<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
X EXCHANGE ACT OF 1934.
------
For the quarterly period ended January 31, 1997
------------------
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: 1-9597
--------
OPPENHEIMER CAPITAL, L.P.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3412614
- - ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
OPPENHEIMER TOWER
WORLD FINANCIAL CENTER, NEW YORK, NEW YORK 10281
- - ------------------------------------------- --------------
(Address of principal executive office) (Zip Code)
(212) 667-7000
---------------------------------------------------
(Registrant's telephone number including area code)
NOT APPLICABLE
--------------------------------------------------------------------
(Former name, address and fiscal year, 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.
Yes X No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
The issuer is a Limited Partnership. There were 15,367,586 Units of
limited partnership interest outstanding at March 12, 1997.
<PAGE>
OPPENHEIMER CAPITAL, L.P.
INDEX
PAGE
PART I - FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
OPPENHEIMER CAPITAL, L.P.
STATEMENTS OF FINANCIAL CONDITION 3
OPPENHEIMER CAPITAL, L.P.
STATEMENTS OF INCOME 4
OPPENHEIMER CAPITAL, L.P.
STATEMENTS OF CASH FLOWS 5
OPPENHEIMER CAPITAL, L.P.
NOTES TO THE FINANCIAL STATEMENTS 6
OPPENHEIMER CAPITAL
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION 8
OPPENHEIMER CAPITAL
CONSOLIDATED STATEMENTS OF INCOME 9
OPPENHEIMER CAPITAL
CONSOLIDATED STATEMENTS OF CASH FLOWS 10
OPPENHEIMER CAPITAL
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 13
PART II - OTHER INFORMATION 19
SIGNATURES 20
- 2 -
<PAGE>
OPPENHEIMER CAPITAL, L.P.
STATEMENTS OF FINANCIAL CONDITION
(In Thousands)
<TABLE>
<CAPTION>
January 31, 1997 April 30, 1996
----------------------- --------------------
ASSETS
<S> <C> <C>
Cash and short term investments $ 72 $ 35
Investment in Oppenheimer Capital 29,912 23,362
Distribution receivable (Note 3) 14,005 11,950
10% Note due 2012 from Oppenheimer Equities, Inc. 32,193 32,193
Interest receivable 547 538
Other assets 134 128
Goodwill, net 39,936 41,893
----------------------- --------------------
TOTAL ASSETS $ 116,799 $ 110,099
======================= ====================
<CAPTION>
LIABILITIES AND PARTNERS' CAPITAL
<S> <C> <C>
Distribution payable to partners $ 14,747 $ 12,713
----------------------- --------------------
TOTAL LIABILITIES 14,747 12,713
----------------------- --------------------
General partner's capital 1,034 987
Limited partners' capital; 15,367,586 and 15,255,070
Units outstanding, respectively 101,018 96,399
----------------------- --------------------
TOTAL PARTNERS' CAPITAL 102,052 97,386
----------------------- --------------------
TOTAL LIABILITIES AND
PARTNERS' CAPITAL $ 116,799 $ 110,099
======================= ====================
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 3 -
<PAGE>
OPPENHEIMER CAPITAL, L.P.
STATEMENTS OF INCOME
(In Thousands, except for per unit amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
January 31, January 31,
------------------------- -------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES
Equity in earnings of Oppenheimer Capital:
Operating earnings $ 13,584 $ 10,776 $ 37,547 $ 29,540
Gain on Quest sale (Note 6) 1,800 17,734 1,800 17,734
----------- ----------- ----------- -----------
Total equity in earnings of Oppenheimer Capital 15,384 28,510 39,347 47,274
Interest 812 812 2,437 2,437
----------- ----------- ----------- -----------
TOTAL REVENUES 16,196 29,322 41,784 49,711
----------- ----------- ----------- -----------
EXPENSES
Amortization of goodwill 652 652 1,956 1,956
Other expenses (Note 4) 33 33 100 100
----------- ----------- ----------- -----------
TOTAL EXPENSES 685 685 2,056 2,056
----------- ----------- ----------- -----------
NET INCOME $ 15,511 $ 28,637 $ 39,728 $ 47,655
=========== =========== =========== ===========
NET INCOME PER UNIT (NOTES 5 AND 6) $ 1.00 $ 1.86 $ 2.56 $ 3.10
=========== =========== =========== ===========
DISTRIBUTIONS DECLARED PER UNIT $ .95 $ 1.175 $ 2.35 $ 2.35
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 4 -
<PAGE>
OPPENHEIMER CAPITAL, L.P.
STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Nine Months Ended
January 31,
------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 39,728 $ 47,655
Adjustments to reconcile net income to net cash provided
by operating activities:
Distributions received (less than) equity in earnings of
Oppenheimer Capital (7,192) (21,197)
Amortization of goodwill 1,956 1,956
(Increase) in interest receivable (9) (9)
(Increase) in other assets (6) (17)
-------------- --------------
Net cash provided by operating activities 34,477 28,388
-------------- --------------
Cash flows from investing activities
Capital contributions to Oppenheimer Capital (380) (300)
-------------- --------------
Cash flows from financing activities Distributions to partners:
General partner (344) (284)
Limited partners (34,096) (28,123)
Issuance of limited partnership units on exercise of
restricted options 380 300
-------------- --------------
Net cash (used in) financing activities (34,060) (28,107)
-------------- --------------
Net increase (decrease) in cash and short term investments 37 (19)
Cash and short term investments at beginning of period 35 60
-------------- --------------
Cash and short term investments at end of period $ 72 $ 41
============== ==============
Supplemental disclosure of cash flow information:
New York City unincorporated business tax paid $ 106 $ 117
============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 5 -
<PAGE>
OPPENHEIMER CAPITAL, L.P.
NOTES TO THE FINANCIAL STATEMENTS
1. Organization:
Oppenheimer Capital, L.P. (the "Partnership") holds a 67.49% general
partnership interest in Oppenheimer Capital (the "Operating Partnership"), a
general partnership. The Partnership (through the Operating Partnership) engages
in the investment management business. The limited partners and Oppenheimer
Financial Corp. ("Opfin"), the Partnership's general partner (the "General
Partner"), hold a 99% interest and 1% interest, respectively, in the
Partnership.
The financial statements of the Partnership should be read in
conjunction with the consolidated financial statements of the Operating
Partnership.
The Operating Partnership is part of an affiliated group of companies
operating in the financial services industry.
2. Basis of Presentation:
The interim financial information in this report has not been audited.
The financial statements should be read in conjunction with the financial
statements included in the Partnership's 1996 Annual Report. In the opinion of
management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position and results of operations for
all periods presented have been made. The results of operations for any interim
period are not necessarily indicative of the operating results for a full year.
3. Distribution Receivable:
On January 31, 1997, the Operating Partnership declared a distribution
to its partners, payable on February 28, 1997, of which $14.0 million was
received by the Partnership.
4. Other Expenses:
Other expenses consist of New York City unincorporated business tax at a
rate of 4% of taxable income. The Partnership is not otherwise subject to
Federal, state or local income taxes which are instead obligations of the
individual partners. However, under current tax law the Partnership will be
taxable as a corporation beginning in 1998.
- 6 -
<PAGE>
OPPENHEIMER CAPITAL, L.P.
NOTES TO THE FINANCIAL STATEMENTS
(Continued)
5. Net Income Per Unit:
(In thousands, except for per unit amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
January 31, January 31,
------------------------- -------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Income $ 15,511 $ 28,637 $ 39,728 $ 47,655
Less 1% applicable to the General Partner 155 286 397 477
----------- ----------- ----------- -----------
Net income available to the Limited Partners $ 15,356 $ 28,351 $ 39,331 $ 47,178
=========== =========== =========== ===========
Weighted average number of units outstanding 15,368 15,247 15,365 15,241
=========== =========== =========== ===========
Net income per unit $ 1.00 $ 1.86 $ 2.56 $ 3.10
=========== =========== =========== ===========
</TABLE>
6. Gain on Quest Sale
Included in "Equity in earnings of Oppenheimer Capital" for the three
and nine months ended January 31, 1997 and 1996 are gains resulting from the
Operating Partnership's sale of the investment advisory and other contracts and
business relationships for its twelve Quest for Value mutual funds (the "Quest
sale") to OppenheimerFunds, Inc., which is unrelated to the Operating
Partnership. The Partnership recorded a gain for its share of the gain on the
sale of $17.7 million, or $1.15 per unit during the three month period ended
January 31, 1996 related to the Initial Purchase Price Payment. During the three
months ended January 31, 1997, the Partnership recorded a gain of $1.8 million,
or $.12 per unit, as a result of a Deferred Purchase Payment based on the assets
of the six merged fixed income funds remaining at stated levels and the final
payment of expenses related to the Quest sale.
7. PIMCO Advisors
On February 13, 1997, Oppenheimer Group, Inc. ("OGI") and its
subsidiary, Opfin, entered into a definitive agreement for PIMCO Advisors and
its affiliate, Thomson Advisory Group Inc., to acquire Opfin's 32.51% managing
general partner interest in the Operating Partnership, Opfin's 1% general
partner interests in the Partnership and in the various subpartnerships of the
Operating Partnership. The transaction covers only the private interests OGI
holds in the Operating Partnership and the Partnership, does not include the
publicly traded units of the Partnership, and is subject to certain conditions
being satisfied prior to closing, including consents from certain lenders,
approval from regulatory authorities including the Internal Revenue Service and
consents of certain clients, which are expected to take up to six months to
obtain.
Upon consummation of the transaction, the Operating Partnership will
function as an indirect subsidiary of PIMCO Advisors. PIMCO Advisors has advised
OGI that it anticipates that the senior portfolio management team of the
Operating Partnership will continue in their present capacities.
