<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
----------------------------------
Date of Report (Date of earliest event reported): February 1, 1999
AFFILIATED MANAGERS GROUP, INC.
(Exact name of Registrant as specified in charter)
Delaware 001-13459 043218510
(State or other jurisdiction (Commission file number) (IRS employer
of incorporation) identification no.)
Two International Place, 23rd Floor, Boston, MA 02110
(Address of principal executive offices) (Zip Code)
(617) 747-3300
(Registrant's telephone number, including area code)
<PAGE>
ITEM 5. Other Events
On November 27, 1997 Affiliated Managers Group, Inc. (the "Company")
filed a Registration Statement on Form S-1 (including all amendments thereto,
the "Registration Statement") under the Securities Act with respect to Common
Stock offered for sale in the Company's initial public offering.
The following description of the Company's Series C Non-Voting Stock
(par value $.01) supplements the section "Description of Capital Stock" in the
Registration Statement.
SERIES C STOCK
Holders of Series C Stock generally have the same rights and
privileges as holders of Common Stock, except that holders of Series C Stock
do not have any voting rights other than those which may be provided by
applicable law. Each share of Series C Stock converts automatically into one
share of Common Stock upon the earlier of March 20, 1999 or upon certain
extraordinary events (subject to adjustment to reflect any dividend in Common
Stock or Series C Stock); provided, that such conversion is not inconsistent
with any regulation, rule or other requirement of any governmental authority
applicable to such holder at such time.
ITEM 7. Financial Statements
Separate financial statements for certain of the Company's
affiliates for periods prior to AMG's investment were included in the
Registration Statement. The attached financial statements are for periods
subsequent to those filed in the Registration Statement through the date of
AMG's investment (not previously required in the Registration Statement).
The Registration Statement, including the exhibits and
schedules thereto, may be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, DC 20549 and at the following regional
offices of the Commission: Seven World Trade Center, New York, New York
10048, and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such materials may be obtained from the public referrals section of
the Commission at its Washington address upon payment of the prescribed fees.
The Company is required to file electronic versions of these documents with
the Commission through the Commission's Electronic Data Gathering, Analysis
and Retrieval ("EDGAR") System. The electronically filed documents, which
also include reports, proxy statements and other information, are maintained
by the Commission and may be found at the World Wide Web site
HTTP://WWW.SEC.GOV. The Common Stock has been approved for listing, subject
to notice of issuance, on the NYSE. Certain reports, proxy statements and
other information of listed companies can be inspected at the offices of the
NYSE, 20 Broad Street, New York, New York 10005.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AFFILIATED MANAGERS GROUP, INC.
By: /s/ Darrell W. Crate
---------------------------
Name: Darrell W. Crate
Title: Senior Vice President,
Chief Financial Officer
and Treasurer (and also
as Principal Financial and
Accounting Officer)
DATE: February 1, 1999
<PAGE>
AFFILIATED MANAGERS GROUP, INC. AND AFFILIATES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
GEOCAPITAL CORPORATION
Report of Independent Accountants................................................................. F-2
Statement of Financial Condition as of September 30, 1997......................................... F-3
Statements of Operations for the Year Ended September 30, 1997.................................... F-4
Statement of Changes in Stockholders' Equity for the Year Ended
September 30, 1997............................................................................ F-5
Statement of Cash Flows for the Year Ended September 30, 1997..................................... F-6
Notes to Financial Statements..................................................................... F-7
TWEEDY, BROWNE COMPANY L.P.
Report of Independent Accountants................................................................. F-11
Statement of Financial Condition as of October 8, 1997............................................ F-12
Statement of Operations for the Period January 1, 1997 through October 8, 1997.................... F-13
Statement of Changes in Partners' Capital for the Period January 1, 1997
through October 8, 1997....................................................................... F-14
Statements of Cash Flows for the Period January 1, 1997 through October 8, 1997................... F-15
Notes to Financial Statements..................................................................... F-16
GOFEN AND GLOSSBERG, INC.
Report of Independent Accountants................................................................. F-22
Statement of Financial Condition as of May 6, 1997................................................ F-23
Statement of Operations for the Period January 1, 1997 to May 6, 1997............................. F-24
Statement of Changes in Shareholders' Equity for the Period January 1, 1997
to May 6, 1997................................................................................ F-25
Statement of Cash Flows for the Period January 1, 1997 to May 6, 1997............................. F-26
Notes to Financial Statements..................................................................... F-27
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
GeoCapital Corporation
We have audited the accompanying statement of financial condition of GeoCapital
Corporation (the "Company") as of September 30, 1997, and the related statements
of operations, changes in stockholders' equity and cash flows for the year then
ended. 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 in accordance with generally accepted auditing standards.
Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of GeoCapital Corporation as of
September 30, 1997, and the results of its operations and its cash flows for the
year then ended, in conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
New York, New York
April 22, 1998
F-2
<PAGE>
GEOCAPITAL CORPORATION
STATEMENT OF FINANCIAL CONDITION
SEPTEMBER 30, 1997
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 417,419
Investment advisory fees receivable 3,982,581
Prepaid expenses 38,983
-----------
Total current assets 4,438,983
Furniture and equipment, net 93,103
Other assets 41,901
-----------
Total assets $ 4,573,987
-----------
-----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 18,930
Investment advisory fees payable 229,652
Professional fees payable 206,160
Performance based management fees payable - current 620,788
-----------
Total current liabilities 1,075,530
Deferred taxes payable 144,000
Performance based management fees payable - noncurrent 1,128,567
-----------
Total liabilities 2,348,097
-----------
Commitments and contingencies (Note 5)
Stockholders' equity:
Common stock - par value $1 per share, 100 shares
authorized, issued and outstanding 100
Additional paid-in capital 90,000
Retained earnings 2,202,457
-----------
2,292,557
Less: Treasury stock, at cost, 20 shares (66,667)
-----------
Total stockholders' equity 2,225,890
-----------
Total liabilities and stockholders' equity $ 4,573,987
-----------
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
GEOCAPITAL CORPORATION
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1997
<TABLE>
<S> <C>
Revenue:
Asset based management fees $ 12,670,589
Interest income 11,146
------------
Total revenue 12,681,735
------------
Expenses:
Performance based management fees expense 849,210
Employee compensation and benefits 9,190,419
Professional fees 1,779,496
Occupancy expense 352,690
Depreciation 34,088
Insurance expense 61,712
Payroll and other taxes 208,854
Other 442,950
------------
Total expenses 12,919,419
------------
Net loss before provision for income taxes (237,684)
Income tax provision:
Current 131,400
Deferred 13,571
------------
Net loss $ (382,655)
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
GEOCAPITAL CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED TREASURY STOCKHOLDERS'
STOCK CAPITAL EARNINGS STOCK EQUITY
---------- ----------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Stockholders' equity,
beginning of year $ 100 $ -- $ 2,585,112 $ (66,667) $ 2,518,545
Capital contributions -- 90,000 -- -- 90,000
Net loss -- -- (382,655) -- (382,655)
----------- ----------- ----------- ----------- -----------
Stockholders' equity,
end of year $ 100 $ 90,000 $ 2,202,457 $ (66,667) $ 2,225,890
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
GEOCAPITAL CORPORATION
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, 1997
<TABLE>
<S> <C>
Reconciliation of net loss to net cash provided by operating activities:
Net loss $(382,655)
----------
Adjustments to reconcile net loss to net cash provided by operating activities:
Non-cash items included in net loss:
Depreciation 34,088
Deferred taxes 13,571
Changes in assets and liabilities:
Increase in investment advisory fees receivable (761,267)
Decrease in prepaid expenses 152,763
Decrease in other assets 43,153
Decrease in accounts payable and accrued liabilities (21,188)
Increase in investment advisory fees payable 229,652
Increase in professional fees payable 206,160
Increase in performance based management fees payable 740,029
----------
Total adjustments 636,961
----------
Net cash provided by operating activities 254,306
----------
Cash flows from investing activities:
Capital expenditures (71,453)
----------
Net cash used in investing activities (71,453)
----------
Cash flows from financing activities:
Capital contributions 90,000
----------
Net cash provided by financing activities 90,000
----------
Increase in cash and cash equivalents 272,853
Cash and cash equivalents, beginning of year 144,566
----------
Cash and cash equivalents, end of year $ 417,419
----------
----------
Cash paid during the year for:
Taxes $ 18,000
----------
----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
GEOCAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES:
NATURE OF BUSINESS
GeoCapital Corporation (the "Company") is a Subchapter S Corporation
incorporated under the laws of the State of Delaware and commenced
operations on July 23, 1979.
The Company's business is to provide investment advisory services to
individuals, corporations, pension plans and non-profit organizations
that are located nationwide. Generally, advisory clients are charged
advisory fees based on a percentage of assets managed.
2. SIGNIFICANT ACCOUNTING POLICIES:
CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes cash in banks, on hand and invested
in money market funds.
REVENUE RECOGNITION
The Company's revenue consists primarily of investment advisory fees.
The majority of the investment advisory fees are billed on a quarterly
basis at the beginning of the quarter and are recognized as earned on a
monthly basis over the quarter. Performance based management fee
revenue (expense) is recognized in accordance with the contractual
formulae based upon the excess (shortfall) of the actual performance of
the managed accounts in relation to a contractual benchmark amount.
FURNITURE AND EQUIPMENT
Furniture and equipment are stated at cost and are being depreciated
over their estimated useful lives ranging from 5 to 7 years, using the
straight-line method. Repairs and maintenance are expensed as incurred.
