10628I
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
RESOLUTION NO. 10, 628 4 9 u
A RESOLUTION APPROVING THE ADOPTION OF NEW
INVESTMENT POLICIES, PURSUANT TO ACT 50 OF 1999,
BY THE BOARD OF TRUSTEES OF THE NON - UNIFORM
EMPLOYEES PENSION FUND; AND FOR OTHER
PURPOSES.
WHEREAS, the Board of Directors has previously authorized the Board of Trustees
( "Trustees ") of the City's Non - Uniform Employees Pension Fund ( "Fund ") to hire an
investment manager to manage the assets of the Fund and to advise and report to the Trustees
quarterly; and
WHEREAS, assets of the Fund consist, as of June 30, 1999, of $8,745,656 in the
Defined Benefit Plan Account and $27,183,811 in the Defined Contribution Account; and
WHEREAS, Act 50 of 1999 gives Cities authority to update their investment policies
and rules consistent with the Arkansas state retirement system policies; and
WHEREAS, The Trustees have consulted with the Fund's investment advisor and
reviewed and adopted new investment policies consistent with state policies on July 28, 1999.
NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF DIRECTORS
OF THE CITY OF LITTLE ROCK, ARKANSAS:
SECTION 1. The adoption of new investment policies by the Board of Trustees of
the Non - Uniform Employees Pension Fund pursuant to Act 50 of 1999 is hereby approved.
ADOPTED: August 17, 1999
ATTEST:
'ad'a C-4
ROBBIE HANCOCK
CITY CLERK
THOMAS M. CARPENTER
CITY ATTORNEY
APPROVED:
JIMWAILEY
MAYOR
0
11
CITY OF LITTLE ROCK NON - UNIFORMED EMPLOYEES'
DEFINED BENEFIT (DB) RETIREMENT FUND
INVESTMENT POLICY STATEMENT
491
I. PURPOSE AND AUTHORITY
The City of Little Rock Non - Uniformed Employees' Retirement Fund (the "Fund ") is a single
employer Defined Benefit (DB) plan that provides retirement pensions. The Fund's members are
all of the regular Non - Uniformed employees of the City who were employed on or before
December 31, 1977.
The Fund and the benefits provided are currently funded entirely by contributions from the City of
Little Rock. Members of the Fund do participate in Social Security as City employees
The Plan's objective is to provide a retirement benefit to retired employees based on a final pay and
years of service formula.
The primary statutory authority for the investment activities of the Board of Trustees for the Little
Rock Non - Uniformed Employees' Defined Benefit Plan is found in Act 50 of 1999 and the
Arkansas Code Ann. Section 24 -3-417 through 24- 3-426. It is administered for the exclusive
purpose of providing benefits to members, retired members, and their beneficiaries and to defray
the necessary expenses of investing and administering the Fund. The Trustees shall discharge their
duties solely in the interest of the Little Rock Employees' Non - Uniformed Defined Benefit Plan and
for the exclusive benefit of plan participants and beneficiaries. These duties shall be discharged with
the care, skill, prudence and diligence under the circumstances then prevailing that a prudent investor
acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a
like character and with like aims. The Board of Trustees is authorized to engage the services of
investment advisors, as defined under the Investment Advisors Act of 1940, and other investment
professionals to provide the specialized research and skilled manpower to meet the Little Rock Non -
Uniform Employees investment objectives and guidelines. Accordingly, the Board of Trustees
requires the investment advisors to adhere to the "prudent man rule" under state law.
The Board of Trustees is composed of five board members consisting of three City appointees
appointed by the City manager and two by ordinance due to their position on the city staff. Those
staff positions are Director of Human Resources and Director of Finance.
This statement sets forth the investment objectives of the Fund, and the investment policies to be
followed in pursuit of the investment objectives. Also, this statement will provide a basis to
evaluate the investment performance of the Total Fund, and also the individual managers hired to
manage assets for the Little Rock Non - Uniformed Defined Benefit Plan.
0 0
DEFINED BENEFIT (DB) INVESTMENT POLICY STATEMENT
CITY OF LITTLE ROCK NON-UNIFORMED EMPLOYEES RETIREMENT FUND
D. INVESTMENT OBJECTIVES
492
The primary investment objective of the fund is to earn a real rate of return (Total Fund rate of
return — Consumer Price Index) of 4.5 %. This return objective is not a year over year objective but
a long -term guideline for the Fund's Trustees. The Trustees will utilize five -year rolling periods as
an appropriate time frame for analysis.
