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Home My WebLink About2002-06-27 - Agendas - Final• • AGENDA FIRE PENSION AND RELIEF FUND BOARD JUNE 27, 2002 A meeting of the Fire Pension and Relief Fund Board will be held on June 27, 2002 at 11:00 a.m. in Room 326 of the City Administration `Building. 1. Approval of the minutes ll�„�0.la.Q2 Gt 2. Approval of the Pension list rrode 3. Investment Report _ 4. Discussion of RFP 1,0Atukt F huf, ;psi at MINUTES OF A MEETING OF THE FAYETTEVILLE FIRE PENSION AND RELEIF FUND BOARD JUNE 6, 2002 A special meeting the Fayetteville Fire Pension and Relief Fund Board was held on June 6, 2002 at 1:00 p.m. in Room 326 of the City Administration Building located at 113 West Mountain Street, Fayetteville, Arkansas. PRESENT: Mayor Coody, Marion Doss, Danny Farrar, Pete Reagan, Ronnie Wood, and City Clerk Heather Woodruff. JOHN JENHINS Pete Reagan moved to approve the retirement of John Jenkins after retirement figures had been confirmed by Chief Doss and Accounting Manager. Mr. Farrar seconded. The motion passed unanimously. Meeting adjourned at 1:05p.m. • MINUTES OF A MEETING OF THE FAYETTEVILLE FIRE PENSION AND RELIEF FUND BOARD MAY 23, 2002 A meeting of the Fayetteville Fire Pension and Relief Fund Board was held on May 23, 2002, at 11:00 a.m. in Room 326 of the City Administration Building located at 113 West Mountain Street, Fayetteville, Arkansas. PRESENT• Mayor Coody, Pete Reagan, Robert Johnson, Danny Farrar, Marion Doss, City Clerk Heather Woodruff, City Attorney Kit Williams, Peggy Vice, Marsha Farthing and Ted Webber. MINUTES Mr. Doss moved to approve the minutes. Mr. Johnson seconded. The motion carried unanimously. PENSION LIST Mr. Reagan moved to approve the pension list. Mr. Doss seconded. The motion carried unanimously. INVESTMENT ADVISOR Mr. Reagan stated Mr. Yada had moved from Merrill Lynch to Smith Barney. It was Mr. Webbers opinion that they should send out RFP. Mr. Webber stated there was some concerns about who they have a contract with, whether it was with Merrill Lynch or Richard Yada. Ms. Woodruff stated she had looked for a contract but had not found one. She had asked Irene, Richard's secretary, for their contract; but she was unaware of one. There would be papers when they started their contract, but no contract. Ms. Vice stated if they did not have a contract, what they needed to do was an RFP. They did not have to if they stayed with the same company, but they did need a signed contract. Mr. Webber stated if they decided to stay with Merrill Lynch, then they needed a contract. If they decided to go to another provider then they needed to get an RFP. Ms. Vice stated if they did not have a current contract and they were entering into a new contract, they would still have to put out an RFP. Mr. Reagan asked if they had to follow Fire Pension guidelines or the city's guidelines. Mr. Williams stated he would guess that they would have to follow the same basic guidelines regardless. He asked if they were all aware if Merrill Lynch had been sued • • successfully by the state attorney. They were also about to be sued by some of their clients. Mr. Webber presented a chart comparing Fire, Police and City investments, the actual sale and not paper Lost. Mr. Reagan asked on the $736,000, was it a combination of Merrill Lynch Private Portfolio Group, Income Account, and Ashland? Mr. Webber stated it was all of them. In response to questions regarding the original contract with Merrill Lynch, Ms. Woodruff stated they had found an onginal contract, but it did not have any signatures on it. Ms. Vice stated they could still select Merrill Lynch if they wanted to. Mr. Reagan stated he thought they should be doing something quick. Ms. Vice stated businesses were use to responding to RFP. They should be able to do it within three weeks. Mr. Reagan moved to send out RFP and to expedite the process as soon as possible. • Mr. Farrar seconded. The motion carried unanimously. • AMENDMENT 59 SETTLEMENT Mr. Williams stated last year they only paid half of the amount owed to the. taxpayers. They had paid all of the attorney fees and administrative fees. • Mr. Reagan moved to pay the second half of the money owed to the taxpayers for the Amendment 59 lawsuit. Mr. Farrar seconded. The motion carried unanimously. Meeting adjourned at 11:30 a.m. FIREMEN'S RELIEF AND PENSION FUND JUNE, 2002 f THE FOLLOWING ARE THE OBLIGATIONS OF THE FIREMEN'S RELIEF FUND FOR THE IlkONTH OF JUNE, 2002. YOU ARE HEREBY INSTRUCTED TO ISSUE CHECKS TO THE AYEES, IN THE AMOUNTS SHOWN, AND FOR THE PURPOSE SO STATED. DATE OF EMP# RETIREMENT 79 11/99 74 3/86 2 . 3/75 63 5/72 68 7/99 44 9/86 45 9/86 49 7/88 4 6/67 5 5/72 57 5/90 6 4/68 84 03/01 85 03/01 8 10/76 61 6/66 78 11/99 11 2/76 38 5/84 91 03/02 34 6/79 70 11/99 86 07/01 64 4/95 76 5/88 37 3/84 54 5/89 12 3/60 13 10/67 14 7/74 51 10/88 60 12/89 55 12/89 40 9/85 50 9/88 39 4/85 35 2/82 15 4/77 29 8/81 73 2/00 42 2/86 17 2/66 16 4/64 62 10/68 48 7/88 .58 9/90 46 5/88 81 02/01 53 2/89 22 4/73 30 3/81 41 9/85 82 03/01 83 03/01 23 4/71 66 8/98 36 5/76 90 03/02 25 2/75 26 3/66 27 3/71 6810-9810-5335-0 NAME • GROSS ARMSTRONG (DILL), PAMELA • BAIRD, JULIA BLACKARD, PAUL BOLAIN, ANN BONADUCE, MICHAEL BOUDREY, BETTY MRS. BOUDREY, HOWARD BOUDREY, JACK CARL, FLOYD JR CASELMAN, ARTHUR CATE, ROY CHRISTIE, ARNOLD CIRCUIT CLERK WASHINGTON CO CIRCUIT CLERK WASHINGTON CO COUNTS, WAYNE DAVIS, BEULAH F. DILL,GARY JOHN FARRAR,ALONZO FRALEY, JOSEPH G. GAGE,TOMMY HARRIS, JAMES E. HARRIS, MARY RUTH JOHN SON ,ROBERT JORDAN, CHARLIE JUDY, JAN KING, ARNOLD D. KING, ARVIL LANE, HOPE MRS LAYER, MERLIN LEE, HAROLD LEWIS, CHARLES LEWIS MARVIE LEWIS, ROGER LOGUE, PAUL D MASON, LARRY MC ARTHUR, RONALD A. MC CHRISTIAN, DWAYNE MC WHORTER, CHARLES MILLER, DONALD MILLER,KENNETH MOORE, JAMES H. MORRIS, WILKIE MRS. MORRIS, WILLIAM H. MORRISON, ELIENE MULLENS, DENNIS W. OSBURN, EDWARD OSBURN, TROY PHILLIPS,LARRY POAGE, LARRY REED, JOE SCHADER, EARVEL SCHADER, TROY SKELTON,KELLY SKELTON, KIMBERLY SKELTON, LAWRENCE BURL SKELTON, PAULINE SPRINGSTON, CARL STOUT, IMOGENE W. STOUT, ORVILLE (DECEASED) TUNE, BILLIE SUE • TUNE, MILDRED MRS. • 1,658.91 1,649.16 55.00 55.00 2,735.14 2,267.18 1,911.99 1,507.82 55.00 75.00 1,637.10 55.00 55.00 377.50 1,658.92 914.10 1,618.08 2,376.34 55.00 55.00 2,812.66 2,081.90 1,507.82 1,393.18 1,566.00 55.00 ' 417 50 55.00 1,507.82 790.49 790.50 2,624.88 1,492.83 1,604.92 55.00 1,221.26 1,193.41 2,910.17 55.00 55.00 70.00 80.00 2,005.35 2,248.33 1,738.46 2,530.45 2,147 56 55.00 1,268.40 1,395.58 1,114.17 1,114.17 870.50 390.00 737.78 702.65 0.00 80.00 80.00 6810-1112-00 FED. TAX 300.00 550.00 475.38 300.00 287.68 100.00 75.00 200.00 226.00 500.00 200.00 300.00 130.00 75.00 50.00 325.00 78.16 150.00 30.00 150.00 125.00 160.00 200.00 300.00 57 00 125.00 125.00 70.00 6810-1113-00 6810-0100-00 ST. TAX NET 100.00 145.00 50.00 50.00 15.00 50.00 100.00 50.00 200.00 25.00 10.00 75.00 50.00 25.00 38.00 100.00 25.00 25.00 17.00 1,258.91 954.16 55.00 55.00 2,259.76 1,917.18 1,911.99 1,170.14 55.00 75.00 1,637.10 55.00 55.00 377 50 1,558.92 839 10 1,403.08 2,100.34 55.00 55.00 2,212.66 2,081.90 1,257.82 893.18 1,436.00 55.00 417 50 55.00 1,407.82 790.49 730.50 2 224 88 1,414.67 1,404.92 25.00 1,071.26 1,043.41 2,910.17 55.00 55.00 70.00 80.00 2,005.35 2,088.33 1,500.46 2,530.45 1 747 56 55.00 1,268.40 1,338.58 964.17 964.17 870.50 390.00 650.78 702.65 0.00 80.00 80.00 71 28 59 88 52 1/00 7/68 5/91 01/02 9/88 WARFORD,THOMAS WATTS, DONALD WATTS, WAYNE WOOD,RONNIE D WRIGHT, RANDALL DROP DATE DROP EMPLOYEES 05/01/98 02/01/99 02/01/99 05/01/99 04/01/00 07/01/00 01/01/01 FREEDLE, LARRY LEDBETTER, DENNIS TATE, RALPH BACHMAN, EDDIE NAPIER,LONNIE REAGAN PETE DOSS,MARION 2,290.35 400.00 1,642.10 2,816.02 1,547.82 72,287.27 300.00 130.00 200.00 6,294.22 20.00 25.00 1,195.00 1,990.35 400.00 1,492.10 2,816.02 1,322.82 64,798.05 NEW BENEFITS 3,492.86 3,455.40 3,356.83 2,396.34 3 219 73 3,235.68 4,920.63 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 THE CUSTOMARY CHARGE FOR SIMILAR SERVICES OR SUPPLIES. SECRETARY CHAIRMAN AND PRESIDENT ACKNOWLEDGEMENT STATE OF ARKANSAS. ) COUNTY OF WASHINGTON) )SS •SWORN TO AND SUBSCRIBED BEFORE ME THIS _DAY OF 2000. • :. NOTARY PUBLIC MY COMMISSION EXPIRES: APPLICATION FOR PENSION PURPOSES • Date 10 — to 0 Board of Trustees Fire Pension and Relief Fund Fayetteville, Arkansas Gentlemen: I, '119 14^' X&NK't r"S have been employed by the Fire Department of the City of Fayetteville, Arkansas since (q — — 1991 I hereby request all of the benefits due me from the Fire Pension and Relief Fund as of to - lo - b2 My Beneficiary is E: L es -'J K I SE My reasons for retirement are 20 y ai S E R t.' cE • • Signature sworn to before me this 64. day of tea, Notary Public .