HomeMy WebLinkAbout1998-01-15 - Agendas - Final AGENDA
POLICEMEN ' S PENSION AND RELIEF BOARD
January 15 , 1998
1 : 00 p . m .
City Hall Room 326
1 . Approval of the minutes of the October 23 , 1997 meeting .
2 . Old Business
3 . Investment Report
A . Report from Elaine Longer , Longer Investments
4 . New Business
5 . Adjournment
FAYETTEVI LLE
THE CITY OF FAYETTEVILLE, ARKANSAS
TO : Policemen ' s Pension Board Members
i FROM : Traci Smith , City Clerk/Treasurer TS
'f DATE : January 13 , 1998
SUBJECT : POLICE PENSION BOARD MEETING
The next Police Pension Board meeting is Thursday , January 15 ,
1998 , at 1 : 00 p . m . , in room 326 of City Hall . Attached , please
find a copy of the agenda for the upcoming meeting , the minutes
from the October 23 regular meeting , and the pension list for
February 1998 .
Attachments
i
113 WEST MOUNTAIN 72701 501 .521-7700
FAX 501 -575-8257
• MINUTES OF A POLICE PENSION BOARD MEETING
A meeting of the Police Pension board was held on January 15, 1998 at 1 :00 p.m. in room 326 of
the City Administration Building, 113 West Mountain, Fayetteville, AR 72701 .
PRESENT: Eldon Roberts, Randy Bradley, Hollis Spencer, James Mashburn, and City
Clerk/Treasurer Traci Smith.
MINUTES
Mr. Mashburn moved to approve the minutes from the October 23, 1997 meeting. Mr. Spencer
seconded the motion. The motion carried unanimously.
OLD BUSINESS
Benefit increase will be discussed under New business.
LONGER INVESTMENT REPORTS
Ms. Elaine Longer presented reports for Combined, Stock, Bond, and Large Holdings accounts.
• She explained the portfolio parameters, bond portfolio and asset class performance. Performance
summary, Realized Gains, and Income and expense were also discussed.
Ms. Longer explained next years performance would be closely tied to the earnings will do. She
explained the market was so volatile because of the Asian market. She felt a more moderate rate
of expansion would ensue The small cap stocks had a higher growth rate estimate, however their
price earning multiple was equal to the S &P 500.
Ms. Longer stated her business was doing well and she felt comfortable handling more of the
Police Pension money. They now had a portfolio manager, a research analysis and a research
assistant. If they were to manage more of the pensions funds their fees above.six million mark
would drop to .65% on their graduated fee schedule, which would be a considerable savings
verses the 1 .78% they were currently paying to other managers.
In response to questions from Mr. Masburn, Ms. Longer explained they were a tax-free account.
They did not have to sell anything. They could transfer securities in.
Mr. Roberts believed the larger population of Baby Boomers were going to keep investing and
were going to lean toward equity. He did not believe the Baby Boomers were going to be
satisfied with 5 .75% return.
• Ms. Longer agreed that the Baby Boomers would have the same impact on the equity market as
,� they had on the housing market in the 70's, when they moved in mass into the housing market.
Police Pension Board
January 15, 1998
Page 2
She noted the peak years for savings were between the ages of 45 and 65. After 65 people
tended to be net liquidators of stocks.
Mr. Roberts thanked Ms. Longer for a clear report and her professionalism. He felt much safer
and more secure as a member on the board because she was making sure the board was meeting
all the requirements.
NEW BUSINESS
Mr. Roberts stated Morgan Keegan higher minimum did not affect them, however, they were
going to have to sign some papers.
Mr. Mayes explained his numbers were slightly different from Ms. Longer's because the city
held $80,000 in a checking account to cover the pension checks.
Mr. Roberts stated he was interested in applying for 60% and 55% increases. He wanted to ask
for 60%. He felt they needed to grant benefit increases when they could. He noted the cost was
$675.00 to ask for the first amount no matter what the percentage. It was $250.00 for every
• request after the first. If they were to ask for three, 60%, 55% and 53%, the cost would be a little
over $ 1 ,000.
In response to questions, Mr. Mayes stated the city would send in both the market and the cost.
They normally received a response back in May or June. He noted this was an actuary year.
MOTION
Mr. Bradley moved to apply for 60% increase to retired and future retiring officers, excluding
surviving widows and officers drawing more than 100% of retiring salaries. In the event that
60% increase is not possible, then a 55% increase.
Mr. Mashburn seconded the motion.
The motion carried unanimously.
YEAR END FIGURES/TOTAL ASSETS
The year end figures for Police Pension and Relief Fund for 1995 was 7,098,000. The year end
figures for 1996 were $8,001 ,000. The year end figures for 1997 were 9,021 ,000.
• Mr. Mayes added 1997 year end projection was $ 7,2401 ,000.
The meeting adjourned.
January 20, 1998
NWQ Investment Management Company
2049 Century Park East, 4°i Floor
Los Angeles, California 90067
RE: CITY OF FAYETTEVILLE POLICE PENSION & RELIEF FUND
Gentlemen :
City of Fayetteville Police Pension & Relief Fund (" Client" ) hereby retains NWQ Investment
Management Company, a Massachusetts corporation ( " NWQ ") to manage the investment
portfolio referenced above (the " Portfolio ") in accordance with the terms and conditions of
this Agreement. `
• NWQ shall have full discretionary authority to invest and reinvest the cash and securities in
the Portfolio subject only to such limitations as may be imposed by Client in writing.
NWQ shall not hold the cash and securities in the Portfolio in its possession . Rather,
Client has established an account at a custodian of client ' s choice for this purpose.
NWQ shall enter orders for the Portfolio with the broker(s) and brokerage firm(s) Client
selects . The brokerage commission Client shall pay shall be negotiated between Client,
NWQ and the broker. Client understands that his broker has referred Client to NWQ and
as a result, NWQ has a potential conflict of interest in negotiating brokerage commissions
on Client' s behalf. Client also understands that the brokerage commission that he pays may
or may not be in excess of commissions which could be obtained from another brokerage
firm because of portfolio services in addition to pure execution provided by the broker on
the Client' s behalf.
Client may terminate the use of NWQ ' s services at any time . NWQ may terminate its
services to Client upon thirty (30) days written notice to Client.
As investment manager, NWQ manages other portfolios whose investment objectives may
• or may not be similar to Client' s . It is NWQ ' s policy to allocate fairly investment ideas
and economic opportunities among client portfolios . However, NWQ is under no Y'
obligation to purchase or sell the same securities at the same time or price for all portfolios .
GN-ER-RF Page I
i
. r
NWQ shall provide Client with quarterly statements showing costs, market value,
income and other pertinent data.
Client agrees to pay NWQ an annual fee as set forth in the enclosed fee schedule. The
annual fee is payable quarterly in advance. The initial fee shall be based on the
Portfolio' s market value at inception of NWQ ' s management; subsequent quarterly fees
shall be based on the Portfolio' s market value as of the close of business on the last
business day of the quarter preceding the quarter for which the fee is due . Fees will be
pro-rated to the date of termination . Any unearned fees which have been prepaid at the
date of termination will be refunded .
NWQ is registered . as an investment adviser under the Investment Adviser' s Act of
1940. As an investment adviser, NWQ acknowledges it is a fiduciary under the
Employee Retirement Income Security Act of 1974 as amended (" ERISA ") with respect
to Client' s Portfolio. Client hereby acknowledges receipt of Part II of NWQ ' s Form
ADV . Client hereby consents to the disclosure of its name as one of NWQ ' s clients in
NWQ ' s marketing materials .
The undersigned hereby represents that s/he is a named fiduciary of Client for purposes
of directing .its .investments and the undersigned warrants that Client has full power and
• authority to enter, into and carry out this Agreement without breaching any obligations
to which Client may be subject.
Client agrees that any controversy or claim , including but not limited to, errors and
omissions arising out of or relating to this Agreement or the breach thereof, shall be
settled by arbitration in accordance with the Code of Commercial Arbitration of the
American Arbitration Association and judgment upon the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof. Any arbitration
shall be held in the County of Los Angeles , State of California. However, this
paragraph does not constitute a waiver of any right provided by the Investment
Advisers Act of 1940, including the right to choose the forum , whether arbitration or
adjudication, in which to seek dispute resolution .
There shall be no assignment of the Agreement without Client' s written consent. This
Agreement constitutes the entire Agreement between Client and NWQ . It may be
amended only by a written agreement signed by an authorized representative of Client
and NWQ.
