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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
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 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
Commission File Number 1-9215
--------------------------------------
UNITED ASSET MANAGEMENT CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 04-2714625
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
ONE INTERNATIONAL PLACE
BOSTON, MASSACHUSETTS 02110
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 330-8900
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -----------------------
Common Stock
($.01 par value) New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (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. X Yes 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. [ ]
The aggregate market value of the voting stock held by stockholders who are
not directors or executive officers of the registrant was approximately
$1.2 billion based on the last reported sale price of the registrant's common
stock on the New York Stock Exchange composite tape on March 4, 1996.
The number of shares of common stock, par value $.01, outstanding as of
March 4, 1996 was 30,355,892.
DOCUMENTS INCORPORATED BY REFERENCE
Certain of the information called for by Parts I through IV, respectively, of
this report on Form 10-K is incorporated by reference from certain portions of
(a) the Annual Report to Shareholders of the registrant for the year ended
December 31, 1995, and (b) the Proxy Statement of the registrant to be filed
pursuant to Regulation 14A and to be sent to shareholders in connection with the
Annual Meeting of Stockholders to be held on May 16, 1996. Such Report and
Proxy Statement, except for the parts therein which have been specifically
incorporated herein by reference, shall not be deemed "filed" as part of this
report on Form 10-K.
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<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
United Asset Management Corporation ("UAM" or the "Company") is a holding
company organized in December, 1980 to acquire and own firms that provide
investment advisory services primarily for institutional clients. The Company's
45 wholly owned subsidiaries (the "Affiliated Firms" or the "Firms") operate in
one business segment, that is, as investment advisers, managing both domestic
and international investment portfolios for corporate, government and union
pension funds, endowments and foundations, mutual funds and individuals. UAM
intends to continue expanding through the internal growth of its present
Affiliated Firms and through the acquisition or organization of additional firms
in the future (see "Affiliated Firms"). In addition, UAM plans to continue to
diversify, both domestically and internationally, with respect to both the
classes of assets managed for institutional investors and client base.
While UAM's Affiliated Firms primarily specialize in the management of U.S.
equities, bonds and cash, other asset classes under management have grown
significantly over recent years to include real estate, international securities
and stable value assets.
Advisory fees based on the assets of pension plans, profit sharing plans,
endowments and foundations provide the substantial portion of the Company's
revenues. Such clients are sometimes referred to as "institutional" clients,
and they are generally "tax-exempt" in that the income and any capital gains
which result from their portfolio investments are not taxable to them under
present law. Advisory fees are primarily based on the value of assets under
management. Fee rates typically decline as account size increases. The assets
of institutional clients have generally been growing, with the most rapid growth
achieved by pension and profit sharing plans (sometimes called employee benefit
plans). For the year ended December 31, 1995, no single client of any
Affiliated Firm provided more than 2% of the Company's consolidated revenues.
Accordingly, the loss of any single client would not have a material adverse
effect on the Company's total investment management business.
Each Affiliated Firm operates under its own name, with its own investment
philosophy and approach. Each conducts its own investment analysis, portfolio
selection, marketing and client service. During any given period, investment
results may vary among Firms. Client fees are set by each Firm based on its own
judgment concerning the market for the services it renders. Each Firm is
separately regulated under applicable federal, state or foreign law.
In addition to the Firms' individual efforts, UAM has established
several distribution and client service organizations which are avaialable to
the Affiliated Firms to supplement the investment management services being
provided by them. This is described more fully under "Method of Operation."
UAM has established revenue sharing agreements with the Affiliated Firms
which are described more fully under "Revenue Sharing." These agreements
provide for UAM to derive increased or decreased income from each Affiliated
Firm, based on a percentage of the change in each Firm's revenues from year to
year, starting from a base amount agreed upon in the year of acquisition. These
arrangements allow each Firm to set its own operating expense budget and
compensation practices, limited by the share of revenues available to the Firm.
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THE INDUSTRY
Revenues in the institutional investment management industry are determined
primarily by fees based on assets under management. Therefore, the principal
determinant of growth in the industry is the growth of institutional assets
under management. In management's judgment, the major factors which influence
changes in institutional assets under management are: (a) changes in the market
value of securities; (b) net cash flow into or out of existing accounts; (c)
gains of new or losses of existing accounts by specific firms or segments of the
industry; and (d) the introduction of new products by the industry or by
particular firms.
In general, assets under management in the institutional segments of the
industry have increased steadily. For example, Money Market Directories, Inc.
recorded in its 1996 Directory $3.7 trillion in assets under management in
accounts of employee benefit plans, foundations and endowments within the United
States as of mid-1995, which represents an average compound five-year annual
growth rate of 8.4% over the corresponding figure as of mid-1990. The largest
institutional segment of assets under management has been employee benefit plan
assets. The 1996 Directory reported $3.5 trillion of employee benefit plan
assets under management as of mid-1995, which represents an average compound
five-year annual growth rate of 8.5% over the corresponding figure as of mid-
1990.
The employee benefit plan market includes two principal sectors: defined
benefit and defined contribution plans. The majority of U.S. retirement plan
assets are in defined benefit plans, which assure workers of a particular level
of pension benefits when they retire. The Employee Retirement Income Security
Act of 1974 ("ERISA") and the Internal Revenue Code of 1986 (the "Code") require
employers to fund their defined benefit plans sufficiently to generate the
benefits they have promised. However, the Code also discourages overfunding of
defined benefit plans by employers by limiting tax deductions for contributions
to fully funded plans. In management's opinion, high investment returns
experienced in the 1980s and thus far in the 1990s has resulted in many defined
benefit retirement plans reaching or exceeding their full funding limits based
on actuarial calculations; therefore, many corporations ceased to contribute
additional cash to the plans. However, if the value of plan assets declines due
to market factors, or if sustained periods of low interest rates cause an
increase in the actuarial value of plan liabilities, employers will generally be
obligated to step up contributions to their defined benefit pension plans. This
counter-cyclical funding pattern for defined benefit plans helps to smooth out
fluctuations in the growth of plan assets under management by firms that provide
investment advisory services to sponsors of defined benefit plans, and
therefore, it helps to smooth out fluctuations in the revenues of these
investment managers. Under defined contribution plans, on the other hand,
employers may contribute to their employees' retirement funds on a tax-
advantaged basis, but individual employees often decide how their plan assets
will be invested. Defined contribution plans are the fastest growing sector of
the employee benefit plan market.
The number and size of investment management firms which UAM would consider
acquiring have grown in the past five years. The 1991 Money Market Directory
showed 1,133 investment advisory firms (including branch offices) within the
United States managing $2.9 trillion as of mid-1990. The 1996 Directory showed
1,349 such firms (including branch offices) within the United States managing
approximately $6.6 trillion of assets as of mid-1995, which represents an
average compound five-year annual growth rate of 18.0% over the corresponding
assets of mid-1990.
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COMPETITION
The Affiliated Firms compete with a large number of investment management
firms, principally those engaged in the management of institutional accounts.
In addition, the Affiliated Firms compete with commercial banks and insurance
companies, many of which have substantially greater capital and other resources
and some of which offer a wider range of financial services. Furthermore, each
of the Affiliated Firms may compete with other Affiliated Firms for clients.
Management believes that the most important factors affecting competition
in the investment management industry are the abilities and reputations of
investment managers, differences in the investment performance of investment
management firms and the development of new investment strategies, information
technologies and client service capabilities, rather than differences in
advisory fees.
Barriers to entry are low, and firms are relatively long-lived in the
investment management business. A new investment management firm has low
capital requirements. Maintaining the firm requires only the continued
involvement of its professional personnel. A major portion of profits may be
regularly withdrawn because new capital commitments are limited and rarely
necessary.
UAM competes, with respect to the acquisition of investment management
firms, with many other potential purchasers of investment management firms,
including insurance companies, banks and other investment groups. For the most
part, these acquirers have sought a single firm rather than undertaking a
program of acquisitions similar to UAM's. As a result of its continuing
acquisition activities, including regular contacts with potential acquisition
candidates, UAM has an extensive knowledge of the candidate population both
domestically and internationally.
UAM'S ACQUISITION PROGRAM
Since its inception, UAM has sought to acquire or to organize institutional
investment management firms. Once it has acquired or organized such firms, UAM
seeks to preserve their autonomy by allowing their key employees to retain
control of investment decisions and manage the day-to-day operations. Where the
Affiliated Firm is acquired from its employee-stockholders, the former
stockholders receive the added benefits of a more diversified company by virtue
of their equity ownership in UAM.
UAM conducts its own acquisition activities rather than relying primarily
upon outside agents to find and develop acquisition candidates for it. UAM's
activities include regular mailing and calling programs through which UAM seeks
to contact and visit potential acquisition candidates on a regular basis. UAM
is willing to use finders to locate suitable candidates and has paid finders'
fees on four occasions. Once acquisition negotiations begin, UAM utilizes its
own staff and outside legal counsel to negotiate price, terms and the wording of
specific documents required. Typically, a definitive purchase agreement is
signed, and then each of the clients of the firm to be acquired is contacted by
a principal of that firm in order to obtain the client's consent to the
assignment of its advisory contract as required by the Investment Advisers Act
of 1940. Once sufficient consents have been received, the acquisition is
completed. Consent of all of a firm's clients has been obtained in connection
with virtually all of UAM's acquisitions to date.
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After acquisition by UAM, Affiliated Firms continue to operate under their
own firm name, with their own leadership and individual investment philosophy
and approach. UAM seeks to achieve diversity by acquiring investment management
firms having different investment philosophies and strategies and specializing
in different asset classes. In addition, UAM has acquired or organized firms at
various stages of their development, from start-up to relatively mature firms
and has acquired both employee-stockholder firms and subsidiaries or divisions
of financial institutions.
UAM has observed that the major reasons that employee-owned firms consider
selling to UAM include: (a) the high value of the firm relative to its
principals' total net worth; (b) the need for liquidity on the part of the
principals; and (c) their desire for diversification and a reduction in their
exposure to a single firm's results. Substantially all the key employees of
Affiliated Firms continue to be vigorously involved in their firm long after its
acquisition by UAM.
In purchasing investment management firms, UAM has structured the
transactions in order to create incentives for the key personnel to remain with
their firm after the expiration of their employment agreements. The key
employees have entered into employment and non-competition agreements for terms
ranging primarily from five to 12 years, which also prohibit the employees from
competing with their firm for a substantial period after termination of
employment. Most of the key employees of the Affiliated Firms were stockholders
of such firms prior to their acquisition by UAM. In connection with the
purchases, the former stockholders and/or key employees have typically received
consideration in the form of cash, subordinated notes and warrants to purchase
UAM common stock, or UAM common stock. The subordinated notes, which may be
used to exercise the warrants, generally have terms between five and ten years.
The key employees of each Affiliated Firm also participate directly, through a
revenue sharing arrangement, in revenues of their firm and meet the firm's
expenses from their share of these revenues, as described more fully under
"Revenue Sharing."
UAM has over the past several years identified a substantial number of
institutional investment management firms both domestically and internationally
which it believes may be candidates for future acquisition on the basis of an
evaluation of their personnel, investment approach, client base, revenues and
profitability.
To fund acquisitions, the Company utilizes its existing capital, together
with Operating Cash Flow (net income plus amortization and depreciation) and
borrowings available under the $400,000,000 Reducing Revolving Credit Agreement
(as more fully described in Note 3 to the Consolidated Financial Statements, see
Items 8 and 14). Such borrowings are secured by the stock of the Company's
subsidiaries. Subsequent to December 31, 1995, the Company is extending and
expanding its Credit Agreement into a five year, $500,000,000 revolving
facility.
METHOD OF OPERATION
UAM itself does not manage portfolio investments for clients and does not
provide any investment advisory services to Affiliated Firms and therefore is
not registered as an investment adviser under federal, state or foreign law.
UAM respects the individual character of each Affiliated Firm and seeks to
preserve an environment in which each Firm may continue to provide investment
management services which are intended to meet the particular needs of each
Firm's clients. UAM provides assistance to the Affiliated Firms in
connection with the preparation of separate company financial statements, tax
matters,
4
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insurance and maintenance of a company-wide profit sharing retirement plan.
In addition, UAM has an operations group composed of senior officers of the
Company which is responsible for establishing new marketing and service
organizations, creating growth incentives and encouraging the undertaking of
new projects and programs by the Affiliated Firms. Upon request, the
Operations Group is also available to assist Affiliated Firms in planning for
future growth and management development, particularly with respect to
succession planning. The Company also sponsors several seminars and meetings
for executives from each of the Affiliated Firms and from UAM which serve as
forums for sharing business information.
UAM seeks to assist the Affiliated Firms in their marketing activities by
providing resources and support for developing new products and reaching new
markets. As a part of these efforts, UAM organized UAM Funds, Inc. previously
named The Regis Fund, Inc., a series mutual fund in which Affiliated Firms may
open portfolios to pool client accounts in an efficient, cost-effective manner
and to provide additional investment styles. As of December 31, 1995, 17 of the
Affiliated Firms had opened, in the aggregate, 36 UAM Fund portfolios, and such
portfolios held assets totaling $2.1 billion.
In 1993, UAM established Regis Retirement Plan Services in response to the
growth in the defined contribution plan sector of the market by offering bundled
products, including investment management capabilities through the UAM Fund
portfolios managed by the Affiliated Firms, as well as employee education,
recordkeeping and trustee services to the sponsors of these plans.
In 1994, UAM established United Asset Management (Japan), Inc. to offer and
service products managed by the Affiliated Firms to Japanese investors. This
affiliate is a single entity delivering service locally in Japan, but it
represents the great breadth of expertise available in all of UAM's Affiliated
Firms. It is currently registered in Japan as a non-discretionary adviser, and
is preparing to apply for a license to offer discretionary investment services
to Japanese institutional investors.
In 1995, UAM established two additional marketing and service
organizations. UAM Investment Services, Inc. was organized to provide
multi-product and global capabilities to large defined benefit plans and
other major institutional investors such as insurance companies, as well as
to financial planners. This new unit does not replace but supplements the
marketing and client service activities of the Affiliated Firms and
participation in it is voluntary on the part of each firm. It will provide a
single convenient channel through which clients both domestically and abroad,
can utilize the many investment products offered by the affiliated firms. In
addition, UAM Fund Services, Inc. was formed to oversee the numerous service
providers currently being used by some of UAM's Firms to support their funds
that are part of UAM Funds, Inc. or their own separate family of funds.
UAM believes that the professional independence of the Affiliated Firms and
the continuing diversification of investment philosophies and approaches within
the Company are necessary ingredients of UAM's success and that of the
Affiliated Firms. The key employees of each Affiliated Firm at the time of
acquisition by UAM have continued with their Firm in accordance with employment
agreements executed in connection with each acquisition, have remained on their
Firm's Board of Directors, and have continued to serve as its executive
officers. Each Affiliated Firm's directors and officers are responsible for
reviewing their respective Firm's results, plans and budgets. UAM intends to
continue the method of operation described above as it acquires or organizes
additional firms.
5
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REVENUE SHARING
UAM operates with the Affiliated Firms under "revenue sharing"
agreements. The agreements permit each Firm to retain a specified percentage
of its revenues (typically 50-70%) for use by its principals at their
discretion in paying expenses of operations, including salaries and bonuses.
The purposes of the agreements are to provide significant ongoing incentives
for the principals of the Affiliated Firms to continue working as they did
prior to the sale of their firm to UAM and to allow UAM to participate in the
growth of revenues of each Affiliated Firm. The agreements are designed to
allow each Firm's principals to participate in that Firm's growth in a
substantial manner and to make operating decisions freely within the limits
of that portion of the Firm's revenues which is retained under the Firm's
control. In effect, the portion of its revenues retained by each Firm that
is not used to pay salaries and other operating expenses is available for
payment to the principals and other key employees of such Firm in the form of
bonuses. Thus, the portion of Affiliated Firm revenues retained by the Firms
and used to pay salaries, fund operating expenses and bonuses is included in
the Company's Consolidated Statement of Income.
Under each agreement, when an Affiliated Firm is acquired by UAM, the "base
revenues" of the Firm are established, and a share of such revenues is allocated
to UAM, with the remaining balance being the acquired Firm's share of revenues.
In addition, agreement is reached on the Firm's and UAM's respective percentage
shares of changes in such Firm's revenues compared to its base revenues. The
Affiliated Firm is required to pay for all of its business expenses out of its
share of its revenues. Each year, the amount of the Affiliated Firm's revenues
that is paid to UAM and the amount that is retained by the Firm are adjusted
upwards in the case of growth in such Firm's revenues over its base, or
downwards in the case of decreases in such Firm's revenues below its base, by
applying the agreed-upon percentages to the total increase or decrease in the
Firm's revenues. Under most of the existing revenue sharing agreements, UAM's
share of increases above a Firm's base revenues is between 30% and 50%, and
UAM's share of decreases below a Firm's base revenues is between 50% and 70%.
Thus, in any year in which the Affiliated Firm's revenues increase over its base
revenues, the Firm retains a portion of such additional amounts to use as its
principals may decide. The balance of the increase in the Affiliated Firm's
revenues is paid to UAM, in addition to UAM's share of such Firm's base
revenues. In any year in which the Affiliated Firm's revenues decrease to a
level below its base revenues, the Firm's share of its base revenues is reduced
by the Firm's portion of the decrease, and therefore, the Firm may need to
reduce its expenses. Similarly, the revenue sharing amount paid to UAM will be
reduced by UAM's share of any decline in the Affiliated Firm's revenues below
its base.
In addition to revenue sharing with its Affiliated Firms, UAM has
designed several incentive programs to reward business growth, client
retention, investment performance and managerial development. Incentives
awarded pursuant to these programs are paid in the form of cash, stock
options, incentive growth shares or some combination thereof.
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AFFILIATED FIRMS
Each of the Affiliated Firms conducts its own marketing, client relations,
research, portfolio management and administrative functions. Each Firm sets its
own investment advisory fees and manages its business independently on a day-to-
day basis.
The investment philosophy, style and approach of each Affiliated Firm are
independently determined by it, and these philosophies, styles and approaches
may vary substantially from Firm to Firm. As a consequence, more than one
Affiliated Firm may be retained by a single client since many clients employ
multiple investment advisers. The strategies employed and securities selected
by Affiliated Firms are separately chosen by each of them, with the result that
any one Firm may be bullish on the stock or bond market while another Firm is
bearish. Two of the Affiliated Firms are full-service institutional real estate
investment management firms with $13.3 billion of assets under management at
year end. These Firms invest in real estate properties in the U.S. and overseas
for their U.S. and foreign clients and provide a broad spectrum of real estate
services, including research, acquisition and disposition, financing and asset
and property management. In addition, another Affiliated Firm, with
$7.4 billion of assets under management at year end, manages stable value asset
portfolios such as guaranteed investment contracts ("GICs") and synthetic GICs.
All of these differences, when combined with the separate names and
identities of the various Affiliated Firms may: (a) tend to insulate UAM from
the various cycles of market performance for specific asset classes and
individual Firms; (b) permit more than one Affiliated Firm to serve any single
client; and (c) mean that some Affiliated Firms may attract substantial new
business while other Firms may be growing more slowly or losing business.
