FINANCIAL ADVISORS AGREEMENT
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CITY OF CLEARWATER, FLORIDA
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FINANCIAL ADVISOR'S AGREEMENT
THIS AGREEMENT made this 7th day of September, 1989 by and
between the City of Clearwater, Florida, hereinafter referred to as the
"City", and Raymond James & Associates, Inc., St. Petersburg, Florida,
hereinafter referred to as "Raymond James";
II
WITNESSETH:
WHEREAS, the City has determined that there is a need to
retain a Financial Advisor to assist the City in investigating and obtaining
capital financing from time to time; and
WHEREAS, Raymond James has responded to the City's request
for proposals for Financial Advisor services on May 23, 1989; and
WHEREAS, the City has determined that Raymond James &
Associates is fully qualified to perform the required services as Financial
Advisor.
NOW, THEREFORE, in consideration of the foregoing, the
parties agree as follows:
SERVICES TO BE PERFORMED BY THE FINANCIAL ADVISOR:
Services to be performed by Raymond James include, but are
not limited to the following:
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1. Review existing debt structure and financial resources to
determine available borrowing capacity and the desirability of refinancing
for any or all of the existing debt.
2. Participate as needed in developing the financing plan and
cash flow projections for the City's capital improvements program.
3. Review existing and proposed loan pools and other
"non-traditional" financing options to determine their desirability.
4. Recommend appropriate financial
projects and provide the City with information
financing programs used by other issuers.
structures
about the
for proposed
structure of
5. Coordinate work with the Members of the City Commission,
staff, and appropriate counsel, regarding the financial and security
provisions of each financing.
6. Attend all relevant meetings associated with a specific
financing or with the capital improvements program as a whole.
7. Recommend the necessary provisions and covenants of the
City of Clearwater to be contained in each financing document including but
not limited to, principal amounts, dates, maturities, interest rates,
redemption provisions, flow of funds, debt service coverage requirements,
reserve funds, rates and charges, security pledges, and conditions relating
to the issuance of any additional debt.
8. Advise the City of current and expected market conditions
and timing and marketing of bond issues.
9. Assist the City in establishing its rating and coordinate
applications for future credit ratings in order to obtain the highest
possible credit rating. If necessary, we will organize and participate in a
presentation directly to the rating agencies.
10. Assist the City in the application for municipal bond
insurance and other credit enhancement providers (as appropriate), and
coordinate the flow of information to the insurers in a timely manner.
11. Prepare any official statement in cooperation with bond
counsel and arrange for the widest possible distribution of the official
statement to bond underwriters and investors.
12. Recommend, for each bond issue, the method of sale,
either public, private, or negotiated.
13. For public sales, prepare bid requests, notices of sale,
assist with bid openings, verify accuracy of bids submitted, and make
formal recommendation to the City relative to bid award.
14. For negotiated sales, assist with the preparation of
requests for proposal for underwriters, assist in the interview and selection
of underwriters, assist the City in negotiating rates and terms of sale, and
make formal recommendation to the City relative to acceptance or rejection
of the underwriters offer to purchase.
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15. Assist the City in selecting trustees, paying agents,
printers, and other bond services.
16.
printing, signing
the investment
regulations.
Assist the City at the bond closing and coordinate
and delivery of bonds, and assist with arrangements for
of the bond proceeds in compliance with arbitrage
17. Advise the City on proposed and actual changes in tax
laws and changes in financial markets that could affect the City's financing
plans.
FEES PAID TO FINANCIAL ADVISOR FOR SERVICES:
1) Work directly related to a bond issue will be billed as
follows:
$10,000 plus $0.75 per $1,000 par amount of bonds issued.
2) Work not directly related to a bond issue ("additional
work") will be billed on an hourly basis as follows:
$175 per hour for First Vice President
$150 per hour for Vice President staff
$125 per hour of Assistant Vice President staff
$100 per hour for Analysts
Raymond James will provide the City with a written estimate of
the total cost of any such additional work, and will obtain prior approval
of the City before proceeding with such additional work.
COSTS PAID BY THE CITY:
The City agrees to pay all costs of any bond issues or other
financing, for attorneys of the Issuer, fee of Bond Counsel, rating agency
fees, insurance costs, printing costs of the Issuer, printing costs of the
Bonds and the Official Statement, advertising costs, traveling expenses of
Officials of the Issuer, and out-of-state traveling expenses of Raymond
James.
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GENERAL CONDITIONS
A. It is distinctly understood that Raymond James will not participate,
either directly or indirectly, as an underwriter in the sale of any Bonds
for which they have acted in the capacity as Financial Advisor. Raymond
James may, however, purchase or sell any of such Bonds in the secondary
market after the expiration of this contract.
B. Should any planned financing materialize, the City shall not be
financially obligated to Raymond James for work done in anticipation of
such planned financing except as to reimbursement of such expenses as may
be approved by the City prior to their being incurred.
C. Should, in
the
course of performing services described in
determine that additional services are desired
this
of
Agreement, the
City
Raymond James, and should Raymond James agree to such additional
services, then this Agreement may be amended in writing as mutually
acceptable to the parties to provide for accomplishment of such additional
services and the basis of payment therefore.
D. This Agreement shall be in full force and effect for a period of
three years from the date of execution hereof provided, however, that the
City shall have the option, at any time during this period and with its sole
discretion to terminate this Agreement, said termination to be effective upon
receipt by Raymond James of written notice at least ninety (90) days prior
to any such termination.
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E. In the event that any of the following principals, Van Sayler, Bonnie
Moore, Kathleen Boylson, or Wendell Gaertner, should either leave Raymond
James & Associates or be permanently unavailable to assist the City of
Clearwater when requested, the City may request a renegotiation of terms
of this Agreement or may, at its sole option, terminate this agreement by
giving written notice at least ten (10) days prior to any such termination.
F. This instrument embodies the whole agreement of the parties. There
are no promises, terms, conditions, or obligations other than those
contained herein; and this Agreement shall supercede all previous
communications, representations of agreements, either verbal or written,
between the parties hereto.
G. Any provision of this agreement to the contrary notwithstanding,
Raymond James hereby represents and warrants to City that all material
representations contained in the Response to the Request for Proposals
(RFP) attached hereto as Exhibit "A" and made a part hereof including, but
not limited to, the liability insurance coverage carried, the location of the
firm, the number of attorneys and financial experts working for the firm
are accurate and correct. Raymond James hereby agrees that should any
such representation be false, inaccurate or misleading at the time of making
the representation, or change between the time of making the representation
and the time of the execution of this agreement, or change after the
execution of this agreement, Raymond James shall promptly notify City
thereof and City shall have the right of re-review of this agreement
together with the right to terminate this agreement by giving written notice
at least ten (10) days prior to any such termination. If Raymond James
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should fail to promptly notify City as required by this paragraph
G, and City receives such information from other sources, City
shall have the right to terminate this agreement by giving a
notice as provided for in this paragraph.
IN WITNESS WHEREOF, the part i es here to have se t the i r hands
and seal the day and year first above written.
Countersigned:
R ta Garvey
Mayor-Commissioner
Approved as to form
and correctness:
RAYMOND JAMES & ASSOCIATES, INC.
By: vaYC{'.\~y~~1-'
First Vice President, Public Finance
CITY OF CLEARWATER, FLORIDA
BY:
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Ron H. Rabun
City Manager
Attest:
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E. Goude8.1r-
erk
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RaY1110nd J 3111eS & Associates, Inc.
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May 23, 1989
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City of Clearwater, Florida
Financial Advisory Services
EXHIBIT A
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May 23, 1989
Mr. Alan Demis, Director
Purchasing Division
City of Clearwater, Florida
711 Maple Street
Clearwater, Florida 34615
Dear Mr. Demis:
We are pleased to submit this proposal to serve Clearwater, Florida as Financial Advisor.
Raymond James welcomes the opportunity to assist the City in developing innovative methods for
meeting the City's financing needs. In addition to having served as Underwriter on a vast number
of issues, Raymond James & Associates, Inc. has extensive experience in serving as Financial
Advisor for numerous Florida clients. We are currently serving as Financial Advisor for the City
of St. Petersburg, the West Coast Regional Water Supply Authority, Leon County, Putnam
County, the City of Fort Myers, and the City of Miami in addition to other Florida Cities and
Counties.
The following table lists the cities in Florida where our offices are located.
Florida Offices
Belleair Bluffs
Boca Raton (2)
Bradenton
Brandon
Cape Coral
Clearwater
Coral Gables
Crystal River
Daytona Beach
Delray Beach
Fort Lauderdale (2)
Fort Myers
Holiday
Jacksonville (3)
Jupiter
Key West
Lake Worth
Largo (2)
Lighthouse Point
Madison
Marathon
Miami
Naples (5)
Orlando
Ormond Beach
Palm Harbor
Panama City (2)
Pompano Beach
Port Charlotte
Punta Gorda
St. Petersburg (5)
Sarasota (2)
Seminole (2)
Spring Hill
Sun City Center
Tallahassee (3)
Tampa (4)
Temple Terrace
Tequesta
Venice
Vero Beach (2)
West Palm Beach (2)
Winter Park
RAYMOND JAMES
& ASSOCIATES. INC.
Member New York Stock Exchange/SIPC
The Raymond James Financial Center 880 Carillon Park'vllOy PO, Box 12749
St. Petersburg, Florida 33733-2749 (813) 578-3800
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,
Mr. Alan Demis, Director
May 23, 1989
Page Two
Raymond James & Associates, Inc., a subsidiary of Raymond James Financial, Inc., is the largest
securities firm headquartered in Florida. Together with other broker/dealer subsidiaries of
Raymond James Financial, Inc., we currently have 70 offices throughout the State, including an
office in Clearwater, and 464 offices nationwide. This branch office network, together with a sales
force of approximately 1,800 professionals, ranks us as the tenth largest brokerage firm in the
nation. With our Company headquarters in St. Petersburg we can offer the City of ClealWater a
timely response to all its financing needs.
The following summarizes why Clearwater should select Raymond James & Associates as its
Financial Advisor:
1. Strong financial condition: Raymond James & Associates is the largest and best
capitalized securities firm headquartered in Florida. With over $74,000,000 in capital and over
$855,000,000 in assets we have the size and staying power to survive the troubled capital markets
that currently exist.
2. Experience and structuring capability: Our professional staff has a wide and varied
background in financing public capital improvements in Florida along with obtaining financing for
issuers' short term cash needs. With experience ranging from lease purchase financing to variable
rate demand bonds to extensive experience with water and sewer financing, Raymond James' staff
has the resources and experience to assist the City with all its financing needs.
3. Analytical Department: Under the direction of Kathy Boylson, a six year employee of
the firm with experience in many areas of trading and selling securities, our computer department
has the experience and capability to rapidly prepare and perform all analytical calculations
required to implement the City of Clearwater's financing.
4. Retail Distribution Network: As Financial Advisor, we utilize the resources of our
significant retail distribution network as a conduit through which we receive a multitude of market
information. This constant interaction allows us to ensure that the City is aware of current bond
pricing matters as well as the changing credit preferences of investors, rating agencies, and credit
enhancement providers. This resource proves valuable in evaluating various financing alterna-
tives.
Our proposal includes responses to questions contained in the request for proposals, together with
our latest Annual Report. Raymond James' public finance staff has had the opportunity to work
with a variety of municipal issuers. This experience, coupled with our presence in Florida and in
the United States as a whole, provides us with the ability to meet the City's needs in a timely and
cost effective manner.
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Mr. Alan Demis, Director
May 23, 1989
Page Three
Raymond James welcomes the opportunity to serve Clearwater, Florida as Financial Advisor. We
are available to meet with you at your convenience to discuss our services and qualifications.
Thank you for your consideration.
Sincerely,
RAYMOND JAMES & ASSOCIATES, INC..
~~~~
Van C. Sayler
First Vice President
Public Finance
VCSjmpm
RAYMOND JAMES
& ASSOCIATES. INC.
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TABLE OF CONTENTS
SECTION
Letter of Transmittal
Plan of Financing I
Firm Qualifications II
Firm Personnel III
Contract and Compensation IV
Conflict of Interest V
Annual Report VI
City of Clearwater, Florida
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PLAN OF FINANCING
For each specified facility/program, the nnn shall develop the plan of financing in consultation
with the City Manager, City officials, the external auditor, consulting engineers and the City's
bond counseL The plan will give consideration to engineering and feasibility studies of proposed
projects, revenue projections and the existing corporate, financial and legal structure of the City.
In this connection, the proposal should:
a. Indicate the steps your fmn would follow in developing a fmancial plan and
duties and responsibilities that would be perfonned and assumed at each step.
Raymond James & Associates, Inc. will, as Financial Advisor, provide a comprehensive
range of services including, but not limited to, those listed below. Weare prepared to provide the
City with a full scope of Financial Advisory services that will assist its staff in developing and
implementing financing alternatives to meet long-term capital requirements. If selected as
Financial Advisor, Raymond James & Associates will not participate in an underwriting capacity
on any Clearwater financings for the duration of the contract.
1. Review existing debt structure and financial resources to determine available
borrowing capacity and the desirability of refinancing for any or all of the existing debt. Changes
in the financial markets, tax laws and the City's revenue base warrant periodic reviews of
Clearwater's debt structure.
2. Participate as needed in developing the financing plan and cash flow projections
for the City's capital improvements program. Eleded officials and their staffs have a public ob-
ligation to carefully plan each SOUFOO of revenue and its use. This encourages, efficiency and
discmJiFages an over issuance of debt
3. Review existing and pliope5ed loan pools and otheli "non-traditional" financing
options to determine their desirability.
4. Recommend appropriate financial structures for proposed projects and pFovid~
the City with information about the structure of financing programs used by othe:r issuers. Financ-
ing should fit the project to ensure its success and minimize its impact on other projects. Where
appropriate, we will inform the City of the financing programs used by other issuers.
5. Coordinate work with the Members of the City Commission, staff, and appropri-
ate counsel, regarding the financial and security provisions of the financings. Attend all relevant
meetings.
We will recommend the necessary provisions and covenants of the City of Clearwater to
be contained in the fmancing documents including but not limited to, bond amounts, dates,
maturities, interest rates, redemption provisions, flow of funds, debt service coverage require-
ments, reserve funds, rates and charges, security pledges, and conditions relating to the issuance
of any additional bonds.
City of Clearwater, Florida
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6. AdVise the City of current and expected market conditions and timing and
marketing of bond issues. Raymond James & Associates is continuously involved in underwriting
and marketing municipal issues and thus maintains a current market perspective.
7. Assist Clearwater in establishing its rating and coordinate applications for future
credit ratings in order to obtain the highest possible credit rating. If necessary, we will organize
and participate in a presentation directly to the rating agencies.
8. Assist the City in the application for municipal bond insurance and other credit
enhancement providers (as appropriate), and coordinate the flow of information to the insurers
in a timely manner.
9. Prepare the official statement in conjunction with bond counsel and arrange for
the widest possible distribution of the official statement to bond underwriters and investors.
10. Determine the method of sale, either public, private, or negotiated.
11. On a public sale, prepare bid request/notice of sale, assist with preparation of
request for proposal for underwriters, and assist in the interview and selection of underwriters.
12. AdVise as to whether to accept or reject the offer of the underwriters to purchase
the issue. By maintaining a daily trading position in municipal issues in Florida and throughout
the United States, we are able to analyze which frrms are providing the most thorough marketing
selVices and the best prices.
13. Assist the City in selecting trustees, paying agents, printers, and other bond
services. Given today's market, substantial savings are possible when these services are carefully
selected.
14. Assist the City at the bond closing and coordinate printing, signing and delivery
of bonds, and arrange for the investment of the proceeds of the bond sale in compliance with
arbitrage regulations. We believe that the closing should be a smooth process where each
participant clearly understands their role and Clearwater's funds are transferred to the appropri-
ate accounts for investment and disbursement.
15. Advise the City on proposed and actual changes in tax laws and changes in
financial markets that could affect Clearwater's financing plans.
The above list is not all-inclusive, but rather, a very brief summary of our financial
advisory services. We are available to define our scope of services in greater detail at your
convenience. Our highest priority is helping our clients reach their financial goals.
City of Clearwater, Florida
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b. Describe the technical and legal support services available to your fmn and
indicate how they would be utilized in the formulation of the financing plan.
As the largest investment banking/securities firm headquartered in Florida, Raymond
James possess a wealth of technical and legal support services which would be available to the City
to develop and support its financing plan. Through our trading desk we have instant market access
and information as well as subscriptions to daily market journals. Our research department tracks
broad economic trends, especially as they impact Florida and the Southeast.
Our public finance department itself subscribes to all of the major industry journals and
magazines which reflect trends and innovations in the municipal finance industry. Our experience
with a large variety of issues and issuers also provides a wealth of support which is available to the
City of Clearwater.
c. Indicate the extent to which your firm would consider alternatives to traditional
municipal bonds in developing the financing plan; describe in detail your firm's experience,
naming firm's members and other personnel involved in successfully designing and implementing
alternative financing for municipal clients.
Raymond James has been involved in a number of innovative and non-bond financing
techniques. One entailed the use of an annual lease structure in the Hernando County Public
Facilities Financing Authority to finance a jail in Hernando County. Other innovations by
Raymond James OJ prineipals in the hbnE: FinanE:e Department include the first use of the Loans
to Lenders structure in a multi-family mortgage revenue bond issue; first multi-county, multi-
family mortgage revenue bond issue using interlocal agreements; and the first use of a graduated
payment mortgage in a Florida single-family revenue bond issue.
The diverse background of Raymond James' Public Finance Staff enables us to provide
professional advice on state and federal grants, pay-as-you-go programs, privatization and other
funding alternatives. We subscribe to numerous financial, accounting, legal, and governmental
publications to better inform our clients. The following briefly describes certain financing
innovations with which Raymond James has recent experience.
Tax Exempt Lease Financing: Raymond James served as Underwriter to Hernando
County and structured the financing of the County's jail project through the creation ofa non-profit
corporation and corresponding lease agreement. The structure enabled the County to mortgage
both the facilities and property and thus avoid pledging a specific source of revenue.
MultiMode Bonds: MultiMode bonds are a fairly new development in the tax exempt
market and represent an attempt to push the state of the art to the utmost with which tax counsel
is comfortable. Basically, a multimode bond combines daily, weekly, monthly, annual and 10ng-
City of Cleanvater, Florida
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term fIxed-rate debt all in one instrument structured to be outstanding for a thirty or forty-year
term. The trust indenture provides that bonds can be sold for various periods of time based upon
either market conditions or the discretion of the issuer. For example, on a $50,000,000 issue,
$10,000,000 can be sold as daily adjustable rate bonds, $10,000,000 as weekly adjustable,
$10,000,000 as annual tender bonds, 10,000,000 as five-year put bonds, and $10,000,000 as thirty-
year fixed rate bonds. At various times while the debt is outstanding, the bonds are remarketed
for different periods of time in order to optimize the interest rate based upon investor demands.
Tax counsel would need to be consulted carefully before pursuing multimode bonds to
make sure that they are comfortable with the proposed structure.
Special Assessment in Lieu of Impact Fees: Raymond James has acted as senior
managing underwriter in the issuance of bonds to finance a regional sewer plant for Indian River
County. Residents of the City of Sebastian and nearby unincorporated areas are agreeing to the
voluntary imposition of special assessments in the amount of current impact fees. The special
assessments will be payable over a ten-year period and will be used to back an issue of bonds, the
proceeds of which will be used to construct the regional sewer plant and collection system. The
bonds will bear an attractive interest rate due to the relatively strong credit of the underlying
properties and the collection mechanism.
Collection of Special Assessments Through Regular Property Tax Bill: Special Assess-
ment Bonds are being used more frequently by cities and counties throughout the State to fInance
infrastructure needs. To improve the credit quality of these bonds, Raymond James has designed
a system in compliance with Florida Statutes wherein the special assessment is collected on the
regular county and city property tax bill. Because of the process in which tax certifIcates are sold,
substantial liquidity is provided to the bond holders in the event of a default in payment of the
special assessments. This improves the credit quality of the special assessment bond which in turn
helps lower the cost of borrowing.
d. For each debt issue, the rmn shall recommend the method of sale. Describe typical
circumstances under which your rmn would recommend utilization of each method (competitive
and negotiated). Indicate the role your finn would playas financial advisor under each alterna-
tive method of sale. Describe in detail your finn's experience with each method of sale.
