<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
------------------------ ------------------------
Commission File Number: 1-9468
Nvest, L.P.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-3405992
- --------------------------------------- -------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
399 Boylston Street, Boston, Massachusetts 02116
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(617) 578-3500
------------------------------------------------------
(Registrant's telephone number, including area code)
New England Investment Companies, L.P.
(Former name, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No
The issuer is a limited partnership. There were 6,405,982 units of limited
partner interest and 110,000 units of general partner interest outstanding on
May 1, 1998.
1 of 20
<PAGE>
NVEST, L.P.
INDEX TO FORM 10-Q
PART I - FINANCIAL INFORMATION
PAGE
ITEM 1. FINANCIAL STATEMENTS.
FINANCIAL STATEMENTS OF NVEST, L.P. ( THE "PARTNERSHIP" )
Balance Sheet as of December 31, 1997 and March 31, 1998 3
Statement of Income for the three months ended March 31,
1997 and 1998 4
Statement of Cash Flows for the three months ended March 31,
1997 and 1998 5
Notes to Financial Statements 6
FINANCIAL STATEMENTS OF THE "OPERATING PARTNERSHIP"
(NVEST, L.P. IN 1997 AND NVEST COMPANIES, L.P IN 1998)
Consolidated Balance Sheet as of December 31, 1997 and
March 31, 1998 9
Consolidated Statement of Income for the three months
ended March 31, 1997 and 1998 10
Consolidated Statement of Cash Flows for the three months
ended March 31, 1997 and 1998 11
Notes to Consolidated Financial Statements 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS. 13
Nvest, L.P. 14
The Operating Partnership
16
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES. 19
ITEM 5. OTHER INFORMATION. 19
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. 19
SIGNATURES 20
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<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
- -----------------------------
NVEST, L.P.
BALANCE SHEET
(in thousands, except unit data)
<TABLE>
<CAPTION>
DECEMBER 31, 1997 MARCH 31, 1998
----------------- --------------
(unaudited)
<S> <C> <C>
ASSETS
- ------
Current assets:
Distribution receivable from Nvest Companies, L.P. $ 5,020 $ 4,679
----------------- --------------
Total current assets 5,020 4,679
Investment in Nvest Companies, L.P. (note 4) 71,008 71,862
----------------- --------------
Total assets $ 76,028 $ 76,541
================= ===============
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
Current liabilities:
Distribution payable $ 5,020 $ 3,794
Gross income tax payable - 881
----------------- --------------
Total current liabilities 5,020 4,675
Contingent liabilities (note 6 )
Partners' capital (6,274,980 units at December 31, 1997
and 6,322,520 units at March 31, 1998) 71,008 71,866
----------------- --------------
Total liabilities and partners' capital $ 76,028 $ 76,541
================= ==============
</TABLE>
See Accompanying Notes to Financial Statements.
3 of 20
<PAGE>
NVEST, L.P.
STATEMENT OF INCOME
(in thousands, except per unit data, unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------------------
1997 1998
------------- ------------
<S> <C> <C>
REVENUES
- --------
Equity in earnings of Nvest Companies, L.P. $ - $ 3,964
Management and advisory fees 116,109 -
Other revenues and interest income 10,688 -
------------- ------------
126,797 3,964
------------- ------------
EXPENSES
- --------
Compensation and benefits 64,999 -
Restricted unit plan compensation 133 -
Amortization of intangibles 9,268 -
Depreciation and amortization 1,556 -
Occupancy, equipment and systems 5,691 -
Interest expense 3,878 -
Other 19,704 -
Gross income tax - 881
------------- ------------
105,229 881
------------- ------------
Income before income taxes 21,568 3,083
Income tax expense 1,215 -
------------- ------------
Net income $ 20,353 $ 3,083
============= ============
Net income per unit (note 3):
Basic $ 0.48 $ 0.49
============= ============
Diluted $ 0.48 $ 0.48
============= ============
Distributions declared per unit:
Regular $ 0.53 $ 0.60
Special 0.05 -
------------- ------------
Total $ 0.58 $ 0.60
============= ============
Weighted average units outstanding - diluted (note 3) 43,087 7,017
============= ============
</TABLE>
See Accompanying Notes to Financial Statements.
4 of 20
<PAGE>
NVEST, L.P.
STATEMENT OF CASH FLOWS
(in thousands, unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------------------------
1997 1998
---------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 20,353 $ 3,083
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of intangibles 9,268 -
Restricted unit plan compensation 133 -
---------------- ------------
Subtotal 29,754 3,083
Equity in earnings of Nvest Companies, L.P. - (3,964)
Distributions received from Nvest Companies, L.P. - 5,020
Depreciation and amortization 1,556 -
Increase in accounts receivable and other assets (8,370) -
Increase (decrease) in accounts payable and other liabilities (15,761) 881
---------------- ------------
Net cash provided by operating activities 7,179 5,020
---------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additional investment in Nvest Companies, L.P. units - (1,569)
Capital expenditures (2,822) -
Acquisition payments, net of cash acquired (41,238) -
---------------- ------------
Net cash used in investing activities (44,060) (1,569)
---------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions paid to unitholders (20,084) (5,020)
Proceeds from issuance of units 380 1,569
Proceeds from notes payable 36,450 -
---------------- ------------
Net cash provided by (used in) financing activities 16,746 (3,451)
---------------- ------------
Net decrease in cash and cash equivalents (20,135) -
Cash and cash equivalents, beginning of period 49,914 -
---------------- ------------
Cash and cash equivalents, end of period $ 29,779 $ -
================ ============
Cash paid during the period for interest $ 2,623 $ -
================ ============
Cash paid during the period for income taxes $ 1,381 $ -
================ ============
Supplemental disclosure of non-cash increase in partners' capital $ 54,261 $ -
================ ============
</TABLE>
See Accompanying Notes to Financial Statements.
5 of 20
<PAGE>
NVEST, L.P.
NOTES TO FINANCIAL STATEMENTS
(unaudited)
NOTE 1 - ORGANIZATION
- ---------------------
Nvest, L.P. ("Nvest" or the "Partnership"), formerly named New England
Investment Companies, L.P., is a publicly traded limited partnership listed on
the New York Stock Exchange. Effective with a restructuring completed on
December 31, 1997 (the "Restructuring"), Nvest's sole business is to act as
advising general partner of Nvest Companies, L.P. ("Nvest Companies" or the
"Operating Partnership"), formerly named NEIC Operating Partnership, L.P.
Nvest's primary asset at March 31, 1998 was 6,322,520 units representing a
general partner's interest in the Operating Partnership.
Pursuant to the Restructuring, the Partnership elected to extend its
grandfathered partnership tax status for 1998. At year-end 1997, the Partnership
contributed all of its assets and liabilities to the Operating Partnership in
exchange for units representing a general partner's interest in the Operating
Partnership. Following this transaction, certain limited partners of the
Partnership exchanged their partnership units for limited partner units of the
Operating Partnership.
As a result of the Restructuring, the Partnership receives distributions from
the Operating Partnership and pays a 3.5% federal gross income tax on its
proportionate share of the gross income of the Operating Partnership. If the
Partnership does not make the applicable election, fails to qualify to make such
election, or decides in the future not to pay the 3.5% federal gross income tax,
it would become subject to the regular federal corporate income tax. The
Partnership expects to distribute to its unitholders substantially all of the
distributions received from the Operating Partnership after accruing the 3.5%
federal gross income tax, any state tax, and any other expenses of the
Partnership.
Nvest Companies is an investment manager that offers a broad array of investment
management products and styles across a wide range of asset categories to
institutions and individuals.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
- ----------------------------------------
Basis of Presentation. The unaudited financial statements of Nvest, L.P. have
been prepared in accordance with the rules and regulations of the Securities and
Exchange Commission. These financial statements should be read in conjunction
with the annual report of the Partnership filed on Form 10-K for the year ended
December 31, 1997. In the opinion of management, all adjustments, consisting
only of normal recurring accruals, have been made to present fairly the
financial statements of the Partnership at March 31, 1998 and for the three
month periods ended March 31, 1997 and 1998. The financial statements of Nvest,
L.P. should also be read in conjunction with the consolidated financial
statements of the Operating Partnership included herein.