A secondary investment objective of the fund is to constrain the volatility of the total fund through
a program of diversification. In practice, the fund should experience less volatility than a 60% S &P
500 -40% Lehman Bros. Govt. /Corp. benchmark over rolling three and five year time frames.
Central to the achievement of this goal is the concept of investing in asset classes that demonstrate
relatively low correlation to one another. These correlations and their impact on total fund
volatility will be reviewed from time to time by the Trustee's to determine the effectiveness of the
diversified program.
IIIREEIZ►�I31. Y� Ui�Ii;�WOOK"I
The investment strategy to be followed in the reasonable expectation of achieving the Retirement
Fund's investment objectives is as follows:
ASSET CLASS TARGET RANGE EXPECTED REAL RETURN
Domestic Equities
50%
45 % -55%
6.5%
International Equities
10%
8 % -12%
6.5%
Domestic Fixed Income
40%
35 %-45%
15%
* ** The asset class targets, ranges, and expected real rates of return are as of June 30, 1999. The
Board of Trustees shall review its asset allocation at least annually to determine if the asset
allocation is consistent with the level of risk and volatility acceptable to the fund.
Quarterly, the asset allocation will be compared to the permissible range. At that time if the actual
asset allocation falls outside the permissible range, the mix should be brought back into the range
unless it is prudent not to do so.
The Trustees will diversify its Domestic Equity allocation to include different investment styles and
market capitalization strategies. The reason for doing so it to expose the total fund to investment
opportunities with attractive risk -return profiles.
0 0
DEFINED BENEFIT (DB) INVESTMENT POLICY STATEMENT
CITY OF LITTLE ROCK NON - UNIFORMED EMPLOYEES RETIREMENT FUND
IV. PERFORMANCE STANDARDS
These performance standards provide a framework in which the Board of Trustees can measure
investment performance. The Board of Trustees preference will be to view managers through a full
market cycle (cyclical peak to trough) rather than an arbitrary time frame. However, absent
adequate cyclical data, the committee will utilize a five -year time frame for analysis.
Total Fund
The Total Fund's performance is expected to exceed the return of a 60% S &P 50040% Lehman
Bros. Govt. /Corp. benchmark after all fees.
The Total Fund is expected to rank in the top half of the Wilshire universe of institutional funds
managed in a similar style.
The Total Fund's volatility of retums, as measured by the standard deviation of monthly returns
should not exceed the 60% S &P 500401/6 Lehman Bros. Govt. /Corp. benchmark.
Domestic Equities
Performance is expected to exceed the most appropriate benchmark in terms of manager style and
market capitalization after all management fees.
The investment manager is expected to rank in the top half of the Morningstar universe of
investment managers using the same investment style and company market capitalization
classifications
The investment manager's volatility of returns as measured by the standard deviation of monthly
retums should not exceed the appropriate benchmark by 25 %.
International Equities
Performance is expected to exceed the MSCI EAFE index after all management fees.
The investment manager is expected to rank in the top half of the Morningstar universe of
investment managers using an international equity style.
The investment manager's volatility of returns as measured by the standard deviation of monthly
returns should not exceed the MSCI EAFE index by 25 %.
0
DEFINED BENEFIT (DB) INVESTMENT POLICY STATEMENT
CITY OF LITTLE ROCK NON - UNIFORMED EMPLOYEES RETIREMENT FUND
Domestic Fixed Income
i
494
Performance is expected to exceed the Lehman Bros. Govt. /Corp. Intermediate Fixed Income index
after all management fees.
The investment manager is expected to rank in the top half of the Morningstar universe of
investment managers using an intermediate fixed income style..
The investment manager's volatility of returns as measured by the standard deviation of monthly
returns should not exceed the Lehman Bros. Intermediate Fixed Income index by 25 %.
ARUK0111-1 11-MIN Q141
All assets selected for the Fund must have a readily ascertainable market value and must be readily
marketable. The following assets and/or transactions are prohibited:
Naked Options - Puts or Calls
Net Short Selling
Commodities
Restricted Stock
The Board of Trustees believes that it is necessary and desirable that equity securities held in the Fund
represent a diversified portfolio. The investment managers will be allowed to choose the degree of
concentration in various issues and industry sectors. For separately managed accounts, the initial
purchase of a single company shall not exceed 101/6 of the portfolio market value. If price appreciation
causes a security to exceed the 101/6 limitation, a sale of the issue shall not be required except as
warranted by investment considerations.
