UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
|X| Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the fiscal year ended December 31, 1997
|_| Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Transition period from ________ to ________
Commission File No. 811-2750
FKF, Inc.
(Exact name of registrant as specified in its charter)
Iowa 42-1083346
(State or other (I.R.S. Employer
jurisdiction of incorporation Identification No.)
or organization)
401 N. Tryon Street,
5th Floor 28255
Charlotte, North Carolina (Zip Code)
(Address of principal
executive office)
Registrant's telephone number, including area code: 704/386-8637
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss.299.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K |X|
The aggregate market value of the voting and non-voting stock held by
non-affiliates of the registrant as of February 28, 1998:
None
The number of shares outstanding of the issuer's classes of common stock as of
February 28, 1998:
Common Stock, $1 Par Value - 250,000
OMISSION OF INFORMATION BY CERTAIN WHOLLY-OWNED SUBSIDIARIES: REGISTRANT MEETS
THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS I(1)(a) AND (b) OF FORM 10-K
AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE>
TABLE OF CONTENTS
Item Page No.
---- --------
PART I
Item 1. Business ............................................... 2
Item 2. Properties ............................................. 2
Item 3. Legal Proceeding ....................................... 3
Item 4. Submission of Matters to a Vote of Security Holders .... 3
PART II
Item 5. Market for Registrant's Common Stock and Related
Security Holder Matters............................... 3
Item 6. Selected Financial Data ................................ 3
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations ........ 3-4
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk .......................................... 4
Item 8. Financial Statements and Supplementary Data ............ 4
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ............... 4
PART III
Item 10. Directors and Executive Officers of Registrant ......... 5
Item 11. Executive Compensation ................................. 5
Item 12. Security Ownership of Certain Beneficial
Owners and Management ................................ 5
Item 13. Certain Relationships and Related Transactions ......... 5
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K .................................. 5-6
SIGNATURES ............................................................... 7
<PAGE>
PART I
ITEM 1. BUSINESS
Registrant, a registered face-amount certificate company under the
Investment Company Act of 1940 (the "40 Act"), was formed on May 17, 1977. On
August 11, 1977, First Kansas Financial, Inc. ("First Kansas") merged with and
into Central National Bancshares, Inc., an Iowa multi-bank holding company,
pursuant to an Agreement and Plan of Reorganization dated March 15, 1977, and
amended as of April 19, 1977, and June 21, 1977, (the "Agreement").
As provided in the Agreement, First Kansas formed a wholly-owned
subsidiary, FKF, Inc. ("Registrant"), to assume the obligations of First Kansas
to its face-amount certificate holders. Immediately prior to consummation of the
merger, First Kansas transferred to Registrant assets and certificate reserves
in an amount in excess of its face-amount certificate liabilities, and
Registrant assumed all liabilities of First Kansas to its face-amount
certificate holders. An order of de-registration was issued on August 14, 1977,
SEC release number 9905, terminating the registration of First Kansas under
Section 8(f) of the 40 Act.
On April 16, 1981, Central National Bancshares, Inc. changed its name to
United Central Bancshares, Inc. Subsequently, on June 24, 1985, United Central
Bancshares, Inc. changed its name to First Interstate of Iowa, Inc. pursuant to
a franchise agreement entered into with First Interstate Bancorp, Los Angeles,
California. On April 1, 1992, First Interstate of Iowa, Inc. merged with and
into Boatmen's Bancshares of Iowa, Inc. ("BBII"), a wholly-owned subsidiary of
Boatmen's Bancshares, Inc. ("BBI"). On January 7, 1997, BBI was acquired by
NationsBank Corporation ("Corporation"). NB Holdings Corporation ("NB
Holdings"), a wholly-owned subsidiary of the Corporation, is the Registrant's
Parent.
First Kansas was the successor in reorganization to First Home Investment
Corporation of Kansas, Inc. ("FHI"), which company was in a Chapter X
reorganization proceeding in the United States District Court for the District
of Kansas (Case #24075-B-2) from April 24, 1973, to April 26, 1976. FHI was the
original issuer of all of the face-amount certificates assumed by Registrant. No
face-amount certificates have been issued by FHI or any successor of FHI since
March 31, 1973.
Under the 40 Act, a company issuing face-amount certificates is required to
maintain reserves at a level not less than the surrender value of outstanding
certificates. While Registrant is not engaged in the issuance of face-amount
certificates, it does maintain deposits of cash and investments of a kind which
are qualified investments for face-amount certificate companies as defined in
Section 28 of the 40 Act. The deposits are maintained at a level not less than
the surrender value of the outstanding certificates. Such deposits of qualified
assets are presently maintained with a Des Moines, Iowa bank and with the State
of Illinois.
Registrant does not consider either financial information about industry
segments or information as to lines of business to be applicable since
Registrant exists for the sole purpose of fulfilling the obligations of First
Kansas to holders of face-amount certificates issued by FHI.
Registrant does not intend to issue any face-amount certificates and will
be liquidated when all the currently outstanding face-amount certificates are
paid.
Registrant has no materially important assets other than cash and
securities.
ITEM 2. PROPERTIES
Registrant's offices are located with the principal offices of NB Holdings.
Registrant does not lease any offices or property and does not own any real
estate.
2
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which Registrant is a
party or to which any of the assets of Registrant are subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable under the reduced disclosure rules.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS
Registrant is a wholly-owned subsidiary of NB Holdings. There is no
established public trading market for the stock of Registrant.
There are no restrictions that would prohibit the payment of dividends out
of retained earnings. Registrant has declared and paid dividends of $20,000 in
1996. No dividends were declared or paid during 1997 and 1995.
ITEM 6. SELECTED FINANCIAL DATA
Not applicable under the reduced disclosure rules.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity. The outstanding face-amount certificates of Registrant may be
redeemed, with certain exceptions, at the request of the certificates' holders.
The redemptions of such certificates are funded by the income stream of
Registrant, from conversion of assets, and if such should be required, from
borrowing.
The assets of Registrant consist of securities which qualify under the Code
of the District of Columbia or under such other rules of the Securities and
Exchange Commission as being of a kind in which insurance companies are
permitted to invest. Such assets are selected for investment to mature at such
frequencies and in such amounts so as to coincide with the level of anticipated
redemption requirements. Management cannot, however, predict with certainty the
level of redemptions, and it is possible for redemption requests to occur in
amounts in excess of Registrant's immediate ability to fund such redemptions.
In general, Registrant does not intend to borrow in order to fund
redemption requirements, but does retain the right to do so in the event
prevailing circumstances cause management to conclude such action would be
prudent and in the best interests of Registrant.
Capital Resources. Registrant, other than its obligations to fund the
redemption of face-amount certificates, to pay management fees to NB Holdings
equal to one percent of the average outstanding face-amount certificate
liability and to pay certain expenses incurred directly by Registrant, does not
have outstanding commitments of a material nature which would adversely affect
Registrant's capital resources.
Results of Operations - Earnings Analysis, 1997 vs. 1996. Net income
increased $5,862 in 1997, or 62.3%, to $15,271 ($.06 per share), up from $9,409
($.04 per share) in 1996. The increase was primarily attributable to higher
gains on sales of available-for-sale securities.
3
<PAGE>
For 1997, the average rate earned on average qualified investment
securities was 6.2%, compared to 6.3% in 1996. Income on investment securities
was down $8,780 in 1997, or 9.8%, to $81,287, compared to $90,067 in 1996.
Management fees decreased $539 in 1997, or 4.0%, to $13,042 down from $13,581 in
1996.
The provision for certificate reserves was $56,476 in 1997, compared to
$62,391 in 1996. The provision consists of charges required by the terms of the
outstanding certificates plus amounts credited under the Additional Credit
policy of the Registrant.