Municipalities have two alternate underwriting procedures to evaluate and then choose
between when issuing bonds, either a competitive bid or a negotiated sale. Depending on the
factors involved in the bond issue, one method may be preferred over the other. In a negotiated
sale, the investment banker obtains the exclusive right to package, underwrite and distribute the
new issue. In a competitive bid, a public auction is held in which a bond issue is sold to the
underwriter whose bid results in the lowest interest cost to the issuer.
City of Clearwater, Florida
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Neeotiated Sale
The underwriter in a negotiated sale is under an exclusive agreement with the issuer. The
primary points of negotiation are the coupon rates of the bonds and the purchase price. In a
negotiated sale, the underwriter takes on various origination duties that may include the following:
developing a financial plan, preparing the prospectus and other sales documents, securing a credit
rating, establishing a sale date, and providing general financial advice regarding the structure of
the issue and the use of the proceeds. During this origination phase, the underwriter may presell
a portion of the issue while examining marketing conditions.
The risk incurred by the underwriter in a negotiated sale is less than that borne in a
competitive bid. Since the underwriter has the advantage of evaluating market conditions and
assessing presale information, the underwriter may decide to postpone or accelerate the sale of the
issue.
The costs associated with this type of sale may be greater due to the added services
provided with origination and due to the monopolistic status. However, because of the presale
marketing, the underwriter can establish the issue's market equilibrium price. Therefore, even if
a negotiated sale results in higher costs, the costs are due to additional services provided which
benefit the issuer.
Competitive Bid
A competitive bid is a method of submitting proposals for the purchase of a new issue of
municipal securities by which the award is made to the underwriter presenting the best bid
according to criteria established by the issuer.
As opposed to a negotiated sale, no origination services are provided in a competitive
bid. In addition, the risk borne by the competitive bidder is greater due to the quick underwriting
procedure. Presale marketing is kept to a minimum resulting in greater rjsk. The cost savings to
the issuer, however, does increase with a greater number of bids, resulting in lower interest rates.
Detenninine the 'J.Ype of Sale
There are six factors to consider when evaluating an issue in order to determine the type
of sale that would most benefit the issuer. If any of these six factors is present, a negotiated sale
should be used.
1. A large issue:
Larger issues require more aggressive marketing to attract the attention of retail sales forces.
During a negotiated sale, the underwriter has the time to pursue the marketing required.
City of Clearwater, Florida
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2. The timing of the issue:
During unstable market conditions, i.e., rates changing from day to day, a negotiated sale will assist
in pinpointing a time for successful market entry. The underwriter can evaluate the situation and
postpone or accelerate the issue as necessary.
3. A complex or innovative structure:
With this type of issue, the negotiated underwriter offers ample opportunity to explain the
transaction to the marketplace to target buyers.
4. The rating of the issue:
If the rating of the issuer is expected to be low or if an upgraded rating is desired, negotiated
financing offers the added rating analysis expertise.
5. A "Story Bond":
A story bond is one that is not only complex, but one in which the issuer may have experienced
significant political or economic changes, or newsworthy and complicated construction projects.
In this case, a negotiated underwriter can better explain these unusual circumstances to the
marketplace prior to the date of issue.
6. A new issuer or administration:
If either the issuer or the administration is new, it is important to create a positive image in order
to maintain a strong market identification and a prominent continuing position in the secondary
market A negotiated sale could produce this type of image. .
e. For each debt issue, the firm shall facilitate the sale and marketing of the City's
debt. Describe the activities your firm would undertake in the performance of this function and
the firm's experience with such activities.
The design and implementation of a marketing strategy tailored to a specific bond issue
is a key element in a financing plan. A successful marketing strategy will give the issue the widest
possible exposure in the marketplace. We will assist the Underwriter structure and implement a
marketing strategy consisting of both a pre-marketing phase as well as the actual marketing effort.
Pre-Marketing Strategy
The pre-marketing strategy of an issue is a key element ina fmancing since such astrategy
will insure the broadest dissemination of information among both retail and institutional investors.
Presenting the issue to the largest possible group of investors will provide the City of Clearwater
City of Clearwater, Florida
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the lowest possible interest rate. Raymond James, with its extensive network of retail and
institutional sales representatives, is in a unique position to implement a pre-marketing strategy
which will ensure that the City's issue has the widest possible exposure.
We will ensure that a broad-based effort will be made to educate both the institutional
sales force and the retail sales force as to the security provisions, projected cash flows, and strength
of the issue. Such efforts have historically resulted in significant institutional orders which have
enhanced retail demand. Due to the strong preference of retail investors for issues in their own
region, our strategy will concentrate distribution efforts in Florida. However, investors in other
states such as New York and California, are also major purchasers of municipal bonds and will thus
be contacted.
We believe that thoroughly educating the underwriter's sales force is also important to
the successful placement of an issue. Thus, Raymond James will help accomplish the following
marketing objectives:
Marketing Period:
Formulate a specific marketing plan
Generate retail sales memoranda
Generate sales force memoranda
Pricing Period:
Utilize advanced telecommunications systems to notify sales personnel of the
offering.
Coordinate marketing efforts among branch offices.
Provide for the broadest market information on the issue to ensure the best
possible interest rate.
Our retail and institutional account executives are trained to sell tax-exempt debt securities
through three vehicles: (1) written materials circulated to all branch offices; (2) electronic
telecommunications which are easily accessible to our account executives and which convey
information on new products and upcoming issues; and (3) a network of municipal sales liaisons
who address investor questions and promote sales.
We regularly send memoranda on municipal products to our sales representatives to keep
them informed as to the structure of current debt issues and of recent market developments. This
written material is supplemented with brochures sent directly to potential investors, as well as with
specific memoranda containing all relevant issue information (e.g., date, size, security, issuer, etc.).
The preliminary official statement is the most detailed marketing document distributed in
connection with new offerings and, as such, will be widely circulated within the Raymond James
sales network.
City of Clearwater, Florida
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Various forms of telecommunications are used to inform our institutional and retail
account executives about debt issues. These include conference calls, electronic mail and market
updates, all conveying up-to-date information concerning new issues. Our network of retail and
institutional liaisons keeps Raymond James account executives informed regarding coverage for
new offerings and existing issues. Stationed at our home office in S1. Petersburg, they communi-
cate directly with municipal coordinators and account executives in each branch office explaining
new types of securities, upcoming issues, and pricing and structuring developments.
In the case of the City's issue, this group would help Raymond James' public finance and
underwriting professionals organize sales strategy and informational meetings for key institutional
and retail investors in Florida and elsewhere. The overall investment community could be alerted
- at the City's option - to its debt offering by pre-sale advertisements in the financial press, including
the Bond Buyer, the New York Times, and the Wall Street Journal. as well as in local news
publications. These advertisements would describe the security and the structure of the program,
and provide investors with contacts from whom they would be able to acquire additional
information.
Marketing Effort
The primary focus of the marketing effort is the distribution of the issue to both retail and
institutional investors. Retail sales is the sale of securities to individuals and households and
institutional sales is the sale of securities to investors such as banks, insurance companies, etc. One
of Raymond James' key strengths in public finance is our ability to distribute bonds through both
our retail and institutional sales force. Our retail sales are handled through our network of 464
branch offices in 47 states, 70 of which are located in Florida
Our total sales force consists of over 1,800 registered representatives ine1uding 490 in the
State of Florida. This large distribution network gives us the ability to market the City of
Clearwater's issue, not only in Florida, but throughout the entire country as wen. A supporting
factor is the capital that Raymond James can bring to an offering. Raymond James Financial
Corporation's total capital of $75,000,000 is the largest capital base of any securities firm
headquartered in Florida. Our financial strength is further evidenced by an asset base of approxi-
mately $855,000,000 and net income which has increased 200% from fiscal year 1984.
Our institutional sales department, located in our headquarters in 51. Petersburg, is staffed
by 15 registered representatives who place municipal securities with institutional investors. These
sales professionals are in continuous contact wiill major institutional investors both in Florida and
across the country. Their ability to monitor the institutional market is a key to our successful
growth in the municipal market. We will utilize this expertise to the fullest extent possible when
assisting in the marketing strategy for the City's issues.
City of Cleanvater, Florida
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f. In situations involving the consideration of the feasibility of refinancing the City's
existing debt as well as the actual such refinancing, the firm would be expected to play an active
role. Describe the duties and responsibilities your firm would normally perform and assume in
a refunding operation and indicate in detail your firm's experience in this area.
When considering the feasibility of refinancing existing debt, several factors need to be
accounted for. Existing debt is usually refunded to reduce debt service and thus realize a present
value savings. Debt may also be refunded, however, to eliminate restrictive bond convanents.
A Financial Advisor needs to have both practical experience and ready access to market
information to effectively assist in the refunding analysis. We have assisted in refunding a large
number of issues, most recently a $22,605,000 issue for the City of Miami. In this refunding we
worked closely with the Underwriter to ensure that the lowest possible interest rate was obtained.
While this meant continual monitoring of the market for several weeks and the analysis of many
different structures, the final refunding resulted in a net present value savings of over half a million
dollars for the City.
In addition to constant market information, Raymond James has technical experience in
developing and implementing techniques to avoid the transferred proceeds penalty. Possible
techniques include the following:
1) Recapture of Negative Arbitrage
This technique is possible where the old escrow was invested at less than the bond yield'. In
other words, the old escrow was a "market limited" escrow. The negative arbitrage created by the
market limited rate on the old escrow is calculated and present valued. This amount is then simply
deducted from the new transferred proceeds penalty.
2) Equity Flip Flop
The equity flip flop uses existing capital improvement funds held by the issuer in various-
non-bond issue related funds and accounts to fund the new escrow. One day after this old issue
has been refunded with this equity escrow, a new bond issue is closed to reimburse the issuer for
these funds.
City of Clearwater, Florida
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3) Escrow Yield Restructure
The escrow yield restructure technique is possible when the old escrow is invested primarily
in open market securities. The issuer, prior to the close of the new bond issue, liquidates all of the
open market securities in the old escrow and replaces them with new open market securities or
SLGS with a current yield. This has the effect of reducing the transferred proceeds penalty. If the
old issue was also a refunding of a refunding then some readjustment of the old transferred
proceeds calculation will probably be necessary and will probably increase the new transferred
proceeds penalty.
4) Escrow Securities Transfer
Under this option an old escrow with open markets is liquidated and the proceeds are
reinvested in the new escrow to effect the new refunding. The proceeds of the new refunding bonds
are palced in the old escrow to bring it back up to its required amounts. The readjustment noted
with the Escrow Yield Restructure will also be required here.
Our abilities in refinancing include in-house computer capabilities to structure and run the cash
flows required to demonstrate savings as well as compliance with the necessary tax restrictions.
This, along with our market information, allows us to provide the City with a variety of options as
regards the structure of new debt as well as the savings to accrue from refundings.
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City of Clearwater, Florida
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g. Pursuant to the City's request, the linn shall provide advice regarding traditional
financing methods, including governmental, private activity and industrial development bond
financing and refinancing, as well as innovative financing techniques such as participation in
loan pools, variable rate demand instruments, lease purchase, sale and leaseback arrangements
and any other creative and innovative financing devices that may emerge from time to time.
a. Serial Bonds
Although serial bonds are a common municipal bond feature, Raymond James has been
successful in the use of a retail term or serial bond. The concept relates to the relative yields
necessary in order to market an issue to institutional versus retail investors. Traditionally,
institutional investors require a higher yield, but the sales commission on such a transaction is
significantly lower due to the large size of the orders. Retail investors, on the other hand, accept
a lower yield but the sales cost is higher in order to sell the bonds in smaller lots (for example,
$25,000 to $50,000). By including a retail maturity in the issue, you can diversify the purchasers
of the issue and achieve a lower overall interest costs. The retail term would be priced at a net yield
including sales commissions slightly less than the overall yield on the institutional term. One
additional benefit of the option is that retail investors are willing to accept shorter call protection
than institutional investors. For example, the typical institutional investor requests 10 years of no
call option. A retail term could easily be sold with eight years and possible as few as six years of
call protection. Due to the advance refunding limitations under the new tax act, this shorter call
protection period could allow the Board to complete a refunding of its bonds when it would
otherwise not be possible.
b. Bond Anticipation Notes
Bond Anticipation Notes (BAN) are primarily useful for three reasons. BAN's provide
initial financing which tan be used until the project is complete. Once all of the costs are known,
long-term bonds can be issued. BAN's can also be used to finance several construction projects
which are then consolidated into one bond issue. The other major use for BAN's the flexibility they
provide in terms of market timing. By issuing BAN's, the project can commence and the final issue
€an be timed to lock-in favorable rates.
~. Bond Ins.nmce
Raymond James & Associates has had substantial experience in obtaining municipal
bond insurance, both as underwriter and as financial advisor. One of our most notable successes
was obtaining FGIC Bond Insurance for the Hernando County Public Facilities Corporation
$7,565,000 Revenue Bond Issue. This issue was structured by Raymond James for Hernando
County in a manner which circumvented the lack of revenue sources necessary for the bonds
required to fund all of their capital programs. They wanted to build both a jail and a courthouse
expansion, but their sales tax revenue would not provide sufficient coverage for both. Therefore,
we structured the jail issue as a lease transaction. The lease obligation by Hernando County is a
year-to-year, annually-renewable pledge. In other words, in any year Hernando County cannot
make the payment on the bonds, the Trustee's sole recourse is to sell the jail project. We are proud
City of Clearwater, Florida
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that we were able to obtain FGICbond insurance on this structure and subsequently achieve a very
low rate of interest.
This issue represents one of the first lease transactions sold in Florida.
We also recently acted as financial advisor in the very innovative bond insurance
transaction for the Housing Finance Authority of Polk County. Polk County sold $35,000,000 of
bonds in 1980, and the reserve account was invested in 13-7/8% long-term U.S. Treasury Bonds.
The Authority desired to obtain some of those funds available as a result of this substantial
depreciation of the dollar value of that treasury bond. Raymond James designed a transaction
whereby bond insurance was obtained on the outstanding bonds (which were not insured
originally). As a result of the bond insurance, the Authority was able to obtain $4,000,000 cash
from the existing issue.
d. Letter of Credit Bank
Issuers benefit through lower costs of borrowing, broader marketability, and the fact that
the bonds need to be issued only once and do not have the reissuance problems associated with
commercial paper.
Letters of Credit are often used in situations where the credit rating on the proposed debt
is less than investment grade or low end investment grade. Letters of Credit are also used to
provide liquidity in the variable rate transactions. In the COP market in Florida, Letter of Credit
Banks have been willing to guarantee issues whereas the traditional bond insurers have not been
willing to do so.
e~ Capital AppredatioD Bonds
As the name implies, these long-term bonds, including the category referred to as zero
coupon bonds, are priced at a discount and thus bear interest at rates substantially below current
market yields. The zero coupon variety pays no interest. An investor's return consists entirely of
price appreciation. Using discount bonds can lower an issuer's interest cost and can be used to
alter an issuer's overall debt payment structure.
f. Tax-exempt lease/purchase financing
Viewed by issuers and investors as a flexible financing instrument, this technique has
become one of the fastest growing methods for state and local governments to fmance buildings
and equipment. It provides an attractive alternative to general obligation debt.
The primary means of implementing this method is through the issuance of lease purchase
revenue bonds and certificates of participation. Generally, the state or local government will
select or create an appropriate entity to issue the bonds on its behalf. This entity then issues the
lease purchase revenue bonds or certificates of participation and applies the proceeds to planned
projects. The government uses the facility and its lease payments to the issuing entity serve as
City of Clearwater, Florida
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security for the bonds. These lease payments are assigned to a trustee and are paid through to the
bondholders. The interest portion of the payments is exempt from federal income tax.
Lease purchase bond issues are usually rated one full grade below the general obligation
rating of the governmental body making the lease payments, reflecting their concern with the risk
of non-appropriation. In assigning a rating, the analysts are primarily concerned with the leased
project's economic viability.
Because of the added degree of risk, lease purchase bonds often are issued with rates
slightly higher than the lessee/government's general obligation interest costs. The differential will
vary depending on the degree of certainty surrounding the lease payments. This added interest
cost is often outweighed by quicker receipt of funds and earlier start-up of construction, and the
off balance sheet nature of the financing.
City of Clearwater, Florida
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,
FIRM OUALIFICATIONS
Indicate size of firm, organizational structure, location of its management and charter authori-
zation and licenses to do business in the State of Florida.
Raymond James & Associates, Inc.'s corporate headquarters is located in St. Petersburg,
Florida. The firm maintains all of the required state and national licenses and professional
memberships including memberShip in the New York Stock Exchange and SIPC. The firm
maintains an extensive network of offices throughout the state, the United States of America,
Switzerland and France, which ranks Raymond James & Associates, Inc. as the tenth largest
securities firm in the country.
Raymond James & Associates, Inc.
Raymond James Financial Center
880 Carillon Parkway
Public Finance Department
4th Floor - West
St. Petersburg, Florida 33716
Office Telephone Number: (813) 573-8255
Telecopier Number: (813) 573-8315
This office is the firm's headquarters in which over 750 people are employed. Raymond
James & Associates Fixed Income Department employs over 70 professionals.
City of Clearwater, Florida
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a. Describe in general your firm's national, statewide and local service capabilities.
Raymond James & Associates, Inc., headquartered in St. Petersburg, Florida, is uniquely
qualified to best serve the City of Clearwater. The team concentrates its effort on the Florida
market and utilizes this vast knowledge and experience to best serve our clients.
RAYMOND .JAMES & ASSOCIATES, INC.
Raymond James & Associates was founded in 1962 with the objective of providing a
comprehensive range of investment opportunities to investors, while maintaining a policy of
professional integrity. The firm has grown to its present size and organization by adhering to what
has been its primary philosophy for the past 2-6 years, that of keeping the client's financial wen-
being foremost.
Raymond James is the largest Florida-based New York Stock Exchange member firm. The
c-ompanyalso holds membership in both the American and Philadelphia Stock Exchanges, as well
as in the Chicago Board Options HKchange.
Raymond James & Associates is ODe of 14 subsidiaries of Raymond James Financial, Inc., a
publicly-held c-ompany whose stock is traded on the New York Stock Exchange under the symbol
RJF. Raymond James & Associates works closely with Raymond James Financial's other
investment firm subsidiaries, including Investment Management & Research, Inc. (IM&R), and
Robert Thomas Securities, Inc., as wen as with the asset management subsidiaries, including Eagle
Asset Management, Inc., to provide a fun range of comprehensive financial services to its clients.
Overall, Raymond James Financial's retail subsidiaries are ranked ninth among the nation's
securities firms based on the number of sales representatives. Those firms have offices throughout
the continental U.S., as well as in Hawaii, Paris and Geneva. It has capital in excess of $75 million,
total assets exceeding $855 million and currently manages over $2.4 billion in funds for various
investors. Our extensive sales force provides a national network for placing tax-exempt and
taxable issues, and the Company's strong financial position guarantees the ability to bring a
financing to completion, even in times of adverse market conditions.
THE FIXED INCOME DEPARTMENT
Raymond James & Associates' Fixed Income Department is structured into six functional
areas, employing 70 people: The Public Finance Department, Municipal Syndicate, Institution-
al Sales, Municipal Sales and Marketing, Taxable Fixed Income, and High Yield Corporate Bonds.
City of Cleanvater, Florida
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Fixed Income Department
Public Taxable
Institutional rued
rlllllDCe Sales Iacome
Municipal ~ Municipal i
High Yield
Syndicate Sales aod Corporate
Muketing Bonds
Management of Rayn;lOnd James & Associates, in cooperation with the various departments has
determined that combining the taxable and tax-exempt fixed income subdepartments allows us to
be most effective when implementing new strategies; including marketing taxable municipal
securities and distribution of municipal securities in overseas markets.
PubUcFinanc-e Department: Members of the Public Finance Staffbrin,gconsiderable eXperience
to municipal issues. The Department is staffed with eight professionals and operates in
conjunction with other Raymond James Financial subsidiaries in providing comprehensive
underwriting and financial advisory services to local governments and other governmental
agencies in Florida and throughout the country. These services include:
* Investment banking and underwriting services for bonds, notes and leases, both tax-
exempt and taxable;
*
Financial consulting services;
*
Investment of governmental funds;
*
Pension fund management.
