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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13E-3
Rule 13e-3 Transaction Statement
(Pursuant to Section 13(e) of the Securities Exchange Act of 1934)
----------------
PIMCO ADVISORS HOLDINGS L.P.
(Name of Issuer)
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PACIFIC ASSET MANAGEMENT LLC
(Name of Person(s) Filing Statement)
----------------
Units of Limited Partner Interest
(Title of Class of Securities)
----------------
69338P10
(CUSIP Number of Class of Securities)
----------------
David Carmichael
PACIFIC LIFE INSURANCE COMPANY
700 Newport Center Drive
Newport Beach, California 92660
(949) 219-3011
(Name, Address and Telephone Number of Persons Authorized to Receive Notices
and Communications on Behalf of Person(s) Filing Statement)
Copies to:
Karen Bertero David C. Flattum
Gibson, Dunn & Crutcher LLP Latham & Watkins
333 South Grand Avenue 650 Town Center Drive
Los Angeles, CA 90071 Costa Mesa, CA 92626
(213) 229-7000 (714) 540-1235
This statement is filed in connection with (check the appropriate box):
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a. [X] The filing of solicitation materials or an information statement
subject to Regulation 14A, Regulation 14C or Rule 13e-3(c) under
the Securities Exchange Act of 1934.
b. [_] The filing of a registration statement under the Securities Act of
1933.
c. [_] A tender offer.
d. [_] None of the above.
</TABLE>
Check the following box if soliciting material or information statement
referred to in checking box (a) are preliminary copies: [X]
CALCULATION OF FILING FEE
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Transaction Valuation* Amount of Filing Fee**
$1,921,362,097.50 $384,273
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* This amount is based upon a merger involving the purchase of 49,583,538
units of limited partnership interest in PIMCO Advisors Holdings L.P. at
$38.75 per unit. Pursuant to, and as provided by, Rule 0-11(b)(1), the
amount required to be paid with the filing of this Schedule 13E-3 is
$384,273.
** The amount of the filing fee calculated in accordance with Exchange Act
Rule 0-11 equals 1/50th of 1% of the value of the securities proposed to be
acquired.
[X]Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: $384,273
Form or Registration No.: Preliminary Schedule 14A
Filing Party: PIMCO Advisors Holdings L.P.
Date Filed: December 20, 1999
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INTRODUCTION
This Rule 13e-3 Transaction Statement on Schedule 13E-3 (the "Schedule 13E-
3") is being filed by Pacific Asset Management LLC, a Delaware limited
liability company ("PAM"), in connection with the acquisition of PIMCO
Advisors Holdings L.P., a Delaware limited partnership (the "Partnership") by
Allianz AG through the merger of an indirect subsidiary of Allianz of America,
Inc., a Delaware corporation ("Allianz of America") with the Partnership
pursuant to an Implementation and Merger Agreement, dated October 31, 1999, by
and among Allianz of America, PAM, the Partnership, PIMCO Advisors L.P.
("PIMCO Advisors"), PIMCO Partners, LLC, PIMCO Holding LLC, PIMCO Partners,
G.P., and other parties named therein (the "Merger Agreement"). By filing this
Schedule 13E-3, the signatory does not concede that Rule 13e-3 under the
Securities Exchange Act of 1934 is applicable to the merger or other
transactions contemplated by the Merger Agreement.
Allianz of America, a subsidiary of Allianz AG, will acquire the Partnership
by merging an indirect subsidiary of Allianz of America into the Partnership,
with the Partnership as the surviving entity. In the merger, all of the
outstanding limited partner and general partner units in the Partnership will
be converted into the right to receive cash in an amount per unit equal to the
Unit Price which will be $38.75, without interest and subject to potential
downward adjustment as described in the Merger Agreement. As a result of the
merger, the Partnership will become an indirect wholly-owned subsidiary of
Allianz of America. Following the merger, all of the equity interests in the
Partnership will be indirectly owned by Allianz of America. The former
unitholders in the Partnership will no longer have an interest in the
Partnership and therefore will not participate in its future earnings and
growth. Additionally, the Partnership's units will no longer trade on the New
York Stock Exchange, price quotations for the units will no longer be
available and the registration of the Partnership's units under the Securities
Exchange Act of 1934 will be terminated.
Following the merger, subsidiaries of Allianz of America will, in a series
of transactions, acquire substantially all of the remaining interests in PIMCO
Advisors at the Unit Price, other than those interests beneficially owned by
PAM. PAM will retain an investment in PIMCO Advisors through a new general
partner to be formed by PAM and a subsidiary of Allianz of America. As a
result of the transactions, Allianz of America will control PIMCO Advisors,
having acquired approximately 70% of the outstanding partnership interests in
PIMCO Advisors.
This Schedule 13E-3 is being filed with the Securities and Exchange
Commission concurrently with a preliminary proxy statement filed by the
Partnership pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended (the "Proxy Statement"). A copy of the Proxy Statement is
attached hereto as Exhibit (d)(1). The following cross reference sheet is
being supplied pursuant to General Instruction F to Schedule 13E-3 and shows
the location in the Proxy Statement of the information required to be included
in this Schedule 13E-3. The information contained in the Proxy Statement,
including all exhibits thereto, is expressly incorporated herein by reference
and the responses to each item are qualified in their entirety by reference to
the information contained in the Proxy Statement and the exhibits thereto.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings ascribed to such terms in the Proxy Statement.
CROSS REFERENCE SHEET
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Item in Schedule 13E-3 Location in Proxy Statement
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1. Issuer and Class of Security
Subject to the Transaction
(a)................................ Cover Page and "SUMMARY--Parties to the
Merger--The Partnership"
(b)................................ "SUMMARY--The Transactions and --Record
Date and Quorum"
(c)................................ "PRICE RANGE OF UNITS AND DISTRIBUTIONS"
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1
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<CAPTION>
Item in Schedule 13E-3 Location in Proxy Statement
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<S> <C>
(d)............................. "PRICE RANGE OF UNITS AND DISTRIBUTIONS"
(e)............................. *
(f)............................. "DIRECTORS AND MANAGEMENT"
2. Identity and Background
(a)-(d); (g).................... "SUMMARY--Parties to the Holdings Merger;"
"THE TRANSACTION--Parties Involved in the
Transactions;" and "DIRECTORS
AND MANAGEMENT"
(e)-(f)......................... *
3. Past Contacts, Transactions or
Negotiations
(a)(1).......................... "DIRECTORS AND MANAGEMENT"
(a)(2).......................... "DIRECTORS AND MANAGEMENT"
(b)............................. "DIRECTORS AND MANAGEMENT"
4. Terms of the Transaction
(a)............................. "SUMMARY;" "THE TRANSACTION;" "SPECIAL
FACTORS--Interests of Certain Persons in
the Transaction;" and "THE MERGER
AGREEMENT"
(b)............................. "SUMMARY--Interests of Certain Persons in
the Transaction;" "THE TRANSACTION;"
"SPECIAL FACTORS--Interests of Certain
Persons in the Transaction;" and "THE
MERGER AGREEMENT"
5. Plans or Proposals of the
Issuer or Affiliate
(a)-(g)......................... "THE TRANSACTION--Plans for the Partnership
After the Merger and--The Subsequent
Transactions;" "SPECIAL FACTORS--Interests
of Certain Persons in the Transaction and--
Interests of Certain Persons in the
Transaction;" "THE MERGER
AGREEMENT;""EFFECT OF THE MERGER ON THE
PARTNERSHIP'S UNITS;" and "PRICE RANGE OF
UNITS AND DISTRIBUTIONS"
6. Source and Amount of Funds or
Other Consideration
(a)............................. "SUMMARY--Financing for the Merger" and
"FINANCING FOR THE MERGER"
(b)............................. "THE TRANSACTION--Payment of Expenses"
(c)............................. *
(d)............................. *
7. Purpose(s), Alternatives,
Reasons and Effects
(a)-(c)......................... "SPECIAL FACTORS--Recommendation of Our
General Partner; Reasons for the Merger"
and "THE TRANSACTION"
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2
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<CAPTION>
Item in Schedule 13E-3 Location in Proxy Statement
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(d).............................. "SPECIAL FACTORS--Recommendation of Our
General Partner; Reasons for the Merger;--
Background to the Transaction;--Opinion of
Our Financial Advisor and --Interests of
Certain Persons in the Transaction;"
"EFFECT OF THE MERGER ON THE PARTNERSHIP'S
UNITS;" "THE TRANSACTION--The Subsequent
Transactions and --Interests of Certain
Persons in the Transaction;" and "MATERIAL
UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES"
8. Fairness of the Transaction
(a)--(b)......................... "SPECIAL MEETING OF UNITHOLDERS--
Recommendation of Our General Partner" and
"SPECIAL FACTORS--Recommendation of Our
General Partner; Reasons for the Merger;--
Background to the Transaction; --Opinion of
Our Financial Advisor and --Other
Information Considered"
(c).............................. "SUMMARY--Vote Required" and "SPECIAL
MEETING OF UNITHOLDERS--Voting of Proxies
and Quorum"
(d).............................. "SPECIAL FACTORS--Opinion of our Financial
Advisor and --Other Information Considered"
and "DIRECTORS AND MANAGEMENT"
(e).............................. "DIRECTORS AND MANAGEMENT"
(f).............................. *
9. Reports, Opinions, Appraisals
and Certain Negotiations
(a)--(c)......................... "SPECIAL FACTORS--Recommendation of Our
General Partner; Reasons for the Merger; --
Background to the Transaction; --Opinion of
Our Financial Advisor; and --Other
Information Considered;" "Appendix B:
Opinion of Salomon Smith Barney," "Appendix
C: Opinion of McLagan Partners, Inc.," and
"Appendix D: Opinion of Goldman, Sachs &
Co."
10. Interest in Securities of the
Issuer
(a).............................. "VOTING SECURITIES AND PRINCIPAL HOLDERS
THEREOF" and "SPECIAL FACTORS--Interests of
Certain Persons in the Transaction"
(b).............................. *
11. Contracts, Arrangements or
Understandings with Respect to "SPECIAL FACTORS--Background to the
the Issuer's Securities........ Transaction and --Interests of Certain
Persons in the Transaction;" "THE
TRANSACTION--The Subsequent Transactions
and --Interests of Certain Persons in the
Transaction;" "THE MERGER AGREEMENT" and
"DIRECTORS AND MANAGEMENT"
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3
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<CAPTION>
Item in Schedule 13E-3 Location in Proxy Statement
---------------------- ---------------------------
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12. Present Intention and
Recommendation of Certain
Persons with Regard to the
Transaction
(a)............................. "THE TRANSACTION--Purpose and Structure of
the Transaction;" "SPECIAL FACTORS--
Recommendation of Our General Partner;
Reasons for the Merger" and "DIRECTORS AND
MANAGEMENT"
(b)............................. *
13. Other Provisions of the
Transaction
(a)............................. "THE TRANSACTION--No Appraisal Rights"
(b)............................. *
(c)............................. *
14. Financial Information
(a)............................. "SELECTED CONSOLIDATED FINANCIAL DATA" and
"WHERE YOU CAN FIND MORE INFORMATION"
(b)............................. *
15. Persons and Assets Employed,
Retained or Utilized
(a)............................. "SPECIAL MEETING OF THE UNITHOLDERS--
Solicitation of Proxies; Expenses;" "THE
TRANSACTION--Payment of Expenses;" "SPECIAL
FACTORS--Background of the Transaction" and
"FINANCING FOR THE MERGER"
(b)............................. "SPECIAL FACTORS--Background of the
Transaction; --Opinion of Our Financial
Advisor and --Other Information Considered"
and "SPECIAL MEETING OF THE UNITHOLDERS--
Solicitation of Proxies; Expenses"
16. ADDITIONAL INFORMATION........ *
17. MATERIAL TO BE FILED AS
EXHIBITS
(a)-(f)......................... Separately filed with this Schedule 13E-3.
</TABLE>
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* The Item is inapplicable or the answer thereto is in the negative.
Item 1. Issuer and Class of Security Subject to the Transaction.
(a) The information set forth in Cover Page and "SUMMARY--Parties to the
Merger--The Partnership" in the Proxy Statement is hereby incorporated herein
by reference.
(b) The information set forth in "SUMMARY--The Transactions" and "SUMMARY--
Record Date and Quorum" in the Proxy Statement is hereby incorporated herein
by reference.
(c) The information set forth in "PRICE RANGE OF UNITS AND DISTRIBUTIONS" in
the Proxy Statement is hereby incorporated herein by reference.
(d) The information set forth in "PRICE RANGE OF UNITS AND DISTRIBUTIONS" in
the Proxy Statement is hereby incorporated herein by reference.
4
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(e) Not Applicable.
(f) The information set forth in "DIRECTORS AND MANAGEMENT" in the Proxy
Statement is hereby incorporated herein by reference.
Item 2. Identity and Background.
This Schedule 13E-3 is being filed by PAM. The information set forth in
"SUMMARY--Parties to the Holdings Merger;" "THE TRANSACTION--Parties Involved
in the Transactions" and "DIRECTORS AND MANAGEMENT" in the Proxy Statement is
hereby incorporated herein by reference.
The information set forth in "DIRECTORS AND MANAGEMENT" as to each executive
officer of PAM is incorporated herein by this reference.
During the last five years, neither PAM, nor any person controlling PAM,
nor, to the best of its knowledge, any of the persons listed on "DIRECTORS AND
MANAGEMENT" in the proxy has (i) been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (ii) been a party to
a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree, or final order enjoining further violations of, or
prohibiting activities subject to, federal or state securities laws or finding
any violation of such laws.
Item 3. Past Contacts, Transactions or Negotiations.
(a)(1) The information set forth in "DIRECTORS AND MANAGEMENT" in the Proxy
Statement with respect to transactions by affiliates involving the issuer is
hereby incorporated herein by reference.
(a)(2) The information set forth in "DIRECTORS AND MANAGEMENT" in the Proxy
Statement with respect to contracts and negotiations by affiliates involving
the issuer is hereby incorporated herein by reference.
(b) The information set forth in "DIRECTORS AND MANAGEMENT" in the Proxy
Statement with respect to contracts and negotiations by affiliates involving
the issuer is hereby incorporated herein by reference.
Item 4. Terms of the Transaction.
(a) The information set forth in "SUMMARY;" "THE TRANSACTION;" "SPECIAL
FACTORS--Interests of Certain Persons in the Transaction;" and "THE MERGER
AGREEMENT" in the Proxy Statement is hereby incorporated herein by reference.
(b) The information set forth "SUMMARY--Interests of Certain Persons in the
Transaction;" "THE TRANSACTION;" "SPECIAL FACTORS--Interests of Certain
Persons in the Transaction;" and "THE MERGER AGREEMENT" in the Proxy Statement
is hereby incorporated herein by reference.
Item 5. Plans or Proposals of the Issuer or Affiliate.
(a)--(g) "THE TRANSACTION--Plans for the Partnership After the Merger;"
"SPECIAL FACTORS--Background of the Transaction;" and "--Interests of Certain
Persons in the Transaction;" "THE TRANSACTION--The Subsequent Transactions;"
"THE MERGER AGREEMENT;" "EFFECT OF THE MERGER ON THE PARTNERSHIP'S UNITS;" and
"PRICE RANGE OF UNITS AND DISTRIBUTIONS" in the Proxy Statement is hereby
incorporated herein by reference.
Item 6. Source and Amount of Funds or Other Consideration.
(a) The information set forth in "SUMMARY--Financing for the Merger" and
"FINANCING FOR THE MERGER" in the Proxy Statement is hereby incorporated
herein by reference.
5
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(b) The information set forth in "THE TRANSACTION--Payment of Expenses" in
the Proxy Statement is hereby incorporated herein by reference.
(c) Not Applicable
(d) Not Applicable.
Item 7. Purpose(s), Alternatives, Reasons and Effects.
(a)--(c) The information set forth in "SPECIAL FACTORS--Recommendation of
Our General Partner; Reasons for the Merger" and "THE TRANSACTION" in the
Proxy Statement is hereby incorporated herein by reference.
(d) The information set forth in "SPECIAL FACTORS--Recommendation of Our
General Partner; Reasons for the Merger;--Background to the Transaction;--
Opinion of Our Financial Advisor; and --Interests of Certain Persons in the
Transaction;" "EFFECT OF THE MERGER ON THE PARTNERSHIP'S UNITS;" "THE
TRANSACTION--The Subsequent Transactions and --Interests of Certain Persons in
the Transaction;" and "MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES"
in the Proxy Statement is hereby incorporated herein by reference.
Item 8. Fairness of the Transaction.
(a)--(b) The information set forth in "SPECIAL MEETING OF UNITHOLDERS--
Recommendation of Our General Partner" and "SPECIAL FACTORS--Recommendation of
Our General Partner; Reasons for the Merger;--Background to the Transaction;--
Opinion of Our Financial Advisor and --Other Information Considered" in the
Proxy Statement is hereby incorporated herein by reference.
(c) The information set forth in "SUMMARY--Vote Required" and "SPECIAL
MEETING OF UNITHOLDERS--Voting of Proxies and Quorum" in the Proxy Statement
is hereby incorporated herein by reference.
(d) The information set forth in "SPECIAL FACTORS--Opinion of Our Financial
Advisor and --Other Information Considered" and "DIRECTORS AND MANAGEMENT" in
the Proxy Statement is hereby incorporated herein by reference.
(e) The information set forth in "DIRECTORS AND MANAGEMENT" in the Proxy
Statement is hereby incorporated herein by reference.
(f) Not Applicable.
Item 9. Reports, Opinions, Appraisals and Certain Negotiations.
(a)--(c) The information set forth in "SPECIAL FACTORS--Recommendation of
Our General Partner; Reasons for the Merger; --Background to the
Transaction;--Opinion of Our Financial Advisor; and --Other Information
Considered;" "Appendix B: Opinion of Salomon Smith Barney," "Appendix C:
Opinion of McLagan Partners, Inc." and "Appendix D: Opinion of Goldman, Sachs
& Co." in the Proxy Statement is hereby incorporated herein by reference.
Item 10. Interest in Securities of the Issuer.
(a) The information set forth in "VOTING SECURITIES AND PRINCIPAL HOLDERS
THEREOF" and "SPECIAL FACTORS--Interests of Certain Persons in the
Transaction" in the Proxy Statement is hereby incorporated herein by
reference.
(b) Not Applicable.
6
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Item 11. Contracts, Arrangements or Understandings with Respect to the
Issuer's Securities.
The information set forth "SPECIAL FACTORS--Background to the Transaction
and --Interests of Certain Persons in the Transaction;" "THE TRANSACTION--The
Subsequent Transactions and --Interests of Certain Persons in the
Transaction;" "THE MERGER AGREEMENT" and "DIRECTORS AND MANAGEMENT" in the
Proxy Statement is hereby incorporated herein by reference.
Item 12. Present Intention and Recommendation of Certain Persons with Regard
to the Transaction.
(a) The information set forth in "THE TRANSACTION--Purpose and Structure of
the Transaction;" "SPECIAL FACTORS--Recommendation of Our General Partner;
Reasons for the Merger" and "DIRECTORS AND MANAGEMENT" in the Proxy Statement
is hereby incorporated herein by reference.
(b) Not Applicable.
Item 13. Other Provisions of the Transaction.
(a) The information set forth in "THE TRANSACTION--No Appraisal Rights" in
the Proxy Statement is hereby incorporated herein by reference.
(b) Not applicable.
(c) Not applicable.
Item 14. Financial Information.
(a) The information set forth in "SELECTED CONSOLIDATED FINANCIAL DATA" and
"WHERE YOU CAN FIND MORE INFORMATION" in the Proxy Statement is hereby
incorporated herein by reference.
(b) Not applicable.
Item 15. Persons and Assets Employed, Retained or Utilized.
(a) The information set forth in "SPECIAL MEETING OF THE UNITHOLDERS--
Solicitation of Proxies; Expenses;" "THE TRANSACTION--Payment of Expenses;"
"SPECIAL FACTORS--Background of the Transaction;" and "FINANCING FOR THE
MERGER" in the Proxy Statement is hereby incorporated by reference.
(b) The information set forth in "SPECIAL FACTORS--Background of the
Transaction; --Opinion of Our Financial Advisor and --Other Information
Considered;" and "SPECIAL MEETING OF THE UNITHOLDERS--Solicitation of Proxies;
Expenses."
Item 16. Additional Information.
The information set forth in the Proxy Statement and the Appendices thereto
and the Exhibits hereto is incorporated herein by reference.
7
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Item 17. Material to be Filed as Exhibits.
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(a) Not Applicable.
(b)(1) Fairness Opinion of Salomon Smith Barney, dated October 29, 1999, is
incorporated by reference from Appendix B of the Proxy Statement
attached hereto in Exhibit (d)(1).
(b)(2) Financial Presentation of Salomon Smith Barney to PIMCO Partners,
G.P. dated October 29, 1999.
(b)(3) Presentation of Lazard Freres & Co. LLC to certain managing directors
of Pacific Investment Management Company and Kenneth M. Poovey dated
July 30, 1999.
(b)(4) Presentation of Lazard Freres & Co. LLC to certain managing directors
of Pacific Investment Management Company and Mr. Poovey dated August
24, 1999.
(b)(5) Presentation of Lazard Freres & Co. LLC to William S. Thompson and
Mr. Poovey dated September 20, 1999.
(b)(6) Presentation of Lazard Freres & Co. LLC to the members of PIMCO
Partners, LLC, dated October 29, 1999.
(b)(7) Opinion of McLagan Partners, Inc., dated October 29, 1999.
(b)(8) Presentation of Goldman, Sachs & Co. to directors of Pacific Life
Insurance Company dated October 29, 1999.
(b)(9) Opinion of Goldman, Sachs & Co. dated October 31, 1999.
(c)(1) The Implementation and Merger Agreement, dated October 31, 1999, by
and among Allianz of America, PAM, the Partnership, PIMCO Advisors
L.P. ("PIMCO Advisors"), PIMCO Partners, LLC, PIMCO Holding LLC,
PIMCO Partners, G.P., and other parties named therein is incorporated
by reference from the Proxy Statement attached hereto in Exhibit
(d)(1).
(d)(1) Copies of each of the Proxy Statement of PIMCO Advisors Holdings
L.P., Letter to Unitholders and Notice of Special Meeting of
Unitholders, filed with the SEC on December 21, 1999.
(d)(2) Press Release Issued on October 31, 1999 incorporated by reference
from Exhibit 99.1 of Form 8-K filed on November 1, 1999.
(e) Not Applicable.
(f) Not Applicable.
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
Dated: December 20, 1999
Pacific Asset Management LLC, a
Delaware limited liability company
By: Pacific Life Insurance Company,
a California corporation, member
/s/ Khanh T. Tran
By __________________________________
Name:Khanh T. Tran
Title:Chief Financial Officer
<PAGE>
EXHIBIT INDEX
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Exhibit Description
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(a) Not Applicable.
(b)(1) Fairness Opinion of Salomon Smith Barney, dated October 29, 1999, is
incorporated by reference from Appendix B of the Proxy Statement
attached hereto in Exhibit (d)(1).
(b)(2) Financial Presentation of Salomon Smith Barney to PIMCO Partners, G.P.
dated October 29, 1999.
(b)(3) Presentation of Lazard Freres & Co. LLC to certain managing directors
of Pacific Investment Management Company and Kenneth M. Poovey dated
July 30, 1999.
(b)(4) Presentation of Lazard Freres & Co. LLC to certain managing directors
of Pacific Investment Management Company and Mr. Poovey dated August
24, 1999.
(b)(5) Presentation of Lazard Freres & Co. LLC to William S. Thompson and Mr.
Poovey dated September 20, 1999.
(b)(6) Presentation of Lazard Freres & Co. LLC to the members of PIMCO
Partners, LLC, dated October 29, 1999.
(b)(7) Opinion of McLagan Partners, Inc., dated October 29, 1999.
(b)(8) Presentation of Goldman, Sachs & Co. to directors of Pacific Life
Insurance Company dated October 29, 1999.
(b)(9) Opinion of Goldman, Sachs & Co. dated October, 31 1999.
(c)(1) The Implementation and Merger Agreement, dated October 31, 1999, by
and among Allianz of America, PAM, the Partnership, PIMCO Advisors
L.P. ("PIMCO Advisors"), PIMCO Partners, LLC, PIMCO Holding LLC, PIMCO
Partners, G.P., and other parties named therein is incorporated by
reference from the Proxy Statement attached hereto in Exhibit (d)(1).
(d)(1) Copies of each of the Proxy Statement of PIMCO Advisors Holdings L.P.,
Letter to Unitholders and Notice of Special Meeting of Unitholders,
filed with the SEC on December 21, 1999.
(d)(2) Press Release Issued on October 31, 1999 incorporated by reference
from Exhibit 99.1 of Form 8-K filed on November 1, 1999.
(e) Not Applicable.
(f) Not Applicable.
</TABLE>
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[Salomon Smith Barney Letterhead] Exhibit 99 (b)(1)
October 29, 1999
General Partner
PIMCO Advisors Holdings L.P.
800 Newport Center Drive
Newport Beach, California 92260
General Partners
PIMCO Advisors L.P.
800 Newport Center Drive
Newport Beach, California 92260
Dear General Partners:
PIMCO Advisors Holdings L.P. ("Holdings LP"), PIMCO Advisors L.P.
("Advisors LP"), Pacific Asset Management LLC ("PacMan"), PIMCO Partners G.P.
("Partners GP"), PIMCO Partners, LLC ("Partners LLC"), PIMCO Holding LLC
("Holding LLC"), Allianz of America, Inc. ("AZOA") and the other parties named
therein propose to enter into the Implementation and Merger Agreement, to be
dated as of October 31, 1999 (the "Agreement"), pursuant to which, among other
things:
(i) a newly formed limited partnership, indirectly wholly owned by
AZOA, will be merged with and into Holdings LP, with Holdings LP as the
surviving entity, in a transaction (the "Holdings LP Merger") in which each
outstanding unit of limited partnership interest in Holdings LP (the
"Holdings LP Units") will be converted into the right to receive, without
interest, an amount in cash equal to the Unit Price (as defined in the
Agreement) (the "Holdings LP Merger Consideration");
(ii) the Class A units of limited partnership interest in Advisors LP
("Class A Advisors LP Units") held by PacMan or Pacific Financial Products,
Inc. immediately prior to the effective time of the Advisors LP Merger (as
defined below) (including certain Class A Advisors LP Units to be
distributed to PacMan by its affiliates prior thereto pursuant to the
Agreement), other than those burdened by employment termination and
noncompetition agreements with current or former employees, will be
exchanged for Class E units of membership interest in a newly formed
limited liability company owned directly or indirectly by AZOA ("Advisors
LP Merger Sub"), which in the Advisors LP Merger will be converted into new
Class E units of limited partnership interest in Advisors LP ("New Class E
Units"), which New Class E Units will be subject to certain purchase and
sale arrangements with AZOA pursuant to the Continuing
<PAGE>
2
Investment Agreement to be entered into between AZOA and PacMan prior to
the closing (the "Closing") of the Advisors LP Merger (collectively, the
"Pacific Arrangements");
(iii) the Class A Advisors LP Units held by affiliates of PacMan
that are burdened by ETAs (as defined in the Agreement) with persons who
have agreed to an amendment of their ETAs extending their non-competition
obligations (an "ETA Amendment") will be acquired by an affiliate of AZOA
for cash and stock of Allianz A.G.;
(iv) Advisors LP Merger Sub will be merged with and into Advisors LP,
with Advisors LP as the surviving entity, in a transaction (the "Advisors
LP Merger") in which (A) each Class A Advisors LP Unit outstanding as of
immediately prior to the effective time of the Advisors LP Merger, other
than (1) Class A Advisors LP Units exchanged or acquired as described in
clauses (ii) and (iii) above, (2) Class A Advisors LP Units held by
Advisors LP Merger Sub and (3) Class A Advisors LP Units converted as
described in clause (iv)(C) below, will be converted into the right to
receive, without interest, an amount in cash equal to the Unit Price (the
"Advisors LP Merger Consideration"), (B) each Class C unit and Class D unit
of limited partnership interest in Advisors LP outstanding as of
immediately prior to the effective time of the Advisors LP Merger will
remain outstanding and unaffected by the Advisors LP Merger, (C) the Class
A Advisors LP Units held by affiliates of PacMan that are burdened by ETAs
with persons who have not agreed to ETA Amendments will be converted into
new Class B units of limited partnership interest in Advisors LP, (D) the
Class A units of membership interest in Advisors LP Merger Sub will be
converted into new Class A units of limited partnership interest in
Advisors LP, and (E) the Class E units of membership interest in Advisors
LP Merger Sub will be converted into New Class E Units (as described in
clause (ii) above); and
(v) certain related transactions described in the Agreement with or
otherwise relating to key employees of Advisors LP and its subsidiaries
will be effected at or prior to the Closing, including without limitation
the entering into of certain severance arrangements and employment
agreements that will become effective as of the Closing, the establishment
of certain arrangements for payments to be made in cash and stock of
Allianz A.G. pursuant to the ETAs and the entering into of ETA Amendments
in connection therewith (as described in clause (iii) above), the
establishment of a five-year retention incentive bonus program and a seven-
year variable retention incentive bonus program, the grant of stock of
Allianz A.G. to certain key employees, and the equitization of a portion of
the existing Pacific Investment Management Company profit-sharing plan
(collectively, the "Management Arrangements"),
(the transactions described in clauses (i), (ii), (iii), (iv) and (v) of this
sentence or otherwise set forth in the Agreement, collectively, the
"Transaction"). The terms and conditions of the Transaction are set forth in
more detail in the Agreement.
<PAGE>
3
You have requested our opinion as investment bankers as to the
fairness, from a financial point of view, of (i) the Holdings LP Merger
Consideration to the holders of Holdings LP Units, other than the Excluded
Holders (as defined below), (the "Holdings Covered Units"), and (ii) the
Advisors LP Merger Consideration to the holders of Class A Advisors LP Units,
other than the Excluded Holders, (the "Advisors Covered Units"). For purposes
of this opinion, "Excluded Holders" means Pacific Life Insurance Company and
each of its affiliates (including without limitation those entities holding the
Class A Advisors LP Units that are burdened by the ETAs), Partners LLC, Partners
GP and each of the managing directors of Pacific Management Investment Company
(including without limitation any units held for the benefit of such persons).
In connection with rendering our opinion, we have, among other things:
(i) reviewed the October 27, 1999 draft of the Agreement (including the exhibits
thereto) in the form provided to us, and have taken into account the terms of
the Transaction set forth therein, including without limitation the Pacific
Arrangements and the Management Arrangements; (ii) reviewed certain publicly
available business and financial information that we deemed relevant relating to
Holdings LP, Advisors LP and the industry in which they operate; (iii) reviewed
certain internal non-public financial and operating data and other information
provided to us by the management of Holdings LP and Advisors LP relating to
Holdings LP's and Advisors LP's respective businesses, including certain
forecast and projection information as to the future financial results of such
businesses; (iv) reviewed certain publicly available business and financial
information with respect to certain other companies that we believed to be
relevant or comparable in certain respects to Holdings LP and Advisors LP, and
the trading markets for such other companies' securities; (v) reviewed and
analyzed certain publicly available and other information concerning the trading
of, and the trading market for, the Holdings LP Units; (vi) reviewed the
financial terms (including without limitation arrangements with management and
controlling persons to the extent publicly available) of certain business
combinations and acquisition transactions we deem reasonably comparable to the
Transaction and otherwise relevant to our inquiry; (vii) discussed with members
of senior management and other officers, employees and representatives of
Holdings LP and Advisors LP the foregoing, including the past and current
business operations, financial condition and prospects of Holdings LP and
Advisors LP; and (viii) considered such other information, financial studies,
analyses, investigations and financial, economic, market and trading criteria as
we deemed relevant to our inquiry.
In our review and analysis and in arriving at our opinion, we have
assumed and relied upon, without assuming any responsibility for verification,
the accuracy and completeness of all of the financial and other information
provided to, discussed with, or reviewed by or for us, or publicly available.
We also have assumed that the final form of the Agreement (including the
exhibits thereto) will not vary in any respect that is material to our analysis
from the last draft reviewed by us. With respect to Holdings LP's and Advisors
LP's financial projections provided to, discussed with or reviewed for us by the
management of Holdings LP or Advisors LP, respectively, we have been advised by
management of Holdings LP and Advisors LP, respectively, and have assumed, that
they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments on the part of management of Holdings LP or
<PAGE>
4
Advisors LP, respectively, as to the future financial performance of Holdings LP
or Advisors LP, as applicable. We express no view as to such projections or
information or the assumptions on which they are based. We have not assumed
any responsibility for making or obtaining any independent evaluations or
appraisals of any of the assets or liabilities of Holdings LP or Advisors LP,
nor for conducting a physical inspection of the properties and facilities of
Holdings LP or Advisors LP, and we have not been furnished with any such
evaluation or appraisal. We have relied upon counsel to Holdings LP and
Advisors LP with respect to interpretations of the provisions contained in the
constituent documents and related agreements of Holdings LP and Advisors LP and
the application of applicable law to such documents and agreements. Our opinion
necessarily is based on market, economic and other conditions as they exist and
can be evaluated on the date hereof, and we assume no responsibility to update
or revise our opinion based upon circumstances or events occurring after the
date hereof. Our opinion does not address the underlying business decision to
effect the Transaction.
In connection with the preparation of this opinion, we have not been
engaged by Holdings LP or Advisors LP to solicit third-party indications of
interest for the acquisition of all or any part of Holdings LP or Advisors LP,
and we have not participated in the structuring of the Transaction or the
negotiation of the terms of the Agreement.
As you are aware, Salomon Smith Barney Inc. ("SSB") has acted as a
financial advisor to Holdings LP and Advisors LP in connection with the
Transaction and will receive a fee for such services, all of which fee will be
received in connection with the delivery of this opinion. In addition, Holdings
LP and Advisors LP have agreed to indemnify us for certain liabilities arising
out of our engagement. We, in the ordinary course of business, have from time
to time provided, and in the future may continue to provide, investment banking,
financial advisory and other related services to Holdings LP, Advisors LP,
Allianz A.G. and/or their respective affiliates, as the case may be, for which
we have or will receive fees. In the ordinary course of business, we or our
affiliates may trade in the debt and equity securities of Holdings LP, Allianz
A.G. and/or their respective affiliates, as the case may be, for our own
accounts and for the accounts of our customers and, accordingly, may at any time
hold a long or short position in such securities. In addition, we and our
affiliates (including Citigroup Inc. and its affiliates) may maintain business
relationships with Holdings LP, Advisors LP, Allianz A.G. and/or their
respective affiliates.
This opinion is for the use and benefit of Advisors LP, Holdings LP,
Partners GP, Partners LLC and Holding LLC in the evaluation of the Transaction
and shall not be used for any other purposes. Except for the foregoing persons,
this opinion is not intended to be relied upon or confer any rights or remedies
upon any person, including any employee, creditor, partner, member or other
equityholder of Holdings LP, Advisors LP, Partners LLC or any of their
respective affiliates. This opinion shall not be reproduced, disseminated,
quoted, summarized or referred to at any time, in any manner or for any purpose,
nor shall any public references to SSB or any of its affiliates be made by
Holdings LP, Advisors LP, Partners LLC or any of their respective affiliates,
without the prior written consent of SSB.
<PAGE>
5
Based upon and subject to the foregoing, we are of the opinion that,
as of the date hereof, (i) the Holdings LP Merger Consideration is fair, from a
financial point of view, to the holders of Holdings Covered Units, and (ii) the
Advisors LP Merger Consideration is fair, from a financial point of view, to the
holders of Advisors Covered Units.
Very truly yours,
SALOMON SMITH BARNEY INC.
<PAGE>
Exhibit 99 (b)(2)
Confidential
Project Apostle
PRESENTATION TO THE GENERAL PARTNERS
October 29, 1999
[LOGO OF SOLOMON SMITH BARNEY]
<PAGE>
Table of Contents
1 TRANSACTION OVERVIEW
2 OVERVIEW OF PIMCO ADVISORS
3 COMPARATIVE OPERATING PERFORMANCE
4 VALUATION
APPENDIX
A. Comparable Company Analysis
B. Precedent Transactions
C. Weighted Average Cost of Capital Analysis
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
1 TRANSACTION OVERVIEW
[LOGO OF SALOMON SMITH BARNEY]
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
Transaction Overview
Assumed Purchase Price: $38.75 (the "Unit Price") per Class A limited
partnership unit ("Unit") of PIMCO Advisors LP
("PIMCO Advisors" or "PALP");
$4,661 million in aggregate as follows:
<TABLE>
<CAPTION>
Allocation: Units % of Total Amount
---------- ---------- ----------
<S> <C> <C> <C> <C>
Holdings 49.6 41.2% $1,920
Pacific Life and subsidiaries 37.2 30.9 1,442 (a)
Units underlying ETAs (b) 17.4 14.5 674
Other (c) 9.7 8.1 376
---------- ---------- ----------
Units Outstanding 113.9 94.7 4,413
Options, net (d) 4.1 3.4 159
Other 2.3 1.9 89
---------- ---------- ----------
Total 120.3 100.0% $4,661
========== ========== ==========
</TABLE>
Adjustment If the Revenue Run-rate declines by more than 15%,
excluding the impact of market changes, the Unit
Price will be adjusted by 2% for every 1% change
in the Revenue Run-rate in excess of 15% (with a
price floor of $31.00).
N.B Transaction structure based on conversations with management.
(a) Pacific life will receive Class E units at closing. Amount in table is
based on a vale at closing of $38.75 per Unit.
(b) Employee Termination Agreements. Amount in table includes cash and Allianz
common stock and assumes a value of $38.75 per Unit.
(c) Includes 3.7 million private units.
(d) Calculated using treasury stock method.
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1
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
Transaction Overview
Transaction Structure:
- - Allianz acquires all Units of PIMCO Advisors, except Units held by Pacific
Life
. 17.4 million Units held under ETAs receive, in the aggregate,
approximately 16% of their consideration in common shares of Allianz
A.G. and the balance in cash (a)
. All other Units acquired receive $38.75 in cash
- - Pacific Life exchanges its retained Units for an equivalent number of newly
issued Class E units to be held indirectly and subject to a put/call
structure with Allianz
- - Pacific Life will receive annual cash distributions after closing on its
Class E units, equivalent to $1.05 per unit plus 20% of defined LTM "PIMCO
Classic" pre-bonus profits (b)
- - Pacific Life has the right to put all of its Class E units to Allianz at
any time post-closing: ---
. At a per-unit price equal to the Liquidity Multiple times the sum of
$1.05 and 20% of LTM PIMCO Classic pre-bonus profits per-unit for the
preceding four quarters (the "Put Price")
. Liquidity Multiple equal to 14.Ox ($38.75 divided by projected 1999
Operating Profit Available for Distribution of $2.77)
. Maximum Put Price of $60.00 per Class E unit
- - Allianz has the right to call all of Pacific Life's Class E units:
---
. In case of change of control of Pacific Life: At the end of the
calendar year during which a change of control transaction is closed,
at the higher of the Put Price and $38.75
. At any time after December 31, 2002: If the Put Price exceeds $50.00,
at that price, but not to exceed $60.00 per Class E unit
- - Pacific Life has indicated that it desires continued participation in PALP
so as to permit continued inclusion of PALP assets in Pacific Life
promotional and business development materials
(a) We have assumed, based on discussions with management, that the per Unit
value of such cash and stock is $38.75.
(b) Based on discussions with PALP management, we have assumed that (i) the
$1.05 fixed portion of such distributions is substantially equivalent to
the projected distributions that would have been received on the non-PIMCO
Classic business, and (ii) the transaction with Allianz will not have a
material impact on the amount of PIMCO Classic distributions.
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2
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
Transaction Overview
Retention Arrangements: In connection with the execution by PIMCO Advisors
employees of customary non-solicitation/non-compete
agreements, Allianz will establish four retention
pools, contingent upon employment, as follows:
<TABLE>
<CAPTION>
Eligible
Amount NPV (a) Employees Consideration Vesting
------- --------- ------------------ ------------- -----------
<C> <C> <S> <C> <C>
Restricted
$50 $50 Gross/Thompson Stock 5 years
391 296 Senior MDs Cash 5
105 81 Other employees* Cash 5
------- --------- ------------------ ------------- -----------
Fixed Component $546 $427
Performance Based Up to 120 103 Other employees* Cash 7
------- ---------
$666 $530
======= =========
</TABLE>
Compensation:
Options and Deferred 8.585 million options on Units will be redeemed for
Compensation cash based on a price of $38.75. Employees deferred
compensation and deferred restricted unit plan will
be cashed out based on a value of $38.75 per Unit.
Bonus Pool PIMCO Advisors will amend its existing Profit Sharing
Plan to "equitize" a reduction in its bonus pool from
45% to 30% of pre-tax, pre-bonus income.
* Not required to execute non-compete/non-solicitation agreements.
(a) Assumes 10% discount rate per management.
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3
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNER
Transaction Overview
Representations and Customary for transactions of this kind
Warranties:
Tax Treatment: The transaction will be taxable. The acquisition of
PIMCO Advisors will create Section 197 intangibles
which can be amortized for tax purposes over 15 years.
The structure of the acquisition of Units underlying
ETAs and options is intended to achieve treatment as
compensation expense for Allianz (a)
Closing Conditions: Customary for transactions of this kind, including (i)
a condition to the obligations of Allianz of a Revenue
Run-Rate flow not less than 75% of the level at
September 30, 1999, and (ii) a condition to the
obligations of all parties of the receipt of the
approval of the transaction by a majority of the
outstanding units of limited partnership interest in
PIMCO Advisors Holdings L.P.
(a) Based on discussions with PIMCO Advisors management, we have assumed that
(i) the agreement of Pacific Life is required in order for this tax benefit
to be realized by Allianz, and (ii) that it has approximate incremental
value to Allianz of $4.00 per Unit held by Pacific Life.
[LOGO OF SALOMON SMITH BARNEY]
4
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
Transaction Overview
TRANSACTION MULTIPLES
Reference Per Unit Price
Data (a) $38.75
Equity Value (b) $4,661
Firm Value (c) 4,754
PALP:
AUM ($B) $256.2 1.86 %
LTM Revenues $944.2 5.0 x
LTMOPAD 303.0 (d) 15.7
Net Income:
LTM As Reported $224.8 (d) 20.7 x
LTM Tax-Effected (d) 132.6 (d)(e) 35.1
1999E 265.6 17.6
2000E 323.9 14.4
PAH:
Diluted Net Income per Unit:
LTM $1.70 (g) 22.8 x
1999E 1.68 (h) 23.1
2000E 2.03 (h) 19.1
Distributions per Unit:
LTM $2.32 16.7 x
1999E 2.48 (h) 15.6
2000E 2.71 (h) 14.3
Premium to Market Based on:
Current Price (10/28/99) $34.13 13.6 %
Day Prior to WSJ Article (7/6/99) 29.56 31.1
Normalized Price 24.76 56.5
___________________________________________________________
(a) At or lot the twelve months ended September 30, 1999.
(b) Excludes management retention package. Based on diluted units outstanding.
(c) Firm value has been adjusted for existing debt (long and short term) of
$145.5 million, less existing cash of $52.2 million.
(d) Adjusted to exclude non-recurring items.
(e) Assumes 41% tax rate.
(f) Based on projections driven by management assumptions. See page 31.
(g) SSB estimate.
(h) Based on IBES median estimates dated October 15. 1999.
[LOGO OF SALOMON SMITH BARNEY]
5
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
2 OVERVIEW OF PIMCO ADVISORS
[LOGO OF SALOMON SMITH BARNEY]
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
PIMCO Advisors - Highlights
BACKGROUND
. PIMCO Advisors is the nation's 17th largest asset manager with
approximately $256.2 billion in assets under management /(1)/
. PIMCO Advisors provides a broad range of fixed income and equity
investment advisory services to institutional and retail clients
. November 1997 acquisition of Oppenheimer Capital added approximately $60
billion in equity AUM
AUM: $256.2B
Equity: 33%
Fixed Inc. 66%
Money Market 1%
Mutual Funds /(2)/: 37%
Separate Accts: 63%
Domestic(3): 92%
International /(3)/ 8%
ASSET GROWTH
[CHART]
CAGR (1995 - September 30, 1999) = 19.2%
1995 1996 1997 1998 September 30, 1999
Equity $ 54,900 $ 68,389 $ 84,405 $ 92,040 $ 84,818
Fixed Income $ 77,500 $ 89,860 $115,140 $152,126 $171,335
(1) AUM data is as of 9/30/99; ranking data as of 12/31/98 per Institutional
Investor.
(2) Includes institutional mutual fund, retail mutual funds and other retail
products.
(3) From discussion with management.
Source: Company-provided financials. Pro forma for acquisition of Oppenheimer
Capital.
[LOGO OF SALOMON SMITH BARNEY]
6
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
PIMCO Advisors - Subsidiary Summary
- - PALP is a limited partnership. Publicly traded units are issued by PIMCO
Advisors Holdings L.P. itself a GP of PALP
- - PALP is structured as a series of relatively autonomous affiliates each of
which controls its own investment process
<TABLE>
<CAPTION>
Pacific Oppenheimer PIMCO
Investments Capital Equity Advisors Cadence Parametric NFJ
--------------------------- -------------- --------------- -------------- --------------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Account Type Institutional / Mutual Fund Institutional Mutual Fund Institutional Institutional Institutional
Primary Style Fixed Income - Total Return Equity - Value Equity - Growth Equity - Blend Equity - Quantitative Equity - Value
9/30/99 AUM ($B) $ 181.5 $ 55.7 $ 6.2 $ 6.5 $ 3.9 $ 2.2
AUM CAGR 26.0 % 10.8 % NM 30.8 % 27.4 % 12.0 %
(1995 - 9/30/99)
</TABLE>
Comment - AUM growth (driven by increase in market share in the
slow-growing defined benefit market
- Premier Fixed Income Manager (Bill Gross): 1998 Fixed
Income Manager of the Year by Morningstar
- Acquired November 1997
- After poor performance (absolute, relative, and dispersion),
upgraded investment professionals, replacing three
portfolio managers, including its Chief Investment Officer
- Represents renamed retail operation of Columbus Circle
- Recently hired a new team of investment managers.