( std e_ My commission expires 0, CITY CLERK/TREASURER'S OFFICE Computation of Retirement Benefits The monthly salary of the above applicant for pension purposes is $ 9O�Zr of applicant's salary $ Additional benefits per Arkansas Act 396 of 1987 Additional benefits per Arkansas 24-11-418 (military time) Total retirement benefits City Clerk/Treasurer Subscribed and sworn to before me this day of Notary Public My commission expires • Name. Emp # SS# DOH: Yrs SSrv: • • John Jenkins 113 431-23-6787 06/07/82 20 GENERAL FIRE PENSION Prepared: Date of Retirement: Hourly Rate: 13.28 Hours Base: 3,247 92 EMT/Hazmat Pa 520.00 Annual Salary Annual Benefit (at 90% of salary) 1\12 of Annual Benefit Additional yrs beyond 20: Monthly benefit Daily benefit 43,652.378 39,287 140 3,273 93 $20.00 0.00 3,273.93_ 107.64 06-03-02A08:21 RCVD 5/31/2002 06/07/02 4 FIREMEN'S PENSION & RELIEF FUND AFFIDAVIT I, tj-0/ /1/ -3-/give/t/5 do solemnly swear that I was a former member of the Fire Department of the City of Fayetteville, Arkansas, and am presently receiving benefits from the Fayetteville Firemen's Pension and Relief Fund. MAILING ADDRESS: a3Ito OLH0 /* 5i pf,Q,Jj FA167/Ev%<nI Gil 7370/ TELEPHONE: (4/79) 52/ -&3.59 SOC. SEC. NO.: t -J3 1 - 23 -%787 DATE OF BIRTH: 7''/7- 5-9 BELOW ARE SHOWN ANY PERSONS. WHO ARE MY BENEFICIARIES: NAME/SOCIAL SECURITY NUMBER BIRTHDATE RELATIONSHIP • E'Le-ged — ,-(3, 33 N39 l0 G /1--25-1,0 g - - 430 73 55-9? 6 / %5071) • r4 Si nature f1�lp1111 i ), 00 F env'_ <�i Z • SAC, ls, CLaeae /.gG�1�1n.�ni� Da e SWORN TO before me, a Notary Public, this 36/day as _ 10160a . ev Q Notary Pub ;y , ..:30n Expires: /%7 ce.c� 07-0/ 0 •. NG 11 .• U 111\\\.• (This affidavit is required annually by the Firemen's Pension and Relief Fund Board of Trustees and must be properly executed and returned to, the Fayetteville City Clerk, 113 West Mountain, Fayetteville, Arkansas.) /4 4y jc k' Boards and Commissions May 21, 2002 FIREMEN'S PENSION AND RELIEF FUND BOARD OF TRUSTEES Robert Johnson 1114 E. Township Fayetteville, AR 72703 H)442-9962 First term/Replaced John Dill 04/30/01 to 04/30/03 ete Reagan k.A. O. Box 1922 Fayetteville, AR 72702 H)521-7542 W)718-7622 Ce11)841-0320 Pager)957-9997 Fourth term/Replaced Darrell Judy 05/11/93 to 04/30/02 Ott i n Wood 17315 Lake Sequoyah Road • Fayetteville, AR 72701 H)442-5925 W)444-1699 Fifth term 4‘,-- 7-1-6 ' , 07/27/95 to 04/30/03 '4 4 uf _ j7 o0 e2anny Farrar 805 Brookshire Springdale, AR 72762 H)927-0336 W)444-3448/3449 First Term/Replaced Pete Reagan 11/30/00 to 04/30/02 • tvlazk Asst. Fire Chief Marion Doss 125 Cato Springs Road Fayetteville, AR 72701 H)521-8898 W)575-8365 Replaced Mickey Jackson 05/31/91 to Indef. hiCifity Clerk Heather Woodruff P.O. Box 293 Fayetteville, AR 72702 H)444-7338 W)575-8323 Replaced Traci Smith 02/17/98 to Indef. ayor Dan Coody 1418E Rodgers Drive Fayetteville, AR 72701 H)443-6758 W)575-8330 Replaced Fred Hanna 01/01/01 to Indef. \-10')0 18 • • • •.rv�-�rx! .Y -.xPa. .. ,.. .. .vr t-,tt Fiyi^'2 T -!A '. - • 1• 0 i • • • • • O:. ."41h .• 10 C `: I! .: 4 ; 11 4 /F« • • • • • •,• •_• • • • • • • • 1 • • • • • • • • 0 CA v. 04 e e OD 24 CO AT CO CCC • ,:0 MO 00C flu 00 MT .:14-1 000 40 *HO 0.0 0441 ND .4041 NH air WO 404 MOC 1-1 0041 404 OI MA N0 PM CN 000 MA WO CC 000 0 04 N AN 0-40 040 00 NW00 WOO O NOW 0c0 400 0000 SWO NNNNWN-Jae: 000000444 c: OW000000000 cut OSNC0 01 i"n .401 0 WC0044444000 co ,\<aTrtrtRR nnnoliniir 0r 44C01400004 v+'<C.i mm fwCe n P4.11.70i4 <rt vr 01)014 Ca 0 00000 M 0000000000 O 0 00000 wc 0000000000 C 0000000000 NNS 0 CANON 0 00000 O0 NO N0000 0000000000 P0000000 000000000000 414.1 Y N p% 0S 00033.003.0 w0000' be W 0 0_ 1440 0 04 CO HCMel.W NO e ND C 140 0 C1 14 CI W N u if I • rt 00' tees 0 00 AA Cm CIO 00 O+ 00 140 04 Cr 0'+ 01 DM 140 OE]L 1101111314t 104M CU `Na F0 0 00 =9 a 00 C WM AP WP 1414 WA P NA 0000 .1 P 14-4 00-4041 Nua 0 00 W4M-00 VO C 4-4 001-104 CC vcONdw °- �'� 4.40400004 P WNN0 AN WHO OM A 411 A WW0 4 WO N4004 A w0 C0000V00N'lYNY C 0 a id 1$224222013 1Y000'on anuanoll YDrynaj 1114 - rasp uo 44I41U oysuea OAT4 - 0299 0904 »_ MCI 04.1 CO.0 WOCACP 0 rn x 0 O 11 71 n 0 3311 0 ep 0 73 MM rn n 0 YT Z • M 0 OD02MC0 uMO 1319 rn t.' • Merrill Lynch FAYETTEVILLE FIRE PENSION AND RELIEF FUND U/A DTD 6/18/86 INCOME ACCOUNT 113 W MOUNTAIN ST FAYETTEVILLE AR 72701 Dear Client Ref: Account 563-96345 Merrill Lynch, Pierce, Fenner 8 Smith Inc. 9601 S. Meridian Englewood CO 80112-5905 May 10, 2002 RECE!VEO 002 NCCTG CEPS', • We would like to make you aware of an optional feature of your account worth considering. A Standing Letter of Authorization for wire transfers allows you to request the wiring of funds to the same bank and account destination with just a phone call to your Financial Advisor. You will no longer have to provide Merrill Lynch with a letter every time you need to wire funds to an enrolled receiving account. Enrollment Is easy, simply confirm the information below, complete those Items which are blank, have the appropriate persons sign, and return to Merrill Lynch in the enclosed stamped envelope. Contact your Financial Advisor or Service Associate If you have any questions. You authorize Merrill Lynch, upon further instruction from you, to wire transfer to the following Federal Reserve member bank: BANK OF ARKANSAS The ABA number for this bank. is 082901392. The funds are to be credited to: FAYETTEVILLE FIRE PENSION AND RELIEF FUND U/A DTD 6/18/86 INCOME ACCOUNT The bank account number is 1063401 05-28-02p04:29 RCVD • Please complete the following section: What is the maximum amount you would like this standing letter of authorization? - If you would like an expiration date for this Standing Letter of Authorization, please indicate the date. Please print. the names of all individuals that may request wire transfers based upon this Standing Letter of Authorization. Sincerely, opezakil JAMES M. THORNTON DIRECTOR - CLIENT ACCOUNT SERVICES I acknowledge that I have received and read a copy of the Standing Letter of Authorization Agreement, which is incorporated by references in this acknowledgement as if included here in its entirety. If I am signing as corporate officer, as a partner, or as a trustee or other fiduciary for this account, I represent and warrant to you, as applicable: (1) that I am duly authorized to execute this Agreement on behalf of the account; (2) that the governing documents of the corporation, partnership, trust or other fiduciary arrangement permit the transfers that are or will be instructed under this Agreement and/or that all necessary action has been taken under such governing documents to authorize the execution of this Agreement and the transfers that are or will be instructed under this agreement by the person who are herewith identified to you as authorized to give instructions on behalf of the account; (3) If a revocable trust, that the transfers that are or will be instructed under this Agreement represent valid partial orr total revocations by me; and you may conclusively rely on these representations. By signing below, 1 acknowledge the accuracy of the information above. I agree to the terms and conditions of this Agreement, including the provisions regarding indemnification, all of which I understand and agree may be subject to change. This Standing Letter .of • • • Merrill Lynch Authorization will remain in force until the expiration date indicated above or until I notify you requesting its cancellation. Signature Signature Title Date Title Date Please add as many signature lines as needed for all participants or other authorized persons to sign. For Corporations, the Principal Executive Officer and .Secretary must sign. For partnerships all general partners must sign. For limited liability companies, all managers must sign if manager run, and all members must sign If member run. For trustsor other fiduciary arrangements, all trustees or other fiduciaries must sign. 1295461175 STANDING LETTER OF AUTHORIZATION AGREEMENT FOR FEDERAL FUNDS • This Agreement contains the terms and • _ ditions goveming the Merrill Lynch nding Letter of Authorization program. As used in this Agreement, 'I', 'me', and 'my' mean each person who signs the Standing Letter of Authorization confirmation letter as an accountholder or as an authorized person on behalf of an entity's account. 