Other operating income increased in 1997 by $5,382, or 64.5%, to $13,722,
up from $8,340 in 1996. This increase was due to gains on the sales of
available-for-sale securities and other miscellaneous income. Other operating
expenses decreased $6,190 in 1997, or 55.3%, to $5,006, down from $11,196 in
1996.
Results of Operations - Earnings Analysis, 1996 vs. 1995. Net income
decreased $4,231 in 1996, or 31.0%, to $9,409 ($.04 per share), down from
$13,640 ($.05 per share) in 1995. The decrease was primarily attributable to
lower yields on the reinvested proceeds of matured or called investments and to
a lower average balance of investment securities.
For 1996, the average rate earned on average qualified investment
securities was 6.3%, compared to 6.5% in 1995. Income on investment securities
was down $10,640 in 1996, or 10.5%, to $90,067, compared to $100,671 in 1996.
Management fees increased $875 in 1996, or 6.9%, to $13,581, up from $12,706 in
1995.
The provision for certificate reserves was $62,391 in 1996, compared to
$66,375 in 1995. The provision consists of amounts called for by the terms of
the outstanding certificates plus amounts credited under the Additional Credit
policy of Registrant.
Other operating income increased in 1996 by $5,569, or 200%, to $8,340,
up from $2,771 in 1995. Other operating expenses increased $3,808 in 1996, or
51.5%, to $11,196, up from $7,388 in 1995.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements of Registrant for the years 1997, 1996 and 1995
are submitted herewith on pages 9 through 17.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
As described in the Registrant's current report on Form 8-K filed on April
4, 1997, Ernst & Young LLP was dismissed from the audit of FKF, Inc. as of April
3, 1997, due to the merger of the Registrant's parent company, BBI, with and
into the Corporation. The change in accountants occurred because Price
Waterhouse LLP is the primary independent accounting firm of the Corporation.
Ernst & Young LLP has not issued an adverse opinion or disclaimer of an
opinion or qualified or modified opinion as to uncertainty, audit scope or
accounting principle of the Registrant. The decision to change accountants
was approved by the Registrant's board of directors on April 3, 1997.
4
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
Not applicable under the reduced disclosure rules.
ITEM 11. EXECUTIVE COMPENSATION
Not applicable under the reduced disclosure rules.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Not applicable under the reduced disclosure rules.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable under the reduced disclosure rules.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) The following financial statements and report of independent
accountants of Registrant are included in Item 8:
Page No.
--------
Report of Independent Accountants - Price
Waterhouse LLP 8
Balance Sheets - December 31, 1997 and 1996 9
Statements of Operations - Years Ended
December 31, 1997, 1996 and 1995 10
Statements of Changes in Shareholder's Equity -
Years Ended December 31, 1997, 1996 and 1995 11
Statements of Cash Flows - Years Ended
December 31, 1997, 1996 and 1995 12
Notes to Financial Statements 13-17
(a)(2) The following financial statement schedules are included in Item
14(d):
Page No.
--------
Schedule I - Investments in Securities of
Unaffiliated Issuers - December 31, 1997 18
Schedule V - Qualified Assets on Deposit -
December 31, 1997 19
Schedule VI - Certificate Reserves - Years Ended
December 31, 1997, 1996 and 1995 20-31
Other financial statement schedules required by Article 6 of
Regulation S-X are not required under the related instructions or are
not applicable, and therefore have been omitted.
5
<PAGE>
(a)(3) Listing of Exhibits - The following documents are filed as exhibits to
this report or are incorporated by reference by specific reference to
previous filings with the Commission:
Exhibit No.
-----------
(3) Articles of Incorporation and Bylaws of Registrant are on file
with the Commission as exhibits to Registrant's Form N-8B-4
Report filed on October 25, 1977, which documents are hereby
incorporated by reference.
(4) Copies of or specimen copies of each of the outstanding
face-amount certificates, that being Series 20, 20L, 20LA, 27 and
27A, and a copy of an order of the United States District Court
for the District of Kansas, dated May 2, 1977, are on file with
the Commission as exhibits to Registrant's Form N-8B-4 Report
filed on October 25, 1977, which documents are hereby
incorporated by reference.
(10) A copy of the Depository Agreement, dated October 23, 1962, as
supplemented and assigned, is on file with the Commission as an
exhibit to Registrant's Form N-8B-4 Report filed on October 25,
1977, and a copy of the Second Amendment to the Depository
Agreement dated November 6, 1981, is filed as an exhibit to the
1981 Form 10-K dated March 16, 1982, which documents are hereby
incorporated by reference.
(13) Registrant's Annual Report to Shareholder consists of the
financial statements submitted herewith on pages 9 through 17.
(16) A copy of the letter regarding the change in independent
accountants dated April 3,1997, is on file with the Commission as
an exhibit to Registrant's Form 8-K filed on April 4, 1997, which
document is hereby incorporated by reference.
(27) Financial Data Schedule
(b) Reports on Form 8-K - Registrant filed a Current Report on Form 8-K
dated April 4, 1997 announcing a change in independent accountants,
which document is hereby incorporated by reference.
(c) Exhibits - The exhibits filed as part of this report are listed in the
Index to Exhibits on page 32.
(d) Financial Statement Schedules - The financial statement schedules of
Registrant are submitted herewith on pages 18 through 31.
6
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
FKF, Inc.
Date: March 31, 1998 By: /s/ Terry W. Efird
------------------------- ---------------------------
Terry W. Efird, President,
CEO, Treasurer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Registrant and in
the capacities and on the dates indicated.
Date
March 31, 1998 By: /s/ Terry W. Efird
- ---------------- ----------------------------------------
Terry W. Efird, President, CEO,
Treasurer and Director
March 31, 1998 By: /s/ Karin Hirtler-Garvey
- ---------------- ----------------------------------------
Karin Hirtler-Garvey, Secretary and Director
March 31, 1998 By: /s/ Judith L. Zappolo
- ---------------- ----------------------------------------
Judith L. Zappolo, Controller
7
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholder of FKF, Inc.
(a wholly-owned indirect subsidiary of NationsBank Corporation)
In our opinion, the accompanying balance sheet and the related statements of
operations, of changes in shareholder's equity and of cash flows present fairly,
in all material respects, the financial position of FKF, Inc. (the "Company") at
December 31, 1997, and the results of its operations and its cash flows for the
year then ended 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 audit. We conducted our audit 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 audit provides a reasonable basis for the opinion expressed
above. The financial statements of the Company for the year ended December 31,
1996 and 1995 were audited by other independent accountants whose report dated
March 25, 1997 expressed an unqualified opinion on those statements.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The accompanying supplemental data (contained in
the schedule of investment in securities of unaffiliated issuers, qualified
assets on deposit, certificate reserves and amounts periodically credited to
certificate holder's accounts to accumulate the maturity amount of installment
certificates) for the year ended December 31, 1997, are presented for purpose of
additional analysis, to conform with requirements of preparing the Company's
Form 10-K to the Securities and Exchange Commission, and are not a required part
of the basic financial statements. Such information has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole. The supplemental data for the years
ended December 31, 1996 and 1995 was subjected to the auditing procedures
applied by the other independent accountants referred to above.
Charlotte, North Carolina By: /s/ Price Waterhouse LLP
March 27, 1998 --------------------------
8
<PAGE>
BALANCE SHEETS
FKF, INC.
