1.760
1,936.00
3.0
2,825
Microsoft Corp.
37.81
106,815.30
46.36
130,967.00
1.8
1.240
3,503.00
2.7
800
National Oilwell Varco
85.35
68,280.15
76.10
60,880.00
0.9
1.840
1,472.00
2.4
1,750
Noble Corp.
27.96
48,930.13
22.22
38,885.00
0.5
1.500
2,625.00
6.8
630
Occidental Petroleum
93.65
59,001.14
96.15
60,574.50
0.9
2.880
1,814.40
3.0
3,650
Pfizer, Inc.
22.61
82,529.75
29.57
107,930.50
1.5
1.040
3,796.00
3.5
1,000
Procter & Gamble Co.
59.42
59,417.61
83.74
83,740.00
1.2
2.570
2,570.00
3.1
1,000
Qualcomm, Inc.
63.62
63,616.39
74.77
74,770.00
1.1
1.680
1,680.00
2.2
2,000
Raven Industries, Inc.
29.57
59,132.39
24.40
48,800.00
0.7
0.520
1,040.00
2.1
700
Sanofi ADR
55.71
38,995.10
56.43
39,501.00
0.6
1.600
1,120.00
2.8
900
Syngenta AG ADR
72.60
65,340.54
63.37
57,033.00
0.8
1.910
1,719.00
3.0
1,150
Wal-Mart Stores, Inc.
62.11
71,423.42
76.47
87,940.50
1.2
1.920
2,208.00
2.5
2,000
Waste Management
42.21
84,414.32
47.53
95,060.00
1.3
1.500
3,000.00
3.2
2,565,419.43
2,938,643.15
41.3
84,038.20
2.9
MUTUALFUNDS
2,198.702
Dodge & Cox Intl Stk
45.48
100,000.00
45.18
99,337.36
1.4
0.700
1,539.09
1.5
2,539.360
Oppenheimer
39.38
100,000.00
38.81
98,552.56
14
0.040
101.57
0.1
Developing Mkts A
200,000.00
197,889.92
2.8
1,640.67
0.8
UNIT TRUSTS
5,000
Alerian MLP
17.53
87,642.21
19.17
95,850.00
1.3
1.110
5,550.00
5.8
9,750
Guggenheim
21.92
213,741.49
24.33
237,217.50
3.3
1.260
12,285.00
5.2
Multi -Asset Income
15,100
SPDR Fact Select Shs
21.94
331,366.45
23.17
349,867.00
4.9
0.370
5,587.00
1.6
4,000
Sector Utility Select Shs
34.14
136,571.82
42.09
168,360.00
2.4
1.520
6,080.00
3.6
3,000
iShares DJ Select Div
52.23
156,695.97
73.86
221,580.00
3.1
2.350
7,050.00
3.2
5,000
iShares IBOXX Inv
109.72
548,583.88
118.22
591,100.00
8.3
4.180
20,900.00
3.5
Grade Corp Bond
4,000
iShares S&P US Pfd Stk
38.34
153,340.30
39.52
158,080.00
2.2
2.290
9,160.00
5.8
1,627,942.12
1,822,054.50
25.6
66,612.00
3.7
TOTAL PORTFOLIO
6,457,676.04
7,113,290.05
100.0
209,437.63
2.5
You should carefully compare this statement to the statement you receive from your custodian and notify us immediately of any discrepancies.
2
Garrison Financial
PURCHASE AND SALE
City of Fayetteville Police Pension and Relief Fund
Charles Schwab #2448-5630
From 01-01-14 To 09-30-14
Trade Settle Unit
Date Date Quantity Security Price Amount
PURCHASES
09-25-14
09-30-14
500 Ansys,Inc.
75.67
37,836.95
07-24-14
07-29-14
125 AutoZone, Inc.
516.09
64,511.70
09-25-14
09-30-14
100 Becton, Dickinson & Company
113.97
11,397.46
09-25-14
09-30-14
100 Becton, Dickinson & Company
113.97
11,397.46
09-25-14
09-30-14
100 Becton, Dickinson & Company
113.96
11,396.36
09-25-14
09-30-14
50 Becton, Dickinson & Company
113.96
5,698.17
07-24-14
07-29-14
100 Broadridge Financial Solutions
41.33
4,133.50
07-24-14
07-29-14
100 Broadridge Financial Solutions
41.33
4,133.49
07-24-14
07-29-14
300 Broadridge Financial Solutions
41.33
12,400.49
07-24-14
07-29-14
700 Broadridge Financial Solutions
41.33
28,934.48
07-24-14
07-29-14
300 Broadridge Financial Solutions
41.33
12,398.39
09-25-14
09-30-14
200 Bunge 4.875% Conv.Pfd.
108.63
21,725.97
09-25-14
09-30-14
100 Bunge 4.875% Conv.Pfd.
108.63
10,862.98
09-25-14
09-26-14
2,198.702 Dodge & Cox Intl Stk
45.48
100,000.00
07-24-14
07-29-14
700 Eastman Chemical
87.89
61,526.35
07-24-14
07-29-14
1,200 GlaxoSmithKlinePlc.