Principles of Consolidation. The 1997 statements of income and cash flows of
Nvest, L.P. include the accounts of its wholly-owned subsidiaries prior to the
Restructuring (see note 1). All material intercompany accounts and transactions
have been eliminated in consolidation.
Equity Method of Accounting. Subsequent to the Restructuring, Nvest, L.P.
records its investment in the Operating Partnership using the equity method of
accounting. Revenue is recorded based on its proportionate share of net income
of the Operating Partnership with a corresponding increase in its investment in
the Operating Partnership. Distributions from the Operating Partnership reduce
the investment in the Operating Partnership.
Gross Income Tax. Effective January 1, 1998, a 3.5% federal gross income tax is
incurred on the Partnership's proportionate share of the gross income of the
Operating Partnership and any of its subsidiary partnerships.
Reclassifications. Certain amounts in prior period financial statements have
been reclassified to conform with the 1998 presentation.
6 of 20
<PAGE>
NVEST, L.P.
NOTES TO FINANCIAL STATEMENTS
(unaudited)
NOTE 3 - NET INCOME PER UNIT
- ----------------------------
The calculation of basic and diluted net income per unit and weighted average
units outstanding for the three months ended March 31, 1997 and 1998 follows:
<TABLE>
<CAPTION>
1997 1998
----------- ----------
(in thousands, except per
unit data)
<S> <C> <C>
Net income $ 20,353 $ 3,083
Add restricted unit plan compensation 133 -
----------- ----------
Net income - for basic calculation 20,486 3,083
Additional equity in earnings, net of gross income tax expense,
of Nvest Companies, L.P. related to incremental units assumed
outstanding - 299
----------- ----------
Net income - for diluted calculation $ 20,486 $ 3,382
=========== ==========
Weighted average units outstanding:
Basic 43,087 6,293
Incremental units assumed outstanding for exercise of unit options - 724
----------- ----------
Diluted 43,087 7,017
=========== ==========
Net income per unit:
Basic $ 0.48 $ 0.49
=========== ==========
Diluted $ 0.48 $ 0.48
=========== ==========
</TABLE>
NOTE 4 - INVESTMENT IN NVEST COMPANIES, L.P.
- --------------------------------------------
Investment activity in Nvest Companies for the quarter ended March 31, 1998
follows (in thousands, except per unit data):
<TABLE>
<S> <C>
Initial investment in Nvest Companies at December 31, 1997 $71,008
Additional investment in units of Nvest Companies 1,569
Equity in earnings of Nvest Companies 3,964
Distribution declared by Nvest Companies at $0.74 per unit (4,679)
---------
Investment in Nvest Companies at March 31, 1998 $71,862
=========
</TABLE>
7 of 20
<PAGE>
NVEST, L.P.
NOTES TO FINANCIAL STATEMENTS
(unaudited)
NOTE 5 - TAX CONSIDERATIONS FOR PUBLIC UNITHOLDERS
- --------------------------------------------------
As a result of the Omnibus Budget Reconciliation Act of 1993 and a special tax
election which the Partnership has made, units purchased in the open market
after August 10, 1993 are allocated a substantial portion of the purchase price
of the units as amortization over a fifteen year period. Taking into account
such amortization tax benefits (which depend in part on the particular
unitholder's purchase price), Partnership distributions are expected to
significantly exceed net taxable income for units purchased after August 10,
1993. Amortization deductions will decrease the unitholder's tax basis of such
units, and will likely be recaptured as ordinary income upon disposition of the
units. Assuming a unit was purchased during December 1997 and is held through
December 31, 1998, this unit would have a convention purchase price, as defined
in the Partnership Agreement of the Partnership, of $27.94 of which
approximately $24.94 is allocated to Section 197 assets. Accordingly, the
estimated tax amortization deduction which benefits the unitholder would be
$1.66 per unit (1/15 of $24.94).
Each year, a Schedule K-1 is sent to each unitholder identifying their
amortization tax benefit, if applicable. Under federal tax law, a unitholder is
required to pay tax on their allocable share of the Partnership's income
regardless of the amount of distributions made by the Partnership. As individual
tax situations may vary, each prospective purchaser of units is urged to consult
their tax advisor.
NOTE 6 - CONTINGENT LIABILITIES
- -------------------------------
The business units of Nvest Companies are from time to time subject to legal
proceedings and claims which arise in the ordinary course of their business. In
the opinion of management, the amount of ultimate liability with respect to
currently pending actions, if any, will not materially adversely affect the
results of operations or financial condition of the Partnership.
8 of 20
<PAGE>
THE OPERATING PARTNERSHIP
CONSOLIDATED BALANCE SHEET
(in thousands, except unit data)
<TABLE>
<CAPTION>
DECEMBER 31, 1997 MARCH 31, 1998
----------------- --------------
(unaudited)
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 91,986 $ 22,765
Management and advisory fees receivable 90,796 99,441
Other 11,275 23,955
----------------- --------------
Total current assets 194,057 146,161
Intangible assets:
Investment advisory contracts 534,848 524,902
Goodwill 125,546 131,084
Fixed assets 26,434 29,945
Other assets 63,683 53,765
----------------- --------------
Total assets $ 944,568 $ 885,857
================= ==============
Liabilities and Partners' Capital
Current liabilities:
Accounts payable and accrued expenses $ 109,776 $ 95,339
Distribution payable 35,539 32,941
Notes payable 44,767 9,867
----------------- --------------
Total current liabilities 190,082 138,147
Deferred compensation, benefits and other 21,561 18,623
Notes payable 271,667 271,667
----------------- --------------
Total liabilities 483,310 428,437
Contingent liabilities (note 3)
Partners' capital (44,467,000 units at December 31,
1997 and 44,515,000 units at March 31, 1998) 461,258 457,420
----------------- --------------
Total liabilities and partners' capital $ 944,568 $ 885,857
================= ==============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
9 of 20
<PAGE>
THE OPERATING PARTNERSHIP
CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per unit data, unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------------
NVEST, NVEST
L.P. COMPANIES, L.P.
1997 (1) 1998 (1)
-------------- --------------
<S> <C> <C>
REVENUES
- --------
Management and advisory fees $ 116,109 $ 150,399
Other revenues and interest income 10,688 13,055
-------------- --------------
126,797 163,454
-------------- --------------
EXPENSES
- --------
Compensation and benefits 64,999 81,254
Restricted unit plan compensation 133 971
Amortization of intangibles 9,268 9,834
Depreciation and amortization 1,556 1,934
Occupancy, equipment and systems 5,691 7,886
Interest expense 3,878 5,418
Other 19,704 28,086
-------------- --------------
105,229 135,383
-------------- --------------
Income before income taxes 21,568 28,071
Income tax expense 1,215 1,024
-------------- --------------
Net income $ 20,353 $ 27,047
============== ==============
Distributions declared per unit:
Regular $ 0.53 $ 0.74
Special 0.05 -
-------------- --------------
Total $ 0.58 $ 0.74
============== ==============
Weighted average units outstanding - diluted 43,087 45,209
============== ==============
</TABLE>
Note:
(1) As discussed in Note 1, the Operating Partnership was Nvest, L.P. prior to
the Restructuring completed on December 31, 1997 and Nvest Companies, L.P.
thereafter.
See Accompanying Notes to Consolidated Financial Statements.
10 of 20
<PAGE>
THE OPERATING PARTNERSHIP
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands, unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-------------------------------
NVEST, NVEST
L.P. COMPANIES, L.P.
1997 (1) 1998 (1)
-------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 20,353 $ 27,047
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of intangibles 9,268 9,834
Restricted unit plan compensation 133 971
-------------- -----------
Subtotal 29,754 37,852
Depreciation and amortization 1,556 1,934
Increase in accounts receivable and other assets (8,370) (11,407)
Decrease in accounts payable and other liabilities (15,761) (11,899)
-------------- -----------
Net cash provided by operating activities 7,179 16,480
-------------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (2,822) (5,445)
Acquisition payments, net of cash acquired (41,238) (10,652)
-------------- -----------
Net cash used in investing activities (44,060) (16,097)
-------------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayment of) notes payable 36,450 (34,900)
Distributions paid to unitholders (20,084) (35,539)
Proceeds from issuance of units 380 835
-------------- -----------
Net cash provided by (used in) financing activities 16,746 (69,604)
-------------- -----------
Net decrease in cash and cash equivalents (20,135) (69,221)
Cash and cash equivalents, beginning of period 49,914 91,986
-------------- -----------
Cash and cash equivalents, end of period $ 29,779 $ 22,765
============== ===========
Cash paid during the period for interest $ 2,623 $ 5,959
============== ===========
Cash paid during the period for income taxes $ 1,381 $ 156
============== ===========
Supplemental disclosure of non-cash increase in partners' capital $ 54,261 $ 250
============== ===========
</TABLE>
Note:
- ----
(1) As discussed in Note 1, the Operating Partnership was Nvest, L.P. prior to
the Restructuring completed on December 31, 1997 and Nvest Companies, L.P.
thereafter.
