1998 Bodes Well for Growth Stocks; 500 Companies in NationsBanc Montgomery Securities Growth Index Priced Attractively.

SAN FRANCISCO--(BUSINESS WIRE)--Jan. 7, 1998--NationsBanc Montgomery Securities today unveiled its re-balanced growth stock index -- the NationsBanc Montgomery Securities Growth Index (NMSGI(SM)) and expressed optimism about growth stock performance in 1998.

The index, launched last year, measures the performance of the 500 fastest growing U.S. companies with market capitalizations of greater than $200 million. The index tracks the market capitalization appreciation of these stocks which were selected on mean 3-5 year EPS growth rates using I/B/E/S estimates (Institutional Brokers Estimate System). The 500 companies fall within six segments of the economy: Media & Communications, Consumer/Business Services, Financial Services, Health Care, Technology and "Other."

"When we unveiled this index last year, we broke new ground in tracking growth companies," said Thomas W. Weisel, Chairman of NationsBanc Montgomery Securities. "By monitoring the various characteristics of the index, growth investors now have points of comparison they've never had before to measure performance. For the first time, investors have a benchmark from which to judge their investment performance."

Several structural aspects of the NMSGI(SM) make it different from existing indices. It is the only index to be based on expected growth rates and unlike other indices it is not influenced by where the component stocks are traded or their respective industries. No one company represents more than 1.5 percent of the total portfolio market capitalization.

In re-balancing the index, Michael Moe, growth strategist for NationsBanc Montgomery noted that 1997 was really a year of "Three Seasons" for growth investors. Season One was marked by horrible performance for growth stocks. Growth stocks measured by the NMSGI(SM) were off -21.8 percent from January 1st to April 25th. Investor sentiment reached a negative extreme during a six-week period in March and April where not one IPO priced above the filing range.

The catalyst for Season Two was a "surprise" budget agreement with provisions for a capital gains tax cut. This, coupled with a preponderance of evidence that inflation would continue to be modest, provided stocks the excuse they needed to go up after being extremely oversold. Growth stocks measured by the NMSGI(SM) went up 55 percent from April 25th to October 9th.

Season Three coincided with the Asian crisis with growth stocks especially technology stocks -- hard hit. Investment sentiment turned very bearish and during the month of December not one IPO priced above the filing range.

"In a year that saw the S&P 500 up 31 percent, growth investors in general had remarkably little to cheer about," noted Moe in releasing the re-balanced index. "Sure, the NASDAQ was up 21.6 percent and the Russell 2000 advanced 20.5 percent, but the performance wasn't due to growth stocks. The NationsBanc Montgomery Securities Growth Index was up only 7.3 percent for the year."

However, Moe noted that the NMSGISM had more companies that met or beat estimates (75 percent) than the S&P (71 percent) and earnings growth year-over-year was up 58 percent for the NMSGISM versus 10 percent for the S&P.

Looking ahead to 1998, Moe expressed optimism about the outlook for growth companies -- and specifically small-cap growth stocks. He cites several reasons for this optimism, including: a slowdown in S&P 500 earnings growth; compelling valuations (the NMSGI(SM) is currently selling at 24.8x '98 estimates, 84 percent of its growth rate and at a 27 percent premium to the S&P); interest rates which are at 20-year lows; bullish investor sentiment; and persistent demand imbalance for equities. -0-

Following are the characteristics of the 1998 index, as of December 1997:

Growth Rates

-- Mean 3-5 year projected EPS growth rate: 32.0%

-- Minimum 3-5 year projected EPS growth rate: 25.0%

-- Mean adjusted P/E multiple: 28.7x

-- Adjusted P/E to growth rate: 89.7%

Market Cap

-- Total market cap: $728 billion

-- Adjusted market cap: $614 billion

-- Average adjusted market cap: $1,228 million

-- Median market cap: $571 million

-- 28% of the index is small cap

-- 39% of the index is mid-cap

-- 33% of the index is large cap

Industry Composition by Adjusted Market Cap

-- 42% in the technology sector / 194 companies

-- 21% in the consumer/business services sector / 141 companies

-- 12% in the health care sector / 80 companies

-- 16% in the communications sector / 45 companies

-- 7% in the "other sector," / 29 companies

-- 1% in the finance sector / 11 companies

-- 500 companies: 394 on NASDAQ , 89 on NYSE and 16 on AMEX 

-- 78.8% of the index traded on NASDAQ

-- 17.8% of the index listed on NYSE

-- 3.2% of the index listed on AMEX -0-

The index is not publicly traded, but is recalculated on a daily basis and made available under the stock ticker symbol NMSGISM on Bridge and under NMSG (index) (go) on Bloomberg terminals. The index is re-balanced annually to determine the correct mix of companies that meet the criterion for inclusion or exclusion from the index. Sub-indices based on the industry sectors and large, small and mid-cap companies represented have also been created.

NationsBanc Montgomery Securities LLC (NMS), a subsidiary of NationsBank Corporation, is a full-service investment bank and brokerage firm with approximately $800 million of regulatory capital. The company provides research, trading and issuance in the equity and fixed-income (high yield, emerging markets, high grade and mortgage-backed markets). Other services include M&A advisory, financial buyer coverage, loan syndications, global investment banking, real estate finance, mortgage finance, money markets and the primary dealer.

Through NationsBank, NMS clients can also access products and services that include senior bank debt, bridge financing, real estate banking, treasury management, trade finance and risk management (derivatives products and foreign exchange).

NMS is a registered broker-dealer with the Securities and Exchange Commission and is a member of the National Association of Securities Dealers and the New York Stock Exchange. NMS employs more than 2,200 investment professionals.

CONTACT: NationsBanc Montgomery Securities

Jennifer Smith, 415/913-5968

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