Item 1. Business
General
United Asset Management Corporation (UAM or the Company) is a holding company organized in December 1980 to acquire and own firms that provide investment advisory services primarily for institutional clients. The Company's wholly owned subsidiaries (Affiliated Firms or Firms) operate in one business segment, that is, as investment advisers, managing both domestic and international investment portfolios for corporate, government and union benefit plans, mutual funds, individuals, endowments, and foundations. UAM intends to continue expanding through the internal growth of its present Affiliated Firms and through the acquisition or organization of additional firms in the future (see "Affiliated Firms"). While UAM's Affiliated Firms primarily specialize in the management of U.S. equities, bonds and cash, other asset classes under management include international securities, real estate and stable value assets.
Advisory fees based on the assets of pension plans, profit sharing plans, endowments and foundations provide the largest portion of the Company's revenues. Such clients are sometimes referred to as "institutional" clients, and they are generally "tax-exempt" in that the income and any capital gains which result from their portfolio investments are not taxable to them under present law. Advisory fees are primarily based on the value of assets under management. Fee rates typically decline as account size increases. The assets of institutional clients have generally been growing, with the most rapid growth achieved by pension and profit sharing plans (sometimes called employee benefit plans). For the year ended December 31, 1999, no single client of any Affiliated Firm provided more than 4% of the Company's consolidated revenues. Accordingly, the loss of any single client would not have a material adverse effect on the Company's total investment management business.
Each Affiliated Firm operates under its own name, with its own investment philosophy and approach. Each conducts its own investment analysis, portfolio selection, marketing and client service. During any given period, investment results may vary among Firms. Client fees are set by each Firm based on its own judgment concerning the market for the services it renders. Each Firm is separately regulated under applicable federal, state or foreign law.
In addition to the Firms' individual efforts, UAM has established distribution and client service organizations which are available to the Affiliated Firms to supplement the investment management services they provide. UAM has also developed an operating partnership concept with the Affiliated Firms. These are described more fully under "Method of Operation."
UAM has revenue sharing plans with the Affiliated Firms which are described more fully under "Revenue Sharing." These agreements provide for UAM to receive increased or decreased revenues from each Affiliated Firm, based on a percentage of the change in each Firm's revenues from year to year, starting from a base amount agreed upon in the year of acquisition or at inception. These arrangements allow each Firm to set its own operating expense budget and compensation practices, limited by the share of revenues available to the Firm.
The Industry
Revenues in the institutional investment management industry are determined primarily by fees based on assets under management. Therefore, the principal determinant of growth in the industry is the growth of institutional assets under management. In management's judgment, the major factors which influence changes in institutional assets under management are: (1) changes in the market value of securities; (2) net cash flow into or out of existing accounts; (3) gains of new or losses of existing accounts by specific firms or segments of the industry; and (4) the introduction of new products by the industry or by particular firms.
In general, assets under management in the institutional segments of the industry have increased steadily. For example, Money Market Directories, Inc. recorded in its 2000 Directory, $6.4 trillion in assets under management in accounts of employee benefit plans and endowments within the United States as of mid-1999, which represents an average compound five-year annual growth rate of 13.5% since mid-1994. The 1999 Directory also reported $15.0 trillion of assets under management as of mid-1999 at investment advisory firms (including branch offices) within the United States, which represents an average compound five-year annual growth rate of 22.3% over the corresponding assets since mid-1994.
The employee benefit plan market includes two principal sectors: defined benefit and defined contribution plans. More than half of U.S. retirement plan assets are in defined benefit plans, which assure employees of a particular level of pension benefits when they retire. The Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code of 1986 (the Code) require employers to fund their defined benefit plans sufficiently to generate the benefits they have promised. However, the Code also discourages overfunding of defined benefit plans by employers by limiting tax deductions for contributions to fully funded plans. In management's opinion, high investment returns experienced in the 1990s have resulted in many defined benefit retirement plans reaching or exceeding their full funding limits based on actuarial calculations; therefore, many employers have ceased to contribute additional cash to the plans. However, if the value of plan assets declines due to market factors, or if sustained periods of low interest rates cause an increase in the actuarial value of plan liabilities, employers will generally be obligated to step up contributions to their defined benefit pension plans. This counter-cyclical funding pattern for defined benefit plans helps to smooth out fluctuations in the growth of plan assets under management by firms that provide investment advisory services to sponsors of defined benefit plans, and therefore, it helps to moderate fluctuations in the revenues of these investment managers. Under defined contribution plans, on the other hand, employers may contribute to their employees' retirement funds on a tax-advantaged basis, but individual employees generally decide how their plan assets will be invested. Defined contribution plans are the fastest growing sector of the employee benefit plan market.