The Public Finance Department employs 9 professionals broken down as follows:
First Vice President 1
Vice Presidents 2
Assistant Vice Presidents 3
Associates 2
Analyst 1
City of Clearwater, Florida
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Public Finance professionals also interact with Raymond James & Associates' Corpo-
rate Finance Department which specializes in traditional investment banking services including,
mergers and acquisitions, debt and equity offering. This sharing of resources and ideas enables
Raymond James to produce innovative financing ideas specifically tailored to a client's needs.
Municipal Syndicate Department: The Public Finance Department works very closely
with the Municipal Syndicate Department in establishing the terms, call provisions, and structure
of our new issues. These professionals are involved on a daily basis in the distribution and
management of syndicates for new issues sold on a negotiated or competitive basis. Working in
conjunction with the Public Finance Department and the issuer, the Municipal Syndicate
Department determines the optimal method of structuring the underwriting syndicate. This may
be a Florida-based syndicate, a national underwriting syndicate or a selling group for the new issue.
The Department then directs the distribution of those bonds to investors and other underwriters
during the offering period.
Fixed Income Institutional Sales: This area is responsible for the placement of new
issues and secondary market items with various institutional investors. Under our structure, these
sales professionals handle the saJe of both tax-exempt and taxable fixed income securities. They
'cover such investors as life and casualty insurance companies, banks and thrifts, mutual funds,
credit unions and corporations. This coverage provides a balance with the retail distribution
network, allowing a full marketing of an Issuer's securities to all potential buyers in order to
achieve the best distribution. This area coordinates the resources of over 40 professionals.
Retail Municipal Sales and Marketing: The Marketing Department is responsible for
providing the day-to-day support to our sales force in the distribution of all municipal securities.
This department is staffed by 12 professionals. This day-to-day participation in the nationwide
distribution of all types of municipal securities is invaluable in providing information to the Public
Finance Department in structuring a marketing plan for new issues. Nationwide buying prefer-
ences and investor concerns are monitored and the information supplied to ourPublic Finance and
Municipal Syndicate Department to keep them appraised of day-to-day changes in the market. In
addition, the traders in this Department are responsible for making markets in the various
municipal securities distributed by the firm, fully supporting the price of the security, which allows
for better future market access.
Taxable Fixed Income: This Department handles various functions relating to the
distribution, sale, secondary market support, and research relating to a variety of taxable fIXed
income investments. These securities include Treasury Bonds, Mortgage Backed Securities,
Government Agencies, Corporate Bonds and other similar investments. This area provides
support to the Public Finance Department in several areas. When determining investment
opportunities for bond proceeds used for construction or for a refunding escrow, Public Finance
personnel draw on the resources of the Taxable Fixed Income Department to evaluate various
investment opportunities to maximize yields consistent with safety standards set forth in the
financing documents. When pricing taxable municipal securities, they are able to draw on their
experience showing pricing levels and investor preference for these securities. This department
has 12 professionals supporting its functions.
City of Clearwater, Florida
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High Yield Corporate Bonds: This Department is responsible for research and
distribution of high yield corporate bonds, often referred to as Junk Bonds. By thorough research
of the credit worthiness of the various issuers, they are able to determine those securities which are
yielding interest rates in excess of those that are warranted in light of their actual credit quality.
These bonds are then marketed to various institutional and retail investors.
ASSET MANAGEMENT
Eagle Asset Management, Inc., is a professional investment advisor which manages in
excess of $1.4 billion for clients. Eagle offers individualized stock and bond portfolio management
for state and local governments (including $130,000,000 for the State of Florida), trusts, founda-
tions, pension and profit sharing plans, corporations, and individuals. Eagle's professionals bring
experienced and proven investment skills while tailoring each portfolio to meet a client's specific
needs. Their services are available to assist in structuring construction funds, escrows and other
investment portfolios for Raymond James' clients.
RESEARCH
The Research Department is charged with analysis of economic and business factors in
Florida and the entire country, and applying that knowledge to the in-depth analysis of corpora-
tions. This requires analyzing past and projecting future financial records as well as interviewing
management. The goal is to identify companies whose securities will out-perform the market over
a reasonable period of time. The Florida Bureau of the Research Department is responsible for
in-depth economic and demographic research of Florida and its economy. This information is
used by the Fixed Income Department in educating institutional investors in the credit quality of
various Florida issuers.
RETAIL DISTRIBUTION NE1WORK
Raymond lQ/lJQ FIIIIlIUial, Inc.
Raymond James Investment Robert Thomas
& Associates, . Management & Securities, Inc.
Ioe. Research, Ioe.
City of Clearwater, Florida
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b. Describe resources available to your firm such as computer capability, access to
market information, personnel with specialized knowledge and legal expertise in the governmen-
tal (including tax-exempt) field.
Our analytical area is headed by Ms. Kathleen Boylson and includes the following
individuals: '
Anne Cope - Analyst
Marsha Miner - Graphics
Tina Lucido - Research
The Analytical Department, using state-of-the-art computer hardware and software and
supported by extensive practical and theoretical experience have the following capabilities:
o Ability to produce and analyze various debt service structures such as level,
accelerated, deferred, and wrapped amortization solutions.
o Ability to size new money issues with the investment of proceeds calculated at the
necessary yields.
o Ability to run various types of refunding issues that involve transferred proceeds
and techniques to diminish this penalty.
o Ability to calculate the most efficient restricted escrow security investments in re-
funding issues using either open market securities or SLG's.
o Ability to structure issues using different types of bonds such as super sinkers for
early prepayment or CAB's for deferral of debt service.
o Ability to interface software with those of well known verification providers.
o Ability to maintain extensive databases of information concerning issuing au-
thorities for comparative purposes.
o Ability to develop spreadsheets for analysis of bond proceeds investments.
o Ability to graph statistical information.
o Ability to generate presentation materials for reports to insurers, rating agencies,
other authorities, the press and the public.
City of Cleanvater, Florida
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Our abilities include in-house computer capabilities to structure and run the cash flows
required to demonstrate proposed debt service schedules, savings in refundings as well as
compliance with the necessary tax restrictions. This allows us to provide the City with a variety of
options regarding the structure of new debt as well as the savings to accrue from refundings. In
addition, the Raymond James Public Staff has considerable experience in dealing with rating
agencies. The securing, enhancing, and maintaining an issuer's rating is one of the most important
components of a financial advisor's function.. This extensive experience has assisted numerous
Florida issuers in establishing and maintaining satisfactory credit ratings.
Raymond James maintains the largest trading desk in the Southeast at our St. Petersburg
headquarters. Through our constant trading and monitoring we gain immediate indications of
trends, changes and market acceptance. This information is invaluable in our role as Financial
Advisor since it allows us to instantly analyze an underwriter's proposed structure or pricing and
thereby obtain the optimal issue for the City.
Our firm actively participates in the primary and secondary market for tax-exempt and
taxable municipal securities. In the primary market, in addition to our Public Finance origination
activities, we are a member of the underwriting syndicate on most Florida and many other issues
being sold in the new issue market. In the secondary market we maintain a constant position in
both tax-exempt and taxable issues through our trading department. The purpose of these
activities is to create the products that our retail and institutional sales force need to satisfy their
customers demand for municipal securities. With over 1,800 salespersons we are constantly in the
market. This market presence has the added benefit of providing our Public Finance department
with immediate information on market levels and, more importantly, the types and features of
securities most in demand at any time. This can be very useful to an issuer.
An example is our ability to sell shorter call protection than that offered by many other
firms. While the standard optional call provision is no call for 10 years and then a 3% penalty, we
have been successfully selling issues with only 8 years of call protection and a 2% penalty. Weare
currently working on improving this as an offset to the advance refunding restrictions contained
in the Tax Reform Act.
Raymond J ames has recently been an active participant in the municipal futures market.
One of our primary goals has been to develop techniques whereby Issuers can access this market
to lock in attractive interest rates without incurring substantial risk. Separately, Raymond James
is one of the largest retailers of Municipal unit trusts in the Country.
In addition to the market information it allows, our St. Petersburg trading desk is staffed
by professionals with a wealth of experience in the governmental, corporate and municipal
securities industry.
The sharing of resources and financial techniques among departments enables us to
remain abreast of the latest advancements in the field. Our professionals in Public Finance are
then able to apply these techniques in a manner which will help Clearwater to structure and
implement its financing plan in an efficient, cost effective way.
City of Clearwater, Florida
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Eagle Asset Management offers full-service investment management services and
provides equity, fixed income and cash management services to a broad range of clients, including
pension and profit sharing plans, governmental bodies,institutions, charitable organizations, and
various types of trusts and individuals. Our Public Finance staff works with Eagle to assist clients
in developing investment strategies for various funds required under bond covenants. Thisgives
an added dimension to the financial expertise Raymond James can provide.
Our Corporate Finance staff possesses outstanding individual records of academic and
professional achievement and a wealth of cumulative knowledge gained from extensive financing
experience in an environment which reward innovative solutions. Raymond James continues to
look for new methods of financing the needs of Florida's governmental bodies. With our large
corporate finance staff, we are currently researching taxable methods of financing infrastructure
needs so that we are ready to propose solutions to the limitations on tax-exempt financings that
may be expected from the tax-reform process.
We could, as Financial Advisor, provide the City of Clearwater with municipal tax-
exempt and taxable volume information; current interest rate structures of the market; new issue
information; updates on Federal Tax law; updates on State law pertaining to municipal finance;
and general information regarding the industry as a whole.
City of Clearwater, Florida
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c. Describe your firm's experience in serving as a financial advisor to local
governmental units.
Raymond James has served a large num-
ber of Florida Cities, Counties and Authorities
as Financial Advisor or Underwriter. We be-
lieve that our underwriting experience strength-
ens our Financial Advisor capabilities. We have
served the Cities of Miami, Sunrise and Ft. Myers
in the southern part of the state and Santa Rosa
County, Leon County and Lake City in the north-
ern part of the State. In the Tampa Bay area, we
have selVed St Petersburg, Pinellas County, Plant
City, Hernando County and Brooksville as Fi-
nancial Advisor.
We have a wealth of experience dealing
with the legislative and economic constraints
facing Florida municipalities. In addition to
assisting our clients in their bond issues, we have
analyzed alternative financing sources. Such as
loan pools and leases as well developed detailed
long range financing plans. We have also as-
sisted in the evaluation and planning to meet the
state-mandated groWth management plan.
In addition to our state-wide fin~cial
advisory experience, we maintain the tenth larg-
est national distribution network.
Our national presence will provide the
City with access to the up-to-the-minute data
required in assessing financing alternatives that
may be national in scope and require marketwide
information to evaluate. In addition, the credi-
bility and standards valued by rating agencies in
examining an issuer's financial capabilities are
better achieved through a national firm with
strong market presence. Our local presence will
insure prompt and timely attention to the City's
needs.
City of Clearwater, Florida
Raymond James continues to look
for new methods of financing the needs of
Florida governmental bodies. With our large
Corporate fmance staff, we are currently re-
searching taxable methods of financing infra-
structure needs to offer solutions to the limita-
tions on tax-exempt financing that are expected
from the new tax laws.
Our response to section "d" of this
section includes summary lists of our overall
experience and financial advisory experience,
respectively. While we are proud of our per-
formance of serving our clients' best interests
as financial advisor, we believe that our per-
formance as underwriter in the following ex-
amples proves our desire to always serve the
best interests of our clients regardless of our
role.
Credit Ratine Process
Raymond James and Associates feels it
is necessary to understand the rating process
thoroughly in order to best selVe the City of
Clearwater. In general, securing a rating for an
~e involves several sequential steps. Through-
out this process, it is critical that the City's
interest be represented by a financial advisor
possessing a thorough knowledge of general
obligation bond issues such that the City's
strong financial position can be convincingly
demonstrated to the rating agencies.
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To start the process, the financial advisor requests a rating from Moody's and/or Standard
& Poors. The rating agencies, in turn, assign analytical teams to the issue. These teams will
research in-house information concerning the City and will review new material submitted by
Clearwater. This process serves to generate a list of questions and concerns which the analysts will
explore further with both the City and the underwriter. Typically, these questions are answered
by a presentation to the agencies or by a site visit to the City.
1. Hernando County. Florida 1985 Water and Sewer Refundine.
We were hired as Underwriter to refund all County's water and sewer debt. The County's
Financial Advisor, Donald Sheldon & Co. recommended issuing approximately $12,000,000 in
new debt to refund all existing debt including utility acquisition notes from prior utility owners.
Raymond James suggested re-negotiating the terms and rates on the note which lowered the new
bond issue size to $5,845,000. This is an example, where as underwriter, we provided better advice
than the financial advisor, even though our underwriting profits were cut in half. Please call Mr.
Hetrick of Hernando County for more details, (904) 769-5021.
2. .Jackson County. Florida Gas Tax Revenue Bonds, Series 1986.
We were hired by Jackson County in July 1986 to underwrite a $7,000,000 gas tax bond
issue. In November, we recommended to the County, based on our research, that the bond issue
be reduced to $4,800,000 to qualify the County for arbitrage earnings under the "small issuers" ex-
emption of the new tax law. While our underwriting fee decreased by $28,600, the County is ex-
pected to earn approximately $120,??oo in arbitrage profits over the life of the bonds. Please call
Mr. Frank Baker, County Attorney for details (904) 526-3633.
3. City of Zephyrhills. Florida Water and Sewer Refundina:.
We were hired to conduct a utility rate study and underwrite a bond issue. While
Zephyrhills has a large retirement population, there was no public protest to the utility rate
increase and bond issue. The City and Raymond James conducted carefully planed and executed
public hearings to clearly explain the need for the utilities projects. Please call Mr. Holt, City Man-
ager for details, (813) 782-1525.
The above engagements are just three of many examples of our firm's philosophy of serv-
ing our clients' best interest in both our Underwriter and Financial Advisor roles. Raymond James
and Associates did not become Florida's largest securities firm by taking advantage of their clients.
City of Cleanvater, Florida
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d. Please list your most recent clients within the State of Florida, including the names,
addresses and phone numbers of contact persons; briefly describe the work performed for these
clients, including the dollar amount of the issues or other financings.
Raymond James & Associates, Inc. has selVed the following as Financial Advisor:
Jeffrey G. Spies, CPA
Manager Capital F"mancing and Cash Management
City of St. Petersburg
175 F"tfth Street North
Post Office Box 2842
St. Petersburg, Florida 33731
(813) 893-7171
Carlos E. Garcia, CPA
Director of F"mance
City of Miami
City Hall
3500 Pan American Drive
Miami, Florida 33133
(305) 579--6350
Jon M. Henning, Esquire
City Attorney
City of Sunrise
lanO West Oakland Park Boulevard
Sunrise, Florida 33351
(305) 741-2580
Bob Zion
Assistant County Administrator for
Management and Budget
Pinellas County
315 Court Street
Pinellas County Court House
Clearwater, Florida 34616
(813) 462-4586
City of Clearwater, Florida
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Mr. James Lucas
Director of F'mance
West Coast Regional Water Supply Authority
2535 Landmark Drive, Suite 211
Clearwater, Florida 34621
(813) 196-2355
Mr. Gus Schuster
Budget Officer
Santa Rosa County
801 Caroline Street Southeast
Milton, Horida 32470
.(904) 623-0135
Mr. G. Edmund NUDer, U
O1ainnu
Polk Conaty Housing F'mance Autltority
222 Second Street, S.W.
Post Office Box 1665
W"mter Haven, Rorida 33883-1665
(813) 299-4610
. Ms. Nettie M. Draughon
City Manager
City of Plant City
301 North Wheeler Street
Main Street Post Office Box 2538
Plant City, Horida 34289
(813) 752-3125
Mr. Ronnie Minchin
City Clerk
City of Lake City
150 North Alachua Street
Post Office Box 1687
Lake City, Horida 32056
(904) 752-2031
Mr. Sam Hurst
F'mance Director
Leon County
Post Office Box 7lJj
Tallahassee, Horida 32301
(904) 487-1235
City ofCleanvater, Florida
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Raymond James & Associates, Inc
Public Finance Department
Recent Financial Advisor Clients
Issuer
TJtle
Polk County Housing rulance Authority
Single Family Mortgage Revenue Bonds, 1988 Series B
Type Issue
Amount
RJA Role
Sale Date
Housing
10,000,000
Financial Advisor
JUN 1 89
Issuer
TItle
Miami, City of .
General Obligation Refunding Bonds, Series 1981
1'ype Issue
Amount
RJA Role
Sale Date
General
22,605,000
F"mancial Advisor
MAY 1789
Issuer
Title
SL Petersbmg, City of
Public Improvement Revenue Bonds, Series 1989A
Type Issue
Amount
RJA Role
Sale Date
General
9,839,008
F"mancial Advisor
MAR 28 89
Issuer
Title
Sunrise, City of
Public Improvement Revenue Bonds, Series 1989
Type Issue
Amount
RJA Role
Sale Date
General
10,999,641
Financial Advisor
MAR 9 89
Issuer
Title
Sunrise, City of
Utility System Refunding Revenue Bonds, Series 1989
Type Issue
Amount
RJA Role
Sale Date
Water and Sewer
11,292,219
Financial Advisor
FEB 23 89
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Raymond James & Associates, Inc
Public Finance Department
Recent Financial Advisor Clients
Issuer
TItle
Leon County
Capital Improvement and Refunding Revenue Bonds
Type Issue
Amount
RJA Role
Sale Date
General
9,7113,m
Financial Advisor
DEe 31 88
Issuer
Title
Miami. City of
General Obligation Bonds
Type Issue
Amount
RJA Role
Sale Date
General
18,400,000
Financial Advisor
NOV 22 88
Issuer
TItle
Polk County Housing Ymance Authority
Single Family Mortgage Revenue Bonds, 1988 Series B
Type Issue
Amount
RJA Role
Sale Date
Housing
10,000,000
F'mancial Advisor
ocr 5 88
Issuer
Title
Polk County Housing F'mance Authority
Single Family Mortgage Revenue Bonds, 1988 Series A
Type Issue
Amount
RJA Role
Sale Date
Housing
10,000,000
Financial Advisor
ocr 5 88
Issuer
TItle
Ft. Myers, City of
Capital Improvement Revenue Bonds
Type Issue
Amount
RJA Role
Sale Date
General
3,500,000
Financial Advisor
SEP 20 88
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Raymond James & Associates, Inq
Public Finance Department
Recent Financial Advisor Clients
Issuer
TItle
Ft. Myers, City of
Improvement Revenue Bonds, 1988 Series B
Type Issue
Amount
RJA Role
Sale Date
Water and Sewer
10,000,000
Financial Advisor
AUG 30 88
Issuer
Title
Ft. Myers, City of
Improvemeot Revenue Bonds, 1988 Series A
Type Issue
Amount
RJA Role
Sale Date
General
2,950,000
Fmancial Advisor
AUG 30 88
Issuer
Title
St. Petersburg, City of
Utility Tax Revenue Bonds, Series 1988
Type Issue
Amount
RJA Role
Sale Date
General
12,000,000
Fmancial Advisor
JUL 28 88
Issuer
Title
West Coast Regional Water Supply Authority
Refunding Revenue Bonds, Series 1988
Type Issue
Amount
RJA Role
Sale Date
Water and Sewer
9,021,285
Financial Advisor
JUL 12 88
Issuer
TItle
Brooksville, City of
Water and Sewer Revenue Refunding Bonds, Series 1988C
Type Issue
Amount
RJA Role
Sale Date
Water and Sewer
5,450,000
Fmancial Advisor
JUN 23 88
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Raymond James & Associates, Inc
Public Finance Department
Recent Financial Advisor Clients
Issuer
Tille
Brooksville, City of
Water and Sewer Revenue Refunding Bonds, Series 1988B
Type Issue
Amount
RJA Role
Sale Date
Water and Sewer
1,670,000
Fmancial Advisor
JUN 23 88
Issuer
Title
Brooksville,City of
Water and Sewer Revenue Refunding Bonds, Series 1988A
Type Issue
Amount
IDA Role
Sale Date
Water and Sewer
1,355,000
Fmancial Advisor
JUN 23 88
Issuer
Tille
St. Petersburg, City of
Public Improvement Refunding Revenue Bonds, Series 1988A
Type Issue
Amount
RJA Role
Sale Date
General
29,200,000
Financial Advisor
JUN 14 88
Issuer
Tille
Pinellas County
Second Guaranteed Entitlement Revenue Bonds, Series 1988
Type Issue
Amount
RJA Role
Sale Date
General
10,000,000
Fmancial Advisor
MAR 15 88
Issuer
Tille
Huntington, City of
Residential Mortgage Revenue Bonds
Type Issue
Amount
RJA Role
Sale Date
Housing
46,250,000
Fmancial Advisor
DEC 22 F/7
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Raymond James & Associates, Inc
Public Finance Department
Recent Financial Advisor Clients
Issuer
Title
Lake County
Sales Tax Revenue Bonds
Type Issue
Amount
RJA Role
Sale Date
General
38,840,000
rmancial Advisor
DEC 8 tr1
Issuer
Title
Brooksville, City of
Capital Facilities Revenue Bonds, Series 1987
Type Issue
Amount
IDA Role
Sale Date
General
1,850,000
Fmancial Advisor
DEC 1 trl
Issuer
Title
Polk and Leon County Housing Fmance Authorities
Single Family Mortgage Revenue, Series B Remarketing
Type Issue
Amount
RJA Role
Sale Date
Housing
7,500,000
rmancial Advisor
ocr 28 tr1
Issuer
TItle
Plant City
Stadium Notes, Series 1987
Type Issue
Amount
RJA Role
Sale Date
General
4,600,000
rmancial Advisor
ocr 2 tr1
Issuer
TItle
Santa Rosa County
Capital Improvement Revenue Bonds
Type Issue
Amount
RJA Role
Sale Date
General
8,900,000
rmancial Advisor
SEP 3 tr1
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Raymond James & Associates, Inc
Public Finance Department
Recent Financial Advisor Clients
Issoer
Title
Lake City
Water and Sewer Revenue Bonds
Type Issue
Amount
RIA Role
Sale Date
Water and Sewer
7,125,000
F'mancial Advisor
JUL 1487
Issuer
Title
Polk County Housing F'mance Authority
Subordinated Single Family
Type Issue
Amount
RJA Role
Sale Date
Housing
300,000
Financial Advisor
APR 187
Issuer
Trtle
Polk and Leon County Housing F'mance Authorities
Single Family Mortage Revenue, Series B
Type Issue
Amount
RJA Role
Sale Date
Housing
7,500,000
F'mancial Advisor
APR 1 87
Issuer
Title
Polk And Leon County Housing F'mance Authorities
Single Family Mortgage Revenue, Series A
Type Issue
Amount
RJA Role
Sale Date
Housing
7,500,000
F'mancial Advisor
APR 187
Issoer
Trtle
Polk County, Housing F'mance Authority Of
Single Family Mortgage Revenue Bonds
Type Issue
Amount
RJA Role
Sale Date
Housing
35,000,000
F'mancial Advisor
MAR 3 87
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Raymond James & Associates, Inc
Public Finance Department
Recent Financial Advisor Clients
Issuer
T"1I:le
Hernando County
Variable Rate Revenue Bonds
Type Issue
Amount
RJA Role
Sale Date
General
300,000,000
Financial Advisor
JUL 1486
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e. Indicate your firm's experience in dealing with the major rating agencies during the
past two years, including the extent to which governmental clients were involved.