See Accompanying Notes to Consolidated Financial Statements.
11 of 20
<PAGE>
THE OPERATING PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION
- ---------------------
Nvest Companies, L.P. ("Nvest Companies" or the "Operating Partnership"),
formerly named NEIC Operating Partnership, L.P., is an 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 Operating
Partnership began operations effective with the Restructuring of Nvest, L.P. at
year-end 1997, as described more fully in Note 1 of the financial statements of
Nvest, L.P. included herein.
NOTE 2- SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------
Basis of Presentation. The unaudited consolidated financial statements of Nvest
Companies, L.P. should be read in conjunction with the annual report of Nvest,
L.P. filed on Form 10-K for the year ended December 31, 1997. In the opinion of
management, all adjustments, consisting only of normal recurring accruals, have
been made to present fairly the financial statements of the Operating
Partnership at March 31, 1998 and for the three month periods ended March 31,
1997 and 1998.
Principles of Consolidation. The consolidated financial statements of Nvest
Companies, L.P., include the accounts of its wholly-owned subsidiaries. All
material intercompany accounts and transactions have been eliminated in
consolidation.
Reclassifications. Certain amounts in prior period financial statements have
been reclassified to conform with the 1998 presentation.
NOTE 3 - CONTINGENT LIABILITIES
- -------------------------------
The business units of Nvest Companies are from time to time subject to legal
proceedings and claims which arise in the ordinary course of their business. In
the opinion of management, the amount of ultimate liability with respect to
currently pending actions, if any, will not materially adversely affect the
results of operations or financial condition of the Operating Partnership.
12 of 20
<PAGE>
PART I. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS.
- ---------------------
GENERAL
- -------
Any statements in this report that are not historical facts are intended to fall
within the safe harbor for forward-looking statements provided by the Private
Securities Litigation Reform Act of 1995. Any forward-looking statements should
be considered in light of the risks and uncertainties associated with the
Partnership and the Operating Partnership and their businesses, economic and
market conditions prevailing from time to time, and the application and
interpretation of federal and state tax laws and regulations, all of which are
subject to material changes and which may cause actual results to vary
materially from what had been anticipated. Certain factors that affect the
Partnership and Operating Partnership have been described in the Partnership's
Annual Report on Form 10-K for the year ended December 31, 1997, particularly
under Item 1, "Business--Forward-Looking Statements" and include factors such as
conditions affecting fee revenues, reliance on key personnel, competition,
regulatory and legal factors, and tax considerations. Readers are encouraged to
review these factors carefully.
1997 RESTRUCTURING OF THE PARTNERSHIP
- -------------------------------------
At year-end 1997, Nvest, L.P. ("Nvest" or the "Partnership") completed a
restructuring (the "Restructuring") that included the transfer of its business,
assets and liabilities to a newly formed operating partnership, Nvest Companies,
L.P. ("Nvest Companies" or the "Operating Partnership"). As a result of the
Restructuring, the Partnership's primary asset consists of partnership units of
the Operating Partnership, and its sole business currently is to act as the
advising general partner of the Operating Partnership. The Partnership records
its investment in the Operating Partnership under the equity method of
accounting based on its proportionate share of net income of the Operating
Partnership. At March 31, 1998, the Partnership owned approximately 6.3 million
units, or 14.2% of the economic interests in the Operating Partnership (15.5% on
a diluted basis). As part of the Restructuring, Nvest, L.P. determined to retain
its partnership tax status in return for paying an annual 3.5% federal gross
income tax. For further information regarding the Restructuring, please refer to
the Partnership's Annual Report on Form 10-K for the year ended December 31,
1997, particularly the discussion under Item 1, "Business--1997 Restructuring of
the Partnership."
As a result of the Restructuring, Management's Discussion and Analysis includes
the following two sections. In the first section, the results of Nvest, L.P. for
the three months ended March 31, 1998 are compared to pro forma results for the
three months ended March 31, 1997 as if the Restructuring had occurred on
January 1, 1997, to show comparative results under the equity method of
accounting. In the second section, the results of Nvest Companies, L.P. for the
three months ended March 31, 1998 are compared to the results of Nvest, L.P. for
the three months ended March 31, 1997, because the operations of the Operating
Partnership prior to the Restructuring were those of the Partnership. A
discussion of the results of Nvest, L.P. for the three months ended March 31,
1998 compared to the three months ended March 31, 1997 is not considered
meaningful due to the accounting changes brought on by the change in structure
(equity method of accounting as compared to consolidated operating results) and
therefore has not been included.
13 of 20
<PAGE>
PART I. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
NVEST, L.P.
-----------
Summary financial information of the Partnership for the three months ended
March 31 follows:
<TABLE>
<CAPTION>
Three Months Ended March 31,
------------------------------------
1997 1998
Pro Forma Actual
-------------- ----------------
(in thousands, except per unit data)
<S> <C> <C>
Equity in earnings of Nvest Companies, L.P. $ 2,918 $ 3,964
Gross income tax 668 881
-------------- ----------------
Net income $ 2,250 $ 3,083
============== ================
Net income per unit - diluted $ 0.37 $ 0.48
============== ================
Regular distributions declared per unit $ 0.53 $ 0.60
============== ================
Weighted average units outstanding - diluted 6,080 7,017
============== ================
</TABLE>
Pro forma financial information for the three months ended March 31, 1997 is
presented to provide a basis of comparison to the results of Nvest, L.P. for the
three months ended March 31, 1998, and gives effect to the Restructuring as if
it occurred on January 1, 1997. Pro forma financial information includes the
Partnership's equity in earnings of the Operating Partnership as if it had been
formed on January 1, 1997 and the 3.5% federal gross income tax was in effect.
The pro forma financial information does not necessarily reflect the results of
operations that would have been obtained had the Restructuring occurred on the
assumed date, nor is the pro forma financial information necessarily indicative
of the results of operations that may be achieved for any future period.
14 of 20
<PAGE>
PART I. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS (CONTINUED)
---------------------------------
NVEST, L.P. (CONTINUED)
-----------------------
STATEMENT OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO PRO
- ------------------------------------------------------------------------------
FORMA FINANCIAL INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1997
- ---------------------------------------------------------------------
Net income of Nvest, L.P. of $3.1 million or $0.48 per unit (diluted) for the
three months ended March 31, 1998 increased $0.8 million or $0.11 per unit
(diluted) from pro forma net income of $2.3 million or $0.37 per unit (diluted)
for the three months ended March 31, 1997. The increase reflects the higher net
income of the Operating Partnership as Nvest's revenue is derived from its
equity interest in the net income of the Operating Partnership.
Equity in earnings of Nvest Companies, L.P. of $4.0 million for the three months
ended March 31, 1998 increased $1.0 million from pro forma equity in earnings of
Nvest Companies, L.P. for the three months ended March 31, 1997. The increase
reflects growth in assets under management of the Operating Partnership, which
increased from $103 billion at March 31, 1997 to $135 billion at March 31, 1998.
Gross income tax expense of $0.9 million for the three months ended March 31,
1998 increased $0.2 million from the pro forma gross income tax expense of $0.7
million for the three months ended March 31, 1997. The gross income tax expense
represents 3.5% of Nvest's proportionate share of the gross income of the
Operating Partnership.
