NVEST LP, 10-Q, 2000-05-10

NVEST LP
10-Q, 2000-05-10
INVESTMENT ADVICE

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<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, 2000

[ ] 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)

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 6,191,482 units of limited
partner interest and 110,000 units of general partner interest outstanding at
April 30, 2000.

1 of 23
<PAGE>

NVEST, L.P.
INDEX TO FORM 10-Q

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS PAGE

FINANCIAL STATEMENTS OF NVEST, L.P. (THE "PARTNERSHIP")

Balance Sheet as of December 31, 1999 and March 31, 2000........ 3

Statement of Income for the three months ended
March 31, 1999 and 2000....................................... 4

Statement of Cash Flows for the three months ended
March 31, 1999 and 2000....................................... 5

Notes to Financial Statements................................... 6

FINANCIAL STATEMENTS OF NVEST COMPANIES, L.P.
(THE "OPERATING PARTNERSHIP")

Consolidated Balance Sheet as of December 31, 1999 and
March 31, 2000................................................ 10

Consolidated Statement of Income for the three months ended
March 31, 1999 and 2000....................................... 11

Consolidated Statement of Cash Flows for the three months ended
March 31, 1999 and 2000....................................... 12

Notes to Consolidated Financial Statements...................... 13

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS............................................. 14

Nvest, L.P. .................................................... 15

The Operating Partnership....................................... 17

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK........ 21

PART II - OTHER INFORMATION

ITEM 5. OTHER INFORMATION................................................. 22

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.................................. 22

SIGNATURES................................................................ 23

2 of 23
<PAGE>

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

NVEST, L.P.
BALANCE SHEET
(in thousands)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1999 2000
-------------- ----------
(unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents ............................ $ 3 $ 261
Distribution receivable from the Operating Partnership 4,835 3,775
------- -------
Total current assets .............................. 4,838 4,036

Investment in the Operating Partnership (Note 5) ........... 61,215 60,605
------- -------

Total assets ...................................... $66,053 $64,641
======= =======

LIABILITIES AND PARTNERS' CAPITAL

Current liabilities:
Distribution payable ................................. $ 3,956 $ 2,894
Gross income tax payable and accrued expenses ........ 678 858
------- -------
Total current liabilities ......................... 4,634 3,752

Contingent liabilities (Note 8)

Partners' capital (6,276,782 units at December 31, 1999
and 6,291,282 at March 31, 2000) ..................... 61,419 60,889
------- -------

Total liabilities and partners' capital ........... $66,053 $64,641
======= =======

</TABLE>

See Accompanying Notes to Financial Statements.

3 of 23
<PAGE>

NVEST, L.P.
STATEMENT OF INCOME
(in thousands, except per unit data, unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------
1999 2000
------ ------
<S> <C> <C>
REVENUES
Equity in earnings of the Operating Partnership ........ $3,967 $3,326
Interest income ........................................ 39 2
------ ------
4,006 3,328
EXPENSES
Gross income tax and other expenses .................... 920 804
------ ------
Net income .................................................. $3,086 $2,524
====== ======
Net income per unit (Note 4):
Basic .................................................. $ 0.48 $ 0.40
====== ======
Diluted ................................................ $ 0.48 $ 0.40
====== ======
DISTRIBUTIONS DECLARED PER UNIT:
Regular ................................................ $ 0.63 $ 0.46
Special ................................................ - -
------ ------
$ 0.63 $ 0.46
====== ======
Weighted average units outstanding - diluted (Note 4) ....... 6,484 6,304
====== ======
</TABLE>

See Accompanying Notes to Financial Statements.

4 of 23
<PAGE>

NVEST, L.P.
STATEMENT OF CASH FLOWS
(in thousands, unaudited)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1999 2000
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................................. $ 3,086 $ 2,524
Adjustments to reconcile net income to net cash provided
by operating activities:
Equity in earnings of the Operating Partnership ..................... (3,967) (3,326)
Distributions received from the Operating Partnership ............... 5,020 4,835
Increase in gross income tax payable and accrued expenses ........... 792 180
------- -------
Net cash provided by operating activities .............................. 4,931 4,213
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of units of the Operating Partnership (Note 7) ...... 4,056 599
------- -------
Net cash provided by investing activities .............................. 4,056 599
------- -------

CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions paid to unitholders ...................................... (4,107) (3,955)
Payment for retirement of units (Note 7) ............................... (4,056) (599)
------- -------
Net cash used in financing activities .................................. (8,163) (4,554)
------- -------
Net increase in cash and cash equivalents .............................. 824 258

Cash and cash equivalents, beginning of period ........................... 2,772 3
------- -------
Cash and cash equivalents, end of period ................................. $ 3,596 $ 261
======= =======
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTION:
Transfer of partners' capital from the Operating Partnership
(Unit Exchanges - Note 3) ........................................... $ 476 $ 438
======= =======

</TABLE>

See Accompanying Notes to Financial Statements.

5 of 23
<PAGE>

NVEST, L.P.
NOTES TO FINANCIAL STATEMENTS
(unaudited)

NOTE 1 - ORGANIZATION

Nvest, L.P. ("Nvest") 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 business currently is to engage in the
investment advisory business by acting as advising general partner of Nvest
Companies, L.P. (the "Operating Partnership"). The Operating Partnership
operates through investment management firms that offer a broad array of
investment management products and styles across a wide range of asset
categories to institutions, mutual funds and private clients. Nvest's primary
asset at March 31, 2000 was 6,291,282 units of the Operating Partnership,
representing a general partner's interest in the Operating Partnership.

As a result of the Restructuring, Nvest 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. Nvest
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 Nvest.

The general partner of Nvest and the managing general partner of the Operating
Partnership is a wholly owned subsidiary of Metropolitan Life Insurance Company
which, at March 31, 2000, owned approximately 48% of the partnership units of
the Operating Partnership (including those owned indirectly through ownership of
Nvest units).

NOTE 2 - BASIS OF PRESENTATION

The unaudited financial statements of Nvest 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
Nvest filed on Form 10-K for the year ended December 31, 1999. In the opinion of
management, all adjustments, consisting only of normal recurring accruals, have
been made to present fairly the financial statements of Nvest at March 31, 2000
and for the three months ended March 31, 1999 and 2000. The financial statements
of Nvest should also be read in conjunction with the consolidated financial
statements of the Operating Partnership included herein.

NOTE 3 - EXCHANGE OF NVEST COMPANIES, L.P. UNITS FOR NVEST, L.P. UNITS

Each quarter, Nvest provides holders of Operating Partnership units a limited
opportunity to exchange their units for Nvest units, subject to applicable
requirements intended to ensure that the Operating Partnership remains a private
partnership. During the three months ended March 31, 2000, 47,500 Operating
Partnership units were exchanged for an equal number of Nvest units and Nvest
received 47,500 units of the Operating Partnership. On April 3, 2000, an
additional 10,200 Operating Partnership units were exchanged for an equal number
of Nvest units and Nvest received 10,200 units of the Operating Partnership.

