<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-2.
</TABLE>
U.S. TRUST CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-12.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
U.S. TRUST CORPORATION
114 WEST 47TH STREET, NEW YORK, NEW YORK 10036
(212) 852-1000
[LOGO] Notice of
Annual Meeting
of Shareholders
DATE: Tuesday, April 28, 1998
TIME: 10:00 a.m.
PLACE: U.S. Trust Auditorium
114 West 47th Street
New York, N.Y. 10036
ITEMS OF BUSINESS
-- Election of six directors to hold office for a term expiring
in 2001
-- Ratification of the appointment of Coopers & Lybrand L.L.P.
as independent auditors
-- Any other matters that may properly come before the meeting
or any adjournment thereof
RECORD DATE
Holders of Common Shares at the close of business on March 10,
1998 are entitled to vote at the meeting and at any adjournment
thereof.
Dated: March 16, 1998
Carol A. Strickland
Secretary
IT IS IMPORTANT THAT YOUR COMMON
SHARES BE REPRESENTED AND VOTED AT
THE MEETING. PLEASE USE THE
TOLL-FREE TELEPHONE NUMBER ON THE
ENCLOSED PROXY CARD OR MARK, SIGN,
DATE AND PROMPTLY RETURN THE
ENCLOSED PROXY CARD IN THE RETURN
ENVELOPE PROVIDED. ANY PROXY MAY BE
REVOKED IN THE MANNER DESCRIBED IN
THE ACCOMPANYING PROXY STATEMENT AND
DOES NOT AFFECT A SHAREHOLDER'S
RIGHT TO VOTE IN PERSON.
<PAGE> 3
U.S. TRUST CORPORATION
Proxy
Statement
GENERAL INFORMATION
This proxy statement is furnished in connection with the solicitation of proxies
by the Board of Directors of the Corporation to be used at the Annual Meeting of
Shareholders (the "Annual Meeting") of the Corporation and at any adjournment
thereof. Your vote is important. For this reason, the Board of Directors is
requesting that you allow your Common Shares to be represented and voted at the
Annual Meeting by the Proxies named in the enclosed proxy card. "We", "our" and
the "Corporation" each refers to U.S. Trust Corporation. "U.S. Trust" refers to
the Corporation's principal subsidiary, United States Trust Company of New York
(the "Trust Company") and its affiliates, including the Corporation. A proxy may
be revoked by a shareholder at any time prior to the time the shares are
actually voted. Proxies may be revoked either by written notice to the
Corporation, by submission of a subsequent proxy or by voting in person at the
Annual Meeting.
This proxy statement and the accompanying form of proxy are first being sent to
shareholders on or about March 16, 1998.
You are entitled to vote your Common Shares if our records show that you held
your shares as of March 10, 1998, the record date. On the record date, there
were 18,917,014 Common Shares of the Corporation outstanding and entitled to be
voted at the Annual Meeting.
INFORMATION ABOUT VOTING
Each Common Share has one vote. The enclosed proxy card shows the number of
Common Shares you are entitled to vote. Your individual vote is confidential and
will not be disclosed to third parties.
Shareholders of record may vote using the toll-free number listed on the proxy
card or they may mark, sign, date and mail their proxies in the postage-paid
envelope provided. If your Common Shares are held by a broker, bank or other
nominee, you will receive instructions from them, including possibly
instructions to vote by telephone, which you must follow in order to have your
shares voted. When you use the telephone system, the system verifies that you
are a shareholder through the use of a unique Control Number which is assigned
to you. The procedure allows you to instruct the Proxies how to vote your Common
Shares and to confirm that your instructions have been properly recorded.
1
<PAGE> 4
The method by which you vote will in no way limit your right to vote at the
Annual Meeting if you decide to attend in person. If your Common Shares are held
in the name of a bank, broker or other holder of record, you must obtain a
proxy, executed in your favor, from the holder of record to be able to vote at
the Annual Meeting.
Whether you mail or telephone your instructions, the Proxies will vote your
Common Shares in accordance with those instructions. If you sign a proxy card
without giving specific voting instructions, your shares will be voted as
recommended by our Board of Directors. We are not now aware of any matters to be
presented at the Annual Meeting other than those described in the Proxy
Statement. If any other matters are properly presented, the Proxies will have
discretion to vote on those matters according to their best judgment.
VOTES REQUIRED. The Annual Meeting will be held if a majority of the
outstanding Common Shares entitled to vote is represented at the meeting. If you
have returned valid proxy instructions by telephone or mail, or if you attend
the meeting in person, your Common Shares will be counted for the purpose of
determining whether there is a quorum, even if you wish to abstain from voting
on some or all matters introduced at the Annual Meeting. "Broker non-votes" also
count for quorum purposes.
A broker "non-vote" occurs when a nominee holding shares for a beneficial owner
does not vote on a particular proposal because the nominee does not have
discretionary voting power with respect to that item and has not received
instructions from the beneficial owner. We do not count abstentions and broker
non-votes for or against any proposal.
A plurality of votes cast is required for the election of directors.
Ratification of the appointment of the independent auditors requires the
affirmative vote of a majority of the votes cast.
COST OF SOLICITATION. We will pay the cost of this proxy solicitation. In
addition to soliciting proxies by mail, proxies may be solicited by personal
interview, telephone, facsimile or telegraph. We expect that a number of our
employees also may solicit proxies. None of these employees will receive any
additional or special compensation for doing this. We have retained Morrow &
Co., Inc. to assist in the solicitation of proxies for a fee of $5,500.00, plus
reasonable out-of-pocket expenses. We will, upon request, reimburse brokers,
banks and other nominees for their expense in sending proxy material to their
principals and obtaining their proxies.
BENEFICIAL OWNERSHIP
The following table contains information as of the close of business on February
27, 1998 concerning beneficial ownership of Common Shares by
- owners of more than 5% of the outstanding Common Shares;
- the Trust Company and its affiliates;
- directors, executive officers named in the Summary Compensation Table and
all directors and executive officers as a group.
Beneficial ownership involves sole voting and dispositive power unless otherwise
indicated.
2
<PAGE> 5
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
TITLE OF CLASS BENEFICIAL OWNER OWNERSHIP OF CLASS
- ------------------------
<S> <C> <C> <C>
Common Shares (par value 401(k) Plan and ESOP of United 3,615,004 shares (in a 18.08
$1 per share) States Trust Company of New York fiduciary capacity)(1)
and Affiliated Companies
114 West 47th Street
New York, New York 10036
GeoCapital LLC 767 Fifth Avenue 933,600 shares (with sole 4.67
New York, New York 10153 dispositive power)(2)
David S. Gottesman 437 Madison 1,230,400 shares (with sole 6.15
Avenue New York, New York 10022 voting and dispositive
power)(3)
United States Trust Company of 1,358,974 shares (in 6.80
New York and Affiliated fiduciary and agency
Companies 114 West 47th Street capacities)(4)
New York, New York 10036
H. Marshall Schwarz 503,759(5)(6)
Jeffrey S. Maurer 267,573(5)(6)(7)(8)
Frederick B. Taylor 201,526(5)(6)(7)(8)
Paul K. Napoli 105,303(5)(6)
John M. Deignan 62,814(5)(6)
Eleanor Baum 4,847(9)
Samuel C. Butler 57,219(9)(10)
Peter O. Crisp 12,185(9)
Philippe de Montebello 6,452(9)
Paul W. Douglas 34,794(9)
Antonia M. Grumbach 4,442(9)
Frederic C. Hamilton 67,135(9)
Peter L. Malkin 5,327(9)
David A. Olsen 2,510(9)
Maribeth S. Rahe 19,398(5)
Philip L. Smith 14,578(9)
John H. Stookey 41,178(9)
Richard F. Tucker 14,309(9)
Robert N. Wilson 12,108(9)
Ruth A. Wooden 4,334(9)
All directors and executive 1,595,921(5)-(10) 7.98
officers as a group (numbering
23 persons)
</TABLE>
- --------------------------------------------------------------------------------
(1) These shares consist of 3,390,793 shares allocated to the individual
accounts of participants in the 401(k) Plan and ESOP (the "Plan"), who have
voting and dispositive power over such shares, and 224,211 shares which have not
been allocated to participant accounts, as to which shares the Trust Company, as
Trustee of the Plan, may be deemed to have voting and dispositive power.