Credit Rating Process
Raymond James and Associates feels it is necessary to understand the rating process
thoroughly in order to best serve the City of Clearwater. In general, securing a rating for an issue
involves several sequential steps. Throughout this process, it is critical that the City's interest be
represented by a financial advisor possessing a thorough knowledge of general obligation bond
issues such that the City's strong financial position can be convincingly demonstrated to the rating
agencies.
To start the process, the financial advisor requests a rating from Moody's and/or Standard
& Poors. The rating agencies, in turn, assign analytical teams to the issue. These teams will
research in-house information conce~g the City and will review new material submitted by
Clearwater. This process serves to generate a list of questions and concerns which the analysts will
explore further with both the City and the underwriter. Typically, these questions are answered
by a presentation to the agencies orby a site visit to the City. Finally, the analysts consolidate the
information on the issue into a standardized fonn for presentation to their respective rating c-om-
mittees who :then determine the appropriate rating for the bonds.
The financial advisor plays an important role in this process by making frequent contact
with the rating agencies, gathering appropriate information, and organizing a site visit or
conducting a presentation. Raymond James' Public Finance Department maintains ongoing
contacts with Standard & Poor's and Moody's Investor Services both through our capacity as
underwriter and financial advisor, and through requests for current information on rating criteria.
Recently, serving as financial advisor to the City of St. Petersburg, we invited the rating
agencies to the City to see changes that have occurred in the area. We feel rating agencies were
better able to evaluate the City after seeing the City for themselves instead of simply speaking to
members of the staff on the phone. We believe that this face-to-face contact is an important aspect.
This month we coordinated a rating agency presentation by the City of Miami. Raymond
James, along with senior staff members from the City, traveled to New York for individual
presentations to Moody's and Standard and Poors. The formal presentation was followed by a
questions and answer session and then a lunch. This structure allowed the City to control its initial
presentation and yet allowed the staff members and rating agency analysts to interact informally.
Raymond James prepared a detailed debt and revenue analysis and a presentation booklet for the
rating agencies.
City of Clearwater, Florida
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r. Describe any innovations that your rIrm has developed or been involved with in
connection with tax-exempt security issues, briefly outlining the problem, your solution and the
results.
Raymond James has been involved in a number of innovative financing techniques. One
entailed the use of an annual lease structure in the Hernando County Public Facilities Financing
Authority to finance a jail in Hernando County. Other innovations by Raymond James or
principals in the Public Finance Department include the first use of the Loans to Lenders structure
in a multi-family mortgage revenue bond issue; first multi-county, multi-family mortgage revenue
bond issue using interlocal agreements; and the first use of a graduated payment mortgage in a
Florida single-family revenue bond issue.
The diverse background of Raymond James' Public Finance Staff enables us to provide
professional advice on state and federal grants, pay-as-you-go programs, privatization and other
funding alternatives. We subscribe to numerous financial, accounting, legal, and governmental
publications to better inform our clients. The following briefly describes certain financing
innovations with which Raymond James has recent experience.
Tax Exempt Lease Financing: Raymond James served as Underwriter to Hernando
County and structured the financing of the County's jail project through the creation of anon-profit
corporation and corresponding lease agreement. The structure enabled the County to mortgage
both the facilities and property and thus avoid pledging a specific source of revenue.
Tax Exempt Lease Purchase Financing: Viewed by issuers and investors as a flexible
financing instrument, this technique has become one of the fastest growing methods for state and
local governments to finance buildings and equipment. It provides an attractive alternative to
general obligation debt.
The primary means of implementing this method is through the issuance of lease purchase
revenue bonds and certificates of participation. Generally, the state or local government will
select or create an appropriate entity to issue the bonds on its behalf. This entity then issues the
lease purchase revenue bonds or certificates of participation and applies the proceeds to planned
projects. The government uses the facility and its lease payments to the issuing entity serve as
security for the bonds. These lease payments are assigned to a trustee and are paid through to the
bondholders. The interest portion of the payments is exempt from federal income tax.
Lease purchase bond issues are usually rated one full grade below the general obligation
rating of the governmental body making the lease payments, reflecting their concern with the risk
of non-appropriation. In assigning a rating, the analysts are primarily concerned with the leased
project's economic viability.
Because of the added degree of risk, lease purchase bonds often are issued with rates
slightly higher than the lessee/government's general obligation interest costs. The differential will
vary depending on the degree of certainty surrounding the lease payments. This added interest
cost is often outweighed by quicker receipt of funds and earlier start-up of construction, and the
off balance sheet nature of the financing. ',.
City of Clearwater, Florida
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MultiMode Bonds: MultiMode bonds are a fairly new development in the tax exempt
market and represent an attempt to push the state of the art to the utmost with which tax counsel
is comfortable. Basically, a multimode bond combines daily, weekly, monthly, annual and long-
term fIXed-rate debt all in one instrument structured to be outstanding for a thirty or forty-year
term. The trust indenture provides that bonds can be sold for various periods of time based upon
either market conditions or the discretion of the issuer. For example, on a $50,000,000 issue,
$10,000,000 can be sold as daily adjustable rate bonds, $10,000,000 as weekly adjustable,
$10,000,000 as annual tender bonds, 10,000,000 as five-year put bonds, and $10,000,000 as thirty-
year fixed rate bonds. At various times while the debt is outstanding, the bonds are remarketed
for different periods of time in order to optimize the interest rate based upon investor demands.
Tax counsel would need to be consulted carefully before pursuing multimode bonds to
make sure that they are comfortable with tbe proposed structure.
Special Assessment in Lieu eflmpact Fees: Raymond James is acting as senior managing
underwriter in the issuance of bonds to fmance a regional sewer plant for Indian River County.
Residents of the City of Sebastian and nearby unincorporated areas are agreeing to the voluntary .
imposition of special assessments in the amount of current impact fees. The special assessments
will be payable over a ten-year period and will be used to back an issue of bonds, the proceeds of
which will be used to construct the regional sewer plant and c-ollection system. The bonds win bear
an attractive interest rate due to the relatively strong credit of the underlying properties and the
collection mechanism.
Collection of Special Assessments Through Regular Property Tax Bill: Special Assess-
ment Bonds are being used more frequently by cities and counties throughout the State to finance
infrastructure needs. To improve the credit quality of these bonds, Raymond James has, in Indian
River County, designed a system in compliance with Florida Statutes wherein the special
assessment is collected on the regular county and city property tax bill. Because of the process in
which tax certificates are sold, substantial liquidity is provided to the bond holders in the event of
a default in payment of the special assessments. This improves the credit quality of the special
assessment bond which in turn helps lower the cost of borrowing.
Deep Discount Bonds: As the name implies, these long-term bonds, including the category
referred to as zero coupon bonds, are priced at a discount and thus bear interest at rates
substantially below current market yields. The zero coupon variety pays no interest. An investor's
return consists entirely of price appreciation. Using discount bonds can lower an issuer's interest
cost and can be used to alter an issuer's overall debt payment structure.
City of Clearwater, Florida
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Additional Innovations:
o Served as financial advisor for the first Second Guaranteed Entitlement issue in
Florida.
o Involved with the first Local Option Sales Tax issue in Florida.
o Using a loans-to-Ienders structure in a multi-family mortgage revenue bond
issue.
o Structuring the first multi-county, multi-family mortgage revenue bond issue
using interlocal agreements.
o First use of a multi-city single family housing program.
City of Clearwater, Florida
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g. For the most fiscal year, and the most recent partial year if possible, provide
financial information for the firm including, but not limited to, a balance sheet, statement of
operations and statement of changes in financial position (or cash flow statement as applicable).
The following is our latest fiscal year end balance sheet, statement of operations and
statement of changes in financial position. For complete financial information on Raymond James
Financial, Inc., please see our Aimual Report in Section VI.
City of Cleanvater, Florida
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"Our focus is on guiding people
away from programs which we
feel are abusive and on
directing them past investment
selections which we feel are
inappropriate for their
financial goals. ..
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Duane McBride
Investment Management
& Research
San Diego. CA
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Raymond James Financial. Inc. and Subsidiaries
Consolidated Statement ot Financial Condition
(in thousands. except share amounts)
September 50. September 25.
1988 1987
ASSETS
Cash and short-term investments (including $139.000 and
$196.000 of securities purchased under agreement
to resell)
Deposits with clearing organizations and exchanges
Receivables:
Brokerage customers
Stock borrowed
Brokers and dealers
Other
Trading and investment account securities
Real estate inventories:
Land held for development
Housing units. finished and under construction
Property and equipment. net
Cost in excess of tangible assets acquired. net of
accumulated amorti7.ation of $545 and $218
Deferred income taxes
Prepaid expenses and other assets
$167.186
5.082
84.556
198.853
19.015
5.885
26.838
21.965
2.725
1.575
2.658
$534.116
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes and mortgages payable
Payables:
Brokerage customers
Stock loaned
Brokers and dealers
Trade and other
Trading account securities sold but not yet purchased
Accrued employee compensation and other expenses
Income taxes currently payable
$ 13.932
197.521
197.805
52.255
5.595
1.307
10.802
1.887
460.678
Subordinated liabilities
15.940
Commitments and contingencies
Stockholders' equity:
Preferred stock; $2 par value:
authorized 1.000.000 shares; outstanding
o shares (5% non-voting cumulative convertible)
Common stock; $.b1 par value; authorized
10.000.000 shares; issued 5.574.155 shares
Additional paid-in capital
Retained earnings
56
58.078
22.155
60.287
(789)
59.498
$554.116
Less: 93.658 and 99.571 common shares in treasury. at cost
$218.893
12.692
85.919
458.679
14.516
2.470
19.963
6.544
2.470
24.141
3.052
2.513
3.673
$855.525
$ 6.735
275.409
466.575
12.083
5.111
1.566
10.920
2.848
781.247
16.500
56
38.129
20.162
58.347
(569)
57.778
$855.525
The accompanying Summary of Significant Accounting Policies and Notes to Consolidated Financial Statements
are integral parts of these financial statements.
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I Raymond James Financial. Inc. and Subsidiaries
Consolidated Statement of Income
(In thousands, except per share amounts)
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Year Ended
I =tJlIti September 30. September 25. September 26.
1988 1987 1986
Revenues :
Securites commissions $ 94.412 $ 82.412 $ 70.389
I Limited partnerships and
investment banking 20.111 22,637 19.870
84 as 86 87 88 Investment advisory fees 12.467 10.455 5.059
Shareholders' Equity Interest 35.377 22.081 12.148
(in Ihousandsl Net trading and investment profits 639 2.302 4.387
I Other 6.888 4.201 2.058
Net revenue (expense) of real
estate subsidiary (185) 350 23
I 169.709 144.438 113.934
Expenses :
Employee compensation 96.681 84.791 70.488
I Data communications 10.923 8.295 7.303
Occupancy and equipment costs 8.091 6.160 4.815
Clearance and floor brokerage 3.596 2.978 3.790
Interest 28.195 16.209 8.869
I Business development 4.666 4.526 3.787
Other 8.443 3.722 2.751
160.595 126.681 101.803
I Income before income taxes. minority
interests and extraordinary item 9.114 17.757 12.131
Provision for income taxes 3.573 7.922 5.572
I Minority interests in income
of consolidated subsidiaries 36 253 343
Income before extraordinary item 5.505 9.582 6.216
I Extraordinary gain on early
extinguishJnent of debt. net of
income taxes 377
Net income $ 5.882 $ 9.582 $ 6.216
I Income per share before
extraordinary item:
Primary $ .99 $ 1.73 $ 1.27
I Fully diluted $ .94 $ 1.53 $ 1.21
Extraordinary item:
Primary $ .07 $ $
I Fully diluted $ .06 $ $
Net income per share:
Primary $ 1.06 $ 1.73 $ 1.27
I Fully diluted $ 1.00 $ 1.53 $ 1.21
Average common and common
equivalent shares outstanding:
Primary 5.531 5.550 4.894
I Fully diluted 6.487 6.501 5.231
I TIle accompanying Summary ot Significant Accounting Policies and Notes to Consolidated Financlal Statements
aft integral parts ot these financlal statements.
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Raymond James Financial. Inc. and Subsidiaries
Consolidated Statement of Cash nows
Increase (Decrease) in Cash and Cash Equivalents
(in thousands)
Year Ended
September 30. September 25. September 26.
1988 1987 1986
$ 5.882 $ 9.582 $ 6.216
3.519 2.863 1.938
893 (237) 587
972 404 45
1.191 38
36 253 343
7.610 (5.405) ((-).535)
591 (20.283) (I (-).8311
259.826 (458.679)
(4.499) 2.391 (5.752)
(1.651) 426 (7~)7)
(4.199) (3.814) 8.797
(2.3(-)7) 1.192
940 (2.124) (350)
294 (1.477) (7(-)4)
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization
Unrealized (gain) loss on investment securities
Provision for bad debts
Provision for other accruals
Minority interests
(Increase) decrease in assets (net of amounts pertaining to
spin-off of real estate subsidiary):
Deposits with clearing organi7.ations
Receivable from:
Brokerage customers
Stock borrowed
Brokers and dealers
Other
T'rading account securities
-Real estate inventories
Deferred income taxes
Prepaid expenses and other assets
Inc,rease (decrease) in liabilities (net of amounts (}ertaining to
spin-off of real estate subsidiary):
Payable to:
Brokerage customers
Stock loaned
Brokers and dealers
Trade and other
Accrued employee compensation and other expenses
Income taxes currently payable
Total adjustments
Net cash provided by (used in) operating activities
Cash flows from investing activities:
Additions to fixed assets
Sales of fixed assets
Sale of investment account securities
Purchase of investment account securities
Net cash used in investing activities
Cash flows from financing activities:
Borrowings from banks and financial institutions
Payment on borrowings from banks and financial institutions
Repayment of loans to real estate subsidiary
Issuance of common stock
Exercise of stock options and warrants
Purchase of treasury stock
Dividend on common stock
Sale of subordinated debentures
Repurchase of subordinated debentures
Net cash provided by financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental disclosures of cash flow information:
Cash paid for interest
Cash paid for taxes
The accompanying Summary of Significant Accounting Polides and Notes to Consolidated Financial Statements
are integral partS of these flnanclal statements.
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h. Indicate the capability of your firm to hold harmless, indemnify and defend the City
for losses, costs and expenses arising from liability claims resulting from alleged negligence of
your firm, its officers, employees and subcontractors; describe liability insurance coverage
carried by your firm.
The following is the cover page from our corporate insurance policy.
City of Clearwater, Florida
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FINANCIAL INSTITUTION BOND
Standard Form No. 14. Revised to October. 1987
Tne Company ISSUing this polley IS inclleated by an "X" in the box to the Ielt 01 the Company'S name.
(J: NATIONAL UNION FIRE INSURANCE COMPANY
OF PITTSBURGH. PA.
IA Stock Insurance Company. herein called Ihe Underwriter)
o AMERICAN HOME ASSURANCE COMPANY
NEW YORK. NEW YORK
(A Stock Insurance Company. herein called the Underwriter)
o THE INSURANCE COMPANY OF
THE STATE OF PENNSYLVANIA
PHILADELPHIA, PA.
IA Stock Insurance Company. herein called the Underwriter)
Item 1. Name of Insured (herein called Insured):
RJ Financial Corporation (See Rider No.1)
Bond Number 362 59 14
Principal Address: 880 Carillon Parkway St. Petersburg, Florida 33716
Hem 2. Bond Period: from 12:01 a.m. on September 30, 1988
IMONTH. DAY. VEARI
to 12:01 a.m. on September 30, 1989
lMONTH. DAY. YEAR,
standard time.
item 3. The Aggregate Liability of the Underwriter during the Bond Period shall be
S 10,000,000
Item 4. Subject to Sections 4 and 11 hereof
The Single Loss Limit of Liability is $
10,000,000
and the Single Loss Deductible is $
5,500,000
PrOVided. however, that if any amounts are inserted below opposite specified Insuring Agreements or Coverage.
those amounts shall be controlling. Any amount set forth below shall be part of and not in addition to amounts set forth
above. (If an Insuring Agreement or Coverage is to be deleted. insert "Not Covered.")
Amount applicable to:
Single Loss Single Loss
Limit of Liability Deductible
$ 10,000,000 $ 5,500,000
$ 10,000,000 $ 5,500,000
$ Not Covered $ Not Covered
$ Not Covered $ Not Covered
Insuring Agreement (D)-FORGERY OR ALTERATION
Insuring Agreement (E)-SECURITIES
Coverage on Partners
Optional Insuring Agreements and Coverages
If .. Not Covered" is inserted above opposite any specified Insuring Agreement or Coverage. such Insuring Agreement
or Coverage and any other reference thereto in this bond shall be deemed to be deleted therefrom.