In addition, consistent with federal tax law, the partnership agreement of the
Operating Partnership generally permits holders of units to exchange a "block"
of units at any time. A "block" for this purpose is at least equal to two
percent of the outstanding units of the Operating Partnership, reduced by the
units held by certain parties that are deemed to be affiliated with the
Operating Partnership, including units held by Nvest. Currently, a "block" for
this purpose is approximately 340,000 units.

6 of 23
<PAGE>

NVEST, L.P.
NOTES TO FINANCIAL STATEMENTS
(unaudited)

NOTE 4 - NET INCOME PER UNIT

The calculation of basic and diluted net income per unit and weighted average
units outstanding follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------
1999 2000
------- -------
(in thousands, except per unit data)
<S> <C> <C>
Net income - for basic calculation ........................................ $ 3,086 $ 2,524
Additional equity in earnings of the Operating Partnership,
net of gross income tax and other expenses, related to:
Incremental units assumed outstanding from
exercise of options* ............................................. 21 1

Incremental units assumed outstanding at the
Operating Partnership for contingent payment consideration ....... - (9)
------- -------
Net income - for diluted calculation ...................................... $ 3,107 $ 2,516
======= =======
Weighted average units outstanding:
Basic ................................................................ 6,434 6,300
Incremental units assumed outstanding
from exercise of unit options * .................................. 50 4
------- -------
Diluted .............................................................. 6,484 6,304
======= =======
Net income per unit:
Basic ................................................................ $ 0.48 $ 0.40
======= =======
Diluted .............................................................. $ 0.48 $ 0.40
======= =======
</TABLE>

* When an option for a unit of Nvest is exercised, the Operating Partnership
issues a unit to Nvest. This increases Nvest's relative ownership interest
in the Operating Partnership. When dilution due to option exercises occurs
at the Operating Partnership, it affects Nvest proportionately.

NOTE 5 - INVESTMENT IN THE OPERATING PARTNERSHIP

Investment activity in the Operating Partnership for the three months ended
March 31, 2000 follows (in thousands):
<TABLE>
<S> <C>
Investment in the Operating Partnership at December 31, 1999 $ 61,215

Investment from unit exchanges (Note 3) .............................. 438

Sale of units of the Operating Partnership (Note 7) .................. (599)

Equity in earnings of the Operating Partnership ...................... 3,326

Distributions declared by the Operating Partnership ($0.60 per unit) (3,775)
--------

Investment in the Operating Partnership at March 31, 2000 ................ $ 60,605
========
</TABLE>

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<PAGE>

NVEST, L.P.
NOTES TO FINANCIAL STATEMENTS
(unaudited)

NOTE 6 - TAX CONSIDERATIONS FOR PUBLIC UNITHOLDERS

Purchasers of Nvest units after August 10, 1993, are allowed an amortization
deduction that reduces the amount of income on which they pay taxes. This
deduction permits such unitholders to amortize a substantial portion of the
price paid for Nvest units over 15 years and significantly reduces the current
effective tax rate on distributions paid by Nvest to unitholders. Amortization
deductions decrease the tax basis of units held and will likely be recaptured as
ordinary income if and when the units are sold.

A hypothetical example of the amount of the amortization tax benefit for 1999 is
explained in detail in Note 7 to the financial statements of Nvest contained in
Nvest's Annual Report on Form 10-K for the year ended December 31, 1999. For the
three months ended March 31, 2000, Nvest estimates that taxable income to the
public unitholder before the amortization deduction was approximately $0.66 per
unit. The amount of the amortization deduction varies depending on the purchase
price and other factors. However, using a purchase price in December 1999 of
$15.875 per unit (of which approximately $12.375 would represent amortizable
assets), the amortization deduction would reduce net taxable income by $0.21 per
unit, resulting in a deferral of nearly 32% of estimated taxable income until
the units are sold. The relative value of this tax benefit will vary depending
on a number of factors, including the unit purchase price and the amount of
taxable income allocable to unitholders. Based on the assumptions above, the tax
benefit for the three months ended March 31, 2000 is shown in tabular form as
follows:

<TABLE>
<CAPTION>
PER
UNIT
----
<S> <C> <C>
Distributions declared for the three months ended
March 31, 2000 $ 0.46

Allocation of estimated taxable income prior to tax
amortization of the purchase price $ 0.66

Less estimated tax amortization allocation of the
purchase price (1/15 OF $12.375 FOR ONE QUARTER) (0.21)
-----
Net taxable income $ 0.45
Estimated income tax (ASSUMED 40% PERSONAL INCOME TAX RATE) (0.18)
Total distributions declared for the three months ended ------
March 31, 2000, net of income taxes $ 0.28
======
</TABLE>

This example is based solely on estimates of taxable income for the three months
ended March 31, 2000. Under Federal law, unitholders are required to pay tax on
their allocable share of Nvest's taxable income regardless of the amount of
distributions paid. Distributions in excess of net taxable income are not
subject to tax in 2000 but decrease a unitholder's tax basis by a like amount.
As individual tax situations may vary, each prospective purchaser is urged to
consult with his or her tax advisor. The statements herein may constitute
forward-looking statements within the meaning of the federal securities laws.
The accuracy of these forward-looking statements depends in large part on the
interpretation and application of tax laws and regulations, which are subject to
change, and estimates made by Nvest based on such interpretations.

8 of 23
<PAGE>

NVEST, L.P.
NOTES TO FINANCIAL STATEMENTS
(unaudited)

NOTE 7 - UNIT REPURCHASE PLAN

On September 16, 1999, the Board of Directors of the general partner of Nvest
and the Operating Partnership extended a plan to repurchase up to one million
limited partnership units of the partnerships through September 30, 2000. The
repurchase plan, which was initiated on September 15, 1998, authorizes the
purchase of units in either the open market or privately negotiated
transactions. In the case of purchases of Nvest units, the Operating Partnership
has made and is expected to continue to make a corresponding purchase at the
same cost of Operating Partnership units from Nvest. During the three months
ended March 31, 1999 and 2000, respectively, 153,800 and 33,000 units were
repurchased at a cost of $4,056,000 and $599,000.

NOTE 8 - CONTINGENT LIABILITIES

The business units of the Operating Partnership are from time to time subject to
legal proceedings and claims that arise in the course of their businesses. In
the opinion of management, the amount of any ultimate liability with respect to
currently pending actions will not have a material adverse effect on the results
of operations or financial condition of Nvest.

