HomeMy WebLinkAbout1996-04-19 - Agendas - FinalFAYETTEVILLE
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THE CITY OF FAYETTEVILLE, ARKANSAS TRACI PAUL, CITY CLERK
TO: Firemen's Pension Board Members
FROM: Traci Paul, City Clerk/Treasurer Y
DATE: April 19, 1996
SUBJECT: Firemen's Pension Board Meeting
The next Firemen's Pension Board meeting is Thursday, April 25,
1996, at 11:00 a.m., in room 326 of City Hall.. Attached, please
find a copy of the agenda for the upcoming meeting, the minutes
-from the March 28 meeting, and the pension list for May, 1996.
Attachments
113 WEST MOUNTAIN 72701 501 575-8323
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AGENDA
FIREMEN'S PENSION AND RELIEF BOARD
April 25, 1996
11:00 a.m.
City Hall Room 326
1. Approval of the minutes of March 28, 1996.
2. Approval of Pension List for May 1996.
3. Old Business
4. New Business
A. Investment Report, Merrill Lynch
5 Adjournment
MINUTES OF A MEETING OF THE FIRE PENSION BOARD
A meeting of the Fayetteville Firemen's Pension and Relief Board
was held on Thursday, March 28, 1996, at 11:00 a.m. in room.326
of the City Administration Building, 113 W. Mountain,
Fayetteville, Arkansas.
PRESENT: Mayor Fred Hanna, Howard Boudrey, Pete Reagan, Marion
Doss, Darrell Judy (arrived late) and City
Clerk/Treasurer Traci Paul
ABSENT: Ron Wood
CALL TO ORDER
Mayor Hanna called the meeting to order.
MINUTES
Doss pointed out a correction that needed to be made. He stated
the minutes should read, "if they spent over 20 years, $5 for
each year", not 25 years.
Reagan, seconded by Boudrey, made a motion to approve the
corrected minutes of the February 29, 1996, regular meeting. The
motion passed unanimously.
PENSION LIST
Paul reported that Betty Boudrey changed her Federal withholding
which caused a minor change in the pension list.
In answer to a question from Reagan, Paul agreed that there was
no change in the bottom line total.
Reagan, seconded by Boudrey, made a motion to approve the April
pension list. The motion passed unanimously.
Doss asked if the DROP participants would be noted on the pension
list.
Paul stated the issue would be addressed later in the meeting
when the Board answers questions presented by the Accounting
Division.
•
OLD BUSINESS
March 28, 1996
Retirement Information
Doss pointed out that the Board received information regarding
what each retiree's salary was at the time of their retirement.
Doss stated the information needs further attention.
Reagan stated Paul is still looking for past increases.
Paul stated Microfilm Clerk Gina Roberts spent hours compiling
the list of retiree's, their retirement dates and their salaries
at retirement. There are no organized records in any one spot.
This list is as complete as it can be.
Mayor Hanna suggested mailing a copy of the information to each
person on the list to help eliminate any errors.
Doss suggested increases and retirements should be documented
better in the future.
In answer to a question from Doss, Paul stated the information
came from minutes, payroll records, and boxes of old records. In
response to Mayor Hanna's idea, Paul stated it is a good idea to
mail copies of the information out to each retiree.
Reagan agreed. Reagan suggested adding the past increases to the
list to show who has received increases and the date of the
increases.
NEW BUSINESS
•
DROP Ouestions - Accounting Division
Mayor Hanna introduced Accounting Manager Marilyn Cramer and
stated the Accounting Division has several questions regarding
the DROP Plan.
Marilyn Cramer asked who is to administer the plan. She stated
the regulations say the staff of the fund is to administer the
plan. If that means the Accounting Division, the Board needs to
address several questions.
Darrell Judy arrived.
After some discussion, Mayor Hanna suggested a subcommittee
consisting of one active member and one retired member review the
list of questions from Accounting and work with Marilyn Cramer to
resolve them.
Mayor Hanna asked Pete Reagan to serve as the active member.
Howard Boudrey volunteered as the retired member.
March 28, 1996
Investment Report
Mayor Hanna reported that the investment managers would not be
present.
Reagan stated he asked the investment managers to send a report
for any meeting they would not be attending. Reagan suggested
the Board send a reminder letter to the managers asking them to
send reports if they cannot attend meetings.
The Llama Company
Mayor Hanna explained that he had been approached by a manager
from The Llama Company who wants to approach. the Board about
Llama's management portfolio for retirement plans. Mayor Hanna
stated he may be in touch with some of the Board members to
inquire about making a presentation.
There being no further business, Mayor Hanna adjourned the
meeting at 11:28 a.m.
•
•
•
FIREMEN'S RELIEF AND PENSION FUND
MAY 1996
TRACI PAUL TREASURER
THE FOLLOWING ARE THE OBLIGATIONS OF THE FIREMEN'S RELIEF FUND FOR THE
MONTH OF MAY 1996. YOU ARE HEREBY INSTRUCTED TO ISSUE CHECKS TO THE
PAYEES, IN THE AMOUNTS SHOWN, AND FOR THE PURPOSE SO STATED.