- Innovation Fund: 1998 Fund of the Year by Mutual Funds
magazine based on a return of 79% for the year
- - In June 1999, PALP sold institutional portion of Columbus Circle Investors
($4.5 B in AUM) to management
- - In October 1998, PALP sold Blairlogie Capital Management ($800 MM in AUM)
to Allegheny Financial Group
- - PALP distributes its retail funds primarily through the broker-dealer
channel. It had 2% share of net flows in 1998 and 5% share through June 30,
1999, placing it 9th among broker-distributed managers
Source: Company, Financial Research Corporation.
7 [LOGO OF SALOMOM SMITH BARNEY]
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
America's Top Money Managers
($ in Millions)
- --------------------------------------------------------------------------------
Total Assets Under Management
-------------------------------
Rank Firm 12/31/1998 12/31/1997
- --------------------------------------------------------------------------------
1 Fidelity Investments $773,124 $625,864
2 Barclays Global Investors 615,500 485,800
3 Merrill Lynch & Co. 501,229 447,945
4 State Street Global Advisors 492,797 398,682
5 Capital Group Cos. 424,235 343,526
6 Mellon Bank Corp. 400,975 313,431
7 Bankers Trust Co. 361,884 317,753
8 Equitable Cos. 359,169 262,837
9 Morgan Stanley Dean Witter & Co. 345,731 288,671
10 SSB Citi Asset Mgmt Group 327,027 -
11 J.P. Morgan lnv. Mgmt 316,193 256,609
12 UBS Brinson Division 303,703 150,801
13 Putnam Investments 294,056 235,086
14 Scudder Kemper Investments 281,188 218,668
15 Vanguard Group 276,318 215,347
16 TIAA CREF 244,171 209,569
17 PIMCO Advisors 244,166 199,544
18 Prudential Insurance Co. 242,838 213,632
19 Bank of America Corp. 233,500 -
20 Northern Trust Global Investments 225,781 196,619
21 Franklin Group of Funds 220,200 221,000
22 AMVESCAP 216,917 156,686
23 Wellington Mgmt Co. 211,318 174,550
24 American Express Co. 196,051 170,872
25 Chase Manhattan 189,603 160,038
Source: Institutional Investor
PALP is the 17th largest asset manager in the U.S. as of December 31, 1998...
8 [LOGO OF SOLOMON SMITH BARNEY]
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
America's Largest Tax-Exempt Money Managers
<TABLE>
<CAPTION>
($ in Millions)
- ------------------------------------------------------------------------------------------
Total Assets Under Management
---------------------------------
Rank Firm 12/31/1998 12/31/1997
- ------------------------------------------------------------------------------------------
<C> <S> <C> <C>
1 Barclays Global Investors $577,800 $462,600
2 State Street Global Advisors 448,928 368,899
3 Fidelity Investments 445,798 349,654
4 Bankers Trust Co. 252,385 228,153
5 J.P. Morgan Inv. Mgmt 228,971 183,377
6 Capital Group International 215,671 176,580
7 Mellon Bank Corp. 209,034 181,600
8 PIMCO Advisors 190,652 157,200
9 UBS Brinson Division 169,742 91,153
10 Northern Trust Global Investments 154,858 153,593
11 Equitable Cos. 151,283 122,851
12 Prudential Insurance Co. 137,978 138,944
13 United Asset Mgmt Corp. 133,008 134,274
14 Vanguard Group 123,271 102,849
15 Putnam Investments 117,169 98,624
16 Metropolitan Life 111,337 103,211
17 Nvest Cos. 88,964 79,609
18 Goldman Sachs Asset Mgmt. 88,551 66,520
19 T. Rowe Price Associates 75,235 66,415
20 AMVESCAP 74,595 51,881
</TABLE>
Source: Institutional Investor
... and the 8th largest manager of tax-exempt assets.
[LOGO OF SALOMON SMITH BARNEY]
9
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
PIMCO Advisors AUM Breakdown
AUM BREAKDOWN FOR PIMCO ADVISORS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Client Breakdown (9/30/99): Total = $256.2 B Asset Allocation (9/30/99): Total = $256.2 B
- ------------------------------------------------------------------------------------------------------
<S> <C>
[PIE CHART] [PIE CHART]
Source: Company AUM Data Source: Company AUM Data
- --------------------------------------------------
Geographic Breakdown (9/30/99): Total = $256.2 B
- --------------------------------------------------
[PIE CHART]
Source: Management Discussion
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Total Asset Style Breakdown (6/30/99): Total Equity Asset Style Breakdown (6/30/99):
Total = $254.6 B Total = $100.6 B
- ------------------------------------------------------------------------------------------------------
<S> <C>
[PIE CHART] [PIE CHART]
Source: Financial Research Corporation, Source: Financial Research Corporation,
InvestWorks, Nelsons InvestWorks, Nelsons
- --------------------------------------------------
Separate Account Breakdown (6/30/99):
Total = $159.2 B
- --------------------------------------------------
[PIE CHART]
Source: Nelsons
</TABLE>
10 [LOGO OF SALOMON SMITH BARNEY]
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
PIMCO Advisors Market Share
<TABLE>
<CAPTION>
PIMCO ADVISORS MARKET SHARE BY NET FLOWS IN THE BROKER-DEALER DISTRIBUTED CHANNEL
($ in millions)
Channel Net Flows
- ----------------------------------------------------------------------------------------------------------------------------
Complex Name YTD 1999 % of Total 1998 % of Total 1997 % of Total
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Alliance Capital $7,010.8 20.4% $13,945.0 13.6% $4,306.8 4.4%
MFS Investment Management 6,673.6 19.4 11,567.4 11.3 5,400.1 5.5
American Fund Distributors 4,246.4 12.4 12,235.5 11.9 12,516.2 12.8
Fidelity Advisors 3,931.5 11.4 3,472.0 3.4 1,677.0 1.7
Putnam Investments 3,271.1 9.5 13,269.0 12.9 19,965.0 20.5
Munder Capital Management 2,490.7 7.2 401.5 0.4 209.8 0.2
Eaton Vance Distributors 2,268.2 6.6 3,648.1 3.5 679.7 0.7
OppenheimerFunds, Inc. 2,226.4 6.5 9,901.5 9.6 8,888.4 9.1
PIMCO Advisors 1,792.8 5.2 1,989.7 1.9 525.1 0.5
Van Kampen Funds 1,411.0 4.1 3,254.4 3.2 2,546.0 2.6
American Skandia 1,238.0 3.6 562.4 0.5 34.6 0.0
Hartford Investment Mgmt. 1,158.7 3.4 1,304.7 1.3 741.2 0.8
Fidelity Distributors 828.4 2.4 832.0 0.8 376.0 0.4
Dreyfus Premier 591.8 1.7 1,055.7 1.0 124.3 0.1
WM Group of Funds 541.2 1.6 (1,139.2) -1.1 (611.5) -0.6
BlackRock Funds 531.5 1.5 601.3 0.6 447.2 0.5
Enterprise Capital Mgt. 507.8 1.5 866.0 0.8 447.2 0.5
AIM Distributors Inc. 447.9 1.3 1,129.6 1.1 4,375.9 4.5
Alger (Fred) Management, Inc. 437.1 1.3 246.1 0.2 74.0 1.1
SunAmerica Inc. 368.3 1.1 500.1 0.5 243.6 0.2
</TABLE>
Source: Financial Research Corporation. Year-to-date data as of June 30, 1999.
PIMCO Advisors has significantly increased its volume and share of broker-dealer
net flows.
11 [LOGO OF SALOMON SMITH BARNEY]
<PAGE>
PIMCO Advisors Historical AUM
<TABLE>
<CAPTION>
HISTORICAL AUM
--------------
--------- --------- --------- --------- --------- CAGR
($ in billions) 1995 1996 1997 1998 9/30/99 1995-9/30/99
--------- --------- --------- --------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Institutional Products
Separate - Fixed Income $ 50.3 $ 57.3 $ 83.0 $ 106.6 $ 117.4 25.4%
Mutual Funds - Fixed Income 16.7 19.6 24.2 33.2 40.0 26.2
Separate Equities 16.2 18.1 51.1 50.8 44.4 30.8
Mutual Funds - Equities 3.8 5.1 6.1 9.3 9.9 29.4
--------- --------- --------- --------- ---------
Total Institutional AUM 87.0 100.0 164.4 200.0 211.8 26.8
--------- --------- --------- --------- ---------
Retail Products
Mutual Funds - Fixed Income 2.0 2.5 5.1 9.0 10.7 55.4
Mutual Funds - Equities 5.5 6.7 27.2 31.9 30.5 58.0
Money Market 0.6 0.7 2.8 3.3 3.3 54.3
--------- --------- --------- --------- ---------
Total Retail AUM 8.2 10.0 35.1 44.2 44.4 57.0
--------- --------- --------- --------- ---------
Total Products AUM $ 95.2 $ 110.0 $ 199.5 $ 244.2 $ 256.2 30.2
========= ========= ========= ========= =========
<CAPTION>
PERCENT OF TOTAL
--------- --------- --------- --------- -----------
1995 1996 1997 1998 9/30/99
--------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Institutional Products
As a % of Total AUM
Separate - Fixed Income 52.8% 52.1% 41.6% 43.7% 45.8%
Mutual Funds - Fixed Income 17.6 17.8 12.1 13.6 15.6
Separate - Equities 13.7 13.1 20.5 16.6 13.9
Mutual Funds - Equities 4.0 4.6 3.1 3.8 3.9
--------- --------- --------- --------- -----------
Total Institutional AUM 91.4 90.9 82.4 81.9 82.7
--------- --------- --------- --------- -----------
Retail Products
As a % of Total AUM
Mutual Funds - Fixed Income 2.1 2.3 2.6 3.7 4.2
MutualFunds - Equities 5.8 6.1 13.6 13.1 11.9
Money Market 0.7 0.6 1.4 1.3 1.3
--------- --------- --------- --------- -----------
Total Retail AUM 8.6 9.1 17.6 18.1 17.3
--------- --------- --------- --------- -----------
Total AUM 100.0% 100.0% 100.0% 100.0% 100.0%
========= ========= ========= ========= ===========
</TABLE>
Source: Company AUM Data
12 [LOGO OF SALOMON SMITH BARNEY]
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
PIMCO Advisors Asset Flow
<TABLE>
<CAPTION>
ASSET FLOW BY PRODUCT
($ in billions) 1995 1996 1997 1998 September 30, 1999
------------------ ------------------- ------------------- -------------------- ---------------------------
BOP Net Market BOP Net Market BOP Net Market BOP Net Market BOP Net Market Ending
AUM Flows Change AUM Flows Change AUM Flows Change AUM Flows Change AUM Flows Change AUM
------------------ ------------------- ------------------- -------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Institutional Products
Separate Fixed Income $38.8 $3.5 $8.0 $50.3 $5.1 $1.9 $57.3 $19.1 $6.6 $83.0 $14.5 $9.2 $106.6 $11.8 $(1.1) $117.4
Mutual Funds Fixed
Income 11.8 2.7 2.2 16.7 1.7 1.1 19.6 2.3 2.3 24.2 7.2 1.8 33.2 6.6 0.2 40.0
Separate Equities 12.5 (0.4) 4.2 16.2 (1.4) 3.3 18.1 29.2 3.9 51.1 (8.0) 7.6 50.8 (7.8) 1.5 44.4
Mutual Funds - Equities 2.5 0.5 0.8 3.8 0.4 0.9 5.1 (0.3) 1.3 6.1 1.6 1.6 9.3 0.3 0.3 9.9
------------------ ------------------- ------------------- -------------------- ---------------------------
Total Institutional
Products 65.6 6.3 15.1 87.0 5.8 7.2 100.0 50.3 14.1 164.4 15.3 20.3 200.0 10.9 0.9 211.8
Retail Products
Mutual Funds - Fixed
Income 1.7 0.1 0.2 2.0 0.4 0.1 2.5 2.4 0.2 5.1 2.9 0.9 9.0 1.8 (0.1) 10.7
Mutual Funds - Equities 4.1 0.3 1.2 5.5 0.4 0.8 6.7 19.5 0.9 27.2 2.4 2.4 31.9 (1.1) (0.4) 30.5
Money Market 0.8 (0.2) 0.6 0.1 0.7 2.1 2.8 0.5 3.3 3.3
------------------ ------------------- ------------------- -------------------- ---------------------------
Total Retail Products 6.6 0.2 1.4 8.2 0.9 0.9 10.0 24.1 1.1 35.1 5.7 3.4 44.2 0.7 (0.5) 44.4
------------------ ------------------- ------------------- -------------------- ---------------------------
Total Products 72.2 6.6 16.5 95.2 6.7 8.2 110.0 74.4 15.1 199.5 21.0 23.6 244.2 11.5 0.4 256.2
================== =================== =================== ==================== ===========================
AS A PERCENTAGE OF BOP AUM
Institutional Products
Separate Fixed Income 9.1% 20.6% 10.1% 3.9% 33.3% 11.5% 17.4% 11.1% 11.1% (1.0)%
Mutual Funds - Fixed Income 23.0 18.5 10.3 6.8 11.8 11.6 29.8 7.6 19.7 0.7
Separate Equities (3.1) 33.5 (8.9) 20.1 161.4 21.5 (15.6) 14.9 (15.4) 3.0
Mutual Funds - Equities 19.7 30.1 11.3 23.5 (5.6) 26.0 26.1 26.7 3.0 3.1
------------ ------------ ------------ ------------ -------------
Total Institutional Products 9.7 23.0 6.7 8.3 50.3 14.1 9.3 12.3 5.4 0.5
Retail Products
Mutual Funds - Fixed Income 6.3 10.8 19.3 5.0 95.9 6.5 56.2 18.3 20.0 (1.1)
Mutual Funds - Equities 6.5 28.8 7.5 15.2 290.1 13.5 8.7 8.9 (3.4) (1.2)
Money Market (19.1) 11.4 295.2 16.0 (0.3)
------------ ------------ ------------ ------------ -------------
Total Retail Products 3.4 20.6 10.7 11.5 241.0 10.7 16.3 9.6 1.6 (1.1)
------------ ------------ ------------ ------------ -------------
Total Products 9.1% 22.8% 7.0% 8.6% 67.6% 13.8% 10.5% 11.8% 4.7% 0.2%
============ ============ ============ ============ =============
</TABLE>
Source: Company AUM Data
13 [LOGO OF SALOMON SMITH BARNEY]
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
PIMCO Advisors Product Performance
($ in billions)
SELECT PRODUCT AUM ANALYSIS
Separate Mutual
Account Fund Total As a %
Select PIMCO Assets Assets Product of Total
Products 6/30/99 08/31/99 Assets AUM
----------------- ---------- ---------- --------- --------
Total Return $ 98.5 $ 28.4 $ 126.9 49.9%
Large Cap Value 35.0 na 35 17.5
StockPlus 19.3 1.4 21 8
Innovation na 1.4 1 1
---------------------------------------------------------------
Total $ 152.9 $ 31.2 $ 184.1 76.8 %
SELECT PRODUCT PERFORMANCE ANALYSIS
<TABLE>
<CAPTION>
Separate Account
-------------------------------------------------------------------
Annualized Return Decile Rank
YTD (as of 6/30/99) (as of 6/30/99)
Select PIMCO Return ------------------------ ----------------------------
Products 6/30/99 1 Year 3 Year 5 year YTD 1 Year 3 Year 5 Year
------------ ------- ------ ------ ------ --- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Return (1.3)% 3.7% 8.6% 9.4% 4 2 1 1
Large Cap Value 11.6 11.9 23.0 24.7 5 7 5 4
StockPlus 11.6 22.8 29.9 29.0 7 4 3 2
Innovation na na na na na na na na
-------------- -------------------------------------------------------------------
<CAPTION>
Mutual Fund
----------------------------------------------------------
Net Flows
Annualized Return ----------------
YTD (as of 8/31/99) (as of 8/31/99)
Select PIMCO Return ----------------------- ---------------- M-Star
Products 08/31/99 1 Year 3 Year 5 Year YTD 1998 Rank
------------ -------- ------ ------ ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Total Return (1.8)% 1.3% 8.0% 8.1% $ 5,566 $ 6,614 5
Large Cap Value na na na na 0 0 na
StockPlus 7.0 39.5 28.1 25.4 347 317 5
Innovation 31.2 113.1 43.0 na 533 99 5
</TABLE>
Mutual Funds
% of 4,5 Star Morningstar Rated Funds to Total Rated Funds: 59.5%
-----
% of 4,5 Star Morningstar Rated Assets to Total Rated Assets: 92.6%
------
Separate Accounts
% of Products in Top 4 Deciles (1): 50.0%
% of AUM in Top 4 Deciles: 70.0%
Source: Financial Research Corporation, InvestWorks, Nelsons.
(1) For products with available InvestWorks data.
14 [LOGO OF SALOMON SMITH BARNEY]
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
PIMCO Advisors - Historical Results
<TABLE>
<CAPTION>
HISTORICAL CONSOLIDATED FINANCIAL RESULTS OF OPERATIONS
($ in millions except per unit data) Year Ended Year Ended 9 Months Ended
---------------------------- ----------------------- ----------------
Actual Pro Forma Last 12 Normalized
12/31/95 12/31/96 12/31/97 12/31/1997(1) 12/31/98 9/30/98 9/30/99 Months Basis
-------- -------- -------- ------------- -------- ------- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Investment Advisory Fees
Private Accounts $ 192.7 $ 213.9 $ 291.9 NA $ 551.4 $ 406.5 $ 417.2 $ 562.1
Proprietary Funds 90.8 128.9 165.8 NA 218.8 158.1 215.9 276.5
Distribution and Servicing Fees 38.2 48.2 56.8 NA 76.8 59.8 75.4 92.4
Other 1.3 1.1 2.2 NA 5.5 NA 7.7 NA
------- ------- ------- ------------- ------- ------- ------- -------
Total Revenues 323.0 392.0 516.7 690.3 852.4 624.4 716.2 944.2
------- ------- ------- ------------- ------- ------- ------- -------
EXPENSES
Compensation and Benefits 149.2 173.5 225.8 299.3 359.6 263.0 295.3 391.9
Commissions 28.7 37.7 46.7 NA 77.8 57.1 67.8 88.6
Restricted Units and Option Plans 6.7 5.2 8.2 NA 25.8 18.9 16.3 23.2
Marketing and Promotional 9.1 11.0 16.6 NA 28.7 NA 26.9 NA
Occupancy and Equipment 8.7 9.2 11.8 NA 23.6 16.7 25.0 31.9
General and Administrative 11.4 17.6 27.4 NA 43.7 31.3 43.2 55.6
Amortization of Intangibles 36.0 36.0 43.5 103.2 55.1 41.3 41.3 55.1
Others 4.8 10.7 18.3 NA 29.9 43.0 30.8 17.7
------- ------- ------- ------------- ------- ------- ------- -------
Total Operating Expenses (2) $ 254.5 300.9 398.3 537.4 644.1 471.3 546.7 719.5
------- ------- ------- ------------- ------- ------- ------- -------
OPERATING INCOME 68.5 91.1 118.3 152.9 208.4 153.2 169.6 224.8
Non Recurring Gain/ (Charge) (3) 0.0 0.0 0.0 4.4 0.0 0.0 (15.7) (15.7)
------- ------- ------- ------------- ------- ------- ------- -------
NET INCOME $68.5 $91.1 $ 118.3 $ 157.3 $ 208.4 $ 153.2 $ 153.9 $ 209.1 $ 224.8
======= ======= ======= ============= ======= ======= ======= ======= =======
Basic Net Income Per Unit $ 1.16 $ 1.29 $ 1.54 $ 1.44 $ 1.92 $ 1.42 $ 1.38 $ 1.88 $ 2.02
Diluted Net Income Per Unit $ 1.16 $ 1.29 $ 1.45 $ 1.39 $ 1.83 $ 1.35 $ 1.32 $ 1.80 $ 1.93
OPAD (4) $ 111.2 $ 132.3 $ 170.0 $ 260.5 $ 289.2 $ 213.4 $ 221.9 $ 297.8 $ 303.0
OPAD Per Unit (4) $ 1.88 $ 1.87 $2.21 $ 2.38 $ 2.66 $ 1.98 $ 1.99 $ 2.67 $ 2.72
Average AUM $ 83.7 $ 102.6 $ 154.8 $ 179.0 $ 211.9 $ 226.5 $ 240.2 $ 218.7
($ in billions)
Advisory Fees/Average AUM 33.9 33.4 29.6 NA 36.4 24.9 26.4 37.1
(in basis points)
- -------------------------------------------------------------------------------------------------------------------------------
Memo Items
Performance Fees $ 19.1 $ 22.5 $ 31.6 NA $ 34.7 $ 22.9 $ 15.1 $ 26.9
<CAPTION>
CAGR
------------------
1995- PF 1997-
LTM LTM
--- ---
<S> <C> <C>
REVENUES
Investment Advisory Fees
Private Accounts 33.0% NA
Proprietary Funds 34.6 NA
Distribution and Servicing Fees 26.5 NA
Other NA NA
Total Revenues 33.1 19.6
EXPENSES
Compensation and Benefits 29.4 16.7
Commissions 35.0 NA
Restricted Units and Option Plans 39.1 NA
Marketing and Promotional NA NA
Occupancy and Equipment 41.5 NA
General and Administrative 52.4 NA
Amortization of Intangibles 12.0 (30.2)
Others 42.0 NA
Total Operating Expenses (2) 31.9 18.1
OPERATING INCOME 37.3 24.6
Non Recurring Gain/ (Charge) (3) NA NA
NET INCOME 34.7% 17.7%
Basic Net Income Per Unit 13.8% 16.6%
Diluted Net Income Per Unit 12.4% 15.9%
OPAD (4) 30.0% 7.9%
OPAD Per Unit (4) 9.8% 6.7%
Average AUM 29.2% 12.1%
($ in billions)
Advisory Fees/Average AUM
(in basis points)
- ----------------------------------------------------
Memo Items
Performance Fees 9.5% NA
</TABLE>
Source: "PIMCO Advisors LP Consolidating Results of Operations" (company
provided), Form 10-K dated 12/31/98 and 12/31/97, Form 10-Q dated 9/30/98.
Historical Financials are not restated for acquisition of Oppenheimer Capital,
which closed on November 4, 1997.
(1) Pro forma for acquisition of Oppenheimer Capital.
(2) Includes PIMCO Advisors estimates of $6.7 million related to Year 2000
expenses for June 30, 1999.
(3) Excludes gain on sale of Quest for Value funds in 1997. Excludes gain on
sale of Blairlogic and charge associated with restructuring of OPCap in
1999.
(4) OPAD (Operating Profit Available for Distribution) is defined as the sum of
net income plus non-cash charges arising from amortization of compensation,
and losses of any subsidiary which is not a flow through entity for tax
purposes.
15 [LOGO OF SALOMON SMITH BARNEY]
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
PIMCO Advisors - Historical Results
HISTORICAL CONSOLIDATED FINANCIAL RESULTS OF OPERATIONS - COMMON SIZE
<TABLE>
<CAPTION>
Year Ended Year Ended 9 Months Ended
----------------------------- ------------------------ ---------------------------
Actual Pro Forma Last 12
12/31/95 12/31/96 12/31/97 12/31/1997(1) 12/31/98 9/30/98 9/30/99 Months
-------- -------- -------- ------------- -------- ------- ------- --------
REVENUES
Investment Advisory Fees
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Private Accounts 59.7% 54.6% 56.5% NA 64.7% 65.1% 58.2% 57.8%
Proprietary Funds 28.1 32.9 32.1 NA 25.7 25.3 30.1 30.5
Distribution and Servicing Fees 31.8 12.3 11.0 NA 9.0 9.6 10.5 10.0
Others 0.4 0.3 0.4 NA 0.6 NA 1.1 NA
-------- -------- -------- ------------- -------- ------- ------- --------
Total Revenues 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
EXPENSES
Compensation and Benefits 46.2 44.3 43.7 43.4 42.2 42.1 41.2 41.3
Commissions 8.9 9.6 9.0 NA 9.1 9.3 9.5 9.5
Restricted Units and Option Plans 2.1 1.3 1.6 NA 3.0 3.0 2.3 2.3
Marketing and Promotional 2.6 2.8 3.2 NA 3.4 NA 3.8 NA
Occupancy and Equipment 2.7 2.3 2.3 NA 2.8 2.7 3.5 3.6
General and Administrative 3.5 4.5 5.3 NA 5.1 5.0 6.0 6.1
Amortization of Intangibles 11.1 9.2 8.4 15.0 6.5 6.6 5.8 5.6
Other 3.5 2.7 3.5 NA 3.5 6.9 4.3 0.9
-------- -------- -------- ------------- -------- ------- ------- --------
Total Operating Expenses 78.8 76.8 77.1 77.9 75.6 75.5 76.3 76.4
OPERATING INCOME 21.2 23.2 22.9 22.1 24.4 24.5 23.7 23.6
Non Recurring Gain/(Charge) 0.0 41.0 0.0 0.8 0.0 0.0 (2.2) (2.2)
-------- -------- -------- ------------- -------- ------- ------- --------
NET INCOME 23.2% 23.2% 22.9% 22.8% 24.4% 24.5% 21.5% 21.4%
======== ======== ======== ============= ======== ======= ======= ========
Memo Items
Performance Fees 5.9% 5.7% 6.1% NA 4.3% 3.7% 2.1% 2.5%
OPAD 34.4 33.7 32.9 37.7 33.9 34.2 31.0 31.5
</TABLE>
(1) Pro forma for acquisitions of Oppenheimer Capital.
16
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
PIMCO Advisors Holdings L.P. - Historical Results
HISTORICAL FINANCIAL RESULTS
<TABLE>
<CAPTION>
Year Ended Year Ended 9 Months Ended CAGR
---------------------------- ---------- ----------------- -------------
($ in millions) Last 12 Normalized 1995- PF 1997-
12/31/95 12/31/96 12/31/97 12/31/98 9/30/98 9/30/99 Months Basis LTM LTM
-------- -------- -------- -------- -------- -------- -------- ---------- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Equity in Earnings of Operating
Partnership $ 34.2 $ 45.9 $ 66.0 $ 90.7 $ 66.4 $ 67.4 $ 91.7 $ 98.8 32.7% 26.0%
Total Revenues 34.2 45.9 66.0 90.7 66.4 67.4 91.7 98.8 32.7 26.0
EXPENSES
Taxes and Other, Net 3.5 0.0 0.0 14.5 10.7 11.7 15.5 15.5 NA NA
Total Expenses 3.5 0.0 0.0 14.5 10.7 11.7 15.5 15.5 48.8 NA
-------- -------- -------- -------- -------- -------- -------- ----------
NET INCOME $ 30.8 $ 45.9 $ 66.0 $ 76.1 $ 55.7 $ 55.7 $ 76.1 $ 83.3 30.4% 14.2%
======== ======== ======== ======== ======== ======== ======== ==========
Distributions Declared NA NA NA $ 103.1 $ 76.0 $ 86.3 $ 113.5 $ 113.5 NA NA
Distributions Per Unit NA NA NA $ 2.18 $ 1.61 $ 1.76 $ 2.32 $ 2.32 NA NA
Basic Net Income Per Unit $ 1.21 $ 1.00 $ 1.44 $ 1.61 $ 1.18 $ 1.14 $ 1.56 $ 1.70 9.5% 10.0%
Diluted Net income Per Unit $ 1.21 $ 0.98 $ 1.39 $ 1.52 $ 1.11 $ 1.08 $ 1.49 $ 1.63 8.3% 9.6%
Selected Statistics
Revenue/Advisors Net income 50.0% 50.4% 55.8% 43.5% 43.4% 43.8% 43.8% 44.0% (3.4)% (12.9)%
Taxes/Revenue 10.2 0.0 0.0 16.0 16.1 17.4 17.0 15.7 14.4 NA
Taxes/Shares of PIMCO Revenue 2.2 0.0 0.0 3.9 4.0 3.7 3.8 3.7 15.8 NA
</TABLE>
Source: PIMCO Advisors Holdings L.P. Form 10-K dated December 31, 1997 and 1998;
Form 10-Q dated September 30, 1998 and management.
17 [LOGO OF SALOMON SMITH BARNEY]
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
PIMCO Advisors - Financial Condition
<TABLE>
<CAPTION>
($ in millions)
At 12/31/97 At 12/31/98 At 9/30/99
----------- ----------- ----------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 34.3 $ 46.1 $ 74.6
Investment advisory fees receivable:
Private Accounts 132.3 146.2 146.0
Proprietary Funds 10.6 17.5 20.4
Distribution and servicing fees receivable 5.4 7.6 8.4
----------- ----------- ----------
Total fees receivable 148.3 171.2 174.8
Notes receivable 1.8 1.0 1.0
Receivable from affiliates 0.5 0.5 0.6
Short term investments 33.6 69.9 95.3
Other current assets 12.7 36.5 91.6
----------- ----------- ----------
Total current assets 231.2 325.4 363.3
Investment in partnerships 4.3 4.8 3.7
Fixed assets 15.4 22.7 43.1
Intangible assets 1060.9 1,005.8 964.5
Other non current assets 23.1 53.4 105.2
----------- ----------- ----------
Total assets $ 1,334.9 $ 1,412.0 $ 1,479.8
=========== =========== ==========
LIABILITIES
Accounts payable and accrued expenses 22.8 28.0 34.4
Commissions payable 10.9 3.9 14.6
Other related current liabilities 19.5 33.4 29.6
----------- ----------- ----------
Total accounts payable, accrued expenses and other 53.2 65.2 78.7
Accrued compensation 50.0 68.5 97.9
Distribution payable 61.8 73.5 78.6
Short term borrowings 30.0 65.0 90.0
----------- ----------- ----------
Total current liabilities $ 195.0 $ 272.2 $ 345.2
Long term notes 83.1 80.5 80.5
Other non current liabilities 2.6 0.3 1.8
----------- ----------- ----------
Total liabilities $ 280.8 $ 353.0 $ 427.5
----------- ----------- ----------
PARTNERS' CAPITAL
General Partners 812.9 801.3 771.2
Class A Limited Partners 247.0 336.4 344.0
Class B Limited Partners 65.7 -- --
Class D Limited Partners -- -- 3.2
Unamortized compensation (71.4) (78.7) (66.1)
----------- ----------- ----------
Total partners' capital $ 1,054.1 $ 1,059.1 $ 1,052.3
----------- ----------- ----------
Total liabilities and partners' capital $ 1,334.9 $ 1,412.0 $ 1,479.8
=========== =========== ==========
</TABLE>
Source: Form 10-K dated 12/31/98 and company-provided "Consolidated Balance
Sheet Comparative" dated 9/30/99.
18 [LOGO OF SALOMON SMITH BARNEY]
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
PIMCO Advisors Holdings L.P. - Market Price & Volume
- --------------------------------------------------------------------------------
Price - Volume (1999 YTD)
- --------------------------------------------------------------------------------
[GRAPH]
Price on Day Prior to Rumor (7/6/99): $29.56
Price on Day prior to Confirmation of talks (10/4/99): $33.75
- --------------------------------------------------------------------------------
Valuation Multiples
- --------------------------------------------------------------------------------
Trading Multiples as of:
------------------------
7/6/99 10/26/99
---------- -----------
Price $29.56 $34.13
Firm Value/PALP AUM (a) 1.4 % 1.6 %
Firm Value/PALP LTM Revenue (a) 3.9 x 4.4 x
Firm Value/PALP LTM OPAD (a) 12.0 13.9
Price/PAH Earnings:
LTM 17.4 x 20.1 x
1998: (b) 17.6 20.3
2000: (b) 14.6 16.8
Price/PAH LTM Distributions 12.8 14.7
(a) Firm value has been adjusted for existing debt (long and short term) of
$145.5 million, less existing cash of $52.2 million
(b) BFS median estimates as of October 15, 1999
[LOGO OF SALOMON SMITH BARNEY]
19
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
Analyst Estimates - PIMCO Advisors Holdings L.P.
<TABLE>
<CAPTION>
Earnings Estimates
Last -------------------- LT Growth Target
Firm Name Analyst Report Rating 1999E 2000E Rate Price
- --------------------- ------------------ --------- ---------- --------- --------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Salomon Smith Barney Guy Moszkowski 9/30/99 Buy (2M) $1.65 $2.05 16.0% $37.00
Schroder Securities James Hanbury 8/11/99 Outperform NA NA NA NA
Lazard Freres Luke Fichthorn 7/28/99 Buy 1.68 2.02 NA 36.00
Putnam, Lovell Neal Epstein 7/21/99 Buy 1.67 2.04 NA 38.00
Merrill Lynch Mark Constant(1) 4/29/99 Buy 1.73 2.09 14.0 35.00
Crowell, Weedon & Co Ben Wei 3/29/99 Buy 1.70 2.06 NA NA
Goldman Sachs Strauss, Richard 3/19/99 Outperform NA NA NA NA
Anderson & Strudwick Charles Mills NA NA NA NA NA NA
Lehman Brothers Mark Constant(1) NA NA NA NA NA NA
- ------------------------------------------------------------------------------------------------------------
High $1.73 $2.09 16.0% $38.00
Mean 1.69 2.05 15.0 36.50
Median 1.68 2.05 15.0 36.50
Low 1.65 2.02 14.0 35.00
IBES 1.68 2.03 10.0 NA
</TABLE>
Source: Investext and Bloomberg
(1) Mr. Constant left Merrill Lynch for Lehman Brothers in 1999.
20 [LOGO OF SALOMON SMITH BARNEY]
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
Comparative Yield
- --------------------------------------------------------------------------------
PIMCO Advisors Yield vs. 30 year T-Bond Yield
- --------------------------------------------------------------------------------
[GRAPH]
- --------------------------------------------------------------------------------
Comparative Spread
- --------------------------------------------------------------------------------
[GRAPH]
21 [LOGO OF SALOMON SMITH BARNEY]
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
3 COMPARATIVE OPERATING PERFORMANCE
[LOGO OF SALOMON SMITH BARNEY]
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
Comparative Operating Statistics -- LTM 6/30/99
<TABLE>
<CAPTION>
LTM data as of 6/30/99
Dollars in millions LTM Profitability Statistics
-----------------------------------------------------
Last Twelve Month Performance Adv. Comp. Margin (%): As % of AUM:
---------------------------------------- Rev./ Exp./ ------------------- -------------------
Total Advisory Net Op. Cash Total Total Net Total Adv.
Rev. Rev. EBITDA Inc. Flow(1) Rev. Rev. EBITDA EBT Inc. Rev. Rev. EBT
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PIMCO Advisors $915.2 $818.1 $296.2 $216.7 $296.1 89.4% 54.0% 32.4% 23.7% 23.7% 0.36% 0.32% 0.09%
C-Corporations
Affiliated Managers Group, Inc. $286.0 $282.9 $136.4 $32.2 $55.6 98.9% 35.8% 47.7% 19.0% 11.3% 0.40% 0.40% 0.08%
AMVESCAP PLC(2) 1,563.0 1,546.8 483.5 124.3 241.1 99.0 -- 30.9 18.4 8.0 0.53 0.52 0.10
BlackRock Inc. 400.0 368.7 118.3 52.2 61.8 92.2 39.5 29.6 24.0 13.0 0.28 0.26 0.07
Eaton Vance Corporation 326.9 191.2 167.8 63.8 125.2 58.5 20.7 51.3 31.5 19.5 0.84 0.49 0.26
Federated Investors, Inc. 564.8 491.5 264.6 107.7 161.4 87.0 26.6 46.8 30.1 19.1 0.48 0.42 0.14
Franklin Resources, Inc. 2,339.1 1,333.0 768.2 465.0 642.7 57.0 22.4 32.8 26.1 19.9 1.03 0.59 0.27
Gabelli Asset Management Inc. 149.2 138.2 55.3 27.4 27.4 92.7 45.4 37.0 30.4 18.4 0.79 0.74 0.24
John Nuveen 328.5 290.0 167.0 91.4 105.4 88.3 28.5 50.8 45.8 27.8 0.55 0.49 0.25
Neuberger Berman Inc. 578.2 368.5 259.5 141.6 155.3 63.7 38.6 44.9 42.5 24.5 1.02 0.65 0.43
Phoenix Investment Partners 254.7 216.8 93.7 20.9 51.7 85.1 39.7 36.8 17.1 8.2 0.43 0.36 0.07
T. Rowe Price Associates, Inc. 945.0 726.3 346.2 195.1 195.1 76.9 34.1 36.6 33.2 20.6 0.59 0.46 0.20
United Asset Management Corp. 902.7 902.7 286.9 64.3 177.0 100.0 49.8 31.8 12.5 7.1 0.44 0.44 0.05
Waddell & Reed Financial Inc. 315.6 147.2 151.2 88.0 92.9 46.6 10.7 47.9 44.8 27.9 1.07 0.50 0.48
--------------------------------------------------------------------------
Mean 80.5% 40.4% 28.9% 17.3% 0.65% 0.48% 0.20%
Median 87.0 37.0 30.1 19.1 0.55 0.49 0.20
--------------------------------------------------------------------------
Master Limited Partnerships
Alliance Capital
Management, L.P. $1,514.6 $1,076.4 $556.7 $343.4 $482.6 71.1% 25.9% 36.8% 26.8% 22.7% 0.47% 0.34% 0.13%
Nvest 656.3 599.4 182.7 107.5 156.3 91.3 50.0 27.8 17.1 16.4 0.48 0.44 0.08
--------------------------------------------------------------------------
Mean 81.2% 32.3% 22.0% 19.5% 0.48% 0.39% 0.10%
Median 81.2 32.3 22.0 19.5 0.48 0.39 0.10
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Low 46.6% -- 27.8% 12.5% 7.1% 0.28% 0.26% 0.05%
Mean 80.5 31.2 39.3 28.0 17.6 0.63 0.47 0.19
Median 87.0 34.1 36.8 26.8 19.1 0.53 0.46 0.14
High 100.0 50.0 51.3 45.8 27.9 1.07 0.74 0.48
--------------------------------------------------------------------------
</TABLE>
NB Financial data excludes all non-recurring and extraordinary items
(1) Represents Net Income plus Depreciation and Amortization
(2) Financial data is adjusted herein US GAAP
22 [LOGO OF SALOMON SMITH BARNEY]
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
Summary Operating Statistics
<TABLE>
<CAPTION>
Total Revenue as a % of AUM
-------------------------------------
1997 1998 LTM 6/30/99
------ ------ -------------
<S> <C> <C> <C>
PIMCO 0.34% 0.35% 0.36%
Mean /(1)/ 0.61 0.65 0.63
C-Corporations
- --------------
Affiliated Managers Group, Inc. 0.21 0.39 0.40
AMVESCAP PLC (2) 0.46 0.50 0.53
BlackRock Inc. 0.21 0.27 0.28
Eaton Vance Corporation 0.89 0.96 0.84
Federated Investors, Inc. 0.44 0.47 0.48
Franklin Resources, Inc. 1.09 1.16 1.03
Gahelli Asset Management Inc. 0.89 0.88 0.79
John Nuveen 0.54 0.56 0.55
Neuberger Berman Inc. 0.93 1.04 1.02
Phoenix Investment Partners 0.37 0.43 0.43
T. Rowe Price Associates, Inc. 0.61 0.60 0.59
United Asset Management Corp. 0.48 0.48 0.44
Waddell & Reed Financial Inc. 1.08 1.04 1.07
Master Limited Partnerships
- ---------------------------
Alliance Capital Management, L.P. 0.45 0.46 0.47
Nvest 0.45 0.50 0.48
<CAPTION>
Advisory Revenue as a % of AUM
---------------------------------------
1997 1998 LTM 6/30/99
------ ------ -------------
<S> <C> <C> <C>
PIMCO 0.30% 0.32% 0.32%
Mean /(1)/ 0.44 0.49 0.47
C-Corporations
- --------------
Affiliated Managers Group, Inc. 0.21 0.38 0.40
AMVESCAP PLC (2) 0.46 0.49 0.52
BlackRock Inc. 0.18 0.25 0.26
Eaton Vance Corporation 0.51 0.59 0.49
Federated Investors, Inc. 0.37 0.45 0.42
Franklin Resources, Inc. 0.62 0.63 0.59
Gahelli Asset Management Inc. 0.73 0.77 0.74
John Nuveen 0.45 0.49 0.49
Neuberger Berman Inc. 0.61 0.68 0.65
Phoenix Investment Partners 0.30 0.36 0.36
T. Rowe Price Associates, Inc. 0.47 0.46 0.46
United Asset Management Corp. 0.48 0.48 0.44
Waddell & Reed Financial Inc. 0.50 0.50 0.50
Master Limited Partnerships
- ---------------------------
Alliance Capital Management, L.P. 0.32 0.33 0.34
Nvest 0.41 0.46 0.44
</TABLE>
(1) Mean is of all C-Corporations and MLPs.
[LOGO OF SALOMON SMITH BARNEY]
23
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
Summary Operating Statistics
<TABLE>
<CAPTION>
EBITDA Margin EBT Margin
---------------------------------------- -----------------------------------------
1997 1998 LTM 6/30/99 1997 1998 LTM 6/30/99
---------- ---------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
PIMCO 33.4% 33.9% 32.4% 23.3% 24.5% 23.7%
Mean (1) 40.7 40.6 39.3 27.5 27.7 28.0
C-Corporations
- --------------
Affiliated Managers Group, Inc. 33.5 47.8 47.7 3.1 17.7 19.0
AMVESCAP PLC (2) 39.8 33.1 30.9 24.8 21.4 18.4
BlackRock Inc. 35.9 28.7 29.6 22.2 22.1 24.0
Eaton Vance Corporation 60.0 46.4 51.3 32.8 22.3 31.5
Federated Investors, Inc. 35.4 43.9 46.8 20.3 27.9 30.1
Franklin Resources, Inc. 32.7 31.5 32.8 27.3 25.0 26.1
Gabelli Asset Management Inc. 36.6 40.4 37.0 33.6 35.9 30.4
John Nuveen 50.8 50.2 50.8 45.4 44.8 45.8
Neuberger Berman Inc. 44.4 46.2 44.9 44.4 44.7 42.5
Phoenix Investment Partners 34.4 36.1 36.8 19.2 16.8 17.1
T. Rowe Price Associates, Inc. 57.5 57.4 36.6 31.0 31.7 33.2
United Asset Management Corp. 32.4 32.0 31.8 17.4 14.3 12.5
Waddell & Reed Financial Inc. 51.6 51.7 47.9 45.5 46.8 44.8
Master Limited Partnerships
- ---------------------------
Alliance Capital Management, L.P. 36.1 35.4 36.8 27.5 26.3 26.8
Nvest 28.8 27.7 27.8 17.4 17.3 17.1
</TABLE>
(1) Mean is of all C-Corporations and MLPs.
24 [LOGO OF SALOMON SMITH BARNEY]
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
Summary Operating Statistics
<TABLE>
<CAPTION>
EBT as a % of AUM Comp. Expense to Total Revenue
------------------------------------------ ------------------------------------------
1997 1998 LTM 6/30/99 1997 1998 LTM 6/30/99
----------- ----------- ------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
PIMCO Advisors 0.08% 0.09% 0.09% 54.1% 54.3% 54.0%
Mean /(1)/ 0.19 0.19 0.19 32.4 31.5 31.2
C-Corporations
- --------------
Affiliated Managers Group, Inc. 0.01 0.07 0.08 43.1 36.4 35.8
AMVESCAP PLC (2) 0.11 0.11 0.10 -- -- --
BlackRock Inc. 0.05 0.06 0.07 38.0 44.0 39.5
Eaton Vance Corporation 0.29 0.21 0.26 22.5 23.2 20.7
Federated Investors, Inc. 0.09 0.13 0.14 34.5 28.1 26.6
Franklin Resources, Inc. 0.30 0.29 0.27 20.0 21.6 22.4
Gabelli Asset Management Inc. 0.30 0.31 0.24 47.4 43.3 45.4
John Nuveen 0.25 0.25 0.25 28.7 28.9 28.5
Neuberger Berman Inc. 0.41 0.46 0.43 38.7 37.2 38.6
Phoenix Investment Partners 0.07 0.07 0.07 41.9 39.6 39.7
T. Rowe Price Associates, Inc. 0.19 0.19 0.20 33.6 34.3 34.1
United Asset Management Corp. 0.08 0.07 0.05 50.0 49.4 49.8
Waddell & Reed Financial Inc. 0.49 0.49 0.48 10.5 10.9 10.7
Master Limited Partnerships
- ---------------------------
Alliance Capital Management, L.P. 0.12 0.12 0.13 27.1 25.7 25.9
Nvest 0.08 0.09 0.08 49.4 50.0 50.0
</TABLE>
(1) Mean is of all C-Corporations and MLPs.
25 [LOGO OF SALOMON SMITH BARNEY]
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
Analysis of PIMCO Advisors Holdings L.P. Normalized Unit Price
<TABLE>
<CAPTION>
Pre-Rumor PIMCO Advisors
Stock Stock Holdings L.P.
Price Price Percent Normalized
10/28/1999 7/1/1999 change Unit Price
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PIMCO Advisors Holdings L.P. $34.13 $29.38 16.2%
C-Corporations
- --------------
Affiliated Managers Group, Inc. $25.00 $30.81 (18.9)%
AMVESCAP PLC(1) 40.88 46.00 (11.1)
Eaton Vance Corporation 33.81 36.00 (6.1)
Federated Investors, Inc. 17.75 16.94 4.8
Franklin Resources, Inc. 32.94 41.88 (21.3)
Gabelli Asset Management Inc. 14.81 15.94 (7.1)
John Nuveen 35.56 42.13 (15.6)
Phoenix Investment Partners 8.50 8.69 (2.2)
T. Rowe Price Associates, Inc. 32.56 39.13 (16.8)
United Asset Management Corp. 20.63 22.06 (6.5)
Waddell & Reed Financial Inc. 23.50 27.94 (15.9)
Master Limited Partnerships
- ---------------------------
Alliance Capital Management, L.P. $26.13 $32.44 (19.5)%
Nvest 19.63 24.38 (19.5)
- -------------------------------------------------------------------------------------------------------------
PIMCO Advisors Holdings L.P. Normalized Unit Price (15.7)% (2) $24.76
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents performance of the American Depository Shares (which in each
represent 5 ordinary shares).
