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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, 1999
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
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(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
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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
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APPLICABLE ONLY TO CORPORATE ISSUERS:
As of March 31, 1999, there were 48,831,863 units of limited partner
interest outstanding.
Page 1 of 24 pages
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PIMCO ADVISORS HOLDINGS L.P.
PART I--FINANCIAL INFORMATION
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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, 1999 and December 31, 1998 11
Statements of Operations for the three months ended March 31, 1999 and March 31, 1998 12
Statements of Cash Flows for the three months ended March 31, 1999 and March 31, 1998 13
Notes to Financial Statements 14
PIMCO Advisors L.P.
Consolidated Statements of Financial Condition as of March 31,
1999 and December 31, 1998 15
Consolidated Statements of Operations for the three months
ended March 31, 1999 and 1998 16
Consolidated Statements of Cash Flows for the three months
ended March 31, 1999 and 1998 17
Notes to Consolidated Financial Statements 18
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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
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of Operations
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General
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PIMCO Advisors Holdings L.P. ("PIMCO Holdings") is a Delaware limited
partnership which as its sole business holds in excess of 48 million general
partnership units of PIMCO Advisors L.P. ("PIMCO Advisors"), representing a 43%
equity interest in PIMCO Advisors. PIMCO Partners, G.P. ("PGP") 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
United States with approximately $248.7 billion under management at March 31,
1999. PIMCO Advisors' business provides high quality fixed income and equity
investment management to institutional and retail clients, offering its
extensive investment management expertise, excellent long-term performance
records and world class reputation, which are largely based on its fixed income
investment management unit Pacific Investment Management Company ("Pacific
Investment Management") and its equity investment management units Oppenheimer
Capital and PIMCO Equity Advisors. PIMCO Advisors' business focuses on:
Fixed Income. PIMCO Advisors provides fixed income investment management to
clients including foreign and domestic corporate and public clients, including
eighty-one of the 200 largest U.S. pension funds as well as retail clients.
Fixed income management is led by Pacific Investment Management, which offers
impressive long-term performance records across a diverse range of product
offerings such as total return, and other duration or sector specific
strategies.
Equity. PIMCO Advisors provides equity investment management to institutional
and retail clients offering the investment management expertise of six equity
management groups, including the highly regarded Oppenheimer Capital and newly
formed PIMCO Equity Advisors. PIMCO Advisors offers investors an enhanced index
based strategy and a variety of management styles, including value, growth,
modified growth, quantitative and international.
Institutional clients invest through separate accounts and pooled vehicles
such as the institutional share classes of the PIMCO Funds, PIMCO Advisors'
family of 52 proprietary mutual funds. PIMCO Advisors offers its investment
management services to institutional clients through client service
representatives at each of its investment managers.
Retail Distribution. PIMCO Advisors offers the investment expertise of its
investment managers to retail investors through the retail share classes of the
PIMCO Funds. They are distributed primarily through broker-dealers including
PIMCO Funds Distributors LLC ("PFD"), a wholly-owned 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, 401(k) programs and various investment products through
sponsored trust companies. PIMCO Advisors' investment management groups,
including Pacific Investment Management and Oppenheimer Capital also provide
investment management for a number of third-party sponsored retail products.
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 in the United
States and overseas, (ii) growth in the retail market by building brand
awareness and direct marketing of the PIMCO Funds through its broker-dealer
network and by penetrating additional distribution channels and (iii) new
product offerings to institutions and retail investors.
The financial condition and results of operations of PIMCO Advisors are
discussed below under "PIMCO ADVISORS L.P."
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PIMCO ADVISORS HOLDINGS L.P.