EMP# NAME
43 BAIRD, RICHARD H.
2 BLACKARD, PAUL
63 BOLAIN, ANN
44 BOUDREY, BETTY MRS.
45 BOUDREY, HOWARD
49 BOUDREY, JACK
4 CARL, FLOYD JR
5 CASELMAN, ARTHUR
57 CATE, ROY
6 CHRISTIE, ARNOLD
7 COLE, EVERETT
8 COUNTS, WAYNE
61 DAVIS, BEULAH F.
10 DEARING, EMMA MRS.
11 FARRAR, ALONZO
38 FRALEY, JOSEPH G.
33 HARRIS, BILL C.
34 HARRIS, JAMES E.
64 JORDAN, CHARLIE
47 JUDY, DARRELL
37 KING, ARNOLD D.
54 KING, ARVIL
12 LANE, HOPE MRS
13 LAYER, MERLIN
14 LEE, HAROLD
51 LEWIS, CHARLES
60 LEWIS, MARVIE
55 LEWIS, ROGER
40 LOGUE, PAUL D.
50 MASON, LARRY
39 MC ARTHUR, RONALD A.
35 MC CHRISTIAN, DWAYNE
15 MC WHORTER, CHARLES
29 MILLER, DONALD
42 MOORE JAMES H.
17 MORRIS, WILKIE MRS.
16 MORRIS, WILLIAM H.
62 MORRISON, ELIENE
48 MULLENS, DENNIS W.
58 OSBURN, EDWARD
46 OSBURN, TROY
53 POAGE, LARRY
20 POLLY, GRACE A. MRS.
22 REED, JOE
30 SCHADER, EARVEL
41 SCHADER, TROY
23 SKELTON, BURL L.
24 SKELTON, LEE
56 SKELTON, ROY
36 SPRINGSTON, CARL
25 STOUT, ORVILLE
27 TUNE, MILDRED MRS.
GROSS FED. TAX
916.20 100.00
55.00
55.00
1,266.21 180.00
1,066.66
837.68 287.68
50.00
75.00
909.50
50.00
375.00 32.50
55.00
377.50
50.00
707.84
953.38 100.00
55.00
55.00
1,192.17
837 68
828.42 100.00
1,131.00 130.00
50.00
417.50
55.00
837.68
439.16
439.17
1,469.38 175.00
829.35 29.35
891.62 100.00
55.00. 30.00
885.14 50.00
863.01 125.00
55.00
50.00
60.00
70.00
1,114.11
1,284.63 160.00
965.81 65.81
1,201.98 200.00
50.00
55.00
915.78
783.74 20.00
692.50 42.50
390.00
1,626.02 126.02
609.88
590 36 50.00
70.00
ST. TAX
50.00
10.00
10.00
20.00
30.00
50.00
NET
816.20
55.00
55.00
1,086.21
1,066.66
500.00
50.00
75.00
909.50
50.00
342.50
55.00
377.50
50.00
707.84
843.38
55.00
55.00
1,192.17
837.68
718.42
1,001.00
50.00
417.50
55.00
837 68
439.16
439.17
1,274.38
800.00
791.62
25.00
835.14
738.01
55.00
50.00
60.00
70.00
1,114.11
1,124.63
900.00
971 98
50.00
55.00
915.78
763.74
650.00
390 00
1,450.00
609.88
540.36
70.00
,s
•
26 TUNE, BILLIE SUE
28 WATTS, DONALD
59 WATTS, WAYNE
52 WRIGHT, RANDALL
70.00
400.00
921.17
877.68
96.17
150.00
31,984.91 2,350.03 170.00
70.00
400.00
825.00
727.68
29,464 88
WE, THE UNDERSIGNED, DO SOLEMNLY SWEAR THAT THE ABOVE OBLIGATIONS ARE
JUST AND CORRECT; THAT NO PART THEREOF HAS BEEN PREVIOUSLY PAID; THAT
THE PENSION PAYMENTS SO CHARGED ARE IN ACCORDANCE WITH THE ACTIONS OF
THE BOARD OF TRUSTEES OF THE FIREMEN'S RELIEF AND PENSION FUND; THAT
THE SERVICES OR SUPPLIES FURNISHED, AS THE CASE MAY BE, WERE ACTUALLY
RENDERED OR FURNISHED; AND THAT THE CHARGES MADE THEREFORE DO NOT
EXCEED THE AMOUNT ALLOWED BY LAW OR T E CUSTOMARY CHARGE FOR SIMILAR
SERVICES OR SUPPLIES.
SECRETARY
CHAIRMA
AND PRESIDENT
ACKNOWLEDGEMENT
STATE OF ARKANSAS )
COUNTY OF WASHINGTON) )SS
SWORN TO AND SUBSCRIBED BEFORE ME THISanvbAY OF May
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tY PUBLI
MY COMMISSION EXPIRES: 3 - / : o'oos'
,1996.
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•
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CPension_I.ncr' es
Treasurer Linebaugh reported that he had been notified by Catherine
Hinshaw from the State Auditor's Office that the actuarial study requested
by the Fayetteville Fire Pension & Relief Board had been completed and the
jbenefit_increase:approved1 He stated that the increase would be 4 -100 -peri,
rmenth__for regular`retirees;`$-1D:per month=for._vollnteer_retirees-awas
effective September -17:y983%, and would be reflected in the September checks.
Fireman Springston, seconded by.Boudrey, made a motion to acknowledge
the State Auditor's report. The motion passed unanimously. Fireman
Boudrey, seconded by Judy, made a motion to approve the pension list, with
the changes as noted, $100 per month increase for regular retirees and $10
per month for volunteer retirees. The motion passed unanimously.
