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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from________________ to
__________________
Commission File Number 1-9597
PIMCO ADVISORS HOLDINGS 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.)
800 Newport Center Drive
Newport Beach, California 92660
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(Address of principal executive offices)
(949) 717-7022
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(Registrant's telephone number, including area code)
NOT APPLICABLE
---------------------------------------------------------------------
(Former name, former address and former 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 ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 subsequent to the distribution of securities under a plan confirmed by a
court.
Yes ______ No _____
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of March 31, 1998, there were 46,222,499 publicly traded units of
limited partner interest.
Page 1 of 71 pages
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PIMCO ADVISORS HOLDINGS L.P.
PART I--FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS (UNAUDITED)
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PAGE
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PIMCO ADVISORS HOLDINGS L.P.
Statements of Financial Condition as of March 31, 1998 and December 31, 1997 12
Statements of Operations for the three months ended March 31, 1998 and January 31, 1997 13
Statements of Cash Flows for the three months ended March 31, 1998 and January 31, 1997 14
Notes to Financial Statements 15
PIMCO ADVISORS L.P.
Consolidated Statements of Financial Condition as of March 31,
1998 and December 31, 1997 17
Consolidated Statements of Operations for the three months
ended March 31, 1998 and 1997 18
Consolidated Statements of Cash Flows for the three months
ended March 31, 1998 and 1997 19
Notes to Consolidated Financial Statements 20
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FORWARD LOOKING STATEMENTS
Except for the historical information and discussions contained
herein, statements contained in this Form 10-Q may constitute "forward looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements involve a number of risks, uncertainties and other
factors that could cause actual results to differ materially, including the
performance of financial markets, the investment performance of PIMCO Advisors
L.P.'s sponsored investment products and separately managed accounts, general
economic conditions, future acquisitions, competitive conditions and government
regulations, including changes in tax laws. PIMCO Advisors Holdings L.P.
cautions readers to carefully consider such factors. Further, such
forward-looking statements speak only as of the date on which such statements
are made. PIMCO Advisors Holdings L.P. undertakes no obligation to update any
forward-looking statements to reflect events or circumstances after the date of
such statements.
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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
PIMCO Advisors Holdings L.P. ("PIMCO Holdings") (formerly
Oppenheimer Capital, L.P.) is a publicly traded Delaware limited partnership
owned .01% by its general partner, PIMCO Partners, G.P. and 99.9 % by its public
limited partners ("Unitholders"). PIMCO Holdings sole business is its ownership
of an approximate 43% interest (approximately 46.2 million General Partner
units) in PIMCO Advisors L.P. ("PIMCO Advisors"), a registered investment
advisor. PIMCO Partners, G.P. and other private holders hold the remaining
interest in PIMCO Advisors. PIMCO Partners, G.P. is the sole general partner of
PIMCO Holdings and is the controlling general partner of PIMCO Advisors.
PIMCO Advisors is one of the largest investment management companies
in the U.S. with approximately $217 billion under management at March 31, 1998.
PIMCO Advisors provides high quality fixed income and equity investment
management to institutional and retail clients, offering the investment
management expertise, performance record and reputations of its institutional
investment managers, which include the fixed income oriented Pacific Investment
Management Company and the equity oriented Oppenheimer Capital. PIMCO Advisors
business focuses on:
Institutional Fixed Income. PIMCO Advisors provides fixed income
investment management to large and medium-sized foreign and domestic corporate
and public clients. Fixed income management is led by Pacific Investment
Management Company, which offers impressive long term performance records across
a diverse range of product offerings such as total return, international and
other duration or sector specific strategies.
Institutional Equity. PIMCO Advisors provides equity investment
management to institutional clients offering the investment management expertise
of six equity management groups, including the highly regarded Oppenheimer
Capital. PIMCO Advisors offers investors a variety of management styles,
including value, growth, quantitative and international management styles, as
well as an enhanced index based strategy.
Institutional clients invest through separate accounts and pooled
vehicles such as the institutional share classes of PIMCO Funds, PIMCO Advisors
family of 45 proprietary mutual funds. PIMCO Advisors offers its investment
management services to institutional clients through client service
representatives of its investment management groups.
Retail Distribution. PIMCO Advisors offers the investment expertise
of its institutional investment managers to retail investors through the retail
share classes of the PIMCO Funds, which are distributed primarily through broker
dealers including PIMCO Funds Distributors LLC ("PFD", formerly known as PIMCO
Funds Distribution Company), a wholly-owed broker-dealer which distributes and
markets shares of the retail mutual funds of PIMCO Advisors. In addition, PIMCO
Advisors offers retail investors wrap fee accounts, variable annuity products,
401K programs and various investment products through sponsored investment
companies.
PIMCO Advisors strategy is to increase the amount and
diversification of its assets under management through (i) growth in the
institutional market by providing high levels of client service and entering new
markets, (ii) growth in the retail market by building brand awareness and
marketing of the PIMCO Funds through its broker dealer network and through
penetrating additional distribution channels and (iii) new product offerings to
institutions and retail investors.
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The financial condition and results of operations of PIMCO Advisors
are discussed below under "PIMCO ADVISORS L.P."
COMBINATION OF OPPENHEIMER CAPITAL AND PIMCO ADVISORS
On November 4, 1997, PIMCO Advisors acquired Oppenheimer Group, Inc.
("Opgroup"), whose subsidiary Oppenheimer Financial Corp. ("Opfin") owned the
32.4% managing general partner interest in Oppenheimer Capital and the one
percent general partner interest in PIMCO Holdings. In the transaction, Opgroup
became a subsidiary of PIMCO Advisors, and the Opgroup stockholders received 2.1
million PIMCO Advisors Class A units and rights to exchange up to $230 million
of outstanding term notes of Opgroup for an additional 6.9 million PIMCO
Advisors Class A units at $33 1/3 per unit. In connection with the transaction,
PIMCO Advisors split the one-percent general partner interest in PIMCO Holdings
into a .01% general partner interest and a .99% limited partner interest, and
sold the general partner interest to its general partner.
On November 30, 1997, Oppenheimer Capital merged with a subsidiary
of PIMCO Advisors, with Oppenheimer Capital surviving (the "OpCap Merger"). In
the OpCap Merger, PIMCO Advisors acquired from PIMCO Holdings its 67.6% general
partner interest in Oppenheimer Capital in exchange for 26.1 million PIMCO
Advisors Class A units, representing an approximate 24% general partner interest
in PIMCO Advisors. As a result, Oppenheimer Capital became a wholly-owned
subsidiary of PIMCO Advisors, and the limited partner units of PIMCO Holdings
came to represent an investment in the business of PIMCO Advisors. On December
1, 1997, PIMCO Holdings effected a 1.67 for 1 split of the PIMCO Holdings units,
so that each PIMCO Holdings unit outstanding after the split represented an
economic interest in one PIMCO Advisors unit.
On December 31, 1997, PIMCO Advisors caused its 19.5 million
publicly held units to be contributed to PIMCO Holdings in exchange for an equal
number of PIMCO Holdings units. As a result, PIMCO Advisors ceased to be
publicly traded, and PIMCO Holdings' general partner interest in PIMCO Advisors
increased to approximately 43%.
Prior to the OpCap Merger, PIMCO Holdings reported its results of
operations and its financial position based on an April 30 fiscal year end. Upon
completion of the OpCap Merger, PIMCO Holdings changed its fiscal year to a
calendar year to correspond with that of PIMCO Advisors.
PIMCO ADVISORS HOLDINGS L.P.
COMPARATIVE RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31, 1998 COMPARED TO PRO FORMA QUARTER ENDED MARCH 31, 1997
Because of the different ownership interests during the historical
reporting periods and the different fiscal quarter ends of the historical
reporting periods, management has included below certain pro forma financial
information as if the above discussed transactions had been completed as of
January 1, 1996. Pro forma results eliminate the significant comparative
differences in the historical results of operations arising primarily from the
inclusion of 67% of Oppenheimer Capital's stand alone results prior to November
30, 1997 as compared with 43% of the consolidated results of PIMCO Advisors
after December 31, 1997, and from certain events effected in the transactions
principally related to the creation and amortization of intangible assets.
The pro forma results of PIMCO Advisors are discussed separately
under "PIMCO Advisors L.P." The following tables compare actual results of
operations of PIMCO Holdings and PIMCO
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Advisors for the quarter ended March 31, 1998 and the pro forma results of
operations for the quarter ended March 31, 1997 as if the acquisition discussed
above had occurred on January 1, 1996.
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PIMCO ADVISORS HOLDINGS L.P.
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FOR THE THREE MONTHS ENDED MARCH 31,
1998 1997
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ACTUAL PRO FORMA
(Dollars in thousands, except per unit amounts)
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Equity in earnings of PIMCO Advisors L.P $ 20,038 $ 12,670
Other expenses 3,513 --
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NET INCOME 16,525 $ 12,670
========= ==========
BASIC NET INCOME PER UNIT $ 0.36 $ 0.28
========= ==========
DILUTED NET INCOME PER UNIT $ 0.34 $ 0.27
========= ==========
DISTRIBUTIONS DECLARED PER UNIT $ 0.53 N/A
========= ==========
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PIMCO ADVISORS L.P.
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FOR THE THREE MONTHS ENDED MARCH 31,
1998 1997
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ACTUAL PRO FORMA
(Dollars in thousands)
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REVENUES
Investment advisory fees:
Private accounts $129,150 $102,457
Proprietary Funds 46,813 36,979
Distribution and servicing fees 17,894 14,913
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Total revenues 193,857 154,349
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EXPENSES
Compensation and benefits 83,851 64,503
Commissions 17,241 13,531
Amortization of intangible assets, Restricted Unit and
Option Plans 19,658 25,452
General and administrative 8,931 6,962
Occupancy and equipment 5,122 4,168
Other expense, net 12,272 9,510
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Total expenses 147,075 124,126
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NET INCOME $ 46,782 $ 30,223
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The above pro forma operating results give effect to:
(i) Conversion of PIMCO Holdings to a calendar year reporting basis;
(ii) The issuance of 2.1 million restricted Class A limited partner units
in connection with the acquisition of the privately held 33% interest
in Oppenheimer Capital which occurred on November 4, 1997 ("Opgroup
Transaction");
(iii) The assumed exchange of $230 million of previously existing
exchangeable debt for an additional 6.9 million PIMCO Advisors Class A
units, of which $146.9 million had been exchanged as of December 31,
1997;
(iv) The contribution of the 67% interest in Oppenheimer Capital by PIMCO
Holdings for 26.1 million PIMCO Advisors Class A units which occurred
on November 30, 1997 in the OpCap Merger;
(v) The addition of approximately $897.5 million of intangible assets at
PIMCO Advisors which arose on November 4, 1997 as result of the
Opgroup Transaction and which will be amortized over 20 years;
(vi) The issuance of approximately 2.2 million restricted unit rights
resulting in a deferred compensation charge of $67.8 million to be
amortized over a 5 year period that occurred on November 4, 1997;
(vii) The elimination of the priority distribution structure related to
pre-December 31, 1997 rights of PIMCO Advisors Class A units; and
(viii) The repayment of the Equities Note in November 1997 and the resulting
elimination of interest income and related expense.
This pro forma information is not intended to reflect the results
that actually would have been obtained if the operations were consolidated
during the periods presented, nor is it an indication of future results.
PIMCO Holdings realized $20.0 million as its proportionate share of
earnings of PIMCO Advisors (approximately 43%) during the quarter ended March
31, 1998 as compared with $12.7 million pro forma in first quarter of 1997, an
increase of $7.4 million or 58.2%. This increase in earnings was the result of
an increase in the net income of PIMCO Advisors, resulting principally from its
increased managed assets and the related revenues, offset by operating expense
increases.
The amortization of intangible assets at PIMCO Advisors in 1997
includes a charge of approximately $6.5 million related to the amortization of
the intangible value (approximately $80.7 million) assigned to PIMCO Advisors'
master limited partnership (MLP) structure, originally scheduled to expire on
December 31, 1997. Under the change in the tax laws enacted in August of 1997,
PIMCO Holdings elected to continue to be treated as a publicly traded
partnership, subject to a 3.5% federal tax on allocable gross income from active
businesses, however, there is no specific intangible amortization related to
this structure in the future. It is expected, therefore, that amortization of
the remaining intangibles, including both the amortization of goodwill and
restricted unit and option plans, will approximate $80 million annually. Based
upon current operating margins, the newly enacted tax amounts to an approximate
17% to 18% reduction in otherwise reportable net income and an 11% to 12%
reduction in cash flow otherwise available for distribution, aggregating
approximately $3.5 million in the first quarter of 1998.
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QUARTER ENDED MARCH 31, 1998 COMPARED TO THE HISTORICAL FISCAL QUARTER ENDED
JANUARY 31, 1997
PIMCO Holdings recorded equity in earnings of PIMCO Advisors for the
quarter ended March 31, 1998 of $20.0 million compared to equity in earnings of
$15.4 million for the quarter ended January 31, 1997. Equity in earnings of
Oppenheimer Capital for the quarter ended January 31, 1997 included gains
recognized by Oppenheimer Capital on the Quest sales of $1.8 million. Interest
income of $812,000 during the quarter ended January 31, 1997 represented
interest earned on the Equities Note for the period.
PIMCO Holdings recorded no amortization of intangible assets during
the quarter ended March 31, 1998 compared to $652,000 during the quarter ended
January 31, 1997. Other expenses amounted to $3.5 million during the quarter
ended March 31, 1998 compared to $33,000 for the quarter January 31, 1997. The
increase in other expenses was primarily a result of the newly enacted federal
and state taxes imposed on publicly traded master limited partnerships starting
in January 1998.
TAXES
PIMCO Holdings is not subject to federal, state, or local income
taxes, which are the obligations of individual partners. However, beginning in
calendar year 1998, PIMCO Holdings elected to be subject to a 3.5% federal tax
on its share of PIMCO Advisors' gross income from the active conduct of a trade
or business in order to retain its partnership status. The imposition of this
tax will reduce both net income and cash available for distribution to partners
from levels that would otherwise be available. Similar taxes may be imposed by
states in which PIMCO Holdings operates.
LIQUIDITY AND CAPITAL RESOURCES
PIMCO Holdings is dependent upon the operating cash flow of PIMCO
Advisors for its liquidity and capital resources. For the quarter ended March
31, 1998, PIMCO Holdings declared total distributions to holders of PIMCO
Holdings units of $0.53 per unit compared to distributions declared during the
quarter ended January 31, 1997 of $0.56 (including the $0.06 per unit special
distribution in 1997 resulting from the Deferred Purchase Payment received on
the Quest sale). PIMCO Holdings' policy is to distribute substantially all its
net operating cash flow on an annual basis. Distributions are declared to
unitholders of record on March 31, June 30, September 30 and December 31 and
paid within thirty days following the end of each calendar quarter. Because
PIMCO Holdings' sole business is to hold an investment as a general partner of
PIMCO Advisors, the operating cash flow of PIMCO Holdings consists of
distributions from PIMCO Advisors. Because PIMCO Advisors currently pays all
expenses of PIMCO Holdings other than taxes, PIMCO Holdings' per unit
distributions generally equal the PIMCO Advisors distributions, less applicable
taxes. The Management Board of PIMCO Advisors has set a quarterly distribution
rate of $0.60 per PIMCO Advisors unit for the first three calendar quarters of
1998, which equates to a distribution rate at PIMCO Holdings of $0.53 per unit
after taxes.
Actual distribution levels will depend on the financial performance
of PIMCO Advisors. There can be no assurance that the stated distribution rates
will be achieved. Distributions made by PIMCO Holdings will depend on the
profitability of the investment management business of PIMCO Advisors, which is
affected in part by overall economic conditions and other factors affecting
capital markets generally, which are beyond the control of PIMCO Holdings and
PIMCO Advisors.
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PIMCO ADVISORS L.P.
COMPARATIVE RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31, 1998 COMPARED TO PRO FORMA QUARTER ENDED MARCH 31, 1997
REVENUES
PIMCO Advisors derives substantially all its revenues and net income
from advisory fees for investment management services provided through its
investment management subsidiaries to its institutional and individual clients
and advisory, distribution and servicing fees for services provided principally
to the PIMCO Funds.
Generally, such fees are determined based upon a percentage of
client assets under management and are billed quarterly to institutional
clients, either in advance or arrears, depending on the agreement with the
client and monthly in arrears to the PIMCO Funds. Revenues are determined in
large part based upon the level of assets under management, which itself is
dependent upon factors including market conditions, client decisions to add or
withdraw assets from PIMCO Advisors' management, and PIMCO Advisors' ability to
attract new clients. In addition, PIMCO Advisors has certain accounts which are
subject to performance based fee schedules wherein performance relative to the
S&P 500 Index or other benchmarks over a particular time period can result in
additional fees. Such performance based fees can have a significant effect on
revenues, and provide an opportunity to earn higher fees (as well as lower) than
could be obtained under fee arrangements based solely on a percentage of assets
under management.