December 31
1997 1996
------------ ------------
Qualified Assets--Note B and Schedule V:
Cash $ 1,629 $ 298
Interest and other receivables 5,669 9,696
Investment securities--Note B and Schedule I:
Held-to-maturity securities 49,800 49,800
Available-for-sale securities 1,380,573 1,376,206
----------- ----------
Total investment securities 1,430,373 1,426,006
Current federal income taxes receivable
from parent company--Note E -- 1,918
------------ ------------
$ 1,437,671 $ 1,437,918
============ ============
Certificate Reserves and Liabilities
Certificate Reserves--Note C and Schedule VI:
Installment payment certificates $ 20,861 $ 23,018
Single payment certificates 537,885 555,818
Unapplied advance payments on
installment certificates 11,736 12,147
Additional amounts accrued or
credited--Note D 538,753 540,233
------------ ------------
1,109,235 1,131,216
Liabilities:
Income taxes payable to parent company--Note E 3,295 --
Deferred federal income taxes payable--Note E 2,050 5,305
Other 13,042 575
------------ ------------
18,387 5,880
------------ ------------
Certificate Reserves and
Liabilities 1,127,622 1,137,096
Shareholder's Equity:
Common stock, par value $1--authorized
4,000,000 shares; issued and
outstanding 250,000 shares 250,000 250,000
Paid-in surplus 12,906 12,906
Retained earnings 43,335 28,064
Net unrealized gains and losses
on securities available-for-sale 3,808 9,852
------------ ------------
310,049 300,822
------------ ------------
$ 1,437,671 $ 1,437,918
============ ============
See accompanying notes to financial statements.
9
<PAGE>
STATEMENTS OF OPERATIONS
FKF, INC.
Years Ended December 31
1997 1996 1995
--------- --------- ---------
Net Investment Income
Income on investment securities $ 81,287 $ 90,067 $ 100,671
Management fees to parent company--Note A (13,042) (13,581) (12,706)
--------- --------- ---------
68,245 76,486 87,965
--------- --------- ---------
Provision For Certificate Reserves--Note D
Specified interest credited to reserves 20,201 22,285 25,181
Provision for additional
credits to reserves 36,275 40,106 41,194
--------- --------- ---------
56,476 62,391 66,375
--------- --------- ---------
Net Investment Income Less
Provision For Certificate Reserves 11,769 14,095 21,590
--------- --------- ---------
Other Operating Income
Securities gains 11,047 7,274 151
Miscellaneous 2,674 1,066 2,620
--------- --------- ---------
13,721 8,340 2,771
--------- --------- ---------
Other Operating Expenses
Registration fees -- 250 250
Miscellaneous 5,006 10,946 7,138
--------- --------- ---------
5,006 11,196 7,388
--------- --------- ---------
Income Before Income Taxes 20,484 11,239 16,973
Income Taxes--Note E 5,213 1,830 3,333
--------- --------- ---------
Net Income $ 15,271 $ 9,409 $ 13,640
========= ========= =========
Net income per share $ 0.06 $ 0.04 $ 0.05
========= ========= =========
10
See accompanying notes to financial statements.
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY
FKF, INC.
<CAPTION>
Net
Unrealized
Gains(Losses)
on Securities
Common Paid-in Retained Available-for-
Stock Surplus Earnings Sale Total
-------------- ------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Balance At January 1, 1995 $ 250,000 $ 12,906 $ 25,015 $ (21,553) $ 266,368
Net income -- -- 13,640 -- 13,640
Change in unrealized gains (losses) on
available-for-sale securities,
net of income taxes of ($20,414) -- -- -- 38,782 38,782
-------------- ------------- --------------- -------------- --------------
Balance At December 31, 1995 250,000 12,906 38,655 17,229 318,790
Net income -- -- 9,409 -- 9,409
Change in unrealized gains (losses) on
available-for-sale securities,
net of income taxes of $3,503 -- -- -- (7,377) (7,377)
Cash dividends-$0.08 per share -- -- (20,000) -- (20,000)
-------------- ------------- --------------- -------------- --------------
Balance At December 31, 1996 250,000 12,906 28,064 9,852 300,822
Net income -- -- 15,271 -- 15,271
Change in unrealized gains (losses) on
available-for-sale securities,
net of income taxes of $3,255 -- -- -- (6,044) (6,044)
-------------- ------------- --------------- -------------- --------------
Balance At December 31, 1997 $ 250,000 $ 12,906 $ 43,335 $ 3,808 $ 310,049
============== ============= =============== ============== ==============
</TABLE>
11
See accompanying notes to financial statements.
<PAGE>
<TABLE>
STATEMENTS OF CASH FLOWS
FKF, INC.
<CAPTION>
Years Ended December 31
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Operating Activities:
Net Income $ 15,271 $ 9,409 $ 13,640
Adjustments to reconcile net income to net
cash provided by operating activities:
Realized investment securities gain (11,047) (7,274) (151)
Provision for reserves 58,901 62,815 66,142
Accretion of investment
securities discounts (4,521) (4,451) (6,956)
(Increase) decrease in accrued interest 4,027 10,754 (433)
Increase in liabilities 15,762 50 57
(Increase) decrease in other assets 1,918 (702) (872)
----------- ----------- -----------
Net cash provided by operating activities 80,311 70,601 71,427
----------- ----------- -----------
Investing Activities:
Proceeds from sales and maturities of
securities available-for-sale 398,197 758,018 1,029,975
Purchases of securities available-for-sale (396,295) (599,728) (903,792)
----------- ----------- -----------
Net cash provided by investing activities 1,902 158,290 126,183
----------- ----------- -----------
Financing Activities:
Cash dividends paid -- (20,000) --
Payments for redemption of face-amount
certificates (80,882) (209,114) (197,398)
----------- ----------- -----------
Net cash used in financing activities (80,882) (229,114) (197,398)
----------- ----------- -----------
Increase (decrease) in cash and
cash equivalents 1,331 (223) 212
Cash and cash equivalents at beginning of year 298 521 309
----------- ----------- -----------
Cash and cash equivalents at end of year $ 1,629 $ 298 $ 521
=========== =========== ===========
Supplemental disclosure of cash flow
information - cash paid during the year
for income taxes $ -- $ 2,532 $ 4,983
=========== =========== ===========
</TABLE>
12
See accompanying notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
FKF, INC.
NOTE A--SIGNIFICANT ACCOUNTING POLICIES
Organization: FKF, Inc. (the "Company"), a wholly-owned subsidiary of NB
Holdings Corporation ("NB Holdings"), is a face-amount certificate investment
company as defined by Section 28 of the Investment Company Act of 1940. The
Company was formed for the sole purpose of assuming the liabilities of First
Kansas Financial, Inc. to holders of its face-amount certificates. First Kansas
Financial, Inc. was the parent company of FKF, Inc. until its merger with and
into Boatmen's Bancshares, Inc. ("BBI"). BBI was subsequently acquired by
NationsBank Corporation (the "Corporation"). The Company no longer accepts
investments in face-amount certificates.
Cash and Cash Equivalents: For purposes of reporting cash flows, cash and cash
equivalents include only cash as presented on the balance sheet.
Investment Securities: Debt securities are classified as held-to-maturity when
the Company has the positive intent and ability to hold the securities to
maturity. Held-to-maturity securities are stated at cost adjusted for accretion
of discounts and amortization of premiums using the straight-line method. Such
amortization, interest and dividends are included in Income on Investment
Securities.
Debt securities not classified as held-to-maturity and marketable equity
securities are classified as available-for-sale. Available-for-sale securities
are stated at fair value, with the unrealized gains and losses, net of tax,
reported in a separate component of shareholder's equity.
Realized gains and losses, and declines in value judged to be
other-than-temporary are included in securities gains (losses). The cost of
securities sold are determined on a specific identification basis.
Face-Amount Certificate Reserves: Face-amount certificate reserves are stated at
the amount computed in accordance with the provisions of the respective
certificates and Section 28 of the Investment Company Act of 1940.
Income Taxes: The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109").
Under SFAS No. 109, there are two components of the income tax provision,
current and deferred. The current income tax provision approximates taxes to be
paid or refunded for the applicable period. Balance sheet amounts of deferred
taxes are recognized for the temporary differences between the bases of assets
and liabilities as measured by tax laws and their bases as reported in the
financial statements. Deferred tax expense or benefit is then recognized for the
change in deferred tax liabilities or assets between periods.