9 of 23
<PAGE>

THE OPERATING PARTNERSHIP
CONSOLIDATED BALANCE SHEET
(in thousands)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1999 2000
------------ --------
(unaudited)
<S> <C> <C>
ASSETS

Current Assets:
Cash and cash equivalents ........................ $ 23,154 $ 20,099
Management and advisory fees receivable .......... 104,059 95,572
Investment securities ............................ 11,038 9,893
Other ............................................ 12,702 11,708
-------- --------
Total current assets ........................ 150,953 137,272
Intangible assets:
Investment advisory contracts .................... 469,365 460,013
Goodwill ......................................... 128,731 128,842
Fixed assets ....................................... 44,140 43,575
Other assets ....................................... 62,784 74,005
-------- --------
Total assets ................................ $855,973 $843,707
======== ========

LIABILITIES AND PARTNERS' CAPTIAL

Current liabilities:
Accounts payable and accrued expenses ............ $121,529 $ 80,574
Distribution payable ............................. 34,230 26,628
Notes payable .................................... 2,600 1,246
-------- --------
Total current liabilities ................... 158,359 108,448

Deferred compensation, benefits and other .......... 17,945 17,592
Notes payable ...................................... 270,000 311,000
-------- --------
Total liabilities ........................... 446,304 437,040

Contingent liabilities (Note 3)

Partners' capital (44,412,586 units at December 31,
1999 and 44,379,586 units at March 31, 2000) ..... 409,669 406,667
-------- --------
Total liabilities and partners' capital ..... $855,973 $843,707
======== ========

</TABLE>

See Accompanying Notes to Consolidated Financial Statements.

10 of 23
<PAGE>

THE OPERATING PARTNERSHIP
CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per unit data, unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------------
1999 2000
------------- ------------
<S> <C> <C>
REVENUES
Management and advisory fees .......... $148,313 $141,460
Other revenues and interest income .... 14,391 17,963
-------- --------
162,704 159,423
-------- --------
EXPENSES
Compensation and benefits ............. 82,834 78,476
Restricted unit plan compensation ..... 933 194
Amortization of intangibles ........... 10,110 10,655
Depreciation and amortization ......... 2,308 2,808
Occupancy, equipment and systems ...... 8,377 9,231
Interest expense ...................... 5,306 5,610
Other ................................. 24,969 28,350
-------- --------
134,837 135,324
-------- --------
Income before income taxes ................. 27,867 24,099
Income tax expense .................... 1,289 862
-------- --------
Net income ................................. $ 26,578 $ 23,237
======== ========
DISTRIBUTIONS DECLARED PER UNIT:
Regular ............................... $ 0.77 $ 0.60
Special ............................... - -
-------- --------
$ 0.77 $ 0.60
======== ========
Weighted average units outstanding - diluted 44,669 44,552
======== ========

</TABLE>

See Accompanying Notes to Consolidated Financial Statements.

11 of 23
<PAGE>

THE OPERATING PARTNERSHIP
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands, unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1999 2000
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................................. $ 26,578 $ 23,237
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of intangibles ........................................ 10,110 10,655
Restricted unit plan compensation .................................. 933 194
-------- --------
Subtotal ....................................................... 37,621 34,086
Depreciation and amortization ...................................... 2,308 2,808
(Increase)/decrease in accounts receivable and other assets ........ (5,104) 7,540
Decrease in accounts payable and other liabilities ................. (31,279) (39,874)
-------- --------
Net cash provided by operating activities .............................. 3,546 4,560
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ................................................... (5,613) (2,243)
Increase in investment securities/other investments .................... (1,217) (7,341)
Acquisition payments ................................................... (4,652) (2,848)
-------- --------
Net cash used in investing activities .................................. (11,482) (12,432)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions paid to unitholders ...................................... (34,441) (34,230)
Payment for retirement of units ........................................ (4,056) (599)
Proceeds from notes payable ............................................ 25,824 39,646
-------- --------
Net cash provided by/(used in) financing activities .................... (12,673) 4,817
-------- --------
Net decrease in cash and cash equivalents .............................. (20,609) (3,055)

Cash and cash equivalents, beginning of period .............................. 52,135 23,154
-------- --------
Cash and cash equivalents, end of period .................................... $ 31,526 $ 20,099
======== ========
Cash paid during the period for interest .................................... $ 5,574 $ 5,084
======== ========
Cash paid during the period for income taxes ................................ $ 2,665 $ 418
======== ========

</TABLE>

See Accompanying Notes to Consolidated Financial Statements.

12 of 23
<PAGE>

THE OPERATING PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

NOTE 1 - ORGANIZATION

Nvest Companies, L.P. (the "Operating Partnership") operates through investment
management firms that offer a broad array of investment management products and
styles across a wide range of asset categories to institutions, mutual funds and
private clients. The business of the Operating Partnership was conducted by
Nvest, L.P.("Nvest") prior to the Restructuring completed on December 31, 1997.

NOTE 2 - BASIS OF PRESENTATION

The unaudited consolidated financial statements of the Operating Partnership
should be read in conjunction with the annual report of Nvest filed on Form 10-K
for the year ended December 31, 1999. 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, 2000 and for the three months ended March 31, 1999 and 2000.

Certain amounts in prior period financial statements have been reclassified to
conform with the 2000 presentation.

NOTE 3 - CONTINGENT LIABILITIES

The business units of the Operating Partnership are from time to time subject to
legal proceedings and claims which arise in the course of their businesses. In
the opinion of management, the amount of any ultimate liability with respect to
currently pending actions will not have a material adverse effect on the results
of operations or financial condition of the Operating Partnership.

NOTE 4 - UNIT REPURCHASE PLAN

NOTE 5 - NOTES PAYABLE

13 of 23
<PAGE>

PART I. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

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. These statements may be
identified by such forward-looking terminology as "expect," "look,"
"believe," "anticipate," "may," "will," or similar statements or variations
of such terms. Any forward-looking statements should be considered in light
of the risks and uncertainties associated with Nvest 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 Nvest and the Operating Partnership
have been described in Nvest's Annual Report on Form 10-K for the year ended
December 31, 1999, 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.

GENERAL

At year-end 1997, Nvest 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. (the "Operating Partnership"). As a
result of the Restructuring, Nvest's primary asset consists of its economic
interest in the Operating Partnership. Nvest 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,
2000, Nvest owned approximately 6.3 million units, or approximately 14% of the
economic interests in the Operating Partnership. As part of the Restructuring,
Nvest elected to retain its partnership tax status in return for paying an
annual 3.5% federal gross income tax on its proportionate share of the gross
income of the Operating Partnership. For further information regarding the
Restructuring, please refer to Nvest's Annual Report on Form 10-K for the year
ended December 31, 1999, particularly the discussion under Item 1,
"Business--1997 Restructuring of the Partnership."

As a result of the Restructuring, Management's Discussion and Analysis includes
two sections. In the first section, the results of Nvest for the three months
ended March 31, 2000 are compared to the results for the three months ended
March 31, 1999. In the second section, the results of the Operating Partnership
for the three months ended March 31, 2000 are compared to the results for the
three months ended March 31, 1999.

