<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF
1934
(AMENDMENT NO. )
[_]Filed by the Registrant
[X]Filed by a Party other than the Registrant
Check the appropriate box:
[_]Preliminary Proxy Statement [_]Confidential, for Use of the
Commission Only (as permitted by
[X]Definitive Proxy Statement Rule 14a-6(e)(2))
[_]Definitive Additional Materials
[_]Soliciting Material Pursuant to Rule 14a-11(c) or Rule 4a-12
NEW ENGLAND INVESTMENT COMPANIES, L.P.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Payment of Filing Fee (Check the appropriate box):
[_]No fee required
[X]Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
Units of Limited Partnership Interest (LP Units)
(2) Aggregate number of securities to which transaction applies: N/A
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): N/A
(4) Proposed maximum aggregate value of transaction: $144,123,512
(5) Total fee paid: $28,825
[X]Fee paid previously with preliminary materials:
[X]Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: $23,400
(2) Form, Schedule or Registration Statement No.: Schedule 14C Information
Statement
(3) Filing Party: New England Investment Companies, L.P.
(4) Date Filed: January 8, 1997
<PAGE>
New England Investment Companies, L.P.
399 Boylston Street
Boston, Massachusetts 02110
To the Limited Partners:
Earlier this year, we sent to all our Unitholders an Information Statement
describing the issuance of additional limited partnership interests ("LP
Units") of New England Investment Companies, L.P. ("NEIC" or the
"Partnership") in connection with the deferred purchase price payment
obligation relating to our 1995 acquisition of Harris Associates L.P. The
Information Statement described, among other things, that the holders of a
majority of the LP Units had agreed to consent to the issuance of the LP
Units. The consent of the majority holders was obtained solely to comply with
rules of the New York Stock Exchange and was not necessary under NEIC's
Agreement of Limited Partnership or Delaware law. The issuance of LP Units
described herein was made on April 2, 1997.
After distributing the Information Statement, we were informed by the New
York Stock Exchange that, although we have received approval of the
transaction from a majority of our Unitholders, we should send the enclosed
documents soliciting consents from all our Unitholders. In order to satisfy
this requirement, we are sending you the enclosed Consent Solicitation
Statement and form of Consent relating to ratification of the issuance of the
LP Units in the Harris Associates transaction. The Consent Solicitation
Statement contains substantially the same information as was contained in the
Information Statement, with certain of the financial information updated to
reflect year-end figures.
Because the consent of the majority holders has already been obtained, this
ratification process will not affect the issuance of these LP Units described
above. If you wish to participate in this ratification, please complete, sign
and return the enclosed Consent in the self-addressed stamped envelope on or
before May 30, 1997.
Edward N. Wadsworth
Secretary of New England Investment
Companies, Inc., General Partner
April 23, 1997
<PAGE>
NEW ENGLAND INVESTMENT COMPANIES, L.P.
CONSENT SOLICITATION STATEMENT
----------------
On September 29, 1995, New England Investment Companies, L.P. ("NEIC" or the
"Partnership") acquired substantially all of the assets and business and
assumed certain liabilities of Harris Associates L.P., in exchange for $79.7
million in promissory notes (that were repaid in January 1996) and 5,366,898
units of limited partnership interest ("LP Units") of the Partnership. The
acquisition is referred to herein as the "Transaction." References in this
Information Statement to "Harris" or the "Company" refer to Harris Associates
L.P. (now renamed "Old HALP, L.P." ("Old HALP")) prior to the closing of the
Transaction and to Harris Associates L.P., a wholly owned subsidiary of NEIC,
following the closing, unless the context otherwise requires. References to
"HAI" refer to Harris Associates, Inc. (now renamed "Old HAI, Inc." ("Old
HAI")), the general partner of Harris Associates L.P. prior to the closing of
the Transaction and to Harris Associates, Inc., a wholly owned subsidiary of
NEIC, the general partner of Harris Associates L.P., following the closing,
unless the context otherwise requires.
This Consent Solicitation Statement is being furnished to Unitholders of the
Partnership in connection with the ratification of the issuance (the
"Issuance") by the Partnership to Old HALP in April 1997 of a number of
additional LP Units based upon the performance of the business of Harris
during 1996 (the Issuance, together with any cash paid in connection with the
repurchase of any such LP Units, is referred to collectively as the
"Contingent Payment"). The Contingent Payment has been made pursuant to the
Partnership Admission Agreement dated as of June 22, 1995, as amended (the
"Agreement") by and among the Partnership, Harris and Harris Associates, Inc.
On April 2, 1997, the Partnership made the Contingent Payment by issuing
2,631,537 LP Units and paying $79,635,065 to Old HALP.
The Issuance has already been approved by written consent of the holders of
over 70% of the outstanding LP Units. As of December 11, 1996, the record date
for the prior consent to the Issuance, 54.6% or 20,790,000 and 16.8% or
6,394,100 of the Partnership's issued and outstanding LP Units were held of
record by Metropolitan Life Insurance Company ("Metropolitan Life") and Reich
& Tang, Inc. ("RTI"), respectively. Metropolitan Life and RTI have each
consented to the Issuance.
This Consent Solicitation Statement is being mailed on or about April 30,
1997, to Unitholders of the Partnership of record on April 28, 1997 (the
"Record Date"). Unitholders should return completed Consents, indicating that
they consent to the ratification of the Issuance, on or before May 30, 1997,
in the enclosed pre-addressed envelope. A consent may be revoked at any time
prior to May 30, 1997, by written notice to the Partnership. The Partnership
will not hold a meeting of the Unitholders of the Partnership in connection
with the ratification of the Issuance. HOLDERS OF LP UNITS WILL HAVE NO
APPRAISAL RIGHTS UNDER DELAWARE LAW IN CONNECTION WITH, OR AS A RESULT OF, THE
MATTERS DESCRIBED IN THIS CONSENT SOLICITATION STATEMENT.
The principal executive offices of the Partnership are located at 399
Boylston Street, Boston, Massachusetts 02116, telephone (617) 578-3500.
----------------
THE DATE OF THIS CONSENT SOLICITATION STATEMENT IS APRIL 23, 1997.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
AVAILABLE INFORMATION..................................................... 3
SELECTED PRO FORMA COMBINED FINANCIAL INFORMATION OF THE PARTNERSHIP AND
HARRIS................................................................... 4
SELECTED CONSOLIDATED HISTORICAL FINANCIAL INFORMATION OF HARRIS.......... 5
INTRODUCTION.............................................................. 6
Overview................................................................ 6
Description of the Agreement............................................ 6
Reasons for the Transaction............................................. 9
Effect of the Transaction on the Rights of Existing Unitholders......... 10
Accounting Treatment.................................................... 10
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS................................. 10
STATE AND LOCAL TAX CONSIDERATIONS........................................ 12
INFORMATION CONCERNING THE PARTNERSHIP.................................... 12
INFORMATION CONCERNING HARRIS............................................. 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS............................................................... 13
VOTING SECURITIES AND PRINCIPAL HOLDERS................................... 16
VOTE REQUIRED FOR APPROVAL................................................ 17
APPRAISAL RIGHTS.......................................................... 17
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................... 17
INDEX TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS OF NEW ENGLAND
INVESTMENT COMPANIES, L.P. .............................................. F-1
INDEX TO FINANCIAL STATEMENTS OF HARRIS ASSOCIATES L.P. .................. F-1
</TABLE>
<PAGE>
AVAILABLE INFORMATION
The Partnership is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Partnership with the Commission
in accordance with the Exchange Act can be inspected and copied at the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the following regional offices of the Commission: Seven World
Trade Center, 13th Floor, New York, New York 10048 and 500 West Madison
Street, Suite 400, Chicago, Illinois 60661. Copies of such material can be
obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition, LP
Units are listed on the New York Stock Exchange (the "NYSE") and similar
information concerning the Partnership can be inspected and copied at the
NYSE, 20 Broad Street, New York, New York 10005.
This information statement incorporates documents by reference that are not
presented herein or delivered herewith. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE."
3
<PAGE>
SELECTED PRO FORMA COMBINED FINANCIAL INFORMATION
OF THE PARTNERSHIP AND HARRIS
The selected pro forma financial information for the year ended December 31,
1996 presented below reflects the pro forma effect of the payment of the
Contingent Payment as if it occurred on January 1, 1996. The selected pro
forma financial information as of December 31, 1996 presented below reflects
the pro forma effect of the payment of the Contingent Payment as if it
occurred on December 31, 1996. The pro forma financial information presented
below is derived from the unaudited pro forma condensed statement of income of
the Partnership and the unaudited pro forma condensed balance sheet of the
Partnership, both of which are included in this Consent Solicitation
Statement, and from the historical consolidated financial statements of the
Partnership incorporated herein by reference.
The pro forma condensed financial information as of and for the year ended
December 31, 1996 does not purport to represent what the Partnership's results
of operations or financial position would have been if the Contingent Payment
had actually occurred on January 1, 1996, nor is the information intended to
be a projection of results for any future period.
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED
DECEMBER 31, 1996
------------------------
(IN THOUSANDS EXCEPT PER UNIT DATA)
(PRO FORMA)(1) (ACTUAL)(2)
<S> <C> <C>
STATEMENT OF INCOME DATA:
Revenues....................... $ 392,651 $ 392,651
Expenses....................... 327,360(3)(5) 319,570
----------------- -----------------
Income before income taxes..... 65,291 73,081
Provision for income taxes..... 2,857 2,857
----------------- -----------------
Net income..................... $ 62,434 $ 70,224
================= =================
Net income per unit............ $ 1.74 $ 1.88
================= =================
Distributions declared per unit
(actual)...................... $ 2.05 $ 2.05
================= =================
Weighted average units out-
standing...................... 40,324 41,490
================= =================
BALANCE SHEET DATA:
Total assets(4)................ $ 721,754 $ 721,658
Notes payable.................. 197,969(5) 118,334
Deferred purchase considera-
tion(4)....................... -- 144,027
Total liabilities.............. 329,002 393,394
Partners' capital.............. 392,752 328,264
</TABLE>
- --------
(1) In the pro forma combined statement of income, the $144.1 million
Contingent Payment is assumed to be settled 45% (or $64.5 million) in
2,631,537 newly issued LP Units (based on the conversion LP Unit price of
$24.51) and 55% (or $79.6 million) in cash.
(2) The actual statement of income data for the year ended December 31, 1996
includes amortization expense of $4,405,000 on a portion of the Contingent
Payment of $144.1 million and assumes the Contingent Payment would have
been made entirely in LP Units.
(3) The pro forma amortization expense adjustment for the year ended December
31, 1996 is $1,985,000 which represents the additional amortization
expense that would be required on the Contingent Payment in addition to
the $4,405,000 which is recorded in the actual statement of income.
(4) In accordance with generally accepted accounting principles, the actual
balance sheet data at December 31, 1996 includes the estimated Contingent
Payment of $144,027,000 recorded as deferred purchase consideration. The
final amount of the Contingent Payment, based upon the actual results of
Harris for the year ended December 31, 1996, was $144,123,000.
Accordingly, the amount of intangible assets recorded at December 31,
1996, has been increased by $96,000, resulting from the increased purchase
consideration based on the calculation of the final amount of the
Contingent Payment.
(5) The cash portion of the Contingent Payment is assumed to be financed by
borrowings under a private debt placement with an effective interest rate
of 7.29%.
