SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by Registrant [ X ]
Filed by Party other than the Registration [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Para 240.14a-11(c) or
Para 240.14a-12
THE SOMERSET GROUP, INC.
(Name of Registrant as Specified in its Charter)
THE SOMERSET GROUP, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ X ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1),
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-
6(i)(4) and 0-11.
1) Title of each class of securities to which transaction
applies:
.................................................................
2) Aggregate number of securities to which transaction
applies:
.................................................................
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth
the amount on which the filing fee is calculated and
state how it was determined):
.................................................................
4) Proposed maximum aggregate value of transaction:
.................................................................
5) Total fee paid:
.................................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify
the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
.................................................................
2) Form, Schedule or Registration Statement No.:
.................................................................
3) Filing Party:
.................................................................
4) Date Filed:
.................................................................
12696<PAGE>
March 20, 1996
Dear Shareholder:
The Directors and Officers of The Somerset Group, Inc. (the
"Corporation") join me in extending to you a cordial invitation to
attend the annual meeting of our shareholders. This meeting will be
held on Wednesday, April 24, 1996, at 9:00 a.m., EST, in the First
Indiana Plaza Conference Center, Ohio and Pennsylvania Streets, Seventh
Floor, Indianapolis, Indiana.
We hope you plan to attend the annual meeting where we will review our
past performance and our plans for the future.
The formal notice of the annual meeting and the proxy statement appear
on the following pages. After reading the proxy statement, please mark,
sign, and return the enclosed proxy card to assure that your votes on
the business matters of the meeting will be recorded. Returning the
proxy does not affect your right to vote in person on all matters
brought before the meeting.
Sincerely,
Robert H. McKinney
Chairman
FIRST INDIANA PLAZA
135 NORTH PENNSYLVANIA STREET
SUITE 2800
INDIANAPOLIS, IN 46204
(317) 634-1400<PAGE>
THE SOMERSET GROUP, INC.
135 North Pennsylvania Street
Suite 2800
Indianapolis, Indiana 46204
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of The Somerset Group, Inc.:
NOTICE IS HEREBY GIVEN that the annual meeting of the shareholders
of The Somerset Group, Inc. (the "Corporation") will be held on
Wednesday, April 24, 1996, at 9:00 a.m., EST, in the First Indiana Plaza
Conference Center, Ohio and Pennsylvania Streets, Seventh Floor,
Indianapolis, Indiana, to consider and take action on the following
matters:
1. Election of Directors. The election of directors as set forth in
the Proxy Statement.
2. Other Business. The transaction of such other business as properly
may come before the meeting and any adjournments thereof.
Only shareholders of record at the close of business on March 4, 1996
are entitled to vote at the meeting or any adjournment thereof.
By order of the Board of Directors
Sharon J. Sanford
Secretary
March 20, 1996
IMPORTANT
PLEASE MARK, SIGN AND RETURN THE ENCLOSED PROXY. NO POSTAGE IS
NECESSARY IF MAILED IN THE UNITED STATES.<PAGE>
THE SOMERET GROUP, INC.
135 North Pennsylvania Street
Suite 2800
Indianapolis, Indiana 46204
(317) 634-1400
PROXY STATEMENT
The accompanying proxy is solicited by the Board of Directors of
The Somerset Group, Inc. (the "Corporation") for use at the annual
meeting of shareholders to be held on Wednesday, April 24, 1996, at 9:00
a.m., EST, in the First Indiana Plaza Conference Center, Ohio and
Pennsylvania Streets, Seventh Floor, Indianapolis, Indiana, and any
adjournments thereof (the "Annual Meeting"). The Notice of Annual
Meeting of Shareholders, this Proxy Statement and accompanying form of
proxy are first being sent or given to shareholders on or about March
20, 1996.
The election of directors will be determined by a plurality of the
shares present in person or represented by proxy. The holder of each
outstanding share of Common Stock is entitled to vote for as many
persons as there are directors to be elected. Any other matters to come
before the Annual Meeting will be determined by a majority of the shares
present in person or represented by proxy. An abstention, non-vote, or
broker non-vote will not change the number of votes cast for or against
the election of any director or for or against any other matter to come
before the Annual Meeting.
A proxy in the enclosed form, if properly executed, duly returned
to the Corporation and not revoked, will be voted in accordance with the
instructions contained therein. The shares represented by executed but
unmarked proxies will be voted FOR the four persons nominated for
election as directors referred to herein. If any other matters are
properly brought before the Annual Meeting, the persons named in the
enclosed form of proxy will vote the shares represented thereby on such
matters in accordance with their best judgment. Other than the election
of directors, the Board of Directors has no knowledge of any matters to
be presented for action by the shareholders at the Annual Meeting.
Execution of a proxy given in response to this solicitation will
not affect a shareholders's right to attend and to vote in person at the
Annual Meeting. Presence at the Annual Meeting of a shareholder who has
signed a proxy does not in itself revoke the proxy. Any shareholder
giving a proxy may revoke it at any time before it is voted by giving
notice thereof to the Corporation in writing or at the Annual Meeting
or by providing a proxy bearing a later date.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Only shareholders of record as of the close of business on March 4,
1996 will be entitled to vote at the Annual Meeting. On March 11, 1996,
the Corporation distributed one additional share of stock for every four
shares owned by shareholders of record on February 29, 1996 (the "Stock
Split"). As a result, shares issued in the Stock Split may be voted by
the recipients thereof at the Annual Meeting. All share information
pertaining to the Corporation's shares of stock has been restated to
reflect the Stock Split. The Corporation has only one class of stock,
its common stock, of which 2,047,927 shares were outstanding as of the
close of business on March 4, 1996.
The following table shows, as of March 4, 1996, the number and
percentage of shares of common stock owned beneficially by (i) each
person who owned beneficially more than 5% of the issued and outstanding
common stock of the Corporation and (ii) executive officers and
directors as a group:
Name and Address Percent
of Beneficial Amount and Nature of of
Owner Beneficial Ownership Class
Robert H. McKinney
135 N. Pennsylvania St., Suite 2800
Indianapolis, Indiana 46204 958,236(1) 45.3%
Marni McKinney
135 N. Pennsylvania St., Suite 2800
Indianapolis, Indiana 46204 958,236(1) 45.3%
Marvin C. Schwartz
c/o Neuberger & Berman
605 Third Avenue
New York, New York 10158 149,375(2) 7.3%
William L. Elder
Southern Indiana Railway, Inc.
320 N. Meridian Street, Room 911
Indianapolis, Indiana 46204 103,157(3) 5.0%
All executive officers and directors
as a group (9 persons) 1,145,355(4) 52.6%
Unless otherwise noted, the above named persons have sole voting
power and sole investment power.
(1) These shares are beneficially owned by a group consisting of
Robert H. McKinney and Marni McKinney. Robert H. McKinney is
deemed to be a beneficial owner as specified in Rule 13d-3
under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), of 444,987 shares held by a limited
partnership established by Mr. McKinney for the benefit of his
children, including Marni McKinney and Kevin K. McKinney. The
total held by the group also includes 13,915 shares owned
directly by Mr. McKinney, 22,690 shares owned of record by his
wife, and 45,250 shares subject to options granted under the
Corporation's Stock Incentive Plans. The total held by the
group also includes 381,631 shares held in two irrevocable
trusts of which Marni McKinney is the Trustee and which were
established by Mr. McKinney for the benefit of his children.
The above number also includes 25,388 shares which
Ms. McKinney owns individually and 24,375 shares subject to
options granted under the Corporation's Stock Incentive Plans.
(2) This information is taken from the Schedule 13D Report dated
February 26, 1992, and filed by the shareholder with the
Securities and Exchange Commission concerning shares held by
it. It does not reflect any changes in those shareholdings
which may have occurred since the date of such filing.
(3) Includes 96,907 shares which Mr. Elder owns individually and
6,250 shares subject to options granted under the 1991
Director Stock Option Plan.
(4) Includes 106,125 shares subject to options granted under the
Corporation's Stock Incentive Plans and 25,000 shares subject
to options granted under the 1991 Director Stock Option Plan.
<PAGE>
PROPOSAL NO. 1: ELECTION OF DIRECTORS
Four directors are to be elected. H. J. Baker, William L. Elder, and
Marni McKinney have been nominated for a term of three years and until
their successors are elected and qualified. Mr. William F. McConnell,
Jr. has been nominated for a term of one year and until his successor
is elected and qualified. Mr. McConnell was elected as a director by
the Board of Directors on February 14, 1996 to serve until the Annual
Meeting. If, at the time of the 1996 Annual Meeting any of such
nominees should be unable or decline to serve, the discretionary
authority provided in the proxy may be exercised to vote for a
substitute or substitutes. The Board of Directors has no reason to
believe that any substitute nominee or nominees will be required.
The Board of Directors unanimously recommends the election of the
following nominees:
Name, Age, Principal Common Stock
Occupation(s) and Beneficially Percent
Business Experience Director Owned on of
During Past 5 Years Since March 4, 1996 Class
The NOMINEES for election
are:
H. J. Baker, Age 68 1986 7,812(1) (2)
Chairman Emeritus, BMW
Constructors, Inc., industrial
mechanical contractors; Director
of First Indiana Corporation and
Lilly Industries, Inc.
William L. Elder, Age 73 1986 103,157(1) 5.0%
Formerly Chairman of Southern
Indiana Commerce Corporation;
formerly President of Southern
Indiana Railway, Inc.; formerly
Director of Merchants National
Corporation, a bank holding company,
and Merchants National Bank and
Trust Company.
William F. McConnell, Age 46 1996 -0- (2)
Senior Vice President and Chief
Operating Officer of Resort
Condominiums International, Inc.;
formerly Consulting Managing
Partner of Andersen Consulting.
<PAGE>
Name, Age, Principal Common Stock
Occupation(s) and Beneficially Percent
Business Experience Director Owned on of
During Past 5 Years Since March 4, 1996 Class
Marni McKinney, Age 39 1987 958,236(3) 45.3%
President and Chief Executive
Officer of the Corporation; Vice
Chairman and Director of First
Indiana Corporation and First Indiana
Bank, A Federal Savings Bank; formerly
President and Chief Operating Officer
of the Corporation (1993-1995) and
Executive Vice President of the
Corporation (1987-1992); Vice
Chairman of, and formerly Vice
President and Director of Strategic
Planning of, First Indiana Bank, A
Federal Savings Bank; formerly Vice
President of First Indiana Corporation.
Directors whose term expires
in 1997:
Douglas W. Huemme, Age 54 1990 6,250(1) (2)
Chairman, President and Chief
Executive Officer, Lilly
Industries, Inc., industrial coatings;
Director of First Indiana Corporation;
formerly Vice President and Group
Executive - Chemicals
Group, Whittaker Corporation.
Kevin K. McKinney, Age 38 1990 17,692(4) (2)
Vice President of the
Corporation; Publisher of NUVO
Newsweekly and Chairman and President
of NUVO, Inc.; formerly President;
Mid America Media; formerly
Chairman, Indianapolis Extra,
Ltd.
<PAGE>
Name, Age, Principal Common Stock
Occupation(s) and Beneficially Percent
Business Experience Director Owned on of
During Past 5 Years Since March 4, 1996 Class
Directors whose terms expire
in 1998:
Robert H. McKinney, Age 70 1985 958,236(5) 45.3%
Chairman of the Corporation;
Chairman and Chief Executive
Officer of First Indiana Corporation,
a savings and loan holding
company; Chairman of First
Indiana Bank, A Federal Savings
Bank; formerly, Chief Executive Officer
of the Corporation (1984-1995);
retired Partner of Bose McKinney &
Evans, attorneys; Director of First
Indiana Corporation and Lilly
Industries, Inc.; Chairman, Federal
Home Loan Bank Board (1977-1979).
Michael L. Smith, Age 47 1988 18,875(6) (2)
President of Somerset Financial
Services, a division of the
Corporation; formerly Chairman,
Director, President and Chief
Executive Officer, Mayflower
Group, Inc., diversified transportation
services; Director of First Indiana
Corporation and Acordia, Inc.