(2) Represents change in industry market cap since 7/1/99.
26 [LOGO OF SALOMON SMITH BARNEY]
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
4 VALUATION
[LOGO OF SALOMON SMITH BARNEY]
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
Summary Valuation
<TABLE>
<CAPTION>
Valuation Methodology $18.00 $20.00 $22.00 $24.00 $26.00 $28.00
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
---------------------------
Public Market - C Corporations (a) $21.04 - $25.78
---------------------------
---------------------------
Public Market - Selected C Corps. (b) $22.92 - $25.19
---------------------------
---------------------------
Public Market - MLPs (c) $17.86 - $21.90
---------------------------
Precedent Transactions Analysis
DCF Analysis - PALP Distributions
DCF Analysis - PALP Distributions
<CAPTION>
Valuation Methodology $30.00 $32.00 $34.00 $36.00 $38.00
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Public Market - C Corporations (a)
Public Market - Selected C Corps. (b)
Public Market - MLPs (c)
--------------------------------
Precedent Transactions Analysis $29.24 - $35.84
--------------------------------
--------------------------------
DCF Analysis - PALP Distributions $33.38 - $37.14
--------------------------------
--------------------------------
DCF Analysis - PALP Distributions $33.07 - $36.98
--------------------------------
<CAPTION>
----------------
Normalized Price
$24.76
----------------
Apostle Ref.
Valuation Date (d) $18.00 $20.00 $22.00 $24.00 $26.00 $28.00
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Equity Value (e) $2,165 $2,406 $2,646 $2,887 $3,127 $3,368
Premium/Market Price (10/28/99) $34.13 (47.3)% (41.4)% (35.5)% (29.7)% (23.8)% (17.9)%
Premium/Pre Nominal Price (7/6/99) 29.56 (39.1) (32.3) (25.6) (18.8) (12.1) (5.3)
Premium/Normalized Price 24.76 (27.3) (19.2) (11.1) (3.1) 5.0 13.1
Firm Value/Assets Under Mgmt. (%) (f) $256.2 0.88 % 0.98 % 1.07 % 1.16 % 1.26 % 1.35 %
Firm Value/LLM Revenues (f) 944.2 2.4 x 2.6 x 2.9 x 3.2 x 3.4 x 3.7 x
Firm Value/LLM OPAD (f) 303.0 7.5 8.2 9.0 9.8 10.6 11.4
Price/PALP LLM OPAD per unit 2.72 6.6 x 7.4 x 8.1 x 8.8 x 9.6 x 10.3 x
Price/PALP 1999: OPAD per unit 2.81 6.4 7.1 7.8 8.5 9.2 10.0
Price/PALP Earnings per Unit:
LTM 1.70 10.6 x 11.8 x 12.9 x 14.1 x 15.3 x 16.5 x
1999: (g) 1.68 10.7 11.9 13.4 14.3 15.5 16.7
2000: (g) 2.03 8.9 9.9 10.8 11.8 12.8 13.8
Price/PALP Distributions per Unit:
LTM: 2.32 7.8 x 8.6 x 9.5 x 10.4 x 11.2 x 12.4 x
1999: (g) 2.48 7.3 8.1 8.9 9.7 10.5 11.3
2000: (g) 2.71 6.6 7.4 8.1 8.8 9.6 10.3
<CAPTION>
------------- ----------
Current Price Deal Price
$34.13 $38.75
------------- ----------
Valuation $30.00 $32.00 $34.000 $36.00 $38.00 $38.75
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Equity Value (e) $3,608 $3,849 $4,089 $4,330 $4,571 4,661
Premium/Market Price (10/28/99) (12.1) % (6.2)% (0.4)% (5.5)% 11.4 % 13.6 %
Premium/Pre Normal Price (7/6/99) 1.5 8.2 15.0 21.8 28.5 31.1
Premium Normalized Price 21.2 29.2 37.3 45.4 53.5 56.5
Firm Value/Assets Under Mgmt. (%) (f) 1.45 % 1.54 % 1.63 % 1.73 % 1.82 % 1.86 %
Firm Value/LLM Revenues (f) 3.9 x 4.2 x 4.4 x 4.7 x 4.9 x 5.0
Firm Value/LLM OPAD (f) 12.2 13.0 13.8 14.6 15.4 15.7
Price/PALP LLM OPAD per unit 11.0 x 11.8 x 12.5 x 13.2 x 14.0 x 14.3 x
Price/PALP 1999: OPAD per unit 10.7 11.4 12.1 12.8 13.5 13.8
Price/PALP Earnings per Unit:
LTM 17.6 x 18.8 x 20.0 x 21.2 x 22.3 x 22.8 x
1999: (g) 17.9 19.0 20.2 21.4 22.6 23.1
2000: (g) 14.8 15.8 16.7 17.7 18.7 19.1
Price/PALP Distributions per Unit:
LTM: 12.9 x 13.8 x 14.7 x 15.5 x 16.4 x 16.7 x
1999: (g) 12.1 12.9 13.7 14.5 15.3 15.6
2000: (g) 11.1 11.8 12.5 13.3 14.0 14.3
</TABLE>
N.B. Data I TM as of September 30, 1999.
(a) Public market comparables (complete list) consists of Affiliated Managers
Group, Inc., AMVESCAP Plc. BlackRock Inc., Eaton Vance Corp., Federated
Inv., Franklin Resources, Inc., Gabelli Asset Mgmt., John Nuveen, Nueberger
Berman, Phoenix Investment Partners, T. Rowe Price UAM and Waddell & Reed.
(b) Public market comparables (selected list) consists of BlackRock Inc.,
Phoenix Investment Partners, T. Rowe Price and Kansas City Southern.
(c) Comparables MLPs consists of Alliance Capital and Nvest.
(d) Normalized for non-recurring items.
(e) Based on 120.3 diluted units outstanding.
(f) Firm value has been adjusted for existing debt (long and short term) of
$145.5 million, less existing cash of $52.2 million.
(g) Based on IBFS median estimates.
[LOGO OF SALOMON SMITH BARNEY]
27
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
Valuation Summary - Public Market Comparables
<TABLE>
<CAPTION>
(Dollars in millions)
- ---------------------------------------------------------------------------------------------------------------------------
PALP Reference Implied Equity
Data Mean Valuation (a) Valuation Range
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PUBLIC MARKET ANALYSIS - C CORPORATIONS (b)(c)
Firm Value as a % of AUM (d) (in billions) $254.6 1.9% --- 2.3% $4,752 --- $5,829
Firm Value/LTM Revenues (d) 915.2 2.8x --- 3.5x 2,505 --- 3,083
Firm Value/LTM EBITDA (d) 296.2 7.2 --- 8.8 2,029 --- 2,500
Market Value/LTM Cash Flow (e) 207.3 11.1 --- 13.6 2,311 --- 2,825
Market Value/LTM Earnings 127.8 16.5 --- 20.1 2,103 --- 2,571
Market Value/1999E Earnings (IBES Projections) (f) 145.4 13.7 --- 16.8 1,998 --- 2,443
Market Value/2000E Earnings (IBES Projections) (f) 175.7 11.5 --- 14.0 2,012 --- 2,459
Average Valuation Range $2,530 --- $3,101
Per Unit (g) $21.04 --- $25.78
PUBLIC MARKET ANALYSIS - SELECTED C CORPS. (c) (h)
Firm Value as a % of AUM (d) (in billions) $254.6 1.9% --- 2.3% $4,645 --- $5,698
Firm Value/LTM Revenues (d) 915.2 3.3x --- 3.2x 2,894 --- 2,859
Firm Value/LTM EBITDA (d) 296.2 9.3 --- 7.5 2,652 --- 2,123
Market Value/LTM Cash Flow (e) 207.3 13.0 --- 15.9 2,699 --- 3,299
Market Value/LTM Earnings 127.8 17.8 --- 18.3 2,273 --- 2,333
Market Value/1999E Earnings (IBES Projections) (f) 145.4 13.9 --- 16.0 2,027 --- 2,325
Market Value/2000E Earnings (IBES Projections) (f) 175.7 12.0 --- 14.7 2,107 --- 2,575
Average Valuation Range $2,757 --- $3,030
Per Unit (g) $22.92 --- $25.19
PUBLIC MARKET ANALYSIS - MLPs (i)
Firm Value as a % of AUM (d) (in billions) $254.6 1.0% --- 1.2% $2,459 --- $3,026
Firm Value/LTM Revenues (d) 915.2 2.1x --- 2.6x 1,837 --- 2,266
Firm Value/LTM EBITDA (d) 296.2 6.3 --- 7.8 1,787 --- 2,205
Market Value/LTM Cash Flow (e) 296.1 6.4 --- 7.8 1,900 --- 2,323
Market Value/LTM Earnings 216.7 9.1 --- 11.2 1,978 --- 2,417
Market Value/1999E Earnings (IBES Projections) (f) 246.4 9.8 --- 12.0 2,427 --- 2,967
Market Value/2000E Earnings (IBES Projections) (f) 297.8 8.9 --- 10.9 2,645 --- 3,232
Average Valuation Range $2,148 --- $2,634
Per Unit (g) $17.86 --- $21.90
</TABLE>
N.B.I.TM data used for PALP is LTM as of June 30, 1999 to be consistent with
public data available for other market comparables.
(a) Range is +/- 10% of the mean multiple.
(b) C Corporation comparables (complete list) consists of Affiliated managers
Group, Inc., AMVESCAP Plc, BlackRock INc., Eaton Vance Corp., Federated
Inv., Franklin Resources. Inc., Gabellie Asset Mgmt., John Nuveen, Neuerger
Berman, Phoenix Investment Partners, T. Rowe Price, UAM, Wadell & Reed.
(c) PALP earnings and cash flow numbers have been tax adjusted at Allianz's tax
rate of 41% when compared with C Corporation and the Selected C
Corporations.
(d) Firm value has been adjusted for existing debt (long and short term) of
$145.5 million, less existing cash of $52.2 million.
(e) Cash flow defined as net income plus amortization.
(f) IBES median estimates.
(g) Assumes PALP diluted units of 120.3 million.
(h) Public market comparables (selected list) consists of BlackRock Inc.,
Phoenix Investment Partners, T. Rowe Price and Kansas City Southern.
(i) Comparable MLP's consists of Alliance Capital and Nvest.
[LOGO OF SALOMON SMITH BARNEY]
28
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
Valuation Summary - Precedent Transactions
<TABLE>
<CAPTION>
(Dollars in millions)
- ------------------------------------------------------------------------------------------------------------
PALP Reference Implied Equity
Data Mean Valuation (a) Valuation Range
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PRECEDENT TRANSACTIONS ANALYSIS
Firm Value / AUM (%) (b) (in billions) $256.2 1.8% -- 2.2% $4,581 - $5,620
Firm Value / LTM Revenues (b) 944.2 3.9x -- 4.8x 3,623 - 4,449
Firm Value / LTM EBITDA (b) 303.0 11.3 -- 13.8 3,318 - 4,076
Equity Value / LTM Pre-Tax Income 225.3 10.4 -- 12.7 3,150 - 3,850
Equity Value / LTM Earnings 132.9 21.9 -- 26.8 2,912 - 3,559
Average Valuation Range $3,517 - $4,311
Per Unit (c) $29.24 - $35.84
</TABLE>
N.B. PALP data as of or for the last twelve months ended September 30, 1999.
(a) Range is +/-10% of the mean multiple.
(b) Firm value has been adjusted for existing debt (long and short term) of
$145.5 million, less existing cash of $52.2 million.
(c) PALP earnings have been tax adjusted at Allianz's tax rate of 41%.
(d) Assumes PALP diluted units of 120.3 million.
29 [LOGO OF SALOMON SMITH BARNEY]
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
Projection Assumptions
- - PIMCO Advisors' projections are based on assumptions provided by management
as follows:
. Annual growth in total assets under management of 13% (8% net performance,
5% net cash flow), with a growing percentage of AUM
. Revenue growth consistent with AUM growth:
- Investment advisory fees equal to 34.8 basis points in 1999 and 34.7
basis points going forward of average assets under management
- Distribution and servicing fees constant at 11.5 basis points of
average mutual fund assets under management
. OPAD margin of 32% in 1999 and 2000 and 33% going forward
. Compensation and benefits constant at 41.5% of revenues
. Commissions equal to 85% of distribution and servicing fees
. Annual general and administrative expense growth of 13%
30 [LOGO OF SALOMON SMITH BARNEY]
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
Projected Income Statement - PALP: Mgmt. Assumptions
<TABLE>
<CAPTION>
(Dollars in millions, except per unit data and as indicated)
Historical Actual Projected
------------------------ ---------------- ------------------------
1997 1998 LTM - 9.99 (a) 1999 2000
-------- -------- ---------------- -------- --------
<S> <C> <C> <C> <C> <C>
Assets Under Management (in billions) $200 $244 $256 $260 $293
Mutual Fund Assets Under Management 65 87 95 97 113
(in billions)
Revenues
Investment Advisory Fees $457.7 $770.2 $838.7 $876.4 $959.0
Distribution and Servicing Fees 59.0 82.3 105.5 105.9 120.9
-------- -------- ---------------- ------------------------
Total Revenues 516.7 852.4 944.2 982.2 1,079.9
-------- -------- ---------------- -------- ---------
Expenses
Compensation and Benefits 225.8 359.6 391.9 407.6 448.1
Commissions 46.7 77.8 88.6 90.0 102.7
General and Administrative 27.4 43.7 55.6 58.0 65.6
Restricted Unit and Option Plans 8.2 25.8 23.2 24.9 24.9
Amortization of Intangible Assets 43.5 55.1 55.1 55.1 55.1
Other Expenses 47.5 90.4 113.4 112.3 117.9
-------- -------- ---------------- ------------------------
Total Expenses 399.1 652.3 727.7 747.9 814.3
-------- -------- ---------------- -------- ---------
Operating Income $117.6 $200.2 $216.5 $234.3 $265.6
Equity in Income/(Loss) of Partnerships (0.4) 0.1 0.1 0.0 0.0
Other Income (net) 2.9 8.6 8.6 0.0 0.0
-------- -------- ---------------- ------------------------
Pre-Tax Income $120.1 $208.9 $225.3 $234.3 $265.6
-------- -------- ---------------- ------------------------
Taxes 1.7 0.6 0.6 0.0 0.0
-------- -------- ---------------- ------------------------
Net Income $118.3 $208.4 $224.8 $234.3 $265.6
======== ======== ================ ========================
Number of Basic Units (in millions) 76.9 108.5 111.5 111.8 112.2
Number of Diluted Units (in millions) 81.6 113.9 116.2 116.7 117.4
Basic Earnings per unit $1.54 $1.92 $2.02 $2.10 $2.37
Diluted Earnings per unit 1.45 1.83 1.93 2.01 2.26
OPAD $173.2 $289.2 $303.0 $314.3 $345.6
OPAD per Basic Unit 2.10 2.66 2.72 (d) 2.81 (d) 3.08
Distributions Declared $167.0 (c) $271.3 $300.9 $314.3 $345.6
---------
Distributions/OPAD 96.4 % 93.8 % 99.3 % 100.0 % 100.0 %
---------
Distributions Declared Per Unit $2.17 (c) $2.50 $2.70 $2.81 $3.08
--------- ---------
OPAD Margin 33.5 % 33.9 % 32.1 % 32.0 % 32.0 %
--------- ---------
Operating Margin 22.8 23.5 22.9 23.9 24.6
---------
Investment Advisory Fees / Average AUM 0.340 % 0.347 % 0.348 % 0.348 % 0.347 %
---------
Distribution and Servicing Fees / Avg. MF AUM 0.101 0.108 0.121 0.115 0.115
---------
Mutual Funds Assets / AUM 32.8 35.5 37.2 37.5 38.5
---------
Compensation and Benefits / Revenues 43.7 % 42.2 % 41.5 % 41.5 % 41.5 %
---------
Growth in General and Administrative Expense 55.5 59.3 27.3 13.0 13.0
---------
Commissions/Distributions and Servicing Fees 79.3 94.6 83.9 85.0 85.0
---------
<CAPTION>
(Dollars in millions, except per unit data and as indicated)
Projected
-----------------------------------------------------------------------------
2001 2002 2003 2004 GAGR 00-04
-------- -------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C>
Assets Under Management (in billions) $331 $374 $423 $478 13.0 %
----------------
Manual Fund Assets Under Management 131 152 176 203 15.8
(in billions) ----------------
Revenues
Investment Advisory Fees $1,083.7 $1,224.5 $1,383.7 $1,563.6 13.0 %
Distribution and Servicing Fees 140.2 162.5 188.2 217.8 15.9
-------- -------- ---------------- --------
Total Revenues 1,223.8 1,387.0 1,571.9 1,781.4 13.3
-------- -------- ---------------- --------
Expenses
Compensation and Benefits 507.9 575.6 652.3 739.3 13.3
Commissions 119.1 138.1 159.9 185.1 15.9
General and Administrative 74.1 83.7 94.6 106.9 13.0
Restricted Unit and Option Plans 24.9 24.9 10.0 10.0 (20.4)
Amortization of Intangible Assets 55.1 55.1 55.1 55.1 0.0
Other Expenses 118.9 131.9 146.3 162.2 8.3
-------- -------- ---------------- --------
Total Expenses 900.0 1,009.3 1,118.3 1,258.7 11.5
-------- -------- ---------------- --------
Operating Income $323.9 $377.7 $453.6 $522.8 18.5 %
Equity in Income/(Loss) of Partnerships 0.0 0.0 0.0 0.0 NA
Other Income (net) 0.0 0.0 0.0 0.0 NA
-------- -------- ---------------- --------
Pre-Tax Income $323.9 $377.7 $453.6 $522.8 18.5 %
Taxes 0.0 0.0 0.0 0.0 NA
-------- -------- ---------------- --------
Net Income $323.9 $377.7 $453.6 $522.8 18.5 %
======== ======== ================ ========
Number of Basic Units (in millions) 112.6 113.0 113.4 113.8 (b) 0.4 %
Number of Diluted Units (in millions) 118.0 118.7 119.3 120.0 (b) 0.6
Basic Earnings per unit $2.88 $3.34 $4.00 $4.59 18.0 %
Diluted Earnings per unit 2.74 3.18 3.80 4.36 17.8
OPAD $403.9 $457.7 $518.7 $587.9 14.2 %
OPAD per Basic Unit 3.59 4.05 4.57 5.17 13.8
Distributions Declared $403.9 $457.7 $518.7 $587.9
Distributions/OPAD 100.0 % 100.0 % 100.0 % 100.0 %
Distributions Declared Per Unit $3.59 $4.05 $4.57 $5.17
--------
OPAD Margin 33.0 % 33.0 % 33.0 % 33.0 %
--------
Operating Margin 26.5 27.2 28.9 29.3
--------
Investment Advisory Fees / Average AUM 0.347 % 0.347 % 0.347 % 0.347 %
--------
Distribution and Servicing Fees / Avg. MF AUM 0.115 0.115 0.115 0.115
--------
Mutual Funds Assets / AUM 39.5 40.5 41.5 42.5
--------
Compensation and Benefits / Revenues 41.5 % 41.5 % 41.5 % 41.5 %
--------
Growth in General and Administrative Expense 13.0 13.0 13.0 13.0
--------
Commissions/Distribution and Servicing Fees 85.0 85.0 85.0 85.0
--------
</TABLE>
(a) Normalized for the LTM period ended September 30, 1999. Excludes
non-recurring charges of $15.7 million.
(b) Assumes full vesting of all units and options.
(c) Adjusted to reflect four quarters only. Form 10K dated 12/31/98 reflects
distributions declared for five quarters.
(d) Including non-recurring items, OPAD per unit was $2.67 and $2.77 for the LTM
period and 1999E, respectively.
31 [LOGO OF SOLOMON SMITH BARNEY]
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
Projected Income Statement - PIMCO Advisors Holdings L.P: Mgmt. Assumptions
<TABLE>
<CAPTION>
(Dollars in millions, except per unit data and as indicated)
Historical Actual (a) Projected
---------------- ---------- ---------------------------------------------------------
1997 1998 LTM - 9/99 1999 2000 2001 2002 2003 2004 CAGR 00-04
------- ------- ---------- -------- -------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $66.0 $90.7 $98.8 $103.7 $117.4 $142.7 $165.8 $198.4 $227.8 18.0%
Expenses 0.0 14.5 15.5 16.5 18.1 20.5 23.1 26.1 29.5 12.9
------- ------- ---------- -------- -------- -------- -------- -------- --------
Net income $66.0 $76.1 $83.3 $87.2 $99.3 $122.2 $142.7 $172.3 $198.3 18.9
======= ======= ========== ======== ======== ======== ======== ======== ========
Average Units Outstanding 45.8 47.3 48.9 49.5 49.6 49.6 49.6 49.6 49.6 0.0%
Basic Net Income per Unit $1.44 $1.61 $1.70 $1.76 $2.00 $2.46 $2.88 $3.47 $4.00 18.9
Diluted Net Income per Unit 1.39 1.52 1.63 1.69 1.91 2.35 2.74 3.30 3.79
Total Distributions Declared $103.0 $113.5 $122.6 $134.6 $157.4 $177.8 $200.8 $226.7 13.9
Distributions Per Unit $2.18 $2.32 $2.48 $2.71 $3.17 $3.58 $4.05 $4.57
Revenues/PALP Net Income 55.8% 43.5% 44.0% 44.3% 44.2% 44.0% 43.9% 43.7% 43.6%
Expenses/Revenues 0.0 16.0 15.7 15.9 15.5 14.4 14.0 13.2 12.9
Tax on Gross Revenues (b) 3.9 3.7 3.8 3.8 3.8 3.8 3.8 3.8
</TABLE>
(a) Normalized to exclude PAH' share of non-recurring items.
(b) Gross Revenues refers to a proportionate share of PALP revenues.
32 [LOGO OF SALOMON SMITH BARNEY]
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
Discounted Cash Flow Analysis - PALP
- --------------------------------
Discount Rate 13.0 %
Terminal Value Multiple 9.0 x
- --------------------------------
<TABLE>
<CAPTION>
Projected ---------
-------------------------------------------------------------- CAGR
1999 2000 2001 2002 2003 2004 ('00-'04)
------ ------ ------ ------ ------ -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Advisors Distributions $314.3 $345.6 $403.9 $457.7 $518.7 $587.9 14.2 %
Terminal Value 0.0 0.0 0.0 0.0 0.0 5,290.8
------ ------ ------ ------ ------ -------- ---------
Total Flows $314.3 $345.6 $403.9 $457.7 $518.7 $5,878.7 N/A
====== ====== ====== ====== ====== ======== =========
</TABLE>
- -----------------------------------------
Net Present Value (at 12/31/99): $4,448
Per Unit (a): $36.98
- -----------------------------------------
SENSITIVITY ANALYSIS:
- ---------------------
Multiple of 2004 Distributions
-----------------------------------------------------
7.0 x 8.0 x 9.0 x 10.0 x 11.0 x
---------- --------- --------- --------- --------
11.0 % $4,106 $4,455 $4,804 $5,153 $5,502
12.0 3,955 4,288 4,622 4,955 5,289
---------------------
Discount 13.0 3,810 4,129 4,448 4,767 5,086
Rate 14.0 3,673 3,978 4,283 4,588 4,894
---------------------
15.0 3,542 3,834 4,126 4,418 4,711
16.0 3,417 3,697 3,977 4,257 4,536
Per Unit:
Multiple of 2004 Distributions
-----------------------------------------------------
7.0 x 8.0 x 9.0 x 10.0 x 11.0 x
---------- --------- --------- --------- --------
11.0 % $34.14 $37.04 $39.94 $42.84 $45.74
12.0 32.88 35.65 38.43 41.20 43.97
---------------------
Discount 13.0 31.68 34.33 36.98 39.64 42.29
Rate 14.0 30.53 33.07 35.61 38.15 40.69
---------------------
15.0 29.45 31.88 34.31 36.74 39.17
16.0 28.41 30.74 33.06 35.39 37.72
(a) Based on 120.3 million diluted units.
[LOGO OF SALOMON SMITH BARNEY]
33
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
Discounted Cash Flow Analysis - PAH
- ---------------------------------
Discount Rate 13.0%
Terminal Value Multiple 10.0x
- ---------------------------------
<TABLE>
<CAPTION>
Projected -------------
-------------------------------------------------------- CAGR
Per Unit: 1999 2000 2001 2002 2003 2004 (00-04)
------ ------ ------ ------ ------ ------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
PAH Distributions $2.48 $2.71 $3.17 $3.58 $4.05 $4.57 13.9% (a)
Terminal Value 0.0 0.0 0.0 0.0 0.0 45.71
------ ------ ------ ------ ------ ------ -------------
Total Flows $2.48 $2.71 $3.17 $3.58 $4.05 $50.28 N/A
====== ====== ====== ====== ====== ====== =============
</TABLE>
- -----------------------------------------
Net Present Value (at 12/31/99): $37.14
Implied Equity Value (a) $4,468
- -----------------------------------------
SENSITIVITY ANALYSIS:
- ---------------------
Multiple of 2004 Distributions
------------------------------------------------
8.0 x 9.0 x 10.0 x 11.0 x 12.0 x
------- --------- --------- --------- ----------
11.0% $34.72 $37.43 $40.15 $42.86 $45.57
12.0 33.42 36.01 38.61 41.20 43.79
-------------------
Discount 13.0 32.18 34.66 37.14 39.62 42.11
Rate 14.0 31.00 33.38 35.75 38.13 40.50
-------------------
15.0 29.88 32.16 34.43 36.70 38.97
16.0 28.82 30.99 33.17 35.35 37.52
Implied PALP Equity Value (b):
Multiple of 2004 Distributions
------------------------------------------------
8.0 x 9.0 x 10.0 x 11.0 x 12.0 x
------- --------- --------- --------- ----------
11.0% $4,176 $4,502 $4,829 $5,155 $5,481
12.0 4,020 4,332 4,644 4,956 5,267
-------------------
Discount 13.0 3,871 4,169 4,468 4,766 5,064
Rate 14.0 3,729 4,015 4,300 4,586 4,871
-------------------
15.0 3,594 3,868 4,141 4,141 4,688
16.0 3,466 3,728 3,989 4,251 4,513
(a) IBES implies a growth rate of approximately 7%
(b) Based on 120.3 million diluted units.
[LOGO OF SALOMON SMITH BARNEY]
34
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
Valuation of Units Retained by Pacific Life
The base case assumes:
. a 15% discount rate for the variable component of PacLife units
. a 7% discount rate for the fixed component of PacLife units
. 7.5% annual growth in the variable component
. 14.0x Liquidity Multiple
<TABLE>
<CAPTION>
Three Year Horizon
- ------------------
1999 2000 2001 2002
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Variable:
Payments $1.72 $1.85 $1.99 $2.13
Future Value 29.88
-------- -------- -------- --------
Total $1.72 $1.85 $1.99 $32.01
- ---------------------------------
NPV (at 12/31/99) $24.15
- ---------------------------------
Fixed:
Payments $1.05 $1.05 $1.05 $1.05
Future Value 14.70
-------- -------- -------- --------
Total $1.05 $1.05 $1.05 $15.75
- ---------------------------------
NPV (at 12/31/99) $14.76
- ---------------------------------
- --------------------------------
Total $38.91
- --------------------------------
</TABLE>
35 [LOGO OF SALOMON SMITH BARNEY]
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
Valuation of Units Retained by Pacific Life
PRESENT VALUE PER UNIT ASSUMING A DISCOUNT RATE OF 11.0%
<TABLE>
<CAPTION>
Annual Growth of Variable Component
-------------------------------------------------------------------------------------------
2.5% 5.0% 7.5% 10.0% 12.5% 15.0% 17.5% 20.0%
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2000 $38.51 $39.09 $39.67 $40.26 $40.84 $41.42 $42.00 $42.58
2001 38.30 39.42 40.57 41.75 42.95 44.18 45.43 46.71
Exit Year 2002 38.10 39.73 41.44 43.22 45.09 47.03 49.06 51.18
2003 37.91 40.02 42.27 44.68 47.25 49.99 52.55 52.99
2004 37.74 40.29 43.09 46.13 49.45 51.23 51.89 52.59
</TABLE>
PRESENT VALUE PER UNIT ASSUMING A DISCOUNT RATE OF 13.0%
<TABLE>
<CAPTION>
Annual Growth of Variable Component
-------------------------------------------------------------------------------------------
2.5% 5.0% 7.5% 10.0% 12.5% 15.0% 17.5% 20.0%
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2000 $38.09 $38.66 $39.23 $39.80 $40.37 $40.94 $41.51 $42.08
2001 37.50 38.58 39.69 40.83 41.99 43.17 44.39 45.62
Exit Year 2002 36.96 38.51 40.13 41.82 43.60 45.44 47.37 49.38
2003 36.47 38.44 40.54 42.79 45.19 47.75 50.14 50.56
2004 36.03 38.37 40.94 43.74 46.78 48.43 49.04 49.70
</TABLE>
PRESENT VALUE PER UNIT ASSUMING A DISCOUNT RATE OF 15.0%
<TABLE>
<CAPTION>
Annual Growth of Variable Component
-------------------------------------------------------------------------------------------
2.5% 5.0% 7.5% 10.0% 12.5% 15.0% 17.5% 20.0%
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2000 $37.69 $38.25 $38.81 $39.37 $39.93 $40.49 $41.05 $41.61
2001 36.74 37.79 38.86 39.96 41.08 42.22 43.39 44.59
-------------------------------
Exit Year 2002 35.90 37.37 38.91 40.52 42.20 43.96 45.79 47.70
-------------------------------
2003 35.15 36.99 38.96 41.06 43.30 45.69 47.92 48.32
2004 34.48 36.64 39.00 41.57 44.38 45.90 46.47 47.08
</TABLE>
36 [LOGO OF SALOMON SMITH BARNEY]
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
Valuation of Units Retained by Pacific Life
PRESENT VALUE PER UNIT ASSUMING A DISCOUNT RATE OF 17.0%
<TABLE>
<CAPTION>
Annual Growth of Variable Component
-------------------------------------------------------------------------------------------
2.5% 5.0% 7.5% 10.0% 12.5% 15.0% 17.5% 20.0%
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2000 $37.29 $37.84 $38.40 $38.95 $39.50 $40.05 $40.60 $41.15
2001 36.02 37.03 38.07 39.13 40.21 41.32 42.45 43.61
Exit Year 2002 34.90 36.30 37.77 39.30 40.90 42.57 44.31 46.13
2003 33.93 35.65 37.50 39.47 41.56 43.80 45.89 46.27
2004 33.07 35.07 37.24 39.62 42.20 43.61 44.15 44.72
</TABLE>
PRESENT VALUE PER UNIT ASSUMING A DISCOUNT RATE OF 19.0%
<TABLE>
<CAPTION>
Annual Growth of Variable Component
-------------------------------------------------------------------------------------------
2.5% 5.0% 7.5% 10.0% 12.5% 15.0% 17.5% 20.0%
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2000 $36.91 $37.46 $38.00 $38.54 $39.08 $39.62 $40.16 $40.70
2001 35.34 36.32 37.32 38.34 39.39 40.46 41.56 42.67
Exit Year 2002 33.98 35.31 36.70 38.16 39.69 41.28 42.93 44.66
2003 32.81 34.42 36.15 38.00 39.96 42.06 44.02 44.38
2004 31.80 33.64 35.65 37.84 40.23 41.53 42.04 42.58
</TABLE>
37 [LOGO OF SALOMON SMITH BARNEY]
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
Comparison of Transaction Retention Packages
<TABLE>
<CAPTION>
Retention as a % Retention as a %
of Purchase Price of Total Consideration
---------------------- -------------------------
Number
of Deals Nominal NPV Nominal NPV
<S> <C> <C> <C> <C> <C>
PIMCO Advisors Holdings (a)
No Performance 11.7% 9.2% 10.5% 8.4%
100% Performance 14.3 11.4 12.5 10.2
Broker/Dealer
All Deals 10
high 103.3 96.3 50.8 49.0
Mean 18.2 16.9 12.1 11.4
Median 9.4 8.8 8.6 8.1
1998 - 1999 Only 5
High 103.3 96.3 50.8 49.0
Mean 30.0 28.1 18.5 17.8
Median 13.9 12.3 12.2 11.0
Asset Managers 3
High 17.7 17.7 15.1 15.1
Mean 8.8 8.8 7.7 7.7
Median 8.6 8.6 7.9 7.9
</TABLE>
Source: SEC filings and Salomon Smith Barney estimates
(a) Assumes 100% purchase at $38.75 per Unit.
38
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
APPENDIX
[LOGO OF SALOMON SMITH BARNEY]
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
A. Comparable Company Analysis
[LOGO OF SALOMON SMITH BARNEY]
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
Public Market Comparables -- C-Corporations
Dollars in millions, except per share amounts
<TABLE>
<CAPTION>
52 Week Firm Value
Stock Price --------------- Div. Mkt. Firm as % of
10/28/99 High Low Yield Cap. Value (1) AUM AUM
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PIMCO Advisors - Normalized (4) $24.76 38.00 26.50 8.9 2,806 2,835 254,600 1.1%
PIMCO Advisors - Current (4) 34.13 38.00 26.50 6.4 3,868 3,896 254,600 1.5
C-Corporations
- --------------
Affiliated Managers Group, Inc. $25.00 $33.94 $22.00 -- 582 784 $70,900 1.1%
AMVESCAP PLC (5) 40.88 56.50 33.75 2.4 5,494 7,515 295,900 2.5
BlackRock Inc. 14.13 15.25 12.50 -- 901 1,096 141,801 0.8
Eaton Vance Corporation 33.81 40.00 18.69 0.9 1,213 1,167 39,000 3.0
Federated Investors, Inc. 17.75 19.81 15.06 0.9 1,496 1,735 117,334 1.5
Franklin Resources, Inc. 32.94 45.63 27.00 2.1 8,305 7,958 227,700 3.5
Gabelli Asset Management Inc. 14.81 18.75 13.06 -- 442 410 18,800 2.2
John Nuveen 35.56 43.69 34.38 2.9 1,119 1,111 59,538 1.9
Neuberger Berman Inc. 28.75 31.63 23.88 -- 1,438 1,433 56,764 2.5
Phoenix Investment Partners 8.50 10.25 6.94 2.8 373 420 59,494 0.7
T. Rowe Price Associates, Inc. 32.56 43.25 25.88 2.5 3,953 3,670 159,200 2.3
United Asset Management Corp. 20.63 26.50 17.38 3.9 1,215 2,002 205,900 1.0
Waddell & Reed Financial Inc. 23.50 28.00 18.56 2.3 1,399 1,348 29,600 4.6
--------------------------------
High 4.6%
Mean 2.1
Median 2.2
Low 0.7
--------------------------------
PALP Data (6): $254,556
Implied PALP Equity
Valuation:
--------------------------------
High $11,498
Mean 5,290
Medium 5,458
Low 1,705
--------------------------------
<CAPTION>
Firm Value
as a Multiple of: Market Cap. as a Multiple of:
---------------------- ---------------------------------------------------
Calendar:
LTM LTM LTM LTM Cash -------------------- Long Term
Rev. EBITDA Pre Tax Net. Inc. Flow(2) 99EE(3) 00EE(3) Growth Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PIMCO Advisors - Normalized (4) 3.1x 9.6x 12.9x 13.0x 10.3x 12.1x 10.0x 14.0%
PIMCO Advisors - Current (4) 4.3 13.2 17.8 17.8 14.2 16.7 13.8 14.0
C-Corporations
- --------------
Affiliated Managers Group, Inc. 2.7x 5.7x 10.7x 18.1x 10.5x 14.7x 12.0x 21.3x
AMVESCAP PLC (5) 4.8 15.5 19.1 44.2 22.8 17.5 14.5 19.5
BlackRock Inc. 2.7 9.3 9.4 17.3 14.6 15.0 12.6 N/A
Eaton Vance Corporation 3.6 7.0 11.8 19.0 9.7 21.2 12.0 13.0
Federated Investors, Inc. 3.1 6.6 8.8 13.9 9.3 13.1 11.1 16.0
Franklin Resources, Inc. 3.4 10.4 13.6 17.9 12.9 14.4 12.5 14.0
Gabelli Asset Management Inc. 2.7 7.4 9.8 16.1 16.1 10.7 9.6 15.0
John Nuveen 3.4 6.7 7.4 12.2 10.6 12.7 11.7 10.0
Neuberger Berman Inc. 2.5 5.5 5.8 10.2 9.3 10.8 10.0 N/A
Phoenix Investment Partners 1.7 4.5 8.6 17.8 7.2 14.7 12.1 12.5
T. Rowe Price Associates, Inc. 3.9 10.6 12.6 20.3 20.3 18.7 17.1 15.0
United Asset Management Corp. 2.2 7.0 10.8 18.9 6.9 19.8 17.7 11.0
Waddell & Reed Financial Inc. 4.3 8.9 9.9 15.9 15.1 15.0 12.4 14.5
- ------------------------------------------------------------------------------------------------------------------------------------
High 4.8x 15.5x 19.1x 44.2x 22.8x 21.2x 17.7x 21.3%
Mean 3.2 8.1 10.6 18.6 12.7 15.3 12.7 14.7
Median 3.1 7.0 9.9 17.8 10.6 14.7 12.1 14.5
Low 1.7 4.5 5.8 10.2 6.9 10.7 9.6 10.0
- ------------------------------------------------------------------------------------------------------------------------------------
PALP Data (6): $915 $272 $217 $128 $183 $145 $176
Implied PALP Equity
Valuation:
- ------------------------------------------------------------------------------------------------------------------------------------
High $4,307 $4,139 $4,141 $5,649 $4,168 $3,089 $3,110
Mean 2,791 2,106 2,311 2,377 2,323 2,220 2,236
Medium 2,719 1,807 2,148 2,279 1,942 2,138 2,133
Low 1,417 1,128 1,270 1,298 1,255 1,561 1,679
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NB Financial data excludes all non-recurring and extraordinary items.
(1) Represents market capitalization plus debt and minority interest less cash.
(2) Represents Net Income plus Depreciation and Amortization.
(3) Earnings estimates represent IBES median estimates from IDD.
(4) Data for PIMCO Advisors. Multiples driven by pricing for PIMCO Advisors
Holdings, LP.
(5) Market data represents that of the American Depository Shares (which each
represent 5 ordinary shares). Financial data is adjusted to reflect US GAAP.
(6) PIMCO Advisors earnings and cash flow numbers taxed at a tax rate of 41%.
39 [LOGO OF SALOMON SMITH BARNEY]
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
Public Market Comparables - Selected List
Dollars in millions, except share amounts.
<TABLE>
<CAPTION>
52 Week
Stock Price ------------- Div. Mkt. Firm
10/28/1999 High Low Yield Cap. Value (1) AUM
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PIMCO Advisors - Normalized (4) $24.76 38.00 26.50 8.9 $2,806 $2,835 $254,600
PIMCO Advisors - Current (4) 34.13 38.00 26.50 6.4 3,868 3,896 254,600
Selected C-Corporations
- -----------------------
BlackRock Inc. $14.13 15.25 12.50 $901 $1,096 $141,801
Federated Investors, Inc. 17.75 19.81 15.06 0.9 1,496 1,735 117,334
Franklin Resources, Inc. 32.94 45.63 27.00 2.1 8,305 7,958 227,700
Selected Fast Growing Companies
- -------------------------------
BlackRock Inc. $14.13 15.25 12.50 $901 $1,096 $141,801
T. Rowe Price Associates, Inc. 32.56 43.25 25.88 2.5 3,953 3,670 159,200
Kansas City Southern Industries 46.06 66.44 37.50 0.3 5,089 5,795 161,700
</TABLE>
<TABLE>
<CAPTION>
Firm Value as a Multiple of
Firm Value ------------------------------------------------------------
as % of LTM LTM LTM LTM
AUM Rev. EBITDA Pue Tax Net Inc.
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PIMCO Advisors - Normalized (4) 1.1% 3.1x 9.6x 12.9% 13.0x
PIMCO Advisors - Current (4) 1.5 4.3 13.2 17.8 17.8
Selected C-Corporations
- -----------------------
BlackRock Inc. 0.8% 2.7x 9.3x 9.4x 17.3x
Federated Investors, Inc. 1.5 3.1 6.6 8.8 13.9
Franklin Resources, Inc. 3.5 3.4 10.4 13.6 17.9
- -----------------------------------------------------------------------------------------------------------------
High 3.5% 3.4x 10.4x 13.6x 17.9%
Mean 1.9 3.1 8.7 10.6 16.3
Median 1.5 3.1 9.3 9.4 17.3
Low 0.8 2.7 6.6 8.8 13.9
- -----------------------------------------------------------------------------------------------------------------
Selected Fast Growing Companies
- -------------------------------
BlackRock Inc. 0.8% 2.7x 93x 9.4x 17.3x
T. Rowe Price Associates, Inc. 2.3 3.9 10.6 12.6 20.3
Kansas City Southern Industries 3.6 3.7 9.6 12.9 20.1
- -----------------------------------------------------------------------------------------------------------------
High 3.6% 3.9x 10.6x 12.9% 20.3x
Mean 2.2 3.5 9.8 11.6 19.2
Median 2.3 3.7 9.6 12.6 20.1
Low 0.8 2.7 9.3 9.4 17.3
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Mean 2.1% 3.3x 9.3x 11.1x 17.8x
- -----------------------------------------------------------------------------------------------------------------
PALP Data (5): $254,556 $915 $272 $217 $128
Implied PALP Equity Valuation:
- -----------------------------------------------------------------------------------------------------------------
High $8,803 $3,020 $2,728 $2,958 $2,283
Mean 5,171 2,894 2,431 $2,414 2,273
Median 1,875 2,415 2,429 2,014 2,379
Low 1,705 1,417 1,128 1,864 2,308
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
Market Cap as a Multiple of:
-------------------------------------------------
Calendar
Cash ----------------- Long Term
Flow (2) 99EE (3) OOEE (3) Growth Rate
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PIMCO Advisors - Normalized (4) 10.3x 12.lx l0.0% 14.0%
PIMCO Advisors - Current (4) 14.2 16.7 13.8 14.0
Selected C-Corporations
- -----------------------
BlackRock Inc. 14.6 15.0x 12.6x N/A
Federated Investors, Inc. 9.3 13.1 11.1 16.0
Franklin Resources Inc. 12.9 14.4 12.5 14.0
- -------------------------------------------------------------------------------------------------
High 14.6x 15.0x 12.6x 16.0%
Mean 12.3 14.2 12.1 15.0
Median 12.9 14.4 12.5 15.0
Low 9.3 13.1 11.1 14.0
- -------------------------------------------------------------------------------------------------
Selected Fast Growing Companies
- -------------------------------
BlackRock Inc. 14.6x 15.0x 12.6x N/A
T. Rowe Price Associates, Inc. 20.3 18.7 17.1 15.0
Kansas City Southern Industries 15.2 16.6 14.0 14.3
- -------------------------------------------------------------------------------------------------
High 20.3x 18.7x 17.1x 15.0%
Mean 16.7 16.8 14.6 14.6
Median 15.2 16.6 14.0 14.6
Low 14.6 15.0 12.6 14.3
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
Mean 14.5x 15.5x 13.3x 14.8%
- -------------------------------------------------------------------------------------------------
PALP Data (5): $183 $145 $176
Implied PALP Equity Valuation:
- -------------------------------------------------------------------------------------------------
High $2,666 $2,185 $2,216
Mean 2,646 2,253 2,341
Median 2,363 2,131 2,201
Low 1,320 2,096 2,133
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents marked capitalization plus debt and minimum interest less cash.
(2) Represents Net Income plus Depreciation and Amortization.
(3) Earnings estimates represent IBES median estimates from IDD.
(4) Data for PIMCO Advisors. Multiples driven by pricing for PIMCO Advisors
Holdings, LP.
(5) PIMCO Advisors earnings and cash flow numbers taxed at a corporate tax rate
of 41%.
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
Selected List - AUM Breakdown
<TABLE>
<CAPTION>
Assets Under Management
----------------------------------------------------------------
Client Type Asset Type
--------------------- -----------------------------------------
Retail Inst'I Equity Fl Dom. Int'l
--------------------- -----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PIMCO Advisors 37.5% 62.5% 36.2% 63.8% 95.0% 5.0%
BlackRock Inc. 41.5 58.5 11.0 57.8 57.6 12.7
Federated Investors, Inc. 96.2 3.9 14.0 86.0 98.0 2.0
Franklin Resources, Inc. 79.0 21.0 62.5 37.5 53.5 46.5
---------------------------------------------------------------------------------------
Mean 72.2% 27.8% 29.2% 60.4% 69.7% 20.4%
Median 79.0 21.0 14.0 57.8 57.6 12.7
---------------------------------------------------------------------------------------
BlackRock Inc. 41.5 58.5 11.0 57.8 57.6 12.7
T. Rowe Price Associates, Inc. 64.0 36.0 73.0 27.0 61.7 38.3
Kansas City Southern Industries 87.0 13.0 90.0 10.0 77.0 23.0
---------------------------------------------------------------------------------------
Mean 64.2% 35.8% 58.0% 31.6% 65.4% 24.7%
Median 64.0 36.0 73.0 27.0 61.7 23.0
---------------------------------------------------------------------------------------
Alliance Capital Management, L.P. 43.9 56.1 58.0 42.0 86.0 14.0
Nvest 27.9 72.1 48.5 51.5 92.0 8.0
---------------------------------------------------------------------------------------
Mean 35.9% 64.1% 53.3% 46.7% 89.0% 11.0%
Median 35.9 64.1 53.3 46.7 89.0 11.0
---------------------------------------------------------------------------------------
</TABLE>
[LOGO OF SALOMON SMITH BARNEY]
41
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
Public Market Comparables - MLPs
<TABLE>
<CAPTION>
Dollars in millions, except per share amounts.