14 of 23
<PAGE>

PART I. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)

NVEST, L.P.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------------
1999 2000
------ ------
(in thousands, except per unit data)
<S> <C> <C>
THE OPERATING PARTNERSHIP
Net income ...................................... $26,578 $23,237
Add back restricted unit plan compensation * .... 933 194
------- -------
Net income available ............................ $27,511 $23,431
======= =======
NVEST, L.P.
Percentage ownership of the Operating Partnership
on a weighted average basis - basic ......... 14.420% 14.193%
======= =======
Equity in earnings of the Operating Partnership . $ 3,967 $ 3,326
Gross income tax and other expenses, net ........ 881 802
------- -------
Net income ...................................... $ 3,086 $ 2,524
======= =======
Net income per unit - diluted ** ................ $ 0.48 $ 0.40
======= =======
Regular distributions declared per unit ......... $ 0.63 $ 0.46
======= =======
Weighted average units outstanding - diluted .... 6,484 6,304
======= =======
</TABLE>

* Restricted unit plan compensation is fully allocated to certain limited
partners of the Operating Partnership, and is added back to net income to
determine net income available for allocation.

** Net income per unit - diluted is calculated based on Nvest's percentage
ownership of the Operating Partnership on a diluted basis, which was
14.516% and 14.150% for the three months ended March 31, 1999 and 2000,
respectively. See Note 4 of the Notes to Financial Statements of
Nvest, L.P. for the calculation of net income per unit.

GENERAL

Nvest derives its net income and cash available for distribution from its
ownership of units in the Operating Partnership. At March 31, 2000, Nvest
owned approximately 6.3 million units of the Operating Partnership,
representing an approximate 14% interest. Each quarter, Nvest distributes
to its unitholders substantially all of the distributions received from the
Operating Partnership after accruing its federal and state tax obligations
and miscellaneous operating expenses. Nvest's major expense is the 3.5%
federal gross income tax that is payable on Nvest's proportionate share of
the Operating Partnership's gross income.

15 of 23
<PAGE>

PART I. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)

NVEST, L.P. (CONTINUED)

DISTRIBUTIONS TO UNITHOLDERS

On March 21, 2000, the Operating Partnership declared a quarterly distribution
of $0.60 per unit, payable on May 15, 2000. Nvest, in turn, declared a
distribution of $0.46 per unit, with the $0.14 difference consisting primarily
of the tax obligations discussed above. The Operating Partnership has
significant non-cash expenses which allow both it and, therefore, Nvest to
maintain a distribution level in excess of net income. Changes in operating cash
flow of the Operating Partnership directly impact the amount of distributions
that Nvest may pay.

STATEMENT OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THE
THREE MONTHS ENDED MARCH 31, 1999

Nvest's net income of $0.40 per unit (diluted) for the three months ended March
31, 2000 decreased $0.08 per unit from $0.48 per unit (diluted) for the three
months ended March 31, 1999. The results reflect lower net income at the
Operating Partnership.

Equity in earnings of the Operating Partnership of $3.3 million for the three
months ended March 31, 2000 was down $0.7 million from $4.0 million for the
three months ended March 31, 1999. Nvest receives a pro rata share of the
Operating Partnership's net income available for allocation based on its equity
interest in the Operating Partnership. The decrease was primarily due to lower
net income at the Operating Partnership combined with a slightly lower equity
interest in the Operating Partnership. Nvest's ownership of the Operating
Partnership on a weighted average basis (basic) declined from 14.420% for the
three months ended March 31, 1999 to 14.193% for the three months ended March
31, 2000, mostly as a result of the unit repurchase plan (Note 7 - Nvest, LP).
For further information, please see Management's Discussion and Analysis of the
Operating Partnership's results, below.

Gross income tax and other expenses consist primarily of a 3.5% federal tax on
Nvest's proportionate share of the gross income of the Operating Partnership.

CAPITAL RESOURCES AND LIQUIDITY

Nvest distributes to its unitholders substantially all of the distributions
received from the Operating Partnership, after accruing its tax obligations and
miscellaneous operating expenses. To the extent that there are any temporary
cash shortfalls due to the timing of tax payments and the receipt of quarterly
distributions, the Operating Partnership makes short-term loans available to
Nvest.

16 of 23
<PAGE>

PART I. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
THE OPERATING PARTNERSHIP

THREE MONTHS ENDED
MARCH 31,
---------------------------------
1999 2000
--------------- --------------
(in thousands, except per unit data)
<S> <C> <C>
Revenues ................................... $162,704 $159,423
-------- --------
Expenses:
Restricted unit plan compensation ........ 933 194
Amortization of intangibles .............. 10,110 10,655
Compensation and other expenses .......... 125,083 125,337
-------- --------
136,126 136,186
-------- --------
Net income .................................... $ 26,578 $ 23,237
======== ========
Operating cash flow (1) ....................... $ 37,621 $ 34,086
======== ========
Operating cash flow per unit - diluted (1)..... $ 0.84 $ 0.77
======== ========
Regular distributions declared per unit ....... $ 0.77 $ 0.60
======== ========
Weighted average units outstanding - diluted... 44,669 44,552
======== ========

</TABLE>

Note:
(1) Operating cash flow, as defined by Nvest, is equal to net income plus
non-cash charges for amortization of intangibles and restricted unit plan
compensation. Operating cash flow per unit should not be construed as an
alternative to net income per unit of Nvest, L.P. 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.

17 of 23
<PAGE>

PART I. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)

THE OPERATING PARTNERSHIP (CONTINUED)

GENERAL

The Operating Partnership is an investment management firm with approximately
$134 billion in assets under management at March 31, 2000. It operates through
twelve investment management firms and six distribution and service firms to
provide a wide array of investment styles and products to institutional, mutual
fund and private client markets. The Operating Partnership's assets under
management include equity and fixed income securities, money market funds and
real estate.

The Operating Partnership seeks to grow by expanding the investment management
firms' capabilities, expanding marketing efforts and distribution channels, and
selectively pursuing the acquisition of investment management firms. The
Operating Partnership supports its firms' existing businesses and new
initiatives that demonstrate substantial potential for growth in assets under
management by allocating capital and other resources to those businesses and
initiatives. In addition, the Operating Partnership and the investment
management firms identify opportunities for joint marketing efforts, enhanced
distribution of investment products (such as mutual funds) and operational
efficiencies across the organization.

