1
Confidential
Presentation regarding:
Project Spirit
PRESENTATION TO THE INDEPENDENT COMMITTEE
OF THE BOARD OF DIRECTORS
March 2, 2000
SALOMON SMITH BARNEY
---------------------------
A member of citigroup[LOGO]
2
PROJECT SPIRIT
Disclaimer
These materials are based solely on information received from publicly
available documents and certain other information provided by the
management of C Co. ("C Co." or the "Company"). Salomon Smith Barney Inc.
("Salomon Smith Barney") has had discussions with certain senior officers
of C Co., but has not attempted independently to investigate or verify
such information, and Salomon Smith Barney does not assume responsibility
for the accuracy or completeness of such information. The projections
included in these materials have been prepared by the management of C Co.
Salomon Smith Barney has relied solely on such projections and, in
preparing these materials has assumed that such projections were
reasonably prepared on bases reflecting the best currently available
estimates and judgments of the management of C Co. Projections involve
elements of subjective judgment and analysis, and there can be no
assurance that such projections will be attained. Salomon Smith Barney
expresses no opinion with respect to such projections or the assumptions
underlying them. These materials are being furnished and should be
considered only in connection with the advice or opinion being provided by
Salomon Smith Barney in connection herewith.
SALOMON SMITH BARNEY
---------------------------
A member of citigroup[LOGO]
3
PROJECT SPIRIT
Table of Contents
1 TRANSACTION SUMMARY
2 EQUITY MARKET REACTION AND UPDATE
3 HISTORICAL OPERATING PERFORMANCE
4 C CO. VALUATION ANALYSIS
A. Market Based Data
B. Discounted Cash Flow
APPENDIX
A. Projected Financial Statements
B. Public Comparable Mortgage Companies
SALOMON SMITH BARNEY
---------------------------
A member of citigroup[LOGO]
4
PROJECT SPIRIT
1 TRANSACTION SUMMARY
SALOMON SMITH BARNEY
---------------------------
A member of citigroup[LOGO]
5
PROJECT SPIRIT
Transaction Summary
- ----------------------------------------------------- ----------------------------------------------
ITEM OFFER TERMS
- ----------------------------------------------------- ----------------------------------------------
Transaction M Co. acquires the outstanding shares of C Co.
Price per Share $12.50
Total Transaction Value $174.6 million
Value of Minority Interest $68.1 million
Form of Consideration 100% cash
Price as a Multiple of:
2000 IBES EPS (as of 2/25/00) 11.2x
2000 Management Projections EPS 13.4
2000 Sensitivity Analysis EPS 17.3
Price Premium/(Discount) to:
52 Week High ($18.75) (33.3%)
52 Week Low ($6.75) 85.2
1-Day Prior to M Co. Initial Offer ($9.5625) 30.7
1-Month Prior to M Co. Initial Offer ($8.4375) 48.1
SALOMON SMITH BARNEY
---------------------------
1 A member of citigroup[LOGO]
6
PROJECT SPIRIT
2 EQUITY MARKET REACTION AND UPDATE
SALOMON SMITH BARNEY
---------------------------
A member of citigroup[LOGO]
7
PROJECT SPIRIT
C Co. Trading History
PRICE/VOLUME
Daily Data: IPO Date (December 17, 1997) through February 25, 2000
[GRAPHIC OMITTED]
(a) 07/29/99: A Co. announces a loss of $179 million.
(b) 08/09/99: Parent is downgraded by Moody's from A3 to Ba1 and then to B1 on
8/12/99.
(c) 08/26/99: M Co. acquires Parent for $1.2 billion in cash.
(d) 10/07/99: C Co. warns that 3rd quarter earnings may be up to 43% below
consensus estimates.
(e) 01/18/00: M Co. offers to purchase outstanding C Co. shares for $10.50 per
share.
SALOMON SMITH BARNEY
---------------------------
2 A member of citigroup[LOGO]
8
PROJECT SPIRIT
C Co. Relative Price Performance
PRICE PERFORMANCE
Daily Data: IPO Date (December 17, 1997) through February 25, 2000
[GRAPHIC OMITTED]
(a) 07/29/99: A Co. announces a loss of $179 million.
(b) 08/09/99: Parent is downgraded by Moody's from A3 to Ba1 and then to B1 on
8/12/99.
(c) 08/26/99: M Co. acquires Parent for $1.2 billion in cash.
(d) 10/07/99: C Co. warns that 3rd quarter earnings may be up to 43% below
consensus estimates.
(e) 01/18/00: M Co. offers to purchase outstanding C Co. shares for $10.50 per
share.
SALOMON SMITH BARNEY
---------------------------
3 A member of citigroup[LOGO]
9
PROJECT SPIRIT
C Co. Relative Price/Forward Earnings Ratio
RELATIVE PRICE/FORWARD EARNINGS
Daily Data: IPO Date (December 17, 1997) through February 25, 2000
[GRAPHIC OMITTED]
(a) 07/29/99: A Co. announces a loss of $179 million.
(b) 08/09/99: Parent is downgraded by Moody's from A3 to Ba1 and then to B1 on
8/12/99.
(c) 08/26/99: M Co. acquires Parent for $1.2 billion in cash.
(d) 10/07/99: C Co. warns that 3rd quarter earnings may be up to 43% below
consensus estimates.
(e) 01/18/00: M Co. offers to purchase outstanding C Co. shares for $10.50 per
share.
SALOMON SMITH BARNEY
---------------------------
4 A member of citigroup[LOGO]
10
PROJECT SPIRIT
Mortgage Business Relative Price Performance
MORTGAGE RELATED PRICE PERFORMANCE
Daily Data: IPO Date (December 17, 1997) through February 25, 2000
[GRAPHIC OMITTED]
SALOMON SMITH BARNEY
---------------------------
5 A member of citigroup[LOGO]
11
PROJECT SPIRIT
C Co. Recent Trading History
PRICE/VOLUME
Daily Data: July 29, 1999 through February 25, 2000
[GRAPHIC OMITTED]
(a) 07/29/99: A Co. announces a loss of $179 million.
(b) 08/09/99: Parent is downgraded by Moody's from A3 to Ba1 and then to B1 on
8/12/99.
(c) 08/26/99: M Co. acquires Parent for $1.2 billion in cash.
(d) 10/07/99: C Co. warns that 3rd quarter earnings may be up to 43% below
consensus estimates.
(e) 01/18/00: M Co. offers to purchase outstanding C Co. shares for $10.50 per
share.
SALOMON SMITH BARNEY
---------------------------
6 A member of citigroup[LOGO]
12
PROJECT SPIRIT
3 HISTORICAL OPERATING PERFORMANCE
SALOMON SMITH BARNEY
---------------------------
A member of citigroup[LOGO]
13
PROJECT SPIRIT
Historical AUM and Revenue Breakdown by Year
AFFILIATED VS. UNAFFILIATED BUSINESSES
($ in millions)
As of December 31,
----------------------------------------------------------
------------ ------------ ------------ ------------ ------------
1996 1997 1998 1999(a) CAGR(b)
------------ ------------ ------------ ------------ ------------
Affiliated Assets Under Management $10,600 $14,200 $17,200 $11,600 3.1%
Unaffiliated Assets Under Management 10,100 11,800 12,400 21,700 29.0
- ------------------------------------------------------------------------------------------------------------------
Total Assets Under Management $20,700 $26,000 $29,600 $33,300 17.2%
- ------------------------------------------------------------------------------------------------------------------
Affiliated Revenues $10.8 $12.1 $16.1 $16.3 14.7%
Unaffiliated Revenues 41.8 52.9 63.5 73.1 20.4
Other Revenues 1.1 1.6 2.6 1.6 14.3
- ------------------------------------------------------------------------------------------------------------------
Total Revenues $53.7 $66.6 $82.2 $90.9 19.2%
- ------------------------------------------------------------------------------------------------------------------
Affiliated Pre-Tax Income $2.4 $2.6 $4.1 $4.6 24.2%
Unaffiliated Pre-Tax Income 8.7 12.5 18.6 17.6 26.5
- ------------------------------------------------------------------------------------------------------------------
Total Pre-Tax Income $11.1 $15.1 $22.7 $22.2 26.0%
- ------------------------------------------------------------------------------------------------------------------
Affiliated
Pre-Tax Income/Revenues 22.2% 21.6% 25.5% 28.2%
Pre-Tax Income/Average AUM 0.6bp 0.5bp 0.7bp 0.8bp
Unaffiliated
Pre-Tax Income/Revenues 20.8% 23.7% 29.3% 24.1%
Pre-Tax Income/Average AUM 2.3bp 2.9bp 3.9bp 2.6bp
Mortgage Revenues as a % of Total 28.5% 24.8% 28.2% 28.2%
(a) The decrease in affiliated AUM in 1999 is due to the loss of assets
related to stable value products and the increase in unaffiliated AUM in
1999 is due to the conversion of a large advisory client to a
discretionary client and the acquisition of TCW's high-grade fixed income
management unit serving insurance companies.