______________
(1) Includes 6,250 shares subject to options granted under the
1991 Director Stock Option Plan.
(2) The number of shares represents less than 1% of the
outstanding shares of the Corporation.
(3) See note (1) to the table under heading "Voting Securities and
Principal Holders Thereof" above. Ms. McKinney is a daughter
of Robert H. McKinney and a sister of Kevin K. McKinney.
(4) Includes 11,192 shares owned directly and 6,500 shares subject
to options granted under the Corporation's Stock Incentive
Plans. Mr. McKinney is a son of Robert H. McKinney and a
brother of Marni McKinney.
(5) See note (1) to the table under heading "Voting Securities and
Principal Holders Thereof" above.
(6) Includes 125 shares owned directly, 6,250 shares subject to
options granted under the 1991 Director Stock Option Plan and
12,500 shares subject to options granted under the
Corporation's Stock Incentive Plans.
<PAGE>
The Board of Directors met five times during the Corporation's last
fiscal year. All directors attended in excess of 75% of the aggregate
of (1) the total number of meetings of the Board of Directors and (2)
the total number of meetings held by all committees on which he or she
served.
Nominees for election as a director of the Corporation are selected
by the Board of Directors.
Certain Committees of the Board of Directors
Among other committees, the Board of Directors has an Audit
Committee, a Compensation and Policy Committee and a Stock
Administration Committee.
The functions of the Audit Committee are: (1) to review audits of
the accounting records of the Corporation and its financial statements
performed by independent auditors, (2) to confer with the independent
auditors and officers of the Corporation regarding accounting and
financial statements and internal controls, (3) to recommend to the
Board the engagement or discharge of the independent auditors and (4)
to perform such other functions as the Committee deems necessary or
desirable. The members of the Audit Committee are: H. J. Baker
(Chairman), William L. Elder and Douglas W. Huemme. (Mr. Elder replaced
Michael L. Smith on the Audit Committee upon Mr. Smith becoming an
officer of the Corporation in January of 1996.) The Committee did not
meet during the last fiscal year of the Corporation as the full Board
of Directors performed the Audit Committee's duties during that year.
The functions of the Compensation and Policy Committee are to
review and make recommendations to the Board of Directors with respect
to the compensation of the officers and key employees of the Corporation
and its subsidiaries and review other policy matters. The members of
the Compensation and Policy Committee are: William L. Elder (Chairman),
Douglas W. Huemme and Michael L. Smith. The Committee met three times
during the last fiscal year of the Corporation.
The functions of the Stock Administration Committee are to
administer and grant stock options, stock appreciation rights and
performance shares under the Corporation's 1986 and 1991 Stock Incentive
Plans and to exercise certain discretionary authority under the
Corporation's 401(k) Savings Plan. Members of the Stock Administration
Committee are: Douglas W. Huemme (Chairman), H. J. Baker and William L.
Elder. (Mr. Elder replaced Michael L. Smith on the Stock Administration
Committee upon Mr. Smith becoming an officer of the Corporation in
January of 1996.) The Committee met twice during the last fiscal year
of the Corporation.
Certain Transactions
In May 1995, the Corporation extended from June 1, 1995 to June 1,
1996 the maturity date of a promissory note payable to the Corporation
by NUVO, Inc. The promissory note resulted from the sale of assets by
the Corporation to Nuvo, Inc. in 1990. Robert H. McKinney, Marni
McKinney, and Kevin K. McKinney are shareholders and directors of NUVO,
Inc., and Kevin K. McKinney is the Chairman and President of NUVO, Inc.
The principal amount of the promissory note is approximately $90,000,
and the promissory note bears interest at the rate of nine percent
(9.0%) per annum. The promissory note is secured by a security interest
in substantially all of the assets of NUVO, Inc., and the note is
current as of the date hereof.
<PAGE>
COMPENSATION OF DIRECTORS
AND EXECUTIVE COMPENSATION
(a) Summary Compensation Table.
The following table sets forth the compensation awarded to, earned
by, or paid by the Corporation during the last three fiscal years to Mr.
McKinney as Chairman and Chief Executive Officer of the Corporation
during that period, and to the one executive officer whose cash
compensation in 1995 exceeded $100,000. The numbers of stock options
set forth below have been adjusted to reflect the Stock Split.
Long Term
Compensation
Annual Compensation Awards
Restricted Securities All
Name and Stock Underlying Other
Principal Salary Bonus Awards Options Compensation
Position Year ($) ($) ($) (#) ($)
Robert H. McKinney1995 $75,000 $13,259 -- 4,375 $3,132(2)
Chairman and Chief1994 5,000 $30,000 $122,500(1) 4,375 $1,135
Executive Officer 1993 $75,563 $ 6,024 -- 4,375 $1,553
of the Corporation
Joseph M. Richter 1995 $95,300 $16,256 -- 3,125 $ 810(2)
Executive Vice 1994 $95,300 000 -- 3,125 $1,464
President and 1993 $90,202 $ 6,600 -- 3,125 $1,654
Chief Financial Officer
of the Corporation
(1) Represents the market value on the date of grant of 12,500
shares of restricted stock granted to Mr. McKinney under the
1991 Stock Incentive Plan. The restricted stock had a market
value of $175,000 on December 31, 1995. The restricted stock
will vest on March 31, 1997 if the Corporation attains certain
performance targets and receives dividends in the same manner
and to the same extent as unrestricted shares of the
Corporation's Common Stock.
(2) Consists of premiums during 1995 for term life insurance
policies for Messrs. McKinney and Richter in the amounts of
$2,820 and $576, respectively, and the Corporation's
contributions to the Corporation's 401(k) Savings Plan during
1995 for the accounts of Messrs. McKinney and Richter in the
amounts of $312 and $234, respectively.
(b) Options Tables.
The following table sets forth the grants of stock options made
during fiscal year 1995 to Mr. McKinney and Mr. Richter. The numbers
of stock options and exercise prices set forth below have been adjusted
to reflect the Stock Split.
Number
of % of Total
Securities Options
Underlying Granted to Exercise
Options Employees or Base
Granted in Fiscal Price
Name (#) Year 1995 ($/Share) Expiration Date
Robert H. McKinney 4,375 31.8% $10.60 April 27, 2005
Joseph M. Richter 3,125 22.7% $10.60 April 27, 2000
The following table sets forth on an aggregate basis each exercise
of stock options during fiscal year 1995 by Mr. McKinney and Mr.
Richter, and the December 31, 1995 value of the unexercised options of
each such executive officer. The numbers of shares and stock options
set forth below have been adjusted to reflect the Stock Split.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND
FISCAL YEAR-END OPTION VALUES
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options at In-the-Money Options at
Acquired On Value December 31, 1995 December 31, 1995
Name Exercise Realized Exercise Unexercise Exercise Unexercise
Robert H. McKinney -- -- 37,750 -- $235,081 $ --
Joseph M. Richter 2,500 $15,000 9,375 6,250 $ 75,824 $21,875
(c) Compensation of Directors.
During the Corporation's last fiscal year, directors who are not
salaried officers received a quarterly fee of $1,250 per quarter, a fee
of $500 for each Board meeting attended, and a fee of $300 for each
Board committee meeting attended.
Under the Corporation's 1991 Director Stock Option Plan, the plan
provides for the issuance of non-qualified options to purchase 1,250
shares to each outside director of the Corporation on August 14, 1991
and thereafter on the date of each annual meeting of shareholders. No
option is exercisable during the period of one year following the date
of grant of such option, and options granted under the plan must specify
an exercise price of not less than 100% of the market price of the
shares at the date of grant.
SHAREHOLDER PROPOSALS
Proposals of Shareholders intended to be presented at the next
annual meeting must be received by the Corporation for inclusion in the
proxy statement and form of proxy relating to that meeting no later than
November 20, 1996. Any such proposals should be sent to the attention
of the Secretary of the Corporation. Shareholder proposals not included
in the Corporation's 1997 proxy solicitation materials must, in order
to be considered at the 1997 Annual Meeting, be submitted in writing to
the Secretary of the Corporation at least sixty days before the date of
the 1997 Annual Meeting, or, if the 1997 Annual Meeting is held prior
to March 24, 1997, within ten days after notice of the Annual Meeting
is mailed to shareholders. The Board of Directors of the Corporation
will review any shareholder proposals that are filed as required, and
will determine whether such proposals meet applicable criteria for
inclusion in its 1997 proxy solicitation materials or consideration at
the 1997 Annual Meeting.
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Corporation's officers and directors, and persons who own
more than 10% of the Corporation's Common Stock, to file reports of
ownership and changes in ownership with the Securities and Exchange
Commission. Officers, directors and greater than 10% shareholders are
required by Securities and Exchange Commission regulations to furnish
the Corporation with copies of all Section 16(a) forms they file.
Based solely on review of the copies of such forms furnished to the
Corporation, the Corporation believes that during 1995, all
Section 16(a) filing requirements applicable to its officers, directors
and greater than 10% beneficial owners were met, other than each of the
McKinney Family, L.P. and Marni McKinney did not timely file one such
report.
FINANCIAL STATEMENTS AND OTHER INFORMATION
The Corporation's financial statements for the fiscal year ended
December 31, 1995, were audited by KPMG Peat Marwick LLP ("Peat
Marwick"). The Corporation has selected Peat Marwick as its independent
auditor for the fiscal year ending December 31, 1996. Representatives
of Peat Marwick are expected to attend the Annual Meeting, with the
opportunity to make a statement if they desire to do so, and will be
available to respond to appropriate questions.
The Annual Report of the Corporation for the year ended December 31,
1995, including audited financial statements, has been mailed to the
shareholders. The Annual Report is not to be considered as proxy
solicitation material.
OTHER MATTERS
The Board of Directors knows of no other matters to be brought
before this Annual Meeting. However, if other matters should come
before the meeting, it is the intention of each person named in the
proxy to vote such proxy in accordance with his judgment on such
matters.
EXPENSES OF SOLICITATION
The entire expense of preparing, assembling, printing and mailing
the proxy form and material used in the solicitation of proxies will be
paid by the Corporation. The solicitation will not be made by specially
engaged employees or paid solicitors. In addition to the use of the
mails, solicitation may be made by employees of the Corporation by
telephone, telegraph, cable or personal interview.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. Therefore,
shareholders who do not expect to attend in person are urged to execute
and return the proxy.
For the Board of Directors,
Sharon J. Sanford
Secretary
March 20, 1996
[FRONT]
THE SOMERSET GROUP, INC. This proxy is solicited on behalf of the
Board of Directors of the Corporation
2800 First Indiana Plaza
135 North Pennsylvania Street
Indianapolis, Indiana 46204 The undersigned hereby appoints
Robert H. McKinney and Sharon J.
Sanford, and each of them,
attorneys-in-fact and proxies,
with full power of substitution,
to vote as designated below all
shares of The Somerset Group, Inc.
(the "Corporation") which the
undersigned would be entitled to
vote if personally present at the
Annual Meeting of Shareholders to
be held on April 24, 1996, at 9:00
a.m., EST, and at any adjournment
thereof.
1. ELECTION OF DIRECTORS
FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees
Nominees for a term of three years:
H. J. Baker, William L. Elder, and Marni McKinney
Nominee for a term of one year:
William F. McConnell, Jr.
(Instruction: To withhold authority to vote for any individual nominee,
write that nominee's name on the space provided below.)
_________________________________________________________________________
2. In their discretion, the Proxies are authorized to vote such other
business as may properly come before the meeting.
(Continued and to be signed on other side.)<PAGE>
[BACK]
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this proxy
will be voted FOR Proposal 1.
The undersigned acknowledges receipt from The Somerset Group, Inc., prior
to the execution of this proxy, of notice of the meeting, a proxy
statement, and an Annual Report to Shareholders.
Please sign exactly as name appears below. When shares are held as joint
tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by the president or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
Signature
(Signature if held jointly)
Dated: , 1996
REVOCABLE PROXY
87505<PAGE>
MESSAGE TO SHAREHOLDERS
Nineteen ninety-five was an important year in the history of The
Somerset Group, Inc. We reported significantly improved earnings,
successfully completed the sale of the remainder of our
construction related businesses, and made progress on our long-term
strategic plan to shift resources from construction and
manufacturing activities to financial services.
