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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