INCOME TAXES
Deferred taxes are recognized for the future tax consequences of the
differences between the tax basis of the assets and liabilities and
their reporting amounts at year end based on enacted tax rates
applicable to the periods in which the differences are expected to
affect taxable income. The principle source of deferred taxes relates
to cash basis of accounting used for tax purposes. Income tax expense
is the sum of the taxes currently payable for the year and the change
during the period in deferred tax assets and liabilities.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
F-7
<PAGE>
GEOCAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. FURNITURE AND EQUIPMENT:
Furniture and equipment at September 30, 1997 are summarized as
follows:
<TABLE>
<S> <C>
Furniture and equipment $ 144,312
Less: Accumulated depreciation (51,209)
-----------
$ 93,103
-----------
-----------
</TABLE>
4. PENSION PLAN:
All of the Company's employees are eligible to participate in the
Company's 401(k) Plan. The Company, at its discretion, can match a
portion of employee contributions. The Company did not make a
contribution to the 401(k) Plan for the year ended September 30, 1997.
5. COMMINTMENTS AND CONTINGENCIES:
The Company currently leases office space under a lease agreement that
expires on November 29, 2000. Rent expense under the lease was $293,126
for the year ended September 30, 1997.
The lease commitment provides for minimum annual rental payments as
follows:
<TABLE>
<CAPTION>
YEAR ENDING
SEPTEMBER 30,
--------------
<S> <C>
1998 $ 220,000
1999 220,000
2000 220,000
2001 35,712
-----------
$ 695,712
-----------
-----------
</TABLE>
F-8
<PAGE>
GEOCAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
6. PERFORMANCE BASED MANAGEMENT FEE PAYABLE:
The Company has a performance based investment management fee contract
with a client that expires in June 30, 2001. During the year ended
September 30, 1997, the Company incurred a performance based management
fee expense of $849,210, as the managed account's performance was less
than the contractual benchmark amount. Based upon the performance of
the managed account to date, the Company is obligated under the
contract at September 30, 1997 as follows:
<TABLE>
<S> <C>
Current portion $ 620,788
Non-current portion 1,128,567
----------
Total performance fee payable $1,749,355
----------
----------
</TABLE>
In accordance with the performance contract, the Company's obligation is payable
over 5 years and can be netted against future performance fees that are earned.
F-9
<PAGE>
GEOCAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
7. CONCENTRATION OF CREDIT RISK:
The Company maintains its cash balances in one major New York City
bank. The balance in this account usually exceeds the insurance limit
of the Federal Deposit Insurance Company. Six clients comprise a
significant portion of the investment advisory fee receivable balance.
The receivables from these six clients at September 30, 1997 were
$1,810,505.
8. SUBSEQUENT EVENTS:
On September 30, 1997, the Company consummated a transaction pursuant
to an Agreement and Plan of Reorganization (the "Plan") among the
Company, its stockholders, Affiliated Managers Group, Inc. ("AMG"), a
wholly-owned subsidiary of AMG and GeoCapital, L.L.C., a limited
liability company of which the Company was manager member and majority
owner (the "L.L.C."). Under the Plan, the Company merged with and into
the wholly-owned subsidiary of AMG after the Company transferred
substantially all of its assets, liabilities and operating business to
the L.L.C. In return, the shareholders of the Company received cash and
shares of preferred stock of AMG. This transaction is not reflected in
the financial statements for the year ended September 30, 1997.
Pursuant to the Plan, the existing stockholders of the Company agreed
to indemnify the L.L.C. for any payments made under the Company's
performance based fee contract (Note 6) for the performance of the
managed account prior to consummation of the Plan.
F-10
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Tweedy, Browne Company L.P.
We have audited the accompanying statement of financial condition of Tweedy,
Browne Company L.P. (the "Partnership") as of October 8, 1997, and the related
statements of operations, changes in partners' capital, and cash flows for the
period January 1, 1997 through October 8, 1997. 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 in accordance with generally accepted auditing standards.
Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Tweedy, Browne Company L.P. as
of October 8, 1997, and the results of its operations and its cash flows for the
period January 1, 1997 through October 8, 1997, in conformity with generally
accepted accounting principles.
/s/Coopers & Lybrand L.L.P.
New York, New York
April 22, 1998
F-11
<PAGE>
TWEEDY, BROWNE COMPANY L.P.