Fireman Boudrey noted that if there was no cost -of -living adjustment
built into the pension system, the firemen sitting here now will be facing
the same thing that the present retirees have faced. Mr. Linebaugh responded
that the new pension system did have this built in, but the old one did not.
ADJOURNMENT
With no further action before the Pension Board, the meeting adjourned
at 4:50 p.m.
Mary E( griffin Sed":tary
•
r
Donald 1. Grimes, Chairman
•
Fire Pension Relief Board
C:February,�l3;J9S4J
Page Three
Linebaugh reported the average term on a GNMA (mortgage on home) is
15 years; he stated that, on 12% coupons, the yield is principal and
interest, with payments around 12.28%, and with a life of about 12
or 12.5 years.
Savings and Loan Associations
Linebaugh referred to the memo distributed from Lou Ann Westerfield
regarding the suitability of local savings & loan associations for
City investments. He stated, as pointed out in the memo, that both
Superior Federal and First Federal of Arkansas are strong enough associ-
ations to be considered in placing pension fund investments.
Savings Account
Linebaugh reported the Pension Fund will have accumulated more than
$100,000 in savings by the end of this month or first of next month,
at which time a decision should be made as to how to invest these
funds.
After some discussion regarding whether to obtain bids on this investment
from the three local banks and the three local savings and loan associ-
ations, Fireman Dill, seconded by Judy, made a motion that bids be
requested from the three local savings and loan associations only.
The motion passed, 4-0.
Linebaugh noted that, in April, a decision should be made whether
to go "long-term" (2 years or more) or stay with 180 days or one year.
He answered a question as to whether a long term certificate can be
obtained with a minimum deposit of $100,000 or whether it required
$500,000, by stating that $100,000 is necessary to get the needed
rate.
NEW BUSINESS
Request for Raise in Retirement Benefits
Fireman Springston stated -that he and others have been discussing
the possibility of asking for a wise in:the_cetirement'benefits,]
as there are still some retirees receiving somewhat low pension benefits.
Springston reported it was the general concensus of those he spoke
with to propose a flat rate for full -pay retirees, of a smaller amount
than that which was requested last year. Springston suggested a figure
of no. more than $�50 00_pe mr ofth for,13 full -paid retirees which
Fire Pension Relief Board
February 13, 1984
Page Four
would be an amount of $650 per month for all 13 eligible beneficiaries.
Treasurer Linebaugh asked what is being recommended as an increase
for the kart—time retirees. Springston stated it was the general
feeling of the few he spoke with that they wished to put an effort
only towards the full—paid retirees.
Ftreman_Springsxon,—seconded—by Dill7made a_motion_to,request n7
L ncreasen-as described.] Springston remarked that there was some fear
that asking for an increase for the part—paid retirees might jeopardize
the chances of receiving approval for the full amount being requested.
Linebaugh suggested an alternative request be submitted in case the
full request is not approved, stating that this would prevent having
to submit a separate request later. There was some discussion about
the necessity of submitting an alternative request and Linebaugh stated
he would check into whether this would be necessary.
Cash Contribution
Treasurer Linebaugh reported a contribution of $33 had been received
for the Pension Fund from James Moore.
ADJOURNMENT
With no further business before the Board, the meeting adjourned at
5:00 P.M.
z
b NALD L. GRIMES,
Fire Pension Minutes
• May 5, 1986
Page 2
It was moved by Reagan, seconded by Dill, and unanimous, to accept
the investments as made by Linebaugh.
It was noted that the next investment to mature on June 17 would be
discussed at the next meeting.
New Business
Gary Springston asked if there was a law which would allow retirees
to draw more in benefits that the amount of salary earned by a current
fire department employee. Springston noted that some retirees' half—salary
amounts to more than what some current employees are earning. Springston
said he wanted to propose getting a pay raise in the works for some
of the retired people but the proposal would be to request a benefit
increase which would exclude five persons who are earning more than
current fire department employees. Springston said there had been
discussion regarding,a=request for a`$50 across=the=board^benefin
r—rintrea-sesairtiitrollowing_13„persons:j
C55177 igerrar_„]
(Davi Mhorter
• tLayer 1cW
B ;Skelton
Matts� CWTIe
L. Skel"to`n
Cr,SChlUelifi
(Stout" rFrale
(Sprfngston1
to 6) \�' -<\'1Qac
O1\CJ
It was so moved by Springston, seconded by Dill, and unanimous to
request the benefit increase as proposed by Springston.
Linebaugh arrived at this point in the meeting and, after being apprised
of the motion, pointed out to the Board that an actuarial valuation
must still be approved.
Linebaugh promised to check into the earlier question which was posed
regarding the law concerning the maximum amount of benefits which
can be earned.
Old Business
Fire Chief Jackson reported that six nominees will compete for the
two positions to be filled on the Board and that the election will
take place at the next department meeting. Jackson noted that Gary
Springston's and Pete Reagan's positions are due to expire.