As an indication of our confidence in Somerset s future, the Board
of Directors declared a five-for-four stock split effective March
11, 1996, to shareholders of record on February 29, 1996. The
semi-annual cash dividend of $.10 per share will be paid on shares
outstanding after the split, resulting in a 25% increase in our
annual cash dividend payments.
For the year ended December 31, 1995, Somerset recorded net income
of $3.4 million, or $1.61 per share, compared with $2.6 million, or
$1.26 per share in 1994, an increase of 28%. Two major factors
contributed to the improved results: an increase in equity income
from First Indiana Corporation and gains from the sales of assets
of the construction products and services operations.
Equity income resulting from our 21.9% ownership of First Indiana
Corporation increased 51% to $3.9 million from $2.6 million in
1994. A favorable economy in all of First Indiana s markets
contributed to its record earnings. First Indiana s performance
can also be attributed to a renewed commitment as a specialized
provider of financial services. Its goal is to be the premier real
estate finance lender in its markets by focusing on three industry
segments: home buyers, home builders, and home equity borrowers.
Generally Accepted Accounting Principles (GAAP) require Somerset to
record income tax expense at full corporate rates on a portion of
its equity income from First Indiana. GAAP also require us to
record our investment in First Indiana at a net carrying value
which represents our acquisition cost of First Indiana shares, plus
our equity share of First Indiana s net income. We feel it is
important that shareholders be aware that under certain
circumstances the tax liability recorded in this manner,
approximately $6.0 million, may not be paid and that the market
value of our investment in First Indiana is approximately $39
million, or $11 million greater than the amounts reflected in our
balance sheet at December 31, 1995.
In last year s annual message, we reported the pending sale of two
of the Company s divisions that provided construction products and
services. During the year we completed these transactions. We
also sold the Company s remaining construction operations to a
group of our management and employees. These sales resulted in a
pre-tax gain of $1.3 million.
The sales of these divisions resulted in the conversion of their
fixed assets and related working capital into cash to support our
strategic plan. We have not yet redeployed these assets, so the
Company s financial position at December 31, 1995 was very strong,
with approximately $10 million of current assets available for use
in our new Financial Services Division.
A desire to enhance shareholder value has been the driving force
behind our plan for redirection of the Company s activities. In
December Michael L. Smith, a Director of Somerset and formerly the
Chairman and Chief Executive Officer of Mayflower Group, Inc., was
appointed President of our newly created Financial Services
Division. This was intended as an interim appointment, and I am
pleased to report that Mike has been working diligently to position
this Company strategically in the financial services arena. Mr.
Smith will be accepting a position with another company in the near
future, and Marni McKinney, our President and CEO, will be
assuming his duties.
Management recognizes that the diversity of businesses within the
Company historically has contributed to factors limiting the value
of an investment in Somerset. The divestiture of businesses
unrelated to our investment in First Indiana was a positive step
that has allowed management to focus on the financial services
industry. While we have not yet determined the exact forms of
services Somerset will be offering, we have been seeking
acquisitions in several areas, including fund management, annuity
and insurance product sales, leasing, and technology-based banking
services.
We are pleased to welcome Mr. William F. McConnell, Jr. to our
Board of Directors. Mr. McConnell was elected by the Board to fill
a vacancy, and he will stand for election at the annual
shareholder s meeting on April 24, 1996. Bill is Senior Vice
President and Chief Operating Officer of Resort Condominiums
International, Inc., and he has previously served as Consulting
Managing Partner of Andersen Consulting in Indianapolis, Indiana.
We look forward to reporting on our progress in the development of
our new Financial Services Division, and we appreciate your
continued support.
Sincerely,
Robert H. McKinney Marni McKinney
Chairman President&ChiefExecutive Officer
FINANCIAL HIGHLIGHTS
At and for the Years Ended December 31,
<TABLE>
<S> <C> <C> <C>
1995 1994 1993
Net sales $11,178,000 $23,467,000 $14,555,000
Income from operations, before income taxes
and minority interest $5,548,000 $4,132,000 $3,631,000
Net income $3,358,000 $2,617,000 $2,219,000
Net income per share $1.61 $1.26 $1.10
Assets:
Investment in First Indiana Corp.$27,549,000 $24,265,000 $21,873,000
All other 11,177,000 15,539,000 13,122,000
Total assets $38,726,000 $39,804,000 $34,995,000
Shareholders equity $29,498,000 $26,429,000 $23,904,000
Return on average assets 8.6% 7.0% 6.8%
Return on average shareholders equity 12.0% 10.4% 9.7%
Book value per share $14.45 $12.90 $11.92
</TABLE>
All per share amounts have been adjusted for a five-for-four stock
split that was effective February 29, 1996.
FORM 10-K--ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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, 1995.
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission File Number: 0-14227
THE SOMERSET GROUP, INC.
(Exact name of registrant as specified in its charter)
INDIANA 35-1647888
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
135 N. Pennsylvania Street, #2800, Indianapolis, IN 46204
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 317/269-1285
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
Name of each exchange on which registered
Common stock without par value Over-the-Counter: NASDAQ National
Market System
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 (or
for such shorter period that the Registrant was required to file
such reports), 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 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 stock held by non-
affiliates of the Registrant was $31,333,290 as of March 4, 1996.
As of March 4, 1996, there were 2,047,927 outstanding shares of the
Capital Stock of the Registrant.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the year ended December 31,
1995 are incorporated by reference into Part III.
Portions of the Form 10-K of First Indiana Corporation for the year
ended December 31, 1995 are incorporated by reference into Part I.
-1-<PAGE>
THE SOMERSET GROUP, INC.
INDEX
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . 3
Item 2. Properties . . . . . . . . . . . . . . . . . . . 3
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . 3
Item 4. Submission of Matters to a Vote of
Security Holders . . . . . . . . . . . . . . . . 4
PART II
Item 5. Market for the Registrant's Common Equity
and Related Security Holder Matters . . . . . . . . . 4
Item 6. Selected Financial Data . . . . . . . . . . . . . 4
Item 7. Management's Discussion and Analysis of Results of
Operations and Financial Condition and liquidity . . 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 the Registrant 4
Item 11. Executive Compensation . . . . . .. . . . . . . 5
Item 12. Security Ownership of Certain Beneficial
Owners and Management . . . . . . . . . . . . . . 6
Item 13. Certain Relationships and Related Transactions . 6
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K . . . . . . . . . . . . . . 6
Signatures . . . . . . . . . . . .. . . . . . . . . 7
-2-<PAGE>
PART I
ITEM 1 - BUSINESS
General Description of Business
The Somerset Group, Inc. ("the Registrant" or "the Company"), is an
Indiana Corporation, with its principal executive offices located
at 135 North Pennsylvania Street, Suite 2800, Indianapolis, Indiana
46204.
During 1995 the Registrant conducted business in two industry
segments: construction products and services and banking. The
construction products and services businesses were sold during
1995. The proceeds from the sale of these businesses are planned
to be redeployed in businesses in the financial services industry;
however, such new businesses had not yet commenced prior to the
date of this report. The banking segment is conducted through
ownership by the Registrant of 1,811,979 shares (as of March 4,
1996) of the common stock of First Indiana Corporation ( First
Indiana ), a holding company which owns 100% of First Indiana Bank.
The 1,811,979 shares represented 21.9% of the issued and
outstanding First Indiana common shares.
Financial Information About Business Segments
Described below are the operations of the Company's segments.
Financial information about the segments is incorporated by
reference to Note 8 of the Company's consolidated financial
statements on page C-12 of this report.
Narrative Description of Business
I. Construction Products and Services Segment (All operations sold
during 1995)
The Registrant manufactured and installed precast/prestressed
concrete products primarily in the seven-state area of Illinois,
Indiana, Kentucky, Michigan, Ohio, Pennsylvania, and West Virginia.
Products were distributed from the Indianapolis, Indiana;
Westfield, Indiana; and Columbus, Ohio manufacturing sites via
commercial carrier, broker drivers or company-operated trucks to
the job site. The customers for these products were real estate
developers, general contractors and businesses which own and occupy
their own structures.
II. Banking Segment
Information on the Registrant's bank affiliate, First Indiana
Corporation, is incorporated into this Report by reference to Item
1 of the 1995 Report on Form 10-K for First Indiana Corporation for
the year ended December 31, 1995, filed separately under commission
file number 0-14354
ITEM 2 - PROPERTIES
The Registrant s property consists of office equipment and
furniture in leased office space. The leased office space consists
of 1,244 square feet located at Suite 2800, First Indiana Plaza,
Indianapolis, Indiana, and 800 square feet located at 1030 S.
Kitley Avenue, Indianapolis, Indiana.
ITEM 3 - LEGAL PROCEEDINGS
Information relative to this item is incorporated into this Report
by reference to Note 13 of the Notes to Consolidated Financial
Statements, on page C-15 of this report.
-3-<PAGE>
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
final quarter of the fiscal period covered by this report.
PART II
ITEM 5 - MARKET - REGISTRANT'S COMMON EQUITY & RELATED SECURITY
HOLDER MATTERS
This information is set forth under the caption "Market for the
Registrant's Common Stock" on page A-1 of this Report.
ITEM 6 - SELECTED FINANCIAL DATA
This information is set forth under the caption "Selected Financial
Data" on page A-1 of this Report.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND
FINANCIAL CONDITION AND LIQUIDITY
This information is set forth under the caption "Management's
Discussion and Analysis of Results of Operations and Financial
Condition and Liquidity" on pages B-1 through B-5 of this Report.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
This information is contained in the Consolidated Financial
Statements, Notes to Consolidated Financial Statements and
Independent Auditors' Report on pages C-1 through C-15 of this
Report. Information on the Registrant's bank affiliate, First
Indiana Corporation, is incorporated by reference to Item 8 of the
1995 Report on Form 10-K for First Indiana Corporation, filed
separately under commission file number 0-14354.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
The Registrant had no changes in and no disagreements with its
accountants regarding accounting and financial disclosure.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors
Information regarding Directors of the Registrant is incorporated
into this Report by reference to the definitive proxy statement of
the Registrant for the Annual Meeting of Shareholders to be held
April 24, 1996, under the caption "Proposal No. 1: Election of
Directors", file separately under commission file number 0-14227.
-4-
Executive Officers
Name Office Held Relationship Age
Robert H. McKinney Chairman Father of President 70
and Director and Vice President
Marni McKinney President, CEO Daughter of 39
and Director Chairman
Kevin K. McKinney Vice President Son of 38
and Director Chairman
Joseph M. Richter Executive V. P., CFO, None 53
and Treasurer
Michael L. Smith President of Somerset None 47
Financial Services, a division,
and Director
Term of office for all officers of the Registrant continue until
the first meeting of the Board of Directors following the Annual
Meeting of Shareholders on April 24, 1996.
A brief account of the business experience of each Executive
Officer during the past five years is as follows:
Robert H. McKinney - Chairman of the Registrant; Chief Executive
Officer until January 1996; Chairman and Chief Executive Officer of
First Indiana Corporation, a savings bank holding company; Chairman
of First Indiana Bank; Chief Executive Officer until May 1992;
retired Partner of Bose McKinney & Evans, attorneys; a Director of
First Indiana Corporation and Lilly Industries, Inc.; Chairman,
Federal Home Loan Bank Board (1977-1979).
Marni McKinney - President, Chief Executive Officer, and a Director
of the Registrant; Vice Chairman and a Director of First Indiana
Corporation and First Indiana Bank; formerly Executive Vice
President (1987 - 1992), Chief Operating Officer of the Registrant
(1992-1995); formerly Vice President and Director of Strategic
Planning of First Indiana Bank.
Kevin K. McKinney - Vice President and a Director of the
Registrant; Publisher of NUVO Newsweekly and Chairman and President
of NUVO, Inc.; formerly President Mid America Media; formerly
Chairman, Indianapolis Extra, Ltd.
Joseph M. Richter - Executive Vice President, Chief Financial
Officer and Treasurer of the Registrant.