Item 5. The liability of the Underwriter is subject to the terms of the following riders attached hereto:
Rider 1, 2, 3,4,5,6,7,8
Item 6. The Insured by the acceptance of this bond gives notice to the Underwriter terminating or canceling prior bond(s) or
pohcy(ies) No(s) 362 54 69 and 362 54 72
such termination or cancelation to be effective as of the time this bond becomes effective.
. _H_____.___~____
.------ .---..--
46726 (12/87)
12/13/88 j f
~" /' /,/ /:J~i' /] //1'
'~hOIlled Re".sent~I"'. .
~ Jill A. Basile P"..eo.nUSA
l ./
Pagel
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i. Provide a statement of assurance that your finn is not presently in violation of any
statutes or regulatory rules that might have an impact on your finn's operations, including those
of the Securities and Exchange Commission, Municipal Securities Rulemaking Board, National
Association of Securities Dealers, etc.
Raymond James & Associates, IDco's Public Finance Department in its role as Financial
Advisor or Underwriter, has not ever been, and is not currently in violation of any rules and
regulations to which the firm is subject and which impact the firm's operations and is not subject
to any litigation or proceeding which relates to our public finance professional activities. This
statement of assurance relates to the regulations promulgated by the United States Securities and
Exchange Commission, the New York Stock Exchange, Inc., the National Association of Securities
Dealers, Inc., and the Municipal Securities Rulemaking Board.
City of Clearwater, Florida
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FIRM PERSONNEL
a. List personnel of your firm who would be assigned to the City engagement; please
include resumes.
b. Describe the education and experience, particularly as it relates to service in a
financial advisory role for a Florida governmental unit of each stalT member who would be
assigned to the engagement. Indicate notable achievements such as books or articles written,
memberships and offices held in professional organizations and outstanding on-the-job accom-
plishments.
The members of our professional staff who will be responsible for serving and assisting the
City of Clearwater, Florida, their qualifications and expertise are outlined below. All of these
professionals are based in Raymond James' corporate headquarters in St. Petersburg. All will be
available to attend to your financing needs on a day-ta-day basis.
VAN C. SAYLER, MBA, First Vice President/Manager, Public Finance and Assistant
Manager, Fixed Income. Mr. Sayler has been active in the municipal bond field since 1977. He
graduated from Vanderbilt University, Nashville, Tennessee with a BSBA with honors in Business
Administration. He obtained a Masters of Business Administration Degree, specializing in
finance, from the University of South Florida. Mr. Sayler is a Registered General Securities
Representative and a General Securities Financial and Operations Principal. He has served as a
member of the Board of Directors of the Florida Municipal Bond Council, Inc., and as chairman
of the Legislative and Membership Committees of that group.
Mr. Sayler's experience in originating municipal issues ranges from water and sewer to
refundings to hospital issues to housing issues. He has extensive experience in obtaining credit
enhancement for municipal issues and in structuring variable rate and put bond issues. He has
been directly involved in the issuance of over $3,000,000,000 of municipal issues acting as Senior
Manager, Co-Manager or Financial Advisor.
BONNIE R. MOORE, MBA, Assistant Vice President, Public Finance. Ms. Moore
graduated from the University of Florida in 1984 with honors in finance. She continued her
education at the University of Florida Graduate School of Business where she received a
Fellowship for Women in Non-Traditional Fields and earned a Masters of Business Administra-
tion with concentration in finance. 'Ms. Moore's experience includes work with a pension
consulting finn where she analyzed returns and maintained a data base of pension funds.
Ms. Moore has served as both underwriter and financial advisor for various Florida
municipal bond issuers. Among others, she has assisted in the structuring of general obligation,
water and sewer, and housing bond issues. Ms. Moore is a Registered General Securities
Representative.
City of Clearwater, Florida
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KATHLEEN G. BOYLSON, Assistant Vice President, Public Finance. Ms. Boylson
received her Bachelor of Science in Business Administration/Management from the Univeristy
of Florida in 1981 where she graduated magna cum laude. She joined Raymond James in 1981 in
municipal trading and continued to work in this area until transferring to the Public Finance
Department in 1986. Ms. Boylson is a Registered General Securities Representative.
Since joining the Public Finance Department, Ms. Boylson has been involved in the
structuring of numerous refunding issues involving transferred proceeds, investment of escrows in
SW's and open market treasury securities, investment contracts and inudustrial development
bond issues. She has also structured several new money issues including BAN's and issues in
conjunction with a refunding issue and has created spreadsheets to aid in the investment of the new
money issue proceeds. Currently Ms. Boylson is in charge of the analytical area which is
responsible for all numerical analyses, graphics, research and development of presentation
materials for the Public Finance Department.
WENDELL G. GAERTNER, MBA, Associate, Public Finance. Mr. Gaertner graduated
from the University of Miami in 1984 with general honors in chemistry. He continued his
education at Stetson University where he received a Masters of Business Administration. Prior
to joining Raymond James, Mr. Gaertner was employed by Barnett Banks ofTamp~ N.A where
he advanced from Credit Analyst to Corporate Banking Officer.
ANNE W. COPE, Financial Analyst, Public Finance. Ms. Cope received her Bachelor of
Science Degree in Business Management, with a concentration in Finance, from Florida Southern
College in 1983. She is currently studying for her Masters of Business Administration at the
University of Tampa. She has been employed with Raymond James & Associates since 1984. Ms.
Cope is a Registered General Securities Representative and a General Securities Principal.
City of Cleanvater, Florida
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c. For each proposed member of the engagement team, given an indication of the
extent of their availability.
The location of our national headquarters in St. Petersburg, Florida assures the City that
we will be responsive to their needs and to the financing. Florida is our primary area of
concentration and our staff and resources are available full time to assist our local clients.
"
City of Clearwater, Florida
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CONTRACT AND COMPENSATION
a. Please furnish a proposed contract including fee proposals.
CIlY OF CLEARWATER, FLORIDA
FINANCIAL ADVISOR'S AGREEMENT
THIS AGREEMENT made this _ day of _, 1989 by and between the City of
Clearwater, Florida, hereinafter referred to as the "City", party of the first part, and Raymond
James & Associates, Inc., St. Petersburg, Florida, hereinafter referred to as the "Financial
AdvisorH, party of the second part;
WITNESSETH:
WHEREAS, the City has determined that there is a need to complete several capital
projects within the City; and
WHEREAS, the City has determined that external funding is required for these
projects; and
WHEREAS, the City has determined that the most feasible method of securing the
required funds is through obtaining funds from various financial markets; and
WHEREAS, a qualified Financial Advisor is required to assist in the preparation of
plans, studies, analysis and recommendations to market the [mancial plans; and
WHEREAS, the City has determined that the Financial Advisor is qualified to
perform the required services hereinafter set out;
City of Clearwater, Florida
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WHEREAS, the Financial Advisor will provide advice to the City regarding the
feasibility of issuing the financial contracts and instruments on behalf of the best interests of the
City.
NOW, THEREFORE, in consideration of the foregoing, the parties agree as follows:
SERVICES TO BE PERFORMED BY THE FINANCIAL ADVISOR:
The Financial Advisor hereby agrees to perform the services described in the
Proposal for Financial Advisor for Clearwater, Florida dated May 23, 1989 in connection with the
authorization, sale and delivery of financial arrangements on behalf of City capital needs subJect
to the conditions and in consideration of payments as hereinafter set forth.
FEES PAID TO FINANCIAL ADVISOR FOR SERVICES:
The Financial Advisor's fee shall be as follows:
1) Work Directly Related to Bond Issue
$10,000 plus $0.75 per $1,000 par amount of bonds issued.
2) Work Not Directly Related to a Bond Issue
Work not directly related to a bond issue will be billed on an hourly basis in
accordance with the following rate schedule:
$175 per hour for First Vice President
$150 per hour for Vice President staff
$125 per hour of Assistant Vice President staff
$100 per hour for Analysts
City of Clearwater, Florida
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COSTS PAID BY THE CI1Y:
The Issuer agrees to pay all costs of the bond issue, including but not limited to; fees
for attorneys of the Issuer, fee of Bond Counsel, rating agency fees, insurance costs, printing costs
of the Issuer, printing costs of the Bonds and the Official Statement, advertising costs, traveling
expenses of Officials of the Issuer, and out-of-state traveling expenses of the Financial Advisor.
GENERAL CONDITIONS:
A It is distinctly understood that Raymond James & Associates, Inc. will not participate,
either directly or indirectly, as an underwriter in the sale of these Bonds. It is agreed that we may
however, purchase or sell any of such Bonds in the secondary market after the expiration of this
contract.
B. Should financing fail to materialize, the Issuer shall not be financially obligated to
Raymond James except as to reimbursement of such expenses as may be hereinafter approved by
the Issuer prior to their being incurred.
C. Should, in the course of performing services described in this Agreement, the Issuer
determines that the additional work products are desired of Raymond James, and should
Raymond James accept such assignments, then this Agreement may be amended in writing as.
mutually acceptable to the parties to provide for accomplishment of such additional work products
and the basis of payment therefore.
D. This Agreement shall be in full force and effect for a period of three years from the date
of execution hereof provided, however, that the Issuer shall have the option, at any time during this
period and with its sole discretion to terminate this Agreement, said termination to be effective
upon receipt by Raymond James of written notice at least ninety (90) days prior to any such
termination.
City of Clearwater, Florida
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E. This instrument embodies the whole agreement of the parties. There are no promises,
terms, conditions, or obligations other than those contained herein; and this Agreement shall
supercede all previous communications, representations of agreements, either verbal or written,
between the parties hereto.
IN WITNESS WHEREOF, the parties hereto have set their hands and seal the day and year
first above written.
RAYMOND JAMES & ASSOCIATES, INC.
Van C. Sayler
First Vice President, Public Finance
CITY OF CLEARWATER, FWRIDA
Alan Demis
Director, Pun::hasing Division
City of Clearwater, Florida
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b. Describe the finn's proposed fee schedule for the work proposed and for various
alternative financing methods. Indicate the impact on the fee structure of a competitive sale as
compared to a negotiated sale.
$10,000 plus $0.75 per $1,000 par amount of bonds issued for both a negotiated and a
competitive sale.
c. Since consulting services may be provided in situations that do not result in a
debt issue iryou intend to bill for such services, please provide a proposed billing procedure (such
as hourly billing rate(s), combination of a retainer and hourly billing rate(s), etc.).
Hourly Rates by Staff Classification:
$175 First Vice President
$150 Vice President
$125 Assistant Vice President
$100 Associate & Analyst
d. Indicate your firm's policy regarding out-of-pocket and/or indirect cost ex,.
penses; if your finn proposes that the City bear such costs, please itemize the types of expense and
give an indication or the basis for billing such expenses.
The City will be billed for all travel, copying, communication and out-of-pocket charges,
but due to our local headquarters, expenses are expected to be minimal.
City of Clearwater, Florida
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CONFLICT OF INfEREST
Any prospective financial advisor should make an affirmative statement in its proposals to the
effect that, to its knowledge, its retention would not result in a conOict of interest with any party.
Alternatively, should any potential conOict exist, the prospective financial advisor's proposal
should specify the party with which there might be a conOict, the nature of the potential conOict,
and the means proposed to resolve such conOict.
Raymond James & Associates, Inc. has, to our knowledge, no conflict of interest which
would interfere with our retention as Financial Advisor to the City of Clearwater.
City of Clearwater, Florida
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Raymond James Financial, Inc.
1988 Annual Report
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The Raymond James Pledge
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iW e the personnel of Raymond James, commit our energies, intellect and knowledge
to attaining the financial objectives of our clients. We believe that putting the financial
well-being of our clients first ultimately serves the best interests of our firm 's employees,
stockholders and communities. Remaining responsive to the needs of our clients in a financial
environment characterized by constant change is our continuing challenge.
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Our business is people and their financial well-being.
In the pursuit of this goal, we will conduct ourselves in accordance with the following precepts:
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Our clients always come first.
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We must provide the highest level of service with integrity.
We must communicate clearly and frequently with our clients.
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Our products and services must be of superior quality.
Teamwork, cooperating with and providing assistance and support to our fellow associates,
is fundamental to sustaining a quality work environment which nurtures
opportunities for personal growth and job satisfaction.
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Continuing education is necessary to maintain the timeliness of product knowledge,
tax laws and financial planning techniques.
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To excel and to emulate other members of our peer group requires that we work harder.
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We must give something back to the communities in which we live and work.
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Innovation is requisite to our survival in a changing world.
Assisting our clients in the attainment of their financial objectives is a worthy enterprise.
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The enhancement of our clients' financial well-being, the key ele-
ment in the Raymond James Financial pledge, is achieved through
our sales force of over 1,500 Account Executives in more than 350
retail branch offices throughout the continental United States. The
client concern demonstrated daily by our Account Executives, their
innovative investment and financial planning techniques and their
diligence, along with the quality of the investment
alternatives they offer. are directly responsible for
Raymond James Financial's profitability and growth.
Harvey Mackay, in his best selling book, Swim With
the Sharks Without Being Eaten Alive, writes:
"The mark of a good salesperson is that his customer
doesn't regard him as a salesperson at all, but a
trusted and indispensable adviser. . . ."
Raymond James Financial, is a diversified holding company whose
subsidiaries provide financial services nationwide. Founded in 1962,
Raymond James is now owned by nearly 3,500 shareholders, and has
a staff of more than 2,200 professionals servicing individual and
institutional clients throughout the nation.
Through its principal financial services subsidiaries the Company
provides comprehensive investment and financial planning through
a broad variety of investment products and services.
The Account Executives in our financial services subsidiaries - Ray-
mond James & Associates, Investment Management & Research and
Robert Thomas Securities - epitomize the Mackay definition.
Through the leadership of Robert F. Shuck, M. Anthony Greene and
J. Stephen Putnam. who are responsible for retail sales for the three
respective firms. our Account Executives have gained a national
reputation for placing the well-being of their clients first and fore-
most. The national distribution network which they represent con-
tinues to distinguish itself within the investment industry for its high
caliber of service and professionalism.
Raymond James Financial, Inc. and Subsidiaries
Financial Highlights
FOR THE YEAR
1988 1987 Increase / (Decrease)
$169,709,000 $144,438,000 17%
$ 5,882,000 $ 9,582,000 (39%)
$ 1.06 $ 1.73 (39%)
$ 1.00 $ 1.53 (35%)
Total Revenues *
Net Income
Net Income Per Share
Prim~
Fully Diluted
AT YEAR END
Shareholders' Equity
Shares Outstanding
Shareholders' Equity Per Share
$ 59,498,000
5,481,000
$10.86
$ 57,778,000
5,475,000
$1055
3%
0%
3%
*lncludes net operating results of the real estate subsidiary which was spun off effective September 30, 1988.
150
120
90
60
30
84 85 86 87 88
Revenues
(in millions)
84 85 86 87 88
Net Income
(in millions)
350
300
250
200
150
100
50
1500
1250
1000
750
500
250
84 85 86 87 88
Branch Offices
(excluding satellites)
84 85 86 87 88
Account Execuffves
84 85 86 87 88
Earnings Per Share
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1.50
1.25
1.00
.75
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.25
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Yes, there is life after October 19. After our industry's illusion of
never-ending prosperity which had been engendered by the ebul-
lient markets of the 1980s and the resulting insupportable stock
market evaluations that accompanied the euphoria, the correction
that was spawned in August 1987 and culminated in a crescendo on
October 19 and 20 was both understandable and necessary. Al-
though the manner of the correction was unique in both its depth
and brevity, our financial system displayed remarkable resiliency.
It is no less remarkable that our firm competently processed the
transaction volume of October and overcame the trading losses
occasioned by the marketquake and the subsequent
lethargy of investors. Revenues were $169,709,000,
up 17% from last year's record level in spite of that
traumatic experience. While profit comparisons are
not that favorable, income before extraordinary item
and net income reached $5,505,000 and
$5,882,000, respectively. Net income per share,
while down 39% from $1.73 to $1,06, absorbed the
first quarter's loss of $0.12 per share. In short, the
last nine months' average quarterly income before
extraordinary item was $2,056,000, which would produce a reason-
able rate of return on equity.
PHILOSOPHICAL INTEGRITY
IN ADVERSITY
Our 1988 performance results from our strategic commitment to
continue implementing our existing strategy in spite of the October
crisis. Specifically:
. We continued to grow our retail sales forces.
. While we utilized the experience to re -emphasize cost control.
we elected not to indiscriminately pare personnel but to defer
replacing employees lost through attrition and to exercise dis-
cretion in the creation of new positions while, at the same time,
adding high quality talent when the opportunity presented
itself.
. Attention was focused upon the necessity to achieve profit-
ability in an era of rebudgeted lower revenues.
. The importance of continuing to become more efficient
through further computer automation was stressed
even though that goal required a commitment to hire
additional computer programmers and purchase more
hardware.
. Exhibiting the flexibility to capitalize on opportunities
as a result of our conservative capital base, we substan-
tially increased our commitment to Public Finance.
Although profit margins are currently depressed,
florida's ever growing need for financing its infra-
structure will eventually yield opportunities for us.
. Remaining committed to agency rather than principal
activities, except to support our sales efforts, delimited
the losses experienced in October's traders' debacle.
Fundamental to our strategic plan is strict adherence to our
mission statement- "Our business is people and their fi-
nancial well-being." In essence, that tenet denotes that
our first obligation is to make our clients money through
attention to their needs, desires and risk tolerance levels.
That "client comes first" mentality must be supported by a
distribution system that is characterized by the highest
level of service attainable. For that reason, this annual
report is dedicated to our clientele and the indispensable
elements in our delivery system, our Account Executives.
ANNUAL HIGHLIGHTS
While direct participation program volume suffered from
changed tax laws and economic conditions in the South-
west, our nascent secondary market trading activities, the
Limited Partnership Trading Desk, has grown and pros-
pered. The melding of the need to provide a market for
those who must sell partnerships with the opportunity to
purchase partnerships with identifiable properties and
existing track records has attained more visibility and
volume has increased.
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During the year, we completed our first Foundation Realty
Fund, Ltd. public offering, a limited partnership created to
invest in southeastern apartment projects. This partner-
ship, which is managed by R) Properties, has $9,400,000
in partners' capital. Recently we launched Foundation II.
Capitalizing on one of the last tax shelters available, tax
credits for investment in certain federally subsidized hous-
ing, we also successfully launched the Gateway Tax Credit
Fund, Ltd.
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In the leasing area, we completed CIS Capital Income Fund
2, L.P., a public limited partnership designed to enable our
investors to participate in the ownership of transportation
equipment, with $30,000,000 of investor funds. We also
completed the second of our Access private partnerships
which purchased pieces of major equipment that are ex-
pected to retain substantial values at lease termination and
we commenced offering CIS 3.
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Our Stock Loan Department generated excellent results in
its first full year of operations as our highly qualified per-
sonnel adroitly arranged loans of securities from owners
to those who are short those issues. Conjoined with judi-
cious cash management techniques, net interest income
rose to record levels.
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We commenced offering the Elite Investment Account:"
which integrates the features of astock brokerage account,
margin borrowing capability, interest bearing depository
capability, a checking account and a credit card in one
automated package . Essentially ,that product was requisite
to compete with those similar accounts offered by nation-
al firms.
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In spite of the traumatic effects of October 1987's market,
assets under management in September 1988 were level
with the totals managed at the same time last year. Per-
formance in the short and long run remained excellent. Pa-
tient investors will be rewarded in the long run.
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In an effort to further automate, our front-end order rout-
ing system, which provides communication between our
branch offices, the exchange floors and our home office,
was integrated with our accounting and operations data
processing system which is housed in our home office. As a
result, an order only needs to be entered in the branch
office and executed on an exchange whereupon all the cus-
tomer information and statements are updated automat-
ically on a real time basis. Our excellent data processing
staff continues to utilize state of the art equipment and
software which enabled us to successfully process the
volume of last October as well as provide efficient and
effective service to our clients.
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We negotiated an agreement with Interstate Securities to
affiliate its Florida Account Executives with us in our exist-
ing branch system. We believe that transition has been suc-
cessful and are proud to have added high-quality account
executives to our organization.