Each of the provisions of this Agreement is severable, and the invalidity or
• inapplicability of one or more provisions, in whole or in part, shall not affect any other
provision . This Agreement shall be governed by the laws of the State of California.
GN-FB-R£ Page 2
SIGNATURE PAGE
CITY OF FAYETTEVILLE POLICE
PENSION & RELIEF FUND
Client' s Name Date
By:
Fred Hanna Mayor
Signature Typed Name Title
Signature Typed Name Title
113 W. Mountain Fayetteville, AR 72701
Address
Telephone:
Business Home
Tax Identification Number:
Accepted by:
NWQ Investment Management Company
2049 Century Park-East, 4'" Floor
Los Angeles, California 90Q67
(310) 712-4000
By:
January 20, 1998
Mary-Gene Slaven - Managing Director Date
•
CN-ER-RF Page J
FEESCHEDULE
Annual rates, computed and payable quarterly, in advance.
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 . 75 %
NWQ Investment Management Company
2049 Century Park East, 4th Floor, Los Angeles, CA 90067 (310) 712-4000
S, . .
FEB 0 6 1998
• Longer Investments, Inc.
PORTFOLIO APPRAISAL FINANCE DIR ,
City of Fayetteville Police Pension Fund
Longer Investments, Inc. Combined Account
January 31, 1998
Unit Total Market Market Pct, Unit Annual Cur.
Quantity Security Cost Cost Price Value Assets Income Income Yield
COMMON STOCK
1,000 American Power 23.35 23255.00 26.19 26,187.50 0.5 0.000 0.00 0.0
Conversion
1 ,000 Applied Materials 32.88 32,882.50 32.25 32250.00 0.6 0.000 0.00 0.0
11733 Baldor Electric 14.66 25,413.87 22.81 39,534.07 0.7 0.400 693.20 1 .8
1 ,750 Best Sotlware Inc. 13.36 23282.60 _ 13.37 239406.25 0.4 0.000 0.00 0.0
2.100 Blyth Industries Inc. 27.20 57,129.51 28.50 599850.00 1 . 1 0.000 0.00 0.0
1 ,800 Bristol Myers Squibb 89.25 160,644.60 99.69 1792437.50 3.2 1 .560 2,808.00 1 .6
1 ,000 C-Cube Microsystems 20.02 20:017.50 18.75 18,750.00 0.3 0.000 0.00 0.0
1 ,012 Cisco Systems Inc. 32. 10 32,480.67 63.06 63;819.25 1 .1 0.000 0.00 0.0
2.400 Concord EFS, Inc. 27.02 64,837.58 25.75 61 ,800.00 1 .1 0.000 0.00 0.0
1 ;530 Diebold, Inc. 23. 15 35,424.95 49.75 76,117.50 1 .4 0.500 765.00 1 .0
31000 Dover Corp. 34.00 101 ,997.50 34.06 102,187.50 1 .8 0.380 1 ,140.00 1 . 1
1 ,000 EMC Corporation 29. 18 29,177.50 32.56 32,562.50 0.6 0.000 0.00 0.0
3,000 Emerson Electric 37.52 112,564.60 60.50 181 ,500.00 3.3 1 . 180 3,540.00 2.0
2,000 Franklin Covey Co 22.64 45282.50 21 .87 43,750.00 0.8 0.000 0.00 0.0
(Formerly Franklin
Quest)
1 ,300 General Electric 26.42 34249.72 77.50 1001750.00 1 .8 1 .200 1 ,560.00 1 .5
• 1 ,500 General Nutrition 19.94 29,916.90 36.06 543093.75 1 .0 0.000 0.00 0.0
1300 Heartland Express 23.79 35,681 .55 24.87 37212.50 0.7 0.000 0.00 0.0
1 .800 Helen of Troy Limited 14.66 26394.00 1525 27,450.00 0.5 0.000 0.00 0.0
700 Hewlett Packard Co. 63.36 44,350.41 60.12 42,087.50 0.8 0.560 392.00 0.9
1 ,000 In Focus Systems Inc. 22.39 22,388.33 3325 33250.00 0.6 0.000 0.00 0.0
1 ,700 Innovex Inc. 22.08 372532.94 21 .81 37,081 .25 0.7 0. 120 204.00 0.6
500 Intel Corp 94.44 47218.39 81 .00 402500.00 0.7 0. 120 60.00 0. 1
1 ,000 Jacobs Engineering 26.53 26,527.94 26.94 26,937.50 0.5 0.000 0.00 0.0
2,000 Leggett and Platt 31 .06 62,128.00 45.19 90,375.00 1 .6 0.560 1 ,120.00 1 .2
500 Life Technology 23.77 11 ,882.92 32.50 16250.00 0.3 0.200 100.00 0.6
534 Lucent Technologies 50. 12 26;763.63 88.50 47259.00 0.8 0.300 160.20 0.3
800 MillerHennan 47.35 37,884.00 57.87 46,300.00 0.8 0.290 232.00 0.5
Incorporated
2,600 Mobil Corp. 73.92 192,185.50 68.50 178;100.00 3.2 2. 120 51512.00 3.1
1 ,500 Molex Inc 26.20 39,307.50 27.25 40,875.00 0.7 0.060 90.00 0.2
1 ,500 Mueller Industries 36.77 55,151 .82 53.87 80,812.50 1 .5 0.000 0.00 0.0
1 ,500 Nabors Industries 31 .10 46,653.37 23.94 35,906.25 0.6 0.000 0.00 0.0
500 Network Associates 51 .19 25_.595.10 54.00 272000.00 0.5 0.000 0.00 0.0
lno.(formcrly McAfee)
1 .200 Northern Trust Corp. 62.00 74,400.00 67.37 80,850.00 1 .5 0.840 1 ,008.00 1 .2
1 ,000 Omnicarc, Inc. 32.35 32,355.00 28.75 28.750.00 0.5 0.070 70.00 0.2
1 .000 Oracle Systems 18.54 18,542.50 2325 23250.00 0.4 0.000 0.00 0.0
1 ,500 Pairgain Technologies, 18.83 28245.00 18.37 27,562.50 0.5 0.000 0.00 0.0
Inc.
1 ,350 Paychex, Inc. 34.87 47.081 .25 47.81 64,546.87 1 .2 0.360 486.00 0.8
1 ,000 Penn Engineering and 26.60 26,600.00 24.81 24,812.50 0.4 0.440 440.00 1 .8
Manufacturing
2,000 Periphonics Corp. 9.75 19.500.00 8.12 16250.00 0.3 0.000 0.00 0.0
1 ,000 Robert Half Imcmational 26. 15 26,153.33 38.62 38,625.00 0.7 0.000 0.00 0.0
1 _,350 Saint John Knits 38.61 52,126. 10 3925 52,987.50 1 .0 0. 100 135.00 0.3
• 500 Schlumberger, LTD 86.58 43 290.00 73.69 36,843.75 0.7 0.750 375.00 LO
700 Schevab Corporation 24.07 16,849.00 36.50 25,550.00 0.5 0.160 112.00 0.4
1
R t: C 1: tlW Lt,r
FEB 0 6 1993
• Longer Investments; Inc. FINANCE DR11
PORTFOLIO APPRAISAL
City of Fayetteville Police Pension Fund
Longer Investntents, Inc. Contlrined Account
January 31, 1998
Unit Total Market Market Pct. Unit Annual Cur.
Quantity Security Cost Cost Price Value Assets Income Income Yield
1 .300 Snap-On, Inc. 32.77 42,601 .00 39. 19 50,943.75 0.9 0.840 1 ,092.00 2.1
1250 Staples, Inc. 17.72 22.146.83 27.25 34,062.50 0.6 0.000 0.00 0.0
500 Starbucks Corp. 30. 19 15,094. 17 36.56 18,281 .25 0.3 0.000 0.00 0.0
1 ,250 Superior Industry 23.95 29,935.94 26.37 32,968.75 0.6 0.280 350.00 1 . 1
International
1 .542 Tyco International 2128 32,820.63 44.37 68,426.25 12 0. 100 154.20 0.2
3.800 Tyson Foods 18.95 72,009.45 18.06 68;637.50 12 0. 100 380.00 0.6
1 ,000 U. S. Filter Corp. 32.45 32,455.00 32.50 32,500.00 0.6 0.000 0.00 0.0
2.100 Valmont Industries 19.48 40,898.50 19.50 40.950.00 0.7 0.225 472.50 1 .2
2.800 Walmarl Stores 25.91 72,555.00 39.81 111 ,475.00 2.0 0.270 756.00 0.7
11500 Woodhead Industries, 15.25 22,875.00 18.50 27,750.00 0.5 0.360 540.00 1 .9
Inc.