50.10
60,124.15
09-22-14
09-25-14
125,000 Kroger Company
100.24
125,297.84
2.300% Due 01-15-19
09-23-14
09-26-14
125,000 Lab Corp. of America
101.23
126,542.12
2.500% Due 11-01-18
07-24-14
07-29-14
100 Lincoln Electric
67.20
6,719.80
07-24-14
07-29-14
100 Lincoln Electric
67.20
6,719.80
07-24-14
07-29-14
6 Lincoln Electric
67.20
403.18
07-24-14
07-29-14
100 Lincoln Electric
67.20
6,719.80
07-24-14
07-29-14
98 Lincoln Electric
67.20
6,585.40
07-24-14
07-29-14
200 Lincoln Electric
67.20
13,439.59
07-24-14
07-29-14
100 Lincoln Electric
67.22
6,721.90
07-24-14
07-29-14
100 Lincoln Electric
67.22
6,721.90
07-24-14
07-29-14
100 Lincoln Electric
67.23
6,722.90
07-24-14
07-29-14
96 Lincoln Electric
67.24
6,454.91
07-24-14
07-29-14
800 National Oilwell Varco
85.35
68,280.15
09-25-14
09-26-14
2,539.360 Oppenheimer Developing Mkts A
39.38
100,000.00
07-24-14
07-29-14
200 Raven Industries, Inc.
29.53
5,906.90
07-24-14
07-29-14
140 Raven Industries, Inc.
29.55
4,137.63
07-24-14
07-29-14
760 Raven Industries, Inc.
29.58
22,483.44
07-24-14
07-29-14
900 Raven Industries, Inc.
29.56
26,604.42
09-25-14
09-30-14
700 Sanofi ADR
55.71
38,995.10
07-24-14
07-29-14
100 Syngenta AG ADR
72.60
7,259.99
07-24-14
07-29-14
100 Syngenta AG ADR
72.60
7,259.59
07-24-14
07-29-14
67 Syngenta AG ADR
72.60
4,863.93
07-24-14
07-29-14
100 Syngenta AG ADR
72.60
7,259.59
07-24-14
07-29-14
100 Syngenta AG ADR
72.60
7,259.59
Garrison Financial
PURCHASE AND SALE
City of Fayetteville Police Pension and Relief Fund
Charles Schwab #2448-5630
From 01-01-14 To 09-30-14
Trade
Date
Settle
Date
Quantity Security
Unit
Price
Amount
07-24-14
07-29-14
100 Syngenta AG ADR
72.60
7,259.59
07-24-14
07-29-14
100 Syngenta AG ADR
72.60
7,259.62
07-24-14
07-29-14
100 Syngenta AG ADR
72.61
7,260.99
07-24-14
07-29-14
33 Syngenta AG ADR
72.62
2,396.46
07-24-14
07-29-14
100 Syngenta AG ADR
72.61
7,261.19
09-22-14
09-25-14
125,000 Verizon Communications
99.92
124,903.50
07-24-14
07-29-14
1.350% Due 06-09-17
28.92
2,891.54
07-24-14
07-29-14
100 EMC Corp.
28.92
1,234,178.72
SALES
07-24-14
07-29-14
1,000 BCE, Inc. C1F
46.20
46,201.03
07-28-14
07-31-14
10,000 B1ackRock Build America Bond Trust
21.87
218,716.22
09-25-14
09-30-14
400 Chevron Corporation
120.88
48,350.78
07-24-14
07-29-14
750 Coca-Cola Company
41.06
30,797.59
07-24-14
07-29-14
600 Coca-Cola Company
41.06
24,638.08
07-24-14
07-29-14
500 ConocoPhillips
86.41
43,205.59
07-24-14
07-29-14
100 EMC Corp.
28.92
2,891.54
07-24-14
07-29-14
100 EMC Corp.
28.92
2,891.54
07-24-14
07-29-14
100 EMC Corp.
28.92
2,891.54
07-24-14
07-29-14
100 EMC Corp.
28.92
2,891.54
07-24-14
07-29-14
300 EMC Corp.
28.92
8,674.66
07-24-14
07-29-14
100 EMC Corp.
28.92
2,891.54
07-24-14
07-29-14
100 EMC Corp.
28.91
2,891.44
07-24-14
07-29-14
100 EMC Corp.
28.91
2,891.44
09-25-14
09-30-14
100 General Electric Co.
25.55
2,555.14
09-25-14
09-30-14
375 General Electric Co.
25.55
9,581.80
09-25-14
09-30-14
125 General Electric Co.
25.55
3,193.93
09-25-14
09-30-14
100 General Electric Co.
25.55
2,555.14
09-25-14
09-30-14
100 General Electric Co.
25.55
2,555.14
09-25-14
09-30-14
200 General Electric Co.
25.55
5,110.29
09-25-14
09-30-14
2,000 General Electric Co.
25.56
51,110.91
07-24-14
07-29-14
100 Merck & Co., Inc.
58.14
5,814.47
07-24-14
07-29-14
900 Merck & Co., Inc.
58.14
52,326.69
09-25-14
09-30-14
355 Occidental Petroleum
96.92
34,405.17
09-25-14
09-30-14
145 Occidental Petroleum
96.92
14,052.81
08-05-14
08-08-14
0 Paragon Offshore PLC
12.62
3.47
09-25-14
09-30-14
583 Paragon Offshore PLC
6.44
3,751.90
07-24-14
07-29-14
600 Procter & Gamble Co.
80.21
48,124.39
07-24-14
07-29-14
300 SPDR S&P Homebuilders
31.03
9,308.20
07-24-14
07-29-14
200 SPDR S&P Homebuilders
31.03
6,205.26
07-24-14
07-29-14
300 SPDR S&P Homebuilders
31.03
9,307.90
07-24-14
07-29-14
650 SPDR S&P Homebuilders
31.03
20,167.11
07-24-14
07-29-14
700 SPDR S&P Homebuilders
31.03
21,718.44
Garrison Financial
PURCHASE AND SALE
City of Fayetteville Police Pension and Relief Fund
Charles Schwab #2448-5630
From 01-01-14 To 09-30-14
Trade
Date
Settle
Date
Quantity Security
Unit
Price
Amount
07-24-14
07-29-14
100 SPDR S&P Homebuilders
31.03
3,102.63
09-25-14
09-30-14
100 Sector Utility Select Shs
41.78
4,178.15
09-25-14
09-30-14
3,400 Sector Utility Select Shs
41.78
142,043.57
07-24-14
07-29-14
100 iShares DJ Select Div
75.88
7,587.73
07-24-14
07-29-14
100 iShares DJ Select Div
75.88
7,587.73
07-24-14
07-29-14
500 iShares DJ Select Div
75.88
37,938.67
07-24-14
07-29-14
200 iShares DJ Select Div
75.88
15,175.26
07-24-14
07-29-14
100 iShares DJ Select Div
75.88
7,587.63
07-24-14
07-29-14
100 iShares DJ Select Div
75.88
7,587.63
07-24-14
07-29-14
100 iShares DJ Select Div
75.88
7,587.73
07-24-14
07-29-14
1,800 iShares DJ Select Div
75.88
136,579.22
07-28-14
07-31-14
5,000 iShares IBOXX Inv Grade Corp Bond
119.28
596,385.87
1,716,014.51
Garrison Financial
REALIZED GAINS AND LOSSES
City of Fayetteville Police Pension and Relief Fund
Charles Schwab #2448-5630
From 01-01-14 Through 09-30-14
Open Close Cost Amort. or
Date Date Quantity Security Basis Accretion Proceeds
06-09-14
07-24-14
300
SPDR S&P Homebuilders
06-09-14
07-24-14
200
SPDR S&P Homebuilders
08-08-11
07-24-14
100
iShares DJ Select Div
08-08-I1
07-24-14
100
iShares DJ Select Div
08-08-I1
07-24-14
500
iShares DJ Select Div
08-08-I1
07-24-14
200
iShares DJ Select Div
06-09-14
07-24-14
300
SPDR S&P Homebuilders
06-09-14
07-24-14
650
SPDR S&P Homebuilders
06-09-14
07-24-14
700
SPDR S&P Homebuilders
06-09-14
07-24-14
100
SPDR S&P Homebuilders
08-08-11
07-24-14
100
iShares DJ Select Div
08-08-11
07-24-14
100
iShares DJ Select Div
08-08-11
07-24-14
100
iShares DJ Select Div
08-08-11
07-24-14
1,800
iSbares DJ Select Div
05-20-10
07-24-14
500
ConocoPhillips
01-13-14
07-24-14
100
Merck & Co., Inc.
01-13-14
07-24-14
900
Merck & Co., Inc.
02-12-14
07-24-14
100
EMC Corp.
02-12-14
07-24-14
100
EMC Corp.
02-12-14
07-24-14
100
EMC Corp.
03-19-09
07-24-14
600
Procter & Gamble Co.
02-12-14
07-24-14
100
EMC Corp.
02-12-14
07-24-14
300
EMC Corp.
02-12-14
07-24-14
100
EMC Corp.
02-12-14
07-24-14
100
EMC Corp.
02-12-14
07-24-14
100
EMC Corp.
08-21-09
07-24-14
1,000
BCE, Inc. Cl F
06-26-14
07-24-14
750
Coca-Cola Company
05-19-10
07-24-14
600
Coca-Cola Company
10-06-09
07-28-14
5,000
iShares IBOXX Inv Grade
Corp Bond
08-23-13
07-28-14
10,000
BlackRock Build America
Bond Trust
06-10-14
08-05-14
0
Paragon Offshore PLC
12-20-10
09-25-14
100
Sector Utility Select Shs
12-20-10
09-25-14
3,400
Sector Utility Select Shs
06-05-09
09-25-14
400
Chevron Corporation
06-10-14
09-25-14
583
Paragon Offshore PLC
06-26-14
09-25-14
100
General Electric Co.
06-26-14
09-25-14
375
General Electric Co.
12-09-09
09-25-14
125
General Electric Co.
12-09-09
09-25-14
100
General Electric Co.
12-09-09
09-25-14
100
General Electric Co.
06-26-14
09-25-14
355
Occidental Petroleum
03-27-14
09-25-14
145
Occidental Petroleum
12-09-09
09-25-14
200
General Electric Co.
12-09-09
09-25-14
2,000
General Electric Co.
TOTAL GAINS
TOTALLOSSES
TOTAL REALIZED GAIN/LOSS
263,949.77
NO CAPITAL GAINS DISTRIBUTIONS
9,886.68
6,591.12
5,223.20
5,223.20
26,116.00
10,446.40
9,886.68
21,421.14
23,068.92
3,295.56
5,223.20
5,223.20
5,223.20
94,017.58
27,790.62
5,138.71
46,248.36
2,564.11
2,564.11
2,564.11
35,650.56
2,564.11
7,692.33
2,564.11
2,564.11
2,564.11
24,395.70
28,956.39
18,589.11
548,583.88
189,745.61
3.34
3,414.30
116,086.05
34,084.61
7,072.51
2,670.00
10,012.50
2,441.48
1,953.18
1,953.18
34,237.76
13,579.63
3,906.37
39,063.70
1,452,064.74
9,308.20
6,205.26
7,587.73
7,587.73
37,938.67
15,175.26
9,307.90
20,167.11
21,715 44
3,102.63
7,587.63
7,587.63
7,587.73
136,579.22
43,205.59
5,814.47
52,326.69
2,891.54
2,891.54
2,891.54
48,124.39
2,891.54
8,674.66
2,891.54
2,891.44
2,89L44
46,201.03
30,797.59
24,638.08
596,385.87
Gain Or Loss
Short Term
Long Term
-578.48
763.85
-385.86
25,957.52
2,364.53
-3,320.61
2,364.53
-114.86
11,822.67
-430.70
4,728.86
-578.78
752.45
-1,254.03
601.96
-1,350.48
601.96
-192.93
473.18
2,364.43
2,364.43
2,364.53
41,480.76
42,561.63
-8,206.73
15,414.97
675.76
230,675.74
6,078.33
327.43
327.43
327.43
12,473.83
327.43
982.33
327.43
327.33
327.33
21,805.33
1,841.20
6,048.97
47,801.99
218,716.22 28,970.61
3.47
4,178.15
142,043.57
48,350.78
3,751.90
2,555.14
9,581.80
3,193.93
2,555.14
2,555.14
34,405.17
14,052.81
5,110.29
51,110.91
0.00 1,716,014.51
0.13
763.85
25,957.52
14,266.16
-3,320.61
-114.86
-430.70
752.45
601.96
601.96
167.41
473.18
1,203.92
12,047.21
41,480.76
230,675.74
-8,206.73
0.00
33,274.02
230,675.74
Garrison Financial
PERFORMANCE SUMMARY
GROSS OF FEES
City of Fayetteville Police Pension and Relief Fund
Charles Schwab #2448-5630
September 30, 2014
PORTFOLIO COMPOSITION
Portfolio Value on 06-30-14
Market
Pct.