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We have been investigating the possibility of acquiring a
small, financially troubled savings and loan institution
from FSLIC with governmental assistance. Our initial ob-
jective would be to offer federally insured deposits of all
types through our existing branch system and, eventually,
to offer other banking services to our clients. To obtain the
necessary cross-marketing and operating powers, our
only option currently is to consider troubled institutions.
While we have reviewed several institutions, met with of-
ficials of the regulatory agencies and even submitted bids,
it is impossible to determine if and when such a transaction
might occur.
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While time has cauterized some of last October's wounds
and human optimism has blocked out some of its painful
memories, negotiating the tumultuous events related to
the market quake was the most significant accomplish-
ment of the year. The viability of the financial services
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industry survived its most difficult test since the early
1930s. More remarkably, our firm survived the experience
with minimal damage and a renewed conviction that our
strategic direction is fundamentally sound, Our perform-
ance is a tribute to the quality of our people who exhibited
great skill, wisdom, courage and patience in adverse cir-
cumstances. I salute them.
The new Bush Administration will face the apparently
intractable twin deficits and the necessity to bail out the
savings and loan crisis while the Democrats are in control
of both houses of Congress. Without a bipartisan effort.
marked by an absence of campaign rhetoric and resultant
animosity, these formidable issues will not be resolved. If
these challenges are not met, I am not optimistic vis -a -vis
the long -term outlook for the economy or the stock market.
Assuming these problems are managed such that the situa-
tion does not deteriorate, the stock and bond markets are
reasonably priced. Judicious selections of stocks and bonds
will be well rewarded. In that event. our business will
remain much like the last three quarters of 1988, as it will
take more time for the investing public to regain the con-
fidence necessary to inspire another bull market. If Con-
gress and the Administration aggressively move to reduce
the deficits, the market could surprise us on the upside.
On behalf of the Board and all of our employees, best
wishes for a healthy and prosperous 1989.
Sincerely,
c'-- C)
!~-." 4" / ~
Thomas A. James
Chairman
December 15, 1988
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SERVICE IS OUR MOST IMPORTANT PRODUCT.
IT ALWAYS HAS BEEN.
We were mavericks from the very beginning in 1962, when the
firm's first Account Executives determined that understanding the
needs of an investor should always come before any sales presenta-
tion is made. It was a simple enough concept. Unless they knew a
client's financial goals and objectives, the lifestyle the client wants to
maintain or achieve, information about the client's family, job, hob-
bies, home, unless they understood a client the way a friend
understands another friend, our Account Executives realized they
could not provide the depth of service investors deserved.
It wasn't long before we started using the phrase "financial plan-
ning," and it caught on quickly. So did our detailed personal finan-
cial profiles and extensive investment plans. As we grew, we realized
that people wanted to be serviced. Investors do not want to be sold a
"product." They want to participate in a well organized investment
plan designed to fulfill their financial objectives.
Not much has changed since those early years, except that the hand-
ful of Account Executives in St. Petersburg has grown to more than
1,500 service -oriented members of our sales force, assisting clients
throughout the continental United States.
Throughout the years, our Account Executives have
fostered strong relationships with their clients by
providing extensive services. Those relationships
have been cemented with trust between the client
and the Account Executive. The value of that trust
extends deep into the operations of Raymond James
Financial, allowing our subsidiaries and divisions
which develop investment services a nationwide outlet for their
offerings.
Additionally, other firms have come to recognize the combined
marketing thrust of our three investment service firms, allowing us
to participate in underwritings and syndications for a broad
array of products.
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This, in turn, benefits our dients by dramatically increasing the
investment alternatives we can offer.
During the past quarter century our client services have increased in
sophistication. From relatively simple financial plans. we developed
more in-depth reviews as our dients' finances became more com-
plex, as new, more complicated. tax laws were enacted and as the
number of investment alternatives increased. We introduced the con-
cepts of asset allocation and diversification. and we have provided
our dients with a continuing stream of information on which they
can build their knowledge. In order to introduce these expanded ser-
vices, we also developed new training programs for our Account
Executives. Today. more than ever, we believe a knowledgeable
Account Executive is critical to the development of any successful
investment plan.
Realizing that the success of Raymond James Financial is heavily
dependent on the successes of its three investment firms' Account
Executives. we are committed to the highest standards of support for
this group. That support ranges from the most modern telecom-
munication and computer systems to the extensive due diligence
reviews required of every product and service we offer. It in dudes the
resources of more than 750 corporate headquarters personnel who
have established themselves as among the leaders in their respective
endeavors. and seasoned traders. both in our headquarters and on
the floors of major exchanges.
Our Account Executives come from varied backgrounds. Most have
compiled very successful records at other investment firms. while
others joined us as trainees. eager to learn. All. however, share a
common concern for their clients' financial well-being.
Attesting to the high degree of service which they have achieved. are
the honors they have garnered. Dozens of our Account Executives
have been singled out for recognition by such outstanding organ-
izations as the International Association for Financial Planning, the
Institute for Certified Financial Planners and the International Board
of Standards and Practices for Certified Financial Planners. Still
others have been honored as among the leaders in their field by
Money, Financial Planning and Registered Repre-
sentative magazines.
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The independence offered each Account Executive
may very well be credited for the successes being
experienced. Each Account Executive is free to select
from among the hundreds of investment alternatives
approved for sale through our firms and market his
or her services to the audience they choose. Our
clients, therefore, range from people whose only in-
vestment is an Individual Retirement Account (IRA)
to those with substantial estates, from small busi-
ness ventures to growth companies, from professional groups to
major institutions.
Equally important, our Account Executives have the absolute free-
dom to offer clients only the investments and services which they be-
lieve are most appropriate. This philosophy allows each Account
Executive to meet the needs of their individual clients, not the quotas
of a firm.
Our clients' regard for the services provided by our Account Ex-
ecutives is reflected in their allegiance. Nearly all of our most success-
ful Account Executives report that their business increases annually
primarily as a direct result of referrals of new clients from existing
clients. There can be no higher regard for a person's abilities than the
recommendation of that person to a friend or relative, and our
Account Executives sincerely appreciate that respect.
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I Raymond James Financial, Inc. and Subsidiaries
Selected Financial Data
(in thousands, except per share data)
I Year Ended
I September 30. September 25. September 26, September 27, September 28.
1988 1987 1986 1985 1984
Operating Results:
Revenues * $169.709 $ 144.438 $ 113.934 $ 81.281 $ 58,796
I Income before
extraordinary item $ 5.505 $ 9.582 $ 6,216 $ 4,684 $ 2,060
I Net income $ 5.882 $ 9.582 $ 6.216 $ 4.684 $ 2,060
Income per share
I before extraordinary
"We are obligated to protect item:**
our clients' interests and be Primary $ .99 $ 1.73 $ 1.27 $ .97 $ .42
absolutely honest at all times. Fully diluted $ .94 $ 1.53 $ 1.21 $ .97 $ .42
I As such, we must always be
cognizant of the risk side of Net income per share**
the risk-reward curve.
We epitomize the difference Primary $ 1.06 $ 1.73 $ 1.27 $ .97 $ .42
between an investment advisor Fully diluted $ 1.00 $ 1.53 $ 1.21 $ .97 $ .42
I and a salesman."
Richard Rudolph Weighted average
Raymond James & Associates shares outstanding: * *
I Naples, FL Primary 5.531 5,550 4,894 4,801 4,891
Fully diluted 6.487 6.501 5,231 4,801 4,891
Cash dividends declared
I per common share * * $ .16 $ .16 $ .13 $ .08 $
I Financial Condition:
Total assets $ 534.116 $ 855,525 $ 298,085 $ 165,837 $ 101,827
I Long term debt $ 27.791 $ 20,354 $ 19,465 $ 3,685 $ 5,336
Stockholders' equity $ 59.498 $ 57,778 $ 44,618 $ 34.016 $ 29,753
I Shares outstanding * * 5.481 5.475 5.179 4.660 4,668
I Equity per common share
and equivalents at
end of period * * $ 10.86 $ 10.55 $ 8.62 $ 7.30 $ 6.37
I *Includes net operating results of the real estate subsidiary which was spun -off effective September 30. 1988.
(See Note 13 of Notes to Consolidated Financial Statements.)
**Gives effect to all common stock dividends.
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Raymond James Financial, Inc. and Subsidiaries
Management's Discussion and Analysis of
Results of Operations and Financial Condition
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General
The "marketquake" of October 1987 did little to slow the Company's growth in number of account
executives and branch offices, which increased 23% and 27%, respectively, with most of the increase
occurring in the independent contractor subsidiaries. A breakdown of this growth is shown in the
following table:
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September 30,
1988
September 25,
1987
Raymond James & Associates, Inc.:
Account Executives
Branch Offices
Investment Management & Research, Inc.:
Account Executives
Branch Offices
Robert Thomas Securities, Inc.:
Account Executives
Branch Offices
Combined Totals:
Account Executives
Branch Offices
344
41
330
40
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825
261
701
202
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337
54
192
38
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1,506
356
1,223
280
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Results of Operations
1988 Compared With 1987
Fiscal 1988was the Company's fourth consecutive record -setting year for revenues, which increased
17% to $169,709,000 from $144,438,000 in the prior year. Income before extraordinary item,
however, declined 43% to $5,505,000 from last year's $9,582,000. An extraordinary gain resulting
from the repurchase of a block of the Company's convertible subordinated debentures boosted
1988's net income to $5,882,000, or $1.06 per share as compared to $1.73 in the prior year.
The 15% increase in securities commission revenues was directly attributable to the increase in the
number of account executives. In spite of the Company's actions to purge lower-producing repre-
sentatives, average production per account executive has declined significantly as retail investor
activity has been sluggish since the "marketquake" of October 1987. Sales of fixed income and
insurance products showed exceptional gains, while sales of mutual funds decreased 41%.
The decline in limited partnership and investment banking revenues reflects the reduced sales of real
estate limited partnerships. Private limited partnership sales have been depressed since the passage
of the Tax Reform Act of 1986. The Company has been designing and selling income and capital
appreciation products, but the universe of investors for such products is much smaller than the pre-
vious market for tax shelter products. While the Company managed or co-managed fewer public
offerings in 1988, an increase in participations offset the decline in managed activity.
Investment advisory fees recorded an impressive 19% increase. Despite the "marketquake," assets
under management at September 30, 1988 were at an all-time high. The Company's Investment
Advisory Services program is gaining momentum and after its first full year of operation has $53
million under management. A significant increase in assets was also realized by Heritage Cash Trust,
the Company's internally sponsored money market mutual fund.
After suffering a $2.76 million loss in the first quarter, the Company's trading accounts rallied to a
$639,000 profit by year-end. While equity lo~ses in October 1987 were too great to overcome, fixed
income trading profits were significantly higher than in the prior year. Of lesser impact, secondary
limited partnership trading profits continue to increase commensurate with volume.
The dramatic increases in both interest revenues and interest expense were principally a result of the
Company's stock borrow / stock loan program which commenced operations in July 1987. This pro-
gram also accounted for the 22% improvement in net interest income. Other major factors affecting
net interest income were relatively unchanged from the prior year.
The increase in other income reflects increases in revenues from fees related to numerous financial
services performed by the Company's subsidiaries. Of particular significance is $1,130,000 of
partnership administration fees. The Company acquired this operation from a related entity effective
January 1, 1988.
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I 2,000
1,750
1,500
I 1,250
1,000
750
500
I 250
84 85 86 87 88
Assets Under Management
(in millions)
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The 14% rise in employee compensation was the net result of several factors. First, commission
expense to account executives increased in proportion to the increase in commission revenues, while
the average payout percentage increased modestly due to a greater percentage of commission
revenues being generated by independent contractors, who receive a higher payout than employee
account executives in order to cover their overhead costs. Second, administrative and clerical com-
pensation increased primarily due to 1988 being the first full year for the many employees hired dur-
ing 1987. The total number of employees increased only slightly during 1988, primarily to service
the growing independent contractor sales forces. There were no layoffs as a result of the October
1987 "marketquake;" instead the Company elected to reduce staff in certain areas through attrition,
i.e. not replacing those who terminated their employment. Third, incentive compensation accruals
decreased significantly. These accruals, both departmental and company -wide, are generally based
on profitability.
The relocation to the Company's current headquarters in July 1987 had a significant impact on cer-
tain overhead expenses. Data communications was directly affected as the Company put communica-
tion and data processing systems in place which have the capacity for many years' expansion, even at
the Company's historically high rates of growth. Other factors contributing to the increase in data
communications include increased postage and printing costs. The most obvious impact of the new
headquarters building is the increase in occupancy expense. Again, the Company has provided for
future growth, Retail branch additions, expansions and relocations also contributed to the increases
in both data communications and occupancy costs.
Clearance and floor brokerage costs increased relatively in proportion to the increase in the Com-
pany's volume of relevant products. Overall. the Company processed 514,000 transactions in 1988
as compared to 436,000 in 1987.
Business development expenses were flat as the Company emphasized control over the amount and
application of these costs in the current market environment.
Other expenses more than doubled primarily due to bad debt, legal and insurance costs. Much of the
bad debt expense was directly attributable to the "marketquake," as the Company's unsecured cus-
tomer debit balances reached an all-time high. Increased litigation is the current status quo for the
securities industry in general, and the Company incurred significant expenses for legal costs and set-
tlements. The increase in insurance costs relates primarily to the renewal of the Company's blanket
bond (a much less expensive multi-year policy expired on 10-1-87) and excess SIPC insurance,
which was purchased for the first time by the Company in 1988 for competitive reasons.
The decrease in the effective income tax rate reflects a full year of the decrease in the corporate fed-
eral income tax rate specified by the Tax Reform Act of 1986. The reduced rate was effective on
July 1, 1987. The Company has not yet adopted Statement of Financial Accounting Standards No. 96,
"Accounting for Income Taxes," issued in December 1987. Such adoption is not required until at
least fiscal 1990, but earlier adoption is being considered. Adoption of the new statement is not
expected to have a significant effect on the Company's financial position or results of operations.
1987 Compared with 1986
Fiscal 1987 was a record year for the Company by nearly all commonly used quantitative measures.
Revenues surged to $144,438,000, a 27% increase from $113,934,000 in 1986. Net income
increased from $6,216,000 to $9,582,000, a 54% improvement. Accordingly, net income per pri-
mary share rose to $1.73 from $1.27 on an increased share base.
AIl unprecedented level of retail securities transactions, particularly in listed securities and in-
surance products, accounted for the 17% increase in commission revenues. The 436,000 trades pro-
cessed represents a 31 % increase from the 332,000 processed in the prior year.
While limited partnership originations and sales were relatively flat, revenues from investment bank-
ing activities rose 156% as a result of significant increases in managed and co-managed under-
writings, syndicate participations, and merger & acquisition and consulting fees.
Investment advisory fees doubled, commensurate with the increase in assets under management, as
the Company's Asset Management Group concept was initiated. This group consists of Eagle Asset
Management (discretionary manager of private equity and fixed income accounts l. Heritage Asset
Management (manager of the in -house Heritage Family of Mutual Funds), the Raymond James
Managed Options Program (covered call writing program), and the newly-formed Investment
Advisory Services (offers a variety of independent portfolio managers). The Asset Management
Group continues to generate an increasing percentage of the Company's revenues and earnings. In
addition to increased investment advisory fees for portfolio management services, which is a high
profit margin activity relative to the Company's overall operations, the growth of assets under
management also has a positive impact on commission revenues from trades executed within the
managed accounts.
Net interest income (interest revenues minus interest expense) increased 79%, accounting for 34%
of pretax income versus 28% in the prior year, as an aggregate result of several factors. Most
significantly, customer margin receivables increased by approximately $20 million. Second, the
Company maintained much larger fixed income inventory positions. Third, customer credit interest
84 85 86 87 88
Book Value Per Share
10
9
8
7
6
5
4
3
2
1
balances continued to rise, providing the Company with a sizable amount of funds on which a small
positive spread was earned.
Net trading profits compare unfavorably due primarily to the discontinuance in September 1986 of
the Company's New York based segment ofits over-the-counter trading operation. To alesser extent,
the sharp rise in interest rates in April and May of the current year reduced fixed income in-
ventory profits.
Other income more than doubled, reflecting increases in nearly all financial service fees attendant to
the increase in retail customer accounts and activity, such as transfer fees and IRA fees. In addition,
there was a significant increase in dividend income generated by short-term investments in cor-
porate -oriented mutual funds. Other factors include a gain on the sale of a branch office building and
favorable arbitration settlements.
All categories of employee compensation increased significantly. Commission expense, which
realized the largest absolute dollar increase, rose as expected in light of the increase in commission
revenues. Administrative and clerical salaries increased in excess of 30%, indicative of the personnel
additions required to sustain the Company's rapid growth. The largest percentage increase in the
employee compensation area was in incentive compensation, which is directly related to corpo-
rate profitability.
Data communications and business development expenses each increased at a rate generally in pro-
portion to the Company's overall growth rate, while occupancy and equipment costs rose signifi-
cantly in the fourth quarter as the Company moved into its new headquarters.
Clearance and floor brokerage costs decreased due primarily to the aforementioned discontinuance
of the New York over-the-counter trading operation, which utilized an outside clearing firm. Ex-
clusive of this factor, clearance and floor brokerage costs increased at a much lower rate than the
increase in listed trading volume due to the Company's personnel additions on the floor of the New
York Stock Exchange, which reduced the use of other floor brokers.
The increase in other expenses reflects increases in legal and bad debt expenses, as well as increases
in numerous other items commensurate with the Company's growth.
The primary factor in the provision for minority interests has been the 30% minority interest in Eagle
Asset Management. As described in the Notes to Consolidated Financial Statements, the Company
acquired this interest effective February I, 1987.
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Liquidity and Capital Resources
A substantial portion of the Company's assets are readily convertible into cash. At September 30,
1988 liquid assets accounted for 95% of total assets. These assets are financed by the Company's
equity capital, subordinated borrowings, bank borrowings, interest bearing and non -interest bear-
ing customer free credit balances, and other payables.
Under the Company's short-term borrowing agreements with various financial institutions, the
Company can obtain additional funds with any unpledged marketable securities and/ or customer
margin balances serving as collateral. Management believes that funds available from operations
and lines of credit will provide sufficient resources to meet all present and reasonably foreseeable
future capital needs.
The Company's broker-dealer subsidiaries are subject to requirements of the Securities and Ex-
change Commission relating to liquidity and capital standards (see Notes 10 and II of the Notes to
Consolidated Financial Statements).
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Effects of Inflation
The Company's assets are primarily liquid in nature, and are not significantly affected by inflation.
Management believes that the replacement cost of property and equipment would not materially
affect operating results. However, the rate of inflation affects the Company's expenses, including
employee compensation, data communication, and occupancy, which may not be readily recoverable
through charges for services provided by the Company.
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"Our focus is on guiding people
away from programs which we
feel are abusive and on
directing them past investment
selections which we feel are
inappropriate for their
financial goals. "
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Duane McBride
Investment Management
& Research
San Diego, CA
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Raymond James Financial, Inc. and Subsidiaries
Consolidated Statement of Financial Condition
(in thousands, except share amounts)
ASSETS
Cash and short-term investments (including $139,000 and
$196,000 of securities purchased under agreement
to resell)
Deposits with clearing organizations and exchanges
Receivables:
Brokerage customers
Stock borrowed
Brokers and dealers
Other
Trading and investment account securities
Real estate inventories:
Land held for development
Housing units, finished and under construction
Property and equipment net
Cost in excess of tangible assets acquired, net of
accumulated amortization of $545 and $218
Deferred income taxes
Prepaid expenses and other assets
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes and mortgages payable
Payables:
Brokerage customers
Stock loaned
Brokers and dealers
Trade and other
Trading account securities sold but not yet purchased
Accrued employee compensation and other expenses
Income taxes currently payable
Subordinated liabilities
Commitments and contingencies
Stockholders' equity:
Preferred stock; $2 par value;
authorized 1.000,000 shares; outstanding
o shares (5% non-voting cumulative convertible)
Common stock; $.bl par value; authorized
10,000,000 shares; issued 5,574,155 shares
Additional paid -in capital
Retained earnings
Less: 93,638 and 99,571 common shares in treasury, at cost
September 30. September 25,
1988 1987
$167.186
5.082
84.356
198.853
19.015
3.885
26.838
2 I .965
2.725
1.573
2.638
$534.116
$ 13.932
197.321
197.803
32.233
5.393
1.307
10.802
1.887
460.678
13.940
56
38.078
22. I 53
60.287
(789)
59.498
$534.116
$218,893
12,692
85,919
458,679
14,516
2,470
19,963
6,544
2,470
24,141
3,052
2,513
3,673
$855,525
$ 6,735
275,409
466,575
12,083
5,111
1,566
10,920
2,848
781,247
16,500
56
38,129
20,162
58,347
(569)
57,778
$855,525
The accompanying Summary of Significant Accounting Policies and Notes to Consolidated Financial Statements
are integral parts of these financial statements.