REVENUES

The Operating Partnership's revenues derive primarily from management and
advisory fees earned from services provided by the investment management firms.
For institutional and private clients, fees are generally billed quarterly and
are calculated as a percentage of actual assets under management at the
beginning or end of the calendar quarter. For mutual fund clients, fees are
billed monthly and are calculated as a percentage of the fund's average daily
net assets. Changes in assets under management, which can result from changes in
market values of securities, net client inflows or outflows, and acquisitions,
have a major impact on revenues earned by the Operating Partnership. The
Operating Partnership earns additional management and advisory fee revenues as a
result of performance fees and transaction fees. Such fees are generally earned
at the end of the performance contract period or upon completion of specific
transactions, sometimes resulting in periodic fluctuations in the recognition of
such revenues.

INTANGIBLE ASSETS AND AMORTIZATION OF INTANGIBLES

Intangible assets of $589 million represent the excess of the purchase price of
acquisitions over the fair value of the net tangible assets acquired. Intangible
assets, including investment advisory contracts and goodwill, are amortized over
periods ranging from 7 to 30 years. The Operating Partnership periodically
evaluates the estimated remaining lives and the carrying value of intangible
assets to determine whether events and circumstances warrant adjustment.
Projected undiscounted future cash flows of each acquisition are compared to the
recorded values of the related intangible assets, factoring in known or expected
trends, future prospects and other relevant information. If the projected future
cash flows are less than the carrying value of the intangible assets, the
Operating Partnership would recognize an impairment loss for the difference
between the carrying amount and the estimated fair value of the intangible
assets. At March 31, 2000, there was no impairment of intangible assets.

Cost assigned to contracts and goodwill acquired is amortized as an operating
expense. It does not, however, require the use of cash and, therefore, it is
added back to net income along with restricted unit plan compensation to arrive
at operating cash flow available for distribution.

18 of 23
<PAGE>

PART I. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)

THE OPERATING PARTNERSHIP (CONTINUED)

DISTRIBUTION POLICY

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 and the repurchase of units. Operating
cash flow is defined as net income plus non-cash charges for amortization of
intangibles and restricted unit plan compensation. During the first quarter of
2000, the Operating Partnership declared a regular distribution of $0.60 per
unit, compared to $0.77 per unit for the first quarter of 1999.

The Operating Partnership adopted a program of regular and special distributions
during the fourth quarter of 1999, declaring a regular distribution of $0.60 per
unit and a special distribution of $0.17 per unit. The Operating Partnership's
policy is to pay quarterly regular distributions, supplemented by periodic
special distributions or increases in the regular distribution rate, depending
on operating results. This provides flexibility in addressing any variability in
the business resulting from transaction and performance fees, as well as shifts
in profitability resulting from factors such as fee rates and asset mix. Total
annual regular and special distributions per unit are expected to range from 80%
to 90% of operating cash flow per unit.

ASSETS UNDER MANAGEMENT

DEC. 31, MARCH 31, DEC. 31, MARCH 31,
1998 1999 1999 2000
<S> <C> <C> <C> <C>

CLIENT TYPE (IN BILLIONS):
Separate Accounts
Third Party Institutional... $ 83 $ 83 $ 85 $ 86
Private Accounts............ 12 11 11 10
MetLife General Account..... 4 4 1 1
---- ---- ---- ----
99 98 97 97
---- ---- ---- ----

Mutual Funds:
Equity...................... 21 19 19 18
Fixes Income/Money Market... 15 16 17 19
---- ---- ---- ----
36 35 36 37
---- ---- ---- ----
$135 $133 $133 $134
==== ==== ==== ====

ASSET CLASS (IN BILLIONS):
Equity........................ $ 61 $ 58 $ 59 $ 56
Fixed Income.................. 58 59 57 59
Money Market.................. 10 10 11 13
Real Estate................... 6 6 6 6
---- ---- ---- ----
$135 $133 $133 $134
==== ==== ==== ====
</TABLE>

Assets under management were $134 billion as of March 31, 2000. This compares to
$133 billion as of March 31, 1999 and December 31, 1999.

19 of 23
<PAGE>

PART I. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)

THE OPERATING PARTNERSHIP (CONTINUED)

Overall, the Operating Partnership has experienced a shift in assets during the
quarter from equity assets to lower fee fixed income and money market assets.
Although assets under management increased $1 billion from December 31, 1999,
the Operating Partnership continued to experience net outflows of approximately
$1.2 billion from the Oakmark Fund. Net new business for the quarter was
essentially flat, after considering the impact of the Oakmark Fund.

STATEMENT OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THE
THREE MONTHS ENDED MARCH 31, 1999

Net income of $23.2 million for the three months ended March 31, 2000 declined
$3.4 million from $26.6 million for the three months ended March 31, 1999. The
decrease was primarily a result of lower management and advisory fee revenues,
partially offset by lower compensation expense.

Management and advisory fees of $141.5 million for the three months ended March
31, 2000 decreased $6.8 million from $148.3 million for the three months ended
March 31, 1999, primarily as a result of a decline in assets under management in
mid to large cap value style equity products, particularly the Oakmark Fund.
Partially offsetting this decline was growth in revenues from risk-adjusted
equity products, growth products and small cap value products on the
institutional side; and growth funds, money market funds, and fixed income funds
on the mutual fund side.

Other revenues and interest income of $18.0 million for the three months ended
March 31, 2000 increased $3.6 million from $14.4 million for the three months
ended March 31, 1999. The increase resulted from client servicing fees,
primarily transfer agency fees, which are largely offset by an increase in
servicing expenses.

Compensation and benefits of $78.5 million for the three months ended March 31,
2000 declined $4.3 million from $82.8 million for the three months ended March
31, 1999. Base compensation increased $3.7 million as a result of annual salary
increases and increased staffing. Variable compensation, which results from
subsidiary incentive payments based on profitability, investment portfolio
performance, new business sales, and participation in the subsidiaries' growth
in revenues and profits, declined $8.0 million. Variable compensation as a
percentage of total compensation declined from 49% for the first quarter of 1999
to 42% for the first quarter of 2000. The variable compensation plans reward the
subsidiaries for growth in their business, but also require them to share in the
impact of declines. In this way, the variable compensation plans act to reduce
fluctuations in the Operating Partnership's profitability.

Occupancy, equipment and systems expense of $9.2 million for the three months
ended March 31, 2000 increased $0.8 million from $8.4 million for the three
months ended March 31, 1999 due to lease renewals at higher rates and costs
associated with expanded business activities.

Other expense of $28.4 million for the three months ended March 31, 2000
increased $3.4 million from $25.0 million for the three months ended March 31,
1999, primarily as a result of increases related to the transfer agent business
and higher sales to intermediaries distributing money market mutual fund
products.

20 of 23
<PAGE>

PART I. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)

THE OPERATING PARTNERSHIP (CONTINUED)

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
and the repurchase of units, is generally distributed to unitholders each
quarter. Distributions to unitholders are typically declared during the last
month of calendar quarters. The Operating Partnership has the ability to make
distributions in excess of net income due to its non-cash amortization expense.
The Board of Directors set the regular distribution rate at $0.60 per unit in
December of 1999, subject to change by the Board of Directors. On March 21,
2000, the Operating Partnership declared a regular distribution of $0.60 per
unit, payable on May 15, 2000, to unitholders of record on March 31, 2000. Total
annual regular and special distributions are expected to range from 80% to 90%
of operating cash flow per unit.