The following table sets forth the composition of PIMCO Advisors assets under
management for the quarter ended March 31, 1998 compared to pro forma March 31,
1997:
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MARCH 31, 1998 MARCH 31, 1997
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ACTUAL PRO FORMA
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(Dollars in millions)
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ASSETS UNDER MANAGEMENT BY SOURCE:
Institutional separate accounts
Fixed income $ 88,569 $ 64,105
Equity 55,328 44,606
Retail products and mutual funds 73,752 52,434
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Total $217,649 $161,145
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ASSETS UNDER MANAGEMENT BY TYPE:
Fixed income $121,080 $ 88,304
Equity 93,575 69,604
Money market 2,994 3,237
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Total $217,649 $161,145
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PIMCO Advisors' consolidated revenues, including those of its
wholly-owned subsidiary PFD, were $193.9 million for the quarter ended March 31,
1998 compared to $154.3 million pro forma in the first quarter of 1997, an
increase of $39.6 million or 25.6%. Advisory revenues were $176.0 million for
the quarter ended March 31, 1998 compared to $139.4 million for the same pro
forma period in 1997, an increase of $36.6 million or 26.2%. Distribution and
servicing revenues for the quarter ended March 31, 1998 increased to $17.9
million from $14.9 million for the same pro forma period in 1997. The increase
in PIMCO Advisors revenues for the quarter ended March 31, 1998 was influenced
predominantly by a pro forma $56.5 billion or 35.1% year over year increase in
assets under management as of March 31,
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1998, which included $18 billion of net cash inflows. Assets under management
aggregated $217.6 billion at March 31, 1998. During the quarter ended March 31,
1998, assets under management increased $18.1 billion, including net cash
inflows of $5.5 billion. There can be no assurances that future increases in
assets under management, cash flows or market activity will occur at the rates
experienced recently. Performance based fees were $4.8 million for the quarter
ended March 31, 1998 compared to $1.6 million during the same pro forma period
in 1997. The increase in performance based fees occurred principally in an
equity product seeking to outperform the S&P 500 Index.
EXPENSES
Compensation and benefits for the quarter ended March 31, 1998 were
$83.9 million, which was $19.3 million or 30.0% higher than the same pro forma
period in 1997. This increase reflects additional staffing, at both Pacific
Investment Management Company and Oppenheimer Capital, as well as higher profit
sharing expenses which are based on profits of each of the investment management
subsidiaries.
Commission expenses related to sales and servicing of retail mutual
funds and similar products, increased $3.7 million to $17.2 million in the first
quarter of 1998 compared to the same pro forma period in 1997, reflecting higher
"trail" commissions due to an increased level of qualifying assets, as well as
increased "up front" commissions on higher current sales levels. Commission
expenses are primarily incurred by PFD and are paid primarily to broker-dealers
and their sales people for the sale of PIMCO Advisors retail-oriented mutual
funds. These include "up-front" commissions paid at the time of sale of the
mutual funds, "trail" commissions for the maintenance of assets in the mutual
funds and service fee commissions paid for services provided to mutual fund
shareholders. The level of commission expense will vary according to the level
of assets in the mutual funds (on which trail and service fee commissions are
determined) and on the level of sales of mutual funds (on which up-front
commissions are determined). Trail and service fee commissions are generally
paid quarterly beginning one year after sale of the mutual funds.
General and administrative expenses were to $8.9 million during the
quarter ended March 31, 1998, an increase of $1.9 million or 28.3% over the same
pro forma period in 1997. This increase can be primarily attributed to the 1997
conversion of the retail share classes of the PIMCO Funds to a fixed
administrative fee basis resulting in increases to this cost category for
expenses previously borne directly by the funds and a corresponding increase in
such asset levels since last year. Occupancy and equipment increased by $1.0
million to $5.1 million for the quarter ended March 31, 1998 in comparison to
the same pro forma period in 1997. The increase can be attributed primarily to
additional office space and equipment as a result of the additional staffing.
Amortization of intangible assets were $13.8 million for the quarter
ended March 31, 1998 compared to $20.2 million pro forma in the first quarter of
1997, a decrease of $6.4 million or 31.9%. The amortization of intangible assets
in 1997 includes a charge of approximately $6.4 million related to the
amortization of the intangible value (approximately $80.7 million) assigned to
PIMCO Advisors' MLP structure, originally scheduled to expire on December 31,
1997. It is expected that amortization of the remaining intangibles will
approximate $55 million annually.
Restricted unit and option plan costs amounted to $5.9 million in
the quarter ended March 31, 1998 and $5.3 million pro forma in the comparable
quarter of 1997. It is expected that such charges will approximate $24 to $25
million annually.
Other cash expenses increased by $2.8 million for the quarter ended
March 31, 1998 in comparison to the same pro forma 1997 period due principally
to increases in marketing and
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promotional costs and professional fees as well as other increases reflective of
inflation and increased staffing.
LIQUIDITY AND CAPITAL RESOURCES
PIMCO Advisors and its predecessor entities' combined business have
not historically been capital intensive. In general, working capital
requirements have been satisfied out of operating cash flow or short-term
borrowings. PIMCO Advisors policy is to make quarterly distributions to its
unitholders.
PIMCO Advisors had approximately $136.3 million of cash and cash
equivalents and short-term investments at March 31, 1998 compared to
approximately $67.9 million at December 31, 1997. PIMCO Advisors liquidity not
otherwise used for quarterly distributions will be used for general purposes
including profit-sharing payments, seed money for new mutual funds and brokers'
commissions on sales of mutual fund shares distributed without a front-end sales
load. PIMCO Advisors believes that the level of such commissions may increase in
the future due to the introduction of new products and mutual fund pricing
structures which may require an alternate financing source.
For the quarter ended March 31, 1998, PIMCO Advisors declared total
distributions to holders of PIMCO Advisors units of $0.60. PIMCO Advisors'
policy is to distribute substantially all its net cash flow on an annual basis.
Distributions are declared and paid to unitholders within thirty days following
the end of each calendar quarter to holders of record on March 31, June 30,
September 30 and December 31 of each year. The Management Board of PIMCO
Advisors has set a quarterly distribution rate of $0.60 per PIMCO Advisors unit
for the first three calendar quarters of 1998, which equates to a distribution
rate at PIMCO Holdings (after taxes at PIMCO Holdings) of $0.53 per unit. Actual
distribution levels will depend on the financial performance of PIMCO Advisors.
There can be no assurance that the stated distribution rates will be achieved.
Distributions made by PIMCO Holdings will depend on the profitability of the
investment management business of PIMCO Advisors, which is affected in part by
overall economic conditions and other factors affecting capital markets
generally, many of which are beyond the control of PIMCO Holdings and PIMCO
Advisors.
PIMCO Advisors assumed $230.0 million of 6% exchangeable debt in
connection with the Oppenheimer Capital acquisition in November 1997. In
December of 1997, $146.9 million of that debt was exchanged for Class A units at
a rate of $33.33 per unit. The remaining $83.1 million of such debt is expected
to be exchanged for units on the same terms upon the expiration of certain tax
contingencies over the next 6 to 7 years. In November 1997, PIMCO Advisors
amended its April 1996, four year revolving line of credit to increase the
available amount for working capital purposes from $25 million to $75 million.
As of March 31, 1998, $65 million was outstanding under this facility. PIMCO
Advisors is currently negotiating an expanded, syndicated five year revolving
credit facility, expected to be finalized in the second quarter of 1998.
OTHER FACTORS
During the quarter ended March 31, 1998, assets under management for
PIMCO Advisors and its subsidiaries increased $18.1 billion. While net cash
inflows for PIMCO Advisors, as a whole, were significant ($5.5 billion during
the first quarter of 1998), Columbus Circle Investors continued to experience
net cash outflows ($675 million during first quarter of 1998), significantly
slowing the trend seen over the last year.
PIMCO Advisors and its subsidiaries are aware of and addressing the
issues surrounding technology and the year 2000. PIMCO Advisors continues to
audit its proprietary and purchased
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systems and anticipates that any required conversions and upgrades will be
completed in 1999. Year 2000 technology conversions are not expected to result
in any material cost or impact on operations.
The general economy including interest rates, inflation and client
responses to economic factors will affect, to some degree, the operations of
PIMCO Advisors. As a significant portion of assets under management are fixed
income funds, fluctuations in interest rates could have a material impact on the
operations of PIMCO Advisors. PIMCO Advisors' advisory business is generally not
capital intensive and therefore any effect of inflation, other than on interest
rates, is not expected to have a significant impact on its operations or
financial condition. Client responses to the economy, including decisions as to
the amount of assets deposited may also impact the operations of PIMCO Advisors.
Any resulting revenue fluctuations may or may not be recoverable in the pricing
of services offered by PIMCO Advisors.
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PIMCO ADVISORS HOLDINGS L.P.
STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, 1998 DECEMBER 31, 1997
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(Dollars in thousands)
- ----------------------------------------------------------------------------------------------------------------------------------
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 15,620 $ 15,522
Distribution receivable and other current assets 27,801 15,187
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Total current assets 43,421 30,709
Investment in operating partnership 400,574 408,137
Other non current assets 153 118
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TOTAL ASSETS $444,148 $438,964
======== ========
LIABILITIES
Distribution payable $ 24,501 $ 15,112
Other current liabilities 19,150 15,515
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Total liabilities 43,651 30,627
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PARTNERS' CAPITAL
General Partner 44 41
Limited Partners (46,222,499 units issued and outstanding at March 31, 1998
and 45,531,583 units issued and outstanding at December 31, 1997)
400,453 408,296
-------- --------
Total Partners' Capital 400,497 408,337
-------- --------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $444,148 $438,964
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
12
<PAGE> 13
PIMCO ADVISORS HOLDINGS L.P.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE THREE MONTHS ENDED
-------------------------- --------------------------
MARCH 31, 1998 JANUARY 31, 1997
-------------------------- --------------------------
(Dollars in thousands, except per unit amounts)
<S> <C> <C>
REVENUES:
Equity in earnings of operating partnership:
Operating earnings $20,038 $13,584
Gain on Quest sales -- 1,800
------- -------
Total equity in earnings of operating
partnership 20,038 15,384
Interest -- 812
------- -------
Total revenues 20,038 16,196
------- -------
EXPENSES:
Amortization of intangible assets -- 652
Other 3,513 33
------- -------
Total expenses 3,513 685
------- -------
NET INCOME $16,525 $15,511
======= =======
BASIC NET INCOME PER UNIT $ 0.36 $ 0.60
======= =======
DILUTED NET INCOME PER UNIT $ 0.34 $ 0.60
======= =======
DISTRIBUTIONS DECLARED PER UNIT $ 0.53 $ 0.56
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
13
<PAGE> 14
PIMCO ADVISORS HOLDINGS L.P.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE THREE MONTHS
ENDED ENDED
----------------- --------------------
MARCH 31, 1998 JANUARY 31, 1997
----------------- --------------------
(Dollars in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 16,525 $ 15,511
Adjustments to reconcile net income to
net cash provided by operating activities:
Distributions received less than the equity in
earnings of operating partnerships (4,952) (4,494)
Amortization of intangibles 652
Change in operating assets and liabilities:
Change in other assets (15) (11)
Change in other liabilities 3,635 --
-------- --------
Net cash provided by operating activities 15,193 11,658
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in operating partnerships (120) --
-------- --------
Net cash used in investing activities (120) --
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions paid (15,112) (11,641)
Capital contribution from General Partner 17 --
Issuance of limited partnership units on
exercise of options 120 --
-------- --------
Net cash used in financing activities (14,975) (11,641)
-------- --------
Net increase (decrease) in cash and cash equivalents 98 17
Cash and cash equivalents, beginning of period 15,522 55
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 15,620 $ 72
======== ========
SUPPLEMENTAL DISCLOSURE
New York City unincorporated business tax paid $ - $ 35
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
14
<PAGE> 15
PIMCO ADVISORS HOLDINGS L.P.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) The condensed financial statements included herein have been
prepared without audit in accordance with the instructions to Form
10-Q pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. In the opinion of
PIMCO Partners, G.P., the General Partner, all adjustments,
consisting only of normal recurring adjustments, necessary for a
fair presentation of (a) the financial condition at March 31, 1998
and December 31, 1997, (b) the results of operations for the
three-month periods ended March 31, 1998 and January 31, 1997, and
(c) the cash flows for the three-month periods ended March 31, 1998
and January 31, 1997, for PIMCO Advisors Holdings L.P. ("PIMCO
Holdings") (formerly Oppenheimer Capital, L.P) have been made. It is
suggested that these unaudited condensed consolidated financial
statements be read in conjunction with the consolidated financial
statements and notes included in PIMCO Holdings' Annual Report on
Form 10-K for the year ended December 31, 1997. Certain
reclassifications have been made to conform the prior period
presentation to the current period presentation. These interim
results may not be indicative of the results which may occur in the
future. (See - Management's Discussion and Analysis of Financial
Condition and Results of Operations - Comparative Results of
Operations).
(2) PIMCO Holdings is a publicly traded limited partnership owned .01%
by its general partner, PIMCO Partners, G.P. and 99.99% by its
public limited partners ("Unitholders"). PIMCO Holdings' sole
business is its ownership of an approximate 43% interest
(approximately 46.2 million GP Units) in PIMCO Advisors L.P. ("PIMCO
Advisors"), a registered investment advisor. PIMCO Partners, G.P.
and other private holders hold the remaining interests in PIMCO
Advisors. The financial statements of PIMCO Holdings should be read
in conjunction with the consolidated financial statements of PIMCO
Advisors.
On November 4, 1997, PIMCO Advisors acquired Oppenheimer Group, Inc.
("Opgroup"), whose subsidiary Oppenheimer Financial Corp. ("Opfin")
owned the 32.4% managing general partner interest in Oppenheimer
Capital and the one percent general partner interest in PIMCO
Holdings. In the transaction, Opgroup became a subsidiary of PIMCO
Advisors, and the Opgroup stockholders received 2.1 million PIMCO
Advisors Class A units and rights to exchange up to $230 million of
outstanding term notes of Opgroup for an additional 6.9 million
PIMCO Advisors Class A units at $33 1/3 per unit. In connection with
the transaction, PIMCO Advisors split the one percent general
partner interest in PIMCO Holdings into a .01% general partner
interest and a .99% limited partner interest, and sold the general
partner interest to its general partner for $80,000, its approximate
book value. The purchase method of accounting was used by PIMCO
Advisors to record the acquisition of Opgroup.
On November 30, 1997, Oppenheimer Capital merged with a subsidiary
of PIMCO Advisors, with Oppenheimer Capital surviving (the "OpCap
Merger"). In the OpCap Merger, PIMCO Advisors acquired from PIMCO
Holdings its 67.6% general partner interest in Oppenheimer Capital
in exchange for 26.1 million PIMCO Advisors Class A units,
representing an approximate 24% general partner interest in PIMCO
Advisors. As a result, Oppenheimer Capital became a wholly-owned
subsidiary of PIMCO Advisors and the limited partner units of PIMCO
Holdings came to represent an indirect investment in the business of
PIMCO Advisors. On December 1, 1997, PIMCO Holdings effected a 1.67
for 1 split of the PIMCO Holding units, so that each PIMCO Holdings
unit outstanding after the split represented an economic interest in
one PIMCO Advisors unit. The transaction was accounted for at book
value of PIMCO Advisors, as a transaction between related parties.
15
<PAGE> 16
PIMCO ADVISORS HOLDINGS L.P.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(CONTINUED)
On December 31, 1997, PIMCO Advisors caused its 19.5 million
publicly held units to be contributed to PIMCO Holdings in exchange
for an equal number of PIMCO Holdings units. As a result, PIMCO
Advisors ceased to be publicly traded, and PIMCO Holdings' general
partner interest in PIMCO Advisors increased to approximately 43%.
Concurrently, PIMCO Holdings New York Stock Exchange trading symbol
was changed from "OCC" to "PA".
Prior to November 4, 1997, PIMCO Holdings was a publicly traded
limited partnership owned 1% by its general partner, Opfin and 99%
by its public limited partners. PIMCO Holdings sole business was its
ownership of a 67.6% interest in Oppenheimer Capital, a registered
investment adviser. Opfin held the remaining 32.4% interest in
Oppenheimer Capital.
(3) Effective December 1, 1997, PIMCO Holdings effected a 1.67 for 1
unit split of PIMCO Holdings units. For purposes of these financial
statements, all units outstanding, and all per unit amounts, have
been restated to reflect the split of the PIMCO Holdings units.
Prior to the OpCap Merger, PIMCO Holdings reported its results of
operations and its financial position based on an April 30 fiscal
year end. Upon completion of the OpCap Merger, PIMCO Holdings
changed its fiscal year to a calendar year to correspond with that
of PIMCO Advisors. Accordingly, current calendar quarter information
is reported and compared with the historical quarterly information
for the fiscal quarter ending within the corresponding calendar
quarter of the prior year.
(4) Basic net income per unit is computed based on the weighted average
number of units outstanding. Diluted net income per unit is computed
assuming the exercise of dilutive unit options at the operating
partnership and the resulting impact on the equity in earnings of
that partnership attributable to PIMCO Holdings. See Exhibit 11 for
the computation of the effect of the dilution at the operating
partnership on PIMCO Holdings' net income per unit during the
periods.
Distributions on the units outstanding are paid quarterly in arrears
30 days after the end of the quarter to unitholders of record as of
the last day of the quarter.