Raymond James Financial, Inc. and Subsidiaries I
Consolidated Statement of Income
(in thousands, except per share amounts)
Year Ended I
50 September 30. September 25, September 26, I
40 1988 1987 1986
30 Revenues:
20 Securites commissions $ 94.412 $ 82,412 $ 70,389
10 Limited partnerships and
0 investment banking 20.111 22,637 19,870 I
84 85 86 87 88 Investment advisory fees 12.467 10,455 5,059
Shareholders' Equity Interest 35.377 22,081 12,148
lin thousands) Net trading and investment profits 639 2,302 4,387
Other 6.888 4,201 2,058 I
Net revenue (expense) of real
estate subsidiary (185) 350 23
169.709 144,438 113,934 I
Expenses:
Employee compensation 96.681 84,791 70,488
Data communications 10.923 8,295 7,303 I
Occupancy and equipment costs 8.091 6,160 4,815
Clearance and floor brokerage 3.596 2,978 3,790
Interest 28.195 16,209 8,869
Business development 4.666 4,526 3,787 I
Other 8.443 3,722 2,751
160.595 126,681 10 1,803
Income before income taxes. minority I
interests and extraordinary item 9.II4 17,757 12,131
Provision for income taxes 3.573 7,922 5,572
Minority interests in income
of consolidated subsidiaries 36 253 343 I
Income before extraordinary item 5.505 9,582 6,216
Extraordinary gain on early
extinguishment of debt. net of I
income taxes 377
Net income $ 5.882 $ 9,582 $ 6,216
Income per share before I
extraordinary item:
Primary $ .99 $ 1.73 $ 1.27
Fully diluted $ .94 $ 1.53 $ 1.21
Extraordinary item: I
Primary $ .07 $ $
Fully diluted $ .06 $ $
Net income per share: I
Primary $ 1.06 $ 1.73 $ 1.27
Fully diluted $ 1.00 $ 1.53 $ 1.21
Average common and common I
equivalent shares outstanding:
Primary 5.531 5,550 4,894
Fully diluted 6.487 6,501 5,231 I
The accompanying Summary of Significant Accounting Policies and Notes to Consolidated Financial Statements
are integral parts of these financial statements. I
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Raymond James Financial, Inc. and Subsidiaries
Consolidated Statement of Changes in Stockholders' Equity
(in thousands, except per share amounts)
Additional Treasury Stock Total
Preferred Stock Common Stock Paid -in Retained Common Stockholders'
Shares Amount Shares Amount Capital Earnings Shares Amount Equity
Balances at September 27, 1985 50 $ 100 4,346 $ 43 $ 20,432 $ 14,116 (110) $ (675) $ 34,016
Stock warrant transactions 1 6 6
Conversion of preferred stock (50) (100) 126 1 99
Net income 6,216 6,216
Cash dividends - common stock
($,14 per share) * (602) (602)
Issuance of common stock 345 4 4,978 4,982
Balances at September 26, 1986 4,817 48 25,509 19,730 (109) (669) 44,618
Net income 9,582 9,582
Cash dividends - common stock
($.16 per share) * (846) (846)
Issuance of common stock 250 3 3,997 4,000
10% common stock dividend 507 5 8,299 (8,304) (11)
Purchase of treasury shares (6) (48) (48)
Issuance of treasury shares 324 26 148 472
Balances at September 25, 1987 5,574 56 38,129 20.162 (100) (569) 57,778
Net income 5,882 5,882
Cash dividends - common stock
($,16 per share) (877) (877)
Purchase of treasury shares (103) (988) (988)
Issuance of treasury shares (51) 109 768 717
Spin -off of real estate subsidiary (3,014) (3,014)
Balances at September 30, 1988 5,574 $ 56 $ 38,078 $ 22,153 (94) $ (789) $ 59,498
*Dividends per share have not been restated to give effect to the March 1987 stock dividend (see Note 8).
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The accompanying Summary of Significant Accounting Policies and Notes to Consolidated Financial Statements
are integral parts of these financial statements.
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"I brought my clients to Robert
Thomas because I was so
impressed with the expertise and
friendliness of the corporate
headquarters people. They are
sincerely concerned about me
and my clients."
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Robert Suter
Robert Thomas Securities
Sacramento, CA
Raymond James Financial, Inc. and Subsidiaries
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Consolidated Statement of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
(in thousands)
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Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization
Unrealized (gain) loss on investment securities
Provision for bad debts
Provision for other accruals
Minority interests
(Increase) decrease in assets (net of amounts pertaining to
spin -off of real estate subsidiary):
Deposits with clearing organizations
Receivable from:
Brokerage customers
Stock borrowed
Brokers and dealers
Other
Trading account securities
Real estate inventories
Deferred income taxes
Prepaid expenses and other assets
Increase (decrease) in liabilities (net of amounts pertaining to
spin -off of real estate subsidiary):
Payable to:
Brokerage customers
Stock loaned
Brokers and dealers
Trade and other
Accrued employee compensation and other expenses
Income taxes currently payable
Total adjustments
Net cash provided by (used in) operating activities
Cash flows from investing activities:
Additions to fixed assets
Sales of fixed assets
Sale of investment account securities
Purchase of investment account securities
Net cash used in investing activities
Cash flows from financing activities:
Borrowings from banks and financial institutions
Payment on borrowings from banks and financial institutions
Repayment of loans to real estate subsidiary
Issuance of common stock
Exercise of stock options and warrants
Purchase of treasury stock
Dividend on common stock
Sale of subordinated debentures
Repurchase of subordinated debentures
Net cash provided by financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental disclosures of cash flow information:
Cash paid for interest
Cash paid for taxes
Year Ended
September 30. September 25, September 26,
1988 1987 1986
$ 5.882 $ 9,582 $ 6,216
3.519 2,863 1,938
893 (237) 587
972 404 45
1,191 38
36 253 343
7.610 (5,405) (6,535)
591 (20,283) (16,831)
259.826 (458,679)
(4.499) 2,391 (5,752)
(1,651) 426 (797)
(4.199) (3,814) 8,797
(2,367) 1,192
940 (2,124) (350)
294 (1,477) (764)
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The accompanying Summary of Significant Accounting Policies and Notes to Consolidated Financial Statements
are integral parts of these financial statements.
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Basis of consolidation
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Reporting period
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Recognition of revenues
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Short-term investments
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Raymond James Financial. Inc. and Subsidiaries
Summary of Significant Accounting Policies
Raymond James Financial. Inc. is a holding company which, through its subsidiaries, is engaged prin-
cipally in the securities brokerage business including the underwriting, distribution, trading and
brokerage of equity and debt securities. and the sale of tax advantaged investments, mutual funds
and ather investment praducts and provides investment management services far retail and in-
stitutianal clients. The accaunting and reporting palicies af Raymand James Financial, Inc. and Sub-
sidiaries (the "Company") canform to, generally accepted accaunting principles, the mare significant
af which are summarized belaw:
.. .. .. .. . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . .
The cansalidated financial statements include the accaunts af Raymand James Financial, Inc. and its
subsidiaries, All material intercompany balances and transactians have been eliminated in can-
solidatian. The consolidated subsidiaries at September 30, 1988 are as fallaws:
Raymand James & Associates, Ine.
Investment Management & Research, Inc.
Robert Thomas Securities, Inc.
Eagle Asset Management Inc.
Planning Carporation af America
Heritage Asset Management Inc.
Raymond James Partners, Inc.
R) Oil and Gas, Inc.
R) Leasing, Inc.
R) Realty, Ine.
R) Gavernment Securities, Inc.
R) Specialist Corparatian
R) Cammunication, Inc.
R) Health Praperties, InC.
R) Equities, Inc.
R) Partners, Ine.
R) Telecommunicatians, Inc.
R) Praperties, Inc.
R) Credit Partners, Inc.
All cansalidated subsidiaries are 10096 awned by Raymand James Financial, Inc. except far R) Proper-
ties, Inc., which is 8596 awned.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Company's fiscal year ends on the last Friday in September af each year.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .. .. ..
Securities transactians and related commissian inca me and expenses are recarded in the ace aunts
an the settlement date, generally the fifth business day follawing the transaction date.
Revenues fram limited partnerships and investment banking are recorded an the settlement date far
sales cancessians and an the dates receivable far underwriting and management fees.
.. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..
Shart -term investments are stated at cost which approximates market at the balance sheet date. For
purpases af the Cansalidated Statement af Cash Flaws, the Campany can siders these short-term
investments to, be cash equivalents.
.. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..
Trading accaunt securites and marketable investment ace aunt securites are recorded at market value
with unrealized appreciatian ar depreciation reflected in incame currently. Investment account
securities not readily marketable are carried at the lawer af cast ar estimated fair value as determined
by management.
.. .. .. .. . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..
Property and equipment is stated at cast less accumulated depreciatian. Depreciation of assets is
proVided principally using the straight-line methad far financial reparting purpases aver the esti-
mated useful lives af the assets. Leasehald improvements are amortized using the straight-line
methad aver the shorter af the lease term ar the estimated useful lives af the assets.
Additians, improvements and expenditures far repairs and maintenance that significantly extend the
useful life af an asset are capitalized. Other expenditures for repairs and maintenance are charged to,
aperatians in the periad incurred. Gains and lasses an disposals af fixed assets are alSO. reflected in
aperations far the year.
Income taxes
Net income per share
Statement of cash flows
Reclassifications
The Company provides deferred income taxes on items of income and expense that are recognized in
different periods for financial reporting and tax purposes.
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Primary earnings per share are computed using the weighted average common stock and common
stock equivalents outstanding. Common stock equivalents include shares issuable under stock
options and stock warrants and are determined under the treasury stock method. Fully diluted earn-
ings per share assUIl'.es, in addition to the above, the conversion of the 7'/2% convertible subor-
dinated debentures, and the related adjustment to net earnings for the elimination of interest
expense on the debentures. All share and per share amounts have been restated to give retroactive
effect to all common stock dividends (Note 8).
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In November 1987,StatementofFinancialAccounting Standards (SFAS) No. 95, "Statement of Cash
Flows" was issued by the Financial Accounting Standards Board. SFAS 95 requires a statement of
cash fiows as part of a complete set of financial statements in place of a statement of changes in finan-
cial position. The Company has included a statement of cash fiows as part of the financial statements
for all years presented.
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Certain amounts from prior years have been reclassified for consistency with current year presenta-
tion. These reclassifications were not material to the consolidated financial statements, except for
reclassifications relating to the distribution of the shares of Sunstyle Corporation common stock
(Note 13).
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"1 have a sincere interest in my
clients. Being in the business for
more than 20 years. 1 learned
long ago that investing is very
personal. and 1 spend most of my
time personally reviewing
clients' portfolio performance
and communicating the results
to them."
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John Winton
Investment Management
& Research
Flint, MI
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Note 1 -
Receivable From and
Payable to Customers:
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Note 2 -
Trading and
Investment Account Securities
(in thousands):
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Note 5 -
Property and Equipment
(in thousands):
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Note 4 -
Notes and Mortgages Payable:
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Raymond James Financial, Ine. and Subsidiaries
Notes to Consolidated Financial Statements
The amounts receivable from and payable to customers represent balances arising from normal cash
and margin transactions. Securities owned by customers and held as collateral for receivables are not
reflected in the accompanying financial statements. The Company pays interest at varying rates on
customer funds on deposit for reinvestment. Such funds on deposit totalled $ 172,905,000 and
$246,969,000 at September 30, 1988 and September 25, 1987, respectively.
September 30. 1988
Securities
sold but
Securities not yet
owned purchased
Marketable:
Stocks and warrants
Municipal obligations
Corporate obligations
Other
Non -marketable
$ 641
345
321
$ 4.774
6.750
7.018
4.785
3.511
$ 26.838
$ 1.307
Land
Buildings and improvements
Model homes and furnishings
Furniture, fixtures, equipment
and leasehold improvements
Less: accumulated depreciation
and amortization
Mortgage note payable, interest at 9.75%,
principal and interest payable monthly,
balloon payment due 1997.
Mortgage payable, interest at prime plus
1 % to 11/2%, interest only payable
monthly, due 1989.
Mortgage note payable, interest at 14.5%,
interest only payable monthly over 10
years, due 1993, callable in 1988
Mortgage notes payable, 52,100,000
revolving line of credit. interest at prime
plus 1 % to 1112%, interest only payable monthly,
due 1989
Mortgage notes payable, interest at 8.75% to
12% payable through 2007.
September 25, 1987
Securities
sold but
Securities not yet
owned purchased
$ 4,314
6,869
3,647
4,199
934
$ 19,963
September 30.
1988
$ 2.919
16.054
14.210
33,183
(1l.2181
$ 21,965
September 30,
1988
(in thousands)
$ 13.932
$ 13.932
$ 480
464
593
29
$ 1.566
September 25,
1987
$ 2,919
16,067
958
12,414
32,358
(8,217)
$ 24,14 1
September 25,
1987
$ 3,246
2,600
557
332
$ 6,735
The Company maintains additional available lines of credit aggregating $25,000,000 with com-
mercial banks (510,000,000 secured and S 15,000,000 unsecured) of which no amounts were
outstanding at September 30. 1988. Under the Company's short-term borrowing agreements with
various financial institutions. the Company can obtain additional funds with any unpledged market-
able securities or customer margin balances serving as primary security. The mortgage note payable
at September 30, 1988 is secured by land, buildings and improvements with a net book value of
approximately $13,050,000,
Principle maturities of the mortgage note payable at September 30, 1988 for the succeeding five fis-
cal years and thereafter are as follows: 1989 - $81,000; 1990 - $97,000; 1991 - $107,000; 1992 -
$118,000; 1993 - $130,000; thereafter - $13,399,000,
In connection with the construction of the new headquarters building, the Company capitalized
interest of $328,000 during 1987.
Note 5 -
Federal and State
Income Taxes
(in thousands):
. . . . . . . . . . . . . . . . . . .
The provision for income taxes consists of:
Year Ended
September 30, September 25, September 26,
1988 1987 1986
Current provision:
Federal $ 2,200 $ 8,806 $ 5.1 97
State 433 1,240 725
2,633 10,046 5,922
Deferred provision:
Federal 779 (1,870) (293)
State 161 (254) (57)
940 (2.124) (350)
$ 3,573 $ 7,922 $ 5,572
The Company's effective tax rate on pre -tax income differs from the statutory federal income tax rate
due to the following:
Year Ended
September 30, September 25, September 26,
1988 1987 1986
Provision calculated at
statutory rates $ 3,099 $ 7,659 $ 5,580
Add:
State income taxes,
net of federal benefit 392 561 361
Less:
Tax exempt interest income (164) (346) (317)
Dividends received deduction (115) (153) (87)
Amortization of intangible asset III 94
Other items, net 250 107 35
$ 3,573 $ 7,922 $ 5,572
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The tax effects of the principal timing differences resulting in deferred tax expenses are as follows: I
Year Ended
September 30, September 25, September 26,
1988 1987 1986
Equity in unconsolidated
subsidiaries and
partnerships $ (47) $ 209 $ 178
Deferred compensation 1.222 (1,892) (411)
Accelerated depreciation 238 (279) 151
Unrealized losses on securities (193) (71) (145)
Non-deductible accruals (369) (49)
Other, net 89 (42) (123)
$ 940 $ (2,124) $ (350)
Note 6 -
Commitments and
Contingencies:
Long -term lease agreements expire at various times from 1989 through 1995. Minimum annual
rentals under such agreements for the succeeding five fiscal years are: $2,038,000 in 1989,
$ 1.270,000 in 1990, $947,000 in 1991. $754,000in 1992 and $494,000in 1993. Rental expense
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I Note 7 -
Subordinated Liabilities:
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I Note 8 -
Capital Transactions:
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incurred under all leases. including equipment under short-term agreements, aggregated
$3,165,000, 82,955,000 and 52,662,000 in 1988, 1987 and 1986, respectively.
At September 30, 1988 Raymond James & Associates, Inc. maintained a $3,500,000 letter of credit
with the Options Clearing Corporation ("OCC"). This letter of credit,in conjunction with $4,700,000
of government securities held as deposits by OCC, was sufficient to cover unsettled options at
that date.
In connection with certain real estate limited partnerships syndicated by Raymond James & Assoc-
iates, Inc., the Company was contingently liable for $2,300,000 at September 30, 1988 in the form of
loan guarantees.
At September 30, 1988 the Company had guaranteed $890,000 of bank debt of a limited part-
nership distributed by a subsidiary of the Company which invested in radio and television properties.
Subsequent to year end additional debt was guaranteed, raising the total amount guaranteed to
$ I ,575,000. This partnership is experiencing cash flow difficulties and additional guarantees may be
necessary. The repayment of the debt by the partnership is uncertain, and losses to the Company
may result.
The Company is a defendant or co-defendant in various lawsuits incidental to its securities business.
The Company is contesting the allegations of the complaints in these cases and believes that there are
meritorious defenses in each of these lawsuits. Although it is impossible to predict the outcome of the
outstanding litigation, in the opinion of management. based on discussions with counsel. the out-
come of the matters will not result in a material adverse effect on the financial condition of the
Company.
In July 1986, the Company issued at par $ 16,500,000 of 7.5% convertible subordinated debentures
with interest payable semi -annually. The debentures are convertible at any time prior to maturity
into common stock of the Company at 816.57 per share. The debentures are currently redeemable at
106% of the principal amount plus accrued interest and at declining prices thereafter.
The debentures are due on June 15, 2006, and commencing on June 15, 1996 have annual sinking
fund requirements of 7.5% of the aggregate principal amount of the debentures or at least 75% of the
debentures prior to maturity. At its option, the Company may make sinking fund payments in cash or
in debentures or by a credit for debentures previously converted or redeemed. The debentures are
subordinated to the claims of general creditors.
On November 11. 1987 the Company's Board of Directors authorized the repurchase of up to
$2,000,000 of the debentures to satisfy future sinking fund obligations. On September 14, 1988 the
Board authorized the repurchase of an additional $3,000,000 of debentures. In September 1988 the
Company repurchased $2,560,000 of the debentures, resulting in an extraordinary gain of
$377,000, net of income taxes of $227,000.
On December 13, 1985 the Company's Board of Directors declared a 10% common stock dividend
paid on January 30, 1986 to shareholders of record on January 6, 1986. On February 13, 1987 the
Company's Board of Directors declared another 10% common stock dividend paid on April 6, 1987 to
shareholders of record on March 9, 1987.All references (unless otherwise noted) in the consolidated
financial statements and accompanying notes to amounts per share and to the number of common
shares have been restated to give retroactive effect to the stock dividends.
During 1986. the Company's profit sharing plan exercised its right to convert its 50,000 shares ofthe
Company's preferred stock into 126,500 shares of common stock.
InJuly 1986, the Company completed a public offering of 345,000shares of common stock at $ 15.50
per share. In February 1987, the Company issued an additional 250,000 shares in connection with
the purchase of the minority interest of Eagle Asset Management. Inc.
The Company's Board of Directors has, from time to time, adopted resolutions authorizing the Com-
pany to repurchase its common stock for the funding of its incentive stock option and stock purchase
plans and other corporate purposes. Of the 500,000 shares authorized by the Board through Sep-
tember 30, 1988,203,420 shares have been repurchased by the Company.
Note 9 -
Employee Benefit Plans:
Note 10 -
Net Capital Requirements:
The Company's profit sharing plan provides certain death or retirement benefits for all employees
who meet certain service requirements. Such benefits become fully vested after ten years of qualified
service. The Company's employee stock ownership plan provides for distribution of vested percen"
tages of the Company's common stock to employees who meet certain requirements. Contributions
to these plans are made in amounts approved annually by the Board of Directors. In addition, during
1987 the Company adopted a plan pursuant to section 401 (k) of the Internal Revenue Code which
provides for the Company to match 50% of the first $1,000 of each participant's deferrals annually.