Michael L. Smith - President of Somerset Financial Services, a
division, and a Director. Previously President and Chief Executive
Officer, Mayflower Group, Inc.; a Director of First Indiana
Corporation and Acordia, Inc.
ITEM 11 - EXECUTIVE COMPENSATION
Information relative to this item is incorporated into this Report
by reference to the definitive proxy statement of the Registrant
for the Annual Meeting of Shareholders to be held April 24, 1996,
under the caption "Compensation of Directors and Executive
Compensation".
-5-<PAGE>
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information relative to this item is incorporated into this Report
by reference to the definitive proxy statement of the Registrant
for the Annual Meeting of Shareholders to be held April 24, 1996,
under the caption "Voting Securities and Principal Holders
Thereof".
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information relative to this item is incorporated into this Report
by reference to the definitive proxy statement of the Registrant
for the Annual Meeting of Shareholders to be held April 24, 1996,
under the caption "Certain Transactions".
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON
FORM 8-K
(a) 1. The financial statements listed in the
accompanying Index to Selected Financial Data,
Management's Discussion and Analysis of
Results of Operations and Financial Condition
and Liquidity, Financial Statements and
Financial Statement Schedules are filed as
part of this report.
2. The financial statement schedules listed in
the accompanying Index to Selected Financial
Data, Management's Discussion and Analysis of
Results of Operations and Financial Condition
and Liquidity, Financial Statements and
Financial Statement Schedules are filed as
part of this report.
3. Exhibits - The following exhibits are attached
to this Form 10-K.
Exhibit
Number Exhibit
3 Amended Articles of Incorporation and Amended
and Restated By-Laws thereto.
22 Subsidiaries of the Registrant.
23 Definitive Proxy Statement for Annual Meeting
of Shareholders to be held April 24,1996.
24 Consent of Independent Certified Public
Accountants, of report dated March 20, 1996, for
incorporation into Form S-8 registration statement.
99 First Indiana Corporation's Form 10-K for the
year ended December 31, 1995.
All other exhibits are not attached since they are not
applicable to the Registrant:
(b) Reports on Form 8-K. No information need be disclosed.
(c) Financial Statement Schedules.
-6-<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto
duly authorized.
THE SOMERSET GROUP, INC.
By s/ Robert H. McKinney 3/15/96
Robert H. McKinney, Chairman
By s/ Marni McKinney 3/15/96
Marni McKinney, President and
Principal Executive Officer
By s/ Joseph M. Richter 3/15/96
Joseph M. Richter, Executive Vice
President and Principal Financial Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons on
behalf of the Registrant in the capacities indicated and on the
date indicated.
Signatures Title Date
s/ Robert H. McKinney Director, Chairman 3/15/96
Robert H. McKinney
s/ Marni McKinney Director, President 3/15/96
Marni McKinney and Principal Executive Officer
s/ Kevin K. McKinney DirectorandVicePresident 3/15/96
Kevin K. McKinney
s/ H. J. Baker Director 3/15/96
H. J. Baker
s/ William L. Elder Director 3/15/96
William L. Elder
s/ Douglas W. Huemme Director 3/15/96
Douglas W. Huemme
s/ William F. McConnell, Jr. Director 3/15/96
William F. McConnell, Jr.
s/ Michael L. Smith Director 3/15/96
Michael L. Smith
-7-<PAGE>
THE SOMERSET GROUP, INC.
Form 10-K for the Year Ended December 31, 1995
Items 5, 6, 7, 8, 14(a) (1) and (2), and 14(c)
Index to Selected Financial Data,
Management's Discussion and Analysis of Results of
Operations and Financial Condition and Liquidity,
Financial Statements and Financial Statement Schedules
Selected Financial Data, Management's Discussion and Analysis
of Results of Operations and Financial Condition and Liquidity,
Financial Statements and Schedules of the Registrant and its
subsidiaries, required to be included in Items 5, 6, 7, 8, 14(a)
(1) and (2), and 14(c) are listed below:
Page
MARKET FOR THE REGISTRANT'S COMMON STOCK A-1
SELECTED FINANCIAL DATA A-1
MANAGEMENT'S DISCUSSION AND ANALYSIS B-1
FINANCIAL STATEMENTS:
- - Independent Auditors' Report C-1
- - Consolidated Statements of Income for the years ended December
31, 1995, 1994,and 1993 C-3
- - Consolidated Balance Sheets as of December 31, 1995 and 1994 C-4
- - Consolidated Statements of Shareholders' Equity for the years
ended December 31,1995, 1994, and 1993 C-6
- - Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1994,and 1993 C-7
- - Notes to Consolidated Financial Statements C-8
- - Summarized Consolidated Statements of Subsidiary, Not
Consolidated with Registrant C-16
FINANCIAL STATEMENT SCHEDULES:
Financial statement schedules have been omitted because the
required information is contained in the notes to the financial
statements or because such schedules are not required or are not
applicable.
The individual financial statements of the Registrant have been
omitted since the Registrant is primarily an operating company and
all subsidiaries included in the consolidated statements being
filed, in the aggregate, do not have minority equity interest
and/or indebtedness to any person other than the Registrant or its
consolidated subsidiaries in amounts which together exceed 25% of
consolidated net assets as shown by the most recent consolidated
balance sheet. All other schedules are omitted because they are
not applicable or the required information is shown in the
financial statements or the notes thereto.
-8-<PAGE>
KPMG Peat Marwick LLP
2400 First Indiana Plaza
135 North Pennsylvania Street
Indianapolis, IN 46204-24552
The Board of Directors and Shareholders
The Somerset Group, Inc:
We have audited the accompanying consolidated balance sheets of
The Somerset Group, Inc. and subsidiaries as of December 31, 1995
and 1994, and the related consolidated statements of income,
shareholders equity, and cash flows for each of the years in the
three-year period ended December 31, 1995. These consolidated
financial statements are the responsibility of The Somerset
Group, Inc. s management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of The Somerset Group, Inc. and subsidiaries at December
31, 1995 and 1994, and the results of their operations and their
cash flows for each of the years in the three-year period ended
December 31, 1995 in conformity with generally accepted
accounting principles.
January 31, 1996, except note 12 which
is as of February 14, 1996
C-1
THE SOMERSET GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
Year Ended December 31,
<S> <C> <C> <C>
1995 1994 1993
Income:
Net sales $11,178,000 $23,467,000 $14,555,000
Cost of sales 9,529,000 19,164,000 12,011,000
Gross profit 1,649,000 4,303,000 2,544,000
Equity in earnings of First Indiana Corp. 3,938,000 2,616,000 3,614,000
Dividend and interest income 447,000 70,000 95,000
Realized investment income 107,000 --- ---
Gain on sale of assets 1,293,000 76,000 ---
Total income 7,434,000 7,065,000 6,253,000
Expenses:
Selling expenses 210,000 568,000 488,000
General and administrative expenses 1,390,000 1,927,000 1,623,000
Interest expense 286,000 438,000 511,000
Total expenses 1,886,000 2,933,000 2,622,000
Income before income taxes and minority inter 5,548,000 4,132,000 3,631,000
Income tax expense 2,190,000 1,608,000 1,437,000
3,358,000 2,524,000 2,194,000
Minority interest in loss of subsidiary --- 93,000 25,000
Net income $3,358,000 $2,617,000 $2,219,000
Income per share $1.61 $1.26 $1.10
Average shares outstanding 2,084,581 2,077,819 2,025,238
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
C-3
THE SOMERSET GROUP, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
ASSETS As of December 31
<S> <C> <C>
1995 1994
Current assets
Cash and cash equivalents $1,699,000 $2,006,000
Short-term investments, at market value 7,194,000 ---
Trade accounts, notes and other receivables
less allowance for doubtful accounts 1,005,000 6,070,000
Contracts in progress, unbilled --- 1,769,000
Inventories --- 390,000
Prepaid expenses 3,000 109,000
Total current assets 9,901,000 10,344,000
Investments
First Indiana Corporation (market values
of $38,882,000 and $23,782,000) 27,549,000 24,265,000
Property, plant and equipment, at cost
Land --- 393,000
Buildings --- 2,738,000
Production and delivery equipment --- 6,593,000
Office furniture and equipment 241,000 556,000
Construction in progress --- ---
241,000 10,280,000
Less accumulated depreciation 196,000 6,126,000
45,000 4,154,000
Other assets
Notes receivable 771,000 511,000
Other 460,000 530,000
1,231,000 1,041,000
Total Assets $38,726,000 $39,804,000
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
C-4
LIABILITIES AND SHAREHOLDERS' EQUITY December 31,
<TABLE>
<S> <C> <C>
1995 1994
Current liabilities
Trade accounts payable $221,000 $808,000
Accrued compensation 36,000 837,000
Taxes, other than income taxes 15,000 194,000
Billings in exccess of costs and
recognized profit 451,000
Deferred income taxes 22,000
Income taxes 191,000 437,000
Other accrued expenses 334,000 743,000
Total current liabilities 797,000 3,492,000
Long-term debt
Notes payable 2,500,000 5,500,000
Deferred income taxes 5,931,000 4,383,000
Shareholders' equity
Common stock, no par, at stated value,
4,000,000 shares, issued 2,286,760 1,829,000 1,829,000
Capital in excess of stated value 4,986,000 4,979,000
Unrealized gains on short-term
investments, net of deferred
income taxes 72,000
Retained earnings 24,230,000 20,999,000
31,117,000 27,807,000
Less 245,414 and 238,327 treasury
shares at cost 1,619,000 1,378,000
Total shareholders' equity 29,498,000 26,429,000
Total Liability and Shareholders'
Equity $38,726,000 $39,804,000
</TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<S> <C> <C> <C>
Year Ended December 31,
Cash flows from operating activities: 1995 1994 1993
Net income $3,358,000 $2,617,000 $2,219,000
Add (deduct) items not affecting cash
Depreciation and amortization 252,000 685,000 541,000
Deferred income taxes 1,404,000 1,265,000 1,363,000
Gain on sale of assets (1,293,000) (76,000) ---
Equity in earnings of First Indiana Corp. (3,938,000) (2,616,000) (3,614,000)
Dividends received from First Indiana Corp. 846,000 782,000 531,000
Other, net (28,000) (70,000) (39,000)
Changes in operating assets and liabilities:
Trade accounts, notes, & other receivables 5,065,000 (3,955,000) 544,000
Contracts in progress, unbilled & inventory 2,159,000 (953,000) 303,000
Prepaid expenses 106,000 (18,000) (50,000)
Accounts payable and accrued expenses (2,427,000) 2,184,000 497,000
Accrued and refundable income taxes (246,000) --- 125,000
Net cash provided (used) by operating activities 5,258,000 (155,000) 2,420,000
Cash flows from investing activities:
Proceeds from sale of assets 5,222,000 1,437,000 7,000
Increase in investment in First Indiana Corp. --- (595,000) ---
Purchase of property, plant and equipment (44,000) (1,250,000) (1,222,000)
Decrease (increase) in other assets 70,000 (339,000) ---
Increase in long-term notes receivable (260,000) (13,000) (45,000)
Increase in short-term investments, at cost (7,076,000) --- ---
Net cash used by investing activities (2,088,000) (760,000) (1,260,000)
Cash flows from financing activities:
Proceeds from long-term borrowings --- --- 2,500,000
Principal payments on long-term borrowings (3,000,000) --- (2,614,000)
Proceeds from minority investment in subsidiary 525,000 539,000
Proceeds from reissue of treasury shares 267,000 227,000 ---
Purchase of treasury shares (417,000) (126,000) ---
Cash dividends paid (327,000) (164,000) ---
Net cash provided (used) by financing activities (3,477,000) 462,000 425,000
Increase (decrease) in cash and cash equivalents (307,000) (453,000) 1,585,000
Cash and cash equivalents at beginning of period 2,006,000 2,459,000 874,000
Cash and cash equivalents at end of period $1,699,000 $2,006,000 $2,459,000
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
C-7
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
January 1, 1993 to December 31, 1995
<TABLE>
Capital in Unrealized
Common Excess of Gains on Retained Treasury
Stock Stated ValueInvestmen Earnings Shares Total
<S> <C> <C> <C> <C> <C>
Balance January 1, 1993 $1,829,000 $4,887,000 $ $16,494,000 ($1,570,000)$21,640,000
Net income --- --- --- 2,219,000 --- 2,219,000
Shares of common stock issued in
connection with 401(k) plan --- --- --- 3,000 7,000 10,000
Equity in other capital changes of
First Indiana Corporation, net of
deferred income taxes --- --- --- 35,000 --- 35,000
_________ _________ _________ _________ _________ _________
Balance December 31, 1993 1,829,000 4,887,000 --- 18,751,000 (1,563,000) 23,904,000
Net income --- --- --- 2,617,000 --- 2,617,000
Shares of common stock issued in
connection with restricted grants,
401(k) plan & exercise of options --- 92,000 --- (176,000) 311,000 227,000
Purchase of Treasury shares --- --- --- --- (126,000) (126,000)
Cash dividends paid --- --- --- (164,000) --- (164,000)
Equity in other capital changes of
First Indiana Corporation, net of
deferred income taxes --- --- --- (29,000) --- (29,000)
_________ _________ _________ _________ _________ _________
Balance, December 31, 1994 1,829,000 4,979,000 --- 20,999,000 (1,378,000) 26,429,000
Net Income --- --- --- 3,358,000 --- 3,358,000
Shares of common stock issued in
connection with restricted grants,
401(k) plan & exercise of options --- 7,000 84,000 176,000 267,000
Purchase of Treasury shares --- --- --- --- (417,000) (417,000)
Cash dividends paid --- --- --- (327,000) --- (327,000)
Unrealized gains on short-term
investments, net of deferrred
income taxes --- --- 72,000 --- --- 72,000
Equity in other capital changes of
First Indiana Corporation, net of
deferred income taxes --- --- --- 116,000 --- 116,000
_________ _________ _________ _________ _________ _________
Balance, December 31, 1995 $1,829,000 $4,986,000 $72,000 $24,230,000 ($1,619,000)$29,498,000
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
C-6
THE SOMERSET GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Nature of Operations and Summary of Significant
Accounting Policies
The Somerset Group, Inc. (The Company ) is a registered savings
bank holding company. It s major asset is a 21.9% ownership
interest in First Indiana Corporation, which owns 100% of First
Indiana Bank, a federally chartered stock savings bank. The
Company also operated in the construction industry during the three
years shown in the accompanying financial statements. During 1995
and 1994 the Company sold substantially all assets of its
construction industry operations for a combination of cash and
notes receivable. The Company recently formed a new financial
services division and is seeking acquisitions in select financial
service industries, including fund management, leasing, and
technology based banking services.