- 7 -
<PAGE>
OPPENHEIMER CAPITAL
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In Thousands)
<TABLE>
<CAPTION>
January 31, 1997 April 30, 1996
--------------------- ---------------------
ASSETS
<S> <C> <C>
Cash and short term investments $ 27,394 $ 21,019
Investment management fees receivable 50,896 43,016
Investments in affiliated mutual funds and other
sponsored investment products 4,989 4,644
Furniture, equipment and leasehold improvements
at cost, less accumulated depreciation and
amortization of $2,726 and $2,179 3,533 3,515
Intangible assets, less accumulated amortization
of $518 and $377 1,558 1,699
Other assets (Note 6) 3,242 2,445
--------------------- ---------------------
TOTAL ASSETS $ 91,612 $ 76,338
===================== =====================
<CAPTION>
LIABILITIES, MINORITY INTEREST AND PARTNERS' CAPITAL
<S> <C> <C>
Accrued employee compensation and benefits $ 14,553 $ 12,873
Accrued expenses and other liabilities 7,065 7,168
Note payable 400 800
Deferred investment management fees 4,136 2,870
Distribution payable to partners 20,751 17,751
--------------------- ---------------------
TOTAL LIABILITIES 46,905 41,462
--------------------- ---------------------
Minority interest 388 174
PARTNERS' CAPITAL 44,319 34,702
--------------------- ---------------------
TOTAL LIABILITIES , MINORITY INTEREST
AND PARTNERS' CAPITAL $ 91,612 $ 76,338
===================== =====================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
- 8 -
<PAGE>
OPPENHEIMER CAPITAL
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
January 31, January 31,
------------------------- -------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Investment management fees $ 46,775 $ 39,223 $ 129,494 $ 110,839
Net distribution assistance and commission income 950 921 3,597 5,260
Interest and dividends 357 419 862 597
----------- ----------- ----------- -----------
TOTAL OPERATING REVENUES 48,082 40,563 133,953 116,696
----------- ----------- ----------- -----------
OPERATING EXPENSES
Compensation and benefits 20,685 17,290 57,055 51,097
Occupancy 1,704 1,704 4,847 5,118
General and administrative 3,167 3,291 9,292 8,872
Promotional 1,461 1,468 4,720 5,599
----------- ----------- ----------- -----------
TOTAL OPERATING EXPENSES 27,017 23,753 75,914 70,686
----------- ----------- ----------- -----------
OPERATING INCOME 21,065 16,810 58,039 46,010
Gain on Quest sale (Note 8) 2,806 27,725 2,806 27,725
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES AND
MINORITY INTEREST 23,871 44,535 60,845 73,735
Income taxes (Note 3) (998) (1,860) (2,352) (3,093)
----------- ----------- ----------- -----------
INCOME BEFORE MINORITY INTEREST 22,873 42,675 58,493 70,642
Minority interest (79) (315) (192) (398)
----------- ----------- ----------- -----------
NET INCOME $ 22,794 $ 42,360 $ 58,301 $ 70,244
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
- 9 -
<PAGE>
OPPENHEIMER CAPITAL
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Nine Months Ended
January 31,
------------------------------
1997 1996
------------- -------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 58,301 $ 70,244
Adjustments to reconcile net income to net cash provided by
operating activities:
Amortization of restricted unit compensation expense 1,626 1,165
Depreciation and amortization 711 736
Minority interest, net of distributions 214 382
(Increase) decrease in:
Investment management fees receivable (7,880) (7,275)
Other assets (821) 2,795
Increase (decrease) in:
Accrued employee compensation and benefits 1,680 1,307
Accrued expenses and other liabilities (103) (702)
Deferred investment management fees 1,266 1,088
------------- -------------
Net cash provided by operating activities 54,994 69,740
------------- -------------
Cash flows from investing activities
Purchases of fixed assets (565) (232)
Proceeds from sales of mutual fund shares and other investments 1,934 2,817
Purchases of mutual fund shares and other investments (2,279) (5,891)
------------- -------------
Net cash (used in) investing activities (910) (3,306)
------------- -------------
Cash flows from financing activities
Net (repayments of) bank loans - (9,182)
Payment of note payable (400) (400)
Distributions to partners:
Oppenheimer Financial Corp. (15,534) (12,771)
Oppenheimer Capital, L.P. (32,155) (26,075)
Contributions by Oppenheimer Capital, L.P. 380 300
------------ -------------
Net cash (used in) financing activities (47,709) (48,128)
------------ -------------
Net increase in cash and short term investments 6,375 18,306
Cash and short term investments at beginning of period 21,019 9,214
------------ -------------
Cash and short term investments at end of period $ 27,394 $ 27,520
============ =============
Supplemental disclosure of cash flow information:
Interest paid $ 87 $ 609
============ =============
New York City unincorporated business taxes paid $ 2,402 $ 3,025
============ =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
- 10 -
<PAGE>
OPPENHEIMER CAPITAL
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Organization:
Oppenheimer Capital (the "Operating Partnership"), a general partnership,
engages in the investment management business. Oppenheimer Capital, L.P. (the
"Partnership") holds a 67.49% general partnership interest in the Operating
Partnership and Oppenheimer Financial Corp. ("Opfin") holds the remaining 32.51%
general partnership interest. The Operating Partnership is part of an affiliated
group of companies operating in the financial services industry.