4
<PAGE>
SELECTED CONSOLIDATED HISTORICAL FINANCIAL INFORMATION OF HARRIS
The selected consolidated financial data at or for the years ended December
31, 1992, 1993 and 1994 is derived from the audited historical consolidated
financial statements of Harris appearing elsewhere in this Information
Statement, and should be read in conjunction therewith. The selected financial
data at or for the nine months ended September 29, 1995 (date of acquisition),
is derived from the unaudited historical consolidated financial statements of
Harris included elsewhere in this Information Statement, and should be read in
conjunction therewith. Harris holds certain investments in limited
partnerships ("Limited Partnerships"), the results of which have been
consolidated with the results of Harris for the periods ended December 31,
1992, through December 31, 1994, due to Harris' effective control over the
general partners of the Limited Partnerships. Concurrent with the Transaction,
the Limited Partnership agreements were amended so that Harris no longer has
effective control of the general partners of the Limited Partnerships. Because
of this change, the Partnership now accounts for Harris' investment in the
Limited Partnerships under the equity method of accounting. As a result of
this change the selected consolidated historical financial data of Harris are
presented below both as consolidated and using the equity method of
accounting. The equity method of accounting reflects the Partnership's
accounting for the Limited Partnerships after September 29, 1995.
<TABLE>
<CAPTION>
AT OR FOR THE AT OR FOR THE
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED
----------------------- SEPTEMBER 29,
1992 1993 1994 1995
---- ---- ---- -----------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
CONSOLIDATED BASIS
STATEMENT OF INCOME DATA
Revenues..................... $ 77,843 $140,670 $ 44,376
Expenses..................... 20,407 19,700 21,599
-------- -------- --------
Income before income taxes
and minority interests...... 57,436 120,970 22,777
Provision for income taxes... (94) (191) (164)
Minority interest in limited
partnerships' (gain) loss... (36,494) (86,057) 20,393
-------- -------- --------
Net income................... $ 20,848 $ 34,722 $ 43,006
======== ======== ========
BALANCE SHEET DATA
Total assets................. $460,058 $663,197 $599,464
Total liabilities............ 172,866 197,879 283,016
Minority interest in limited
partnerships................ 273,324 437,021 292,937
Partners' capital............ 13,868 28,297 23,511
EQUITY METHOD
STATEMENT OF INCOME DATA
Revenues..................... $ 34,492 $ 49,587 $ 58,991 $47,475
Expenses..................... 13,581 14,762 15,824 12,767
-------- -------- -------- -------
Income before income taxes... 20,911 34,825 43,167 34,708
Provision for income taxes... (63) (103) (161) (60)
-------- -------- -------- -------
Net income................... $ 20,848 $ 34,722 $ 43,006 $34,648
======== ======== ======== =======
BALANCE SHEET DATA
Total assets................. $ 22,951 $ 29,790 $ 24,761 $18,481
Total liabilities............ 9,083 1,493 1,250 5,857
Partners' capital............ 13,868 28,297 23,511 12,624
ASSETS UNDER MANAGEMENT (in
billions)..................... $ 2.4 $ 5.1 $ 5.7 $ 7.0
</TABLE>
5
<PAGE>
INTRODUCTION
OVERVIEW
The Partnership
NEIC, a Delaware limited partnership, is a major investment manager that
offers a broad array of investment management products and styles across a
wide range of asset categories to institutions and individuals. The
Partnership currently operates through thirteen investment management,
distribution and other support firms. Its assets under management include
domestic and international fixed income and equity securities, money market
instruments, and real estate. As of December 31, 1996, the Partnership's
assets under management were $100.3 billion, $66.0 billion of which was
attributable to institutional clients.
Harris
Founded in 1976, Harris is a Chicago-based investment advisory firm with
$10.4 billion in assets under management at December 31, 1996. It has
developed institutional, private client and multi-manager product offerings,
totaling $4.5 billion in assets under management at December 31, 1996. Harris
also serves as the investment advisor for The Oakmark Family of Funds, which
had $5.9 billion of assets at the end of 1996. Prior to its acquisition by
NEIC, Harris was a privately held partnership. Harris was acquired by NEIC on
September 29, 1995.
The Transaction
On June 22, 1995, the Partnership, Harris and HAI entered into the
Agreement, pursuant to which Harris agreed to contribute to NEIC substantially
all of its assets, subject to certain liabilities, in exchange for payment by
NEIC of (i) $175 million (the "Initial Purchase Price") to Old HALP at the
closing of the Transaction (the "Closing") in a combination of cash and newly
issued LP Units as described below and (ii) an additional payment to Old HALP
in April 1997 (the "Contingent Payment" and, together with the "Initial
Purchase Price, the "Purchase Price"), also in cash and LP Units, as a
purchase price adjustment based upon the performance of the business of Harris
in fiscal 1995 and in 1996. See "Description of the Agreement--Consideration."
Under the Agreement, the proportion of cash and LP Units for the Initial
Purchase Price and for the Contingent Payment are both determined based upon
elections to be made by the individual partners of Old HALP. In payment of the
Initial Purchase Price, NEIC ultimately issued a total of 5,366,898 LP Units
and paid $79.7 million in promissory notes (which were repaid in January
1996). On April 2, 1997, the Partnership made the Contingent Payment by
issuing 2,631,537 LP Units and paying $79,635,065 to Old HALP. The LP Unit
valuation for the Contingent Payment was $24.506, the average market value of
the LP Units for the first 20 trading days of 1997.
The contribution of Harris's business to NEIC and from NEIC to a newly
formed subsidiary occurred pursuant to the Agreement as follows: (i) Harris
contributed to NEIC substantially all of its assets, including its limited
partnership interest in Harris Associates Securities, L.P. ("HASLP"), its
broker-dealer subsidiary, subject to certain liabilities; (ii) NEIC
contributed those assets and liabilities to a wholly owned limited partnership
subsidiary which was renamed Harris Associates L.P. ("New HALP"); (iii) Old
HALP withdrew as the limited partner of HASLP and New HALP was admitted as the
limited partner of HASLP; (iv) HAI withdrew as the general partner of HASLP
and a wholly owned corporate subsidiary which was renamed Harris Associates,
Inc. was admitted as the general partner of HASLP; (v) Old HALP withdrew as
the general partner of each of its multi-manager investment partnerships (the
"Investment Partnerships") and Harris Partners L.L.C., a Delaware limited
liability company and wholly owned subsidiary of New Harris ("HP LLC"), was
admitted as general partner of each of the Investment Partnerships.
DESCRIPTION OF THE AGREEMENT
The following is a summary of certain material terms of the Agreement. This
summary is qualified in its entirety by reference to the text of the
Agreement, a copy of which was filed with the Commission as an exhibit to
NEIC's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 (with
an amendment filed as an exhibit to NEIC's Current Report on Form 8-K dated
September 29, 1995), and is incorporated herein by reference.
6
<PAGE>
Assets and Liabilities Contributed
The assets contributed by Harris to the Partnership under the Agreement were
substantially all the assets of Harris immediately prior to the Closing,
subject to certain cash adjustments to ensure that the total amount of cash,
cash equivalents and accounts receivable ("Cash Equivalents") transferred
provided sufficient Cash Equivalents for the near term operations of and
payment of distributions by Harris, and to meet all applicable regulatory
capital requirements. The cash adjustment provisions permitted Harris to
exclude from the assets contributed any Cash Equivalents except as described
in the preceding sentence.
The liabilities assumed by the Partnership from Harris were those
liabilities reflected on Harris's most recent audited balance sheet and
certain other specified liabilities, but did not include Excluded Liabilities.
Excluded Liabilities include amounts owed by Harris to its affiliates, tax
liabilities, liabilities relating to former partners of Harris, and
obligations of Harris to pay investment banking fees or expenses to its
financial adviser in connection with the Transaction or the Agreement.
Consideration
The Agreement provided for payment at the Closing of the Initial Purchase
Price of $175 million, payable initially in 9,859,154 LP Units valued at an
Exchange Price determined by formula to be $17.75 per LP Unit. On the Closing
date and during the 16 days immediately following the Closing date, each of
Old HALP and its partners had the opportunity to elect to sell back to the
Partnership some or all of the LP Units issued to Old HALP at the Closing at a
repurchase price determined by formula. The Partnership repurchased 4,492,256
LP Units for a total of $79.7 million.
In addition to the Initial Purchase Price paid at the Closing, on April 2,
1997 (the "Contingent Payment Date"), the Partnership paid to Old HALP the
Contingent Payment based on the performance of the business of Harris during
1995 and 1996. The Contingent Payment, like the Initial Purchase Price, was
paid in LP Units, with Old HALP and any of its partners to whom such LP Units
are distributed having the right to require the Partnership to repurchase some
or all of such Units during the 16 days following the Contingent Payment Date
(the "Exchange Period"). For purposes of determining the number of LP Units to
be issued on the Contingent Payment Date, LP Units were valued at $24.506, the
average of the closing prices of the LP Units during the first 20 trading days
of 1997 (the "Exchange Price"). The Repurchase Price was set as follows: (i)
for those LP Units that NEIC repurchased on, or on the two days immediately
following, the Contingent Payment Date, the Repurchase Price was the Exchange
Price and (ii) for those LP Units that NEIC repurchased starting on the third
day following the Contingent Payment Date, the Repurchase Price would have
been the lower of (x) the Exchange Price and (y) the closing price of LP Units
on the NYSE on the last trading day preceding the day of repurchase. Old HALP
and its partners were obligated to indicate to the Partnership prior to the
Contingent Payment Date the number of LP Units that Old HALP or such partner,
as the case may be, expected to tender for repurchase. Old HALP or any of its
Partners could have elected during the Exchange Period to have more LP Units
repurchased than originally indicated, but, in such a case, the Partnership
would then have had forty-five days following the Contingent Payment Date to
pay the Repurchase Price for the excess LP Units.
The Contingent Payment settled the determination of the final value of the
acquired business of Harris for purposes of the Transaction, subject to rights
to indemnification and certain adjustments. Under the Agreement, the
Contingent Payment could not be less than $41 million, an amount determined
based on the Pro Forma Qualifying Revenue (as defined in the Agreement) of
Harris for 1995. Based on such revenue of Harris through December 31, 1996,
the Contingent Payment was $144.1 million. This increase in the estimated
amount of the Contingent Payment was due to substantially increased revenues
at Harris. Management and advisory fee revenues, which constitute the largest
portion of Pro Forma Qualifying Revenues under the Agreement, grew 38%, from
$58.9 million (at Old HALP and, after September 29, 1995, at Harris) for the
year ended December 31, 1995, to $81.4 million (at Harris) for the year ended
December 31, 1996. The increase in revenues was due primarily to increased
assets under management, which grew 32%, from $7.9 billion on December 31,
1995, to $10.4 billion on December 31, 1996. The actual amount of the
Contingent Payment was based on the audited financial statements of Harris for
1996.
7
<PAGE>
Representations and Warranties
The Agreement contains representations and warranties by each party of a
type which are customary in connection with transactions such as those
contemplated by the Agreement. The representations and warranties survive the
Closing until the completion of the repurchases of LP Units following the
Contingent Payment Date.
Certain Covenants
The parties to the Agreement have made certain covenants regarding post-
Closing matters. These covenants include the agreement by NEIC to operate the
business formerly operated by Harris as a direct or indirect subsidiary of the
Partnership, to be headquartered in the Chicago Metropolitan Area and to be
known under Harris's name during at least five years after the Closing date.
The Agreement states the intention of the parties that following the Closing
date, the Board of Directors of the general partner of Harris will consist of
seven members, five of whom, including the chairman, will initially be
selected by Harris and the remaining two of whom will be representatives of
NEIC. Peter S. Voss and G. Neal Ryland currently so serve. In addition, NEIC
has agreed that, prior to five years after the Closing, it will not, other
than in the ordinary course of business, without the consent of those
directors of the general partner of Harris selected by Old HALP, sell any
assets of the Partnership existing immediately prior to the Closing and
contributed to Harris by Old HALP unless such sale is effected as part of a
sale of all or substantially all the assets of the Partnership or as part of
the liquidation and dissolution of the Partnership.
Bonus Compensation Plan and Options
Pursuant to the Agreement, the Partnership has caused Harris to adopt a
bonus compensation plan for the benefit of the active employees of Harris.