STATEMENT OF FINANCIAL CONDITION
OCTOBER 8, 1997
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 632,495
Investment advisory fees receivable 4,368,374
Receivable from clearing broker 40,415
Other current assets 157,399
----------------
Total current assets 5,198,683
----------------
Furniture, equipment and leasehold improvements, net 639,666
Secured demand notes receivable (Note 5) 800,000
Other assets 74,283
----------------
Total assets $ 6,712,632
----------------
----------------
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable and accrued liabilities $ 357,877
Accrued compensation 1,170,996
Professional fees payable 451,404
Investment advisory fee payable 11,993
Due to partners 2,192,409
----------------
Total current liabilities 4,184,679
Subordinated indebtedness (Note 5) 800,000
----------------
Total liabilities 4,984,679
Commitments and contingencies (Note 7)
Partners' capital 1,727,953
----------------
Total liabilities and partners' capital $ 6,712,632
----------------
----------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-12
<PAGE>
TWEEDY, BROWNE COMPANY L.P.
STATEMENT OF OPERATIONS
FOR THE PERIOD JANUARY 1, 1997 THROUGH OCTOBER 8, 1997
<TABLE>
<S> <C>
Revenue:
Management fees $ 34,953,053
Commissions 2,444,410
------------
Total revenue 37,397,463
------------
Expenses:
Employee compensation and benefits 5,304,823
NYC unincorporated business tax 795,670
Commissions and clearing charges 991,526
Depreciation and amortization 379,223
Investment and other purchased services 434,995
Professional fees 464,009
Occupancy 410,987
Computer expenses 598,342
Telephone and postage 301,310
Marketing 212,186
Office expenses 247,401
Insurance 206,107
Mutual fund expenses 184,133
Other 207,017
------------
Total expenses 10,737,729
------------
Net income $ 26,659,734
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-13
<PAGE>
TWEEDY, BROWNE COMPANY L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE PERIOD JANUARY 1, 1997 THROUGH OCTOBER 8, 1997
<TABLE>
<CAPTION>
LIMITED GENERAL
PARTNERS PARTNERS TOTAL
------------ ------------- --------------
<S> <C> <C> <C>
Partners' capital, beginning of period $ 4,746,856 $ 3,893,200 $ 8,640,056
Partners' drawings (18,460,719) (15,111,118) (33,571,837)
Net income 14,662,854 11,996,880 26,659,734
------------ ------------- --------------
Partners' capital, end of period $ 948,991 $ 778,962 $ 1,727,953
------------ ------------- --------------
------------ ------------- --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-14
<PAGE>
TWEEDY, BROWNE COMPANY L.P.
STATEMENT OF CASH FLOWS
FOR THE PERIOD JANUARY 1, 1997 THROUGH OCTOBER 8, 1997
<TABLE>
<S> <C>
Reconciliation of net income to net cash provided by operating activities:
Net income $ 26,659,734
-------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 379,223
Changes in assets and liabilities:
Increase in investment advisory fees receivable (3,928,117)
Decrease in receivable from clearing broker 367,883
Increase in other current assets (121,084)
Increase in deposit with Internal Revenue Service (672,859)
Decrease in accounts payable and accrued liabilities (32,846)
Increase in accrued compensation 442,898
Increase in professional fees payable 360,376
Increase in investment advisory fees payable 191,527
-------------
Total adjustments (3,012,999)
-------------
Net cash provided by operating activities 23,646,735
-------------
Cash flows from investing activities:
Capital expenditures (231,585)
Expenditures for organizational costs (74,283)
-------------
Net cash used in investing activities (305,868)
-------------
Cash flows from financing activities:
Cash withdrawn by partners (27,212,194)
-------------
Net cash used in financing activities (27,212,194)
-------------
Decrease in cash and cash equivalents (3,871,327)
Cash and cash equivalents, beginning of period 4,503,822
-------------
Cash and cash equivalents, end of period $ 632,495
-------------
-------------
Cash paid during the period for:
NYC unincorporated business taxes $ 915,000
-------------
-------------
Non-cash activity:
In-kind withdrawal of assets by partners $ 4,167,234
-------------
-------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-15
<PAGE>
TWEEDY, BROWNE COMPANY L.P.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND NATURE OF BUSINESS:
Tweedy, Browne Company L.P. (the "Partnership") is a limited partnership
organized in the state of Delaware, registered with the Securities and
Exchange Commission ("SEC") as a broker-dealer and an investment advisor,
and is a member of the National Association of Securities Dealers
("NASD"). The Partnership consists of three general partners who are also
limited partners and a limited partner who retired as a general partner in
1995. The Limited Partnership Agreement (the "Agreement") provides for
allocation of net profits and net losses as of the end of each fiscal
period, as defined, to the General Partners and the Limited Partners in
proportion to their respective interests, as defined in the Agreement.
The Partnership's headquarters are located in New York City. It also has a
branch office in London, U.K. to conduct securities research in connection
with foreign investments. All accounts are maintained in U.S. dollars.
2. SIGNIFICANT ACCOUNTING POLICIES:
CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes cash in banks, on hand and invested in
money market funds.
FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Furniture and equipment are stated at cost and are being depreciated over
their estimated useful lives, ranging from 5 to 7 years, using the
straight-line method or an accelerated method beginning in the year an
item was placed in service. The difference between the accelerated method
and the straight-line method is not material. Leasehold improvements are
amortized over the shorter of their estimated useful lives or the term of
the leases.
REVENUE RECOGNITION
The Partnership's revenue consists primarily of investment advisory fees
and brokerage commissions. The majority of the investment advisory fees
from managed accounts are billed on a quarterly basis at the beginning of
the quarter and are recognized as earned on a monthly basis over the
quarter. Investment advisory fees from domestic regulated investment
companies are billed and recorded on a monthly basis. Brokerage
commissions are recorded on a trade date basis and are remitted by the
clearing broker on a monthly basis after necessary offsets for clearing
charges and execution costs.
INCOME TAXES
The Partnership is not subject to Federal or state income taxes. The
partners are responsible for reporting their proportionate share of the
Partnership's income on their individual returns. The Partnership is
subject to New York City unincorporated business taxes. Until September
30, 1997, the Partnership maintained a refundable deposit with the
Internal Revenue Service in accordance with Section 444 of the Internal
Revenue Code as a condition of electing a fiscal
F-16
<PAGE>
TWEEDY, BROWNE COMPANY L.P.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
year other than December 31. In anticipation of the conversion to a
limited liability company (see Note 12) and a subsequent change in tax
year to December 31, 1997, the Partnership distributed the aforementioned
refundable deposit in-kind to its partners.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
3. RECEIVABLE FROM CLEARING BROKER:
The Partnership is an introducing broker that clears its customer security
transactions through Fleet Clearing Corporation on a fully disclosed
basis. The Partnership pays its clearing broker a fixed ticket charge for
clearing its transactions. At October 8, 1997, $40,415 is due from Fleet
Clearing Corporation, consisting principally of commissions due on
transactions after deductions for clearing and other execution charges.
4. FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS:
Furniture, equipment and leasehold improvements at October 8, 1997 are
summarized as follows:
<TABLE>
<S> <C>
Computer equipment $ 1,016,853
Furniture and fixtures 536,366
Leasehold improvements 503,604
--------------
2,056,823
Less: Accumulated depreciation and
amortization (1,417,157)
---------------
$ 639,666
---------------
---------------
</TABLE>
5. SUBORDINATED INDEBTEDNESS:
On July 1, 1989, the Partnership entered into a subordinated loan
agreement with two of its general partners. In 1995, one of the general
partners retired but continues as a limited partner and remains a party to
the subordination agreement. The individuals each provided collateralized
demand notes of $400,000 to the Partnership which call for interest at the
rate of 6% per annum. These notes become due on September 30, 2006.
F-17
<PAGE>
TWEEDY, BROWNE COMPANY L.P.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
The resulting liability for repayment of such notes is subordinated to all
other claims of general creditors. The subordinated notes have been
approved by the NASD and are available for computing net capital under the
SEC's Uniform Net Capital Rule. To the extent that such debt is required
for the Partnership's continued compliance with minimum net capital
requirements, it may not be repaid. The subordinated notes are
collateralized by marketable securities of the general partners having a
market value at October 8, 1997 in excess of $7,000,000. Interest expense
on the above subordinated indebtedness amounted to $37,032 for the period
January 1, 1997 through October 8, 1997.
6. PROFIT SHARING PLAN:
The Partnership has a non-contributory profit sharing plan (the "Plan")
that covers all eligible employees of the partnership. For the period
January 1, 1997 through October 8, 1997, the Partnership contributed
$319,186 to the Plan, none of which was payable by the Partnership at
October 8, 1997.
7. COMMITMENTS AND CONTINGENCIES:
The Partnership currently leases office space in New York and London, U.K.
under lease agreements expiring April 30, 1999 and April 17, 2005,
respectively. With respect to the latter, either party has the right to
terminate the lease by giving six months written notice before April 17,
2000. Rent expense under these leases was approximately $529,814 and
$34,714, respectively, for the period January 1, 1997 through October 8,
1997.
The lease commitments provide for minimum annual rental payments as
follows:
<TABLE>
<CAPTION>
12-MONTH PERIOD NEW YORK LONDON,
ENDING OCTOBER 8, CITY U.K.
-------------------- ------------ -------------
<S> <C> <C>
1998 $ 528,000 $ 36,318
1999 293,655 36,318
2000 - 36,318
2001 - 36,318
2002 - 36,318
2003 and thereafter - 91,541
----------- -----------
$ 821,655 $ 273,131
----------- -----------
----------- -----------
</TABLE>
These minimum rentals are subject to escalation or reduction based upon
certain costs incurred by the landlord and, with respect to the London
office, by real estate tax of approximately $14,450 per year for each year
that the premise is actually occupied by the Partnership.