'You' and your mean Merrill Lynch, Pierce, Fenner & Smith Incorporated. Representations, Additional Terms, and Amendments I acknowledge that I have read this Agreement and the Standing Letter of Authorization Program Description and agree to its terms and conditions. I also acknowledge that this Agreement must be signed by all persons who signed the agreements or documents required for the establishment of my/our Menill Lynch account and agree that any additional terms and conditions contained in those documents . shall , apply to my/our participation in the Standing Letter of Authorization program as if they were fully set out in this Agreement. I agree that you shall have the right to iiticend this agreement by modifying or coding any of its existing provisions or adding any new provision. Any such amendment shall be effective as of a date to be established by you, subject to applicable jaw. Cade aoe (Re.. WOO) • • Authorization I authorize you to effect transfers of funds and/or securities from my/our Merrill Lynch account in the manner specified in the Standing Letter of Authorization confirmation letter to which this Agreement relates, either 1) on a recurring basis in such amount or quantity and upon such schedule as 1/we have instructed in such letter, or 2) upon my or another authorized person's telephone instruction, subject to any limitations as I/we may have specified in such letter. In the event that any erroneous transfers are made, I authorize you to initiate correcting entries in my/our account and to act on my/our behalf to attempt to correct such errors to such extent as may be possible, provided that any such correction is made in accordance with applicable laws, rules or regulations. I authorize any financial institution holding an account of mine/ours to which I have authorized transfers to be made to accept correcting instructions from you without responsibility for the correctness thereof. Indemnification and Limitation of Liability I agree to indemnify and hold you harmless from any loss, liability, cost, or expense for acting upon my/our instructions, whether written, verbal, or telephonic, except as limited by applicable law. In no event shall you be liable to me/us for any damages, whether consequential, direct, indirect or special, arising out of any failure to execute any transfer in a timely manner and in accordance with or another authorized person's instructions except direct damages resulting from your negligence or bad faith. You shall not be liable for any 'errors, delays or negligence of any funds transfer or communications systems, or any intermediary, agent bank or subagent bank that may be used in making transfers for my/our account, each of which shall be deemed to be my/our agent. Termination of the Standing Letter of Authorization This authorization is to remain in full force • and effect until you receive notification from me or any authorized person of its termination. Any termination will become effective as soon as you have had a reasonable amount of time to act on it. GOVERNING LAW I UNDERSTAND AND AGREE THAT THE TERMS AND CONDITIONS OF THIS AGREEMENT WILL BE GOVERNED BY NEW YORK LAW. • • CITY OF FAYETTEVILLE, ARKANSAS Request for Proposals For Financial Advisor/Trustee Services June 25, 2002 Request for Proposal Number RFP 2002 -11 SECTION I. BACKGROUND AND SUMMARY OF WORK: Notice is hereby given that the City of Fayetteville Firemen's Pension and Relief Board is seeking requests for proposals from persons/firms desiring to be considered to perform financial advisory trustee services. The City of Fayetteville Firemen's Pension and Relief Board may retain a single individual or firm as financial advisor/trustee who will be responsible for delivering the services outlined below, whether performed by an individual or firm or by others working in the employ of that firm. SECTION II. GENERAL REQUIREMENTS FOR PROPOSING 1. Notice to Those Submitting: Information provided in these specifications is to be used only for purposes stated. It is further expected that each proposer will read these specifications with care The Board believes that the data contained in these specifications are sufficient for preparation of proposals. The information is believed to be accurate and is based on the latest available information but is not to be considered in any way as a warranty. Therefore, the proposer, in submitting a proposal, assumes the risk of any inaccuracies in the information provided herein which might result from failure to provide any other information which might have been available. Each proposer shall provide the name and telephone number of the appropriate contact person for the firm Submission of Proposals and Questions: If your firm is interested in submitting a proposal to provide financial advisor/trustee services, please return your written proposal to the address below by the date and time set forth. City of Fayetteville Purchasing Division Peggy Vice, Purchasing Manager 113 West Mountain Street Fayetteville, AR 72701 Eight (8) copies of each proposal must be received by the Purchasing Division at Room 306, 113 West Mountain Street, Fayetteville, Arkansas, by 3:00 p.m. on July 12th, 2002. • All proposals will become the property of the Board. All proposals shall remain firm and subject to acceptance for 90 days after receiving. 1 • • The proposal submission should be clearly labeled RFP 2002- 11 on the outside of the envelope. Proposals Not Considered: All proposals received after the time specified shall not be considered. Where proposals are mailed, the proposer assumes all risk for non-delivery by the U.S. Post Office to the designated office by the deadline established. Only those proposals considered responsive to the Request for Proposal (RFP) will be eligible for consideration in the selection process. Rejection of Proposal. The Board reserves the right to reject any and all proposals received in response to this RFP if determined to be in the best interest of the Board. The Board may not award a contract solely on the basis of this RFP and does not intend . . to pay for information solicited or obtained. The information obtained will be used to determine suitability of the proposal. Non-acceptance of any proposal does not convey criticism nor imply deficiency of that proposal. Non-acceptance of any proposal will mean that another proposal was deemed more advantageous to the Board. 5. Amendments: The Board may require changes in the Scope of Services to be performed hereunder. Such changes which are mutually agreed upon by and between the Board and the firm, shall be incorporated by an amendment to the contract. • 6. Insurance: Please provide as part of your response to the Request for Proposal, evidence of insurance showing type and amount of coverage for workers compensation, general liability, completed operations, professional liability, and errors and omissions insurance. 7. Independence: The firm should provide certification that it is independent of the City of Fayetteville Fire Pension Board, the City of Fayetteville City's elected officials, and the City's employees as part of the proposal. 