CAPITAL RESOURCES AND LIQUIDITY
- -------------------------------
On March 31, 1998, the Partnership had a distribution receivable from the
Operating Partnership of $4.7 million representing its ownership of 6,322,520
units at $0.74 per unit. After accruing the gross income tax expense, the
Partnership declared a distribution of $0.60 per unit payable to Nvest
unitholders. The Partnership expects to distribute to its unitholders
substantially all of the distributions received from the Operating Partnership
after accruing the 3.5% federal gross income tax, any state tax, and any other
expense of the Partnership.
15 of 20
<PAGE>
PART I. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
THE OPERATING PARTNERSHIP
-------------------------
The following is an analysis of the financial condition and results of
operations of Nvest Companies, L.P. for the three months ended March 31, 1998
compared to Nvest, L.P. for the three months ended March 31, 1997. The
operations of the Operating Partnership in 1997 prior to the Restructuring were
those of the Partnership.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-------------------------------------
NVEST, NVEST
L.P. COMPANIES, L.P.
1997 1998
--------------- --------------
(in thousands, except per unit data)
<S> <C> <C>
Revenues $ 126,797 $ 163,454
--------------- --------------
Expenses:
Restricted unit plan compensation 133 971
Amortization of intangibles 9,268 9,834
Other expenses 97,043 125,602
--------------- --------------
106,444 136,407
--------------- --------------
Net income $ 20,353 $ 27,047
=============== ==============
Distributions declared per unit:
Regular $ 0.53 $ 0.74
Special 0.05 -
--------------- --------------
Total $ 0.58 $ 0.74
=============== ==============
Operating cash flow (1) $ 29,754 $ 37,852
=============== ==============
Operating cash flow per unit - diluted (1) $ 0.69 $ 0.84
=============== ==============
Weighted average units outstanding - diluted 43,087 45,209
=============== ==============
</TABLE>
Note:
- -----
(1) Operating cash flow is defined as net income adjusted for amortization of
intangibles, restricted unit plan compensation and non-recurring items.
Operating cash flow per unit should not be construed as an alternative to net
income per unit or as an alternative to cash flow from operating activities as
reported in the consolidated statement of cash flows. Operating cash flow, as
calculated above, may not be consistent with comparable computations by other
companies.
16 of 20
<PAGE>
PART I. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- -------------------------------------------------------------------------------
RESULTS OF OPERATIONS (CONTINUED)
--------------------------------
THE OPERATING PARTNERSHIP (CONTINUED)
------------------------------------
STATEMENT OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THE
- -----------------------------------------------------------------------------
THREE MONTHS ENDED MARCH 31, 1997
- ---------------------------------
Net income of $27.0 million for the three months ended March 31, 1998 increased
$6.6 million from $20.4 million for the three months ended March 31, 1997. The
increase primarily reflects higher revenues due to increases in assets under
management.
Total revenues of $163.5 million for the three months ended March 31, 1998
increased $36.7 million (or 29%) from total revenues of $126.8 million for the
same quarter last year, reflecting increases in assets under management.
Additionally, the increase in equity assets under management, with higher
investment management fees compared to fixed income assets, contributed to the
growth in revenues.
Compensation and benefits of $81.3 million for the three months ended March 31,
1998 increased $16.3 million compared to the same quarter last year and
consisted of 47% base compensation and 53% of variable compensation. The
increase in variable compensation of $10 million resulted from subsidiary
incentive payments based on profitability, investment portfolio performance, new
business sales, and participation in the subsidiaries' growth in revenues and
profits. Base compensation increased by $6 million due to growth in staffing,
annual salary increases and acquisitions.
Restricted unit plan compensation of $1.0 million for the three months ended
March 31, 1998 increased $0.8 million from the same quarter last year due to
grants during the first quarter of 1998.
Occupancy, equipment and systems expense of $7.9 million for the three months
ended March 31, 1998 increased $2.2 million from the same quarter last year due
to systems initiatives and higher costs associated with expanded business
activities.
Interest expense of $5.4 million for the three months ended March 31, 1998
increased $1.5 million from the same quarter last year, primarily reflecting
interest on the $160 million of senior notes payable issued on April 1, 1997.
Other expense of $28.1 million for the three months ended March 31, 1998
increased $8.4 million from the same quarter last year, due to higher general
and administrative expenses associated with expanded business activities,
including distribution and marketing initiatives.
CAPITAL RESOURCES AND LIQUIDITY
- -------------------------------
Operating cash flow not required for normal business operations and working
capital needs, including support of the Operating Partnership's growth strategy,
is generally distributed to unitholders each quarter. Distributions to
unitholders are typically declared during the last month of calendar quarters.
On March 12, 1998, the Operating Partnership declared a regular distribution of
$0.74 per unit compared to the $0.53 per unit regular distribution declared in
the first quarter of 1997. The Operating Partnership has the ability to make
distributions in excess of net income due to its non-cash amortization expense.
For the three months ended March 31, 1998, total distributions paid to
unitholders were $35.5 million compared to $20.1 million for the same period
last year.
Cash and cash equivalents at March 31, 1998 of $22.8 million decreased $69.2
million from December 31, 1997 due to the repayment of certain notes payable,
distributions paid to unitholders, incentive compensation payments, and a $10.7
million contingent payment for a prior year acquisition.
At March 31, 1998, the Operating Partnership had future contingent payment
obligations of up to $50 million through 2000. The obligations result from
completed acquisitions and depend upon attainment of certain revenue targets by
the businesses acquired. Such obligations are not expected to have a material
impact on the capital resources of the Operating Partnership.
The Operating Partnership had lines of credit totaling $185 million of which
$177 million was unused at March 31, 1998.
17 of 20
<PAGE>
PART I. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- -------------------------------------------------------------------------------
RESULTS OF OPERATIONS (CONTINUED)
- --------------------------------
THE OPERATING PARTNERSHIP (CONTINUED)
-------------------------------------
ASSETS UNDER MANAGEMENT
A summary of assets under management follows:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, MARCH 31,
1997 1997 1998
--------- ---------- ---------
<S> <C> <C> <C>
CLIENT TYPE (IN BILLIONS):
Institutional $ 67 $ 80 $ 84
Mutual Funds 27 33 38
Private Accounts and Other 9 12 13
--------- ---------- ---------
$ 103 $ 125 $ 135
========= ========== =========
ASSET CLASS (PERCENTAGE):
Equity 43% 47% 49%
Fixed Income 42 41 40
Money Market 9 7 7
Real Estate 6 5 4
--------- ---------- ---------
100% 100% 100%
========= ========== =========
</TABLE>
At March 31, 1998, assets under management of $135 billion increased $10 billion
(or 8%) as compared to $125 billion at December 31, 1997. The increase results
primarily from growth in equity mutual funds and fixed income institutional
accounts.
YEAR 2000 COMPLIANCE
The "Year 2000 Issue" refers to problems that may result from computer programs
being written using two digits rather than four to define the applicable year.
Any computer programs that have date-sensitive software may recognize a date
using "00" as the year 1900 rather than the year 2000. The Year 2000 Issue could
result in system failures or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities. The Operating
Partnership and its subsidiaries are in the process of assessing the impact of
the Year 2000 Issue on their operations to ensure that necessary technology
changes are identified, tested and implemented. The subsidiaries rely heavily
upon data processing services provided by third party service providers,
including securities custody, transfer agency, trading and pricing services, and
on a daily basis, trade through security exchanges which are highly automated.
The subsidiaries also have internally developed software programs and use third
party software programs. Action plans being developed include purchasing or
developing new software systems which are Year 2000 compatible, obtaining
certifications attesting to Year 2000 systems compliance from third party
vendors, and testing of systems. Progress on Year 2000 initiatives is being
monitored by the Operating Partnership's audit committee and the audit
committees of each subsidiary. Management believes the cost of implementing
these actions plans will not materially adversely affect the operating results
or financial condition of the Partnership or the Operating Partnership.
18 of 20
<PAGE>
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES.
- ------------------------------
During the quarter ended March 31, 1998, Nvest, L.P. issued an aggregate of
8,640 units in connection with employment arrangements entered into in
connection with a prior business acquisition. The units were issued to a limited
number of executives of a subsidiary in transactions that were exempt from
registration pursuant to Section 4(2) under the Securities Act of 1933, as
amended (the "Securities Act") and the rules contained in Regulation D
thereunder. The dates of issuance and the number of units issued were as
follows: January 20, 1998 - 4,320 units and March 31, 1998 - 4,320 units. The
Registrant received non-cash consideration for the issuance consisting of
services, as authorized by the Board of Directors or the Compensation Committee
of the General Partner of the Registrant.