Firm Value Firm Value as a Multiple of:
----------------------------
Stock Price 52 Week Div. Mkt. Firm as % of LTM LTM
-------------
10/28/1999 High Low Yield Cap. Value(1) AUM AUM Rev EBITDA
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PIMCO Advisors Normalized (4) $24.76 38.00 26.50 8.9 $2,806 $2,835 254,600 1.1% 3.1x 9.6x
PIMCO Advisors Current (4) 34.13 38.00 26.50 6.4 3,868 3,896 254,600 1.5 4.3 13.2
Master Lindied Partnerships
- ---------------------------
Alliance Capital Management, L.P. 26.13 33.44 24.13 8.3 $4,471 $4,741 321,000 1.5 3.1 8.5
Nvest 19.63 29.50 18.75 15.7 781 1,021 136,000 0.8 1.6 5.6
----------------------------------------------------------------------
High 1.5% 3.1x 8.5x
Mean 1.1 2.3 7.1
Median 1.1 2.3 7.1
Low 0.8 1.6 5.6
----------------------------------------------------------------------
PALP Data $254,556 $915 $272
Implied PALP Equity Valuation:
----------------------------------------------------------------------
High $3,666 $2,772 $2,226
Mean 2,743 2,051 1,828
Median 2,743 2,051 1,828
Low 1,819 1,331 1,429
----------------------------------------------------------------------
<CAPTION>
Market Cap. as a Multiple of:
----------------------------------------------
LTM LTM Cash Calendar Long Terms
----------------
Pre Tax Net Inc. Flow(2) 99EE(3) 00EE(3) Growth Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PIMCO Advisors Normalized (4) 12.9x 13.Ox 10.3x 12.1x lO.Ox 14.0%
PIMCO Advisors Current (4) 17.8 17.8 14.2 16.7 13.8 14.0
Master Lindied Partnerships
- ---------------------------
Alliance Capital Management, L.P. 11.0 13.0 9.3 11.6 10.3 14.8
Nvest 6.9 7.3 5.0 10.3 9.4 10.0
--------------------------------------------------------------------------------------------------------
High 11.0x 13.0x 9.3x 11.6x 10.3x 14.8%
Mean 9.0 111.1 7.1 10.9 9.9 12.4
Median 9.0 10.1 7.1 10.9 9.9 12.4
Low 6.9 7.3 5.0 10.3 9.4 10.0
--------------------------------------------------------------------------------------------------------
PALP Data $217 $217 $272 $246 $298
Implied PALP Equity Valuation:
-------------------------------------------------------------------------------------
High $2,392 $2,821 $2,517 $2,849 $3,081
Mean 1,951 2,198 1,938 2,697 2,938
Median 1,951 2,198 1,938 2,697 2,938
Low 1,510 1,574 1,358 2,545 2,796
-------------------------------------------------------------------------------------
</TABLE>
(1) Represents market capitalization plus debt and minority interests less
cash.
(2) Represents Net Income plus Depreciation and Amortization
(3) Earnings estimates represent IBES median estimates from IDD.
(4) Data for PIMCO Advisors. Multiples driven by pricing for PIMCO Advisors
Holdings, LP.
[LOGO OF SMITH SALOMON SMITH BARNEY]
42
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
B. Precedent Transactions
[LOGO OF SALOMON SMITH BARNEY]
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
Precedent Transactions
<TABLE>
<CAPTION>
Dollars in Millions
Announce % Mut. % Sep. % % Fixed % Money Purchase
Date Acquiror Target AUM Fund Accts Equity Income Market Price
- -------- ------------------- ------------------------ -------- ------ ------- ------ ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
02/15/99 Credit Suisse Warburg Pincus AM $22,000 45.0% 55.0% 85.0% 15.0% 0.0% $602.2
08/10/98 Northwestern Mutual Frank Russell Company 42,000 0.0 100.0 67.0 23.0 10.0 1,200.0
05/08/98 Robeco Groep Weiss Peck & Greer 16,000 8.0 92.0 35.0 65.0 0.0 509.1
08/15/97 Fleet Columbia Mgmt. Company 22,000 30.0 70.0 62.0 33.0 5.0 550.0
11/19/97 Merrill Lynch Mercury Asset Mgmt. 176,614 12.0 88.0 75.0 25.0 0.0 5,100.0
06/27/97 Zurich Scudder, Stevens & Clark 177,000 33.0 67.0 42.0 58.0 0.0 1,600.0
02/14/97 PIMCO Advisors Oppenheimer Capital 16,000 13.0 87.0 82.0 13.0 5.0 265.1
11/04/96 INVESCO PLC AIM Mgmt. Group 57,000 74.0 26.0 68.0 7.0 25.0 1,690.0
07/24/96 LGT Chancellor Capital Mgmt. 33,000 0.0 100.0 62.0 33.0 5.0 300.0
06/24/96 Morgan Stanley Van Kampen American 57,123 87.0 13.0 35.0 33.0 31.0 1,175.0
12/15/95 Dresdner Bank RCM Capital Mgmt. 26,000 6.0 94.0 62.0 38.0 0.0 300.0
06/29/95 Morgan Stanley Miller Anderson & Sherard 33,000 20.0 80.0 40.0 59.0 0.5 350.0
06/17/94 PNC Bank BlackRock Financial 23,400 35.0 65.0 0.0 100.0 0.0 240.0
<CAPTION>
Dollars in Millions
Price as a Price as a Multiple of:
------------------------------------------------
Announce Percent of LTM LTM LTM LTM
Date Acquiror Target AUM Revenues EBITDA Pretax Inc. Net Inc.
- -------- ------------------- ------------------------ ---------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
02/15/99 Credit Suisse Warburg Pincus AM 2.74% na na na na
08/10/98 Northwestern Mutual Frank Russell Company 2.86 3.1x 20.Ox na 47.8x
05/08/98 Robeco Groep Weiss Peck & Greer 3.18 na na na na
08/15/97 Fleet Columbia Mgmt. Company 2.50 na na 8.1x na
11/19/97 Merrill Lynch Mercury Asset Mgmt. 2.89 8.2x 17.2x 18.0x 25.4x
06/27/97 Zurich Scudder, Stevens & Clark 1.37 3.3x na na na
02/14/97 PIMCO Advisors Oppenheimer Capital 1.66 4.5x 10.3x 10.6x 17.8x
11/04/96 INVESCO PLC AIM Mgmt. Group 2.96 5.1x 10.5x 12.8x 20.4x
07/24/96 LGT Chancellor Capital Mgmt. 0.91 na na na na
06/24/96 Morgan Stanley Van Kampen American 2.06 3.8x lO.Ox 12.8x 21.3x
12/15/95 Dresdner Bank RCM Capital Mgmt. 1.15 3.5x 11.2x 13.7x 22.8x
06/29/95 Morgan Stanley Miller Anderson & Sherard 1.06 3.5x na 7.8x na
06/17/94 PNC Bank BlackRock Financial 1.03 4.3x 8.2x 8.6x 14.8x
---------------------------------------------------------------------
High 3.18% 8.2x 20.0x 18.0x 47.8x
Mean 2.03 4.4 12.5 11.6 24.3
Median 2.06 3.8 10.5 11.7 21.3
Low 0.91 3.1 8.2 7.8 14.8
---------------------------------------------------------------------
PALP Data: $256,153 $944 $280 $225 $133
Implied PALP Valuation
---------------------------------------------------------------------
High $8,180 $7,772 $5,643 $4,056 $6,339
Mean 5,224 4,159 3,537 2,603 3,227
Median 5.299 3,589 2,985 2,643 2,823
Low 2,358 2,957 2,334 1,753 1,967
---------------------------------------------------------------------
</TABLE>
[LOGO OF SALOMON SMITH BARNEY]
43
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
C. Weighted Average Cost of Capital Analysis
[LOGO OF SALOMON SMITH BARNEY]
<PAGE>
PROJECT APOSTLE - PRESENTATION TO THE GENERAL PARTNERS
Weighted Average Cost of Capital Analysis
<TABLE>
<CAPTION>
Reported Betas
------------------------------------------------------------------------------------------
Selected Comparable C-Corporations Bloomberg (a) IDD (a) S&P Historical Barra Projected Barra Median
- ---------------------------------- --------------- ---------- ------ ---------------- --------------- --------
<S> <C> <C> <C> <C> <C> <C>
Franklin Resources, Inc. 1.52 1.45 1.70 1.71 1.39 1.52
Federated Investors, Inc. 0.91 N/A 0.97 1.29 1.25 0.97
T. Rowe Price Associates, Inc. 1.59 1.58 1.16 1.17 1.28 1.28
- ------------------------------------------------------------------------------------------------------------------------------
High 1.59 1.58 1.70 1.71 1.39 1.52
Median 1.52 1.52 1.16 1.29 1.28 1.28
low 0.91 1.45 0.97 1.17 1.25 0.97
Median Discount Rate -- Selected Comparable C-Corporations (b) 13.83%
- ------------------------------------------------------------------------------------------------------------------------------
Other Asset Management C-Corporations
- -------------------------------------
Affiliated Managers Group, Inc. 1.26 N/A N/A 2.64 1.42 1.34
AMVESCAP PLC 1.27 1.14 N/A 1.16 1.28 1.18
Phoenix Investment Partners 0.74 0.76 1.27 1.25 1.14 0.76
John Nuveen 1.62 0.57 0.43 0.44 0.78 0.44
Eaton Vance Corporation 0.93 0.80 0.66 0.72 1.20 0.72
Gabelli Asset Management, Inc. 0.60 N/A N/A N/A 1.12 0.60
United Asset Management Corp. 0.86 0.85 1.00 1.02 1.16 0.86
Waddell & Reed Financial Inc. 0.99 N/A N/A 1.66 1.24 1.11
- ------------------------------------------------------------------------------------------------------------------------------
High 1.27 1.14 1.27 2.64 1.42 1.34
Median 0.90 0.80 0.83 1.16 1.18 0.81
low 0.60 0.57 0.43 0.44 0.78 0.44
Median Discount Rate -- All Asset Management C-Corporations (b) 11.01%
- ------------------------------------------------------------------------------------------------------------------------------
Selected Master Limited Partnerships
- ------------------------------------
Alliance Capital Management, L.P. 0.95 0.88 1.14 1.10 1.07 0.95
Nvest 0.81 0.74 N/A 0.82 0.61 0.68
- ------------------------------------------------------------------------------------------------------------------------------
High 0.95 0.88 1.14 1.10 1.07 0.95
Median 0.88 0.81 1.14 0.96 0.84 0.81
Low 0.81 0.74 1.14 0.82 0.61 0.68
Median Discount Rate -- Selected Master Limited Partnerships (b) 11.03%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Based on adjusted Beta calculations for the two years ended September 28,
1999.
(b) Discount rate calculated using an equity risk premium of 6% and a 30-year
risk free rate of 6.15% as of October 28, 1999. Equity risk premium based
on Salomon Smith Barney Research.
44 [LOGO OF SALOMON SMITH BARNEY]
<PAGE>
CONFIDENTIAL
Exhibit 99 (b) (3)
PROJECT APOSTLE
Discussion Materials
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC July 30, 1999
<PAGE>
Project Apostle
- --------------------------------------------------------------------------------
Table of Contents
Page
----
I. Transaction Overview.............................. 1
II. IMCO Financial Review............................. 3
III. Preliminary Valuation Analysis.................... 8
IV. Financial Analysis of Proposal.................... 16
V. Appendix.......................................... 21
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC July 30, 1999
<PAGE>
I. Transaction Overview
- --------------------------------------------------------------------------------
Transaction Overview: Allianz would acquire economic interests in PIMCO
Advisors comprising approximately 70% of the fully
diluted interests and secure admission of Allianz as
Managing General Partner of the PIMCO operations.
Pro Forma Ownership: Units (000) % Total
----------- -------
Allianz 87,490 70.2 %
Pacific Life 37,210 29.8
----------- -------
Total 124,700 100.0 %
=========== =======
Total Consideration $3.46 billion in cash and Allianz shares, as follows:
Per
Units (000) Unit Total
----------- -------- -------
Consideration for PALP Units:
PIMCO Advisors Holdings 48,837 $36.00 $1,758
PIMCO Holdings LLC 17,410 36.00 627 (a)
Deferred comp. plan 4,428 36.00 159
Restricted units 3,799 36.00 137
Option, net(h) 9,014 15.25 137
Convertible debt 2,414 36.00 87
PIMCO Partners LLC 142 36.00 5
NFJ LLC 426 36.00 15
PPA LLC 390 36.00 14
CCM LLC 630 36.00 23
-------- -------
Total Consideration for PALP Units 87,490 $2,963
Retention and Bonus Incentive Pool: 500
-------
Total Consideration $3,463
=======
- ----------------------------------------
(a) Includes $527 mm of cash and $100 mm of Allianz common.
(b) Net of $187 mm cash from exercise of options.
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 1
<PAGE>
I. Transaction Overview
- --------------------------------------------------------------------------------
Liquidation of Employee
Termination Agreements (ETAs): . Payment in cash ($530 million) and Allianz
common shares ($100 million)
. Employees other than Messrs. Gross, Hague,
Harris, Powers and Thompson would receive
all cash.
. Messrs. Gross, Hague, Harris, Powers and
Thompson would receive cash and common
shares, with shares distributed
proportional to ETA ownership and equal to
approximately 50% of after-tax proceeds.
Pacific Investment Management
Bonus Pool Buy-Down: . Allianz "suggests" a reduction in the
bonus pool to 30% of pre-bonus EBITDA
through "a 10-year buy-down program" with
"vesting and participation features".
Retention and Bonus Incentive . $500 million pool for key employees of
PALP: $100 million paid year-end 2002
through 2006
. $100 million allocated at closing, subject
to execution of employment agreements.
Fixed Income Assets: . $100 billion of Allianz Group portfolio
assets by 2000.
. Minimum $10 million annual contribution to
bonus pool through 2000.
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 2
<PAGE>
II. PIMCO Financial Review
- --------------------------------------------------------------------------------
Historical Assets Under Management
(dollars in millions)
<TABLE>
<CAPTION>
For the Year Ending December 31, CAGR
--------------------------------------------------------------- -----------------
1994 1995 1996 1997 1998 6/99 94-98 98-6/99
------ ------ ------ ------ ------ ------ ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Subsidiary:
- ---------------------
Pacific Investment Mgmt. $56,883 $76,371 $88,147 $117,985 $157,965 $171,845 29% 18 %
Oppenheimer Capital -- -- -- 61,393 62,452 62,394 NA (0)
Cadence 1,762 2,393 3,229 5,191 7,350 7,458 43 3
Parametric 1,546 1,569 2,001 2,557 3,440 3,968 22 33
NFJ 1,072 1,455 1,743 2,448 2,445 2,421 23 (2)
PEA -- -- -- -- -- 6,302 NM NM
Other 129 79 70 27 19 168 NM NM
Columbus Circle 10,304 12,670 14,159 9,297 9,598 -- (2) NM
Blairlogie 479 645 673 647 897 -- 17 NM
-------- -------- --------- --------- --------- ---------
Total $72,175 $95,182 $110,022 $199,545 $244,166 $254,556 36 9
======== ======== ========= ========= ========= =========
Asset Class:
- ------------
Institutional:
--------------
Fixed Income
Separate $38,778 $50,264 $57,295 $82,981 $106,633 $110,698 29 % 8
Mutual Fund 11,830 16,732 19,592 24,195 33,247 37,507 29 27
Equity
Separate 12,461 16,248 18,075 51,139 50,753 48,468 42 (9)
Mutual Fund 2,515 3,768 5,077 6,112 9,341 10,698 39 31
-------- -------- --------- --------- --------- ---------
Total 65,584 87,012 100,039 164,427 199,974 207,371 32 8
-------- -------- --------- --------- --------- ---------
Retail Mutual Funds:
--------------------
Fixed Income 1,744 2,043 2,541 5,142 8,973 11,023 51 51
Equity 4,055 5,486 6,728 27,154 31,946 33,029 68 7
Money Market 792 641 714 2,822 3,273 3,133 43 (8)
-------- -------- --------- --------- --------- ---------
Total 6,591 8,170 9,983 35,118 44,192 47,185 61 14
-------- -------- --------- --------- --------- ---------
Total $72,175 $95,182 $110,022 $199,545 $244,166 $254,556 36 9
======== ======== ========= ========= ========= =========
</TABLE>
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 3
<PAGE>
II. PIMCO Financial Review
- --------------------------------------------------------------------------------
Historical Statement of Operations
(dollars in millions)
<TABLE>
<CAPTION>
For the Year Ended December 31,
------------------------------------------------------------------------ CAGR
1999 IH Budget ----------------
1995 1996 1997 (a) 1998 Annualized 1999E 95-98 98-99E
---------- ---------- ---------- ---------- ---------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
- ---------
Investment advisory fees $283.5 $342.7 $457.7 $770.2 $839.9 40 %
Distribution and servicing fees 38.2 48.2 56.8 76.8 97.4 26
Other 1.3 1.1 2.2 5.5 9.3 61
---------- ---------- ---------- ---------- ----------
Total revenues 323.0 392.0 516.7 852.4 946.5 $934.7 38 10 %
---------- ---------- ---------- ---------- ---------- ----------
Expenses:
- ---------
Compensation and benefits 49.6 56.9 81.9 181.8 172.8 184.0 54 1
Commissions 28.7 37.7 46.7 77.8 93.1 NA 39 NM
MD profit sharing (b) 99.6 116.6 144.0 177.8 222.0 212.3 21 19
Restricted unit and option plans 6.7 5.2 8.2 25.8 21.9 24.4 57 (5)
Marketing and promotional 9.1 11.0 16.6 28.7 36.0 40.7 47 42
Occupancy and equipment 8.7 9.2 11.8 23.6 28.2 31.5 40 34
General and administrative 11.4 17.6 27.4 43.7 54.4 37.0 56 (15)
Insurance 2.8 2.6 2.6 2.9 2.3 2.6 2 (12)
Professional fees 3.2 5.5 6.4 7.7 8.1 8.8 34 15
Amortization of intangibles 36.0 36.0 43.5 55.1 55.1 55.1 15 0
Other (1.2) 2.6 9.3 19.3 32.3 104.0 (c) NM NM
---------- ---------- ---------- ---------- ---------- ----------
Total expenses 254.5 300.9 398.3 644.1 726.1 700.3 36 9
---------- ---------- ---------- ---------- ---------- ----------
Net income $68.5 $91.1 $118.3 $208.4 $220.4 (d) $234.3 45 12
========== ========== ========== ========== ========== ==========
OPAD $111.2 $132.3 $173.2 $289.2 $297.4 $313.8 38 9
OPAD margin 34 % 34 % 34 % 34 % 31 % 34 %
Compensation/ revenues (e) 48 46 45 45 44 45
</TABLE>
- ----------------------------------------
(a) Includes results of Oppenheimer Capital from November 4.
(b) Excludes Oppenheimer Capital MD profit sharing.
(c) Includes commissions.
(d) Excludes first quarter $19.4 mm extraordinary item.
(e) Compensation includes: compensation and benefits, MD profit sharing and
restricted unit plans.
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 4
<PAGE>
II. PIMCO Financial Review
- --------------------------------------------------------------------------------
Historical Statement of Condition
(dollars in millions)
<TABLE>
<CAPTION>
Fiscal Year Ended December 31,
-------------------------------------------------------
1995 1996 1997 1998 3/99
------ ------ ------ ------ ------
Assets:
- -------
<S> <C> <C> <C> <C> <C>
Cash and equivalents $34.9 $41.3 $34.3 $46.1 $87.0
Short term investments 11.5 11.5 33.6 69.9 76.3
Fees receivable 57.4 66.3 148.3 171.2 165.3
Other current assets 3.9 6.0 15.0 38.1 16.4
------- ------- --------- --------- --------
Total current assets 107.6 125.1 231.2 325.4 345.0
Investment in partnerships 3.4 2.6 4.3 4.8 4.3
Fixed assets, net 10.7 10.6 15.4 22.7 21.6
Intangibles, net 243.8 207.8 1,060.9 1,005.8 992.1
Deferred commissions, net 3.6 11.0 22.7 51.0 58.0
Other assets 0.4 1.4 0.4 2.4 30.3
------- -------- --------- --------- --------
Total assets $369.6 $358.5 $1.334.9 $1.412.0 $1.451.3
======= ======== ========= ========= ========
Liabilities and Capital
- -----------------------
A/P & accrued expenses $16.0 $33.8 $53.2 $65.3 $80.6
Accrued compensation 21.2 26.0 50.0 68.5 76.0
Distribution payable -- -- 61.8 73.5 75.7
Short term borrowings -- -- 30.0 65.0 80.0
------- ------- --------- --------- --------
Total current liabilities 37.3 59.8 195.0 272.2 312.3
Long term notes -- -- 83.1 80.5 80.5
Other non current liabilities 0.7 2.4 2.6 0.3 0.3
------- ------- --------- --------- --------
Total liabilities 38.0 62.3 280.8 353.0 393.0
------- ------- --------- --------- --------
Capital 331.6 296.2 1,054.1 1,059.1 1,058.4
------- ------- --------- --------- --------
Total liabilities and capital $369.6 $358.5 $1,334.9 $1,412.0 $1,451.3
======= ======= ========= ========= ========
</TABLE>
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 5
<PAGE>
II. PIMCO Financial Review
- --------------------------------------------------------------------------------
1998 Operating Performance by Segment
(dollars in millions)
<TABLE>
<CAPTION>
Average
Asset Under Mgmt. OPAD
------------------------- ---------------------------------------
% of % of % of
Amount Total Revenues Amount Total Revenues
----------- ----------- ----------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Continuing Operations:
- ----------------------
Pacific Investment Management $137,975 62 % $ 374.7 $ 154.2 53 % 41 %
Oppenheimer Capital 61,923 28 250.7 103.5 36 41
Cadence 6,271 3 35.6 15.4 5 43
Parametric 2,999 1 5.8 0.4 0 7
NFJ 2,447 1 11.8 6.7 2 57
PFD & Other 23 0 124.9 (6.0) NM NM
----------- ----------- ----------- ---------- ------------
Total continuing 211,636 95 % 803.5 274.2 95 % 34
----------- ----------- ----------- ---------- ------------
Discontinued Operations:
- ------------------------
Columbus Circle 9,448 4 48.9 15.0 5 31
Blairlogie 772 0 NA NA NA NA
----------- ----------- ----------- ---------- ------------
Total discontinued 10,220 5 48.9 15.0 5 31
----------- ----------- ----------- ---------- ------------
Total $221,856 100 % $ 852.4 $ 289.2 100 % 34
=========== =========== =========== ========== ============
</TABLE>
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 6
<PAGE>
II. PIMCO Financial Review
- --------------------------------------------------------------------------------
Projected Financial Performance
(dollars in millions)
<TABLE>
<CAPTION>
Projected
--------------------------------------------------------------------
For the Year Ending December 31, CAGR
Actual -------------------------------------------------------------------- -----------------
1998 1999 2000 2001 2002 2003 2004 2005 98-99 99-05
------- ------- -------- -------- -------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $852 $963 (a) $1,065 $1,206 $1,372 $1,561 $1,777 $2,022 13% 13%
Recurring expenses 563 649 (b) 702 790 899 1,024 1,166 1,327 15 13
Restricted stock amortization 26 22 (c) 18 19 19 5 5 5 (16) (21)
Goodwill amortization 55 55 55 55 55 55 55 55 0 0
------- ------- -------- -------- -------- -------- -------- --------
Net income $208 $237 $289 $342 $399 $477 $550 $634 14 18
======= ======= ======== ======== ======== ======== ======== ========
OPAD $289 $314 $363 $416 $473 $537 $611 $694 8 14
OPAD margin 34% 33% 34% 34% 34% 34% 34% 34%
</TABLE>
- ------------------------
(a) Excludes second quarter gain of $3.9 mm related to gain on sale of
Blairlogie.
(b) Excludes first quarter charge of $8.9 mm.
(c) Excludes first quarter accelerated amortization of certain restricted stock
units of $10.5 mm.
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 7
<PAGE>
III. Preliminary Valuation Analysis
- --------------------------------------------------------------------------------
Year-to-Date PAH Market Performance
[GRAPH]
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 8
<PAGE>
III. Preliminary Valuation Analysis
- --------------------------------------------------------------------------------
Selected Public Company Trading Statistics
(dollars in millions)
<TABLE>
<CAPTION>
Firm Value as a Multiple of:
------------------------------------ 45-Day
Equity 1999 Operating Operating Price
Value P/E (a) Revenues Income AUM Change
-------- ------- ---------- --------- ----- --------
<S> <C> <C> <C> <C> <C> <C>
PIMCO $3,986 19.6 x 4.4 x 13.5 x 1.6 % 10.1 %
MLPs:
- -----
Alliance $5,160 13.9 x 4.6 x 13.5 x 1.8 % 1.5 %
Nvcst 1,120 12.5 2.0 7.6 1.0 2.8
C-Corps:
- --------
Franklin Resources $9,599 19.8 x 5.6 x 14.8 x 4.0 % (2.3) %
Amvescap 6,223 20.0 5.6 17.5 3.0 5.9
T. Rowe Price 4,568 22.0 5.5 16.0 3.3 5.2
Waddell & Reed 1,625 17.4 5.1 11.4 5.2 3.0
Federated Investors 1,598 13.9 3.4 9.0 1.5 7.3
John Nuveen 1,447 15.0 4.7 9.9 2.6 1.0
Eaton Vance 1,276 19.0 4.3 11.2 3.5 19.2
UAM 1,246 19.5 2.3 7.2 1.0 (4.9)
Affiliated Managers 684 18.8 5.5 10.7 1.2 3.3
Gabelli 503 14.0 3.1 8.0 2.5 8.9
Phoenix Inv. Partners 461 15.7 3.2 9.7 1.3 3.0
Conning 231 13.8 2.3 7.3 0.6 (3.0)
Summary Statistics:
----------------------------------------------------------------
High 22.0 x 5.6 x 17.5 x 5.2 % 19.2 %
Low 12.5 2.0 7.2 0.6 (4.9)
Mean 17.0 4.1 11.2 2.3 4.1
Median 17.4 4.4 10.7 1.8 3.0
----------------------------------------------------------------
</TABLE>
- ----------------
As July 27, 1999.
(a) Based on I/B/E/S median estimates.
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 9
<PAGE>
III. Preliminary Valuation Analysis
- --------------------------------------------------------------------------------
Selected M&A Transaction Statistics
(dollars in millions)
<TABLE>
<CAPTION>
Firm Value as a Multiple of LTM:
----------------------------------- Premium
Announcement Acquiror/ Firm AUM Operating One Month
Date Acquiree Value ($ BN) Income Revenues AUM Prior
- ------------ ------------------------------------- -------- ------ --------- -------- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Aug-98 Northwestern Mutual Life $950 $41.0 18.6 x 3.7 x 2.3% NA
Frank Russell Company
Jan-98 Amvescap PLC 1,151 55.0 14.8 2.6 2.1 NA
LGT Chancellor
Nov-97 Merrill Lynch & Co. 5,077 176.6 17.2 8.2 2.9 23 %
Mercury Asset Management (UK)
Jun-97 Zurich Insurance Group 1,660 120.5 NM 3.2 1.3 NA
Scudder, Stevens & Clark
Jul-96 Liechtenstein Global Trust 260 32.2 11.4 2.9 0.8 NA
Chancellor Capital Management
Jan-96 Dresdner Bank AG 390 27.4 11.8 4.6 1.4 NA
RCM Capital Management
Jun-95 Morgan Stanley & Co. Inc. 350 33.0 NA 3.5 1.1 NA
Miller Anderson & Sherrerd
Aug-94 Swiss Bank Corporation 870 37.5 11.2 5.8 2.3 NA
Brinson Partners Inc
Jun-94 PNC Bank Corp. 240 23.0 9.5 4.5 1.0 NA
BlackRock Financial Management
Dec-93 Mellon Bank Corporation 1,918 79.2 10.6 3.8 1.5 30 %
The Dreyfus Corporation
</TABLE>
Summary Statistics:
------------------------------------------------------------
High 18.6 x 8.2 x 2.9 % 30 %
Low 9.5 2.6 0.8 23
Mean 13.1 4.3 1.7 27
Median 11.6 3.8 1.5 27
------------------------------------------------------------
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 10
<PAGE>
III. Preliminary Valuation Analysis
- --------------------------------------------------------------------------------
Illustrative Comparison of Operations
(dollars in millions)
<TABLE>
<CAPTION>
Scudder (a) Mercury (b) PIMCO (c)
----------------- ----------------- ---------------
<S> <C> <C> <C>
Equity value $1,735 $5,259
Firm value 1,660 5,077
Operating statistics:
Operating revenue $529 3.1x $619 8.2x $915
Operating income 62 NM 295 17.2 296
Operating margin 12 % 48 % 32 %
Net income $34 NM $206 25.5 $217
Growth:
AUM 13.7 % 18.9 % 8.7 %
Revenue 8.9 20.0 11.0
Operating income (2.1) 22.4 2.8
Total AUM $117,704 $176,614 $254,556
Institutional $79,935 $155,420 $207,371
Retail 43,769 21,194 47,185 (d)
Equity $55,271 $132,460 $92,195
Fixed Income 59,662 44,153 159,228
Other 2,771 0 3,133
</TABLE>
- -------------------------
(a) Transaction announced June 1997. Operating data for quarter ending March
31, 1997, annualized. Two year CAGR for 1994 - 1996. AUM data as of
December 31, 1996. Retail includes separate accounts for HNW clients.
(b) Transaction announced November 1997. LTM operating data through September
30, 1997. Two year CAGR for 1995 - 1997.
(c) LTM operating data through June 30, 1999. One year CAGR for 1998 - 1999 (I
H Annualized).
(d) Retail mutual funds only.
<PAGE>
III. Preliminary Valuation Analysis
- --------------------------------------------------------------------------------
Market Premium Analysis for Selected M&A Transactions
(dollars in millions)
<TABLE>
<CAPTION>
Premium over prior
Annc. Deal --------------------------------------
Date Acquiror Target Value 1 day 1 week 4 weeks
------ -------------------------- -------------------------------- -------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
7/99 Piraeus Bank S.A. Ergobank S.A. $3,239 76% 79% 69%
6/99 Zions Bancorp First Security Corp. 5,678 55 53 50
5/99 AmSouth Bancorp First American Corp. 6,328 30 31 33
5/99 HSBC Holdings plc Republic New York Corp. 7,703 3 20 30
3/99 CIT Group Inc. Newcourt Credit Group Inc. 4,172 (14) (6) (27)
2/99 Sun Life and Provincial GRE plc 5,692 42 42 42
11/98 Deutsche Bank AG Bankers Trust New York Corp. 9,082 58 79 37
7/98 SunTrust Banks Inc. Crestar Finl Corp. 9,603 31 40 56
7/98 Star Banc Corp. Firstar Corp. 7,218 45 44 34
4/98 Conseco Inc. Green Tree Financial Corp. 7,359 83 86 94
2/98 Banco de Santander S.A. Banesto 3,850 14 12 20
1/98 St Paul Companies Inc. USF&G Corp. 3,782 18 22 15
11/97 Merrill Lynch & Co. Mercury Asset Management 5,077 32 32 23
12/93 Mellon Bank Corporation The Dreyfus Corporation 1,918 28 25 30
-------------------------------------------------
Mean 37% 42% 38%
Median 37 41 35
High 83 86 94
Low (14) (6) (27)
-------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 12
<PAGE>
III. Preliminary Valuation Analysis
- --------------------------------------------------------------------------------
Summary Discounted Cash Flow Analysis
(dollars in millions)
<TABLE>
<CAPTION>
Stand-Alone Equity Value Stand-Alone Equity Value per Unit
<S> <C> <C> <C> <C> <C> <C>
----------------------------- -------------------------------
Range of Values $4,600 - $5,200 $36.89 - $41.70
----------------------------- -------------------------------
---------- ----------
Mean Value $4,900 $39.29
---------- ----------
<CAPTION>
Equity Value Assuming
Terminal Value of OPAD Equity Value per Unit
Discount ----------------------------------------- -------------------------------------------
Rate 9.Ox 1O.Ox 11.Ox 9.Ox 10.0x 11.Ox
----------- -------- ---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
12.0 % $5,025 $5,367 $5,709 $40.30 $43.04 $45.78
14.0 4,596 4,902 5,208 36.86 39.31 41.77
16.0 4,216 4,490 4,765 33.81 36.01 38.21
</TABLE>
- --------------------
See Appendix page 21 for details.
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 13
<PAGE>
III. Preliminary Valuation Analysis
- --------------------------------------------------------------------------------
Summary Valuation Analysis
(dollars in millions; except per unit amounts)
<TABLE>
<CAPTION>
Judgmental Value Range
----------------------------------------------------------
Unit Value Firm Value (a) Cash Flow Multiple (b)
--------------------------- --------------------------- ----------------------------
Low High Low High Low High
------------- ------------ ------------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
PIMCO Trading Price
Current $33.50 $3,990 13.3x
High (c) 31.40 3,729 12.4
Low (c) 26.90 3,167 10.5
Median (c) 29.40 3,479 11.6
Public Company Trading Range $30.50 $35.25 $3,610 $4,211 12.0x 14.0x
Selected M&A Transactions $35.25 $42.50 $4,211 $5,114 14.0x 17.0x
Takeover Premium (d) $38.50 $41.50 $4,614 $4,988 15.3x 16.6x
DCF Analysis $37.00 $41.75 $4,427 $5,019 14.7x 16.7x
</TABLE>
- --------------------
(a) Diluted shares outstanding: 124.7 million. ($187 mm cash from options
exercise.)
(b) LTM adjusted OPAD: $300.8 million. (Adjusted for conversion of long term
notes.)
(c) January 1, 1999 through July 5, 1999.
(d) Premium of 30% to 40% to one month prior price per share ($29.69).
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 14
<PAGE>
III. Preliminary Valuation Analysis
- --------------------------------------------------------------------------------
Analysis at Various Prices
(dollars in millions)
<TABLE>
<CAPTION>
Price Per Unit
-----------------------------------------------------------
$36.00 $38.00 $40.00 $42.00 $44.00
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Equity Value (a) $4,489 $4,739 $4,988 $5,237 $5,487
Firm Value (b) $4,302 $4,552 $4,801 $5,050 $5,300
PIMCO
Multiples of Firm Value: Statistic
- ------------------------ ---------
LTM Adj. OPAD $301 14.3 x 15.1 x 16.0 x 16.8 x 17.6 x
LTM Revenues $915 4.7 5.0 5.2 5.5 5.8
AUM ($bn) $255 1.7 % 1.8 % 1.9 % 2.0 % 2.1 %
Multiples of Earnings: (c)
- ----------------------
LTM Net Income $166 27.1 x 28.6 x 30.1 x 31.6 x 33.1 x
1999E Net Income $177 25.4 26.8 28.2 29.6 31.0
</TABLE>
- ---------------------------------
(a) Diluted shares outstanding: 124.7 mm.
(b) Reflects $187 million cash from options exercise.
(c) Net income before goodwill amortization less taxes (assume 40% rate).
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 15
<PAGE>
IV. Financial Analysis of Proposal
- --------------------------------------------------------------------------------
Consideration Paid to Stakeholders
(dollars in millions)
<TABLE>
<CAPTION>
<S> <C> <C>
Based on consideration for PALP units and
ETAs: Consideration for PALP Units and ETAs:
--------------------------------------
Consideration for Units $2,336
Cash Consideration for ETAs 527
AZ stock for ETAs 100
-------
Total Consideration 2,963
Percentage Purchased 69 % (a)
-------
Implied Consideration for Units $4,302
=======
Per Unit $36.00
Based on total consideration, including
Retention and Bonus Incentive arrangements: With Retention and Bonus Incentive:
-----------------------------------
Total Consideration for PALP Units and ETAs $4,302
Cash Incentive Pool 500
-------
Total Consideration $4,802
=======
Per Unit $40.19
Adjusted for taxes and timing: Total Adjusted Consideration:
-----------------------------
Total (Nominal) Consideration $4,802
Tax Savings (b)
-----------
ETAs (251)
Units (398)
Incentive Pool (143)
Timing adjustment, Incentive Pool (c) (142)
-------
Total Adjusted Consideration $3,869
=======
Per Unit $32.37
</TABLE>
- ------------------------------
(a) Ownership percentage based on diluted shares outstanding using treasury
stock method.
(b) Assumes a tax rate of 40.0%
(c) Assumes a discount rate of 7.0%.
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 16
<PAGE>
IV. Financial Analysis of Proposal
- --------------------------------------------------------------------------------
Incremental Fixed Income Assets
(dollars in billions)
<TABLE>
<CAPTION>
For Year Ended December 31,
------------------------------------------------
1999 2000 2001 2002 Comments:
-------- -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C>
Insurance
Germany:
Life/Health $73.7 $78.8 $84.4 $90.3 - 7.0% growth p.a.
P&C 12.2 13.0 13.9 14.9 - 7.0% growth p.a.
Euro Funds 10.6 11.4 12.2 13.0 - 7.0% growth p.a.
Europe (Ex. Germany) ? ? ? ?
--------
US (Westport) 16.5 16.5 16.5 16.5 - As of 12/31/98
--------
Asia ? ? ? ?
-------- -------- -------- --------
Total 113.0 119.7 127.0 134.7 - Total fixed income $155.5 bn at 12/31/98
-------- -------- -------- --------
Retail (Third-party)
Germany 3.8 5.1 7.2 9.8 - Target 3.0% market share by 2003
Europe (Ex. Germany) 12.1 13.3 15.6 19.2 - Target 2.0% market share by 2002
-------- -------- -------- --------
Total 15.9 18.4 22.8 29.0
-------- -------- -------- --------
Institutional (Third-party)
Germany 1.9 3.1 6.1 9.2 - Target 2.0% market share by 2002
Europe (Ex. Germany) 5.5 6.4 7.7 9.3 - Target 1.5% market share by 2002
-------- -------- -------- --------
Total 7.4 9.5 13.8 18.5
-------- -------- -------- --------
Total $136.3 $147.6 $163.6 $182.2
======== ======== ======== ========
</TABLE>
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 17
<PAGE>
<TABLE>
<CAPTION>
IV. Financial Analysis of Proposal
- -------------------------------------------------------------------------------------------------------------------------
Incremental Fixed Income Revenue
(dollars in millions)
For Year Ended December 31,
--------------------------------------------------
1999 2000 2001 2002 Comments:
--------- --------- --------- -------- ----------
<S> <C> <C> <C> <C> <C>
Insurance
Germany:
Life/Health $14.7 $15.8 $16.9 $18.1 Low estimate. See pp 22-23.
P&C 7.9 8.5 9.1 9.7 Low estimate. See pp 22-23.
Euroland Funds 10.1 10.8 11.6 12.4 Low estimate. See pp 22-23.
Europe (Ex. Germany) ? ? ? ?
US (Westport) ? ? ? ?
Asia ? ? ? ?
--------- --------- --------- --------
Total 32.7 35.0 37.5 40.1
--------- --------- --------- --------
Retail (Third-party)
Germany 4.6 6.8 11.2 17.9 - l2 bps(1999)to l8 bps (2002)
Europe (Ex. Germany) 6.1 6.7 7.8 9.6 - 5 bps for Master Portfolio
--------- --------- --------- --------
Total 10.7 13.5 19.0 27.5
--------- --------- --------- --------
Institutional (Third-party)
Germany 3.4 5.6 11.0 16.6 - 18 bps
Europe (Ex. Germany) 5.5 6.4 7.7 9.3 - 10 bps
--------- --------- --------- --------
Total 8.9 12.0 18.7 25.9
--------- --------- --------- --------
Total $52.3 $60.5 $75.2 $93.5
========== ========== ========= ========
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
Lazard Freres & Co. LLC Page 18
<PAGE>
<TABLE>
<CAPTION>
IV. Financial Analysis of Proposal
- ---------------------------------------------------------------------------------------------------------
Incremental Fixed Income Contribution
(dollars in millions)
For Year Ended December 31,
------------------------------------------
1999 2000 2001 2002 Comments:
-------- ------- ------ ------- ---------
<S> <C> <C> <C> <C> <C>
Insurance
Germany:
Life/Health $0.2 $0.2 $0.3 $0.3 - Cost 1.97 bps, 7.0% CAGR
P&C 5.5 5.9 6.3 6.8 - Cost 1.97 bps, 7.0% CAGR
Euro Funds 8.0 8.6 9.2 9.8 - Cost 1.97 bps, 7.0% CAGR
Europe (Ex. Germany) ? ? ? ?
US (Westport) ? ? ? ?
Asia ? ? ? ?
-------- ------- ------ -------
Total 13.7 14.7 15.7 16.8
-------- ------- ------ -------
Retail (Third-party)
Germany 4.6 6.8 11.2 17.9 - AZ to pay cost of distribution and client service;
Europe (Ex. Germany) 6.1 6.7 7.8 9.6 assume no marginal investment cost.
-------- ------- ------ -------
Total 10.7 13.5 19.0 27.5
-------- ------- ------ -------
Institutional (Third-party)
Germany 0.0 0.2 7.4 16.0 - AZ to finance all losses
Europe (Ex. Germany) 0.0 0.0 0.9 2.3
-------- ------- ------ -------
Total 0.0 0.2 8.3 18.3
-------- ------- ------ -------
Total $24.4 $28.4 $43.0 $62.6
======== ======= ====== =======
</TABLE>
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 19
<PAGE>
IV. Financial Analysis of Proposal
- --------------------------------------------------------------------------------
Pro Forma Impact
(dollars in millions)
<TABLE>
<CAPTION>
For the Year Ending December 31,
--------------------------------------------------------- CAGR
1999 2000 2001 2002 99/02
------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
PALP:
- -----
PALP Stand-Alone OPAD $313.8 $362.7 $415.9 $473.2 14.7 %
Plus: Incremental OPAD 24.4 28.4 43.0 62.6 36.8
Less: Incremental Profit Sharing (a) (11.0) (12.8) (19.4) (28.2) NM
Plus: Potential Cost Savings ? ? ? ?
Less: Additional Costs ? ? ? ?
Plus: Interest Savings 4.8 4.8 4.8 4.8 0.0
------ ------ ------ ------
Pro Forma OPAD $332.0 $383.2 $444.3 $512.4 15.6 %
====== ====== ====== ======
% Change From Stand-alone 5.8 % 5.6 % 6.8 % 8.3 %
PIMCO:
- ------
PIMCO Profit Sharing (b) $156.3 $179.2 $205.5 $235.7 14.7 %
Incremental Profit Sharing (a) 11.0 12.8 19.4 28.2 36.8
------ ------ ------ ------
Pro Forma Profit Sharing $167.3 $192.0 $224.9 $263.9 16.4
====== ====== ====== ======
% Change From Stand-alone 7.0 % 7.1 % 9.4 % 12.0 %
PIMCO Stand-Alone OPAD (b) $190.7 $218.6 $250.7 $287.5 14.7 %
Plus: Incremental OPAD 24.4 28.4 43.0 62.6 36.8
Less: Incremental Profit Sharing (a) (11.0) (l2.8) (19.4) (28.2) 36.8
------ ------ ------ ------
Pro Forma OPAD $204.1 $234.3 $274.4 $322.0 16.4
====== ====== ====== ======
% Change From Stand-alone 7.1 % 7.1 % 9.4 % 12.0 %
</TABLE>
- ------------------------
(a) Incremental profit sharing equal to 45% of incremental OPAD
(b) Assumed to grow at stand-alone OPAD growth rate.
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 20
<PAGE>
V. Appendix
- --------------------------------------------------------------------------------
Discounted Cash Flow Analysis - Unitholder
(dollars in millions)
<TABLE>
<CAPTION>
Projected
----------------------------------------------------------------------------------------
For the Year Ending December 31,
211 ---------------------------------------------------------------------------
1999 2000 2001 2002 2003 2004 2005
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $493 $1,065 $1,206 $1,372 $1,561 $1,777 $2,022
Expenses 328 702 790 899 1,024 1,166 1,327
---------- ---------- ---------- ---------- ---------- ---------- ----------
OPAD 165 363 416 473 537 611 694
RSUs and options expense 11 18 19 19 5 5 5
Interest savings (a) -- (5) (5) (5) (5) (5) (5)
Amortization 28 55 55 55 55 55 55
Revenue tax (b) 8 18 20 23 26 29 33
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income $119 $277 $327 $381 $456 $526 $605
Adjustments: (c)
------------
Amortization 28 55 55 55 55 55 55
RSUs and options expense 11 18 19 19 5 5 5
Change in working capital (d) (12) (22) (31) (36) (41) (47) (54)
B share commissions, net (17) (29) (24) (29) (34) (28) (30)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Free cash flow $127 $299 $346 $389 $441 $511 $582
========== ========== ========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Firm Value Assuming
PV of Terminal Value Multiple of OPAD
Discount Cash ----------------------------------------
Rate Flows 9.Ox 10.0x 11.0x
-------- --------- -------- -------- --------
<S> <C> <C> <C> <C>
12.0 % $1,761 $4,838 $5,180 $5,522
--------------------------------------------------------------------
14.0 1,654 4,409 4,715 5,021
--------------------------------------------------------------------
16.0 1,558 4,029 4,303 4,578
</TABLE>
- --------------------------------
(a) Interest from debt of $80.5 mm, which is assumed to be converted into 2.4
mm units.
(b) Assumes 3.8% revenue tax on public stake.
(c) Assumes no change in net fixed assets.
(d) Based on 22% of the change in total revenues.