16
<PAGE> 17
PIMCO ADVISORS L. P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, 1998 DECEMBER 31, 1997
-------------- -----------------
(Dollars in thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 90,423 $ 34,301
Short term investments 45,828 33,611
Fees receivable 152,915 148,283
Other current assets 6,723 8,044
----------- -----------
Total current assets 295,889 224,239
Investment in unconsolidated partnerships 4,948 4,336
Fixed assets - net of accumulated depreciation and amortization 15,125 15,418
Intangible assets - net of accumulated amortization 1,047,106 1,060,869
Other non current assets 52,705 38,174
----------- -----------
TOTAL ASSETS $ 1,415,773 $ 1,343,036
=========== ===========
LIABILITIES
Current liabilities:
Accounts payable, accrued expenses and other current liabilities $ 58,500 $ 46,258
Accrued compensation 66,505 50,033
Distribution payable 64,804 61,786
Short term borrowings 65,000 30,000
----------- -----------
Total current liabilities 254,809 188,077
Long term notes 83,129 83,129
Other non current liabilities 22,760 17,765
----------- -----------
Total liabilities 360,698 288,971
----------- -----------
PARTNERS' CAPITAL
General Partner (47,022,498 units issued and outstanding at March 31, 1998 and 46,336,184 units
issued and outstanding at December 31, 1997) 805,204 812,884
Class A Limited Partners (61,043,526 units issued and outstanding at March 31, 1998 and
27,201,200 units issued and outstanding at December 31, 1997)
336,591 246,950
Class B Limited Partners (no units outstanding at March 31, 1998 and 32,993,050
units issued and outstanding at December 31, 1997) -- 65,662
Unamortized compensation (86,720) (71,431)
----------- -----------
Total Partners' Capital 1,055,075 1,054,065
----------- -----------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 1,415,773 $ 1,343,036
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
17
<PAGE> 18
PIMCO ADVISORS L. P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
-------------------------------------
MARCH 31, 1998 MARCH 31, 1997
-------------- --------------
(Dollars in thousands)
<S> <C> <C>
REVENUES
Investment advisory fees:
Private accounts $129,150 $ 52,533
Proprietary Funds 46,813 36,980
Distribution and servicing fees 17,894 13,793
-------- --------
Total revenues 193,857 103,306
-------- --------
EXPENSES
Compensation and benefits 83,851 45,178
Commissions 17,241 10,248
Amortization of intangible assets, Restricted Unit and Option Plans 19,658 10,293
General and administrative 8,931 5,491
Occupancy and equipment 5,122 2,460
Other 12,272 6,447
-------- --------
Total expenses 147,075 80,117
-------- --------
NET INCOME $ 46,782 $ 23,189
======== ========
NET INCOME PER UNIT:
Basic net income per General Partner and Class A Limited Partner Unit $ 0.44 $ 0.32
======== ========
Diluted net income per General Partner and Class A Limited Partner Unit $ 0.41 $ 0.32
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
18
<PAGE> 19
PIMCO ADVISORS L. P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
------------------------------------
MARCH 31, 1998 MARCH 31, 1997
-------------- --------------
(Dollars in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 46,782 $ 23,189
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, amortization 16,811 10,649
Restricted unit & Option Plans 5,895 1,291
Equity in income of unconsolidated partnership (52) (29)
Unrealized (gain) loss on investments (781) 28
Issuance of restricted units in lieu of directors fees -- 81
Change in operating assets and liabilities:
Change in fees receivable (4,632) 4,590
Change in other assets (14,545) (4,222)
Change in accrued liabilities and other current
liabilities 12,242 (10,198)
Change in accrued compensation 16,472 10,276
Change in other long term liabilities 4,995 1,462
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 83,187 37,117
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (1,042) (865)
Notes receivable advances (380) (123)
Purchase of investments (12,583) (10,938)
Proceeds from sale of investments 1,200 9,500
Investment in partnership (612) (65)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (13,417) (2,491)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short term borrowing 35,000 --
Cash distributions paid (61,786) (34,540)
Issuance of limited partnership units to deferred
compensation plan trust 9,945 --
Capital contribution from General Partner 16 --
Issuance of limited partnership units on
exercise of options 3,177 --
-------- --------
Net cash used in financing activities (13,648) (34,540)
-------- --------
Net increase in cash and cash equivalents 56,122 86
Cash and cash equivalents, beginning of period 34,301 41,312
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 90,423 $ 41,398
======== ========
Supplemental disclosure
Income tax paid $ 3,940 $ 233
======== ========
Interest paid $ 1,328 $ 67
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
19
<PAGE> 20
PIMCO ADVISORS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) The condensed consolidated financial statements included herein have
been prepared without audit in accordance with the instructions to
Form 10-Q pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. In the
opinion of the general partners, all adjustments, consisting only of
normal recurring adjustments, necessary for a fair statement of (a)
the financial condition at March 31, 1998 and December 31, 1997, (b)
the results of operations for the three-month periods ended March
31, 1998 and 1997, and (c) the cash flows for the three-month
periods ended March 31, 1998 and 1997, for PIMCO Advisors L.P.
("PIMCO Advisors") have been made. It is suggested that these
unaudited condensed consolidated financial statements be read in
conjunction with the consolidated financial statements and notes
included in PIMCO Advisors Holdings' Annual Report on Form 10-K for
the year ended December 31, 1997. Certain reclassifications have
been made to conform the prior period presentation to the current
period presentation. These interim results may not be indicative of
the results which may occur in the future. (See Item 2 -
Management's Discussion and Analysis of Financial Condition and
Results of Operations - Results of Operations).
(2) PIMCO Advisors and its subsidiaries were formed on November 15,
1994, when Pacific Asset Management Company (a subsidiary of Pacific
Life Insurance Company) merged certain of its investment management
businesses and substantially all of its assets (the "PFAMCo Group")
into Thomson Advisory Group L.P. ("TAG LP") (the "Consolidation").
On November 4, 1997, PIMCO Advisors acquired Oppenheimer Group, Inc.
("Opgroup"), whose subsidiary Oppenheimer Financial Corp. ("Opfin")
owned the 32.4% managing general partner interest in Oppenheimer
Capital and the one percent general partner interest in PIMCO
Advisors Holdings L.P. (formerly Oppenheimer Capital, L.P.) ("PIMCO
Holdings"). In the transaction, Opgroup became a subsidiary of PIMCO
Advisors, and the Opgroup stockholders received 2.1 million PIMCO
Advisors Class A units and rights to exchange up to $230 million of
outstanding term notes of Opgroup for an additional 6.9 million
PIMCO Advisors Class A units at $33 1/3 per unit. In connection with
the transaction, PIMCO Advisors split the one percent general
partner interest in PIMCO Holdings into a .01% general partner
interest and a .99% limited partner interest, and sold the general
partner interest to its general partner for $80,000, its approximate
book value. The purchase method of accounting was used by PIMCO
Advisors to record the acquisition of Opgroup.
On November 30, 1997, Oppenheimer Capital merged with a subsidiary
of PIMCO Advisors, with Oppenheimer Capital surviving (the "OpCap
Merger"). In the OpCap Merger, PIMCO Advisors acquired from PIMCO
Holdings its 67.6% general partner interest in Oppenheimer Capital
in exchange for 26.1 million PIMCO Advisors Class A units, an
approximate 24% general partner interest in PIMCO Advisors. As a
result, Oppenheimer Capital became a wholly-owned subsidiary of
PIMCO Advisors and the limited partner units of PIMCO Holdings came
to represent an indirect investment in the business of PIMCO
Advisors. As a result, the consolidated statement of operations
includes the operations of Oppenheimer Capital since November 4,
1997. The transaction was accounted for at book value of PIMCO
Advisors, as a transaction between related parties.
On December 31, 1997, PIMCO Advisors caused its 19.5 million
publicly held units to be contributed to PIMCO Holdings in exchange
for an equal number of PIMCO Holdings units. As a result, PIMCO
Advisors ceased to be publicly traded, and PIMCO Holdings general
partner
20
<PAGE> 21
PIMCO ADVISORS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(CONTINUED)
interest in PIMCO Advisors increased to approximately 43%.
Concurrently, PIMCO Holdings' New York Stock Exchange trading symbol
was changed from "OCC" to "PA".
(3) Basic net income per unit is computed based on the weighted average
number of units outstanding. Diluted net income per unit is computed
assuming the exercise of dilutive unit options. See Exhibit 11 for
the computation of the effect of the dilution per unit during the
periods.
21
<PAGE> 22
PART II: OTHER INFORMATION
Item 1. Legal Proceedings. None
Item 2. Changes in Securities and Use of Proceeds. None
Item 3. Defaults Upon Senior Securities. None
Item 4. Submission of Matters to a Vote of Security Holders. None
Item 5. Other Information.
1998 PLAN
On April 21, 1998 the Management Board of PIMCO Advisors Holdings
L.P. (the "Registrant") adopted and approved the 1998 Unit Incentive Plan of
PIMCO Advisors Holdings L.P. and PIMCO Advisors L.P. (the "1998 Plan") effective
as of January 1, 1998. The 1998 Plan was also adopted by the Management Board of
PIMCO Advisors L.P. on April 21, 1998.
The 1998 Plan was adopted to replace the previous unit-based
incentive plans sponsored by PIMCO Advisors and Oppenheimer Capital. As of the
effective date of the adoption of the 1998 Plan, each option outstanding under
the 1993 Unit Option Plan of PIMCO Advisors L.P., the 1996 Unit Incentive Plan
of PIMCO Advisors L.P., the Oppenheimer Capital Amended and Restated Restricted
Option Plan and the Oppenheimer Capital Amended and Restated Restricted Unit
Plan was replaced by an option or award under the 1998 Plan. Each such award
covered the same number of limited partnership units and had the same term and
vesting schedule as the award which it replaced.
The 1998 Plan is a joint plan of the Registrant and PIMCO Advisors.
Generally, the 1998 Plan provides for awards of limited partner units of the
Registrant, although participants who are eligible to be partners of PIMCO
Advisors may elect to receive limited partner units in PIMCO Advisors upon
exercise or vesting of the awards.
The total number of limited partner units subject to the 1998 Plan
is the sum of (i) the number of units underlying awards assumed under the
previous unit based incentive plans, and (ii) two percent of the outstanding
PIMCO Advisors general partner and limited partnership units on January 1 of
each year beginning January 1, 1998, on a cumulative basis. On January 1, 1998,
2.13 million units were available for new awards and grants (based on
106,530,384 general and limited partner units outstanding). On March 31, 1998
there were awards and grants covering 12,562,565 partnership units outstanding
and awards and grants covering 651,500 partnership units remained available to
be granted in 1998 under the 1998 Plan. Each year on January 1, the number of
Partnership Units subject to the 1998 Plan will increase by a number of units
equal to two percent of the outstanding PIMCO Advisors Units on that date.
Because the 1998 Plan is considered a broadly based plan under rules
promulgated by the New York Stock Exchange, the 1998 Plan is not required to be
approved by the Unitholders. A copy of the 1998 Plan is attached hereto as
Exhibit 10.1.
22
<PAGE> 23
EXECUTIVE DEFERRED COMPENSATION PLAN
On April 21, 1998 the Management Board of the Registrant adopted and
approved the Executive Deferred Compensation Plan of PIMCO Advisors Holdings
L.P. and PIMCO Advisors L.P. (the "Deferred Compensation Plan") effective as of
January 1, 1998. The Deferred Compensation Plan was also adopted by the
Management Board of PIMCO Advisors L.P. on April 21, 1998. The Deferred
Compensation Plan was adopted as an amendment and restatement of a similar plan
of PIMCO Advisors adopted effective December 1, 1996. The Deferred Compensation
Plan is an unfunded nonqualified deferred compensation plan pursuant to which a
portion of compensation otherwise payable to certain eligible employees will be
subject to mandatory deferral, and pursuant to which eligible employees may
elect to defer additional amounts of compensation.
An employee's eligibility to participate in the Deferred
Compensation Plan is determined based on that employee's estimated compensation
for the plan year in question. Employees with estimated compensation in excess
of $250,000 (as adjusted for inflation) for a plan year are eligible.
Participation in the Deferred Compensation Plan consists of a mandatory
component and a voluntary component, determined based on the level of an
eligible employee's equity holdings in PIMCO Advisors and PIMCO Holdings.
Participation is mandatory for an eligible employee whose equity holdings are
less than his estimated compensation for that plan year, unless the employee's
estimated compensation is greater than $1 million, in which case participation
is mandatory unless the employee's equity holdings are greater than twice his
estimated compensation for that plan year. In addition, a participating employer
may specify that any person elected as a Managing Director shall be a mandatory
participant for the year in which he is elected, and such additional number of
years as may be specified by the employer. Eligible employees who are not
required to participate may voluntarily elect to defer a portion of their
compensation pursuant to the Deferred Compensation Plan. Employees for whom
participation is mandatory are subject to deferrals of compensation according to
the following schedule: (i) 10% of compensation in excess of $250,000 up to
$500,0000; (ii) 30% of compensation in excess of $500,000 up to $1,000,000; and
(iii) 30% of all compensation in excess of $1,000,000 (Pacific Investment
Management Company has elected a 40% deferral rate for compensation over
$1,000,000).
If a participant's equity holdings are less than four times his
estimated compensation for the plan year, cash in his subaccounts is invested in
Advisors Units at a 15% discount from fair market value. Each month, the Trustee
will use available cash to acquire Advisors Units from PIMCO Advisors.
A copy of the Executive Deferred Compensation Plan is attached hereto as Exhibit
10.2.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT NO. DESCRIPTION
10.1 1998 Unit Incentive Plan of PIMCO Advisors Holdings L.P. and PIMCO
Advisors L.P.
10.2 Executive Deferred Compensation Plan of PIMCO Advisors Holdings
L.P. and PIMCO Advisors L.P.
11 Computations of Net Income Per Unit.
27 Financial Data Schedule.
(b) Reports on Form 8-K. None
23
<PAGE> 24
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.
PIMCO Advisors Holdings L.P.
By: /s/ William D. Cvengros
-----------------------------
William D. Cvengros
Chief Executive Officer
By: /s/ Robert M. Fitzgerald
-----------------------------
Robert M. Fitzgerald
Principal Accounting Officer
Date: May 14, 1998
24
<PAGE> 25
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
10.1 1998 Unit Incentive Plan of PIMCO Advisors Holdings L.P. and PIMCO
Advisors L.P.
10.2 Executive Deferred Compensation Plan of PIMCO Advisors Holdings
L.P. and PIMCO Advisors L.P.
11 Computations of Net Income Per Unit.
27 Financial Data Schedule.
25
<PAGE> 1
EXHIBIT 10.1
1998 UNIT INCENTIVE PLAN
OF PIMCO ADVISORS HOLDINGS L.P. AND PIMCO ADVISORS L.P.
PIMCO Advisors Holdings L.P., a Delaware limited partnership
("Holdings"), and PIMCO Advisors L.P., a Delaware limited partnership
("Advisors," and together with Holdings, a "Partnership," or collectively the
"Partnerships") have adopted the 1998 Unit Incentive Plan (this "Plan"),
effective January 1, 1998, for the benefit of the members of their Management
Boards, their key employees and their consultants. This Plan amends and restates
in its entirety the 1997 Unit Incentive Plan of PIMCO Advisors Holdings L.P. and
PIMCO Advisors L.P.
Holdings' units of limited partner interest ("Holdings LP Units")
are publicly owned. Holdings' only significant assets are units of general
partner interest in Advisors. Advisors is an operating partnership which,
directly and through its subsidiaries, engages in the investment management
business. Members of the Advisors Management Board and executive officers of
Advisors, and managing directors of subsidiaries of Advisors which are engaged
in the investment advisory business, either own Class A units of limited partner
interest in Advisors ("Advisors LP Units"), or are qualified to be admitted as
limited partners of Advisors.
Holdings wishes to further its financial success, both through its
own efforts and by furthering the financial success of Advisors, and accordingly
it wishes (i) to obtain and retain the services of members of its Management
Board, key employees and consultants who will contribute to its growth,
development and financial success, and (ii) to support Advisors in its efforts
to obtain and retain the services of members of the Advisors Management Board,
key employees and consultants who will contribute to the growth, development and
financial success of Advisors, by offering such members, key employees and
consultants the opportunity to own, or have the right to share in the
appreciation of, Holdings LP Units, and, if they are Qualified Persons, Advisors
LP Units.
Advisors wishes to further its financial success, and accordingly it
wishes to obtain and retain the services of members of its Management Board, key
employees and consultants who will contribute to its growth, development and
financial success, by offering such members, key employees and consultants the
opportunity to own, or have the right to share in the appreciation of, Holdings
LP Units, and, if they are Qualified Persons, Advisors LP Units.
Holdings and Advisors wish to make tandem grants of awards under
this Plan, so that any participant in this Plan who is a Qualified Person at the
time of issuance of Units pursuant to an award made to such participant under
this Plan may elect to receive either Holdings LP Units or Advisors LP Units, or
any combination thereof.
<PAGE> 2
ARTICLE I
DEFINITIONS
Wherever the following terms are used in this Plan they shall have
the meaning specified below:
Advisors Board shall mean the Management Board of Advisors or any
successor board established by the general partner(s) of Advisors.
Advisors LP Units is defined in the recitals to this Plan.
Affiliate of a Person shall mean any Person directly or
indirectly controlling, controlled by or under common control with such Person.
As used in this definition of Affiliate, the term"control"means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
Award shall mean a Unit Option Award, a Deferred Unit Award or a
Restricted Unit Award.
Board shall mean the Holdings Board or the Advisors Board.
Board Member shall mean a member of a Board.
Business Entity shall mean a corporation, a business trust or
association, a real estate investment trust, a common-law trust, a limited
liability company or an unincorporated business, including a general or limited
partnership or registered limited liability partnership.
Change of Control shall mean the acquisition (whether by way of
merger, consolidation, sale of assets, purchase of securities, or otherwise) by
a pre-existing Business Entity and its Affiliates (other than Holdings and its
Affiliates) of direct or indirect beneficial ownership of all or substantially
all of Advisors' assets or 51% or more of Advisors' units of general partner
interest or Advisors' units of partner interest, or the liquidation or
dissolution of Advisors.