The Company's operating results are included in the consolidated federal income
tax return of the Corporation. The method of allocating federal income tax
expense is determined under a tax allocation agreement between the Company and
the Corporation. This allocation agreement specifies that income tax expense
will be computed for all subsidiaries on a separate company method, taking into
account tax planning strategies and the tax position of the consolidated group.
Management Fees: Management fees are charged by NB Holdings for services
provided to the Company. Annual fees are computed at the rate of one percent of
the average outstanding balance of face-amount certificate reserves.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
FKF, INC.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Net Income Per Share: Net income per share amounts are based on the weighted
average number of common shares outstanding during the year.
NOTE B--QUALIFIED ASSETS
Under the provisions of its face-amount certificates and the Investment Company
Act of 1940, the Company is required to have cash and qualified investments (as
defined in Section 28(b) of the Act) with a value not less than the aggregate
amount of the $250,000 capital stock requirement and the face-amount certificate
reserves. At December 31, 1997, the Company had qualified assets of $1,437,671
which exceeded the amount of qualified assets required under the Act of
$1,359,235.
The average taxable equivalent rates of return for each type of investment
security owned by the Company are as follows:
1997 1996 1995
------ ------ ------
U. S. Treasury notes 5.6% 5.7% 7.4%
Other bonds 6.6% 6.2% 6.3%
Other securities 5.8% 6.9% 7.1%
As provided by the face-amount certificates, the Company must maintain qualified
assets equal to the face-amount certificate reserves at a depository institution
as security for the performance of its obligations. At December 31, 1997, all of
the Company's investment securities were on deposit at Brenton Bank, N.A. and
with the State of Illinois to satisfy these requirements.
The following is a summary of held-to-maturity securities and available-for-sale
securities at December 31, 1997:
Held-to-Maturity Securities
-------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---------- ---------- ---------- ----------
Other bonds $ 49,800 $ 1,308 $ -- $ 51,108
========== ========== ========== ==========
Available-for-Sale Securities
-------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---------- ---------- ---------- ----------
U.S. Treasury notes $ 199,227 $ 98 $ (388) $ 198,937
Other bonds 648,327 1,626 -- 649,953
Other securities 527,161 4,522 -- 531,683
---------- ---------- ---------- ----------
$1,374,715 $ 6,246 $ (388) $1,380,573
========== ========== ========== ==========
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
FKF, INC.
The following is a summary of held-to-maturity securities and available-for-sale
securities at December 31, 1996:
Held-to-Maturity Securities
---------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---------- ---------- ---------- ----------
Other bonds $ 49,800 $ 1,286 $ -- $ 51,086
========== ========== ========== ==========
Available-for-Sale Securities
---------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---------- ---------- ---------- ----------
U.S. Treasury notes $ 198,484 $ 284 $ (620) $ 198,148
Other bonds 894,550 5,873 -- 900,423
Other securities 268,015 10,151 (531) 277,635
---------- ---------- ---------- ----------
$1,361,049 $ 16,308 $ (1,151) $1,376,206
========== ========== ========== ==========
The amortized cost and market value of securities at December 31, 1997 by
contractual maturity are as follows:
Amortized Market
Cost Value
---------- ----------
Held-to-maturity securities:
Due after five through ten years $ 49,800 $ 51,108
========== ==========
Amortized Market
Cost Value
---------- ----------
Available-for-sale securities:
Due in one year or less $1,192,907 $1,194,631
Due after one year through five years 149,310 148,922
Equity securities 32,498 37,020
---------- ----------
$1,374,715 $1,380,573
========== ==========
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
FKF, INC.
NOTE C--CERTIFICATE RESERVES
At December 31, 1997, the face-amount certificate reserves, by type of
certificate, and annual rates of accumulation thereon were as follows:
Carrying Accumulation
Value Rate
---------- -------
Installment payment certificates:
during the fourth quarter of 1997.Series 20L $ 10,847 3-1/8%
Series 20LA 10,014 3-1/8%
----------
20,861
----------
Single payment certificates:
Series 27 520,232 3-1/2%
Series 27A 17,653 3-1/2%
----------
537,885
----------
Unapplied advance payments on
installment certificates 11,736 3-1/8%
Additional amounts accrued or credited 538,753
----------
550,489
----------
Total face amount certificate reserves $1,109,235
==========
Redemptions of outstanding face-amount certificates, as provided by the
respective certificates, totaled $80,882 and $209,114 during the years ended
December 31, 1997 and 1996, respectively.
Under the provisions of Series 20LA and 27A face-amount certificates, the
Company is required to maintain a special share reserve with a depository
institution consisting of all shares of the Corporation's common stock of
certificate holders which have been purchased under the terms of their
certificates. At December 31, 1997, 1,042 shares of common stock of the
Corporation were on deposit with Brenton Bank, N.A. Dividends paid on such
shares of common stock are credited to the reserves and unapplied payments of
the corresponding face-amount certificates. The value of such shares is not
included in the financial statements of the Company.
NOTE D--ADDITIONAL AMOUNTS ACCRUED OR CREDITED
The income earned by the Company from the investment of funds derived solely
from the qualified assets comprising face-amount certificate reserves, after
provision for income taxes, is applied: first, to the payment of the stated rate
of interest set forth in the face-amount certificates; second, to the payment of
annual management fees equal to one percent of the average outstanding balance
of face-amount certificate reserves; third, to additional credits up to four
percent of the face-amount certificate reserves; and fourth, the remainder, if
any, is divided equally between the Company and the face-amount certificate
holders.
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
FKF, INC.
NOTE E--INCOME TAXES
Income tax expense consists of a current tax expense of $5,213, $1,830 and
$3,333 for the years ended December 31, 1997, 1996 and 1995, respectively. There
was no deferred tax expense or benefit for these years.
Current federal income tax expense is determined as if the Company filed a
separate tax return, taking into consideration the tax position of the
consolidated group, and the amount so determined is payable to or receivable
from the Corporation. Current federal taxes payable to (receivable from) the
Corporation of $3,295 and ($1,918) are included in the accompanying balance
sheets at December 31, 1997 and 1996, respectively.
The Company had a net deferred tax liability of $2,050 and $5,305 at December
31, 1997 and 1996, respectively, representing the tax effects of unrealized
gains and losses on available-for-sale securities that are included in
shareholder's equity.
A reconciliation of the expected federal income tax expense based on the federal
statutory rate of 35%, to actual income tax for the years ended December 31 is
as follows:
1997 1996 1995
------- ------- -------
Expected federal income tax expense $ 7,169 $ 3,935 $ 5,941
Non-taxable interest income (897) (897) (897)
Non-taxable dividend income (1,059) (1,208) (1,711)
------- ------- -------
$ 5,213 $ 1,830 $ 3,333
======= ======= =======
17
<PAGE>
<TABLE>
Schedule I
FKF, Inc.
Investments in Securities of Unaffiliated Issuers
December 31, 1997
<CAPTION>
Number of
Shares or
Principal Amortized Market Market
Name of Issuer and Title of Issue Amount Cost Adjustment Value
- -------------------------------------------------------------- ------------- --------------- ------------ --------------
<S> <C> <C> <C> <C>
HELD-TO-MATURITY SECURITIES
Other Bonds:
Public Housing Authority, Cook County,
Illinois, 5.125% due May 1, 2005 $ 50,000 $ 49,800 $ 1,308 $ 51,108
--------------- ------------ --------------
Total Held-to-Maturity Securities 49,800 1,308 51,108
--------------- ------------ --------------
AVAILABLE-FOR-SALE SECURITIES
U.S. Treasury Notes:
5.875%, due August 15, 1998 50,000 49,917 98 50,015
5.000%, due February 15, 1999 150,000 149,310 (388) 148,922
------------ --------- ------------
199,227 (290) 198,937
Other Bonds:
Federal Agency, FHLB 5.87%, due June 26, 1998 350,000 349,982 346 350,328
Federal Agency, FNMA 5.375%, due June 10, 1998 300,000 298,345 1,280 299,625
------------ --------- ------------
648,327 1,626 649,953
Other Securities:
Preferred Stocks:
Cleveland Electric Illuminating, 7.40% 250 21,406 3,344 24,750
Entergy Gulf States Utilities, 8.80% 120 11,092 1,178 12,270
------------ --------- ------------
32,498 4,522 37,020
Brenton U.S. Government Money Market 494,663 494,663 N/A 494,663
--------------- ------------ ------------
Total Available-for-Sale Securities 1,374,715 5,858 1,380,573
--------------- ------------ ------------
TOTAL INVESTMENT SECURITIES $ 1,424,515 $ 7,166 $ 1,431,681
=============== ============ ==============
</TABLE>
Note 1: Generally, market value is determined on the last business day of the
year by using either the last reported sales price, the mean between
the last quoted bid and asked prices, or if quotations are not
available, management's best estimate of the fair value.