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Comparative Results of Operations
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Quarter Ended March 31, 1999 Compared To Quarter Ended March 31, 1998
PIMCO Holdings realized $14.4 million as its proportionate share of
earnings of PIMCO Advisors (approximately 43%) during the quarter ended March
31, 1999 as compared with $20.0 million for the quarter ended March 31, 1998, a
decrease of $5.6 million or 28.4%. This decrease in earnings was principally a
result of a non-recurring charge of $19.4 million at PIMCO Advisors in the first
quarter of 1999 which related to the consolidation of Oppenheimer Capital's
operations into a single new facility and for severance costs primarily related
to recent changes in its senior management. PIMCO Holdings proportionate share
of this one-time charge was approximately $8.5 million. This amounted to $0.17
per unit on a diluted basis. PIMCO Advisors' recurring earnings for the quarter
increased by $5.4 million or 11.6% compared to the quarter ended March 31, 1998,
resulting principally from its increased managed assets and the related
revenues. PIMCO Advisors' assets under management increased $4.5 billion to
$248.7 billion during the quarter ended March 31, 1999, which was comprised of
$4.4 billion of net cash inflows and $0.1 billion of market appreciation. There
can be no assurance that future cash flows or market activity will occur at the
rates experienced in recent years.
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. Based upon
current recurring operating margins, the publicly traded partnership 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 $3.8 million in the first quarter of 1999. Because
the tax is a function of allocable operating revenue, these effective rates were
significantly higher in the first quarter of 1999 when PIMCO Advisors recognized
the non-recurring charge discussed above.
Taxes
PIMCO Holdings is not subject to federal, state, or local income taxes,
which are the obligations of individual partners. However, beginning January 1,
1998, PIMCO Holdings elected to be subject to a 3.5% publicly traded partnership
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 reduces both net income and cash available for
distribution to partners from levels that would otherwise be available. Similar
taxes have been imposed by one state in which PIMCO Holdings does business.
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, 1999,
PIMCO Holdings declared total distributions to holders of PIMCO Holdings units
of $0.58 per unit compared to distributions declared during the quarter ended
March 31, 1998 of $0.53 per unit. PIMCO Holdings' policy is to distribute
substantially all its net operating cash flow on an annual basis subject to
establishment of appropriate reserves. 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 evaluates distribution levels on
a quarterly basis.
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Actual distribution levels will depend on the financial performance of
PIMCO Advisors. There can be no assurance that the current distribution rates
will be maintained. 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.
PIMCO ADVISORS L.P.
Comparative Results of Operations
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Quarter Ended March 31, 1999 Compared To Quarter Ended March 31, 1998
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. While no assurances can be given that PIMCO Advisors will continue
to earn any performance fees, such fees aggregated $1.9 million during the
quarter ended March 31, 1999 compared to $4.8 million during the quarter ended
March 31, 1998. The decrease in performance fees occurred primarily in an
equity product seeking to outperform the S&P 500 index.
The following table sets forth the composition of PIMCO Advisors' assets
under management for the quarter ended March 31, 1999 compared to the quarter
ended March 31, 1998:
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March 31, 1999 March 31, 1998
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(Dollars in millions)
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Assets under management by source:
Institutional separate accounts
Fixed income $107,960 $ 88,569
Equity 50,369 55,328
Retail products and mutual funds 90,336 73,752
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Total $248,665 $217,649
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Assets under management by type:
Fixed income $153,814 $121,080
Equity 91,689 93,575
Money market 3,162 2,994
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Total $248,665 $217,649
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PIMCO Advisors' consolidated revenues, including those of its wholly-owned
subsidiary PFD, were $228.6 million for the quarter ended March 31, 1999
compared to $193.9 million for the quarter ended March 31, 1998, an increase of
$34.7 million or 17.9%. Advisory revenues were $203.1 million
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for the quarter ended March 31, 1999 compared to $176.0 million for the quarter
ended March 31, 1998, an increase of $27.1 million or 15.4%. Distribution and
servicing revenues for the quarter ended March 31, 1999 increased to $25.5
million from $17.9 million for the quarter ended March 31, 1998. The increase in
PIMCO Advisors revenues for the quarter ended March 31, 1999 was influenced
predominantly by a $31.1 billion or 14.3% increase in assets under management at
March 31, 1999 when compared to $217.6 billion in assets under management at
March 31, 1998. The increase included $19.9 billion of net cash inflows in the
twelve month period. Assets under management aggregated $248.7 billion at March
31, 1999. During the quarter ended March 31, 1999, assets under management
increased $4.5 billion, including net cash inflows of $4.4 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. While the
consolidated assets under management of PIMCO Advisors increased by $4.5
billion, Oppenheimer Capital continued to experience net outflows of managed
assets aggregating $3.2 billion in the quarter ended March 31, 1999.