On December 31, 1995, UAM's 45 Affiliated Firms had 6,040 clients with
$142.1 billion of assets under management for an average account size of $23.5
million. On a fee basis, the 20 largest clients represented 10% of total
revenues and the 100 largest clients represented 21%. On an asset basis, the 20
largest clients represented 16% of the total assets under management and the 100
largest clients represented 34%. The client list includes many of the largest
corporate, government, charitable and union funds in the U.S. and abroad along
with the funds of several mutual fund organizations, many individuals and a
number of professional groups. Additional information regarding the number of
clients and types and amounts of assets under management is found in the table
on page 38 of the Company's 1995 Annual Report to Shareholders (the "Annual
Report"), which table is incorporated herein by reference.
The following table summarizes UAM's asset mix:
<TABLE>
<CAPTION>
Assets Under Management at December 31,
(in $ millions) 1993 1994 1995
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<S> <C> <C> <C> <C> <C> <C>
U.S. Equities $ 57,305 57% $ 52,546 50% $ 84,465 59%
U.S. Bonds and Cash 23,116 23 20,530 20 25,130 18
Real Estate 8,858 9 13,389 13 14,227 10
International Securities 10,805 11 10,587 10 10,897 8
Stable Value - - 6,994 7 7,405 5
-------- --- -------- --- -------- ---
$100,084 100% $104,046 100% $142,124 100%
-------- --- -------- --- -------- ---
-------- --- -------- --- -------- ---
</TABLE>
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As previously described, each of the Affiliated Firms is responsible for
and provides its own marketing of its investment management services.
Typically, one or more of the employees at each Firm is responsible for making
an initial contact with prospective clients. Most Firms have brochures
describing the Firm, its principals and its investment approach. These
brochures are mailed to prospective clients. In addition, clients are solicited
by telephone and in person. Once an initial contact is made, several face-to-
face meetings between the principals of such Firm and the prospective client
take place at which investment philosophy, management fees and a variety of
other related matters are discussed.
REGULATION
UAM's domestic investment advisory subsidiaries are registered with
and subject to regulation by the Securities and Exchange Commission
(the "SEC") under the Investment Advisers Act of 1940 and, where applicable,
under state advisory laws. The Company's foreign investment advisory affiliates
are members of or subject to certain self-regulatory bodies or other regulatory
agencies. The Company's brokerage subsidiaries are registered as broker-dealers
with the SEC under the Securities Exchange Act of 1934 and, where applicable,
under state securities laws, and are regulated by the SEC, state securities
administrators and the National Association of Securities Dealers, Inc. Three
Affiliated Firms are regulated by the Commodities Futures Trading Commission,
and two own trust companies which are subject to regulation by the Office of
Comptroller of the Currency or applicable state law.
UAM's domestic investment advisory subsidiaries are subject to ERISA and to
regulations promulgated thereunder to the extent they are "fiduciaries" under
ERISA with respect to their clients.
Registrations, reporting, maintenance of books and records and
compliance procedures required by these laws and regulations promulgated
thereunder are maintained by each UAM subsidiary on an independent basis.
The officers, directors and employees of UAM's investment advisory
subsidiaries may from time to time own securities which are also owned by one or
more of their clients. Each such Firm has internal guidelines and codes of
ethics with respect to individual investments, and requires reporting of
securities transactions and restricts certain transactions so as to minimize
possible conflicts of interest.
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UAM's Affiliated Firms as of December 31, 1995 are listed below in the
order in which they were acquired or organized.
<TABLE>
<CAPTION>
Principal Acquired
Affiliated Firm Location or Organized
- --------------- -------- ------------
<S> <C> <C>
Nelson, Benson & Zellmer, Inc. Denver, CO August, 1983
Chicago Asset Management Company Chicago, IL October, 1983
Hamilton, Allen & Associates, Inc. Atlanta, GA February, 1984
Hellman, Jordan Management Company, Inc. Boston, MA August, 1984
Thompson, Siegel & Walmsley, Inc. Richmond, VA December, 1984
Sterling Capital Management Company Charlotte, NC December, 1984
Analytic Investment Management, Inc.(1) Irvine, CA May, 1985
Northern Capital Management, Inc. Madison, WI January, 1986
Cooke & Bieler, Inc. Philadelphia, PA February, 1986
Olympic Capital Management, Inc. Seattle, WA June, 1986
Fiduciary Management Associates, Inc. Chicago, IL June, 1986
Investment Counselors of Maryland, Inc. Baltimore, MD December, 1986
Hagler, Mastrovita & Hewitt, Inc. Boston, MA December, 1986
Rothschild/Pell, Rudman & Co., Inc. Baltimore, MD December, 1986
Rice, Hall, James & Associates San Diego, CA May, 1987
C.S. McKee & Company, Inc. Pittsburgh, PA August, 1987
Hanson Investment Management Company San Rafael, CA August, 1987
Barrow, Hanley, Mewhinney & Strauss, Inc. Dallas, TX January, 1988
Sirach Capital Management, Inc. Seattle, WA January, 1989
Dewey Square Investors Corporation Boston, MA May, 1989
The Campbell Group, Inc. Portland, OR May, 1989
Cambiar Investors, Inc. Englewood, CO August, 1990
Newbold's Asset Management, Inc. Bryn Mawr, PA September, 1990
First Pacific Advisors, Inc. Los Angeles, CA June, 1991
Spectrum Asset Management, Inc. Stamford, CT November, 1991
Acadian Asset Management, Inc. Boston, MA February, 1992
Alpha Global Fixed Income Managers London, England March, 1992
The L&B Group Dallas, TX June, 1992
NWQ Investment Management Company Los Angeles, CA October, 1992
Tom Johnson Investment Management, Inc. Oklahoma City, OK December, 1992
Regis Retirement Plan Services New York, NY February, 1993
Pell, Rudman & Co., Inc. Boston, MA March, 1993
Ki Pacific Asset Management London, England June, 1993
Heitman Financial Ltd. Chicago, IL August, 1993
Murray Johnstone Limited Glasgow, Scotland November, 1993
GSB Investment Management, Inc. Fort Worth, TX December, 1993
Dwight Asset Management Company Burlington, VT January, 1994
Investment Research Company Chicago, IL February, 1994
Suffolk Capital Management, Inc. New York, NY July, 1994
United Asset Management (Japan), Inc. Tokyo, Japan October, 1994
UAM Investment Services, Inc. Boston, MA January, 1995
Provident Investment Counsel Pasadena, CA February, 1995
Pilgrim Baxter & Associates Wayne, PA April, 1995
Jacobs Asset Management Fort Lauderdale, FL July, 1995
UAM Fund Services, Inc. Boston, MA October, 1995
</TABLE>
(1) Name was changed from Analytic Investment Management, Inc. to Analytic-TSA
Global Asset Management, Inc., on January 31, 1996, upon the acquisition of
TSA Capital Management, Inc.
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EMPLOYEES
The UAM holding company has 51 employees, seven of whom are executive
officers of UAM (see Item 10, Directors and Executive Officers). Each
Affiliated Firm employs its own investment advisory, marketing and client
service, administrative and operations personnel as needed to provide
advisory services to its clients and to maintain necessary records in
accordance with various regulatory agencies (see "Affiliated Firms" and
"Regulation" on pages 7 and 8, respectively). At December 31, 1995, the
Company as a whole employed 2,171 persons. These numbers exclude 1,783
individuals who are employed by the property management subsidiaries of The
L&B Group and Heitman Financial Ltd. and whose total compensation is billed
directly to clients of these affiliates.
ITEM 2. PROPERTY
UAM's only offices are its executive offices in Boston, Massachusetts,
which occupy approximately 17,000 square feet under a lease which expires in
1997. Affiliated Firms are likewise lessees of their respective offices under
leases which expire at various dates.
ITEM 3. LEGAL PROCEEDINGS
Certain of the Company's subsidiaries are subject to legal proceedings
arising in the ordinary course of business. On the basis of information
presently available and advice received from counsel, it is the opinion of
management that the disposition or ultimate determination of such legal
proceedings will not have a material adverse effect on the financial position
of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to the vote of the security holders of the
Company during the fourth quarter of the fiscal year covered by this report.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
As of December 31, 1995, there were 447 shareholders of record. As of
March 4, 1996, there were 471 shareholders of record. The balance of the
information required by this item is incorporated herein by reference to the
"Common Stock Information" appearing on page 57 of the Annual Report.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is incorporated herein by reference
to the "Eleven Year Review" appearing on pages 42 and 43 of the Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this item is incorporated herein by reference
to the "Management's Discussion and Analysis" appearing on pages 39 through 41
of the Annual Report.
10
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is incorporated herein by reference
to the "Selected Quarterly Financial Data" on page 57 of the Annual Report,
"Consolidated Financial Statements" and "Notes to the Consolidated Financial
Statements" appearing on pages 44 through 55 of the Annual Report and the
"Report of Independent Accountants" on page 56 of the Annual Report. (See also
the "Financial Statement Schedule" filed under Item 14 of this Form 10-K.)
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is incorporated herein by reference
to the sections entitled "Election of Directors-Nominees for Election as
Directors" and "Executive Compensation-Executive Officers" included in the
Company's Proxy Statement for the Annual Meeting of Stockholders to be held on
May 16, 1996 (the "Proxy Statement").
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by reference
to the sections entitled "Executive Compensation-Summary Compensation Table,"
"Executive Compensation-Option Grants in 1995," "Executive Compensation-
Aggregated Option Exercises in 1995 and Option Values at December 31, 1995" and
"Election of Directors-Directors' Fees" included in the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated herein by reference
to the section entitled "Voting Securities" included in the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated herein by reference
to the section entitled "Election of Directors-Certain Transactions" included in
the Proxy Statement.
11
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The following consolidated financial statements of United Asset Management
Corporation and report of independent accountants, included on pages 44
through 56 of the Annual Report, are incorporated herein by reference as a
part of this Form 10-K:
Page(s) in the
Title Annual Report
----- -------------
Report of Independent Accountants 56
Consolidated Balance Sheet as of December 31, 1995
and 1994 44
Consolidated Statement of Income for the three years
ended December 31, 1995 45
Consolidated Statement of Cash Flows for the three
years ended December 31, 1995 46
Consolidated Statement of Changes in Stockholders'
Equity for the three years ended December 31, 1995 47
Notes to Consolidated Financial Statements 48-55
2. Financial Statement Schedule
The following consolidated financial statement schedule and report of
independent accountants are filed as a part of this Form 10-K and are
located on the following pages:
Page
----
Report of Independent Accountants on Financial F-1
Statement Schedule
Schedule VIII Valuation and Qualifying Accounts for F-3
the three years ended December 31, 1995
All other schedules have been omitted since they are not required, not
applicable or the information is contained in the Financial Statements or
Notes thereto.
12
<PAGE>
3. Exhibits
Exhibit
Number Title
------ -----
(1) 3.1 Restated Certificate of Incorporation of the Registrant.
(1) 3.2 By-Laws of the Registrant.
(2) 4.1 Specimen Certificate of Common Stock,
$.01 par value, of the Registrant.
(3) 4.2 Agreement to furnish copies of subordinated debt instruments
to the Commission.
9.0 Not Applicable
(4) 10.1 Acquisition Agreement by and among United Asset Management
Corporation, Heitman Financial Ltd., JMB Institutional
Realty Corporation, JMB Realty Corporation and Certain
Affiliates of JMB Institutional Realty Corporation and JMB
Realty Corporation dated as of October 18, 1994.
(4) 10.2 Acquisition Agreement by and among United Asset Management
Corporation, Provident Investment Counsel, PIC Newco, Inc.
and the Stockholders of Provident Investment Counsel dated
as of November 10, 1994.
(1) 10.3 Second Amended and Restated Reducing Credit Agreement dated
as of November 18, 1994, among United Asset Management
Corporation, the banks parties thereto, Morgan Guaranty
Trust Company of New York, as Agent, and The First National
Bank of Boston, as Collateral Agent.
(5) 10.4 Note Purchase Agreement dated as of August 1, 1995.
(5) 10.5 First Amendment and consent dated as of August 1, 1995 to
the Second Amended and Restated Credit Agreement dated as of
November 18, 1994.
(6) 10.6 United Asset Management Corporation Profit Sharing and
401(k) Plan dated as of May 11, 1989 and amended and
restated as of November 26, 1990.
(7) 10.7 Revised First Amendment to United Asset Management
Corporation Profit Sharing and 401(k) Plan effective as of
January 1, 1992.
(7) 10.8 Second Amendment to United Asset Management Corporation
Profit Sharing and 401(k) Plan effective as of January 1,
1993.
(1) 10.9 Third Amendment to United Asset Management Corporation
Profit Sharing and 401(k) Plan effective as of January 1,
1994.
13
<PAGE>
10.10 Fourth Amendment to United Asset Management Corporation
Profit Sharing and 401(k) Plan effective as of January 1,
1995.
(1) 10.11 1994 Stock Option Plan.
(1) 10.12 1994 Eligible Directors Stock Option Plan.
10.13 United Asset Management Corporation Deferred Compensation
Plan effective January 1, 1994.
(8) 10.14 Consulting Agreement between United Asset Management
Corporation and David I. Russell dated as of January 1,
1993.
11.1 Calculation of Earnings Per Share.
12.0 Not Applicable
13.1 Annual Report to Shareholders for the Year Ended
December 31, 1995.
16.0 Not Applicable
18.0 Not Applicable
21.1 Subsidiaries of the Registrant.
22.0 Not Applicable
23.1 Consent of Independent Accountants.
24.0 Not Applicable
27.0 Financial Data Schedule for the Year Ended
December 31, 1995.
28.0 Not Applicable
_________________
(1) Filed as an exhibit to the Company's Annual Report on Form 10-K
for the year ended December 31, 1994, and incorporated herein by
reference.
(2) Filed as an Exhibit to the Company's Form S-1 as filed with the
Commission and which became effective on August 22, 1986, and
incorporated herein by reference (Registration No. 33-6874).
(3) Filed as an Exhibit to the Company's Annual Report on Form 10-K
for the year ended December 31, 1988, and incorporated herein by
reference.
(4) Filed as an Exhibit to the Company's Current Report on Form 8-K
as filed with the Commission on December 1, 1994, and
incorporated herein by reference.
(5) Filed as an Exhibit to the Company's Quarterly Report on
Form 10-Q for the period ended September 30, 1995, and
incorporated herein by reference.
(6) Filed as an Exhibit to the Company's Annual Report on Form 10-K
for the year ended December 31, 1990, and incorporated herein by
reference.
14
<PAGE>
(7) Filed as an Exhibit to the Company's Annual Report on Form 10-K
for the year ended December 31, 1993, and incorporated herein by
reference.
(8) Filed as an Exhibit to the Company's Annual Report on Form 10-K
for the year ended December 31, 1992, and incorporated herein by
reference.
Location of Documents Pertaining to Executive Compensation Plans and
Arrangements:
(1) 1994 Stock Option Plan, Exhibit 10.11 to this Form 10-K.
(2) 1994 Eligible Directors Stock Option Plan, Exhibit 10.12 to this
Form 10-K.
(3) United Asset Management Corporation Deferred Compensation Plan
effective January 1, 1994, Exhibit 10.13 to this Form 10-K.
(4) Consulting Agreement between United Asset Management Corporation and
David I. Russell dated as of January 1, 1993 - Form 10-K for fiscal
year ended December 31, 1992, Exhibit 10.14 to this Form 10-K.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the fourth quarter
of the fiscal year covered by this report.
15
<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.
UNITED ASSET MANAGEMENT CORPORATION
-----------------------------------
(Registrant)
Date: March 28, 1996 By /s/ Norton H. Reamer
---------------------------------
Norton H. Reamer
President and
Chief Executive Officer
By /s/ William H. Park
---------------------------------
William H. Park
Executive Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant in
the capacities and on the dates indicated.
/s/ Norton H. Reamer
- ----------------------------------
(Norton H. Reamer) Director March 28, 1996
/s/ Richard A. Englander
- ----------------------------------
(Richard A. Englander) Director March 28, 1996
/s/ Robert J. Greenebaum
- ----------------------------------
(Robert J. Greenebaum) Director March 28, 1996
/s/ Charles E. Haldeman, Jr.
- ----------------------------------
(Charles E. Haldeman, Jr.) Director March 28, 1996
/s/ Robert M. Kommerstad
- ----------------------------------
(Robert M. Kommerstad) Director March 28, 1996
/s/ M. Thomas Lardner
- ----------------------------------
(M. Thomas Lardner) Director March 28, 1996
/s/ Jay O. Light
- ----------------------------------
(Jay O. Light) Director March 28, 1996
/s/ John F. McNamara
- ----------------------------------
(John F. McNamara) Director March 28, 1996
/s/ David I. Russell
- ----------------------------------
(David I. Russell) Director March 28, 1996
/s/ Philip Scaturro
- ----------------------------------
(Philip Scaturro) Director March 28, 1996
/s/ John A. Shane
- ----------------------------------
(John A. Shane) Director March 28, 1996
/s/ Barbara S. Thomas
- ----------------------------------
(Barbara S. Thomas) Director March 28, 1996
16
<PAGE>
Exhibit 11.1
UNITED ASSET MANAGEMENT CORPORATION
CALCULATION OF EARNINGS PER SHARE
(in thousands, except per-share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------
1995 1994 1993
<S> <C> <C> <C>
Common and common equivalent
shares:
Net income................... $67,317 $59,012 $53,287
Adjustments thereto (1)...... 4,790 - -
------- ------- -------
Adjusted net income.......... $72,107 $59,012 $53,287
------- ------- -------
------- ------- -------
Average shares outstanding... 30,200 28,084 25,968
Adjustments thereto (2)...... 3,076 1,441 2,913
------- ------- -------
Shares used in computation...... 33,276 29,525 28,881
------- ------- -------
------- ------- -------
Per share....................... $ 2.17 $ 2.00 $ 1.85
------- ------- -------
------- ------- -------
Common shares-assuming full
dilution:
Net income................... $67,317 $59,012 $53,287
Adjustments thereto (1)...... 4,653 - -
------- ------- -------
Adjusted net income.......... $71,970 $59,012 $53,287
------- ------- -------
------- ------- -------
Average shares outstanding... 30,200 28,084 25,968
Adjustments thereto (2)...... 3,076 1,486 3,127
------- ------- -------
Shares used in computation...... 33,276 29,570 29,095
------- ------- -------
------- ------- -------
Per share....................... $ 2.16 $ 2.00 $ 1.83
------- ------- -------
------- ------- -------
</TABLE>
______________
(1) The proceeds from the exercise of stock options and warrants in accordance
with the modified treasury stock method are first used to buy back up to
20% of the Company's common stock at the average price for the period in
the primary calculation and at the higher of the average or closing price
in the fully diluted calculation. Any remaining proceeds are used to
retire debt, and this adjusts income for the interest assumed to be saved,
net of income tax, from the use of such proceeds.