Accrued Interest
Value
Assets
Net Additions/Withdrawals
Cash & Equivalents
592,691.92
8.3
Account Fixed
2,278,565.56
32.0
Income
-0.03
Income Received
Account Equities
4,242,032.57
59.6
Account
0.00
0.0
Commodities
Total
Account
40% Fixed Income/60%
Equity Blended Index
Account Fixed Income
Barclays Capital Intermed
Govt/Credit
Account Equities
S&P 500
7,113,290.05 100.0
CHANGE IN PORTFOLIO
Yield
0.0
Portfolio Value on 06-30-14
7,162,197.81
2.2
Accrued Interest
11,436.95
2.9
Net Additions/Withdrawals
2,098.60
-
Realized Gains
-22,369.02
0.05 - -
Unrealized Gains
-88,875.66
-0.03
Income Received
49,015.50
1.13 - -
Change in Accrued Interest
445.68
Portfolio Value on 09-30-14
7,101,407.41
Accrued Interest
11,882.64
2.5
7,113,290.05
TIME WEIGHTED RETURN
Annualized
Quarter Year Last 12
Inception
To Date To Date Months
To Date
-0.86 - -
-0.86
0.68 - -
0.68
0.05 - -
0.05
-0.03 - -
-0.03
-1.50 - -
-1.50
1.13 - -
1.13
All "Account' returns refer to your portfolio. Benchmark indexes are also listed for reference. All returns are reported as
percentages.
This report is calculated using industry -standard accounting and performance calculation methodologies and is generated by our Axys
portfolio accounting software. Calculations are a time -weighted total return series based on monthly valuations, including all cash
and equivalents. All calculations are done based on trade date, employing the accrual method of accounting and include cash,
interest, dividends and realized and unrealized gains and losses. Performance is adjusted to accurately reflect portfolio deposits and
withdrawals. Results are presented after transaction costs but before management fees. Inception -to -date returns are annualized
numbers, except for accounts under management less than one year. Unsupervised assets are excluded in performance calculation.
At any given point in time an investment may be worth more or less than the original purchase price.
GARRISON
FINANCIAL
October 7, 2014
City of Fayetteville Police Pension and Relief Fund
Charles Schwab #2448-5630
113 West Mountain
Fayetteville, AR 72701
STATEMENT OF MANAGEMENT FEES
For The Period July 1 through September 30, 2014
Portfolio Value as of 06-30-14
7,173,635
Portfolio Value as of 07-31-14
7,113,258
Portfolio Value as of 08-31-14
7,274,747
Portfolio Value as of 09-30-14
7,113,290
Average of 4 Months
7,168,733
7,168,733 @ 0.5000% per annum 8,961
Quarterly Management Fee 8,961
TOTAL DUE AND PAYABLE 8,961
This statement is for informational purposes only. As you requested, the fee will be automatically
deducted from your account. Please be advised that it is the responsibility of the client to verify the
accuracy of each fee calculation. The custodian will not determine whether the fee is properly calculated.
OFFICE OF THE CITY CLERK TREASURER
Sondra E. Smith — City Clerk Treasurer
Lisa Branson — Deputy City Clerk
June 23, 2014
Northern Trust Company
Attn: Michael McGee
50 S. LaSalle Street
Chicago, Illinois 60603
113 W. Mountain Street, Suite 308
Fayetteville, AR 72701
RE: Fayetteville Policemen's Pension and Relief Fund 0394885
Dear Mr. McGee,
Phone 479.575.8323
cityclerk@fayetteville-ar.gov
Please use this letter as authorization to transfer all the holdings (cash and investments) in the
Fayetteville Policemen's Pension and Relief account #0394885 to the follow account at Charles
Schwab and Company Inc.:
Fayetteville Policemen's Pension and Relief Fund
Charles Schwab account #2448-5630
DTC#: 0164, Code 40
Fedwire Monies:
Wire to: Citibank NA, 111 Wall Street, New York, NY 1005
ABA#: 021000089
FBO: Charles Schwab & Co., Inc. A/C #: 40553953
For further credit to Schwab Client Account #:2448-5630
Physical Delivery of Checks and/or Securities:
Name and Address: Overnight Mailing Address:
Charles Schwab & Co., Inc Charles Schwab & Co. Inc.
AS Document Control AS Document Control
P.O. Box 52114 2423 E. Lincoln Drive
Phoenix, AZ 85072-2114 Phoenix, AZ 85016
OFFICE OF THE CITY CLERK TREASURER
Sondra E. Smith — City Clerk Treasurer
Lisa Branson — Deputy City Clerk
113 W. Mountain Street, Suite 308
Fayetteville, AR 72701
Phone 479.575.8323
cityclerk@fayetteville-ar.gov
Once all holdings, cash and trailing dividends and interest have transferred out, please close the
account. If you have any questions regarding this transaction please contact Kerry Bradley at
Garrison Financial phone# 479-587-1045. Thank you for your prompt attention to this request.
Co ially,
Lionel ordan
Account Holder
Sondra Smith
Account Holder
t
r%
Smith, Sondra
From: Kim Cooper <kim@longerinv.com>
Sent: Thursday, June 26, 2014 1:37 PM
To: Smith, Sondra
Cc: Elaine Longer
Subject: Final Portfolio Reports
This message contains attachments delivered via ShareFile.
•Q2 2014 Fayetteville Police Pension.pdf (115.5 W)
Download the attachments by clicking here.
Dear Members of the City of Fayetteville Police Pension Board:
Attached please find a link to the final portfolio reports from Longer Investments Inc. for the City of
Fayetteville Police Pension Fund. These reports include a portfolio appraisal, a summary of realized gains and
losses and income and expenses, a distribution report, reports of year-to-date and inception -to -date
performance, and a reconciliation report. As instructed, the management fee will be billed to the account at
Northern Trust.
Northern Trust notified us yesterday that the transfer of assets is now in progress, and we are no longer able to
execute transactions in the account. As a result, we ceased trading in the account, effective immediately. The
assets are expected to arrive at the new custodian on Monday, June 30.
The ending portfolio value, as of yesterday's close, was $7,199,297. The realized capital gains in 2014 have
been $133,238, and net income has been $104,928. Distributions from the portfolio since January 1 have been
$537,000. Year-to-date, equities are up 2.8%. This return compares to the returns on the Dow Jones Industrial
Average (cash basis) of 1.8% and the S&P 500 (cash basis) of 6.0%. The total account return is 4.2% this year,
which includes the fixed-income securities, income assets, and the investment in gold.
Since inception in 1990, the average annualized investment return on the total portfolio has been 6.2%. In
comparison, the current actuarial return assumption is 5.0%. The actuarial return assumption at account
inception was 6.0%, and it has changed over the years. The average actuarial rate has been 5.875% during the
time we have managed the account, so the actual return achieved has exceeded the assumptions at all levels.
The reconciliation report reflects the beginning value of the portfolio, subsequent contributions of cash and
assets, income earned and realized and unrealized gains. The investment return since 1990, net of all fees and
expenses, has been $8,767,368. Distributions have totaled $10,776,500 over that time period. Even though the
investment return has outperformed the actuarial return assumptions since account inception, the distributions
have exceeded the investment return by over $2 million. We continue to caution that the weight of the
distributions on the capital base is unsustainable, as these data points show.