(b) Represents a CAGR from 1996-1999.
SALOMON SMITH BARNEY
---------------------------
7 A member of citigroup[LOGO]
14
PROJECT SPIRIT
Historical AUM and Revenue Breakdown by Quarter
AFFILIATED VS. UNAFFILIATED BUSINESSES
($ in millions)
1999
----------------------------------------------------------
------------ ------------ ------------ ------------
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
------------ ------------ ------------ ------------
Affiliated Assets Under Management $17,100 $17,300 $11,800 $11,600
Unaffiliated Assets Under Management 12,300 15,100 22,200 21,700
- --------------------------------------------------------------------------------------------------
Total Assets Under Management $29,400 $32,400 $34,000 $33,300
- --------------------------------------------------------------------------------------------------
Affiliated Revenues $4.0 $4.1 $4.3 $3.9
Unaffiliated Revenues 18.5 19.5 16.9 18.1
Other Revenues 0.5 0.4 0.3 0.4
- --------------------------------------------------------------------------------------------------
Total Revenues $23.0 $24.0 $21.5 $22.4
- --------------------------------------------------------------------------------------------------
Affiliated Pre-Tax Income $1.2 $1.2 $1.2 $1.0
Unaffiliated Pre-Tax Income 5.1 5.4 3.1 4.0
- --------------------------------------------------------------------------------------------------
Total Pre-Tax Income $6.3 $6.6 $4.3 $5.0
- --------------------------------------------------------------------------------------------------
Affiliated
Pre-Tax Income/Revenues 30.0% 29.3% 27.9% 25.6%
Pre-Tax Income/Average AUM (a) 0.7bp 0.7bp 0.8bp 0.9bp
Unaffiliated
Pre-Tax Income/Revenues 27.6% 27.7% 18.3% 22.1%
Pre-Tax Income/Average AUM (a) 4.1bp 3.9bp 1.7bp 1.8bp
(a) Annualized
SALOMON SMITH BARNEY
---------------------------
8 A member of citigroup[LOGO]
15
PROJECT SPIRIT
Historical Operating Statistics vs. Peer Group
------ ------ ------
1997 1998 1999
------ ------ ------
Revenue Growth
C CO. 24.1% 23.4% 10.5%
Peer Group 22.7 25.2 11.8
Net Income Growth
C CO. 43.5% 47.1% 1.6%
Peer Group 12.5 14.6 18.1
AUM Growth
C CO. 25.6% 13.8% 12.5%
Peer Group 33.5 21.6 13.1
Advisory Revenue/Total Revenue
C CO. 50.1% 49.0% 43.8%
Peer Group 87.4 94.1 96.4
Mortgage Revenue/Total Revenue
C CO. 24.8% 28.2% 28.2%
Peer Group -- -- --
Comp. Expense/Total Revenue
C CO. 50.0% 46.5% 47.3%
Peer Group 40.6 39.9 36.1
Total Revenue/AUM
C CO. 0.26% 0.28% 0.27%
Peer Group 0.46 0.47 0.53
Advisory Revenue/AUM
C CO. 0.13% 0.14% 0.12%
Peer Group 0.41 0.46 0.48
EBITDA Margin
C CO. 27.6% 31.1% 27.6%
Peer Group 35.7 42.2 40.3
Price/Forward Net Income
C CO. NA 19.4x 14.1x (a)
Peer Group 18.8 19.2 16.9 (a)
Note: Data for the peer group is based on the median of the historical operating
statistics.
Peer group includes FII, BLK, JNC, AMG, UAM and GBL.
(a) Through 8/9/99.
SALOMON SMITH BARNEY
---------------------------
9 A member of citigroup[LOGO]
16
PROJECT SPIRIT
Business Mix vs. Peer Group
(As of September 30, 1999)
Assets Under Management
-----------------------------------------------------------------------
Client Type Asset Type Region
-------------------- -------------------- ------------------
Retail Inst'l Equity FI Dom. Int'l
- -----------------------------------------------------------------------------------------------------------
C Co. - Management Projections -- 100.0% 12.0% 88.0% 100.0% --
C Co. - Sensitivity Analysis -- 100.0 13.5 86.5 100.0 --
PUBLIC ASSET MANAGERS
Federated Investors, Inc. 88.0% 12.0% 15.0% 85.0% 98.0% 2.0%
BlackRock Inc. 39.9 60.1 10.3 89.7 98.0 2.0
John Nuveen 66.7 33.3 25.1 74.9 100.0 --
Affiliated Managers Group 7.0 93.0 67.0 33.0 64.0 36.0
United Asset Management 4.0 96.0 87.0 13.0 86.0 14.0
Gabelli Asset Management Inc. 50.3 49.7 88.0 12.0 100.0 --
- -----------------------------------------------------------------------------------------------------------
High 88.0% 96.0% 88.0% 89.7% 100.0% 36.0%
Median 45.1 54.9 46.0 54.0 98.0 2.0
Low 4.0 12.0 10.3 12.0 64.0 --
- -----------------------------------------------------------------------------------------------------------
SALOMON SMITH BARNEY
---------------------------
10 A member of citigroup[LOGO]
17
PROJECT SPIRIT
4 C CO. VALUATION ANALYSIS
SALOMON SMITH BARNEY
---------------------------
A member of citigroup[LOGO]
18
PROJECT SPIRIT
A. Market Based Data
SALOMON SMITH BARNEY
---------------------------
A member of citigroup[LOGO]
19
PROJECT SPIRIT
Valuation Summary - Market Based Data
-------------
Current C Co.
Market Price:
$10.69
-------------
|
V
------------- ------------- -------------
M Co. Initial M Co. First M Co. Second
Offer Price: Revised Offer Revised Offer
$10.50 Price: $11.50 Price: $12.50
------------- ------------- -------------
| | |
V V V
Valuation Methodology $6.50 $7.50 $8.50 $9.50 $10.50 $11.50 $12.50 $13.50
- ------------------------------------------------------------------------------------------------------------------------------------
Management Projections
---------------------------
Summary Component Valuation $8.50-10.50
---------------------------
------------------------------
Public Asset Managers (a) $9.25-$12.00
------------------------------
Sensitivity Analysis
----------------------
Summary Component Valuation $6.50-8.00
----------------------
---------------------
Public Asset Managers (a) $7.25-9.25
---------------------
Squeeze Out Analysis
---------------------
1-Day Prior Premium to M Co.'s Initial Offer $10.75-12.50
---------------------
------------------
1-Month Prior Premium to M Co.'s Initial Offer $9.75-11.75
------------------
Valuation Multiples $6.50 $7.50 $8.50 $9.50 $10.50 $11.50 $12.50 $13.50
- ------------------------------------------------------------------------------------------------------------------------------------
Premium/Market Price (February 25, 2000)(b) (39.2)% (29.8)% (20.5)% (11.1)% (1.8)% 7.6% 17.0% 26.3%
Premium/Market Price (January 14, 2000)(c) (32.0) (21.6) (11.1) (0.7) 9.8 20.3 30.7 41.2
Premium/Market Price (December 14, 1999) (d) (23.0) (11.1) 0.7 12.6 24.4 36.3 48.1 60.0
Premium/Market Price (August 9, 1999) (e) (59.7) (53.5) (47.3) (41.1) (34.9) (28.7) (22.5) (16.3)
Firm Value/Management Projections 1999 EBITDA 0.9x 1.5x 2.1x 2.7x 3.4x 4.0x 4.6x 5.3x
Firm Value/Sensitivity Analysis 1999 EBITDA 1.1 1.9 2.8 3.6 4.4 5.2 6.1 6.9
Price/Management Projections 1999 Net Income 7.9 9.1 10.3 11.5 12.7 13.9 15.1 16.3
Price/Sensitivity Analysis 1999 Net Income 10.2 11.7 13.3 14.9 16.4 18.0 19.6 21.1
Price/Management Projections 2000E Net Income (f) 7.0 8.0 9.1 10.2 11.2 12.3 13.4 14.4
Price/Sensitivity Analysis 2000E Net Income (g) 9.0 10.4 11.8 13.1 14.5 15.9 17.3 18.7
- ------------------------------------------------------------------------------------------------------------------------------------
(a) Public asset managers consist of FII, BLK, JNC, AMG, UAM, GBL.