(2) Information with respect to GeoCapital LLC ("GCC") has been obtained from
GCC and from filings with the Securities and Exchange Commission by GCC, a
registered investment
3
<PAGE> 6
adviser. Such filings disclose that the shares were acquired in the ordinary
course of business and were not acquired for the purpose of and do not have the
effect of changing or influencing the control of the Corporation and were not
acquired in connection with or as a participant in any transaction having such
purpose or effect.
(3) Information with respect to David S. Gottesman has been obtained from Mr.
Gottesman's filings with the Securities and Exchange Commission and from First
Manhattan Co., of which Mr. Gottesman is a general partner. First Manhattan Co.
holds 18,980 shares in accounts of clients as to which it may be deemed to have
shared voting power and 19,420 shares as to which it may be deemed to have
shared dispositive power. Mr. Gottesman disclaims beneficial ownership of all
such shares held in accounts of clients. Such filings further disclose that the
shares acquired by Mr. Gottesman were acquired solely for investment purposes.
(4) U.S. Trust has sole voting power as to 19,554 of such shares, shared voting
power as to 59,089 of such shares, sole dispositive power as to 501,675 of such
shares and shared dispositive power as to 857,299 of such shares. The 224,211
shares held in the Plan which have not been allocated to participant accounts as
described in footnote 1, and as to which U.S. Trust may have sole voting and
dispositive power, are not included. As a matter of policy, U.S. Trust votes
shares held in an agency capacity only as directed by its clients, and where it
holds shares as a co-fiduciary, votes such shares as directed by the other
co-fiduciaries. Shares held by U.S. Trust as sole fiduciary are not voted unless
specific voting instructions are given by a donor or beneficiary pursuant to the
governing trust instrument.
(5) Includes shares attributable to deferred awards under the 1989 Stock
Compensation Plan and Predecessor Performance Plans and shares attributable to
awards under the Executive Incentive Plan as follows: Mr. Schwarz 361,009
shares, Mr. Maurer 159,685 shares, Mr. Taylor 87,167 shares, Mr. Napoli 60,497
shares and Mr. Deignan 37,864 shares and Ms. Rahe 17,145 shares. See
"Compensation of Executive Officers" below.
(6) Includes shares subject to employee stock options exercisable within 60 days
of February 27, 1998 as follows: Mr. Schwarz 44,500 shares, Mr. Maurer 34,250
shares, Mr. Taylor 27,500 shares, Mr. Napoli 13,750 shares, Mr. Deignan 13,750
shares and all directors and executive officers as a group 175,000 shares.
(7) Includes 5,000 shares owned by Mr. Maurer's wife, and 7,978 shares owned by
Mr. Taylor's wife, with respect to which the director in each case disclaims
beneficial ownership.
(8) Includes 7,968 shares held in the Maurer family limited partnership and 540
shares held in a trust of which Mr. Taylor is sole trustee and in which he has a
beneficial interest.
(9) Includes shares attributable to deferred compensation under the Board
Members' Deferred Compensation Plan as follows: Dr. Baum 2,847 shares, Mr.
Butler 39,618 shares, Mr. Crisp 9,385 shares, Mr. de Montebello 1,452 shares,
Mr. Douglas 29,719 shares, Ms. Grumbach 442 shares, Mr. Hamilton 4,085 shares,
Mr. Malkin 1,527 shares, Mr. Olsen 110 shares, Mr. Smith 1,578 shares, Mr.
Stookey 3,178 shares, Mr. Tucker 6,259 shares, Mr. Wilson 577 shares and Ms.
Wooden 1,934 shares. See "Directors' Compensation" below.
(10) Includes 2,500 shares held in a trust of which Mr. Butler is trustee and
9,829 shares held in a trust in which he has a beneficial interest.
Other than as set forth above, management of the Corporation is aware of no
person who, on the record date, was the beneficial owner of more than 5% of the
Corporation's outstanding Common Shares.
I ELECTION OF DIRECTORS
Six directors of the Corporation are to be elected at the Annual Meeting to
serve for a three-year term expiring at the Corporation's annual meeting in the
year 2001 and, in each case, to serve until their successors have been elected
and qualified, or until his or her death, resignation or retirement.
The Corporation expects each nominee to be able to serve if elected. If any
nominee is unable to serve, proxies will be voted in favor of the remainder of
those nominated and may be voted for
4
<PAGE> 7
substitute nominees proposed by the Board of Directors unless the Board chooses
to reduce the number of directors to be elected. All of the nominees are now
directors of the Corporation. All directors of the Corporation are also
directors of the Trust Company and serve parallel terms on both Boards.
The following table contains information regarding the nominees and other
directors whose terms of office will continue after the Annual Meeting. The year
indicated in each biography is the year since which each nominee has been
continuously a director of the Corporation or of its predecessor corporation.
The age indicated in each biography is as of April 28, 1998. Information about
share ownership can be found in the table of Beneficial Ownership beginning on
page 3.
Nominees
<TABLE>
<CAPTION>
FIRST
PRINCIPAL OCCUPATION AND BECAME
NAME (AGE) BUSINESS EXPERIENCE DIRECTOR
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TERM EXPIRES IN 2001
Samuel C. Butler (68) Partner in Cravath, Swaine & Moore (law firm) 1972
Mr. Butler joined the law firm of Cravath, Swaine & Moore in 1956 and was elected a partner of the
firm in 1960. He is also a director of Ashland Inc. and Millipore Corporation. Mr. Butler is a trustee
of the New York Public Library and of the Culver Educational Foundation.
Paul W. Douglas (71) Retired Chairman of the 1978
Board of The Pittston
Company (coal mining,
transportation and
security services)
Mr. Douglas retired as chairman of the board and chief executive officer of The Pittston Company in
September 1991. Prior to joining Pittston in January 1984, he had been associated with
Freeport-McMoRan Inc. following the merger of Freeport Minerals Company and McMoRan Oil and Gas
Company in April 1981. Formerly, he was director of the internal finance section of the ECA Mission to
France. Mr. Douglas is also a director of New York Life Insurance Company and Phelps Dodge
Corporation. He is a trustee of The International Center for the Disabled and of St. Luke's-Roosevelt
Hospital.
Maribeth S. Rahe (49) Vice Chairman of the Board 1997
of the Corporation and the
Trust Company
Prior to joining U.S. Trust as vice chairman, Ms. Rahe was with Harris Bank serving as vice chair of
the board from 1995 and as senior executive vice president from 1994, executive vice president
1991-1994 and senior vice president 1988 -1991. She was also with Harris Bank from 1974 to 1980. From
1980 to 1988, she held various positions with Morgan Guaranty Trust Company and J.P. Morgan Investment
Management in London and New York. Ms. Rahe is a director of Trustmark Insurance Company and
Pasquinelli Construction Company. She has served as chairman of the Private Banking Section of the
American Bankers Association. Ms. Rahe also serves on the boards of Rush-Presbyterian-St. Luke's
Medical Center and the Foundation Board of the Committee of 200.
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
FIRST
PRINCIPAL OCCUPATION AND BECAME
NAME (AGE) BUSINESS EXPERIENCE DIRECTOR
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
H. Marshall Schwarz (61) Chairman of the Board and 1977
Chief Executive Officer of
the Corporation and the
Trust Company
Mr. Schwarz joined the Trust Company in 1967 after a seven-year association with Morgan Stanley & Co.
In 1972, he was elected a senior vice president and head of the Banking Division. He was elected
executive vice president and chief operating officer of the Trust Company's Bank Group in 1977 and
chief operating officer of the Asset Management Group in 1979. Mr. Schwarz served as president of the
Corporation and the Trust Company from June 1986 through January 1990 and became chairman and chief
executive officer effective February 1, 1990. He is also a director of Atlantic Mutual Companies and
Bowne & Co., Inc. Mr. Schwarz is a trustee and former chairman of the board of the American Red Cross
in Greater New York and a director of the United Way of New York City. He is a trustee of Teachers
College-Columbia University and the Camille and Henry Dreyfus Foundation, Inc. and is president of the
board of trustees of Milton Academy.
Philip L. Smith (64) Corporate Director and Trustee 1987
Mr. Smith was chairman of the board and director of the Golden Cat Corporation from November 1990 to
July 1, 1995. He was chairman of the board, president and chief executive officer of The Pillsbury
Company from August 1988 through January 1989. Formerly, he had been associated with General Foods
Corporation for over 20 years, serving in his final position as chairman of General Foods and director
of Philip Morris Companies, Inc. Mr. Smith is also a director of Whirlpool Corporation and Ecolab
Corporation. He is vice chairman of the Bishops Foundation and trustee of the Guardian of Dreams
Foundation.