Thank you again for the opportunity to manage the assets of the Police Pension Fund for the past 24 years. It
has been our pleasure to work with all of the members of the Police Pension Board over the years, and we wish
you and the City's retired police officers the best as we move in another direction. If we can of any further
assistance with the transfer of management, please contact our office.
Sincerely,
Elaine M. Longer, CFA
President
EML/kmc
Attachment
b LONGER INVESTMENTS INCORPORATED
Z.,
ARrgisMrrdGrn ImenlAdvisor
April 7, 2014
Ms. Sondra Smith
City of Fayetteville Police Pension Fund
113 W. Mountain St.
Fayetteville, Arkansas 72701
Dear Sondra:
Enclosed please find the 2014 first-quarter reports for the City of Fayetteville Police
Pension Fund. These reports include a portfolio appraisal, a sununary of realized
gains/losses and income/expenses, and a performance report. In accord with the board's
instructions, the account at Northern Trust will be billed for the management fee.
On February 21, 2014, Vodafone sold its stake in Verizon Wireless to Verizon.
Vodafone paid a special cash dividend and issued a stock dividend for shares of Verizon
to shareholders. The Vodafone investment has been a very profitable investment for the
portfolio, even though the enclosed reports reflect realized losses on our subsequent sales
of Vodafone. This realized loss is a result of the way Vodafone accounted for the spin-
off. Instead of considering the distribution of Verizon shares a return of capital, it will be
reported as a dividend. The cash distribution will also be reported as a dividend, not a
capital distribution. Following the distribution, we sold Vodafone because we do not
agree with management's treatment of this transaction and believe that, from this point,
there are better growth options for the portfolio. We wanted to provide an accounting of
the returns received on this investment because the way it was handled by Vodafone was
difficult to decipher. The table on page two reflects the total return in Vodafone since we
purchased it for the account in late 2012 and early 2013.
P.O. Bav 1269
Cuyellmille, Arknnuu 72702.
Tdcpho u•: 479-44-1-5851
Toll lin': 800-8-77-7710
Ru. 179-443-7129
Web silt: x�rnt(mi�niuerom
Ms. Sondra Smith
April 7, 2014
Page Two
Original Cost 4350 Vodafone
$110,177.71
Dividends Earned
5,793.29
Cash Dividend From Spin -Off
9,856.01
Stock Dividend (Verizon)
24,572.18
Realized Gains Before Spin -Off
18,729.50
Realized Gain/Loss (Verizon) After Spin -Off
130.50
Realized Gain/Loss (Vodafone) After Spin -Off
(9,168.07)
Total Gain
$49,913.41
% Return
45.3%
Elaine is attending an investment seminar in New York this week, and the second quarter
newsletter will be forthcoming later in the quarter. The stock market has been digesting
the gains of last year, as investors have dealt with the increase in geopolitical risks in
Ukraine, the slowing of growth in China and emerging markets, the uncertainty of the
U.S. economic growth outlook, and a new Federal Reserve chairman. Basically, there
has been a lot of chuming, with the Dow Jones Industrial Average slightly down for the
year and the S&P 500 slightly positive for the year. Bonds have improved, and gold has
bounced back from year-end tax selling. Foreign markets closed the first quarter flat to
down.
There were no material changes to the Longer Investments Inc. Form ADV Part 2 that
was submitted to the Securities and Exchange Cormnission on March 28, 2014. If you
would like a copy of the full brochure, please contact Kim Cooper at (800) 827-7710 or
via e-mail at kim@longerinv.com.
We appreciate the opportunity to assist with the management of the City of Fayetteville
Police Pension Fund's assets. Please do not hesitate to call if you have any questions or
comments, or if we can be of fiirther service.
Sincerely,
Kim M. Cooper
Executive Administrator
/kmc
Enclosure
Longer Investments Inc.
PORTFOLIO APPRAISAL
City of Fayetteville Police Pension Fund
March 31, 2014
Unit
Total
Market
Pct
Unit
Annual
Cur.
Quantity
Security
Cost
Cost
Price
Value
Assets
Income
Income
Yield
Common Stock
3,000
AT&T
28.24
84,713.82
35.07
105,210.00
1.5
1.84
5,520.00
6.52
1,965
Abbott Laboratories
40.06
78,727.14
38.51
75,672.15
1.0
0.88
1,729.20
2.20
220
Apple Inc.
500.11
110,023.97
536.74
118,082.80
1.6
t2.20
2,684.00
2.44
2,350
BCE, Inc.
2440
57,329.90
43.14
101,379.00
1.4
2.23
5,241.81
9.14
1,750
Centurytel Inc.
30.92
54,103.35
32.84
57,470.00
0.8
2.16
3,780.00
6.99
800
Chevron Corp.
85.21
68,169.23
118.91
95,12800
1.3
4.00
3,200.00
4.69
4,100
Cisco Systems, Inc.
19.70
80,782.73
22.42
91,901.50
1.3
0.76
3,116.00
3.86
2,000
Coca-Cola
30.98
61,963 71
38.66
77,320.00
1.1
1.22
2,440.00
3.94
6,700
Coeur dAlene Mines
11.17
74,811.02
9.29
62,243.00
0.9
0.00
0.00
0.00
Corp.
1,650
ConocoPhillips
55.58
91,709.04
70.35
116,077.50
1.6
2.76
- 4,554.00
4.97
4,250
EMC Corporation
25.64
108,974.70
27.41
116,492.50
1.6
0.40
1,700.00
1.56
5,700
Ericsson
12.06
68,743.42
13.33
75,981.00
1.0
0.30
1,710.00
2.49
11,150
Financial Select Sector
21.82
243,288.73
22.34
249,091.00
3.4
0.34
3,809.96
1.57
SPDR Fund
3,580
Ford Motor Co.
15.56
55,704.08
15.60
55,848.00
0.8
0.50
1,790.00
3.21
6,350
General Electric
19.53
124,027.24
25.89
164,401.50
2.3
astl
5,588.00
4.51
3,000
Intel Corp.
20.53
61,603.62
25.81
77,442.00
LI
0.90
2,700.00
4.38
300
International Business
172.39
51,716.55
192.49
57,747.00
0.8
3.80
1,140.00
2.20
Machines Corp.
1,250
Johnson & Johnson
64.70
80,869.69
98.23
122,787.50
1.7
2.64
3,300.00
4.08
2,100
Merck &Co. Inc.
51.39
107,912.85
56.77
119,21700
1.6
1.76
3,696.00
3.42
2,675
Microsoft Corp.
37.59
100,543.80
40.99
109,648.25
15
1.12
2,996.00
2.98
1,000
Northern Trust
43.31
43,314.51
65.56
65,560.00
0.9
1.24
1,240.00
2.86
Corporation
775
Occidental Petroleum
93.65
72,580.77
95.29
73,849.75
1.0
2.88
2,232.00
3.08
Corporation
3,600
Pfizer Inc.
20.12
72,441.75
32.12
115,632.00
1.6
1.04
3,744.00
5.17
1,600
Procter & Gamble Co.
59.42
95,068.17
80.60
128,960.00
1.8
2.41
3,849.60
4.05
1,300
Qualcomm Incorporated
63.62
82,701.31
78.86
102,518.00
1.4
1.40
1,820.00
2.20
1,500
Wal-Mart Stores Inc.
62.11
93,160.98
76.43
114,645.00
1.6
1.92
2,880.00
3.09
8,000
iShams Dow Jones
52.23
417,855.93
73.32
586,560.00
8.1
2.23
17,819.08
4.26
Select Dividend Index
2,642,842.01
3,236,864.45
44.6
94,279.65
3.75
Other Income Securities
10,000
BlackRock Build
18.97
189,745.61
20.24
202,400.00
2.8
1.58
15,840.00
8.35
America Bond Tr
10,000
Guggenheim
21.92
219,222.04
25.13
251,300.00
3.5
1.29
12,930.00
5.90
Multi -Asset Income
Index
8,250
Utilities Select Sector
34.14
281,679.38
41.46
342,045.00
4.7
1.47
12,139.13
4.31
SPDR Fund
4,000
iShmes U.S. Preferred
38.34
153,340.30
39.03
156,120.00
2.2
2.58
10,318.35
6.73
Stock Index Fund
843,987.32
951,865.00
13.1
51,227.48
5.98
Mutual Funds -Fixed
10,000.0000
iShares iBoxx
109.72
1,097,167.76
116.94
1,169,400.00
1&1
4.30
42,964.19
3.92
Investment Grade Corp
Bond
Government Bonds
150,000
U. S. TreasuryNote
100.00
150,000.00
109.78
164,671.80
2.3
5.13
7,687.50
5.13
5,125% Due 05-.15-16
800,000
U. S. Treasury Now
103.76
830,072.13
110.67
885,375.20
12.2
4.00
32,000.00
3.86
4.000%Due 08-15-18
Longer Investments Inc.