2. Basis of Presentation:
The interim financial information in this report has not been audited. The
financial statements should be read in conjunction with the financial statements
included in the Partnership's 1996 Annual Report. In the opinion of management,
all adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position and results of operations for all periods
presented have been made. The results of operations for any interim period are
not necessarily indicative of the operating results for a full year.
3. Income Taxes:
The Operating Partnership is not generally subject to Federal, state or
local income taxes. The Operating Partnership, however, was subject to New York
City unincorporated business tax of $1.0 million and $2.4 million, respectively,
for the three months and nine months ended January 31, 1997 and $1.9 million and
$3.1 million, respectively, for the three months and nine months ended January
31, 1996.
4. Acquisitions of Businesses:
In May, 1994, a subsidiary of the American Medical Association ("AMA") and
the Operating Partnership formed AMA Investment Advisers, L.P. to acquire the
assets of AMA Investment Advisers, Inc. and American Medical Investment Company,
Inc. The Operating Partnership and Opfin acquired a 79.1% and 1.0% partnership
interest, respectively, for their pro rata portions of $500,000 in cash and a
$1.2 million promissory note bearing interest at the prime rate. On each of May
1, 1995 and May 1, 1996, $400,000 was paid on the promissory note, with the
remainder due on May 1, 1997. AMA Investment Advisers, L.P. offers investment
services and products tailored especially for members of the AMA, other health
care professionals and medical organizations. (See page 17)
On May 1, 1994, the Operating Partnership acquired Liberty Street Trust
Company from Oppenheimer Holdings, Inc., an affiliate, for its net book value of
approximately $1.6 million and renamed it Oppenheimer Capital Trust Company.
This company offers collectively-managed portfolios of specialized asset
classes.
On May 10, 1994, the Operating Partnership formed Saratoga Capital
Management, a joint venture, to provide asset allocation services to
broker-dealers utilizing mutual funds managed by independent investment advisers
and Opcap Advisors, an affiliated investment adviser.
5. Prior Period Financial Information:
Certain prior period financial information has been reclassified to
conform with the current period's presentation.
- 11 -
<PAGE>
OPPENHEIMER CAPITAL
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. Gain on Quest Sale
On November 22, 1995, the Operating Partnership completed the sale of the
investment advisory and other contracts and business relationships for its
twelve Quest for Value mutual funds to OppenheimerFunds, Inc. ("OFI"), which is
unrelated to the Operating Partnership, for an Initial Purchase Price Payment of
$41.7 million. In December, 1996, a Deferred Purchase Price Payment of $3.8
million was received by the Operating Partnership as a result of the assets of
the six merged fixed income funds being at stated levels. The gains on the sale,
shown separately from operating income on the statements of income, amounted to
$2.8 million for the three and nine month periods ended January 31, 1997 and
$27.7 million for the three and nine month periods ended January 31, 1996.
7. PIMCO Advisors
On February 13, 1997, Oppenheimer Group, Inc. ("OGI") and its
subsidiary, Opfin, entered into a definitive agreement for PIMCO Advisors and
its affiliate, Thomson Advisory Group Inc., to acquire Opfin's 32.51% managing
general partner interest in the Operating Partnership, Opfin's 1% general
partner interests in the Partnership and in the various subpartnerships of the
Operating Partnership. The transaction covers only the private interests
OGI holds in the Operating Partnership and the Partnership, does not include
the publicly traded units of the Partnership, and is subject to certain
conditions being satisfied prior to closing, including consents from certain
lenders, approval from regulatory authorities including the Internal Revenue
Service and consents of certain clients, which are expected to take up to six
months to obtain.
Upon consummation of the transaction, the Operating Partnership will
function as an indirect subsidiary of PIMCO Advisors. PIMCO Advisors has advised
OGI that it anticipates that the senior portfolio management team of the
Operating Partnership will continue in their present capacities.
- 12 -
<PAGE>
PART I, ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OPPENHEIMER CAPITAL, L.P.
General
The primary source of income for Oppenheimer Capital, L.P. (the
"Partnership") is its proportionate share of the net income of Oppenheimer
Capital (the "Operating Partnership") and interest income on a $32,193,000 par
value 10% note due from Oppenheimer Equities, Inc. in the year 2012 (the
"Equities note").
Revenues and Expenses
The Partnership recorded equity in earnings of the Operating
Partnership for the three months ended January 31, 1997 and January 31, 1996 of
$15.4 million and $28.5 million, respectively. For the nine months ended January
31, 1997 and January 31, 1996, the Partnership recorded equity in earnings of
the Operating Partnership of $39.3 million and $47.3 million, respectively.