Under the plan, employees designated by the Board of Directors of the general
partner of Harris will receive a bonus each year based on operating revenues
of Harris. The aggregate bonuses paid under the plan for fiscal years 1995 and
1996 were 10% of Harris revenues for such years. In subsequent years, the
bonuses will be subject to certain hurdles but will not, for any year, be less
than 10% of revenues for the prior fiscal year.
In addition certain employees of Harris received 200,000 options at the
Closing under the Partnership's 1993 Equity Incentive Plan, with additional
options granted at the end of 1995 and 1996 (and, in the discretion of NEIC'
Board of Directors, subsequent years) pursuant to a formula based on the
performance of Harris for such years.
Registration Rights Agreement
On the Closing date, the Partnership and Old HALP entered into a
registration rights agreement (the "Registration Rights Agreement") relating
to the rights of Old HALP and its partners who receive LP Units upon
distribution to cause the Partnership to register with the Securities and
Exchange Commission all or a part of their LP Units for sale to the public.
The Registration Rights Agreement provides to holders under the agreement
"piggyback" registration rights in connection with primary offerings by the
Partnership or registrations effected by the Partnership at the request of a
Unitholder other than a holder under the Registration Rights Agreement. Rights
to demand registrations on Form S-3 are also provided for requests by holders
representing LP Units having an aggregate net offering price of at least $5
million. All registration rights are subject to scaling back if required by
the underwriters of an underwritten offering. In addition, registration rights
of holders under the Registration Rights Agreement are subject to certain pre-
existing preferential rights in favor of RTI and Metropolitan Life, as
successor to New England Mutual Life Insurance Company. Once these preferences
have expired, participation in registered offerings is determined by a ratio
based on proportionate ownership of LP Units. The Registration Rights
Agreement also contains provisions relating to the selection of underwriters
and to the relative rights of holders of rights thereunder and other parties
who may be granted registration rights at a later date. The Registration
Rights Agreement is an exhibit to the Agreement.
8
<PAGE>
Certain Tax Matters
The Agreement provides, among other things, (i) that each party thereto will
report the Transaction for tax purposes in a manner consistent with its form,
and (ii) that NEIC may allocate to the assets acquired from Harris any
increase in adjusted tax basis that arises from the repurchase of LP Units by
NEIC from Old HALP or any of its partners in connection with the Transaction.
The Agreement also provides that NEIC and Harris will cooperate to minimize
the amount of taxes for which Harris is directly or indirectly liable and
provides, in the event that Harris becomes taxable as a corporation, for a
reduction in the percentage of the gross revenues of Harris that will be
distributed to NEIC, as the limited partner of Harris, and to the general
partner of Harris (which is an indirectly held subsidiary of NEIC), as well as
for a reduction in the amount available to operate the business of Harris.
Indemnification and Insurance
The Agreement provides that Old HALP will indemnify the Partnership and its
directors, partners, officers and controlling persons against any and all
expenses, losses, claims, damage and liabilities imposed upon or reasonably
incurred by any of them in connection with any claim or action in which any
one of them may be involved by reason of (i) any untrue statement or alleged
untrue statement of a material fact relating to Harris or any of its
subsidiaries contained in this Statement or in related materials or arising
out of the omission or alleged omission to state in this Statement or such
materials a material fact relating to Harris or any of its subsidiaries
required to be stated herein or necessary to make the statements relating to
them not misleading (ii) the Excluded Liabilities or (iii) any breach of any
representation or warranty made by Old HALP under the Agreement or any exhibit
or schedule thereto.
Conversely, the Agreement provides that the Partnership will indemnify Old
HALP and its directors, partners and controlling persons against any and all
expenses, losses, claims, damages and liabilities imposed upon or reasonably
incurred by any of them in connection with any claim or action in which any
one of them may be involved by reason (i) of any untrue statement or alleged
untrue statement of a material fact relating to the Partnership contained in
this Statement or related materials of a material fact relating to the
Partnership required to be stated herein or necessary to make the statements
relating to them not misleading or (ii) any breach of any representation or
warranty made by the Partnership under the Agreement or any exhibit or
schedule thereto.
Neither Old HALP's nor the Partnership's liability for indemnification
claims (other than with respect to those described in clause (i) of each of
the two immediately preceding paragraphs) may exceed the amount of the
Contingent Payment, as adjusted upon the receipt of Harris's audited
financials for 1996. Neither party will be liable for indemnification
obligations with respect to claims arising from any breach of representation
or warranty until the aggregate cumulative amount of such obligations of such
party exceeds $1 million, whereupon such party will be liable for the full
amount of such obligations. The Partnership may set off claims for
indemnification against the Contingent Payment and any payment made in
adjustment of the Contingent Payment upon written notice to Old HALP of the
nature and basis of such claims.
Old HALP has agreed to use its best efforts to maintain, at its expense, for
a period of two years following the Closing, its existing directors' and
officers' liability insurance and its errors and omissions insurance to cover
claims made with respect to actions or omissions at or prior to the Closing
date.
REASONS FOR THE TRANSACTION
The acquisition of investment management firms serving institutional and
individual clients is a key strategy of the Partnership in seeking to increase
cash flow and Unitholder distributions. The acquisition of Harris conformed to
the Partnership's general acquisition strategy as an acquisition that is
expected to be accretive, meaning that the Partnership expects that the
acquisition will increase the per LP Unit cash flow available for distribution
to Unitholders. The Transaction also fits the Partnership's strategies of
increasing diversification
9
<PAGE>
across types of assets under management and of preserving the independent
identity of acquired firms, which (as in the case of its current subsidiary
investment management firms) are expected to operate with substantial
autonomy, retaining control of investment decisions, investment philosophy and
day-to-day operations.
EFFECT OF THE TRANSACTION ON THE RIGHTS OF EXISTING UNITHOLDERS
See "Certain Federal Income Tax Considerations."
ACCOUNTING TREATMENT
The Transaction has been accounted for, and has been reflected in the
unaudited pro forma and actual financial statements included herein, and other
financial statements incorporated herein by reference, using the purchase
method of accounting.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
INTRODUCTION
This section is a summary of certain federal income tax consequences to the
Partnership and the Unitholders resulting from the Transaction and the
Contingent Payment and is based upon the Internal Revenue Code of 1986, as
amended (the "Code"), judicial decisions, Treasury Regulations ("Regulations")
and administrative rulings of the Internal Revenue Service (the "IRS"). This
section is based on current authorities, and there can be no assurance that
future legislative or administrative changes or court decisions will not
significantly modify the law regarding the matters described herein.
Additionally, there is uncertainty regarding how some of the rules set forth
in the Code and Regulations are to be applied in the context of the
Transaction and the Contingent Payment. The discussion does not cover all
aspects of federal taxation that may be relevant to, or the actual tax effect
that any of the matters described herein will have on, particular Unitholders,
and does not address all aspects of state, local, or foreign income or other
tax laws.
ACCORDINGLY, THE FOREGOING DISCUSSION IS FOR GENERAL INFORMATION ONLY AND IS
INTENDED TO BE ONLY A SUMMARY OF THE PRINCIPAL TAX CONSEQUENCES OF THE
TRANSACTION AND THE CONTINGENT PAYMENT. UNITHOLDERS SHOULD CONSULT THEIR OWN
TAX ADVISORS CONCERNING THE FEDERAL, STATE, LOCAL AND OTHER TAX CONSEQUENCES
TO THEM OF THE TRANSACTION AND THE CONTINGENT PAYMENT.
TAX CLASSIFICATION OF THE PARTNERSHIP
As a result of amendments to the Code made in 1987, publicly traded
partnerships are in general taxed as corporations. Because the Partnership was
publicly traded prior to the effective date of such amendments, the
Partnership qualifies for transition relief that is scheduled to expire at the
end of 1997. This transition relief permits the Partnership to continue to
enjoy partnership status until its first taxable year beginning in 1998, so
long as the Partnership does not add a substantial new line of business (or
otherwise ceases to be taxed as a partnership without regard to the publicly
traded partnership rules) before then. Thereafter, the Partnership will cease
to be treated as a partnership for federal income tax purposes unless it
ceases to be publicly traded. Under applicable Treasury Regulations, the
contribution of assets to the Partnership by Harris in exchange for LP Units
and the continuation of the investment advisory business of Harris by the
Partnership and its subsidiaries does not cause the Partnership to be treated
as having added a substantial new line of business and therefore does not
cause the Partnership to cease to qualify for the transition relief.
Accordingly, the Partnership should continue to be treated as a partnership
for federal income tax purposes following the Transaction and the Contingent
Payment unless and until that status changes pursuant to the rules described
above or until the Partnership voluntarily undergoes a Restructuring (as
defined in the Partnership's agreement of limited partnership) in anticipation
of or in connection with such a status change.
THE REMAINING PORTION OF THIS SECTION DESCRIBES CERTAIN FEDERAL INCOME TAX
CONSEQUENCES TO THE PARTNERSHIP AND ITS PARTNERS FOLLOWING THE TRANSACTION AND
THE CONTINGENT PAYMENT ON THE ASSUMPTION
10
<PAGE>
THAT THE PARTNERSHIP WILL REMAIN CLASSIFIED AS A PARTNERSHIP FOR FEDERAL
INCOME TAX PURPOSES. IF THE PARTNERSHIP DOES NOT SO CONTINUE TO BE CLASSIFIED
AS A PARTNERSHIP FOR FEDERAL INCOME TAX PURPOSES, MOST, IF NOT ALL, OF THE
DISCUSSION BELOW WOULD BE INAPPLICABLE TO THE UNITHOLDERS.
TAXATION OF THE PARTNERSHIP AND PARTNERS
Flow-Through of Partnership Income. Following each of the Transaction and
the Contingent Payment, the Partnership will continue to pay no federal income
tax. Instead, Unitholders will be required to report on their federal income
tax returns their allocable share of income, gains, losses, deductions and
credits of the Partnership. The receipt of a cash distribution from the
Partnership by a Unitholder will in general not result in taxable income,
unless the amount of the distribution exceeds the Unitholder's basis in his or
her LP Unit.
Issuance of Additional Units. Neither the Partnership nor the existing
Unitholders recognized gain or loss for federal income tax purposes in
connection with the Transaction or the Contingent Payment. The issuance of
additional LP Units as part of the Contingent Payment, however, increased the
outstanding number of LP Units, thereby reducing each Unitholder's
proportionate share of income, gain, loss, deduction, credit and distributions
of the Partnership.
Adjusted Basis of the Partnership in the Harris Assets. To the extent that
the Harris partners received LP Units in exchange for assets contributed to
the Partnership and such LP Units are not repurchased by the Partnership, the
Partnership will have a "carryover" basis in the Harris assets, equal to the
basis those assets had in the hands of Old HALP. To the extent Harris partners
received cash or notes, the Partnership acquired additional basis in its
assets in an amount determined with reference to the amount of cash paid.
Because of the way in which the Transaction and the Contingent Payment were
structured, the additional basis in Partnership assets is less than the amount
of cash paid by the Partnership to the Harris partners.
Adjusted Tax Basis of LP Units. In general, a purchaser of LP Units takes a
tax basis in the LP Units equal to the amount paid for them, increased by the
Unitholder's allocable share of income and gain and decreased by (i) the
Unitholder's allocable share of loss, deduction (including amortization
deductions) and credit and (ii) the amount of distributions received with
respect to such LP Unit. Under applicable Treasury Regulations, each
Unitholder's adjusted tax basis of LP Units is increased by the Unitholder's
share, as determined by regulation, of the nonrecourse debt incurred by the
Partnership in connection with the Transaction or the Contingent Payment. A
Unitholder's proportionate share of such nonrecourse debt is, however,
included in the amount realized when the LP Unit is sold.