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 21
<PAGE>
V. Appendix
- --------------------------------------------------------------------------------
German Insurance Assets -- Performance Fees
<TABLE>
<CAPTION>
Portfolio Performance
Alpha (bps) (a) Outperformance (bps) (b) Fee (bps) (c)
Pfandbrief Actively -------------------- ---------------------------- -------------------------------
Benchmark Managed Low High Low High Low High AZ (d)
---------- ------- ------- -------- ------- -------- ---------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Life/ Health 90% 10% 10.0 12.5 0.0 2.5 0.0 0.7 3.3
Allianz Pension 90% 10% 10.0 12.5 0.0 2.5 0.0 0.8 3.3
P&C 75% 25% 25.0 31.3 15.0 21.3 4.5 6.4 9.0
Allianz AG 75% 25% 25.0 31.3 15.0 21.3 4.5 6.4 9.0
Euroland Funds 75% 25% 25.0 31.3 15.0 21.3 4.5 6.4 9.9
Europe Funds 75% 25% 25.0 31.3 15.0 21.3 4.5 6.4 12.3
</TABLE>
- ---------------------
(a) Assuming 100-125 bps of alpha on the actively managed portion of the
portfolio.
(b) Assuming 10 bps hurdle rate.
(c) Life/ Health: 30% on first II bps of outperformance. 50% above 21 bps with
a cap at 50bps.
P&C: 30% on first 30 bps of outperformance. 50% above 40 bps with
a cap at 80 bps.
Euroland Funds: 30% on first 33 bps, 50% above 43 bps with a cap at 86 bps.
Europe Funds: 30% on first 41 bps, 50% above 51 bps with cap at 102 bps.
(d) Allianz estimate per 23 July 1999 presentation.
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 22
<PAGE>
V. Appendix
- --------------------------------------------------------------------------------
German Insurance Assets - Revenues
(dollars in millions)
<TABLE>
<CAPTION>
Performance Fee Total Fee
Base -------------------------------------- -------------------------------------
AUM Fee Low High AZ Low High AZ
--------- ---------- ------- -------- ------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life/Health $73,685 $14.7 $0.0 $5.5 $24.3 $14.7 $20.3 $39.1
(Includes Allianz Pension) 2.0 bps 0.0 bps 0.7 bps 3.3 bps 2.0 bps 2.8 bps 5.3 bps
P&C $12,165 $2.4 $5.5 $7.8 $10.9 $7.9 $10.2 $13.4
(Includes Allianz AG) 2.0 bps 4.5 bps 6.4 bps 9.0 bps 6.5 bps 8.4 bps 11.0 bps
Euroland Funds $7,598 $3.8 $3.4 $4.8 $7.5 $7.2 $8.6 $11.3
5.0 bps 4.5 bps 6.4 bps 9.9 bps 9.5 bps 11.4 bps 14.9 bps
Europe Funds $3,038 $1.5 $1.4 $1.9 $3.7 $2.9 $3.5 $5.3
5.0 bps 4.5 bps 6.4 bps 12.3 bps 9.5 bps 11.4 bps 17.3 bps
--------- -------- ------- -------- ------- -------- -------- --------
Total $96,486 $22.5 $10.3 $20.1 $46.5 $32.7 $42.6 $69.0
========= ======== ======= ======== ======= ======== ======== ========
</TABLE>
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 23
<PAGE>
CONFIDENTIAL
Exhibit 99 (b)(4)
PROJECT APOSTLE
Overview of European
Fixed Income Business
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC August 24, 1999
<PAGE>
Project Apostle
- --------------------------------------------------------------------------------
Table of Contents
Page
----
I. Overview.......................................................... 1
II. Insurance Assets.................................................. 3
III. Third-Party Retail Assets......................................... 9
IV. Third-Party Institutional Assets.................................. 11
V. Pro Forma Impact on PIMCO......................................... 13
VI. Key Issues and Potential Alternatives............................. 14
VII. Appendix.......................................................... 17
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC August 24, 1999
<PAGE>
I. Overview
- --------------------------------------------------------------------------------
Fixed Income Assets Under Management
(dollars in millions)
<TABLE>
<CAPTION>
---------------------------------------------------- CAGR
1999 (a) 2000 2001 2002 99-02
-------- ------------- ------------ ----------- ------
<S> <C> <C> <C> <C>
German Insurance Assets:
Life Assets $73,689 $78,847 $84,367 $90,272 7 %
P&C Assets 12,166 13,018 13,929 14,904 7
Euroland Funds 7,598 8,130 8,699 9,308 7
Europe Funds 3,038 3,251 3,478 3,722 7
-------- ------------- ------------ -----------
Total Insurance Assets 96,491 103,245 110,473 118,206 7
-------- ------------- ------------ -----------
% of Total AUM 81 % 79 % 75 % 71 %
Third-Party Retail:
Germany 3,840 5,091 7,197 9,828 37
Europe (Ex. Germany) 12,100 13,310 15,573 19,154 17
-------- ------------- ------------ -----------
Total Retail 15,940 18,401 22,770 28,983 22
-------- ------------- ------------ -----------
% of Total AUM 13 % 14 % 15 % 17 %
Third-Party Institutional:
Germany 1,860 3,130 6,139 9,249 71
Europe (Ex. Germany) 5,500 6,435 7,658 9,342 19
-------- ------------- ------------ -----------
Total Institutional 7,360 9,565 13,797 18,591 36
-------- ------------- ------------ -----------
% of Total AUM 6 % 7 % 9 % 11 %
Total AUM $119,791 $131,212 $147,039 $165,780 11 %
Period Growth - 10 % 12 % 13 %
</TABLE>
(a) As of June 30, 1999.
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 1
<PAGE>
I. Overview
- --------------------------------------------------------------------------------
Financial Summary
(dollars in millions)
<TABLE>
<CAPTION>
Insurance Third-Party Total
--------------------------- -------------------------- --------------------------
Low High Retail Institutional Low High
---------- ------------- ---------- ------------- ---------- ------------
1999:
- -----
<S> <C> <C> <C> <C> <C> <C>
Assets $96,491 $15,940 $7,360 $119,791
Revenues (a) $24.2 $32.7 $10.7 $8.8 $43.7 $52.3
Expenses (b) (18.0) (18.0) 0.0 (12.0) (30.0) (30.0)
Subsidy -- -- -- 3.2 3.2 3.2
---------- ------------- ---------- ------------- ---------- ------------
Contribution $6.2 $14.8 $10.7 $0.0 $16.9 $25.4
========== ============= ========== ============= ========== ============
<CAPTION>
2002:
- -----
<S> <C> <C> <C> <C> <C> <C>
Assets $118,206 $28,983 $18,591 $165,780
Revenues (a) $29.6 $40.1 $27.5 $31.6 $88.7 $99.2
Expenses (b) (22.0) (22.0) 0.0 (13.4) (35.4) (35.4)
Subsidy -- -- -- 0.0 0.0 0.0
---------- ------------- ---------- ------------- ---------- ------------
Contribution $7.6 $18.1 $27.5 $18.2 $53.3 $63.8
========== ============= ========== ============= ========== ============
</TABLE>
- ---------------------------
See Appendix pgs. 25-26 for details.
(a) Based on LF Low and High case insurance scenarios.
(b) Excludes incremental PIMCO expenses.
<PAGE>
II. Insurance Assets
- --------------------------------------------------------------------------------
Current Assets Under Management
(dollars in millions)
Investment Class
------------------------
Govt./
AUM Pfandbrief Corp. (a)
-------- ---------- ------
Life Assets:
Allianz Life $59,313 91 % 9 %
Vereinte Life 5,850 82 18
Vereinte Health 6,922 88 12
AZ Pension 1,604 87 13
--------
Total Life 73,689 90 10
--------
P&C Assets:
Allianz Versicherung 5,879 62 38
BVB 669 69 31
Frankfurt 1,235 74 26
Vereinte Versicherung 1,443 86 14
Allianz AG 2,940 42 58
--------
Total P&C 12,166 62 38
--------
Euro Funds:
Euroland Funds 7,598 75 25
Europe Funds 3,038 75 25
--------
Total Euro Funds 10,636 75 25
--------
Total Insurance Assets $96,491 85 % 15 %
- ------------------
As of 6/30/99.
(a) Proxy for the actively managed portion of portfolio.
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 3
<PAGE>
<TABLE>
<CAPTION>
II. Insurance Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Historical Performance
Year Ended December 31,
-------------------------------------------------------------------- YTD Average
1994 1995 1996 1997 1998 Jun-99 94-99
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life Portfolio: (a)
Performance (2.0) % 16.3 % 8.3 % 6.7 % 10.6 % (0.3) %
Benchmark (2.0) 16.6 7.9 6.4 10.2 (0.1)
Alpha 0 bps. (30) bps. 40 bps. 30 bps. 40 bps. (20) bps. 10 bps.
P&C Portfolio: (b)
Performance (2.7) % 16.8 % 8.3 % 5.8 % 9.0 % (0.1) %
Benchmark (2.6) 16.8 7.4 6.3 8.6 0.2
Alpha (1O) bps. 0 bps. 90 bps. (50) bps. 40 bps. (30) bps. 7 bps.
</TABLE>
- ------------------
(a) Excludes Allianz Pension assets.
(b) Excludes Allianz AG assets.
Benchmark: Life Portfolio P&C Portfolio
- ---------- ---------------------------- ----------------------------
1994-1997 20% REXI 80% PEX J.P. Morgan Germany
1998 PEX/ REX Customized PEX/ REX Customized
1999 Lehman Euro-Agg (customized) Lehman Euro-Agg (customized)
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 4
<PAGE>
<TABLE>
<CAPTION>
II. Insurance Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Allianz Fee Proposal
(dollars in millions)
Life P&C Euroland Europe
Assets Assets Funds Funds
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
AUM (6/99) $73,689 $12,166 $7,598 $3,038
Base Fee 2 bps 2 bps 5 bps 5 bps
Performance Fees:
Performance Hurdle 10 bps 10 bps 10 bps 10 bps
(0% Participation until Hurdle)
Level I Performance 11-21 bps 11-40 bps 11-43 bps 11-51 bps
(30% Participation)
Level II Performance 22 - 50 bps 41 - 80 bps 44 - 86 bps 52 - 102 bps
(50% Participation)
Cap 50 bps 80 bps 86 bps 102 bps
(0% Above Cap
</TABLE>
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 5
<PAGE>
<TABLE>
<CAPTION>
II. Insurance Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Estimated Performance: Allianz Scenario
Allianz expects active duration management to provide the greatest
opportunity for outperformance.
Life P&C Euroland Europe
Assets Assets Funds Funds
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1999 Assets $73,689 $12,166 $7,598 $3,038
Expected Alpha:
Duration 18 bps 20 bps 20 bps 20 bps
Yield Curve 1 7 7 10
Credit Weighting 1 5 9 10
Credit Duration/
Security Selection 1 5 5 6
Convergence 0 3 2 5
----------- ----------- ----------- -----------
Total Expected Alpha 21 40 43 51
Performance Hurdle (10) (10) (10) (10)
----------- ----------- ----------- -----------
Level I Outperformance 11 bps 30 bps 33 bps 41 bps
=========== =========== =========== ===========
PIMCO Participation 30 % 30 % 30 % 30 %
Performance Fees (bps) 3.3 bps 9.0 bps 9.9 bps 12.3 bps
Performance Fees ($) $24.3 $10.9 $7.5 $3.7
</TABLE>
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 6
<PAGE>
II. Insurance Assets
- --------------------------------------------------------------------------------
Estimated Performance: Low and High Scenarios
The LF Low and High scenarios are based on achieving 50-100 bps of
outperformance on the actively managed portion of the portfolio.
<TABLE>
<CAPTION>
Life P&C Euroland Europe
Assets Assets Funds Funds
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
1999 Assets $73,689 $12,166 $7,598 $3,038
Pfandbrief 90% 75% 75% 75%
Govt./Corp. 10 25 25 25
Low Scenario: (a)
Expected Alpha 5.0 bps 12.5 bps 12.5 bps 12.5 bps
Performance Hurdle (10.0) (10.0) (10.0) (10.0)
--------- --------- --------- ---------
Level I Performance (5.0) bps 2.5 bps 2.5 bps 2.5 bps
========= ========= ========= =========
PIMCO Participation 30 % 30 % 30 % 30 %
Performance Fees (bps) 0.0 bps 0.8 bps 0.8 bps 0.8 bps
Performance Fees ($) $0.0 $0.9 $0.6 $0.2
High Scenario: (b)
Expected Alpha 10.0 bps 25.0 bps 25.0 bps 25.0 bps
Performance Hurdle (10.0) (10.0) (10.0) (10.0)
--------- --------- --------- ---------
Level I Performance 0.0 bps 15.0 bus 15.0 bps 15.0 bps
========= ========= ========= =========
PIMCO Participation 30 % 30 % 30 % 30 %
Performance Fees (bps) 0.0 bps 4.5 bps 4.5 bps 4.5 bps
Performance Fees ($) $0.0 $5.5 $3.4 $1.4
</TABLE>
- ----------------------
(a) Assumes 50 bps of outperformance on actively managed portion of portfolio.
(b) Assumes 100 bps of outperformance on actively managed portion of
portfolio.
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 7
<PAGE>
II. Insurance Assets
- --------------------------------------------------------------------------------
Comparison of Projected Revenues and Contribution
(dollars in millions)
<TABLE>
<CAPTION>
1999 2002
---------------------------------------- ----------------------------------------
LF Scenarios LF Scenarios
------------------------ -----------------------
Allianz Low High Allianz Low High
---------- --------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
AUM:
Life Assets $73,689 $90,272
P&C Assets 12,166 14,904
Euroland Funds 7,598 9,308
Europe Funds 3,038 3,722
---------- ----------
Total AUM $96,491 $118,206
---------- ----------
Base Fees
Life/P&C Assets $17.2 $17.2 $17.2 $21.0 $21.0 $21.0
Euro Funds 5.3 5.3 5.3 6.5 6.5 6.5
---------- --------- --------- ---------- --------- ---------
Total Base Fees 22.5 22.5 22.5 27.5 27.5 27.5
---------- --------- --------- ---------- --------- ---------
Performance Fees:
Life Assets 24.3 0.0 0.0 29.8 0.0 0.0
P&C Assets 10.9 0.9 5.5 13.4 1.1 6.7
Euroland Funds 7.5 0.6 3.4 9.2 0.7 4.2
Europe Funds 3.7 0.2 1.4 4.6 0.3 1.7
---------- --------- --------- ---------- --------- ---------
Total Performance 46.5 1.7 10.3 57.0 2.1 12.6
---------- --------- --------- ---------- --------- ---------
Total Revenues 69.0 24.2 32.7 84.5 29.6 40.1
Expenses:
Compensation 7.9 7.9 7.9 9.7 9.7 9.7
Technology 4.8 4.8 4.8 5.9 5.9 5.9
Prop. & Communication 5.3 5.3 5.3 6.5 6.5 6.5
Distribution 0.0 0.0 0.0 0.0 0.0 0.0
---------- --------- --------- ---------- --------- ---------
Total Expenses 18.0 18.0 18.0 22.0 22.0 22.0
---------- --------- --------- ---------- --------- ---------
Contribution $51.0 $6.2 $14.8 $62.5 $7.6 $18.1
========== ========= ========= ========== ========= =========
</TABLE>
- ----------------------
See Appendix pgs. 19-20 for expense detail & pgs. 21-23 for 1999-2002
contribution.
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 8
<PAGE>
III. Third-Party Retail Assets
Revenues and Contribution: Germany
(dollars in millions)
For Retail assets in Germany, PIMCO will provide a model portfolio and
receive 30% of the total management revenues. All Retail expenses will be
borne by Allianz.
<TABLE>
<CAPTION>
------------------------------------------------------------------- CAGR
1999 2000 2001 2002 99-02
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
AUM:
Existing $3,840 $4,109 $4,396 $4,704 7 %
New 0 983 2,801 5,124 NM
------ ------ ------ ------
Total $3,840 $5,091 $7,197 $9,828 37
====== ====== ====== ======
Management Fees:
Existing 40.0 bps 40.0 bps 40.0 bps 40.0 bps
New 0.0 65.0 70.0 80.0
Management Revenues:
Existing 15.4 16.4 17.6 18.8 7 %
New 0.0 6.4 19.6 41.0 NM
------ ------ ------ ------
Total 15.4 22.8 37.2 59.8 57
------ ------ ------ ------
PIMCO Share $4.6 $6.8 $11.2 $17.9 57 %
</TABLE>
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 9
<PAGE>
III. Third-Party Retail Assets
- --------------------------------------------------------------------------------
Revenues and Contribution: Europe (ex. Germany)
(dollars in millions)
For Retail assets outside of Germany, PIMCO will provide a model portfolio
and receive a subadvisory fee of 5 bps. All Retail expenses will be borne
by Allianz.
<TABLE>
<CAPTION>
---------------------------------------------------------------------- CAGR
1999 2000 2001 2002 99-02
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
AUM: $12,100 $13,310 $15,573 $19,154 17 %
Management Fees:
Management Fees 110.0 bps 105.0 bps 100.0 bps 90.0 bps
Subadvisory Fee 5.0 5.0 5.0 5.0
Management Revenues:
Management Fees $133.1 $139.8 $155.7 $172.4 9 %
Subadvisory Fee 6.1 6.7 7.8 9.6 17
</TABLE>
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 10
<PAGE>
IV. Third-Party Institutional Assets
- --------------------------------------------------------------------------------
Revenues and Contribution: Germany
(dollars in millions)
PIMCO will have P&L responsibility for Institutional assets in Germany.
Allianz will fund the initial losses.
<TABLE>
<CAPTION>
---------------------------------------------------- CAGR
1999 2000 2001 2002 99-02
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
AUM:
Existing $1,860 $1,990 $2,130 $2,279 7%
New 0 1,140 4,010 6,971 NM
---------- ---------- ---------- ----------
Total $1,860 $3,130 $6,139 $9,249 71
========== ========== ========== ==========
Management Fees:
Existing 18.0 bps 18.0 bps 18.0 bps 18.0 bps
New 0.0 21.0 24.0 26.0
Management Revenues:
Existing $3.3 $3.6 $3.8 $4.1
New 0.0 2.4 9.6 18.1
---------- ---------- ---------- ----------
Total Revenues 3.3 6.0 13.5 22.2 88%
---------- ---------- ---------- ----------
Expenses:
Compensation 2.1 2.1 2.2 2.3
Technology 2.3 2.4 2.4 2.5
Prop. & Communication 1.4 1.4 1.5 1.5
Distribution 0.0 0.0 0.0 0.0
---------- ---------- ---------- ----------
Total Expenses 5.7 5.9 6.1 6.3 3%
Contribution ($2.4) $0.1 $7.4 $15.9 NM
AZ Subsidy 2.4 0.0 0.0 0.0
---------- ---------- ---------- ----------
Contribution to PIMCO $0.0 $0.1 $7.4 $15.9 NM
========== ========== ========== ==========
</TABLE>
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 11
<PAGE>
IV. Third-Party Institutional Assets
- --------------------------------------------------------------------------------
Revenues and Contribution: Europe (ex. Germany)
(dollars in millions)
PIMCO will also have P&L responsibility for Institutional assets outside of
Germany. Allianz will fund the initial losses.
<TABLE>
<CAPTION>
--------------------------------------------------------- CAGR
1999 2000 2001 2002 99-02
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
AUM $5,500 $6,435 $7,658 $9,342 19%
Management Fees: 10.0 bps 10.0 bps 10.0 bps 10.0 bps
Revenues $5.5 $6.4 $7.7 $9.3 19%
Total Expenses 6.3 6.5 6.8 7.1 4
Contribution ($0.8) ($0.1) $0.9 $2.2 NM
AZ Subsidy 0.8 0.1 0.0 0.0
------- ------- ------- -------
Contribution to PIMCO $0.0 $0.0 $0.9 $2.2 NM
======= ======= ======= =======
</TABLE>
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 12
<PAGE>
V. Pro Forma Impact on PIMCO
- --------------------------------------------------------------------------------
Summary Contribution to PIMCO
(dollars in millions)
<TABLE>
<CAPTION>
1999 2002
--------------------------------------- -----------------------------------------
LF Scenarios LF Scenarios
------------------------- ------------------------
Allianz Low High Allianz Low High
--------- ---------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Insurance:
Revenue $69.0 $24.2 $32.7 $84.5 $29.6 $40.1
Expense (18.0) (18.0) (18.0) (22.0) (22.0) (22.0)
--------- ---------- --------- ---------- --------- ---------
Contribution 51.0 6.2 14.8 62.5 7.6 18.1
--------- ---------- --------- ---------- --------- ---------
Retail:
Revenue 10.7 10.7 10.7 27.5 27.5 27.5
Expense -- -- -- -- -- --
--------- ---------- --------- ---------- --------- ---------
Contribution 10.7 10.7 10.7 27.5 27.5 27.5
--------- ---------- --------- ---------- --------- ---------
Institutional:
Revenue 8.8 8.8 8.8 31.6 31.6 31.6
Expense (12.0) (12.0) (12.0) (13.4) (13.4) (13.4)
Subsidy 3.2 3.2 3.2 0.0 0.0 0.0
--------- ---------- --------- ---------- --------- ---------
Contribution 0.0 0.0 0.0 18.2 18.2 18.2
--------- ---------- --------- ---------- --------- ---------
Total Contribution 61.7 16.9 25.4 108.2 53.3 63.8
Less: PIMCO Expenses (1.5) (1.5) (1.5) (1.8) (1.8) (1.8)
--------- ---------- --------- ---------- --------- ---------
Net Contribution 60.2 15.4 23.9 106.4 51.5 61.9
Bonus Pool(%) 45 % 45 % 45 % 45 % 45 % 45 %
--------- ---------- --------- ---------- --------- ---------
Impact on PIMCO Bonus Pool $27.1 $6.9 $10.8 $47.9 $23.2 $27.9
========= ========== ========= ========== ========= =========
</TABLE>
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 13
<PAGE>
VI. Key Issues & Potential Alternatives
- --------------------------------------------------------------------------------
Key Issues
. Bonus pool impact
- Allianz estimates annual impact of $27 mm (1999) increasing to
$48 mm (2002)
- LF estimates range from $7 mm - $11 mm (1999) to $23 mm - $28 mm
(2002)
. Quality of earnings from insurance assets
- Base fees cover costs (approx. $4.5 mm profit or 0.5 bps)
- Profit extremely sensitive to performance fees
. Uncertainty in estimating performance fees from insurance assets
- Investment restrictions limit total return opportunities
- Allianz assumption of active duration management inconsistent
with PIMCO relative value orientation
- "Upside opportunities" with "special funds" and likely
liberalization of investment guidelines (LF estimates may be too
conservative in later years)
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 14
<PAGE>
VI. Key Issues & Potential Alternatives
- --------------------------------------------------------------------------------
Key Issues (cont`d)
. Retail assets account for approximately 40% to 65% of the near-term
profit opportunity
- "Value-added" limited to provision of model portfolio
- Huge profit margin: assumption that model portfolio can be
provided at zero marginal cost
- Unclear what support will be required to supervise implementation
of model portfolio or other aspects of the retail sales effort
. PIMCO control over costs of the European investment organization
- PIMCO expected to directly supervise 6 to 10 portfolio managers,
4 traders, and 12 client services representatives
- Allianz to provide non-investment services
- Large percentage of costs currently are allocated from Allianz to
AAM
- How will PIMCO control the quality and cost of services provided
by Allianz/ AAM?
. PIMCO incremental expenses
. Control over institutional marketing
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 15
<PAGE>
VI. Key Issues & Potential Alternatives
- --------------------------------------------------------------------------------
Potential Alternatives to Allianz Proposal
. Alternative 1. Increase the base fee on life and P&C assets from 2 bps
to 3 bps
- Rationale: provide reasonable level of total fees (3.4 bps to 4.3
bps) and balance between base profit ($ 13.1 million) and
performance upside ($1.7 to $10.3 million)
- Increases contribution by 8.6 million, bonus pool by $3.9 million
. Alternative 2. Increase the base fee on life assets only from 2 bps to
3-4 bps
- Rationale: provide reasonable level of fees on asset class with
the least performance upside: life 2 bps compares to P&C expected
2.8 bps to 6A bps
- Increases contribution by $7.4 to $14.8 million, bonus pool by
$3.3 to $6.6 million
. Alternative 3. Increase the base fee on life assets from 2 bps to 4
bps with clawback. Clawback possibilities:
- Progressive reduction to P&C base fee level as investment
restrictions on life assets are liberalized
- Reduce performance fee sharing percentage on life assets from 30%
to 15%
. Alternative 4. Set the base fee on insurance assets at cost plus [2]
bps with no performance fee
- Rationale: protect PIMCO profit margin if direct and/or allocated
costs are not within PIMCO's control
- Results in contribution of $19.3 million, compared to $6.2 -
$14.8 - under AZ proposal or $14.8 - $23.4 under Alternative 1
above
. Alternative 5. Create performance-based fee structure for third-party
institutional assets
- Rationale: most likely area of PIMCO outperformance; current base
fees at low levels
- Would require AAM subsidy or new advisory contracts
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 16
<PAGE>
<TABLE>
<CAPTION>
VII. Appendix
- --------------------------------------------------------------------------------------------------------------
Headcount by Functional Area
Current Organizational Structure
-------------------------------------------------------------
Third-Party
-------------------------
Insurance Retail Institutional Total
--------- ------ ------------- -----
<S> <C> <C> <C> <C>
Investment Professionals:
CIO 9 -- -- 9
Research 16 2 4 22
Portfolio Managers (Fl & Eq) 33 3 3 39
Trading 7 1 1 9
Asset/ Liability Matching 1 -- 2 3
--------- ------ ------------- -----
Total Investment 66 6 10 82
--------- ------ ------------- -----
Marketing:
CMO 2 8 3 13
Product Development -- 4 1 5
Other 9 -- -- 9
--------- ------ ------------- -----
Total Marketing 11 12 4 27
--------- ------ ------------- -----
Institutional:
Institutional Sales -- -- 9 9
Client Relations 1 -- 6 7
--------- ------ ------------- -----
Total Institutional 1 0 15 16
--------- ------ ------------- -----
Retail:
Administration 9 4 5 18
Marketing -- 13 -- 13
Internet -- 4 -- 4
Sales Support 1 71 -- 72
Backoffice/ Client Services 9 67 2 78
--------- ------ ------------- -----
Total Retail 19 159 7 185
--------- ------ ------------- -----
Operations:
COO 7 1 -- 8
Corp. Controlling 4 1 -- 5
IT 10 3 1 14
Performancel Risk Control 11 1 -- 12
Middle Office 12 2 1 15
AAM HK & Luxembourg 13 -- -- 13
--------- ------ ------------- -----
Total Operations 57 8 2 67
--------- ------ ------------- -----
Total Employees 154 185 38 377
- --------------------------------------------------------------------------------------------------------------
</TABLE>
Lazard Freres & Co. LLC Page 17
<PAGE>
VII. Appendix
- --------------------------------------------------------------------------------
Estimated Compensation Expense
(dollars in millions; except per employee amounts in thousands)
<TABLE>
<CAPTION>
Third Party
-------------------------------
Insurance Retail Institutional Total
--------- ----------- ---------------- ---------
<S> <C> <C> <C> <C>
Total Employees 154 185 38 377
Compensation Per Employee:
Salary $72.0 $63.0 $72.0
Social Security (20%) 14.4 12.6 14.4
Bonus 21.6 30% 12.6 20% 21.6 30%
-------- ------- --------
Expense Per Employee $108.0 $88.2 $108.0
======== ======= ========
Total Compensation Expense $16.6 $16.3 $4.1 $37.1
</TABLE>
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 18
<PAGE>
VII. Appendix
- --------------------------------------------------------------------------------
Expense Breakdown
(dollars in millions)
<TABLE>
<CAPTION>
Third-Party
-------------------------
Insurance Retail Institutional Total
--------- ------ ------------- -----
<S> <C> <C> <C> <C>
Administration:
Compensation (incl. Bonuses) $16.6 $16.3 $4.1 $37.1
Information Technology:
IT Equipment/ Services 6.9 5.1 2.9 14.9 Primarily direct expenses.
IT Projects 3.3 1.6 1.6 6.5 Depreciated over 4 years. Allocated 50%/25%/25%.
------ ------ ------ -------
Total IT 10.1 6.7 4.6 21.4
Property & Communication 11.1 13.3 2.7 27.2 Allocated by headcount.
Distribution:
Marketing 0.0 9.8 0.0 9.8
Commissions 0.0 36.6 0.0 36.6
------ ------ ------ -------
Total Expenses $37.8 $82.8 $11.4 $132.0
====== ====== ====== =======
$46.2 (a) $95.4 (a)
====== =======
Expense Breakdown: (b)
- ------------------
Fixed Income $18.0 48% $30.5 66% $5.7 50%
Equity 19.9 53% 15.7 34% 5.7 50%
PIMCO Expenses: (c)
- ---------------
Staff (excl. Bonuses) $1.0
Other 0.5
-------
Total $1.5
=======
</TABLE>
- ----------------------------
(a) Excludes commissions
(b) AZ expenses allocated by fixed income/ equity asset split.
(c) Assumes no additional infrastructure needed.
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 19
<PAGE>
VII. Appendix
- --------------------------------------------------------------------------------
Property & Communication Expense Breakdown
(dollars in millions)
<TABLE>
<CAPTION>
Functional Area
-----------------------------------------------
Investment Marketing Operations Total
---------- --------- ---------- -------
<S> <C> <C> <C> <C>
Operating IT Costs:
Premises/Office Space/Other $2.1 $2.1 $2.5 $6.7
Telephone 0.2 1.3 0.1 1.6
---------- --------- ---------- -------
Total 2.3 3.4 2.6 8.3
Administrative Costs:
Representation 0.1 0.3 0.1 0.5
Advertisement & PR 0.2 4.8 0.2 5.2
Consultant Costs 0.1 1.3 0.2 1.6
Training 0.2 0.2 0.3 0.7
Office Supplies 0.0 0.0 0.1 0.1
Depreciation 0.0 0.4 0.3 0.7
---------- --------- ---------- -------
Total 0.7 7.0 1.0 8.8
Other:
Company Cars 0.1 0.1 0.0 0.2
Low Value Assets 0.0 0.1 0.0 0.2
Literature 0.0 0.3 0.1 0.4
Svcs. Provided by Head Office 1.8 2.0 3.4 7.2
Miscellaneous 0.1 1.1 1.0 2.1
---------- --------- ---------- -------
Total 2.0 3.6 4.5 10.1
Total Property & Communications $5.0 $14.0 $8.1 $27.2
</TABLE>
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 20
<PAGE>
VII. Appendix
- --------------------------------------------------------------------------------
Insurance Assets: Projected Revenues and Contribution: Allianz Scenario
(dollars in millions)
<TABLE>
<CAPTION>
CAGR
-----------------------------------------------------------------
1999 2000 2001 2002 99-02
-------- --------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
AUM:
Life Assets $73,689 $78,847 $84,367 $90,272 7 %
P&C Assets 12,166 13,018 13,929 14,904 7
Euroland Funds 7,598 8,130 8,699 9,308 7
Europe Funds 3,038 3,251 3,478 3,722 7
-------- --------- --------- ---------
Total AUM $96,491 $103,245 $110,473 $118,206 7
-------- --------- --------- ---------
Base Fees
Life/P&C Assets $17.2 $18.4 $19.7 $21.0
Euro Funds 5.3 5.7 6.1 6.5
-------- --------- --------- ---------
Total Base Fees 22.5 24.1 25.7 27.5
-------- --------- --------- ---------
Performance Fees:
Life Assets 24.3 26.0 27.8 29.8
P&C Assets 10.9 11.7 12.5 13.4
Euroland Funds 7.5 8.0 8.6 9.2
Europe Funds 3.7 4.0 4.3 4.6
-------- --------- --------- ---------
Total Performance 46.5 49.8 53.3 57.0
-------- --------- --------- ---------
Total Revenues 69.0 73.8 79.0 84.5
Expenses:
Compensation 7.9 8.5 9.0 9.7
Technology 4.8 5.1 5.5 5.9
Prop. & Communication 5.3 5.6 6.0 6.5
Distribution 0.0 0.0 0.0 0.0
-------- --------- --------- ---------
Total Expenses 18.0 19.2 20.6 22.0
-------- --------- --------- ---------
Contribution $51.0 $54.6 $58.4 $62.5
======== ========= ========= =========
</TABLE>
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 21
<PAGE>
VII. Appendix
- --------------------------------------------------------------------------------
Insurance Assets: Projected Revenues and Contribution: Low Scenario
(dollars in millions)
<TABLE>
<CAPTION>
---------------------------------------------------------------- CAGR
1999 2000 2001 2002 99-02
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
AUM:
Life Assets $73,689 $78,847 $84,367 $90,272 7 %
P&C Assets 12,166 13,018 13,929 14,904 7
Euroland Funds 7,598 8,130 8,699 9,308 7
Europe Funds 3,038 3,251 3,478 3,722 7
-------- -------- -------- -------- ---------
Total AUM $96,491 $103,245 $110,473 $118,206 7
-------- -------- -------- -------- ---------
Base Fees
Life/P&C Assets $17.2 $18.4 $19.7 $21.0
Euro Funds 5.3 5.7 6.1 6.5
-------- -------- -------- --------
Total Base Fees 22.5 24.1 25.7 27.5
-------- -------- -------- --------
Performance Fees:
Life Assets 0.0 0.0 0.0 0.0
P&C Assets 0.9 1.0 1.0 1.1
Euroland Funds 0.6 0.6 0.7 0.7
Europe Funds 0.2 0.2 0.3 0.3
-------- -------- -------- --------
Total Performance 1.7 1.8 2.0 2.1
-------- -------- -------- --------
Total Revenues 24.2 25.9 27.7 29.6
Expenses:
Compensation 7.9 8.5 9.0 9.7
Technology 4.8 5.1 5.5 5.9
Prop. & Communication 5.3 5.6 6.0 6.5
Distribution 0.0 0.0 0.0 0.0
-------- -------- -------- --------
Total Expenses 18.0 19.2 20.6 22.0
-------- -------- -------- --------
Contribution $6.2 $6.7 $7.1 $7.6
======== ======== ======== ========
</TABLE>
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 22
<PAGE>
VII. Appendix
- --------------------------------------------------------------------------------
Insurance Assets: Projected Revenues and Contribution: High Scenario
(dollars in millions)
<TABLE>
<CAPTION>
-------------------------------------------------------- CAGR
1999 2000 2001 2002 99-02
------- -------- -------- -------- -----
<S> <C> <C> <C> <C> <C>
AUM:
Life Assets $73,689 $78,847 $84,367 $90,272 7 %
P&C Assets 12,166 13,018 13,929 14,904 7
Euroland Funds 7,598 8,130 8,699 9,308 7
Europe Funds 3,038 3,251 3,478 3,722 7
------- -------- -------- --------
Total AUM $96,491 $103,245 $110,473 $118,206 7
------- -------- -------- --------
Base Fees
Life/P&C Assets $17.2 $18.4 $19.7 $21.0
Euro Funds 5.3 5.7 6.1 6.5
------- -------- -------- --------
Total Base Fees 22.5 24.1 25.7 27.5
------- -------- -------- --------
Performance Fees:
Life Assets 0.0 0.0 0.0 0.0
P&C Assets 5.5 5.9 6.3 6.7
Euroland Funds 3.4 3.7 3.9 4.2
Europe Funds 1.4 1.5 1.6 1.7
------- -------- -------- --------
Total Performance 10.3 11.0 11.7 12.6
------- -------- -------- --------
Total Revenues 32.7 35.0 37.5 40.1
Expenses:
Compensation 7.9 8.5 9.0 9.7
Technology 4.8 5.1 5.5 5.9
Prop. & Communication 5.3 5.6 6.0 6.5
Distribution 0.0 0.0 0.0 0.0
------- -------- -------- --------
Total Expenses 18.0 19.2 20.6 22.0
------- -------- -------- --------
Contribution $14.8 $15.8 $16.9 $18.1
======= ======== ======== ========
</TABLE>
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 23
<PAGE>
VII. Appendix
- --------------------------------------------------------------------------------
Summary Contribution to PIMCO - Allianz Scenario
(dollars in millions)
<TABLE>
<CAPTION>
---------------------------------------------------- CAGR
1999 2000 2001 2002 99-02
------- -------- ------- ------- -----
<S> <C> <C> <C> <C> <C>
Insurance $51.0 $54.6 $58.4 $62.5 7 %
Retail:
Germany 4.6 6.8 11.2 17.9 57
Europe (Ex. Germany) 6.1 6.7 7.8 9.6 17
------- -------- ------- -------
Total Retail 10.7 13.5 18.9 27.5 37
------- -------- ------- -------
Institutional:
Germany 0.0 0.1 7.4 15.9 NM
Europe (Ex. Germany) 0.0 0.0 0.9 2.2 NM
------- -------- ------- -------
Total Institutional 0.0 0.1 8.2 18.2 NM
------- -------- ------- -------
Total Contribution $61.7 $68.2 $85.6 $108.2 21 %
</TABLE>
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 24
<PAGE>
VII. Appendix
- --------------------------------------------------------------------------------
Summary Contribution to PIMCO - Low Scenario
(dollars in millions)
<TABLE>
<CAPTION>
---------------------------------------------------- CAGR
1999 2000 2001 2002 99-02
-------- ------- -------- -------- -----
<S> <C> <C> <C> <C> <C>
Insurance $6.2 $6.7 $7.1 $7.6 7 %
Retail:
Germany 4.6 6.8 11.2 17.9 57
Europe (Ex. Germany) 6.1 6.7 7.8 9.6 17
-------- ------- -------- --------
Total Retail 10.7 13.5 18.9 27.5 37
-------- ------- -------- --------
Institutional:
Germany 0.0 0.1 7.4 15.9 NM
Europe (Ex. Germany) 0.0 0.0 0.9 2.2 NM
-------- ------- -------- --------
Total Institutional 0.0 0.1 8.2 18.2 NM
-------- ------- -------- --------
Total Contribution $16.9 $20.2 $34.3 $53.3 47 %
</TABLE>
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 25
<PAGE>
VII. Appendix
- --------------------------------------------------------------------------------
Summary Contribution to PIMCO - High Scenario
(dollars in millions)
<TABLE>
<CAPTION>
------------------------------------------------------- CAGR
1999 2000 2001 2002 99-02
---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
Insurance $14.8 $15.8 $16.9 $18.1 7 %
Retail:
Germany 4.6 6.8 11.2 17.9 57
Europe (Ex. Germany) 6.1 6.7 7.8 9.6 17
---------- ---------- ---------- ----------
Total Retail 10.7 13.5 18.9 27.5 37
---------- ---------- ---------- ----------
Institutional:
Germany 0.0 0.1 7.4 15.9 NM
Europe (Ex. Germany) 0.0 0.0 0.9 2.2 NM
---------- ---------- ---------- ----------
Total Institutional 0.0 0.1 8.2 18.2 NM
---------- ---------- ---------- ----------
Total Contribution $25.4 $29.4 $44.1 $63.8 36 %
</TABLE>
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 26
<PAGE>
CONFIDENTIAL
Exhibit 99 (b)(5)
PROJECT APOSTLE
Status Report
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC September 20, 1999
<PAGE>
Project Apostle
- --------------------------------------------------------------------------------
Table of Contents
Page
----
I. Adam's Proposed Terms .......................................... 1
II. Preliminary Valuation Analysis ................................. 8
III. Analysis of Offer .............................................. 15
IV. Proposed Equity Plan ........................................... 18
V. Incremental Fixed Income Assets ................................ 27
VI. Appendix ....................................................... 30
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC September 20, 1999
<PAGE>
I. Adam's Proposed Terms
- --------------------------------------------------------------------------------
Transaction Overview: Through a series of related transactions, Adam
would acquire approximately 69% of the fully
diluted interests of Peter and become the
Managing General Partner of Peter Partners GP:
-- Through a merger with Peter Advisors
Holdings, Adam would acquire all public
units outstanding
-- Through a merger, Adam would acquire
approximately 3.7 million private units
and 2.9 million vested Deferred
Compensation and Deferred Restricted
units
-- Option agreements would be exchanged for
an agreement to pay the "spread value"
plus interest at 8% per annum, within one
year of closing
-- Certain unvested Deferred Restricted,
Deferred Compensation and Performance
units would be exchanged for agreements
to pay the purchase price plus interest
at 8% per annum, on the existing vesting
schedule
-- Adam would make a capital contribution to
Peter Holdings LLC to amend and buyout
the ETA agreements
-- Adam would purchase all membership
interests in Peter Partners LLC
-- Adam would purchase the membership
interests in other specified LLCs and
their related ETA agreements
-- Adam would enter into a put/call
arrangement for the purchase of the 31%
stake retained by Paul
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 1
<PAGE>
I. Adam's Proposed Terms
- ------------------------------------------------------------------------------
Pro Forma Ownership: Units
(000) % Total
--------- ---------
Adam 83,024 69 %
Paul 37,224 31
--------- ---------
Total 120,248 100 %
========= =========
Purchase Price: $38 per unit
Total Consideration for Units: $3.2 billion in cash and Adam shares for
69% of total units outstanding:
<TABLE>
<CAPTION>
Units Total
(OOOs) Consideration
------- -------
<S> <C> <C>
Consideration for Units:
Peter Advisors Holdings 49,501 $1,881
Peter Partners LLC 142 5
Private Units 3,696 140
Peter Holdings LLC (ETAs) 17,402 661 (a)
Other ETAs 1,445 55
Deferred Comp. Plan 2,781 106
Deferred Restricted Units 1,596 61
Deferred Units 2,093 80
Performance Units 201 8
Option, net 4,069 (b) 155 (c)
OG1 Note 98 4
Total Consideration for Units 83,024 $3,155
------- -------
Implied Value for all Units 120,248 $4,569
======= =======
</TABLE>
- --------------------------------------
(a) Includes cash and Adam common stock.
(b) Option shares calculated using treasury stock method. Average strike price
of $20.31 per unit.
(c) Net of $177 million cash from exercise of options.
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 2
<PAGE>
I. Adam's Proposed Terms
- --------------------------------------------------------------------------------
Amendment of Employee
Termination Agreements (ETAs): . Payment in cash ($555 million) and Adam
common shares ($106 million).
. ETA holders other than Messrs. Gross,
Hague, Harris, Powers and Thompson
would receive all cash.
. Messrs. Gross, Hague, Harris, Powers
and Thompson would receive cash and
common shares, with shares distributed
proportional to ETA ownership.
. ETA agreements will be amended to
provide for a five year post-closing
covenant not to compete.
Paul Units: . Adam and Paul will enter into a
put/call agreement for the purchase of
all of the Paul units (37.2 million).
. Put exercisable in October 2002 at
$58.00/ unit ($38.00 at a 13% CAGR).
. Call exercisable in January 2003 at
$38.00/ unit + 10% per annum after
closing.
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 3
<PAGE>
I. Adam's Proposed Terms
- --------------------------------------------------------------------------------
Retention and Bonus Incentive:
Senior MDs . $391 million (PV $296 million)
. Five year payout, $78 million/year
. Five year employment agreements
(Podlich and Meiling to sign
non-solicitation agreements)
. Amounts not paid not subject to
redistribution or reallocation without
agreement of Adam
. Breach of contract results in
forfeiture of future bonuses and
refund of half of all bonuses paid
Other Peter . $105-$225 million over seven years
(PV $81-$156 million)
. Fixed retention pool of $105 million:
-- $21 million/year from 2000 to 2004
. Variable retention pool of $0 to $120
million:
-- Up to $24 million/year from 2002 to
2006
-- No payments if three-year EBITDA
growth is 10% or less
-- $24 million/year if three-year
EBITDA growth is 20% or more
-- $9 million/year if three-year EBITDA
growth is 15%
-- Interpolation of amounts between
performance targets
-- EBITDA excludes services to
affiliated portfolios
- --------------------------------------------------------------------------------
Lazard Freres Co. LLC Page 4
<PAGE>
I. Adam's Proposed Terms
- --------------------------------------------------------------------------------
Retention and Bonus Incentive:
(Cont'd)
Other Peter (Cont'd) . Amount of fixed pool allocated upon
execution of definitive documents
to be discussed
. Allocation of 100% of the 2002
variable payment agreed upon
execution of definitive agreements
. Each year the CEO of Peter would
allocate the performance bonus
contingent upon the next three
years' revenue growth with the
concurrence of the CEO of AAM
. Forfeited amounts would be
available for reallocation by the
CEO of Peter with the concurrence
of the CEO of AAM
. No employment or non-compete
agreements
Special Equity Incentive For each of Gross and Thompson:
. Seven year employment and
non-competition agreements
. $25 million of restricted Adam
stock
-- Vesting over five years
contingent upon two annual
factors
. 1/2 at the discretion of the
CEO of AAM
. 1/2 subject to continued
employment
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 5
<PAGE>
I. Adam's Proposed Terms
- --------------------------------------------------------------------------------
Transition and Incentive . $62 - $142 million over seven years
Compensation (PV $49-$99 million)
. Separate pools established for severance
payments and retention payments for each
operating entity
. Fixed retention pool of $62 million:
-- Annual payments from 2000 to 2004
-- Up to 60% may be paid out in first two
years
. Variable retention pool of $0 to $80
million:
-- Up to $16 million/year from 2002 to 2006
-- No performance payments if three-year
revenue growth is baseline-33% or less
-- Additional $16 million/year if three-
year revenue growth is baseline+33% or
more
-- Additional $6 million/year if three-year
revenue growth is baseline
-- Interpolation of amounts between
performance targets
. 60% of the fixed would be allocated prior
to execution of definitive agreements
. Allocation of 100% of the 2002 variable
payment agreed upon execution of definitive
agreements
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 6
<PAGE>
I. Adam's Proposed Terms
- --------------------------------------------------------------------------------
Fixed Income Assets: . $100 billion of Adam Group portfolio assets
by 2000
. Minimum $10 million annual contribution to
bonus pool in 2000 and 2001 from the
insurance portfolio
Peter Bonus Pool Buy-Down: . Adam "proposes" a reduction in the bonus
pool to 30% of pre-bonus operating income
. Advanced a preliminary proposal for a
deferred compensation scheme
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 7
<PAGE>
II. Preliminary Valuation Analysis
- --------------------------------------------------------------------------------
Peter Advisors Holdings Market Performance
[GRAPH]
[GRAPH]
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 8
<PAGE>
II. Preliminary Valuation Analysis
- --------------------------------------------------------------------------------
Selected Public Company Trading Statistics
(dollars in millions)
<TABLE>
<CAPTION>
Firm Value as a Multiple of:
------------------------------------ 90-Day
Equity 1999 Operating Operating Price
Value P/E (a) Revenues Income AUM Change
-------- ------ ---------- ----------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Peter $4,271 21.9 x 4.7 x 14.5 x 1.7 % 24 %
MLPs:
-----
Alliance $4,520 11.8x 4.0 x 11.5 x 1.5 % (13)%
Nvest 1,006 11.6 2.0 7.5 1.0 (10)
C-Corps:
--------
Franklin Resources $7,720 15.8 x 4.3 x 11.5 x 3.1 % (23) %
Amvescap 3,213 15.7 5.0 15.9 2.7 (14)
T.RowePrice 3,869 17.7 4.2 15.1 2.4 (15)
Waddell & Reed 1,493 15.3 4.7 10.5 4.9 (7)
Federated Investors 1,652 14.2 3.5 9.3 1.6 16
John Nuveen 1,258 13.1 4.1 8.7 2.2 (12)
Eaton Vance 1,087 17.9 3.7 9.6 3.0 (3)
UAM 1,114 18.0 2.2 6.7 1.0 (13)
Affiliated Managers 596 15.0 3.2 8.4 1.1 (12)
Gabelli 463 11.1 2.7 7.5 2.1 (0)
Phoenix Inv. Partner 386 15.0 3.0 9.2 1.2 (3)
Conning 174 11.0 1.7 5.2 0.4 (27)
<CAPTION>
Summary Statistics:
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
High 21.9 x 5.0 x 15.9 x 4.9 % 24 %
Low 11.0 1.7 5.2 0.4 (27)
Mean 15.0 3.5 10.1 2.0 (8)
Median 15.0 3.7 9.3 1.7 (12)
-------------------------------------------------------------------------------
------------------------------
As of September 16. 1999.