Equity in earnings of the Operating Partnership decreased for both the three and
nine month periods due to the gain recognized by the Operating Partnership on
the sale in November 1995 of the Quest for Value investment advisory and other
contracts and business relationships (the "Quest sale") to OppenheimerFunds,
Inc. ("OFI"), an unrelated third party, and the decrease was offset in part by
the higher operating income of the Operating Partnership for both the three and
nine month periods. Equity in earnings of the Operating Partnership for both the
three and nine months ended January 31, 1997 included $1.8 million related to
the Quest sale. Equity in earnings of the Operating Partnership for both the
three and nine months ended January 31, 1996 included $17.7 million related to
the Quest sale.
Other expenses consist of New York City unincorporated business tax
("UBT"). For the three months ended January 31, 1997 and January 31, 1996, the
Partnership's New York City UBT totaled $33,000 and $33,000, respectively, and
for the nine months ended January 31, 1997 and January 31, 1996, New York City
UBT totaled $100,000 and $100,000, respectively.
Net income for the three months ended January 31, 1997 and January 31,
1996 amounted to $15.5 million and $28.6 million, respectively, or $1.00 per
unit and $1.86 per unit, respectively. Net income for the nine months ended
January 31, 1997 and January 31, 1996 amounted to $39.7 million and $47.7
million, respectively, or $2.56 per unit and $3.10 per unit, respectively. For
both the three and nine months ended January 31, 1997, the gain on the Quest
sale represented net income of $1.8 million, or $.12 per unit. For both the
three and nine months ended January 31, 1996, the gain on the Quest sale
represented net income of $17.7 million, or $1.15 per unit.
Liquidity and Capital Resources
The only business activity carried on by the Partnership is its
investment in the Operating Partnership. The Partnership receives quarterly cash
distributions from the Operating Partnership and receives interest income from
Oppenheimer Equities, Inc. The Partnership distributes its available cash flow
to its partners, which equals cash distributions from the Operating Partnership
plus interest income from the Equities note less New York City UBT.
Consequently, the Partnership does not require any additional liquidity or
capital resources.
The Partnership makes quarterly distributions in an amount equal to 99%
of available cash flow to the limited partners (the "Unitholders") and 1% to the
general partner, Oppenheimer Financial Corp. ("Opfin"). For the three and nine
months ended January 31, 1997, the Partnership declared distributions to
Unitholders of $0.95 per unit and $2.35 per unit, respectively. The $0.95 per
unit distribution declared during the three months ended January 31, 1997 was
comprised of a $0.85 regular quarterly distribution and a $0.10 special
distribution resulting from the Deferred Purchase Payment received on the Quest
sale. For the three and nine months ended January 31, 1996, the Partnership
declared distributions to Unitholders of $1.175 per unit and $2.35 per unit,
respectively. The $1.175 per unit distribution declared during the three months
ended January 31, 1996 was comprised of a $0.625 regular quarterly distribution
and a $0.55 special distribution resulting from the Initial Purchase Price
Payment received on the Quest sale.
- 13 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
OPPENHEIMER CAPITAL
General
The Operating Partnership's results of operations include those of its
basic institutional investment management business and those of Opcap Advisors
("Advisors"), OCC Distributors ("Distributors"), Oppenheimer Capital Limited,
AMA Investment Advisers, L.P. ("AMA Advisers"), Oppenheimer Capital Trust
Company and Saratoga Capital Management.
For the periods presented, the Operating Partnership's operations have
been characterized by increases in assets under management. This growth has been
from three principal sources. First, new clients have entered into investment
management agreements with the Operating Partnership and existing clients have
added funds to their accounts under management. Second, rising securities price
levels have increased the market values of investment portfolios. Third, retail
accounts including wrap fee, mutual funds and other commingled products have
added to assets under management due to increased sales and market appreciation.
The growth in assets under management has been tempered by the Operating
Partnership's withdrawal from the low fee rate option management business in
order to concentrate on businesses offering higher returns. For the periods
presented, the option management business had no material effect on revenues or
profitability. Revenues for all periods presented consist principally of
investment management fees.
As shown below, the value of assets under management increased 30.2% to
$50.6 billion at January 31, 1997 from $38.8 billion at January 31, 1996. The
Operating Partnership continued to experience growth in its traditional
business, the management of separate accounts for large financial institutions
and high-net-worth individual investors, as well as its retail businesses,
including mutual funds and wrap fee accounts.
<TABLE>
<CAPTION>
Percent
At January 31, 1997 At January 31, 1996 Increase
----------------------- ----------------------- ---------------
<S> <C> <C> <C>
Separate Account Management $ 33,260 $ 27,641 20.3%
Wrap Fee 5,419 2,960 83.1%
Mutual Funds & Other Commingled Products 11,911 8,144 46.3%
----------------------- ----------------------- ---------------
Subtotal 50,590 38,745 30.6%
Option Management (1) - 100 n/a
----------------------- ----------------------- ---------------
Total $ 50,590 $ 38,845 30.2%
======================= ======================= ===============
</TABLE>
(1) Reflects withdrawal from the option management business.