PORTFOLIO APPRAISAL
City of Fayetteville Police Pension Fund
March 31, 2014
NOTE: Please compare this statement with account statements received from the account custodian.
Unit
Total
Market
Pct.
Unit
Annual
Cur.
Quantity Security
Cost
Cost Price
Value
Assets
Income
Income
Yield
Accrued Interest
6,777.62
0.1
980,072.13
1,056,824.62
14.6
39,687.50
4.05
Government Agency
200,000 Federal Farm Credit
99.97
199,938.00 109.99
219,981.80
3.0
6.13
12,250.00
6.13
Bank(NC)6.127%
YTM
6.125% Due 12-29-15
Accrued Interest
3,130.56
0.0
_
199,938.00
223,112.36
3.1
12,250.00
6.13
Cash and Equivalents
Dividends Accrued
5,813.20
5,813.20
0.1
0.00
0.00
0.00
Money Market
556,380.40
556,380.40
7.7
0.01
55.64
0.01
562,193.60
562,19360
7.8
55.64
0.01
Limited Partnerships
3,000.00 ALPS Aterian MLP ETF
17.15
51,451.61 17.66
52,980.00
0.7
1.09
3,255.00
6.33
TOTAL PORTFOLIO
6,377,652.45
7,253,240.03
100.0
243719,46
3.92
NOTE: Please compare this statement with account statements received from the account custodian.
Longer Investments Inc.
REALIZED GAINS AND LOSSES WITH
INCOME AND EXPENSES SUMMARY
City of Fayetteville Police Pension Fund
From 01-01-14 Through 03-31-14
Realized Gains and Losses
TOTAL REALIZED GAINS AND LOSSES 78,487.96
Income and Expenses
Income: Common Stock
60,779.27
Other Income Securities
9,159.02
Mutual Funds -Fixed
6,935.54
Government Bonds
16,455.81
Cash and Equivalents
8.46
Limited Partnerships
834.00
Expenses: ADR Fee
30.00
Foreign Tax on Dividends
187.65
Miscellaneous Expense
8.54
Northern Trust Fee
891.68
Management Fee
15,449.73
NET INCOME
77,604.50
Longer Investments Inc.
CONTRIBUTIONS/WITHDRAWALS
City of Fayetteville Police Pension Fund
From -01-01-14 To 03-31-14
Tran
Trade
Settle
dp
Broker
Code
Date
Date
Security
Amount Quantity Code Commission
01-15-14
Foreign Tax on Dividends
CONTRIBUTIONS
dp
01-17-14
dp
01-17-14
01-17-14
Money Market
427.05
Service Charge
for Wyeth Distribution on 1/17/14
Wyeth Distribution for Class Action Litigation
dp
01-31-14
01-31-14
Northem Trust Fee
305.74
427.05
WITHDRAWALS
02-28-14
Northern Trust Fee
281.70
wd
01-01-14
01-01-14
Money Market
65,000.00
wd
02-01-14
02-01-14
Money Market
100,000.00
wd
03-01-14
03-01-14
Money Market
103,000.00
268,000.00
EXPENSE ACCOUNTS
dp
02-05-14
02-05-14
ADR Fee
30.00
dp
01-15-14
01-15-14
Foreign Tax on Dividends
187.65
dp
01-17-14
01-17-14
Miscellaneous Expense
8.54
Service Charge
for Wyeth Distribution on 1/17/14
dp
01-31-14
01-31-14
Northem Trust Fee
305.74
dp
02-28-14
02-28-14
Northern Trust Fee
281.70
dp
03-31-14
03-31-14
Northern Trust Fee
304.24
1,117.87
AFTER FEE PERFORMANCE EXPENSE ACCOUNTS
dp 01-13-14 01-13-14 Management Fee 15,449.73
15,449.73
PORTFOLIO NET TOTAL -284,140.55
EXPENSE ACCOUNTS PAID BY CLIENT
AFTER FEE PERFORMANCE EXPENSE
ACCOUNTS PAID BY CLIENT
0.00
0.00
GRAND TOTAL -154,14u.e>
Longer Investments Inc.
PERFORMANCE HISTORY
NET OF FEES
City of Fayetteville Police Pension Fund
Combined Account
Percent Return
Per Period
Time Period Total Equities Fixed Other Alternative
Account Income Income Investments
(Gold)
12-31-13 to 03-31-14 l.11 -0.80 1.39 5.66 10.04
Date to Date
12-31-13 to 03-31-14 1.11 -0.80 1.39 5.66 10.04
March 31, 2014
City of Fayetteville Police Pension Fund
113 W. Mountain
Fayetteville, Arkansas 72701
Longer Investments Inc.
STATEMENT OF MANAGEMENT FEES
For The Period Ending March 31, 2014
Portfolio Valuation as of 03-31-14
7,243,331.85
3,000,000 @ 1.000%per annum 7,500.00
3,000,000 @ 0.750 % per annum 5,625.00
1,243,332 @0.650%per annum 2,020.41
Quarterly Management Fee $ 15,145.41
TOTAL DUE AND PAYABLE $ 15,145.41
Pursuant to Section 204-3 of the Investment Advisors Act of 1940, Part Il of Form AD V is available wall clients of Longer Investments Inc.
This statement may be obtained by submitting a written request to the company. As instructed, the management fee has been billed to the account.
It is the responsibility of the client to verify the accuracy of the fee calculation. The custodian will not determine if the fee is properly calculated.
.1.
vlcvv
COMMENTS AND OUTLOOKS FROM LONGER INVESTMENTS INCORPORATED
In the first half of 2014, the markets were less
volatile than they were in recent years (see Chart A on
insert). After a 5% pullback in January; the stock market
mounted a modest advance. Interest rates were down
from 2013 levels (see Table 1). Bonds recovered from
some of the price decline caused by last year's rising rates.
Table I
The Bond Market
In 2013, bond rates rose sharply. Bond prices
declined, by enough to offset entirely the coupon interest.
The result was the worst negative bond market year since
1994. So far in2014, rates have declined on the 10 -year
and 30 -year Treasury bonds (see Table 1). Bonds have
delivered a "coupon -plus" retum. 'That is, investors`
return consisted of the income on the bond plus price
appreciation as some of last year's decline in prices was
recovered.
The Federal Reserve (the Fed), under Chair Janet
Yellen, has remained accommodative. Although the Fed
continues to taper off its monthly purchase of Treasury
and agency mortgage -hacked debt (from$85 billion
monthly in 2013 to $35 billion monthly now), it is holding
short-term interest rates at zero percent. In testimony
before. Congress, Yellen indicated that the Fed will keep
interest rates at zero until the unemployment rate drops
below 6% or inflation rises above 20/% Unlike the
European Central Bank (ECB) whichfocuses on price
stability, the Fed operates under a dual mandate-- price
stability and employment growth. The Fed wants to see
inflation return to 2% which would offset the deflationary
forces lingering from the credit crisis of 2008. It also
wants to see the unemployment rate below 6% for a while
before it raises rates. Current market rates on U.S.
Treasury securities suggest that the market doesn't expect
short-term rates to rise until mid -2015.
Monetary policy is expansionary worldwide,not
just in the United States. The Bank of Japan (BOJ) is
buying debt and holding rates low. It is trying to spur
economic growth and offset the impact of a consumption -
based tax that went into effect earlier this year. The
July 7, 2014
European Central Bankhas adopted &negative interest
rate policy on bank deposits: It not only pays no.
interest; it charges its member banks to hold their money.
The F.CB continues its accommodative policy to support
economermovery.
The question for investors is whether the Fed (or the
ECB or the BOJ) will raise rates if Inflation tops their
targets, before unemployment drops to desired levels. If
inflation does become a worry by rising too far too fast,
the markets will tighten (before monetary officials tighten)
by driving long-term rates higher, while short-term rates
are held at zero, thereby steepening the yield. curve. If
this happens, bond prices will again move downward.
For this reason, we are still cautious with our fixed-
income investments. Our strategy has been to hold only
the highest-qua]ity U.S. Treasury, corporate, and
municipalbonds of short or moderate maturities. In 2011
we amended our investment policies to allow our
portfolios to include high -dividend stocks and utility
funds, preferred stocks, and energy master limited
partnerships. These investments make up a class called
"income assets," outside the "equity assets" class. We
did this because of our concerns that bond values would
decline if interest rates rose. This asset elm delivered
double-digit rates of return in 2013, even as bonds posted
negative returns. The class has continued to outperform
bonds so far in 2014.