0A, (1 0
it° NQ'
•
•
TEL:501-375-3451 Apr 25'96 10:06 No.002 P.02
FAYETTEVILLE FIRE DEPT PENSION AND RELIEF FUND
PORTFOLIO PERFORMANCE 12/31/95 TO 03/31/96
NM CAPITAL MANAGEmENT
INCOME ACCOUNT
KEYSTONE ASSET MGT
• - MONTHS TREASURY GILLS
DJIA W/DIV REINVESTED
S R P '.500 W/DIV REINVEST
LONG PERM TREASURY BONDS
H IGH GRADE CORP BONDS
CPI
NM CAPITAL time wtc7)
INCOME ACCOUNT
KEYSTONE ASSET MGMT
'i1 THJ)L'<AWt4L.3:
_./13/'36
$16, fI(1•r)
st4 7A4„,,
9r-
12/31/95
$3,891,670
3,848,643
1,016,776
12/31/95
+ 5. 46
+35. 53
+34,34
+27, 63
+23. Si
+ 2. 67
+ 15. 68
+ 15. L1
+ 1.68
is. Do J
7.S', o'.il
.... .03/31/96
$4,0901634
3,838,456
1,081,808
• 03/31/96
+ 1.23
+ 9.19
t 5.38
- 7.04
- 4.74
+ 0.91
+ 2.77
- 0.52
+ 5. 47
Ge °/ ,�.3/fes
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TO: Marilyn Cramer, Accounting Manager
FROM: Pete Reagan, Fire Pension Board Member
DATE: April 25, 1996
SUBJECT: DROP Plan
Please find below the answers to your questions regarding the
DROP Plan.
1. The Fayetteville Fire Pension Board will administer the
plan with assistance from the City Clerk's office, the
Accounting Division, and Payroll.
2. Interest will be credited to the individual DROP
accounts when we receive our actuarial report.
Interest will be credited on an annual basis.
3. The average annual balance will be computed on the
average amount in each account on an annual basis.
The actuarial report will compute the rate of return on
the fund.
5. The Board is looking to the Accounting Division for
guidance in this report.
6. The Board will comply with this request.
7. Distributions will be reported as a pension payment.
8. The Board would like to request that the names of DROP
participants be added to the pension list.
8
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•
INVOICE
NM CAPITAL MANAGEMENT, INC.
6501 AMERICAS PARKWAY, SUITE 950
ALBUQUERQUE, NM 87110
April 25, 1996
Mr. Richard Yada
Merrill Lynch
425 W. Capitol, Suite 200
�-� Little Rock; AR -72201-*—
NM CAPITAL
MANAGEMENT, INC.
INVESTMENT COUNSEL
Re: City of Fayetteville Fire Pension & Relief Fund
Account #563-96346
STATEMENT OF MANAGEMENT FEES:
Forthe.period from,January 01, 1996 through March 31, 1996
CITYOFFAYETTEVILLE FIRE PENSION ANDM1RELIEF FUND
Portfolio Valuation as of 03-31-96
-$ 4,062,975.99 @ 0.5000% per annum
Quarterly Management Fee
* $ 4,062,975.99
S 5.078.71
$ 5,078.71
....._--._ --- _-- --- ----.'-5; 078:7%
ALL INVOICES ARE DUE UPON RECEIPT. TO INSURE fROPkERreim FHR�DTnTy
PLEASE INDICATE ACCOUNT NAME ON CHECK. aw_ ` *rdl.OiCE
*Portfolio Valuation used for -fee computation has been reduced by
,,,accruals,amounting.to $30,293.34.
•
A copy of this invoice has been sent to the client for their record.
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NM Capital Management, Inc
First Quarter 1996
Reporting Period: 01/01/96 through 03/31/96
CITY OF FAYETTEVILLE FIRE PENSION AND RELIEF FUND
Please find enclosed your quarterly report and our latest
market commentary. In the event that your financial
circumstances or objectives have recently changed, please
contact your financial consultant or NM Capital directly We
appreciate your continued confidence in NM Capital
Management and look forward to many more years of service
FAY ETTPP-NTSC
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NM Capital Management, Inc.
Quarterly Investment Comment
First Quarter 1996
FIRST QUARTER 1996 REVIEW
Stock Returns Lip - Bond Returns Flat
Moderate economic growth continued to create
further gains in stocks during the first quarter.
The S&P 500, including dividends, returned
5.4%. Most of the stock market advance took
place in the first half of the quarter. For the rest
of the quarter, the S&P stalled and traded in a
narrow range. Stock returns in this quarter were
not dominated by technology and health care as
they were in 1995. Signs of economic strength
during the quarter appeared to renew investor
interest in retail and industrial cyclical stocks.
These changes may indicate some shift in
market leadership. Strength in oil prices had a
positive impact on energy stocks, and large
capitalization stocks, as a group, out
performed medium or smaller companies.
The volatility in the stock market during the
latter half of the quarter reflected a rise in
interest rates which began in mid February.
Signs of renewed economic strength and the
stalled budget discussions may have influenced
the Federal Reserve's decision not to lower short
rates. The benchmark 30 year Treasury yield
increased from a low of 6.0% on February 12 to
6.67% on March 31. Three year Treasury Note
yield rose from 4.9% to 5.9% over the same
period. A yield curve that was relatively flat at
the beginning of the quarter steepened
dramatically as rates rose, possibly indicating
generally higher rates in the future. Rising
interest rates impacted bond returns.
Government/corporate intermediate and long
bond indices returns were slightly negative for
the quarter.