- 14 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
OPPENHEIMER CAPITAL (Continued)
Gain on Quest Sale
On November 22, 1995, the Operating Partnership completed the sale of
the investment advisory and other contracts and business relationships for its
twelve Quest for Value mutual funds (the "Quest sale") to OppenheimerFunds, Inc.
("OFI"), which is unrelated to the Operating Partnership, for an Initial
Purchase Price Payment of $41.7 million. In December, 1996, a Deferred Purchase
Price Payment of $3.8 million was received by the Operating Partnership as a
result of the assets of the six merged fixed income funds being at stated
levels. The gains on the sale, shown separately from operating income on the
statements of income, amounted to $2.8 million for the three and nine month
periods ended January 31, 1997 and $27.7 million for the three and nine month
periods ended January 31, 1996.
The net proceeds from the Quest sale were used to pay special
distributions to partners, eliminate bank borrowings, and to fund the working
capital needs of the Operating Partnership.
Operating Revenues
Total operating revenues increased 18.5% for the three months ended
January 31, 1997 to $48.1 million from $40.6 million for the three months ended
January 31, 1996 and increased 14.8% for the nine months ended January 31, 1997
to $134.0 million from $116.7 million for the nine months ended January 31,
1996. Total operating revenues include investment management fees, net
distribution assistance and commission income, and interest and dividends.
Investment management fees increased 19.3% for the three months ended
January 31, 1997 to $46.8 million from $39.2 million for the three months ended
January 31, 1996 as average assets under management for the three months ended
January 31, 1997 increased 29.0% to $48.2 billion from $37.3 billion for the
three months ended January 31, 1996. Investment management fees increased 16.8%
for the nine months ended January 31, 1997 to $129.5 million from $110.8 million
for the nine months ended January 31, 1996 as average assets under management
for the nine months ended January 31, 1997 increased 24.1% to $44.4 billion from
$35.8 billion for the nine months ended January 31, 1996.
Investment management fee revenue grew less than assets under
management due to the lower subadvisory fee rates earned on the Oppenheimer
Quest funds than the advisory fee prior to the Quest sale. However, these lower
fee rates were more than offset by asset growth for these funds and the
elimination of mutual fund distribution expenses. Annual subadvisory fees
related to the Quest funds are projected at $11.4 million annually, based on
assets under management at January 31, 1997, down from the previous $15.7
million of annual fees for the twelve Quest for Value Funds at November 22,
1995. Assets in the six equity funds have more than doubled to $3.8 billion at
February 24, 1997 from $1.4 billion on November 21, 1995, reflecting record fund
sales and market appreciation. The above decrease was offset in part by
investment management fees increasing due to higher fee realizations resulting
from a shift in the asset mix toward higher effective fee rate businesses,
including mutual funds, variable annuities and wrap fee accounts and the
withdrawal from the option management business, which had very low fee rates.
Net distribution assistance and commission income increased 3.1% to
$1.0 million for the three months ended January 31, 1997 from $921,000 for the
three months ended January 31, 1996, and decreased 31.6% to $3.6 million for the
nine months ended January 31, 1997 from $5.3 million for the nine months ended
January 31, 1996. The decrease in the nine month comparison is primarily due to
lower unit investment trust commission income due to reduced demand for fixed
income unit investment trusts, and reduced commission and distribution income as
a result of the Quest sale. These decreases were offset in part by higher
certificate of deposit commission income resulting from greater demand for funds
by banks.
- 15 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
OPPENHEIMER CAPITAL (Continued)
Operating Revenues (continued)
Interest and dividend income decreased to $357,000 for the three months
ended January 31, 1997 from $419,000 for the three months ended January 31, 1996
and increased to $862,000 for the nine months ended January 31, 1997 from
$597,000 for the nine months ended January 31, 1996. The increase in interest
and dividend income for the current nine month period as compared to the prior
year period can be primarily attributed to the higher average daily cash
balances during the current year period as a result of the retention of part of
the proceeds from the Quest sale on November 22, 1995.
Operating Expenses
Total expenses increased 13.7% for the three months ended January 31,
1997 to $27.0 million from $23.8 million for the three months ended January 31,
1996 and increased 7.4% for the nine months ended January 31, 1997 to $75.9
million from $70.7 million for the nine months ended January 31, 1996.
The Operating Partnership's most significant category of expense is
employee compensation and benefits, which includes salaries, bonuses, sales
commissions, incentive compensation and other payroll related expenses.
Compensation and benefits expense increased 19.6% for the three months ended
January 31, 1997 to $20.7 million from $17.3 million for the three months ended
January 31, 1996 and increased 11.7% for the nine months ended January 31, 1997
to $57.1 million from $51.1 million for the nine months ended January 31, 1996.
Compensation and benefits increased primarily as a result of higher incentive
compensation accruals due to increased new business and higher operating
profits. In addition, compensation and benefits expense increased due to
additions to staff in the expanding retail and separate account management
businesses. These increases were offset in part by significant staff reductions
at Distributors, AMA Advisers, and in mutual fund accounting. Current staffing
levels have decreased 17.2% to 351 from a high of 424 prior to the Quest sale.