Allocation of Taxable Income and Loss with Respect to the Harris
Business. Except as noted below, in general, items of taxable income and loss
attributable to the Harris business are allocated to Unitholders in proportion
to the number of LP Units held.
. Special Allocations in Respect of Certain Contributed Property. To the
extent the former Harris partners received LP Units as consideration for
the contribution to the Partnership of the Harris assets, Code Section
704(c) requires that allocations of taxable income should be made
specially to the Harris partners so as to take account of the unrealized
pre-contribution taxable gain or loss in the property, i.e. the variation
between the contributor's adjusted tax basis in the property and the
property's fair market value at the time of contribution, adjusted in
certain circumstances for certain depreciation and amortization from the
date of contribution. Literal application of the rules of Code Section
704(c) and certain other sections of the Code (including Section 197,
described below) could result in differences in the tax attributes of LP
Units originally issued to The New England Mutual Life Insurance Company
("TNE"), the predecessor to Metropolitan Life, to RTI and to Old HALP and
the Harris partners that would not be fully offset by allocations
attributable to the Partnership's special tax election under Code Section
754, thereby producing different tax results to Unitholders depending
upon the identity of the transferor from whom the Unitholder obtained LP
Units. The Partnership intends to adopt certain conventions to ameliorate
this result. See "-- Conventions," below.
11
<PAGE>
. Amortization; Section 197. The Partnership believes that, under Code
Section 197 and as a result of the special tax election which the
Partnership has made under Code Section 754, Unitholders purchasing LP
Units in the open market after August 10, 1993 (and in certain cases
Unitholders purchasing in the open market after January 1, 1993) and on
or before the date of the transfer by TNE of its investment in the
Partnership to Metropolitan Life (the "Merger") were entitled to be
allocated current amortization based on the portion of the Unitholder's
purchase price of the LP Units that was allocated to certain intangible
assets. To the extent that the assets acquired from Harris are
amortizable intangibles, the Partnership believes that a Unitholder who
purchased LP Units after the Transaction and before the Merger should
generally also, under the principles of these Code provisions, have had
a special "amortizable" basis adjustment with respect to the Harris
intangible assets which should give rise to amortization deductions that
may be claimed by the Unitholder. The amortization was computed by
treating such assets as having a fifteen-year life, and a substantial
portion of such a Unitholder's purchase price was allocated to the
Partnership's intangible assets including, with respect to Unitholders
who purchased after the Transaction, the Harris intangible assets. The
Partnership expects similar results to apply for taxable periods after
the Merger (both for transferees after such date and for transferees who
purchased after August 10, 1993, who continued to hold LP Units after
the Merger), but to obtain such results the Partnership may make certain
tax elections and adopt certain tax conventions and interpretations, or
take certain other actions. See "--Conventions," below.
. Conventions. In order to promote uniformity among the LP Units while
making the allocations required by Code Section 704(c), the Partnership
intends to use certain accounting methods employed by other publicly
traded partnerships. In addition, although the transfer to Metropolitan
Life resulted in a technical termination of the Partnership for federal
income tax purposes, the Partnership expects to make certain tax
elections and adopt certain tax conventions and interpretations, or take
other actions, designed to provide Unitholders who purchased after
August 10, 1993 (and in certain cases Unitholders purchasing in the open
market after January 1, 1993) with all or a substantial portion of the
benefits of tax amortization that they would have enjoyed if the
termination had not occurred. The tax accounting methodology that may be
utilized by the Partnership following the technical termination also
involves the adoption of conventions designed to facilitate the public
trading of units. The Partnership believes that the relevant tax
accounting methodologies and conventions that may be utilized by the
Partnership generally are responsive to the federal income tax rules
pertaining to partnerships, although such methodologies and conventions
involve matters of interpretation in areas of legal uncertainty and are
not necessarily fully consistent with technical aspects of certain
rules. If these special tax accounting methodologies and interpretations
of law were successfully challenged by the IRS, Unitholders could
receive smaller amortization deductions than they would have received
absent the Merger, and issues could be raised as to the fungibility of
LP Units, which could affect the market value and/or marketability of LP
Units during the period in which the Partnership remains a partnership
for federal income tax purposes.
. Recapture. Amortization deductions will decrease a Unitholder's tax
basis, and will likely be recaptured as ordinary income upon disposition
of the LP Units. Under certain provisions of the Code relating to
recapture income, a Unitholder may be required to notify the Partnership
of its disposition of LP Units.
STATE AND LOCAL TAX CONSIDERATIONS
The state and local income tax considerations to the Partnership and its
Unitholders depend in part on the tax laws of those jurisdictions in which the
Partnership is deemed to be doing business and in part on the tax laws of
those jurisdictions in which Unitholders themselves are resident or doing
business. The Partnership is doing business in a number of jurisdictions.
INFORMATION CONCERNING THE PARTNERSHIP
Information concerning the Partnership's business and financial condition is
incorporated herein by reference to certain annual, quarterly and current
reports filed by the Partnership with the Commission. See "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE."
12
<PAGE>
INFORMATION CONCERNING HARRIS
Founded in 1976, Harris is a Chicago-based investment advisory firm with
$10.4 billion in assets under management at December 31, 1996. It has
developed institutional, private client and multi-manager product offerings,
totaling $4.5 billion in assets under management at December 31, 1996. Harris
also serves as the investment advisor for The Oakmark Family of Funds, which
had assets of $5.9 billion at December 31, 1996. Prior to its acquisition on
September 29, 1995, Harris was a privately held partnership. Harris has been a
value manager since its inception. Its investment philosophy is to invest in
companies at a substantial discount to their true business value thereby
minimizing downside risk and maximizing long-term appreciation potential. This
bottom-up investment process relies primarily on internal fundamental
research, including quantitative analysis, management contacts and company
visits.
Harris's principal executive offices are located at Two North LaSalle
Street, Suite 500, Chicago, Illinois 60602-3790, telephone (312) 621-0600.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following is management's discussion and analysis of financial condition
and results of operations for Harris for the nine months ended September 29,
1995, the nine months ended September 30, 1994, and the years ended December
31, 1994, 1993 and 1992. Financial statements for the respective periods
appear elsewhere in this Statement.
STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 29, 1995 COMPARED TO
THE NINE MONTHS ENDED SEPTEMBER 30, 1994
Net income of $34.6 million for the nine months ended September 29, 1995
increased $2.7 million as compared to the net income of $31.9 million for the
nine months ended September 30, 1994.
Fees for account supervision and investment advisory services of $42.6
million for the nine months ended September 29, 1995 increased $5.0 million as
compared to $37.6 million from the same period last year. This increase was
due to strong performance and new subscriptions in the mutual funds, and asset
growth in the advisory accounts and limited partnerships.
Employee and partner compensation and benefits of $8.0 million for the nine
months ended September 29, 1995 increased $1.9 million from $6.1 million for
the same period last year, mainly as a result of increased variable
compensation tied to higher revenues.
Communication expense of $0.9 million for the nine months ended September
29, 1995 increased $0.4 million from $0.5 million for the same period last
year.
Other expense of $2.8 million for the nine months ended September 29, 1995
decrease $0.4 million from $3.2 million for the same period in 1994. The
decrease was due to lower general and administrative expenses.
STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1994 COMPARED TO THE YEAR
ENDED DECEMBER 31, 1993
Net income of $43.0 million for the year ended December 31, 1994 increased
$8.3 million as compared to net income of $34.7 million for the year ended
December 31, 1993.
Fees for account supervision and investment advisory services of $47.2
million for the year ended December 31, 1994 increased $18.8 million as
compared to $28.4 million from the same period last year. The increase was
primarily due to new subscriptions in the mutual funds and asset growth in the
investment advisory accounts.
13
<PAGE>
Net realized and unrealized gains (losses) on securities owned and sold, not
yet purchased decreased from gains of $38.6 million in 1993 to a loss of
($1.0) million in 1994. The decrease was due to the performance of the
underlying investments of the limited partnerships in 1994.
Equity in earnings (loss) of limited partnerships decreased from earnings of
$60.5 million in 1993 to a loss of $17.1 million in 1994. The 1994 loss is
substantially offset by limited partners' interest in (gain) loss of
consolidated partnerships which decreased from a gain of ($86.1) million in
1993 to a loss of $20.4 million in 1994. The decrease was primarily due to the
performance of the underlying investments of the limited partnerships.
Interest and dividend income of $8.3 million for the year ended December 31,
1994 increased $2.3 million from $6.0 million from the same period last year.
The increase was due to the changing asset mix of the underlying investments
of the limited partnerships.
Employee and partner compensation and benefits of $9.4 million for the year
ended December 31, 1994, was substantially unchanged from $9.3 million from
the same period in 1993.
Interest expense of $3.0 million for the year ended December 31, 1994
increased $1.4 million from the same period in 1993. The increase was due to
higher interest rates and higher borrowings at the limited partnerships.
External investment advisory fees of $1.3 million for the year ended
December 31, 1994 decreased from $2.0 million from the same period last year.
The decrease was due to decreased assets in managed accounts and performance
at the limited partnerships.
Other expense of $4.4 million for the year ended December 31, 1994 increased
$0.9 million from $3.5 million from the same period in 1993. The increase was
due to higher general and administrative expenses.
STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1993 COMPARED TO THE YEAR
ENDED DECEMBER 31, 1992
Net income of $34.7 million for the year ended December 31, 1993 increased
$13.9 million as compared to net income of $20.8 million for the year ended
December 31, 1992.
Fees for account supervision and investment advisory services of $28.4
million for the year ended December 31, 1993 increased $11.0 million as
compared to $17.4 million from the same period in 1992. The increase was
primarily due to strong performance and new subscriptions in the mutual funds.
Net realized and unrealized gains on securities owned and sold, not yet
purchased increased from $19.8 million in 1992 to $38.6 million in 1993. The
increase was due to the performance of the underlying investments of the
limited partnerships.
Equity in earnings of limited partnerships increased from $26.0 million in
1992 to $60.5 million in 1993. The 1993 increase was substantially offset by
the limited partners' interest in the gain of consolidated partnerships which
increased from $36.5 million in 1992 to $86.1 million in 1993. The increase
was primarily due to performance and new subscriptions of the limited
partnerships.
Interest and dividends of $6.0 million for 1993 decreased $2.1 million from
$8.1 million from the same period in 1992. The decrease was due to the
changing asset mix of the underlying investments of the limited partnerships.
Employee and partner compensation and benefits of $9.3 million for the year
ended December 31, 1993 increased $1.5 million from $7.8 million from the same
period in 1992.
Interest expense of $1.6 million for the year ended December 31, 1993
decreased $1.3 million from the same period in 1992. The decrease was due to
lower interest rates and lower borrowings of the limited partnerships.
14
<PAGE>
External investment advisory fees of $2.0 million for the year ended
December 31, 1993 increased from $0.3 million from the same period in 1992.
The increase was due to increased assets in managed accounts and fees tied to
performance of the limited partnerships.
Other expense of $3.5 million for the year ended December 31, 1993 increased
$1.4 million from $2.1 million from the same period in 1992. The increase was
due to higher general and administrative expenses.
CAPITAL RESOURCES AND LIQUIDITY
Cash and cash equivalents at September 29, 1995 of $13.4 million decreased
$3.4 million as compared to December 31, 1994 (based on the equity method of
accounting for Harris' investment in the Limited Partnerships). Capital
withdrawals by Harris' partners of $45.5 million for the nine months ended
September 29, 1995 exceeded net cash provided by operating activities of $43.0
million and net cash used in investing activities of $0.9 million.
Net cash provided by operating activities of $43.0 million for the nine
months ended September 29, 1995 increased $8.6 million as compared to $34.4
million for the nine months ended September 30, 1994. The increase was mainly
the result of the increase in net income of $2.7 million for the nine months
ended September 29, 1995, combined with increases in payables and decreases in
receivables.