F-18
<PAGE>
TWEEDY, BROWNE COMPANY L.P.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
The Partnership has entered into a sublease agreement under which it
leases approximately 40% of the 7th floor area of the New York City office
to a subtenant who pays rent to the Partnership based upon the percentage
of square footage occupied to the total of the 7th floor square footage.
Rent under this sublease will continue through April 30, 1999. For the
period January 1, 1997 through October 8, 1997, rental income amounted to
$135,348, and is included as a reduction of the aggregate rent expense.
The Partnership is also subleasing a portion of its London office and
received $10,337 for the period January 1, 1997 through October 8, 1997.
8. RELATED PARTY TRANSACTIONS:
In addition to commissions and investment advisory fees from unrelated
customers, the Partnership receives investment advisory fees and
commission income for securities brokerage services performed for two
domestic investment partnerships wherein certain of the general partners
of the Partnership are general partners and for four Passive Foreign
Investment Companies wherein certain of the partners of the Partnership
are stockholders and the Partnership is the investment advisor. For the
period January 1, 1997 through October 8, 1997, such commissions and
investment advisory fees amounted to $432,011, of which $16,646 was
receivable at October 8, 1997.
The Partnership has distribution agreements with Tweedy, Browne Fund Inc.
as the exclusive sales agent for Tweedy, Browne Global Value Fund and
Tweedy, Browne American Value Fund (the "Funds"). The Partnership is also
the investment advisor for the Funds. The aforementioned partners of the
Partnership are officers and/or directors of Tweedy, Browne Fund Inc.
During the period January 1, 1997 through October 8, 1997, the Partnership
earned investment advisory fees from the Funds of $15,510,998 and
$3,953,726, respectively, of which $3,243,717 was receivable at October 8,
1997.
9. DUE TO FORMER PARTNERS:
In connection with the equity sale to AMG (see Note 12), the Partnership
notified the NASD of its intention to distribute to its partners a
substantial amount of its excess net capital, as defined by the Securities
and Exchange Commission, prior to October 8, 1997. Net assets in the
amount of $4,167,234, consisting of net management fees receivable of
$1,956,425 and a deposit with the Internal Revenue Service of $2,210,809,
were distributed in-kind and $2,192,409 is payable at October 8, 1997.
These amounts are included in partners' drawings and reduced the
respective capital accounts.
F-19
<PAGE>
TWEEDY, BROWNE COMPANY L.P.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
10. NET CAPITAL REQUIREMENT:
As a registered broker-dealer, the Partnership is subject to the Uniform
Net Capital Rule 15c3-1 of the Securities and Exchange Commission. This
rule prohibits a broker-dealer from engaging in securities transactions
when its aggregate indebtedness exceeds 15 times its net capital as those
terms are defined in the net capital rule. Rule 15c3-1 also provides that
equity capital may not be withdrawn or cash dividends paid if the
resulting net capital ratio would exceed 10 to 1. The Partnership computes
its net capital under the aggregate indebtedness method permitted by the
rule which requires the Partnership to maintain minimum net capital, as
defined, equal to the greater of 6-2/3% of aggregate indebtedness, as
defined, or $5,000. At September 30, 1997, the Partnership had net capital
of $1,578,073, which was $1,285,194 in excess of its required net capital
of $292,879. The Partnership's net capital ratio was 2.7859 to 1 at
September 30, 1997.
The Partnership is exempt from the provisions of SEC Rule 15c3-3 because
it does not receive any funds or securities in connection with its
activities as a broker or dealer, and does not otherwise hold funds or
securities for, or owe money or securities to, customers.
11. CONCENTRATION OF CREDIT RISK:
The Partnership maintains its cash balances in two major New York City
banks. The balances in these accounts usually exceed the insurance limits
of the Federal Deposit Insurance Corporation. The Company is subject to
credit risk should these financial institutions be unable to fulfill their
obligations.
The majority of the Partnership's brokerage transactions, and consequently
the concentration of its credit exposure, is with broker-dealers, and
other financial institutions. In the event counterparties do not fulfill
their obligations, the Partnership may be exposed to credit risk. The risk
of default depends on the creditworthiness of the counterparty or issuer
of the instrument. The Partnership seeks to control credit risk by
monitoring credit limits and requiring collateral where appropriate.
F-20
<PAGE>
TWEEDY, BROWNE COMPANY L.P.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
12. SUBSEQUENT EVENTS:
On October 9, 1997, the Partnership converted from a Delaware limited
partnership to a Delaware limited liability company. Immediately following
this conversion the then existing members sold a majority equity interest
in the limited liability company to a wholly-owned subsidiary of
Affiliated Managers Group, Inc. ("AMG"). Included in other assets are
costs incurred in connection with organizing, structuring and planning for
the newly formed limited liability company in the amount of $74,283.