(b) Price as of close of M Co.'s first and second revised offer (2/25/00):
$10.6875
(c) Price 1-day prior to M Co.'s initial offer (1/14/00): $9.5625
(d) Price 1-month prior to M Co.'s initial offer (12/14/99): $8.4375
(e) Price prior to Parent ratings downgrade announcement (8/9/99): $16.125
(f) Based on management projections of $0.93 for 2000 and 13.97 million shares
outstanding.
(g) Based on a sensitivity analysis of $0.72 for 2000 and 13.97 million shares
outstanding.
SALOMON SMITH BARNEY
---------------------------
11 A member of citigroup[LOGO]
20
PROJECT SPIRIT
Summary Component Valuation
- ----------------------------------------------------------------------------------------------------
2000E Net
Income Per P/2000E Multiple Implied
Business Line Share Median Valuation Valuation Range
- ----------------------------------------------------------------------------------------------------
Management Projections
Unaffiliated AUM (a) $0.56 11.6x -- 14.2x $6.45 -- $ 7.88
Affiliated AUM (Retained) (a) 0.04 11.6 -- 14.2 0.52 -- 0.64
Mortgage (b) 0.33 4.7 -- 5.8 1.59 -- 1.94
-------- -------------------- ----------------
- ----------------------------------------------------------------------------------------------------
Total C Co. $0.93 9.1x -- 11.2x $8.55 -- $10.46
- ----------------------------------------------------------------------------------------------------
Sensitivity Analysis
Unaffiliated AUM (a) $0.45 11.6x -- 14.2x $5.21 -- $ 6.36
Mortgage (b) 0.28 4.7 -- 5.8 1.30 -- 1.59
-------- -------------------- ----------------
- ----------------------------------------------------------------------------------------------------
Total C. Co. $0.72 9.0x -- 11.0x $6.51 -- $ 7.96
- ----------------------------------------------------------------------------------------------------
N.B. Management Projections.
(a) Represents median of P/2000E estimates adjusted by +/- 10% for an index of
public asset managers companies (FII, BLK, JNC, AMG, UAM and GBL).
(b) Represents median of P/2000E estimates adjusted by +/- 10% for an index of
residential and commercial mortgage REIT companies (NDE, AHR, RWT, AMMB,
RAS and LMM).
SALOMON SMITH BARNEY
---------------------------
12 A member of citigroup[LOGO]
21
PROJECT SPIRIT
Public Asset Managers
FINANCIAL INFORMATION AS OF OR FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999.
(Dollars in millions, except per share data)
Market Cap.
as a Multiple of:
-------------------------------------
2/25/00 Calendar:
Market LTM -------------------
Cap. AUM Net.Inc.(b) 00EE(c) 01EE(c)
- ----------------------------------------------------------------------------------------------------------
C Co. - Management Projections $149 $24,400 12.9x 11.4x 9.6x
C Co. - Sensitivity Analysis 149 21,700 16.7 14.8 11.0
PUBLIC ASSET MANAGERS
Federated Investors, Inc. $1,910 $124,820 15.4x 13.4x 11.7x
BlackRock Inc. 1,201 161,500 20.2 15.1 12.7
John Nuveen 1,053 59,784 10.8 10.7 9.7
Affiliated Managers Group 830 82,041 11.5 14.7 11.8
United Asset Management 828 202,600 13.5 12.4 10.7
Gabelli Asset Management Inc. (a) 495 18,629 12.0 10.0 8.4
------------------------------------------------------------------
High $202,600 20.2x 15.1x 12.7x
Median 103,431 12.8 12.9 11.2
Low 18,629 10.8 10.0 8.4
------------------------------------------------------------------
------------------------------------------------------------------
C Co. Management Projections Implied Price Per Share:
Median $10.56 $12.06 $12.50
Low 8.95 9.31 9.37
------------------------------------------------------------------
------------------------------------------------------------------
C Co. Sensitivity Analysis Implied Price Per Share:
Median $8.17 $ 9.33 $10.92
Low 6.92 7.20 8.18
------------------------------------------------------------------
N.B. Financial data excludes certain non-recurring and extraordinary items.
(a) LTM data is as of 9/30/99
(b) C Co. is restated based on management estimates.
(c) Public asset managers' earnings estimates are from IBES as of 2/25/00. C
Co. earnings based on management projections.
SALOMON SMITH BARNEY
---------------------------
13 A member of citigroup[LOGO]
22
PROJECT SPIRIT
Premium Analysis: Going Private Transactions
- --------------------------------------------------------------------------------
Premiums Paid to Non-Control Public Interest in a Going Private Transaction,
1995 to February 25, 2000
- --------------------------------------------------------------------------------
1-Month Market Premium 1-Day Market Premium
to Initial M Co. Offer to Initial M Co. Offer
------------------------- -----------------------
Number of Implied C Co. Implied C Co.
Transactions Median Price(a) Median Price(b)
- ---------------------------------------------------------------------------------------------------
Cash Consideration 77 25.0% $10.55 19.7% $11.45
Stock Consideration 14 16.0 9.79 4.6 10.00
Mixed Consideration 4 18.0 9.95 17.2 11.20
- ---------------------------------------------------------------------------------------------------
Median 24.2 10.48 18.9 11.37
- ---------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
All Going Private Transactions, 1995 to February 25, 2000
- --------------------------------------------------------------------------------
1-Month Market Premium 1-Day Market Premium
to Initial M Co. Offer to Initial M Co. Offer
------------------------- -----------------------
Number of Median Implied C Co. Median Implied C Co.
Transactions Premium Price(a) Premium Price(b)
- -------------------------------------------------------------------------------------------------------------
Transaction Value > $500 million 10 20.7% $10.19 21.8% $11.64
Transaction Value $100-499 million 42 24.9 10.54 17.2 11.20
Transaction Value < $99 million 43 25.0 10.55 19.0 11.38
- -------------------------------------------------------------------------------------------------------------
Median 24.2 10.48 18.9 11.37
- -------------------------------------------------------------------------------------------------------------
1-Month Market Premium 1-Day Market Premium
to Initial M Co. Offer to Initial M Co. Offer
------------------------- -----------------------
Median Implied C Co. Median Implied C Co.
Premium Price(a) Premium Price(b)
- -----------------------------------------------------------------------------------------------
25th Percentile 16.0% $9.79 11.1% $10.63
50th Percentile 24.2 10.48 18.9 11.37
75th Percentile 40.2 11.83 31.7 12.59
- -----------------------------------------------------------------------------------------------
Source: Securities Data Corp.
(a) Based on closing price of $8.438 on 12/14/99.
(b) Based on closing price of $9.563 on 1/14/00.