Effective with the sale of Harris to NEIC on September 29, 1995 monthly
distributions are made to NEIC by Harris based on a percentage of total
revenues earned for the prior month in accordance with the partnership
agreement.
15
<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS
The following table sets out information as of February 28, 1997 as to (i)
each person known by the Partnership to hold 5% or more of the Partnership's
outstanding LP Units, (ii) each director of the Partnership's general partner,
(iii) each officer of the Partnership's general partner who was a "named
executive officer" in the Partnership's most recent annual report on Form 10-K
and (iv) all directors and executive officers of the Partnership's general
partner as a group. Except as otherwise indicated in the footnotes to this
table, the Partnership believes that the persons named in this table have sole
voting and investment power with respect to all of the LP Units indicated.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
---------------- -------------------- ----------
<S> <C> <C>
Metropolitan Life Insurance Company.......... 20,790,000(1) 51.5%
One Madison Avenue
New York, New York 10010
Reich & Tang, Inc. .......................... 6,291,100(1) 15.6%
125 Cove Neck Road
Oyster Bay, New York 11771
Oscar L. Tang+............................... 2,981,325(2) 7.4%
600 Fifth Avenue
New York, New York 10020
William S. Antle III+........................ 0(3) 0
Robert J. Blanding+.......................... 9,000 **
Paul E. Gray+................................ 500 **
Harry P. Kamen(+)............................ 0 0
Charles M. Leighton+......................... 2,654(3)(4) **
Victor A. Morgenstern+....................... 700,000(5) 1.7%
Catherine A. Rein+........................... 0 0
Peter S. Voss+*.............................. 351,400(6) **
Neal G. Litvack*............................. 7,500(7) **
G. Neal Ryland*.............................. 31,044(8) **
Sherry A. Umberfield*........................ 50,310 **
Edward N. Wadsworth*......................... 47,070 **
All directors and executive officers of the
General Partner as a group (13 persons)..... 4,180,803 10.4%
</TABLE>
- -------
+ Director.
* Named Executive Officer.
** Less than 1%.
(1) Does not include 194,800 LP Units and 101,500 LP Units contributed to the
Partnership's Restricted Unit Plan (the "RUP") by New England Mutual (the
predecessor to Metropolitan Life) and Reich & Tang, Inc. ("RTI"),
respectively, as to which the contributing organizations retain certain
income or reversionary rights. The ownership of Metropolitan Life shown
excludes 110,000 units of general partnership interest ("GP Units") owned
by the Partnership's general partner, which represent all GP Units
outstanding. All stockholders of RTI are parties to a stockholders'
agreement relating to the maintenance of such corporation's status as an
"S" corporation under the Internal Revenue Code and which creates numerous
reciprocal and other rights relating to the disposition of stock in RTI by
the stockholders.
(2) All Mr. Tang's LP Units are beneficially owned indirectly through stock
ownership in RTI, and such LP Units are included in the ownership
attributed to RTI set out immediately above. Included are (i) 34,740 LP
Units indirectly held by a trust for the lifetime benefit of Mr. Tang of
which Mr. Tang is one of two trustees, and (ii) 846,393 LP Units
indirectly held by trusts for Mr. Tang's children, as to which Mr. Tang
disclaims beneficial ownership. Mr. Tang is a director of the general
partner of the Partnership.
(3) Does not include accounts holding values equal to 347 LP Units and 9,720
LP Units for Messrs. Antle and Leighton, respectively, under a plan
whereby directors of the General Partner can defer some or all of their
Board retainer and meeting fees.
(4) Includes 577 units owned by Mr. Leighton's spouse, as to which he
disclaims beneficial ownership.
(5) Includes 180,000 LP Units held by a limited partnership of which Mr.
Morgenstern serves as general partner. Does not include 300,000 LP Units
issued to Mr. Morgenstern as a partner of Old HALP in the Issuance.
(6) Includes 300 LP Units held by a child of Mr. Voss, as to which Mr. Voss
disclaims beneficial ownership, and 1,100 LP Units held by a trust of
which Mr. Voss is trustee.
(7) Represents units awarded under the RUP that are subject to vesting over
the next two years.
(8) Includes 1,700 LP Units held by Mr. Ryland's children, as to which he
disclaims beneficial ownership.
16
<PAGE>
VOTE REQUIRED FOR APPROVAL
While not required by the Delaware Revised Uniform Limited Partnership Act
or by the Partnership's Agreement of Limited Partnership, the Partnership is
seeking the written consent of the holders of its LP Units (other than
Metropolitan Life and RTI) in favor of ratification of the Issuance in order
to comply with certain rules of the New York Stock Exchange relating to
issuance of voting securities by listed companies. However, because RTI and
Metropolitan Life, who together currently represent over 65% of the
outstanding LP Units, have already consented to the Transaction and approved
the Issuance, no other Unitholder consents are necessary in connection with
this matter. As of April 3, 1997, there were approximately 43.0 million LP
Units outstanding, approximately 27.0 million of which were owned by MetLife
and RTI in the aggregate, and approximately 16.0 million of which were owned
by other public and private Unitholders.
The costs of soliciting the Consents will be borne by the Partnership. In
addition to solicitations by mail, directors, officers and regular employees
of the Partnership may solicit Consents by telephone, telegram, facsimile or
in person. Such individuals may be reimbursed for reasonable out-of-pocket
expenses incurred in connection therewith. Brokers, nominees, fiduciaries and
other custodians have been requested to forward the soliciting materials to
the beneficial owners of LP Units held of record by them, and such custodians
will be reimbursed by the Partnership for their reasonable out-of-pocket
expenses.
APPRAISAL RIGHTS
No Unitholders are entitled to appraisal rights in connection with the
Transaction or the Issuance.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Partnership pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this Statement and before the
Issuance shall be deemed incorporated herein by reference, and such documents
shall be deemed to be a part hereof from the date of filing of such documents.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Statement to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Statement.
The Partnership will provide without charge to each person to whom this
Statement is delivered, on the written or oral request of any such person, a
copy of any or all of the above documents incorporated herein by reference
(other than exhibits to such documents, unless such exhibits are specifically
incorporated by reference into the documents that are incorporated into this
Statement). Requests should be directed to New England Investment Companies,
L.P., 399 Boylston Street, Boston, Massachusetts 02116, Attention: Edward N.
Wadsworth, Secretary (617-578-3500). The Partnership will provide such
documents by first class mail, or other equally prompt means, within one
business day of receipt of any such request.
The following documents filed by the Partnership with the Commission are
incorporated herein by reference:
1. Annual Report on Form 10-K for the fiscal year ended December 31,
1996.
2. Current Report on Form 8-K dated January 3, 1997.
3. Exhibit (Partnership Admission Agreement) to Quarterly Report on Form
10-Q for the quarter ended June 30, 1995.
4. Exhibit (Amendment No. 1 to Partnership Admission Agreement) to
Current Report on Form 8-K dated September 29, 1995.
17
<PAGE>
INDEX TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
OF NEW ENGLAND INVESTMENT COMPANIES, L.P.
<TABLE>
<CAPTION>
PAGES
-----
<S> <C>
Unaudited Pro Forma Condensed Balance Sheet as of December 31, 1996..... F-2
Unaudited Pro Forma Condensed Statement of Income for the Year Ended
December 31, 1996...................................................... F-3
Pro Forma Adjustments................................................... F-4
</TABLE>
INDEX TO FINANCIAL STATEMENTS OF HARRIS ASSOCIATES L.P.
<TABLE>
<CAPTION>
PAGES
-----
<S> <C>
Unaudited Consolidated Statements of Financial Condition as of September
29, 1995 and September 30, 1994......................................... F-5
Unaudited Consolidated Statements of Income for the Nine Months Ended
September 29, 1995 and September 30, 1994............................... F-6
Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended
September 29, 1995 and September 30, 1994............................... F-7
Unaudited Consolidated Statements of Partners' Capital for the Nine
Months Ended September 29, 1995 and September 30, 1994.................. F-8
Notes to Unaudited Consolidated Financial Statements..................... F-9
Report of Independent Accountants........................................ F-10
Consolidated Statements of Financial Condition as of December 31, 1994,
1993 and 1992........................................................... F-11
Consolidated Statements of Income for the Years Ended December 31, 1994,
1993 and 1992........................................................... F-12
Consolidated Statements of Partners' Capital for the Years Ended December
31, 1994, 1993 and 1992................................................. F-13
Consolidated Statements of Cash Flows for the Years Ended December 31,
1994, 1993 and 1992..................................................... F-14
Notes to Consolidated Financial Statements............................... F-15
</TABLE>
F-1
<PAGE>
NEW ENGLAND INVESTMENT COMPANIES, L.P.
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
NEIC ADJUSTMENTS NEIC
---- ----------- ---------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................... $ 49,914 $ 49,914
Accounts receivable and other............... 66,430 66,430
Other....................................... 6,692 6,692
-------- --------
Total current assets...................... 123,036 123,036
Intangible assets............................. 527,765 $ 96 (3) 527,861
Fixed assets.................................. 19,236 19,236
Other assets.................................. 51,621 51,621
-------- --------- --------
Total assets.............................. $721,658 $ 96 $721,754
======== ========= ========
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities:
Accounts payable and other liabilities...... $ 38,651 $ 38,651
Accrued compensation and benefits........... 43,612 43,612
Distributions payable....................... 20,084 20,084
-------- --------
Total current liabilities................. 102,347 102,347
Deferred compensation, benefits and other..... 28,686 28,686
Notes payable................................. 118,334 $ 79,635 (2) 197,969
Deferred purchase consideration............... 144,027 96 (3) --
-- (144,123)(2) --
-------- --------- --------
393,394 (64,392) 329,002
Partners' capital............................. 328,264 64,488 (2) 392,752
-------- --------- --------
Total liabilities and partners' capital... $721,658 $ 96 $721,754
======== ========= ========
</TABLE>
See Pro Forma Adjustments appearing on page F-4 of this Consent Solicitation
Statement.
F-2
<PAGE>
NEW ENGLAND INVESTMENT COMPANIES, L.P.
UNAUDITED PRO FORMA CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER UNIT DATA)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
NEIC ADJUSTMENTS NEIC
---- ----------- ---------
<S> <C> <C> <C>
Revenues:
Management and advisory fees................. $341,345 $341,345
Other revenues............................... 46,318 46,318
Gain on partial sale of affiliate............ 4,988 4,988
-------- --------
392,651 392,651
-------- --------
Expenses:
Compensation and benefits.................... 189,986 189,986
Restricted unit.............................. 7,598 7,598
Amortization of intangibles.................. 25,277 $ 1,985 (1) 27,262
Interest expense............................. 8,728 5,805 (2) 14,533
Other........................................ 87,981 87,981
-------- ------- --------
319,570 7,790 327,360
-------- ------- --------
Income before taxes............................ 73,081 (7,790) 65,291
Provision for income taxes..................... 2,857 2,857
-------- ------- --------
Net income..................................... $ 70,224 $(7,790) $ 62,434
======== ======= ========
Net income per unit............................ $ 1.88 $ 1.74
======== ========
Weighted average units outstanding............. 41,490 (1,166)(2) 40,324
======== ======= ========
</TABLE>
See Pro Forma Adjustments appearing on page F-4 of this Consent Solicitation
Statement.
F-3
<PAGE>
NEW ENGLAND INVESTMENT COMPANIES, L.P.
PRO FORMA ADJUSTMENTS
(1) Intangible assets of approximately $322.5 million arising from the
acquisition of Harris represents the excess of purchase price over the net
tangible assets acquired. Intangible assets include the Initial Purchase Price
of Harris of $175.0 million, the Contingent Payment of $144.1 million, $4.9
million of acquisition related costs, less the net tangible assets acquired of
$1.5 million. The Contingent Payment of $144.1 million is based upon the
performance of Harris' business through December 31, 1996. The pro forma
intangible asset amortization expense adjustment of $1,985,000 consists of pro
forma amortization expense of $6,390,000 on the Contingent Payment of $144.1
million less historical amortization expense of $4,405,000 recognized on the
estimated Contingent Payment during the year ended December 31, 1996. The
intangible assets are being amortized over periods ranging 9 to 30 years on a
straight line basis.