8. Applicable Laws and Venue: The contract shall be made subject to all applicable Federal and Arkansas State Laws, the Charter and Ordinances of the City of Fayetteville as amended, and all applicable rules and regulations promulgated by all local, state, and national boards, bureaus, and agencies. The contract shall be enforceable in Fayetteville, Arkansas and if any legal action is necessary by either party with respect to the enforcement of any or all terms and conditions herein, exclusive venue for same shall lie in Fayetteville, Arkansas. The contract shall be governed and construed in accordance with the laws and court decisions of the State of Arkansas. SECTION III. SCOPE OF SERVICE: The following is a general list of services to be provided by the selected financial advisor/trustee. It is not intended to be all inclusive. • 9 The financial advisor/trustee shall assist the Board in developing a financial plan for the Fire Pension Plan. 2 • • • • The Board may request the financial advisor/trustee to appear and/or assist the Board by appearing before or responding to any oversight body, or other interested body. The financial advisor/trustee may be requested to explain the financial plan and any other work products and the assumptions and projections used in their development. The financial advisor/trustee shall document the development of the work products so that an objective third party can verify that appropriate care was exercised in their development. D The financial advisor/trustee shall not profit or be affiliated with any investments for the Fire Pension Fund. 0 The financial advisor/trustee shall file all State and Federal required tax filings. D The financial advisor/trustee shall issue monthlypension payments from approved lists authorized by the Fire Pension Board. D The financial advisor/trustee shall provide monthly financial reports to include all monthly receipts, disbursements, investment earnings, etc. SECTION IV. SELECTION PROCEDURES AND CRITERIA Proposals will be reviewed by a committee that may consist of representatives of citizens, Fire Pension Board, and City staff which will make a recommendation for selection. Selection will be made pursuant to the City's professional selection policy with relevant factors as follows: • (1) Qualifications in relation to the specific project to be performed: 25% (2) Experience, competence, and capacity for performance: (3) Proposed method of doing work: (4) Past record of performance: (5) Price: ANTIDISCRIMINATION POLICY 20% 10% 25% 20% The City is an Equal Opportunity Employer. It is the policy of this City that there be no discrimination against any person or entity on the basis of race, color, national origin, religion, gender, age, disability, or sexual orientation. SECTION V. SPECIFIC REQUIREMENTS FOR PROPOSAL Proposals will not be considered unless the following basic and qualifying conditions are met in full and are set out explicitly in the proposal as being processed by and having been previously performed by the consultant or consulting firm. 3 Summary Statement: The City requests proposals for financial advisory/trustee services. Any questions and correspondence may be directed in writing to Marsha Farthing, Accounting Manager, at 113 West Mountain Street, Fayetteville, Arkansas 72701, by fax at (501) 575-8273, by e-mail at mfarthing@ci.fayetteville.ar.us or by telephone by calling (501) 575-8288. 2. Firm Requirements and Guarantees: The Firm shall submit a schedule of fees for services rendered that will set forth the fees to be charged for each hour of service performed. The fee schedule should address any staff member of the successful firm that may be used in performing the task outlined in this RFP and as set forth in Appendix A. The Firm shall submit the details of and cost of any "extra services" or "add-on services" not included in your basic price. 3. Qualifications: Respondents to this request will provide the following information concerning their qualifications. 0 Respondents shall acknowledge an understanding of the intent of the required work and illustrate why the firm or talent should be enlisted. If your firm has experienced any significant financial problems or other problems that could negatively affect its ability to carry out its duties and responsibilities, please specifically identify the problem(s) and discuss why each problem(s) should not affect your selection. 0 Are there pending charges, investigations or litigation by or involving the United States Securities and Exchange Commission or other regulatory body or court (local, state, or federal) regarding the conduct of your firm or its management? If so, please provide a list and brief explanation. 0 Qualifications of anticipated staffing will be a significant consideration in the selection process. Provide the names of the principals of the firm including the partners, junior partners, president, vice presents, and other significant personnel along with a detailed statement of the qualifications of the firm and of each individual who will be assigned to carry out charges of the resulting contract. In the event staff members are unable to fulfill the term of the contract, substitutions of equal skill levels will be entertained subject to approval by the City. D Describe how the firm is organized. Provide the scope of services the firm offers in the field and the years of continuous experience to indicate the firm's qualifications in a given category. List any prior experience capabilities that distinguish the firm from competitors. 4 • Provide a representative list of clients (minimum of 6) served by you for a period not to exceed the last five (5) years and indicate those that are currently under contract. Indicate if they were sealed bids, negotiated placements or a combination thereof. Include the names and telephone numbers of appropriate individuals in the client firms so the we may contact them as references, if necessary. Specify for each client listed the role of your firm i.e. financial advisor only or financial advisor and trustee, etc. Provide the number and amounts of any pension funds handled as a financial advisor/trustee. 0 Provide a copy of your firm's policy prohibiting discrimination against individuals or entities based on race, color, national origin, religion, gender, age, disability or sexual orientation. • • 5 • • APPENDIX A SCHEDULE OF PROFESSIONAL FEES AND EXPENSES For Financial Advisor/Trustee Services Executive/Partners: $ Managers: $ Supervisory: $ Staff: $ Other (specify): Out-of-pocket expenses Transportation. Other (specify): financial.advisor.firepension.RFP Hourly Rates Merrill Lynch 21 June 2002 Hord- buE P'gm 616 Global 1 Global Research Highlights The Merrill Lynch View • co .00 t7 Investment Cryogenics On the surface, finance and physics are unrelated disciplines. They seem to be overlapping now, however, because many investors are frozen solid. Call it investment cryogenics—the inability to take action in the face of the uncertainties that are chilling the financial markets. The list of uncertainties is as well-known as it is long. Some of the main topics on it are the crisis of confidence in corporate governance and reporting policies, the risks associated with the war on terrorism and geopolitical issues, worries about the outlook for the economic recovery and earnings, and the still -high valuation levels of the stock market as a whole. The technology sector is one corner of the market in which the ice appears to be particularly thick. It's clear that the sector's fundamental problems will take a long time to be resolved, particularly if a trend toward consolidation doesn't begin to take shape soon. In short, technology is no longer a growth sector, as chief U.S. strategist Rich Bernstein has been saying for some time. Our sense is that many investors agree with that view in the abstract, but are reluctant to act on it by trimming