(2) Adjusts shares for stock options and warrants under the modified treasury
stock method and contingently issuable shares based on the probability of
issuance, after adjusting for the stock assumed repurchased in accordance
with (1) above.
17
<PAGE>
UNITED ASSET MANAGEMENT CORPORATION Exhibit 21.1
SUBSIDIARIES OF THE REGISTRANT
Jurisdiction of Financial
Affiliated Firm Organization Statements
- --------------- ------------ ----------
Acadian Asset Management, Inc. Massachusetts Consolidated
Alpha Global Fixed Income Managers Delaware Consolidated
Analytic-TSA Global Asset Management, Inc. California Consolidated
Barrow, Hanley, Mewhinney & Strauss, Inc. Nevada Consolidated
Cambiar Investors, Inc. Colorado Consolidated
The Campbell Group, Inc. Delaware Consolidated
Chicago Asset Management Company Delaware Consolidated
Cooke & Bieler, Inc. Pennsylvania Consolidated
Dewey Square Investors Corporation Delaware Consolidated
Dwight Asset Management Company Delaware Consolidated
Fiduciary Management Associates, Inc. Delaware Consolidated
First Pacific Advisors, Inc. Massachusetts Consolidated
GSB Investment Management, Inc. Delaware Consolidated
Hagler, Mastrovita & Hewitt, Inc. Delaware Consolidated
Hamilton, Allen & Associates, Inc. Delaware Consolidated
Hanson Investment Management Company California Consolidated
Heitman Financial Ltd. Delaware Consolidated
Heitman Properties Ltd.(1) Illinois Consolidated
Heitman/JMB Advisory Corporation Illinois Consolidated
Hellman, Jordan Management Company, Inc. Delaware Consolidated
Investment Counselors of Maryland, Inc. Maryland Consolidated
Investment Research Company Illinois Consolidated
Jacobs Asset Management Delaware Consolidated
Tom Johnson Investment Management, Inc. Massachusetts Consolidated
Ki Pacific Asset Management, Inc. Delaware Consolidated
L&B Realty Advisors, Inc. (The L&B Group) Delaware Consolidated
L&B Institutional Property Managers, Inc.(2) Delaware Consolidated
L&B Real Estate Counsel Texas Consolidated
C.S. McKee & Company, Inc. Pennsylvania Consolidated
Murray Johnstone Limited Scotland Consolidated
Nelson, Benson & Zellmer, Inc. Colorado Consolidated
Newbold's Asset Management, Inc. Pennsylvania Consolidated
Northern Capital Management, Inc. Wisconsin Consolidated
NWQ Investment Management Company Massachusetts Consolidated
Olympic Capital Management, Inc. Washington Consolidated
Pell, Rudman & Co., Inc. Delaware Consolidated
Pilgrim Baxter & Associates Delaware Consolidated
Provident Investment Counsel Massachusetts Consolidated
Regis Retirement Plan Services Delaware Consolidated
Rice, Hall, James & Associates California Consolidated
Rothschild/Pell, Rudman & Co., Inc. Maryland Consolidated
Sirach Capital Management, Inc. Washington Consolidated
Spectrum Asset Management, Inc. Connecticut Consolidated
Sterling Capital Management Company North Carolina Consolidated
Suffolk Capital Management, Inc. Delaware Consolidated
Thompson, Siegel & Walmsley, Inc. Virginia Consolidated
UAM Fund Distributors, Inc. Massachusetts Consolidated
UAM Fund Services, Inc. Delaware Consolidated
UAM Investment Services, Inc. Delaware Consolidated
United Asset Management (Japan), Inc. Delaware Consolidated
All of the Registrant's subsidiaries do business under the respective names
indicated above and are wholly owned.
(1) Heitman Properties Ltd. has 40 wholly owned property management
subsidiaries operating in the U.S.
(2) L&B Institutional Property Managers, Inc. has 5 wholly owned property
management subsidiaries operating in the U.S.
18
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of United Asset Management Corporation
Our audits of the consolidated financial statements referred to in our report
dated February 7, 1996 appearing on page 56 of the 1995 Annual Report to
Shareholders of United Asset Management Corporation (which report and
consolidated financial statements are incorporated by reference in this Annual
Report on Form 10-K) also included an audit of the Financial Statement Schedule
listed in Item 14(a) of this Form 10-K. In our opinion, this Financial
Statement Schedule presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related consolidated
financial statements.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Boston, Massachusetts
February 7, 1996
F-1
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-3 (Nos. 33-36928,
33-44215, 33-46310, 33-63350, 33-69034, 33-51443, 33-52517, 33-57049 and
33-64449) and in the Registration Statements on Form S-8 (Nos. 33-10621,
33-21756, 33-34288, 33-48858 and 33-54233) of United Asset Management
Corporation of our report dated February 7, 1996 appearing on page 56 of the
Annual Report to Shareholders which is incorporated in this Annual Report on
Form 10-K. We also consent to the incorporation by reference of our report on
the Financial Statement Schedule, which appears on page F-1 of this Form 10-K.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Boston, Massachusetts
March 25, 1996
F-2
<PAGE>
UNITED ASSET MANAGEMENT CORPORATION Schedule VIII
VALUATION AND QUALIFYING ACCOUNTS
(in $ thousands)
<TABLE>
<CAPTION>
Cost Assigned
to Contracts Acquired Accumulated Amortization
--------------------------------------- ---------------------------------------------------
Weighted
Range of Average Ending
Estimated Estimated Tax
Remaining Remaining Balance
Lives Lives Beginning Ending Beginning Charged to Ending in Excess
Firm (in years) (in years) Balance Additions Other Balance Balance Operations Other Balance of Book
- ---- ---------- ---------- --------- --------- ----- ---------- --------- ---------- ----- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1993
BHM&S 9-10 9 $106,088 $ - $ - $ 106,088 $ 34,356 $ 7,284 $ - $ 41,640 $ 7,979
FPA 3-21 12 51,032 - - 51,032 5,337 3,533 - 8,870 2,432
NAM 2-20 13 55,020 - - 55,020 7,989 3,422 - 11,411 (A)
NWQ 3-12 11 96,011 65 - 96,076 1,597 8,078 - 9,675 12,869
All Others 1-21 9 321,957 49,610 - 371,567 120,306 26,176 - 146,482 54,247
-------- -------- ----- ---------- -------- ------- ----- -------- --------
$630,108 $ 49,675 $ - $ 679,783 $169,585 $48,493 $ - $218,078 $ 77,527
-------- -------- ----- ---------- -------- ------- ----- -------- --------
-------- -------- ----- ---------- -------- ------- ----- -------- --------
1994
BHM&S 8-9 8 $106,088 $ - $ - $ 106,088 $ 41,640 $ 7,284 $ - $ 48,924 $ 14,774
FPA 2-20 11 51,032 - - 51,032 8,870 3,533 - 12,403 4,998
HFL 4-22 15 - 212,668 - 212,668 - 1,142 - 1,142 -
NAM 1-19 9 55,020 - - 55,020 11,411 4,311 - 15,722 (A)
NWQ 2-11 10 96,076 - - 96,076 9,675 8,077 - 17,752 16,788
All Others 1-20 8 371,567 36,878 (755) 407,690 146,482 30,774 (755) 176,501 49,665
-------- -------- ----- ---------- -------- ------- ----- -------- --------
$679,783 $249,546 $(755) $ 928,574 $218,078 $55,121 $(755) $272,444 $ 86,225
-------- -------- ----- ---------- -------- ------- ----- -------- --------
-------- -------- ----- ---------- -------- ------- ----- -------- --------
1995
BHM&S 7-8 7 $106,088 $ - $ - $ 106,088 $ 48,924 $ 7,284 $ - $ 56,208 $ 22,062
HFL 3-21 14 212,668 7,748 - 220,416 1,142 14,678 - 15,820 -
NWQ 1-10 9 96,076 - - 96,076 17,752 8,077 - 25,829 21,620
PBA 5-17 15 - 104,605 - 104,605 - 4,293 - 4,293 789
PIC 3-23 18 - 347,307 - 347,307 - 16,309 - 16,309 5,344
All Others 1-19 7 513,742 14,682 - 528,424 204,626 42,551 - 247,177 54,033
-------- -------- ----- ---------- -------- ------- ----- -------- --------
$928,574 $474,342 $ - $1,402,916 $272,444 $93,192 $ - $365,636 $103,848
-------- -------- ----- ---------- -------- ------- ----- -------- --------
-------- -------- ----- ---------- -------- ------- ----- -------- --------
</TABLE>
(A) Due to the structure of this acquisition, tax amortization is less than
book amortization.
F-3
<PAGE>
UNITED ASSET MANAGEMENT CORPORATION
PROFIT SHARING AND 401(k) PLAN
FOURTH AMENDMENT
WHEREAS, United Asset Management Corporation (hereinafter referred to as
the "Company") adopted the United Asset Management Corporation Profit Sharing
and 401(k) Plan (hereinafter referred to as the "Plan") effective as of January
1, 1989 and restated effective January 1, 1990, to provide retirement benefits
for certain employees of the Company and its subsidiaries; and
WHEREAS, in accordance with Article 11, the Company wishes to amend the
Plan;
NOW, THEREFORE, the Plan is hereby amended effective as of January 1, 1995,
unless otherwise indicated, as follows:
1. Section 7.5 of Article 7 is amended to read and provide as follows:
Upon the death of any Participant, whether or not such Participant is an
active Employee, terminated, or receiving a benefit in accordance with
Section 7.3(a), the Participant's Total Account in the Trust Fund shall be
payable to the Participant's surviving Spouse or to the Participant's
Beneficiary as designated in accordance with Section 7.6 of the Plan.
If no election is made pursuant to the following paragraph, the
Participant's vested interest shall be distributed in a lump sum payable in
accordance with Section 7.2 as soon as practicable after the first
Valuation Date that follows the death of the Participant by at least ten
(10) days. The amount of any distribution made pursuant to this paragraph
shall be determined as of the applicable Valuation Date determined under
the preceding sentence.
Subject to the limitations of Section 7.7, the Beneficiary of a deceased
Participant may elect (by giving at least ten (10) days' notice prior to
the date that distribution would otherwise be made pursuant to the
preceding paragraph) to defer distribution of a lump sum payable in
accordance with Section 7.2 or may elect
<PAGE>
installment payments identical to those permitted under Section 7.3(a).
Any election under this paragraph shall be subject to the following
restrictions:
(i) No benefit account of $3,500 or less shall be eligible for
deferral of a lump-sum payment or for installment payments.
(ii) A non-Spouse Beneficiary may not defer payment of a lump sum
distribution beyond December 31 of the year that contains the
fifth anniversary of the Participant's death.
(iii) A non-Spouse Beneficiary may not delay commencement of
installment payments beyond December 31 of the year that contains
the first anniversary of the Participant's death.
(iv) A Spouse-Beneficiary may not delay payment of a lump sum
distribution or commencement of installment payments beyond the
April 1 following the calendar year in which the Participant
would have attained age 70-1/2.
(v) All such delayed or installment distributions shall be determined
and made or commenced as of the latest administratively
convenient Valuation Date prior to the earlier of the date
elected by the recipient for the distribution or the applicable
deadline for the distribution in subparagraphs (i) - (iv) above.
(vi) Except to the extent expressly contradicted in this Section 7.5,
such delayed or installment distributions shall be subject to the
provisions of Sections 7.7 and 7.8, including without limitation
the restriction that installment payments may not extend beyond
the life expectancy of the recipient.
Notwithstanding the foregoing, if payments of a Participant's vested
interest in the Plan have commenced prior to the Participant's death, then
upon such Participant's death the Participant's remaining interest in the
Plan will be distributed at least as rapidly as under the method of
distribution being utilized as of the date of the Participant's death.
2. Article 7 is amended by adding the following new Section 7.11:
7.11 IN-KIND DISTRIBUTIONS
(a) No in-kind distributions shall be permitted from any general
investment fund established pursuant to Section 5.1.
(b) A Participant or Beneficiary may elect to receive
distribution of segregated investment assets acquired pursuant to
Section 5.8,
2
<PAGE>
either in cash or in kind, provided that in the event any such
segregated investment is illiquid and cannot be sold on
reasonable terms, the Trustee may distribute such asset in kind
without the consent of the Participant or Beneficiary.
3. Section 10.6 of Article 10 is amended by adding the following as the Second
Sentence of the Section:
Each Company Contribution to the Plan is hereby deemed to be
conditioned on its deductibility for federal income tax purposes by
either United Asset Management Corporation or the Company that has
made the contribution.
Except as specifically amended hereby, the Plan is hereby reaffirmed in all
respects.
Signed as a sealed Massachusetts instrument effective as of the date stated
above.
UNITED ASSET MANAGEMENT
CORPORATION
By: /s/ William H. Park
_________________________________
William H. Park, Senior Vice President
2-9-95
- --------------
Date
3
<PAGE>
3/16/95
UNITED ASSET MANAGEMENT CORPORATION
DEFERRED COMPENSATION PLAN
EFFECTIVE JANUARY 1, 1994
<PAGE>
UNITED ASSET MANAGEMENT CORPORATION
DEFERRED COMPENSATION PLAN
TABLE OF CONTENTS
SECTION 1. ADOPTION AND GENERAL MATTERS . . . . . . . . . . . . . . . . . . . 1
1.1 Adoption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Purpose of the Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Nature of the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Applicability of ERISA to the Plan . . . . . . . . . . . . . . . . . . . 1
SECTION 2. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 "Account". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 "Allocation" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 "Beneficiary". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.4 "Benefit". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.5 "Board". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.6 "Change of Control". . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.7 "Code" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.8 "Company". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.9 "Company Contributions". . . . . . . . . . . . . . . . . . . . . . . . . 6
2.10 "Compensation". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.11 "Effective Date". . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.12 "Eligible Employee" . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.13 "Eligible Participant". . . . . . . . . . . . . . . . . . . . . . . . . 7
2.14 "Entry Date". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
-i-
<PAGE>
2.15 "Liquidity Fund". . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.16 "Mutual Fund Election". . . . . . . . . . . . . . . . . . . . . . . . . 7
2.17 "Notional Shares" . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.18 "Notional Shares Election". . . . . . . . . . . . . . . . . . . . . . . 8
2.19 "Participant" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.20 "Plan Year" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.21 "Qualified Plan". . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.22 "Retirement Committee". . . . . . . . . . . . . . . . . . . . . . . . . 8
2.23 "Separation from Service" . . . . . . . . . . . . . . . . . . . . . . . 8
2.24 "Stock" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.25 "Valuation Date". . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.26 "Vesting Percentage". . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 3. PARTICIPATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.1 Eligibility. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.2 Termination of Eligibility . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 4. ALLOCATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.1 No Contributions Permitted . . . . . . . . . . . . . . . . . . . . . . . 8
4.2 Allocations to Accounts. . . . . . . . . . . . . . . . . . . . . . . . . 9
4.3 No Allocation of Forfeitures . . . . . . . . . . . . . . . . . . . . . . 9
4.4 Responsibility for Benefit Payments. . . . . . . . . . . . . . . . . . .10
SECTION 5. TIME OF BENEFIT PAYMENT. . . . . . . . . . . . . . . . . . . . . .10
5.1 Eligibility for Payment. . . . . . . . . . . . . . . . . . . . . . . . .10
5.2 Benefit Commencement Date.. . . . . . . . . . . . . . . . . . . . . . .10
(a) Time of Commencement. . . . . . . . . . . . . . . . . . . . . . . . .10
(b) Benefit Commencement Election . . . . . . . . . . . . . . . . . . . .10
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SECTION 6. AMOUNT OF BENEFIT PAYMENT. . . . . . . . . . . . . . . . . . . . .11
6.1 Amount of Benefit. . . . . . . . . . . . . . . . . . . . . . . . . . . .11
6.2 Vested Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
6.3 Forfeitures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
SECTION 7. FORM AND MEDIUM OF BENEFIT PAYMENTS. . . . . . . . . . . . . . . .12
7.1 Benefit Form Available . . . . . . . . . . . . . . . . . . . . . . . . .12
7.2 Medium of Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . .12
(a) Under Mutual Fund Election. . . . . . . . . . . . . . . . . . . . . .12
(b) Under Notional Shares Election. . . . . . . . . . . . . . . . . . . .12
SECTION 8. PLAN ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . . .13
8.1 Retirement Committee . . . . . . . . . . . . . . . . . . . . . . . . . .13
8.2 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
8.3 Ownership of Assets. . . . . . . . . . . . . . . . . . . . . . . . . . .14
8.4 Accounts and Expenses. . . . . . . . . . . . . . . . . . . . . . . . . .14
8.5 Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
(a) Mutual Fund Election. . . . . . . . . . . . . . . . . . . . . . . . .15
(b) Notional Shares Election. . . . . . . . . . . . . . . . . . . . . . .16
SECTION 9. LIQUIDITY FUND . . . . . . . . . . . . . . . . . . . . . . . . . .16
9.1 Maintenance of Liquidity Fund. . . . . . . . . . . . . . . . . . . . . .16
9.2 Investment of Liquidity Fund . . . . . . . . . . . . . . . . . . . . . .18
9.3 Status of Liquidity Fund . . . . . . . . . . . . . . . . . . . . . . . .18
SECTION 10. AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . . . . . .18
10.1 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
10.2 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
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SECTION 11. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . .19
11.1 Limitations of Rights; Employment Relationship. . . . . . . . . . . . .19
11.2 Determination of Benefits, Claims, Procedure and Administration . . . .19
(a) Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
(b) Decision on Claim . . . . . . . . . . . . . . . . . . . . . . . . . .19
(c) Request for Review. . . . . . . . . . . . . . . . . . . . . . . . . .20
(d) Review of Decisions . . . . . . . . . . . . . . . . . . . . . . . . .20
11.3 Designation of Beneficiary. . . . . . . . . . . . . . . . . . . . . . .21
11.4 Non-Assignability of Benefits . . . . . . . . . . . . . . . . . . . . .21
11.5 Facility of Payments. . . . . . . . . . . . . . . . . . . . . . . . . .22
11.6 Obligations to Withhold and Pay Taxes . . . . . . . . . . . . . . . . .20
11.7 Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
11.8 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
11.9 Applicable Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
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3/16/95
UNITED ASSET MANAGEMENT CORPORATION
DEFERRED COMPENSATION PLAN
Section 1. Adoption and General Matters
1.1 ADOPTION. This Deferred Compensation Plan is hereby adopted as set
forth in the following pages, effective January 1, 1994, by United Asset
Management Corporation.
1.2 PURPOSE OF THE PLAN. The purpose of the Plan is to provide
employees who become covered under the Plan with enhanced retirement security
through tax-deferred benefits which will be payable on account of retirement,
death or other termination from employment or upon the occurrence of a change of
control over United Asset Management Corporation.
1.3 NATURE OF THE PLAN. The Plan shall be maintained for the exclusive
benefit of covered employees and is intended to comply with the requirements of
the Internal Revenue Code of 1986, as amended, and regulations thereunder, and
other applicable laws, as such laws apply to deferred compensation plans that
are not intended to be "qualified plans" pursuant to Section 401(a) of the Code
and are maintained by employers which are not "eligible employers" within the
meaning of Section 457(e)(1) of the Code.