F-21
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Shareholders and Board of Directors
Gofen and Glossberg, Inc.
We have audited the accompanying statement of financial condition of Gofen and
Glossberg, Inc. as of May 6, 1997, and the related statements of operations,
changes in shareholders' equity and cash flows for the period January 1, 1997 to
May 6, 1997. 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 in accordance with generally accepted auditing standards.
Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the financial
statements. We believe that our audit of the financial statements provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Gofen and Glossberg, Inc. as of
May 6, 1997 and the results of its operations and cash flows for the period
January 1, 1997 to May 6, 1997, in conformity with generally accepted accounting
principles.
/s/Coopers & Lybrand L.L.P.
Chicago, Illinois
May 29, 1998
F-22
<PAGE>
GOFEN AND GLOSSBERG, INC.
STATEMENT OF FINANCIAL CONDITION
MAY 6, 1997
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,030,246
Accounts receivable 588,162
Shareholder notes receivable 350,391
Prepaid expenses 20,576
--------------
Total current assets 1,989,375
Property, equipment and leasehold improvements (net of
accumulated depreciation and amortization
of $1,179,729) 505,808
--------------
Total assets $ 2,495,183
--------------
--------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 350,966
State taxes payable 155,000
--------------
Total current liabilities 505,966
Deferred revenue 861,000
Deferred rent abatement 94,000
--------------
Total liabilities 1,460,966
Commitments and Contingencies (Note 4)
Shareholders' Equity:
Common stock, no par or stated value; authorized 100,000
shares; issued and outstanding 15,200 shares 69,365
Retained earnings 964,852
--------------
Total shareholders' equity 1,034,217
--------------
Total liabilities and shareholders' equity $ 2,495,183
--------------
--------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
F-23
<PAGE>
GOFEN AND GLOSSBERG, INC.
STATEMENT OF OPERATIONS
FOR THE PERIOD JANUARY 1, 1997 TO MAY 6, 1997
<TABLE>
<S> <C>
Revenues:
Asset-based management fees $ 2,993,380
Other 13,122
----------------
Total revenues 3,006,502
----------------
Expenses:
Salaries and benefits 1,221,701
Incentive compensation and bonuses 84,000
Investment and other purchased services 40,386
Occupancy 177,853
Depreciation and amortization 35,078
Marketing 28,999
Professional fees 399,166
Telephone and postage 27,519
Office supplies 28,644
State tax expense 155,000
Other 45,071
----------------
Total expenses 2,243,417
----------------
Net income $ 763,085
----------------
----------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
F-24
<PAGE>
GOFEN AND GLOSSBERG, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE PERIOD JANUARY 1, 1997 TO MAY 6, 1997
<TABLE>
<CAPTION>
COMMON COMMON RETAINED
SHARES STOCK EARNINGS TOTAL
<S> <C> <C> <C> <C>
Balances, December 31, 1996 15,200 $ 69,365 $ 436,767 $ 506,132
Distribution (235,000) (235,000)
Net income 763,085 763,085
------ -------- ----------- -----------
Balances, May 6, 1997 15,200 $ 69,365 $ 964,852 $ 1,034,217
------ -------- ----------- -----------
------ -------- ----------- -----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
F-25
<PAGE>
GOFEN AND GLOSSBERG, INC.
STATEMENT OF CASH FLOWS
FOR THE PERIOD JANUARY 1, 1997 TO MAY 6, 1997
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income $ 763,085
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 35,078
Changes in operating assets and liabilities:
Increase in accounts receivable (63,326)
Decrease in prepaid expenses 12,536
Increase in shareholder notes receivable (349,720)
Increase in accounts payable and accrued liabilities 301,275
Increase in state taxes payable 155,000
Increase in deferred revenue 216,000
Decrease in deferred rent abatement (56,000)
-----------
Net cash provided by operating activities 1,013,928
-----------
Cash flows from investing activities:
Purchases of property and equipment (11,434)
-----------
Net cash used in investing activities (11,434)
-----------
Cash flows from financing activities:
Distribution to shareholders (235,000)
-----------
Net cash used in financing activities (235,000)
-----------
Net increase in cash and cash equivalents 767,494
Cash and cash equivalents at beginning of period 262,752
-----------
Cash and cash equivalents at end of period $ 1,030,246
-----------
-----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
F-26
<PAGE>
GOFEN AND GLOSSBERG, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
Gofen and Glossberg, Inc., an Illinois corporation (the "Company"),
provides asset management and investment advisory services to
institutional investors and high net worth individuals located throughout
the United States.
2. SIGNIFICANT ACCOUNTING POLICIES
CASH EQUIVALENTS
For financial statement purposes, the Company considers
interest-bearing cash and all highly liquid investments with a
maturity of three months or less when purchased to be cash
equivalents. Cash equivalents are stated at cost which approximates
market value due to the short-term maturity of these investments.