Expenses
Expenses in the quarter ended March 31, 1999 included a non-recurring
charge of $19.4 million related to the consolidation of Oppenheimer Capital's
operations into a single new facility and for severance costs related to recent
changes in its senior management. This charge is reflected as $0.5 million in
compensation and benefits; $10.5 million in amortization of restricted unit and
option plans; $5.4 million in occupancy and equipment; and $3.0 million in
general and administrative expenses.
Compensation and benefits for the quarter ended March 31, 1999 were $98.3
million, which was $14.4 million or 17.2% higher than the quarter ended March
31, 1998. This increase reflects the previously discussed non-recurring charge
and 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 $5.0 million to $22.2 million in the quarter
ended March 31, 1999 compared to the quarter ended March 31, 1998, 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 $14.7 million during the quarter
ended March 31, 1999, an increase of $5.8 million or 65.1% compared to the
quarter ended March 31, 1998. This increase can be primarily attributed to the
previously discussed non-recurring charge of $3.0 million, and expanded
operations at most subsidiaries. Occupancy and equipment increased by $7.1
million to $12.3 million for the quarter ended March 31, 1999 in comparison to
the quarter ended March 31, 1998. Exclusive of the previously discussed non-
recurring charge of $5.4 million, the increase can be attributed primarily to
additional office space and equipment as a result of additional staffing.
Amortization of intangible assets was $13.8 million for the quarter ended
March 31, 1999 compared to $13.8 million in the quarter ended March 31, 1998.
Restricted unit and option plan costs amounted to $16.2 million in the
quarter ended March 31, 1999 compared to $5.9 million in the quarter ended March
31, 1998, an increase of $10.3 million or
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175.5%. Exclusive of the non-recurring charge of $10.5 million previously
discussed, this cost category remained relatively stable.
Other cash expenses increased by $6.0 million for the quarter ended March
31, 1999 in comparison to the quarter ended March 31, 1998 due principally to
increases in marketing and promotional costs, interest expense and professional
fees as well as other increases reflective of inflation and increased staffing.
Liquidity and Capital Resources
PIMCO Advisors business has 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 $163.3 million of cash and cash
equivalents and short-term investments at March 31, 1999 compared to
approximately $116.1 million at December 31, 1998. 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, 1999, PIMCO Advisors declared distributions
to holders of PIMCO Advisors units of $0.67 per unit. PIMCO Advisors' policy is
to distribute substantially all its net cash flow on an annual basis after
provision of appropriate reserves. 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 evaluates distribution levels on a
quarterly basis. Actual distribution levels will depend on the financial
performance of PIMCO Advisors. There can be no assurance that historical
distribution rates will be maintained. 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 1998. As of March 31,
1999, $149.5 million of that debt had been exchanged for limited partnership
units at a rate of $33.33 per unit. The remaining $80.5 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. On May 12, 1998 PIMCO
Advisors secured a syndicated $500 million credit facility to provide liquidity
for working capital and strategic opportunities. As of March 31, 1999, $80.0
million was outstanding under this facility.
Other Factors
General Economic and Other Factors
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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
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revenue fluctuations may or may not be recoverable in the pricing of services
offered by PIMCO Advisors.
Year 2000 Readiness Disclosure
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The United States securities industry is massive in size and complex in
function. It is characterized by a heavy reliance on computerized information
processing technology and by extensive interdependencies. Many of the world's
computer systems record years in a two-digit format. These systems may be unable
to correctly recognize, interpret or use dates beyond the year 1999. This
inability to process date information might lead to significant business
disruptions. Before discussing PIMCO Advisors' year 2000 readiness, it is
important that one essential principal (from the Report to Congress of the
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Readiness of the United States Securities Industry and Public Companies to meet
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the Information Processing Challenges of the Year 2000 (United States Securities
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and Exchange Commission (June 1997)) be understood. "It is not, and it will not,
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be possible for any single entity or collective enterprise to represent that it
has achieved complete Year 2000 compliance and thus to guarantee its remediation
efforts."