Note 2: Held-to-maturity securities are stated in the balance sheet at
amortized cost.
Note 3: The aggregate cost for Federal income tax purposes is $1,424,515.
18
<PAGE>
<TABLE>
FKF, Inc.
Qualified Assets on Deposit
December 31, 1997
<CAPTION>
Investment First Mortgages
Securities and Other First
At Amortization Liens on Real
Name of Depository Cash Cost Estate Other Total
- ---------------------------- --------------- ------------------ ---------------- -------------- -----------------
<S> <C> <C> <C> <C> <C>
Brenton Bank, N.A. $ 1,679 $ 1,374,598 $ -- $ -- $ 1,376,277
NationsBank, N.A. (50) -- -- -- (50)
State of Illinois -- 49,917 -- -- 49,917
--------------- ------------------ ---------------- -------------- -----------------
$ 1,629 $ 1,424,515 $ -- $ -- $ 1,426,144
=============== ================== ================ ============== =================
</TABLE>
19
<PAGE>
<TABLE>
Schedule VI
FKF, Inc.
Certificate Reserves
Year Ended December 31, 1995
<CAPTION>
Balance at Beginning of Year Additions
--------------------------------------------- -------------------------------------------
Amount Reserve Charged
Number of Amount Charged Payments by to
of Maturity of to Certificate Other
Description Accounts Value Reserves Income Holders Accounts
- ----------------------- ------------- ------------- -------------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Series 20
installment
payment
face-amount
certificates (2.52%
yield to maturity):
Monthly Payments
1-12 $ $ $ $ $
13-24
25-36
37-48
49-60
61-72
73-84
85-96
Paid-up 6 249 488 11
------------- ------------- -------------- ----------- --------------- -----------
Total Certificates 6 249 488 11
Additional Credits 426 426 18
------------- ------------- -------------- ----------- --------------- -----------
Total 6 $ 675 $ 914 $ 29 $ $
============= ============= ============== =========== =============== ===========
<CAPTION>
Deductions Balance at End of Year
------------------------------------------------- ---------------------------------------------
Cash Amount
Surrenders Cancellations Number of Amount
Prior and of Maturity of
Description Maturities to Maturity Withdrawals Accounts Value Reserves
- ----------------------- -------------- -------------- ---------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Series 20
installment
payment
face-amount
certificates (2.52%
yield to maturity):
Monthly Payments
1-12 $ $ $ $ $
13-24
25-36
37-48
49-60
61-72
73-84
85-96
Paid-up 499
-------------- -------------- ---------------- ------------- ------------- --------------
Total Certificates 499
Additional Credits 444
-------------- -------------- ---------------- ------------- ------------- --------------
Total $ 943 $ $ $ $
============== ============== ================ ============= ============= ==============
</TABLE>
The balance of Additional Credits at the end of each period presented on pages
20 through 26 does not include the provision for additional credits to reserves
reported in the Statements of Operations.
20
<PAGE>
<TABLE>
Schedule VI (continued)
FKF, Inc.
Certificate Reserves
Year Ended December 31, 1997
Balance at Beginning of Year Additions
--------------------------------------------- -------------------------------------------
Amount Reserve Charged
Number of Amount Charged Payments by to
of Maturity of to Certificate Other
Description Accounts Value Reserves Income Holders Accounts
- ----------------------- ------------- ------------- -------------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Series 20L installment
face-amount
certificates (2.51%
yield to maturity):
Monthly Payments
1-12 117 $ 321,000 $ 9,839 $ 287 $ $
13-24 7 16,000 1,531 28
Paid-up 12 313 761 23
------------- ------------- -------------- ----------- --------------- -----------
Total Certificates 136 337,313 12,131 338
Additional Credits 12,220 12,220 839
------------- ------------- -------------- ----------- --------------- -----------
Total 136 $ 349,533 $ 24,351 $ 1,177 $ $
============= ============= ============== =========== =============== ===========
Series 20LA installment
face-amount
certificates (2.51%
yield to maturity):
Monthly Payments
1-12 18 $ 84,000 $ 3,012 $ 72 $ $
13-24 1 20,000 2,304 71
Paid-up 6 1,306 5,571 171
------------- ------------- -------------- ----------- --------------- -----------
Total Certificates 25 105,306 10,887 314
Additional Credits 14,213 14,213 1,219 420
------------- ------------- -------------- ----------- --------------- -----------
Total 25 $ 119,519 $ 25,100 $ 1,533 $ $ 420
============= ============= ============== =========== =============== ===========
<CAPTION>
Deductions Balance at End of Year
------------------------------------------------- ---------------------------------------------
Cash Amount
Surrenders Cancellations Number of Amount
Prior and of Maturity of
Description Maturities to Maturity Withdrawals Accounts Value Reserves
- ----------------------- -------------- -------------- ---------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Series 20L installment
face-amount
certificates (2.51%
yield to maturity):
Monthly Payments
1-12 $ 1,005 $ $ 102 $ 286,000 $ 9,121
13-24 610 5 10,000 949
Paid-up 8 11 309 776
-------------- -------------- ---------------- ------------- ------------- --------------
Total Certificates 1,623 118 296,309 10,846
Additional Credits 2,066 10,993 10,993
-------------- -------------- ---------------- ------------- ------------- --------------
Total $ 3,689 $ $ 118 $ 307,302 $ 21,839
============== ============== ================ ============= ============= ==============
Series 20LA installment
face-amount
certificates (2.51%
yield to maturity):
Monthly Payments
1-12 $ 1,186 $ $ 10 $ 44,000 $ 1,898
13-24 1 20,000 2,375
Paid-up 6 1,306 5,742
-------------- -------------- ---------------- ------------- ------------- --------------
Total Certificates 1,186 17 65,306 10,015
Additional Credits 1,631 14,221 14,221
-------------- -------------- ---------------- ------------- ------------- --------------
Total $ 2,817 $ $ 17 $ 79,527 $ 24,236
============== ============== ================ ============= ============= ==============
</TABLE>
21
<PAGE>
<TABLE>
Schedule VI (continued)
FKF, Inc.