ECONOMIC AND INVESTMENT OUTLOOK
Moderate Economic Growth Is Favorable
An array of economic data suggests continued
moderate growth of the economy and a
generally positive outlook for financial assets.
Chairman of the Federal Reserve, Alan
Greenspan, testifying before the House Banking
Committee in February, indicated he believed
the economy was in better shape than some
investors had thought. His comments implied
that further cuts in short term rates were not
imminent. An improving economy can be
considered bad for bonds and, indirectly, stocks
because it portends rising inflation fears,
increasing interest rates, and eventual recession.
In January, many investors were betting on a
recession with the hope of a continuing decline
in interest rates. We did not share this view.
Mr. Greenspan's remarks and subsequent
positive economic data have now altered that
perception of economic weakness, causing an
increase in interest rates and volatility in the
stock market. The huge unexpected surge in
February's payroll statistics, the biggest
monthly jobs gain in years, pushed the
unemployment rate down to 5.5% and was a
sure sign of economic strength. Subsequent
positive data for February included a lump in
leading indicators, a pick-up in existing home
sales, a rebound in auto sales, and a rise over
weak January levels in personal income and
consumer spending. Better than expected
employment gains in March was the most recent
sign of strength. As long as inflation does not
accelerate too rapidly, this evidence of
economic expansion is good for stocks in
general since it suggests a continuation of
earnings growth.
Over the last five years ended March 1996, the
S&P 500 including income has returned an
annualized 14.7%. Over the last 70 years, the
average annual return on stocks has been
about 10% and, with interest rates presently in
the 5-7% range, we expect the broad stock
market to approximate the long-term average.
Further, it seems that much of the good
economic and investment environment is
already discounted in the market. Even the
recent rise in interest rates during the first
quarter has not precipitated any meaningful
correction. Though the environment looks
favorable, moderate economic growth is not
guaranteed.
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EQUITY STRATEGY
A number of companies that we invest in have
restructured their operations to reduce debt and
improve future earnings. Restructuring has
included the spin-off to stockholders of
operating divisions in an attempt to enhance
shareholder value and allow management to
focus on their primary businesses. Over the
last nine months, James River spun -off Crown
Vantage; Dole Foods spun -off Castle & Cooke;
and Sprint spun -off 360 Communications, Inc.
In March, Morrison Restaurants split into three
operating companies: Ruby Tuesday, Morrison
Fresh Cooking and Morrison Health Care.
Depending on the stock's price, balance sheet,
and earnings expectations, we will sell, hold, or
buy the spun -off stock.
Equity Focus Comment
Mittelstand
The trouble with fads is that that is exactly what
they are. Fads are tremendously impressive
and influential upon initial impact, only to
fade into ignominious obscurity - hardly the
stuff upon which a sound program of
investment should be founded. Yet that is
precisely what investors so often do. From the
"concept" stocks of the 1960's, to the "nifty -fifty"
stocks of the early 1970's, to the energy stocks of
the early 1980's, to all the mini -fads in between
(biotech, consumer franchise, REITS, or the
limitless value of Tokyo real estate), all had
spectacular ascents and huge followings, only to
end in equally spectacular collapse. Driven by
an incessant demand for instant success and a
perennial need to reduce the anxiety of
uncertainty, investors endlessly repeat the same
errors in judgment. Basing the justification for
these errors on the immediate proof of data taken
from a greatly compressed and recent time
frame and encouraged by the convivial comfort
of the crowd, they extrapolate the present case
beyond all reason. While each binge is unique,
the finale is almost always presaged by hearty
choruses of "this time it's different", "valuation
doesn't matter anymore", or "all you need is
momentum". With the latest episode of such
self-propelled and self-limiting levitation
having lost some steam, investors are now
beating a collective retreat into that somewhat
tired old haven which equates big -cap, Blue -
Chip stocks with competitive yet steady rates of
return and safety. The one thing they will all
certainly not invest in will be small -cap, risky
stocks nobody's ever heard of.
At NM Capital, we say following the crowd
has never been the way to accumulate
investment wealth. Further, as any student of
stock market history knows, following the
crowd into big, well-known stocks, without
regard to valuation, is not only the road to
below average returns, it isn't necessarily safe
either. The best way to accumulate investment
wealth at below average risk levels is to buy
assets when nobody else wants them period!
Fundamentally sound assets in real businesses
selling at discounts to what real, profit oriented,
managers in those and related businesses are
currently willing to pay for them represent
investment opportunities. Currently, investors'
infatuation with larger capitalization stocks
has created an unusual concentration of
investment opportunity in the small to mid -
cap area. Thus, NMCM's portfolios have a
larger than usual concentration in smaller
stocks. Far from being concerned about this, we
are enthusiastic. Despite the current belief that
"bigger is better", small has in fact been the
source of a large part of the world's incremental
creation of wealth. Just as much of Germany's
historic economic strength has been derived not
from giant industrial corporations but from the
collection of small to mid-size companies
collectively known as the Mittelstand, likewise
the entrepreneurial culture of high quality,
flexible, niche -oriented small to mid -cap
companies in the U.S. is also a highly fecund
reservoir of economic growth and profitability.