(a) Principles of Consolidation: The consolidated financial
statements include the accounts of The Somerset Group, Inc.
( the Company ) and its 100% owned subsidiaries for all
periods and a 51% owned subsidiary through its sale on October
31, 1994.
(b) Cash and Cash Equivalents: For purposes of reporting cash
flows, cash and cash equivalents include: cash on hand, cash
in banks, and money market funds immediately available.
(c) Short-Term Investments: The investments are valued at market
price on the statement date. They are available-for-sale and
proceeds are available on three days notice. Unrealized
holding gains and losses are excluded from earnings and are
reported net of deferred income taxes as a separate component
of shareholders equity until realized.
(d) Investment in First Indiana Corporation: First Indiana
Corporation is a bank holding company whose primary subsidiary
is a savings bank which operates in Indiana, North Carolina,
and Florida through its mortgage banking division. The
Company s investment in First Indiana Corporation is stated at
cost, adjusted for the Company s share of undistributed
earnings, and includes adjustments under the purchase method
of accounting. Capital changes of First Indiana Corporation
are reflected as a separate component of consolidated retained
earnings.
(e) Construction Contracts: The Company used the percentage-of-
completion method for reporting profits from construction
contracts for financial statement purposes during the periods
it conducted such business. The units-of-production method
was utilized in the computation. Contracts in progress,
unbilled, consists of costs incurred under contracts plus
gross profit for the units completed that, in accordance with
progress billing terms of the individual contracts, are not
yet billable to the customer.
At December 31, 1995, there were no such contracts in progress.
At December 31, 1994, the total value of work completed for such
contracts in progress was $8,820,000, of which $7,502,000 had
been billed.
(f) Inventories: Inventories are stated at the lower of cost or
replacement market. Cost is determined principally by the
first-in, first-out method. Inventory consists of raw
materials and supplies.
(g) Property, Plant and Equipment: Property, plant and equipment
are stated at historical cost for financial reporting
purposes, depreciation is determined using the straight-line
method based upon the estimated useful lives of the individual
assets. Both straight-line and accelerated methods are used
for income tax purposes.
(h) Employee Benefit Plans: The Company maintained a non-
contributory, trusteed, defined benefit Pension Plan and an
Employee Savings and Investment Plan which was qualified for
tax deferred employee contributions under section 401(k) of
the Internal Revenue Code. The Employee Savings and
Investment Plan was terminated on June 30, 1995, and the
Pension Plan was terminated on November 30, 1995.
-22-
Benefits of the Pension Plan were based on years of service and
the employee s compensation. The Company has provided for
contributions to the plan equal to the estimated value of all
participants benefits. The Employee Savings and Investment Plan
was a trusteed, defined contribution plan with the Company
matching a portion of the employee s contribution in the form of
shares of the Company s common stock. All Company matching
contributions have been made.
(i) Income Taxes: The Company uses the asset and liability method
to account for income taxes. The principal temporary
difference between the financial statement carrying amounts
and the tax bases of existing assets and liabilities that
results in deferred taxes is the investment in First Indiana
Corporation, accounted for under the equity method of
accounting.
(j) Income Per Share: Income per share is based on the average
number of common shares and common share equivalents (stock
options) outstanding during the year. The effect of
outstanding stock options on income per share on a fully
diluted basis is not material. All share and per share
amounts have been adjusted for a five-for-four stock split
that was effective February 29, 1996.
(k) Treasury Shares: Treasury shares issued to fund employee
benefit plans are valued at average cost of all treasury
shares at the date of issuance.
Note 2. Sale of Assets
The Company sold all assets of its construction products and
services operations during 1995 and 1994, and ceased doing business
in the construction industry. The results of these operations are
included in the consolidated financial statements through the dates
of sale. The total sale price of the assets was $5,522,000 and
$1,437,000 for 1995 and 1994, respectively. After consideration of
expenses relating to the sales, the Company recorded gains on sale
before income taxes of $1,293,000 and $76,000, respectively. These
assets represented all of the Company s operating activities, and
therefore the Company had no direct sales nor operating activities
following the sale.
<PAGE>
Note 3. Short-Term Investments
Short-term investments are valued at market price and are
available-for-sale. The Company is actively seeking new businesses
in the financial services industry and expects to utilize these
funds for that purpose.
The investments at December 31, 1995, consisted of bond mutual
funds as follows:
Unrealized Market
Cost Gains Value
MFS Limited Maturity Fund $3,022,000 $ 13,000 $3,035,000
Armada Fixed Income Fund 4,053,000 106,000 4,159,000
$7,075,000 $119,000 $7,194,000
-23-
Note 4. Trade Accounts, Notes and Other Receivables
Trade accounts, notes and other receivables are net of allowances
for doubtful accounts of $105,000 and $8,000 at December 31, 1995
and 1994. Activity concerning the allowances for doubtful accounts
for the three years ended December 31, 1995 was as follows:
1995 1994 1993
Balance at beginning of period $8,000 $25,000 $51,000
Additions charged to costs and expenses 105,000 --- ---
Uncollectible accounts written off,
net of recoveries (8,000) (17,000) (6,000)
Amount credited to costs and expenses --- --- (20,000)
Balance at end of period $105,000 $8,000 $25,000
Note 5. Investment in First Indiana Corporation
The Company s percentage ownership in First Indiana Corporation was
as follows:
(Shares have been adjusted for First Indiana Corporation s six-for-
five stock split effective February 21, 1996.)
First Indiana
Shares Shares Percentage
As of: Owned Outstanding Ownership
December 31, 1995 1,811,979 8,272,323 21.9%
December 31, 1994 1,811,979 8,649,902 20.9%
December 31, 1993 1,769,980 8,580,490 20.6%
The Company s equity in earnings of First Indiana was as follows:
Year Ended December 31,
1995 1994 1993
Equity in earnings of First Indiana based
on percentage of ownership $3,624,000 $2,169,000 $3,115,000
<PAGE>
Purchase price adjustments:
The Company s equity ownership
of First Indiana s net assets exceed
the actual cost of its shares. Under
the purchase accounting method,
these purchase price adjustments
are being amortized to income using
both the declining balance and straight
line methods and amortization periods
of 3 to 10 years 314,000 447,000 499,000
Total equity in earnings $3,938,000 $2,616,000 $3,614,000
At December 31, 1995, the unamortized balance of the purchase price
adjustments was $767,000.
The changes to retained earnings for equity in other capital
changes of First Indiana Corporation primarily represents dilution
of the Company s percentage share of First Indiana s net worth that
resulted from shares of common stock issued, treasury shares
acquired, and unrealized investment gains and losses of First
Indiana. Equity in undistributed earnings and capital changes of
First Indiana of $14,603,000 and $11,632,000 are included in
consolidated retained earnings at December 31, 1995 and 1994,
respectively.
-24-
First Indiana Corporation is not subject to any regulatory
restrictions on the payment of dividends to its stockholders.
However, the Office of Thrift Supervision has promulgated
regulations governing dividend payments, stock redemptions, and
other capital distributions, including up streaming of dividends by
a savings institution to a holding company. Under these
regulations, the Bank may make distributions to First Indiana
Corporation of up to 100 percent of the Bank s net earnings over
the most recent four-quarter period, less distributions made during
such four-quarter period. The Bank is required to give the Office
of Thrift Supervision 30 days advance notice before declaring a
dividend.
Note 6. Other Assets
Notes receivable consisted of the following: December 31,
1995 1994
Long-term note receivable in connection
with the sale of discontinued radio
broadcasting properties $471,000 $487,000
Long-term note receivable in connection with the
sale of investment in Mid-America Media, Inc. --- 24,000
Long-term note receivable in connection
with the sale of construction assets 300,000 ---
$771,000 $511,000
Other consisted of the following:
Investment in split-dollar life insurance contract
for a key officer of the Company, secured by
cash value and contractual guarantee of yield $460,000 $460,000
Other --- 70,000
$460,000 $530,000
Note 7. Long-Term Debt
Long-term debt consisted of the following: December 31,
1995 1994
Note payable to bank at 8.23%.
Retired on May 19,1995. $ --- $3,000,000
Note payable to bank at 6.85%, with final
due date of January 2, 1997, at option of
Company. 2,500,000 2,500,000
$2,500,000 $5,500,000
The Company paid interest of $286,000, $436,000, and $637,000
during the years ended December 31, 1995, 1994, and 1993,
respectively.
-25-<PAGE>
Note 8. Business Segment Year Ended December 31,
1995 1994 1993
Net sales of construction products and services*
$11,178,000 $23,467,000 $14,555,000
Operating profit of construction products & services
1,019,000 2,715,000 1,144,000
Add (deduct):
Equity in earnings of First Indiana Corp.
3,938,000 2,616,000 3,614,000
Gain on sale of assets 1,293,000 76,000 ---
Realized investment gains 107,000 --- ---
Dividend and interest income 447,000 70,000 95,000
Interest expense (286,000) (438,000) (511,000)
General corporate expense (970,000) (907,000) (711,000)
Income from operations before taxes $5,548,000 $4,132,000 $3,631,000
Identifiable assets
Construction products and services $ --- $11,834,000 $11,351,000
Investment in First Indiana Corp. 27,549,000 24,265,000 21,873,000
Corporate assets 11,177,000 3,705,000 1,771,000
Total assets $38,726,000 $39,804,000 $34,995,000
Depreciation and amortization
Construction products and services $237,000 $670,000 $526,000
Corporate assets 15,000 15,000 15,000
Total depreciation and amortization $252,000 $685,000 $541,000
Capital expenditures:
Construction products and services $44,000 $1,250,000 $1,222,000
* All assets of the construction products and services division
were sold during 1995. See Note 2.