Certificate Reserves
Year Ended December 31, 1996
<CAPTION>
Balance at Beginning of Year Additions
--------------------------------------------- -------------------------------------------
Amount Reserve Charged
Number of Amount Charged Payments by to
of Maturity of to Certificate Other
Description Accounts Value Reserves Income Holders Accounts
- ----------------------- ------------- ------------- -------------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Series 20L installment
face-amount
certificates (2.51%
yield to maturity):
Monthly Payments
1-12 378 $ 862,000 $ 22,649 $ 561 $ $
13-24 23 44,000 4,097 90
37-48 1 1,000 31 1
Paid-up 49 905 1,928 34
------------- ------------- -------------- ----------- --------------- -----------
Total Certificates 451 907,905 28,705 686
Additional Credits 27,201 27,201 1,615
------------- ------------- -------------- ----------- --------------- -----------
Total 451 $ 935,106 $ 55,906 $ 2,301 $ $
============= ============= ============== =========== =============== ===========
Series 20LA installment
face-amount
certificates (2.51%
yield to maturity):
Monthly Payments
1-12 52 $ 229,000 $ 8,129 $ 204 $ $
13-24 2 21,000 2,324 71
Paid-up 10 2,307 9,649 166
------------- ------------- -------------- ----------- --------------- -----------
Total Certificates 64 252,307 20,102 441
Additional Credits 24,078 24,078 1,497
------------- ------------- -------------- ----------- --------------- -----------
Total 64 $ 276,385 $ 44,180 $ 1,938 $ $
============= ============= ============== =========== =============== ===========
<CAPTION>
Deductions Balance at End of Year
------------------------------------------------- ---------------------------------------------
Cash Amount
Surrenders Cancellations Number of Amount
Prior and of Maturity of
Description Maturities to Maturity Withdrawals Accounts Value Reserves
- ----------------------- -------------- -------------- ---------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Series 20L installment
face-amount
certificates (2.51%
yield to maturity):
Monthly Payments
1-12 $ 13,371 $ $ 117 $ 321,000 $ 9,839
13-24 2,656 7 16,000 1,531
37-48 32
Paid-up 1,201 12 313 761
-------------- -------------- ---------------- ------------- ------------- --------------
Total Certificates 17,260 136 337,313 12,131
Additional Credits 16,596 12,220 12,220
-------------- -------------- ---------------- ------------- ------------- --------------
Total $ 33,856 $ $ 136 $ 349,533 $ 24,351
============== ============== ================ ============= ============= ==============
Series 20LA installment
face-amount
certificates (2.51%
yield to maturity):
Monthly Payments
1-12 $ 5,321 $ $ 18 $ 84,000 $ 3,012
13-24 91 1 20,000 2,304
Paid-up 4,244 6 1,306 5,571
-------------- -------------- ---------------- ------------- ------------- --------------
Total Certificates 9,656 25 105,306 10,887
Additional Credits 11,362 14,213 14,213
-------------- -------------- ---------------- ------------- ------------- --------------
Total $ 21,018 $ $ 25 $ 119,519 $ 25,100
============== ============== ================ ============= ============= ==============
</TABLE>
22
<PAGE>
<TABLE>
Schedule VI (continued)
FKF, Inc.
Certificate Reserves
Year Ended December 31, 1995
<CAPTION>
Balance at Beginning of Year Additions
--------------------------------------------- -------------------------------------------
Amount Reserve Charged
Number of Amount Charged Payments by to
of Maturity of to Certificate Other
Description Accounts Value Reserves Income Holders Accounts
- ----------------------- ------------- ------------- -------------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Series 20L installment
face-amount
certificates (2.51%
yield to maturity):
Monthly Payments
1-12 431 $ 1,013,000 $ 29,107 $ 845 $ $
13-24 44 94,000 9,145 255
25-36 8 11,000 1,938 38
37-48 1 1,000 30 1
Paid-up 133 2,873 5,636 141
------------- ------------- -------------- ----------- --------------- -----------
Total Certificates 617 1,121,873 45,856 1,280
Additional Credits 42,161 42,161 2,472
------------- ------------- -------------- ----------- --------------- -----------
Total 617 $ 1,164,034 $ 88,017 $ 3,752 $ $
============= ============= ============== =========== =============== ===========
Series 20LA installment
face-amount
certificates (2.51%
yield to maturity):
Monthly Payments
1-12 63 $ 286,000 $ 9,713 $ 266 $ $
13-24 3 26,000 2,958 69
Paid-up 15 3,033 11,660 304
------------- ------------- -------------- ----------- --------------- -----------
Total Certificates 81 315,033 24,331 639
Additional Credits 28,535 28,535 1,744
------------- ------------- -------------- ----------- --------------- -----------
Total 81 $ 343,568 $ 52,866 $ 2,383 $ $
============= ============= ============== =========== =============== ===========
<CAPTION>
Deductions Balance at End of Year
------------------------------------------------- ---------------------------------------------
Cash Amount
Surrenders Cancellations Number of Amount
Prior and of Maturity of
Description Maturities to Maturity Withdrawals Accounts Value Reserves
- ----------------------- -------------- -------------- ---------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Series 20L installment
face-amount
certificates (2.51%
yield to maturity):
Monthly Payments
1-12 $ 7,303 $ $ 378 $ 862,000 $ 22,649
13-24 5,303 23 44,000 4,097
25-36 1,976
37-48 1 1,000 31
Paid-up 3,849 49 905 1,928
-------------- -------------- ---------------- ------------- ------------- --------------
Total Certificates 18,431 451 907,905 28,705
Additional Credits 17,432 27,201 27,201
-------------- -------------- ---------------- ------------- ------------- --------------
Total $ 35,863 $ $ 451 $ 935,106 $ 55,906
============== ============== ================ ============= ============= ==============
Series 20LA installment
face-amount
certificates (2.51%
yield to maturity):
Monthly Payments
1-12 $ 1,850 $ $ 52 $ 229,000 $ 8,129
13-24 703 2 21,000 2,324
Paid-up 2,315 10 2,307 9,649
-------------- -------------- ---------------- ------------- ------------- --------------
Total Certificates 4,868 64 252,307 20,102
Additional Credits 6,201 24,078 24,078
-------------- -------------- ---------------- ------------- ------------- --------------
Total $ 11,069 $ $ 64 $ 276,385 $ 44,180
============== ============== ================ ============= ============= ==============
</TABLE>
23
<PAGE>
<TABLE>
Schedule VI (continued)
FKF, Inc.
Certificate Reserves
Year Ended December 31, 1997
<CAPTION>
Balance at Beginning of Year Additions
--------------------------------------------- -------------------------------------------
Amount Reserve Charged
Number of Amount Charged Payments by to
of Maturity of to Certificate Other
Description Accounts Value Reserves Income Holders Accounts
- ----------------------- ------------- ------------- -------------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Series 27 single
payment face-
amount certificates
(3.2% yield to
maturity):
Total Certificates 369 $ 1,024,550 $ 539,520 $ 18,627 $ $
Additional Credits 462,537 462,537 36,369
------------- ------------- -------------- ----------- --------------- -----------
Total 369 $ 1,487,087 $ 1,002,057 $ 54,996 $ $
============= ============= ============== =========== =============== ===========
Series 27A single
payment face-
amount investment
annuity certificates
(3.2% yield to
maturity):
Total Certificates 7 $ 10,420 $ 16,298 $ 585 $ $ 770
Additional Credits 11,156 11,156 1,010 320
------------- ------------- -------------- ----------- --------------- -----------
Total 7 $ 21,576 $ 27,454 $ 1,595 $ $ 1,090
============= ============= ============== =========== =============== ===========
<CAPTION>
Deductions Balance at End of Year
------------------------------------------------- ---------------------------------------------
Cash Amount
Surrenders Cancellations Number of Amount
Prior and of Maturity of
Description Maturities to Maturity Withdrawals Accounts Value Reserves
- ----------------------- -------------- -------------- ---------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Series 27 single
payment face-
amount certificates
(3.2% yield to
maturity):
Total Certificates $ $ 37,915 $ 353 $ 975,050 $ 520,232
Additional Credits 34,128 464,778 464,778
-------------- -------------- ---------------- ------------- ------------- --------------
Total $ $ 72,043 $ 353 $ 1,439,828 $ 985,010
============== ============== ================ ============= ============= ==============
Series 27A single
payment face-
amount investment
annuity certificates
(3.2% yield to
maturity):
Total Certificates $ $ $ 7 $ 10,420 $ 17,653
Additional Credits 12,486 12,486
-------------- -------------- ---------------- ------------- ------------- --------------
Total $ $ $ 7 $ 22,906 $ 30,139
============== ============== ================ ============= ============= ==============
</TABLE>
Note: Additions charged to other accounts represent amounts credited to
certificate reserves from dividends declared by NationsBank
Corporation upon common stock beneficially owned by face-amount
certificate holders.