1300 Zero Corporation 20.71 35,211 .50 25.62 43,562.50 0.8 0.120 204.00 0.5
2,370,248.11 2,853,077.94 51 .2 245951 . 10 0.9
MUTUAL FUNDS-EQUITY
6;126.182 Turner Small Cap Fund 24.91 152,618.38 24.51 1503152.72 2.7 0.000 0.00 0.0
3,160.599 Vanguard Intl Equity 11 .16 35281 .10 8.13 25,695.67 0.5 0.090 284.45 1 . 1
Index Pacific
• 187,899.48 175,848.39 32 284.45 0.2
CORPORATE BONDS
140.000 Wal-Mart Stores 101 .83 142,565.75 103.34 144,68125 2.6 6.500 9,100.00 6.3
(Non-callable) Rated
AAI/AA
6.500 % Due 06-01-03
Accred Interest 11516.67 0.0
142,565.75 146,197.92 2.6 9,100.00 6.3
GOVERNMENT BONDS
250,000 U. S. Treasury Note 99.93 249,820.00 100.37 250937.50 4.5 6.250 157625.00 6.2
6.250 % Due 06-30-98
240,000 U. S. Treasury Note 99.95 239,882.00 100.44 241 ,050.00 4.3 6.250 15,000.00 6.2
6.250 % Due 07-31-98
200.000 U.S. Treasury Note 99.87 199,736.00 101 . 19 202,375.00 3.6 6.375 12,750.00 6.3
6.375 % Due 04-30-99
50.000 U.S. Treasury Note 100.06 50030.00 101 .19 50,593.75 0.9 6.375 31187.50 6.3
6.375 % Due 05-15-99
100,000 U. S. Treasury Note 99.90 99,905.00 100.44 100,437.50 1 .8 5.625 5,625.00 5.6
5.625 % Due 11-30-99
100,000 U.S. Treasury Note 99.92 _ 99,924.00 100.52 100,516.25 1 .8 5.625 5,625.00 5.6
5.625 % Due 12-31-99
50.000 U. S. Treasury Note 99.56 49,781 .50 102.12 51 ,062.50 0.9 6.250 31125.00 6. 1
6.250 % Due 0831-00
100.000 U. S. Treasury Note 98.63 982632.82 107.75 107,750.00 1 .9 8.000 89000.00 7.4
8.000 % Due 05-15-01
100,000 U. S. Treasury Note 101 .50 101 ,500.00 103.84 1039843.75 1 .9 6.375 61375.00 6.1
6.375 % Due 08-15-02
155,000 U. S. Treasury Note 98.34 152,425.98 109.39 169,555.47 3.0 7.250 11 237.50 6.6
• 7.250 % Due 05-15-04
ar
FEB 0 6 1998
�INAnuE IrMs
Longer Investments, Inc.
AD PORTFOLIO APPRAISAL
City of Fayetteville Police Pension Fund
Longer Investments, Inc. Combined Account
January 31, 1998
Unit Total Market Market Pct. Unit Annual Cur.
Quantity Security Cost Cost Price Value Assets Income Income Yield
50,000 U. S. Treasury Note 99.97 49,984.38 113.22 56,609.37 1 .0 7.875 3,937.50 7.0
7.875 % Due 11-15-04
50,000 U. S. Treasury Note 99.87 49,937.50 105.87 52,937.50 1 .0 6.500 3250.00 6.1
6.500 % Due 08-15-05
50,000 U.S. Treasury Note 99.97 495984.37 106.31 53,156.25 1 .0 6.500 3,250.00 6.1
6.500 % Due 10-15-06
50,000 U. S. Treasury Note 99. 12 49,560.53 104._69 52,343.75 0.9 6.250 31125.00 6.0
6.250 % Due 08-15-23
25,000 U.S. Treasury Bond 99.56 24,890.47 108.72 27,179.69 0.5 6.500 11625.00 6.0
6.500 % Due It - 15-26
Accrued Interest 19,942.50 0.4
1565,994.55 1 ,640290.78 29.5 101 ,737.50 6.3
GOVERNMENT AGENCY
150_,000 Fed, Farm Credit Bank 100.00 150,000.00 100.34 150,515.62 2.7 6.190 95285.00 6.2
(call 12-18-98 (al 100)
6.190 % Due 12-18-00
100.000 Federal Home Loan Bank 100.31 100,312.50 103.34 103,343.75 1 .9 6.690 6,690.00 6.5
(Non-callable)
6.690 % Due 05-16-01
• 150,000 Federal Home Loan Bank 100.00 150,000.00 99.81 149,718.75 2.7 6.250 9,375.00 6.3
(call 1 -21-99 t@ 100)
6.250 % Due 01 .21-03
150,000 Federal Home Loan Bank 100.00 15Q,000.00 101 .31 1515968.75 2.7 7.020 10,530.00 6.9
{ (Call 8-20-99 Q 100)
7.020 % Due 08-20-07
Accrued Interest 7,472.46 0.1
550312.50 563,019.33 10.1 352880.00 6.5
CASH. AND EQUIVALENTS
Dividends Accrued 1 ,085.88 1 ,085.88 0.0 0.000 0.00 0.0
Money Market 187,464.30 187,464.30 3.4 4.770 8,942.05 4.8
1887550. 18 188,550. 18 3.4 8,942.05 4.7
TOTAL PORTFOLIO 59005,570.57 5,566,984.55 100.0 180,895.10 3.3
•
3
tjLCaiV 4
FEB 0 6 1990
• Longer Investments, Inc. F1NAME OW
REALIZED GAINS AND LOSSES
City of Fayetteville Police Pension Fund
Longerinvestntents, Inc. Combined Account
Fran 01-01-98 Through 01-31-98
Cost
Date Quantity Security Basis Proceeds Gain Or Loss
01 -02-98 0 Cisco Systems Inc. 16.05 27.43 11 .38
01 - 13-98 700 Fluor Corp. 25,511 .50 26,569.36 1 ,057.86
01 - 15-98 55,000 PepsiCo (Non-callable) Rated 54,618.30 55,000.00 381 .70
Al /A
6. 125 % Due 0 1 -15-98
01 -20-98 1 ,000 EMC Corporation 29,177.50 29,019.02 -158.48
01 -20-98 1 ,350 Hanna, M. A. 29,299.62 30,569.72 11270. 10
01 -26-98 300 Network Associates 15,357.06 16,093.66 736.60
Ine.(formerly McAfee)
01 -26-98 800 Northern Trust Corp. 49,600.00 52,039.26 2,439.26
01 -29-98 700 Alternative Resources 127930.75 13,580.65 649.90
TOTAL GAINS 6,546.80
TOTAL LOSSES - 158.48
216,510.78 2229899. 10 6,388.32
•
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Longer
Longer Investments, Inc. FEB 06 1998
INCONIE AND EXPENSES
City of Fayetteville Police Pension Fund f 1NARCE d ^
Longer Investments, Inc. Combined Account
From 01-01-98 Through 01-31-98
Trade Settle Security Amount
COMMON STOCK
01 -08-98 01 -26-98 Superior lndusnyInternational 87.50
01 - 12-98 02-14-98 Saint John Knits 33.75
01 -28-98 03-01 -98 Intel Corp 15.00
01 -28-98 03-01 -98 Lucent Technologies 40.05
01 -29-98 02-16-98 Payches, Inc. 121 .50
01 -29-98 02- 16-98 Woodhead Industries, Inc. 135.00
432.80
CORPORATE BONDS
O1 -15-98 01 - 15-98 Pepsico (Non-callahle) Rated AI /A 1 ,684.38
6. 125% Due O l - 15-98
1 ,684.38
GOVERNMENT BONDS
01 -31 -98 01 -31 -98 U. S. Treasury Note 7,500.00
• 6.250% Due 07-31 -98
7,500.00
EXPENSE ACCOUNTS
01 -20-98 01 -20-98 Accounting Fee 450.00
450.00
AFTER FEE PERFORMANCE EXPENSE ACCOUNTS
O1 -20-98 01 -20-98 Management Fee 7,990.35
01 -20-98 01 -20-98 Management Fee 41297.66
12,288.01
NET INCOME -39120.83
•
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. Longer Investments, Inc. FEB 0 6 1999
PORTFOLIO APPRAISAL
City of Fayetteville Police Pension Fund Fi�lAPlC� � �
Stock Account
January 31, 1998
Unit Total Market Market Pct. Unit Annual Cur.