Note 9. Income Taxes
Total income tax expense (benefit) for the three years ended
December 31, 1995 was allocated as follows:
Year Ended December 31,
1995 1994 1993
Income from operations $2,190,000 $1,608,000 $1,437,000
Retained earnings for:
Unrealized investment gains 46,000 --- ---
Equity in other capital changes of Firest Indiana
76,000 (9,000) 18,000
Total income tax expense $2,312,000 $1,599,000 $1,455,000
Income tax expense attributable to income from operations consisted
of:
Current:
Federal $637,000 $273,000 $ ---
State and local 149,000 70,000 ---
786,000 343,000 ---
Deferred:
Federal 1,138,000 997,000 1,135,000
State and local 266,000 268,000 302,000
1,404,000 1,265,000 1,437,000
Total:
Federal 1,775,000 1,270,000 1,135,000
State and local 415,000 338,000 302,000
Total income tax expense on income
from operations $2,190,000 $1,608,000 $1,437,000
-26-
<PAGE>
Income tax expense attributable to income from operations differed
from the amounts computed by applying the federal income tax rate
of 34% to pretax income from operations as a result of the
following:
Year Ended December 31,
1995 1994 1993
Federal income tax at statutory rate, 34% $1,886,000 $1,405,000 $1,235,000
Add (deduct) tax effect of:
State and local income taxes,
net of federal income tax benefit 304,000 204,000 199,000
Other --- (1,000) 3,000
$2,190,000 $1,608,000 $1,437,000
The Company made income tax payments of $1,168,000 during 1995 and
$24,000 during 1994, and received income tax refunds (net of
payments made) of $33,000 for the year ended December 31, 1993.
The tax effects of temporary differences that give rise to
significant portions of the net deferred tax liability at December
31, 1994 and 1993 are presented below:
December 31,
Deferred tax assets: 1995 1994
Compensated absences (principally vacation earned)
accrued for financial reporting purposes $7,000 $72,000
Pension benefits accrued for financial reporting purposes
42,000 104,000
Net operating loss carry forwards --- 234,000
Other 78,000 105,000
Less valuation allowance --- (234,000)
Total deferred assets $127,000 $281,000
Deferred tax liabilities:
Investment in First Indiana Corporation $6,000,000 $3,949,000
Unrealized investment gain 46,000 ---
Plant and equipment 12,000 640,000
Contracts in progress - unbilled --- 97,000
Total deferred liabilities 6,058,000 4,686,000
Net deferred tax liability $5,931,000 $4,405,000
Note 10. Stock Incentive Plans
Stock Options
All share and price per share amounts have been adjusted for a
five-for-four stock split that was effective February 29, 1996.
The Company s 1986 and 1991 Stock Incentive Plans provide for
granting of stock options to officers and other key employees at
the quoted market value of the Company s common stock on the date
of the grant. The terms and conditions of both the 1986 and 1991
Plans are identical. Options are exercisable during a period of
two to five years after the date of grant, and expire five years
from the date of grant. The 1986 Plan authorized 117,187 shares
for granting options, and the 1991 plan authorized 125,000 shares
for granting options, with or without stock appreciation rights.
The Company also maintains a 1991 Director Stock Option Plan, which
authorized 62,500 shares. The plan provides for the granting of
stock options to non-employee directors of the Company. Grants
issued are non-qualified stock options, which do not afford
favorable tax treatment to recipients and which normally result in
tax deductions to the Company.
-27-
Options are granted annually at the time of the annual meeting of
the shareholders, at the quoted market price on that date. The
plan allows no more than the grant of 12,500 shares annually.
Director options have a term of five years and are exercisable at
any time during that term.
The following summary reflects changes in the options outstanding
during the three years ended December 31, 1995.
Officers & Key
Employees Directors Price Range
Plans Plan Per Share
Balance at December 31, 1992 93,563 15,000 $5.00-$13.60
Options granted 28,250 6,250 $7.30-$7.40
Options expired (4,250) (2,500) $5.20-$7.50
Balance at December 31, 1993 117,563 18,750 $5.00-$13.60
Options granted 29,500 5,000 $9.50-$10.40
Options expired --- (3,750) $5.20-$7.40
Options exercised (28,625) --- $5.00-$5.30
Balance at December 31, 1994 118,438 20,000 $5.00-$13.60
Options granted 13,750 5,000 $10.60
Options expired (19,500) --- $5.20-$10.40
Options exercised (29,813) --- $5.00-$7.30
Balance at December 31, 1995 82,875 25,000 $5.00-$13.60
At December 31, 1995, all of the following options were exercisable
except for 5,000 shares at $10.40 per share and 5,000 shares at
$10.60 per share. Outstanding option shares at December 31, 1995,
by exercise price per share, were as follows:
Officers & Key
Price Per Employees Directors
Share Plans Plan
$5.00 3,750 ---
5.20 17,250 5,000
5.30 5,250 ---
5.83 8,125 ---
6.00 --- 5,000
7.30 13,750 ---
7.40 --- 5,000
7.50 3,500 ---
9.50 --- 5,000
10.40 13,750 ---
10.60 13,750 5,000
13.60 3,750 ---
82,875 25,000
Stock Grants
The Company s 1986 and 1991 Stock Incentive Plans also provide for
the issuance of stock grants to key individuals for achievement of
specific results over a three-year period. On April 1, 1994, the
Company awarded 12,500 shares of stock to each of two executive
officers. These shares are subject to recall by the Company in the
event that certain specific employment and performance objectives
are not met by March 31, 1997. The Company has charged expense for
$82,000 and $62,000 during 1995 and 1994, respectively, in
connection with these grants.
Reserved for future stock options and stock grants at December 31,
1995 are 75,875 shares under the Officers and Key Employees Plans
and 37,500 shares under the Directors Stock Option Plan.
-28-
<PAGE>
Note 11. Retirement Plans
The Company sponsored a 401(k) savings plan that was qualified for
tax-deferred employee contributions under the Internal Revenue
code. The 401(k) savings plan was terminated on April 30, 1995.
The Company also maintained a non-contributory, defined benefit
pension plan covering non-bargaining unit employees. The defined
benefit pension plan was terminated on November 30, 1995. Both
plan terminations occurred as a result of the sale of the assets of
the construction products and services divisions and the related
termination of employment of the divisions employees. These
employees constituted the major portion of all participants of the
plans.
The Company has accrued pension costs at December 31, 1995 of
$106,000 for changes in valuation of plan benefits and market value
of plan assets before such approvals are obtained. Net periodic
pension expense for the plan consisted of the following:
Year Ended December 31,
1995 1994 1993
Service cost benefits earned during the year
$150,000 $153,000 $143,000
Interest cost on projected benefit obligation
321,000 303,000 298,000
Return on plan assets (298,000) 40,000 (95,000)
Net amortization and deferral (22,000) (375,000) (254,000)
Gain on termination of plan (344,000) --- ---
Net pension expense (benefit) ($193,000) $121,000 $92,000
The actuarial estimated value of the accumulated benefit for all
vested plan participants and the value of all pension trust assets
on the date of plan termination were:
Vested accumulated benefit obligations $4,245,000
Fair value of plan assets 4,312,000
Plan assets in excess of benefit obligations $ 67,000
It is anticipated that the excess plan assets will be used to pay
expenses of the plan termination and liquidation. The plan
termination is pending approval of the Pension Benefit Guarantee
Corporation and the Internal Revenue Service. The vested
accumulated benefit obligations were determined using the published
discount rate of the Pension Benefit Guaranty Corporation of 4.5%.
The plan assets were valued at market value and consisted primarily
of U. S. Government agency obligations.
In addition, the amounts contributed to multi-employer pension
plans, under contracts with various construction trade unions, for
the three years ended December 31, 1995, 1994, and 1993 for
operations to the dates of sale were $136,000, $156,000, and
$129,000, respectively. All contracts with unionized employees
were assumed by the purchasers of the construction assets.
Note 12. Subsequent Event
On February 14, 1996, the Board of Directors declared a five-for-
four stock split to be issued March 11, 1996, to shareholders of
record on February 29, 1996. All per share amounts shown in the
financial statements have been adjusted accordingly.
<PAGE>
Note 13. Commitments and Contingencies
The Company, in the normal course of business, is involved in
various claims and contingencies. After taking into consideration
legal counsel s evaluation and the extent of insurance coverage,
management is of the opinion that the outcome of claims and
contingencies will not result in any ultimate liability material to
the consolidated financial statements.
-29-
STATEMENT OF MANAGEMENT RESPONSIBILITY
Management of The Somerset Group, Inc. has prepared and is
responsible for the financial statements and for the integrity and
consistency of other related information contained in the Annual
Report. In the opinion of management, the financial statements,
which necessarily include amounts based on management s estimates
and judgments, have been prepared in conformity with generally
accepted accounting principles appropriate to the circumstances.
The Corporation maintains a system of internal accounting
controls designed to provide reasonable assurance that assets are
safeguarded, that transactions are executed in accordance with the
Corporation s authorizations and policies, and that transactions
are properly recorded so as to permit preparation of financial
statements that fairly present the financial position and results
of operations in conformity with generally accepted accounting
principles. Internal accounting controls are augmented by written
policies covering standards of personal and business conduct and an
organizational structure providing for division of responsibility
and authority.
Management believes the system of controls has prevented any
occurrences that could be material to the financial statements.
The Corporation engaged the firm of KPMG Peat Marwick,
independent certified public accountants, to render an opinion on
the financial statements. The accountants have advised management
that they were provided with access to all information and records
necessary to render their opinion.
The Board of Directors exercises its responsibility for the
financial statements and related information through the Audit
Committee, which is composed entirely of outside directors. The
Audit Committee meets regularly with management and KPMG Peat
Marwick to assess the scope of the annual audit plan, to review the
Annual Report and Form 10-K, including major changes in accounting
policies and reporting practices, and to approve non-audit services
rendered by the independent auditors.
KPMG Peat Marwick also meets with the Audit Committee, without
management present, to afford the Committee the opportunity to
express its opinion on the adequacy of compliance with established
corporate policies and procedures and the quality of financial
reporting.
February 14, 1996
Robert H. McKinney Marni McKinney Joseph M. Richter
Chairman President and Chief
Financial Officer Chief Executive Officer
-15-<PAGE>
THE SOMERSET GROUP, INC.
MARKET FOR THE REGISTRANT'S COMMON STOCK
The Company s common stock trades on The NASDAQ National Market
System under the symbol SOMR. The quarterly range of prices for
the Company s common stock for the years ended December 31, 1995
and 1994 is presented below:
1995 1994
Quarter High Low High Low
First - ended March 31, $14.00 $12.75 $14.25 $9.75
Second - ended June 30, $14.50 $13.25 $12.50 $11.63
Third - ended September 30, $17.50 $13.50 $13.25 $11.13
Fourth - ended December 31, $18.25 $16.75 $13.50 $12.50
As of March 4, there were 225 shareholders of record and
approximately 658 beneficial owners.
SELECTED FINANCIAL DATA
(in thousands except per share amounts)
Years Ended December 31,
1995 1994 1993 1992 1991
Netsalesofconstructionoperations $11,178 $23,467 $14,555 $15,875 $13,935
Equity income of First Indiana Corp. 3,938 2,616 3,614 3,080 2,516
Income from operations before tax(1) 5,548 4,132 3,631 2,744 1,486
Net income 3,358 2,617 2,219 44 120
Net income per share (2) 1.61 1.26 1.10 .02 .06
As of December 31,
1995 1994 1993 1992 1991
Working capital $9,104 $6,852 $4,885 $4,897 $5,806
Carrying value-investment in First Indiana Corp.
27,549 24,265 21,873 18,731 16,242
Market value-investment in First Indiana Corp.