Ruth A. Wooden (51) President & Chief Executive 1994
Officer of The Advertising
Council, Inc. (not-for-profit
public service advertising)
Ms. Wooden became president and chief executive officer of The Advertising Council in August 1987.
Prior to joining The Advertising Council, she was employed with NW Ayer, Inc. for eleven years. Ms.
Wooden serves as a trustee of The Edna McConnell Clark Foundation, director of CARE, USA, and a
director of Replication and Program Strategies, Inc. Ms. Wooden serves as an advisor to the Columbia
Health Sciences Advisory Council and the Harvard University Initiative on Social Enterprise.
Directors Continuing in Office
TERM EXPIRES IN 2000
Peter O. Crisp (65) Retired Chairman of Venrock, Inc. 1992
(venture capital)
Mr. Crisp retired in September 1997 after serving as general partner of Venrock Associates from 1969
and chairman of Venrock, Inc. from 1995. He continues as an advisor to the Rockefeller family as a
director of Rockefeller Financial Services Inc. Mr. Crisp is also a director of Acadia Risk
Management, Inc., American Superconductor Corporation, Evans & Sutherland Computer Corp., Novacare,
Inc., Thermedics Inc., ThermoElectron Corp., ThermoPower Corporation and ThermoTrex Corp. Mr. Crisp
serves as a member of the Board of Managers of Memorial Sloan-Kettering Cancer Center, Memorial
Hospital for Cancer and Allied Diseases and Sloan-Kettering Institute for Cancer Research. He is a
trustee of North Shore Long Island Jewish Health System and of The Teagle Foundation.
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
FIRST
PRINCIPAL OCCUPATION AND BECAME
NAME (AGE) BUSINESS EXPERIENCE DIRECTOR
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Antonia M. Grumbach (54) Partner in Patterson, Belknap, 1991
Webb & Tyler LLP (law firm)
Ms. Grumbach joined the law firm of Patterson, Belknap, Webb & Tyler LLP in 1971 and became a partner
of the firm in 1979. She is vice chairman of the board of trustees of the William T. Grant Foundation,
a trustee of Teachers College-Columbia University and of Milton Academy and a director of The Henfield
Foundation. Ms. Grumbach also served as an initial member of the Board of Advisors of the New York
University program on philanthropy and the law.
Frederic C. Hamilton (70) Chairman of the Board of The 1972
Hamilton Companies
(investments and venture capital)
Mr. Hamilton serves as chairman of The Hamilton Companies and chairman of the board of Tejas Gas
Corporation. He is also a director of the American Petroleum Institute and a member of the National
Petroleum Council. Mr. Hamilton is chairman of the Denver Art Museum Foundation and of the Denver Art
Museum and the Graland Foundation, and a trustee of the Boy's Club Foundation and the Boy Scouts of
America Denver Foundation. Mr. Hamilton is also a director of numerous private companies.
Jeffrey S. Maurer (50) President of the Corporation 1989
and the Trust Company
Mr. Maurer joined the Trust Company in 1970 and was made manager of the Asset Management and Private
Banking Group in 1988. He was elected senior vice president in November 1980, executive vice president
in May 1986, president effective February 1990 and chief operating officer in December of 1994. Mr.
Maurer is a trustee of Alfred University, a director and treasurer of The Children's Health Fund, a
director of The Hebrew Home for the Aged and the Riverdale Terrance Housing Fund Developmental
Company, Inc., a member of the Advisory Board of The Salvation Army of Greater New York, and a
director of the North Shore Long Island Jewish Health System.
David A. Olsen (60) Retired Chairman of the Board and 1997
Chief Executive Officer of
Johnson & Higgins (insurance
broker/benefit consulting firm)
Mr. Olsen was associated with Johnson & Higgins for over 30 years, in sales, client work,
international and office management. After the merger of Johnson & Higgins with Marsh & McLennan, Inc.
in June 1997, Mr. Olsen served as vice chairman of Marsh & McLennan until his retirement at year-end.
Prior to the merger, he had been a partner of Johnson & Higgins from 1980 and chairman and chief
executive officer from 1990. Mr. Olsen is a director of Marsh & McLennan Companies and Trident Corp.
He is a trustee of Bowdoin College, director of the New York City Partnership and United Way of New
York City, a director of Sharon Hospital and vice chairman and director of the South Street Seaport
Museum.
Richard F. Tucker (71) Retired Vice Chairman of the 1983
Board of Mobil Corporation
(petroleum and chemicals)
Mr. Tucker joined Mobil Corporation in 1961 and retired as vice chairman in May 1991. He was a
director of Mobil from 1971, and president and chief operating officer of Mobil Oil Corporation from
1986 until his retirement. Mr. Tucker is trustee emeritus of Cornell University and a life member of
the Board of Overseers of Cornell Medical College. He is also a trustee of the Aldrich Museum of
Contemporary Art and The Teagle Foundation. Mr. Tucker is a member of the National Academy of
Engineering, The Council on Foreign Relations, Inc. and the Woods Hole Oceanographic Institution.
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
FIRST
PRINCIPAL OCCUPATION AND BECAME
NAME (AGE) BUSINESS EXPERIENCE DIRECTOR
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TERM EXPIRES IN 1999
Eleanor Baum (58) Dean of Engineering at 1994
The Cooper Union for the Advancement of
Science & Art
Eleanor Baum became dean of engineering at Cooper Union in 1987. Prior to that, she was dean at Pratt
Institute in Brooklyn and worked as an engineer in the aerospace industry. Dr. Baum is also a director
of Allegheny Power Systems, Inc. and Avnet, Inc. She is the past president of the American Society for
Engineering Education and vice chairman of the Board of Governors of the New York Academy of Sciences.
Dr. Baum is director and president of the Accreditation Board for Engineering & Technology,
chairperson of the Association of Engineering Schools, New York State, and an advisory board member at
Duke University, Rice University and the U.S. Merchant Marine Academy. She is a commissioner of the
Engineering Manpower Commission and a fellow of the Institute of Electrical & Electronic Engineers.
Philippe de Montebello (61) Director of the Metropolitan 1983
Museum of Art
Mr. de Montebello has been associated with the Metropolitan Museum of Art since 1963, serving as
associate curator for European paintings from 1963 to 1969, vice director for curatorial and
educational affairs from 1974 to 1977 and as director since 1978. In the interim of his duties at the
Metropolitan, Mr. de Montebello served as director of the Museum of Fine Arts in Houston from 1969 to
1974. He is a member of the Advisory Board of the Skowhegan School of Painting and Sculpture and the
Columbia University Advisory Council-Departments of Art History and Archaeology. Mr. de Montebello is
a trustee of the New York University Institute of Fine Arts and the American Federation of Arts.
Peter L. Malkin (64) Chairman of Wien & Malkin LLP (law firm) 1992
Mr. Malkin joined the predecessor law firm of Wien & Malkin LLP in 1958 and became a partner in the
firm in 1962. He is also chairman of W & M Properties, Inc. and is a general partner in the ownership
of several New York City buildings, including the Empire State Building, the Graybar Building, the
Lincoln Building, 1185 Avenue of the Americas and The International Toy Center. Mr. Malkin is founding
chairman of the Grand Central Partnership and of the 34th Street Partnership, a founding director of
the Fashion Center Business Improvement District, a director of the NYC Partnership and Chamber of
Commerce, a director and member of the Executive Committee of Lincoln Center for the Performing Arts,
chairman of the Dean's Council and a member of the Overseers Committee to visit The John F. Kennedy
School of Government at Harvard University and was from 1989 through 1995, a member of the Board of
Overseers of Harvard College.
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
FIRST
PRINCIPAL OCCUPATION AND BECAME
NAME (AGE) BUSINESS EXPERIENCE DIRECTOR
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
John Hoyt Stookey (68) Chairman of Suburban Propane Pts. 1989
(petrochemicals and propane)
Mr. Stookey served as president of Quantum Chemical Corporation from 1975 to 1993 when Quantum was
acquired by Hanson Industries, Inc. He continued as chairman of the board of Quantum, a position he
held from 1986, until Suburban Propane was organized in 1995. As Chairman of Quantum, Mr. Stookey
served from 1989 to 1993 as an executive officer of Petrolane Incorporated, Petrolane Finance Corp.
and QJV Corp., affiliates of Quantum, which companies were reorganized on July 15, 1993 under the U.S.
Bankruptcy Code. Prior to joining Quantum, Mr. Stookey was president of Wallace Clark Incorporated
from 1969 to 1975 and served as the U.S. Representative to both private and public banks in Mexico. He
is also a director of Cyprus AMAX Minerals Co., ACX Technologies Inc. and Chesapeake Corporation. Mr.