Quantity Security Cost Cost Price Value Assets Income Income Yield
COMMON STOCK
1 ,000 American Power 23.35 23,355.00 26. 19 26,187.50 0.7 0.000 0.00 0.0
Conversion
1 ,000 Applied Materials 32.88 32,882.50 32.25 32,250.00 0.9 0.000 0.00 0.0
1 ,733 Baldor Electric 14.66 25,413.87 22.81 39,534.07 1 . 1 0.400 693.20 1 .8
1 ,750 Best Sofhvare Inc. 13.36 23,382.60 13.37 23,406.25 0.7 0.000 0.00 0.0
2, 100 Blyth Industries fire. 27.20 57,129.51 28.50 597850.00 1 .7 0.000 0.00 0.0
1 ,800 Bristol Myers Squibb 89.25 1602644.60 99.69 179,437.50 5.0 1 .560 2,808.00 1 .6
1 ,000 C-Cubc Microsystems 20.02 20.017.50 18.75 187750.00 0.5 0.000 0.00 0.0
1 ,012 Cisco Systems Inc. 32. 10 32,480.67 63.06 63,81925 1 .8 0.000 0.00 0.0
2.400 Concord EFS, Inc. 27.02 64,837.58 25.75 61 ,800.00 1 .7 0.000 0.00 0.0
1 ,530 Diebold, Inc. 23. 15 35,424.95 49.75 76,117.50 2. 1 0.500 765.00 1 .0
3,000 Dover Corp. 34.00 101 ,997.50 34.06 1029187.50 2.8 0.380 1 ,140.00 1 . 1
1 ,000 EMC Corporation 29.18 29,177.50 32.56 327562.50 0.9 0.000 0.00 0.0
3,000 Emerson Electric 37.52 112,564.60 60.50 181 ,500.00 5.0 1 .180 3,540.00 2.0
2,000 Franklin Covey Co 22.64 45,282.50 21 .87 435750.00 12 0.000 0.00 0.0
(Formerly Franklin
Quest)
12300 General Electric 26.42 34,349.72 77.50 1002750.00 2.8 1 .200 1 ,560.00 1 .5
• 1 ,500 General Nutrition 19.94 29,916.90 36.06 549093.75 1 .5 0.000 0.00 0.0
1 ,500 Heartland Express 23.79 35,681 .55 24.87 377312.50 1 .0 0.000 0.00 0.0
1 ,800 Helen of Troy Limited 14.66 26394.00 15.25 27,450.00 0.8 0.000 0.00 0.0
700 Hewlett Packard Co. 63.36 44350.41 60.12 42,087.50 1 .2 0.560 392.00 0.9
1 ,000 In Focus Systems Inc. 22.39 22.388.33 3325 33,250.00 0.9 0.000 0.00 0.0
1 ,700 Innovex Inc. 22.08 37532.94 21 .81 37,081 .25 1 .0 0. 120 204.00 0.6
500 Intel Corp 94.44 47.218.39 81 .00 40,500.00 1 .1 0. 120 60.00 0. 1
1 ,000 Jacobs Engineering 26.53 26,527.94 26.94 26,937.50 0.7 0.000 0.00 0.0
2,000 Leggett and Platt 31 .06 627128.00 45.19 90,375.00 2.5 0.560 1 ,120.00 1 .2
500 Life Technology 23.77 112882.92 32.50 16,250.00 0.5 0.200 100.00 0.6
534 Lucent Technologies 50.12 26,763.63 88.50 47,259.00 1 .3 0.300 160.20 0.3
800 Miller Herman 47.35 37_.884.00 57.87 46,300.00 1 .3 0.290 232.00 0.5
Incorporated
2,600 Mobil Corp. 73.92 192, 185.50 68.50 178.100.00 5.0 2. 120 51512.00 3.1
1 ,500 Molexlnc 2620 39307.50 2725 40,875.00 1 .1 0.060 90.00 0.2
1 .500 Mueller Industries 36.77 55,151 .82 53.87 80,812.50 22 0.000 0.00 0.0
1 ,500 Nabors Industries 31 . 10 46,653.37 23.94 35,90625 1 .0 0.000 0.00 0.0
500 Network Associates 51 . 19 25.595. 10 54.00 27,000.00 0.8 0.000 0.00 0.0
Inc.(fonnerly McAfee)
1 .200 Northern Trust Corp. 62.00 74,400.00 67.37 80350.00 22 0.840 17008.00 1 .2
1 ,000 Omnicare, lnc. 32.35 32,355.00 28.75 28,750.00 0.8 0.070 70.00 0.2
1 ,000 Oracle Systems 18.54 18,542.50 23.25 23.50.00 0.6 0.000 0.00 0.0
1 ,500 Pairgain Technologies, 18.83 28.245.00 18.37 27,562.50 0.8 0.000 0.00 0.0
Inc.
1350 Paychcx, Inc. 34.87 47,08125 47.81 64,546.87 1 .8 0.360 486.00 0.8
1 ,000 Penn Engineering and 26.60 26,600.00 24.81 24,812.50 0.7 0.440 440.00 1 .8
Manufacturing
2,000 Periphonics Corp. 9.75 19,500.00 8.12 16,250.00 0.5 0.000 0.00 0.0
1 ,000 Robert Half International 26.15 26,153.33 38.62 38,625.00 1 .1 0.000 0.00 0.0
1 ,350 Saint John Knits 38.61 52,126.10 39.25 52,987.50 1 .5 0.100 135.00 0.3
500 Schlumberger, LTD 86.58 43,290.00 73.69 36,843.75 1 .0 0.750 375.00 1 .0
• 700 Schwab Corporation 24.07 16,849.00 36.50 25,550.00 0.7 0. 160 112.00 0.4
1
L
L.ongcr Investments, Inc. FEB 0 1998
PORTFOLIO APPRAISAL
City of Fayetteville Police Pension Fund RKANCE 091
Stock Account
Janamv3l, 1998
Unit Total Market Market Pct. Unit Annual Cur.
Quantih• Security Cost Cost Price Value Assets Income Income Yield
1300 Snap-On, Inc. 32.77 42,601 .00 39.19 50,943.75 1 .4 0.840 1 ,092.00 2. 1
1 .250 Staples, Inc. 17.72 22046.83 27.25 34,062.50 0.9 0.000 0.00 0.0
500 Starbucks Corp. 30.19 157094.17 36.56 18281 .25 0.5 0.000 0.00 0.0
1 ,250 Superior Industry 23.95 29,935.94 26.37 32,968.75 0.9 0.280 350.00 1 .1
International
1 ,542 Tyco International 21 .28 32,820.63 44.37 68,426.25 1 .9 0.100 154.20 0.2
1800 Tvson Foods 18.95 72,009.45 18.06 68,637.50 1 .9 0. 100 380.00 0.6
11000 U. S. Filter Corp. 32.45 32,455.00 32.50 32,500.00 0.9 0.000 0.00 0.0
2. 100 Valmont Industries 19.48 40,898.50 19.50 40,950.00 1 .1 0.225 472.50 1 .2
2.800 Walmart Stores 25.91 72,555.00 39.81 111 ,475.00 3. 1 0.270 756.00 0.7
1 ,500 Woodhead Industries, 1525 22,875.00 18.50 27,750.00 0.8 0.360 540.00 1 .9
Inc.