SALOMON SMITH BARNEY
---------------------------
14 A member of citigroup[LOGO]
23
PROJECT SPIRIT
B. Discounted Cash Flow
SALOMON SMITH BARNEY
---------------------------
A member of citigroup[LOGO]
24
PROJECT SPIRIT
Discounted Cash Flow Analysis - Management Projections
($ in millions)
Management
----------------------------------
----- ----- ----- ----- -----
CAGR
1999 2000 2001 2002 99-02
----- ----- ----- ----- -----
Net Income $11.2 $13.1 $15.6 $18.5 18.1%
Plus: Amortization 2.5 2.7 2.9 3.1 7.6
----- ----- ----- ----- ----
Interim Cash Flows 13.7 15.8 18.5 21.6 16.3%
Terminal Value (a) 0.0 0.0 0.0 184.6 NM
----- ----- ----- ----- ----
Total Cash Flows $13.7 $15.8 $18.5 $206.1 NM
----- ----- ----- ----- ----
Multiple of 2002 Net Income (b)
--------------------------------------
9.0x 9.5x 10.0x 10.5x
--------------------------------------
5.0% $8.56 $8.89 $9.22 $9.55
Net Income 10.0 9.65 10.03 10.41 10.79
Growth Rate (c) 15.0 10.85 11.28 11.71 12.15
20.0 12.14 12.63 13.12 13.62
N.B. Management projections and restated 1999 information based on management
estimates.
(a) Based on a 10.0 x multiple of 2002 net income.
(b) Assumes 13.97 million diluted shares.
(c) Discount rate of 12% was calculated by using a median beta comprised of
public asset managers, an equity risk premium of 5.50% and the 30 year
risk free rate.
SALOMON SMITH BARNEY
---------------------------
15 A member of citigroup[LOGO]
25
PROJECT SPIRIT
Discounted Cash Flow Analysis - Sensitivity Analysis
($ in millions)
Management
----------------------------------
----- ----- ----- ----- -----
CAGR
1999 2000 2001 2002 99-02
----- ----- ----- ----- -----
Net Income $8.9 $10.1 $13.6 $16.0 21.4%
Plus: Amortization 1.7 2.7 2.9 3.1 21.9
----- ----- ----- ----- ----
Interim Cash Flows 10.6 12.8 16.5 19.1 21.5%
Terminal Value (a) 0.0 0.0 0.0 159.8 NM
----- ----- ----- ----- ----
Total Cash Flows $10.6 $12.8 $16.5 $178.9 NM
----- ----- ----- ----- ----
Multiple of 2002 Net Income (b)
--------------------------------------
9.0x 9.5x 10.0x 10.5x
--------------------------------------
5.0% $6.93 $7.19 $7.45 $7.72
Net Income 10.0 7.80 8.10 8.40 8.71
Growth Rate (c) 15.0 8.75 9.09 9.44 9.79
20.0 9.78 10.17 10.56 10.96
N.B. Based on management's projections and adjusted for other potential loss of
business derived from C Co.'s relationship with Parent.
(a) Based on a 10.0 x multiple of 2002 net income.
(b) Assumes 13.97 million diluted shares.
(c) Discount rate of 12% was calculated by using a median beta comprised of
public asset managers, an equity risk premium of 5.50% and the 30 year
risk free rate.
SALOMON SMITH BARNEY
---------------------------
16 A member of citigroup[LOGO]
26
PROJECT SPIRIT
APPENDIX
SALOMON SMITH BARNEY
---------------------------
A member of citigroup[LOGO]
27
PROJECT SPIRIT
A. Projected Financial Statements
SALOMON SMITH BARNEY
---------------------------
A member of citigroup[LOGO]
28
PROJECT SPIRIT
Projected Income Statement - Management Projections
1999 - 2002 PROJECTIONS
($ in millions, except per share amounts)
--------- --------- --------- --------- ---------
1999-2002
1999 2000 2001 2002 CAGR
--------- --------- --------- --------- ---------
Total Revenues $82.1 $94.8 $104.3 $114.8 11.8%
Expenses
Employee Compensation and Benefits 41.6 46.6 49.9 53.5 8.8
Amortization of Goodwill 2.6 2.7 2.9 3.1 5.6
Other Expenses (a) 18.3 23.2 24.9 26.7 13.4
--------- --------- --------- --------- ---------
Total Expenses $62.6 $72.5 $77.7 $83.3 10.0%
Operating Income $19.5 $22.3 $26.6 $31.4 17.2%
Interest Expense 0.2 0.2 0.2 0.1 (15.4)
--------- --------- --------- --------- ---------
Pre-Tax Income $19.3 $22.1 $26.4 $31.3 17.5%
Taxes 7.7 9.0 10.8 12.8 18.4
--------- --------- --------- --------- ---------
Net Income $11.5 $13.1 $15.6 $18.5 16.9%
========= ========= ========= ========= =========
Diluted EPS (b) $0.83 $0.93 $1.12 $1.32 16.9%
Operating Margin 23.8% 23.5% 25.5% 27.4%
Assets Under Management $24,400 $29,135 $32,569 $36,385 14.2%
Total Revenues as a % of Average AUM 0.39% 0.40% 0.38% 0.37% --
Net Income as a % of Average AUM 0.06 0.04 0.04 0.04 --
N.B. Management estimates for 1999 and projections for 2000 - 2002. Includes
estimated cost savings, including eliminations of allocated overhead,
resulting from M Co.'s retraction of the general account assets managed by
C Co.
(a) Includes occupancy and equipment costs, marketing and production costs and
professional services.
(b) Based on 13.97 million diluted shares outstanding.
SALOMON SMITH BARNEY
---------------------------
17 A member of citigroup[LOGO]
29
PROJECT SPIRIT
Projected Income Statement - Sensitivity Analysis
1999 - 2002 PROJECTIONS
($ in millions, except per share amounts)
--------- --------- --------- --------- ---------
1999-2002
1999 2000 2001 2002 CAGR
--------- --------- --------- --------- ---------
Total Revenues $60.9 $74.0 $83.6 $91.5 11.2%
Expenses
Employee Compensation and Benefits 29.4 36.5 38.3 40.2 3.3
Amortization of Goodwill 1.7 2.7 2.9 3.1 4.6
Other Expenses (a) 14.6 17.4 19.1 20.9 6.2
--------- --------- --------- --------- ---------
Total Expenses $45.7 $56.7 $60.3 $64.2 6.5%
Operating Income $15.2 $17.3 $23.3 $27.2 25.3%
Interest Expense 0.1 0.2 0.2 0.1 (13.2)
--------- --------- --------- --------- ---------
Pre-Tax Income $15.1 $17.1 $23.1 $27.1 25.8%
Taxes 6.2 7.0 9.5 11.1 16.5
--------- --------- --------- --------- ---------
Net Income $8.9 $10.1 $13.6 $16.0 25.8%
========= ========= ========= ========= =========
Diluted EPS (b) $0.64 $0.72 $0.97 $1.14 25.8%
Operating Margin 25.0% 23.4% 27.8% 29.8%
Assets Under Management $21,700 $25,978 $29,157 $32,672 12.1%
Total Revenues as a % of Average AUM 0.36% 0.26% 0.25% 0.24% --
Net Income as a % of Average AUM 0.05 0.03 0.03 0.04 --
N.B. Based on management's projections and adjusted for other potential loss of
business derived from C Co.'s relationship with Parent.
(a) Includes occupancy and equipment costs, marketing and production costs and
professional services.
(b) Based on 13.97 million diluted shares outstanding.
SALOMON SMITH BARNEY
---------------------------
18 A member of citigroup[LOGO]
30
PROJECT SPIRIT
Projected Operating Results by Segment - Management Projections
2000 PROJECTIONS
($ in millions, except per share amounts)
---------- ------------ -------- ------------ ---------- --------
Expense
Affiliated Unaffiliated Mortgage Consolidated Reductions Total
---------- ------------ -------- ------------ ---------- --------
Total Revenues $15.1 $62.9 $23.7 $101.7 ($6.9) $94.8
Expenses
Employee Compensation and Benefits 6.9 31.5 9.6 48.0 (1.4) 46.6
Amortization of Goodwill (a) 0.0 1.6 1.1 2.7 0.0 2.7
Other Expenses (b) 4.2 16.4 5.1 25.8 (2.6) 23.2
---------- ------------ -------- ------------ ---------- --------
Total Expenses $11.1 $49.6 $15.8 $76.5 ($4.0) $72.5
Operating Income $4.0 $13.3 $7.9 $25.2 ($2.9) $22.3
Interest Expense (a) 0.0 0.2 0.0 0.2 0.0 0.2
---------- ------------ -------- ------------ ---------- --------
Pre-Tax Income $4.0 $13.1 $7.9 $25.0 ($2.9) $22.1
Taxes 1.6 5.4 3.2 10.2 (1.2) 9.0
---------- ------------ -------- ------------ ---------- --------
Net Income $2.3 $7.8 $4.7 $14.8 ($1.7) $13.1
========== ============ ======== ============ ========== ========
Diluted EPS (c) $0.17 $0.56 $0.33 $1.06 ($0.12) $0.93
Operating Margin 26.2% 21.2% 33.4% 24.8% 42.0% 23.5%
Assets Under Management $12,357 $25,978 NM $38,335 ($9,200) $29,135
Total Revenues as a % of Average AUM 0.13% 0.26% NM 0.20% 0.08% 0.40%
Net Income as a % of Average AUM 0.02 0.03 NM 0.04 0.02 0.04
------------ --------
N.B. Management projections for 2000. Includes estimated cost savings,
including eliminations of allocated overhead, resulting from M Co.'s
retraction of the general account assets managed by C Co.