Code shall mean the Internal Revenue Code of 1986, as amended.
Commission shall mean the Securities and Exchange Commission.
Committee is defined in Section 6.1.
Consultant shall mean any person other than an Employee who
renders services to Holdings or Advisors or any of their respective
Subsidiaries.
Deferred Compensation Plan shall mean the Executive Deferred
Compensation Plan of PIMCO Advisors Holdings L.P and PIMCO Advisors L.P.
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Deferred Unit Award shall mean an award of a right to receive
Units to the extent that such right vests prior to the time the award is
canceled or expires.
Employee shall mean any person who renders services to Holdings
or Advisors or any of their respective Subsidiaries in the status of an
employee.
Exchange Act shall mean the Securities Exchange Act of 1934, as
amended.
Fair Market Value of a Unit as of a given day shall mean (i) if
Holdings LP Units are listed or admitted to trading on one or more National
Securities Exchanges, the last reported sales price per Holdings LP Unit on such
day, or if such day is not a trading day, on the trading day immediately
preceding such day, or in case no such reported sale takes place on such day,
the average of the last reported bid and asked prices per Holdings LP Unit on
such trading day, in either case on the principal National Securities Exchange
on which Holdings LP Units are listed or admitted to trading; or (ii) if
Holdings LP Units are not listed or admitted to trading on a National Securities
Exchange, an amount equal to the fair market value of such Unit as of such day
as determined by an independent appraiser selected and retained by the
Committee.
Holdings Board shall mean the Management Board of Holdings or any
successor board established by the general partner(s) of Holdings.
Holdings LP Units is defined in the recitals to this Plan.
Issuer with respect to an Award shall mean the issuer of the Unit
underlying the Award.
Management shall mean the chief executive officer of Advisors or
his delegate.
National Securities Exchange shall mean (i) an exchange
registered with the Commission under Section 6(a) of the Exchange Act, or (ii)
the National Association of Securities Dealers Automated Quotations System.
Non-Employee Board Member is defined in Rule 16b-3 under the
Exchange Act.
Oppenheimer Capital shall mean Oppenheimer Capital, a Delaware
general partnership.
Option Units shall mean Units subject to issuance upon exercise
of a Unit Option Award.
Participant shall mean an Employee or Consultant who has been
granted an Award under this Plan.
Partnership shall mean PIMCO Advisors Holdings L.P., a Delaware
limited partnership, or PIMCO Advisors L.P., a Delaware limited partnership.
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Person shall mean an individual, Business Entity, trust, estate,
custodian, nominee or any other entity in its own or any representative
capacity.
Plan shall mean the 1998 Unit Incentive Plan of PIMCO Advisors
Holdings L.P. and PIMCO Advisors L.P.
Qualified Person is defined in the Amended and Restated Agreement
of Limited Partnership of PIMCO Advisors L.P.
Recapitalization shall mean any distribution of Units with
respect to outstanding Units, subdivision or combination of outstanding Units,
or like action.
Restricted Unit Award shall mean an award of Units which are
forfeited to the extent they have not vested at the time the award of such Units
is canceled or expires.
Securities Act shall mean the Securities Act of 1933, as amended.
Subsidiary is defined in Regulation S-X under the Securities Act.
Transaction shall mean a merger or consolidation to which a
Partnership is a party, a sale of all or substantially all of a Partnership's
assets, or an exchange of all or substantially all of the outstanding units of
partner interest in a Partnership, in each case as a result of which a
Partnership's units of partner interest are exchanged for or converted into
cash, securities or other property ("Transaction Consideration").
Transaction Consideration is defined in the definition of
Transaction.
Unit Option Award shall mean an award of an option to purchase
Units to the extent that such option vests prior to the time the award is
canceled or expires.
Units shall mean Holdings LP Units or Advisors LP Units.
Unitholders shall mean holders of units of partner interest in a
Partnership.
ARTICLE II
UNITS SUBJECT TO PLAN; TRANSITION PROVISIONS
Section 2.1 Units Subject to Plan.
(a) The total number of Units underlying Awards granted pursuant
to this Plan shall be (i) the number Units underlying Awards assumed or granted
pursuant to Section 2.2, plus (ii) two percent (2%) of the outstanding Advisors
GP and Advisors LP Units on January 1 of each year, beginning January 1, 1998,
on a cumulative basis.
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(b) Any Units (i) subject to issuance upon exercise of a Unit
Option Award which remain unissued when such Unit Option Award is canceled or
expires, (ii) surrendered to an Issuer in payment of all or part of the purchase
price of Option Units, (iii) subject to issuance upon vesting of a Deferred Unit
Award which remain unissued when such Deferred Unit Award is canceled or
expires, or (iv) delivered to an Issuer when a Restricted Unit Award is canceled
or expires, shall in each case again be available for Awards.
Section 2.2 Transition Provisions.
(a) Upon the effectiveness of this Plan, each option outstanding
under the 1993 Unit Option Plan of PIMCO Advisors L.P. ("1993 Option") shall, to
the extent the holder shall have consented thereto, be replaced by a Unit Option
Award. Each such Unit Option Award shall cover the same number of Units and have
the same exercise price, term and vesting schedule as the 1993 Option which it
replaces.
(b) Upon the effectiveness of this Plan, each option outstanding
under the 1996 Unit Incentive Plan of PIMCO Advisors L.P. ("1996 Option") shall
be replaced by a Unit Option Award. Each such Unit Option Award shall cover the
same number of Units and have the same exercise price, term and vesting schedule
as the 1996 Option which it replaces.
(c) Upon the effectiveness of this Plan, each option outstanding
under the Oppenheimer Capital Amended and Restated Restricted Option Plan
("Opcap Option") shall be replaced by a Unit Option Award. Each such Unit Option
Award shall cover the same number of Units and have the same exercise price,
term and vesting schedule as the Opcap Option which it replaces.
(d) Upon the effectiveness of this Plan, each right to receive
Holdings LP Units outstanding under the Oppenheimer Capital Amended and Restated
Restricted Unit Plan ("Opcap Right") shall be replaced by a Deferred Unit Award,
or if the holder of such right is an Eligible Employee under the Deferred
Compensation Plan and wishes to defer compensation recognized upon vesting of
such right, such right shall be replaced by a Restricted Unit Award, which shall
be granted to the Trustee under the Deferred Compensation Plan. Each such Award
shall cover the same number of Units and have the same term and vesting schedule
as the Opcap Right which it replaces.
(e) Upon the effectiveness of this Plan, each unit appreciation
right granted by Oppenheimer Capital on November 4, 1997 in connection with the
acquisition by Advisors of a general partner interest in Oppenheimer Capital
("Opcap UAR") shall be replaced by a Deferred Unit Award, or if the holder of
such award is an Eligible Employee under the Deferred Compensation Plan and
wishes to defer compensation recognized upon vesting of such right, such right
shall be replaced by a Restricted Unit Award, which shall be granted to the
Trustee under the Deferred Compensation Plan. Each such Award shall cover the
same number of Units and have the same term and vesting schedule as the Opcap
UAR which it replaces.
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ARTICLE III
ELIGIBILITY AND GRANTING OF AWARDS
Section 3.1 Eligibility.
Any key Employee or Consultant shall be eligible to be a
Participant.
Section 3.2 Granting of Awards.
(a) The Committee shall from time to time:
(i) Determine which of the Employees and Consultants are key
Employees and Consultants, and select from among the key Employees or
Consultants those to whom Awards should be granted;
(ii) Determine the Awards to be granted to each such
selected Employee and Consultant; and
(iii) Determine the terms and conditions of such Awards,
consistent with this Plan.
(b) The Committee shall not grant an Award to an Employee or
Consultant except upon the recommendation of Management.
ARTICLE IV
AWARD AGREEMENTS
Section 4.1 Award Agreements.
Each Award shall be evidenced by a written agreement, which shall
be executed by the Participant and both Partnerships in the case of a Unit
Option Award or a Deferred Unit Award, or by the Issuer of the Restricted Units
in the case of a Restricted Unit Award.
Section 4.2 Unit Option Award Agreements.
A Unit Option Award agreement shall set forth (i) the number of
Units which may be purchased by the Participant upon exercise of the option,
(ii) the exercise price per Unit, (iii) the number of Units in and vesting date
or other conditions for vesting of each installment of the option, and any
provisions for acceleration of such vesting, (iv) whether the option, to the
extent vested, may be exercised in part, (v) the terms on which the Participant
may, if he is a Qualified Person at the time, elect to receive Advisors LP Units
upon exercise of the option, and a provision that if such election is not timely
made, the Participant will receive Holdings LP Units, (vi) the terms of payment
of the exercise price, (vii) whether Units may be surrendered in payment of the
exercise price, and if so, how such Units will be valued for that purpose,
(viii) any terms and conditions of the issuance and delivery of Units purchased
by exercise of the
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option, including payment by the Participant of any required withholding taxes
and compliance with applicable securities laws, (ix) provisions for adjusting
the number of Units or changing the securities subject to such Award to reflect
any Recapitalization or Transaction, (x) the expiration date or other conditions
for expiration of the Award, and (xi) such other terms and conditions as the
Committee shall determine, consistent with this Plan.
Section 4.3 Deferred Unit Award Agreements.
A Deferred Unit Award agreement shall set forth (i) the initial
number of Units which shall be issued to the Participant upon vesting of the
Award, (ii) the number of Units in and vesting date or other conditions for
vesting of each installment of Units, and any provisions for acceleration of
such vesting, (iii) the terms on which the Participant may, if he is a Qualified
Person at the time, elect to receive Advisors LP Units upon vesting of the
Award, and a provision that if such election is not timely made, the Participant
will receive Holdings LP Units, (iv) provisions for adjusting the number of
Units or changing the securities subject to such Award to reflect any
Recapitalization or Transaction, (v) provisions for increasing the number of
unvested Deferred Units as of any record date for a distribution to holders of
Advisors LP Units, effective as of the date such distribution is made, by an
amount equal to (A) the distribution which would have been paid on such Deferred
Units had they been issued and outstanding on such record date, divided by (B)
the Fair Market Value of an Advisors LP Unit on such distribution date, (vi) any
terms and conditions of the issuance and delivery of vested Units, including
rounding of any fractional Unit resulting from increases to reflect Unit
distributions, payment by the Participant of any required withholding taxes or
compliance with applicable securities laws, (vii) the expiration date or other
conditions for expiration of the Award, and (viii) such other terms and
conditions as the Committee shall determine, consistent with this Plan.
Section 4.4 Restricted Unit Award Agreements.
A Restricted Unit Award agreement shall set forth (i) the Issuer
of the Units, and the designation and number of Units being issued, (ii) the
number of Units in and vesting date or other conditions for vesting of each
installment of Units, and any provisions for acceleration of such vesting, (iii)
provisions for escrowing of Units until they vest, retention in escrow of
extraordinary distribution on Units, release of Units to the Participant when
they vest, and delivery of Units to the Issuer to the extent they are unvested
at the time the Award is canceled or expires, (iv) any terms and conditions to
the release of vested Units to the Participant, including payment by the
Participant of any required withholding taxes and compliance with applicable
securities laws, (v) the expiration date or other conditions for expiration of
the Award, and (vi) such other terms and conditions as the Committee shall
determine, consistent with this Plan.
ARTICLE V
ISSUANCE OF UNITS TO NON-EMPLOYEE BOARD MEMBERS
A Non-Employee Board Member may elect to receive all or a portion of
his annual retainer fee in the form of Units. His election must be in writing
delivered to the Secretary of the Issuer of such Units, shall apply to retainer
fees payable from and after the date that the election
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is made, and shall be made no more than once with respect to retainer fees
payable in any calendar year. Units issued in respect of a retainer fee shall be
issued on the date that the retainer fee would otherwise have been paid, and
shall be valued at 91% of the Fair Market Value of the Units on the date of
issuance.
ARTICLE VI
ADMINISTRATION
Section 6.1 The Committee.
(a) There shall be a Committee for the Plan. The Committee shall
be comprised of (i) all of the members of the Holdings Board, or two or more
Non-Employee Board Members of the Holdings Board appointed by the Holdings
Board, and (ii) if all of the members of the Unit Incentive Committee of the
Advisors Board are Non-Employee Board Members, the members of such Committee, or
if not, all of the members of the Advisors Board, or two or more Non-Employee
Board Members of the Advisors Board appointed by the Advisors Board.
(b) The Committee shall act (i) by a majority of the members of
the Committee present at a meeting, which majority shall comprise (A) all of the
Holdings Board Members, or if two or more of the Non-Employee Board Members of
the Holdings Board are the sole representatives of Holdings on the Committee, a
majority of such Non-Employee Board Members, and (B) all of the Advisors Board
Members, or if two or more of the Non-Employee Board Members of the Advisors
Board are the sole representatives of Advisors on the Committee, a majority of
such Non-Employee Board Members, or (ii) by unanimous written consent of the
members of the Committee.
(c) The Chairperson of the Committee shall appoint a Secretary to
keep the minutes of its meetings.
(d) The Chairperson of the Committee is authorized to execute any
instrument required to be executed by the Committee.
Section 6.2 Duties and Powers of the Committee.
(a) The Committee shall have full and exclusive discretionary
power and authority to operate and administer the Plan, including without
limitation exclusive discretionary power and authority:
(i) to administer, interpret and apply the Plan;
(ii) to determine eligibility for and granting of Awards;
(iii) to determine the terms and conditions of Award
agreements;
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(iv) to determine questions of vesting, cancellation or
expiration of Awards;
(v) to make findings of fact as necessary to make any
determinations and decisions in the exercise of such discretionary power and
authority; and
(vi) to engage actuaries, attorneys, accountants,
appraisers, brokers, consultants, administrators, physicians or other Persons
and to rely upon the reports, advice, opinions or valuations of any such
Persons.
(b) Every finding, determination and decision made by the
Committee shall be final and binding upon all parties, except to the extent
found by a court of competent jurisdiction to constitute an abuse of discretion.
Section 6.3 Payment of Expenses and Indemnification.
(a) Advisors shall pay all expenses (including reasonable
attorneys' fees) reasonably incurred in the administration of the Plan.
(b) Advisors shall indemnify and hold each Committee member, each
other Person rendering services with respect to the Plan or its operation or
administration, and their respective Affiliates (each, an "Indemnified Person"),
harmless from all claims, liabilities and costs (including reasonable attorneys'
fees) arising out of the good faith performance of their services with respect
to the Plan or its operation or administration.
(c) Advisors may obtain and provide for any Indemnified Person,
at the expense of Advisors, liability insurance against liabilities imposed on
such Indemnified Person by law.
Section 6.4 Record Keeping.
(a) The Committee shall maintain, or cause to be maintained,
suitable records of (i) Awards granted to Participants and (iii) the Committee's
findings, determinations and decisions.
(b) The Committee shall not be required to maintain any records
which duplicate any records maintained by the Partnerships.
Section 6.5 Statements to Participants.
Within sixty days after the last day of each calendar quarter,
the Partnerships shall furnish to each Participant a statement setting forth the
Awards granted to him, the number of Units covered by such Awards, the exercise
price for any Unit Option Awards, the vesting schedule for such Awards and the
extent to which such Awards have vested, and such other information as the
Committee shall instruct the Partnerships to furnish to the Participants.
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Section 6.6 Inspection of Records.
Copies of the Plan and the records of a Participant's Awards
shall be open to inspection by him at the principal office of Advisors at any
reasonable business hour.
ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 7.1 Awards Not Transferable.
A Participant's Awards shall be not be liable for his debts,
contracts or engagements, or the debts, contracts or engagements of his
successors in interest, or be taken in execution by levy, attachment or
garnishment or by any other legal or equitable proceeding, nor shall the
Participant or his successors in interest have any rights to alienate,
anticipate, commute, pledge, encumber or assign any Award in any manner
whatsoever.
Section 7.2 Amendment, Suspension or Termination of the Plan.
This Plan may be amended, suspended or terminated at any time or
from time to time by action of both Boards; provided, however, that no
amendment, suspension or termination of this Plan shall, without the consent of
a Participant, alter or impair any rights or obligations under an Award granted
to such Participant, unless the Award agreement otherwise provides.
Section 7.3 Change of Control.
In the event of a Change of Control, the Committee may determine
that outstanding Awards should vest upon the consummation of such Change of
Control, or at such time prior to such consummation as the Committee shall
determine.
Section 7.4 Compliance with Laws.
This Plan, the granting and vesting of Awards and the issuance
and delivery of Units underlying Awards are subject to compliance with all
applicable federal and state laws, rules and regulations and to such approvals
by any listing, regulatory or governmental authority as may, in the opinion of
counsel for the Partnerships, be necessary or advisable in connection therewith.
Any security delivered under this Plan shall be subject to such restrictions,
and the Participant acquiring such securities shall, if requested by the Issuer
of such securities, provide such representations to the Issuer, as the Issuer
may deem necessary or desirable to assure compliance with all applicable legal
requirements.
Section 7.5 Titles.
Titles are provided herein for convenience only and are not to
serve as a basis for interpretation of this Plan.
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Section 7.6 Governing Law.
This Plan and any Award agreements shall be administered,
interpreted and enforced under the internal laws of the State of Delaware
without regard to principles of conflicts of laws.