The Stock Market
In 2013, the stock market's advance far outpaced
earnings growth, whichwas about 60%. In 20I4, the stock
market is performing more in line with expected earnings
growth. The stock market's advance since the lows of the
financial crisis in 2009 is largely attributable to improve-
mens in operating margins (which supported earnings
growth far above revenue growth) and an expansion in the
valuation (orpriceleamings [PS) multiple) applied to the
carrvngs (see Table 2).
Table 2
Revenue Growth & Earnings Growth
Market Low March 9, 2009, through July 1, 2014
Revenue
IJ.S. Treasury Yield Curve
Operating Margin
Maturity
`12/31/12
Q31113
06J30114
Five -Year
0.70%
1.75%
1.620/.
10 -Year
1.75%
3.03%
2.53%
30-1ear
2.85%
3.960/0
3.34%
The Bond Market
In 2013, bond rates rose sharply. Bond prices
declined, by enough to offset entirely the coupon interest.
The result was the worst negative bond market year since
1994. So far in2014, rates have declined on the 10 -year
and 30 -year Treasury bonds (see Table 1). Bonds have
delivered a "coupon -plus" retum. 'That is, investors`
return consisted of the income on the bond plus price
appreciation as some of last year's decline in prices was
recovered.
The Federal Reserve (the Fed), under Chair Janet
Yellen, has remained accommodative. Although the Fed
continues to taper off its monthly purchase of Treasury
and agency mortgage -hacked debt (from$85 billion
monthly in 2013 to $35 billion monthly now), it is holding
short-term interest rates at zero percent. In testimony
before. Congress, Yellen indicated that the Fed will keep
interest rates at zero until the unemployment rate drops
below 6% or inflation rises above 20/% Unlike the
European Central Bank (ECB) whichfocuses on price
stability, the Fed operates under a dual mandate-- price
stability and employment growth. The Fed wants to see
inflation return to 2% which would offset the deflationary
forces lingering from the credit crisis of 2008. It also
wants to see the unemployment rate below 6% for a while
before it raises rates. Current market rates on U.S.
Treasury securities suggest that the market doesn't expect
short-term rates to rise until mid -2015.
Monetary policy is expansionary worldwide,not
just in the United States. The Bank of Japan (BOJ) is
buying debt and holding rates low. It is trying to spur
economic growth and offset the impact of a consumption -
based tax that went into effect earlier this year. The
July 7, 2014
European Central Bankhas adopted &negative interest
rate policy on bank deposits: It not only pays no.
interest; it charges its member banks to hold their money.
The F.CB continues its accommodative policy to support
economermovery.
The question for investors is whether the Fed (or the
ECB or the BOJ) will raise rates if Inflation tops their
targets, before unemployment drops to desired levels. If
inflation does become a worry by rising too far too fast,
the markets will tighten (before monetary officials tighten)
by driving long-term rates higher, while short-term rates
are held at zero, thereby steepening the yield. curve. If
this happens, bond prices will again move downward.
For this reason, we are still cautious with our fixed-
income investments. Our strategy has been to hold only
the highest-qua]ity U.S. Treasury, corporate, and
municipalbonds of short or moderate maturities. In 2011
we amended our investment policies to allow our
portfolios to include high -dividend stocks and utility
funds, preferred stocks, and energy master limited
partnerships. These investments make up a class called
"income assets," outside the "equity assets" class. We
did this because of our concerns that bond values would
decline if interest rates rose. This asset elm delivered
double-digit rates of return in 2013, even as bonds posted
negative returns. The class has continued to outperform
bonds so far in 2014.
The Stock Market
In 2013, the stock market's advance far outpaced
earnings growth, whichwas about 60%. In 20I4, the stock
market is performing more in line with expected earnings
growth. The stock market's advance since the lows of the
financial crisis in 2009 is largely attributable to improve-
mens in operating margins (which supported earnings
growth far above revenue growth) and an expansion in the
valuation (orpriceleamings [PS) multiple) applied to the
carrvngs (see Table 2).
Table 2
Revenue Growth & Earnings Growth
Market Low March 9, 2009, through July 1, 2014
Revenue
+10.60/a
Operating Margin
+102.80/o
Earnings
+124.40/.
S&P 500 Total Return
+174.00/9
LON�:,ER INVESTMENTS €NC'ORPORATED
Profit margins and P1E mhos are important. At this
point, profit margins are at historically high levels; they
appear to be. peaking (see Chart B). The BE valuation
on stocks has risen from 13 times earnings in 2012
(below the norm of 15) to a level of 18 times projected
earnings for 2014. Because these two props that
supported the increase in stock prices now appear to be
stretched, investors are focused on growth this year.
Specifically, investors now need to see the growth in
revenues (sales) that will support market valuations at
these level& historically, growth in revenues depends
upon both domestie and international economic growth.
Anything that threatens eoonomic growth recovery
at home or abroad (Ukrainian reactions to Russian
incursions, Iraqi conflicts that cause energy prices to
spike) affects stock market levels. If growth disap-
points, earnings will disappoint The market can
significantly outperform earnings only so long. Over
time (see Chart C), either earnings catch up to price, or
the market priceadjusts downward to earnings support -
First -quarter GDP growth, originally estimated at
0.1 °/a was first reported to be -1.0°/y then revised in
June to -2.9% This was the worst quarterly GDP
growth. report since 2008 (see Chart D). The question
on investors' minds is, "How much ofthat decline is
weather-related?" Preliminary reports (employment
data, ISMmanufacturing index, consumer confidence)
show steady improvement in the economy in the second
quarter. Actual second-quarter earnings will be reported
in July. As those. figures come in and as corporate chiefs
interpret them in conference calls; Nye will have a better
idea how much first-quarter weakness carried over to the
second quarter and what to expect in the second half of
2014.
The dilemma is this: Theeconomy needs to grow
to sustain the stock market's advance — but it can't get
too hot If growth takes off abruptly, it will cause
problems in the bond market (interest rates will rise,
bond prices will decline) and the Fed may move foward
the date by which it begins to raise interest rates_ We
need a Goldilocks growth scenario — not too. hot, not
too cold.
We have shitted some of the investments in our
equity portfolios from defensive sectors (ut8ities,
telecommunications, consumer staples) to more cyclical
sectors, ones that benefit from stronger economic growth
(homebuilding, manufacturing and materials, energy and
technology). This is a subtle shift to a more cyclical
orientation, not a significant portfolio reallocation
Cyclicals have lagged in performance in 2013 and 2014;
they are poised to perform well if growth is better than
expected. We continue to favor large blue-chip companies
with good dividends and with strong balance sheets and
cash #lows. The dividend yield on our established equity
portfolios is still 3.5% to 4.0%.
We try to walk a balanced path We look for value on
the growth side of the portfolio. We look for income on
the fixed-income side of the portfolio that is not exposed
to maturity risk (bond price volatility in rising interest
rates). We participate in the markets in a tactical mariner,
realizing that markets are subject W volatility and risks
associated with economic growth, Fed policy, election -
year politics, and geopolitical crises abroad.
Thank you for the opportunity to manage your
financial assets. We appreciate the hosted position you
have given us. Please send any questions or continents our
way. We wish all of you a happy summer!
The information provided herein is illustrative only. R
should not be construed as. a formal recommendation
by Longer Investments Inc.
:., LONGER INVESTMENTS INCORPORATED
SSetvius Mmided hvLongn Imasimfnl5It 1C.: lhrulaIInt of Yinm19:g-RM., kilffana Assam!oit - IW.,,f mrr: i! of
an IhvmnalliroSrr Nr,Ynnri{aPkiIIwia-114,PnoiolramlProfi!5ltrtnul?+fangaimrrtI-ynrtilvnh'n"arrd-sink Tiurufza 11'anninrt
(JainadePull avatrrrlznou-1,011<nrftR1atriatiotia.i4iTnukw eiIi ilrnagannst-IaAai0t.cosrting Fditatlon-Repulable
tie-I;asrrll.�ct:%lumunttritt
RO Box !2611 £rr✓cfc411t xit3cansrn 72A2
,
Ieiepnofrr: 479-4-1.3 585! • Zoll firm 80!1-81.7 •':10, Fitt: 479,443 71",,g• h mail: intit(ct±lergr^irn-.mrr:
Kh b nte. wv rvw.lor,;grimicvrn
1980
1960
1940
1920
19(yj f 'm C�redft
1860
82: 1
1890
Reteai
17M "maodake
1760
1740
S&P 500 2014 YTD TIMEMNE
SSCP 500 -2014 Events YTD
i Fed tapers
Russian 510 bn
troops Order ealm'YeHen
Crimea slips in press
conference
House
Testimony
Good GDP Report
Stro
ng
IPNil Megxtants
IQ GDP seize Iraqi
tdisappoints clues
10 -yr reaches, 10.