Combined with NMCM's unique emphasis on
margin -of -safety, such stocks can be a prime
source of above-average return attained at
relatively low risk levels Stocks representative
of this sector in NMCM portfolios today
include companies like Antec, a back door
play on expansion of the World Wide Web;
Delta Woodside, direct beneficiary of the shift
to domestic textile manufacturing; ACX,
developer of innovative technology to create
advanced solutions across a wide range of
applications from consumer packaging to
telecommunications; and Parker Drilling,
whose specialized rigs and years of drilling
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expertise are now being put to work opening
up the great Tarim Oil Basin in China.
NMCM's equity investment strategy has been
and will remain driven by valuation, long-term
return potential and the downside protection
discounted assets provide. We will invest in
stocks, large or small, which possess these
attributes as we find them, whether they are in
fashion or not, whether they perform today or
tomorrow. Our goal is the accumulation of
above-average returns for the benefit of our
clients' portfolios. We will continue to pursue
this goal, consistently, objectively, and
strategically, no matter how unpopular,
temporarily inconvenient, or ill-advised this
may seem to those who prefer fads to fortune.
FIXED INCOME STRATEGY
1996 - Deja Vu All Over Again? So Far!
In our previous comment, we posed this
question in wondering if 1996 was going to be
another year of dramatic interest rate changes.
Our answer a short three months ago was,
"NO!" In fact, interest rates have increased
dramatically in relation to the short time that
has passed. The surprise event we were
concerned about at that time, faster than
expected economic growth, has indeed become
the market's concern. We went on to point out
that, "It is prudent to maintain a conservative
position, and we will continue to invest in the
short to intermediate sector of the bond
market."
Bond Mathematics - A Short Course
The prudent positioning mentioned above is
graphically illustrated by the results of different
maturity bonds in the first quarter. Let's look at
three different bonds: the 30 year, the 10 year
and the 2 year U.S. Government issues. Holders
of these three bonds experienced very different
rates of return in the quarter. The low point in
interest rates was February 13 for most
bonds The high for interest rates occurred at
the end of the quarter. The owner of the 30
year bond saw the price of his bond decline by
approximately 8.9% over this period (interest
rates and bond prices move in opposite
directions). He also earned some interest from
his bond which offset the price decline
somewhat, giving him a total return (price
change plus income) of negative 8.1%. For the
owner of the 10 year bond, her price went down
6.0% and her total return was negative 5.3%.
The owner of the 2 year bond fared by far the
best, losing 2.0% in price, and had a total return
of only negative 1.4%. These results are despite
the fact that the 2 year interest rate increased by
over one percentage point, while 30 year rates
increased only three quarters of a percent.
A bond's price is simply the current value of
what you will receive from the bond in the
future: interest payments and the return of the
principal. The longer the maturity of the bond,
the more uncertain is the value of these future
payments. Therefore, when interest rates
change, longer maturity bonds fluctuate more
in price than short maturity bonds.
Fixed Income Strategy = Risk Management
The dramatic losses experienced by holders of
long maturity bonds in the first quarter of 1996
are just the kind of risk we are trying to avoid.
Our objective in our fixed income portfolios is
to achieve steady consistent returns over time.
One important way to do that is to avoid the big
risk. What is the BIG RISK going forward in
1996? It continues to be a stronger than
expected economy. Very preliminary signs of
such an event caused investors to bid up interest
rates significantly beginning February 13.
Confirmation of a stronger economy would lead
to a further increase in rates. We feel it is
prudent to maintain our conservative position
at this time. Should rates continue to climb,
we will consider modest maturity extensions
from the two year to perhaps the five to seven
year maturity range.
1
NM CAPITAL MANAGEMENT, INC. Page 1
CLIENT : FAYETTPP - CITY OF FAYETTEVILLE FIRE PENSION AND RELIEF FUND REPORTING PERIOD: 01/01/96 TO 03/31/96
SAGER: NTSC
' PORTFOLIO COMPOSITION STATEMENT OF CHANGES
MARKET % OF PORTFOLIO MARKET VALUE AT 01/01/96: $3,943,291.48
II
VALUE TOTAL
DEPOSITS 9,785.51
CASH ANO EQUIVALENTS $179,515.56 4.4 WITHDRAWALS (19,571.29)
EQUITIES 2,820,241.63 68.9 INCOME EARNED 37,500.45
'GOV'T/CORP BONDS 1,063,218.80 26.0 CAPITAL APPRECIATION 122,263.18
ACCRUED INCOME 30,293.34 0.7
' TOTAL $4,093,269.33 100.0 PORTFOLIO MARKET VALUE AT 03/31/96: $4,093,269.33
THE FOLLOWING RETURNS ARE SHOWN GROSS OF MANAGEMENT FEES:
II
CUMULATIVE ANNUALIZED
01/01/96 TO 03/31/96 YEAR-TO-DATE PAST TWELVE MONTHS SINCE INCEPTION SINCE INCEPTION
' TOTAL PORTFOLIO 4.1%
4.1% 17.0%
102.0% 12.0%
CASH AND EQUIVALENTS 1.2% 1.2% 4.5% 35.2% 5.0%
EQUITIES 5.9% 5.9% 20.8% 125.9% 14.0%
GOVT/CORP BONDS 0.1% 0.1% 9.8% 70.6% 9.0%
1PARATIVE INDICES
ANCED INDEX - I (60/35/5) 3.0% 3.0% 22.2% 101.5% 12.0%
US T BILLS 1.3% 1.3% 5.9% 38.4% 5.4%
S8P500 TOTAL RETURN 5.4% 5.4% 32.0%
II 129.3% 14.3%
GOVT/CORP INTERMEDIATE BOND -0.8% -0.8% 9.5% 63.6% 8.3%
CONSUMER PRICE INDEX 1.4% 1.4% 3.2% 23.5% 3.5% .