(a) Affiliated businesses assumed to have 0% of annual goodwill amortization
and interest expense beginning in 2000.
(b) Includes occupancy and equipment costs, marketing and production costs and
professional services.
(c) Based on 13.97 million shares outstanding.
SALOMON SMITH BARNEY
---------------------------
19 A member of citigroup[LOGO]
31
PROJECT SPIRIT
Projected Operating Results by Segment - Management Projections
2001 PROJECTIONS
($ in millions, except per share amounts)
---------- ------------ -------- ------------ ---------- --------
Expense
Affiliated Unaffiliated Mortgage Consolidated Reductions Total
---------- ------------ -------- ------------ ---------- --------
Total Revenues $16.6 $68.6 $26.7 $111.9 ($7.6) $104.3
Expenses
Employee Compensation and Benefits 7.7 33.0 10.8 51.4 (1.4) 49.9
Amortization of Goodwill (a) 0.0 1.8 1.1 2.9 0.0 2.9
Other Expenses (b) 4.3 18.0 5.3 27.6 (2.7) 24.9
---------- ------------ -------- ------------ ---------- --------
Total Expenses $11.9 $52.8 $17.2 $81.8 ($4.1) $77.7
Operating Income $4.7 $15.8 $9.5 $30.1 ($3.5) $26.6
Interest Expense (a) 0.0 0.2 0.0 0.2 0.0 0.2
---------- ------------ -------- ------------ ---------- --------
Pre-Tax Income $4.7 $15.6 $9.5 $29.9 ($3.5) $26.4
Taxes 1.9 6.4 3.9 12.3 (1.4) 10.8
---------- ------------ -------- ------------ ---------- --------
Net Income $2.8 $9.2 $5.6 $17.6 ($2.0) $15.6
========== ============ ======== ============ ========== ========
Diluted EPS (c) $0.20 $0.66 $0.40 $1.26 ($0.15) $1.12
Operating Margin 28.4% 23.1% 35.7% 26.9% 45.7% 25.5%
Assets Under Management $13,011 $29,157 NM $42,169 ($9,600) $32,569
Total Revenues as a % of Average AUM 0.13% 0.25% NM 0.20% 0.08% 0.38%
Net Income as a % of Average AUM 0.02 0.03 NM 0.04 0.02 0.04
------------ --------
N.B. Management projections for 2001. Includes estimated cost savings,
including eliminations of allocated overhead, resulting from M Co's
retraction of the general account assets managed by C Co.
(a) Affiliated businesses assumed to have 0% of annual goodwill amortization
and interest expense beginning in 2000.
(b) Includes occupancy and equipment costs, marketing and production costs and
professional services.
(c) Based on 13.97 million diluted shares outstanding.
SALOMON SMITH BARNEY
---------------------------
20 A member of citigroup[LOGO]
32
PROJECT SPIRIT
Projected Operating Results by Segment - Management Projections
2002 PROJECTIONS
($ in millions, except per share amounts)
---------- ------------ -------- ------------ ---------- --------
Expense
Affiliated Unaffiliated Mortgage Consolidated Reductions Total
---------- ------------ -------- ------------ ---------- --------
Total Revenues $18.3 $75.0 $29.8 $123.1 ($8.3) $114.8
Expenses
Employee Compensation and Benefits 8.4 34.5 12.0 55.0 (1.5) 53.5
Amortization of Goodwill (a) 0.0 2.0 1.1 3.1 0.0 3.1
Other Expenses (b) 4.3 19.7 5.4 29.5 (2.8) 26.7
---------- ------------ -------- ------------ ---------- --------
Total Expenses $12.7 $56.3 $18.6 $87.6 ($4.2) $83.3
Operating Income $5.6 $18.7 $11.2 $35.5 ($4.1) $31.4
Interest Expense (a) 0.0 0.1 0.0 0.1 0.0 0.1
---------- ------------ -------- ------------ ---------- --------
Pre-Tax Income $5.6 $18.6 $11.2 $35.4 ($4.1) $31.3
Taxes 2.3 7.6 4.6 14.5 (1.7) 12.8
---------- ------------ -------- ------------ ---------- --------
Net Income $3.3 $11.0 $6.6 $20.9 ($2.4) $18.5
========== ============ ======== ============ ========== ========
Diluted EPS (c) $0.23 $0.79 $0.47 $1.49 ($0.17) $1.32
Operating Margin 30.4% 25.0% 37.7% 28.9% 49.2% 27.4%
Assets Under Management $13,714 $32,672 NM $46,385 $10,000 $36,385
Total Revenues as a % of Average AUM 0.14% 0.24% NM 0.20% 0.08% 0.37%
Net Income as a % of Average AUM 0.02 0.04 NM 0.05 0.02 0.04
------------ --------
N.B. Management projections for 2002. Includes estimated cost savings,
including eliminations of allocated overhead, resulting from M Co's
retraction of the general account assets managed by C Co.
(a) Affiliated businesses assumed to have 0% of annual goodwill amortization
and interest expense beginning in 2000.
(b) Includes occupancy and equipment costs, marketing and production costs and
professional services.
(c) Based on 13.97 million diluted shares outstanding.
SALOMON SMITH BARNEY
---------------------------
21 A member of citigroup[LOGO]
33
PROJECT SPIRIT
B. Public Comparable Mortgage Companies
SALOMON SMITH BARNEY
---------------------------
A member of citigroup[LOGO]
34
PROJECT SPIRIT
Mortgage Unit Valuation Analysis
FINANCIAL INFORMATION AS OF DECEMBER 31, 1999.
(Dollars in millions, except per share data)
Price as a Multiple of:
Price 52-Week Range Current as -----------------------
Market as of ---------------- a % of 2000E Book
Name Cap. 2/25/00 High Low 52-Wk High EPS (a) Value
- ----------------------------------------------------------------------------------------------------------------------------
C Co. Management Projections $149 $10.69 $18.75 $6.75 57.0% 11.4x NA
C Co. Sensitivity Analysis 149 10.69 18.75 6.75 57.0 14.8 NA
RESIDENTIAL AND COMMERCIAL MORTGAGE REITS
Indymac Mortgage Holdings, Inc. $872 $11.38 $17.44 $9.88 65.2% 8.8x 1.05x
Anthracite Capital, Inc. 134 6.38 7.88 6.00 81.0 5.0 0.79
Redwood Trust, Inc. (b) 105 12.00 17.88 11.25 67.1 6.3 0.47
AMRESCO, Inc. (b) 66 1.34 10.56 1.00 12.7 3.4 0.11
Resource Asset Inv. Trust 63 10.13 13.44 9.94 75.3 4.3 0.73
LASER Mortgage Management, Inc. (b) 59 3.94 5.63 3.13 70.0 5.5 0.79
---------------------------------------------------------
High 81.0% 8.8x 1.05x
Median 68.6 5.3 0.76
Low 12.7 3.4 0.11
---------------------------------------------------------
---------------------------------------------------------
C Co. Management Projections Implied Price Per Share (c):
Median $1.76 NA
Low 1.15 NA
---------------------------------------------------------
---------------------------------------------------------
C Co. Sensitivity Analysis Implied Price Per Share (d):
Median $1.45 NA
Low 0.95 NA
---------------------------------------------------------
(a) Earnings estimates based on median IBES estimates as of 2/25/00.