Competition
The Affiliated Firms compete to manage domestic and international investment portfolios for corporate, government and union benefit plans, mutual funds, individuals, endowments, and foundations. Management believes that the most important factors affecting competition in the investment management industry are: (1) the abilities and reputations of investment managers; (2) stability of a firm's workforce, especially of portfolio managers; (3) an effective marketing force with broad access to channels of distribution; (4) differences in the investment performance of
investment management firms; (5) adherence to particular investment styles; (6) quality of client service; (7) the development of new investment strategies; (8) resources to invest in information technologies; and (9) public recognition of trade names in retail markets.
The Affiliated Firms face many competitors, including public and private investment advisers, as well as affiliates of securities broker-dealers, commercial banks, investment banks, and insurance companies. Barriers to entry are low, and firms in the investment management business are relatively long-lived.
Institutional clients typically may terminate investment management contracts without penalty upon 30-days' notice. Mutual funds typically may terminate investment management contracts without penalty upon 60-days' notice, and retail clients may redeem investments in mutual funds at any time.
Method of Operation
UAM itself does not manage portfolio investments for clients and does not provide any investment advisory services to Affiliated Firms and therefore is not registered as an investment adviser under federal, state or foreign law. UAM respects the individual character of each Affiliated Firm and seeks to preserve an environment in which each Firm continues to provide investment management services that meet the particular needs of the Firm's clients. UAM provides assistance to the Affiliated Firms in connection with the preparation of separate company financial statements, tax matters, insurance and maintenance of a company-wide profit sharing retirement plan. As part of its "operating partnership" with its Affiliated Firms, UAM is providing significantly more financial and management assistance to its Firms in product development, client service, marketing operations, technology and other areas. During 1999, the Company committed more than $20 million to these programs in 18 of its firms.
In addition, UAM assists Firms in planning for future growth and management development, particularly with respect to succession planning. The Company sponsors seminars and meetings for executives from each of the Affiliated Firms and from UAM that serve as forums for sharing business information. UAM is also offering more enterprise-wide services to its Firms such as investment-performance attribution analysis supplied by a leading provider of analytical services to the investment management industry.
During 1999, the Company continued to enhance its website, www.uam.com, to make it a direct, convenient link between UAM's investment professionals and sophisticated investors. The Company also implemented full transaction capability on its website for shareholders of UAM Funds.
In recent years, UAM has established a number of organizations that augment the marketing and client service capabilities of its Affiliated Firms.
UAM (Japan) Inc. offers the diverse investment management services of the Affiliated Firms to the Japanese institutional market. UAM (Japan) has a license to offer fully discretionary investment management services to Japanese institutional investors.
UAM Investment Services, Inc. provides UAM affiliates third-party marketing, sales and product development in the U.S. and certain European countries. ISI offers mutual funds, trust portfolios, and individual account products. These products are offered principally to professional financial advisors and individuals, banks, and providers of 401(k) services.
UAM Funds, Inc. and UAM Funds, Inc. II, each a series mutual fund, allow Affiliated Firms to open portfolios to pool client accounts in an efficient, cost-effective manner and to provide additional investment styles. As of December 31, 1999, 25 of the Affiliated Firms managed 49 UAM Funds portfolios, and such portfolios held assets totaling $3.2 billion.
UAM Fund Services, Inc. oversees service providers used by UAM Funds, Inc. and, upon request, by separate fund families offered by Affiliated Firms.
UAM Trust Company assists Affiliated Firms in establishing commingled investment pools for their clients. Collective group trusts and other commingled investment vehicles can fit those situations where neither separately managed accounts nor mutual funds meet clients' needs.
UAM Shareholder Service Center, Inc. provides fund shareholders with product and account information, transaction processing, and transfer agent services. The center enables Pilgrim Baxter and other UAM Affiliated Firms to consolidate and enhance shareholder services and marketing activities.