The Board of Trustees believes that it is necessary and desirable that fixed income securities held in
the Fund represent a diversified portfolio. The fixed income investment managers will be allowed to
choose the degree of concentration in various issues and market sectors. With the exception of U.S.
Government securities, the securities of a single fixed income issuer shall not represent more than 10%
of the portfolio market value.
V. PROXY VOTING
The Board of Trustees recognizes that proxy voting is a fiduciary responsibility and requires that
proxies be voted based on those factors which would enhance the value of the fund's investments. The
Investment Committee delegates its authority to vote proxies to the investment managers and instructs
the investment managers to maintain accurate voting records and to vote proxies for the exclusive
benefit of the fund.
0
0
CITY OF LITTLE ROCK NON - UNIFORMED EMPLOYEES'
DEFINED CONTRIBUTION (DC) RETIREMENT FUND
INVESTMENT POLICY STATEMENT
495
L PURPOSE AND AUTHORITY
The City of Little Rock Non - Uniformed Employees' Retirement Fund (the "Fund ") is a single
employer Defined Contribution (DC) plan that provides retirement pensions. The Fund's members
are all of the regular Non - Uniformed employees of the City.
The Fund and the benefits provided are currently funded entirely by contributions from the City of
Little Rock and the employees (contribution rates are 4.0% City, 3.5% employees). Members of
the Fund do participate in Social Security as City employees
The primary statutory authority for the investment activities of the Board of Trustees for the Little
Rock Non - Uniformed Employees' Defined Contribution Plan is found in Act 50 of 1999 and the
Arkansas Code Ann. Section 24 -3-417 through 24 -3426. It is administered for the exclusive
purpose of providing benefits to members, retired members, and their beneficiaries and to defray
the necessary expenses of investing and administering the Fund. The Trustees shall discharge their
duties solely in the interest of the Little Rock Employees' Non - Uniformed Defined Contribution
Plan and for the exclusive benefit of plan participants and beneficiaries. These duties shall be
discharged with the care, skill, prudence and diligence under the circumstances then prevailing that a
prudent investor acting in a like capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims. The Board of Trustees is authorized to engage the
services of investment advisors, as defined under the Investment Advisors Act of 1940, and other
investment professionals to provide the specialized research and skilled manpower to meet the Little
Rock Non - Uniform Employees investment objectives and guidelines. Accordingly, the Board of
Trustees requires the investment advisors to adhere to the "prudent man rule" under state law.
The Board of Trustees is composed of five board members consisting of three City appointees
appointed by the City manager and two by ordinance due to their position on the city staff. Those
staff positions are Director of Human Resources and Director of Finance.
This statement sets forth the investment objectives of the Fund, and the investment policies to be
followed in pursuit of the investment objectives. Also, this statement will provide a basis to
evaluate the investment performance of the Total Fund, and also the individual managers hired to
manage assets for the Little Rock Non - Uniformed Defined Contribution Plan.
0 0
DEFINED CONTRIBUTION (DC) INVESTMENT POLICY STATEMENT
CITY OF LITTLE ROCK NON - UNIFORMED EMPIAYEES RETIREMENT FUND
IL INVESTMENT OBJECTIVES
496
The primary investment objective of the fund is to earn a real rate of return (Total Fund rate of
return — Consumer Price Index) of 5.0 %. This return objective is not a year over year objective but
a long -term guideline for the Fund's Trustees. The Trustees will utilize five -year rolling periods as
an appropriate time frame for analysis.
A secondary investment objective of the fund is to constrain the volatility of the total fund through
a program of diversification. In practice, the fund should experience less volatility than a 70% S &P
500 -30% Lehman Bros. Govt. /Corp. benchmark over rolling three and five year time frames.
Central to the achievement of this goal is the concept of investing in asset classes that demonstrate
relatively low correlation to one another. These correlations and their impact on total fund
volatility will be reviewed from time to time by the Trustee's to determine the effectiveness of the
diversified program.