(b) Financial data as of 9/30/99.
(c) Based on management's forecasts for the mortgage business management
projections of $0.33 per share for 2000.
(d) Based on management's forecasts for the mortgage business sensitivity
analysis of $0.28 per share for 2000.
SALOMON SMITH BARNEY
---------------------------
22 A member of citigroup[LOGO]
35
PROJECT SPIRIT
AMRESCO Case Study
CASE STUDY: LEND LEASE CORP. ACQUIRES FIVE OF AMRESCO'S BUSINESSES
o Target Description - AMRESCO Inc. specializes in real estate lending,
commercial finance and the acquisition, resolution and servicing of
commercial loans. Based in Dallas, AMRESCO has offices nationwide as well
as in Canada, the United Kingdom, Mexico and Asia. Businesses sold focused
on commercial mortgage and banking services, real estate lending and asset
management included: AMRESCO Capital Ltd., Holliday Fenoglio Fowler LP,
Real Estate Structured Finance, AMRESCO Services Ltd., and Asset
Management.
AMRESCO TRANSACTION DETAILS
Announcement date December 8, 1999 Price / LTM Income NM
Transaction value $257.5 million Price / Servicing Portfolio 0.59%
Form of consideration Cash plus Promissory note, and $10.0 Total Servicing Portfolio $44,000 million
million retention pool
EQUIVALENT VALUE FOR C CO.
Implied transaction value $25.2 million ($1.80 per C Co. share) Total Servicing Portfolio $4,300 million
SALOMON SMITH BARNEY
---------------------------
23 A member of citigroup[LOGO]
36
Confidential
Presentation regarding:
Project Spirit
UPDATED VALUATION ANALYSIS
January 27, 2000
SALOMON SMITH BARNEY
---------------------------
A member of citigroup[LOGO]
37
Table of Contents PROJECT SPIRT
1 EQUITY MARKET REACTION AND UPDATE
2 C CO. VALUATION ANALYSIS
3 ADDITIONAL VALUATION CONSIDERATIONS
APPENDIX
A. Projected Financial Statements
B. Public Comparable Asset Management Companies
C. Public Comparable Mortgage Companies
D. Weighted Average Cost of Capital and Trading History
SALOMON SMITH BARNEY
---------------------------
A member of citigroup[LOGO]
38
PROJECT SPIRIT
1 EQUITY MARKET REACTION AND UPDATE
SALOMON SMITH BARNEY
---------------------------
A member of citigroup[LOGO]
39
PROJECT SPIRIT
C Co. Relative Price Performance
PRICE PERFORMANCE
Daily Data: January 1, 1999 through January 25, 2000
C Co.'s stock price under-performed its peers in 1999, in large part due to
uncertainty around the Parent situation beginning in the third quarter.
[GRAPHIC OMITTED]
(a) 07/29/99: A Co. announces a loss of $179 million.
(b) 08/09/99: Parent is downgraded by Moody's from A3 to Ba1 and then to B1 on
8/12/99.
(c) 08/26/99: M Co. acquires Parent for $1.2 billion in cash.
(d) 10/07/99: C Co. warns that 3rd quarter earnings may be up to 43% below
consensus estimates.
(e) 01/18/00: M Co. offers to purchase outstanding C Co. shares for $10.50 per
share.
SALOMON SMITH BARNEY
---------------------------
1 A member of citigroup[LOGO]
40
PROJECT SPIRIT
C Co. Trading History
PRICE PERFORMANCE
Although the Parent's situation was successfully resolved in August, C Co.'s
stock price has not yet recovered to pre-announcement levels.
Daily Data: July 29, 1999 through January 25, 2000
[GRAPHIC OMITTED]
(a) 07/29/99: A Co. announces a loss of $179 million.
(b) 08/09/99: Parent is downgraded by Moody's from A3 to Ba1 and then to B1 on
8/12/99.
(c) 08/26/99: M Co. acquires Parent for $1.2 billion in cash.
(d) 10/07/99: C Co. warns that 3rd quarter earnings may be up to 43% below
consensus estimates.
(e) 01/18/00: M Co. offers to purchase outstanding C Co. shares for $10.50 per
share.
SALOMON SMITH BARNEY
---------------------------
2 A member of citigroup[LOGO]
41
PROJECT SPIRIT
C Co. Trading History
PRICE PERFORMANCE
C Co.'s stock price was at $9.5625 per share when the $10.50 per share offer was
announced.
Daily Data: January 1, 2000 through January 25, 2000
[GRAPHIC OMITTED]
(a) 01/18/00: M Co. offers to purchase outstanding C Co. shares for $10.50 per
share.
SALOMON SMITH BARNEY
---------------------------
3 A member of citigroup[LOGO]
42
PROJECT SPIRIT
C Co. Relative Price/Earnings Performance
PRICE/EARNINGS PERFORMANCE
Although C Co.'s P/E closely tracked the Peer Index through August, C Co.'s P/E
currently represents a 30% discount to the Peer Index.
Daily Data: January 1, 1999 through January 25, 2000
[GRAPHIC OMITTED]
(a) 07/29/99: A Co. announces a loss of $179 million.
(b) 08/09/99: Parent is downgraded by Moody's from A3 to Ba1 and then to B1 on
8/12/99.
(c) 08/26/99: M Co. acquires Parent for $1.2 billion in cash.
(d) 10/07/99: C Co. warns that 3rd quarter earnings may be up to 43% below
consensus estimates.
(e) 01/18/00: M Co. offers to acquire outstanding C Co. shares for $10.50 per
share.
Source: IBES consensus estimates, C Co. Earnings Estimates, Salomon Smith
Barney.
SALOMON SMITH BARNEY
---------------------------
4 A member of citigroup[LOGO]
43
PROJECT SPIRIT
C Co. Earnings Estimates
FIRST CALL ESTIMATES FOR THE ROLLING 12 MONTHS FORWARD
C Co.'s median 2000 earnings estimate of $1.10 has declined approximately 20%
from its July high of $1.35.
[GRAPHIC OMITTED]
(a) 07/29/99: A Co. announces a loss of $179 million.
(b) 08/09/99: Parent is downgraded by Moody's from A3 to Ba1 and then to B1 on
8/12/99.
(c) 08/26/99: M Co. acquires Parent for $1.2 billion in cash.
(d) 10/07/99: C Co. warns that 3rd quarter earnings may be up to 43% below
consensus estimates.
(e) 01/18/00: M Co. offers to acquire outstanding C Co. shares for $10.50 per
share.
Source: First Call consensus estimates.
SALOMON SMITH BARNEY
---------------------------
5 A member of citigroup[LOGO]
44
PROJECT SPIRIT
C Co. Research Coverage
CURRENT IBES RESEARCH COVERAGE
- -------------------------- ----------------- ------------------- -------------
2000E
------------------- Last
Firm Opinion Current Previous Estimate Date
- -------------------------- ----------------- ------------------- -------------
A.G. Edwards Maintain Position $1.10 $1.10 12/20/99
Donaldson Lufkin & Jenrette Market Perform 1.10 1.10 10/13/99
Putnam, Lovell, de Guardiola Hold 1.15 1.15 9/2/99
- ----------------------------------------------------------------------------------------
Median $1.10 $1.10
- ----------------------------------------------------------------------------------------
IBES Mean Estimates $1.12 $1.12
- ----------------------------------------------------------------------------------------
Management Estimates $1.06 $1.06
========================================================================================
Source: Bloomberg.
SALOMON SMITH BARNEY
---------------------------
6 A member of citigroup[LOGO]
45
PROJECT SPIRIT
Investor Community Reaction to Recent Events
PRICE/EARNINGS IMPACT
Prior to the offer, the market had been applying very little value to C Co.'s
affilated businesses.
------------ ------------
Day Prior to Day Prior to
Parent M Co.