UAM believes that the professional independence of the Affiliated Firms and the continuing diversification of investment philosophies and approaches within the Company are necessary ingredients of UAM's success and that of the Affiliated Firms. Many key employees of each Affiliated Firm at the time of acquisition by UAM have continued with their Firm in accordance with employment agreements executed in connection with each acquisition, have remained on their Firm's Board of Directors, and have continued to serve as its executive officers. Each Affiliated Firm's directors and officers are responsible for reviewing their respective Firm's results, plans and budgets.
See Note 7 of the Company's 1999 Annual Report to stockholders (the Annual Report), which is incorporated herein by reference, for the Company's segment information.
Revenue Sharing
Most of UAM's Affiliated Firms operate under revenue sharing plans. Such plans permit each Firm to retain a specified percentage of its revenues (typically 50-70%) for use by its principals at their discretion in paying expenses of operations, including salaries and bonuses. The purposes of the plans are to provide significant ongoing incentives for the principals of the Affiliated Firms to continue working as they did prior to the sale of their firm to UAM, to support their autonomy, and to allow UAM to participate in the growth of revenues of each Affiliated Firm. The plans are designed to allow each Firm's principals to participate in that Firm's growth in a substantial manner and to make operating decisions freely within the limits of that portion of the Firm's revenues which is retained by the Firm. In effect, the portion of its revenues retained by each Firm that is not used to pay salaries and other operating expenses is available for payment to the principals and other key employees of such Firm in the form of bonuses. The portion of Affiliated Firm revenues retained by the Firms and used to pay salaries and bonuses and to fund operating expenses is included in the Company's Consolidated Statement of Operations.
Under each agreement, when an Affiliated Firm is acquired by UAM, the base revenues of the Firm are established, and a share of such revenues is allocated to UAM, with the balance being the acquired Firm's share of revenues. In addition, agreement is reached on the Firm's and UAM's respective percentage shares of changes in such Firm's revenues compared to its base revenues. The Affiliated Firm pays for all of its business expenses out of its share of revenues. Each year, the
amount of the Affiliated Firm's revenues that is paid to UAM and the amount that is retained by the Firm are adjusted upwards in the case of growth in such Firm's revenues over its base, or downwards in the case of decreases in such Firm's revenues below its base, by applying the agreed-upon percentages to the total increase or decrease in the Firm's revenues. Under most of the existing revenue sharing agreements, UAM's share of increases above a Firm's base revenues is between 30% and 50%, and UAM's share of decreases below a Firm's base revenues is between 50% and 70%. Thus, in any year in which the Affiliated Firm's revenues increase over its base revenues, the Firm retains a portion of such additional amounts to use as its principals may decide. The balance of the increase in the Affiliated Firm's revenues is paid to UAM, in addition to UAM's share of such Firm's base revenues. In any year in which the Affiliated Firm's revenues decrease to a level below its base revenues, the Firm's share of its base revenues is reduced by the Firm's portion of the decrease, and therefore, the Firm may need to reduce its expenses. Similarly, the revenue sharing amount paid to UAM will be reduced by UAM's share of any decline in the Affiliated Firm's revenues below its base.
In addition to revenue sharing with its Affiliated Firms, UAM has designed incentive programs to further reward business growth through positive net client cash flow. Incentives awarded under these programs are paid in the combination of cash, stock options and incentive units. UAM is also modifying its economic relationship with some of its affiliates to enable the principals to hold equity in their own firms.
Affiliated Firms
Each Affiliated Firm conducts its own marketing, client relations, research, portfolio management and administrative functions. Each Firm sets its own investment advisory fees and manages its business independently on a day-to-day basis.
The investment philosophy, style and approach of each Affiliated Firm are independently determined by it, and these philosophies, styles and approaches may vary substantially from firm to firm. As a consequence, more than one Affiliated Firm may be retained by a single client, since many clients employ multiple investment advisers. The strategies employed and assets selected by Affiliated Firms are separately chosen by them, with the result that any one Firm may be bullish on the stock or bond market while another Firm is bearish. Two of the Affiliated Firms are full-service institutional real estate investment management firms with $8.9 billion of assets under management at year end. These Firms invest in real estate properties in the U.S. and overseas for their U.S. and foreign clients and provide a broad spectrum of real estate services, including research, acquisition and disposition, financing, and asset and property management. Another Affiliated Firm, with $13.8 billion of assets under management at year end, manages stable value asset portfolios such as guaranteed investment contracts (GICs) and synthetic GICs.