ITEM 5. OTHER INFORMATION.
- --------------------------
CERTAIN OPERATING POLICIES
THE PARTNERSHIP. The Partnership expects to distribute to its unitholders
substantially all of the distributions received from the Operating Partnership
after accruing the 3.5% federal gross income tax, any state tax, and any other
expenses of the Partnership. For the three months ended March 31, 1998, the 3.5%
federal gross income tax reduced the $0.74 per unit distribution received by the
Partnership by $0.14 per unit, resulting in a $0.60 per unit distribution
payable to unitholders.
THE OPERATING PARTNERSHIP. The Operating Partnership generally distributes to
its unitholders operating cash flow not required for normal business operations
and working capital needs, including support of its growth strategy. Operating
cash flow is defined as net income adjusted for amortization of intangibles,
restricted unit plan compensation and non-recurring items. On March 12, 1998,
the Operating Partnership declared a distribution of $0.74 per unit compared to
the $0.53 per unit regular distribution declared in the first quarter of 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
- ----------------------------------------
(a) Exhibits
3.1 Restated Articles of Organization of New England Investment Companies,
Inc., reflecting change of name to Nvest Corporation.
3.2 Amendment to Certificate of Limited Partnership of New England Investment
Companies, L.P., reflecting change of name to Nvest, L.P.
3.3 Amendment to Second Amended and Restated Agreement of Limited Partnership
of New England Investment Companies, L.P., reflecting change of name to
Nvest, L.P.
3.4 Amendment to Amended and Restated Certificate of Limited Partnership of
NEIC Operating Partnership, L.P., reflecting change of name to Nvest
Companies, L.P.
3.5 Amendment to Amended and Restated Agreement of Limited Partnership of
NEIC Operating Partnership, L.P., reflecting change of name to Nvest
Companies, L.P.
27 Financial Data Schedule.
(b) Reports on Form 8-K
- -----------------------
On January 5, 1998, the Registrant filed a Current Report on Form 8-K (File No.
1-9468) dated December 31, 1997 reporting the restructuring of the Registrant.
On March 16, 1998, the Registrant filed a Current Report on Form 8-K (File No.
1-9468) dated March 16, 1998, reporting that the Board of Directors of its
General Partner had authorized the Registrant to change its name from New
England Investment Companies, L.P. to Nvest, L.P., and that its affiliated
operating partnership would change its name from NEIC Operating Partnership,
L.P. to Nvest Companies, L.P., effective March 31, 1998.
19 of 20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Nvest, L.P.
- -----------------------------------
Registrant
/s/ G. Neal Ryland May 13, 1998
- ----------------------------------- ------------
G. Neal Ryland Date
Executive Vice President and
Chief Financial Officer
/s/ Stephen D. Martino May 13, 1998
- ----------------------------------- ------------
Stephen D. Martino Date
Senior Vice President and Controller
20 of 20
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibits
- ------ -----------------------
3.1 Restated Articles of Organization of New England Investment Companies,
Inc., reflecting change of name to Nvest Corporation.
3.2 Amendment to Certificate of Limited Partnership of New England
Investment Companies, L.P., reflecting change of name to Nvest, L.P.
3.3 Amendment to Second Amended and Restated Agreement of Limited
Partnership of New England Investment Companies, L.P., reflecting
change of name to Nvest, L.P.
3.4 Amendment to Amended and Restated Certificate of Limited Partnership of
NEIC Operating Partnership, L.P., reflecting change of name to Nvest
Companies, L.P.
3.5 Amendment to Amended and Restated Agreement of Limited Partnership of
NEIC Operating Partnership, L.P., reflecting change of name to Nvest
Companies, L.P.
27 Financial Data Schedule
<PAGE>
EXHIBIT 3.1
FEDERAL IDENTIFICATION
NO. 04-1174158
- -----------
Examiner
THE COMMONWEALTH OF MASSACHUSETTS
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
RESTATED ARTICLES OF ORGANIZATION
(GENERAL LAWS, CHAPTER 156B, SECTION 74)
- -----------
Name Approved
I, Edward N. Wadsworth, *Vice President,
-------------------------------------------------------------
and ,*Clerk,
-------------------------------------------------------------------
of New England Investment Companies, Inc.
-----------------------------------------------------------------------------,
(Exact name of corporation)
located at 399 Boylston Street, Boston, Massachusetts 02116
---------------------------------------------------------------------,
(Street address of corporation Massachusetts)
do hereby certify that the following Restatement of the Articles of Organization
was duly adopted by unanimous written consent effective
March 31, 1998 by a vote of
- -------- --
50 shares of Common Stock of 50 shares outstanding,
- ---- ------------------------------- -------------
(type, class & series, if any)
shares of of shares
- ---- -------------------------------- --------------
(type, class & series, if any)
outstanding, and
shares of of shares
- ---- -------------------------------- --------------
(type, class & series, if any)
outstanding,
being at least two-thirds of each type, class or series outstanding and entitled
to vote thereon of each type, class or series of stock whose rights are
adversely affected thereby:
C [_]
ARTICLE I
P [_]
The name of the corporation is:
M [_]
Nvest Corporation
R.A. [_]
ARTICLE II
The purpose of the corporation is to engage in the following business
activity(ies):
(1) To serve as the general partner of Nvest, L.P. and the managing general
partner of Nvest Companies, L.P.; and
(2) To carry on any manufacturing, mercantile, selling, management, service or
other business, operation or activity which may be lawfully carried on by a
corporation organized under the Business Corporation Law of The Commonwealth
of Massachusetts whether or not related to that referred to in the foregoing
paragraph.
* Delete the inapplicable words. **Delete the inapplicable clause.
Note: If the space provided under any article or item on this form is
insufficient, additions shall be set forth on separate 8 1/2 x 11 sheets of
paper with a left margin of at least 1 inch. Additions to more than one article
may be made on a single sheet so long as each article requiring each addition is
clearly indicated.
- ----------
P.C.
<PAGE>
ARTICLE III
State the total number of shares and par value, if any, of each class of stock
which the corporation is authorized to issue:
- --------------------------------------------------------------------------------
WITHOUT PAR VALUE WITH PAR VALUE
- -------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- -------------------------------------------------------------------------------
Common: Common: 100 $.01
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Preferred: Preferred:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
ARTICLE IV
If more than one class of stock is authorized, state a distinguishing
designation for each class. Prior to the issuance of any shares of a class, if
shares of another class are outstanding, the corporation must provide a
description of the preferences, voting powers, qualifications, and special or
relative rights or privileges of that class and of each other class of which
shares are outstanding and of each series then established within any class.
N/A
ARTICLE V
The restrictions, if any, imposed by the Articles of Organization upon the
transfer of shares of stock of any class are:
N/A
ARTICLE VI
**Other lawful provisions, if any, for the conduct and regulation of the
business and affairs of the corporation, for its voluntary dissolution, or for
limiting, defining, or regulating the powers of the corporation, or of its
directors or stockholders, or of any class of stockholders:
See Continuation Sheets 6A through 6D attached hereto and
incorporated herein.
**If there are no provisions state "None".
Note: The preceding six (6) articles are considered to be permanent and may ONLY
be changed by filing appropriate Articles of Amendment.
<PAGE>
Article 6
- -----------------------------------
Other Lawful Provisions
6.1 The corporation may carry on any business, operation or activity
referred to in Article 2 to the same extent as might an individual, whether as
principal, agent, contractor or otherwise, and either alone or in conjunction or
a joint venture or other arrangement with any corporation, association, trust,
firm or individual.
6.2 The corporation may carry on any business, operation or activity
through a wholly or partly owned subsidiary.
6.3 The corporation may be a partner in any business enterprise which
it would have power to conduct by itself.
6.4 The directors may make, amend or repeal the by-laws in whole or
in part, except with respect to any provision thereof which by law or the by-
laws requires action by the stockholders.
6.5 Meetings of the stockholders may be held anywhere in the United
States.
