2005 Arizona Revised Statutes - Revised Statutes §38-848  Fund manager

A. The fund manager shall consist of five members and shall have the rights, powers and duties that are set forth in this section. The term of office of members shall be three years to expire on the third Monday in January of the appropriate year. Members are eligible to receive compensation in an amount of fifty dollars a day, but not to exceed one thousand dollars in any one fiscal year, and are eligible for reimbursement of expenses pursuant to chapter 4, article 2 of this title. The fund manager consists of the following members appointed by the governor pursuant to section 38-211:

1. One elected member from a local board to represent the employees.

2. One member to represent this state as an employer of public safety personnel. This member shall have the qualifications prescribed in subsection R of this section.

3. One member to represent the cities as employers of public safety personnel.

4. An elected county or state official or a judge of the superior court, court of appeals or supreme court.

5. One public member. This member shall have the qualifications prescribed in subsection R of this section.

B. All monies in the fund shall be deposited and held in a public safety personnel retirement system depository. Monies in the fund shall be disbursed from the depository separate and apart from all monies or funds of the state and the agencies, instrumentalities and subdivisions thereof. The monies shall be secured by the depository in which they are deposited and held to the same extent and in the same manner as required by the general depository law of the state. The fund is subject to the sole management of the fund manager for the purpose of this article.

C. All contributions under this system shall be forwarded to the fund manager and shall be held, invested and reinvested by the fund manager. All property and funds of the fund, including income from investments and from all other sources, shall be retained for the exclusive benefit of members, as provided in the system, and shall be used to pay benefits to members or their beneficiaries or to pay expenses of operation and administration of the system and fund.

D. The fund manager shall have the full power in its sole discretion to invest and reinvest, alter and change the monies accumulated under the system. The fund manager may delegate the authority the fund manager deems necessary and prudent to the administrator, employed by the fund manager pursuant to subsection K, paragraph 6 of this section, and any assistant administrators to invest the monies of the system if the administrator and any assistant administrators follow the investment policies that are promulgated by the fund manager. The fund manager may commingle securities and monies of the fund subject to the crediting of receipts and earnings and charging of payments to the account of the appropriate employer. In making every investment, the fund manager shall exercise the judgment and care under the circumstances then prevailing which persons of ordinary prudence, discretion and intelligence exercise in the management of their own affairs, not in regard to speculation but in regard to the permanent disposition of their funds, considering the probable income from their funds as well as the probable safety of their capital, provided:

1. That not more than seventy per cent of the pension fund shall be invested at any given time in corporate stocks, based on cost value of such stocks irrespective of capital appreciation.

2. That no more than five per cent of the pension fund shall be invested in securities issued by any one institution, agency or corporation, other than securities issued as direct obligations of and fully guaranteed by the United States government.

3. That not more than five per cent of the voting stock of any one corporation shall be owned.

4. That corporate stocks and exchange traded funds eligible for purchase shall be restricted to stocks and exchange traded funds that, except for bank stocks, insurance stocks and membership interests in limited liability companies, are either:

(a) Listed or approved on issuance for listing on an exchange registered under the securities exchange act of 1934, as amended (15 United States Code sections 78a through 78ll).

(b) Designated or approved on notice of issuance for designation on the national market system of a national securities association registered under the securities exchange act of 1934, as amended (15 United States Code sections 78a through 78ll).

(c) Listed or approved on issuance for listing on an exchange registered under the laws of this state or any other state.

(d) Listed or approved on issuance for listing on an exchange of a foreign country with which the United States is maintaining diplomatic relations at the time of purchase, except that no more than ten per cent of the pension fund shall be invested in foreign equity securities on these exchanges, based on the cost value of the stocks irrespective of capital appreciation.

(e) An exchange traded fund that is recommended by the chief investment officer of the system, that is registered under the investment company act of 1940 (15 United States Code section 80a-1) and that is both traded on a public exchange and based on a publicly recognized index.