Stookey is the founder and president of The Berkshire Choral Institute, The Wonderland Opera and of
Landmark Volunteers, chairman of Per Scholas Inc. and trustee of the Berkshire School, The Clark
Foundation and The Robert Sterling Clark Foundation. He is a member of The New York Academy of Science
and a fellow of the American Institute of Chemists.
Frederick B. Taylor (56) Vice Chairman of the 1989
Board and Chief Investment
Officer of the Corporation
and the Trust Company
Mr. Taylor joined the Trust Company in 1966. In 1980, he was elected a senior vice president and, in
1986, he was elected an executive vice president of the Corporation and chairman, Investment Policy of
the Trust Company. Mr. Taylor was elected vice chairman and chief investment officer effective
February 1990. He is a member of the New York Society of Security Analysts and the Association for
Investment Management and Research. Mr. Taylor serves on the board of counselors of White Plains
Hospital and on the senior advisory board of the New York Chapter of the Arthritis Foundation.
Robert N. Wilson (57) Vice Chairman of the 1991
Board of Johnson &
Johnson (health care products)
Mr. Wilson joined Johnson & Johnson in 1964. He was appointed to the Executive Committee in 1983 and
was elected to the board of directors in 1986. Mr. Wilson is vice chairman of the board of directors
of Johnson & Johnson and is also a member of the board of directors of Amerada Hess Corporation. He is
a member of the board of directors of the Pharmaceutical Research and Manufacturers Association, the
PhRMA Foundation, Inc. and is chairman of the Healthcare Institute of New Jersey. He is also a member
of the board of directors of World Wildlife Fund and The Georgetown College Foundation, Inc. Mr.
Wilson is a director of The James Black Foundation in London.
</TABLE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Corporation's
directors and certain officers to file reports of holdings and transactions in
U.S. Trust Common Shares with the Securities and Exchange Commission. Based on
the Corporation's records and other information, the Corporation believes that
all SEC filing requirements applicable to its directors and officers with
respect to 1997 were met.
THE BOARD AND ITS COMMITTEES
The Corporation is governed by a Board of Directors and various committees of
the Board which meet regularly throughout the year. Members of the Board are
kept informed of the Corporation's business through discussions with the
Chairman and other officers, by reviewing materials provided to them and by
participating in meetings of the Board and its committees.
9
<PAGE> 12
During 1997, there were 10 meetings of the Board. Each director attended at
least 75% of the meetings of the Board and committees on which the director
served in the last year except Mr. Hamilton.
The Board has four standing committees. The following describes for each
committee the functions, membership and number of meetings held during 1997.
Executive Committee -- 3 meetings in 1997
<TABLE>
<CAPTION>
FUNCTIONS MEMBERS
<S> <C>
- power to act on behalf of the Board whenever the Samuel C. Butler
Board is not in session except as limited by law Philippe de Montebello
- consider nominees for election to the Board, Paul W. Douglas
including any written recommendation by a Antonia M. Grumbach
shareholder which is mailed to the attention of Jeffrey S. Maurer
the Secretary H. Marshall Schwarz
- exercise general oversight of Board governance (Chairman)
matters John H. Stookey
</TABLE>
Audit Committee -- 5 meetings in 1997
<TABLE>
<CAPTION>
FUNCTIONS MEMBERS
<S> <C>
- review adequacy of financial controls, accounting Samuel C. Butler
policies and reliability of financial information Paul W. Douglas
- oversight of activities of internal auditor David A. Olsen
- review engagement and services provided by Philip L. Smith
independent auditor John H. Stookey
- evaluate reports of examinations of the (Chairman)
Corporation including regulatory examinations Robert N. Wilson
</TABLE>
Compensation & Benefits Committee (the "Compensation Committee") -- 3 meetings
in 1997
<TABLE>
<CAPTION>
FUNCTIONS MEMBERS
<S> <C>
- determine compensation and benefits for officer- Peter O. Crisp
directors and other executive officers Frederic C. Hamilton
- review and approve compensation and benefit Philip L. Smith
programs (Chairman)
- oversee the benefit plan fiduciaries and plan Robert N. Wilson
administrators Ruth A. Wooden
</TABLE>
10
<PAGE> 13
Corporate Responsibility Committee -- 3 meetings in 1997
<TABLE>
<CAPTION>
FUNCTIONS MEMBERS
<S> <C>
- review community reinvestment activities Eleanor Baum
- review policies, programs and practices in Philippe de Montebello
connection with equal employment and recruiting, Antonia M. Grumbach
safety and health, employee training, education (Chairman)
and assistance Peter L. Malkin
- review policies and practices relating to Richard F. Tucker
charitable and political contributions, ethics
and investor relations issues
</TABLE>
DIRECTORS' COMPENSATION
Non-employee directors receive a $15,000 cash retainer and a stock retainer of
400 Common Shares annually. In addition, $5,000 in the form of phantom share
units is credited to each director's deferred compensation account per year. An
attendance fee of $1,000 is paid for each meeting of the Board, the Executive
Committee and the Corporate Responsibility Committee attended.
The Chairman of the Audit Committee receives an annual retainer of $12,500 and
each Committee member receives an annual retainer of $10,000. The Chairman of
the Compensation Committee receives an annual retainer of $10,000 and each
Committee member receives an annual retainer of $7,000. All directors are
reimbursed for travel and other out-of-pocket expenses incurred by them in
attending Board or committee meetings.
Under the Board Members' Deferred Compensation Plan, non-employee directors may
defer any or all of their cash compensation until they leave the Board. All
deferrals are allocated between an interest account and a phantom share unit
account (at least 50% of deferred amounts must be allocated to phantom share
units). Interest accounts are credited with earnings based on four available
rates of return: the Trust Company's prime rate and rates of return matching
those of the Standard & Poor's 500 Index, the Lehman Bros. Government/Corporate
Bond Index and the IBC's Money Fund Report First Tier Average. Deferred
compensation is converted into phantom share units on the basis of the market
value of a Common Share at the time of conversion. Phantom share units earn
Common Share dividend equivalents which are converted into additional phantom
share units on the basis of the market value of a Common Share on the relevant
dividend payment date. Payouts of interest account balances are made in cash,
and payouts with respect to phantom share units consist of one Common Share for
each whole phantom share unit. A director's right to receive future payments
under any deferred account is an unsecured claim against the Corporation's
general assets.
COMPENSATION OF EXECUTIVE OFFICERS
Compensation Committee Interlocks and Insider Participation
Membership of the Compensation Committee in 1997 is described above under
"Compensation & Benefits Committee." No member of the Compensation Committee is
or ever was a U.S. Trust officer or employee, or served during 1997 as an
executive officer of another company on whose board a U.S. Trust executive
officer serves. None of U.S. Trust's executive officers is, or in 1997 was, a
member of a comparable compensation committee of a company of which any U.S.
Trust director is an executive officer.
Report on Executive Compensation
The Compensation Committee is responsible for the administration of U.S. Trust's
executive compensation program, with oversight review by the Boards of Directors
of the Corporation and of the Trust Company. The Compensation Committee
determines salary, bonus, stock options
11
<PAGE> 14
and other benefits for senior officers of U.S. Trust, in each case (other than
the Chief Executive Officer) upon the recommendation of the Chief Executive
Officer.
COMPENSATION STRATEGY AND PROGRAM. U.S. Trust is committed to attracting,
motivating and encouraging long-term employment of high-caliber,
service-oriented individuals. The Compensation Committee expects and seeks
excellence in performance and uses the compensation program as a means to reward
superior achievement. The Compensation Committee manages compensation to support
the long-term interests of U.S. Trust and its shareholders by adhering to the
following basic strategic principles:
- Compensation at all levels will be competitive with comparable
organizations and will reward employees on the basis of their performance
and contribution to U.S. Trust.
- U.S. Trust's benefits package will be competitive and designed to
encourage a career commitment to U.S. Trust.
- Total incentive compensation paid will be based on overall corporate
performance; individual and unit performance will determine the
allocation of the total among selected participants.
- As an employee moves up at U.S. Trust, a larger proportion of his or her
total compensation will be incentive compensation which will be
influenced in large part by the market value of U.S. Trust Common Shares.
Incentive compensation (including stock options) at the executive officer
level could exceed by several times the executive's base salary, while
for the great majority of employees, incentive compensation is unlikely
to exceed their base salary. One-half or more of each executive officer's
total incentive compensation is likely to be earned based on the value of
U.S. Trust Common Shares.