Occupancy expenses remained consistent for the three months ended
January 31, 1997 at $1.7 million as compared to $1.7 million for the three
months ended January 31, 1996 and decreased 5.3% for the nine months ended
January 31, 1997 to $4.8 million from $5.1 million for the nine months ended
January 31, 1996. The decrease for the nine month comparison reflects reduced
rent expense as a result of the termination of leases for AMA Advisers.
Additionally, adjustments to rent escalation accruals were made during the nine
months ended January 31, 1997.
General and administrative expenses decreased 3.8% for the three months
ended January 31, 1997 to $3.2 million from $3.3 million for the three months
ended January 31, 1996. For the nine months ended January 31, 1997, general and
administrative expenses increased 4.7% to $9.3 million from $8.9 million for the
nine months ended January 31, 1996. The 3.8% decline in the current quarter is
primarily due to reduced costs as a result of the Quest sale and cost reductions
of AMA Advisers. As a result of the Quest sale in November 1995, the Operating
Partnership was able to eliminate all of its outstanding bank loans and the
related interest expense. The 4.7% increase in the nine month comparison is the
result of costs incurred in connection with the development of new businesses
and increased investments in computer equipment and software as a result of
increased technical support for professional and administrative staff, and
higher professional services expenses due to the expansion of the Operating
Partnership's business, and was offset in part by cost savings realized from the
Quest sale and cost reductions at AMA Advisers.
Promotional expenses remained consistent for the three months ended
January 31, 1997 at $1.5 million as compared to $1.5 million for the three
months ended January 31, 1996 and decreased 15.7% for the nine months ended
January 31, 1997 to $4.7 million from $5.6 million for the nine months ended
January 31, 1996. The decrease in promotional expenses was due primarily to a
reduction in promotional expenses incurred by Distributors as a result of the
elimination of the open-end mutual fund distribution effort (the Quest sale),
and the elimination of the retail operations of AMA Advisers.
- 16 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
OPPENHEIMER CAPITAL (Continued)
Operating Income
Operating income for the three months ended January 31, 1997 increased
25.3% to $21.1 million from $16.8 million for the three months ended January 31,
1996 and increased 26.1% for the nine months ended January 31, 1997 to $58.0
million from $46.0 million for the nine months ended January 31, 1996. For the
three months ended January 31, 1997, the operating profit margin expanded to
43.8% from 41.4% for the three months ended January 31, 1996 as operating
revenues grew 18.5% while expenses increased 13.7%. For the nine months ended
January 31, 1997, the operating profit margin expanded to 43.3% from 39.4% for
the nine months ended January 31, 1996 as operating revenues grew 14.8% while
expenses increased 7.4%.
Income Taxes
The Operating Partnership is not subject to Federal, state, or local
income taxes, which are the obligations of the individual partners. The
Operating Partnership, however, was subject to New York City UBT of $1 million
and $2.4 million, respectively, for the three months and nine months ended
January 31, 1997 and $1.9 million and $3.1 million, respectively, for the three
months and nine months ended January 31, 1996. New York City UBT for the three
and nine months ended January 31, 1997 declined from the prior years period due
to lower net income in fiscal 1997 than fiscal 1996. The decline in net income
is due to a larger gain on the Quest sale that was recorded in the third quarter
of fiscal 1996 than the gain recorded in fiscal 1997. This decline was offset in
part by higher operating income during the three and nine months ended January
31, 1997 compared to the prior years period.
Liquidity and Capital Resources
The Operating Partnership's business is not capital intensive and its
working capital requirements are generally modest. To the extent that additional
funds are required by the Operating Partnership (e.g., to support increased
investment management fees receivable or to expand its facilities to accommodate
the growth of its businesses), the Operating Partnership currently intends to
borrow from affiliated or non-affiliated parties. The Operating Partnership
intends to distribute on a quarterly basis substantially all its net income to
the Partnership and to Opfin. The Operating Partnership may distribute to the
Partnership and to Opfin excess cash, taking into account the Operating
Partnership's financial condition, results of operations, cash requirements and
general economic conditions. On January 31, 1997, the Operating Partnership
declared a distribution to its partners of $20.8 million which was paid on
February 28, 1997.
PIMCO Advisors
On February 13, 1997, Oppenheimer Group, Inc. ("OGI") and its
subsidiary, Opfin, entered into a definitive agreement for PIMCO Advisors and
its affiliate, Thomson Advisory Group Inc., to acquire Opfin's 32.51% managing
general partner interest in the Operating Partnership, Opfin's 1% general
partner interests in the Partnership and in the various subpartnerships of the
Operating Partnership. The transaction covers only the private interests
OGI holds in the Operating Partnership and the Partnership, does not include
the publicly traded units of the Partnership, and is subject to certain
conditions being satisfied prior to closing, including consents from certain
lenders, approval from regulatory authorities including the Internal Revenue
Service and consents of certain clients, which are expected to take up to six
months to obtain.