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CERTIFICATE
I hereby certify that the foregoing 1998 Unit Incentive Plan
of PIMCO Advisors Holdings L.P. and PIMCO Advisors L.P. was duly adopted by the
Management Board of PIMCO Advisors Holdings L.P. effective January 1, 1998, and
by the Management Board of PIMCO Advisors L.P. effective January 1, 1998.
Executed as of this 21st day of April, 1998.
By /s/ Richard M. Weil
----------------------------
Richard M. Weil
Secretary
<PAGE> 1
EXHIBIT 10.2
EXECUTIVE DEFERRED COMPENSATION PLAN
OF PIMCO ADVISORS HOLDINGS L.P. AND PIMCO ADVISORS L.P.
PIMCO Advisors L.P., a Delaware limited partnership ("Advisors"),
adopted the PIMCO Advisors L.P. Executive Deferred Compensation Plan (the
"Advisors Plan"), effective as of December 1, 1996, for the benefit of the
eligible employees of Advisors, certain of its subsidiaries, and certain of its
other subsidiaries which adopted the Advisors Plan.
The Advisors Plan was amended and restated by Advisors effective
as of January 1, 1998, and as amended and restated was adopted by PIMCO Advisors
Holdings L.P., a Delaware limited partnership and a general partner of Advisors,
effective as of January 1, 1998.
The Advisors Plan as so amended and restated (the "Plan") is a
nonqualified deferred compensation plan pursuant to which a portion of the
compensation otherwise payable to certain eligible employees will be mandatorily
deferred, and pursuant to which certain eligible employees may elect to defer
additional amounts of compensation. The Plan is unfunded and is maintained
primarily for the purpose of providing deferred compensation for a select group
of management or highly compensated employees, within the meaning of Sections
201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act
of 1974, as amended.
ARTICLE I
DEFINITIONS
Wherever the following capitalized terms are used in the Plan, they
shall have the meanings specified below.
1998 Unit Incentive Plan shall mean the 1998 Unit Incentive Plan
of PIMCO Advisors Holdings L.P. and PIMCO Advisors L.P.
Adjusted with reference to a dollar figure shall mean such dollar
figure as adjusted as of September 30 of each Plan Year to reflect any change in
the Consumer Price Index for All Urban Consumers as published by the Bureau of
Labor Statistics since January 1, 1998 or the last September 30 as of which such
dollar figure was so adjusted, whichever is later. Such adjusted dollar figure
shall be rounded up to the nearest one thousand dollars, but the unrounded
dollar figure shall be used in the next adjustment.
Advisors shall mean PIMCO Advisors L.P., a Delaware limited
partnership.
Advisors Management Board shall mean the Management Board of
Advisors or any successor board established by the general partners of Advisors.
Advisors Units shall mean Class A units of limited partner
interest in Advisors.
<PAGE> 2
Assets shall mean cash, Units, other securities or other assets.
Base Salary of an Employee as of a specified date shall mean such
Employee's annual salary at the rate in effect on such date.
Beneficiary of a Participant shall mean (i) a Person designated
by such Participant as a Beneficiary whose designation has not been revoked, and
(ii) a former spouse of such Participant who has been given rights as a
Beneficiary pursuant to a qualified domestic relations order issued in
accordance with Code Section 414(p); provided, however, that if at the time of
the Participant's death no Beneficiary has been designated whose designation has
not been revoked, the Persons deemed to be designated by the Participant as his
Beneficiaries shall be his surviving spouse, if any, or if his spouse does not
survive him, his surviving children in equal shares, or if no children survive
him, his heirs at law as determined under the laws of the state in which he
resided on the day he died governing succession to personal property; provided,
further, that if at the time of the Participant's death, a Beneficiary has been
designated whose designation has not been revoked, but such Beneficiary is a
person who does not survive until the Assets in the Participant's Deferral
Accounts are distributed pursuant to Section 9.2(c), such Beneficiary shall be
replaced as Beneficiary by his surviving spouse, if any, or if his spouse does
not survive him, his surviving children in equal shares, or if no children
survive him, his heirs at law as determined under the laws of the state in which
he resided on the day he died governing succession to personal property.
Benefits shall mean Assets in a Deferral Account distributed to a
Participant or his Beneficiaries pursuant to Article IX.
Bonus Compensation shall mean any Compensation other than Base
Salary.
Business Entity shall mean a corporation, a business trust or
association, a real estate investment trust, a common-law trust, a limited
liability company or an unincorporated business, including a general or limited
partnership or registered limited liability partnership.
Canadian Bonus Compensation of an Employee for a Plan Year shall
mean Bonus Compensation for services rendered by such Employee during such Plan
Year while such Employee was a resident of Canada.
Canadian Compensation of an Employee for a Plan Year shall mean
Compensation for services rendered by such Employee during such Plan Year while
such Employee was a resident of Canada.
Change of Control shall mean the acquisition (whether by way of
merger, consolidation, sale of assets, purchase of securities, or otherwise) by
a pre-existing Business Entity and its Affiliates (other than Holdings and its
Affiliates) of direct or indirect beneficial ownership of all or substantially
all of Advisors' assets or 51% or more of Advisors' units of general partner
interest or Advisors' units of partner interest, or the liquidation or
dissolution of Advisors.
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Code shall mean the Internal Revenue Code of 1986, as amended
from time to time.
Committee shall mean the committee established pursuant to
Section 10.1.
Compensation of an Employee for a Plan Year shall mean all
compensation, including salary, bonuses, payments under profit-sharing plans,
commissions and other forms of incentive compensation, for services rendered by
such Employee to Advisors or its Subsidiaries during such Plan Year, whenever
paid, including Deferred Compensation but excluding compensation attributable to
(i) signing or relocation bonuses, (ii) employee benefits, including principal
or interest forgiven on loans to such Employee, (iii) the exercise of options on
Units, the granting or vesting of, or the receipt of distributions on,
Restricted Units or Deferred Units, or the receipt of Unit payments or payments
in respect of Unit appreciation rights, pursuant to a Unit Incentive Plan, or
(iv) the distribution of Benefits under the Plan, including distributions from
such Employee's distribution subaccounts.
Compensation Contribution Subaccount of a Participant for a Plan
Year shall mean the contribution subaccount of his Compensation Deferral Account
for such Plan Year.
Compensation Deferral Account of a Participant shall mean his
individual account established in accordance with Section 5.1(a).
Compensation Deferral Subaccounts of a Participant for a Plan
Year shall mean the basic deferral subaccount, excess deferral subaccount and
voluntary deferral subaccount of his Compensation Deferral Account for such Plan
Year.
Current Employee shall mean an Employee who is, at the time of
reference, rendering services to Advisors or any of its Subsidiaries in the
status of an employee as that term is defined in Code Section 3121(d).
Contribution Subaccount of a Participant for a Plan Year shall
mean his Compensation Contribution Subaccount or Unit Award Contribution
Subaccount for such Plan Year.
Deferral Account of a Participant shall mean his Compensation
Deferral Account or his Unit Award Deferral Account.
Deferral Schedule of a Participant for a Plan Year shall mean the
schedule of mandatory deferrals, and if applicable, voluntary deferrals, of
Compensation established by the Plan and such Participant for such Plan Year.
Deferral Subaccounts of a Participant for a Plan Year shall mean
his Compensation Deferral Subaccounts and Unit Award Deferral Subaccount, if
any, for such Plan Year.
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Deferred Compensation shall mean Compensation deferred by a
Participant pursuant to Article III.
Deferred Units shall mean Units issued to Employees of Advisors
and its Subsidiaries when they vest pursuant to an award under a Unit Incentive
Plan.
Disability of an Employee shall mean a physical, mental or
emotional condition which renders the Employee unable to perform the usual and
customary duties of his position with his Employer, as determined in accordance
with the employment rules and policies of his Employer.
Discount Subaccount shall mean a subaccount of a Deferral Account
designated as a Discount Subaccount pursuant to Section 5.1(e) or 6.1(c).
Disputed Activity shall have the meaning set forth in Section
8.4(d).
Disputed Activity Notice shall have the meaning set forth in
Section 8.4(d).
Eligible Employee with respect to a Plan Year shall mean any
Employee of a Participating Employer whose Estimated Compensation for such Plan
Year is greater than $250,000 (as Adjusted).
Employee shall mean any person who renders services to Advisors
or any of its Subsidiaries in the status of an employee.
Employer of a Participant, determined on any date, shall mean the
Person of which the Participant is an Employee.
Equity Holdings of an Employee, determined on any date, shall
mean the aggregate Fair Market Value of all Units held directly by such Employee
or in which such Employee has a pecuniary interest (to the extent of such
interest), including Restricted Units, Deferred Units and Units held in his
Deferral Accounts, whether or not vested. Such Employee shall be deemed to have
a pecuniary interest in Units underlying options or Unit appreciation rights
awarded to him pursuant to a Unit Incentive Plan, whether or not vested, equal
to the dollar amount by which the Fair Market Value of such Units as of such
date exceeds the exercise price or base price.
ERISA shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
Estimated Bonus Compensation of an Employee for a Plan Year shall
mean the estimated amount of total Bonus Compensation which will be paid to such
Employee for services rendered by him to Advisors or any of its Subsidiaries
during such Plan Year, determined in accordance with the first of the following
rules which is applicable:
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(i) If the total Bonus Compensation for services rendered by
such Employee to Advisors or any of its Subsidiaries during the year preceding
such Plan Year (annualized if he was employed for less than the whole year) is
fixed at the time of such determination, such total Bonus Compensation shall be
such Employee's Estimated Bonus Compensation for such Plan Year.
(ii) If the total Bonus Compensation for services rendered
by such Employee to Advisors or any of its Subsidiaries during the year
preceding such preceding year (annualized if he was employed for less than the
whole year) is fixed at the time of such determination, such total Bonus
Compensation shall be such Employee's Estimated Bonus Compensation for such Plan
Year.
(iii) If not determined in accordance with the preceding
rules, the Estimated Bonus Compensation of such Employee for such Plan Year
shall be determined by the Committee.
Estimated Compensation of an Employee for a Plan Year shall mean
(i) his Base Salary determined as of the first day of such Plan Year, or if he
becomes an Employee during such Plan Year, his Base Salary determined as of the
date he becomes an Employee, plus (ii) his Estimated Bonus Compensation for such
Plan Year.
Fair Market Value of a Unit shall mean the fair market value of
such Unit as determined in good faith by the Committee.
Former Employee shall mean a person who is not, at the time of
reference, rendering services to Advisors or any of its Subsidiaries in the
status of an employee.
Holdings shall mean PIMCO Advisors Holdings L.P., a Delaware
limited partnership.
Holdings Management Board shall mean the Management Board of
Holdings or any successor board established by the general partner of Holdings.
Holdings Units shall mean units of limited partner interest in
Holdings.
Indemnified Person shall have the meaning set forth in Section
10.4(b).
Investment Management Firm shall mean any division or Subsidiary
of Advisors which is principally engaged in the investment advisory business.
Investment Management Services shall mean any services which
involve: (i) the management, for a fee or other remuneration, of an investment
account or fund (or a portion thereof) or a group of investment accounts or
funds, or (ii) the giving of advice, for a fee or other remuneration, with
respect to the investment of specific assets or funds (or a specific portion
thereof) or any specific group of assets or funds; provided, however, that
Investment Management Services shall not include the giving of general
investment advice that is not related
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to an identifiable investment account or fund (or portion thereof) or group of
investment accounts or funds for which the advisor receives no fee or other
remuneration.
Managed Funds shall mean, as of any date, those funds or
investments with respect to which any Investment Management Firm or any
Subsidiary of any Investment Management Firm is performing any Investment
Management Services.
Management Boards shall mean the Advisors Management Board and
the Holdings Management Board.
Managing Director shall mean a person who is employed by an
Investment Management Firm in the capacity of, and holds the title of, Managing
Director.
Money Market Fund shall mean an open end mutual fund selected by
the Trustee which invests in short-term investment grade interest-bearing
securities and endeavors to maintain a share value of $1.00.
Non-Canadian Compensation of an Employee for a Plan Year shall
mean (i) if he is not a resident of Canada at any time during such Plan Year,
his Compensation for such Plan Year, or (ii) if he is a resident of Canada at
any time during such Plan Year, his Compensation for such Plan Year which is not
Canadian Compensation.
Participant shall mean a person who is a Mandatory Participant or
a Voluntary Participant during the current Plan Year, or who was a Mandatory
Participant or a Voluntary Participant during a prior Plan Year.
Participating Employer shall mean Advisors, any Subsidiary of
Advisors which is not an Investment Management Firm, any Subsidiary of Advisors
which is an Investment Management Firm and which adopts the Plan in accordance
with Section 11.4(a), and any successor Business Entity which adopts the Plan
pursuant to Section 11.4(b).
Partnership shall mean Advisors or Holdings.
Person shall mean an individual, Business Entity, trust, estate,
custodian, nominee or any other entity in its own or any representative
capacity.
Plan shall mean the Executive Deferred Compensation Plan of PIMCO
Advisors Holdings L.P. and PIMCO Advisors L.P.
Plan Year shall mean the calendar year.
Prohibited Competition Activity shall have the meaning set forth
in Section 8.4(a).
Prohibited Investment Management Services shall mean any
Investment Management Services which compete with the Investment Management
Services of any Investment Management Firm or any Subsidiary of any Investment
Management Firm.
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Qualified Participant shall mean a Participant who is a partner
of Advisors or who is qualified to be a partner of Advisors under the Advisors
Partnership Agreement.
Rabbi Trust shall mean that certain trust dated as of December 1,
1996 established by Advisors and the other Participating Employers as of that
date for purposes of receiving payments of deferred Compensation, investing such
payments pursuant to Article VII, and distributing Benefits to Participants and
Beneficiaries pursuant to Article IX.
Restricted Unit Agreement shall mean an agreement governing the
vesting and forfeiture of Restricted Units.
Restricted Units shall mean Units issued to Employees of Advisors
and its Subsidiaries pursuant to a Unit Incentive Plan which are subject to
forfeiture until they vest..
Retirement of an Employee shall mean his retirement on or after
his fifty-fifth birthday in accordance with the employment rules and policies
established by his Employer.
Rules of the Plan shall mean the rules adopted by the Committee
pursuant to Section 10.2(a)(i), as the same may be amended or revoked from time
to time.
Subsidiary of a Person shall mean a subsidiary of such Person
within the meaning of Regulation S-X under the Securities Act of 1933, as
amended.
Termination of Employment of a Participant shall occur when such
Participant ceases to be employed by Advisors or any of its Subsidiaries for any
reason except Retirement, Disability or death; provided, however, that a
vacation, sick leave or leave of absence taken by a Participant in accordance
with the employment rules and policies established by his Employer shall not
constitute a Termination of Employment; provided, further, that failure of a
Participant to return to work upon expiration of any vacation, sick leave or
leave of absence shall constitute a Termination of Employment on such date as is
determined by the employment rules and policies of his Employer.
Trustee shall mean the trustee under the Rabbi Trust.
Unforeseen Emergency shall have the meaning set forth in Section
8.2(c).
Unit Award shall have the meaning set forth in Section 4.1.
Unit Award Compensation shall have the meaning set forth in
Section 4.2.
Unit Award Contribution Subaccount of a Participant for a Plan
Year shall mean the contribution subaccount of his Unit Award Deferral Account
for such Plan Year.
Unit Award Deferral Account of a Participant shall mean his
individual account established in accordance with Section 6.1(a).
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Unit Award Deferral Subaccount of a Participant for a Plan Year
shall mean the deferral subaccount of his Unit Award Deferral Account for such
Plan Year.
Unit Incentive Plan shall mean the 1998 Unit Incentive Plan or
any similar plan for the granting of options on Units, restricted Units, Unit
payments, deferred Units, Unit appreciation rights and similar awards to
Employees of Advisors and its Subsidiaries.
Units shall mean units of partner interest in a Partnership.
Vest, when used with reference to a Participant's Deferral
Accounts and subaccounts, shall mean becoming nonforfeitable except as provided
in Section 8.3.
ARTICLE II
ELIGIBILITY FOR COMPENSATION DEFERRALS
Section 2.1 Mandatory Participation
(a) An Eligible Employee whose Estimated Compensation for a Plan
Year is less than $1,000,000 (as Adjusted) and whose Equity Holdings determined
as of the first day of such Plan Year, or if he becomes an Employee during such
Plan Year, his Equity Holdings determined as of the date he becomes an Employee,
are less than his Estimated Compensation, shall become a Mandatory Participant
as of the first day of such Plan Year, or if later, the date on which he becomes
an Employee, and shall remain a Mandatory Participant until the last day of such
Plan Year.
(b) An Eligible Employee whose Estimated Compensation for a Plan
Year is equal to or greater than $1,000,000 (as Adjusted) and whose Equity
Holdings determined as of the first day of such Plan Year, or if he becomes an
Employee during such Plan Year, his Equity Holdings determined as of the date he
becomes an Employee, are less than twice his Estimated Compensation, shall
become a Mandatory Participant as of the first day of such Plan Year, or if
later, the date on which he becomes an Employee, and shall remain a Mandatory
Participant until the last day of such Plan Year.
(c) A Participating Employer may, when it adopts the Plan and
thereafter during the third quarter of any Plan Year, specify that any of its
Employees who is elected as a Managing Director shall be a Mandatory Participant
for the Plan Year in which he is elected and such number of ensuing Plan Years
as shall be specified by such Participating Employer.