The Operating Partnership has a $165 million revolving credit agreement, which
expires October 28, 2001. The balance of $41 million outstanding under this
agreement as of March 31, 2000 is classified as long-term. In addition, the
Operating Partnership has a $20 million line of credit available, of which $0.9
million was outstanding as of March 31, 2000.

As of March 31, 2000, the Operating Partnership estimates that $49 million in
cash and/or units may be paid to the sellers of certain firms previously
acquired. Such amounts would be paid over a seven-year period following the
respective closing dates through December 31, 2006, depending upon the
attainment of certain post-closing revenue and profit levels. A total of $10
million of this amount is expected to be paid during the third quarter of 2000
in a combination of cash and units. Substantially all of the contingent
consideration, if paid, is expected to be accounted for as additional purchase
price.

PART 1. ITEM. 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Please refer to Item 7A of Nvest's Annual Report on Form 10-K for the year ended
December 31, 1999.

21 of 23
<PAGE>

PART II - OTHER INFORMATION

ITEM 5. OTHER INFORMATION

On February 17, 2000, the Board of Directors of the general partner of Nvest and
the managing general partner of the Operating Partnership voted to approve the
2000 Equity Incentive Plan. The plan provides for grants of options and other
employee incentives with respect to a maximum of 6,000,000 limited partnership
units of Nvest or the Operating Partnership, to a broadly-based group of
employees of Nvest, the Operating Partnership and their affiliates.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(A) EXHIBITS

10.1 2000 Equity Incentive Plan.

27. Financial Data Schedule.

(B) REPORTS ON FORM 8-K

None.

22 of 23
<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 10, 2000
- --------------------------------------- ------------
G. Neal Ryland Date
Executive Vice President and
Chief Financial Officer

/s/ Duncan B.E. Wilkinson May 10, 2000
- --------------------------------------- ------------
Duncan B.E. Wilkinson Date
Senior Vice President and
Controller

23 of 23

<PAGE>

NVEST

2000 EQUITY INCENTIVE PLAN

1. DEFINED TERMS

Exhibit A, which is incorporated by reference, defines the terms used
in the Plan and sets forth certain provisions relating to those terms.

2. IN GENERAL

The Plan has been established to advance the interests of Nvest by
giving selected Employees, directors and other persons (including both
individuals and entities) who provide services to Nvest equity-based or cash
incentives through the grant of Awards. No Awards may be granted under the Plan
after February 17, 2010, but Awards granted prior to that date may extend beyond
that date.

The Plan is intended to qualify as a broadly-based plan for purposes
of Section 312.03(a)(2) of the New York Stock Exchange Listed Company Manual.
In furtherance of the foregoing, (a) at least a majority of the full-time
Employees in the United States, who are "exempt employees," as defined under
the Fair Labor Standards Act of 1938, are eligible to receive Awards under
the Plan, and (b) it is intended that at least a majority of the LP Units
underlying Awards under the Plan, during the shorter of the three-year period
commencing on the date on which the Plan is adopted by Nvest or the term of
the Plan, will be awarded to employees who are not officers (as defined in
Rule 16a-1(f) under the Securities Exchange Act of 1934, or any successor
rule) or directors of Nvest Corporation, Nvest, L.P. or Nvest Companies. Any
failure to comply with any of the above-listed requirements will not affect
the validity of any Award under the Plan.

3. ADMINISTRATION

The Administrator has discretionary authority, subject only to the
express provisions of the Plan, to interpret the Plan; determine eligibility for
and grant Awards; determine, modify or waive the terms and conditions of any
Award; prescribe forms, rules and procedures (which it may modify or waive); and
otherwise do all things necessary to carry out the purposes of the Plan. Once an
Award has been communicated in writing to a Participant, the Administrator may
not, without the Participant's consent, alter the terms of the Award so as to
affect adversely the Participant's rights under the Award, unless the
Administrator expressly reserved the right to do so in writing at the time of
such communication.

4. UNITS SUBJECT TO THE PLAN

A maximum of 6,000,000 LP Units may be delivered under the Plan,
subject to adjustment under Section 7. For purposes of the preceding sentence,
the following LP Units shall not be deemed to have been issued under the Plan:
(i) LP Units remaining under an Award that terminates without having been
exercised in full (in the case of an Award requiring

<PAGE>

exercise); (ii) LP Units subject to an Award, where cash is delivered to a
Participant in lieu of such LP Units; (iii) Restricted LP Units that have been
forfeited in accordance with the terms of the applicable Award; and (iv) LP
Units held back, in satisfaction of tax withholding requirements, from LP Units
that would otherwise have been delivered pursuant to an Award. The number of LP
Units issued under an Award shall be determined net of any previously acquired
LP Units tendered by the Participant in payment of the exercise price or of
withholding taxes.

5. ELIGIBILITY AND PARTICIPATION

The Administrator will select Participants from among those key
Employees, directors and other individuals or entities providing services to
Nvest who, in the opinion of the Administrator, are in a position to make a
significant contribution to the success of Nvest.

6. RULES APPLICABLE TO AWARDS

a. ALL AWARDS

(1) PERFORMANCE OBJECTIVES. Where rights under an Award depend
in whole or in part on attainment of performance objectives, actions by Nvest
that have an effect, however material, on such performance objectives or on the
likelihood that they will be achieved will not be deemed an amendment or
alteration of the Award unless accomplished by a change in the express terms of
the Award or other action that is without substantial consequence except as it
affects the Award.

(2) ALTERNATIVE SETTLEMENT. The Administrator retains the
right, provided the holder of the Award consents, at any time to extinguish
rights under an Award in exchange for payment in cash, LP Units (subject to the
limitations of Section 4) or other property on such terms as the Administrator
determines.

(3) TRANSFERABILITY OF AWARDS. Except as the Administrator
otherwise expressly provides, Awards (other than an Award in the form of an
outright transfer of cash or Unrestricted LP Units) may not be transferred other
than by will or by the laws of descent and distribution. During a Participant's
lifetime an Award requiring exercise may be exercised only by the Participant
(or in the event of the Participant's incapacity, the person or persons legally
appointed to act on the Participant's behalf).

(4) VESTING, ETC. The Administrator may determine the time or
times at which an Award will vest (i.e., become free of forfeiture restrictions)
or become exercisable. Unless

-2-

<PAGE>

the Administrator expressly provides otherwise, an Award requiring exercise will
cease to be exercisable, and all other Awards to the extent not already fully
vested will be forfeited, immediately upon the cessation (for any reason,
including death) of the Participant's employment or other service relationship
with Nvest.