All of these differences, when combined with the separate names and identities of the various Affiliated Firms may: (1) tend to insulate UAM from the various cycles of market performance for specific asset classes and individual Firms; (2) permit more than one Affiliated Firm to serve any single client; and (3) mean that some Affiliated Firms may attract substantial new business while other Firms may grow more slowly or lose business.
UAM's Firms manage both domestic and international investment portfolios for corporate, government and union benefit plans, mutual funds, individuals, endowments, and foundations. As
of December 31, 1999, UAM's Firms had approximately $202.6 billion under management with an average account size of $32.7 million. The 20 largest clients of UAM's Affiliated Firms represented 15% of total revenues and the 100 largest clients represented 29%. Additional information regarding the number of clients and types and amounts of assets under management is found in the table on page 25 of the Annual Report, which is incorporated herein by reference.
The following table summarizes UAM's asset mix:
As previously described, each Affiliated Firm is responsible for marketing its own investment management services. Typically, one or more of the employees at each Firm are responsible for making initial contact with prospective clients. Most Firms have brochures describing the Firm, its principals and its investment approach. These brochures are mailed to prospective clients, in addition to soliciting clients by telephone and in person. Once initial contact is made, face-to-face meetings between the principals of a Firm and the prospective client take place to discuss investment philosophy, management fees and a variety of other related matters.
UAM's Acquisition Program
Since its inception, UAM has sought to acquire or to establish institutional investment management firms. Once it acquires or organizes such firms, UAM seeks to preserve their autonomy by allowing their key employees to retain control of investment decisions and manage day-to-day operations, while adding value to the Firm through an operating partnership described below. When an Affiliated Firm is acquired from employee-stockholders, the former stockholders receive the added benefits of a more diversified company by virtue of equity ownership in UAM. After acquisition by UAM, Affiliated Firms continue to operate under their own firm name, with their own leadership and individual investment philosophy and approach.
In selecting acquisition candidates, the Company uses selective criteria for potential transactions. The Company focuses on investment management firms that will enhance the business of existing affiliates, provide entry to new channels of distribution, or boost UAM's participation in attractive asset classes that are currently under-represented among its Firms. UAM is interested in companies that have pursued their investment philosophy with consistency, shown a determination and an ability to grow, and developed a second generation of money managers and leaders. In addition, UAM has acquired or organized firms at various stages of development, from start-up to relatively mature firms and has acquired both employee-owned firms and subsidiaries or divisions of financial institutions.
UAM has observed that the major reasons that employee-owned firms consider selling to UAM include: (1) the high value of the firm relative to its principals' total net worth; (2) the need
for liquidity on the part of the principals; (3) their desire for diversification and a reduction in their exposure to a single firm's results; (4) their autonomy after acquisition; and (5) the access to channels of distribution provided by UAM's service firms. Substantially all the key employees of Affiliated Firms continue to be actively involved in their firms long after their acquisition by UAM.
In purchasing investment management firms, UAM has structured the transactions to create incentives for key personnel to remain with their firm after the expiration of their employment agreements. The key employees have entered into employment and noncompete agreements for terms ranging primarily from five to 12 years, which also prohibit the employees from competing with their firm for a substantial period after termination of employment. Most of the key employees of the Affiliated Firms were stockholders of such firms prior to their acquisition by UAM. In connection with the purchases, the former stockholders and/or key employees have typically received consideration in the form of cash, subordinated notes and warrants to purchase UAM common stock, and/or UAM common stock. The subordinated notes, most of which may be used to exercise the warrants, generally have terms of between five and 10 years. The key employees of each Affiliated Firm also participate directly, through revenue sharing, in revenues of their firm and meet the Firm's expenses from their share of these revenues, as described more fully under "Revenue Sharing."
To fund acquisitions, the Company utilizes its existing capital, together with internally generated cash and borrowings available under its $750,000,000 Reducing Revolving Credit Agreement (as more fully described in Note 3 of the Annual Report, also see Items 8 and 14 of this Form 10-K). Such borrowings are secured by the stock of the Company's subsidiaries.