PIMCO Advisors and its subsidiaries are taking steps to assure that their
computer systems will function properly after 1999. PIMCO Advisors and its
subsidiaries have designated a team of information and business professionals to
address the Year 2000 problem and have developed a written Year 2000 Plan to
address Year 2000 issues. PIMCO Advisors presently estimates that its Year 2000
related expenditures will be approximately $17.6 million and that Year 2000 will
not have a material affect on its operations. As of March 31, 1999, PIMCO
Advisors and its subsidiaries have expended an estimated $9.4 million on Year
2000 related costs and, as of May 12, 1999, had expended an estimated $11.7
million on Year 2000 related costs. PIMCO Advisors and its subsidiaries are in
various stages of reviewing, testing and implementing repairs and upgrades to
those systems and programs that have been identified to have Year 2000 related
problems. Because the Year 2000 project is an ongoing company-wide endeavor, the
state of progress changes daily. Year 2000 budget estimates are subject to
change and revision. See "Uncertainty" below. The PIMCO Advisors' Year 2000 Plan
consists of five general phases: Awareness, Assessment, Remediation, Testing,
and Implementation.
Awareness: During the Awareness phase, the Year 2000 team informed the
employees of PIMCO Advisors and its subsidiaries, including the highest levels
of PIMCO Advisors' management, about the Year 2000 problem. A written Year 2000
Plan was prepared and Year 2000 budget estimates were compiled. The Management
Board of PIMCO Advisors formally approved the Year 2000 Plan and a preliminary
budget on July 21, 1998. The Board approves successive and updated Year 2000
plans and budgets quarterly.
Assessment: During the Assessment phase, the Year 2000 team prepared an
inventory of Information Technology ("IT") and non IT systems used in PIMCO
Advisors' and its subsidiaries' business. Systems are classified as software,
hardware, and embedded chips. Separately, systems are also classified as mission
critical systems and non mission critical systems. Except for voice, and data
lines, security, fire, electrical and other building facilities, PIMCO Advisors
does not currently believe that the failure of its non IT systems would have a
material adverse effect upon its business. As the inventory is compiled and
verified, each system is preliminarily assessed for Year 2000 compliance. This
preliminary assessment is made by obtaining manufacturers' representations that
a given product is Year 2000 compliant or other evidence of compliance. Systems
for which no such evidence can be obtained are identified as candidates for
correction or replacement ("Remediation"). The assessment phase is substantially
complete. On-going assessment of systems will continue as new information
becomes available or as deemed prudent.
Remediation: During the Remediation phase, software, hardware, and
embedded chips identified during the Assessment phase to be non Year 2000
compliant will be corrected or replaced. PIMCO Advisors and its subsidiaries
have substantially completed remediation of the non compliant mission
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critical software, hardware, and non IT systems. Exceptions to this include the
portfolio management and accounting system utilized by Oppenheimer Capital and
PIMCO Advisors, which is expected to be remediated by May 28, 1999 and
implemented by June 30, 1999, and certain portfolio accounting functions at
Pacific Investment Management which are expected to be remediated by June 30,
1999. Non mission critical systems are anticipated to be substantially completed
by June 30, 1999 except for certain non-mission critical systems at Pacific
Investment Management which are anticipated to be complete by July 31, 1999.
Necessarily, further corrections and replacements may be required after the
Remediation phase as a result of issues identified during the Testing phase or
otherwise.
Testing: The Testing phase includes internal testing, point-to-point
testing, and industry testing. Testing is being conducted on both existing and
new systems as they are added. PIMCO Advisors generally plans to test its
systems in order of criticality (mission critical, then non mission critical).
PIMCO Advisors does not plan to test non mission critical systems that are not
used in its business ( e.g., software applications incidentally installed on PCs
with other software that is used in PIMCO Advisors and its subsidiaries'
business). PIMCO Advisors will design and implement internal, point-to-point,
and industry testing programs that use test scripts, portfolios and various
hypothetical dates generated by PIMCO Advisors and its subsidiaries, vendors,
and industry groups. Internal testing has taken place at PIMCO Advisors' major
subsidiaries, Pacific Investment Management and Oppenheimer Capital. Three of
PIMCO Advisors' SEC registered investment advisory subsidiaries and two broker
dealers are participating in an industry-wide testing forum sponsored by the
Securities Industry Association. Pacific Investment Management Company has been
at the forefront of this process through its participation in the Bond Market
Association's Asset Managers' Forum, a committee which is advising the
Securities Industry Association on issues associated with investment managers
and Year 2000 issues. PIMCO Advisors currently expects that internal testing of
its mission critical systems will be substantially complete by June 7, 1999;
point-to-point testing will be substantially complete by June 7, 1999; and
industry testing has been completed. Exceptions to this includes Pacific
Investment Management which expects the internal testing of its mission critical
systems to be substantially completed by June 30, 1999 and point-to-point
testing to be substantially completed by June 30, 1999. These dates may change
significantly depending upon whether PIMCO Advisors and its subsidiaries and
their counterparties meet their anticipated deadlines. PIMCO Advisors
anticipates that it may conduct tests with as yet unidentified third parties
until December 31, 1999, as circumstances warrant.