E. Notwithstanding any other law, the fund manager shall not be required to invest in any type of investment that is dictated or required by any entity of the federal government and that is intended to fund economic development projects, public works or social programs, but may consider such economically targeted investments pursuant to its fiduciary responsibility. The fund manager, on behalf of the system, may invest in, lend monies to or guarantee the repayment of monies by a limited liability company, limited partnership, joint venture, partnership, limited liability partnership or trust in which the system has a financial interest, whether the entity is closely held or publicly traded and that, in turn, may be engaged in any lawful activity, including the ownership, development, management, improvement or operation of real property and any improvements or businesses on real property or the lending of monies.

F. Conference call meetings of the fund manager of the public safety personnel retirement system which are held for investment purposes only are not subject to chapter 3, article 3.1 of this title, except that the fund manager shall maintain minutes of these conference call meetings and make them available for public inspection within twenty-four hours after the meeting. The fund manager shall review the minutes of each conference call meeting and shall ratify all legal actions taken during each conference call meeting at the next scheduled meeting of the fund manager.

G. The fund manager shall not be held liable for the exercise of more than ordinary care and prudence in the selection of investments and performance of its duties under the system and shall not be limited to so-called "legal investments for trustees", but all funds of the system shall be invested subject to all of the conditions, limitations and restrictions imposed by law.

H. Except as provided in subsection D of this section, the fund manager may:

1. Invest and reinvest the principal and income of the pension fund without distinction between principal and income.

2. Sell, exchange, convey, transfer or otherwise dispose of any investments of the fund held in the name of the system by private contract or at public auction.

3. Also:

(a) Vote upon any stocks, bonds or other securities.

(b) Give general or special proxies or powers of attorney with or without power of substitution.

(c) Exercise any conversion privileges, subscription rights or other options and make any payments incidental to the exercise of the conversion privileges, subscription rights or other options.

(d) Consent to or otherwise participate in corporate reorganizations or other changes affecting corporate securities, delegate discretionary powers and pay any assessments or charges in connection therewith.

(e) Generally exercise any of the powers of an owner with respect to stocks, bonds, securities or other investments held in the fund.

4. Make, execute, acknowledge and deliver any other instruments that may be necessary or appropriate to carry out the powers granted in this section.

5. Register any investment held in the fund in the name of the fund or in the name of a nominee.

6. At the expense of the system, enter into an agreement with any bank or banks for the safekeeping and handling of securities and other investments coming into the possession of the fund manager. The agreement shall be entered into under terms and conditions that secure the proper safeguarding, inventory, withdrawal and handling of the securities and other investments. No access to and no deposit or withdrawal of the securities from any place of deposit selected by the fund manager shall be permitted or made except as the terms of the agreement may provide.

7. Appear before local boards and the courts of this state and political subdivisions of this state through counsel or appointed representative to protect the fund. The fund manager is not responsible for the actions or omissions of the local boards under this system but may seek review or rehearing of actions or omissions of local boards. The fund manager does not have a duty to review actions of the local boards but may do so in its discretion in order to protect the fund.

8. Empower the fund administrator to take actions on behalf of the fund manager that are necessary for the protection and administration of the fund in accordance with the guidelines of the fund manager.

9. Do all acts, whether or not expressly authorized that may be deemed necessary or proper for the protection of the investments held in the fund.

I. Investment expenses and operation and administrative expenses of the fund manager shall be accounted for separately and allocated against investment income.

J. The fund manager, as soon as possible within a period of six months following the close of any fiscal year, shall transmit to the governor and the legislature an annual statement on the operation of the system containing, among other things:

1. A balance sheet.

2. A statement of income and expenditures for the year.

3. A report on an actuarial valuation of its assets and liabilities.

4. A detailed statement of the investments acquired and disposed of during the year.

5. A list of investments owned.

6. The total rate of return, yield on cost, and per cent of cost to market value of the fund.

7. Any other statistical and financial data that may be necessary for the proper understanding of the financial condition of the system and the results of its operations. A synopsis of the annual report shall be published for the information of members of the system.

K. The fund manager shall:

1. Maintain the accounts of the system and issue statements to each employer annually and to each member who may request it.

2. Report the results of the actuarial valuations to the local boards and employers.

3. Contract on a fee basis with an independent investment counsel to advise the fund manager in the investment management of the fund and with an independent auditing firm to audit the fund manager's accounting.

4. Permit the auditor general to make an annual audit and the results shall be transmitted to the governor and the legislature.