1
INVESTMENT EARNINGS (APPRECIATION + INCOME) SINCE INCEPTION DATE 01/18/90: $2,272,987.89
1
IINOTE: THE COMPARATIVE INDICES SHOW RETURNS FOR THE ENTIRE INDICATED PERIODS. THESE MAY NOT BE DIRECTLY COMPARABLE TO
YOUR RETURNS FOR SEPARATE SEGMENTS OF THE PORTFOLIO (CASH, EQUITIES, ETC) IF YOU DID NOT OWN THE SEGMENT FOR
THE ENTIRE INDICATED PERIOD. THESE SEGMENT RETURNS ARE SUPPLEMENTAL INFORMATION TO THE TOTAL PORTFOLIO RETURN.
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NM CAPITAL MANAGEMENT, INC.
DATE PRINTED: 04/23/96 PortfolioSummary PRICING DATE: 03/31/96
DATE OF APPRAISAL: 03/31/96
FAYETTPP CITY OF FAYETTEVILLE FIRE PENSION AND RELIEF FUND
ESTIMATED
MARKET % OF ANNUAL
VALUE PORTFOLIO INCOME YIELD
Cash and Equivalents
MONEY MARKET FUNDS
Fixed Income
GOVERNMENT ISSUES
Equities
COMMON STOCKS
ACCRUED INTEREST
ACCRUED DIVIDEND
TOTAL PORTFOLIO
179,515.56
1,063,218.80
2,820,241.63
27,861.84
2,431.50
4.4 8,581 4.8
26.0 82,650 7.8
68.9 61,852 2.2
0.7
0.1
4,093,269.33 100.0
153,083 3.7
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NM CAPITAL MANAGEMENT, INC.
DATE PRINTED: 04/23/96 Common Stock Summary PRICING DATE: 03/31/96
DATE OF APPRAISAL: 03/31/96
FAYETTPP - CITY OF FAYETTEVILLE FIRE PENSION AND RELIEF FUND
X OF % OF
MARKET COMMON TOTAL
COMMON STOCKS VALUE STOCKS PORTFOLIO
Capital Goods - Industrial
Capital Goods - Technology
Consumer Durables
Consumer Non -Durables
Services
Energy
Finance
Basic Industry
Transportation
Utilities
TOTAL COMMON STOCK
77,500.00
206,025.00
374,812.50
1,018,180.38
42,427.75
311,150.00
16,375.00
455,562.50
188,412.50
129,796.00
2,820,241.63
2,7
7.3
13.3
36.1
1.5
11.0
0.6
16.2
6.7
4.6
1.9
5.0
9.2
24.9
1.0
7.6
0.4
4.6
3.2
100.0 68.9
1
1110 DATE PRINTED:
ISHARES /
FACE VALUE
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04/23/96
DESCRIPTION
NM CAPITAL MANAGEMENT, INC. Page 1
Client Appraisal
FAYETTPP - CITY OF FAYETTEVILLE FIRE PENSION AND RELIEF FUND
Cash and Equivalents
MONEY MARKET FUNDS
179,515.56 MONEY MARKET FUND
320,000
100,000
100,000
100,000
400,000
Fixed Income
GOVERNMENT ISSUES
US TREAS 8.500% 05/15/97
FNMA 9.550% 09/10/97
FNMA 9.150% 04/10/98
US TREAS 5.250% 07/31/98
US TREAS 7.875% 11/15/99
TOTAL GOVERNMENT ISSUES
UNIT
COST
TOTAL
COST
MARKET
PRICE
PRICING DATE: 03/31/96
DATE OF APPRAISAL: 03/31/96
% OF
MARKET % OF ASSET
VALUE PORTFOLIO CLASS
ESTIMATED
ANNUAL CUR
INCOME YLD
1.00 179,515.56 1.00 179,515.56 4.4 100.0 8,581 4.8
100.85
99.34
99.34
101.25
103.03
322,722.20 103.13
99,343.75 105.28
99,343.75 105.75
101,254.85 98.69
412,106.95 105.88
1,034,771.50
330,000.00
105,281.30
105,750.00
98,687.50
423,500.00
8.1 31.0 27,200 8.2
2.6 9.9 9,550 9.1
2.6 9.9 9,150 8.7
2.4 9.3 5,250 5.3
10.3 39.8 31,500 7.4
1,063,218.80 26.0 100.0 82,650 7.8
Equities
COMMON STOCKS
Capital Goods - Industrial
2,000 HARNISCHFEGER INDUSTRY 20.34 40,682.94 38.75 77,500.00 1.9 2.7
Capital Goods - Technology
4,800 ANTEC CORP
3,000 THIOKOL CORPORATION
4,200
4,700
7,800
5,300
800 1.0
16.85 80,880.00 15.50 74,400.00 1.8 2.6 0 0.0
26.78 80,328.63 43.88 131,625.00 3.2 4.7 2,040 1.5
TOTAL Capital Goods - Technology
Consumer Durables
ARVIN INDS INC
BROWN GROUP INC
CROSS (A.T.) COMPANY
OUTBOARD MARINE CORP