38,882 23,782 24,890 19,221 12,041
Total assets 38,726 39,804 34,995 30,649 32,618
Long-term debt 2,500 5,500 5,500 5,587 7,013
Total liabilities 9,228 13,375 11,091 9,009 10,618
Shareholders equity 29,498 26,429 23,904 21,640 22,000
Cash dividends per share .20 .10 --- --- ---
Book value per share (2) 14.45 12.90 11.91 10.79 11.00
(1) These amounts primarily represent the results of the
construction operations and equity income from First Indiana
Corporation. The construction operations were sold in June
1995.
(2) Per share amounts have been adjusted for a five-for-four stock
split that was effective February 29, 1996.
A-1<PAGE>
THE SOMERSET GROUP, INC.
MANAGEMENT S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
The Company earned $3,358,000 in 1995, compared to $2,617,000 in
1994 and $2,219,000 in 1993. Earnings in 1995 represented a 28%
increase over 1994 and a 51% increase over 1993. A non-recurring
pretax gain of $1,293,000 on sale of assets is included in 1995
earnings. Excluding the non-recurring gain, net income for 1995
amounted to $2,576,000.
The most significant event affecting operating results during 1995
was the sale of assets. The assets sold were primarily used in the
Company s construction products and services business segment. At
the time of the sale of the assets, the company s operations in the
business segment ceased. The sales agreements were effective on
April 30, 1995 and June 30, 1995, and the financial results
contained in the 1995 Consolidated Statements of Income represent
operating activities from these assets from January 1, 1995 to
their dates of sale.
Cash received from the sales and the conversion to cash of working
capital employed by these operations is planned to be used for
acquisitions or new operations in the financial services industry.
During the second half of 1995, the Company did not complete an
acquisition in financial services and was temporarily investing the
cash proceeds in short-term investment securities.
Net income, after allocation of income taxes, during the three
years ended December 31, 1995 was provided as follows:
1995 1994 1993
Operating income - construction products and services
$616,000$1,752,000 $716,000
Equity in earnings First Indiana 2,382,000 1,583,000 2,186,000
Gain on sale of assets 782,000 46,000 ---
Investment income 335,000 43,000 57,000
4,115,000 3,424,000 2,959,000
Interest expense (173,000) (268,000) (309,000)
General corporate expenses (584,000) (539,000) (431,000)
Net income $3,358,000$2,617,000$2,219,000
Return on average equity 12.0% 10.4% 9.7%
Net operating income from construction products and services of
$616,000 represented a decrease of 65% from the $1,752,000 earned
in 1994, and a decrease of 14% from the $716,000 reported in 1993.
The decrease resulted from the cessation of operations in this
business segment during 1995. The Company operated in this
business segment approximately 40% of the year.
Equity in earnings of First Indiana Corporation of $2,382,000
increased 50% compared to the $1,583,000 in 1994, and were 9% above
the $2,186,000 equity earnings in 1993.
Investment income added net income of $335,000 during 1995,
compared to $43,000 in 1994 and $57,000 in 1993. The availability
of cash from the asset sale and the subsequent conversion of
construction industry working capital to cash, combined with a
strong bond market during the second half of 1995 caused this
significant increase.
General corporate expenses increased during 1995, as consulting
and legal expenses in connection with expansion in the financial
service industry increased.
-10-
Net income excluding the non-recurring gain on sale of assets were
$2,576,000, which was 2% lower than the $2,617,000 earned in 1994,
primarily as a result of the change in business strategy to
withdraw from the construction industry in order to focus on
financial services. Net income from construction products and
services operations ceased during the last 60% of the year because
of the sale of these assets. The capital employed in these
operations was temporarily invested in U. S. Treasury obligations
and corporate bonds. On a comparative basis, the income from these
investments was less than the prior year earnings from construction
products and services, thus causing consolidated income results to
be lower. When compared to 1993 results, the 1995 comparable
earnings of $2,576,000 were 16% above the $2,219,000 earned in
1993. Earnings from the construction operations for the full year
of 1993 were only slightly above the partial year earnings in 1995.
Equity in Earnings of First Indiana Corporation
The Company s equity in earnings of First Indiana Corporation,
before income taxes, amounted to $3,938,000 for 1995, compared to
$2,616,000 for 1994, and $3,614,000 in 1993. The 1995 amount
represented a 51% increase over 1994 earnings and a 9% increase
over the 1993 amount.
First Indiana Corporation s earnings for 1995 were the highest ever
recorded by the Company. A strong economy in all of the Bank s
markets fueled growth. The Bank s renewed focus on real estate
finance created efficiencies and encouraged emphasis on carefully
targeted sales strategies.
Included in 1995 equity earnings were a first quarter gain from the
sale of deposits of a banking center and a gain from the sale of
fixed-rate home equity loans during the second quarter. During the
fourth quarter, the Bank also realized a gain from the sale of
foreclosed commercial real estate and increased its provision for
loan losses. These items added $360,000 to Somerset s equity
earnings.
First Indiana s net interest income rose to $58.0 million in 1995,
compared to $49.2 million in 1994 and $45.9 million in 1993. The
increase in 1995 was the result of significant growth in the Bank s
home equity, residential construction, and business loan
portfolios, that generally have higher yields than the Bank s
residential mortgage loan portfolio. Residential mortgage loan
originations amounted to $354 million, compared with $343 million
in 1994. Originations in home equity lending grew 61 percent to
$302 million, compared with $188 million in 1994.
The Bank continued building its franchise in construction lending,
with originations of $284 million, compared with $322 million last
year. Despite the slight downturn in this area, First Indiana
maintained its market share of the custom builder market in
metropolitan Indianapolis, with strong performance in the
production builder segments as well.
These areas form the cornerstone of the Bank s lending portfolio,
and all experienced substantial growth in outstanding balances
during 1995. At December 31, 1995, home equity and construction
loans outstanding were $485 million and $142 million, compared with
$329 million and $117 million one year earlier. Business lending
to selected segments within the Indianapolis market added to the
Bank s growth, rising to $72 million outstanding at year-end 1995,
compared with $42 million one year earlier.
First Indiana s net interest margin is a strong indicator of its
ability to generate core earnings. The margin rose to a record
4.12 percent for the year ended December 31, 1995, compared with
3.96 percent in 1994 and 3.64% in 1993.
-11-
First Indiana s average interest-rate spread for the year ended
December 31, 1995 was 3.60 percent, compared with 3.57 percent in
1994 and 3.24 percent in 1993. The interest spread results from
the Bank s interest-earning assets repricing faster than the
repricing of funding liabilities during 1995.
The contribution of interest-free funds to First Indiana s net
interest margin varies depending on the level of capital and use of
interest-free liabilities. Average interest-free funds provided an
additional 52 basis points to the margin in 1995, compared with 39
and 40 basis points in 1994 and 1993.
As a method to control non-performing assets, First Indiana has
managed its loan portfolio to reduce concentration of loan types
and to diversify assets geographically. Non-performing assets,
which consist of non-accrual, impaired and restructured loans, real
estate owned ( REO ), and other repossessed assets, fell seven
percent during 1995 to $27.2 million at December 31 from $29.1
million one year earlier.
First Indiana s assets grew in 1995 to $1.52 billion at year end,
compared to $1.39 billion at December 31, 1994. The tangible and
core capital of the Bank was $12.7 million, or 8.26% of assets,
which exceeded regulatory minimums at year-end 1995.
Legislation pending in Congress proposes a one-time assessment on
all SAIF-insured deposits of First Indiana. This assessment is
intended to recapitalize the Savings Association Insurance Fund to
the required level of 1.25 percent of insured deposits. If the
assessment occurs, the effect on The Somerset Group, Inc. would be
a reduction of equity earnings from First Indiana of approximately
$1,170,000.
The Bank s management has identified several strategies for
improving earnings in 1996 and beyond. First Indiana s plan calls
for continued enhancements to its core real estate lending
business, including construction, home equity, and residential
mortgage lending. In addition, the Bank is continuing its efforts
to enhance efficiencies and streamline processes, particularly in
mortgage banking. The Bank further intends to expand its business
lending portfolio, specializing in loans to smaller, independently
owned companies with a demonstrated history of strong performance.
Finally, the Bank is looking toward the development and acquisition
of companies that will provide additional sources of non-interest
income.
Gain on Sale of Assets
The sale of assets of the construction products and services
operations commenced in 1994 and was completed in 1995. The sale
price of all assets was $6,959,000, of which $5,522,000 occurred in
1995, and $1,437,000 in 1994. After consideration of the carrying
value of the assets and expenses relating to the sales, the Company
recorded gains on sale before income taxes of $1,293,000 and
$76,000 in 1995 and 1994, respectively. There were no such gains
or losses on sale of assets during 1993. The assets sold in 1995
consisted of the Company s three precast concrete manufacturing
facilities, assets of its design engineering subsidiary, its
trucking subsidiary, and assets off its precast concrete
installation and erection operations. The operation sold in 1994
was a manufacturing facility for highway bridge products.
Selling and General and Administrative Expenses
Selling expenses relate solely to the sales of construction
products and services. During 1995 they amounted to $210,000, a
decrease of $358,000 from the $568,000 incurred in 1994, and a
decrease of $278,000 from the $488,000 of 1993. As a percentage of
sales, selling expenses were also lower at 1.9% of 1995 sales,
compared to 2.4% in 1994, and 3.4% in 1993. Both the lower expense
amount and percentage of sales resulted from the sale of the
construction products and services operations in the first half of
1995. Selling expenses prior to the sale were held to a minimum
during that period. The 1994 increase in expense compared to 1993
was caused by higher sales commission expense on the increase in
sales of 1994 compared to 1993.
-12-
General and administrative expenses amounted to $1,390,000 during
1995 and represented a decrease of $537,000 from the $1,927,000
incurred in 1994, and a decrease of $233,000 from the $1,623,000 of
1993. The major portion of the decrease in 1995 expense related to
reductions in employee costs relating to operations of the
construction products and services operations, and a downsizing of
corporate staff, resulting from the temporary downsizing of active
operations. The 1994 increase compared to 1993 was caused by an
increase in expenses directly related to the increased sales and
manufacturing volume of construction products during 1994 compared
to 1993 and incentive compensation of management personnel for
improved performance of the construction group.
Interest Expense
Interest expense decreased $152,000 in 1995 compared to 1994 and
$225,000 compared to 1993, and occurred because of early retirement
of $3 million of long-term debt and the repayment and cancellation
of short-term lines of credit. Proceeds from the sale of assets
and the conversion of working capital to cash of the construction
products and services operations provided the cash for retirement
of this debt.
Impact of Accounting Standards
In October 1995, the Financial Accounting Standards Board ( FASB )
issued SFAS No. 123, Accounting for Stock-Based Compensation.
SFAS No. 123 allows the recognition of expense based upon the
estimated fair value of all stock-based compensation. However, the
Statement also allows enterprises the option of retaining the
accounting treatment for stock-based compensation set forth in
Accounting Principle Board Opinion 25, Accounting for Stock Issued
to Employees ( APB 25") does not require expense recognition for
the type of stock options issued by The Somerset Group, Inc. The
Statement requires pro forma disclosures of net income and earnings
per share computed as if the fair value based method had been
applied in financial statements of companies that continue to
follow current accounting practice under APB 25. The Statement is
applied prospectively in fiscal years beginning after December 15,
1995. The Company intends to retain the APB 25 accounting
treatment of stock-based compensation. Consequently, adoption of
this Statement will not have any effect on the Company s
consolidated financial statements.
Other pronouncements of the FASB during 1995 and to the date of
this report are not applicable to the Company s consolidated
financial statements.
FINANCIAL CONDITION AND LIQUIDITY
Management considers the financial condition and liquidity of the
Company to be very good at December 31, 1995. The Company was also
in a relatively sound position at the end of 1994. Because of the
sale of all construction industry operating assets and the
conversion of the related net current assets to cash, the Company s
balance sheet contains a large percentage of liquid assets and no
intangible assets. These liquid assets are being invested
temporarily and are intended for use in acquisitions of businesses
in the financial services industry.
At December 31, 1995, the Company had a very high ratio of current
assets to current liabilities, that stood at 12.4 to one, compared
to 3.0 to one at December 31, 1994. In addition, 90% of the
current assets consisted of cash, cash equivalents and short-term
investments.