Announcement Announcement
(8/9/99) (1/14/00)
------------ ------------
Share Price $16.13 $9.56
2000E EPS(a) 1.41 1.06
Price / 2000E EPS for C Co. 11.5x 9.0x
Price / 2000E EPS for Unaffiliated AUM(b) 11.5x 11.5x
Unaffiliated EPS(c) $1.20 $0.89
------------ ------------
Contribution $13.81 $10.18
Price / 2000E EPS for Affiliated AUM 11.5x (3.7)x
Affiliated EPS(c) $0.20 $0.17
------------ ------------
Contribution $2.32 ($0.62)
Total $16.13 $9.56
Source: Company documents
(a) Reflects IBES estimates as of August 9, 1999, and current management
estimates.
(b) Assumes that the market's valuation of the earnings from the unaffiliated
AUM is unchanged at 11.5x.
(c) Reflects annualized weighted-average profitability from the six months
ended June 30, 1999, and current management estimates.
SALOMON SMITH BARNEY
---------------------------
7 A member of citigroup[LOGO]
7
46
PROJECT SPIRT
C Co. Public Ownership
The weighted average basis of the positions of all current shareholders is
$16.94.
(Shares in thousands)
- ------------------------------------------------------------------------------------------------------
Top 13F Institutional Holders Shares Held % of Total % of Non Weighted Average
(000's) Held Parent Shares Purchase Price(a)
- ------------------------------------------------------------------------------------------------------
1 David L. Babson & Co. Inc. 686 5.0% 12.9% $18.32
2 MFS Investment Management 516 3.8 9.7 17.33
3 Dimensional FD Advisors, Inc. 264 1.9 5.0 13.78
4 Sterling Capital Management Co. 216 1.6 4.1 16.08
5 Wellington Management Co. LLP 186 1.4 3.5 15.20
6 PaineWebber Group Inc. 180 1.3 3.4 19.07
7 AXA Financial, Inc. 175 1.3 3.3 16.52
8 Barclays Bank plc 68 0.5 1.3 17.99
9 John A. Levin & Company, Inc. 65 0.5 1.2 13.78
10 State Street Bank & Trust Co. Boston 60 0.4 1.1 19.77
11 Mellon Private Asset Management 56 0.4 1.0 19.11
12 Fleet Boston Corporation 55 0.4 1.0 17.50
13 College Retire Equities 52 0.4 1.0 18.26
14 Hartford Investment Mgmt Co. Inc. 45 0.3 0.8 14.08
15 Frank Russell Co. 31 0.2 0.6 15.60
16 Bankers Trust NY Corp. 31 0.2 0.6 13.33
17 First Source Bank 30 0.2 0.6 13.78
18 Wilmington Trust Company 24 0.2 0.4 16.55
19 Westcap Investors, LLC 21 0.2 0.4 16.43
20 Northern Trust Company 16 0.1 0.3 18.26
21 Citigroup Investments Inc. 15 0.1 0.3 18.65
22 Firstar Investment Research & Mgmt Co. 14 0.1 0.3 15.84
23 World Asset Management 4 0.0 0.1 17.85
-------------------------------------- ------ ----- ----- ------
Total Top 13F Institutional Holders 2,810 20.6% 52.9% $16.94
Insiders/Management 654 4.8 12.3
Parent 8,305 61.0 --
Implied Retail 1,844 13.5 34.7
-------------------------------------- ------ ----- -----
Total Shares Outstanding 13,613 100.0% 100.0%
====================================== ====== ===== =====
Source: CDA Spectrum. Holdings as of September 30, 1999.
(a) Estimate of holders basis in c Co. shares; applies a FIFO inventory to
shares sold.
Note: The following institutions have sold their entire holdings in C Co. since
the 6/30/99 report: American General Corporation, Bank One Corporation,
Chase Manhattan Corp., Credit Suisse First Boston Corp., Morgan Stanley
Dean Witter Advisors, and Prospector Partners, LLC.
SALOMON SMITH BARNEY
---------------------------
8 A member of citigroup[LOGO]
47
PROJECT SPIRIT
Shareholder Analysis
(Shares in thousands)
- ------------------------------------------------------------------------------------------------------------------------------------
Holdings (O00s) as of: (a)
Top 13F InstItutional Holders Change 12-31-97 Change 12-31-98 Change 3-31-99 Change 6-30-99 Change 9-30-99
- ------------------------------------------------------------------------------------------------------------------------------------
1 Davd L. Babson & Co. Inc. -- -- 546 546 10 556 22 577 109 686
2 MFS Investment Management -- -- 313 313 7 319 8 327 189 516
3 Dimensional FD Advisors, Inc. -- -- -- -- -- -- -- -- 264 264
4 Sterling Capital Management Co. 54 54 86 141 64 204 4 208 7 216
5 Wellington Management Co. LLP -- -- 81 81 168 249 55 304 (118) 186
6 PaineWebber Group Inc. -- -- 225 225 -- 225 -- 225 (45) 180
7 AXA Financial, Inc. -- -- -- -- 14 14 310 323 (149) 175
8 Barclays Bank plc -- -- 49 49 10 59 1 60 9 68
9 John A. Levin & Company, Inc. -- -- -- -- -- -- -- -- 65 65
10 State Street Bank & Trust Co.
Boston -- -- 52 52 1 53 (1) 53 8 60
11 Mellon Private Asset Management -- -- 50 50 (3) 47 1 48 8 56
12 Fleet Boston Corporations -- -- 35 35 -- 35 -- 35 20 55
13 College Retire Equities -- -- 53 53 -- 53 (4) 50 3 52
14 Hartford Investment Mgmt.
Co. Inc. -- -- 32 32 -- 32 13 45 -- 45
15 Frank Russell Co. 17 17 6 26 20 43 -- 43 (12) 31
16 Bankers Trust NY Corp. -- -- 37 37 5 42 (3) 39 (8) 31
17 First Source Bank 19 19 (19) -- -- -- -- -- 30 30
18 Wilmington Trust Company -- -- -- -- -- -- 24 24 -- 24
19 Westcap Investors, LLC -- -- -- -- -- -- 21 21 -- 21
20 Northern Trust Company -- -- 12 12 -- 12 -- 12 5 16
21 Citigroup Investments Inc. -- -- 52 52 (4) 48 (33) 15 -- 15
22 Firstar Investment Research &
Mgmt. Co. -- -- 90 90 9 98 -- 98 (84) 14
23 World Asset Management 1 1 2 3 -- 3 -- 3 1 4
-------------------------------------------------------------------------------------------------------------------------------
Total Top 13F Institutional
Holders 91 91 1,700 1,792 300 2,091 417 2,509 301 2,810
Top 13F Institutional
Holders as of a % of Total 0.7% 13.8% 15.6% 18.5% 100.0%
Total 13F Institutional Holders 713 2,552 2,769 2,874 2,810
13F Institutional as a % of Total 5.5% 19.7% 20.7% 21.2% 20.6%
Total Shares Outstanding 12,875 12,939 13,375 13,534 13,613
-------------------------------------------------------------------------------------------------------------------------------
Source: CDA Spectrum. Holdings as of September 30, 1999.
(a) 13F Institutions excludes Parent's majority share in C Co.
SALOMON SMITH BARNEY
---------------------------
9 A member of citigroup[LOGO]
48
PROJECT SPIRIT
2 C CO. VALUATION ANALYSIS
SALOMON SMITH BARNEY
---------------------------
A member of citigroup[LOGO]
49
PROJECT SPIRIT
Valuation Summary (Base Case)
------------ ------------- --------------------
M Co. Current C Co. C Co Prices.
Offer Price: Market Price: Cumulative Wtd. Avg.