1.4 APPLICABILITY OF ERISA TO THE PLAN. For purposes of the Employee
Retirement Income Security Act of 1974, as amended, the Company and each
Participant intend that this Plan be considered an "unfunded" arrangement
(within the meaning of Sections 201, 301 and 401 of such Act) that is maintained
primarily to provide deferred compensation benefits for the Participants, each
of whom is a member of a select group of management or highly compensated
employees of the Company.
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Section 2. Definitions
For purposes of the Plan, the following terms shall have the following
meanings:
2.1 "ACCOUNT" means the unfunded memorandum account maintained on the
books of the Company to reflect the aggregate sum of all Allocations made on the
Participant's behalf, as adjusted for the Participant's cumulative share of any
income, gains and losses on the imputed investment of such Account pursuant to
the Plan and to reflect all distributions, expenses and other charges or
adjustments allocable to such Account.
2.2 "ALLOCATION" means the amount, if any, credited from time to time
to a Participant's Account pursuant to Section 4.
2.3 "BENEFICIARY" means the individual(s), trust(s), or estate entitled
to receive benefits under this Plan after the death of a Participant or another
Beneficiary.
2.4 "BENEFIT" means the amount due a Participant or Beneficiary under
the Plan as determined under Subsection 6.1.
2.5 "BOARD" means the board of directors of the Company; provided that
to the extent that powers, duties, responsibilities or discretionary acts under
this Plan are delegated, either specifically or generally, to the Compensation
Committee of the Board, "Board" shall mean such Compensation Committee for all
such purposes other than actions described in Section 2.6.
2.6 "CHANGE OF CONTROL" means:
(a) The acquisition by any individual, entity or group (within the
meaning of Sections 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934
(the "Act")) (a "Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Act) of 20 percent or more of either (i) the then
outstanding shares of the Stock or (ii) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in the
election of the directors (the "Outstanding Company Voting Securities");
provided, however, that
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the following acquisitions shall not constitute a Change of Control: (A) any
acquisition directly from the Company (excluding an acquisition by virtue of the
exercise of a conversion privilege); (B) any acquisition by the Company or by
any corporation controlled by the Company; (C) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company; or (D) any acquisition by any corporation
pursuant to a consolidation or merger, if, following such consolidation or
merger, the conditions described in clauses (i), (ii), and (iii) of paragraph
(c) of this Subsection 2.6 are satisfied; or
(b) Individuals who, as of the Effective Date, constitute the Board
(the "Incumbent Board") ceasing for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the Effective Date whose election, or nomination for election by
the Company's shareholders, was approved by a vote or resolution of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of either an actual or threatened election contest (as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Act)
or other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board; or
(c) Adoption by the Board of a resolution approving an agreement of
consolidation of the Company with or merger of the Company into another
corporation or business entity in each case, unless, following such
consolidation or merger, (i) more than 60 percent of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
consolidation or merger and/or the combined voting power of the then outstanding
voting
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<PAGE>
securities of such corporation or business entity entitled to vote generally in
the election of directors (or other persons having the general power to direct
the affairs of such entity) is then beneficially owned, directly or indirectly,
by all or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Stock and Outstanding Company Voting
Securities immediately prior to such consolidation or merger in substantially
the same proportions as their ownership, immediately prior to such consolidation
or merger, of the Stock and/or Outstanding Company Voting Securities, as the
case may be, (ii) no Person (excluding the Company, any employee benefit plan
(or related trust) of the Company or such corporation or other business entity
resulting from such consolidation or merger and any Person beneficially owning,
immediately prior to such consolidation or merger, directly or indirectly, 35
percent or more of the Stock and/or Outstanding Company Voting Securities, as
the case may be) beneficially owns, directly or indirectly, 35 percent or more
of, respectively, the then outstanding shares of common stock of the corporation
resulting from such consolidation or merger or the combined voting power of the
then outstanding voting securities of such corporation or business entity
entitled to vote generally in the election of its directors (or other persons
having the general power to direct the affairs of such entity) and (iii) at
least a majority of the members of the board of directors (or other group of
persons having the general power to direct the affairs of the corporation or
other business entity) resulting from such consolidation or merger were members
of the Incumbent Board at the time of the execution of the initial agreement
providing for such consolidation or merger; provided that any right which shall
vest by reason of the action of the Board pursuant to this paragraph (c) shall
be divested, with respect to any such right not already exercised, upon (A) the
rejection of such agreement of consolidation or merger by the
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<PAGE>
stockholders of the Company or (B) its abandonment by either party thereto in
accordance with its terms; or
(d) Adoption by the requisite majority of the whole Board, or by the
holders of such majority of stock of the Company as is required by law or by the
Certificate of Incorporation or By-Laws of the Company as then in effect, of a
resolution or consent authorizing (i) the dissolution of the Company or (ii) the
sale or other disposition of all or substantially all of the assets of the
Company, other than to a corporation or other business entity with respect to
which, following such sale or other disposition, (A) more than 60 percent of,
respectively, the then outstanding shares of common stock of such corporation
and/or the combined voting power of the outstanding voting securities of such
corporation or other business entity entitled to vote generally in the election
of directors (or other persons having the general power to direct the affairs of
such entity) is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Stock and Outstanding Company Voting Securities
immediately prior to such sale or other disposition in substantially the same
proportions as their ownership, immediately prior to such sale or other
disposition, of the Stock and/or Outstanding Company Voting Securities, as the
case may be, (B) no Person (excluding the Company and any employee benefit plan
(or related trust) of the Company or such corporation or other business entity
and any Person beneficially owning, immediately prior to such sale or other
disposition, directly or indirectly, 35 percent or more of the Stock and/or
Outstanding Company Voting Securities, as the case may be) beneficially owns,
directly or indirectly, 35 percent or more of, respectively, the then
outstanding shares of common stock of such corporation and/or the combined
voting power of the then outstanding voting securities of such corporation or
other business entity entitled to vote generally in the election of
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<PAGE>
directors (or other persons having the general power to direct the affairs of
such entity) and (C) at least a majority of the members of the board of
directors (or other group of persons having the general power to direct the
affairs of such corporation or other entity) were members of the Incumbent Board
at the time of the execution of the initial agreement or action of the Board
providing for such sale or other disposition of assets of the Company; provided
that any right which shall vest by reason of the action of the Board or the
stockholders pursuant to this paragraph (d) shall be divested, with respect to
any such right not already exercised, upon the abandonment by the Company of
such dissolution, or such sale or other disposition of assets, as the case may
be.
2.7 "CODE" means the Internal Revenue Code of 1986, as amended, and
including all regulations thereunder.
2.8 "COMPANY" means United Asset Management Corporation.
2.9 "COMPANY CONTRIBUTIONS" has the meaning defined in Qualified Plan
Section 1.11 or any successor thereto and applied in Qualified Plan Article 4 or
any successor thereto.
2.10 "COMPENSATION" has the meaning provided in Qualified Plan Section
1.12 or any successor thereto, provided that no Participant's Compensation for
purposes of this Plan shall be subject to any limitations imposed under the Code
or under the Qualified Plan for purposes of complying with the Code, including
without limitation Code Section 401(a)(17) and the regulations thereunder.
2.11 "EFFECTIVE DATE" means January 1, 1994.
2.12 "ELIGIBLE EMPLOYEE" means an employee of the Company who meets all
of the following requirements: (a) the employee is eligible pursuant to Article
2 of the Qualified Plan to receive allocations of Company Contributions pursuant
to Article 4 of the Qualified Plan; (b) the
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<PAGE>
employee is designated by the Board as eligible to participate in this Plan; and
(c) the employee is a member of a select group of management or highly
compensated employees of the Company. For purposes of this Plan, such "select
group" shall include only employees who hold the rank of vice president of the
Company or senior and whose Compensation exceeds the limit in effect from time
to time under Code Section 401(a)(17) or any successor thereto.
2.13 "ELIGIBLE PARTICIPANT" means for any Plan Year each Participant who
is eligible pursuant to Article 4 of the Qualified Plan to receive an allocation
of Company Contributions made on account of such Plan Year.
2.14 "ENTRY DATE" means the date specified as such by the Board with
respect to a Participant. No Participant's Entry Date shall precede the
Effective Date.
2.15 "LIQUIDITY FUND" means the investment fund, if any, created and
owned by the Company pursuant to Section 9.
2.16 "MUTUAL FUND ELECTION" means the election available to each
Participant pursuant to Subsection 8.5(a).
2.17 "NOTIONAL SHARES" means fictitious shares of the Company's common
stock that are equivalent in value at all times to shares of Stock.
2.18 "NOTIONAL SHARES ELECTION" means the election available to each
participant pursuant to Subsection 8.5(b).
2.19 "PARTICIPANT" means a present or former Eligible Employee who is or
has been enrolled in the Plan and who retains the right to receive a Benefit
under the Plan.
2.20 "PLAN YEAR" has the meaning defined in Qualified Plan Section 1.29
or any successor thereto; provided that if no such term is therein defined at
any time, "Plan Year" shall mean the Company's fiscal year.
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<PAGE>
2.21 "QUALIFIED PLAN" means the United Asset Management Corporation
Profit Sharing and 401(k) Plan, as amended from time to time, and any successor
thereto designated by the Board as such for purposes of this Plan.
2.22 "RETIREMENT COMMITTEE" means the committee appointed pursuant to
Subsection 8.1.
2.23 "SEPARATION FROM SERVICE" means the termination of a Participant's
employment for any reason, including the death of the Participant.
2.24 "STOCK" means the Company's common stock, $.01 par value.
2.25 "VALUATION DATE" means the date or dates in each Plan Year as of
which Accounts are valued pursuant to Subsection 8.4.
2.26 "VESTING PERCENTAGE" means the percentage of a Participant's
Account which is nonforfeitable from time to time pursuant to Subsection 6.2.
Section 3. Participation
3.1 ELIGIBILITY. Each Eligible Employee shall become a Participant on
his or her Entry Date.
3.2 TERMINATION OF ELIGIBILITY. A Participant whose employment is
terminated for any reason or who otherwise ceases for any reason to be an
Eligible Employee shall remain a Participant in the Plan so long as he or she
retains the right to receive a Benefit under the Plan, but shall immediately
cease to be an Eligible Participant for purposes of receiving additional
Allocations under the Plan.
Section 4. Allocations
4.1 NO CONTRIBUTIONS PERMITTED. This Plan is unfunded and the Company
shall not make any contributions hereunder. Furthermore, no contributions by
Participants shall be required or permitted under this Plan. Notwithstanding
the foregoing, the Company shall make such Allocations under this Plan, if any,
for a Plan Year as are determined by the Board in its
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<PAGE>
sole and absolute discretion. All such Allocations for a Plan Year shall be
credited to the Accounts of the Eligible Participants for such Plan Year as
provided in Subsection 4.2.
4.2 ALLOCATIONS TO ACCOUNTS. On account of each Plan Year for which
the Board determines to make Allocations under this Plan, all Eligible
Participants in such Plan Year shall receive an Allocation credited to their
respective Accounts of an identical percentage (subject to the limitations
below) of their respective Compensations; provided that no Participant shall
receive an Allocation that exceeds the lesser of (a) 15 percent of his or her
Compensation for such Plan Year and (b) the amount of (i) $50,000 minus (ii) the
amount of any Company Contribution allocated to the Participant under the
Qualified Plan on account of such Plan Year.
4.3 NO ALLOCATION OF FORFEITURES. No forfeitures arising under this
Plan shall be allocated to any Participant.
4.4 RESPONSIBILITY FOR BENEFIT PAYMENTS. Although the Company will not
make any contributions under this Plan, it shall be responsible for paying all
Benefits as and when they fall due under the Plan.
Section 5. Time of Benefit Payment
5.1 ELIGIBILITY FOR PAYMENT. Benefits shall be paid from the Plan only
upon the occurrence of one or both of the following events: (a) Separation from
Service and (b) Change of Control.
5.2 BENEFIT COMMENCEMENT DATE.
(a) TIME OF COMMENCEMENT. Unless a Participant or Beneficiary (as the
case may be) has made a timely election to defer benefits with the approval of
the Retirement Committee pursuant to paragraph (b) of this Subsection 5.2, the
Participant's benefits under this Plan shall be paid 60 days after the earlier
of (i) the date of the Participant's Separation from Service and (ii) the date
on which a Change of Control occurs. Notwithstanding the foregoing, at any time
after a Participant's Separation from Service and prior to the earlier of (i)
payment of the Participant's Benefit pursuant to this Subsection 5.2 and (ii)
the date on which a Change of
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Control occurs, the Company may elect unilaterally to defer payment of all or
any portion of the Participant's Benefit until the next January following the
Participant's Separation from Service if the Participant was a "covered
employee" within the meaning of Code Section 162(m) at the time of his or her
Separation from Service. Any such election by the Company may be made by either
the Board, the Retirement Committee or the Company's chief executive officer,
and shall be evidenced in writing and sent to the Participant (at his or her
last known address).
(b) BENEFIT COMMENCEMENT ELECTION. Subject to the Retirement
Committee's approval, a Participant or Beneficiary may make a one-time
irrevocable election to defer payment of benefits to any determinable date
beyond 60 days after the Participant's Separation from Service or the date on
which a Change of Control occurs; provided that such election is made on the
form prescribed by the Retirement Committee and is received by the Retirement
Committee within 30 days after the Participant's Separation from Service or the
date on which a Change of Control occurs (as the case may be). The Retirement
Committee shall have absolute discretion to approve, disapprove or modify before
approving any such election to defer benefits.
Section 6. Amount of Benefit Payment
6.1 AMOUNT OF BENEFIT. A Participant's Benefit under the Plan (and the
Benefit of anyone claiming through the Participant, including without limitation
any Beneficiary) shall equal the vested balance (as determined pursuant to
Subsections 6.2 and 8.4) of the Participant's Account.
6.2 VESTED BALANCE. The vested balance of a Participant's Account
shall equal at any time the balance of such Account at such time multiplied by
the Participant's Vesting Percentage at such time. The Participant's Vesting
Percentage at any time prior to the occurrence of a Change of Control shall
equal the nonforfeitable percentage that the Participant is (or would be)
entitled to at such time under Qualified Plan Article 6, or any successor
thereto, in an account for Company Contributions. The Participant's Vesting
Percentage at any time on and after the date on which a Change of Control occurs
shall always be 100 percent.
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6.3 FORFEITURES. Any balance of a Participant's Account that is not
vested pursuant to Subsection 6.2 when the Participant's Benefit is paid shall
be forfeited at such time and shall always remain the sole property of the
Participant's Participating Employer.
Section 7. Form and Medium of Benefit Payments.
7.1 BENEFIT FORM AVAILABLE. Except to the extent that the Company
exercises its discretion pursuant to Subsection 5.2(a), all Benefits under the
Plan shall be paid in one lump sum.
7.2 MEDIUM OF PAYMENT.
(a) UNDER MUTUAL FUND ELECTION. Subject to the Retirement Committee's
approval, the portion of any Benefit for which the Mutual Fund Election of
Subsection 8.5(a) is in effect at the time of payment shall be paid in cash
(equal to the value of such portion of the Benefit as of the final Valuation
Date on or before the date of payment) or in kind (by distribution of assets in
the Liquidity Fund, or otherwise owned by the Company, representing such portion
of the Benefit), or in any combination thereof, at the recipient's election;
provided that such election is made on a form prescribed by the Retirement
Committee and is received by the Retirement Committee by such date as the
Retirement Committee may set. The Retirement Committee shall have absolute
discretion to approve, disapprove or modify before approving any such election
of payment medium.
(b) UNDER NOTIONAL SHARES ELECTION. The portion of any Benefit for
which the Notional Shares Election of Subsection 8.5(b) has been made shall be
paid by the distribution of shares of Stock equal in number to the Notional
Shares representing such portion of the Benefit as of the date of payment;
provided, however, that the aggregate number of shares of Stock that are to be
distributed under the Plan shall not exceed 50,000, subject to adjustment by the
Retirement Committee to equitably reflect the effects of any stock splits, stock
dividends, stock combinations, recapitalizations and other similar changes in
the capital structure of the Company after the Effective Date. At the Company's
sole option, such Stock may either be issued or
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purchased by the Company for delivery to the recipient. The Company shall
register all shares of Stock distributed under the Plan for resale pursuant to
applicable securities laws. Except to the extent that shares of Stock may not
be distributed because of the foregoing limit of this paragraph, no payment in
cash or other property shall be made of any part of the Notional Shares Election
portion of any Participant's Benefit.
Section 8. Plan Administration
8.1 RETIREMENT COMMITTEE. The Plan shall be administered by a
Retirement Committee consisting of one or more members appointed by the Board,
and shall be the committee serving from time to time as the Administrative
Committee of the Qualified Plan unless a different appointment is then in effect
under this Plan. Each member shall serve at the pleasure of the Board. The
Retirement Committee shall act by majority decision of its members; provided
that any one or more members may act singly to perform any ministerial act on
behalf of the Committee. The Committee shall have responsibility for the
operation and administration of the Plan and shall have the power and authority
to adopt, interpret, alter, amend or revoke all forms, rules and regulations
necessary to administer the Plan, to interpret all provisions of the Plan and
determine all questions of eligibility for participation in and benefits under
the Plan and all other issues of administration, and to delegate ministerial
duties and employ such outside professionals as may be required for prudent
administration of the Plan. The Retirement Committee shall also have the
authority to enter into agreements on behalf of any Participating Employer as
necessary to implement this Plan. The members of the Retirement Committee, if
otherwise Eligible Employees, may participate in the Plan, but shall not make
decisions of the Committee solely with respect to their own benefits.
8.2 INDEMNIFICATION. The Company shall indemnify and save harmless any
individual acting as a member of the Retirement Committee or in any other
fiduciary capacity from, against, for and in respect of any and all damages,
losses, obligations, liabilities, liens, deficiencies, attorneys' fees, costs
and expenses incident to the performance of such person's duties unless
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resulting from the gross negligence, willful misconduct, or lack of good faith
of such individual. Such indemnification shall apply to any such individual
even though at the time liability is imposed the individual was no longer acting
in a fiduciary capacity or as a member of the Retirement Committee.
8.3 OWNERSHIP OF ASSETS. All amounts allocated under this Plan, all
property and rights purchased with such amounts, and all income attributable to
such amounts, property or rights shall remain (until made available to the
Participant or Beneficiary or the occurrence of a Change of Control) solely the
property and rights of the Company (without being restricted to the provision of
benefits under this Plan) and shall be subject to the claims of the general
creditors of the Company. No trust is created under this Plan and it is not
otherwise funded in any manner. No Participant or Beneficiary shall have any
preferred claim on, or any beneficial ownership interest in, any assets of the
Company or any benefit Account maintained under the Plan prior to the time such
assets are distributed as a Benefit, and all rights created under the Plan shall
be mere unsecured contractual rights. Notwithstanding the foregoing, nothing in
this Plan shall be construed to prohibit any one or more Participants or
Beneficiaries from purchasing insurance to protect against loss on account of
the provisions of this Subsection 8.3, and the Company shall cooperate in any
effort to obtain such insurance; provided that any such insurance shall be
obtained, owned and paid for solely by the insured persons and not by the
Company.