(a) Based on I/B/E/S median estimates.
</TABLE>
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 9
<PAGE>
II. Preliminary Valuation Analysis
- --------------------------------------------------------------------------------
Selected M&A Transaction Statistics
(dollars in millions)
<TABLE>
<CAPTION>
Firm Value as a Multi of LTM:
----------------------------- Premium
Annc. Acquiror/ Firm AUM Operating One Month
Date Acquiree Value ($ BN) Income Revenues AUM Prior
---- -------- ----- ----- ------ -------- --- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Sep-99 Union Bank of Switzerland $675 $13.9 21.0 x NA 4.9 % NA
Global Asset Management
Mar-99 Prudential 2,933 30.1 23.6 11.0 x NM 52 %
M & G Investment Management
Aug-98 Northwestern Mutual Life 950 41.0 18.6 3.7 2.3 NA
Frank Russell Company
Jan-98 Amvescap PLC 1,151 55.0 14.8 2.6 2.1 NA
LGT Chancellor
Nov-97 Merrill Lynch & Co. 5,077 176.6 17.2 8.2 2.9 23
Mercury Asset Management (UK)
Jun-97 Zurich Insurance Group 1,660 120.5 NM 3.2 1.3 NA
Scudder, Stevens & Clark
Nov-96 INVESCO PLC 1,735 57.1 11.2 4.9 3.0 NA
AIM Management Group
Jul-96 Liechtenstein Global Trust 260 32.2 11.4 2.9 0.8 NA
Chancellor Capital Management
Jan-96 Dresdner Bank AG 390 27.4 11.8 4.6 1.4 NA
RCM Capital Management
Jun-95 Morgan Stanley & Co., Inc. 350 33.0 NA 3.5 1.1 NA
Miller Anderson & Sherrerd
Aug-94 Swiss Bank Corporation 870 37.5 11.2 5.8 2.3 NA
Brinson Partners Inc
Jun-94 PNC Bank Corp. 240 23.0 9.5 4.5 1.0 NA
BlackRock Financial Management
Dec-93 Mellon Bank Corporation 1,918 79.2 10.6 3.8 1.5 30
The Dreyfus Corporation
<CAPTION>
Summary Statistics:
-------------------------------------------------------------
<S> <C> <C> <C> <C>
High 23.6 x 11.0 x 4.9 % 52 %
Low 9.5 2.6 0.8 23
Mean 14.6 4.9 2.1 35
Median 11.8 4.2 1.8 30
-------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 10
<PAGE>
II. Preliminary Valuation Analysis
- --------------------------------------------------------------------------------
Market Premium Analysis for Selected M&A Transactions
(dollars in millions)
<TABLE>
<CAPTION>
Premium over prior
Annc. Deal -----------------------------
Date Acquiror Target Value 1 day 1 week 4 weeks
---- ------------------------------- ----------------------------- -------- ----- ------ -------
<S> <C> <C> <C> <C> <C> <C>
8/99 TD Bank Financial Group CT Financial Services Inc. $5,303 (3) % (2) % (2) %
7/99 Banco Comercial Portugues S.A. Banco Pinto & Sotto Mayor S.A. 3,887 1 1 (7)
7/99 Piraeus Bank S.A. Ergobank S.A. 3,239 76 79 69
6/99 Zions Bancorp First Security Corp. 5,678 55 53 50
5/99 AmSouth Bancorp First American Corp. 6,328 30 31 33
5/99 HSBC Holdings plc Republic New York Corp. 7,703 3 20 30
2/99 Sun Life and Provincial GRE plc 5,692 42 42 42
11/98 Deutsche Bank AG Bankers Trust New York Corp. 9,082 58 79 37
7/98 SunTrust Banks Inc. Crestar Finl Corp. 9,603 31 40 56
7/98 Star Banc Corp. Firstar Corp. 7,218 45 44 34
4/98 Conseco Inc. Green Tree Financial Corp. 7,359 83 86 94
2/98 Banco de Santander S.A. Banesto 3,850 14 12 20
1/98 St Paul Companies Inc. USF&G Corp. 3,782 18 22 15
9/99 National Westminster Bank Legal & General 17,333 (2) 15 34
3/99 Prudential M&G Investment Management 2,933 40 46 52
11/97 Merrill Lynch & Co. Mercury Asset Management 5,077 32 32 23
12/93 Mellon Bank Corporation The Dreyfus Corporation 1,918 28 25 30
-------------------------------------------------
Mean 32 % 37 % 36 %
Median 31 32 34
High 83 86 94
Low (3) (2) (7)
-------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 11
<PAGE>
II. Preliminary Valuation Analysis
- --------------------------------------------------------------------------------
Summary Discounted Cash Flow Analysis
(dollars in millions)
<TABLE>
<CAPTION>
<S> <C> <C>
Stand-Alone Equity Value Stand-Alone Equity Value per Unit
----------------------------------------- -------------------------------------------
Range of Values $4,400 -- $5,000 $36.59 -- $41.58
----------------------------------------- -------------------------------------------
------------ -------------
Mean Value $4,700 $39.09
------------ -------------
<CAPTION>
Equity Value Assuming
Terminal Value of OPAD Equity Value per Unit
Discount ------------------------------------ ------------------------------------
Rate 9.0x 10.0x 11.0x 9.Ox 1O.Ox 11.Ox
---- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
12.0 % $4,750 $5,092 $5,434 $39.50 $42.34 $45.19
14.0 4,321 4,627 4,933 35.94 38.48 41.03
16.0 3,941 4,215 4,490 32.77 35.06 37.34
</TABLE>
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 12
<PAGE>
II. Preliminary Valuation Analysis
- --------------------------------------------------------------------------------
Summary Valuation Analysis
(dollars in millions; except per unit amounts)
<TABLE>
<CAPTION>
Judgmental Value Range
------------------------------------------------------
Unit Value Firm Value (a) Cash Flow Multiple (b)
------------------------ ----------------------- ---------------------------
Low High Low High Low High
-------- ---------- --------- -------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Peter Trading Price
Current $36.38 $4,462 14.8x
High (c) 31.40 3,864 12.8
Low (c) 26.90 3,323 11.0
Median (c) 29.40 3,623 12.0
Public Company Trading Range $27.00 $32.00 $3,309 $3,910 11.Ox 13.0x
Selected M&A Transactions $34.50 $41.75 $4,211 $5,114 14.Ox 17.0x
Takeover Premium (d) $38.50 $41.50 $4,718 $5,078 15.7x 16.9x
DCF Analysis $36.50 $41.50 $4,477 $5,078 14.9x 16.9x
</TABLE>
- ---------------
(a) Diluted shares outstanding: 120.2 million.
(b) LTM adjusted OPAD: $300.8 million.
(c) January 1, 1999 through July 5, 1999.
(d) Premium of 30% to 40% to price per share on July 5, 1999 ($29.69).
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 13
<PAGE>
II. Preliminary Valuation Analysis
- --------------------------------------------------------------------------------
Analysis at Various Prices
(dollars in millions; except Ier unit amounts)
<TABLE>
<CAPTION>
Price Per Unit
--------------------------------------------------------------------
$36.00 $37.00 $38.00 $39.00 $40.00 $41.00 $42.00
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Equity Value (a) $4,329 $4,449 $4,569 $4,690 $4,810 $4,930 $5,050
Firm Value (b) $4,417 $4,537 $4,657 $4,778 $4,898 $5,018 $5,138
<CAPTION>
Peter
Multiples of Firm Value: Statistic
------------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LTM Adj. OPAD $301 14.7 x 15.1 x 15.5 x 15.9 x 16.3 x 16.7 x 17.1 x
l999 Proj. OPAD 319 13.9 14.2 14.6 15.0 15.4 15.7 16.1
LTM Revenues 915 4.8 5.0 5.1 5.2 5.4 5.5 5.6
AUM ($bn) 255 1.7 % 1.8 % 1.8 % 1.9 % 1.9 % 2.0 % 2.0 %
<CAPTION>
Multiples of Earnings: (c)
----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LTM Net Income $166 26.1 x 26.8 x 27.5 x 28.3 x 29.0 x 29.7 x 30.4 x
1999E Net Income 177 24.5 25.2 25.8 26.5 27.2 27.9 28.6
<CAPTION>
Premium to Trading Value:
-------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Before Announcement $29.69 21 % 25 % 28 % 31 % 35 % 38 % 41 %
Current (d) 36.38 (1) 2 4 7 10 13 15
High (d) 31.40 15 18 21 24 27 31 34
Low (d) 26.90 34 38 41 45 49 52 56
</TABLE>
- ---------------
(a) Diluted shares outstanding: 120.2 mm. Options outstanding purchased for
"spread value."
(b) Includes OGI Note ($88 mm).
(c) Net income before goodwill amortization less taxes (assume 40% rate).
(d) January 1, 1999 through July 5, 1999.
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 14
<PAGE>
III. Analysis of Offer
- --------------------------------------------------------------------------------
Consideration Paid to Stakeholders
(dollars in millions; except per unit amounts)
<TABLE>
<CAPTION>
<S> <C> <C>
Based on consideration for Peter units and
ETAs: Consideration for Peter Units and ETAs:
---------------------------------------
Consideration for Units $2,494
Cash Consideration for ETAs 555
Adam stock for ETAs 106
-------
Total Consideration 3,155
Percentage Purchased 69 % (a)
-------
Implied Consideration for Units $4,569
=======
Per Unit $38.00
Multiple of 1999 Est. OPAD 14.6x (9)
Based on total consideration, including
Retention and Bonus Incentive arrangements: With Retention and Bonus Incentive:
----------------------------------
Total Consideration for Peter Units and ETAs $4,569
Retention Incentive Pool (b) 522
Bonus Impact - Europe (c) 38
-------
Total Consideration for PALP Units and ETAs $5,129
=======
Per Unit $42.66
Multiple of 1999 Est. OPAD 16.4x (f)
Adjusted for taxes and timing: Total Adjusted Consideration:
-----------------------------
Total Consideration $5,129
Tax & Timing Adjustments (d)
------------------------
ETAs (228)
Units (e) (442)
Retention and Bonus Incentive Pool (209)
Bonus Impact - Europe (15)
-------
Total Adjusted Consideration $4,236
=======
Per Unit $35.22
Multiple of 1999 Est. OPAD 13.6x (f)
</TABLE>
- ---------------
(a) Ownership percentage based on diluted shares outstanding using treasury
stock method.
(b) Assumes baseline performance. NPV at 10%.
(c) NPV (at 10% discount rate) of five years of bonus contributions (assumed
$10 mm/ year).
(d) Assumes a tax rate of 40% and 10% discount rate.
(e) Assumes no tax benefits for Paul Units.
(f) Firm value includes OGI Note ($88mm).
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 15
<PAGE>
III. Analysis of Offer
- --------------------------------------------------------------------------------
Adjusted Consideration
(dollars in millions; except per unit amounts)
<TABLE>
<CAPTION>
Nominal Consideration Less: Tax Adjusted Consideration
Units ---------------------- & Timing ----------------------
(000s) Total Per Unit Adjustments Total Per Unit
------- --------- ----------- ----------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Consideration for Units:
Peter Advisors Holdings 49,501 $1,881 $38.00 ($293) $1,588 $32.08 (e)
Peter Partners LLC 142 5 38.00 (1) 5 34.15
Private Units 3,696 140 38.00 (23) 118 31.82
Peter Holdings LLC (ETAs) 17,402 661 (a) 38.00 (210) 451 25.91
Other ETAs 1,445 55 38.00 (17) 37 25.91
Deferred Comp. Plan:
Vested 1,887 72 38.00 (12) 60 31.85
Unvested 894 34 38.00 (5) 28 31.85
Deferred Restricted Units:
Vested 101 4 38.00 (1) 3 31.85
Unvested 1,495 57 (h) 38.00 (12) 45 30.26
Deferred Units 2,093 80 (b) 38.00 (32) 47 22.63
Performance Units 201 8 (h) 38.00 (3) 5 22.63
Option, net 4,069 (c) 155 (d) 38.00 (61) 94 23.08
OGI Note 98 4 38.00 4 38.00
-------- ------ -------- -------
83,024 3,155 38.00 (670) 2,485 29.93
Paul 37,224 1,415 (f) 38.00 0 1,415 38.00
-------- ------ -------- -------
Total Consideration for Units 120,248 4,569 38.00 (670) 3,900 32.43
Retention and Bonus Incentive Pool 683 5.68 (370) 313 2.60
Bonus Impact - Europe 50 0.42 (27) 23 0.19
------ -------- -------
Total Consideration $5,303 $44.10 ($1,067) $4,236 $35.22
====== ======== =======
</TABLE>
---------------------------------------------------
(a) Includes cash ($555 mm) and Adam common stock ($106 mm).
(b) Agreement to pay on existing vesting schedule plus 8% per annum.
(c) Option shares calculated using treasury stock method. Average
strike price of $20.31 per unit.
(d) "Spread value" only.
(e) Includes basis impact from pro rata share of OG1 Note.
(f) Assumes purchase price of $38.00 with no tax benefits.
- -------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 16
<PAGE>
III. Analysis of Offer
- --------------------------------------------------------------------------------
Retention Pool Analysis
(dollars in millions)
<TABLE>
<CAPTION>
2000-2006
---------------------------------------------------------------------- ---------------------
2000 2001 2002 2003 2004 2005 2006 Total NPV @10%
------ ------ ------ ------ ------ ------ ------ --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Peter
-----
Senior MDs $78 $78 $78 $78 $78 $391 $296
Other Peter
Base Case
(15% Revenue Growth)
Fixed $21 $21 $21 $21 $21 $105 $80
Variable 0 0 9 9 9 $9 $9 45 28
---- ---- ---- ---- ---- ---- ---- ----- -----
Total $21 $21 $30 $30 $30 $9 $9 $150 $108
==== ==== ==== ==== ==== ==== ==== ===== =====
Maximum
(20%+ Revenue Growth)
Fixed $21 $21 $21 $21 $21 $105 $80
Variable 0 0 24 24 24 $24 $24 120 75
---- ---- ---- ---- ---- ---- ---- ----- -----
Total $21 $21 $45 $45 $45 $24 $24 $225 $155
==== ==== ==== ==== ==== ==== ==== ===== =====
Non-Peter:
----------
Base Case
(Baseline Revenue Growth)
Fixed $16 $14 $14 $8 $8 $62 $49
Variable 0 0 6 6 6 6 6 30 19
---- ---- ---- ---- ---- ---- ---- ----- -----
Total $16 $14 $20 $14 $14 $6 $6 $92 $67
==== ==== ==== ==== ==== ==== ==== ===== =====
Maximum Case
(133% of Baseline Revenue Growth)
Fixed $16 $14 $14 $8 $8 $62 $49
Variable 0 0 16 16 16 16 16 80 50
---- ---- ---- ---- ---- ---- ---- ----- -----
Total $16 $14 $30 $24 $24 $16 $16 $142 $99
==== ==== ==== ==== ==== ==== ==== ===== =====
</TABLE>
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 17
<PAGE>
IV. Proposed Equity Plan
- --------------------------------------------------------------------------------
Summary of Proposed Terms
. Adam will sell approximately 21.4% of Peter's equity in the form of
limited partnership units (Units) to Peter MDs over the next five
years. Peter's Compensation Committee will determine the allocation of
equity among eligible employees.
. Peter's bonus pool will be reduced by 15% over the next five years
(from 45% to 30%):
-- 4% in year 1
-- 3 1/2% in year 2
-- 3% in year 3
-- 2 1/2% in year 4
-- 2% in year 5
. Plan participants will purchase Units at Fair Market Value (FMV)
reflecting a private market discount for illiquidity, transfer
restrictions, etc. FMV will be 6.Ox the trailing twelve month's OPAD,
giving effect to the reduced bonus pool (but not transaction-related
charges, e.g., goodwill, retention bonus payments, etc).
. Plan participants will pay for Units with a full recourse 7% Note
payable over five years (straight-line amortization). The base
compensation of the participant will be increased in an amount equal
to annual principal amortization and interest on the Note.
Participants will pay income tax on the increased compensation but
also receive regular distributions on the Units purchased.
-- The increased compensation will not be charged against earnings for
purposes of the bonus pool or the purchase price of Units
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 18
<PAGE>
IV. Proposed Equity Plan
- --------------------------------------------------------------------------------
Summary of Proposed Terms (Cont'd)
. Peter will have the right to repurchase Units corresponding to the
unpaid principal balance of the Note upon the participant's departure
from Peter for any reason, by canceling the Note. These Units would be
resold to other eligible employees at FMV and financed by a newly
issued Note.
. Units which are not restricted by the Note (a pro rata number of Units
-- 1/5 per year following purchase -- are "released" as the Note
amortizes) may be sold by the participant, subject to limitations:
-- While an active employee: Units may be sold only to other plan
participants during an annual "window period" at privately
negotiated prices
-- Upon termination of employment: Until the second anniversary of
departure Units may only be sold to Adam or plan participants who
are actively employed, as described above. After this period Units
may be sold in privately negotiated transactions to any accredited
investor.
. Adam will have a call option on Units. The call is exercisable at the
first, second and third anniversary of a plan participant's
termination of employment. The call is transferable in any sale to an
active employee but not to an unrelated private investor. The call
price will be equal to a multiple of the trailing twelve month's OPAD
which will vary depending upon Peter's weighted average 1-year and
3-year investment performance:
-- First quartile: 14.0x
-- Second/third quartile: 12.0x
-- Fourth quartile: 10.0x
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 19
<PAGE>
IV. Proposed Equity Plan
- --------------------------------------------------------------------------------
Summary of Proposed Terms (Cont'd)
. Plan participants will have a put option to Adam. The put is
exercisable at the first, second and third anniversary of a plan
participant's termination of employment. The put is transferable in
any sale to another active employee but not to an unrelated private
investor. The put price will be equal to a multiple of the trailing
twelve month's OPAD which will vary depending upon Peter's weighted
average 1-year and 3-year investment performance:
-- First quartile: 12.0x
-- Second/third quartile: 10.0x
-- Fourth quartile: 8.0x
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 20
<PAGE>
IV. Proposed Equity Plan
- --------------------------------------------------------------------------------
Equity Cash Flows
(dollars in millions)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
1999 2000 2001 2002 2003 2004 2005 2006 2007
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Data:
- ---------------
Pre-Bonus Operating Income $347 $396 $435 $479 $526 $579 $637 $701 $771
-----
Period Growth -- 14 % 10 % 10 % 10 % 10 % 10 % 10 % 10 %
-----
Bonus Pool:
- -----------
Bonus Pool 45.0 % 41.0 % 37.5 % 34.5 % 32.0 % 30.0 % 30.0 % 30.0 % 30.0 %
Bonus Pool Reduction (%) 4.0 3.5 3.0 2.5 2.0
Cumulative Bonus Pool
Reduction(%) 4.0 7.5 10.5 13.0 15.0 15.0 15.0 15.0
Current Bonus Pool $178 $196 $215 $237 $261 $287 $315 $347
Revised Bonus Pool 162 163 165 168 174 191 210 231
----- ------ ----- ----- ----- ----- ----- -------
Bonus Pool Reduction $16 $33 $50 $68 $87 $96 $105 $116
----- ------ ----- ----- ----- ----- ----- -------
Pro Forma Operating Income $191 $233 $272 $313 $358 $405 $446 $490 $540
Equity Purchase:
- ----------------
Purchase Price 6.0x $78 $73 $66 $58 $50
Units Owned, BOP 0.0 6.8 12.0 16.0 19.1 21.4 21.4 14.6
Total Units Purchased 6.8 5.2 4.0 3.1 2.3
Units Forfeited 0.0 0.0 0.0 0.0
----- ------ ----- ----- ----- ----- ----- -------
Units Owned, BOP, Adjusted 6.8 12.0 16.0 19.1 21.4 21.4 21.4 14.6
----- ------ ----- ----- ----- ----- ----- -------
Units Sold (6.8) (5.2)
----- ------ ----- ----- ----- ----- ----- -------
Units Owned, EOP 6.8 12.0 16.0 19.1 21.4 21.4 14.6 9.4
===== ====== ===== ===== ===== ===== ===== =======
Units Released, EOP 1.4 3.8 7.0 10.8 15.1 18.0 13.1 9.0
Total Units Outstanding 100.0
Pro Forma Ownership 6.8 % 12.0 % 16.0 % 19.1 % 21.4 % 21.4 % 21.4 % 14.6 %
Unencumbered Ownership 1.4 3.8 7.0 10.8 15.1 18.0 19.9 14.2
<CAPTION>
Exit Multiple 12.0x
Income Growth 10 %
Tenure (years) 11
Amort. Period 5
--------------------------------
2008 2009 2010
--------- ---------- ---------
<S> <C> <C> <C>
Operating Data:
- ---------------
Pre-Bonus Operating Income $848 $933 $1,026
Period Growth 10 % 10 % 10 %
Bonus Pool:
- -----------
Bonus Pool 30.0 % 30.0 % 30.0 %
Bonus Pool Reduction (%)
Cumulative Bonus Pool 15.0 15.0 15.0
Reduction(%) $382 $420 $462
Current Bonus Pool
Revised Bonus Pool 254 280 308
--------- ---------- ---------
Bonus Pool Reduction $127 $140 $154
========= ========== =========
Pro Forma Operating Income $593 $653 $718
Equity Purchase:
- ----------------
Purchase Price 6.0
Units Owned, BOP 9.4 5.4 2.3
Total Units Purchased
Units Forfeited 0.0 0.0 0.0
--------- ---------- --------
Units Owned, BOP, Adjusted 9.4 5.4 2.3
Units Sold (4.0) (3.1) (2.3)
--------- ---------- --------
Units Owned, EOP 5.4 2.3 0.0
========= ========== ========
Units Released, EOP 5.4 2.3 0.0
Total Units Outstanding
Pro Forma Ownership 9.4 % 5.4 % 2.3 %
Unencumbered Ownership 9.4 5.4 2.3
</TABLE>
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 21
<PAGE>
IV. Proposed Equity Plan
- --------------------------------------------------------------------------------
Equity Cash Flows
(dollars in millions)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
2000 2001 2002 2003 2004 2005 2006 2007
------ -------- --------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Impact on Holder:
- -----------------
Equity Distribution $16 $33 $50 $68 $87 $96 $105 $79
Plus: Increased Compensation 20 39 54 66 75 56 38 23
Less: Interest Expense (5) (8) (10) (11) (10) (6) (3) (1)
------ -------- --------- -------- -------- -------- --------- ---------
Taxable Income 31 63 94 123 152 145 140 101
Less: Income Tax @ 50% (16) (31) (47) (62) (76) (72) (70) (50)
Less: Amortization (16) (30) (43) (55) (65) (49) (35) (22)
------ -------- --------- -------- -------- -------- --------- ---------
Net Cash Flow $0 $1 $3 $7 $11 $23 $35 $29
====== ======== ========= ======== ======== ======== ========= =========
Equity Valuation 12.Ox $399 $338
Less: Capital Gains Tax @ 22% (71) (58)
--------- ---------
Net Proceeds $328 $280
========= =========
Memo: Capital Gain $321 $265
Foregone Bonus $16 $33 $50 $68 $87 $96 $105 $116
Incremental Bonus (Not Reduced) $44 $33 $22 $11 $0 $0 $0 $0
Less: Income Tax @ 50% (22) (16) (11) (5) 0 0 0 0
------ -------- --------- -------- -------- -------- --------- ---------
Incremental Bonus (Not Reduced) $22 $16 $11 $5 $0 $0 $0 $0
====== ======== ========= ======== ======== ======== ========= =========
Total NPV @ 12%
----- ---------
Gross Proceeds (p/t) $1,891 $782 $44 $35 $28 $24 $22 $46 $469 $395
1999 Bonus Multiple (p/t) 15.0x
Gross Proceeds (alt) $1,427 $573 $22 $18 $14 $12 $11 $23 $364 $308
1999 Bonus Multiple (a/t) 22.0x
Net Proceeds (a/t) 877 $307 (8) (15) (22) (27) (32) (25) 311 251
IRR (a/t) 56.4 %
<CAPTION>
Exit Multiple 12.0x
Income Growth 10 %
Tenure (years) 11
Amort. Period 5
-----------------------------
2008 2009 2010
------- ------- -------
<S> <C> <C> <C>
Impact on Holder:
- -----------------
Equity Distribution $56 $35 $17
Plus: Increased Compensation 10 0 0
Less: Interest Expense (0) 0 0
------- ------- -------
Taxable Income 66 35 17
Less: Income Tax @ 50% (33) (18) (8)
Less: Amortization (10) 0 0
------- ------- -------
Net Cash Flow $23 $18 $8
======= ======= =======
Equity Valuation 12.Ox $287 $242 $199
Less: Capital Gains Tax @ 22% (49) (40) (33)
------- ------- -------
Net Proceeds $238 $201 $166
======= ======= =======
Memo: Capital Gain $221 $184 $150
Foregone Bonus $127 $140 $154
Incremental Bonus (Not Reduced) $0 $0 $0
Less: Income Tax @ 50% 0 0 0
------- ------- -------
Incremental Bonus (Not Reduced) $0 $0 $0
======= ======= =======
Gross Proceeds (p/t) $333 $277 $216
1999 Bonus Multiple (p/t)
Gross Proceeds (alt) $261 $219 $l75
1999 Bonus Multiple (a/t)
Net Proceeds (a/t) 198 149 98
IRR (a/t)
</TABLE>
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 22
<PAGE>
IV. Proposed Equity Plan
- --------------------------------------------------------------------------------
Summary Financial Analysis -- 12x Exit Multiple
(dollars in millions)
<TABLE>
<CAPTION>
Key Assumptions:
Amortization Period 5 yrs.
Discount Rate 12 %
Tenure Tenure
---------------------------------- ---------------------------------
5 7 11 5 7 11
----- ----- ----- ----- ----- -----
Gross PV Income Multiple
(After tax) (After tax)
Operating Income
<S> <C> <C> <C> <C> <C> <C>
0% Growth $245 $290 $302 9.4x 1l.2x 1l.6x
5% Growth 326 398 417 12.6 15.3 16.1
10% Growth 433 541 573 16.7 20.8 22.0
15% Growth 571 731 781 22.0 28.1 30.0
20% Growth 749 980 1,057 28.8 37.7 40.6
<CAPTION>
Net PV IRR
(After tax) (After tax)
Operating Income
<S> <C> <C> <C> <C> <C> <C>
0% Growth $138 $155 $125 43.8% 41.9% 38.3%
5% Growth 209 244 202 52.7% 51.0% 47.3%
10% Growth 305 366 307 61.8% 60.2% 56.4%
15% Growth 431 530 448 71.0% 69.4% 65.6%
20% Growth 596 750 635 80.3% 78.8% 74.8%
</TABLE>
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 23
<PAGE>
IV. Proposed Equity Plan
- --------------------------------------------------------------------------------
Gross and Net Present Value Comparison -- 12x Exit Multiple
(dollars in millions)
Gross PV Net PV
[GRAPH] [GRAPH]
5 Year Tenure
7 Year Tenure
11 Year Tenure
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 24
<PAGE>
IV. Proposed Equity Plan
- --------------------------------------------------------------------------------
Summary Financial Analysis - lOx Exit Multiple
(dollars in millions)
<TABLE>
<CAPTION>
Key Assumptions:
Amortization Period 5 yrs.
Discount Rate 12 %
Tenure Tenure
---------------------------------- ----------------------------------
5 7 11 5 7 11
----- ----- ----- ----- ----- -----
Gross PV Income Multiple
(Alter tax) (After tax)
Operating Income
<S> <C> <C> <C> <C> <C> <C>
0% Growth $218 $256 $266 8.4x 9.9x 10.2x
5% Growth 289 350 366 11.1 13.5 14.1
10% Growth 382 474 501 14.7 18.2 19.3
15% Growth 501 638 680 19.3 24.5 26.2
20% Growth 655 853 918 25.2 32.8 35.3
<CAPTION>
Net PV IRR
(After tax) (After tax)
Operating Income
<S> <C> <C> <C> <C> <C> <C>
0% Growth $111 $121 $90 39.5% 37.2% 32.7%
5% Growth 172 196 151 48.2% 45.9% 41.4%
10% Growth 254 298 234 57.0% 54.8% 50.1%
15% Growth 361 437 347 66.0% 63.8% 59.0%
20% Growth 502 623 496 75.0% 72.9% 68.0%
</TABLE>
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 25
<PAGE>
IV. Proposed Equity Plan
- --------------------------------------------------------------------------------
Summary Financial Analysis -- 14x Exit Multiple
(dollars in millions)
<TABLE>
<CAPTION>
Key Assumptions:
Amortization Period 5 yrs.
Discount Rate 12 %
Tenure Tenure
---------------------------------- ----------------------------------
5 7 11 5 7 11
------ ------ ------ ------ ------ -----
Gross PV Income Multiple
(After tax) (After tax)
<S> <C> <C> <C> <C> <C> <C>
Operating Income
0% Growth $271 $324 $337 10.4x 12.5x 13.Ox
5% Growth 364 446 469 14.0 17.1 18.0
10% Growth 484 609 645 18.6 23.4 24.8
15% Growth 641 824 882 24.7 31.7 33.9
20% Growth 843 1,108 1,196 32.4 42.6 46.0
<CAPTION>
Net PV IRR
(After tax) (After tax)
<S> <C> <C> <C> <C> <C> <C>
Operating Income
0% Growth $164 $188 $161 47.5% 46.0% 43.1%
5% Growth 247 292 253 56.8% 55.4% 52.4%
10% Growth 356 433 379 66.1% 64.9% 61.8%
15% Growth 501 623 548 75.5% 74.4% 71.2%
20% Growth 690 878 775 85.0% 83.9% 80.7%
</TABLE>
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 26
<PAGE>
V. Incremental Fixed Income Assets
- --------------------------------------------------------------------------------
Fixed Income Assets Under Management
(dollars in billions)
<TABLE>
<CAPTION>
----------------------------------------------------------- CAGR
1999 (a) 2000 2001 2002 99-02
-------- -------- -------- -------- --------
German Insurance Assets:
<S> <C> <C> <C> <C> <C>
Life Assets $ 73,689 $ 78,847 $ 84,367 $ 90,272 7 %
P&CAssets 12,166 13,018 13,929 14,904 7
Euroland Funds 7,598 8,130 8,699 9,308 7
Europe Funds 3,038 3,251 3,478 3,722 7
----------- ----------- ----------- -----------
Total Insurance Assets 96,491 103,245 110,473 118,206 7
----------- ----------- ----------- -----------
% of Total AUM 81 % 79 % 75 % 71 %
Third-Party Retail:
Germany 3,840 5,091 7,197 9,828 37
Europe(Ex. Germany) 12,100 13,310 15,573 19,154 17
----------- ----------- ----------- -----------
Total Retail 15,940 18,401 22,770 28,983 22
----------- ----------- ----------- -----------
% of TotaI AUM 13 % 14 % 15 % 17 %
Third-Party Institutional:
Germany 1,860 3,130 6,139 9,249 71
Europe (Ex. Germany) 5,500 6,435 7,658 9,342 19
----------- ----------- ----------- -----------
Total Institutional 7,360 9,565 13,797 18,591 36
----------- ----------- ----------- -----------
% of Total AUM 6 % 7 % 9 % 11 %
Total AUM $119,791 $131,212 $147,039 $165,780 11 %
Period Growth -- 10 % 12 % 13 %
</TABLE>
(a) As of June 30, 1999.
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 27
<PAGE>
V. Incremental Fixed Income Assets
- --------------------------------------------------------------------------------
Insurance Assets
(dollars in millions)
<TABLE>
<CAPTION>
2000 2001 2002
------------------ ------------------ ------------------
Low high Low High Low High
------- -------- ------- --------- ------- ---------
Base Fees:
<S> <C> <C> <C> <C> <C> <C>
Life/P&C Assets $18.4 $18.4 $19.7 $19.7 $21.0 $21.0
Euro Funds 5.7 5.7 6.1 6.1 6.5 6.5
------- -------- ------- --------- ------- ---------
Total Base Fees 24.1 24.1 25.7 25.7 27.5 27.5
------- -------- ------- --------- ------- ---------
Performance Fees:
Life Assets 0.0 0.0 0.0 0.0 0.0 0.0
P&C Assets 1.0 5.9 1.0 6.3 1.1 6.7
Euroland Funds 0.6 3.7 0.7 3.9 0.7 4.2
Europe Funds 0.2 1.5 0.3 1.6 0.3 1.7
------- -------- ------- --------- ------- ---------
Total Performance 1.8 11.0 2.0 11.7 2.1 12.6
------- -------- ------- --------- ------- ---------
Total Revenues 25.9 35.0 27.7 37.5 29.6 40.1
Expenses:
Adam Expenses 19.2 19.2 20.6 20.6 22.0 22.0
Peter Expenses 4.2 4.2 6.2 6.2 6.2 6.2
Adam Reimbursement (a) (8.9) (4.8) (9.6) (5.2) 0.0 0.0
------- -------- ------- --------- ------- ---------
Total Expenses 14.5 18.6 17.2 21.6 28.2 28.2
------- -------- ------- --------- ------- ---------
Insurance Income $11.4 $16.4 $10.5 $15.9 $1.4 $11.9
======= ======== ======= ========= ======= =========
</TABLE>
(a) Assume 45% bonus pool.
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 28
<PAGE>
V. Incremental Fixed Income Assets
- --------------------------------------------------------------------------------
Summary Contribution to Peter
(dollars in millions)
<TABLE>
<CAPTION>
2000 2001 2002
----------------- ------------------ ------------------
Low High Low High Low High
------ ------ ----- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Insurance:
Revenues $25.9 $35.0 $27.7 $37.5 $29.6 $40.1
Adam Expenses (19.2) (19.2) (20.6) (20.6) (22.0) (22.0)
Peter Expenses (4.2) (4.2) (6.2) (6.2) (6.2) (6.2)
Reimbursement (a) 8.9 4.8 9.6 5.2 0.0 0.0
------ ------ ------ ------ ------ ------
Contribution 11.4 16.4 10.5 15.9 1.4 11.9
------ ------ ------ ------ ------ ------
Retail:
Revenues 13.5 13.5 18.9 18.9 27.5 27.5
Peter Expenses (0.9) (0.9) (1.4) (1.4) (1.6) (1.6)
------ ------ ------ ------ ------ ------
Contribution 12.6 12.6 17.5 17.5 25.9 25.9
------ ------ ------ ------ ------ ------
Institutional:
Revenues 12.4 12.4 21.1 21.1 31.6 31.6
Adam Expenses (12.4) (12.4) (12.9) (12.9) (13.4) (13.4)
Peter Expenses (2.3) (2.3) (3.8) (3.8) (4.2) (4.2)
Reimbursement 0.1 0.1 0.0 0.0 0.0 0.0
------ ------ ------ ------ ------ ------
Contribution (2.2) (2.2) 4.4 4.4 14.0 14.0
------ ------ ------ ------ ------ ------
Total Income $21.7 $26.8 $32.5 $37.8 $41.3 $51.8
Contribution to Bonus Pool:
45% Bonus Pool $14.7 $14.7 $19.9 $19.9 $18.6 $23.3
30% Bonus Pool 13.1 13.1 16.6 16.6 12.4 15.5
</TABLE>
(a) Assume 45% bonus pool.
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 29
<PAGE>
VI. Appendix
- --------------------------------------------------------------------------------
Third-Party Institutional Assets (Germany)
(dollars in millions)
Peter will have P&L responsibility for Institutional assets
in Germany. Adam will fund any initial losses but not the
incremental Peter expenses.
--------------------------------- CAGR
2000 2001 2002 00-02
------- ------- ------- -----
AUM:
Existing $1,990 $2,130 $2,279 7 %
New 1,140 4,010 6,971 147
------- ------- -------
Total $3,130 $6,139 $9,249 71
======= ======= =======
Management Fees:
Existing 18.0 bps 18.0 bps 18.0 bps
New 21.0 24.0 26.0
Management Revenues:
Existing $3.6 $3.8 $4.1
New 2.4 9.6 18.1
------- ------- -------
Total Revenues 6.0 13.5 22.2
------- ------- -------
Adam Expenses 5.9 6.1 6.3
Income $0.1 $7.4 $15.9
AZ Subsidy 0.0 0.0 0.0
Peter Expenses (0.8) (1.8) (2.1)
------- ------- -------
Income to Peter ($0.7) $5.6 $13.8
======= ======= =======
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 30
<PAGE>
VI. Appendix
- --------------------------------------------------------------------------------
Third-Party Institutional Assets (Europe)
(dollars in millions)
Peter will also have P&L responsibility for Institutional assets outside
of Germany. Adam will fund any initial losses but not the incremental
Peter expenses.
---------------------------------------- CAGR
2000 2001 2002 00-02
------- ------- ------- -----
AUM $6,435 $7,658 $9,342 19 %
Management Fees: 10.0 bps 10.0 bps 10.0 bps
Revenues $6.4 $7.7 $9.3
Adam Expenses 6.5 6.8 7.1
Income ($0.1) $0.9 $2.2
AZ Subsidy 0.1 0.0 0.0
Peter Expenses (1.5) (2.0) (2.1)
------- ------- -------
Income to Peter ($1.5) (1.1) $0.1
======= ======= =======
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 31
<PAGE>
VI. Appendix
- --------------------------------------------------------------------------------
Third-Party Retail Assets (Germany)
(dollars in millions)
For Retail assets in Germany, Peter will provide a model
portfrlio and receive 30% of the total management revenues.
---------------------------------- CAGR
2000 2001 2002 00-02
------- ------- ------- --------
AUM:
Existing $4,109 $4,396 $4,704 7.0 %
New 983 2,801 5,124 128.4
------- ------- -------
Total $5,091 $7,197 $9,828 38.9
======= ======= =======
Management Fees:
Existing 40.0 bps 40.0 bps 40.0 bps
New 65.0 70.0 80.0
Management Revenues:
Existing 16.4 17.6 18.8
New 6.4 19.6 41.0
------- ------- -------
Total 22.8 37.2 59.8
------- ------- -------
Peter Revenue Share 6.8 11.2 17.9
Peter Expenses (0.3) (0.5) (0.6)
------- ------- -------
Income to Peter $6.5 $10.7 $17.3
======= ======= =======
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 32
<PAGE>
VI. Appendix
- --------------------------------------------------------------------------------
Third-Party Retail Assets (Europe)
(dollars in millions)
For Retail assets outside of Germany, Peter will provide a
model portfolio and receive a subadvisory fee of 5 bps.
----------------------------------- CAGR
2000 2001 2002 00-02
-------- -------- -------- ------
AUM: $13,310 $15,573 $19,154 20.0 %
Management Fees:
Management Fees 105.0 bps 100.0 bps 90.0 bps
Subadvisory Fee 5.0 5.0 5.0
Management Revenues:
Management Fees $139.8 $155.7 $172.4
Subadvisory Fee 6.7 7.8 9.6
Peter Expenses (0.6) (0.9) (1.0)
-------- -------- --------
Income to Peter $6.1 $6.9 $8.6
======== ======== ========
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 33
<PAGE>
Exhibit 99 (b)(6)
Summary of
Final Documents
Project Apostle
Executive Summary
29 October 1999
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Confidential
<PAGE>
Executive Summary
- --------------------------------------------------------------------------------
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
I. Acquisition Transaction.............................................. 1
II. Retention Payments................................................... 8
III. Governance........................................................... 12
IV. PIMCO Profit Sharing and Unit Purchase Plans......................... 15
V. Allianz Fixed Income Assets.......................................... 18
</TABLE>
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Confidential
<PAGE>
Executive Summary
- --------------------------------------------------------------------------------
I. Acquisition Transaction
A. Overview
Through a series of related transactions, Allianz will acquire
approximately 69% of the outstanding units of PIMCO Advisors LP (PALP),
including all of the units held by PIMCO Advisors Holdings (PAH), and
become the Managing General Partner of PIMCO Partners GP (Partners GP).
Pacific Life will exchange approximately 31% of the Class A units for Class
E units and enter into put/call arrangements with Allianz for the future
disposition of its remaining economic interest.
B. Public Units of PIMCO Advisors Holdings LP
Subject to approval of the PAH unitholders, an Allianz subsidiary will
merge into PAH with PAH as the surviving entity. All of the PAH units will
be converted into cash at the Unit Price (described below), and PAH units
will cease to be publicly traded.
C. Employment Termination Agreements
An Allianz subsidiary will offer to amend all of the outstanding employment
termination agreements (ETAs) entered into in November 1994. The amendment
will provide for (i) payment to the ETA holder of an amount equal to the
Unit Price multiplied by the number of PALP units underlying his ETA (the
ETA Payment), (ii) continuation of his covenant not to compete for the
current term, but not more than five years from closing, and (iii)
repayment of the ETA Payment if he violates his covenant not to compete
during its term.
With respect to the Cadence, NFJ and Parametric ETAs, approximately $16 per
unit of each ETA Payment will be paid in cash directly to the ETA holder,
and the balance will be paid in cash as the purchase price of his LP
interest in Cadence Partners LP, NFJ Partners LP or Parametric Partners LP,
as the case may be. The amendment will reference the sale of his LP
interest to support the covenant not to compete.
With respect to the Pacific Investment Management Company (PIMCO) ETAs, the
ETA Payments will be paid directly to the ETA holders. The active PIMCO MDs
will receive 16% of their ETA Payments in stock of Allianz AG, valued at
$273.99 per share, and the balance will be paid in cash. Other PIMCO MDs
will receive their ETA Payments in cash.
PALP units underlying the ETAs of Edington and Rabinovich (collectively the
Former MDs) will be exchanged for PALP Class B units in the PALP merger
(described below). The Class B units will have a liquidation preference of
the Unit Price, and a preferred distribution of 7.5% of the Unit Price per
annum, payable quarterly. The Class B units will be redeemed by PALP at
the request of the Former MDs after five years from the Closing and will be
redeemable by PALP after ten years from the Closing at the liquidation
preference. At any time between Closing and the expiration of their
original ETA noncompete covenants, the Former MDs may deliver an ETA
Amendment
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 1
<PAGE>
Executive Summary
- --------------------------------------------------------------------------------
I. Acquisition Transaction (Cont'd)
substantially in the form of that signed by the other PIMCO MDs at Closing
and receive the liquidation preference. Under this option, the original
ETA noncompete covenant will survive through the expiration of the original
ETA noncompete term.
D. PALP Merger
An Allianz sub will merge into PALP with PALP as the surviving entity.
Except for the units held by Allianz and Pacific Life and their respective
affiliates, all of the PALP Class A units will be converted into cash at
the Unit Price.
E. Unit Options and Deferred Units
Options on units will be converted into the right to receive cash in an
amount equal to the difference between the Unit Price and the exercise
price, plus interest at 8% per annum from the closing date, with payment
expected to be approximately 100 days following closing.
Deferred units will be converted into the right to receive cash equal to
the Unit Price plus interest at 8% per annum from the closing date, payable
as deferred units vest on the original vesting schedule.
F. Executive Deferred Compensation Plan
Deferred compensation units and vested deferred restricted units will be
exchanged for cash equal to the Unit Price.
Unvested deferred restricted units will be converted into the right to
receive cash equal to the Unit Price plus interest at 8% per annum from the
closing date, payable as units vest on the original vesting schedule.
Assets held by the Plan Trustee will be maintained in accounts for which
investments will be individually directed by each participant.