24
<PAGE>
<TABLE>
Schedule VI (continued)
FKF, Inc.
Certificate Reserves
Year Ended December 31, 1996
<CAPTION>
Balance at Beginning of Year Additions
--------------------------------------------- -------------------------------------------
Amount Reserve Charged
Number of Amount Charged Payments by to
of Maturity of to Certificate Other
Description Accounts Value Reserves Income Holders Accounts
- ----------------------- ------------- ------------- -------------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Series 27 single
payment face-
amount certificates
(3.2% yield to
maturity):
Total Certificates 405 $ 1,124,030 $ 594,664 $ 20,159 $ $
Additional Credits 490,495 490,495 36,140
------------- ------------- -------------- ----------- --------------- -----------
Total 405 $ 1,614,525 $ 1,085,159 $ 56,299 $ $
============= ============= ============== =========== =============== ===========
Series 27A single
payment face-
amount investment
annuity certificates
(3.2% yield to
maturity):
Total Certificates 8 $ 12,920 $ 18,995 $ 540 $ $ 566
Additional Credits 12,842 12,842 877
------------- ------------- -------------- ----------- --------------- -----------
Total 8 $ 25,762 $ 31,837 $ 1,417 $ $ 566
============= ============= ============== =========== =============== ===========
<CAPTION>
Deductions Balance at End of Year
------------------------------------------------- ---------------------------------------------
Cash Amount
Surrenders Cancellations Number of Amount
Prior and of Maturity of
Description Maturities to Maturity Withdrawals Accounts Value Reserves
- ----------------------- -------------- -------------- ---------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Series 27 single
payment face-
amount certificates
(3.2% yield to
maturity):
Total Certificates $ $ 75,303 $ 369 $ 1,024,550 $ 539,520
Additional Credits 64,098 462,537 462,537
-------------- -------------- ---------------- ------------- ------------- --------------
Total $ $ 139,401 $ 369 $ 1,487,087 $ 1,002,057
============== ============== ================ ============= ============= ==============
Series 27A single
payment face-
amount investment
annuity certificates
(3.2% yield to
maturity):
Total Certificates $ $ 3,803 $ 7 $ 10,420 $ 16,298
Additional Credits 2,563 11,156 11,156
-------------- -------------- ---------------- ------------- ------------- --------------
Total $ $ 6,366 $ 7 $ 21,576 $ 27,454
============== ============== ================ ============= ============= ==============
</TABLE>
Note: Additions charged to other accounts represent amounts credited to
certificate reserves from dividends declared by Boatmen's Bancshares,
Inc. upon common stock beneficially owned by face-amount certificate
holders.
25
<PAGE>
<TABLE>
Schedule VI (continued)
FKF, Inc.
Certificate Reserves
Year Ended December 31, 1995
<CAPTION>
Balance at Beginning of Year Additions
--------------------------------------------- -------------------------------------------
Amount Reserve Charged
Number of Amount Charged Payments by to
of Maturity of to Certificate Other
Description Accounts Value Reserves Income Holders Accounts
- ----------------------- ------------- ------------- -------------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Series 27 single
payment face-
amount certificates
(3.2% yield to
maturity):
Total Certificates 447 $ 1,240,030 $ 650,412 $ 21,928 $ $
Additional Credits 521,408 521,408 32,278
------------- ------------- -------------- ----------- --------------- -----------
Total 447 $ 1,761,438 $ 1,171,820 $ 54,206 $ $
============= ============= ============== =========== =============== ===========
Series 27A single
payment face-
amount investment
annuity certificates
(3.2% yield to
maturity):
Total Certificates 9 $ 13,140 $ 17,951 $ 641 $ $ 757
Additional Credits 12,204 12,204 866
------------- ------------- -------------- ----------- --------------- -----------
Total 9 $ 25,344 $ 30,155 $ 1,507 $ $ 757
============= ============= ============== =========== =============== ===========
<CAPTION>
Deductions Balance at End of Year
------------------------------------------------- ---------------------------------------------
Cash Amount
Surrenders Cancellations Number of Amount
Prior and of Maturity of
Description Maturities to Maturity Withdrawals Accounts Value Reserves
- ----------------------- -------------- -------------- ---------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Series 27 single
payment face-
amount certificates
(3.2% yield to
maturity):
Total Certificates $ $ 77,676 $ 405 $ 1,124,030 $ 594,664
Additional Credits 63,191 490,495 490,495
-------------- -------------- ---------------- ------------- ------------- --------------
Total $ $ 140,867 $ 405 $ 1,614,525 $ 1,085,159
============== ============== ================ ============= ============= ==============
Series 27A single
payment face-
amount investment
annuity certificates
(3.2% yield to
maturity):
Total Certificates $ $ 354 $ 8 $ 12,920 $ 18,995
Additional Credits 228 12,842 12,842
-------------- -------------- ---------------- ------------- ------------- --------------
Total $ $ 582 $ 8 $ 25,762 $ 31,837
============== ============== ================ ============= ============= ==============
</TABLE>
Note: Additions charged to other accounts represent amounts credited to
certificate reserves from dividends declared by Boatmen's Bancshares,
Inc. upon common stock beneficially owned by face-amount certificate
holders.
26
<PAGE>
<TABLE>
Schedule VI (continued)
FKF, Inc.
Amounts Periodically Credited to Certificate Holders' Accounts
to Accumulate the Maturity Amount of Installment Certificates
Series 20
<CAPTION>
Amount credited Amount credited to Total credited
Payments made by Less to reserve reserves to mature to reserves Accumulative
Year Certificate holders loading to mature by charges to income to mature total
---- ------------------- ------- ---------------- -------------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
1st 38.10 19.04 19.06 .62 19.68 19.68
2nd 38.10 2.66 35.44 1.80 37.24 56.92
3rd 38.10 2.66 35.44 3.00 38.44 95.36
4th 38.10 2.66 35.44 4.26 39.70 135.06
5th 38.10 2.66 35.44 5.54 40.98 176.04
6th 38.10 1.52 36.58 6.92 43.50 219.54
7th 38.10 1.52 36.58 8.32 44.90 264.44
8th 38.10 1.52 36.58 9.78 46.36 310.80
9th 38.10 1.52 36.58 11.28 47.86 358.66
10th 38.10 1.52 36.58 12.86 49.44 408.10
11th 38.10 1.52 36.58 14.44 51.02 459.12
12th 38.10 1.52 36.58 16.12 52.70 511.82
13th 38.10 1.52 36.58 17.84 54.42 566.24
14th 38.10 1.52 36.58 19.60 56.18 622.42
15th 38.10 1.52 36.58 21.42 58.00 680.42
16th 38.10 1.52 36.58 23.32 59.90 740.32
17th 38.10 1.52 36.58 25.26 61.84 802.16
18th 38.10 1.52 36.58 27.26 63.84 866.00
19th 38.10 1.52 36.58 29.34 65.92 931.92
20th 38.10 1.52 36.58 31.50 68.08 1,000.00
</TABLE>
27
<PAGE>
<TABLE>
Schedule VI (continued)
FKF, Inc.