1 ,700 Zero Corporation 20.71 35211 .50 25.62 43,562.50 1 .2 0. 120 204.00 0.5
2,370248. 11 2,853,077.94 79.3 24,951 .10 0.9
MUTUAL FUNDS-EQUITY
6,126. 182 Turner Small Cap Fund 24.91 1527618.38 24.51 150,152.72 42 0.000 0.00 0.0
3,160.599 Vanguard hill Equity 11 .16 35,281 . 10 8. 13 25,695.67 0.7 0.090 284.45 1 . 1
Index Pacific
187,899.48 175,848.39 4.9 284.45 0.2
OVERNMENT BONDS
250,000 U. S. Treasury Note 99.93 249,820A0 100.37 250,937.50 7.0 6.250 15,625.00 6.2
6.250 % Due 0630-98
100,000 U.S. Treasury Note 99.87 99,868.00 101 . 19 101 .187.50 2.8 6.375 6,375.00 6.3
6.375 % Due 04-30-99
50,000 U.S. Treasury Note 100.06 50,030.00 101 . 19 50,593.75 1 .4 6.375 32187.50 6.3
6.375 % Due 05-15-99
100,000 U. S. Treasury Note 99.90 99.905.00 100.44 1002437.50 2.8 5.625 5,625.00 5.6
5.625 % Due 11 -30-99
Accrued Interest 41506.25 0.1
499.623.00 507.662.50 14.1 30,812.50 6. 1
CASH AND EQUIVALENTS
Dividends Accrued 1 ,085.88 1 ,085.88 0.0 0.000 0.00 0.0
Money Market 59,149.43 597149.43 1 .6 4.770 21821 .43 4.8
6023531 60235.31 1 .7 21821 .43 4.7
TOTAL PORTFOLIO 3,118,005.90 31596,824.14 100.0 58,869.48 1.6
F C(;t:. uVJ . Cd
Longer lnvesunents, Inc. FEB 06 ISM
PORTFOLIO APPRAISAL
City of Fayetteville Police Pension Fund F{�{�I��, � �
Bond Account
Januaty31, 1998
Unit Total Market Market Pct. Unit Annual Cur.
Quantity Security Cost Cost Price Value Assets Income Income Yield
CORPORATE BONDS
140,000 Wal-Mart Stores 101 .83 142,565.75 103.34 144,681 .25 7.3 6.500 91100.00 6.3
(Non-callable) Rated
AA 1 /AA
6.500 % Due 06-01 -03
Accrued Interest - 1,516.67 0.1
142,565.75 1462197.92 7.4 9,100.00 6.3
GOVERNMENT BONDS
240.000 U. S. Treasury Note 99.95 239,882.00 100.44 241 ,050.00 12.2 6.250 15,000.00 6.2
6.250 % Due 07.31 -98
100,000 U.S. Treasury Note 99.87 99,868.00 101 .19 101 ,187.50 5. 1 6.375 62375.00 6.3
6.375 % Due 04-30-99
100,000 U.S. Treasury Note 99.92 99,924.00 100.52 100,516.25 5. 1 5.625 5,625.00 5.6
5.625 % Due 12-31 -99
50,000 U. S. Treasury Note 99.56 499781 .50 102. 12 51 ,062.50 2.6 6.250 3,125.00 6.1
6.250 % Due 08-31-00
100,000 U. S. Treasury Note 98.63 98,632.82 107.75 107,750.00 5.5 8.000 8,000.00 7.4
8.000 % Due 05-15-01
• 100,000 U. S. Treasury Note 101 .50 1012500.00 103.84 103,843.75 5.3 6.375 6,375.00 6. 1
6.375 % Due 08-15-02
155,000 U. S. Treasury Note 98.34 152,425.98 109.39 1695555.47 8.6 7.250 11 ,237.50 6.6
7.250 % Due 05-15-04
50,000 U. S. Treasury Note 99.97 49,984.38 11322 56,609.37 29 7.875 3,937.50 7.0
7.875 % Due 11 -15-04
50,000 U. S. Treasury Note 99.87 49,937.50 105.87 52,937.50 2.7 6.500 3,250.00 6. 1
6.500 % Due 08-15-05
50,000 U.S. Treasury Note 99.97 49 984.37 106.31 53,15625 2.7 6.500 3,250.00 6. 1
6.500 % Due 10-15-06
50,000 U. S. Treasury Note 99.12 49,560.53 104.69 52,343.75 2.7 6.250 3,125.00 6.0
6.250 % Due 08-15-23
25,000 U.S. Treasury Bond 99.56 24,890.47 108.72 27,179.69 1 .4 6.500 1 ,625.00 6.0
6.500 % Due 11-15-26
Accrued Interest 15,436.25 0.8
1 ,066,371 .55 19132,62828 57.5 70,925.00 6.3
GOVERNMENT AGENCY
150,000 Fed. Fan Credit Bank 100.00 150,000.00 100.34 150,515.62 7.6 6. 190 9,285.00 6.2
(call 12-18-98 Q 100)
6.190 % Due 12-18-00
100.000 Federal Home Loan Bank 100.31 100,312.50 103.34 103,343.75 52 6.690 6,690.00 6.5
(Non-callable)
6.690 % Due 05-16-01
150.000 Federal Home Loan Bank 100.00 150.000.00 99.81 149,718.75 7.6 6.250 92375.00 6.3
(call I-21-99 r@ 100)
6.250 % Due 01 -21-03
150.000 Federal Home Loan Bank 100.00 150,000.00 101 .31 151 ,968.75 7.7 7.020 10,530.00 6.9
(Call 8-20-99 (a3 100)
7.020 % Due 08-20-07
•
L
re �v' y: � iCrLb
Longer Investments, Inc. FEB 0 6 1998
• PORTFOLIO APPRAISAL FIMANTE 6 �
City of Fayetteville Police Pension Fund
Bond Account
January 31, 1998
Unit Total Market Market Pct. Unit Annual Cm..
Quantihr Security Cost Cost Price Value Assets Income Income Yield
Accrued Interest 7,472.46 0.4
550,312.50 563,019.33 28.6 35,880.00 6.5
CASH AND EQUIVALENTS
Money Market 128,314.87 128,314.87 6.5 4.770 6,120.62 4.8
128.314.87 128,314.87 6.5 61120.62 4.8
TOTALPORTFOLIO 11887,564.67 11970,160.40 100.0 122,025.62 6.3
•
•
Morgan Keegan & Coo, Inc*
Ratajczak 's Economic Comments
From: _KIRKLAND Phone: 1-800-758-4008 January 15, 1998
�_ jDate] Announc inent � ®Estimate f t'Announunient
1/12 Monthly - Ml +0.3% $1,067.5 Dec. +0.6% $1,064.0 Nov.
�. - M2 +0.5% $4,017.4 Dec. +0.6% $3,997.8 Nov.
- M3 +0.8% $5,342.0 Dec. +0.9% $5,299.6 Nov.
1/13 vg. Weekly Earnings - Real +0.5% $258.59 Dec. +0.9% $257.30 Nov.
onsume`Price Index +0.1 % 161.9 Dec. +0.1 % 161.8 Nov.
CPI less food and energy +0.1 % 171.0 Dec. +0.1 % 170.9 Nov.
1/141
et
Sales +0.4% $214.68 Dec. +0.2% $213.82 Nov.
000 1/15 anufacturing/Trade - Inventories +0.4% $1,044.98 Nov. +0.4% $1 ,040.82 Oct.
Sales +0.2% $763.65 Nov, -0.1 % $762.05 Oct.
1/16 ndustrial Production +0.4% 127.8 Dec. +0.8% 127.3 Nov.
opacity Utilization Rate +0.0% 83.2 Dec. +0.4% 83.2 Nov,
ECONOMIC INDICATORS FOR THE WEEK ENDING JANUARY 9, 1998
EMPLOYMENT - On the surface, the 370,000 gain in payroll employment is another sign of a very strong
economy. However, hours worked in the private economy fell. Therefore, people were replacing elongated
workweeks. The index of fours worked actually fell by 0.2%, For the quarter, however, total hours worked grew
•nearly 4%. This suggests that GDP will rise at least at the rates currently projected and could surprise to the
upside. Despite fewer hours in most sectors, the manufacturing workweek actually rose. This will lead to gains in
the leading indicators. Also rising was construction hours,
Hourly earnings grew only 0.1% and is now up only 3.7% from the previous. However, this series is not adjusted
for composition and may be distorted downward by the large increase in temporary employment during last
December. The diffusion index remained strongly in expansionary territory.
Initial claims grew another 20,000 to 334,000. Along with the reversal of temporaries in January, this suggests the
payroll employment will grow less than originally expected. Unemployment, which rose slightly in December,
should remain at this level as the temporaries not only leave employment but also the workforce.
BUSINESS ACTIVITY -The manufacturing report showed stronger inventory growth at the final goods level than
expected. This should diminish next month but goods in processing probably should take up the slack as some of
those airplane orders begin to be built. The strong gains in manufacturing hours suggest that industrial production
will grow more than originally expected. Capacity utilization should remain unchanged, as capacity continues to
grow 4.5% at annual rates.