8.4 ACCOUNTS AND EXPENSES. The Retirement Committee shall establish and
maintain an unfunded bookkeeping Account on behalf of each Participant and
surviving Beneficiary who is awaiting or receiving payment of a Benefit under
the Plan. Accounts shall be valued at least once each Plan Year on the
Valuation Date or Dates determined by the Retirement Committee, and each
Participant (or surviving Beneficiary) shall receive written notice of his or
her Account balance following such valuation. Account balances shall reflect
the cumulative Allocation amounts and any earnings or losses attributable to the
deemed investment of such amounts pursuant to Subsection 8.5, and shall be
reduced by (a) administrative, investment and other fees, in such amounts and at
such times as the Retirement Committee deems appropriate for the
-13-
<PAGE>
maintenance of this Plan and (b) benefits paid to or on behalf of the
Participant and/or anyone claiming through the Participant (including without
limitation any Beneficiary). Notwithstanding the foregoing, the Company shall
have the discretion, but not the obligation, to pay all or any portion of the
fees and expenses incurred in administering the Plan.
8.5 INVESTMENTS.
(a) MUTUAL FUND ELECTION.
(i) THE ELECTION. Each Participant may elect to have all or any
portion of his or her Allocations under the Plan be deemed to be invested in one
or more mutual funds selected by the Participant. All such elections shall be
made on a form prescribed by the Retirement Committee and shall be subject to
the following requirements and restrictions:
(1) A maximum of three mutual funds may be utilized by any Participant
at any one time;
(2) The Participant may change his or her designated funds and mix of
investments among such funds a maximum of once during each Plan Year;
(3) The availability of any particular mutual fund shall be subject to
the Retirement Committee's sole discretion; and
(4) No election shall be effective until it is received and approved by
the Retirement Committee.
(ii) THE INVESTMENT. The deemed investment in or sale of a mutual fund
pursuant to a Participant's election shall be made at the daily value of such
fund on the next business day after the Retirement Committee approves the
election.
(iii) INVESTMENT EXPENSES. All loads, fees, commissions, and sales
charges and the like that would have been paid on such deemed mutual fund
investments shall be deducted from the Participant's Account unless the Company,
in its sole discretion, elects to waive such deductions.
-14-
<PAGE>
(iv) INCOME REINVESTMENT. The pre-tax amount of all dividends and other
income that would be realized on such deemed investments shall be deemed to be
reinvested in each mutual fund.
(v) CALCULATION OF ACCOUNT BALANCE. The value of the portion of a
Participant's Account for which the Mutual Fund Election is in effect at any
Valuation Date shall equal the daily value of the deemed mutual fund holdings of
such Account on such Valuation Date (or on the last previous business day if
such Valuation Date is not a business day). Such deemed holdings shall reflect
all deductions and deemed reinvestment of income, if any, made pursuant to this
Paragraph (a) of Subsection 8.5.
(b) NOTIONAL SHARES ELECTION.
(i) THE ELECTION. Each Participant may elect to have all or any
portion of his or her Allocations under the Plan (including all or any portion
of his or her existing Account that was previously invested under the Mutual
Fund Election) be deemed to be invested in Notional Shares. All such elections
shall be made on a form prescribed by the Retirement Committee and shall be
subject to the following requirements and restrictions:
(1) The election with respect to any Allocations made for a Plan Year
and/or any portion of an existing Account previously invested under the Mutual
Fund Election shall be received by the Retirement Committee on or before June 30
of such Plan Year for a deemed investment (or reinvestment) in Notional Shares
as of the last day of such Plan Year (provided that elections made for the Plan
Year ending December 31, 1994 were made on or before such date and shall be
deemed to be invested in Notional Shares as of June 30, 1995);
(2) No investment or reinvestment in Notional Shares will be made to
the extent that the Retirement Committee determines that such action would
likely result in more Notional Shares being credited to Accounts under the Plan
than could be paid out as shares of Stock pursuant to paragraph (b) of
Subsection 7.2;
(3) To the extent that a Notional Shares Election cannot be carried out
because of clause (2) above, it will be deemed to be a Mutual Fund Election; and
-15-
<PAGE>
(4) Once made, investment of an Allocation or reinvestment of any
portion of an existing Account in Notional Shares is irrevocable.
(ii) THE INVESTMENT. As of the date that any deemed investment in
Notional Shares takes place, the number of Notional Shares credited to the
Participant's Account shall be determined by dividing the amount of the
Allocation to be invested and/or the value of the Account to be reinvested by
the closing price of the Stock on its principal trading exchange as of such date
(or on the last previous business day if such date is not a business day), with
any resulting fractional Notional Share rounded up to the next whole Share.
(iii) NO INVESTMENT EXPENSES. No loads, commissions, fees, or other
sales charges or the like shall be deducted from a Participant's Account with
respect to such deemed investments in Notional Shares.
(iv) DIVIDEND REINVESTMENT. The pre-tax amount of all dividends that
would have been declared on the Notional Shares credited to a Participant's
Account (if such shares were shares of Stock) shall be deemed to be reinvested
in additional Notional Shares at the closing price of the Stock on its principal
trading exchange on the dividend payment date, with any resulting fractional
Notional Share rounded up to the next whole Share.
(v) CALCULATION OF ACCOUNT BALANCE. The value of the portion of a
Participant's Account for which the Notional Shares Election is in effect at any
Valuation Date shall equal the closing price of the Stock on its principal
trading exchange on such Valuation Date (or on the last previous business day if
such Valuation Date is not a business day) multiplied by the number of Notional
Shares credited to such Account.
Section 9. Liquidity Fund
9.1 MAINTENANCE OF LIQUIDITY FUND. The Company at its sole option may
from time to time maintain liquid assets representing all or any portion of the
value of Accounts invested pursuant to Mutual Fund Elections.
-16-
<PAGE>
9.2 INVESTMENT OF LIQUIDITY FUND. Any Liquidity Fund maintained
pursuant to Subsection 9.1 shall be invested at the discretion of the Retirement
Committee; provided, however, that it is the intent of the Plan that any such
Liquidity Fund be invested generally in the same kinds and numbers of mutual
fund shares as the Participants' Accounts are deemed to be invested in from time
to time pursuant to the Mutual Fund Elections.
9.3 STATUS OF LIQUIDITY FUND. Any Liquidity Fund maintained pursuant
to Subsection 9.1 shall not be held in trust for any Participant or Beneficiary
and shall in all respects remain subject to the provisions of Subsection 8.3.
Section 10. Amendment and Termination
10.1 AMENDMENT. The Company shall have the right to amend this Plan, at
any time and from time to time, in whole or in part; provided, however, that no
amendment (a) may reduce the vested balance of any Participant's Account as of
the date of such amendment or (b) except with the approval of the holders of the
Company's capital stock entitled to vote on such matters, (i) materially
increase benefits accruing under the Plan to Participants, (ii) materially
modify the requirements as to eligibility for participation in the Plan, or
(iii) increase the limit specified in paragraph (b) of Subsection 7.2.
10.2 TERMINATION. Although the Company has established this Plan with a
bona fide intention and an expectation to maintain the Plan indefinitely, the
Company may terminate or discontinue this Plan in whole or in part at any time
without any liability for such termination or discontinuance; provided, however,
that no such termination or discontinuance may reduce the vested balance of any
Participant's Account as of the date of such termination or discontinuance.
Upon termination or discontinuance of the Plan, all Allocations shall cease. At
the Retirement Committee's sole discretion, the vested portion of all Accounts
shall be either distributed immediately as Benefits or retained until each
Participant has a Separation from Service or a Change of Control occurs, and
Benefits shall thereafter be paid pursuant to Sections 5 through 7 of the Plan,
as then in effect.
-17-
<PAGE>
Section 11. Miscellaneous
11.1 LIMITATIONS OF RIGHTS; EMPLOYMENT RELATIONSHIP. Neither the
establishment of this Plan nor any modification thereof, nor the creation of any
fund or account, nor the payment of any benefits, shall be construed as giving a
Participant or any other person any legal or equitable right against the Company
except as provided in this Plan. In no event shall the terms of employment of
any employee be modified or in any way be affected by the Plan.
11.2 DETERMINATION OF BENEFITS, CLAIMS, PROCEDURE AND ADMINISTRATION.
(a) CLAIM. A person who believes that he or she is being denied a
benefit to which he or she is entitled under the Plan (hereinafter referred to
as a "Claimant") may file a written request for such benefit with the Company,
setting forth his or her claim. The request must be addressed to the Retirement
Committee in care of the Company at its then principal place of business.
(b) DECISION ON CLAIM. Upon receipt of a claim, the Retirement
Committee shall advise the Claimant that a reply will be forthcoming within 90
days and shall, in fact, deliver such reply within such period. The Retirement
Committee may, however, extend the reply period for an additional 90 days for a
reasonable cause.
If the claim is denied in whole or in part, the Retirement Committee shall
adopt a written opinion, using language calculated to be understood by the
Claimant, setting forth:
(i) The specific reason or reasons for such denial
(ii) The specific reference to pertinent provisions of the Plan on which
such denial is based
(iii) A description of any additional material or information necessary
for the Claimant to perfect his or her claim and an explanation of why such
material or such information is necessary
-18-
<PAGE>
(iv) Appropriate information as to the steps to be taken if the Claimant
wishes to submit the claim for review
(v) The time limits for requesting a review and for completing any such
review.
(c) REQUEST FOR REVIEW. Within 60 days after the receipt by the
Claimant of the written opinion described above, the Claimant may request in
writing that the chief executive officer of the Company (or his designee) review
the determination of the Retirement Committee. Such request must be addressed to
the chief executive officer of the Company, at the Company's then principal
place of business. The Claimant or his or her duly authorized representative
may, but need not, review the pertinent documents and submit issues and comments
in writing for consideration by the chief executive officer or his designee. If
the Claimant does not request a review of the Retirement Committee's
determination by the chief executive officer of the Company within such 60-day
period, he or she shall be barred and estopped from challenging the Retirement
Committee's determination.
(d) REVIEW OF DECISIONS. Within 60 days after receipt of a request for
review, the chief executive officer of the Company or his designee shall review
the Retirement Committee's determination. After considering all materials
presented by the Claimant the chief executive officer or his designee shall
render a written opinion, written in a manner calculated to be understood by the
Claimant, setting forth the specific reasons for a decision and containing
specific references to the pertinent provisions of the Plan on which the
decision is based. If special circumstances require that the 60-day time period
be extended, the chief executive officer or his designee shall so notify the
Claimant and shall render the decision as soon as possible, but not later than
120 days after receipt of the request for review.
11.3 DESIGNATION OF BENEFICIARY. Each Participant (and each surviving
Beneficiary who is awaiting payment of benefits under the Plan) shall have the
right to designate a Beneficiary, and to amend or revoke such designation at any
time. Each such designation, amendment or revocation shall be made on the form
prescribed by the Retirement Committee, and shall be effective only upon receipt
by the Retirement Committee. If no designated
-19-
<PAGE>
beneficiary survives the Participant (or a surviving Beneficiary) and benefits
are payable following the Participant's (or surviving Beneficiary's) death, the
Retirement Committee shall direct that payment of benefits be made to the person
or persons in the first of the following classes of successive preference
Beneficiaries:
(a) Spouse
(b) Descendants, Per Stirpes
(c) Parents
(d) Siblings
(e) Estate
11.4 NON-ASSIGNABILITY OF BENEFITS. Neither the Participant nor his or
her Beneficiary nor any other beneficiary under the Plan shall have any power or
right to transfer, assign, anticipate, hypothecate or otherwise encumber any
part or all of the amounts payable hereunder, which are expressly declared to be
nonassignable and non-transferable. Any such attempted assignment or transfer
shall be void. No amount payable under the Plan shall, prior to actual payment
thereof, be subject to seizure by any creditor of any such person for the
payment of any debt, judgment or other obligation, by a proceeding at law or in
equity, or be transferable by operation of law in the event of the bankruptcy,
insolvency, divorce or death of the Participant, his or her designated
Beneficiary or any other beneficiary under this Plan.
11.5 FACILITY OF PAYMENTS. In the event that the Retirement Committee
shall determine that any person to whom a benefit is payable under the Plan is
unable to care for his or her affairs because of illness or accident, or is
otherwise mentally or physically incompetent, or unable to give a valid receipt,
the Committee may cause the payment becoming due to be paid to the person's
spouse, child, grandchild, parent, brother or sister, or to any appropriate
individual appointed by a court of competent jurisdiction, or to any person
deemed by the Committee to have incurred expense for such person otherwise
entitled to payment.
11.6 OBLIGATIONS TO WITHHOLD AND PAY TAXES. Each Participant or other
recipient of benefits under the Plan shall be liable for all tax obligations, if
any, with respect to any sum
-20-
<PAGE>
received pursuant to the Plan and for accurately reporting and paying in full
all such taxes to the appropriate federal, state and local authorities. The
Company shall have the right to deduct and withhold from any payment due under
the Plan or from other amounts owed to or with respect to the Participant all
withholding taxes and other amounts required by law.
11.7 REPRESENTATIONS. The Company makes no representation or guarantee
that any particular federal or state income, payroll, personal property or other
tax consequence will result from participation in this Plan. A Participant
should consult with professional tax advisors to determine the tax consequences
of his or her participation. Furthermore, the Company makes no representation
or guarantee of the successful investment of any Allocations, nor shall the
Company be required to repay any loss which may result from such investment or
lack of investment.
11.8 SEVERABILITY. If a court of competent jurisdiction holds any
provision of this Plan to be invalid or unenforceable, the remaining provisions
of the Plan shall continue to be fully effective.
11.9 APPLICABLE LAW. This Plan shall be governed by and construed in
accordance with applicable federal law and, to the extent not preempted by such
federal law, the laws of the Commonwealth of Massachusetts applicable to
contracts that are made and to be wholly performed in such Commonwealth.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed under
seal by its duly authorized representative this 29th day of March, 1995.
UNITED ASSET MANAGEMENT
CORPORATION
By: /s/ William H. Park
___________________________
William H. Park
Executive Vice President
-21-
<PAGE>
Exhibit 11.1
UNITED ASSET MANAGEMENT CORPORATION
CALCULATION OF EARNINGS PER SHARE
(in thousands, except per-share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------
1995 1994 1993
<S> <C> <C> <C>
Common and common equivalent
shares:
Net income................... $67,317 $59,012 $53,287
Adjustments thereto (1)...... 4,790 - -
------- ------- -------
Adjusted net income.......... $72,107 $59,012 $53,287
------- ------- -------
------- ------- -------
Average shares outstanding... 30,200 28,084 25,968
Adjustments thereto (2)...... 3,076 1,441 2,913
------- ------- -------
Shares used in computation...... 33,276 29,525 28,881
------- ------- -------
------- ------- -------
Per share....................... $ 2.17 $ 2.00 $ 1.85
------- ------- -------
------- ------- -------
Common shares-assuming full
dilution:
Net income................... $67,317 $59,012 $53,287
Adjustments thereto (1)...... 4,653 - -
------- ------- -------
Adjusted net income.......... $71,970 $59,012 $53,287
------- ------- -------
------- ------- -------
Average shares outstanding... 30,200 28,084 25,968
Adjustments thereto (2)...... 3,076 1,486 3,127
------- ------- -------
Shares used in computation...... 33,276 29,570 29,095
------- ------- -------
------- ------- -------
Per share....................... $ 2.16 $ 2.00 $ 1.83
------- ------- -------
------- ------- -------
</TABLE>
______________
(1) The proceeds from the exercise of stock options and warrants in accordance
with the modified treasury stock method are first used to buy back up to
20% of the Company's common stock at the average price for the period in
the primary calculation and at the higher of the average or closing price
in the fully diluted calculation. Any remaining proceeds are used to
retire debt, and this adjusts income for the interest assumed to be saved,
net of income tax, from the use of such proceeds.
(2) Adjusts shares for stock options and warrants under the modified treasury
stock method and contingently issuable shares based on the probability of
issuance, after adjusting for the stock assumed repurchased in accordance
with (1) above.
17
<PAGE>
UNITED ASSET MANAGEMENT'S CLIENTS
- -------------------------------------------------------------------------------
The following is an analysis of the clients of UAM's firms. All data are as
of December 31, 1995.
UAM's firms had 6,040 clients with approximately $142.1 billion under
management for an average account size of $23.5 million. On a fee basis, the
20 largest clients represented 10% of total revenues and the 100 largest
clients represented 21%. On an asset basis, the 20 largest clients
represented 16% of the total assets under management and the 100 largest
clients represented 34%. The mix of assets under management for clients of
UAM's firms was 59% U.S. equities, 18% U.S. bonds and cash, 10% real estate, 8%
international securities and 5% stable value assets. The client list includes
many of the largest corporate, government, charitable and union funds in the
U.S. and abroad along with the funds of several mutual fund organizations, many
individuals and a number of professional groups.
Each UAM firm is dedicated to providing superior, focused and individualized
service to its clients. A sound and consistent investment philosophy, regular
communications and a keen awareness of individual client needs are all
critical elements in providing high-quality client service. Because each
affiliate retains its own identity, together with its investment and
operating independence, UAM's unique structure enhances each operating firm's
ability to meet or exceed client expectations, and thereby to retain existing
clients and attract new prospects.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
ASSETS UNDER AVERAGE
MANAGEMENT NUMBER ACCOUNT SIZE
AS OF DECEMBER 31, 1995 (IN MILLIONS) PERCENT OF CLIENTS (IN MILLIONS)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Corporate Employee Benefit Plans $ 54,615 38.4% 1,816 $ 30.1
Government Employee Benefit Plans 27,870 19.6 339 82.2
Mutual Funds 22,582 15.9 135 167.3
Individuals 12,917 9.1 2,455* 5.3
Endowments and Foundations 12,218 8.6 775 15.8
Union Member Benefit Plans 10,033 7.1 263 38.1
Professional Groups 1,436 1.0 239 6.0
Corporate Cash Reserves 453 0.3 18 25.2
_______________________________________________________________________________________________
$142,124 100.0% 6,040 $ 23.5
_______________________________________________________________________________________________
_______________________________________________________________________________________________
</TABLE>
*These clients include 58 wrap-fee relationships with brokerage firms which
represent approximately 25,000 individual accounts with $5.8 billion
under management.
<PAGE>
COMMON STOCK INFORMATION
- -------------------------------------------------------------------------------
The Company's common stock is listed on the New York Stock Exchange.
Presented below are the high, low and closing quarterly stock prices for 1994
and 1995, as reported on the New York Stock Exchange composite tape, together
with quarterly dividends declared.