Implementation: During the Implementation phase, systems that have been
tested and identified as being Year 2000 compliant will be put into normal
business operation. PIMCO Advisors and its subsidiaries currently plan to
complete Implementation with respect to their mission critical systems by May
31, 1999 (with the exception of the portfolio management system utilized by
Oppenheimer Capital and PIMCO Advisors and certain portfolio accounting
functions utilized by Pacific Investment Management). PIMCO Advisors and its
subsidiaries are continuously reviewing and revising written contingency plans
addressing possible failures of technology and services in their various
business operations. PIMCO Advisors also anticipates that it will continuously
revise its contingency plans until December 31, 1999, as new risks and
strategies become apparent. Although PIMCO Advisors and its subsidiaries are
preparing plans, no assurance can be given that contingency plans can be
developed that would avoid all problems in the event of the failure of certain
mission critical systems, counterparties, and third-party providers.
Third Parties: PIMCO Advisors' and its subsidiaries' business operations
are heavily dependent upon a complex worldwide network of systems that contain
date fields, including data feeds to trading systems, securities transfer agent
operations and stock markets. PIMCO Advisors' and its subsidiaries' ability to
assess the effects of the Year 2000 Problem upon their clients is highly
dependent upon the efforts of third parties, particularly brokers, dealers, and
clients' custodians. With respect to the Year 2000 Problem, the failure of third
party organizations to resolve their own processing issues in a timely manner
could have a material adverse effect on PIMCO Advisors' business. PIMCO Advisors
and its subsidiaries are taking steps to assess the Year 2000 readiness of
material third parties with which they do business. PIMCO Advisors and its
subsidiaries have substantially completed an inventory of brokers,
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dealers, custodians, and other material third parties with which they have
direct, significant business relationships. PIMCO Advisors and its subsidiaries
have sent written questionnaires to the identified third parties inquiring about
the status of their Year 2000 compliance programs. The results of these
questionnaires are collected, analyzed, and distributed to appropriate internal
personnel. Follow up or additional questionnaires and inquiries will be sent to
third parties that did not respond satisfactorily to the initial questionnaire.
With respect to its most significant business partners, PIMCO Advisors is
conducting on site reviews of their Year 2000 programs. PIMCO Advisors currently
anticipates that its efforts with respect to assessing the Year 2000 status of
its counterparties and other third parties will continue into the Year 2000.
Uncertainty: This discussion of PIMCO Advisors' and its subsidiaries'
Year 2000 program contains forward looking statements. At present, the
management of PIMCO Advisors believes that costs associated with the Year 2000
problem will not have a material adverse effect on PIMCO Advisors' business or
operations. However, PIMCO Advisors expects that its Year 2000 expense
estimates will change as the Year 2000 approaches and PIMCO Advisors and its
subsidiaries complete the Testing and Implementation phases. Although PIMCO
Advisors' efforts and expenditures on Year 2000 issues are substantial, there
can be no assurances that its clients, unitholders, counterparties or others
will not suffer from disruptions or adverse results arising as a consequence of
entering Year 2000. PIMCO Advisors' current expectations regarding its and its
counterparties transition to Year 2000 are based upon unfinished remediation and
testing, and are subject to a number of uncertainties and factors that are
beyond its control and which could cause actual costs to differ materially from
those currently expected. Furthermore, although management currently
anticipates that its expenditures and efforts are appropriate, complications as
yet unidentified with internal or external systems, with data providers, with
other securities firms or institutions, with other counterparties, and with
general economic conditions related to the Year 2000 in general may trigger
significantly greater expenses or losses.