(5) TAXES. The Administrator will make such provision for the
withholding of taxes as it deems necessary. The Administrator may, but need not,
hold back LP Units from an Award or permit a Participant to tender previously
owned LP Units in satisfaction of tax withholding requirements, but shall not
hold back or permit to be tendered for this purpose LP Units in excess of the
amount required to satisfy Nvest's minimum statutory withholding rates.

(6) DIVIDEND EQUIVALENTS, ETC. The Administrator may provide
for the payment of amounts in lieu of cash dividends or other cash distributions
with respect to LP Units subject to an Award.

(7) RIGHTS LIMITED. Nothing in the Plan shall be construed as
giving any person the right to continued employment or service with Nvest, or
any rights as a shareholder except as to LP Units actually issued under the
Plan. The loss of existing or potential profit in Awards will not constitute an
element of damages in the event of termination of employment or service for any
reason, even if the termination is in violation of an obligation of Nvest to the
Participant.

b. AWARDS REQUIRING EXERCISE; SPECIAL RULES

(1) TIME AND MANNER OF EXERCISE. Unless the Administrator
expressly provides otherwise, (a) an Award requiring exercise by the holder will
not be deemed to have been exercised until the Administrator receives a written
notice of exercise (in form acceptable to the Administrator) signed by the
appropriate person and accompanied by any payment required under the Award; and
(b) if the Award is exercised by any person other than the Participant, the
Administrator may require satisfactory evidence that the person exercising the
Award has the right to do so.

(2) PAYMENT OF EXERCISE PRICE, IF ANY. Where the exercise of
an Award is to be accompanied by payment, such payment shall be by cash or check
acceptable to the Administrator except as otherwise provided in the Award or as
otherwise determined by the Administrator.

-3-
<PAGE>

7. EFFECT OF CERTAIN TRANSACTIONS

a. MERGERS, ETC.

In the event of a Covered Transaction, all outstanding Awards requiring
exercise that are then exercisable will cease to be exercisable, and all Awards
to the extent not fully vested or exercisable (including Awards subject to
performance conditions not yet satisfied or determined) will be forfeited, as of
the effective time of the Covered Transaction; provided, however, that
immediately prior to the consummation of such Covered Transaction the vesting
and exercisability of Awards shall be accelerated unless, in the case of any
Award, the Administrator provides for one or more substitute or replacement
awards from, or the assumption of the existing Award by, the acquiring or
surviving entity (if any) or its affiliates on terms substantially similar (as
determined by the Administrator) to those imposed under the Award. For purposes
of the preceding sentence, the substitution of stock or other securities of the
acquiring or surviving entity or its affiliates for LP Units outstanding under
an Award (for example, the substitution of restricted stock or securities of an
acquiring or surviving entity for Restricted LP Units) shall be deemed a
substitution, replacement or assumption of an award provided for by the
Administrator regardless of how such substitution of stock or other securities
is effectuated, provided that the restrictions (if any) or other terms to which
such substituted stock or other securities are subject are substantially similar
to the terms of the Award to which they relate.

The Administrator may provide in the case of any Award that the
provisions of the preceding paragraph shall also apply to (i) mergers or
consolidations involving Nvest, L.P. or Nvest Companies that do not constitute a
Covered Transaction, or (ii) other transactions, not constituting a Covered
Transaction, that involve the acquisition of LP Units.

b. CHANGES IN AND DISTRIBUTIONS WITH RESPECT TO THE
LP UNITS

(1) BASIC ADJUSTMENT PROVISIONS. In the event of a change in
the capital structure of Nvest, L.P. or Nvest Companies, the Administrator may
make appropriate adjustments to the maximum number of LP Units that may be
delivered under the Plan under Section 4 and may also make appropriate
adjustments to the number and kind of LP Units or securities subject to Awards
then outstanding or subsequently granted, any exercise prices relating to Awards
and any other provision of Awards affected by such change.

(2) CERTAIN OTHER ADJUSTMENTS. The Administrator may also make
adjustments of the type described in paragraph (1) above to take into account
distributions to the holders of LP Units other than normal distributions of
operating cash flow, mergers, consolidations, acquisitions, dispositions or
similar transactions, or any other event (including

-4-

<PAGE>

a repurchase of LP Units), if the Administrator determines that adjustments are
appropriate to avoid distortion in the operation of the Plan and to preserve the
value of Awards made hereunder.

(3) CONTINUING APPLICATION OF PLAN TERMS. References in the
Plan to LP Units shall be construed to include any partnership units or other
securities resulting from an adjustment pursuant to Section 7.b.(1) or 7.b.(2)
above.

(4) NO CHANGE ON ACCOUNT OF RESTRUCTURING. In no event shall a
Restructuring result in adjustment under this paragraph.

c. ASSIGNMENT OF CERTAIN CONTRACTS

Notwithstanding any other provision in the Plan or any Award to the
contrary, in the event of an "assignment" as defined in the Investment Company
Act of 1940 and the Investment Advisers Act of 1940 of the investment advisory
contracts between Nvest, L.P. or Nvest Companies (and their controlled
entities), on the one hand, and their investment advisory clients, on the other
hand, all then outstanding Awards requiring exercise will immediately become
exercisable and all unvested Awards then outstanding shall immediately vest
(become free of restrictions under the Plan); provided, that in no event shall a
Restructuring be deemed to result in accelerated vesting or exercisability of
Awards under this paragraph.

8. RIGHTS ENFORCEABLE AGAINST NVEST, L.P. AND NVEST COMPANIES;
CONDITIONS ON DELIVERY OF LP UNITS

All rights to receive LP Units under the Plan are exercisable or
enforceable in the first instance against Nvest Companies, and all LP Units
forfeited, returned or paid over to Nvest under the Plan shall be forfeited,
returned or paid over to Nvest Companies and only in the event of a default
by Nvest Companies shall such rights be exercisable against Nvest, L.P. Nvest
Companies shall make such arrangements as the Administrator deems necessary
and appropriate and which are acceptable to Nvest, L.P. to obtain LP Units
from Nvest, L.P. or from unitholders of Nvest, L.P. to satisfy Awards granted
hereunder and otherwise to make adjustments reflecting forfeitures or other
transactions in LP Units; provided, that in respect of Awards made to persons
employed by or performing services to Nvest, L.P., such arrangements may
include the issuance of LP Units directly by Nvest, L.P. No LP Units shall be
required to be delivered pursuant to the Plan, nor shall any restriction
applicable to LP Units previously delivered under the Plan be required to be
removed, until: Nvest's counsel has approved all legal matters in connection
with the issuance and delivery of such LP Units; if the outstanding LP Units
are at the time of delivery listed on any stock exchange or national market
system, the LP Units to be delivered have been listed or authorized to be
listed on such

-5-

<PAGE>

exchange or system upon official notice of issuance; and all conditions of the
Award have been satisfied or waived. If the sale of LP Units has not been
registered under the Securities Act of 1933, as amended, the Administrator may
require, as a condition to exercise of the Award, such representations or
agreements as the Nvest's counsel may consider appropriate to avoid violation of
such Act. The Administrator may require that certificates evidencing LP Units
issued under the Plan bear an appropriate legend reflecting any restriction on
transfer applicable to such LP Units.