Ticker Symbol: UAM
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------
DIVIDEND
HIGH LOW CLOSE DECLARED
- --------------------- ---------- ---------- ---------- ------------
First Quarter, 1994 $41-3/4 $32-1/2 $33-1/2 $.24
Second Quarter, 1994 $36-1/2 $29-3/4 $33 $.24
Third Quarter, 1994 $39-3/4 $32-5/8 $37-5/8 $.26
Fourth Quarter, 1994 $38-3/8 $33-5/8 $36-7/8 $.26
- --------------------- ---------- ---------- ---------- ------------
First Quarter, 1995 $39-3/8 $35 $38-3/8 $.28
Second Quarter, 1995 $41-1/8 $34-3/4 $35-5/8 $.28
Third Quarter, 1995 $41-1/2 $35-1/8 $40-1/8 $.30
Fourth Quarter, 1995 $40-3/8 $35-3/4 $38-3/8 $.30
</TABLE>
<PAGE>
ELEVEN YEAR REVIEW
UNITED ASSET MANAGEMENT CORPORATION
<TABLE>
<CAPTION>
(In thousands, unless otherwise indicated, except per-share amounts) 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income Statement Data
Revenues $698,462 $492,288 $449,858 $376,160
- --------------------------------------------------------------------------------------------------------------
Operating expenses:
Compensation and related expenses 336,787 240,611 218,617 188,997
Amortization of cost assigned to contracts acquired 93,192 55,121 48,493 37,279
Other operating expenses 106,773 80,577 73,043 65,016
- --------------------------------------------------------------------------------------------------------------
536,752 376,309 340,153 291,292
- --------------------------------------------------------------------------------------------------------------
Operating income 161,710 115,979 109,705 84,868
- --------------------------------------------------------------------------------------------------------------
Interest expense, net and other amortization 44,020 12,773 15,235 16,116
- --------------------------------------------------------------------------------------------------------------
Income before income tax expense 117,690 103,206 94,470 68,752
Income tax expense 50,373 44,194 41,183 29,680
- --------------------------------------------------------------------------------------------------------------
Income before extraordinary credit 67,317 59,012 53,287 39,072
Extraordinary credit--utilization of loss carryforward --- --- --- ---
- --------------------------------------------------------------------------------------------------------------
Net income $ 67,317 $ 59,012 $ 53,287 $ 39,072
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Earnings per Share
Primary:
Income before extraordinary credit $ 2.17 $2.00 $1.85 $1.50
Extraordinary credit -- -- -- --
- --------------------------------------------------------------------------------------------------------------
Net income $ 2.17 $2.00 $1.85 $1.50
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Fully diluted:
Income before extraordinary credit $ 2.16 $2.00 $1.83 $1.47
Extraordinary credit -- -- -- --
- --------------------------------------------------------------------------------------------------------------
Net income $ 2.16 $2.00 $1.83 $1.47
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Dividends Declared per Common Share $ 1.16 $1.00 $.84 $.68
Operating Data
Operating Cash Flow (net income plus amortization
and depreciation) $ 168,355 $119,986 $107,397 $ 81,445
Assets under management at end of year (in millions) $ 142,124 $104,046 $100,084 $ 86,244
Balance Sheet Data
Total assets $1,384,937 $915,627 $675,800 $650,238
Cost assigned to contracts acquired, net $1,037,280 $656,130 $461,705 $460,523
Long-term debt (including current portion) $ 674,872 $365,339 $212,179 $272,860
Total stockholders' equity $ 485,897 $399,841 $353,011 $284,652
Number of common shares outstanding at end of year* 29,977 28,093 26,972 24,700
</TABLE>
*Represents shares outstanding after restatements for pooling of interests
transactions, when applicable.
**Represents annual compound growth rate since 1986, the year the Company
began paying dividends.
42
<PAGE>
<TABLE>
10 YEAR
ANNUAL
COMPOUND
1991 1990 1989 1988 1987 1986 1985 GROWTH RATE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$307,114 $254,938 $217,867 $184,208 $164,214 $120,364 $ 64,848 26.8%
- --------------------------------------------------------------------------------------------------------------
153,654 125,068 105,148 84,151 78,037 60,864 33,535 25.9%
30,535 27,157 23,808 21,387 14,398 8,527 4,372 35.8%
53,944 53,015 40,545 37,678 34,456 23,694 14,677 22.0%
- --------------------------------------------------------------------------------------------------------------
238,133 205,240 169,501 143,216 126,891 93,085 52,584 26.2%
- --------------------------------------------------------------------------------------------------------------
68,981 49,698 48,366 40,992 37,323 27,279 12,264 29.4%
- --------------------------------------------------------------------------------------------------------------
16,904 12,917 12,811 12,794 6,933 6,180 4,584 25.4%
- --------------------------------------------------------------------------------------------------------------
52,077 36,781 35,555 28,198 30,390 21,099 7,680 31.4%
21,869 14,858 13,654 11,160 13,167 9,823 3,473 30.7%
- --------------------------------------------------------------------------------------------------------------
30,208 21,923 21,901 17,038 17,223 11,276 4,207 32.0%
-- -- -- -- -- -- 700 --
- --------------------------------------------------------------------------------------------------------------
$ 30,208 $ 21,923 $ 21,901 $ 17,038 $ 17,223 $ 11,276 $ 4,907 29.9%
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
$1.27 $1.01 $1.02 $.87 $.83 $.61 $.33 --
-- -- -- -- -- -- .05 --
- --------------------------------------------------------------------------------------------------------------
$1.27 $1.01 $1.02 $.87 $.83 $.61 $.38 19.0%
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
$1.19 $1.01 $1.01 $.86 $.83 $.59 $.31 --
-- -- -- -- -- -- .05 --
- --------------------------------------------------------------------------------------------------------------
$1.19 $1.01 $1.01 $.86 $.83 $.59 $.36 19.6%
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
$ .55 $ .43 $ .34 $.26 $.18 $.06 -- 29.2%**
$ 65,030 $ 52,883 $ 49,349 $ 42,644 $ 35,313 $ 22,645 $ 11,273 31.0%
$ 72,456 $ 55,608 $ 51,642 $ 39,663 $ 35,020 $ 26,845 $ 12,205 27.8%
$521,408 $452,840 $399,604 $341,548 $295,575 $265,204 $101,473 --
$343,421 $320,940 $292,199 $258,804 $187,507 $187,843 $ 53,622 --
$204,719 $189,234 $154,340 $129,432 $ 71,128 $ 77,850 $ 41,164 --
$223,584 $188,527 $175,365 $161,971 $164,124 $142,747 $ 40,244 --
21,670 20,200 19,466 19,425 19,412 18,279 10,269 --
</TABLE>
43
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
- -------------------------------------------------------------------------------
The revenues of UAM's affiliated firms are derived from fees for investment
advisory services provided to institutional and other clients. Investment
advisory fees are generally a function of the overall fee rate charged to
each account and the level of assets under management by the affiliated
firms. A minor portion of revenues are generated when firms consummate
transactions for client portfolios. Assets under management can be affected
by the addition of new client accounts or client contributions to existing
accounts, withdrawals of assets from or terminations of client accounts and
investment performance, which may depend on general market conditions.
-----------------------------------------------------------------------------
AMORTIZATION OF COST ASSIGNED TO CONTRACTS ACQUIRED AND OPERATING CASH FLOW
(NET INCOME PLUS AMORTIZATION AND DEPRECIATION)
Cost assigned to contracts acquired, net of accumulated amortization,
represented approximately 75% of the Company's total assets as of December
31, 1995. Amortization of cost assigned to contracts acquired, which is a
non-cash charge, represented 17% of the Company's operating expenses.
Recording the cost assigned to contracts acquired as an asset, with the
resulting amortization as an operating expense, reflects the application of
generally accepted accounting principles to acquisitions by UAM of investment
management firms in transactions accounted for as purchases, where the
principal assets acquired are the investment advisory contracts which
evidence the firms' ongoing relationships with their clients.
Although the contracts acquired are typically terminable on 30 days notice,
analyses conducted by independent consultants retained by UAM to assist the
Company in allocating the purchase price among the assets acquired and the
experience of UAM's firms to date have indicated that: (1) contracts are
usually relatively long-lived; (2) the duration of contracts can be
reasonably estimated; and (3) the value of the cost assigned to contracts
acquired can be estimated based on the present value of its projected income
stream.
The cost assigned to contracts acquired is amortized on a straight-line basis
over the estimated weighted average useful life of the contracts of
individual firms acquired. These lives are estimated through statistical
analysis of historical patterns of terminations and the size and age of the
contracts acquired as of the acquisition date.
When actual terminations differ from the statistical patterns developed or
upon the occurrence of certain other events, the Company updates the lifing
analyses discussed above. If the update indicates that any of the estimates
of the average remaining lives should be shortened, the remaining cost
assigned to contracts acquired will be amortized over the shorter life
commencing in the year in which the new estimate is determined. There has
been no material effect on the Company's financial position or results of
operations as a result of these updates.
Cost assigned to contracts acquired is amortized as an operating expense. It
does not, however, require the use of cash and therefore, management believes
that it is important to distinguish this expense from other operating
expenses in order to evaluate the performance of the Company. Amortization of
cost assigned to contracts acquired per share referred to below has been
calculated by dividing total amortization by the same number of shares used
in the fully diluted earnings-per-share calculation.
For purposes of this discussion, Operating Cash Flow is defined as net income
plus amortization and depreciation, as reflected in the Company's
Consolidated Statement of Cash Flows. Management uses Operating Cash Flow not
to the exclusion of net income, but rather as an additional important measure
of the Company's performance.
-----------------------------------------------------------------------------
RESULTS OF OPERATIONS
1995 COMPARED TO 1994
Revenues increased 42% to $698,462,000 in 1995 from $492,288,000 in 1994.
This increase is the result of acquisitions that occurred during both 1995
and 1994, as well as the overall increase in revenues due to positive
portfolio performance achieved by UAM's affiliated firms partially offset by
the effect of net client cash outflows. The revenues of Provident Investment
Counsel and Pilgrim Baxter & Associates have been included since their
acquisition dates, February 15, 1995 and April 28, 1995, respectively. In
addition, the revenues from the acquisitions of Suffolk Capital Management,
Inc. and JMB Institutional Realty acquired July 14, 1994 and December 2,
1994, respectively, have been included for a full year in 1995.
During 1995, UAM experienced a net increase in assets under management of
$38.1 billion to a total of $142.1 billion as of December 31, 1995.
Acquisitions totaling $19.6 billion and investment performance of $27.2
billion were partially offset by net client cash outflows of $8.7 billion.
39
<PAGE>
Compensation increased 40% to $336,787,000 from $240,611,000 and other
operating expenses increased 33% to $106,773,000 from $80,577,000, reflecting
the acquisitions described above and higher operating expenses and
compensation earned by employees of existing affiliated firms in accordance
with revenue sharing agreements. Amortization of cost assigned to contracts
acquired rose 69% to $93,192,000 from $55,121,000 primarily due to the
acquisitions of Provident Investment Counsel and Pilgrim Baxter & Associates
and a full year of amortization of Suffolk Capital Management, Inc. and JMB
Institutional Realty.
Interest expense increased to $45,557,000 from $13,337,000 in 1994, due to
the increase in both the Company's average debt levels and interest rates
charged on senior debt.
Income before income tax expense increased 14% to $117,690,000 from
$103,206,000, reflecting the net result of the events discussed above. Net
income for 1995 increased 14% to $67,317,000 from $59,012,000 in 1994.
Fully diluted earnings per share for 1995 increased 8% to $2.16 compared to
$2.00 in 1994. This increase reflects the higher net income and the effect of
the Company's common stock repurchased, partially offset by the impact of the
issuance of shares of common stock, the Company's higher common stock price
and the exercise of warrants and stock options on the calculation of earnings
per share under the modified treasury stock method. Amortization of cost
assigned to contracts acquired on a per-share basis increased to $2.80 in
1995 from $1.86 in 1994 primarily as a result of the acquisitions described
above.
Operating Cash Flow increased 40% to $168,355,000 from $119,986,000 in 1994,
as a result of the circumstances discussed above.
1994 COMPARED TO 1993
Revenues increased 9% to $492,288,000 in 1994 from $449,858,000 in 1993. This
increase is the result of acquisitions that occurred during both 1994 and
1993 being partially offset by the effect of net client cash outflows and by
net declines in portfolio market values. The revenues from the acquisitions
of Dwight Asset Management Company, Suffolk Capital Management, Inc. and JMB
Institutional Realty were included from January 4, 1994, July 14, 1994 and
December 2, 1994, their respective dates of acquisition. The revenues of
Investment Research Company, acquired February 25, 1994 in a pooling of
interests transaction, have been included for all of 1994. In addition, the
revenues of Pell, Rudman & Co., Inc., acquired March 29, 1993, and GSB
Investment Management, Inc., acquired December 29, 1993, were included for a
full year in 1994, while only being included after their acquisition dates in
1993.
Compensation increased 10% to $240,611,000 from $218,617,000 and other
operating expenses increased 10% to $80,577,000 from $73,043,000, reflecting
the acquisitions described above and higher operating expenses and
compensation earned by employees of existing affiliated firms in accordance
with revenue sharing agreements. Amortization of cost assigned to contracts
acquired rose 14% to $55,121,000 from $48,493,000 primarily due to the
acquisitions of Dwight Asset Management Company, Suffolk Capital Management,
Inc. and JMB Institutional Realty and a full year of amortization of Pell,
Rudman & Co., Inc. and GSB Investment Management, Inc.
Interest expense decreased to $13,337,000 from $15,111,000 in 1993, primarily
due to the decrease in the average senior debt balance partially offset by
the increase in interest rates.
Income before income tax expense increased 9% to $103,206,000 from
$94,470,000 in 1993 as a result of the events discussed above. Net income for
1994 increased 11% to $59,012,000 from $53,287,000 in 1993.
Fully diluted earnings per share for 1994 increased 9% to $2.00 compared to
$1.83 in 1993. This increase reflects the higher net income together with the
effect of the Company's lower common stock price, partially offset by the
issuance of shares of common stock and the exercise of warrants and stock
options on the calculation of earnings per share under the modified treasury
stock method. Amortization of cost assigned to contracts acquired on a per-
share basis increased to $1.86 in 1994 from $1.67 in 1993, primarily as a
result of the acquisitions discussed above.
Operating Cash Flow increased 12% to $119,986,000 from $107,397,000 in 1993,
as a result of the circumstances discussed above.
40
<PAGE>
- -----------------------------------------------------------------------------
FINANCIAL CONDITION AND LIQUIDITY
The Company generated $168,355,000 of Operating Cash Flow in 1995. This
Operating Cash Flow as well as the proceeds from the issuance of $150,000,000
in Senior Notes (the Senior Notes) completed in August 1995 were used
primarily for the following: to finance the $56,693,000 cash portion of the
acquisitions completed in 1995 (including additional purchase price
associated with prior years acquisitions), to repurchase shares of the
Company's common stock for $48,819,000, to pay dividends to shareholders
totaling $35,275,000 and to pay down $172,000,000 of borrowings under the
Company's line of credit. As of December 31, 1995, the Company had working
capital of $79,368,000 and had the full $400,000,000 line of credit
available. Subsequent to December 31, 1995, the Company is extending and
expanding its line of credit into a five year, $500,000,000 revolving
facility (see Note 3 to the Consolidated Financial Statements included in
this Annual Report).
Management believes that the Company's existing capital, together with
Operating Cash Flow and borrowings available under its revolving line of
credit, will provide the Company with sufficient resources to meet its
present and reasonably foreseeable future cash needs. Management expects that
the principal need for financial resources will be to acquire additional
investment management firms, to fund commitments due or potentially due to
existing affiliates, to pay shareholder dividends and to repurchase shares of
the Company's common stock, which will require cash, the issuance of
additional UAM securities, or some combination thereof.
-----------------------------------------------------------------------------
STOCK-BASED COMPENSATION PLANS
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation, which
requires the Company to either adopt the fair value method of accounting for
stock-based compensation plans or to continue accounting for these plans
under the intrinsic value method and provide pro forma disclosures of net
income and earnings per share, including the tax effects if any, as if the
fair value accounting method had been adopted. This standard is effective for
fiscal years beginning after December 15, 1995. The Company intends to
continue accounting for its stock-based compensation plans under the
intrinsic value method and provide the necessary pro forma disclosures in
1996.
-----------------------------------------------------------------------------
EFFECTS OF INFLATION
The Company's business is not capital intensive. Management believes that
financial results as reported would not be significantly affected had such
results been adjusted to reflect the effects of inflation and price changes.
Increases or decreases in interest rates affect UAM's costs of operations
chiefly through increasing or decreasing the interest expense related to the
Company's assumption of debt. To mitigate the risks associated with increases
in interest rates, UAM has entered into and plans to continue to enter into
interest rate protection agreements (see Notes 1 and 3 to the Consolidated
Financial Statements included in this Annual Report). Rates of interest on
the Senior Notes and a portion of existing subordinated debt are fixed.
Increases and decreases in interest rates may also affect market prices for
the various asset classes held by the Company's affiliated firms as assets
under management for clients. Changes in such prices may affect the
affiliated firm's revenues, and therefore UAM's consolidated revenues.
41
<PAGE>
SELECTED QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
1995 1994
- ------------------------ ------------------------------------------ ------------------------------------------
Unaudited (In thousands, FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
except per-share data) QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
- ------------------------ ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $151,102 $170,987 $175,861 $200,512 $121,340 $115,525 $118,922 $136,501
Operating income $ 35,969 $ 40,724 $ 41,063 $ 43,954 $ 29,365 $ 27,925 $ 28,655 $ 30,034
Income before income
tax expense $ 27,277 $ 29,317 $ 28,803 $ 32,293 $ 26,148 $ 25,017 $ 25,752 $ 26,289
Net income $ 15,605 $ 16,769 $ 16,475 $ 18,468 $ 14,904 $ 14,294 $ 14,756 $ 15,058
- ------------------------ ------- ------- ------- ------- ------- ------- ------- -------
- ------------------------ ------- ------- ------- ------- ------- ------- ------- -------
Primary and fully
diluted earnings per
share* $.51 $.53 $.53 $.59 $.50 $.49 $.50 $.51
- ------------------------ ------- ------- ------- ------- ------- ------- ------- -------
Operating Cash Flow** $ 37,252 $ 42,504 $ 43,165 $ 45,434 $ 29,623 $ 28,907 $ 29,776 $ 31,680
- ------------------------ ------- ------- ------- ------- ------- ------- ------- -------
- ------------------------ ------- ------- ------- ------- ------- ------- ------- -------
</TABLE>
*Under generally accepted accounting principles, when earnings per share are
computed under the modified treasury stock method and when the market price
of a company's common stock changes, the total of four quarters' earnings
per share may not equal the earnings per share for the year.