10
<PAGE>
PIMCO ADVISORS HOLDINGS L.P.
STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
-------------- -----------------
(Dollars in thousands)
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 15,076 $ 10,580
Distribution receivable and other current assets 32,775 32,033
-------- --------
Total current assets 47,851 42,613
Investment in operating partnership 457,732 461,230
Other non current assets 153 153
-------- --------
TOTAL ASSETS $505,736 $503,996
======== ========
LIABILITIES
Distribution payable $ 28,325 $ 27,631
Other current liabilities 18,556 14,746
-------- --------
Total liabilities 46,881 42,377
-------- --------
PARTNERS' CAPITAL
General Partner 62 63
Limited Partners (48,831,863 units issued and
outstanding at March 31, 1999 and 48,469,822 units
issued and outstanding at December 31, 1998) 458,793 461,556
-------- --------
Total Partners' Capital 458,855 461,619
-------- --------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $505,736 $503,996
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
PIMCO ADVISORS HOLDINGS L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For The Three Months Ended
March 31, 1999 March 31, 1998
-------------- --------------
(Dollars in thousands, except per unit amounts)
<S> <C> <C>
REVENUES:
Equity in earnings of operating
Partnership $14,357 $20,038
------- -------
Total revenues 14,357 20,038
------- -------
EXPENSES:
Taxes and other, net 3,662 3,513
------- -------
Total expenses 3,662 3,513
------- -------
Net income $10,695 $16,525
======= =======
Basic net income per unit $ 0.22 $ 0.36
======= =======
Diluted net income per unit $ 0.21 $ 0.34
======= =======
Distributions declared per unit $ 0.58 $ 0.53
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
PIMCO ADVISORS HOLDINGS L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For The Three Months Ended
March 31, 1999 March 31, 1998
-------------- --------------
(Dollars in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 10,695 $ 16,525
Adjustments to reconcile net income to
net cash provided by operating activities:
Distributions received greater (less) than the
equity in earnings of operating partnership 17,636 (4,952)
Change in operating assets and liabilities:
Change in other assets (14) (15)
Change in other liabilities 3,810 3,635
-------- --------
Net cash provided by operating activities 32,127 15,193
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in operating partnership - (120)
-------- --------
Net cash used in investing activities - (120)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions paid (27,631) (15,112)
Capital contribution from General Partner - 17
Issuance of limited partnership units on
exercise of options 120
-------- --------
Net cash used in financing activities (27,631) (14,975)
-------- --------
Net increase in cash and cash equivalents 4,496 98
Cash and cash equivalents, beginning of period 10,580 15,522
-------- --------
Cash and cash equivalents, end of period $ 15,076 $ 15,620
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
PIMCO ADVISORS HOLDINGS L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
(1) The 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, 1999 and December
31, 1998, (b) the results of operations for the three-month periods ended
March 31, 1999 and March 31, 1998, and (c) the cash flows for the three-
month periods ended March 31, 1999 and March 31, 1998, for PIMCO Advisors
Holdings L.P. ("PIMCO Holdings") have been made. It is suggested that
these unaudited financial statements be read in conjunction with the
financial statements and notes included in PIMCO Holdings' Annual Report on
Form 10-K for the year ended December 31, 1998. 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.
(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 48.8 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.
(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 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.
(4) As a result of the Omnibus Budget Reconciliation Act of 1993 and a special
tax election which PIMCO Holdings has made, units purchased in the open
market after August 10, 1993 have a substantial portion of the purchase
price amortized over a fifteen year period. Taking into account such
amortization tax benefits (which depend in part on the particular
unitholder's purchase price), partnership distributions are expected to
significantly exceed net taxable income for units purchased after August
10, 1993. Amortization deductions will decrease the unitholder's tax basis
of such units, and will likely be recaptured as ordinary income upon
disposition of the units.
Each year, a Schedule K-1 is sent to each unitholder identifying their
amortization tax benefit, if applicable. Under federal tax law, a
unitholder is required to pay tax on their allocable share of the
partnership's income regardless of the amount of distributions made by the
partnership. As individual tax situations may vary, each prospective
purchaser of units is urged to consult their tax advisor.