Section 2.2 Voluntary Participation
An Eligible Employee who is not a Mandatory Participant for a
Plan Year may elect to participate in the Plan as a Voluntary Participant as of
the first day of such Plan Year, or if later, the date on which he becomes an
Employee, and shall remain a Voluntary Participant until the last day of such
Plan Year.
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ARTICLE III
COMPENSATION DEFERRAL
Section 3.1 Mandatory Deferral
(a) Each Mandatory Participant for a Plan Year shall defer the
following amount of his Compensation for such Plan Year:
(i) 10% of his Compensation between $250,000 (as Adjusted)
and $500,000 (as Adjusted); plus
(ii) 30% of his Compensation, if any, between $500,000 (as
Adjusted) and $1,000,000 (as Adjusted); plus
(iii) 30% of his Compensation, if any, in excess of
$1,000,000 (as Adjusted).
(b) A Participating Employer may, when it adopts the Plan and
thereafter during the third quarter of any Plan Year, specify percentages and
amounts in excess of those set forth above, which shall be applicable to
succeeding Plan Years until changed; provided, however, that mandatory deferral
of Compensation in excess of $1,000,000 (as Adjusted) may not exceed 50%, and
mandatory deferral of total Compensation may not exceed 40%.
(c) No amounts shall be deferred unless the total amount deferred
exceeds $1,000.
Section 3.2 Voluntary Deferral
(a) Each Mandatory Participant for a Plan Year may elect to defer
a specified amount of his Compensation for such Plan Year exceeding the amount
deferred pursuant to Section 3.1, and each Voluntary Participant for a Plan Year
may elect to defer a specified amount of his Compensation for such Plan Year.
(b) The total amount of Compensation for a Plan Year deferred by
a Participant pursuant to Section 3.1 and this Section 3.2 shall not exceed the
total amount of his Compensation for such Plan Year less the amount determined
as of the first day of such Plan Year in accordance with Code Section
401(a)(17).
Section 3.3 Limit on Deferral of Canadian Compensation
The amount of a Participant's Canadian Compensation for a Plan
Year that may be deferred pursuant to Sections 3.1 and 3.2 shall not exceed such
Participant's Canadian Bonus Compensation for such Plan Year.
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Section 3.4 Compensation Deferral Elections
(a) No later than two weeks after the Plan is adopted by a
Participating Employer, the Committee shall provide each Employee of such
Participating Employer who may be an Eligible Employee for the ensuing Plan Year
with a Compensation deferral form for such Plan Year on which such Employee
shall provide the information set forth in Section 3.5, including any election
by such Employee, if not a Mandatory Participant, to participate in the Plan as
a Voluntary Participant. Each such Employee shall complete and sign the
Compensation deferral form and return it to the Committee no later than four
weeks after the Plan is adopted by such Participating Employer.
(b) In the fourth quarter of each Plan Year following the
adoption of the Plan by a Participating Employer, the Committee shall provide
each Employee of such Participating Employer who may be an Eligible Employee for
the ensuing Plan Year with a Compensation deferral form for such Plan Year on
which such Employee shall provide the information set forth in Section 3.5,
including any election by such Employee, if not a Mandatory Participant, to
participate in the Plan as a Voluntary Participant. Each such Employee shall
complete and sign the Compensation deferral form and return it to the Committee
no later than the last day of such quarter.
(c) No later than two weeks after an Employee is first employed
by a Participating Employer, if such Employee may be an Eligible Employee for
the current Plan Year, the Committee shall provide such Employee with a
Compensation deferral form for such Plan Year on which such Employee shall
provide the information set forth in Section 3.5, including any election by such
Employee, if not a Mandatory Participant, to participate in the Plan as a
Voluntary Participant. Such Employee shall complete and sign the Compensation
deferral form and return it to the Committee no later than four weeks following
the date on which such Eligible Employee is first employed by such Participating
Employer.
Section 3.5 Contents of Compensation Deferral Form
Each Employee shall set forth on his Compensation deferral form
for a Plan Year
(i) his consent that he and his Beneficiaries, his and their
successors in interest and assigns and all Persons claiming under him or them
shall be bound by the statements contained therein and by the provisions of the
Plan and the Rules of the Plan as they then exist, and as they may be amended
from time to time;
(ii) the Plan Year to which the form applies;
(iii) if applicable, his election to participate in the Plan
as a Voluntary Participant;
(iv) if applicable, the amount of his Compensation for such
Plan Year that he elects to defer pursuant to Section 3.2;
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(v) the period during which his deferred Compensation for
such Plan Year is to be deferred pursuant to Section 8.2(a);
(vi) the method of distribution of Benefits from his
Compensation Deferral Subaccounts and Compensation Contribution Subaccount, if
any, established for such Plan Year;
(vii) whether income from the Assets held in his
Compensation Deferral Subaccounts and Compensation Contribution Subaccount, if
any, for such Plan Year shall be distributed to him, and if so, when such
distributions should commence; and
(viii) such other information as may be required for the
administration of the Plan.
Section 3.6 Deferral Procedures
The amount of Compensation for a Plan Year deferred by a
Participant shall be determined at the time of each payment of his Bonus
Compensation for such Plan Year, and shall be withheld from such payment, as
follows:
(i) If the total amount of such Participant's Bonus
Compensation for such Plan Year is known at the time of the first payment of his
Bonus Compensation for such Plan Year, such total amount shall be added to his
Base Salary for such Plan Year, and his Deferral Schedule for such Plan Year
shall be applied to such amount to produce the total amount to be deferred. If
his Bonus Compensation is paid in one installment, the total amount to be
deferred shall be withheld from such installment. If his Bonus Compensation is
paid in more than one installment, a proportionate amount of the total amount to
be deferred shall be withheld from each installment.
(ii) If the total amount of such Participant's Bonus
Compensation for such Plan Year is not known at the time of the first payment of
his Bonus Compensation for such Plan Year, then at the time of each payment of
Bonus Compensation, his total Bonus Compensation for such Plan Year through the
date of such payment shall be added to his Base Salary for such Plan Year, and
his Deferral Schedule for such Plan Year shall be applied to such amount to
produce the total amount to be deferred. The total amount to be deferred less
the total amount already deferred for such Plan Year shall be withheld from such
payment.
Examples of typical deferral calculations are attached to this Plan as Schedule
1.
Section 3.7 Payments to Trustee
(a) Each Participating Employer shall pay to the Trustee the
Compensation deferred by Participants who are Employees of such Participating
Employer, at the times and in the amounts such Compensation would have been paid
to such Participants by such Participating Employer if it had not been deferred.
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(b) Upon receipt by the Trustee of a payment made by a
Participating Employer pursuant to Section 3.7(a) of Compensation for a Plan
Year deferred by a Participant, the Trustee shall allocate such payment to the
Participant's Compensation Deferral Subaccounts for such Plan Year.
Section 3.8 Discontinuance of Deferral
A Participant may request a reduction or discontinuance of the
deferral of his Compensation for a Plan Year pursuant to Section 3.2 on a form
specified by the Committee. The reduction or discontinuance shall apply only to
the portion of such Participant's Compensation for such Plan Year that has not
yet been earned.
ARTICLE IV
UNIT AWARD DEFERRAL
Section 4.1 Eligibility for Unit Award Deferral
An Eligible Employee who receives an award of Restricted Units
under a Unit Incentive Plan ( a "Unit Award") and who is not a Participant for
the Plan Year in which he receives such Unit Award may elect to participate in
the Plan as a Voluntary Participant as of the date on which he receives such
Unit Award, and shall remain a Voluntary Participant until the last day of such
Plan Year.
Section 4.2 Voluntary Deferral
An Employee who receives a Unit Award during a Plan Year for
which he is a Mandatory Participant or Voluntary Participant may elect to defer
compensation recognized upon vesting of such Unit Award ("Unit Award
Compensation").
Section 4.3 Unit Award Deferral Elections
No later than two weeks after an Eligible Employee receives a
Unit Award, the Committee shall provide such Employee with a Unit Award deferral
form for the current Plan Year on which such Employee may provide the
information set forth in Section 4.4, including an election by such Employee, if
not a Mandatory Participant, to participate in the Plan as a Voluntary
Participant. If such Employee wishes to defer Unit Award Compensation with
respect to such Unit Award, he shall complete and sign the Unit Award deferral
form and return it to the Committee no later than four weeks following the date
that he receives the Unit Award.
Section 4.4 Contents of Unit Award Deferral Form
Each Employee shall set forth on his Unit Award deferral form for
a Plan Year:
(i) his consent that he and his Beneficiaries, his and their
successors in interest and assigns and all Persons claiming under him or them
shall be bound by the statements
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contained therein and by the provisions of the Plan and the Rules of the Plan as
they then exist, and as they may be amended from time to time;
(ii) the Plan Year to which the form applies;
(iii) if applicable, his election to participate in the Plan
as a Voluntary Participant;
(iv) the number of Units underlying his Unit Award for such
Plan Year for which he elects to defer Unit Award Compensation;
(v) the period for which his deferred Unit Award
Compensation is to be deferred pursuant to Section 8.2(b);
(vi) the method of distribution of Benefits from his Unit
Award Deferral Subaccount and Unit Award Contribution Subaccount, if any, for
such Plan Year;
(vii) whether income from the Assets held in his Unit Award
Deferral Subaccount and Unit Award Contribution Subaccount, if any, established
for such Plan Year shall be distributed to him, and if so, when such
distributions should commence; and
(viii) such other information as may be required for the
administration of the Plan.
Section 4.5 Delivery of Units to Trustee
(a) The issuer of Restricted Units as to which a Participant has
elected to defer Unit Award Compensation shall issue and deliver such Units to
the Trustee.
(b) Upon receipt by the Trustee of Restricted Units as to which a
Participant has elected to defer Unit Award Compensation, the Trustee shall
allocate such Units to the Participant's Unit Award Deferral Subaccount for the
Plan Year in which the Participant received the Unit Award.
ARTICLE V
COMPENSATION DEFERRAL ACCOUNTS
Section 5.1 Compensation Deferral Accounts
(a) The Trustee shall establish and thereafter maintain for each
Participant who defers Compensation a Compensation Deferral Account, which shall
consist of the subaccounts provided for in this Section 5.1.
(b) If a Participant is a Mandatory Participant for a Plan Year,
the Trustee shall establish and thereafter maintain a basic deferral subaccount
of such Participant's
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Compensation Deferral Account for such Plan Year. Such basic deferral subaccount
shall be increased by any payments received by the Trustee for Compensation
deferred by such Participant for such Plan Year pursuant to Sections 3.1(a)(i)
and (ii), and by any income realized with respect to Assets held in such
subaccount (unless such income is credited to a corresponding distribution
subaccount), and shall be decreased by any distributions of Benefits from such
subaccount, and by any losses realized with respect to Assets held in such
subaccount (unless such losses are debited to a corresponding distribution
subaccount).
(c) If a Participant is a Mandatory Participant for a Plan Year
and his Compensation for such Plan Year is equal to or greater than $1,000,000
(as Adjusted), the Trustee shall establish and thereafter maintain an excess
deferral subaccount of such Participant's Compensation Deferral Account for such
Plan Year. Such excess deferral subaccount shall be increased by any payments
received by the Trustee for Compensation deferred by such Participant for such
Plan Year pursuant to Section 3.1(a)(iii), and by any income realized with
respect to Assets held in such subaccount (unless such income is credited to a
corresponding distribution subaccount), and shall be decreased by any
distributions of Benefits from such subaccount, and by any losses realized with
respect to Assets held in such subaccount (unless such losses are debited to a
corresponding distribution subaccount).
(d) If a Participant elects to defer a specified amount of his
Compensation for a Plan Year pursuant to Section 3.2, the Trustee shall
establish and thereafter maintain a voluntary deferral subaccount of such
Participant's Compensation Deferral Account for such Plan Year. Such voluntary
deferral subaccount shall be increased by any payments received by the Trustee
for Compensation deferred by such Participant for such Plan Year pursuant to
Section 3.2, and by any income realized with respect to Assets held in such
subaccount (unless such income is credited to a corresponding distribution
subaccount), and shall be decreased by any distributions of Benefits from such
subaccount, and by any losses realized with respect to Assets held in such
subaccount (unless such losses are debited to a corresponding distribution
subaccount).
(e) If (i) a Participant is a Mandatory Participant for a Plan
Year, or (ii) a Participant's Equity Holdings determined as of the first day of
a Plan Year, or if he becomes an Employee during such Plan Year, his Equity
Holdings determined as of the date he becomes an Employee, are less than four
times his Estimated Compensation, such Participant's Compensation Deferral
Subaccounts for such Plan Year shall be designated as Discount Subaccounts, and
the Trustee shall establish and thereafter maintain a contribution subaccount of
such Participant's Compensation Deferral Account for such Plan Year. Such
contribution subaccount shall be increased by any allocation of Advisors Units
to such subaccount pursuant to Section 7.2, and by any income realized with
respect to Assets held in such subaccount (unless such income is credited to a
corresponding distribution subaccount), and shall be decreased by any
distributions of Benefits from such subaccount, and by any losses realized with
respect to Assets held in such subaccount (unless such losses are debited to a
corresponding distribution subaccount).
(f) If a Participant elects, effective at a specified time, to be
paid the income realized with respect to the Assets held in his Compensation
Deferral Subaccounts and
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Compensation Contribution Subaccount, if any, established for a Plan Year, the
Trustee shall establish as of such effective time and thereafter maintain a
distribution subaccount of such Participant's Compensation Deferral Account for
such Plan Year; provided, however, that a Participant may not elect to be paid
the income realized with respect to Assets held in a Compensation Contribution
Subaccount established for a Plan Year until such subaccount has Vested in
accordance with Section 8.1(a). Such distribution subaccount shall be increased
by any income realized with respect to the Assets held in such Compensation
Deferral Subaccounts and Compensation Contribution Subaccount, and by any income
realized with respect to Assets held in such distribution subaccount, and shall
be decreased by any distribution of Benefits from such distribution subaccount,
by any losses realized with respect to Assets held in such Compensation Deferral
Subaccounts and Compensation Contribution Subaccount, and by any losses realized
with respect to Assets held in such distribution subaccount.
(g) If a Participant is a resident of Canada at any time during a
Plan Year, his Compensation Deferral Subaccounts and Compensation Contribution
Subaccount, if any, established for such Plan Year shall be divided between
Canadian subaccounts and Non-Canadian subaccounts. His deferred Canadian
Compensation for such Plan Year shall be allocated to his Canadian Compensation
Deferral Subaccounts established for such Plan Year, and his deferred
Non-Canadian Compensation for such Plan Year, if any, shall be allocated to his
Non-Canadian Compensation Deferral Subaccounts established for such Plan Year.
Amounts allocated to his Compensation Contribution Subaccount for such Plan Year
pursuant to Section 7.2 shall be further allocated to his Canadian Compensation
Contribution Subaccount and Non-Canadian Compensation Contribution Subaccount
for such Plan Year, in proportion to the cash in each immediately prior to the
purchase of Advisors Units as provided in Section 7.2.
(h) A Participant's Compensation Deferral Account shall not be
liable for his debts, contracts or engagements, or the debts, contracts or
engagement of his Beneficiaries or successors in interest, or be taken in
execution by levy, attachment or garnishment or by any other legal or equitable
proceeding, nor shall the Participant or his Beneficiaries or successors in
interest have any rights to alienate, anticipate, commute, pledge, encumber or
assign any Benefits or other distributions under this Plan in any manner
whatsoever, except for the Participant's right to designate a Beneficiary or
Beneficiaries pursuant to Section 9.1.
(i) As provided in Section 11.3, the rights of a Participant and
his Beneficiaries in the Assets in his Compensation Deferral Account shall be no
greater than the rights of an unsecured general creditor of his Employer.
ARTICLE VI
UNIT AWARD DEFERRAL ACCOUNTS
Section 6.1 Unit Award Deferral Accounts
(a) The Trustee shall establish and thereafter maintain for each
Participant who defers Unit Award Compensation a Unit Award Deferral Account,
which shall consist of the subaccounts provided for in this Section 6.1.
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(b) If a Participant elects to defer Unit Award Compensation with
respect to a Unit Award received by him during a Plan Year, the Trustee shall
establish and thereafter maintain a deferral subaccount of such Participant's
Unit Award Deferral Account for such Plan Year. Such deferral subaccount shall
be divided into tranches corresponding to the dates on which the restrictions on
the Restricted Units in such Unit Award expire under the Deferred Restricted
Unit Agreement covering such Unit Award. Each tranche in such deferral
subaccount shall be increased by any Units received by the Trustee with respect
to such tranche pursuant to Section 4.5, and by any income realized with respect
to Assets held in such tranche (unless such income is credited to a
corresponding distribution subaccount), and shall be decreased by any
distributions of Benefits from such tranche, and by any losses realized with
respect to Assets held in such tranche (unless such losses are debited to a
corresponding distribution subaccount).
(c) If a Participant elects to defer Unit Award Compensation with
respect to a Unit Award received by him during a Plan Year and (i) such
Participant is a Mandatory Participant for such Plan Year, or (ii) such
Participant's Equity Holdings determined as of the first day of such Plan Year,
or if he becomes an Employee during such Plan Year, his Equity Holdings
determined as of the date he becomes an Employee, are less than four times his
Estimated Compensation, such Participant's Unit Award Deferral Subaccount for
such Plan Year shall be designated as a Discount Subaccount, and the Trustee
shall establish and thereafter maintain a contribution subaccount of such
Participant's Unit Award Deferral Account for such Plan Year. Such contribution
subaccount shall be divided into tranches corresponding to the dates on which
the restrictions on the Restricted Units in such Unit Award expire under the
Deferred Restricted Unit Agreement covering such Unit Award. Each tranche in
such contribution subaccount shall be increased by any allocation of Advisors
Units to such tranche pursuant to Section 7.2, and by any income realized with
respect to Assets held in such tranche (unless such income is credited to a
corresponding distribution subaccount), and shall be decreased by any
distributions of Benefits from such tranche, and by any losses realized with
respect to Assets held in such tranche (unless such losses are debited to a
corresponding distribution subaccount).