Compensation expense includes aggregate contributions to these plans of $1,247,000,
$2,027,000, and $1,273,000 for 1988, 1987, and 1986, respectively.
On September 30, 1982 the Board of Directors of the Company adopted an Incentive Stock Option
Plan, which currently covers an aggregate of 563,000 shares of common stock. Options are granted
to registered representatives of Raymond James & Associates, Inc. who achieve certain gross com-
mission levels and to key administrative employees of the Company. The options are granted at fair
market value. No compensation expense will be recognized with respect to these options. Options are
exercisable in the 36th to 72nd months following the date of grant and only in the event that the
grantee is an employee of the Company at that time. The following table summarizes. the option
activity under this program for the three years ended September 30, 1988:
Shares Under
Option
175,087
46,750
(13,140)
208,697
91.692
(22,008)
(1.089)
277,292
47,500
( 14,342)
(43,672)
266,778
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Outstanding at September 27, 1985
Granted
Cancelled
Outstanding at September 26, 1986
Granted
Cancelled
Exercised
Outstanding at September 25, 1987
Granted
Cancelled
Exercised
Option Price
Range
$ 2.74 to $ 8.13
10.69to 13.41
2.74 to 10.69
2.74 to 13.41
10.79 to 18.11
2.74 to 13.41
5.55
2.74 to
9.24 to
5.55 to
2.74 to
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10.91
13.41
6.54
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Outstanding at September 30, 1988
5.55 to 18,11
On December 13, 1985 the Company's Board of Directors adopted a stock option plan covering
121,000 shares of common stock for the benefit of independent contractor registered represent-
atives of the Company. At September :;>0, 1988 there were options covering 77,485 shares outstand-
ing pursuant to this plan. These options are exercisable at prices ranging from $9.48 to $10.90 per
share at various times through March 1993.
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The broker-dealer subsidiaries ofthe Company are subject to the requirements of Rule 15c3-1 under
the Securities Exchange Act of 1934. This rule requires that aggregate indebtedness, as defined, not
exceed fifteen times net capital, as defined. In addition, net capital must be a minimum of $25,000.
Rule 15c3-1 also provides for an "alternative net capital requirement" which, if elected, requires that
net capital be equal to or greater than two percent of aggregate debit items computed in applying the
formula for determination of reserve requirements (see Note 11). The New York Stock Exchange may
require a member organization to reduce its business if its net capital is less than four percent of
aggregate debit items and may prohibit a member firm from expanding its business and declaring
cash dividends if its net capital is less than five percent of aggregate debit items. In addition, based on
the nature of its activities, Raymond James & Associates, Inc. must maintain minimum net capital of
$100,000. Net capital positions of the Company's broker-dealer subsidiaries were as follows:
September 30, September 25,
1988 1987
Raymond James & Associates, Inc.: (dollar amounts in thousands)
(alternative method elected)
Net capital as a percent of aggregate debit items
Net capital
Required net capital
Investment Management & Research, Inc.:
Ratio of aggregate indebtedness to net capital
Net capital
Required net capital
Robert Thomas Securities, Inc.:
Ratio of aggregate indebtedness to net capital
Net capital
Required net capital
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19.19% 21.33%
$18,408 $21,998
$ 1.918 $ 2,063
1.30 2.86
$ 811 $ 477
$ 70 $ 91
2.89 3.76
$ 743 $ 260
$ 143 $ 65
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I Note 11 -
Reserve Requirements:
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I Note 12 -
Acquisition:
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Note 15 -
I Spin -off of
Real Estate Subsidiary :
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Rule 15c3-3 ofthe Securities Exchange Act of 1934 specifies certain conditions under which brokers
and dealers carrying customer accounts are required to maintain cash or qualified securities in a spe-
cial reserve bank account for the exclusive benefit of customers. Amounts to be maintained, if
required, are computed in accordance with a formula defined in the rule. At September 30, 1988 Ray-
mond James & Associates, Inc. had $139,129,000 (including $139,000,000 of securities purchased
under agreement to resell) in special reserve bank accounts as compared to a reserve requirement of
$126,296,000 at that date. At September 25, 1987 this subsidiary had $196.120,000 (including
$196,000,000 of securities purchased under agreement to resell) in special reserve bank accounts
as compared to a reserve requirement of $186,442,000. Securities purchased under agreement to
resell are held in safekeeping in the Company's name. At September 30, 1988 all such agreements
were on an overnight basis with Southeast Bank, N.A.
Investment Management & Research, Inc. and Robert Thomas Securities, Inc. are exempt from the
provisions of Rule 15c3- 3 since they clear all transactions with and for customers on a fully disclosed
basis with Raymond James & Associates, Inc.
.. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..
In February, 1987 the Company acquired the 30% minority interest in its Eagle Asset Management.
Inc. ("Eagle") subsidiary in a transaction accounted for as a purchase. The former sole minority
stockholder of Eagle, a Director of the Company. received 250,000 shares of the Company's common
stock (before giving effect to the 10% stock dividend paid to shareholders of record on March 9,
1987). The purchase was effective on February 1. 1987, representing a purchase price of approx-
imately $4,000,000. The approximately 53,270,000 of purchase price in excess of book value
acquired is attributable to existing investment management contracts and is being amortized on a
straight -line basis over a period of ten years. If the acquisition had occurred at the beginning of either
fiscal year 1987 or 1986, pro forma results of operations for these periods would not differ materially
from actual results.
.. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..
On August 25, 1988 the Company's Board of Directors authorized the distribution of all of the com-
mon stock of Sunstyle Corporation ("Sunstyle"). the Company's real estate development and home-
building subsidiary, to the shareholders of the Company. The spin-off of Sunstyle was effective
September 30, 1988, with a distribution date of October 7, 1988. Shareholders received one com-
mon share of Sunstyle for each five shares of the Company's common stock owned.
The results of Sunstyle's operations have been segregated and appear on the Consolidated State-
ment of Income as "Net revenue (expense) of real estate subsidiary." The Company's balance sheet
accounts at September 30, 1988 were adjusted to retroactively give effect to the distribution in the
same manner as would be done ifthe distribution had occurred on that date. The transaction resulted
in a reduction in stockholders' equity of $3,014,000, the net assets of the real estate subsidiary.
Report of Independent Certified Public Accountants
To the Board of Directors and Stockholders of
Raymond James Financial, Inc.
In our opinion, the accompanying consolidated statement of financial condition and the related con-
solidated statements of income, of changes in stockholders' equity and of cash flows present fairly, in
all material respects, the financial position of Raymond James Financial, Inc. and its subsidiaries at
September 30, 1988and September 25. 1987. and the results oftheir operations and their cash flows
for each of the three years in the period ended September 30, 1988 in conformity with generally
accepted accounting principles, These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial statements based on our
audits. We conducted our audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management. and evaluating the
overall financial statement presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
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Tampa, Florida
November 22, 1988
Number of Shareholders
lO-K
Annual Meeting
Raymond James Financial, Inc. and Subsidiaries
Quarterly Financial Information
(In thousands, except per share amounts)
1988 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
Revenues $33,129 $40,892 $44,872 $50,816
Income (loss) before income taxes,
minority interests, and
extraordinary item (1,077) 2,995 2,092 5,104
Income (loss) before extraordinary item (662) 1,759 1,264 3,144
Net income (loss) (662) 1,759 1.264 3,521
Income (loss) per share before
extraordinary item:
Primary (.12) .32 .23 .57
Fully diluted (.12) .29 .22 .50
Net income (loss) per share:
Primary (.12) .32 .23 .64
Fully diluted (.12) .29 .22 .56
Cash dividends declared
per common share .04 .04 .04 .04
Stock price range
High 17 1/8 12 1/2 II 1/2 10 1/4
Low 85/8 95/8 91/2 91/4
1987
Revenues $30,843 $38,276 $36,553 $38,766
Income before income taxes
and minority interests 4,002 6,368 4,343 3,044
Net income 2,048 3,421 2,439 1.674
Net income per share: *
Primary .39 .62 .43 .30
Fully diluted .35 .54 .38 .27
Cash dividends declared
per common share * .04 .04 .04 .04
Stock price range*
High 12 1/2 25 1/2 25 3/4 20 1/4
Low 10 11/16 11 18 161/2
*Gives effect to the March 1987 common stock dividend.
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At December 12, 1988 there were approximately 3,500 shareholders of record.
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The annual report to the Securities and Exchange Commission on form 10- K is available. A copy may
be obtained upon request in writing to Investor Relations Department, Raymond James Financial,
Inc., 880 Carillon Parkway, St. Petersburg, FL 33716.
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The 1989 annual meeting of shareholders will be conducted at Raymond James Financial's head- I
quarters in The Raymond James Financial Center, 880 Carillon Parkway, St. Petersburg, Florida, on
February 9, 1989 at 5 p.m.
Notice of the annual meeting, proxy statement and proxy voting card accompany this report.
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Quarterly reports are mailed to shareholders in February, May, August and December.
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Directors
I Walter E. Auch
Consultant
I Jonathan A. Bulkley
President
Charterhouse Media Group
Investment banking partnership
I Herbert E. Ehlers
President
Eagle Asset Management, Inc.
I Francis S. Godbold
President
M. Anthony Greene
I Executive Vice President
Harvard H. Hill, Jr.
Managing General Partner
I Houston Partners (venture capital)
Christopher W. James
Consultant
I Thomas A. James
Chairman of the Board
and Chief Executive Officer
I Ralph W. Quartetti
President
Sunstyle Corporation
I Robert F. Shuck
Executive Vice President
Officers
I Thomas A. James
Chairman of the Board and
Chief Executive Officer
I Francis S. Godbold
President
I M. Anthony Greene
Executive Vice President
Robert F. Shuck
Executive Vice President
I Jeffrey P. Julien
Vice President, Finance
I Lynn Pippenger
Secretary and Treasurer
Mary Jean Kissner
Controller
I Lawrence A. Silver
Vice President, Investor Relations
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Raymond James Financial, Inc.
Subsidiaries
Retail Investment Firms
Raymond James & Associates. Inc.
Member New York Stock Exchange
Thomas A. James, President
Providing investment and financial planning
services throughout the southeast
Investment Management & Research. Inc.
M. Anthony Greene, President
Providing financial planning services
throughout the country
Robert Thomas Securities. Inc.
J. Stephen Putnam, President
Providing investment services
throughout the country.
Other
Eagle Asset Management. Inc.
Herbert E. Ehlers. President
Asset management for individuals,
municipalities, corporations and
pension funds
Heritage Asset Management, Inc.
Richard K. Riess, President
Investment advisor to the Heritage Family
of Mutual Funds
Planning Corporation of America
James Sipe, President
Insurance
RJ Credit Partners. Inc.
Ronald Diner, President
General partner for real estate
limited partnerships prOjected
to generate tax credits
RJ Health Properties, Inc.
Fred Whaley, President
General partner for healthcare
real estate management
limited partnerships
RJ Leasing, Inc.
Michael Cole, President
General partner for equipment
leasing limited partnerships
RJ Properties. Inc.
Robert Love, President
General partner for real
estate limited partnerships,
property management
RJ Telecommunications, Inc,
Robert Dressler, President
General partner for radio
and television station
limited partnerships
Transfer Agent
and Registrar
Southeast Bank, N.A.
Miami, Florida
Independent Accountants
Price Waterhouse
Tampa, Florida
Attorneys
Schifino, Fleischer & Neal, P. A.
Tampa, Florida
Corporate Counsel
Alex J. Sabo
New York Stock Exchange
Symbol
RJF
RAYMOND JAMES
FINANCIAL. INC.
The Raymond James Financial Center
880 Carillon Parkway, St. Petersburg, FL 33716
(813) 573-3800
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I Note 11 -
Reserve Requirements:
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I Note 12 -
Acquisition:
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Note 13 -
I Spin -off of
Real Estate Subsidiary :
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Rule 15c 3- 3 ofthe Securities Exchange Act of 1934 specifies certain conditions under which brokers
and dealers carrying customer accounts are required to maintain cash or qualified securities in a spe-
cial reserve bank account for the exclusive benefit of customers. Amounts to be maintained, if
required, are computed in accordance with a formula defined in the rule. At September 30, 1988 Ray-
mond James & Associates, Inc. had $139.129,000 (including $139,000,000 of securities purchased
under agreement to resell) in special reserve bank accounts as compared to a reserve requirement of
$126,296,000 at that date. At September 25,1987 this subsidiary had $196.120,000 (including
$196,000,000 of securities purchased under agreement to resell) in special reserve bank accounts
as compared to a reserve requirement of $186,442,000. Securities purchased under agreement to
resell are held in safekeeping in the Company's name. At September 30, 1988 all such agreements
were on an overnight basis with Southeast Bank, N.A.
Investment Management & Research, Inc. and Robert Thomas Securities, Inc. are exempt from the
provisions of Rule 15c3- 3 since they clear all transactions with and for customers on a fully disclosed
basis with Raymond James & Associates, Inc.
In February, 1987 the Company acquired the 30% minority interest in its Eagle Asset Management;
Inc. ("Eagle") subsidiary in a transaction accounted for as a purchase. The former sole minority
stockholder of Eagle ,aDirector ofthe Company. received 250,000 shares ofthe Company's common
stock (before giving effect to the 10% stock dividend paid to shareholders of record on March 9.
1987). The purchase was effective on February 1, 1987, representing a purchase price of approx-
imately $4,000,000. The approximately $3.270,000 of purchase price in excess of book value
acquired is attributable to existing investment management contracts and is being amortized on a
straight -line basis over a period of ten years. If the acquisition had occurred at the beginning of either
fiscal year 1987 or 1986, pro forma results of operations for these periods would not differ materially
from actual results.
On August 25, 1988 the Company's Board of Directors authorized the distribution of all of the com-
mon stock of Sunstyle Corporation ("Sunstyle"). the Company's real estate development and home-
building subsidiary, to the shareholders of the Company. The spin -off of Sunstyle was effective
September 30. 1988, with a distribution date of October 7. 1988. Shareholders received one com-
mon share of Sunstyle for each five shares of the Company's common stock owned.
The results of Sunstyle's operations have been segregated and appear on the Consolidated State-
ment of Income as "Net revenue (expense) of real estate subsidiary." The Company's balance sheet
accounts at September 30, 1988 were adjusted to retroactively give effect to the distribution in the
same manner as would be done if the distribution had occurred on that date. The transaction resulted
in a reduction in stockholders' equity of $3.014.000, the net assets of the real estate subsidiary.
Report of Independent Certified Public Accountants
To the Board of Directors and Stockholders of
Raymond James Financial, Inc.
In our opinion. the accompanying consolidated statement of financial condition and the related con-
solidated statements of income. of changes in stockholders' equity and of cash flows present fairly, in
all material respects. the financial position of Raymond James Financial, Inc. and its subsidiaries at
September 30, 1988and September 25. 1987. and the results oftheir operations and their cash flows
for each of the three years in the period ended September 30, 1988 in conformity with generally
accepted accounting principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial statements based on our
audits. We conducted our audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a
test basis. evidence supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management; and evaluating the
overall financial statement presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
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Tampa. Florida
November 22.1988
Number of Shareholders
LO-K
Annual Meeting
Raymond James Financial, Inc. and Subsidiaries
Quarterly Financial Information
(In thousands, except per share amounts)
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1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. I
$33,129 $40,892 $44,872 $50,816 I
(1,077) 2,995 2,092 5,104
(662) 1,759 1,264 3,144 I
(662) 1,759 1,264 3,521
1988
Revenues
Income (loss) before income taxes,
minority interests, and
extraordinary item
Income (loss) before extraordinary item
Net income (loss)
Income (loss) per share before
extraordinary item:
Primary
Fully diluted
Net income (loss) per share:
Primary
Fully diluted
Cash dividends declared
per common share
Stock price range
High
Low
1987
(.12) .32 .23 .57
(.12) .29 .22 .50
(.12) .32 .23 .64
(.12) .29 .22 .56
.04 .04 .04 .04
17 1/8 121/2 II 1/2 IO 1/4
85/8 95/8 91/2 91/4
$30,843 $38,276 $36,553 $38,766
4,002 6,368 4,343 3,044
2,048 3,421 2,439 1,674
,39 .62 .43 .30
.35 .54 .38 .27
.04 .04 .04 .04
12 1/2 25 1/2 25 3/4 20 1/4
10 11/16 11 18 16 1/2
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Revenues
Income before income taxes
and minority interests
Net income
Net income per share: *
Primary
Fully diluted
Cash dividends declared
per common share *
Stock price range*
High
Low
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*Gives effect to the March 1987 common stock dividend.
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.. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 't .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..
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At December 12, 1988 there were approximately 3,500 shareholders of record.
.. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..
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The annual report to the Securities and Exchange Commission on form 10- K is available. A copy may
be obtained upon request in writing to Investor Relations Department, Raymond James Financial,
Inc., 880 Carillon Parkway, St. Petersburg, FL 33716.
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The 1989 annual meeting of shareholders will be conducted at Raymond James Financial's head- I
quarters in The Raymond James Financial Center, 880 Carillon Parkway, St, Petersburg, Florida, on
February 9, 1989 at 5 p.m.
Notice of the annual meeting, proxy statement and proxy voting card accompany this report. I
Quarterly reports are mailed to shareholders in February, May, August and December.
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Directors
I Walter E. Auch
Consultant
I Jonathan A. Bulkley
President
Charterhouse Media Group
Investment banking partnership
I Herbert E. Ehlers
President
Eagle Asset Management, Inc.
I Francis S. Godbold
President
M. Anthony Greene
I Executive Vice President
Harvard H. Hill, Jr.
Managing General Partner
I Houston Partners (venture capital)
Christopher W. James
Consultant
I Thomas A. James
Chairman of the Board
and Chief Executive Officer
I Ralph W. Quartetti
President
Sun style Corporation
I Robert F. Shuck
Executive Vice President
Officers
I Thomas A. James
Chairman of the Board and
Chief Executive Officer
I Francis S. Godbold
President
I M. Anthony Greene
Executive Vice President
Robert F. Shuck
Executive Vice President
I Jeffrey P. Julien
Vice President, Finance
I Lynn Pippenger
Secretary and Treasurer
Mary Jean Kissner
Controller
I Lawrence A. Silver
Vice President, Investor Relations
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Raymond James Financial, Inc.
Subsidiaries
Retail InvesnnentFUnns
Raymond James & Associates, Inc.
Member New York Stock Exchange
Thomas A. James. President
Providing investment and financial planning
services throughout the southeast
Invesnnent Management & Research, Inc.
M. Anthony Greene. President
Providing financial planning services
throughout the country
Robert Thomas Securities, Inc.
J. Stephen Putnam. President
Providing investment services
throughout the country.
Other
Eagle Asset Management, Inc.
Herbert E. Ehlers. President
Asset management for individuals.
municipalities. corporations and
pension funds
Heritage Asset Management, Inc.
Richard K Riess. President
Investment advisor to the Heritage Family
of Mutual Funds
Planning Corporation of America
James Sipe. President
Insurance
RJ Credit Partners, Inc.
Ronald Diner. President
General partner for real estate
limited partnerships projected
to generate tax credits
RJ Health Properties, Inc.
Fred Whaley. President
General partner for healthcare
real estate management
limited partnerships
RJ Leasing, Inc.
Michael Cole. President
General partner for equipment
leasing limited partnerships
RJ Properties, Inc.
Robert Love. President
General partner for real
estate limited partnerships.
property management
RJ Telecommunications, Inc.
Robert Dressler. President
General partner for radio
and television station
limited partnerships
Transfer Agent
and Registrar
Southeast Bank, N.A.
Miami. Florida
Independent Accountants
Price Waterhouse
Tampa. Florida
Attorneys
Schifino, Fleischer & Neal, P. A.
Tampa. Florida
Corporate Counsel
Alex J. Sabo
New York Stock Exchange
Symbol
RJF
RAYMOND JAMES
FINANCIAL. INC.
The Raymond James Financial Center
880 Carillon Parkway, St. Petersburg, FL 33716
(813) 573-3800
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