14
<PAGE>
PIMCO ADVISORS L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
-------------- -----------------
(Dollars in thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 87,023 $ 46,134
Short term investments 76,300 69,923
Fees receivable 165,341 171,222
Other current assets 16,360 38,073
---------- ----------
Total current assets 345,024 325,352
Investment in unconsolidated partnerships 4,321 4,764
Fixed assets net of accumulated depreciation and amortization 21,596 22,717
Intangible assets net of accumulated amortization 992,054 1,005,817
Other non current assets 88,342 53,388
---------- ----------
Total assets $1,451,337 $1,412,038
========== ==========
LIABILITIES
Current liabilities:
Accounts payable, accrued expenses and other current liabilities $ 80,591 $ 65,244
Accrued compensation 76,005 68,476
Distribution payable 75,666 73,455
Short term borrowings 80,000 65,000
-------- --------
Total current liabilities 312,262 272,175
Long term notes 80,467 80,467
Other non current liabilities 257 309
-------- --------
Total liabilities 392,986 352,951
-------- --------
PARTNERS' CAPITAL
General Partner (49,636,961 units issued and outstanding at March 31, 1999
and 49,274,920 units issued and outstanding at December 31, 1998) 782,671 801,304
Class A Limited Partners (63,297,070 units issued and outstanding at March
31, 1999 and 62,021,252 units issued and outstanding at December 31, 1998) 341,881 336,438
Unamortized compensation (66,060) (78,655)
Cummulative translation adjustment (141) -
--------- ---------
Total Partners' Capital 1,058,351 1,059,087
--------- ---------
Total liabilities and partners' capital $1,451,337 $1,412,038
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
15
<PAGE>
PIMCO ADVISORS L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For The Three Months Ended
March 31, 1999 March 31, 1998
-------------- --------------
(Dollars in thousands)
<S> <C> <C>
REVENUES
Investment advisory fees:
Private accounts $137,089 $129,150
Proprietary Funds 65,963 46,813
Distribution and servicing fees 25,505 17,894
-------- --------
Total revenues 228,557 193,857
-------- --------
EXPENSES
Compensation and benefits 98,285 83,851
Commissions 22,197 17,241
Amortization of intangible assets, Restricted Unit and Option Plans 30,005 19,658
General and administrative 14,749 8,931
Occupancy and equipment 12,258 5,122
Other 18,238 12,272
-------- --------
Total expenses 195,732 147,075
-------- --------
Net income 32,825 46,782
-------- --------
OTHER COMPREHENSIVE INCOME
Foreign currency translation adjustments (141) -
-------- --------
Total other comprehensive income (141) -
-------- --------
Comprehensive income $ 32,684 $ 46,782
======== ========
Net income per unit:
Basic net income per General Partner and Class A Limited Partner Unit $ 0.30 $ 0.44
======== ========
Diluted net income per General Partner and Class A Limited Partner Unit $ 0.28 $ 0.41
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
16
<PAGE>
PIMCO ADVISORS L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For The Three Months Ended
March 31, 1999 March 31, 1998
-------------- --------------
(Dollars in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $32,825 $46,782
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, amortization 20,696 16,811
Restricted unit & Option Plans 16,242 5,895
Equity in income of unconsolidated partnership (48) (52)
Unrealized loss (gain) on investments 572 (781)
Issuance of restricted units in lieu of directors fees 20 -
Other (307) -
Change in operating assets and liabilities:
Change in fees receivable 5,881 (4,632)
Change in other assets (16,203) (14,545)
Change in accrued liabilities and other current
liabilities 17,558 12,242
Change in accrued compensation 7,529 16,472
Change in other long term liabilities (52) 4,995
------- -------
Net cash provided by operating activities 84,713 83,187
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (2,303) (1,042)
Notes receivable advances (547) (380)
Purchase of investments (30,585) (12,583)
Proceeds from sale of investments 23,848 1,200
Investment in partnership (332) (612)
Return of investment in partnership 777 --
------- -------
Net cash used in investing activities (9,142) (13,417)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short term borrowing 15,000 35,000
Cash distributions paid (74,650) (61,786)
Issuance of limited partnership units to deferred
compensation plan trust 23,806 9,945
Capital contribution from General Partner - 16
Issuance of limited partnership units on exercise
of options 1,162 3,177
------- -------
Net cash used in financing activities (34,682) (13,648)
------- -------
Net increase in cash and cash equivalents 40,889 56,122
Cash and cash equivalents, beginning of period 46,134 34,301
------- -------
Cash and cash equivalents, end of period $87,023 $90,423
======= =======
Supplemental disclosure
Income tax paid $ 174 $ 3,940
======= =======
Interest paid $ 2,127 $ 1,328
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
17
<PAGE>
PIMCO ADVISORS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) The 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, 1999 and December 31,
1998, (b) the results of operations for the three-month periods ended March
31, 1999 and 1998, and (c) the cash flows for the three-month periods ended
March 31, 1999 and 1998, for PIMCO Advisors L.P. ("PIMCO Advisors") have
been made. It is suggested that these unaudited 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, 1998. 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.