Regulation
UAM's domestic investment advisory subsidiaries are registered with and subject to regulation by the Securities and Exchange Commission (the SEC) under the Investment Advisers Act of 1940 and, where applicable, under state advisory laws. The Company's foreign investment advisory affiliates are members of or subject to certain self-regulatory bodies or other regulatory agencies. The Company's brokerage subsidiaries are registered as broker-dealers with the SEC under the Securities Exchange Act of 1934 and, where applicable, under state securities laws, and are regulated by the SEC, state securities administrators and the National Association of Securities Dealers, Inc. Four Affiliated Firms are regulated by the Commodities Futures Trading Commission, and among the Affiliated Firms are four trust companies which are subject to regulation by the Office of Comptroller of the Currency or applicable state law.
UAM's domestic investment advisory subsidiaries are subject to ERISA and its regulations to the extent they are "fiduciaries" under ERISA with respect to their clients.
Registrations, reporting, maintenance of books and records and compliance procedures required by these laws and regulations are maintained independently by each UAM subsidiary.
The officers, directors and employees of UAM's Affiliated Firms may from time to time own securities which are also owned by one or more of their clients. Each such Firm has internal guidelines and codes of ethics with respect to individual investments, requires reporting of securities transactions, and restricts certain transactions so as to minimize possible conflicts of interest.
UAM's Affiliated Firms as of December 31, 1999 are listed below in the order in which they were acquired or established.
Employees
The UAM holding company has 76 employees, 9 of whom are executive officers of UAM (see Item 10, Directors and Executive Officers of the Registrant). Each Affiliated Firm employs its own investment advisory, marketing and client service, administrative and operations personnel as needed to provide advisory services to its clients and to maintain necessary records in accordance with the rules of various regulatory agencies (see "Affiliated Firms" and "Regulation" on pages 5 and 7, respectively). At December 31, 1999, the Company, as a whole, employed 2,189 persons. These numbers exclude 178 individuals who are employed by the property management subsidiary of L&B Realty Advisors, Inc. and whose total compensation is billed directly to clients of this affiliate.
Available Information
Information about the Company, including copies of its Forms 10-K and 10-Q filed with the Securities and Exchange Commission, may be obtained without charge by writing to the Company at One International Place, Boston, Massachusetts 02110 or reviewing its website at www.uam.com. This information may also be obtained by contacting the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549 (1-800-SEC-0330).
Item 2.
Item 2. Properties
UAM's executive offices in Boston, Massachusetts occupy approximately 27,000 square feet under a lease which expires in 2002. Affiliated Firms are likewise lessees of their respective offices under leases which expire at various dates.
Item 3.
Item 3. Legal Proceedings
The Company and certain of the Company's subsidiaries are subject to legal proceedings arising in the ordinary course of business. On the basis of information presently available and advice received from legal counsel, it is the opinion of management that the disposition or ultimate determination of such legal proceedings will not have a material adverse effect on the Company's consolidated financial position, its consolidated results of operations or its consolidated cash flows.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to the vote of the security holders of the Company during the fourth quarter of the fiscal year covered by this report.
PART II
Item 5.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
During the fourth quarter of 1999, UAM issued an aggregate of 494,624 shares of its Common Stock, $.01 par value, in reliance on Section 4(2) of the Securities Act of 1933, as amended (the Act), to certain executives of its subsidiaries upon the exercise of warrants originally issued in connection with the acquisition of such subsidiaries by UAM. The exercise prices of the warrants ranged from $17.50 to $22.66 per share.
As of March 15, 1999, there were 348 stockholders of record. The balance of the information required by this item is incorporated herein by reference to the "Common Stock Information" on page 47 of the Annual Report.
Item 6.
Item 6. Selected Financial Data
The information required by this item is incorporated herein by reference to the "Eleven-Year Review" on pages 30 and 31 of the Annual Report.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The information required by this item is incorporated herein by reference to the "Management's Discussion and Analysis" on pages 26 through 29 of the Annual Report.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The Company's primary market risk exposures are in the areas of interest-rate risk, foreign currency exchange-rate risk, and equity-price risk.
The Company's exposure to interest-rate risk arises from variable-rate and fixed-rate debt arrangements entered into for other-than-trading purposes. To mitigate the risks associated with increases in interest rates, the Company has entered into and plans to continue to enter into interest-rate protection agreements. The agreement outstanding as of December 31, 1999 extends up to two years and limits interest rates to an average of 8.4%. Tabular information with respect to this interest-rate protection agreement has not been presented as the financial statement impact of such agreement is not considered material.