their tech holdings. They remain frozen in tech stocks despite deteriorating fundamentals and sharp price declines, unwilling to sell because they are afraid of missing an upturn. One upshot is that many investors have portfolios that are not appropriately diversified. They are overexposed to tech and telecom, and neither sector is likely to resume a leadership position in the foreseeable future Another upshot has to do with the opportunity cost of being out of areas that might emerge as new leaders. Indeed, that cost is evident right now: roughly half of the stocks in the S&P 500 have posted gains so far this year, even though the index itself is off by about 12% and the NASDAQ Composite is down by about 25%. To our way of thinking, that is a strong argument in favor of diversification rather than concentration and selectivity rather than indexing. We suggest that investors seriously consider "thawing out" a portion of their tech holdings and reinvesting the proceeds in other areas of the market. One possibility is individual stocks in promising sectors; the areas that Rich Bernstein favors include dividend -paying utilities, consumer staples, and industrials, particularly the aerospace/defense group. In addition, investors should consider diversifying among money managers by size (large -cap and small - cap) and style (growth, value, and income). The advantages of that approach are many: if the tech sector mounts a sustained, unexpected comeback, investors would still have a considerable portion of their funds exposed to the upturn; if it remains moribund, a significant amount of money will be at work in areas that could provide attractive returns. Either way, it would be good to start melting some of the ice. Merrill Lynch Global Securities Research & Economics Group Equity Research Marketing Services Department #16719 Steven R. Narker Director of Research, Private Client Investors should assume that Merrill Lynch is seeking or will seek investment banking or other business relationships with the companies in this report. Global Research Highlights -21 June 2002 Merrill Lynch Economic Focus United States • The economy and the financial markets remain in parallel universes. The equity market has been tumbling, with the NASDAQ 100 down to a five-year low and other indexes only a little above their post -9/11 lows. Nonetheless, hous- ing is still very strong, chain -store sales have rebounded, the semiconductor book -to -bill ratio has jumped, and the Philadelphia Fed's business activity index has risen sharply. In short, the economy is strengthening after a temporary slowdown. Investors hope that the markets will catch up. We expect them to. • The technology sector remains the great question mark. An encouraging sign is that the semiconductor book -to -bill ratio rose to 1.26 for May, the highest level in two years. Although shipments are still 40% below their year-ago level, orders are up by 50%. Because tech inventories are at an eight-year low, it's not the case that the channel is being stuffed with inventory. With orders so -far above shipments, production is almost certain to rise. • Adding to the sense of momentum, the Philadelphia Fed's business activity index jumped from 9.1 for May to 22.2 for June, a four-year high. New orders were up sharply, and capital spending plans improved dramatically. The Philadelphia index can be volatile, but we think that it points to a quicken- ing recovery. • Meanwhile, fears that the consumer is about to give up are unjustified, in our view. Chain -store sales jumped sharply during the first two weeks of June, suggesting that the May decline in retail sales was a temporary, weather-related pause. To be sure, consumer spending is probably growing at a rate of only 2.5% in the second quarter, but we think that a solid base is being built for stronger growth during the second half. Consumer Alive and Well BTM/USBW Chain Store Sales Index Source: BTMNSBW • In particular, the on-going strength of housing activity should drive, with a short lag, demand for home goods. Housing starts for May jumped by 11.6% to a 1.73 -million -unit rate, the biggest monthly gain in seven years. Investors should keep in mind that that performance doesn't reflect the latest down- draft in bond yields and mortgage rates. • Mortgage applications for home purchases have been running at a record pace during the past month, pointing to 2 • further gains in home sales. We think that residential con- struction will make a sizable contribution to second-quarter and third-quarter growth. Meanwhile, refinancing activity is also likely to pick up. • As we have said before, the labor market remains key to the consumer outlook. If job growth improves, consumer -spending gains will surely be healthy; if it doesn't, they won't. Happily, the labor market appears to be improving gradually. Initial un- employment claims stayed below 400,000 for the third con- secutive week. The four-week moving average of claims fell to 396,000, which is consistent with modest job growth. We expect payroll employment to rise by 75,000 for June, better than the 42,000 gain for May. • Based on currently available data, we estimate that second- quarter GDP is rising at a 3.5% rate. That is half -a -percent- age -point less than we projected in our most -recent forecast. Our estimate may change as additional information becomes available, but the important point is that the economy is not falling out of bed. We believe that it will re -accelerate during the second half. • Even so, the financial markets clearly doubt the strength of the recovery. During the past few months, equities have set the tone for the bond and currency markets. Weakness in stocks has pulled down the dollar, while bonds have rallied strongly. On the days that stocks have actually managed to rise, the dollar has usually gone along for the ride, and bonds have weakened. Terror warnings and problems of corporate govemance have taken a toll, but we believe that concern about the economy has been the main market driver. • Second-quarter earnings should be a catalyst for the equity market one way or another, and June economic data will start to be reported at about the same time as earnings. We think that the data that will be released during the next month will look stronger than those released during the past month. Assuming that earnings reflect the economy, the equity market may be in for some better news. • In the case of the bond market, we suspect that the current rally has gone about as far as it can go, barring some steeper setback in stocks. In our judgment, current yields represent a refinancing window for both companies and households. • Finally, the dollar has slumped to a two-year low against the euro. The euro may make a move toward parity or slightly beyond during the next month or so, but market participants need to remember that America's economic and eamings prospects are brighter than those for Europe. That should limit the dollar's downside. We believe that the euro will be below parity in six months. Bruce Steinberg Chief Economist • Merrill Lynch Global Research Highlights — 21 June 2002 Strategy Focus United States • The valuation disparities between the aerospace/defense group and the technology sector aren't new news, but they remain strongly in favor of overweighting the former at the expense of the latter, in our judgment. At the peak of the tech bubble, the aerospace/defense group sold at a discount of about 80% to the technology sector. Today, the discount is 55 -to -60%. • The fundamentals also argue in favor of aerospace/ defense, in our view. The tech sector is highly fragment- ed, and profit margins are under pressure. At the same time, aerospace/defense appears to be a value industry that is becoming a growth industry. • The chart shows the relative P/E (based on forecast earnings . throughout the time period shown) of the S&P 500 aerospace/ defense group and the S&P 500 tech sector. On average, the aerospace/defense group has sold at a