6.6 Except as otherwise provided by law, no stockholder shall have
any right to examine any property or any books, accounts or other writings of
the corporation if there is reasonable ground for belief that such examination
will for any reason be adverse to the interests of the corporation, and a vote
of the directors refusing permission to make such examination and setting forth
that in the opinion of the directors such examination would be adverse to the
interests of the corporation shall be prima facie evidence that such examination
would be adverse to the interests of the corporation. Every such examination
shall be subject to such reasonable regulations as the directors may establish
in regard thereto.
6.7 The directors may specify the manner in which the accounts of the
corporation shall be kept and may determine what constitutes net earnings,
profits and surplus, what amounts, if any, shall be reserved for any corporate
purpose, and what amounts, if any, shall be declared as dividends. Unless the
board of directors otherwise specifies, the excess of the consideration for any
share of its capital stock with par value issued by it over such par value shall
be surplus. The board of directors may allocate to capital stock less than all
of the consideration for any share of its capital stock without par value issued
by it, in which case the balance of such consideration shall be surplus. All
surplus shall be available for any corporate purpose, including the payment of
dividends.
6.8 The purpose or other acquisition or retention by the corporation
of shares of its own capital stock shall not be deemed a reduction of its
capital stock. Upon any reduction of capital or capital stock, no stockholder
shall have any right to demand any
-6A-
<PAGE>
distribution from the corporation, except as and to the extent that the
stockholders shall have provided at the time of authorizing such reduction.
6.9 The directors shall have the power to fix from time to time their
compensation. No person shall be disqualified from holding any office by reason
of any interest. In the absence of fraud, any director, officer or stockholder
of this corporation individually, or any individual having any interest in any
concern which is a stockholder of this corporation, or any concern in which any
of such directors, officers, stockholders or individuals has any interest, may
be a party to, or may be pecuniarily or otherwise interested in, any contract,
transaction or other act of the corporation, and
(1) such contract, transaction or act shall not be in any way invalidated
or otherwise affected by that fact;
(2) no such director, officer, stockholder or individual shall be liable
to account to the corporation for any profit or benefit realized
through any such contract, transaction or act; and
(3) any such director of the corporation may be counted in determining the
existence of a quorum at any meeting of the directors or of any
committee thereof which shall authorize any such contract, transaction
or act, and may vote to authorize the same;
provided, however, that any contract, transaction or act in which any director
or officer of the corporation is so interested individually or as a director,
officer, trustee or member of any concern which is not a subsidiary or affiliate
of the corporation, or in which any directors or officers are so interested as
holders, collectively, of a majority of shares of capital stock or other
beneficial interest at the time outstanding in any concern which is not a
subsidiary or affiliate of the corporation, shall be duly authorized or ratified
by a majority of the directors who are not so interested, to whom the nature of
such interest has been disclosed and who have made any findings required by law;
the term "interest" including personal interest and interest as a director,
officer, stockholder, shareholder, trustee, member or beneficiary of any
concern;
the term "concern" meaning any corporation, association, trust,
partnership, firm, person or other entity other than the corporation; and
the phrase "subsidiary or affiliate" meaning a concern in which a majority
of the directors, trustees, partners or controlling persons is elected or
appointed by the directors of the corporation, or is constituted of the
directors or officers of the corporation.
-6B-
<PAGE>
To the extent permitted by law, the authorizing or ratifying vote of the holders
of shares representing a majority of the votes of the capital stock of the
corporation outstanding and entitled to vote for the election of directors at
any annual meeting or a special meeting duly called for the purpose (whether
such vote is passed before or after judgment rendered in a suit with respect to
such contract, transaction or act) shall validate any contract, transaction or
act of the corporation, or of the board of directors or any committee thereof,
with regard to all stockholders of the corporation, whether or not of record at
the time of such vote, and with regard to all creditors and other claimants
under the corporation; provided, however, that
A. with respect to the authorization or ratification of contracts,
transactions or acts in which any of the directors, officers or
stockholders of the corporation have an interest, the nature of such
contracts, transactions or acts and the interest of any director,
officer or stockholder therein shall be summarized in the notice of
any such annual or special meeting, or in a statement or letter
accompanying such notice, and shall be fully disclosed at any such
meeting;
B. the stockholders so voting shall have made any findings required by
law;
C. the stockholders so interested may vote at any such meeting except to
the extent otherwise provided by law; and
D. any failure of the stockholders to authorize or ratify such contract,
transaction or act shall not be deemed in any way to invalidate the
same or to deprive the corporation, its directors, officers or
employees of its or their right to proceed with or enforce such
contract, transaction or act.
If the corporation has more than one class or series of capital stock
outstanding, the vote required by this paragraph shall be governed by the
provisions of the Articles of Organization applicable to such classes or series.
No contract, transaction or act shall be avoided by reason of any provision of
this paragraph 6.9 which would be valid but for such provision or provisions.
6.10 A director of the corporation shall not be liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent that exculpation from liability is not
permitted under the Massachusetts Business Corporation Law as in effect at the
time such liability is determined. No amendment or repeal of this paragraph
6.10 shall apply to or have any effect on the liability or alleged liability of
any director of the corporation for or with respect to any acts or omissions of
such director occurring prior to such amendment or repeal.
-6C-
<PAGE>
6.11 The corporation shall have all powers granted to corporations by the
laws of The Commonwealth of Massachusetts, provided that no such power shall
include any activity inconsistent with the Business Corporation Law or the
general laws of said Commonwealth.
-6D-
<PAGE>
ARTICLE VII
The effective date of the restated Articles of Organization of the corporation
shall be the date approved and filed by the Secretary of the Commonwealth. If a
later effective date is desired, specify such date which shall not be more than
thirty days after the date of filing.
ARTICLE VIII
THIS INFORMATION CONTAINED IN ARTICLE VIII IS NOT A PERMANENT PART OF THE
ARTICLES OF ORGANIZATION.
a. The street address (post office boxes are not acceptable) of the principal
office of the corporation in Massachusetts is:
399 Boylston Street, Boston, Massachusetts 02116
b. the name, residential address and post office address of each director and
officer of the corporation is as follows:
NAME RESIDENTIAL ADDRESS POST OFFICE ADDRESS
President:
Treasurer: See Continuation Sheet 8A attached hereto and incorporated
herein.
Clerk:
Directors
c. The fiscal year (i.e., tax year) of the corporation shall end on the last day
of the month of: December
d. The name and business address of the resident agent, if any, of the
corporation is:
N/A
**We further certify that the foregoing Restated Articles of Organization affect
no amendments to the Articles of Organization of the corporation as heretofore
amended, except amendments to the following articles. Briefly describe
amendments below:
Article I Change of name
Article II Change of business purpose
SIGNED UNDER THE PENALTIES OF PERJURY, this 31st day of March, 1998,
--------- ----- --
/s/ Edward N. Wadsworth
_____________________________________________________, Vice President,
/s/ Edward N. Wadsworth
______________________________________________________,*Clerk
*Delete the inapplicable words. **If there are no amendments,
state "None".
<PAGE>
Article VIII(b)
- ---------------
Directors and Officers
<TABLE>
<CAPTION>
NAME RESIDENTIAL ADDRESS POST OFFICE ADDRESS
<S> <C> <C> <C>
President: Peter S. Voss 302 Marlborough Street 399 Boylston Street
Boston, MA 02116 Boston, MA 02116
Treasurer: Kevin P. Charleston 5 Pattys Road 399 Boylston Street
Mansfield, MA 02048 Boston, MA 02116
Clerk: Edward N. Wadsworth 44 Fayette Street 399 Boylston Street
Boston, MA 02116 Boston, MA 02116
Directors: William S. Antle, III 150 Glezen Lane 399 Boylston Street
Wayland, MA 01778 Boston, MA 02116
Robert J. Blanding 16300 Norrbom Road 399 Boylston Street
Sonoma, CA 95476 Boston, MA 02116
Paul E. Gray 100 Memorial Drive - 399 Boylston Street
Suite 11-4A Boston, MA 02116
Cambridge, MA 02142
Harry P. Kamen 910 Park Avenue - 399 Boylston Street
Apt. 6-S Boston, MA 02116
New York, NY 10021
Charles M. Leighton 51 Vaughn Hill Road 399 Boylston Street
Bolton, MA 01740 Boston, MA 02116
Victor A. Morgenstern 2684 Sheridan Road 399 Boylston Street
Highland Park, IL 60035 Boston, MA 02116
Catherine A. Rein 21 East 22nd Street, 8B 399 Boylston Street
New York, NY 10010 Boston, MA 02116
Oscar L. Tang 2 West 67th Street 399 Boylston Street
New York, NY 10023 Boston, MA 02116
Peter S. Voss 302 Marlborough Street 399 Boylston Street
Boston, MA 02116 Boston, MA 02116
</TABLE>
-8A-
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
RESTATED ARTICLES OF ORGANIZATION
(GENERAL LAWS, CHAPTER 156B, SECTION 74)
==============================================
I hereby approve the within Restated Articles
of Organization and, the filing fee in the
amount of $400 having been paid, said
articles are deemed to have been filed with me
this 31st day of March, 1998.