PROPERTY AND EQUIPMENT, DEPRECIATION AND AMORTIZATION
Property and equipment are recorded at cost and depreciated
principally on accelerated methods over the estimated useful lives of
the related assets, generally five to seven years. Amortization on
leasehold improvements is computed on a straight-line basis over the
shorter of their estimated useful lives or the term of the lease.
Maintenance and repairs are charged to expense when incurred.
REVENUE RECOGNITION
The Company's revenues are derived primarily from asset-based
investment advisory fees. These fees are generally billed in advance
and on a quarterly basis based on the amount of assets under
management at the beginning of each quarter. The revenue is deferred
and the income is recognized as earned during the quarter.
INCOME TAXES
No provision for income taxes is made in the accompanying financial
statements since the Company, as a Subchapter S Corporation, is
treated as a partnership for income tax purposes whereby the
shareholders are responsible for recording their proportionate share
of the Company's income in their tax returns.
F-27
<PAGE>
GOFEN AND GLOSSBERG, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
2. SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
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 reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<S> <C>
Office equipment $ 796,883
Furniture and fixtures 494,956
Leasehold improvements 393,698
---------------
1,685,537
Accumulated depreciation and amortization (1,179,729)
--------------
$ 505,808
--------------
--------------
</TABLE>
4. COMMITMENTS AND CONTINGENCIES
The Company leases its office facilities under an operating lease that
expires in 2009. The Company accounts for this lease under Statement of
Financial Accounting Standards No. 13, ACCOUNTING FOR LEASES whereby
total minimum rental payments are recognized as rent expense on a
straight-line basis over the term of the lease. Amounts charged to rent
expense that are in excess of amounts required to be paid under the lease
are carried on the statement of financial condition as a deferred credit.
The lease also provides the Company with space improvement and
redecorating credits. The Company's maximum available credits for space
improvement and for redecorating are approximately $26,500 and $136,400,
respectively, of which approximately $15,900 and $81,800, respectively,
may be applied against the Company's future rental commitments. No
credits have been utilized by the Company.
F-28
<PAGE>
GOFEN AND GLOSSBERG, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
4. COMMITMENTS AND CONTINGENCIES, CONTINUED
Additional terms of the lease provide the Company with the option of
extending the lease term for a five-year period commencing October 1,
2009 and the option of adding approximately 4,000 square feet to the
lease effective October 1, 2000. Neither of these options have been
exercised by the Company. Rent expense for the period January 1, 1997 to
May 6, 1997 was $164,927, including real estate taxes and maintenance.
At May 6, 1997, future minimum rentals for the above operating lease,
which is subject to an escalation clause, are payable as follows:
<TABLE>
<CAPTION>
CALENDAR YEAR ENDING AMOUNT
<S> <C>
1997 $ 271,081
1998 418,816
1999 362,638
2000 189,743
2001 193,555
Thereafter 1,636,851
</TABLE>
5. BENEFIT PLANS
The Company has a 401(K) retirement plan covering all eligible employees.
Company contributions are made for each eligible participant based upon a
percentage of wages subject to certain minimum and maximum limitations,
as defined. The contributions for the period January 1 to May 6, 1997
were $75,000.
The Company has an unfunded deferred compensation plan for key employees.
In the event of death, disability or retirement, it is payable in 60
monthly installments of $4,167 each. The Company made no payments and had
no existing obligations under the plan for the period January 1, 1997 to
May 6, 1997.
6. SHAREHOLDERS' EQUITY
A shareholders' agreement provides that the Company will purchase for
book value, as defined, the outstanding shares of any shareholder in the
event of death, disability or termination of service from the Company.
F-29
<PAGE>
GOFEN AND GLOSSBERG, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
7. LOANS TO SHAREHOLDERS
The Company made a distribution of $235,000 to its shareholders. Such
Distribution was used by the shareholders to make certain capital
contributions to a sucessor entity (see Note 8).
The Company loaned $350,000 to shareholders of the Company on a
non-interest bearing basis. The loans were repaid in full to the
Company's successor Gofen and Glossberg L.L.C. (See Note 8).
8. SUBSEQUENT EVENT
Effective at the close of business on April 28, 1997, the Company
transferred substantially all of its assets and liabilities and made
certain capital contributions to a successor, Gofen and Glossberg,
L.L.C., (the "LLC") a newly established Delaware limited liability
company. On May 6, 1997, Affiliated Managers Group, Inc. purchased the
Company's interest in the LLC consisting of 55% of the LLC's
membership points and 100% of the LLC's capital.
Pursuant to the Agreement, the Company's lease and leaseholds along
with certain rent abatements and buildout allowances, were transferred
to a newly established affiliate entity, Suite 3000 Holdings, Inc.,
wholly owned by AMG.
F-30