discount of about 22% to the tech sector during the past 18 years or so. The recent figure is well -below the long-term average and continues to suggest that a valuation convergence trade is under way. S&P 500 Aerospace/Defense Industry vs. S&P 500 Technology: Next Year Relative PIE from August 1984 Source: Menill Lynch Quantitative Strategy • Some market participants are concerned because the aero- space/defense group's valuation in relation to the market as a whole has risen significantly since the trough valuations associated with the tech bubble. That relationship is roughly at its long-term average. In our view, in light of the war on terrorism and on-going geopolitical risks, it is not outlandish to think that aerospace/defense is on the way to becoming a growth industry. • One clement in our thinking is that the U.S. may be return- ing to a "cold -war" mentality when it comes to technological innovation. The 1990s were highly unusual because the post - cold -war "peace dividend" let the Department of Defense encourage the use of innovative technology for commercial purposes. Even before September 11, there were hints that the Pentagon wanted to start reversing that lenient trend. Since September 11, there have been indications that the process has started. • Another factor signaling that aerospace/defense might be changing into a growth industry has to do with the search for the next "killer app." That phrase refers to tech investors' never-ending hunt for the next application that will drive soft- ware and hardware spending. We think that the next "killer app" is the Pentagon. The killer app during the 1990s was the Internet, and the emphasis was on privately funded research and development efforts and private -sector capital investment. The next several years might be about the Pentagon, publicly . funded R&D, and public -sector investments in security, intelligence, and defense. • Meanwhile, we think that the mainstream tech sector is clearly no longer a growth area Investment activity during the bubble era provided the tech sector with an artificially low cost of capital. History suggests that a very low cost of capital for an industry eventually gives risc to tremendous levels of overcapacity. That's exactly what happened in the tech sector during the 1990s, in our view. Number of Technology Companies in the Merrill Lynch Universe from 1980 to December 2001 10 IA I. _ 1] 300 11 250 11 200 150 100 11 b MYyp u e M '$T i1 Si 1m *1 12 tl N n Aug n a e vi 01 n Source: Menill Lynch Quantitative Strategy • Some market participants are concerned because the aero- space/defense group's valuation in relation to the market as a whole has risen significantly since the trough valuations associated with the tech bubble. That relationship is roughly at its long-term average. In our view, in light of the war on terrorism and on-going geopolitical risks, it is not outlandish to think that aerospace/defense is on the way to becoming a growth industry. • One clement in our thinking is that the U.S. may be return- ing to a "cold -war" mentality when it comes to technological innovation. The 1990s were highly unusual because the post - cold -war "peace dividend" let the Department of Defense encourage the use of innovative technology for commercial purposes. Even before September 11, there were hints that the Pentagon wanted to start reversing that lenient trend. Since September 11, there have been indications that the process has started. • Another factor signaling that aerospace/defense might be changing into a growth industry has to do with the search for the next "killer app." That phrase refers to tech investors' never-ending hunt for the next application that will drive soft- ware and hardware spending. We think that the next "killer app" is the Pentagon. The killer app during the 1990s was the Internet, and the emphasis was on privately funded research and development efforts and private -sector capital investment. The next several years might be about the Pentagon, publicly . funded R&D, and public -sector investments in security, intelligence, and defense. • Meanwhile, we think that the mainstream tech sector is clearly no longer a growth area Investment activity during the bubble era provided the tech sector with an artificially low cost of capital. History suggests that a very low cost of capital for an industry eventually gives risc to tremendous levels of overcapacity. That's exactly what happened in the tech sector during the 1990s, in our view. Number of Technology Companies in the Merrill Lynch Universe from 1980 to December 2001 Source: Merrill Lynch Quantitative Stategy • There are now too many tech companies and not enough current demand for the goods and services that they provide, in our judgment. The number of companies in the sector , roughly doubled from 1995 to 2000. Now, two years after the peak of the bubble, there has been little consolidation, the industry is highly fragmented, and profits are under a great deal of pressure. With demand likely to be weaker during the 2000-05 period than it was from 1995 to 2000, the tech industry probably won't reclaim the growth mantle any time • soon. Richard Bernstein Chief U.S. Strategist 3 400 350 300 250 200 150 100 Number W rSmobgy &NMpinN. in Ile 50 a11r91 Lyn. Universe (Annual Dell) 0 ' . . 00 81 828364 85868786 69909192 93949596 92989900 01 Source: Merrill Lynch Quantitative Stategy • There are now too many tech companies and not enough current demand for the goods and services that they provide, in our judgment. The number of companies in the sector , roughly doubled from 1995 to 2000. Now, two years after the peak of the bubble, there has been little consolidation, the industry is highly fragmented, and profits are under a great deal of pressure. With demand likely to be weaker during the 2000-05 period than it was from 1995 to 2000, the tech industry probably won't reclaim the growth mantle any time • soon. Richard Bernstein Chief U.S. Strategist 3 Global Research Highlights — 21 June 2002 Merrill Lynch Strategy Focus Global • It may not feel like it, but, according to our Fund Managers' Survey for June, global stock -market conditions have taken a turn for the better. Our summary measure of the survey—the Merrill Lynch Stock Market Conditions (SMC) Indicator—rose quite sharply from 9.2 for May to 12.3 for June, its highest level since March 2002. We attribute the improvement to a more -favorable perception of equity valuations against a background of resilient earnings expectations and benign monetary conditions. • The survey shows that 32% of fund managers believe that the U.S. now has the least -favorable outlook for corporate profits and the worst balance of any region, including Japan. It also shows that 27% now believe that the U.S. market has the worst quality of earnings, second only to Japan, and that 60% believe that U.S. equities are relatively the most expensive in the world. As a result, the U.S. equity market is the one that managers would be most likely to underweight for the next 12 months. The big winner seems to be Japan, where more asset allocators are now overweight than underweight. • Despite recent worries about global growth and corporate earnings, the Profit Expectations Component of the SMC was a better-than-expected +51 in June vs. +50 in May. The number of fund managers who expect the global economy to strengthen was 83% for the third consecutive month. The number who thought that corporate -profits growth would improve was 85%. Moreover, both of those items cross-check with the proportion of the panel,73%, that expects further increases in industrial - commodity prices. In addition, 58% still prefer cyclicals over defensives—a slight improvement vs. results of recent months. • Fund managers expect global earnings growth of 11% during the next 12 months, with 47% of the panel expecting cost cutting to lead the way and 44% projecting that higher volumes will be the main driver. Only 5% believe that higher selling prices will drive the