Amounts Periodically Credited to Certificate Holders' Accounts
to Accumulate the Maturity Amount of Installment Certificates
Certificate Series 20L and 20LA per $1,000 Face Amount
Monthly Payment Basis
<CAPTION>
Annual gross Amount credited Amount credited to Total credited
payments made by Less to reserves reserves to mature to reserves Accumulative
Year certificate holders loading to mature by charges to income to mature total
---- ------------------- ------- --------------- -------------------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
1st 51.00 5.76 45.24 .77 46.01 46.01
2nd 51.00 5.76 45.24 2.18 47.42 93.43
3rd 51.00 5.76 45.24 3.63 48.87 142.30
4th 51.00 5.76 45.24 5.13 50.37 192.67
5th 51.00 5.76 45.24 6.88 52.12 244.79
6th 51.00 5.76 45.24 8.07 53.31 298.10
7th 51.00 5.76 45.24 9.91 55.15 353.25
8th 51.00 5.76 45.24 11.60 56.84 410.09
9th 51.00 5.76 45.24 13.34 58.58 468.67
10th 51.00 5.76 45.24 15.14 60.38 529.05
11th 51.00 5.76 45.24 16.99 62.23 591.28
12th 51.00 5.76 45.24 18.90 64.14 655.42
13th 51.00 5.76 45.24 20.86 66.10 721.52
14th 51.00 5.76 45.24 22.89 68.13 789.65
15th 51.00 5.76 45.24 24.68 69.92 859.57
16th 26.66 26.66 886.23
17th 27.17 27.17 913.40
18th 28.00 28.00 941.40
19th 28.86 28.86 970.26
20th 29.74 29.74 1,000.00
</TABLE>
28
<PAGE>
<TABLE>
Schedule VI (continued)
FKF, Inc.
Amounts Periodically Credited to Certificate Holders' Accounts
to Accumulate the Maturity Amount of Installment Certificates
Certificate Series 20L and 20LA per $1,000 Face Amount
Annual Payment Basis
Annual gross Amount credited Amount credited to Total credited
payments made by Less to reserves reserves to mature to reserves Accumulative
Year certificate holders loading to mature by charges to income to mature total
---- ------------------- ------- ----------------- -------------------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
1st 48.00 3.36 44.64 1.37 46.01 46.01
2nd 48.00 3.36 44.64 2.78 47.42 93.43
3rd 48.00 3.36 44.64 4.23 48.87 142.30
4th 48.00 3.36 44.64 5.73 50.37 192.67
5th 48.00 3.36 44.64 7.48 52.12 244.79
6th 48.00 3.36 44.64 8.67 53.31 298.10
7th 48.00 3.36 44.64 10.51 55.15 353.25
8th 48.00 3.36 44.64 12.20 56.84 410.09
9th 48.00 3.36 44.64 13.94 58.58 468.67
10th 48.00 3.36 44.64 15.74 60.38 529.05
11th 48.00 3.36 44.64 17.59 62.23 591.28
12th 48.00 3.36 44.64 19.50 64.14 655.42
13th 48.00 3.36 44.64 21.46 66.10 721.52
14th 48.00 3.36 44.64 23.49 68.13 789.65
15th 48.00 3.36 44.64 25.28 69.92 859.57
16th 26.66 26.66 886.23
17th 27.17 27.17 913.40
18th 28.00 28.00 941.40
19th 28.86 28.86 970.26
20th 29.74 29.74 1,000.00
</TABLE>
29
<PAGE>
<TABLE>
Schedule VI (continued)
FKF, Inc.
Amounts Periodically Credited to Certificate Holders' Accounts
to Accumulate the Maturity Amount of Installment Certificates
Series 27
Annual gross Amount credited Amount credited to Total credited
payments made by Less to reserves reserves to mature to reserves Accumulative
Year certificate holders loading to mature by charges to income to mature total
---- ------------------- ------- --------------- -------------------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C>
1st 425.00 29.75 395.25 13.83 409.08 409.08
2nd 14.31 14.31 423.39
3rd 14.81 14.81 438.20
4th 15.33 15.33 453.53
5th 15.86 15.86 469.39
6th 16.42 16.42 485.81
7th 16.99 16.99 502.80
8th 17.58 17.58 520.38
9th 18.20 18.20 538.58
10th 18.84 18.84 557.42
11th 19.50 19.50 576.92
12th 20.18 20.18 597.10
13th 20.88 20.88 617.98
14th 21.61 21.61 639.59
15th 22.37 22.37 661.96
16th 23.15 23.15 685.11
17th 23.96 23.96 709.07
18th 24.80 24.80 733.87
19th 25.67 25.67 759.54
20th 26.57 26.57 786.11
21st 27.50 27.50 813.61
22nd 28.46 28.46 842.07
23rd 29.45 29.45 871.52
24th 30.48 30.48 902.00
25th 31.54 31.54 933.54
26th 32.66 32.66 966.20
27th 33.80 33.80 1,000.00
</TABLE>
30
<PAGE>
<TABLE>
Schedule VI (continued)
FKF, Inc.
Amounts Periodically Credited to Certificate Holders' Accounts
to Accumulate the Maturity Amount of Installment Certificates
Series 27A
Annual gross Amount credited Amount credited to Total credited
payments made by Less to reserves reserves to mature to reserves Accumulative
Year certificate holders loading to mature by charges to income to mature total
---- ------------------- ------- --------------- -------------------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
1st 425.00 29.75 395.25 13.83 409.08 409.08
2nd 14.31 14.31 423.39
3rd 14.81 14.81 438.20
4th 15.33 15.33 453.53
5th 15.86 15.86 469.39
6th 16.42 16.42 485.81
7th 16.99 16.99 502.80
8th 17.58 17.58 520.38
9th 18.20 18.20 538.58
10th 18.84 18.84 557.42
11th 19.50 19.50 576.92
12th 20.18 20.18 597.10
13th 20.88 20.88 617.98
14th 21.61 21.61 639.59
15th 22.37 22.37 661.96
16th 23.15 23.15 685.11
17th 23.96 23.96 709.07
18th 24.80 24.80 733.87
19th 25.67 25.67 759.54
20th 26.57 26.57 786.11
21st 27.50 27.50 813.61
22nd 28.46 28.46 842.07
23rd 29.45 29.45 871.52
24th 30.48 30.48 902.00
25th 31.54 31.54 933.54
26th 32.66 32.66 966.20
27th 33.80 33.80 1,000.00
</TABLE>
31
<PAGE>
INDEX TO EXHIBITS
The following documents are filed as exhibits to this report or are incorporated
by reference by specific reference to previous filings with the Commission:
Exhibit No.
(3) Articles of Incorporation and Bylaws of Registrant are on file with
the Commission as exhibits to Registrant's Form N-8B-4 Report filed on
October 25, 1977, which documents are hereby incorporated by
reference.
(4) Copies of or specimen copies of each of the outstanding face-amount
certificates, that being Series 20, 20L, 20LA, 27 and 27A, and a copy
of an order of the United States District Court for the District of
Kansas, dated May 2, 1977, are on file with the Commission as exhibits
to Registrant's Form N-8B-4 Report filed on October 25, 1977, which
documents are hereby incorporated by reference.
(10) A copy of the Depository Agreement, dated October 23, 1962, as
supplemented and assigned, is on file with the Commission as an
exhibit to Registrant's Form N-8B-4 Report filed on October 25, 1977,
and a copy of the Second Amendment to the Depository Agreement dated
November 6, 1981, is filed as an exhibit to the 1981 Form 10-K dated
March 16, 1982, which documents are hereby incorporated by reference.
(13) Registrant's Annual Report to Shareholder consists of the financial
statements submitted herewith on pages 9 through 17.
(16) A copy of the letter regarding the change in independent accountants
dated April 3, 1997, is on file with the Commission as an exhibit to
Registrant's Form 8-K filed on April 4, 1997, which document is hereby
incorporated by reference.
(27) Financial Data Schedule.
32
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 1,424,515
<INVESTMENTS-AT-VALUE> 1,461,651
<RECEIVABLES> 5,664
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 7,624
<TOTAL-ASSETS> 1,431,671
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,127,622
<TOTAL-LIABILITIES> 1,127,622
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 262,906
<SHARES-COMMON-STOCK> 250,000
<SHARES-COMMON-PRIOR> 250,000
<ACCUMULATED-NII-CURRENT> 43,335
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,808
<NET-ASSETS> 310,049
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 81,257
<OTHER-INCOME> 2,674
<EXPENSES-NET> 74,529
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 11,047
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