5. Contract on a fee basis with an actuary who shall make actuarial valuations of the system, be the technical adviser of the fund manager on matters regarding the operation of the funds created by the provisions of the system and perform other duties required in connection therewith. The actuary must be a member of a nationally recognized association or society of actuaries.

6. Employ, as administrator, a person, state department or other body to serve at the pleasure of the fund manager.

7. Establish procedures and guidelines for contracts with actuaries, auditors, investment counsel and legal counsel and for safeguarding of securities.

L. The administrator, under the direction of the fund manager, shall:

1. Administer this article.

2. Invest the funds of the system as the fund manager deems necessary and prudent as provided in subsections D and H of this section and subject to the investment policies and fund objectives promulgated by the fund manager.

3. Establish and maintain an adequate system of accounts and records for the system which shall be integrated with the accounts, records and procedures of the employers so that the system operates most effectively and at minimum expense and that duplication of records and accounts is avoided.

4. In accordance with the fund manager's governance policy and personnel rules and procedures and the budget adopted by the fund manager, hire such employees and services the administrator deems necessary and prescribe their duties, including the hiring of one or more assistant administrators to manage the system's operations, investments and legal affairs.

5. Be responsible for income, the collection of the income and the accuracy of all expenditures.

6. Recommend to the fund manager annual contracts for the system's actuary, auditor, investment counsel, legal counsel and safeguarding of securities.

7. Perform additional duties and powers prescribed by the fund manager and delegated to the administrator.

M. The system is an independent trust fund and the fund manager, the administrator, the assistant administrators and all persons employed by them are not under the jurisdiction of the department of administration or any other agency, department or instrumentality of this state or subject to section 38-611 or title 41, chapter 4 or 6. The salaries of the administrator, assistant administrators and other employees of the fund manager are the sole determination of the fund manager. Contracts for goods and services approved by the fund manager are not subject to title 41, chapter 23. As an independent trust fund whose assets are separate and apart from all other funds of this state, the system and the fund manager are not subject to the restrictions prescribed in section 35-154 or article ix, sections 5 and 8, Constitution of Arizona.

N. The attorney general or an attorney approved by the attorney general and paid by the fund shall be the attorney for the fund manager and shall represent the fund manager in any legal proceeding or forum that the fund manager deems appropriate. The fund manager, administrator, assistant administrators and employees of the fund manager are not personally liable for any acts done in their official capacity in good faith reliance on the written opinions of the fund manager's attorney.

O. At least once in each five-year period after the effective date, the actuary shall make an actuarial investigation into the mortality, service and compensation experience of the members and beneficiaries of the system and shall make a special valuation of the assets and liabilities of the funds of the system. Taking into account the results of the investigation and special valuation, the fund manager shall adopt for the system such mortality, service and other tables deemed necessary.

P. On the basis of the tables the fund manager adopts, the actuary shall make a valuation of the assets and liabilities of the funds of the system not less frequently than every year. By November 1 of each year the fund manager shall provide a preliminary report and by December 15 of each year provide a final report to the governor, the speaker of the house of representatives and the president of the senate on the contribution rate for the ensuing fiscal year.

Q. Neither the fund manager nor any member or employee of the fund manager shall directly or indirectly, for himself or as an agent, in any manner use the monies or deposits of the fund except to make current and necessary payments, nor shall the fund manager or any member or employee become an endorser or surety or in any manner an obligor for monies loaned by or borrowed from the fund.

R. The members of the fund manager who are appointed pursuant to subsection A, paragraphs 2 and 5 of this section shall have at least ten years' substantial experience as any one or a combination of the following:

1. A portfolio manager acting in a fiduciary capacity.

2. A securities analyst.

3. An employee or principal of a trust institution, investment organization or endowment fund acting either in a management or an investment related capacity.

4. A chartered financial analyst in good standing as determined by the association for investment management and research.

5. A professor at the university level teaching economics or investment related subjects.

6. An economist.

7. Any other professional engaged in the field of public or private finances.

S. Financial or commercial information that is provided to the fund manager, employees of the fund manager and attorneys of the fund manager in connection with investments in which the fund manager has invested or investments the fund manager has considered for investment is confidential, proprietary and not a public record if the information is information that would customarily not be released to the public by the person or entity from whom the information was obtained.