$10.50 $11.06 $14.17(g)
------------ ------------- --------------------
Valuation Methodology $6.00 $7.50 $9.00 $10.50 $12.00 $13.50 $15.00 $16.50 $18.00 $19.50
- -------------------------------------------------------------------------------------------------------------------------------
Whole Company
-----------
Summary Component Valuation $9.00-11.00
-----------
-----------
Public Market Comparables(a) $8.75-11.25
-----------
------------
Precedent Transaction Analysis $13.00-14.50
------------
-------
Squeeze Out Analysis (1 Day Prior) $12.25-
13.00
-------
------
Squeeze Out Analysis (1 Month Prior) $9.50-
10.25
------
------------
DCF Analysis $15.00-18.75
------------
Unaffiliated Operations
----------
Summary Component valuation $7.50-9.25
----------
----------
Public Market Comparabiles(a) $7.25-9.25
----------
-------
Precedent Transaction Analysis $10.75-
11.50
-------
------------
DCF Analysis $12.75-16.25
------------
Valuation Multiples $6.00 $7.50 $9.00 $10.50 $12.00 $13.50 $15.00
- ---------------------------------------------------------------------------------------------------------------------------
Premium / Market Price (January 25, 2000)(b) (45.8)% (32.2)% (18.6)% (5.1)% 8.5% 22.0% 35.6%
Premium / Market Price (January 19, 2000)(c) (44.8) (31.0) (17.2) (3.4) 10.3 24.1 37.9
Premium / Market Price (December 27, 1999)(d) (26.7) (8.4) 9.9 28.2 46.6 64.9 83.2
Premium / Market Price (August 9, 1999)(e) (62.8) (53.5) (44.2) (34.9) (25.6) (16.3) (7.0)
Firm value / Total Assets Under Mgmt.(%) 0.04 0.10 0.16 0.22 0.29 0.35 0.41
Firm Value / Unaffiliated Assets Under Mgmt.(%) 0.06 0.15 0.25 0.34 0.44 0.54 0.63
Firm Value / LTM Revenues 0.1x 0.4x 0.0x 0.8x 1.1x 1.3x 1.5x
Firm value / LTM EBITDA 0.5 1.3 2.1 3.0 3.8 4.6 5.5
Price / LTM Net Income 6.3 7.9 9.5 11.0 12.6 14.2 15.8
Price / 1999E Earnings(f) 6.3 7.9 9.5 11.0 12.6 14.2 15.8
Price / 2000E Earnings(f) 5.7 7.1 8.5 10.0 11.4 12.8 14.2
- ---------------------------------------------------------------------------------------------------------------------------
Valuation Multiples $16.50 $18.00 $19.50
- ----------------------------------------------------------------------------
Premium / Market Price (January 25, 2000)(b) 49.2% 62.7% 76.3%
Premium / Market Price (January 19, 2000)(c) 51.7 65.5 79.3
Premium / Market Price (December 27, 1999)(d) 101.5 119.8 138.2
Premium / Market Price (August 9, 1999)(e) 2.3 11.6 20.9
Firm value / Total Assets Under Mgmt.(%) 0.69 0.76 0.82
Firm Value / Unaffiliated Assets Under Mgmt.(%) 1.06 1.16 1.26
Firm Value / LTM Revenues 2.5x 2.8x 3.0x
Firm value / LTM EBITDA 9.2 10.0 10.8
Price / LTM Net Income 17.3 18.9 20.5
Price / 1999E Earnings(f) 17.3 18.9 20.5
Price / 2000E Earnings(f) 15.6 17.1 18.5
- ----------------------------------------------------------------------------
(a) Public market comparables consist of Federated Investors, John Nuveen,
Eaton Vance Corp., Black Rock Inc., Neuberger Berman and Gabelli Asset
Mgmt.
(b) Price as of close (1/25/00): $11.0625
(c) Price as of close (1/19/00): $10.875
(d) Price as of close (12/27/00): $8.1875
(e) Price price to Parent ratings downgrade announcement (8/9/99): $16.125
(f) Based on management forecasts of $0.95 and $1.06 for 1999 and 2000,
respectively, and 13.97 million shares outstanding.
(g) Cumulative weighted average price from 12/16/97 to 1/25/00.
SALOMON SMITH BARNEY
---------------------------
10 A member of citigroup[LOGO]
50
PROJECT SPIRIT
Valuation Summary (Optimal Case)
------------ ------------- --------------------
M Co. Current C Co. C Co Prices.
Offer Price: Market Price: Cumulative Wtd. Avg.
$10.50 $11.06 $14.17(g)
------------ ------------- --------------------
Valuation Methodology $9.00 $10.S0 $12.00 $13.50 $15.00 $16.50 $18.00 $19.50 $21.00 $22.50
- ------------------------------------------------------------------------------------------------------------------------------------
Whole Company
------------
Summary Component Valuation $12.75-15.75
------------
------------
Public Market Comparables(a) $11.25-16.75
------------
------------
Precedent Transaction Analysis $18.00-22.50
------------
-------------
Squeeze Out Analysis (1 Day Prior) $13.00-14.50
-------------
------------
Squeeze Out Analysis (1 Month Prior) $10.25-11.50
------------
------------
DCF Analysis $16.00-20.25
------------
Unaffiliated Operations
-------------
Summary Component valuation $10.50-13.00
-------------
-----------
Public Market Comparabiles(a) $9.25-13.75
-----------
------------
Precedent Transaction Analysis $14.50-15.50
------------
------------
DCF Analysis $13.75-17.50
------------
Valuation Multiples $9.00 $1040 $12.00 $13.50 $15.00 $16.50 $18.00
- --------------------------------------------------------------------------------------------------------------------------
Premium / Market Price (January 25, 2000)(b) (18.6)% (5.1)% 8.5% 22.0% 35.6% 49.2% 62.7%
Premium / Market Price (January 19. 2000)(c) (17.2) (3.4) 10.3 24.1 37.9 51.7 65.5
Premium / Market Price (December 27,19991(d) 9.9 28.2 46.6 64.9 83.2 101.5 119.8
Premium / Market Price (August 9,1999)(e) (44.2) (34.9) (25.6) (16.3) (7.0) 2.3 11.6
Firm Value / Total Assets Under Mgmt.(%) 0.16 0.22 0.29 0.35 0.41 0.48 0.54
Firm Value / Unaffiliated Assets Under Mgmt.(%) 0.25 0.34 0.44 0.54 0.63 0.73 0.83
Firm Value / LTM Revenues 0.6x 0.8x 1.1x 1.3x 1.5x 1.7x 2.0x
Firm Value / LTM EBITDA 2.1 3.0 3.8 4.0 5.5 6.3 7.2
Price / LTM Net Income 9.5 11.0 12.6 14.2 15.8 17.3 18.9
Price / 1999E Earnings(f) 9.5 11.0 12.6 14.2 15.8 17.3 18.9
Price / 2000E Earnings(f) 8.5 10.0 11.4 12.8 14.2 15.6 17.1
- --------------------------------------------------------------------------------------------------------------------------
Valuation Multiples $19.50 $21.00 $22.50
- -----------------------------------------------------------------------------
Premium / Market Price (January 25, 2000)(b) 76.3% 89.8% 103.4%
Premium / Market Price (January 19. 2000)(c) 79.3 93.1 106.9
Premium / Market Price (December 27,19991(d) 138.2 156.5 174.8
Premium / Market Price (August 9,1999)(e) 20.9 30.2 39.5
Firm Value / Total Assets Under Mgmt.(%) 0.82 0.88 0.94
Firm Value / Unaffiliated Assets Under Mgmt.(%) 1.21 1.35 1.45
Firm Value / LTM Revenues 3.0x 3.2x 3.5x
Firm Value / LTM EBITDA 10.8 11.7 12.5
Price / LTM Net Income 20.5 22.1 23.6
Price / 1999E Earnings(f) 20.5 22.1 23.1
Price / 2000E Earnings(f) 18.5 19.9 21.3
- -----------------------------------------------------------------------------
(a) Public market comparables consist of Federated Investors, John Nuveen,
Eaton Vance Corp., Black Rock Inc., Neuberger Berman and Gabelli Asset
Mgmt.
(b) Price as of close (1/25/00): $11.0625
(c) Price as of close (1/19/00): $10.875
(d) Price as of close (12/27/00): $8.1875
(e) Price price to Parent ratings downgrade announcement (8/9/99): $16.125
(f) Based on management forecasts of $0.95 and $1.06 for 1999 and 2000,
respectively, and 13.97 million shares outstanding.
(g) Cumulative weighted average price from 12/16/97 to 1/25/00.
SALOMON SMITH BARNEY
---------------------------
11 A member of citigroup[LOGO]