Strong retail month low
sales data
Feb ?,%4ar Apr May jm
.................. ......... - - - -----
Chart B
Profit Margins Peaking
After -Tax Corporate Profits as a % of National IncomeM
12% 1 . "I'll, ...... 1---.- . ................ .
J Avg &9% 'Z%
'v
6% ----- --- V-
Good jobs
Fed va inuies indicate
Repml
Weak China
Tate rise wan't
data sparks
happen as sssr4, as
!lard -landing
foreciarted
:vjV ,.kU(2�-n.zdg
Weak
f—a
!a, U a ine
tanno I.acalate
coroulnes'
Confidence
GDPT�
down to
Data
I19% QIQ
AR%
i Fed tapers
Russian 510 bn
troops Order ealm'YeHen
Crimea slips in press
conference
House
Testimony
Good GDP Report
Stro
ng
IPNil Megxtants
IQ GDP seize Iraqi
tdisappoints clues
10 -yr reaches, 10.
Strong retail month low
sales data
Feb ?,%4ar Apr May jm
.................. ......... - - - -----
Chart B
Profit Margins Peaking
After -Tax Corporate Profits as a % of National IncomeM
12% 1 . "I'll, ...... 1---.- . ................ .
J Avg &9% 'Z%
'v
6% ----- --- V-
Chart C
> lY . .i[r
Chart D
GDP Quarterly Percentage Change
'04 'OS '06 'Oa '08 W '10 11 12 13
a
4
Z
0
-4
-6
-10
Sources.
ChartsA-C: Strategas Research Partners
Chart D: Northern YYust Company
S&P 500 vs S&P 500 EPS
2004
- _. _.... - — --- -
35.00
tt�a
1800
OM
1600
x
1400
- — -- - _
25.00
0
1200—.
—
-=
20M9°
M
1000
800
15.00
m
600
- — I
10.00
v
pop
- - --; ....... _....
m;
5.00
200
— — — —
!
p
0.00
.
Cp CLi F+ k`+ w W
h w w 00 co4iJ C+ 0 cs cv ¢] O 4 p w 0 0 0
—S&P 500 —S&P 500 Operating Earnings
Source: Thomson Reuters, Haver Analytics, and C1i Research - US Equity Strategy ,
Chart D
GDP Quarterly Percentage Change
'04 'OS '06 'Oa '08 W '10 11 12 13
a
4
Z
0
-4
-6
-10
Sources.
ChartsA-C: Strategas Research Partners
Chart D: Northern YYust Company
Policemen's Pension and Relief Fund Board of Trustees
DESCRIPTION: The Policemen's Pension and Relief Fund Board of Trustees was established
pursuant to the A.C.A 24-11-405. The board shall make all necessary rules and regulations for its
government and the discharge of its duties and shall hear and decide all applications for relief or
pension. The Board shall have the power to make all rules and regulations needful of its guidance
to implement the provisions regarding Board composition.
TERMS: Two-year terms, ending May 31.
MEMBERS: The Board shall be composed of seven members as follows:
The chief executive, who shall serve as chairman of the board
The city treasurer, who shall be the treasurer of the fund;
Five active or retired members of the pension fund;
APPOINTMENT: If there are no active members of the pension fund, all five members shall be
elected from and by the retired membership of the pension fund. The retired member or members
shall be chosen in May of each year by a method to be determined by the board, with the member
or members to be chosen in alternating years.
CONTACT: Sondra Smith, City Clerk, 575-8323.
PUBLIC NOTIFICATION: A weekly meetings list is prepared by the City Clerk office which
is distributed to the press and posted on the City's web site: www.fayetteville-ar.gov
MEETING TIMES: Regular meetings are held the third Thursday of each quarter in January,
April, July and October at 3:00 p.m. in Room 326 at the City Administration Building.
Due to elections not being held until May of each year, the term end date was changed to May 31
at the Police Pension meeting on October 21, 2004
WA
Policemen's Pension and Relief Fund Board of Trustees
Chairman Retired Position 3
Mayor Lioneld Jordan John Brown
113 W. Mountain 11701 Illinois Chapel Road
Fayetteville, AR 72701 Prairie Grove, AR 72753
575-8330 — Business 846-6414 — Home
01/01/09-Indef. 225-3540 — Cell
Treasurer
Sondra Smith
113 W. Mountain
Fayetteville, AR 72701
442-7838 — Home
575-8323 — Business
02/03/03-hidef.
Secretary
Retired Position 1
Eldon Roberts
4199 E. Huntsville Rd.
Fayetteville, AR 72701
521-0183 — Home
601-6469 — Cell
Replaced Randy Bradley
06/01/05-05/31/07 1St Terre
06/01/07-05/31/09 2nd Term
06/01/09-05/31/11 3`d Term
06/01/11-05/31/13 4th Term
06/01/13-05/31/15 5th Term
Retired Position 2
Ruston Cole
4201 East Canvas Road
Fayetteville, AR 72701
841-2356 — Cell
Replaced Jerry Friend
06/01/14-05/31/16 1st Term
38
Replaced Tim Helder
06/01/13-05/31/15 1" Term
Retired Position 4
Melvin W. Stanley
PO Box 289
Greenland, AR 72737
839-3106 — Home
601-1224 — Cell
Replaced Dr. James Mashburn
11/15/06-05/31/07 Unexpired Term
06/01/07-05/31/09 1St Term
06/01/09-05/31/11 2nd Term
06/01/11-05/31/13 Std Term
06/01/13-05/31/15 4th Term
Retired Position 5
Frank Johnson
3328 Jasper Lane
Fayetteville, AR 72704
204-2588 — Business
Replaced Jerry Surles
06/01/06-05/31/08 1" Term
06/01/08-05/31/10 2nd Term
06/01/10-05/31/12 3`d Term
06/01/12-05/31/14 0 Term
06/01/14-05/31/16 5th Term
In 2005 Act 386 changed the composition of
the board eliminating the physician position
and adding one active member. The active
position is now a retired position due to the
fact that there are no current active members
on the pension plan. The physician position
was also replaced by a retired member.
N"I %7�L11'r,; l C
t
Garrison Financial
PORTFOLIO APPRAISAL
City of Fayetteville Police Pension and Relief Fund
Charles Schwab #2448-5630
October 15, 2014
Adj Unit Total Adjusted Market Pct. Unit Annual
Quantity Security Cost Cost Price Value _ Assets Income Income
CASH AND EQUIVALENTS
Schwab Advisor Cash Res
Premier
TREASURY NOTE
487,638.02
487,638.02
Yield
487,638.02 7.1 0.010 48.76 0.0
487,638.02 7.1 48.76 0.0
150,000
US Treasury Note
100.00
150,000.00
107.75
161,625.00
2.4
5.125
7,687.50
0.2
5 125% Due 05-15-16
700,000
US Treasury Note
101.74
712,184.72
111.06
777,437.50
11.4
4.000
28,000.00
IA
COMMON STOCK
4, 000% Due 08-15-18
2,000
AT&T, Inc.