Effective Date:_______________________________
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
TO BE FILLED IN BY CORPORATION
PHOTOCOPY OF DOCUMENT TO BE SENT TO:
Jeffrey D. Plunkett
Nvest Corporation
-----------------------------------------------
399 Boylston Street
-----------------------------------------------
Boston, MA 02116
-----------------------------------------------
(617) 578-1925
Telephone:_____________________________________
<PAGE>
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF LIMITED PARTNERSHIP
OF
NEW ENGLAND INVESTMENT COMPANIES, L.P.
New England Investment Companies, L.P., a limited partnership organized
under the Delaware Revised Uniform Limited Partnership Act (the "Act"), for the
purpose of amending its Certificate of Limited Partnership pursuant to Section
17-202 of the Act, hereby certifies that effective on March 31, 1998, Paragraphs
numbered 1 and 3 of the Certificate of Limited Partnership are amended to read
in their entirety as follows:
1. Name. The name of the limited partnership is Nvest, L.P.
3. General Partner. The name and business address of the sole general
partner of the Partnership are: Nvest Corporation, 399 Boylston Street, Boston,
Massachusetts 02116.
IN WITNESS WHEREOF, this Certificate of Amendment has been duly executed by
a general partner thereunto duly authorized as of the 31st day of March, 1998.
GENERAL PARTNER:
NVEST CORPORATION
By /s/ Edward N. Wadsworth
------------------------------------------
Edward N. Wadsworth
Executive Vice President
<PAGE>
EXHIBIT 3.3
AMENDMENT NO. 1 TO
SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF
NEW ENGLAND INVESTMENT COMPANIES, L.P.
THIS AGREEMENT, is entered into on this 31st day of March, 1998 by Nvest
Corporation, formerly known as New England Investment Companies, Inc. (the
"General Partner"), both on its own behalf as general partner of New England
Investment Companies, L.P. (the "Partnership") and on behalf of all limited
partners of the Partnership (the "Limited Partners").
WHEREAS, the parties hereto entered into the Second Amended and Restated
Agreement of Limited Partnership of New England Investment Companies, L.P. dated
as of December 29, 1997 (the "Partnership Agreement");
WHEREAS, pursuant to Section 2.2(b) of the Partnership Agreement, the
General Partner in its sole discretion may change the name of the Partnership at
any time and from time to time;
WHEREAS, pursuant to Section 15.1 of the Partnership Agreement, the General
Partner may amend the Partnership Agreement without the approval of any Limited
Partner to reflect, among other things, a change in the name of the Partnership
or a change that in the good faith opinion of the General Partner does not
adversely affect the Limited Partners in any material respect;
WHEREAS, the General Partner is changing its name to Nvest Corporation,
NEIC Operating Partnership, L.P. is changing its name to Nvest Companies, L.P.,
and the General Partner desires to change the name of the Partnership to Nvest,
L.P.;
NOW, THEREFORE, to implement the understandings set forth herein, it is
agreed as follows:
1. Definitions. Capitalized terms not otherwise defined in this
-----------
Agreement are used as defined in the Partnership Agreement.
2. Amendment of Partnership Agreement. The Partnership Agreement is
----------------------------------
amended as follows:
2.1 Amendment of Article I. Article I of the Partnership Agreement is
----------------------
amended by:
(a) amending the definition of "Partnership" to read in is entirety
as follows:
<PAGE>
""Partnership" means Nvest, L.P., a Delaware limited partnership."
(b) adding immediately after the definition of "Ninety-Five Percent
Interest" definitions of "Nvest Companies" and "Nvest Corporation" to read in
their entirety as follows:
""Nvest Companies" means Nvest Companies, L.P., a Delaware limited
partnership, formerly known as NEIC Operating Partnership, L.P.
"Nvest Corporation" means Nvest Corporation, a Massachusetts
corporation, formerly known as New England Investment Companies, Inc."
(c) deleting the definitions of "NEIC, Inc." and "NEICOP." All
references in the Partnership Agreement to "NEIC, Inc." shall be deemed to be
references to Nvest Corporation, and all references in the Partnership Agreement
to "NEICOP" shall be deemed to be references to Nvest Companies.
2.2. Amendment to Section 2.2. Section 2.2 of the Partnership Agreement is
------------------------
amended to read in its entirety as follows:
"2.2. Name. The name of the Partnership shall be, and the
business of the Partnership shall be conducted under the name of
"Nvest, L.P."; provided, however, that (a) the Partnership's business
may be conducted under any other name or names deemed advisable by the
General Partner, (b) the General Partner in its sole discretion may
change the name of the Partnership at any time and from time to time
and (c) the name under which the Partnership conducts business shall
include "Ltd." or "Limited Partnership" (or similar words or letters)
where necessary for purposes of maintaining the limited liability
status of each Limited Partner or otherwise complying with the laws of
any jurisdiction that so requires."
2.3. Amendment to Annex A. Annex A to the Partnership Agreement is amended
--------------------
to read in its entirety as Annex A attached hereto.
3. General. Except to the extent expressly amended hereby, the
-------
provisions of the Partnership Agreement shall remain unmodified and are
confirmed as being in full force and effect. The headings in this Agreement are
for convenience of reference only and shall not alter or otherwise affect the
meaning hereof. This Agreement may be executed in any number of counterparts,
which together shall constitute one instrument and shall be governed by and
construed in accordance with the laws (other than the conflict of law rules) of
the State of Delaware and shall bind and inure to the benefit of the parties
hereto and their heirs, executors, administrators, successors, legal
representatives and assigns.
-2-
<PAGE>
The undersigned has executed this Agreement as of the date first above
written.
NVEST CORPORATION, formerly known as NEW
ENGLAND INVESTMENT COMPANIES, INC.,
on its own behalf, and on behalf of all
Limited Partners
By /s/ Edward N. Wadsworth
---------------------------------------
Edward N. Wadsworth
Executive Vice President and
General Counsel
-3-
<PAGE>
ANNEX A
[Form of Face of Certificate]
Units of Limited Partnership Interests in
NVEST, L.P.
This certifies that is the registered holder of
LP Units representing limited partnership interests in NVEST, L.P., a
limited partnership formed under the laws of the State of Delaware (the
"Partnership"), transferable on the books of the Partnership, in person or by
duly authorized attorney, upon surrender of this Certificate properly endorsed
and accepted. This Certificate and the LP Units evidenced hereby are issued and
shall in all respects be subject to all the provisions of the Agreement of
Limited Partnership of the Partnership as amended or restated from time to time,
to all of which the holder, by acceptance hereof, assents, and to the additional
terms and provisions on the reverse side hereof.
This Certificate is not valid unless countersigned and registered by the
Transfer Agent and Registrar.
Witness the facsimile signatures of the duly authorized officers of the
General Partner of the Partnership.
DATED:
NVEST, L.P.
By NVEST CORPORATION
as General Partner
By..................................... By...................................
COUNTERSIGNED AND REGISTERED:
.......................................
as Transfer Agent and Registrar
By ...................................
-4-
<PAGE>
(Form of Reverse Side of Certificate)
NVEST, L.P.
NVEST, L.P., a limited partnership formed under the laws of the State of
Delaware (the "Partnership"), will furnish to the holder and each assignee of
this Certificate and the LP Units evidenced hereby, without charge, on written
request to the Partnership at its principal place of business, 399 Boylston
Street, Boston, MA 02116, a copy of the Agreement of Limited Partnership of the
Partnership, as amended or restated from time to time.
FOR VALUE RECEIVED, hereby sell, assign
and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
................................................................................