9. AMENDMENT AND TERMINATION

Subject to the last sentence of Section 3, the Administrator may at any
time or times amend the Plan or any outstanding Award for any purpose which may
at the time be permitted by law, or may at any time terminate the Plan as to any
further grants of Awards.

10. NON-LIMITATION OF NVEST'S RIGHTS

The existence of the Plan or the grant of any Award shall not in any
way affect Nvest's right to award a person bonuses or other compensation in
addition to Awards under the Plan.

11. GOVERNING LAW

The Plan shall be construed in accordance with the laws of the State of
Delaware.

-6-

<PAGE>

EXHIBIT A

DEFINITION OF TERMS

The following terms, when used in the Plan, shall have the meanings and
the Plan shall be subject to the provisions set forth below:

"ADMINISTRATOR": The Committee, if one has been appointed; otherwise
the Board.

"AFFILIATE": Any corporation or other entity in which either Nvest,
L.P. or Nvest Companies owns, directly or indirectly, 50% or more of the
outstanding capital stock (determined by aggregate voting rights) or other
voting interests. Without regard to the application of the preceding sentence,
Nvest, L.P., Nvest Companies and Nvest Corporation (the general partner of
Nvest, L.P. and the managing general partner of Nvest Companies) shall be deemed
Affiliates of one another.

"AWARD": Any of the following:

(i) Options ("Options") entitling the recipient to acquire LP
Units upon payment of the exercise price. Each Option will have an
exercise price at least equal to the fair market value of the LP Units
subject to the option, determined as of the date of grant, and shall
have a maximum term not to exceed ten years from the date of grant. The
Administrator will determine the medium in which the exercise price is
to be paid, the duration of the Option, the time or times at which an
Option will become exercisable, provisions for continuation (if any) of
option rights following termination of the Participant's employment
with Nvest, and all other terms of the Option.

No Option awarded under the Plan will be an ISO unless the
Administrator expressly provides for ISO treatment.

(ii) Rights ("UARs") entitling the holder upon exercise to
receive cash or LP Units, as the Administrator determines, equal to a
function (determined by the Administrator using such factors as it
deems appropriate) of the amount by which the LP Units have appreciated
in value since the date of the Award.

(iii) LP Units subject to restrictions ("Restricted LP Units")
under the Plan requiring that such LP Units be redelivered to Nvest if
specified conditions are not satisfied. The conditions to be satisfied
in connection with any Award of Restricted LP Units, the terms on which
such LP Units must be redelivered to Nvest, the purchase price of such
LP Units, and all other terms shall be determined by the Administrator.

<PAGE>

(iv) LP Units not subject to any restrictions under the Plan
("Unrestricted LP Units").

(v) A promise to deliver LP Units or other securities in the
future on such terms and conditions as the Administrator determines.

(vi) Securities (other than Options) that are convertible into
or exchangeable for LP Units on such terms and conditions as the
Administrator determines.

(vii) Cash bonuses tied to performance criteria as described
at (viii) below ("Cash Performance Awards").

(viii) Awards described in any of (i) through (vii) above
where the right to exercisability, vesting or full enjoyment of the
Award is conditioned in whole or in part on the satisfaction of
specified performance criteria ("Performance Awards").

(ix) Grants of cash, or loans, made in connection with other
Awards in order to help defray in whole or in part the economic cost
(including tax cost) of the Award to the Participant. The terms of any
such grant or loan shall be determined by the Administrator.

Notwithstanding the foregoing, Awards may, in the Administrator's discretion,
be made with respect to Special Units. Awards may be combined in the
Administrator's discretion.

"BOARD": The Board of Directors of Nvest Corporation, the general
partner of Nvest, L.P. and the managing general partner of Nvest Companies.

"CODE": The U.S. Internal Revenue Code of 1986 as from time to time
amended and in effect, or any successor statute as from time to time in effect.

"COMMITTEE": A committee of the Board charged with the responsibility
of administering the Plan.

"COVERED TRANSACTION" means (i) a consolidation or merger in which
Nvest, L.P. does not survive as an entity or which results in the acquisition of
substantially all of the LP Units by a single person or entity or by a group of
persons and/or entities acting in concert, or (ii) a consolidation or merger in
which Nvest Companies is not the surviving entity or which results in the
acquisition of substantially all of the partnership units (as the case may be)
of Nvest Companies by a single person or entity or by a group of persons and/or
entities acting in concert, or (iii) a sale or transfer of all or substantially
all of Nvest, L.P.'s assets, or (iv) a sale or transfer of all or substantially
all of Nvest Companies' assets or (v) a dissolution or

<PAGE>

liquidation of Nvest, L.P. or Nvest Companies. In no event shall a Restructuring
itself be considered a Covered Transaction.

"EMPLOYEE": Any person who is employed by Nvest.

"LP UNITS": Limited partnership units in Nvest, L.P. Notwithstanding
the foregoing, the term "LP Units" shall (except as used in the definition of
"Covered Transaction") also include any Special Units that are subject to Awards
whether granted before or after a Restructuring.

"NVEST": Nvest, L.P., Nvest Companies, Nvest Corporation, and the
Affiliates, or any of them.

"NVEST, L.P.": Nvest, L.P., a Delaware limited partnership.

"NVEST COMPANIES": Nvest Companies, L.P., a Delaware limited
partnership.

"PARTICIPANT": An Employee, director or other person providing services
to Nvest who is granted an Award under the Plan.

"PLAN": The Nvest 2000 Equity Incentive Plan as from time to time
amended and in effect.

"RESTRUCTURING": A "Restructuring" as defined in the Second Amended and
Restated Agreement of Limited Partnership of Nvest, L.P. (formerly named New
England Investment Companies, L.P.) dated as of December 29, 1997.

"SPECIAL UNITS": Limited partnership units in Nvest Companies that are
subject to Awards that contain such additional terms and provisions as the
Administrator determines to be necessary or appropriate.

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
MARCH 31, 2000 FORM 10-Q OF NVEST, L.P. 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-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 261
<SECURITIES> 0
<RECEIVABLES> 3,775
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,036
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 64,641
<CURRENT-LIABILITIES> 3,752
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 60,889
<TOTAL-LIABILITY-AND-EQUITY> 64,641
<SALES> 0
<TOTAL-REVENUES> 3,328
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 804
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,524
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,524
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,524
<EPS-BASIC> 0.40
<EPS-DILUTED> 0.40

</TABLE>