TOTAL Consumer Durables
Consumer Non -Durables
5.000 ACX TECHNOLOGIES INC
8,069 ARCHER DANIELS MIDLAND
6,700 COORS ADOLPH
9,500 DELTA WOODSIDE
7,200 GIBSON GREETINGS INC
3,600 GREAT ATLANTIC & PAC TEA CO
6,400 HANSON PLC SPONSORED ADR
1,900 MORRISON FRESH COOKING INC
3,800 RUBY TUESDAY INC
8,800 RUSS BERRIE & CO INC
4,500 SAVANNAH FOODS & INDUSTRIES
TOTAL Consumer Non -Durables
21.46
29.60
14.56
18.44
161,208.63
90,145.20
139,120.49
113,561.55
97,710.92
440,538.16
20.75
13.50
15.75
19.13
206,025.00 5.0 7.3 2,040 1.0
87,150.00
63,450.00
122,850.00
101,362.50
2.1
1.6
3.0
2.5
3.1
2.2
4.4
3.6
3,192 3.7
4,700 7.4
4,992 4.1
2,120 2.1
374,812.50 9.2 13.3 15,004 4.0
17.12 85,600.00 18.13 90,625.00
13.40 108,110.88 18.38 148,267.88
19.19 128,577.51 17.88 119,762.50
12.46 118,362.05 5.75 54,625.00
17.20 123,874.85 13.50 97,200.00
20.50 73,785.12 31.00 111,600.00
18.73 119,894.04 14.88 95,200.00
5.95 11,306.07 7.88 14,962.50
15.49 58,847.12 23.00 87,400.00
15.24 134,116.70 17.00 149,600.00
13.04 58,695.00 10.88 48,937.50
2.2 3.2 0 0.0
3.6 5.3 1,614 1.1
2.9 4.2 3,350 2.8
1.3 1.9 3,800 7.0
2.4 3.4 0 0.0
2.7 4.0 720 0.6
2.3 3.4 6,355 6.7
0.4 0.5 171 1.1
2.1 3.1 2,797 3.2
3.7 5.3 5,280 3.5
1.2 1.7 450 0.9
1,021,169.34 1,018,180.38 24.9 36.1 24,537 2.4
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DATE PRINTED: 04/23/96
IP
ISHARES /
FACE VALUE DESCRIPTION
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NM CAPITAL MANAGEMENT, INC. Page 2
Client Appraisal PRICING GATE: 03/31/96
DATE OF APPRAISAL: 03/31/96
FAYETTPP - CITY OF FAYETTEVILLE FIRE PENSION AND RELIEF FUND
Services
2,533 MORRISON HEALTH CARE INC
2,700
7,000
16,000
Energy
COOPER CAMERON CORP
DESTEC ENERGY INC
PARKER DRILLING CO
% OF ESTIMATED
UNIT TOTAL MARKET MARKET X OF ASSET ANNUAL CUR
COST COST PRICE VALUE PORTFOLIO CLASS INCOME YLO
16.00 40,535.48 16.75 42,427.75 1.0 1.5 519 1.2
31.81
14.86
6.06
85,873.50
104,020.00
96,964.85
TOTAL Energy 286,858.35
Finance
1,000 CASTLE & COOKE INC
11,800
5,700
7,200
4,200
Basic Industry
CALGON CARBON CORP
PH GLATFELTER CO
HORSHAM CORP
JAMES RIVER CORP VA
TOTAL Basic Industry
42.00
12.25
7.00
113,400.00
85,750.00
112,000.00
2.8
2.1
2.7
4.0
3.0
4.0
0 0.0
0 0.0
0 0.0
311,150.00 7.6 11.0 0 0.0
15.66 15,660.00 16.38 16,375.00 0.4 0.6 0 0.0
11.70 138,046.70 12.13 143,075.00 3.5 5.1 3,776 2.6
18.06 102,962.85 17.38 - 99,037.50 2.4 3.5 3,990 4.0
13.84 99,648.00 14.63 105,300.00 2.6 3.7 504 0.5
21.10 88,623.56 25.75 108,150.00 2.6 3.8 2,520 2.3
429,281.11 455,562.50 11.1 16.2 10,790 2.4
Transportation
4,500 AAR CORP 13.28 59,741.97 20.38 91,687.50 2.2 3.3 2,160 2.4
5,300 OVERSEAS SHIPHOLDING GROUP 19.19 101,716.70 18.25 96,725.00 2.4 3.4 3,180 3.3
TOTAL Transportation
161,458.67 188,412.50 4.6 6.7 5,340 2.8
Utilities
2,822 SPRINT CORP 19.68 55,535.03 38.00 107,236.00 2.6 3.8 2,822 2.6
940 360 COMMUNICATIONS COMPANY 12.70 11,939.96 24.00 22,560.00 0.6 0.8 0 0.0
TOTAL Utilities
TOTAL COMMON STOCKS
ACCRUED INTEREST
ACCRUED DIVIDEND
TOTAL PORTFOLIO
67,474.99 129,796.00 3.2 4.6 2,822 2.2
2,664,867.67 2,820,241.63 68.9 100.0 61,852 2.2
27,861.84 0.7
2,431.50 0.1
3,879,154.73 4,093,269.33 100.0 100.0 153,083 3.7
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