The table below summarizes the Company's market risks associated with debt obligations as of December 31, 1999. At Decemer 31, 1999, the Company had borrowings outstanding of $297,000,000 outstanding under its $750,000,000 Reducing Revolving Credit Agreement (the Credit Agreement). Interest rates available for amounts outstanding under the Credit Agreement are currently: prime, 1.875% over 30-day LIBOR or a money market bid option. The recorded cost of the Senior Notes and Credit Agreement approximates fair value. Due to the unique nature of each of the subordinated debt instruments issued as consideration for businesses acquired, an assessment of current fair value is not practical. In the table, effective interest rates shown for subordinated debt instruments represent a weighted-average of fixed interest rates attached to notes having a particular expected year of maturity. The Company intends to finance the Senior Notes, as well as the subordinated debt that becomes due which has not been tendered in connection with the exercise of warrants, by utilizing the Credit Agreement. As such, $25,000,000 of Senior Notes and $3,349,000 of subordinated notes due in 2000 have been included in the payments due in 2003, the year the Credit Agreement expires.
The Company also has exposure to foreign currency exchange-rate fluctuations for the cash flows received from its foreign affiliates. This risk is mitigated by the fact that the operations of its subsidiaries, most of which are located in the U.K. or Canada, are conducted in their respective local currencies. In addition, any cash remitted by the foreign affiliates occurs shortly after the related accounts receivable have been collected, further mitigating this risk. Currently, the Company does not engage in foreign currency hedging activities as it does not believe that its foreign currency exchange rate risk is material.
The Company also has equity-price risk as more fully described in the "Industry" section on page two. This risk is somewhat mitigated by the Company's practice of participating in revenue sharing with its Affiliates. See page 4 for a discussion of "Revenue Sharing." The Company does not use any market-rate-sensitive instruments for trading purposes or otherwise to protect against this risk.
Item 8.
Item 8. Financial Statements and Supplementary Data
The information required by this item is incorporated herein by reference to the "Selected Quarterly Financial Data" on page 47 of the Annual Report, "Consolidated Financial Statements" and "Notes to the Consolidated Financial Statements" on pages 32 through 45 of the Annual Report, and the "Report of Independent Accountants" on page 46 of the Annual Report. (See also the "Financial Statement Schedule" filed under Item 14 of this Form 10-K.)
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant
The information required by this item is incorporated herein by reference to the sections entitled "Election of Directors," "Executive Officers," and "Proxy Statement - Section 16(a) Beneficial Ownership Reporting Compliance" in the Company's Proxy Statement for the Annual Meeting of Stockholders to be held on May 18, 2000 (the "Proxy Statement").
Item 11.
Item 11. Executive Compensation
The information required by this item is incorporated herein by reference to the sections entitled "Executive Compensation - Summary Compensation Table," "Executive Compensation - Total Option Exercises in 1999 and Year-End Values," "Executive Compensation - Option Grants in 1999," "Executive Compensation - Compensation Committee Report," "Performance Graph," "Compensation Committee Interlocks and Insider Participation," and "Governance of the Company - Compensation of Directors" in the Proxy Statement.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is incorporated herein by reference to the section entitled "Ownership of UAM's Common Stock" in the Proxy Statement.
Item 13.
Item 13. Certain Relationships and Related Transactions
The information required by this item is incorporated herein by reference to the section entitled "Governance of the Company - Related Transactions" in the Proxy Statement.
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K
(a) 1. Financial Statements
The following consolidated financial statements of United Asset Management Corporation and report of independent accountants, included on pages 32 through 46 of the Annual Report, are incorporated herein by reference as a part of this Form 10-K:
Page(s) in the Title Annual Report ----- -------------
Report of Independent Accountants. 46
Consolidated Balance Sheet as of December 31, 1999 and 1998. 32
Consolidated Statement of Operations for each of the three years in the period ended December 31, 1999. 33
Consolidated Statement of Cash Flows for each of the three years in the period ended December 31, 1999. 34
Consolidated Statement of Changes in Stockholders' Equity for each of the three years in the period ended December 31, 1999. 35
Notes to Consolidated Financial Statements. 36 - 45
2. Financial Statement Schedule
The following consolidated financial statement schedule and report of independent accountants are filed as a part of this Form 10-K and are on the following pages:
Page ----
Report of Independent Accountants on Financial Statement Schedule.
Schedule VIII Valuation and Qualifying Accounts for each of the three years in the period ended December 31, 1999.