earnings recovery. • Investors' interest -rate expectations remain remarkably stable. The Interest -Rate Prospects component of the SMC Indicator deteriorated only slightly from minus 31% in May to minus 33% in June. Core inflation remains a concern for many investors, with 54% of respondants expecting it to be higher a year from now. The assessment of monetary policy was broadly unchanged: only 19% of fund managers think that monetary policy is too stimulative. They still expect short-term interest rates to be higher a year from now and any • tightening to be modest. The only area in which there was a meaningful shift was in the slope of the global yield curve: 35% now expect it to become more negative vs. 28% in May. • The Equity Valuations component of the SMC rose from +5 in May to +16 in June. With the outlook for earnings and interest rates essentially unchanged and with world stock prices down about 4% between May and June, 16% of the panel now consider global equities to be undervalued. How do investors expect valuations to evolve in the coming months? Only 4% expect the markets to become more expensive vs. 21% who thought so in April. Investors' cash positions, the 4 second element of the Equity Valuations component, have also improved The number of fund managers overweight cash rose from 10% to 16%, and the average cash balance of our panel rose from 4.2% to 4.4%. • The Investor Sentiment component of the SMC rose slightly to 15 in June from 13 in May. The good news is that the difficult market environment of the past month has not shaken investor confidence any further. The bad news is that it has failed to improve significantly. On a 12 -month view, 73% of the panel believe that global equities prices will be higher, with 30% still looking for double-digit returns. A net 76% said they would buy the market if it fell 10% in the next three months, while only 15% said they would sell if the market rose 10%. Investors' appetite for risk, however, remains poor: 16% of fund managers now believe that the level of risk in their portfolios is below normal vs. 8% who believed it was above normal three months ago. • In terms of regional preferences, the profits outlook for global emerging markets is still regarded as the most attractive; the U.K. equity market is believed to have the best quality of eamings; and global emerging equities are still considered to have the most attractive relative valuations. Indeed, that is the region that fund managers would most like to overweight (+32%), followed by the eurozone (+29%). Interestingly, although investors have become less negative on Japan, they are still reluctant to commit to that market. • Meanwhile, the dollar remains overvalued according to 57% of those questioned. For the long term, the euro, regarded by a majority of fund managers as undervalued, is overwhelmingly the currency of choice. The yen is off the radar screen at present. Half of those questioned identified long-euro/short- dollar as their favorite 'pair trade.' • Our sub -sample of asset allocators (170 out of the 282 participants) remain committed to equities. In terms of global sectors, the industries with net overweight positions include basic materials (+29%), general industrials (+27%), and financials (+26%). The sectors that asset allocators have designated as the most negative include telecoms (minus 42%), utilities (minus 37%), and technology (minus 30%). • What does the really long term hold? When asked what kind of return on global assets they expected during the coming decade, our panel's response was an annual average of 6.7%. Asset allocators specializing in Japan generally had lower expectations (most thought 5% was possible), while asset allocators specializing in global funds were more optimistic (most expected 7%). David Bowers Chief Investment Strategist Merrill Lynch Global Research Highlights — 21 June 2002 • Technical Focus • • • • United States • We think that the stock market may face some additional downside tests in the near term before starting a new sustainable phase of advance. Short-term momentum indicators recently reached oversold readings, and medium- term measures are now at or near such levels. That com- bination should soon set the stage for a durable new ad- vance in the summer. Sentiment indicators have continued to improve, and they should provide additional support for a nearby market upturn. • At this point, we arc inclined to maintain our recent opinion that the market's weakness will prove to be a test of, or, at worst, a secondary low in relation to, the September 21 primary lows of the major averages. The weakness also appears to represent an interim pullback or correction within the already - evolved uptrcnds of the mid- and small -cap -related averages. • We are somewhat concerned about the recent increases in volume and the number of stocks reaching new 52-week lows on the NYSE and the NASDAQ. However, those measures are still well -below the extreme readings registered as the averages fell to their lows last September. We would therefore not assume that they indicate that a major downside accelera- tion is developing in the market at this time. • The seemingly relentless stream of negative news events and the persistent market weakness are having the positive technical effect of improving the market's sentiment indicators. Overall, the evidence of increasing caution or bearishness is a positive sign, but that caution could expand further (possibly through some additional short-term market weakness) before it provides a strong indication that the market's winter/spring corrective phase has bottomed and that a sustainable or major advance is about to develop. • Another positive indication is that the NASDAQ/NYSE volume ratio has continued to contract. It has fallen to the 117 -to -119% range in the past few weeks and to a three-week average of 123%, a new low for the measure's contractionary trend of the past couple of years. The relatively subdued level of NASDAQ volume seems to imply that the NASDAQ/ technology arca of the market is in a testing stage of its 2000- 02 corrective process rather than at the beginning of a severe new decline. If we are correct, it should be followed by a substantial recovery in the summer before further downside tests or base -building moves occur. • Among the groups we currently favor are aerospace/defense, building products, specialty chemicals, healthcare services, medical products/technology, restaurants, paper/forest products, and selected insurance, retailing, oil -services, and trucking issues. Richard T. McCabe Chief Market Analyst Fixed -Income Focus United States • Clouds continue to gather in the telecom arena. S&P recently cut its credit rating for WorldCom (Ba2 j/B+j) by another notch to B+ and left it on watch for a potential further downgrade. The latest move occurred amid rising concerns that WorldCom might not successfully renegotiate a bank credit line that would help it to meet its heavy long-term debt maturities in coming years. Although it remains profitable for now, WorldCom's margins have contracted significantly in the face of intense competition and substitution in the long- distance space. In addition, with maturing term debt estimated at $3.1 billion for 2003 and averaging $2.5 billion a year through 2011, WorldCom seems likely to run out of cash and to seek bankruptcy reorganization, in ourjudgment, although probably not before late -2003. • Sprint Corporation (Baa3BBB-) has significantly lowered its guidance for net -subscriber additions for the current quarter and for the rest of 2002. After that announcement, S&P cut Sprint's credit ratings by two notches. Sprint's ratings are now at the bottom rung of investment grade at Moody's and S&P, and, although not imminent, there is a risk of a sub - investment -grade rating, in our view. In addition to other concerns, the ratings agencies cited intense competition in the wireless sector S&P recently indicated that the ratings for AT&T Wireless (Baa2BBB) remain