(d) If a Participant elects, effective at a specified time, to be
paid the income realized with respect to the Assets held in his Unit Award
Deferral Subaccount and Unit Award Contribution Subaccount, if any, established
for a Plan Year, the Trustee shall establish as of such effective time and
thereafter maintain a distribution subaccount of such Participant's Unit Award
Deferral Account for such Plan Year; provided, however, that a Participant may
not elect to be paid the income realized with respect to (i) Units held in such
Unit Award Deferral Subaccount until such Units have Vested in accordance with
Section 8.1(b), or (ii) Assets held in such Unit Award Contribution Subaccount
until such subaccount has Vested in accordance with Section 8.1(a). Such
distribution subaccount shall be increased by any income realized with respect
to the Assets held in such Unit Award Deferral Subaccount and Unit Award
Compensation Contribution Subaccount, and by any income realized with respect to
Assets held in such distribution subaccount, and shall be decreased by any
distribution of Benefits from such distribution subaccount, by any losses
realized with respect to Assets held in such Unit Award Deferral Subaccount and
Unit Award Contribution Subaccount, and by any losses realized with respect to
Assets held in such distribution subaccount.
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(e) A Participant's Unit Award Deferral Account shall be not be
liable for his debts, contracts or engagements, or the debts, contracts or
engagements of his Beneficiaries or successors in interest, or be taken in
execution by levy, attachment or garnishment or by any other legal or equitable
proceeding, nor shall the Participant or his Beneficiaries or successors in
interest have any rights to alienate, anticipate, commute, pledge, encumber or
assign any Benefits or other distributions under this Plan in any manner
whatsoever, except for the Participant's right to designate a Beneficiary or
Beneficiaries pursuant to Section 9.1.
(f) As provided in Section 11.3, the rights of a Participant and
his Beneficiaries in the Assets in his Unit Award Deferral Account shall be no
greater than the rights of an unsecured general creditor of his Employer.
ARTICLE VII
INVESTMENT OF FUNDS
Section 7.1 Investment in Money Market Funds
Cash received by the Trustee with respect to a subaccount of a
Participant's Deferral Accounts shall be invested in Money Market Funds until
invested in Advisors Units or distributed.
Section 7.2 Investment in Advisors Units
(a) On the fifth trading day of each calendar month, the Trustee
shall sell any Assets other than Advisors Units held in Deferral Subaccounts and
Contribution Subaccounts, and shall use all of the cash held in such subaccounts
after receipt of the proceeds of sale to purchase Advisors Units from Advisors.
The purchase price of the Advisors Units shall be (i) 85% of Fair Market Value
for Advisors Units purchased with cash from (i) Discount Subaccounts and
Contribution Subaccounts of Current Employees, and (ii) 100% of Fair Market
Value for Advisors Units purchased with cash from other Deferral Subaccounts and
Contribution Subaccounts.
(b) The Trustee shall aggregate all of the cash in (i) Discount
Subaccounts and Contribution Subaccounts of Current Employees and (ii) other
Deferral Subaccounts and Contribution Subaccounts, and shall purchase the
maximum possible number of whole Advisors Units with each such aggregate of
cash. Any remaining cash shall be allocated back to such subaccounts in
proportion to the cash in each such subaccount immediately prior to the
purchase.
(c) The Trustee shall allocate 85% of the Advisors Units
purchased at 85% of Fair Market Value to the Discount Subaccounts and
Contribution Subaccounts of Current Employees, in proportion to the cash in each
such subaccount immediately prior to the purchase.
(d) The Trustee shall allocate 15% of the Advisors Units
purchased at 85% of Fair Market Value to the Contribution Subaccounts of each
Current Employee in proportion to
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the Advisors Units allocated pursuant to Section 7.2(c) to such Participant's
Discount Subaccounts and Contribution Subaccounts for the same Plan Year.
(e) The Trustee shall allocate 100% of the Advisors Units
purchased at 100% of Fair Market Value to (i) Deferral Subaccounts of Current
Employees not designated as Discount Subaccounts and (ii) Deferral Subaccounts
and Contribution Subaccounts of Former Employees, in proportion to the cash in
each such subaccount immediately prior to the purchase.
(f) The Trustee shall allocate fractional Units as necessary to
subaccounts.
Section 7.3 Quarterly Distributions
Not later than thirty days after each payment of a distribution
on the Advisors Units, the Trustee shall sell any Assets held in the
distribution subaccounts of the Deferral Accounts, and shall distribute all of
the cash held in a Participant's distribution subaccounts to him.
ARTICLE VIII
VESTING OF ACCOUNTS; DEFERRAL
PERIODS; FORFEITURE
Section 8.1 Vesting of Accounts
(a) A Participant's interest in a Compensation Deferral
Subaccount shall Vest immediately upon deferral. A Participant's interest in a
Compensation Contribution Subaccount shall vest on the earlier of (i) the first
day of the sixth year following the Plan Year in which such subaccount was
established (the last day of the third year following such Plan Year for a
Canadian Compensation Contribution Subaccount), or (ii) his Retirement,
Disability or death, or (iii) the occurrence of a Change of Control. In the
event of a Participant's Termination of Employment prior to the date on which a
Compensation Contribution Subaccount Vests, all of the Assets in such subaccount
shall be forfeited and returned by the Trustee to Advisors.
(b) A Participant's interest in each tranche of a Unit Award
Deferral Subaccount shall Vest upon expiration of the restrictions on the Units
in such tranche. A Participant's interest in each tranche of a Unit Award
Contribution Subaccount shall Vest on the later of (i) the date on which the
Units in the corresponding Unit Award Deferral Subaccount Vest, or (ii) the
earlier of (A) the first day of the sixth year following the Plan Year in which
such tranche was established, or (B) his Retirement, Disability or death, or (C)
the occurrence of a Change of Control. In the event of the cancellation or
expiration of the Deferred Restricted Unit Agreement covering Units allocated to
a tranche prior to the date on which such Units Vest, all of the Assets in such
tranche and the corresponding tranche of the Unit Award Contribution Subaccount
shall be forfeited and returned by the Trustee to Advisors, and in the event of
a Participant's Termination of Employment prior to the date on which a tranche
of a Unit Award Contribution Subaccount Vests, all of the Assets in such tranche
shall be forfeited and returned by the Trustee to Advisors.
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Section 8.2 Compensation Deferral Periods
(a) Non-Canadian Compensation for a Plan Year shall be deferred
until five years following such Plan Year. A Participant may elect to defer such
Compensation for such minimum period or for any whole number of years extending
beyond such minimum period, or until the Participant's Retirement or Disability
or for any whole number of years after the Participant's Retirement or
Disability, or until the Participant's death. Canadian Compensation for a Plan
Year shall be deferred for three years following such Plan Year.
(b) Unit Award Compensation deferred with respect to a Unit Award
received during a Plan Year shall be deferred until the later of (i) five years
following such Plan Year or (ii) one full year after expiration of all
restrictions on the Units covered by such Unit Award. A Participant may elect to
defer such Unit Award Compensation for such minimum period or for any whole
number of years extending beyond such minimum period, or until the Participant's
Retirement or Disability or for any whole number of years after the
Participant's Retirement or Disability, or until the Participant's death.
(c) If the Committee determines that a Participant has suffered a
severe financial hardship resulting from a sudden and unexpected illness or
accident of the Participant or of a dependent of the Participant, the loss of
the Participant's property due to casualty, or other similar extraordinary and
unforeseeable circumstances arising as a result of events beyond the control of
the Participant (each, an "Unforeseen Emergency"), the Committee may, upon the
Participant's request, but only to the extent required to mitigate the
Participant's hardship, (i) reduce the deferral periods applicable to one or
more Plan Years for which Compensation was deferred by the Participant or (ii)
permit an early transfer of Assets from the Participant's Deferral Account to
the Participant. Reduction of a deferral period or early transfer from a
Participant's Deferral Account may be authorized by the Committee only to the
extent that the Participant's hardship cannot be relieved (i) through
reimbursement or compensation by insurance or otherwise, (ii) by liquidation of
the Participant's assets, to the extent that liquidation of such assets would
not itself cause severe financial hardship, or (iii) by cessation of deferrals
under the Plan. Examples of what are not considered to be Unforeseen Emergencies
include the desire to send a Participant's child to college or the desire to
purchase a home.
Section 8.3 Forfeiture By Reason of Prohibited Competition Activity
If so specified by a Participating Employer when it adopts the
Plan, in the event that an Employee of such Employer who was a Managing Director
at the time of his Termination of Employment, Retirement or Disability engages
in any Prohibited Competition Activity within five years after the Plan Year in
which an excess deferral subaccount of his Compensation Deferral Account was
established for him (three years in the case of a Canadian excess deferral
subaccount), all Assets in such subaccount shall be forfeited and returned by
the Trustee to the Managing Director's Employer.
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Section 8.4 Prohibited Competition Activity
(a) "Prohibited Competition Activity" means any of the following
activities:
(i) Directly or indirectly (A) diverting or taking away any
Managed Funds, or (B) soliciting any Person for the purpose of diverting or
taking away any Managed Funds.
(ii) Directly or indirectly performing any Prohibited
Investment Management Services. In the event that a former Managing Director
desires to perform Investment Management Services which he believes will not
constitute Prohibited Investment Management Services, he may, prior to his
commencing the performance of such Investment Management Services, request
Advisors to make a determination as to whether the proposed Investment
Management Services constitute Prohibited Investment Management Services. Any
such request shall be made in writing and shall contain all information
concerning the proposed Investment Management Services which the former Managing
Director reasonably believes to be material to the determination to be made. In
addition, the former Managing Director shall submit such other information as
may be reasonably requested by Advisors.
(iii) Directly or indirectly soliciting or encouraging any
Employee of Advisors or any of its Subsidiaries to leave such employment or
directly or indirectly employing or causing to be employed any such Employee.
(b) For purposes of this Section 8.4, a former Managing Director
shall be deemed to be indirectly engaged in an activity described in Section
8.4(a) if such activity is carried out or effected by or through another Person
that is acting at the direction of, or in conjunction with, the former Managing
Director, on behalf of the former Managing Director or any other Person.
(c) No activity shall be considered to constitute Prohibited
Competition Activity if the involvement of the former Managing Director in such
activity has been approved, prior to the time that he becomes involved in such
activity, by the Advisors Management Board. The determination by the Advisors
Management Board to grant or withhold approval for a former Managing Director to
be involved in any activity that would otherwise constitute Prohibited
Competition Activity shall be final and shall be binding on the parties.
(d) In the event that the Advisors Management Board determines
that a former Managing Director has engaged in any activity (the "Disputed
Activity") which constitutes the performance of Prohibited Competition Activity,
Advisors shall give written notice (the "Disputed Activity Notice") to the
former Managing Director of the Board's determination that such Disputed
Activity constitutes Prohibited Competition Activity. Such Disputed Activity
Notice shall explain, in reasonable detail, the nature of the Disputed Activity
and the reasons why the Advisors Management Board believes such Disputed
Activity constitutes Prohibited Competition Activity. During the thirty-day
period immediately following the giving of the Disputed Activity Notice, the
former Managing Director shall be entitled to take such remedial action as may
be necessary to cure and eliminate, in all material respects, the performance of
the
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Disputed Activity, and any such cure or elimination effected within such
thirty-day period shall cause the Disputed Activity to be deemed not to have
constituted Prohibited Competition Activity.
ARTICLE IX
DESIGNATION OF BENEFICIARIES;
PAYMENT OF BENEFITS
Section 9.1 Designation of Beneficiaries
(a) A Participant shall have the right at any time and from time
to time to designate one or more Persons as Beneficiaries and to revoke any such
designation.
(b) Designation of a Person as a Beneficiary and revocation of
any such designation shall be in writing on a form prescribed by the Committee
and shall become effective upon delivery to the Secretary of Advisors.
Section 9.2 Distribution of Assets
(a) After the expiration of the deferral period applicable to a
Plan Year for which Compensation was deferred by a Participant, the Trustee
shall distribute to the Participant, if he is alive at the date of distribution,
the Assets held in his Compensation Deferral Subaccounts and Compensation
Contribution Subaccount, if any, for such Plan Year, less any amount required to
be withheld by law, in accordance with one of the following methods, as elected
by the Participant in his Compensation deferral form for such Plan Year:
(i) the distribution of such Assets in one installment, or
(ii) with respect to Assets which are not held in his
Canadian Compensation Deferral Subaccounts or Canadian Compensation Contribution
Subaccount, if any, for such Plan Year, the distribution of such Assets in two
or more annual or more frequent installments (not exceeding 20 years or four
installments per year), the Assets included in each such installment to be
determined by dividing the total value of the Assets remaining in such
subaccounts by the remaining number of installments to be paid.
The Participant shall make an election in his Compensation deferral form for
such Plan Year as to whether Assets which are not held in his Canadian
Compensation Deferral Subaccounts or Canadian Compensation Contribution
Subaccount, if any, for such Plan Year shall be distributed in one installment
or two or more annual or more frequent installments. If the Participant elects
to have such Assets distributed in two or more annual or more frequent
installments, he shall specify the number and frequency of such installments at
least one year before the expiration of the deferral period applicable to such
Plan Year. Such specification shall be in writing on a form prescribed by the
Committee and shall become effective upon delivery to the Secretary of Advisors.
If the Participant fails to elect two or more annual or more frequent
installments, or
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having so elected, fails timely to specify the number and frequency of such
installments, all of such Assets shall be distributed in one installment.
(b) After the expiration of the deferral period applicable to a
Plan Year in which a Unit Award was received by a Participant, the Trustee shall
distribute to the Participant, if he is alive at the date of distribution, the
Assets held in his Unit Award Deferral Subaccount and Unit Award Contribution
Subaccount, if any, for such Plan Year, less any amount required to be withheld
by law, in accordance with one of the following methods, as elected by the
Participant in his Unit Award deferral form for such Plan Year:
(i) the distribution of such Assets in one installment, or
(ii) the distribution of such Assets in two or more annual
or more frequent installments (not exceeding 20 years or four installments per
year), the Assets included in each such installment to be determined by dividing
the total value of the Assets remaining in such subaccounts by the remaining
number of installments to be paid.
The Participant shall make an election in his Unit Award deferral form for such
Plan Year as to whether the Assets shall be distributed in one installment or
two or more annual or more frequent installments. If the Participant elects to
have the Assets distributed in two or more annual or more frequent installments,
he shall specify the number and frequency of such installments at least one year
before the expiration of the deferral period applicable to such Plan Year. Such
specification shall be in writing on a form prescribed by the Committee and
shall become effective upon delivery to the Secretary of Advisors. If the
Participant fails to elect two or more annual or more frequent installments, or
having so elected, fails timely to specify the number and frequency of such
installments, all of such Assets shall be distributed in one installment.
(c) Upon the death of a Participant, the Trustee shall
distribute to the Participant's Beneficiaries all of the Assets held in his
Deferral Accounts, less any amount required to be withheld by law, in one
installment.
(d) The Assets included in an installment shall be
distributed to the Participant or his Beneficiaries within thirty days after the
expiration of the relevant deferral period for the first installment or within
thirty days after the death of the Participant, as the case may be, and within
thirty days after the end of the installment period for subsequent installments,
or as soon as practicable thereafter.
(e) The Trustee shall not transfer Advisors Units to a
Participant who is not Qualified or to a Beneficiary. The Trustee shall instead
endeavor to exchange Advisors Units due to be transferred to such a Participant
or to a Beneficiary for Holdings Units prior to the date they are to be
transferred. If such Advisors Units cannot be timely exchanged, the transfer
shall be delayed until they can be exchanged.
(f) If a distribution of Benefits includes a fractional
Unit, Advisors shall redeem such fractional Unit, and if a distribution of
Benefits includes Units, Advisors shall redeem such whole number of Units as
shall be necessary in order for the distribution to include
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cash in the amount required to be withheld by law. In each case, any such
redemption shall be for cash at Fair Market Value, and shall be effected prior
to any exchange of Advisors Units for Holdings Units.
ARTICLE X
ADMINISTRATIVE PROVISIONS
Section 10.1 The Committee
(a) There shall be a Committee for the Plan. Unless otherwise
provided by the Management Boards, the members of the Unit Incentive Committee
of the Advisors Management Board shall be the members of the Committee, and the
Chairperson of the Unit Incentive Committee shall be the Chairperson of the
Committee.
(b) The Committee shall act by a majority of its members in
office, either at a meeting or by a written instrument executed by a majority of
the Committee members. The Chairperson of the Committee is authorized to execute
any instrument required to be executed by the Committee.
(c) The Chairperson of the Committee shall appoint a Secretary to
keep the minutes of its meetings.