All other schedules have been omitted since they are not required, not applicable or the information is in the Financial Statements or Notes thereto.
3. Exhibits
Exhibit Number Title ------ -----
(1) 3.1 Restated Certificate of Incorporation of the Registrant.
(2) 3.2 Amended and Restated By-Laws of the Registrant.
(3) 4.1 Specimen Certificate of Common Stock, $.01 par value, of the Registrant.
(4) 4.2 Agreement to furnish copies of subordinated debt instruments to the Commission.
9.0 Not applicable.
(5) 10.1 $750,000,000 Amended and Restated Credit Agreement dated as of April 29, 1998.
(5) 10.2 Undertaking to Furnish Copies of Omitted Exhibits and Schedules to $750,000,000 Amended and Restated Credit Agreement dated as of April 29, 1998.
(6) 10.3 Amendment No. 1 to Amended and Restated Credit Agreement dated as of August 12, 1998.
(2) 10.4 Amendment No. 2 and Waiver to Amended and Restated Credit Agreement dated as of December 30, 1998.
(2) 10.5 Amendment No. 3 and Waiver to Amended and Restated Credit Agreement dated as of January 29, 1999.
(7) 10.6 Note Purchase Agreement dated as of August 1, 1995.
(8) 10.7 First Amendment dated as of June 23, 1998 to Note Purchase Agreement dated as of August 1, 1995.
(6) 10.8 $250,000,000 Note Purchase Agreement dated as of August 12, 1998.
(6) 10.9 Undertaking to Furnish Copies of Omitted Exhibits and Schedules to $250,000,000 Note Purchase Agreement dated as of August 12, 1998.
(9) 10.10 United Asset Management Corporation Profit Sharing and 401(k) Plan dated as of May 11, 1989 and Amended and Restated as of November 26, 1990.
(10) 10.11 Revised First Amendment to United Asset Management Corporation Profit Sharing and 401(k) Plan effective as of January 1, 1992.
(10) 10.12 Second Amendment to United Asset Management Corporation Profit Sharing and 401(k) Plan effective as of January 1, 1993.
(1) 10.13 Third Amendment to United Asset Management Corporation Profit Sharing and 401(k) Plan effective as of January 1, 1994.
(11) 10.14 Fourth Amendment to United Asset Management Corporation Profit Sharing and 401(k) Plan effective as of January 1, 1995.
10.15 Fifth Amendment to United Asset Management Corporation Profit Sharing and 401(k) Plan effective as of January 1, 2000.
(12) 10.16 United Asset Management Corporation Amended and Restated 1994 Stock Option Plan (as further amended and restated as of March 31, 1999).
(2) 10.17 United Asset Management Corporation Stock Option Deferral Plan effective December 29, 1998.
(11) 10.18 United Asset Management Corporation Deferred Compensation Plan effective January 1, 1994.
(13) 10.19 First Amendment to United Asset Management Corporation Deferred Compensation Plan effective July 1, 1997.
10.20 Second Amended and Restated Consulting Agreement by and between United Asset Management Corporation and David I. Russell as of January 1, 2000.
(5) 10.21 Employment Agreement between United Asset Management Corporation and Charles E. Haldeman, Jr. dated March 1, 1998.
10.22 First Amendment dated November 29, 1999 to Employment Agreement between United Asset Management Corporation and Charles E. Haldeman, Jr.
10.23 Salary Continuation Plan
(14) 10.24 Forms of Agreements with Certain Employees.
11.1 Calculation of Earnings (Loss) Per Share.
12.0 Not applicable.
13.1 Annual Report to Stockholders for the Year Ended December 31, 1999.
16.0 Not applicable.
18.0 Not applicable.
21.1 Subsidiaries of the Registrant.
22.0 Not applicable.
23.1 Consent of Independent Accountants.
24.0 Not applicable.
27.1 Financial Data Schedules.
99.1 Risk Factors.
Notes to Exhibit Listing
(1) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1994, and incorporated herein by reference.
(2) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1998, and incorporated herein by reference.
(3) Filed as an Exhibit to the Company's Form S-1 as filed with the Commission and which became effective on August 22, 1986, and incorporated herein by reference (Registration No. 33-6874).
(4) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1988, and incorporated herein by reference.
(5) Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for the period ended March 31, 1998, and incorporated herein by reference.