- The Compensation Committee believes that the performance of U.S. Trust is
best when employees think like owners. Consequently, U.S. Trust
encourages employee ownership of U.S. Trust Common Shares and has
established an ESOP and other stock-based incentive compensation plans.
Acceptance of U.S. Trust's ownership philosophy is a requirement for
advancement to senior management positions; senior management will be
expected over time to build and maintain significant ownership positions
in U.S. Trust Common Shares.
- In furtherance of the Corporation's stock ownership philosophy for senior
management, the Compensation Committee has established specific minimum
target levels of stock ownership for each of U.S. Trust's executive
officers. In the case of the executive officers named in the Summary
Compensation Table below, the target levels of ownership, which are
expected to be achieved over a period of time, are stock having a value
of eight times salary for Messrs. Schwarz, Maurer and Taylor and six
times salary for Messrs. Napoli and Deignan.
Salaries for executive officers are administered to provide a level of base
compensation that is competitive with that available at other high caliber
institutions. Annual salary increases generally reflect improved individual
performance, increased responsibilities and changes in the competitive
marketplace. These factors involve subjective judgments made by the Compensation
Committee and are not weighted. For competitive comparisons, the Committee
compared total compensation for U.S. Trust executive officers against total
compensation paid by over 50 asset management firms (banks and non-banks) to
their executive officers. Total compensation for U.S. Trust's executive officers
is designed, if all targets are met, to be at or somewhat above the median of
total compensation levels for executives in similar positions with the
comparative group of firms. Since so much of U.S. Trust's executive compensation
is incentive-based, the Compensation Committee would expect to see executives'
total pay well above these levels in years when performance exceeds goals and
well below them when performance falls short.
Incentive compensation for the executive officers in 1997 was paid under the
terms of the Executive Incentive Plan (EIP) approved by shareholders in October
1995. The compensation so payable was based on the attainment of pre-established
performance goals for the period beginning on January 1, 1997 and ending on
December 31, 1997. As to the corporate performance goals, the Committee
determined that the pool available for awards for this period would be a
percentage, ranging upward from 30%, of a Target Awards Pool of $10.5 million,
12
<PAGE> 15
depending on the level of the Corporation's diluted income per share for this
period. U.S. Trust's diluted income per share for the period resulted in an
awards pool equal to 118.7% of the Target Awards Pool. Individual EIP awards to
the named executive officers were determined under a formula and other
applicable provisions contained in the Plan. None of the awards exceeded the
amount generated by applying the 118.7% award percentage to their pre-
established target awards for 1997.
Long-term incentive compensation for U.S. Trust's executive officers in 1997 was
provided in the form of grants of stock options under the 1995 Stock Option Plan
approved by shareholders in October 1995. The grants provide for an exercise
price equal to the fair market value of U.S. Trust Common Shares at the time of
grant and vest 25% per year over four years. The size of each executive
officer's stock option award was not based on arithmetic criteria but rather was
based on the Compensation Committee's assessment of the individual's potential
long-term contribution to U.S. Trust's financial results. Executive officers are
strongly encouraged to hold shares obtained through the exercise of stock
options consistent with U.S. Trust's general commitment to substantial stock
ownership by its executives and the specific target levels of ownership
established for each executive.
Under section 162(m) of the Internal Revenue Code of 1986, the amount allowable
as a tax deduction for compensation paid to the chief executive officer and each
of the four other highest paid officers of any publicly-held corporation
generally is limited to $1 million per year for each such officer. Certain
performance-based compensation is excluded from compensation subject to this
deduction limit. The Committee believes that all stock options granted to the
executive officers in 1997 under the 1995 Stock Option Plan qualified for the
exclusion for performance-based compensation under section 162(m), as did awards
made to the executive officers for 1997 under the EIP.
For 1998 and subsequent years, the Committee will endeavor to provide
compensation to U.S. Trust's executive officers in amounts that will not exceed
the section 162(m) tax deduction limit, to the extent the Committee believes
this will be consistent with the achievement of the objectives of the
Committee's compensation strategy described above. However, the Committee
retains the flexibility to provide compensation to any U.S. Trust executive
officer in an amount that may exceed the limit for tax deductibility under
section 162(m), whenever the Committee believes that payment of such
compensation may help attain the goals of the Committee's executive compensation
strategy, or may otherwise be in the best interest of U.S. Trust and its
shareholders.
CEO COMPENSATION FOR 1997. The base salary paid in 1997 to H. Marshall Schwarz,
Chairman and Chief Executive Officer ("CEO"), was $619,231. Mr. Schwarz's salary
reflected the Compensation Committee's review of competitive and internal
compensation levels, as well as its belief that executive compensation should be
influenced by both short and long-term operating results and should reflect both
short and long-term incentives rather than salary alone.
Mr. Schwarz also received an award for 1997 under the EIP. The amount of this
award to Mr. Schwarz was determined in the manner indicated in the above
description of this program. In addition, Mr. Schwarz received a stock option
grant for 28,000 Common Shares exercisable at a price of $47.875 per share, the
market price of U.S. Trust Common Shares on February 28, 1997, the date of the
grant.
In summary, the Compensation Committee believes it has a comprehensive and
competitive executive compensation program with an appropriate balance between
salary and short and long-term incentives and with an emphasis on stock-based
compensation. It intends to continue this emphasis in the future.
Respectfully submitted,
Philip L. Smith, Chairman
Peter O. Crisp
Frederic C. Hamilton
Robert N. Wilson
Ruth A. Wooden
13
<PAGE> 16
The table below shows, for the last three fiscal years, cash and other
compensation paid or accrued to the CEO and the four other most highly
compensated executive officers ("Named Executive Officers") for services
rendered in all capacities to U.S. Trust:
Summary Compensation Table
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
--------------------------- -------------------------------
AWARDS PAYOUTS
OTHER -------------------- ---------
ANNUAL RESTRICTED STOCK LONG-TERM ALL OTHER
COMPEN- STOCK OPTION INCENTIVE COMPEN-
SALARY BONUS SATION AWARDS AWARDS PAYOUTS SATION(3)
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($)(1) (#) ($)(2) ($)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
H.M. Schwarz 1997 619,231 728,036 0 363,964 28,000 0 101,000
Chairman, CEO 1996 623,077 657,572 0 328,736 35,000 758,472 24,096
1995 572,308 450,923 0 150,688 140,000 512,798 28,615
J.S. Maurer 1997 485,385 514,692 0 257,308 25,000 0 57,500
President, COO 1996 488,077 461,950 0 230,941 26,000 654,582 7,500
1995 455,385 418,385 0 105,840 105,000 347,849 22,769
F.B. Taylor 1997 485,385 544,694 0 272,306 20,000 0 65,750
Vice Chairman, 1996 488,077 461,950 0 230,941 21,000 549,297 7,500
Chief Investment 1995 407,692 299,615 0 104,580 84,000 290,585 20,385
Officer
P. K. Napoli 1997 335,846 321,349 0 160,651 10,000 0 35,000
Executive Vice 1996 331,154 276,715 0 138,337 10,500 362,537 7,500
President 1995 306,077 189,158 0 61,740 30,000 189,223 15,304
J.M. Deignan 1997 332,000 308,105 0 153,985 10,000 0 34,250
Executive Vice 1996 331,154 276,715 0 138,337 10,500 300,529 7,500
President 1995 307,923 219,708 0 61,740 30,000 203,838 15,396
</TABLE>
- --------------------------------------------------------------------------------
(1) Each dollar value shown in this column for 1995, 1996 and 1997 reflects the
Restricted Units Portion (i.e. 33 1/3%) of a Named Executive Officer's EIP award
for that year. Such dollar values for 1997 were converted into Restricted Units,
on February 24, 1998, as follows, based on the average of the high and low
market prices of a Common Share on that date: Mr. Schwarz -- 5,720 units; Mr.
Maurer -- 4,044 units; Mr. Taylor -- 4,280 units; Mr. Napoli -- 2,525 units; and
Mr. Deignan -- 2,420 units. A holder of restricted Common Shares is entitled to
receive dividends paid on such shares, and a holder of Restricted Units is
credited with additional units in respect of dividends that would be paid on the
Common Shares underlying his or her Restricted Units. The number and value of
the Named Executive Officers' aggregate restricted stock and unit holdings at
the end of the Corporation's last fiscal year (December 31, 1997), not including
the above-mentioned February 1998 awards, were as follows: Mr. Schwarz -- 10,802
units ($676,470); Mr. Maurer -- 7,588 units ($475,177); Mr. Taylor -- 7,550
units ($473,135); Mr. Napoli -- 4,503 units ($281,990); and Mr. Deignan -- 4,503
units ($281,990).