(2) In accordance with generally accepted accounting principles, the
Partnership recorded the Contingent Payment of $144.0 million as deferred
purchase consideration at December 31, 1996. In accordance with the
Partnership Admission Agreement, the Contingent Payment could be settled in
either LP Units, cash or a combination thereof based on selection by the
seller's partners. In accordance with generally accepted accounting principles
the Partnership's actual financial statements assumed the Contingent Payment
was to be made entirely through the issuance of additional LP Units because
the ultimate form of payment is at the election of the seller's partners.
Accordingly, the historical weighted average units outstanding for the year
ended December 31, 1996, includes the impact of the Contingent Payment being
made entirely in LP Units. In the pro forma combined statement of income, the
$144.1 million Contingent Payment is assumed to be settled 45% (or $64.5
million) in 2,631,537 newly issued LP Units (based on the conversion LP Unit
price of $24.51) and 55% (or $79.6 million) in cash. The cash portion of the
Contingent Payment is assumed to be financed by borrowings under a private
debt placement with an effective interest rate of 7.29%.
(3) The final amount of the Contingent Payment, based upon the actual
results of Harris for the year ended December 31, 1996, was $144,123,000.
Accordingly, the amount of intangible assets recorded at December 31, 1996,
has been increased by $96,000, resulting from the increased purchase
consideration based on the calculation of the final amount of the Contingent
Payment.
F-4
<PAGE>
HARRIS ASSOCIATES L.P. AND SUBSIDIARY
(A DELAWARE LIMITED PARTNERSHIP)
UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
AS OF SEPTEMBER 29, 1995 AND SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
SEPTEMBER 29, SEPTEMBER 30,
1995 1994
------------- -------------
<S> <C> <C>
ASSETS
Cash and cash equivalents.......................... $13,359,091 $ 8,145,198
Receivables:
Investment advisory fees......................... 1,012,385 3,370,132
Broker and dealer................................ 217,964 1,106,147
Other............................................ 582,413 204,910
Investments in limited partnerships................ 1,485,743 1,379,777
Furniture, equipment and leasehold improvements, at
cost,
net of accumulated depreciation................... 1,046,428 468,113
Other assets....................................... 777,274 210,157
----------- -----------
Total assets....................................... $18,481,298 $14,884,434
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses............ $ 3,740,791 $ 1,033,346
Other payables................................... 1,400,000 0
Unearned advisory fees........................... 445,291 414,078
Deferred rent payable............................ 270,714 153,573
----------- -----------
Total liabilities.................................. 5,856,796 1,600,997
Partners' capital.................................. 12,624,502 13,283,437
----------- -----------
Total liabilities and partners' capital............ $18,481,298 $14,884,434
=========== ===========
</TABLE>
See accompanying Notes to Unaudited Consolidated Financial Statements.
F-5
<PAGE>
HARRIS ASSOCIATES L.P. AND SUBSIDIARY
(A DELAWARE LIMITED PARTNERSHIP)
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 29, 1995 AND SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
SEPTEMBER 29, SEPTEMBER 30,
1995 1994
------------- -------------
<S> <C> <C>
REVENUES
Fees for account supervision and investment
advisory services............................... $42,614,962 $37,574,259
Commissions...................................... 2,255,899 2,306,515
Interest and dividends........................... 398,471 221,620
Equity in earning of limited partnerships........ 73,055 715,540
Other............................................ 2,133,166 1,915,191
----------- -----------
Total revenues..................................... 47,475,553 42,733,125
----------- -----------
EXPENSES
Employee and partner compensation and benefits... 7,951,126 6,094,086
Clearing fees.................................... 483,066 558,111
Communications................................... 851,792 451,505
Occupancy and equipment rental................... 671,458 465,503
Other............................................ 2,810,308 3,179,754
----------- -----------
Total expenses..................................... 12,767,750 10,748,959
----------- -----------
Income from operations............................. 34,707,803 31,984,166
Provision for state income taxes................... 59,500 123,470
----------- -----------
Net income......................................... $34,648,303 $31,860,696
=========== ===========
</TABLE>
See accompanying Notes to Unaudited Consolidated Financial Statements.
F-6
<PAGE>
HARRIS ASSOCIATES L.P. AND SUBSIDIARY
(A DELAWARE LIMITED PARTNERSHIP)
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 29, 1995 AND SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
SEPTEMBER 29, SEPTEMBER 30,
1995 1994
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................................... $ 34,648,303 $ 31,860,696
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................. 237,392 167,411
Equity in earnings of partnerships............. (73,055) (715,540)
Decrease in investment advisory fees
receivable.................................... 2,091,908 1,565,566
Decrease (increase) in due from brokers and
dealers....................................... 1,485,470 (561,508)
Decrease in other receivables.................. 546,805 1,995,315
Increase in other assets....................... (559,988) (23,130)
Increase (decrease) in accounts payable and
accrued expenses.............................. 3,163,931 (762,791)
Increase in other payables..................... 1,400,000 --
Increase in unearned advisory fees............. 20,248 36,482
Increase in deferred rent payable.............. 23,093 834,438
------------ ------------
Net cash provided by operating activities.......... 42,984,107 34,396,939
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to furniture, equipment and leasehold
improvements.................................... (837,361) (146,458)
Increase in investments in limited partnerships,
net............................................. (32,454) (290,830)
Withdrawals of equity in and repayments of
advances to partnerships........................ -- 11,715,840
------------ ------------
Net cash provided by (used in) investing
activities........................................ (869,815) 11,278,552
------------ ------------
CASH FLOWS FOR FINANCING ACTIVITIES:
Capital contributions............................ -- 429,011
Capital withdrawals.............................. (45,534,812) (47,303,358)
------------ ------------
Net cash used in financing activities.............. (45,534,812) (46,874,347)
------------ ------------
Decrease in cash and cash equivalents.............. (3,420,520) (1,198,856)
Cash and cash equivalents, beginning of period..... 16,779,611 9,344,054
------------ ------------
Cash and cash equivalents, end of period........... $ 13,359,091 $ 8,145,198
============ ============
</TABLE>
See accompanying Notes to Unaudited Consolidated Financial Statements.
F-7
<PAGE>
HARRIS ASSOCIATES L.P. AND SUBSIDIARY
(A DELAWARE LIMITED PARTNERSHIP)
UNAUDITED CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 29, 1995 AND SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
SEPTEMBER 29, SEPTEMBER 30,
1995 1994
------------- -------------
<S> <C> <C>
Balance, beginning of period...................... $ 23,511,011 $ 28,297,088
Contributions................................... -- 429,011
Withdrawals..................................... (45,534,812) (47,303,358)
Net income...................................... 34,648,303 31,860,696
------------ ------------
Balance, end of period............................ $ 12,624,502 $ 13,283,437
============ ============
</TABLE>
See accompanying Notes to Unaudited Consolidated Financial Statements.
F-8
<PAGE>
HARRIS ASSOCIATES L.P. AND SUBSIDIARY
(A DELAWARE LIMITED PARTNERSHIP)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements of Harris Associates L.P. (Harris)
include the following limited partnerships in which Harris was the general
partner which are accounted for using the equity basis of accounting: Aurora
Limited Partnership, Perseus Partners Limited Partnership, Pleiades Partners
L.P., Stellar Partners L.P. and SPA Partners L.P. (the "Limited Partnerships).
The partnership agreements were amended in July 1995 to allow Harris to be
replaced as general partner, at which point the equity method of accounting
was adopted. Prior to the amendment of these partnership agreements, Harris
consolidated the results of the Limited Partnerships with its financial
results. In the opinion of management, all adjustments, consisting only of
normal recurring accruals, have been made to present fairly the financial
statements of Harris as of and for the nine months ended September 29, 1995
and September 30, 1994.
2. TRANSACTION WITH NEW ENGLAND INVESTMENT COMPANIES, L.P.
On June 22, 1995, New England Investment Companies, L.P. ("NEIC") agreed to
acquire certain of the assets and assume certain of the liabilities of Harris
in exchange for limited partnership units of NEIC. The Transaction closed on
September 29, 1995. The information shown in the foregoing financial
statements reflects transactions that occured prior to the closing of the
Transaction.