**Net income plus amortization and depreciation.
57
<PAGE>
CONSOLIDATED BALANCE SHEET
UNITED ASSET MANAGEMENT CORPORATION
<TABLE>
<CAPTION>
DECEMBER 31, 1995 1994
- --------------------------------------------------------------- ------------- ------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 123,768,000 $ 89,050,000
Investment advisory fees receivable 124,055,000 77,292,000
Other current assets 12,877,000 12,922,000
- --------------------------------------------------------------- ------------- ------------
Total current assets 260,700,000 179,264,000
Fixed assets, net 26,746,000 19,351,000
Cost assigned to contracts acquired, net of accumulated
amortization of $365,636,000 in 1995 and $272,444,000 in 1994 1,037,280,000 656,130,000
Other assets 60,211,000 60,882,000
- --------------------------------------------------------------- ------------- ------------
Total assets $1,384,937,000 $915,627,000
- --------------------------------------------------------------- ------------- ------------
- --------------------------------------------------------------- ------------- ------------
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 93,714,000 $ 65,032,000
Accrued compensation 85,766,000 48,048,000
Current portion of notes payable 1,852,000 1,009,000
- --------------------------------------------------------------- ------------- ------------
Total current liabilities 181,332,000 114,089,000
Senior notes payable 150,000,000 172,000,000
Subordinated notes payable 523,020,000 192,330,000
Deferred income taxes 44,688,000 37,367,000
Total liabilities 899,040,000 515,786,000
- --------------------------------------------------------------- ------------- ------------
Commitments and contingencies
Stockholders' equity:
Common stock, par value $.01 per share:
Authorized--200,000,000 shares
Issued--30,815,512 shares in 1995 and 28,283,082 in 1994 308,000 283,000
Capital in excess of par value 341,398,000 255,162,000
Retained earnings 175,695,000 150,951,000
- --------------------------------------------------------------- ------------- ------------
517,401,000 406,396,000
Less treasury shares at cost--838,465 shares in 1995 and
189,726 in 1994 (31,504,000) (6,555,000)
- --------------------------------------------------------------- ------------- ------------
Total stockholders' equity 485,897,000 399,841,000
- --------------------------------------------------------------- ------------- ------------
Total liabilities and stockholders' equity $1,384,937,000 $915,627,000
- --------------------------------------------------------------- ------------- ------------
- --------------------------------------------------------------- ------------- ------------
</TABLE>
See Notes to Consolidated Financial Statements.
44
<PAGE>
CONSOLIDATED STATEMENT OF INCOME
UNITED ASSET MANAGEMENT CORPORATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995 1994 1993
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES $698,462,000 $492,288,000 $449,858,000
- -----------------------------------------------------------------------------------------------------
OPERATING EXPENSES:
Compensation and related expenses 336,787,000 240,611,000 218,617,000
Amortization of cost assigned to contracts acquired 93,192,000 55,121,000 48,493,000
Other operating expenses 106,773,000 80,577,000 73,043,000
- -----------------------------------------------------------------------------------------------------
536,752,000 376,309,000 340,153,000
- -----------------------------------------------------------------------------------------------------
Operating income 161,710,000 115,979,000 109,705,000
- -----------------------------------------------------------------------------------------------------
NON-OPERATING EXPENSES:
Interest expense, net 42,325,000 11,512,000 13,790,000
Other amortization 1,695,000 1,261,000 1,445,000
- -----------------------------------------------------------------------------------------------------
44,020,000 12,773,000 15,235,000
- -----------------------------------------------------------------------------------------------------
Income before income tax expense 117,690,000 103,206,000 94,470,000
Income tax expense 50,373,000 44,194,000 41,183,000
- -----------------------------------------------------------------------------------------------------
NET INCOME $ 67,317,000 $ 59,012,000 $ 53,287,000
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
Primary earnings per share $2.17 $2.00 $1.85
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
Fully diluted earnings per share $2.16 $2.00 $1.83
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
UNITED ASSET MANAGEMENT CORPORATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flow from operating activities:
Net income $ 67,317,000 $ 59,012,000 $ 53,287,000
Adjustments to reconcile net income to net cash flow
from operating activities:
Amortization of cost assigned to contracts acquired 93,192,000 55,121,000 48,493,000
Depreciation 6,151,000 4,592,000 4,172,000
Other amortization 1,695,000 1,261,000 1,445,000
- ------------------------------------------------------------------------------------------------------------
Net income plus amortization and depreciation 168,355,000 119,986,000 107,397,000
Changes in assets and liabilities:
Increase in investment advisory fees receivable (46,819,000) (1,758,000) (8,038,000)
Decrease (increase) in other current assets 27,000 (7,276,000) (103,000)
Increase in accounts payable and accrued expenses 28,993,000 7,649,000 11,290,000
Increase in accrued compensation 37,765,000 27,615,000 2,172,000
Increase in deferred income taxes 7,321,000 3,629,000 4,751,000
- ------------------------------------------------------------------------------------------------------------
Net cash flow from operating activities 195,642,000 149,845,000 117,469,000
- ------------------------------------------------------------------------------------------------------------
Cash flow used in investing activities:
Purchase of fixed assets (13,576,000) (8,747,000) (4,508,000)
Cash additions to cost assigned to contracts
acquired (43,582,000) (161,649,000) (30,499,000)
Change in other assets (1,115,000) (4,099,000) (2,045,000)
- ------------------------------------------------------------------------------------------------------------
Net cash flow used in investing activities (58,273,000) (174,495,000) (37,052,000)
- ------------------------------------------------------------------------------------------------------------
Cash flow from (used in) financing activities:
Purchase of treasury shares (48,819,000) (14,883,000) (4,166,000)
Reductions in long-term debt (295,188,000) (140,280,000) (114,736,000)
Additions to long-term debt 266,500,000 224,500,000 64,500,000
Issuance or reissuance of equity securities 10,494,000 8,153,000 9,590,000
Dividends declared (35,275,000) (28,123,000) (20,304,000)
- ------------------------------------------------------------------------------------------------------------
Net cash flow from (used in) financing activities (102,288,000) 49,367,000 (65,116,000)
- ------------------------------------------------------------------------------------------------------------
Effect of foreign exchange rate changes on cash flow (363,000) 1,526,000 (562,000)
- ------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 34,718,000 26,243,000 14,739,000
Cash and cash equivalents at beginning of year 89,050,000 62,807,000 48,068,000
- ------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 123,768,000 $ 89,050,000 $ 62,807,000
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
46
<PAGE>
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
UNITED ASSET MANAGEMENT CORPORATION
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
COMMON
STOCK AT CAPITAL IN TREASURY
SHARES PAR EXCESS OF RETAINED TREASURY SHARES
ISSUED VALUE PAR VALUE EARNINGS SHARES AT COST
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
December 31, 1992 24,719,566 $247,000 $196,107,000 $ 88,848,000 (18,900) $ (550,000)
Issuance of stock 319 -- 11,000 -- -- --
Exercise of stock options and
warrants 2,252,513 23,000 36,491,000 (2,195,000) 158,300 4,716,000
Issuance of warrants -- -- 1,150,000 -- -- --
Purchase of treasury shares -- -- -- -- (139,400) (4,166,000)
Net income -- -- -- 53,287,000 -- --
Dividends declared ($.84 per share) -- -- -- (20,304,000) -- --
Foreign currency translation
adjustment -- -- -- (654,000) -- --
- --------------------------------------------------------------------------------------------------------------------------
December 31, 1993 26,972,398 270,000 233,759,000 118,982,000 -- --
Issuance of stock 575,437 6,000 1,000 2,205,000 -- --
Exercise of stock options and
warrants 735,247 7,000 17,357,000 (2,989,000) 256,274 8,328,000
Issuance of warrants -- -- 4,045,000 -- -- --
Purchase of treasury shares -- -- -- -- (446,000) (14,883,000)
Net income -- -- -- 59,012,000 -- --
Dividends declared ($1.00 per share) -- -- -- (28,123,000) -- --
Foreign currency translation
adjustment -- -- -- 1,864,000 -- --
- --------------------------------------------------------------------------------------------------------------------------
December 31, 1994 28,283,082 283,000 255,162,000 150,951,000 (189,726) (6,555,000)
Issuance of stock 1,873,004 19,000 67,351,000 -- -- --
Exercise of stock options and
warrants 659,426 6,000 17,383,000 (7,119,000) 652,061 23,870,000
Issuance of warrants -- -- 1,502,000 -- -- --
Purchase of treasury shares -- -- -- -- (1,300,800) (48,819,000)
Net income -- -- -- 67,317,000 -- --
Dividends declared ($1.16 per share) -- -- -- (35,275,000) -- --
Foreign currency translation
adjustment -- -- -- (179,000) -- --
- --------------------------------------------------------------------------------------------------------------------------
December 31, 1995 30,815,512 $308,000 $341,398,000 $175,695,000 (838,465) $(31,504,000)
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
49
- -
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNITED ASSET MANAGEMENT CORPORATION
- --------------------------------------------------------------------------------
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY
The principal business activities of United Asset Management Corporation (the
Company) are investment advisory services, primarily for institutional
clients, and the acquisition of institutional investment management firms.
The Company's wholly owned subsidiaries operate in one business segment, that
is, as investment advisers, managing both domestic and international
investment portfolios for corporate, government and union pension funds,
endowments and foundations, mutual funds and individuals. While the Company's
subsidiaries primarily specialize in the management of U.S. equities, bonds
and cash, other asset classes under management have grown significantly in
recent years to include real estate, international securities and stable
value assets.
The Company has arrangements with its subsidiaries and certain of their
principal officers (revenue sharing plans) under which the subsidiaries are
entitled to use a portion (determined by formula) of their revenues to meet
all their operating expenses, including compensation, at the discretion of
the subsidiaries' management. Revenues in excess of those used to meet
operating expenses of a subsidiary are used by the Company to meet its
operating and cash flow needs. All operating expenses incurred by the
subsidiaries are charged to operations and reported as compensation and
related expenses or as other operating expenses in these consolidated
financial statements.
CONSOLIDATION
These consolidated financial statements include the accounts of the Company
and all of its subsidiaries. All inter-company balances and transactions have
been eliminated.
REVENUE RECOGNITION
The majority of the Company's revenues are derived from investment advisory
fees that are normally accrued over the period in which services are
performed. Any fees collected in advance are deferred and recognized as
income over the period earned. Transaction-based fees are recognized when all
contractual obligations have been satisfied. All investment advisory fees
receivable are expected to be collected.
FIXED ASSETS AND DEPRECIATION
Equipment and other fixed assets are recorded at cost and depreciated using
the straight-line method over their estimated useful lives. Leasehold
improvements are amortized over the shorter of their estimated useful lives
or the term of the lease.
COST ASSIGNED TO CONTRACTS ACQUIRED AND GOODWILL
The purchase price for the acquisition of companies acquired in business
combinations accounted for as a purchase transaction is allocated based on
the fair value of the net assets acquired, primarily investment advisory
contracts.
The cost assigned to contracts acquired is amortized using the straight-line
method over periods ranging from five to 20 years. These lives represent the
estimated weighted average lives of the contracts acquired and are based
generally on historical experience of the individual companies acquired. The
estimated remaining weighted average lives of contracts acquired are
periodically reevaluated. If experience subsequent to the acquisition
indicates that the estimate of the average remaining lives should be
shortened, the cost assigned to contracts acquired will be amortized over the
shorter life commencing in the year in which the new estimate is determined.
The results of the most recent reevaluations of estimated remaining lives had
no material effect on the Company's financial position or results of
operations.
Amounts paid to certain key employees for entering into long-term employment
contracts and noncompetition agreements at the time of acquisitions are
included in cost assigned to contracts acquired and are amortized on a
straight-line basis over the lives of such arrangements.
Purchase price in excess of the fair value of the net assets acquired is
recorded as goodwill and amortized on a straight-line method over 40 years.
Goodwill, net of accumulated amortization, was $20,793,000 and $21,419,000 at
December 31, 1995 and 1994, respectively, and is included in other assets in
the accompanying consolidated balance sheet.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNITED ASSET MANAGEMENT CORPORATION
- --------------------------------------------------------------------------------
INCOME TAXES
Income taxes for financial reporting purposes are recorded in accordance with
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes (FAS 109). The asset and liability approach underlying FAS 109 requires
the recognition of deferred tax liabilities and assets for the expected
future tax consequences of temporary differences between the carrying amounts
and tax bases of the Company's assets and liabilities, primarily the cost
assigned to contracts acquired.
RETIREMENT AND PENSION PLANS
The Company has certain retirement and pension plans which cover eligible
employees of the Company and its subsidiaries. All plans are defined
contribution retirement plans, with the exception of a defined benefit
pension plan maintained by a non-U.S. subsidiary. The expense related to all
plans was $8,523,000, $6,883,000 and $7,050,000 in 1995, 1994 and 1993,
respectively.
The defined benefit pension plan has an excess of plan assets over plan
obligations. Excess plan assets and pension expense relating to this plan are
not significant in relation to the Company's consolidated financial
statement.
STOCK-BASED COMPENSATION PLANS
Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation (FAS 123), is effective for fiscal years beginning
after December 15, 1995. Under the requirements of FAS 123, the Company may
adopt the new fair value method of accounting for stock-based compensation
plans or continue to account for these plans using the intrinsic value method
prescribed by Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees (APB 25). If the accounting treatment under APB 25
continues, pro forma disclosures of net income and earnings per share,
including the tax effects if any, as if the fair value accounting method had
been adopted are required. The Company intends to continue accounting for its
stock-based compensation plans under APB 25 and will provide the necessary
disclosures required under FAS 123 in 1996.
EARNINGS PER SHARE
Primary earnings per share represent earnings per common and common
equivalent share which are determined on the basis of the weighted average
number of shares outstanding after giving effect to (1) potentially dilutive
stock options and warrants under the modified treasury stock method; and (2)
contingently issuable stock and warrants based on the probability of
issuance.
Fully diluted earnings per share represent earnings per common share assuming
full dilution which are determined based on (1) the weighted average number
of common and common equivalent shares assumed outstanding under the modified
treasury stock method during the period; and (2) the issuance of contingently
issuable stock and warrants at the most dilutive level.
CASH EQUIVALENTS
Cash equivalents represent highly liquid investments with an original
maturity of three months or less. The Company invests its excess cash in
deposits with major banks, money market funds or in securities, principally
commercial paper of companies with strong credit ratings in diversified
industries. At December 31, 1995, cash equivalents included $30,946,000 of
short-term interest bearing securities, which were classified as held to
maturity and for which cost approximated fair value.
FOREIGN CURRENCY TRANSLATION
In accordance with Statement of Financial Accounting Standards No. 52,
Foreign Currency Translation, the financial statements of all non-U.S.
subsidiaries are translated to U.S. dollars as follows: assets and
liabilities at year-end exchange rates; income, expenses and cash flows at
average exchange rates; and stockholders' equity at historical exchange
rates. The resulting translation adjustment is recorded as a component of
stockholders' equity.
INTEREST RATE PROTECTION AGREEMENTS
The Company periodically enters into interest rate protection agreements to
reduce the potential impact of increases in interest rates associated with
borrowings under the Company's Reducing Revolving Credit Agreement. Premiums
paid for these instruments are amortized as interest expense over the terms
of the agreements. Any amounts receivable under these agreements are recorded
as a reduction of interest expense.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect amounts and disclosures reported in the accompanying financial
statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNITED ASSET MANAGEMENT CORPORATION
- --------------------------------------------------------------------------------
NOTE 2-FIXED ASSETS AND LEASE OBLIGATIONS
Fixed assets, which have estimated useful lives up to 10 years, consist of
the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
DECEMBER 31, 1995 1994
<S> <C> <C>
- --------------------------------------------------------------------------------------
Equipment, leasehold improvements and other fixed assets $ 58,463,000 $ 47,124,000
Accumulated depreciation and amortization (31,717,000) (27,773,000)
- --------------------------------------------------------------------------------------
$ 26,746,000 $ 19,351,000
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
</TABLE>
At December 31, 1995, future minimum rentals for operating leases that have
initial or non-cancelable lease terms in excess of one year are payable as
follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
REQUIRED
MINIMUM
YEAR ENDED DECEMBER 31, PAYMENT
- --------------------------------------------------------------------------------
<S> <C>
1996 $18,252,000
1997 $16,644,000
1998 $14,188,000
1999 $11,848,000
2000 $10,894,000
Thereafter $15,469,000
</TABLE>
Rent expense for 1995, 1994 and 1993 approximated $18,366,000, $13,173,000
and $11,776,000, respectively.
- --------------------------------------------------------------------------------
NOTE 3-NOTES PAYABLE
In August 1995, the Company sold $150,000,000 in Senior Notes (the Senior
Notes) to a group of institutional investors. The Senior Notes bear interest
at a fixed rate of 7.12% and mature in accordance with a scheduled payment
plan calling for equal annual payments beginning August 25, 2000 and ending
August 25, 2005. The proceeds from the issuance of the Senior Notes were used
to pay $150,000,000 of outstanding borrowings under the Company's Reducing
Revolving Credit Agreement (the Credit Agreement). Subsequent to this
transaction and under the terms of the Credit Agreement, the Company has the
ability to borrow, prepay and reborrow up to $400,000,000 through August 29,
1996. The principal amount of borrowings outstanding under the Credit
Agreement at that date will be payable in 12 equal quarterly installments
through August 29, 1999. As of December 31, 1995, an annual commitment fee of
.35% is payable on the daily average unused portion of the $400,000,000
commitment. The Company had no borrowings outstanding under the Credit
Agreement at December 31, 1995. Subsequent to December 31, 1995, the Company
is extending and expanding its Credit Agreement into a five year,
$500,000,000 revolving facility.
Interest rates available for amounts outstanding under the Credit Agreement
are currently: prime, 1% over LIBOR, 1.125% over certain certificate of
deposit rates or a money market bid option. Under the money market bid
option, the Company can borrow up to $50,000,000 from members of its banking
group at prevailing money market rates; any such borrowings reduce the
commitment under the Credit Agreement.
Under the terms of the Senior Notes and the Credit Agreement, the Company is
required to meet certain financial covenants, including covenants restricting
dividends and repurchase of the Company's common stock, and requiring the
Company to maintain a minimum net worth, as defined. The Company must also
continue to maintain certain minimum working capital, cash flow, and debt to
equity ratios. Under the terms of the most restrictive covenant, $80,000,000
is available for the payment of cash dividends and repurchase of the
Company's common stock during 1996.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNITED ASSET MANAGEMENT CORPORATION
- --------------------------------------------------------------------------------
Borrowings under both the Senior Notes and the Credit Agreement are secured
by the stock of the Company's subsidiaries.
At December 31, 1995, the Company was a party to interest rate protection
agreements entered into with certain members of the Company's banking group,
which extend up to three years and limit interest rates to an average of
8.3%. The notional principal amount of debt covered by individual
arrangements over their remaining lives ranges from $15,000,000 to
$150,000,000. Unamortized premiums outstanding were $2,309,000 and $3,532,000
at December 31, 1995 and 1994, respectively. These amounts approximate fair
market value of the agreements. Amortization of premiums which is included in
interest expense was $1,477,000, $51,000 and $247,000 for the years ended
December 31, 1995, 1994 and 1993, respectively. Currently, the Company
mitigates the credit risk associated with interest rate protection agreements
by entering into these arrangements only with members of the group of banks
who are party to the Credit Agreement. The Company monitors the credit
standing of these counterparties on a continuous basis.