CONSTRUCTION ACTIVITY - Wet weather in the West and some weakness in the South led to declines in
construction expenditures in all segments except residential. The strong gains in construction hours suggest that
construction rebounded in December, with gains in public construction probably leading the way. The
construction deflator grew slightly more rapidly, but declining prices for materials should soon restrain that.
• Pagel of 3
Tse Information containM herein Is based an sources considered to be reliable but IF not represented to be complete and its accuracy is not guaranteed. The opinions expressed herein re°eet the judgment of the
author at this date and are subject to change without notice and are not a murder analysis of every material fact respecting any company, industry or security. Morgan Keegan & Company, Inc. and Its ollimrs,
directors, shareholders, employees and affiliates and members of their families may make investments in a cumpamy or securities mentioned herein before, after or concurrently with the publication of this report.
Morgan Keegan & Company, Inc. may from time to time prrfarm or seek to perform Investment banking or other services for, or solicit Investment banking or other semicee from any company, person or
entities mentioned herein. Neither the information nor any opinion expressed herein constitutes asolleitatlon for the purchase or sale or any security.
Y. '
Single family /sousing sales were surprisingly strong, with large gains occurring in the South. Inventories are now
at a 4 month supply and probably need to be replenished. With mortgage rates declining, housing should remain
an area of strength into the spring.
•CONSUMER ACTIVITY - The reduced hours and subdued earnings should lead to slightly smaller gains in
personal income than originally expected. Strong vehicle sales should add to retail sales in December, although
non-auto sales should be up only 0.3%. Some moderation in those sales should be expected in January despite the
continuation of strong promotions.
PRICES - Energy prices fell slightly more than expected, leading to even more favorable changes in the PPI than
expected. Further price declines in energy are certain for January. Agricultural prices appear controlled.
Therefore, the overall PPI should fall by comparable amounts. Higher tobacco prices may prevent the core index
from declining, but no commodity inflation is apparent.
Agricultural prices fell sharply with only soybeans showing any significant advance. This also should end, leading
to further declines in agricultural prices in January.
MONETARY ACTIVITY - Money growth is gradually rising because of the turmoil in Asia. The dollar has
become the most certain currency in the world. Thus, strong gains in currency and in the monetary base should
not suggest inflation at this time. The $10 billion drop in nonfinancial paper is seasonal and does not mean that
the demand for money has dipped.
INTEREST RATES - Further problems in Asia probably will require some attempt to lower the attractiveness of
the dollar by cutting short term interest rates. We have now assumed that rates will be cut in February and
another cut is possible late in the spring. This should allow long term interest rates to fall toward 5.25%, given the
inflation justifiable environment that currently prevails. The search for alternatives to other financial assets has
•aided treasury yields as well. We will watch to see if bond prices begin to fall once the stock market has been
righted.
FOREIGN EXCHANGE -The dollar is king but the Japanese are beginning to defend their currencies. European
currencies have given some ground against the dollar as well. Until the Asian problem subsides, which is not
expected this week, the dollar will continue to gain ground against all currencies.
STOCK PRICES - An oversold market could show a little bounce this week. However, no sustained equity price
gains are likely until Asia has stabilized. Given the false starts since Thailand set off the crisis, more than a week
of stability will be needed to support equity values. Therefore, some reductions in equity values remain likely
through the remainder of January.
•
Page,2 of
F, ~
_ ECONOMIC FORECAST
_ - 1997 1998 FAnnual Annual
fQIII� LQIV QIP V1.10 LQLU LQIV4M 1997 1998
Federal Funds 5.53 5.55 5.42 5. 16 5.05 5 . 11 5.45 5. 19
Prime Rate 8.50 8.50 8.47 8.26 8. 16 8.75 8.44 8.40
91 -Day Bills 5.06 5. 12 5. 15 4.97 4.81 4.86 5.10 4.90
1 -Yr Note 5.54 5.45 5.35 5.11 5.05 5. 13 5.50 5. 18
2-Yr Note 5.90 5.75 5.52 5.17 5. 10 5. 13 5.80 5.30
5-Yr Note 6. 13 5.81 5.61 5.26 5.20 5.23 5.98 5.40
10-Yr Note 6.24 5.87 5.70 5.48 5.37 5.40 6.09 5.60
30-Yr Bond 6.53 16. 15 5.76 5.54 5.43 5.61 6.32 5.71
Dow Jones Index 7,935.2 75883.5 17,789.6 185343.9 1 8,557.6 8,743.9 72612.6 8,622.0
S&P 500 930.0 936.7 930.4 1,008.4 1 1 ,023. 1 1 ,054.7 895.7 1 ,041 .5
updated 01112198
�Dr. Ratajczak's Schedule
02/11/98 Atlanta, GA, John Sillay contact
06/01/98 Lincolnshire, IL Joe Hurst contact
10/08/98 New York, NY Craig Elder contact
10/09/98 Pittsburg, PA Ted Donaldson contact
• Ratajczak 's Economic Comments is prepared by Dr. Donald Ratajczak, PhD., Director of the Economic Forecasting
Center, Georgia State University. . This report is a transcript of comments made by Dr. Ratajczak and should be read
in that context. Additional Information Is Available Upon Request
Page 3 of 3
Capital Markets Group, Inc.
Capital Markets Group, Inc. A SuL6ltllery of National Bank o1 Commerce
A Subsidiary of National Bank of Commerce , Memphis, Tennessee
Michael P. Scola 111
Account Executive 1
6 January, 1998 ,
ONE COMMERCE SQUARE (800) 795-3759
City of Fayetteville SUITE 900 Phone (901 ) 523-3759
Tracy Smith MEMPIES, 3N 38150 Fax (901) 523-3765
113 west Mountain
Fayetteville, Ark 72701
Dear Mrs. Smith,
I enjoyed talking with you recently, and appreciate your time and courtesy. In order to
familiarize you with NBC Capital Markets Group Inc. , a few Points merit emphasis.
NBC Capital Markets Group, Inc. is the securities broker/dealer subsidiary of the National
Bank of Commerce. NBC's parent company, National Commerce Bancorporation (NCBC) of
Memphis, Tennessee, is a publicly owned company with assets of over 4.2 billion and capital
in excess of 313 million as of December 31 , 1996. For the last six years NCBC has held one
of the top positions on Keefee, Bruyette and Woods prestigious Honor Roll for ten year
compounded earnings growth.
• NBC Capital Markets Group, Inc. has a total staff in excess of 100 including sales
professionals and support personnel. We specialize in providing a full array of both fixed-
income and adjustable rate securities ranging from Money Market instruments to Mortgage
Backed securities and CMO's as well as Treasuries, Agencies, and Tax-Exempt securities. We
are also an approved SBA Pool Assembler and are very active in the purchase of whole loan
residential product. In addition, we offer a number of financial and analytical service to help
manage and measure your portfolio's performance. We are registered with Securities and
Exchange Commission (SEC) and regulated by both the National Association of Securities
Dealers (NASD) and the Office of the Comptroller of the Currency (OCC).
While I am naturally biased. I believe that the resources of NBC Capital Markets Group in
terms of people and products enable us to offer you a very professional, creative, and
personalized long term investment service. Should you have any additional questions or if I
can be of assistance in any way, please fell free to contact me at 800-795-3759
Sincerely,
Mike P. Scola III
Account Executive
•
ONE COMMERCE SQUARE • MEMPHIS, TENNESSEE 38150 • (901 ) 523-3700
• - • •
LY (2M U2
Michael P. Scold III
Michael Scola is an account executive with NBC Capital Markets Group.
Inc. , the broker/dealer .subsidiary of the National Bank of Commerce. His
clients include commercial banks, savings and loans, credit unions,
insurance companies, pension funds, investment advisors and money
strategic portfolio management available in today 's complex accounting and
regulatory environment.
A graduate of the University of Memphis, Michael holds a Bachelor of
Business Administration in Finance. In addition he has a .fro essional
p
licenses with both General Securities Registration NASD Series 7 and the
Uniform Securities Association State NASD Series 63. Furthermore, Mike is
involved in NBC CMGs continuing internal education programs in the
areas of regulatory changes and product information.
Prior to joining NBC capital Markets Group, Inc. , Mike was regional sales
representative for Ingram Entertainment Inc. , servicing West Tennessee,
Mississippi, Arkansas, and Kentucky.