(2) These amounts reflect the dollar value of awards of Performance Share Units
made to the Named Executive Officers under the 1989 Stock Compensation Plan for
the performance cycles ended in 1995 and 1996. No awards under the 1989 Stock
Compensation Plan were made in 1997 and no further awards will be made in the
future.
(3) See following table for identification and amounts of components.
14
<PAGE> 17
The following table lists "All Other Compensation" paid or accrued to each of
the Named Executive Officers.
All Other Compensation
<TABLE>
<CAPTION>
EMPLOYER EARNINGS ON 12/31/97
CONTRIBUTION DEFERRED BEP
TO ESOP(1) AWARDS(2) ALLOCATION(3) TOTAL
NAME YEAR ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
H.M. Schwarz 1997 8,000 0 93,000 101,000
J.S. Maurer 1997 8,000 0 49,500 57,500
F.B. Taylor 1997 8,000 0 57,750 65,750
P. K. Napoli 1997 8,000 0 27,000 35,000
J.M. Deignan 1997 8,000 0 26,250 34,250
</TABLE>
- --------------------------------------------------------------------------------
(1) Represents the amount of the employer contribution made to the ESOP portion
of the 401(k) Plan and ESOP on behalf of each of the Named Executive Officers
for the year indicated.
(2) Represents that portion of the earnings credited on certain previously
deferred incentive plan cash awards which is required to be reported by the
rules of the Securities and Exchange Commission.
(3) Represents the allocation credited to the new Benefit Equalization Plan on
behalf of each of the Named Executive Officers. See "Retirement Benefits" below.
STOCK OPTIONS. The following table shows options granted during 1997 to the
Named Executive Officers including potential gains that these officers would
realize under two stock price growth-rate assumptions compounded annually. Under
the 5% growth-rate assumption, the indicated values would be realized if the
stock price reached $76.97 per share at the end of the option term (10 years
from grant). Correspondingly, under the 10% growth-rate assumption, the
indicated values would be realized if the stock price reached $122.55 per share.
Option Grants in 1997
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(1)
--------------------------------------------------- --------------------------
EXERCISE
NUMBER OF PRICE PER
SECURITIES % OF TOTAL SHARE
UNDERLYING OPTIONS (MARKET
OPTIONS GRANTED TO PRICE AT
GRANTED EMPLOYEES IN DATE OF EXPIRATION
NAME (#) FISCAL YEAR GRANT)($) DATE(2) 5% ($) 10% ($)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
H.M. Schwarz 28,000 4.85% 47.875 02/25/07 814,528 2,091,021
J.S. Maurer 25,000 4.33% 47.875 02/25/07 727,257 1,866,983
F.B. Taylor 20,000 3.47% 47.875 02/25/07 581,805 1,493,587
P.K. Napoli 10,000 1.73% 47.875 02/25/07 290,903 746,793
J.M. Deignan 10,000 1.73% 47.875 02/25/07 290,903 746,793
</TABLE>
- --------------------------------------------------------------------------------
(1) Annual growth-rate assumptions are prescribed by rules of the Securities and
Exchange Commission and do not reflect actual or projected price appreciation of
U.S. Trust Corporation Common Shares.
(2) Each option will vest and become exercisable in four equal, cumulative
installments on each of the first through fourth anniversary dates of the date
of grant (February 25, 1997).
15
<PAGE> 18
The following table shows the aggregated stock option exercises for each Named
Executive Officer in the fiscal year ended December 31, 1997. It also shows the
number of vested and unvested unexercised options and the value of vested and
unvested unexercised in-the-money options as of December 31, 1997.
Aggregated Option Exercises in 1997 and Year-End Option Values
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES YEAR-END(#) YEAR-END($)(2)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE(#) REALIZED($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
H.M. Schwarz 0 0 28,750/174,250 1,205,156/6,207,968
J.S. Maurer 0 0 21,500/134,500 901,375/4,711,000
F.B. Taylor 0 0 17,250/107,750 723,093/3,774,781
P.K. Napoli 0 0 8,624/ 41,876 361,507/1,423,330
J.M. Deignan 0 0 8,624/ 41,876 361,507/1,423,330
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Aggregate market value on the date(s) of exercise less aggregate exercise
price.
(2) Total value of unexercised options is based on the difference between
aggregate market value of U.S. Trust Corporation Common Shares at $62.625 per
share, the closing price on December 31, 1997, and aggregate exercise price.
16
<PAGE> 19
PERFORMANCE GRAPH. The graph below compares the annual change in the cumulative
total return on U.S. Trust Corporation Common Shares with the annual change in
the cumulative total returns of the Standard & Poor's 500 Stock Index and the
Standard & Poor's Financial Index, an index currently composed of 66 financial
services firms. Effective September 2, 1995, U.S. Trust's securities processing
business was sold to The Chase Manhattan Corporation ("Chase") in a transaction
(the "Reorganization") that was accomplished by (i) the transfer of U.S. Trust's
remaining businesses to "New" U.S. Trust Corporation (the Corporation as it is
now constituted), (ii) the spin-off, on a share-for-share basis, of all the
shares of "New" U.S. Trust Corporation to the shareholders of "Old" U.S. Trust
Corporation (which was the Corporation as it was constituted prior to the
Reorganization), and (iii) the merger of "Old" U.S. Trust Corporation into
Chase, with the shareholders of "Old" U.S. Trust Corporation receiving .68 of a
share of Chase common stock in exchange for each outstanding common share of
"Old" U.S. Trust Corporation. The graph assumes an investment of $100 on
December 31, 1992 in "Old" U.S. Trust Common Shares, and the reinvestment of all
subsequent dividends (including the value of the Chase common stock received in
the Reorganization) into the Common Shares of "Old" U.S. Trust and "New" U.S.
Trust.
Management believes that, for purposes of showing total return over a five-year
period, the financial services firms comprising the Standard & Poor's Financial
Index are more comparable to "New" U.S. Trust than would be a group comprised
solely of banks.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG U.S. TRUST, S&P 500 AND S&P FINANCIAL INDEX
<TABLE>
<CAPTION>
MEASUREMENT PERIOD S&P FINANCIAL
(FISCAL YEAR COVERED) U.S. TRUST CORP. S&P 500 INDEX
<S> <C> <C> <C>
1992 100.00 100.00 100.00
1993 110.00 110.10 111.10
1994 138.40 111.50 107.10
1995 216.40 153.40 165.10
1996 349.90 188.60 223.00
1997 561.40 251.50 330.30
</TABLE>
* Assumes that (1) the value of the investment in U.S. Trust Common Shares, the
S&P 500 Stock Index and the S&P Financial Index was $100 on December 31, 1992,
and (2) all dividends, including the value of the Chase common stock received
in the Reorganization, were reinvested.
17
<PAGE> 20
RETIREMENT BENEFITS. The Named Executive Officers participate in the Employees'
Retirement Plan of United States Trust Company of New York and Affiliated
Companies (the "Retirement Plan"), a tax qualified defined benefit pension plan.
The Retirement Plan provides for payment of an annual pension benefit equal to a
percentage (based on the length of a participant's credited service up to a
maximum of 35 years) of the participant's average base salary for his highest
five consecutive years of base salary during the last ten plan years of
employment, reduced by a portion of the participant's annual Social Security
benefit. Benefits payable under the Retirement Plan are subject to limitations
applicable to qualified plans under the Internal Revenue Code.
The table below shows the annual pension benefit accrued as of December 31, 1997
and the estimated annual pension benefit payable upon retirement as a single
life annuity under the Retirement Plan at normal retirement age (65) to the
Named Executive Officers:
<TABLE>
<CAPTION>
ANNUAL RETIREMENT ANNUAL RETIREMENT
PLAN BENEFIT PLAN BENEFIT
NAME AS OF 12/31/97 AT AGE 65
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
H.M. Schwarz........................................ $116,000 $121,400
J.S. Maurer......................................... 79,100 106,900
F.B. Taylor......................................... 116,800 121,200
P.K. Napoli......................................... 50,400 85,000
J.M. Deignan........................................ 43,800 74,400
- -------------------------------------------------------------------------------------------------
</TABLE>
Prior to January 1, 1997, the Corporation's Benefit Equalization Plan ("BEP")
provided eligible employees, including the Named Executive Officers, with
benefits equal to those that would have been provided under the Retirement Plan
but that could not be provided because of the Internal Revenue Code limitations
applicable to qualified plans. The BEP was amended effective as of January 1,
1997. The amended BEP ("New BEP") is designed to provide eligible employees with
benefits upon retirement (including future allocations under the New BEP)
targeted at 80% of the benefits they might have earned under the prior BEP.