F-9
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of Harris Associates L.P.:
We have audited the accompanying consolidated statement of financial
condition of HARRIS ASSOCIATES L.P. (a Delaware limited partnership) AND
SUBSIDIARIES as of December 31, 1994, 1993 and 1992, and the related
consolidated statements of income, partners' capital and cash flows for each
of the years then ended. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audits. We did not audit the financial
statements of Hesperus Partners, Ltd. ("Hesperus"), Aurora Limited Partnership
("Aurora"), Perseus Partners Limited Partnership ("Perseus"), Pleiades
Partners L.P. ("Pleiades"), (all Illinois limited partnerships), and Stellar
Partners L.P. ("Stellar") (a Delaware limited partnership). The investments in
these partnerships represent 6%, 43% and 42% of partners' capital and the
equity in earnings represent 2%, 31% and 48% of net income in 1994, 1993 and
1992, respectively. The financial statements of Hesperus, Aurora, Perseus,
Pleiades and Stellar were audited by other auditors, whose reports have been
furnished to us, and our opinion, insofar as it relates to the amounts
included for such partnerships, is based solely on the reports of the other
auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, based on our audits and the reports of other auditors, the
financial statements referred to above present fairly, in all material
respects, the financial position of Harris Associates, L.P. and Subsidiaries
as of December 31, 1994, 1993 and 1992 and the results of their operations and
their cash flows for each of the years then ended, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois,
February 10, 1995
(except June 9, 1995, as to the financial statements audited by others see
Note 2, and June 22, 1995, as to subsequent events, see Note 15)
F-10
<PAGE>
HARRIS ASSOCIATES L.P. AND SUBSIDIARIES
(A DELAWARE LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
AS OF DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
ASSETS
CASH AND CASH EQUIVALENTS.............. $ 27,378,010 $ 73,859,198 $ 36,989,652
RECEIVABLES:
Investment advisory fees............. 2,808,034 4,583,820 956,907
Brokers and dealers (Note 3)......... 22,331,652 25,767,979 125,420,712
Other................................ 2,198,297 3,327,022 1,589,894
SECURITIES OWNED (cost of $141,911,574,
$128,187,343 and $62,586,273 in 1994,
1993 and 1992, respectively):
Corporate bonds and notes............ 76,975,833 61,222,522 11,403,034
Preferred stocks..................... 12,094,742 20,033,638 9,743,875
Common stocks........................ 27,411,424 94,464,728 60,101,563
Warrants and options................. 16,210,610 8,189,266 6,639,829
Other................................ 413,078 352,870 1,460,856
------------ ------------ ------------
133,105,687 184,263,024 89,349,157
INVESTMENTS IN AND ADVANCES TO LIMITED
PARTNERSHIPS (Note 4)................. 405,491,227 364,747,219 202,729,126
DESIGNATED INVESTMENTS (Note 5)........ 5,461,198 5,949,080 2,370,432
FURNITURE, EQUIPMENT AND LEASEHOLD
IMPROVEMENTS, at cost, net of
accumulated depreciation of
$1,712,518, $1,475,481 and
$1,275,720............................ 446,460 489,066 416,186
OTHER ASSETS........................... 243,740 211,014 235,953
------------ ------------ ------------
Total assets....................... $599,464,305 $663,197,422 $460,058,019
============ ============ ============
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Loans payable (Note 6)............... $ 24,340,300 $ 10,000,000 $ 11,791,000
Payable to brokers and dealers (Note
3).................................. 4,314,671 9,695,428 2,144,932
Securities sold, not yet purchased
(proceeds of $119,350,901,
$73,518,320 and $120,475,471 in
1994, 1993 and 1992, respectively)
Corporate bonds and notes.......... 373,208 234,769 8,360
Preferred stocks................... 44,909,705 809,758 --
Common stocks...................... 68,101,180 79,226,121 119,133,661
Warrants and options............... 208,348 1,483,311 1,389,649
------------ ------------ ------------
113,592,441 81,753,959 120,531,670
Accounts payable and accrued
expenses............................ 2,184,730 4,367,174 1,090,255
Unearned advisory fees............... 425,043 377,596 264,628
Consolidated Partnerships
Limited partners' contributions
received in advance................ 17,915,213 65,854,030 27,417,300
Limited partners' withdrawals
payable............................ 120,243,332 25,830,666 9,626,091
------------ ------------ ------------
Total liabilities.................. 283,015,730 197,878,853 172,865,876
LIMITED PARTNERS' INTERESTS IN
CONSOLIDATED PARTNERSHIPS............. 292,937,564 437,021,481 273,324,512
PARTNERS' CAPITAL (Notes 8 and 14)..... 23,511,011 28,297,088 13,867,631
------------ ------------ ------------
Total liabilities and partners'
capital........................... $599,464,305 $663,197,422 $460,058,019
============ ============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-11
<PAGE>
HARRIS ASSOCIATES L.P. AND SUBSIDIARIES
(A DELAWARE LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
REVENUES:
Fees for account supervision and
investment advisory services (Note
10)............................... $ 47,243,782 $ 28,414,146 $ 17,359,315
Commissions (Note 10).............. 3,047,876 4,566,821 3,670,993
Interest........................... 6,915,137 2,899,872 6,154,208
Dividends.......................... 1,341,710 3,110,670 1,969,153
Net realized and unrealized gains
(losses) on securities owned and
sold, not yet purchased........... (957,516) 38,568,354 19,812,274
Equity in earnings (loss) of
limited partnerships
(Note 4).......................... (17,065,405) 60,470,405 26,038,715
Other (Note 10).................... 3,850,791 2,639,301 2,837,887
------------ ------------ ------------
Total revenues................... 44,376,375 140,669,569 77,842,545
------------ ------------ ------------
EXPENSES:
Employee and partner compensation
and benefits
(Note 11)......................... 9,447,833 9,291,564 7,809,208
Clearing fees...................... 744,394 716,358 875,098
Interest........................... 2,988,627 1,574,323 2,834,610
Dividends on short stock........... 855,380 1,054,613 5,203,319
External investment advisory fees.. 1,305,243 2,031,737 295,956
Communications..................... 592,053 408,658 142,958
Occupancy and equipment rental..... 1,471,294 1,315,002 1,204,878
Other.............................. 4,358,980 3,498,571 2,134,661
------------ ------------ ------------
Total expenses................... 21,763,804 19,890,826 20,500,688
------------ ------------ ------------
Income before limited partners'
interest in Consolidated
Partnerships...................... 22,612,571 120,778,743 57,341,857
LIMITED PARTNERS' INTEREST IN (GAIN)
LOSS OF CONSOLIDATED PARTNERSHIPS... 20,393,158 (86,056,438) (36,493,838)
------------ ------------ ------------
Net income....................... $ 43,005,729 $ 34,722,305 $ 20,848,019
============ ============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-12
<PAGE>
HARRIS ASSOCIATES L.P. AND SUBSIDIARIES
(A DELAWARE LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
BALANCE, beginning of year............ $ 28,297,088 $ 13,867,631 $ 13,454,540
Contributions....................... 429,011 354,236 184,451
Withdrawals......................... (48,220,817) (20,647,084) (20,619,379)
Net income.......................... 43,005,729 34,722,305 20,848,019
------------ ------------ ------------
BALANCE, end of year.................. $ 23,511,011 $ 28,297,088 $ 13,867,631
============ ============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-13
<PAGE>
HARRIS ASSOCIATES L.P. AND SUBSIDIARIES
(A DELAWARE LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income....................... $ 43,005,729 $ 34,722,305 $ 20,848,019
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities
Depreciation and amortization.. 250,722 214,765 179,543
Equity in (earnings) loss of
partnerships.................. 17,065,405 (60,470,405) (26,038,715)
Limited partners interest in
gain (loss) of Consolidated
Partnerships.................. (20,393,158) 86,056,438 36,493,838
Decrease in receivables........ 6,340,838 94,288,692 253,743,119
(Increase) decrease in
marketable securities......... 51,157,337 (94,913,867) (8,276,034)
(Increase) decrease in
designated investments........ 487,882 (3,578,648) (835,767)
Increase in investments in and
advances to limited
partnerships, net............. (57,809,413) (101,547,688) (4,489,354)
(Increase) decrease in other
assets........................ (46,412) 14,484 (6,620)
Increase (decrease) in accounts
payable and accrued expense... (2,182,444) 3,276,919 (70,532)
Increase (decrease) in payable
for securities sold not yet
purchased..................... 31,838,482 (38,777,711) (253,765,049)
Increase (decrease) in unearned
advisory fees................. 47,447 112,968 (18,815)
Increase (decrease) in payable
to brokers and dealers........ (5,380,757) 7,550,496 2,144,932
------------- ------------- -------------
Net cash provided by (used
in) operating activities.... 64,381,658 (73,051,252) 19,908,565
------------- ------------- -------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Additions to furniture, equipment
and leasehold improvements ..... (194,430) (277,190) (141,594)
------------- ------------- -------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from loans.............. 95,935,311 113,022,370 130,356,902
Repayments of loans.............. (81,595,011) (114,813,370) (181,254,583)
Consolidated Partnerships
Increase (decrease) in limited
partners' interests........... (123,690,759) 77,640,531 44,108,531
Increase (decrease) in limited
partners' contributions
received in advance........... (47,938,817) 38,436,730 24,978,204
Increase (decrease) in limited
partners' withdrawals
payable....................... 94,412,666 16,204,575 (20,427,081)
Capital contributions............ 429,011 354,236 184,451
Capital withdrawals.............. (48,220,817) (20,647,084) (20,619,379)
------------- ------------- -------------
Net cash (used in) provided
by financing activities..... (110,668,416) 110,197,988 (22,672,955)
------------- ------------- -------------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................. (46,481,188) 36,869,546 (2,905,984)
CASH AND CASH EQUIVALENTS, begin-
ning of year...................... 73,859,198 36,989,652 39,895,636
------------- ------------- -------------
CASH AND CASH EQUIVALENTS, end of
year.............................. $ 27,378,010 $ 73,859,198 $ 36,989,652
============= ============= =============
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-14
<PAGE>
HARRIS ASSOCIATES L.P. AND SUBSIDIARIES
(A DELAWARE LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
1. SIGNIFICANT ACCOUNTING POLICIES:
The consolidated financial statements include the accounts of Harris
Associates L.P. ("HALP") and Harris Associates Securities L.P. ("HASLP"), of
which HALP is a 99% limited partner. The consolidated financial statements
also include the following entities of which HALP owned the majority voting
interest or over which it exercised significant control: Venus Partners
("Venus"), Hesperus Partners, Ltd. ("Hesperus"), Aurora Limited Partnership
("Aurora"), Perseus Partners Limited Partnership ("Perseus"), Pleiades
Partners L.P. ("Pleiades") and Stellar Partners L.P. ("Stellar"), hereinafter
referred to as the "Consolidated Partnerships". Statement of Financial
Accounting Standards ("SFAS") No. 94, "Consolidation of all Majority-Owned
Subsidiaries," requires that such entities be consolidated (see Note 2). All
intercompany accounts and transactions have been eliminated in consolidation.
HALP and consolidated subsidiaries are hereinafter referred to as "the
Partnership."
Securities owned and securities sold, not yet purchased are valued as
follows: securities that are traded on a national securities exchange or
securities listed on the NASDAQ National Market System are valued at the last
sales price on the exchange or market where primarily traded or listed, or if
no last sale, the mean between the "bid" and "ask" prices.
Marketable securities sold, not yet purchased, represent obligations of the
Partnership to deliver a specified security at a future date which will
necessitate purchasing the security at then-prevailing prices.
Investments in limited partnerships are valued at the Investment
Partnership's proportionate interest in the fair value of the underlying net
assets of such limited partnerships determined from their audited financial
statements. The resulting gains and losses are reflected in the accompanying
statements of income.
Securities transactions are accounted for on the trade date (date the order
to buy or sell is executed). Dividend income and expense is recorded on the
ex-dividend date and interest income is recorded on the accrual basis.
Realized gains and losses from securities transactions are reported on the
first-in, first-out basis.
Assets and liabilities denominated in foreign currencies are translated at
the closing rate of exchange at the end of the period. Transactions during the
period, including purchases and sales of securities, are translated at the
rate of exchange prevailing on the date of the transactions. Forward foreign
currency contracts and foreign currencies are valued at the forward and
current exchange rates, respectively, prevailing on the day of valuation. All
highly liquid investments with a maturity of three months or less at the date
of purchase are considered to be cash equivalents.
Limited partners' contributions received in advance represent amounts
contributed by limited partners in the Consolidated Partnerships prior to
December 31, which are to become effective as of January 1 of the following
year. As of January 1 of the following year, these amounts are classified as
limited partners' interests in Consolidated Partnerships. Limited partners'
withdrawals payable represent limited partners' withdrawals from the
Consolidated Partnerships as of December 31 for those who have given notice
prior to December 31, that they are withdrawing amounts as of year-end.
Depreciation is computed under accelerated methods over estimated useful
lives of 5 to 10 years. Amortization of leasehold improvements is computed
over the lesser of their economic useful lives or the remaining term of the
lease.
F-15
<PAGE>
HARRIS ASSOCIATES L.P. AND SUBSIDIARIES
(A DELAWARE LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994, 1993 AND 1992
No provision is made for federal income tax purposes since the Partnership's
income is includable in the income tax returns of the individual partners. The
Partnership is subject to an Illinois replacement tax equal to 1 1/2% of net
income, as defined.
2. CONSOLIDATED PARTNERSHIPS:
HALP was the general partner in Venus, a limited partnership which engaged
in "reverse conversion" transactions through early 1993. HALP was the general
partner in Hesperus, a private investment partnership, through December 31,
1993. Also, HALP is currently the general partner in Aurora, Perseus, Pleiades
and Stellar, limited partnerships which trade securities and invest in other
partnerships which trade various financial instruments. Stellar commenced
operations in 1994.
HALP's percentage of capital was approximately 99% of Venus, 3% of Hesperus
and 1% of the other partnerships. HALP received a pro rata allocation of
income or loss in addition to other priority allocations. In certain
instances, the net income of the individual Consolidated Partnerships had to
exceed specified amounts before HALP received such a priority allocation.