(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 into Thomson Advisory Group L.P.
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. 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 interest in PIMCO Advisors
increased to approximately 43%. Concurrently, PIMCO Holdings' New York
Stock Exchange trading symbol was changed from "OCC" to "PA".
18
<PAGE>
(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.
19
<PAGE>
PIMCO ADVISORS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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.
Sale of Blairlogie Capital Management.
On April 30, 1999, PIMCO Advisors L.P. completed the sale of Blairlogie
Capital Management to a subsidiary of Alleghany Asset Management pursuant to the
Purchase and Sale Agreement, dated as of October 24, 1998, as amended.
Blairlogie Capital Management is an Edinburgh, Scotland based former investment
management subsidiary of PIMCO Advisors, which currently manages approximately
$800 million in assets, principally in non-U.S. equities.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
- -----------
11 Computations of Net Income Per Unit.
27 Financial Data Schedule.
(b) Reports on Form 8-K. None
20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
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, 1999
21
<PAGE>
EXHIBIT 11
PIMCO Advisors Holdings L.P.
Computation of Basic Net Income Per Unit
(Unaudited)
<TABLE>
<CAPTION>
For The Three Months Ended
March 31, 1999 March 31, 1998
-------------- --------------
(Dollars in thousands, except per unit amounts)
<S> <C> <C>
Net income $10,695 $16,525
Less net income applicable to the General Partner (1) (2)
------- -------
Net income available to the Limited Partners $10,694 $16,523
======= =======
Weighted average number of units outstanding 48,712 45,935
Basic net income per unit $ 0.22 $ 0.36
======= =======
</TABLE>
Computation of Diluted Net Income Per Unit
(Unaudited)
<TABLE>
<CAPTION>
For The Three Months Ended
March 31, 1999 March 31, 1998
-------------- --------------
(Dollars in thousands, except per unit amounts)
<S> <C> <C>
Net income $10,695 $16,525
Effect on the recognized equity in earnings of the
operating partnership resulting from the dilution
of earnings per unit at the operating partnership (620) (1,101)
------- -------
Net income after effect of dilution 10,075 15,424
Less net income applicable to the General Partner (1) (2)
------- -------
Diluted net income available to the Limited Partners $10,074 $15,422
======= =======
Weighted average number of units outstanding 48,712 45,935
Diluted net income per unit $ 0.21 $ 0.34
======= =======
</TABLE>
<PAGE>
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 March 31
1999 1998
---- ----
(in thousands)
<S> <C> <C>
Basic
General Partner and Class A Limited Partner Units 111,025 107,249
Diluted
General Partner and Class A Limited Partner Units 116,007 113,445
</TABLE>
<TABLE> <S> <C>
<PAGE>
<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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 15,076
<SECURITIES> 0
<RECEIVABLES> 32,775
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 47,851
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 505,736
<CURRENT-LIABILITIES> 46,881
<BONDS> 0
0
0
<COMMON> 458,855<F1>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 505,736
<SALES> 0<F2>
<TOTAL-REVENUES> 14,357
<CGS> 0<F2>
<TOTAL-COSTS> 0<F2>
<OTHER-EXPENSES> 3,662
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 10,695
<INCOME-TAX> 0
<INCOME-CONTINUING> 10,695
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,695
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.21
<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>