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 2
<PAGE>
Executive Summary
- -----------------------------------------------------------------------------
I. Acquisition Transaction (Cont'd)
G. PIMCO ETAs
The PIMCO MDs who accept Allianz's offer to amend their ETAs will receive
the following ETA Payments:
<TABLE>
<CAPTION>
ETA Consideration
-----------------------------------------------
ETA AZ Shares (a)
-----------------
Individual Units Total Cash Shares Total
---------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Gross 6.281 $243.4 $189.1 0.198 $ 54.3
Muzzy 1.942 75.2 58.5 0.061 16.8
Hague 1.067 41.3 32.1 0.034 9.2
Harris 1.067 41.3 32.1 0.034 9.2
Powers 1.067 41.3 32.1 0.034 9.2
Thompson 1.067 41.3 32.1 0.034 9.2
Meiling 1.586 61.5 61.5
Podlich 1.501 58.1 58.1
Edington 0.656 25.4 25.4 (b)
Rabinovich 1.170 45.4 45.4 (b)
------ ------ ------ ------ ------
Total 17.402 $674.3 $566.4 0.394 $107.9
====== ====== ====== ====== ======
</TABLE>
_________________
(a) Assumes a share price of $273.99, based upon the 30-business
day average price ending October 5, 1999.
(b) Edington and Rabinovich will receive PALP Class B units.
H. Purchase of GP Interest in Partners GP
Prior to closing, Allianz will acquire the GP interest in Partners GP held
by Partners LLC for a nominal price in cash. Allianz would thereby become
the managing partner of Partners GP.
I. Pacific Life
As part of the transaction, Pacific Life will exchange all of its Class A
units for Class E units. These preferred units will have a distribution
equal to $1.05 per unit plus 20% of PIMCO's pre-bonus profits, calculated
in accordance with the Profit Sharing Plan, but excluding the effects of
(i) performance fees on the management of Allianz insurance assets, (ii)
provision of subadvisory services to European retail assets sourced through
Allianz, and (iii) the subsidy, if any, to the PIMCO bonus pool in 2001 and
2002.
Allianz and Pacific Life will enter into a put/call arrangement for the
eventual disposition of the Class E units. At the end of any calendar
quarter, Pacific Life may put any or all of the Class E units at a price
equal to (i) 14 multiplied by (ii) the distribution per unit paid during
the four preceding calendar quarters (excluding Stocks-Plus performance
fees) (Per Unit Purchase Price). The Per Unit Purchase Price will not be
greater than $60 per unit.
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 3
<PAGE>
Executive Summary
- ------------------------------------------------------------------------------
I. Acquisition Transaction (Cont'd)
At the end of any calendar quarter beginning December 31,2002, if the Per
Unit Purchase Price is greater than $50, Allianz may call the Class E units
at the Per Unit Purchase Price. At the end of any calendar year after a
Change of Control occurs, Allianz may call the Class E units at the higher
of the Unit Price or the Per Unit Purchase Price.
J. "Unit Price"
The Unit Price will be equal to $38.75 per unit, provided, if the Revenue
Run-Rate on the Unit Price Determination Date (the month end prior to
closing) is less than 85% of the Revenue Run-Rate on September 30, 1999,
the Unit Price will be reduced by 2% for each 1% below 85%, subject to a
maximum reduction of 20%. For example:
Revenue Unit %
Run-Rate Price Reduction
----------- ------ ---------
85% or more $38.75 0%
80% 34.88 10%
75% or less 31.00 20%
The Revenue Run-Rate is based upon annualized fees under all Advisory
Agreements, excluding performance fees. Changes in the Revenue Run-Rate
will result from net cash flows (including new accounts, account
terminations, additions, withdrawals, distributions and reinvested income)
since the definition excludes the impact of market fluctuations.
- -------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 4
<PAGE>
Executive Summary
- --------------------------------------------------------------------------------
I. Acquisition Transaction (Cont'd)
K. Summary of Other Key Provisions of the Implementation and Merger
Agreement
. Representations and Warranties - The Pacific Life parties and
Partners LLC will make various representations and warranties,
including authorization to enter into the transaction, the accuracy
and completeness of disclosed information and the absence of any
material adverse change in the business. It is a condition to
Allianz' obligation to close that these representations and
warranties, as qualified, be true as of the signing of the
definitive agreement and as of the closing.
. Covenants - The Sellers will be required to conduct business in the
ordinary course between signing and closing, with explicit
limitations on permissible changes in capital structure, dividends,
contractual obligations, etc.
The Sellers also agree not to solicit any competing acquisition
proposals, but will have a "fiduciary out" to consider bona fide
unsolicited offers. If a competing proposal is accepted and the
Allianz transaction is terminated, PALP will pay a $180 million
breakup fee to Allianz.
Negative consents will be sought for the assignment of each
advisory contract and proxies will be solicited for each Investment
Company (the cost of proxy solicitations for Funds and PAH
unitholders will be borne equally by PALP and Allianz). Sellers
will use commercially reasonable efforts to dispose of PIMCO Trust
Co. and Columbus Circle Trust Company and will cooperate with
Allianz in trying to obtain a revocation of the autonomy of Cadence
and Parametric.
. Conditions - Includes the usual closing conditions relating to
absence of a material adverse change (excluding any reduction in
the Revenue Run-Rate), receipt of government approvals, PAH
unitholder approval, absence of injunctions and accuracy of reps
and warranties. Gross and Thompson shall have entered into
Employment Agreements and at least 60% of the active Managing
Directors (other than Gross and Thompson) as of signing shall be
employees as of closing. In addition, as of the Determination Date,
the Revenue Run-Rate shall not be less than 75% of the Revenue Run-
Rate as of September 30, 1999. Other conditions relate to the
Continuing Investment Agreement with Pacific Life and the
Indemnification Agreement.
. Termination - Either party may terminate if the closing has not
occurred by September 30, 2000. Allianz may terminate if the
Revenue Run-Rate is less than 75% of the Revenue Run-Rate on
September 30, 1999 for at least two consecutive calendar months.
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 5
<PAGE>
Executive Summary
- --------------------------------------------------------------------------------
I. Acquisition Transaction (Cont'd)
. Indemnification - Pacific Life and the PIMCO MDs will indemnify
Allianz for Losses resulting from breaches of representations,
warranties and covenants under the Implementation and Merger
Agreement. The representations and warranties will survive until
the later of March 31, 2001 and the first annual audited financial
statement of Advisors LP. However, the representations and
warranties relating to taxes will survive until the expiration of
the relevant statutory periods.
A Covered Loss is a single claim which exceeds $5 million. The
first $25 million of losses to Allianz (after insurance proceeds)
resulting from Covered Losses (Allianz Losses) are not subject to
indemnification. Allianz Losses in excess of $25 million
(Indemnified Losses) will be allocated to Pacific Life and the
PIMCO MDs in proportion to the PALP units beneficially owned by
each of them just prior to closing, as a percentage of outstanding
PALP units just prior to closing, regardless of fault.
The PIMCO MDs will not indemnify Allianz for any Loss arising out
of Cadence, NFJ or Parametric.
Indemnification by PIMCO MDs will be capped at one-third of the
Unit Price times the PALP units beneficially owned by them just
prior to closing. Amounts payable under the PIMCO Retention Plan to
the PIMCO MDs will be reduced by Indemnified Losses allocated to
the PIMCO MDs, and if such reductions are not sufficient, amounts
payable as the result of puts and calls under the Class B Unit
Purchase Plan will then be reduced. No action will be brought
against any MD personally. Any reduction to cover an Indemnified
Loss not finally confirmed as such will be promptly paid to the
PIMCO MDs with interest at 8%.
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 6
<PAGE>
Executive Summary
- -------------------------------------------------------------------------------
I. Acquisition Transaction (Cont'd)
L. Financial Summary
($ in millions)
Units (a) Total
(000s) Consideration
---------- -------------
Units Acquired:
PIMCO Advisors Holdings 49,559 $ 1,920
PIMCO Partners LLC 142 6
PALP Private Units 3,697 143
PIMCO Holding LLC (ETAs) 17,402 674 (b)
Other ETAs 1,445 56
Deferred Comp. Plan:
Vested 2,132 83
Unvested 856 33
Def. Restricted Units (Unvested) 1,518 59
Deferred Units 2,544 99
Options, net 4,085 (c) 158 (d)
OGI Note 143 6
-------- -------
Total Units Acquired 83,525 $ 3,237
======== =======
% Acquired 69%
Implied Value for all Units 120,749 $ 4,679
======== =======
________________
(a) As of October 30, 1999.
(b) Includes cash, Allianz common stock and PALP Class B units.
(c) Option shares calculated using treasury stock method. Average
strike price of $20.23 per unit.
(d) Net of $174 million cash from exercise of options.
Selected Reference Documents:
. Implementation and Merger Agreement
. Indemnification Agreement
. Continuing Investment Agreement
. Second Amendment to Employment Termination and Non-Competition
Agreement
. First Amendment to the Executive Deferred Compensation Plan of
PIMCO Advisors Holdings L.P. and PIMCO Advisors L.P.
. Second Amendment to the 1998 Unit Incentive Plan of PIMCO Advisors
Holdings L.P. and PIMCO Advisors L.P.
________________________________________________________________________________
Lazard Freres & Co. LLC Page 7
<PAGE>
Executive Summary
- --------------------------------------------------------------------------------
II. Retention Payments
A. Senior MD Fixed Retention Awards
A $391 million pool will be established for the Senior Managing Directors
listed below. Recipients will execute five-year employment/non-
solicitation agreements (except for Messrs. Podlich and Meiling, who will
execute consulting/non-solicitation agreements). Each award will vest
ratably over five years with the first 20% vesting on December 31, 2000.
Payments will be made in cash on [a date which is the first anniversary
of the closing date or a later date agreed by the parties] of the year
following vesting.
Breach of employment terms will result in forfeiture of unpaid retention
bonus amounts; breach of competition/non-solicitation terms will
additionally result in repayment of half of retention bonus amounts
previously paid. Forfeited amounts will be reallocated to PIMCO
executives not part of the original Senior MD group, but any reallocation
must be related to a plan to replace the departed executive and requires
the concurrence of the CEO of Allianz Asset Management (AAM).
All Senior MD Fixed Retention Awards are subject to reduction in the
event of Indemnified Losses under the Indemnity Agreement.
Retention Awards
----------------------------
Nominal NPV
-----------------
Individual Annual Total @10%
---------- ------ ------- -------
Gross $ 34.8 $ 174.0 $ 131.9
Muzzy 10.8 54.0 40.9
Hague 6.0 30.0 22.7
Harris 6.0 30.0 22.7
Powers 6.0 30.0 22.7
Thompson 6.0 30.0 22.7
Meiling 4.4 22.0 16.7
Podlich 4.2 21.0 15.9
------ ------- -------
$ 78.2 $ 391.0 $ 296.4
====== ======= =======
B. Executive Fixed Retention Awards
A $105 million pool will be established for other Managing Directors and
officers of PIMCO. Unlike the Senior MD Fixed Retention Awards,
Participants will not be required to execute employment agreements.
Awards will vest over a three, four or five year period beginning
December 31, 2000. Payments will be made in cash on [a date which is the
first anniversary of the closing date or a later date agreed by the
parties] of the year following vesting. The initial allocation of awards
and reallocations of any forfeited awards require the concurrence of the
CEO of AAM.
________________________________________________________________________________
Lazard Freres & Co. LLC Page 8
<PAGE>
Executive Summary
- --------------------------------------------------------------------------------
II. Retention Payments (Cont'd)
C. Variable Retention Payments
Five annual Variable Retention Payments ranging from $0 to $24 million will
be made to PIMCO employees who are not Managing Directors based on the
three-year growth rate of Adjusted Operating Profit Available for
Distribution (OPAD). The first three-year "Test Period" begins in 2000 and
end in 2002; payments commence in 2003 on [a date which is the anniversary
of the closing date or a later date agreed by the parties]. The
Compensation Committee will allocate interests in each Variable Retention
Payment in the quarter prior to the commencement of each three year period;
additional allocations may be granted at any time prior to the Payment
Date. The initial allocation of awards and reallocations of any forfeited
awards require the concurrence of the CEO of AAM.
The amount of the Variable Retention Payment will be based on the three-
year average percentage growth (Growth Rate) of PIMCO's Adjusted OPAD,
excluding the effect of services to affiliated portfolios (i.e., profit on
the management of Allianz insurance assets), for the periods ending
December 31 of each of the years 2002 through 2006. For each Test Period
if the Growth Rate is:
(1) 10% or less, no payment will be made;
(2) greater than 10%, but less than 15%, the payment will be $1.8
million for each 1% greater than 10%;
(3) greater than 15%, but less than 20%, the payment will be $9.0
million plus $3.0 million for each 1% greater than 15%; and
(4) 20% or more, the payment will be $24 million.
D. Special Equity Incentive
Bill Gross and Bill Thompson will each enter into seven-year employment
agreements. In recognition of their anticipated contributions to both
PIMCO and AAM, $50 million of restricted Allianz common stock (182,488
shares) would be awarded at closing, half to each.
The stock would vest over five years:
. Half would vest in equal annual amounts, contingent upon continued
employment.
. Half would vest in a proportion set each year at the discretion of the
CEO of AAM.
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 9
<PAGE>
Executive Summary
- --------------------------------------------------------------------------------
II. Retention Payments (Cont'd)
E. Non-PIMCO Transition and Incentive Compensation
Separate pools will be established for non-PIMCO employees to fund
transition and retention payments for the Corporate Services Group and
incentives for the Equity and Retail groups. These pools consist of fixed
and performance components and aggregate between $66 - $141 million ($50 -
$98 million), payable over seven years.
The Corporate Services transition pool will consist of $9 million ($8
million NPV) of payments from 2000 to 2003. The Corporate Services
retention pool consists of $39 million ($31 million of NPV) of payments
from 2000 to 2004. Any unallocated amounts will be added to the Equity
group performance pool
Each of the Retail and Equity groups will have a separate performance pool.
The Retail group performance pool will consist of payments from $0-$1
million per year, payable from 2000 to 2004. The amount of the payment
will be determined by annual gross sales growth. If gross sales grow 6.7%
or less, there will be no payment. If gross sales grow at 13.3% or more,
then the payment will equal $1 million (aggregate NPV of $4 million). In
between performance targets, the payment amount will be interpolated.
The Equity group performance pool will consist of payments from $4 - $18
million per year, payable from 2002-2006. The Equity group performance
pool will be further segmented into four pools, one for each equity style:
value, GARP, growth and quantitative. Allocations among the equity styles
and allocations to individuals will be assigned at the beginning of each
three-year period. In aggregate, the Baseline payment for the entire
Equity group will be $9 million (Baseline Amount) at a 10% revenue growth
rate (Target CAGR). For each style if the Target CAGR is
(1) 6.7% or less, the payment will be 42% of the Baseline Amount;
(2) 10%, the Baseline Amount will be paid;
(3) 13.3% or more, the payment will be 204% of the Baseline Amount;
and
(4) in between performance targets, the payment will be interpolated.
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 10
<PAGE>
Executive Summary
- --------------------------------------------------------------------------------
II. Retention Payments (Cont'd)
F. Financial Summary
The following chart summarizes the payments made under the various
retention plans:
<TABLE>
<CAPTION>
2000-2006
----------------------------------------------------------------- ------------------
2000 2001 2002 2003 2004 2005 2006 Total NPV@10%
----- ------- ------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Base Case:
- ---------
Special Equity Incentive $ 50 $ 50 $ 50
Senior MD Fixed Retention 78 $ 78 $ 78 $ 78 $ 78 391 296
PIMCO Retention Pool (a)
Executive Fixed Retention 21 21 21 21 21 105 80
Variable Retention Payments 9 9 9 9 9 45 28
Non-PIMCO Retention Pools (b) 17 13 17 14 14 9 9 93 68
------ ------- ------- ------ ------ ------ ------ ------ ------
Total $ 166 $ 112 $ 125 $ 122 $ 122 $ 18 $ 18 $ 684 $ 522
====== ======= ======= ====== ====== ====== ====== ====== ======
Minimum Case:
- ------------
Special Equity Incentive $ 25 $ 25 $ 25
Senior MD Fixed Retention 78 $ 78 $ 78 $ 78 $ 78 391 296
PIMCO Retention Pool (a)
Executive Fixed Retention 21 21 21 21 21 105 80
Variable Retention Payments 0 0 0 0 0 0 0
Non-PIMCO Retention Pools (b) 17 13 11 9 9 4 4 66 50
------ ------- ------- ------ ------ ------ ------ ------ ------
Total $ 141 $ 112 $ 110 $ 108 $ 108 $ 4 $ 4 $ 587 $ 451
====== ======= ======= ====== ====== ====== ====== ====== ======
Maximum Case:
- ------------
Special Equity Incentive $ 50 $ 50 $ 50
Senior MD Fixed Retention 78 $ 78 $ 78 $ 78 $ 78 391 296
PIMCO Retention Pool (a)
Executive Fixed Retention 21 21 21 21 21 105 80
Variable Retention Payments 24 24 24 24 24 120 75
Non-PIMCO Retention Pools (b) 18 14 26 24 24 18 18 141 98
------ ------- ------- ------ ------ ------ ------ ------ ------
Total $ 167 $ 113 $ 149 $ 147 $ 147 $ 42 $ 42 $ 807 $ 599
====== ======= ======= ====== ====== ====== ====== ====== ======
</TABLE>
_______________________
(a) Base Case: 15% Adj. OPAD growth.
Minimum Case: 10% Adj. OPAD growth or less.
Maximum Case: 20% Adj. OPAD growth or MORE.
(b) Base Case: 10% Revenue or Sales growth.
Minimum Case: 6.7% Revenue or Sales growth or less.
Maximum Case: 13.3% Revenue or Sales growth or more.
Selected Reference Documents:
. Transition and Retention Plan
. Retention Plan for Executives of PIMCO
- Senior Managing Directors
- Other Executives
. Form of Employment Agreement
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 11
<PAGE>
Executive Summary
- --------------------------------------------------------------------------------
III. Governance
A. Limited Liability Company Agreement
PIMCO will be converted to an LLC. The Agreement contemplates PALP
being the sole member after PIMCO Management Inc. has been merged into
PALP, resulting in the termination of PIMCO's structural semi-
autonomy.
PIMCO will be recapitalized with two classes of units: Class A Units,
which are common equity, and Class B Units, which bear a special
distribution that includes a share of the profits of Affiliated Fixed
Income Managers. Class B Units will be sold to PIMCO Managing
Directors pursuant to the Class B Unit Purchase Plan.
B. Written Consent
The Managing Member of PALP (Allianz) will delegate all of its rights,
powers and duties to manage and control PIMCO, except for certain
reserved rights described below, to a Management Board composed of
PIMCO Managing Directors. The delegation may be revoked at any time,
but intervention in the absence of a Business Crisis will result in
accelerated vesting and payment of various retention awards and Class
B units (see C. below).
Actions requiring prior approval:
. Financial matters
- annual operating budget
- significant long-term contracts outside the ordinary course
of business and not contemplated in the budget
- significant capital expenditures not in the budget
- acquisitions and divestitures not in the ordinary course of
business
- incurrence of indebtedness
. Significant changes in the business and certain contracts
- changes in the name, image or global branding
- introduction of new products that adversely alter the risk
profile
- entering a new line of business
- policies which impose a material burden on the Managing
Member's other investment management businesses
- activities which result in an Adverse Tax Event
- amendment of certain Transaction Documents
. Compensation matters
- establishment or modification of any significant fringe
benefit program
- modification of the Profit Sharing Plan, the Class B Unit
Purchase Plan and the Retention Plan
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 12
<PAGE>
Executive Summary
- --------------------------------------------------------------------------------
III. Governance (Cont'd)
Actions requiring prior consultation:
. allocation to Managing Directors of bonuses under the Profit
Sharing Plan and Class B Units under the Unit Purchase Plan
. promotions to Senior Vice President or Executive Vice
President
. nomination of new Managing Directors or material reassignment
or change in the role of a Managing Director
The Consent also provides for committees of the Management Board,
including the Executive Committee and the Compensation Committee, and
specifies procedures for electing the CEO and the CIO:
. CEO will be nominated by majority board vote of the Management
Board and require formal approval from the CEO of AAM after
consultation with the CIO
. CIO will be nominated by majority board vote of the Management
Board and require formal approval from the CEO of AAM after
consultation with the CEO
. If both the CEO and CIO are to be replaced:
- A MD will be appointed as CIO for a one-year trial term by
a super-majority vote following the Management Board's
consultation with Allianz
- A person will be appointed as the CEO for a one-year trial
term by Allianz after consultation with the Management
Board
- At any time during the one-year term, the CEO of AAM can
ratify the CIO's position, and the CEO's position can be
affirmed by a super-majority board vote of the Management
Board
- If either fails to be affirmed, then both will be
terminated from their positions and the procedure will
begin again
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 13
<PAGE>
Executive Summary
- --------------------------------------------------------------------------------
III. Governance (Cont'd)
C. Revocation of the Delegation; "Business Crisis"
The side letter to the Written Consent sets forth the consequences of
revoking the delegation or interfering in the conduct of PIMCO's
business under any circumstances unless the Managing Member has made a
good faith determination that internal circumstances exist at PIMCO
which have not effectively been addressed by management and which, if
continued, would likely result in a substantial impairment to the
value of PIMCO (a "Business Crisis").
These consequences include:
. Amounts due under the Retention Plan would immediately vest
and be payable according to the original schedule. The
covenant not to compete or solicit would continue for the
lessor of 18 months or the original term, but the obligation
to repay 50% of the payments previously made for violating
this covenant would cease.
. All shares of Allianz stock issued to Gross and Thompson under
the Restricted Stock Agreements would immediately vest.
. All Class B Unit repurchase rights upon Termination or
Disability would be cancelled. All Class B units would be
puttable at the greater of the then Put Price or the Put Price
calculated as of the date of intervention and callable at the
greater of the then Call Price or the Call Price as of the
date of intervention.
Selected Reference Documents:
. Limited Liability Company Agreement of Pacific Investment
Management Company LLC
. Written Consent of the Managing Member of Pacific Investment
Management Company LLC
. Letter agreement between Allianz and Pacific Investment
Management Company
. Memorandum dated October 31, 1999 addressed to William S.
Thompson from Joachim Faber
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 14
<PAGE>
Executive Summary
- --------------------------------------------------------------------------------
IV. PIMCO Profit Sharing and Unit Purchase Plans
A. PIMCO Non-Qualified Profit Sharing Plan
The Plan supercedes the 1994 Plan and amends it in several important
respects. Among the changes:
. The Profit Sharing Percentage is set at 42% for 2000, declining by
3% per annum to 30% in 2004 and each year thereafter
. OPAD will not reflect any deductions for retention payments
(including amounts equal to cash principal repayments made by
employees in respect of promissory notes (Notes) to acquire PIMCO
Class B units)
. Adjusted Net Profit is broadened to include earnings from
Affiliated Fixed Income managers
. The Profit Participation Pools in 2000 and 2001 reflect a minimum
of $10 million annual contribution from services to insurance
portfolios of Affiliated Fixed Income Managers
B. Unit Purchase Plan
PALP will sell interests entitled to receive 15% of PIMCO's pre-profit
sharing OPAD in the form of Class B units to PIMCO employees over the
next five years, beginning January 1, 2000. 3% will be sold each year.
PIMCO's Compensation Committee will determine the allocation of purchases
among eligible employees. Among the key terms:
. Purchase Price - Participants will purchase the units at Fair
Market Value (currently estimated at 6x trailing pro forma OPAD)
. Payment for Purchase - Payment will be in full recourse Notes
(currently estimated interest rate of 7%). Principal will amortize
for each series of Notes as indicated below; the base compensation
of Participants will be increased by the amount of principal
amortization. Notes may not be prepaid.
Units Amortization
----------------------------------
Purchased 2004 2005 2006 2007 2008
--------- ----------------------------------
2000 100%
2001 0% 100%
2002 0% 50% 50%
2003 0% 33% 33% 33%
2004 0% 0% 33% 33% 33%
. Termination of Employment - Upon termination for any reason other
than death or disability, PALP shall have the right to repurchase a
number of units equal to the unpaid principal balance of the Note
divided by the purchase price. PALP will acquire the units by
canceling the unpaid balance of the Note.
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 15
<PAGE>
Executive Summary
- --------------------------------------------------------------------------------
IV. PIMCO Profit Sharing and Unit Purchase Plans (cont'd)
. Death or Disability - In this event PALP will repurchase "paid"
units at the Special Call Price (an average of the Put and Call
prices), with the number of "paid" units equal to 20% for each year
prior to termination. The remaining units will be purchased by
canceling a pro rata portion of the unpaid Note balance.
. Call Rights - PALP will have the right on March 31 of each year to
call up to 20% of Released Units (corresponding to the amortization
of the Note). PALP also has the right to call some or all of the
units held by terminated employees on March 31 of the year
following the calendar year of termination and the first, second
and third anniversaries thereafter.
. Put Rights - Participants will have identical put rights to PALP,
except that the annual put right is cumulative.
. Put and Call Prices - Put and call prices will be determined with
reference to (i) the Class B distribution amount for the calendar
year most recently ended multiplied by (ii) the applicable
multiple, which will depend upon PIMCO's weighted average three-
year investment performance for the three calendar years most
recently ended (see below) multiplied by (iii) 1.02.
Applicable Multiple
-------------------
Call Put
---------- --------
3-Year Performance:
------------------
1st Quartile 14.0x 12.0x
2nd Quartile 12.0 10.0
3rd Quartile 10.0 8.0
4th Quartile 10.0 6.0
. Third/Fourth Quartile Performance Adjustment - If PIMCO's
investment performance is in the third or fourth quartile, the Call
Multiples above are multiplied by a factor (the "CAGR Factor")
which depends upon the most recent three-year annual growth rate in
Adjusted Net Profit.
3-Year Adjusted CAGR
Net Profit CAGR Factor
--------------- ------------
5% or Less 0.5
5% to 15% Interpolated
15% or Greater 1.0
PALP may choose either to exercise its call without regard to the
CAGR Factor or suspend its call until the earlier of (i) two years
or (ii) March 31 of the year following the calendar year in which
investment performance is in the first or second quartile.
. Investment Performance - The audited AIMR composite return for
portfolios employing PIMCO's Full Authority Composite Total Return
investment methodology will be compared with the Frank Russell
Universe of institutional portfolios most nearly corresponding to
the investment objectives of the Total Return methodology.
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 16
<PAGE>
Executive Summary
- --------------------------------------------------------------------------------
IV. PIMCO Profit Sharing and Unit Purchase Plans (cont'd)
. Reduction of Payments - All amounts owed to Senior MDs under the
Class B Unit Purchase Plan on puts or calls are subject to
reduction in the event of Indemnified Losses under the Indemnify
Agreement.
. Transfer Restrictions - Participants may not Transfer any Units
except with the consent of Allianz. Allianz will not unreasonably
withhold such consent if the Transfer relates to charitable or
estate planning purposes.
C. Financial Summary
The following financial analysis illustrates the present value (at a 12%
discount rate) of the Unit Purchase Plan at various operating income
growth rates and investment performance quartiles. "Net PV" adjusts the
"Gross PV" to reflect the reduction in cash flows to unit holders at
lower bonus pool percentages. All amounts are presented on an after-tax
basis.
<TABLE>
<CAPTION>
----------------------------------------- ---------------------------------------
Performance Quartile: 1st 2nd 3rd 4th 1st 2nd 3rd 4th
Call Multiple: 14x 12x 10x 10x 14x 12x 10x 10x
----------------------------------------- ---------------------------------------
Gross PV Income Multiple
(After tax) (After tax)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Income:
0% Growth $ 321 $ 285 $ 158 $ 158 (a) 12.4x 11.0x 6.1x (a) 6.1x (a)
5% Growth 449 397 217 217 (a) 17.3 15.3 8.3 (a) 8.3 (a)
10% Growth 621 548 386 386 (b) 23.9 21.1 14.8 (b) 14.8 (b)
15% Growth 852 751 651 651 32.8 28.9 25.0 25.0
20% Growth 1,160 1,022 883 883 44.6 39.3 34.0 34.0
Net PV IRR
(After tax) (After tax)
Operating Income:
0% Growth $ 145 $ 109 ($19) (a) ($19) (a) 62% 53% 2% (a) 2% (a)
5% Growth 233 182 1 (a) 1 (a) 78% 68% 13% (a) 13% (a)
10% Growth 354 282 119 (b) 119 (b) 94% 84% 52% (b) 52% (b)
15% Growth 518 418 317 317 109% 99% 86% 86%
20% Growth 739 600 462 462 124% 113% 100% 100%
</TABLE>
________________________
Note: PV calculated using a 12% discount rate.
(a) Assumes 5.0x exit multiple due to growth multiplier.
(b) Assumes 7.5x exit multiple due to growth multiplier.
Selected Reference Documents:
. PIMCO Non-Qualified Profit Sharing Plan
. PIMCO Class B Unit Purchase Plan
. Unit Purchase Agreement
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 17
<PAGE>
Executive Summary
- --------------------------------------------------------------------------------
V. Allianz Fixed Income Assets
A. Allianz Insurance Assets
In 2000, PIMCO will begin to manage approximately $100 billion of Allianz
Group affiliated portfolios. A substantial portion of the resources
required to manage and service these portfolios will be transferred from
investment operations of Allianz.
PIMCO will receive a management fee with base and performance components.
The base fee will equal 2 basis points on Life/Health and P&C insurance
assets (approximately 89% of the portfolio). For Euroland and Europe funds
(11% of the portfolio), the base fee will equal 5 basis points.
Performance fees are calculated quarterly based upon trailing four quarters
performance and will be based upon sharing the portfolio return (before
fees) in excess of specified benchmarks, as outlined below:
(a) Life/Health insurance assets: Alpha below 10 basis points, 0% of
alpha;
Alpha of 11-21 basis points, 30% of
alpha;
Alpha of 22-50 basis points, 50% of
alpha;
Cap at 50 basis points.
(b) P&C insurance assets: Alpha below 10 basis points, 0% of
alpha;
Alpha of 11-40 basis points, 30% of
alpha;
Alpha of 41-80 basis points, 50% of
alpha;
Cap at 80 basis points.
(c) Euroland funds: Alpha below 10 basis points, 0% of
alpha;
Alpha of 11-43 basis points, 30% of
alpha;
Alpha of 44-86 basis points, 50% of
alpha;
Cap at 86 basis points.
(d) Europe funds: Alpha below 10 basis points, 0% of
alpha;
Alpha of 11-51 basis points, 30% of
alpha;
Alpha of 52-102 basis points, 50%
of alpha;
Cap at 102 basis points.
In 2000 and 2001, Allianz will reimburse PIMCO with respect to services
relating to insurance portfolios of affiliated European entities, after
taking into account PIMCO's reasonable expenses allocable to these
services, in an amount calculated to yield profits from these services
which will result in a $10 million accretion to PIMCO's bonus pool. An
annual plan of expense increases related to such services will be agreed
between the CEO of PIMCO and the CEO of AAM.
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 18
<PAGE>
Executive Summary
- --------------------------------------------------------------------------------
V. Allianz Fixed Income Assets (cont'd)
B. European Retail Assets
AAM manages approximately $3.8 billion and $12.1 billion in German and
other European retail fixed income assets, respectively, as of June 30th.
Pacific Investment Management will provide model portfolios for these
retail funds and receive 30% of the management fees on German assets and 5
bps on other European assets. Pacific Investment Management will not be
responsible for distribution or other costs with respect to these assets.
As new retail fixed income funds are developed, Pacific Investment
Management would serve as manager or sub-advisor for which it would receive
arms-length advisory fees.
C. European Institutional Assets
AAM manages approximately $7.4 billion in European institutional fixed
income assets. Pacific Investment Management will assume responsibility
for management of these assets and the related financial result. Allianz
will reimburse Pacific Investment Management to the extent contributed
revenues do not cover contributed costs.
D. Assets Under Management
The following chart summarizes the estimated Allianz fixed income assets to
be managed by PIMCO.
<TABLE>
<CAPTION>
CAGR
-----------------------------------------------------
1999 (a) 2000 2001 2002 99-02
-------- -------- -------- -------- -----
<S> <C> <C> <C> <C> <C>
German Insurance Assets:
Life Assets $ 73,689 $ 78,847 $ 84,367 $ 90,272 7%
P&C Assets 12,166 13,018 13,929 14,904 7
Euroland Funds 7,598 8,130 8,699 9,308 7
Europe Funds 3,038 3,251 3,478 3,722 7
-------- -------- -------- --------
Total Insurance Assets 96,491 103,245 110,473 118,206 7
-------- -------- -------- --------
% of Total AUM 81% 79% 75% 71%
Third-Party Retail:
Germany 3,840 5,091 7,197 9,828 37
Europe (Ex. Germany) 12,100 13,310 15,573 19,154 17
-------- -------- -------- --------
Total Retail 15,940 18,401 22,770 28,983 22
-------- -------- -------- --------
% of Total AUM 13% 14% 15% 17%
Third-Party Institutional:
Germany 1,860 3,130 6,139 9,249 71
Europe (Ex. Germany) 5,500 6,435 7,658 9,342 19
-------- -------- -------- --------
Total Institutional 7,360 9,565 13,797 18,591 36
-------- -------- -------- --------
% of Total AUM 6% 7% 9% 11%
Total AUM $119,791 $131,212 $147,039 $165,780 11%
Period Growth -- 10% 12% 13%
</TABLE>
__________________________
(a) As of June 30, 1999.
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 19
<PAGE>
Executive Summary
- --------------------------------------------------------------------------------
V. Allianz Fixed Income Assets (cont'd)
E. Westport
The fixed income management activities of Allianz Fixed Income
(Westport) would become integrated in the investment process of PIMCO.
Westport would participate in developing jointly with PIMCO the model
portfolios used in the management of the assets of the Allianz US
insurance operations and Westport would maintain client servicing
responsibilities. Westport would add business development activities in
order to manage third party insurance and other assets alongside the
portfolios of affiliated insurance companies. The management of "third
party" assets would be integrated into PIMCO with the servicing of these
clients remaining at Westport, as deemed appropriate by the CEO of
PIMCO. The profit (loss) from the management of Westport's third party
fixed income assets would be reflected in PIMCO's financial results.
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 20
<PAGE>
Executive Summary
- --------------------------------------------------------------------------------
V. Allianz Fixed Income Assets (cont'd)
F. Preliminary Financial Analysis
The following financial analysis is based on financial projections provided
by AAM and expense projections provided by PIMCO. For the insurance
assets, low and high scenarios have been developed to estimate the
potential range of performance fees. The retail and institutional revenue
and fee arrangements are described above.
AAM has provided a breakdown of the estimated personnel costs and
associated overhead and allocations. In addition, PIMCO has developed
estimates of the incremental costs necessary to manage these assets. These
expenses do not include any costs for the PIMCO's existing European
operations.
The estimated bonus contribution has been adjusted to reflect the lower
profit sharing percentages resulting from the bonus equitization plan as
well as the guaranteed $10 million impact from the insurance assets in 2000
and 2001.
<TABLE>
<CAPTION>
2000 2001 2002
--------------- --------------- ---------------
Low High Low High Low High
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Insurance:
Revenues $ 25.9 $ 35.0 $ 27.7 $ 37.5 $ 29.6 $ 40.1
Allianz Expenses (19.2) (19.2) (20.6) (20.6) (22.0) (22.0)
PIMCO Expenses (4.2) (4.2) (6.2) (6.2) (6.2) (6.2)
------ ------ ------ ------ ------ ------
Contribution 2.5 11.6 0.9 10.7 1.4 11.9
------ ------ ------ ------ ------ ------
Retail:
Revenues 13.5 13.5 18.9 18.9 27.5 27.5
PIMCO Expenses (0.9) (0.9) (1.4) (1.4) (1.6) (1.6)
------ ------ ------ ------ ------ ------
Contribution 12.6 12.6 17.5 17.5 25.9 25.9
------ ------ ------ ------ ------ ------
Institutional:
Revenues 12.4 12.4 21.1 21.1 31.6 31.6
Allianz Expenses (12.4) (12.4) (12.9) (12.9) (13.4) (13.4)
PIMCO Expenses (a) (2.3) (2.3) (3.8) (3.8) (4.2) (4.2)
Reimbursement 0.1 0.1 0.0 0.0 0.0 0.0
------ ------ ------ ------ ------ ------
Contribution (2.2) (2.2) 4.4 4.4 14.0 14.0
------ ------ ------ ------ ------ ------
Total Income 12.9 22.0 22.9 32.7 41.3 51.8
Bonus Pool % 42% 42% 39% 39% 36% 36%
Contribution to Bonus Pool $ 5.4 $ 9.2 $ 8.9 $ 12.7 $ 14.9 $ 18.7
Insurance Reimbursement 9.0 5.1 9.6 5.8 0.0 0.0
------ ------ ------ ------ ------ ------
Contribution to Bonus Pool $ 14.4 $ 14.4 $ 18.6 $ 18.6 $ 14.9 $ 18.7
====== ====== ====== ====== ====== ======
</TABLE>
______________________
(a) Expenses not directly related to contributed revenues and
therefore not subject to AAM cost reimbursement
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 21
<PAGE>
Executive Summary
- --------------------------------------------------------------------------------
V. Allianz Fixed Income Assets (cont'd)
Selected Reference Documents:
. Letter agreement between Allianz and Pacific Investment Management
Company
. Memorandum dated October 29, 1999 addressed to William S.
Thompson from Joachim Faber
- --------------------------------------------------------------------------------
Lazard Freres & Co. LLC Page 22
<PAGE>
Exhibit 99 (b)(7)
[LETTERHEAD OF MCLAGAN PARTNERS]
October 29, 1999
PIMCO Partners LLC
PIMCO Advisors L.P.
c/o PIMCO Advisors L.P.
800 Newport Center Drive
Newport Beach, CA 92660
Gentleman:
PIMCO Advisors L.P. (PIMCO) has asked McLagan Partners to opine on the
suitability of specific retention incentive arrangements proposed in connection
with the acquisition of a controlling interest in PIMCO by an affiliate of
Allianz A.G. This letter responds to this request by:
. Providing background information about McLagan Partners.
. Confirming our understanding of the scope of the proposed request.
. Opining on the suitability of the proposed arrangements.
* * *
McLagan Partners' Qualifications
- --------------------------------
Founded in 1966, McLagan Partners specializes in providing compensation
consulting and related services to the financial services industry. We are a
global firm, with offices in Stamford, Chicago, London, Tokyo, and Hong Kong.
Our compensation-related services include:
. Annual and long-term incentive plan design.
. Retention plan design and evaluation in the context of mergers and
acquisitions.
. Surveys of pay levels and practices with the asset management, banking and
capital markets businesses.
<PAGE>
PIMCO Partners LLC
October 29, 1999
Page Two
Our clients include virtually every major global financial services firm,
including leading asset management companies, banks and investment banks,
securities firms, and insurance companies. Within the US asset management
industry, current clients include:
. Over 220 investment management organizations.
. 82% of the top 150 firms (as ranked by Pensions & Investments).
The Firm's Managing Directors are seasoned professionals, typically having over
15 years of financial services industry experience.
Project Scope
- -------------
PIMCO asked McLagan Partners to opine on the suitability of proposed retention
incentive arrangements and the payments provided for thereunder. Our comments on
the proposed retention incentive arrangements are based exclusively on a review
of:
. The PIMCO Advisors L.P. Retention Plan for Executives of Pacific Investment
Management Company (dated October 25, 1999).
. Various analyses and proposed allocations prepared by management that
relate to the above Plan.
Our evaluation is based on the assumption that:
. The primary objectives of the proposed retention incentive arrangements are
to retain and motivate key executives and investment talent subsequent to
Allianz's acquisition of PIMCO.
. The loss of PIMCO's executives and senior investment talent would have a
materially adverse impact on PIMCO's business and investment results and,
in turn, the Firm's total enteprise value.
. The retention/incentive arrangements are not intended to act as substitutes
for ongoing base salary and bonus plans that are unrelated to the proposed
acquisition.
. A five-year retention period is required to integrate PIMCO's business
practices and processes, and the collective knowledge and expertise of its
staff into Allianz.
<PAGE>
PIMCO Partners LLC
October 29, 1999
Page Three
McLagan Partners' Opinion
- -------------------------
We focused on the following in developing our Opinion on the Retention Plan
referred to above:
. External market practices associated with acquisition-related retention
incentive programs within the financial services industry.
. Internal historical compensation practices and expected current year pay
levels for investment talent within PIMCO.
. Extensive meetings with James G. Ward, Senior Vice President and Director
of Human Resources PIMCO Advisors.
. Project Apostle Executive Summary dated 27 October 1999.
. The Pacific Investment Management Company Non-Qualified Profit Sharing
Plan.
. Form of Employment Contracts for Pacific Investment Management Company
Managing Directors.
In terms of external market practices, we have observed the following through
our consulting work involving the design and evaluation of acquisition-related
retention plans within the financial services industry.
. Retention incentive program coverage is typically limited to officer-level
staff.
. Targeted retention incentive award values are greatest for incumbents
having the ability to most significantly impact future business and
investment results.
. Awards are often established as a multiple of annual cash compensation
within a tiered framework linked to organizational level. For example:
- For staff below executive management, retention incentive multiples
often approximate one times annual compensation over a three-year
period.
- For executive management (i.e., Managing Directors and above),
retention incentive multiples are higher.
Award multiples for individual participants vary within this framework
based on a number of factors, including, but not limited to, relative
business impact and tenure.
<PAGE>
PIMCO Partners LLC
October 29, 1999
Page Four
. Retention incentive values and participation rates are generally higher in
acquisitions driven by strategic business concerns. Correspondingly, such
values and rates are generally lower when the acquiring firm's objectives
are strictly focused on near-term financial returns.
. The timing of retention incentive payouts generally coincides with the
anticipated time required to successfully integrate the acquired firm, its
business practices and investment processes. and its collective knowledge
and staff expertise
In terms of our understanding of PIMCO's internal pay practices and levels, we
observe that:
. PIMCO has covered its senior staff under several highly structured
incentive arrangements that are directly linked to PIMCO's profits.
. Based on past, current, and projected profits. PIMCO's incentive plans have
generated significant compensation, in aggregate and for selected senior
executives.
We are of the opinion that the proposed retention incentive arrangements
referenced herein are reasonable in light of competitive market practices and,
moreover, PIMCO's existing pay practices and levels. Further we are of the
opinion that the retention incentive arrangements referenced herein are
suitable to Allianz's presumed objectives of retaining and motivating PIMCO's
officers in the context of the contemplated acquisition by Allianz.
* * *
Cordially,
/s/ Michael P. Curran
Michael P. Curran Adam B. Barnett
Managing Director Managing Director
<PAGE>
EXHIBIT 99 (b)(8)
[LOGO OF GOLDMAN SACHS]
Highly Confidential
-------------------
Pacific Life Insurance Company
Presentation to the
Board of Directors
Goldman, Sachs & Co.
October 29, 1999
<PAGE>
Summary of Proposed PIMCO Transaction Terms
. Allianz purchases all outstanding Class A units not owned by Pacific Life
for $38.75 per unit (the "Unit Price") subject to downward adjustments if
the PIMCO revenue run rate the month end prior to closing is less than 85%
of current rate
. Pacific Life will exchange all of its Class A units for an equivalent
amount of Class E units and will have a put/call arrangement in place with
Allianz with respect to these units
. Pacific Life will continue to receive cash distributions (the "Distribution
per Unit") after closing; currently, this amount is expected to be
comparable with existing distributions. These will be equal to $1.05 per
unit plus 20% of Pacific Investment ("PIMCO classic") pre-bonus profits
excluding the effects of:
- Performance fees on the management of Allianz insurance assets
- Sub-advisory services sourced through Allianz
- The subsidy to the PIMCO bonus pool in 2001 and 2002
. Under the terms of the Put/Call Pacific Life has the right to put all
of its PIMCO units to Allianz anytime at a price equal to Liquidity
Multiple (14.0) times the Distribution per Unit paid during the four
preceding calendar quarters excluding Stocks Plus performance fees
("Per Unit Purchase Price") plus the aggregate amount of accrued but
unpaid distributions with respect to the Class E units, subject to a
maximum put price of $60 per unit
. If exercised today, the cash value of Pacific Life's Class E units would be
the Unit Price payable at closing
. Allianz has the right to call all of Pacific Life's PIMCO units:
- In case of a change of control of Pacific Life: at the end of the
----------------------------------------------
calendar year during which a change of control transaction is closed,
at the greater of the Unit Price or the Per Unit Purchase Price
- At the end of any calendar quarter after December 31, 2002: at the Per
----------------------------------------------------------
Unit Purchase Price if the Per Unit Purchase Price is greater than
$50, but not to exceed $60 per unit
. Pacific Life no longer will be a general partner but has a continuing
participation in PIMCO Advisors L.P. to assure continued ability of Pacific
Life to include PIMCO assets in its promotional and business development
materials and to assure protection of distributions
<PAGE>
Proposed Transaction Observations
. The $38 to $39 per unit transaction price is a 28.6% to 31.9% premium to
the trading unit price of PIMCO on 7/6/1999, the trading day prior to the
first rumor regarding the proposed current transaction
. Trading values of other publicly traded asset manager master limited
partnerships have declined on average about 20% since 7/6/1999. Adjusting
for this decrease, PIMCO's units might be trading as low as $23.50 per unit
absent market speculation regarding the transaction. Compared to such
theoretical trading value, the premium to market implied by the $38 to $39
per unit transaction price is approximately 62% to 66%
. The most recent transaction for a money manager with a strong institutional
presence having aggregate consideration in excess of $500 million was
announced in March 1999. There have been seven such transactions since June
1997. All of these deals were completed at times of higher public market
valuations for asset management companies (approximately 30% higher at time
of the median deal).
