from the January 31, 2001 meeting of
The Longhorn Alumni Band Charitable Fund
Board of Trustees
A non-profit Texas corporation
Attending: President: Mark Hastings, Treasurer: Ken Crone, Secretary: Jim Sims, Moton Crockett,
J.P. Kirksey, Don Mayer, Alan Adelman, Ann Yelderman
Absent: Alan Ford
Guest: Jack Keene, First Vice-President, Salomon Smith Barney
Call to Order: Mark Hastings called the meeting to order at 6:54 PM at the office of Moton Crockett at
317 S. Congress Ave., Austin, Texas. A quorum was present.
S-B Report Jack Keene gave his report on the fund’s quarterly performance.
For the year we were up 9.13%, annualizing at 11.87% in a very difficult environment.
We started with $246,000 around June of 99. In that time frame we have added $53,000
in net contributions. Actual gain is also $53,000 by coincidence. We do have a deposit
account in which we leave a little money for checks to be written and so forth. Asset
allocation page as of 12/31 year in review for 2000. At year-end we had 2% cash, 41%
domestic equities, 4% international, and 52% fixed income.
Asset allocation by manager: SBAM, 16%, Laurel Core 31%, and income manager
53%. Any questions?
Each manager was reviewed individually. Jack made a recommendation concerning
SBAM. The portfolio managed by Roger Paradiso was up over 64% in spite of the
NASDAQ’s being –39%. Mr. Paradiso made a defensive move in the summertime out
of technology into health care. The manager has outperformed with less risk but the
allocation has entered a gray area with a single issue at 9.1% of that part of the portfolio.
Laurel is annualizing at 3.51% more like the general market. Risk-return is greater than
the S&P 500 but not much.
Bond manager: 53% of the portfolio. Yield overall is up in anticipation of interest rates
coming down. Current yield is 5.80. We expect 1-1.5% capital appreciation over the
yield. This will not last forever. The rates should level off somewhere around 5%.
Year 2000: DOW off 8%, S&P off 13%, NASDAQ off 51%, Russel 2000 off 20%. The
stock market was the worst in 30+ years. The crystal ball. We are not at the bottom yet.
We have been in a recession since June of last year. S-B expects to be coming out of it
by June or so of this year with lower interest rates. We3 also need positive income
reports. Actual income reports will not be in until April. We could be wrong. It may be
longer. Once the market improves, the average year’s return is around 30%.
Recommendation: Take $20.000 from SBAM and give it to our large cap core manager
(Laurel). That is about a 5% move for the portfolio responsibly, to keep the asset
allocation in line. For a fiduciary account, for the short term (less than five years), the
large cap portion of the portfolio is the place to move some of the profits that we have
made in SBAM.
MH: When is the best time to do this?
JK: Right now. If we err it is best to do it on the conservative side and take some of the
money out of the sector that has done so well.
JK: My job is also to manage your expectations. S-B expects average returns (about 5-
10%) over the next several years. We have been lucky so far.
The client appreciation dinner will be Feb. 21 in San Antonio. Everyone is welcome.
JP: Everyone appreciates the work you have done here.
Motion: : A motion was made and approved to move $20.000 from SBAM to Laurel Core Equity.
Minutes: Minutes of the previous meeting were read and approved with corrections. Ann
Yelderman made the corrections immediately on the disc copy of the minutes.
Treasurer’s KC: None:
Report: MH: We would like a current statement at each meeting
Old Business: 6a. Officers’ liability insurance: KC: I needed the last three financial statements which I
now have and will contact Hanks and Puryear, a local company for D&O insurance. We
once had a policy but now we are starting over. LHAB, Inc. needs to have a completely
Motion: A motion was made and carried to enable Ken to get the proper insurance for the BOT
with a $1,000 maximum.
6b. Whom to call to get the pictures for Burnt Orange awards. Ken will investigate.
6c. Letters to contributors: Any contributor who makes a contribution greater than $200
needs a letter that the contribution was made to a 501c3 organization. Mark and Alan
will take care of the letters. There are about 13 of them.
6d. Kathleen Munday wants to extend her note until she gets a final mortgage. The final
mortgage should pay off the note to the LHAB Charitable Fund. Ann will get this
straight with Mike Figer.
Don Adelman sent a thank you note for the help with Austin Crimestoppers.
. Melissa White sent a thank you letter for the James Sims scholarship.
New Business: Scholarship timeline:
John Fleming will chair the meeting. The presentation to the band will be in February
MH: We need to figure out how much we are going to give again. Last year it was a
shade under $28,000.
AY: We raised the amounts by 50% and decreased the numbers by 5. The way the funds
are going we can be a generous as we want to be.
JKS: I was hoping we could address that topic. Not so much in terms of not being
generous but in terms of providing for the continuing capital growth of the scholarship
program. I was hoping we could relate the amount of the scholarship to some cost of
going to school, either tuition or whatever, rather than saying we have some extra
money and we will make the scholarships bigger. That creates an expectation of what it
is going to be next year.
JP: We should maintain some level of consistency for some period of time.
AA: If we change anything, it will be the number of scholarships.
AY: There were about 35 of them last year.
JKS: There are a couple of numbers we are being asked to come up with. One is how
much can we afford to give from the fund and the other is how much to leave in it to
leave the fund on a viable basis and provide for capital growth. If I were running my
own fund I would vary the amount awarded from 5 to 7% of net assets in order to
provide for some consistency in the amounts awarded without diminishing the amount
left for capital growth. The reason I say 5 to 7% is if you have a bad year, seven percent
can be awarded to provide for some consistency in the number of scholarships. If you
have a good year like last year, 5% would by a more reasonable choice. I would also
treat new contributions like new capital and include that in the calculation of 55 of total
assets. That would drive the scholarships in perpetuity without diminishing the fund
AY: How much are the fees now?
JP: It seems to be on a semester hour basis.
AY: The first three-hour course costs about $360 less proportionately for a full load.
Most people are in for about $1,000.
AA: It’s more like $1,300.
AY: What is the purpose of the fund?
MH: Eventually to provide scholarships for every band member, just like the football
JP: Some people in the past have wanted their contributions distributed entirely I the
year the contribution was made feeling there was no reason to hoard the money.
JKS: Originally, when the fund was small there would have been no scholarships had a
significant amount not been distributed but the fund has matured to the extent that 5%
of total assets now roughly equals the amount contributed each year.
JKS: I don’t think we are going to make any decisions today, but I gather we are willing
to continue the discussion.
Minutes will be posted on LHAB.org by Alan Adelman
James K. Sims