The combined condensed financial information of Venus, Hesperus, Aurora,
Perseus, Pleiades and Stellar for each of the three years ended December 31,
1994, 1993 and 1992, are as follows (in thousands of dollars):
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Assets--
Cash and cash equivalents....................... $ 10,914 $ 64,515 $ 36,573
Receivables..................................... 21,697 26,350 125,755
Securities owned................................ 132,790 184,264 89,349
Investments in and advances to limited
partnerships................................... 405,491 364,747 202,729
Designated investments and other assets......... 5,488 5,973 2,405
-------- -------- --------
Total assets.................................. $576,380 $645,849 $456,811
======== ======== ========
Liabilities--
Loans payable................................... $ 24,340 $ 10,000 $ 3,601
Securities sold, not yet purchased.............. 113,592 81,754 120,532
Other liabilities............................... 5,971 13,299 2,899
Limited partners' contributions received in
advance and withdrawals payable................ 138,159 91,685 37,043
-------- -------- --------
Total liabilities............................. 282,062 196,738 164,075
Partners' capital................................. 294,318 449,111 292,736
-------- -------- --------
Total liabilities and partners' capital....... $576,380 $645,849 $456,811
======== ======== ========
Revenues, including change in unrealized
appreciation (depreciation) of securities........ $(10,159) $105,343 $ 53,944
Expenses, including advisory and administrative
fees to HALP..................................... 9,517 8,732 11,640
-------- -------- --------
Net income (loss)............................. $(19,676) $ 96,611 $ 42,304
======== ======== ========
Carrying value of investments of HALP at December
31............................................... $ 1,380 $ 12,089 $ 19,412
HALP's share of net income exclusive of advisory
and administrative fees paid to HALP............. 716 10,555 6,957
Advisory and administrative (management) fees paid
to HALP.......................................... 3,739 3,690 3,487
======== ======== ========
</TABLE>
F-16
<PAGE>
HARRIS ASSOCIATES L.P. AND SUBSIDIARIES
(A DELAWARE LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994, 1993 AND 1992
3. DUE TO/FROM BROKERS AND DEALERS:
The Partnership conducts its clearing and depository operations for its
trading activities through various brokers pursuant to customary agreements.
Due to/from brokers and dealers includes cash balances with the Partnership's
clearing brokers, net amounts receivable and payable for securities
transactions that have not settled and collateral for a specified percentage
of the value of all marketable securities sold, not yet purchased.
4. INVESTMENTS IN LIMITED PARTNERSHIPS:
The Investment Partnerships have investments in limited partnerships which
engage in various trading strategies. Underlying investments of the limited
partnerships are valued at current market and can include purchases and short
sales of government or government agency securities, corporate stocks and
bonds, commodity futures and forward contracts, options, repurchase and
reverse repurchase agreements, rate caps and rate swaps, commercial paper and
other securities. At December 31, 1994, the Investment Partnerships in the
aggregate had investments in approximately 60 limited partnerships; the
largest investment in any one limited partnership being approximately
$25,000,000.
5. DESIGNATED INVESTMENTS:
One of the Investment Partnerships has invested in certain limited
partnerships, which have allocated, among the partners of such limited
partnerships, a fixed percentage ownership interest in any appreciation or
depreciation and realized gains or losses on disposition of certain
investments, hereinafter referred to as "Designated Investments." Designated
Investments are valued at fair value as determined by the general partners of
such limited partnerships.
Capital consisting of each partner's share of the cost and net unrealized
appreciation or depreciation resulting from designated investments is
segregated within partners' capital of such partnership. The cost of such
investments, as well as related unrealized gains or losses, is not available
for distribution until the investment is sold or otherwise disposed of by the
limited partnership.
6. LINE-OF-CREDIT ARRANGEMENTS:
Certain of the Consolidated Partnerships maintain separate lines of credit
agreements with banks aggregating $59,200,000 at December 31, 1994. Interest
is payable at the prime or corporate base rate, as determined by the bank. The
total borrowings are limited as defined in the agreements, including, among
other things, the borrowings are limited to 33% of the net assets of such
Investment Partnerships. During 1992, HALP had a $20,000,000 line of credit,
the sole purpose of which was to invest in and make advances to Venus. Any
loans thereunder were collateralized by HALP's general partnership interest in
Venus and the guarantee of certain partners of HALP with interest at
approximately 1.5 times the federal funds rate.
The average borrowings on the credit arrangements described above and the
average rate of interest for 1994, 1993 and 1992 were $37,441,000, $23,919,000
and $32,104,000 and 5.6%, 4.6% and 5.1%, respectively.
Interest expense incurred on such lines of credit was $2,157,128, $1,159,932
and $2,069,456 for the years ended December 31, 1994, 1993 and 1992,
respectively.
F-17
<PAGE>
HARRIS ASSOCIATES L.P. AND SUBSIDIARIES
(A DELAWARE LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994, 1993 AND 1992
7. COMMITMENTS AND CONTINGENCIES:
HALP had a lease for office facilities through 1998 which it renegotiated in
1994. At December 31, 1994, HALP's lease for office facilities requires
minimum annual rental payments, excluding escalations and increases in
operating expenses and taxes, as follows:
<TABLE>
<S> <C>
Year ending December 31--
1995........................................................ $ 460,299
1996........................................................ 517,199
1997........................................................ 526,237
1998........................................................ 535,275
1999........................................................ 544,313
2000 to 2004................................................ 2,511,067
----------
Total..................................................... $5,094,390
==========
</TABLE>
Under the terms of the lease agreements, rental payments for certain periods
were waived. HALP computed an average monthly rental for the entire term of
the lease and charged this amount to rental expense each month. Rental expense
for 1994, 1993 and 1992 was $449,886, $409,174 and $456,998, respectively. The
difference between the average monthly rental and the actual rental payment is
accounted for as deferred rent payable. This difference will be offset in
future years when the actual rental payments exceed the calculated average
monthly rental.
HASLP is an introducing broker and clears all transactions with and for
customers on a fully disclosed basis with another broker-dealer. HASLP
promptly transmits all customer funds and securities to such clearing broker-
dealer. In connection with this arrangement, HASLP is contingently liable for
the payment of securities purchased and the delivery of securities sold by
customers.
8. NET CAPITAL REQUIREMENTS:
As a registered broker-dealer and member of the National Association of
Securities Dealers, Inc., HASLP is subject to the Uniform Net Capital Rule
15c3-1 of the Securities and Exchange Commission ("SEC"). This rule requires
that net capital, as defined, shall be at least the greater of $100,000 or 6
2/3% of aggregate indebtedness, as defined. Net capital and aggregate
indebtedness change from day to day, but at December 31, 1994, HASLP had
required capital of $100,000 and excess net capital of $158,645. The ratio of
aggregate indebtedness to net capital was .59 to 1. HASLP was in compliance
with the net capital rule at December 31, 1993 and 1992. Under the agreement
with its clearing broker, HASLP is to maintain minimum net capital of
$250,000.
9. EXEMPTION FROM SEC RULE 15C3-3:
HASLP is exempt from the provisions of SEC Rule 15c3-3 because it clears all
customer trades with another broker-dealer on a fully disclosed basis.
10. RELATED PARTIES:
Harris Associates, Inc. ("HAI") is the general partner of HALP and HASLP.
F-18
<PAGE>
HARRIS ASSOCIATES L.P. AND SUBSIDIARIES
(A DELAWARE LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994, 1993 AND 1992
HALP provides investment advisory and administrative services to Harris
Associates Investment Trust ("HAIT"), a series of mutual funds that utilize
the Oakmark name. Certain of HAIT's officers and trustees are also partners
and employees of HALP. During 1994, 1993 and 1992, HALP received $28,048,203,
$11,289,461 and $613,801, respectively, in fees from HAIT. HASLP received
$272,804, $287,438 and $191,464 in commissions from HAIT during 1994, 1993 and
1992, respectively.
Pursuant to an agreement dated June 30, 1992, certain partners of HALP
withdrew from HALP. In connection with such withdrawal, those partners were
relieved of certain obligations imposed under HALP's Partnership Agreement. As
consideration for being relieved of those obligations, the withdrawing
partners surrendered their partnership units and agreed to pay HALP
approximately $2,500,000 on June 30, 1992, plus additional amounts to be paid
through June 30, 1995. Concurrent with the withdrawal of those partners from
HALP, the investment advisory agreements with The Acorn Fund, Inc. ("Acorn")
and certain other persons were terminated and Acorn and those other persons
entered into new investment advisory agreements with an entity formed by the
withdrawn partners. HALP received $3,384,837, $1,892,432 and $2,739,600 in
1994, 1993 and 1992, respectively, under this agreement. HALP received
$3,377,531 in fees for investment advisory services in the first half of 1992.
11. EMPLOYEE BENEFIT PLAN:
HALP has a profit-sharing plan covering partners and employees.
Contributions to the plan are at the discretion of HALP. HALP funds all
contributions on a current basis. The amounts charged to expense for 1994,
1993 and 1992 were $934,899, $1,035,512 and $879,219, respectively.
12. FORWARD FOREIGN CURRENCY AND FUTURES COMMODITY CONTRACTS:
Certain of the Investment Partnerships, through an advisory account, enter
into forward foreign currency contracts to hedge the currency risks associated
with the purchase of foreign securities. The Investment Partnerships entered
into forward foreign currency contracts to deliver 26,377,000, 11,073,000 and
1,341,000 Canadian dollars in exchange for $19,196,371, $8,419,186 and
$1,056,332 at December 31, 1994, 1993 and 1992, respectively. The unrealized
gain of $391,555, $55,474 and $6,456 at December 31, 1994, 1993 and 1992,
respectively, is reflected in the accompanying statements of income. The
Investment Partnerships bear the risk of changes in foreign exchange rates and
the risk that the counterparty fails to perform under terms of the contract.
At December 31, 1993 and 1992, Hesperus had sold S&P 500 futures contracts
short with a contractual amount of $24,500,000 and $19,700,000, respectively.
Such contracts were recorded on the trade date and marked to market with the
gain/loss reflected in net realized and unrealized gains (losses) on
securities owned.
13. ADDITIONAL CASH FLOW INFORMATION:
Illinois replacement tax paid was $80,195, $69,780 and $62,781 during 1994,
1993 and 1992, respectively. Interest expense paid was $2,530,716, $1,354,658
and $2,692,935 during 1994, 1993 and 1992, respectively.
14. SUBSEQUENT PARTNERS' CAPITAL WITHDRAWALS:
During the period January 1, 1995, to February 10, 1995, the partners
withdrew capital of $20,404,531.
F-19
<PAGE>
HARRIS ASSOCIATES L.P. AND SUBSIDIARIES
(A DELAWARE LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
DECEMBER 31, 1994, 1993 AND 1992
15. SUBSEQUENT EVENTS:
On June 22, 1995, New England Investment Companies, L.P. ("NEIC") agreed
with HALP and HAI to acquire certain of the assets and assume certain of the
liabilities of HALP, including its interest in HASLP, in exchange for limited
partnership units of NEIC. It is anticipated that, prior to the closing of the
agreed-upon transaction, the partners of HALP would make substantial capital
withdrawals, leaving HALP with minimal assets.
F-20
<PAGE>
REVOCABLE CONSENT
NEW ENGLAND INVESTMENT COMPANIES, L.P.
399 BOYLSTON STREET, BOSTON, MASSACHUSETTS 02116
THIS CONSENT IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby consents to the adoption of the following resolution
with the same force and effect as if adopted at a meeting duly called and held
of the holders of limited partnership interests of New England Investment
Companies, L.P. (the "Partnership").
1. To ratify, confirm and approve the issuance of units of limited partnership
interest of the Partnership ("LP Units") in connection with the deferred
payment obligation of the Partnership pursuant to the Partnership Admission
Agreement dated as of June 22, 1995, as amended, by and among the
Partnership, Old HALP L.P. (formerly Harris Associates L.P.), and Old HAI,
Inc. (formerly Harris Associates, Inc.), in addition to those LP Units
issued at the time of the closing of the transactions contemplated thereby.
The undersigned hereby acknowledges receipt of a copy of the accompanying
Consent Solicitation Statement and hereby revokes any consent or consents
heretofore given. This consent may be revoked at any time prior to May 30, 1997.
Please sign name exactly as shown.
When there is more than one holder,
each should sign. When signing as
an attorney, administrator,
executor, guardian or trustee,
please add your title as such. If
executed by a corporation,
partnership or other entity, the
consent should be signed by a duly
authorized person, stating his
title or authority.
Dated:
-----------------------------
-----------------------------------
-----------------------------------
Signature of Unitholder
Please Date, Sign and Mail Your Consent Promptly in the Enclosed Envelope