................................................................................
................................................................................
............LP Units representing limited partnership interests evidenced by
this Certificate and do hereby irrevocably constitute and appoint
................. to transfer the said LP Units on the books of the Partnership
with full power of substitution in the premises.
Dated: .....................
.............................................
(Signature)
............................ ..............................................
SIGNATURE(S) GUARANTEED (Signature)
SIGNATURE(S) MUST BE NOTICE: The Signature(s) to this Agreement
GUARANTEED BY A MEMBER FIRM must correspond with the name(s) as written
OF THE NEW YORK STOCK upon the face of this Certificate in every
EXCHANGE OR BY A COMMERCIAL particular, without alteration or enlargement
BANK OR TRUST COMPANY or any change whatever.
-5-
<PAGE>
Acceptance of LP Units Representing Limited Partnership Interests in NVEST, L.P.
The Undersigned (the "Assignee") hereby (a) agrees to become a limited
partner of NVEST, L.P., a Delaware limited partnership (the "Partnership"), and
a party to, and hereby executes, the Agreement of Limited Partnership of the
Partnership, as amended or restated from time to time (the "Agreement"), (b)
agrees to comply with and be bound by all the provisions of such Agreement and
(c) grants the Power of Attorney set forth in Article II of such Agreement.
Dated: ...................... ......................................
Signature of Assignee
The LP Units evidenced hereby shall be subject to such restrictions on
transfer, if any, as the General Partner of the Partnership may impose from time
to time pursuant to the provisions of the Partnership's Second Amended and
Restated Agreement of Limited Partnership, including without limitation any such
restrictions imposed as part of or in connection with any Restructuring (as
defined in such Second Amended and Restated Agreement of Limited Partnership).
Attempted transfers in violation of such restrictions may result in the
imposition of damages or penalties, including forfeiture of the LP Units
evidenced hereby.
-6-
<PAGE>
Exhibit 3.4
-----------
CERTIFICATE OF AMENDMENT
TO
AMENDED AND RESTATED
CERTIFICATE OF LIMITED PARTNERSHIP
OF
NEIC OPERATING PARTNERSHIP, L.P.
NEIC Operating Partnership, L.P., a limited partnership organized under the
Delaware Revised Uniform Limited Partnership Act (the "Act"), for the purpose of
amending its Amended and Restated Certificate of Limited Partnership pursuant to
Section 17-202 of the Act, hereby certifies that effective on March 31, 1998,
Paragraphs numbered 1 and 4 of the Amended and Restated Certificate of Limited
Partnership are amended to read in their entirety as follows:
1. Name. The name of the limited partnership formed and continued hereby
----
is Nvest Companies, L.P.
4. General Partners. The names and business addresses of the general
----------------
partners of the Partnership are:
Nvest Corporation
399 Boylston Street
Boston, Massachusetts 02116
Nvest, L.P.
399 Boylston Street
Boston, MA 02116
IN WITNESS WHEREOF, this Certificate of Amendment has been duly executed by
the general partners thereunto duly authorized as of the 31st day of March,
1998.
GENERAL PARTNERS:
NVEST CORPORATION
By /s/ Edward N. Wadsworth
---------------------------------
Edward N. Wadsworth
Executive Vice President
NVEST, L.P.
By /s/ Edward N. Wadsworth
---------------------------------
Edward N. Wadsworth
Executive Vice President
<PAGE>
EXHIBIT 3.5
AMENDMENT NO. 1 TO
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF
NEIC OPERATING PARTNERSHIP, L.P.
THIS AGREEMENT, is entered into on this 31st day of March, 1998 by Nvest
Corporation, formerly known as New England Investment Companies, Inc. (the
"Managing General Partner"), both on its own behalf as managing general partner
of NEIC Operating Partnership, L.P. (the "Partnership") and on behalf of New
England Investment Companies, L.P. and all limited partners of the Partnership
(the "Limited Partners").
WHEREAS, the parties hereto entered into the Amended and Restated Agreement
of Limited Partnership of NEIC Operating Partnership, L.P. dated as of December
29, 1997 (the "Partnership Agreement");
WHEREAS, pursuant to Section 2.2(b) of the Partnership Agreement, the
Managing General Partner in its sole discretion may change the name of the
Partnership at any time and from time to time;
WHEREAS, pursuant to Section 15.1 of the Partnership Agreement, the
Managing General Partner may amend the Partnership Agreement without the
approval of any other general partner of the Partnership (a "General Partner")
or any Limited Partner to reflect, among other things, a change in the name of
the Partnership or a change that in the good faith opinion of the General
Partner does not adversely affect any other General Partner or the Limited
Partners in any material respect;
WHEREAS, the Managing General Partner is changing its name to Nvest
Corporation, New England Investment Companies, L.P. is changing its name to
Nvest, L.P., and the Managing General Partner desires to change the name of the
Partnership to Nvest Companies, L.P.;
NOW, THEREFORE, to implement the understandings set forth herein, it is
agreed as follows:
1. Definitions. Capitalized terms not otherwise defined in this
-----------
Agreement are used as defined in the Partnership Agreement.
2. Amendment of Partnership Agreement. The Partnership Agreement is
----------------------------------
amended as follows:
2.1 Amendment of Article I. Article I of the Partnership Agreement is
----------------------
amended by:
<PAGE>
(a) amending the definition of "Partnership" to read in is entirety as
follows:
""Partnership" means Nvest Companies, L.P., a Delaware limited
partnership."
(b) adding immediately after the definition of "Ninety-Five Percent
Interest" definitions of "Nvest Corporation" and "Nvest, L.P." to read in their
entirety as follows:
""Nvest Corporation" means Nvest Corporation, a Massachusetts
corporation, formerly known as New England Investment Companies, Inc.
"Nvest, L.P." means Nvest, L.P., a Delaware limited partnership,
formerly known as New England Investment Companies, L.P."
(c) deleting the definitions of "NEIC, Inc." and "NEIC, L.P." All
references in the Partnership Agreement to "NEIC, Inc." shall be deemed to be
references to Nvest Corporation, and all references in the Partnership Agreement
to "NEIC, L.P." shall be deemed to be references to Nvest, L.P.
2.2. Amendment to Section 2.2. Section 2.2 of the Partnership Agreement is
------------------------
amended to read in its entirety as follows:
"2.2. Name. The name of the Partnership shall be, and the
business of the Partnership shall be conducted under the name of
"Nvest Companies, L.P."; provided, however, that (a) the Partnership's
business may be conducted under any other name or names deemed
advisable by the Managing General Partner, (b) the Managing General
Partner in its sole discretion may change the name of the Partnership
at any time and from time to time and (c) the name under which the
Partnership conducts business shall include "Ltd." or "Limited
Partnership" (or similar words or letters) where necessary for
purposes of maintaining the limited liability status of each Limited
Partner or otherwise complying with the laws of any jurisdiction that
so requires."
3. General. Except to the extent expressly amended hereby, the
-------
provisions of the Partnership Agreement shall remain unmodified and are
confirmed as being in full force and effect. The headings in this Agreement are
for convenience of reference only and shall not alter or otherwise affect the
meaning hereof. This Agreement may be executed in any number of counterparts,
which together shall constitute one instrument and shall be governed by and
construed in accordance with the laws (other than the conflict of law rules) of
the State of Delaware and shall bind and inure to the benefit of the parties
hereto and their heirs, executors, administrators, successors, legal
representatives and assigns.
<PAGE>
The undersigned has executed this Agreement as of the date first above
written.
NVEST CORPORATION, formerly known as
NEW ENGLAND INVESTMENT COMPANIES, INC., on
its own behalf, and on behalf of New England
Investment Companies, L.P. and all Limited
Partners
By /s/ Edward N. Wadsworth
-----------------------------------------
Edward N. Wadsworth
Executive Vice President and
General Counsel
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARCH
31, 1998 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 4,679
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,679
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 76,541
<CURRENT-LIABILITIES> 4,675
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 71,866
<TOTAL-LIABILITY-AND-EQUITY> 76,541
<SALES> 0
<TOTAL-REVENUES> 3,964
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 881
<INCOME-CONTINUING> 3,083
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,083
<EPS-PRIMARY> 0.49
<EPS-DILUTED> 0.48
</TABLE>