This memorandum is for informational purposes only. Although the information contained has been obtained from sources believed to be
reliable, NBC Capital Markets Group, Inc., does not guarantee or assume any responsibility for accuracy or completeness of the ;
information shown herein. Additionally, such information may be incomplete or condensed. All opinions and estimates included in this
report are those of the personnel of NBC Capital Markets Group, Inc. as of this date and are subject to change without notice. This report `
is not intended as an offer or solicitation with respect to the purchase or sale of any security. NBC Capital Markets Group, Inc. is not a
bank and securities offered by the firm unless otherwise stated are not backed or guaranteed by any bank or insured by FDIC. NBC
Capital Markets Group, Inc. is a member of the NASD and SIPC.
pr
rt • � : rte
rM
FINANCIAL & ANALYTICAL SERVICES OFFERED
Securities Portfolio Analvsis
A detailed summary of your current investment portfolio
which includes charts, graphs, projected cashflows, and
projected cashflow interest sensitivity.
GAT/CMO Portfolio Analvsis
A detailed summary of your current CMO portfolio which _
includes deal history, collateral summary, tranche analysis
report and FFIEC report in booklet form. This supplies
excellent information which the regulators require.
FFIEC Stress Test
A complete summary of the three fold test that regulators
now require on all CMOs, and REMICS.
Peer Group Analvsis
Detailed summary of your institution versus national peer
group, selected state sampling or against a competitor
within your city.
Mortgage Loan Portfolio Analvsis
An extensive review on your mortgage loan portfolio
including stratification, cashflow analysis, and
recommendations of disposition alternatives. Analysis can
be integrated into an overall asset restructuring plan.
MBS/CMO Analvsis Report
Monthly summary on yields, current factor, principal
paydown and. interest, current prepayment rates and more.
Portfolio Accounting Services
A monthly accounting system which provides details on
interest accrual, book values and other pertinent data for
all types of securities. Reports issued bi-monthly.
GAP Analvsis & Rate Sensitivity
Performed quarterly and includes gap analysis, interest rate risk
analysis, risk based capital test and alternative minimum tax analysis.
0
This memorandum is for informational purposes only. Although the information contained has been obtained from sources believed tobe
reliable, NBC Capital Markets Group, Inc., does not guarantee or assume any responsibility for accuracy or completeness of the
information shown herein. Additionally, such Information may be incomplete or condensed. All opinions and estimates included in this
report are those of the personnel of NBC Capital Markets Group, Inc. as of this date and are subject to change without notice. This report
is not intended as an offer or solicitation with respect to the purchase or sale of any security. NBC Capital Markets Group, Inc. is not a
bank and securities offered by the firm unless otherwise stated are not backed or guaranteed by any bank or insured by FDIC. NBC
Capital Markets Group, Inc. is a member of the NASD and SIPC.
NBC CAPITAL MARKETS GROUP , INC .
A subsidiary of National Bank of Commerce-Memphis, TN
• Represented by a team of sales professionals,
- strategists, and support personnel in excess of 115
• Specializes in providing fixed income and other
related investment products to over 2500 Banks,
Savings & Loans, Insurance Companies, Credit
Unions, and Pension Funds
• Product lines consist of the following:
4 U. S. Treasury & Agency Securities
Money Market Instruments
Municipal Securities
Mortgage Backed Securities
Mortgage Derivative Securities (CMOIREMIC)
Small Business Administration (SBA) Loans
Corporates
Mutual Funds
Over The Counter Options
• Conducts purchasing and sales activity tbrough a
team of seasoned traders
• Regulated by the NASD, SEC, OCC, and the State of
Tennessee Securities Division
e January 1997
k
i .
1
i
DM
p m ,
NBC CAPITAL MARKETS GROUP , INC .
CORPORATE OVERVIEW
NBC Capital Markets Group, Inc. is the securities broker/dealer subsidiary of the National Bank of
Commerce (NBC) which was established in 1873. As a bank broker/dealer, we are registered with
the Securities and Exchange Commission (SEC) and regulated by both the National Association of
Securities Dealers (NASD), and the Office of the Comptroller of the Currency (OCC). NBC's
parent company, National Commerce Bancorporation based in Memphis, Tennessee, is a publicly
owned company with stock traded under the NASDAQ symbol "NCBC." Total assets of NCBC
were over $4.2 billion as of December 31, 1996. National Commerce Bancorporation retained its Nl
position for the third straight year on the Keefe, Bruyette and Woods 1995 Honor Roll for
exceptional ten year compound earning's growth per share.
Represented by a team of more than 115 sales professionals, strategists, and support personnel,
NBC Capital Markets Group, Inc. offers a wide variety of investment products and programs.
These product lines consist of U.S. Treasury & Agency Securities, Mortgage-Backed Securities,
Mortgage Derivative Securities (CMO/REMIC), Small Business Administration (SBA) Loans,
Municipal Securities, Money Market Instruments, Corporates, Mutual Funds and Over the
Counter Options.
STRATEGIES AND ANALYSIS
NBC Capital Markets Group, Inc. has a full staff of professionals responsible for developing
financial strategies that are specifically designed with the client's objectives in mind. Each analysis
takes into consideration the current accounting and regulatory framework of specific investments,
as well as the long and short term implications, of these items. As a group of uniquely qualified
CPAs and trained analysts, Strategies also reviews the legislative and tax considerations of
investment portfolios. The Strategies Group's work is supported by a proprietary software system
designed for the analysis of mortgage loans, consumer receivable, swap opportunities, product
research and development. Our expertise in the financial marketplace creates tailored investment
programs to assist clients in the overall management of asset/liability positions for portfolio
div�ersification's, attractive yields and liquidity.
Your NBC Capital Markets Group, Inc. account representative manages these many services to the
benefit of your organization. If you should have any questions about our products or programs,
please contact us at 1-800-795-2421.
,
FINANCIAL HIGHLIGHTS
NATIONAL COMMERCE BANCO R PORATION AND SII BSI O IAR I E 51
national commerce bancorporation , headquartered in
Memphis, Tenn., is the parent company of National Bank of Commerce; Nashville Bank of
Commerce; NBC Bank, FSB (Knoxville) and NBC Bank, FSB (Belzoni), with operations in Tennessee,
North Carolina, Virginia, Georgia and Mississippi. In addition to traditional banking services,
the Company offers investment advice through Commerce Capital Management, Inc. and Brooks,
Montague & Associates, Inc.; investment and brokerage services through NBC Capital Markets
Group, Inc.; data processing capabilities through Commerce General Corporation; in-store banking
to licensed banks through National Commerce Bank Services, Inc.; electronic payment systems,
data processing and card services to the transportation industry through TransPlatinum Service
Corp.; consumer financing through Commerce Finance Company; equipment leasing through
Kenesaw Leasing, Inc. and J&S Leasing, Inc.; and lockbox leasing through USI Alliance Corp. The
Company attributes its consistent growth and profitability to a unique blend of conservative
banking tradition and forward-thinking innovation — both very keenly customer-focused.
In Thousands, Except Per Share Amounts 3996 1995 % Change
for the year
Net income $ 57,533 $ 49.035 17.3%
per share " $ 2.30 $ 1.94 18.6
Cash dividends $ 39,367 $ 17,300 12.0
per share' $ •79 $ .70 12.9
Average shares outstanding' 259049 25.249 (•8)
at year end
Total assets $4,200409 $3.695,042 13.7%
Deposits $ 2,976,430 $2,574,770 15.6
Loans, net of unearned discounts $ 2,347,973 $ 1,931,213 21.6
Total securities, including
trading account $ 1649,711 $ 1,298,805 19.3
Stockholders' equity $ 333329 $ 296,679 5.6
• After retroactive adjustment for all stock dividends and stock splits declared through December 31, 1996.
t C"NCBC" or "the Company")
YEAR-END ASSETS NET INCOME EARNINGS PER SHARE
$ In Millions $ In Thousands
$4.so0 $60,000 51.50
$4,000 $55.000
$so,000
Saoo
$3.500 545.000
$3.000 540.000
535.000 $1's°
So 500
530.000
$2,000 S25.000 $1.00
$1,500 $20.000
515.000
. Ss,000 5.50
$10,000
Ssoo $5,000
87 96 87 96 87 96
Compound Growth Rate 11.85% Compound Growth Rate 15.13% Compound Growth Rate 14.19%
111/1111111
A MESSAGE FROM THE r " AiRMgS
•
was an outstanding year for "this little bank." As the company known for pioneering
the in-store delivery system, National Commerce Bancorporation (NCBC) continues to
grow, extending its own network of branch locations, expanding its consulting influence
upon the in-store banking endeavors of client banks, adding to the products and services
offered, adopting new and improving upon existing technologies for serving customers
and, in so doing, attracting the attention of industry insiders throughout the country
and around the world.