stable for now. Although those for Cingular Wire -less (A3/A-) may be considered for a possible downgrade, those ratings also remain stable for now. We also note that our equity analyst, Linda Mutschler, has lowered her opinion of the wireless sector to reduce/sell because of growing competitive pressures. • The preferred shares of Telephone & Data Services (A3/A-) (TDS) have traded erratically in recent days, but we consider the company to be generally sound from a credit perspective. Through its 82% ownership of U.S. Cellular (A3/A-), TDS is in the wireless sector, but it also has large holdings in diversified European telecom carriers Deutsche Telekom (Baal/BBB+) and Vodaphone (A2/A). TDS s credit ratings were placed on negative outlook by Moody's and S&P recently because of leverage stemming from U.S. Cellular's purchase of the Chicago PrimeCo market. TDS will face the competitive pressures that exist throughout the wireless sector, and its credit metrics are likely to weaken at the margin, Even so, its large stock holdings provide room for TDS to generate cash quickly should it be required. • Considering the deep retrenchment in the telecom sector, we reiterate our concems about telecom suppliers, including Lucent Technologies (B2/B+), Nortel Networks Ltd. (Ba3/BB-), and Corning Inc. (Baa3 j/BBB-), which have experienced significant credit erosion as their business outlooks have dimmed. Martin .1. Mauro William Scapell, CFA Fixed -Income Strategists 5 Global Research Highlights - 21 June 2002 Merrill Lynch Focus 1 List Merrill Lynch Research selects one stock each week as its Focus 1 stock. This focus recommendation either reflects Merrill Lynch's current economic and investment outlook or an unusual fundamental and/or investment development. The selected stock remains as one of our Focus 1 stocks for a period of 12 months unless the Focus 1 committee, at its discretion, removes the stock in connection with an analyst downgrade or otherwise. The following shows the Focus 1 selections currently on our actively managed Focus 1 list Focus 1 Company ACE Limited Affiliated Computer Services Amerada Hess American International Group AmerisourceBergen Avon Products Baxter Boeing Burlington Resources Citigroup Costco Wholesale Dell Computer First Data Corp Ford Motor HCA, Inc. Johnson & Johnson Kroger Co. Lowe's Novellus Philip Morris Southwest Airlines SPX Corp TXU Corp. United Parcel Service Universal Health Services Viacom Weatherford International Weyerhaeuser Co Current Price 6118/02 Symbol Opinion $33.86 ACE B-1-1-7 53.82 ACS 8-1-1-9 79.23 AHC B-1-1-7 68.86 AIG A-1-1-7 81.44 ABC C-1-1-7 53.20 AVP B-1-1-7 48.65 BAX B-1-1-7 43.78 BA C-1-1-7 38.92 BR B-1-1-7 43.07 C B-1-1-7 40.75 COST B-1-1-9 26.71 DELL C-1-1-9 40.41 FDC B-1-1-7 16.92 F C-1-1-7 51.02 HCA C-1-1-7 56.46 JNJ A-1-1-7 19.91 KR C-1-1-9 45.20 LOW B-1-1-7 37.19 NVLS 0-1-1-9 54.94 MO D-1-1-7 15.70 LUV B-1-1-7 125.33 SPW C-1-1-9 52.19 TXU B-1-1-7 62.57 UPS B-1-1.7 50.98 UHS C-1-1-9 47.09 VIAB B-1-1-9 47.68 WFT C-1-1-9 64.74 WY B-1-1-7 Country Bermuda US US US US US US US US US US US US US US US US US US US US US US US US US US US Date Added to Focus List 4/23/02 10/3/01 3/18/02 2/7/02 10/15/01 6/5102 8/9/01 4/26/02 4/12102 10/22/01 12/14/01 5/22/02 6/6/02 5/20/02 10/29(01 10/16/01 7/17/01 8/27101 4/24/02 5/28/02 1/29/02 6/4/02 11/2/01 11/27/01 5/14/02 2/5/02 2/22/02 5/6/02 Price When Added S43.15 41.83 75.91 71.11 68.41 51.97 49.54 41.51 39.15 47.01 42.27 27.40 39.40 16.73 39.55 56.77 24.49 38.51 48.40 55.11 18.23 131.20 46.83 55.00 43.50 37.46 45.14 63.70 Investors should review the most recent research report on a company prior to making an investment decision. "RESTRICTED. SOLICITATION OF COMMISSION ORDERS IS PROHIBITED. (C, FDC, VIA B One or more analysts responsible for covering the securities in this report owns such securities. [SPW, UHS, WFT] MLPF&S or one of its affiliates was a manager of the most recent offering of securities of this company within the last three years. [ACE, AIG, C, F, HCA, JNJ, LOW, LUV, TXU, VIA B] MLPF&S was a manager of the most recent public offering of securities of this company within the last three years. [COST DELL NVLS] The securities of the company are not listed but trade over-the-counter in the United States. In the US, retail sales and/or distribution of this report may be made only in states where these securities are exempt from registration or have been qualified for sale. MLPF&S or its affiliates usually make a market in the securities of this company. [BR, C, EDO. F, HCA, JNJ, LOW, NVLS, SPW, TXU, UPS, UHS] MLPF&S has received oris entitled to receive compensation for services rendered in connection with equity underwritings and/or merger and acquisition fransadrons involving the company that were publicly announced in the past 12 months. Merrill Lynch also may have received or may receive compensation in connection with other business relationships with the company. 6 • • • Merrill Lynch 19 June 2002 Daniel T. Lemaitre, CFA Katherine A. Martinelli Timothy 1. Lee i United States' Medical Technology Johnson & Johnson Not Backtracking Despite Recent Weakness Reason for Report: Company Update STRONG BUY* Long Term STRONG BUY Symbol: Price: 12 -Month Price Objective: JNJ $57.45 $75 Estimates (Dec) 2001A 2002E 2003E EPS: $1.91 $2.23 P/E: 30.Ix 25.8x EPS Change (YoY): 16.8% Consensus EPS: $2.23 (First Call: 03 -Jun -2002) Q2 EPS (Jun): $0.51 $0.58 Cash Flow/Share: Price/Cash Flow: Dividend Rate: Dividend Yield: $2.43 23.6x $0.72 1.3% Opinion & Financial Data Investment Opinion: Volatility Risk: Mkt. Value / Shares Outstanding (mn): Book Value/Share (Mar -2002): Price/Book Ratio: ROE 2002E Average: LT Liability % of Capital: Est. 5 Year EPS Growth: Stock Data $2.70 21.3x $0.80 1.4% $2.65 21.7x 18.8% $2.60 A-1-1-7 Low $178,956.8 / 3,115 57.62 7.5x 26.0% 22.8% 13.0% Highlights: • We believe that the U.S. market is likely to convert to coated stents faster than most expect in 2003. That could boost JNJ's top -line growth to 12 -to -14% and prompt an increase in consen- sus EPS estimates. P/E expansion would likely accompany an acceleration in top -line growth, in our view, driving the stock price to $70 -to -75. • Concerns that Eprex is about to be pulled from $2 98 Europe because of Pure Red CeII Aplasia 19.3x (PRCA) seem overdone, especially with mount - $o.88 ing evidence that the route of administration is 1.5% the most -likely cause of higher rates of PRCA in Europe. We remain confident that Q2 sales of Eprex/Procrit will be up by I5 -to -20%. 52 -Week Range: Symbol / Exchange: Options: Institutional Ownership -Vickers: Brokers Covering (First Call): $65.89-549.13 JNJ/NYSE Chicago 63.4% 21 ML Industry Weightings & Ratings** Strategy; Weighting Rel. to Mkt.: Income: Overweight Growth: Overweight Income & Growth: Overweight Market Analysis; Technical Rating: Average *Intermediate tern opinion last changed on 16 -Oct -2001. **The views expressed arc those of the macro department and d necessarily coincide with those of the Fundamental analyst. For full investment opinion definitions, sec footnotes. (25 -Oct -2000) (25 -Oct -2000) (25 -Oct -2000) (13-May2002) o not Merrill Lynch Global Securities Research & Economics Group Global Fundamental Equity Research Department • In coated stents, we think that JNJ should post a $50MM sequential gain in overseas sales, indica- ting a high single -digit share for Cypher in Europe. Although yields are not optimal, JNJ should be ready for a U.S. launch, from a manufacturing perspective, as early as October. • Boston Scientific's (BSX; $29; C-2-2-9) TAXUS II study will likely trump JNJ's SIRIUS results, which could raise concerns about market share once JNJ has to face paclitaxel coated stents. Even so, cross -study comparisons may not be fair, and JNJ will have a six -to -nine-month regulatory lead. Stock Performance 6.060 60 4- -0.056 60- -0.052 -0446 0.04 s2' 4- -0.026 4 1p- 0.021126- -0.024 0.020 32 1999 IWO 2001 2002 - Johnsen & Johnsen - Rol to SAP Canto -M Index (500) (Right Scab) 7