At December 31, 1995 and 1994, the Company also had $524,872,000 and
$193,339,000 of subordinated notes outstanding, respectively. These notes
primarily represent a portion of the consideration paid to selling
shareholders of businesses acquired, the majority of which remain employed by
the Company's subsidiaries subsequent to the date of acquisition. The notes
mature at various dates, through 2002, and have interest rates currently
ranging from 5.5% to 9%. These notes outstanding, with the exception of
$294,082,000 of notes due in 1996, may be tendered upon the exercise of
warrants issued in conjunction with these notes. In connection with the
exercise of warrants through the tender of subordinated notes, subordinated
debt of $23,676,000, $16,611,000 and $29,488,000 was extinguished in 1995,
1994 and 1993, respectively. The Company intends to finance subordinated debt
that becomes due which has not been tendered through the exercise of warrants
by utilizing amounts available under its line of credit.
The aggregate cash repayments of all outstanding borrowings during each of
the five years subsequent to December 31, 1995 total the following amounts:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
REQUIRED
MINIMUM
YEAR ENDED DECEMBER 31, PAYMENT
- -------------------------------------------------------------------------------
<S> <C>
1996 $ 31,381,000
1997 $110,473,000
1998 $101,712,000
1999 $117,457,000
2000 $ 31,063,000
</TABLE>
The recorded cost of the Senior Notes approximates fair value. Due to the
unique nature of each of the subordinated debt instruments issued to the
sellers of firms, the assessment of current fair value is not practicable.
Included in accounts payable and accrued expenses at December 31, 1995 and
1994 is accrued interest of $26,285,000 and $4,925,000, respectively.
Interest expense and interest paid for each of the three years ended December
31 were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest expense $45,557,000 $13,337,000 $15,111,000
Interest paid $22,720,000 $12,129,000 $15,095,000
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNITED ASSET MANAGEMENT CORPORATION
- --------------------------------------------------------------------------------
NOTE 4-STOCKHOLDERS' EQUITY
During 1995, the Company issued 1,873,004 shares of its common stock in
connection with acquisitions accounted for as purchases. In 1994 and 1993,
the Company issued 575,437 and 3,694,398 shares of its common stock,
respectively, to effect acquisitions accounted for as poolings of interests.
The Company issued 1,359,038, 1,690,653 and 393,806 warrants during 1995,
1994 and 1993, respectively, to effect acquisitions accounted for as
purchases.
The Company has a program to systematically repurchase shares of its common
stock to meet the requirements for future issuance of shares upon the
exercise of stock options and warrants. Through December 31, 1995, 4,624,917
shares of common stock had been repurchased at a cost of $107,045,000, and
all but 838,465 shares had been reissued from treasury upon the exercise of
stock options and warrants. Subsequent to December 31, 1995, the Company's
directors increased the number of shares authorized for repurchase from
6,000,000 to 8,000,000 shares.
Included in accounts payable and accrued expenses at December 31, 1995 and
1994 are dividends payable of $9,036,000 and $7,304,000, respectively.
At December 31, 1995, the following warrants were outstanding at a weighted
average exercise price of $38.99 per share:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
SHARES ISSUABLE EXERCISE PRICE YEAR OF EXPIRATION
- -------------------------------------------------------------------------------
<S> <C> <C>
243,311 $16.22-23.00 1996
580,823 $16.50-23.00 1997
81,116 $23.00-29.00 1998
1,276,043 $33.00-35.00 1999
150,421 $29.00-33.00 2000
1,934,038 $29.00-57.50 2001
1,359,038 $39.00-57.50 2002
- ---------------
5,624,790
- ---------------
- ---------------
</TABLE>
The Company is authorized to issue 5,000,000 shares of $1.00 par value
preferred stock, none of which has been issued through December 31, 1995.
- -------------------------------------------------------------------------------
NOTE 5-STOCK OPTION PLANS
Under the Company's 1994 Stock Option Plan, the Board of Directors is
authorized to grant options for the purchase of 2,900,000 shares of the
Company's common stock to officers and other key employees of the Company and
its subsidiaries. The exercise price of the options is not less than the fair
market value at the date of the grant. The options expire five years from the
date of the grant and may not be exercised for one year from the date of the
grant. Thereafter, they may be exercised at dates stipulated in each grant.
An additional 300,000 shares may be awarded under the 1994 Eligible Directors
Stock Option Plan. Under this plan, each eligible director will be granted
5,000 options annually for the purchase of shares of the Company's common
stock at the fair market value at the date of the grant. In addition,
eligible directors may also elect to receive discounted options in lieu of a
portion of their directors' fees. In 1995, 30,000 shares were granted under
the annual plan and 5,908 discounted options were issued in lieu of
directors' fees. These options expire five years from the date of the grant.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNITED ASSET MANAGEMENT CORPORATION
- -------------------------------------------------------------------------------
The following is a summary of stock option transactions during 1993, 1994 and
1995:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
NUMBER OF STOCK OPTION
SHARES PRICE RANGE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance, December 31, 1992 2,299,330 $ .02-32.00
Options granted 802,179 $29.00-46.38
Options exercised (509,602) $ .02-31.25
Options canceled (51,767) $14.88-41.00
----------
Balance, December 31, 1993 2,540,140 $ .02-46.38
Options granted 1,063,977 $26.81-40.75
Options exercised (255,685) $ .02-31.25
Options canceled (60,602) $14.25-46.38
----------
Balance, December 31, 1994 3,287,830 $ .02-46.38
Options granted 876,956 $26.72-39.88
Options exercised (438,595) $ .02-38.88
Options canceled (119,980) $14.21-46.38
----------
Balance, December 31, 1995 3,606,211 $ .02-46.38
----------
----------
Options exercisable at the end of the year 1,513,487
Options available for future grants 2,083,383
Shares reserved, but unissued at the beginning of the year 6,219,611
Shares reserved, but unissued at the end of the year 5,689,594
</TABLE>
The options outstanding at December 31, 1995 expire at various times in 1996
through 2000. Options exercisable at December 31, 1995 had a weighted average
price of $23.88. The weighted average exercise price of all options
outstanding at December 31, 1995 was $30.47. The options which are
exercisable at $.02 per share resulted from exchanging UAM options for
options outstanding at an affiliated firm acquired in 1992.
- -------------------------------------------------------------------------------
NOTE 6-INCOME TAXES
<TABLE>
<CAPTION>
Income before income tax expense was taxed under the following jurisdictions:
- -------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic $107,566,000 $ 92,170,000 $85,358,000
Foreign 10,124,000 11,036,000 9,112,000
- -------------------------------------------------------------------------------
$117,690,000 $103,206,000 $94,470,000
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
Income tax expense consists of the following:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $32,706,000 $30,159,000 $27,414,000
State 6,938,000 6,658,000 5,734,000
Non-U.S. 3,408,000 3,748,000 3,284,000
Deferred:
Federal 6,221,000 2,948,000 3,909,000
State 1,100,000 681,000 842,000
- -------------------------------------------------------------------------------
$50,373,000 $44,194,000 $41,183,000
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNITED ASSET MANAGEMENT CORPORATION
- --------------------------------------------------------------------------------
Deferred income tax liabilities are comprised of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
December 31, 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Excess contract amortization for tax purposes $42,356,000 $35,043,000
Installment sale for tax purposes on real estate
partnerships sold prior to acquisition of
subsidiary 1,296,000 1,675,000
Other 1,036,000 649,000
- --------------------------------------------------------------------------------
$44,688,000 $37,367,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
For purchase acquisitions which occurred prior to The Revenue Reconciliation
Act of 1993 (the Act), the excess contract amortization for income tax
purposes results from the application of a method under which the deductions
for income tax purposes are determined by (1) amortizing the cost assigned to
contracts acquired on a straight-line basis over the same estimated useful
lives as those used for financial reporting purposes; and (2) deducting the
unamortized balance of such cost which is allocated to the individual
contracts when any such contract is terminated. For acquisitions subsequent
to the Act, the deduction for income tax purposes is determined by amortizing
the cost assigned to contracts acquired on a straight-line basis over a 15
year period, with no deduction for the unamortized balance of individual
contract terminations.
The effective income tax rate differs from the statutory Federal income tax
rate as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal income tax statutory rate 35% 35% 35%
State income taxes, net of federal benefit 5 5 6
Nondeductible items 3 3 3
- --------------------------------------------------------------------------------
43% 43% 44%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
Income taxes of $40,551,000, $39,907,000 and $31,264,000 were paid in 1995,
1994 and 1993, respectively.
The Company's federal income tax returns for the years ending December 31,
1984 through 1992 remain under audit by the Internal Revenue Service. On
January 30, 1992, the Company received a Revenue Agent's Report proposing
certain adjustments to the Company's federal income tax returns for the years
ending December 31, 1984, 1985 and 1986. In April 1992, the Company filed its
protest with the Internal Revenue Service. The principal issue involved is
the deductibility of the amortization of cost assigned to investment advisory
contracts acquired. Management and its advisors believe that the Company's
practice of deducting the amortization of cost assigned to contracts acquired
is correct and that the Company's position for the years under audit will
ultimately be sustained on appeal within the Internal Revenue Service, or, if
necessary, in court. In management's opinion, the appropriateness of the
Company's practice was further supported in 1993 by the Supreme Court's
favorable decision on similar practices for treating intangible assets.
Should the adjustments proposed in the Revenue Agent's Report be upheld in
their entirety, the Company's additional liability for federal income tax for
the years covered by the report would approximate $13,124,000, plus statutory
interest thereon. The Company believes that the amount, if any, which might
result from the audit will not have a material effect on the Company's
consolidated financial position, its consolidated results of operations nor
its consolidated cash flows.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNITED ASSET MANAGEMENT CORPORATION
- --------------------------------------------------------------------------------
NOTE 7-ACQUISITIONS AND COMMITMENTS
During 1995, the Company acquired Provident Investment Counsel and Pilgrim
Baxter & Associates through purchase transactions.
During 1994, the Company issued shares of its common stock to acquire
Investment Research Company through a transaction accounted for as a pooling
of interests. The Company also acquired Dwight Asset Management Company and
Suffolk Capital Management, Inc. during 1994 through purchase transactions.
In addition, the Company acquired, through a purchase transaction, certain
assets of JMB Institutional Realty and JMB Properties Company which were
contributed to an affiliate, Heitman Financial Ltd.
During 1993, the Company issued shares of its common stock to acquire Heitman
Financial Ltd. and Murray Johnstone Limited through transactions accounted
for as poolings of interests. The Company also acquired Pell, Rudman & Co.,
Inc. and GSB Investment Management, Inc. during 1993 through purchase
transactions.
The purchase price, including direct costs, associated with the acquisitions
accounted for as purchases and the allocations thereof are summarized as
follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Consideration:
Cash $ 52,295,000 $170,394,000 $32,693,000
Subordinated notes 356,893,000 85,584,000 19,056,000
Common stock and warrants 68,872,000 4,045,000 1,161,000
- -------------------------------------------------------------------------------
$478,060,000 $260,023,000 $52,910,000
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Allocation of purchase price:
Net tangible assets $ 9,336,000 $ 6,464,000 $ 2,112,000
Cost assigned to contracts
acquired 468,724,000 251,365,000 49,675,000
Other assets -- 2,194,000 1,123,000
- -------------------------------------------------------------------------------
$478,060,000 $260,023,000 $52,910,000
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The results of operations of Provident Investment Counsel and Pilgrim Baxter
& Associates are included in the consolidated results of operations of the
Company from their respective dates of acquisition, February 15, 1995 and
April 28, 1995.
At December 31, 1995, $7,940,000 was accrued in connection with additional
purchase price commitments that are payable in 1996 to the former owners of
affiliates. Of this amount, $6,470,000 will be paid in cash and the remainder
will be issued as subordinated notes.
At December 31, 1994, $7,683,000 was accrued in connection with additional
purchase price commitments that were paid in 1995 to the former owners of
affiliates. Of this amount, $4,398,000 was paid in cash and the remainder was
issued as subordinated notes.
Cash and subordinated notes of $2,896,000 were paid in 1993 in connection
with additional purchase price commitments due in 1993 to the former owners
of an affiliate.
In conjunction with certain acquisitions and employment arrangements, the
Company has entered into agreements to make payments potentially totaling as
much as $278,000,000 in the form of cash, subordinated notes and the
Company's common stock, on dates through 2001. These payments are dependent
upon the achievement of stipulated business goals.
Unaudited pro forma data for the years ended December 31, 1995, 1994 and 1993
are set forth below, giving consideration to the acquisitions occurring in
the respective three year period assuming revenue sharing plans (see Note 1)
had been in effect and after certain other pro forma adjustments have been
made.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $722,599,000 $662,158,000 $639,958,000
Net income $ 69,305,000 $ 68,182,000 $ 67,495,000
Primary earnings per share $2.22 $2.19 $2.14
Fully diluted earnings per share $2.21 $2.19 $2.12
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of United Asset Management Corporation
Our audits of the consolidated financial statements referred to in our report
dated February 7, 1996 appearing on page 56 of the 1995 Annual Report to
Shareholders of United Asset Management Corporation (which report and
consolidated financial statements are incorporated by reference in this Annual
Report on Form 10-K) also included an audit of the Financial Statement Schedule
listed in Item 14(a) of this Form 10-K. In our opinion, this Financial
Statement Schedule presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related consolidated
financial statements.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Boston, Massachusetts
February 7, 1996
F-1
<PAGE>
UNITED ASSET MANAGEMENT CORPORATION Exhibit 21.1
SUBSIDIARIES OF THE REGISTRANT
Jurisdiction of Financial
Affiliated Firm Organization Statements
- --------------- ------------ ----------
Acadian Asset Management, Inc. Massachusetts Consolidated
Alpha Global Fixed Income Managers Delaware Consolidated
Analytic-TSA Global Asset Management, Inc. California Consolidated
Barrow, Hanley, Mewhinney & Strauss, Inc. Nevada Consolidated
Cambiar Investors, Inc. Colorado Consolidated
The Campbell Group, Inc. Delaware Consolidated
Chicago Asset Management Company Delaware Consolidated
Cooke & Bieler, Inc. Pennsylvania Consolidated
Dewey Square Investors Corporation Delaware Consolidated
Dwight Asset Management Company Delaware Consolidated
Fiduciary Management Associates, Inc. Delaware Consolidated
First Pacific Advisors, Inc. Massachusetts Consolidated
GSB Investment Management, Inc. Delaware Consolidated
Hagler, Mastrovita & Hewitt, Inc. Delaware Consolidated
Hamilton, Allen & Associates, Inc. Delaware Consolidated
Hanson Investment Management Company California Consolidated
Heitman Financial Ltd. Delaware Consolidated
Heitman Properties Ltd.(1) Illinois Consolidated
Heitman/JMB Advisory Corporation Illinois Consolidated
Hellman, Jordan Management Company, Inc. Delaware Consolidated
Investment Counselors of Maryland, Inc. Maryland Consolidated
Investment Research Company Illinois Consolidated
Jacobs Asset Management Delaware Consolidated
Tom Johnson Investment Management, Inc. Massachusetts Consolidated
Ki Pacific Asset Management, Inc. Delaware Consolidated
L&B Realty Advisors, Inc. (The L&B Group) Delaware Consolidated
L&B Institutional Property Managers, Inc.(2) Delaware Consolidated
L&B Real Estate Counsel Texas Consolidated
C.S. McKee & Company, Inc. Pennsylvania Consolidated
Murray Johnstone Limited Scotland Consolidated
Nelson, Benson & Zellmer, Inc. Colorado Consolidated
Newbold's Asset Management, Inc. Pennsylvania Consolidated
Northern Capital Management, Inc. Wisconsin Consolidated
NWQ Investment Management Company Massachusetts Consolidated
Olympic Capital Management, Inc. Washington Consolidated
Pell, Rudman & Co., Inc. Delaware Consolidated
Pilgrim Baxter & Associates Delaware Consolidated
Provident Investment Counsel Massachusetts Consolidated
Regis Retirement Plan Services Delaware Consolidated
Rice, Hall, James & Associates California Consolidated
Rothschild/Pell, Rudman & Co., Inc. Maryland Consolidated
Sirach Capital Management, Inc. Washington Consolidated
Spectrum Asset Management, Inc. Connecticut Consolidated
Sterling Capital Management Company North Carolina Consolidated
Suffolk Capital Management, Inc. Delaware Consolidated
Thompson, Siegel & Walmsley, Inc. Virginia Consolidated
UAM Fund Distributors, Inc. Massachusetts Consolidated
UAM Fund Services, Inc. Delaware Consolidated
UAM Investment Services, Inc. Delaware Consolidated
United Asset Management (Japan), Inc. Delaware Consolidated
All of the Registrant's subsidiaries do business under the respective names
indicated above and are wholly owned.
(1) Heitman Properties Ltd. has 40 wholly owned property management
subsidiaries operating in the U.S.
(2) L&B Institutional Property Managers, Inc. has 5 wholly owned property
management subsidiaries operating in the U.S.
18
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-3 (Nos. 33-36928,
33-44215, 33-46310, 33-63350, 33-69034, 33-51443, 33-52517, 33-57049 and
33-64449) and in the Registration Statements on Form S-8 (Nos. 33-10621,
33-21756, 33-34288, 33-48858 and 33-54233) of United Asset Management
Corporation of our report dated February 7, 1996 appearing on page 56 of the
Annual Report to Shareholders which is incorporated in this Annual Report on
Form 10-K. We also consent to the incorporation by reference of our report on
the Financial Statement Schedule, which appears on page F-1 of this Form 10-K.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Boston, Massachusetts
March 25, 1996
F-2
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This financial data schedule contains summary financial information extracted
from the Company's year ended December 31, 1995 consolidated statement of income
(see Annual Report page 45) and the consolidated Balance Sheet (see Annual
Report page 44). This information is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 123,768
<SECURITIES> 0
<RECEIVABLES> 124,055
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 260,700
<PP&E> 58,463
<DEPRECIATION> 37,717
<TOTAL-ASSETS> 1,384,937<F1>
<CURRENT-LIABILITIES> 181,332
<BONDS> 673,020<F2>
0
0
<COMMON> 308
<OTHER-SE> 485,589
<TOTAL-LIABILITY-AND-EQUITY> 1,384,937
<SALES> 0
<TOTAL-REVENUES> 698,462
<CGS> 0
<TOTAL-COSTS> 443,560
<OTHER-EXPENSES> 93,192<F3>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 44,020
<INCOME-PRETAX> 117,690
<INCOME-TAX> 50,373
<INCOME-CONTINUING> 67,317
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 67,317
<EPS-PRIMARY> 2.17
<EPS-DILUTED> 2.16
<FN>
<F1>Includes $1,037,280,000 of cost assigned to contracts acquired, net.
<F2>Includes $150,000,000 in Senior notes payable and $523,020,000 in
Subordinated notes payable.
<F3>Represents amortization of cost assigned to contracts acquired for FY '95.
</FN>
</TABLE>