Eligible employees were given the option to either receive their frozen benefit
as of December 31, 1996 under the terms of the prior BEP or to participate in
the New BEP. Record-keeping accounts were established as of January 1, 1997 on
behalf of each eligible employee who elected to participate in the New BEP. Each
participant was credited with a lump sum amount equal to the present value of
his or her BEP benefit as of December 31, 1996. Certain participants were also
credited with a supplemental amount equal to the difference between 80% of the
lump sum present value of the participant's benefit at age 62 under the BEP and
the present value of the participant's projected account balance at age 62 under
the New BEP.
The following table shows retirement benefits payable to each Named Executive
Officer as of December 31, 1996 and the initial account balance as of January 1,
1997 for each of the Named Executive Officers under the New BEP.
<TABLE>
<CAPTION>
TOTAL ANNUAL RETIREMENT PLAN BEP ANNUAL BEP INITIAL
NAME BENEFIT ANNUAL BENEFIT BENEFIT ACCOUNT BALANCE
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
H. M. Schwarz $302,600 $114,600 $188,000 $2,149,758
J. S. Maurer 158,000 77,000 81,000 306,914
F. B. Taylor 220,100 115,500 104,600 1,123,764
P. K. Napoli 67,500 47,600 19,900 129,636
J. M. Deignan 61,200 40,700 20,500 122,555
- --------------------------------------------------------------------------------------------------
</TABLE>
Additional allocations will be credited to the New BEP accounts of eligible
employees on December 31 of each year based on an amount equal to a specific
percentage (based on the participant's age at that time) of the participant's
base salary in excess of the Internal Revenue Code compensation limit ($160,000
in 1997). The amounts credited to the Named Executive
18
<PAGE> 21
Officers are included in "All Other Compensation" in the Summary Compensation
Table. The following table shows the specific percentage for each age group:
<TABLE>
<CAPTION>
CONTRIBUTION
AGE PERCENTAGE
- ----------------------
<S> <C>
Under 30 0%
30-34 2.5%
35-39 5.0%
40-44 7.5%
45-49 10.0%
50-54 15.0%
55-59 17.5%
60-62 20.0%
Over 62 10.0%
- ----------------------
</TABLE>
Twenty-five percent of both the initial account balance and all future
allocations made to the New BEP will be allocated to phantom share units
("PSUs"). Each PSU is valued at the average share price of U.S. Trust
Corporation Common Shares on the date the allocation is made. Each PSU is
credited with dividend equivalents. The remaining 75% is credited with earnings
based on one or more investment crediting options selected by the participant.
The current investment options available are The Standard & Poor's 500 Index,
The Lehman Brothers Government/ Corporate Bond Index, and The IBC's Money Fund
Report First Tier Average. At retirement, a participant is paid, in addition to
his or her benefit under the Retirement Plan, the value of his or her individual
account under the New BEP, partly in cash and partly in U.S. Trust Corporation
Common Shares, in either a lump sum or in ten annual installments.
CHANGE IN CONTROL PROVISIONS. The Named Executive Officers participate in
various compensation and benefit plans maintained by U.S. Trust, which contain
provisions pursuant to which payment of the benefits provided under such plans
would be accelerated in the event of a "change in control" of the Corporation
(as defined below), unless the Board of Directors otherwise determines prior to
the date of the change in control (or not later than 45 days thereafter in
certain circumstances). A "change in control" means that any of the following
has occurred: (i) 20% or more of the Common Shares have been acquired by any
person (as defined by Section 3(a)(9) of the Securities Exchange Act of 1934)
other than directly from the Corporation; (ii) there has been a merger or
equivalent combination after which 49% or more of the voting stock of the
surviving corporation is held by persons other than former shareholders of the
Corporation; or (iii) 20% or more of the directors elected by shareholders to
the Board of Directors of the Corporation are persons who were not nominated by
the Board of Directors or Executive Committee of the Board of Directors in the
most recent proxy statement of the Corporation.
Upon a change in control (a) the restrictions applicable to all restricted stock
previously awarded under the 1989 Stock Plan ("Stock Plan") would lapse, and a
cash payment would be made for each share of restricted stock equal to the
Determined Value (as defined in the Stock Plan) of a Common Share of the
Corporation; (b) the non-vested portion of all stock options granted under the
1995 Stock Option Plan and held by current officers or former officers whose
employment terminated by reason of retirement would become vested and
immediately and fully exercisable; (c) each outstanding but unexercised option
under the 1995 Stock Option Plan would be canceled, and the holder thereof would
be entitled to receive a cash payment equal to the excess of the Determined
Value (as defined in the 1995 Stock Option Plan) of the Common Shares subject to
such option over the aggregate purchase price of such Common Shares under the
terms of the option; (d) all previously deferred awards of performance share
units under the Stock Plan would become immediately payable in the form of a
cash payment in an amount equal to the sum of the Interest Portion (as defined
in the Stock Plan) of such awards and the Determined Value (as defined in the
Stock Plan) of the number of Common Shares of the Corporation corresponding to
the number of units included in the Phantom Share Unit Portion (as defined in
the Stock Plan) of such awards; (e) all benefit equalization units previously
granted under the Stock Plan (a form of phantom share unit) would become
immediately
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payable in the form of a cash payment in an amount equal to the Determined Value
(as defined in the Stock Plan) of the number of Common Shares of the Corporation
corresponding to the number of benefit equalization units credited to the
participant; (f) all awards under the Executive Incentive Plan for the year in
which the change in control occurs would be deemed to have been earned in full
and to the maximum extent, and would be immediately payable in the form of a
cash payment; (g) all Restricted Units (a form of phantom share unit) granted
under the Executive Incentive Plan would become immediately vested, and the
holders thereof would be entitled to receive a cash payment equal to the
Determined Value (as defined in the Executive Incentive Plan) of such Restricted
units; (h) the balance of each participant's account under the Executive
Deferred Compensation Plan would become immediately payable in a cash lump sum;
and (i) the supplemental pension benefits provided for any officer under the New
BEP would become immediately payable in a cash lump sum.
The Retirement Plan provides that in the event that the plan is terminated
within four years after a change in control, any surplus assets in the plan
would be applied (subject to the Internal Revenue Code and tax qualification
requirements) to provide pro rata increases in the accrued pension benefits of
all qualified participants in the Retirement Plan including the Named Executive
Officers.
Under the 1990 Change in Control and Severance Policy for Top Tier Officers,
each of the Named Executive Officers would be entitled to receive severance
benefits (i) in the event of any such officer's involuntary termination (as
defined in such plan) of employment within two years following a change in
control or (ii), in the case of a member of the Office of the Chairman, in the
event of such officer's voluntary termination of employment within six months
following a change in control. Such benefits are payable in cash in an amount
equal to the sum of (a) two times such officer's then current annual base
salary, (b) two times the average of the highest three of the previous five
year's awards to such officer under the Executive Incentive Plan and the 1990
Annual Incentive Plan previously maintained by the Trust Company and (c) 26
times such officer's then current weekly base salary. In addition, if such cash
payment, or any benefit payable to such officer upon a change in control, or
upon termination of employment following a change in control, under any other
plan or agreement described above (a "Change in Control Benefit") would be
subject to the excise tax imposed on "excess parachute payments" under section
280G of the Internal Revenue Code, each top tier officer would be entitled to
receive, pursuant to the 1990 Change in Control and Severance Policy for Top
Tier Officers, a "gross-up" payment in an amount that is intended to make such
officer whole, on an after-tax basis, for such excise tax.
The Corporation and the Trust Company have also entered into "Benefit Protection
Agreements" with each Named Executive Officer under which such officer would be
entitled to receive the Change in Control Benefits that otherwise would be
payable to such officers under each of the plans or agreements described above
if a change in control occurs, even if the Board of Directors should determine
that the transaction in question should not be treated as a change in control
for purposes of any one or more of such plans or agreements. Each Benefit
Protection Agreement provides for an initial two-year term, with automatic
extensions for successive one-year terms unless the Trust Company notifies the
Named Executive Officer in writing at least 90 days before the expiration of the
term that his Benefit Protection Agreement will not be further extended.