III. INVESTMENT POLICY
The investment strategy to be followed in the reasonable expectation of achieving the Retirement
Fund's investment objectives is as follows:
ASSET CLASS TARGET RANGE EXPECTED REAL RETURN
Domestic Equities
60%
55 % -65%
6.5%
International Equities
10%
8 % -12%
6.5%
Domestic Fixed Income
30%
25 % -35%
1.5%
* ** The asset class targets, ranges, and expected real rates of return are as of June 30, 1999. The
Board of Trustees shall review its asset allocation at least annually to determine if the asset
allocation is consistent with the level of risk and volatility acceptable to the fund.
Quarterly, the asset allocation will be compared to the permissible range. At that time if the actual
asset allocation falls outside the permissible range, the mix should be brought back into the range
unless it is prudent not to do so.
The Trustees will diversify its Domestic Equity allocation to include different investment styles and
market capitalization strategies. The reason for doing so it to expose the total fund to investment
opportunities with attractive risk -return profiles.
0 0
DEFINED CONTRIBUTION (DC) INVESTMENT POLICY STATEMENT
CITY OF Lrrrr.E ROCK NON - UNIFORMED EMPLOYEES RETIREMENT FUND
IV. PERFORMANCE STANDARDS
491
These performance standards provide a framework in which the Board of Trustees can measure
investment performance. The Board of Trustees preference will be to view managers through a full
market cycle (cyclical peak to trough) rather than an arbitrary time frame. However, absent
adequate cyclical data, the committee will utilize a five -year time frame for analysis.
Total Fund
The Total Fund's performance is expected to exceed the return of a 70% S &P 500 -30% Lehman
Bros. Govt. /Corp. benchmark after all fees.
The Total Fund is expected to rank in the top half of the Wilshire universe of institutional funds
managed in a similar style.
The Total Fund's volatility of returns, as measured by the standard deviation of monthly returns
should not exceed the 70% S &P 500 -30% Lehman Bros. Govt. /Corp. benchmark.
Domestic Equities
Performance is expected to exceed the most appropriate benchmark in terms of manager style and
market capitalization after all management fees.
The investment manager is expected to rank in the top half of the Morningstar universe of
investment managers using the same investment style and company market capitalization
classifications
The investment manager's volatility of returns as measured by the standard deviation of monthly
returns should not exceed the appropriate benchmark by 25 %.
International Equities
Performance is expected to exceed the MSCI EAFE index after all management fees.
The investment manager is expected to rank in the top half of the Morningstar universe of
investment managers using an international equity style.
The investment manager's volatility of returns as measured by the standard deviation of monthly
returns should not exceed the MSCI EAFE index by 25 %.
0 9
DEFINED CONTRIBUTION (DC) INVESTMENT POLICY STATEMENT
CITY OF LITTLE ROCK NON - UNIFORMED EMPLOYEES RETIREMENT FUND
Domestic Fixed Income 4 j u
Performance is expected to exceed the Lehman Bros. Govt. /Corp. Intermediate Fixed Income index
after all management fees.
The investment manager is expected to rank in the top half of the Morningstar universe of
investment managers using an intermediate fixed income style..
The investment manager's volatility of returns as measured by the standard deviation of monthly
returns should not exceed the Lehman Bros. Intermediate Fixed Income index by 25 %.
V. INVESTMENT GUIDELINES
All assets selected for the Fund must have a readily ascertainable market value and must be readily
marketable. The following assets and/or transactions are prohibited:
Naked Options - Puts or Calls
Net Short Selling
Commodities
Restricted Stock
The Board of Trustees believes that it is necessary and desirable that equity securities held in the Fund
represent a diversified portfolio. The investment managers will be allowed to choose the degree of
concentration in various issues and industry sectors. For separately managed accounts, the initial
purchase of a single company shall not exceed 10% of the portfolio market value. If price appreciation
causes a security to exceed the 10% limitation, a sale of the issue shall not be required except as
warranted by investment considerations.
The Board of Trustees believes that it is necessary and desirable that fixed income securities held in
the Fund represent a diversified portfolio. The fixed income investment managers will be allowed to
choose the degree of concentration in various issues and market sectors. With the exception of U.S.
Government securities, the securities of a single fixed income issuer shall not represent more than 10%
of the portfolio market value.
V. PROXY VOTING
The Board of Trustees recognizes that proxy voting is a fiduciary responsibility and requires that
proxies be voted based on those factors which would enhance the value of the fund's investments. The
Investment Committee delegates its authority to vote proxies to the investment managers and instructs
the investment managers to maintain accurate voting records and to vote proxies for the exclusive
benefit of the fund.