. Strengths of PIMCO include:
-- One of the largest investment management companies in the United
States with over $256 billion of assets under management managing 53
stock and bond funds
-- Leading, fixed-income, institutional franchise with equity and retail
product capabilities
-- Strong four year historical compound annual growth rates (1995-1999E):
Assets under management - 30%, Revenue - 32%, EBITDA - 31% and Pre-tax
income - 37%
. Areas of concern of PIMCO include:
-- EBITDA margin is below that of the publicly traded asset management
peer median
. Fees are typically lower for fixed-income asset management than equity
asset management
. Compensation as a percentage of revenue and operating expenses as a
percentage of revenue for PIMCO are higher than most publicly traded
asset managers
-- PIMCO's Oppenheimer Capital, primarily an equity manager which is
estimated to contribute 26% to PIMCO's 1999 total revenue, suffered
$4.9 billion in net asset outflows in 1998 and $6.5 billion of gross
asset outflows through the first nine months of 1999 due to weak
investment performance, helping to contribute to current 1999
projections below original budget
-- 1999E earnings was revised to $1.50 from $1.70 per unit
<PAGE>
Proposed Transaction Observations
-- 1999E projected growth in assets under management was revised from 10% to
6%, and is expected by PIMCO management to be 12% to 15% annually going
forward, below recent historical growth rates
<PAGE>
PIMCO Advisors L.P. -- Current Structure
Beneficial Economic Ownership
September 30, 1999
(Units and $ in Millions)
Class Pacific Life
A Units Beneficial
Units
- ----------------------------------------------------------------------------
Public Unitholders 49.6 0.0
PFP 14.4 14.4
PGP 39.4 22.0
PUPS 1.4 0.0
Other 9.1 0.8
PPLLC 0.1 0.0
------- -----
PALP Total (c) 113.9 37.2
- ----------------------------------------------------------------------------
. PALP is managed and controlled by Pacific Life and managing directors of
Pacific Investment Management Company through their general partners
entities, PIMCO Partners G.P. and PIMCO Advisors Holdings L.P.
. Certain fundamental major actions require the consent of both general
partners. Normal course of business actions have been delegated to
management board until 2005
. Management board consists of 15 members, three of whom are appointed by
Pacific Life
. Management board has in turn delegated most of its functions to executive
committee composed of five members, one of whom is an executive of Pacific
Life
<TABLE>
<S> <C>
[CHART]
-----------------------------
Pacific Life Asset Management
(PAM)
-----------------------------
---------------------- ------------- ----------------------
Pacific Life Financial PIMCO Holding PIMCO Partners, LLC (a)
Products, Inc. (PFP) LLC (PPLLC)
14.4 Units (PHLLC) 0.1 Units
---------------------- ------------- ----------------------
GP GP
- ---------------- ----------------------------------
PIMCO Partners G.P.
Other ---------
9.1 Units $130 Debt (PGP) -----------
- ---------------- ----------------------------------
PUPS 17.4 MD ETA Units (b) Public
1.4 Units ---------------------------------- 49.6 Units
- ---------------- 22.0 Pacific Life Beneficial Units
0.8 Pacific Life ---------------------------------- -----------
Beneficial Units GP
- ---------------- ----------------
PIMCO Advisors
GP Holdings L.P.
(Holdings)
----------------
GP
-----------------------------------------------------------------------------------------------------------
PIMCO Advisors L.P.
(PALP)
Total Units = 113.9(c)
-----------------------------------------------------------------------------------------------------------
</TABLE>
(a) Owned by PIMCO MDs.
(b) MDs of Pacific Investment Management Company beneficially owned through
employment contracts with Pacific Life.
(c) 120.0 million units on a fully diluted basis.
<PAGE>
PIMCO Summary Financials
($ in millions)
<TABLE>
95-98
1995 1996 1997 1998 CAGR 3Q1999 LTM
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Assets Under Management $ 94,478 $ 109,279 $ 137,478 $ 243,053 30.3 % $ 256,153 $256,153
Growth 15.7 % 25.8 % 76.8 % - 5.4 %
Revenue $ 323 $ 392 $ 517 $ 852 31.5 $ 716 $ 944
Growth 21.4 % 31.7 % 65.0 % - 10.8 %
EBITDA $ 113 $ 134 $ 173 $ 302 31.4 $ 227 $ 315
Growth 18.9 % 29.0 % 74.8 % - 4.4 %
EBITDA Margin 34.8 % 34.1 % 33.4 % 35.4 % 31.7 % 33.4 %
EBITDA as a % of AUM 0.12 % 0.12 % 0.13 % 0.12 % 0.09 % 0.12 %
Net Income $ 68 $ 91 $ 118 $ 208 $ 154 $ 209
Growth 33.1 % 29.9 % 76.1 % - 0.4 %
Net Income Margin 21.2 % 23.2 % 22.9 % 24.4 % 21.5 % 22.2 %
Net Income as a % of AUM 0.07 % 0.08 % 0.09 % 0.09 % 0.06 % 0.08 %
OPAD $ 111 $ 132 $ 170 $ 289 30.5 $ 222 $ 298
Growth 19.0 % 28.5 % 70.1 % - 2.9 %
OPAD Margin 34.4 % 33.7 % 32.9 % 33.9 % 31.0 % 31.5 %
OPAD as a % of AUM 0.12 % 0.12 % 0.12 % 0.12 % 0.09 % 0.12 %
Fixed Income OPAD $ 75 $ 91 $ 118 $ 154 23.7 - -
Fixed Income OPAD Growth 20.6 % 29.5 % 31.0 % - -
Equity OPAD $ 36 $ 41 $ 52 $ 135 42.2 - -
Equity OPAD Growth 15.6 % 26.4 % 158.1 % - -
- ------------------------------------------------------------------------------------------------------------------------------------
Note: Fixed income OPAD per unit equals fixed income OPAD divided by 55% times 20% divided by 37.2 million units.
</TABLE>
<PAGE>
Pimco Advisors Holdings
Daily Common Stock Price and Trading Volume History
High $37.44
Low 26.88
Mean 31.16
Current 34.19
[GRAPH]
7/7/1999 PIMCO's talks with Allianz appear in press
PA PA
DATE PRICE VOLUME
27-Oct-1998 29.94 74,000
28-Oct-1998 30.13 50,500
29-Oct-1998 31.06 62,400
30-Oct-1998 31.50 46,800
02-Nov-1998 31.31 68,100
03-Nov-1998 31.00 31,100
04-Nov-1998 31.69 38,200
05-Nov-1998 31.94 44,400
06-Nov-1998 31.94 34,200
09-Nov-1998 31.50 89,600
10-Nov-1998 31.38 70,100
11-Nov-1998 31.19 37,100
12-Nov-1998 31.13 29,900
13-Nov-1998 31.06 39,900
16-Nov-1998 31.00 54,000
17-Nov-1998 30.88 78,600
18-Nov-1998 31.50 92,800
19-Nov-1998 31.25 71,400
20-Nov-1998 31.88 50,600
23-Nov-1998 32.31 96,800
24-Nov-1998 31.75 33,900
25-Nov-1998 32.00 42,400
26-Nov-1998 32.00
27-Nov-1998 32.19 37,500
30-Nov-1998 32.25 50,700
01-Dec-1998 32.13 91,300
02-Dec-1998 32.00 123,100
03-Dec-1998 32.75 192,000
04-Dec-1998 32.56 56,900
07-Dec-1998 32.56 42,800
08-Dec-1998 32.50 34,200
09-Dec-1998 32.56 26,800
10-Dec-1998 32.63 36,800
11-Dec-1998 32.56 44,600
14-Dec-1998 32.13 45,200
15-Dec-1998 32.00 42,300
16-Dec-1998 31.56 32,200
17-Dec-1998 31.88 76,600
18-Dec-1998 32.69 32,300
21-Dec-1998 32.13 96,600
22-Dec-1998 31.75 74,300
23-Dec-1998 32.50 104,600
24-Dec-1998 32.38 21,000
25-Dec-1998 32.38
28-Dec-1998 30.88 128,300
29-Dec-1998 31.13 127,100
30-Dec-1998 30.94 80,500
31-Dec-1998 31.13 50,800
01-Jan-1999 31.13
04-Jan-1999 30.94 92,700
05-Jan-1999 30.94 62,300
06-Jan-1999 30.31 106,000
07-Jan-1999 30.50 145,500
08-Jan-1999 30.50 113,800
11-Jan-1999 30.63 81,000
12-Jan-1999 30.69 59,700
13-Jan-1999 30.38 74,800
14-Jan-1999 29.75 57,000
15-Jan-1999 30.31 49,300
18-Jan-1999 30.31
19-Jan-1999 30.19 54,900
20-Jan-1999 30.19 77,000
21-Jan-1999 29.75 87,500
22-Jan-1999 29.69 56,900
25-Jan-1999 29.44 49,100
26-Jan-1999 29.63 52,400
27-Jan-1999 29.31 103,600
28-Jan-1999 28.88 168,600
29-Jan-1999 28.81 124,100
01-Feb-1999 29.38 143,500
02-Feb-1999 29.44 95,100
03-Feb-1999 28.69 74,500
04-Feb-1999 28.19 206,800
05-Feb-1999 28.19 145,800
08-Feb-1999 28.88 145,300
09-Feb-1999 28.88 74,100
10-Feb-1999 29.13 97,200
11-Feb-1999 29.50 75,400
12-Feb-1999 29.31 100,700
15-Feb-1999 29.31
16-Feb-1999 29.38 118,900
17-Feb-1999 29.31 41,700
18-Feb-1999 29.63 59,800
19-Feb-1999 29.44 98,400
22-Feb-1999 29.44 137,000
23-Feb-1999 29.44 73,100
24-Feb-1999 29.44 60,000
25-Feb-1999 29.13 134,700
26-Feb-1999 28.75 43,300
01-Mar-1999 28.81 71,700
02-Mar-1999 29.50 87,200
03-Mar-1999 29.31 36,600
04-Mar-1999 29.31 58,000
05-Mar-1999 29.38 75,300
08-Mar-1999 29.81 113,700
09-Mar-1999 30.19 106,300
10-Mar-1999 30.13 90,800
11-Mar-1999 30.25 84,300
12-Mar-1999 30.25 63,600
15-Mar-1999 30.94 84,500
16-Mar-1999 30.50 81,500
17-Mar-1999 30.50 61,600
18-Mar-1999 31.00 40,200
19-Mar-1999 30.56 55,300
22-Mar-1999 30.75 70,600
23-Mar-1999 29.44 126,900
24-Mar-1999 29.75 57,700
25-Mar-1999 30.31 58,700
26-Mar-1999 30.50 48,900
29-Mar-1999 30.00 60,200
30-Mar-1999 30.25 62,600
31-Mar-1999 31.44 360,000
01-Apr-1999 30.00 77,700
02-Apr-1999 30.00
05-Apr-1999 29.56 71,900
06-Apr-1999 29.31 68,300
07-Apr-1999 29.00 56,800
08-Apr-1999 29.06 84,100
09-Apr-1999 29.13 61,600
12-Apr-1999 28.88 79,000
13-Apr-1999 29.56 100,200
14-Apr-1999 29.25 49,600
15-Apr-1999 29.00 67,600
16-Apr-1999 28.94 47,000
19-Apr-1999 29.69 89,200
20-Apr-1999 28.38 147,400
21-Apr-1999 28.25 71,900
22-Apr-1999 28.13 73,000
23-Apr-1999 28.13
26-Apr-1999 28.00 144,900
27-Apr-1999 28.00 112,000
28-Apr-1999 27.56 135,300
29-Apr-1999 26.88 137,300
30-Apr-1999 26.88 200,000
03-May-1999 26.88 128,300
04-May-1999 27.25 167,600
05-May-1999 28.13 95,100
06-May-1999 28.81 141,200
07-May-1999 29.69 99,400
10-May-1999 29.69 65,300
11-May-1999 29.00 53,800
12-May-1999 28.94 77,600
13-May-1999 28.25 62,200
14-May-1999 29.00 47,200
17-May-1999 28.81 67,300
18-May-1999 29.13 55,100
19-May-1999 28.50 53,600
20-May-1999 28.63 47,900
21-May-1999 29.31 47,200
24-May-1999 28.50 59,700
25-May-1999 27.75 65,200
26-May-1999 27.69 54,700
27-May-1999 28.44 77,800
28-May-1999 28.38 33,400
31-May-1999 28.38
01-Jun-1999 28.06 58,100
02-Jun-1999 28.06 57,300
03-Jun-1999 28.00 40,900
04-Jun-1999 27.69 88,000
07-Jun-1999 28.19 65,700
08-Jun-1999 28.50 124,300
09-Jun-1999 29.00 89,800
10-Jun-1999 29.44 68,300
11-Jun-1999 29.75 64,400
14-Jun-1999 29.06 84,200
15-Jun-1999 28.75 75,500
16-Jun-1999 29.19 88,600
17-Jun-1999 29.75 88,700
18-Jun-1999 29.63 55,000
21-Jun-1999 29.56 91,500
22-Jun-1999 29.81 55,500
23-Jun-1999 29.88 58,200
24-Jun-1999 29.75 46,600
25-Jun-1999 29.69 49,400
28-Jun-1999 29.50 46,800
29-Jun-1999 29.44 54,100
30-Jun-1999 29.75 63,800
01-Jul-1999 29.38 80,400
02-Jul-1999 30.19 76,500
05-Jul-1999 30.19
06-Jul-1999 29.56 82,400
07-Jul-1999 33.88 908,000
08-Jul-1999 32.88 309,100
09-Jul-1999 34.50 317,500
12-Jul-1999 33.69 106,000
13-Jul-1999 33.88 103,600
14-Jul-1999 34.00 70,500
15-Jul-1999 33.88 89,900
16-Jul-1999 33.88 51,200
19-Jul-1999 33.50 55,200
20-Jul-1999 33.25 76,700
21-Jul-1999 33.19 53,700
22-Jul-1999 33.00 61,200
23-Jul-1999 33.25 48,600
26-Jul-1999 32.75 47,400
27-Jul-1999 33.50 70,200
28-Jul-1999 33.69 57,400
29-Jul-1999 33.50 74,800
30-Jul-1999 33.50 54,200
02-Aug-1999 34.25 108,200
03-Aug-1999 33.56 57,000
04-Aug-1999 32.63 57,700
05-Aug-1999 31.69 83,700
06-Aug-1999 31.00 62,500
09-Aug-1999 31.00 78,900
10-Aug-1999 30.94 47,100
11-Aug-1999 31.50 139,200
12-Aug-1999 32.69 64,900
13-Aug-1999 33.69 58,400
16-Aug-1999 34.88 123,200
17-Aug-1999 33.88 135,700
18-Aug-1999 33.63 75,500
19-Aug-1999 33.25 47,900
20-Aug-1999 33.19 55,100
23-Aug-1999 33.31 32,300
24-Aug-1999 33.00 48,100
25-Aug-1999 32.50 55,300
26-Aug-1999 34.44 83,000
27-Aug-1999 36.44 265,900
30-Aug-1999 35.56 193,200
31-Aug-1999 35.25 84,700
01-Sep-1999 35.00 59,700
02-Sep-1999 34.44 59,700
03-Sep-1999 35.31 90,200
06-Sep-1999 35.31
07-Sep-1999 36.38 160,600
08-Sep-1999 35.81 60,100
09-Sep-1999 35.50 51,200
10-Sep-1999 35.31 38,800
13-Sep-1999 35.94 189,200
14-Sep-1999 35.63 63,700
15-Sep-1999 37.44 415,000
16-Sep-1999 36.81 160,700
17-Sep-1999 36.38 120,900
20-Sep-1999 35.63 73,800
21-Sep-1999 34.75 106,900
22-Sep-1999 34.56 91,100
23-Sep-1999 33.63 62,200
24-Sep-1999 33.69 53,200
27-Sep-1999 34.56 96,000
28-Sep-1999 33.44 121,300
29-Sep-1999 32.94 68,800
30-Sep-1999 31.50 583,100
01-Oct-1999 30.00 183,000
04-Oct-1999 30.50 82,400
05-Oct-1999 32.75 101,400
06-Oct-1999 34.94 731,400
07-Oct-1999 34.88 218,300
08-Oct-1999 35.00 168,200
11-Oct-1999 35.19 64,400
12-Oct-1999 34.50 103,700
13-Oct-1999 34.69 72,600
14-Oct-1999 33.75 159,600
15-Oct-1999 33.44 90,100
18-Oct-1999 33.19 125,500
19-Oct-1999 33.38 111,400
20-Oct-1999 33.25 64,100
21-Oct-1999 32.88 65,000
22-Oct-1999 33.88 140,000
25-Oct-1999 33.81 73,700
26-Oct-1999 33.50 85,300
27-Oct-1999 34.19 109,300
Daily from 10/27/1998 to 10/27/1999
<PAGE>
PIMCO vs. Comparable Composites
Daily Indexed Common Stock Price History
Asset Management
Companies (AMC):
- ---------------
Affiliated Managers Group
AMVESCAP
Conning & Company
Eaton Vance
Federated Investors
Franklin Resources
Gabelli Asset Management
John Nuveen
Phoenix Investment Partners
T. Rowe Price
United Asset Management
Waddell & Reed
Master Limited
Partnerships (MLP):
- ------------------
Alliance Capital Management
Nvest Companies
[Graph comparing daily indexed common stock price of PIMCO, S&P 500, Asset
Management Companies, and Master Limited Partnerships for the period of 7/6/1999
to 10/27/1999.]
<PAGE>
<TABLE>
<CAPTION>
Comparison of Selected Investment Management Companies (a)
Market % of P/E
Price Price Cap 52-Week ----------------------
Company 10/27/99 7/8/1999 % Change ($mm) High 1999E 2000E
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PIMCO Advisors $34.19 $29.56 15.6 % $3,884 90.0% 20.4 x 16.8 x
Asset Management Companies
- --------------------------
Franklin Resources $31.56 $42.38 (25.5)% $7,958 69.2% 12.4 x 12.0 x
AMVESCAP 36.38 47.81 (23.9) 4,854 64.4 16.2 13.5
T. Rowe Price 30.69 39.61 (22.9) 3,725 71.0 17.6 16.2
Federated Investors 17.25 17.69 (2.5) 1,454 87.1 12.8 10.8
Waddell & Reed 23.00 26.56 (13.4) 1,370 82.1 14.6 12.2
Neuberger Berman 26.06 NA NA 1,304 62.4 9.7 8.9
Eaton Vance (c) 32.81 38.88 (15.6) 1,177 82.0 20.6 11.5
UAM 20.00 21.94 (8.8) 1,178 75.5 19.2 17.1
John Nuveen 35.56 40.75 (12.7) 1,119 81.4 12.7 11.7
Blackrock 14.06 NA NA 900 94.5 14.8 12.2
AMG 24.44 31.38 (22.1) 569 72.0 14.4 11.7
Gabelli Asset Management (d) 14.81 15.50 (4.4) 442 79.0 10.7 9.6
Phoenix Investment Partners 8.13 8.56 (5.1) 357 79.3 14.0 11.6
Conning & Company 8.25 17.50 (52.9) 112 39.3 8.7 7.5
- ------------------------------------------------------------------------------------------------------------------------------------
Median - Asset Management Companies (14.5) % 79.1 % 14.2 x 11.7 x
- ------------------------------------------------------------------------------------------------------------------------------------
Master Limited Partnerships
- ---------------------------
Alliance Capital Management $ 25.75 $32.25 (20.2)% $4,407 77.0 % 11.4 x 10.2 x
Nvest Companies 19.75 25.00 (21.0) 870 66.9 10.4 9.4
- ------------------------------------------------------------------------------------------------------------------------------------
Median - Master Limited Partnerships (20.6)% 72.0 % 10.9 x 9.8 x
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Median - All (17.9)% 78.0 % 13.4 x 11.6 x
- ------------------------------------------------------------------------------------------------------------------------------------
IBES 1999 P/E Adjusted Market Cap/
5-year / 5-year ------------------------------ Price to Div.
Company Growth Growth AUM Revenue EBITDA(b) LTM Div. Yield
- ------------------------------------------------------------------------------------------------------------------------------------
PIMCO Advisors 14.0 % 1.5 x 1.6 % 4.2 x 13.4 x 14.7 x 7.0 %
Asset Management Companies
- --------------------------
Franklin Resources 14.0 % 0.9 x 3.2 % 3.2 x 10.6 x 143.5 x 0.7 %
AMVESCAP 19.5 0.8 1.9 3.7 11.7 48.2 1.7
T. Rowe Price 15.0 1.2 2.1 3.6 8.9 76.7 1.3
Federated Investors 16.0 0.8 1.4 2.9 7.1 32.5 1.0
Waddell & Reed 14.5 1.0 4.4 4.2 8.8 143.8 2.3
Neuberger Berman 15.0 1.1 2.3 2.3 4.1 NA NA
Eaton Vance (c) 20.0 1.0 2.9 3.5 8.7 109.4 1.2
UAM 11.0 1.7 1.0 2.2 6.3 25.0 4.0
John Nuveen 10.0 1.3 1.9 3.6 7.3 32.3 3.3
Blackrock 16.0 0.5 0.7 2.4 8.4 NA NA
AMG 21.3 0.7 1.0 2.5 5.3 NM 0.0
Gabelli Asset Management (d) 15.0 0.7 2.2 2.6 7.7 NM 0.0
Phoenix Investment Partners 12.5 1.1 1.1 2.6 7.6 33.9 3.0
Conning & Company 18.0 0.5 0.2 0.9 2.7 43.4 2.4
- ------------------------------------------------------------------------------------------------------------------------------------
Median - Asset Management Companies 15.0 % 0.9 x 1.9 % 2.8 x 7.7 x 45.8 x 1.5 %
- ------------------------------------------------------------------------------------------------------------------------------------
Master Limited Partnerships
- ---------------------------
Alliance Capital Management 14.8 % 0.8 x 1.4 % 3.0 x 10.2 x 13.6 x 8.7 %
Nvest Companies 10.0 % 1.0 0.8 1.7 6.2 7.8 12.8
- ------------------------------------------------------------------------------------------------------------------------------------
Median - Master Limited Partnerships 12.4 % 0.9 x 1.1 % 2.3 x 8.2 x 10.7 x 10.7 %
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Median - All 15.0 % 0.9 x 1.7 % 2.8 x 7.7 x 38.6 x 2.0 %
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: All earnings estimates per IBES.
(a) As of or for the Last Twelve Months ended June 30, 1999 (9/30/1999 for
PIMCO).
(b) Earnings before interest, taxes, depreciations and amortization.
Amortization of deferred sales commissions is considered an operating
expense for calculating EBITDA.
(c) EBITDA excludes impact of accounting change requiring closed-end fund sales
to be capitalized rather than expensed.
(d) Results are pro forma for restructuring. Extraordinary expense due to
restructuring has been eliminated.
<PAGE>
Comparison of Selected Investment Management Companies (a)
<TABLE>
<CAPTION>
5-Year LTM Operating EBITDA/
AUM AUM AUM Revenue/ Expenses/ Comp./ Interest EBITDA Debt/ Debt/
Company ($bn) Growth Growth AUM Revenue Revenue Expenses Margin EBITDA Cap.
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PIMCO Advisors $ 256.2 35.6% 13.4% 0.37% 78.7% 41.6% 31.1x 31.5% 0.5x 12.1%
Asset Managers
- --------------
Franklin Resources $ 227.7 33.0% (3.8)% 1.00% 74.6% 22.9% 31.2x 34.2% 0.7x 15.0%
AMVESCAP (b) 295.9 42.4 13.4 0.53 72.5 NA 7.8 31.4 2.2 34.5
T. Rowe Price 159.2 37.4 12.2 0.59 63.4 34.1 NM 40.0 0.0 2.1
Federated Investors 117.3 NA 16.7 0.48 62.8 26.6 7.7 48.0 1.7 76.1
Waddell & Reed 29.6 NA 10.9 1.06 54.0 10.7 55.1 47.6 0.6 35.1
Neuberger Berman 56.8 18.0 (3.9) 1.01 46.3 25.5 2.3 55.8 0.1 12.1
Eaton Vance (d) 39.0 25.9 41.8 0.82 59.8 21.2 NM 60.0 0.3 16.5
UAM 205.9 23.6 (2.0) 0.44 80.1 49.8 5.0 34.3 2.9 81.3
John Nuveen (c) 59.5 19.3 14.1 0.54 54.6 29.1 60.7 49.3 0.3 10.7
Blackrock 141.8 25.5 21.5 0.27 75.0 40.5 8.8 29.1 1.1 48.6
AMG 70.9 NA 29.1 0.40 61.1 36.2 10.4 47.1 1.3 28.8
Gabelli Asset Management (e) 18.0 NA 16.9 0.85 67.0 41.1 24.3 33.6 1.0 28.4
Phoenix Investment Partners 59.5 NA 17.7 0.42 76.8 40.6 6.2 35.5 4.1 59.4
Conning & Company 32.4 29.6 14.9 0.27 71.5 45.9 118.1 32.0 0.0 0.0
- ----------------------------------------------------------------------------------------------------------------------------------
Median-Asset Management Companies $ 65.2 25.9% 14.5% 0.53% 65.2% 34.1% 9.6x 37.8% 0.8x 28.6%
- ----------------------------------------------------------------------------------------------------------------------------------
Master Limited Partnerships
- ---------------------------
Alliance Capital Management $ 321.0 30.9% 22.3% 0.47% 72.4% 25.9% 38.5x 37.9% 0.8x 43.3%
Nvest Companies 136.0 24.1 0.0 0.48 79.6 49.4 8.5 27.8 1.6 40.2
- ----------------------------------------------------------------------------------------------------------------------------------
Median-Master Limited Partnerships $ 228.5 27.5% 11.1% 0.48% 76.0% 37.7% 23.5x 32.9% 1.2x 41.7%
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Median-All $ 94.1 25.9% 14.5% 0.51% 69.2% 34.1% 9.6x 36.7% 0.9x 31.7%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: All earnings estimates per IBES.
(a) As of or for the Last Twelve Months ended June 30, 1999 (9/30/1999 for
PIMCO).
(b) UK GAAP equity of $2,093.5 mm used for calculations. US GAAP equity is
$2,139.7 mm. Debt includes amount due to creditors within the year of
$1,118.0 mm.
(c) Equity includes $45 mm of preferred.
(d) EBITDA excludes impact of accounting change requiring closed-end fund sales
to be capitalized rather than expensed.
(e) Results are pro forma for restructuring. Extraordinary expense due to
restructuring has been eliminated.
<PAGE>
Summary of Recent Asset Manager Transactions
Includes Managers with a Strong Institutional Presence
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Date Acquiror/ Approximate Assets Aggregate Multiple of Multiple of
Announced Target Under Management Consideration Revenue LTM EBITDA
($ in billions) ($ in millions)
- ------------------------------------------------------------------------------------------------------------------------------------
Summary of Selected Deals Greater than $500 Million (Selected Deals in Italics)
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
High 11.6 x 24.9 x
Low 3.1 11.1
Mean 5.5 17.7
Median 4.8 18.6
----------------------------------------------------------------------------------------------------------------
Summary of All Deals Since 1996
----------------------------------------------------------------------------------------------------------------
High 11.6 x 24.9 x
Low 3.1 9.5
Mean 5.4 14.3
Median 4.8 11.2
----------------------------------------------------------------------------------------------------------------
Jul-99 Putnam Investments/ $ 5.0 N.A. N.A. N.A.
Thomas H. Lee & Co
May-99 Wachovia/ 11.0 $ 200.0 5.0 x N.A.
Offitbank
Mar-99 Prudential/ 29.8 3,064.5 11.6 24.9
M&G
Apr-99 WestLB/ 9.0 N.A. N.A. N.A.
Criterion Investment Management
Apr-99 AIG/ 4.0 N.A. N.A. N.A.
John McStay
Feb-99 First Union/ 4.0 N.A. N.A. N.A.
Tattersall Advisory Group
Dec-98 OppenheimerFunds/ 8.5 N.A. N.A. N.A.
Trinity Investment Management
Oct-98 Axa/ 7.0 125.0 N.A. N.A.
Barr Rosenberg Capital
Aug-98 Northwestern Mutual Life Insurance/ 42.0 915.0 3.7 18.6
Frank Russell Company
Jun-98 Liberty Financial/ 5.3 147.5 N.A. N.A.
Crabbe Huson
May-98 Robeco Group/ 15.2 506.0 4.8 11.5
Weiss, Peck & Greer
<CAPTION>
- ----------------------------------------------------------------------------------------------
Multiple of LTM Percentage of
Date Acquiror/ EPS/Net Assets Under
Announced Targer Income Management
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
Summary of Selected Deals Greater than $500 Million (Selected Deals in Italics)
High 35.7 x 3.3 %
Low 22.5 1.3
Mean 28.1 2.3
Median 26.0 2.3
- ----------------------------------------------------------------------------------------------
Summary of All Deals Since 1996
- ----------------------------------------------------------------------------------------------
High 35.7 x 4.5 %
Low 15.8 0.9
Mean 23.5 2.3
Median 22.5 2.2
- ----------------------------------------------------------------------------------------------
Jul-99 Putnam Investments/ N.A. N.A.
Thomas H. Lee & Co
May-99 Wachovia/ N.A. N.A.
Offitbank
Mar-99 Prudential/ 35.7 x 2.2 %
M&G
Apr-99 WestLB/ N.A. N.A.
Criterion Investment Management
Apr-99 AIG/ N.A. N.A.
John McStay
Feb-99 First Union/ N.A. N.A.
Tattersall Advisory Group
Dec-98 OppenheimerFunds/ N.A. 2.4
Trinity Investment Management
Oct-98 Axa/ N.A. 3.6
Barr Rosenberg Capital
Aug-98 Northwestern Mutual Life Insurance/ 26.0 2.2
Frank Russell Company
Jun-98 Liberty Financial/ N.A. 2.8
Crabbe Huson
May-98 Robeco Group/ N.A. 3.3
Weiss, Peck & Greer
</TABLE>
<PAGE>
Summary of Recent Asset Manager Transactions
Includes Managers with a Strong Institutional Presence
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Approximate Assets Aggregate
Date Acquiror/ Under Management Consideration Multiple of Multiple of
Announced Target ($ in billions) ($ in millions) Revenue LTM EBITDA
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Feb-98 Value Asset Management/ $ 3.0 N.A. N.A. N.A.
Grosvenor Capital Management
Jan-98 Amvescap/ $60.0 $1,450.0 3.1 x 20.6 x
Chancellor LGT Asset Mgmt
Dec-97 Robeco/ 8.0 N.A. N.A. N.A.
RREEF
Dec-97 Legg Mason/ 7.5 146.0 N.A. N.A.
Brandywine Asset Management
Nov-97 PIMCO Advisors L.P./ 60.7 800.0 5.0 11.1
Oppenheimer Capital (67%)
Nov-97 Merrill Lynch & Co. / 177.0 4,551.3 7.1 17.6
Mercury Asset Management
Aug-97 Commerzbank/ 8.0 250.0 N.A. 11.0
Montgomery Securities Inc.
Jul-97 Generale Bank/ 4.7 42.0 N.A. N.A.
Harbor Capital Management
May-97 Refco Group/ 3.7 N.A. N.A. N.A.
Forstmann-Leff Associates
Apr-97 United Asset Management/ 1.5 33.6 N.A. N.A.
Thomson Horstmann & Bryant
Mar-97 Affiliated Managers Group/ 3.2 N.A N.A. N.A.
Gofen & Glossberg
Mar-97 United Asset Management/ 4.2 N.A. N.A. N.A.
Pacific Financial Research, Inc.
Feb-97 Phoenix Duff & Phelps/ 4.0 54.0 N.A. 11.0
GMG/Seneca Capital Management
Feb-97 PIMCO Advisors, L.P./ 48.0 233.0 4.7 11.2
Oppenheimer Capital (33%)
Dec-96 Countrywide Credit Industries/ 1.1 17.0 N.A. N.A.
Leshner Financial
<CAPTION>
- ----------------------------------------------------------------------------------------------
Multiple of LTM Percentage of
Date Acquiror/ EPS/Net Assets Under
Announced Targer Income Management
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Feb-98 Value Asset Management/ N.A. N.A.
Grosvenor Capital Management
Jan-98 Amvescap/ N.A. 2.4 %
Chancellor LGT Asset Mgmt
Dec-97 Robeco/ N.A. N.A.
RREEF
Dec-97 Legg Mason/ N.A. 1.9
Brandywine Asset Management
Nov-97 PIMCO Advisors L.P./ N.A. 2.3
Oppenheimer Capital (67%)
Nov-97 Merrill Lynch & Co. / 22.5 x 2.6
Mercury Asset Management
Aug-97 Commerzbank/ N.A. 3.1
Montgomery Securities Inc.
Jul-97 Generale Bank/ N.A. 0.9
Harbor Capital Management
May-97 Refco Group/ N.A. N.A.
Forstmann-Leff Associates
Apr-97 United Asset Management/ N.A. 2.2
Thomson Horstmann & Bryant
Mar-97 Affiliated Managers Group/ N.A. N.A.
Gofen & Glossberg
Mar-97 United Asset Management/ N.A. N.A.
Pacific Financial Research, Inc.
Feb-97 Phoenix Duff & Phelps/ N.A. 1.4
GMG/Seneca Capital Management
Feb-97 PIMCO Advisors, L.P./ N.A. 1.7
Oppenheimer Capital (33%)
Dec-96 Countrywide Credit Industries/ N.A. 1.5
Leshner Financial
</TABLE>
<PAGE>
Summary of Recent Asset Manager Transactions
Includes Managers with a Strong Institutional Presence
<TABLE>
<CAPTION>
- ------------- ---------------------------- -------------------------------- ------------------- ------------------- ----------------
Approximate Assets Aggregate
Date Acquiror/ Under Management Consideration Multiple of Multiple of
Announced Target ($ in billions) ($ in millions) Revenue LTM EBITDA
- ------------- ----------------------------- ------------------------------- ------------------- ------------------ ----------------
<S> <C> <C> <C> <C> <C>
Oct-96 Goldman Sachs & Co./ 5.4 60.0 N.A. N.A.
Liberty Investment Management
Sep-96 New England Investment Companies, L.P./ $ 4.8 $ 107.0 N.A. N.A.
Jurika & Voyles, Inc.
Sep-96 New England Investment Companies, L.P./ 5.1 102.5 N.A. N.A.
Aldrich Eastman & Waltch Inc.
Jul-96 Liechtenstein Global Trust/ 33.0 300.0 N.A. N.A.
Chancellor Capital Management
Jul-96 Goldman Sachs/ N.A. N.A. N.A. N.A.
CIN Management
Jul-96 United Asset Management/ 6.0 137.7 4.7 x 10.4 x
Clay Finlay
May-96 Merrill Lynch & Co./ 10.0 178.5 4.3 9.5
Hotchkiss & Wiley
<CAPTION>
- -------------- -------------------------------------------- ---------------------- ---------------------
Multiple of LTM Percentage of
Date Acquiror/ EPS/Net Assets Under
Announced Targer Income Management
- -------------- -------------------------------------------- ---------------------- ---------------------
Oct-96 Goldman Sachs & Co./ N.A. N.A.
Liberty Investment Management
Sep-96 New England Investment Companies, L.P./ N.A. 2.1 %
Jurika & Voyles, Inc.
Sep-96 New England Investment Companies, L.P./ N.A. 2.0
Aldrich Eastman & Waltch Inc.
Jul-96 Liechtenstein Global Trust/ N.A. 4.5
Chancellor Capital Management
Jul-96 Goldman Sachs/ N.A. N.A.
CIN Management
Jul-96 United Asset Management/ 17.4 x 2.3
Clay Finlay
May-96 Merrill Lynch & Co./ 15.8 1.7
Hotchkiss & Wiley
</TABLE>
<PAGE>
Transactions in Context with Public Market Environment
Managers with Strong Institutional Presence
Selected Deals Greater than $500 Million
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Composite P/E
Aggregate Assets Management Announcement/
Date Acquiror/ Consideration Composite P/E at Current Composite
Announced Target ($ in millions) Announcement(a) P/E (b)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mar-1999 Prudential/ $ 3,064.5 17.1 x 1.2 x
M&G
Aug-1998 Northwestern Mutual Life Insurance/ 950.0 20.1 1.4
Frank Russell Company
May-1998 Robeco Group/ 506.0 22.9 1.6
Weiss, Peck & Greer
Jan-1998 Amvescap/ 1,450.0 21.2 1.5
Chancellor LGT Asset Mgmt
Nov-1997 PIMCO Advisors, L.P./ 800.0 20.5 1.4
Oppenheimer Capital (67%)
Nov-1997 Merrill Lynch & Co. / 4,551.3 20.9 1.5
Mercury Asset Management
Jun-1997 Zurich Kemper Investments/ 1,550.0 18.5 1.3
Scudder, Stevens & Clark
- ------------------------------------------------------------------------------------------------------------------------------------
Median 20.5 x 1.4 x
- ------------------------------------------------------------------------------------------------------------------------------------
Current (10/27/99) 14.2 x 1.0 x
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Represents the asset management composite current year median P/E at
transaction announcement.
(b) Represents the asset management composite P/E at announcement over the
current (10/27/1999) asset management composite P/E.
<PAGE>
Comparison of Deal Multiples
($ in millions)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Implied
Premium at
PIMCO $38.75 / Unit Historical Transaction Premiums (a)
----- ------------- -----------------------------------------
Low Median High
--- ------ ----
<S> <C> <C> <C> <C> <C>
Current Price (10/29/1999) $ 34.69 11.7 %
Undisturbed Price (7/6/1999) (b) 29.56 31.1 0.7 % 27.2 % 69.4 %
Adjusted Undisturbed Price (c) 23.47 65.1 0.7 27.2 69.4
Implied
Multiples at
LTM (through 9/30/99): PIMCO $38.75 / Unit Historical Transaction Multiples (d)
----- ------------- ----------------------------------------
Revenue $ 944.2 4.7 x 3.1 x 4.8 x 11.6 x
EBITDA 314.9 14.0 9.5 11.2 24.9
Net Income 209.3 21.0 15.8 22.5 35.7
% of AUM ($bn, at 9/30/99) $ 256.2 1.7 % 0.9 % 2.2 % 4.5 %
Implied
Multiples at
PIMCO $38.75 / Unit Current Market Multiples (e)
----- ------------- --------------------------------------
Low Median High
--- ------ ----
1999E PIMCO EPS (f) $ 1.50 25.8 x 8.4 x 12.6 x 20.6 x
1999E IBES EPS (g) 1.68 23.1 8.4 12.6 20.6
2000E IBES EPS (g) 2.03 19.1 7.3 10.7 16.2
</TABLE>
(a) All financial service deals greater than $1 billion since 1998. Premium
over price four weeks before announcement.
(b) Price trading day before rumors of transaction appeared in the press.
(c) Undisturbed price adjusted for the 20.5% decline in master limited
partnership stock prices since 7/6/1999.
(d) All institutional asset management deals since 1996.
(e) Includes publicly traded asset managers.
(f) Based on PIMCO third quarter 1999 press release dated 10/27/1999.
(g) IBES estimates as of 10/27/1999.
<PAGE>
[LETTERHEAD OF GOLDMAN, SACKS & CO.]
PERSONAL AND CONFIDENTIAL
- -------------------------
EXHIBIT 99.(b)(9)
October 31, 1999
Board of Directors
Pacific Life Insurance Company
700 Newport Center Drive
Newport Beach, California 92660
Ladies and Gentlemen:
You have requested our opinion as to the fairness from a financial point of view
to Pacific Life Insurance Company ("Pacific Life"), which shall include, where
appropriate, its affiliates, including without limitation, Pacific Asset
Management LLC, of the Consideration (as defined herein, with such assumptions
reflected in such definition) to be received by Pacific Life pursuant to the
Implementation and Merger Agreement dated as of October 31, 1999 by and among
affiliates of Allianz of America Inc. ("Allianz"), Pacific Life, PIMCO Advisors
L.P. ("PIMCO"), and certain other parties named therein (the "Merger
Agreement"), and the Continuing Investment Agreement by and among Allianz and
Pacific Life (the "Investment Agreement" and, together with the Merger
Agreement, the "Agreements"). As more fully described in the Agreements, (i)
Allianz will acquire all outstanding Class A Units of PIMCO (the "Class A
Units"), other than those held by Pacific Life, for a purchase price of $38.75
in cash (the "Class A Unit Price"), (ii) Pacific Life will exchange all of its
Class A Units for an equivalent number (subject to a reverse split) of Class E
Units of PIMCO (the "Class E Units"), and (iii) Pacific Life will enter into a
put/call arrangement (the "Put/Call Arrangement") with Allianz with respect to
such Class E Units (the "Exchange").
We understand based on discussions with representatives of Pacific Life that, in
connection with the transactions contemplated by the Agreements, (i) Pacific
Life will relinquish its role as one of two general partners of PIMCO Partners
G.P., an affiliate of PIMCO, and Allianz will become the sole managing member of
the general partner of PIMCO, (ii) after consummation of the transactions
contemplated by the Agreements, the public market for the Class A Units will
cease to exist and Pacific Life's liquidity for the Class E Units will be
provided solely by the Put/Call Arrangement as outlined in the Investment
Agreement, and (iii) under the terms of the Put/Call Arrangement, Pacific Life
will immediately have the ability to put the Class E Units to Allianz at the
Class A Unit Price, subject to certain adjustments.
<PAGE>
Pacific Life Insurance Company
October 31, 1999
Page Two
Goldman, Sachs & Co., as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. We are familiar with
Pacific Life having provided certain investment banking services to Pacific Life
from time to time, including having acted as its financial advisor in connection
with its reorganization in September 1997 to a mutual holding structure and
having acted as its financial advisor in connection with, and having
participated in certain of the negotiations leading to, the Agreements. We have
also provided certain investment banking services to PIMCO from time to time. In
addition, we have provided certain investment banking services to Allianz from
time to time, including having acted as its financial advisor in connection with
the sale of its subsidiary San Francisco Re in November 1996, as its financial
advisor in connection with its acquisition of AGF in May 1998 and as a
co-manager for three of its debt issuances from 1996 to 1998. Also, in September
1999, Paul Achleitner, a Managing Director of Goldman, Sachs & Co., was named
Chief Financial Officer of Allianz AG, an affiliate of Allianz, effective
January 1, 2000. Goldman, Sachs & Co. provides a full range of financial
advisory and securities services and in the course of its normal trading
activities, may from time to time effect transactions and hold securities,
including derivative securities, of Pacific Life, PIMCO and Allianz for its own
account and for the account of customers. In addition, we may provide investment
banking services in the future to PIMCO and Allianz.
In connection with this opinion, we have reviewed, among other things, the
Agreements; the Amended and Restated Agreement of Limited Partnership of PIMCO
dated June 30, 1999; the Amended and Restated Agreement of Limited Partnership
of PIMCO Advisors Holdings L.P. ("Holdings") dated June 30, 1999; Annual Reports
on Form 10-K of Holdings; Quarterly Reports on Form 10-Q and certain other
interim reports of Holdings; Annual Reports of Pacific Life for the five years
ended December 31, 1998 and certain other quarterly reports of Pacific Life;
audited GAAP financial statements of Pacific Life, PIMCO and Holdings for the
five years ended December 31, 1998; Statutory Annual Statements filed by Pacific
Life with the Insurance Department of the State of California for the five years
ended December 31, 1998; certain internal financial analyses and forecasts for
Pacific Life prepared by the management of Pacific Life; and certain internal
financial analyses and forecasts for PIMCO prepared by the management of PIMCO.
We also have held discussions with members of the senior managements of Pacific
Life, PIMCO and Allianz regarding the Exchange and the other transactions
contemplated by the Agreements, and PIMCO's past and current business
operations, financial condition and future prospects. In addition, we have
reviewed the reported price and trading activity for the Class A Units, compared
certain financial and stock market information for PIMCO with similar
information for certain other companies the securities of which are publicly
traded, reviewed the financial terms of certain recent business combinations in
the asset management industry specifically and in other industries generally,
and performed such other studies and analyses as we considered appropriate.
<PAGE>
Pacific Life Insurance Company
October 31, 1999
Page Three
We have relied upon the accuracy and completeness of all of the financial and
other information reviewed by us and have assumed such accuracy and completeness
for purposes of rendering this opinion. As you are aware, the management of
PIMCO has informed us that PIMCO has not prepared forecasts beyond the current
fiscal year. Accordingly, we note that our review with respect to such forecasts
with your consent was based on estimates for PIMCO published by the
Institutional Brokers Estimate System. In addition, we have not made an
independent evaluation or appraisal of the assets or liabilities of PIMCO or any
of its subsidiaries and we have not been furnished with any such evaluation or
appraisal. We have not been requested to evaluate, and we express no opinion as
to, the tax implications to Pacific Life of the Exchange or the transactions
contemplated thereby, including the Put/Call Arrangement. We also have not been
requested to evaluate, and we express no opinion as to, the cash or other
distributions that may be made to Pacific Life as a holder of Class E Units and,
with your consent, have evaluated the consideration to be received by Pacific
Life pursuant to the Exchange and related transactions assuming Pacific Life had
fully exercised on the date hereof its put option with respect to its Class E
Units as contemplated by the Put/Call Arrangement and had received upon such
exercise the Class A Unit Price for all of its Class E Units (such assumed
consideration, the "Consideration"). Our advisory services and the opinion
expressed herein are provided for the information and assistance of the Board of
Directors of Pacific Life in connection with its consideration of the
transactions contemplated by the Agreements and may not be relied upon by any
other party, including, without limitation, the Board of Directors of PIMCO or
holders of securities of PIMCO. In addition, this opinion is not to be used,
circulated, quoted or otherwise referred to for any other purpose, nor is it to
be filed with, included in or referred to in whole or in part in any
registration statement, proxy statement or any other document, except in
accordance with our prior written consent.
Our opinion is necessarily as of the date hereof, and we express no opinion as
to the value of PIMCO in the future, the actual value of the Class E Units when
issued to Pacific Life pursuant to the Exchange or the price at which such Class
E Units may be sold or otherwise transferred in the future pursuant to the
Put/Call Arrangement or otherwise.
Based upon and subject to the foregoing and based upon such other matters as we
consider relevant, it is our opinion that as of the date hereof the
Consideration (as defined herein, with such assumptions reflected in such
definition) to be received by Pacific Life pursuant to the Agreements is fair
from a financial point of view to Pacific Life.
Very truly yours,
/s/ Goldman, Sachs & Co.
- -------------------------------------
(GOLDMAN, SACHS & CO.)