(6) Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for the period ended September 30, 1998, and incorporated herein by reference.
(7) Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for the period ended September 30, 1995, and incorporated herein by reference.
(8) Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 1998, and incorporated herein by reference.
(9) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1990, and incorporated herein by reference.
(10) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1993, and incorporated herein by reference.
(11) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1995, and incorporated herein by reference.
(12) Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for the period ended March 31, 1999, and incorporated herein by reference.
(13) Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for the period ended September 30, 1997, and incorporated herein by reference.
(14) Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for the period ended September 30, 1999, and incorporated herein by reference.
Location of Documents Pertaining to Executive Compensation Plans and Arrangements:
(1) United Asset Management Corporation Amended and Restated 1994 Stock Option Plan (as further amended and restated as of March 31, 1999), Exhibit 10.16 to this form 10-K.
(2) United Asset Management Corporation Stock Option Deferral Plan effective December 29, 1998, Exhibit 10.17 to this Form 10-K.
(3) United Asset Management Corporation Deferred Compensation Plan effective January 1, 1994, Exhibit 10.18 to this Form 10-K.
(4) First Amendment to United Asset Management Corporation Deferred Compensation Plan effective July 1, 1997, Exhibit 10.19 to this Form 10-K.
(5) Second Amended and Restated Consulting Agreement by and between United Asset Management Corporation and David I. Russell as of January 1, 2000, Exhibit 10.21 to this form 10-K.
(6) Employment Agreement between United Asset Management Corporation and Charles E. Haldeman, Jr. dated March 1, 1998, Exhibit 10.22 to this Form 10-K.
(7) Amendment dated November 29, 1999 to Employment Agreement between United Asset Management Corporation and Charles E. Haldeman, Jr., Exhibit 10.23 to this Form 10-K.
(8) Salary Continuation Plan, Exhibit 10.24 to this Form 10-K.
(9) Forms of Agreement with Certain Employees, Exhibit 10.25 to this form 10-K.
(b) Reports on Form 8-K
A report on Form 8-K was filed on November 29, 1999. The items reported and financial statements and exhibits were as follows:
Item 5. Other Events
On November 29, 1999, the Company published a press release in the form of Exhibit 99.1.
Item 7. Financial Statements and Exhibits
(c) Exhibits
99.1 Press Release of United Asset Management Corporation Dated November 29, 1999.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 17, 2000 UNITED ASSET MANAGEMENT CORPORATION (Registrant)
By /s/ Norton H. Reamer By /s/ William H. Park ----------------------------- ------------------------------ Norton H. Reamer William H. Park Chairman of the Board and Executive Vice President and Chief Executive Officer Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.
/s/ Norton H. Reamer - --------------------------------- (Norton H. Reamer) Director March 17, 2000
/s/ Harold J. Baxter - --------------------------------- (Harold J. Baxter) Director March 17, 2000
/s/ Francis Finlay - --------------------------------- (Francis Finlay) Director March 17, 2000
/s/ Robert J. Greenebaum - --------------------------------- (Robert J. Greenebaum) Director March 17, 2000
/s/ Beverly L. Hamilton - --------------------------------- (Beverly L. Hamilton) Director March 17, 2000
/s/ George E. Handtmann, III - --------------------------------- (George E. Handtmann, III) Director March 17, 2000
/s/ Jay O. Light - --------------------------------- (Jay O. Light) Director March 17, 2000
/s/ David I. Russell - --------------------------------- (David I. Russell) Director March 17, 2000
/s/ Philip Scaturro - --------------------------------- (Philip Scaturro) Director March 17, 2000
/s/ John A. Shane - --------------------------------- (John A. Shane) Director March 17, 2000
/s/ Barbara S. Thomas - --------------------------------- (Barbara S. Thomas) Director March 17, 2000
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of United Asset Management Corporation
Our audits of the consolidated financial statements referred to in our report dated February 2, 2000 appearing in the 1999 Annual Report to Stockholders of United Asset Management Corporation (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedule listed in Item 14(a)(2) of this Form 10-K. In our opinion, this Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.
/s/ PricewaterhouseCoopers LLP - ------------------------------ PricewaterhouseCoopers LLP Boston, Massachusetts February 2, 2000
Schedule VIII
UNITED ASSET MANAGEMENT CORPORATION VALUATION AND QUALIFYING ACCOUNTS (In thousands)