Section 10.2 Duties and Powers of the Committee
(a) The Committee shall be the named fiduciary of the Plan, and
shall have full and exclusive discretionary power and authority to operate and
administer the Plan in accordance with the Plan and ERISA, including without
limitation exclusive discretionary power and authority:
(i) to adopt Rules of the Plan that are not inconsistent
with the Plan or applicable law and to amend or revoke any such Rules;
(ii) to construe the Plan and the Rules of the Plan;
(iii) to determine questions of eligibility, deferral,
Vesting and forfeiture;
(iv) to determine entitlement to Benefits;
(v) to make findings of fact as necessary to make any
determinations and decisions in the exercise of such discretionary power and
authority;
(vi) to engage actuaries, attorneys, accountants,
appraisers, brokers, consultants, administrators, physicians or other Persons
and to rely upon the reports, advice, opinions or valuations of any such
Persons;
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(vii) to appoint claims officials and review officials to
conduct the procedures described in Section 10.10; and
(viii) to delegate any such discretionary power or authority
to the Trustee, executive officers or a committee of executive officers of
Advisors, or any other Person.
(b) Every finding, determination and decision made by the
Committee shall be final and binding upon all parties, except to the extent
found by a court of competent jurisdiction to constitute an abuse of discretion.
Section 10.3 Standards of Interpretation and Administration
The Plan shall be uniformly and consistently interpreted and
applied with regard to all Participants in similar circumstances. The Plan shall
be administered, interpreted and applied fairly and equitably and in accordance
with the specified purposes of the Plan.
Section 10.4 Payment of Expenses and Indemnification
(a) Advisors shall pay all expenses (including reasonable
attorneys' fees) reasonably incurred in the administration of the Plan.
(b) Advisors shall indemnify and hold each Committee member, each
other Person rendering services with respect to the Plan or its operation or
administration, and their respective Affiliates (each, an "Indemnified Person"),
harmless from all claims, liabilities and costs (including reasonable attorneys'
fees) arising out of the good faith performance of their services with respect
to the Plan or its operation or administration.
(c) Advisors may obtain and provide for any Indemnified Person,
at the expense of Advisors, liability insurance against liabilities imposed on
such Indemnified Person by law.
Section 10.5 Record Keeping
(a) The Committee shall maintain, or cause to be maintained,
suitable records of (i) each Participating Employer and the date as of which it
adopted the Plan; (ii) each Participant's Deferral Accounts and subaccounts; and
(iii) the Committee's findings, determinations and decisions.
(b) The Committee shall not be required to maintain any records
which duplicate any records maintained by the Participating Employers.
Section 10.6 Statements to Participants
Within sixty days after the last day of each calendar quarter of
the Plan Year, the Trustee shall furnish to each Participant a statement setting
forth the Assets held in, and the value
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of, his Deferral Accounts and each of his subaccounts, and such other
information as the Committee shall instruct the Trustee to furnish to the
Participants.
Section 10.7 Inspection of Records
Copies of the Plan and the records of a Participant's Deferral
Accounts and subaccounts shall be open to inspection by him or his duly
authorized representatives at the principal office of Advisors at any reasonable
business hour.
Section 10.8 Identification of Fiduciaries
The Committee as named fiduciary of the Plan, the Trustee, the
Management Boards, the Participating Employers, and every other Person which
exercises any discretionary authority or discretionary control respecting the
Plan or which has any discretionary authority or discretionary responsibility in
the administration of the Plan, including any Person designated by the Committee
to carry out fiduciary responsibilities under the Plan, shall be a fiduciary of
the Plan and as such shall be subject to the provisions of ERISA and other
applicable laws governing fiduciaries.
Section 10.9 Procedures for Allocation of Administrative
Responsibilities
(a) Administrative responsibilities under the Plan shall be
allocated as follows:
(i) the sole responsibilities allocated to the Committee,
the Trustee, the Management Boards, any Participating Employer and any other
Person shall be those expressly provided in the Plan; and
(ii) all administrative responsibilities not expressly
allocated to the Trustee, the Management Boards, the Participating Employers are
allocated to the Committee, and may be delegated as provided in Section 10.2.
(b) Administrative responsibilities under the Plan may be
reallocated among the Plan fiduciaries by amending the Plan in the manner
prescribed in Section 11.8, followed by the fiduciaries' acceptance of, or
operation under, such amended Plan.
Section 10.10 Claims Procedures
(a) The Committee shall endeavor to ensure that there are at all
times a claims official and a review official who have been appointed by the
Committee and agreed to serve in their respective capacities.
(b) Any claim by a Participant, Beneficiary or other Person
concerning a Deferral Account, Benefits or other distribution under the Plan,
other than a claim arising under Section 8.3 or 8.4, shall be presented to the
claims official.
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(c) The claims official shall, within a reasonable time, consider
the claim and issue his determination thereon in writing.
(d) If the claim is granted is whole or in part, appropriate
action shall be taken by the Plan fiduciaries to satisfy the claim as granted.
(e) If the claim is denied in whole or in part, the claims
official shall, within 90 days (or such longer period as may be reasonably
necessary), provide the claimant with written notice of such denial, setting
forth, in a manner calculated to be understood by the claimant:
(i) the specific reason or reasons for such denial;
(ii) specific reference to pertinent provisions of the Plan
or the Rules of the Plan on which the denial is based;
(iii) a description of any additional material or
information necessary for the claimant to perfect the claim and an explanation
of why such material or information is necessary; and
(iv) an explanation of the Plan's claims review procedures.
(f) The Committee shall provide each claimant with a reasonable
opportunity to appeal the claims official's denial of a claim to the review
official. The claimant or his duly authorized representative:
(i) may request a review by written application to the
review official;
(ii) may review pertinent documents; and
(iii) may submit issues and comments in writing.
(g) The review official may establish such time limits within
which a claimant may request review of a denied claim as are reasonable in
relation to the nature of the claim and to other attendant circumstances, but in
no event less than sixty days after receipt by the claimant of written notice of
denial of his claim.
(h) The decision by the review official upon review of a claim
shall be made not later than sixty days after his receipt of the request for
review, unless special circumstances require an extension of time for
processing, in which case a decision shall be rendered as soon as possible, but
in no event more than 120 days after receipt of such request for review.
(i) The decision on review shall be in writing and shall include
specific reasons for the decision written in a manner calculated to be
understood by the claimant with specific references to the pertinent provisions
of the Plan and the Rules of the Plan on which the decision is based.
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(j) In considering claims under this claims procedure, the claims
official and the review official shall have fiduciary and discretionary
authority to make findings of fact and to construe the terms of the Plan and the
Rules of the Plan, and the determination of the claims official (if no review is
properly requested) or the decision of the review official (on review, if review
has been properly requested) shall be final and binding on all parties unless
held by a court of competent jurisdiction to constitute an abuse of discretion.
Section 10.11 Conflicting Claims
If the Committee is confronted with conflicting claims concerning
a Deferral Account, the Committee may interplead the claimants in an action at
law, or in an arbitration conducted in accordance with the rules of the American
Arbitration Association, as the Committee shall elect in its sole discretion,
and in either case, the attorneys' fees, expenses and costs reasonably incurred
by the Committee in such proceeding shall be paid from such Deferral Account.
Section 10.12 Service of Process
The Secretary of Advisors is hereby designated as agent of the
Plan for the service of legal process.
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.1 Termination of the Plan
(a) While the Plan is intended as a permanent program, the
Management Boards shall have the right at any time to declare the Plan
terminated as to all Participating Employers or as to any Participating
Employer; provided, however, that no such termination shall decrease the
interest of any Participant or any of his Beneficiaries in the Participant's
Deferral Accounts.
(b) In the event of any termination of the Plan, the Trustee
shall continue to maintain the Participants' Deferral Accounts, and
distributions of Benefits from such Deferral Accounts shall continue to be made
in accordance with Article IX.
Section 11.2 Limitation on Rights of Employees
The Plan is strictly a voluntary undertaking on the part of the
Participating Employers and shall not constitute a contract between a
Participating Employer and any Employee with respect to, or consideration for,
or an inducement or condition of, the employment of such Employee. Nothing
contained in the Plan shall give any Employee the right to be retained in the
service of his Employer or to interfere with or restrict the rights of the
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Participating Employers, which are hereby expressly reserved, to discharge or
retire any Employee at any time without notice and with or without cause.
Section 11.3 Unfunded Obligations of the Participating Employers
The obligations of the Participating Employers under the Plan
shall be unfunded and unsecured, and nothing contained in the Plan shall be
construed as providing for Assets of the Rabbi Trust to be segregated from the
assets of Participating Employers for the benefit of any Participant or
Beneficiary. To the extent that a Participant or Beneficiary has the right to
receive Benefits, such right shall be no greater than the right of an unsecured
general creditor of such Participant's Employer to be paid from the Assets in
the Participant's Deferral Accounts. The Plan is intended to be "unfunded" for
purposes of the Code and Title I of ERISA.
Section 11.4 Adoption of Plan by Other Employers: Consolidation or
Merger
(a) An Investment Management Firm which is not a Participating
Employer may, not less than six weeks before the end of a Plan Year (or such
shorter period as may be determined by the Committee) and with the consent of
the Management Boards, adopt the Plan effective as of the first day of the
following Plan Year.
(b) In the event of the consolidation or merger of a
Participating Employer with or into any other Business Entity, or the sale by a
Participating Employer of all or substantially all of its assets to another
Business Entity, the successor Business Entity may, with the consent of the
Management Boards, continue to participate in the Plan by adopting the Plan. If
within 90 days from the effective date of such consolidation, merger or sale of
assets, such successor Business Entity does not adopt the Plan, the Plan shall
be terminated in accordance with Section 11.1 as to such Participating Employer.
Section 11.5 Certain Transactions
(a) If the outstanding Advisors Units are converted into or
exchanged for securities of another Business Entity or cash, the Trustee shall
be authorized to take such actions as the Committee may find to be appropriate
and equitable to cause the Advisors Units held in the Rabbi Trust to be
converted into or exchanged for such securities or cash. If the Advisors Units
are converted into or exchanged for such securities, all references in the Plan
to Advisors Units shall be deemed to be references to such securities. If the
Advisors Units are exchanged for cash, the Trustee shall invest such cash in
such securities as shall be recommended from time to time by the Committee.
(b) If the outstanding Holdings Units are converted into or
exchanged for securities of another Business Entity, all references in this Plan
to Holdings Units shall be deemed to be references to such securities. If the
outstanding Holdings Units are exchanged for cash, the Trustee shall be
authorized to take such actions as the Committee may find to be appropriate and
equitable to cause the Advisors Units held in the Rabbi Trust to be exchanged
for Holdings Units, and to cause such Holdings Units to be exchanged for cash,
and the Trustee shall invest such cash in such securities as shall be
recommended from time to time by the Committee.
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Section 11.6 Errors and Misstatements
In the event of any clerical error or any misstatement or
omission of fact by a Participant which results in the distribution of Benefits
in an incorrect amount, the Committee shall upon discovery of the facts promptly
cause the amount of future distributions of Benefits to be corrected. The
Trustee shall, as appropriate, distribute any underpayment to the Participant or
his Beneficiaries in a lump sum. The Trustee may, as appropriate, recoup any
overpayment from future distributions of Benefits to the Participant or his
Beneficiaries in such amounts as the Committee shall direct or proceed against
the Participant or his Beneficiaries for recovery of such overpayment.
Section 11.7 Payment on Behalf of Beneficiary
In the event any Benefits would be distributed under the Plan to
a Beneficiary who is a minor, or a person who is considered by the Committee, by
reason of his physical, mental or emotional condition, to be unable to give a
valid receipt therefor, the Committee may direct that such Benefits be
distributed to any Person found by the Committee to have assumed the care of
such minor or other person. Any distribution made pursuant to such direction
shall constitute a full release and discharge of the Committee and the other
Plan fiduciaries.
Section 11.8 Amendment of Plan
The Management Boards shall have exclusive power and authority to
adopt amendments to the Plan from time to time, including retroactive amendments
necessary to conform to the provisions and requirements of ERISA or the Code or
the regulations thereunder; provided, however, that no such amendment shall be
operative to the extent it adversely affects the rights of a Participant or his
Beneficiaries in the Assets in such Participant's Deferral Accounts as of the
effective date of such Amendment.
Section 11.9 Governing Law
The Plan shall be construed and administered under, and governed
in all respects by, applicable federal laws and, where state law is applicable,
the laws of the State of California, without regard to principles of conflict of
laws.
Section 11.10 Pronouns and Plurality
The masculine shall include the feminine, and where the context
so indicates, the singular shall include the plural.
Section 11.11 Titles
Titles are provided herein for convenience only and shall not
serve as a basis for interpretation or construction of the Plan.
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Section 11.12 References
References to a statute, regulation or document shall be
construed as referring to any subsequently enacted, adopted or executed statute,
regulation or document.
Executed at Newport Beach, California.
PIMCO Advisors L.P.
By: \s\ William D. Cvengros
----------------------------
Name: William D. Cvengros
--------------------------
Title: CEO
-------------------------
PIMCO Advisors Holdings L.P.
By: \s\ William D. Cvengros
---------------------------
Name: William D. Cvengros
--------------------------
Title: CEO
-------------------------
<PAGE> 31
SCHEDULE 1
DEFERRAL EXAMPLES
Example One. Employee receiving Bonus Compensation in two equal payments.
Assume a Mandatory Participant with Base Salary of $150,000 and
Bonus Compensation for the Plan Year of $370,000, which is paid in two equal
installments. The amount to be deferred from such Compensation for such Plan
Year would be $31,000 (10% of $250,000, plus 30% of $20,000). Accordingly,
$15,500 would be deferred from each payment of Bonus Compensation.
Example Two. Employee receiving Bonus Compensation in three unequal payments.
Assume a Mandatory Participant with Base Salary of $250,000 and
Bonus Compensation for the Plan Year of $2,750,000, paid as follows: $500,000 in
June, $750,000 in October, and $1,500,000 in December: further assume that the
Participant's Employer has prescribed 40% as the percentage deferral for
Compensation over $1,000,000. The amount to be deferred from such Compensation
for such Plan Year would be $975,000 (10% of $250,000, plus 30% of $500,000,
plus 40% of $2,000,000). Accordingly, 35.45% ($975,000 divided by $2,750,000) of
each payment of Bonus Compensation would be deferred, or $177,273 from the first
payment, $265,909 from the second payment, and $531,818 from the third payment.
Example Three. Employee receiving quarterly commission payments.
Assume a Participant with Base Salary of $80,000, who receives
commission payments for the Plan Year of $100,000 in April, $100,000 in July,
$50,000 in October and $100,000 in the following January. From the first
commission payment, no amount would be deferred. From the second payment $3,000
would be deferred (10% of $30,000). From the third payment $5,000 would be
deferred (10% of $80,000, less $3,000 already deferred). From the fourth
payment, $10,000 would be deferred (10% of $180,000, less $8,000 already
deferred).
31
<PAGE> 1
EXHIBIT 11
PIMCO ADVISORS HOLDINGS L.P.
COMPUTATION OF BASIC NET INCOME PER UNIT
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE THREE MONTHS
ENDED MARCH 31, 1998 ENDED JANUARY 31, 1997
-------------- ----------------
(Dollars in thousands, except per unit amounts)
1998 1997
-------- --------
<S> <C> <C>
Net income $ 16,525 $ 15,511
Less net income applicable to the General Partner (2) (155)
-------- --------
Net income available to the Limited Partners $ 16,523 $ 15,356
======== ========
Weighted average number of units outstanding 45,930 25,665
Basic net income per unit $ 0.36 $ 0.60
======== ========
</TABLE>
COMPUTATION OF DILUTED NET INCOME PER UNIT
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE THREE MONTHS
ENDED MARCH 31, 1998 ENDED JANUARY 31, 1997
-------------- ----------------
(Dollars in thousands, except per unit amounts)
1998 1997
<S> <C> <C>
Net income $ 16,525 $ 15,511
Effect on the recognized equity in earnings of the operating partnership
resulting from the dilution of earnings per unit at the operating
partnership (1,101) --
-------- --------
Net income after effect of dilution 15,424 15,511
Less net income applicable to the General Partner (2) (155)
-------- --------
Diluted net income available to the Limited Partners $ 15,422 $ 15,356
======== ========
Weighted average number of units outstanding 45,930 25,665
Diluted net income per unit $ 0.34 $ 0.60
======== ========
</TABLE>
<PAGE> 2
EXHIBIT 11
(CONTINUED)
PIMCO ADVISORS L.P.
COMPUTATION OF NET INCOME PER UNIT
(UNAUDITED)
The weighted average number of units used to compute basic and
diluted net income per unit was as follows:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31
1998 1997
------- ------
(in thousands)
<S> <C> <C>
BASIC
General Partner and Class A Limited Partner Units 107,249 40,946
DILUTED
General Partner and Class A Limited Partner Units 113,445 42,689
Class B Limited Partner Units -- 35,197
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PIMCO
ADVISORS HOLDINGS L.P. FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 15,620
<SECURITIES> 0
<RECEIVABLES> 27,801
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 43,421
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 444,148
<CURRENT-LIABILITIES> 43,651
<BONDS> 0
0
0
<COMMON> 400,497<F1>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 444,148
<SALES> 0<F2>
<TOTAL-REVENUES> 20,038
<CGS> 0<F2>
<TOTAL-COSTS> 0<F2>
<OTHER-EXPENSES> 3,513
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 16,525
<INCOME-TAX> 0
<INCOME-CONTINUING> 16,525
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,525
<EPS-PRIMARY> 0.36
<EPS-DILUTED> 0.34
<FN>
<F1>Entity is a partnership. Amount shown represents Partners' Capital.
<F2>The partnership is in the service business and has no sales or cost of good
sold on tangible products.
</FN>
</TABLE>