-13-
The ratio of long-term debt to shareholders equity improved to .08
to one at December 31, 1995, compared to .21 to one at the end of
1994. A $3 million portion of long-term debt was retired during
1995. The remaining long-term debt of $2.5 million has been
maintained and not retired since a favorable fixed interest rate
has allowed for the investment of the funds at returns greater than
the interest cost.
Shareholders equity increased to $29.5 million at December 31,
1995 from $26.4 million at the end of 1994. Adjusted for the
February 29, 1996 5-for-4 stock split, the per share amounts were
$14.45 compared to $12.90.
The Company s investment in First Indiana Corporation is stated at
cost, plus the Company s share of undistributed earnings, as
required by the FASB s accounting standard for equity accounting.
This treatment does not give effect to the market value of this
investment within the consolidated financial statements. At
December 31, 1995, the market value of the Company s investment in
First Indiana Corporation, as determined from the closing price on
the NASDAQ National Market System, was $11.3 million greater than
the carrying value in the consolidated financial statements. At
December 31, 1994 such market value was $483 thousand less than
the carrying value.
Operating activities during 1995 provided $5.3 million of cash,
compared to cash used in 1994 of $155 thousand. The primary causes
of this change was a $4.7 million decrease in the amount of working
capital needed to support operations in 1995 versus a $2.7 million
increase in such working capital needs in 1994, and the increase in
net income in 1995 compared to 1994. The 1995 decrease in working
capital was a result of the discontinuance of the businesses that
required significant amounts of working capital.
In 1995 the Company canceled its $3 million line of credit that had
been established in prior years to fund significant changes in cash
flow that are typical in the construction industry. The line of
credit was no longer needed.
Proceeds from the sale of assets amounted to $5.2 million during
the year, and when combined with the cash provided from operations,
allowed management to retire early $3 million of long-term bank
debt, repurchase 25,000 shares of its common stock in the open
market, and temporarily invest $7.1 million in short-term
investments.
During 1995 the Company paid $327,000 in cash dividends to its
shareholders, $.20 per share annually. On February 14, 1996 the
Board of Directors declared a 5-for-4 stock split to be effective
February 29, 1996. In addition, the regular semi-annual dividend
of $.10 per share was declared on the post stock split shares. On
an annual basis, this results in a 25% increase in projected cash
dividends for 1996, compared to 1995.
The Company is seeking acquisitions in select financial services
industries, including fund management, leasing, annuity brokerage,
and technology based banking services. The Somerset Group, Inc. is
a registered savings bank holding company and subject to
regulations of permitted activities defined in the National Housing
Act and administered by the Office of Thrift Supervision.
-14-<PAGE>
FIRST INDIANA CORPORATION
SUMMARIZED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
1995 1994
<S> <C> <C>
Assets
Cash and cash equivalents $57,000 $39,684
Investments 102,656 149,529
Mortgage-backed securities - net 49,498 69,597
Loans receivable - net 1,250,726 1,078,494
Premises and equipment 13,157 13,333
Accrued interest receivable 11,645 9,812
Real estate owned 1,877 5,796
Prepaid expenses and other assets 37,390 28,636
Total Assets $1,523,949 $1,394,881
Liability and Shareholders s Equity Liabilities
Deposits $1,119,086 $1,018,163
Federal Home Loan Bank Advances 214,781 201,155
Short-term borrowings 38,642 35,922
Accrued interest payable 2,715 1,696
Advances by borrowers for tax & Insurance 2,107 2,356
Other liabilities 10,688 7,296
Total Liabilities 1,388,019 1,266,588
Negative Goodwill 6,633 7,581
Shareholders s Equity 129,297 120,712
Total Liabilities & Shareholder Equity $1,523,949 $1,394,881
</TABLE>
Summarized financial information is presented above and on the
following two pages for First Indiana Corporation. This 21.9
percent owned subsidiary represents a significant part of The
Somerset Group, Inc. s income and financial strength. Summary
discussions of the operating and financial results for First
Indiana Corporation appear in the Management s Discussion and
Analysis section of the report. A complete 1995 annual report for
First Indiana Corporation is available upon request.
-30-<PAGE>
FIRST INDIANA CORPORATION
SUMMARIZED CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
(Dollars in Thousands)
<S> <C> <C> <C>
1995 1994 1993
Interest Income $109,871 $81,553 $78,660
Loans 4,396 5,473 10,178
Mortgaged-backed securities 9,181 9,784 7,568
Investments 613 762 678
Total Interest Income 124,061 97,572 97,084
Interest Expense
Deposits 50,533 39,342 43,431
Federal Home Loan Bank Advances12,891 6,952 2,039
Short-term borrowings 2,593 330 421
Mortgage-backed bonds --- 1,719 2,287
Floating rate notes --- --- 3,001
Total Interest Expense 66,017 48,343 51,179
Net Interest Income 58,044 49,229 45,905
Provision for Loan Losses 7,900 3,900 4,396
Net Interest Income After Provision for Loan Losses
50,144 45,329 41,509
Non-Interest Income
Sale of loans 2,749 (706) 2,803
Loan servicing income 2,645 2,861 1,427
Loan fees 2,206 2,378 2,408
Dividends on FHLB Stock 996 602 871
Other 7,655 5,190 6,328
Total Non-Interest Income 16,251 10,325 13,837
Non-Interest Expense
Salary and benefits 20,890 19,465 17,370
Net occupancy 3,069 2,989 2,771
Deposit insurance 2,298 2,318 1,864
Real estate owned ops - net (3,060) (26) (5)
Other 15,450 13,756 11,504
Total Non-Interest Expense 38,647 38,502 33,504
Earnings Before Income Taxes 27,748 17,152 21,842
Income Taxes 10,481 6,516 6,741
Net Earnings $17,267 $10,636 $15,101
</TABLE>
-31-<PAGE>
FIRST INDIANA CORPORATION
SUMMARIZED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
<TABLE>
<S> <C> <C> <C>
1995 1994 1993
Cash Flows from Operating Activities
Net Earnings $17,267 $10,636 $15,101
Adjustments to Reconcile Net Earnings to Net
Cash Provided (Used) by Operating Activities
(Gain) Loss on sales of assets and deposits
(4,307) 1,051 (3,155)
Amortization 2,197 1,609 28
Depreciation 1,909 1,922 1,437
Proceeds from sale of mortgage-backed
securities held for sale --- --- 18,762
Provision for loan losses 7,900 3,900 4,396
Net proceeds from trading of investments
--- (335) 13,228
Net sale of loans held for resale (41,116) 62,766 5,125
Net change in all other assets and liabilities
(4,742) 1,222 (4,262)
Net Cash Provided (Used) by Operating Activities
(20,892) 82,771 50,660
Cash Flows from Investing Activities
Proceeds - sales of investments available for sale
72,057 --- ---
Proceeds-sales of investment securities
2,993 --- 1,777
Proceeds - maturities of investment securities
5,010 28,525 88,832
Purchase of investment securities (35,388) (66,381) (122,796)
Origination of loans and mortgage-backed
securities - net of collections (240,820)(135,640) (1,065)
Purchase of mortgage-backed securities
--- --- (20,092)
Proceeds from sale of loans 125,313 1,819 11,148
Purchase of premises and equipment (1,750) (1,615) (7,712)
Other - net 32 10 265
Net Cash Used by Investing Activities (70,745)(173,282) (49,643)
Cash Flows from Financing Activities
Proceeds from sale of deposits (25,462) --- ---
Net change in deposits 127,882 2,855 (26,731)
Net change in short-term borrowings 2,720 35,922 (2,469)
Net change in FHLB Advances 13,626 94,278 85,718
Purchase of treasury stock (6,203) --- ---
Maturity of other debt --- (50,000) (70,000)
Other - net (3,610) (3,298) (8,212)
Net Cash Provided (Used) by Financing Activities
108953 79,757 (21,694)
Increase (Decrease) in Cash and Cash Equivalents
$17,316 ($10,754) ($20,677)
</TABLE>
-32-<PAGE>
OPERATING COMPANIES AND MANAGEMENT
CORPORATE OFFICE
135 N. Pennsylvania Street
Suite 2800
Indianapolis, IN 46204
Telephone 317/269-1285
CORPORATE OFFICERS
Robert H. McKinney
Chairman
Marni McKinney
President &
Chief Executive Officer
Joseph M. Richter
Executive Vice President,
Chief Financial Officer &
Treasurer
Kevin K. McKinney
Vice President
Sharon J. Sanford
Secretary
FINANCIAL SERVICES DIVISION
Michael L. Smith
President
BANKING
Robert H. McKinney
Chairman & Chief Executive
Officer of the Corporation
and Chairman of the Bank
Marni McKinney
Vice Chairman of the
Corporation and
Vice Chairman of the Bank
Owen B. Melton, Jr.
President & Chief Operating
Officer of the Corporation
and President & Chief
Executive Officer of the Bank
David L. Gray
Internal Support Services
Division
Senior Vice President, Chief
Financial Officer & Treasurer
David A. Lindsey
Consumer Banking Sales
Division
Senior Vice President
Merrill E. Matlock
Commercial Banking Division
Senior Vice President
Timothy J. O Neill
Consumer Banking Services
Division
Senior Vice President
Kenneth L. Turchi
Marketing & Strategic Planning
Division
Senior Vice President
BOARD OF DIRECTORS AND SHAREHOLDER INFORMATION
DIRECTORS
Robert H. McKinney
Chairman, The Somerset Group, Inc.;
Chairman & Chief Executive Officer,
First Indiana Corporation
Marni McKinney
President and Chief Executive Officer
The Somerset Group, Inc.; Vice Chairman,
First Indiana Corporation
H. J. Baker
Chairman (emeritus)
BMW Constructors, Inc.
William L. Elder
Chairman (emeritus)
Southern Indiana Commerce Corporation
<PAGE>
Douglas W. Huemme
Chairman, President &
Chief Executive Officer
Lilly Industries, Inc.
William F. McConnell, Jr.
Senior Vice President &
Chief Operating Officer
Resort Condominiums International, Inc. (RCI)
Kevin K. McKinney
Vice President, The Somerset Group, Inc.
Publisher, NUVO Newsweekly
Michael L. Smith
President
Somerset Financial Services
SHAREHOLDER INFORMATION
Annual Meeting
The Annual Meeting of
Shareholders will be held
Wednesday, April 24, 1996 at
9:00 a.m. EST at
First Indiana Plaza, Seventh
Floor Conference Center,
135 N. Pennsylvania St.,
Indianapolis, Indiana
Capital Stock
The Somerset Group, Inc. stock
is traded on the
NASDAQ National Market System
- - symbol of SOMR
Registrar and Transfer Agent
Harris Trust and Savings Bank
311 West Monroe Street, 11th
Floor
Chicago, Illinois 60606
800/573-4048
Independent Auditors
KPMG Peat Marwick LLP
Indianapolis, Indiana
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 1699000
<SECURITIES> 7194000
<RECEIVABLES> 1110000
<ALLOWANCES> 105000
<INVENTORY> 00
<CURRENT-ASSETS> 9901000
<PP&E> 241000
<DEPRECIATION> 196000
<TOTAL-ASSETS> 38726000
<CURRENT-LIABILITIES> 797000
<BONDS> 00
00
00
<COMMON> 1829000
<OTHER-SE> 27669000
<TOTAL-LIABILITY-AND-EQUITY> 38726000
<SALES> 11178000
<TOTAL-REVENUES> 16963000
<CGS> 9529000
<TOTAL-COSTS> 11415000
<OTHER-EXPENSES> 00
<LOSS-PROVISION> 105000
<INTEREST-EXPENSE> 286000
<INCOME-PRETAX> 5548000
<INCOME-TAX> 2190000
<INCOME-CONTINUING> 3358000
<DISCONTINUED> 00
<EXTRAORDINARY> 00
<CHANGES> 00
<NET-INCOME> 3358000
<EPS-PRIMARY> 1.61
<EPS-DILUTED> 1.61
</TABLE>