BENEFIT PROTECTION TRUSTS. The Corporation has established the U.S. Trust
Corporation Benefits Protection Trust I and the U.S. Trust Corporation Benefits
Protection Trust II, and the Trust Company has established the United States
Trust Company of New York and Affiliated Companies Executive Benefits Protection
Trust for the purposes of assisting the Corporation and the Trust Company in
meeting their obligations under certain of the benefit and compensation plans
maintained by them. The U.S. Trust Corporation Benefits Trust I also covers
benefits payable under the Board Deferred Plan with respect to the "Interest
Portion" of a board member's deferred amounts under that plan.
Upon a change in control, the trust funds would be used to make benefit payments
to the officers and board members in accordance with the provisions of the
applicable plans and the trust
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<PAGE> 23
agreements. However, prior to payment, all assets held in the trusts will remain
subject to the claims of the Corporation's and the Trust Company's respective
creditors.
The trusts are intended to be "grantor trusts" under the Internal Revenue Code.
No contributions have been made to the trusts to date.
TRANSACTIONS WITH DIRECTORS AND EXECUTIVE OFFICERS
Some of the Corporation's directors are U.S. Trust customers and some of the
directors are officers of corporations or members of partnerships which are U.S.
Trust customers. As customers, they have had transactions in the ordinary course
of business, including borrowings, all of which were on substantially the same
terms as those prevailing at the time for comparable transactions with other
persons and did not involve more than normal risk of collectibility or present
other unfavorable features. In the ordinary course of business, we use the
products or services of a number of organizations with which directors of the
Corporation are affiliated as officers or partners and we expect to have similar
transactions with such organizations in the future. Mr. Butler, Ms. Grumbach and
Mr. Malkin are each partners in law firms that provide certain legal services to
us from time to time. We believe that these transactions have been on terms that
were at least as favorable to us as would have been available from other service
providers.
II RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Coopers & Lybrand L.L.P., certified public
accountants, as independent auditors for the year 1998 and a resolution will be
presented to the Annual Meeting to ratify the appointment. Coopers & Lybrand
L.L.P. have served as independent auditors for U.S. Trust for many years. In
their capacity as independent auditors for the year 1997, Coopers & Lybrand
L.L.P. performed the following services: audited the consolidated financial
statements of the Corporation and of certain of the subsidiaries of the
Corporation and the Trust Company, the separate financial statements of the
Trust Company's employee benefit plans as required by the Employee Retirement
Income Security Act of 1974 and the separate financial statements of the Pooled
Pension and Profit Sharing Trust Funds and Discretionary Trust Funds
administered by the Trust Company; conducted limited reviews of the quarterly
financial information that is reported to shareholders; and conducted special
internal accounting control reviews with respect to certain aspects of the Trust
Company's trust and fiduciary responsibilities.
Representatives of Coopers & Lybrand L.L.P. will be present at the Annual
Meeting with the opportunity to make a statement if they wish to do so. They
also will be available to respond to appropriate questions. If the shareholders
do not ratify the appointment of Coopers & Lybrand L.L.P., the selection of
independent accountants will be reconsidered by the Board.
III MISCELLANEOUS
SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented at the 1998 Annual Meeting of
Shareholders must be received by the Corporation for possible inclusion in the
proxy statement and form of proxy relating to the 1999 meeting by November 16,
1998.
Dated: March 16, 1998
Carol A. Strickland
Secretary
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<PAGE> 24
U.S. TRUST
Dear Fellow Shareholder:
We have attached your Proxy Card for U.S. Trust's Annual Meeting of
Shareholders. Your vote is important, and we urge you to exercise your rights
as a shareholder.
This year, you can vote in one of two ways:
1. Call toll free 1-888-457-2962 on a touch-tone telephone and follow the
instructions on the reverse side. There is NO CHARGE to you for this call.
OR
2. Mark, sign and date your proxy card and return it promptly in the enclosed
envelope.
Should you wish to attend, the Annual Meeting will be held on Tuesday, April
28, 1998, at 10:00 a.m. in the first floor auditorium at 114 West 47th Street,
New York City.
Thank you for your cooperation and continued support.
H. Marshall Schwarz
Chairman and Chief Executive Officer
- --------------------------------------------------------------------------------
U.S. TRUST
U.S. TRUST CORPORATION
PROXY/VOTING INSTRUCTIONS SOLICITED BY BOARD OF DIRECTORS FOR USE AT THE
ANNUAL MEETING OF SHAREHOLDERS OF U.S. TRUST CORPORATION,
ON TUESDAY, APRIL 28, 1998
The undersigned appoints each of WILLIAM M. THROOP, JR. and JOAN MURTAGH
FRANKEL, with full power of substitution, to attend the Annual Meeting of
Shareholders or any adjournment thereof. THE SHARES REPRESENTED BY THIS
PROXY/VOTING INSTRUCTION WILL BE VOTED AS INSTRUCTED BY THE UNDERSIGNED, AND IN
THE DISCRETION OF THE PROXIES ON ALL OTHER MATTERS. IF NOT OTHERWISE SPECIFIED,
SHARES WILL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF
DIRECTORS.
VOTING BY MAIL. If you wish to vote by mailing this proxy, please sign your name
exactly as it appears on this proxy and mark, date and return it in the enclosed
envelope. When signing as attorney, executor, administrator, trustee, guardian
or officer of a corporation, please give your full title as such.
VOTING BY TELEPHONE. If you wish to vote by telephone, please follow the
instructions on the reverse side.
U.S. TRUST EMPLOYEES. If you are a current or former employee of U.S. Trust and
have an interest in Common Shares through the 401(k) Plan and ESOP, your ESOP
shares and proportionate interest in the Stock Fund as of February 27, 1998 are
shown on this card and your vote (by mail or telephone) will provide voting
instructions to the Trustee of the Plan. If no instructions are given, the
Trustee will vote the shares pursuant to the terms of the Plan.
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY OR VOTE BY TELEPHONE.
CONTINUED ON THE REVERSE SIDE
<PAGE> 25
VOTE BY TELEPHONE
24 HOURS A DAY, 7 DAYS A WEEK
CALL TOLL FREE ON A TOUCH-TONE PHONE
1-888-457-2962
U.S. Trust Corporation offers you the convenience of telephone voting. Your
telephone vote authorizes the named proxies to vote your shares in the same
manner as if you marked, signed and returned your proxy card. To vote by
telephone:
- - Have your proxy card in hand. Decide how you wish to vote. Call
1-888-457-2962.
- - You will be asked to enter a Control Number, which is located in the
box in the middle of this form.
- - You will hear the following instructions.
Option # 1: To vote as the Board of Directors recommends on ALL proposals:
Press 1
Option # 2: If you choose to vote on each proposal separately, press 0.
You will hear these instructions:
Proposal 1: To vote FOR ALL nominees, press 1; to WITHHOLD FOR ALL
nominees, press 9
To WITHHOLD FOR AN INDIVIDUAL nominee, press 0 and
listen to the instructions
Proposal 2: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1 - THANK YOU FOR VOTING.
If you vote by telephone, DO NOT mail back your proxy.
Call 1-888-457-2962 -- ANYTIME
There is NO CHARGE for this call. -----------------------
CONTROL NUMBER
- ----------------------------------------------------------------------------
- FOLD AND DETACH HERE IF YOU ARE NOT VOTING BY TELEPHONE -
- ----------------------------------------------------------------------------
PLEASE MARK YOUR
/X/ VOTE WITH AN X.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1 - 2
- ----------------------------------------------------------------------------
1. Election of Directors
WITHHELD
FOR FOR ALL
/ / / /
NOMINEE
01 Samuel C. Butler
02 Paul W. Douglas
03 Maribeth S. Rahe
04 H. Marshall Schwarz
05 Philip L. Smith
06 Ruth A. Wooden
WITHHELD FOR: (Write nominee name(s) in the space provided below)
-------------------------------------------------------
2. Appointment of Independent Accountants
FOR AGAINST ABSTAIN
/ / / / / /
- ----------------------------------------------------------------------------
-------------------------------------------
If you vote by telephone as
instructed above,
there is no need to mail back your proxy.
------------------------------------------
- ----------------------------------------------------------------------------
SIGNATURE(S) PLEASE MARK, SIGN, DATE AND RETURN THIS DATE
PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
NOTE: Please sign as your name or names appear above. Please add your
title if you are signing as Attorney, Administrator, Executor, Guardian,
Trustee or in any other representative capacity.
(SEE REVERSE SIDE)