Upon consummation of the transaction, the Operating Partnership
will function as an indirect subsidiary of PIMCO Advisors. PIMCO Advisors has
advised OGI that it anticipates that the senior portfolio management team
of the Operating Partnership will continue in their present capacities.
- 17 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
OPPENHEIMER CAPITAL (Continued)
AMA Advisers
The Operating Partnership reached a preliminary agreement to sell its
exclusive license to market financial products to members of the American
Medical Association. This transaction is subject to the parties entering into a
definitive purchase and sale agreement. The proceeds from this transaction will
be used to purchase the 20% of AMA Advisers not owned by the Operating
Partnership and to repay the balance of the original acquisition debt incurred
to purchase AMA Advisers. AMA Advisers will continue to operate, collecting
distribution fees on mutual funds previously sold by American Medical Investment
Company Inc.
Saratoga Capital Management.
The Operating Partnership entered into a definitive agreement, subject
to certain financial conditions and to shareholder approval, to sell its 50%
interest in Saratoga Capital Management. The proceeds, which are not expected to
be significant, will be paid to the Operating Partnership over a five year
period. Saratoga Capital Management had not attained break-even status. After
the sale, the Operating Partnership will continue to manage two portfolios of
the Saratoga Advantage Trust, for which it will continue to receive fees.
Unit Investment Trusts
The Operating Partnership has decided not to offer any additional Unit
Investment Trusts as a result of a reduced demand for this product. The
Operating Partnership will continue to service existing trusts for which it
receives an annual fee. Personnel involved in this business are being allowed to
resign and receive severance payments or will be deployed elsewhere in the
Operating Partnership's business.
Dual Purpose Fund Sale
On January 31, 1997, the Quest For Value Dual Purpose Fund (the "Fund")
redeemed all 18,004,302 of its Income Shares for total proceeds of $209 million
as required by its prospectus. On March 3, 1997, the Fund began trading as an
open-end mutual fund which was renamed the Oppenheimer Quest Capital Value Fund.
As part of the Quest sale, OFI was granted a call to purchase from the Operating
Partnership the investment advisory and other contracts and business
relationships for the Fund and such call was exercised by OFI. The terms of the
agreement call for the purchase price payable by OFI to be determined 120 days
after the Fund's conversion to an open-end mutual fund, based on the net assets
at that date. The Operating Partnership expects to declare a special
distribution to its partners based on the net profit from this transaction.
On March 3, 1997, the Operating Partnership began to manage the Fund
under a subadvisory agreement with OFI. The subadvisory fee is significantly
lower than the management fee previously earned by the Operating Partnership.
- 18 -
<PAGE>
Part II. Other Information
Not applicable.
- 19 -
<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.
Oppenheimer Capital, L.P.
By: Oppenheimer Financial Corp.,
its General Partner
Date: March 12, 1997 By: /s/ Joseph M. La Motta
----------------------
Joseph M. La Motta
Executive Vice President and Director
of Oppenheimer Financial Corp.;
Chairman and Chief Executive Officer
of Oppenheimer Capital
By: /s/ Sheldon M.Siegel
----------------------
Sheldon M. Siegel
Managing Director and Chief Financial
Officer of Oppenheimer Capital
- 20 -
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION ECTRACTED FROM THE
STATEMENTS OF FINANCIAL CONDITION AND STATEMENTS OF INCOME FOUND ON PAGES 3 AND
4 OF THE PARTNERSHIP'S FORM 10-Q FOR THE YEAR-TO-DATE, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000814562
<NAME> OPPENHEIMER CAPITAL, L.P.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-01-1996
<PERIOD-END> JAN-31-1997
<CASH> 72
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 14,624<F1>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 116,799<F2>
<CURRENT-LIABILITIES> 14,747
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 102,052<F3>
<TOTAL-LIABILITY-AND-EQUITY> 116,799
<SALES> 0
<TOTAL-REVENUES> 41,784
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,056
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 39,728
<INCOME-TAX> 0
<INCOME-CONTINUING> 39,728
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 39,728
<EPS-PRIMARY> 2.56
<EPS-DILUTED> 2.56
<FN>
<F1> CURRENT ASSETS IS COMPRISED OF CASH ($72), DISTRIBUTION RECEIVABLE
($14,005), AND INTEREST RECEIVABLE ($547)
<F2> TOTAL ASSETS INCLUDE CURRENT ASSETS PLUS INVESTMENT IN OPPENHEIMER CAPITAL
($29,912), A NON-TRADE NOTE RECEIVABLE ($32,193), GOODWILL ($39,936) AND
OTHER ASSETS ($134)
<F3> OTHER SHAREHOLDERS EQUITY IS COMPRISED OF GENERAL PARTNER'S CAPITAL
($1,034) AND LIMITED PARTNERS' CAPITAL ($101,018)
</FN>
</TABLE>