Accrued Interest
56,475.88
33.87
67,740,00
7,837.47
0.1
3,680.00
5.4
_
Abbott Laboratories
40.06
78,727-14
862,184.72
78,619.65
946,899.97
13.9
1,729.20
35,687.50
0.9
AGENCY BONDS
114.33
71,456-06
130.90
81,812.50
1.2
2.440
1,525.00
1.9
200,000
Federal Farm Credit
100.00
199,992.28
107.16
214,315.00
3.1
6.125
12,250.00
0.2
500
Bank
75.67
37,836.95
72.21
36,105,00
0.5
0,000
0.00
0.0
1,680
6.125%Due 12-29-15
72.69
122,121.54
97.54
163,867.20
2.4
1.880
3,158.40
1.9
125
Accrued Interest
516.09
64,511.70
505.99
_ 3,606.94
0.1
0.000
0.00
0.0
1,350
BCE, Inc. CI F
2440
199,992 28
41.90
217,921.94
3.2
1200
12,250.00
0.2
CORPORATE BONDS
Becton, Dickinson &
113.97
39,889.45
124.53
43,585.50
0.6
2.180
763.00
125,000
Verizon
99.92
124,905.79
100.19
125,236-50
1.8
1350
1,687.50
1.3
Communications
Broadridge Financial
41.33
62,000.35
39.39
59,085.00
0.9
1.080
1,620.00
29
1350% Due 06-09-17
Solutions
125,000
Lab Corp. of America
101.22
126,519.50
102.16
127,694.50
1.9
2.500
3,125,00
2,0
1.9
2500%Due I1-01-18
Chevron Corporation
85.21
34,084.62
109.27
43,708,00
0.6
4.280
1,712.00
125,000
Kroger Company
100.23
125,293.52
101.70
127,119.75
1.9
2.300
2,875.00
1.9
3.3
2.300% Due 01-15-19
Coca-Cola Company
30.98
43,374.60
43.23
60,522.00
0.9
1.220
1,708.00
2.8
Accrued Interest
ConocoPhillips
_
63,918.42
2,723.61
0.0
1.1
2.920
_
4,4
2,000
EMC Corp.
376,718.81
51,282.21
382,774.36
5.6
0.8
7,687.50
1,7
CONVERTIBLE PREFERRED
300
Burge 4.875%Conv.
108.63
32,588.95
107.00
32,100.00
0.5
4.875
1,462.50
4.6
Pfd.
32,588.95
32,100.00
0.5
1,462.50
4-6
COMMON STOCK
2,000
AT&T, Inc.
28.24
56,475.88
33.87
67,740,00
1.0
L840
3,680.00
5.4
1,965
Abbott Laboratories
40.06
78,727-14
40.01
78,619.65
1.2
0.880
1,729.20
2.2
625
Amgen, Inc.
114.33
71,456-06
130.90
81,812.50
1.2
2.440
1,525.00
1.9
700
Anadarko Petroleum
86.53
60,570.15
85.46
59,822.00
0.9
1.080
756.00
1.3
500
Ansys, Inc.
75.67
37,836.95
72.21
36,105,00
0.5
0,000
0.00
0.0
1,680
Apple Computer
72.69
122,121.54
97.54
163,867.20
2.4
1.880
3,158.40
1.9
125
AutoZone, Inc.
516.09
64,511.70
505.99
63,248,75
0.9
0.000
0.00
0.0
1,350
BCE, Inc. CI F
2440
32,934.20
41.90
56,565.00
0.8
1200
2,970.00
5.3
350
Becton, Dickinson &
113.97
39,889.45
124.53
43,585.50
0.6
2.180
763.00
1.8
Company
1,500
Broadridge Financial
41.33
62,000.35
39.39
59,085.00
0.9
1.080
1,620.00
29
Solutions
3,000
CSX Corporation
28.88
86,627.40
32.98
98,940.00
1.4
0.640
1,920.00
1.9
400
Chevron Corporation
85.21
34,084.62
109.27
43,708,00
0.6
4.280
1,712.00
3.9
4,300
Cisco Systems, Inc.
19.87
85,424.73
22.96
98,728,00
1.4
0.760
3,268.00
3.3
1,400
Coca-Cola Company
30.98
43,374.60
43.23
60,522.00
0.9
1.220
1,708.00
2.8
1,150
ConocoPhillips
55.58
63,918.42
66.25
76,187.50
1.1
2.920
3,358.00
4,4
2,000
EMC Corp.
25.64
51,282.21
27.27
54,540.00
0.8
0.460
920.00
1.7
700
Eastman Chemical
87.89
61,526.35
73.47
51.42900
0.8
1-400
980.00
1.9
Garrison Financial
PORTFOLIO APPRAISAL
City of Fayetteville Police Pension and Relief Fund
Charles Schwab #2448-5630
October 15, 2014
Quantity Security
1,310
Emerson Electric
1,750
Ensco Plc.
2,000
Freeport-McMoRan
19.53
Copper & Gold, Inc.
3,825
General Electric Co.
1,200
GlaxoSmithKline Plc.
200
BM Corporation
3,250
Intel Corp.
1,250
Johnson & Johnson
5,650
Keycorp
1,000
Lincoln Electric
1,100
Merck & Co., Inc.
2,825
Microsoft Corp.
800
National Oilwell Varco
1,750
Noble Corp.
3,650
Pfizer, Inc.
1,000
Procter & Gamble Co.
1,000
Qualcomm, Inc.
2,000
Raven Industries, Inc.
700
Sanofi ADR
900
Syngenta AG ADR
1,150
Wal-Mart Stores, Inc.
2,000
Waste Management
MUTUALFUNDS
Adj Unit Total Adjusted
Cost Cost
68.00
89,080.00
50.34
88,100.71
34.88
69,754.00
19.53
74,709.32
50.10
60,124.15
172.39
34,477.70
21.12
68,641.12
64.70
80,869.69
13.42
75,839.95
67.21
67,209.18
51.39
56,525.78
37.81
106,815.30
85.35
68,280.15
27.96
48,930.13
22.61
82,529.75
59.42
59,417.61
63.62
63,616.39
29.57
59,132.39
55.71
38,995.10
72.60
65,340.54
62.11
71,423.42
42.21
84,414.32
2,566,988.44
Price
Market
2,253.20
Value
59.35
77,748.50
38.15
66,762.50
30.03
60,060.00
24.28
92,871.00
43.13
51,756.00
181.75
36,350,00
31.28
101,643.75
98.21
122,762.50
12.14
68,591.00
62.65
62,650.00
54.73
60,203.00
43.22
122,096.50
69.97
55,976.00
18.88
33,040.00
28.19
102,893.50
82.95
82,950.00
71.20
71,200.00
24.14
48,280.00
51.50
36,050.00
60.57
54,513.00
75.20
86,480.00
46.28
92,560.00
2,781,942.35
Pet. Unit
Assets Income
Annual
Income Yield
1.1
1.720
2,253.20
2.9
1.0
3.000
5,250.00
7.9
0.9
1.250
2,500.00
4.2
1.4
0.880
3,366.00
3.6
0.8
2.650
3,180.00
6.1
0.5
4.400
880.00
2.4
1.5
0.900
2,925.00
2.9
1.8
2.800
3,500.00
2.9
1.0
0.260
1,469.00
2.1
0.9
0.920
920.00
1.5
0.9
1.760
1,936.00
3.2
1.8
1240
3,503.00
2.9
0.8
1.840
1,472.00
2.6
0.5
1.500
2,625.00
7.9
1.5
1.040
3,796.00
3.7
1.2
2.570
2,570.00
3.1
1.0
1.680
1,680,00
2.4
0.7
0.520
1,040.00
2.2
0.5
1.600
1,120.00
3.1
0.8
1.910
1,719.00
3.2
1.3
1.920
2,208.00
2.6
1_4
1.500
3,000.00
3.2
40.7
82,979.80
3.0
2,198.702 Dodge & Cox Intl Stk 45.48 100,000.00 42.20 92,785.22 1.4 0.700
2,539.360 Oppenheimer 39.38 100,000.00 37.83 96,063.99 1.4 0.040
Developing Mkts A
200,000.00 188,849.21 2.8
UNIT TRUSTS
87,642.21
5,000
Alerian MLP
9,750
Guggenheim
34.14
Multi -Asset Income
15,100
SPUR Fncl Select Shs
4,000
Sector Utility Select Shs
3,000
iShares DJ Select Div
5,000
iShares 03OXX hry
601,500.00
Grade Corp Bond
4,000
iShares S&P US Pfd Stk
TOTAL PORTFOLIO
17,53
87,642.21
21.92
213,741.49
21.94
331,366.45
34.14
136,571.82
52.23
156,695.98
109.72
548,583.88
38.34
153,340.30
3.2
1,627,942.12
6,354,053.34
2
17.83
89,150,00
1.3
22.99
224,152.50
3.3
22.04
332,804.00
4.9
42.71
170,840.00
2.5
72.13
216,390,00
3.2
120.30
601,500.00
8.8
39.31
157,240.00
2.3
1,792,076,50 26.2
6,830,202.35 100.0
1,539.09 1.7
101.57 0.1
1,640.67 0.9
1.110
5,550.00
6.2
1.260
12,285.00
5.5
0.370
5,587.00
1.7
1.520
6,080.00
3.6
2.350
7,050.00
3.3
4.180
20,900.00
3.5
2.290
9,160.00
5.8
66,612.00 3.7
208,368.73 2.5