tC, z, - rU -1kl -lg ;11eIfr " 11 ,? t1C4 In April 1996, U.S. Banker magazine
named NCBC the top performing banking company in the United States. The publica-
tion's "Top ioo Performance Ranking for 1996" analyzed the 1995 non-performing assets
ratio, net charge-off ratio, return on equity, efficiency ratio, leverage ratio and Tier 1
capital ratio of the nation's 1o0largest financial institutions. Credit for this performance
is largely owed to a motivated group of managers and employees throughout the
organization, coupled with the wise counsel of a dedicated board of directors. Through •
the Employee Stock Ownership Plan (ESOP), stock options outstanding and individual
stock ownership, this group tends to think as you, our shareholders. Consequently,
your long-term best interest continues to be a primary goal.
interstate branch expansion In what has been unprecedented
growth for the Company, NCBC expanded its interstate branch network from 81 at year-
end 1995 to 1o1 locations in five states at the close of 1996. Included in that figure is
DIVIDENDS PER SNARE First Market Bank, our newest in-store banking venture targeted to small- to medium-
50.80 sized communities, which made its debut in Ft. Oglethorpe and Calhoun, Georgia, in
So )° November and December.
50.60
In addition to the expansion of Company-owned
So.s°
branches, the Company's influence is being felt throughout the country and around the
So.go
world through our in-store banking affiliate, National Commerce Bank Services, Inc.
(NCBS). With client relationships in 48 U.S. states, NCBS exported its expertise in 1996,
$O''OV launching the first full-service, in-store banks in Australia and in Peru, as well as in-store
sO1D banks in Puerto Rico and Canada.
97 96 •
Compound Growth Rate 18 07% Net income was $57,513,000, a 17, 3 percent increase
over 1995 • Earnings per share were $2.30, compared to $1.94 in 1995 , an 18.6 percent
increase. This increase is quite positive considering the expenses associated with the
11111111111
expanding market start-up costs in Raleigh, THOMAS M. GARROTT
Chairman of the Board, President
Durham, Winston-Salem and Greensboro, and Chief E:ecuthreOfficer
North Carolina, and the start-up expenses
for the new First Market Bank locations
and the decreasing net interest margin
environment.
Return on average assets for 1996 was 1.51
percent, compared to 1.53 percent in 1995,
both years' performances well in excess of
industry norms. Return on average equity
was 19.44 percent, up significantly from the
1B.00 percent recorded in 1995, and also
in excess of industry norms. Cash dividends declared per share in 1996 were $.79,
compared to $.70 for 1995, a 12.9 percent increase, marking the 22nd consecutive
year for dividend increases.
• By year-end 1996, loans, net of unearned income, had grown to over $2.3 billion, up
21.6 percent over year-end 1995, primarily due to expanded activity in real estate and
indirect automobile lending. As loan volume grew, the allowance for loan losses also
increased, growing from $29.0 million at year-end 1995 to $35.5 million in 1996. The
1996 year-end allowance for loan losses was 1.51 percent of year-end net loans, com-
pared to 1.50 percent for year-end 1995. Loan quality also remained strong as there
were no non-performing loans and assets at December 31, 1996.
RETURN ON ASSETS
stock repurchase program ourstrongcapital position allowed 2.00%
the Company in 1996 to actively begin a two-year, aggressive stock repurchase program
Of Up to 2,000,000 shares with the objective of increasing per share returns and fund-
a.So%
ing stock-based employee benefits plans. At year end, approximately 1,025,00o shares
had been repurchased. Primarily as a result of this program, capital ratios are down
1.00%
from 1995. Tier 1 capital to total assets (leverage ratio) was 7.33 percent compared to
7.91 percent a year ago. Tier 1 capital to risk-weighted assets Of 11.05 percent and total
capital to risk-weighted assets Of 12.30 percent are also down slightly from a year ago.
However, the Company and its banking subsidiaries continue to exceed all minimum
• required ratios for well capitalized institutions.
ST 96
The Company strives to keep its efficiency ratio (operating expenses as a percentage
of operating income) one of the lowest in the country. In spite of start-up costs asso-
111111111
NCBC MANAGEMENT COMMITTEE
From left: Lewis E. Holland, NCBC >n s,:•s���
execul ive vice president, Ireasurer
and chief financial officer; Mackie H.
Gotrer, president. Natlonal Bank of
Commerce; William R. Reed Jr., NCBC
executive vice president; Gary L.
Lazanni, NBC executive vice president
and chairman of NBC Capital Markets
Group. Inc.; Tom Scott, president,
Commerce General Corporation;
and Gus B. Denton, NCBC secretary
and NBC executive vice president.
Holland, Goleer and Reed also join
Thomas M. Garrott in comprising the
Office of the Chairman. 1
ciated with expansion, the efficiency ratio decreased from 51.21 percent in 1995 to
49.72 Percent in 1996. This ratio had been as high as 74.1 percent in the early 198os.
The Company bolstered its leasing offerings with the •
merger of NBC Bank, FSB in Knoxville and Knoxville-based Kenesaw Leasing, Inc. in
October, and with the acquisition of Knoxville-based J&S Leasing, Inc. announced in
December. Kenesaw leases new and used equipment, fixtures and furnishings primarily
to companies and small businesses, while J&S leases forklifts, heavy equipment and
other machinery to the transportation and construction business sectors. USI Alliance
Corp., which was incorporated in 1996, is a start-up leasing company that will have a
RETURN ON EQUITY nationwide scope in offering lockbox services to nursing homes and care facilities.
10%
Our Company is fortunate to be led by an astute and
as% experienced board of directors. G. Mark Thompson, president of the Nashville Marketing
ao% Area for the Kroger Co., joined the National Commerce Bancorporation board of directors
in December, following several years as director of the Nashville and Knoxville regional
,s%
banks. In addition, Memphis businessmen David L. "Casey" Bowlin, Scott P. Ledbetter
ro% and Phillip H . McNeill Sr. were named directors of National Bank of Commerce. We wet-
5% come them and look forward to their active participation in the affairs of the Company.
Managing the Company in the best long-term interest of our shareholders continues •
67 yd
to be a top priority. The large percentage of stock ownership of directors, directors
emeriti, officers and employees continues to be a powerful motivator. These groups
and their families own approximately 40 percent of the Company's common stock,
11104111
and 78 percent of all full-time employees are shareholders through the Employee Stock
Ownership Plan. Various stock option opportunities offered to officers and employees
provide further incentive to approximately zo percent of the Company's full-time
employees who have been granted options.
In an age of rapidly emerging technologies, it is easy
to become either jaded toward or carried away by each new advancement or business
trend that comes along. It is only after much deliberation and with the wise counsel
of our allied partners that your Company enters such novel endeavors. Discussed
elsewhere on the pages of this report are some of the latest technologies and trends
adopted by our Company in 1996 to help us better serve our customers and increase
the return on our shareholders' investment. Of particular note are the Company's new
customer call center, the introduction of our site on the World Wide Web and the
potential these hold for expanding capabilities in the future.
continued OptImism Management continues to be optimistic for the
near and intermediate term regarding continued earnings improvement. Through in-
store banking, new markets may be added without the high cost of brick-and-mortar
entry. In our experience, name recognition is not necessary to succeed in a supermarket
location. Convenience, value pricing and excellent customer service are more important.
Net interest margins, however, could suffer as rapid deposit growth outstrips loan
production in the short run; however, our experience to date is that loan to deposit
ratios in mature supermarket branches far exceed those of traditional branches,
offering expectations of excellent longer-term profitability.
AVERAGE EQUITY/ASSETS
With this in mind, we will continue to emphasize retail banking with supermarket Exclusive of Mark to-market Adjustment so%
branches fueling the de novo expansion opportunities which would be accretive to
earnings and enhance shareholder value. We will also aggressively continue to pursue e%
non-traditional income sources from non-banking affiliates to continue our evolution
6%
as a multi-faceted financial services institution.
q%
Sincerely,
87 96
Thomas M. Garrott
Chairman of the Board,
President and Chief Executive Officer